Category Archives: Financial

The Oil Standard

Up until 1971, the United States was required to back its paper currency with gold, using a system called the gold standard.  It was in 1971 that President Nixon implemented several policy changes that would take the United States, and the rest of the world off the gold standard.  This profoundly changed the world’s economic practices.  No longer were the currencies of the world backed by gold, which meant more currency than gold could exist.  This allowed governments to print money on-demand, because having $1 billion dollars of gold and $4 billion dollars of currency no longer mattered.  This behavior devalues your money because there is more currency than actual value (gold is the actual value to back up the currency).  In the case I mention above, your currency would be worth 25% less than if there were the same amount of currency as gold reserves.

If gold is no longer backing the United States currency, then what is?  Oil.

 

After the final nail was put into the gold standard’s coffin, the only thing backing the currency was the promise of wealth and economic growth.  The only way to continually have both economic growth and wealth is through the use of more oil.  The availability of cheap, easily abundant oil has spoiled us.  It has allowed consistent economic growth for years, but as oil becomes more expensive and more challenging to extract, the ability to grow has also become more challenging.  Oil was easy to come by around 1971 so no one thought otherwise.  Oil could easily drive the economy and could easily create wealth, because as the fiat currency was inflated the economy grew, thanks to cheap oil.  Aside from the short lived oil embargo of 1973, wealth came easily to many because manipulating the currency would allow more wealth.  This seems counterintuitive at first glance, but the truth was that printing more money equated to boosting wealth and power.  It was as if the currency was not controlled by physics, then came $140.41/barrel oil in 2008.  Again, we were reminded that currency manipulation can only go so far.

 

Since 2008 economic growth has slowed and both wealth and power has diminished.  The typical solution, manipulation of the currency, has not worked.  It appears that the currency manipulation has actually aggravated the problem, because oil is no longer cheap and easily obtainable.  Oil has never really been “cheap” since 2008 and as the economy begins to show signs of life, oil prices increase.  It would appear that a growing economy is effected by physical properties, not just man’s counterfeit economical properties.  Unlike the counterfeit properties many have grown accustomed to, the physical properties are not changeable.  The unchangeable physical properties that dictate our world are over powering the ability to continually print more money, accumulate more debt, and constantly grow an economy.

How can anything continue to exponentially grow?  It can’t.

 

What we are seeing is the reality that oil is the backer of our currency, our live styles, and our power.  For a long time the physical properties did not seem clear because obtaining more oil was just a matter of more money.  Manipulating the physical properties seemed no different than manipulating the man-made counterfeit economics.  Fiat currency systems are based on the idea that wealth, power, and growth will continue for ever.  Physics dictates that this is not true.  At some point you will reach a plateau, a point were you can no longer pump enough oil out of the ground in order to feed the desire of man to continually expand.  Man has become arrogant and has ignored the fact that the ONE thing the entire economical and political system is based on, oil, can not continue to be manipulated.  Unlike currencies, oil can not be printed on demand.

 

For more information on fiat currency systems check out U.S. Dollar Is The Next Financial Shoe To Drop on Forbes.com.

 

Government Policies Are Shaping Our Countries Energy Future

As the United States government has grown, so has its influence on our society.  An area that the government has had an increasingly large influence is energy.  The government influences the type and quantity of energy and fuel sources we use today.  In order to finance ethanol producers the federal government has bolstered ethanol, a fuel source, through laws requiring its usage and through subsidies.  The strong support from the government has created a market for ethanol, but the large demand for ethanol would probably not exist if the government was not involved.  As many of you know ethanol offers a low Energy Returned On Energy Invested (EROEI); corn-based ethanol is roughly 1 and at worst has a negative EROEI.  Would a fuel that behaves like an energy converter be in high demand if the market were allowed to decide?  I would probably say no.  I believe the only thing that has been propping up ethanol is the strong support it has been getting from the federal government.  If the government were not supporting ethanol, it would have probably failed by now and we might see other more viable options.  Ethanol is not the only case, but ethanol is one of the best examples of why government should not be making energy decisions.

The United States Capital Building

Courtesy of Wikimedia

With promising advancements in fields like algae, diesel engines, and ammonia, it makes no sense for the government to endorse a fuel like ethanol.  Many of these more promising advancements are in the background operating quietly, which is a shame.  These advancements are competing with every other energy advancement on the market, but they have one major disadvantage, they have not yet gotten the full attention of the U.S. government.  Even without the full support of the federal government many of these other energy advances are progressing.  Imagine what might be if these energy technologies were only competing against other energy advancements, and not the government too.  While the government is out supporting things like ethanol in our gasoline and battery powered electric vehicles, which aggravate our energy problems, individuals are working hard trying to come up with real energy solutions.  It amazes me that our country is relying on politicians to dictate our energy future, when the free market should be.

In a free market profit motive is typically at the forefront of the decision-making.  This is directly related to EROEI without the people making the decisions even knowing it.  That is because typically a good EROEI will equate to a profit.  This is the type of force we need driving our energy future, not politicians that are swayed for personal and political reasons.  In the end the market will hopefully prevail and the energy advancement of the future will be chosen, but this is only if the federal government doesn’t make it impossible to exist.  The federal government should not be making decisive decisions about what energy we should use, but the government can help all possible alternative energy technologies by giving tax incentives.  Stopping the subsidizations of alternative energy would be ideal, and instead implementing tax incentives so the free market can have more freedom to work.  I believe that in order for new energy advancements to be successful, government must have as little interaction with them as possible.  Government is not capable of choosing the correct energy path for our future.

 

High-Speed Rail Infrastructure Debate

High-speed rail has the potential to greatly reduce travel times between many major cities, and to move people more efficiently.  I am a proponent of high-speed rail (HSR), but I am also cautious about how it is going to be implemented. According to an article in The Wall Street Journal, the freight train railroad companies (like CSX, CN, etc…) are not happy with the idea of putting HSR trains on their freight train tracks.

I started thinking about the logistics of having 200mph trains sharing the same track as 55mph trains, and common sense says its not a great idea.  The government is pushing to use current track infrastructure whenever possible because they are hoping to reduce costs and increase time to market.  I fully understand the government’s stance on this, and from there viewpoint it does make some sense.  The problem is that mixing slow trains and HSR trains on the same track does not make a lot of sense, i mean there is a reason why Europe and Asia have made separate HSR tracks.

If HSR is going to be a large part of our future lives, then building the infrastructure correctly from the beginning is absolutely CRITICAL.  I agree with the private companies that sharing rail space with HSR trains will cause bottlenecks and safety issues.  Also, if the private rail companies don’t want to share their tracks, then why should they have to?  HSR needs its very own infrastructure, separate from freight and slower moving Amtrak trains, otherwise we will end up with a HSR system that isn’t as good as it could be.  Also, some valuable information can be found from the Wall Street Journal article here.

What are your thoughts about this topic, and about high-speed rail (HSR)?

Smart Grid Communication Network Technologies

Below is a literature review, which is defined on Wikipedia as:

A literature review is a body of text that aims to review the critical points of current knowledge including substantive findings as well as theoretical and methodological contributions to a particular topic. Literature reviews are secondary sources, and as such, do not report any new or original experimental work.

This literature review is written for an audience that has a technical background, so many technical terms may not be explained or defined.  I hope you enjoy this literature review, and please feel free to leave comments.

Selected Review of Literature: Smart Grid Communication Network

Given the increased emphasis on energy efficiency, the current electrical grid is in need of a robust communication network.  The communication infrastructure will rely on three technologies: 4G wireless communications, fiber optics, and/or broadband over power lines (BPL) to reliably transmit low latency data at speeds of 2-to-5 Mbps per device (Sood, Fischer, Eklund, & Brown, 2009).  The smart grid will need to be able to handle two-way communication in order to share energy-related data amongst utilities and end-users (Aggarwal, Kunta, & Verma, 2010).  This communication system must handle large amounts of continual two-way data transmission from all electricity users, devices, and sensors in order to provide proper usage feedback to both the end-user and to the utility (Aggarwal, et al., 2010).  This paper will look at the three competing technologies, and some of the pluses and minuses of each.

Broadband Over Power Lines

Broadband over power line technology uses the electrical grid to transfer data on top of the AC power already being transferred through the power lines.  This allows utilities to build a communications network on top of the already existing infrastructure, i.e. the power lines (Srinivasa Prasanna, et al., 2009).  BPL typically has limited bandwidth because the current power grid infrastructure was not designed to transfer data, but according to Schneider, speeds of 5Mbps are achievable in distances less than 1 kilometer.  Increasing this distance will reduce the speeds that BPL can achieve, but using additional equipment can help alleviate that issue (2009).  BPL typically uses the 1-34 MHZ frequency range instead of AC’s 60HZ to transfer data (Tsiropoulos, Sarafi & Cottis, 2009).  According to Anderson, the estimated installation cost of BPL is $1000 per home, but offers the capability to reach any home with electrical service (2010).

Fiber Optics

Fiber optics are able to handle large amounts of data at much faster speeds than any of the other communication technologies discussed in this paper.  Utilities typically have the right away along their transmission lines, so this makes laying fiber optic cable relatively easy.  Fiber optic cables have the ability for transfer speeds of several hundred Gbps.  Since such high data rates are possible it makes fiber optics an expandable and relatively future-proof communication technology (Aggarwal, et al., 2010).  Another strong reason to pick fiber optics is the fact that there are many fiber optic cables already available.  This gives utilities the option of leasing current fiber optic infrastructure to help reduce costs and time to market (Sood, et al., 2009). With so many positive points one might wonder why other technologies are being considered for the smart grid communication system.  One thing to take in consideration is that fiber optics may not always be the most feasible solution in certain areas.  This could be due to location, cost, or regulatory restrictions.

4G Wireless

Since 4G wireless technologies are starting to be deployed nationwide, this gives utilities another great alternative to the other two communication technologies.  Wimax 4G is estimated to cost roughly $440 per home to install and is currently seeing transfer speeds between 3-to-6 Mbps per connection (Anderson, 2010).  With a lower cost per home than BPL and a higher transfer speed than BPL, this makes 4G a very attractive option for utilities where 4G service is available.  Wimax 4G also offers very low latency times (~10ms), so the smart grid can communicate with devices rather quickly (Sood, et al., 2009).  Although fiber optics have a much lower latency time (~5 µs per kilometer), Wimax 4G latency is still within current smart grid requirements (Sood, et al., 2009).  The ability to communicate to devices quickly is very important, especially if a breaker is in need of being kicked as fast as possible.  Another quality of Wimax is its closed loop power control features.  These features allow each device linked to the Wimax network to have its own power control settings, and this minimizes the power consumption of the Wimax radio equipment (Sood, et al., 2009).  The single biggest issue that Wimax 4G has is its ability to communicate with devices inside buildings and other radio frequency dead areas.  Another major problem is that 4G wireless communications do not provide coverage everywhere a home would be located.

Conclusion

Due to the high cost of implementing a smart grid communication network it must be built with adequate capacity for future growth.  Utilities will need to plan their systems for increased usage during emergency situations, and for a lifespan of roughly 20 years (Wenpeng, Sharp, & Lancashire, 2010).  It is unlikely that any one-communication technology will reign supreme.  It is much more likely that we will see hybrid systems that implement several or all of these technologies for varying circumstances (Tsiropoulos, et al, 2009).

References

Aggarwal, A., Kunta, S., Verma, P.K. (2010). A proposed communications infrastructure for the smart grid. Innovative Smart Grid Technologies (ISGT) (1-5). Gaithersburg, MD. doi: 10.1109/ISGT.2010.5434764

Anderson, M. (2010). WiMax for smart grids. Spectrum, IEEE 47(7), 14-14. doi:10.1109/MSPEC.2010.5490999

Schneider, D. (2009). Is this the moment for broadband over power lines?. Spectrum, IEEE 46(7), 17-17.

Sood, V.K., Fischer, D., Eklund, J.M., Brown, T. (2009). Developing a communication infrastructure for the Smart Grid. Electrical Power & Energy Conference (EPEC) (1-7). doi: 10.1109/EPEC.2009.5420809

Srinivasa Prasanna, G.N., Lakshmi, A., Sumanth, S., Simha, V., Bapat, J., Koomullil, G. (2009). Data communication over the smart grid,” Power Line Communications and Its Applications. IEEE International Symposium (273-279). doi: 10.1109/ISPLC.2009.4913442

Tsiropoulos, G.I., Sarafi, A.M., Cottis, P.G. (2009) Wireless-broadband over power lines networks: A promising broadband solution in rural areas.  PowerTech, 2009 IEEE Bucharest (1-6). Bucharest, Romania:IEEE. doi: 10.1109/PTC.2009.5282200

Wenpeng Luan, Sharp, Duncan, Lancashire, Sol. (2010). Smart grid communication network capacity planning for power utilities. Transmission and Distribution Conference and Exposition (1-4). IEEE. doi: 10.1109/TDC.2010.5484223

What Is The Future Of Offshore Oil Drilling in the United States?

BP has been under a lot of criticism lately from citizens, organizations and government officials because many feel that BP is to blame for the Gulf of Mexico oil well leak.  The oil well began leaking oil into the ocean over 40 days ago.  Since that time, BP has tried several different techniques to either control or halt the flow of crude oil into the Gulf of Mexico.  With government officials making comments like, “I think we’re now beginning to understand that we cannot trust BP…BP has lost all credibility, now the decisions will have to be made by others because it’s clear that they have been hiding the actual consequences of this spill”, Congressman Ed Markey.  I’ve began to wonder what will happen to future offshore drilling endeavors.  Do you think that BP wants or likes losing all of this oil into the ocean?

With quotes like that made by Congressman Ed Markey, it seems like we are going to see more government intrusion into the oil industry through regulations and/or the government trying to control aspects of the oil industry.  Do the ‘evil’ bankers ring a bell?

Suddenly, because of this one offshore oil drilling disaster, talks of putting offshore drilling to a halt have risen.  We have been drilling for oil in the Gulf of Mexico for over 70 years now and on top of that there are thousands of operating oil wells that have a good track record.  I know that the BP oil leak is major, but to consider stopping offshore oil drilling would be halting an important energy source for our nation.  Per President Obama during his BP press conference, “The government is running things…”; since when has the government micromanaged anything very successfully?

The federal government can not continue to attack BP both publicly and legally by launching a criminal investigation into BP.  The plans for this, and all oil wells are presented in detail to the federal government before drilling can begin; only after the approval by the federal government can drilling start.  BP got the plans for this oil well approved so blaming BP for this disaster seems ignorant.  This type of behavior has the potential to scare away companies and to stop future oil well development.

I would love to see the adoption of more renewable energies but we simply can not change the fact that we NEED oil and that finding sources of oil will require us to go offshore.  It is naive to think that government could/can solve this problem, that we should stop our search for oil, and that we have the ability to stop using oil.  Renewable sources have a ways to go before becoming a good replacement for oil, so until then we need to work on gathering more oil and perfecting renewables at the same time.

Sources:

BP Criminal Investigation Launched By Feds – Huffington Post

Obama under pressure on oil drilling ban – The Examiner

Dems:’We cannot trust BP’ – MSNBC

Federal Gulf Distribution by Production Rate Bracket – EIA

Offshore Oil and Gas in the US Gulf of Mexico – Wikipeda

What Caused The Deepwater Horizon Disaster? – The Oil Drum

Obama Defends Response to Gulf Oil Spill, Pledge to ‘Shut This Down’ – FoxNews

Is The Obama Administration Good For Nuclear Energy?

Recently, President Obama announced an $8.33 billion loan guarantee to build a brand new nuclear power plant in Georgia. This could be the first new nuclear power plant in nearly 30 years, which is a big deal. Now before everyone gets all giddy about this announcement there are several things that need to be understood.

What is a Loan Guarantee?

A loan guarantee is a promise by a government to assume a private debt obligation if the borrower defaults. Most loan guarantee programs are established to correct perceived market failures by which small borrowers, regardless of creditworthiness, lack access to the credit resources available to large borrowers.
–Wikipedia–

Basically, what this means is that the government is “cosigning” the loan and is responsible for the loan if anything goes wrong. This can be used to help finance projects that are risky, new or are having a hard time getting the amount of credit needed to finance the project.

What About the Radioactive Nuclear Waste?

Nuclear waste can be a scary thing when you consider the harmful potential of this substance. Typically nuclear waste is stored in pools of water or cement caskets on-site of the nuclear power plant. This system has proved to be relatively successful thus far, but a more permanent solution is needed. With the Obama administration’s cancellation of the Yucca Mountain project, which was supposed to be the nations repository for radioactive waste, many are left wondering what will happen to existing and future nuclear waste. With no clear long-term plan for radioactive waste, many are left wondering why the President would be in favor of building a new nuclear power plant.

Personally, I feel relatively safe with the cement caskets being used to store this waste. The cement caskets that store this radioactive waste are rated to be good for 90 years, so we still have some time to get a game plan.

Courtesy: Wikipedia

So the questions that immediately come to my mind are:

  • How long will these cement caskets actually last?
  • What do we do when these caskets start needing to be replaced, do we just move the waste to newer caskets?
  • Why don’t we start reprocessing nuclear waste to generate electricity?

Unfortunately the answers to these questions are topics of much debate. Clear answers to these questions do not appear to be in the immediate future.

Should the Government Be Guaranteeing Loans for Nuclear Plants?

With the pathetic financial state that our government is in, are they really in a position to even offer a loan guarantee? How can a government that is constantly raising its debt ceiling even consider having to pay 8 billion dollars for a power plant. If the government continues offering loan guarantees for nuclear power plants and some of the companies default on their loans, where is the money going come from to pay these loans?

Regardless of your political beliefs, the fact that the United States government is continuing to promise more expenditure should be a red flag. How much longer can we continue promising, borrowing and ‘printing’ money?

But Nuclear Energy is a Good Clean Source of Energy, right?

As many of you know, I am in favor of building new nuclear power plants, see my previous blog post here. Nuclear power offers many benefits and we are in need of diversifying our energy portfolio. There is no doubt in my mind that nuclear energy will play an important role in our energy future because of the increased energy demands and reduced availability of cheap/clean energy. Nuclear energy has been picking up steam for several years and it appears that it may finally be getting some much-needed attention. As nuclear energy continues to garner attention and becomes more cost beneficial, I am confident private investors will start investing in the construction of these plants.

Global Warming, Peak Oil, and Economic Crisis

When Zach and I started this blog, we agreed that it should be in the technical domain, rather than the political one as much as possible. The hope was that with high quality information available to the political class and activists, the “solutions” would be forthcoming. As time goes on though, it seems that even as difficult as our energy challenges are, the political ones are tougher. This reality requires the Energy Strain blog to deal with issues that may be considered to be more in the political domain.

For the moment, the world seems focused on “Climate Change.” Climate change is the new term for what was originally termed “Global Warming.” It is difficult to figure out who changed “Global Warming” to “Climate Change.” I would argue that both of these names are actually very poor names for this problem. One thing that we know for sure is that the Earth’s climate has been changing for the entire time that it has existed. It seems to me that if you wanted to come up with a name to motivate people to action, you would not use a term that describes something that is “normal.”

Peak Oil is an equally poor name for the problems that people are using it to describe. Peak oil, when used in the M King Hubbert sense, is a perfectly correct term. Hopefully we all know of the work of M King Hubbert, and his curves describing how oil fields age. The problem with the way that “Peak Oil” is now used is that it now means hundreds of different things to different people. From the simplest and obviously correct meaning, that a mathematical curve can be applied to the theoretical extraction rate of an oil province, Peak Oil is now also being used as a substitute term for we’re running out of oil, Malthus was right, all problems are caused by running out of oil, and the end is coming.

Economic crisis is also a very poor name for a widely varied set of symptoms. Economists originally called it “Sub-Prime” Crisis, then “Recession,” and now their favorite seems to be “Economic Crisis.” The names are likely to change as the symptoms of the end of the Industrial Age present themselves.

After studying the end of the Industrial Age for about five years, it all seems quite simple to me. These problems are all related, and must be contemplated and solutions proposed for the actual problems, not just the symptoms, and not with solutions that “feel good,” but rather solutions that fit the physics of the problem.

The problem is simple.
Man found a substance in Earth’s “basement” that allowed him to temporarily overcome the normal limit of living on Earth, that limit being: living on the energy that comes from the Sun. Man used the energy from this substance to continuously increase the amount of energy available from this substance. He also created an economic system that automatically creates more interest debt as time passes, and thus requires economic growth in order that it remain plausible that the interest accumulation could be repaid. As he used this substance, he put the undesired components into the atmosphere, hoping that it would be OK.

Now Industrial Man finds himself in the following situation.
1. The net energy (gross energy minus the energy used in the extraction) from fossil fuel is in decline.
2. His financial system is collapsing because repayment of the interest is not plausible, and the economy cannot grow enough without more energy to make it plausible.
3. The Earths formerly sequestered carbon is now in the atmosphere, and he is not sure exactly what it means. But most agree it’s probably not good.

So Global Warming, Peak Oil, and financial collapse are the same problem.
Maybe we should name the entire situation “DADESFFC” for Dying and Dysfunctional Energy System Feeding Financial Collapse. Ok, so maybe it’s not a sexy acronym. Or maybe it’s too complicated for some to understand. But the point is that without understanding the big picture, and without looking for solutions to the actual problems, we are left in the dark shooting at the symptoms.

Lately “Climate Change” has been in the news with the negotiations in Copenhagen, Denmark. Some of the activists seem to be advocating that we solve the problems with massive redistribution of wealth. Their solutions are simple–take money from the polluters and give it to the less fortunate. Problem Solved. If only it were anywhere near this easy.

The reality is that the technologies that are available to “replace” the current fossil fuel technologies are not drop-in replacements. A society created from alternative energy technologies will be profoundly different. Here are some of the technical challenges along with the implications of a post fossil fuel economy:

1. Renewable energy sources are powered by low density energy.
Low density means that the systems will be very large, and consume huge quantities of resources and labor in order to construct. In an economic sense, this by necessity means that the systems will be expensive.

2. Renewable energy sources have low energy return on energy investment (EROEI). Low EROEI means that renewable energy systems will have low profitability for their investors, and will take many years to return their initial investment. It also means that there is not room for mistakes in the implementation of these systems. Small mistakes in implementation that cause increased energy consumption, will convert low EROEI energy “production” systems into energy “sinks,” i.e., they cause consumption rather than provide energy.

3. Renewable energy systems are not a drop-in for fossil fuel technologies. This means that much of the most expensive equipment in our fossil fuel powered industrial economy must be replaced. A replacement society that is powered from renewable energy sources will be less wealthy, and have less complexity than a fossil fuel powered one. This may mean that there is no excess wealth to transfer from the former “wealthy” countries to the “developing” countries.

Simply transferring wealth from the “wealthy” fossil fuel consumers to the “developing” countries is very likely to aggravate the problems. It could leave the “wealthy” countries without enough surplus capital to develop renewable technologies, and it could just cause increased energy consumption in the “developing” countries.

Converting to a post fossil fuel era will not be easy. Resources will be scarce and financial systems very unstable. This means that in order to successfully accomplish it, we will have to understand what we are really up against, not choose one symptom and propose a “solution” for it that aggravates the real problem.

If we cannot solve the technical problems of operating a modern society from renewable energy, the only “deal” that we may be able to make is to lower our standard of living to their standard of living, if they agree not to try to raise theirs.

It goes without saying that this will be a difficult political sell, and I fear that those who are pushing these large redistributions aren’t as concerned about the environment as they claim, meaning that this would not be an acceptable solution, even though it may be the only one that is technically feasible with our current technology.

Energy or Money–Which Is More Real?

Often while I am studying our energy future, I run into this question:

“As the price of energy increases, won’t the market respond by inventing new systems that generate new supplies of energy and prevent energy supply problems?”

This question begs the following question.

Does money control the energy supply? Or does the energy supply control the value of money? In order to answer these questions, we first need to understand the concepts of energy and money.

What is energy?
The word “energy” comes from the Greek word meaning activity, “energeia,” and is the quantity of work that can be done by a force. The study of energy turns up in nearly all scientific endeavors, from studies of the beginning of life to space travel.

While energy can take many forms and is never lost, there are observed behaviors of energy expressed by the laws of thermodynamics. These laws are part of physical reality, preventing mankind from “creating” energy and also placing strict limits on its conversions.

Energy is an important part of anything that is alive. One definition of life is “a characteristic of an organism that uses biological processes to change free energy or energy containing substances to a degraded form.” Energy separates life from death, growth from decay, and breakdown from repair.

Most marvels of the modern world are massive energy consumers. A list of industries in the modern world reveals that nearly all are large consumers of energy. Modern transportation, housing, health care, and food production all require huge inputs of energy. The availability of large quantities of energy has changed human existence in such a profound way that it difficult to even contemplate. Much of what is commonly thought of as “amazing technology” and/or the “power of money” is actually “energy availability.”

The energy that humans currently use has allowed modern societies to break free of the limits that preceded and will follow this period. That limit is living with the energy that arrives at Earth each day from the Sun.

What is money?
Money is an accounting system used to facilitate trade and the keeping of accounts. United States money is a “fiat” currency system. Fiat means that federal law requires the currency be accepted for public and private debts. There are no guarantees the money will retain any value. In fact, the US government neither guarantees the value of money nor actually owns any money. All US dollars are owned by a private banking consortium called the Federal Reserve, and congress is prohibited by law from interfering with the wishes of the bankers. The private bankers adjust the money supply and therefore the value of the money as they see fit.

In summary
Money, at least the kind that most modern societies use, is a concept created by man and does not exist in the physical world. The rise and fall of currencies is of little consequence to the laws of energy and energy will limit the “wealth” of all organisms, beings, and societies long after all human currencies have collapsed and cease to exist. Money must be managed carefully by humans so that it remains useful in the face of changes in the energy system, for it is energy that powers everything from the human heart to the world’s largest building.

Crash Course

Crash Course: Economy, Energy, and the Environment

As discussed previously on this blog, with time more and more is understood about the effects of decreasing net energy on the industrial economy. Eventually one comes to the realization that nearly everything in Industrial Man’s world will change or will have to be changed.

Few things will have a bigger impact on the day to day life of everyone in the modern industrial world as the destabilization of the exponential financial system. All of us have been taught the “power” of compounding. In high school, I was told that if I put a little money in the bank each year, eventually my wealth would begin to grow in a near vertical curve. I learned this from a teacher who did not understand physics, and it would be 30 some years before I realized the absurdity of this curve. Where would the energy come from to cover my consumption if this were to occur and I were to spend that money? The answer is of course that the system would fatally collapse because the energy is not available.

In the process of studying the decreasing net energy collapse of the exponential economy, I found a web-based course called “Crash Course” from Chris Martenson at http://www.chrismartenson.com. This course is very good and is available on the web and via DVD. Chris Martenson has a very deep understanding of what is happening to the exponential financial system. Chris has a PhD in science and an MBA in finance and is the best teacher of this material that I have found. Chris even allows you to burn and sell his DVDs for profit.

Please check out the “Crash Course.” If you are stuck without high speed Internet, please contact us here at Energy Strain and we will send you a copy of the “Crash Course” DVD.

Google PowerMeter, helps monitor your energy usage.

Google announced a new service, Google PowerMeter, earlier this month.   Google is said to be currently testing this service internally.  I can’t wait for it go public because I know that I would use it.

In case you aren’t aware, Google PowerMeter is a service that will allow you to monitor energy usage in your home.  This will allow you to find high energy users and to help you reduce the amount of energy you consume.  For more information visit the Google PowerMeter site or the Google.org blog.  The Google.org blog also has some information on the ,”Plug into the Smart Grid” event that Google and GE co-hosted on February 17th.

If Google PowerMeter is as well refined as most of Google’s products, then this should be a very successful tool.  Nice!