Archive for March, 2011

WARNING: FORCING MOMENTS AHEAD

Wednesday, March 23rd, 2011

WARNING!

FORCING MOMENTS AHEAD

LINK-

http://jaygaskill.com/WarningForcingMomentsAhead.htm

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The DOT 2 DOT Blog

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Copyright © 2011 by Jay B. Gaskill

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Also feel free to PRINT IT FOR YOUR PERSONAL USE….

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For all permissions, comments or questions, please contact Jay B. Gaskill, attorney at law, via e mail at law@jaygaskill.com

When Kicking the Can down the Road,

Watch For the Sign

WARNING!

FORCING MOMENT AHEAD

By

Jay B Gaskill

We’ve all heard the popular bromide – kicking the can down the road. It has been the popular pastime of elected and unelected officials for several decades.  Now we are beginning to hear about “forcing moments”.

In the technical sense, a “forcing moment” describes an event in the life of a dynamic system that is running with some inherent imbalance (or disequilibrium) when some external push causes the system to “tip over” into a different, more stable state.  Think of an airplane’s defiance of gravity as it climbs at takeoff.  There is a fragile dynamic equilibrium between lift, angle of climb and forward motion that cannot be maintained forever without stalling.  As the stall point gets closer and closer, any minor change in airflow or the pilot’s ascent angle can be the “forcing point” that results in a stall…or a prudent leveling off for the long haul.

Of course, the ultimate stability of any aircraft is reached on the ground – ideally in one piece.  Economies, like airplanes, defy gravity only by a safe landing, not by flying forever.

Used a bit more loosely, the notion of a “forcing moment” describes those all-too-familiar times when some external event compels us to address a belated, long deferred adaptation to a growing problem.  In other worlds a forcing moment marks the place where kicking the can down the road no longer works.
Think of chronically falling behind in rent – a major forcing moment occurs when the landlord locks you out, and the deferred adaptation is when you move into cheaper digs.  In this usage, a forcing moment is an event or situation that forces a long deferred decision.

FISCAL FORCING

The notion of economic forcing has been introduced in an important Wall Street Journal article (it ran February 22) in connection with the national debt.  Here is the pull quote.

“The Treasury would face a difficult question after the government reaches the debt limit and continues to pay as first priority the interest on debts coming due. The situation, in essence, would be this:

“The Treasury does not have enough money to pay out all of the appropriations made;

Congress has, by law, said that the Treasury must carry out all appropriations laws and cannot refuse to carry out a portion of them (an action called “impoundment” that was prohibited years ago by law); and

“Congress has, by law (the debt limit statute), said that the Treasury cannot borrow to supplement income tax receipts to pay the government’s bills.

“In short, the Treasury would not have enough money to go around. Although the law generally does not appear to tell the President what he must do in that situation, some may argue that, as a practical matter, he would have to “just do it” and set priorities for which of the lawfully owed bills will get paid and which will not until there is more money in the Treasury to pay everything that the laws require to be paid. At some point down the road, the President could even decide to move other priorities higher than paying net interest. A President acting alone to decide which government bills to pay and which not to pay, operating without statutory authority, is anathema in a democracy based on law—clearly, something that is best avoided.”

The entire article should be carefully studied.  WSJ  – LINK ▼

http://online.wsj.com/article/SB10001424052748703445904576118533071051152.html

OTHER CANS, OTHER ROADS

The human tendency to deny vexing situations and to procrastinate doing something about them is endemic, for example, consider the matter of —:

ENERGY TECHNOLOGY FORCING

AS IN AGING TECHNOLOGY:

The world’s water cooled nuclear reactors, especially those deployed before 1980, need to be supplied with more robust containment structures and greater redundancy in post shut down cooling infrastructures.  Or they need to be retired.

Because of fierce opposition (mostly uninformed in my opinion) from the “anything-but-nuclear” crowd, funding has dried up for the much safer, newer generations of nuclear reactors that, should have been brought on line to replace all of the aging reactors years ago.  The policy paralysis put political and economic pressures on the operators of the older, less safe reactors, to kick the can down the road.

The forcing moment is almost at hand in the shape of a perfect storm of three convergent developments:  [A] a huge increase in the costs of fossil fuels due to growing demand and choked supply; [B] large scale food cost inflation and [C] protracted economic stagnation – the latter two due to a growing energy shortage.

AS IN INADEQUATE TECHNOLOGY:

Windmills, solar panels and other boutique energy technologies will fail us when we most need to be kept warm or cool or fed or transported or safe.  At the end of the day (a phrase rich with irony here), we will have to suffer a dramatic increase in worldwide poverty or we’ll undertake a comprehensive energy production surge, utilizing natural gas, clear coal processing technologies as a bridge to generation 3 and 4 nuclear power production.  That forcing moment is close at hand.

__

MOTHER NATURE’S FORCING

The greatest forcing mechanism in the human story remains the inexorable laws of large scale behavior, natural and human, and the raw forces of nature, especially the laws of physics and economics and the power of water.

Leaving aside the policy, scientific and ideological arguments about the recent global warming trend (indisputable from 1947 to date, but otherwise subject to reasonable scientific debate), there is a hidden conceit: We moderns are all too prone to dramatically overestimate the human technological capacity to redirect nature.  A glimpse at Japan, one of the most technologically developed countries in history, makes the case for humility.  If we were really able to alter the world’s climate by simple changes in industrial practices, then we have arrived at another ‘forcing moment’, the one where climate alteration becomes a casus belli, the sort of thing that brings nations to war.

And speaking or war….

___

NUCLEAR WINTER

Two Rutgers climate scientists, Alan Robock and Owen Brian Toon, have reworked the studies that first a\made the world community aware of the catastrophic side effects of a significant nuclear bomb attack and counterattack affecting urban areas.  Killing summer frosts, dramatic temperature drops – comparable to an ice age would trigger famine and starvation deaths on a biblical scale.

“A nuclear war could trigger declines in yield nearly everywhere at once, and a worldwide panic could bring the global agricultural trading system to a halt, with severe shortages in many places. Around one billion people worldwide who now live on marginal food supplies would be directly threatened with starvation by a nuclear war between India and Pakistan or between other regional nuclear power.” [My emphasis.]

Back when the US and Russia were the main concern, both governments changed policy to avert this dire outcome.  Today, Pakistan and India, among other regimes, could bring down world agriculture without any help from the original nuclear powers.

Nuclear “non-proliferation” is the sorry tale of a can being kicked down the road.

The forcing moment, may well the regional Islamic civil was now just underway in the Middle East.  This is one “forcing moment” that may not allow any second chances.

REFERENCES:

http://climate.envsci.rutgers.edu/pdf/RobockToonSciAmJan2010.pdf

http://climate.envsci.rutgers.edu/nuclear/

http://climate.envsci.rutgers.edu/robock/robock_nwpapers.html

http://climate.envsci.rutgers.edu/pdf/acp-7-2003-2007.pdf

http://oasis.lib.harvard.edu/oasis/deliver/~env00007

National Geographic News 2-22-11

“Even a regional nuclear war could spark “unprecedented” global cooling and reduce rainfall for years, according to U.S. government computer models.

Widespread famine and disease would likely follow

nuclear war remains a very real threat—for instance, between developing-world nuclear powers, such as India andPakistan.

“To see what climate effects such a regional nuclear conflict might have, scientists from NASA and other institutions modeled a war involving a hundred Hiroshima-level bombs, each packing the equivalent of 15,000 tons of TNT—just 0.03 percent of the world’s current nuclear arsenal.

“The researchers predicted the resulting fires would kick up roughly five million metric tons of black carbon into the upper part of the troposphere, the lowest layer of the Earth’s atmosphere.

“In NASA climate models, this carbon then absorbed solar heat and, like a hot-air balloon, quickly lofted even higher, where the soot would take much longer to clear from the sky.

“’Our results suggest that agriculture could be severely impacted, especially in areas that are susceptible to late-spring and early-fall frosts,’ said Oman, of NASA’s Goddard Space Flight Center in Greenbelt, Maryland.

“’Examples similar to the crop failures and famines experienced following the Mount Tambora eruption in 1815 could be widespread and last several years,’ he added. That Indonesian volcano ushered in ‘the year without summer,’ a time of famines and unrest.”

LINK

http://news.nationalgeographic.com/news/2011/02/110223-nuclear-war-winter-global-warming-environment-science-climate-change/

___

FORCED OPTIMISM?

I remain an optimist because I steadfastly refuse to believe that, when pressed, saner heads will not step in and prevail.

But when?

To quote Hillel the Elder:  “If I am not for myself, who will be for me? And when I am for myself, what am ‘I’? And if not now, when?”

So…Are we there yet?

JBG

[][][]

The author is a California Attorney.  His novel, “The Stranded Ones”, a near-future thriller, is a highly original homage to Robert Heinlein and Michael Crichton.  For an illustrated peek, go to http://jaygaskill.com/ReadTheStrandedOnes.pdf .

Purchase as a download from —

Amazon / Kindle:

http://www.amazon.com/The-Stranded-Ones-ebook/dp/B002YQ2IN0

…or

Barnes and Noble / Nook

http://search.barnesandnoble.com/The-Stranded-Ones/Jay-Gaskill/e/9781926760155
…and other vendors.  Just Google – < ebooks by Jay B Gaskill > .

___

Some Related Articles by Jay B Gaskill

http://jaygaskill.com/NukeWhisperer.htm

http://jaygaskill.com/TheNukeWhisperer2.htm

http://jaygaskill.com/ScienceTruthAndHumility.pdf

http://jaygaskill.com/JapanSyndrome.htm

http://jaygaskill.com/BrokeredTrust.htm

MELTDOWN, JAPAN? THE JAPAN SYNDROME

Thursday, March 17th, 2011

THE JAPAN SYNDROME

The

DOT 2 DOT Blog

As Published On

→The Dot to Dot Blog: http://www.jaygaskill.dot2dot

And

→The Policy Think Site: http://www.jaygaskill.com

All contents, unless otherwise indicated are

Copyright © 2011 by Jay B. Gaskill

LINK TO THIS ARTICLE OR FORWARD IT TO OTHER READERS, AS YOU WISH.

Also feel free to PRINT IT FOR YOUR PERSONAL USE….

Otherwise,

The author’s permission to publish all or part of this article is needed.

License to print copies for use in group discussions is usually given on request.

For all permissions, comments or questions, please contact Jay B. Gaskill, attorney at law, via e mail at law@jaygaskill.com

LINK to this article in htm format  – http://jaygaskill.com/JapanSyndrome.htm

JAPAN MELTDOWN?

FEAR OF THE FUTURE

&

The Nuclear Litmus Test

As the Japanese nuclear power plant disaster unfolds, here is the emerging litmus test:

Who is rooting for the success of those who are working to contain this disaster, averting the worst from happening, and who is rooting for failure?

Beware those in the second category, the ones who are secretly rooting for failure, who are hoping that the Japanese experience will drive a stake through the heart of the “nuclear power menace” once and for all.

The real question is whether we are willing and ready to enter an era of energy abundance – with all the benefits that brings, or whether a combination of fear and naiveté will lead us into an era of serious energy deprivation.   Without question, a period of serious energy deprivation virtually guarantees poverty, social chaos and war.

Consider a thought experiment:

The year is 2041.  In the developed world, fossil fuels have been retired from routine use in electricity generation, transportation, even heating.  These developments were driven by a combination of political instability in Middle Eastern oil producing areas and a general concern about the environmental impact of burning hydrocarbons. All in all, the age is one of energy abundance.  Crops are being harvested and delivered.  The world living standard has improved from the dark days of 2011.  Nuclear mishaps are rare, leaks of radioactivity almost unheard of, and repairs and emergencies are handled by robots.

Assume that this optimistic sketch actually takes place.  Can anyone realistically imagine that any of the weather-dependent energy technologies of 2011, solar panels and collectors and wind turbines among them, could ever adequately replace the retired “fossil” fuels by 2041? There is only one “clean burning” technology that could fill the “fossil” fuel gap in the next thirty years.

It is nuclear power.

A footnote to the 2041 scenario:

The electric powered transportation economy is made possible without fossil fuels, by using hydrogen fuel cells. Hydrogen supplies are routinely generated by Generation 4 nuclear reactors using water as the raw material. Nuclear mishaps are rare, leaks of radioactivity almost unheard of, and repairs and emergencies are handled by robots. Cancer deaths from exposure to petro-chemicals and combustion byproducts have been reduced dramatically over 2011 rates.

But can we get there from here?

Not a pound of uranium or plutonium need be mined for the next several centuries.  The nuclear weapons stockpiles in the USA alone could power the world’s energy needs for centuries to come.

No radical or unproven technologies need to be developed.  The working models and detailed designs for safe nuclear power and waste disposal have already been developed.  They are simply awaiting deployment.  The reactors that failed in Japan (under an extraordinary perfect storm of calamitous circumstances) were an obsolete technology that should have been retired a few years ago, and – as a result of the events in Japan – will soon be retired or radically upgraded.

The water cooled reactors built in the 1970’s with 1960’s technologies that require elaborate and fragile processes to achieve a safe reactor shutdown in an emergency are effectively obsolete.  The cheaper, Mark 1 version of this technology, marketed by GE to Japan and other customers in early 70’s cut corners on containment structures.  As a result of a biblical scale natural disaster, we are seeing the consequences of neglect.

New York times, March 16, 2011

General Electric Mark I Reactor’s Design flaws

“In the United States, 23 reactors at 16 locations use the Mark 1 design, including the Oyster Creek plant in central New Jersey, the Dresden plant near Chicago and the Monticello plant near Minneapolis.

“G.E. began making the Mark 1 boiling-water reactors in the 1960s, marketing them as cheaper and easier to build — in part because they used a comparatively smaller and less expensive containment structure.

“American regulators began identifying weaknesses very early on.”

http://www.nytimes.com/2011/03/16/world/asia/16contain.html?_r=1

HOW IT HAPPENED

Unlike the primitive reactors that the Soviet’s used at the time of the Chernobyl disaster, the Japanese reactors did not depend on a human operator to initiate the core shutdown by inserting the damping rods that quell the fission reaction.  Even in the 1970’s technology, the damping rods are designed to drop into place in an emergency, initiating a full reactor shutdown.   But curtailing active nuclear fission isn’t quite enough.  The fuel rods are still very hot.  In this design, they still need active cooling by the circulating water for many days before the spent rods can be safely stored.  When the power went out on the Mark 1 reactors, the primary water pumps went down and a heat build up began….

Science News 3-14-11

Link –

http://www.sciencenews.org/view/generic/id/71193/title/Japan_struggles_to_control_earthquake-damaged_nuke_plant

“As planned, backup diesel generators kicked in after the monster earthquake and continued to pump water in to cool the reactor cores. But when a tsunami swept across the Japanese coast about an hour later, the wave disabled the backup generators. The next backup system then kicked in: battery-powered pumps.

“But the battery pumps could not keep up with the residual heat still coming from the cores of several Daiichi reactors. Excess heat caused steam to build up in the system, which operators eventually vented into the environment along with low levels of radioactive elements like cesium and iodine.”

___

These failures were of 1970’s reactor technology, essentially obsolete.  Generation 3 reactor designs do a much better job of shutting themselves down and bypassing this sort of cooling pump failure scenario.

In the opinion of responsible experts, the currently working 1970’s generation nuclear reactors should be retired from use as soon as practicable, unless additional layers of redundant emergency shutdown and cooling shutdown procedures are installed.  Not coincidently, the German government has just shut down its old model (pre-1980) reactors.

Meantime the Chinese and Indian governments are still committed to the deployment of the next generation nuclear reactors.  The logic is simple and rational.  Given the problematic future of petroleum and natural gas energy supplies, there is no other realistic choice for growing economies at present.  Both governments are faced with the necessity of sustaining economic growth against the alternative of stagnation, starvation and civil war.

The USA has a significant opportunity here:  If we press forward with the aggressive development of Generation 3 and 4 nuclear technologies, we are part of the future.  The future belongs to smaller, passive-failsafe, more efficient reactors with a common platform allowing technicians to seamlessly move from one reactor to the next without retraining.

Among the pending generation 3 and 4 designs:

“Another, more innovative US advanced reactor is smaller – 600 MWe – and has passive safety features (its projected core damage frequency is more than 100 times less than today’s NRC requirements).  The Westinghouse AP600 gained NRC final design certification in 1999 (AP = Advanced Passive).”

“South Africa’s Pebble Bed Modular Reactor (PBMR) was being developed …with Mitsubishi Heavy Industries … [and] draws on German expertise.  It aims for a step change in safety, economics and proliferation resistance.  Production units would be 165 MWe. …. “helium is passed through a water-cooled pre-cooler and intercooler before being returned to the reactor vessel.”

“Performance includes great flexibility in loads (40-100%), with rapid change in power settings.  Power density in the core is about one tenth of that in a light water reactor, and if coolant circulation ceases the fuel will survive initial high temperatures while the reactor shuts itself down – giving inherent safety.”

See http://www.world-nuclear.org/info/inf08.html

I should note that helium in unique among reactor coolants because, as a simple element, it cannot be made radioactive.

Given these and other options, we are entitled to ask:  Why the delay in modernization?

  • The first level answer obvious – people are afraid of nuclear power and the Japanese disaster has only made matters worse.
  • The second level answer is a lack of intelligent, candid, credible leadership.
  • The third level answer is that these things require long lead times and the electorate has little appetite for long term planning.  [See the leadership gap problem above.]

But none of these considerations have deterred the Chinese and the Indians, not to mention the South Africans and others.

The US is an acute state of political paralysis on the subject.  There are fervently irrational environmentalists whose opposition to nuclear power represents at most 15% of the electorate, but whose strident voices account for 67% of all the noise.  Their stance has distinct flavor of a fundamentalist religious rant.  A recent email exchange will illustrate:

Me to my environmentalist correspondent:

You seem obviously unalterably convinced that the whole nuclear energy exercise is a dangerously deadly dead end.  But, if you are so inclined, I’d invite you to do your own research on the Generation 3 and 4 designs, especially the “pebble bed” reactor models under development.

I suspect that you and I would have no real argument about the dangers of radiation exposure.  But all risks are balanced against other risks, no? Solar panels are toxic.  Coal is toxic.  Dams are damaging to the environment.  Natural gas causes pollution.

Coal health hazards

http://www.envirojean.com/2011/02/05/toxins-inevitable-from-coal-gasification/

http://www.sourcewatch.org/index.php?title=Coal_waste

Natural gas health hazards

http://www.dinslaw.com/epas_costly_rule_targeting_emissions/

Solar panel toxins

http://www.holistichealtharticles.com/Artz/10969/412/Is-Solar-Toxic-Solar-s-Responsibility-to-Environmental-Protection.html

Gasoline toxins

http://www.envtox.ucdavis.edu/cehs/TOXINS/gasoline.htm

The Huffington Post is not a terribly reliable source for nuclear policy analysis.

By the way, starvation is toxic.

There is no completely safe source of large scale energy production, and no relatively safe energy technology that cannot be mishandled to the point that it produces unacceptable consequences.

The environmentalist’s reply to me”

No, I have heard all I need to hear about the new generation nukes. Feeble, pointless, and will never happen. The only ones promoting it are the ones who would get jobs or grants from it. And I have heard the same arguments about risks and have answered these many times in debates and articles. They aren’t worth the time of day.

OUR POLICY PARALYSIS

The deeper roots of our policy paralysis are in the republican – democrat standoff.

The republicans have avoided being infected with excessive nuclear-phobia (many pointing out the US Navy’s long standing successful reliance on atomic reactors to power its ships), but remain are split on the core policy issues because of the necessarily heavy government financial and regulatory involvement that the industry requires.

It is no coincidence that France, having adopted nuclear power technologies developed in the USA (not far from where I grew up), was able to quickly implement the conversion because it had a socialist government.

The democrats, for the moment, are completely in the thrall of the extremist environmental wing of their party.

One might think that the time is ripe for a national security-driven consensus, the energy-independence conservatives allying with the global warming avoidance liberals on a generation 3 nuclear option.

But that requires public education and knowledgeable, courageous leadership.  Need I say more?

JBG

JAPAN & OUR NUCLEAR FUTURE

Monday, March 14th, 2011

By no means out of the woods.  As of now…

In reactor No. 2, which is now the most damaged of the three at the Daiichi plant, at least parts of the fuel rods have been exposed for several hours, which also suggests that some of the fuel has begun to melt. If more of the fuel melts before water can be injected in the vessel, the fuel pellets could burn through the bottom of the containment vessel and radioactive material could pour out that way — often referred to as a full meltdown.

New York Times

This further update from The New Scientist (links below)

But even if the rods do melt and sink to the base of the reactor vessel, this shouldn’t be a problem unless the vessel itself breaks open. “The big question is whether the containment holds,” says Wakeford. “There was a meltdown at Three-Mile Island in New York, but the vessel remained intact.”

Wakeford says there is no chance of a “China syndrome” scenario, with the fuel burning its way right through to the earth’s core with potential to blow up the planet.

The repeated coolant failures have made the situation much worse, because temperatures and pressures will have risen much more. The pressure vessel that contains the fuel rods will have some threshold beyond which it cannot cope, and will break open.

Japan and our Nuclear Future

The

DOT 2 DOT Blog

As Published On

→The Dot to Dot Blog: http://www.jaygaskill.dot2dot

And

→The Policy Think Site: http://www.jaygaskill.com

All contents, unless otherwise indicated are

Copyright © 2011 by Jay B. Gaskill

LINK TO THIS ARTICLE OR FORWARD IT TO OTHER READERS, AS YOU WISH.

Also feel free to PRINT IT FOR YOUR PERSONAL USE….

Otherwise,

The author’s permission to publish all or part of this article is needed.

License to print copies for use in group discussions is usually given on request.

For all permissions, comments or questions, please contact Jay B. Gaskill, attorney at law, via e mail at law@jaygaskill.com

This article is also posed at:  http://jaygaskill.com/JapanAndOurNuclearFuture.htm

Japan is the first truly modern society to encounter a disaster of nearly biblical scale. In spite of the huge challenges is doing very well…a truly remarkable combination of preparation, sophistication and poise.

The Nuclear incident in Japan poses grave policy risks for the USA.

Where to go for reliable additional information –

The fault movement

http://www.newscientist.com/blogs/shortsharpscience/2011/03/giant-quake-was-small-for-its.html

Ongoing

http://www.newscientist.com/blogs/shortsharpscience/

Current

http://www.newscientist.com/blogs/shortsharpscience/2011/03/japan-megaquake-update.html

Earlier

http://www.newscientist.com/blogs/shortsharpscience/2011/03/powerful-japan-quake-sparks-ts.html

Japan – The Nuclear Perspective

A 9.0 earthquake (it has been upgraded from 8.9) exceeds any natural disaster affecting a modern urban population in the last three generations.  An event that triggers a vertical jump in the North American plate that in turn generates a tsunami that wrecks a major nation is a once in a century event – and more accurately it is a one-off event because in 1911 there was no nation state comparable to Japan.

The peaceful use of nuclear power that began in the USA in the 1950’s has gone through several stages, much as the auto industry from the Model-A Ford to the Toyota Prius.  Atomic reactor power plants have a useful life measured in decades but they all have a “pull off the shelf” date.  The failing Japanese reactors were close to retirement and are running on obsolete technology.

Generation 3 nuclear plants (which have passive shutdown capabilities) were first installed in Japan in 1993.  They would probably not have been catastrophically disrupted by the latest event.  Unsurprisingly, the 1970’s model water-cooled nuclear reactors are faring worse than their successors, because their safe operation requires and active, electrically powered cooling process.

Japan has 54 working nuclear power reactors, and six of them were adversely affected by the earthquake.

As this writing, I’m willing to predict that no full core meltdown will take place, but that further steam venting will be necessary for many days before these reactors can be stabilized.  [But see today’s development in reactor # 2.] The act of flooding a water-cooled reactor with sea water (in these cases doped with boric acid – boron slows the nuclear reaction*) amounts to reactor euthanasia.

POLICY IMPLICATIONS

Nuclear phobia has been reignited.  This is a tragedy because modern nuclear generation technology is far safer and more environmentally friendly than the BP to refinery flow path.  …And far more practical than reliance on windmills and solar panels.  This fact was realized years ago by Greenpeace co-founder, Dr. Patrick Moore, now a supporter of nuclear energy.  See http://www.wired.com/science/planetearth/news/2007/11/moore_qa.

Our elites have done us a grave disservice by failing to bring public opinion and knowledge in line with the realities of energy production technology. The most dangerous thing we face as a country is energy policy paralysis and catastrophic ignorance.

JBG

___

*

“Nuclear Reactor maintains continuous nuclear reaction in safe, and is equipped in

many nuke plants as well as in air craft carriers and submarines.

Boron is an atomic element numbered 5 with chemical symbol B, one of group 13

elements. The 10B isotope of Boron possesses a very large neutron absorption cross

section and is used to control nuclear reaction, and its compound Boric acid is

dissolved in primary coolant to control excessive reaction in pressurized water reactor.”

http://www.kyoto-kem.com/en/pdf/industry/Energy/ETIS-92001.pdf

___

The author, Jay B Gaskill, a California attorney, spent his formative years surrounded by nuclear scientists and engineers (mostly by their children) in Idaho during the birth years of atomic reactor technology and retains many of those contacts.  His science fiction novel, “The Stranded Ones”, deals with the consequences of the international collapse of all legal protections for intellectual property.  When aliens arrive carrying a treasure trove of technological innovations, things get very interesting.  Available for purchase as an e-book, only, on Amazon and Barnes & Noble, among other vendors:

http://www.amazon.com/The-Stranded-Ones-ebook/dp/B002YQ2IN0/ref=sr_1_1?ie=UTF8&m=AG56TWVU5XWC2&s=digital-text&qid=1300126309&sr=1-1

http://search.barnesandnoble.com/The-Stranded-Ones/Jay-Gaskill/e/9781926760155/?itm=1&USRI=%22the+stranded+ones%22

China’s “Lewis Moment” and its consequences for the Economy

Monday, March 7th, 2011

The

DOT 2 DOT Blog

As Published On

→The Dot to Dot Blog: http://www.jaygaskill.dot2dot

And

→The Policy Think Site: http://www.jaygaskill.com

All contents, unless otherwise indicated are

Copyright © 2011 by Jay B. Gaskill

LINK TO THIS ARTICLE OR FORWARD IT TO OTHER READERS, AS YOU WISH.

Also feel free to PRINT IT FOR YOUR PERSONAL USE….

Otherwise,

The author’s permission to publish all or part of this article is needed.

License to print copies for use in group discussions is usually given on request.

For all permissions, comments or questions, please contact Jay B. Gaskill, attorney at law, via e mail at law@jaygaskill.com

MONDAY, MARCH 7, 2011

The Tweet version for the impatient, busy reader:  Developments in China will require the USA to adapt much more quickly than the comfort level inside the Beltway contemplates.  This is something you need to study as soon as time permits.

JBG

FULL ARTICLE PRINT LINK: http://jaygaskill.com/ALewisMomentInChina.htm

A MOMENT OF TRUTH

China’s “Lewis Moment” and its consequences for the Economy

Eventually the truth leaks out.  This happens when the knowledgeable elites cannot any longer contain it, and the clueless elites wake up to smell a coming storm. This happened this weekend.  It will continue to leak out over the next several news cycles.

In recent business reports (see Bloomberg, S F Chronicle, 3-5-11 *) we are told that China has arrived at its “Lewis moment” (after the Nobel winning economist of the same name).  This is the moment when a developing economy arrives at an employment saturation point, that economic stage when there is a shortage of workers.

Several things quickly follow:  Wages go up – in China’s case, wages probably increase at the rate of 15-20% per year.  The prices of Chinese goods go up.  Chinese worker consume more.  Chinese manufacturers begin outsourcing (this has already happened.)  Inflation hits China’s customers (and this has already started).  The cost of borrowing from the Chinese goes up.

Hint to the naïve:  The world stage, both as an economic playing field and as a power arena, is still a Darwinian struggle.  No, the game is not necessarily won by any single player, and the use of brute force is rarely the decisive factor.

The game goes to the most creative-adaptive players.

My formal economic courses (taken before law school) are no longer current, but was obvious even to me some time ago (See my Links*** below) that a major adjustment in the economic relationship between China and the USA is looming.

We have overplayed our run as a consumption-based, debt-fueled economy by about 20 years and China’s 20-year run as a consumption-repressed, production-based economy has run its course.

Enter Fed Chair Bernanke, a conventional Keynesian economist tasked to do the impossible.  With no power to change the fiscal policies of the administration, his agency is supposed to contain inflation and maintain sufficient credit liquidity to keep the economy humming using “monetary” policy, only.  POTUS and the Congress can, for example, run about 45% of federal expenditures on credit and the fed is left to pick up the pieces, and actually is doing just that as I write this.

Sometimes the pieces are just too big.

In fact, things are not going well with the fed.  In what is charmingly called QE-2 (not a nutritional supplement, not a cruise ship) the fed has embarked on the infusion of new liquidity into the economy by using fiat money (dollars created out of thin air) to buy back about .8 trillion dollars of US debt instruments via “quantitative easing”.  Even without the push from China and the coming spike is gasoline prices, real food price inflation is already evident.  More price increases will come.

This is very much like the little Dutch boy who sees a small leak in the dam.

The economy is on dialysis. The QE-2 infusion is to end on June.  A question will then arise – Who will be willing to buy the roughly $1 trillion dollars in federal debt needed to keep this mighty spending engine going?  [Links **] Whatever the configuration of investors that agree to buy the US debt in June and following, two things will be true, given the present course:

1. The price of federal borrowing will go up.

2. An endpoint, that dreaded day when it becomes just too hard for the USA to borrow what it needs, will appear on someone’s calendar.  That moment will be like turning a page in one’s date book and finding that your own funeral has already been scheduled.

So…the pressure on the fed to adopt the irresponsible path of least resistance will be hard to resist.  Will it be QE-3?  QE-4?

Here are the three dirty little secrets.

ONE:

It is too late for the US economy to “grow out” of its current indebtedness within the productive lifetimes of workers 40 and older.  The sheer magnitude of government debt dwarfs any stretch of GDP growth period in our modern history.

TWO:

Inflation will decrease the national debt by devaluing the dollars with which it must be paid, hence the Great Temptation.  Bernanke should and probably will resist, but…

THREE:

Runaway inflation will lead to catastrophic results.  Certain South American countries and the pre-Nazi Weimar Republic in Germany have already been there.  Savings, pensions, long term contractual arrangements are burned to ash in such inflations and damaging social unrest follows.

Back to the Darwinian struggle:  Creative-adaptive wins.  We will get through this only if we quickly reign in all the red ink, much as an EMT stops bleeding at the scene of an accident.  Then we notice that the change in the American-Chinese relationship is an opportunity.  And we seize the moment. This is our invitation to return to the earlier US status as a productive, investment-driven economy.

How in the world can we do that, you ask?

Things have radically changed since someone could credibly say, “What’s good for General Motors is good for the country” (1953, GM President Wilson).

Much of the USA’s manufacturing base disappeared during the period between 1985 and 2005, an exodus driven primarily by high domestic labor costs.  Does anyone remember the hysteria surrounding the advent of automated, robotized manufacturing?  The conversion to automation in the USA was delayed for two decades by the convergence of two factors:  American labor resisted change and cheap foreign labor – living cheaply elsewhere – filled the gap.

It is hard to escape the implications of the fact that there are almost no unions in the Silicon Valley industries.  As foreign labor costs rise, the time is ripe for a resurgence of American manufacturing driven by high tech innovation, second and third generation automation, innovations safeguarded by a far more robust protection of American intellectual property. [I note here that the Chinese have appropriated without compensation an entire range of US and Western intellectual property.]

Government at all levels has run out of money and is on the brink of running out of credit.  Dumping gobs more of fiat money on the problem of stagnant growth is counterproductive because of the risks attendant hyperinflation.

This leaves private money.  Trillions of privately owed and controlled dollars (or their equivalent) are poised to invest in the US economy – or somewhere else.  Fortunately their owners are rational in the sense that they want their investments to be productive.  The USA is still one of the safest places to invest in a new business, but not necessarily the most long-term profitable one.

What needs to happen? The current political load on commerce, the red tape, the petty approvals, the irrational bureaucracies that threaten to suffocate any new economic venture need to be carefully, rationally and rapidly peeled away.

This is the only play we have left.

In the current situation, Americans and their servant politicians need to open the doors wide to private investment from anywhere in the world so long as the resulting enterprise and its backers remain subject to the three core rules of business development in the contemporary American setting:

(1) When you risk you money here, you will not be bailed out if you fail, and you will not be punished – or bled – when you succeed.

(2) Your capitalization needs to be sufficient to ensure accountability for fraud, misrepresentation and contractual compliance.

(3) You and your backers need to respect American intellectual property rights.

Implementation of such a vision of an open door, return to private-investment-driven capitalism, with a strong emphasis on creative innovation, requires a set of leaders that has not yet clearly emerged on scene.   Among the lessons that all too many of our political leaders have not learned is this: Bureaucrats are to creativity as water boarding is to breathing.

[My more detailed proposals and the background analysis are in a series of my articles, linked*** below.]

JBG

LINKS

* http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/03/05/BUVN1I3MCD.DTL

Pull quote –

“Dong Tao [is the] chief regional economist for non-Japan Asia at Credit Suisse in Hong Kong.

Tao says China is fast approaching the so-called Lewis turning point, named after Arthur Lewis, the Nobel Prize-winning economist whose work described that critical moment in a developing economy’s rise when its surplus labor supply dries up, and increases in wages, prices and inflation ensue. In China’s case, demand for workers will outstrip supply by 2014, Tao’s team calculated in a January report.”
** http://finance.fortune.cnn.com/2011/03/02/gross-warns-qe2s-end-could-sink-markets/

Pull quote A

“…if QE2 ends on schedule at the end of June, that bid will disappear – and the government will presumably have to offer somewhat higher interest rates to appeal to purchasers who are increasingly concerned about the prospect of inflation down the road.”

http://www.cnbc.com/id/41392090/Fed_to_Start_Tightening_as_QE2_Runs_Out_LaVorgna

Pull quote B

“With the second leg of the Fed’s QE program to run out in June, after it purchases another $600 billion of Treasurys to expand its balance sheet to nearly $3 trillion, it will then be faced with a tough choice of how to proceed.

“Investors will be watching the move closely.”

[No kidding…. JBG]

“Nomura Securities’ Bob Janjua estimated earlier this week that QE2 has been responsible for 250 points of the S&P 500 rally since late August 2010. Pimco’s Bill Gross also attributes a chunk of the stock market gain to the Fed, putting the impact at 4,000 Dow points since it started intervening.”

“LaVorgna, Deutsche’s chief US economist, lays out his expected timeline:

“As QE2 runs its course in June, the Fed at its June 21-22 meeting will announce that it will let its mortgage-backed securities run off its balance sheet and will not reinvest the proceeds in Treasurys, as it has been doing.”

*** Background Articles by JBG:

ON the nature of the crisis and the failure of conventional wisdom:

http://jaygaskill.com/KeynsianCollapse.pdf

http://jaygaskill.com/FiscalEarthquake.htm

http://jaygaskill.com/DelusionalEconomics.htm

http://jaygaskill.com/ChinaKrugmanGreatAdjustment.htm

ON the challenges of sparking creative solutions

“Creativity & Survival” http://jaygaskill.com/CreativityAndSurvival.htm

Getting Practical:

http://jaygaskill.com/ChinaInc.htm

http://jaygaskill.com/ChinaInc2.htm

http://jaygaskill.com/China3.htm

Walking the Walk:

http://jaygaskill.com/Breakout1.0.htm

http://jaygaskill.com/Breakout2.0.htm