There are times when it may behoove us to step away from our daily lives and interests in an attempt to make sense of the events going on around us, and the economic and financial events of the last month certainly qualifies the present as one of those times. After sorting through recent financial, economic and political events, it struck me that many of the economic issues that had been nagging at me for years had gotten under my saddle for a reason: The economic world has drifted into a chronic state of non-equilibrium.

Part 1:
Chinese labor and manufacturing costs are often substantially understated

It’s obvious China is no democracy. The government and/or businesses can arbitrarily set wages and costs resulting in artificially low total costs of production.  Coal-fired power plants are being constructed at a rate that rivals the 90′s proliferation of Starbucks stores, and dangerous mining conditions, dubious environmental regulations, and regulated electrical costs provides absurdly cheap power to feed China’s insatiable appetite for growth.

To see how sideways things have become, let’s look at a couple of examples.  In the United States, it now costs about as much to buy a nice roast, a couple potatoes and some carrots to cook in the microwave as to buy the microwave itself, and reasonably complex inkjet printers can be purchased for under $30 USD.  The majority of Chinese goods are not just cheap; they are disturbingly, perplexingly, eerily cheap. This is not indicative of a world economy in balance.

In the last two decades, the low price of Chinese goods have led directly to artificially high demand for their products.  Across the United States and Europe, houses, flats and garages have been filled with millions of tons of nondurable Chinese goods, and containers from container stores and mini-storage units catch the overflow. If televisions are cheap, why not have one in each room? If silk blouses are only $20, why not buy five? And since economic times have been so good for so long, why not buy on credit or with equity borrowed from primary housing? Now the debts have come due, while the goods bought during this unprecedented spending spree have little or no current value, and contribute little toward quality of life.

As China enjoys its day in the sun, the manufacturing base in developed countries has been seriously eroded by its inability to compete with China’s seemingly unfair competitive advantage, forcing many American and European manufacturers to either become distributors and shut down domestic production facilities or go out of business. As factories and assembly lines close, displaced workers accept lower-paying positions in the service industries which lowers purchasing power and widens the income gap.  I personally and economically have no problem with letting Bush’s tax cuts expire. However, while raising taxes on businesses and the wealthiest individuals to restore purchasing power to a displaced middle class can provide a temporary fix, it is not a viable long-term economic solution. New domestic high-tech design, production and manufacturing jobs must be created to reverse the trend toward low-skill service jobs, or the long-term economic prognosis is poor.

Of all the issues that face us, China may prove the most problematic. Protectionism is not typically a good economic policy, but the developed world is not on an even playing field, and cannot stand by while China gobbles up the remaining manufacturing base. The Chinese are already working their way up the food chain to large durable goods such as heavy equipment and automobiles, and everything being equal, the results are likely to be the same.

Part 2 Part 3 Part 4

When going green, address common household chores such as washing clothes. Brand-name laundry detergents contain surfactants that reduce the surface tension of water and promote cleaning, along with chemicals such as sodium and boron that soften water and promote oxygenation, and chlorine bleach to whiten. While generally safe for humans, certain chemicals contained in these detergents can cause skin problems and be detrimental to the environment. Making matters worse, ingredient labeling is extremely vague, replacing actual chemical compounds with phrases such as ‘cleaning agents’ and ‘stabilizers’.

After researching a number of environmentally friendly detergents, I was struck by the similarities between many ‘green’ brands and their brand-name competition. One highly rated ‘green’ detergent contains sodium laureth sulfate, sodium borate, calcium chloride and sodium hydroxide (lye), so I did a little research.

Sodium laureth sulfate (SLES) is typically derived from coconut oil soap (sodium laurate), but since soaps are not as effective in hard water, chemists replaced the carbon-based acid in sodium laurate with a sulfur-based acid and added etheylene oxide, which is made from petroleum to reduce irritation to eyes and skin. While SLES is not a carcinogen, does NOT cause blindness, and is less irritating than is sodium laurel sulfate (SLS), it has been linked to hair loss, and may increase absorption of toxins through the skin. Also, the chemical used to make SLES, ethylene oxide, can form a by-product called 1,4-dioxane which is a known carcinogen.

Sodium borate (borax) in wastewater can be toxic to plants, and the United States Environmental Protection Agency has found a possible link between sodium borate and male developmental toxicity in humans. Calcium chloride changes the pH value of wastewater, and sodium hydroxide (lye), while not dangerous at low concentrations, is extremely corrosive.

Because there are currently no laws regulating what constitutes a ‘green’ household cleaning product, it is easy, and even tempting, for a company to charge a premium price for a ‘green’ laundry soap that is little more than a name-brand soap in a different container. Additionally, creating a laundry soap that cleans well without the use of bleaches, borax, and salts is a daunting task for a company without the resources of large corporations. While most of the ‘green’ laundry soaps I researched struggled to be green and/or clean, ECOS® Liquid Laundry Detergent, by Earth Friendly Products, got consistently high marks for its cleaning capability and environmentally responsible ingredients. Made from plant (coconut) based surfactant, soap bark, chamomile, horsetail (the plant), lavender, rosemary, soy based fabric softener, essential oils of magnolias and lilies, and water, ECOS contains no SLS, SLES, borax, or added salts. If you are aware of other quality ‘green’ laundry soaps or have differing opinions, please feel free to comment.

Image courtesy of Earth Friendly Products

So before you pick up some ‘green’ detergent at your local grocery or health food store, do some research and make an informed purchase.

The election is over and it’s time to move on. The new administration has made public its desire to reduce greenhouse gases by 80% by 2050, and to meet this goal, electrical energy currently generated with coal and other fossil fuels must be replaced with clean, sustainable sources. Unfortunately, if you look at the facts, this transition will likely prove difficult and very costly.

Let’s check the facts:

*2006 United States Electrical Generation by Fuel in Megawatts

Total                    464,000

Coal                      220,000

Natural Gas            92,000

Nuclear                  89,000

Hydroelectric         33,000

Wind                       21,000 (2008)

To put things in perspective, Hoover Dam produces 2,000 Megawatts of power.

Natural gas is a far cleaner fuel than is coal. And according to a Navigant Consulting survey, tapping into unconventional gas supplies could raise production by 50% in 10 years.  While not a long-term solution, replacing coal-fired power plants with gas-fired generators would have a substantial, positive impact on the environment.

Ethanol is a clean burning fuel, but America’s breadbasket cannot be emptied to create electricity.  As a source for biofuel, a tree or a plant that is both rich in oil and able to tolerate drought and frost would be ideal.  Rather than competing with corn and wheat production, biofuel sources could be grown and processed on (conventionally) unproductive land in the Southwestern areas of the United States. The jatropha plant is rich in oil, is well suited to the desert Southwest, but cannot survive a freeze.  However, grown in greenhouses warmed by low temperature geothermal energy (see below,) jatropha could provide the oil needed to replace petrol-based diesel with cleaner, sustainable bio-diesel, which is of vital importance to the military and the long-haul trucking industry.

When it comes to generating electricity, wind power is becoming a real player. There are, however, certain costs. Those huge blades, drive-trains, and towers are made of steel, aluminum, and copper. Somewhere, raw materials are mined, smelted, machined, processed, and transported to produce the end-product. Nothing comes without a price. That said, wind power is one of the few alternative energy sources that can provide America with the substantial quantities of electricity so vitally needed for the transition away from fossil fuels.

Low Temp Geothermal Generator - Image courtesy of Raser Technologies

Another promising technology uses low temperature geothermal energy to produce electricity. While high temperature geothermal energy production amounts to roughly 2,800 megawatts annually and is geologically limited, low temperature geothermal generating plants have the potential to produce more than 100,000 megawatts. Using already existing technologies, low temperature geothermal well-water transfers heat to fluids that boil at temperatures lower than water does. The possibilities are huge, but current production constraints do limit the impact on America’s total energy requirements. A retooling by Ford, Chrysler and/or GM to low temperature geothermal generators would be necessary to provide the scale required to make the transition from fossil fuels.

When it comes to a clean energy policy and energy independence, getting from here to there is a road fraught with peril.  Short of a major technological breakthrough, weaning America off fossil fuels will prove to be a painful, expensive process and a single misstep could put America’s security or economy at risk. Major resource shifts are required, but concessions may be necessary. Economies in ruin are not concerned with going green.

*Source: Energy Information Admintration

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Image courtesy of The Old Fashioned Milk Paint Company

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