RETURN OF THE UNDERWEAR GNOMES

Christopher MarkowskiArticle, Research & The Economy0 Comments

JANUARY 2012

We want underpants today, all day

 Search for underpants, today

We won’t stop until we have underpants

Yum yum yummy yum yay

Time to go to work, work all day

Search for underpants today

We won’t stop until we have underpants

Yum yum yummy yum yay                                      —   The Underwear Gnomes

The Underwear Gnomes have returned! 

Back in 1998, the hit Comedy Central show South Park released an episode that introduced the world to the Underwear Gnomes.  The Underwear Gnomes have a unique business plan…

Phase One:  Collect Underpants

Phase Two:  ?

Phase Three: Profit

The children of South Park who were the only ones that could see the Gnomes and witness their work, were perplexed at the business plan as well.  When they pressed the Gnomes on what Phase Two was, the Gnomes would tell them not to worry because Phase Three was profit!  We have been reporting on the multiple business failures of this administration for the past couple of years.  When President Obama visited Solyndra back in May of 2010 and all the workers were sent home for the day, we guaranteed our listeners that Solyndra would go out of business.  What competent CEO would shut down an assembly line that was churning out profits?  Sure enough, a year later the company was gone.  The company that we were forced to invest in by our fearless leader, cost us over a half a billion dollars.  The company is such a disaster that an auction for the company failed to attract any bidders.  On January 2012, CBS News in San Francisco reported that they caught employees of Solyndra destroying millions of dollars worth of glass parts that were never even paid for. 

“Workers in white jumpsuits were unwrapping brand new glass tubes used in solar panels last week.  They are the latest, most cutting edge solar technology, and they are being thrown into dumpsters.  Solyndra still owes the German company that made the tubes close to $8 million.”

In the Presidents State of the Union speech, he stated that he is going to “double down” on green energy “investments.”  That very same week three of his other “investments” using our money went bankrupt.  If your investment advisor put you in companies that continued to go belly-up, would you retain he or she?  This President however, doesn’t waiver, he will continue to borrow money from China, put it on our credit card, and blow it on what he and his administration believe are “technologies of the future.” 

If you are for green energy than you should be even angrier with what President Obama is doing.  By picking and choosing winners and losers in the field of green energy, companies or ideas that could actually survive and thrive in the marketplace end up being left out.  The government is not capable of deciding what will work and what will not, the free market will.  If a company or idea needs a subsidy, by definition it is a failure.  Private capital will fund companies that have a chance of actually working.  They will always attract capital.  I am for alternative energy as well, however I realize that the only way you will get alternative energy that is sustainable in a free market, is to get it’s point of profitability, better than the alternative, which just so happens to be what we are using already.  The first combustion engines ran on bio-fuel, the reality was that petroleum was simply cheaper.

Phase One:  Collect Taxpayer Money

Phase Two: ?

Phase Three: Repeat Phase One

A version of the Underwear Gnome business model and investment philosophy is currently being implemented by President Obama and is creating companies that are on life support from day one.  These Franken-companies would die off if it weren’t for either our tax dollars or some shady cost-ineffective government contract.

On December 18, 2009, three months after the Department of Energy loan guarantee was formally awarded, Solyndra submitted a filing to the Securities and Exchange Commission for a planned initial public offering of stock.  In that filing, Solyndra said that it planned to “profit” in part by “strategically aligning our products with key government programs that provide financial incentives, export credit and project finance.” 

Andrew Stiles of National Review has chronicled the incestuous relationship between Solyndra and the Obama administration. 

In a May 24, 2010 e-mail sent to a senior White House official from Department of Energy stimulus adviser Mike Rogers, stated that the company’s executives “have been counting on an energy bill to pass.”

Perhaps most revealing of the extent to which Solyndra depended on continued government largesse is an August 10, 2010, exchange between several of the company’s primary investors, an email chain that included Mitchell and newly appointed Solyndra CEO Brian Harrison:

“Getting business from Uncle Sam is a principle element of Solyndra’s channel strategy.  When Obama visited Solyndra in June 2010, Chris Gronet spoke very openly to Obama about the need for installation of Solyndra’s rooftop solar on U.S. government buildings.  I heard Obama actually promise Chris that he would look into it when he returned to Washington.  Working together with DOE, Department of the Interior and other agencies, we should be able to get a lot of Solyndra’s rooftop solar deployed throughout the U.S. government building energy infrastructure.”

Solyndra is just one of dozens of companies that have been tossed on the scrap heap of failed government venture capital investments with our money.  Another one that doesn’t fall under green energy, but is part of the green strategy is the electric car.  The Chevy Volt, which has already been recalled, sold a dismal 600 units in January 2012, and thus far cost the taxpayers over $250,000 per car in state and federal dollars, for a total of three billion dollars.  The amount of government assistance does not include the fact that General Motors is currently 26% owned by the federal government.  If battery manufacturers awarded incentives to produce batteries that are used by the Volt are included in the equation the subsidy goes up to $256,824. 

The best quote from an auto executive in regards to the Volt came from Johan de Nysschen, President of Audi of America who stated, “The Chevy Volt will fail.  Anybody that buys the car is an idiot.  The people who buy the car are an intellectual elite who want to show what enlightened souls they are.”  The fellas of South Park did an episode on the smugness of the people who own green cars.  They were so enamored and pleased with themselves that they loved the smell of their own flatulence.

Nathan Myhrvold of Bloomberg breaks down the numbers in regards to energy production for the various sources per kilowatt-hour and finds that all of our green alternatives are substantially more expensive than our cheapest source natural gas.  Land wind turbines produce electricity at a 73% premium.  Offshore wind turbines a 290% premium.  Solar photovoltaic is a 230% premium.  Solar thermal had a cost premium of 400 percent.  Only with enormous subsidies or ridiculous carbon taxes can these sources be made viable. 

My question to the enlightened leadership class that resides in Washington D.C., Rather than continue to pour money into technologies that have been proven to be ineffective, inefficient and completely unable to work in the free market, wouldn’t it be better to allow the market to dictate what will work and find out what the better mousetrap actually is? 

Myhrvold makes the point; Subsidies reward inefficiency, cultivate dependency, on government largess and promote a rush to manufacture before the hard work of perfecting a technology is done.  As for the learning curve effect, the electronics industry has demonstrated that when a technology has true potential, subsidies aren’t needed.  Each step of the way, electronics technology paid for itself as well as for the R&D that led to successive generations.  This was certainly true for microprocessors and memory chips, whose cost per transistor or per bit of storage space consistently was cut in half every 12 to 18 months.  Solar-cell makers and their champions love to talk about a similar Moore’s law for solar, but the physics of the situation argues against this.  Yes, since 1985 solar-cell prices have dropped by a factor of four, but during the same period, Moore’s law slashed the price of computational power by a factor of at least 130,000.

I recently was taking a look at the employment situation over in Europe.  The country that is fairing the worst is Spain.  They currently have over a 20% unemployment rate, and even more unsettling is the fact that the rate for people ages 16-25 is 54%.  When Barack Obama was elected he pushed, as a part of his Hope and Change platform this ridiculous Green Jobs initiative.  He hired a Green Job’s Czar who was ousted for being a bit of radical and a communist.  The President, back in 2008, often praised Spain in his speeches, touting the wonderful advances in that country, with their many windmills, solar plants and fast choo choo trains.  The evidence at the time, which he chose to ignore from the University of Madrid, showed that for every Green Job created two other jobs in Spain were destroyed.  I wonder what those statistics would be today?  We wrote about this study, we discussed it incessantly on the radio show, yet the people once again drank the Kool-Aide.  The sad thing is, despite all the evidence in the world that their pie in the sky scheme would be a failure of monumental proportion these liberals pressed on.  To them, it is never about success or outcome, it is their pure as the wind driven snow intentions.

More like a road to hell.   

 

Publius Solyndra Auction Fails To Attract Any Bidders Big Government 1/18/12

Staff Reporter Bankrupt Solyndra Caught Destroying Brand New Parts CBS News 1/19/12

Stiles Andrew The Solyndra Business Model National Review 12/5/11

Gantert Tom Chevy Volt Costing Taxpayers Up To $250K Per Vehicle Mackinac Center For Public Policy 12/21/2011

Myhrvold Nathan Subsidies Stymie Wind, Solar Innovation Bloomberg 11/27/2011

 

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