Thursday, July 24, 2008

Shadow governments for America

FP noticed a Marc Ambinder report on Obama's preparations for a White House transition.

I have long held the belief that all key presidential candidates should form a UK-style shadow government, so as to prepare for the transition well in advance.


  • Would permit vetting of key advisors and cabinet posts, long before the November election.
  • Would give the voters a better picture of the candidate.
  • Permits presidential candidate to lean on key advisors in public. Right now, media coverage of presidential candidates simply assumes that a President is a one-person expert on all subjects. Reality clearly shatters this illusion.
  • Other minor advantages that come from having a Secretary of State-in-waiting, a Secretary of Defenese-in-waiting, etc.

We should do everything we can to encourage John McCain to follow suit.

The transition has already begun, anyway: President Bush now briefs both Obama and McCain on key issues they must confront, once elected.

Overall, this should improve future White House transitions, and increase transparency of a candidate and his campaign.

I can see some disadvantages, although in my opinion not outweighing the advantages: inevitably some posts in a candidate's shadow government will be vacant, or go through rapid changes during the campaign. Therefore, voters may "vet" one Shadow Secretary of State, while a wholly different person gets the job following the election.

Another disadvantage might be the added scandal-by-association danger that additional spot-lit personalities bring. This is not a disadvantage for voters, as it results from added transparency, but candidates will surely consider this angle.

Monday, July 21, 2008

Is geo-engineering a good idea?

Is geoengineering a good idea? In most cases, I say no.

Popular Mechanics, green websites and other sources have been offering geoengineering solutions such as massive carbon dioxide sinks to help offset pollution elsewhere. The latest example is using lime to cut carbon dioxide levels.

Geoengineering worries me because doing so on a planetary scale is inevitably fraught with unintended consequences. It is an attempt to control one of the most complex systems in existence: all of Earth. Testing is out of the question, as any test would inevitably fail to account for the trillions of variables involved in everyday life: ocean currents, surface and underwater temperature changes, sunlight (potentially filtered through lime/algae/etc.), amount of fish poop in the water, and on and on. Without testing, geoengineering is by definition a one-shot gamble, with the entire planet at stake.

And, at the end of the day, most geoengineering solutions involve combatting pollution with more pollution.

My favorite analogy is Pepsi Clear: during the manufacturing process of clear Pepsi, the drink begins its life as opaque syrup, and ingredients (read: chemicals) are added to the drink to make it clear. That is just plain unsettling. When one adds two positive numbers together, you don't get zero.

Infrastructure and oil prices

Here in North Carolina, gasoline taxes fund roads and public transportation. Cutting taxes, as this story from 2006 describes, directly impacts that infrastructure.

As high oil and gas prices today reduce demand, revenue to maintain that infrastructure decreases.

In a future where personal vehicles don't run on fossil fuels, where will that money come from? The general fund? Bonds? Taxes on electricity and natural gas? Tolls?

My futuristic guess: In the future, you will subscribe to American Super Highways(tm) road service, just like you subscribe to Internet service, thus giving your vehicle or PRT access to that roadway.

In any case, if gasoline-fuelled cars become the minority, that "hidden" cost must be borne elsewhere. This is not a criticism of any particular policy. I'm merely a technocrat wondering aloud about an unsolved problem we must eventually confront.

Friday, July 18, 2008

Republicans behave shamefully

Usually this blog tries to avoid the "horse race" of US politics, which dominates most US news coverage of politics, but sometimes events rise to the occasion anyway.

A Journal editorial describes how Republicans mistreat reformers in their own party.

Voters are not blind to the crazy spending during the six years of Republican reign, and they will inevitably be aware of all these efforts to continue earmarking and spending. One wonders why the Republican party continues to pursue the path of seppuku.

When it comes to earmarks, the Democrats are no better, of course. Voters know this, too. Congressional approval ratings, Democrat or Republican, are at an all time low for good reasons. Nobody from either party is showing leadership at a time of economic turmoil.

Thursday, July 17, 2008

Bankers hurting most of all?

An interesting perspective on the credit crisis from across the pond, helping put some of the forecasts of economic doom in context:

The upshot is that the main people suffering pay cuts and job losses in the present crisis are bankers, rather than industrial workers as in previous slowdowns. Not surprisingly, this gives financiers a jaundiced view of the world. [...]

Wednesday, July 16, 2008

US preparing a deal with Iran?

FP posted (with permission) an interesting email from Iran policy scholar Gary Sick. In it, he critiqued John Bolton's analysis of the Iran/Israel/US situation. A choice paragraph:

While much of the world was hyperventilating over the possibility that the United States (and maybe Israel) were getting ready to launch a new war against Iran, Bolton was looking at the realities and concluding that far from bombing, the U.S. was preparing to do a deal with Iran. He had noticed that over the past two years the U.S. had completely reversed its position opposing European talks with Iran.

Read the whole thing. There definitely have been some policy shifts in the Bush administration recently, and it does seem like Gates and Rice are taking the lead at the moment.

Update: Washington Post reports on a "significant" departure from prior policy: the U.S. meets with Iran in Geneva.

Bretton Woods 2

Ed Cone's summary of Nouriel Roubini's Bloomberg interview was interesting and thought-provoking.

It is useful to review the history of Bretton Woods at Wikipedia, and in particular, the current system informally known as Bretton Woods II:

  • The United States imports considerable amounts of goods, particularly from East Asian export-oriented economies such as China, Japan and various other Southeast-Asian countries.
  • Since China and Japan don't have much demand for U.S.-produced goods, United States runs large trade deficits with both countries.
  • Under normal circumstances, trade deficits would correct themselves through depreciation of the dollar and appreciation of the yen and the renminbi. However, Chinese and Japanese governments are interested in keeping their currencies low with respect to the dollar to keep their products competitive. To achieve that, they are forced to buy large quantities of U.S. treasury securities with freshly-printed money.
  • Similar mechanisms work in the Eurozone with the euro and its satellite currency (Swiss franc). The Eurozone is somewhat less coupled to the U.S. economy, so the euro has been allowed to appreciate considerably with respect to the dollar.

In my opinion, we need a stronger dollar policy. Presently the weak dollar makes US exports attractive and overall shrinks the trade deficit, which is great for us. But, where does it end?

Continued weak dollar policy could unravel Bretton Woods II, because it devalues dollars so much that foreigners face massive losses, simply by holding dollar reserves. That in turn greatly diminshes our ability to shape events in the world.

Strong dollar policy naturally does the reverse. It enhances Bretton Woods II, and helps keep global peace by ensuring that we are all happy trading partners. It ensures our own continued economic health, by encouraging holders of dollar reserves to continue holding them, rather than dumping dollars for another currency.

Yet the downsides to stronger dollar policy ripples through US exports and the trade deficit, eventually to US jobs. Inflation will continue, which readily explains reluctance of the current US administration to change things. Yet events will eventually force their hand.

As an aside, this protectionist streak running through the country could help unravel Bretton Woods II as well. I'm talking to both Democrats and Republicans here. Free trade not only benefits all trading partners, and lifts millions out of poverty, it also helps keep the peace.

Start engaging in protectionist behavior, and other countries will be forced to retaliate in kind. As global resources like air, oil and water become ever more scarce or overused, we need global cooperation more than ever before. Like it or not, we are dependent on other nations. Calling for "Manhattan Projects" to fix problems doesn't change the immediate situation.

Update, from today's Financial Times: Sovereign funds cut exposure to weak dollar. As one ADIA staffer says in the article, echoing the pain felt by all countries pegged to the weakening U.S. dollar, "We are suffering. We are importing inflation for no reason."

Monday, July 14, 2008

Mexico: crisis of democracy

In the past year, most of the Mexican news that bubbles up before my eyes seemed to be related to either population migration (no surprise) or violent Mexican drug cartels.

I was disheartened but not surprised to read a BBC report about Mexican drug cartels threatening the country's very foundation, its democratic institutions (according to the head of the Mexican intel service).

Tuesday, July 8, 2008

Europe oil/gas wants to bring nuclear power to Mid East

Two of Europe’s biggest oil and gas companies, Total and Eni, each plan to bring nuclear power to countries in the Middle East. (link)

It should be U.S. companies leading the way, in that technology. After the 1970s energy crisis, France invested heavily in nuclear power and technology, and is seeing clear benefits today.

It's sad that the United States is not a serious contender in the nuclear power arena, at a time when we need plentiful, clean, safe energy.

Sunday, July 6, 2008

UAE cancels Iraqi debt, sends ambassador

BBC: The United Arab Emirates is sending an ambassador to Baghdad, and cancelling all debt ($7 billion) owed it by Iraq. (link)

Saturday, July 5, 2008

Food price linkage to ethanol

Interesting article, related to my previous post: Secret report: biofuel caused food crisis. Internal World Bank study delivers blow to plant energy drive.

The key paragraph (as it relates to my last post):

President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases."

With regards to biofuels, using a food source was always a stupid idea. Waste biomass is a much more plentiful source, one that does not compete with food.

With regards to India and China and my last post, that industrialization and urbanization shift is not something that occurs in a matter of months, like these food price increases.

The article doesn't discuss how much of the food price increases were linked to oil price increases (food must be transported to the market, after all). Analysis I've read in FT and elsewhere seems to think that the oil price increases are not yet fully factored into food prices, implying further price increases are coming.

Tuesday, July 1, 2008

Just the facts

World population: 6.6 billion (link)
India population: 1.1 billion (link)
China population: 1.3 billion (link)
United States population: 0.3 billion (link)

Our industrial revolution began in the late 1700s. Our Western society took decades upon decades to fully industrialize, with progress continuing (and accelerating) to this day.

The rapid industrialization and urbanization in India and China has been going on for, maybe, 10 years. That means 36%, or one third of the entire planet, is moving at light speed towards Western-style lifestyles and consumption rates. Raw materials are at record prices, as China in particular requires ever-more food, oil, steel, concrete, ...

The law of supply and demand is like the law of gravity: it just is. When there is more demand, prices will go up and consumption will go down. When there is less demand, the reverse occurs. Politicians cannot wish away the increases in demand from China and India.

American politicans — both Democrats and Republicans — have their favorite blame targets (evil oil companies, evil environmentalists that prevent domestic drilling), but don't believe the hype.

We need to prepare our country for some fundamental shifts, such as a country four times as big as ours, all wanting cars and Taco Bell.

And don't even get me started on looming demographics in Western countries (thanks D for the link), and what happens when you build monetary programs like Social Security on the assumption that population will always increase over time.