Isegoria

Over the centuries, Matthew Yglesias reminds us, people have invented many different kinds of machines that help us do things and improve living standards:

But in a very general way, what most of these inventions do is let us substitute some form of power for human effort. And as long as we were totally ignoring the costs of burning coal and oil, this was a great mechanism for progress — you invent new ways to do things by burning coal and oil, so then you burn more coal and oil.

But since the mid-1970s we’ve been increasingly aware of the limits and problems with this model, and it’s put us on an energy diet. Now when we invent something cool, we often have to say “too bad the energy requirements are so high.”

But as Ryan Avent (from whom I borrowed that chart) and others have written, this is a backward way of looking at things. The turn toward conservation and efficiency was a necessary evil in an era when we couldn’t come up with a better way to deal with geopolitical instability linked to oil and pollution linked to all forms of fossil fuels.

Instead, we should raise our clean energy production ambitions. We don’t want to replace 100% of our current dirty energy — we want to generate vastly more energy than we are currently using and make it zero carbon.

What difference does it make in how you look at it?

In the “energy is a necessary evil” frame, we look at our current electricity needs and then ask, “How can we generate all that from zero-carbon sources?” In the alternate framing, you say that to the extent we can develop affordable, zero-carbon sources of electricity, we want to generate tons and tons of electricity. Ideally, we would want to replace much more than 100% of current gas, coal, and oil with zero-carbon sources of electricity and use that to literally power a bold new era of rapid economic growth.

I find that this vision tends not to be intuitively compelling to a lot of people who are accustomed to living in the efficiency era. But let’s just imagine a world with small modular nuclear reactors and advanced geothermal energy production — a world in which we have plenty of baseline power. As our ability to make batteries gets better and better, we can put them all in vehicles rather than using them to address intermittent renewables. Then when the sun shines or the wind blows, we have even more power that we can use for stuff that doesn’t need to be on all the time. It’s a world of energy abundance — Lewis Strauss’ dream of electricity that’s “too cheap to meter.”

Printing money requires both nuclear keys:

The Federal Reserve can create new base money, but doesn’t have a mechanism to spend it into the real economy. The Treasury, on the other hand, can spend money on behalf of Congress, but has to issue bonds to do it, which sucks money out from somewhere else in the economy. In other words, the Treasury mostly just moves money around. This division of powers between the federal government and the central bank is what keeps the money supply relatively stable during most times in history, and leaves money creation mostly to the commercial bank system.

However, the combination of the Treasury and Federal Reserve working in concert results in a sharp rise in the broad money supply. With this approach, the Treasury spends money into the economy at a massive scale, and the bonds that are issued to pay for it are bought by the Federal Reserve with brand new base money, resulting in outright broad money creation. This close collaboration between the Treasury and the Federal Reserve occurred in the 1940s, and began occurring again in 2020.

[...]

During the subprime mortgage crisis, the Federal Reserve rapidly expanded the monetary base, but the Treasury’s response was more modest. If we continue with the nuclear key analogy for money-printing, only the Federal Reserve’s key was used. The Treasury did not use their key back then; little money was handed out to the broad economy.

[...]

Banks went into the 2008 crisis woefully under-capitalized, much like 1929. In response to a systemic failure of the banking system in 2008, the Federal Reserve created trillions of dollars of new base money to buy some of their assets, in a process referred to as quantitative easing. Additionally, fiscal bills removed troubled assets from bank balance sheets and provided very modest aid to the public. There was, however, no broad bailout of homeowners or other members of the general public other than for relatively small programs like “cash for clunkers”, and this dichotomy of bailing out Wall Street more than Main Street contributed to the rise of both left-leaning and right-leaning populist movements, ranging from Occupy Wall Street to the Tea Party.

All of this new base money in 2008, in other words, mostly remained in the banking system to recapitalize the banks and to decrease leverage ratios. As a result, the broad money supply didn’t spike at all, since people were not getting stimulus checks and there was no massive fiscal policy response.

Fast-forward to 2020, we went into this pandemic crisis with very different circumstances. Banks were well-capitalized this time from a combination of prior bailouts, leverage regulations, and more risk-averse lending behavior. Indeed, the banking system had plenty of excess reserves going into this crisis.

Instead, the economic shock came directly to consumers and businesses, and the fiscal response of providing stimulus checks, federal unemployment benefits, small business loans that mostly turn into grants, and a variety of other forms of aid, directly increased the broad money supply. Finishing with the analogy, both “keys” were initiated in 2020; the Federal Reserve created even more base money than before, and unlike 2008, the Treasury also sent out massive checks to inject it into the broad money supply, with massive fiscal deficit levels as a percentage of GDP that had not been seen since the 1940s.

You can almost hear the quiver in their NPR voice as they ask, Is plastic recycling a lie?

Laura Leebrick, a manager at Rogue Disposal & Recycling in southern Oregon, is standing on the end of its landfill watching an avalanche of plastic trash pour out of a semitrailer: containers, bags, packaging, strawberry containers, yogurt cups.

None of this plastic will be turned into new plastic things. All of it is buried.

“To me that felt like it was a betrayal of the public trust,” she said. “I had been lying to people … unwittingly.”

Rogue, like most recycling companies, had been sending plastic trash to China, but when China shut its doors two years ago, Leebrick scoured the U.S. for buyers. She could find only someone who wanted white milk jugs. She sends the soda bottles to the state.

But when Leebrick tried to tell people the truth about burying all the other plastic, she says people didn’t want to hear it.

“I remember the first meeting where I actually told a city council that it was costing more to recycle than it was to dispose of the same material as garbage,” she says, “and it was like heresy had been spoken in the room: You’re lying. This is gold. We take the time to clean it, take the labels off, separate it and put it here. It’s gold. This is valuable.”

But it’s not valuable, and it never has been. And what’s more, the makers of plastic — the nation’s largest oil and gas companies — have known this all along, even as they spent millions of dollars telling the American public the opposite.