Mandating Higher Costs; Unobtanium

Meredith Willson's iconic con man, Harold Hill, is alive and well in the think-tanks and corridors of legislatures across the globe. His bald-faced scheming has been adopted and adapted to drive common sense from the conversation.

Want an amazing life? It's simple! Just imagine it!

Want to drive a car magically? Simple! Imagine it! No need to scour the surface for any type of understanding what technologies, what inputs of production are needed to create this magic. Instead, we are told, the technologies we're pouring our national treasure into--or down--will produce the miracle of sustainability. Just imagine it.

The things that actually work, like nuclear, coal and gas powered plants are bad. Nuclear because we'll end up with three-eyed fish. (Don't believe me? Just watch The Simpsons.) Coal because it's dirty. Gas, because, well, just because. And don't you know how much damage you'll be doing to the Earth? Mining. Ugh.

But electric cars? Just fine. (Just don't tell me how their made!) (La-la-la, I can't hear you.)

In my in-box today came this missive from Governor Kitzhaber's green-shirted thugs:

"Oregon is being targeted for liquefied natural gas (LNG) pipelines, and our legislature is poised to make approval of these projects easier. Almost 600 miles of pipelines have been proposed through more than a dozen Oregon counties. Although the first version — the Palomar pipeline — has just been cancelled, NW Natural Gas Corporation has promised to bring it back next year. Another LNG pipeline, from Coos Bay to Ashland, would be dramatically sped up if HB 2700 passes as currently written.

"Tell your state senator to protect Oregon and either reject or amend HB 2700 to avoid fast-tracking LNG.

"Thousands of rural Oregon families could have their lives disrupted and their property damaged by HB 2700, a bill that would make it easier for LNG projects to move forward in Oregon. The bill would change Oregon laws to allow LNG projects to cross protected streams and wetlands on private lands, farms and forests without the owner’s permission." (The Team at Onward Oregon, presser, March 31.)(Their "scare" bold.)

Pretty scarey stuff. Crossing protected streams. Wetland. Private farms. Etc.

I live in Seaside, and use natural gas. Know how it gets here? Beats me.

Using the Think System, I think it gets here through the wires that come to my house. The same wires that will power the cars of the future.

Thirty years ago, Diamond Shamrock was running around the county, offering leases on your land in order to develop the natural gas fields in Clatsop county. My neighbor, Hank, talked to me, and we decided to wait until they found marketable deposits, since the price offered would be higher than for unproven gas fields. But folks out on the Walluski were abuzz with the idea that they would be wealthy, if D/S proved to be right. It was reminiscent of an Al Capp cartoon.

Around that same time, in 1984, Diamond Shamrock planned for development (.pdf) of a 32-acre site in Alaska. Object? To ship a billion tons of low sulfur coal. At $77.00 per short ton, that's a lot of wealth. How has that worked out?

Well, it hasn't, really. When it comes to electric cars, the fact that the amount of rare metals that need to be excavated from hillsides around the world is mind-boggling, it is because we rely upon the Think System, we are able to ignore the mining that must take place to build our Vision!™

But to retrieve from the earth usable commodities like coal, well, unthinkable. So, the project has, like the other projects that would reduce our dependence on foreign oil, not moved forward. When we talk about exploration of our own oil resources we are told that reliance upon oil is reliance upon a source of energy that "isn't sustainable" so, not worthwhile pursuing. Then we are told, that it would take ten years before that energy became available to the market. So, why bother.

Why bother, indeed, when we can instead rely upon the future deployment of unobtanium, that miracle energy source being produced by the Think System.

So, a coupla years ago, the guys behind the Cook Inlet field came up with a stunningly good idea; "CIRI proposes to use a process called underground coal gasification to turn a coal seam into synthetic gas."

Carbon dioxide? Dealt with. 150-megawatt power plant? Dealt with. This is real technology, a real break-through, a real source of baseline power. Then there is the Think System solution.

"...hydrokinetic means using the motion of the water to create energy."

Yeah. We know how well that worked the last time. Or, is working this time;

"That bright yellow contraption bobbing in the saltwater offshore of Seattle is a small version of what may dot the oceans one day. The prototype is successfully generating clean, renewable power... though not very much."

The major difference between the two-sources of energy is one of funding. Who pays. Funny, that the stuff we're told is "unsustainable" is profitable, but the stuff we're told is "sustainable" is unprofitable? And all these plans are opposed by the same group of green-shirted thugs who oppose any resource utilization as injury to the planet. Fish, streams, grasslands, wetlands, forests, hillsides, valleys.

The adults in the room, those who don't rely upon the duplicity of the Left, are getting frustrated. Proven methods of providing cheap sources of power, for cars, for businesses, for manufacture are being denied and destroyed. (See Boardman power plant.) The Think System approach is also being denied, which lends a certain comic quality to the debate. Here's President Obama on gas and oil development:

"Right now, the industry holds tens of millions of acres of leases where they're not producing a — a single drop. They're just sitting on supplies of American energy that are ready to be tapped. And that's why part of our plan is to provide new and better incentives that promote rapid, responsible development of these resources. And we're also exploring and assessing new frontiers for oil and gas development, from Alaska to the Mid- and South Atlantic states, because producing more oil in America can help lower oil prices, can help create jobs, and can enhance our energy security. But we've got to do it in the right way."

Here's the American Petroleum Institute (.pdf) response:

"The report completely whitewashes the fact that in many cases, the reason these leases have no exploration plans is that (the federal agency that oversees oil and gas leases) is sitting on those plans.

"This is like leasing an apartment from the government for $20 million dollars – the government refusing to give you the keys to the apartment – and the government proceeding to complain because you are not occupying the premises.

"The disturbing reality is that 2011 could go down as the first year since 1957 that there has not been at least one offshore lease sale. Not one."

I watched with interest the interview of Washington Democrat Representative Jay Inslee, last night on the Kudlow Report. Why don't we drill, drill, drill? Because, according to Representative Inslee, there are only 65 years of oil in the continental United States, and we're better off using alternatives to gas, oil and coal. How did he arrive at this conclusion? The Think System.

Ron Paul, Nutz, The Gold Standard and a Balanced Budget Amendment

I'll make this brief.

I'm not a Ron Paul fan. Or, a Paulist.* The reason is simple. Even if we have a gold standard, the gold standard itself doesn't constrain the money supply. Money is the amount of cash in circulation, and banks create money. Not the Fed. (Okay, the Fed can "print" money, but if you understand QE1 and QE2, you realize that the mechanics of money creation by Treasury are significantly different from the mechanics of bank created money.)

Even without federally mandated reserve requirements, banks make money whenever they loan money. Whenever a bank makes a loan, it occurs as a subtrahend. But not just as an subtraction of an asset, but as an increase in an asset. It does increase the liability of the bank. But, it also increase the holding of the bank.

The Paulist guys that I've conversed with seem to feel that losing the Federal Reserve is key to some constantly brilliant economic future. Which, I just don't get. You and I know that prices and wages tend to be sticky. And, while I rail again and again against mandated minimum wage levels, my advocacy relies less on the stickiness of wages as it does on the dignity of labour. Let's take the level of contract law as is. Which includes so many different levels of commitments, moral and contractual, that it would be hard if not impossible to parse those commitments into different degrees of dissimulation. That is, at what point does the contractor have to, or need to, unilaterally apply a contract-breaking action that allows for wage stickiness to no longer have effect?

A gold standard does not, and cannot, eliminate the creation of money by banks, without outlawing lending.

Think about it. Keeping your money at a bank. A bank that doesn't lend money.

This is one of the ideas that needs to be addressed by Paulists. By the way, banks without lending have a different name. Big Vault. Which is a model we can adopt. My understanding of Mohammedan law is, that lending with interest is not allowed. So, to say that interest free banking and lending is impossible isn't supported by empirical fact. There do exist banks that neither charge nor offer interest.

But we're only talking about one aspect of an interest free, gold-based currency.

One of the greatest risks facing anyone in business is the challenge of price fluctuation. Coming from a farming family, the risk faced by anyone involved in farming is challenging. (A sidenote: why we should disallow bankers from making money based upon their risk, while allowing farmers to make money based upon their risk is an unqualifiable stupid for me. Why should farmers be allowed profit based upon their risk, and not bankers?) When you plant a crop, whether it be corn, or wheat or peas, what level of risk should the planter adopt, against the zero risk of planting nothing?

We need to ask ourselves, what role do we wish money have? There are several roles we wish for; a store of value, portability, a medium of account, and a method for payment. But this isn't all we get for our money. We also get a hedge against other currencies. And, I submit, there are other advantages we get from currency that I'm not listing here. But, you must admit these are some pretty powerful characteristics!

Without getting into some mathematical equations, the role of money is important, but the major roles of money are as a store of value, and as the means to set up accounts and manage payment. This is how most of us view money. But what happens when we replace money--fiat currency--with a gold standard (the Paulist view)?

Without a total re-regulation of the banking industry, the primary defect of banking (the expansion of the monetary supply) will still occur. As long as banks are allowed to depend upon fractional reserves, the money supply will increase, without regard to the amount of gold held in reserve by the central bank. A brief example: a bank takes in 100 dollars worth of deposits. It determines that it has 10-thousand deposits of 1oo dollars. To take care of drafts (the checks you write against your account) it needs only have on hand a smaller amount of cash that the million dollars it has in deposits. It is that difference, between it's obligations on a daily basis and it's needs for cash on hand to meet depositor requirements, that allows banks to lend money.

Idle money has a cost.

It is the cost of interest not returned due to inactivity.

Banks warrant that the deposit you make will be honoured when you make the claim.

Now, the Gold standard doesn't change this particular relationship between you and your bank. What has changed is the role government has assumed in banking. In 1933, the government decided it was important to protect banks from failure. It did this in the guise of protecting depositors, with the creation of the FDIC.

This is no knock on Sheila Bair. I think we have one of the most competent chairmen of the FDIC we've ever had. What I don't appreciate is the economic milieu she's had to compete with. Honesty in banking is at a low point. Bankers do know things that you and I aren't supposed to know. Take problem banks.

Loan balances continue to decline.

The number of institutions on the FDIC's "Problem List" rose from 860 to 884.

What I offer is, that none of these problems could be, or would be, avoided by either a Gold Standard, or by a Balanced Budget Amendment. The reason is simple. We don't want to cut our prices.

Our prices are either the prices we ask for your good and services, or, more importantly, the price we'll accept for our labour. A gold standard does not favour labour. If we have a consistently gold-based economy, where the amount of cash in circulation is determined by the value of gold deposts held by our country, without an expansion of our gold assets, there is no mechanism for increasing the amount of cash in circulation. As the economy expands, the competition for resources in one market will require a reduction of resources available in another.

That is, if gold is equal to 100, then cash is equal to 100.

If increases in demand in A requires an increase in cash by ten percent, then, given no reduction in demand from all other sectors, to meet the increase in demand by A, all other sectors must reduce their prices by their share of A's increase in demand.

Which is why Paulists don't have a clue.

Milton Friedman was the guy who worried about money supply. Prior to Uncle Miltie, we had Keynes and the Classicists. Following Bretton Woods, there was a general understanding that prices were sticky, both in commodities and labour, and that a general rise in price levels would allow for adjustments that were socially unacceptable under the gold standard. The key for Friedman was, that increases in the money supply should only accommodate increases in productivity. The easiest way to understand this is to view the way we agglomerate independent variables to come up with the Consumer Price Index. The CPI doesn't take all prices of all goods sold last year, and then compare those prices with this years prices. What the CPI does it take a look at the weighted values of what was sold in the last period, to the weighted value of what was sold in the current period, to determine changes in the price index.

It's an important distinction.

In 1973, x number of colour televisions were sold. In 1993, y number of televisions were sold. Even though the number of colour TV's sold increased, the total cost of those televisions went down. But the amount of cash spent buying computers went up amazingly!

How did we find the amount of cash to finance the expansion of computers, while absorbing the loss to televisions? Simple.

As demand increased for both televisions and computers, the amount of cash supplied to the economy rose. As productivity in television construction increased, productivity in computer manufacture increased. Labour, involved in television manufacture, decreased. Labour, in computer manufacture, increased. Changes in manufacturing processes occurred, some segments of the labour market decreased, while others increased. But, prices for televisions didn't decline because of decreases in the money supply. Prices for television decreased because manufacturers were able to increase productivity over fixed costs, while improving reliability and quality, due to changes in technology. While the demand for television sets remained fairly constant, increases in productivity due to technology changes allowed manufacturers to increase their productivity while reducing costs. As their profitability margins improved, they were forced, through competition, to reduce their prices, allowing me to buy, a couple of years ago, a forty-inch TV for $299 a couple of years ago.

Wages didn't decrease in the television sector. Productivity increased. Meaning that companies were able to make more money without changing their inputs. (Later on the meaning of unions and "outsourcing".)

But it's important to note, that whole ranges of products came onto the market that increased the general wealth, without any particular person having to take a hit. Prices tend to rise. To an economist, this is known as the ratchet effect.

Because we rely upon a fiat currency, we are able to adjust the quantity of money, enough to enable transactions, without having to enforce price reductions. I will admit that fiat currency is a social choice. We could require all inputs to production to have to face their decreasing value to the production process more immediately. Again, I'm not sure that this is wise.

So, too, is my impression of advances towards a Balanced Budget Amendment.

It sounds good. Kicks butt and all that. But I look at the U.S. economy following 9/11. 43 was right to cut taxes. My friends, following 9/11, the economy was in a spin. We hadn't experienced anything like 9/11 before. Pearl Harbour? Close. Mebbe the same thing. I should look at some charts. But I won't. As I promised, this is a short not.

Our country needs to be able to spend more than it takes in, from time to time. Our current emergency isn't about debt, it's about legislators who attempt to cure all of life's discourtesies through legislation. If you think we should attempt to breed unicorns and outlaw bad things, you're willing to vote for anyone who agrees with you. If you think that law should be about either a national interest, or a state's interest, then you will vote accordingly. And it doesn't matter what side of the fence you find yourself on. If you want government to do anything for you that it doesn't already, chances are, you're a slacker/loser. If you want government to do less for you, you're probably willing to pick-up the slack, yourself.

Looking at an end of the FDIC, or the Federal Reserve, or the, whatever, probably isn't a good idea. A gold standard isn't going to happen. A Balanced Budget Amendment isn't going to happen. I'm willing to talk about it, but, in my own experience, disagreeing with those who want either is shouting into a blind tunnel.

*Catholic joke. I am a Paulist.

Vox Populi, Pax Romana

Watched a presentation tonight about the justification for the Aztlan movement. The first thought that kicked through was, why not Israel?

The argument being forwarded is, this is what my race, or, ethnicity, or, my county of origin was at some time in the past. Therefore, I should be in charge of the land that is currently represented under that surmise. Because, this is the land of my people.

There is a certain harmonic to this argument. Which is why I'm asking for a return of Pax Romana. As the descendent of Scottish heritage, I know that I should be, or my antecedents where, under the control of the Roman Empire. Pax Romana is my new battle cry. Under my creed, we need not look for justification for invading Libya. Libya is ours!

John Locke is an old, dead guy. His most important work, in my estimation, is his Second Treatise. You don't have to read it, and most people haven't, but if you haven't and you wish to opine on the issue of nations and nationality, you really don't have a leg to stand on. Remember, that I was at university during that time when SB 100 was passed. I was open to argument that it was necessary, to save the state, to pass laws that,until then, had never been before contemplated.

Central planning control. In Oregon. To defend Oregon. "Visit, but don't stay."

Crazy talk.

All I'm saying is, maybe I have standing to sue the state for its role in creating central planning agencies. Because, they aren't based upon Roman law. Oh, by the way, the reason why the Aztlan Movement prior doesn't work is simple. They weren't there. Just ask them to do the DNA testing. It's great, it's freeing to be a radical without impulse control. It's a little harder when there are test to disprove the rhetoric.

Dosha Vote

I posted earlier about this. No link. My post was recent. Scroll down.

Dosha lost. Union won. 154 employees.

Let's see how long Dosha exists.

Time To Shut 'Er Down

A lot of talk going on about how irresponsible Republicans in Congress are for holding fast to their promise to cut government spending.

If you are reading this, then you've seen it, too.

Chuck Schumer telling fellow Democrats to blame Speaker Boehner for truculent behaviour.

I will tell you; the Republican Party lost faith with the American public when George Bush 41 broke his pledge, "Read my lips, no new taxes."

Republicans would be walking on water today if GW had kept his pledge. Priors are important. Trust is important. Doing what you say you are going to do is more important than what you've said. Don't have an opinion on abortion? Okay. Won't hold you to that. But if you say you are either for or opposed to the criminalization of abortion, and then you vote a different way in your tenure as a legislator, guess what?

I don't trust you.

Closing down the Federal government isn't a task to be undertaken lightly. I know that. You know that. The kicker is, once close, it could be opened almost immediately, as long as the President decides not to boogy down to Rio.

Taking America back. What does it mean to you?

Keeping your promise is job number one. Those who disagree with us must be put in a place where they need to defend their decision. Republicans were elected to make a difference. Without a difference, why elect Republicans?

Somebody explain to me why I'm wrong. Not about my policy choices. But about the promise a candidate makes to his or her constituency, and the outcomes that should result when those promises are broken.

Stare Decisis

I posted some time ago about the perils facing radicals in Clatsop County. I had spoken with a, then, majority of the Clatsop County Commission about the rules imposed on Multnomah County following the decision in State ex rel English v. Multnomah County.

Following this decision, it became apparent that the leadership of the Left in Clatsop County, who view themselves uniquely qualified to run your life, didn't understand the rules of law, and the concomitant jeopardy which they were going to place the county.

I didn't understand why Cindee originally granted cert in this case. The case law was ironclad. Her rescission was, and I conjecture here, based upon someone getting to her and letting her know that she was ill-served by counsel before the bar.

More on this farce at North Coast Oregon.

Notice Anything?

Here is a chart of increases in state expenditures by small states in the Western United States.

One of the questions this chart raises is, whether these debt levels are being expressed in nominal or real terms. For the sake of argument, we need to assume that these are nominal amounts. Here are the rates of change in the price index for the years 1998 to 2009:

1998 1.6
1999 2.7
2000 3.4
2001 1.6
2002 2.4
2003 1.9
2004 3.3
2005 3.4
2006 2.5
2007 4.1
2008 0.1
2009 2.7

Nothing in these numbers can produce an alibi for our state government. Oregon, unlike her sisters, rapidly expanded government expenditures, even in the face of the economic stresses that face those citizens who participate in the private sector. And remember, even though we've increased taxes on the productive sector of the economy, rather than our state reducing the rate of increase in our debt, in 2009 and 2009, the rate of increase in our debt went up.

Sure, it's nice to live in a state where we can send kindergartners to school for a full day. Of course, this is just baloney, since public schools have a vision of full days equalling six hours. And all the studies I've read show little or no improvement of scores for third-graders based on kindergarten, part-time or full-time. When it comes to settled science, whatever the OEA says is what we believe. And, they spend a lot of money supporting political candidates that support them. Which is natural. It's like a crime syndicate. I scratch your back, you scratch mine.

My mentor, The Real King of France, asked the question, why? And then answers it. Democrat control versus Republican control.

It's like living in a Ray Stevens song. "Everything Is Beautiful." How can we cut money for schools? Well, easy. But it takes spine. How can we cut money for the arts? Again, easy. Spine. No matter where you turn, cutting is attacked as cruel, unfair, racist. Sexist. Helping the rich. So, since everything is beautiful--and necessary--our debt continues to mount. While our neighbors manage on less.

Wish Oregon luck. We do things different here.

Textbook Study

Are unions good?

The events unfolding over at Dosha Salon will provide you with a case study of how businesses transform when faced with hostile employees. When I was young, you got your hair cut by a union barber. Then, during the seventies, rules changed. What made a barber different than a hair dresser? A hair dresser couldn't give you a shave. Hair dressers came into salons as independent contractors, paying rent to the salon owner for their space, perhaps a chair and sink. Some hair dressers went to work as employees for a salon's owner. But, when accredited by the state board, a hair dresser could usually find a niche for themselves. Lots work out of their homes. Some rent small spaces. The degree of independence for hair dressers is really quite remarkable.

I had my hair cut by hair dressers for decades. The salon was Richard Herrera. The guy who cut my hair had worked for Richard when they were in the bank tower, worked out of his own shop on 23rd for years, and then returned to Richard's shop. I knew the guy who cut my hair personally...we would sometimes bug out to the tavern next door and play PacMan. Richard's daughter was an Econ TA when I was at Oregon State.

How good is Richard? I know that, at least when I was going to Richard's shop for my haircuts, that Richard was the guy who cut José Eber's hair when José was in town.

Point is, working for Richard is a privilege. From what I can see, working for Dosha would be a privilege, too.

But some employees don't like the work they've chosen. They want the rules to be changed, and that agent of change is union organization.

From what I can see, there are employees who don't want to be responsible for their scheduled shifts, their own need to save and plan for the future, and are demanding something they call "respect." Let me tell you something, campers. If I hire you, that means I respect you enough to hire you. If you've lost my respect, or feel I don't respect you, the problem is deeper than you think.

So let's watch together the demise of Dosha. The two sides have divided up. You can get the Dosha As Is side here. You can get the union side here. You can get the union overview here.

Once equality of outcome is mandated, the best will move away. The worst will remain. Because of the rules enforced by unionization, the company will be forced to spend a lot of money to simply close their doors. When bankruptcy occurs, the equity holders of Dosha will be demonized.

Not the union.

155 jobs. Portland. Keeping weird.