When did economists lose their minds?

The man-made global energy shortage is the real crisis and the pretense that tinkering with fiscal and monetary policy will remedy the depression that is coming is nonsense

Earth’s 8 billion or so people have a few things in common - they need to eat, to have potable water and to use energy to heat and cool their homes and transport goods from where they are grown or made to where they are consumed. This surely is not a controversial statement.

The dream that “renewables” meaning wind and solar can provide the power mankind needs for generations to come is nonsense. Wind’s contribution is easy to estimate.

A typical wind turbine can take up to 80 acres of land. United States needs 4 Terawatt hours today and is projected to need generating capacity of 1.68 Terawatts by 2050.

At 80 acres per windmill and 3,285,000 KwH per year, about 358 million acres of land would be needed to host enough windmills to supply America’s current power needs, or about 16% of the total land mass of the United States. With the U.S. economy growing at 3% per year and energy consumption growing in parallel, windmills would need to cover the entire land mass of the United States within 65 years to supply it with its power generation needs if wind were the only source of power. People that think wind is the future of American power generation are, well, blowing wind.

Solar is less land intensive but has another problem. When the sun’s energy is converted into electricity by solar panels, it is not radiated back to space but is effectively “trapped” except for the portion that manifests itself as heat. Isn’t trapping the sun’s energy what CO2 is alleged to do that has everyone’s knickers in a knot? Solar’s other problem is the acres and acres of toxic waste that is generated and the reality that a solar field covered with ice or snow is useless as a source of electric power. About 33% of the Earth’s landmass is covered by seasonal snowfall. Of course, one benefit of the snow coverage is the higher relative albedo of snow so much of the sun’s energy is reflected back to space by that snow.

One day, not soon, the planet will need to replace fossil fuels with another energy source and nuclear is the only sensible option.

Economists who think that inflation can be permanently curbed through high interest rates are right if the corollary is acceptable - long periods of economic decline with high unemployment. But if the monetary policy approach is short term to manage inflation expectations and cool off an overheated economy, it does not address the underlying longer term issue - a global energy shortage that can only be ameliorated in both the short and longer term by much higher fossil fuel production.

I have yet to see a mainstream economist promoting efforts to expand oil output except for Douglas Porter, Chief Economist for Bank of Montreal, who has it right that we need to slow the rise in oil prices. As for the rest of the global pack of economists, their prognoses based on tinkering with short term interest rates are devoid of critical thinking and will surely lead to bad policy. The world needs to solve its energy shortage and only the United States has the capability of adding oil & gas output quickly. Under a climate nutter like Joe Biden, that won’t happen.

Harvard Economist Larry Summers sees the risk of recession and the need for higher rates clearly and is critical of the weak-kneed effort of the central bank to move aggressively. But Summers does not comment on the energy shortage that underlies the inflation and while his assessment of the recession risks seems accurate, the absence of a change in focus to deal with the energy problem suggests his recipe may be an appetizer but may not include the main meal and will surely exclude any dessert, if sustained low inflation is the main meal and sustained economic growth is the dessert.

I am proud to be from Canada where at least one first rate economist can see the global problems clearly enough to admit the surging oil price is the underlying cause of inflation but embarassed to admit our Prime Minister can’t think straight. While the monetarists are competent, their “one trick pony” of higher interest rates alone is evidence they may have lost their minds.