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The 5 Most Important Forecasts of 2008
Bill Paul, Energy Tech Stocks
#1 President-elect Obama On the US Power Grid
Get ready to make some notes on which energy investments should do well in 2009 and beyond based on what leading experts forecast in 2008 – predictions that have gone largely unnoticed by the rest of the media in the crush of the global credit crisis.
President-elect Obama, in a cable TV interview on MSNBC on the eve of his election, saying, “One of, I think, the most important infrastructure projects that we need is a whole new electricity grid. Because if we’re going to be serious about renewable energy, I want to be able to get wind power from North Dakota to population centers, like Chicago. And we’re going to have to have a smart grid if we want to use plug-in hybrids, then we want to be able to have ordinary consumers sell back the electricity that’s generated from those car batteries, back into the grid. That can create five million new jobs, just in new energy.”
Any longtime energy investor reading this statement can only say, “Wow!” In a matter of seconds, Obama has referenced two multi-billion-dollar investment opportunities that he says will be at the top of his list: energy “storage” and plug-in hybrid electric vehicles (PHEVs).
The first is what will be needed to connect solar, wind and other green power sources into a grid whose stability already is less than desirable.
(10 December 2008)
The other articles in this series are online:
#3 Toyota on Peak Oil; #2 Merrill on Cleantech
#5 Boeing on Biofuel; #4 Google on Geothermal
A conversation about economics with Nassim Taleb (video)
Charlie Rose show
A conversation about economics with Nassim Taleb author of “The Black Swan.”
(3 December 2008)
Create your own currency
Sarah Kuck, WorldChanging
Money,” wrote Jamais Cascio, “is the tangible manifestation of an agreement between you and other people that the oddly-colored piece of paper in your hands has value.”
But what’s truly valuable is not those units of currency, so much as the units of time they represent to those who earn and spend them.
Two women from Ashland, Ore., who follow this philosophy have created a way to turn units of time into currency that can be directly
traded and tracked through their online system OurNexChange. This “community currency” allows local residents to buy goods and services
without exchanging any money.
(4 December 2008)
Treasuries trade at a negative interest rate (briefly)
Randall W. Forsyth, Barron’s
Original headline: The Trillion-Dollar Rally
… the deficit seems headed for $1 trillion, based on the assumption of $224 billion in stimulus spending. With talk of a fiscal package running between $400 billion and $700 billion, the tide of red ink could run much higher.
If so, the Treasury market doesn’t seem to care. Monday, three-month bills were auctioned at a high rate of 0.005%. That’s right, half a basis point. Moreover, for a variety of mind-numbingly complex reasons, T-bills actually traded at a negative interest rate Monday.
Beyond the minutiae of the money market, Treasury yields remain at rock bottoms—under 1% for two-year notes, under 3% for 10-year notes and just over 3% for long bonds. While yields ticked up Monday as stocks rallied, investors continue to accept low yields for the safety of Treasuries.
(9 December 2008)
We are entering very strange territory. See next article for background on near-zero interest rates. -BA
Heading for zero
Roger Bootle, Telegraph
Central banks are making history. Last week’s 1pc cut took interest rates down to 2pc, the level that they were last at in 1951, which was the all-time low since the Bank of England was formed in 1694.
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What now? I think that interest rates around the world should be cut to zero – and what’s more, I think they just about will be. But why stop at zero? Why not send interest rates negative? The answer gets to the root of a monetary economy and hints at why deflation is so dangerous. The answer is cash – i.e notes. They do not carry interest, positive or negative. This imposes a limit on what can be done with bank deposits.
… Some people were prepared to accept negative interest rates because they hoped to offset this loss with a capital gain as the Swiss franc rose on the exchanges. Even this episode applied only to non-residents in special circumstances and did not last long.
And in the Great Depression in the US there were instances of negative rates. The prices of Treasury Bills at auction occasionally exceeded par, thereby giving a small negative yield. But these were exceptional quirks, and they do not offer a way of breaking through the zero limit.
There is, however, a theoretical way of breaking through it, namely to date notes and make their value decline with time. But this would play havoc with the monetary system which, after all, is founded on the idea that a pound is a pound, whenever the note was printed.
Roger Bootle is managing director of Capital Economics and economic adviser to Deloitte.
(8 December 2008)
There was a radical proposal to do exactly what Roger Bootle mentions in the last paragraph of the excerpt – to set the value of currency to decline over time. Now whose proposal was that? I can’t remember. I think the purpose was to discourage hoarding and encourage people to spend. Can anyone remember? -BA
UPDATE (December 11) EB readers have the answer. Thank you!
Ben Brangwyn:
You asked about a proposal for money that “rusts”. That’s the principle of “demeurrage” and was used for the local currencies during the Great Depression. During that time, people were hoarding money under mattresses
(not in the banks ‘cos lots of them failed). So there were 1) raw materials 2) willing labour 3) people who wanted stuff. But there was no money to set that cycle in motion – hence the local currencies with the demeurrage to encourage people to move them onto the next person.
David Porreca:
It was the currency of the Austrian town of Worgl that was set to decline in value monthly. Adopting this scheme lifted the town out of the Depression, until central authorities caught wind of it and shut it all down. You can Wiki the name of the town and find links from there. The town’s mayor, Michael Unterguggenberger, based his scheme on the theories of economist Silvio Gessell.
Paul Sebby:
I’ve seen this mentioned several times recently on Ran Prieur’s blog — it’s called “demurrage currency”: http://en.wikipedia.org/wiki/Demurrage_(currency)
Michael Miller:
Regarding ‘Heading for zero’ editor’s question about declining currency,
see story of Worgl, Austria, at http://en.wikipedia.org/wiki/Local_currency#Historical_local_currencies
and elsewhere.
Bryan:
I’ve been investigating local currency and the LETS (Local Exchange Trading Systems) seem to use this system. Every year the local currency becomes worthless so you have to spend it, it’s also worthless outside your
community so you help neighbours. Seems like a good idea but I haven’t done anything about it yet.
BA:
Also see Interesting Economics by Mike Hearn at The Oil Drum.
