What good is wind energy if we can’t transmit it?

Paul called my attention to this NYT article: Wind Energy Bumps Into Power Grid’s Limits. Notable excerpt:

The dirty secret of clean energy is that while generating it is getting easier, moving it to market is not.

The grid today, according to experts, is a system conceived 100 years ago to let utilities prop each other up, reducing blackouts and sharing power in small regions. It resembles a network of streets, avenues and country roads.

The basic problem is that many transmission lines, and the connections between them, are simply too small for the amount of power companies would like to squeeze through them. The difficulty is most acute for long-distance transmission, but shows up at times even over distances of a few hundred miles.

The antiquated electricity transmission infrastructure poses a classic Catch-22: we need alternative energy and the technology exists, but we can’t utilize it because the grid can’t handle it. An overhaul of the grid is needed – something which became very apparent after the NYC blackout and Hurricane Katrina – but it’s almost impossible to accomplish on a national scale because of all the competing interests.

Stuff I Like

** In order to make the blog more interesting, I’m starting a new category called Stuff I Like **

SIGG Water Bottle
These things are impossibly cool. I finally broke down yesterday and bought one. At $20 for the small bottle, I’m sure someone, somewhere is making a ton of money!

Tilex Fresh Shower
I love having a clean shower, but I hate scrubbing. I’ve been using this product on my new shower for over a month and it still looks good as new!

High Thread Count White Sheets
There’s something nice about bright white sheets. These are luxurious and soft — worth every penny.

Craziness in the Gold Market

Gold prices have fallen from $1,000 to under $800 per ounce just in the last month. As prices fell below $800, demand for physical gold rose to the point that many dealers – including the US Mint! – ran out of supply.

Bill Fleckenstein offers a great explanation for the strange recent action. Notable excerpt:

There are huge amounts of money being managed according to mechanical or mathematical trend-following systems. When those systems kick in, gold and silver can drop in price even on days when inflation is reported to be high, as happened Aug. 14. That’s because when a major liquidation is under way, the economic fundamentals have no bearing on market action. The quantitative systems take control.

Except for the dollar’s huge rally, virtually nothing has changed in the case for owning gold, though the price recently tanked by more than 20%. However, in the short run, fundamentals do not make any difference when powerful tailwinds or headwinds push prices around.

In the stock market, price action often reflects underlying events in businesses, industries and the economy. With commodities, price is just a reflection of the market’s attempt to help balance supply and demand, as the cost of production and other variables have only long-term relevance.

A closer look at the gold market reveals shortages driven by price declines and a subsequent explosion in retail demand, and many dealers have run out of assorted forms of gold coins, bars, etc. If you click here, for example, you can see that Tulving is out of gobs of products. Kitco.com has been warning about delivery delays.

These shortages likely have something to do with the fact that last week the U.S. Mint suspended sales of gold coins — a reflection of the surging demand. The fall in price also triggered an outpouring of buying in India and the Middle East. In addition, the exchange-traded funds, or ETFs, that hold gold and silver showed an amazing resilience in the face of plunging prices.

Thus we witnessed an unusual dichotomy: Physical buying (and here I’m kind of including the ETFs, though they aren’t purely physical) was ratcheting up even as the selling of futures contracts was driving the market lower. When the price was rallying, the futures market had a big hand in that, so we can’t ignore it when it seems to be at the epicenter of lower prices.

In any case, if we saw (as it appeared) heavy selling or short-selling in the futures market while demand for gold in the physical world was rising, that historically would be a very bullish development.

Narrowing Ecologies of Global Finance

Paul McCulley of PIMCO on why global interconnectedness has complicated the picture for central bankers:

The mobility of capital combined with the mobility of information across countless interconnected nodes, hindered occasionally by politics and the transparency tolerance of various governments, gives the largest holders of capital something of a “God-complex” in today’s global economy. Small banks expand to become mega-banks, regional banks consolidate to become universal banks, and foreign central banks “self-insure” to become sovereign wealth funds. Wealth and capital supercede the common CEO, the everyday purchasing manager, and humble central bankers of today in velocity, mobility and connectivity. Global central bankers in particular need to catch up quickly.

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The article in a nutshell:

• Global asset prices are deflating

• This is having a contractionary effect on the real economy and causing a decrease in aggregate demand (or, at least the growth of agg demand in certain countries)

• The problems of the financial system – whose collateral is these falling assets – is resulting in a reduction of available credit.

• Central banks are doing everything they can to liquefy the banks and to ensure the world that they will not let the big banks fail. But it’s not having enough of the desired effect – cost of capital is still too high for the banks.

I’m not sure what McCulley’s prescription is, though he seems to suggest that central banks should pay more attention to asset prices. I think by now we should realize that asset prices are as important to consumption and demand as consumer prices (blogged about here).

KC Concert II

Here are a couple of pics from the Kenny Chesney concert last night Raleigh. I went with a big group of my new friends from school.

That was my third KC concert (second one blogged about here) and I had feelings of deja-vu when he played some of the same songs I’ve heard at every concert. It’s weird to repeat things after a multi-year break. I felt the same way visiting the Calgary airport a few weeks ago.

It makes me think about how random life is and also about how much has changed in my life… mostly for the better!

What’s Most Important In This Election?

The other night, Paul and I were arguing about the election. I am still undecided. Paul was trying to convince me to vote for Obama.

Why I’m Undecided

I am totally opposed to Obama’s plans for taxes and healthcare. If they get passed, I think it will be disastrous for the country. On both of these issues, I prefer McCain’s plans.

But when it comes to “social” issues, I think Obama will be a better president. He will nominate left-leaning judges to courts that are likely to hear cases on gay marriage and other issues that are important to me. Beyond the judge thing, I think Obama has the opportunity to permanently change public opinion on these matters.

Paul’s Argument

Paul makes an interesting, if cynical, argument. He says a) social issues are more important anyway; and b) major policy proposals have little chance of passage. He uses Bush as an example: Bush claimed to be fiscally conservative yet his administration has been marked by huge budget deficits, profligate spending, a collapsing currency, and inflation.

This is a smart argument because it plays on my cynicism about the Federal Government. But even if it is logically coherent, I’m not sure it’s empirically plausible. There are numerous recent examples of presidents affecting major policy changes: Bush tax cuts, Iraq War, NAFTA, and several examples from the Reagan administration.

So when I’m thinking about who to vote for, I’m assuming there’s a reasonable chance that his policy proposals will become law. And so I have to decide what’s more important to me: healthcare and taxes or social issues?

Obama Town Hall

My friend Alan got me tickets to an Obama Town Hall in Raleigh last night.  It was fun and our seats were amazing!

Is College a Waste of Time?

Charles Murray writes that higher education in its current form is a waste of time. As an alternative, he suggests a system of certification exams:

Outside a handful of majors — engineering and some of the sciences — a bachelor’s degree tells an employer nothing except that the applicant has a certain amount of intellectual ability and perseverance. Even a degree in a vocational major like business administration can mean anything from a solid base of knowledge to four years of barely remembered gut courses.

The solution is not better degrees, but no degrees. Young people entering the job market should have a known, trusted measure of their qualifications they can carry into job interviews. That measure should express what they know, not where they learned it or how long it took them. They need a certification, not a degree.

The model is the CPA exam that qualifies certified public accountants. The same test is used nationwide. It is thorough — four sections, timed, totaling 14 hours. A passing score indicates authentic competence (the pass rate is below 50%). Actual scores are reported in addition to pass/fail, so that employers can assess where the applicant falls in the distribution of accounting competence. You may have learned accounting at an anonymous online university, but your CPA score gives you a way to show employers you’re a stronger applicant than someone from an Ivy League school.

Certification tests need not undermine the incentives to get a traditional liberal-arts education. If professional and graduate schools want students who have acquired one, all they need do is require certification scores in the appropriate disciplines. Students facing such requirements are likely to get a much better liberal education than even our most elite schools require now.

Certification tests will not get rid of the problems associated with differences in intellectual ability: People with high intellectual ability will still have an edge. Graduates of prestigious colleges will still, on average, have higher certification scores than people who have taken online courses — just because prestigious colleges attract intellectually talented applicants.

But that’s irrelevant to the larger issue. Under a certification system, four years is not required, residence is not required, expensive tuitions are not required, and a degree is not required. Equal educational opportunity means, among other things, creating a society in which it’s what you know that makes the difference. Substituting certifications for degrees would be a big step in that direction.

I’m not sure I like this idea, mostly because college was a lot of fun. But I guess that’s kinda the point.

** With this post I’m creating a new blog category: “status quo bias.” In my opinion, we are averse to new and different ideas because they are new and different — they challenge the status quo. That doesn’t mean they’re bad, though. If nothing else, it’s fun to think about “radical” ideas.**

Beijing National Stadium

Here’s a neat satellite image of the Beijing National Stadium. Click on the picture for the link to the NASA website with details about the image.