On the Nonsense of Hybrid Cars Solving the Energy 'Problem'

Robert Samuelson explodes the myth:

It's easy to exaggerate how quickly new technologies can improve our situation. Obama says that we can have a million plug-in hybrids averaging 150 miles a gallon on the road within six years (plug-in hybrids run on electricity and gasoline). Sounds impressive. But that would be less than one-half of 1 percent of all vehicles, and the forecast is probably a stretch. The battery technology required for plug-in hybrids is still not competitive, adding $7,000 to $10,000 per vehicle, says Brett Smith of the independent Center for Automotive Research. Obama would address this problem by providing a $7,000 tax credit (in effect: a rebate) on plug-in hybrids. These subsidies might go mainly to upper-middle-class buyers, permitting them to flaunt their "green" credentials

The Current Economy In Perspective

From a very informative column by Robert Samuelson:

As yet, the present economic slowdown does not even approach the harshest post-World War II slump. The back-to-back recessions of 1980 and 1981-82 (as dated by the National Bureau of Economic Research) constituted, for most people, one prolonged downturn. Unemployment peaked at 10.8 percent in late 1982. In 1981 and 1982, housing starts were down almost 50 percent from their 1978 peak. From 1979 to 1982, the economy stagnated; output lurched down, then up and then down. There had been nothing like that since the 1930s...

The paradoxical thing about today's economy is its strength. No kidding. Consider all the hand grenades lobbed at it. Higher oil prices. The housing implosion. Large layoffs in affected industries: autos, airlines, construction, mortgage banking. The "credit squeeze" triggered by losses on "subprime" mortgages. Despite all that, the economy hasn't collapsed. It's merely weakened. Output in the first quarter of 2008 was actually 2.5 percent higher than a year earlier.

As we have written many times, the current downturn is a downturn in the mortgage industry and supporting industries, such as finance. We are not in a full-fledged recession. However, if the Fed continues to implement a near zero growth money supply policy, a recession or even worse, a depression, may be around the corner.