- Allow people to "invest" in other individuals and the investors return would come from the tax revenues paid by the recipient of the investment. For example: Person X, pays 5000 which is applied to Person Y's college expenses. In return some % of persons Y's federal (or state) taxes go to person X for a set number of years. So Person Y does not pay back person X directly, the federal (or state) govt does. But the government would come out ahead if the total taxes paid by person Y are increased enough by the investment to more than offset the payback to person X. Everybody wins. The only serious downside to this idea is a privacy issue. If person X is paid directly from person Y's taxes, person X has a good idea of what person Y is making. This may seem in a way like indentured servitude, but it is really not. Person X has no control of person Y at all, just a stake in his taxes. Person Y is free to do whatever he chooses, free to take any job he wants. Of course person X has a stake in person Y's success so he is an "interested party" so to speak. That makes the situation interesting. You would probably want to make a prohibition against investing in close family members. Perhaps a website could be set up to match up investors and those looking for capitol in this way.
- Pneumatic tubes to deliver the mail in dense urban areas. This was actually done in New York and several other cities around the turn of the 20th century but was abandoned due to motorcar (later auto) delivery of the mail. Now cities are choked full of to much traffic and energy is a huge issue. Key question(s): 1) how much energy does such a system use vs delivery by truck and 2) can such a system handle high volumes. In Chicago there was a whole series of underground tunnels that delivered various kinds of freight until the depression. Part of the rationale for both systems was to alleviate congestion. Why did these systems fall into disuse and why were they replaced. The easy answer is the automobile but I think the real answer is slightly more subtle. Usage of both systems fell sharply during the depression and then after the depression a deliberate decision was made to favor the auto industry which received all sorts of tax breaks and incentives and this may have sealed the fate of competitor systems. Even deeper, the U.S. and to some extent the rest of the developed world has moved in the direction of mass market capitalism as the vehicle for prosperity and progress. Coherent systems - perhaps "centrally planned" in some way fell out of favor. Post WW II progress stemmed from mass production of autos, mass production of TV's, mass production of washing machines and so forth. Europe joined that party. But is the mass production regime the best regime for all sectors of society in the 21'st century? In the realm of transport doesn't it lead to less efficient use of energy and space?
Saturday, December 6, 2008
Tuesday, October 7, 2008
Now for some analysis
The m2 money supply is rising at the fastest rate since 9-11.
Source:
http://research.stlouisfed.org/fred2/data/M2.txt
The latest week (9/22) shows the second greatest gain in the entire range! The greatest gain was in the week after 9-11.
The increase in the money supply was over 2% (vs. just over 3% the week after 9-11).
2% in one week is a LOT for money supply growth. Compound that kind of growth over 52 weeks and you would have hyper inflation.
No week other than the post 9/11/2001 week and the 9/22/2008 week show even a 1% gain. The average weekly gain in M2 has been about 1/10 of 1 percent. So the latest reported week shows a gain of 20 times greater than normal.
It will be interesting to see if there is another big gain in the week of Sept 29 and also interesting to speculate where this money is going right now.
I feel confident that we are not headed toward hyper-inflation; in fact we seem to be in a somewhat deflationary period -think stocks, job losses, energy prices in the last month.
Source:
http://research.stlouisfed.org/fred2/data/M2.txt
The latest week (9/22) shows the second greatest gain in the entire range! The greatest gain was in the week after 9-11.
The increase in the money supply was over 2% (vs. just over 3% the week after 9-11).
2% in one week is a LOT for money supply growth. Compound that kind of growth over 52 weeks and you would have hyper inflation.
No week other than the post 9/11/2001 week and the 9/22/2008 week show even a 1% gain. The average weekly gain in M2 has been about 1/10 of 1 percent. So the latest reported week shows a gain of 20 times greater than normal.
It will be interesting to see if there is another big gain in the week of Sept 29 and also interesting to speculate where this money is going right now.
I feel confident that we are not headed toward hyper-inflation; in fact we seem to be in a somewhat deflationary period -think stocks, job losses, energy prices in the last month.
Saturday, October 4, 2008
Robert Reich on the socialization of risk and privatization of gain
From
http://quote.yahoo.com/expert/article/stockblogs/94661
• Former Secretary of Labor Robert Reich has some harsh words for policymakers. He says that "socialized capitalism of the sort the Fed and the Treasury are now practicing, consisting of private gains and public losses, is untenable. On the other hand, giant Wall Street investments banks as well as Fannie Mae and Freddie Mac are too big to fail." How to reconcile the two? Reich has an intriguing proposal - that "[w]hen taxpayers insure a giant entity against loss, the entities must agree that for the duration of the bailout, their top executives can't be paid more than the President of the United States; and the government gets 5% of their current valuation as shares of stock (roughly representing the benefit to their shareholders of the federal insurance) -- so that if and when the entities become profitable again, taxpayers are compensated for the risk they've taken on."
This sounds like a decent proposal to me.
We as a society need to think long and hard about this injustice (the privatization of gain and socialization of risk) should be addressed.
In prior times the centerpiece of dealing with this issue was a progressive income tax system but this has been rejected because it punishes the hardest workers, the most talented and the biggest risk takers. But our system clearly does not give it's highest rewards to those people now so we are back to square one! Who we reward in America in 2008 are those whose imprimatur is on things whether they have anything to do with gains or not - or even if they fail!
We were told that one of the biggest reasons to flatten the tax system was that a progressive tax punished those who "took the risk" yet we know now that those who claimed to be taking the risk (the CEO's and business elite) were in fact not taking the risk - as illustrated spectacularly on Friday.
Perhaps a better way would be to
a) identify real risk takers (starting with those who put their *own* money on the line) and tax gains that come from that lower.
b) If we want lower taxes on those who work hard how about a lower rate for overtime.
I'm sure there are other ideas...this is just a start.
http://quote.yahoo.com/expert/article/stockblogs/94661
• Former Secretary of Labor Robert Reich has some harsh words for policymakers. He says that "socialized capitalism of the sort the Fed and the Treasury are now practicing, consisting of private gains and public losses, is untenable. On the other hand, giant Wall Street investments banks as well as Fannie Mae and Freddie Mac are too big to fail." How to reconcile the two? Reich has an intriguing proposal - that "[w]hen taxpayers insure a giant entity against loss, the entities must agree that for the duration of the bailout, their top executives can't be paid more than the President of the United States; and the government gets 5% of their current valuation as shares of stock (roughly representing the benefit to their shareholders of the federal insurance) -- so that if and when the entities become profitable again, taxpayers are compensated for the risk they've taken on."
This sounds like a decent proposal to me.
We as a society need to think long and hard about this injustice (the privatization of gain and socialization of risk) should be addressed.
In prior times the centerpiece of dealing with this issue was a progressive income tax system but this has been rejected because it punishes the hardest workers, the most talented and the biggest risk takers. But our system clearly does not give it's highest rewards to those people now so we are back to square one! Who we reward in America in 2008 are those whose imprimatur is on things whether they have anything to do with gains or not - or even if they fail!
We were told that one of the biggest reasons to flatten the tax system was that a progressive tax punished those who "took the risk" yet we know now that those who claimed to be taking the risk (the CEO's and business elite) were in fact not taking the risk - as illustrated spectacularly on Friday.
Perhaps a better way would be to
a) identify real risk takers (starting with those who put their *own* money on the line) and tax gains that come from that lower.
b) If we want lower taxes on those who work hard how about a lower rate for overtime.
I'm sure there are other ideas...this is just a start.
Monday, September 29, 2008
The fundamental problem: lack of trust
The reason why no bailout is yet at hand for the current problems is simple: there is not enough trust.
Calls and letters coming in to congress are running 50-1 against the bailout. Why? few trust Wall St. and congress to be telling them the truth and most suspect that this is simply a gambit for continued big paydays by wall st. honchos.
Why?
In the mid to late 1990's the pundits and experts lauded the so called "new economy" which needed no profits and then didn't even need revenues. All it needed was "eyeballs" watching the new web sites that the new economy was spawning. Spawning massive new wealth practically through thin air (A.K.A the internet). Those who were skeptical and felt business would need revenues and profits were told they "just didn't get it." The "new economy" was not a fringe idea, it had became conventional wisdom before the concept crashed and burned in the "tech wreck" of 2000-2002. This kind of episode erodes trust.
Why?
The election of 2000 was contested. It was not won cleanly but decided by a supreme court decision. Never before in our history had we gone through something like that. Some important assumptions about our country flew out the window in that episode. This kind of thing erodes trust.
Why?
In 2003 our nation was led into war via a claim that Iraq had "Weapons of Mass Destruction." Iraq was invaded and no Weapons of Mass Destruction were ever found. Iraq is believed to possess the second largest reserve of oil of any nation on earth. This kind of episode erodes trust.
Why?
Throughout the middle of this decade a deliberate effort was undertaken to bolster/inflate the housing market. Lending standards went down down and then down some more. We were told by the "experts" not to worry. Housing cannot go down. None other than Alan Greenspan claimed that there was nothing systemic to worry about because there could not be an overall drop in housing prices. Simply couldn't happen. He lectured that there was "no nationwide housing market" - that housing consisted instead of many local markets that moved somewhat independently so if Phoenix was dropping then Philadelphia would probably be rising and if not Philadelphia then somewhere else. Bottom line: don't worry your pretty little heads about a housing downturn. It has never happened and can't happen. As we know, housing is now in a dreadful tailspin; according to Case/Schiller it's down 17% and dropping. This kind of episode erodes trust.
Furthermore, in each of these episodes there has been skepticism from those of us outside the halls of power and it has often met with a concerted effort to get us all "on board."
- See the video's of Abby Joseph Cohen, Bill Gates and others in the 90's extolling the "new economy." Those who didn't see the new economy just didn't "get it" - maybe they were not so smart.
- Watch the mocking sarcastic comments of Donald Rumsfeld when asked directly where the WMD's were in early '03. Watch the comments of Dick Cheney and Bush on the subject in 2002-2003. We were told that everyone knew they were there. Everyone.
- Watch the oh-so-sober presentations of Alan Greenspan on the possibility of a housing bubble (it can't happen he said). Watch other "expert" commentary on the risk of a housing bubble. Consensus until this year was that it cannot happen.
The unwashed masses might *think* that any asset could be bid to high and a mania could develop anywhere but the experts assured us that housing was an exception. They used advanced statistics and calculus and a lot of other neat things to drive home the point.
Put together, these events have done a lot to diminish trust in our leaders over the past 10 years and given the ultimate outcomes one must ask what the hell is going on.
A subtext to all of this of course was sky high executive compensation for those who were on the inside and a yawning gap between the "haves" who were running the show and the unwashed "have nots" - who were often the doubters.
We were told that our leaders really knew what was going on, we were told that our leaders had the character to stick with the program and make the tough decisions, we were told that our leaders had the seasoning to have "been through it all before" and the intelligence to make good tactical decisions. They create the wealth we were told. And in return for all this a 10 or 20 million a year was but a trifle.
But now we know that the new economy was a fraud, there were no WMD in Iraq and housing prices are now dropping like the price of unsold Halloween candy on November 1.
There is extremely little trust right now. People do not trust their leaders, they do not trust the CEO's, they do not trust Bush, they do not trust the Democrats.
Most "main street" type people feel this wall street bailout is just a grasp at another grandiose payday by powerful people who seem very adept at manipulating and used to getting their way.
Could this bailout be just an attempt to again profit at the expense of the rest of us? Much of the public believes this.
Consider that CEO and upper management pay packages are based on stock prices and nothing has to get paid back if stock prices decrease later. These guys are usually in their 50's or 60's. Helping along a "new economy" bubble could therefore be rational from their perspective. Consider that a big new market should have been opened up with the invasion of Iraq (it's as big in population and size as California and has 4 times as much oil as the U.S.) Consider the paydays "throughout the chain" from the origination of mortgages. None of those origination fees have to be paid back.
Could it be that the much of the general "advice" from our leaders and experts on the subjects I touch upon above was self-serving (as opposed to 24-Karat gold insight?)
Could it be that they simply told us to do what was good for them and were not all that concerned about the risks we were exposed to in following it?
The troubling fact is that the self-serving thesis makes sense given the ultimate outcomes: the insiders made out like bandits even while their rationales were exposed as bunk each time.
We probably cannot know yet whether our leaders are being sincere of whether this is another "new economy" sham but regardless we have no reason to trust them.
If they are finally telling the truth then we are all in deep *****.
Calls and letters coming in to congress are running 50-1 against the bailout. Why? few trust Wall St. and congress to be telling them the truth and most suspect that this is simply a gambit for continued big paydays by wall st. honchos.
Why?
In the mid to late 1990's the pundits and experts lauded the so called "new economy" which needed no profits and then didn't even need revenues. All it needed was "eyeballs" watching the new web sites that the new economy was spawning. Spawning massive new wealth practically through thin air (A.K.A the internet). Those who were skeptical and felt business would need revenues and profits were told they "just didn't get it." The "new economy" was not a fringe idea, it had became conventional wisdom before the concept crashed and burned in the "tech wreck" of 2000-2002. This kind of episode erodes trust.
Why?
The election of 2000 was contested. It was not won cleanly but decided by a supreme court decision. Never before in our history had we gone through something like that. Some important assumptions about our country flew out the window in that episode. This kind of thing erodes trust.
Why?
In 2003 our nation was led into war via a claim that Iraq had "Weapons of Mass Destruction." Iraq was invaded and no Weapons of Mass Destruction were ever found. Iraq is believed to possess the second largest reserve of oil of any nation on earth. This kind of episode erodes trust.
Why?
Throughout the middle of this decade a deliberate effort was undertaken to bolster/inflate the housing market. Lending standards went down down and then down some more. We were told by the "experts" not to worry. Housing cannot go down. None other than Alan Greenspan claimed that there was nothing systemic to worry about because there could not be an overall drop in housing prices. Simply couldn't happen. He lectured that there was "no nationwide housing market" - that housing consisted instead of many local markets that moved somewhat independently so if Phoenix was dropping then Philadelphia would probably be rising and if not Philadelphia then somewhere else. Bottom line: don't worry your pretty little heads about a housing downturn. It has never happened and can't happen. As we know, housing is now in a dreadful tailspin; according to Case/Schiller it's down 17% and dropping. This kind of episode erodes trust.
Furthermore, in each of these episodes there has been skepticism from those of us outside the halls of power and it has often met with a concerted effort to get us all "on board."
- See the video's of Abby Joseph Cohen, Bill Gates and others in the 90's extolling the "new economy." Those who didn't see the new economy just didn't "get it" - maybe they were not so smart.
- Watch the mocking sarcastic comments of Donald Rumsfeld when asked directly where the WMD's were in early '03. Watch the comments of Dick Cheney and Bush on the subject in 2002-2003. We were told that everyone knew they were there. Everyone.
- Watch the oh-so-sober presentations of Alan Greenspan on the possibility of a housing bubble (it can't happen he said). Watch other "expert" commentary on the risk of a housing bubble. Consensus until this year was that it cannot happen.
The unwashed masses might *think* that any asset could be bid to high and a mania could develop anywhere but the experts assured us that housing was an exception. They used advanced statistics and calculus and a lot of other neat things to drive home the point.
Put together, these events have done a lot to diminish trust in our leaders over the past 10 years and given the ultimate outcomes one must ask what the hell is going on.
A subtext to all of this of course was sky high executive compensation for those who were on the inside and a yawning gap between the "haves" who were running the show and the unwashed "have nots" - who were often the doubters.
We were told that our leaders really knew what was going on, we were told that our leaders had the character to stick with the program and make the tough decisions, we were told that our leaders had the seasoning to have "been through it all before" and the intelligence to make good tactical decisions. They create the wealth we were told. And in return for all this a 10 or 20 million a year was but a trifle.
But now we know that the new economy was a fraud, there were no WMD in Iraq and housing prices are now dropping like the price of unsold Halloween candy on November 1.
There is extremely little trust right now. People do not trust their leaders, they do not trust the CEO's, they do not trust Bush, they do not trust the Democrats.
Most "main street" type people feel this wall street bailout is just a grasp at another grandiose payday by powerful people who seem very adept at manipulating and used to getting their way.
Could this bailout be just an attempt to again profit at the expense of the rest of us? Much of the public believes this.
Consider that CEO and upper management pay packages are based on stock prices and nothing has to get paid back if stock prices decrease later. These guys are usually in their 50's or 60's. Helping along a "new economy" bubble could therefore be rational from their perspective. Consider that a big new market should have been opened up with the invasion of Iraq (it's as big in population and size as California and has 4 times as much oil as the U.S.) Consider the paydays "throughout the chain" from the origination of mortgages. None of those origination fees have to be paid back.
Could it be that the much of the general "advice" from our leaders and experts on the subjects I touch upon above was self-serving (as opposed to 24-Karat gold insight?)
Could it be that they simply told us to do what was good for them and were not all that concerned about the risks we were exposed to in following it?
The troubling fact is that the self-serving thesis makes sense given the ultimate outcomes: the insiders made out like bandits even while their rationales were exposed as bunk each time.
We probably cannot know yet whether our leaders are being sincere of whether this is another "new economy" sham but regardless we have no reason to trust them.
If they are finally telling the truth then we are all in deep *****.
Saturday, September 27, 2008
The case for progress and reason
The essay "The Case Against Perfection" by Michael J. Sandel (http://www.theatlantic.com/doc/200404/sandel) encapsulates well the establishment argument against Genetic Engineering.
His case is groundless.
The title implies that genetic engineering is a "quest for perfection" but this idea is of course a canard. We engineer cars, airplanes, roads, buildings and all sorts of other things and such engineering is neither a "quest for perfection" nor is it denounced as such. It's problem solving and it's what we do.
Sandel further states that "the moral quandary arises when people use such therapy not to cure disease but to reach beyond health, to enhance their physical or cognitive capacities, to lift themselves above the norm."
But wait, I drove a car to my office and that car traveled at times faster than any human has ever physically run. The computer that I am using now is providing me with a very real cognitive boost, checking the spelling as I type and allowing me to look up just about anything I want in another browser window. Many people in this world do not have cars nor computers hence I have have a clear advantage and have been thusly lifted "above the norm". Is it incumbent on me to ditch my car and computer for these reasons? If so where do we draw the line?
An important difference between genetic engineering vs. engineering cars, computers and the like is that engineering cars and computers do not change us from the "inside", they do not change who we are, they do not change our "character".
Or maybe they do.
Human beings have been changing physically since our ancestors left Africa and much of those changes have been driven by technology. We have little body hair yet live successfully in cold climates because we figured out how to make clothing. We can throw an object with deliberate aim (we are the only animal that can do that!) and have been perfecting things to throw for a long time (spears, stones, bows and arrows etc.) Clearly we have already been changing ourselves and this did not begin yesterday.
We have already been changing our character via technology, genetic engineering would only make the changes more exact and deliberate. If you look at the arc of human history you see that more exact and deliberate methods of change are the rule as time goes on. Sandel does claim to be favorably inclined towards this "conventional" technological progress but he (and like minded people) want to make an exception in the case of genetic engineering. Everything else is be under one framework (go for progress, progress, progress) but an exception is to be made in the case of genetic engineering where we should eschew progress. This is inconsistent and will not hold up. In the long run exceptions cannot and will not be made.
Sandel claims that genetic engineering would usher in a world "inhospitable to the unbidden." (things not asked for). This is not the case. The unbidden will still lurk around every other corner. Genetic engineering could *in theory* only eliminate the unbidden in the realm of biological reproduction - a tiny slice of the physical universe. But even here it's elimination is questionable - just watch "Prototype This".
And much of modern civilization has been about changing the unbidden into the bidden! Boil that concept down and what you are talking about is progress. Hunting and gathering were dependent on the the vagaries of wild animals and plants. The "unbidden" Wolly Mammoth could be the difference between starvation and living. With agriculture, cows and sheep are deliberately raised for sustenance. Big change from the unbidden to the deliberate. How about government. Prior to democracy we had monarchies - kings and queens. The people did not ask for their king, he was given: he was unbidden. Democracy has made government what the people deliberately ask for. Is this a bad thing?
I would suggest that moving the unbidden and unknown "away" is part and parcel of progress - and it's generally a good thing (think democracy). I would also suggest that there will be no way to entirely eliminate the unbidden - ever. Worrying about that is kind of like worrying that engineering will eliminate entropy.
Sandel correctly notes that we do not really have a meritocracy because much of success is based on inherited genetic talent and that inherited genetic talent is not earned - it's given. Then Sandel goes on to make the absurd claim that "genetic control" would erode the "actual solidarity that arises when men and women reflect on the contingency of their talents and fortunes." This "solidarity" is a fantasy. Kind of like the "solidarity" that kings and queens had with the people they ruled. The prevailing mindset throughout history is "things are the way they are for a reason", or "it's part god's plan". Inherited gifts (like royal blood) inevitably lead to feelings of superiority and entitlement - not solidarity. Royal blood is really just another form of generic gift.
Sandel would have us give up the possibility of an actual *real* meritocracy in order to maintain fantasy "solidarity" that clearly does not exist.
There is of course a class warfare element here. Sandel and his cohorts in the elite of this world have generally inherited a relatively superior genetic profile and their relative position in the genetic lottery would of course be threatened by the introduction of genetic engineering.
What is going on is that Sandel and his fellow "Genetic royals" are peddling fear in an attempt to frighten the majority into rejecting what would be for them positive change. This is similar to the scare tactics Royal monarchs used against democracy in the 1600's and 1700's. They and their apologists (who included much of the elite of the time) had dire warnings about democracy. Democracy, it was said would lead to chaos, "mob rule" and ultimately starvation. Equally important, democracy violated god's divine order, his master plan: the divine right of Kings and it's associated order. Messing with that order would result in all sorts of trouble and chaos.
Does that argument sound familiar?
Genetic engineering is really genetic democracy - and it too will ultimately emerge and win the day.
His case is groundless.
The title implies that genetic engineering is a "quest for perfection" but this idea is of course a canard. We engineer cars, airplanes, roads, buildings and all sorts of other things and such engineering is neither a "quest for perfection" nor is it denounced as such. It's problem solving and it's what we do.
Sandel further states that "the moral quandary arises when people use such therapy not to cure disease but to reach beyond health, to enhance their physical or cognitive capacities, to lift themselves above the norm."
But wait, I drove a car to my office and that car traveled at times faster than any human has ever physically run. The computer that I am using now is providing me with a very real cognitive boost, checking the spelling as I type and allowing me to look up just about anything I want in another browser window. Many people in this world do not have cars nor computers hence I have have a clear advantage and have been thusly lifted "above the norm". Is it incumbent on me to ditch my car and computer for these reasons? If so where do we draw the line?
An important difference between genetic engineering vs. engineering cars, computers and the like is that engineering cars and computers do not change us from the "inside", they do not change who we are, they do not change our "character".
Or maybe they do.
Human beings have been changing physically since our ancestors left Africa and much of those changes have been driven by technology. We have little body hair yet live successfully in cold climates because we figured out how to make clothing. We can throw an object with deliberate aim (we are the only animal that can do that!) and have been perfecting things to throw for a long time (spears, stones, bows and arrows etc.) Clearly we have already been changing ourselves and this did not begin yesterday.
We have already been changing our character via technology, genetic engineering would only make the changes more exact and deliberate. If you look at the arc of human history you see that more exact and deliberate methods of change are the rule as time goes on. Sandel does claim to be favorably inclined towards this "conventional" technological progress but he (and like minded people) want to make an exception in the case of genetic engineering. Everything else is be under one framework (go for progress, progress, progress) but an exception is to be made in the case of genetic engineering where we should eschew progress. This is inconsistent and will not hold up. In the long run exceptions cannot and will not be made.
Sandel claims that genetic engineering would usher in a world "inhospitable to the unbidden." (things not asked for). This is not the case. The unbidden will still lurk around every other corner. Genetic engineering could *in theory* only eliminate the unbidden in the realm of biological reproduction - a tiny slice of the physical universe. But even here it's elimination is questionable - just watch "Prototype This".
And much of modern civilization has been about changing the unbidden into the bidden! Boil that concept down and what you are talking about is progress. Hunting and gathering were dependent on the the vagaries of wild animals and plants. The "unbidden" Wolly Mammoth could be the difference between starvation and living. With agriculture, cows and sheep are deliberately raised for sustenance. Big change from the unbidden to the deliberate. How about government. Prior to democracy we had monarchies - kings and queens. The people did not ask for their king, he was given: he was unbidden. Democracy has made government what the people deliberately ask for. Is this a bad thing?
I would suggest that moving the unbidden and unknown "away" is part and parcel of progress - and it's generally a good thing (think democracy). I would also suggest that there will be no way to entirely eliminate the unbidden - ever. Worrying about that is kind of like worrying that engineering will eliminate entropy.
Sandel correctly notes that we do not really have a meritocracy because much of success is based on inherited genetic talent and that inherited genetic talent is not earned - it's given. Then Sandel goes on to make the absurd claim that "genetic control" would erode the "actual solidarity that arises when men and women reflect on the contingency of their talents and fortunes." This "solidarity" is a fantasy. Kind of like the "solidarity" that kings and queens had with the people they ruled. The prevailing mindset throughout history is "things are the way they are for a reason", or "it's part god's plan". Inherited gifts (like royal blood) inevitably lead to feelings of superiority and entitlement - not solidarity. Royal blood is really just another form of generic gift.
Sandel would have us give up the possibility of an actual *real* meritocracy in order to maintain fantasy "solidarity" that clearly does not exist.
There is of course a class warfare element here. Sandel and his cohorts in the elite of this world have generally inherited a relatively superior genetic profile and their relative position in the genetic lottery would of course be threatened by the introduction of genetic engineering.
What is going on is that Sandel and his fellow "Genetic royals" are peddling fear in an attempt to frighten the majority into rejecting what would be for them positive change. This is similar to the scare tactics Royal monarchs used against democracy in the 1600's and 1700's. They and their apologists (who included much of the elite of the time) had dire warnings about democracy. Democracy, it was said would lead to chaos, "mob rule" and ultimately starvation. Equally important, democracy violated god's divine order, his master plan: the divine right of Kings and it's associated order. Messing with that order would result in all sorts of trouble and chaos.
Does that argument sound familiar?
Genetic engineering is really genetic democracy - and it too will ultimately emerge and win the day.
Thursday, September 25, 2008
Deafening silence from Wall Street's powerful on the subject of their compensation
We have all witnessed the circus surrounding the big Wall St. bailout that has been going on for a couple of weeks now.
Trust me the big shots like Len Lewis (CEO Bank of America), Lloyd C. Blankfein (Goldman Sachs), James Dimon (JP Morgan Chase) are watching this whole thing with keen interest and in fact lobbying like mad behind the scenes in favor of this bailout.
And they know darn well that the issue of their compensation WILL come up.
What floors me is that they ask for so much from the rest of us (the bailout is estimated to cost $3,000 for every man woman and child in this country), yet they offer no sacrifice whatsoever from themselves.
There could be a grand gesture from these guys that would take the issue of executive compensation right out of this bailout controversy and grease the works in favor of quick passage. Remember Lee Iacocca? He offered to work for 1$ for a year in return for a government guaranteed loan. He asked for something and he offered something back and the whole thing worked.
Fast forward 28 years. Now Wall St. comes hat in hand to Washington and asks for a hell of a lot more than Iacocca ever asked for yet they offer...nothing. They lecture day after day that if Wall St. does not get bailed out then there will be financial Armageddon for everyone. Give us a huge bailout or we all go down. Sounds almost like blackmail. It would not seem so much like blackmail if they offered something back- but they offer nothing.
Ken Lewis could offer to work for 1$ for a year. Lloyd C. Blankfein could offer to work for a $1 for one year, James Dimon (JP Morgan Chase) could offer to work for $1 next year also. A grand gesture like that from Wall St. leaders would take the executive compensation issue off the table and be quite inspiring to all of us. But we hear nothing of the sort. It looks like they are looking at this as a high stakes poker game and they are trying to get the other side (congress and by extension the other 299 million of us) to blink first giving them yet another huge windfall.
Notice that I have chosen people in this post (Ken Lewis, Lloyd C. Blankfein and James Dimon) who who are currently viewed as having done a good job over the last several years. You might think something along the lines of "these men should be rewarded, the ones who did a bad job punished" hence the sky's the limit for their compensation. But these men are the ones who will benefit from this massive bailout. These guys have already gotten paid for their prior performance, this bailout will give them even more.
They come now to the federal government and ask that the taxpayer pay about $3,000 apiece to them. To put it as succinctly as I can: the "bad" CEO's have already lost their jobs and are out, they will not benefit from this bailout. Lewis, Blankfein, Dimon and guys like that WILL benefit PERSONALLY from this (as it is now constructed) and in a very big way. And these guys engaged in the very same things that the others did! They just played the game better so others went down first.
Take a look at the compensation last year for these guys and grok on who and what your $3000 is going for:
Lloyd C. Blankfein $70,323,572
James Dimon: $27,766,073
Ken Lewis: $21,601,594
.
.
source: salary.com
Note: there are lots more wealthy bankers and brokers who will also be getting a piece of your $3000.
Trust me the big shots like Len Lewis (CEO Bank of America), Lloyd C. Blankfein (Goldman Sachs), James Dimon (JP Morgan Chase) are watching this whole thing with keen interest and in fact lobbying like mad behind the scenes in favor of this bailout.
And they know darn well that the issue of their compensation WILL come up.
What floors me is that they ask for so much from the rest of us (the bailout is estimated to cost $3,000 for every man woman and child in this country), yet they offer no sacrifice whatsoever from themselves.
There could be a grand gesture from these guys that would take the issue of executive compensation right out of this bailout controversy and grease the works in favor of quick passage. Remember Lee Iacocca? He offered to work for 1$ for a year in return for a government guaranteed loan. He asked for something and he offered something back and the whole thing worked.
Fast forward 28 years. Now Wall St. comes hat in hand to Washington and asks for a hell of a lot more than Iacocca ever asked for yet they offer...nothing. They lecture day after day that if Wall St. does not get bailed out then there will be financial Armageddon for everyone. Give us a huge bailout or we all go down. Sounds almost like blackmail. It would not seem so much like blackmail if they offered something back- but they offer nothing.
Ken Lewis could offer to work for 1$ for a year. Lloyd C. Blankfein could offer to work for a $1 for one year, James Dimon (JP Morgan Chase) could offer to work for $1 next year also. A grand gesture like that from Wall St. leaders would take the executive compensation issue off the table and be quite inspiring to all of us. But we hear nothing of the sort. It looks like they are looking at this as a high stakes poker game and they are trying to get the other side (congress and by extension the other 299 million of us) to blink first giving them yet another huge windfall.
Notice that I have chosen people in this post (Ken Lewis, Lloyd C. Blankfein and James Dimon) who who are currently viewed as having done a good job over the last several years. You might think something along the lines of "these men should be rewarded, the ones who did a bad job punished" hence the sky's the limit for their compensation. But these men are the ones who will benefit from this massive bailout. These guys have already gotten paid for their prior performance, this bailout will give them even more.
They come now to the federal government and ask that the taxpayer pay about $3,000 apiece to them. To put it as succinctly as I can: the "bad" CEO's have already lost their jobs and are out, they will not benefit from this bailout. Lewis, Blankfein, Dimon and guys like that WILL benefit PERSONALLY from this (as it is now constructed) and in a very big way. And these guys engaged in the very same things that the others did! They just played the game better so others went down first.
Take a look at the compensation last year for these guys and grok on who and what your $3000 is going for:
Lloyd C. Blankfein $70,323,572
James Dimon: $27,766,073
Ken Lewis: $21,601,594
.
.
source: salary.com
Note: there are lots more wealthy bankers and brokers who will also be getting a piece of your $3000.
Saturday, September 20, 2008
A thousand points of light (control)
We do not have a free market in the United States and the structure and layout of our economy is not based on unfettered decisions.
Much of it is rigged. Our transportation system (biased in favor of private car ownership), finance where a cartel controls access to the IPO market, health care, high tech where one company (Microsoft) has had a near monopoly in a key place for 20 years. We don't live in a totalitarian society of course, it's far from that but our economy has become progressively more and more rigged as time has gone on. There are a thousand points of light (as opposed to heavy) control.
Take nursing homes:
---------------------------------------------------------------------------------
Fla. Medicaid recipients want out of nursing homes
By MATT SEDENSKY, Associated Press Writer
Sat Sep 20, 6:37 AM ET
Charles Todd Lee spent a lifetime going backstage at concerts, following politicians on the campaign trail and capturing iconic shots of everyone from Martin Luther King Jr. to Mick Jagger to Mickey Mantle. Today, he enjoys such freedom only in his dreams.
The 67-year-old photographer has been confined to a nursing home for five years, the victim of a stroke that paralyzed his left side. And he's angry.
"Most of the people come here to die, so you want to die," he said. "It is a prison. I can't escape it."
Lee is among the Medicaid recipients across Florida challenging the nightmare of the old and disabled: to be forced from comfort and familiarity into a nursing home.
They say the state is illegally forcing them to live in nursing homes when they should be able to live where they choose. Advocates charge that nursing homes, afraid of losing money, have successfully pressured politicians to make qualifying for community care more difficult. They have filed a federal lawsuit seeking class-action status on behalf of nearly 8,500 institutionalized Floridians.
Whether the litigation gets Lee and others moved out of nursing homes remains to be seen. But at the very least, it has illuminated the frustration experienced by older people or those with disabilities who say they're shuttled into nursing homes when they are healthy enough to live at home, with relatives, or in other less institutional settings.
"There are very, very, very few people who cannot be cared for outside in the community," said Stephen Gold, a Philadelphia disability lawyer who, along with AARP attorneys and others, is representing the group. "Why should the state give a damn whether you put the money in the left pocket of the nursing home or the right pocket of the community?"?
Americans who qualify for Medicaid and get sick or disabled enough to require substantial care typically have little problem gaining admission to a nursing home. But obtaining Medicaid-supported services at home, such as visits from an aide, is substantially harder and often involves a long waiting list, even though it may cost the government less.
Advocates for the elderly and disabled had hoped a 1999 Supreme Court case would change that. The Olmstead decision, as it is known, involved two Georgia women, both Medicaid beneficiaries with mental retardation who wanted community-based services, but were refused and were treated in institutions.
The high court ruled unjustified isolation of the disabled in institutions amounted to discrimination under the Americans with Disabilities Act. It said states must provide community services if patients want them, if they can be accommodated and if it's appropriate. Medicaid is the state-federal partnership that provides health coverage and nursing home care to the poor.
"There's a lot of concern that the nursing home industry is very powerful in many states and has made sure that a lot of Medicaid dollars go to institutional care as opposed to home and community-based care," said Toby Edelman, an attorney at the Center for Medicare Advocacy.
States have been putting more money into community services, but not nearly enough to meet the demand of people who would rather stay at home than go to a facility. Nationally, state Medicaid payments for long-term community care have skyrocketed since the Olmstead decision, from $17.4 billion in 1999 to $42.8 billion last year, though spending on nursing homes and other institutions is still substantially higher.
A total of $59.5 billion was spent last year on institutional care through Medicaid.
The Florida Agency for Health Care Administration, the Florida Department of Elder Affairs and Gov. Charlie Crist's office — the three defendants — all declined to comment on the litigation. So did the attorney general's office, which is representing the defendants.
In court filings, the defendants have claimed the plaintiffs lack standing because they haven't proven that treatment professionals deemed community-based care appropriate for each patient.
"Plaintiffs are not alleging that Florida's Medicaid program has failed to cover their medically necessary services," the defendants wrote. "Instead, plaintiffs want this court to second-guess the manner by which Florida's elected officials and policymakers have chosen to make those services available in light of the state's available resources."
The American Association of Homes and Services for the Aging represents about 5,700 not-for-profit organizations from nursing homes to adult day care to in-home aides. A spokeswoman, Lauren Shaham, said there is "an institutional bias" in the Medicaid program that limits home and community care, but also noted nursing homes are needed for some of society's frailest or most disabled.
The American Health Care Association, which represents about 11,000 nursing homes and long-term care facilities, a majority of them for-profit, also said such institutions were often most appropriate for round-the-clock care. Spokeswoman Susan Feeney noted, "You don't want to be there but sometimes for health reasons beyond your control, you have to be."
John Boyd, 50, has been in a nursing home for the last nine years. He hates them. He became a quadriplegic 36 years ago when he fell off a wall and broke his neck.
"I can't choose what meal I want, I can't have a visitor after 8 o'clock — it's just like a prison without bars," he said. "People are making decisions for and about me that don't even know me or even care about me. All they care about is the money they're getting for me."
---------------------------------------------------------------------------------
This is not an isolated case. It's a somewhat egregious one but other than that not remarkable. A determined and well funded minority (in this case the Nursing Home industry via it's lobby, the innocuous sounding "American Health Care Association") manages to rig the Medicare process in their favor and (in my opinion) clearly at the expense of the other 299.9 million of us). Again and again we see this in our "free" economy: a determined, well connected, well funded minority trumps the common interest.
In this case the resulting tragedy is almost Soviet: in failing health we can be forced out of our homes and into a nursing home even if there are other less expensive and more humane options. Much of the money going to nursing homes could instead go to care-giver(s) or other aids that could allow us to stay in our homes. It's of course likely that the nursing home option will be more expensive. Sometimes vastly more expensive. If Medicaid was working for the benefit of the people it serves and for the benefit of the taxpayer a nursing home would be a last resort. Instead it's pretty much where you go when you need care and are out of money. It's not a last resort, it's the default!
The Medicaid system in this space is working for the Nursing Home industry and at our expense. This is both a fiscal and human tragedy.
Much of it is rigged. Our transportation system (biased in favor of private car ownership), finance where a cartel controls access to the IPO market, health care, high tech where one company (Microsoft) has had a near monopoly in a key place for 20 years. We don't live in a totalitarian society of course, it's far from that but our economy has become progressively more and more rigged as time has gone on. There are a thousand points of light (as opposed to heavy) control.
Take nursing homes:
---------------------------------------------------------------------------------
Fla. Medicaid recipients want out of nursing homes
By MATT SEDENSKY, Associated Press Writer
Sat Sep 20, 6:37 AM ET
Charles Todd Lee spent a lifetime going backstage at concerts, following politicians on the campaign trail and capturing iconic shots of everyone from Martin Luther King Jr. to Mick Jagger to Mickey Mantle. Today, he enjoys such freedom only in his dreams.
The 67-year-old photographer has been confined to a nursing home for five years, the victim of a stroke that paralyzed his left side. And he's angry.
"Most of the people come here to die, so you want to die," he said. "It is a prison. I can't escape it."
Lee is among the Medicaid recipients across Florida challenging the nightmare of the old and disabled: to be forced from comfort and familiarity into a nursing home.
They say the state is illegally forcing them to live in nursing homes when they should be able to live where they choose. Advocates charge that nursing homes, afraid of losing money, have successfully pressured politicians to make qualifying for community care more difficult. They have filed a federal lawsuit seeking class-action status on behalf of nearly 8,500 institutionalized Floridians.
Whether the litigation gets Lee and others moved out of nursing homes remains to be seen. But at the very least, it has illuminated the frustration experienced by older people or those with disabilities who say they're shuttled into nursing homes when they are healthy enough to live at home, with relatives, or in other less institutional settings.
"There are very, very, very few people who cannot be cared for outside in the community," said Stephen Gold, a Philadelphia disability lawyer who, along with AARP attorneys and others, is representing the group. "Why should the state give a damn whether you put the money in the left pocket of the nursing home or the right pocket of the community?"?
Americans who qualify for Medicaid and get sick or disabled enough to require substantial care typically have little problem gaining admission to a nursing home. But obtaining Medicaid-supported services at home, such as visits from an aide, is substantially harder and often involves a long waiting list, even though it may cost the government less.
Advocates for the elderly and disabled had hoped a 1999 Supreme Court case would change that. The Olmstead decision, as it is known, involved two Georgia women, both Medicaid beneficiaries with mental retardation who wanted community-based services, but were refused and were treated in institutions.
The high court ruled unjustified isolation of the disabled in institutions amounted to discrimination under the Americans with Disabilities Act. It said states must provide community services if patients want them, if they can be accommodated and if it's appropriate. Medicaid is the state-federal partnership that provides health coverage and nursing home care to the poor.
"There's a lot of concern that the nursing home industry is very powerful in many states and has made sure that a lot of Medicaid dollars go to institutional care as opposed to home and community-based care," said Toby Edelman, an attorney at the Center for Medicare Advocacy.
States have been putting more money into community services, but not nearly enough to meet the demand of people who would rather stay at home than go to a facility. Nationally, state Medicaid payments for long-term community care have skyrocketed since the Olmstead decision, from $17.4 billion in 1999 to $42.8 billion last year, though spending on nursing homes and other institutions is still substantially higher.
A total of $59.5 billion was spent last year on institutional care through Medicaid.
The Florida Agency for Health Care Administration, the Florida Department of Elder Affairs and Gov. Charlie Crist's office — the three defendants — all declined to comment on the litigation. So did the attorney general's office, which is representing the defendants.
In court filings, the defendants have claimed the plaintiffs lack standing because they haven't proven that treatment professionals deemed community-based care appropriate for each patient.
"Plaintiffs are not alleging that Florida's Medicaid program has failed to cover their medically necessary services," the defendants wrote. "Instead, plaintiffs want this court to second-guess the manner by which Florida's elected officials and policymakers have chosen to make those services available in light of the state's available resources."
The American Association of Homes and Services for the Aging represents about 5,700 not-for-profit organizations from nursing homes to adult day care to in-home aides. A spokeswoman, Lauren Shaham, said there is "an institutional bias" in the Medicaid program that limits home and community care, but also noted nursing homes are needed for some of society's frailest or most disabled.
The American Health Care Association, which represents about 11,000 nursing homes and long-term care facilities, a majority of them for-profit, also said such institutions were often most appropriate for round-the-clock care. Spokeswoman Susan Feeney noted, "You don't want to be there but sometimes for health reasons beyond your control, you have to be."
John Boyd, 50, has been in a nursing home for the last nine years. He hates them. He became a quadriplegic 36 years ago when he fell off a wall and broke his neck.
"I can't choose what meal I want, I can't have a visitor after 8 o'clock — it's just like a prison without bars," he said. "People are making decisions for and about me that don't even know me or even care about me. All they care about is the money they're getting for me."
---------------------------------------------------------------------------------
This is not an isolated case. It's a somewhat egregious one but other than that not remarkable. A determined and well funded minority (in this case the Nursing Home industry via it's lobby, the innocuous sounding "American Health Care Association") manages to rig the Medicare process in their favor and (in my opinion) clearly at the expense of the other 299.9 million of us). Again and again we see this in our "free" economy: a determined, well connected, well funded minority trumps the common interest.
In this case the resulting tragedy is almost Soviet: in failing health we can be forced out of our homes and into a nursing home even if there are other less expensive and more humane options. Much of the money going to nursing homes could instead go to care-giver(s) or other aids that could allow us to stay in our homes. It's of course likely that the nursing home option will be more expensive. Sometimes vastly more expensive. If Medicaid was working for the benefit of the people it serves and for the benefit of the taxpayer a nursing home would be a last resort. Instead it's pretty much where you go when you need care and are out of money. It's not a last resort, it's the default!
The Medicaid system in this space is working for the Nursing Home industry and at our expense. This is both a fiscal and human tragedy.
They take the risk
For a long time now apologists for stratospheric executive compensation would say (regarding executives) that "they take the risk" and hence they deserve the rewards.
Did anyone ever really believe that? I think many thought this concept would never really be tested - but now it is, and it's clear that it's us (the taxpayers) who were always taking the risk.
Many of the complex structures born of "financial innovation" are now crumbling and it is the U.S. taxpayer -not the high paid executives- who it turns out is on the hook. We had over the last 30 years an extraordinary privatization of reward (while times were good) and now that times turn bad we get the socialization of risk.
In 2007, Lehman Brothers CEO Richard S. Fuld raked in $34,382,036 in total compensation according to the SEC. In 2008 - and for many years to come, some of the taxes paid by Janet Mckenzie (Brockton MA, salary $28,436, three kids) will go to fund the bailout of our financial system made necessary because of the irresponsibility and greed from likes of Mr. Fuld. In 2007, Daniel H. Mudd (CEO of Fannie Mae) raked in $11,648,409 in total compensation according to the SEC. Fannie Mae's bad assets will now be guaranteed by taxes paid by Roger Santeria (Bakersfield CA, salary $41,822, wife, 2 kids) and millions of others at his level. According to Forbes Magazine, AIG honcho Maurice Greenberg is the 98'th richest person in America (2.8 billion). The government bailout of AIG could be worth a billion to Greenberg personally. Taxes paid by John Barstow (Sanborn Minnesota, salary $39,832) will contribute to this billion for Greenberg.
If something good can come out of all this mess it might be the revamping of executive compensation in America. The idea that "they take the risk" has been exposed as fiction. WE take the risk. Not the CEO's but all of us. This is nothing new. Government action (and taxpayer money) was required as early as 1893 to stabilize markets. It happened again in 1907 and again in 1929 and again in 1991 and most recently in 1998 (Resolution Trust Company). The long time between 1929 and 1991 may be explained by that being a period of strong regulation and governmental involvement (until 1980 or so). Has it not been proven beyond a reasonable doubt that unfettered capitalism without some sort of collective safety net will collapse?
That being the case, who exactly is taking the risk.
Did anyone ever really believe that? I think many thought this concept would never really be tested - but now it is, and it's clear that it's us (the taxpayers) who were always taking the risk.
Many of the complex structures born of "financial innovation" are now crumbling and it is the U.S. taxpayer -not the high paid executives- who it turns out is on the hook. We had over the last 30 years an extraordinary privatization of reward (while times were good) and now that times turn bad we get the socialization of risk.
In 2007, Lehman Brothers CEO Richard S. Fuld raked in $34,382,036 in total compensation according to the SEC. In 2008 - and for many years to come, some of the taxes paid by Janet Mckenzie (Brockton MA, salary $28,436, three kids) will go to fund the bailout of our financial system made necessary because of the irresponsibility and greed from likes of Mr. Fuld. In 2007, Daniel H. Mudd (CEO of Fannie Mae) raked in $11,648,409 in total compensation according to the SEC. Fannie Mae's bad assets will now be guaranteed by taxes paid by Roger Santeria (Bakersfield CA, salary $41,822, wife, 2 kids) and millions of others at his level. According to Forbes Magazine, AIG honcho Maurice Greenberg is the 98'th richest person in America (2.8 billion). The government bailout of AIG could be worth a billion to Greenberg personally. Taxes paid by John Barstow (Sanborn Minnesota, salary $39,832) will contribute to this billion for Greenberg.
If something good can come out of all this mess it might be the revamping of executive compensation in America. The idea that "they take the risk" has been exposed as fiction. WE take the risk. Not the CEO's but all of us. This is nothing new. Government action (and taxpayer money) was required as early as 1893 to stabilize markets. It happened again in 1907 and again in 1929 and again in 1991 and most recently in 1998 (Resolution Trust Company). The long time between 1929 and 1991 may be explained by that being a period of strong regulation and governmental involvement (until 1980 or so). Has it not been proven beyond a reasonable doubt that unfettered capitalism without some sort of collective safety net will collapse?
That being the case, who exactly is taking the risk.
Wednesday, September 17, 2008
Finance Fatcats Live Large as Firms Crumble
Just finished reading:
http://abcnews.go.com/Business/story?id=5821887&page=1
and a number of comments that users posted.
Basic point of the article is the upper managements of many of the crumbling companies have been getting very rich (more rich then they already were actually) while their companies crumbled, and most are getting golden parachutes with bigger monetary values than the lifetime earnings of most of us.
In a nutshell: pretty close to zero accountability and pretty extreme economic injustice. The average employee in many of these companies is getting pretty hammered.
Many comments rant about seizing assets of these people and redistributing them to the poor or even "French revolution" type justice. Problem is these people have everything locked up legally so there is not much that can be done. The problems of "French Revolution" style justice I think pretty much speak for themselves. I suppose the government could go after them on some sort of fraud basis and try to take their assets that way but this to would open up a whole different can of worms. History shows vengeance to be counterproductive.
So what can be done. I thought about this today and I have an idea. The financial engineers who created this mess should be shunned. This has to be a grass roots thing of course to some extent and I'm talking about serious shunning. Guys like James Cayne (Bear Stearns) and Richard Fuld (Lehman Brothers) should never get positions of serious authority again. No CEO positions no Board of Director appointments, if possible they should even be thrown out of their country clubs. This can only be engineered via social pressure. Shun them and then ignore them. It might feel better to see their money taken away but where would their money go: chances are it would go to people just as undeserving (IE lawyers and the government) and the cycle of unjust predatory gains would just continue.
Instead, lets put those lawyers and our government to work in preventing this from happening again.
The system of executive compensation in America is badly broken and needs to be totally changed from the bottom up. Maybe now there will be an opportunity to really fix it.
At another time I will go into more detail but I'll give you the basics of what I think are wrong. The basic problem is that most compensation is "performance based." This is something that is designed to sound good but when you think it through you realize it's a huge mistake. It is (and was) really a scam - and always will be. How is performance for upper management measured? Stock price or profits of course. Both can be and have been manipulated. Both can be manipulated *legally* (to some extent). Plus there is a deeper issue: the stock price is influenced by all the employees of the company and is influenced by events outside of the control of *anyone* at the company. The fed can lower interest rates and that can result in an overall increase in stock prices. A scientist or engineer can come up with a great advance. A salesperson can make a big sale. Why should a tiny group of people (upper management) reap the windfall from everyone else. This is the inevitable result of paying people at this level for "performance." There is no way around this. Pay for "performance" for people at the top has not worked, is not working now and will *never* work.
It needs to be stopped and a different system put in place. This is not to say that upper management should not be highly compensated - they should be. But *how* highly compensated is a big issue and what compensation is based on is also a big deal.
I also think that if a company requires help from the Government that it's CEO and top management team should be required to have their compensation set to 1 dollar less than the President of the United States - or lower. These things need to be negotiated at the outset of course, you cannot force this on people after the fact.
It must really gall people that the likes of James Cayne and Richard Fuld are now the beneficiaries of government largess - and to a much bigger tune than anyone on so called "welfare".
For years apologists for high executive compensation maintained that CEO's "took the risk" and therefore deserved the money. Nope: we now know that we the people in the middle and bottom (the taxpayers) were the ones taking the risk (the government is bailing these entities out with our money) and the people at the top are walking away with huge additional paydays.
http://abcnews.go.com/Business/story?id=5821887&page=1
and a number of comments that users posted.
Basic point of the article is the upper managements of many of the crumbling companies have been getting very rich (more rich then they already were actually) while their companies crumbled, and most are getting golden parachutes with bigger monetary values than the lifetime earnings of most of us.
In a nutshell: pretty close to zero accountability and pretty extreme economic injustice. The average employee in many of these companies is getting pretty hammered.
Many comments rant about seizing assets of these people and redistributing them to the poor or even "French revolution" type justice. Problem is these people have everything locked up legally so there is not much that can be done. The problems of "French Revolution" style justice I think pretty much speak for themselves. I suppose the government could go after them on some sort of fraud basis and try to take their assets that way but this to would open up a whole different can of worms. History shows vengeance to be counterproductive.
So what can be done. I thought about this today and I have an idea. The financial engineers who created this mess should be shunned. This has to be a grass roots thing of course to some extent and I'm talking about serious shunning. Guys like James Cayne (Bear Stearns) and Richard Fuld (Lehman Brothers) should never get positions of serious authority again. No CEO positions no Board of Director appointments, if possible they should even be thrown out of their country clubs. This can only be engineered via social pressure. Shun them and then ignore them. It might feel better to see their money taken away but where would their money go: chances are it would go to people just as undeserving (IE lawyers and the government) and the cycle of unjust predatory gains would just continue.
Instead, lets put those lawyers and our government to work in preventing this from happening again.
The system of executive compensation in America is badly broken and needs to be totally changed from the bottom up. Maybe now there will be an opportunity to really fix it.
At another time I will go into more detail but I'll give you the basics of what I think are wrong. The basic problem is that most compensation is "performance based." This is something that is designed to sound good but when you think it through you realize it's a huge mistake. It is (and was) really a scam - and always will be. How is performance for upper management measured? Stock price or profits of course. Both can be and have been manipulated. Both can be manipulated *legally* (to some extent). Plus there is a deeper issue: the stock price is influenced by all the employees of the company and is influenced by events outside of the control of *anyone* at the company. The fed can lower interest rates and that can result in an overall increase in stock prices. A scientist or engineer can come up with a great advance. A salesperson can make a big sale. Why should a tiny group of people (upper management) reap the windfall from everyone else. This is the inevitable result of paying people at this level for "performance." There is no way around this. Pay for "performance" for people at the top has not worked, is not working now and will *never* work.
It needs to be stopped and a different system put in place. This is not to say that upper management should not be highly compensated - they should be. But *how* highly compensated is a big issue and what compensation is based on is also a big deal.
I also think that if a company requires help from the Government that it's CEO and top management team should be required to have their compensation set to 1 dollar less than the President of the United States - or lower. These things need to be negotiated at the outset of course, you cannot force this on people after the fact.
It must really gall people that the likes of James Cayne and Richard Fuld are now the beneficiaries of government largess - and to a much bigger tune than anyone on so called "welfare".
For years apologists for high executive compensation maintained that CEO's "took the risk" and therefore deserved the money. Nope: we now know that we the people in the middle and bottom (the taxpayers) were the ones taking the risk (the government is bailing these entities out with our money) and the people at the top are walking away with huge additional paydays.
Monday, August 18, 2008
Against Michael Phelps
Anyone overdosed on Michael Phelps yet? Your not alone. I guess the incessant hype has gotten me to thinking critically about the Michael Phelps phenomenon.
After doing a little digging and thinking I have some opinions, observations.
Is Michael Phelps the greatest athlete ever? I think that is the wrong question. The 8 gold medals reveal not so much the greatness of Michael Phelps but the lack of competition in swimming right now. Sorry to pour cold water on the hype machine but facts are facts. The competition in swimming is just not there at the moment and that's why one guy (admittedly pretty good) was able to get 8 gold medals. The medal counts in swimming show the withering of competition clearly: United States 31 medals, Australia 20, China 6, France 6, Japan 5. Is something missing here? Remember the old days? Countries like the Soviet Union (then Russia), Germany, the whole east block and Great Britain were always there. That's really the elephant in the swimming room right now: the drop off in competition. In one Olympics (1976) the Soviet Union has actually got more medals in swimming than the U.S. -but they are not even in the top 5 now. That is an amazing cratering of a once potent athletic force. A potent force that swimmers of the last generation had to deal with but Phelps does not. As recently as 2004 Russia had a still dominant swimmer in Alex Popov who came out of the old now defunct Soviet system. But no more. Russia is hardly a shadow of it's former self in the world of swimming, same for the east block in general and also Britain has dropped off some.
The biggest competitor to the U.S. in swimming right now is Australia - a nation with less than 1/10 the population of the United States and less than 1/10 the GDP. After Australia the drop off is profound: France with only 6 swimming medals, China with 6 and Japan with 5. Compare this with the medal count in Track and Field (so far): United States 9, Kenya 7, Russia 6, Belarus 5 and Jamaica 4. Much more competition! Track and field of course is a sport with much lower barriers to entry - a sport that poor countries can do well in and by it's nature generates far more real competition than international swimming ever did. Sprinters have come out of the Carribean and Africa for decades. North African nations (and Great Britain) produce great middle distance runners. Kenya and Ethiopia produce great marathoners. Sometimes Japan and Korea produce great marathoners. A Chinese man won the 110 hurdles in 2004. The field is wide open. Swimming on the other hand is a somewhat elite sport that requires a lot of money and capital. African nations do not have the money for swimming programs. They do not need money to generate runners. At this point international swimming is the preserve of just a hand full of rich western nations - and Michael Phelps is the beneficiary of this evaporation of competition.
I have no doubt that if there had been swimmers of the caliber of Ian Thorpe or Alex Popov at this Olympics Phelps would not have had much of a chance to match Spitz. And Spitz was lucky to have competed *before* the rise of the Soviet Block swimming machine was complete. With more open competition neither Spitz nor Phelps medal counts would have been possible. To match Phelps in track someone would have to do something like this: win the 100m, 200m, 400m and 800m, 4X100 relay and 4X400, long jump and triple jump. It's never going to happen because track and field is just way more competitive.
As far as world and Olympic records (set by Phelps) go I have one word: technology. Swim suits and pool technology make swimming records pretty meaningless at present. Lets see how long Phelps records last. Also the margin of victory for Phelps on average has been less than Spitz.
Lastly, two events have been added to Olympic swimming since the Spitz era and this gave Phelps a clear advantage over Spitz as far as medal counts go.
So much for Michael Phelps being the greatest athlete of all time: the real story is the drop off in competition in an already constrained elite sport.
Phelps has gotten endless kudos in the media for "doing so much for the sport of swimming". I would like to ask: how so. Swimming is not a new sport nor is it a sport that Americans have had a difficult time competing in. I just don't get this. Swimming has been around since the very first Olympics and Americans have been strong competitors since the beginning. Remember names like Johnny Weismueller and Buster Crab? How exactly has Phelps been responsible for "doing so much for the sport" like our talking heads blather on about. I just don't get this. Can someone explain this to me?
I think what Phelps is doing so much for are certain American advertisers and marketers who seem intent on creating a cultural icon who can be used for their commercial purposes. Not quite the Olympic ideal. I am old enough to remember the 72 Olympics and I can tell you there was nothing like the hype machine over Spitz prior to the games. He pretty much exploded onto the scene during the games - and that seemed more real to me than this Phelps thing has felt. It has felt contrived and almost a fait-accomplis from the beginning. I suspect that the experts knew well that international swimming competition is not there right now and that gave Phelps practically a lock (barring a big screw-up). The only surprise to me was that two of the races were so close.
Another bad aspect of this: the Phelps story (in the American media) has crowded out other good stories that would have otherwise been presented. One of the highlights of this Olympics has been the record shattering 100 Meter final by Usain Bold. To bad NBC ignored it and jammed Michael Phelps down our throat all night long and waited until 2 in the morning to show Bolt.
After doing a little digging and thinking I have some opinions, observations.
Is Michael Phelps the greatest athlete ever? I think that is the wrong question. The 8 gold medals reveal not so much the greatness of Michael Phelps but the lack of competition in swimming right now. Sorry to pour cold water on the hype machine but facts are facts. The competition in swimming is just not there at the moment and that's why one guy (admittedly pretty good) was able to get 8 gold medals. The medal counts in swimming show the withering of competition clearly: United States 31 medals, Australia 20, China 6, France 6, Japan 5. Is something missing here? Remember the old days? Countries like the Soviet Union (then Russia), Germany, the whole east block and Great Britain were always there. That's really the elephant in the swimming room right now: the drop off in competition. In one Olympics (1976) the Soviet Union has actually got more medals in swimming than the U.S. -but they are not even in the top 5 now. That is an amazing cratering of a once potent athletic force. A potent force that swimmers of the last generation had to deal with but Phelps does not. As recently as 2004 Russia had a still dominant swimmer in Alex Popov who came out of the old now defunct Soviet system. But no more. Russia is hardly a shadow of it's former self in the world of swimming, same for the east block in general and also Britain has dropped off some.
The biggest competitor to the U.S. in swimming right now is Australia - a nation with less than 1/10 the population of the United States and less than 1/10 the GDP. After Australia the drop off is profound: France with only 6 swimming medals, China with 6 and Japan with 5. Compare this with the medal count in Track and Field (so far): United States 9, Kenya 7, Russia 6, Belarus 5 and Jamaica 4. Much more competition! Track and field of course is a sport with much lower barriers to entry - a sport that poor countries can do well in and by it's nature generates far more real competition than international swimming ever did. Sprinters have come out of the Carribean and Africa for decades. North African nations (and Great Britain) produce great middle distance runners. Kenya and Ethiopia produce great marathoners. Sometimes Japan and Korea produce great marathoners. A Chinese man won the 110 hurdles in 2004. The field is wide open. Swimming on the other hand is a somewhat elite sport that requires a lot of money and capital. African nations do not have the money for swimming programs. They do not need money to generate runners. At this point international swimming is the preserve of just a hand full of rich western nations - and Michael Phelps is the beneficiary of this evaporation of competition.
I have no doubt that if there had been swimmers of the caliber of Ian Thorpe or Alex Popov at this Olympics Phelps would not have had much of a chance to match Spitz. And Spitz was lucky to have competed *before* the rise of the Soviet Block swimming machine was complete. With more open competition neither Spitz nor Phelps medal counts would have been possible. To match Phelps in track someone would have to do something like this: win the 100m, 200m, 400m and 800m, 4X100 relay and 4X400, long jump and triple jump. It's never going to happen because track and field is just way more competitive.
As far as world and Olympic records (set by Phelps) go I have one word: technology. Swim suits and pool technology make swimming records pretty meaningless at present. Lets see how long Phelps records last. Also the margin of victory for Phelps on average has been less than Spitz.
Lastly, two events have been added to Olympic swimming since the Spitz era and this gave Phelps a clear advantage over Spitz as far as medal counts go.
So much for Michael Phelps being the greatest athlete of all time: the real story is the drop off in competition in an already constrained elite sport.
Phelps has gotten endless kudos in the media for "doing so much for the sport of swimming". I would like to ask: how so. Swimming is not a new sport nor is it a sport that Americans have had a difficult time competing in. I just don't get this. Swimming has been around since the very first Olympics and Americans have been strong competitors since the beginning. Remember names like Johnny Weismueller and Buster Crab? How exactly has Phelps been responsible for "doing so much for the sport" like our talking heads blather on about. I just don't get this. Can someone explain this to me?
I think what Phelps is doing so much for are certain American advertisers and marketers who seem intent on creating a cultural icon who can be used for their commercial purposes. Not quite the Olympic ideal. I am old enough to remember the 72 Olympics and I can tell you there was nothing like the hype machine over Spitz prior to the games. He pretty much exploded onto the scene during the games - and that seemed more real to me than this Phelps thing has felt. It has felt contrived and almost a fait-accomplis from the beginning. I suspect that the experts knew well that international swimming competition is not there right now and that gave Phelps practically a lock (barring a big screw-up). The only surprise to me was that two of the races were so close.
Another bad aspect of this: the Phelps story (in the American media) has crowded out other good stories that would have otherwise been presented. One of the highlights of this Olympics has been the record shattering 100 Meter final by Usain Bold. To bad NBC ignored it and jammed Michael Phelps down our throat all night long and waited until 2 in the morning to show Bolt.
Friday, August 15, 2008
High-Tech Hitchhiking
I just read an article on something I have thought about myself: using cellphones and GPS devices to enable "High Tech Hitchhiking." See http://www.theoildrum.com/node/4406
This is a great idea. A really really great idea. In a nutshell the concept is to give people the ability to share their cars with others in a dynamic "spur of the moment" way and give users Ebay like ratings to ensure safety.
But this concept will have serious hurdles to get over if it is ever to come to pass.
Car sharing of this type would be a huge threat to the taxi industry and other entrenched players and those industries cannot be expected to just sit back and let this happen. They will do everything in their power to stop this from happening and do everything conceivable to undermine it should it start. And we should not underestimate their power. I do not think this kind of thing will be allowed unless there is a real sense of crisis (environmental or oil supply). And yes there are plenty of ways to stop this.
BTW, a theme you will be seeing on this blog will be how manipulated our economy is and this is a very good place to start.
Car sharing involving money is illegal in almost all of the United States. Very illegal and vigorously prosecuted.
You cannot get insurance in my state for a car that will be shared on a regular basis with non family members (even if no money is involved). They will not sell it to you at any cost. I asked. It's *state law*. I suspect that most states have this same restriction. This pretty much puts the kibosh on this kind of car sharing given that you cannot drive at all in my state without car insurance!
The taxi industry is technically a cartel in most places.
If you think about it this is a massive manipulation of our economy! In most places there is an absolute fixed number of taxi's allowed and in order to operate one you must buy a "medallion" which may cost tens or hundreds of thousands of dollars. Can you imagine other industries regulated this way? How about the government mandating that there can only be X amount of websites. If you want one you must purchase a "medallion" from someone who already owns a website. How about restaurants. Cleveland will only allow 2349 restaurants and if you want to open one you must purchase one of the 2349 medallions? It's laughable - except that a major U.S. industry (taxis) actually operates this way!
I've heard the arguments in favor of having this kind of cartel (yes technically this *is* a cartel) and they are not compelling to put it mildly. Biggest argument is space: if we were to allow more taxis our already crowded streets would get even more crowded. This is backwards. If there were more taxis (and car sharing in general) there would be FEWER private cars and there would be MORE space and LESS traffic. There are orders of magnitude more private cars than cabs and I have not seen any proposal to force the far larger group of private car owners to purchase a medallion before they can buy a car. If space is the problem that you want to solve you need to limit private cars and *encourage* taxis and car sharing. The space argument is not a reason it is an excuse. The logic behind this argument is shallow and backwards.
Second argument for medallions: safety. "We can't let just anyone drive a cab lest there be safety issues, so we have to limit the number of taxis". Lets go back to restaurants. Restaurants have safety regulations they must follow but we do not limit the number of restaurants in a city. This to is not a reason but is another excuse.
In fact there is no real reason for the taxi cartel (just excuses) and in todays world not only does it serve no purpose (it did at one time as we will see below), it is counterproductive.
So why do we have this cartel with taxis but not with other industries?
The answer is that allowing cars to be shared (a taxi is a form of shared car) would limit the demand for cars and enhance the appeal of inner cities (over suburbs) and this is the *opposite* of what our leaders wanted after WWII - when these policies were enacted or greatly strengthened. Potential growth in the taxi industry had to be seriously hamstrung - and it was via the medallions, and car sharing had to be discouraged - and it was.
Car sharing has been seriously limited, made illegal or discouraged for decades.
Restaurants on the other hand do not allow people to "share kitchens" and thereby threaten the appliance industry. Restaurants do not eliminate the need for refrigerators and stoves in houses. Websites threaten nothing in this manner either and the mid 1990's -when the web appeared- was a very different era than the depression and post WWII eras when transit policy regarding cabs was being set.
The U.S. government very deliberately enacted policies after WWII to encourage private car ownership and discourage/hamper/limit rail and any forms of car sharing (like the taxi). The idea was that subsidizing the car industry and single family homes - especially in the suburbs, would be a good way to stop the country from sliding back into depression - which was greatly feared. So the cartel idea had some merit then.
Think of all the industries that benefited in the 1940's from a high degree of private car ownership and usage: the auto industry itself, steel, rubber electronics, glass and oil. In 1946 taxi medallions fit right into this. The idea was that people should not be taking taxis around inner cities (or god forbid mass transit) they should be driving their cars to and from the suburbs. *That* was the way to generate solid economic growth at that time. Or so it was thought.
But those reasons (whether or not they were even valid then) no longer make sense given limited and expensive oil and global warming. Now we want and need greater sharing in the transport sector.
Problem is the taxi industry relies on this system. They have (literally) bought into it by purchasing very expensive medallions and could be devastated by private car sharing as described in http://www.theoildrum.com/node/4406. They will fight this like mad. They will fight this in court, they will fight this in state capitals (where their $500/hour lobbyists do their best work) they will fight this in Washington. Not loudly, not with press conferences but as silently as they can. They will fight it in a way that makes it look like they have done nothing. Make it look like things "just happened." That people just "don't want to share their cars". That's the way a determined minority with something to lose often fights in America. Make it look like things were just "freely decided." All they have really have to do (in my state) is keep the laws and insurance regulations the same and then insist (when pressed) that the public just "decided" they didn't like to share their cars.
The taxi industry where I live takes this stuff very seriously. "Gypsy" cabs are fought like mad. Certain seemingly minor offenses are felonies. They feel their livelihood is at stake and clearly they would be threatened by High-Tech Hitchhiking and will fight tooth and nail against this.
Don't expect them to lose barring a real crisis.
This is a great idea. A really really great idea. In a nutshell the concept is to give people the ability to share their cars with others in a dynamic "spur of the moment" way and give users Ebay like ratings to ensure safety.
But this concept will have serious hurdles to get over if it is ever to come to pass.
Car sharing of this type would be a huge threat to the taxi industry and other entrenched players and those industries cannot be expected to just sit back and let this happen. They will do everything in their power to stop this from happening and do everything conceivable to undermine it should it start. And we should not underestimate their power. I do not think this kind of thing will be allowed unless there is a real sense of crisis (environmental or oil supply). And yes there are plenty of ways to stop this.
BTW, a theme you will be seeing on this blog will be how manipulated our economy is and this is a very good place to start.
Car sharing involving money is illegal in almost all of the United States. Very illegal and vigorously prosecuted.
You cannot get insurance in my state for a car that will be shared on a regular basis with non family members (even if no money is involved). They will not sell it to you at any cost. I asked. It's *state law*. I suspect that most states have this same restriction. This pretty much puts the kibosh on this kind of car sharing given that you cannot drive at all in my state without car insurance!
The taxi industry is technically a cartel in most places.
If you think about it this is a massive manipulation of our economy! In most places there is an absolute fixed number of taxi's allowed and in order to operate one you must buy a "medallion" which may cost tens or hundreds of thousands of dollars. Can you imagine other industries regulated this way? How about the government mandating that there can only be X amount of websites. If you want one you must purchase a "medallion" from someone who already owns a website. How about restaurants. Cleveland will only allow 2349 restaurants and if you want to open one you must purchase one of the 2349 medallions? It's laughable - except that a major U.S. industry (taxis) actually operates this way!
I've heard the arguments in favor of having this kind of cartel (yes technically this *is* a cartel) and they are not compelling to put it mildly. Biggest argument is space: if we were to allow more taxis our already crowded streets would get even more crowded. This is backwards. If there were more taxis (and car sharing in general) there would be FEWER private cars and there would be MORE space and LESS traffic. There are orders of magnitude more private cars than cabs and I have not seen any proposal to force the far larger group of private car owners to purchase a medallion before they can buy a car. If space is the problem that you want to solve you need to limit private cars and *encourage* taxis and car sharing. The space argument is not a reason it is an excuse. The logic behind this argument is shallow and backwards.
Second argument for medallions: safety. "We can't let just anyone drive a cab lest there be safety issues, so we have to limit the number of taxis". Lets go back to restaurants. Restaurants have safety regulations they must follow but we do not limit the number of restaurants in a city. This to is not a reason but is another excuse.
In fact there is no real reason for the taxi cartel (just excuses) and in todays world not only does it serve no purpose (it did at one time as we will see below), it is counterproductive.
So why do we have this cartel with taxis but not with other industries?
The answer is that allowing cars to be shared (a taxi is a form of shared car) would limit the demand for cars and enhance the appeal of inner cities (over suburbs) and this is the *opposite* of what our leaders wanted after WWII - when these policies were enacted or greatly strengthened. Potential growth in the taxi industry had to be seriously hamstrung - and it was via the medallions, and car sharing had to be discouraged - and it was.
Car sharing has been seriously limited, made illegal or discouraged for decades.
Restaurants on the other hand do not allow people to "share kitchens" and thereby threaten the appliance industry. Restaurants do not eliminate the need for refrigerators and stoves in houses. Websites threaten nothing in this manner either and the mid 1990's -when the web appeared- was a very different era than the depression and post WWII eras when transit policy regarding cabs was being set.
The U.S. government very deliberately enacted policies after WWII to encourage private car ownership and discourage/hamper/limit rail and any forms of car sharing (like the taxi). The idea was that subsidizing the car industry and single family homes - especially in the suburbs, would be a good way to stop the country from sliding back into depression - which was greatly feared. So the cartel idea had some merit then.
Think of all the industries that benefited in the 1940's from a high degree of private car ownership and usage: the auto industry itself, steel, rubber electronics, glass and oil. In 1946 taxi medallions fit right into this. The idea was that people should not be taking taxis around inner cities (or god forbid mass transit) they should be driving their cars to and from the suburbs. *That* was the way to generate solid economic growth at that time. Or so it was thought.
But those reasons (whether or not they were even valid then) no longer make sense given limited and expensive oil and global warming. Now we want and need greater sharing in the transport sector.
Problem is the taxi industry relies on this system. They have (literally) bought into it by purchasing very expensive medallions and could be devastated by private car sharing as described in http://www.theoildrum.com/node/4406. They will fight this like mad. They will fight this in court, they will fight this in state capitals (where their $500/hour lobbyists do their best work) they will fight this in Washington. Not loudly, not with press conferences but as silently as they can. They will fight it in a way that makes it look like they have done nothing. Make it look like things "just happened." That people just "don't want to share their cars". That's the way a determined minority with something to lose often fights in America. Make it look like things were just "freely decided." All they have really have to do (in my state) is keep the laws and insurance regulations the same and then insist (when pressed) that the public just "decided" they didn't like to share their cars.
The taxi industry where I live takes this stuff very seriously. "Gypsy" cabs are fought like mad. Certain seemingly minor offenses are felonies. They feel their livelihood is at stake and clearly they would be threatened by High-Tech Hitchhiking and will fight tooth and nail against this.
Don't expect them to lose barring a real crisis.
The hydrogen economy will never happen
I am going to start off this blog with a somewhat bold prediction: the so-called "Hydrogen Economy" (http://en.wikipedia.org/wiki/Hydrogen_Economy) that has been so hyped for the last several years is not going to happen. Ever. It's a classic smoke-and-mirrors dream. If you are an investor don't put any long term money into companies that support it - typically Fuel Cell makers, as you will see below. In the short term hype may cause some action in this area but in the longer term this is a dead dog.
Why? Read on.
Lets look at what Hydrogen fuel cells do and what they would *have* to do to compete. What they do is generate electricity directly from fuel via an electrochemical conversion device (see http://en.wikipedia.org/wiki/Fuel_Cell, or http://auto.howstuffworks.com/fuel-cell.htm) and the cost of generating electricity this way is far higher than the far more simpler method of just burning fuel to boil water and turn a turbine. The most convenient fuel for a fuel cell is of course Hydrogen, hence my usage of the term "Hydrogen Fuel Cell" above. Hydrogen is fed into the fuel cell it combines with Oxygen and generates electricity in the process. Sounds great doesn't it? But we must answer the question of where does the hydrogen come from and how is it stored and in answering that we will see the fatal flaw.
Fuel cells get Hydrogen from either electrolysis of water or by splitting a hydrogen atom off a hydrocarbon molecule (like petroleum). If you use electrolysis to get the hydrogen you are guaranteed of using more energy in getting the hydrogen than you get by using it in a fuel cell. This is due to fundamental laws of physics which cannot be broken. Oops. OK so what about splitting the Hydrogen off a hydrocarbon. Well why not just burn the hydrocarbon (easy!) instead of splitting off hydrogen (moderately hard) and then using a fuel cell to generate electricity from it (moderately hard to very hard).
The fact is it will *always* be easier to just burn the hydrocarbon and this is the reason the Hydrogen economy will never happen. Also consider the problems storing and moving Hydrogen. Hydrogen is extremely difficult to contain. It is the *smallest* atom there is and the problems in containing it are legendary. Just take a look at this: http://en.wikipedia.org/wiki/Hydrogen_storage
Problems in storing Hydrogen and making Fuel Cells competitive with other methods of generating electricity will *not* be "solved by technology" (the tooth fairy of our time). It will always be cheaper and easier to use the hydrocarbons that we have (Crude Oil and Natural Gas primarily) vs. stripping out hydrogen first and *then* using the hydrogen. This is fundamental and will never change.
OK so why the hype. The hype is there because a "Hydrogen Economy" is something that people *want to believe in*. It's a great story: we will get massive amounts of power from something (Hydrogen) that when used in a Fuel Cell generates nothing but water as waste. Notice that I have left this key aspect and selling point till the end. That is a great line isn't it! We use Hydrogen (the most abundant element in the universe) and just combine it in a fuel cell with Oxygen and va-voom we get electricity and water. What could *possibly* be better than that. But like room temperature nuclear fusion of a generation ago (which sounded every bit as good as the Hydrogen economy) it's not going to happen. The "legs" of the story in both cases are it speaks to what people *want* to believe: cheap limitless energy with no pollution. Not reality.
Bottom line: The "Hydrogen Economy" and Fuel Cells will forever be limited to demonstration projects, glorified toys and hype.
Why? Read on.
Lets look at what Hydrogen fuel cells do and what they would *have* to do to compete. What they do is generate electricity directly from fuel via an electrochemical conversion device (see http://en.wikipedia.org/wiki/Fuel_Cell, or http://auto.howstuffworks.com/fuel-cell.htm) and the cost of generating electricity this way is far higher than the far more simpler method of just burning fuel to boil water and turn a turbine. The most convenient fuel for a fuel cell is of course Hydrogen, hence my usage of the term "Hydrogen Fuel Cell" above. Hydrogen is fed into the fuel cell it combines with Oxygen and generates electricity in the process. Sounds great doesn't it? But we must answer the question of where does the hydrogen come from and how is it stored and in answering that we will see the fatal flaw.
Fuel cells get Hydrogen from either electrolysis of water or by splitting a hydrogen atom off a hydrocarbon molecule (like petroleum). If you use electrolysis to get the hydrogen you are guaranteed of using more energy in getting the hydrogen than you get by using it in a fuel cell. This is due to fundamental laws of physics which cannot be broken. Oops. OK so what about splitting the Hydrogen off a hydrocarbon. Well why not just burn the hydrocarbon (easy!) instead of splitting off hydrogen (moderately hard) and then using a fuel cell to generate electricity from it (moderately hard to very hard).
The fact is it will *always* be easier to just burn the hydrocarbon and this is the reason the Hydrogen economy will never happen. Also consider the problems storing and moving Hydrogen. Hydrogen is extremely difficult to contain. It is the *smallest* atom there is and the problems in containing it are legendary. Just take a look at this: http://en.wikipedia.org/wiki/Hydrogen_storage
Problems in storing Hydrogen and making Fuel Cells competitive with other methods of generating electricity will *not* be "solved by technology" (the tooth fairy of our time). It will always be cheaper and easier to use the hydrocarbons that we have (Crude Oil and Natural Gas primarily) vs. stripping out hydrogen first and *then* using the hydrogen. This is fundamental and will never change.
OK so why the hype. The hype is there because a "Hydrogen Economy" is something that people *want to believe in*. It's a great story: we will get massive amounts of power from something (Hydrogen) that when used in a Fuel Cell generates nothing but water as waste. Notice that I have left this key aspect and selling point till the end. That is a great line isn't it! We use Hydrogen (the most abundant element in the universe) and just combine it in a fuel cell with Oxygen and va-voom we get electricity and water. What could *possibly* be better than that. But like room temperature nuclear fusion of a generation ago (which sounded every bit as good as the Hydrogen economy) it's not going to happen. The "legs" of the story in both cases are it speaks to what people *want* to believe: cheap limitless energy with no pollution. Not reality.
Bottom line: The "Hydrogen Economy" and Fuel Cells will forever be limited to demonstration projects, glorified toys and hype.
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