Son of Xethanol Goes Bankrupt

I have written several essays on Xethanol over the past few years. If you recall, they were a poster child for the theme of “overpromise, boost your stock price, and get rich quick” on biofuels.

For me, this story dates back to 2006, when an investigative journalist working for Dallas Mavericks’ owner Mark Cuban e-mailed me and asked about the company’s claims. They had announced that thy would “be the first to commercialize cellulosic ethanol” (if I had a nickel for every time I have heard that), and they issued press releases at every opportunity. It worked for a while – at one point their market cap was something like half a billion dollars – despite the fact that there was very little of real value within the company.

Anyway, the investigative journalist published his story (which seems to be offline at the moment), Mark Cuban shorted the stock just before the story was released, and I wrote up something on the company, which I considered to be essentially a scam:

Xethanol Story

Anyway, if you looked into their financials, they were spending money on everything but R&D, while claiming they would be the first to commercialize cellulosic ethanol – which would require a lot of R&D. I continued to follow the story, and predicted in February 2007 that they would eventually go bankrupt:

Xethanol Can’t Deliver on its Promises

Well, about this time last year they went bankrupt – more or less:

Xethanol Now Defunct

I say more or less, because what they did was stop operations as Xethanol, changed their direction, and relaunched as Global Energy Holdings Group Inc. At that point I said I wouldn’t write about Xethanol any more, but there is a final chapter to this saga:

Global Energy Holdings Group Files Chapter 11

Global Energy, formerly known as Xethanol Corp., warned in a recent securities filing that it needed substantial additional capital, but that the credit crunch has made it difficult to sell assets or obtain financing.

Global has had no operating revenue this year and said its sole source of revenue last year was an Iowa ethanol plant that ceased production because of high corn and natural gas prices. The company sold the Iowa plant last week and is also looking for a buyer or partner for a landfill gas project in Georgia.

I do want to make it clear, though, that when Global Energy Holdings Group Inc. was created from the ashes of Xethanol, they did so under new management. Therefore, I don’t attribute the same shenanigans to them as I did Xethanol. As far as I know they were making a legitimate attempt to make a go of it, whereas it appeared to me that Xethanol was just trying to make a fast buck off of very gullible investors. But they were handicapped by previous Xethanol decisions, and the current credit crisis was enough to push them over the edge.

I think that officially closes the book on the Xethanol saga – unless a grandson of Xethanol is born. But with the baggage that comes along with it, I wouldn’t bother reorganizing. If you still want to do business, get a fresh start.

59 thoughts on “Son of Xethanol Goes Bankrupt”

  1. Shale gas in China?

    SHANGHAI -(Dow Jones)- China has begun its first joint development project in shale gas, in a bid to tap into an unconventional source of cleaner-burning fuel to meet the nation's rising demand.
    Energy major Royal Dutch Shell PLC and China's top listed gas producer PetroChina Co. (PTR) have signed an agreement to jointly develop shale gas resources in southwestern China's Sichuan province, China National Petroleum Corp. said Friday.

    We know the USA has shale gas for generations, already a 100 years supply, and the gas boys are new at this game.

    China has a huge land mass. Maybe they have huge supplies too. I don't even want to think about Russia, or former USSR.

    My guess is that if oil ever becomes expensive, we shift to natural gas for much of ground transport. There are more than 10 million CNG vehicles globally already, so we know it works. Proven technology.

    I just do not see a doom scenario that makes sense. CNG even burns more cleanly than oil.

    Biofuels, on the other hand, seem iffy. Palm oil, and maybe some situations where the biomass is free, such as garbage pick-up.

  2. Maybe the story of Xethanol carries a useful message — develop new technology on the investor's dime, not the taxpayers.

    At least if investors lose money, there is an end to it. But taxpayers can be squeezed for more cash for ever.

  3. On the other hand you have a company like Poet that has done, absolutely, Everything "Right."

    It's "America," folks. We've got some Con Men, and Raving Lunatics, but we usually get it right, "in the end."

  4. Under the category of “over promising” there is the Pickens Scam. So the top story of 2008 may have been:

    “Mesa Power LLP, a company created by T. Boone Pickens, has placed an order with General Electric to purchase 667, 1.5 megawatt wind turbines for the worlds largest wind farm, capable of generating 1,000 megawatts, nameplate,..”

    How much has Pickens lsot since then?

    I checked the Mesa web site and not much to say since early 2008.

    So I checked to see how others were doing in wind this year. Duke Energy (stock ownership disclosure) reentered the renewable energy business in 2007 and now is a leader in wind, solar and biomass. Duke Energy works hard at not “over promising” so you have to go digging for projects often for local new stories. From their web site:

    “Details of these projects can be found below. The Duke Energy wind development pipeline consists of approximately 5,000 megawatts of potential projects located throughout the United States.”

    I like project details. Nothing smacks of success like success itself. If you quietly start and finish projects, you pay dividends to investors.

    Also from the web site is my nomination of the “top energy-related stories of 2009”

    Southern Ohio Clean Energy Park Alliance
    http://www.duke-energy.com/pdfs/Alliance-Fact-Sheet.pdf

    The reason I found this newsworthy is this project is smack dab in the middle of coal country by the third largest coal burner in the US.

    “DOE’s Portsmouth site is located on a 3,700 acre reservation in Pike County, Ohio,”

    Another reason this is newsworthy is because the only new nuke plant to be announced since O got elected. Several new nuke projects have been put on hold since O got elected (more likely the economy) and Ohio is swing state. If you are going to get votes from coal miners, you better be finding new real jobs for their children.

  5. Speaking of ethanol, I'm surprised that RR missed this story buried on Thanksgiving Day:

    U.S. Is Unlikely to Need all the Ethanol Congress Ordered

    WASHINGTON — Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible.

    “The market is full,” said Jeff Broin, chief executive of Poet, a company in Sioux Falls, S.D., that produces ethanol.

    When Congress wrote the rules, in 2007, gasoline consumption had been growing for years, and it looked as if the nation would be able to use considerably more ethanol in the future. Gasoline consumption hit a peak of 3.4 billion barrels that year.

    But gasoline demand fell in 2008, after soaring gas prices early in the year were followed by the economic crisis. Consumption was slightly less than 3.3 billion barrels last year, and it could end 2009 at about the same level.

    As of yet, not all gasoline is blended with 10 percent ethanol, but that saturation point is rapidly approaching. Under the present rules, the nation could hit the upper limit of its ability to consume ethanol in 2011.

    Not to say "I told you so" but . . .

  6. The problem with ethanol is that it ONLY makes sense with a subsidy. Farmers can't export it because their costs are higher than the Brazilians can sell it for. So there is literally no place for ethanol to go.

    I would argue that we are probably seeing the practical limits of ethanol blending. Most of it is produced and blended in the midwest. It is shipped by truck and rail. Not every terminal has blending facilities. Logistically you may not be able to reach 10% of the gasoline market.

    So we are going to continue to see more bankruptcies of ethanol companies.

  7. "the nation could hit the upper limit of its ability to consume ethanol in 2011."

    The upper limit is when everyone fills up with E85 Kinuach. With cellulol coming down the pike,it may be time for tariffs on imported oil. We can't be serious about energy security and NOT use all the biofuels we have available.

  8. Actually, King, "Brazilian" cane ethanol is selling for $3.26/gal vs $2.06 for U.S. Corn Ethanol.

    Several companies are trying to work their way through the maze of tariffs (20%,) regulations, restrictions, etc to import US Ethanol into Brazil.

  9. Speaking of ethanol, I'm surprised that RR missed this story buried on Thanksgiving Day:

    I actually posed this question a year ago, when gasoline demand started to fall. I asked the EIA what would happen, hypothetically, if gasoline demand fell by 50%. Is there a provision in the RFS that says blenders don't have to blend the entire 10 billion gallons of ethanol? The answer was no, hence you get the dilemma mentioned in this story.

    RR

  10. Of course, ethanol is still about $0.50, or $0.60/gal too expensive to compete with gasoline at this point; but, on the other hand,

    we don't have 160,000 American Troops risking their lives protecting the "Iowa Corn Fields," either. Nor do we have Two Navy "Fleets" patrolling the Mississippi River.

    And, then again, if we took the approx. 1.6 Million Barrels/Day of Ethanol out of the Global Fuel Supply we would expect gasoline to be a bit more expensive, also. Right?

  11. Right Now, we're actually a little short on supply of ethanol (hence, the very good price to refiners.)

    There are still a couple of refiners that are going to go down due to the bad decisions, and the bad market the end of last year, and the beginning of this, but, overall, things are looking up a bit for the ethanol industry.

  12. And, then again, if we took the approx. 1.6 Million Barrels/Day of Ethanol out of the Global Fuel Supply we would expect gasoline to be a bit more expensive, also. Right?

    Unless that "more expensive" ethanol that is mandated has idled the capacity of cheaper gasoline. We do know that refineries are running at less than normal capacity, forced to blend ethanol. We do know that there is spare oil/gasoline capacity in the system. So could that be brought online and put into the market for less than ethanol currently is? Probably.

    RR

  13. I guess that's possible; but it seems more likely that ethanol is holding down the price of oil, rather than increasing it. Be hard to Prove, though.

  14. “The problem with ethanol is that it ONLY makes sense with a subsidy.”

    How is this a problem? I think people are engaged in moving goal posts.

    Ethanol producers said they could increase production if incentives were provided. They have. What a great success story. Having an adequate supply of energy is not a problem.

    “So we are going to continue to see more bankruptcies of ethanol companies.”

    Again not a bad thing. The good producers will stay in business and the others will be weeded out. Too sad, too bad! Some of that has happened in the electricity generating industry. Not enough by my thinking.

    I would have preferred the smaller mandate in the 2005 Energy Bill. Small mandates stimulate the market enough to get things going and find out the cost and limitations. Large mandates and incentives overheat the market drawing the scam artist.

    Apparently settling unattainable goals is good for establishing 'green' credentials. If goals are not met , you can go on the lecture circuit and blame those who came after you.

  15. That is an interesting point about the Congressional mandate on ethanol. The EU subsidized dairy farmers and ended up with the infamous "Butter Mountain". Maybe the US Political Class will end up with a subsidized "Ethanol Lake".

    But there is another possibility. Just possibly we may be approaching a societal discontinuity — rather like the Soviet Union, which was big & dominating until quite suddenly it was gone.

    The US Government has an unsustainable budget deficit. The US has an unsustainble trade deficit. Now Climategate/Warmaquiddick has shown that the leading researchers in one of the most prominent areas of government-funded science are frauds or fools, which in effect undermines the foundations of all science-based government policies.

    Going forward, it could be unwise to invest in businesses which rely on government mandates, subsidies, & tax relief to survive.

  16. Kinu-

    I am wondering if radical reforms are in the making too. How long until people ask "Why does it take our US military $1 million a year to put a soldier on the ground?' And that doesn't count overhead costs.

    "How will we fight enemies who can put soldiers on the ground fro a few thousand a year–who will outlast who in such wars? "

    How long until people ask, "Why, 80 years after the Dust Bowl, are US farmers the most subsidized weakling businesses on the planet?"

    "Why do we pump hundreds of billions of federal dollars into rural economies that do not deserve to be there?"

    Why is the R-Party "energy program" actually a farm subsidy in drag–ethanol, in other words.

    My answer: People will never ask these questions. We will just continue to muddle forward or sideways.

    China will roar ahead.

  17. Let's face it; if, in 2014, we're "awash" in oil, we'll know we probably got carried away with the ethanol thing. However, if gas prices are $4.00/gal, again, and rising, we'll figure we should have done more.

    Life in a free market. Always in a "flux;" uncertainty reigns.

  18. Benny, do keep One thing in mind: Our Citizens spend the lowest percentage (10%) of income on food of any people in the history of the world.

    And, the very greatest portion of that "Farm Bill" goes to School lunches, Food Stamps, US Aid, etc. Probably about 20% actually goes to "farmers."

  19. Kinu is confused by his recollection of history. Did you vote for Carter twice?

    The USSR was only dominated the repressed people who lived there. The rest was perception. I have to admit to accepting that perception. This was concurrent with our weak leadership.

    Here is the difference. Give American industry a goal and we exceed it. In the USSR, goals were never met except on paper. Management feared telling government that goal were not met.

    “Nor do we have Two Navy "Fleets" patrolling the Mississippi River.”

    Think about it! Nature abhors a vacuum. Just who do want to keep the world safe?

    The French, Spanish, Russian, and Chinese are lucky to get a ship out of port. Everyone one else exercises with the US Navy and her majesties royal navy.

    Who cares what China thinks? The only reason to worry about such a corrupt regime thinks is if outr current weak leadership gets confused. China's economy is based on selling stuff to productive Americans.

    American crop reports are important to the world. Is there something important that happens in China? I mean other than the 100s of million who live and die as peasants.

  20. Easy, some second class petty officers sitting in the air condition combat center of a navy ship will fly a drone into their mist and blow them to the after life. After 6 years in the navy he or she will return to the US and become a very productive member of society. Benny does not understand that his cheap soldiers has the training and transportation opportunities to rape the women in the next town over.

    “How long until people ask, "Why, 80 years after the Dust Bowl, are US farmers the most subsidized weakling businesses on the planet?"”

    Benny is the only one who asks that that I know of. The answer is that he is incorrect. American farmers are so productive that it hard for anyone elese in the world to compete in an open market.

  21. Kit, a point I didn't make was that I want the Greatest Navy the world has ever known to be able to concentrate on "Protecting the Country," not escorting Iraqi oil tankers down the Straits of Hormuz.

  22. Rufus – what the Flex Fuel market is maybe 1% of the US auto fleet? There are only 2 places I know of in my area where you can even get E85.

    My guess is that EPA will mandate 15% or 20% ethanol blends in gasoline. Then if you have engine problems you can sue the OIL COMPANIES, who had nothing to do with creating the problem. (Just like boat owners are doing in Florida). As for me, I would prefer to buy E0 so Rufus can have my share! Oh, that's right I don't get a choice.

    When I said that exporting was a problem, I meant for the ethanol producers. The ethanol to gasoline business in the US was created out of whole cloth by the government. As usual the proposed solution when a government program fails is – more government!

  23. King, you wrote:

    Farmers can't export it because their costs are higher than the Brazilians can sell it for. So there is literally no place for ethanol to go.

    THAT, obviously, isn't true.

    You can have your own opinion; you Can't have your own "Facts."

  24. King, you know what BOAT stands for, right?

    Break
    Out
    Another
    Thousand

    Boat-owners are ALWAYS having trouble. Only in the case of a couple of models made back in the 70's is any of it the fault of ethanol.

  25. Do you have a source for world ethanol prices? NYMEX has December EtOH at $2.20 per gallon.

    other than Brazil there isn't much of a market for ethanol blends – again because other than in Brazil it is an artificial market created by government.

    I don't know the status of the ethanol lawsuit in Florida. It has been about a year since it was filed. My understanding is there were a lot of problems not just a few older models.

  26. Katy, just about the only countries in the world that Aren't instituting ethanol mandates are the oil "exporting" countries. India, Europe, Canada, Thailand, Australia, Philippines, and a whole lot more are going to 5%, or 10% blends.

  27. Rufus-

    The federal Ag. budget is about $100 billion, and about one-half is food stamps. Half is fat for farmers.

    Imagine if we gave $50 billion every year to US manufacturers, and they paraded stories around every year about how productive they are, and how good people work in manufacturing and all the soprry bananas that goes on with the ag budget.

    What not some free enterprise for farmers?

    And if the US military cannot figure out how to put a soldier on the ground for less than $1 million a year (not even counting most overhead), then how on Earth will we ever prevail in a prolonged engagement w/o bankrupting future generations?

    Even a second-rate engagement in a third-rate shithole country sets us back hundreds of billions of dollars.

    But no waa-waa from the right or the left.

    They just tax us, and go to Bermuda with some lobbyists.

    .

  28. @Benny: "What not some free enterprise for farmers?"

    Don't know about you but here in Europe the rationale for farm subsidies has always been food security. In years gone by there have been scandals about overproduction, butter mountains, wine lakes, ploughing food into the ground etc. But if you go back to our parents' generation there were widespread shortages, nutrition deficiency diseases etc. We've got very short memories. Nowadays people seem to think it is worth paying a premium for energy security. We've forgotten that it's even possible to be short of food.

  29. Rufus

    http://www.census.gov/compendia/statab/tables/09s0454.pdf

    From this doc. you see Ag budget nearly at $100 billion

    and from this budget, this much is food stamps:

    WASHINGTON (Reuters) – The U.S. recession will drive the cost of the food stamp program, which helps poor people buy food, to $50 billion this year, up 27 percent from 2008, congressional forecasters said on Wednesday.

    BTW, lest anyone think I am a raving liberal, I wonder also about food stamps. Here in Los Angeles, I can buy a 50 lb bag of rice for $17, grow my own vegetables, and spend about $12 a week on meat and eggs. Food is just not that expensive anymore.

    PeteS–Food security is best purchased by a free market. Farmers make more money on subsidies than they do growing food.

    The right-wing in America has built up a mythology, and in it, right-wing organizations are always free of ossified lard and patronage. In fact, they are half of the problem. The other half is our left wing.

  30. Here's the Real numbers from Treas.Gov Benny.

    You'll notice that "Food, and Nutrition" Programs were about $78 Billion, and Forest Service was about $5.9 Billion.

    Commodity Credit (crop support programs) was about 10% of the "Ag" Budget.

  31. Don't worry folks. Bin Laden gets a bigger cut from a gallon of American gas than Iowa corn farmers ever will. There's no need for change. Oil is cheap and supplies are infinite. Go back to sleep. 2008 was just a bad dream.

  32. Benny said… "PeteS–Food security is best purchased by a free market. Farmers make more money on subsidies than they do growing food."

    Again, don't know about the US. In the EU we've weeded out some of those excesses. But at the end of the day, you have to guarantee a price to farmers if you want them to survive the bad years so that they can make their own way in the good ones. You want to keep production capacity, and Nature doesn't always play fair in a free market.

  33. Rufus-
    If we really want to balance the fedarl budget we have to look at the biggest items on the budget, and that includes The Department of Defense, VA, Ag Department, Homeland Security and debt.

    My point is the right-wing says they want income tax cuts even when we are bleeding red ink, and even when more than one-half of federal outlays
    are consumed by the above agencies–all of which are sacred cows in right-wing land.

    In short, it is the Reagan, Bush, Bush jr plan- oceans of red ink all the time. That is why any R-Party prezzy will run red ink. Ever wonder why all the red ink even when the R-Party controlled the House, Senate, White House and Supreme Court (2000-2006). Total one-part domination and we had red ink to the moon.

    Ever wonder why it takes the US military one million dollars per year to put a man on the ground, and that does not even cover overhead? No ossified lard and patronage in those numbers? How come no one ever says, "Money is not the solution," when it comes to the US military or farmers getting subsidies?

    Sheesh. Ron Paul is making more sense everyday. Never thought I would ay that, but if our choices are the Dems or the R-Party, I choose Ron Paul.

  34. PeteS

    Benny is using debating device similar to asking if those with different views if they still beat their wife.

    “you have to guarantee a price to farmers if you want them to survive the bad years so that they can make their own way in the good ones.”

    You have accurately described the US. When an American farmer plants seed and buts fertilizer and fuel oil, there is no way to predict if there will be a bumper crop or no crops. The things that Benny describe are only problems that he has imagined. Our society has so few problems that we have stated making them up.

    There is a certain divide between between people who live in rural a areas and congested cities. If you fly across the US and look out the window you would notice a sparsely populated country with magnificent grandeur. There are population centers on the east and left coast with massive freeways. The morning radio shows feature fowl mouthed shock jocks to entertain those stuck in rush hour. The worry about pollution, crime, high taxes, population control, urban sprawl, and landfills overflowing.

    In rural area, small cities have radio stations where the morning show is about crop reports. No pollution, no crime, low taxes, good schools, affordable housing, no stuck in traffic jams. and no overflowing landfills.

  35. “Ever wonder why all the red ink even when the R-Party controlled the House, Senate, White House and Supreme Court (2000-2006).”

    Benny I think you are confuse about history and US government. Almost all of the time, neither party has had control. Do you know anything about our military or agriculture? It is the finest in the world but you seem to want to make up stuff. Generally speaking, the military service and agriculture careers is not a good way to get rich. It has its own satisfaction.

    Benny, lets be fair here. What do you for a living? Are you part of the money class or do you provide a useful service to society. I work in the electricity generating industry. All my life I hear about over capacity and high bills. You should how the Bennys of world scream when cap city falls short.

    Just in case Benny forgot, what happened on 9/11?

  36. The average American farmer farms about 500 acres, and makes a little over $26,000.00 off his land.

    He, and his wife both work "in town," and their Total family income is about $67,000.00/yr.

  37. Kit-

    Ad hominen arguments are meritless. The value of my argument is the same (in this context) whether I am a fop who wears smoking jackets and inhabits cafe society at night (where I yuck it up with Rufus, btw), or whether I am a truck-driving man who takes 18-wheelers coast-to-coast through bandit country, with a knife-blade between my teeth.
    I happen to be a woodworker, cabinet maker. I also work in PR part-time for architects, as my business is very very slow right now.

    Maybe the US ag and military sectors are the best in the world.

    But any federal agency is funded by Congress (House and Senate Authorizations and Appropriations Committee). That is a political process, and includes the Department of Defense.

    Additionally, it is the nature of the DoD that it is a monopoly and a communist organization (small C). That is to say, is is funded in common by all off us, for the common good, and never faces competition. Yes, ironically, our military is a communist-type organization. No one ever says that out loud, but it is true.

    Inevitably, such an organization is given to ossified lard and patronage. See the Soviet Union.

    It is the most hoary of sacred cows however, and the R-Party will never, ever demand radical reforms of the US military–even to make it better for less.

    Years ago, Kit, I was part of the mandarin classes–a lobbyist for the thrift industry (S&L's).

    We had a motto: "There are two things we believe in: Free enterprise and Reg Q."

    Reg. Q, in those days, allowed thrifts to pay more for passbook deposits than banks. Rates were regulated in those days, the 1980s.

    Long time ago.

    I see farmers are still stuck in the 1930s.

    Finally, Kit, the R-Party did have control of all major branches of government 2000-2006, and flopped miserably, and run huge oceans of red ink.

    About then, I thought Ron Paul did not look so bad.

    I remember 9/11–and would like to have an effective military for today's battles, not a lumbering dinosaur, unable to do battle with smaller mammals that are eating all the eggs out of its nest (some believe that's how small mice whooped the Tyrannosaurus Rex).

  38. Well, like I said, Benny: "We pay less for our food than anybody in the history of the world."

    Maybe, we better be careful of any "sudden moves."

  39. Benny have you heard of Tom Daschle and Harry Reid. Both were Senate majority and both are democrats. Then there was Michael Mansfield who was longest-serving Majority Leader of the United States Senate, serving from 1961 to 1977. Lest we forget Robert Byrd and George John Mitchell (entire Bush I presidency).

    Then there is Nancy Pelosi Speaker of the United States House of Representatives since January 4, 2007. Do not forget "Tip" O'Neill, who was the Speaker of the House from 1977 until his retirement in 1987. Jim Wright and Tom Foley were both democrats.

    Finally my favorite "Newt" Gingrich who served as the Speaker of the United States House of Representatives from 1995 to 1999 ending 40 years of the Democratic Party being in the majority.

    That is 40 years Benny! Nice try Benny blaming all the spending on the GOP.

    “It is the most hoary of sacred cows however, and the R-Party will never, ever demand radical reforms of the US military–even to make it better for less.”

    Don Rumsfeld Secretary of Defense under President George W. Bush from 2001 (also Ford). In case you are to young too remember, as a young Congressman, Rumsfeld promoted to the idea of an all volunteer military. One of my favorite liberal causes of my youth. At the Pentagon the first time, Rumsfeld oversaw the transition to an all-volunteer military. The second time he immediately announced a series of sweeping reviews intended to transform the U.S. military into a lighter force.

  40. Ron Paul flew over the cuckoos nest years ago. He can make sense on some subjects at times,but he's still crazy as hell.

    As much doom and gloom we hear connected to the national debt,it was actually about where it should have been before the economy derailed last year. 3% of GDP is the goal set for countries in the EU. That's about $400B per year for the US. The budget deficit won't be our Waterloo. The trade deficit will.

  41. Benny admitted "I am a fop who wears smoking jackets and inhabits cafe society at night" — out of context, of course:)

    Benny, I am basically in sympathy with your disgust at the political establishment. But you have to be honest about these things — the Democrats have controlled Congress and the Supreme Court since about the Great Depression. Republicans have been a giant disapointment, but the Democrats have been a real failure too.

    If things are slow for you, look for some of the management books written by Irish professor Charles Handy. He has a great concept — the sigmoid curve. Basically, any organization requires an investment period, then the successful ones go through a growth period. Unfortunately, that growth peters out eventually for a number of causes, and then there is the inevitable decline.

    It is a helpful way to look at what happened to the Roman Empire and the British Empire — or GM. Explains what is happening to the BBC and the NYT today. All things must pass.

  42. Don't know about you but here in Europe the rationale for farm subsidies has always been food security.

    Pete,

    There is also a desire in Europe to maintain the image of a certain rural lifestyle. For example, it is more pleasant to drive through Bavaria or the Tyrol and see men in lederhosen and women in dirndls out making hay in June and taking their cows up to the high Alpine meadows, rather than see a huge diesel-tractor driving across a huge 10,000 hectare field.

    In the Rhein-Pfalz region of Germany, it is more pleasant to see a small, rural village every 5 kilometers interspersed with small wheat, rye, and barley fields, and balsam forests than to see huge tractors chugging across huge wheat fields as in Kansas.

    In the Netherlands and Denmark it is more pleasant to see many small, attractive dairy farms rather than to see huge CAFOs.

    Those are all pleasant things, and they maintain a certain quality of life, but they aren't possible without subsidies.

  43. People get confused between effective policy and not liking something. For example, small mandates and incentives for ethanol and renewable energy have been very effective at increasing production from those energy sources.

    The 2005 Energy Bill was not a 2001 Energy Bill because of democrat opposition. Since I was developing renewable energy projects when Clinton was president, I was very interested in what Bush would do. Clinton talked a lot but did not provide any effective policies. Furthermore, the PNW was very adversely affect by the California energy crisis. I read the National Energy Policy, May 2001. I tuned in daily to the energy debate on capital hill until a commercial air liner flew into the Pentagon.

    The 2007 Energy Bill was a product of democrats. More ethanol, more renewable energy without taking time to find out how it is working.

    It is only 2009 however, I see no problem giving polices a chance to work.

  44. Wendell it is going to take a lot more than subsidies to make Kansas look like Denmark or Bavaria . Have you been to Tillamook or Whatcom county?

    “In the Netherlands and Denmark it is more pleasant to see many small, attractive dairy farms rather than to see huge CAFOs.”

    Producing milk efficiently with a CWA zero discharge permit so that children have affordable dairy products with little environmental impact seems like a very attractive idea to me.

  45. …it is going to take a lot more than subsidies to make Kansas look like Denmark or Bavaria.

    Kit,

    I'm under no illusions. I went to school in Colorado and have driven across Kansas many times. Kansas will never look like Denmark or Bavaria.

  46. Rufus,

    There were Indians on the warpath in Kansas eight hundred years after the Vikings finished marauding in Europe, and only sixty years before the Nazis in Germany. Believe it or not, stuff has actually been happening in Europe since you kicked out the English. You should read about it some time. 🙂

  47. Wendell,

    The EU doesn't pay farm subsidies because it likes lederhosen or because it wants South Tyrol to look like a scene from "Heidi". Not any more, at any rate. The entrance of Poland into the EU with its huge number of small inefficient farms meant that the previous EU 15 closed ranks to deny Poland the sort of grants under the Common Agricultural Policy (CAP) that countries like Portugal and Ireland got in earlier years. This is against a backdrop of the EU planning to cut farm subsidies from 50% of the total EU budget in 1992 to 30% in 2013. CAP reform means that many smaller farms will no longer be economically viable, and consolidation is the name of the game. I don't think it'll ever mean Kansas-style farms, but that's because Kansas only happened yesterday in relative historical terms, and is essentially empty compared to the population density of practically all European countries. (Even Ireland, which is a ghost town by European standards and whose population never recovered after a 19th century famine has seven times the population density of Kansas).

  48. If you want Kansas-style farms, look beyond the EU's eastern borders to the Ukraine — the breadbasket of the former Soviet Union. European ag. conglomerates have started buying tracts there and you may see huge farm consolidation in the next number of years.

    (That's assuming Ukraine doesn't have any of several potential political meltdowns — West vs. East Ukrainian civil war, Russian invasion to shore up its Black Sea base in Sevastopol before its least expires in 2017, civil unrest due to Gazprom/mafia-induced natural gas shortages etc. etc. etc.)

  49. Kinu-

    I say the Dems are no good either (excuse while I retrieve a towel, I am in the spa right now).

    However, there is no denying who controlled the federal government, entirely, from 2000-2006. The R-Party. We saw no substantial changes, and, if anything, trends got worse. Debt, useless wars, ag subs, social welfare.

    Maybe Ron Paul is a bit nutty. Who cares? Would you rather keep fighting endless wars–at $1 billion per day–far overseas, and keep piling up debt with no means to pay it down?

    Vote Ron Paul.

    Sadly, I think Kinu may be right: Unless we alter some very bad habits, the US is in decline. Liberal social welfare spending and taxes, and "conservative" budget-busting outlays for wars, militarism, rural subsidies and ag departments will undermine us.

    Kit P:

    An "all-volunteer" army is nice-talk for "mercenaries." It was a reform–that costs us billions upon billions of dollars every month.

    Moreover, it lets our "leaders" wage wars the public would never otherwise tolerate.

    If somebody drafted my son to send him to Afghanie–well, let's just say every legal means within my disposal would be used to thwart using my son, or anyone else's, in that useless war. There would be no Iraqistan if the Bush twins had to serve on the front lines–or any upper-class sons and daughters.

    No one would "volunteer" for that war–they are enticed by money and benefits.

    And how about we actually pay for these wars, instead of just borrowing the money?

    America today: Fighting overseas wars on borrowed money with mercenary soldiers.

    Remember the Brits sending the Hessians to fight our forefathers? And how Hesssians were always branded as souless mercenaries?

    How far we have come, how far we have come from our roots. Now, we have our own mercenary force.

  50. Moreover, it lets our "leaders" wage wars the public would never otherwise tolerate.

    Benny-

    You're right. If we manned the Army with the draft, and shared the burden equally, we would all have skin in the game.

    There are a few Congressmen and Washington policymakers who have sons and daughters in the Armed Forces, but not many. (I would have loved to see Chelsea Clinton or one of the Bush twins to a West Point, Annapolis, or the Air Force Academy and spend four or five years as an officer, as the royals in Great Britain do.)

    There are also now far too few Congresspersons who have served.

    Unfortunately, the volunteer military leads to a growing gap between the elite and those who serve in the Armed Forces.

  51. Benny, Clinton was president the entire year of 2000. No really is is true. Look it up if you do not believe me but I was living in the US at the time. Tom Daschle was Senate Majority leader until January 3, 2003.

    “We saw no substantial changes”

    Well Benny, I saw lots of substantial changes in energy and environmental policies but that was because I was looking for myself and not depending on some journalists the LA Times.

    “useless wars”

    Well Benny maybe you can tell me which war you thinks is useful. All war is useless but maybe you can tell me your better plan to respond to 9/11.

    “An "all-volunteer" army is nice-talk for "mercenaries."

    No it is not.

    “A mercenary is a professional soldier hired by a foreign army, as opposed to a soldier enlisted in the armed forces of a sovereign state.”

    Bush II and I have something in common. Our fathers were naval aviators in WWII. Bush II and I have something in else in common. We both served our country with out ever firing a shot in anger.

    “No one would "volunteer" for that war–they are enticed by money and benefits.”

    Benny, I do not think you have a clue about what motivates American to join the military. Furthermore, reenlistment rates are very high. Trust me, money and benefits is not what motivates.

    “You're right. If we manned the Army with the draft, and shared the burden equally, we would all have skin in the game.”

    While I was drafted, later I reenlisted for an officer program. As an officer, I had enlisted who both draftees and volunteers. When the Army was manned with a draft, the burden was not shared equally.

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