Saturday, February 28, 2009
On Friday California’s Governor, Arnold Schwarzenegger, declared a drought emergency for the state. The cause: lack of rain in northern California, the normal source of water for arid southern California. What’s ironic is it’s quite possible there will be floods in the very area of concern in the next few days. Simultaneous flooding and drought? Only in California! Yet here’s the 5 day precipitation forecast and the area from Tahoe to San Francisco to the Oregon border is going to be deluged. The Goverantor of this ungovernable state will be asking municipalities to plan for 20% cuts in water usage. There is the distinct possibility of rationing similar to what occurred in the early nineties. Oh can we ever forget this call to conserve, ‘If it’s yellow let it mellow, if it’s brown flush it down?” What is sad is California has been slow to adopt the promising technology of reverse osmosis (RO) to supplement supplies of water, especially for the communities at the tail end of the water supply lines in coastal southern California. Yet this is precisely where it would be easiest to implement. Florida has similar wet and dry seasons (though at opposite times of year), with the same threats of drought. Tampa has built a 25 mgd RO plant to ensure sufficient supplies and the small island where I live, Sanibel, has a 5 mgd plant which supplies all the water needs to our 7,000 dwelling units. Of note is the efficiency gains of RO technology. RO plants of today need only 25% of the electricity of 20 years ago. Sanibel went 20 years without a water rate increase solely on these efficiency gains. California’s problem is there is always a constituency that finds it imperative that something not be done. Take this snippet on reverse osmosis from the Pacific Institute: "Our communities cannot be rushed into desalination projects -- the economic, environmental and social costs of desalination are too high," said Heather Cooley, lead author of the report. "Local, state, and national laws do not sufficiently protect our communities from costly mistakes." "While desalination can produce high-quality, reliable water, it can also have significant impacts on marine ecosystems," [Peter] Gleick [President of Pacific Institute] said. Marine organisms can be crushed against intake-pipe screens or sucked in and killed by the desalination process. Further, the discharge of the highly salty waste brine -- which is sometimes laced with processing chemicals and toxic metals -- can harm local fish populations and accumulate in the food chain. The Institute also finds that desalination can have impacts on community development. New water sources along the coast can lead to unanticipated and unplanned new growth along the coast. The main criticism of RO has been its high energy use. That could be valid if looked at only in the abstract. In reality the amount of electricity used to transport water from the Colorado River and northern California is not much different and sometimes less. In a 2007 interview with Sramana Mitra, an entrepreneur and a strategy consultant in Silicon Valley since 1994, HP Michelet said, "You don't have to go overseas to look at the critical aspects of desalination. It's enough to just go to California. We demonstrated that we could now, in California, desalinate a cubic meter of water for a total of 1.58 kilowatt hours. Colorado today spends about 1.9 kilowatt hours just to pump the state water around to California. In addition to that, about 1.6 kilowatt hours of additional energy is spent just to slush the Colorado River water around in California. When you look at all the energy being consumed by California today just by pumping water around, you realize that it is actually cheaper to desalinate water from the Pacific Ocean". And this from a VerdeXchange News interview: They've built a full-size, state of the art seawater desalting plant, and are operating it at Port Hueneme, just outside of Oxnard, California in order to demonstrate the actual cost of desalting seawater. Their goal was to show that the energy efficiency of modern seawater reverse osmosis systems had improved to the point where it actually consumes less energy than it takes to pump water in the State Water Project from Northern California to Southern California, and that it's very similar to what it costs to pump water from the Colorado River to Southern California. In fact, they finished their first run about a year ago and published their paper. Sure enough, the energy consumption for seawater R.O. was less than what it cost to pump water in the state water project, and just about the same as it is for the Colorado River Aqueduct. There’s nothing like a crisis to get Californians to face reality.
Sunday, February 8, 2009
This recent item from Bloomberg News caught my attention. Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said. Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said. Paul Volker was Federal Reserve Chairman during the Carter and Reagan years. He is a fiscal hawk as any Fed Chairman should be. That job, first and foremost, is to maintain the value and stability of the dollar. And he did that when inflation ran rampant in the seventies. Instead of the ill advised wage and price controls under Nixon and tepid Fed Funds and discount rate increases later, he took the bull by the horns and dramatically and mercilessly broke the back of stagflation of the Carter years by upping Fed Funds rates to 20% and holding them there. But he caused a recession and many Democrats think that caused the defeat of Carter in 1980. Inflation is a means of escaping debt, both personal and by government. But it comes at the price of a cheapened dollar. And I suspect that this is what the new administration is aiming to do. With endemic inflation, long term interest rates will climb sky high (the government can’t control them, they are market driven) slowing business growth, exacerbate inflation by upping the cost of imported goods, devastate those living on fixed incomes and kill any thought of maintaining a savings account. One only needs to look at the hyperinflation in Zimbabwe where in mid-January it issued a 100 trillion dollar note worth US $33. Yikes, at that rate we could pay off our national debt with your change from McDonalds. Democrats have traditionally been inflation friendly. In the years they controlled the House, especially in the Carter years, when inflation ran rampant (over 10% at times), they used bracket creep to raise taxes. Then at election time they magnanimously voted to "readjust" the brackets, billing it a tax cut. The cuts were all illusory. But they kept the Democrats in office. Reagan’s tax reform in the early eighties put an end to that game by indexing most tax rates. Fiscal and monetary irresponsibility will kill the dollar as an international currency. It will end our ability to sell our debt to foreign nations. It will put us in the category of Mexico, Argentina and Zimbabwe in international markets. The utter disregard of sound economic principles in the current stimulus bill is a giant step in that direction. Hang tough Paul Volker.
Saturday, February 7, 2009
If Jeffrey Immelt, Chairman and CEO of GE, had to take a salary cut to $500,000, should high earners within GE and its subsidiary NBC be made to take the same pay level? Should Brian Williams, anchor of NBC Nightly News, and David Letterman of the Late Show do the same? Immelt’s total compensation for 2007 was $15.48 million, including salary, bonus, other (perks) and stock gains. Williams’ contract is a reportedly $10 million per year and Letteman’s $31 million. If Immelt’s pay is obscene, what about Williams’ and Letterman’s? Fortunately Immelt went to private sources (Warren Buffett) to borrow $3 billion for troubled GE Credit, not the government. Who says Fortune 500 CEOs are stupid?
Monday, February 2, 2009
“Only little people pay taxes.” – Leona Helmsly To that I might add, “and Democrats in high places when cornered.” We have had Ways and Means Chairman Charles Rangel, Treasury Secretary Tim Geithner and HHS Secretary nominee Tom Daschle. And we had rumors of tax problems with potential Senator Caroline Kennedy Schlossberg. That's a pretty long list in a short period of time. Tim Geithner should never have been confirmed, nor should be Tom Daschle. We can’t undo Geithner but we should take a better look at Daschle. Not only did he know about his tax problem in June, but he failed to act until discovered by the transition team in January. The very specific amounts of the value of the car and driver services appears to indicate a 1099 was filed and he ignored it, but we won’t know that unless asked by a committee member. But there are other items in Daschle’s past that throw doubt on his integrity. He allowed his wife to represent Boeing, while he was Senate Minority and Majority leader, and of course in a position to influence legislation on the Air Force Tanker program. This unusual lease back program was criticized by the non-partisan Congressional Budget Office as being highly unfavorable to the government. It eventually blew up when it was discovered that the Air Force contracting officer had been offered a job by the CFO of Boeing during the selection process that chose Boeing over competitor Northrop Grumman/EADS. Both the contracting officer and the CFO served federal prison time for their misdeeds. While lobbying the Congress by a Senator’s spouse is not an ethics violation under the extraordinarily lax Senate rules, it certainly goes against the grain of accepted first world business practices. The other question is what the heck did Daschle do to warrant a million dollar a year salary from Leo Hindery? What were his duties as Chairman of the Advisory Committee of InterMedia? Sounds pretty vague. Who else was on the committee he chaired? Was this a “no show” job? A very uncurious press hasn’t even posed these questions, much less answered them. So much for “Hope and Change.”