Thoughts on Demand

It seems that ignorance about basic economics (macro version) reigns supreme these days, especially when we get visited by the ghost of Ronald Raygun past (remember the Toles image of the Particle Board Beam?). So...same facts to burst this seemingly Prozac and Valium induced fantasy:

http://www.angrybearblog.com/2011/02/few-graphs-describing-reagan-presidency.html#more

But nowadays, with a Democrat in charge, businessmen keep calling for austerity (mysteriously missing in the reign of George Bu$h) in government (which shrinks economic demand) as well as more incentives for them to invest the $2 trillion plus of cash that they are sitting on (which will shrink government tax revenues, and lead to greater deficits, and more need for more austerity):

And what austerity brings - more calls for corporate welfare when the economy responds to a shrinkage in economic demand by shrinking in output, which eventually hits corporate profits (shrinking or eliminating them/replacing them with losses) once the poor and middle classes have been tapped beyond viability:

http://www.nakedcapitalism.com/2011/02/uk-about-to-implement-massive-tax-break-for-banks-is-the-us-far-behind.html

Of course, more governmental welfare for corporations means more expenditures and less government revenues... thus continuing the situation.

At Gov. Cuomo's recent speech at Daemen College (2-4-11), what was notable was the lack of any creation in Demand by his budget. Sure, its good to go after/cut off from the state money tap the corporate rip-off artists in the Medicare biz, and overpaid public officials, such as the 50% of all public school district supervisors in NY State hauling in more than $200,000/yr in base salary (BTW, there are far worse examples - just google "See Through NY" or scroll through http://www.seethroughny.net/). Maybe the Governor of NY is too far down the totem pole to be able to do anything about macroeconomic demand in NY State. But without more demand for products, business will not:

a) hire more people to make the stuff needed to supply that demand
b) invest in more productive assets, which will also allow more stuff to be made, and to thus create more supply for that demand; this also creates additional hiring (i.e. demand for labor)

And if workers don't get hired, they don't pay more in revenue to NY State, and the budget deficit either does not improve and/or it gets even worse, necessitating more cuts and thus a shrinkage in Demand. This onset of a deflationary death spiral also comes at a time when Peak Oil is cranking up oil prices, and various climate effects (as in the initial teasings of Global Warming) are putting a hurt on agricultural production in many parts of the world. Oh goody, more squeeze...

Behind me at the Gov's speech was a businessman who said that because tax rates (on him, not me) might get dropped, more workers would get hired. But more importantly, because the NY State expenditures would drop, more workers would get hired...!!! Right. But what would these businesspeople make, and who would they sell it too? His answer was "overseas" since domestically, there is no increase in demand for most things. But competition outside the US is even more cutthroat than in the US (and often based on things like bribery/kickbacks, which are supposedly illegal for businesspeople to do), especially in the growing (outside the US, that is) Green Energy field. After all, we have not been technological leaders in this area for a decade (that would be Europe, and that is generally where China buys its renewable technology from/steals it from), so in general, the US does not even have technology in this market to sell, let alone products made from this non-existent technology (some exceptions, but fewer and fewer). Europe's technology is often a result of Feed-In Laws, because the Feed-In Laws allow the products from this technology to be sold at viable prices, because the product of those devices - renewable energy - can also be sold on a cost plus reasonable profit basis. Last year, Green Energy investments in the U.S. (notably wind turbines), shrank, as did the rate of delivered renewable energy (most of which was supplied by wind turbines) from those investments.

I'm guessing this guy was just spouting pre-programmed religion - just press the button and out it comes. And his view seems to have been embraced by the local media, as they refuse to talk about what will actually create economic Demand in NY State, especially on a long term basis. They will tend to go on about education, but the story in the Sunday news about the Just Pizza delivery dude with his degree in biochemistry is going to be SO typical for the next decade unless this issue of THE LACK OF JOBS is addressed. In 2007, 57% of college grads had a job lined up that would require a college degree. In 2008 it was 18%, and 2009 was similar. The 2010 number may have crept up to 30%. The number one concern among college students is "where can I get ANY kind of job, not just one requiring the use of skills learned in their institution of higher learning". That is 4 years (and at about 1 million grads/year)... where an average of 2/3 of college grads had to go after jobs that would normally go to those without a college degree. Talk about a snowball situation, where every year another 700,000 people get piled onto the already several million people with college degrees and with either no job, or a job where no college degree is required. How long can this go on before college attendance and the business of college starts feeling these economics? After all, most who go to college do so because they have a better probability of getting any job, and especially a better paying job. What happens when that is generally no longer true? Why go in the hole to the tune of $30,000 to $100,000 for no net gain? Are the "social activities" in college that can be had no other way worth that kind of coin?

We are used to warehousing large percentages of our population in dead end or no (legal) employment arrangements, but now college seems mostly a way to keep shoving this "dust" (all those millions of people) under the rug, so to speak, to warehouse people for which there are no jobs. How this will play out is anyone's guess, but in the Arab world, it is already boiling over. But maybe US college students and grads are "soma'd out" by any combination of consumer gadgets, alcohol, video games/internet distractions and general sub-urban isolation, so it will be another "no problem situation".

But on the other hand, what happens when the empty rhetoric of of Gov. Cuomo's nice sounding and nicely intentioned "green jobs" gets confronted by actual Green Jobs in Ontario, and essentially none in NY? Will our local and statewide media be able to keep this from ever happening (that is, letting the Ontario Green Jobs story out) by insuring blanket ignorance among NY's young adults? Inquiring minds would like to know... And will needed environmental improvements - like removing possibility that sewage gets dumped into the Buffalo River via the "CSO mechanism" - get dealt with or does that (which also creates lots of jobs, at least during the construction phase) get zapped by the surge to austerity...

Anyway, the sad fact is that the macro-economically ignorant businessman probably has a college degree. So all that knowledge that supposedly was poured into his brain just went out and fell on the floor. Or else, as Upton Sinclair once said, it is easy to remain ignorant when your paycheck depends upon it. And obviously, he's working hard at staying ignorant and spouting the (business) Party line...

DB

2010 Wind Energy Results

The results are in from 2010 with regards to newly installed capacity. You can check out the nifty graphics at http://www.gwec.net/fileadmin/documents/Publications/GWEC_PRstats_02-02-2011_final.pdf, as well as a table that lists the world happenings by region, and also for most of the major countries in the world with respect to installed capacity. A good summary article can be found at http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews[tt_news]=279&tx_ttnews[backPid]=4&cHash=ada99bb3b6

Good news for Egypt.... their installed capacity is now up to 530 MW, with the recent addition of another large wind farm on the Gulf of Suez. They now have the most installed wind capacity of any country on the African continent.

There are a couple of big items to note, aside from the fact that the world did not quite hit the 200 GW installed capacity "goal post" - only a mere 194 GW, which is an investment of roughly $US 350 to $US 400 billion. The installation rate dropped to around 35 GW ($US 70 billion) from last years effort of 39 GW, largely because the U.S. was a real slacker, installing only 5 GW in 2010 versus 10 GW in 2009. If you want a great example of why the "stimulus" wasn't very stimulating, that is a good one; if we had doubled the U.S. installation rate to 20 GW, that would have been worth 208,000 job-years of direct employment, most of which would have been in the U.S. Instead, there were layoffs in the wind business in the U.S. Total installed capacity is around 40 GW, but the rate of installation has picked up of late. Without the very limited Federal assistance (especially Section 1603 grants), things would have been much worse for 2010, as the "traditional" incentive - the Production Tax Credit - was particularly ineffective due to the lingering effects of the Great George Bu$h Recession of 2007-2010.

On the other hand, China doubled its rate of installations to about 16 GW/yr, and now has an installed capacity of nearly 43 GW. Almost all of those are Made in China units due to Chinese governmental policies of mercantilism and protectionism for what they consider essential growth industries. And there is a bit of a price to pay for this, as Chinese wind turbines have a very low net output efficiency despite some very high quality winds where most of these are being installed (see http://en.wikipedia.org/wiki/Wind_power#Wind_power_usage). In China, the consumption of raw materials (notably steel and cement) and labor to manufacture these is presently FAR more important than the actual electricity produced. The US net output is about twice what the Chinese net output is for similar wind resources (Great Plains, Mongolia).

The other major player in the world wind industry is Europe, which is where most of the technology of late in this industry has been commercialized (and where China buys it from, with some US technology purchases). Last year, the EU 27 installed about 10 GW, bringing their combined capacity to nearly 84 GW. In northern Europe, the offshore wind sector is now experiencing significant growth (51% last year), and this seems to be the bet on how this part of Europe will achieve a significant fraction of its electricity by 2020. Units as large as 6 MW (RE Power) have been installed in waters nearly 45 meters deep ( 148 feet) and up to 50 km (31 miles offshore). Plans and permits for at least $US 100 billion worth of installations should take place in the next 5 years (25 GW capacity, 10 GW delivered), and this is also viewed as a major job growth/economic growth sector.

For more information, check out http://www.awea.org, http://www.ewea.org and for the offshore sector, http://www.offshorewind.biz. Lots of potential jobs await those countries that install and especially manufacture a lot of wind turbines.... And the beauty of these is that they "pay back" the CO2 pollution used to make and install them in less than a year (typical 7 to 9 months), and they should last about 20 to 30 years. That is one of the best ways to stay civilized and yet not pollute our atmosphere with CO2 pollution yet devised - at least 3 to 5 times better than solar PV systems, which are close to the next best thing in that area. After all, a viable planet does depend on us humans not fouling our own nest (such as the atmosphere or acidifying the top 100 meters of the ocean via CO2 absorbed from the air) with CO2 from burning fossil fuels. Here's the Read It And Weep (RIAW) tracker site for that - December 2010 was 389.89 ppm: http://www.esrl.noaa.gov/gmd/ccgg/trends/.

DB