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Bill received a BS in 1972 from West Point with concentrations in math, physics, chemistry, and engineering. He was an NCAA All American Wrestler and captain of the wrestling team. He is an eight-year infantry veteran, Airborne, Ranger, Arctic Light and Mechanized Infantry in the United States... More
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  • Invest In Energy During The Oil Famine

    In artificial markets, invest in energy. The purpose of this article is to recommend investing in energy assets and propose that the dollar be backed by energy assets, not gold.

    "One thing that makes it very hard to forecast home prices right now is that we're living in a totally artificial real estate economy," said Shiller, co-creator of the Standard & Poor's/Case-Shiller Index.

    Currency markets are equally artificial and unsustainable. The Federal Reserve unconstitutionally regulates the value of money by printing $trillions (specific duty of Congress, Article 1, Section 8). Current Quantitative Easing (currency debasement) is about $85 billion per month.

    Oil markets are equally artificial and unsustainable. The US must import 50% of its oil needs. Oil-wars have been required since 1990 to secure access to that foreign oil. Instead of capitalizing costs into the price of gasoline so markets would adjust, they were socialized into national debt. Similar to the Ireland's dependence on a single variety of potatoes in the 1840s, the US is susceptible to a sudden 50% loss of energy, Oil Famine. Potato Famines cost Ireland 20-25% of her population; the equivalent of 62 million Americans today.

    At some oil exporters will demand to be paid in a currency that retains its value. My guess is the trigger will come when Israel and Iran go to war, North Korea does more than talk, or Mexico collapses. It almost triggered in Sept 2008.

    The author is founder of JPods, a Personal Rapid Transit company working to deploy solar-powered transportation networks. Energy collection systems built into the rail structures gather approximately 5 megawatt-hours per mile of rail per day.

    Basing The Dollar Of Energy

    Life requires energy. Energy is the currency in which life trades. Money should be based on energy.

    The objective of this article is to suggest the US dollar be backed by 4 kilowatt-hours, or $0.25 a kwhr; people will start collecting and/or conserving energy because energy is money.

    Since solar input is about .5 kwhr per square meter per day ($0.50). An energy collection system 20 feet by 40 feet (74 square meters) would support a family collecting about $37.16 per day or about $13,563 per year from a system that would easily fit in their yard.

    The right of individuals and small businesses to compete with power monopolies to sell excess electricity is normally referred to as Feed-In-Tariffs or FITs. FITs were introduced in Germany in 2000. By 2011, 20% of electricity in Germany came from renewable sources with 70% of that provided by FITs.

    My guess is that within 10 years of liberty to collect and sell power being restored to the people in America, energy self-reliance will become common, dependence on coal and foreign oil will drop by 20% to 60%. Free markets will develop solutions to store and trade energy. This shift will mimic the shift from mainframes to vast networks of Personal Computers. Central power plant will be displaced by vast networks of Personal Energy Servers™. Millions of jobs will be created to aid in the collection, distribution and sale of energy. Thomas Edison's observation from 1910 will be realized:

    "Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy.

    "Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

    "There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."

    Implementing concepts are Wampum, Peak Oil, Oil Famine, Disposable Energy, Economic Flywheel, Net Energy, Growth, and the Constitution.

    Wampum

    Wampum are beautiful white and purple seashell beads that represented money to the Iroquois Indians when the European immigrants first arrived in America. As the US currency was backed by gold, backing currency with something rare causes that rare substance to be collected and cherished.

    In 1971 President Nixon ended gold backing the dollar, backing it with debt. As a result debt has been the massive collection. If the US Federal government declares that the dollar will be backed by 4 kwhr, a massive effort will be undertaken to shed debt and collect energy.

    Life requires energy. Basing money on energy will be directly link money to supporting life.

    Peak Oil

    Life requires energy. Oil is finite.

    (click to enlarge)Peak Oil

    Life based on oil will diminish as oil fields deplete. US Peak Oil was in 1970 at 9.6 million barrels per day (mb/d). Fracking will not solve the problem. America has been trading economic strength and blood to keep the price of oil from reflecting domestic depletion. Since 1970 national debt has increased in tandem with oil imports from $0.37 to $16.37 trillion as many oil costs were socialized instead of capitalized into the price of gasoline. Wars and occupation of the oil-rich Middle East has been required since 1990 to defend access to foreign oil.

    Oil Famine

    Life requires energy. Less affordable energy, less life.

    (click to enlarge)Oil Famine

    When the potato was brought from South America to Europe it supported an expansion of the population. Potatoes grew well in northern climates, produced far more energy than wheat, expanded the population with a monolithic dependence on a variety of potatoes. When a blight affected that variety, Potato Famine resulted. The US borrows and prints dollars to buy 50% of the oil energy that is the lifeblood of the US economy. At some time faith in the dollar will collapse. Access to 50% of the oil we are accustomed to may suddenly cease. If this happens at planting or harvest, a growing season of food could be lost. The exact shape of how Oil Famine will snap is uncertain. That it has been unfolding since 1970 can be seen in the $16 trillion of US Debt, the 494% increase in oil prices since 1998 and the decrease of $4,155 of disposable income by families.

    Disposable Energy

    The pursuit of happiness is (click to enlarge)Disposable Energy powered by Disposable Energy; the energy people can afford beyond subsistence. Disposable Energy is a single metric combining disposable income, the price of energy and how efficiently energy can be applied. This metric should replace GDP as the metric of government fulfilling its Constitutional duties. Disposable Energy has been crashing since $12 a barrel oil prices in 1998. Life requires energy, less affordable energy, less life.

    Wealth increases with energy. If people collect as much energy than they want and need, abundance will be common.

    Economic Flywheel

    The economy is an artifact of how people apply energy and labor.

    (click to enlarge)Economic Flywheel

    Momentum builds into an Economic Flywheel as Disposable Energy increases, energy prices drop, money is spent, taxes decrease and other positive factors increase. Momentum drains from the Economic Flywheel as debts must be repaid, money is saved, taxes increase, energy prices increase, unemployment increases and other negative factors decrease the amount of labor applying energy.

    QE is Quantitative Easing, debasing the value of the dollar.

    Net Energy

    Net energy is like take home pay.(click to enlarge)Net Energy

    It is the energy available to the economy relative to one unit of that energy required to get that energy to the economy. Oil before 1930 has a Net Energy of over 100:1. As oil fields depleted more and more energy was required to get oil. With Oil Sands and Shale, the Net Energy has dropped below 5:1. The Net Energy of solar and wind is over 20:1.

    Growth

    Economic Growth in the US is highly correlated to World Oil Supply Growth. World Oil Supply Growth has dropped to zero so future US economic growth will depend on growth in some other source of energy or in energy efficiency. Making a dollar worth 4 kwhr, there will be a push to collect energy to support economic growth. When people realized they can collect $13,563 a year of energy in their yard/roof, vast numbers of renewable energy collectors will be deployed to displace fossil fuels.

    (click to enlarge)Growth

    There are 36 kwhr in a gallon of gasoline. If the dollar is valued at 4 kwhrs, a gallon of gasoline would be worth about $9. This is much higher than current prices ($3.55) because the costs of wars to protect foreign oil, pollution, and resource depletion costs are socialized into national debt instead of being properly capitalized into gasoline prices. The true cost of gasoline to the economy is about $14 a gallon. Socializing costs distorts the free markets ability to adapt and fulfill our duty to Posterity.

    The Constitution

    As Oil Famine impacts the US economy, I believe Americans will reject being governed by the whims of the governing and will return to be governed by Law, with the Constitution as the supreme law of the land:

    • "To coin Money, regulate the Value thereof...."

    • "To declare War...."

    • "secure the Blessings of Liberty to ourselves and our Posterity...."

    The Constitution is a contract between "We the People." It is the maximum enumerated powers granted to the Federal governing to "establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity." The Constitution divides Sovereignty between Federal government to "provide" defense and State governments to provide Welfare. Federal powers are specifically limited to only "promote" welfare.

    If the governing wish more power, they must use Article 5 to ask "We the People" to amend our instructions to them to grant such power. Violating the Constitution to provide welfare to drivers in the form of Interstates, the whims of Federal officials debased the value of labor, oil-wars since 1990, and, created Oil Famine.

    Debase the value of labor, "To coin Money, regulate the Value thereof...."

    Congress must vote on the value of money, just as it votes on the level of taxes. The value of money must be regulated relative to something voters understand and can hold votes in Congress accountable. When President Nixon removed the Gold Standard in 1971 the value of a dollar was regulated so that $35 would buy one ounce of gold. Congress avoiding its Constitutional duty to "regulate the value thereof" as debased the value of the dollar to the extent that today $1,561.

    An ounce of gold is still exactly an ounce of gold. A gallon of gasoline in that cost $.36 in 1971 is the same as a gallon of gasoline that costs $3.55. The gasoline did not change. The Federal government debased the value of the labor, requiring workers to work more hours or seek pay raises to earn $3.55 while government benefits from spending money printed beyond its value.

    Life requires energy. Congress must regulate the value of money relative to something people understand. Fixing the value of the dollar to 4 kwhr allows voters to hold Congress to its Constitutional duties.

    Oil-Wars, "To declare War...."

    By statute, to commit the nation to war requires a 2/3rd majority vote. The whims of the governing violated laws made under the Constitution with wars in Korea, Vietnam, Iraq and Afghanistan, all resulting in stalemates. Von Clausewitz noted that "Power is the will and ability to win applied to achieving an objective." No amount of bravery, nor personal sacrifice by America's soldiers, could compensate for politicians' failure to define an objective or rally the will of the nation to win. (Author's note: I am not anti-war. As a West Point graduate and an 8 year Infantry veteran I understand that peace is the enforced absence of war. I support the ethical use of violence to defend liberty, the nation as prescribed by laws under the Constitution).

    Oil Famine, "secure the Blessings of Liberty to ourselves and our Posterity...."

    There is a usufruct duty to Posterity. Usufruct, means to use for profit without harm. Thomas Jefferson's "The Earth Belongs to the Living" letter of James Madison explains the usufruct duty to Posterity:

    • "Then no man can by _natural right_ oblige the lands he occupied, or the persons who succeed him in that occupation, to the paiment of debts contracted by him. For if he could, he might during his own life, eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be reverse of our principle."

    • "...nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19. years?"

    Tyranny of the Majority is the barrier to a stable currency and energy policy. Unconstitutionally the Federal-Aid Highway Act of 1956 taxed and spent to build the Interstate Highway network. Interstates are 1.4% of American roads and carry 25% of car miles institutionalizing oil as the lifeblood of America's economy. A majority of voters are drivers. Depending on gasoline resulted in drivers voting for politicians that socialized $16 trillion of oil-war, imported oil, pollution and other costs into the national debt. Debt is the tax on future labor. Federal politicians have bound the liberty and future labor of children to $53,000 in debt for each child to provide drivers with cheaper gasoline today. This is Taxation without Representation; children did not vote or consent to owing $53,000 each.

    Tyranny of the Majority and Taxation without Representation are unconstitutional. The Constitution very specifically limits Federal taxing and spending on highways to "postal roads." President Madison, the Father of the Constitution and Bill of Rights, stated this when he vetoed a transportation bill on March 3, 1817:

    "Having considered the bill this day presented to me entitled 'An act to set apart and pledge certain funds for internal improvements,' and which sets apart and pledges funds 'for constructing roads and canals, and improving the navigation of water courses' . . . I am constrained by the insuperable difficulty I feel in reconciling the bill with the Constitution of the United States to return it with that objection to the House of Representatives. The legislative powers vested in Congress are specified and enumerated in the eighth section of the first article of the Constitution, and it does not appear that the power proposed to be exercised by the bill is among the enumerated powers."

    Socialism, Federal control of the means of production in power and transportation is unconstitutional. Funding Interstates created a government monopoly, causing the loss of thousands of miles of railroads that average 480 ton-miles per gallon. Funding Interstates delayed expansions of Personal Rapid Transit (PRT) networks. The PRT network in Morgantown, WV has delivered 110 million oil-free, injury-free passenger-miles since being built as a solution to the 1973 Oil Embargo. In the same period that the Morgantown's PRT has been injury-free, the Federal highway monopoly has killed 1.6 million Americans.

    A similar unconstitutional Federal monopoly of communications resulted in a century of rotary telephones. When declared unconstitutional in 1982, free markets were restored. Long dormant technologies of the Internet (1969) and radio telephones (1946) were able to commercialize. When Federal central planners chose networks, they chose consistency. When liberty to choose communications networks was restored to the people, people chose value.

    Action

    End government by the whims of the governing. Enforce the Constitution by Congress passing a law to "regulate the Value" of the dollar at 4 kwhr.

    References and Implementation Guides:

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: Author is the founder of JPods, a Personal Rapid Transit company.

    Tags: long-ideas
    Apr 23 9:51 AM | Link | Comment!
  • QE Will Backfire, Forcing Unemployment To Rise

    Fed money printing is putting upward pressure on commodity prices. Gasoline prices are highly correlated with unemployment 2 years later (SeekingAlpha article).

    (click to enlarge)Gas Prices and Unemployment

    Life requires energy. Less affordable energy, less life. Families have lost about $4,155 per year to higher gasoline (CNBC article).

    Less affordable energy means fewer workers are required to apply available energy to build economic work into the economy. Momentum in the Economic Flywheel declines.

    The Quantitative Easing of the Fed and debt policies of the Federal government are going to backfire with much higher unemployment. The drag they are adding to Economic Flywheel is growing.

    (click to enlarge)Economic Flywheel

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: economy
    Mar 31 3:47 AM | Link | Comment!
  • Life Requires Energy

    Problem: Life requires energy. Coal and oil are finite. America powered by finite resources is dying. Americans face Oil Famine, the monolithic dependence on a source of energy 50% outside our control. Civilization killers of Peak Oil, Climate Change and Debt are being caused by a century of Federal control of the means of production in power and transportation.

    Solution: Self-reliance. Restore power and transportation to free markets so people, not central planners, choose infrastructures. Repeat the success of restoring free markets to communications in 1984. Our Constitutional duty is to "secure the Blessings of Liberty to ourselves and our Posterity."

    Background:

    In 1918 communications, power and transportation infrastructures were monopolized/socialized as "natural monopolies."

    In 1935 the US had a vibrant distributed energy industry. Approximately 600,000 electric and water windmills had been deployed against the headwinds of WWI and the Great Depression. The Rural Electrification Administration bankrupted these companies and the renewable energy industry collapsed. Had every REA-subsidized utility pole been offered to anyone to add a windmill, we would be awash in wind electricity and Americans would wonder how coal could ever compete with wind. Oil Famine(click to enlarge)

    The Federal-Aid Highway Act of 1956 unconstitutionally funded Interstate highways. Interstates are 1.4% of American roads and carry 25% of car-miles. Interstates caused US cities to sprawl and forced Americans to buy oil and cars to be economically competitive. Oil was institutionalized as the lifeblood of America's economy in the same year Peak Oil was predicted to be about 1970.

    The US actually hit Peak Oil in 1970. National debt increased in tandem with oil imports, from $.37 to $16 trillion. Counting "no-fly missions," war to defend access to foreign oil has been required continuously since 1990. (click to enlarge)Gasoline and Unemployment

    Life requires energy. There is a high correlation between gasoline prices and unemployment 2 years later. Disposable income per year decreased $4,155/family as gasoline prices increased. More and more families used mortgage payments to buy gas.

    GDP is the wrong metric. The foreclosure-triggered 2008 collapse was a surprise because using GDP to govern the economy is like driving your car by looking at snapshots of your rear view mirror. GDP is a periodic assessment of how corporations and government benefit from economic policy in the past. (click to enlarge)Disposable Energy

    Federal duty is to defend "unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." People's pursuit of happiness depends on how much energy their disposable income can buy, the metric Disposable Energy. This metric started warning of 2008 collapse in 1999. Federal duty is to people, not institutions.

    As labor applies Disposable Energy, Economic Work builds momentum into the Economic Flywheel.
    (click to enlarge)

    As energy becomes less affordable, less work is applied to the flywheel, momentum decays. Government spending adds to GDP and the momentum of the flywheel in the moment. The flywheel experiences drag as inflation, taxes and servicing of government spending and debts reduce disposable income. Keynesian benefits are short, consequences delayed.

    Action timeline: Oil and coal are finite. Out duty is to our Posterity. The 2012 drought and Sandy warn of tilting natures balance. The Joint Forces Command warned of oil risks in 2010:

    "By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."

    Intent: Implement actions to accomplish what Thomas Edison identified as practical in 1910:

    "Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy."

    "Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

    "There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."

    Specific tasks:

    • Victory Gardens. Self-reliance begins with the self. Gardens can preempt oil supply shocks from becoming famine. Call on all Americans to plant Victory Gardens.
    • Enforce the Constitution. End socialism in power and transportation infrastructure. Restore State Sovereignty over infrastructure (Federalist Papers #9, #10, #45). Restore Federal roll to regulating, not managing commerce. Establish Performance Standards to allow private capital to build infrastructure.
    • Restore free markets. Capitalize all costs of fossil fuel use into the price of using those fuels. Stop socializing defense costs required to protect access to foreign oil into national debt. Stop socializing pollution risks into weather risks to our Posterity. If these costs cannot be capitalized without economic dislocation, then issue Feed-in Tariffs to level the economics with renewables, acknowledge this is a temporary fix, set a timeline where capitalism can be restored. Adopt Jefferson's principle of usufruct, to use for profit without harm.
    • Localize essential manufacturing.
    • Grade government performance based on Disposable Energy instead of GDP.

    JPods contribution is a version of Personal Rapid Transit (PRT or PodCars). JPods approach freight rail efficiency (400+ ton-miles per gallon) with on-demand urban transportation of people, cargo and trash. Solar collectors and windmills integrated into our rail structures gather 5,000 to 30,000 vehicle-miles of power per mile of rail per day. We will privately fund the construction of about 500,000 miles or rail to reduce oil-powered urban transport by 70% by 2020. More time would be helpful, but Oil Famine sets the timeline.

    (click to enlarge)JPods

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 25 11:22 PM | Link | Comment!
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