New Book by Cohen and DeLong

Brad DeLong and Stephen Cohen have just published a book with the title The End of Influence: What Happens When Other Countries Have the Money.

The following sentence from the introduction of the book is funny because it is so wrong, so clearly indicates the American blindness to their own ugly manipulations of power post WWII (initially to 'win' the Cold War but since the collapse of Communism as a brazen imposition of American 'will' on the rest of the world):

Having the money was a powerful tool and force. America, of course, used its economic dominance exclusively for for global good.

I'm willing to admit that the US was a less onerous overlord than most any other country would be. But for those whose neck was held down by the hobnailed boot of American 'power' (soft or otherwise), it wasn't that pleasant.

This quote from the introduction gets it right and holds some very bad news for Americans:

When you have the money -- and "you" are a big, economically and culturally vital nation -- you get more than just a higher standard of living for your citizens. You get power and influence, and a much-enhanced ability to act out. When the money drains out, you can maintain the edge in living standards of your citizens for a considerable time (as long as others are willing to hold your growing debt and pile interest payments on top). But you lose power, especially the power to ignore others, quite quickly -- though hopefully, in quiet, nonconfrontational ways. And you lose influence -- the ability to have your wishes, ideas, and folkways willingly accepted, eagerly copied, and absorbed into daily life by others.

These words are very true. Sadly almost no Americans yet recognize that the "light on a hill" that Reagan proclaimed has gone out and that the future for America will be increasingly grim. (Ironically it was Reagan's budget-breaking policies that helped bust the nation.) It is interesting to see DeLong and Cohen are willing to admit a truth of diminished American power which has not yet dawned on Americans.

These authors make the following point which will have very interesting implications in the coming years, implications which Americans are yet to recognize:

If you owe the bank $1 million, the bank has you; if you owe $1 billion, you have the bank. The implication is that China, the biggest and most important holder of U.S. debt, is trapped into a strange, unwanted, and uncomfortable embrace with the indebted United States. The Chinese government holds about $2.5 trillion in foreign reserves, probably 70 percent of that U.S. obligations. This comes to over $20,000 per U.S. household; there is no way the United States could readily pay it back. Because it also amounts to about half of China's GDP, China can't just write it off.

Thus, China and the United States are economically co-dependent, the producer and consumer, the creditor and the debtor. ... We're bound together, and we must manage this mutual dependence carefully and, over time, wind down those economic imbalances. Populist reactions in the United States and China must also begin to work more broadly as partners to stabilize a world in political, social, and economic disarray.

So perhaps it won't matter, at least not very much. We can hope. But one thing is sure: Absent an international economic catastrophe or a major war or another game-changing disaster, the money will not soon be coming back to America.

The world has changed. Americans need to wake up to their reduced role in the world. Unlike the Bush years, a fantasy period, in which America took a 'go it alone' stance, the reality is that the world is fragile and the US can't act alone any more. At least Obama is aware of this. I have yet to see any fundamental policy changes to reflect this reality. Changes can be peaceful and satisfactory, or fanatics (nationalists and other malcontents) can rise up and drive countries into bizarre behaviours. Fanatics get this power when citizens realize that they have been living a dream and need to face up to a new reality. Accepting a loss of dominance is hard, very hard. But Americans are going to have to face this. And hopefully the fanatics won't gain control during the period of adjustment. (I'm pessimistic given the fanaticism shown by one major party, the Republicans, who are largely guilty for getting the US into the mess. This party shows no willingness to face reality.)

This book by DeLong and Cohen looks like it will be a "must read".

Finally, Republican Hypocrisy is Noted

USA Today is running an AP story that names names and points out the hypocrisy of the Republicans over health care:

Republican senators attacking the cost of a Democratic health care bill showed far different concerns six years ago, when they approved a major Medicare expansion that has added tens of billions of dollars to federal deficits.
The inconsistency — or hypocrisy, as some call it — has irked Democrats, who claim that their plan will pay for itself with higher taxes and spending cuts and cite the nonpartisan Congressional Budget Office for support.

By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates.

With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt.

All current GOP senators, including the 24 who voted for the 2003 Medicare expansion, oppose the health care bill that's backed by President Barack Obama and most congressional Democrats. Some Republicans say they don't believe the CBO's projections that the health care overhaul will pay for itself. As for their newfound worries about big government health expansions, they essentially say: That was then, this is now.

Six years ago, "it was standard practice not to pay for things," said Sen. Orrin Hatch, R-Utah. "We were concerned about it, because it certainly added to the deficit, no question." His 2003 vote has been vindicated, Hatch said, because the prescription drug benefit "has done a lot of good."

Sen. George Voinovich, R-Ohio, said those who see hypocrisy "can legitimately raise that issue." But he defended his positions in 2003 and now, saying the economy is in worse shape and Americans are more anxious.

Sen. Olympia Snowe, R-Maine, said simply: "Dredging up history is not the way to move forward." She noted that she fought unsuccessfully to offset some of President George W. Bush's deep tax cuts at the time.

But for now, she said, "it's a question of what's in this package," which the Senate passed Thursday in a party-line vote. The Senate bill still must be reconciled with a House version.

The political situation is different now, Snowe said, because "we're in a tough climate and people are angry and frustrated."

Some conservatives have no patience for such explanations.

"As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt," said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled "Republican Deficit Hypocrisy."

Bartlett said the 2003 Medicare expansion was "a pure giveaway" that cost more than this year's Senate or House health bills will cost. More important, he said, "the drug benefit had no dedicated financing, no offsets and no revenue-raisers. One hundred% of the cost simply added to the federal budget deficit."

The pending health care bills in Congress, he noted, are projected to add nothing to the deficit over 10 years.

Go read the whole article.

Finally, a major media outlet blasts the hypocrisy of the Republicans, the party that run the US into the ditch during the 8 years under Bush and who are busy blocking anything and everything under Obama with a "No!". The Republicans are a party of hypocrites who wrap themselves in the flag of patriotism while they dismantle government and sells the country off to the highest corporate bidder. Hypocrites!

The US Tentatively Joins the 21st Century

Here's a bit from a Paul Krugman blog posting that emphasizes how the current health care bill will help the bottom half of the population:

From the Kaiser Health Reform Subsidy Calculator, here’s the percentage of insurance premiums on the individual market that would be covered by subsidies at different levels of income measured as a percentage of the poverty line (all calculations are for a family of 4 headed by a 40-year-old):
Guys, this is a major program to aid lower- and lower-middle-income families. How is that not a big progressive victory?

The Changing Sun

Fanatics on the earth insist on human control of climate to keep it unchanging. Meanwhile, old Sol insists on changing. Here's a bit from a news release by NASA on data gathered so far by the TIMED (Thermosphere Ionosphere Mesosphere Energetics and Dynamics) mission:

New measurements from a NASA satellite show a dramatic cooling in the upper atmosphere that correlates with the declining phase of the current solar cycle. For the first time, researchers can show a timely link between the Sun and the climate of Earth’s thermosphere, the region above 100 km, an essential step in making accurate predictions of climate change in the high atmosphere.

Scientists from NASA’s Langley Research Center and Hampton University in Hampton, Va., and the National Center for Atmospheric Research in Boulder, Colo., presented these results at the fall meeting of the American Geophysical Union in San Francisco from Dec. 14 to 18.

Earth’s thermosphere and mesosphere have been the least explored regions of the atmosphere. The NASA Thermosphere-Ionosphere-Mesosphere Energetics and Dynamics (TIMED) mission was developed to explore the Earth’s atmosphere above 60 km altitude and was launched in December 2001. One of four instruments on the TIMED mission, the Sounding of the Atmosphere using Broadband Emission Radiometry (SABER) instrument, was specifically designed to measure the energy budget of the mesosphere and lower thermosphere. The SABER dataset now covers eight years of data and has already provided some basic insight into the heat budget of the thermosphere on a variety of timescales.
Energy emitted by the upper atmosphere as infrared (IR) radiation in 2002 (top) and 2008 (bottom) -- In this SABER plot, Nitric Oxide (NO) is the IR emitter.
The extent of current solar minimum conditions has created a unique situation for recent SABER datasets, explains Stan Solomon, acting director of the High Altitude Observatory, National Center for Atmospheric Research in Boulder, Colo. The end of solar cycle 23 has offered an opportunity to study the radiative cooling in the thermosphere under exceptionally quiescent conditions.

“The Sun is in a very unusual period,” said Marty Mlynczak, SABER associate principal investigator and senior research scientist at NASA Langley. “The Earth’s thermosphere is responding remarkably — up to an order of magnitude decrease in infrared emission/radiative cooling by some molecules.”

The lesson I draw from this is that all the climate "modelling" is fairly worthless until the models are validated, i.e. there is enough understanding of all the elements of climate change and these are properly included in the models. Current models ignore the sun. They can't postdict previous climate regimes. So why are politicians willing to sell our future out in favour of fanatics who want to put a stop to a better future in order to put us into a worse past?

I'm not a climatologist, but I'm not a fool. It is pretty evident to me that the climate "scientists" are selling a story, a likely story, but science isn't literature. It is hard facts with sound theories. The fanatics have only a pretense of this. The fanatics realize their "dream". A lot of climate "scientists" get showered with money. But the rest of us get hosed by fanatics. It has happened many, many times in the past. Why is this any different? Sadly, the voices of caution and moderation are drowned out by fanatics. The siren song of certainty overwhelms the average Joe in the street. The mantra is "the science is settled". Nuts to that!

Documenting Corruption

Here's a press release from the University of Michigan's business school highlighting the results of their latest research:

Banks with strong political connections were more likely to receive bailout money from the government — and more of it — in the past year than those with weaker ties, say Ross researchers.

A new study by Ross professors Ran Duchin and Denis Sosyura found that banks with connections to members of congressional finance committees and banks whose executives served on Federal Reserve boards were more likely to receive funds from the Troubled Asset Relief Program, the federal government's program to purchase assets and equity from financial institutions to strengthen its financial sector.

Further, their research shows that TARP investment amounts were positively related to banks' political contributions and lobbying expenditures, and that, overall, the effect of political influence was strongest for poorly performing banks.

Let me translate that for you: THE POLITICAL SYSTEM IN THE UNITED STATES IS CORRUPTED BY MONEY. POLITICAL FAVOURS ARE BOUGHT. BANKS THAT BOUGHT POLITICIANS GOT THE MOST BAILOUT MONEY.

Projecting the Future

I got a kick out of reading this bit in a posting by Anthony Watts in his Watts Up With That? blog:

World oil reserves are over 20 times greater now than they were when record-keeping began in the 1940s; world gas reserves are almost four times greater than they were in the 1960s; world coal reserves have risen fourfold since 1950. Political events can drive supply down and prices up, but the raw mineral resource base is prolific—and expanding in economic terms thanks to an inexhaustible supply of human ingenuity and exploratory capital.

Record energy consumption has been accompanied by improving air quality. Urban air quality is significantly better today than in the 1970s in the United States.

...

There is much to be thankful for this holiday season with our energy economy. But thoughts about the less fortunate should be with us too. An estimated 1.5 billion people do not have electricity for lighting, heating, cooling, cooking, or water purification. A Christmas tree for us is likely to be firewood for those living in energy poverty. For these people, there could be no greater holiday gift than affordable electricity itself, explaining why the developing world has flatly rejected proposals from environmental elites to forsake future energy usage in the quixotic quest to “stabilize climate.”

This reminds me of a book I read many years ago, Julian Simon's The Ultimate Resource. The second edition of this book is available on line and is worth reading. The message is simple: humans are clever and will find ways to cope with looming resource shortages. The doomsters who claim that the world is coming to a "point of no return" just haven't looked at humanity's history. There have always been looming shortages and reason to be gloomy. But there have always been clever people who found new ways of doing things, new resources, and new technologies that get around the seemingly impassible hurdles.

My father was taught in the 1930s that we were coming to "the end of oil". I remember teaching a social studies class in a secondary school in the 1970s that we were coming to "the end of oil". At the time I didn't know that the gloomy prediction had been around for 40 years and that it was based on a simple-minded, but wrong, reading of the facts. The oil companies generally report a potential of 20 years of oil because they don't explore for the sake of exploring. They only find enough oil to satisfy markets for the near term future. Therefore, there is alway "just twenty year's supply before we run out" as the gloomster tell us. But the doom-and-gloom crowd doesn't understand that there never will be more than 20 years supply in the ground because it doesn't pay for oil companies to explore beyond that amount.

So the "peak oil" crowd keep projecting exhausing just around the corner. But I wouldn't bet on it. It is already pretty clear that we will wean ourselves off carbon-based energy over the next 30-40 years. The new energy technologies are blossoming all around. They will displace the old fossil fuel energy suppliers except in special industries, e.g. transportation will always need something like oil, but I'm willing to bet that it will be supplied by algae in 2050 and not by punching more holes in the ground.

I can't pass up a chance to tweak the nose of the "global warming" crowd. They are hysterics who are closely related to the "peak oil" crowd, i.e. they are linear extrapolators of the present into the future. They have no sense of technology and change. Their "solution" is to stop growth. That is crazy unless you are already rich (like most of the leadership of these 'environmental' groups). The future will be green, and it will be greener sooner if we invest in science and technology and not into rules and regulation and lots of busy bodies going around making sure that nobody is using more than their allotment of fossil fuel.

AIG

Here is Barry Ritholtz talking about the wonderful financial model that fuels those billion dollar bonuses at Goldman Sachs: you get paid to start a fire, and you get paid to put put the fire. The Wall Street Banker as arsonist/fireman taking home the bacon for a hard day's work...