Thursday, January 31, 2013

Costly Federal Loan Subsidies

What you may not know or think about is the many ways that the Federal Government is dominating certain parts of the economy and markets.  For instance the Federal Gov't (thru Fannie Mae and Freddie Mac) is now 90% of the mortgage market and some 80% of the upwardly spiraling student loan market.  Medicare/Medicaid is about 45% of the healthcare market and set to increase (if the Feds can find more taxpayer money, or worse, print more money).

Some of these roles have led to loses and will lead to more to come.

Taxpayers have had to bailout Fannie and Freddie to the tune of $200 billion and are still 'on the hook' for further and even unlimited loses, thanks to Barney Frank and our wonderful lawmakers. Thanks to Federal Reserve pump-priming, printing and MBS purchases, housing prices appear to be stabilizing which should help stabilize mortgage portfolios at those agencies.  But keep an eye on upcoming bailouts for Sallie Mae, the agency that dominates the student loan market.

I recently commented about the student loan 'bubble' in my blog entitled The Student Loan Bubble and Bailout.   The government (Sallie Mae) is still loaning to students at record rates and student loan burdens have quadrupled in 10 years.  While student loans have soared 400% in 10 years, college tuition and fees have risen about 300%.  Do you see a connection here?    See the following chart showing college tuition inflation  from

College Tuition and Fees Vs Overall Inflation (CPI)
The problem is that the debt burden for students is now so great and employment opportunities so poor that delinquent student loans are now 11% of loans.  This assures that defaults will rise as well.  The bad news for student loan holders is that these loans are not dischargeable in bankruptcy. The other bad news is for taxpayers who will inevitability absorb more losses.

The Federal Government Subsidizes Student and Mortgage Loans and the Taxpayer Incurs Loses

You ever wonder why credit card rates from your bank are 13 to 15%?   It's because, in private enterprise, banks have to set rates to take into account default losses. Credit card debt defaults have recently run about 4 % or so, meaning that banks are making a very profitable 9 to 11% on credit card balances.  Default rates can run much higher however.

Since student loan delinquencies are suddenly 11% with 9% in default.  Since the cost of money for the government is about 3%, this means that, if the government priced student loans taking into account the cost of defaults, then student loan rates would be about 12% or near typical credit card rates.

The beauty of free markets is that if student loan rates, if set in the private market, would have already risen gradually along with default rates and this rise would have already curtailed the quantity of loans being made.  This means that we wouldn't have a student loan bubble today if the government hadn't encouraged it (had been more like a private enterprise).  It's why the government became 80% of the student loan market: private lenders bowed out long ago.

But instead, we have ANOTHER financial bubble on our hands and losses will accrue to the taxpayer.  Worse, student loans are still being made at inappropriately low rates which means loans are continuing and losses will continue to mount!  But there are No Adults In Charge in Washington!

Similarly, mortgage money supplied in part by Fannie Mae and Freddie Mac, fed the housing boom in the 2000s and fueled housing inflation (along with favorable tax benefits for capital gains and interest deductability).  If the lender, the Federal Government, were correctly pricing mortgage interest rates today, they'd be at 5% and not 3.5%.  That's because the cost of money is 3% and the current mortgage default rate is about 2%.  The default rate was over 6% in recent years. If housing loans had been priced to reflect losses, the interest rate would have been 8 or 9%.  Yes, that would have really crushed the housing prices and banks.  No one has been accustomed to any kind of tough love coming from the government in half a century or more.  It's another form of moral hazard of government intervention.  So, the taxpayers are absorbing the default loses.

Indeed, the treasury has had to fund about $200 billion in losses at Fannie Mae and Freddie Mac (gov't mortgage entities) over the past 5 years. See Figure 1 below.  There may be more to come.  But keep an eye on subsidies to Sallie Mae to cover delinquent student loans.

Figure 1
Net Income for Freddie Mac and Fannie Mae
Interestingly enough, mortgage default rates remained low during the bubble years so market mortgage interest rates did not curtail the housing bubble like they would have in the student loan market.  Yes, many mortgage loans were made by the private sector.  But the bubble remained mostly hidden as rising asset prices supported the entire housing and mortgage markets---until it didn't.

Tuesday, January 29, 2013

Expect Aid to Egyptian Brotherhood to Go Forward

Hate Speech From Morsi in Egypt

Earlier this month, remarks from Egypt’s President Mohammed Morsi have been widely reported referring to Israelis as “bloodsuckers” and “the descendants of apes and pigs,” in addition to calling President Barack Obama a liar.  Fox News today tells of a top aide to Morsi claiming the
Holocaust a hoax cooked up by U.S. intelligence operatives and claimed the 6 million Jews who were killed by Nazis simply moved to the U.S.
The outrageous claims, by Fathi Shihab-Eddim, a senior figure close to President Morsi who is now responsible for appointing the editors of all state-run Egyptian newspapers, came as the world marked Holocaust Remembrance Day on Jan. 27, and also as the U.S. continues to assess its relationship with the increasingly radical Arab state.
“The myth of the Holocaust is an industry that America invented,” Shihab-Eddim said, leaving no room for doubt that the Egyptian government -- like Iran's -- has at the very least significant elements that deny one of history's best documented genocides.

Egyptian Family Imprisoned for Converting to Christianity

This follows a report on January 22nd that a family was imprisoned in Egypt for converting to Christianity.  This is a bit surprising because the Koran and many Muslims believe in killing people that renounce Islam, so it's nice to know that they are at least alive!  The family was imprisoned as well as anyone that helped them change their identity and place of residence (yes, they had to go into hiding and into a"witness protection" program---so deep were there convictions).  Christians have faced intense persecution since the so-called and mis-labeled "Arab Spring".  Coptic Christians in Egypt have faced continued persecution since the rise of the Muslim Brotherhood (of Hate).  

Hey, it's in the Koran to wipe out Christians or other non-Islamic persons. You still think only "radical" Islam is the problem for the world??  ALL of Islam is a problem for the world.

Expect Billions in Military Aid to be Delivered

Meanwhile Hillary is taking victory laps in the talk shows.  And expect this administration and Congress to send billions in aid to these idiots in Egypt.  Word on January 22nd Fox News story that an aid package is on schedule to be delivered to these idiot haters.  In that article, Malou Innocent with the Cato Institute was quoted as follows:
"U.S. aid accounts for as much as 80% of the Egyptian Defense Ministry’s weapons procurement costs... In essence, American taxpayers have been Egypt’s major arms supplier, subsidizing the supply of F-16 jet fighters, M1A1 Abrams battle tanks, armored personnel carriers, Apache helicopters, and hundreds of millions of dollars in surplus military equipment."
I say, cut off the aid.    When will we ever call for responsibility and accountability?  They'll get the message clearly if we cut them off!   Oh sorry, I forget.  Truth, respect for Christians being persecuted, responsibility and accountability are secondary to defense company profits and their lobbyists in Washington DC. Do we believe in any principles anymore? I think there's a need for another revolution in Egypt.

Strategically,  the Russians might step back in to support Egypt if we don't and the Suez Canal does run through Egypt.  But so what?  Besides, F-16s and tanks can only be used to fight Israel and suppress the people of Egypt.  Still, If you can't cut this out of the budget, you'll never cut anything!  Nothing will ever be cut!  I guess it's poetic justice that the aid we send Egypt will be financed with deficit spending and borrowed from China!?!  

Oh, and why we're at it,  cut off the aid to the Palestinians.

Obama Undermining Rule of Law

In recent blogs Courts Uphold Constitution and Spank Obama and Obama Ignoring The Constitution, I've complained that Obama Administration has been either selectively enforcing laws (not his prerogative),  trying to use administrative 'ploys' at the EPA and other agencies, or using executive orders to circumvent the law.

Yes, the Republicans have been obstructionist to say the least, but the "party of no" must oppose the party of "never can say no."  The big problem with Obama is that he's such a political novice that he is totally unaccustomed and incompetent in handling the normal 'political process'.  He has proven himself to be an extremely poor negotiator.  He also creates problems for himself by being so polarizing and insulting to the opposition and to anyone else who does not hold his political positions.  Worse, his ideas are always so 'tired' and predictable. Obama is a "Jimmy Carter" redux and now we're finding out what a 2nd Carter administration looks like: more of the same.  Sigh.

Eric Cantor has commented with more detail about the administration's effort to 'stretch' his authority in his article Cantor Takes Obama to Task for 'Imperial Presidency' which was published before the election on October 23rd 2012.  He says:
“When ‘laws’ are created without going through Congress; when laws are selectively executed; when an administration intervenes into the normal judicial process and diminishes an individual's property rights; and when the normal regulatory process is circumvented, the rule of law is eroded.”
That’s exactly what has happened under Obama, Cantor says.
“While administrations of both political parties have been known to test the bounds of the limits of their power, the breadth of the breakdown in the rule of law in recent years has reached new levels,”
Numerous examples of the President trying to avoid the normal law-making process include the following (no indentation to save space):

Ignoring Advise & Consent, such as through recess appointments (these recess appointments have just been struck down; see Courts Uphold Constitution and Spank Obama)

Creating laws outside of the Congressional process, such as changing the unionization process, telling businesses where they are allowed to locate, imposing propaganda mandates on employers, telling federal contractors who they have to hire, regulation of hydraulic fracturing, establishing a national ocean regulatory policy, creating a new land regulation program, global warming regulations, network neutrality regulations, auto efficiency mandate, claiming the power to define what constitutes religious employment, draconian regulation of coal;

Ignoring the Plain Letter of the Law & Failing to Faithfully Execute the Law, such as waiving work requirements under welfare; the contraception mandate and the rights of religious employers, expansion of the refundable tax credit providing for premium assistance, Medicare Advantage quality bonus demonstration, medical loss ratio requirement for health insurers, termination of Yucca Mountain nuclear waste repository, rewriting bankruptcy law, failing to defend the Defense of Marriage Act, recognition of Jerusalem, lobbying for abortion overseas, halting the airport screening partnership program, expedited airport screening for members of the Armed Forces, DREAM Act deferred action, administrative amnesty for illegal immigrants, withholding critical information about counterfeit goods, Medicare Solvency Requirements;

Circumventing the Normal Regulatory Process, such as abuse of sue and settle tactics, re-write of coal regulations, abuse of guidance documents, refusing to disclose regulatory agenda, failing to list essential health benefits, Gulf drilling moratorium; banning uranium mining in Arizona;

Government By Waiver, such as education policy by waiver and healthcare law waivers;

Creating New Programs Not Authorized by Congress, such as the National Network for Manufacturing Innovation, new “super” agencies, the healthcare Independent Payment Advisory Board, and the Consumer Financial Protection Bureau.

“This is no way to govern. The President has set a precedent that even his supporters should find troubling. . . . The Founding Fathers wisely gave the President many powers, but making law was not one of them.”


Monday, January 28, 2013

Federal Courts Uphold Constitution And Spank Obama

US Court of Appeals Strikes Down Obama's Radical NLRB Appointees

Most people have heard that Obama's recess appointments of three NLRB (National Labor Relations Board) members were ruled unconstitutional by the US Court of Appeals for the DC District.   What's worse is that our "Chavista" president tried to "pack" the panel with radical pro-labor lawyers/activists.  Remember when that board was shamefully interfering with Boeing's plant opening in South Carolina??  That was particularly galling since Boeing already had the go-ahead from that same panel and the plant was on the verge of opening.  What's even worse was that Obama, during his re-election, was extolling the virtues of the same plant and Boeing despite the fact that his NRLB was trying to close the plant!  Obama is nearly always two-faced.

Now, all of the rules passed since those appointments are now void. Lawmakers are demanding that these appointees step down now. Of course the administration will appeal the decision.

Obama is working against the tide of history as union membership in America is at an all-time low of 7% meaning that 93% of private sector workers are non-union members.  The public sector is much more unionized at 35.9%.  Fully 24 US States are "right-to-work" states meaning that union thugs cannot intimidate workers to become members.  The most recent state to join "right-to-work" ranks is Michigan!

Courts Also Strike Down Six EPA Power Grabs 

Courts have also spanked EPA's Lisa Jackson (and Obama), who is the attack dog for Obama's Eco-Imperialism.  No less than 6 EPA actions have been struck down by various courts that would have killed jobs with costly regulation at a time when the economy is barely recovering.  More cases are in progress. From  article "EPA Defeats Keep Piling Up" reporting that:
...federal court decisions...slapped down the EPA for ignoring its legal obligations. Those decisions harshly criticized the EPA for “magical thinking” (Mingo Logan v. EPA); “unthinkable” conduct running roughshod over due process and property rights (Sackett v. EPA); and “overstepping” the bounds of the agency’s authority (Luminant Generation Co. v. EPA).
the D.C. Circuit struck down the EPA’s “Cross-State Air Pollution Rule” that would have imposed $2.4 billion (at least!) in drastic new requirements on utilities in “upwind states” to curb emissions that could affect “downwind states” (EME Homer v. EPA). That sounds like a laudable objective - except, as the D.C. Circuit explained, the Clean Air Act already has a provision to address this very problem (colloquially called the “Good Neighbor” provision) - and the Act relegates the job to the states, not the EPA.
the Fifth Circuit overturned an EPA effort to take over Texas’s long-standing air quality permitting program (State of Texas, et al. v. EPA). The Fifth Circuit ruled that the EPA could not unilaterally dismantle the Texas program after letting it operate for 16 years. What’s more, the court reminded the EPA that the states play a “central role” in the Clean Air Act, and have “broad responsibility” and discretion regarding the means to achieve air quality standards set by the federal government.
More cases are making their way through the courts.  The best news is that Lisa Jackson, head of the EPA, has stepped down.  Yea!  It's great to see that the Courts continue to uphold the rule of law in this country against the assault of our radical leftist administration.

Sunday, January 27, 2013

Balance Medicare and S.S. Taxes and Expenditures

Everyone is familiar with SS/Medicare payroll deductions which pay for a variety of benefits including Social Security Disability (SSDI), old(er) age pensions (SS), Medicare's Hospital Insurance (HI).  Most people understand that these payroll taxes are dedicated to paying these benefits.

I suggest that someone in Congress propose a law to balance Medicare and Social Security tax collections and expenditures.  Radical idea?  It's supposed to work that way!   In fact, the payroll tax scheme was set up to withhold more than expended to build up a trust fund for future beneficiaries.

Here's Our Situation

Medicare/Social Security spending is $1.3 Trillion per year (last year) and total collections are only $700 billion meaning that the entitlement deficit is about $500 billion (approximately 1/2 of the US federal budget deficit).  If you agree that we should pay-as-we-go, then payroll taxes should rise to cover what is being spent, right?   To balance accounts then, you'd need to raise the collections by 75% to cover what's being spent (or reduce expenditures or a combination).

And don't be fooled by talk about trust funds---there isn't any money in them.  We strictly have a pay-as-you-go system. However, we aren't paying for the monies going out!!

Get Ready For The Shock

The proposed legislation would require that, this year, every working person's payroll taxes must increase from 7.65% to 13.3%.  SS/HI/Medicare taxes on employers would increase by the same amount.  Self-employed persons would pay 26.775% rate (all increased by 75%).  Furthermore, if spending rises next year, then taxes also go up.  What could be more simple?

There, that should shake up people out of their stupor.  Let's see if people want the tax increase, or do they want to reduce benefits.  The younger generation of workers need a wake-up call to make them realize the burden that they bear.  They will either bear the burden today or tomorrow due to the accumulating national debt unless we act responsibly.

Proposing a law to balance income and expenditures would revive a much needed debate.  Let the debate begin!!

Sunday, January 20, 2013

'Laser' Focus On Jobs?

President Obama promised to have a "laser focus" on jobs?  Well, here comes news that his highly publicized Council on Jobs hasn't met in over a year.  It doesn't matter, he doesn't REALLY listen to business leaders or economists anyway.  In fact, he's proven to be incapable of both learning and changing.

He's been too busy trying to kill off any nascent recovery in the economy by increasing taxes. The rise in dividend, capital gains and income taxes together with new ObamaCare taxes, by most estimates amounts to something like $62 billion in tax increases and will trim up to 1% off of growth this year.  Worse, in a 1 1/2 to 2% economic growth environment, shaving 1% off of growth is relatively large effect.

I'm all in favor of starting to reduce the deficit, but it's generally agreed by economists that spending cuts are less detrimental than tax increases.  Budget austerity by reliance on tax increases is the European way; see Socialist Presidents Come From the Same Mold--and it's not working well.  Europe is in recession and will remain there for the foreseeable future.

With this President and Congress, you can expect spending to rise even faster than the tax increases.  In fact, in the first two weeks of this year, right after the tax increases were passed, $60 billion was spent on Sandy relief and associated pork in that law.  So, it took just two weeks to spend the entire annual increase in revenues!!

As I keep stressing, Pro-growth policies are the only way out and the President rejects these.  A new national agenda for next term would have been great, but it's not going to happen now.

America, you've got what you deserve.  People will get the government they deserve.

Saturday, January 19, 2013

Public Unions Should Be Banned: Even FDR Agreed

Public unions for all employees, including office workers, teachers, firemen and police---at the federal, state and local government level----should be banned.  Why?  Because, when the Unions naturally act for the benefit of their members, this almost by definition works mostly against the public interest!  And remember, every penny more that the government pays for services, either from direct or contract employees compared to the private sector, is a form of extortion of taxpayers.  Make no mistake about it.

For example, teacher unions are doing harm to our nation's educational system.  Bad teachers can't be removed, education reforms including pay for performance can never be enacted and real accountability is not achievable  It's insane that firemen, in some municipalities as in the recently bankrupt city of Stockton, get $45,000 per year and another $20,000 per annum in benefits when many firefighters in the country are VOLUNTEERS!

Municipality and even State finances are already under strain from over-generous pension promises that can't be negotiated away.  Municipal bankruptcies will continue to increase since promised benefits can not be paid.  Bankruptcy filings are required to break public union contracts as these unions refuse to give up their generous benefits.  But what can not be paid, will not be paid.

In Federal, State and Local contracts, it is important that no preference should be given to union shop contractors as it is now.  Union labor is just too expensive. Public infrastructure projects already are vastly too expensive and take decades to complete!

Federal salaries and especially benefits are already too high compared to similar jobs in the public sector. It used to be that government salaries were lower because of higher benefits, but salaries and benefits both are now higher than the private sector.  Every penny more that the government pays for services performed, compared to the costs in the private sector, is a form of extorting that money from taxpayers.

None other than the most socialist president in US History, Franklin Delano Roosevelt agrees with me and said in 1937 (hat tip to Mish at Globaleconomicsanalysis):

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.
The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.
Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.
A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.
Get rid of public unions! Outlaw them!  Don't be afraid for government employees or contractors to the government.  Government employers must compete with the private sector in salaries and benefits in every case, so there are checks and balances.  The best protection for all workers is a robust economy with plenty of jobs available.  Unions have done their fair share to chase away jobs to Japan, China, Mexico and Korea.

Thursday, January 17, 2013

Comments on Gun Violence

Obama, in front of a bunch of children for sentimental and dramatic effect, announced a bunch of "fluffy" executive orders for gun control.  Read them here on ZeroHedge.  I tend to agree with the need for better background checks which, with another focus on mental health, was a big theme in the "action items."

There is nothing that strikes me as "unconstitutional" despite Republican fears to the contrary.

Obama,with his rhetoric and recent history, has invited this kind of fear. He has indeed pressed and exceeded the limits of his authority to NOT enforce laws in the case of unilaterally not enforcing a few existing immigration laws. He also unilaterally changed existing welfare work requirements embodied in laws passed by Clinton and the Republicans in the 1990s. Recently, Obama has publicly threatened to increase the debt limit without Congressional approval.  Good luck with that!!  See my blog Obama Ignoring The Constitution.  This President seems so traumatized by the ordinary political process!

It doesn't matter that mental illness was the root problem of the Newtown massacre, legislators must be "seen to be doing something"---anything.  So, now the target are so-called assault weapons--a ban on such guns would have to be approved by Congress.  I don't know why people need those weapons, but I doubt banning them would have much of an effect except on political perceptions.

Let's face it, Liberals would love to ban guns.  In fact they'd also prefer to ignore the 2nd Amendment to the Constitution or "interpret" the law to presume the founding fathers would be appalled by the types of weapons available.  I guess they might have a point.

Interestingly, in Socialist Britain, guns were seized in 2007.

UK Experience With Gun Seizures

It's weird because you don't think of the UK as a "gun oriented" society where even the police are unarmed.  I managed to find some recent UK data about gun offences from the UK Home Office. Have a look at the graph below:
UK Gun Offences
Caveat:  When you read the report from the Home Office,  the number of 'offences' might appear high, the number of fatalities is very low--58 fatalities in 2010/2011, up from 40 fatalities the year before.  Most of the offences were air gun offences. Therefore pay attention to the "non-air gun weapons" category in the figure above.

This data also means that the rate of homicide in the UK iis 0.12 homocides per 100,000 persons. This is low compared to most countries including the US which is 2.97 homicides per 100,000 persons (Year 2000).   It's been low in the UK for a very long time.   The data also shows that the 2007 seizure of registered guns was fairly irrelevant to gun offences in the UK.  There was already a downward trend in place at that time.  

So the rights of people were trampled by legislative fiat for minimal effect.  Let that be a warning to hyper-active legislators who want to be seen to "acting."  They are acting all right!

Here's some US homicide data from Wikipedia's: Gun violence in the US.  Handgun homocides peaked in 1994 and have come down since.  Also, there is a downward trend in other homicides.

Chicago and Washington DC gun violence should be the focus of examining gun violence!

Supposedly Chicago has the toughest gun laws in America, but over 500 people were killed there last year--one of the most violent cities in the US.  A great deal of this violence stems from gang activities.  Chicago should be a focus of the debate on gun control. Obama, get your own house in order!

But Washington DC has an even higher rate of gun-related homocides---at 35 per 100,000.  D.C. has one of the highest homicide rates in the WORLD (except Columbia, which in the year 2000, according to Wikipedia, in the middle of a drug war, had a homicide rate at 51 per 100,000).   Washington DC gun violence should be the focus of examining gun violence!  It's one of the most dangerous places on earth!

African American Males Are Most Responsible For Gun Homicides

The unfortunate fact for President Obama and the The Left is that it's African Americans who are disproportionately responsible for gun violence, crime and gun deaths.   See Gun Violence in the United States.   Over 7000 black people are killed each year and 94% of the killers are black.

African Americans make up only 13% of the population but are responsible for 56% of gun-related homicides. Let's face it, only black males are committing the crimes, so the reality is that 6.5% of the US population (black males) are responsible for 54% of gun homicides. From Bureau of Justice Statistics, here's the data for homocides by race.  The good news is that it's trending down.
Gun Homicides By Ethnicity
According to the Bureau of Justice Statistics, between 1976 and 2011, there were 279,384 black murder victims. 94 percent of those murder victims were murdered by other blacks.   From Walter Williams at Townhall, says that all of the black fatalities in Korea, Vietnam and all recent wars put together were 18,515, or a number that palls in comparison to black-on-black homicides in that same period.

Homicide Type By Race 1976 to 2005

Conclusion:  Gun violence is most associated with drug abuse, felony crime and African Americans are vastly over-represented relative to their share of the population.  But even if there were no African American homicides, the US homicide rate would still be one of the highest in the world.  When over 1/2 of gun violence is due to African Americans, shouldn't that be the focus of attention?

Sorry Mr. Obama, the truth hurts.  So "Where is Obama's Plan to Lift Afro-America?"

Tuesday, January 8, 2013

Thorium Reactors May Solve World's Energy Crisis

One of my favorite journalists in the financial arena is Ambrose Evans-Pritchard who writes for the Daily Telegraph in London.  He has, from time to time, written articles to call attention to the potential for Thorium Reactor power generation as a potential game-changing technology to radically alter the energy cost and supply landscape.  His latest article is China Blazes Trail For 'Clean' Nuclear Power From Thorium.

Norway and China are moving quickly to re-evaluate Thorium reactors as a better, safer and more environmentally friendly form of nuclear reactors, especially the molten fluoride salt reactors (THSRs or LFTR).  There is, at this moment, a reactor being tested this year in Halden Norway to power a local paper mill.   Also China is moving quickly to adopt US-developed Thorium Molten Salt Reactors.  

Thorium reactors using molten salts seem to be the most promising technology that solves nearly all of the problems using Uranium-based reactors. It also solves the considerable problems of radioactive waste with the enrichment and production of uranium reactor fuel.  Small amounts of naturally occurring Thorium is fed directly into the reactor and it is all consumed.  Molten salt Thorium reactors have significant inherent safety advantages too.

Thorium is also much more commonly occurring than Uranium--3 to 4 times more abundant while it takes much less Thorium to create the same energy output as refined Uranium.. The US already has stockpiles of Thorium; enough to last decades. Since it's relatively common and abundant, there's enough for 1000's of years of power generation.

For more details about how these reactors work and how much less fuel is required than Uranium 235 reactors, see my blog entitled How Thorium Reactors Work.

The TMSR (Thorium molten salt reactor design) advantages include:
  1. It takes 200 times less Thorium to create the same amount of energy than raw Uranium. Refer to my blog How Thorium Reactors Work.  
  2. TMSRs are much cheaper to build than convention nuclear reactors since they don't need pressurized containment.
  3. The waste products of Thorium reactor are extremely small in volume, far less toxic and have a vastly shorter half-life than transuranic waste products associated with Uranium reactors. There ARE NO transuranic waste products with Thorium reactors. The waste products also contain useful and valuable by-products including medical isotopes and xenon gas.
  4. Thorium reactors, using molten salt technology, are designed as inherently safe.  If power is lost, the reactor goes to a safe condition.  Loss of cooling water (due to loss of power) is the Achilles heel of current Uranium reactors.  The temperature of reactants also cannot exceed that of the reactor metallurgy under any circumstances.
  5. Thorium reactors, using molten salt technology do not operate under pressure and don't require expensive containment buildings or extremely thick high pressure reactors..
  6. Thorium reactors can be designed to not use water/steam for power generation and/or cooling, so they don't need to be located near large bodies of water.  
  7. Thorium reactor power turbines operate with gases other than steam and operate at a much higher temperature with higher thermodynamic efficiency (50%).
  8. These reactors can also "burn up" existing nuclear waste and can be a solution for the disposal of existing nuclear waste.
  9. This technology has no nuclear weapons by-products. It can not easily be used to generate fissile material for bombs. 
  10. Like all nuclear reactors, there are no carbon emissions.
  11. The molten salt reactors can be scaled in size to fit a single industrial application or larger for large-scale power plants for the electric grids.  These types of power plants can be small and distributed to minimize power distribution costs.  Small power plants can be disposed of more easily.

How Thorium Reactors Work

One of major figures in resuscitating the potential of molten salt Thorium reactors is a Georgia Tech alumnus named Kirk Sorensen. He has formed a company called Filbe Energy to promote this technology as a safe, efficient and environmentally friendly alternative to Uranium-based nuclear power reactors. Thorium reactors were developed in the US in the 1950s and 60s, but Uranium reactors "won" due to the programs to develop and stockpile nuclear weapons at that time.

There are many inherent advantages with these reactors as detailed in my blog Thorium Reactors May Solve The World's Energy Crisis:  inherent safety, no need for elaborate and large containment buildings, vastly more fuel efficient, Thorium is a much more abundantly available in the world, and the fuel cycle has vastly reduced reactor waste products.

All of the images below are from Kirk Sorensen's presentation at Detailed video explanations of the following graphics explain all of the information included below. I highly recommend the video explanation of the fuel cycle which is the 8th in the series. Please browse all of them however.

(click on any image to enlarge)
A Photo of an Existing Molten Florine Salts Thorium Reactor

Molten Flouride Salts at Very High Temperatures Are Integral To The TMSR Fuel Cycle
This type of reactor is not under pressure like Uranium reactors. 

TMSR Reactors Have a Fail Safe Design In The Event Of Power Failure
These reactors automatically drain and cool and the fission reaction stops in the event of a power failure

Thorium Production and Utilization is Vastly More Efficient Than Uranium

To Generate 1000 MegaWatts of Power For One Year Requires Only One Ton Of Thorium Vs. 250 Tons of Uranium Feedstock 
There are much less waste products using Thorium in reactors.  Uranium enrichment itself has significant waste products as does the Uranium reactor.  The issue of waste is extremely important to the issue of nuclear power.

The Thorium Fuel Cycle

Thorium to Uranium 233 Fuel Cycle
Thorium 232, introduced in the outer core of the reactor, is bombarded by neutrons generated from the fission in the inner core and is converted to Uranium 233.  This Uranium is separated from the "fertile salt" and then feed into the "Fuel Salt" portion of the reactor as fuel.  The Uranium is then bombarded by neutrons which results in fission reactions which releases huge amounts of energy and more neutrons. The cycle continues as the neutrons converts the Thorium in the outer core to more Uranium 233 fuel.  The Uranium 233 is completely consumed in the reactor.  

A "Cartoon" of A Thorium Reactor
The Thorium is in the outer "blanket"or "fertile" salts where it absorbs neutrons from the "Fuel Salt Core" and becomes Uranium 233.  This Uranium 233 is separated from the outer salts and feed to the inner core for fission.  Obviously fission is the source of massive amounts of energy.   The equipment on the right is for batch "cleaning" of the salts to remove "other" fission products.

Monday, January 7, 2013

The National Agenda That Never Was

The following is a list of what SHOULD happen in the first months of the next Presidential term but won't:

The Next Presidential Term's First 100 days
  1. Sponsor the first federal budget in 4 years.  Freeze Federal spending on all programs for one year. Freeze benefit increases for federal workers at the same time. 
  2. In his inauguration, the President should hark back to the days of John F Kennedy and call for energy independence for the US (maybe independence from OPEC oil?) in ten years, which can be this decade's version of JFK's ambitious goal to "Land a Man on the Moon in 10 Years." Open the US East and West coasts to energy exploration by re-initiating permitting on those offshore areas. Open ANWR to exploration.  Accelerate delayed permitting  in the US Gulf Coast hat has been bogged-down by the last term.
  3. Invite Boone Pickens and energy company leaders to the White House and support a private enterprise plan to build CNG filling stations (compressed natural gas) across the country to enable substitution of natural gas for gasoline and diesel transportation fuels.  Converting cars to CNG could be a good growth industry as conversion kits are available.
  4. Work out a Grand Bipartisan Compromise on Individual and Corporate Tax Reform.  As in Simpson Bowles, reduce marginal rates but broaden tax collection.  Limit individual tax deductions at some maximum amount at $15,000 or $17,000. Limit and/or eliminate certain tax credits  Maybe eliminate all deductions/credits for incomes over $500k.  
  5. Work out a Medicare and Social Security compromise by means testing both of these programs right away. 
  6. With Corporate marginal tax rates lowered, make a patriotic call for bringing manufacturing and jobs back to the USA from Asia.  Make a deal with WalMart to re-institute a "made in USA" policy again.  Make a big patriotic splash on the steps of the White House to make republicans, democrats and business leaders look like heroes.
  7. Approve the Keystone Pipeline extension.  
  8. Call for a moratorium on increased business regulation.  Reverse EPA's regulation of carbon dioxide since carbon dioxide in flue gas is not harmful to human health in any reasonable sense of the term.
The Next Presidential Term's First Six Months
  1. Limit the cost of ObamaCare and pass a new laws that focus on medical cost reductions such as tort reform, increased competition where possible, and expand the number of doctors through immigration and more MD graduations.  
  2. Pass a long term Medicare Reform that caps government cost growth (vouchers or block grants to the states) and garners bipartisan support. 
  3. Plan to increase the Social Security and Medicare eligibility age slowly over time starting 10 to 12 years from now.
  4. Modify Dodd Frank and/or break up the big banks into investment and banking entities and limit leverage to about 12 times capital, require everything to be indicated on-balance sheets, and mark-to-market all hedges daily.  Pass financial malfeasance laws that require jail terms and 7 year salary claw-backs for bank executives and high level management should a bank fail or serious fraud occur.
  5. Eliminate a number of Federal government departments including Dept of Education, NLRB, Dept of Energy, Homeland Security, and the Dept of Agriculture.  Consolidate and reduce the size of the various intelligence agencies.
  6. Eliminate agriculture subsidies to large corporate farmers.
  7. Invite population growth by encouraging qualified immigrants with valuable skills. Offer 10 year work permits and visas for 'qualified' foreigners who buy a USED house in the US.
  8. Replace Bernanke with someone who is committed to normalize monetary policy and raise interest rates to more "normal" levels relative to inflation.
  9. Eliminate money in politics. Go with all Federal money for national campaigns--no private contributions permitted. Ban lobbyist money too. No SuperPacs.  Make 2012 the last year of billion dollar campaigns! 
For a more complete suggestion list for a national agenda, please see my Mega-blog Series, called Solutions to Big Problems which has links to a total of four blog entries. 

Our $1/2 Trillion Entitlement Deficit

From Charles Biderman at TrimTabs, Chuck explains the sorry state of Medicare and Social Security:
Last year, employment taxes were something over $600 billion and old folks like me paid $100 billion towards our Medicare coverage. The Heritage Foundation reports that total Social Security and Medicare spending was $1.28 trillion. In other words, even by boosting payroll taxes $110 billion, the entitlement deficit will still be a half a trillion dollars.
Today there are 2.9 workers for every retiree. In 20 years that drops to 2 workers for every retiree. That means the entitlement gap between employment taxes paid and the amount spent has to surge, even if the retirement age is boosted to 70 and means testing begins.
So, even at best, our nation's entitlement deficit is $1/2 Trillion dollars. Shame on the politicians who want to put their heads in the sand and pretend that everything's OK.  Worse, shame on those same people who vilify those politicians that want to right the ship!

Our entitlement deficit goes nothing but higher.  Have a look at projected increases in Social Security and Medicare/Medicaid spending:

In just four years, the end of do-nothing-Obama's 2nd term, the entitlement deficit increases to something like $700 billion.   Yeah, everything's fine, keep your heads in the sand.

Oh, and to those young readers who support Obama, don't blame me when there are no jobs for you when you graduate in the next few years or if there's no Medicare or Social Security when you retire.   If Medicare and Social Security survive, then the benefits might buy a cup of coffee---compliments of the Federal Gov't.

Sunday, January 6, 2013

Republicans Are Crazy To Demand Fiscal Fix?

Kelly really "stepped in it" when she read a tweet from Bill Blaine, an overseas "strategist" from Britain (who cares what those socialists in Britain think??) who commented that  the US economy would be alright if it weren't for Republican "lunatics" threatening to push the U.S. into a "technical default" by failing to raise the U.S. debt ceiling.

Rick Santelli responded appropriately.

Saturday, January 5, 2013

The Student Loan Bubble and Bailout

In my blog entitled The Real Cause of Income Inequality, I mention that government expenditures and loan guarantee programs are largely responsible for inflating medical and especially college tuition costs. I also said at the end of that blog that I wouldn't be surprised if student loans were the next government funded bubble to "pop." It looks like it's happened.

From Zero Hedge, the following graphs show the extent of the building bubble in student loans outstanding. Student loans outstanding have quadrupled in 10 years.  But the delinquency rate for student loans just shot up from 9% to 11% in just one quarter---the most recent quarter (Q4, 2012).

(click images to enlarge)
Student Loans Quadruple to $1 Trillion in just 10 Years 

Student Loan Delinquencies Rising--Signal ANOTHER Burst Debt Bubble??

Here Comes The Bailout!

Now comes a little noticed bailout called "Pay As You Earn Repayment Plan" where, from the WSJ and Zero Hedge,
A new federal program should make it easier for some recent college graduates to keep their student-loan payments manageable.
The new option, known as the "Pay as You Earn Repayment Plan," lets eligible borrowers sharply lower their monthly loan payments and qualify for loan forgiveness quicker than they might otherwise.
"It's a very good safety net for students who borrow too much," says Mark Kantrowitz, publisher of the financial-aid site "If your debt exceeds your annual income, you will probably benefit."
Pay as You Earn, which took effect on Dec. 21, "is designed to help offset the effects of the recession for student borrowers most likely to take a hit in this tough job market," says Lauren Asher, president of the Institute for College Access and Success, which has pushed for the creation of income-based repayment plans.
So, here is a summary of what we have in a nutshell:
  1. Borrow too much (from the government or with gov't guarantees) to have fun in school, paying inflated tuition prices, and earning a degree with no economic value in this economy (or any economy),
  2. Pay a little or nothing at all for 20 years (or in 10 years if you subsequently work in "public service") you're loan is discharged (forgiven) and,
  3. 100's of billions of dollars of delinquent loans are transferred to the Trillions of debt already owed by the taxpayers,
  4. Continue to make loans to students that can never be paid back and,
  5. Repeat process.
Republicans and especially Democrats can never say no!  Does anyone doubt that this new "forgiveness" law will be used fraudulently to get a personal debt bailout?  How insane is it that the government is now providing loans and guaranteeing loans while, at the same time, they are mopping up the rising delinquencies?  Meanwhile, college tuitions are rising much faster than the rate of inflation thanks to this government-enabled spending.  It's another vicious circle caused by the government.

It's even worse than that!  The government caused the mortgage debt explosion and it's subsequent economic collapse. Then the government perpetuates the downturn by failed policies like the just enacted tax increase.. This, in turn, causes high youth unemployment and the "demand" for student loans.

Now that this process has progressed massively in the past 10 years, the subsequent hangover apparently is beginning.  Expect more debt added to the national debt from delinquent student loans.  Add this to all of the delinquent mortgage debt from Fannie Mae and Freddie Mac (government programs) as their mortgages continue to go sour.

The taxpayer barely notices and re-elects the same government again and again!