Last night, I had the misfortune of hearing an interview with Senators' Dodd & Shelby discussing their bipartisan housing bill (which passed committee 17-2, or so). This was just after listening to Speaker Pelosi rant about the dire need to release oil from the SPR in order to send prices lower. Little makes me more despondent than watching the knaves pandering.
First let me address Dodd's inanities, which were delivered in a tone of voice that was positively pleading, usually reserved for a mother with a malnourished child. "THE SKY IS FALLING ALL AROUND US AND NOT JUST IN THE US BUT WORLDWIDE!!! THE CASE-SCHILLER INDEX IS LIKELY TO FALL ANOTHER 30%", he told PBS's reporter, " AND WE SIMPLY CANNOT ALLOW THIS TO HAPPEN..." Ahem, pardon me, Mr Dodd, but ummm where the hell were you when when housing prices were vaulting upwards and the Fed was doing its best mimic of Japan's ZIRP? You were dissing Issing, and all others who suggested that skyrocketing asset prices demanded attention. Where were you when financial institution balance sheets and credit growth were ballooning?? Which fellow Senators were you whipping into shape when tax cuts were the rage, unrequited as they were by fiscal restraint??!? Perhaps if you'd not let housing prices appreciate so, and encourage your banking friends to willy-nilly finance the HELOCs and equity-withdrawal refi's in order to mindlessly consumer beyond their means, we wouldn't be here now. Hypocrite!
Gollywag #2 was listening to Madame Pelosi waffle on about the benefits of slamming the market with oil from the SPR. Mrs Pelosi may be a fine leader, and consensus-builder, and she may have a good heart, in sort of the same way that Gore Vidal is a wonderful writer and perhaps the top literary critic. But neither he, nor she should trespass into the realm of economics. For while such a notion of spending our savings would be consistent with American public and private economic policy over the past two decades - particularly the last one, it is, I must say daft in the extreme, particularly when the primary reason cited was: "Because the American people have already paid for it...". Ma'am, if I might point out, that logic is the same logic that would have us spend all our savings, because we've already saved. It is utter nonsense. The SPR, like one's savings, have been built for a rainy day. Not a drizzle. Not a light shower. But a full-on honking severe turbo-tempest. Next time, we who would dearly like to see the republicans dethroned would kindly ask that you please think before speak.
The SPR issue really gets my goat. For LOWER oil prices (without an attendant energy policy) only encourages MORE of the wastefulness that has gotten into this dilemma in the first instance. I would be amenable to a temporary draw on the SPR in exchange for say large energy taxes, renewable incentives, mandatory conservation initiatives (beginning with government itself), etc. But it is terribly painful to listen to all manner of demagogue (whether its about the SPR, drilling the ANR or offshore, or imploring the Saudi's to pump more) prattle on about supply, when - as Amory Lovins of the Rocky Moutnain Institute rights points out, by far the highest returns on energy investment are NOT on the supply side, but on the demand side in the form of conservation and extracting higher efficiencies.
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Oh, indeed.
Is Speaker Pelosi even aware she is influenced by Keynes imperfectly, or by Chicago School particularly? Possibly not.
For that matter, I see similar leanings in Senator Obama's pronouncements, Volcker's endorsement notwithstanding.
Perhaps an introduction could be arranged, for both, to Joseph Stiglitz? He's native, charming, a prize-winner, and reasonably sensible after all.
Did you perhaps mean the highest marginal returns on investment are on the demand side? NB: Much like personal savings, a lesson Americans seem to have forgotten.
One suspects, or wants to believe at any rate, that there is some new mode of consumable energy out there that is just waiting for sufficient investment (or perhaps carbon taxation) to become commercially viable.
I suspect that the highest returns in the energy business, pace Amory Lovins, are neither on the demand side nor on the supply side, but on the regulation side. That is, a dollar invested in influencing Mr Dodd et al. to create regulations that make me rich pays off much better than a dollar invested either in increasing supply or in decreasing demand. If we don't tackle that problem the others are moot.
Of course I am not talking about social welfare. But as I understand the article, both Mr Lovins and Mr Dodd are discussing modifying incentives to individuals, and they are missing the incentives that matter.
sargon TM
For the general amusement of your readers: Deep within the 700 page Housing Bill recently passed, as part of the FHA foreclosure rescue program, is a provision to help the HELOC portfolio of giants JPM, WF and BAC. Those who subordinate to a reconfiguration of the underlying 1st mortgages will get "equity participation certificates" which will allow them to share in any future appreciation in the home.
Perhaps there is a Leonardo Da Vinci of accounting somewhere who can explain how this will work?
In the silly "Fool's Gold" there's a scene in which a thief goes into an underwater cavern after ancient treasure. The waves come in and the villain is turned into a red mist as he's blown upward through a "blowhole" in the coral.
Without drawing too broad an analogy, may we liken the "drill more holes" crowd to that villain? He could after all have waited for the tide to ebb and simply have dipped up gold coins in a bucket. :)
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