Sunday, July 31, 2011

The grid adjusts...  

To all the wind and solar projects. As I have discussed before, one big obstacle to alternative energy is the fluctuation problem - wind speeds, cloudy weather, etc. To accommodate more variable energy generators the grid has to be able to balance the voltage and frequency with varying supplies and demand.

This is a hot new area for investment and research.
If you think twirling the mass of a family car hundreds of times a second is an unlikely way to keep power grids humming at perfect pitch, think again. Flywheel developer Beacon Power Corp., based in Tyngsboro, Mass., is already making money that way in Stephentown, N.Y., where it operates more than 160 1150-kilogram magnetically levitated flywheel motor-generators. These machines continuously accelerate and decelerate to balance electrical supply and demand and thus keep New York state's grid tuned to 60 hertz.
AC frequency fluctuates from second to second as generators turn on and off and consumer demand varies. When demand exceeds supply, the extra load slows down power plant turbines, thus depressing frequency. Meanwhile, the turbines accelerate whenever supply is in excess. Frequency regulators add or remove power to restore balance.
Beacon's flywheels can regulate frequency with superior speed relative to the dominant method today—throttling power generators up and down. And grid operators are changing outdated rules to favor faster-acting regulators, including flywheels and grid-scale batteries. The prize: priority access to a frequency regulation market worth US $495 million in the United States last year and growing with the expansion of ever-varying wind and solar power.
One challenge will be competition from battery-based frequency regulators, which are cheaper per megawatt to install. Several battery systems are testing the market, including a 20-MW frequency regulating facility that Arlington, Va.–based power firm AES is building in Johnson City, N.Y. The $22 million plant uses lithium batteries from A123 Systems.
Kema's Hawkins agrees that batteries will lose their edge over flywheels under that level of use. "A battery really doesn't like to be totally charged and discharged," says Hawkins, "whereas flywheels can handle a pretty severe duty cycle." But he says that another threat looms, one that could eviscerate the market for frequency regulation: millions of electric vehicles. Plugged in to the grid, they could respond to frequency deviations at the local level.
Pacific Northwest National Laboratory, a unit of the U.S. Department of Energy, proved a similar concept a few years ago, showing that electric water heaters and dryers could correct frequency dips by temporarily turning off their heating elements. In March, PNNL licensed the concept to Texas-based semiconductor start-up Encryptor, which hopes to make chips for appliances.
So in the future, the frequency regulator could be you. [More]
It is developments like this that renew my belief in our ability to weather storms and adapt to new circumstances. It also makes me want to keep an eye on plug-in sales.

Friday, July 29, 2011

Hu-mans! Hu-mans!...  

While trying to get the image of what the Playmate of the Month would look like had we lost out of my mind, the struggle between humans and Neanderthals was far more prosaic than previously pictured.
Humans may not have been more aggressive than the Neanderthals they replaced in Europe 40,000 years ago. They were more prolific, growing their population ten times faster, a study suggests.
Better tools, food storage techniques and, importantly, stronger social bonding helped humans multiply at a faster rate, helping to drive the Neanderthals into extinction over a 15,000- year period, according to a study in the journal Science.
The researchers used new methods to assess human population growth, measuring the number and density of skeletal remains, living places and tools in a 75,000 square kilometer location in western France. Neanderthals, who had been in control of Europe for almost 300,000 years, rapidly went extinct after humans arrived, said Paul Mellars, lead author of the study. [More]
Sometimes simply out-breeding 'em is a winning strategy.

Wednesday, July 27, 2011

Junkbox, Episode XCV℉...  

So happy for all youse who got rain...(sigh)...

Tuesday, July 26, 2011

Balls in the air...  

Latest count: about 5.  I'm pretty busy with Aaron gone on vacation and the drainage contractor showed up to lay the main for another 200 acre field this fall. It's really creepy mowing down perfectly good soybeans and 10' corn, but getting it done now means we'll be at the top of the list for the rest of the system when the crops come off. Although we are dry, the lawn is just now starting to brown, and the corn is only showing minimal stress.

Meanwhile, I am busy wiring my new GSS (Greenhouse Support Structure). Jan wanted a greenhouse and I talked her into a lean-to model.

 [Update: this is the catalog photo - just an example of what it will look like, after my skilled craftsmanship tangles with glass and plastic]

This is the actual GSS. Greenhouse will be located by the middle door.

My suggestion was a modest 30' x 64' woodshop for it to lean on. It was finished about 3 weeks ago, and the electrician just finished the entrance.
BTW - have you priced copper wire lately!!!

So, I'm wiring and plumbing and getting ready to actually erect the greenhouse.  Which is where we came in, I believe.

Bottom line: blogging is falling down the list. While these are "interesting times" as they say, I am pressed for computer time and having more fun with these other ventures.

Thanks for reading. I'll post as I can.

More info...  

Re: Bush tax cuts and federal revenue.  

First, I use it measured as a percent of GDP, as do most economists for comparison, since the growth (or shrinkage) of the economy can hide the effect. The same system is used for expenses, BTW, since a bigger economy means more "variable costs/income" for government.

The absolute revenue fluctuation looks like this:

The tax cuts were in 2001. Here is a summary of the results.
OK, a pitter-patter of applause for what the tax cuts did do effectively: Cut taxes and reduce overall payments to Uncle Sam. Low-income families benefited from the child-care credit jumping from $500 to $1,000. High-income families benefited from the top marginal rate falling. Billionaires benefited from lightly taxed dividend income. And government receipts, in turn, dropped.
But the benefits mostly accrued to the rich, according to the nonpartisan Tax Policy Center. The think tank reports that between 2001 and 2008, the bottom 80 percent of filers received about 35 percent of the cuts. The top 20 percent received about 65 percent—and the top 1 percent alone claimed 38 percent.
What about the president's claims? Take his pledge that the cuts would spur job growth. To be fair, we'll ignore employment changes during 2008, the year the Great Recession seized the economy. During the 2001 to 2007 business cycle, America's economy enjoyed 52 straight months of job growth. But it was sluggish—in fact, the slowest rate of jobs growth on record since World War II, and just one-fifth the pace of the 1990s.
Then there's wealth. Put simply, the aughts were a decade of income stagnation: The tax cuts failed to bolster most taxpayers' earnings, even before the recession hit. Median real wages actually dropped from 2003 to 2007. Household income from business-cycle peak to business-cycle peak declined for the first time since tracking started in 1967. As documented by my colleague Timothy Noah in his series "The United States of Inequality," this did not hold true for the nation's billionaires and millionaires. Garden-variety high-wage earners saw their income go up. And incomes for the top 1 percent skyrocketed. For some people, obviously, the cuts "generated new wealth," in the president's phrase. But overall, inequality got worse.
That leads to the third metric: Did the cuts "open new opportunities"? It's a vague phrase, but one way to measure it is to look at job growth—and there's nothing to see there. Another way would be to say that the cuts benefited "job creators" (to use the current en vogue phrase), like the nation's start-up businesses. But the number of private-sector jobs created by young companies fell during the Bush administration.
Unfortunately, the tax cuts never translated into robust economic growth, either. Indeed, the aughts saw the worst growth since World War II. From 2001 to 2007, annual GDP growth averaged just 2.4 percent per year, lower than in any other postwar business cycle. The contrast is starker still when judging against the previous decade. In real terms, GDP grew half as much from 2001 to 2010 as from 1991 to 2000.
There is another metric that Bush set out for the tax cuts: Did they succeed in helping to create a smaller government? Again, the answer is no. Events beyond Bush's control necessitated the Afghanistan war. He later decided to invade Iraq, and pushed through unpaid-for domestic expansions of government, like Medicare Part D. Deficits and government spending as a share of GDP grew during the Bush administration.
OK, a final attempt at celebration. Did the tax cuts stimulate the flagging economy in the early aughts? Sort of. Tax cuts give a mild boost to the economy, but not a big one. "After the tax rebates in 2001, 2003, and 2008, households [spent] between 25 and 67 cents more for each dollar of tax cut," William Gale of the Tax Policy Center writes. That makes tax cuts "a relatively weak way to help the economy compared to increases in government purchases, for which each dollar of increased deficit turns into an additional dollar of spending."
So, to recap: The Bush tax cuts were followed by low GDP growth, negative median wage growth, and little job growth. Even before the Great Recession, growth in the Bush business cycle was the weakest since World War II. And the cuts cost about $2.6 trillion between 2001 and 2010, according to the Economic Policy Institute—adding to a debt future generations of taxpayers will pay for, plus interest.[More]

You guys are lucky I have to get in and cool off every now and then.

You do know about Google, right?

Some info that might help...  

Lots of speculation on how the numbers work out for the debt limit debate and how we got here. Maybe we can shed some light and lower the heat.

First, I don't see evidence that spending on new programs by the current administration is THE major cause. Even the spending on his major new policy - healthcare reform - is way down the list of contributors.

 [Source - yeah I know it's the NYT, but show me better numbers and I'll correct it]

Furthermore, much of the Obama new spending was one time: stimulus spending to be exact. The Bush tax cuts and wars keep taking and taking ...

My point is the idea of runaway spending occurring since due to Obama's election is a misguided meme. He jumped on a truck as it headed over the cliff.

Perhaps a better illustration of where the deficit explosion came from:


I also think the President has offered a generous package of cuts and taxes, and has continued to offer more to avoid default. Of course, that effort is viewed as weakness by many opponents who really don't think default would be that bad (for them).

The infographic above shows that the president’s latest offer to House Speaker John Boehner (R-OH) is heavily titled toward spending cuts. In fact, the president’s offer contained about $1 trillion less revenue than the recent proposal from the so-called Gang of Six, a group that includes three Republican senators and three Democratic senators. It also represents significant movement from the president’s original debt reduction framework, which itself was already more conservative than the recommendations from the chairs of the debt commission (Erskine Bowles and Alan Simpson) last December. [More]
This is the reason I feel that the push to default by TP members is not all about fiscal restraint - it's about Obama and political power. To add to my conviction, consider this revealing wording:
Here’s the two-step proposal Boehner is circulating. Note that the title isn’t “An approach to raising the debt ceiling,” or “An approach to reducing the deficit and cutting spending.” It’s the:
Two-Step Approach to Hold President Obama Accountable
 Finally, some clarity about how much money the government will have to do what with after we really, really reach the ceiling.
Lots of folks want to cut spending, and when it's pointed out that this would be painful, they retort that there's plenty of money for debt service, military payrolls, Social Security, Medicare, and Medicaid, and that therefore, people like me are just scaremongering about the consequences of refusal to raise the ceiling.  I put up this graph last week, because I don't think people are really thinking this true.  They've got this big "spending" basket in their head, but they're not focusing on the line items.

Let's say that we refuse to raise the ceiling.  Does the prioritization listed above mean that we don't need to cut politically untouchable programs?

No.  Let's think through what would happen if we tried to use this plan:

  • You just cut the IRS and all the accountants at Treasury, which means that the actual revenue you have to spend is $0.
  • The nation's nuclear arsenal is no longer being watched or maintained
  • The doors of federal prisons have been thrown open, because none of the guards will work without being paid, and the vendors will not deliver food, medical supplies, electricity,etc.
  • The border control stations are entirely unmanned, so anyone who can buy a plane ticket, or stroll across the Mexican border, is entering the country.  All the illegal immigrants currently in detention are released, since we don't have the money to put them on a plane, and we cannot actually simply leave them in a cell without electricity, sanitation, or food to see what happens.
  • All of our troops stationed abroad quickly run out of electricity or fuel.  Many of them are sitting in a desert with billions worth of equipment, and no way to get themselves or their equipment back to the US.
  • Our embassies are no longer operating, which will make things difficult for foreign travellers
  • No federal emergency assistance, or help fighting things like wildfires or floods. Sorry, tornado people!  Sorry, wildfire victims!  Try to live in the northeast next time!
  • Housing projects shut down, and Section 8 vouchers are not paid. Families hit the streets.
  • The money your local school district was expecting at the October 1 commencement of the 2012 fiscal year does not materialize, making it unclear who's going to be teaching your kids without a special property tax assessment.
  • The market for guaranteed student loans plunges into chaos. Hope your kid wasn't going to college this year!
  • The mortgage market evaporates. Hope you didn't need to buy or sell a house!
  • The FDIC and the PBGC suddenly don't have a government backstop for their funds, which has all sorts of interesting implications for your bank account.
  • The TSA shuts down. Yay! But don't worry about terrorist attacks, you TSA-lovers, because air traffic control shut down too.  Hope you don't have a vacation planned in August, much less any work travel.
  • Unemployment money is no longer going to the states, which means that pretty soon, it won't be going to the unemployed people.
These are just the very immediate, very theatrical outcomes.  Obviously, over any longer term, you'd have issues from bankrupt vendors stopping work funded with federal highway money, forgone maintenance on things like levees and government buildings, and so forth.  Averting any of these things would require at least small cuts in Social Security, Medicare/Medicaid spending, or military payrolls. [More]
I would prefer to avoid such an outcome.

Monday, July 25, 2011

Kiss them goodbye...  

The Bush tax cuts, that is.  One of the curious developments in the debt-limit crisis has been the strategy of forcing the Democrats to capitulation without regard to what happens down the road.
That brings us to where we are now. John Boehner is proposing a deal with about $1 trillion in spending cuts and a short-term increase in the debt ceiling and a bipartisan congressional committee charged with developing a large deficit reduction package that would be immune to amendments and filibusters and would be the price of the next increase in the debt ceiling. Harry Reid is developing a package of spending cuts that Democrats could accept and would reach Boehner's $2.4 trillion mark.
If you take the Republicans' goals as avoiding a deal in which they have to vote for tax increases and denying Obama a political victory, it looks like they have succeeded. That success has come with costs -- they've done themselves political damage, are risking a crisis that could do the economy tremendous harm, and have left the Bush tax cuts unresolved, which means they might end up watching taxes rise much higher than if they'd taken Obama's offer -- but it's still been a success.
The question is, what happens if they don't stop pushing?
Late last week, pollster Mark Blumenthal summarized the "consistent findings" from the polling on the debt ceiling. First, he said, "Americans prefer a deal featuring a mix of tax hikes and spending cuts to a deal featuring just spending cuts." Second, "most of the surveys find strong sentiment in favor of compromise, especially among Democrats and independents." Finally, "the surveys all show Americans expressing significantly more confidence and trust in President Obama's handling of the issue than of either the Republican or Democratic leadership in Congress."
Republicans have leverage because the debt ceiling needs to be raised and it can't be raised without their support. But they don't have popular support behind their position or their leadership. They can push this up to the brink and win, because Democrats really, really, really don't want a debt-ceiling crisis that could set back the economy. But if they push it over the brink, they're likely to lose, as the public really, really doesn't want Congress to create an economic crisis that will set back the economy, and they're primed to blame the GOP if one does in fact come to pass. [More]
It is this omission of the Bush tax cuts that puzzles me. Having perfected the art of intransigence by a minority, I am sure Democrats will happily mimic their behavior (filibusters, holds, absolute demands, etc.) when the time comes to try to prevent them from expiring. Getting things passed is now next to impossible. Not doing anything is easy, and that's all that has to happen for those budget busting cuts to expire.
Once again, things fall apart in the debt ceiling talks. The way clear of this seems to me to be something like:
— Debt ceiling hiked by $2 trillion and paired with $2 trillion in spending cuts.
— House passes full extension of the Bush tax cuts.
— Harry Reid tries to bring extension of the middle class Bush tax cuts to the floor, but GOP filibusters.
— Bush tax cuts expire in 2012.
— Obama and GOP nominee fight it out in 2012.
This seems to me to achieve a substantive outcome better for progressives than the deal Obama is pushing for. At the same time in political terms achieves congressional republicans’ goal of avoiding an affirmative vote in favor of tax increases, and avoiding letting Obama play the Grand Bipartisan Dealmaker. [More]
The thing to watch now is how the cuts are spread around. The economic contraction resulting from the layoffs, smaller checks, etc. will start to be felt rapidly, and forecasting how the economy will absorb an anti-stimulus is not even close to easy.

The debate posture for the right has created a new normal for Congressional action, I think. It will be hard to move on from dysfunction especially unless centrist Republicans do well in the primaries and the TP grip is loosened on the right.

Hence, the whole of the Bush tax cuts are toast, it seems at this point.

Sunday, July 24, 2011

Photo of the Day...  

Yes, photo.

[Click to enlarge - highly recommended]

This just in...  

From our correspondent in PA:
Demand rationing may have occurred in an unexpected manner (can you say black swan event?) here in Lancaster County. Friday's record heat of 103, not since 1966, was absolutely devastating to poultry and hog facilities. Friday evening saw dump trailers showing up at layer complexes to handle the mortality a tractor trailer load at a time. One of our son's works packing eggs, and hours needed to pack eggs are down 25%. If eggs are not there, the hens are not eating because they are not there. Fire companies were out Friday afternoon wetting down the roofs of livestock buildings to lower inside temps. I understand second handed that mortality was very high in sow units. If sows indeed are lost, again, not a mouth to feed, but also their offspring are not going to need that 10 bushels of corn each.
Meanwhile, O'Hare set a rain record.
It’s officially the rainiest day on record in Chicago since 1871, according to the National Weather Service.
As of 10:30 a.m., 6.86 inches of rain had fallen since midnight, according to NWS Meteorologist Richard Castro.
“This is the rainiest calendar day already,’’ Castro said. “It’s an incredible amount of rain.’’
Nearly all of it pelted the area between the hours of 1 a.m. and 7 a.m., when 6.85 inches fell at O’Hare – the most since officials began keeping records in 1871.
The prior record was the 6.64 inches that fell on Sept. 13, 2008, Castro said.
In the 24-hour period that ended at 7 a.m. Saturday, 8.20 inches of rain had been recorded at O’Hare, according to the weather service. [More]
Four years do not climate change prove, I freely admit. But how many years of below-trendline yields, deluges and droughts will make critics even pause to consider?

I'm guessing 7. (It's very biblical).
The NG Black Swan...  

Cast your mind back to the days of yore when Enron was swindling the state of California for natural gas supplies. Remember the panic about this vanishing resource?
In 2009, the US used some 22 trillion cubic feet of NG (Tcf), moving ahead of Russia to again become the world’s largest producer and consumer. In that year the greatest production came from five Southern and Western states.
One of the most powerful drivers in the growth of demand for natural gas has been as a result of its increased use in generating electricity. This is particularly evident as it takes market share from coal-fired power stations due to concerns over the emission of greenhouse gases.
Nationwide, coal-fired electric power generation declined 11.6 percent from 2008 to 2009, bringing coal's share of the electricity power output to 44.5 percent, the lowest level since 1978. Coal consumption at U.S. power plants paralleled the decline in generation, dropping 10.3 percent from 2008.
In sharp contrast, natural gas-fired generation increased 4.3 percent in 2009, despite the 4.1-percent decline in overall electric generation. The natural gas share of generation increased to 23.3 percent—,the highest level since 1970. Electricity's share of the total U.S. natural gas consumption has also risen rapidly, growing from 17 percent in 1996 to over 30 percent in 2009
There is a greater capacity for gas-generated power than these numbers reflect, since the utilities still tend to use coal over NG for longer-term operation as the costs are lower. [More]
To get this new bonanza of energy to consumers we can expect a whole lotta pipeline building.

In fact, we had one go through our farm just last year (they are still fixing the drainage in neighbors' fields) and the talk is another could follow, because it's easier to crowd into a ROW already established than negotiate a new route. [See also I-69]

At the same time, efforts to upgrade our grid are making some regulatory progress.
Solar and wind industry leaders are hailing interstate transmission line regulations adopted Friday by the Federal Energy Regulatory Commission (FERC) as a move that could boost renewable developments across the rural parts of the U.S.

Saturday, July 23, 2011

One bright side to default... 

If you're a lawyer.
Some fear that a default could cause a 2008-style crunch in repo markets, with the raising of “haircuts” on Treasuries leading to margin calls. The reality would be more complicated. For one thing, it’s not clear that there is a viable alternative as the “risk-free” benchmark. One banker jokes that AAA-rated Johnson & Johnson is “not quite as liquid”. In a flight to safety triggered by a default, much of the money bailing out of risky assets could end up in Treasury debt. Increased demand for collateral to secure loans could even push up its price.Then there is the impact of a ratings downgrade. Money-market funds, which hold $684 billion of government and agency securities, are allowed to hold government paper that has been downgraded a notch. Other investors, such as some insurers, can only hold top-rated securities but their investment boards are likely to approve requests to rewrite their covenants, especially if a lower rating looks temporary. “It would be a full-employment act for lawyers,” says Lou Crandall of Wrightson ICAP, a research firm. There’s a surprise. [More]
I did not know about the flexibility many funds have for downgraded debt. And factoring in the lack of alternatives this could play out differently than I expected. But default does withdraw an immense amount of money from the economy overnight.
But I view it very closely to Andrew Sullivan's position, who has followed the politics of this war closely.
I read George Will's retread column from the 1980s today and simply cannot fathom what he is talking about. Except, I fear I can. He is channeling Mitch McConnell. Boehner and McConnell have one goal and it is has nothing to do with the economy. It is destroying this president and this presidency. They are clearly calculating that the economic devastation their vandalism could create will so hurt the economy that it could bring them back to power through the wreckage. And they will use every smear, every lie, every canard possible to advance this goal. The propaganda channel dreamt of by Roger Ailes in the Nixon era will continue to pump poison into the body politic, until they defeat the man whose legitimacy as president they have never truly accepted.Coming from abroad, this country seems as if it is beyond dysfunctional. It looks like a banana republic on the verge of economic collapse. Now that Nixon's dream has come true and the GOP is fundamentally the party of the Confederacy, it was perhaps naive to think they could ever accept the legitimacy of this president, or treat him with respect or act as adults in the governing process.But this is who they are. I longed for Obama to bridge this gulf in ideology. But he cannot bridge it alone, especially when the GOP is determined to burn the bridge entirely, even when presented with a deal so tilted to the right only true fanatics could possibly walk away from it. And so the very republic is being plunged into crisis and possible depression by a single, implacable, fanatical faction. Until they are defeated, the country remains in more peril than we know. [More]
This debate is about Obama and anger that the world is more complex than we want it to be. But even it they win, the right cannot make it simple (as if it ever was) or even govern.
Meanwhile, the Old World keeps talking and talking and...reaching agreement.

AFTER musing on the new euro-zone plan for an evening, two principal thoughts stand out. First, the deal clearly makes for good firefighting. Yields on peripheral debt are cratering this morning, and it isn't too difficult to understand why. A few days ago, Iwrote:
Either the Europeans are willing to fight to keep their union or they aren't. If they aren't, they'll lose it; it's as simple as that.

In recent weeks, markets came to doubt seriously that the Europeans were willing to fight. The seeming lack of urgency and imagination made a near-term break-up of the euro zone look plausible, even likely, and that was increasingly reflected in bond yields. The new plan does not solve all of the euro-zone's problems, but it does send a strong signal that Europe is not done fighting. And it increases the likelihood that further troubles in the future will be met with further assistance from core euro-zone governments. That alone is enough to take the wind out of the sails of traders betting against the future of the euro zone. [More] 

Of course, that's the upside. But I'll bet our older cousins will still be standing after our circular firing squad has proven less than effective.

Tuesday, July 19, 2011

Junkbox, Episode STNG...  

I spend much of my grain cart time pondering the mysteries of our universe.

Monday, July 18, 2011

Yeah, I could do that...  

If I really, really wanted to. 

Which I don't.

No-hands volleyball.

Early harvest strategy...

This note from my buddy in PA:
My local grain dealer, (my Cargill for you) says basis will likely hit $2.00 here by September, and he believes harvesting and drying 28% corn to deliver IMMEDIATELY to the local mills will likely be very well rewarded during the last half of September. Who would have thought?
This idea occurred to me as we started planting, and I switched much of my corn to an earlier variety. It completed pollination last week and is moving rapidly to ear fill. My theory is just what my friend alludes to. I didn't have storage for everything and my discussions with the elevator is they will be scratching for corn to load out for the southeast.

What I'm hoping for is some kind of cheap (or free!) drying for stuff around 20% or so.

The consumer problem...  

Relying on consumer spending for 70% of our economy (although this number is debatable) has a serious downside:
But the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.
The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.
The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover. [More]
This is the reason that the now immanent cutbacks in federal spending are probably going to prove badly timed and recessionary. As I have said before, I argued for fiscal restraint during the flush years, and will again, but not now.

However, most folks don't feel like cutting back when times are good. It is the nature of human culture, so we are faced with doing good things at not so good times.  

Sunday, July 17, 2011

No wonder the real world...  

Is such a shock to graduates. They have no grasp of effort-reward, thanks to grade inflation.

The authors don’t attribute steep grade inflation to higher-quality or harder-working students. In fact, one recent study found that students spend significantly less time studying today than they did in the past.
Rather, the researchers argue that grade inflation began picking in the 1960s and 1970s probably because professors were reluctant to give students D’s and F’s. After all, poor grades could land young men in Vietnam.
They then attribute the rapid rise in grade inflation in the last couple of decades to a more “consumer-based approach” to education, which they say “has created both external and internal incentives for the faculty to grade more generously.” More generous grading can produce better instructor reviews, for example, and can help students be more competitive candidates for graduate schools and the job market. [More]
This would also help sales of those honor-student bumper stickers, I would imagine.
Never search for a crescent wrench again...  

Finally - a solution for lost wrenches other than "put stuff back where you got it".

[via ezra]

Thursday, July 14, 2011

Pooling our ignorance...  

I am spending most of my meager surfing time reading as much as I can about the range of possible repercussions from US debt default, which I now rate as very likely. I can't help coming to a conclusion similar to Meagan McCardle:

And about that, Wall Street knows less than we here in Washington.  I dialed into a sell-side  conference call last week to hear what sort of high-level analysis the bond vigilantes were doing, and the answer seemed to be that they knew less than I did.  I didn't hear anything about the process that I couldn't have read in the pages of the New York Times or the Wall Street Journal--or my own blog.  Listening, I thought of the frustration I've often had with people in New York who blithely lay out political strategies for their favored party that couldn't possibly actually work, either because said New Yorkers don't understand the institutional barriers, or because they don't understand what is actually popular outside of Manhattan and Brooklyn.  Even a misunderstanding of small technical questions--like the need for a CBO score, the vulnerability of bills to amendment, or the time it takes to whip votes--lead people outside of Washington to frequently underestimate the difficulties of doing the "obvious" thing.  

On the flip side, it's also clear to me that many people in Washington are living in a bubble where procedure and politics often shut out common sense.  I know I'm losing valuable intelligence about what's happening in the financial sector, because I'm simply not marinating in it every day.  On that same call, I heard an analyst made a point about proposed 14th Amendment bypass of the debt limit, which was so obvious that I couldn't believe I hadn't thought of it: to wit, even if the Treasury simply went ahead and issued more debt, who was going to buy these instruments of dubious legality? And at what price?  Yet all the DC people I'd seen writing about the "14th Amendment Solution" had focused on the legality of the move, or the political fallout; no one had thought about, like, finding customers for the debt.

Washington almost never really thinks about the customers for our debt.  They're useful bogeymen who can be deployed against policies you don't like.  You see liberals claiming that bondholders will be horrified if we cut Social Security benefits (they won't, though they might be horrified if this becomes necessary because we don't lift the debt ceiling--but that worry will be a fear that Congress is crazy, not a fear that this means we're defaulting on our "obligations" to seniors)  You see Republicans claim that they'll be spooked by tax hikes (maybe if we were hiking them from 70% to 80%, but no, the bond market does not care whether top marginal rates are 35% or 45%.)  But on questions where it's actually important, we ignore the core problem of finding customers in favor of arguing about constitutional arcana.  I had an email exchange with someone about the legitimacy of the 14th amendment route, to whom I pointed out that it didn't seem very practical, and he replied "practicalities aside . . . "  Practicalities aside?  Who cares whether it's constitutional for the Treasury to issue bonds no one buys?

And don't get me started on the people who think that some sort of "technical" default wouldn't be a problem.

There are people in Washington who get Wall Street, and people on Wall Street who get Washington.  But they are a small minority in both places--and in both places, outcomes depend on the majority.  I submit that this disconnect is dangerous.  Wall Street is giving us too much rope to hang ourselves because they don't really understand the barriers to achieving fiscal sanity--and Washington is taking it, because they don't really understand how Wall Street thinks, and what the bond traders will do when they finally decide that we're likely to default. [More]
To be sure, our financial industry has passed into inscrutability in many areas like derivatives. This makes substituting simple models for true knowledge very tempting for both sides. But it would seem to me when we are so unsure what might happen to this huge, global economic lynchpin, driving the car over the edge to see what happens is absurd.
The level of misunderstanding is not faked either, I now believe. May Republicans subscribe to a theory that default is no big deal and not to use it to achieve their agenda is to pass up the chance of a generation.
Carl Hulse of The New York Times goes full scale shrill blogger and accuses House Republicans of deliberately engineering economic chaos in an effort to secure political advantage: “many Congressional Republicans seem to be spoiling for a fight, calculating that some level of turmoil caused by a federal default might be what it takes to give them the chance to right the nation’s fiscal ship.”
But he seems to have the goods:
“I certainly think you will see some short-term volatility,” said Representative Austin Scott of Georgia, the president of the freshman class. “In the end, the sun is going to come up tomorrow.”
Such sentiments are strongly influencing the negotiating posture of House Republican leaders as they try to strike an agreement with the White House while remaining well aware that the rank-and-file seem more than prepared to oppose a deal if they believe it falls short of the deep spending cuts they contend are required.
More surprising to me is the idea that the No. 1 priority for Republicans is exactly what Mitch McConnell stated some months ago: make Obama a one-term president. Why that takes precedence over the economic health of the country baffles me, but I now believe he was sincere.  For the right, this is not just about the economy, it is more about political power.

We are preparing for some rude shocks here at Route 2, even though I'm not clear what form they will take. Certainly an exit of fund money from commodity markets might be one reflex, and it would be capable of overpowering a simultaneous drought threat in the short run.

We've already locked in as much long term interest rates as we can, and we are looking at the "transfer tax" window to take advantage of offloading appreciating real estate to downstream generations, since all bets would be off on estate taxes in recessionary government revenue shortfall.

Speaking of which, lost in all the insistence for tax cuts is the fact they are really, really low right now. And the fact that deficit reduction by spending cuts alone is not all that popular outside the far right.

I have no idea whether the political payoff will be there for those betting on default as an election strategy. But I think we we learn about the consequences both quickly and brutally.

Tuesday, July 12, 2011

Another reason...

We're looking at more red machines on our farm.
Franco Fusignani, CEO of New Holland Agriculture and CNH International, commented, "Climate change is the biggest global challenge of our age, and it has particular resonance in the emerging and high potential economies that we serve. Through this sponsorship we aim to contribute to Climate Action's objective of providing a platform for an ongoing dialogue between business and governments, where international corporations such as ours can highlight solutions they are able to provide for tackling climate change." [More]

Even if you view this a cynical sales strategy, it implies CNH thinks the issue has power in the marketplace. Either way, the number of business - as apposed to political  - decisions being made to cope with climate change is growing exponentially.

This of course doesn't mean my position is right, but it is little less fringe-like in agriculture than it used to be.

Did I miss anything?...  

Arrived back from Italy/Turkey/Greece yesterday. (Tomorrow?) It's either 4 am. or September according to my body clock, so just letting you know the trip was a once-in-a-lifetime event. It was the longest I have ever taken off from my job, and as such, a powerful experience in perspective about what I want the future to look like.

Sometimes you really need to stop and smell the martinis.

More soon, but I have a USFR taping/speech for Wyffels today (Tuesday) and tomorrow and Cargill ProPricing on Thursday. 

Maybe I'll  see you there.

Sunday, July 03, 2011

Link storage

US share of world ag output: here

[Apologies: this is how I stash links I want to use later.  I give them a date in the distance so they won't be published, just handy for notes for other posts. I forgot to delete this one, so it autopublished on 7/3.  I'll leave it up, but it obviously is not a finished product.]

BTW - in Istanbul this morning, so check the news for riots in Turkey today/tomorrow.