Showing posts sorted by relevance for query CRASH 2008. Sort by date Show all posts
Showing posts sorted by relevance for query CRASH 2008. Sort by date Show all posts
Tuesday, May 26, 2020
Thursday, July 22, 2021
2008 THE GREAT BANK CRASH
UK
Taxpayer stake in NatWest Group may be slashed to less than 40% as Treasury looks to offload billions in shares over next 12 months
Two £1.1bn share sales were made by the UK Government in March and May
The Treasury sold another two tranches totalling £2.5bn each in 2015 and 2018
Taxpayers are expected to lose £38.8bn from the sale of NatWest Group shares
By HARRY WISE FOR THIS IS MONEY
PUBLISHED: 07:13 EDT, 22 July 2021
The Treasury is set to sell more of its stake in NatWest Group in a move that could leave the banking giant in majority private ownership for the first time since before the global financial crisis.
UK Government Investments (UKGI), a Treasury-owned body that administers its NatWest stake, said it had directed Morgan Stanley to gradually offload up to 15 per cent of its shares over a year-long period from next month.
It means the taxpayer's ownership stake might reduce from the 54.7 per cent it currently holds to less than 40 per cent, having already fallen by about 7 per cent this year following two sell-downs.
Sell-off: The Government said it had directed Morgan Stanley to gradually offload up to 15 per cent of its shares over a year-long period from next month
In March, the Treasury announced that it had sold £1.1billion worth of shares back to NatWest - previously known as Royal Bank of Scotland (RBS) until July last year - before selling the same amount two months later.
It sold another two tranches totalling £2.5billion each in 2015 and 2018 that cut its ownership share from 78.3 per cent to 62.4 per cent as part of plans to eventually trade its whole stake in the financial services group by 2023-24.
However, these sell-offs ignited considerable controversy as they were all traded at a significant loss compared to the average 502p-per-share price the Government paid to bail out RBS over a decade ago.
NatWest Group's shares were down 1.1 per cent to 197.4p this morning, though they have risen by 24 per cent since the start of the year.
According to recent estimates from the Office for Budget Responsibility, of the £45.8 billion spent to prop up the bank during the crisis, the taxpayer is expected to make a loss of £38.8billion.
The deadline to sell the entire taxpayer stake in NatWest was also pushed back a year when the coronavirus crisis struck the UK, as a global sell-off saw stock markets around the globe collapse.
Saved: NatWest Group was known as RBS until July last year. The UK Government became the bank's majority owner in 2008 after spending £46.8billion bailing it out
The Treasury additionally missed out on a dividend payment last year when regulators decided to ban payouts by financial institutions during the height of the pandemic in order to buffer capital stocks and incorporate potential loan losses.
Those restrictions were partially relaxed in December, and NatWest subsequently declared a dividend in 2021 of 3p a share, handing £225million to the Government as the biggest shareholder.
It later reported pre-tax operating profits surged by 82 per cent to £946million for the first three months of 2021 thanks to expectations for fewer loans to turn sour due to the pandemic and a jump in mortgage lending and customer deposits.
NatWest came close to going bust in 2008 soon after it bought Dutch bank ABN Amro in 2007 - despite investor warnings - as part of a consortium in what was the largest takeover ever in the financial services industry.
Six months afterwards, it launched a record-breaking £12billion rights issue and went on later that year to report a half-year loss of nearly £700mllion, its first loss in four decades, as a result of credit crunch write-downs of £5.9billion.
The UK Government eventually rescued it in October 2008 and took a 43 per cent stake in Lloyds Bank after spending £20.3billion bailing it out. It started selling its shares in Lloyds in 2013 and eventually sold its last stake four years ago.
UK
Taxpayer stake in NatWest Group may be slashed to less than 40% as Treasury looks to offload billions in shares over next 12 months
Two £1.1bn share sales were made by the UK Government in March and May
The Treasury sold another two tranches totalling £2.5bn each in 2015 and 2018
Taxpayers are expected to lose £38.8bn from the sale of NatWest Group shares
By HARRY WISE FOR THIS IS MONEY
PUBLISHED: 07:13 EDT, 22 July 2021
The Treasury is set to sell more of its stake in NatWest Group in a move that could leave the banking giant in majority private ownership for the first time since before the global financial crisis.
UK Government Investments (UKGI), a Treasury-owned body that administers its NatWest stake, said it had directed Morgan Stanley to gradually offload up to 15 per cent of its shares over a year-long period from next month.
It means the taxpayer's ownership stake might reduce from the 54.7 per cent it currently holds to less than 40 per cent, having already fallen by about 7 per cent this year following two sell-downs.
Sell-off: The Government said it had directed Morgan Stanley to gradually offload up to 15 per cent of its shares over a year-long period from next month
In March, the Treasury announced that it had sold £1.1billion worth of shares back to NatWest - previously known as Royal Bank of Scotland (RBS) until July last year - before selling the same amount two months later.
It sold another two tranches totalling £2.5billion each in 2015 and 2018 that cut its ownership share from 78.3 per cent to 62.4 per cent as part of plans to eventually trade its whole stake in the financial services group by 2023-24.
However, these sell-offs ignited considerable controversy as they were all traded at a significant loss compared to the average 502p-per-share price the Government paid to bail out RBS over a decade ago.
NatWest Group's shares were down 1.1 per cent to 197.4p this morning, though they have risen by 24 per cent since the start of the year.
According to recent estimates from the Office for Budget Responsibility, of the £45.8 billion spent to prop up the bank during the crisis, the taxpayer is expected to make a loss of £38.8billion.
The deadline to sell the entire taxpayer stake in NatWest was also pushed back a year when the coronavirus crisis struck the UK, as a global sell-off saw stock markets around the globe collapse.
Saved: NatWest Group was known as RBS until July last year. The UK Government became the bank's majority owner in 2008 after spending £46.8billion bailing it out
The Treasury additionally missed out on a dividend payment last year when regulators decided to ban payouts by financial institutions during the height of the pandemic in order to buffer capital stocks and incorporate potential loan losses.
Those restrictions were partially relaxed in December, and NatWest subsequently declared a dividend in 2021 of 3p a share, handing £225million to the Government as the biggest shareholder.
It later reported pre-tax operating profits surged by 82 per cent to £946million for the first three months of 2021 thanks to expectations for fewer loans to turn sour due to the pandemic and a jump in mortgage lending and customer deposits.
NatWest came close to going bust in 2008 soon after it bought Dutch bank ABN Amro in 2007 - despite investor warnings - as part of a consortium in what was the largest takeover ever in the financial services industry.
Six months afterwards, it launched a record-breaking £12billion rights issue and went on later that year to report a half-year loss of nearly £700mllion, its first loss in four decades, as a result of credit crunch write-downs of £5.9billion.
The UK Government eventually rescued it in October 2008 and took a 43 per cent stake in Lloyds Bank after spending £20.3billion bailing it out. It started selling its shares in Lloyds in 2013 and eventually sold its last stake four years ago.
Thursday, October 15, 2009
Forward to the Past
Well excuse me if I am not surprised that Steady Eddie Alberta's CEO produced a TV show last night that announced nothing new. In fact while some folks bemoan the premier for not being Ralph Klein, including King Ralph his-self, Steady Eddie is living up to his name.
In fact he is the ghost of the Tories Past, the actions of his government are just a rehash of Klein's fiscal renovation, of the 1990's. The government is cutting hospital beds and freezing hiring of nurses and doctors, just as Klein did. The are cutting back funding to schools, just as Klein did. They are cutting funding to post secondary institutions just as Klein did. They are calling for a wage freeze for two years for all public sector workers just as Klein did. The debt and deficit hysteria that launched the Klein regime has returned like Marley's ghost to haunt the Alberta Government. Having no plan Steady Eddie returns to the past to find solutions to the Tories Made In Alberta Recession.
Blaming the economic crash of last year for Alberta's current deficit is of course par for the course, all governments have used the crash to explain away their economic mistakes. But in Alberta that crash should have been expected, since we have experienced boom and busts before, and those who had like former Premier Peter Lougheed warned that the Alberta Government led by his old party, had no plan to deal with the boom. And of course it had no
plan to deal with a crash.
The failure to invest the Heritage Trust fund or to fund it adequately led to the current deficit. And yet those in charge of investing both the Trust fund and the new AIMCO investment fund (made up of your and my public sector pension funds) lost the province billions, that now make up part of the current deficit. It was this investment failure that has cost the province much including outrageous buy outs and bonuses to these same fund managers.
Add to that the expansion of infrastructure projects, that under Klein had been halted, as labour costs increased during the boom and you have another reason for the deficit.
Finally we have the creation of Hospital Boards, which were to have been publicly elected and were for one term and then when to0 many liberals and dippers were elected the boards were fired by Klein and replaced with Tory hacks. Steady Eddie's first act as Premier was to follow in Klein's footsteps, firing the regional boards and forming a super board, the cost of which was again payouts resulting in the new super board having a half billion dollar deficit.
And while Steady Eddie announced a wage freeze for senior government managers it means little when in fact these same managers racked in bonuses worth $6.7 million last year. And we suspect that even if he follows through with MLA and cabinet salary freezes its after the cabinet gave itself and the Premier a 34% increase last year.
The other reason for the deficit is that Alberta is business friendly. The cost of doing business in this province is nil, zilch, nada. The working class taxpayers in Alberta shoulder the burden of business costs. And thanks to the generous tax breaks to business the burden of the deficit is shouldered by you and me, and the solution that some are suggesting is the dreaded of all taxes the sales tax.
Like the mythical debt and deficit crisis of the Klein years this too is a short term recession, with a temporary deficit. And like then the deficit will be paid off by cutting public sector funding and freezing wages rather than taxing the capitalists. Nothing new here just as there is nothing new with the Tired Old Tories still in power.
Find blog posts, photos, events and more off-site about:
Alberta, Heritage Trust Fund, LAPP, Alberta Investment Management Corporation, Canada, Pensions, P3, public-private-partnerships, investment, infrastructure, VenCap, shareholders, economics
,d blog posts, photos, events and more off-site about:
Alberta, Premier, Ed Stelmach,
salary increase,PC, MLA, Conservatives,Greg Michlen, Cabinet Minister, Alberta Weekly Wage, democratic deficit, One Party State,, ,
In fact he is the ghost of the Tories Past, the actions of his government are just a rehash of Klein's fiscal renovation, of the 1990's. The government is cutting hospital beds and freezing hiring of nurses and doctors, just as Klein did. The are cutting back funding to schools, just as Klein did. They are cutting funding to post secondary institutions just as Klein did. They are calling for a wage freeze for two years for all public sector workers just as Klein did. The debt and deficit hysteria that launched the Klein regime has returned like Marley's ghost to haunt the Alberta Government. Having no plan Steady Eddie returns to the past to find solutions to the Tories Made In Alberta Recession.
Blaming the economic crash of last year for Alberta's current deficit is of course par for the course, all governments have used the crash to explain away their economic mistakes. But in Alberta that crash should have been expected, since we have experienced boom and busts before, and those who had like former Premier Peter Lougheed warned that the Alberta Government led by his old party, had no plan to deal with the boom. And of course it had no
plan to deal with a crash.
The failure to invest the Heritage Trust fund or to fund it adequately led to the current deficit. And yet those in charge of investing both the Trust fund and the new AIMCO investment fund (made up of your and my public sector pension funds) lost the province billions, that now make up part of the current deficit. It was this investment failure that has cost the province much including outrageous buy outs and bonuses to these same fund managers.
The province's Heritage Savings Trust Fund lost the $3 billion between March 2008 and March 2009 in the economic downturn, and currently sits at $14.3 billion. The record loss sent Alberta into a deficit for the first time in 15 years. It was the biggest loss in the fund's 33-year history.The collapse of oil and gas prices of course added to the deficit but not to the degree that the bad investments of our surpluses did. In fact the decline in natural gas production in the province began back in 2001 and is something that could be planned for, if you had a government that was not adverse to planning.
two AIMCo executives earned a combination of more than $5 million last year even as the funds they managed -- including the Heritage Savings Trust Fund -- lost more than $7 billion.
The problem, however, is that production in the Western Canadian Sedimentary Basin (WCSB) is declining. Production peaked in 2001; the vast majority of the country's natural gas is produced in the WCSB. According to Canada's National Energy Board (NEB), Canada's marketable production peaked around 17 Bcf/day in 2001.
Sadly, no amount of drilling is going to reverse the decline. Production declined in 2005, despite having a record number of well completions in the WSCB. Take a look for yourself:
If we take a look back, 2005 should have been a huge year for Canadian natural gas. That year, we saw the most active Atlantic hurricane season in recorded history. Fifteen hurricanes blew past us. Five became Category 4 hurricanes and four reached Category 5, including Katrina and Wilma.
That same year, Canada imported 3.7 Tcf of natural gas to the U.S. However, Canadian production of marketable natural gas fell 1.7%, compared to 2001 levels. According to NEB projections for 2009, natural gas production will sit at 5.5 Tcf — 12% lower than in 2001.
Add to that the expansion of infrastructure projects, that under Klein had been halted, as labour costs increased during the boom and you have another reason for the deficit.
Finally we have the creation of Hospital Boards, which were to have been publicly elected and were for one term and then when to0 many liberals and dippers were elected the boards were fired by Klein and replaced with Tory hacks. Steady Eddie's first act as Premier was to follow in Klein's footsteps, firing the regional boards and forming a super board, the cost of which was again payouts resulting in the new super board having a half billion dollar deficit.
And while Steady Eddie announced a wage freeze for senior government managers it means little when in fact these same managers racked in bonuses worth $6.7 million last year. And we suspect that even if he follows through with MLA and cabinet salary freezes its after the cabinet gave itself and the Premier a 34% increase last year.
The other reason for the deficit is that Alberta is business friendly. The cost of doing business in this province is nil, zilch, nada. The working class taxpayers in Alberta shoulder the burden of business costs. And thanks to the generous tax breaks to business the burden of the deficit is shouldered by you and me, and the solution that some are suggesting is the dreaded of all taxes the sales tax.
The Progressive Conservative government, in power since 1971, has long had a hands-off approach to business. Foreign investors have long been attracted by the lack of sales, payroll or capital taxes, low income taxes and competitive corporate taxes, at 29 per cent and dropping to 25 per cent by 2012. Despite a current deficit, overall net direct and indirect debt is low, totalling C$1bn or 0.3 per cent of GDP on March 31, according to a recent Moody’s report that gave Alberta a triple-A debt rating.
Like the mythical debt and deficit crisis of the Klein years this too is a short term recession, with a temporary deficit. And like then the deficit will be paid off by cutting public sector funding and freezing wages rather than taxing the capitalists. Nothing new here just as there is nothing new with the Tired Old Tories still in power.
Your Pension Dollars At Work
P3= Public Pension Partnerships
Find blog posts, photos, events and more off-site about:
Alberta, Heritage Trust Fund, LAPP, Alberta Investment Management Corporation, Canada, Pensions, P3, public-private-partnerships, investment, infrastructure, VenCap, shareholders, economics
,d blog posts, photos, events and more off-site about:
Alberta, Premier, Ed Stelmach,
salary increase,PC, MLA, Conservatives,Greg Michlen, Cabinet Minister, Alberta Weekly Wage, democratic deficit, One Party State,, ,
Thursday, July 28, 2022
Interest Rate Hikes Will Not Save Us from Inflation
Rather than making money harder to get, the U.S. government needs to focus on the other side of the demand vs. supply equation.
In prescribing cures for inflation, economists rely on the diagnosis of Nobel laureate Milton Friedman: inflation is always and everywhere a monetary phenomenon—too much money chasing too few goods. But that equation has three variables: too much money (“demand”) chasing (the “velocity” of spending) too few goods (“supply”). And “orthodox” economists, from Lawrence Summers to the Federal Reserve, seem to be focusing only on the “demand” variable.
The Fed’s prescription is to suppress demand (borrowing and spending) by raising interest rates. Summers, a former U.S. Treasury Secretary who presided over the massive post-2008 bank bailouts, is proposing to reduce demand by raising taxes or raising unemployment rates, reducing disposable income and thus people’s ability to spend. But those rather brutal solutions miss the real problem, just as Summers missed the crisis leading up to the 2008-09 crash. As explained in a November 2021 editorial titled “Too Few Goods – The Simple Explanation for October’s Elevated Inflation Rates,” we don’t actually have too much consumer money chasing available goods:
M2 money supply surged [in 2020] as the Fed pumped out liquidity to replace businesses’ lost sales and households’ lost paychecks. But bank reserves account for nearly half of the cumulative increase since 2020 began, and the vast majority seem to be excess reserves sitting on deposit at Federal Reserve banks and not backing loans. Excluding bank reserves, M2 money supply is now growing more slowly than it did for most of 2015 – 2019, when inflation was mostly below the Fed’s 2% y/y target, much to policymakers’ chagrin. Weak lending also suggests money isn’t doing much “chasing,” a notion underscored by the historically low velocity of money. US personal consumption expenditures—the broadest measure of household spending—have already slowed from a reopening resurgence to rates more akin to the pre-pandemic norm and surveys show many households used stimulus money to repay debt or build savings they may not spend at all. It doesn’t look like there is a mountain of household liquidity waiting to do more chasing from here. [Emphasis added.]
In March 2022, the Federal Reserve tackled inflation with its traditional tools – raising interest rates and tightening the money supply by selling bonds, pulling dollars out of the economy. But not only have prices not gone down since then, they are going up. As observed in a July 15 article on Seeking Alpha titled “Fed-Induced Recession Looms As Rate Fears Roil All Markets”:
On Wednesday, the Consumer Price Index came in at a 9.1% annual rate. The higher-than-expected reading puts the CPI at a new 41-year high.
The biggest contributors to rising consumer prices are the basic necessities of food, fuel, and shelter. As households struggle to make ends meet, they are trimming discretionary spending, burning through savings, and running up credit card balances.
Businesses are also getting squeezed. On Thursday, the Producer Price Index showed wholesale costs rising at a massive 11.3% year-over-year.
When their own costs go up, producers must raise the prices of their products to cover those costs, regardless of demand. Less money competing for their products won’t bring producer costs down. It will just drive the companies out of business, as happened in the Great Depression. The Seeking Alpha article concludes:
… As both businesses and consumers are forced to tighten their belts, a slowdown looms.
And if the Federal Reserve makes another major policy misstep, then a severe recession and financial crisis may also be coming.
Recession is already evident. The stock market has lost a cumulative $7 trillion in value this year, while the crypto market has lost $2 trillion since last November. Emerging markets are in even worse straits. According to a July 14 article by Larry McDonald on ZeroHedge, “Emerging and frontier market countries currently owe the IMF over $100 billion. US central banking policy plus a strong USD is vaporizing this capital as we speak.… A quarter-trillion dollars of distressed debt is threatening to drag the developing world into a historic cascade of defaults.”
Every time the Fed raises rates, borrowing becomes more expensive. That means higher interest costs not only for governments but for borrowers with mortgages, home equity lines of credit, credit cards, student debt and car loans. For both large and small businesses, loans also get pricier.
To be clear, this is not the same sort of inflation that Paul Volcker was taming in 1980 when he raised the Fed funds rate to 20%. McDonald observes, “In 2021, global debt reached a record $303T, according to the Institute of International Finance .… Volcker was jacking rates into a planet with about $200T LESS debt.” [Emphasis added]
Volcker was also not dealing with the supply shortages we have today, generated by lockdowns that put more than 100,000 U.S. companies out of business; sanctions and war that cut off global supplies of fuel, food and resources; and farming crises such as that in the Netherlands, generated by overly stringent regulations.
Higher interest rates don’t alleviate cost/push inflation caused by supply crises; they make it worse. Rather than making money harder to get, the government needs to focus on the supply side of the equation, stimulating local production to bring supply levels up. Rather than Volcker’s solution, what we need is that pioneered by Alexander Hamilton, Abraham Lincoln, and Franklin D. Roosevelt, who pulled us out of similar crises with public banking institutions designed to stimulate infrastructure and development.
For foreign models, we can look to the infrastructure-funding central banks of Australia, New Zealand and Canada in the first half of the 20th century; and to China, which salvaged the global economy following the 2008 banking crisis with massive infrastructure and development funded through its state-owned development banks.
China Did It
In the last 40 years, China has exploded from one of the world’s poorest countries to a global economic powerhouse. Among other notable achievements, from 2008 to 2022 it built 23,500 miles of high-speed rail, at a time when U.S. infrastructure projects were stalled for lack of funding. How did China pull this off? Rather than relying on taxpayer funds or foreign debt, it borrowed from its own banks.
China has three massive state-owned infrastructure and development banks – the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China. Called “policy banks,” they get their liquidity either (a) directly from the People’s Bank of China (PBOC) in the form of “Pledged Supplementary Lending,” or (b) by issuing bonds, which have higher credit ratings than commercial bank bonds and are in demand because they can be used as collateral to borrow from the central bank. China’s policy banks are limited to funding certain specific government policies; and these policies are all productive and public-purpose-driven, unlike the short-term private profit-maximization driving Wall Street banks.
Besides its big state-owned banks, China has an extensive network of local banks, which know their local markets. The PBOC website lists seven tools it can use for adjusting monetary policy, including not just a short-term lending facility like the U.S. Fed’s discount window, but a facility to inject liquidity into banks for medium-term loans, as well as the “pledged supplementary lending” to fund long-term loans from the three policy lenders for specific sectors, including agriculture, small businesses, and shanty town re-development.
Yet all this stimulus has not driven up Chinese prices. In fact, consumer prices initially fell in 2008 and have hovered around 2% ever since. [See chart below.]
Prices are creeping up now, as is happening everywhere; but they have reached only 2.5%—far below the 9.7% seen in the U.S. in July.
Our Forebears Did It Too
State-owned infrastructure banks are not unique to China. In the United States, a similar model was initiated by Alexander Hamilton, the first U.S. Treasury Secretary. The “American System” of government-issued money and credit was key both to winning the American Revolutionary War and to transforming the nation from a collection of agrarian colonies to an industrial powerhouse. But after the War, the federal government was $70 million in debt, including $44 million from the colonies-turned-states.
Hamilton solved the debt problem with debt-for-equity swaps. Debt instruments were accepted in partial payment for stock in the First U.S. Bank. This capital was then leveraged into credit, issued as the first U.S. currency. Loans were based on the fractional reserve model. Hamilton wrote, “It is a well established fact, that Banks in good credit can circulate a far greater sum than the actual quantum of their capital in Gold & Silver.”
That was also the model of the Bank of England, the financial engine of the colonial oppressors; but there were fundamental differences between the two models. The Bank of the United States (BUS) was designed for public development. The Bank of England (BOE) was intended for private gain. (See Hamilton Versus Wall Street: The Core Principles of the American System of Economics by Nancy Spannaus, and Alexander Hamilton: A Biography by Forrest McDonald.)
The BOE was chartered to fund a national war and was capitalized exclusively by public debt. The government would pay private lenders, who controlled what policies could be funded. Hamilton’s BUS, by contrast, was to be a commercial bank, funding itself by generating credit for infrastructure and development.
Under Hamilton’s system of “Public Credit,” the primary function of the BUS would be to issue credit to the government and private interests for internal improvements and other economic development. Hamilton said a bank’s function was to generate active capital for agriculture and manufactures, increasing the quantity and quality of labor and industry. The BUS would establish a sovereign currency, a banking system, and a source of credit to build the nation, creating productive wealth, not just financial profit.
The BUS was chartered for only 20 years, after which it lapsed. When economic hardships and monetary pressures followed, the Second Bank of the United States was founded in 1816 under President John Quincy Adams, basically on the Hamiltonian model. It funded one of the most intense periods of economic progress in history, investing directly in canals, railroads, roads, and coal and iron enterprises; lending money to states and cities engaged in such projects; and managing credit so that it continually flowed into needed productive activities.
After the Second BUS was shut down, Abraham Lincoln’s government issued Greenbacks (U.S. Notes) directly, funding both the Civil War and extensive infrastructure and development. The National Banking System was also established, under which national banks would be partially capitalized with federal securities.
An International Movement Is Born
The American System and its leaders not only allowed the American colonists to break free of British control but inspired an international movement. Other British colonies revolted, including Australia, New Zealand and Canada; and other countries rebelled against the British imperial free-trade doctrines and developed their own infrastructure and manufacturing, including Germany, Ireland, Russia, Japan, India, Mexico, and South America.
The Commonwealth Bank of Australia (CBA), founded in 1911, followed the Hamiltonian model. It was masterminded by an American named King O’Malley, who called Hamilton “the greatest financial man who ever walked the earth.” The CBA funded major national development and Australia’s participation in World War I, simply with national credit issued by the bank.
In Canada from 1939-74, the government borrowed from its own Bank of Canada, effectively interest-free. Major government projects were funded without increasing the national debt, including aircraft production during and after World War II, education benefits for returning soldiers, family allowances, old age pensions, the Trans-Canada Highway, the St. Lawrence Seaway project, and universal health care for all Canadians.
Meanwhile in the U.S., we got the Federal Reserve – and the worst banking crisis and economic depression ever in 1929-33. Pres. Franklin D. Roosevelt then rebuilt the U.S. economy financed through the Reconstruction Finance Corporation, again funded on the Hamiltonian model. Initially capitalized with $500 million, from 1932 to 1957 it lent or invested over $40 billion for infrastructure and development of all kinds; funded the New Deal and World War II; and turned a net profit to the government of $690 million.
Solving Today’s Price Inflation
That could be done again, assuming the political will. Some pundits predict that the Fed will back off its aggressive interest rate hikes when the carnage from that approach becomes painfully evident, but it seems to be a phase we have to go through to convince policymakers that the Fed’s current tools are not able to curb the price inflation we have today. We need to stimulate local development with a national infrastructure and development bank like China’s; and for that, Congress needs to pass an infrastructure bank bill.
Four such bills are currently before Congress. Only one, however, is capable of generating the nearly $6 trillion that the American Society of Civil Engineers says is needed over the next decade for U.S. infrastructure investment. This is HR 3339: The National Infrastructure Bank Act of 2021, which would effectively be self-funded on the American System model – a critical feature given that the federal debt is at record levels. The bank would be capitalized with federal debt acquired in debt-for-equity swaps – federal securities for non-voting bank shares paying a 2% dividend. This capital would then be leveraged at 10 to 1 into low-interest loans, essentially at cost. The bank would be anti-inflationary, by bringing supply up to meet demand; would not require new taxes but would rather increase the tax base, by increasing GDP; and would require only a small Congressional outlay for startup costs, which would quickly be repaid. For more information on HR 3339, see the National Infrastructure Bank Coalition website.
• This article was first posted on ScheerPost.
Wednesday, June 23, 2021
An electric car fire is like 'a trick birthday candle' — and a nightmare for firefighters
Cyrus Farivar
It’s the kind of blaze that veteran Chief Palmer Buck of The Woodlands Township Fire Department in suburban Houston compared to “a trick birthday candle.”
On April 17, when firefighters responded to a 911 call at around 9:30 p.m., they came upon a Tesla Model S that had crashed, killing two people, and was now on fire.
They extinguished it, but then a small flare shot out of the bottom of the charred hulk. Firefighters quickly put out those flames. Not long after, the car reignited for a third time.
“What the heck? How do we make this stop?’” Buck asked his team. They quickly consulted Tesla’s first responder guide and realized that it would take far more personnel and water than they could have imagined. Eight firefighters ultimately spent seven hours putting out the fire. They also used up 28,000 gallons of water — an amount the department normally uses in a month. That same volume of water serves an average American home for nearly two years.
By comparison, a typical fire involving an internal combustion car can often be quickly put out with approximately 300 gallons of water, well within the capacity of a single fire engine.
As the popularity of electric vehicles grows, firefighters nationwide are realizing that they are not fully equipped to deal with them. So they have been banding together, largely informally, to share information to help one another out. In fact, Buck recently spoke on Zoom about the incident before a group of Colorado firefighters.
That’s because the way that electric vehicles are powered triggers longer-burning fires when they crash and get into serious accidents. Electric cars rely on a bank of lithium-ion batteries, similar to batteries found in a cellphone or computer. But unlike a small phone battery, the large batteries found in the Tesla Model X, for instance, contain enough energy to power an average American home for more than two days.
So when an electric vehicle gets in a high-speed accident and catches on fire, damaged energy cells cause temperatures to rise out of control, and the resulting blaze can require a significant amount of water to put out. Such vehicles, given their large electrical energy storage capacity, can be a considerable hazard, known as “stranded energy,” to first responders.
But training to put out these fires can’t come fast enough as more electric vehicles arrive on U.S. roads every day. According to IHS Insight, an industry analysis firm, the number of registered electric vehicles reached a record market share in the United States of 1.8 percent and is forecast to double to 3.5 percent by the end of this year. But IHS notes that 1 in 10 cars are expected to be electric by 2025.
Still, most firefighters across America have not been adequately trained in the key differences between putting fires out in gas and electric cars. Some counterparts in Europe have developed a different approach, sometimes even putting a burning electric vehicle into a converted shipping container or dumpster -- essentially giving it a bath -- so that it cannot do further harm. Tesla says in its publicly available first responders guide that this method is not advisable and that departments should just use lots of water to put fires out.
The problem has become widespread enough that late last year the National Transportation Safety Board published a report noting the “inadequacy” of all car manufacturers’ first responder guides. The agency further noted that while there are electric disconnection mechanisms, known as “cut loops,” they are often damaged in serious crashes. Finally, the NTSB also said that first responders generally lack an understanding of how to put out fires that can result from such crashes.
“The instructions in most manufacturers’ emergency response guides for fighting high-voltage lithium-ion battery fires lack necessary, vehicle-specific details on suppressing the fires,” the NTSB said
But there’s little that the board can do to fix the problem.
“We do not have any regulatory power, we do not have any enforcement power,” said NTSB spokesperson Eric Weiss, pointing out that such authority sits with the National Highway Traffic Safety Administration, or NHTSA.
In an email, Lucia Sanchez, a spokesperson for the safety administration, said that this topic remains important for the agency, one that it is “actively engaged in with our stakeholders including members of the first responder community.” In recent correspondence with the NTSB, the regulatory agency said that it continues to conduct research on “developing practical strategies for responders.”
Tesla, the largest electric-vehicle seller in the United States, did not respond to requests for comment about the NTSB report. But Capt. Cory Wilson, a 14-year veteran of the fire department in Fremont, California, where all U.S.-made Teslas are manufactured, said that Tesla has worked directly with his department for the past eight years. Still the best advice that Wilson gave was to advise firefighters to print out and keep Tesla safety guides in their trucks.
“Tesla has done a good job trying to get first responders educated,” he said.
Benedikt Griffig, a Volkswagen spokesperson, said in an email that German firefighting authorities have largely reached the same conclusion as their American counterparts, noting that they, too, may need considerable volumes of water to put out such a fire. Nissan spokesperson Ashli Bobo declined to respond to questions, but pointed to the company’s publicly available first responder guide. David McAlpine, a General Motors spokesman, said the company has actively worked on providing guidance for first responders working with electric vehicles and that "General Motors is committed to developing products that are safe and enjoyable for all our customers." Ford did not respond to requests for comment.
Recent discovery
While the first Tesla vehicles hit American streets in 2008, the National Transportation Safety Board did not investigate its first electric-vehicle battery fires until after an Aug. 25, 2017, crash of a Tesla Model X. That car was driving an estimated 70 mph or more down a residential street in Lake Forest, California, about an hour’s drive southeast of downtown Los Angeles.
According to the NTSB, the driver lost control of the car, crossed a sidewalk, traveled down a drainage ditch, hit a culvert and a property wall, and finally zoomed into an open garage and collided with a parked BMW, narrowly missing a man inside.
The Tesla caught fire, which spread to the BMW, then the garage and the house itself.
While Orange County Fire Authority’s firefighters put out most of the fire within 20 minutes, they found that a fire continued to burn in the attic above the fire, fueled by the burning Tesla. It took another 30 minutes for them to get the Tesla out of the garage, after which it reignited.
But 45 minutes after the flames on the Tesla were extinguished, it reignited again. Firefighters began hosing it down with copious amounts of water, up to 200 gallons per minute, but “that did not extinguish the flames,” according to the NTSB. At approximately 9:13 p.m., nearly three hours after the first alarm was received, firefighters had to pour out more than 600 gallons of water per minute. In the end, two firefighters sustained minor smoke inhalation-related injuries, and the agency used 20,000 gallons of water.
Capt. Sean Doran, the spokesperson for the Orange County Fire Authority, said that electric vehicle-related fires are a “game changer,” given that they require such huge amounts of water, and incidents can last hours longer than what most departments may be used to.
“One of the concepts in firefighting is don’t start what you can’t finish,” he said. “We don’t want to start applying water before we have a water source.”
It’s also often difficult for firefighters to get that volume of water outside of a mid-size city with adequate hydrants or other natural sources. That’s also what The Woodlands Township Fire Department, which responded to the Tesla crash in April, concluded.
“On a highway, to figure out how you’re going to get 20,000 gallons is a planning and logistics nightmare,” Buck, the fire chief, said.
Seeking help
Fire department officials say one of the biggest problems they face is that Tesla and other major car manufacturers often don’t include enough detail in their model guides for first responders as some fire agencies would like.On May 8, 2018, a 2014 Tesla Model S took a curve at 116 mph in a 30-mph zone in Fort Lauderdale, Florida. The car hit a wall in a residential area before it erupted in flames, then continued down the road and hit a light pole, finally stopping in a driveway. The driver and front passenger were both killed, while the rear passenger was seriously injured.
Fort Lauderdale Fire Rescue arrived four minutes after a 911 call was placed and began hosing down the car.
According to Asst. Fire Marshal Stephen Gollan, his agency had “minimal training” before this incident, but he knew enough to consult the Tesla online emergency response guide, which describes the “cut loops” that shut down the high voltage system. But firefighters couldn’t reach the loops.
The instructions for this model also includes the warning: “use large amounts of water to cool the battery. DO NOT extinguish fire with a small amount of water,” according to Tesla.
But Gollan said that not only does Tesla's manual lack a definition of “large amounts” of water, it also provides little detail about what firefighters should do with the remaining damaged batteries that may still contain dangerous stranded energy. In the end, Fort Lauderdale Fire Rescue used a combination of water and firefighting foam, even though Tesla does not recommend using foam.
“The Tesla manuals only say to use copious amounts of water,” he said. “They don't provide any direction as to how to remove that energy.”
In the end, the Tesla was loaded onto a tow truck for removal from the crash site. But the battery reignited twice during that process.
Like Buck in The Woodlands case, Gollan found himself quickly fielding calls from numerous agencies trying to learn more about how to put out electrical vehicle fires from someone who had done it firsthand.
“Following the incident we did substantial debriefings with NTSB and other municipal fire departments,” he said. “And since that time I've had multiple calls with other agencies from across the U.S.”
Support groups
While some firefighters are now turning to one another for help, like Buck speaking to his counterparts in Colorado, other groups like the National Fire Protection Association (NFPA), a lobbying and research arm for the fire insurance and firefighting community, are also trying to address the growing demand for their firefighter courses.
While the NFPA has trained approximately 250,000 firefighters and emergency responders in the last 12 years on this issue, that leaves nearly 80 percent of the more than 1.1 million firefighters nationwide left to train, according to the organization. Of those, approximately two-thirds are volunteers and may be harder to reach.
“With EVs (electric vehicles), especially for the fire service, it’s a new paradigm,” said Andrew Klock, the group’s emerging issues lead manager.
Robert Swaim, who retired nearly two years ago, spent more than 30 years at the NTSB. He began digging into the issue with lithium-ion batteries after a Boeing 787 caught fire in Boston in 2013.
Swaim has been offering his own training, comparable to ones offered by NFPA, except his classes are live -- and he brings his own Chevy Volt to class. He points out that his in-person and hands-on training is considerably more helpful than the myriad of PDFs that various manufacturers put out. He said that after recently posting some of his presentation slides, traffic to his website has jumped by more than a factor of 10.
“You’re going to tell me that a volunteer firefighter is going to go to the Ford website and learn about Ford’s emergency response guide?” he said. “That’s not going to happen.”
Continuing problems
In the meantime, fire departments are facing far more time-intensive fires. In the past, most car fires were put out in well under an hour. Then the scene was turned over to local law enforcement, and a tow company moved the car.
“Then we are going to have to sit on scene usually for 45 minutes to an hour with our [thermal imaging camera] to make sure the battery is not continuing to heat up,” said Wilson, the Fremont Fire captain.
Later this summer, Buck is set to give another presentation to his former agency, the Austin Fire Department, where he worked for 27 years. The Texas capital is set to become Tesla’s new manufacturing hub, known as Gigafactory Texas, where the company’s new all-electric Cybertruck is expected to be produced.
Buck fears that as electric cars become larger, they’re going to need bigger batteries, which could mean even longer-burning fires. He notes that this is too big a burden on small fire departments.
“The time on scene is more concerning than even the amount of water — the fact that I might have a unit tied up for multiple hours while it cools down,” he said. “I'm just babysitting, and that’s problematic.”
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