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National Energy Independence Policy

Consider this possibility: North Korea is acting up, and America decides to employ something just short of a nuclear weapon (say a daisy cutter bomb) to flatten the facility making such bombs. The Chinese are unhappy. They don’t have to take up arms against America, or lob some bombs over here. All they have to do is just stop buying our treasury bonds.

So what, you say. Well, then the bid coverage for the bonds might only be 1 to 1, instead of a more normal situation where bids are equal to twice what the Treasury wants to sell. Or maybe just shy of what the government wanted to sell. And you say, no problem, the bonds were covered, or nearly. But only just. This will be enough to cause a royal conniption fit. Interest rates will rise dramatically, which will cause an immediate and horrible fall in the stock market. Other consequences will follow. All adjustable mortgages will climb. That will cause a cessation of the new home market. Autos, too. Low interest rates have already stolen sales from the future, so end-demand in these markets will be dead as a doornail.

Are you getting the picture? It might look like something Hieronymous Bosch might have created. Hell.

And the Chinese didn’t have to lift a finger. Oh, yes, we’ll get our revenge. We’ll quit buying Chinese. Like we could do such thing. But let’s say we can. Suddenly, everything costs more, and that deflationary Chinese thing that Greenspan was counting is suddenly gone.

I think it would behoove us act to protect ourselves from such a financial attack. Balancing the Budget is critical to this task. But additionally, my analysis suggests an excellent place to start is with energy independence. Let’s see what energy independence could do:

  • Improve our Balance of Trade. Reduced purchases of oil from the Middle East means fewer dollars leaving our shores.  ($13.4 billion to Saudi Arabia alone).
  • Reduced oil purchases will leave the Middle East with less money to cause shenanigans in the rest of the world. Douglas MacArthur leap-frogged islands in the pacific in WWII, because those islands caught in between would die on the vine without supplies. Remember, nearly all the 9/11 terrorists came from Saudi Arabia. Starve them.
  • The wind turbine program probably needs to be equal to the interstate road system.  That will create a lot of jobs.  But as we pursue solar, grow crops for ethanol, build coal and nuclear plants, we will be adding to our economy.
  • Reduced oil purchases will help to reduce demand and will help to stabilize or reduce the price of the remaining oil that we buy.
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    I think all avenues of energy creation should be pursued until the goal is met. So, I would pursue the following avenues, probably in this order:

  • Wind turbines. The wind characteristics of only 12 states are needed to produce 4 times the national electricity demand. The additional electricity can be used to make hydrogen. Until information presents itself, downside is negligible.
  • Solar energy. Becoming more efficient. Downside limited.
  • Tides, heat from the earth’s center.
  • Ethanol from corn. Substitute for gasoline, until we move to hydrogen vehicles.
  • Coal. Use all resources until those with limited downside risk can meet all demand.
  • Nuclear. Same as coal.
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    Our auto industry always seems to be playing catch up, but it should be encouraged to build:

    It is not a plan that can be achieved overnight, but for true security, it is a measure that should be pursued immediately.

     

    September 14, 2004