Month: October 2008

The Obama Apollo Project

Although I’m fundamentally a capitalist, and a strong believer in the power of free markets to allocate capital effectively, I’m not an absolute market libertarian. So whilst I’m convinced that an economy based on competition and creative destruction is far more able to generate productivity growth and technological advance than one that’s centrally planned, I do recognise that there are certain areas of industry that are often neglected or even avoided by the private sector.

Companies are bound by their shareholders to seek a profit, and so they are less inclined to invest in areas of ambitious scientific research where returns are neither immediate nor guaranteed, or in blue sky projects where the route to profit is not even apparent. It is in these areas, where the private sector is unwilling or unable to invest, that a government can in a way that’s beneficial to the long term success of an economy.

Although there have no doubt been many failures, there are numerous examples of government-led research projects that have changed society for the better, e.g.

  • The Internet (US Government – DARPA)
  • Moon Landings (US Government – Apollo Program)
  • Radar (British Air Ministry in World War 2)
  • GPS (US Government – Department of Defense)

It’s because of this, that I’m optimistic that if (when?) Barack Obama becomes President he is going to support a government-led, apollo-like, energy project to rapidly accelerate the world’s transition to renewable fuels, whilst turbo charging the economy and weaning us off our dependancy for cheap credit at the same time. And I’m optimistic that it could succeed.

According to Time Magazine:

He wants to launch an “Apollo project” to build a new alternative-energy economy. His rationale for doing so includes some hard truths about the current economic mess: “The engine of economic growth for the past 20 years is not going to be there for the next 20. That was consumer spending. Basically, we turbocharged this economy based on cheap credit.” But the days of easy credit are over, Obama said, “because there is too much deleveraging taking place, too much debt.” A new economic turbocharger is going to have to be found, and “there is no better potential driver that pervades all aspects of our economy than a new energy economy … That’s going to be my No. 1 priority when I get into office.”

If Obama really does make it his number one priority when he gets into office, and he has the electoral mandate behind him, then that political will could make a huge impact.

The New Apollo Program from the Apollo Alliance

The idea for a new Apollo program to build a new energy economy has been around since the Apollo Alliance was founded in 2004. According to their website, the program calls for investing $500 billion over 10 years on steps to:

  • Generate clean power (25% from renewable sources by 2025)
  • Improve energy conservation and efficiency
  • Cut energy bills
  • Improve US technological and industrial capabilities
  • Create 5 million green-collar jobs

These are pretty ambitious targets, particularly as they want to cut energy bills at the same time as raising the amount of power from renewable sources, but so was putting a man on the moon!

So how much is $50 billion a year?

10 Years, $500 Billion, 5 Million Jobs
The program would generate and invest $500 billion over 10 years. An annual investment of about $50 billion a year, the Alliance notes, is a smaller share of the gross domestic product than what was spent on the Apollo space program, about one-third of current spending in Iraq, and roughly half of what was just lent by the federal government to insurance giant AIG.

Could it be that by backing this project, Obama has the answers to see us out of the financial crisis and solve global warming simultaneously? If we can put a man on the moon, we can certainly hope so.

References:

– Time.com: Why Barack Obama is Winning

– Apollo Alliance: The New Apollo Program

World’s biggest cruise ships, by size

As we are thinking of going on a cruise for our honeymoon next year, I thought I’d do some research into the different cruise ships in use today. Of course there are many factors you could compare, but to start with I’m interested in just one thing: the size!

Cunard Line Limited

Maiden Voyage Name Gross Tonnage Length Height Passengers
2004 Queen Mary 2 148,528 345m 72m 2,620

Royal Caribbean International

Maiden Voyage Name Gross Tonnage Length Height Passengers
2006 Freedom of the Seas 154,407 339m 64m 4,370
2009 Oasis of the Seas 220,000 360m 65m 5,400

P&O

Maiden Voyage Name Gross Tonnage Length Height Passengers
2008 Ventura 113,000 290m ? 3,092
2005 Arcadia 86,799 GRT 290m ? 1,952

Celebrity Cruises

Maiden Voyage Name Gross Tonnage Length Height Passengers
2008 Celebrity Solstice 122,000 314m ? 2,850

Why can’t governments just print money to fund spending?

This is the first post of what I hope will become a series of posts on my blog to discover what money is and how it works. We take money for granted as something that can be exchanged for goods and services, but it is in fact a complicated instrument who’s real value and supply is always changing.

I’ve wanted to write some blog posts like this for a while, but with all the financial turmoil that has hit the world recently, and the mind boggling amounts of money that is being used to prop up the banking industry I think now is particularly good time.

European leaders announced today that they would be bailing out their banks to the tune of nearly £1.5 trillion…. so the theme for my first post is:

Rather than raise taxes or borrow, why don’t governments just print money to fund their spending?

Central banks can literally create or destroy money. They do this every day in order to manipulate the money supply in the economy in an attempt to steer inflation to within a target range. The only problem with creating new money, is that the more they create, the less each unit becomes worth. If they create too much of it, and give it away too cheaply, then it’s purchasing power diminishes and people lose confidence. This can ultimately lead to hyperinflation and the destruction of the currency.

It happened to Germany after World War I, when the government attempted to print money to balance their budget. This lead to hyperinflation peaking at 3,250,000 % per month (prices double every two days). The currency became so worthless that people would need a wheel barrow full to buy a loaf of bread, and would use it as an alternative to firewood to fuel their stoves.

John Maynard Keynes described the situation in his book, The Economic Consequences of the Peace:
“The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”

So when a government needs more money, rather than create new money and risk hyper-inflation it will borrow the money through the issuance of government bonds. This by itself doesn’t increase the total money supply.

Attack of the Wee PCs

Anyone looking for an ultra portable / mini laptop / sub notebook / netbook is now spoilt for choice. It seems that after the OLPC (one laptop per child) project announced they were aiming to build an ultraportable device for $100, every manufacturer wants a piece of the pie.

Name Screen Size Weight Price
ASUS EEE PC 7" – 10" 0.92 – 1.1 KG £160 – £340
OLPC XO-1 7.5 1.45 KG $200 ($400 give one get one)
Dell Mini 9 8.9" 1.035 KG £269 – £299
Acer Aspire One 8.9" 0.99 – 1.26 KG £198 – £269

References:

Wikipedia – Comparison of Netbooks