Dana Blankenhorn

How America Must Lead

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Think of this as Volume 12, Number 25 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Last week I talked about why America will win the future.

Now I want to talk about how to do that, and our responsibility for making that happen. 

America will continue to lead because of the hard work we have all done in the last generation, not so much in Washington but in our lives and communities. 

All the many movements of the last generation -- the womens' movement, the gay rights movement, the civil rights movement, the fight for rights for the disabled and ethnic minorities, the environmental movement -- all of what I have called the AntiThesis to the Nixon Thesis, or the outright rejection of that thesis -- all have had an impact. 

All of them have taken us further down the road of progress than most other societies have even contemplated going, and what came to me most clearly during my recent trip was that elites elsewhere recognize that progress, and envy it.

What they have given our society is flexibility, mobility, an ability to adapt to change unparalleled in human history. The ruins of failed societies all around the world attest to this. Change is the hardest work a society can undertake. No society has succeeded at it like ours, and none has done more to unite people worldwide around the idea that change is both good and necessary.

The clearest proof is living in the White House right now. But we can't rest on that laurel. Here is what we must do:

1. Set high goals 
2. Learn what real leadership means 
3. Embrace the change process

  Let me take these one at a time:

The War Against Oil is a War for the Economy

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Think of this as Volume 12, Number 20 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Want to get the economy out of the ditch? 

Make something. Make something new, something valuable, something real, something with a ready market. 

Despite what critics felt there was something real about the Internet, which defined the 1990s. The Internet accelerates the transfer of knowledge, and of any knowledge-based value store. It's the most powerful economic accelerant since the creation of the telegraph.

By contrast there was nothing ever real about the economic drivers of this decade, financial services and homes. Not that homes aren't real. But the value of a home has nothing to do with its cost or even its location. It is a measure of the economic value left out there to buy homes. A home sucks money, it only creates money for those who build, assuming someone buys. Thus homes became a natural sinkhole for the confederate money of this decade, soaking up as much as the banksters could create from thin air.

Now that the economy has stopped falling this question becomes vital. On what will we base the next boom? 

The answer is obvious. Energy. 

Behind Obama Fail in the War Against Oil

While the President's first 100 days deserve strong praise there is one area of conspicuous failure.

The War Against Oil.

There are good and bad reasons for this:

1. Good - Lower energy prices reduce the priority for alternatives, and the savings from conservation.
2.  Bad - Energy has been lost among all the other priorities of the first 100 days.  

You can't fight the market unless you either make it your top priority or have an ongoing market failure driving public opinion. We have ongoing market failures in the financial and health markets. But in energy, in the near term, the market is our friend. The recession has pushed oil prices into the $50/barrel range, and gasoline prices are half what they were at their peak. 

What is in a Word in the War Against Oil

Last night the President gave all those who agree we need a War Against Oil nearly everything we could have asked for.

To truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.

So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.

And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.

He has a plan. It's tied to reducing hydrocarbon emissions. He did mention "clean coal" but he also (for the first time) advocated a cap-and-trade system to cap emissions, which could easily kill current coal plants in short order.

He even gave it the right priority. First. He said in his speech he would concentrate on three key challenges -- energy, health and education. Energy first. That's not an accident, it's a priority.

The only thing he did not do was use the word "war."

This was a mistake.

A Good Start in The War Against Oil But Just a Start

The President's Stimulus bill, just signed , makes a very good start toward fighting the War Against Oil. (Picture from Whitehouse.gov.)

But oil is a pernicious foe. Even now its advocates are taking advantage of some parts of the stim, and condemning the necessary next steps, in order to keep Americans enslaved to the oil power.

Let's start with the good news. Nearly 10% of this money is going into the low-hanging fruit of conservation and research:

1. Almost $11 billion will go into making government buildings more efficient.
2. Almost $10.5 billion will go into improving the efficiency of housing used by poor people, who are least likely to make the investment on their own.
3. About $16.4 billion is going into "supertrains" of one sort or another, either local transit or inter-city links. Trains are 10-20 times more efficient at moving people than cars.
4. There is $11 billion here for "smart grid" technology, which could allow utilities to buy as well as sell power.
5. There's $7.5 billion for building renewable power sources and transmission lines to get them to market.

There's some potential waste here, and a lot will depend on how well Dr. Stephen Chu and the Department of Energy do their work doling out the money.

• Some think of the "smart grid" only in terms of time-shifting power demand and getting more money from each kilowatt they sell, not enabling the purchase of power from urban solar farms or suburban windmill owners.
• Boone Pickens could easily grab that $7.5 billion to force construction of low-efficiency power lines from his West Texas windfarms to Dallas-Ft. Worth.

There's a big bet being placed here, namely that government can do things right. Republicans love condemning government and praising the free market, but it was the privatization of government and rejection of regulation that got us into this mess.

Now, for a warning and what comes next.

War Against Oil Still Being Fought

If you turn on the TV or listen to the mainstream media these days you would think that the War Against Oil was a one-time boom that is now going bust.

All eyes are said to be on the stimulus package, looking for cash to invest. Supposedly. Meanwhile our enemies in this war, like Venezuela's Hugo Chavez, are laughing themselves silly. America needs oil "like air, like oxygen to live, to survive.” You can almost hear the Bond villain laughter.

But this is not the reality. America is already the world's largest producer of wind energy, and will soon be number one in solar as well. Investors in the space remain optimistic. Some communities are starting to pay people who produce energy at their homes or offices.

It's true that the enemy is powerful, but its power is diminishing. The fact that oil prices are holding near the $50 level is good news. Everyone now knows that oil remains a permanent check on economic growth -- that as growth returns oil prices will go up and take away any gains. This is leading to a growing determination, especially in this country, to rid ourselves of this dependence once and for all.

The best way to guarantee continued success is by changing the business model. A carbon tax would do that. In the short run it would work better than a price floor -- if all industrialized countries adopt it. That's a danger for both proposals, and it's the main reason this Congress is unlikely to adopt it. (Instead we'll go with cap-and-trade, which is a short-term fix.)

The Real Benefits of a Hydrogen Economy

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Think of this as Volume 12, Number 4 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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So far we've been selling the idea of a hydrogen cycle (instead of a carbon cycle) as nationalism, as environmentalism, or as a way to make our electrical grid more flexible and robust.

But there is another, even more important argument for the hydrogen economy.

Water.

For thousands of years the history of civilization has been a history of water. Water defines civilization. It can't exist without water.

Read Rushdie's The Enchantress of Florence, or watch Michael Wood's The Story of India, and you learn how central Asia, what's now the deserts of Afghanistan, Turkmenistan, and the "tribal areas" of Pakistan, are the real cradles of civilization.  Those civilizations were destroyed as water sources dried up. That's why the Ganges means life.

To give life water must be clean, and the most important technologies of our last century are those devoting to maintaining supplies of clean water. Water purification, water desalinization, these are the most expensive projects we have. And their reach is very limited. Man can't magically create water. He can only preserve, transport, and purify what he has available around him.

Until now.

Addressing the Crisis

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Think of this as Volume 12, Number 1 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Despite all the problems of the world, there is a feeling of confidence in America. (Picture from UC Santa Cruz. Go Banana Slugs.)

The Crisis which has been building for a generation, and which has become obvious over the last four years, is finally going to be addressed.

But before we get to work there is something important which bears constant repeating.

It's going to be hard. At times, the task before us will seem impossible. We will be told it's impossible, by many people, we will be told to turn back, to turn away. And we will want to, very much.

Don't expect wisdom out of the opposition or the press corps. The first group got us into this mess and still refuses to own it. The second enabled this mess and still refuses to own that. To a large degree we will be on our own.

Our leaders will come to seem distant, no matter how hard they work to avoid it. The daily grind will consume them, and the minutiae will threaten to consume us as well.

The only hope is to keep our eyes on the prize.

A world without oil.

Where the Next Boom Will Start

Think of this as Volume 11, Number 43 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Every economic recovery is different. What worked before may recover but it's never the same.

That said, note that every new boom starts slowly. Growth is never uniform, not between industries or within an economic cycle. Recovery will be slow. It will take years. But its pace will accelerate and at some point we'll forget again what hard times felt like. That's when we'll be ready for another bust.

Let me start by looking at previous booms I have lived through:

• The 1970s happened in the oil patch. I was in Houston then and it was a lot like Dubai has been the last few years. One bank put up what looked from the air like a huge green dollar sign. That's how things were. After the crash, which was hard, there was finally a recovery, but it was never the same as it had been.
• The 1980s happened on Wall Street. I was a business reporter then and I watched as supposedly brilliant people took apart companies, then put them back together to reveal value. Everything else went up in sympathy. After the crash the Wall Street game changed. You still read about the "heroes" of that era, like Carl Icahn, but it's not the same. Nor will it be.
• The 1990s  happened on the Internet. I was an Internet reporter. I started warning of the crash in 1997, but the boom happened despite me. The bust took down a ton of companies, and I was out of work completely for over two years. But it did come back. Amazon and eBay came back. Other sites came back. Google barely existed at that time. But, again, this decade, online, has been mainly about consolidation and steady change, not revolution.
• The 2000s were all about housing. Whether the boom was real or artificial, the product of lax regulation or an attempt to cover up for the Iraq War's costs, is irrelevant right now. We created enough Confederate Money to paper the world, backed by houses that were only worth a fraction of what we paid for them, and it will take years to unwind that. When housing does "come back" it won't be the same. It can't be. But, in time, it will come back.

Big Threat to the War Against Oil

There is an enormous threat developing to the War Against Oil we all need to conduct in order to save the planet.

Low oil prices.

The price of crude on world markets has been cut in half over the last few months, as the recession we started with our Confederate Money spreads around the world. While the U.S. has responded appropriately, injecting new liquidity to partly make up for what has been lost, the world has yet to respond. The dollar is up against the Euro as a result.

Why is a lower oil price bad? If you spent the last year working on a plan to develop solar or geothermal or hydrogen energy, based on a price equivalent of $100/barrel oil, your project is now dead in the water. Your investors have pulled out and that energy won't be produced.

So long as energy prices are subject to the instant fluctuations of hedge funds and day traders, it is impossible to plan for new supplies.

The solution is simple, and it's time we went for it. As I have stated here many times, that solution is to set a floor price for oil.