das kapitalism

Wave Power

2008-09-29T15:11:00.000-07:00

This animation shows how a Pelamis Wave Energy Converter works. I don't have any numbers on the cost per kilowatt hour for wave power but I have to say, it looks simple and cheap. What's more, wave energy is as reliable as the spinning of the earth. Also, in a scenario straight out of a cyberpunk novel, Google is looking to build massive off shore data centers powered by Pelamis Wave Energy Converters.

Gov. Palin has it Right On Energy Policy

2008-09-07T20:31:00.000-07:00

See the above interview with Governor Palin on CNBC. One interesting fact she points out in this interview is that Democratic VP candidate Joe Biden voted against the Trans Alaskan oil pipeline 30 years ago. That is a factoid she might just take out and beat Joe Biden like drum with at the Oct 2nd debate.

The Great Ethanol Boondoggle

2008-08-13T20:06:00.000-07:00

Obama's Shameful "Windfall" Tax On Oil Companies

2008-08-08T00:28:00.000-07:00

Here is the Obama campaign's explanation of Obama's proposed windfall tax.

Barack Obama will require oil companies to take a reasonable share of their record-breaking windfall profits and use it to provide direct relief worth $500 for an individual and $1,000 for a married couple. The relief would be delivered as quickly as possible to help families cope with the rising price of gasoline, food and other necessities. The rebates would be fully paid for with five years of a windfall profits tax on record oil company profits. This relief would be a down payment on Obama’s long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief. The Obama energy rebates will: offset the entire increase in gas prices for a working family over the next four months; or pay for the entire increase in winter heating bills for a typical family in a cold-weather state. In addition, Obama has proposed setting aside a portion of a second round of fiscal stimulus to ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months.

Hugo Chavez would be proud. Obama is using populist rhetoric to villanize oil companies in order to justify seizing their profits and using those profits to purchase votes. As Mark Perry points out on his blog, Oil Companies already pay more taxes than all the lower 50% of income earners combined and Exxon alone has paid over $20 billion in taxes in the first half of 2008. Where does it end?

Still No Northwest Passage

2008-08-06T23:29:00.000-07:00

Global warming alarmists have been shown once again to have poor predictive powers. We heard a lot of hype recently in the media about all of the ice at the North Pole melting this summer. (In case you don't follow the news much and don't believe me see here, here, here, here, here, and here.) Well it didn't happen. By now we should be used to this. Remember when global warming was going to bring record hurricanes? That didn't happen either. Instead of a record loss of ice, what we got was the most ice since 2004. Don't take my word for it, visit the National Snow and Ice Data Center web site. Just to give an idea of exactly how far off the alarmists were. Below is an image of the 9 million sq km of ice at the North Pole in July of this year, just a small bit below the median for July.

Of course, there are still six weeks left in the melting season so some are still raising concerns about the "thinning ice" and still say we may have open waters at the North Pole this summer. Fat chance.

HT: DaveScott at Uncommon Descent

It Is Not The Great Depression

2008-08-06T12:49:00.000-07:00

Not shocking. A recent study conducted by the Business & Media Institute found that the media overhypes negative economic news and makes unwarranted comparisons of the current economy with the great depression. The study determined that this was in part the result of ignorance of economics and history and shallow "sound bite" reporting. Among the study's key findings:

Modern Media Much More Negative: During the week of the 1929 stock market crash, daily news stories reported positive news more often than negative by a 4-to-1 ratio. The week that the Bear Stearns fall occurred, coverage was the complete opposite. Negative stories on ABC, CBS and NBC outnumbered positive 6-to-1.
No Good News: Roughly 40 percent of the stories from 2008 contained no positive comments at all. On CBS, that percentage was even higher. Completely negative stories made up nearly 60 percent of its reports.
It’s Not A Depression: Today’s journalists are making repeated connections to the largest economic crisis in modern times – often with the phrase “not since the Great Depression.” Only a few of those comments explained the differences between today’s economy and the nation’s darkest economic years, or bothered to note that America is not in a depression.
Old Presidents Never Die…: The claim that President George W. Bush would be the first president since Hoover to lose jobs in his first term proved false, yet journalists repeated it more often than Democratic operatives. Journalists have been comparing Republicans to Hoover for several years and have already begun doing so with Sen. John McCain, the presumptive GOP presidential nominee.
CBS the Worst: CBS consistently appears among the worst media outlets on the economy. This study was no different. Business reporter Anthony Mason was even called “the grim reaper” by his own anchor Katie Couric. In 2008 during the week of the Bear Stearns collapse, negative stories on CBS outnumbered positive by an 11-to-1 ratio.
NBC the Best: NBC’s attempts to deliver balanced economic coverage can be summed up in two words – Maria Bartiromo. The star of sister network CNBC was a cautious voice reminding viewers that negative news can have an impact. “We could talk ourselves into a recession,” she told NBC’s “Today.”

Greenspan: Regulation and Protectionism Not the Answer

2008-08-05T09:19:00.000-07:00

Alan Greenspan has an article today in the Financial Times where he comments on the current non-recession and argues in favor of the free market. It is a popular theme in the current political environment that the current housing and credit crisis was somehow created by government policy or lack of regulation. In fact, government policy had less to do with it than global forces in the financial markets and, as Greenspan puts it, "human nature’s propensity to sway from fear to euphoria and back." However, Greenspan warns, attempting to retreat from globalization would have "an awesome cost."

It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of Adam Smith’s invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces. Previously heavily controlled economies – such as China, Russia and India – have embraced competitive markets in lieu of bureaucratic edict. The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost.

The full article is here.

Adding a "Diesel Gene" Into Algae

2008-08-03T18:05:00.000-07:00

The Greeley Tribune is reporting that a professor at the University of Northern Colorado has received funding for research on putting genes from a copaifera tree or so-called "diesel tree" into algae and other non-food plants. The "diesel tree" naturally produces an oleoresin called copaiba that is chemically similar to diesel. In fact, it is similar enough that it can be used in a diesel engine without any processing. Copaiba is harvested from the trees in basically the same way maple syrup is harvested from maple trees. A hectare of diesel trees yields about 12,000 liters of copaiba per year. Not a huge amount. Right now, copaiba oil sells for about $1000 a barrel on ebay. So putting the genes for copaiba into a more productive plant might be a more economical scenario for harvesting copaiba than tapping the trees.

Solar Energy Storage Breakthrough at MIT

2008-08-02T02:20:00.000-07:00

Photosynthetic plants are the inspiration for MIT Professor Daniel Nocera's invention for splitting water into it hydrogen and oxygen. Together with postdoctoral fellow Matthew Kanan, he discovered that by simply adding cobalt and phosphate to water and running a current through it, water could be split into its constituent oxygen molecules. This method is far cheaper than any previous method, opening the door for the efficient storage of electricity created by solar panels. The primary draw back to solar energy is that it is only available during sunlight hours and excess energy is expensive and impractical to store. But with this latest invention from MIT, if solar generated electricity can cheaply create and store hydrogen, then the hydrogen can efficiently be converted back to electricity with a fuel cell at night when power is needed. From Popular Mechanics:

The problem of how to store solar energ—or any energy at a large scale—is very real. Batteries are simply too expensive and don't yet have enough capacity. The Andasol solar thermal plant in Spain will test one interesting option later this year: Liquid heated by its mirrors will be stored in what is essentially a giant Thermos, so that the plant can continue to generate six hours of electricity each night. Abengoa recently announced a similar plant in Arizona; thermal storage will power the air-conditioning usage peak that continues after sunset in the Southwest.

Nocera's scheme has several advantages, though. Because it can work on a small scale, it's suitable for distributed power in homes.

The fact that they are using heat as a means to store solar energy in Spain is an indication of how sorely needed an efficient energy storage method is needed. Nocera's invention appears to just such a method and this is why it is being greeted with a significant amount of press and media attention.

Venter Hopes For Fourth Generation Biofuel This Year

2008-07-31T23:23:00.000-07:00

Craig Venter gave a lecture at the Oxonian Society in New York Wednesday night. During the Q&A session afterwards, an intrepid reporter from Discover Magazine asked the question about "fourth generation biofuels" that I have been wanting ask. When do we get these things?

[D]uring his talk, Venter sketched out a plan to copy genes from deep-sea microbes to produce organisms that could slurp up highly concentrated carbon dioxide and spew out hydrogen gas–killing two environmental birds with one stone by simultaneously providing clean energy and drawing down current levels of greenhouse gases in the atmosphere to more bearable levels. The first step towards this goal will be to compose a genome on a computer, synthesize it from scratch, and insert it into a microbe without killing it. I’ve been wondering when Venter will take that step (see my conversation with him last fall on Bloggingheads.tv). Back then, Venter said some time in 2008. During the Q&A after his talk, I asked how the experiment was going. He said he still hoped to finish it this year

This year. Or within 5 months. They must be making significant progress if he hopes to have it done that soon. Which is good because I am getting impatient.

On another note, I have been describing Venter's "fourth generation biofuels" as genetically modified algae, Venter himself has referred to them as "genetically engineered algae." From the description given in Discover Magazine it sounds like the organism will have a completely synthetic genome. More accurately it is a genome of pre-existing genes compiled in a novel way. On the other hand, the organism mentioned above also produces hydrogen? The genetically engineered algae are designed to produce oil. Maybe the reporter got it wrong or maybe Venter is referring to a different project.

Coalition Deaths Continue to Decline in Iraq

2008-07-31T12:38:00.001-07:00

The above graph illustrates the decline in coalition deaths from hostile activity in Iraq since "the Surge" began in May of 2007. Since the beginning of "the Surge," hostile deaths have declined from 123 in May of 2007 to 8 in July of 2008. Additionally this continued decline in violence is occurring even as the five surge brigades have left Iraq. See the link here for more statistics.

Craig Venter's Fourth Generation Biofuels From Algae

2008-07-30T16:49:00.000-07:00

I first heard Craig Venter discuss so-called "fourth generation biofuels" during a presentation he gave at TED, where he predicted fourth generation biofuels would exist within 18 months. Venter's new company, Synthetic Genomics, is genetically modifying photosynthetic algae to cause it to secrete oil. These genetically modified organisms will combine C02 and sunlight to create an oil that is passed through the membrane of the algae and into the water were it can be collected. If successful, this will be a revolutionary method of creating biofuel. Current algae fuel methods require the algae to be harvested, dried, and then the algae is somehow either mechanically separated from its oil and processed or gasified. With Venter's method, the algae not only does not have to be dried and separated from the oil, it doesn't even have to be harvested. The algae excretes the oil and the oil is collected. So rather than spend energy continually growing new algae crops, a stable population of algae spends its energy producing and excreting oil.

By far, this is the most promising scenario for algae fuel that I have heard. However, few details have been divulged and it is difficult to know how much progress has actually been made. Today, Popular Mechanics posted a brief interview with Craig Venter describing fourth generation biofuels. The good parts of the interview are excerpted below, the rest of the interview is rather tedious as Venter expresses his total buy-in to the man made global warming hypothesis and how great he thinks Jimmy Carter was as a President.

And the fourth-generation fuels?

We're using a unique type of algae that we've genetically engineered to turn sunlight and CO2 into C8 and C10 and larger lipids. The people that initially grew algae viewed it as farming—you know, you grow a bunch of algae and then you harvest it. But it's totally different if the algae are chemical factories. Ours continuously secrete these molecules, so we get constant production of something that can basically be used right away as biodiesel.

So they perform better than traditional biofuels—but will they actually be better for the environment?

Because we actually have to feed them concentrated CO2, we can take CO2 streams from power plants, cement plants and other places. People view CO2 as a contaminant—they want to bury it in the ground or pump it into wells to hide or sequester it. We want to take all that waste product and convert it into fuel.

When do you hope to have these fuels in people's cars?

Our goal is to have multiple things on the market within five years. We're looking now at how to scale this up. Our molecules are much higher energy density [than ethanol], but even so we need to produce hundreds of billions of gallons if we're really going to make a dent in oil use.

Trying to read between the lines, it sounds as if Synthetic Genomics already has the modified algae that secrete the oils they are interested in manufacturing and they are now looking for a way to grow this organism on a commercial basis. At any rate, developments regarding this technology are eagerly awaited.

PetroAlgae's Centrifuge Oil Extraction Method

2008-07-29T17:21:00.000-07:00

The video above is a short news clip about PetroAlgae, a company in Florida attempting to make fuel from algae. What is interesting about PetroAlgae is their method of extracting oil from the algae. They use a high speed centrifuge. PetroAlgae claims their method of growing and extracting algae oil is able to make fuel at a price competitive with gasoline. However, their goal is to use the algae to create electricity rather than power cars. An interview today in the Orlando Sentinal with Fred Tennant, the Vice President of product development at PetroAlgae, yielded the following tidbits:

What's the problem?

It's expensive. Tom Byrne, on the board of directors of the nonprofit Algal Biomass Organization, said a pilot plant can cost from $50 million to $100 million, but as long as petroleum stays above $50 a barrel, algae can be competitive.

How's the oil harvested?

The algae are grown to their maximum density -- when their water turns a deep forest green, either in open pools or closed systems encased in plastic tubes or tanks. The water is drained and the paste is milled to separate the oil from its "meal." The crude oil is then refined at a biodiesel facility.

The question I have is what is more efficient; extracting and then refining the oil like PetroAlgae or just throwing it in the gasifier like David James?

Ride The Lightning

2008-07-29T16:13:00.000-07:00

As oil becomes more expensive, it is becoming apparent that the most efficient method of powering our cars is electricity. An electric car is not only more efficient in the use of energy than a gasoline car, it is agnostic to the source of electricity and will therefore be relatively immune to the fluctuations in fuel price that afflict cars powered by a distinct type of fuel, i.e. gasoline, diesel, or natural gas. The problem with the electric car is that they typically have a limited range, take a long time to recharge, are underpowered, and look more like a an eco-fashion statement than a car. All of that may be about to change. Pictured above is the Lightning GT from the UK automotive company Lightning. The Lightning GT is an electric car that is powered by four electric motors, one at each wheel, that combine for 700 hp. It does zero to sixty in four seconds. The Lightning GT has 30 batteries made of lithium-titanate nanoparticles, which give the car an advertised range of over 185 miles and take only 10 minutes to recharge. 185 miles is far less than a gasoline engine but it is further than most people drive in a day. Since you can recharge it at home, visiting a gas station will be a thing of the past except on longer trips where drivers will have to stop every 185 miles or so to recharge for 10 minutes. The GT Lightning is expected to be available in early 2009 at a price of about $250,000, so it is not exactly economical. However, I remember when a CD player cost $10,000. Hopefully volume production and maturation of the technology will drive the cost of a car like the Lightning GT down to a price competitive with an internal combustion engine car.

UPDATE: Motortrend has reported that the Lightning GT has a range of 250 miles. If true, that is an impressive range on par with many internal combustion engine vehicles. Most likely, Motortrend has their facts wrong. Nonetheless, the possibility that it is accurate makes it worth a mention.

Plasma Gasification

2008-07-24T10:41:00.001-07:00

David James does it with algae in his backyard but the video above shows the potential for major industrial application of gasification as well as a very nice explanation of how gasification works.

Fuel From Algae By Gasification

2008-07-23T23:39:00.001-07:00

The production values in the above video are horribly low. However, it is interesting enough to post. In the video, David James explains his gasification method and how he makes gasoline or diesel directly from dried algae in about five minutes. Gasification eliminates the need to extract oil from the algae because the algae is vaporized by the heat of the gasifier. According to James, after the algae is vaporized it is then converted directly to gasoline through the use of proprietary catalysts. I would really like to see a video of his gasifier in action but I haven't been able to find one.

Headmaster Makes Algae Gasoline for $1.90 a Gallon

2008-07-22T14:09:00.000-07:00

David James, the principal of a private school in Opelika, Alabama, is not content to merely administer the school. No, he wants to make the schools energy as well. He uses biodiesel from algae to run the school's buses and machinery. Pictured above is James at his algae growing operation at Eastwood Christian School. According to a report at RedOrbit, James claims to efficiently make gasoline from algae using a gasifier.

It takes about 13 pounds of algae, which James is growing in a greenhouse, to make a gallon of gas, which they can make for an estimated $1.50 to $1.90 a gallon, he said. He also said an acre of algae, in the low estimates, could yield five to six thousand gallons of fuel.

According to James, a gasifier is the best way to make fuel from algae,

"The answer is gasification. ... I believe the gasifier is the way of the future," he said.

Gasification is a process of converting biomass into carbon monoxide and hydrogen by exposing it to high temperatures with a certain amount of oxygen or steam.
...
He said his friend at Unified Fuels, Inc. was the engineer who had built the gasifier they were converting the algae in and the specific catalysts they were using in the system were patented.

Some tantalizing quotes about the potential of algae fuels but I wouldn't bank on those numbers just yet. For more see the report at RedOrbit.

Solazyme's Sugar Eating Algae

2008-07-21T10:35:00.000-07:00

The above video shows Solazyme's mehod for creating oil from algae. It is one of the nicest productions so far regarding algae. Solazyme's algae does not use photosynthesis, which would seem to defeat the whole point of using algae for fuel. The offered reason for not using photosynthesis is that the algae produces oil more efficiently when using sugars. It seems that statement would depend on your definition of efficient. The sugars that these algae eat has to come from somewhere, so somewhere in the chain it uses land and sunlight. However, Solazyme claims that their process uses cellulosic sugars from non-food stocks. I wonder if the process can use cellulosic food stocks now or if that is something they are working towards? Anyway, it is a good video but I have become convinced that a photosynthetic algae will be the best solution. In particular, I am waiting anxiously for Craig Venter's group at Synthetic Genomics to produce their fourth generation biofuel.

Boeing Bullish on Biofuel from Algae

2008-07-20T09:27:00.001-07:00

Algae makes good jet fuel. Good enough that Boeing is heavily promoting algae. From the Seattle Times:

"It makes extremely good jet fuel," said Darrin Morgan, Boeing's director of business analysis for environmental strategy. ...

"It grows naturally in an aquatic environment; it doubles in mass every day; it's very plant-oil dense," he said.

Morgan said the algae — grown either in shallow ponds or closed tanks — is so productive that the entire supply of fuel for the world's fleet of commercial jets could be provided in a cultivated area about the size of West Virginia.

"Of course, West Virginia may not be the right place," he deadpanned. He envisages ideal cultivation areas in such places as Australia or the desert Southwest of the United States, where crops won't grow and salty aquifers or the sea provide reusable water. ...

Morgan said Boeing isn't planning to go into the fuel business, but it will do everything it can to promote research so extracting oil from algae becomes commercially viable on a large scale. ...

Boeing's rosy forecast is that as much as 5 to 10 percent of aviation fuel could come from this source by 2015.

My question is why only 5 to 10% in seven years? Why not more faster? Is it the cost or is it the lack of production capacity? See the full article in the Seattle Times and another piece on the same topic in the New York Times, both of which focus on boring environmentalism and never bother to talk about the business case for algae fuel.

Ford to Manufacture European Cars in America

2008-07-19T18:55:00.000-07:00

The Wall Street Journal is reporting that Ford will retool its U.S. factories to manufacture European cars for the domestic market. Ford believes the smaller more fuel efficient cars it sells in Europe, such as the Mondeo pictured above, will do well under the current economic conditions in the United States. Europe has been a bright spot for Ford, its main European markets rose 2% in the year's first half while its U.S. sales dropped 14% in the same period. From the WSJ article:

By making its European models in U.S. plants, Ford can avoid the foreign-exchange impact and sell the vehicles at more attractive prices.

The move was pushed by Chief Executive Alan Mulally and met resistance from others in the company, people familiar with the matter said. Opponents questioned whether Ford can meet the timetable for the effort -- possibly as soon as 18 months -- and worried it could ultimately fail, as did previous efforts by Ford to sell European models in the U.S., these people said.

But Mr. Mulally, who spent his career at Boeing Co. before taking over the second-largest U.S. auto maker in 2006, decided to push ahead, they said.

I think this is a no-brainer for Ford. However, I wonder why they don't manufacture in the U.S. for the European market? With the lower cost of employment and favorable exchange rate you would think that exporting from the U.S. to Europe would work well. It seems to work for BMW, as I reported previously. If Ford doesn't export cars from America to Europe, my guess is that it is because the labor unions in the U.S. make it uncompetitive. BMW makes it work but those are newer and undoubtedly nonunion factories that it uses.

Jesse Jackson Paved The Way For Osama bin Laden?

2008-07-18T21:10:00.000-07:00

Okay, this is a little off topic for this blog, however, I think this is interesting and it is getting surprisingly little publicity. Drudge hasn't even picked it up. In this clip, Dan Rather refers to Barack Obama as Osama bin Laden and ends up saying that Jesse Jackson paved the way for Osama bin Laden. Funny stuff. But the irony is that had a Republican or a Conservative made this gaffe it would be all over the news with the worst intentions gratuitously inferred. As it is, there is not a peep in the media. Watch how the hosts of the show don't even flinch as Rather says "Osama bin Laden" instead of "Barack Obama." Are they covering up or did they just not notice?

There Is No Consensus On Global Warming

2008-07-17T22:19:00.001-07:00

DailyTech is reporting that the American Physical Society, an organization representing nearly 50,000 physicists, is recognizing that many of its members disbelieve in anthropogenic global warming. The APS had previously called the evidence for anthropogenic global warming "incontrovertible."

The article quotes APS editor Jeffrey Marque as saying,

"There is a considerable presence within the scientific community of people who do not agree with the IPCC conclusion that anthropogenic CO2 emissions are very probably likely to be primarily responsible for global warming that has occurred since the Industrial Revolution."

The APS is publishing a paper by Lord Monckton of Brenchley, which concludes that IPCC modeling has grossly overstated the amount of temperature change a given amount of greenhouse gas will cause. The paper implies additional atmospheric CO2 will have little effect on climate.

Monckton told DailyTech,

"I was dismayed to discover that the IPCC's 2001 and 2007 reports did not devote chapters to the central 'climate sensitivity' question, and did not explain in proper, systematic detail the methods by which they evaluated it. When I began to investigate, it seemed that the IPCC was deliberately concealing and obscuring its method."... "in the peer-reviewed literature, most articles on climate sensitivity conclude, as I have done, that climate sensitivity must be harmlessly low."

See the whole article at DailyTech here.

Oil From Algae at Half the Cost of Fossil Oil

2008-07-16T23:11:00.000-07:00

Four companies, HR BioPetroleum, Alexander & Baldwin, Inc., Maui Electric, and Hawaiian Electric Col, announced this week that they have joined together to produce biodiesel from algae at a facility on Maui. HR BioPetroleum will maintain the facility and grow the algae while Maui Electric and Hawaiian Electric Co., will provide carbon dioxide for the algae to feed on.

According to the CEO of HR BioPetroleum, the company has developed techniques to achieve at least a 50 percent improvement over the price per barrel of fossil fuel today. According to the company's website, they intend to harvest 60 tons of oil per hectare and to construct a 1,000 hectare facility on Hawaii. This would produce 60,000 tons of oil annually or about 432,000 barrels per year. At $140 per barrel, that would be over $60 million in fossil oil.

Here is how HR BioPetroleum plans to grow the algae:

HR proposes to pump brackish water at Ma'alaea, which will be put into long, clear plastic tubes along with a starter batch of algae.

Algae grow with sunlight, water and carbon dioxide and a small admixture of nutrients, primarily nitrogen and phosphorous.

HR will get carbon dioxide from the stacks of MECO's diesel-fired generators at Ma'alaea. That is why the farm must be close to the power plant. ...

After multiplying for a short while in closed reactors, the inoculation of algae soup will be poured into long shallow growing ponds. These will be about 100 feet long by 30 feet wide and 8 inches deep. ...

The ponds will multiply the algae quickly and, to keep them from being infected from things in the air, they will be harvested every day. ...

With food, light and warmth, the algae produce proteins. By putting them under stress (by limiting nutrients), the algae can be induced to shift production to lipids - vegetable oils.

The oils are equivalent to oils from seed crops and are converted into biodiesel by the same process.

Depending on the refining process, they can be made into diesel, jet fuel or feedstock for other industrial products, like plastics.

Other products can be recovered, like astaxanthins for use in pharmaceuticals and feed additives.

At best, the algae produce about 35 percent lipids.

The remainder is largely protein, which can be processed into animal feed, and some carbohydrates, which could be made into ethanol.

What is More Cost Effective, Algae or Bacteria Fuel?

2008-07-10T22:31:00.000-07:00

One of the primary costs of deriving fuel from algae is the space required to grow the algae. Productivity of algae is calculated per acre. Algae requires sunlight and the amount of algae that can be grown on an acre is limited. Synthetic Bacteria on the other hand can produce oil without sunlight, so in comparison to algae the productivity per acre can be very high. One could theoretically grow bacteria in giant silos many stories tall. However, in order for synthetic bacteria to produce oil without sunlight they must consume sugar for energy. According to a recent article in Popular Mechanics, current technology still requires sugars to come from an easy to use source of sucrose such as sugar cane or corn. This means that synthetic bacteria fuel will compete for food stocks much the same way ethanol does, driving up the price of both. Technologies to easily derive sugars from nonfood stock cellulosic material, such as corn's remaining stalks, leaves and cobs, do not yet exist. Furthermore, even when they are developed, it estimated that it would take one acre to produce 2,000 gallons of fuel. Algae by comparison is expected to yield over 30,000 gallons per acre. On the other hand, cellulosic materials may be cheaper and easier to grow and harvest than algae.

There are, however, fuel producing bacteria that derive their energy from the sun using photosynthesis. Such bacteria would not have the advantage over algae of growing in the dark but there may be other advantages over algae. According to Bruce Rittman of the ASU BioDesign Institute,

Algae and bacteria both accumulate a lot of lipids, but they do so for different reasons. When bacteria accumulate a lot of lipids, they do it when they are growing fast. That is ideal. Algae do the opposite, and produce high lipids when under stress, and are not growing very well.

In other words, bacteria can produce lipids (oil) faster. Furthermore, bacteria excrete their oil which floats to the top of their bioreactor whereas algae requires costly extraction methods. It would be nice to see a method that use both algae and bacteria. The algae to grow and produce oil along with cellulosic material that can be metabolized by bacteria to release the oil in the algae and create even more oil.

The Pickens Plan

2008-07-09T23:25:00.001-07:00

T. Boone Pickens explains his plan to reduce American dependence on foreign oil. I like it.

LS9 Makes Oil from Bugs at $125 a Barrel

2008-07-08T22:37:00.000-07:00

LS9 has been called the leading company in developing fuel from synthetic bacteria. Recently, the President of LS9, Robert Walsh, appeared for an interview on CNN and gave us some numbers. Here is the money quote:

Right now, later this summer, we'll be making barrels a week of that. And 2010, we'll be making millions of gallons. And in 2011, hundreds of millions of gallons as we continue to scale up this process.

I think the other thing that's important is that right now this costs me $125 to make this a barrel. Our goal is to get to $50 a barrel so we can help everyone out.

If true, those are quite frankly some world changing statements. The next question of course is does the bacteria consume feed stocks to make petroleum? According to Robert Walsh, they do not.

[O]ne of the things we have designed into this, the bacteria, that they can use nonfood feed stocks. It's actually agricultural byproducts, wood chips, wheat straw, rice straw, that are collected already. I think that's the big plus. You have to disconnect yourself from the food crop issue.

Also, you're not going to be able to drive economics without doing that, which is important for the consumer.

Amazing. Why is this not front page news? I don't know but The Times of London has a slightly more sober analysis:

The closest that LS9 has come to mass production is a 1,000-litre fermenting machine, which looks like a large stainless-steel jar, next to a wardrobe-sized computer connected by a tangle of cables and tubes. It has not yet been plugged in. The machine produces the equivalent of one barrel a week and takes up 40 sq ft of floor space.

However, to substitute America’s weekly oil consumption of 143 million barrels, you would need a facility that covered about 205 square miles, an area roughly the size of Chicago.

That is the main problem: although LS9 can produce its bug fuel in laboratory beakers, it has no idea whether it will be able produce the same results on a nationwide or even global scale.

Sequesco's Grow in the Dark Synthetic Super Bugs

2008-07-07T22:14:00.000-07:00

Craig Venter, world famous biotech scientist extraordinaire, has for the last year been a high profile advocate for the potential of synthetic biology to create what he calls a "fourth generation biofuel" which are bacteria that eat carbondioxide and turn it into fuel. His company, Synthetic Genomics, has been hard at work on the problem for some time and a product is expected any minute now. Meanwhile, a company called Sequesco claims to have a synthetic bacteria that is already a fourth generation fuel. Here is the description by science writer Jeremy Jacquot, whose article has appeared on a number of blogs yesterday, that caught my attention.

Sequesco’s bacteria grow 10 times faster than most algae raised for biodiesel, and because they are non-photosynthetic, they can be grown 24 hours a day, rain or shine. Area isn’t a constraint for the bugs (only volume is), so they can be cultured in conventional, low-cost bioreactors. Since space isn’t an issue, there’s great potential for scalability, and the bioreactors can be installed almost anywhere.

As usual, we don't have any cost estimates about how much it costs to grow these bugs. Since these bugs do not use photosynthesis for energy, they must metabolize something for energy. What do they eat and how much does that food source cost? Nonetheless, the potential for cost effectiveness is there. The CEO of Sequesco, Lisa Dyson, is quoted by the Jacquot article as saying that the company plans to have a demonstration facility up by the end of 2009, to be followed in short succession with small and large commercial-scale plants in 2010 and 2011, respectively. It would be nice to see some peer review publications related to Sequesco's technology as well.

A Tale of Two Graphs

2008-07-07T15:32:00.001-07:00

The image above is the most recent prediction of sunspot activity from NASA. The graph below is NASA's prediction circa March 2006. Notice any differences? Cycle 24 has produced only a few minor sunspots and solar activity has been well below the predicted amount for years. In fact, a recent paper published by the Astronomical Society of Australia warns we are now in danger of global cooling.

Hydrogen from Algae at MIT.

2008-07-07T02:12:00.000-07:00

Shown in the video above at what is described as "the power plant at MIT," gases from a flew are piped through tubes filled with algae. Alan Alda interviews a researcher who wants to use the algae to consume C02 and nitrous oxide and release hydrogen. Interesting.

12,000 gallons of algae in 3 days?

2008-07-05T22:37:00.000-07:00

According to an article in the Current Argus, a research group in New Mexico, CEHMM, claims to have harvested 12,000 gallons of algae in 3 and a half days. CEHMM partners with the Los Alamos National Laboratory's Carlsbad office and the New Mexico State University Agriculture Science Center in its algae research. CEHMM grows algae in two large ponds. I could only find a small picture of the pond at right. By the looks of it, I would guess each pond is a quarter acre in size. If CEHMM is in fact getting 12,000 gallons in half a week from two such ponds it is truly remarkable. Assuming the species of algae that is used is 50% oil and if they are able to extract 90% of the oil, that works out to about 257 barrels of oil a week from a half acre (almost 14,000 barrels per year). It is rather hard to believe frankly. Consider that Valcent only claims to get 33,000 gallons of oil or 785 barrels per year from a one acre vertical bioreactor. CEHMM also claims to have a proprietary method of extracting oil from algae that they are keeping a secret. From the Current Argus,

At the Agriculture Science Center in Atoka, 5 miles outside the Artesia city limits, brooder ponds, incubators and two large harvesting ponds are dear to the heart of Lynn and researchers with the demonstration project. They have been working on the project since 2006, and they are beginning to see the light at the end of the tunnel.

The challenges have been many. The first was to grow algae that are stable and highly productive in our climate and provide them with optimum nutrients.

The second challenge was the ability to harvest the micro algae, which is so small the human eye can't see it, other than knowing it is in the pond by the greenish color of the water. But filtering and capturing the algae on a large scale looks promising, Lynn said.

The third, and biggest challenge, will be the extraction of the algae's desirable oil and developing the techniques for mass extraction in a cost-effective manner.

Lynn said CEHMM is fortunate to have NMSU's infrastructure, its researchers and Los Alamos National Lab working with his organization. "I honestly think we have the best staff in this industry," Lynn said. "No one else is trained in this industry like the people that we have." Lynn said because of the advances CEHMM has made since it began the research, the entire process of converting algae oil to biofuel is being kept under wraps. "We have actually had people representing companies come to the agriculture science center and try to find out how we are doing it," Lynn said. "Some have even come with cameras. We asked them to leave."

Quantum Fracturing

2008-07-05T09:27:00.001-07:00

Extracting oil from algae is one of the more costly steps in producing fuel from algae. A method of efficient oil extraction is critical to making algae fuel cost competitive with fossil fuels. Yesterday, OriginOil, a company in Los Angeles, announced the filing of its fourth patent for a method of extracting oil from algae called Quantum Fracturing.

OriginOil's latest invention builds on the company's first patent, Quantum Fracturing, in which ultrasound from intense fluid fracturing breaks down algae cells much in the same way a high-frequency sound wave breaks glass. In the new patent filing, the flowing algae biomass is first sent through a shielded wave guide system where it receives low-wattage, frequency-tuned microwave bursts, breaking the cell walls. Quantum Fracturing is then applied to these pre-cracked cells to complete the oil extraction. The result is a system that makes low-energy and environmentally-safe algae oil production a reality.

"High energy and operating costs defeat the goal of a cost-effective alternative to petroleum", commented Paul Reep, OriginOil's senior technical advisor. He continued, "The OriginOil extraction system is effective, safe and energy-efficient. I'm proud of the team of lead inventor Steven Shigematsu and co-inventor Nicholas Eckelberry, who have demonstrated, once again, their ability to combine lateral thinking with solid engineering advances."

It would be great to know the actual cost of this method of extracting oil from algae in contrast to the more common methods of expeller and/or solvent.

C02 Bioreactors

2008-07-04T15:16:00.000-07:00

The video above explains the design of a patented bioreactor from GS CleanTech. It illustrates how a very fancy and hightech C02 bioreactor might work. Below is an example of a bioreactor in the real world that is actually being used. It is not as fancy as the CleanTech design and the harvesting of the algae seems less efficient, nontheless it is a real world example of the concept and has been successful enough that the project is being expanded. These videos give a lot of emphasis on the environmental aspects of the technology, which is not as interesting as a cost effective source of fuel.

Thermometers Not Cooperating With Global Warming

2008-07-02T22:17:00.000-07:00

Anthony Watts has been on a tear recently of excellent posts concerning global warming over at his blog "Watts Up With That?". The above graph created by Anthony Watts shows global temperatures since 1978. Do you see a warming trend? You might notice that the current temperature is within less than one tenth of a degree of where it was in 1978. In a period of rapid global industrial expansion and sky rocketing carbon emissions - world temperatures during that period peaked in 1998, that's a decade ago for you non-math majors. As Brett Stevens recently wrote in the Wall Street Journal in regard to the absence of evidence for global warming:

NASA now begrudgingly confirms that the hottest year on record in the continental 48 was not 1998, as previously believed, but 1934, and that six of the 10 hottest years since 1880 antedate 1954. Data from 3,000 scientific robots in the world's oceans show there has been slight cooling in the past five years, never mind that "80% to 90% of global warming involves heating up ocean waters," according to a report by NPR's Richard Harris.

The Arctic ice cap may be thinning, but the extent of Antarctic sea ice has been expanding for years. At least as of February, last winter was the Northern Hemisphere's coldest in decades.

Global Warming: The Anti-Capitalism

2008-07-02T21:39:00.000-07:00

Bret Stevens writing in the Wall Street Journal hit the nail on the head in regards to what motivates the hard core believers in global warming- and it isn't scientific evidence.

Socialism may have failed as an economic theory, but global warming alarmism, with its dire warnings about the consequences of industry and consumerism, is equally a rebuke to capitalism. Take just about any other discredited leftist nostrum of yore – population control, higher taxes, a vast new regulatory regime, global economic redistribution, an enhanced role for the United Nations – and global warming provides a justification. One wonders what the left would make of a scientific "consensus" warning that some looming environmental crisis could only be averted if every college-educated woman bore six children: Thumbs to "patriarchal" science; curtains to the species.

That is exactly right. Vaclav Klaus, the President of the Czech Republic recently wrote

As someone who lived under communism for most of his life, I feel obliged to say that I see the biggest threat to freedom, democracy, the market economy and prosperity now in ambitious environmentalism, not in communism. This ideology wants to replace the free and spontaneous evolution of mankind by a sort of central (now global) planning.

The environmentalists ask for immediate political action because they do not believe in the long-term positive impact of economic growth and ignore both the technological progress that future generations will undoubtedly enjoy, and the proven fact that the higher the wealth of society, the higher is the quality of the environment. They are Malthusian pessimists

I do not expect that global warmists will be happy with the recent technological improvements in solar energy and algae fuel that I have been writing about on this blog. Because while these technologies address the issue of carbon emissions they do not address what really motivates the climate change alarmists - dislike of capitalism.

Wall Street Journal On Scum Power

2008-07-01T19:26:00.000-07:00

The Wall Street Journal has done a report on algae fuel and it wastes no time getting right to the heart of the business case for algae energy.

The truth is, it is too good to be true -- at least right now. While engineers can grow small batches of algae in beakers in laboratories and convert it into fuel, re-creating that process on an industrial scale has proved elusive and expensive when compared with the price of gasoline. ...

"Growing the algae in a controlled way at commercial scale is a big challenge," says Randy Balik, vice president of business development at GreenFire Energy, which is seeking additional funding for its effort to find a way to do just that. "We are, optimistically, two to three years away, maybe four to five, from realistic, large-scale commercialization." ...

Today, the cheapest algae production -- done for the food-supplement industry -- costs $5,000 per ton, says F. Blaine Metting, a researcher at the Pacific Northwest National Laboratory, a U.S. Department of Energy facility in Richland, Wash. Still, he believes that if the crude oil stays at its current lofty price, algae-based oil could be competitively priced in five years if engineers and scientists can improve algae productivity per acre. "There are fundamental biological questions that need to be answered," he says.

According to the WSJ article, the optimistic outlook is two to five years for commercial viability for algae fuel. That does not make algae energy too good to be true in a realistic business sense, in the world of biotechnology and energy development this is actually quite short. Nonetheless, the take away point from the article is that algae fuel is still not yet commercially viable.

Investment in Renewable Energy Skyrockets

2008-07-01T18:16:00.000-07:00

We could call it "green" energy but I don't like the phrase for the simple reason that it smacks of environmental "glowball warming" nonsense. C02 is not a pollutant anymore than water vapor is a pollutant. If the earth is warming it will probably result in a net benefit to humanity rather than a negative. However, renewable energy has become a business proposition that stands on its own merits. I perceive renewable energy as the next big thing in capitalism. My suspicions have been bolstered by the fact that investment in renewable energy surged some 60 per cent to $148 billion in 2007. From the Times.

Global investment in renewable energy surged 60 per cent to $148 billion (74.3 billion) last year and is still accelerating despite the slowdown in the wider economy, according to the United Nations.

Wind energy attracted the biggest amount of around $50.2 billion and solar, the fastest growing area, attracted investment of $28.6 billion. Since 2004, the global market for solar energy has grown by annual rate of 254 per cent.

The report from the UN’s Environmental Programme (UNEP) likened the flood of investment to the renewable energy sector to a “green gold rush”.

“Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe,” said Achim Steiner, head of UNEP.

Public investment in renewable energy via the markets more than doubled to $23.4 billion, up from $10.6 billion in 2006, the report said.

While there was strong growth in wind and solar energy, the biofuel sector was weaker with funds dropping by nearly one third to $2.1 billion.

The report indicated that the renewable energy sector is set to expand to $450 billion by 2012, and $600 billion by 2020.

“We have a significant economic signal here, that goes well beyond what, 10 years ago, energy thinktanks or international financial institutions thought would happen,” Mr Steiner said.

Vertical Algae Bioreactor

2008-07-01T14:04:00.000-07:00

A one acre pond of algae produces up to 20,000 gallons of oil per year. A closed system vertical bioreactor such as the one shown in the above video can use land even more efficiently. According to Valcent, a company developing algae related energy solutions, if an area one tenth the size of the state of New Mexico were committed to algae it could supply the entire energy needs of the United States. Valcent anticipates that it can achieve yields of 100,000 gallons of oil per acre per year.

Valcent recently issued a press release regarding the productivity they were seeing with their bioreactor:

The research and development team of Valcent Products Inc. has now completed twelve months of the algae vertical bioreactor development program. During a 90-day continual production test, algae was being harvested at an average of one gram (dry weight) per liter. This equates to algae bio mass production of 276 tons of algae per acre per year. Achieving the same biomass production rate with an algal species having 50% lipids (oil) content would therefore deliver approximately 33,000 gallons of algae oil per acre per year.

First Solar, energy at $1.14 per watt

2008-06-27T13:10:00.000-07:00

Yesterday I posted a blog entry about Nanosolar's manufacturing technique and their claim to manufacture at $1.00 per watt. I also noted that the reality of the claim was not verified. Meanwhile, First Solar, the world's leading thin film solar panel company, claims to have manufactured panels at a cost of $1.14 per watt in the first quarter of 2008. The company predicts that costs bellow $1.00 per watt are achievable. Whereas Nanosolar uses a photovoltaic made from a copper-indium-gallium selenide (CIGS) semiconductor, First Solar uses a photovoltaic made from cadmium and tellurium (CdTe). Both elements are byproducts of the mining and production of base metals such as zinc and copper. These materials are present in abundant quantities to support multiple giga-watts of annual production.

First Solar announced $196 million in sales in the first quarter of 2008 up almost 300% from first quarter sales of 66 million in 2007. First Solar stock is currently trading at $265 per share.

First Solar will not be left without competition. GE has acquired a majority interest in PrimeStar Solar, a start-up that intends to compete in the CdTe solar panel market. Perhaps even more bullish on the technology than First Solar, the CEO of PrimeStar, Fred Seymour, says he sees a "clear path for getting to 15% conversion efficiency modules" and that the company "is well on track to beat 70 cents per watt without major breakthroughs." Unlike First Solar, PrimeStar Solar does not yet manufacture or sell a product. However, GE intends to achieve 1 billion dollars a year in solar energy revenue within three years.

Spain gives rights to Apes

2008-06-27T10:05:00.000-07:00

The Spanish parliament has adopted a resolution requiring the Government to promote the Great Apes Project internationally and ensure the protection of apes from “abuse, torture and death.” The Great Ape Project was founded by philosophers Peter Singer and Paola Cavalieri who claim that hominids such as chimpanzees, gorillas and orang-utans should enjoy the right to life and freedom and not to be mistreated. Critics complain that new resolution gives rights to animals previously only recognized for humans. For the proponents of ape rights this is precisely the point. From the London Times:

The resolutions will outlaw harmful experiments on great apes, though activist say that they have no knowledge of any being carried out in Spain. It will also make keeping great apes for circuses, TV commercials or filming a criminal offence.

Keeping apes in zoos will remain legal, but conditions for the 350 apes in Spanish zoos will have to improve. Animal rights activists say that 70 per cent of apes in Spanish zoos live in sub-human conditions.

This is more than a little bit nutty and is especially surprising coming from the nation famous for bull fights. What this indicates is that the Spanish have lost the moral and philosophical framework to distinguish between a human and an animal. That is a sad state of affairs.

Nanosolar, solar energy at $1 per watt

2008-06-26T11:20:00.000-07:00

Nanosolar is a Silicon Valley start-up that manufactures thin film solar panels. The video above shows Nanosolar's method of manufacturing solar cells by printing photovoltaic material directly upon sheets of aluminum at a rate of 100 feet per minute. Nanosolar claims that using this method they can manufacture solar cells at $1 per watt. If they can really produce solar cells at $1 per watt, it will represent a huge shift in energy economics. Nanosolar estimates that at $1 per watt, the over all cost of a system will be $2 per watt compared to a coal plant which has a cost of $2.10 per watt.

The average home uses about 8,900 kilowatt hours in a year. If a solar panel could generate electricity 24 hours a day, a one kilowatt solar panel would be sufficient to power the average American home. However, every place on earth averages 12 hours of daylight and many days are cloudy. Assuming a panel can average 6 hours of sunlight a day, a four kilowatt panel should handle the power needs of an average home. This type of array would generate excess electricity during peak hours on hot sunny days when electricity is in high demand which could be sold back to the grid in exchange for credits for energy used from the grid on cloudy days or at night.

At a price of $2 per watt a four kilowatt system would cost $8000. The cost of electricity, depending on where you live, is about $.12 per kilowatt hour. The average homes spends about $1068 on electricity per year. So over the course of a decade, a Nanosolar system would save the average home $2,600 excluding financing charges and assuming that energy prices do not rise. If the panels last 25 years, as warrantied by the company, the average home would save approximately $18,700. However, energy prices are almost certain to rise and so the actual savings would be greater.

Unfortunately, it is impossible to verify if Nanosolar can actually manufacture at $1 per watt. The company is not disclosing prices and claims that current manufacturing capacity is sold out for the next 12 months.

Indian Company to Outsource to the US

2008-03-19T09:02:00.000-07:00

Skilled workers, moderate labor restrictions, and the weak dollar continue to make outsourcing to the United States attractive, even for countries with very low labor costs such as India.

Wipro plans to open more centres in the US in a continuing trend of “reverse outsourcing”, as Indian information technology outsourcing companies recruit in the US and Europe.

Azim Premji, chairman of Wipro, India’s third-largest information technology outsourcing company, this week said it aimed to hire more than 1,000 people in the US to staff two new software development centres in Michigan and Atlanta.

See the article here.

Still No Sunspots

2008-03-13T10:45:00.000-07:00

The graphic above is a NASA prediction circa March 2006 of when solar cycle 24 would arrive. Click here or on the graphic for a larger image. As you can see from the graph, solar cycle 24 was expected to begin in late 2006 or early 2007. It is now March of 2008 and solar cycle 24 has not arrived. The latest solar observations, photographs of which are posted here, continue to show that there are still zero sunspots. According to NASA's prediction, we were expected to be well into solar cycle 24 and experiencing upwards of thirty sunspots per month at this time.

Global Relative Tax Burdens

2008-03-12T16:22:00.000-07:00

From the Economist.

BMW Shifts Production from Germany to U.S.A.

2008-03-10T11:36:00.000-07:00

German auto company BMW will reduce its workforce in Germany while increasing production in the United States by 50%.

"This is completely driven by the plunge in the dollar," said Greg Gardner with Oliver Wyman, publisher of the Harbour Report on automotive manufacturing activity. "It is untenable to produce at a much higher cost in Germany."

The euro climbed to record heights Friday, reaching $1.5463 before falling back to $1.5335 in late trading after the Federal Reserve announced it would provide more cash to banks that need it. That means European goods cost more for Americans to buy.

By building the cars in the U.S., BMW can save money on the lower dollar and on wages because its South Carolina workers make less than German workers, Gardner said.

The declining dollar also means BMW and other foreign automakers probably will start buying locally for more of the parts used by their U.S. plants, he said. That shift in production has led to the cuts at home for the Munich-based luxury car maker.

Go here for the full story.

What Has Obama Ever Accomplished Anyway?

2008-03-07T13:23:00.000-08:00

The Cost of War in Context, Part III

2008-03-05T10:25:00.000-08:00

The Bush administration is seeking $108 billion in funding for the War in Iraq in 2008. While this is a sizable sum by any measure, how large is it in the context of the $14 trillion US economy? An interesting data point for comparison was given today by the American Automobile Association and Cambridge Systematics. According to research performed by Cambridge Systematics for the automobile association, auto accidents in the United States cost consumers $164 billion annually. In comparison to the often decried cost of war in Iraq, the even greater cost of auto accidents is incurred almost without notice.

The Cost of War in Context, Part II

2008-03-04T10:41:00.000-08:00

What percentage of active duty United States Army and Marines does the war in Iraq require? The pie chart below shows the percentage of Army and Marine troop deployment at the peak of the "surge" in September of 2007. The percentage of active duty military deployed to Iraq is much smaller when all branches of the military are considered, however, since the war in Iraq primarily drains ground troop resources only Army and Marine forces were included in this pie chart. For the source of these figures, see here.

Is the Liberty Dollar Legal?

2008-03-03T13:35:00.000-08:00

A couple of days ago I posted on NORFED's fascinating attempt to create an alternative currency in the United States. According to the U.S. Mint, this is illegal. According to NORFED supporters, it is not. Who is correct? The law that the U.S. Mint cites to as making NORFED's activity illegal is 18 U.S.C. § 486.

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.

According the the U.S. Mint,

Under 18 U.S.C. § 486, it is a Federal crime to pass, or attempt to pass, any coins of gold or silver intended for use as current money except as authorized by law. According to the NORFED website, "Liberty merchants" are encouraged to accept NORFED "Liberty Dollar" medallions and offer them as change in sales transactions of merchandise or services.

In all fairness, the law is very clear, it is illegal to "pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money." Setting aside the fact that the NORFED coins look an awful lot like United States currency, 18 U.S.C. § 486 outlaws minting coins for use as current money whether you are counterfeiting or whether you are minting coins of "original design." NORFED denies that the coins are intended for use as current money, however, their website states,

The Liberty Dollar is private, inflation proof REAL money that is devoid of inflation and debt. It's a currency of the people, for the people, and by the people.

NORFED supporters claim that 18 U.S.C. § 486 only applies to coins and that NORFED only intended the paper notes it created to be used as currency and not the coins. This is a nuance that is likely lost on the casual observer and seems to be refuted by NORFED's rather self-incriminating web site, which states,

The Liberty Dollar is available in three forms: metal Gold & Silver Libertys (which are by far the most popular), paper Silver Certificates, and in digital form for use on-line and via email.

Unless those "Gold & Slivery LIbertys" are something other than coins, NORFED will have a very difficult time establishing their innocence.

The Cost of War in Context

2008-03-03T12:43:00.000-08:00

Although the loss of even one human life is a tragedy, the toll in the Iraq war is low by historical standards, not only in comparison to other wars but also in comparison to years of peace. When all causes are taken into account, the number of deaths of active duty military personnel during the Iraq war has not reached the number of peace time deaths during the 1980s. This is primarily do to the fact that the number of active duty military was much higher during the Cold War. See the graph below.

For source data see here.

Coalition Fatalities Continue to Decline in Iraq

2008-02-29T12:36:00.000-08:00

From a peak of 123 fatalities in May of 2007, the month before the United States announced it was beginning its "Surge" related maneuvers, coalition fatalities in Iraq have declined to 30 in February of 2008. See icausalties.org for more detail.

Competing Currency in the USA

2008-02-29T10:56:00.000-08:00

Presidential candidate and Libertarian leader Ron Paul claims that Americans are held hostage to the unsound currency manipulations of the United States Federal Reserve. Essentially, Ron Paul is about as big an inflation hawk as you will find. He doesn't care for fiat money and believes that in the very least Americans should be able to choose the currency that they use. To this end he has proposed that Americans be allowed to use competing currencies. An American corporation, NORFED, has taken up the charge and is issuing notes backed by gold and silver and coins. This "currency" is more popularly known as the "LIberty Dollar." The problem is, this is apparently illegal. In November of 2007, federal agents raided NORFED and confiscated 2 tons of copper coins and 500 pounds of silver coins. According to the United States Mint:

Under 18 U.S.C. § 486, it is a Federal crime to pass, or attempt to pass, any coins of gold or silver intended for use as current money except as authorized by law. According to the NORFED website, "Liberty merchants" are encouraged to accept NORFED "Liberty Dollar" medallions and offer them as change in sales transactions of merchandise or services.

NORFED tells "Liberty associates" that they can earn money by obtaining NORFED "Liberty Dollar" medallions at a discount and then can "spend [them] into circulation."

NORFED’s "Liberty Dollar" medallions are specifically marketed to be used as current money in order to limit reliance on, and to compete with the circulating coinage of the United States. Consequently, prosecutors with the United States Department of Justice have concluded that the use of NORFED’s "Liberty Dollar" medallions violates 18 U.S.C. § 486, and is a crime.

A Day Without Sunspots

2008-02-27T09:53:00.000-08:00

It is believed that sunspots play a roll in temperature here on earth. Basically, the theory is the more sunspots the warmer it gets on earth. This commentary on the relationship is from the National Weather Service:

From the mid 1600s to early 1700s, a period of very low sunspot activity (known as the Maunder Minimum) coincided with a number of long winters and severe cold temperatures in Western Europe, called the Little Ice Age. It is not known whether the two phenomena are linked or if it was just coincidence. The reason it is hard to relate maximum and minimum solar activity (sunspots) to the Earth's climate, is due to the complexity of the Earth's climate itself. For example, how does one sort out whether a long-term weather change was caused by sunspots, or maybe a coinciding El Nino or La Nina? Increased volcanic eruptions can also affect the Earth's climate by cooling the planet. And what about the burning of fossil fuels and clear cutting rain forests? One thing is more certain, sunspot cycles have been correlated in the width of tree ring growth. More study will be conducted in the future on relating sunspot activity and our Earth's climate.

The Solar Cycle: Sunspots increase and decrease through an average cycle of 11 years. Dating back to 1749, we have experienced 22 full solar cycles where the number of sunspots have gone from a minimum, to a maximum and back to the next minimum, through approximate 11 year cycles. We are now well into the 23rd cycle, with the 24th cycle right around the corner. The number of sunspots in this cycle reached a peak in May, 2000 where the number of sunspots were measured at near 170. A secondary sunspot maximum occurred near the beginning of 2002 where the sunspot number was about 150. The next sunspot minimum is forecast to occur in late 2006 through mid 2007.

The photograph of the sun taken above is from a link that updates with the latest photograph of the sun. As you can see, there are no sunspots. And there have been almost zero over the last couple of weeks. The last solar cycle has mostly ended and typically a new one would have begun. But it hasn't happened. The end of the last solar cycle and the current absence of sunspots coincides with the largest drop in temperature over a 12 month period in recored history. This is a record drop in temperature correlating with a record absence of sunspots. In my opinion the correlation between low sunspots and a drop in temperatures, both now and during the Maunder Minimum or "little ice age", bolsters the argument for causation.

Global Temperature Drops Percipitously

2008-02-26T13:32:00.000-08:00

Well, so much for global warming. There is now solid evidence that something is driving the temperature of the earth down at an alarming rate. The decline in global temperatures over the last twelve months is the fastest temperature change ever recorded.

All four major global temperature tracking outlets (Hadley, NASA's GISS, UAH, RSS) have released updated data. All show that over the past year, global temperatures have dropped precipitously.

Meteorologist Anthony Watts compiled the results of all the sources. The total amount of cooling ranges from 0.65C up to 0.75C -- a value large enough to erase nearly all the global warming recorded over the past 100 years. All in one year time. For all sources, it's the single fastest temperature change ever recorded, either up or down.

Go here for the full article.

The Coldest Winter in 40 Years?

2008-02-26T07:39:00.000-08:00

Is the Northern Hemisphere winter of 2007/2008 the coldest winter in 40 years? According to an article at the National Post it may be.

Snow cover over North America and much of Siberia, Mongolia and China is greater than at any time since 1966.

The U.S. National Climatic Data Center (NCDC) reported that many American cities and towns suffered record cold temperatures in January and early February. According to the NCDC, the average temperature in January "was -0.3 F cooler than the 1901-2000 (20th century) average."

China is surviving its most brutal winter in a century. Temperatures in the normally balmy south were so low for so long that some middle-sized cities went days and even weeks without electricity because once power lines had toppled it was too cold or too icy to repair them.

There have been so many snow and ice storms in Ontario and Quebec in the past two months that the real estate market has felt the pinch as home buyers have stayed home rather than venturing out looking for new houses.

In just the first two weeks of February, Toronto received 70 cm of snow, smashing the record of 66.6 cm for the entire month set back in the pre-SUV, pre-Kyoto, pre-carbon footprint days of 1950.

Luskin Takes on the Bears

2008-01-12T13:55:00.000-08:00

Paul Krugman foe Donald Luskin has a new article at smartmoney.com that challenges the rhetoric of those who claim a recession is imminent.

Consider the case of Robert Rosenberg, the celebrated economist for Merrill Lynch. He's been bearish forever (that didn't stop Merrill Lynch from throwing away untold billions on foolish investments in exotic subprime mortgage derivatives — but that's another story). Rosenberg is one of those economists who is very facile at quoting economic statistics — and massaging them to make his bearish case. Unless you're an economist yourself, it's pretty easy to get swayed by his seemingly authoritative arguments.

This week, following the announcement that the unemployment rate has risen to 5% from a low of 4.4% earlier this year, Rosenberg has gotten a lot of publicity "proving" statistically that this means we're heading into recession. He told Merrill clients: "At no time in the past 60 years has the unemployment rate risen 60 basis points (50 bps is the actual cutoff) from the cycle low without the economy slipping into recession..." And he attached a chart, claiming that this was true "100% of the time."

Scary, huh? An indicator that works all the time. Never misses!

But let's look a little closer. Note that Rosenberg cheats a bit by talking about rises in the unemployment rate "from the cycle low." What does that mean? How do you know when you're at the "cycle low," until months or years have gone by and you can identify a particular moment as a "cycle low?"

This is important, because there have been times when the unemployment rate has risen by 50 basis points, or more, when a recession did not follow. But apparently Rosenberg doesn't count those, because those weren't a "cycle low" according to his personal definition. So when you look at all the data, not just the examples that fit Rosenberg's argument, what he claims is not actually true "100% of the time."

One example is February 1986, when the unemployment rate surged from 5.7% to 6.2% in a single month. No recession followed. The next recession was not until 1990.

You can find the full column here.

Are Ron Paul's Libertarian Views Practical?

2008-01-12T13:34:00.000-08:00

A column in the Washington Post today by Michael Kinsley examines whether the principles of libertarian candidate Ron Paul are practical.

So what is wrong with the libertarian case for extremely limited government? Economics 101 teaches some of the basic justifications for government interference in the economy. Some things, such as the cost of national defense, are "public goods." We can't each decide for ourselves how much defense we want. We have to decide that together. Then there are "externalities," which are costs (or, sometimes, benefits) that your decisions impose on me. Pollution is the classic example. Without government involvement of some sort to override our individual judgments, we will produce more pollution than most of us want.

There are "market-oriented" solutions to this problem, but there is a difference --often forgotten, especially by Republicans -- between using market forces and leaving something to the market. The point of principle is whether the government should intervene at all. How it chooses to intervene is purely pragmatic.

Libertarians have a fondness for complex arrangements to make markets work in situations where the textbooks say they can't. Hey, let's issue stamps, y'see, and use the revenues to form a corporation that sells stock to buy military equipment, then the government leases the equipment and the stockholders vote on whether to user it -- and so on. The point becomes proving a point, not economic or government efficiency.

See the full column here.

Is Huckabee's Fair Tax Feasable?

2008-01-11T11:05:00.000-08:00

Presidential candidate Mike Huckabee is proposing a "Fair Tax" that abolishes the IRS and income tax and replaces it with a national sales tax. Today at Slate.com, economist Steven E. Landsburg calls Huckabee's Fair Tax plan "brilliant." Here is an excerpt.

With an income tax, you pay up front. Earn a dollar in 2008, and you'll pay 20 cents tax in 2008. (Actually, you'll pay more, of course; I'm assuming a 20 percent tax rate for the sake of illustration.) With a sales tax, that 20 cents sits in your bank account earning interest until the day you spend your earnings. Let me say that again: Your pretax earnings sit around collecting interest until the day you withdraw and spend them. Where have we heard that before? It's exactly what happens when you invest in a traditional IRA!
So, one way to mimic the effect of a sales tax is to let you deposit every dollar you earn directly into an IRA. As far as your family—or any family—is concerned, the effects are identical. A sales tax is the exact equivalent of an income tax with a provision for unlimited IRA contributions (and no withdrawal penalties). The merits and demerits of the Huckabee tax plan are identical to the merits and demerits of a vastly liberalized IRA policy.
A lot of economists, myself included, think that there's a lot to be said for unlimited IRAs. Any conceivable tax system discourages work, which is unfortunate but unavoidable. But the current system also discourages saving, which is avoidable. A liberalized IRA policy—or, equivalently, a sales tax—eliminates that problem. The downside is that when IRAs grow, there's less income to tax, so tax rates must be higher—which increases the disincentive to work. But for the past decade or so, the macroeconomics journals have been rife with papers arguing—on highly technical grounds—that the terms of that tradeoff are well worthwhile.

See the rest of the article here.

John Stossel on the Ethanol Myth

2008-01-09T09:28:00.000-08:00

No Convincing Evidence For Decline In Tropical Forrests

2008-01-07T15:50:00.000-08:00

According to a study to be published today in the Proceedings of the US National Academy of Sciences by Dr Alan Grainger, Senior Lecturer in Geography and one of the world's leading experts on tropical deforestation, there is no convincing evidence for decline in tropical forests. Using the latest satellite data to survey the forests in 63 countries, Dr. Grainger found 1,181 million hectares of tropical forests, compared to an estimated 1,081 million hectares for the same 63 countries in 1980.

[T]he lack of apparent decline in tropical moist forest area suggests that deforestation is being offset by natural reforestation at a higher rate than previously thought. Dr Grainger uses data from FAO’s latest report, published in 2006, to show that in a few countries, such as Gambia and Vietnam, forest area has actually expanded since 1990, as the reforestation rate has exceeded the deforestation rate. He believes that a rise in natural reforestation is a logical precursor to this switch from net deforestation to net reforestation. It has already been the subject of studies in Brazil, Ecuador and India, but available data are too poor for us to be sure of its exact scale worldwide.

See the full article here at Physorg.com.

Economists Overwhelmingly Predict No Recession

2008-01-07T13:22:00.000-08:00

If you listen to the politicians, it sounds as if it is common knowledge that America is headed for a recession. Economists, however, seem less certain. 52 of 54 economists polled by Business Week did not predict a recession.

The bottom line looks like this: The economists project, on average, that the economy will grow 2.1% from the fourth quarter of 2007 to the end of 2008, vs. 2.6% in 2007. Only two of the forecasters expect a recession, although it might feel like one if there's sluggish growth over the next couple of quarters, as many predict. Almost all think the risk of a downturn has risen substantially in recent months.

As a group, the forecasters say slow growth will lift the jobless rate from 4.7% in November to 5.1%, and it will hold down inflation. As oil prices level off or decline, the yearly growth in consumer prices will slide from 4.3% in November to 2.4%, while core inflation, which excludes energy and food, will hold steady at a tame 2.2%. Profits will grow in the low single digits. Home prices will fall about 7%, but housing starts will bottom out by midyear.

To see the results of the survey, go here.

The Myth of the Shrinking Middle Class

2008-01-06T16:48:00.000-08:00

Populist politics is all the rage this election year. Jonathon Edwards seems to be channeling the spirit of Huey Long as he vows to "Fight! Fight! Fight!" corporate greed. On the Republican side, Huckabee is making headway with populist rhetoric, winning the Iowa caucus with little financing. Central to the populist argument is the claim that the middle class is disappearing in the United States as a result of being exploited by corporate greed, tax policies that favor the rick, and international trade. Unfortunately for the populists, it is not true. George Will has an excellent article at Real Clear Politics where he gives some interesting facts.

Economist Stephen Rose, defining the middle class as households with annual incomes between $30,000 and $100,000, says a smaller percentage of Americans are in that category than in 1979 -- because the percentage of Americans earning more than $100,000 has doubled from 12 to 24, while the percentage earning less than $30,000 is unchanged. "So," Rose says, "the entire 'decline' of the middle class came from people moving up the income ladder." Even as housing values declined in 2007, the net worth of households increased.

Huckabee told heavily subsidized Iowa -- Washington's ethanol enthusiasm has farm values and incomes soaring -- that Americans striving to rise are "pushed down every time they try by their own government." Edwards, synthetic candidate of theatrical bitterness on behalf of America's crushed, groaning majority, says the rich have an "iron-fisted grip" on democracy and a "stranglehold" on the economy. Strangely, these fists have imposed a tax code that makes the top 1 percent of earners pay 39 percent of all income tax revenues, the top 5 percent pay 60 percent, and the bottom 50 percent pay only 3 percent.

See the whole article here.

Consumer Spending Rises at Fastest Rate in Over Three Years

2007-12-21T13:52:00.000-08:00

Well it looks like November retail beat expectations rather handedly. The consensus estimate for November was a .7% increase over October. According to a report from the Associated Press,

Consumers put aside worries about slumping home sales and soaring gasoline prices and headed to the malls in November, pushing spending up by the largest amount in 3 1/2 years. The better-than-expected surge lessened fears of an imminent recession.

The Commerce Department reported Friday that consumer spending shot up 1.1 percent last month, nearly triple the October gain. It was the biggest one-month jump since a 1.2 percent rise in May 2004 and was significantly higher than the 0.7 percent gain analysts had expected.

For the rest of the article, go here.

The Awesome Power of Arnold Schwarzenegger

2007-12-20T11:46:00.000-08:00

From the Washington Times:

Last January, $1.42 billion worth of California produce was lost to a devastating five-day freeze. Thousands of agricultural employees were thrown out of work. At the supermarket, citrus prices soared. In the wake of the freeze, California Gov. Arnold Schwarzenegger asked President Bush to issue a disaster declaration for affected counties. A few months earlier, Mr. Schwarzenegger had enthusiastically signed the California Global Warming Solutions Act of 2006, a law designed to cool the climate.

Okay, well mission accomplished Governator. Now can you pass a bill warming us back up? It turns out that 2007 is one of the coldest years on record.

See the rest of the Washington Times article on the record cold in 2007 here.

Also, go here for the U.S. Senate report on how "Over 400 Prominent Scientists Disputed Man-Made Global Warming Claims in 2007."

The Unintended Consequences of Ethanol

2007-12-20T10:29:00.001-08:00

President Bush signed a major energy bill Wednesday that calls for production of 15 billion gallons a year of corn-based ethanol fuel and 21 billion gallons of "advanced biofuels" from other raw materials. The unintended consequences of ethanol are explained in the upcoming issue of MIT's Technology Review.

More alarming, the boom in ethanol production is driving up the price of food. Of the record 93 million acres of corn planted in the United States in 2007, about 20 percent went to ethanol. Since most of the rest is used to feed animals, the prices of beef, milk, poultry, and pork are all affected by increases in the cost of corn. The international Organization for Economic Coöperation and Development (OECD) recently warned that the "rapid growth of the biofuels industry" could bring about fundamental shifts in agricultural markets worldwide and could even "cause food shortages."

Add this to the fact that ethanol is highly inefficient and does not provide a net energy gain and you have the makings of a fiasco that can do real economic damage. The forces that drive ethanol are a perfect storm of half baked ideas and misguided good intentions; environmentalism, global warming nonsense, Iowa politics, and energy independence. Ethanol is a mirage that finds appeal across the political spectrum. As far as I am aware, John McCain is the only Presidential candidate taking a stand against government subsidies for ethanol.

See the MIT article here.

U.S. Trade Deficit Continues to Shrink

2007-12-18T09:26:00.000-08:00

The U.S. trade deficit is continuing to shrink. The balance on trade of goods and services and income receipts and payments has decreased from the third quarter of 2006 at $193.5 billion to $152.7 billion in the third quarter of 2007. This over 40 billion dollar narrowing of the trade deficit has been accomplished primarily by an increase in exports which has outpaced the increase in imports. The table below shows the relative growth of the accounts and the narrowing of the deficit. These figures do not include unilateral transfers of money, such as foreign workers sending money to relatives and family in foreign countries, estimated at $25.8 billion in the third quarter of 2007.

Currently, imports are 24.5% greater than exports. In the 3rd quarter of 2006, imports were 36.3% greater than exports. At the current rates of growth, the United States would eliminate its trade deficit in four years.

The source of this information is the Bureau of Economic Analysis.

Why Were Not In A Recession

2007-12-16T14:37:00.000-08:00

The single most interesting argument I have seen against the idea that we are in or headed for a recession is the graph below from Mark Perry's blog Carpe Diem. The shaded areas represent a recession. You will notice that the last three recessions correlated with a decline in industrial production but not consumer spending. According to the latest Fed report, total industrial output grew by .3 percent in November and is up 2.1% from one year ago. Given the continuing increase in industrial production, it seems rather improbable that we are in a recession.To get Mark Perry's learned commentary on this topic, go here.

Are We In A Recession?

2007-12-16T10:44:00.000-08:00

Forget about all the gloomy forecasts for 2008, the New York Times has decided it is time to look deep into our soul and confront the recession within. The Times invited six experts to answer the question, "Are we in a recession?." Here is a sampling of the responses.

Stephen S. Roach, You Can Almost Hear It Pop

The current recession is all about the coming capitulation of the American consumer — whose spending now accounts for a record 72 percent of G.D.P.

Marcelle Chauvet and Kevin Hassett, The Facts Say No

According to the model, the probability that the American economy was in a recession in October, the last month for which we have data, was only 16.5 percent.

Laura Tyson, Bet the House on It

Plummeting real estate values and escalating foreclosures will cause further losses on mortgage-related securities and will further burden American consumers already dealing with higher energy prices and substantial debt.

Jason Furman, Not if Exports Save Us

Net exports added 1.4 percentage points to economic growth over the past six months, more than making up for the 0.7 percentage point subtracted by the decline in residential construction. Exports should continue to grow over the coming year.

James Grant, Nobody Knows

Prices have not come down as they should have. Neither has indebtedness. The architecture of the economy remains as it was. Land, labor and capital are still structured for an imagined glittering future.

Martin Feldstein, Wait Till Next Year

My judgment is that when we look back at December with the data released in 2008 we will conclude that the economy is not in recession now.

See the whole collection of essays here.

Credit Crisis? What Credit Crisis?

2007-12-16T01:00:00.000-08:00

WSJ Realtime has an interesting report via Michael Feroli of J.P. Morgan Chase about the Federal Reserve’s fourth quarter survey of terms of business lending. Apparently the Fed found evidence of only very minor tightening of credit.

“The most direct evidence of credit tightening was the increase in commercial and industrial loan spreads over the fed funds rate, which increased to 2.37% points in November from 1.93% points in the previous survey. However, that move only brings the spread back to the level it was in 2005. Moreover, given the decline in fed funds, the actual cost of business borrowing moved down to 6.87% from 7.18% the previous quarter,” Mr. Feroli said.

He added: “A handful of other indicators of bank lending terms reported on in the STBL show little meaningful change, even two months into the current period of credit market stress.”

See the WSJ Realtime post here.

More Inflation Graphs

2007-12-15T22:06:00.000-08:00

Below are two more graphs related to inflation. On top is the one month CPI (not seasonally adjusted). Below is the twelve month rolling average for the same graph. As you can see, although inflation is above its ten year average, it is not abnormally high relative to the last eight or nine years.

Growth Deniers Find New Strategy

2007-12-14T14:54:00.000-08:00

Before Thanksgiving, growth deniers told us that consumers were not shopping this year, then when consumers packed the malls, we were told that they weren't actually buying anything but where bargain hunting as a "sport." If they did buy anything, we were told, it would only be items on sale at a deep discount. When the sales reports came in well above 2006, the growth deniers explained that this was because of a quirk in the calendar that created an extra week in November. Yesterday, the U.S. Census Bureau released their calendar adjusted figures for November retail showing that sales were up 6.3% over November 2006. The growth deniers can explain this as well. It is inflation they say, without inflation and the different reporting calendars there would be no growth. Is this true? Of course not.

To begin with, the U.S. Census figures were already adjusted for the differences in reporting calendars between '06 and '07, so we don't need to bother with that claim. The inflation claim is more interesting. What is the inflation rate right now? Including energy and food, the twelve month CPI was at 4.3% in November. This is the second or third highest in the last ten years and cause for concern. It is not so high that it waives away 6.3% in sales growth. The chart below of the 12 month CPI for the last decade gives some historical perspective.Of course, this chart is slightly skewed because it reflects a rise in commodity prices, which are partly inflationary and partly do to increasing global demand. Also, if we are talking about Holiday shopping, it is not quite relevant, people do not buy kilowatts and bushels of grain for Christmas presents. The twelve month CPI, excluding energy and food, was 2.3% in November, which is only slightly above the 10 year average and lower than it was for most of last year. See the graph below.As you can see, this year is not extraordinary compared to the last 10 years in regards to inflation. While some of the increase is do to inflation (this would be true in any year) it does not justify the position that sales this November are either flat or down from last year. Nor does it justify the position that reports of November sales are significantly less meaningful this year than in years past.

Larry Elder on Townhall Today

2007-12-13T10:34:00.001-08:00

Larry Elder has an excellent column on Townhall.com today about the credit crisis. Here are some of the highlights.

George Mason University economist Tyler Cowen says, "We've all heard about the defaults on subprime mortgage loans. But so far, the real story is how little the broader American economy has suffered. Today, banks usually sell their loans to third parties. You might have originally borrowed money from Wells Fargo, but now a bank overseas cashes your mortgage checks.

"If a large group of people can't pay their mortgages, they may lose their homes. But the banks don't suffer as they used to -- local American lenders have already converted those loans into cash and sold off their risk. In fact, German regional banks suffered some of the most significant losses from bad American mortgages. Other European and Asian banks and hedge funds took their lumps as well. American banks essentially bought insurance by exporting their risk overseas."

On falling home prices and mortgage defaults.

U.S. homeowners' equity today equals almost $11 trillion. Price declines for this year and next year may amount to $6 billion, or a 0.05 percent decline -- a worry, but hardly Judgment Day.

Christopher Cagan, of First American Real Estate Solutions, estimates that "the impact of rate sensitivity and subsequent defaults will be well below one-half percent of total mortgage debt outstanding" and spread out over several years.

The column can be found here.

Christmas Retail Cheer Bigger Than Ever in 2007

2007-12-13T08:59:00.000-08:00

The U.S. Census Bureau released an advanced estimate of November retail sales and so far they blow past the projected 4% increase from 2006. Here is the money quote.

U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $385.8 billion, an increase of 1.2 percent (±0.7%) from the previous month and 6.3 percent (±0.8%) above November 2006. Total sales for the September through November 2007 period were up 5.4 percent (±0.5%) from the same period a year ago. The September to October 2007 percent change was unrevised from +0.2 percent (± 0.2%).

If you have been reading this blog, you may recall I predicted that Christmas sales would exceed the 4% forecast back in early December, see here. At that time, it had been reported that GDP was up 4.9% in the third quarter, productivity was up 6.3%, employment was way up in October and November, wages were up, day after Thanksgiving shopping was up 8.5% over 2006, and ShopperTrak put November sales at 6.5% over the year before period. Those facts, weighted against reports of "negative consumer sentiment," and the rising cost of gas and food, seemed to clearly favor a Christmas season that would exceed previous expectations. Still, many pundits did not want to move off the idea the economy was slowing and that this Christmas would be a bad one in terms of retail sales. Television stations reported that the " the holiday cheer's missing at retail stores." In the face of the positive data, so-called experts such as Peter Morici, an economics professor at the University of Maryland, gave us sound bites such as the following:

The numbers don't tell the whole story, ... Retailers are trying to put a positive spin on things. People are very pessimistic about what things will be like this winter. ... they're buying less expensive items. So it all fits together. It indicates a slowing economy.

As per usual, the doom sayers have not been vindicated. Get the U.S. Census Bureau report here.

Alan Greenspan in the Wall Street Journal Today

2007-12-12T11:02:00.000-08:00

Alan Greenspan has a column in the Wall Street Journal today about the current credit crisis. He discusses a number of fascinating points, including the loss of control of long term interest rates by central banks and when the credit crisis will end. Here are some excerpts.

Arbitragable assets--equities, bonds and real estate, and the financial assets engendered by their intermediation--now swamp the resources of central banks. The market value of global long-term securities is approaching $100 trillion. Carry trade and foreign exchange markets have become huge.

The depth of these markets became readily apparent in March 2004, when Japanese monetary authorities abruptly ceased intervention in support of the U.S. dollar after accumulating more than $150 billion of foreign exchange in the preceding three months. Beyond a few days of gyrations following the halt in purchases, nothing of lasting significance appears to have happened. Even the then seemingly massive Japanese purchases of foreign exchange barely budged the prices of the vast global pool of tradable securities.

In theory, central banks can expand their balance sheets without limit. In practice, they are constrained by the potential inflationary impact of their actions. The ability of central banks and their governments to join with the International Monetary Fund in broad-based currency stabilization is arguably long since gone. More generally, global forces, combined with lower international trade barriers, have diminished the scope of national governments to affect the paths of their economies.

And when the credit crisis will end:

The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end. That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities. Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.

The rest of the article can be found here.

United States Economy In Perspective

2007-12-11T16:56:00.000-08:00

Over at his blog, Carpe Diem, economist Mark Perry has posted a map of the United States that helps put our 14 trillion dollar economy into perspective. Each state in the United States is identified as a foreign country with the equivalent GDP of that state. You will notice, for example, that Florida has an economy the size of Australia's economy. To view the map, click here.

ADP v. Labor Department

2007-12-10T20:48:00.000-08:00

From January to October of this year, the monthly ADP National Employment Report has deviated from the Labor Department report by an average of 54,000 jobs. The ADP report has tended to understate the number of jobs created. However, in November, it reported 189,000 jobs compared to the preliminary Labor Department report of 94,000 jobs, a difference of 95,000 jobs. It will be interesting to see if a Labor Department adjustment moves the November jobs report closer to the ADP number. In August, ADP reported the creation of 38,000 jobs while the preliminary Labor Department reported the loss of 4,000 jobs. The August report was later revised to show a gain of 93,000 jobs. In September, the Labor Department report was revised down, from an initial 110,000 to 44,000, an adjustment that brought the report closer to ADP's reported 58,000. Below is a monthly comparison chart between the ADP report and the Department of Labor report in 2007.

Household Net Worth Continues to Advance

2007-12-08T23:10:00.000-08:00

Household net worth has increased for 20 consecutive financial quarters. Total household net worth is now at 58.6 trillion. Up from 38.8 trillion in 2002, a mind boggling 51% increase in less than five years. This increase has continued in spite of the recent subprime problems, absorbing the decline in real estate values and marching on.

Arthur Laffer on Clinton's Economic Policies

2007-12-08T12:35:00.001-08:00

Arthur Laffer, the economist who contributed greatly to Ronald Reagen's supply-side economic polices and views, did an interview with Time-Blog recently and had this to say about Bill Clinton's economic policies.

He lost the House, he lost the Senate, he lost the governorships, he lost the state legislatures. And then he became more Reagan than Reagan: He got Nafta through Congress, against the unions, against his own party. He reappointed Reagan's Fed chairman twice. He signed welfare reform, that you actually have to look for a job to get welfare. He cut government spending as a share of GDP by 3.5 percentage points. No president ever has come anywhere near him on that. He had the biggest capital gains tax cut in our nation's history in '97. He got rid of the retirement test on Social Security. This guy was a great president and I voted for him twice.

Although I would decline to say that Clinton was a great president, I think his economic record was highly underrated. It is interesting to see none other than Arthur Laffer giving Clinton so much praise. It is difficult to know how much of Clinton's financial policy success was due to a Republican congress that was elected specifically to enact smaller budgets, lower taxes, and less welfare. It leaves some hope that if Hillary gets elected we will see more of Clinton's "more Reagan than Reagen" economic policies. Here is what Laffer had to say about Hillary's chief rival, Barack Obama,

I love Obama and I think he's a hell of a neat guy and a smart guy. But he'll destroy the economy if he puts in what he says.

Check out the rest of the interview here.

Analysts See Downward Trend In Jobs Data

2007-12-07T01:30:00.000-08:00

Some analysts are saying there is a definite downward trend in jobs data. Personally, I don't see any trend at all. Below is a graph of Labor Department figures for monthly job creation since January 2006. What this graph tells me is that the preceding three months is a poor predictor of the following month. Looking back it appears that 4th quarter job creation will be ahead of third quarter performance but second half of 07job creation has been slower than 06 or the first half of 07. So I guess you could make the case for a trend in either direction.

Rumors of Coming Recession are Greatly Exaggerated

2007-12-06T23:50:00.000-08:00

Although it seems exceedingly fashionable to predict gloom and doom in regards to the economy, following the ADP report and the drop in jobless claims, a couple of pundits at least are willing to buck the trend and point out that the data isn't trending toward a recession. Larry Kudlow puts it quite well:

So here’s my point: Jobs aren’t folding. Jobs aren’t plummeting. Jobs are strengthening. Now I’m not smart enough to know what the jobs number is going to be tomorrow, but you could easily have a blockbuster 200,000 jobs report. I don’t know, it could be 150K, it could be minus 600K, but I highly doubt that folks. When you see this kind of ADP report, you’ve got a whole new situation.

Meanwhile, Suitably Flip, an excellent blog, has this clear analysis:

The economy is adding jobs fast enough to be pulling people out of unemployment (perhaps much faster than we realize, if ADP is right); the job expansion is the longest in U.S. history and still going strong; the hourly pay for those jobs is increasing (perhaps accelerating), without unduly affecting inflation; and productivity is not only growing, and not only accelerating, but accelerating faster than "analysts said" it would.

Major Retailers Beat November Estimates On Average

2007-12-06T11:39:00.000-08:00

Jeff Macke at Minayanville has posted a list of major retailers and how they performed relative to their projected sales. On average, the retailers in the list beat estimates by 1.23%. It should be noted that this average does not accurately reflect the overall retail sales picture because each retailer represents a disproportionate share of the market. For example, Wal-Mart beating estimates by .3% is probably more significant to the overall November sales figures than Chicos missing estimates by 6.8%. Still, when retailers are beating estimates on average it is a strong indication that overall sales figure will be above estimates.

November Grows Extra Week

2007-12-06T09:37:00.000-08:00

November retail sales reports are in and it appears that premium stores are doing well with a sharp rises in same store year over year sales; 13.4 percent at Macy’s, 10.2 percent at Kohl’s, 9 percent as Costco, and 8.7 percent at Nordstrom. Improved sales at these stores contradicts the reports that Christmas shoppers this year are only "bargain hunters." What is truly interesting is the justification for these improved sales given by the New York Times.

The sudden improvement can be traced, in part, to a quirk in the calendar, which gave retailers an extra week of post-Thanksgiving sales this November, compared with last, artificially boosting sales.

An extra week in November? If there were some change in the Gregorian calendar that created an extra week in November between Thanksgiving and December 1st, it would surely be a Pulitzer Prize winning revelation. The New York Times, however, is not alone in this version of events. CNNMoney also reported this apparently amazing fact.

November sales results for many retailers were also helped by an extra week of post-Black Friday sales versus a year ago.

Unfortunately for the Pulitzer Prize hopefuls, November has the same number of days last year as this year. Actually what is happening, and being poorly explained in the media, is that retailers are apparently including an extra week in their reports. This "extra week" is built into sales projections, so it is significant to compare actual sales versus projections. The premium retailers listed above beat projections by the following amounts: 5.9 percent at Macy’s, 4.6 percent at Kohl’s, 2.3 percent as Costco, and 4.8 percent at Nordstrom.

ADP Jobs Report Shocks Prognosticators

2007-12-05T14:33:00.000-08:00

ADP, the payroll company, has issued its jobs report which is its estimate for the number of jobs created or lost each month. ADP has inside information on this because they write the paychecks. Using the fluctuations in their clients payrolls as a statistical sample for the rest of the country, ADP puts out a job report that is on average within 30,000 jobs of the Labor Department report. For November, ADP estimates 189,000 private sector jobs were created in November. The latest Reuiters poll of economists showed an average prediction of 75,000 non-farm jobs created in November, according to the Wall Street Journal the average estimate was 50,000 nonfarm jobs. Some economists are revising their estimates upward but few, if any, are willing to admit that ADP is even within 75,000 jobs of what the Labor Department will report on Friday. From WSJ Realtime Economics, here is a round-up of adjustments made after the ADP report.

Paul Ashworth of Capital Economics says the ADP figure suggests a gain of 90,000 nonfarm jobs in the government report, but notes it “has been spectacularly wrong on more than one occasion in its short history.” Ian Shepherdson of High Frequency Economics says the ADP report “is the best single indicator of payrolls month-to-month, but it is still not very good” with a margin of error of about plus or minus 160,000. He raised his estimate for the official number to 125,000 jobs from 50,000. Morgan Stanley economists also raised their estimate for total November employment gains, to 100,000 jobs from an earlier forecast of 50,000.

Once again, I am going to be bullish and "take the over." I project that the ADP report will be within 30,000 jobs of the Labor Department report. Plus there should be about 20,000 government jobs added. So I am projecting 180,000 or more jobs created in November. I also project that if the number comes in that high, economists will complain that a lot of the jobs are temporary for the holiday season. This is sort of the jobs version of claiming Christmas shoppers are just bargain hunters. We can add that to my projection that retail sales in November will show a greater than 4% gain over 2006. The November retail figures are due to come out tomorrow and the labor report on Friday. So for the rest of the week I can look forward to either gloating or eating crow.

3rd Quarter GDP Shows Strong Growth

2007-12-05T09:10:00.000-08:00

The revised numbers for the third quarter of 2007 show strong growth in the GDP, 4.9%. Where did it come from? The chart below shows how the economy performed. Notice consumption and exports are the two leading areas of growth. Housing and imports are contracting.
The growth in exports is due in significant part to the "weak" dollar. Looking at these numbers, I question how so many prognosticators can be so sure that Christmas sales will be down and that we are heading into a slowdown.

Money Supply vs. Gross Domestic Product

2007-12-04T19:00:00.001-08:00

Ron Paul Presumes to Lecture Bernanke On Monetary Policy

2007-12-04T16:28:00.000-08:00

Apparently there were too many wrong notions in Ron Paul's lecture for Bernanke to unpack in any reasonable amount of time, so he mostly ignores him. Rather than be dismissive of Ron Paul, I am going to address some of his economic views on this blog and why they are wrong. Ron Paul has some interesting views on economic policy that resonant with a lot of voters. Ron Paul's view that the weak dollar is bad for America is addressed in this post below.

It is the next guy that is in trouble

2007-12-04T13:02:00.000-08:00

In his online article The 4 Boneheaded Biases of Stupid Voters, Brian Caplan, a Professor of Economics at George Mason University, describes the pessimistic bias of the public.

As a general rule, the public believes economic conditions are not as good as they really are. It sees a world going from bad to worse; the economy faces a long list of grim challenges, leaving little room for hope. We can call this the pessimistic bias, a tendency to overestimate the severity of economic problems and underestimate the economy’s performance in the recent past, the present, and the future.

At a time when declining consumer sentiment is being reported in the media as if it really mattered, it is good to keep the pessimistic bias in mind. An interesting fact about the pessimistic bias that Brian Caplan does not mention is that people are typically much less pessimistic about their own finances and future, it is generally the next guy and society in general that they believe is in trouble. This is probably due to the fact that they actually know and understand their own financial situation while the only information they have on the rest of society is from the media.

Keep the above in mind and read the below quote from WSJ Real Time Economics.

The nation’s chief executive officers expect a slowdown in U.S. economic growth over the next year, but remain optimistic about their companies’ prospects.

The latest survey by the Business Roundtable, made up of chief executives of major companies, showed that 70% expect higher sales over the next six months. That was slightly higher than when the survey was last conducted in September. In addition, their employment and spending plans edged up. That lifted the overall economic outlook to 79.5 from the 77.4 recorded in September. The survey was conducted Nov. 5-20. A level above 50 indicates economic expansion.

The survey that WSJ Real Time is referring to can be found here. The 160 chief executives who are members of Business Roundtable run companies with a total of 10 million employees and $4.5 trillion in annual revenues, that is roughly 1/3 of the United States GDP.

Mankiw's 10 Principles of Economics Lampooned

2007-12-04T10:28:00.000-08:00

Yarum Bauman, who has his Ph.d in economics, spoofs Harvard Professor Greg Mankiw's 10 Principles of Economics.

Economy Top Issue in Presidential Contest

2007-12-04T08:38:00.001-08:00

An article today in the Wall Street Journal Online states,

Fifty-two percent of Americans say the economy and health care are most important to them in choosing a president, compared with 34% who cite terrorism and social and moral issues, according to the latest Wall Street Journal/NBC News poll. That is the reverse of the percentages recorded just before the 2004 election. The poll also shows that voters see health care eclipsing the Iraq war for the first time as the issue most urgently requiring a new approach.

Actually, the economy is probably the top issue in every Presidential election. The basic rule is that a sitting President always gets reelected if the economy is perceived to be doing well at the time of the election and loses the election if economy is perceived to be in recession. So far as I know, there has never been an exception to this rule. Notice I said that what matters in a Presidential election is how the economy is perceived to be performing, not how it is actually performing. Given the constant down talking of the economy in the media, one wonders if there is a motive to influence the election or if it is just that bad news gets better ratings. What ever it is, the tendency of the media to put a negative spin on the economic data seems transparently obvious.

"Growth Slipped" a Negative Spin on Positive News

2007-12-03T10:29:00.000-08:00

The Associated Press and the Reuters News Service reported on the exact same manufacturing report today. The contrast in headlines is amusing. The AP headline portrayed the news as positive with the headline, "New orders boost manufacturing in Nov.", while the Reuters headline had a negative spin. "Manufacturing sector growth slipped in Nov: ISM" What is the best take on the manufacturing data? I think a balanced spin-free summary is given by Norbert Ore, chairman of the ISM Manufacturing Business Survey Committee. He is quoted towards the bottom of the aforementioned Reuters article.

"The news coming out of the financial sector is all gloom and doom but manufacturing is holding its own pretty well,"

"Manufacturing is at a fairly high level. Supply and demand is strong in most sectors. But we're kind of plateauing there,"

"We did see a change in employment and we'll have to see if that's a continuing trend toward lower employment in manufacturing. But given some of the other concerns in the economy, manufacturing is doing well,"

New York Times Column on the "Weak" Dollar

2007-12-02T22:45:00.001-08:00

I am always surprised by how many people believe the weak dollar is a negative economic indicator. Maybe they shouldn't call it a "weak" dollar. Maybe they should call it an "export strong" dollar. At any rate, the "weak" dollar is the source of much unnecessary anxiety, typically fueled by the media. Lowering the value of the dollar without inflation is actually considered one of the most significant achievements of the Reagen Administration. On Saturday, the New York Times published an opinion column by Tyler Cowen, a professor of economics at George Mason University, that sets the record straight. Here is an excerpt,

ANXIETY about the dollar continues to spread. The falling greenback is often seen as a sign of an impending recession or the fall of the United States from global leadership. A low dollar simply looks bad. We are, after all, used to judging ourselves against others — comparing our salaries with the earnings of our peers, and our homes with those of our neighbors. We’re used to thinking it is a big advantage to stand at the top of a numerical list.

But when it comes to currencies, a higher value neither brings national success nor predicts future prosperity. The measure of a nation’s wealth is the goods and services it produces, not the relative standing of its currency. Take a look at 1985-88, when the dollar lost more ground than in the last few years. Those were good times, and the next decade was largely prosperous as well....

For the rest of the column, click here. (registration may be required.)

A Quick Economics Quiz

2007-12-02T17:54:00.000-08:00

Doom Sayers Launch Preemptive Strike on Christmas

2007-12-02T17:00:00.000-08:00

It is a holiday tradition in American media to forecast poor Christmas sales. If it turns out sales aren't as slow as predicted, you can expect reports that shoppers are "only buying bargains" because "money is tight for shoppers this year." 2007 is no exception and is rather notable for the attempts of negative prognosticators to cling to their dire predictions even in the face of positive news.

Even before Thanksgiving, news media such as the Boston Herald reported that, "The list of reasons why this year’s holiday season stands to be a tough one for retailers could be lengthier than most people’s shopping lists." ABC Channel 7 let us know that, "Despite the hoopla of an early start to the season, the holiday cheer's missing at retail stores." UC Berkeley Professor Bob Edelstein informed reporters that a slow holiday shopping season could have far-reaching consequences.

Black Friday finally came and it was grudgingly reported the next day that shoppers had come out in droves. The Washington Post quoted John Ford of Sears Holdings as saying that,"It exceeded our expectations. We had more customers at opening yesterday than we had in prior years, ... it was 50 to 100 percent higher than it was in previous years." Did the increased traffic change the prognostications? "I don't think so," said Candace Corlett a principal with WSL Strategic Retail and apparently professional doom-sayer. According to Corlett, shoppers were out looking but probably not buying. "It's become more of a shopping sport," Corlett said.

Five days after Black Friday, when more data could be collected, ShopperTrak RCT Corp., estimated Black Friday sales this year rose 8.3% from 2006 to $10.3 billion, aka "strong sales." Still, the doom sayers did not give up. Dow Jones warned that, "last year, retailers had a good start during the Thanksgiving weekend, but many stores struggled in December, and a shopping surge just before and after Christmas wasn't enough to make up for lost sales." Before you wonder if the Dow Jones reporter has a good point, keep in mind that Christmas shopping in 2006 was a healthy 4.6% better than the prior year.

We are now officially one week into the Christmas shopping season. According to ShopperTrak, data for the Thanksgiving weekend, not just Black Friday, shows retail sales at a strong 6.5% over 2006. Have the doom sayers relented? Of course not. Instead they have resorted to the "shoppers are only buying bargains this year" argument. "The numbers don't tell the whole story," claims Peter Morici, an economics professor at the University of Maryland, "Retailers are trying to put a positive spin on things. People are very pessimistic about what things will be like this winter. ... they're buying less expensive items. So it all fits together. It indicates a slowing economy."

According to the Dow Jones newswire, the National Retail Federation forecasts a 4% rise in holiday sales from a year ago, the smallest gain in five years. In truth, despite being "the weakest in five years," 4% growth isn't bad. If holiday sales outpace economic growth it means that consumers are either going into debt or they are cannabalizing consumption from other parts of the year. Nobody should be disappointed in 4% annual growth. However, based on the data collected so far, I am going to "take the over" and forecast that holiday sales will exceed the forecast 4% increase over last year.

Predicting Recession

2007-12-02T16:21:00.000-08:00

It has been said that economists have successfully predicted 8 of the last 2 recessions. Surely the mainstream media has an even worse record. Financial reporting in the American media is a tedious and unrelenting drizzle about the next recession allegedly lurking just around the corner. These articles are usually supported by a survey showing falling consumer sentiment, a smattering of data on whatever indicators in the economy are not completely bullish, and prognostications from economists who foresee an economic slowdown. Since it is unlikely that the economy will never have a recession, they will eventually be correct. Whether they are genuinely prescient is another matter. Even a broken clock is right twice a day. The interesting thing is that recession is constantly predicted in the face of consistent and pervasive economic growth. An economy is generally considered in recession if the gross domestic product (GDP) is declining. I created the graph below with data from the Economic History Services showing the annual GDP of the United States since 1980.

United States Annual GDP Since 1980

As you can see, recessions have been rare over the last quarter century relative to economic growth, with the gross domestic product of the United States more than doubling over that time period from just over 5 trillion USD to almost 12 trillion per annum. Yet the doom sayers persist unashamed.