The Curley Effect, so-called after Michael James Curley, four times mayor of Boston and one of the most colorfully corrupt 20th century politicians in Massachusetts, has been noted as a significant factor in city politics, where a long-time and popular ruling politician deliberately makes the city inhospitable to those who tend to oppose them, essentially shaping the electorate into one which will support the ruling politician forever and ever, amen. This tactic, of rewarding supporters with public largesse, and punishing opponents economically, worked well for the individual politician, as it did for the very Catholic and Irish Mayor Curley but at the expense of Boston overall, as those individuals, businesses and institutions who opposed him most frequently, departed, taking their money, businesses and civic involvement with them. Mayor Curley and his cronies throve, but Boston was much the worse for it, over the long run.
Business
“Green” Energy: Materials-Intensive–And It Matters
There is now considerable momentum behind wind and solar power generation. In addition to the governments pushing these technologies, there are many companies intending to profit by manufacturing and implementing these systems–also companies intending to get “sustainability” points for using them–and a nontrivial part of the financing industry licking their chops at the prospect of raising the necessary capital.
While wind and solar systems do not directly consume fuels, they do consume capital, that capital representing the labor and materials (and also the energy, in various forms) necessary to manufacture and install them. Some of these materials are relatively scarce at present, and are sourced from problematic locations under questionable conditions.
Here is an interesting and quite detailed study on “green” materials and sourcing options, from the International Energy Agency. Worth careful reading for anyone interested in energy issues, technologies, and politics. Note that in addition to China’s development of its internal resources of the relevant materials, that country is developing strong trade and financing relationships…which may evolve to neo-colonial or even full-colonial relationships…with other countries possessing such resources.
And here are a pair of articles arguing that the only way for the US to acquire the requisite materials for a “green” energy transition will require close collaboration with China…that if the two greatest greenhouse-gas emitters on this planet can’t work together, we’re all going to be living in a more or less literal hell. The authors of these pieces don’t seem to be very concerned about the risks of US dependence on China for our energy supply; they seem more concerned about the risks of a cold war (anti-China) mentality. (It is also interesting that the word ‘nuclear’ doesn’t appear in either article.)
Comes now a Reuters article, which asserts that: The Biden administration is considering a plan to import the bulk of the materials needed to build electric vehicles and the batteries that power them instead of mining them domestically — a nod to environmental groups that make up a key part of the Democratic constituency, according to a report. The article goes on to quote an administration source as saying, referring to mining, that “it’s not that hard to dig a hole”…a comment which interestingly echoes Michael Bloomberg’s assertions about farming–“I could teach anybody, even people in this room, no offense intended, to be a farmer…You dig a hole, you put a seed in, you put dirt on top, add water, up comes the corn.” (Bloomberg also made similarly dismissive remarks about manufacturing jobs)
On the other hand, a post at the Seeking Alpha investment blog asserts that Contrary to Rumors, the Biden Administration is Not Abandoning Lithium–that on the contrary, they want to expand both domestic and international supply of this material. (The author of this piece also notes critically that the Reuters article did not reference a single named source.)
But even if the Biden administration does throw some money at domestic mining and processing, environmental objections and litigation are likely to slow things down considerably…a Trump-style president might be willing and able to blow past such constraints, but Biden/Harris, given their dependence on their party’s extreme Left, will likely find it easier to placate environmentalists by combining a US emphasis on vehicle electrification and “green” energy with a de facto sourcing policy of acquiring most of the relevant materials from outside the United States–including China–which allowing most US mining and bulk processing initiatives to bog down in red tape.
Here’s a follow-up article from Reuters.
As the IEA article notes, “green” energy represents a shift from a fuel-intensive to a materials-intensive energy system. Few of the prominent/influential advocates of such a shift seem to have given much thought to where those required materials might actually come from.
Wind and solar are more capital-intensive than are fossil-fuel power sources, and mining requires considerable capital as well. It seems likely to me that the worldwide push for “green” energy and electric vehicles will drive enough capital demands–whether via government or private financing–to have a material upward impact on interest rates.
Inflation…or Deflation? The Debate
Financial writer John Mauldin has two pieces: the first one, with the argument that we should expect inflation, and the second one, arguing that the case for deflation is stronger.
Read, consider, and comment if you feel so inclined.
Thinking, Making, Profiting
256 years ago this month, James Watt made the conceptual breakthrough that enabled a much more efficient steam engine…an engine that would play a major role in driving the Industrial Revolution. He had been thinking about possibilities for improving the coal-hungry Newcomen engine, then the best available, which lost huge amounts of heat every cycle through the successive heating and cooling of the cylinder walls:
It was in the Green of Glasgow. I had gone to take a walk on a fine Sabbath afternoon…I was thinking upon the engine at the time…when the idea came into my mind, that as steam was an elastic body it would rush into a vacuum, and if a communication was made between the cylinder and an exhausted vessel, it would rush into it, and might be there condensed without cooling the cylinder.
But in addition to the many details involved in reducing this idea to practice, there was another problem inhibiting the creation of reasonably-efficient steam engines. The boring of the cylinders…even when the best tools and the highest skills of the day were applied…was so imprecise that considerable quantities of steam escaped around the piston, greatly lowering the overall efficiency of the engine.
Enter Matthew Boulton, who became Watt’s partner, and John Wilkinson, a Boulton associate and foundry operator who was obsessed with all things cast iron. Boulton and Wilkinson wanted a steam engine to provide the blast for Wilkinson’s foundry, and they wanted an engine with especially-large cylinders…which made the problem of tight cylinder/piston fit even harder to solve.
Wilkinson saw that the technology he had already developed for the very precise boring of cannon could, with some modifications, be adapted to the boring of steam engine cylinders. Amid “searing heat and grinding din,” he achieved a cylinder, four feet in diameter, which “does not err the thickness of an old shilling at any part.” With the combination of Watt’s separate condenser and Wilkinson’s improved boring process, the steam engine was ready for the starring role that it was to hold for the next century and beyond.
Key point: It wasn’t only the design of the improved steam engine that mattered, but also the process for making it.
What if Britain had been offshoring its foundry operations, with their “searing heat and grinding din” to another country? Spain, let’s say. Given the importance of the interaction between the design talent and the manufacturing talent, would the improved steam engine have been developed in the 1770s timeframe at all? And whenever it had been developed, to which individuals and countries would the financial benefits of steam power have accrued?
The present-day parallel is the relationship between microchip designers and microchip manufacturing facilities…foundries, as they are actually called.
More about John Wilkinson, here.
Continuing Supply Chain Issues
I have been sharing supply chain woe stories over the past year plus, ever since the Chinese commie crud took over the headlines. I work in the world of industrial distribution.
Many of those supply chain issues remain to this very day, and some are getting worse. I have been in the industry for 35 years (HVAC distribution specifically, a subset of industrial distribution) and with a mature industry such as the one I am in, supply chain always had ebbs and flows, however these were easily predictable and looked like a very shallow sine wave. Over the past year and continuing to today, the supply chain is very spiky and extremely difficult to navigate.
Disasters such as the Suez Canal closure and plants getting damaged in Texas over the Winter added to an already miserable time. Many businesses are opening back up and demand is surging as equipment that was previously mothballed or otherwise inoperative is coming online (and breaking). We continue to have transportation issues with LTL (for those who don’t know, LTL stands for Less Than Load, or semi trailers that are making deliveries of many skids of product to different locations rather than a straight shot to one location) being a disaster right now. Labor is a problem as many that were laid off have either moved to other jobs, or simply refuse to come back to work due to overly generous federal and state unemployment benefits.
The whole enchilada is quite the mess. Oddly, when I go to work in the morning I am resigned at this point to just saying to myself “I wonder what insane thing I will have to deal with today” and just put my head down and deal with it. When you get used to adversity things don’t bother you as much, I suppose.
I made the decision to never cancel any orders and simply take on more inventory. This hurts in the short term as cash flow and inventory turns are adversely impacted, but mission number one is to smooth out these spiky curves to our customers, so they can continue to make money – it needs to be my job to bear the brunt of this and to make it virtually unnoticed for our contractors. It remains quite the challenge. There will be major issues this Summer with imported equipment such as ductless mini splits, window airs and dehumidifiers imported from over there due to the persistent port delays on the West Coast. These issues are already happening. As hard as I am trying, I can’t get every product for every customer in these conditions. Most have been understanding. If they aren’t, well, I can’t unload the containers so….
Here is an interesting story about a different industry, flowers. I always take my wife out to a nice brunch for Mother’s Day. In addition, I always get her a corsage with three spray roses, the white ones with the red tips. I called the florist to order it up yesterday and the person on the other end laughed and said that they hadn’t seen spray roses in a year. In fact, when I go to pick up my corsage, they couldn’t even tell me what type of flower it would be. The shipment of flowers shows up and they have to make do with what shows up. She said that it was probable that I could get a single white rose but no guarantees. I told her that I could completely relate as I have been living this hell for a while too. She was pleased to speak with someone who was sort of in the same boat and went on to tell me that the last year was full of enormous challenges in the flower industry – that a lot of flowers simply didn’t exist to purchase.
While that is an anecdote, it is still telling of how we will likely see supply chain issues for some time to come.