Inflation By Any Other Name

This subject has come-up here from time-to-time and I have tried my darnedest to remain circumspect, intellectually honest, good-humored and resist any snarky impulses to poke fun of individuals who seemingly believe that presidents posses cryptic powers to turn inflation on, and off, like a switch.  When it comes to lazy economic thinking the struggle is real.  Thankfully, understanding inflation is not rocket science.  If you have a basic grasp of the interplay between excess liquidity (M2) and demand economics it is not very complicated.  But I digress.

Inflation figured significantly in both the run-up and results of last month's presidential election.  In his interview with Kristen Welker several weeks ago president-elect Trump said: I won on two things; I won on the border and I won on groceries.  And at the RNC convention of last summer Trump declared he would:  End the devastating inflation crisis immediately.  Trump took credit for low inflation in his first term of office; he might take the blame for price inflation in his second term.  Time will tell.

As an old guy I am mildly bemused at the notion that younger voters have no institutional memory of inflation, soaring energy costs and the accompanying astronomical interest rates, of the late 1970s and early 1980s.  By those hardcore economic standards today's historically low inflation, low energy costs and interest rates are the modern equivalent of lotus eating.  Nevertheless, the president-elect has promised to bring inflation down and if he doesn't the voters might become restive. He's certainly got his work cut out for him as there's not much a chief executive can do to immediately influence forces at play in an economy as large and complex as ours. 

Complicating this already challenging task is the potential interplay of tariffs and immigration policies. Consider this.

Tariffs are a tax.  If I own an import-export business and import an item subject to a tariff or duty I have to pay the US Treasury the tax due upon receipt.  The country of origin does not pay the tax - the importer does.  To cover the tax I'll mark-up the price of the imported item when it lands with a distributor.  As a consumer purchases the item from a retailer it is that buyer who ultimately pays the mark-up.  Consequently, tariffs can contribute to inflation as the price of retail goods rise. Trump's challenge is the use of tariffs as a negotiating tactic or to surgically target specific imported goods.  It's a high wire balancing act.  

Almost two million undocumented workers are integrated into our food supply chain.  Another 30% of construction workers are immigrant labor - documented or not.  Immigrant labor is a significant contributor to what we pay for everything from fruits and vegetables at the grocery to a replacement roof.

My hope is that the Trump administration finesses this stuff.  Get too aggressive on immigration and tariffs and prices could rise.  Fail at one or the other and you tread at your own peril with an economy-stalling bout of deflation.  If only there was a magic switch in the White House bunker.

Trump naturally supports the sweeping reform of government regulation.  Furthermore, efforts to re-shore manufacturing to our hemisphere implies efficiencies, retraining a labor force and other productivity gains.  This shrinks inflation pressures but takes time to trickle down in a network economy.  Because 70% of our economy is driven by consumer spending these gains would be modest at best.  

Last, but not least, there is: drill, baby, drill.  Trump has promised to increase domestic energy production by lifting environmental restrictions and fast-tracking permitting.  It isn't clear to me precisely how this will dramatically reduce inflation and shrink the price of my groceries; nor has the former president elaborated.

Transportation costs already benefit from lower energy pricing because domestic energy production has been at record levels for years.  Several weeks ago I filled-up the Honda with regular unleaded and paid less than $2.50 a gallon.  Prices fell further over the busy Christmas Holiday travel season.  Go figure.

I own shares of energy and related companies and in a world where CEOs answer to shareholders; further retail price reductions will be challenged by sustaining record profitability, dividends and share prices.   Besides, oil is a fungible commodity, traded in dollars.  Accordingly, global markets play an outsized role in pricing.  My sense is that lower energy costs are largely baked-into the cake so we'll have to see how this plays-out.  What I know for sure is government doesn't drill for oil and gas.  (Like I said, the struggle is real.)

In closing, inflation is relatively easy to explain; it is far more difficult to bend to your political will.  It is possible that the in-coming president is beginning to wrestle with boastful promises made during his campaign.  As I said to a pal several months ago:  I'm looking forward to detailed policy which will improve my prosperity and general lot in life.

Meanwhile, all of our major appliances have been replaced, a new water heater installed, a new car for me, new car for Jill and a contract for a replacement metal roof on the house in 2025.  If tariffs materialize I think we may have dodged the major impact of any Trump tax increases.  Only time will tell....

Edit To Add:

Got home around noon following an overnight road trip and topped-off the tank of the Missus' new Honda.  Local pricing for regular unleaded:  $2.479....

The Next Morning

Sometimes you have to toss a pie in the Forno at the end of the day.

Thursday evening I fed my sourdough starters and figured I'd use some of the discard to make pizza dough for the holiday weekend.

Last night I made a couple of pizzas.  CSMOs to be exact. For the uninitiated that acronym stands for: cheese, sausage, mushroom and onion.  In the pizza world that is commonly known as The Milwaukee Special.  We ate one and par-baked the second - freezing it for a quick meal down the road.

Pro Tip - Not wanting to waste any BTUs, upon rising this morning the oven had cooled to 375F.  So I baked Door County cherry scones.  

Of course, you can bake bread, cinnamon rolls or cookies too.  Forno be like a big ole battery retaining heat for hours.....

All-Electric Livestock

 

 

One of the last coal powered sheep.

Most sheep are all electric nowadays....

 

Saving The Planet

Earlier this year, and 2200 miles ago, we took delivery of a battery electric vehicle - a BEV.  It is a Ford Mustang Mach-E; a sporty number that is capable of accelerating from 0 to 60 in about 3.9 seconds.  If it weren't for all of the driver assist features you could rack-up some serious speeding violations in reasonably short order.  

Hands Free Driving

That aside, my acquisition of this vehicle is not going to save the planet.  Why is that you ask?  It's a consequence of my reliance on the grid.  Without a solar array or wind generator I get my electricity the same way most of my readers do - from the power company.  And the brutal, honest truth is only about 11% of the electricity generated in Wisconsin is from renewable sources.  The remaining 89% is generated by the burning of fossil fuels. 

It should come as no surprise that according to a report issued by the American Council for an Energy Efficient Economy (ACEEE) that this year's most environmentally friendly automobile is the plug-in hybrid electric Toyota Prius Prime SE.  This vehicle can travel up to 44 miles on a battery charge before switching to hybrid mode.  When you factor-in the carbon emissions from both manufacturing and daily operation you have a winning combination.

And while the sale of BEVs continues to rise, the pace of growth has softened a bit as consumer tastes for plug-in hybrid electric vehicles (PHEV) also grows slightly faster.  As a long time shareholder this likely explains the run-up in share value as Toyota Motor has been one of the biggest beneficiaries of the popularity of plug-in hybrid vehicles.  (ADR ticker TM).

So, is the EV dead on arrival?  I don't think so.  For a segment of the marketplace such as commuters who want a second vehicle and those who can afford them; an EV remains a solid choice.  Speaking for myself, it is near optimal for local use easily making a round trip to Green Bay, Sheboygan, Manitowoc and Sister Bay.  With a Level Two charger in the attached garage I plug it in before going to bed and it charges overnight during off-peak hours.  As a daily ride an EV is sublime.  Would I drive it to the Gulf Coast to visit the grand kids?  With some planning I could.  Yet the notion is unappealing as the Honda Odyssey minivan is a more practical choice.

Another interesting thing I've learned is that adopters of a battery electric vehicle rarely go back and replace it with an internal combustion engine vehicle (ICEV).  I suspect that battery technology, and consequently range, will continue to evolve.  The price point will likely also move with the export of mass-produced, lower cost EVs from China.  An unknown factor is Donald Trump.  Demonstrably hostile to electric vehicles if he wins reelection this fall I suspect that the sale of BEVs will suffer.

Meanwhile, the sale of BEV and PHEV units will likely continue to rise as automobile manufacturers seek to improve the fuel efficiency of their fleets.  Ford, Kia and Toyota are going to continue to expand their selection of hybrid options to appeal to consumers who are not quite ready for a fully electric vehicle.  

In conclusion, is an electric vehicle or a hybrid better for the environment and save the planet?  The answer is complicated because battery manufacturing is a dirty business.  There are plenty of carbon inputs in the assembly of both.  And where I live the grid doesn't offer much in the way of renewable energy.  Factors such as range anxiety, personal preference, daily use, attraction to new technology and affordability probably play an outsize role.  I like my Mustang Mach E more than I enjoyed driving the 5.0L fire-breathing Mustang I owned between marriages.  It's a fast and sporty drive and other than my neighbors who drive Chevy Corvettes or race on the local dirt tracks I have one of the fastest rides in my small community and virtually none of the maintenance.  Besides, our family presently owns three additional ICEVs, a 4-wheeler and side-by-side powered by gasoline, a diesel tractor and a boat with a couple of two-cycle motors.

Bottom line, I'm not saving the planet. Big deal; so what.  Now, get off my damn lawn...

Stovewood

I spent part of my an afternoon stacking freshly-split ash from the seemingly inexhaustible supply left for us following the 2020 logging operation.  There remains an estimated twelve cords of 8-foot bolts stacked up at the north property line and my neighbors and I have been reducing it slowly and surely.

It would appear I have a couple of face cords readily available on the porch and under the granary lean-to.  There's another two full cords in the granary as a reserve.

The gun deer opener is right around the corner so it's wise to have a supply on hand to keep the home fires burning.

Bring-on the dank and cold; it's true that firewood warms you twice.  Cutting, splitting and stacking.  Finally, burning.

Stove Wood

Over the last couple of weeks one of my pals and I cut a ginormous pile of ash harvested from our forest into stove wood lengths.

Last weekend our wives joined-in on the fun and we split and moved in two trips (by rough estimate) about three full cords of wood.

It's a start for our two families as we both supplement our winter heating needs with wood burning units.

Like I said it's just a start.

Stay-tuned.

Cocooning

Dank and cold tonight. There’s even a chance of slushy white stuff in the forecast. 

That said, this is one of my favorite times of year for a movie or a couple of book chapters. 

Stove wood du jour is a seemingly lifetime supply of ash nowadays. 

If the interweb is to be believed there is purportedly 20,000,000 BTUs of heat (gross) in a full cord of seasoned green ash. 

Raising a toast to renewables….

 

Staying Cozy

 

 

Unless the mercury dips into serious negative territory the wood burner is generally up to the task of maintaining a cozy 70 degrees Fahrenheit on the first floor living quarters here at The Platz.

After replenishing the wood rack on the porch we're nearing the halfway point on wood consumption for the heating season. 

Is Wood Good?

A FB friend of mine shared an article with me that was recently published in The Guardian. Like my family, he supplements his heat with wood during the colder months at our latitude. My sense is that he was more concerned and inquisitive than alarmed. His friends on the email chain appeared more alarmed. The background is as follows:

A recent study conducted in Athens, Greece has resulted in research that supports the notion that wood burning stoves in urban areas are responsible for almost half of people’s exposure to cancer-causing chemicals found in air pollution particles.  I am reminded that only two generations ago my forebears heated their homes with coal.  Yup, bituminous coal for daytime heat and anthracite for banking the fire overnight.  The last house I owned still had the coal chute built into the basement wall for easy delivery.  And the rafters above the footprint of the coal bunker were still covered in coal dust.  The air quality back then was horrific.  Burning all that coal left a pall - a miasma - across the sky when conditions were sub-optimal. PAHs ruled.

The introduction of gas forced-air heat technology made the previous technology obsolete by the time the 1960s rolled-around.  Like coal, natural gas was a non-renewable fossil fuel; but cleaner-burning than its predecessor. But I digress.

The polycyclic aromatic hydrocarbons (PAHs) in tiny pollution particles are produced by burning fuels and have long been known to have carcinogenic effects. This new study examined the sources of the PAHs and suggests that wood burning produced them in larger quantities than the diesel fuel or gasoline used for vehicles.

This is important on several levels. Researchers suggest that smoke from wood burning is much more toxic than other types of particles suggesting that wood burning is a significant driver of long-term carcinogenic risk. Nevertheless, the concentration of the PAHs in the Athens study was below EU limits but double the World Health Organization’s reference level. Based on WHO data, the PAHs in Athens would be expected to cause 5 extra cancer cases for every 100,000 people.  Can the EU and WHO have it both ways?

The questions that come to mind include the following:

• One study, in one city.

• Urban communities are crowded. More dwellings means more wood stoves concentrated in a smaller area. What about rural dwellings?

• The study suggests that the complex topography of the basin favors the appearance of mesoscale flows throughout the year and the frequent stagnation of air masses. There are seasonal non-local contributions from the Black Sea area, Balkans and Eastern Europe. There are similar effects found in Los Angeles and Denver.  Heck, in Ireland peat continues to be burned as biomass for generating electricity.

• Of critical importance to this blogger are the type of stoves used. Are they ordinary fireplaces or something more efficient? Are they regulated and thus engineered as to reduce emissions output? We have a wood stove that is EPA certified. It operates at an exceedingly high temperature, uses only outside air for the combustion of wood and wood gases. At operational temperature there is more heat produced, more complete combustion and less smoke. Most stack emissions are water vapor. There is also less ash produced.

• We burn only dry, aged hardwood. The study suggests that Athenians burn fresh softwood (pine) and hardwood (olive, oak, beech) This practice has been consistent for residential heating over recent years.

My conclusion is that this study is incomplete and raises more questions than it answers. I would like more background and further study of rural v. urban air quality, results with various wood fuels and stove technology and regulation. If I had to hazard a guess, US and Canadian air quality standards are stronger with added emphasis paid on cleaner-burning technologies in North America. That our diesel regulations are stricter than those of Europe comes to mind. 

Wood is also a sustainable fuel resource.  Non-renewable fossil fuels used for direct burning or power generation is unsustainable.

With modern stove technology my take-away is that choosing to heat with wood continues to be good. 

Link to the study is here.

 

Battling the Cold

 

Overnight lows are getting closer to dipping in the single digits and I am reminded of two things:

1.  Entering-into a prepaid forward contract for propane in July was prescient

2.  Same for laying-in 2+ cords of stove wood for supplemental home heating

Raising a toast to sustainable living.....  

Hibernation

Not quite - but close.

So far this autumn we have not had to run the furnace.  We've been heating our living space with stove wood.  

And generally keeping our living area a comfy 72 F.

Keeping the furnace turned-off overnight the temps drop gradually as the fire dies out and sleeping temps of 69 F or less return.

And the next day we begin the process all over again.....

Don't Mess With Texas

There is a saying that everything is bigger in Texas. I guess weather events and the power grid are included in this aphorism. 

In case you’ve missed the news there is a really big energy crisis in Texas which happens to be a consequence of a really big cold snap. The stretch of cold snap now has extended to three consecutive days of energy outages. 

Natural gas distribution has slowed to a crawl.  The grid is down and plagued with rolling blackouts.

The extended power outages have led to unheated homes, apartments and offices, frozen and burst pipes (flooding), closed gas stations (no electricity to run the pumps), boil advisories (if you have running water), inoperable handheld devices (no power to recharge them) and an abundance of Texas-sized finger pointing and blame-shifting. 

Let me begin by pointing out that 90 percent of Texas’s power needs (more than 25 million customers) are served by the Electric Reliability Council (ERCOT) an independent and largely unregulated energy grid. 

Governor Greg Abbott (R) has aimed his ire at frozen wind turbines. Former Texas Governor Rick Perry has also falsely blamed frozen wind turbines for the mass outages adding: Texans would be without electricity for longer than three days to keep the federal government out of their business. 

So what’s Texas’s business problem? 

The main problem is frigid temperatures and frozen natural gas pipelines that stalled ERCOT’s natural gas production and distribution, which is responsible for the majority of Texas’s power supply.  Wind and other renewable energy resources are hardly insignificant yet contribute less than 10 percent of the state’s overall mix of power generation. 

Unremarkably, here in the frozen tundra, we get natural gas to heat houses and generate electricity through pipelines carrying natural gas from Texas. Our end of the pipeline doesn't freeze - even at 30 below zero. Our wind and solar generation work just fine at 30 below.

As remarkable as it is that Texas supplies the world with talented engineering minds this is an engineering problem. Really bad engineering - pure and simple.  Engineers don't design things to simply work - they design things to not fail. Texas’s ERCOT was negligent in the design and construction standards of their gas pipelines, power plants and energy distribution system. Texas standards are lower than those applied in other states and countries because Texans chaff over the notion of being regulated. Texas made a calculated choice to avoid federal regulation and a requirement that the grid be effectively winterized. The ERCOT equipment that failed in Texas is working just fine in predictably colder northern latitudes everywhere else in the world where it has been winterized. 

The Texas privatization system discouraged redundancy in critical systems.  And as a consequence they have no one to blame but themselves. Blaming wind or solar energy is a lame distraction. 

As evidence of this reality consider the fact that all the neighboring states are suffering identical and even colder weather than Texas yet their power grid is fully-functional. And as much as they’d like to lend a friendly neighborly hand to help Texas out of its predicament they cannot. Texas does not allow their power lines to cross the state line.  Go figure.  

So what about the other 10 percent of Texans not dependent-upon ERCOT?  Ironically, these Texans belong to well-managed Rural Electric Co-Ops. They haven’t suffered any service interruptions, blackouts or water issues. 

Don't mess with Texas.

 

Interesting Factoids

The other day I took the opportunity to get caught-up with my reading of back issues of National Geographic.  The April edition featured a split- image report with both and optimistic and pessimistic report of the future of planet earth.  If you can get your hands on that issue it's a thought-provoking read.  I learned some things too.

The state of Texas produces one-fourth of all of the wind-powered electricity in the United States – the most of any state. If Texas were a country it would rank fifth globally in renewable power generation. Texas is also a leader of the profit-driven commercialization of renewable power. 

Texas farmers can lease a footprint on their land for either a set rental per turbine or for a small percentage of gross annual revenue from power generation. This provides an additional revenue stream to agribusiness with little or no impact on traditional grazing or farming practices. Royalty payments for a lease can range upwards of $5,000 a year for each turbine. 

Jobs development is impressive too with more than 24,000 new jobs created in the renewable energy sector - without pirating jobs from the fossil fuel industry.

Wind power is so cheap that ExxonMobil has contracted to purchase most of a single farm’s 338-megawatt output in order to power more fracking for oil and gas.

Who knew?

Changing of the Seasons

 

 

 

 Say what you will about my OCD - it makes for a tidy stack of stove wood. 

 

Impossible to get an accurate measure of dry volume unless it is stacked and well-stowed.  That would be one and a half cords.

 

Two-thirds of the way by my reckoning..

 

Raising a toast to heating with renewables.....

Heating Season is Nigh

I want to give a big shout-out to a couple of my pals who helped to chuck and stack two cords of firewood today. 

Best Beard and Six Deuce.

The closed circuit, EPA-approved, low emission, word-burning unit is cleaned, inspected and ready to roll.  Overnight lows this weekend were down to the mid-thirties.  No frost yet and the mosquitoes were a pain in the patoot while hunting yesterday afternoon. 

Thanks guys!

Raising a toast to heating with renewables.....

Cozy

When it is cold outside it's cozy warm inside with the wood stove stoked. 

Raising a toast to sustainable living and sustainable energy...

Fire Good

It has occurred to me that the wood burning stove has been in almost continuous use since Thursday of last week.  As a matter of fact - from Friday night thru Sunday night - we never allowed the fire to extinguish itself.

Raising a toast to better living with renewable resources.

 

Stove Wood

Two full cords of mixed hardwood - split and delivered.  $420. Just call Dave at Sunnypoint Landscape, LLC, Egg Harbor.  Purveyor of fine firewood for as long as I've lived here.  One of the reasons our propane purchases from the Door County Co-op have reached the annual prepaid contract minimum.

Raising a toast to heating with a renewable resource.

Tree Farmer

I have to share that I've become quite smitten with my recently acquired pejorative label of 'tree farmer'. I've been called a lot of names in my long life but this is singularly appropriate. 

A point of pride.

I was out with all my girls in the woods today and if you look carefully at this picture you can count twelve little tamarack trees that have self-sown in a sunny, open patch. 

More than a couple of decades ago 40,000+ trees were machine-planted in an ecologically-sensitive and barren, sterile Door County farm field. Nowadays this natural regeneration is a common occurrence for many of the conifers and hardwoods - all native Wisconsin species carefully matched with the soil types.

Once my acorn factory revs-up there no telling what's going to happen.

If any of you want to call me a 'tree farmer' behind my back or distribute a scathing manifesto with the same to the press - feel free.

Sustainable forestry rocks.  And sometimes you have to kick-start it.

Keeper of the Fire

click to enlarge

First one up on Sunday morning has to start the coffee, stoke the fire in the wood stove, sip coffee and feed the dogs.

In that order.

Seriously