There is lots of information available on  the internet that itemizes average energy costs for various household items, but with rising energy prices, wouldn’t it be nice to have a gadget that quantifies the cost for anything that plugs into a standard 110-120 volt outlet?   P3 International’s P4400 Kill A Watt power meter does just that by tracking energy consumption by kilowatt-hour.  After obtaining a cumulative 24 hour total, multiply total kw-h * 30 (days in month) * cost per kw-h (listed on your electric bill) to obtain an accurate operational energy cost to run any standard household electrical item for a month.   

P3 International's P4400 Kill A Watt

Because of the P4400′s portability, moving the meter from outlet-to-outlet is a breeze, making a complete inventory of power-hungry household items a piece of cake.   You’ll save cash on your electric bill with knowledge gained from your inventory, and conservation will meet less resistance once household members become aware of exactly how much it costs to run various items.

With a low street price of under $25.00 USD, the P3′s P4400 Kill A Watt is a no-brainer investment for anyone interested in saving the planet and/or saving a few bucks off their electric bill.

Part 4: (final)
Sustainable Energy and Responsible Energy Usage are the Keys to Long-Term Economic Health and National Security *

There are many posts related to energy generation already available on this site, so I won’t delve deeply into specifics.  Suffice it to say energy conservation and a transition to renewable energy should be a private and governmental priority second only to stabilizing the economy. 

The easiest way to reduce energy consumption is through conservation.  Often overlooked, businesses and government agencies have a responsibility and economic interest to revamp and upgrade their enormously inefficient plants, warehouses and offices.  A sweeping energy audit rollout for large corporations and governmental agencies could pay huge dividends in a very short timeframe.  Audit results can provide the information necessary to identify and prioritize areas for improvement.  Obsolete, inefficient HVAC systems can be upgraded to modern, high efficiency systems, while incandescent lighting can be replaced with fluorescent and LED fixtures.  Mandatory restrictions won’t be necessary once private businesses realize the savings and return on investment that can be realized through small, incremental improvements on existing buildings, plants and equipment, while major improvements and upgrades can be approved and capitalized through the normal budgetary process with tax incentives providing additional incentives. Governmental agencies, not as burdened by the bottom line, can expedite improvements either through expensing, budgeting, or as the recipient of some type of public works improvement. 

Just as important, individuals can be shown how to save energy.  Websites can be created to explain how and where to conserve energy, while interactive pages can show just how much an individual or family can save by making changes to lifestyle, personal transportation, appliances and other household items.  Additionally, a website can be created which lists all energy-related governmental undertakings, and the public can sponsor any project he or she feels strongly about.  For example, a person can donate $10 toward building a low-temperature geothermal electrical generation plant in Colorado to replace a coal-fired plant.  When the transaction is made, the donor’s name is recorded (if requested) , and bookkeeping entries are made to earmark the funds to the appopriate project.  He or she can then track total donatons to the project, and when the goal is attained, can monitor the construction progress.  Anyone can view the donors and progress of any project at any time.   Users can create buddy or distribution lists to share their sponsorships with groups, family or friends.

It will take patience, perseverance, sacrifice, knowledge and lots of creativity to get us through this economic and environmental crisis, but Americans are a gritty lot.   Keep the course.

Part 1 Part 2 Part 3

Part 3:
Money Supply 101 a.k.a. How to Kick-Start an Economy *

If you think of an early agrarian society, the recipe for economic success is simple: Times of plenty are used to store excess grain and other foodstuffs which may then be used for seed stock and consumed during times of hardship.

Take the threat of starvation out of the equation and behavior changes dramatically. In modern industrial societies, when things are going well, consumers expect the trend will continue and respond by saving sparingly, spending freely, taking risks and increasing debt. During times of hardship or perceived hardship, consumers pay off debts, cut back on spending and risk, and save more. Governments behave similarly during periods of economic growth by spending freely and creating budgets based on recent tax revenues. During hard times, however, governments are not constrained by budgets and may, and often do, spend freely.

Hang with me, here…

Today, the United States and most of Europe are in a recession. The majority of consumers have responded by, you guessed it, spending less, paying off debts, and not taking on new obligations – not exactly an economist’s recipe to spend one’s way out of a recession. Normally,  governments would respond by reducing interest rates, increasing government spending and perhaps providing a small financial stimulus package.  In an otherwise normal economy with a healthy financial sector, the lower interest rates would stimulate the economy by increasing loans to companies and consumers, but today’s financial sector is anything but healthy. Banks are sitting on cash reserves, while loans to businesses and consumers have dropped dramatically.

That is what makes the current recession different. During the Great Depression, economists believed if you increase the money supply by 25%, spending will increase by roughly 25%. They did not understand that actual money supply equals static money supply times the yearly turnover. Let’s say it’s pre-depression 1928, the money supply totals $10 billion, and average buck is spent (turned over) 4.5 times. Roughly speaking, the real supply of money equals $45 billion.

Now, let’s fast-forward to 1932. The Federal Reserve has been printing money like mad, and let’s say the static money supply has increased by a whopping 100% in 4 years to $20 billion. Imagine the government’s dismay as the depression continues to worsen. What they did not realize was the turnover of money had decreased from, say, 4.5 to 2 times annually so, in effect, the real money supply had contracted from $45 billion to $40 billion.

We are certainly not in a depression, but apply this scenario to current economic conditions and it fits rather nicely. Banks have cash but aren’t loaning, customers aren’t spending, and posts on the Where’s George website are down 20% because turnover is down by a fifth. Because the Fed has not begun printing more money, the real money supply and spending are down a cool 20%.

Let’s say it is now February 1, 2009, and economic conditions have not improved.  Since calling Ben Bernanke of the Federal Reserve and requesting he increase the money supply 20% by the end of the month is not a viable option, a more likely scenario would be for now President Obama to push through a one-time stimulus package that equals roughly 20% of the average household’s annual income, which amounts to about $10k per head of household and $5k per individual filer.  A month or two later, the checks are in the mail.

Consumers get their fat checks, bank deposits swell, spending increases almost immediately, perceptions improve, employers hire, borrowers pry out their wallets and begin lending money, the sun shines, birds sing, and the patient is stabilized – for the moment.   

Part 1 Part 2 Part 4

Part 2:
Residential real estate values were out of touch with wage rates *

By 2007, it became obvious residential real estate values were not sustainable given current wages and interest rates.   For example, according to city-data.com, the 2007 median household income for a family in San Diego, California was $62k, while the average house or condo value was $558k.  Thus, the average house value was approaching 10 times median household income.  A typical prime mortgage costs the homeowner about $600/month per $100,000 borrowed, so financing $500k for a $558k home (58k down payment) results in a monthly mortgage payment of about $3k.  Dividing $62k median income by 12 months, we arrive at a median monthly income of about $5200.   Doing the math, on average, a staggering 57% of the median gross monthly household income would be required to pay the mortgage on a house purchased in San Diego, which is about twice the recommended mortgage obligation of 25-35%.

Remember, these numbers are for prime mortgages.  Subprime mortgage interest rates would increase monthly payments even further.  Regardless, there was no way for many housing markets to sustain the alarming appreciation that was often seen in the 1990′s.  Something had to give.

How did we get there?  Residential sales and construction began to level off in 2002-2003, and left to its own devices, the housing market quite possibly could have followed a normal cycle of recovery.  On the contrary, with limited exposure, financial incentive, and often well-meaning but questionable judgement, lending agencies and mortgage brokers began to relax qualifying standards which refueled demand with a flood of new mortgages, many of which were subprime.  The real estate market had been so strong for so long that many individuals and investors had never experienced a down market.  Why wouldn’t valuations continue to rise?

Consisting of mortgages purchased from the U.S. Federal Housing Administration and Veterans Administration by Fannie Mae and Freddie Mac, the issuance of mortgage-backed securities, which are securities backed by the principal and interest of a group of mortgage loans, peaked in 2003 with a staggering value of over $2 trillion usd which represented about 1/3 of all outstanding mortgages.  Just when the residential housing market was poised to take a breather, Fannie, Freddie, brokers and investors hit it with a stimulus of unprecedented proportion.    The market on steroids, real estate valuations continued to rise until mid-2007.  What began as a typical housing market cycle had turned into a tsunami.

Many investors and fund managers had become enamored with Fannie and Freddie’s success story, and proceeded to purchase large amounts of mortgage-backed securities, often on margin.  In the summer of 2008, as reality set in, the current value of these securities dropped precipitously.  As a typical scenario, an investor calls his/her broker and requests the purchase of $1 billion worth of mortgage-backed securities on margin.  Buying on a margin of 40:1, the investor is out $25 million, with 10% or $100 million, backed by the security, going to the broker.  If real estate values contained in the mortgage-backed security drop only 10%, the current value drops to $900 million.  Subtracting the broker fee of $100 million, the initial investment of $25 million has turned into a loss of 225 million.  Multiply this scenario times a thousand, and it’s easy to see how quickly things can go from manageable to catastrophic.

Is America alone to blame for the housing and financial crises?  By no means.  Fact is, housing had become grossly overvalued throughout Europe as well, especially in Ireland, the U.K. and France.  Could the United States have done a better job regulating these securities?  Absolutely.  Unfortunately, regulators , rating agencies and auditors tend to become sympathetic to those they regulate, which makes catching major problems in a timely fashion extremely difficult.  What started out as a typical housing cycle has become a worst-case scenario, and it will take a tricky bit of balancing by the Government and Federal Reserve to pad the fall.

Part 1 Part 3 Part 4