One of the broad assumptions behind recessions and recoveries is that during the “boom”, excess capacity is built into the system as manufacturers & service providers expand to meet increasing needs (today, and in the future). During the recession, manufacturers & service providers pare back, leaving capacity idle.

Part of the reason that the recovery (typically) gains steam is that bringing back this idle capacity (both in physical and human capital) is cheaper than building (or training) new, and it allows the economy to “roar” back into high gear. In some high level sense WW2 leveraged all of the physical and human capital that was idled by the great depression; while huge plants were built and millions of workers mobilized much of the initial lift was caused by leveraging what we had that was unused at the time.

When I look at this “boom” and recession, however, from the point of view of the USA, it doesn’t seem that we over-invested in productive capacity. Much of the investment was in residential real estate and commercial real estate for distribution, retail and services.

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California state officials have been busy writing regulations:

The California Air Resources Board (CARB) just passed a new regulation that requires glazed glass in automobiles that is supposed to reduce the need to use air conditioning. The catch is that the same properties that block electromagnetic sunlight radiation also blocks lower frequency electromagnetic radio waves. That means radios, satellite radios, GPS, garage door openers, and cell phones will be severely degraded. Even more surprising is that it requires this glass even for jeeps that have soft covers, plastic windows, and no air conditioning. Furthermore, the rules are so stringent that they effectively make sunroofs black, even though many consumers use the covers.

Also, the California State Energy Commission is promulgating stringent energy-consumption requirements for flat-screen TVs. At a minimum, these will surely increase prices to consumers (if manufacturers could increase energy efficiency without raising prices, they would have already done it, since efficiency is a selling point) and may effectively ban some size-technology combinations. This is being done on the theory that it will reduce overall electricity consumption and help avoid the need to build new power plants.
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(Click the image to see it larger in a new window.)

So, Chinese scientist have made a “desktop blackhole”. Big whoop. I’ve had one on my desktop for years.

At least, things tossed onto my desk seem to disappear completely never to be seen again. Clearly, Occam’s razor says that a black hole is the most likely explanation.

iPhone saves woman from bear.

There are few ways in which a man can be more innocently employed than in getting money

–Samuel Johnson

I was reminded of this quote by something Irving Kristol wrote:

In New York the ruling passion is the pursuit of money, whereas in Washington it is the pursuit of power. Now, the pursuit of power is a zerosum game: you acquire power only by taking it away from someone else. The pursuit of money, however, is not a zero-sum game, which is why it is a much more innocent human activity. It is possible to make a lot of money without inflicting economic injury on anyone. Making money may be more sordid than appropriating power—at least it has traditionally been thought to be so—but, as Adam Smith and others pointed out, it is also a far more civil activity.
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The Anabasis of Cyrus, Book VI. Chapter 1.

“As they were thinking about all this, they began to turn to Xenophon. The captains approached him and said that army was of this judgment, and each showed his goodwill and tried to persuade him to undertake the rule. Now in some ways Xenophon wished for this, for he believed that in this way he would obtain greater honor for himself in the eyes of his friends; his own name would be greater when he should arrive in the city; and perchance he could become the cause of some good to the army.”

Leadership often brings with it opportunity, and by nature, leaders tend to be people who have in their characters, an ample amount of ambition. Most people tend to lose their heads when such opportunities arise and permit their ego satisfaction become a driver of their decision-making process. That stupid but ambitious officers are dangerous is an oft remarked truism, variously attributed to a constellation of German generals and field marshals. Xenophon was anything but stupid. Instead he had an intuitive, statesmanlike, grasp of the larger political realities of the Greek world even as he discerned the temper of the hoplite and peltast soldiers in the army to be one of shortsighted enthusiasm for his leadership that could wane when it created difficulties or danger.

Xenophon’s response to the soldiers also demonstrated the keen calculation of self-interest along with political realism:
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There is no more unaccountable group in America today than academics. This is true even when they work for public institutions. This is clearly on display in this story about the American Association of University Professors arrogantly claiming that anyone who seeks to bring academics’ work out into the sunshine threatens their “academic freedom”.

Academics tell us all how important they are and how they need great gobs of funding. But when when the people ask for an accounting of the work and spending, academics declare with great moral outrage that “academic freedom” is under assault by the people wondering where their money went and what is being done and said in their name.

Academics have forgotten that academic freedom isn’t a natural phenomenon, but rather a cultural artifact of the free West that people support because it provides benefits to the greater society.

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Check out the headline on this AP story:

Can you image the AP describing non-leftists’ ideas on health care as “reform”? Can you imagine them describing leftists’ objections to non-leftists’ ideas as “attacks” on those “reforms”?

Revealingly, the “attack” is just an industry study of the cost associated with the supposed leftist plan du jour. The horribly unfair and unjust industry conclusion of the evil insurance companies?

The chief reason, said the report, is a decision by lawmakers to weaken proposed penalties for failing to get health insurance. The bill would require insurers to take all applicants, doing away with denials for pre-existing health problems. In return, all Americans would be required to carry coverage, either through an employer or a government program, or by buying it themselves.
 
But the CBO estimated that even with new federal subsidies, some 17 million Americans would still be unable to afford health insurance. Faced with that affordability problem, senators opted to ease the fines for going without coverage from the levels Baucus originally proposed. The industry says that will only let people postpone getting coverage until they get sick.

It is one of the strange conceits of leftists that they believe that people do not respond to economic incentives. It’s simply common sense that if insurance remains very expensive for people, but they know that by law all insurance companies will have to grant coverage at any time, even if they’re already in the hospital, the economically rational thing for people to do is to delay purchasing health insurance until the very moment they need it. Pointing out that people respond to economic incentives and that they make decisions that provide them the best economic outcome is considered an “attack” by the AP

The AP is so far in the tank they can’t even see out of it.

[update (2009-20-12 3:58pm): I must not have been the only one to notice. Now the headline reads, "Insurance industry assails health care bill." Maybe they can learn.]

Carl von Clausewitz famously asserted that war is the continuation of political intercourse with the addition of other means. The Anabasis of Cyrus puts this assertion to the test, reducing the phenomenon of war to a single petri dish filled with Ten Thousand wayward Greeks. The Ten Thousand descend into Mesopotamia for a purely political purpose: Cyrus the Younger wants his brother’s throne. Cyrus calculates that a quick strike into the political heartland of the Persian empire will allow him to catch his brother at a disadvantage. The initial descent is calculated to roll from Asia Minor down to Babylon with such momentum that Artaxerxes II’s political decision loop would be overwhelmed. Most of the political impact that Cyrus’s military strategy is calculated to produce will be produced by strategic shock alone.
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Traditional newspapers are under intense pressure from a financial perspective. Newspapers provide much of the material that is linked to on blogs and other websites but they make little money for providing this service, while Google (owner of Blogger, which runs many sites on the internet) is a financial and stock market titan.

In addition to the financial threat, newspapers have a more “existential” crisis as they attempt to justify their role in the new world. They are often “scooped” by blogs and other media, which feature focused, partisan and expert writers on specific topics, as opposed to the “generalist” model used by traditional journalists.

In Chicago the Sun-Times has been rescued from bankruptcy by Jim Tyree of Mesirow Financial, who paid $5M and assumed $20M in debt for an enterprise with $200M of revenue / year. This rescue was accompanied by significant work rule changes from the unions that run the Sun Times, which are supposed to enable Tyree to restructure the enterprise to become profitable.

With all of this drama, the Chicago Sun-Times had an excellent opportunity to re-establish their voice and champion their role as journalists and their importance to the city. Let’s hear what they had to say in an column by Neil Steinberg titled “Hard choice lets city keep 2 newspapers“…

If the Trump Tower toppled into Wabash Avenue this afternoon because its builder secretly mixed Cream of Wheat in with the concrete, the Chicago Sun-Times… would instantly rush people over… to talk to people stumbling out of the twisted wreckage. More important, it would set reporters to work, figuring out just how that Cream of Wheat got into the cement, and what we could learn from the fiasco.

The question that the Sun-Times needs to answer is WHAT would be missed if they were to exit the scene, and HOW that would impact the citizenry of the City of Chicago and the other cities that they serve.

This completely feeble example is so far off base that I don’t even know where to begin. The most important value of journalism is to get AHEAD of stories before they become disasters, so that the disaster is averted. This means that they learn about an industry or topic, watch what is occurring, and raise the alert to the public before the event significantly impacts the population.

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“There are things to be done. Resist retreat as a matter of strategy and principle. And provide the means to continue our dominant role in the world by keeping our economic house in order.” Krauthammer

I’ve long acknowledged the powerful pull of tribalism. And time has only increased my nostalgia for those great flat plains. Still, you know, I would pause before voting for Bob Kerrey: that he couldn’t see the reflexive anti-Americanism in Obama (one I doubt he feels) is a problem. Of course, it is easy to understand Winger’s attraction and he was much younger; still watching her description of Polanski as victim made me wonder again at his judgment in the personal. And, sure, Krauthammer is more cogent. Still, Kerrey can be and has been heroic; he remains a Nebraskan and remains more right (and more honest) than most Democrats:

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About a month ago, Bill Waddell recommended a book called The Puritan Gift, written by Kenneth and William Hopper. Recommended it in pretty strong terms, in fact:

If you want to understand management – especially manufacturing management – how we got here, what has worked and what doesn’t – and how to get back on the phenomenal track American manufacturing was on before the wheels started to come off a few decades back, you have to read this book.

and

It is not an overstatement to describe The Puritan Gift as an essential book for manufacturing management. You really will have a hole in your understanding of the art and science of manufacturing until you take the time to let the Hopper brothers fill it for you. It will be the best $20 you ever spent.

(Bill’s full post here)

Social and intellectual history combined with practical advice on business management…sounded interesting, so I ordered a copy. I’ve read it pretty quickly and will now go back and read it in more depth, but I agree with Bill that it’s a pretty significant book. I’d encourage other Chicago Boyz and Chicago Girlz and Readerz to pick up a copy so we can discuss.

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All the head scratching over this year’s peace nobel is overshadowing the Nobel Literature Prize, given to Herta Muller, a surprise pick. Mrs. Muller’s writings deal with Communism, focusing on Romania, and she is an activist in the cause of exposing the truth of what happened during the communist period and where are these people today. Her works are sure to gain in popularity though they necessarily must remain difficult. The reality of communism is difficult, there is no getting around that.

There does seem to be a strange meme floating about, suggesting that Obama would have been a better Nobel laureate for literature. I can only think that the Literature Nobel has been debased so badly that the actual winner isn’t even looked at before the snark starts.

Full disclosure: Herta Muller was born in Timis county, Romania, as was I.

When I told my son that Obama had been awarded the Nobel Peace Prize he at first thought I was joking. When I told him they really did he said, “Why? Did they have a spare one laying around?”

Never has any Nobel Peace Prize winner done so little to deserve what used to be an honor. It is especially ridiculous given his utter lack of accomplishments as President (as lampooned by this SNL skit).

As a sociological/psychological phenomenon, the awarding of the prize is especially revealing given that the nomination deadline for this year’s prize was February 1st. That’s right, Obama was nominated for the Peace Prize when he had been in office for only two weeks!. This award reveals the left’s love of fantasy over reality. Leftists all over the world have created a massive fantasy construction based around Obama being the mythic hero who will save the world by virtue of his being a superman who transcends the grubby vices that the rest of us wallow in. It’s like he’s cast as the uberhero in the pseudo-intellectual’s version of World of Warcraft and the geeks from Norway just logged on.

Put starkly, Obama is not an extraordinary or accomplished individual in the domain of American politics. He has never accomplished anything of note apart from winning various offices. Instead, his entire career has been to serve as a living symbol of other people’s moral evolution. That is why he is President of the United States and that is why he got the Nobel Peace Prize. The Nobel Peace Prize committee is using Obama to demonstrate their own righteousness. They have no interest in rewarding actual accomplishment because for them, as leftists, simply believing in the fantasy of a better world is just as virtuous as actually making the world a better place.

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This is where the stimulus money actually is being spent… on new curbs and sidewalks here in Chicago. In the modern version of “ditch digging” these are the transformational projects that seem to have been chosen. On virtually every street in my neighborhood they are breaking up the sidewalks and installing ramps or fixing curbs in the corner. And I was told that they were going to use these funds to fix the US transmission grid for electricity, but apparently that’s “too hard”.

Note also the mandatory “Green” label on the side of the cement mixer. Right…

Cross posted at LITGM

Power Generation:

The US power generation portfolio is primarily made up of nuclear power, coal, and natural gas. Hydroelectric can be significant in parts of the country (and in power coming from Canada) but no one is even thinking of adding new hydro assets (in fact they talk about tearing down the dams we have today). Despite all you read in the press, “alternative” energy including solar and wind energy makes up a minuscule portion of total US generation (and almost none of the critical “base load” generation which is reliable).

In many posts over the years I have written about the media myths about power – one of the most prevalent is that nuclear power is enjoying a “renaissance” – nothing could be further from the truth. You can click on the sidebar (here) to view my previous posts on this topic. Nothing of substance (i.e. shovels turning dirt, committed orders occurring) is happening in the US; even in Europe where the revolution is also occurring one of the few new Western nuclear plants under construction (in Finland) is plagued by cost overruns and difficulties – from this NY Times article:

Areva, a French nuclear construction company, said this week that its project to build the world’s most powerful reactor remained mired in delays and was over-budget by 2.3 billion euros, or about $3.3 billion. The price tag of the plant in Olkiluoto, Finland — the first of a fleet of so-called evolutionary power reactors that Areva foresees building in coming years — was about $4.3 billion in 2003 and costs have steadily increased. The reactor was meant to have gone online early this summer but Areva no longer is committing to any dates for its completion.

With all of these difficulties in building coal or nuclear plants, the industry has turned almost exclusively to natural gas in order to provide extra capacity for the US. Natural gas plants are relatively cheap to build and easy to site; they emit less greenhouse gases than coal plants – but their down side is that with the price of natural gas up near $10 – $14 / unit (as anyone who uses natural gas to heat their home can attest), these plants are much more expensive to run. In addition, US supplies of natural gas have been limited (by exploration constraints and lack of LNG facilities and pipelines to get the gas where it is needed).

Natural Gas Today:

Often in this blog I criticize journalists for their poor understanding of business concepts; but I need to instead praise the Wall Street Journal for an excellent and succinct article on natural gas on Monday, October 5th.

The article is titled “Natural-Gas Glut Posts Risks for Independents” and is about the impact of lower natural gas prices on independent power producers (traditionally known as IPP’s). This article is on the back page of the investing section, called “Heard on the Street”. The articles here assume that the reader has a pretty in depth knowledge level of what is being discussed and as such get right to the point.
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Obama gets the Nobel Peace Prize. There’ll be no living with him now.

Why did he get it, exactly? For failing to bring the Olympics to Chicago?

It seems that the Nobel committee is still seething that Bush managed to forge a democracy in the Middle East, as their praise of Obama sounds an awful lot like the scolding Bush got during his two terms. It seems that our current President brought hope to the world, changed the climate of international politics, stuff like that. Sounds like one of Obama’s campaign speeches.

The praise heaped on Obama is all about ephemeral accomplishments that have yet to actually happen. Getting the US involved in combating climate change, reducing the number of nuclear weapons in the world, reducing tensions between Muslim nations and the US. Sort of like giving the heavyweight boxing championship to an Internet tough guy who never actually threw a punch.

But trying to use the Nobel prize to try and make Bush feel bad is now traditional for the Nobel committee. Back in 2002, they passed one off to former President Jimmy Carter for that very reason.

The next step is to give a Nobel prize to the girl Bush knew in high school that turned him down for a date. That will show him!