Savings, Fiscal Sustainability and Environmental Sustainability

In his previous post, “On the Fourth,” EMR suggested using the metric, “U.S. Net National Savings as a Percentage of GDP,” as an indicator of the extent to which U.S. society is preparing for the future. Why is savings so important? As EMR often says, the benefits of civilization are expensive. We have three choices: (1) Save the capital ourselves to pay for those benefits, (2) borrow the capital from foreigners, or (3) live without the benefits.

Since the 1980s, the U.S. has chosen Option 2. We can continue borrowing until our level of indebtedness gets so high that foreigners stop lending to us. It is the thesis of “Boomergeddon” that such a day will come, probably some 15 to 20 years from now (although with each passing month I am tempted to advance the date by several years).

To grasp our sad state of affairs, view the chart (based on OECD data) at the top of this post. That compares the household savings rate (excluding business and government) of the U.S. to that of other nations in the 2006-2007 time frame. Our consumers then were among the most profligate in the world. Since then, the household savings rate has ticked back up to between 3% and 6%, still a fraction of what it will take to pay for all the things that need paying for.

The good news is that between higher savings and defaults consumers have reduced their liabilities significantly since the Global Financial Crisis, although they still have a long way to go before the household debt/income ratio return to rates prevailing in the early 1980s, as shown in the chart above (based on Federal Reserve Bank data).We can be grateful that consumers are not actively mortgaging the nation’s future. But consumer reluctance to spend does create a short-term problem in an economy in which consumer spending accounts for 70% of all economic activity.

On the positive side, U.S. business is piling up large sums of cash — the most since the 1970s. (This chart comes from the PIMCO Group website.) On the positive side, U.S. business is strengthening its balance sheets. On the flip side, this helps explain why the rate of job creation is so low. Businesses would rather hang on to their cash than invest in growth. Unfortunately, slower economic growth = lower tax revenues = higher deficits = higher national debt.

As we all know, the big deficit spender in recent years has been government, especially the federal government. We can argue all day long as to whether deficit spending is needed to spur economic recovery, but the fact remains that the spending is occurring and the deficits are mounting, bringing Boomergeddon — the day the government cannot borrow any longer in public markets — that much closer.

One last chart. When it comes to total indebtedness, the U.S. is not the most profligate of all advanced nations. As can be seen from chart at left published in the Economist (based on data published by the McKinsey consulting firm), that distinction belongs to Japan.

Unlike the U.S., however, Japan, Britain, France, Italy and Germany have resolved to shrink their deficits. Whether they will succeed in doing so remains an open question. But having peered into the abyss of sovereign default, the major European countries apparently have made the decision to suffer the pain of a potential double-dip recession today than the conflagration of a meltdown in sovereign debt a decade from now.

So, how does this tie in to EMR’s discussion of environmental sustainability? It will take mucho dinero to make the transition from our current energy-intensive, natural capital-depleting economy to an economy that is environmentally sustainable. As EMR frequently observes, the window of opportunity to develop efficient human settlement patterns at reasonable expense closed back in the 1980s. It will be far more costly to do so now, even if we were committed to doing so, which we are not.

Right now, Americans are still enjoying the benefits of a global capital glut, but that inexpensive capital will disappear as the world’s largest economies shift from being net savers to net consumers of capital and as governments commandeer an ever increasing share of that limited supply of capital to cover their deficit spending. In another 15 to 20 years, the window will slam shut — with plywood boarding bolted on, to boot — on any hope of redeveloping our human settlement patterns in more efficient configurations.

Boomergeddon is going to be a real bummer.


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Comments

86 responses to “Savings, Fiscal Sustainability and Environmental Sustainability”

  1. Anonymous Avatar
    Anonymous

    Jim,

    I think the burden of persuasion on eh sustainable settlement patter lies with it promoters and you have not done the job. You need to explain what Fairfax County, for example, should look like; what policies should the County adopt to move to that direction; what policies should big employers adopt to move in that direction; what policies should the Fairfax County delegation support to move in that direction. Who will win? Who will lose? Should the winners compensate the losers? And if so, how?

    I am not arguing that you or EMR are wrong. But you are writing in broad open-ended language. You might as well write "Let's work for world peace and an end to hunger." But what does that look like and how do you get there?

    The Tysons landowners tried to use generalities (walkable community, green buildings, transit oriented development) to schmooze their way to mega density grants, but, except for those right at the stations, were generally handed their a**. They spent millions of dollars and wasted five years of time and got 8 million more square feet of density than they started with. Let's get real. Let's describe exactly what you mean. Then we can debate the merits. You might be right, but it's impossible to tell.

    TMT

  2. James A. Bacon Avatar
    James A. Bacon

    TMT, In the absence of specifics, calling for "efficient human settlement patterns" is indeed a lot like calling for "world peace." Touche. All I can do is refer you to my writings on this blog of the past five years, as well as those of EMR. I am tilling new ground now and I would prefer to devote space to elaborating upon the new arguments than rehashing the old ones.

  3. E M Risse Avatar
    E M Risse

    Jim:

    Great post.

    Thank you for the flag!

    As frequently happens, you stated EMRs views more succinctly that he does. You hit the nail on the head vis a vis the cost of living a sustainable, happy and safe life.

    On second thought that 1946 fireworks may have been at the fair grounds, not the airport but they may have been the same place. Not much air traffic at Lompoc in 1946.

    The graphic that blew EMR away was the one from Fortune.

    Here is the link.

    http://money.cnn.com/2010/06/30/news/economy/personal_savings_decline.fortune/index.htm

    Keep up the good work…

    EMR

  4. E M Risse Avatar
    E M Risse

    TMT:

    I agree with Jim.

    We hope to have our new web site up in a week or so and it will provide ways to look up answers to questions like yours.

    You are right that to date, what we have said is not clear enough to a Critical Mass at any scale.

    EMR

  5. E M Risse Avatar
    E M Risse

    That should be "CREATE a Critical Mass at any scale."

    There are some who are starting to get the picture in spite of those who hope the picture is NEVER clear enough to achive a Critical Mass of understanding.

    EMR

  6. Larry G Avatar
    Larry G

    shoot.. I meant to post this here:

    good job on pulling the data together…

    but as usual .. it's ALL in the interpretation of the data!

    Obama reminded the other countries that they should not expect to recover their economies by selling goods to the US.

    But I think one more chart is needed here also and that would be a ranked list of countries by external debt – per capita and as a percent of GDP…like this one:

    http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

    and then.. perhaps FUSE this with the savings rate, eh?

    so then we'd know if there is a real connection between the rate of savings and the rate of borrowing, right?

  7. Larry G Avatar
    Larry G

    My view is that debt is what we owe for what we have right now and have to pay off in the future.

    It's okay to have debt for a home or a car if you make enough to pay it back.

    But it's not okay to be incurring debt for your day-to-day operating expenses.

    The stimulus is a lot like borrowing money to pay for your current expenses knowing that either your income has to catch up soon to your expenses or you have to cut your expenses or both.

    But saving your money in this situation is only going to further imperil your financial situation.

    Setting aside money instead paying your electric bill or buying food would be dumb.

    Are we saying that after we are successful at escaping , we should start saving again or are we saying that saving right now is the path to escape a possible depression?

    a little confusing here.

  8. hydra Avatar

    Since when do you get to plan on tapping my household savings for all the things you think meed paying for?

    Sounds like you are planning a big tax on savings. Shucks,might as well spend it then.

  9. James A. Bacon Avatar
    James A. Bacon

    Larry, you have touched upon the dilemma for which there is no easy answer. If we continue massive deficit spending in the hope of stimulating the economy, we rack up an even bigger national debt and get closer to the point at which investors lose faith in our ability to repay. If we cut spending (or raise taxes) to lower the deficit, we arguably slow down the economy…. which results in lower tax revenues and raises the deficit.

    No matter which course we take, there are significant downsides. We are in one hell of a pickle. That's why I think Boomergeddon is inevitable.

    Repent, for the end is at hand. (Well, it's not "on hand"… it might take 15 years to get there. But it's coming!)

  10. hydra Avatar

    It is the same dillemma any business has: don't spend or borrow enough and lose sales or revenue opportunity. Borrow too much and put the enterprise at risk.

  11. Larry G Avatar
    Larry G

    Boomergeddon sounds a bit fatalistic which might explain why Jim think we should do ourselves in earlier – rather than later, eh?

    My view is a stimulus can buy us some time and if it works then we get our house in order pronto or else.

    but I am also struck by the idea that in the 2nd year of a young and inexperienced President who has had the kitchen sink of bad economies thrown at him – that it's all on his back.. at the same time some of us are saying also that it's basically all his fault that we have no hope to climb out of this mess.

    I spoke briefly yesterday with a solid Business Republican who disliked Obama from the get go and right now he is saying that if we do not do an effective stimulus that we are going to to 20%+ unemployment and we are going to go down the tubes.. for who knows how long and that there is a real possibility that the govt will have no choice but to renege on Medicare, SS and perhaps even Government employee's pensions.

    But is that really Boomergeddon?

    We run out of money.. everyone bleeds a little or a lot… sooner or later the ship get righted …

    I just don't think everyone is going to go home, slam the door, and proceed to starve to death.

    People are going to work.. they're going to find ways to survive ..

    at the end of the day, we might be living in 1400 square foot homes and driving whatever flavor of Chevy Geo is available but we won't be any worse off than say any other Industrialized nations…

    OR.. is Jim Bacon saying that some Industrialized nations (including perhaps this one) could fall back to 3rd world status?

    Is Greece going to turn into a 3rd world economy?

  12. James A. Bacon Avatar
    James A. Bacon

    Larry, I don't think Boomergeddon will return the U.S. to third world status any more than the Great Depression did. But it will inflict economic pain and misery the likes of which we haven't see in this country since the Great Depression. It will lead to the pall mall retreat of American empire, and it will shred the safety net. It won't last forever. We will recover. But we will be a very different country when we do.

    And, oh, by the way, if you're a Boomer counting on full Social Security and Medicare benefits to support your retirement lifestyle, you'll be severely disappointed.

  13. Larry G Avatar
    Larry G

    " And, oh, by the way, if you're a Boomer counting on full Social Security and Medicare benefits to support your retirement lifestyle, you'll be severely disappointed."

    Naw.. I've got a full pension.. guaranteed… full medical.. guaranteed…

    no one would take that away would they?

    ha ha ha

    I agree.

    There is a world of hurt getting ready to come down but I see a relatively simple solution.

    Replace our tax code with a nationwide progressive GST.

    zero for basic foodstuffs. 8% for upscale/luxury items.

    10% for big screen TVs and SUVs and the like.

    So if you are at the bottom of the scale, you get your basics without prejudice.

    The higher up you go on the scale, the more you pay.

    The first 5 gallons a week you get at regular pump price.

    The next 10 gallons cost you a buck a gallon extra.

    Anything over 20 has a $2 a gallon tax.

    Socialism and fiscal conservatism at it's finest.

  14. James A. Bacon Avatar
    James A. Bacon

    Larry, Ever hear of the "Fair Tax"?

  15. Larry G Avatar
    Larry G

    Jim – I have. But I'd like to see it not so discriminatory to folks on the margins.

    Overall I like the concept tho.

    I guess it would be cynical to suggest that some in the current administration might see the current dynamics as opportunity for tax reform?

    I can't wait to hear the bleats and whines after the tax commission returns with recommendations.

    Is there a tax reform path that would garner a majority of Congress – both houses – even after the 2010 fall elections?

    It's not an impossibility.

  16. Larry G Avatar
    Larry G

    Jim – how about a post of your views on a Fair Tax?

  17. Anonymous Avatar
    Anonymous

    Jim & EMR – with all due respect, I don't ever recall reading a specific proposal for Fairfax County. The County is clearly the economic engine of the Commonwealth. If there is some clear steps that could be taken to change settlement patterns in the County that would substantially reduce energy consumption, traffic congestion and I'm guessing taxes, it might be nice to examine them.
    I've seen the final plans for Tysons, which are not ridiculous. But know that, given employment trends, personal preferences and construction costs, most people who work in Tysons will not also live there or take the Silver Line there.

    The County expects huge increases in the number of commuters driving single occupant vehicles, which is why I fought the Task Force's "Vision" for years. And successfully, I might add.

    Fairfax County spent years of time and millions of dollars to get to where it is — about 10 million square feet more of development and most of the density at or within one-quarter mile of the stations. That is the County's best guess. What should it have done?

    TMT

  18. Larry G Avatar
    Larry G

    I have a proposal for Tysons and all New Urban(ish) proposals like it.

    It's pretty simple.

    There must be the same number of jobs available as there are residential units and the average salary must be able to afford the average unit.

    If that requirement is met – then the New Urban promise of being able to live near to where you work without having to use an automobile will me met.

    If you don't meet the requirement.. go fish.

    I'm sure the developers would develop a case of hemorrhoids over this rule.

  19. hydra Avatar

    Hey, if I had that rule available at the farm I could build that house I want tomorrow.

  20. James A. Bacon Avatar
    James A. Bacon

    The Fair Tax is one of the five quick big fixes I advocate to restore the federal government to a sustainable fiscal path.

    Regarding the "fairness" issue, Fair Tax proponents would solve it this way. Issue "prebates" at the beginning of every month equivalent to the tax on income set at the poverty line. In effect, anyone under the poverty line comes out whole. Someone over the poverty line is effectively taxes only on (a) what he/she spends, and (b) that portion over the poverty line.

  21. Anonymous Avatar
    Anonymous

    Jim, would we need to phase in the Fair Tax? So much of our economy is based on consumption. Cutting that consumption rapidly would likely cause a lot of people their jobs.

    TMT

  22. Groveton Avatar
    Groveton

    One of the most interesting articles lately. Good commentary too. Only one tear jerker about how unfair life has been to Obama lately.

    Right now, the government can print money without raising inflation because the velocity of money has slowed dramatically. In fact, this slowdown in the velocity of money has people talking de-flation again.

    Jim Bacon is right about this recession allowing companies and people to clean up their balance sheets. I've never seen so much cash on the balance sheets of big companies. I've never seen so many short sales, foreclosures and bankruptcies among consumers. Sure, that's painful but people should come out of short sales, foreclosures and bankruptcy with better balance sheets.

    The problem is that the de-leveraging of the financial institutions (code name for writing off debt without making much in the way of new loans) has put a crimp in lending. Small businesses in particular (which are not generally flush with cash) can't borrow. And they need to borrow to create the 75% of all new jobs usually created by small business in the early stage of a recovery.

    Meanwhile, the government is racking up defecits at an unprecedented rate. The electorate is getting nervous and elections are four months away.

    What's a "community organizer" to do?

    Unfortunately, Obama needs to stay the New Keynesian course. He needs to keep printing money and running a "stimulus" economy for about another year. This will have two positive effects:

    1. It will avoid a double dip recession by holding the economy flat for the next 6 months. After that, continued stimulus will be adding to underlying economic growth which will provide a full recovery by the second half of calendar 2011.

    2. The current popular backlash against defecit spending will require politicians to commit to serious austerity measures over the next 3 – 5 years. Inflation and its hand maiden, higher interest rates, will come along with the recovery. The presses will need to stop as the velocity of money increases through the recovery.

    After a few years, let's say 7 – 10, inflation and higher interest rates will push us into the next recession. The big question will be whether we have implemented the austerity measures (including tax hikes) during the brief "good years". If so, we weather the next recession and repeat the cycle. If not … Boomergeddon.

    All we're left to ponder is the liklihood of the two major parties implementing a sensible austerity plan (with higher taxes) after the deficit fueled recovery is underway.

    Me? I am buying gold and having it stored in The Bahamas. Because the next time America's two hopelessly incompetent political parties screw the economic pooch it will be screwed for a very long time. So long that I expect to see direct taxes on wealth rather than income (thing real estate taxes writ large) and a massive tax for anybody changing citizenship or trying to take their "already taxed" wealth out of the Unites States.

  23. hydra Avatar

    The chart makes it clear. Invest in Brazil, India, Russia, China.

  24. hydra Avatar

    Should the winners compensate the losers, and if so, how?

    😉

    RH

  25. Larry G Avatar
    Larry G

    Do my eyes deceive me or did Jim and Groveton both agree that more stimulus is needed?

    gazooks!

  26. hydra Avatar

    Groveton:

    I'm surprised at you. Buying gold is equivalent to putting money in a cash box. A sure loser.

    Always better to invest in someone making something. To invest in gold,buy gold mines.

    BTW. I need about 15k for a newer and faster sawmill.

    RH

  27. hydra Avatar

    Listen to Buffet. Even if currency is reduced to wampum those that own the means to production will be better of than those without.

  28. Larry G Avatar
    Larry G

    I think we are seeing a pretty significant shifting of the positions of Jim Bacon and Groveton who, if not mistaken, have, in the not too distant past, have argued vociferously against the stimulus and now seem to be saying that it is necessary.

    Am I wrong or can further words be offered?

  29. James A. Bacon Avatar
    James A. Bacon

    Larry, Your eyes *did* deceive you. I do *not* think more stimulus is warranted. What I meant to convey is that the choice is not an easy or a clear-cut one.

    My concern is that government stimulus does a lousy job of stimulating the economy. Not only that but we rack up debt that we will never be able to repay. Better to take our lumps now by cutting spending, restoring fiscal integrity and sucking up the inevitable hardships caused by getting the budget back into balance than to careen out of control and ending up with Boomergeddon, which will cause far *greater* pain and disruption.

    Indeed, Boomergeddon will create a failure so widespread and so deep that it will call into question the validity of the liberal welfare state. If you believe in the welfare state, you should be very concerned.

  30. James A. Bacon Avatar
    James A. Bacon

    TMT, A phase-in of a Fair Tax might be advisable. As you observe, any change in the tax regime as drastic as a shift from individual/corporate income taxes to a national sales tax would require a lot of adjustment in the private sector economy. An alternative to phasing it in might be to give two or three years advance notice — a period of time that the government probably would need to implement the change.

  31. Larry G Avatar
    Larry G

    Okay, I stand corrected. So if "taking our lumps now" takes us to 20% unemployment – it's the price we need to pay – correct?

    It appears to be that on the 20% there is agreement from both the pro and con stimulus folks that that is the likely outcome of stopping govt stimulus efforts.

    So you are in the camp of the 20% unemployment path?

  32. Larry G Avatar
    Larry G

    Without corrupting nor confirming the recently in-vogue idea that crises are how policy changes can be teed up – that in other times would never be a possibility…

    let's assume that there are, in fact, some folks "out there" in Congress, perhaps in this administration, perhaps the recently-instituted tax commission who would view the current crisis as the perfect opportunity to revamp and reform….

    a question –

    which would form the better framework for true material changes to the tax code ?

    A. – a stimulus-economy?

    B. – a 20%+ unemployment economy?

    Of the two – A. and B. – which would be bringing in LESS tax revenues? ( yes a FAT pitch..)

  33. Larry G Avatar
    Larry G

    oops… one more from the NYT Economix Blog this morning:

    " To Spend or Not to Spend
    By EDWARD L. GLAESER

    Edward L. Glaeser is an economics professor at Harvard.

    Should nations embrace austerity to atone for their past sins of overspending, or will such behavior plunge the world into another Great Depression?"

    http://economix.blogs.nytimes.com/2010/07/06/to-spend-or-not-to-spend/

  34. Anonymous Avatar
    Anonymous

    Jim,

    The only "Fair Tax" is NO TAX!

    Get the government out of everything including my pocket.

    As Patrick Henry said, "Give me LIBERTY…"

    The Fair Tax is a suckers bet for keeping the socialist redistribution going indefinitely at an even higher level of legalized theft.

    Freedom Works

  35. James A. Bacon Avatar
    James A. Bacon

    Freedom Works, I would love to live in a no-tax world, except for the fact that no-tax = no government = anarchy = Hobbs' state of nature where life is nasty, poor, brutish and short. No thanks. However, I would like to see a lot less government than what we have now. The question is, how do you achieve that goal? A violent overthrow of government? That's not for me. The only other alternative is working within the (admittedly flawed) democratic system for incremental change.

  36. Larry G Avatar
    Larry G

    …or we could adopt a form of government like Afghanistan has and kill two birds with one stone – the second bird meaning that since we adopted their form of government there is no need for us to stay there and "nation build" to be what Freedom Works says is the wrong kind of govt anyhow.

  37. Groveton Avatar
    Groveton

    LarryG –

    Your eyes do not deceive you with me. I think more stimulus spending is necessary. I hate to say that. Unfortunately, when you place a heroin addict on methadone you cannot suddenly cut off that addict from methadone. You have to continue the methadone until the heroin addiction is ended. Then … you have the problem of ending the methadone addiction. However, methadone is an easier addiction to end so, theoretically, you are better off.

    I am not sure our economy needed to be put on methodone. However, that was what happened.

    Unfortunately, in 2006 Methadone was part and parcel of 3,849 deaths in the United States.

    Another $1T of stimulus spending comes with some serioud potential side effects. Jim Bacon has described some of those side effects.

    The big question is whether we cn trust our politicians to stop spening after another $1T. I have my doubts.

    However, as in the Hoover administration, the die is cast. Hoover "blinked" and the economy tanked. Who knos if the ultimate result of Hoover's new found austerity would have proven better than Roosevelt's spendthrift policies. The winners write the history books and Roosevelt and his cronies wrote the history books from that era.

    However, one thing is for sure – Hoover's policy of starting with big stimulus and then drastically cutting back mid-stream plunged us into a double dip depression.

    That's enough for me.

    Can we trust the current crop of politicians to curb spending after the next 18 months and the next $1T? I don't know. Maybe I doubt it. But maybe hope springs eternal.

  38. Gooze Views Avatar
    Gooze Views

    Jim,
    Not sure sure it is a great thing that companies are hoarding cash.
    Firms do this as a reaction to recession. It's the first thing they do — find and accumulate cash.
    The fact that they have it means they are not yet expanding and hiring. Nor are banks really lending despite exceptionally low interest rates.
    This is one reason for the weak recovery.

    PG

  39. Larry G Avatar
    Larry G

    Indeed – virtually the ONLY money that is in circulation is govt money.

    Private money has dried up.

    My question to you financial wizards is this:

    There is a TON of money (despite the losses) in 401K pension plans.

    WHERE is this money right now because it sure looks like it's NOT in circulation… unless it's in Govt securities and the govt is spending it

  40. Hydra Avatar

    "Not in circulation"

    Well, it wouldn't be. My 401k is invested in a wide variety of companies, and has been for decades. The companies would have spent my paltry contribution long ago, and presumably on capital expansions: new equipment and facilities.

    That is what you raise capital for.

    But once it is invested in stuff, it is invested and no longer in circulation, same as money invested in my tractors. The money is spent and it "goes into circulation" for whoever I bought it from, but they have to pay off their loan and eventually it gets back to the manufacturor – where my 401 K is invested.

    RH

  41. Larry G Avatar
    Larry G

    awell.. money goes for infrastructure that pays those who build it who then spend it on food and shelter that in turn goes to those who provide the food and shelter who then add more to their 410Ks ( they are still growing for the non-retired right?)…

    and the money goes round and round…

    so where is it?

    why does the Govt have to spend money by borrowing against the future on infrastructure …"round and round"… teachers deputies etc?

    where is the money?

    even Groveton now believes that we must have a stimulus and I'm suspecting that Jim Bacon believes this also but he would be run out of town as a RINO if he admitted it…

    so..WHERE is the money?

    I believe that it is not in circulation and essentially "parked" somewhere and not moving…

    unless one believes… that there is a sinister counterbalancing force that seeks to burn a dollar for every one the govt prints…

    Jim Bacon would call this …the "anti stimulus" eh?

    The antidote to boomergeddon?

  42. James A. Bacon Avatar
    James A. Bacon

    Actually, Larry, I call stupid government stimulus spending "suckulus" — as in giant sucking sound.

  43. Larry G Avatar
    Larry G

    re: suckulus

    is there some other alternative to 20% unemployment?

    do we not agree that if we stop the suckulus that the economy will _really_ crater?

  44. James A. Bacon Avatar
    James A. Bacon

    Larry, It is the thesis of "Boomergeddon" that the economy is going to crater… the only question being, will it crater now, causing immense pain, or later, causing pain so insufferable it will call our fundamental institutions into question.

    Take your pick.

  45. Larry G Avatar
    Larry G

    so.. okay. even though you won't come right out and say it – you take the 20 unemployment path now – on the theory that as bad as that will be.. it will not be as bad as not doing it now and waiting…

    correct? (don't want to put words in mouth – just trying to understand the complete logic).

  46. Hydra Avatar

    and the money goes round and round…

    so where is it?

    ================================

    If it is a capital investment, it is not going round and round; it is money that is sunk.

    Hopefully it is sunk in something productive and the money from THAT goew round and round. But that expensive wheel forge bought with capital money can go off line and sit there for a long time if there are no current orders for forged wheels.

    That is the problem we face today.

  47. Anonymous Avatar
    Anonymous

    Maybe 20% unemployment wouldn't be so bad. We dont need all the people we have working in order to get all we need.

    We just hate the idea of other people not working and getting something for nothing. What I'd like to know is when do I get my 20%?

    What we need is not less unemployment, but more equitable unemployment, and unemployument sans stigma.

    RH

  48. Larry G Avatar
    Larry G

    " If it is a capital investment, it is not going round and round; it is money that is sunk."

    if that were true then the rationale behind the stimulus would be flawed big time.

    You pay people a wage to build a highway and they take that money and buy stuff and give the people who make that stuff jobs.. etc..

    The company that hires the workers gets paid.. makes a profit and is able to buy new equipment – which gives jobs to those who make that equipment..

    etc etc, so on and so forth

    no?

    "sunk" money would be like buying a 1000 acres and not using the land ..just holding on to it… right?

    whether or not you lose the race between the taxes and it's potential appreciation is not known initially…

    so that money truly is "parked" … into something that is not productive and does not go "round and round" (unless the land is improved or being improved…

    but the whole idea behind the stimulus is to provide what amounts to "artificial" cash to provide jobs that in turn will, in theory, provide other jobs.

    If you stop the stimulus you put a whole bunch of highway workers on unemployment right?

  49. Larry G Avatar
    Larry G

    re: "… unemployument sans stigma."

    I thought we had jobs that no one would do…

    how can that be if you are unemployed and not getting funds?

    I saw bananas selling for 50 cents EACH in 7-11.

    Heck ..the unemployed could go out and buy a pound for 50 cents and make 500% profit on them.. right?

  50. Anonymous Avatar
    Anonymous

    Jim and Larry G.,

    Here is a link to Walter Williams article which I think makes my point that virtually all government spending today is illegitimate. So when I say the only "Fair Tax" is "NO TAX" I am only slightly exaggerating for emphasis. We could do with less than 10% and maintain social order.

    http://www.washingtonexaminer.com/opinion/columns/The-Founders_-vision-against-ours-97944644.html

    "In 1794, when Congress appropriated $15,000 to assist some French refugees, James Madison, the acknowledged father of our Constitution, stood on the floor of the House to object, saying, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." He later added, "(T)he government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government." Two hundred years later, at least two-thirds of a multi-trillion-dollar federal budget is spent on charity or "objects of benevolence.""

    Now that we have socialism here with government banks, government mortgage lenders, government auto manufactures, government health care, government retirement programs, government education, etc., why did we waste money and lives fighting communism over seas?

    The wars are all a big scam to keep the welfare warfare state going regardless of which party is in power.

    Freedom Works

  51. Hydra Avatar

    "the unemployed could go out and buy a pound for 50 cents and make 500% profit on them.. right?"

    Wrong. They would immediately saturate the market. If your argument was the case, I could plant 150 acres of lousewort and make a killing.

    We only need a fraction of the population to work in order to make all we need. All we want, is something else again.

    We have switched over to a point where most of our production is optional, and yet we cling to the outmoded idea that work is not optional.

    If anything is going to be the root cause of boomergeddon, this is it.

    Less than 2% of the US population is feeding all of the US (with some seasonal help from Chile and other places). I'd be more than happy to let someone else do their share of the farm work, and I'll take their unemployment check.

    Call it paying your full locational cost.

    RH

  52. Hydra Avatar

    "if that were true then the rationale behind the stimulus would be flawed big time."

    Building a roadway is labor intensive, and therefore it creates stimulus as you describe.

    Once it is built though, that activity dies down, which is why it gets such criticism from the (unthinking) right.

    Now, if it is a road to nowhere, the money is truly sunk, and you may never see a return on the money spent to build it, beyond the original stimulus effect.

    But if it is a road that supports a lot of commerce, it will eventually pay, even if traffic is slow for a few months.

    Sure enough, for me, a ne tractor is a capital expenditure. And when I make that expenditure well, the prospect of that expenditure kept some people employed builing the tractor, but that was months ago. Today, they are unemployed.

    horses are a luxury now, so the price of hay is way down, and I'm not using the tractor much. in any case, nothing I do or don;t do with the tractor is going to change the employent condition of the people who make tractors – at least not any time soon. Eventually, I will wear out the tractor and put people to work building a new one.

    In the meantime,therefore, the investment in the tractor is sunk.

    Pick another example where the investment can be made without using a lot of labor in the process or because of the investment. Picture a robot that manufactures robots.

    RH

  53. Hydra Avatar

    Freedom Works:

    Notice how fast the governor of Louisiana started asking for government help when he needed it.

    We could do with less than 10% and maintain SOME social order, but it would be a lot different than what we have now, or any other civilized country has.

    now that we have socialism here, you might ask yourself how it got that way. It got that way because private enterprise could not handle the responsibility of taking care of people: of providing them a fair measure of food, shelter, and clothing in return for the profit they provided to PE in the form of labor.

    RH

  54. Hydra Avatar

    A nearly 40-year-old board game is getting a lot of new attention because of eerie similarities between the scenarios of its play and the 78-day-old BP Gulf oil disaster.

    The game BP Offshore Oil Strike, which came out in the 1970s and is adorned with an old BP logo, revolves around four players exploring for oil, building platforms and constructing pipelines – all in the name of being the first to make $120 million.

    But like the real-life oil game there are some big hazards, too. Players have to deal with the possibility of large-scale oil spills and cover cleanup costs. You struggle with "hazard cards" that include phrases now part of our daily vernacular, including: "Blow-out! Rig damaged. Oil slick cleanup costs. Pay $1 million."

    And yet no one saw this coming.

    RH

  55. hydra Avatar

    You should read "Down With Doom and Gloom" at mjperry.blogspot.com.

  56. James A. Bacon Avatar
    James A. Bacon

    Ray, I checked out Perry's blog. Once upon a time, I agreed with him. And I would add, while I am pessimistic about government finance, I am far more optimistic about American business and the American people. While I am convinced that Boomergeddon is inevitable, I also believe that we will reinvent ourselves and come out stronger on the other side.

    Perry's observation that things always turn out better than the gloom mongers predicted are based, for the most part, on issues related to the economy and the environment. He does not contemplate a fiscal meltdown of the federal government.

  57. Hydra Avatar

    I may be more pessimistic than you are. I'm leery of people who present a Pollyanna view that technology is going to solve all our problems.

    RH

  58. Hydra Avatar

    Case in point about technology solving all our problems:

    Scotts Valley Residents Ask City for Moratorium on Smart Meters

    On July 7th, a group of Scotts Valley residents alarmed about PG&E’s installation of wireless ‘smart’ meters that use microwave radiation to report one’s electricity and gas usage to the utility took their protest to the Scotts Valley City Council. The new group, Scotts Valley Neighbors Against Smart Meters, is asking the City Council to sign on to moratorium requests to the California Public Utilities Commission (CPUC) by the City of San Francisco and the EMF Safety Network.

    Questions continue to be raised about billing accuracy, fire safety, and exposure to electromagnetic radiation. “Just as worrying scientific evidence is beginning to emerge about the health impacts of cell phones and wifi, do we really want to install millions of new sources of this radiation throughout our communities, with very little benefit to the consumer?” asks Joshua Hart, Director of Scotts Valley Neighbors Against Smart Meters

  59. Larry G Avatar
    Larry G

    wait.. we've have remote phones (land line) that use "radio" waves, microwaves, wireless routers, garage door openers, and myriad other devices for decades and ….NOW … when Smart Meters use a similar technology, we have a problem?

    ha ha ha

    I call this LUDDITE LITE… for those who don't like the idea of really knowing how much electricity they use and for what purposes… much less get to pay your more fair share of it when you use it at peak hour….

    Nope.. this has virtually nothing to do with said technology and virtually everything to do with paying for what you use.

    Some day… when the electricity demand is very high and they have to put more polluting plants on line to meet the demand – they'll charge you a surcharge … right?

    In other words, you get the basic polluting rate and then you get the surcharge for super-polluting.

    sort of like a gas guzzler tax, or buying a car that needs high test, eh?

  60. Hyder Avatar

    cell phones are under scrutiny for the same radio wave problem. some people are paranoid about radio waves and don't distinguish between electromagnetic radiation and ionizing radiation.

    High tension wires are also suspect for the same sort of paranoid reason.

    The problem here is the same issue that you have raised previously and now ha ha ha at.

    From their perspective it doesn't matter what the facts are: if they fear radiation then it is damaging and they have the right to object and to be protected. The party producing the radiation has no say in how they (the citizens) feel about it.

    By your own previous argument THEY get to decide what the damage is and waht the prevention should be, without regard to the cost to others.

    However, you missed my point. I was alluding to the earlier posts about smart grid and how some claimn it would cure all our electrical ills. here is a group that claims otherwise.

    My cynical observation is that these people have rightly figured out that there will be no cost savings to THEMSELVES and that they will wind up paying for a amart gritd that benefits the power companies. They are using the radio wave issue as a faux environmental issue, otherwise they are not going to get any attention.

    RH

  61. Larry G Avatar
    Larry G

    the whole point of smart meters is to help people understand when the grid is at the limits of what it can provide and for them to take some responsibility in how to deal with that problem.

    The problem is…whether the issue is roads or electricity – providing peak hour capacity is very expensive.

    In the case of electricity, it costs about 7 times as much to provide extra power at peak demand periods and though I've not see data or roads, I'd not be surprised to see equivalent data.

    The point is – who should pay for capacity that costs 7 times as much as non-peak capacity – and how much should they pay for it?

    The current system basically provides electricity at the lower rate to anyone who wants it – even if it costs 7 times as much to provide it.

    Shouldn't we all pay for what it costs to provide the power at any given time?

    If we don't do that, aren't we all not really connected with the realities of the issue and basically expecting something to be provided to us – for far less than it's actual cost?

    Isn't this sort of like people expecting you to sell them hay at the same low price that is charged for no-drought conditions hay as drought-conditions hay?

    If someone offered you electricity at 1/2 the regular price – as long as you agreed to pay twice the regular price at peak hour.. would you take the deal?

  62. hydra Avatar

    The point has nothing to do with smart meters.

    It has to do with people who believe technology can solve all of our problems.

    Rh

  63. hydra Avatar

    We are already paying what it costs to provide peak power. The question is whether the division of cost is equitable. Given that most of us are diurnal and keep more or less the same schedule I'd argue that the inequality is small.

    The point of smart meters is to allow the power company to bill you for peak power when they had no way to do it before. They will charge you for the meter, then use it to bill you for peak power.

    The benefit to you is that now you get to plan York day around the electric meter and buy a timer for the clothes dryer.

    Would I take the deal? I don't know yet,I have not seen it yet. Sure, if they offer me half price for 23 hours and 7X for one hour,I could live with that.

    Only a fool thinks that is what will happen.

    Remember when the banks charged extra to use a teller,to encourage you to use the ATM?

    RH

  64. hydra Avatar

    If smart meters work then the grid will be working closer to capacityand with less backup.

    This will increase the likelihood of major failure.

    Anyway, these people get to decide what the damage is,not you. Right?

    RH

  65. Larry G Avatar
    Larry G

    well no.. it's people who are arguing against technology that is affecting them in ways they don't want it to…

    compare to red light cameras or mileage-based taxes….or transponder tolls, etc.

    Charging for peak power would do the opposite of pushing closer to brownouts, etc because it would kick in much higher charges that people with smart meters would see… like all the gas stations are suddenly charging &6 a gallon and they will shut down as much as they can.

    People will see that it makes no sense to heat water that they won't use until later for many extra dollars…

    This, in turn, will help the power companies better manage the peak-loads and plan better for how much peak-load capacity to have enough of.

    It may well push the normal and peak levels closer but it will also allow them to turn the heat way, way up the closer they get to exhausting their capacity.

    Smart Meters don't have to result in higher overall bills for people.

    they can be revenue neutral in fact.

    what it boils down to…literally is that instead of having to build more peaker plants – and more base plants also (for growth) – they get slowed down… and it's these new plants that add to total costs that people have to pay for on their bills.

    One of the new plants that was approved in Va – gave the company the right to add new charges on people's bills to pay for the new plant.

  66. hydra Avatar

    I don't want it if it is going to be revenue neutral
    I want an actual cash decrease in my bill and not just the opportunity to avoid the new higher charges the device enabled.

    The power Co doesn't want it if it will decrease revenues unless it decreases costs more.

    That means you are running closer to the edge with less backup. And it is not backup that can be quickly replaced: If You screw up,its too late. I can reduce weight and widage aloft by using smaller wire on my rigging. It is more efficient but more dangerous and inconvenient: you can't get a new mast when you suddenly need one.

    Besides,they will need more peaking plants anyway to back up increasing wind generation, so the new plant savings wont materialize. Next, peak demand will be whenever the wind doesn't blow.

  67. Larry G Avatar
    Larry G

    revenue neutral – as opposed to the rates going up to pay for new plants.

    Do you want to pay a whole lot more or more or less the same?

    you run closer yes but you have much more control over the peak by charging more and more or it such that people will not use more of it than actually needed when it is that expensive.

    but you're wrong.

    you can add natural gas peaker plants pretty easily – the only problem is they cost quite a bit more to operate..

    So you have as many as you need to prevent brownouts but don't operate them unless you absolutely must – and when you do, you charge people what it costs to operate them.

    … instead of buying more base power plants that sit idle much of the time.

    "peak power" will be whenever demand increases higher than the baseload.

    You provide it when people want it but you charge for it what it costs – and that effects how many will really want it at 7 times the normal price.

    People will work to fix their homes so that they will cut back their peak and base usage so that the will net the same costs or make them even less if they can.

    GE makes a heat-pump water heater that costs 4 times a normal heater but uses 1/2 the electricity.

    If you couple that with a tankless water heater….

    you'd pay a lot more money up front but use a lot less energy over time – and save money also.

    This is the problem right now.

    It's like the incandescent bulb at a quarter verses a CF at a buck or two…

    The CF saves money.. saves baseload and peak.. and yet people have no incentive to buy it if it costs more up-front.

    That kind of energy-saving technology exists in many applications but it costs more initially and so many will not buy it even though in the longer run it saves them also.

    Smart meters will get them to look closer at the numbers.

  68. Hydra Avatar

    It seems to me that a smart meter and an instant hot water heater would be the worst of both worlds.

    It takes one calorie to heat a gram of water one degeree whether you use a conventional heater or an instant heater. The instant heater costs more, so it costs more to heat the water. The difference comes from the loss of heat during storage. This can be minimized by adding another layer of insulation to your conventional hot water heater, which costs only a few dollars. In addition conventional heaters are now equipped with microprocessors which determine when your low use periods are and don't heat the water during those times.

    By buying an instant heater you do away with the loss of heat during storage, but you also do away with the ability to store hot water. So now, if you need hot water during the peak period your instant hat water heater will suck own juice like there was not tomorrow, when you might have stored it in a conventional heater and bought the power at a lower rate.

    Tankless heater companies advertise savigs of "up to" 50%, but the savings can be far less than that. Like spending extra for a Prius, it makes sense for some users and not for others, but the blanket endorsement of such technology does no one any favors.

    RH

  69. Hydra Avatar

    Look, Larry, all I'm telling you is that it might work out and might not. I'll decide when I see the proposed rates, or when I see an actual reduction in my bill.

    I don't think the power company has much incentive to make that happen.

    I understand all the theoretical benefits,(I studied energy economics in grad school) but I still don't think your sieve holds water.

    With the increased supply of natural gas and increased controls on coal plants operating gas plants will be more and more competitive, especially since they can be quite small and therefore strategically placed.

    If you are running closer to the edge you need a lot better control, not a little better. And then there is the question of whose control? I can see the power company turning back my AC, and after a while the microporcessor on the programmable thermostat sees that coming so it cools down the house a little more in anticipation.

    Mutual death grip.

    If the base load is increasingly covered by wind power, you will have little idea when you will nedd the "peaking" plants. They will be less like peaking plants and more like backup plants. either way they sit idle until needed. You are just going to need the backup plants more often so they pay their way sooner.

    Or, looked at another way, they are part of the cost of wind power.

    Up front costs for more efficiency do not necessarily always save money in the long run. That is the point i was trying to make about people who present a Pollyanna view of new technology.

    The Prius makes sense for me but it does not make sense for someone who drives 25 miles a week. There is no point in putting a CF bulb in my basement where I turn on the light for ten minutes pnce a month.

    In either case, it depends on whether I have some other use for the money with a faster or higher payback.

    Finally, if saving energy costs more money, it is probably not saving anergy. Money represents resources and using resouces always involves using energy.

    If the power companies can save money on the smart grid, and if competition means that savings flows down to me as a user, then I'm fine with it. I just don't see that happening. They are going to bill me for the smart grid and I'm going to spend more for smart appliances and the power company will pocket the savings.

    The best way to benefit from the smart grid is going to be to buy stock in the power companies.

    RH

  70. Hydra Avatar

    Look, Larry, all I'm telling you is that it might work out and might not. I'll decide when I see the proposed rates, or when I see an actual reduction in my bill.

    I don't think the power company has much incentive to make that happen.

    I understand all the theoretical benefits,(I studied energy economics in grad school) but I still don't think your sieve holds water.

    With the increased supply of natural gas and increased controls on coal plants operating gas plants will be more and more competitive, especially since they can be quite small and therefore strategically placed.

    If you are running closer to the edge you need a lot better control, not a little better. And then there is the question of whose control? I can see the power company turning back my AC, and after a while the microporcessor on the programmable thermostat sees that coming so it cools down the house a little more in anticipation.

    Mutual death grip.

    If the base load is increasingly covered by wind power, you will have little idea when you will nedd the "peaking" plants. They will be less like peaking plants and more like backup plants. either way they sit idle until needed. You are just going to need the backup plants more often so they pay their way sooner.

    Or, looked at another way, they are part of the cost of wind power.

    Up front costs for more efficiency do not necessarily always save money in the long run. That is the point i was trying to make about people who present a Pollyanna view of new technology.

    The Prius makes sense for me but it does not make sense for someone who drives 25 miles a week. There is no point in putting a CF bulb in my basement where I turn on the light for ten minutes pnce a month.

    In either case, it depends on whether I have some other use for the money with a faster or higher payback.

    Finally, if saving energy costs more money, it is probably not saving anergy. Money represents resources and using resouces always involves using energy.

    If the power companies can save money on the smart grid, and if competition means that savings flows down to me as a user, then I'm fine with it. I just don't see that happening. They are going to bill me for the smart grid and I'm going to spend more for smart appliances and the power company will pocket the savings.

    The best way to benefit from the smart grid is going to be to buy stock in the power companies.

    RH

  71. Hydra Avatar

    Technology that does not pay.

    FNMA doesn't want to back mortgages where people have installed solar panels.

    Solar panels increase the loan to value ratio on the loand and therefore it is more risky.

    Solar panels are sometimes paid for under a government program that adds the cost of the solar panels to the proerty tax bill, which stays with the house even if it is sold. In foreclosure, proerty taxes have to be paid first, increasing Fannie Maes exposure.

    Solar panels cost more than they increase the value of the home, and they cause increased roof problems.

    And

    Fannie Mae has filed a patent on a method of selling carbon credits to homeowners. No telling where that goes yet.

    RH

  72. Larry G Avatar
    Larry G

    re: tankless…hybrid systems..

    where you keep the water at 60 or 70 degrees then bring the part you use up to desired.

    I don't know about the insulation. I suppose if you covered your tank with 12" of R45… and did the same to your hot water pipes.. maybe…

    but the difference is is you have a hybrid system – you get the hot water you need – when you need it – even if you pay peak hr costs for the amount you actually use but over the longer run – you use less energy.

    Your insulation idea would also work with the hybrid tankless idea.. in fact.. may be a super-efficient setup.

    solar now comes in siding and windows… and roof shingles guy.

    It is possible to build a net-zero house now days… one that is on the grid and uses grid power when the house is not generating power but then reverses when the house produces power.

    If you had most houses working that way – your base power needs would grow much, much more slowly and much more easily be managed with natural gas peaker plants.

    but in order for the system to work automatically and not manually – you need the computer controls – i.e. "smart meters" .. and ultimately "smart grid".

    I've never heard of the micro-processor-controlled water heater than adjusts your historical use.. have you got a link for that?

  73. Hydra Avatar

    GE makes a heat-pump water heater that costs 4 times a normal heater but uses 1/2 the electricity.

    If you couple that with a tankless water heater….

    ===========================

    You would be a complete and utter energy idiot. That would make no sense, none whatever.

    A tankless water heater uses a really big heat exchanger so it can absorb a lot of energy all at once, and the result is seemingly instant hot water. You can use gas or electricty as the energy source.

    A heat pump water heater uses mechanical energy to absorb heat from the surroundings and use that to heat water and store it in a conventional tank. Mechanical energy is high value and high expense energy because you first have to build a machine to convert electricity or fuel to motion. you still get a "savings" from this because the heat pump can scavenge more energy from the surroundings than it uses in the process.

    Strangely enough, you would burn more fuel to heat the water than to run the machine that heats the water.

    If you already have a heat pump, you have hot coils outside (during the summer) and they are wasting heat to the atmosphere. You could capture this heat and use it to heat your hot water. In winter, when the heat pump is heating your house, you would divert some of that heat to heat the hot water.

    So far as I know such systems do not exist except for rather exotic home co-generation systems. The heat pump haot water heater is based on the same principle but it is a dedicated unit, not associated with your regular heat pump.

    Anyway, buying one of those AND a tankless heater makes no sense. Buying one or the other MIGHT make sense, but not necessarily.

    RH

  74. Hydra Avatar

    I've never heard of the micro-processor-controlled water heater than adjusts your historical use.. have you got a link for that?
    ================================

    I bought mine at Lowes. It is supposed to work, but I never could tell, and I never had hot water. It might be because my schedule is highly erratic, and it could not identify a pattern. Also, there are only two of us so the usage is small.

    I finally hit the over-ride switch because the savings wasn't worth the aggravation. Paid extra for an energy savings that neer materialized.

    Maybe they are better now.

    What probably makes a lot more sense is the microprocessor controlled main water shut-off valve.

    It monitors your water use and if it sees an unusually large spike in usage it shuts off the water. This can save you thousands in water damage and it costs less than the insurance policy – which might not pay anyway.

    Household floods due tobroken water pipes are pretty common and this is a pretty cheap fix – around $400. And installing one will get you a big discount on your water damage insurance.

    RH

  75. Hydra Avatar

    you use less energy.

    ===================================

    No. It always costs the same amount to heat the water: one calorie per gram per degree.

    Unless you use a heat pump which steals heat from someplace else. It still takes one calorie per degree per gram to heat the water, but now you don't buy all that energy.

    The only difference you are talking about is the cost of the loss during storage. If you store water at 70 degrees yo ulose less in storage because there is less energy to lose and less temeprature delta to drive the loss.

    Even R-15 will work wonders on your water heater. Get the kind with aluminum backing, wrap it around and fasten it with duct tape. Or buy the kit.

    Wait a few hours and then slide your hand under the insulation next to the outside sheet metal on your water heater. You will be astonished at how warm it is under there.

    If you really want a hybrid system, put the tank in a box with a glass cover and set it outside. Most of the time your tank will be far warmer than 70 degrees, and no heat pump required.

    RH

  76. Hydra Avatar

    solar now comes in siding and windows… and roof shingles guy.

    ============================

    I know all that. Come see me in thirty years. Meanwhile, be aware that some lenders will count this against you. It is one of those naste external costs that doesn;t matter until it hits you.

    RH

  77. Hydra Avatar

    All that stuff is fine. The question is will it pay, and over how much time. It is not more efficient just because it costs more.

    RH

  78. Hydra Avatar

    It is possible to build a net-zero house now days…

    All you need is an extra $80 thousand and permission from the zoning board and your homeowner association to put theis funny looking thing at an odd angle on the street.

    It is possible to sail straight upwind, too, but almost no one ever does it: it is too expensive.

    RH

  79. Larry G Avatar
    Larry G

    oh..you mean property rights, eh?

    so if you can't orient the house to maximize your own dollars losses for energy.. they are infringing on your rights?

  80. Hydra Avatar

    so if you can't orient the house to maximize your own dollars losses for energy.. they are infringing on your rights?

    ===============================

    I think you mean savings for energy.

    Not necessarily.

    If you bought the house or house lot with restrictions already in place, then there was no infringement of your rights.

    But, if society thinks saving energy is so important that they will mandate purchase of smart meters (is that like mandating health insurance?) then it seems a little twisted that they won't let you hang your clothes on a clothesline or rotate your house to the sun instead of the street.

    Again, the point isn't that such technology does not exist or won't work, but that waving evey new gimcrack as if it was the best invention since the Sabbath isn;t really helpful and may even lead to a lot of waste.

    As a rule, we do a really lousy job of eveluating benefits against risk or cost. Experiment after experiment shows us human biases that make no mathematical sense. Yet, is risk analyisis ever covered in high school math?

    OOPs, that's right. You have to be able to add first.

    RH

  81. Larry G Avatar
    Larry G

    I don't think society should mandate smart meters.

    In fact most folks would oppose them because then it would cost them to use electricity without regard to high use periods.

    If we can NOT WASTE energy – at the high peak periods ..use less of it and use it when the demand is not at peak..then that helps everyone.

    It means we don't have to build new base generation near as often and than when we do, it will last longer before the next new one is needed.

    The problem is just like with thing like the GE Hybrid water heater:

    http://www.myrec.coop/content-documents/ge-hybrid-wh-brochure_000.pdf

    that it costs $1200 up front rather than $300 even though it will save you 4 times or more that much over the life of the unit.

    It's a no brainer in terms of ROI but people won't go for the $1200.

    But if we had smart meters.. they would then see in front of their eyes – the costs of the conventional vs hybrid.

  82. Anonymous Avatar
    Anonymous

    Read the cite.

    the thing costs $1920, installed, and it saves you 350 ay year (if you use enough water – we don;t know what the basis is, but we could figure it out from the data provided).

    It takes 5.4 years before you break even and it is warranted for ten years. So after eight years you have to replace the compressor, and even if they give it to ou for free it costs $300 to install.

    At the end of ten years you have saved 2X what it cost, not 4X.

    Then there is opportunity cost. If you invested the $1920 at 5% a year
    you ould hae over $3000 at the end of ten years, instead of a 1920 hunk of junk.

    Or, it would throw off about $100 a year in interest you could use to pay your hot water electric bill.

    Therefore, the true savins is not $351 as claimed, but only $251, which means your payback is actually 7.6 years, or just about in time to replace the compressor.

    By the time the ten years is up you saved a whopping $600 and your IRR is 5%.

    Then you get to cough up another $1920 for a replacement. this is the equivalent of buying a CD tht locks up your money for ten years and pays you 5%, but then you don't get your money back.

    The IRR for the aleternative regular water heater is negative 2%, but you also get to have $2000 lying around for emergency or something, so the insurance value of retaining your options is worth something.

    The heat pump water heater will save you (some) money over ten years, if you use enough hot water to justify it. But the savings are not 4X, they are more like 4%.

    RH

  83. Larry G Avatar
    Larry G

    It saves you money and it save energy which, in turn, helps with the base electrical generation issue.

    The unit can also be programmed and if it could be programmed to NOT use electricity during peak hour periods.. then the savings would be even greater (if we were charging more for peak hour use).

    this is an example of something that saves money and energy and if you multiplied across the grid, it would be a win-win.

    what would be your reason for opposing it?

  84. in turn, helps with the base electrical generation issue.

    ================================

    Beyond the amount that it saves me in money, why is base generation my problem?

    The fact that it saves me money (and not that much money, as pointed out above), isn't enough.

    It has to save me MORE money than anything else I could spend my money on. Otherwise, money being equivalent to resources, of which energy is only one, it would NOT be the green thing to do to spend on this option first.

    Not only that, but there is a probability issue. I cannot know what will happen in the future. So If I have three $700 options and one $2100 option I might be better off spreading the risk of failur by choosing the three smaller ones.

    And, by choosing the smaller ones, I can get two of them up and running which I would still be saving up to put the one larger, more expensive, option in place, which has a higher risk of failure.

    Your claim is that it "saves you money" and may claim is that, no it doesn't, not really. Or maybe it does eventually, but not enough to worry about.

    RH

  85. Larry G Avatar

    If continuing the status quo is not an option… then what?

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