Fractals of Change

Vermont Files in Support of Using White Space for Mobile Broadband Access

The Vermont Public Service Department and the Vermont Telecommunications Authority have joined in an ex parte filing at the Federal Communications Commission urging that the Commission “move expeditiously to adopt the necessary technical parameters … and help make this promising technology [use of the so-called ‘TV whitespaces’] a reality.” Given that the docket has been open since May of 2004, a little expeditiousness is certainly in order.

“TV white spaces” is the term used by the FCC but it’s a misnomer; no broadcaster has actually paid for any of the spectrum at issue; no one is using it; in short; it’s wasted. Originally, before cable and satellite TV and before the Internet, it was reasonably believed that this spectrum would eventually be occupied by a proliferation of over-the-air stations. That’s not gonna happen. Vermont has as much radio spectrum “reserved” for over-the-air TV stations as New York City – 50 channels worth. That “reserved” spectrum is not of any use to anyone and won’t be until the FCC promulgates some rules for its use.

The filing explains the many reasons why this spectrum is ideally suited to meeting the needs or rural America for much better broadband and cellular coverage:

“First, rural areas like Vermont have relatively fewer TV broadcasters and therefore more unused ‘white spaces.’ Moreover, rural communities also have the largest geographic areas without access to wireless services. Second, the ability of TV frequencies to propagate over great distances and difficult terrain provides an opportunity to reach locations too economically challenging for existing wireless services. Third, the use of TV ‘white space’ for the provision of rural broadband is an alternative means of accomplishing the Commission’s universal service goal of deploying advanced services to all areas of the nation without requiring additional funding mechanisms. In fact, the use of TV ‘white space’ could actually decrease the demand for universal service funding at a time when the level of funding is facing heightened scrutiny.”

The filing makes clear that the petitioners do NOT think that this spectrum should be auctioned off at a high price. The greatest public good will come from making these public resources available “at low or no-cost to those entities willing to utilize them for such purpose [broadband and mobile access].”

It will take the concentrated political power of rural America to free up this spectrum to meet the rural need for better communication. But this isn’t urban vs. rural; urban areas also have something to gain from better spectrum availability and nothing to lose.

Not to over-dramatize but I see this as the public interest vs. entrenched communications interests. The TV industry would like to sit on this spectrum without paying for it “just in case”; they also may be worried about Internet use of the spectrum becoming a competing “channel” for delivering entertainment. Traditional communications carriers benefit from LACK of competition in the US broadband market; they have no reason to want to see competition growing like weeds (or, more accurately, like WiFi) in fields of open spectrum.

Google and other “Internet” companies do have an interest in keeping their paths to the consumer unblocked; competition would be good for that. This post is about a proposal Google has made for putting the unused white space to work.

Disclosure: My wife, Mary Evslin, is Chair of the Vermont Telecommunications Authority.

What Would Success Look Like in Iraq?

How about an end to private militias? That’s pretty important to the kind of success in Iraq that lets most American troops leave knowing that they’ve helped make the world a safer place. How about a Shiite-led government cracking down on Shiite militias while Sunni tribes turn on Sunni al Qaeda? That would be pretty good.

And how about an Iraqi army that quickly corrects its mistakes, flushes out its non-performers, tries again and succeeds? An Iraqi army that can provide security for Iraqis by itself? Wow, that would be great.

There’s plenty of reason to be cynical about apparent good news coming out of Iraq. All of the many sides (including ours) have good reasons and bad to spin the facts as much as they can, especially in the run-up to the American presidential election. Nevertheless, there are reasons to be hopeful as well, whether or not you think we should have invaded in the first place.

If it was a bad sign that Iraqi government forces didn’t flush the Mehdi army from Basra when they tried a few weeks ago, it’s got to be a good sign that they regrouped and apparently succeeded rather easily at taking control of the city this time. Sure, they had help from the US and UK; but there isn’t any question that the ground forces were overwhelmingly Iraqi.

The fact that Muqtada al-Sadr, apparently somewhere in Iran, claims to have ordered his forces to surrender their Basra headquarters indicates that that he didn’t have much of an option. His threats to end the truce he formerly “proclaimed” while his people are already fighting in Sadr City, Nasiriya, and, until very recently, Basra mean either that he has little control over his forces anyway or that he doesn’t have the means for a stronger counter-attack (I could be tragically wrong about this, of course; but I hope not). It’s a good thing that this very anti-American cleric seems to be losing power.

It’s puzzling that Iran praised the Iraqi government’s action against al-Sadr, whom they shelter and probably helped arm. That could be an ominous sign that the al-Maliki government may be too much under the control of Iran. Or it could simply mean that, for the moment, US and Iranian interests happen to coincide – probably not something we can build on.

All the many sides have their own reasons for continuing the power struggle in Iraq – not least among them that none of them can be sure of their fate if the other guys win. At a strategic level – which probably doesn’t matter much on the dangerous streets, the importance of influencing the American electorate is huge. If the situation appears to be deteriorating further, it’s likely that the next president will be someone committed to a rapid pullback of American troops; if the aftermath of the American surge is what looks like real progress (which eventually means an orderly withdrawal of most troops), then the next president may be McCain who will keep up the fight. (I’m not making a political statement; just analyzing the situation. I actually think we have a lot of important issues besides Iraq which ought to determine who is our next president.)

It’s important that we be as shrewd as we can be in recognizing both failure and success in Iraq. The original invasion was a huge success; the aftermath was a dismal failure of both planning and execution; the surge appears to have been helpful; now what’s happening? Our press needs to be as objective as human beings can be. We can anticipate efforts by those hostile to our presence to influence our election with a violent “surge” of their own which will be, like the Tet Offensive so long ago, either a sign of enemy desperation or of our inability to control events on the ground.

I wouldn’t presume to say how this story ends but am watching with an open mind and a little bit of hope.

Are We Sure We Don’t Like Free Trade?

Detroit Sets Bold Goal: Exporting U.S. Cars is the headline of a Wall Street Journal article about how a change in relative labor costs added to a weak dollar has made the US competitive again as a car EXPORTER. Most of the article is about planning but some of the shift has already happened:

“Chrysler had been using a contract manufacturer to assemble minivans for sale in Europe, but it chose not to extend the deal beyond 2007 and this year started exporting the Dodge Caravan minivan…made in a plant near St. Louis to Europe…It is also exporting increasing numbers of compact Dodge and Jeep models made in Belvidere, Ill., to several European countries. So far this year, more than 15,000 have been exported, up about 40% from the year-earlier period.”

And

“Spurred by the dollar, foreign auto makers are also devoting more attention to the U.S. BMW AG is pumping $750 million into its South Carolina plant to significantly expand U.S. output, much of which is earmarked for Europe [emphasis added]. Volkswagen AG is looking to build a new plant in North America, and many observers expect it to be in the U.S. Italy's Fiat SpA last week confirmed it is beginning discussions to find a partner that can assemble Alfa Romeo cars built in the U.S.”

The New York Times often decries the loss of American jobs caused by cheap imports. That doesn’t stop the times from finding bad news in imports becoming less cheap. Asian Inflation Begins to Sting U.S. Shoppers the headline says. “The free ride for American consumers is ending,” says the story. “Workers in the developing world facing higher prices have been increasingly vocal in demanding higher wages, with protests erupting in recent days in Vietnam, Cambodia and Egypt.” The Times could have added, but didn’t, that increasingly prosperous workers in China and India are in a position to demand higher wages and a better standard of living by job-shopping – so they do. The Times could have added, but didn’t, that Americans increasingly buy domestic goods when foreign prices go up AND foreigners buy our goods as well.

OK. Attention those of you campaigning in Pennsylvania: are you sure you hate NAFTA and other trade agreements now that the US in INCREASING exports? I know you checked with your pollsters but they measure yesterday’s attitudes towards the day before yesterday’s news.

Here’s a couple of factoids from the WSJ article to chew on between sound bites:

Re the rustbelt: “The company [GM] also has told UAW officials it is seriously considering building a future small car in Lordstown, Ohio, that would be exported to markets outside North America, people familiar with the matter said. It would be one of five new vehicles being produced there near the turn of the decade, one of these people said. The 42-year-old Lordstown assembly plant had been considered a candidate for closure due to high UAW labor costs.”

Re NAFTA: “The U.S. last year exported $50.66 billion worth of cars and light trucks…. Roughly half of its exports are to neighboring Mexico and Canada.”

And re the future: “The trend isn't limited to the big players. Tesla Motors, a Northern California start-up developing an electric car, recently decided to scrap plans to build its $20,000-plus batteries in Thailand. Instead, it will assemble the components in the U.S. because of currency values. Tesla has also pushed ahead its plan to sell cars in Europe by one year in hopes of banking big profits by selling cars to buyers paying in euros.”

Hope trade restrictions don’t stop us from a chance to lead the world in electric cars.

Let the Market Regulate Investment Banks

In the recent credit meltdown, the Federal Reserve has made emergency financing available to investment banks which is normally reserved for commercial banks. Treasury Secretary Henry Paulson says, according to the New York Times, that there will need to be more “oversight” (meaning regulation) of the investment banks since they are getting protections which used to be reserved for their heavily regulated commercial brethren.

Investment “banks” are companies like Bear Stearns, Morgan Stanley, Lehman Brothers etc. Although they have to follow the law and all kinds of SEC regulations, they are allowed to keep many more secrets than commercial banks and do not have to be transparent about their assets. They are also not subject to the kind of proactive auditing and examination that commercial banks undergo. They are, by design, more freewheeling than commercial banks are allowed to be. Often that freedom is a good thing and has made possible creative (in the good sense) financing of growth. Sometimes that freedom is a bad thing and it lads to creative (in the bad sense) financing of dubious (as opposed to risky schemes) and the invention of incredibly elaborate “investment” vehicles with a suspicious resemblances to Ponzi schemes which yield more in fees to the bankers than yield to the participants – especially once they unwind (the schemes, that is; bankers never unwind).

Paulson is right that the investment banks shouldn’t be allowed the backstopping services of the Fed (like the $30 billion credit line JP Morgan gets to help it buy Bear Stearns) without getting regulated in the bargain. If they get public “investment”, the public gets to protect its investment. But, IMHO, the solution is don’t give them the public help in the first place.

The prospect of market failure should be the regulator of the investment banking market. No matter what the short term pain, the country would have been better off letting Bear Stearns fail than bailing it out – and enriching JP Morgan further in the bargain. Yes, other investment banks might then have failed as well. Stock prices probably would have plummeted in the short term. On the other hand, investment banks might have become more creative in working things out with the homeowners whose mortgages are underwater. Now the banks can take a tough line with the borrowers knowing that the Federal Reserve is behind them.

If we bail them out, we encourage irresponsible behavior so we then need to regulate. But regulation discourages risk taking – and we need risk taking. We actually need investment banks. Moreover, regulation of the 24 hour worldwide online market the investment banks operate in is impractical. Regulators would have to slow the flow in order to watch it which would simply mean a faster exodus of the financial community to more hospitable shores. Only the lazy who like bailouts and regulation will be left here.

The market’s a cruel but effective regulator. It’ll remove the foolish (and the unlucky) and allow the wise (and the lucky) to survive even bad times. The prospect of failure will lead to an appropriate degree of both risk-taking (because you’ve got to make money) and caution (because you’ve got to survive). Might even be that without the prospect of a Fed bailout the banks would reduce executive compensation or defer bonuses until the long term consequences of short-term profits are more clear.

The best way to assure that the credit crisis is not quickly resolved is to shield investors in both houses and mortgages (and lots of other risky stuff) from the consequences of their actions. The best way to assure that the economy does not become robust again is to increase both regulation and bailouts.

The best course for the economy is to let failure take its toll and clear the decks for further growth.

Ben Bernanke’s Blunder: How NOT to Solve the Mortgage Crisis

Yesterday the US Federal Reserve took a big step towards prolonging the mortgage crisis. Its short-term reward was a big one-day run up in stock prices; Today prices were down again. I hope Fed Chairman Ben Bernanke isn’t making the mistake that was so hard for so many of us CEOs of public companies to avoid: navigating with one eye on the stock ticker.

From the New York Times:

“In an action that sent stock prices soaring, the central bank offered to let the biggest investment banks on Wall Street borrow up to $200 billion in Treasury securities in exchange for hard-to-sell mortgage-backed securities as collateral. And the Fed made clear that it was prepared to do more as needed.”

What the Fed did is get squarely in the way of unraveling the mortgage mess. Accepting these unsellable loans at face value as collateral is exactly the same as offering home equity loans to people whose mortgages are underwater based on the equity they used to have before prices fell.

If the Fed didn’t act in this way, if it and politicians of every stripe made clear that the “biggest investment banks on Wall Street” were going to have to take their losses just like their clients do, then we’d be well on the way to a workout of this crisis.

Pretty far down in the Times article:

“Indeed, some analysts warned that the central bank might make things worse in the long run by postponing the repricing of mortgage assets that financial institutions are holding, or by further weakening the value of the dollar and aggravating inflation.”

The reality is that people who bought houses with little or no money down are not really owners in the financial sense even though they appear on the deed; they are renters with an option to buy. When prices went up, almost everyone exercised that option, at least in part, although many preserved their renter status by diligently withdrawing every dollar of equity in a refinancing or a home equity loan.

Now that prices are down, people both don’t want to and can’t afford to exercise their options to buy. If you had an option to buy a stock at 80 and it was trading at seventy, you obviously wouldn’t want to exercise the option. Surprise Wall Street, Main Street doesn’t want to buy a $400,000 house for $600,000 when prices are falling and the market is glutted. Mr. and Ms. Main Street don’t want to do that even if they live in the house. Maybe – if they can – they’ll keep paying the rent; maybe they’ll go somewhere cheaper.

Walkawayplan.com offers people help in escaping an underwater mortgage with minimal damage to their credit and other assets (they say, I don’t know anything about them first hand). It’s good that buyers have some leverage in dealing with the banks whether this outfit is helpful or not.

The solution to this crisis isn’t rocket science; it’s a workout of the kind that banks do all the kind when a commercial loan turns bad. The reality is that many houses aren’t currently worth the amount of the mortgages they secure and so those mortgages and securities based on those mortgages aren’t worth their face value either. Investors in some of those securities and securities based on those securities already have realized or unrealized losses. That’s what happens sometimes when you invest (or at least when I invest).

The principal on many if not all mortgages need to be written down to less than the value of the asset. This is more helpful than lowering the interest rate even when the result is the same in terms of a reduced monthly payment. Why? Because it lets the homeowners sell and move to something they can afford if they don’t have to ante up extra money to get out AND it gives those who stay an equity interest. Note that both of these things are as good for the banks as they are for the homeowners. In the move-away case the banks get the reduced principal back and have no further risk; in the cases where the families stay, the asset are taken care of by (partial) owners rather than renters who may well not feel like stretching their budget further to do maintenance on a house they have negative equity in.

In this kind of workout, the borrower and the lender share the pain. But workouts happen because both are better off when their loan agreement reflects current reality. So why isn’t this happening in the current crisis as fast as it should?

1. Both homeowners and banks would be better off still if taxpayers put some money into the equation to bail them out. Since this seems to be happening, at least as far as the banks are concerned, why take any further losses?
2. The web of financial instruments between the simple mortgage a homeowner has in a safe-deposit box and the financial instruments the Fed is now willing to take as security is extremely complex: there certainly isn’t a simple one-to-one relationship between debtors and creditors.

If there were no prospects of a bailout, the financial geniuses who figured out how to package these instruments in the first place are certainly smart enough to figure out how to unwind them. Ignoring the losses they’ve already incurred, they’d probably make money from the depackaging just as they did from the packaging. But it’s not gonna happen as long a the Fed is “prepared to do more as needed.”

And Those Who Harbor Them

The high point of President George W. Bush’s presidency was this sentence in his 9/11 address to the country: “We will make no distinction between the terrorists who committed these acts and those who harbor them.” Yeah, that reasoning can be and has been misused to attack almost anyone. Nevertheless, nations cannot allow other nations – or ungovernable non-nations – to provide a launching ground for attacks on them.

Barack Obama was right to say we would go into Pakistan with or without Pakistani blessing if we had “actionable intelligence” about Osama bin Laden’s exact whereabouts there. The (first?) Clinton administration was wrong, especially with the hindsight of the 9/11 commission report, not to have acted in Afghanistan against al Qaeda after the bombing of US embassies but before the attack on the US homeland.

We have recently attacked suspected terrorist targets in Somalia.

But our case for our right of self-defense against “those who harbor them” would be stronger if we were consistent in acknowledging that other countries have that right as well – even if it’s inconvenient for us when they exercise it.

For example, why do we urge great caution and restraint on Turkey which is attacked by Kurdish rebels from the Iraqi side of its joint border with that country? If we have a right of self-defense against countries halfway around the world, certainly Turkey has a right to pursue a menace next door.

Why don’t we strongly defend Colombia’s right to pursue FARC rebels into Ecuador where they have not only been tolerated but perhaps even aided and encouraged?

We have been generally supportive of Israel but wishy-washy about its absolute right to defend its borders – even if that means building a fence or attacking rocket launch sites which Hamas or Hezbollah decided to put in civilian areas.

Vladimir Putin is a very scary guy; Russian reaction in Chechnya has apparently been marked by atrocities; but we get no consistency points from our friends or our enemies if we deny that Russia has a right to prevent Chechnya from being a staging ground for a attacks on Russian civilians or a sanctuary for those who carry out such attacks.

Moreover, those who must pursue attackers into the territory of harborers have no responsibility to leave such territory better than they found it. Hopefully we’ll be able to do that in Afghanistan because it’s in our self-interest to do so and a good thing besides. We may not be able to do so in Iraq. If we were right to attack (and I’m avoiding that topic here), we did not incur an open-ended responsibility to stay until that country has a civil, just, and democratic society it hasn’t had at any time in its recent history.

A country with porous borders can’t cry “sovereignty” when it’s providing sanctuary to a movement like Islamic extremism, FARC (perhaps more a drug gang), or Kurdish separatists. Making that clear in advance and consistently will help countries which have the means to control their borders to protect themselves from dangerous mistakes. The US has no monopoly on the right of extra-territorial or pre-emptive self-defense; our case would be better made to the world if we consistently defended the right of other nations to defend themselves against not only attackers but also “harborers”.

Plug-In Hybrid Vehicles – Readers Add to the Discussion

Lots of good comments from readers that deserve prominence and more discussion.

First from Craig Plunkett:

“PHEV's do exist for the truck market. There is a small company on Long Island producing them. Bucket Trucks and Garbage Trucks are great targets for this technology. The CTO of Odyne at the time came to talk about them to a business group I belong to…”

In his own post about this presentation, Craig points out that PHEV garbage trucks are much quieter than their conventional equivalents. Not only is there not engine roar but the regenerating braking systems don’t make as much noise as truck brakes. I would think that there would also be a market for “pure” electrics in trucks that are heavy anyway (so batteries may not be as much of a problem) and have a predictably short route.

kent beuchert does some useful calculations:

“Actually, if you do the simple math using the DOT's graph of the distribution of commuting trips in the US, you'll find that a 40 mile ranged plug-in like the Volt would achieve 295 MPG in commuting, even without any workplace recharging occurring. This would avoid 93% of gasoline used for commuting. With 1/4 of commuters recharging at work, the fleet's MPG would jump to 397 MPG, avoiding 96% of gasoline usage.”

So why aren’t we (the collective we) doing more to move the world’s ground transportation fleet to PHEV? CJ does point out some practical concerns:

“I almost agree with you on this one. 1) The electric grid is in such poor shape that the added load of charging all these vehicles could put it over the edge. 2) Low temps effect the power output of batteries and 3) Gas electric hybrid's and their massive batteries are dangerous in a crash - both to the occupants and the emergency personnel - because disconnecting the battery no longer eliminates current flowing through the vehicle. As a member of a volunteer fire dept, there is a lot of concern over responding to hybrid's involved in accidents. The special training is just starting to hit small depts such as ours.”

Although CJ is right about the pathetic state of our electrical grid (like much of our infrastructure), I think the fact that PHEVs would be recharged mainly at night when the grid is way below peak usage mitigates this problem to a large extent (see more on this below). Moreover, having more nighttime usage for the grid improves the economics for capital improvements that need to be made anyway. The more kilowatt hours flow through a given segment, the more quickly investment in the segment can be amortized AND the less each kilowatt hour has to be burdened with depreciation.

Batteries do lose effectiveness in cold weather but the availability of the gasoline backup means that the driver isn’t stranded on a low electric mileage day.

The fire problem is an interesting one and CJ is much more qualified to comment on that than I am. Some work needs to be done here to prepare for a PHEV future.

CJ goes on to recommend fuel cell technology:

“However, there is a slightly different twist on your plugin that should be hitting the market soon from Honda (I believe). A fuel cell vehicle that will power the car without need for batteries and a gas engine, but the big advantage is that when you plug these vehicles in, they generate power. A home owner could supply their home electrical needs, or a portion of it, as well as get long range emission free driving. For businesses that have fleet vehicles, the generating benefits increase greatly. As well, small inputs into the existing grid from home power generation make the whole grid a more efficient system.”

The Honda he is talking about is the FCX Clarity which “Honda plans to lease to a limited number of retail consumers in Southern California with the first deliveries taking place in summer 2008.”  The FCX Clarity is NOT rechargeable; it requires a supply of hydrogen which, in turn, requires a delivery infrastructure which doesn’t yet exist. Moreover, although water is the only tailpipe emission from a fuel cell car; hydrocarbons are usually a by product of producing the hydrogen fuel supply just a some hydrocarbons are a by product of some methods of generating electricity. IMHO, fuel cells will be part of the global answer in time, perhaps the major part – but PHEVs are a quicker fix.

In an offline communication, friend Michael Birnbaum pointed to a post on salon.com by Andrew Leonard which talks about a study published in the March issue of Environmental Research Letters which concludes that the current electrical grid in California could support one million PHEVs without additional capacity assuming that they are not recharged in peak hours of peak days.

The study does say, however:

“Even with gasoline dear at $4.00/gallon and electricity cheap at $0.05/kWh, vehicle purchasers may only find a compact car plug-in hybrid economical if its cost premium relative to an ordinary hybrid vehicle were under $2000 and if its cost premium relative to a conventional vehicle were under $3500. Such price premiums may require battery pack costs (including electronics, etc) under $650/kWh, while current battery pack prices for plug-in hybrids applications may well be in excess of $1000/kWh.”

Gas isn’t $4.00 gallon (yet) and electricity costs $.20/kWh here in the Northeast. Nevertheless, mass production should bring the cost of the battery pack down quickly to an acceptable level. The trick is to jump start the process so the battery cost can come down.

The Homeowners Own the Banks

There’s an old saying “If you owe the bank a hundred dollars, they own you. If you owe the bank a million, you own the bank.” The numbers need to be updated but the principle applies. The banks lent too much; they over-valued the housing stock that was the collateral; they made the same bet that the homeowners did: prices would keep going up. But the banks can’t afford to own all the houses whose mortgages are under water; so the homeowners own the banks.

The banks (by which I mean those who own the mortgages) should make a deal with the homeowners; they need each other. Naturally both the banks and the homeowners would like taxpayers to share some of the pain. There’s no good reason why taxpayers should get in the middle; but this is an election year so there are lots of bad reasons which may be compelling.

Bankers are suggesting that the federal government buy these mortgages at a discount; the bankers would take losses (which some of them have already booked); the feds would presumably go easy on the borrowers; people would keep their homes; and the downward spiral of housing prices MIGHT be stopped.

A couple of problems with this approach are 1) how would the government decide which homeowners “deserve” forbearance and which don’t? 2) what happens to people who can’t make any reasonable payments at all? 3) who decides what price the government pays for these mortgages? Overpaying means bailing out the lenders.

The prospect of a bailout is delaying the real negotiation and pain-sharing that would be the beginning of the end of this “crisis”.

Bank by bank, the banks should voluntarily set policies which let them reduce the principal due on some mortgages to less than the value of the collateral. The loans have already lost value along with the houses; “sharing” the loss in value with the homeowners increases the chances that the homeowners will be willing and able to stay and pay money to the bank. The banks don’t want the houses; they need to help their debtors work out of debt. Banks can also decide to forgo raising interest as much as they are entitled to by the mortgage contracts, all in the interest of getting paid as much as possible.

A second benefit of adjusting the principal to fit reality is that this strategy allows owners who’d rather have less house and less debt to sell. This good news for the bank which gets their (reduced) principal back; it’s good for the people who can reduce their debt burden by downsizing; and it’s good for the new owners who can presumably afford the joint because sub-prime mortgages are hard to get these day. As long as the face amount of the mortgage is more than the value of the house, the mortgagee is trapped since they have to come up with cash in order to sell.

Banks will still foreclose in cases where the collateral has enough value and/or there is no chance of getting repaid anything substantial.  Banks will still collect as much as they can from the mortgagees. This isn’t a bailout; it’s a recognition of reality. This kind of workout happens all the time with corporate debt. It’s not a “moral hazard” as a government bailout would be because there’s no subsidy and plenty of pain for all. Still more people WILL get to keep their homes than if the banks keep trying to collect full freight. A huge advantage is the government doesn’t have to decide who’s worthy of being bailed out.

BTW, I know I’m oversimplifying. The mortgages are often NOT owned by the banks which service them. They seem, in fact, to be owned by investors all over the world. Those investors are already taking losses on the securities they bought. Nevertheless, the sooner a settlement is reached with as many mortgagees who can settle, the less the future losses.

There MAY actually be a role for government in making any regulatory changes necessary to allow these complex negotiations to happen. There may even be a role for us taxpayers if the FDIC insurance fund is not sufficient to cover insured deposits at banks which may turn out to be underwater once their mortgage investments are valued at what they’re worth.

Two years ago politicians were echoing the complaint that housing was so expensive it was unaffordable. Now prices are readjusting to reality. More people can actually afford houses (without assuming someone will buy them out before their mortgage interest rate resets); that’s not all bad. The people already in houses will have a better chance of staying in them if their mortgage principal is marked down to reality; and the banks’ll have a better chance of collecting money instead of empty houses in declining neighborhoods if they forget the amount they actually lent and only try to collect what the collateral is now worth.

Japan’s Internet Access Satellite Is a Mistake

CNN reports that “Japan launched a rocket Saturday carrying a satellite that will test new technology that promises to deliver "super high-speed Internet" service to homes and businesses around the world… If the technology proves successful, subscribers with small dishes will connect to the Internet at speeds many times faster than what is now available over residential cable or DSL services… the Associated Press said the satellite would offer speeds of up to 1.2 gigabytes per second [nb. with a seventeen foot dish].”

Sounds good but it isn’t.

What neither the Associated Press nor CNN picked up is the altitude at which the satellite is intended to orbit, probably because they don’t understand why that’s important. Slashdot was a little more discerning, however: they picked up that it is intended to be geostationary (always appearing in the same spot in the sky so that antennae can be pointed at it). Physics (and the release from the Japanese AerospaceExploration Agency) tell us that a geostationary satellite must be 22, 000 miles above the earth. Other laws of physics say that radio signals are going to take more than a tenth of a second to get there and the same time to get back; the universe apparently doesn’t allow faster speeds.

Not only does that mean that these satellites won’t be good for interactive gaming (as Slashdot points out) and that they’ll be terrible for VoIP; they also won’t work well for web browsing. That matters! A modern web page is built in many interactions between your computer and the host of the website (much more detail here); the minimum time for each of those interactions is half a second because the signal has to go up and down to get to the server and up and down to get back to you. Those half a seconds don’t sound like much but they add up (this delay is called “latency”). If you use satellite, you know how slow page builds are and how may pages just break during the delay. Unfortunately fast data rates don’t help when latency is the problem.

The satellite’ll be good for email; it’s a good backup to oceanic fiber that seems to be getting cut lately. It will NOT do what the Japanese Agency’s press release says: “…even in some areas where major ground infrastructure for the Internet is difficult to establish, people can enjoy the same level of Internet service as that in urban areas.” Cable, DSL, and even terrestrial wireless measure latency in milliseconds (thousandths of a second); latency is very often MORE important than bandwidth in determining the quality of Internet experience. Anyone who thinks geostationary satellites are an acceptable way to bring broadband to rural areas doesn’t understand how the modern web works.

WHO Doesn’t Like the Gates Foundation

From a recent article in the New York Times:

“The chief of malaria for the World Health Organization has complained that the growing dominance of malaria research by the Bill and Melinda Gates Foundation risks stifling a diversity of views among scientists and wiping out the world health agency’s policy-making function.

“In a memorandum, the malaria chief, Dr. Arata Kochi, complained to his boss, Dr. Margaret Chan, the director general of the W.H.O., that the foundation’s money, while crucial, could have ‘far-reaching, largely unintended consequences.’”

WHO is a UN organization, in case you didn’t know. UN agencies, even those that don’t do their job very well (most of them), don’t like to have their “policy-making function” wiped out.

Dr. Kochi, according to the NY Times article from which all facts following in this post come,  says the Gates Foundation is forcing recipient scientists into “group think”. A Dr. Amir Attaran at the University of Ottawa agrees with Dr. Kochi but “…believed that scientists were not afraid of the foundation, but of its chief of malaria, Dr. Regina Rabinovich, whom he described as ‘autocratic.’”

The Gates Foundation has spent about $1.2 billion on malaria research. Before their involvement in 2000, less than $100 million a year was being spent on this and drug companies had pretty much abandoned the field. You’d think the Foundation would be entitled to have an opinion and influence policy since it pays the bills but not according to Dr. Kochi who complains that the foundation “even takes its vested interest to seeing the data it helped generate taken to policy.”

I had a lot of contact with Bill Gates and Melinda and I were peers when I worked at Microsoft. I’d much rather have them setting policy – particularly on how their money is spent - than UN bureaucrats. Yeah, Bill can be arrogant; yeah, people who work for him sometimes think aping the arrogance will also make them as brilliant and successful as them. But, when Bill gets “hard core” about things, they get done. The things the Gates Foundation is doing need someone getting hard core about them. They need much more rigorous analysis and much better execution than the UN especially but also many other governmental and non-governmental have shown themselves capable of.

The last few paragraphs of the Times story may well explain what the Gates Foundation has done to raise the ire of UN officials:

“There have been hints in recent months that the World Health Organization feels threatened by the growing power of the Gates Foundation. Some scientists have said privately that it is ‘creating its own W.H.O.’

“One oft-cited example is its $105 million grant to create the Institute for Health Metrics and Evaluation at the University of Washington. Its mission is to judge, for example, which treatments work or to rank countries’ health systems.

“These are core W.H.O. tasks, but the institute’s new director, Dr. Christopher J. L. Murray, formerly a health organization official, said a new path was needed because the United Nations agency came under pressure from member countries. His said his institute would be independent of that.”

Maybe we ought to find out what other UN functions the Gates Foundation would be willing to take over.

Danger: Biofuels Cause Global Warming

The abstract of an article in a recent edition of Science Magazine says:

“Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. Using a worldwide agricultural model to estimate emissions from land use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products.^”

Europeans trying to comply with Kyoto mandates have proposed stipulating that biofuels used to meet their alternative fuel mandates cannot come from land that was previously rain forest. However, the study points out that such restrictions are window dressing. Food, like energy, is fungible. If European biofuels come only from existing agricultural land, the food crops formerly grown there will be grown somewhere else; good chance that somewhere else will be newly cleared.

A New York Times article by Elizabeth Rosenthal about the studies published in Science gives this example:

“…Previously, Midwestern farmers had alternated corn with soy in their fields, one year to the next. Now many grow only corn, meaning that soy has to be grown elsewhere.

“Increasingly, that elsewhere, Dr. Fargione said, is Brazil, on land that was previously forest or savanna. ‘Brazilian farmers are planting more of the world’s soybeans — and they’re deforesting the Amazon to do it,’ he said.”

The studies do point out that biofuels made from agricultural waste (technologies for which are being worked on but have not yet been made remotely economical) and that biofuels from sugar – as made in Brazil and, inexplicably to me, not made in any quantity in Hawaii – would and do have a positive carbon impact.

Defenders of the subsidized biofuels industry are quick to point out that biofuels do help energy independence. On a global basis, use of farmland to “grow energy” diversifies energy sources – a good thing – and increases income to farmers in poor as well as wealthy areas – another good thing. On the other hand, diversion of cropland raises food prices.

The world economy isn’t as complex as the environment but it may be as chaotic and hard to model. Food prices and the amount of land under cultivation would both be going up now even without corn-based ethanol production because the huge number of people escaping poverty in India and China are using some of their new income to eat more and better – as well as to buy motorcycles and cars.

In the long term it seems foolish to use plants to convert sunlight to energy for fuel when solar collectors – after a huge capital outlay and with big infrastructure changes – yields one hundred times more energy per acre than growing corn. Moreover, some of the best places for solar generated electricity are not cropland because they are arid.

But now it seems that corny ethanol may not be a good short term solution either. Suppose, for example, we burn more coal even before we have a way to sequester or divert the atmospheric carbon dioxide produced. Even giving full credit to the most alarming predictions of carbon-based global warming, this may be environmentally more friendly than clearing a rain forest. You can stop burning the coal if you can’t sequester the CO2 or whenever replacement energy comes online; you can’t  replant the rain forest. Hmm…

Some will argue reasonably that discrediting ethanol as a panacea is one more reason why conservation (aka less driving in smaller cars) is the only solution to the twin problems of energy independence and global warming. Trouble with that thinking is that the aforementioned newly unpoor aren’t going to forgo the pleasures of personal transportation which we have long enjoyed. We need more energy sources.

The math behind my claim that solar produces 100 times the yield of corn in net energy per acre at 1800 times the capital cost is here.

Primary Strategy

In Vermont we get to choose which primary we vote in. It now looks like that choice and how we vote might still make a small difference on Town Meeting Day, March 4, which is when our Democratic and Republican primaries will both take place. It’s an interesting decision for me.

On Friday I was convinced that John McCain (whom I like) had safely wrapped up the Republican nomination. But the Republican nominee could well end up NOT being president, so a vote in the Democratic primary would be a vote for my second choice in case I don’t get my first choice. That seemed like a good strategy, and I’d tentatively decided to vote for Obama although I’ve been put off lately by his preachy generalities without many specifics.

Yesterday results in Kansas and Louisiana, which McCain lo