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Low Dollar Will Demand Export Profits

Posted on July 9, 2006
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by Tim Tursick,
Denver, Co.

There was a largely ignored speech given today. Donald L. Kohn, a Vice Chairman of the Federal Reserve Board of Governors spoke to the European Economics and Financial Center Seminar at the House of Commons in London. While the world tilts and whirls on every comment by Chairman Bernanke, I believe Mr. Kohn’s comments give a very clear idea about the vision and consensus of the board in general as it relates to future monetary policy.

If Mr. Kohn’s comments are to be perceived as the views of a team player (and why wouldn’t they be?), then the case for an end to rising rates has much stronger support than it did before today. While much of the speech laid the ground work for key points, I believe the most important key point Mr. Kohn delivered was this: “At some point the United States is going to need to finance its imports with the proceeds of its exports, not with foreign savings.” This statement tells me,more than any other, of the recent past, that the Fed has decided the only course for the foreseeable future is the weak dollar course. The real question that is yet to be answered is this: What will the United States be able to export in substantial quantity that can take the place of foreign investment?

I have written a few papers in the past about the need for massive corporate and possibly some government investment in New American Industry. It is not enough to simply plod along as we have been with big dollars being poured into R & D, with little return for actual producing industries. The biggest area we can regenerate American Industry Export Growth in is the automobile. The automobile as we have known it, a fossil fuel guzzler, should be all but considered dead for the move I suggest. Believe it or not, we have the technology to build a hydrogen infrastructure, with hydrogen fuel stations and cars that use hydrogen as fuel for internal combustion engines. We have the technology to go into production now. There may be minor glitches along the way but, isn’t that true in all technology? No technology is perfect when first fielded.

There are two projects currently underway to prove what works and what doesn’t in a hydrogen fueled transportation system. The Hydrogen Highway Projects in California and; I believe there is one in the mid-west. They are keying in on personal vehicle use which is where we need to make the change. It is time to leave the oil to the big diesel movers, aircraft and the plastics manufacturers while the rest of us move into hydrogen. The only thing needed is capital investment on a massive scale. Investment may need massive injections but, the returns promise to be much greater.

Tim Tursk

Comments and discussion welcome below.

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16 Comments so far
  1. Art Framke July 9, 2006 8:46 pm

    It is amazing to me the progress quietly being made in hydrogen technology has been largely ignored by the mass media. It seems that the dream is closer to reality
    than previously thought especially concerning hydrogen
    fuel cell technology. Honda Motor Corporation recently
    stated that it will begin commercialization of a hydrogen
    fuel cell vehicle within the next 2 years. That is much sooner than the consensus would have you believe. Daimler
    has been operating a fleet (35+) of hydrogen fuel cell buses around the world for the past several years without
    a glitch. Ballard Power Systems is about to commercialize
    a home generation fuel cell system in cooperation with Japan’s Ebara Corp that really is the next big thing!

    The only thing missing from the above 3 examples of
    hydrogen energy progress is any mention of a US corporation! Japan, Europe and Canada are beatin the
    socks off of us in this regard. The US needs to shake off this lazy oil dependent stupor we are in. It is starting to become serious now folks. btw…a hydrogen energy commercialization drive would invigorate the US economy in
    a HUGE way….the right thing to do always seems the hardest at first!

  2. JDR July 9, 2006 10:04 pm

    Yes the hydrogen economy will be great. Of course the necessary ingredient, hydrogen, must be manufactured from natural gas leaving the greenhouse gas CO2 as a byproduct. Or we can get hydrogen from electrolysis of water using electricity generated by burning natural gas or coal, again creating massive amounts of CO2 as a byproduct.

    Hmmm, what’s wrong with this picture?

  3. Dan Friedly July 9, 2006 11:08 pm

    Hydrogen is a wonderful fuel (no polution) but an important point must be made here: hydrogen is basically a battery–there are no natural sources on earth and energy must be used to produce it from something else, most commonly natural gas. Electrolysis works but you might as well store electricity in batteries and run your cars that way (and that technology is here).

    On the other hand, a fuel source that we have in abundant quantities is coal and coal can be transformed into liquid and gas fuel, oil, wax and so on. They’re doing it in South Africa; the economics makes sense (not expensive).

    It would take a while to make enough fuel from coal to have any left for export–it would basically reduce imports for a long time.

    So far as selling things to bring dollars home I expect that a lot of it will be in foreign investment in US corporations, real estate, and infrastructure–foreigners already are signing long term leases on US toll roads (Indiana recently). I don’t like it particularly but that is what is happening. Selling widgets would be better but labor is a lot cheaper elsewhere.

    Mr. Kohn said “At some point the United States is going to need to finance its imports with the proceeds of its exports, not with foreign savings.” I heartily agree. That point was twenty or thirty years ago. There’s a LOT of catching up to do and I’m not sure it is possible.

  4. Moneylender July 9, 2006 11:54 pm

    The US is BANKRUPT living on a daily overdraft of two million dollars a day from the People’s Bank of China and the rest of the world.
    The Our Standing Market Credit Debt is at the last count was 46 Trillion dollars, this cannot be serviced or capital paid off in a 1000 years, and every second it remains on the book it ac rues exponential compound interest.
    Every one and every thing imaginable are owned by private banks
    The biggest subsidized industry is the Arms industry, a bottom less hole.
    The solution on offer is continued arms conflict on imaginary WMDs, as long as there are enough cretins willing to become cannon fodder it will go on.
    As a committed pacifist I pray for peace, if we can prepare for war we can prepare for peace at half the cost.Unfortunately the Moral America has been enslaved too fable to take up NON VIOLENT protest

  5. WalltoWall July 10, 2006 12:56 am

    Moneylender - the daily “overdraft” is $2 billion not $2 million, and yes the US is bankrupt as it will be unable to meet its future obligations. The American people are sleepwalking into a very deep hole, let by their incompetant Government and the (private) FED.

  6. m_astera July 10, 2006 7:00 am

    Hi All- Great replies above, pretty much covers the Hydrogen thing, which boils down to where is this H supposed to come from?

    This huge debt has been run up by the State, in collusion with the corporations looking to profit from it and the Fed and other Int’l banks. It has not been run up by the ordinary American people.

    So let them pay it. They made the mess, let them deal with it. It will not be fixed with band-aids or pipe dreams about new widgets to sell.

    The age of the robber barons is over, just like the feudal age was over a few hundred years ago. It really is time for something “completely different”, to grab a line from Monty Python.

    A de-centralized economy on the local level, as in local production and consumption, is what I see on the horizon. I also foresee the end of the parasite classes lording it over the common people. Greed is not good; look where that has gotten us: ordinary people working their lives away as virtual slaves to what end? So that they can hope to appear as wasteful and “opulent” as the parasites? What a stupid waste of a life.

  7. Art Framke July 10, 2006 7:13 am

    concerning fuel cell natural gas/kerosene/ethanol
    fuel processors, it is my understanding that the process
    of converting these fuels into hydrogen gas through the fuel processor is as much as 40% more effiecent than the combustion of these fuels. Also, I understand that the CO2
    product gas release is substaintally less than that from
    the combustion process….please elaborate on any different
    statistical evidence

  8. bp July 10, 2006 7:17 am

    Tim, an interesting post - thanks. I would have to agree with the commentors about this situation right now, though. This hydrogen-based economy is promising, but I don’t see a concerted effort in the US to move in that direction. For a country like Iceland it might be feasible, but here and now in the US there are significant problems. A big one being that most of the population still seems to be in denial about the situation, that, and the fact that this effort may need an integrated coordination across various industries, many of which would rather capture the short term profits rather than invest in the long term future. As for coal - yes we have a lot of it which could be used for hydrogen generation, but I haven’t seen any promising reports out as to how to avoid increasing CO2 - check here - http://www.energybulletin.net/17876.html

    Do you know of any efforts to deal with this coal and CO2 generation problem? - I checked Ballard’s site, but they don’t go into that problem - and natural gas … I hear that that is peaking in the US too - of course there is always the promise of “off shore drilling”, but my hunch is that we couldn’t replace the energy lost by the falling oil and natural gas deposits we are currently mining.

    To me, it seems we need an effort like the one we had to meet WWII, but so far the “will of the people” seems not to have been aroused sufficiently. If it happens, I do think that we can resolve this problem, but we are so far along in our denial, I do think that the transition will be painful, but perhaps a good learning experience…perhaps we need to change our priorities after all.

    and, Dan I would have to agree with you about our situation with manufacturing - I worked in studying industries trying to protect themselves from imports by using the Critical Industries Act (critical to national defense)- it became obvious after awhile that it would be very hard, and time consuming, to rebuild a critical industry once the key personnel were lost (engineers, scientists, and technologists) - so yeah, we need to rebuild our exports/manufacturing base, but…Rome wasn’t built in a day, and neither will be our export capability.

  9. bp July 10, 2006 7:23 am

    Art, sorry to see your comment after i posted - it seems the problem is not the efficiency of the hydrogen combustion, but in the production of the hydrogen itself - how can it be produced without the CO2 problem - any ideas or reports you can refer us to?

  10. Tursk July 10, 2006 7:54 am

    Imagine this: off shore hydrogen production plants producing hydrogen from sea water and delivering it to chemical storage tanks. Or how about: Nuclear powered ships, huge tanker types of vessels, farming hydrogen from the sea along coastal areas and delivering it to port much the same way we get oil from tankers. We will never be totally free of fossil fuels but, switching to hydrogen powered vehicles in the personal transportation system we have all come to depend on will be a major blow to pollution and oil use, the major blow. This will leave fossil fuel for the heavy movers, I.E. diesel, aircraft, trains. One step at a time. The thing is, we do have the technology to get moving on this, we just need the capital push. Fuel cells are still to expensive at this point but, hydrogen used in internel combustion engines could be done now. Hydrogen is the only known fuel that delivers as much power as gasoline or diesel, and will have virtually no pollution. If this infrastructure is pushed and built, fuel cells will follow in as a prime mover. The danger in waiting for the technology to be perfect and inexpensive, as I see it, are twofold: (1) We are wasting valuable time as the world continues to war over oil (2) If the fuel cell becomes the prime mover first, we may never see the switch to pure hydrogen as the main fuel. This is because fuel cells only need a hydrogen rich fuel, I.E. NG, Gas, etc… Fuel cell can solve pollution but they could keep us dependent on fossil fuel as the hydrogen source. Capital to push mass production as Ford did in the early 1900’s is the key to getting this thing off of the ground in a big way. Mass production brings prices down.

  11. JDR July 10, 2006 8:18 am

    “Or how about: Nuclear powered ships, huge tanker types of vessels, farming hydrogen from the sea along coastal areas and delivering it to port much the same way we get oil from tankers.”

    Handling and transporting large volumes of liquid hydrogen is not a simple task. It is far more hazardous than LNG or oil. The greenies would go crazy over any proposal for hundreds or thousands of large, nuclear-powered ships each carrying thousands of tons of a volatile, explosive cargo. Why not skip the middle men and just put the reactors on land and use the electricity to charge batteries?

    Another point often missed is the suitability of hydrogen as a fuel for aircraft and trucks. Unless we invent some new physics, there is little chance we can develop a hydrogen-powered airliner or truck because these uses require fuels with more energy density than even liquid hydrogen can supply.

  12. Tursk July 10, 2006 8:37 am

    You are right and I agree. Liquid hydrogen is expensive and hazardous. It is the chemical storage of hydrogen that hold the best promise for storage and transport of large volume. I’m no chemist but remember, there is more hydrogen in one cubic foot of water than there is in one cubic foot of oure hydrogen. Hydrogen chemically comines to other molecules and there are many hydrides, metal hydrides that are used to store hydrogen safely and in large volumes. There are many opinions on all of this and I am certainly opinionated but we can’t deny the fact that it works and is being proved as we write. I would encourage all to visit the california hydrogen highway web sight. Just google hydrogen highway and you will find it. There is also a small group of people at United Nuclear who developed a conversion kit, while it is rather expensive and at a current stop due to legal problems, they have proved it can be done.

  13. Art Framke July 10, 2006 11:13 am

    bp..there is alot of debate out there concerning the CO2
    effects of producing hydrogen but the point that I think is overlooked is the fact that a fuel cell is a much more efficent use of hydrocarbons ….in other words,
    producing hydrogen from hydrocarbons through a fuel cell processor STILL produces CO2…however you are getting
    a much larger ‘bang for your buck’ in terms of energy production via the fuel cell….a simple analogy might be the fact that 1 gallon of fuel in an internal combustion
    engine will take you a distance of 20 miles travelling @60mph BUT that same 1 gallon of fuel processed thru a fuel cell will take you 30 miles travelling @60mph….this is the point of commercializing fuel cells now…they can
    make what we have left go much further…..here is a link to some discussion on this issue…its been hard to find new info…it seems most of the debate about the hydrogen economy peaked in 2003 http://www.tcsdaily.com/article.aspx?id=063003A

  14. Tursk July 10, 2006 11:45 am

    The fuel cell is the most efficient use and the majority of the ongoing R & D concerning ‘hydrogen based transport’ keys on fuel cell development. The economic feasability for using fuel cells as the prime mover is still estimated to be a long way off. The use of a hydrogen fueled internal combustion engine could be done now, in a mass production mode, using the same basic auto plant tooling, with a more seamless integration into the vehicle side of current industry and systems. The production of hydrogen as a fuel requires large electrical power as we know. Nuclear power in combination with others can be used. Thinking logistically, the greatest source of hydrogen is the ocean so thats where the production should focus. We don’t have enough fresh water and although the byproduct of combusting hydrogen is water,(theoretically we wouldn’t be losing fresh water), we couldn’t know if the water byproduct would be reintroduced into the water cycle at a rate we would need to regenerate the fresh water we would use to generate hydrogen. When compared with the pollutant gases that hundreds of millions of gasoline burning automobiles dump into the atmosphere every day, I believe we need to choose between the lesser of two evils. We may also lessen the importance of waging war for oil. We will always need oil, that is why we need to stop burning so much of it. Leave the oil to the big diesel movers, the airplanes and the chemical/plastics industry. A hydrogen fueling infrastructure is of course needed and would require much capital. If companies aren’t willing to push forward with production and distribution then the idea is dead before it begins. The success or failure of the hydrogen highway project may be the tilting factor for a ‘pure hydrogen system’.

  15. bp July 10, 2006 4:36 pm

    hm, I don’t disagree with your (Art’s and Tursk’s) arguments for fuel cells and a hydrogen economy - I just figure it has a slow learning/implementation curve and that in the meantime we need to do “everything” we can to keep the boat afloat - for now I think moving away from the highways and toward rail transportation could also lessen our dependence on oil - to some extent - but there does need to be a stronger gov backing to move to new/alternate technologies and means of energy production and transportation.

  16. tursk July 10, 2006 9:00 pm

    I agree that expansion of railway use would be a good thing. In Art’s last post he said from what he found on the web it seemed debate on the hydrogen economy peaked in 2003. There was a frenzy of buzz about it, that built in the previous years and the buzz did seem to die out but that deadening buzz is mis leading. In 2004 California started on a fast track as directed by Governor Ahnold, ( think what you will about him but he is right on in his thinking about this subject), anyway he directed the state to get it together and take the lead on producing the infrastructure, vehicles and everything else for a hydrogen based personal transportation system. It is a huge team effort between government and industry. They are using both fuel cell power and hydrogen burning internal combustion engine vehicles. They ARE DOING IT. The progress that has been made is astounding. The reason they have made such rapid progress is precisely because most of the required technology was already there, it just needed to be pushed into production by mandate and much effort. You know, the behemoth industries of the U.S., both within our borders and the global conglomerates sometimes will not budge and need to have some newtons law applied to them, as in, an outside force causing a change in motion. There are always many nay sayers when it comes to change, especially change on such a large scale. It was only in the past few months that the mainstream media gave time to the ethanol based vehicle system in use by one of our south american neighbors. As soon as everyone became aware of the news the first thing out of most mouths was “if they can do it, why cant we?. Well my friends, hydrogen is our best bet for the most seamless transition to change the fuel we use in personal vehicle systems. California is doing it. There is no reason it can not be done, technologically speaking. If California can do it, why can’t we all do it? I believe we will, eventually. You’ll be happy to hear that I am officially done talking about it here. Thanks for your inputs and I encourage everyone to google to the hydrogen highway project and learn about what is happening there.

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