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FRED
01-25-08, 11:25 AM
http://www.itulip.com/images/cnbc.jpgSee Eric Janszen Interviewed on CNBC today January 25, 2008 at 2:20 PM Eastern. "Street Signs" covers the top stories of the day with Erin Burnett.

Discuss the interview here.


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Rajiv
01-25-08, 11:30 AM
Today is the 25th - not the 24th -- is it today or was it yesterday?

Jim Nickerson
01-25-08, 12:20 PM
You're gonna have to change "EJ" to "BD" "Big Dog."

lb
01-25-08, 12:51 PM
I think the Asian chick is filling in for Erin today.

Good luck, she's terrible. Have a response ready in advance for when she asks you about the VIX.

FRED
01-25-08, 03:31 PM
I think the Asian chick is filling in for Erin today.

Good luck, she's terrible. Have a response ready in advance for when she asks you about the VIX.

He got Erin after all. Interview was cut short by the casino fire. Fitting, isn't it? While the big Wall Street casino burns, a little one in Vegas gets the attention.

Video of the interview is available here (http://www.cnbc.com/id/15840232?video=628378387&play=1).

bill
01-25-08, 03:55 PM
What do we call the bubble?
Alternative energy bubble
Infrastructure bubble
Alternative energy and Infrastructure bubble
Energy Infrastructure Bubble
Energy efficiency and Infrastructure Bubble
Carbon Bubble
Green Bubble
New Deal bubble
Ideas……

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FRED
01-25-08, 04:01 PM
What do we call the bubble?
Alternative energy bubble
Infrastructure bubble
Alternative energy and Infrastructure bubble
Energy Infrastructure Bubble
Energy efficiency and Infrastructure Bubble
Carbon Bubble
Green Bubble
New Deal bubble
Ideas……

<!-- toctype = X-unknown --><!-- toctype = text --><!-- text -->

The New New Deal

dbarberic
01-25-08, 04:17 PM
He got Erin after all. Interview was cut short by the casino fire. Fitting, isn't it? While the big Wall Street casino burns, a little one in Vegas gets the attention.

Video of the interview is available here (http://www.cnbc.com/id/15840232?video=628378387&play=1).
Well, at least he was not on with the long haired Tom Adkins that always fights with Peter Schiff.

I want to punch my TV everytime I hear him speak.

icm63
01-25-08, 06:29 PM
Bubbles charted here : http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P (http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P)


You are seriously wrong if you think any bubble in alternative energy and Infrastructure will be larger than the real estate bubble.


Real estate hit every one in the USA and other anglo saxon markets ( spain and Italy as well).


Bubble market capitalisation size has been rising upwards from Tech to Liquidity , then to real estate, and no way will Itulps bubble of "alternative energy and Infrastructure" be larger than all previous bubbles.


The next bubble always must be larger than the previous to keep things going up at the same pace. Thus I think it wont, hence world GDP will trend down from 2007 onwards.

rabot10
01-25-08, 06:36 PM
He got Erin after all. Interview was cut short by the casino fire. Fitting, isn't it? While the big Wall Street casino burns, a little one in Vegas gets the attention.

Video of the interview is available here (http://www.cnbc.com/id/15840232?video=628378387&play=1).

Fred let's run a contest were the winner gets to go as EJ's personal assistant - I Take great notes.

FRED
01-25-08, 06:40 PM
Bubbles charted here : http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P (http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P)


You are seriously wrong if you think any bubble in alternative energy and Infrastructure will be larger than the real estate bubble.


Real estate hit every one in the USA and other anglo saxon markets ( spain and Italy as well).


Bubble market capitalisation size has been rising upwards from Tech to Liquidity , then to real estate, and no way will Itulps bubble of "alternative energy and Infrastructure" be larger than all previous bubbles.


The next bubble always must be larger than the previous to keep things going up at the same pace. Thus I think it wont, hence world GDP will trend down from 2007 onwards.

Always keep in mind, the Next Bubble is the optimistic scenario. If it fails...

sadsack
01-25-08, 08:37 PM
Always keep in mind, the Next Bubble is the optimistic scenario. If it fails...



. . . welcome to the die off?

:confused:

:D

Seriously, belief in the Next Bubble is beginning to take on shades of Descartes' justification for his belief in the existence of God - the consequences of not believing are almost too horrible to contemplate.

rabot10
01-25-08, 08:57 PM
. . . welcome to the die off?

:confused:

:D

Seriously, belief in the Next Bubble is beginning to take on shades of Descartes' justification for his belief in the existence of God - the consequences of not believing are almost too horrible to contemplate.

Sorry I am to stupid to have gottten your point - could U make it a little more simple?

sadsack
01-25-08, 09:15 PM
Sorry; to rephrase:

Given the worldwide dimensions of the ongoing collapse in the housing bubble, and the potential for geopolitical instability, it becomes increasingly important that a "next bubble" occur. Otherwise, it's time to buy one of those abandoned missile complexes, stock up, and hunker down . . .

Plus, I find tinfoil hats very uncomfortable to wear in my sleep . . .

tree
01-25-08, 11:00 PM
The New New Deal

Yes, Fred, you've got it. The New New Deal. It sounds like something out of a Tom Wolfe novel.

Verrocchio
01-25-08, 11:20 PM
Sorry; to rephrase:

Given the worldwide dimensions of the ongoing collapse in the housing bubble, and the potential for geopolitical instability, it becomes increasingly important that a "next bubble" occur. Otherwise, it's time to buy one of those abandoned missile complexes, stock up, and hunker down . . .

Plus, I find tinfoil hats very uncomfortable to wear in my sleep . . .

Well said, SadSack, but if you're right, then members of the iTulip community should perhaps cheer on any means possible to extend what Steven Davis referred to as the "Period of Great Moderation." This would go against the grain, given the general disapproval of both government and private sector machinations seen on these pages. As Davis suggested in the brief moments that he had to respond, bubbles are better seen as "financial development," and that they are mere hiccups associated with financial development, that the benefits well outweighed the costs.

SadSack, is your position that we have no alternative but to develop another, yet larger mania?

sadsack
01-25-08, 11:48 PM
Well said, SadSack, but if you're right, then members of the iTulip community should perhaps cheer on any means possible to extend what Steven Davis referred to as the "Period of Great Moderation." This would go against the grain, given the general disapproval of both government and private sector machinations seen on these pages. As Davis suggested in the brief moments that he had to respond, bubbles are better seen as "financial development," and that they are mere hiccups associated with financial development, that the benefits well outweighed the costs.

SadSack, is your position that we have no alternative but to develop another, yet larger mania?

The FIRE economy, from what I gather, is a neverending series of "doubling down" on the next "big thing."

As a statistician by training, I'm familiar with the "Gambler's Ruin" problem; i.e. at what point is a gambler, in a sequence of bets on a substantially random processs of outcomes, and with finite monetary resources relative to "the house," brought to bankruptcy/ruin?

If one believes the thesis of the FIRE economy, then one must also accept that the sequence of bubbles are successive wagers in the "Gambler's Ruin" scenario. Ultimately, if no additional wealth or value is created (as distinguished from "wealth transfer" discussed in other notable threads) in the process, then nothing but ruin is in store for the vast majority of the human population.

The "Next Bubble," in the above context, is merely buying time to better prepare for the inevitable.

EDIT:

GIS on "Carter Castastrophe", predator/prey propulation models (mankind is the pre-eminent predator)

It is my (perhaps over-pessimistic) belief that we are indeed approaching a "bottleneck" in human civilization. I'm no granola-crunching, tree hugging eco-freak; rather I hope that "human ingenuity" can get us through. The more people, the more potential Einsteins that can be be born.

Applying the Stamford-Binet norms to human intelligence, out of 10 billion people, this means that under peak world population models, approximately 300,000 people will be born with IQ's exceeding 160 - any one of which could be the next Archimedes, Newton, Einstein, etc.

"Oh, what Brave New World, that has such people in't. . ."

Verrocchio
01-26-08, 12:10 AM
The FIRE economy, from what I gather, is a neverending series of "doubling down" on the next "big thing."

As a statistician by training, I'm familiar with the "Gambler's Ruin" problem; i.e. at what point is a gambler, in a sequence of bets on a substantially random processs of outcomes, and with finite monetary resources relative to "the house," brought to bankruptcy/ruin?

If one believes the thesis of the FIRE economy, then one must also accept that the sequence of bubbles are successive wagers in the "Gambler's Ruin" scenario. Ultimately, if no additional wealth or value is created (as distinguished from "wealth transfer" discussed in other notable threads) in the process, then nothing but ruin is in store for the vast majority of the human population.

The "Next Bubble," in the above context, is merely buying time to better prepare for the inevitable.

OK, but if your analogy holds up at all, we as the collective Gambler become progressively worse off as the night wears on. So if we "double down" our bet by huffing and puffing a new and larger bubble into existence, we are not better preparing for the inevitable impoverishment, only hastening it.

chrisk
01-26-08, 12:22 AM
I think the phrase Next Bubble is good for catching people's attention, and is not inappropriate, but it does have connotations that don't seem to fit. I doubt if the taxi drivers will be giving out tips on infrastructure investment, for example (even if they may be participating by way of their tax dollars).

There might also be some confusion because the BIG bubble, the debt bubble that is now finally starting to deflate, is a different animal than the investment bubbles like tech and housing which it enabled. In fact, once you make the distinction, it raises the question of how an investment bubble during a debt DEflation might differ from one during a debt INflation. My guess is that it will be harder to profit from an investment-bubble while overall debt levels are deflating, even if you predict the investment winds correctly. It will be harder to leverage investments, for one thing, and also everyone will be taxed one way or another to pay for the previous debt binge, including (even especially) successful investors. Not that we really have any choice but to seek out the best investments anyway...

(By the way Eric, congrats on the good interview.)

sadsack
01-26-08, 12:40 AM
OK, but if your analogy holds up at all, we as the collective Gambler become progressively worse off as the night wears on. So if we "double down" our bet by huffing and puffing a new and larger bubble into existence, we are not better preparing for the inevitable impoverishment, only hastening it.

In this context, the ruin is inevitable, by virtue of the fact that the gambler can only absorb finite losses until he is rendered bankrupt.

The only degree of control the gambler has is to prolong the number of turns by judicious betting, so as to postpone the time of ultimate bankruptcy.

In that sense, I agree with you that "doubling down," as a betting strategy, must geometrically decrease the number of turns that are left to the gambler.


Unfortunately, the above strategy seems to have been the patten over the last generation in this country.

My hope is that we'll catch a few favorable random blips, so that human ingenuity has enough time to come up with a viable "Plan B" . . .


EDIT:

Apologies in advance for the off-topic discussion

Chris Coles
01-26-08, 04:30 AM
In this context, the ruin is inevitable, by virtue of the fact that the gambler can only absorb finite losses until he is rendered bankrupt.

The only degree of control the gambler has is to prolong the number of turns by judicious betting, so as to postpone the time of ultimate bankruptcy.

In that sense, I agree with you that "doubling down," as a betting strategy, must geometrically decrease the number of turns that are left to the gambler.


Unfortunately, the above strategy seems to have been the patten over the last generation in this country.

My hope is that we'll catch a few favorable random blips, so that human ingenuity has enough time to come up with a viable "Plan B" . . .


EDIT:

Apologies in advance for the off-topic discussion

But you are not off topic, far from it. The problem is that a capitalist society has lost sight of the great leveller, capital. It is the consistent drive to fund all business by loans, moreover, made up from depleted "magic Bean" derivatives rather than sound money that has driven the last few episodes of bubble mania. What is needed is a return to the investment of capital, particularly as equity. I must add that is a particular theme of my own. I believe that the failure to see the depletion of the use of equity as a means of investment is right at the heart of all our financial problems today.

What is so interesting in the EJ interview is the comments by the economist drafted in by CNBC, (who, [by the way], I do not believe stopped the interview because of a hotel fire, but because likely someone in the background suddenly realised they had the great Satan of anti-republican anti-establishment Media Mogul, EJ, on their screens and I should imagine someone started screaming..." Get him off, he takes the piss out of our leaders every day".....).

As for the economist, it appears all the economists are coming out with the same story; that what EJ calls a bubble is nothing of the sort, but instead engenders a period of stability and forward growth of the economy. In economics terms, everything is hunky dory and quite stable....

raja
01-26-08, 09:46 AM
You are seriously wrong if you think any bubble in alternative energy and Infrastructure will be larger than the real estate bubble.
Real estate hit every one in the USA and other anglo saxon markets ( spain and Italy as well).

Perhaps someone can tackle this issue mathematically, i.e., calculate the comparative size of the two bubbles, then we'd have some idea. (It's beyond my experience and knowledge to do this, however.)

It seems to me that the biggest difference between the two bubbles would be that the housing bubble put apparent spendable wealth directly in hands of home-owning consumers, whereas the infrastructure/alt. energy bubble would add wealth primarily through . . . through what?? Jobs? Investments? Adding to the wealth of already wealthy people who will rake in the profits?

Verrocchio
01-26-08, 11:33 AM
But you are not off topic, far from it. The problem is that a capitalist society has lost sight of the great leveller, capital. It is the consistent drive to fund all business by loans, moreover, made up from depleted "magic Bean" derivatives rather than sound money that has driven the last few episodes of bubble mania. What is needed is a return to the investment of capital, particularly as equity. I must add that is a particular theme of my own. I believe that the failure to see the depletion of the use of equity as a means of investment is right at the heart of all our financial problems today.

What is so interesting in the EJ interview is the comments by the economist drafted in by CNBC, (who, [by the way], I do not believe stopped the interview because of a hotel fire, but because likely someone in the background suddenly realised they had the great Satan of anti-republican anti-establishment Media Mogul, EJ, on their screens and I should imagine someone started screaming..." Get him off, he takes the piss out of our leaders every day".....).

As for the economist, it appears all the economists are coming out with the same story; that what EJ calls a bubble is nothing of the sort, but instead engenders a period of stability and forward growth of the economy. In economics terms, everything is hunky dory and quite stable....

Certainly possible, Chris. I for one would rather have heard what was coming next from the economist Davis, whose last words were, "Can I just make a comment about that?"

zmas28
01-26-08, 11:55 AM
I thought it interesting that Marc Faber has also mentioned a couple of points that, taken together, support EJ's thesis: (1) that US policy is wrongly geared toward (further) stimulation of consumer spending and would be better served by encouraging capital investment and (2) US infrastructure is in a poor state of disarray.
On a separate issue, he is sometimes more agnostic on whether the Fed will succeed in fighting off the deflationary forces in play, although at other times he does seem to think they will succeed in supporting asset prices in nominal terms although not in real (inflation-adjusted or measured against gold) terms.

FRED
01-26-08, 12:06 PM
Bubbles charted here : http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P (http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1514434&cmd=show[s118756172]&disp=P)


You are seriously wrong if you think any bubble in alternative energy and Infrastructure will be larger than the real estate bubble.


Real estate hit every one in the USA and other anglo saxon markets ( spain and Italy as well).


Bubble market capitalisation size has been rising upwards from Tech to Liquidity , then to real estate, and no way will Itulps bubble of "alternative energy and Infrastructure" be larger than all previous bubbles.


The next bubble always must be larger than the previous to keep things going up at the same pace. Thus I think it wont, hence world GDP will trend down from 2007 onwards.

EJ writes in:

We sent out the first batch of Feb. 2008 Harper's issues to subscribers. If you haven't had a chance to read it you, you'll see some of the math we used to come up with over $20 trillion in spending.

My philosophy is that it’s not enough for me to identify how screwed up things are and how bad things are going to get if I don’t also have any constructive solutions to offer, and that’s really what the Harper’s article is all about. As the economy and financial markets devolve over the next few years, we all going to be looking for ways to get things going again and I’m hoping we go the re-industrialization route without the global depression, de-globalization, and war that followed the collapse of the last major debt financed asset price inflation, back in the 1920s. To help readers see what I see, I ask a number of questions.

Why can’t the US have the best auto industry in the world, leading with the best next generation technology? Why not build a national high speed rail network where you can work as if you’re in your office as you head to Texas, Florida, Chicago, or California from Boston or New York? Why not build safe and simple pebble bed nukes for local electricity and hydrogen fuel production for local personal transportation and wean ourselves off imported fossil fuels? Why not install fiber to ever home to enable communication tools that vastly reduce the need for in-person contact and commuting.

These are the kinds of energy, transportation, and communications projects I have in mind, massive investments to make the US economy more efficient for private businesses. Get government out of the business of subsidizing industry directly as it does the real estate industry today. Participants are government, private industry, private equity, and Wall Street. Capital gains tax rate on private company investment? Zero. If as an entrepreneur you’re taking all the risk to compete to, say, make the best ceramics technology for the high temperature turbines for the new nukes, you and your investors should not pay any capital gain taxes if the bet wins. How to make up for the tax revenue shortfall? Shift taxes back onto the FIRE Economy, especially real estate and other non-productive assets. The economy will shift its focus from debt-financed consumption to equity financed production.

The FIRE Economy V2.0 is as good as over anyway. What we need is a place to transition to.

vcif
01-26-08, 12:10 PM
In honor of Sir Allen, how about the MAESTRO Bubble?

Morphing
Alternative
Energy and infra-
Structure
To
Reinflate
Oblivion

;)

zmas28
01-26-08, 12:47 PM
EJ writes in:

We sent out the first batch of Feb. 2008 Harper's issues to subscribers. If you haven't had a chance to read it you, you'll see some of the math we used to come up with over $20 trillion in spending.

My philosophy is that it’s not enough for me to identify how screwed up things are and how bad things are going to get if I don’t also have any constructive solutions to offer, and that’s really what the Harper’s article is all about. As the economy and financial markets devolve over the next few years, we all going to be looking for ways to get things going again and I’m hoping we go the re-industrialization route without the global depression, de-globalization, and war that followed the collapse of the last major debt financed asset price inflation, back in the 1920s. To help readers see what I see, I ask a number of questions.

Why can’t the US have the best auto industry in the world, leading with the best next generation technology? Why not build a national high speed rail network where you can work as if you’re in your office as you head to Texas, Florida, Chicago, or California from Boston or New York? Why not build safe and simple pebble bed nukes for local electricity and hydrogen fuel production for local personal transportation and wean ourselves off imported fossil fuels? Why not install fiber to ever home to enable communication tools that vastly reduce the need for in-person contact and commuting.

These are the kinds of energy, transportation, and communications projects I have in mind, massive investments to make the US economy more efficient for private businesses. Get government out of the business of subsidizing industry directly as it does the real estate industry today. Participants are government, private industry, private equity, and Wall Street. Capital gains tax rate on private company investment? Zero. If as an entrepreneur you’re taking all the risk to compete to, say, make the best ceramics technology for the high temperature turbines for the new nukes, you and your investors should not pay any capital gain taxes if the bet wins. How to make up for the tax revenue shortfall? Shift taxes back onto the FIRE Economy, especially real estate and other non-productive assets. The economy will shift its focus from debt-financed consumption to equity financed production.

The FIRE Economy V2.0 is as good as over anyway. What we need is a place to transition to.

All this sounds very exciting and makes so much sense. However, for this massive industrialization and infrastructure buildout to take place, the right political forces have to be in the ascendancy and overcome entrenched business interests. In particular, I am thinking of the defence industry, the fossil fuels industry and the FIRE economy interests. I can see where companies like GE might be on board.
Do you think the political forces are in place (or developing) for this to happen?

FRED
01-26-08, 01:00 PM
All this sounds very exciting and makes so much sense. However, for this massive industrialization and infrastructure buildout to take place, the right political forces have to be in the ascendancy and overcome entrenched business interests. In particular, I am thinking of the defence industry, the fossil fuels industry and the FIRE economy interests. I can see where companies like GE might be on board.
Do you think the political forces are in place (or developing) for this to happen?

EJ sez:

As I have said starting way back with The Big Bet (http://www.itulip.com/forums/showthread.php?t=608) back in 2005, first a crisis has to occur to empower new leadership. USA, Inc. needs restructuring and new management. Paradoxically, if economic problems don't get bad enough fast enough, this will make matters worse because new management will be aligned with old interests who got them elected, and they will try to keep the system working. Then it's four years of throwing everything and the kitchen sink at it (ala Japan 1990 - 1994) versus a well thought out New New Deal.

Rajiv
01-26-08, 01:36 PM
The problem that you do not address and raise is the whole issue of interest - particularly compound interest -- which requires indefinite growth to service debt. This is the issue that Michael Hudson raises -- and I have raised the issue before (http://www.itulip.com/forums/showthread.php?p=24793#post24793) -- and nobody wishes to directly address it.

This problem has been discussed by others -- in particular Margrit Kennedy (http://www.margritkennedy.de/index.php?modus=BUE&inc=ENG&lang=EN)

donalds
01-26-08, 02:05 PM
Seeds for the bubble mania economy began with the Reagan administration following on the heals of the Volcker regime. That amounted to privatization, deregulation, and the shift from away from labor (income) to capital (credit creation gradually from banks to shadow banks and debt as substitute for income). Now we are witnessing the aftermath: credit destruction/debt deflation.

The answer to this: another bubble, except this one will be socially redeeming? Seems a stretch to me. And lets not attribute this to human nature - epistemologically weak, to say the least.

How about a bubble in a steady state, sustainable economy? OK, no chance of that.

Rajiv
01-26-08, 02:18 PM
How about a bubble in a steady state, sustainable economy? OK, no chance of that.

See my comment further down (http://www.itulip.com/forums/showthread.php?p=25762#poststop)

zmas28
01-26-08, 02:30 PM
EJ sez:

As I have said starting way back with The Big Bet (http://www.itulip.com/forums/showthread.php?t=608) back in 2005, first a crisis has to occur to empower new leadership. USA, Inc. needs restructuring and new management. Paradoxically, if economic problems don't get bad enough fast enough, this will make matters worse because new management will be aligned with old interests who got them elected, and they will try to keep the system working. Then it's four years of throwing everything and the kitchen sink at it (ala Japan 1990 - 1994) versus a well thought out New New Deal.
I went back and read the Big Bet article. Great article and what was scary was that I actually understood most of it! You concluded with "As Paul Volcker stated in April of this year, "I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.""

It looks very much like the financial crisis is here.

I went and browsed the websites of the major Presidential candidates (Romney, McCain, Clinton, Obama) for clues. Based on an admittedly cursory inspection, here's what I came up with.
McCain: main focus appears to be on tax cuts for middle class and business while maintaining fiscal discipline. Doesn't sound like the "infrastructure, alt energy" candidate.
Romney: wants to reduce taxes also, while reducing growth in government spending. There's a brief mention of build and repair transportation infrastructure, but difficult to see how this would be done on the required scale while maintaining fiscal discipline and cutting taxes.
Clinton: she has more on her website
"Hillary Clinton’s plan to promote energy independence, address global warming, and transform our economy includes:
* A $50 billion Strategic Energy Fund, paid for in part by oil companies, to fund investments in alternative energy. The SEF will finance one-third of the $150 billon ten-year investment in a new energy future contained in this plan;
* Doubling of federal investment in basic energy research, including funding for an ARPA-E, a new research agency modeled on the successful Defense Advanced Research Projects Agency
* Aggressive action to transition our economy toward renewable energy sources, with renewables generating 25% of electricity by 2025 and with 60 billion gallons of home-grown biofuels available for cars and trucks by 2030;
* 10 “Smart Grid City” partnerships to prove the advanced capabilities of smart grid and other advanced demand-reduction technologies, as well as new investment in plug-in hybrid vehicle technologies;
* An increase in fuel efficiency standards to 55 miles per gallon by 2030, and $20 billion of “Green Vehicle Bonds” to help U.S. automakers retool their plants to meet the standards;
* A plan to catalyze a thriving green building industry by investing in green collar jobs and helping to modernize and retrofit 20 million low-income homes to make them more energy efficient;
* A new “Connie Mae” program to make it easier for low and middle-income Americans to buy green homes and invest in green home improvements;
link: http://www.hillaryclinton.com/news/release/view/?id=4057

And from the Obama website:
Barack Obama will implement a cap-and-trade program to reduce greenhouse gas emissions to the level recommended by top scientists. Obama will invest $150 billion over ten years to deploy clean technologies, protect our existing manufacturing base and create millions of new jobs.
......
The Obama plan will invest in America's highly-skilled manufacturing workforce and manufacturing centers to ensure that American workers have the skills and tools they need to pioneer the first wave of green technologies that will be in high demand throughout the world. Obama will also provide specific tax assistance and loan guarantees to the domestic auto industry to ensure that new fuel-efficient cars and trucks are build in the U.S. with American workers.
....
Obama will create a federal Renewable Portfolio Standard (RPS) that will require 25 percent of American electricity be derived from renewable sources by 2025.
....
Additionally, the Obama plan will provide tax credits for locally-owned biofuel refineries – which have already started to strengthen the economic vitality of rural America.
link: http://www.barackobama.com/issues/economy/#climate-for-innovation

metalman
01-26-08, 04:31 PM
wow, great work. so looks like the dems are the next bubble/new new deal candidates, extra points for clinton. i think ej mentions that someplace... culled from hilarity clinton's NH debate babble.

jk
01-26-08, 05:46 PM
comments on several issues in this thread:

Can alt energy and infrastructure be bigger than real estate? in front of every home there is a road. Under or beside that road runs power, communication and, sometimes, sewer and water services. That road can be dug up and new, improved services installed to further the energy efficiency goals.


Great moderation? What was moderate? Some immoderate inflation was magicked away by statistical legerdemain. Also while many of the statistics for the real economy were moderated, a giant credit and derivative bubble was expanding immoderately. The great moderation is analagous to the lack of volatility in the equity markets, exemplified by a low and stable vix. Turns out that the moderation was achieved by moving all the volatility off the books into mark to myth financial instruments.

The problem of Gambler’s ruin and the successive “doubling down” of bubbles- the gambler in the gambler’s ruin lacks an essential tool available to the u.s. – a printing press to print new money. This serves 2 purposes- it provides new funds for the new “bets” on the new bubble, and through inflation it diminishes the value of past losses. Run that through your model!

is additional wealth created by the bubble? YES. The tech bubble created a lot of tech infrastructure, for example fiber optic networks. When, e.g., global crossing went belly up, the fiber it had laid did not disappear. Instead it could be acquired cheaply and therefore lit to provide service at lower rates. In the 19th century there was a railroad boom. Ultimately all the rail companies went bankrupt. But the track and rolling stock was still there, to be used at cheaper rates once resold at a cheaper price. All the houses built in the recent bubble are still standing. They face a somewhat diminished prospect because of the rising cost of commuting, but their prices will reflect that. the alt-energy and infrastructure bubble will result in real wealth being created, but that real wealth will at some point be overpriced in the marketplace, and then its price will drop. But the real wealth, the energy plants, the communications facilities, the more efficient cars and so on, will remain.

On the word “bubble” – the word has become too popular and too varied in its meaning. People ask, for example, whether gold is in a bubble, pointing to its meteoric rise in the ‘70s and its recent repeat performance. So sometimes “bubble” is used to refer to an unsustainable, parabolic price rise, whatever its source. Ej, however, wants to reserve the term for a government sponsored inflation of values in some economic sector. I think this is a losing battle, and we either need a new word or phrase or we need to accept the broader definition of an unsustainable rise in some asset class prices.

GRG55
01-26-08, 06:58 PM
Certainly possible, Chris. I for one would rather have heard what was coming next from the economist Davis, whose last words were, "Can I just make a comment about that?"

In a perverse sort of way, it seems both were in agreement (but not necessarily for the same reasons).

All the apologists for bubbles are saying that "bubbles are good for the economy because [fill in unique and creative rationalization here]".

EJ's view is that the only thing worse than the "next bubble" is "no next bubble"...

...in other words, bubbles are "good". :D

zmas28
01-26-08, 07:09 PM
The same question had occurred to me: "Can alt energy and infrastructure be bigger than real estate?". I rationalized it in the following way.
The amount of money that needs to be spent on alt energy/infrastructure to generate a specific GDP response would seem to depend on the efficiency (multiplier effect?). I seem to remember reading in the distant past that money spent on defence expenditures was very inefficient; similarly that it currently takes about $4 of new credit to generate $1 of GDP growth. I speculate that where real value is being created with new paradigm shifts (bubble talk?) that much less money would need to be spent in order to return the same GDP response, i.e. the process would be more efficient.
Further, even if the bubble is not big enough to subsume the housing virtual wealth loss, it should help cushion the fallout.

bill
01-26-08, 08:08 PM
EJ writes in:

As the economy and financial markets devolve over the next few years, we all going to be looking for ways to get things going again and I’m hoping we go the re-industrialization route

. Get government out of the business of subsidizing industry directly as it does the real estate industry today. Participants are government, private industry, private equity, and Wall Street. Capital gains tax rate on private company investment? Zero. If as an entrepreneur you’re taking all the risk to compete to, say, make the best ceramics technology for the high temperature turbines for the new nukes, you and your investors should not pay any capital gain taxes if the bet wins. How to make up for the tax revenue shortfall? Shift taxes back onto the FIRE Economy, especially real estate and other non-productive assets. The economy will shift its focus from debt-financed consumption to equity financed production.

The FIRE Economy V2.0 is as good as over anyway. What we need is a place to transition to.
A very important point you made in Harpers magazine.





infrastructure upgrades will accelerate,




with plenty of opportunity for big government
contractors fleeing the declining market in Iraq.

With US government incentives corporations will redirect project priorities, thus launching massive projects creating the new new deal.
Can the US make investment policy attractive enough for domestic as well as international investors? I think our policy makers know what to do as they are heavily influenced by corporations in need of opportunities.
Keep an eye on politically correct corporations and product standards produced by labs.

http://www.wgint.com/projects/ee/
https://www.llnl.gov/
http://www.inl.gov/
http://altenergy.lanl.gov/index.shtml
http://www.babcock.com/services/research_and_development/
http://www.ne.anl.gov/index.html
http://bakerinstitute.org/Event_View.cfm?EID=732
http://www.battelle.org/index.aspx
http://www.netl.doe.gov/index.html
http://www.futuregenalliance.org/
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GRG55
01-26-08, 09:37 PM
comments on several issues in this thread:

Can alt energy and infrastructure be bigger than real estate? in front of every home there is a road. Under or beside that road runs power, communication and, sometimes, sewer and water services. That road can be dug up and new, improved services installed to further the energy efficiency goals...

Perhaps a less US-centric perspective on our part might reduce the need for the question "Can alternate energy and infrastructure be bigger than real estate?". In the developing world a large part of the infrastructure boom IS real estate (housing).

The massive demand for adequate housing for growing (in numbers and in wealth) populations is partly responsible for driving the construction of more power, water desalination/treatment, schools, hospitals, roads, sewers, telecommunications, and so forth. The Arabian Gulf states were transformed dramatically in this respect in the short 7 years I lived there, and it hasn't slowed down so far. I saw much the same in India and many other places I travelled. One difference in these locales - mortgage credit standards usually require the debtor to put up 25%-30% of the purchase price. Interesting concept, eh? No jingle mail there...



Great moderation? What was moderate? Some immoderate inflation was magicked away by statistical legerdemain. Also while many of the statistics for the real economy were moderated, a giant credit and derivative bubble was expanding immoderately. The great moderation is analagous to the lack of volatility in the equity markets, exemplified by a low and stable vix. Turns out that the moderation was achieved by moving all the volatility off the books into mark to myth financial instruments...

The moderation, imperfect though it may be, is that during the last 25 years or so we have witnessed (one of ?) the greatest peaceful economic and political integrations of mankind around the globe:

the maturing and material expansion of the "European project";
the successful emergence of elements of capitalism in the economies of the world's two most populous countries;
the end of apartheid and South Africa's isolation;
the fall of the Berlin Wall and the end of the isolation of Eastern Europe;
the addition of previously war-torn Vietnam, Laos, and Cambodia to ASEAN;
significant expansion and development of the WTO (despite the efforts of Seattle protestors and Bill Clinton's spineless public pandering to them at the time);
the early signs of political reform and economic emergence in select African nations...All this, and more, without a World War. Have we ever witnessed this much cooperation and collaboration between nations and peoples in such a comparatively compressed time frame? My late father-in-law, who fought for the Allies in Europe in WWII, was emphatic that the EU, for all its problems and deficiencies, deserved unconditional support if for no other reason than to ensure sufficient political and economic integration to preclude another European war. Perhaps the same can be said of the whole world?

There are only two times when it seems "easy" to achieve broad cooperation and consensus - during times of economic plenty, and during times of crisis. We've been witness to decades of the former. Will it continue a while longer, or are we about to partake in the later?


is additional wealth created by the bubble? YES. The tech bubble created a lot of tech infrastructure, for example fiber optic networks. When, e.g., global crossing went belly up, the fiber it had laid did not disappear. Instead it could be acquired cheaply and therefore lit to provide service at lower rates. In the 19th century there was a railroad boom. Ultimately all the rail companies went bankrupt. But the track and rolling stock was still there, to be used at cheaper rates once resold at a cheaper price. All the houses built in the recent bubble are still standing. They face a somewhat diminished prospect because of the rising cost of commuting, but their prices will reflect that. the alt-energy and infrastructure bubble will result in real wealth being created, but that real wealth will at some point be overpriced in the marketplace, and then its price will drop. But the real wealth, the energy plants, the communications facilities, the more efficient cars and so on, will remain....

Agree with your view. With respect to US housing specifically, an excerpt from a post last summer http://www.itulip.com/forums/newreply.php?do=newreply&p=14712:



...Wall St. appears to have executed a remarkably effective marketing job to foreigners, and stuffed every corner of the globe with garbage paper backed by US housing. Every day there's a new revelation by someone holding this junk - hedge funds from Australia to Zurich, German state banks, BNP Paribas, and today even the Chinese fessed up...

...I am not an economist, but on a macro level seems to me that over the last 5 years the USA has built about 20 years of housing stock, complete with new roads/utilities/malls/schools, etc. without using any of its own national savings (hell, there aren't any savings...). All of this funded by foreigners who are now taking a major balance sheet hit. They can't very well jet over to the USA and take the assets back with them now can they.

Bail out or no bail out, the end result is the USA has an enormous inventory of modern housing stock and the foreign investors have...well...a fresh hair cut. Over the years to come this probably means that a disproportionate share of USA national income and savings can be devoted to productive, export related investment as it works off the oversupply in the fundamentally unproductive housing sector. That should make the Chinese lose a bit of sleep.
The USA has always muddled through it's periods of bad leadership. I seem more optimistic than some others that post on iTulip, and even if the post-housing-bubble transition is tumultuous, neither the American people nor the rest of the world has much tolerance for it to be an extended one.

metalman
01-26-08, 09:49 PM
The same question had occurred to me: "Can alt energy and infrastructure be bigger than real estate?". I rationalized it in the following way.
The amount of money that needs to be spent on alt energy/infrastructure to generate a specific GDP response would seem to depend on the efficiency (multiplier effect?). I seem to remember reading in the distant past that money spent on defence expenditures was very inefficient; similarly that it currently takes about $4 of new credit to generate $1 of GDP growth. I speculate that where real value is being created with new paradigm shifts (bubble talk?) that much less money would need to be spent in order to return the same GDP response, i.e. the process would be more efficient.
Further, even if the bubble is not big enough to subsume the housing virtual wealth loss, it should help cushion the fallout.

even a poorly executed alt energy boom is better than a bunch of ad hoc shit from dodd et al. what we need is a midi/japan boom.

raja
01-27-08, 12:40 PM
Can alt energy and infrastructure be bigger than real estate? in front of every home there is a road. Under or beside that road runs power, communication and, sometimes, sewer and water services. That road can be dug up and new, improved services installed to further the energy efficiency goals.

Who are the laborers that are going to be building all those roads, sewers, etc.?

During the Depression, the unemployment rate went up to 25%. Does unemployment have to get up to those levels for this new new deal to start working?

I've read that 70% of the economy comes from consumer spending. How is building new infrastructure going to put money in the hands of the consumers?

Jim Nickerson
01-27-08, 12:55 PM
Who are the laborers that are going to be building all those roads, sewers, etc.?

During the Depression, the unemployment rate went up to 25%. Does unemployment have to get up to those levels for this new new deal to start working?

I've read that 70% of the economy comes from consumer spending. How is building new infrastructure going to put money in the hands of the consumers?

Unless all the laborers are illegals, then the workers doing the labor of building will get paid, and what do people in America do with their paychecks? According the the datum you quote, spend 70% of it on consumption.

c1ue
01-27-08, 01:04 PM
The question I have is not whether the stimulus/next bubble money will be spent; the question is on what.

One reason bubbles have to be successively larger is that the short term debts from the older bubbles are paid off (or written off in context) by the next.

Having a same or smaller size successive bubble doesn't keep the economy going if the previous debts cannot be paid/written off.

Thus in this scenario, the next bubble money could wind up just recapitalizing the failed banks - i.e. paying off the HDTV, home, and car loans.

Were this to happen, it would not bode well for the US economy as repayment of debt does not add to jobs, incomes, or anything else.

Of course, the other scenario is almost as bad - Americans keep on truckin', buying 100in HDTVs to replace their 60 inchers, and maintain or even increase their debt loads.

This postpones the trouble for 2 or 3 years, then the redoubled weight of debt falls geometrically harder.

Of course, this could be a cunning strategy - inflate a new bubble AND increase inflation.

This would provide money for short term consumption continuation - while medium term the debts accumulated are inflated down.

I cannot believe the US trading partners would stand still for this though - it means the effective nullification of 50% or more of their capital accumulation from the past 10 years. Again, the Arabs might not care as they have more than enough money per population to not matter, but other nations like China would not be so sanguine.

jk
01-27-08, 01:38 PM
the issue is how long the process can be strung out. in the meantime we hope that the domestic stimulus/infrastructure/alt.energy spending creates something useful in the way of making the u.s. economy more productive.

zmas28
01-27-08, 02:51 PM
I hope the alt energy/infrastructure bubble will add real value, like the tech bubble initially did, but unlike the housing bubble. The previous bubbles provided fuel for the consumer to keep on spending from the perceived wealth effect (first in equities and then in housing). Our economy (actually the global economy) is too dependent on US consumer spending (70% of US GDP). This is unsustainable as we are finding out. My hope is that this new "re-industrialization" envisioned by EJ will go some way to help restore the balance towards a more capital investment oriented economy (not a FIRE "investment" economy) where new domestic jobs are added.
There is the potential to add a lot of new domestic jobs here in clean/green tech, wind power (turbines, etc.), solar power (eg plumbing, electrician jobs for home heating), not to mention engineering and construction jobs across the spectrum. Most of these jobs would be domestic and not outsourceable.
Deficit government spending will likely deprecate the dollar even further so it is unlikely the stock market (overall) would go up in real terms.

Crow
01-27-08, 09:08 PM
Bubbles can only last as long as the bubble machine that creates them To say fiat money can be created forever would be false...as history has already proven. I find it odd that people will question where the next bubble will be? By asking such a question, one is assuming they are transferring money from one asset class or service to another. But the root problem is not the re-allocation of money...it's the value of the money itself.

The next bubble could well be tulips for all we know (I jest, of course) but the number of wheel barrels of paper dollars required to buy a tulip will grow exponentially as the hidden M3 continues its skyward trajectory. It will all have to come back to the most simplistic of transactions. You have something of value I need. I have something of value you need. We will have a mutual agreement as to how we can best conduct this transaction. A paper note is made from 75% virgin cotton 25% linen blend of paper, and
industrial oil based ink is used to produce the coloring on the paper. Real value...maybe 2 or 3 cents? But when this piece of paper is backed by a huge military machine, the largest consumer nation in the world and a history of wellness, it has a value that is perceived to be much larger. But more and more people are aware of whats behind Mr. Wizard of Oz's curtain and are calling his bluff.

My point is, perhaps it is time to stop looking for bubbles....because in the end they are what they are...full of air and not much else...and the bubble machine is getting weaker by the day. Perhaps its time to forget about bubbles and tulips...and get back to the fair trade of what they need and what we need. At least that's something that is both tangible and of intrinsic value.

{

jk
01-28-08, 09:36 AM
Bubbles can only last as long as the bubble machine that creates them To say fiat money can be created forever would be false...as history has already proven. I find it odd that people will question where the next bubble will be? By asking such a question, one is assuming they are transferring money from one asset class or service to another. But the root problem is not the re-allocation of money...it's the value of the money itself.

The next bubble could well be tulips for all we know (I jest, of course) but the number of wheel barrels of paper dollars required to buy a tulip will grow exponentially as the hidden M3 continues its skyward trajectory. It will all have to come back to the most simplistic of transactions. You have something of value I need. I have something of value you need. We will have a mutual agreement as to how we can best conduct this transaction. A paper note is made from 75% virgin cotton 25% linen blend of paper, and
industrial oil based ink is used to produce the coloring on the paper. Real value...maybe 2 or 3 cents? But when this piece of paper is backed by a huge military machine, the largest consumer nation in the world and a history of wellness, it has a value that is perceived to be much larger. But more and more people are aware of whats behind Mr. Wizard of Oz's curtain and are calling his bluff.

My point is, perhaps it is time to stop looking for bubbles....because in the end they are what they are...full of air and not much else...and the bubble machine is getting weaker by the day. Perhaps its time to forget about bubbles and tulips...and get back to the fair trade of what they need and what we need. At least that's something that is both tangible and of intrinsic value.

{
crow, welcome. you will find plenty of threads here that deal with inflation. this just happens not to be one of them. it is about how a particular aspect of the inflationary process will unfold, how it will affect industrial development, and how it will affect financial markets along the way.

dcarrigg
01-28-08, 09:36 AM
The problem that you do not address and raise is the whole issue of interest - particularly compound interest -- which requires indefinite growth to service debt. This is the issue that Michael Hudson raises -- and I have raised the issue before (http://www.itulip.com/forums/showthread.php?p=24793#post24793) -- and nobody wishes to directly address it.

This problem has been discussed by others -- in particular Margrit Kennedy (http://www.margritkennedy.de/index.php?modus=BUE&inc=ENG&lang=EN)




Rajiv, it seems to me that there are five results to the problem you present. Either:

A) Indefinite Growth
B) Overvalue assets and create bubbles to simulate growth
C) Inflation to temper periods of slow/no/negative growth
D) Debt forgiveness packages (when push comes to shove policy squashes economics).
E) Theft of wealth (a la conventional or economic warfare. Chiquita anyone?)

These might qualify as "transfer of wealth" to Hudson, as well they should, but there are a few options open.

I like to think of this problem like recess:

-You owe a fellow student $5 which you do not have...what do you do?

A)Go out and earn $5
B)Trade him some "expensive" POGs (CDOs/whatever...it was a kid bubble)
to forgive the debt
C)Trade him $5 of McDonald's gift certificates and hope he doesn't realized
that they've expired
D)Cry to your teacher/parents and beg for a handout
E)Beat up the small kid who happens to have $5 or a good lunch.

Given these choices, different personalities follow different patterns. Choice A actually requires adding value to the system, but it clearly takes more time and effort than the other choices (free lunch). Who cares if the other choices are dishonest/annoying/wrong? So long as they present themselves as viable solutions, there will be those that choose to use them. This is especially true when there is not five dollars to be made (No allowance this week). And when push comes to shove, there's always good old option E.

The FIRE economy is perhaps more aptly named than people realize. Nothing like handing Johnny an M-16 and Rosie the rivet gun to fuel up the machine.


But I haven't come across anybody addressing the conundrum posed by Michael Hudson in his paper "The Mathematical Economics of Compound Interest" (Part One (http://www.michael-hudson.com/articles/debt/CompoundInterest1.html)) (Part Two (http://www.michael-hudson.com/articles/debt/CompoundInterest2.html))



The following poem - along with its explanation is quite good.

raja
01-28-08, 10:04 AM
Unless all the laborers are illegals, then the workers doing the labor of building will get paid, and what do people in America do with their paychecks? According the the datum you quote, spend 70% of it on consumption.
Right now we have 5% unemployment.
If a new bubble in infrastructure is created, laborers will be needed to build the bridges, dig the sewers, etc. Where will these laborers come from?

IIRC, in the Depression the economy, there was massive unemployment, THEN the New Deal was enacted and people were put to work. Is that the way it will have to happen this time?

In the real estate bubble, the wealth was created by people buying and selling houses. As the value of homes surged, there was more money to spend as people drew from their home equity. Yes, there were new jobs created in the housing industry, but I wonder how much of consumer spending money was due to those jobs, and how much was due to increase in asset value of existing homes?

So, to restate my questions:

1) Will we have to have economic collapse and massive unemployment BEFORE the next bubble can take off?

2) Would the labor force displaced by the collapse of the housing bubble be adequate to fill the labor needs of the new infrastructure bubble?

3) Would the increase in jobs produced by the infrastructure bubble be able to create the same wealth effect and level of consumer spending as the asset inflation of the housing bubble?

Rajiv
01-28-08, 10:37 AM
Basically, what you are suggesting is a transfer of wealth from those who produce to those who consume

Option A is not possible in a closed system with limited resources -- so we rape the planet until its productive capacity collapses -- See the work of Jared Diamond (http://en.wikipedia.org/wiki/Collapse:_How_Societies_Choose_to_Fail_or_Succeed) and William Catton
(http://www.amazon.com/Overshoot-Ecological-Basis-Revolutionary-Change/dp/0252009886)
My take on the problem is that monetary reform has to take place -- in a manner suggested by Margrit Kennedy (http://www.margritkennedy.de/index.php?lang=EN) and Tom Greco (http://www.reinventingmoney.com/) -- before this problem can be resolved.

GRG55
01-28-08, 12:20 PM
Right now we have 5% unemployment.
If a new bubble in infrastructure is created, laborers will be needed to build the bridges, dig the sewers, etc. Where will these laborers come from?

IIRC, in the Depression the economy, there was massive unemployment, THEN the New Deal was enacted and people were put to work. Is that the way it will have to happen this time?

In the real estate bubble, the wealth was created by people buying and selling houses. As the value of homes surged, there was more money to spend as people drew from their home equity. Yes, there were new jobs created in the housing industry, but I wonder how much of consumer spending money was due to those jobs, and how much was due to increase in asset value of existing homes?

So, to restate my questions:

1) Will we have to have economic collapse and massive unemployment BEFORE the next bubble can take off?

2) Would the labor force displaced by the collapse of the housing bubble be adequate to fill the labor needs of the new infrastructure bubble?

3) Would the increase in jobs produced by the infrastructure bubble be able to create the same wealth effect and level of consumer spending as the asset inflation of the housing bubble?

Here's an alternate view on the outlook for US labour and infrastructure bubbles:

US unemployment remains persistently below historical norms;
There are shortages of labour, particularly skilled labour, in many domestic industries - particularly those out-of-favour industries that saw corporate & labour shrinkage during the '80's & '90's financial sector boom (try to find a mining engineer, petroleum drill push or even an experienced coal shovel operator right now);
Excluding immigration the population of the US is aging with the boomer bulge on the eve of initiating a retiree bulge (starts in 2 years time);
There is a growing political backlash against illegal immigrants, and this has a strong possibility of spilling over into an "anti-immigration" (of any sort) sentiment, particularly as the recession advances and unemployment continues to tick-up in an election year;
Security and terrorism concerns further discourage entry into the USA (I've seen quite a change crossing the Cdn/US land border in the past couple of years, and I go out of my way to avoid connecting flight transits through US territory, it's become such a pain in the azz);
These trends in concert will result in measurable labour shortages, labour cost increases, and impair the pace of development of (and risks prematurely aborting) the predicted alt energy/infrastructure bubble in the USA. :eek:Then again, maybe all the creative "brain work" for the next bubble happens in California and Massachusetts, and all the component manufacturing gets done in Chindia... :p ... and everyone else is flipping burgers or driving an ethanol-grain harvestor.

raja
01-28-08, 01:16 PM
These trends in concert will result in measurable labour shortages, labour cost increases, and impair the pace of development of (and risks prematurely aborting) the predicted alt energy/infrastructure bubble in the USA. :eek:Then again, maybe all the creative "brain work" for the next bubble happens in California and Massachusetts, and all the component manufacturing gets done in Chindia... :p ... and everyone else is flipping burgers or driving an ethanol-grain harvestor.

Yes . . . .

And how much consumer spending will result from paychecks for flipping burgers?

According to a recent post by Rajiv, one expert said, "People have been drawing home equity out of the houses at a rate of $700bn or $800bn a year. It's been a huge boost to consumption . . ."

Is it realistic to think that an infrastructure bubble will occur, or if it occurs, that it will keep the economy going like the housing bubble? I haven't seen enough to make me a believer . . . .

c1ue
01-28-08, 01:34 PM
Then again, maybe all the creative "brain work" for the next bubble happens in California and Massachusetts, and all the component manufacturing gets done in Chindia... :p ... and everyone else is flipping burgers or driving an ethanol-grain harvestor.

GRG,

Sorry to burst your bubble, but in fact a large number - if not a majority - of said 'creative brains' are Chinese and/or Indian.

There has been an undocumented trend in the past 5 years where these Chinese/Indian engineers are offered packages in China or India duplicating their after tax savings in dollars, but otherwise offering pay in rupees and/or RMB in the country in question.

Overall savings between taxes and subsidized what-not is over 50% of salary, more like 60%+ for parts of India.

Thus I see no reason whatsoever why said 'creative brains' must remain in the United States at all, much less California.

In fact, I'll come right out and say that Palo Alto is for engineering what Manhattan is for financials.

dcarrigg
01-28-08, 08:30 PM
Basically, what you are suggesting is a transfer of wealth from those who produce to those who consume

Option A is not possible in a closed system with limited resources -- so we rape the planet until its productive capacity collapses -- See the work of Jared Diamond (http://en.wikipedia.org/wiki/Collapse:_How_Societies_Choose_to_Fail_or_Succeed) and William Catton
(http://www.amazon.com/Overshoot-Ecological-Basis-Revolutionary-Change/dp/0252009886)
My take on the problem is that monetary reform has to take place -- in a manner suggested by Margrit Kennedy (http://www.margritkennedy.de/index.php?lang=EN) and Tom Greco (http://www.reinventingmoney.com/) -- before this problem can be resolved.

____
Long story short, yes. A carefully planed forced transfer of wealth from producers (not at the top of the food chain) to consumers (where power, albeit waning, resides) must occur. So long as the balance of power (the ability to control systemic processes [economic, political, administrative, power projection via military) lies with the consumers.

You are probably right about option A. It just goes against what any intro microecon textbook will tell you about how the game is not zero sum. The fact that this contradicts the "island earth" passages in any intro ecology textbook is seldom, if ever, mentioned.

So far as Margrit Kennedy goes, I just cannot see this happening. Imagine you are the government of a sovereign state...are you really going to give up your right to central banking privileges just to have a better worldwide monetary system? Where's the incentive? Dies wird nie innerhalb die Vereinigten Staaten funktionieren.

Vested interests (rich people) and powers that be (rich people + government) would seem to gain nothing by this...particularly a government that was in control of a reserve currency. The rentier class of modern capitalists would be distraught to say the least. Even a rouge leader pushing such a thing would do well to double down on the secret service detail.

Rajiv
01-28-08, 10:20 PM
You are probably right about option A. It just goes against what any intro microecon textbook will tell you about how the game is not zero sum. The fact that this contradicts the "island earth" passages in any intro ecology textbook is seldom, if ever, mentioned.


From the 3rd Chapter (http://billtotten.blogspot.com/2005/03/dependence-on-phantom-carrying.html) of Catton's book


The growth and progress upon which we looked back with such pride had committed mankind to living on a scale that exceeds the sustainable carrying capacity of this finite planet, and the leaders of nations continued to devote far more effort toward attempting to prolong overshoot than toward undoing it. Reluctance to face facts was driving us to make bad matters worse. The faster the present generation draws down the fossil energy legacy upon which persistently exuberant lifestyles now depend, the less opportunity posterity will have to live in anything like the same way or the same numbers. Yet most contemporary political proposals for solving problems of economic stagnation or inequity amount to plans for speeding up the rate of drawdown of non-renewable resources. <6>

Invisible Acreage

The truth of these statements is implicit in the concept of "ghost acreage". Georg Borgstrom, a food scientist at Michigan State University, devoted a whole chapter of his 1965 book, The Hungry Planet, to this subject. A number of nations have seemed to get away with exceeding the human carrying capacity of their own land, but Borgstrom pointed out that they had only been able to do so by drawing upon carrying capacity that was "invisible" - that is, located elsewhere on the planet. The food required by such a nation's population comes only partly from the harvest of "visible acreage" - farm and pasture land within the nation's borders. A very substantial fraction comes from net imports of food. Not all the imports come from other countries; some are obtained from the sea. Borgstrom therefore subdivided "ghost acreage" into two components, "trade acreage" and "fish acreage". By each phrase he simply expressed, in terms of land area, the additional farming that would have been needed to provide from internal sources the net portion of a nation's sustenance actually derived from sources outside its boundaries and in excess of its own carrying capacity. As we shall see, a third component must be recognized if we are to understand fully the part played by ghost acreage in the life of modern man.

To see the importance of Borgstrom's two components, trade and fish acreage, let us consider two examples: Great Britain, a national ancestor of the United States, and Japan, a booming industrial giant in the Far East. By 1965 more than half of Britain's sustenance was coming from ghost acreage. <7> If food could not be obtained from the sea (6.5%) or from other nations (48%), more than half of Britain would have faced starvation, or all British people would have been less than half nourished. Likewise, if Japan could not have drawn upon fisheries all around the globe and upon trade with other nations, two-thirds of her people would have been starving, or every Japanese citizen would have been two-thirds undernourished <8> (which presumably means that nearly all might have died). Yet this was the most prosperous nation in the Orient, the one whose low birth rate supposedly exemplified Asia's hope of averting overpopulation.

These densely populated nations had continued to exist and prosper only because, on top of their own intensive agriculture, they could harvest the oceans and could export non-agricultural products in ex-change for food from countries with agricultural surpluses. Accordingly, ghost-acreage-dependent countries like these were vulnerable to foreign efforts to manipulate their policies (such as the Arab oil embargo). They were also threatened by population growth in the food-exporting countries, for such growth would stem the flow of food exports they needed in order to survive.

When there ceased to be agricultural surpluses anywhere, and when all nations became dependent on oceanic ghost acreage, population densities of a British or Japanese magnitude would be more obviously non-viable. In the meantime, Americans, Canadians, Australians, et al, habitually pointed to their own wheat surpluses and reassured themselves that they were a long way from being overpopulated. "Look at Japan", said their people, blinded still by the old pre-ecological paradigm: "much more heavily populated than we are, yet prospering".

Space Age accomplishments at last brought some recognition that the earth must be considered as a unit. It is man's one habitat. This planet is an island, more absolutely than Japan or Britain. When Homo sapiens in the 1960s became able to "export" a few manufactured items from earth to the moon, to Mars, to Venus, et cetera, only new knowledge came back in exchange - there were no imports of foodstuffs. The knowledge increments were magnificent achievements, well worth pursuing; still, the terms of the exchange by which they were accomplished began to underscore the fact that mankind as a whole could not disregard overpopulation, as some component countries had continued to do when they outgrew the carrying capacities of their own territories. There was no "trade acreage" in outer space.

"Fish acreage", if considered globally, could also be seen to provide only a shrinking reserve for the world's family of nations to fall back on. The earth's oceans are finite. In the 1970s the fish, whales, and other edible marine creatures were already being harvested in greater quantities than would permit a sustained yield. <9> From over-fishing and from pollution, the seas were dying. <10> Accordingly, various nations were becoming more overtly competitive in their use of this reserve. Some were compelled by circumstances to express such competitiveness in the form of territoriality. Human societies thus turned out to behave much in the manner of communal groups of other mammal species, when one group begins to suffer from encroachments by others upon resources it needs in order to sustain itself. A typical animal response to population pressure is to assert territorial claims and to exclude competitors from the claimed area. <11> A number of nations unilaterally extended their claims to exclusive fishing. The original "three-mile limit" of national sovereignty over the seas became a "twelve-mile limit", and then various nations went on to extend their fishing claims out to fifty miles, or a hundred, or two hundred. <12>

The so-called Cod War between Britain and Iceland, and similar friction between the United States and Peru, were territorialist responses to the end of exuberance. These territorialist responses were becoming so universal that they compelled the United Nations to begin rewriting the law of the sea to institutionalize such marine claim-staking. Meanwhile, the United States unilaterally proclaimed a 200-mile fishing limit effective March 1 1977, and this severely pinched fish acreage-dependent Japan. On a November day in 1976, when talks began that were intended to lead to a bilateral North Pacific fisheries agreement between Japan and the US, thousands of banner-carrying Japanese took to the streets of Tokyo in protest. In a newspaper ad, the Japan Fisheries Association said the 200-mile limit off American shores could seriously restrict Japanese protein consumption, curtailing by as much as 44 percent the amount of fish that would be eaten in Japan. <13>

Importing from the Past

The onetime American shibboleth, "Freedom of the seas", had been an idea born in the Age of Exuberance. Post-exuberant overload was now depleting the world's resources and requiring even the United States to take such steps as fencing off a private fishing domain. But the predicament was global. Without knowing it, Homo sapiens faced a plight much like that of Japan when confronted with fish-depleted oceans. As an island in space, the world could not rely on imports from elsewhere; nevertheless, it was already heavily dependent upon imports from elsewhen. That we were importing from the past becomes clear when we logically extend Borgstrom's ghost acreage concept to include a third component. Technological progress had made mankind heavily dependent upon imports of energy from prehistoric sources. Man's use of fossil fuels has been another instance of reliance on phantom carrying capacity.

The energy we obtain from coal, petroleum, and natural gas can be expressed as "fossil acreage" - the number of additional acres of farmland that would have been needed to grow organic fuels with equivalent energy content. Mankind originally did rely on organic fuels, chiefly wood. Wood was a renewable resource, though even in the world's once vast forests it grew in limited quantity. Access to vast but non-renewable deposits of coal and petroleum came to be mistaken by peoples and nations as an opportunity for permanently transcending limits set by the finite supplies of organic fuel.


You wrote:


So far as Margrit Kennedy goes, I just cannot see this happening. Imagine you are the government of a sovereign state...are you really going to give up your right to central banking privileges just to have a better worldwide monetary system? Where's the incentive? Dies wird nie innerhalb die Vereinigten Staaten funktionieren.

Vested interests (rich people) and powers that be (rich people + government) would seem to gain nothing by this...particularly a government that was in control of a reserve currency. The rentier class of modern capitalists would be distraught to say the least. Even a rouge leader pushing such a thing would do well to double down on the secret service detail.


This may change in the not too distant future - as finally populations begin to collapse - when the resource crunches start hitting -- and it is discovered that merely printing money does not add any additional wealth.

GRG55
01-29-08, 01:12 AM
GRG,

Sorry to burst your bubble, but in fact a large number - if not a majority - of said 'creative brains' are Chinese and/or Indian.

There has been an undocumented trend in the past 5 years where these Chinese/Indian engineers are offered packages in China or India duplicating their after tax savings in dollars, but otherwise offering pay in rupees and/or RMB in the country in question.

Overall savings between taxes and subsidized what-not is over 50% of salary, more like 60%+ for parts of India.

Thus I see no reason whatsoever why said 'creative brains' must remain in the United States at all, much less California.

In fact, I'll come right out and say that Palo Alto is for engineering what Manhattan is for financials.

My one and only visit to Silicon Valley was to HP Labs in Palo Alto in 1977 when I was an engineering student. At that time there was an modified HP logo in the reception lobby; it said "Have Pride".

HP was then riding high more than 20 years before the tech boom blow-off. As we know it subsequently fell into the abyss and perhaps now is going to work its way back up to the canyon rim. Maybe Palo Alto will go through a similar pattern. Maybe not.

But I am quite certain that if immigration to the USA declines materially, relative US labour costs will increase (and US unemployment rates will surprise everyone with how low they remain), and the economy will be even more hooked on currency depreciation to remain internationally competitive.

c1ue
01-29-08, 02:39 PM
Actually the primary point I was aiming at is that Palo Alto will survive as a tech company corporate headquarters, but the 90% non general management/GM entourage jobs in a typical tech company will move elsewhere.

Much as in Manhattan, where the top knobs have offices; there are some central HQ type stuff, but otherwise jobs leak off to other regions.

BiscayneSunrise
01-29-08, 03:03 PM
Don't forget,too that when the Chinese/Indian talent are offered attractive packages to remain in their home countries, an added benefit is exactly that: they get to remain in their home country, close to family, friends, the culture they know in a country that is getting increasingly comfortable.

I'm also waiting for the day when US shareholders begin demanding that US corporations move their headquarters to countries where costs are lower including executive packages.

Jim Nickerson
01-29-08, 03:27 PM
Don't forget,too that when the Chinese/Indian talent are offered attractive packages to remain in their home countries, an added benefit is exactly that: they get to remain in their home country, close to family, friends, the culture they know in a country that is getting increasingly comfortable.

I'm also waiting for the day when US shareholders begin demanding that US corporations move their headquarters to countries where costs are lower including executive packages.

Is it Greg? Greg, I hope your genes are exquisitely tuned for longevity.

GRG55
01-29-08, 03:45 PM
Don't forget,too that when the Chinese/Indian talent are offered attractive packages to remain in their home countries, an added benefit is exactly that: they get to remain in their home country, close to family, friends, the culture they know in a country that is getting increasingly comfortable.

I'm also waiting for the day when US shareholders begin demanding that US corporations move their headquarters to countries where costs are lower including executive packages.

On a global basis the depreciation of the US$ has already made the USA incredibly cheap in many, many respects compared to only a few short years ago. Some Indian companies, Infosys is one example, are relocating some of their US client business outside of India (back to the USA or Mexico) because they can't compete for US$ contracts given the rise in the Rupee and the escalating costs of office space, salaries, etc in their home base.

I really get the impression that many analysts are underestimating how powerful that currency depreciation effect is going to be, once the usual lag time is worked off. GE is one of three world scale manufacturers of large power generators and control systems for power utilities. The other two are France's Alstom and Germany's Siemens AG. Imagine what the Euro/US$ exchange rate has done to them in the last 7 years.

As the yuan/US$ rate changes in favour of the dollar, manufacturers like CAT, that still have plants in the USA, are going to smack competitors like Komatsu, who lowered their costs by moving manufacturing from Japan to China. Before this is over we are going to get lots of reports of Asian and European manufacturers investing in production capacity in the USA.

Coming out of this recession, many parts of the US economy are going to be formidably competitive, especially if the US$ continues to decline compared to European and Asian currencies, as many expect. Yes, that means that the purchasing power of US salaries and wages will decline, perhaps along with relative standards of living, but it's not going to be a disaster.

Edit Added: No argument that executive compensation has become excessive, especially when those that fail are rewarded even more than those that lead corporations to success. However, their compensation is like airline pilot pay - it's a relatively small part of the total cost structure, the enterprise (apparently) can't operate without them, and therefore they have excessive bargaining power compared to other labour.

BiscayneSunrise
01-29-08, 03:59 PM
Is it Greg? Greg, I hope your genes are exquisitely tuned for longevity.

Jim, LOL! You are exactly right. Expecting those foxes on compensation committees to guard the henhouse is unrealistic, I know.

Perhaps the reason why executive compensation is climbing so fast is it is their way to keep up with dollar devaluation (and then some)

Greg

BiscayneSunrise
01-29-08, 04:31 PM
GRG, I hear you. Many say that dollar devaluation is making the US the exporter of choice, hence you hear many stock gurus recommend those US companies with heavy global and/or export exposure.

We had a discussion on a thread here many months ago about this and the general consensus was that the labor cost advantage in emerging economies would far outweigh any currency advantage. Steve Forbes has been recently pounding Bush for his weak dollar policy. Forbes says a weak dollar does not translate into a strong economy.

As for exec. compensation, airline pilots are usually immune to cost pressures until their respective companies exercise bankruptcy. Recently pilots for the big US carriers have gotten whacked with 50%+ pay cuts. Their excess bargaining power simply disappeared. Now don't get me wrong, I am no socialist and I know how emotionally straining it is to be an exec at a publicly traded corporation especially post Sarbanes-Oxley but it seems to me the executive foxes on the compensation committees are guarding the henhouse justifying excessive compensation packages.

To your point, compared to other internal costs executive compensation is minimal, execs have freedom to move to other companies and since they do have excess bargaining power, even the most ardent shareholder rights advocates figure its not worth the fight.

PS: Sorry for the thread drift.

BiscayneSunrise
01-29-08, 05:04 PM
PS: Here is the Forbes editorial on the weak dollar:

http://www.forbes.com/columnists/forbes/2008/0211/019.html

t's the Dollar, Stupid (and Taxes, Too)
Steve Forbes 02.11.08, 12:00 AM ET


More From Steve Forbes
Audio: Steve Forbes on Sky Radio


On the Run
Stagpanic
Experience
Suspended Animation
Complete Contents



Uh-oh. Washington wants a stimulus package to rejuvenate our slowing economy. Usually such programs are full of nice-sounding but wasteful spending initiatives, as well as tax breaks that have a weak, one-shot impact on the economy. President Bush should therefore offer a deal: strong, pro-growth measures as the price for signing off on the usual unproductive stuff. But the White House has panicked and will go for things that won't solve the problems plaguing us. The President should recover his nerve and verve. Otherwise, he will blast away a positive economic legacy.

The most potent, constructive medicine would be for the Bush Administration to stop its Jimmy Carter-like weakening of the dollar. A feeble dollar means inflation--witness what's happened to commodity prices over the last four years, the most prominent being oil, which has almost quadrupled in price. This ain't a case of supply and demand. Four years ago an ounce of gold would buy you roughly 12 barrels of oil; an ounce today would get you roughly 10 barrels--that's hardly a 300% real price increase. A weak dollar also brings about economic distortions, such as the (now disastrous) subprime mortgage orgy. President Bush should announce that we will defend the dollar and make it stronger. The Fed should announce that it will let the federal funds interest rate float, at the same time removing some of the excess money it created in 2004--05.

The bottom line: No strong economy has a weak currency.

An additional and powerful shot in the arm would be to make permanent--and, indeed, deepen--the tax cuts on dividends and interest that expire in 2010. Reduce the levy on dividends and capital gains from 15% to 10% and you'd see a sharp boost in equity markets, as well as in consumer and business confidence. Business capital outlays would boom, as would entrepreneurial startups.

Former Bush economic adviser Larry Lindsey recently came up with a good idea in the Wall Street Journal to unclog the tightening credit arteries: Allow manufacturers and retailers to open up their own in-house banks or financial institutions that could borrow and lend money. These entities could make loans to customers that now frightened banks are increasingly loath to make. Unfortunately, approval for this type of entity has been paralyzed by the fight over Wal-Mart (nyse: WMT - news - people )'s attempt to open such a bank. Unions and banks opposed it, and the proposal has languished.

Congressional Democrats instinctively oppose things that actually facilitate progress. They'll howl that all of these proposals are a giveaway to the rich. So in exchange for the good stuff, give them some of their pet projects in return; for example, one-time rebates of the kind George Bush issued in 2001 and Gerald Ford in 1975.

The Donkey Party will want some other programs, such as temporary aid to states for housing assistance. These things are well worth the price for the short- and long-term power of tax-rate reduction, sound currency and unclogged credit arteries.

Pernicious Pretension

Why is there an almost universal dogma that governments can play significantly positive roles in economic activity, that they can fine-tune economic activity and prevent excesses and cushion downturns?

It's a colossal conceit, and one that does immeasurable harm. Economies are not like engines that can be mechanically manipulated to run better. To hear all the chatter about tax rebates, for example, you'd think they were the equivalent of recharging your car's dead battery.

In fact, it's usually government actions that cause destructive economic troubles and excesses. The Great Depression, for instance, is always cited as prima facie proof as to why we need active government involvement. To the contrary, government blundering brought on the disaster, starting with the Smoot-Hawley Tariff of 1929--30, which began a devastating trade war that, in turn, dried up international trade and flows of global capital. That horrible error was compounded in the U.S. by Herbert Hoover's massive tax increase to balance the budget in 1932. Hoover thought a balanced budget would revive confidence. Instead, the deficit ballooned, as the high taxes deepened the slump. Compounding Hoover's errors, Franklin Roosevelt retarded recovery through major tax increases and destructive regulatory meddling. For the first and only time in our history a recovery didn't surpass the peak of the previous economic expansion.

The horrific inflation that racked the U.S. and most of the world in the 1970s and early 1980s was clearly the result of excess money creation by the Federal Reserve, abetted by other central banks. President Richard Nixon cut the U.S. dollar from gold in 1971, and central banks floundered.

Today the weak dollar is roiling financial markets and hurting our economy.

As for the cures for economic contractions, government spending isn't one of them. Franklin Roosevelt repeatedly "primed the pump" with government spending and job-creation programs in the 1930s--to little avail.

Japan repeatedly enacted stimulus packages during its 15-year quasi-recession, from the late 1980s to the early part of the new millennium--futilely.

If government spending was the way to wealth, the Soviet Union would have won the Cold War.

c1ue
01-29-08, 09:39 PM
No argument that executive compensation has become excessive, especially when those that fail are rewarded even more than those that lead corporations to success. However, their compensation is like airline pilot pay - it's a relatively small part of the total cost structure, the enterprise (apparently) can't operate without them, and therefore they have excessive bargaining power compared to other labour.<!-- / message --><!-- edit note -->

GRG,

I'm not so sure that executive compensation is a relatively small part of the total cost structure.

In the company I last worked at, the top 10 executives and/or board members were being granted 100K or more shares each, every year. Not options, full shares.

Given that the stock price was in the $17 to $20 range, you're looking at $15M to $30M in cash compensation; and this was on top of their pay and perks.

Given that the company in question was earning less than $1M a year, I posit that the executive compensation was a factor in corporate performance. Note this was on top of the gigantic options packages received for joining the company a mere 4 years ago.

GRG55
01-30-08, 12:18 PM
GRG, I hear you. Many say that dollar devaluation is making the US the exporter of choice, hence you hear many stock gurus recommend those US companies with heavy global and/or export exposure...

The stock gurus will do what they always do...take the valid underlying factor or trend and overpromote and oversell it until it eventually collapses. There are going to be US corp winners from this trend, its a matter of figuring out which ones - possibly a few the stock gurus overlook?


We had a discussion on a thread here many months ago about this and the general consensus was that the labor cost advantage in emerging economies would far outweigh any currency advantage. Steve Forbes has been recently pounding Bush for his weak dollar policy. Forbes says a weak dollar does not translate into a strong economy...

I am no fan of a currency depreciation strategy, but we know they're going to do it anyway. Wealth holders like Steve Forbes understand how inflation works and will be the prominent objectors. because they will be among the largest losers (they can't all pull a Jim Rogers, sell everything in the USA and move to Asia). Skilled US workers in the right industrial sectors will be the "winners", to the degree there are any so called winners.

Falling housing costs, commercial real estate rents, and the currency will help. Maybe some counterproductive tax policies (as Finster has explained in a number of posts) will also be amended. Regardless, the pendulum is now swinging the other way.


As for exec. compensation, airline pilots are usually immune to cost pressures until their respective companies exercise bankruptcy. Recently pilots for the big US carriers have gotten whacked with 50%+ pay cuts. Their excess bargaining power simply disappeared. Now don't get me wrong, I am no socialist and I know how emotionally straining it is to be an exec at a publicly traded corporation especially post Sarbanes-Oxley but it seems to me the executive foxes on the compensation committees are guarding the henhouse justifying excessive compensation packages.

To your point, compared to other internal costs executive compensation is minimal, execs have freedom to move to other companies and since they do have excess bargaining power, even the most ardent shareholder rights advocates figure its not worth the fight.

PS: Sorry for the thread drift.

Compensation committees are colluding with one another through the compensation consultants. A RICO action is needed :). But I suspect that even that will start to swing the other way given the obvious excesses and the increasing number of faltering companies (it already has for airline pilots as you point out). At least I hope that is what happens...

bill
10-28-08, 09:55 PM
The New New Deal

New New Deal name seems to be catching on.
Projects are ready,,,,need $, need http://www.itulip.com/forums/showthread.php?p=31416#post31416“real assets”

http://enr.ecnext.com/coms2/article_nefiar081028

<TABLE cellSpacing=0 cellPadding=0 width=470 align=center bgColor=#ffffff border=0><TBODY><TR><TD class=mainTitle colSpan=2 height=18>Academics Tell Bush Administration <!-- #EndEditable --></TD></TR><TR><TD class=tagline colSpan=2 height=18><!-- #BeginEditable "tagline" --> <!-- #EndEditable --></TD></TR><TR><TD class=articleDate colSpan=2 height=18><!-- #BeginEditable "articleDate" -->10/28/2008<!-- #EndEditable --></TD></TR><TR><TD><!-- #BeginEditable "articleAuthor" -->By Debra K. Rubin <!-- #EndEditable --> (enr_web_editors@mcgraw-hill.com)</TD></TR><TR><TD colSpan=2>http://www.enr.com/images/_.gif</TD></TR><TR><TD class=maincontent colSpan=2><!-- #BeginEditable "mainArticleContent" -->Engineering and business scholars urged Bush administration officials to take a page from FDR’s New Deal and invest in infrastructure.
Ninety transportation projects in eight states are ready to go and could generate up to $20 billion in economic activity, according to a letter from 11 professors to Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson. The letter was sent Oct. 24.
The letter responds to earlier comments by Bernanke raising concerns that infrastructure investment would take too long to make a meaningful change in employment and the economy.
<TABLE borderColor=#666666 cellSpacing=0 cellPadding=5 width=214 align=right border=0><TBODY><TR><TD><TABLE borderColor=#666666 cellSpacing=0 cellPadding=2 width=214 align=right border=1><TBODY><TR><TD><TABLE cellPadding=5 width=214 align=right border=0><TBODY><TR><TD class=mainbold2 bgColor=#e6e6e6>http://enr.construction.com/images/red_arrow.gif Related Links: </TD></TR><TR><TD vAlign=top>Investing in Infrastructure Projects as Conduits for Economic Stimulus (http://enr.construction.com/news/finance/2008/archives/docs/infrastructure_as_economic_stimulus.pdf)
</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>"One of the reasons that policy makers are putting forward not to invest in the nation's infrastructure as fiscal stimulus is that shaping, approving, planning, and developing infrastructure projects takes too long and critics say that it does not create new jobs and spending fast enough," say the academics. "While this may have been true during the Great Depression era, it is simply not true today at a time when hundreds of billions of dollars of infrastructure projects across America have already been approved but are sitting 'on the shelf' due to funding shortfalls."
The academic group included Raymond E. Levitt, engineering professor at Stanford University and director of the Collaboratory for Research on Global Projects, as well as engineering professors at the University of Illinois, Urbana-Champaign; Columbia University, Virginia Tech University, Clemson University and the University of Wisconsin, Madison. Also among the signatories is Witold Henisz of the University of Pennsylvania's Wharton School.
The letter urges government officials to "endorse the idea of a new New Deal" to channel infrastructure spending through state and local governments. They claim it would, among other things, create immediate employment, generate a high multiplier effect, remove growth roadblocks and spur more college graduates and young people to work in the "real" economy rather than in financial services, despite the lure of high salaries.
The academics concede that their infrastructure investment jumpstart program still faces challenges, including contracting lead time, the advent of winter conditions in parts of the US and industry capacity constraints.
However, the professors also offer suggestions for a phased investment approach.
"We have the ability to do something tangible," says Paul Chinowsky, a member of the group, and construction professor in the engineering dept. at the University of Colorado, Boulder. "This is so essential."
The academics are affiliated with Leadership and Management in Engineering and the Construction Working Group, which are compiling a list of projects in various infrastructure sectors that are approved, permitted, and waiting for funding and could be "effective" economic stimulants, they say.
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