Perhaps, it's not too surprising that while the Bush Administration has had seven-plus years to come up with a "comprehensive energy plan," it has not done so. Bush and Cheney are "oil people." In 2009, Cheney may go back to Halliburton and Bush will retire to Crawford (and probably purchase a home in Dallas where his presidential library will be built).
What this suggests to me is that basically any "comprehensive solution" to the energy problem, coming from this administration has to have "oil" at its center. In turn, this means open drilling in places such as ANWAR and off-shore along our coasts, as well as a major reduction in environmental regulation concerning refineries. In other words, the plan had to first and foremost take care of the oil industry and then, secondarily include some window dressing for alternative fuel advocates, global warming and environmentalists.
When this approach ran up against the latter and failed to get even a Republican Congress' approval, the "comprehensive solution" became dead in the water. Bush has "talked" about ridding ourselves of foreign dependency on oil and the promotion of alternative fuels (ethanol). But, as with so many other issues within this administration, the idea of "policy formulation," seems to be to call in industry lobbyists, listen to what they want and then find a "political way" of achieving it.
I suppose buggy whip manufacturers also "died hard," with the advent of the automobile and, in their day, lobbied to prevent the horseless carriage. And, today, I see the oil industry and the Bush Administration in a similar light. Here's the deal: Peak Oil (or, at least Peak Easy Oil) has or is about to occur. There may still be ways to fore go completely running out of oil for another 100-200 years via shale oil, drilling off-shore, etc., but the cost of the remaining oil (once the present known reserves are gone) will be high, maybe high enough to sustain $100-200 a barrel. At those prices, the cost of a gallon of gasoline isn't going to decline much and will probably rise higher over the long run. Speculation regarding a non-renewable resource will continue.
Plus, even if the search/drilling for additional oil is successful, we still end up with a comparatively "dirty energy." Let's forget, for the moment, global waming and disturbing Alaska, Floridia and California eco-systems and wildlife. Putting large amounts of carbon emissions into the air we breath for the sake of economic growth is just not a very smart idea if there are alternative energy solutions. Government subsidies, tax incentives, etc., should be shifting from fossil fuel conversion toward these alternative forms (bio-mass, solar, nuclear, hydro, wind - and the least emphasized, simple conservation).
A couple of more points. All of the oil in ANWAR doesn't substantially change our reliance on foreign oil at current rates of usage. Shale oil technology has a way to go before the result can be refined into vehicle useable gasoline. Similarly, coal conversion to useable oil is still a long way off. And, of course, even at higher prices we are left with essentially a "dirty fuel." Off-shore drilling? While oil covered Florida or California beaches doesn't particularly bother me personally, I doubt the tourist industry or environmentalists in those states will want to run the risk. [Prediction: Charlie Crist, Republican Governor of Florida, recently flip-flopped on his stand against off-shore drilling along Florida coasts, apparently to bring his position in-line with John McCain, in anticipation of becoming a VP candidate. I would predict that a) Crist will NOT get the VP slot and b) he'll be voted out of office in the next election. The Arnold, in California, also a Republican Governor, has announced he'll continue to fight against off-shore drilling in California.]
As for refineries: would you want one next door to you? Plus, why invest money in a refinery that may be useless in twenty years?
In sum, the Bush Administration is using the "scare pressure" of high oil prices to force Congress to return to an essentially outmoded form of energy.
In my opinion, given the long term and short term demand for energy (not just here, but around the world), oil prices will continue to rise whether we drill off-shore or in ANWAR and Americans would be kidding themselves if they think American oil companies are going to sell that oil at lower than the global market price, based on some patriotic motivation.
It's time to hold firm against drilling in ANWAR and off-shore, end fossil fuel subsidies and create a "comprehensive" energy program based on alternative energy forms. This will be a battle against one of the most powerful lobbying groups in our history and will probably require a global effort, led by the "post-industrial" West, which has achieved much of its material wealth and success based on fossil fuels.
The American people need to understand the "scare tactics" and stand-up to them. At an absolute minimum, environmentally sound ANWAR and off-shore drilling should be "traded" for a genuine long-term alternative fuel program, with a rough, overall phase out for fossil fuels and a phase-in for substitutions.
Saturday, June 21, 2008
Friday, June 13, 2008
Stumbling to the Finish and a Clarification
Clarification
First, the clarification. Going over my last post on oil, I noticed that I concluded with a statement that in retrospect seems a bit harsh toward "average Americans." The statement branded them as having become "lazy and complacent" and "coddled" by easy credit.
It was an "unqualified" conclusion, which obviously requires qualification and probably refers far more to our political system and the majority of the politicians that system produces, than to our general population.
Apoligies to all of those falsely blamed. And, more explanation in a subsequent post.
Stumbling to the Finish
Bad week for Bush. Supreme Court upholds habeas corpus, in a close 5-4 decision (deserves separate post on its own). Prime Minister of Iraq Maliki announces that joint Iraqi-U.S. negotiations over a new occupation agreement for U.S. forces have broken down (the existing agreement ends at the end of the year). Seems the major sticking point is over Iraqi sovereignity; they want U.S. forces to be subject to Iraqi law and Iraqi coordination on U.S. operations in-country. Our presence in Iraq may end with a whimper rather than a bang, by simply being asked, by the Iraqi government, to leave.
Fair enough. The principal reason justifying pre-emptive war (i.e. the invasion) was weapons of mass destruction - get them before they get us. The 9/11 ties between Al Qaeda and Iraq were ALWAYS weak and implied, not stated. The reason of Iraqi failure to adhere to prior U.N. resolutions broke down when we failed to go back to the U.N., due to lack of votes, for a final resolution authorizing implementation of the prior resolutions by force. Invading Iraq to eliminate weapons of mass destruction, which we believed would be used against us, was a very tenuous, but more or less "legitimate" reason for war. Of course, once we failed to find these weapons, that reason evaporated. Point is that until we determined there were no weapons of mass destruction, Iraq was OUR problem. Once that reason disappeared, Iraq became primarily an Iraqi problem and we became part of the Iraqi problem.
I am in the camp that believes the invasion was one of the worst U.S. foreign policy blunders in our history, but for a moment let's give the Administration the benefit of the doubt. Assuming some sanity, the present "goal" of the United States in Iraq must be to simply ensure sufficient stability to allow the Iraqi people to carry on with their lives without the secretarian violence the invasion brought on and, hopefully, better than they had lived under Saddam Hussein and the Baathist Party. Any goal beyond that (e.g. a democratic state in the mid-east, access to Iraqi oil, an anti-Iranian regime, etc.) is basically U.S. interference in the internal affairs of a sovereign state, through armed intervention and occupation.
In other words, if we want to leave Iraq now that is certainly our decision, with a parting gesture ranging from "sorry bout that," to x number of dollars in aid for reconstruction, or whatever. But, contrary to the Bush/McCain position, the conditions for staying in Iraq are the prerogative of the duly elected Iraqi government and Parliament, not ours.
Technically, we are in Iraq today under a U.N. mandate recognizing us as an "occupying power," with specific duties and responsibilities. That "authority," which does NOT take a stand on whether or not we had the right to invade in the first place, runs out at the end of the year and is to be replaced with one of three courses of action: 1) a U.S.-Iraqi agreement on status of forces (preferred by all and the subject of Maliki's comments), 2) an extension of the U.N. mandate on the U.S. as an "occupying force," or 3) nothing (least preferable). In other words, although it is hard to understand given the Presidential campaign and the "stay" Republican position versus the "go" Democratic position, "staying" in terms of legality within the context of international law, isn't OUR decision to make. As a sovereign state, the Iraqis make that decision, not the United States.
This is an important point in distinquishing between the McCain position and the Obama positions on Iraq. If McCain defines "winning" as the establishment of a pro-U.S., anti-radical fundamentalist Islamic state, then this is merely an extension of the Bush Doctrine, that led us in in the first place and pretty much a continuance of the neo-conservative arguments. This definition of "winning" may indeed be a legitimate "goal" of U.S. foreign policy, but it is not a legitimate reason to continue as an occupying force.
In sum, "going" is our decision. "Staying" is an Iraqi decision. Staying to win, for duty, honor, country is misleading, deceiving and simply "disengaged" from the reality of our situation.
Hmmm? That point might be worth making in another Guest Commentary piece in the local paper.
Meanwhile, Congressional oversight hearings, re-started by a Democratic Congress that has enough votes for exposure, but lacks the votes for change, continue. I've listened to literally days of Administration testimony, from the Federal Aviation Administration, to the Food and Drug Administration, to the Consumer Product Safety Commission, to the Department of Energy, to the Department of Veterans Affairs, to the Department of Housing and Urban Development, to the Department of Homeland Security, etc., etc. There is a theme running through the testimony, namely "no money." Yes, we'd like to make air traffic safer. Yes, we'd like to be able to make our food and drugs safe. Yes, we'd like to ensure safe toys from China. Yes, we'd like to have a comprehensive energy policy. Yes, we wish we could do more for our Veterans. And, on and on. No one seems to tie Bush tax cuts and the expense of the Iraq war to agency failures at home.
And, of course, this was the week the Senate Intelligence Committee, six years late and roughly a trillion dollars or so short, issued its findings into the Bush ad campaign for the war in Iraq. This was promptly followed by Dennis Kisinich's introduction of a resolution for impeachment in the House of Representatives. The closest we'll come to that was the reading (once by Kisinich and once by the House clerks) of the 35 page resolution on the floor of the House. The resolution now goes to the Judiciary Committee, where it will stay until Bush is out of office.
First, the clarification. Going over my last post on oil, I noticed that I concluded with a statement that in retrospect seems a bit harsh toward "average Americans." The statement branded them as having become "lazy and complacent" and "coddled" by easy credit.
It was an "unqualified" conclusion, which obviously requires qualification and probably refers far more to our political system and the majority of the politicians that system produces, than to our general population.
Apoligies to all of those falsely blamed. And, more explanation in a subsequent post.
Stumbling to the Finish
Bad week for Bush. Supreme Court upholds habeas corpus, in a close 5-4 decision (deserves separate post on its own). Prime Minister of Iraq Maliki announces that joint Iraqi-U.S. negotiations over a new occupation agreement for U.S. forces have broken down (the existing agreement ends at the end of the year). Seems the major sticking point is over Iraqi sovereignity; they want U.S. forces to be subject to Iraqi law and Iraqi coordination on U.S. operations in-country. Our presence in Iraq may end with a whimper rather than a bang, by simply being asked, by the Iraqi government, to leave.
Fair enough. The principal reason justifying pre-emptive war (i.e. the invasion) was weapons of mass destruction - get them before they get us. The 9/11 ties between Al Qaeda and Iraq were ALWAYS weak and implied, not stated. The reason of Iraqi failure to adhere to prior U.N. resolutions broke down when we failed to go back to the U.N., due to lack of votes, for a final resolution authorizing implementation of the prior resolutions by force. Invading Iraq to eliminate weapons of mass destruction, which we believed would be used against us, was a very tenuous, but more or less "legitimate" reason for war. Of course, once we failed to find these weapons, that reason evaporated. Point is that until we determined there were no weapons of mass destruction, Iraq was OUR problem. Once that reason disappeared, Iraq became primarily an Iraqi problem and we became part of the Iraqi problem.
I am in the camp that believes the invasion was one of the worst U.S. foreign policy blunders in our history, but for a moment let's give the Administration the benefit of the doubt. Assuming some sanity, the present "goal" of the United States in Iraq must be to simply ensure sufficient stability to allow the Iraqi people to carry on with their lives without the secretarian violence the invasion brought on and, hopefully, better than they had lived under Saddam Hussein and the Baathist Party. Any goal beyond that (e.g. a democratic state in the mid-east, access to Iraqi oil, an anti-Iranian regime, etc.) is basically U.S. interference in the internal affairs of a sovereign state, through armed intervention and occupation.
In other words, if we want to leave Iraq now that is certainly our decision, with a parting gesture ranging from "sorry bout that," to x number of dollars in aid for reconstruction, or whatever. But, contrary to the Bush/McCain position, the conditions for staying in Iraq are the prerogative of the duly elected Iraqi government and Parliament, not ours.
Technically, we are in Iraq today under a U.N. mandate recognizing us as an "occupying power," with specific duties and responsibilities. That "authority," which does NOT take a stand on whether or not we had the right to invade in the first place, runs out at the end of the year and is to be replaced with one of three courses of action: 1) a U.S.-Iraqi agreement on status of forces (preferred by all and the subject of Maliki's comments), 2) an extension of the U.N. mandate on the U.S. as an "occupying force," or 3) nothing (least preferable). In other words, although it is hard to understand given the Presidential campaign and the "stay" Republican position versus the "go" Democratic position, "staying" in terms of legality within the context of international law, isn't OUR decision to make. As a sovereign state, the Iraqis make that decision, not the United States.
This is an important point in distinquishing between the McCain position and the Obama positions on Iraq. If McCain defines "winning" as the establishment of a pro-U.S., anti-radical fundamentalist Islamic state, then this is merely an extension of the Bush Doctrine, that led us in in the first place and pretty much a continuance of the neo-conservative arguments. This definition of "winning" may indeed be a legitimate "goal" of U.S. foreign policy, but it is not a legitimate reason to continue as an occupying force.
In sum, "going" is our decision. "Staying" is an Iraqi decision. Staying to win, for duty, honor, country is misleading, deceiving and simply "disengaged" from the reality of our situation.
Hmmm? That point might be worth making in another Guest Commentary piece in the local paper.
Meanwhile, Congressional oversight hearings, re-started by a Democratic Congress that has enough votes for exposure, but lacks the votes for change, continue. I've listened to literally days of Administration testimony, from the Federal Aviation Administration, to the Food and Drug Administration, to the Consumer Product Safety Commission, to the Department of Energy, to the Department of Veterans Affairs, to the Department of Housing and Urban Development, to the Department of Homeland Security, etc., etc. There is a theme running through the testimony, namely "no money." Yes, we'd like to make air traffic safer. Yes, we'd like to be able to make our food and drugs safe. Yes, we'd like to ensure safe toys from China. Yes, we'd like to have a comprehensive energy policy. Yes, we wish we could do more for our Veterans. And, on and on. No one seems to tie Bush tax cuts and the expense of the Iraq war to agency failures at home.
And, of course, this was the week the Senate Intelligence Committee, six years late and roughly a trillion dollars or so short, issued its findings into the Bush ad campaign for the war in Iraq. This was promptly followed by Dennis Kisinich's introduction of a resolution for impeachment in the House of Representatives. The closest we'll come to that was the reading (once by Kisinich and once by the House clerks) of the 35 page resolution on the floor of the House. The resolution now goes to the Judiciary Committee, where it will stay until Bush is out of office.
Thursday, June 12, 2008
Oil: The Next Bubble Has Arrived
I suspect that virtually ALL of the reasons given for the oil pricing crisis are to some degree true.
The question is: How are they related? This post, while far, far from being comprehensive, suggests a broad outline of the relationships and problem.
1) Oil speculation. This refers primarily to the investments of financial institutions (i.e. banks) and financial instruments (i.e. investment vehicles such as hedge funds). The sub prime mortgage collapse created huge losses for both, via essentially overvalued real estate, whether based upon actual housing value or the value of the mortgage packages put together for investors. These losses are being written off and banks are now, across the board, raising new capital to replace the losses. However, the new capital must promise a healthy return and consequently must be invested in something, somewhere - e.g. commodities, of which oil is the leading example. Of course, there must also be some "rationale" for such investment - e.g. like the high tech stock bubble in which investors were "sold" based on arguments of the "New Economy," globalization, an almost certain future DJ average of 20,000, etc. A sort of "the market will always go up" mentality that sucked in investors who had missed the initial rise and were hesitant to enter the market too late. The same thing happened in the sub prime mortgage market with the argument that real estate will never fall. Any substantial "bubble" has to have some rationale that the investment of choice will ALWAYS get better and the risk of a turn around is minimal, if not impossible. This is where the other factors enter.
2) Supply and Demand and Peak Oil. The simple argument for speculation is that the world is running out of oil. In other words, if supply and demand is not an immediate problem, it most certainly will be within the next 5-10 years, as demand rises and with the failure of the world's single largest consumer to produce any meaningful long-term energy plan (i.e. the United States). The anticipation of a supply and demand problem drives up the price of oil futures, which in turn drives up current market prices. This aspect of the problem has recently worsened due to the growing acceptance of Peak Oil, which is the point wherein regardless of demand (which is anticipated only to increase) oil production will begin to decline due to a lack of sufficient reserves. Recently, increasing evidence that Saudi reserves are far less than the Saudis claim has hit the market and oil industry. This also fuels speculation.
3) Global warming, ANWAR, Off-Shore drilling, etc. Here, I would contend that one factor driving oil futures up is the gradual acceptance in the west that global warming is for real and that it is not a good thing to continue to put a lot of CO2 emissions into our atmosphere. Investors are basically betting that western environmentalists have won or will win, particularly with a Democratic President and Congress in 2009. This means that additional oil (or any fossil fuel) is NOT the answer, because it only delays the inevitable and continues to poison the planet while doing so. [Note: Global Warming, as a phenomena, is close to being considered "a fact," as is the conclusion that adding CO2 to the atmosphere hastens the process. What is debatable is the degree to which man-made CO2 emissions contribute to global warming.] Oil companies, who make their living on carbon-based, fossil fuel energy, naturally want to frame the argument in terms of more oil to meet certain rising energy demands. In sum, it is an argument between those who believe additional oil will solve the short-term economic problem versus those who believe that additional oil will only serve to worsen the long-term environmental problem of CO2 emissions. Shale oil and coal-conversion to liquid energy forms are other arguments, but to date lack the technology to "cleanse" the fuels of CO2 emissions and in some cases require more energy to process than they yield. This logic, however, does not apply to the rising economies in China, India, Russia, et al. Investors are "betting" that while oil demand will decrease in the west, it will continue to rise in the east; that market-oriented economies in the west will be able to adjust faster to alternative energy forms than state oriented economies in the east, whose on-going demand will hold the high oil prices.
4) Miscellaneous Causes. These range from failed foreign and domestic economic policies to a lack of refining capacity. Trying to bring democratic-capitalism to the middle east is perhaps the largest of the foreign policy failures. The Saudis and the Persian Gulf states are basically tribal-based dictatorships. Iran is a religious dictatorship. Indeed, one is hard pressed to find a democratic-capitalist system in any of the OPEC countries or among their future big customers (India may be a somewhat confusing exception to the latter). In other words the New World Economy, dominated by the USA, as the single surviving super-power has failed, largely through inattention to our own problems at home and failures abroad. We have precious little of value left to sell and what there is, is over-valued. Foreign investors can help drive up the price of overvalued stock or real estate, but they have little control over falling prices, other than to stand by and watch their investments drop in value. The impact of all of this is that the world has lost a great deal of confidence in the United States, both in terms of our military incursion in Iraq and our failure to look after their U.S. investments at home. The outcome of this may well be a global shift in the status of the dollar as the world's reserve currency. Ironically, the present shift of investment from speculation in real estate to speculation in oil may forestall this event temporarily, as long as oil is priced in dollars, but substantial improvement in our position will come only through restoring our economy at home and an improvement of our image abroad.
Refining capacity would seem to be a relatively minor blip in contributing to rising oil prices and may be little more than an excuse to avoid environmental regulation and/or an excuse not to invest in long-term and massive capital expenditures in face of a society that has become convinced that it needs less reliance on oil than more. If ways can be found to "clean oil," there may still be a future for Big Oil, but at the moment Big Oil is spending more of its profits in buying back their stock, than in R&D. Long term, there seems to be the attitude within Big Oil itself that they will either make the transition to non-fossil fuel based energy companies or liquidate over the next fifty years.
In sum, the future of the United States as the dominating power in a post-Cold War world does not look bright, over the short-term. However, because of our size, innovation, and one would like to think, democratic system, we may yet return to our former status based on a rebuilding of our own society upon more solid economic ground than we have had over the last twenty years.
Note: The rising price of oil may actually be seen as a "tax" eventually beneficial to the American economy (if it doesn't destroy that economy). Rival world economies, such as India and China, must also pay the higher prices, usually with U.S. dollar reserves. If the shift of western investment into oil pays off, those dollars recirculate largely to our own economy, bringing more tax revenue to the government, with which to rebuild our own society (assuming a future Democratic Presidency and Congress, which will raise taxes on the wealthy). In a sense, the present spike in oil prices may be the last chance of western capitalism as we know it today. If prices break and fall, the investment community will take another round of huge losses and the "oil bubble" may become the last great bubble of our times. Sort of "double or nothing" as the last Big Casino bet.
Either way, short-term, things do not bode well for the "average American." Having been lulled into complacency and laziness over twenty years of both government and financial institution coddling through cheap money and easy credit, the country is going to need more jobs, producing more income, and perhaps most of all, more savings. With inflation to be certainly around the corner, it will be difficult to achieve this, with rising prices. While the wealthy are undoubtedly going to get hurt by increases in taxation and more regulation of our financial markets, this in itself will not eliminate the disparities in wealth and may, in fact, accentuate them - e.g. the wealthy will be paying more taxes, while the rest are losing their homes, paying $5.00/gallon for gas, etc. This will certainly test social stability. Being or appearing to be poor may become "politically correct."
The question is: How are they related? This post, while far, far from being comprehensive, suggests a broad outline of the relationships and problem.
1) Oil speculation. This refers primarily to the investments of financial institutions (i.e. banks) and financial instruments (i.e. investment vehicles such as hedge funds). The sub prime mortgage collapse created huge losses for both, via essentially overvalued real estate, whether based upon actual housing value or the value of the mortgage packages put together for investors. These losses are being written off and banks are now, across the board, raising new capital to replace the losses. However, the new capital must promise a healthy return and consequently must be invested in something, somewhere - e.g. commodities, of which oil is the leading example. Of course, there must also be some "rationale" for such investment - e.g. like the high tech stock bubble in which investors were "sold" based on arguments of the "New Economy," globalization, an almost certain future DJ average of 20,000, etc. A sort of "the market will always go up" mentality that sucked in investors who had missed the initial rise and were hesitant to enter the market too late. The same thing happened in the sub prime mortgage market with the argument that real estate will never fall. Any substantial "bubble" has to have some rationale that the investment of choice will ALWAYS get better and the risk of a turn around is minimal, if not impossible. This is where the other factors enter.
2) Supply and Demand and Peak Oil. The simple argument for speculation is that the world is running out of oil. In other words, if supply and demand is not an immediate problem, it most certainly will be within the next 5-10 years, as demand rises and with the failure of the world's single largest consumer to produce any meaningful long-term energy plan (i.e. the United States). The anticipation of a supply and demand problem drives up the price of oil futures, which in turn drives up current market prices. This aspect of the problem has recently worsened due to the growing acceptance of Peak Oil, which is the point wherein regardless of demand (which is anticipated only to increase) oil production will begin to decline due to a lack of sufficient reserves. Recently, increasing evidence that Saudi reserves are far less than the Saudis claim has hit the market and oil industry. This also fuels speculation.
3) Global warming, ANWAR, Off-Shore drilling, etc. Here, I would contend that one factor driving oil futures up is the gradual acceptance in the west that global warming is for real and that it is not a good thing to continue to put a lot of CO2 emissions into our atmosphere. Investors are basically betting that western environmentalists have won or will win, particularly with a Democratic President and Congress in 2009. This means that additional oil (or any fossil fuel) is NOT the answer, because it only delays the inevitable and continues to poison the planet while doing so. [Note: Global Warming, as a phenomena, is close to being considered "a fact," as is the conclusion that adding CO2 to the atmosphere hastens the process. What is debatable is the degree to which man-made CO2 emissions contribute to global warming.] Oil companies, who make their living on carbon-based, fossil fuel energy, naturally want to frame the argument in terms of more oil to meet certain rising energy demands. In sum, it is an argument between those who believe additional oil will solve the short-term economic problem versus those who believe that additional oil will only serve to worsen the long-term environmental problem of CO2 emissions. Shale oil and coal-conversion to liquid energy forms are other arguments, but to date lack the technology to "cleanse" the fuels of CO2 emissions and in some cases require more energy to process than they yield. This logic, however, does not apply to the rising economies in China, India, Russia, et al. Investors are "betting" that while oil demand will decrease in the west, it will continue to rise in the east; that market-oriented economies in the west will be able to adjust faster to alternative energy forms than state oriented economies in the east, whose on-going demand will hold the high oil prices.
4) Miscellaneous Causes. These range from failed foreign and domestic economic policies to a lack of refining capacity. Trying to bring democratic-capitalism to the middle east is perhaps the largest of the foreign policy failures. The Saudis and the Persian Gulf states are basically tribal-based dictatorships. Iran is a religious dictatorship. Indeed, one is hard pressed to find a democratic-capitalist system in any of the OPEC countries or among their future big customers (India may be a somewhat confusing exception to the latter). In other words the New World Economy, dominated by the USA, as the single surviving super-power has failed, largely through inattention to our own problems at home and failures abroad. We have precious little of value left to sell and what there is, is over-valued. Foreign investors can help drive up the price of overvalued stock or real estate, but they have little control over falling prices, other than to stand by and watch their investments drop in value. The impact of all of this is that the world has lost a great deal of confidence in the United States, both in terms of our military incursion in Iraq and our failure to look after their U.S. investments at home. The outcome of this may well be a global shift in the status of the dollar as the world's reserve currency. Ironically, the present shift of investment from speculation in real estate to speculation in oil may forestall this event temporarily, as long as oil is priced in dollars, but substantial improvement in our position will come only through restoring our economy at home and an improvement of our image abroad.
Refining capacity would seem to be a relatively minor blip in contributing to rising oil prices and may be little more than an excuse to avoid environmental regulation and/or an excuse not to invest in long-term and massive capital expenditures in face of a society that has become convinced that it needs less reliance on oil than more. If ways can be found to "clean oil," there may still be a future for Big Oil, but at the moment Big Oil is spending more of its profits in buying back their stock, than in R&D. Long term, there seems to be the attitude within Big Oil itself that they will either make the transition to non-fossil fuel based energy companies or liquidate over the next fifty years.
In sum, the future of the United States as the dominating power in a post-Cold War world does not look bright, over the short-term. However, because of our size, innovation, and one would like to think, democratic system, we may yet return to our former status based on a rebuilding of our own society upon more solid economic ground than we have had over the last twenty years.
Note: The rising price of oil may actually be seen as a "tax" eventually beneficial to the American economy (if it doesn't destroy that economy). Rival world economies, such as India and China, must also pay the higher prices, usually with U.S. dollar reserves. If the shift of western investment into oil pays off, those dollars recirculate largely to our own economy, bringing more tax revenue to the government, with which to rebuild our own society (assuming a future Democratic Presidency and Congress, which will raise taxes on the wealthy). In a sense, the present spike in oil prices may be the last chance of western capitalism as we know it today. If prices break and fall, the investment community will take another round of huge losses and the "oil bubble" may become the last great bubble of our times. Sort of "double or nothing" as the last Big Casino bet.
Either way, short-term, things do not bode well for the "average American." Having been lulled into complacency and laziness over twenty years of both government and financial institution coddling through cheap money and easy credit, the country is going to need more jobs, producing more income, and perhaps most of all, more savings. With inflation to be certainly around the corner, it will be difficult to achieve this, with rising prices. While the wealthy are undoubtedly going to get hurt by increases in taxation and more regulation of our financial markets, this in itself will not eliminate the disparities in wealth and may, in fact, accentuate them - e.g. the wealthy will be paying more taxes, while the rest are losing their homes, paying $5.00/gallon for gas, etc. This will certainly test social stability. Being or appearing to be poor may become "politically correct."
Wednesday, June 11, 2008
"How long our troops stay in Iraq isn't important"
The title quote is McCain's latest manifestation of the raging "foot-in-mouth" disease from which he seems to be suffering.
He went on to say that what IS important are the casualties we're taking...more proof perhaps that he REALLY doesn't know about economics.
McCain has always supported the war, although he had serious reservations about the way the Rumsfeld/Cheney/Bush Team was conducting it. This presumably means that he supports the other aspects of the Bush Doctrine (e.g. democratizing the world, pre-emptive war if necessary to get the job done, war with Iran if necessary to stop their nuclear development, etc., etc.).
He has made it clear that the War on Terror, in his mind, refers to radical Islamic fundamentalists and that the struggle is similar to fighting fascism or communism. Along these same lines, he points to our troop presence in Germany since WWII, our presence in Korea, Japan, etc.
One suspects that McCain sees Iraq as some twisted way to undo the mistakes of Vietnam. He needs to be called on this by the media, with a few pointed questions:
1) Do you feel we should have remained in Vietnam and continued to fight?
2) What would you do, as President, if the Iraqi government demanded we leave, although such a departure would be against our own military and intelligence estimates?
3) What terrorist organizations, other than Al Qaeda, pose a direct and imminent threat to the United States?
4) Do you believe that your 5 years as a POW and service as a naval aviation squadron commander, prior to entering politics, qualify you, above all others, to make national security policy for the United States?
5) Do you believe that honesty and decisiveness puts your policies above reproach? Can't you be both and be wrong?
6) What are the limits of Presidential power in the role of Commander-in-Chief?
He went on to say that what IS important are the casualties we're taking...more proof perhaps that he REALLY doesn't know about economics.
McCain has always supported the war, although he had serious reservations about the way the Rumsfeld/Cheney/Bush Team was conducting it. This presumably means that he supports the other aspects of the Bush Doctrine (e.g. democratizing the world, pre-emptive war if necessary to get the job done, war with Iran if necessary to stop their nuclear development, etc., etc.).
He has made it clear that the War on Terror, in his mind, refers to radical Islamic fundamentalists and that the struggle is similar to fighting fascism or communism. Along these same lines, he points to our troop presence in Germany since WWII, our presence in Korea, Japan, etc.
One suspects that McCain sees Iraq as some twisted way to undo the mistakes of Vietnam. He needs to be called on this by the media, with a few pointed questions:
1) Do you feel we should have remained in Vietnam and continued to fight?
2) What would you do, as President, if the Iraqi government demanded we leave, although such a departure would be against our own military and intelligence estimates?
3) What terrorist organizations, other than Al Qaeda, pose a direct and imminent threat to the United States?
4) Do you believe that your 5 years as a POW and service as a naval aviation squadron commander, prior to entering politics, qualify you, above all others, to make national security policy for the United States?
5) Do you believe that honesty and decisiveness puts your policies above reproach? Can't you be both and be wrong?
6) What are the limits of Presidential power in the role of Commander-in-Chief?
McCain Economic Advisors
A brief post on the McCain economic advisory team:
1) Phil Gramm - ex U.S. Senator from Texas. Author of Gramm-Leach-Bliley Act (1999), which essentially cancelled most of the post depression era legislation designed to prevent another depression by establishing "firewalls" between commercial banking, investment banking and the insurance industry [Glass-Steagall Act]. Co-Sponsor of Commodity Futures Modernization Act of 2000, heavily lobbied for by Enron, which essentially eliminated government oversight of "credit default swaps." [A CDS is essentially an insurance policy bought against the failure of a Collateralized Debt Obligation (CDO), which in turn is a bundled package of investments, primarily mortgages, in the subprime mess.]
Gramm's spouse, had previously served as Chairperson of the Commodity Futures Trading Commission (the government oversight agency), where she successfully passed a Commission rule exempting energy trading from oversight. Following her service on the Commission, she joined the ENRON board of directors, where she served on the audit committee. Gramm received between $1.0M and $2.0M in campaign contributions from the financial services industry, over his last ten years in office. He resigned his seat around the same time as ENRON failed and a few months prior to end of his term to allow appointment of another Republican Senator, who then was able to retain Gramm's seniority and avoid an election. Gramm now serves as a Vice Chairman of the United Bank of Switzerland, which has - thus far - declared subprime mortgage losses approaching $40B. In 1996, McCain served as campaign chairman for Gramm's unsuccessful Presidential bid. McCain, who has admitted he knows little about economics, told the Wall Street Journal, in a 2005 interview, he considers Gramm his "economic guru."
2) Carly Fiorina - ex-Chairperson and CEO of Hewlett Packard. Fired by a revolt of the HP board for poor performance. Currently serves on the board of the Taiwan Semiconductor Manufacturing Company. Supporter of globalization and serves on a committee of the World Economic Forum. Supports outsourcing and more H1b visas, for foreign high tech employees.
3) Jack Kemp - former football player, ex-Congressperson, ex-Cabinet member, ex-VP candidate on Dole-Kemp ticket. Big proponent of supply side economics. Currently runs a lobby firm.
In the wake of the subprime mortgage mess, even the Bush Administration has conceded that one cause of the losses was a lack of government oversight of both lending practices and the new financial instruments created to package, insure and resell the resulting subprime mortgages. As on Iraq, McCain seems to be running somewhere to the "right" of the Bush Administration.
1) Phil Gramm - ex U.S. Senator from Texas. Author of Gramm-Leach-Bliley Act (1999), which essentially cancelled most of the post depression era legislation designed to prevent another depression by establishing "firewalls" between commercial banking, investment banking and the insurance industry [Glass-Steagall Act]. Co-Sponsor of Commodity Futures Modernization Act of 2000, heavily lobbied for by Enron, which essentially eliminated government oversight of "credit default swaps." [A CDS is essentially an insurance policy bought against the failure of a Collateralized Debt Obligation (CDO), which in turn is a bundled package of investments, primarily mortgages, in the subprime mess.]
Gramm's spouse, had previously served as Chairperson of the Commodity Futures Trading Commission (the government oversight agency), where she successfully passed a Commission rule exempting energy trading from oversight. Following her service on the Commission, she joined the ENRON board of directors, where she served on the audit committee. Gramm received between $1.0M and $2.0M in campaign contributions from the financial services industry, over his last ten years in office. He resigned his seat around the same time as ENRON failed and a few months prior to end of his term to allow appointment of another Republican Senator, who then was able to retain Gramm's seniority and avoid an election. Gramm now serves as a Vice Chairman of the United Bank of Switzerland, which has - thus far - declared subprime mortgage losses approaching $40B. In 1996, McCain served as campaign chairman for Gramm's unsuccessful Presidential bid. McCain, who has admitted he knows little about economics, told the Wall Street Journal, in a 2005 interview, he considers Gramm his "economic guru."
2) Carly Fiorina - ex-Chairperson and CEO of Hewlett Packard. Fired by a revolt of the HP board for poor performance. Currently serves on the board of the Taiwan Semiconductor Manufacturing Company. Supporter of globalization and serves on a committee of the World Economic Forum. Supports outsourcing and more H1b visas, for foreign high tech employees.
3) Jack Kemp - former football player, ex-Congressperson, ex-Cabinet member, ex-VP candidate on Dole-Kemp ticket. Big proponent of supply side economics. Currently runs a lobby firm.
In the wake of the subprime mortgage mess, even the Bush Administration has conceded that one cause of the losses was a lack of government oversight of both lending practices and the new financial instruments created to package, insure and resell the resulting subprime mortgages. As on Iraq, McCain seems to be running somewhere to the "right" of the Bush Administration.
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