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  • Inflating the next bubble

    Inflating the next bubble

    by Eric Janszen - Business Day - Friday, August 22, 2008

    Re-printed with permission of Business Day. All Rights Reserved.

    Editor's Note: Entrepreneur and Venture capitalist Eric Janszen, in a February article for Harper's magazine, dispelled the myth that asset price inflations, commonly called 'bubbles', result from the madness of crowds. Instead, the process is driven by a combination of economic, financial market and government policies and practices unique to the United States. Janszen revisits his hypothesis at the Independent's invitation and finds recent US legislation is pumping up the next bubble.


    In the United States in modern times, asset bubbles form within the political and market framework of an economy dominated, financially and politically, by the finance, insurance and real estate (FIRE) industries.

    No bubble has occurred since the 1980s without government creating, by changes in regulation and tax policy, the initial market for speculation that later developed into a bubble.

    Tax subsidies, loan guarantees, loose monetary and regulatory policy, and a heavy marketing campaign supported by the FIRE economy trade media, created the housing bubble.

    Bubbles require a new source of credit, such as the mortgage securities that financed the loans used to purchase homes. Governments of nations dominated by a FIRE economy enable asset inflations to assist failing economies and to generate capital gains to tax and finance government.

    After a government lays the foundation for a bubble it requires monetary stimulus to evolve in the case of the housing bubble, after the US Federal Reserve quickly lowered short-term interest rates from 6.5% to 1.75% in 2001.

    The London Inter-bank Offered Rate (LIBOR), the rate banks use to lend to each other, fell to 2.5%. Adjustable-rate mortgages, tied to LIBOR, fell more than 50%, cutting monthly mortgage payments proportionately.

    Builders need years to buy land, gain permits, hire construction teams and build homes several times longer than the nine months it took the central bank to cut the monthly cost of homes in half. Home prices rocketed as too much credit chased too few homes. Meanwhile, new credit products, such as no-doc or so-called "liar loans'', were created to expand the pool of available homebuyers.

    A FIRE economy, in contrast to an industrial economy, grows mainly by FIRE industry companies generating capital gains on sales of inflated assets instead of by manufacturing companies earning profits from sales of goods and services.

    The FIRE economy was America's answer in the early 1980s to increased competition from rising industrial giants in Europe and Asia in the 1960s that began to out-compete the US industrial economy in the 1970s.

    The ideological cover for the FIRE economy was to lower taxes that financed infrastructure development and maintenance, among other public goods, ostensibly to free households and businesses to use the added disposable income to allocate spending more efficiently than government.

    What occurred instead is that all of the money households spent on taxes for the benefit of infrastructure to support the entire economy is now spent to service debt for the benefit of FIRE industries. Ultimately, the debts are financed by foreign borrowing.

    After prospering as a net creditor, enjoying a positive balance of trade and running a current account surplus for its entire existence until the 1960s, by late that decade the US not only ran up large net foreign debts, but debts that it could not repay in gold the international currency established after World War II.

    The US defaulted on its gold debts and promised to pay only in irredeemable national currency. Never in history had such an arrangement existed. Initially, the US dollar went into a tailspin, but after a brief period of chaos a new international currency regime established itself and irredeemable US dollars became the world's reserve currency under a floating exchange-rate system.

    The new system created global demand for dollars used for major transactions outside US borders, including oil purchases, reducing the need for the US to earn foreign exchange as other nations do, through a positive balance of trade, and causing a build-up of dollars in the US to fund current account deficits. The US trade partners least happy with the arrangement were oil producers. The Economist reported in its 1999 cover article, "Drowning in Oil'': "What'', sneered Abdurrahman Salim Atiqi, Kuwait's one-time oil minister, "is the point of producing more oil and selling it for an unguaranteed paper currency?''

    By inflating the purchasing power of dollars, the value of oil was suppressed, distorting market signals and causing depletion far more rapid than would occur in a global free-currency market based on a commodity standard. The exchange of finite oil for infinite dollars came back to haunt the world decades later.

    This unique arrangement established the FIRE economy by attracting foreign capital beyond the ability of the US economy to absorb it productively. The FIRE economy funded many financial exploits, from the leveraged buyout (LBO) bubble of the 1980s, to the technology, stock and housing bubbles that followed.

    More than 20 years ago, foreign central banks arrived as the source of funding for America's FIRE economy. The New York Times said at that time: "The chief guardian against a free fall of the dollar is Paul A Volcker, chairman of the Federal Reserve Board. He told congress that the United States had largely escaped the adverse consequences of the `insidious combination' of low savings rates and high federal deficits by drawing on capital from abroad; its flow last year exceeded all the savings by United States households.

    "That situation, Mr Volcker said, cannot last: it is not sustainable economically to pile up foreign debts while failing to make the investments needed to generate growth and earn the money to service the debts; it is not sustainable politically, as pressures on the American industrial base are transmuted into demands for protection, and it is not sustainable internationally, as the confidence that underlies the flow of foreign savings will be eroded.

    "'Sooner or later,' Mr. Volcker said, `the process will stop. The only question is how.'''

    Twenty years later and counting. Did the US economy "get its act together'' or did the FIRE economy have more than a few surprises for Paul Volcker and company?

    Volcker thought, and perhaps still thinks, the US economy has to make capital investments to grow. Through the magic of the finance-based economy funded by foreign capital flows, returns can be generated without capital investment, for as long as the money flows in and the FIRE economy operates. The only problem is that FIRE economy expansion leaves behind piles of debt that cannot be repaid through production. Only the interest can be paid, and even then new FIRE economy inventions, such as the technology stock bubble starting in 1995 that revived the dollar, are needed.

    In "The Next Bubble'', I asserted the collapsing housing bubble would lead to rapidly falling prices and defaults on mortgages, causing major dislocations in global financial markets that are "polluted with credit risk'' from years of issuance of mis-priced securitised mortgage debt by US securities firms, sold across the US and Europe to pension funds, but not to Asia where fund managers, with a recent financial crisis still fresh in their minds, said "no thanks''. I also claimed the housing bubble crash, after producing gradual but profound negative wealth effects and knock-off effects on consumption, from home furnishings to car sales, will bring on the first consumer-led recession in the US in a generation, and that the Federal Reserve and Congress will be forced to take bold moves to staunch the bleeding and reflate the economy.

    As I told the audience during my keynote speech at the Hard Assets Conference in Las Vegas a year ago, with the dollar already weak and inflation rising from years of negative real short-term interest rates, a hangover from the reflation measures taken following the collapse of the technology stock bubble, US policy-makers are limited to using dollar depreciation to boost economic growth through exports.

    Indeed, an unofficial weak dollar policy has been the cornerstone of post housing-bubble reflation policy. I also warned that weak dollar policy, while reasonable in the short term will, if extended for years on end, drive inflation higher; the US economy will then face the dual scourges of recession as fallout from the housing bubble combined with an inflation cycle as rising import prices, especially energy, cut household disposable income just as job growth begins to dry up. How well did the theory forecast events?

    Home sales and prices have declined more than during The Great Depression of the 1930s. Credit contraction has spread to business and student loans. Unemployment is rising in every state in the US except for anaemic 0.2% to 0.4% declines in lowly populated Arkansas, Oklahoma, South Dakota, and Wisconsin states that benefit from higher energy and food prices but together account for just 2.5% of the US population.

    Unemployment in California, the country's most populous and in gross domestic product (GDP) terms the eighth largest "nation'' in the world, reached 7% in June this year, up from 4.9% just two years ago at the top of the housing bubble.

    Debate continues over whether the US as a whole is still in recession, as it was in the fourth quarter of 2007, defined as two consecutive quarters of negative GDP growth. But data ranging from unemployment to retail sales to declining tax revenues flash clear recession warnings.

    Evidence of economic contraction in the US is obscured by rising inflation. Real GDP growth reversed in the fourth quarter of 2007 as nominal GDP growth declined 0.2% and consumer price inflation (CPI) increased to 3.6%, not including energy and food prices. The source of the inflation is the outsized impact of rising energy import prices of food and other goods and services that are sensitive to rising energy input costs.Can wage rate inflation be far behind? The Federal Reserve does not believe so and behaves as if it believes that, even while holding short-term rates below the inflation rate, maintaining negative real interest rates, rising unemployment will take care of the inflation problem by lowering demand.

    But the inflation was not caused by excess demand in the first place but from falling demand for dollars causing rising energy input costs for businesses and households. If the US cannot attract new foreign private investment to support the dollar, the Fed's wait-and-see policy will not lower inflation.

    "The Next Bubble'' concluded the only way to clean up America's structural stagflationary mess is to use the apparatus of the FIRE economy to shift the US economy from dependence on asset price inflations to "re-industrialise'' America. Policies need to focus on rebuilding essential transportation and communications infrastructure left in shambles by the FIRE economy, increasing energy efficiency to reduce US dependence on energy imports, and increasing national and household savings. Such a politically inexpedient set of policies will require strong leadership spurred by economic and financial crisis.

    If this thesis strikes you as far-fetched, consider that at the time "The Next Bubble'' appeared, candidates for the upcoming US presidential election were not talking about the economy, or alternative energy, or infrastructure. Now they talk about little else.

    "Next Bubble'' development proceeds according to the inexorable logic of the US political economy. Two examples make the point.

    The seeds of US government sponsorship of an alternative energy boom were planted in legislation intended to rescue the US economy from the damage done by the collapsing housing bubble. Emergency legislation titled "Housing and Economic Recovery Act of 2008'' passed recently. It provides loans to new home buyers, and has controversial provisions that allow the US Treasury to directly purchase the bonds and stock of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac a policy not allowed under the US Constitution.

    The bill, rushed through congress and signed by the president with alacrity not justified by the gradual pace of economic decline is really about reassuring foreign central banks that hold nearly $US1 trillion of US agency debt the US government intends to guarantee the GSE's credit, and even stock if necessary, to avoid foreign official sales of agency securities that will cause a spike in mortgage rates at this precarious time for the US housing market.

    The bill is also about getting the new alternative energy and infrastructure boom going. Tagged on to the end of the bill is Title X: "Clean Energy Tax Stimulus Act of 2008''. To the uninitiated the add-on is incongruous. Why include energy-related tax subsidies in a bill to rescue home owners and mortgage lenders? What does alternative energy have to do with home foreclosures and failing mortgage companies?

    Students of "The Next Bubble'' understood the implications immediately: US Congress is eager to get a new boom going before the collapse of the previous one pulls the US economy, likely already in recession, into an uncontrollable tailspin.

    The second example is proposed government bailouts of US car-makers. Proposed legislation has an alternative energy focus. Michigan lawmaker John Dingell is pushing for $US25b in government loans to convert General Motors, Ford and Chrysler factories to build alternative-fuel vehicles.

    Legislation to seed the next bubble is in train as the previous bubble collapses. New investment vehicles and sources of foreign capital are needed to grow it. Keep an eye out for new securities from Wall St firms and watch for sovereign wealth funds as the primary foreign buyers.

    Is there a better way?

    A book I am writing, titled New New Deal: Re-industrialization of Post Depression America, proposes an alternative approach to FIRE economy post-bubble economic recovery. Instead of a Next Bubble, remove government subsidies of FIRE industries and use the funds generated to finance tax cuts and other subsidies to boost the productive sectors of the US economy by leveraging the US's unique innovative capacity.

    Debts will be restructured to free households and businesses of high interest burden they carry today to allow them to increase savings and capital investment. Revenue from exports of goods and services will exceed exports of financial assets, eventually, and the US trade balance and current account will turn positive.

    The US will gain a constructive role in the world economy as the nation that invents the next generation of vehicles and communications substitutes for transportation, and develops for export the leading technologies that allow nations to conserve energy and use petroleum alternatives.

    Eric Janszen is the founder and president of iTulip, Inc. He was formerly managing director of venture capital firm Osborn Capital, chief executive of Autocell and Bluesocket and entrepreneur in residence for Trident Capital.

    iTulip Select: The Investment Thesis for the Next Cycle™
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    Ed.

  • #2
    Re: Inflating the next bubble

    Frankly, I think we'd be better off taking our Depression like adults and let the economy and financial system projectile vomit/explosively defecate into true bottoms; it'd be the best way, as well, to ensure the end of America's witless interventionism around the globe and stop the perversity of 'globalization'.

    Comment


    • #3
      Re: Inflating the next bubble

      Originally posted by Rantly McTirade View Post
      Frankly, I think we'd be better off taking our Depression like adults and let the economy and financial system projectile vomit/explosively defecate into true bottoms; it'd be the best way, as well, to ensure the end of America's witless interventionism around the globe and stop the perversity of 'globalization'.
      I am in 100% philosophical agreement. However, there has never been nor will there ever be an economy or financial system free of government intervention. From the first moment a tribe was able to generate one goat or basket of wheat of economic surplus, the local chief began to take a piece of it as taxes to develop infrastructure for all the tribes to use to further their ability to produce even more economic surplus, and – not coincidentally – increase the rulers' tax collections. Same goes for regulation. The question, then, becomes what sort of taxation and regulation, to what purpose, and for whose benefit? That is the adult conversation.
      Last edited by FRED; 08-22-08, 02:21 PM.

      Comment


      • #4
        Re: Inflating the next bubble

        Originally posted by Rantly McTirade View Post
        Frankly, I think we'd be better off taking our Depression like adults and let the economy and financial system projectile vomit/explosively defecate into true bottoms; it'd be the best way, as well, to ensure the end of America's witless interventionism around the globe and stop the perversity of 'globalization'.
        If we had a real depression here, the soldiers in Iraq would have to hitch-hike home...

        Think about it.

        Comment


        • #5
          Re: Inflating the next bubble

          I was just thinking about this this morning...
          "The test of our progress is not whether we add more to the abundance of those who have much it is whether we provide enough for those who have little." - Franklin D. Roosevelt

          Comment


          • #6
            Re: Inflating the next bubble

            I really like the idea because we would have a bubble that when it pops we still have something useful, but I wonder how it gets funded / paid for. In the Harper's article you mention some 20 trillion dollars. Ok they are hyperinflated or bonar type dollars ( a new bubble with a new type of dollar sounds scary) but somebody is going to want real money for all the materials this project will take. We pulled it off in the Great Depression probably because we had savings and it was the first time to use government debt big time. This time we are at the bottom of the bucket. Maybe we can do it if we promise to use lots of stuff made in China and let the Gulf States name the things. Possibly this becomes a global depression that requires a global currency to inflate a really big bubble, hmmmm
            "The issue ... which will have to be fought sooner or later is the People versus the Banks." Acton

            Comment


            • #7
              Re: Inflating the next bubble

              Originally posted by FRED View Post
              The bill is also about getting the new alternative energy and infrastructure boom going. Tagged on to the end of the bill is Title X: "Clean Energy Tax Stimulus Act of 2008''. To the uninitiated the add-on is incongruous. Why include energy-related tax subsidies in a bill to rescue home owners and mortgage lenders? What does alternative energy have to do with home foreclosures and failing mortgage companies?

              Students of "The Next Bubble'' understood the implications immediately: US Congress is eager to get a new boom going before the collapse of the previous one pulls the US economy, likely already in recession, into an uncontrollable tailspin.
              EJ - This legislation has not passed and this version is not likely to pass, as the House is opposed to offering tax credits without a funding source. The other version has the oil and gas industry as the funding source and the current Senate has been quite clear that they don't back that version. Even if they do manage to get this through the Senate the President has made it clear he will veto a version of the bill that takes from oil and gas to give to our little industry.

              This issue is virtually shutting down the commercial photovoltaics business in the US, as we speak. The installation activity today is frenzied as everyone is trying to get their projects implemented, commissioned and signed off before 12/31. But financing has gone completely dry for new projects until this is resolved. By far the largest PV installation in the US is the proposed PG&E 800MW arrays. That consists of 2 huge projects, both of which require the 30% Federal ITC. This program is still scheduled to sunset 12/31.

              Comment


              • #8
                Re: Inflating the next bubble

                Originally posted by Jeff View Post
                I was just thinking about this this morning...
                Jeff; are "stimulus package" not a form of electronic bread line?

                Comment


                • #9
                  Re: Inflating the next bubble

                  Originally posted by santafe2 View Post
                  EJ - This legislation has not passed and this version is not likely to pass, as the House is opposed to offering tax credits without a funding source. The other version has the oil and gas industry as the funding source and the current Senate has been quite clear that they don't back that version. Even if they do manage to get this through the Senate the President has made it clear he will veto a version of the bill that takes from oil and gas to give to our little industry.

                  This issue is virtually shutting down the commercial photovoltaics business in the US, as we speak. The installation activity today is frenzied as everyone is trying to get their projects implemented, commissioned and signed off before 12/31. But financing has gone completely dry for new projects until this is resolved. By far the largest PV installation in the US is the proposed PG&E 800MW arrays. That consists of 2 huge projects, both of which require the 30% Federal ITC. This program is still scheduled to sunset 12/31.
                  H.R. 3221: Housing and Economic Recovery Act of 2008 was passed by both the house and senate and signed by the President July 30, 2008. If there is any doubt in your mind that the bill was used to carry forward a number Transportation and Energy Infrastructure programs to get a new boom going, we recommend you read the 237 amendments to the bill, that begin as follows:
                  Items 1 through 150 of 237
                  Amendments For H.R.3221

                  1. H.AMDT.743 to H.R.3221 Amendment requires natural gas utilities to integrate energy efficiency resources into the plans and planning processes of the natural gas utility; and adopt policies that establish energy efficiency as a priority resource in the plans and planning processes of the natural gas utility.
                  Sponsor: Rep Blumenauer, Earl [OR-3] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Blumenauer amendment (A001) Agreed to by voice vote.

                  2. H.AMDT.744 to H.R.3221 Amendment authorizes $1.2 billion for the Weatherization Assistance Program for fiscal year 2007.
                  Sponsor: Rep Shays, Christopher [CT-4] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Shays amendment (A002) Agreed to by voice vote.

                  3. H.AMDT.745 to H.R.3221 Amendment requires the Administrator of the Environmental Protection Agency to enter into an arrangement with the Secretary of Education and the Secretary of Energy to conduct a detailed study of how sustainable building features such as energy efficiency affect multiple perceived indoor environmental quality stressors on students in K-12 schools.
                  Sponsor: Rep Hooley, Darlene [OR-5] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Hooley amendment (A003) Agreed to by voice vote.

                  4. H.AMDT.746 to H.R.3221 Amendment provides an exception to boilers that operate without electricity from energy efficiency requirements in the bill.
                  Sponsor: Rep Pitts, Joseph R. [PA-16] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Pitts amendment (A004) Agreed to by voice vote.

                  5. H.AMDT.747 to H.R.3221 Amendment encourages the use of geothermal technology in government buildings.
                  Sponsor: Rep Terry, Lee [NE-2] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Terry amendment (A005) Agreed to by voice vote.

                  6. H.AMDT.748 to H.R.3221 Amendment requires electric suppliers, other than governmental entities and rural electric cooperatives, to provide 15 percent of their electricity using renewable energy resources by the year 2020.
                  Sponsor: Rep Udall, Tom [NM-3] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Udall (NM) amendment (A006) Agreed to by recorded vote: 220 - 190 (Roll no. 827).

                  7. H.AMDT.749 to H.R.3221 Amendment adds language asking state regulatory authorities and nonregulated utilities to consider offering home energy audits, publicizing the financial and environmental benefits associated with home energy efficiency improvements and educating homeowners about all existing federal and state incentives, including the availability of low-cost loans.
                  Sponsor: Rep Van Hollen, Chris [MD-8] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Van Hollen amendment (A007) Agreed to by voice vote.

                  8. H.AMDT.750 to H.R.3221 Amendment requires Federal agencies to consider the environmental benefits of the vendors with which they contract for meetings and conferences.
                  Sponsor: Rep Schwartz, Allyson Y. [PA-13] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Schwartz amendment (A008) Agreed to by voice vote.

                  9. H.AMDT.751 to H.R.3221 Amendment sought to repeal the availability of Federal eminent domain authority for use by companies permitted by FERC to construct or modify transmission lines within National Interest Electric Transmission Corridors and require companies to proceed in accordance with state law for obtaining a right-of-way.
                  Sponsor: Rep Arcuri, Michael A. [NY-24] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment not agreed to. Status: On agreeing to the Arcuri amendment (A009) Failed by recorded vote: 169 - 245 (Roll no. 828).

                  10. H.AMDT.752 to H.R.3221 Amendment requires the Secretary of Energy to conduct a study of the renewable energy rebate program for homes and small businesses contained in the Energy Policy Act of 2005.
                  Sponsor: Rep Hodes, Paul W. [NH-2] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Hodes amendment (A010) Agreed to by voice vote.

                  11. H.AMDT.753 to H.R.3221 Amendment modifies section 9502(a) to ensure that the Energy Information Administration restores its previously terminated collection of data on solid by-products from coal-based energy producing facilities and makes improvements on these data.
                  Sponsor: Rep Barton, Joe [TX-6] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Barton (TX) amendment (A011) Agreed to by voice vote.

                  12. H.AMDT.754 to H.R.3221 An amendment numbered 12 printed in Part B of House Report 110-300 to require the FERC to hold one public meeting before issuing a permit, license, or authorization that will affect land use when a public meeting is requested by at least five individuals or an organization representing 30 or more people. If a request for reconsideration is granted and the request was filed before enactment of this section and a hearing had not been held before the permit or authorization concerned was issued, the Commission must hold a hearing.
                  Sponsor: Rep Murphy, Christopher S. [CT-5] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 By unanimous consent, the Murphy (CT) amendment was withdrawn.

                  13. H.AMDT.755 to H.R.3221 Amendment to provide a sense of the Congress to recognize and support large and small scale conventional hydropower.
                  Sponsor: Rep Sali, Bill [ID-1] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Sali amendment (A013) Agreed to by recorded vote: 402 - 9 (Roll no. 829).

                  14. H.AMDT.756 to H.R.3221 Amendment establishes a grant program to support energy sustainability and efficiency projects on college and university campuses.
                  Sponsor: Rep Welch, Peter [VT] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Welch (VT) amendment (A014) Agreed to by voice vote.

                  15. H.AMDT.757 to H.R.3221 Amendment requires the Secretary of the Interior, acting through the Minerals Management Service, to submit a report to Congress on the status of regulations required to be issued under section 8(p)(8)) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(p)(8)) with respect to the production of wind energy on the Outer Continental Shelf.
                  Sponsor: Rep Castle, Michael N. [DE] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Castle amendment (A015) Agreed to by voice vote.

                  16. H.AMDT.758 to H.R.3221 Amendment authorizes the establishment of a competitive grant program, in a geographically diverse manner, for projects submitted for consideration by institutions of higher education to conduct research and development of renewable energy technologies.
                  Sponsor: Rep Wu, David [OR-1] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Wu amendment (A016) Agreed to by voice vote.

                  17. H.AMDT.759 to H.R.3221 Amendment provides for the creation of a Solar Energy Industries Research and Promotion Board and a Solar Energy Research and Promotion Operating Committee.
                  Sponsor: Rep Giffords, Gabrielle [AZ-8] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Giffords amendment (A017) Agreed to by voice vote.

                  18. H.AMDT.760 to H.R.3221 Amendment requires the Secretary of Transportation to establish and implement a pilot program to carry out vanpool demonstration projects in not more than 3 urbanized areas and not more than 2 other than urbanized areas.
                  Sponsor: Rep Tauscher, Ellen O. [CA-10] (introduced 8/4/2007) Cosponsors (None)
                  Latest Major Action: 8/4/2007 House amendment agreed to. Status: On agreeing to the Tauscher amendment (A018) Agreed to by voice
                  Now, what were you saying?
                  Ed.

                  Comment


                  • #10
                    Re: Inflating the next bubble

                    Originally posted by phirang View Post
                    If we had a real depression here, the soldiers in Iraq would have to hitch-hike home...

                    Think about it.

                    Occupational hazard of Hessianing.

                    Comment


                    • #11
                      Re: Inflating the next bubble

                      Originally posted by EJ View Post
                      I am in 100% philosophical agreement. However, there has never been nor will there ever be an economy or financial system free of government intervention. From the first moment a tribe was able to generate one goat or basket of wheat of economic surplus, the local chief began to take a piece of it as taxes to develop infrastructure for all the tribes to use to further their ability to produce even more economic surplus, and – not coincidentally – increase the rulers' tax collections. Same goes for regulation. The question, then, becomes what sort of taxation and regulation, to what purpose, and for whose benefit? That is the adult conversation.

                      Sort/purpose/benefit= for the benefit of the mass of citizens(not merely
                      'residents') and the nation as a whole.
                      Of course, that is oh so rare.:mad:
                      And, that is the real reason the American founders included the 2nd
                      amendment-power to try and ensure a responsive & representative
                      gubbermint. They knew what Mao spake of nearly two centuries later.

                      Finally, not to get into a whole 'thing', but it seems that the 'adult' thing
                      is that when what 'should' happen, sans unjustified finagling, coincides with what one's intellectual analysis reveals to be as the optimal outcome,
                      one strives to ensure that outcome, perhaps with some pallitives for the
                      inevitable human tragedies that ensue. Unfortunately,I now find the adjective use of the terms 'adult' and 'serious' rather irritating, probably because they're favorite weasel words used by the idiot-con delusionists at the WSJ iditorial pages, etc., when the sheer stupidity of their fantasies is revealed in a rude and direct manner. And I'm certainly not insinuating your support or advocacy of those specific stupidities, nor any of any similar level of nonsense.

                      Comment


                      • #12
                        Re: Inflating the next bubble

                        The Bill was definitely passed and signed by GWB post haste, I took the time to follow the legislation and posted the Title X info here.

                        The more I read legislation generated out of DC whether passed or not solidifies my belief in the FIRE economy as outlined here on iTulip.

                        As a student of the next bubble I have been researching for the second wave of Alt Energy investments. A Hedge Fund I have been following was busy shorting Alt Energy this year, they may lose their shorts literally if they haven't already.

                        I also am considering changing my full time job at a Fortune 500 to a Alt Energy start up, since it is hard to resist the potential for huge gains in stock options as well as actually helping America prosper and cleaning up the environment.

                        My biggest hurdle right now is I may need to lean to read, write, and speak Chinese to get the kind of lift that I am looking for.

                        Comment


                        • #13
                          Re: Inflating the next bubble

                          Originally posted by FRED View Post
                          H.R. 3221: Housing and Economic Recovery Act of 2008 was passed by both the house and senate and signed by the President July 30, 2008. If there is any doubt in your mind that the bill was used to carry forward a number Transportation and Energy Infrastructure programs to get a new boom going, we recommend you read the 237 amendments to the bill, that begin as follows:
                          Now, what were you saying?
                          That your assumption about the solar tax credit being in this bill as passed and signed is incorrect. Here's an article from yesterday that captures the issues well. I'm working every day in an industry which is preparing to shut down.

                          Will US Solar Businesses Weather the Coming Storm? by Glenn Harris, SunCentric Incorporated
                          California, United States [RenewableEnergyWorld.com]
                          With just over 120 days left before federal incentives expire, solar businesses in the U.S. are taking action to protect their core business. Layoffs, announced and unannounced, have started. Construction projects are being canceled or postponed and new sales have dropped dramatically. Uncertainty is forcing our solar businesses into difficult decisions -- not if, but when to cut and, how deep to cut. The coming loss of talented people and companies should be viewed as a loss of our country's intellectual property -- and a national tragedy.
                          It has been my habit over the years to look for the silver lining when it comes to the solar business in the U.S. But today, it's tough to find one.

                          A delay in a new federal program until a new administration can act in Q2 2009 is now a realistic scenario. This possibility makes it easy to imagine that U.S. grid-connected installations could fall to well below 100 megawatts (MW) in 2009, down from forecasts of 300 to 500 MW, which would represent a radical decline after years of steady growth. Each part of the channel and each business sector will be impacted.

                          Integrators and installation companies across the U.S. are most at risk. These local and regional businesses have no realistic way to create profitable new markets or work outside of the U.S. For those who focus on commercial projects, no Investment Tax Credit (ITC) means zero installations. Potential solar system owners won’t purchase and install systems without ITC certainty. Some well-managed and established residential installers will likely scrape by, but many companies will lay their work force off and go out of business. California’s residential installers, our largest market, have already been suffering because of high costs and low incentives. The loss of the US $2,000 ITC for homeowners will make a bad situation worse. Solar on new homes, which has been getting some traction despite the downturn in the new home construction market, will virtually stop as even the most progressive solar homebuilders and their partners lose the foundation of their business plan.

                          Solar distributors will be hard hit as many of the under-capitalized small and medium solar installation companies they serve will disappear overnight. If they are unable to sell the PV modules they have committed to, those modules will be sent to other countries, severely impacting revenues. Most of these companies have been through tough times before and will adapt again by downsizing and shifting their emphasis to the small off-grid segment and other markets allowed by their supplier relationships.

                          U.S. PV manufacturers and those international PV companies that support the U.S. market face many challenges and may consider the U.S. slowdown a minor market disruption. They will reallocate their products internationally and, based on world selling prices, make better margins. Some planned investments in U.S. manufacturing, organization and infrastructure growth will be canceled or postponed and some companies will scale back U.S. operations.



                          Other U.S. based manufacturers of inverters, mounting structures, balance of system components and data monitoring who have already diversified their businesses into international markets have a fair chance. Few have done this. Those who were counting on a robust U.S. market will need to scramble to adapt their products for international markets. For the unprepared it’s difficult to imagine gaining traction near-term without significant investments in product and market development. The scale of the international markets and our favorable exchange rate, if it continues, gives those who are properly capitalized a fighting chance.

                          Power Purchase Agreement companies and others who provide financing for solar systems, may continue to sell and do some preliminary work on projects, but with only a 10% ITC there is no scenario short of radical electricity price increases or radical decreases in installed system cost that would allow investors to authorize many projects. Some have low overhead operations and will likely take a “solar vacation” and wait out the storm. Other more vertically integrated organizations will likely downsize while the industry is offline. A few risk takers may double down hoping to build a significant backlog of business that they can complete when the market restarts.

                          Last week PG&E announced two PV projects totaling 800 MW — the type of projects that prove solar electricity can be relevant to utilities today. The press release includes the following statement: “Both projects are contingent upon the extension of the federal investment tax credit for renewable energy and processes to expedite transmission needs.” OptiSolar, a U.S. based thin-film startup will supply 550 MW to the project, an amount that would certainly help create jobs, as well as grow a potentially profitable U.S. manufacturer — the exact reasons why governments around the world support developing industries.

                          It has been my habit over the years to look for the silver lining when it comes to the solar business in the U.S. Today, it’s tough to find one. The worse case, the idea that we will have to take a giant step backwards and then rebuild, is coming true. Our people have worked tirelessly to move our fledgling industry ahead and gain momentum against enormous inertia and countless barriers. It is beyond my comprehension how 535 people in congress and 1 in the White House could let partisanship rule at a time when the right decision for the country is so obvious. Our industry’s objectives of job creation, energy independence, and environmental stewardship should be treated as an urgent national priority.

                          Glenn Harris is CEO of the consultancy firm SunCentric Incorporated.

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                          • #14
                            Re: Inflating the next bubble

                            Originally posted by santafe2 View Post
                            That your assumption about the solar tax credit being in this bill as passed and signed is incorrect. Here's an article from yesterday that captures the issues well. I'm working every day in an industry which is preparing to shut down.
                            If McCain wins, let's just say there'll be a buying opportunity for solar equities.:eek:

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                            • #15
                              Re: Inflating the next bubble

                              Originally posted by santafe2 View Post
                              That your assumption about the solar tax credit being in this bill as passed and signed is incorrect. Here's an article from yesterday that captures the issues well. I'm working every day in an industry which is preparing to shut down.
                              Regret that the amendment that effects you personally was not included among the hundred or so that support EJ's point: next bubble tax amendments were a major feature of this last bubble bill, and contrary to your assertion, it did pass.
                              Ed.

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