The folks at ISI are suggesting that the economic and policy data is beginning to become overwhelmingly positive. I am less sanguine then they are, and I disagree with a few of the bullet points (#1 especially).

However, it is a pretty long list of things that seem to be improving — or at least not getting worse:

• Housing starting to recover
• Labor market improving
• Credit expansion unfolding
• Low dollar
• Low rates
• Pent-up demand
• US mfg renaissance
• US energy sector booming
• Double-dip fears minimal so far this year
• Inflation receding around the world
• Europe financial strains have eased
• Liquidity is building in the world economy, eg, corporate cash
• There’ve been 83 stimulative policy initiatives announced around
the world over the past 5 months, eg, Indonesia cut rates
• The Fed has rates on hold at zero and is doing Operation Twist
• ECB is scheduled to further expand its balance sheet on Feb 29
by as much as + €1t
• There are no particular problems at the moment such as Japan
disasters, Thailand floods, supply-chain disruptions, gasoline
price spikes, and debt ceiling crises

What do you think? Is the data objectively getting better, or is this merely a selective list of positives?

~~~

What say ye?

My afternoon train reading:

• Lunch with Kenneth Rogoff (FT.com)
• Facebook already went public, you weren’t invited (Fortune)
• Kant and Hume on Causality (Stanford Encyclopedia of Philosophy)
• Here’s Why It May Be Time To Think Defensively (WSJ)
• Cancer rates triple among New York police officers who responded to 9/11 (Telegraph)
• In Piracy Debate, Deciding if the Sky Is Falling (NYT)
• The rise and fall of lap dancing (BBC)
• Gartner Says Western European PC Shipments Fell 16% in Q4 (Gartner)
• How Massage Heals Sore Muscles (NYT) see also How to live 100 healthy years (Market Watch)
• Blogosphere, We Get It… (Floating Path)

What’s on your tablet?
>

Ranks of Low-Risk Corporate Issuers Thin

Source: WSJ

Source:
S.E.C. Is Avoiding Tough Sanctions for Large Banks
NYT, February 3, 2012

The 10 yr auction was mixed but not enough a mover either way to alter market dynamics. The yield of 2.02% was a touch below the when issued but the bid to cover of 3.05 was just under the average over the last 12 months of 3.14. Direct and indirect bidders took a combined amount similar to the Jan auction. If there is a conclusion to draw, its that concerns about global growth are still obvious as why else would there be such demand for 10 yr Treasuries yielding 2%, especially with the implied inflation rate now in the TIPS market at 2.20%, the highest since August. The US economic data has improved but the bond market, in clear contrast to the equity market, seems more focused on Europe, the growth moderation in Asia and uncertain sustainability of US growth in light of another mediocre GDP report for Q4. Also, company comments on Q4 earnings calls didn’t point to robustness in economic activity. That said, stocks are more on the drug high of QE pump priming.

Click to enlarge:

>Source: Bianco Research

>

Happy Anniversary! Here we are, exactly 5 years to the day from the beginning of the credit crisis.

Jim Bianco dates the crisis as formerly beginning on February 8, 2007 when HSBC’s Household International announced huge losses due to subprime lending. HSBC had to restate its 2006 earnings significantly lower. Bianco adds that while most people were asking what a subprime loan was, HSBC was “patient zero” of the crisis.

To underscore this was indeed the start, HSBC ended this lending unit March 2009, literally hours before the stock market bottomed.

Chicago Fed Letter. “Explaining the Decline in the U.S. Labor Force Participation Rate,” by Daniel Aaronson, Jonathan Davis and Luojia Hu. March 2012, Number 296. (PDF)

(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();

I like a legal department that has a sense of humor. This is the standard disclaimer that Contango Oil & Gas Company (MCF) includes with their quarterly earnings reports:

Lawyer Stuff

The future is unknowable. We have good intentions but all of our projections and estimates will be wrong, and could be materially wrong. Wildcat exploration is expensive, speculative and potentially dangerous. An offshore spill or explosion would be enormously expensive. We have insurance but it may not be enough. You could lose your entire investment. Don’t be lazy – read our 10-Q’s, 10-K’s and press releases, and if you lose money – please no tears.

“Don’t forget about risk-free T-bills in your portfolio…After inflation and taxes you’ll likely only lose 5-10% of your investment.”

- Contango V.P. Investor Relations

Great stuff!

Hat tip Aurelian Management

~~~

Contango_PCP2012

My early morning reads:

• What Game Theory has to do with Market Volatility (Bloomberg)
• Bernanke-Led Economy Shows Critics Wrong About Fed (Bloomberg) see also To Senators, Bernanke Defends the Fed’s Dual Objectives (NYT)
• Retail: The decline of the shopping mall (CS Monitor)
• Blue Chips Hit a Yearly High (WSJ) see also Stop The Presses, Dr. Doom Is Turning Bullish (WSJ)
• Proposed settlement with banks over foreclosure practices dealt a setback (Washington Post)
• Another Year of Fear for Municipal Bonds (WSJ) see also BlackRock, Fidelity, Schwab Signal Demand for Corporate Bonds (Bloomberg)
• Time to close the carried-interest loophole (Washington Post)
• Self-Inflicted Blindness: The Austerity Threat To Innovation (Forbes) see also The hazards of crisis management (The Economist)
• Apparently, Richard Nixon was a Leftist: 1971 SOTU Address (Credit Rightdowns)
• The iPhone is a nightmare for carriers (CNNMoney Tech)

What are you reading?

>

It’s Time To End the Greek Rescue Farce

Source: Spiegel.de

With the debt deal in Greece just about done, what’s left we all know is the budget steps Greece needs to take in order to secure Bailout II funds and Papademos has another meeting with his government at 9am est to hopefully finalize. The ECB seems willing to chip in with about 11b euros of debt reduction as they hand their bonds over to the EFSF marked at the price they paid. We’re all tired of discussing Greece at this point and hopefully by Monday we won’t have to for a while. German exports in Dec fell 4.3% m/o/m, more than expectations of a decline of 1%. The drop was led by a decline in exports to the Eurozone specifically. Imports also unexpectedly fell. In Asia, the Shanghai index bounced back by 2.4% ahead of important inflation data tonight. In the US, the MBA said the avg 30 yr mortgage rate fell to a new low of 4.05% and it led to a 9.4% rise in refi’s to a level matching the highest since Nov ’10. Low rates did little for purchase apps as they were flat. II: Bulls 52.1 v 48.9 Bears 28.7 v 29.8

Click to enlarge:

The Wall Street Journal – Rate Probe Keys On Traders

Investigators in a world-wide probe of how crucial interest rates are set are focusing on a small number of traders suspected of trying to influence other bank employees to manipulate the rates, according to people familiar with the situation. The move is part of investigations by regulators and law-enforcement officials in Europe, Japan and the U.S. that began more than a year ago. Officials are trying to determine if major banks colluded to manipulate benchmark interest rates such as the London interbank offered rate, commonly known as Libor, and the Tokyo interbank offered rate, or Tibor. There is no indication that the alleged actions by the traders resulted in bank employees acting improperly in setting rates or that there has been any collusion among banks, say people familiar with the situation…People familiar with the ongoing probe said investigators in Japan have found dozens of emails and online chat messages from traders who appeared to be trying to influence other bank employees who submitted Libor or Tibor quotes involved in the interest-rate-setting process. None of the traders has been charged with wrongdoing. Japanese authorities have taken civil actions against two banks. Several banks have disclosed they are under investigation in Europe and the U.S., but this doesn’t indicate that any charges will result. In the wider investigation, officials are trying to determine whether some banks deliberately tried to skew Libor by submitting inaccurate data during the financial crisis. One possibility being looked at is whether any banks held down their rates, so as to try not to appear in riskier financial condition than their rivals.

Comment

For years we have argued that the LIBOR market essentially does not exist. Federal Reserve intervention and banks lying about their levels have strained the credibility of this measure.  As the chart above shows, the difference between the highest and lowest reported 3-month LIBOR bank rates is at its widest spread since May 2009.

We have linked stories proclaiming “LIBOR fails to paint a true picture” and that extraordinary government intervention in this market has distorted the rate so much that banks are reducing their use of LIBOR as a reference rate for new unsecured lending. It still remains the reference rate for trillions of existing loans, securities, derivatives and bank deposits. Currently there is no good alternative to LIBOR, although the Overnight Index Swap (OIS) and “LIBOR floors” are trying to replace it with limited success. So, the marketplace is searching for an alternative with many banks attempting to devise their own measures to varying degrees of success. The British Bankers Association has noticed this, which is why they are trying to rework this measure.

Source: Bianco Research

Dow Theory — a study of the relationship between the Industrials and the Transports — are suggesting a potential inflection point is nearing.

A move above 12,900 in the Dow Industrials would surpass the April 2011 highs, and the bulls would like to see that confirmed by the Trannies getting over 5630.

As we see from the indices via The Chart Store below, both the Industrials & Trannies are on the verge of that breakout. Just note that Classic Technical analysis requires you wait for the breakout/breakdown confirmation, rather than anticipate it.

Caveat: I am not a Dow Theorist, and this is a grossly oversimplified explanation. For more details, Wikipedia has an excellent primer on the major tenets of Dow Theory. Or check out Richard Russell’s The History of the Dow Theory.

>

Click to enlarge:

˜˜˜

Source: The Chart Store

300.000 Norwegians move house every year. If the pattern made by their journeys could be compressed into one short animation, what would it look like? What would someone seeing it be able to learn, if anything?

Deluge from even westvang on Vimeo.

Deluge is a C++ application designed to answer these questions. The underlying data was generated by cross referencing 8 million tax records from 2006 and 2007 to track changes in postal codes.

A major foreclosure services company is indicted for “robo-signing,” even as a multibillion-dollar deal to provide relief to struggling homeowners offers limited legal protection for financial firms.

Japans current account surplus declined for the 10th consecutive month in December. Exports were lower for the 3rd month on the trot, whilst imports rose yet again – for the 24th straight month. The current account surplus declined by approx 75% YoY, slightly worse than market expectations. The MoF states that Japan should maintain a current account surplus “for the time being” – “for the time being”, a definite Hmmmmm. Japans 2011 current account surplus was down some 44% YoY and the lowest since 1996 as Japan posted a trade deficit last year. With the nuclear problem, Japan’s need to import more energy will impact the trade numbers. The Yen (finally) is declining – above 77 against the US at present;

China’s PBoC is to provide assistance for 1st time home owners, though authorities remain vigilant on a general rise of property prices. Home prices declined in 52 out of 70 cities.

Fitch warn that a hard landing in China is a “key global risk”. Its forecast is for GDP to rise by +8.2% this year. However, China needs to grow by 7% – 8% to maintain employment and avoid social tensions.

It looks as if China will cough up to bail out the Euro Zone. Reports circulate that they may contribute (initially US$10bn, rising to US$100bn. Look, its simple. Europe is China’s largest trading partner – an European implosion will be an unmitigated disaster for China – forget the claptrap about “decoupling” – helping Europe out is in China’s best interests.

Chinese inflation data out tomorrow (they allowed an increase in diesel and petrol prices today, as production had declined in response to price curbs – the 1st increase in 10 months) and export data out on Friday. Both will be watched carefully;

A study by the South African Government states that nationalisation of the country’s mining sector (demanded by the youth wing of the ANC) would be an “unmitigated disaster”. Great. However, the study and the Mines Minister calls for more Union involvement in business decisions and for tax increases !!!!!.  Well that really is a big Hmmmmmm;

As usual Greece failed to meet its deadline to agree to the conditions imposed by the Troika on the additional bail out yesterday. However, the Euro Zone Ministers meet tomorrow – will that be the deadline? The acting Greek PM is to meet the heads of the main political parties yet again. However, a deal is expected.

The WSJ reports that the ECB will “sell”/”swap” its holding of Greek Sovereign bonds in order to reduce the amount of Greek Sovereign debt outstanding. The ECB is thought to own between E45bn – E50bn (not disclosed) and if they sell at their cost price, the overall reduction in Greek debt may amount to E11bn. If the ECB coughs up for Greece, why not for Italy, Spain, Portugal and Ireland. Clearly the ECB will have to extend its largess to these countries – the ECB currently owns E219bn of PIIGS bonds. Good for banks/insurance companies in those countries. Still think Bank of Ireland (Ticker BKIR) is looking good – bought some more.

I’m sure that the ECB will be delighed to get rid of its holding of Greek bonds – they would have taken a loss otherwise.

Just look at this Greek data re tax revenue.
Overall, revenues are down -7.0% YoY, as opposed to a target of +8.9%. VAT revenues are down -18.7%, as Greek business have simply withheld payments. Why may I ask is the Euro Zone providing additional bail out funds. Look, the reality is that Greece is a failed country, run by crooked, insane and incompetent politicians.
Don’t think I’m going to holiday in Greece anytime soon !!!;

German December’s trade surplus came in at a seasonally adjusted E13.9bn, in line with forecasts;

The British Retail Consortium announced that (non food) price inflation slowed to +1.4% in January YoY, from +1.7% in December – should provide additional ammunition for the BoE to announce additional QE by Sterling 50bn (some expect Sterling 75bn) tomorrow;

Mr Benanke’s advised the Senate Committee yesterday that unemployment remained a problem in the US, irrespective of Fridays NFP. He reiterated that the FED would hold rates at basically zero till well into 2014. No real surprise in yesterdays testimony. Still believe that the FED will go for QE3, though it may be a bit delayed;

Mr Santorum won in Minnesota, Missouri and Colarado – Romney won in Minnesota and Colarado in his 2008 campaign. Don’t know much about Mr Santorum, other than he is a “socially conservative” former Senator from Pennsylvania. President Obama’s reelection campaign managers must be delighted. Still believe that Romney will be chosen as the Republican candidate;

Some opposition from shareholders owning some 5.0% of Xstrata to the proposed merger with Glencore – however, they need to get to around 16.5% to block the deal.

Asian markets are up again, following a rise in US markets yesterday. The DOW is at its highest level since May 2008. European futures suggest a higher opening – indeed they are rising further, given the “better” Greek news.

Brent Oil has shot up to USU118.40, with the spread to WTI widening further – definitely a negative for both markets and inflation. Middle Eastern risks basically. Need to follow the Middle East more closely. Gold has risen to US$1753. The VIX remains at a (low) 17.65.

Euro is rising, given the Greek news – currently US$1.3270 (increased short), the A$ at US$108.33 (blast – shorted at just below US$1.08) and the 77.05 Yen against the US$.

Markets continue to be optimistic – too optimistic? beginning to believe that.

Still believe that EM’s, in particular, have risen too far too fast. Also remain extremely cautious on China. Todays results by BHP (down modestly in Aussie trading) did not inspire me with too much confidence – the 1st decline in BHP earnings in 2 years. The CEO talks about “volatility” Hmmmm. RIO results are out tomorrow, if I recall.

Just for fun, Portuguese 10 year bond yields have declined by some 400 bps recently – should have followed my own advice.

My afternoon train reading:

• Americans Gaining Energy Independence With U.S. Emerging as No. 1 Producer (Bloomberg)  see also Messages show conflict within NRC after Japan earthquake and tsunami (Washington Post)
• Advice for Advisors: Stop Talking and Start Listening! (Financial Sense) see also Mastering the Mad Scramble for New Clients (Registered Rep)
• Target at Post-Bailout GM: Earning $10 Billion a Year (WSJ) see also Bush Tells Dealers He Avoided ‘Gamble’ in Bail Out (Bloomberg)
• Bernanke: Fed Policy’s Encouragement of Risk Is by Design (Real Time Economics) see also Investors Place Their Money on Fed (WSJ)
• Is Facebook accurately counting its daily active users? (CNet) see also Facebook “Jumps the Shark” Interview with Michael Whalen (IRA Analyst)
• MF Trustee Traced $105B in Cash Movement (Bloomberg) see also Challenges for MF Trustee (WSJ)
• Bartlett: Tilting the Budget Process to the G.O.P. (Economix)  see also The Business Cycle Throws The GOP A Curveball (Forbes)
• Beast With Four Tails: Milky Way Devouring Neighboring Dwarf Galaxies (Science Daily) see also Galaxy Hosts 100 Billion Planets, in New Estimate (WSJ)
• Romney Finding Support Where Women Hold Sway (WSJ) but see Are Republicans About To Commit Medicare Suicide? (TPM)
• Truth, lies and Afghanistan (Armed Forces Journal) see also What goes on in the mind of a sniper? (BBC News)

What are you reading?

>

Dollar’s China Conundrum

Source:WSJ

Click interactive chart to see which sectors have lost or gained the most jobs cumulatively since the recovery started:

Source: WSJ, January 4, 2012

Nice SocGen expression of how the search for yield has manifested itself in different asset classes:

>
Click to enlarge

Source:
Societe General – Cross Agent Research
The Global Income Investor
January, 30, 2012

Barry has been crushing the BLS flat-earthers the past few days.

Resistance, however, is futile.  Try as I might not to opine on the 1.2-million-one-month-drop-in-the-labor-force, I cannot help but spill a few pixels of my own.  So here goes.

Let’s start with last month’s BLS Employment Situation release.  It contained a box, on Page 4 (of the PDF), that included the following heading and text (emphasis mine):

Upcoming Changes to the Household Survey

Effective with the release of The Employment Situation for January 2012 scheduled for February 3, 2012, population controls that reflect the results of Census 2010 will be used in the monthly household survey estimation process. Historical data will not be revised to incorporate the new controls; consequently, household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods. A table showing the effects of the new controls on the major labor force series will be included in the January 2012 release.

So right there, in black and white, BLS explicitly told its users that January 2012 and December 2011 (and earlier) simply would not be comparable — and that would obviously be the case notwithstanding how the various numbers broke.

Overlooking that caveat is one thing, I guess.  Being corrected all over the web and then not correcting and/or retracting is something else altogether.

ADDING:  For what little I’m sure it’s worth, whenever I have had a question about an economic release — and that’s dozens (hundreds?) of times — I have picked up the phone and inquired directly of the issuing agency.  Guess what?  They’ve always been happy to help.  Point being, there’s no need to go out with bad information or run your mouth when you have doubts.  Of course, this will be of no comfort to the tin-hatters who claim the agencies are in the bag.

Source:
December 2011 Employment Situation
BLS Employment Situation News Release, Friday, January 6, 2012
USDL-12-0012

This post originally appeared at Treehugger.com on February 7, 2012.

- by Brian Merchant

For decades now, fossil fuel company executives and D.C. politicians have worked together to ensure that coal and oil prices stay low enough to keep the American people hooked. In his new book Greedy Bastards, Dylan Ratigan explains how “vampire industries” like oil and coal have forged “an unholy alliance with government based not just on the money that they contribute to political campaigns and spend on lobbying, but on their ability to hypnotize us with false prices.”

Industry gets tax breaks, subsidies, military support in volatile regions, the right to use our air and water like a sewer, and assurance that the government will clean up its environmental messes. Politicians get campaign contributions, a steady flow of dirty energy, and a talking point to brandish about how they kept gas affordable.

But the American public just gets screwed.

We get stuck with a dirty, polluting energy regime; one that enriches a few one percenters while making the public sick and hobbling American innovation. As Ratigan puts it in his book, a handful of greedy bastards are fleecing Americans with a “Very Bad Deal”. Fossil fuels seem cheap and convenient now, but when we get hit with the true costs—of a spoiled environment, of missing out on vital future industries like clean energy, of a mounting public health burden, of possible war—we’ll see we were had.

The Rigged Market for Fossil Fuels

Just how rigged is the fossil fuels market? In a word, overwhelmingly.

Experts believe that oil companies alone receive $10-40 billion in handouts yearly. A conservative study from the Environmental Law Institute found that from 2002-2008, oil companies received $72 billion of taxpayer’s hard-earned cash. Another report from Management Information Systems, Inc found that between 1950 and 2010, $594 billion was spent directly subsidizing fossil fuels—and the lion’s share of that, almost two thirds, went to the oil industry. Coal, too, receives billions of dollars in annual federal handouts.

Clearly, government assistance distorts the price of fossil fuels, making them artificially cheaper. But those direct subsidies are nothing compared to the enormous costs the public indirectly pays for fossil fuels.

For one, our taxpayer dollars fund the cleanup of the industry’s accidents and disasters. In an interview, Dylan Ratigan told me that greedy bastards in the energy world are “masters” of transferring the long tail risk in their businesses to the public:

“They transfer that two tenths of a percent chance that the nuke melts down or the oil spill happens, or whatever the abomination is, to the state. The state takes that risk, and allows the limited regulation and all of the profits from the extraction of the energy resources to go to the energy companies, because they fund the politicians.”

Mining, transporting, and burning oil, gas, and coal also inflicts major damage to the environment and public health—and we pick up the tab. A 2009 report from the National Research Council showed that fossil fuels impose $120 billion of annual costs on the public every year. Air pollution takes a massive toll on public health—it causes respiratory problems, widespread illness and death, and leads to a huge number of missed work days. The prognosis from a Harvard study, the first to analyze the full life-cycle impact of coal, is even bleaker.

That report’s lead author, the late Dr. Paul Epstein, told me in an interview that “Between the land disturbance, the mountaintop removal, the processing … and the combustion, we estimate that this is costing the American public somewhere between a third to half a trillion dollars in health costs and deaths.”

Yes, that’s ‘trillion’ with a ‘T’. Every year.

In fact, coal is so economically disastrous that the mainstream journal American Economics Review found that the electricity generated from coal actually does more damage to the economy than the electricity is worth. Grist’s David Roberts notes that “Coal-fired power is a net value-subtracting industry. A parasite, you might say. A gigantic, blood-sucking parasite that’s enriching a few executives and shareholders at the public’s expense.”

Finally, taxpayer-funded military expeditions have played a crucial role in securing fossil fuel supplies and transport routes—a cost to the public registered not just in billions of dollars but in American lives.

According to Ratigan’s calculations, the price of gasoline is around $10 too cheap per gallon when all unaccounted-for costs are included. Other projections put the figure even larger. And there are a wide range of estimates of the “true” cost of coal: Depending on how you factor in the costs of climate change, it could be between a few additional cents per kWh to a whopping ¢26.89 extra per kilowatt hour—the high-end estimate from the Harvard study. By way of comparison, the average American paid ¢11.54 per kWh on their residential electric bills last year. In other words, if prices accurately reflected all of the actual costs of burning coal, coal-fired power plants would be dead in the water.

Using the example of oil, Ratigan writes that such distortion results in a situation where “the free market can’t help [us] decide if it’s worth switching from gas to another fuel, because the market isn’t free, it’s rigged.” Similarly, investors, homeowners, and utilities can’t decide whether it will pay off to invest in clean energy and efficiency when the price of burning coal, which still supplies nearly half the nation with electricity, is so cheap.

Which is why we’ve got to restore price integrity to commodities like oil and coal—we’ve got to prevent fossil fuel companies from dumping their costs on us, level the playing field for clean energy technologies, and give Americans the choice they deserve over what powers their lives. Which means we’ve got to increase the price of gasoline and coal-fired electricity.

Restoring Price Integrity: Fee and Dividend

Lower your pitchforks for a second, hold back with the tar and feathers. What if there was a way to make fossil fuels companies pay their fair share—while putting extra cash in American pockets?

It’s called ‘Fee and Dividend’. The plan is simple: charge oil, gas and coal companies a small, annually increasing fee on fossil fuels sales—then collect the fees and evenly distribute them amongst the American people. The idea has the support of not just environmentalists, but scientists, politicians, and free-market conservatives.

Jim DiPeso, the Republicans for Environmental Protection’s Vice President for Policy and Communications, sings its praises: “Transparent. Market-based. Does not enlarge government. Leaves energy decisions to individual choices … Sounds like a conservative climate plan.”

Dr. James Hansen

NASA’s Dr. James Hansen, one of the world’s top climate scientists, also advocates this approach. Hansen describes it as a “flat, across-the-board rising fee on carbon emissions” that would be levied on fossil fuels at a domestic mine or port of entry. Hansen wrote to me to explain the impact fee and dividend would have:

“The price of fossil fuel energy will rise, but with today’s fossil fuel uses, over 60 percent of the people will get more in their dividend than they pay in increased energy prices. People who have several houses or fly around the world all the time will have costs that increase more than their dividend. People will tend to make consumer and lifestyle choices that minimize their carbon emissions—this will happen naturally via the prices that they see.”

That way, when fuel prices rise to reflect their true costs, the public will have a buffer—in fact, the majority of Americans will earn money from the policy. And they’ll earn even more if they use less fossil fuels. A public website could be created to track the fees collected on fossil fuels, and Americans could see exactly how much they stand to earn.

As DiPeso explains, “Those who wish to use carbon-based energy with abandon would be free to do so – knowing up front that they would pay the environmental and other costs of using lots of carbon-based energy rather than shift those costs onto their fellow citizens.”

It’s a win-win. Not just for individual Americans, but our economy at large: Nonpolluting industries will benefit from a leveled playing field, American innovation will be unleashed, and jobs will grow in the clean energy sector.

“The carbon fee should rise over time to a level that covers the full cost of fossil fuels to society—by the time it gets there we will have generated better energy technologies and improved energy efficiency,” Hansen says.

Now, it’s not a perfect solution—farmers and folks who live in rural areas would be hit harder than those in urban areas, who already rely less on fossil fuels. A fair way to help cover those costs—perhaps tax breaks for energy efficient machinery upgrades—must be worked out with citizens in fossil fuel-dependent regions and occupations.

From Securing Oil to Securing Our Future

We also need to eliminate the massive fossil fuel subsides for coal, oil, and gas companies. This too has widespread bipartisan support. Obama calls to repeal oil subsidies just about every year, and Republicans, Independents, and Democrats alike support ending the handouts—but the unholy alliance between industry execs and the politicians they finance keeps them in place.

And, of course, we’d have to tackle what’s perhaps the biggest oil subsidy of all: U.S. military assistance to fossil fuel companies. This is a deeply entrenched system, and no single piece of legislation could likely disrupt the long-standing symbiosis between Big Oil and the military.

But we could start by launching a jobs program designed to help vets get work in the energy efficiency and clean energy sector. A group called Operation Free is already fighting a battle along those lines: Founded by veterans, it helps other vets organize to fight for clean energy policies that will lead to true energy independence, to ensure that their children won’t have to fight the same oil-tinged wars that they did.

In many European nations, where the oil industry doesn’t have as powerful a grip on politics, gasoline routinely costs two or three times as much. Governments levy gas taxes that better reflect the true cost of oil, which then spurs industry to develop cleaner, more efficient cars. This leads to less pollution, healthier communities, job transference to more productive industries, and a more competitive economy. We could do the same in the United States—in fact, we’ve got to.

Now, plenty of skeptics will insist that these ideas aren’t “politically feasible”. The plan is too ambitious, it will never pass the dysfunctional Congress, it’s too … yawn. Over the last year, we’ve watched as brand new spaces for novel approaches to politics have been blown wide open—Occupy Wall Street suddenly brought the nation face to face with its own income inequality and the safe-housing of corporate greed. The same could happen for energy and pollution. In a recent discussion, former US Energy Secretary Bill Richardson told me we need an “Arab Spring for the environment”. Indeed, across the nation, concerned citizens are beginning to rally against the cushy alliance between D.C. and the fossil fuels industry. Who can blame them?

Americans are paying through the nose on their tax returns and health bills to help Big Oil and the political elite maintain the illusion that cheap, dirty energy is a bargain. But enough is enough, and time is of the essence. We’re paying for wars, pollution and handouts to massive multinationals—instead of allowing the free market to reward the innovators and industries that will lead us to energy security. To stop the vicious cycle, we must unravel and reset the rigged market for oil and coal, revealing their true costs once and for all. We must loose the nation from the stranglehold of its aging, fossil-fueled energy regime.

As Ratigan says, “There’s no greater path to freedom than energy independence.”

Related Articles

Auction 2012: The Hidden Costs of Energy (1/31/12)

Auction 2012: Energy Fear Factor with Dan Froomkin (2/1/12)

My morning reads:

• Those Millions on Facebook? Some (most, actually) May Not Actually Visit (DealBook)
• All measures of unemployment are falling (Washington Post) but see Is glass half empty or half full? (Market Watch)
• This is NOT a tech bubble (CNN Money)
• Yeah! DOX Faces Forgery Charges in Mortgage Foreclosures (NYT)
• Admit It: Countrywide Is Bankrupt (American Banker) see also For Sale: AIG’s Subprime Bonds (WSJ)
• The downward mobility of the American middle class. (CS Monitor)
• Bondpocalypse? Again, Don’t Count On It (WSJ)
• CR says “The Housing Bottom is Here” (Calculated Risk) see also Banks Pay Homeowners to Avoid Foreclosures (Bloomberg)
• The meaning of the Transports’ weakness (Market Watch)
• Chrysler and Clint Make Obama’s Day (and Ruin Karl Rove’s) (NY Mag) and Clint Eastwood defends himself over ‘political’ Super Bowl ad (Telegraph)

What are you reading?

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Bulls on Asia See Room to Roam

Source: WSJ