Capital Abandons Its Own Carbon Purchase Scheme

Samantha sent this bit of additional news just after her article made it through copyediting:

Carbon Tax is already looking to go progressive!

"To fairly divide the climate change fight between rich and poor, a new study suggests basing targets for emission cuts on the number of wealthy people, who are also the biggest greenhouse gas emitters, in a country."

This is obviously so! Squeeze the carbon-spewing rich till the bums bleed!

"Since about half the planet's climate-warming emissions come from less than a billion of its people, it makes sense to follow these rich folks when setting national targets to cut carbon dioxide emissions, the authors wrote on Monday in Proceedings of the National Academy of Sciences."

Uh huh.

Of course, no one has yet proposed getting rid of any of the other six billion mouth-breathers who must surely be adding a great deal of carbon dioxide to the biosphere with every breath.

Maybe ― after we ground all the planes, junk all the cars and shut down all the power plants ― we should set a target of wiping out some sensible number of non-human land animals, too. They're all just adding to the problem one exhalation at a time.

Best Stocks Market

That reminds me: Summer Glau.

Summer was one of the stars of Firefly, the best television series made by humans. It was a science fiction series about Earth getting all used up and humanity heading out to a nearby solar system where dozens of moons were terraformed into Earth simulacra.

The central planets formed a utopian but oppressive unified state ― essentially composed of the remnants of the U.S. and Chinese governments ― and tried to force all the other planets to abide by their rule. The other colonized planets naturally wished to remain independent and a great, big interplanetary war ensued.

The Alliance won. Firefly follows the lives of some of the defeated independents ― aboard a "Firefly" class transport ship ― who live on the fringes of the system and as far from Alliance interference as possible.

Resource depletion, a war against the state for self-determination, defeated rebels hiding from the Man…tres Whiskey, no?

Of course, well-written and beautifully realized series that cast a dubious eye on centralized governance can't last long in this world. Fox showed the series out of order, frequently preempted it for sports and then canceled it after just 14 episodes despite a rabid fan following. Several years of reality television ensued.

(The intense fan devotion refused to simmer down and creator Joss Whedon was able to make a big screen version of the beloved show years after the cancellation: "Serenity".)

But Firefly still inspires fierce love. Your editor fell head over heels when he discovered it on Hulu.com a few months ago. You can watch all 14 episodes in their entirety by clicking here.

I loved the show so much that I bought the DVD collection just to be able to see the outtakes.

Samantha has recently seen the first episode and is hooked. She promises to finish watching the whole series soon and get back to me with a review.

In the meantime you can just watch it for free on Hulu. Be sure to watch it in order! This is a series whose beauty lies in the development of its characters. Enjoy!

Whew. I could go on about Firefly all day. But we do have some serious matters to which to attend…
Gary,

Could you explain how money is created in your ideal world?

I know it would be gold-backed.

I know you believe in smallest government possible.

I think I know you believe in a private banking system issuing units of debt (for some reason, you call it credit)

But I do not know how you'd create money in the first place.

Is your ideal a debt (credit) based / gold-backed monetary system, or??

Where does the money come from to buy the gold?

Re: Your so-called "naive view of capitalism", perhaps you could address the very real problem of monopolies (oligarchies) taking control of "the markets".  As you yourself like to point out, many (if not all) of our problems / market distortions are due to government interference. However, you fail to mention that many (if not all) of these regulations / manipulations serve various private interests, at our expense!
 
Privatize profits - socialize costs; brilliant!

How does a free market deal with this problem? (This is not a rhetorical question!).
 
It should also be pointed out to the regulatory crowd that they are equally naive.

Corruption in government - corruption in the markets... what a surprise!

Good questions!

Money is a) is just a way to keep score that's more convenient than barter and b) what the market says it is.

It's really about that simple. You want meat. Butcher wants bread. But you don't got bread; you got beaver furs. What to do?! Money saves you the trouble of trading first into something else before you can get what you want. It's just a way to keep score of the relative (and shifting!) value of countless goods and services. The value remains in the goods and services; money's just a convenient accounting unit that facilitates trade in the marketplace.

Now, what do we use for this accounting function? Hmmm…need something durable…and easily divisible…not easily counterfeited…relatively rare…hmmm…

Silver and gold have been the natural choice for money for as long as there's been a need for money. No one deems it so; it just happens as naturally and innocently as true love.

Kings, los presidentes and central bankers like to try to convince us that their scrip is just as good as gold. Sometimes they get really outrageous and try to convince us that debt is money. Those silly guys!

And the second part of your question really isn't a question. As soon as there is political manipulation, there is no longer a free market. Private interests with political backing are not the same thing as private interests and private property interacting in an open marketplace.

Get a few yahoos with the majority vote together, and they'll be regulating like there's no tomorrow, controlling property that isn't theirs and channeling profits to themselves and their cronies. And they'll tell you that it's all in your best interest, too.

Tomorrow: Currency expert Bill Jenkins will have a few things to share with us. Plus, is there something Don Stott and James Howard Kunstler can agree on? Surprisingly, yes!

See you tomorrow.

To put an end to this cap-and-trade fiasco, the only option is probably to cap all the "revolving door" stooges and trade them out for oil and coal execs. But unfortunately, Shooters, that won't be the fate of cap and trade. Not if the U.S. Climate Action Partnership (USCAP) can help it!

Linda Brady Traynham, our Whiskey morning glory, had us poking into HR 2454 when she mentioned Texan Rep. John Carter's amendments to it in her recent shot.

Ron Paul is right on the money in saying this bill will "sell pollution permits to the industry as the Catholic Church used to sell indulgences to sinners."

But the intrepid Carter was no Martin Luther. Dem House leaders barred his amendments from floor debate on June 25. Carter was bested by the 309-page amendment from California Democrat ― and bill sponsor ― Henry Waxman. Of course, Waxman's folly came to a floor vote before House Members had time to read it. HR 2454 squeaked by with seven more yeas than nays.

Harry Reid expects Senate results this fall. But in the meantime, let's take best stock and follow the money trail to the bill's real supporters.

Behind That Green Machine, Pope Goldman Is Pushing

Project Cap and Tax began with the unholy Enron. That blind Cyclops of Energy pushed hard for cap-and-trade policy before its 2001 demise. But you'll never believe who wanted in on it next.

Insurance titan AIG. The once-proud member of USCAP.

AIG knew creating exotic "insurance" wasn't going to stay profitable much longer. But investing in currently worthless carbon credits and tanking alternative energy companies COULD mean big-time money ― if Congress wanted it.

Back in 2007, then-CEO Martin Sullivan wanted to jump in feet first, saying that AIG:

"can help shape a broad-based cap-and-trade legislative proposal, bringing to this critical endeavor a unique business perspective on the business opportunities and risks that climate change poses for our industry."

Note that Sen. Dodd has been AIG's donation darling since 1990 ― netting $284,000 from AIG's employees, executives and PACs. And right now, Chris Dodd can help make the Senate's version of the cap and trade. He's so pro-cap and tax he wants to tack on a carbon tax ― above and beyond cap and trade ― that he hopes will generate $50 billion annually for renewable energy research..
 
But in February 2009, Joe Barton (R) led to charge to cut AIG out of USCAP. He cited AIG's use of taxpayer money to finance lobbying activities. Point for cap-and-trade critic Joe Barton! We bet GM will drop from the USCAP roster if Barton has a hand in it.

But AIG's single biggest counterparty will pick up the slack. Goldman Sachs spent $3.5 million on climate issues alone last year.

Then on Jan. 12, 2009, former Goldman CEO Hank Paulson offered think tank Resources for the Future (whose chairman of the board is also a Goldman alum) this interview: "How Markets Can Help Address Climate Change and Other Major Environmental Problems."

We doubt this interest is merely because Hank Paulson is a lifelong bird-watcher.

Paulson confides that he "could see at Goldman" the value of carbon credits: "to come up with a system ultimately that has got credibility or is verifiable, that when someone pays to avoid it, you know, a ton of carbon emissions, they know they're really getting a ton of carbon emissions avoided."

When pressed, Paulson pooh-poohed the carbon tax. He said a tax wasn't transparent, as the cap and trade was ― amid crowd hoots and howls of laughter ― as he emphasized the words "fair," "credible," "efficient" and "transparent."

Is this the same man who guaranteed an efficient, transparent, and, um, highly credible, unregulated credit default swaps market? Is this the same purveyor of the clarity and transparency of the Moody's and S&P ratings on bundles of mortgages?

But where Paulson may have stepped down, a new pro-CAP man steps up.

Treasury chief of staff Mark Patterson clocked lots of time across the street from Capitol grounds. From 2005 until April 11, 2008, he lobbied for Goldman as VP of government relations. While you'd think allowing a former lobbyist to work on an issue he has lobbied for within the past two years would besmirch Obaman ethics, we've been assured that he "steps out" of such matters at the Treasury, like a judge stepping down from a case. Yeah, sure he does.

Goldman likes cap and trade for one big reason: Its investments depend upon it.

Follow the Money Trail to Mr. Derivative

When you ask who's the biggest winner if the bill goes through, you'll find the Chicago Climate Exchange (CCX), co-founded by Hank Paulson and Al Gore. Members include Amtrak, DuPont, Ford, Oakland, Chicago, and the Iowa Farm Bureau.

The whole idea is the brainchild of Richard Sandor ― aka "Mr. Derivative." He's the guy to thank for interest rate futures, as well as earthquake futures. In the early '90s, he pioneered the collateralized mortgage obligation(CMO). And while you might not know exactly what a CMO is, you've probably heard the name Kidder, Peabody ― where Mr. Derivative worked. By the mid-'90s, it held 28% of the total world CMO pie on its own balance sheet. Surprise, surprise, it all blew up in 1994, forcing the 130-year-old firm to the auction block ― because of toxic instruments that look an awful lot like the mortgage securities that just blew up on us in 2007.

Do you feel confident?

Goldman sure does. It owns a 10% stake in it. It also owns a 19% share in CCX's parent: Climate Exchange Plc. It nearly doubled its holdings in January 2009.

The icing on the cake is its stake in Blue Source, a Utah-based purveyor of carbon creds. In 2005, when Paulson drew up the bank's environmental policy and started Goldman on a stream of energy partnerships, investments and subsidiarys, he offered this comment: "We're not making those investments to lose money."

In 2009, Goldman got caught up in a botched IPO of its investment Changing World Technologies, which turned Butterball turkey offal into diesel ― at the cost of $80 a barrel ― before filing for Chapter 11. You can bet Goldman will ensure this sort of misstep doesn't happen again.

Government-Guaranteed Price Hikes

The government "cap" is what makes this stocks market a true racket.

As Peak Oilers know, the less and less of a dwindling resource, the higher the price you can get from the people that need it.

Capped carbon follows the same logic. We start with a high cap of carbon pollution and that's the national limit of how much CO2 can be emitted that year. Each year, that cap shrinks a little more, and the next year even more, until we reach the "no-harm" level ― which some environmentalist absurdly place at zero.

Now here's the catch. The government divvies up the shares of emissions among businesses that produce or consume energy. (This handout may be based on history of consumption.) Say hello to a new breed of lobbyist pimping a whole new tier of Beltway bureaucracy.

The "surplus" credits will trade on exchanges like Chicago Climate Exchange or Blue Source, allowing companies to outbid each other for the leisure of producing more than the government said they could.

Each year, the government will hand out fewer and fewer emissions indulgences. Meaning there will be fewer credits to trade. And we commodity buffs know that the less there is of something, the higher the price rockets.

And the Chicago Climate Exchange will score larger and larger sums from the corporate carbon largesse. Goldman and company have everything to gain from this.

And you've got to ask: What exotic new derivatives can come out of this? Will institutional investors bet on futures of how much the government will lower the cap in 2025…2030? Wait, there already is a Chicago Climate Futures Exchange. Of course, it's the wholly owned subsidiary of the Chicago Climate Exchange.

Could the coal companies purchase carbon default swaps? After all, what happens when they discover the hydropower credits they bought in Brazil didn't quash emissions as much as anticipated?

That brings us to a big flaw: Does it really work?

Capital Abandons Its Own Carbon Purchase Scheme

The best part of this swindle? It's hard to tell if it's a swindle. You see, the credits fund development projects in countries like India or Brazil, for installing things like hydropower plants or rice husk-fired generators. Watchdog group International Rivers concluded that three-quarters of these projects would probably have been funded anyway, since they were already completed at time of approval.

Consider tree planting. How do you measure the carbon offset? It all changes based on soil and climate conditions, not to mention growth rate. Only when a tree has lived 100 years does it become a net carbon absorber.

Mr. Sandor doesn't care if it works or not. He finds the debate: "quite interesting, but that's not my business…I'm running a for-profit company."

So why does the House of Reps think cap and trade will work? Well, it shouldn't ― based on recent experience.

It's "Green the Capitol" campaign began with compact fluorescents. Then it switched to natgas power to keep the lights on. But the Capitol still wasn't carbon neutral, so the House bought 24,000 metric tons of carbon offsets on the Chicago Climate Exchange. (Yep, through the same outfit owned 10% by Goldman Sachs.) But in February, after not being able to confirm that it offset any of its carbon, the House dropped all plans to "go green" with offsets.

So we have a classic case of "do as we say, not as we do" from our honorable reps.

We got the above anecdote from Ted Gayer ― who worked a single year as deputy assistant secretary of economic policy at the Treasury: 2007-2008. Wonder if the unpopularity of his opinions turned him toward Georgetown professordom?

Lest we leave out another odious option, let's talk direct carbon tax. The carbon heavies would pay a penalty for the carbon content of their products. The idea is that companies would cut emissions for the sake of avoiding the tax. But they'd probably just tuck the added cost into what you and I will pay.

So that's our choice: A private tax collection scheme that's government backed or yet another Fed tax that business will probably loophole its way out of.

Either way, Shooters, we'll end up with a case of cap and stick it…and you're holding the bag, as usual. Estimates from various sources say you could pay $175-3,300 per household because of it.

The only way to trump this system? Hope the government will hand us a set of credits for owning ― but not using ― our clothes dryer…and then, as we hang our clothes to dry in the free sunshine, selling our credits to the highest bidder via the Blue Source Exchange.

Of course, if you feel the need to storm your senator's home office during the summer recess, we wish you luck.