Regulator Yoke
Regulator Yoke The Electric Car Crapshoot Al Gore, Rick Wagoner, Tom Friedman, our President Elect, Barack Obama, and many more celebrities are all heavily favoring and supporting a wholesale chan...
Regulator Yoke
The Electric Car CrapshootAl Gore, Rick Wagoner, Tom Friedman, our President Elect, Barack Obama, and many more celebrities are all heavily favoring and supporting a wholesale changeover from fossil fuel driven cars to electrically powered automobiles. Their faith is based on the Lithium Ion battery. These batteries are very expensive, are heavy, must be replaced after several years, and require hours for recharging. Lithium is not widely available in the US and must be imported. Electric cars perform admirably. They do not emit greenhouse gases directly, can be designed to accelerate well, and are very quiet. Electric cars are considered by many as the secret weapon that will reduce our dependence on imported petroleum and will lessen our payments to oil producing countries. In a good year, US citizens will buy roughly 15 million cars to replenish and grow the US inventory of nearly 250 million used cars. It may take anywhere from twelve to fifteen years to replace most of this inventory with new models. The Volt, the first electric car produced by General Motors, will likely be leased in small numbers initially to stay on top of performance and warranty issues. Optimistically, we can assume that GM and other car companies will sell more than 2.5 million electric cars during the next ten years. Replacing 250 million cars will take a few decades longer. At the same time the US is looking at a population growth of another 100 million residents during the next fifty years. Under the most optimistic assumptions we can expect to eventually see 150 million electric cars and 150 million liquid fuel powered cars in use by 2050. Passenger cars are responsible for only 45% of present liquid fuel consumption. Under the most favorable conditions and assumptions, electric cars may be able to save 25% of petroleum imports eventually. Liquid fuel consumption for other uses will certainly increase during this time. Optimistically, we may expect that electric cars can cut liquid fuel consumption by 20% in 2050. This figure does not bode well for curing the oil import dependency of the US. It certainly will not reduce dollar exports. It is certain that petroleum prices will rise substantially in future years. Additionally, we will have to pay for imported raw materials for batteries from abroad. All these figures lead to one overpowering conclusion; electric cars will never be able to free us from the yoke of petroleum imports or reduce our balance of payments significantly! There a few technical complications, too. Electric cars must be recharged regularly with electric energy. Electric energy is produced presently with fossil and nuclear fuels. Solar power is not suited too well because most electric cars must be recharged during the night hours when the Sun is not shining. For the next ten to fifteen years only a limited number of nuclear plants can be installed. Wind power is an intermittent energy, which cannot yet be stored in quantities. Fossil fuel burning has to provide virtually all of the electric energy for recharging the new fleet of electric cars for years to come. Combining efficiencies of coal fired power plants, of electricity transmission, and of battery chargers results in an overall energy efficiency that is not better than the energy efficiency of modern combustion engine inventory. Therefore, electric cars will not lower greenhouse gas emissions! Only very efficient combustion engines can accomplish this feat! If electric cars cannot save us from a coming energy crisis, what other choices do we have? The answer is sobering. Without the coming of a Deus ex Machina, there seems to be only one and only one rational solution. We must learn how to make renewable fuels from large-scale production of renewable biomass. The Earth cannot support the use of large amounts of fossil fuels any longer. We will not be able to stop the use of petroleum in the near future. We must outlaw the use of fossil fuels soon to save the Earth from overheating. Only two other energy sources exist, which can provide the large amounts of energy that modern economies depend on. Sunlight is inexhaustible and available in quantities we will never be able to consume. Several conversion technologies are available for converting sunlight into the two energy forms that our economies depend on; electricity and liquid transportation fuels. The other large energy source is nuclear fuel. It is likely that nuclear fuels will last for more than one century. Other energy sources such as hydro power, marine power, and geothermal power are not available everywhere and are limited in capacity. We are left with one conclusion. For the next century or two, we will have to depend heavily on converting sunshine into electricity and into liquid transportation fuels. Energy in the form of sunshine is not very concentrated. Fortunately, biomass has the unusual ability to use sunlight and create energy rich carbohydrates and a few hydrocarbons. More amazingly yet; biomass energy can be stored. There are a few technical problems we must solve before biomass can become the savior technology. We must grow very large amounts of biomass, we must learn to convert carbohydrates into hydrocarbons, and we must agree to reserve arable lands for food production only. All remaining obstacles can be overcome with existing technologies. It will take about one long decade to develop workable and economically attractive solutions. To be successful we must support exploratory research on a large scale and we must organize and fund an independent Energy Supply Development Agency. The dismal interference of US Congress in energy matters must be changed. Instead of demanding the ineffective manufacturing of electric cars and regulating fuel consumption of passenger cars, US Congress must change to a new, practicable, and effective energy policy. US Congress and the new administration must demand increased thermal efficiencies from all newly manufactured internal combustion engines and must initiate the fast track development of liquid fuels production from renewable biomass. About the Author Dr. Hemsath recently published the book: CLIMATE CHANGE - GOLD RUSH OR DISASTER? For 50 years he has worked as scientist, process engineer, Corporate Vice President of R&D, Company President, CEO, and Inventor. He holds more than 60 US Patents. |
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China's Stealth Abandonment of the Dollar Has Begun (Part Two)
China wants to get shed of its excess dollar reserves – and to eventually see the dollar replaced as the world’s reserve currency – but in its deep ambition China must tread carefully. The great game has begun...
“If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.”
– Yu Yongding, influential Chinese economist, citing John Maynard Keynes
A quick note relating to Friday’s Taipan Daily, “The Last Western Country Where Banker isn’t a Cussword.” TD reader from down under Roger K. writes,
There is another western country where banks are also doing well, that is Australia. The banks here have similar stringent regulation and conservative management... and Australia is a western country and we speak english - well sort of...
Good on ya Roger. (An Aussie expression, for those unaware.) I should have thought to include Australia in my mental checklist of Western countries.
When I took a semester at Macquarie Uni in Sydney (back in the late 1990s), there was a lively debate taking place as to whether Australia should consider itself a part of the West or a part of Asia. Perhaps I subconsciously resolved the question in favor of the latter.
Anyhow, getting back to the opening quote (and today’s topic at hand)...
China is well aware of its little “problem” – that is to say, the problem of what to do with $1.3 trillion worth of U.S. dollar reserves. (China’s total reserves are pegged at just under $2 trillion. Roughly two-thirds of that sits in dollar-denominated assets.)
Nor is it an easy problem to solve. In many respects the United States has China over a barrel. There is no way China can credibly threaten to dump its dollar holdings over the side en masse, as such would be an act of financial self-destruction. This “gotcha” situation gives Uncle Sam a certain degree of freedom to be as abusive as he likes when it comes to the printing press.
But hold on, that’s not quite accurate. If things get desperate enough in Beijing, the mandarins can, in fact, threaten America with a full-scale dollar blowout. They can put the gun to their own heads, so to speak, and in so doing put it to Uncle Sam’s head too. (For more along this line, see the March 20 Taipan Daily essay, “China, the Fed and Financial MADness revisited.”)
Of course, that action is only palatable as a last-ditch resort. Playing the madman requires a certain air of desperation, a certain loss of face at home... and no doubt the mandarins would prefer avoiding that indignity if they can.
Something has to be done about the dollar situation regardless. And as we try to handicap the moves, we have to remember that China is very comfortable playing the long game. While U.S. politicians are content to play checkers, in other words, China prefers to play chess. Or, to make the analogy more apt, perhaps China prefers to play “Go” – an ancient game involving the placement of black and white stones that is, in its own way, even more subtle and complex than chess.
Change at the Periphery
The first tactical concept China seems to be embracing is “change at the periphery.” If you cannot challenge your opponent bluntly and head on, then you do so obliquely and from the side. You undertake a series of quiet, subtle maneuvers – perhaps so subtle that your opponent does not notice them at first – and slowly build strength in that fashion.
This process of change at the periphery is related to a powerful concept from the theory of evolution known as “punctuated equilibrium.” I gave a talk on this subject (as it relates to markets) in New Orleans in 2006.
A key thrust of the punctuated equilibrium idea is that, despite what many assume, the center does not actually evolve or change. Instead, the center remains relatively stable, while interesting things happen out on the fringes (the periphery). These fringe-area happenings are mostly inconsequential... little bubbles of experimentation that come and go.
But then, given enough time, something happens. One of those fringe happenings out on the edge catches on. Something new and powerful takes place at the periphery. This new model or idea or experiment or whatever it is – the precise technical term doesn’t matter – begins to catch on.
The source of peripheral change then begins to compound in force and impact, reaching a stage where it grows and expands rapidly. And then, seemingly out of nowhere, the dominance of the old center is challenged.
As mentioned before, the old center does not actually change or evolve. Instead it is challenged and eventually dominated – perhaps dominated out of existence – by a new center that quietly grew in the shadows, out on the fringes, while few were paying attention.
One Shovel at a Time
This roadmap of “change at the periphery” is the path China must take to free itself from the heavy yoke of excess dollar reserves. The mountain is too big to be moved all at once. And so, instead, China must figure out how to move the mountain quietly and in stages... one shovelful of earth at a time.
At the same time, China is obviously thinking of power on the geopolitical stage. It is not just enough to get shed of overwhelming greenback exposure – that is only half the goal.
The other half of the goal is finding ways to accelerate the twilight of the dollar as the world’s reserve currency, in such a manner that Beijing’s power can wax as Washington’s wanes, without disturbing the existing order of things so much as to bring the current system crashing down on everyone’s head. This, too, is a delicate business.
And so China must start small, and proceed with caution. But there is a time factor here too... the longer Beijing waits to carry out a strategic plan of action, the greater the risk that large stores of Chinese wealth could evaporate through the ongoing process of dollar debasement. There is no element of leisure here. In many ways time is of the essence, and this requires certain movements to be perhaps a little less subtle and a little more blunt than the mandarins would ideally prefer.
So that’s the setup... tomorrow I will tell you about the three key “peripheral actions” China has recently undertaken, and show you how these actions could have dramatic impact on our trading and investing strategies in the years ahead.
http://www.taipanpublishinggroup.com/taipan-daily-042109.html
About the Author
Justice Litle is Editorial Director for Taipan Publishing Group. He is also a regular contributor to Taipan Daily, a free investing and trading e-letter, and Editor of Taipan's Safe Haven Investor and newly introduced service Macro Trader.
Justice has worked with hedge funds, traded equities for a private partnership, written multiple articles for Futures Magazine, been quoted in the Wall Street Journal, sought for market commentary by the likes of Reuters and Dow Jones, made contributions to the book, Trend Following: How Traders Make Millions in Up or Down Markets, and also filled the lead editor of Outstanding Investments, a popular natural resource newsletter.