Can natural gas ignite the economy?

New technology is unlocking vast amounts of natural gas in the United States, enough to have a huge economic impact.  Yes, it involves “fracking,” the controversial practice of pumping chemical-laced water into shale deposits, but improvements in that technique are starting to satisfy all but the most zealous environmentalists.  I’m glad to see companies from my native Oklahoma are leading the way.  Businessweek has a big story on the topic with the deck below the headline, “Unlocking vast reserves of shale gas could solve the energy crisis, the jobs crisis, and the deficit.”

“The United States,” [energy company CEO Aubrey] McClendon boasts, “has the capacity to become the Saudi Arabia of natural gas.”

A tall man who wears his wavy silver hair long by CEO standards, McClendon, 52, exudes the confidence of someone who’s certain he’s seen the future. Exploitation of newly accessible supplies of gas embedded in layers of what’s known as shale rock, he predicts, will help revive domestic manufacturing and change the terms of debate about global warming. “It’s a new industrial renaissance,” he says. . . .

Encouraged by the availability of inexpensive and cleaner domestic gas, some electric utilities are replacing their coal-burning capacity with gas-fired units. Energy-intensive manufacturers of chemicals, plastics, and steel are beginning to bring home operations that they exported years ago. “We believe natural gas must be part of any discussion on strengthening our country’s long-term economic health,” Mulva said in Detroit. “It should also be part of any discussion on improving energy security, protecting the environment, and, yes, creating jobs.”

On the economic potential of the nascent shale revolution, even some career environmentalists sound impressed, if cautious. “This thing is a potential game-changer,” says Fred Krupp, president of the New York-based Environmental Defense Fund (EDF). Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30 percent of the country’s natural gas supply. That proportion is heading toward 50 percent in coming years. The U.S. passed Russia in 2009 to become the world’s largest producer of natural gas. An Energy Dept. advisory panel on which Krupp sits estimated in August that more than 200,000 jobs, both direct and indirect, “have been created over the last several years by the development of domestic production of shale gas.” At a moment of 9.1 percent unemployment nationally, additional decently paid work is just one potential benefit. “Natural gas burns cleaner than coal, emits less in the way of greenhouse gases, and avoids mercury and other pollutants from coal,” Krupp points out. “So this could be win-win, if—and this is a big ‘if’—we do it the right way.”

via Could Shale Gas Reignite the U.S. Economy? – Businessweek.

Beware of Greeks fearing gifts

The Greeks founded Europe, and now they may end it.  And the vehicle for both is the same:  Democracy.

The European powers carefully crafted a deal to bail out Greece, forgiving half of their debt at the cost of significant reforms and austerity measures.  With this agreement, the world’s stock markets soared.  But then the Greek government, despite its earlier agreement, suddenly decided to put the accord to the vote of the people.  Since the population seems opposed to  austerity, the prospect of a referendum has cast the agreement into doubt, sending the world’s stock markets into another dive and shaking the economic foundations of the Eurozone.

World leaders convening at this resort [Cannes] for a long-planned summit find themselves confronting a suddenly acute crisis over Greece and signs of an economic slowdown throughout Europe that may narrow their room for action.

Greek Prime Minister George Papandreou left a cabinet meeting in Athens early Wednesday with his government intact — for now — and backing his plan to hold a national referendum on the country’s latest international rescue program.

World leaders will gather in Cannes, France, on Nov. 3 and Nov. 4 to discuss Europe’s debt crisis and other economic issues. Thousands of protesters are gathering in France to urge the G-20 leaders to focus on the poor.

But his call for a popular vote on Tuesday has jeopardized the rescue plan and upended the agenda for Group of 20 leaders. Papandreou has been called to a meeting here Wednesday night to explain himself.

This was to have been a summit where the G-20 — the forum where industrialized nations and the leading developing economies compare notes on the world economy — puts its stamp on a plan that convincingly appeared to settle Europe’s lingering financial crisis.

Instead, with Cannes under a security lockdown that has made its streets into a virtual ghost town, the group will be looking for ways to avoid even greater problems. The 17-nation euro region is trying desperately to navigate between the budget-cutting and reform needed to bring down high levels of government debt, and the tepid economic growth that is sapping incomes, causing chronically high unemployment and straining political systems.

via World leaders to confer with Greece over referendum call – The Washington Post.

Do you think the Greek government was right to put the question of accepting the economic package to a popular referendum?  Does the world’s economic problems bring us to the limits of Democracy, the possibility that people will not vote to suffer, even when the alternative may be suffering on a far greater scale?  Can you see something like that happening here, with voters rejecting efforts to cut back federal spending AND repudiating new taxes AND demanding ever more entitlements, to the point of national bankruptcy?

UPDATE:  The Greek government has now scrapped the referendum.

Why is Wall Street supporting Obama?

Democrats are attacking Republicans as lackeys for Wall Street.  President Obama has thrown his support behind the Occupy Wall Street protesters.  He wants to pour on more regulations and restrictions to big investors and banks and to take advantage of the public backlash against big corporations.  And yet the denizens of Wall Street are giving Barack Obama much more money than they are giving Republicans.  In fact, Mitt Romney’s old company is contributing more money to Obama  than to their former CEO!

Despite frosty relations with the titans of Wall Street, President Obama has still managed to raise far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate, according to new fundraising data.

Obama’s key advantage over the GOP field is the ability to collect bigger checks because he raises money for both his own campaign committee and for the Democratic National Committee, which will aid in his reelection effort.

As a result, Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all of the GOP candidates combined, according to a Washington Post analysis of contribution data. The numbers show that Obama retains a persistent reservoir of support among Democratic financiers who have backed him since he was an underdog presidential candidate four years ago.

Obama’s fundraising advantage is clear in the case of Bain Capital, the Boston-based private-equity firm that was co-founded by Romney, and where the Republican made his fortune. Not surprisingly, Romney has strong support at the firm, raking in $34,000 from 18 Bain employees, according to the analysis of data from the Center for Responsive Politics.

But Obama has outdone Romney on his own turf, collecting $76,600 from Bain Capital employees through September — and he needed only three donors to do it.

The battle for Wall Street cash has become a crucial subtext in the 2012 campaign, which is shaping up to focus heavily on federal banking and markets policies and the struggling economy.

Top Republicans have courted major U.S. bank executives and financiers, arguing that Obama’s policies have hurt them, while Democrats are seeking to turn the erosion of support on Wall Street to their populist advantage.

Obama’s ties to Wall Street donors could complicate Democratic plans to paint Republicans as puppets of the financial industry, particularly in light of the Occupy Wall Street protests that have gone global over the past week.

via Obama still flush with cash from financial sector despite frosty relations – The Washington Post.

Can anyone explain why donors would contribute to candidates against their interests?  Or do these donors think that Democrats would be far more likely to bail they out again than Republicans?  What all is going on here?

Creative destruction

One side effect of the foreclosure crisis:  Many banks do not want to hold and pay taxes on run-down properties that no one will ever want to buy.  So they are razing the decrepit buildings that plague so many of our big cities and are donating the lots to new land banks.  These, in turn,  are making the land available for next to nothing for new development and neighborhood improvement projects.  (These include churches, which in some cases are getting land for expansion for pennies.) Thus we have an example of capitalism’s “creative destruction.”

See Banks turn to demolition of foreclosed properties to ease housing-market pressures – The Washington Post.

It’s the European economy, dummkopf!

Ezra Klein argues that neither presidents nor congress, no matter which party, will be able to do much to influence the economy.  What will either pull us down further or bring improvement is what happens in Europe.  And so, if the state of the economy is what determines who gets elected president, our elections are in the hands of Angela Merkel:

Sometimes, the things driving the country’s economy are not passed by Congress. Sometimes, Congress has almost no influence over them. And this is one of those times.

Europe has reached a tipping point. Without a systemic solution — and fast — Greece will default. If Greece falls, chances are that Ireland and Portugal will follow. Desmond Lachman, a fellow at the American Enterprise Institute, compares it to Bear Stearns collapsing and dragging Lehman down with it.

If that happens, we’re going down, too. The European Union is a big economy. Bigger than ours, in fact. In 2010, the United States exported $240 billion worth of products to the European Union, and imported $320 billion. And our other major trading partners — Canada, Mexico, China, etc. — are similarly interlinked with the European economy. So just as a financial crisis that began in the United States was capable of creating an economic crisis around the world, a debt crisis that begins in the European Union has plenty of channels through which it can shatter a fragile global economy. . . .

Even the not-so-bad outcomes are still, well, pretty bad. Goldman Sachs estimates that if the European Union simply limps along the way it is now, the financial stress “is likely to slow the U.S. economy to the edge of recession by early 2012.” . . .

That’s the reality of the economy over the next year. If Europe gets its house in order, we might see a recovery. If it continues staying one step ahead of catastrophe, we’re likely to continue stagnating. And if it makes a mistake, we’re likely to follow it into recession.

In determining the likely future of our economy, Europe will probably also determine the outcome of our election. And that means that Congress, the president, and even the Republican presidential candidates, for all that they will pretend otherwise, will not. In 1992, James Carville, an adviser to Bill Clinton’s presidential campaign, used to constantly remind his candidate, “It’s the economy, stupid.” In 2012, it may well be the European economy, dummkopf.

via How Angela Merkel could defeat Barack Obama – The Washington Post.

Europe’s problem and our problem

Economics columnist Robert J. Samuelson gives a good explanation of what’s going on in the European economy:

Europe’s banking crisis — and “crisis” is used advisedly — tells us how much and how little has changed since the onset of global financial turmoil in September 2008. Then, people worried about the viability of major American banks, loaded with “toxic” mortgage-backed securities whose value was difficult to determine. Now, people worry about major European banks, loaded with government (a.k.a. “sovereign”) bonds whose value is difficult to determine. We are flirting with another financial crisis not unlike the post-Lehman Brothers panic.

So American financial institutions were pulled down because of bad loans on houses.  European institutions are on the verge of being pulled down because of bad loans on whole countries.

Read the column for the details:   Is another financial crisis looming in Europe? – The Washington Post.


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