FedUpUSA

Archive for March 16th, 2011

The authorities in Japan appear to be losing control of the situation at their crippled nuclear plant.

We know serious core-melt incidents have occurred in three of the reactors (1-3.)  These are bad and have economically destroyed the reactors, but none of that news is new, and my assessment of the issues and risks are unchanged on this basis.  Core melts, even catastrophic ones (and the two percentages of presumed damaged rods at the plants in question I’ve seen quoted fall into that category) are not sufficient to result in a generalized catastrophe in the environment.

However, it appears that there’s little evidence that TEPCO and other emergency responders are making any sort of progress in getting water feed back to the fuel pools stored near the reactors.  That’s an entirely different situation, and has now, in my opinion, escalated to an “all hands on deck” event.

The puzzling factor for the last couple of days has been that there have been no real response in getting water sources to the buildings – specifically, to those fuel pools.  There is no pressure (beyond the lift to the height of the pool) required to feed these as they’re open pools but the ability to replace water that boils off is absolutely essential in the absence of the normal heat exchange mechanism.

Actual facts on the ground have been difficult to come by, but one news flash came across late last night that implied what may be going on: TEPCO was reported to be deploying a maximum effort in building (!) a road to get fire engines to the plant.

Remember, this area got hit by a tsunami.  That’s bad.  Apparently, it is much worse in terms of access to the plant that has been let on.  While authorities have not said this, the destruction of three of the four fire engines at the plant by the explosion in Building 3 may have destroyed three of the only four fire engines that could reach the plant.

Rescue and recovery are important.  But unless the Japanese are prepared to abandon a 25-mile or so diameter area of land around this plant permanently (which incidentally means abandoning not only the stricken four units but six more that are undamaged and will be needed for recovery of the nation from this disaster they need to get this situation under control – right now.

Reports yesterday of radiation rate spikes at the plant were very troubling.  If you remember my missive from yesterday I said that the “gold standard” for a reason to get very nervous as to forward expectations were lethal-level radiation readings at the plant.  We’re now seeing them, albeit on an intermittent basis.  Thus far it appears they’re related to the release of steam from the shut down but hot reactors, specifically unit #3.

This will not be the case for a whole lot longer, however, if there is not meaningful progress on getting whatever infrastructure is necessary to provide water to the fuel pools restored and secured.  Again, this is a matter of being able to provide water in volume, but there is no pressure requirement (other than the pressure necessary to lift the water to the height where the pool is) as there is with providing a water feed into a containment building or primary reactor pressure vessel.

I give this situation about another 48 hours before it becomes essentially impossible to manage.  At this point it is likely that some people will have to sacrifice themselves intentionally in order to get the water feeds that are necessary in place and operating.  That number may be significant and the longer it takes before this task is accomplished the higher the count is going to go.

I believe it is time for TEPCO to be relieved of their management of this situation and for civil defense and/or the military to step in and take control of the response.  Irrespective of how or with what, including whatever loss of life may occur in establishing and maintaining water flow, cooling water must be secured on an immediate and continuing basis for the fuel pools.

For those who are in the United States there remains no reason to be alarmed by the events on the ground in terms of effects on human health here.  Scare-mongers are now peddling Potassium Iodide tablets on eBAY for over two hundred dollars for a package of tablets – more than 10x the usual price - and some people are selling expired lots.  This is utterly ridiculous; while there’s a reason to keep some of this substance around in the US in the event of a local nuclear incident there is no reason to buy it as a US resident in response to what is going on in Japan. 

This is not true, however, if you are in Japan.  The impact in that nation, should the authorities fail to get fuel pool water levels under control, is entirely determined by the direction of the wind.  So far it has been cooperative in that most of the radioactive products have been blown out to sea, and will be diluted in the Pacific.  This cannot be assured on an ongoing basis and, in my opinion, if you live within 100 miles of the plant it would be prudent to determine if you can increase that distance on an expedited basis should it become necessary.

The humanitarian problems for those within the tsunami impact zone are extremely serious; large swaths of land were inundated by the flood..  Nonetheless the priority focus at the present time must be to get water supplies secured for the fuel pools at all six plants.

Here in the United States the political debate is, of course, once again heating up.  We have not built a new nuclear plant since Three Mile Island.  Our existing plants are aging and will have to be eventually replaced.  At the same time we must deal with a need to improve our economic security through energy security.  We continue to stick our heads in the sand when it comes to a coherent energy policy for America, relying instead of a patchwork that involves far too many foreign entanglements. 

This must stop right here and now.

Nuclear power is not without risk.  It is, however, the only viable alternative we have at the present time, and the only one we’re likely to have for the foreseeable future, for base-load electrical generation.  There are, in my opinion, better alternatives than the present boiling-water reactor designs that are in common use, but we have been unwilling to have a clean debate on the alternatives and put forward the necessary expenditures and efforts.

The level of screaming from the “anti-nuke” camp has, as expected, increased markedly in volume over the last week.  False claims are being made, including raw acts of fraud such as the widely-distributed “map” that allegedly shows the entire population of the west coast being wiped out by a deadly radioactive cloud.  We must not, as a nation, allow hype and fear to form the basis on which we make decisions for our energy future.  The spent fuel problems at the Japanese plants, and those here in the United States, are largely of our own making as a direct and proximate consequence of our unwillingness to embrace and support reprocessing and re-use of nuclear fuel materials.  We are being treated to a demonstration of what refusal to acknowledge and deal with those risks, instead hiding them away in pools of water, can bring to a nation when things go horribly wrong, exactly as we got a demonstration of how hiding financial risks with “credit default swaps” and other similar games can blow up in your face during the economic crash of 2008. 

Incidentally, despite that lesson being taught in 2008 we have failed to learn from and act on it, and it will return with a vengeance much sooner than anyone (other than a few, like myself, who continue to see the deteriorating mathematical reality) expects.

We cannot make decisions predicated on irrational fear and exploitation of events to score political points.  No economy can survive and prosper without secure energy sources.  We have the technological ability to provide energy security but doing so will always involve the acceptance of risk.  Those who claim that the risks are unacceptable must be charged with producing an alternative that is defensible both economically and on a thermodynamic and physical level, and if they are unable to do so, their opinions, no matter how well-constructed, must be discarded and ignored.

As with so many matters in the economic realm in which children waving the “Armageddon” card have managed to literally rob the public of trillions of dollars, we must, on the energy front, put the howling children in their playpens, close the door behind them, and allow the adults to have a reasoned and logical conversation on the alternatives, including a robust debate on both risk and reward.

The Market-Ticker

The Federal Reserve has done an excellent job in covering up the trillion dollar banking bailout by essentially pretending it did not occur.  To show how much it doesn’t care, it actually named a few bailout vehicles “Maiden Lane” for the New York Fed’s address in lower Manhattan.  This sounds better than the “New York Fed” being bailed out by the Fed not to conjure up images of a snake eating its own tail.  Like a professional liar, pretending with full conviction is usually a good way of getting away with theft.  The Federal Reserve was one of the largest players in the commercial real estate market bailout.  Many in the U.S. have no idea that their central bank has purchased and supports luxury products like multi-million dollar hotels in California.  They would hesitate at calling it a purchase but they do own the liabilities securing the property.  The bailouts were marketed and branded as a way of helping out the working and middle class.  Given the massive financial destruction that the working and middle class still face it is easy to conclude that the stated policy failed.  Yet looking at banking profits it did succeed for this segment of our economy.  The Federal Reserve doesn’t even bother hiding this massive bailout and even labels these toxic vehicle hotels with its own address.  Let us look closely at the Maiden Lane product.

Maiden Lane – A nice name for a bailout

Source:  Federal Reserve, New York

As we have stated, the Fed doesn’t even bother hiding the fact that they have pursued trillion dollar bailouts to support the banking sector.  The Fed has purchased over $1 trillion in mortgage backed securities alone.  Of course don’t expect to hear about this in the media.  The only talk we have heard about any of this in the mainstream press is when the U.S. Treasury was proudly talking about banks repaying their TARP funds.  This is like giving a gambler $1 million in the hole another million and having him pay you back when he hits blackjack.  This gambler however failed to mention he also was in debt by $100 million.  The Fed on the other hand does conduct complicated banking procedures but in the end it winds up being a bailout for banking gamblers.

The above chart shows the various Maiden Lane Limited Liability Companies (LLCs).  These were designed with differing purposes.  The original Maiden Lane was designed to support the bailout of Bear Stearns:

“Purpose: ML LLC was created to facilitate the merger of JP Morgan Chase & Co. (JPMC) and Bear Stearns Companies, Inc. (Bear Stearns) by purchasing approximately $30 billion in assets from the mortgage desk at Bear Stearns.”

Source:  New York Fed

Now what in the world is in this portfolio?  The Fed doesn’t allow a full audit even today.  But we do know that Maiden Lane I holds assets for JPMorgan that it found to be too risky.  So the Fed essentially gave JPMorgan a $30 billion credit line to the LLC to help unwind whatever was in the portfolio.

We don’t get exact details but we do know it holds a ton of real estate in the battered state of California:

36 percent of the portfolio is located in California.  Of course if you follow the news even slightly you realize that California real estate is one of the worst investments in the last few years.  And this is what the Federal Reserve is backing up.

On further investigation, you realize that a large number of the commercial loans come from hospitality:

This industry has not performed well and is largely overpriced especially if it is in California.  How is this not a bailout?  The Fed tries to keep the data obscure but we can even pull up some of the actual borrowing entities here:

Doesn’t take a genius to make out who was dipping their hand here.  Last time I checked the Hilton and Waldorf were not catering to working and middle class Americans.  The Federal Reserve has been bailing out the wealthy at the expense of everyone else.  How much proof and evidence do people need?  In fact, the Fed flat out doesn’t even care since the media does no reporting on this so they simply put the data where the public can access it if they only wished to do so.

There is absolutely no way the public would have bought into this kind of commercial real estate bailout so that is why it happened behind closed doors.  This is your money at work here.  By the way, the commercial real estate industry has collapsed in the last few years:

Source:  MIT

Maiden Lane was put together in 2008 near the peak of the CRE bubble.  Of the $30 billion portfolio, the Fed put the fair market value at $28.478 billion as of October of 2010.  Apparently this portfolio, a toxic wasteland that JPMorgan did not want to touch without a guarantee has only fallen by 5 percent while the entire industry is down near 50 percent.  This is why if you go back to the first chart the unwinding of this LLC is occurring behind closed doors and they just hope the public has conveniently forgotten.  Remember everyone, TARP was paid back by Wall Street investment banks so nothing more to see here.

My Budget360