Thursday, September 6, 2012

Steel demand up, coal down

This gleaned from an interesting NYT front-pager about barge traffic on the Ohio.

The first item is good news for the conventional growth-related view of the economy, and also good news for the industrial heartland of the US. This improvement is at least partly due to the current domestic and Canadian oil and gas boom. Steel is needed for well pipe and other essentials.

As I mentioned in my own recent NYT piece, increases to the domestic and North American economic multipliers caused by the natural gas boom will take likely care of the rump of this recession and add to US and western prestige and economic and military strength for many years.

Not a moment too soon, is it?

Of course, you have to be a practiced Keynesian analyst to know all this. So many politicians, pundits and even economists have forgotten their Keynes, which is part of the reason we're in the mess we're in. There's no good reason for this. Keynes is complicated, for sure, and people are often lazy thinkers who don't like to have to use complicated ideas. But a big part of the objection to Keynes is unthinking and purely ideological or even self-serving.

Coal is well down due to the gas boom, which is also good. Every percentage drop in coal consumption adds a disproportionately larger drop in emissions. Other than eliminating pure waste, reducing coal consumption is the cheapest and easiest way to reduce emissions, at least in the first one or two decades of an emissions reduction campaign. And right now gas is so cheap, we're getting paid to reduce these emissions.

This kind of Green Keynesian thinking can't be used forever. Eventually we'll have to figure out how to transition to an more purely ecological kind of economics, but for right now, the world is too dangerous a place for that. In the meantime, any climate emissions reductions that come without a concomitant drop in the multiplier are welcome.

There has already been a significant reduction in US emissions as we replace coal with gas for power production. This will continue as long as gas is as cheap as it is. There won't be an impact on the global climate, because Europe and the BRICs must follow suit for that to happen. But the US may yet meet our own targets.

As a welcome by-product, acid rain and mercury pollution in Maine will drop yet further. We'll be able to eat more freshwater fish.

Good news, but complicatedly so

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