If not Iowa...  

I'd say ethanol was over as a major political factor.

In the past, ethanol was a hot topic in the Iowa caucuses, but in 2011, most of the GOP field came out against ethanol subsidies and greater numbers of Iowans seem to agree with them as larger, more pressing issues such as the economy and the budget take over.

“It’s an issue I think Iowans are mindful of, but with the economy and everything else like that, there are other issues that they’re more focused on,” said Craig Robinson, formerly political director for the state Republican Party and editor of The Iowa Republican.

The industry insists that its political sway is as important as ever.

“I would argue it’s bigger. That is, I mean, y’all don’t write as many stories about it, but in terms of impact on Iowans’ votes it’s probably bigger than it’s ever been because of the size of the industry,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

“When you look at what’s driven Iowa’s economy over the last few years, it’s agriculture,” Shaw added. “And the No. 1 driver behind agriculture is renewable fuels, in Iowa.” [More]

 And, umm... ag isn't the 'driver".

 [Click to enlarge]

[Components do not total to 100% due to a limitation of ten sectors] 
 [Source - try building your own graph/table - it's easy]


We just refuse to accept the reality of our place in the economy, don't we?

Belated, but worth it...  

Meant to post this earlier, of course, but amazing has a shelf-life.



Wonder what the Star Trek Theme would sound like?

It looks good on paper...  

The capitalism of Adam Smith gained popularity in part because it was easy to follow, and had the helpful appearance of calm reason. It also described in many ways the actions of people in the real world of his time as free markets were just beginning to become intricate. I have long subscribed to his basic premises, but the advancing complication of our global economy has shown a few serious gaps between theory and reality.

Kenneth Rogoff identifies some of the problems with modern capitalism.

Perhaps the real point is that, in the broad sweep of history, all current forms of capitalism are ultimately transitional. Modern-day capitalism has had an extraordinary run since the start of the Industrial Revolution two centuries ago, lifting billions of ordinary people out of abject poverty.  Marxism and heavy-handed socialism have disastrous records by comparison. But, as industrialization and technological progress spread to Asia (and now to Africa), someday the struggle for subsistence will no longer be a primary imperative, and contemporary capitalism’s numerous flaws may loom larger.
First, even the leading capitalist economies have failed to price public goods such as clean air and water effectively. The failure of efforts to conclude a new global climate-change agreement is symptomatic of the paralysis.
Second, along with great wealth, capitalism has produced extraordinary levels of inequality. The growing gap is partly a simple byproduct of innovation and entrepreneurship. People do not complain about Steve Jobs’s success; his contributions are obvious. But this is not always the case: great wealth enables groups and individuals to buy political power and influence, which in turn helps to generate even more wealth. Only a few countries – Sweden, for example – have been able to curtail this vicious circle without causing growth to collapse.
A third problem is the provision and distribution of medical care, a market that fails to satisfy several of the basic requirements necessary for the price mechanism to produce economic efficiency, beginning with the difficulty that consumers have in assessing the quality of their treatment.
The problem will only get worse: health-care costs as a proportion of income are sure to rise as societies get richer and older, possibly exceeding 30% of GDP within a few decades. In health care, perhaps more than in any other market, many countries are struggling with the moral dilemma of how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care.
It is ironic that modern capitalist societies engage in public campaigns to urge individuals to be more attentive to their health, while fostering an economic ecosystem that seduces many consumers into an extremely unhealthy diet. According to the United States Centers for Disease Control, 34% of Americans are obese. Clearly, conventionally measured economic growth – which implies higher consumption – cannot be an end in itself.
Fourth, today’s capitalist systems vastly undervalue the welfare of unborn generations. For most of the era since the Industrial Revolution, this has not mattered, as the continuing boon of technological advance has trumped short-sighted policies. By and large, each generation has found itself significantly better off than the last. But, with the world’s population surging above seven billion, and harbingers of resource constraints becoming ever more apparent, there is no guarantee that this trajectory can be maintained.
Financial crises are of course a fifth problem, perhaps the one that has provoked the most soul-searching of late. In the world of finance, continual technological innovation has not conspicuously reduced risks, and might well have magnified them. [More worth reading]

Of all the issues he lists and others that I wonder about, I think at the top is the current "capitalist" obsession with budget deficits. This anxiety is rooted in several mistaken ideas.

One is the interpretation of financial propriety, wherein borrowing is linked to a lower moral status. I have argued before that borrowers and lenders are engaging in a peer-to-peer transaction, but until (and I think we are there for the most part) lenders have no one to pay them to use their money this mistaken moral judgement will continue to mislead public policy.

Deficits on a personal or national level are a bad idea when things are going well. During the early part of this century we could have continued our deficit reduction, but chose to cut taxes unnecessarily and splurge on Medicare D, not to mention devise obscure instruments to fund wagering in housing. The anger many now feel at those actions is triggering a response they should have advocated THEN, not during a steep recession.

Our mistaken blind belief in simplified capitalism is now leading into even deeper financial difficulty, as economic growth is the only proven answer to address our spluttering economies. It also diverts us from other important issues that impair our economy.

It is also leading to austerity – taxes are increasing and government spending is falling at the local and state level around the country. A difficult fiscal conversation still lies ahead at the federal level, but cuts and contractions of various types seem likely.
Some people argue that Americans need to tighten their belts. That’s an interesting discussion, particularly at a time with unemployment is still above 8% (with recent declines largely the result of many jobless workers’ decision to stop looking and drop out of the labor force altogether). Precipitate austerity is hardly likely to help the economy find its way back to higher employment levels.
But what about government support for the big banks? Is this contracting in the light of our current fiscal pressures? Unfortunately, it is not; much government support remains, implicitly through allowing banks to be “too big to fail,” and explicitly through various kinds of backing provided by the Federal Reserve.
The rationale – or perhaps we should call it ideology – behind supporting big banks is that they are needed for the economy to recover. But this position looks increasingly doubtful when the banks are sitting on piles of cash while creditworthy consumers and businesses are reluctant to borrow. [More]

Right now the US costs for public borrowing is negative across the yield curve. It costs us not to borrow. Wasteful government spending is of course inefficient, but even deficit-abhorring farmers are asking for better bridges, locks, and other infrastructure. With the massive construction sector still in the doldrums, investment in infrastructure, energy, and education will generate returns that at least will be positive.


Recognizing the difference between our global economy and that of Adam Smith would be a good first step in tackling our problems. Capitalism is not a stand-alone invention, but a system shaped by an increasing number of minds as more people around the world are able to make economic decisions. Our public (government) decisions should likewise borrow from a more current and applicable set of alternatives. Just because Smith's system was easier to understand does not make it accurate or right.

Now I know why...  

Tyler Cowen writes more than he speaks. Although this message is very powerful, it is the first time I have seen Cowen actually present in public. He is more formidable on paper, IMHO, but still effective, and the sixteen minutes here is really good stuff.

Transcript here

For those who remember...

Calvin and Hobbes.



[via sullivan]

Hope...  

I drew the short straw and represented the clan at morning worship. Even with the meager crowd, I was struck by how many cancer references filled the "Joys and Concerns".  While I have looked and hoped for progress against this Hydra of disease, I offer this clear-eyed look at the growing reasonableness of such dreams.

After four decades of largely unfulfilled hopes—Dec. 23 marks 40 years since President Nixon declared war on cancer—scientists have hit on a potential cure that few thought possible a few years ago: vaccines. If they succeed, cancer vaccines would revolutionize treatment. They could spell the end of chemotherapy and radiation, which can have horrific side effects, which tumor cells often become resistant to, and which often make so little difference it would be laughable were it not so tragic: last week, for instance, headlines touted two new drugs for metastatic breast cancer even though studies failed to show that they extend survival by a single day. Vaccines could make such “advances” a thing of the past. And they could make cancer as preventable, with a few jabs, as measles. [More for reading]

The writer, Sharon Begley, used to be the science writer for the WSJ, and is no lightweight. The whole article reinforces my hopes for generations to follow, and I thought it was an appropriate thing to share the Christmas Day.

Rejoice!...  

Here's wishing you a great Christmas. We're full of excited <7 yr-olds poised to open presents. Jan and I are up because that's what old people with old habits do. Meanwhile I still have to get ready for my bank meeting Tuesday.

Am I the only one who is continuing to be shocked by the hockey stick that is the business of farming? The numbers are relatively enormous compared with just a few years ago - and that's QuickBooks talking, not just me. Now add in I'm not farming the whole farm either - just about half.

In talking to farmers and those who work with us, I haven't heard one suggest our businesses could either stay this good or get better. And yet...

Oddly, I believe they can and very probably will. Moreover, I am convinced we are beginning to manage this prosperity slightly better each season.

Anyhoo, that outcome is what I wish for all of you guys.

Iowa over? (ctd)...  

At the risk of repetition, I will echo some additional remarks about the totally entertaining circus that the Iowa primary has become.

We are forever indebted to the Hawkeye State for the Eskimo Pie (from Christian Nelson, in Onawa) and the largest butter sculpture in the world (at the state fair). But let’s not kid ourselves. There’s nothing representative about Iowa. Whites make up 91.3 percent of the state’s 3 million citizens, compared with 64 percent of the country at large. Hispanics are 5 percent of Iowans, blacks 2.9 percent. Demographics aren’t the only anomaly. Unemployment in Iowa is less than 6 percent, the seventh-lowest rate in the nation.
A record 115,000 Republicans turned out to vote in the 2008 caucuses -- that’s right, less than 4 percent of Iowans makes a record. And since 1976, Iowans have picked the Republican nominee only three times.
...
Paul has many fine qualities as a candidate, which his furious supporters are quick to point out whenever the news media treats his campaign as a sideshow. In a year when voters crave authenticity, Paul exudes it. He eschewed earmarks before it was cool and, according to the Associated Press, as a practicing physician he rejected Medicaid payments, instead taking whatever a patient could afford, including a batch of fresh shrimp once in return for delivering a baby.
Yet Paul is seriously out of step with much of the Republican Party and most of the U.S. He has long championed the gold standard and lenient drug laws while opposing U.S. interventions abroad, the Federal Reserve and the income tax. A unique politician? Yes. The Republican nominee? Never.
Paul’s rise isn’t the only factor hastening Iowa’s irrelevance. Iowa’s stock in trade is retail politics, which enables voters to take the personal measure of a candidate in a way the hurried contests that follow don’t allow. Iowa’s diners used to be so crowded with candidates you could hardly muster a quiet cup of coffee without a glad-handing politician stopping by to curry favor.
...
For Romney, who has failed to rise much even as Gingrich falls, it’s tolerable to be beaten by Paul in Iowa provided Romney regroups to win the New Hampshire primary on Jan. 10. Gingrich, too, will live to fight another day should Paul take Iowa. In other words, if Paul wins, everyone wins, because no one really loses. Except for Iowa, which has it coming. [The whole thing]

And you just don't know what will happen next...

A Big Fracking Deal...  

I'm officially naming the explosion (heh) in natural gas production as the The Big Thing for 2011. Although I was impressed at the time I first heard of it, it continues to create huge side-effects that wil rock our world.

• NG exploration has helped the steel and construction industries.

For example, estimates of Pennsylvania job creation due to increased shale gas production since 2009 range from 44,000 to 72,000. In Bradford County, Pa., the 2009 unemployment rate of 10 percent has been halved because of Marcellus Shale gas development. New York’s economically depressed Southern Tier is also benefiting from gas field development in nearby Pennsylvania. Case in point: RB Robinson Contracting, Inc., a family construction business in Candor, N.Y., had eight full-time employees in 2009. Today, it provides full- and part-time work for 120 people.

Ohio’s steel industry has also felt the economic impact of the revival of shale production. More than 400 workers in Youngstown are constructing a new $650 million steel mill for Vallourec & Mannesmann Holdings, Inc. It will annually produce a half million tons of seamless steel well tubing used in drilling and “fracking” natural gas wells. U.S. Steel is spending $95 million to expand and upgrade its tubular steel mill in Lorain, Ohio, and Timkin is spending $50 million on a similar project at its Canton mill." [More]

• NG is replacing coal and oil (especially in the East)for electricity.

Natural gas will replace coal as the leading fuel for generating electricity in the U.S. by 2025, when it will also become the world's No. 2 overall fuel source thanks to its abundance and a drive for cleaner-burning energy, according to the latest long-term outlook from Exxon Mobil Corp. [More]

Here in the US, NG will become the #1 electricity fuel even sooner: 2019. And while it is not a panacea for carbon emissions, it does have big advantages in transportation, distribution, and its own environmental plusses.

• NG may be pulling the plug on wind farms even with their subsidies. I'm not counting this as a plus, just acknowledging I was wrong about the effect of more NG.  I thought peaker plants would help to stabilize the grid with lots of fickle wind turbines and their fluctuating output, but it seems it's easier to just build the NG generators.

General Electric saw a drop in demand for its wind power turbines to around half of its 2009 sales levels as power companies turned to natural gas for cheaper alternative energy forms, the company said on a conference call. GE is the top supplier of wind turbines for some of the nation’s largest wind power farms — huge swathes of land dotted by giant windmills that use the wind to generate anywhere from 1 to 3 megawatts of power per windmill. Each turbine and wind farm typically carries enormous upfront capital costs that can take several years before the power company can recoup its costs. [More]

• NG could spawn more basic chemical production, as it is an excellent feedstock for all kinds of basic chemical needs.

Officials in Appalachian states are hoping the natural-gas boom will attract more than just controversy to their economically struggling region. Pennsylvania, Ohio and West Virginia are offering tax breaks and incentives to "ethane crackers," or the multi-billion dollar plants that start the chain of making ethylene, a basic feedstock for chemical plants, reports Gabriel Nelson of Energy and Environment News.

No ethane cracker has been built in the U.S. since 2001 because natural-gas prices were too high, and most production was sent overseas. Since new deposits, such as those in the Marcellus Shale, have been tapped, crackers are now cheaper in the U.S. than anywhere except the Middle East. The U.S. ethane supply has grown by 25 percent over 10 years, and because it's harder to transport than methane, cracking plants must be located close to drilling sites. Nelson reports if ethane supplies stay at current levels, petrochemical companies will spend over $16 billion on pipelines and crackers. [ More]

I still am not sure how this will play our for transportation fuel, but this close the the East Coast, where oil is still used for home heating and electricity, replacing both with NG could dampen demand for oil enough to keep gasoline prices lower than might be expected. This is not good news for ethanol, and would seem to cap upside potential to the mandate.

I'm OK with that possibility, especially since we can't seem to match our predictions for corn production, and it is rapidly becoming clear cellulosic ethanol is a joke.

Like I predicted. [Apologies for shameless, gratuitous self-congratulation, but getting something right happens soooo rarely...]

Could not resist...  

Just one quick post.

On the subject of The Great Land Bubble:

Is China about to implode? Paul Krugman is worth a read on the subject, though in the end he doesn't know any better than anyone else. For what it's worth, the one encouraging thing I've consistently read about China is that their property bubble is largely driven by cash purchases, not debt. And non-debt bubbles, like the dotcom bubble, are inherently less destructive when they burst than debt-driven bubbles. [More]

I agree whole-heartedly. The other difference with a farmland bubble is the low velocity. Most of us never want to actually sell the land, so after a while even a way off-base price is little more than an unpleasant memory. I suppose I have paid too much for land, but my heirs won't care, just like I don't care what my forebears paid for the land handed down to me.

Then again how often have we said, "This time is different?" But even if we are way wrong, the default rate on land mortgages in 1987 (the bottom) was about 7%, or viewed from the other direction, 93% gritted our teeth and scrounged up the payments somehow.

Better and better...  

After Herculean effort, my ISP guy (a young farmer/engineer neighbor) has fired up a REAL Internet connection.  I use picpitstop.com to measure speed and I've been hitting 13+ Meg (down) and nearly 1M up.

However, something screwy is going on with my Mac and Airport router.  I have to restart several times, swap cords, reconfigure, sacrifice a chicken, and I still don't know what happens. I have to get that squared away and write the Christmas letter today.


I'll try to post some stuff before I drop off for no good reason.


(I'll bet I need a new 27" iMac, don't you?)

#%^&**$@!...  

My e-mail account was hacked a few hours ago (password stolen) and a stream of messages sent from my account. To all affected, sorry. I think I have stopped the flood.

To be fair, Macs are very virus-proof, but passwords are my own responsibility.

Junkbox, Episode XIXMAS...  

AT&T is frustrating my ISP guy by missing appointments for a new high-bandwidth "pipe" like...well, a cable guy.  Meanwhile, I can't get iCloud to clear up (heh).

• The farm boom isn't doing much for the rest of our counties
• Farmers didn't just suffer through the Great Depression - one economist thinks they caused it. (I respectfully disagree with his analysis)
• The looming Shrubbery Crisis
• Finance isn't about allocating capital anymore.
• Another biotech promise seems in doubt
• Nice guys do actually finish last 

 Still not too late for shopping, folks.

Peak ethanol...  

Perhaps.

Drivers of the approximately 16,500 highway-worthy electric vehicles in the U.S. can choose from 4,448 public charging stations should they want to plug in someplace other than home or work, according to U.S. Energy Department data.
That's one per 3.7 electric cars, such as Nissan's Leaf or Tesla's Roadster. That compares with 2,468 places to fill up the 7.6 million vehicles that can run on E85, a fuel that is 85% ethanol. E85-capable vehicles, also known as flex-fuel vehicles, can run on either E85 or traditional gasoline.
The Obama administration is pushing for still more charging stations, with $230 million worth of support from the Energy Department and private investment:
Ecotality received funds under the federal program to install 14,000 chargers in 18 metropolitan areas in six states and the District of Columbia.
"Electricity is the flavor of the month, just as others have had their time in the sun, electricity is now there," said Brett Smith, co-director of manufacturing, engineering and technology at the Center for Automotive Research in Ann Arbor, Michigan. "Is this a long-term technology or is it just that flavor of the month?"
Smith cited E85 and hydrogen fuel-cell cars as examples of technologies that have been favored by the government before the Obama administration chose to promote electric vehicles through policy and spending. [More]

And of course, ethanol is not wildly popular with the Republican Tea party base outside farm states.

But this year is an exception because the party, under increasing influence from the Tea Party, has pivoted on the subsidy. This summer, many Republicans in Washington voted to end the $6 billion-per-year ethanol subsidy. Though it ultimately survived, subsidies have become a rallying call for fiscal conservatives looking to cut waste and Tea Partiers who don’t want government ‘picking winners and losers.” No other candidate is as uncompromisingly for the subsidy than Newt. Mitt Romney, who has been vague on the issue, most recently says that while he initially supported the subsidy, should not “go on forever” — hardly a comforting position for Iowa farmers. Rick Perry, Michele Bachmann, Rick Santorum, and Ron Paul have all come out against the subsidy.  [More]

Finally, the antipathy on the right for the EPA doesn't really reassure ethanol producers either.

You live by the subsidy, you die by the subsidy, I guess. In this case it looks like the whole political spectrum is a threat.

A man and the moon...  

Simply amusing and amazing photos.
 

[Even more]

Good grief - Yoda was right!...  

We may have found "THE FORCE".

This could be the announcement we've all been waiting for.
As soon as the Large Hadron Collider (LHC) revved up its supercooled electromagnets in 2008 -- which promptly "quenched" (read: broke down in a very expensive way) and then restarted the following year -- it's been the one piece of news the world has been eagerly awaiting: confirmation of the discovery of one of the Universe's most secretive particles -- the Higgs boson.
After gazillions of particle collisions and countless rumors of Higgs discoveries, we have... yet another rumor of a Higgs discovery. But this time, the rumor seems to be meatier than ever.
...
According to comments left on a number of particle physics blogs, the word is that the LHC is closing in on the Higgs.
The Higgs boson is theorized to be the "force carrier" of the Higgs field -- a field thought to permeate the entire Universe, endowing matter with mass. Only by using powerful particle accelerators like the LHC do we stand a chance of seeing these mysterious particles. [More]

I can't wait for Sheldon to explain it all on an upcoming The Big Bang Theory.

[Insert your joke here]

And also with you.

Freeze! [or] Panic!...

Even in this time of starkly divergent and entrenched positions in public debate do you simultaneously run across two well-reasoned arguments that both appeal and completely contradict.

First, this truly depressing information about the new urgency in reducing carbon emissions, since a 2℃ rise (the popular target maximum) will be much worse than we had previously calculated.

The thing is, if 2 degrees C is extremely dangerous, 4 degrees C is absolutely catastrophic. In fact, according to the latest science, says Anderson, "a 4 degrees C future is incompatible with an organized global community, is likely to be beyond 'adaptation', is devastating to the majority of ecosystems, and has a high probability of not being stable."
Yeeeah. You'll want to read that sentence again. Then you'll probably want to pour yourself a stiff drink.
Obviously, "incompatible with an organized global community" is what jumps out, but the last bit, "high probability of not being stable," is equally if not more important. One of the most uncertain areas of climate science today has to do with feedbacks -- processes caused by climate change that in turn accelerate (or decelerate) climate change. For instance, heat can melt the Arctic permafrost, which releases methane, which accelerates climate change, which melts more permafrost, etc.
Based on current scientific understanding, positive climate feedbacks -- the ones that accelerate the process -- considerably outweigh negative feedbacks. At some level of temperature rise, some of those positive feedbacks are likely to become self-reinforcing and effectively unstoppable, no matter how much emissions are cut. These are the "tipping points" you hear so much about.
But at what level? Will hitting 2 degrees C trigger runaway positive feedbacks? It's difficult to know; this is one of the most uncertain areas of climate science. James Hansen thinks 2 degrees C will do it. Others disagree.
But the situation becomes considerably clearer around 4 degrees C. At that level, there's good reason to believe that some positive feedbacks will become self-reinforcing. In other words, 4 degrees C would very likely be a way station on the road to much higher temperatures. [More]

There is an excellent presentation of the paper supporting this stance here. Not a lot of laughs. But it does mesh well with other research about the consequences of even small temperature increases on what we view as "normal" climate.

But the real stunner was this economic perspective from a econoblogger rising in the ranks, Karl Smith.

I hold these positions

1. Climate Change is almost certainly real
2. Humans are almost certainly causing it with carbon emissions, deforestation and domestication of animals
3. There will be large environmental costs associated with climate change include a very rapid increase in extinctions
4. There are likely to be major population dislocations because of climate change
5. There are likely to be major agricultural shifts because of climate change.

Nonetheless, we should pursue the development of fossil fuels as rapidly as possible including looking for ways to streamline regulation in North American regarding fossil fuel production. [More]

Smith goes on the the argument that since we can't reach emissions goals without deep economic sacrifice, we have to bet the globe on advancing technology fast enough to enable a solution to be found in the future.

This strikes me as a pretty gutsy position, but his case has merits. However, as the research like the first case continues, if it shows even worse outcomes than we are imagining now from temperature rises, the tradeoff suggested by Smith becomes an ever worsening gamble. He could still be right that since we don't show any interest in taking the threat seriously yet, at least in the US, betting on a future miracle may be our default non-decision.

But the odd and consequences of being wrong approach catastrophic.

On a slightly related note, I think Huntsman may be feeling some love from anybody-but-Mitt Republican voters and bigwigs, as he suddenly decided to backtrack on his courageous climate-change stand.

Jon Huntsman used to believe climate change is real. Now he’s not so sure.
In a move that’s sure to endear him to the conservatives who are starting to warm up to the former Utah governor, Huntsman said Tuesday under questioning from TPM that he now believes there’s “more debate yet to play out” before we can be sure climate change is really happening.
That’s certainly not the way Huntsman sounded waaay back in August, when he famously tweeted:

“To be clear, I believe in evolution and trust scientists on global warming. Call me crazy.”

That was part of an organized effort by Huntsman to be the sane one when it came to climate science. In an interview with Time, he said it this way:

“I’m not a meteorologist. All I know is 90 percent of the scientists say climate change is occurring. If 90 percent of the oncological community said something was causing cancer we’d listen to them.” [More]

Seems like a lot of folks are betting on a) a Gingrich implosion, and 2) a Romney closure failure. And I suppose climate change is an easy issue to play fast and loose with on the right. Ron Paul may be cornering the market in consistency and principle.

You can run...  

But you can't hide. I'm talking about hot money looking for safe place to live - theme that shows up constantly in my posts, I now realize.

I would guess I'm not surprised because I am ~130% invested in farm land, which not only has been safe for the last few decades, but lucrative. But if you are not a land nut, choices for safe investment are not ample.

You’ll find the above on page 143 of the Credit Suisse 2012 Global Outlook, which we’ve stuck in the usual place.
It shows how the world’s outstanding stock of safe haven assets denominated in either dollars or euros has evolved, adjusted to account for the Fed’s purchases of US Treasuries and other assets in recent years as part of quantitative easing.
You can see just how impressive the decline has been since 2007, and we’d also note that if Credit Suisse had been feeling uncharitable, they would have been justified in excluding French sovereigns.
The chart helps explain much of what’s happening in global financial markets now, especially in Europe (not on its own, mind you — we said “helps” explain):
– Begin with the ongoing collateral crunch, and how the decline of safe assets is directly tied to the dramatic fall in the availability of high-quality collateral in European lending markets. So much of it is now encumbered via direct bilateral funding agreements or by sitting at the central bank drawing liquidity. [More]

While I kinda thought this was happening, the scale of the shrinkage was alarming.It also makes me wonder, what will have to happen to make stuff that was downgraded upgraded in the future? I suspect only significant time and good performance.

Baby, we are drilling...  

Once oil companies began including the full costs of sourcing in developing nations, the economics of producing at home, or at least countries with functioning democracies, looked a little better.

Now, in a sense, the choice has been made for them. Big onshore fields in the world's most prolific hydrocarbon provinces are increasingly the preserve of national oil companies, state-owned behemoths like Saudi Aramco and Russia's OAO Rosneft and OAO Gazprom. For foreign majors like Royal Dutch Shell PLC and BP PLC, their former heartlands in the Gulf sands are now largely off-limits.
Shut out of the Middle East, they have responded with a huge push into new areas, both geographic and technological. Over the past few decades, they have built vast plants to produce liquefied natural gas, or LNG. They have drilled for oil in ever-deeper waters, ever farther offshore. They have worked out how to squeeze oil from the tar sands of Alberta. And they have deployed technologies like hydraulic fracturing, or fracking, and horizontal drilling to produce gas from shale rock.
Wood Mackenzie, an oil consultancy in Edinburgh, says that more than half of the international oil companies' long-term capital investments are now going into these four "resource themes"—a huge shift, considering how marginal the companies once considered them.
There are also drawbacks to the new focus on nontraditional kinds of hydrocarbons. Environmentalists strongly oppose shale-gas extraction due to fears that fracking may contaminate water supplies, the oil-sands industry because it is energy-intensive and dirty, and deep-water drilling because of the risk of oil spills like last year's Gulf of Mexico disaster.
There are financial considerations, too. While conventional assets are relatively easy to develop and historically have offered good returns, projects in some more technically difficult sectors—like deep-water and LNG—typically take longer to bring on-stream, and are higher cost, meaning returns are lower.
But there is an upside for the majors. "The silver lining is the shape of the profile of these projects, which is different than conventional ones," says Simon Flowers, head of corporate analysis at Wood Mackenzie. LNG ventures, for example, can deliver contract levels of gas at a steady rate over 20 years. "So the returns may be lower, but overall you have a more dependable cash-flow stream," he says.
By pursuing these nontraditional fuels, the oil companies are committing themselves ever more deeply to the wealthy nations of the Organization for Economic Cooperation and Development. Wood Mackenzie says $1.7 trillion of future value for all the world's oil companies—52% of the total—is in North America, Europe and Australia. The consultancy has identified a "significant westward shift" in oil-industry investment, away from traditional areas like North Africa and the Middle East "towards the Brazilian offshore, deepwater oil in the Gulf of Mexico and West Africa and unconventional oil and gas in North America." And then there's Australia, far out east, "which is in the early stages of a spectacular growth phase." [More]

While I was impressed with the possibilities for domestic natural gas production, once again I was several beats behind the march away from the Mideast.

It would be ironic if after pouring enormous resources of every kind into that area, it becomes a auxiliary supplier for the US.

Meanwhile, the mismanagement of Russia's resource-based economy seems to have been noticed by its citizens.

First, political optics are particularly important in Russian politics. Mr. Putin has always promised stability, and this was based to a significant degree on his perceived invincibility and the power of deterrence that his rule, via the “power vertical” system, conveyed. There was a sense of inevitability to his policies, reinforced by the strength of both his personality and of the political machinery supporting him. Mr. Putin, therefore, looked to elections as in part a legitimizing ritual in a political order that – as it moved ever further away substantively from Mr. Medvedev’s declarations of fealty to democracy – has come to occupy an increasingly thin border between limited democracy and full authoritarian rule. Yet, with the regime’s invincibility now severely dented, critics and opponents will undoubtedly be emboldened in opposing government policies, challenging the pervasive corruption, and demanding a fairer distribution of incomes and resources at a time when Russia’s one-dimensional, resource-driven economy, is confronting growing challenges.
Second, Mr. Medvedev’s future itself has become cloudy. He had to deliver the votes during the parliamentary election if he was to be given the prime ministership. He had already lost whatever credibility he had with the electorate with the closed-door decision to switch the two top governing positions. Now, despite all of the administrative advantages that the ruling party had – where it could mobilize workers; control the television medium; use its judicial connections to fine Russia’s leading independent vote monitor, Golos, for alleging electoral violations; employ other connections to mysteriously shut down communications broadcast from independent radio stations such as Ekho Moskvy, and blogging platforms such as LiveJournal; as well as the widespread, scathing allegations of thousands of violations of electoral rules by external and internal observers – United Russia still had a relatively poor showing. Mr. Putin has a history of not tolerating politicians who do not deliver as he expects.
Third, the election is also an indicator of a brewing legitimacy crisis in Russia. As the late Harvard scholar Samuel Huntington wrote, “performance legitimacy” plays a critical role in authoritarian regimes. When Mr. Putin was able to deliver growth and increasing public goods to the population, the legitimacy of his rule seemed solid because he reinforced it with an image of personal vigour and determination. Given Russia, however, is confronting massive structural problems due to its reliance on energy, with the vast Reserve Fund used to prop up the economy during the recession now largely depleted, and a demographic time bomb of extremely low birth rates, a shrinking population and a disintegrating health care system, not to mention an outflow of funds to Western safe havens, performance legitimacy is an increasingly less viable option within Mr. Putin’s social contract that trades freedom for security. [More]

While not the only vehicle, I think this is another piece of evidence that the Internet will increasingly play a bigger though as yet undefined role in public policy development and politics. And I mean everywhere.

[Note: Re-reading this, I realized it maybe should have been two posts, but one thing reminded me of the other. And you learn to write it down immediately. This is how 60+ year-old minds work.]

[Oh yeah - yours will too.]

Morality and debt...  

There has been a robust debate in the econoblogs regarding the Eurozone crisis and how the economic strength of Germany does or does not grant them the moral "high ground".  I have noticed this is often how debtor/creditor arguments devolve - the virtues of the lender versus the vices of the borrower. Tyler Cowen does an excellent job of listing the facets of this debate, and sums up this way:

I believe that the Germans have approached this crisis with some bad economic theories, a lack of understanding of how government spending cuts can be self-defeating in the short run, and a good deal of more or less deliberate self-deception about its partners in the union, not to mention Germany’s own ability and willingness to act “fully European.”  I’m also not sure that Germany has a path out of this which leaves their own financial system intact.  You can rack up the moral and practical minus points there in considerable number.  That said, I see a lot of intellectuals dismissing the perspective outlined above, rather than figuring out why it makes so much sense to so many people, not just in Germany.  I think the financial elites in the periphery countries themselves actually see it quite clearly.

The result is significant misunderstandings about what can happen and will happen in the eurozone.  Germany cannot and will not drop its moral perspective, even if there is some theory — and yes theory is the right word here, because no one knows these broad guarantees will work — of how a broader and far more costly commitment can set things right.

In reading American discussions of the eurozone, I am frequently reminded of earlier discussions of the Soviet Union.  Most outsiders simply didn’t realize how little social capital was left in the system, though some of the Soviet insiders did.  Might the same be true of the eurozone?  I’m not calling these countries corrupt, rather there may be remarkably little cross-national cultural capital, and remarkably little deep public support for a costly EU bargain, so little that many German (and other) insiders know that no grand bargain can be sustained or even seriously attempted.

I believe we need to be exposed to this moral perspective, and this intellectual Turing test, as a bracing slap in the face, as a wake-up call, and I see our unwillingness to do anything with this perspective, other than summarily dismiss it as a kind of tragic juvenile moralizing, as a sign of our own decline, right here in the USofA.

But it's the same transaction, people!  How can lending be an act of moral superiority and the borrowers' actions be cast as morally suspect? If nothing else, hasn't the lender then engineered the "fall" of the borrower?

To be sure, the economic and cultural character of Germany resonates with the "work ethic" moral training remains a powerful part of Western societies: hard work, thrift, gratification delay, self-determination, etc. But I think we may be outgrowing those values or at least failing to modify them to present economic realities.

One of the most powerful of these new realities is the abundance of wealth. In the face of that surplus the choices for investors are not always an array of solid, high return productive assets, but a sorry collection of higher-risk, low yield instruments. I do not disallow the German culture its moral high ground connected to thrift and good choices, but I do wonder why they should not bear responsibility for their investment choices - both private and public. Why were they pouring money into Greek, Spanish, Irish debt to such a degree they could not suffer bad consequences? Aren't they guilty of bad investment strategy at least? Should not they bear the consequences of buying junk?

This is the dilemma of capital surplus countries and individuals. You will seldom find another place to park your money as "virtuous" as your own business, since they would likely be in capital excess, too.

Meanwhile, Ezra Klein reports from the financial front lines.

Over the course of dozens of interviews conducted in Berlin over the last few days, I've spoken to members of Angela Merkel's government, members of the opposition Social Democrats, industrialists, and bankers. No one has evinced even the slightest willingness to see the euro zone crack apart. But nor have they quite said they're willing to save it. Rather, they remain serenely confident that they will save it. But they don't have a surefire strategy. They have a bet. A big one.
That's really the key to understanding the German psychology on the euro. In America, we keep asking why they don't join with the European Central Bank to end the run on the European periphery. The answer is simple: they don't want to end the run on the European periphery. To them, the run on Italy and Greece and Portugal and Spain is a feature, not a bug. It's leverage, and they want to use it.
Look how much it has already gotten them. Greece, Portugal, Italy and Ireland are working their way through stringent deficit-reduction plans. The widely disliked governments of Greece and Italy, which proved unequal to the task of fiscal reform, have been toppled. There is a good chance that the euro zone might become what Germany has always wanted it to be: a fiscal union, in which the members meet their deficit targets and reform their labor markets. And none of this would have happened without the markets making their run at the European periphery.
So to understand the German position, look at it from their perspective: Why in the world would Germany let up the pressure now? When they're so close to amending the very treaty underlying the euro zone? When France has joined with them on a set of reforms? When the market is doing what the Germans never could?
I worry this makes the Germans sound like puppetmasters. They're not. Many of their intended reforms are very sensible. The flaws they point to in the euro zone are, indeed, deep, structural flaws in the euro zone. They do envision a future that includes sacrifice on their part: eurobonds that raise Germany's cost of borrowing and a bailout fund -- excuse me, a fiscal stabilization fund -- that they contribute heavily to.
So my concern isn't that the Germans are selfish and calculating. It's that, without quite realizing it, they have become reckless. They are trying to time the market, betting that they can, in essence, manage the run -- that they can do just enough to keep the pressure on without letting matters get totally out of hand. They are like a doctor who, faced with an unhealthy patient presenting signs of a heart attack, demands to see the patient lose weight before they will administer the life-saving treatment.
In almost all of their arguments, the Germans are right. The euro does need to be fixed. But first it needs to be saved. The Germans are betting that this is their opportunity to do both. If they're right, it will have been a remarkable play. If they're wrong, it will have been a disastrous one. [More]

It will be some time featuring very low rates before this curious economic puzzle gets solved. The idea of excess money struggling to get a return despite being the trophy of economically prudence and self-discipline will take some time getting used to. My guess is we are nearing that time as the last of the ~5 year investment instruments roll over into sub 1% territory. I'm seeing it at my bank, and now in Europe.

[Update: Rats! As soon as I labored through this post, Kevin Drum explains it much better. And with punctuation, spelling and charts. It's a must-read for those newly interested in the euro.]

Savers need borrowers just as much as the reverse. Meanwhile, the ag markets have a huge stake in this political turmoil as we obviously miss the extra money in the pits.

Add Danforth...  

The roll call of Republicans aghast at their own party grows. His defense of Sen. Lugar, whom I consider to be one of the best the GOP has ever had, is priceless.

Republican John Danforth, who served as a senator from Missouri for nearly 20 years and later as George W. Bush’s ambassador the United Nations, is not happy with the slate of Republican presidential candidates. “I’ve been watching some of these Republican debates and they’re just terrible. Terrible,” he told KTRS in St. Louis yesterday. “It’s embarrassing for me as a Republican to watch this stuff,” he added, calling out audiences for applauding the candidates’ morbid boastings. [More]

 If the GOP sinks to nominating Gingrich, it could mark the low water point, IMHO. 

One more reason...  

Why I would have died a flaming death in corporate America: marketing campaigns. I try to imagine having a meeting with these people.

Below are some highlights. Warning: We are about to enter the strange arena of marketing, where fictional worlds are conjured up out of whole cloth for the sole purpose of moving goods.
From what I can tell, the intention expressed here is to brush up the image of Hillshire Farm and roll out two new premium brands: "Smith & Smith Fine Meats" and "Flat Iron Ranch." The campaign is "foundational," the one slide declares, "and demonstrates how the new, purposeful Sara Lee will manifest: Modern. Authentic. Simple."

Seriously, if you can't sense a wind change in the meat industry from this, what will it take? It looks to me you're going to have to be able to fake "sustainability" and "humane production" at the very least.

 

My new crusade...  

 Why I use credit cards:




[via mr]

Wish I had said it...  

"Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world."

[Source?]

Another subculture...  

I pretended didn't exist.

 

In fairness, it's not much different than dog shows, IMHO.

Just not as upscale, I guess.

Newt...  

Why implausible is the new possible.

Junkbox, Episode YULEIX...  

Some quickies for starters.

• I'm not the only one hating on the new Coke cans.
• No left turns. (Thanks, Jack)
• Economic Buzzword of the Day: Giffen good
• No doubt you heard we are now a fuel exporter
• Wait - maybe farmers do ♡ regulations
• Gary Schnitkey should write horror movies.

A squirrel ate my Internet...  

This could become Numero Uno in my Timeless Excuses List™. I was getting intermittent signals from my WAN radio and it finally gave up altogether this week after over 4" of rain* last week.


The coax cable was leaking water from outside into the power port.  A squirrel (my guess) chewed the insulation off up by the receiver. 


I just can't take the fuss of posting from the iPad so I went dark, and surfing was so slow I fooled around getting the floor finished in the new woodshop. We're back to a full 5 Megs without periodic hangs to boot, so life is good. I"ll try to get some stuff up this weekend.

*November is now my wettest month at 8.1". Go figure.

Another apostate...  

Dan Drezner, to whom I have linked occasionally, is a noted conservative foreign policy writer whose opinion I always consider, even when I disagree. Like so many others, including yours truly, he has lost the faith with what is masquerading as the Republican Party.

2)  I haven't overtly talked about my own personal political beliefs since the blog moved to FP, but this seems to be an appropriate time to bring it up and then never speak of it again.  When I've published essays like this before, I find liberals write "even conservative Dan Drezner..." while conservatives often deploy terms like "academic elitist" or "RINO." 

In my case, at this point in time,  I believe that last appellation to be entirely fair and accurate.  I'm not a Democrat, and I don't think I've become more liberal over time.  That said, three things have affected my political loyalties over the past few years.  First, I've become more uncertain about various dimensions of GOP ideology over time.  It's simply impossible for me to look at the aftermath of the 2003 invasion of Iraq and the 2008 financial crisis and not ponder the myriad ways in which my party has made some categorical errors in judgment.   So I'm a bigger fan of the politics of doubt during an era when doubt has been banished in political discourse. 

Second, the GOP has undeniably shifted further to the right over the past few years, and while I'm sympathetic to some of these shifts, most of it looks like a mutated version of "cargo cult science" directed at either Ludwig Von Mises or the U.S. Constitution (which, of course, is sacred and inviolate, unless conservatives want to amend it).  Sorry, I'm not embracing outdated concepts like the gold standard or repealing the 16th Amendment.  Not happening. 

Third, David Frum wrote something in New York Magazine that touches on the issues I just discussed, but also articulates something that has been nagging at me for a few years now: 

The conservative shift to ever more extreme, ever more fantasy-based ideology has ominous real-world consequences for American society. The American system of government can’t work if the two sides wage all-out war upon each other: House, Senate, president, each has the power to thwart the others. In prior generations, the system evolved norms and habits to prevent this kind of stonewalling. For example: Theoretically, the party that holds the Senate could refuse to confirm any Cabinet nominees of a president of the other party. Yet until recently, this just “wasn’t done.” In fact, quite a lot of things that theoretically could be done just “weren’t done.” Now old inhibitions have given way. Things that weren’t done suddenly are done.

Also, things that weren't said are now being said.  Or, to be more precise, things that use to be said but ignored are now being taken seroiusly by the GOP's leading lights.  Newt Gingrich endorses the notion that Obama has a "Kenyan, anti-colonial" worldview.  Mitt Romney claims Obama has been apologizing around the world and no longer believes in American exceptionalism.  Herman Cain is [Remember your mercy rule!!--ed.].... Herman Cain.  There's good, solid partisanship -- a vital necessity in this country -- and then there's unadulterated horses**t.  Too much of the GOP's rhetoric on Obama reads like the latter to me. 

So for those reasons, I really am a Republican in Name Only at this point.  And I say this for the GOP's benefit.  The next time someone writes, "even the Republican Dan Drezner has said...." GOP partisans should feel perfectly entitled to link to this post and call me a RINO.  Because it's true. [More]

There is more to foreign policy for the US than doing whatever Netanyahu wants amd ignoring the rest of the globe. But you wouldn't know it from the GOP candidates, save Huntsman and Paul.

Not my party anymore.

Winter touches the sea floor...

(Mostly an experiment to correct an embedding problem, but cool nonetheless)

Wall Street detour...  

Say what you will about the OWS movement, the idea of "The 1%" has taken root. While many before had questioned how the finance sector added so much value it was entitled to oversize profits, some of our best economic minds are having trouble seeing this to be true as well. In the process of thinking this through some are discovering something farmers have instinctively, if not consciously, believed. (Note my emphasis below)

But the bigger idea, I guess, is that the “normal people” helped by Wall Street are the 1%, and that Wall Street has its “fingers on the scales in their favor”, and that if the scales are tipped towards the 1%, then that means the 99% are the losers. They’re the prey for Wall Street’s predators.
I don’t buy this analysis. I don’t believe that Wall Street is meaningfully improving the lives of the 1%, except insofar as Wall Streeters are the 1%. (Remember that financial professionals make up only 14% of the top 1%, and 18% of the top 0.1%. They’re a large chunk, but by no means the majority.)
In fact, I suspect that the top 1%, if anything, are responsible for a disproportionate share of Wall Street’s income. Wall Street isn’t picking the pockets of the 99% and giving the proceeds to the 1%: it’s picking the pockets of the 1% and giving the proceeds to itself. And Wall Street is taking a whole bunch of money from the 99%, too. But for the 86% of the top 1% who don’t work in finance, I really don’t believe for a minute that Wall Street is helping them out by giving them the hard-earned money of the 99%.
I also don’t believe in some halcyon era when Wall Street was “an economic helpmate” to the 99%. It has always been very good at extracting rents, and very bad at creating wealth for its clients.
Narrowly speaking it’s easy to see where Emerson’s speech is coming from: the housing bubble was certainly instrumental in allowing millions of Americans to live beyond their means. And yes, Wall Street was a necessary part of the machinery of the housing bubble. But of course the Americans who bought beyond their means did not “get to continue living like kings”; instead, they got foreclosure and eviction notices. And Wall Street wasn’t there to help them when that happened.
But I don’t believe that Wall Street has its fingers on any scale. There are wealthy families who have managed to preserve and grow their wealth over many centuries — Italy and Germany both have quite a few of them, the ultimate Black Swan that was World War II notwithstanding. Those families tend to have a lot of real property: income-producing land, if you’re growing things like grapes or trees, is an amazing long-term asset, since the main rents you’re extracting come directly from the Sun. By contrast, the rich families who hire Goldman Sachs to look after their money and end up invested in Global Alpha or pre-IPO Facebook shares tend to be much newer money. They made it quickly, and they’ll probably lose it quite quickly too — it could quite easily all be gone within two or three generations. [More]

Long before I even suspected what was going on in big banks, I resented their seemingly unnecessary fee extraction rackets. This from a 1996 Top Producer article:

Much has been said about the single-minded focus of farmers for land. Interestingly enough, we are not the only profession with such prejudices. I have noticed accountants and financial advisers, for instance, tend to favor money, especially cash or easily convertible assets. The reason is analogous - they “farm” these assets like we do land. If you make your living by moving others’ money from one form to another, seeing it tied up for centuries in land, which ends their involvement (and commissions) is not attractive.[More]

The global financial sector is not earning its pay, IMHO. "Efficient allocation of assets", my posterior! We have cash piling up in companies and banks while deflation remains an ominous threat in the developed world, for the fifth year running. Does that sound efficient to you?

What finance has done is perfected rent-seeking tactics for all those who prefer cash as an asset over all other things. In a totally unexpected development, the world is awash in such assets, as the growing global economy and technology /productivity have generated more available capital and simultaneously tempered demand for private investment. We have enormous wealth looking for somewhere to be.

I feel perversely lucky I have always been absolutely terrible at managing money, and piled my wealth into other forms instead. Moreover, debt is one really good method to countering to the One Percent, when you think about it.  Nobody embezzles a loan.


When the game is rigged against you, don't play. And while everyone should feel free to to mock and deride the loopy protestors in the Occupy movement, it should give you pause that there is some serious kernel of truth fueling this anger.

Why staying home...  

Is a smart idea.  Unless (as is often the case) your family /friends make Black Friday shopping a social event that contributes to your holiday festivities, you could save money staying home and cleaning the gutters. (I don't want to talk about it)

What the professor has determined with a complex computer algorithm for consumer electronics, others have found through less scientifically rigorous means for other products, including clothing and toys: despite all the ads that suggest otherwise, the lowest prices tend to come at other times of the year.

In the case of toys, stores actually offer the steepest discounts in the weeks immediately following Thanksgiving because they want to unload the inventory not swept up on Black Friday, said Dan de Grandpre, who has tracked deals for 15 years at Dealnews.com.

“Toys have a very short shelf life,” he said.

“On Dec. 26, they’re not really useful to retailers anymore, so they have to get rid of it and start slashing prices early in December.”

And it is a precise window of opportunity. In the week or so before Christmas, toy prices shoot back up, Mr. de Grandpre’s tracking shows, as last-minute shoppers come stampeding for Barbies and Lego sets and stores are less desperate “because they’ve been able to reduce their inventory.” [More]

I also wonder if the recent steep slide in corn prices won't bring rampant machinery sales to an abrupt halt, much as it did this summer when we didn't know what we had in our fields. I think we are much more sensitive to such exterior phenomena than before, maybe because we are buying a lot of stuff we could postpone or even do without, rather than badly needed equipment.

Better mice...  

Note how fast it returns to the start after mapping.

Update: the embedding isn't working. Click here.

Sorry

Ya gotta believe this kind of software will be what we turn on at the entrance to a field soon.

Password sense...  

Of all the places to find a better password system, xkcd was not my first thought:

 [Click to embiggen]

Roll your own here.

A mandate by any other name...  

The fervor on the right for the SOTUS to declare the health care insurance mandate unconstitutional is far from a stand-alone issue. I have written before about the comparison to the ethanol mandate, but it is even more abstruse legally than I had imagined.

For instance, if the ACA mandate doesn't pass muster, it could impact the 1938 Farm Bill, which undergirds every farm bill since.

The role the Wickard decision will play in the health care reform lawsuits that are now before, or headed toward, the U.S. Supreme Court is unclear, because some lower court judges have refused to use the 1942 case as precedent, while others have.
ISU’s Harl notes in his article that “one of the more influential opinions from the appellate courts” did take notice of Wickard and upheld the health care law “as within the power of Congress to legislate under the commerce power.”
Of particular interest, Harl said, is the fact that the three-judge panel of the District of Columbia Court of Appeals that made the decision was headed by Judge Laurence Silberman, a conservative judge who was appointed by President Ronald Reagan in 1985.
The Silberman decision, Harl wrote, stated that “Wickard … comes very close to authorizing a mandate similar to (the health care legislation), at least indirectly.”
Also, Harl noted, “Judge Silberman, in the opinion, concluded with the statement ‘we are obliged — and this might well be our most important consideration — to presume that acts of Congress are constitutional.’ ”
Harl’s article concludes with a question: “What are the chances that the current (Supreme) court will follow the path taken by the District of Columbia Court of Appeals and uphold the legislation?”
The high court, he wrote, “has a choice — overturn Wickard v. Filburn or, at least distinguish it, which could be difficult to do, or uphold the 2010 health care legislation.” [More]

Moreover, striking it down will really complicate other applications of the Commerce Clause, which has allowed Congress to meddle in all kinds of sectors to reward constituents/supporters.

To be sure, a number of the Supreme Court's Commerce Clause cases have used the word "activity" to describe behavior that was either regarded as within or without Congress's authority.  But those cases did not purport to limit Congress to reach only existing activities.  They were merely identifying the relevant conduct in a descriptive way, because the facts of those cases did not raise the question--presented here--of whether "inactivity" can also be regulated.  In short, we do not believe these cases endorse the view that an existing activity is some kind of touchstone or a necessary precursor to Commerce Clause regulation. . . .

Indeed, were "activities" of some sort to be required before the Commerce Clause could be invoked, it would be rather difficult to define such "activity."  For instance, our drug and child pornography laws, criminalizing mere possession, have been upheld no matter how passive the possession, and even if the owner never actively distributes the contraband, on the theory that possession makes active trade more likely in the future.  And in our situation, as Judge Sutton has cogently demonstrated, many persons regulated by the mandate would presumably be legitimately regulated, even if activity was a precursor, once they sought medical care or health insurance. [More]

 And it's just that simple.

Seriously, the legal fallout from this case will be immense regardless of the decision.

Update: Another opinion that cites Wickard as an important guiding precedent.

Another feckless prediction...  

Fertilizer prices may have peaked. 

No, seriously. 

Aaron and I are revising our P & K apps in light of the outcome of our cash rent negotiations. My pattern has been to simply slow the buildup on fields that need it.

But whether the Fertilizer Oligopoly can repeat their slowdown to limit supplies is to be seen.

According to the International Fertilizer Industry Association (IFA), there are currently 250 fertilizer production capacity expansion projects under way globally and planned investments of approximately $88 billion through until 2015, including huge projects in China, the Middle East and Latin America.

...

Among the minerals, nitrogen production capacity is growing particularly quickly.

Capacity is seen 19% higher at 229.6 mmt by 2015, driven by expansion in China, India and Latin America, where authorities are seeking to increase self sufficiency and in Africa, where there are the most accessible deposits, according to the IFA.

Meanwhile, regarding urea, the Middle East and North Africa are set to become more important because of the energy cost advantages.

"New capacity is being built to take advantage of cheap gas in Qatar Saudi Arabia and Iran, among other spots," said Calum Findlay of UK fertilizer merchant Gleadell Agriculture.

Another area in which heavy investments are being made is potash and, as a result, large potash surpluses are expected from 2015 onward, according to the IFA. Canada will have the biggest surplus, providing a readily available source of potassium for U.S. farmers. By 2015, North America will produce 39% of the world's potash.

In the area of phosphates, rock mining capacity is expected to grow 26% between 2010 and 2015 with the largest growth areas in Africa, which has the most readily accessible reserves.

In the short term, phosphoric acid supply remains tight but that should ease in the next three to four years as 34 new plants are planned for completion between 2010 and 2015.

With food and feedstuff prices still near all-time highs, demand for fertilizers remains buoyant. But affordability will keep a lid on demand. That's because, at current levels, fertilizer prices are around 30% higher than what is considered a natural equilibrium point against agricultural commodity prices, according to CRU analysis. [More]

Another curious development is the glut of crude in the Midwest and the unusual reaction.

The decision to reverse the flow of a key oil pipeline should alleviate a supply bottleneck that has trapped crude in the Central U.S. for the better part of this year.

It will also raise the price of oil in the U.S., and could restore some of the lost legitimacy of the main U.S. crude benchmark.
Benchmark crude on the New York Mercantile Exchange jumped above $102 a barrel after Wednesday's announcement that Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) would reverse the direction of the Seaway pipeline to transport crude from the oil hub of Cushing, Okla., to refiners on the Gulf Coast.
The reversal should help drain the brimming tanks of oil in the Midwest, where elevated inventories and a shortage of outgoing pipelines have depressed the price of crude on the Nymex, also called West Texas Intermediate, compared with Europe's Brent benchmark for much of this year.
...
Pending regulatory approval, the 500-mile pipeline could ship an initial 150,000 barrels of oil a day from Cushing to the Houston-area refining market by the second quarter of next year, Enbridge and Enterprise said.
After pump station additions and modifications, the capacity could rise to 400,000 barrels a day by early 2013, the two companies said.
That flow should help reduce oil inventories in the Midwest, which have been elevated for much of the year. Over the past 12 months, commercial crude held in storage in the Midwest has risen 4% to 91.2 million barrels last week, according to Department of Energy data.
"It enables the increasing amount of oil production to get to the refining centers on the Gulf coast in an economical way," said Andy Lipow, president of the Houston oil-industry consultancy Lipow Oil Associates.
Seaway isn't the only pipeline in the works that will transport crude out of the Midwest. TransCanada Corp.'s (TRP) expansion of its Keystone pipeline, which carries Canadian crude into Cushing, will offer an outlet to the Gulf Coast as well. [More]

I am embarrassed to say I thought they were one-way pipelines.