Guest Post: Bailout Lost Opportunity Cost

Tyler Durden's picture

Submitted by Alfred Collins

Bailout Lost Opportunity Cost

This Bloomberg article about German utilities giving away power got me thinking what our world would look like if the trillions in bailout money had instead been spent to build alternative energy infrastructure.

From Bloomberg:

“The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.”

“You’re looking at a future where on a sunny day in Germany , you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.” source link

I will use only simple round numbers and calculations to make my point.

Let’s say the bailout money (remember, we have not finished bailing yet) is about $20T, and alternative energy infrastructure costs $10 per watt (it has been getting cheaper recently).  That represents potentially 2TW (TerraWatts) peak of electrical energy generation capacity.

Building an infrastructure this large would provide employment for millions of people for several decades.  Again, using very rough numbers, this would provide employment for perhaps as many as 20 million people for twenty years.

Don’t get me wrong; I am not saying I support the government imposing taxes on us to pay for this.
I am just expressing the cost of the bailout in terms of jobs and the amount of energy infrastructure this amount of spending (preferably by private sector enterprise) would provide. Consider this as the lost opportunity cost of the bailout.

Which would you rather have done with the bailout money: 1) propped up zombie banks for three years, or 2) provide 2 TerraWatts peak electrical generation capacity and employment for 20 million people for 20 years?

This is the lost opportunity cost of the bailouts.

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zorba THE GREEK's picture

I vote for choice #2 Monte.

LowProfile's picture

Annnnd...  Choice number 2 is..!


Imagine if we had spent those trillion$ on thorium fueled power plants...

nachtliche's picture

You can't get money unless there is a military application like depleted uranium.

AldousHuxley's picture

They don't want you to see that the revolution can be real.


Occupy Maine - rain or shine


Occupy Asheville, NC


Occupy Seattle


Occupy Denver in front of Federal Reserve


Occupy Austin, TX


Occupy San Antonio, TX


Occupy Portland


Occupy Los Angeles


Occupy San Francisco - Marines joining in


Occupy DC in starting protest against corporate personhood


Occupy Chicago in front of the Federal Reserve


Occupy Boston - "Fuck the Fed"


Occupy Wall Street New York   500 arrested on Brooklyn Bridge


More launching near you:



It is a class war. 1% vs 99%. Make banksters pay!

MiddleMeThis's picture

I happened to mention the Occupy movement to one of my friends/co-workers.  I consider her to be fairly intellegent and aware, but she had absolutely no idea what I was talking about.  It just goes to show, she is only intelligent and aware about those things which the MSM feeds to her. 

As John Mayer so eloquently put it...

"And when you trust your television
what you get it what you got
Cause when they own the information
they can bend it all they want."

bid the soldiers shoot's picture

You mean like stock, metal and currency traders? :-) < sarc >

bid the soldiers shoot's picture

Aldous, You better keep out of trouble. It's not 1776 any more. The King had horses, we had horses. The king had muskets, we had muskets. The king had powder, we had powder. The King had balls, we had BALLS.

Flash forward to 2011. The PTB has nerve gas, we have automatic weapons. TPTB have drone missiles. we have molotov cocktails. TPTB have an army in training for 10 years with experience in Iraq and Afghanistan, we have training in pick-up basketball and touch football on Saturdays in the Commons.

I fear for the Bloomsbury Light Brigade, Aldous. Here they are outnumbered.

UBIGDummy's picture

UHM,  choice number 2 all ready happened, its failed company called SOLYNDRA.

RobotTrader's picture

Wow. I guess that totally debunks the "blackouts" all the Peak Oilers were predicting.

No wonder the solar industry is imploding.

Way too much power to go around, to the point where consumers are getting paid???

illyia's picture

Exactly - I think about this all the time.

And, Report From Iron Mountain...

That Peak Oil Guy's picture

Believe it or not, if you harvest too much wind then you risk disrupting the weather cycles of the planet.  Indeed, there is no free lunch in an entropic universe.

Here is a summary of a paper which estimates that our limit for wind production on the planet is 1 TW:

bid the soldiers shoot's picture

The Bible said that a jillion years ago:

"For they sow the wind, and they shall reap the whirlwind" Hosea. (whoever he was.) :-)

agrotera's picture

That is perfectly logical.  Do you know if oil and gas acquisition affects technonic plates?  If a substance similar to what was removed from the ground doesn't go in to replace the withdrawal, it would seem that this would cause disruptions.  I see that Exxon commercial for gas exploration and it makes me wonder about the New Madrid fault and the Fayette discovery? 

Hurdy Gurdy Man's picture

I agree.  I keep thinking of "Lives of a Cell" and how the macro & micro mirror each other.  I was wondering what the human-bilogical equivalent of joint fluid would be to the Earth.  Oil seems like a candidate, but not sure... for the earth it could be like a certain density or kind of rock that allows sliding, for all I know.  Oil seems like a candidate, but I don't know for sure.  If that's the case, perhaps the Earth makes the oil (non-biological oil), in which case there's no tipping point, could go on forever messing things up, and the scarcity of oil is something that is not real, like Gold, but just controlled by Big Oil the way deBeers controls diamonds.


gmrpeabody's picture

That goes without saying.

UBIGDummy's picture

UHH, so on that logic we should knock down all 4 story and higher buildings because they are disrupting the airflow of the trade winds.  


DormRoom's picture

You're using a strawman argument.  He's saying that trilliions of dollars invested into alternative energy technologies, innovation, and infrastructure, would give consumers more low cost energy days, as more electricity is created from alt-sources, and put into the smart grid.


Low cost energy would help consumers, and businesses, and remove US dependency from petro-terrorist states, like Iran.  It would be a public good, like the US National Highway System.


I'd rather have cheap energy than saving an overbloated banking system that over-leverages, doesn't help the real economy, but props up the debt economy, using financial engineering to obscure risk, so more debt can be applied.


China is already orienting its economy towards a green tech revolution, so it can climb up the value supply chain, and dominate this multi trillion dollar market.

Geography is destiny.  The British industry revolution was faciilitated by the over-abundance of cheap coal.  Steel was foundational to the  American industrial revolution.  China has the largest deposits of Rare Earth Elements, that are used to make super-magnets ,necessary for wind tubine, and electric engines.  It also has some of the largest solar fab plants in the world.


If you want to understand the Chinese mind, here it is:

"I don't care if the cat is white, or black.  As long as it catches mouse"

America is paralyzed between Democratic ideologies, and Republican ideologies, and this has created a huge deadlock, and bottleneck in the political system, that it's underminding the economic super-structure.

CharlieSDT's picture

Excellent post and true.  The Chinese will do whatever it takes to rule the world.  Will America continue to do so?  That can only lead to war.

Libertarian777's picture

hahaha. what a funny comment. paralysed between repub and democrat ideologies. newsflash, it's the same ideology. they will debate cutting 50 vs 100 billion in spending but both will vote yes on a $850bn pentagon budget.

Ahmeexnal's picture

Giving trillions to alt energy would have resulted in thousands of Solyndra ponzi energy outfits.

Since we all know, that when it comes to handouts, "they" choose who the recipients are.



AnAnonymous's picture

Wow. I guess that totally debunks the "blackouts" all the Peak Oilers were predicting.


How? This US cheap propaganda simply parts between people who wish to believe in it, want others to believe in so they can monetize it and people who see it for what it is: US cheap propaganda.

First, until the conditions are met, it is generally stupid to draw any inferment contradicting logical conclusions (Occam's razor)

Currently, the world is still abundant in oil. Drawing conclusions that an unneeded, surplus energy source might compensate for a lack of oil is stupid because the lack of oil is not actual.

Germany is still awashed with oil and anything coming additionally is just that: surplus. And abundance is that. But abundance is not scarcity.

When reading the article, one piece of advice imposes itself: US citizens should stop pushing Indians and force them into a programmed extinction because in a near future, the world will require experts in wind and sun dances.

Cause drawing inferences from a specific climate on a given day has nothing to do with the continuous flow given by oil extraction. Storing electricity...ummmh... Not that efficient.

So when your energy consumption depends on a windy or a sunny day, well, better to have experts capable of calling the wind or the sun.

BigDuke6's picture

For this fantasy to have been realised a default would have been necessary.

When Argentina defaulted, not only did the government default but they forced a private default. If you had a debt in US dollars in Argentina prior to the default, you were forced to pay it back in peso.

It was illegal to make payment in US dollars.

Likewise if you had a US dollar asset you got back peso. A dollar deposit in Citigroup in Buenos Aires became a peso deposit. If you really wanted to keep your dollars you needed to make your Citigroup deposit in New York.

The forced private sector default was necessary for Argentina. The Argentine banks all had lots of US dollar funding. If you devalued without forcing their default then they would all have uncontrolled defaults (disaster) and the country would lose its institutions. 

The same applies in the USA or even Greece. If the Greek government were to devalue the new drachma (to perhaps one-third of the value of the euro) then the banks (which are loaded with Greek sovereign paper) would default. 

The Argentine economy was doing ok after the devaluation. The lesson was that devaluation worked – provided you simultaneously forced private sector default.

So making this article another opportunity that went by due to greed and corruption.

Old Poor Richard's picture

The banksters wouldn't have defaulted on me.  Or on anybody else I know.  The giant banks would have imploded together, being wiped off the map, leaving behind responsible banks to step up.  They could have spent nothing on bailouts, let the chips fall, and Paulson and Bernanke could have provided necessary liquidity to the solvent banks left over to keep businesses in business.  Instead  they bailed out the criminal banks, the criminal banks refused to lend out the bailout money, and the economy further contracted.  Those cascading defaults would have been vastly preferable economically, and would have been morally just to boot.


BigDuke6's picture

i agree thats what they should have done but it wasn't. people should be mad.

so the road ahead and how to travel it is important.

its important to realise that the usa elite realise that they can spend as much as they like while the usa can keep borrowing... until you run out of dollars and can't pay anyone.

the politicians in order to hold onto power will keep borrowing enough to kick the can down the road while they sell assets to kick it further.

expect more bad decisions to be made...maybe my point is obvious.

Central Bankster's picture

 It is very probable the financial crisis would caused a wave of public and private defaults (IE deflation/credit contraction) beyond the scope that you are imagining.  FDIC would have needed a bailout, pensions would have been destroyed, insurance companies collapse, and obviously complete chaos in the equity/bond markets so those 401ks might lose 80-90% of their value.  All of these things I am OK with, as I do not pass judgement about the market pricing in reality (eventually).  However, I think it is grossly optimistic to think you and those you know would not be grossly impacted in many ways that are unknown and unknowable at this time.

bob_dabolina's picture

Cue the left wing enviromentalists. 

Don't forget we couldn't build an oil pipeline in Alaska because it disrupted the mating grounds of the caribou.

But for just as long, massive fiberglass blades on the more than 4,000 windmills have been chopping up tens of thousands of birds that fly into them, including golden eagles, red-tailed hawks, burrowing owls and other raptors.

That article was from 2005 so the death toll must be in the hundreds of thousands if not millions by now. This is like the Auschwitz for birds.

These wind turbines have Hank Paulson in tears.

Seize Mars's picture

Cue the left wing enviromentalists. 

Don't forget we couldn't build an oil pipeline in Alaska because it disrupted the mating grounds of the caribou.

Environmentalism in the domestic case is for one good reason: the USA needs to export dollars to keep the fiat money shit-show going. That's what oil is, a big facilitator of the export of dollars. It's all about exporting inflation in big size. So they can't allow domestic drilling, and they need a good excuse. Cue the hippies and the spotted owl.

snowball777's picture

They run into skyscrapers, bridges, and airplanes too...should we stopping building and using them?

bob_dabolina's picture

We'd save a lot in energy costs ;)

barnabeg's picture

You're ridiculous. So you would rather live in a world where corporations can pollute at will, where we choke on the air we breath, poison ourselves with the food we eat, and biodiversity is a thing of the past? Environmentalist are trying to preserve the inhabitability of our planet. I think we have done enough damage for future generations to despise us. Nature is our most important resource. We should treat it with respect. We clearly cannot live without it. It, however, will carry on quite well without us. Moron. 

sun tzu's picture

The sky is falling you fucking moron

Ahmeexnal's picture

... massive fiberglass blades on the more than 4,000 windmills have been chopping up tens of thousands of birds that fly into them, including golden eagles, ....


Why would anyone in their right mind toss thousands of gold coins onto the wind turbine blades??

Hurdy Gurdy Man's picture

I bet there's a technological answer that hasn't been produced yet for birds - like, magnetic fields that steer them away from fields, or something.  I hope something like that comes along.


Id fight Gandhi's picture

The whole point of going renewable was to get off foreign power. Throwing all that money to china to manufacture windmills and solar panels and lightbulbs defeats this purpose.

So instead of the USA paying as it goes for fossil fuels, it goes deep into debt to replace working infrastructure to cut a check to china.

If they want to do renewable, the condition should be made in USA only, or it's just another scam.

pauhana's picture

Not happening if money continues to go to well-connected friends of the political class who waste it on fancy factories.  But maybe tilting at windmills is more cost effective than manufacturing solar panels.   

Old Poor Richard's picture

How 'bout the taxpayers keep that money for ourselves, instead of either giving it to fucktard banksters or giving it to the "green" energy racket?

Seize Mars's picture

Which would you rather have done with the bailout money: 1) propped up zombie banks for three years, or 2) provide 2 TerraWatts peak electrical generation capacity and employment for 20 million people for 20 years?

This is a very important point to make. This is exactly the underlying theme of the Austrian economists' theory of the structure of capital. Issuing paper money, Keynesian borrowed money / stimulus / bailouts cannot possibly create new wealth, all they can do is falsely motivate people to misdirect their investments.

In other words, this is what they call "malinvestment." What's needed is for people to liquidate all the malinvested assets and get back to work. Big brother, however, keeps on trying to prop up the prices of housing and related paper securities by manipulating the cost of money. More wasted time, resources, heartaches and pain.

End the Fed, and we would see an economic boom.

And it would ensue immediately.

bob_dabolina's picture

You would not see an economic boom at least if using history as the compass. 


 After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833. (See Banking in the Jacksonian Era)

The bank's money-lending functions were taken over by the legions of local and state banks that sprang up. This fed an expansion of credit and speculation. At first, as Jackson withdrew money from the Bank to invest it in other banks, land sales, canal construction, cotton production, and manufacturing boomed.[34] Then, in 1836, Jackson issued the Specie Circular, which required buyers of government lands to pay in "specie" (gold or silver coins). The result was a great demand for specie, which many banks did not have enough of to exchange for their notes. These banks collapsed.[34] This was a direct cause of the Panic of 1837, which threw the national economy into a deep depression. It took years for the economy to recover from the damage.[35


snowball777's picture

As stupid as monetary stimulus is in a debt-deflation spiral, Austrian pipe dreams outmatch it in their sheer ability to ignore economic reality.

What would be the origin of your economic 'boom'?

Unemployment would skyrocket, businesses would close instead of merely hoarding cash, and every financial asset on the planet would be completely destroyed for decades, but you've got the "ensue" part right. You'd replace 'malinvestment' with NO investment.


Seize Mars's picture

Austrian pipe dreams outmatch it in their sheer ability to ignore economic reality.

Human beings have needs. We would go to work each day, making and doing things for other people. No bank or government standing inbetween us, taking our stuff. That activity alone is the central source of wealth. (Not pieces of paper, mind you, but actual wealth).

Your take on the Austrian school is a little puzzling. It is drastically more subtle, complex and powerful of a method than Keynes. Why would you ride a bicycle when you can drive a car? In other words, I think if you read some things about the theory of business cycles and the structure of capital, you would say, "Ah hah, this is exactly correct."

cramers_tears's picture

Ron Paul wants to END THE FED.

Manthong's picture

Hey, what if the government started right away handing out billions for the manufacture of electric cars, solar panels, and other kinds of alternative energy?

That would create jobs and  jump start our becoming more efficient and less dependent on foreign sources to ..  uh..  what?

Oh, that's what the government has been doing all along?


illyia's picture

There is something fundamentally missing in this discussion: What if energy becomes - essentially - free? What happens if relatively few manufacturers are able to produce almost all goods with ever decreasing human laborers?

What about the cloud? Paper pushers, receptionists, insurance agents?

What if everyone goes to school on the web? If manufacturing a gizmo can be done from your 3D printer??

What happens to "the economy" if traditional productive work becomes irrelevant? 

illyia's picture

And, what does this have to do with debt and national wealth destruction?

sitenine's picture

Agreed.  What exactly does suggesting that $20T should have been spent on windmills have to do with anything? Considering how absurd the notion is to begin with, I'm a little surprised that ZH chose to post the story at all.

I guess the author sort of tried to tie it in with, "Building an infrastructure this large would provide employment for millions of people for several decades."  But that statement is totally unverifiable fantasy as well.

The whole post is akin to Krugman's call for alien invasion.  I wasted 2 minutes of my life reading it, and I lost another 5 minutes posting this comment.

AE911Truth's picture

You might want to waste a little more of your time reading this:

China to invest 2 trln yuan in green economy in next 5 year plan.


I think it is verifiable reality that this will provide jobs for millions of employees for many years.

sitenine's picture

Thank you for the link - time not wasted.  It is good to see that good projects and forward thinking are still being implemented in economies that can still afford it.

But seriously, 20T Dollar != 2T Yuan, and China doesn't have to borrow the money to do it either.

Also, Americans are so NOT Chinese.