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The C Word

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June 8, 2009

I always find it amusing when politicians adopt the catch phrases and other expressions, obviously created by their lobbyist/puppeteers.  One of my favorites is “foreign oil”, as in:  “We need to end our dependence on foreign oil”.  Do they expect people to believe that Jesus made our oil different from that “Muslim oil”, which causes air pollution?  The expression:  “foreign oil” is obviously being used to vilify Arab countries for last year’s inflated gasoline prices, caused by oil speculators and American oil companies.  (Let’s not forget the price gouging by gasoline retailers.)  Most Americans realize that we have a serious problem with our dependence on petroleum products and, more generally fossil fuels, including coal, as sources of energy.  According to a March, 2009 Gallup poll, 60 percent of Americans are “worried a great deal or fair amount” by global warming.  Although this is down from last year’s 66 percent, 76 percent of Americans are “worried a great deal or fair amount” by air pollution itself, independent of the global warming consequences (according to the same poll).

Attention is increasingly focused on the concept of “clean coal” as an energy source.  In his February 24 address to the Joint Session of Congress, President Obama made it clear that he supported Congressional financing of the development of “clean coal” as a viable energy source.  The timing seemed intended to coincide with the aggressive advertising campaign against “clean coal”.  In case you’re wondering just what “clean coal” is  .  .  .  Ben Elgin wrote an article for Business Week last year, entitled:  “The Dirty Truth About Clean Coal”.  Here’s some of what he had to say:

The catch is that for now — and for years to come — “clean coal” will remain more a catchphrase than a reality.  Despite the eagerness of the coal and power industries to sanitize their image and the desire of U.S. politicians to push a healthy-sounding alternative to expensive foreign oil and natural gas, clean coal is still a misnomer.

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Corporations and the federal government have tried for years to accomplish “carbon capture and sequestration.”  So far they haven’t had much luck.  The method is widely viewed as being decades away from commercial viability.  Even then, the cost could be prohibitive:  by a conservative estimate, several trillion dollars to switch to clean coal in the U.S. alone.

Then there are the safety questions.  One large, coal-fired plant generates the equivalent of 3 billion barrels of CO2 over a 60-year lifetime.  That would require a space the size of a major oil field to contain.  The pressure could cause leaks or earthquakes, says Curt M. White, who ran the U.S. Energy Dept.’s carbon sequestration group until 2005 and served as an adviser until earlier this year.  “Red flags should be going up everywhere when you talk about this amount of liquid being put underground.”

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Companies seeking to build dozens of coal-fueled power plants across the country use the term “clean coal” liberally in trying to persuade regulators and voters.

Needless to say, President Obama’s advocacy on behalf of the “clean coal” lobby has outraged more than a few people.  Will Harlan wrote an article for the March 20 edition of Blue Ridge Outdoors magazine, entitled:  “The Dirty Truth Behind Obama’s ‘Clean Coal’ Stimulus”.  In addition to addressing the problems yet to be overcome with carbon capture, as well as the problems associated with mountaintop removal mining, sludge spills, dam breaches, poisoned wells, skyrocketing cancer rates, childhood asthma, premature deaths, slurry ponds, coal ash waste and mercury emissions, Harlan pointed out that:

Obama has also committed to reviving a boondoggle coal facility that even the Bush Administration decided to kill:  the FutureGen Carbon Capture and Storage Plant, which just happens to be located in Obama’s home state of Illinois.  Even though the facility costs have soared well beyond budget, and it is nowhere close to developing cost-effective technologies to safely capture and store carbon, Obama continues to support it.

Why are we letting Obama get away with greenwashing coal by perpetuating the “clean coal” myth?  The Democrats received close to $1 million in “contributions” in 2008 from the coal mining industry.  And southern Illinois is part of the country’s coal belt.

Eugene Robinson deserves a hat tip for his June 5 Washington Post column, criticizing Obama’s stance on this issue.  The strongest point made by Robinson was the cost/benefit analysis:

The Obama administration is spending $2.4 billion from the stimulus package on carbon capture and storage projects — a mere down payment.  Imagine what that money could do if it were spent on solar, wind and other renewable energy sources.  Imagine if we actually tried to solve the problem rather than bury it.

It should come as no surprise that the Greenpeace website would feature an essay, critical of “clean coal” with the following conclusion:

“Clean coal” is an attempt by the coal industry to try and make itself relevant in the age of renewables.  Existing CCTs do nothing to mitigate the environmental effects of coal mining or the devastating effects of global warming.  Coal is the dirtiest fuel there is and belongs in the past.  Much higher emission cuts can be made using currently available natural gas, wind and modern biomass that are already in widespread use.  Clean, inexpensive.  This is where investment should be directed, rather than squandering valuable resources on a dirty dinosaur.

Nevertheless, what does come as a surprise is that the very same article quoted above appears on Barack Obama’s Campaign for America website.  In case you’re wondering how to reconcile that point of view with Obama’s enthusiasm for “clean coal”, you have to read the disclaimer appearing at the end of the article on the Campaign for America site:

Content on blogs in My.BarackObama represents the opinions of community members and in no way should be interpreted as endorsed or approved by the campaign.

In other words:  “Don’t be dumb enough to believe that President Obama is really going to support anything you read here”.

In his June 4 opinion piece for The Washington Post, E.J. Dionne observed how the media are:

… largely ignoring critiques of Obama that come from elected officials on the left.

This was brought home at this week’s annual conference of the Campaign for America’s Future, a progressive group that supports Obama but worries about how close his economic advisers are to Wall Street, how long our troops will have to stay in Afghanistan and how much he will be willing to compromise to secure health-care reform.

To the objective observer, it is becoming increasingly obvious that Barack Obama is as much of a hypocrite as any other politician who found his way to the White House.

Spinning Away From The Truth

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May 14, 2009

Wednesday was a rough day on Wall Street.  The Dow Jones Industrial Average dropped 184 points (just over two percent) to 8284; the Standard and Poor’s 500 index gave up over 24 points (2.69 percent) closing at 883.92 and the NASDAQ 100 index gave up 51.73 points (3.01 percent).  One didn’t have to look very far to find the reason.  At The Daily Beast website on Wednesday evening, item number 2 on the Cheat Sheet was a link to an article from The Wall Street Journal by Peter McKay, entitled:  “Signs of Consumer Strain Hit Stocks”.  The morning’s bad news was described by Mr. McKay in these terms:

The Commerce Department reported that retail sales fell 0.4% in April from the prior month, a steeper decline than the 0.1% gain economists expected.  Sales in March were revised down, falling 1.3% instead of 1.2% as previously reported.

The Wall Street Journal also ran an article on this subject by Justin Lahart:  “Retail Sales Stall on Consumer Caution”.  Mr. Lahart’s piece underscored the message reverberating through the evening’s financial reporting:

Indeed, retail sales rose in January and February after sliding for six straight months.  But those hopes were undermined by the 1.3% drop in retail sales in March as well as April’s decline.

The data suggest that a recovery won’t come until the second half of the year, and that when it does arrive it will be sluggish, said Michael Darda, an economist at MKM Partners in Stamford, Conn.

As I scanned through a number of websites to peruse the evening’s news stories, I was quite shocked to see the following headline on the Huffington Post blog, with screaming, bright red, upper-case, oversized font:  “BLOOMBERG NEWS:  CONSUMERS FEELING ‘INSPIRED’ TO SPEND MORE”.  Huh?   Just below the headline were three large photos.  The photo on the left featured a lineup of luxurious yachts, reminiscent of what can be found along Indian Creek during the Miami Beach Boat Show.  The middle picture showed that guy from Lifestyles of the Rich and Famous, raising a silver goblet in a toast to the photographer.  The photo on the right depicted a headless woman, adorned in enough jewelry to turn Ruth Madoff green with envy.  Had someone hacked into the HuffPo website and put this up as a gag?  (Later in the evening, I checked back at the site.  Although there was a new main headline relating to a different story, the link to the “inspired consumers” story was still there, although down the page.)

Clicking on the “inspired consumers” headline brought me to a story from Bloomberg News, entitled:  “‘Good Bad’ Economy Inspires Consumers As Slump Eases”.  “Good bad economy”?  I had trouble figuring out what that meant because I lost my George Orwell Decoder Ring.  Looking at this slice from the story told me enough about what they were trying to say:

Investor Exuberance

A Bloomberg survey of users on six continents showed that confidence in the global economy rose to the highest level in 19 months.

Antarctica and what five other continents?

The Huffington Post‘s BizarroWorld headline struck me as an attempt to imbue readers with a perception of Happy Days in Obamaland.  That headline and its incorporated story reminded me of a point recently made by one of my favorite bloggers, Jr. Deputy Accountant:

You know, there are times when I wonder just how difficult it is to keep the PR machine running at full speed and keep the market propped up artificially and massage Goldman’s nuts all at once.  Somehow, the powers-that-be are pulling it off, and I imagine that a large part of the dirty work, at least when it comes to PR, is taken care of by our moronic friends in mainstream media who feed up gems like this:  Citi using most of TARP capital to make loans.

(As an aside:  the reference to “Goldman” is Goldman Sachs, the second largest contributor to President Obama’s election campaign.)

Instead of relying on “the PR machine” to feed me propaganda about the economy, I rely on some of the sources included on this website’s blogroll.  Most of the writers for those sites are credentialed professionals, regarded as experts in their field (as opposed to the dilettantes, who cheerlead for Wall Street in the mainstream media).  One of these experts is Yves Smith of Naked Capitalism.  If you want to keep up with what’s really happening in the financial world, I suggest that you read her blog.

The truth of what the economy has in store for us is not pretty.  If you are ready to have a look at it, read Jeremy Grantham’s most recent report.  His bottom line is that late this year or early next year there will be a stock market rally, bringing the Standard and Poor’s 500 index near the 1100 range.  After that, get ready for seven really lean years:

A large rally here is far more likely to prove a last hurrah — a codicil on the great bullishness we have had since the early 90s or, even in some respects, since the early 80s.  The rally, if it occurs, will set us up for a long, drawn-out disappointment not only in the economy, but also in the stock markets of the developed world.

Unfortunately, it’s already too late for President Obama to accept the following rationale from Mr. Grantham’s essay:

We should particularly not allow ourselves to be intimidated by the financial mafia into believing that all of the failing financial companies — or very nearly all — had to be defended at all costs.  To take the equivalent dough that was spent on propping up, say, Goldman or related entities like AIG (that were necessary to Goldman’s well being), as well as the many other incompetent banks and spending it instead on really useful, high return infrastructure and energy conservation and oil and coal replacement projects would seem like a real bargain for society.  Yes, we would certainly have had a very painful temporary economic hit from financial and other bankruptcies if we had decided to let them go, but given the proven resilience of economies, it would still have seemed a better long-term bet.

After reading Jeremy Grantham’s recent quarterly letter, ask yourself this:  Do you feel “inspired” to spend more?

Somebody Really Loves Goldman Sachs

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May 17, 2009

The recent article about Treasury Secretary “Turbo” Tim Geithner by Jo Becker and Gretchen Morgenson, appearing in the April 26 edition of The New York Times, seems to have helped fan the flames of the current outrage concerning the Federal Reserve Bank of New York.  Turbo Tim was president of the New York Fed during the five years prior to his appointment as Treasury Secretary.  Becker and Morgenson pointed out many of the ways in which “conflict of interest” seems to be one of the cornerstones of that institution:

The New York Fed is, by custom and design, clubby and opaque.  It is charged with curbing banks’ risky impulses, yet its president is selected by and reports to a board dominated by the chief executives of some of those same banks. Traditionally, the New York Fed president’s intelligence-gathering role has involved routine consultation with financiers, though Mr. Geithner’s recent predecessors generally did not meet with them unless senior aides were also present, according to the bank’s former general counsel.

By those standards, Mr. Geithner’s reliance on bankers, hedge fund managers and others to assess the market’s health — and provide guidance once it faltered — stood out.

The New York Fed is probably the most important of the nation’s twelve Federal Reserve Banks, since its jurisdiction includes the heart of America’s financial industry.  As the Times piece pointed out, this resulted in the same type of “revolving door” opportunities as those enjoyed by members of Congress who became lobbyists and vice versa:

A revolving door has long connected Wall Street and the New York Fed.  Mr. Geithner’s predecessors, E. Gerald Corrigan and William J. McDonough, wound up as investment-bank executives.  The current president,William C. Dudley, came from Goldman Sachs.

The New York Fed’s current chairman, Stephen Friedman, has become a subject of controversy these days, because of his position as director and shareholder of Goldman Sachs.   Goldman sought and received expedited approval to become a “bank holding company” last September, thus coming under the jurisdiction of the Federal Reserve and becoming eligible for the ten billion dollars in TARP bailout money it eventually received.  After Goldman became subject to the New York Fed’s oversight (with Friedman as the New York Fed chairman) the Fed made decisions that impacted Goldman’s financial state.  Although this controversy was discussed here and here by The Wall Street Journal, that publication’s new owner, Rupert Murdoch, now requires a $104 annual on-line subscription fee to read his publication over the Internet. Sorry Rupert:  Homey don’t play that.  Although Slate provided us with an interesting essay on the Friedman controversy by Eliot “Socks” Spitzer, the best read was the commentary by Robert Scheer, editor of Truthdig.  Here are some important points from Scheer’s article, “Cashing In on ‘Government Sachs’ “:

When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multi-million-dollar stock stash and to remain on the Goldman board.  The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary.  Yet,without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares.  With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Tuesday.

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As Jerry Jordan, former president of the Fed Bank in Cleveland, told the Journal in reference to Friedman’s obvious conflict of interest, “He should have resigned.”

Unfortunately, this was not the view during the reign of Geithner, who argued that Friedman needed to remain chairman of the N.Y. Fed board to find a suitable replacement for Geithner as he moved on to be secretary of the Treasury.  Friedman chose a fellow former Goldman Sachs exec for the job.

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Geithner is a protege of former Goldman Sachs chairman Rubin.  And it was therefore not surprising when he picked Mark Patterson, a registered lobbyist for Goldman Sachs, to be his chief of staff at the Treasury Department.  That appointment was made on the same day that Geithner announced new rules for limiting the influence of registered lobbyists.  Need more be said?

Yes, there are a couple more things:  Goldman Sachs was the second largest contributor to Barack Obama’s Presidential election campaign, with a total of $980,945 according to OpenSecrets.org.  President Obama nominated Gary Gensler of Goldman Sachs to become Chairman of the Commodity Futures Trading Commission.  As Ken Silverstein reported for Harpers, this nomination has stalled, since a “hold” was placed on the nomination by Vermont Senator Bernie Sanders.  Mr. Silverstein quoted from the statement released by the office of Senator Sanders concerning the rationale for the hold:

Mr. Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S.history.   He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become “too big to fail.”  He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices.  At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.

“Change you can believe in”, huh?