The Slow Demise of Coal

"To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it." — Thomas Jefferson

Obama stated during the 2008 presidential campaign his dislike of coal as a source of energy and his plans to destroy the coal industry. As part of his hope and change mantra he kept pushing “green energy” as part of his transforming America agenda. He said he did not care if energy costs doubled he wanted America to go green. In four years we have not even come close to going green even though the government has wasted billions of dollars on solar and wind power.

Recent news that President Obama's re-election web page on energy policy didn't include coal on the list of "all of the above" energy sources sparked outrage in coal-producing states like Kentucky, Virginia, West Virginia, Ohio and Pennsylvania. The website had listed oil, natural gas, bio-fuels, wind, solar power and nuclear power but omitted coal, a fossil fuel that left-wing environmental groups despise.

After criticism from members of Congress and conservative bloggers, the Obama campaign put "clean coal" back on the "all of the above" energy list. The Obama administration now says that coal is an "essential" part of the administration's energy strategy. Coal accounts for 44 percent of electricity production in the United States, and coal mining is a major source of union jobs. Even after the Obama campaign put clean coal back on the list, the attacks and controversy live on, and there is now speculation that Mr. Obama may have done his campaign real damage in battle ground states like Virginia and Ohio.

According to Wikipedia coal accounts for 44.9% of our electrical generation.

Energy Source	Percent
Coal	44.9
Natural Gas	23.4
Nuclear	20.3
Hydro-Electric	6.9
Other Renewables	3.6
Petroleum	1.0

The original decision to leave coal off of the list was exposed by Ed Whitfield, the Republican congressman from Kentucky, who called it a "glaring omission" and relentlessly attacked the Obama campaign for putting coal jobs at risk. Mr. Whitfield has made the case that Mr. Obama and the Environmental Protection Agency have been engaged in a "war on coal." He remains "skeptical" that Obama will "do anything to draw on this resource" and continues to fume at new EPA regulations that threaten to put many coal-burning fire plants out of business.

The Obama campaign gaffe, if it was one, has come at the worst possible time for the president. Republicans in the Senate have been ridiculing his "none of the above" energy strategy. They point to the decision not to build the Keystone pipeline; to the reduction in Interior Department leases for oil and natural gas drilling; to Solyndra-type scandals with renewable energy grants; and to high gas prices.

Even though Obama’s campaign staff has backtracked on their stand on coal the Obama administration, through draconian regulations from the EPA, have slowly been destroying the coal industry causing our costs for electrical energy to go up and displacing thousands of workers — workers who for generations have supported their families by working in the coal industry.

According to a recent report in Bloomberg Patriot Coal, one of the largest producers of coal in the United States, has filed for bankruptcy and terminated over 1,000 jobs. The report states that two of the reasons for Patriot’s actions were the declining cost of natural gas and the increasing cost of coal due to EPA regulations. The report states:

“Patriot Coal Corp. (PCX) sought bankruptcy protection after milder winters and a shift to natural gas sent coal demand to a 24-year low.

The St. Louis-based company’s Chapter 11 petition listed $3.57 billion in assets and $3.07 billion in debts. The filing in U.S. Bankruptcy Court in Manhattan said dozens of the company’s units would join in the filing.

“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” Chief Executive Officer Irl F. Engelhardt said in a statement that cited lower thermal coal prices, canceled customer contracts and rising costs for environmental liabilities for increasing pressure on the company in recent months.

Patriot already has a loan to finance operations in bankruptcy and expects its mining operations and customer shipments to continue through the case, the company said in its statement. The $802 million loan, which still requires court approval, is through Citigroup Global Markets Inc., Barclays Bank Plc and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arrangers.

The company intends to “emerge as a viable and strong competitor in the coal industry,” Chief Financial Officer Mark Schroeder said yesterday in court papers. Patriot needs to trim labor costs because of declining prices and demand for coal, along with regulations that will require the company to spend hundreds of millions of dollars on water-treatment facilities and pension benefits in coming years, he said.

The company will also seek court approval to pay employees and continue health-care and other benefits, according to the statement.

Patriot has 13 active mining complexes in Appalachia and the Illinois Basin and controls an estimated 1.9 billion tons of coal reserves, according to its website. It sells thermal coal to electricity generators and metallurgical coal to steel and coke producers.

Wilmington Trust Co., and U.S. Bank NA were among Patriot’s largest unsecured creditors, according to court papers. Wilmington is a trustee to $250 million in notes and U.S. Bank is a trustee to $200 million in notes. The filing listed BlackRock Inc. (BLK), State Street Corp. (STT) and Vanguard Group Inc. as entities that control 5 percent or more of the voting stock in the company.”

The Report continues:

“U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Utilities have switched some power plants to cheaper natural gas as regulations restricting emissions make coal costlier to burn. Gas fell to a decade low in April amid a surplus of the fuel.

This year, Patriot has reduced thermal coal production by more than 4 million tons, trimmed costs and laid off 1,000 employees or contractors, according to a May 9 filing with the U.S. Securities and Exchange Commission.”

In a companion report on energy Forbes reported that the Federal Energy Regulatory Commission (FERC) has filed a petition against the bank in the context of an investigation into the alleged manipulation of energy markets in California and the Midwest. The Forbes report states:

“A petition filed Monday at a federal court in Washington DC revealed that FERC is conducting an investigation into JPMorgan’s “abusive” bidding strategies in energy markets, possibly inflating prices by more than $73 million.

FERC has served JPMorgan with at least two subpoenas since April, as the bank headed by Jamie Dimon has refused to hand over at least 25 emails with potentially sensitive information. The regulator is now asking the court to force the bank to hand those over, while investigating the potential violation of JPMorgan’s “duty to make truthful and non-misleading communications to the Commission and regional energy market operators.”

The regulator is accusing JPMorgan of using at least four “abusive” bidding strategies that have helped it extract “exaggerated” payments from wholesale markets in the Midwest and California. Complaints coming from the California Independent System Operation (CAISO) and the Midwest Independent Transmission Operator (MISO) sparked an investigation into how JPMorgan was potentially gaming the system to its own benefit.”

Obama’s energy policy is a fraud at best. He is pandering to his radical left-wing environmental base. Every time the cost of energy increases it’s tantamount to a tax. Not only does the cost of you electricity go up but so does the costs for food stuffs, goods, and services you purchase that are dependent upon electricity. Supermarkets need electricity to refrigerate their perishable items. Hospitals need electricity to run all of their diagnostic equipment and monitors. In a recent heat wave on the east coast people had no air conditioning causing the deaths of babies and seniors.

Obama’s obsession with green energy, while placating his radical base, is killing the American people. It is causing rising prices and losses in jobs. How is this hope and change working out for you?

What Is The Real Price Of Gasoline?

"The people always have some champion whom they set over them and nurse into greatness. This and no other is the root from which a tyrant springs; when he first appears he is a protector." — Plato

While politicians deflect, defend and blame and consumers grouse about Big Oil, large profits and offshore drilling, almost no one is discussing what’s really happening to the price of gasoline at the pump.

Conventional wisdom is that gas prices are shooting through the roof. But that’s not the case. In fact, gas prices are right at their historical average.

Gas prices are reflecting inflation. As I have explained before, inflation is not rising prices. It is an increase in the money supply. Rising prices are a product of inflation, and the increasing numbers on the signs at gas stations are a reflection of inflation. Or, to put it another way, they reflect a decrease in the value of the dollar.

This is explained in detail at Forbes:

“During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl. It has been higher than that during 225 of those months and lower than that during 268 of those months. Plotted as a graph, the line representing the price of a barrel of oil in terms of gold has crossed the horizontal line representing the long-term average price (Au0.0732/bbl) 29 times.

At Au0.0602/bbl, today’s WTI price is only 82% of its average over the past 41+ years. Assuming that gold prices remained at today’s $1,759.30/oz, WTI prices would have to rise by about 22%, to $128.86/bbl, in order to reach their long-term average in terms of gold. As mentioned earlier, such an increase would drive up retail gasoline prices by somewhere between $0.65 and $0.75 per gallon.

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot. And, because the dollar is currently a floating, undefined, fiat currency, there is no inherent limit to how far the price of gold in dollars can rise, and therefore no ultimate ceiling on gasoline prices.

Federal Reserve Chairman Ben Bernanke uses a “core CPI index” that excludes food and energy to guide monetary policy. From Big Ben’s point of view, rising gasoline prices are not a problem. For the rest of us, they are becoming a big problem.

Over the centuries, gold has been “the golden constant”. Eventually, all prices equilibrate with gold. This is why gold represents the best available standard in terms of which to define the value of a monetary unit. Forty-one years ago, when the value of the dollar was defined in terms of gold at $35/oz, WTI was selling for $3.56/bbl.”

The following is a simple version.

Since Jan. 1, 1971, the price of a barrel of West Texas Intermediate (WTI) crude oil compared to gold has averaged 0.0602 ounces of gold per barrel. Gold is currently trading $1,789 per ounce, and WTI is trading at $108 per barrel. That’s a ratio of 0.0603, and it’s right on the statistical average.

So who or what is to blame for “higher gas prices?” Look no further than the Federal Reserve, Ben Bernanke (and Alan Greenspan before him) and their money-printing policies.

Another way to look at the price of Gasoline is to compare it to the price of silver.

The real price of oil is $5 a barrel in real US silver coins from 1963. The real price of gasoline is down 50% from 1963. In 1963 a gallon of gasoline was three silver Roosevelt dimes ($.30). Today, in 2012, the real price of gasoline is two gallons at $3.77 per gallon ($7.54 less tax) for three silver dimes. In real money gasoline is 50% cheaper today in 2012 than it was in 1963. You can calculate the price of silver in your coins by clicking here.

We are misallocating our civilization based on fake counterfeit money and unlimited credit. The problem is not oil. The problem is fake counterfeit money that promotes misallocation of all our assets. It’s not an energy problem. It’s a money problem benefitting asset owners, banks, and government. The winners love this counterfeit fraud that drives their possessions, taxes, fees, and profits up, up, up. It’s all free money.

Losers are the bottom 80% have their time and money misallocated into wasteful social experiments. When these losers are fired at age 50 from a misallocated job they suffer greatly in restructuring and lose their homes and families because they can’t get a comparable job at their misallocated wage rate.

I did some checking using the U.S. Bureau of Labor Statistics Inflation Calculator. In 1963 the average price for a gallon of gasoline was $0.29 per gallon (less taxes). Using the inflation calculator I got a price of $2.15 per gallon for 2012. If I add $0.65 for taxes (state, federal, and local) for California I get $2.80 per gallon. This is the price Newt Gingrich is advocating with his energy policy.

You see, gas prices aren’t rising. The value of those green slips of paper in your wallet is shrinking.

Our Most Dangerous Enemy

“We have met the enemy and he is us.” — Walt Kelly

Walt Kelly was an American animator and cartoonist, best known for the classic comic strip, Pogo. Probably the most known saying of his cartoon character, Pogo, is “We have met the enemy and he is us.”

While some conservative commentators are on the right side of most issues, they are careful to stay “in bounds.” The last thing in the world any political pundit wants is to be seen as an extremist by his colleagues. Note Charles Krauthammer.

Recently, I watched a panel of think-tank experts debate how best to solve our country’s fiscal problems. What caught my attention was that no one — not even the free-enterprise spokesmen from the ultra-conservative Heritage Foundation and the Free Enterprise Institute — so much as alluded to the unconstitutionality of any of the myriad government programs that have caused these problems.

What does this mean? Simply that the far left in this country has, for all practical purposes, already succeeded in fundamentally transforming America, regardless of who the next President is. The problem is that even though many conservatives are experts when it comes to debating the factual side of fiscal issues, they seem to accept — by default — the false premise that government transfer-of-wealth programs are Constitutional.

At least one motivating force behind this sad situation is pragmatism. For example, both Dick Morris and Donald Trump have opined that Republicans are committing suicide with Paul Ryan’s proposed plan to overhaul Medicare. And they could very well be right.

Morris is a strategy genius when it comes to elections, so it’s no surprise that his opinion is based on what he believes is necessary to win the next election. I get it.

But if conservatives fear that Ryan’s addressing the single biggest fiscal problem facing the U.S. will result in re-electing a Marxist President, it says a lot about the decline of America as a virtuous nation. More to the point, it means most voters are so addicted to our redistribution-of-wealth culture that they will vote against anyone who dares to threaten that culture.

Thus, the question of Constitutionality increasingly appears to be off the table when it comes to debating major fiscal issues such as the deficit, the debt ceiling, unfunded Medicare and Social Security liabilities, and redistribution-of-wealth programs ranging from unemployment benefits to food stamps.

I was again reminded of this while watching another recent debate on the aforementioned Medicare issue, this one between Ryan and Democrat Chris Van Hollen. These two men know the numbers on Medicare inside and out, but Ryan’s approach to solving the Medicare crisis is based on free-market solutions, while Van Hollen believes in government solutions.

I have great respect for Ryan, but I was disappointed that he didn’t address the question of whether Medicare is even constitutional. It’s as though the default position in every debate is that the program being discussed is Constitutional — even if it’s not.

Put another way, regardless of how conservative any particular participant may be, political debates are almost always based on the false premise that the Constitution is irrelevant. And as polling numbers regarding Ryan’s Medicare proposal demonstrate, more than half the nation’s voters agree with that false premise.

But there’s another subject that is avoided even more than the question of Constitutionality. In fact, it is virtually never mentioned by politicians or commentators. The subject I am referring to is dictatorship. Even if some members of Congress are knowledgeable enough about world history to be concerned about the dangers of a dictatorship befalling the U.S., they dare not mention the word out loud for fear of being labeled an alarmist or conspiracy nut.

And yet, as President Barack Obama and others on the far left know full well, that is precisely what unsustainable debt and a collapsed economy can lead to. One of the surest ways to bring about a dictatorship is through runaway inflation, which is caused by massive increases in the money supply (popularly referred to inside the Beltway as “quantitative easing”) in a frantic effort to continue paying for unsustainable government programs. This is what happened in the 1930s to the German Weimar Republic.

Although the inflation ended with the introduction of the Rentenmark and the Weimar Republic continued for a decade afterwards, hyperinflation is widely believed to have contributed to the Nazi takeover of Germany and Adolf Hitler's rise to power. Adolf Hitler himself in his book, Mein Kampf, makes many references to the German debt and the negative consequences that brought about the inevitability of "National Socialism". The inflation also raised doubts about the competence of liberal institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of bankers and speculators, whom the government and press blamed for the inflation. Many of them were Jews, and some Germans called the hyper-inflated Weimar banknotes Jew Confetti.

Additionally, later German monetary policy showed far greater concern for maintaining a sound currency, a concern that even affects Germany's present attitude in Eurozone debates concerning bailouts of failing national economies today.

Ultimately, people become panicked, and anarchy and chaos result. The government then “has no choice” but to resort to strong-armed totalitarian measures to “restore order.”

When pundits and politicians say things like “Barack Obama will have no choice but to start dramatically cutting back on spending,” “the President is going to have to come to grips with the reality that market forces always prevail,” etc., they ignore the fact that a dictatorship can override reality with an iron fist.

For example, under a dictatorship, oil prices can be whatever the dictator (or oligarchy) wants them to be. And anyone can own a house if the government mandates that others give it to him free of charge. Just about anything is possible through the use of force.

Roll your eyes if you wish, but do yourself a favor and stay alert for a possible drastic change in the American way of life as we continue to move briskly down the road to financial ruin. Do not be deluded into believing America is immune to the same consequences that have destroyed so many other nations.

Having said this, I hasten to add that Obama and his progressive allies are not our biggest threat. In fact, they would be as hapless as were Karl Marx and Friedrich Engels if it were not for the avarice of benefit-addicted voters who have no desire to compete in the free market for their livelihoods. With this in mind, I would argue it isn’t so much that people get the government they deserve. Rather, they get the government that reflects their own values. If a majority of Americans are willing to ignore the Constitution and demand that their transfer-of-wealth largess remain intact no matter how obvious the cataclysmic long-term consequences may be, they will vote for politicians they believe are most likely to keep the government redistribution-of-wealth machine well-oiled and running.

Thus, instead of complaining about corrupt politicians, Americans need to take a good look in the mirror and start thinking long and hard about their own tainted morals, as well as what kind of nation they want to leave their children and grandchildren. While the far left is certainly an enemy of freedom, if Americans are willing to look in the mirror, they might just recognize that (to put a twist on comic-strip character Pogo’s famous quotation) the most dangerous enemy is us.