The Great Disruption

It is "national strategies" of social and economic engineering that gave us Stalin, Hitler, Mao, etc. Let people be free and creative and seek to improve their lot in life and humanity will be just fine. Not perfect members of a utopian society, not free of conflict or hardship, but fine.

— Anonymous
March 8th 2010, 5:36 pm

I have just finished reading Hot, Flat, and Crowded. Thank you for a very interesting book. However, I was disappointed that you did not discuss two vital areas:

1. As you so correctly point out, Crowded is our current condition and getting steadily worse. If something is not done to reduce the human population, nothing is going to help the ecosystem. There is obviously a limit to the number of Homo sapiens the globe can reasonably support; I think we're way past that number. How about some discussion of this issue, and the (somewhat) successful efforts in Singapore and China to limit population growth?

2. I would have liked to see some discussion of some of the ideas to counteract the effects of greenhouse gases (SO2 injection into the upper atmosphere, for instance), to go along with your excellent discussion on ways to transform the economy to produce less of them.

— Tom Webb MD
March 7th 2010, 4:27 pm

The answer is not to wait for the people in power to figure it out. You have to do it yourself on your own small scale. Scale back your life. Shrink your carbon footprint. Give up your insatiable consumer appetite for more, more, more. Abandon the ego game. If it comes with a mortgage, don't buy it. Put the money into some solar panels.

www.simplesolarhomesteading.com

— Anonymous
March 3rd 2010, 8:55 am

The Three Ways Out
Any prudent observer would consider the possibility that fossil fuels might run short within years and very short within decades. Given that we depend on oil, natural gas, and coal for 90 percent of our energy, we could be facing the most catastrophic change in modern history. Equally scary, even should more fossil fuels be discovered, burning them without storing away the carbon dioxide they produce could cause global warming.
The False Ways Out

Many purported ways out are false hopes, either because they are too small to matter or because they have a fatal flaw.

- Hydroelectric power is low-cost, but cannot be expanded.
- Geothermal is available in only a few locations, and likewise cannot be expanded.
- Wind has huge potential capacity, but even in the best locations only blows fast enough to turn the windmills one-third of the time. Its fatal flaw is that we have no storage mechanism for electricity today, and none of the proposed ones would return more than 25 percent of the energy that goes in. The electricity produced by windmills could be used to make liquid fuels, but such transformations are very wasteful. If battery technology improves enough, hybrid-electric or pure electric vehicles may be the wave of the future, and full-time electric power plants (such as coal or nuclear) would avoid the conversions required by intermittent ones, such as wind or solar.
- Photovoltaic solar is many times more expensive than competing technologies, and will remain so indefinitely because sunlight is weak, the physical infrastructure costs are huge, and the sun delivers only about two thousand effective hours per year (25 percent), even in the desert. Plus, solar has the same flaw as wind: we can’t store it. Thus, while it may address peak electricity demand on a summer afternoon, it would not be reliable enough to power the world.
- Biomass as currently practiced – corn ethanol or soybean diesel – produces such small net gains in energy that no amount of farmland could ever replace a meaningful portion of our fossil fuel consumption. Corn ethanol is just a way to convert natural gas (through fertilizer and steam) into a liquid fuel. It has only gained traction because of the temporary availability of natural gas at prices lower than oil, state-level mandates, and federal-level subsidies (of 75 cents per gasoline-equivalent gallon). Soy diesel, in contrast, can be produced at a small profit, but only because we need the soy protein first. Even so, net production of 35 gallons per acre would yield less than 1 percent of U.S. petroleum consumption (2.5 billion gallons) even if all 75 million acres of soybeans were utilized. The only biomass that hasn’t been discredited as a serious energy source is cellulosic alcohol – because the proposals for it are so poorly defined no one can say what they mean. We should be skeptical because cellulose is far more difficult to break down than corn or soybeans, and the lignin that cellulose advocates propose to use for process heat is as little as 20 percent of fast-growing plants.
- Finally, while both the world and the U.S. have a lot of coal, we have yet to demonstrate even one case of large-scale long-term storage of CO2.

The Real Ways Out

Fortunately, we won’t have to live in the dark or melt all the glaciers. Conservation, efficiency, and nuclear power are real ways out.

Cutting demand (conservation) won’t be popular, but we could take at least one significant step – by curbing population growth. By 2050, the path we’re on will add 150 million people to the 300 million we reached in the U.S. this year. But the growth is driven almost entirely by immigration levels set by Congress, which Congress has the power to reduce. They just haven’t made the connection between population and energy.

Increased efficiency, particularly in transportation, space heating, and electric appliances, could generate huge savings, and many observers claim the first 50 percent reduction could be achieved with little impact on quality of life. Higher-mileage cars, better insulation, and more efficient lighting could go a long way.

But after all that, we will still need a massive source of reliable, long-lasting, low-pollution energy. And, except for a huge piece of luck, there might have been none. But we’re lucky, and one exists – nuclear fission. If, over the next 50 years, we built a thousand one-gigawatt nuclear power plants in the best known way, we could simultaneously: 1) meet all of our energy needs at reasonable cost, 2) operate them more safely than any other large-scale technology ever deployed, 3) reduce greenhouse gas emissions to a fraction of their current rate, 4) solve the waste disposal problem, 5) have a fuel supply that would last forever, and 6) add nothing to the risk of nuclear weapons proliferation.

The fundamental reason is that nuclear forces are vastly stronger than chemical bonds – about 3 million times stronger, if you compare the weight of uranium to the energy-equivalent weight of coal.

The way to unlock uranium’s full potential while minimizing its harmful by-products is to change from today’s open fuel cycle to a closed one, and from today’s fleet of light-water reactors to one containing at least some so-called fast reactors. A closed fuel cycle means reprocessing the spent fuel, in order to send the unused uranium and the created undesirable trans-uranium elements back into the reactor to be split apart, thereby releasing more energy. Only the fission products – the smaller atoms created when large ones break – would be sent to a repository. Fast reactors, which are named after the higher-energy neutrons they utilize, would serve two purposes – to burn up the trans-uranium elements and to breed new fuel (hence, the name breeder reactors) by converting the 99 percent of uranium which will not normally split into plutonium atoms which will. Light-water reactors do this, too, but on too small a scale to keep the process going. Thus they require far higher quantities of fresh uranium.

The differences would be dramatic – over 100 times more energy per ton of uranium in, and 20 times less waste per gigawatt-year of electricity produced. Even more important, the waste stream would contain so little radioactive material that after 500 years it would be no more radioactive than uranium ore in the ground. Repositories such as Yucca Mountain could be simplified or even eliminated.

How could these claims be true, you ask, since we rarely hear anyone talking about them? Because after Three Mile Island, the nuclear industry had to improve its procedures and designs, nuclear power’s opponents stopped all rational discussion, and natural gas was plentiful and cheap for a couple of decades. Nuclear power genuinely had a problem, but that’s changed.

Let’s look at these claims. Nuclear is safe enough, because even an accident which caused a large economic loss, such as Three Mile Island, harmed no one. The defense-in-depth design did what it was supposed to do, and the industry learned and applied many lessons to reduce the chance of a similar accident. We would have greenhouse gas reductions, because nuclear fission emits none. And there would be non-proliferation, because all the proposed fuel cycles mix materials in ways which would make recycled fuel undesirable for weapons design and dangerous to handle.

Nuclear power can be had at reasonable cost because: 1) the 2005 energy bill solved the unpredictable licensing process by mandating a single license for construction and operation, 2) because fast reactors will keep nuclear fuel inexpensive, and 3) because nuclear waste can be reduced to a small problem by reprocessing steps that would cost less, some say far less, than one cent per kilowatt-hour (about 12 percent of today’s average retail price).

Not that all of this will be simple. The development of closed fuel cycles and fast reactors is not yet finished. But what’s left is engineering, not the discovery of new solutions. It will take decades to build a thousand reactors, but that just underlines the task’s urgency. We can’t wait until there’s a crisis to start developing solutions, and we can’t afford to waste time on false hopes.

George Taylor is a writer in Los Altos, California who is researching a book on the feasibility, economics, and environmental impacts of all practical sources of primary energy for the next 50 years.

— George Taylor
March 3rd 2010, 4:51 am

Hi Tom & Everyone:

I am only halfway through "Hot, Flat and Crowded," but wanted to share some current research that we are calling REIs: Renewable Energy Infrastructures.

BRIEF

If we recognize that architects have historically played a role as technological innovators, then we must also recognize that architects, like scientists, are engaged in a form of applied research. Our university-based design / research team has applied design thinking skills to a problem that involves energy production, energy transmission, and urban living. We believe a Renewable Energy Infrastructure (REI) will solve this problem.

An REI generates renewable energy megawatts (MW) at an industrial scale through the simultaneous harnessing of wind, solar, and geothermal resources, but within an integrated, holistic, and free-standing facility positioned in an urban environment. An REI is not a retrofit of a pre-existing architectural condition, but rather is conceived as a new typology to be owned and operated by an electrical utility. While current renewable energy technologies of industrial scale are typically located in rural areas, their greatest possible service to urban areas is limited due to measurable degradation rates along transmission lines and loss during step-downs at transformers. We understand the economic, political and social forces that locate industrial-scale renewable energy technologies in rural areas, and we furthermore recognize that the agenda for an REI meets resistance by the existing realities of zoning ordinances and prevailing “not-in-my-backyard” (NIMBY) sensibilities. We are in an advantageous position to consider this design problem and are currently assessing the full design requirements involved in such a proposal.

Our project deliverables yielded require working with the State of Nebraska’s various public power districts in the design of (3) site-specific, technically-plausible REI solutions of escalating scale in Norfolk NE (population 23,516), Lincoln NE (popu¬lation 251,624) and Omaha NE (population 438,646). These forthcoming options shall be site-specific to maximize urban site conditions and varying climatic zones.

The anticipated impact of this REI effort is the strategic formation of a cross disciplinary, design-led research team that delivers a technically-plausible, cost-effective option for reducing greenhouse gas emissions from public power districts. Through the agency of an REI in our urban fabric, we improve the efficiencies of existing electrical technologies, improve urban land use policy, and provide an ecologically-responsible alternative that can dovetail with, or ultimately succeed, prevailing methods of electrical production at industrial scales.

This design-led research project is funded by a 2009 AIA Upjohn Research Initiative grant, a 2009 energy research grant from the Nebraska Center for Energy Sciences Research, and the 2008-2010 Steward Professorship in Sustainable Design award. In Oct 2009, this preliminary design received a 2009 “Monster of Design” award from the AIA Kansas City Young Architects Forum.

PRINCIPAL INVESTIGATOR

Chris Ford
2008-2010 Steward Professor in Sustainable Design
College of Architecture, University of Nebraska
cford4@unl.edu

IMAGES AT:

http://www.chrisfordoffice.com/index_files/Re...

— Chris Ford
March 2nd 2010, 3:34 pm

Bill Gates: our nuclear waste can save the planet:
http://www.ted.com/talks/bill_gates.html

Advanced fast reactors are over 100 times as fuel-efficient, and our existing waste from light water reactors could power the world for millennia.

— Anonymous
February 27th 2010, 7:19 pm

Stimulating The US Economy
By Managing Social Security
As A Sovereign Wealth Fund

An Alternative to Keynsian & Supply Side Economics

Here is a game changing idea that has the potential to revitalize the economic destiny of the United States and alter the course of human history with respect to Global Warming. Simply put, I am suggesting that the Social Security Trust Fund be managed as a Sovereign Wealth Fund and be used as the vehicle for economic stimulus in the US in place of the Federal Budget.

At this juncture in history, it is painfully obvious that Supply Side stimulus money ends up in investments in China and that it fuels consumption in the US. Keynsian stimulus, on the other hand, places an undue burden on the US Treasury, which appears to be unsustainable and politically untenable. Evidence suggests that we are entering a period of long term, persistent, systemic deflation and this poses a serious dilemma for policy makers.

As such, the concept that I am presenting represents a 21st Century alternative that is neither Keynsian nor Supply Side economics. Essentially, the Social Security Trust Fund would be managed as a Sovereign Wealth Fund to fund super-efficient, productivity enhancing energy investments, which would be supported by a government regulatory structure which facilitates a higher rate of return on Social Security investments, creates energy security and fights global warming in a very big way. The proceeds would support the old folks.

In order to accomplish this goal Congress would have to allow the Social Security Trust Fund to Sell approximately 1.5 trillion dollars in US Treasuries per year to the Fed or the open market for 5 years and finance a new energy infrastructure so that the increase in energy efficiency brings forth significant increases in productivity in the US and benefits the Social Security Trust Fund in such a way that it ensures the long term solvency of the trust fund. A simplistic example of this idea would be to have the Social Security Trust Fund purchase 100 nuclear power plants or tidal power plants and then have the government support this investment with a regulatory structure that favors power plants which do not create greenhouse gasses. This program would create an enormous number of jobs, and create long term investment income for retirees who depend on Social Security because when people pay their power bills each month it will accrue as investment income to the Sovereign Wealth / Social Security Trust Fund. The returns would be higher than US Treasuries and it would meaningfully improve the long term viability of social security. The Social Security Trust Fund could also pay for a new power-line infrastructure that is more energy efficient.

Now that I have introduced you to this concept, I want you to understand that I actually favor a more complex paradigm which could benefit energy efficiency in our country enormously. You may be familiar with the concept of LEEDS certification. This is a series of certifications for buildings to meet heightened energy efficiencies. An example can be found in the Clinton Foundation's work to make the Empire State Building LEEDS compliant. The major construction overhaul will be paid for by energy savings over 18 years. In other words, the money which is saved each month on energy bills is enough to pay for the loans on the construction (manufactured materials and wages for construction workers) and there will be a complete payoff of the stimulus expense through aggregate reduction in energy cost after 18 years. But think about this. If we pay for the project, say over 20 years out of increased efficiency, then perhaps we are gaining a 5% increase in productivity on a yearly basis over 20 years, because we are able to pay for 100% of the costs through increased productivity over 20 years. The net cost is zero but we have created enormous employment revenues and enhanced the tax base. What if a portion of this increase in productivity could be structured such that it accrues to the Social Security Trust Fund as secured interest payments? Bingo! You got it. Manna from heaven, or more concisely, investment cash returns from increased productivity. We will unlock sorely needed cash over time with intelligently applied investments. Ok, now, let’s roll.

Here is how it would work. The Congress passes national regulation mandating LEEDS certification (or something like it). Preference should be given to energy-efficient products produced locally or out of recycled materials (because there is an environmental and energy benefit to local production). Who would pay for all of this???? The cities and counties would pay for all of this construction. How? You ask.

Monies would be loaned to the cities and counties by the Sovereign Wealth / Social Security Trust Fund and they would be secured with liens on the property taxes which are coming from the properties that are being improved. Construction could begin immediately if the first iteration of building projects meet a screened criteria for easy and straight forward implementation. For example, you might start with hospitals and university infrastructure to just get things started. As time progresses many new, innovative, green building technologies would be seeded with cash from all of this business. As an example, natural gas powered fuel cells in each building might provide a decentralized power infrastructure which is twice as efficient as the grid. New windows, solar lighting technologies, and insulation are all examples of materials that might be developed. The money used for construction would be paid back to the Trust Fund through increased property taxes rather than having individual property owners apply from loans to make improvements. However, the increase in property taxes would be offset by a decrease in energy bills. If you are an economist and if you want to run with this idea, here is where the potential for a Nobel Prize in Economics shows up. If the energy savings pay for a very large number of national energy saving construction projects on hundreds of thousands or millions of properties, what is the result of massive productivity gains? Answer: low Inflation over the long term, doing more with less …..and jobs, lots of remodeling and construction jobs. And remember, this cannot all be accomplished in one day. It needs to stretch out over time, and there should perhaps be an order of priority given to which type buildings are to be retrofitted first. A tangential benefit might also be an improvement in property values.

Now let us look at the argument that this kind of increase in the money supply might be inflationary. In fact, that is the first thing that the sceptics bring up , including my congressman. But ohhhhhh no. Here is where the idea really starts to gain merit. You cut back on consumption at the same time that this investment stimulus is occurring. It was done (in its own unique way) during World War Two. We stimulated the hell out of the economy, invoked a spirit of common sacrifice and cut back on consumption. In our period of time, we would make it more difficult to get credit cards, raise interest rates, and raise taxes. (Oh, but these things are already happening!) Well, we better do something then because all of these things will dampen consumption and our economy is all about consumption. In other words, you might engineer an economic recovery which is based, not on increasing consumption or imports, but on large scale increases in productivity and efficiency in the energy economy. America is dying of consumption anyway. Everywhere you look we have become a nation of fat people. This is just what the Doctor ordered. And listen, if 1.5 trillion per year in Social Security-owned Treasury sales to the Fed is too much or if it is inflationary, then scale it back a bit. But develop the concept. America does not need to resign itself to a paralytic fate brought on by over-consumption and too much debt which accrued as a result of the Supply Side Economics experiment. We need to grow out of the debt. We can lead the world by invoking a spirit of self sacrifice and being proactive about reducing greenhouse emissions. People are looking for this kind of leadership and the younger generation yearns for the kind of forward thinking that will save their planet and ensure their economic future.

Now let us look at consequences for the American Dollar. Well, first of all, if we use the Sovereign Wealth / Social Security Trust Fund as the vehicle of economic stimulus, we will not have to sell Treasuries to the Chinese, because we will balance the budget. The voters are going to demand this anyway. Second, America is floating on an ocean of natural gas. What if each home or business were equipped with a natural gas fuel cell which would generate electricity (without generating greenhouse gases) and provide both heat and hot water. Hmmmm……… ok, stretch your imagination now. Guess who will get on board with this program with massive job creating investment cash???? Yup, that old environmental nemesis, the Oil and Gas Industry. Yes, leverage the resources of the Oil and Gas Industry to create jobs and get conservatives on board with this program. There are also some promising new technologies which allow the creation of a clear, odorless, non-polluting diesel fuel made of natural gas. We can replace gasoline with room temperature liquid natural gas. The next phase of development would be to use this liquid natural gas fuel in fuel cells so that we do not create global warming when we drive. By doing this we will eliminate oil imports rather soon and eliminate a large portion of the trade deficit. Sorry about that OPEC friends. We are taking control of our destiny.

Uh ohhhh. We might just get a little political synergy here. How shall we spin this???? Are we creating “energy independence” or are we fighting “global warming”? Ooooooo Ahhhhhhhh, maybe our leaders might just be able to agree on something here and maybe both political parties could just speak out of both sides of their mouths at one time. We will have a love fest in Washington DC. Groooooovy…….

As you might guess, there are a couple of political prerequisites to this program. First, Congress can no longer borrow money from Social Security in order to fund the federal budget. We need an “Integrity in Budgeting” law. Second, the federal budget needs to be balanced because it is no longer required to provide stimulus. Operations in the Middle East (Centcom) could be financed with a surtax on imported oil (a consumption tax) And third, the President needs to call people to make a sacrifice for the common good. We need to create a climate of moral imperative here where energy security (Republican hot button) and global warming (Democrat hot button) inspire a call to action that unites the country. And lets create a gigantic leap in productivity to boot, because that is what is required over the long term to service the current levels of indebtedness that are in this country. Look at it this way. If you could engineer a 5% aggregate increase in productivity per year in the US, then the doomsday financial scenario will fade remarkably into the distance. It would add about 600 billion dollars to our economy each year, and those numbers would compound year after year. Run the math and everything changes, including the social mood in this country. Too many people are resigned to long term decline because conventional thinking about our mounting deficits does not take into account the aggregate long term potential which would be brought forth by a sustained, quantum increase in productivity. In a manner of speaking, over time we have the potential to deal with our current economic situation by going Star Trek. I do not think that this is too much of an exaggeration. Technological progress is built into the fabric of things and it is moving forward exponentially. We need to consciously focus on this aspect of technology. Instead of increasing entitlement programs, Americans would be more inclined to increase the pie by using technology to do more with less. Traditional Democrats are thinking like socialists from the thirties rather than entrepreneurs from the current age. At least, that is the popular conception. If they do not change the message, they will lose control of Congress. Throttle consumption, increase productivity and balance the budget.

So, here it is. Steal my ideas. If you are an economist and you are inspired by this line of thought, go out and win yourself a Nobel prize in economics. Give me a footnote if you wish, but really......... do it for the common good and the benefit of all people. We need to do something about global warming and while we do it we can solve the solvency problem with social security, put people back to work, balance the federal budget and inspire the world. Use your network. As a footnote, the banks are squeezing the kaa kaa laka out of small businesses in this country and there is no reason that the Social Security Trust Fund cannot be used like a bank to stimulate productive business that improves energy efficiency. But remember, Sovereign Wealth / Social Security Trust Funds should only go into very secure investments and firm guidelines need to be established. These investments should most certainly be secured by liens on property taxes or by utility income which is supported with a robust regulatory structure that protects this class of investment. What I have in mind is something similar to the student loan system, which makes it impossible to discharge student loans in bankruptcy. If the Trust Fund investments can be protected in this way then the money will turn over and over again once it is unleashed in the form of construction loans.

When you consider what has happened in our political and financial system during the past year and a half, I would argue that it is morally preferable for the Fed to buy US Treasuries from the Social Security Trust Fund and endow it with cash, than it is to dump so much cash into Goldman Sachs, Blackstone, Pimco and the like through lucrative insider arrangements and funny deals which make their balance sheets look good. The retail banks are not helping us right now. They are trying to save themselves and a large amount of the so-called stimulus cash has ended up in the stock markets, derivative markets and in China. As many of us in the business community are aware, imploding credit lines have a devastating multiplier effect throughout the economy. A Sovereign Wealth Fund, which is dedicated to dramatically increasing productivity over the long term and making significant amounts of seed capital available for energy infrastructure innovation and investment is a game changing idea. It would be similar to coming up with a killer software application that changes everything, or perhaps even inventing a device similar in impact to the internet. This is a systemic, paradigm changing concept. Run with it.

In summary, what I am suggesting is a way forward which would
a.) balance the Federal budget.
b.) create a large number of construction jobs.
c.) stimulate huge investment in green building technologies and manufacturing (preferably in the US).
d.) give preferential treatment to local suppliers because it is more efficient to buy locally and to use building products made of recycled materials.
e.) fight global warming on a meaningful scale.
f.) provide for energy security, reducing imports.
g.) save social security by investing in secure, higher yielding investments which increase productivity.
h.) invoke a common spirit of sacrifice for the future, which would give our people a greater sense of meaning than living for the purpose of consumption. People look to America for inspiration. Americans need inspiration. Inspirational leadership would be a strong card that Barak Obama could play in this regard.
i.) stop borrowing money from Chinese (which is a catastrophic geopolitical disaster in the making).
j.) confront the Chinese government over the reality of a 40% currency manipulation which is decimating our industrial base.

The issue of the US-China trade regime deserves special consideration here and must be addressed if the Sovereign Wealth / Social Security Trust Fund is to function as a proper vehicle of stimulus in this country. Under the current trade regime, all of our stimulus cash eventually ends up in China. We get all of the debts and they get all of the assets. If the US is to remain viable as a nation we must have the ability to manufacture. The Government MUST confront the Chinese over myriad unfair trade practices, which stem from their prejudicial legal system, paperwork requirements for imports etc. etc. etc. GW Bush made numerous mistakes, but one of the biggest was the one-sided trade arrangement with China. It has worked well for his core constituency of large, supranational corporations, but it is a disaster for the long term financial health of this country. A financial system that depends as much on leverage as ours, simply must maintain an asset base which can be used as collateral. Otherwise the system will implode. We cannot export all of our manufacturing assets to China and take on debt to buy things made over there. Our financial system will not function. We need an asset base which has value in order to support our current level of indebtedness. The banks need viable collateral in order to loan money. The trade dynamic with China is far too large to just hand them all of our manufacturing assets and job base. Our banking system cannot handle it. Disregarding this situation is not an option. If we have all of the debts and they have all of the assets then sooner or later our financial system will collapse. We have had our wake up call. The banking system can only fudge its balance sheets for so long. Declining asset values are not an option and the corollary principle is that exporting the industrial base is not an option because that value added service, ultimately is what creates value on the banks balance sheets as they look at future cash flows from value added by people with good ideas and machines. Banks cannot count on bubble valued collateral to support debts. We need hard assets. Consuming our way into creating value is a line of thought that only a group of morons would believe over the long run, but a lot of us have been believers during this past 20 years.

Now its one thing, to give the US government all of the debts and then give wealthy Republicans all of the assets and have them invest in lower cost manufacturing facilities located in the southern US states as they did in the 80s, but this paradigm has been subverted so that now the Chinese get all of the manufacturing assets (under a prejudicial legal system) and we are powerless to confront them because they have allied themselves with our own moneyed class which has a 49 percent stake in the factories over there. Politically, it is a very very clever arrangement on their part but the sad truth is that we cannot really confront a powerful country with a basically fascist political system unless we stop borrowing money from them. Allowing this one way cash flow to continue will create an unprecedented geo-political nightmare for the entire world. We should not be in bed with a regime which harvests organs from political prisoners and we must not under any circumstances allow them to suck the Super-Power out of the US through clever manipulation of our system. In many ways we are going into a historical period similar to the thirties. During the thirties different forms of socialism became popular in different nations. Chinese socialism today is very similar to Nazional Sozialismus, which ascended in Europe during the thirties. We need to be cognizant that we are witnessing the rise of a very powerful and dangerous authoritarian political system in China and we have no business handing all of our cash over to them as we are today. This needs to stop. We need a new trade regime. The intense computer hacking against our military industrial complex is not and accidental or an isolated set of events. If we reach the point where we realize that the US is being or has been disemboweled by a ruthless adversary, it will probably be too late. Look past the PR campaign. This is not a friendly situation. Under the surface there is a confluence of powerful self interested parties in the US and a massively dense and sophisticated, computer savvy police state in China. We need to sit up and pay attention. The US Government must confront China over the trade regime before it usurps all of our wealth. They are moving very deliberately in that direction and we owe it to the entire world and to future generations to maintain ourselves as a viable geo-political counterbalance to China. We must recognize that, with the exception of a one way transfer of wealth to China which seems to work pretty well, our two systems are basically incompatible and it is time for us to set up import regulations which mirror theirs. This is essential if we are to use the Sovereign Wealth / Social Security Trust Fund as the vehicle of stimulus in lieu of federal government borrowing. It would be prudent for US Government officials to begin meeting privately with the captains of industry to give them a confidential heads up so that they can unload their manufacturing assets in China. We will reach a point where we must, at a minimum place a 40% countervailing tariff on Chinese imports in order to make up for currency manipulation. American factories in China will lose their government protected special viability and steroid-based profitability. Yes, we will hear blood curdling screams but if we do not do that then we will lose control of our destiny as a nation. As I said, the banks need assets that they can hold as collateral in order to make loans. Our system loans money into existence. Cash flow from the industrial base is the collateral that sustains the banking system. Bubble-based cash flow is non-existent in this environment because asset values have declined. Sending all of our money to China will lead to deep, long lasting deflation and destroy the financial system. We must address this issue or perish. The banks need collateral in order to loan money. We need assets to function as collateral for the system to work. We need industry and good sales cash flow that will create more value and greater productivity in the future. Our banking system likes to invest in things that will service the debts and increase wealth. Our whole system thrives on that. Exporting our industrial base will decimate the financial system, bankrupting state and local governments.

In tandem with handling the China issue, we can use our new Sovereign Wealth Fund to stimulate the economy; balance the budget; install non-polluting natural gas fuel cells in our buildings; create significant gains in productivity through large scale Leeds certification; create millions of new construction jobs; save social security. If we change the way we think, then it will become obvious that our current economic situation is like that of an infant that is drowning in two inches of water. Just turn the infants head for Gods sake! A few policy changes, will not only balance the federal budget, they could also eliminate the trade deficit, because 83% of our non-OPEC trade deficit is with China. It is a nothing more than a transparent and cleverly manipulated transfer of cash from one side of the Pacific to the other. They will yell and scream when we take charge of our own house, but that is exactly what we must do. With regard to oil imports, a simple regulation change in the formulation of automobile fuel, requiring a 20% blend of liquid natural gas as a clean fuel additive would have a large effect on imports and international oil markets. Its time to increase our asset base through domestic stimulation and production. Simultaneously we can cut back on the foreign debts. We have everything we need. We are not helpless. This is an astounding country and here is a way forward.

In any case, if you are an economist take these ideas and go and get yourself a Nobel Prize in Economics. There is enough in this brief piece of pontification to create a new paradigm which could replace or at least augment the other existing two schools of thought, Keynian and Supply Side Economics. We need to begin using the Social SecurityTrust Fund as a Sovereign Wealth Fund which invests in the United States. We can step into it 500 billion at a time. This is the new paradigm, but remember the investments need to also increase productivity, because innovation and increased productivity is what will allow us to get out of our current economic mess. Our biggest economic crime during the Bush era was that our massive debts were used to fuel consumption and bomb rocks. Both are poor investments. We mortgaged our homes for consumption and sent the assets to China. When it became clear that we did not have enough assets to cover our indebtedness, prices plunged. We need to learn from this situation and use a Sovereign Wealth Fund as a bedrock of assets. THIS IS A KEY POINT. We need a bedrock of solid assets. Only then can we re-experience the aggregate holographic extension of asset power which is granted by leverage and which is called “Superpower” by the rest of the world. We must remember that capitalism works well for those who have assets; its not so great for debtors; but it is horrible for those whose debts exceed their assets. In the US that would be defined as systemic collapse.

We need INNOVATION AND INCREASED PRODUCTIVITY, seed cash for solar industries and fuel cell industries, but not entitlement programs and undue consumption of overseas goods. It is utterly essential that these principles be enshrined in the charter of the new Sovereign Wealth / Social Security Trust Fund.

And whatever we do, we cannot subcontract the management of this fund to Goldman Sachs, Blackstone, Pimco and the like. And we must must must level the playing field with China. Otherwise China and the patriotic American investment banks will find innovative ways to suck out all of this national pension fund cash in due course of time. As you may recall, they made a go at that when GW Bush tried to privatize Social Security accounts a few years ago. Fortunately they failed but they still managed to get away with plenty of loot. There need to be strong safeguards in this regard.

In conclusion, I have read that during the next 100 years the world has the potential to make 200 centuries in technological development. That is not a linear model that is equal to the last 20,000 years. It is 200 times the last century! Given this torrid pace of accelerating change the future holds potential for enormous dislocation on a continual basis. The key to our success will be our ability to adapt and innovate. We must change our culture from being that of a consumer culture to that of a productivity and innovation culture. If we can get the semantics of this right and if we are all aiming for a culture that increases productivity at 4% or 5% per year, then everything will be just fine over time. We need to spark innovation which, in aggregate and over time would be equivalent to discovering fire or inventing the wheel. I have tried to lay out a program that would help to establish that new foundation. Consumption is out. Productiviy, efficiency, energy security and saving the planet from global warming are in. This is the vision. Now we need a leader to take the reigns. We are all waiting for this. The timing is perfect for a masterful stroke of political leadership. Do we have any takers? The younger generation is waiting to hear from you.

Best Regards,

Wade S. Luther, CEO
North American Technology Exchange
Boulder, Colorado
luther.investments@gmail.com
303-521-6364