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FRED
02-07-08, 10:27 AM
Eric Janszen is interviewed on BNN by "Squeeze Play" hosts Kevin O'Leary and guest host Paul Waldie about iTulip.com and the housing bubble fallout: recession and the next radical government US economy reflation program.

Note from EJ on the interview:

Expect additional concentration of purchasing power in the hands of governments – whether government is buying out of the treasury account, lending short term out of the central bank account, or purchasing out of the Federal budget – to further distort markets. As more of this occurs in response to deteriorating private sector economic performance as the US economy deteriorates due to the debt deflation starting in 2007, political relationships will become more important than market and economic forces in shaping major economic investment decisions.

We all know that governments are terrible at allocating investment capital, although they are needed to enforce the "rules of the road" so markets can function. The tech and housing bubbles could have been avoided if the SEC had been able to enforce securities law and the housing bubble if the Fed and other regulatory bodies had enforced lending laws and properly regulated credit derivatives. The paradox is that the inevitable response to the failure of governments to fulfill their legitimate role to enforce the rules of the road in markets is to increase their less constructive role of making direct investment in industries better served by private source of funding. To the extent that Sovereign Weath Funds (SWVs) invest in US infrastructure projects that are the traditional realm of government, I'm in favor. In fact, I see Private Public Partnerships (PPPs), while imperfect, as having the potential to improve on the capital-inefficient and tending toward wasteful and corrupt pure government management of infrastructure projects, such as we suffered here recently in The Big Dig. PPPs have the potential to offer the benefits of private corporate oversight, with the rigors of public company project management in terms of transparency and needing to meet obligations to shareholders, while also providing a level of funding that only governments can offer.

SWFs investing in properly structured PPPs is not ideal – the ideal solution was to not have the credit bubble and economic crash in the first place. But here we are with a lot of debt, an economy going into a prolonged recession, our productive capacity weakened by decades of dependence on the FIRE sector, and there they are will all their "surplus savings" denominated in dollars to put to work and a limited number of places in which to get a return on a level of risk that is lower than a government guaranteed PPP investment.
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bill
02-07-08, 07:46 PM
It sure makes for a better interview when they donít rush you.
When the question comes up about financing the next bubble throw this at them.
http://online.wsj.com/article/SB120209079624339759.html?mod=yahoo_hs&ru=yahoo


Banks Push Utilities
To Plan for Impact
Of Emissions Caps
By JEFFREY BALL
February 4, 2008; Page A6

Three of Wall Street's biggest investment banks are set to announce today that they are imposing new environmental standards that will make it harder for companies to get financing to build coal-fired power plants in the U.S.
Citigroup (http://online.wsj.com/quotes/main.html?type=djn&symbol=c) Inc., J.P. Morgan Chase (http://online.wsj.com/quotes/main.html?type=djn&symbol=jpm) & Co. and Morgan Stanley (http://online.wsj.com/quotes/main.html?type=djn&symbol=ms) say they have concluded that the U.S. government will cap greenhouse-gas emissions from power plants sometime in the next few years. The banks will require utilities seeking financing for plants before then to prove the plants will be economically viable even under potentially stringent federal caps on carbon dioxide, the main man-made greenhouse gas.


The banks are under pressure from environmental groups but say their bigger motive is financial. Most major presidential candidates favor legislation to limit emissions. "What is earth-shakingly different between now and two years ago is the focus on CO2," says Eric Fornell, vice chairman of J.P. Morgan's natural-resources banking division. Several states have begun requiring utilities to account for the potential cost of emissions in new-plant plans.
The banks say they will encourage energy-efficiency and renewable-energy pushes before backing new coal plants. And they say they will help utilities push for new government policies that make efficiency programs and renewable energy more practical.


Then tell them nuclear will be the flavor of finance and years before the nuclear plants are on line there will be a massive electric grid expansion to accommodate electric trams,buses and plug-ins of all types.