Sunday, June 15, 2008

Energy as the next Manhattan Project

Diana posted at Porter County - Northwest Indiana Politics today a rant about Congress mandating that we use a specific lightbulb The light bulb police are coming!

I commented back that I believe we will innovate our way to new frontiers, but perhaps there was no reason to do so until gasoline reached $4.00

Then later today I ran into this story in a couple places: Scientists find bugs that eat waste, and excrete petrol. Serious! That's the genius of American ingenuity. We will find so much energy that it will break the backs of the little demand crisis we're in right now and I think gasoline will free fall back to $1.50

Think I'm crazy?


prayeramedic said...

I'm not sure if it wall fall back much, at least not to $1.50. I still think the main issue is not energy, the real issue is the devaluation of the dollar due to the Federal Reserve's detrimental rate cuts.

You can't print money out of thin air to buy bonds from banks and expect everything to be ok! It causes hyperinflation -- Reischmark, here we come!

Daltonsbriefs said...

I think the real price, at cost plus margin, of gasoline would be about $1.50 for the foreseeable future. Yes, you're right that the dollar's fall in value has affected this price but not to the tune of 200%.

The dollar will strengthen, we went thru this same worry when the Japanese were coming on strong in the 80's and 90's. China will have it's own problems and the dollar will be the strong safe place for sovereign funds.

As for inflation, not concerned about it right now. We need the housing business to come back so that Americans regain that feeling of net worth increases. We need the bond markets to apply more risk analysis to mortgage bond placements, but we sure don't need to eliminate the one securitization technique that the rest of the world dreams of.

I would agree that it would be nice if the Fed would leave the rates where they are for the next 10 years, and merely manipulate money supply to manage the flows. This was advocated by Stephen Forbes, another unelectable but bright conservative, and I still think it would be wiser than playing with interest rates.

Playing with interest rates is really just rent control economics, which never works.