On August 27, 1859 Colonel Edwin Drake drilled the first successful oil well in Titusville, Pennsylvania and ushered in the Age of Oil. The Age of Oil will not endure. Already just 150 years into it, we are seeing the endline but there is little question that oil has remade our world. That magical string of hydrocarbons allows us to live on this planet in numbers otherwise not possible. If not for oil, at least 40% of us would not be here. We literally eat oil for without we could not produce the quantity of food that enables our numbers of now near seven billion. Indeed, the major phenomenon of the modern era are wholly attributable to oil. The Green Revolution, globalization, the advent of plastics are all ultimately tied to our mastery of oil's magic. Our transportation infrastructure is largely based on a hydrocarbon economy. There is no question that solving our energy riddle is one of the paramount questions for the upcoming century.
Thus it is striking that the President last night in Williamsburg made the following comment:
This plan will begin to end the tyranny of oil in our time. It doubles our capacity to generate alternative sources of energy like wind, solar, and biofuels in three years.
It's an interesting and perhaps odd phrase, the tyranny of oil, but those involved in the study of peak oil or in the transition towns movement that phrase has real meaning and it is music to our ears. It signifies that President is aware of the daunting challenge to wean a planet off a diminishing resource before our world literally slides off a cliff. For me personally as someone who was less than enthused with candidate Obama, that phrase along with his comment back in Toledo to Joe the Plumber about "share the wealth" are the most instructive and insightful into the President's thinking and core beliefs. If President Obama addresses the "tyranny of oil" and moves to address the growing income inequality in this country then he truly is the one that I have been awaiting.
The above is a presentation from the Davos World Economic Forum summarizing four possible scenarios through 2020 for the global financial system. The four scenarios are Financial Regionalism, Re-engineered Western Centrism, Fragmented Protectionism, and Rebalanced Multilateralism. More on these below the fold.
After seeing the Republicans and the chattering class go on extended run scoring points left and but mostly right about tax cuts this and tax cuts that, the President brought his A-game to Williamsburg, Virginia delivering a fiery and often partisan speech to the House Democratic caucus reminding his audience of the urgency of the hour noting that this "is the moment for leadership that matches the great test of our time." The President painted the grim economic picture with the starkest of brushes.
If we do not move swiftly to sign the American Recovery and Reinvestment Act into law, an economy that is in crisis will be faced with catastrophe. Millions more Americans will lose their jobs. Home will be lost. Families will go without health care. Our crippling dependence on foreign oil will continue. That is the price of inaction.
This isn't some abstract debate. Last week, we learned that many of America's largest corporations are planning to layoff tens off tens of thousands of workers. Today, we learned that last week, the number of new unemployment claims jumped to 626,000. And tomorrow, we're expecting another dismal jobs report on top of the 2.6 million jobs we lost last year.
But his brilliance tonight was his embrace of the partisan. He attacked the Republicans for the "gift" of the ten trillion dollar debt that doubled on their watch. And he warned of the same old "false theories of the past."
The American people are watching. They did not send us here to get bogged down with the same old delay and distractions. They did not vote for the false theories of the past. They did not vote for the status quo - they sent us here to bring change, and we owe it to them to act.
The President warned his opponents pointblank not to "come to table with the same tired arguments and worn ideas that helped create this crisis." But he also implored members of Congress "not make the perfect the enemy of the absolutely necessary," asking them to "set aside the gameship" in order to get something done. Frankly, this was the speech that we have been awaiting with growing anxiety. Tonight he delivered a slam dunk.
The President gave a short speech today on the urgency of passing the American Recovery and Reinvestment Act while visiting the Department of Energy.
Now, I read the other day that critics of this plan ridiculed our notion that we should use part of the money to modernize the entire fleet of federal vehicles to take advantage of state of the art fuel efficiency. This is what they call pork. You know the truth. It will not only save the government significant money over time, it will not only create manufacturing jobs for folks who are making these cars, it will set a standard for private industry to match. And so when you hear these attacks deriding something of such obvious importance as this, you have to ask yourself -- are these folks serious? Is it any wonder that we haven't had a real energy policy in this country?
Are they serious? Unfortunately, they are. Recently, Art Laffer in his column in the Wall Street Journal called on the President to "forget about energy independence" because the "only way to get there is job-killing taxes." If one takes Mr. Laffer at his word then one must draw the conclusion that he is simply insane. In his column, he believes that to achieve energy independence would require an embargo to overturn "despotic regimes". Why would any sane person slap an embargo on Saudi Arabia or even Venezuela?
Throughout the world, change is the order of the day. In every Nation economic problems, long in the making, have brought crises of many kinds for which the masters of old practice and theory were unprepared. In most Nations social justice, no longer a distant ideal, has become a definite goal, and ancient Governments are beginning to heed the call.
Thus, the American people do not stand alone in the world in their desire for change. We seek it through tested liberal traditions, through processes which retain all of the deep essentials of that republican form of representative government first given to a troubled world by the United States.
The attempt to make a distinction between recovery and reform is a narrowly conceived effort to substitute the appearance of reality for reality itself. When a man is convalescing from illness, wisdom dictates not only cure of the symptoms, but also removal of their cause.
We find our population suffering from old inequalities, little changed by vast sporadic remedies. In spite of our efforts and in spite of our talk, we have not weeded out the over privileged and we have not effectively lifted up the underprivileged. Both of these manifestations of injustice have retarded happiness. No wise man has any intention of destroying what is known as the profit motive; because by the profit motive we mean the right by work to earn a decent livelihood for ourselves and for our families.
We have, however, a clear mandate from the people, that Americans must forswear that conception of the acquisition of wealth which, through excessive profits, creates undue private power over private affairs and, to our misfortune, over public affairs as well. In building toward this end we do not destroy ambition, nor do we seek to divide our wealth into equal shares on stated occasions. We continue to recognize the greater ability of some to earn more than others. But we do assert that the ambition of the individual to obtain for him and his a proper security, a reasonable leisure, and a decent living throughout life, is an ambition to be preferred to the appetite for great wealth and great power.
These words were spoken on January 4, 1935. They form part of FDR's State of the Union Address. President Obama would do well to study this speech in its entirety. More than any of FDR's inaugural speeches, this state of the union address would come to define his Presidency. In the months that followed this address would come the great programs and reforms of the New Deal that led to the creation of the embedded liberal state, a state that despite the near continuous assault by foe and friend remains at the heart of our great Republic.
(a) In General- None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States.
(b) Exceptions- Subsection (a) shall not apply in any case in which the head of the Federal department or agency involved finds that--
(1) applying subsection (a) would be inconsistent with the public interest;
(2) iron and steel are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or
(3) inclusion of iron and steel produced in the United States will increase the cost of the overall project by more than 25 percent.
(c) Written Justification for Waiver- If the head of a Federal department or agency determines that it is necessary to waive the application of subsection (a) based on a finding under subsection (b), the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.
(d) Definitions- In this section, the terms `public building' and `public work' have the meanings given such terms in section 1 of the Buy American Act (41 U.S.C. 10c) and include airports, bridges, canals, dams, dikes, pipelines, railroads, multiline mass transit systems, roads, tunnels, harbors, and piers.
Yet from Davos to Ottawa to Seoul to Washington, this smacks of protectionism and must be stricken. Even the President seems to thinks so. From Marc Ambinder:
CHARLES GIBSON: A couple of quick questions. There are "Buy America" provisions in this bill. A lot of people think that could set up a trade war, cost American jobs. You want them out?
PRESIDENT OBAMA: I want provisions that are not going to be a violation of World Trade Organization agreements or in other ways signal protectionism. I think that would be a mistake right now. That is a potential source of trade wars that we can't afford at a time when trade is sinking all across the globe.
CHARLES GIBSON: What's in there now? Do you think that does that? Do you want it out?
PRESIDENT OBAMA: I think we need to make sure that any provisions that are in there are not going to trigger a trade war.
Benjamin Franklin was off the mark. A penny saved is a penny taxed, it seems. If only he had kept his old ride (frankly, I'm surprised he didn't drive a pick up truck). Why, Tom, why?
Seriously, though, Mr. Daschle's tax problems should not have disqualified the former Senator from South Dakota turned lobbyist for the H&HS Cabinet post. Mr. Daschle was "uniquely qualified" for this position. His loss is not just a loss for the Obama Administration but a loss for the country. President Obama will be hard pressed to find another candidate with the same background though perhaps it's not required. Besides his Congressional experiences in both the House and Senate, Mr. Daschle authored a well-received book, Critical: What We can Do About the Health-Care Crisis in which the former Senate Minority Leader argues the United States cannot neglect the issue any longer because it weakens US competitiveness. And while he backtracked from a pure single payer system where the government is the sole insurer, Mr. Daschle's proposals would have likely moved the ball forward in that direction. Moreover, I believe that he had the clout to see its passage through the US Senate.
It does not get much more humble than a safety match, but through its history the forces at work in globalization are rather clearly demonstrated. The world's match industry dates to the nineteenth century. In 1827, the friction match was invented by a British chemist John Walker using potassium chlorate and antimony sulfide on the burner side. In 1844, two brothers in Sweden, Johan Edvard Lundstrom and Carl Frans Lundstrom, established a match factory in Jonkoping to manufacture lucifer matches. The lucifer match had a fatal flaw however, it ignited too easily but in 1855, Johan Edvard Lundstrom invented the Swedish-style safety match, the same match that we use now, by separating the combustible ingredients between the match stick head and the striking surface using newly discovered red phosphorus. For most of the rest of the nineteenth century, Sweden and then Japan (Makoto Shimizu went to Sweden in 1879 and brought back the technology) would dominate the global trade in matches but even so the world's match industry through 1914 is best described as autarkic. Local demand was largely met by local manufacturing.
As a result of severe competition prior to the First World War, the Swedish match industry underwent consolidation from 20 to two companies. One of these two surviving companies, Aktiebolaget Förenade Tändsticksfabriker (Förenade), was led by Ivar Kreuger. Between 1913 and 1932, Ivar Kreuger, who came to be known as the "Swedish Match King," would turn his small, family-owned match business into a $600 million global match empire. By 1917, Kreuger formed the Svenska Tändsticks Aktiebolaget, or in English, the Swedish Match AB (the company formally changed its name to the English version in 1980).
Despite the economic upheavals and political disruptions of the interwar period, Swedish Match had manufacturing operations in 36 countries including monopolies in 16 countries controlling nearly 60% of the world's match production. Kreuger's companies lent over $300 million dollars to governments in Europe, Latin America, and Asia in exchange for national match monopolies. Relying on international capital markets to finance acquisitions and to secure monopoly deals, by 1929 the stocks and bonds of Kreuger match companies were the most widely held securities in the world, including the most widely held in the US. When Kreuger committed suicide in 1932, forensic auditors discovered that Kreuger had operated a giant pyramid scheme, commonly called Ponzi schemes. His accounts were ridden "with fictitious assets, the truth hidden in a maze of over 400 subsidiary companies". Swedish Match's deficits exceeded Sweden's national debt. Funny how things just don't change though Bernard Madoff is sadly still alive.
On Tuesday, the President traveled to the other end of Pennsylvania Avenue to meet, talk with and listen to both House and Senate Republicans in an effort to secure their concurrence on the American Recovery and Reinvestment Act. Working the power corridors of officialdom in Washington isn't a bad move though I suspect sending Chief of Staff Emanuel to coerce the House GOP and sending the Vice President and the Treasury Secretary to the Senate to cajole and to mend fences may also pay dividends in this end. But if the President really wants to get the GOP to sit up and take notice, he might do better by taking his show on the road a bit further than just the other end of Pennsylvania Avenue.
Take it to Pennsylvania, for instance, where state unemployment rolls have risen by just over 62,000 since December 2007, an increase of 22%, and the Pennsylvania unemployment rate has risen some two hundred and twenty basis points from 4.4% in December 2007 to 6.7% in December 2008. The President might go to Allentown, home to GOP Congressman Charlie Dent, and remind Congressman Dent's constituents that Pennsylvania's unemployment benefits fund may run out of money by the end of this year if jobless rates continue to climb in the Keystone state. While there the President might tout the $43 billion for increased unemployment benefits and job training that American Recovery and Reinvestment Act includes.
Thousands of angry citizens have joined noisy weekly protests against the government's handling of the economy, clattering pots and kitchen utensils in what some commentators called the "Saucepan Revolution."
A cacerolazo in Reykjavik? Not surprising given the depths to which Iceland has been plunged. Iceland has been mired in crisis since late September, when the country's three largest banks collapsed under the weight of debts (more on 'securitization' below the fold) amassed during years of rapid expansion. The value of the country's krona currency has plummeted over 30%, hitting many Icelanders who took out special loans denoted in foreign currencies for new homes and cars during the boom years. In addition, Iceland must repay billions of dollars to Dutch and British citizens who held accounts with subsidiaries of collapsed Icelandic banks. Prime Minister Geir Haarde's government attempted to combat the crisis by nationalizing the banks and negotiating about $10 billion in bailout loans from the International Monetary Fund and from a number of countries, including other Nordics, Russia and the United Kingdom. Still, economists expect the Icelandic economy to contract 9.6%. Life for an Icelander may yet again be just "salted fish". The above clip is from the second day of the biggest protests against the government in Iceland since 1949 when people protested against Iceland joining NATO.
A cacerolazo (cacerola is Spanish for pot) is a form of popular street protest and demonstrations in Latin America which consists in a group of people creating noise by banging pots, pans and other utensils in order to call attention to political and social grievances. Cacerolazos date back to Salvador Allende's Chile when housewives took the streets of Santiago and other major Chilean cities to protest stagflation and severe shortages in 1970-1973. The empty pots weren't good for anything else. The practice remains fairly common in Latin America and has spread elsewhere. Cacerolazos erupted last Spring when Argentine President Cristina Fernández de Kirchner attempted to raise export tariffs on a variety of agricultural commodities setting off six months worth of political and social unrest in the South American country. Now cacerolazos have come to Reykjavik.