Tag Archives: BusinessWeek

Economics Is Hard And Then You Die, Part II

Peter Coy at Businessweek:

Alberto Alesina is a new favorite of fiscal hawks like former President George W. Bush’s chief economic adviser, N. Gregory Mankiw. A professor of economics at Harvard University, the 53-year-old Italian disputes the need for more government spending to prop up growth and advocates spending cuts instead.

This is Alesina’s hour. In April in Madrid, he told the European Union’s economic and finance ministers that “large, credible, and decisive” spending cuts to reduce budget deficits have frequently been followed by economic growth. He backed his proposal with historical research on rich countries’ experiences since 1980. Later, at the Group of 20 summit in Toronto on June 26-27, the presidents and prime ministers of the advanced economies agreed to shrink their budget gaps by half or more by 2013. That put pressure on President Barack Obama to follow the lead of cost-cutters such as Britain’s Chancellor of the Exchequer, George Osborne, and German Chancellor Angela Merkel. Says Alesina: “I think the Germans are right.”

Alesina argues that austerity can stimulate economic growth by calming bond markets, which lowers interest rates and promotes investment. In addition, he says, deficit-cutting reassures taxpayers that more wrenching fiscal adjustments won’t be needed later. That revives their animal spirits and their spending. Alesina says that as a way to shrink deficits, spending cuts are better for growth than raising taxes. The Madrid paper, a summary of his views, was influential enough to be cited in the official communiqué of the EU finance ministers’ meeting.

The U.S.’s Rare Situation

Alesina’s historical research, though, doesn’t shed much light on what might happen if the U.S. adopts an austerity budget, because current circumstances don’t resemble most of those in Alesina’s database. It’s rare for a nation to suffer such a big shortfall in demand that it cuts interest rates to zero, as the U.S. has. It’s even rarer for a government in such circumstances to tighten its fiscal belt. Japan’s experience is a cautionary tale. Japan attempted to tackle its deficit in the late 1990s during a period of weak demand and near-zero rates. Many economists say the move prolonged the slump that became known as Japan’s Lost Decade. To be sure, Japan tried to balance its budget mainly by raising taxes, which is not Alesina’s preferred solution.

Economists who describe themselves as Keynesians or neo-Keynesians don’t buy Alesina’s medicine. Gauti B. Eggertsson, a staff economist at the Federal Reserve Bank of New York, concluded in a paper last November that, with interest rates at zero, the right remedy is to raise government spending, not cut it. Espousing his own views and not those of the Fed, Eggertsson wrote that when extremely loose monetary policy isn’t stimulative enough, “the goal of policy should be to increase aggregate demand—the overall level of spending in the economy.”

Alesina’s own research shows mixed results from deficit-cutting. He identified 26 examples since 1980 of deficit reductions that triggered growth of gross domestic product and 21 that lowered government debt substantially. He found only nine double victories in which government policymakers managed both to expand their economies and reduce debt. (Among them: Ireland in 2000, and the Netherlands and Norway in 2006).

Alesina is unfazed. While acknowledging that experience with zero-rate situations is scant, he says, “I don’t see how anyone can argue that we should push even more on the fiscal accelerator.” He says the greatest risk to global growth is a financial crisis brought on by fears of government overindebtedness. Clearly, economists are as divided as politicians. The problem is that if austerity budgets are pursued and they prove ill-advised, many more people will suffer than just a few economists.

Ezra Klein:

To argue with myself for a moment, this is one of the difficulties with analysis. Fairly few political commentators know enough to decide which research papers are methodologically convincing and which aren’t. So we often end up touting the papers that sound right, and the papers that sound right are, unsurprisingly, the ones that accord most closely with our view of the world. So Alesina’s paper gets a lot of conservative pickup, but if it had found the opposite, it would’ve been ignored by conservatives, or maybe torn apart by experts sympathetic to the conservative approach to austerity, even as liberals championed its findings.

That said, even as a matter of simple logic, I really don’t understand the case for why a business would begin spending if the government announces major cuts this year. So the government says, “I’m going to take demand out of the market, end tax cuts that are helping people spend, throw a large number of public employees out of work, and reduce the spending power of the unemployed.” And it’s in that context that, say, a manufacturer of picture frames, or a local coffee chain, decides to hire more people? Where is the promise of further demand?

Will Wilkinson:

This is one of the reasons I tend not to blog as much I’d like about a lot of debates in economic policy. I just don’t know who to trust, and I don’t trust myself enough to not just tout work that confirms my biases. This is also why I tend to worry a lot about methodology in my policy papers. How much can we trust happiness surveys? How exactly is inequality measured? How exactly is inflation measured? Does standard practice bias standard measurements in a particular direction? Of course, the motive to dig deeper is often suspicion of research you feel can’t really be right. But this is, I believe, an honorable motive, as long as one digs honestly. Indeed, I’m pretty sure motivated cognition, when constrained by sound epistemic norms, is one of the mainsprings of intellectual progress.

Anyway, I just wanted to say that Alberto Alesina was one of my favorite economists before Alberto Alesina was cool, and I don’t think his findings on deficit-reduction should be lightly dismissed.

Megan McArdle:

Wading through the online debates, I note that opinions on stimulus are nearly 100% correlated with the composition of that stimulus, and the opinionator’s prior view of that activity.  So when Democrats are in power and stimulus is mostly spending, liberals think that the stimulus is an issue of fierce moral urgency stymied by venal greed and rank idiocy, while conservatives develop deep qualms about budget deficits.  When Republicans are in power, and stimulus consists mostly of tax cuts, Democrats get all vaporish about deficits and the income deficit, while Republicans suddenly realize that the normal rules don’t apply in an emergency.  When out of power, both sides will grudgingly concede that some small amount of highly temporary stimulus might be all right, but note (correctly) that the other side seems to be trying to make permanent as much of this “stimulus” as possible.

For me, then, this mostly ends up as a proxy war over the level of government spending, a war I’d rather fight honestly on value grounds rather than attempting to disguise my preferences with a shoddy veneer of “scientific” logic.

E.D. Kain at The League:

This is one of my huge frustrations with blogging. I find that it’s very difficult to keep up with the paid professionals who have a great deal more time on their hands, more resources, and therefore better perspective and, generally, better material to show for it. Whatever expertise got them into those positions in the first place is given even more room to grow and evolve.

Sure, in the age of self-publishing anyone can blog and they can do it fairly cheaply. But unless you’re being paid well for your efforts or you’re independently wealthy, then you probably need to hold down another job or jobs, and that ties up a lot of time and energy and resources.

I don’t mean to complain by any means. I could have a much worse blogging set-up. But I do often find myself wishing that I had the time and resources at my fingertips that many A-list bloggers do. It’s tough to keep up.

In many senses I think this is all that really differentiates the really good A-list bloggers from everyone else. They have the time and the resources to burn on their writing, while the rest of us fit what we can into our busy days and hope it sticks. If it’s hard for Ezra Klein or Will Wilkinson to determine “which research papers are methodologically convincing and which aren’t” it’s even harder for the rest of us.

That’s my rant and I’m sticking to it.

UPDATE: Daniel Drezner

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Not-So-Hot Tuna

Heather Horn at The Atlantic has the round-up

Paul Greenberg at The New York Times Magazine:

On the morning of June 4, in the international waters south of Malta, the Greenpeace vessels Rainbow Warrior and Arctic Sunrise deployed eight inflatable Zodiacs and skiffs into the azure surface of the Mediterranean. Protesters aboard donned helmets and took up DayGlo flags and plywood shields. With the organization’s observation helicopter hovering above, the pilots of the tiny boats hit their throttles, hurtling the fleet forward to stop what they viewed as an egregious environmental crime. It was a high-octane updating of a familiar tableau, one that anyone who has followed Greenpeace’s Save the Whales adventures of the last 35 years would have recognized. But in the waters off Malta there was not a whale to be seen.

What was in the water that day was a congregation of Atlantic bluefin tuna, a fish that when prepared as sushi is one of the most valuable forms of seafood in the world. It’s also a fish that regularly journeys between America and Europe and whose two populations, or “stocks,” have both been catastrophically overexploited. The BP oil spill in the Gulf of Mexico, one of only two known Atlantic bluefin spawning grounds, has only intensified the crisis. By some estimates, there may be only 9,000 of the most ecologically vital megabreeders left in the fish’s North American stock, enough for the entire population of New York to have a final bite (or two) of high-grade otoro sushi. The Mediterranean stock of bluefin, historically a larger population than the North American one, has declined drastically as well. Indeed, most Mediterranean bluefin fishing consists of netting or “seining” young wild fish for “outgrowing” on tuna “ranches.” Which was why the Greenpeace craft had just deployed off Malta: a French fishing boat was about to legally catch an entire school of tuna, many of them undoubtedly juveniles.

Brian Merchant at Treehugger:

Sea Shepherd’s tactics may turn some heads, and draw the ire of many, but the activist group is proving itself incredibly effective. First, reports have surfaced that Sea Shepherd may have slashed Japan’s illegal whaling catch by half. Now, in yet another daring exploit, the group’s divers have saved 800 of the most endangered fish on earth, the Bluefin Tuna, from poachers — using rotten butter to aid the rescue operation.

[…]

Bluefin tuna are one of the most valuable fish in the world — and as a result, they’re fast becoming extinct. High demand for the fish in Japan, where it’s used in high-end sashimi, is one of the primary reasons that it has been devastatingly overfished in recent years. And yes, you may have read about one of the Bluefin tuna’s few breeding grounds — in the Gulf of Mexico — being direly threatened by the BP spill. Scientists say that unless fishing is halted, or at least slowed dramatically, the bluefin will be entirely extinct in a matter of years. Unfortunately Japan persuaded China to block a trade ban proposed by the UN, so it remains legal to catch, albeit in limited numbers.

But those limited numbers are often ‘overlooked’ by poachers who recognize the bluefin’s value, and such regulations are frequently violated. Which is why activist groups like Sea Shepherd are poised to become heroes to many, and a scourge to fisherman — as they’ve already proved themselves to be both whaling arena.

Francesca Vella at The Malta Independent:

A Maltese fisherman was injured yesterday, in yet another clash with anti-bluefin tuna fishing activists in the Mediterranean.

The incident involved Sea Shepherd Conservation Society and Maltese aquaculture operators who were towing bluefin tuna cages, in what the Resources and Rural Affairs Ministry said was a legal operation.

The Sea Shepherd Conservation Society, on the other hand, said its ship, Steve Irwin, had identified two purse seiners committing illegal activities.

The incident took place in Libyan territorial waters, allegedly about 35 nautical miles off the coast of Tripoli, and a Libyan patrol boat was sent to the area.

Although information on what actually happened was sketchy yesterday evening, a Maltese fisherman seems to have suffered a ripped arm after one of the activists threw a grapnel at the tuna pen.

Bluefin tuna fishing has long been a matter of controversy due to badly depleted stocks. Only recently, member governments of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) turned down a proposal to ban international commercial trade in Atlantic bluefin tuna – a measure that could have helped avert the rapid extinction of the species.

Both Greenpeace and the Sea Shepherd Conservation Society estimate that 80 per cent of bluefin tuna have already been fished out. The organisations have been calling for an end to bluefin tuna fishing to allow populations to recover to healthy levels.

A few days ago, the European Commission decided to close the bluefin tuna fishery to purse seiners in the Mediterranean and Eastern Atlantic, due to the exhaustion of the allocated quotas.

The European Commission said: “The closure of the purse seine fishery is necessary to protect the fragile stock of bluefin tuna and to ensure its recovery as envisaged by the recovery plan of the International Commission for the Conservation of Atlantic Tunas (ICCAT). The Commission has declared a zero tolerance approach towards overfishing and will take all necessary measures to ensure full compliance across the board.

Bruce Einhorn and Stuart Biggs at Businessweek:

Tokyo’s Tsukiji fish market is a long way from the oil-drenched waters of the Gulf of Mexico. Starting at 4 a.m. every day, agents from Japanese trading companies bid for bluefin tuna and other fish from around the world that lie side by side on the floor of a cavernous warehouse. Bluefin is a mainstay of any sushi restaurant in Tokyo, and the giant fish—sometimes weighing more than 500 pounds—is the king of Tsukiji. BP’s spill is billowing near one of two spawning grounds for the Atlantic variety of bluefin (the other is in the Mediterranean). For now, fishmongers in Tsukiji say they’re not worried about the effect the BP (BP) disaster will have on the bluefin population. “If there’s an impact,” says one trader for local wholesaler Umino who won’t give his full name, “we won’t see it for a few years.”

Go to the U.S., though, and you’ll find plenty of scientists, state officials, and fishermen wondering already about the disaster’s impact on the bluefin. Japan last year consumed about 80 percent of the world’s bluefin catch, or 52,000 tons, according to the Japanese Ministry of Agriculture, Forestry & Fisheries. A large chunk of that comes from the Atlantic. The chemicals BP is using to contain the spill could damage the bluefin larvae produced by adults that spawned in the Gulf. “The oil plus the dispersants are likely to have a huge effect,” says Bill Fox, managing director for fisheries at the World Wildlife Fund. For the Atlantic bluefin, “this is a real blow.”

Scientists from several institutions, including the National Oceanic & Atmospheric Administration, are trying to figure how big the blow really is. Bluefin tuna live for up to 40 years, and in that time many repeat the same cycle endlessly: spawn in the Gulf or the Mediterranean, then head to the teeming waters of the North Atlantic to feed. Spawning in the Gulf takes place from March to June, and the spawning ground overlaps with the oil spill. Bluefin need clean ocean water to spawn—adults spawn at the surface, so they may have gotten coated with oil while spawning this year.

No one is sure exactly what happened this year when the Gulf spawning season started. If there is an effect, “we’ll see [it] in about three to four years,” says Greg Stunz, marine scientist at the Harte Research Institute for the Gulf of Mexico in Texas. That’s when the bluefin tuna born this year reach adult size. A weakened, underpopulated generation of bluefin would show something serious happened. Some fishermen, though, say enough of the spawning occurred before the Apr. 20 spill to minimize the damage.

The Economist:

Things might be better for the bluefin if it were possible to breed them in captivity, as well as raising them there. Though they call it farming, what Mr Azzopardi and his competitors are engaged in is actually more like ranching. Real husbandry nurtures animals from birth to death rather than just fattening up wild-caught individuals. That could bring economic benefits. It would also, some people think, take the pressure off wild stocks.

Clean Seas Tuna, an Australian company, has been working on the idea of farming bluefins for more than a decade, and seems to have made some progress. Last year it posted a video on YouTube showing baby southern bluefin that it had bred.

But there is more to farming than just breeding. A recurring problem for tuna-rearers is “spooking and walling”. Alex Mühlhölzl of Oceanic Tuna, a company based in Scotland which also claims to be able to breed bluefin, explains that the fish are easily frightened. In the sea, there are no walls and a frightened fish’s best escape is to swim off very fast indeed in whatever direction takes its fancy. In tanks and cages, however, this is a bad—often fatal—strategy.

Another argument against both ranching and farming is that the tuna still have to be fed, and that means with other fish caught from the wild. But this could change. In the case of salmon, a carnivorous species that is now farmed routinely, it has proved possible to mix veggies and other sources of protein into the fish’s chow. The fish content of salmon food has been reduced from 70% in 1972 to around 20% today, says Kjell Bjordal, the head of Ewos, a Norwegian fish-food company.

Feeding has also become more efficient. Mr Bjordal says that for salmon the conversion rate—the number of kilos of food needed for a gain of one kilo of body weight—is now almost 1.1:1. For tuna it can be as bad as 6:1. But that is where salmon farming was 35 years ago, so there is plenty of scope for improvement.

If bluefin could be farmed routinely, it might bring the price down, relieving pressure on wild stocks, as happened with salmon. That would be a boon to the hungry consumer. It would also be a boon to the species itself, though—again, as with salmon—the wild animal might become a premium product in its own right.

Robert Prather:

No doubt a mixed approach will be necessary that will contain market mechanisms and some instances of command and control. As for market mechanisms, I would prefer a system of tradable fishing quotas. In essence, there would be a permit that entitled existing fishermen to catch a certain amount of fish each year in an area and the permit would be tradable, creating a transferrable property right that would have value, much like the medallion system for taxi cabs in New York City (though that’s not a commons problem).A fisherman who wanted to exit fishing at some point, either for retirement or to start a new career, could sell his permit to another fisherman. The benefits to this seem obvious to me, such as creating a method for fishermen to exit or enter the profession based on how much it’s worth to them while also giving them a sort of “ownership” of the ocean. Alone though, it won’t be enough.

The article goes into some detail discussing the existing treaty arrangements and the potential solutions to the larger problem of overfishing. For once, this is an area where the UN’s involvement is essential and welcome, to me. We’re dealing with a resource that’s in international waters and no other organization has jurisdiction. Of course, treaties will be needed and command and control policies, such as a ban on fishing in large parts of the ocean, might be necessary to allow fisheries to recover.

There’s another article that’s quite interesting on genetically engineered salmon that I wanted to address, but this post is quite long already. I’ll leave you with a comment from the article’s comment section (#236) that’s nothing more than a leftist laundry list of Luddite laments:

Scientists are killing us with their good intentions. Chernobyl, Deep water drilling, Bhopal, Roundup Ready soybeans, genetically modified fast growing chickens, cows and now fish. This planet is going to hell in a handbasket. The problem is overpopulation, greed and ignorance compounded by “scientific breakthroughs” that allow overpopulation, greed and ignorance to continue uninterupted.

Now most of these aren’t even necessarily bad, but that’s a discussion for another time. Between the far left’s anti-science positions as described above and the far right’s creationism and such, it’s a wonder there was ever a Renaissance or Enlightenment.

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I’ll Have A Martini, Extra-Dry, With Vodka, Stirred With An iPhone

Jason Chen at Gizmodo:

You are looking at Apple’s next iPhone. It was found lost in a bar in Redwood City, camouflaged to look like an iPhone 3GS. We got it. We disassembled it. It’s the real thing, and here are all the details.

While Apple may tinker with the final packaging and design of the final phone, it’s clear that the features in this lost-and-found next-generation iPhone are drastically new and drastically different from what came before.

[…]

We’re as skeptical—if not more—than all of you. We get false tips all the time. But after playing with it for about a week—the overall quality feels exactly like a finished final Apple phone—and disassembling this unit, there is so much evidence stacked in its favor, that there’s very little possibility that it’s a fake. In fact, the possibility is almost none. Imagine someone having to use Apple components to design a functioning phone, from scratch, and then disseminating it to people around the world. Pretty much impossible. Here are the reasons, one by one.

It has been reported lost
Apple-connected John Gruber—from Daring Fireball—says that Apple has indeed lost a prototype iPhone and they want it back:

So I called around, and I now believe this is an actual unit from Apple — a unit Apple is very interested in getting back.

Obviously someone found it, and here it is.

John Gruber at Daring Fireball:

It’s been an open secret to those of us in the racket that Gizmodo purchased this unit about a week ago, from those who claimed to find it. That this belongs to and was made by Apple is almost beyond question at this point. Just how much it looks like what Apple plans to ship this summer, I don’t know. Note that it’s thinner than a 3GS.

I’m mentioned in the article, and must respond. Jason Chen writes:

Apple-connected John Gruber — from Daring Fireball — says that Apple has indeed lost a prototype iPhone and they want it back:

So I called around, and I now believe this is an actual unit from Apple — a unit Apple is very interested in getting back.

Obviously someone found it, and here it is.

Note that I did not use the word “lost”. It is my understanding that Apple considers this unit stolen, not lost. And as for the “someone(s)” who “found” it, I believe it is disingenuous for Gizmodo to play coy, as though they don’t know who the someones are.

Daniel Lyons at Newsweek:

The photos of the phone are splattered all over the home page of tech-gadget blog Gizmodo today. If they’re real, the folks at Apple, a place known for its crazy secrecy and security measures, must be freaking out.

“This is our biggest Apple week ever,” says Brian Lam, editor of Gizmodo. “This is the best. It’s just so great.”

Traffic to the site was so heavy that Gizmodo had to take down its comments system. The post, they said, was “setting our servers on fire.”

Apple, for its part, did not respond immediately to NEWSWEEK’s request for comment.

MG Sielger at Tech Crunch:

Stop me if you’ve heard this one before: a guy walks into a bar. No, a guy walks into a bar with an iPhone. No, a guy walks into a bar with a next-generation iPhone disguised as a current-generation iPhone. No, a guy walks into a bar with his next-generation iPhone disguised as a current-generation iPhone and leaves it there. Okay, we’ve never heard anything like this before.

Yes, it appears that the next hardware iteration of the iPhone (two common monikers are ‘iPhone 4G’ or the ‘iPhone HD’) has been outed. And while the apparent specs are sexy (higher rez screen, front-facing camera, bigger battery, etc), the story behind the leaked device seems even more interesting.

[…]

There are still a few oddities to all of this. First, assuming this is real, it is definitely the most high-profile leak of all time out of the super-secretive Apple. Hell, it may be the most high-profile hardware leak of all time from any company. If there has ever been anything that will draw the wrath of Apple’s legal team, this would seem to be it. And yet, if Gizmodo (or its parent, Gawker) have gotten a take-down notice, they haven’t let it be known yet.

It’s possible, and likely even probable, that Apple is taking this as something worthy of action much more serious than the fairly common takedown notices the company sends from time to time. As Gruber noted earlier today, according to his sources, Apple considers this device to be not lost, but stolen.

Well what do you know about this? With all those rumors flying around that the iPhone 4G we’d spotted was no more than a Japanese knock-off of an Apple product, it was starting to look like this thing was too good to be true. That is until one of the Engadget editors spotted what seems to be solid proof that this is — in fact — the next iPhone. If you’ll recall, the night before the iPad was revealed, we had leaked shots of the device from what appeared to be an Apple test lab. Upon further inspection of these pictures today, the aforementioned editor discovered that the new iPhone 4G we’ve just gotten photos of is actually sitting on the table beside the iPad prototype! Imagine how blown our minds were when we realized we have had a photo of the next iPhone for months! As you can see in the pic above, the left side of the new device is clearly visible on this table in the upper right hand corner, and since we believe that these photos come directly from an Apple testbed, it’s hard to deny that the phone you’ve just seen is in fact the real deal. Not only that, but we suspect that the device on the tablet itself is also a version of the new phone (you can see what looks like aluminum along the bottom) which seems to be housed in some type of iPhone 3G-like case.

Additionally, a source — who confirms this is the next Apple iPhone — also tells us that the device apparently does have a higher res screen on-board, a front-facing camera, a higher resolution camera with flash, and takes MicroSIM cards (that’s the little “button” around the side you see in the Twitpic which is floating around the internet)

Juli Weiner at Vanity Fair:

Someone miraculously found what could very well be the new iPhone in some bar in California and just gave it to Gizmodo. The editors say the prototype was “camouflaged” to look like the current version of the iPhone, but such a disguise did not fool the enterprising bloggers, who have already disassembled, photographed, and reviewed the thing. Josh Gruber of Daring Fireball corroborates the phone’s legitimacy: “So I called around, and I now believe this is an actual unit from Apple— a unit Apple is very interested in getting back.” Gruber says Gizmodo’s videos and description—along with Engadget’s photos of the device, posted over the weekend—are consistent with Apple’s 2006 patent for “the use of Zirconia as a radio-transparent material for part of the enclosure.”

The new version also apparently includes a “front-facing video chat camera,” a back camera with flash, an “improved display,” an entirely flat back, and a “16 percent larger battery,” among other things. Of the design: “Gone is the flushed screen glass against the metal rim. Gone is the single volume button, replaced by two separate ones. Gone is the seamless rim, and gone are the tapered, curved surfaces.” The result? A phone that feels “freaking amazing.” As we reported earlier, it’s rumored that Apple could release the device as early as this summer.

UPDATE: M.G. at The Economist

Brian Lam at Gizmodo

UPDATE #2: Huffington Post

UPDATE #3: Jon Stewart

UPDATE #4: Michael Malone at ABC

Matthew Yglesias

David Carr in NYT

Rod Dreher

UPDATE #5: Connie Guglielmo and Joel Rosenblatt at BusinessWeek

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Grey Economics Are Gonna Clear Up, Put On A Happy Face

Floyd Norris at NYT:

The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating.

That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.

[…]

Why is good news being received with such doubt? Why is “new normal” the currently popular economic phrase, signifying that growth will be subpar for an extended period, and that the old normal is no longer something to be expected?

It is possible, of course, that I am wrong and the prevalent pessimism is correct. Many economic indicators, including Thursday’s retail sales report, are looking up, but that does not prove the recovery will be self-sustaining. There are issues relating to over-indebted consumers and local governments. The housing collapse will have an impact for some time.

But there are, I think, a number of reasons for the glum outlook that are unrelated to the actual economic data.

First, the last two recoveries, after the downturns of 1990-91 and 2001, were in fact very slow to pick up any momentum. It is easy to forget that those recessions were also remarkably shallow. If you are under 45, you probably don’t have much recollection of the last strong recovery, after the recession that ended in late 1982.

Add to that the fact that the vast majority of the seers did not see this recession coming. Remember Ben Bernanke assuring us the subprime problem was “contained”? In mid-2008, after the recession had been under way for six months, the Fed thought there would be no recession, and the most pessimistic member of its Open Market Committee thought the unemployment rate could climb to 6.1 percent by late 2009. It actually went over 10 percent.

In January of this year — after the recession had probably been over for at least a few months — the most optimistic member of the committee expected the unemployment rate to fall to 8.6 percent by late this year. The consensus was for a rate no lower than 9.5 percent.

Having been embarrassed by missing impending disaster, there is an understandable hesitation to appear foolishly optimistic again.

But even without that factor, it is normal for recessions to make people pessimistic. “Go back and read what people were saying in 1982 or 1975,” said Robert Barbera, the chief economist of ITG. “Nobody was saying, ‘Deep recession, big recovery.’ It is quite normal to expect an abnormally weak recovery. It is also normal for that expectation to be wrong.”

Daniel Gross at Newsweek:

After the failure of Lehman Brothers in September 2008, industries and institutions tethered to the easy-money era were nearly sliced in half. And so was America’s economic self-esteem. Between the end of 2007 and the first quarter of 2009, $9 trillion of wealth evaporated. The relentless boom of China, India, and Brazil, with their cheap labor and abundant natural resources, emerged as a frightening new threat. The collapse coincided with other foreboding omens: $4-a-gallon gas, the rise of the tea partiers, an ungovernable Senate, an oddly blasé White House, unrepentant banks, and stubbornly high unemployment. The broad measure that tallies frustrated part-timers and those who have given up remains at 16.9 percent. If the U.S. doesn’t tumble back into recession, the consensus holds, we’ll face a Japan-style lost decade. A 2009 NBC/Wall Street Journal poll found that only 27 percent were confident their children’s standard of living would be better than their own.

Bleak is the new black.

But the long-term decline of the U.S. economy has been greatly exaggerated. America is coming back stronger, better, and faster than nearly anyone expected—and faster than most of its international rivals. The Dow Jones industrial average, hovering near 11,000, is up 70 percent in the past 13 months, and auto sales in the first quarter were up 16 percent from 2009. The economy added 162,000 jobs in March, including 17,000 in manufacturing. The dollar has gained strength, and the U.S. is back to its familiar position of lapping Europe and Japan in growth. Among large economies, only China, India, and Brazil are growing more rapidly than the U.S.—and they’re doing so off a much smaller base. If the U.S. economy grows at a 3.6 percent rate this year, as Macroeconomic Advisers projects, it’ll create $513 billion in new economic activity—equal to the GDP of Indonesia.

So what accounts for the pervasive gloom? Housing and large deficits remain serious problems. But most experts are overlooking America’s true competitive advantages. The tale of the economy’s remarkable turnaround is largely the story of swift reaction, a willingness to write off bad debts and restructure, and an embrace of efficiency—disciplines largely invented in the U.S. and at which it still excels. America still leads the world at processing failure, at latching on to new innovations and building them to scale quickly and profitably. “We are the most adaptive, inventive nation, and have proven quite resilient,” says Richard Florida, sociologist and author of The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity. If these impulses are embraced more systematically and wholeheartedly, the U.S. can remain an economic superpower well into the current century.

//

So what will our new economy look like once the smoke finally clears? There will likely be fewer McMansions with four-car garages and more well-insulated homes, fewer Hummers and more Chevy Volts, less proprietary trading and more productivity-enhancing software, less debt and more capital, more exported goods and less imported energy. Most significant, there will be new commercial infrastructures and industrial ecosystems that incubate and propel growth—much as the Internet did in the 1990s.

Mike Dorning at BusinessWeek:

Bloomberg national poll in March found that Americans, by an almost 2-to-1 margin, believe the economy has gotten worse rather than better during the past year. The Market begs to differ. While President Obama’s overall job approval rating has fallen to a new low of 44%, according to a CBS News Poll, down five points from late March, the judgment of the financial indexes has turned resoundingly positive. The Standard & Poor’s 500-stock index is up more than 74% from its recessionary low in March 2009. Corporate bonds have been rallying for a year. Commodity prices have surged. International currency markets have been bullish on the dollar for months, raising it by almost 10% since Nov. 25 against a basket of six major currencies. Housing prices have stabilized. Mortgage rates are low. “We’ve had a phenomenal run in asset classes across the board,” says Dan Greenhaus, chief economic strategist for Miller Tabak + Co., an institutional trading firm in New York. “If Obama was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the President.”

Little more than a year ago, financial markets were in turmoil, major auto companies were on the verge of collapse and economists such as Paul Krugman were worried about the U.S. slumbering through a Japan-like Lost Decade. While no one would claim that all the pain is past or the danger gone, the economy is growing again, jumping to a 5.6% annualized growth rate in the fourth quarter of 2009 as businesses finally restocked their inventories. The consensus view now calls for 3% growth this year, significantly higher than the 2.1 % estimate for 2010 that economists surveyed by Bloomberg News saw coming when Obama first moved into the Oval Office. The U.S. manufacturing sector has expanded for eight straight months, the Business Roundtable’s measure of CEO optimism reached its highest level since early 2006, and in March the economy added 162,000 jobs—more than it had during any month in the past three years. “There is more business confidence out there,” says Boeing (BA) CEO Jim McNerney. “This Administration deserves significant credit.”

Reihan Salam on Gross:

But does he gives us any reason to believe that this will happen? Have we curbed subsidies for homeownership? Have we curbed subsidies for the purchase of new automobiles? Will we see actually see legislation that bans or limits proprietary trading, would it be desirable, and would such legislation prove workable? My sense is that Neil Barofsky, quoted by Hart and Zingales in their National Affairs essay on curbing systemic risk, was right:

These banks that were too big to fail are now bigger. Government has sponsored and supported several mergers that made them larger. And that guarantee — that implicit guarantee of moral hazard, the idea that the government is not going to let these banks fail — which was implicit a year ago, it’s now explicit.

As for the more productivity-enhancing software piece, have we seen a sweeping effort from the White House to scrap software patents or to limit copyright terms, or have we seen an Administration that, like its predecessor, is eager to protect the interests of entrenched incumbents in this space?

Again, I like the Gross vision. But does he give us any reason to believe that it is coming to pass?

Gross writes:

In the 1990s, Japanese policymakers deliberated and delayed before embarking on a program that included interest-rate cuts, a huge stimulus program, expanded bank insurance, and the nationalization of failed institutions. In 2008 and 2009 it took the United States just 18 months to conduct the aggressive fiscal and monetary actions that Japan waited for 12 years to carry out. And the patient responded to the shock therapy, as the credit markets and financial sector bounced back. Since the announcements of the Treasury-imposed stress tests in May 2009, banks have raised more than $140 billion in new equity capital. In August 2009, not even the most cockeyed optimists could have projected that within four months, Bank of America, Citi, and Wells Fargo would return $100 billion in borrowed funds to the taxpayers. But they did.

Is he arguing that the financial system is basically sound? And is it really safe to say that the enormous monetary and fiscal expansion we’ve seen over this period hasn’t actually exacerbated the downside risks of another sudden downturn? Jeffrey Sachs would disagree.

Gross’s essay does include one specific bit of information that I find very encouraging.

In the short term, the ruthless pursuit of efficiency translates into the uncomfortable—and unsustainable—dichotomy of rising profits and falling employment. But the focus on efficiency is creating new business opportunities for smart companies. At BigBelly Solar, a Needham, Mass.-based firm whose solar-powered trash compactors reduce the need for both labor and energy, sales doubled in both 2008 and 2009. “Cities and institutions like universities and park systems are eager to do more with less,” says CEO Jim Poss. Leasing 500 compacting units has allowed Philadelphia to cut weekly pickups from 17 to five and will save it $13 million over 10 years. BigBelly employs fewer than 50 people, but like many businesses in fast-growing markets it indirectly supports a much larger number of jobs.

This is the power of capitalism, I tell you! But is BigBelly Solar more representative of the economy that is emerging or the massive transfers to declining industries, the pressure on GSEs to originate mortgages of dubious value, modification efforts that amount to huge subsidies for the financial sector, and much else besides?

Ryan Avent at Free Exchange at The Economist:

The trigger for the stories is clear. Economic data have been trending upward for a while, but March’s positive employment report was the catalyst for this rush of pieces. And once out there, the “Americans are too pessimistic” meme takes on a life of its own.

By its self, the cheerleading isn’t necessarily a bad thing. Confidence is a key ingredient to recovery, and if Americans are convinced that it’s once again ok to spend and invest, then the confidence boost to the economy may feed on itself. But it’s worth pointing out that after meeting on Friday, the NBER recession dating committee declared that it was not prepared to announce an official recession end date. This doesn’t mean that the economy is still in recession; it could simply mean that they have not yet seen enough data to agree upon a date. But it should indicate that America is not that far removed from contraction.

And optimism could be dangerous if it leads the country to underestimate its continued vulnerabilities—to new financial shocks, to new shocks to household budgets (as from rising resource costs), to new deterioration in housing markets, to continued drag from an unemployment problem that remains very serious. At this point in any recovery, complacency is the enemy. All observers want this to be 1983, but it very well might turn out to be 1937.

Kevin Drum:

But just off the top of my head, here are the things that gnaw at me when I hear stuff like this:

  1. This is a balance sheet recession, not a Fed-induced recession. Paul Volcker caused the 1981 recession by jacking up interest rates and he ended it by lowering them. That’s not going to happen this time.
  2. In fact, there won’t be any further stimulus from lower interest rates. They’re already at zero, and Ben Bernanke has made it clear that he doesn’t plan to effectively lower them further by setting a higher inflation target.
  3. Consumer debt is still way too high. There’s more deleveraging on the horizon, and that’s going to make consumer-led growth difficult.
  4. The financial sector remains fragile and there could still be another serious shock somewhere in the world.
  5. There are strong political pressures to reduce the budget deficit. That makes further fiscal stimulus unlikely.
  6. Housing prices are still too high. They’re bound to fall further, especially given rising interest rates combined with the end of government support programs.
  7. Our current account balance remains pretty far out of whack. Fixing this in the short term will hinder growth, while leaving it to the long term just kicks the can down the road.
  8. The Fed still has to unwind its balance sheet. That has the potential to stall growth.
  9. Oil prices are rising. This not only causes problems of its own, but also makes #7 worse.
  10. Unemployment and long-term unemployment continue to look terrible. Yes, these are lagging indicators, but still.

I don’t expect all of this stuff to be as dire as it sounds, and overall I suspect that we are indeed going to see steady if unspectacular growth over the next few years. But I’m not entirely sure of that, and these are the reasons why. Just thought I’d share.

Daniel Drezner:

If this happens, it would be consistent with the aftermath of past crises.  The U.S. tends to bounce back more quickly from global shocks — including those caused by the United States.

What’s intriguing about all of this is whether a U.S. economic resurgence would affect American attitudes about the rest of the world.  Afghanistan, Iraq, and the economic downturn have caused a lot of Americans to (understandably) grow weary of sustained engagement in other parts of the globe.  If the economy turns around, a lot of attitudes about foreign affairs might become less sour.

Question(s) to readers:  do you think the U.S. economy is primed for an supercharged recovery?  If so, how will that affect attitudes towards American foreign policy?

Marc Ambinder:

It can’t be a coincidence that Newsweek and BusinessWeek both proclaim (with caveats buried deep within) that America is back, that the worst is over, that a bright future for the country is ahead. It’s not the analysis that troubles me, it’s the perspective from which that analysis is derived. It is absolutely true that the worst is over, and is absolutely true that way too many Americans are suffering, and will continue to suffer, much more than when similar headlines were written about the ending of other recessions.

Americans don’t think the economy’s getting better, and they’re not confident it will get better. That’s the governing party’s major political challenge for the midterms. It also produces a disjuncture between elite opinion, which is talking up the economy, and public opinion, which is living with it.
I think the authors of these pieces are talking to their friends at private equity firms and on Wall Street — where exuberance reigns — and aren’t talking as much to vice presidents at, say, General Electric. It’s harder to talk to corporations when they’re not performing well and still in cautionary/recession mode. So there are more sources available to reporters who will say good things about the economy than will say bad things.
Furthermore, those writing the articles may have had trouble refinancing their mortgage, but probably aren’t underwater: they have jobs, they aren’t mobile, so they are somewhat disconnected from the depth of economic duress. (Again, these articles include caveats, but they’re intellectual, not emotional — the authors don’t give much weight to the experiences that don’t comport with their own.)
The truth is that unemployment is massive and people have a myriad of challenges. Millions face their own private liquidity crises. The unemployment rate might rise between now and November as people dip their toes back into the job market and discover that it’s still way too cold.
In general, the economy we see today is probably the economy we’ll see in November. That creates a political challenge for the White House and Democrats: they desperately want credit for saving the economy, and they’re eager to participate in stories that play up the economy. The mental figurin’ is that if the status quo is the status quo, it’s be better to talk it up than to project caution.

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“We Didn’t Want To Advertise What We Were Doing Because We Didn’t Want A Bunch Of People Calling.”

Chicago Tribune:

We didn’t want to advertise what we were doing because we didn’t want a bunch of people calling.”

—David Pickens, former top aide to Chicago Public Schools chief Arne Duncan

The quote says it all. CPS officials maintained a secret list to track requests from politicians, businessmen and other VIPs who wanted to get students admitted to one of the city’s elite high schools. Most parents didn’t know they could appeal to Duncan’s office for a closer look, and that’s the way school officials wanted it.

It’s one more example of how things are done in Illinois: One set of rules for people with clout, another set for everyone else.

Getting into one of Chicago’s nine selective-enrollment high schools is a fiercely competitive process, with tens of thousands of students vying for a few thousand slots. Admission is based on a point system, but principals have limited discretion to enroll students who wouldn’t normally make the cut.

For years, some parents have complained that well-connected neighbors were able to access those few spots through back channels. Last summer, a handful of public officials acknowledged they had used influence to get friends and relatives admitted. A federal investigation was launched in July, and Duncan’s replacement, Ron Huberman, ordered an internal investigation and an outside audit. The district’s clout list, maintained over several years under Duncan, was obtained by the Tribune this week.

Those on the list include House Speaker Michael Madigan, Attorney General Lisa Madigan, former U.S. Sen. Carol Moseley Braun, former White House social secretary Desiree Rogers and half of the Chicago City Council. The initials “A.D.” — Arne Duncan, Pickens says — appear dozens of times. Duncan’s mother and his wife also appear as sponsors.

John Hechinger at Business Week:

The Chicago school system’s Office of the Inspector General is investigating whether influential citizens circumvented the normal admissions process to gain entrance to the schools for certain applicants, according to the district’s Web site. Students are primarily chosen for selective high schools on the basis of test scores. Principals in some cases can select students using their own discretion, according to the Web site.

“We were trying to be responsive,” said Cunningham, who was also a spokesman for Duncan in Chicago. Duncan was “never” personally involved on behalf of any of the people on the list, Cunningham said in an interview.

Rob Bluey at Heritage:

Duncan’s role comes amid growing concerns in the District of Columbia over the fate of the D.C. Opportunity Scholarship Program, a signature school choice initiative that benefits low-income families. As education secretary, Duncan has overseen the dismantling of the program, which the Obama Administration has essentially left to die after strident opposition from Sen. Dick Durbin (D-IL) and teacher unions.

Obama’s fiscal 2011 budget cuts funding for the program, leaving just $8 million for scholarship recipients for the remainder of their time in the program. And despite appeals from D.C. parents last August, Duncan withdrew the scholarships of 216 students who had been admitted to the D.C. Opportunity Scholarship Program. Those students are attending lower-performing schools as a result.

The irony, of course, is that Duncan himself attended the exclusive University of Chicago Lab Schools from kindergarten through 12th grade.

One has to wonder: What does Arne Duncan have against low-income students who, for the first time in decades, have found an effective education in the District of Columbia? Shouldn’t these students have the same opportunities as the rich and powerful who appealed to him for help in Chicago?

Ed Morrissey:

This is bald corruption.  Having a secret process that only the powerful know to get preferential treatment for their children is the antithesis of openness and transparency.  It turned Chicago schools and their admission process from an open competition to another spoils process in the Chicago Machine.  It’s not surprising, given the rampant corruption in the Windy City, but it is disgusting.  Parents of children who got aced out of a spot in the school of their choice now have to assume that Duncan and his team gamed the system, putting children at a disadvantage in order  to gain political favor for themselves.

Anyone participating in that system should leave public service immediately, including Duncan himself.  Will Mr. Hope and Change keep Duncan as part of his White House team and endorse this patronage system built on the backs of children?

Instapundit:

Prediction: There’ll be special “lists” for powerful people who need kidney transplants, too.

Joanne Jacobs:

Really… whoever could have guessed that the best of publicly funded resources would go to the powerful?  It’s bad enough that the rich can fund their own better schools.  It’s even worse when they demand that the middle and lower class do it for them.

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In Bloom

Jeff Bertolucci at PC World:

Now that Bloom Energy has unveiled its innovative fuel cell technology to the world, it appears the much-hyped Silicon Valley startup’s “Energy Server” shows a lot of promise, particularly for Fortune 500 companies that can afford the parking lot-sized power boxes priced up to $800,000 apiece.

But is the Bloom box too good to be true? We may not know for years, of course, although early reports from an impressive lineup of beta testers, including Bank of America, Coca-Cola, eBay, FedEx, Google, and Wal-Mart, are showing sizable reductions in both energy costs and CO2 emissions [PDF]. A power generator that saves money and the environment? This must be Tomorrowland!

Well, Bloom Energy is developing a power box for the home too, a development that could fundamentally change the way home users buy energy, if (again) the Bloom box is the real deal.

Heather Clancy at ZDNet:

This is a huge, paradigm-shifting idea, of course. First off, this addresses the classic problem associated with renewable energy: that it is a transient, unpredictable thing. In order for renewable energy to really have a chance as an alternative to fossil fuels, we need ways to store the electricity produced and ways to feed that power back into the grid if we’re not using all of it.

I liken the thinking behind the Bloom Box to the idea of distributed computing: which enabled thousands of businesses to benefit from information technology, even though they couldn’t afford or support a mainframe computer. If you buy into that idea, why shouldn’t you buy into the idea of distributed energy that is both off the grid and on it, to boot.

If the Bloom Box concept works, and that is a big if obviously, this will be a ground-breaking idea.

Kevin Bullis at MIT Technology Review:

While Bloom is not releasing full details of the technology, it’s a type of solid-oxide fuel cell (SOFC). Unlike hydrogen fuel cells proposed for use in vehicles, SOFCs operate at high temperatures (typically well over 600 ºC) and can run on a variety of fuels. They can be more efficient than conventional turbines for generating electricity. But their high cost and reliability problems have kept them from widespread commercial use.

Sridhar says Bloom’s technology has made the fuel cells affordable. What’s more, costs are expected to decrease significantly as production ramps up.

“All indications are that they have taken pretty conventional SOFC technology (zirconia electrolyte, nickel anode) and spent a lot of money to do a very good job of engineering and process development,” says Jeff Bentley, CEO of CellTech Power, which is developing its own fuel cells that can run on fuels such as diesel and even coal. According to Bloom, the technology is based on planar solid oxide fuel cells that Sridhar developed as a professor at the University of Arizona.

Bloom sells 100-kilowatt modules. They’re made of small, flat 25-watt fuel cells that can be stacked together. A complete 100-kilowatt module, with multiple stacks and equipment for converting DC power from the stacks into AC power to be used in buildings, is about the size of a parking space. The company says each module can power a small supermarket.

In addition to Google, eBay, and Walmart, Bloom’s customers include Bank of America, Coca-Cola, Cox Enterprises, FedEx, and Staples. A 400-kilowatt system powers a building at Google that contains an experimental data center. Walmart has installed Bloom modules at two locations, where they generate between 60 to 80 percent of the electricity for the stores.

Andrew Moseman at Discover Magazine:

It’s taken upwards of $400 million in venture capital to advance the Bloom Box, an idea Sridhar got from his days at NASA working on a way to make oxygen on Mars. Sridhar simply turned the concept on its head by pumping oxygen into the box, along with fuel. The oxygen and fuel combine within a new type of fuel cell to create the chemical reaction that makes electricity [Popular Science]. The chemical reaction wouldn’t produce any globe-warming emissions, and the energy for the fuel cells could reportedly come from natural gas, biofuel, or even solar panels. Sridhar wants these individual power sources to replace the electrical grid, and he has some high-profile support, too: Wal-Mart and Google are among the companies currently trying out his box, and Colin Powell is an adviser.

But if the idea of cheap, clean energy leaves you suspicious, and reminds you of similar promises from experiments like the 1989 Fleischmann-Pons cold fusion “breakthrough,” you’re not alone. Greentech Media CEO Michael Kanellos appeared on the CBS segment to question Bloom’s promises, noting the long and difficult history of fuel cell technology and the lack of great detail about Bloom Box: “You know, they wanna almost make instant energy. But they’re also kind of sprinkled with stardust. You know, Al Gore talks about them. You see the CEO palling around with Tom Friedman at Davos. So there’s a certain whiff of celebrity” [CBS News]. As of this writing, Greentech Media’s own post about the Bloom Box is illustrated with a fanciful unicorn prancing in front of a rainbow.

Sridhar plans to unveil the machine on Wednesday, and Bloom Box’s own cryptic Web site features little besides a clock counting down to that time. Though the corporate units currently in demo cost hundreds of thousands of dollars, Sridhar says he can eventually bring the cost down to about $2,000, and wants one in every home in the country. We’ll see.

Jennifer L. Schenker at BusinessWeek:

Some industry analysts remain skeptical, pointing to a long list of fuel cell startups that have never managed to turn a profit. “I am pretty sure that when we learn more about Bloom Energy we will see that it works technically, but the costs are unapproachably high for the next 10 years,” says Michael Liebreich, chief executive of Bloomberg New Energy Finance, an energy research consultancy. “We already have a lot of those solutions.”

Consider the case of two companies that make the same type of fuel cells as Bloom Energy. Ceramic Fuel Cells Ltd, an Australian solid-oxide fuel cell company created in 1992, is still not profitable, says Jacob Grose, a senior analyst specializing in alternative power and energy storage in the New York office of Lux Research. Neither is Ceres Power Holdings,a publicly-traded British fuel cell company founded in 2001. It reported losses of £8 million ($12.24 million) last year on revenues of £1 million ($1.53 million).

Fuel Cell Energy, an established Danbury (Conn.) company that uses a different flavor of fuel cell, also has struggled. The company’s power plants have generated more than 340 million kilowatts of electricity for big business customers like Pepperidge Farm (a unit of Campbell Soup) using a variety of fuels, including wastewater gas, biogas from beer and food processing, and natural gas and other hydrocarbon fuels. Yet the company reported just $80 million in revenues in 2009, with losses of $72.5 million.

The key to Bloom Energy’s success will thus be whether it can break this pattern and sell its energy servers profitably. Bloom Energy says it will prevail where others have failed because its technology is distinct in key ways. The company claims to use lower-cost materials, allowing its boxes to be more easily mass produced and affording them a wider potential market. Bloom also says its solution is more efficient at converting fuel to electricity; is more easily deployed and maintained than alternatives; and has the ability to work with a wide range of renewable or traditional energy sources.

Bloom executives concede that fuel cells have so far under-delivered on their promise. That’s why the eight-year-old company has been so secretive until this point: It wanted to demonstrate solid experience with real customers to prove it’s really different. Bloom has now revealed that it made its first commercial installation in July 2008, and that since then, its boxes have collectively produced more than 11 million kilowatt hours of electricity and saved 14 million pounds of carbon dioxide—the equivalent of powering 1,000 American homes for a year and planting one million trees.

The company’s ambitions go beyond fueling corporations to powering individual homes. Bloom boxes also could reduce dependence on gasoline-powered vehicles by generating electricity for hybrid or electric cars. And when the cells are run in reverse, they output hydrogen, which could power hydrogen vehicles, if they ever take off. Sridhar is especially excited about the potential for Bloom boxes in emerging economies, where he says they could bring power and light to remote villages now cut off from the power grid—potentially boosting education, health care, and access to clean water and refrigeration.

That said, he acknowledges it will take at least three to five years before Bloom boxes reach “grid parity” for home use, or price competitiveness with traditional residential-scale electric supplies. And no timetable has been announced yet for an international rollout of the technology.

For now, the focus is on big business customers in the U.S., who use Bloom’s energy servers as a complement to traditional power supplies. The company says that in commercial applications, it can already generate power more cheaply than via traditional fossil fuels—for about 9 to 10 cents a kilowatt hour, vs. typical rates of 13 to 14 cents for power from the grid. Bloom’s corporate boxes cost about $700,000 to $800,000 and have a three- to five-year payback period, the company estimates. “We are twice as efficient as the U.S. national grid, which means we can produce the same amount of electricity for half the fuel and half the carbon footprint,” Sridhar says.

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Should The Last Post Of 2009 Be On Unemployment Numbers? What Subject Would Be More Appropriate?

Atrios:

The CNBC tells me there are 432K new lucky duckies. Getting closer to ‘normal’ territory.

Mark Perry at Seeking Alpha:

1. The number of people filing new claims for unemployment benefits in the U.S. unexpectedly fell in the latest week to its lowest level in 18 months, a sign the labor market may be turning a corner. Initial claims for unemployment benefits fell by 22,000 to a seasonally adjusted 432,000 in the week ended Dec. 26, the lowest level since July 19, 2008. Economists surveyed by Dow Jones Newswires had forecast claims would rise by 3,000.

2. Meantime, the Labor Department said in its weekly report Thursday that the number of people collecting jobless benefits for more than a week also continued to decline.The tally of continuing claims, or those drawn by workers collecting benefits for more than one week, fell by 57,000 to 4,981,000 in the week ended Dec. 19.

3. The four-week average of new claims, which aims to smooth volatility in the data, dropped by 5,500 to 460,250 — marking its 17th consecutive drop. That was the lowest level since Sep. 20, 2008 (see chart above).

Courtney Schlisserman at Business Week:

“What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.”

A Labor Department spokesman said last week’s figures were “consistent” with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he said.

The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.

Continuing claims decreased by 57,000 in the week ended Dec. 19, reaching the lowest level since February. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Tyler Durden at Zero Hedge:

The fabulous news of the day undoubtedly will be the latest release from the Dept of Labor: Initial Claims for the week ended December 26 came in at 432,000, a 22,000 decline from the prior week, and below consensus. The number was sufficient to prompt Bloomberg’s Courtney Schlisserman to come up with the following observation, “Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year.” Perhaps Courtney and Steve Liesman should sit down in a corner and finally figure out what this whole EUC (Emergency Unemployment Compensation) business is – trust us, it is not that difficult. And for the week ended Dec. 12 it surged by 191,669 to almost 4.5 million, another all time record. Three weeks ago we were shocked when this number hit the all time high of 4.2 million: in a mere 21 days it has added a whopping 7% to the total. Unfortunately, at this point we have gotten a little desensitized to new EUC records. We ask Ms. Schlisserman what happens to the “sustainable economic growth” when there are 0 Initial Claims (hurray!!) and a million EUC claims weekly (d’oh)? Again, a simple question. Luckily for Bloomberg, the DOL and the BLS there is no consensus number for EUC, as the downside surprises there would have been staggering, if anyone actually cared to report those on the front pages of the even impartial mainstream media.

Joe Weisenthal at The Business Insider

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