Reply To: Space Fountain

[Duke Leto]

OK, short version of the above is that a recession is when you have too much shit and not enough people buying it. A boom is when you have not enough shit and too many people buying it.

Now the way the federal reserve controls inflation is by contracting the money supply (taking away babysitting scrips) and the way it does this is by raising interest rates. (Fewer people borrow, more people save.) The way it controls unemployment is by doing the opposite, lowering interest rates. (More people borrow, fewer save.)

All right, “so what” you say?

OK a nation’s Gross Domestic Product is defined as “the market value of all final goods and services produced in a country in a given period”. In other words it’s all the shit a nation produces. It’s also ipso facto all the income a nation earns. There are several formulas for GDP, but the only one we care about is the expenditure formula.

Expenditure:

GDP = Personal Consumption + Gross Investment + Government Spending + (Exports – Imports).

GDP = C + I + G + (eX – i) (http://en.wikipedia.org/wiki/Gross_domestic_product)

Another definition of a recession is when GDP goes down rather than up. Right now in the United States the economy isn’t growing fast enough because C is not going up (people are saving more rather than spending), I is not going up (businesses aren’t investing in new capital) and G is going down (because a party of unhinged and economically illiterate morons is insisting cutting government spending will help the economy). ((eX – i) is so small in the US GDP as to be negligible. )

Now normally to end a recession the Federal Reserve would just increase the money supply by lowering interest rates… oh wait a minute they are already practically 0%. So acoording to good Neo-Keynesian theory an aggressive program of deficit spending by the Federal Government to increase G will boost that GDP right back up to where it ought to be!… oh wait, aforementioned party of imbeciles controls half of congress.

So in other words there is nothing we can do to get out of the current lesser depression.

All that make sense? Good. Now remember when I said GDP is all the shit a nation produces? In the US we consume 87,000 kWh per capita per year. Let’s pretend that all of that is C and none of it is I or G. (It really makes no difference.)

87,000 kWh per capita * an average cost of 12 cents per kWh * 300 million odd capitas = ~$3.1 Trillion. The total US GDP is $15 Trillion. So in other words Energy makes up 20% of the US economy.

OK, tomorrow FF generators are perfected and instantly the average cost energy in five years all of the energy in the US is Focus Fusion based and costs 0.1 cent a kWh. That means the total consumer spending on energy is now $26 Billion. Therefore the total GDP is now abruptly $12 Trillion.

We have caused more deflation in the middle of a depression and a sharp contraction in GDP.

In other words, “Congratulations Eric Lerner, you have with the [em]best of intentions[/em] just caused the [em]biggest economic contraction[/em] in US History.”

But wait you say, doesn’t all that increased productivity mean that businesses will invest more? Mmmm… somewhat, but it still won’t be enough. You see with all that lessened demand profits are down. But won’t people just buy more and more energy to make up the difference? Using it for what, exactly? What new industries are being invested in when the government is cutting spending and corporations are tightening their belts because of a worsening depression? Won’t people have more disposable income? Yeah and the value of their houses are going down while their mortgages stay the same. But can’t the government step in and deficit spend us out of a slump? Nope, see the know-nothing party currently in control. (The same thing is to a lesser extent true in Europe. The oil producing countries have just seen their export income collapse and China and India are being pulled down by their inability to export any more to the developed world, which is in a depression.)

In fact, something like this happened when coal power came online. There was depression and mass unemployment in the industrializing world rather than a straight up increase in productivity and prosperity. That’s where the Luddites came from.

Let me put this another way. FF comes online. All coal industry workers are out of a job. They can’t buy anything. People selling to the coal miners go out of business. More people are out of a job. And so on in a vicious cycle.

The faster FF comes online, the [em]worse[/em] the heightened depression.

The only way out of this is for someone to [em]borrow and spend[/em] the $3 trillion to make up the difference. (Actually $12 Trillion because of the size of the energy economy of the whole world.)

But who could have such an enormous credit?

LPPX if it’s making and operating its own FF generators, that’s who! LPPX in this scenario would borrow against its future profits to invest in completely new industries. (Say for example a global vacuum MagLev transit network. And powerful recycling tech and mass desalinization and everything else. Hey how about a space elevator and asteroid mining?)

The only downside to this scenario is that Eric and the LPPX stockholders become exorbitantly rich. Given Eric’s commitment to social justice, I can think of much worse outcomes.

See my discussion at Internet Infidels: http://www.freeratio.org/showthread.php?t=305047

OK discuss and hurl tomatoes. I’m done.