American Elephants

Annie Lennox by The Elephant's Child
September 1, 2011, 9:51 pm
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(h/t: American Digest)


The Epic Fail, “unexpectedly,” of Green Jobs. by The Elephant's Child

In March 2009, Solyndra was the first company to get an Energy Department loan guarantee worth $535 million.  President Obama proudly extolled the thousands of jobs the stimulus money would create. Last year on a visit to the new plant in Fremont, California, Mr. Obama said “the true engine of economic growth will always be companies like Solyndra.” And “a testament to American ingenuity and dynamism.”

On Wednesday, the solar panel maker announced plans to suspend business and file for bankruptcy.  More than 1.100 employees will lose their jobs. “Green jobs.”

President Obama is blaming cuts in Europe’s subsidies for solar power for his administration’s half-a-billion bet on a failed California green power firm.  Germany has been cutting back on those subsidies in an effort to reduce their own deficit spending.  The price for solar cells has fallen 42% since the beginning of the year.

Jonah Goldberg yesterday noted that “No president since Woodrow Wilson or Franklin Roosevelt has been more enamored with the cult of expertise than Obama.”

The cult of experts has acolytes in all ideological camps, but its most institutionalized following is on the left. The Left needs to believe in the authority of experts because without that authority, almost no economic intervention can be justified. If you concede that you have no idea whether your remedy will work, it’s going to be hard to sell it to the patient. Market-based ideologies don’t have that problem because markets expect events in ways experts never can.

The Obama administration set up the Energy Department as a Venture Capitalist with a pot of some $70 billion to invest in “green energy.”In other words, the government would pick winners and losers and support them with taxpayer money. They listened to promoters and with a big pot of government money from a government that supported anything green, a lot of promoters turned up. Those who had been bundlers for the Obama-Biden campaign had a leg up.

Mr. Obama has been noted by many for his dislike of being disagreed with. If this is indeed a characteristic, it’s a bad one for venture capital due diligence.  If you are listening to promoters telling you that this is the next big thing, you’d better listen to the experts who are telling you that the sun is too diffuse to ever be a significant producer of energy, and to remember that the sun goes down at night.

Wind, on the other hand, is intermittent. It blows in gusts, zephyrs, gales, breezes and not at all.  It can blow not at all for days at a time. Wind turbines turn and produce electricity when the wind blows at the right speed. When the wind does not blow, or blows at the wrong speed, the energy that the turbine would have produced has to be replaced by a coal or gas-fired power plant devoted to turbine energy replacement.

Electricity can be stored only in electric batteries, but the potential of electric batteries is governed by non-ferrous industrial metals, which are not in huge supply. Some say that they have gone through the entire table of elements, and where the new breakthrough will come from is simply unknown. This long article from John Petersen is titled “It’s Time to Kill the Electric Car, Drive a Stake Through it’s Heart and Burn the Corpse.” He starts with an 1883 quote from Thomas Edison:

“The storage battery is one of those peculiar things which appeals to the imagination, and no more perfect thing could be desired by stock swindlers than that very selfsame thing. Just as soon as a man gets working on the secondary battery it brings out his latent capacity for lying.”

At the time, Edison was a customer who wanted to buy batteries to improve the reliability of the Pearl Street Station, the first coal-fired utility in North America. An essential truth even Edison failed to recognize is that battery developers don’t lie, but potential customers consistently lie to themselves. They hear about gee-whiz inventions, overestimate the practical importance of the innovations and then make quantum leaps of imagination from the reasonable to the absurd. Therefore, the most important task for investors is to critically and objectively examine their own assumptions and avoid hopium induced hallucinations.

The article is very worth your attention because it demonstrates the problems inherent in green energy.

The federal government has no business attempting to be venture capitalists. They, unlike real venture capitalists in a free market, are playing with other people’s money. Real venture capitalists are putting up their own money and consequently take due diligence investigations very seriously indeed.

Governments cannot pick winners and losers. When they attempt to do so, they make messes for the rest of us.

The Goal of Business Is To Create Jobs? by The Elephant's Child

Investors Business Daily noted today  that a Rasmussen survey that was taken on August 20 and 21st found that 64% of the country thinks that the  most basic goal of businesses is “to create jobs for the overall economy.” Only 25% of the respondents to the poll understood that “the primary objective of a business” is “to create value for the shareholders.”

Jobs are probably the number one concern of Americans at this point. Even those who are happily employed probably know someone who is not, or at least are aware of shuttered storefronts and ‘for Rent’ signs on offices. So in a way it is not surprising that they should answer incorrectly.  But jobs are not created out of thin air, and businesses are not charities.

Business begins with an idea. Someone thinks he can make money with his idea. Unless he is independently wealthy, he must raise money to start. He has to sell his idea to people who will believe that his idea will create value. Those people will become shareholders, giving our idea man enough money to get a start, and he in turn, gives them shares or rights to future value.

With that financial backing he can hire people to do the jobs necessary to create the value promised to shareholders and continue to create value so they will continue to support him.  Investors will stick around only so long buoyed by hope for future profits. They expect to get their money back, with some more value thrown in to reward them for risking their money.

“Profit” is not a dirty word.  People have long been confused by the political left— academics and media people who simply do not understand the profit motive. A successful idea, well-implemented, can create many jobs, not only in their own offices, but in all the companies that supply a business: raw materials, shipping containers, computers, equipment, janitorial services, transportation, and so on; and the same increase happens in each of the suppliers’ businesses.  Free enterprise at work.  How is it possible to misunderstand so completely?

In early American times, most houses had a garden, an orchard, some livestock. Many were self-sufficient — until they needed something that their land could not provide.When they raised more than they needed for themselves, they could sell the excess to neighbors who did not have as much produce, and use the money to buy a buggy. If he grew a lot more than he needed, he might create a job for another man to help. With more income he might buy some more land to increase his income and hire more help.  We are talking about “profit” here. At what point does profit become a dirty word? And when does it become “excess profit?” Is our man’s wanting something not produced on his self-sufficient property “greed?” Of course it is.  And why not?

When our self-sufficient man gets a big idea and decides he will make buggies out in the barn, and gets friends to invest and hires helpers to train in buggy-making, he may be entering the industrial revolution, but is there something bad about his profit?  Who knows, maybe his grandson will become Henry Ford and invent the production line.

Do greed and profit only become dirty words when you post your business name on the internet? or when you get a neon sign and a letterhead?

The business of business is to turn a profit to create value for shareholders because that free enterprise process is how jobs are created. When a business grows, it hires, when it grows it enriches its suppliers who are creating value for their shareholders, and creating jobs, and so on.

Businessmen hope to create value for their shareholders, but that “greed,” that wish to create value may well also be a desire to create the world’s most perfect buggy, or i-pad.

So how do Democrats get so confused about how jobs are created? Why are they so troubled about profit, and greed, and value and free enterprise? If you look into backgrounds, it is easy to discover that many, if not most, have never had to meet a payroll, or work to turn a profit.


Great Expectations? Not Much. Government Needs to Get Out of the Way! by The Elephant's Child

President Obama sent a message to Congress.  He would like to make a televised address to a joint session of the House and the Senate, on Wednesday, September 1, at 8:00 p.m.  The President may ask, but not order. Presidents are usually invited, and do not demand a time slot. Congress is a co-equal branch of government, a fact that the President sometimes forgets. A speech to a joint session of Congress is an unusual occurrence, usually reserved for the State of the Union, and the attack on America on 9/11.

Surely it is merely a coincidence that the Republicans have a major debate on that day and at that time.  Not even reporters at the Washington Post could swallow that one, and were embarrassed that Jay Carney was sent out to claim coincidence. It was a clumsy political move, and a mistake.

Speaker Boehner responded for the House of Representatives that he would be washing his hair at that particular time. (Well, no, that’s not what Speaker Boehner said. I lied) He returned a very polite letter explaining why Wednesday was not possible — first time Congress is in session with votes at 6:30 that evening, no time, requires 3 hours for a joint session speech, need full security sweep before receiving a president, etc. etc. We look forward to hearing your ideas, how about Thursday?

White House has said Thursday’s fine, and will get done before the game. In the past 2½ years Obama has given over 200 speeches on jobs and the economy. Blogger Ed Morrissey noted that Obama previewed Obama’s blockbuster speech in an interview with NBC’s Brian Williams:

Williams: Let’s talk about another topic that’s part of the firmament here and everywhere. And that’s the economy. The New York Times said this weekend, “President Obama has another new plan on the economy. Now would be a good time to find out about it.” Do you have anything new on the economy? And while you’ve been away, we had a horrible GDP number last month.

Obama: Well, look, we–we anticipated that the recovery was slowing. The economy is still growing, but it’s not growing as fast as it needs to. I’ve got things right now in–before Congress that we should move immediately. And I’ve said so before I went on vacation, and I’ll keep on saying when I–now that I’m back.

This interview aired on Sunday Aug. 29, 2010.  Over at the Wall Street Journal, James Taranto said that Obama is a one-man echo chamber. He keeps echoing the same ideas over and over. Taranto notes further that “the so-called mainstream media is engaged in a bizarre propaganda effort, aimed not so much at persuading voters to agree with Obama but at convincing politicians that voters agree with Obama.

President Obama has described the policies he plans to offer in his speech as “bipartisan ideas that ought to be the kind of proposals that everyone can get behind.” One of them is the employer tax credit for those who hire. Both Democrats and Republicans oppose this as simply unworkable. Business will hire when there is enough demand for their product that they need more people. Economists point out that the cost of hiring a new full-time worker often costs more than the tax credit is worth.

He will propose his “infrastructure bank,” and idea that will not go far in the House.  The President does not seem to understand infrastructure.  Projects will often take years to come to fruition, with planning, environmental reviews, funding, and politics.  “Construction” workers laid off by the housing crisis carpenters, electricians, plumbers aren’t the same people as the ironworkers who build high rises, nor the construction workers who build highways and bridges. Union workers don’t get to move from trade to trade.

Obama’s devotion to big government leads him to think that government programs can create jobs, when the problem is getting government out of the way. Business, over and over, has told the administration that government programs are the problem, but that is not what Obama wants to hear.

Republicans are readying a plan of their own.  They ave been investigating and inventorying the regulatory burdens for job creators in the private sector.  They will attempt to repeal  job-destroying regulations and to lift the cloud of uncertainty hanging over the business community.  They also want to tackle fundamental and structural reform of the rule-making system.   Here is a memo from Majority Leader Eric Cantor outlining the ten most job-destroying regulations that will create even more job losses for American workers.

You might want to let your congressmen know that you want these execrable and foolish regulations repealed.


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