November 30, 2009

Iran Dishonors Itself, Again

After the American Century

No other nation has ever sunk so low since the Nobel Peace Prize was first given a century ago. In 2003 the recipient was Shirin Ebadi, an Iranian lawyer who has championed democracy and freedom of speech. She put the prize itself in a safe deposit box for safekeeping. Now the prize has been taken, not by bank robbers, but by the Iranian government itself. The government has also stopped paying her pension and blocked access to her own bank accounts. Last year it forcibly closed her law offices. The rule of law is not the strong point of this regime.

The world already knew that they lied about their capacity to produce plutonium. The world already knew that its June elections were irregular, to say the least. The world already knew that the Iranian government brutally suppressed the demonstrations against the flawed election. And it already knew that many of these same peaceful demonstrators have now been condemned to death or life imprisonment. And the world also knows that Iran's falsely elected president, whom I refuse to name here, has repeatedly said that the Holocaust never happened, while denouncing Israel's right to exist.

Now the regime in Iran has signaled its contempt for the Nobel Peace Prize, by stealing it from Shirin Ebadi. No government has ever done such a thing. This is not really a government, however, but a fundamentalist dictatorship that will stop at nothing to suppress its people.

This outrage apparently is connected - in the minds of the Iranian regime - with its current defiance of the UN on the production of plutonium. It seems signal that they do not care what anyone else thinks about them, that indeed they are spoiling for a fight and would like to drag the Peace Prize into it. Perhaps they imagine that they have dishonored the Prize. All they have done, again and again, is to dishonor themselves.

It appears that the Iranian regime is trying to provoke someone to take action against them.

My sympathies go out to Shirin Ebadi and to the Iranian people.

November 27, 2009

The Weakening Dollar

After the American Century

For much of the twentieth century the American dollar was the benchmark currency. Whenever a crisis arose, world investors moved money into the dollar. For decades, the dollar was a good investment for anyone living in an inflation-prone economy, like those in Latin America or Africa. Likewise, because the dollar was stable, it was the preferred currency in the oil market.

The apparent rock-like stability of the dollar began to weaken already in the 1970s, when President Richard Nixon took the dollar off the gold standard. Until then, at least for very large investors, one could redeem dollars in gold. After then, the dollar was a little less rock-like, but on the whole was the preferred currency in any crisis. One could see this again in the wake of the financial collapse during the fall of 2008. Even though American banks were largely responsible for the sudden downturn, many people around the world instinctively moved money into the dollar.

Those days are over, and probably over forever. Rationally speaking, the dollar is not a smart investment at the moment. It has been declining in value for months, and has reached its lowest point in 14 years against the Japanese yen. The current interest rate on dollar savings accounts is also very low, so that even assuming the dollar's decline ends soon, nevertheless, the rate of return is better in the Euro zone.

The Chinese, meanwhile, are keeping their currency artificially weak, as a way to stimulate exports and continue building up already massive foreign reserves. In effect, the United States is letting its currency fall in value for the same reason, to stimulate exports and dampen the desire for imports. But China is way ahead in this race to the bottom, while Japan and Europe are both being hurt. Because China and to a lesser extent the United States have weak currencies, both Japanese and European goods cost more - forcing some factories to close or to move overseas where labor costs are lower. Japan and Europe have higher unemployment and fewer exports because their currency is too strong.

This is a dangerous game for all concerned. As President Obama pointedly told the Chinese leadership on his state visit, Asian economies need to play by the same rules as the rest of the world. Asian consumers, particularly in China, need to buy more, and their currencies should be worth more, to bring the world's economic system into balance.

For the United States, the danger is that it will soon be forced to increase interest rates in order to fund its growing national debt. This will increase the dollar's value, but it will also slow or halt economic recovery. This in turn will reduce American demand for foreign goods, as the economy stagnates.

Unfortunately, precisely this scenario (in which the US weakens) might be what China wants. For if it comes to pass, then China's massive holdings in American dollars will increase in value, while the US itself will grow slowly or not at all. The Chinese economy might then outpace US growth by 5% or more per year, until, in perhaps a decade, perhaps less, the US currency would enter a more definitive decline.

I hope this scenario is wrong. Should it prove at all accurate, then the dollar's reign as the world's reserve currency might not last longer than about 2020. Clearly this is not a happy thought for anyone with a pension or investments in the United States. Just as importantly, the relative decline of the US economy vis-a-vis the rest of the world will soon necessitate a major realignment that takes account of new players: Brazil, India, Indonesia, and most of all, China.

November 26, 2009

Obama and the Copenhagen Climate Summit

After the American Century

President Obama has announced that he will briefly attend the Copenhagen Climate Summit. This is welcome news. But the timing of the visit (early) and its length (brief) suggest that the White House does not expect a major breakthrough to occur. After all, in the American system of government the President can only carry out what the independent Congress has mandated, and no laws are yet on the books that endorse even the modest 17% cutbacks that Obama has proposed.

One weakness of the preparations for the Copenhagen Summit is that there seem to be no clear guidelines on the methods of calculation that all nations share in advance. So when Obama says the US will cut CO2 emissions by 30% in 2025, this sounds much like what the EU is offering to achieve by 2020. It is not. The EU calculates from 1990 while the US is using a 2005 baseline. What the US is actually promising is to make reductions back to about where it was in 1990, while the EU is promising to go 20% lower than the 1990 level.

A second problem is that the focus really ought to be on per capita energy use and CO2 emissions. The United States uses about twice as much energy per person as Japan, so the US would need to reduce its total energy use by one half just to get to get even. Nations such as China and India, which each have more than four times as many people as the United States, look at per capita energy use, and relatively speaking do not see themselves as the problem. India uses less energy that the United States, and millions of its people still do not have regular electrical service. China is now the world's largest polluter, but the United States is by far the largest per capita.

A third problem is that the summit seems to be focused primarily on ends - CO2 reductions - without a corresponding showcase for the technological means to achieve it. Some nations, notably the UK, are adopting atomic energy as the way forward, since nuclear plants produce almost no CO2 compared to coal-fired ones. The problem is that atomic energy does produce serious amounts of toxic waste, and it must be stored for hundreds, or in some cases for thousands of years. Look around for examples of hermetically sealed buildings that have been constantly guarded for even 100 years. There are none. When all the long-term costs and dangers of atomic power are included, is it not likely that wind, tide, thermal, and solar power are more desirable?

In short, in addition to having a big political circus with heads of state coming that negotiate on the ends, the world needs an equally big demonstration of what is already possible. We already have the means available to build houses that are close to self-sufficient. We already can make automobiles that are twice as efficient as the average vehicle on the road today. There are hundreds of new technologies and best practices that just need to become better known and put to use.

The Kyoto agreement focused on noble ends, but they have not been achieved. In practice, not even one of the major industrial nations that signed the Kyoto agreement has in fact managed to do what they promised. In every case, energy use has continued to rise. (See my October 1, 2009 blog on this.) It is time to focus more on the technological means. The leaders can promise whatever they like, but will they know how to achieve those noble ends?

November 15, 2009

Senator Inhofe from Oklahoma Champions Copenhagen Consensus

After the American Century

My American readers may be embarassed, but those from Europe will perhaps be delighted to hear that the buffoon of the United States Senate, James Inhofe says he plans to come to Copenhagen for the December climate conference. Since the media yesterday told us that the great powers have informally agreed that nothing binding will actually happen in Copenhagen, it is good to know that other entertainment is on the way.

Senator Inhofe is a most militant opponent of environmentalists. He famously declared that global warming is “the greatest hoax ever perpetrated on the American people.” For years during the Bush majority he chaired the Senate's Environment and Public Works Committee. Inhofe favors drilling for oil and gas in the Alaskan wilderness, and he resists efforts to save endangered species. He frequently quotes the Bible in his speeches.

Danes should not feel too smug when laughing at Inhofe, however, as he also likes to quote their own Bjorn Lomborg, whose crusade against global warming has been, well, warmly supported by their own government. Inhofe has used Lomborg's arguments at some length in an op-ed piece in The Washington Post.

The Copenhagen Consensus, Lomborg's "think tank" gets a direct grant from the government. Lomborg is not a scientist, but a statistician. If he has actually had an original scientific idea of his own, I am not aware of it. However, he says what big oil and coal companies like to hear, and he gets major economists to confuse talking about apples as though they were oranges, (i.e. with such questions as which is better, to solve the global warming problem (orange) or to save children who are malnourished (apple)?) When Inhofe comes to Copenhagen to declare that there is no global warming problem, count on Lomborg to line up some compliant Danes to sing backup vocals.

And so, the Danish government will have it both ways. They will sponsor the conference and appear to be leading a reluctant world toward a cooler and greener future. But for years the same government has paid Lomborg and funded his center to attack the whole idea that any money should be spent on global warming at all. With one hand they admonish the Obama Administration to help stop global warming, and with the other hand they give completely different advice to Senator Inhofe.

November 03, 2009

Unsustainable Cheney vs. Sustainable Gore

After the American Century

In recent weeks two vice-presidents have been in the headlines. If either of them were a prospective presidential candidate, this would hardly be unusual. But Dick Cheney is too old to be considered realistically as a candidate, and his health is also a question. And Al Gore clearly does not want to run for president again, after passing up the 2008 campaign.

Both men are in the news because they can be taken to represent opposed elements in American politics. Cheney the former oil executive who is a hard-liner on foreign policy stands in stark contrast to Gore, the advocate of green energy who won the Nobel Peace Prize.

Both men have been willing to "put their money where their mouth is," by which I mean they have invested their personal fortunes in the kinds of industries they believe in. Curiously, however, only Gore seems to be in the spotlight this week. He has been criticized for investing in the green technologies that he wants governments to adopt. This is no different than Cheney, who vigorously defended the coal and oil industries while serving as vice-president, except that Gore is not in office. He is a private citizen, and there is no conflict of interest in his case. Gore has never worked as a lobbyist. So the charge that Gore might profit from green energy investments seems idiotic coming from Republicans. Do they have something against business now?

It would be in order, however, for Congress to hold an investigation into Dick Cheney's relationship to Halliburton while he served as Vice President. Cheney retained many personal ties with Halliburton while in office, and that corporation was given multi-billion dollar contracts to rebuild Iraq - often with no competitive bidding - on the grounds that the response had to be rapid and asking for and evaluating bids took too much time.

Then there was Dick Cheney's big gift to Halliburton in the 2005 Energy Bill. A provision was added to that bill, at Cheney's request, which took away from the Environmental Protection Agency the right to regulate some forms of oil drilling. In particular, a process invented by Halliburton called hydraulic fracturing was exempted from EPA control. And, yes, hydraulic fracturing can lead to pollution of the water table, as toxic chemicals are involved. For more on this, see the article in the New York Times. This addition to the 2005 Energy Bill is often called the Halliburton Loophole.

This then is the contrast. On the one side, Dick Cheney, a vice-president who used his office to protect and enrich the company where he used to be chief executive. On the other side, Al Gore, a former vice-president who as a private citizen has put his own money into green technologies. Is it really impossible for Republicans to see that Cheney is a reprehensible self-serving pawn of special interests? Apparently so. Is it really impossible for Republicans to see that Gore is an idealist working within the capitalist system, risking his own money on what he believes in? Again, apparently the Republicans really are this inconsistent and blind.

The persistence of such Republican misconceptions helps us to understand why they are able to see "drill baby drill" Sarah Palin as a feasible presidential candidate.