Steam Valve

Soap Price Mystery Solved?

I'd been wondering recently why the price of laundry detergent had gone through the roof.  My musings took place mostly in the detergent aisle of the grocery store, and I didn't take it any further than that.  But the sticker shock when confronted with the price hikes left me with the firm and definite conviction that something was going on in the laundry detergent business, and it was more than just the generalized price increases we saw when gasoline was $4/gallon.

Today I read a blog post on the Foundry  that shed a glimmer of light on the question:

When Congress passed its last major energy legislation in 2005, a minor provision was added late in the legislative process that created a $1-per-gallon tax credit for renewable diesel fuel created through thermal depolymerization. The measure was included to benefit a single firm that produced boiler fuel from turkey waste, but in 2007 the Internal Revenue Service ruled that the tax credit also applied to other livestock waste. This led corporate giants ConocoPhillips and Tyson Foods to form a joint venture that turned chicken, cow, and pig fat into diesel fuel.

But just as ethanol mandates drove up the price of food, diverting Tyson’s animal fat into the energy market drove up the costs of manufacturing soap. So the soap lobby fought back and earlier this year Congress cut the thermal depolymerization tax credit in half. This made the Conoco/Tyson venture unprofitable, which they have since discontinued.

Whether this will have any effect on the price of laundry detergent remains to be seen. 

The other night I was looking through an old cookbook I inherited from my mother-in-law.  I started out looking for rhubarb recipes but ended up thumbing through the entire collection.  The cookbook contained recipes contributed by various women in the area south of Mankato.  I found a soap recipe, which the author suggested could be used for laundry soap by grating the final product into your washing machine.

This did not send me rushing out to the store to buy lye, however.  Many years ago, not long after having earned a chemistry degree, I decided to experiment at home with soap making.  I found a couple recipes, gathered together the tin cans I had filled with a variety of different fats (bacon grease poured on top of chicken fat, etc.) and got out a can of draino.  As I recall, I may have used my since forgotten chemistry knowledge to somehow remove the impurities in the fat.  I don't remember how I did that. 

What I do remember is that I never used the resulting product for anything.  It was greasy.  Maybe I didn't use enough lye.  Store-bought soap suddenly seemed to be a miraculous invention when compared with the results of my foray into soap making.  I couldn't summon up any motivation to continue experimenting with soap making.

So I'm a little less than enthusiastic to try this old cookbook recipe.  But maybe if the economy gets bad enough, homemade soap may make a comeback, and we'll be seeing articles in those magazines in the checkout aisle titled, "Tips to Keep your Soap from Getting Too Greasy."

And on the Bright Side

Positive news from Mark Perry:
 

  

From the Frying Pan into the Fire

Think folks are having a hard time with the economy as it is now? Obama is planning to make things much worse with a cap and trade proposal. The Heritage Foundation blog puts it well:

In a taped message shown yesterday to California Gov. Arnold Schwarzenegger’s “Governors Global Climate Summit,” President-elect Barack Obama reiterated much of the same rhetoric from the campaign trail: a federal cap-and-trade system, cutting carbon emissions by 80% by 2020, $15 billion a year in new spending, and 5 million new green jobs. The globe-trotting delegates at the posh Beverly Hills conference swallowed every word. London-based Climate Group chief executive Steve Howard told attendees: “It looks as if we’re about to have a climate emissions Terminator in Washington.”

Let’s leave aside the jobs question just for a moment. Obama also told the attendees, “The science is beyond dispute, and the facts are clear.” Obama is right; the science is clear. But not in the way he used it. Obama was referring to the litany of green fear mongering always listed with global warming: rising sea levels, stronger storms, droughts, etc. As bad as all of these things are, there is absolutely no scientific evidence that Obama’s carbon capping targets would solve any of these problems. If the U.S. reduced carbon emissions by 75% by 2050, it would result in just 0.013 degrees Celsius of “prevented” warming by 2050. Studies show that stabilizing carbon at 2000 levels would do nothing to stop the rising seas. And we haven’t even talked about China and India yet. The Electric Power Research Institute in Palo Alto, Calif., calculates that even if the United States, Europe and Japan turned off every power plant and mothballed every car, atmospheric carbon dioxide would still climb from the current 380 parts per million to a perilous 450 ppm by 2070, thanks to contributions from China and India. Let’s recap: There are no environmental benefits from Obama’s green agenda promises.

So what are the costs that we have to bear for Obama’s cap-and-trade plan? Obama says he will take the proceeds from his plan (which is just an energy tax dressed in drag) and spend $15 billion a year to create 5 million new green jobs. But the environmentalist left has already admitted these numbers are completely bogus. Apollo Alliance co-director (and self proclaimed coiner of the “green collar jobs” term) Kate Gordon recently told the Wall Street Journal that her group’s job estimates were arrived at “just to inspire people.” Sure, if the government spends $15 billion, some jobs will be created. But raising that $15 billion will come at a cost. That’s just Economics 101. Heritage’s Center for Data Analysis studied the economic costs of the much less stringent Lieberman-Warner cap-and-trade plan and found that it would cost the U.S. economy a $4.8 trillion loss in GDP and a net 1 million loss of jobs by 2030.

There is a reason European Union countries such as Germany and Italy are insisting that the EU’s greenhouse gas emissions targets be eased; they are experiencing the economic pain of the green agenda first hand. The EU’s cap-and-trade program is in complete collapse. Now is not the time for the U.S. to import Europe’s failed and job killing environmental policy.

Cross-posted on Truth v. The Machine

Good Economic News

Thank goodness for Mark Perry bringing to light the plain facts generally ignored by the mainstream media unless they support the media's agenda.

For example -- now this we can see with our own eyes just by watching the falling prices at the pump, but Dr. Perry crunches the numbers and shows us that the falling prices will save consumers between $156 and 188 billion annually.

Falling Gas Prices Over The Last Month Will Save Consumers $156 to $188 Billion Annually

  

And then there's the dollar. I remember seeing news stories about it when it was falling, but I haven't heard much in a while. Does that mean there's good news out there?
Turns out the dollar is at an 18 month high.

 
Cross-posted at Truth v. The Machine

The Sky Isn't Falling

Michael Flynn at the Reason Foundation writes a very clear description of what has happened and what is happening on the financial front

Let's be clear: This is a Wall Street crisis, not a national economic crisis. The overall economy, while a bit weak, is still growing. Some politicians are comparing the current environment to the Great Depression. But in 1932, when the federal government last moved to bail out the banking sector, economic output had fallen 45 percent and unemployment was a staggering 24 percent. Today, economic output is actually up and unemployment is a historically modest 6.1 percent.

And in spite of all the scary talk we hear about credit drying up and people losing jobs, apparently the facts don't bear this out:

The overall economy doesn't even face a liquidity crisis in the current turmoil. Consumer, commercial/industrial, and real estate loans are all up over last year. Main Street is doing fine. The liquidity crisis is confined to Wall Street, between and among investment banks, insurance and securities firms, and hedge funds. There is the possibility that the contagion could spread, but in a global capital market, this is hardly certain.

And here's his description of more recent events, highlighting how last week's proposals were born of panic instead of reason:

The one-two punch of Lehman's failure and the government's $85 billion bailout of AIG on September 16 seriously spooked the Street and the Bush administration. With Fannie Mae and Freddie Mac already in government receivership, there were fears that the MBS weakness would spread through the entire financial system. There was a big sell-off on the Dow. The next day, the government announced there would be a bold rescue plan. The market rebounded. Details emerged over the weekend. On Monday, the Dow had another sell-off. But, the most important signal was the rise of oil. The spot price for October delivery of oil jumped $25 a barrel. Some of this was covering trades, but a sizable amount of this appreciation was probably a "flight to quality," a place to park money while everything was sorted out. It was also a signal that the government's plan might not work.

The original plan crafted by Treasury would authorize the department to spend up to $700 billion to buy MBSes and other "toxic" debt and thereby remove them from banks' balance sheets. With the "bad loans" off the books, the banks would become sound. Because it was assumed that the MBS market was "illiquid," the government would become the buyer of last resort for these products. There is a certain simple elegance to the plan.

Except that no market is truly illiquid. It just isn't liquid at the price you want to sell. This summer, Merrill Lynch unloaded a bunch of bad debt at 22 cents on the dollar. There are likely plenty of buyers for the banks' bad debt, just not at the price the banks would prefer. Enter the government, which clearly intends to purchase MBSes at some premium above the market price. That was the nature of the bailout that failed on Monday.

Congressional leaders have vowed to bring a new proposal for a vote, possibly as soon as Thursday, proving yet again that Washington is fertile ground for really bad ideas. But with the market rebounding—as of this writing the Dow was up almost 300 points—and public opposition hardening, signs are emerging that banks are starting to clean house. The crisis may have already peaked. Of course, Congress' ability to further screw this up can't be overstated.

Partisan Battles over Regulating Fannie Mae and Freddie Mac

And What Have we Learned From This?

Looking for some humor in our current economic situation? Mark Perry offers this:

If you had purchased $1,000 of Delta Air Lines stock one year ago, you would have $49 left.

With Fannie Mae, you would have $2.50 left of the original $1,000.

With AIG, you would have less than $15 left.

But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have $214 cash.

Based on the above, the best current investment advice is to drink heavily and recycle.

Cross posted at Truth v. The Machine

Malkin's Updated Fable

Michelle Malkin has updated the ant and grasshopper fable to more accurately portray modern life in the US of A.

Economic Cancer

Those who favor tighter environmental regulations like to argue that cancer takes a long time to develop, and that's why we should ban things before we have any real proof that they'll kill us.

It's certainly true that many things in life take a long time to develop. Like our current financial developments spawned by the mortgage meltdown. An IBD editorial explores the development of federal regulations begun during the Clinton administration:

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the '90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.

As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.

Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.

Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.

In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.

But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.

At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.

The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today's nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.

And the worst is far from over. By the time it is, we'll all be paying for Clinton's social experiment, one that Obama hopes to trump with a whole new round of meddling in the housing and jobs markets. In fact, the social experiment Obama has planned could dwarf both the Great Society and New Deal in size and scope.

There's a political root cause to this mess that we ignore at our peril. If we blame the wrong culprits, we'll learn the wrong lessons. And taxpayers will be on the hook for even larger bailouts down the road.

But the government-can-do-no-wrong crowd just doesn't get it. They won't acknowledge the law of unintended consequences from well-meaning, if misguided, acts.

Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

Market failure? Hardly. Once again, this crisis has government's fingerprints all over it.

Cross-posted at Truth v. The Machine

Tough Times

A Pioneer Press article covers what many in this country are going through, as Congressional members enjoy their six week vacation without having done anything to lower energy costs.

Contrast this with Nancy Pelosi's out-of-touch and supremely arrogant refusal to even allow debate on proposals to drill for oil before she had the lights turned out on the representatives that were trying to get something done to help the American people.

It's quite ironic that so many Americans continue to believe that the democrats care about the people, and the republicans don't.

Cross posted at Truth v. The Machine