Will Pump-priming the Economy Help Post-Covid?

Because I operated a company that had the primary objective of developing technology for new businesses in the chemical arena, economics interested me. We can all be smart looking back, but what about now? What should we do about the economy during virus times? So what are some options? This will take more than one post, but first, what is the best example in history of getting out of trouble? What tools are available?

In 1936, John Maynard Keynes published “The General Theory of Employment, Interest and Money”, and when he did so, he should have known it worked for getting out of depression because when Adolf Hitler took over in Germany, the economy was in a mess, with horrendous unemployment and terrible wages for most of those actually employed. Hitler promised to fix things, and he did, by implementing the policies that Keynes was later to publish. By 1936 the German unemployment had essentially disappeared and Keynes would know that.  Hitler was to provide the world with horrors, but early on his economic policy was exactly what Germany needed.

Keynes’ approach was essentially that in a depression the state should provide money to prime the economy, and when better times arrived, pay it back. In my opinion, therein lay one flaw: when better times arrive, do politicians want to pay it back? Er, no. Better (at least for re-election chances) to leave it as debt and inflate it away. (Hitler never had the opportunity to pay it back, because he had other interests.) It is usual to say that Keynes’ economics collapsed in the 1970s with persistently high inflation and high unemployment. One could argue that at least part of the inflation was because the governments refused to pay back, and instead kept borrowing. I have no doubt the counter to that will be, look at now – there is no inflation, and governments are borrowing heavily. Maybe.

If following Keynes, does it matter what the money is spent on? In the German example, the money went on infrastructure, and on providing the expansion of industries for making things. There was an unintended consequence after the war: once the West Germans started to run their own economy they had another economic miracle. Thanks to Hitler’s apprentice schemes, there were a large number of highly skilled people required for manufacturing, and they had factories. The allies bombed cities but mainly left the factories alone. German manufacturing reached its highest point of the war in late 1944. As an example, they made ten times more fighters then than around the Battle of Britain. (That they had run out of skilled pilots was a separate issue.) 

Keynesian economics involved high taxes on the wealthy and some claim such tax rates prevent innovation and general expansion. In the US, from 1953 to 1964, the top tax rate was 90%, and it did not drop below 70% until about 1982. This period corresponded to the US being the most developed country in the world. The tax rates did not stifle anything. Of course, there were tax exemptions for money being sent in the desired direction, and that may well be a desirable aspect of taxation policy. The death of Keynesian economics was probably a consequence of Milton Friedman, as much as anything else. The stagflation in the late 1970s convinced politicians they could no longer spend their way out of a recession. An important observation of Friedman was that if policymakers stimulated without tackling the underlying structural deficiencies, they would fail. They did not and fail they did, but that was partly because the politicians had ceased to look at structural deficiencies. Friedman was correct regarding the problem, but that was because in detail Keynes’ obligations were overlooked. No more than half of the Keynes  prescription was implemented generally. So, where does that leave us? Is Keynes applicable now? In my opinion, the current attempts to spend our way out of virus difficulties won’t work because there are further problems that apply, but that is for a later post.

Ebook discount

From April 13 – 20, A Face on Cydonia,  the first in a series, will be discounted to 99c/99p on Amazon. In 2129, Fiona Bolton has her life before her. She is a world expert in sonic viewing with a corporation-funded University chair, but when her husband protests against that corporation she finds herself recording his murder. She wants justice.

Jonathon Munro so wants to be important in a corporation, but he has no talent that should be needed by any corporation, until he finds himself in a position to help a senior conceal a murder. If he wishes to advance he must ditch his girlfriend, Sharon Galloway, who is developing a special digging device. Meanwhile, there is growing pressure to explain why, on a TV program, a battered butte on Mars morphed into the classical face and winked. Grigori Timoshenko forms an expedition to settle this “face” for once and for all. He needs Fiona to image the interior of the rock, he needs Sharon and her digger, and he gets Jonathon anyway. With hidden agendas, a party in with members hating each other, the gloss of visiting another planet soon wears thin. A story of corruption, greed, murder, the maverick, the nature of Mars, and with the problem of why would an alien race be interested in such a disparate party. Book 1 of the First Contact trilogy.

Ebook discount

From March 1 – March 7, my ebooks at Smashwords will be significantly discounted, and one will be offered free. The fictional ebooks include”

Puppeteer:  (Free!) A technothriller where governance is breaking down due to government debt, and where a terrorist attack threatens to kill tens to hundreds of millions of people and destroy billions of dollars worth of infrastructure.

http://www.smashwords.com/books/view/69696

‘Bot War:  A technothriller set about 8 years later, a more concerted series of terrorist attacks made by stolen drones lead to partial governance breaking down.

https://www.smashwords.com/books/view/677836

Troubles. Dystopian, set about 10 years later still, the world is emerging from anarchy, and there is a scramble to control the assets. Some are just plain greedy, some think corporate efficiency should rule, some think the individual should have the right to thrive, some think democracy should prevail as long as they can rig it, while the gun is the final arbiter.

https://www.smashwords.com/books/view/174203

There is also the non-fictional “Biofuels”. This gives an overview of the issues involved in biofuels having an impact on climate change. Given that electric vehicles, over their lifetime probably have an environmental impact equivalent to or greater than the combustion motor, given that we might want to continue to fly, and given that the carbon from a combustion exhaust offers no increase in atmospheric carbon levels if it came from biofuel, you might be interested to see what potential this has. The author was involved in research on this intermittently (i.e. when there was a crisis and funding was available) for over thirty years. https://www.smashwords.com/books/view/454344

Book Discount

From January 23 – 30, my thriller, The Manganese Dilemma, will be discounted to 99c/99p on Amazon. 

The Russians did it; everyone is convinced of that. But just exactly what did they do? Charles Burrowes, a master hacker, is thrown into a ‘black op’ with the curvaceous Svetlana for company to validate new super stealth technology she has brought to the West. Some believe there is nothing there since their surveillance technology cannot show any evidence of it, but then it is “super stealth” so just maybe . . . Also, Svetlana’s father was shot dead as they made their escape. Can Burrowes provide what the CIA needs before Russian counterintelligence or a local criminal conspiracy blow the whole operation out of the water? The lives of many CIA agents in Russia will depend on how successful he is.

Ebook Discount

From December 25 – January 1, my ebooks at Smashwords will be significantly discounted. The fictional ebooks include”

Puppeteer:  A technothriller where governance is breaking down due to government debt, and where a terrorist attack threatens to kill tens to hundreds of millions of people and destroy billions of dollars worth of infrastructure.

http://www.smashwords.com/books/view/69696

‘Bot War:  A technothriller set about 8 years later, a more concerted series of terrorist attacks made by stolen drones lead to partial governance breaking down.

Smashwords    https://www.smashwords.com/books/view/677836

Troubles. Dystopian, set about 10 years later still, the world is emerging from anarchy, and there is a scramble to control the assets. Some are just plain greedy, some think corporate efficiency should rule, some think the individual should have the right to thrive, some think democracy should prevail as long as they can rig it, while the gun is the final arbiter.

https://www.smashwords.com/books/view/174203

There is also the non-fictional “Biofuels”. This gives an overview of the issues involved in biofuels having an impact on climate change. Given that electric vehicles, over their lifetime probably have an environmental impact equivalent to or greater than the combustion motor, givn that we might want to continue to fly, and given that the carbon from a combustion exhaust offers no increase in atmospheric carbon levels if it came from biofuel, you might be interested to see what potential this has. The author was involved in research on this intermittently (i.e. when there was a crisis and funding was available) for over thirty years. https://www.smashwords.com/books/view/454344

Brexit Strikes Again

Last week, I reblogged a post that I found to be quite interesting. It appears that currently there is chaos in Britain regarding Brexit, and it is worth looking at how we got here. As Philip Henley pointed out, the vote to leave the EU in accord with the results of a referendum was passed by Parliament by 498 votes to 114 votes. That became law and is the default position should a deal not be made. The May government then set about negotiating a deal with the EU, and the EU became very hard-nosed: its attitude was that it would make the situation as tough for the UK as it could reasonably do to discourage others from leaving, but also leave an easy route to remain. One of the provisions of this deal was the so-called Irish Backstop, nominally a transition period to ensure the Irish border could be kept open, but with the proviso that it would remain in force until the EU decided that it was no longer needed. The net result of this is the possibility that it could refuse indefinitely, in which case Northern Ireland would effectively become part of Eire. This deal was rejected by Parliament three times.

As her tenure as PM came to an end, Parliament came together and the ordinary MPs rebelled and took over the House, claiming they were trying to reach an agreement. At first they came up with eight possible options, but when put to the vote, all eight were rejected. Obviously, they were a negative bunch. After a panicking weekend, they reduced the number of options, but again nothing got a positive vote. Missing from the choice was “no deal”; the reason being that the Speaker stated that was the default option. That meant that everybody who wanted the “no deal” exit voted no to everything and those who wanted various deals cancelled each other out. Of course, there was no alternative deal that was realistic; both sides have to agree for there to be a deal and the EU stated there were no alternatives. Accordingly, the “no” vote won. What we learn from that is that in such a situation, the order you do things is important.

Part of the problem appears to be there are a number of hidden agendas. Nicola Sturgeon wants another referendum, as do the “Remainers”. Sturgeon simply wants a precedent for another referendum for Scotland leaving the UK, and presumably taking the North Sea Oil revenues with it. The “Remainers” simply won’t accept they lost the Parliamentary vote. Corbyn merely wants to be Prime Minister. I have heard no clue what he really wants to do about Brexit, other than annoy the government.

How could this have been different? First, decisions should be final, and the first decision was whether to leave or not leave. An overwhelming majority took the leave option. MPs then had the obligation to make that decision work. That vote was the time to argue whether the first referendum was fair, binding, or what. They declined because they did not want to come out and tell their own constituents they don’t care what they think.

The next step is to negotiate a deal. The mathematics of decision-making is called Game Theory. In terms of mathematics, there are clear requirements to get the best from a negotiation, one of which is that if the bottom line is not met, you will walk. For that to mean anything, it has to be credible. If the UK politicians want anything better than the May deal, then “No Deal” must be on the table, and it must be credible that will apply. Johnson is as near to credible as possible. If he is undermined, the UK is highly likely to lose.

At this point, the behaviour of some MPs is unconscionable. They have no proposal of their own, they have heard Johnson say he will try for a deal, and Johnson has laid down just one condition – the Irish backstop must be replaced. He should be supported in his efforts unless they have a better idea. There is talk of Johnson being undemocratic for suspending Parliament for 23 days. As Philip Henley has pointed out in the previous post, 23 days is far from being unprecedented. Johnson has the job of negotiating some sort of deal with the EU with a pack of yapping dysfunctional MPs offering a major distraction. The fact is, none of them have come up with something workable.

Now Parliament has voted to block a “no-deal” exit. Does that mean there must be a deal? No, of course not. First, the bill must be passed by the Lords. Since they are largely “Remainers”, they probably will pass it, although when is another matter. However, for that to be effective, there actually has t be a deal on offer. The only one that is the one they have voted out three times. The EU says they will not offer another one, although what would happen if Johnson offered a workable option to the Irish border is uncertain. The Commons also voted that the UK request another extension. Whether the EU would be interested in that is less certain; they must be on the verge of saying they want rid of this ridiculous situation. Note if only one EU member votes against it, it fails. Then after demanding an election for the last few months, Corbyn has vetoed one before Brexit date, deciding instead he wants another referendum. (His problem is that many of the Labour seats come from regions that voted strongly for leaving.) Just what that would solve with this dysfunctional lot of MPs eludes me. However, the so-called blocking vote has arisen because a number of Conservative MPs have defected. They were always “Remainers”, but their defection means Johnson at best runs a minority government that will not accept anything, or everybody else votes in Corbyn as Prime Minister. That is unlikely, so it will be Johnson who goes to Brussels to ask for a deal or an extension. The question then is, how intense will his asking be?

Fake or Real News and Headlines

I shall add a little next Thursday, but these are excellent points that somehow seem to have got lost in the background noise

Phenweb Publishing

The never-ending debate on Brexit continues to polarise opinion with now the new PM adding to the fray. His request to the Queen to prorogue the UK Parliament has been treated with varying degrees of support or hostility based entirely on the already dived opinion line of Remain or leave. I wish the Remain camp would stop arguing their opposition is against no deal when they voted against a deal negotiated with 27 other countries. At least the Lib Dems are honest enough to admit that.

My concern is in the so called impartiality of figures who should know better and yet claim precedent or lack of it. But I’ll start with the BBC coverage and one headline in particular.
Yesterday BBC news and web site reported the following

https://www.bbc.co.uk/news/business-49493885

“Pound Falls” is the less of a headline than BBC news which headlined at 18:00 “Pound crashes” on news. The…

View original post 609 more words

The Hydrogen Economy to solve Climate Change?

One of the interesting aspects of climate change is the number of proposals put forward to solve it that do not take into account adverse consequences. There is a strong association of wishful thinking with some of these. On the other side are the gloomy ones, and maybe I fall into that category. What brought that thought to the fore was I have seen further claims for hydrogen as a solution. Why? Well, there are wild claims that wind and solar will solve everything. One problem with these is they tend to deliver their energy in pulses: solar during the day, wind when it is blowing. The net result is that if these can deliver adequate power for all times, there is serious overproduction required at other times. The problem then is how to store this energy. One way is to pump water uphill, but that requires large storage. In a country like New Zealand, where much of the electricity is hydro generated, you would just turn off that generation and use the hydro to manage power demand. However, that assumes there is not a large increase in electricity demand. One proposed solution is to generate hydrogen by electrolysing water. This is a well-understood technology, with no problems, given the power. There are, however, significant economic ones.

This is claimed to solve another problem; a very significant amount of domestic heating is obtained from burning gas. Now, all we have to do is burn hydrogen. We could also use hydrogen in vehicles. My big problem, having worked with hydrogen before, is that it leaks, and is extremely flammable. According to Wikipedia, the flammability range of hydrogen in air is between 4% and 75%; to detonate, the limits are 18.3 – 59% (each by volume), and a leak can support combustion at flow rates as low as 4 micrograms/second. Mixtures can ignite with very low energy input, 1/10 of that needed to ignite gasoline/air, and any static electric spark can ignite it.

The leak problem is made worse by the fact that hydrogen can embrittle metals, and thus create a way for it to escape. It is lighter than air, so it tends to accumulate at the ceilings of buildings, and its very wide explosive range is a broad hazard. The idea that hydrogen could be piped into houses to provide heating is not something I would want to see. The problem is made worse in that you might be sensible and cautious and not take it up, but your neighbour might. The consequences of that can impinge on you. Recently, in Christchurch, a house blew up, and reduced itself to a collection of boards, roofing material, etc., with only the foundations remaining more or less where they started. Several neighbours houses were severely damaged, and made effectively unliveable, at least without major repairs. By some miracle, nobody was killed, although a number had injuries. What apparently happened was a registered gasfitter had done some work on the house’s gas system, there was a natural gas leak, and something ignited it. My guess is, he has some explaining to do, but my point is if this can happen to a registered tradesman, what will happen if there is widespread use of something that leaks with orders of magnitude more ease?

There is a further irony. The objective behind using hydrogen is to help the greenhouse effect by reducing the amount of carbon dioxide we emit. Unfortunately, leaked hydrogen also magnifies the greenhouse effect. At first sight, this does not look right because greenhouse gases work because there is a change of dipole moment in the vibrational mode. This is needed because unless the transition involves a change of electric moment, it cannot absorb a photon. Hydrogen has only one vibrational mode and no electric moment, and no change of electric moment when it is stretched because of its symmetry, i.e.one end of H2 is exactly the same as the other end. There is a minor effect in that the molecule can be polarised for an instant in a collision with something else, but that is fairly harmless.

The problem lies in downstream consequences. One of the important greenhouse gases is methane, emitted by natural gas leaks, farm animals, other farm processes, anaerobic fermentation, etc. Methane is about 35 times more powerful than carbon dioxide as a greenhouse gas, and worse, it absorbs in otherwise transparent parts of the infrared spectrum. (The otherwise does not include other hydrocarbon gases.) However, methane is not as serious as it might be because it is short-lived. UV radiation in the upper atmosphere breaks water, directly or indirectly, into hydroxyl radicals and hydrogen radicals. The hydroxyl radicals rapidly degrade methane, and the hydrogen radicals react with oxygen in the air to make peroxyl radicals that also degrade methane. Molecular hydrogen reacts with both these sort of radicals, and thus indirectly preserves the methane.

There are, of course, other ways of using hydrogen, such as in chemical reactions, including upgrading biofuels, and it can be stored in chemical compounds. Hydrazine (N2H4) is an example of a liquid that could make a very useful fuel. (In the book, and film “The Martian”, the hero has hydrazine from the fuel tank of a rocket, so he catalytically converts it to hydrogen to burn to make water, and blows up his “dome”. It would have been so much easier to burn hydrazine, as it was, after all, from a rocket fuel tank.) Other options include storing hydrogen as hydrides, e.g. borohydrides, or as ammonia, which is cheaper to make than hydrazine, but it is also a gas, unlike hydrazine. The problem is usually how to deliver the hydrogen at a regular and controllable rate.

The use of hydrogen in a chemical manufacturing plant, or when handled with expertise, such as when used by NASA, is no problem. My concern would be for the average person doing repairs themselves to pipes conveying hydrogen, or worse still, plumbing incorrectly. As for having hydrogen as a fuel to be delivered at refuelling stations, I used this concept in my ebook “Puppeteer” to illustrate the potential danger if there are terrorists on the loose.

Book Discount

From August 22 – 28  Jonathon Munros will be discounted to 99c on Amazon in the US and 99p in the UK. The third book in a series, in which the evil Jonathon Munro violates the only reason his evil behaviour has as yet not been punished. He is to be replaced by an android, who learns to behave like the real man. However, Jonathon’s inherent evil has been underestimated, and the android, knowing of Jonathon’s obsession with sex, and knowing that sex is needed for reproduction, decides to start reproducing itself. What could possibly go right? A dystopian hard science fiction novel that, while the third of a series, stands alone as long as you accept the characters have a past, and a problem that makes the Terminator seem modest.