We desperately need a power source that is clean and renewable. The human race needs to overcome this major hurdle so we can live on and advance our civilization.

The question is, do we want to continue polluting our planet so our children and our children’s children will have to deal with the problem, or do we want to solve it now? We need a “Manhattan Project” type initiative to break our addiction to oil and gas. In the past century, our society has made tremendous advances due to cheap energy from fossil fuels, but the time has come to move on.

So what is the answer? We need a cheap energy source that produces energy without producing greenhouse gas emissions. While wind and solar power are two alternatives, wind is unreliable because wind does not blow all the time, and solar power is still in the infancy stage of development. Wind and solar should be part of the big solution, but we need massive amounts of energy to power our cars and maintain our lifestyle.

The best answer is nuclear power. We have the technology right now to power our planet for millions and millions of years. Nuclear power can produce enough electricity to power all of Earth’s homes and cars.

Another benefit of nuclear energy is that it can be used to turn our oceans’ salt water into fresh water. Humans could have an unlimited amount of clean drinking water. And, the fresh water from the desalination process can be used to farm the desserts and boost our food production.

Okay, I know there are many people out there that hate nuclear energy with a passion. People are scared of all the nuclear waste that is produced and fear a nuclear reactor meltdown. What if I told you about a rapidly developing technology called a “Breeder Reactor” that can actually recycle the nuclear waste into more fuel? Not only would we not have nuclear waste to worry about, but we would have sufficient fuel to power our reactors forever. Nuclear reactor technology has come a long way since the incidents at Three Mile Island and Chernobyl. Today’s new reactors are extremely safe, and the chance of an accident occurring is almost impossible.

Breeder reactors use a mixed plutonium fuel that has “fast” neutrons that prolong the reaction and hold more energy. A coolant like sodium is used to control the internal neutron flux in the breeder reactor. breeder reactors open the door to an infinite amount of fuel for the production of electricity.

Many countries like France, Britain and Japan have already constructed breeder reactors and the technology is quickly improving and reaching its full potential. It is currently more expensive to recycle the fuel than just mining it, but the cost will come down to competitive levels as more breeder reactors come online.

Now that we know nuclear power is safe and produces clean energy, we need to focus on getting away from fossil fuels and start developing this clean energy source. I propose a Herculean effort to start building new nuclear power plants around the globe. We need to get our best scientists onboard to take nuclear power to its full potential. Now is the perfect time to launch this project as switching from fossil fuels to clean energy is a massive project that will create many jobs during this period of global recession.

Imagine a planet with no pollution problems and no energy or water shortages. Picture what mankind can achieve with an inexhaustible and safe supply of cheap electricity derived from nuclear power.

Source: Is Nuclear Power the Answer?

If you want free market commentary today, go over yonder to our colleagues at Money Morning, who have it all under contrarian control.

Back here at the western edge of the Great Plains and at the foot of the Rocky Mountains, there is a lot of empty retail space. Maybe it’s early in the summer shopping season. Maybe people are flying and driving less for vacation. Or maybe there’s just way too much retail space in America.

Either way, the whole geography of America’s strip mall retail network lends itself to huge booms and busts. And since we’re coming off a boom, this could be the bust. The architecture of the retail network offers you clusters of stores selling linens, patio furniture, $20 shoes from China, and huge quantities of chocolate. It all comes via truck, rail and container ship. And with global fuel prices high, it’s expensive to get things to the middle of the continent, a mile up from sea level.

But cheap energy convinces you that long logistics tails are merely matters of proper inventory management and just-in-time delivery. For the last fifty years, energy has trumped distance. That’s why America’s malls and stores are located in large residential developments which are themselves miles outside city centres. Fortress Wal-Mart.

Most of these future feudal outposts here on the Front Range of the continental divide were built by large national developers like KB Homes and Lennar. The homes are nice enough, with great views of the mountains. And they are conveniently located near grocery stores and shopping. But there are probably too many of them, and more still are being built.

They are not, we reckon, particularly well made. On the way to lunch today, our brother told us the Chipotle (a Mexican fast food joint serving enormous burritos stuffed with cheap calories) at Flat Irons Crossing Mall was vacant because the foundation had cracked. Other stores in the massive mall suffered the same fate. The mall is less than ten years old.

You wonder, with all the “For Sale” signs out front of these cookie cutter houses what these cul de sacs and neighbourhoods will look like in twenty years. Will people still live here and commute to work? Or will the whole economy of this particular living arrangement become a casualty of more expensive energy?

The word we used for it about six years ago was simple: Suburbistan. A place where the parts (copper wire, plumbing, wood frames) are worth more than the whole…empty tracts of houses built for people who couldn’t afford them with real money and which, in any case, are the ticky-tacky icons of a giant mis-allocation of the nation’s capital.

Right now, though, it’s not that bad. Times are tougher for sure. Good paying work is harder to get. This is a function of the globalisation of labour and free trade agreements. Jobs are created. But they aren’t the same jobs America created in the post-War boom of the 1960s and 1970s. They aren’t in manufacturing with high wages, lifetime employment, and defined benefit pensions (think General Motors).

The jobs created in America today pay lower wages and don’t come with a pension at all, unless it’s defined contribution scheme. New jobs come from services and retail (think Wal-Mart) and reflect the nation’s shift towards debt-based consumption and asset-based saving, neither of which lead to long-term capital formation. America is becoming a nation of window shoppers.

In fact, it’s evident now that capital is being either exported (as factories) or sold (as equity) to pay the bills (as debt). And that’s for the capitalists! For the workers and wage slaves, there is more job mobility, but less job security. Do you think it’s a good trade? How long before a clever politician begins appealing to the growing sense of resentment…and a desire for something “to be done” to someone?

The time is ripe on the national scene for a demagogue who appeals to America’s sense of injured pride and national greatness. That should be interesting to watch. Both Obama and McCain would fit the bill nicely, despite coming from opposite ends of the political spectrum. They share at least one belief in common: that State power should be used to shape people’s lives in whichever way the State chooses. America will be worse off with either way.

The country has huge fiscal and geopolitical challenges. It also still has a lot of nuclear weapons and, at least in Washington D.C., an exalted sense of its place in the world order. So much for American modesty, or walking softly and carrying a big stick for a rainy day. Watch out the anti-anti-American backlash.

Here in the mountains, Colorado has always been a bit of a boom-bust state. In the late 1970s and early 1980s it boomed with high oil prices. Natural gas drilling on the Western Slope boomed. Exxon Mobil opened a refinery in Parachute to turn oil shale into something like crude oil (kerogen). The U.S. Department of Energy even exploded a nuclear bomb underground near Rulison in Western Colorado to try and liberate stranded pockets of natural gas.

Nuclear mining! Lang Hancock would have loved it!

When oil prices crashed in the early ‘80s, Exxon shut the whole oil-shale retorting plant down. Who needs an alternative to crude when you have Prudhoe Bay, the North Sea, the Gulf of Mexico and Saudi Arabia? Oil prices stayed low for years and people resumed carefree consumption. National law makers went on a long holiday from serious thought and a realistic energy policy.

But hey, these things go in cycles. People have always been thoughtless and unprepared in the midst of great luxury. Same species, different century.

If you’ve lived through a bust, you don’t forget it and you never quite behave the same way because of it. The locals still refer to the day Exxon pulled the plug at Parachute as “Black Monday.” The massive housing development Exxon built for all the future employees at the facility became a retirement community known as “Battlement Mesa.”

Take oil. As Gabriel and Al mentioned in Money Morning earlier this week, the correction is on. Oil was down another two dollars in U.S. trading around US$122. And it wasn’t even the thundering of George Soros in front of Congress that scared speculators out of their positions, either.

High prices, as the saying goes, are the cure for high prices. “Cure” may not be the best word, though, especially if you’re an airline company or a car maker. Here in the States, United Airlines announced it would cut its domestic service Ted (the equivalent of Jetstar), cut 1,100 jobs, and retire about 70 planes, including the lumbering, old, creaky 747s that fly the Sydney to LA and Sydney to San Francisco route.

Why the drastic measures? Jet fuel prices are up 89% in the last year. High prices. The auto industry is finally reacting to high prices as well. General Motors announced it would close four truck and SUV plants in the U.S. and shed 10,000 jobs. GM’s capacity to build gas-guzzling trucks will decline by 35%.

It’s been a long time coming. And while GM makes fewer bigger cars, the company plans to make a new smaller, more fuel-efficient car. It also plans to get into the plug in hybrid market with the Chevy Volt.

Jets and cars and oil prices. Demand is finally destroyed by high prices. Of course the demand destruction in the transportation and travel market means a contraction of an economic activity. It also means, as GM’s CEO Rick Wagoner suggested, a permanent shift to a world where cheap energy is no longer the assumption. Maybe we’re moving toward a different living arrangement after all. Hmmn.

Much too late in the game, Fed chairmen Ben Bernanke is talking up the dollar, as if kind words were any replacement for a real yield. Bernanke is trying to talk people out of being worried about the very inflation his monetary policy has caused worldwide. He told listeners to a commencement speech at Harvard that heightened inflation expectations by the public are a “significant concern.”

But don’t worry, he continued. This ain’t nothing like the 70s. It’s all good. Nothing to see here. Move along. Go away. Shut up. Goodbye.

“We see little indication today of the beginnings of a 1970s-style wage- price spiral,” is what Bernanke actually said. “The overall inflation rate has averaged about 3.5 percent over the past four quarters, significantly higher than we would like but much less than the double-digit rates that inflation reached in the mid-1970s.”

Well it all depends on how you measure inflation, doesn’t it? The Fed probably under reports actual inflation. But it’s also probably true that inflation hasn’t yet reached the wild levels of the 70s. For that to happen, expectations have to begin driving consumer behaviour (trading cash for tangible goods while the cash retains purchasing power) and monetary policy must become even looser to respond to tight credit markets or over-indebted consumers.

Do you really think the Fed will be raising rates this year? Not likely, with credit markets still tied up in knots and house prices in the U.S. still falling. This is one reason why we think the Aussie dollar is still a good bit to hit parity this year with the greenback.

Speaking of Australian interest rates, just when you thought it was safe to begin thinking of lower rates, more mixed signals for the RBA. The Australian Bureau of Statistics reported yesterday that Aussie GDP grew at 0.6% in the first quarter. That comes out to an annual rate of 3.6%.

That growth rate is 0.6% higher than what economists surveyed by Bloomberg expected, although it’s lower than last year’s rate of 3.9%. This is exactly the kind of economic growth that’s led the RBA to the conclusion that inflation will grow at 4.25% until some time in 2010.

Not so, says the OECD! The OECD assures us that inflation will slow to 3% by the end of next year, a full year earlier than Australia’s own central bank expects. Why? Because, “economic activity is likely to slow to below 3% in 2008 and 2009 because of tighter financial conditions and the worsening external environment. This should ease pressures on the labour market and bring inflation down to under 3% by the end of 2009.”

Well there you go. Despite all evidence to the contrary, the OECD says it will be so.

We know the DR has been a little thin on analysis of the Aussie market and the economy this week. We promise to resume our full coverage upon our return next week. Until tomorrow…

Dan Denning
The Daily Reckoning Australia

P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Inflation Hasn’t Yet Reached the Wild Levels of the 70’s

Google, Chevron and Goldman are all betting that this prediction is correct. This from Bloomberg:

Unlike photovoltaic solar panels that convert sunlight to electricity, solar thermal focuses sunrays with mirrors to heat oil in glass pipes to about 700 degrees Fahrenheit (370 degrees Celsius). The oil turns water to steam, which spins an electric turbine. A solar thermal unit that begins operation in 2010 will produce power at 14.2 cents a kilowatt hour, almost triple the 4.8 cents for a plant using pulverized coal, the Energy Information Administration estimates.

Costs for solar thermal may fall as low as 3.5 cents a kilowatt hour by 2020, according to a report commissioned by the U.S. Energy Department. Meanwhile, coal expenses may rise. Congress is considering limits on carbon dioxide and other greenhouse gas emissions. The purchase of pollution permits may be required under a measure the Senate will begin debating next month.

Chevron, Goldman Sachs, FPL, PG&E and other companies have filed more than 50 applications with the Bureau of Land Management to lease government-owned desert property for solar power systems … Google’s philanthropic division put $10 million into eSolar, a start-up in Pasadena, California. Dan Reicher, a former Energy Department official who manages the unit’s climate and energy initiatives, said there will be more such investments.

The PowerShares Clean Energy ETF (PBW) has more than $1.5bn in assets and is one of the most popular ways to invest in solar, biomass, wind, and geothermal energy, says Brian Hunt in Daily Wealth.

“Common sense tells us when the holy trinity of fossil fuels – crude oil, coal, and natural gas – rise in price, companies that provide cleaner substitutes should also rise in price.

“PBW’s only been around for three years […] But with oil approaching $130 a barrel and clean energy stocks out of favor, expect a rally from the ‘treehugger-approved’ companies of the world.”

“Solar panels won’t be accepted en masse unless the economics of it makes sense,” says Charles Delvalle in Investor’s Daily Edge. “Sure, adoption is growing. But it won’t be mainstream until everyone can afford it. The same goes for wind power.

“With so many solutions not making any economic sense, why is adoption skyrocketing? You can thank the government and their incentives. States are ramping up incentives for clean energy production (like California’s $3.3 billion solar initiative). If it weren’t for government incentives adoption would drastically drop.

“When you combine these government incentives with the whole culture change that’s going on, you have a recipe for amazing growth.”

If you read Drudge or troll right-wing websites (or do I repeat myself?) you’ve seen it by now: Barack Obama speaking at a rally in Oregon, quoted by Agence France Presse, and remarkably, by no one else who covered the rally. “We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times … and then just expect that other countries are going to say OK,” he said. “That’s not leadership. That’s not going to happen,” he added.

The uncomfortable implication is pretty obvious: It’s within Washington’s purview — or maybe even the UN’s — to regulate the kind of vehicles we drive, the amount of food we eat, and where we set out thermostats. Right-wingers are justifiably outraged. But beneath that outrage is an unjustifiable, unstated assumption: That cheap energy is some sort of American birthright.

The fact that the lifestyle afforded us by cheap energy is to a large degree an accident of history — made possible by plentiful American oil for the first seven decades of the 20th Century coupled with the fact the United States was the only major economy not hollowed out by World War II — well, that’s something the right wingers just don’t want to hear. $126 oil? Must be those greedy Ay-rabs. (Or if you’re a Bill O’Reilly brand of right-winger, you’ll gladly join in bashing Big Oil, too.) But in a right-winger’s world, it can’t possibly be the laws of supply and demand at work. Somebody’s pulling levers somewhere.

To the extent a free market exists in energy (admittedly limited), the free market as expressed through the price system will dictate whether Americans give up their SUVs for compacts, adjust their diets, or turn down their thermostats in the winter. And to some small degree, this is already happening. Call it Peak Oil, call it a supply-demand imbalance, call it whatever you want… but the immutable laws of supply and demand will force lifestyle adjustments upon us whether Barack Obama and the UN dictate them or not; obviously it would be preferable if they did not and we were left to figure out the details for ourselves.

These lifestyle adjustments won’t come easily. MSN Money recently did an article positing what a world of $10-a-gallon gasoline would look like. It was actually pretty sanguine. Half the fleet of commercial passenger aircraft would be grounded, there’d be no more pizza delivery, and things like taxicabs and FedEx would become luxuries; there was just a casual mention of “civil unrest as the poor scrambled to survive” more than halfway into the article. The truly painful adjustment away from exurban life, 40-mile one-way commutes becoming unsustainable, tract homes eventually returning to farmland in places like Kendall County, Illinois (77% population growth from 2000-2007 as people sought out more affordable housing farther away from Chicago), was barely broached.

And the market will take care of all that. No politician could mandate that sort of adjustment — can you imagine the uprising that would come from a program of forced relocation? — but by the same token no politician wants to acknowledge that such an adjustment is in the offing anyway. Not even Barack Obama.

Over the weekend, Gideon Rachman wrote in the Financial Times, “No leading politician is yet prepared to say that Americans may have to adjust their lifestyles to a world of permanently higher fuel prices.” Well, Barack Obama just did — in a remarkably clumsy, heavy-handed way that pretty much guarantees an accelerated polarization of debate in this country between thick-headed left-wingers who want to micro-manage how we live (while refusing to drill for oil off the coasts of Florida and California), and thick-headed right-wingers who pine for the day of $1 gas, and if that means nuking the Arabs who produce oil, or the Chinese who consume it in increasing quantities, well so be it.

Nice going for the politician who’s running on a campaign of trying to unite people.

Source: Buried Within the Blather