Monday, November 30, 2009

Sustainable Economics And Sustainable Energy Update

It has been a while since we talked about the concept of sustainable economics. Yet it has been a topic of many posts on here over the last few years. There is no better time than during the mini-crisis which has developed in Dubai to dust off the topic. Let's do a short review for new readers.

When peak oilers were yapping about the world running out of oil & carbon-based energy, we were remarking years before that the world was experiencing an unprecedented capacity glut. When oil was peaking we were talking about the impending collapse in commodities, the Middle East and China. We also had a few detailed posts discussing the dynamics involving the world's engineers, scientists, business executives and entrepreneurs which were being unleashed on the energy productivity dilemma. And, we put up quite a few lengthy posts on what this meant to the American economy. We also talked about the impact it would have on the OPEC cartel and an eventual brutal response from American inventiveness.

If the U.S. can stem the tide of energy imports, it will account for trillions upon trillions of dollars which will instead be invested in industries within the United States. Many of those industries will be sustainable. ie, A renewable annuity creating sustainable economics and sustainable employment. It isn't a matter of if but when. Not only will the direct costs of energy imports be mitigated but so too will the trillions of military dollars and foreign aid spent protecting our energy supply lines. That means the future of the U.S. economy will eventually see a massive swell involving tens of trillions of dollars which is now exported out of our country. And, I do mean tens of trillions of dollars. In other words, for most of the tyrannical, repressive, crooked and often outright evil OPEC goons, it sucks to be you. Not yet. But all in due time. (Ever thought about what impact these dynamics will have on the U.S. dollar? Or plans to move away from the dollar and eventually develop a pan Arabian peninsula currency? Or any other yapping commentary so readily available from the mindless financial press?)

There are many unnerving dynamics we have written of which are likely to develop between now and some future end state including our anticipated bust in oil prices. We bounced off of the downside oil target we wrote of in 2007 and have shot higher but eventually I believe $10-20 per barrel dollar oil is quite plausible. And well before the U.S. is substantially energy independent. That ties in with the bust in the Middle East which we have also written about quite extensively.

Don't be fooled with the fear mongering that the U.S. is going to lose this race to the Chinese or the Germans or anyone else. That is completely ridiculous fear mongering. First off, the U.S. can set any economic policy it sees fit. ie, We control our own destiny as a self-determined society regardless of any nonsensical economic ideology which has gained hold in today's world. Secondly, other nations have plenty to keep burgeoning industries humming domestically if they so choose. And, thirdly, the U.S. is and will remain the dominant hotbed of invention and scientific research. Today the U.S. still accounts for one third of all scientific research for the entire world. A number that far exceeds our measured GDP impact on the global economy. A number which more appropriately indicates the dominance of the American economy. And, in fact, much of the research done outside of the United States is funded by American capital in the form of multi-national businesses. The United States is and will remain the dominant economy in the world for a long, long time. The doomsayers predicting the rise and replacement of the U.S. with China are kidding themselves. The U.S. is re-inventing itself as I type this. It's a slow, brutal and ugly process but the wheels of democracy are starting to churn with more vigor. All while the rest of the world continues down the path of the status quo only to be eventually caught as deer in the headlights. Foolishly anticipating a continuation of today's economic ideology.

All of this is simply a rehash of posts we have put up over the last four years. But what is new with this post is below.

On the cover of November's Scientific American is a plan to become completely energy independent in the next twenty years. Right plan? Wrong plan? Who cares. The plan isn't likely to be financially achievable nor is it technologically desirable but that is really irrelevant on some level. What is relevant is the world has made tremendous scientific progress in a short period of time and that trend is going to gain even more momentum in coming years. I'd encourage you to run down to the news stand and pick up a copy. If not, the authors have been kind enough to post some of their work on the net for our review.

This is an opportunity for government to play a major role in constructing a new economy. Not necessarily just by direct involvement but then we should be open to any type of solution which benefits democracy. As an example, we could let "as-is" capitalism develop this transformation in the form of monopoly utilities, mega corporations and the same old same old. Or we could incent entrepreneurs, monetization of new technologies by the creation of small businesses and have cities or government only grant contracts to small businesses thus incenting business creation and a more democratic implementation of capital creation. We could go a step further and require much of any operational businesses to be local thus creating sustainable jobs not just for the U.S. but for individual communities. Or, frankly, we could have individual cities work in concert with local cooperatives to invest in sustainable energy businesses owned by local communities and or businesses. The solutions are endless. How they are implemented should be accomplished in a thoughtful manner. They should be skewed to enhance democracy and new capital formation. If that involves capitalism, so be it. But solutions don't need to in fact be capitalistic to be democratic or to help transform the economy and create sustainable industries and employment. From my perspective, a key component that must be part of most sustainability initiatives is localization. Localization is a big deal on here. Whether anyone realizes it yet, it is a substantial future of the American economy.

People who say the technology isn't ready may be correct on some level. Biofuel research hasn't led to solutions which are able to be monetized as of yet, as an example. Future invention will replace much of what is currently under development. But really, who cares? Scientific research never reaches an end state. Did you wait until 2009 to buy a quad core Windows 7 laptop or did you start reaping the benefits with a Commodore 64 back in 1982?

If businesses or solutions provide a quantifiable return on investment to measurable problems, incent the market and let American invention and creativity determine what is possible.

The financialization of the American economy is over. Period. Wall Street and their beholden politicians and lobbyists are trying to keep the fraud alive but they will fail. If you work in the financial industry and you aren't in a traditional banking role, you might start considering a new career. Say .... basket weaving. We have been writing about this coming dynamic for four years but the future will have marginal use for many of today's financial talents. Pushing paper around does not increase the capital stock of society. A fact not an opinion. And that means just like Wall Street's undue political influence over the American economy forced countless millions of people to retrain for new, generally less economically-valuable careers, so to will the economy force this change on the financial community. Who will retrain our financial community? Why of course, it will be the same self-important pinheads at Harvard and other elite institutions who were so necessary to the financialization of our economy in the first place. And what will they be teaching? They will be teaching the undoing of their complicity over the last twenty years. Reprogramming the ridiculous theories and notions they stuffed into so many heads in the brainwashing that the new economic rock stars would be bankers. That Wall Street would become the economy. A role Wall Street still attempts to play today. A completely preposterous notion that has absolutely no validity.

What is old becomes new again. What is new often becomes worth substantially less. And so the cycle turns again and again.
posted by TimingLogic at 5:23 PM