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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother – October 7, 2017

The Daily Escape:

Naiman Nuur (Eight Lakes) National Park, Mongolia. The lakes are just 22 miles from the Orkhon waterfalls, but are accessible only by hiking, or by horse. You can get to it with 4 wheel drive vehicles, but it is 80+ miles one way, 160 if there are heavy rains. You are probably never coming here.

Rick Perry heads Trump’s Department of Energy, (DoE). With the Russians, nuclear war with North Korea, ditching the Iran deal, and hurricanes, we have ignored Perry. But Perry hasn’t ignored the coal industry Trump hired him to protect. The DoE has asked the Federal Energy Regulatory Commission (FERC) to begin the rule-making process to subsidize coal and nuclear plant operator’s costs and profits. From Vox:

Perry wants utilities to pay coal and nuclear power plants for all their costs and all the power they produce, whether those plants are needed or not.

This takes a brief unpacking. The DoE did a study of power grid reliability that said:

The loss of coal plants had not diminished grid reliability; in fact, the grid is more reliable than ever. Reliability can be improved further through smart planning and a portfolio of flexible resources.

Then the DoE said to FERC: Address a crisis we determined doesn’t exist. They are asking FERC to adopt a rule forcing utilities in competitive energy markets to pay the full cost of plants that have 90 days’ worth of fuel on-site. Perry’s argument is that the levels of renewable energy produced from wind and solar is variable. And since backup is needed for days with calm winds or cloudy skies, we need to preserve the aging coal and nuclear plants to protect the power grid from dips in availability, because they alone among electric power sources, have 90-days of fuel on hand.

Perry’s contention is that coal and nuclear stored fuel is necessary for grid reliability, and, that these plants are unfairly being driven out of business by subsidies to renewable energy. This is patently false. It is cheap natural gas that is driving coal out of business.

Having fuel on-site does little for grid resilience. No one expects energy outages if coal and nuclear plants continue closing. But, let’s have more corporate welfare for the least useful part of the energy industry!

Perry’s alleged problem isn’t real, and his solution, subsidizing coal and nuclear plants, is a form of theft. A transfer from the most deserving, clean renewable and safe plants, to the least deserving, most polluting and dangerous coal and nuclear plants.

And people will be taxed through artificially higher electricity rates to subsidize coal and nuclear plants. More from Vox:

It’s hard to overstate how radical this proposal is. It is wildly contradictory to both the spirit and practice of competitive energy markets. It amounts to selective re-regulation, but only for particular power sources, which wouldn’t have to compete, they’d just have to have piles of fuel.

So does FERC have to do what DoE asks? No, but consider this: FERC has three commissioners (a quorum), two of which, including the chair, are Trump appointees. The chair is Neil Chatterjee, who was a staffer for Sen. Mitch McConnell, the Senate’s champion of coal. Chatterjee recently said:

I believe baseload power should be recognized as an essential part of the fuel mix. … I believe that generation, including our existing coal and nuclear fleet, needs to be properly compensated to recognize the value they provide to the system.

So, this market-wrecking plan to Make Coal Great Again is likely to happen.

This is an old-school Ayn Rand-style looter giveaway from a bunch of self-described free-market “conservatives” trying to rescue a dinosaur industry that is choking the world.

Just another issue that raises our anxiety level. It’s Saturday, and we need to dial it back, relax and stop thinking about how these Trump termites are quietly undermining everything. Grab a hot, steaming cup of Mystic Monk Paradiso Blend coffee ($15.99/lb.), find a quiet corner, put on the Bluetooth headphones and listen to Telemann’s “Concerto in D major for Violin, Cello, Trumpet and Strings”, TWV 53:D5. Here performed by the Bremer Barockorchester, recorded in a November, 2015 live performance at the Unser Lieben Frauen Church, Bremen, Germany:

Note the valveless trumpet played by Giuseppe Frau. It is an Egger (three-hole system) Baroque trumpet.

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – September 23, 2017

The Daily Escape:

Sunndalsøra, Norway, best known for its aluminum factory, one of the largest in Europe – photo by Brotherside

WaPo reports that estimates say it will take about four months for electric power to be restored on Puerto Rico. You would hope that we could beat the estimate by quite a bit. What is the Congress’s plan to help out our Commonwealth?

Can you imagine living somewhere without power for several months? We had to do it once at the Mansion of Wrong, at the height of winter for 7 days. It got to 37°F one night inside the house. We now have a whole house generator.

What happens to the Puerto Rican economy if there is no power for multiple months? Can average people make a living? How will they pay the rent, or the mortgage?

Our first concern should be providing them with supplementary power. Generators and the fuel to power them must be among the first things we deliver to the island. They are the cheapest, fastest way to deliver temporary power while the basic infrastructure of power lines and cell towers are rebuilt. Fuel (mostly diesel) will need to be brought in via ship. Health care facilities need power to operate, and the basic elements of government requires it as well. With power, they can begin to restore normalcy, communications and water for citizens.

People will need some form of temporary housing. Businesses will need to sell products and services, and help keep people employed. It’s also not clear how law and civil order will stand up to months without power, or to a situation where people can’t get their basic needs met.

Anyone with resources, or family connections on the US mainland is going to move away, many will come here. Will Puerto Rican immigrants be seen by the GOP base as simply more illegals coming to use our welfare system?

Will the GOP remind their base that Puerto Ricans are US citizens? It isn’t certain that Republicans all will say that. Think about what that says about the America we live in today.

The scale of this disaster would be unfathomable and unacceptable on the US mainland. Will we step up as a country and help our brothers back to their feet? Or, will we do something half-hearted because they are the “other“?

Before you answer, remember that Flint Michigan still doesn’t have safe drinking water. Maybe getting the help you need is mostly about whether you (and your town) are the correct color.

Time to get soothed after another really tough week. Try to find a bag of Beanstock’s Shucker’s Roast coffee (only available at retail during the Wellfleet Cape Cod Oysterfest) but otherwise available at great Cape Cod restaurants like C-Shore Wellfleet. Then, brew up a hot, strong cuppa. Settle back, put on the Bluetooth headphones, and listen to Tchaikovsky’s Trio in A minor, Op. 50. This will take about an hour, but you will be greatly rewarded.

Tchaikovsky wrote this between December 1881 and late January 1882. It is the only work Tchaikovsky ever wrote for piano, violin, and cello. Here it is performed live at the New England Conservatory’s Jordan Hall in February 2013, with Livan on piano, Zenas Hsu on violin and Yina Tong on cello:

Those who read the Wrongologist in email can view the video here.

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Houston’s Petrochemical Industry Fails to Protect City

The Daily Escape:

Ranwu Lake Campsite, Tibet photo by Arch-exist Photography. Ranwu Lake is a tourist attraction in SE Tibet, and is called the “Tibetan Switzerland”.

Life in the age of corporatism resembles life in the food chain. In a potentially disastrous outcome from the Harvey flooding, a chemical plant in Crosby, Texas belonging to French industrial giant Arkema, has had several explosions of peroxide and other volatile chemicals. From the NYT:

The company had already ordered all workers to leave the damaged plant, and Harris County ordered the evacuation of residents within a 1.5-mile radius.

These chemicals have to be refrigerated. When the plant’s warehouses lost power, they transferred the product to diesel-powered refrigerated containers. But later, the backup generators were swamped by flood waters, so cooling was lost, and the explosions began. On Tuesday, the company released a statement:

Refrigeration on some of our back-up product storage containers has been compromised due to extremely high water, which is unprecedented in the Crosby area. We are monitoring the temperature of each refrigeration container remotely….while we do not believe there is any imminent danger, the potential for a chemical reaction leading to a fire and/or explosion within the site confines is real.

The rains are over, but the chemical fires linger. Richard Rowe, the CEO of Arkema’s American operations said:

The company has no way of preventing chemicals from catching fire or exploding at its heavily flooded plant…the company has no way to prevent…this worst case outcome.

The CEO says, “No way to prevent explosion“. Back in the olden days, that would be known as a “major design flaw”. Most engineers would have recommended placing the generator sets above at least the 100-year high water mark, just to prevent this kind of fun event. They would also put the diesel tanks above that water line.

Maybe next time. The Houston Chronicle had this amazing map of chemical plants in the Houston area:

In case it is hard to read the map legend, the yellow markers are for petrochemical plants that have a “medium” potential for harm based on their location within the 100-year flood plain. The red markers have a ”high” risk for harm. Houston’s ship channel and the surrounding area along the Gulf coast represent about 40% of U.S. petrochemical manufacturing. At least 25 Houston-area plants have either shut down, or experienced production issues due to Hurricane Harvey’s flooding.

Any guesses that the concentration of plants in the Houston flood zone will cause our corporate overlords to think about relocation of a few of these sites? Or, how they best secure them from the next 500-year flood, which looks like it will happen in say, the next five years? From Forbes:

Harvey was a wake-up call, reminding us that it is time to take a more serious look to ensure the safety of the petrochemical industry and the public at large, just as the nuclear power industry has done in reaction to the Fukushima disaster.

But Arkema has worked hard to change EPA rules in their favor. David Sirota reports that the new rules, which were set to go into effect this year, were halted by the Trump administration after a lobbying campaign by Crosby plant owner Arkema and its affiliated trade association, the American Chemistry Council:

Those rules — which would have taken effect on March 14 — were blocked by EPA administrator Scott Pruitt. The move was a big win for the chemical industry that has spent more than $100 million supporting federal lawmakers since 2008.

Apparently, sacrifices must be made in the name of making America great.

The closures are not just disrupting markets; they’re also causing the release of toxic pollutants that pose a threat to human health. The NYT reports that damaged refineries and oil facilities have already released more than two million pounds of hazardous substances into the air.

The sheer number of facilities around Houston that have to come back online at the same time creates another huge emissions problem. From City Lab:

The real problem is that the plants are allowed to operate so close to residential areas in the first place. Houston’s lack of zoning regulations have been front-and-center in discussions about why Harvey has been so terrible for the city, and that’s no different in the discussion about air pollution.

Not to worry, Houston, your petrochemical corporations will be fine. They have insurance. They will get to write off any damage against their profits. They will get tax incentives to rebuild, or if they choose to move, tax credits from the town down the road.

The people? Most will have no insurance to rebuild their homes or to purchase new furniture.

And the pollution impact? A cost of doing business for the petrochemical industry.

Unfortunately, for the people, pollution’s about their health. And there will be no help forthcoming for the most vulnerable Houstonians.

Have a slice of Texas-themed music: Here is Robert Earl Keen, doing “Corpus Christi Bay” from his 1993 album “A Bigger Piece of Sky”:

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Saturday Soother, January 7, 2017

Happy Birthday today Kelly!! Other than that happy fact, little went right in America this week. Our Overlord, Donald I, rode to a presidential win by saying he would bring jobs back to America that have been lost to automation and offshoring by US companies.

But economists have said for years that creating jobs for low skilled Americans will be difficult. Here is further evidence that bringing back jobs may be tougher than Trump thinks. Salon reports that for men ages 25 to 54, the work statistics are poor:

For this group, labor force participation has sunk to 88.5% from a 1954 peak of 97.9%. Most of that loss has occurred among men who have a high school degree or less, according to a report this year by the Obama administration.

And there are interesting facts to consider where unemployed men are concerned. The NYT’s Upshot reports that the jobs that have been disappearing, like machine operator, are predominantly those that men do, while the occupations that are growing, employ mostly women. More from Upshot:

Of the fastest-growing jobs, many are various types of health aides, which are about 90% female. When men take these so-called pink-collar jobs, they have more job security and wage growth than in blue-collar work, according to recent research. But they are paid less and feel stigmatized.

Upshot quotes David Autor, an economist at M.I.T.:

The jobs being created are very different than the jobs being eliminated…I’m not worried about whether there will be jobs. I’m very worried about whether there will be jobs for low-educated adults, especially the males, who seem very reluctant to take the new jobs.

The issue is America’s culture of masculinity. Andrew Cherlin, a sociologist and public policy professor at Johns Hopkins says:

Traditional masculinity is standing in the way of working-class men’s employment…We have a cultural lag where our views of masculinity have not caught up to the change in the job market.

Why is it that men can get away with saying that they deserve better than women? Perhaps that is a rhetorical question. After all, we elected Donald Trump, who can get away with anything.

The Salon article had this snippet: (emphasis by the Wrongologist)

Health problems and the opioid epidemic may also be a major barrier to work, according to research by Alan Krueger, a Princeton economist and former Obama adviser. Nearly half of men ages 25 through 54 who are neither working nor looking for work, take pain medication daily.

Some of these men may have been injured on the job and were subsequently laid off. But some may also represent part of the huge increase in opioid use in America. They may be part of the increase in disability cases since the Great Recession: More than 10 million Americans received Social Security disability benefits in 2014 (most recent statistics). Benefits paid to disabled workers totaled $11.4 billion per month nationwide, a substantial increase from the $6.1 billion paid monthly in 2004. The top three states receiving disability benefits are West Virginia, Alabama and Arkansas.

We became this society honestly. Our politicians hold our corporations in high esteem. The corporations repay us by automating most jobs and shipping other jobs overseas. They do this with little or no responsibility to help displaced workers retrain, or find new work. They do this while asking for bigger tax breaks to remain domiciled in the US. They do this while blaming our education system for not providing trained, ready-to-work job entrants at no cost to them.

We just cannot count on them to be good corporate citizens.

Those on pain killers may or may not have disabilities that prevent them from working. But in any case, society does not owe unemployed working age men permanent, high paying manufacturing or mining jobs, despite whatever efforts Trump may make.

It is time for them to adapt.

We need a soother. Here is Grex Vocalis a Norwegian chorus formed in 1971. Grex Vocalis has reached the finals of the BBC contest “Let the Peoples Sing” three times. In this video they are performing “An Irish Blessing” (May the road rise to meet you) written by an American, James E. Moore in 1987, live at the Amadeo Roldán Theatre in Havana Cuba:

A Norwegian chorus performing an Irish tune, written by an American, in Cuba. That’s gotta be soothing.

For those who read the Wrongologist in email, you can view the video here.

Sample Lyrics:

May the sun make your days bright

May the stars illuminate your nights

May the flowers bloom along your path

Your house stand firm against the storm.

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Congress Is Back, And the Revolution Begins!

Here is food for thought from David Weigel of the WaPo: (emphasis by the Wrongologist)

When the 115th Congress begins this week, with Republicans firmly in charge of the House and Senate, much of that legislation will form the basis of the most ambitious conservative policy agenda since the 1920s. And rather than a Democratic president standing in the way, a soon-to-be-inaugurated Donald Trump seems ready to sign much of it into law…

That plan was long in the making. Almost the entire agenda has already been vetted, promoted and worked over by Republicans and think tanks that look at the White House less for leadership and more for signing ceremonies

There is little reason for Republicans to seek bipartisan support for middle-of-the-road legislation. They will simply work as a hive to turn America into Kansas. You remember Kansas, the state that has such a terrible record of job creation and economic growth? Kansas governor Republican Sam Brownback launched the orthodoxy of Grover Norquist and the Koch brothers on the state. And Brownback and Steven Moore who helped Brownback with his disastrous legislative agenda, are both economic advisors to Trump.

We have seen lots of hand-wringing about how to stand up to the Trump agenda that will begin raining down on America on January 20th. Most calls to action are from single-issue activist groups that lack the resources to get media attention, or to make a difference.

But there is a clear need for collective action on national, state and local levels. And that movement needs a leader.

How about an anti-president? Maybe Bernie Sanders? When Trump governs by tweet, he would be countered by the anti-president. Americans might come to know that, while Trump and company are cutting healthcare, the shadow government led by anti-president Sanders and vice president Warren are passing and signing a national healthcare bill.

When Trump cuts taxes on the rich and corporations, the shadow government is raising taxes on the rich and penalizing corporations that locate overseas to avoid paying tax at home.

When Trump appoints an anti-abortion, pro-Citizens United Supreme Court Justice, the shadow government appoints someone who is for social justice.

This can begin to build a consensus about what Trump is doing wrong.

We don’t have a parliamentary system, but, most Americans have no idea about political theory, or political facts. So, few will realize that a shadow government isn’t consistent with our Constitutional system!

And the new shadow government MUST not contain Pelosi, Schumer, or any of the geriatric Democrats in the House and Senate. That will de-legitimize the effort.

On New Year’s Day, Wrongo and Ms. Right attended a Baroque music concert at an old Congregational church in Washington CT that dates from 1741. Within a beautiful program, we heard a piece by the Italian composer, Domenico Zipoli. Zipoli has an interesting history. He studied with Scarlatti, he became a Jesuit, and worked as a missionary and died in 1726 in Argentina at age 38. Zipoli’s music was a revelation to us. Here is Zipoli’s “Elevazione” for oboe, violin, organ and cello. It was wonderful to hear it in a place with a good pipe organ.

The “elevation” is the point in the Catholic mass when the chalice and host are presented to the congregation. The performance lasts for eight+ minutes, much longer than what Wrongo prefers to present to you, but it is achingly beautiful, so please have patience.

It may be the perfect antidote to the shenanigans we will be seeing from the Trump administration, and we may need to watch it daily for a few months:

It begs the question, why was the 18th century blessed with so many great composers while the 21st century was given Justin Bieber?

Those who read the Wrongologist in email can view the video here.

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How Do You Solve a Problem Like Ohio?

Our industrial heartland has withered away, in that there are fewer manufacturing jobs than ever, while manufacturing revenues have never been higher. Forty years of promises by politicians have come to nothing: These people are victims of a world order in which corporations have either exported or automated those jobs, with no responsibility to workers. It is left to the towns of Middle America and the federal government to clean up their mess.

This world order we live in today was born in 1980, with Thatcher and Reagan. According to Ian Welsh, the world order made a few core promises:

If the rich have more money, they will create more jobs.

Lower taxes will lead to more prosperity.

Increases in housing and stock market prices will increase prosperity for everyone.

Trade deals and globalization will make everyone better off.

Those promises were not kept, and in America’s Midwest, economic stress is now the order of the day. That stress has contributed to rising rates of drug addiction and falling life expectancy.

Understandably frustrated, Ohioans and other Midwesterners gave Donald Trump a victory in November. His win has refocused attention by pundits and pols on the plight of our failing de-industrialized areas. While we have economic growth, we also have growing inequality. Here is a graphic illustration of the problem, comparing the US with the EU:

The Economist reports that from 1880 to 1980, the incomes of poorer and richer American states tended to converge, at a rate of nearly 2% per year. The chart above shows that the pattern no longer exists. This causes us to ask if the shift of resources and people from places in decline to places that are growing is simply taking longer to adjust, or has the current world order failed our people? In econo-speak, the gains in some regions should compensate those regions and towns harmed by the shift, leaving everyone better off.

But that is a political and financial lie promulgated by the very corporations that benefited, and by their political and economist cheerleaders.

With economic decline, some towns and cities became poverty traps. A shrinking tax base means deterioration in local services (think Detroit). Public education that might provide the young with new skills and thus opportunities, fails. Those that remain are on government subsidies or hold low-wage service jobs, or both. It is impossible to tell these citizens that the decay of their home town is an acceptable cost of the rough-and-tumble of the global economy.

Politicians are short on solutions. Since housing costs have risen sharply in towns and cities that are growing, underemployed Americans are less likely to move, and those who do, are less likely to head for richer places. Enrico Moretti of the University of California, Berkeley and Chang-tai Hsieh of the University of Chicago argue that our GDP could be 13.5% higher if this wasn’t the situation in America.

But if moving isn’t an option, what can be done to improve the outlook for those who are left behind?

Would more government subsidies help? Prosperous tax payers already support poorer ones. Subsidies for health insurance costs with Obamacare, as well as industrial tax incentives provide some cushion, but they are not likely to deliver long-run economic recovery, and they have not stemmed the growth of populist political sentiment.

To be fair, many people in Ohio and elsewhere want good jobs, but without having to move too far to get them. That may be impossible.

In the 19th century, the federal government gave land to states, which they could sell to raise proceeds for “land-grant universities”. Those universities, including some that are among our finest, were given a practical task: to develop and disseminate new techniques in agriculture and engineering. They went on to become centers of advanced research and, in some cases, hubs of local innovation and economic growth.

Politicians and academic economists might disdain a modern-day version of the program, one that would train workers, foster new ideas, and strengthen weakened regional economies.

But if our politicians do not provide answers, our populist insurgents will.

Time for a Christmas song. Here is Elvis with “Santa Claus Is Back in Town & Blue Christmas”, from his comeback special on NBC. This was recorded over six days in June, 1968 and aired on December 1, 1968. Elvis flubs “Santa Claus is Back in Town”:

Despite his flub, he does get this line right:

You don’t see me comin in no big black Cadillac

Kind of like out-of-work Ohioans.

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Sunday Cartoon Blogging – December 11, 2016

We are seeing the shape of Trump’s cabinet, and it’s clear that we will soon be working for idiots who used to be in sales. So, it’s time for some definitions: What are Kleptocracy and Kakistocracy?

Kleptocracy is a government where the rulers (kleptocrats) use their power to exploit the people and natural resources of their country in order to extend their personal wealth and power.

Kakistocracy means a state or country run by the worst, least qualified, or most unscrupulous citizens. The word comes from the Greek words kakistos (worst) and kratos (rule), with a literal meaning of government by the worst people.

Posted for your reference, in case something happens after January 20th that requires you to know about either term.

Trump’s commitment to renewable energy was on display in his Boeing tweet:

cow-hot-air-force-1

His cabinet, er, his junta:

cow-general-election

We’ve had high-ranking military men serve in high positions in our government since the beginning of the country, starting with George Washington through Andrew Jackson, Ulysses S. Grant, Dwight D. Eisenhower, through Colin Powell.  But Trump is surrounding himself with an awful lot of them, and some of them have had issues with both their temperament and civil liberties. Just like the man hiring them.

Any issue with so many generals? The NYT offers this:

cow-7-days-in-may

Man of the Year is questioned, but it is real my friends:

cow-time

 

 

 

 

 

 

 

 

 

Trump’s EPA will be his undoing in the next election:

cow-mistletoe

Pearl Harbor is hardly remembered:

cow-pearl-harbor

It’s another Family of Trump voters having quality time at home. Never have so many known so little about so much.

I’m stepping through the door, and I’m floating in a most peculiar way…and the stars look very different today:

cow-john-glenn

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Sunday Cartoon Blogging – December 4, 2016

Quite the week. Trump makes Cabinet appointments, he tweets about taking citizenship away from US flag burners exercising freedom of speech, he takes a call from the president of Taiwan, and gets a formal protest from China.

That wasn’t all. You missed it, but Congress passed HR 5732, the “Caesar Syria Civilian Protection Act”. The bill sets the stage for the implementation of a no-fly zone (NFZ) over Syria. It requires the administration to submit to the appropriate congressional committees a report:

That assesses the potential effectiveness, risks and operational requirements of the establishment and maintenance of a no-fly zone over part of all of Syria.

These Congressional chicken hawks may not realize that NFZs are a form of limited war. Politicians are usually the first to forget that limited wars only stay limited by mutual agreement. The military will tell you to never declare an NFZ unless you are entirely willing to fight a real air and ground war to enforce it. In the case of Syria, a No-Fly Zone would require the destruction of Syrian aircraft and missile systems from Day 1, probably leading to the death of Russians shortly thereafter. We could have a shooting war with Russia by the end of the first week.

Syria has over 130 air defense systems. A dozen or so are in the Aleppo area. Syria also has over 4,000 air defense artillery pieces and a few thousand portable infrared-guided missile systems. Russia has also located its advanced S-400 anti-aircraft missiles into Syria to protect their bases in Latakia Province. Those missile systems effectively give Russia control over Syria’s airspace, and for the US to impose a no-fly zone would require an air battle with Russia, which would all but guarantee the loss of a large number of US warplanes.

Over the last 25 years, there has been an evolving political infatuation with two pillars of “political airpower”: airstrikes and no-fly zones. Did we get the results our politicians promised?

Onward to cartoons. Trump goes to Indiana, gives Carrier tax breaks:

cow-carrier

It was great political theater, but it is a standard “socialize the losses” GOP play: tax breaks for jobs. The taxes earned from keeping the jobs never pay the cost of the tax credits.

Paul Krugman had a good observation:

cow-krugman-on-carrier

Fidel Castro dies:

cow-fidel-hell

Free speech isn’t well understood by the Orange Overlord:

cow-burn-this

Nancy Pelosi is reelected as Minority Leader. Many are pleased:

cow-pelosi

Mitt wants work, will say anything:

cow-mitt-agrees

 

 

 

 

 

 

 

 

 

 

 

 

Trump still has lots of posts to fill. Word is that former vice presidential candidate and Tina Fey impersonator Sarah Palin is on the list of possible Cabinet appointments.

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GOP Plans To Gut Dodd-Frank

Do you trust the banks and brokerage houses to govern themselves? Do you think that reducing banking regulations will help the economy, or your personal financial situation? Before you answer:

  • Remember that the economic meltdown of 2008 was caused by overreach by the financial industry.
  • Remember that it took the next eight years to climb out of the Great Recession and return to pre-2008 employment levels.

Dave Dayen in the Fiscal Times points out that there will be a vote this week in the Congress that will say a lot about how willing the Democrats in Congress will be to fight the deregulation avalanche that’s about to come crashing down on We the People. From Dayen: (brackets and emphasis by the Wrongologist)

As early as Wednesday, the House will take up H.R. 6392, the Systemic Risk Designation Improvement Act. This bill would lift mandatory Dodd-Frank regulatory supervision for all banks with more than $50 billion in assets, meaning those financial giants would no longer be subject to blanket requirements regarding capital and leverage, public disclosures and the production of “living wills” to map out how to unwind [the bank] during a crisis.

The intent of the new regulation authored by Blaine Leutkemeyer (R-MO), isn’t about helping the biggest banks, but the relatively smaller regional players, firms like PNC Bank, Capital One and SunTrust. An estimated 28 institutions would be affected. The eight “global systemically important banks” would remain subject to the standards: Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street Bank.

But the so-called regional banks are not small operations. These 28 regionals have combined assets of about $4.5 trillion. It is useful to remember that in the 2008 crisis, regional banks like Washington Mutual and Wachovia also came crashing down.

The American Banker says that the Financial Stability Oversight Council (FSOC), the new super-regulator charged with monitoring systemic risk, will be gutted by the Trump administration: (brackets and emphasis by the Wrongologist)

Because the FSOC is headed by the Treasury secretary…[a cabinet post selected]…by the White House, a Trump administration is unlikely to continue any of the council’s…priorities, including the designation of nonbanks or continued regulation of those firms already designated.

It is obvious that if this bill passes and is signed by President Trump, financial regulation will be relaxed, not by repeal, but through atrophy. Republicans want to replace any mandatory rules for regulation with discretionary ones. That way they can claim that they’re merely improving the system by putting the decisions in the hands of the experts instead of members of Congress.

A next step will be to hire regulators dedicated to turning a blind eye to what the financial industry does. The chair of FSOC is the Treasury Secretary. Trump’s candidates for Treasury Secretary include Steven Mnuchin, Trump’s national finance chair and the most likely choice for Treasury, who sits on the board of directors of CIT, a financial services company with more than $50 billion in assets. The Treasury Secretary will ensure that the rest of the FSOC board is made up of regulators and presidential appointees who share Trump’s laissez-faire philosophy.

President Obama will veto this bill if it passes the Senate before January 20th. But the Republicans plan to roll it out this week, instead of waiting for Trump to enter the Oval Office. They want to gauge just how much backbone Democrats have after their thumping in the election. More from Dayen:

This is really a moment of truth for those Democrats. If Republicans put up a big bipartisan vote in the House for this, the Senate will be more inclined to try to pass it down the road. And it will serve as a test case for Democratic resolve more generally.

Wall Street-friendly Dems have already endorsed tailoring Dodd-Frank rules to eliminate smaller regionals from the rules. This bill is a big change, and the question is whether Democrats play ball with Trump’s deregulation agenda, or will they recognize the harm it will cause?

This is an early test for those Dems whose seats are at-risk in 2018 and 2020.

Financial deregulation has rarely been a partisan political matter. Democrats and Republicans have typically worked together to roll back rules and loosen up the Wall Street casino.

HR 6392 could represent a return to those times, or it could be the moment when Democrats join together and say “no”, forcing Republicans to support the banking industry agenda on their own.

Party line resistance by Democrats could be in their longer-term best interest.

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Smart Guys, Smart Power

When we think of entrepreneurs involved in renewable energy, usually just one name comes to mind, Elon Musk, a smart guy who has given Tesla a new meaning. He just merged Tesla with Solar City.

But smart entrepreneurs in solar are emerging. The NYT wrote yesterday about Nicholas Beatty, a former banker who has covered about 25 acres of his farm in England with solar panels. This isn’t a new phenomenon, lots of farms have solar arrays both in the UK and elsewhere:

What’s new in Mr. Beatty’s field is a hulking 40-foot-long shipping container. Stacked inside, in what look like drawers, are about 200 lithium-ion cells that make up a battery large enough to store a substantial portion of the electricity the solar farm puts out.

The battery and its smart software give Mr. Beatty an advantage over other solar panel farmers. Power prices rise and fall depending on the supply and demand. The spread between the high and low price can be dramatic. By storing power in the battery, Mr. Beatty can feed it into the grid when prices are high:

The battery effectively takes power off the line when there is too much and puts it on when there is too little…

Improved industrial-sized batteries are a way of achieving that flexibility. Mr. Beatty’s battery storage system cost about $1 million, but could increase revenue for his solar farm by as much as $250k per year. Beatty is one of many entrepreneurs and businesses trying to play the fast-shifting electric power landscape. This is a capital-intensive business:

With about a dozen friends and family members…he spent £6.5 million ($8 .1 million) to build the solar farm in 2014. The solar panels…generate about £650,000 ($810k) in revenue a year…

Improved battery storage and its smart controlling software has been one of the two pillars required to make solar power competitive with non-renewable energy sources. The other is the cost of solar panels. Tesla has been working on both axis. They have built a solar demonstration project on the island of Ta’u in American Samoa that generates 1.4 megawatts of energy. The microgrid has 60 Tesla Powerpacks, the company’s large commercial battery with 6 megawatt hours of battery storage. These batteries can be fully charged with only 7 hours of daylight from 5,300 solar panels.

The microgrid facility can fully power the island of 600 residents for 3 days on battery power. It is expected to save the island 109,500 gallons of diesel per year or $8 million in fuel costs. Ta’u previously relied on diesel fueled generators for power.

Cost of solar energy per kilowatt or megawatt hour has been uncompetitive for a long time, but that is changing. And most countries and most US states now are willing to purchase power from independent generators, like Mr. Beatty in the UK. The Economist has this chart of the relative costs of sources of energy:

price-of-solar

All of this means that American farmers could open a new revenue stream by becoming smart solar power generators. Farmers own large acreage in sunny locations. They have a deep understanding of farming, another capital-intensive business. They understand that farming is a climate-dependent enterprise, another factor in common with solar power generation.

A key factor is whether their state allows interconnection with the power grid, and whether the state’s program to pay the independent power generator for power sent to the grid at an economic rate.

Let’s hope that Donald Trump’s fascination with coal doesn’t lead to bad policy. The Economist reports that Trump has promised to make more public land available to miners; but access to coal reserves isn’t their problem. Coal employment peaked in the 1920s, and today, fewer electric utilities want to use coal. If he intervenes on behalf of coal, he will be actively handicapping renewables and natural gas. If Trump’s energy policy is focused on a few unprofitable coal-mines, China will take a commanding lead in batteries, solar panels and wind turbines. That wouldn’t be so smart.

We are at a time when the cost of solar energy has dropped dramatically, and with greater economies of scale, it will fall even further.

It is past time for a few smart entrepreneurs to take up the disruption of the fossil fuel industry and its fellow travelers, the electric utilities.

 

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