Brad Setser

Follow the Money

Cross border flows, with a bit of macroeconomics

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One time return to blogging

by Brad Setser
September 22, 2009

My post on the G-20’s agenda can be found on the official Pittsburgh Summit blog.


  • Posted by anon

    Are you still doing the tedious analyses of BOP data? Will you have an opportunity to share with us, or have you been completely coopted, with all your future communications just cheerleading for the administration?

  • Posted by Cedric Regula

    I see you got the “Director of the International Economy” position. Great! The last guy was doing a crappy job. On Vorlon they have a capable economist in that position, and he is generally credited with the smooth running of the planetary economy there.

    Glad to see the G20 hasn’t forgotten that the financial system needs fixing. Compensation too. Could I interest Democrats in a 90% top marginal tax rate?

    Good idea about doing away with fossil fuel subsidies before entertaining silly ideas like Cap and Trade.

    Also, I haven’t heard much about 3rd generation nuclear in the current admin’s plans regarding carbon, oil dependence, electrification of cars, and our hope for electricity in our future in general.

    Here’s the most concise website I’ve found on the current state of the nuclear industry. Three projects started up in the US in 2008, but that is just a drop in the bucket.

    I also heard of one promising approach to possibly salvage the bleak outlook for coal electric generation. Right now almost 50% of our electricity comes from coal, and 35% of our carbon comes from coal power plants. (the other 35% is from cars and light trucks; the remaining 30% is everything else). In Norway, they have a novel approach to carbon sequestering. The are capturing CO2 at the smokestack, compressing it to liquid, then pumping it into depleted offshore oil wells in the North Sea. The high pressure down there keeps the CO2 liquid. They have been doing this for 10 years with good results and no leakage.

    In the US so far we have been talking about sequestering in a mythical underground cavern, pumping it into onshore oil wells to reclaim more oil(which they have been doing for 10 years, and I suspect we have more CO2 than onshore oil wells), and chemical plant processing of captured CO2 into a solid that can be disposed of. A couple pilot plants have been built and commercial size plants are expected to be 50% of the footprint of a coal plant, and 75% of the cost of a new coal plant.

    Realistically we can’t just shut down 50% of existing capacity, so compressed undersea storage deserves some consideration. In Norway, it is Statoil pumping it into depleted offshore wells. So here the equivalent industry would be Big Oil.

    So maybe you should direct the Obama Administration to pursue some explicit plans here, rather than some murky rules for cap and trade, which are also sure to take up part of a wing in the Library of Congress.

  • Posted by guest


    There is on going project, multinational endeavour in the south of France, called ITER project.
    Quiet old in its essence, deuterium and litium combination for the production of atomic batteries.
    Preliminary results 2016

  • Posted by Cedric Regula



    I have to confess that I don’t really speak French, but I did stick the article into Babelfish and got a readable translation.

    Princeton also has a fusion project going.

    Whenever I think of global warming however, I am going by the timeframe that the rule makers are speaking of. Something like 25% reduction by 2020 and 50% by 2050.

    I don’t think anything in R&D can get deployed in full commercial scale prior to 2020 timeframe. So I save those for the 2050 deadline. Some of these are promising and game changing, like algae to transportation fuel, or MIT last year announced a breakthrough where they mimicked the chemistry of photosynthesis and this could result in large scale, low cost storage of electricity. That of course would greatly improve the economics of intermittent energy sources like wind and solar. Right now they need to be 100% backed up by 24X7 power generation, so “renewable energy” is not financially sustainable. Unless you think we can pay at 2X-4X for new infrastructure, continue to build the old infrastructure, ultimately resulting in 3X-5X the capital cost of our existing electric infrastructure(which is amortized over 40 years). And have it all cost us the “one postage stamp a day” that the Obama Admin is forecasting. If anyone believes that, I have a post office to sell them.

    So that is why I have a “short list” for the 2020 time frame.

  • Posted by Glen

    When I first heard President Obama comment on the need to address ‘global; imbalances’, my first thought was of you Brad. It is nice to see that you are influential at your new position!

    On a side note, as a means to prevent an over accumulation of reserves and unrealized currency valuations, perhaps the IMF could orchestrate a system whereby any country that holds large reserves (more than 50% of GDP?) would need to allow a portion of such to be swapped at current exchange rates.

    For example, China’s reserves are at a level that is incongruent with its needs. While those inside the beltway are reluctant to label the Yuan as manipulated, it is relatively obvious that it is very undervalued. To discourage such practises, if China was forced to allow a for a swap of debt (outside of balance of trade necessitated swaps), newly created for the sole purpose of swapping and offset by they counter-party, there would be a mechanism for accounting for distorted currency values.

    In a sense it would work like a buy – sell agreement. Whereby a strike price is initiated by either party forcing the other to either buy of sell.

  • Posted by Indian Investor

    Good essay. At least we’re on the path to recovery now.

  • Posted by Judy Yeo

    Glad to see you’re doing well Brad. Actually every time “global imbalances” and “SWF” investment strategies are mentioned, your blog comes to mind. Bet you would have had lots to say about the reported 350b loss reported by gulf swfs… sigh, for the days of blogging indiscretion?

  • Posted by Glen

    Why is Peter Morici,an expert on trade, ignored in Washington. If anyone has seen the problems facing the US clearly it is him.

  • Posted by Rien Huizer


    It took a while to discover this, good to see integrity and consistency at work! Is your sudden resurrection due to Michael Pettis’ problems with the local internet?

  • Posted by t


    actually ITER is an international project (including the US, EU, Japan, China, India, Korea & Russia) and its technology readiness is quite high. The main remaining challenges are in developing materials suitable for long term use in fusion reactors.

    The total ITER budget contribution from the US is of the order of $100 million 2009.

    The Iraq war is costing of the order of trillions.

    Which is the more cost-effective way to a secure energy future?

  • Posted by t

    closing italic tag, sorry.

  • Posted by Cedric Regula


    Ya, Iraq is still under 1 trillion, but that still sucks. Problem is the Middle East is not just about energy security. There are other factors.

    But conventional nuclear can be done for about $5B a GW, once they get started and get some learning curve on Gen 3 and build up the supply chain. The US has 330GW in coal capacity, so 1.65 trillion is the cost to replace it with nuclear. Iraq money would have got us more than halfway there.

    But even tho the tech is ready to break ground today, we can’t build that many before the 2020 timeframe. It takes too long and the entire supply chain, skilled labor, etc…needs to be developed.

    So for that reason (besides cost) we need some practical way of saving coal plants. There is an MIT study on the CFR site that gets into the details of the feasibility of carbon sequestering. It too is not cheap, and they say someone needs to prove out, develop and operate sequestering sites. I haven’t heard the Sierra Club volunteer, so I think that leaves the USG to be the coordinator of that piece of infrastructure.

  • Posted by A. Dawn

    Glad to see you back, Brad. Hopefully we will see you again.

  • Posted by Pallj

    I knew you would be in the thick of things sooner or later, and I know they got their best man for the job. Missing your blog, but accept that we can’t have it both ways.

    Your blog used to be one of the very best paces to try and understand this world we live in. The sense of inevitability about what has happened in the financial world, and is still in progress, has caused some sleepless nights, but to have seen it coming was a genuine thrill. I would never have felt I was a little bit in the know, if it hadn’t been for your blog.

    If you ever need anything in Iceland, feel free to ask.

  • Posted by dato

    Thank you for interesting post

  • Posted by adam madley
  • Posted by globumedes

    Hallo Mr. Setser

    I really miss your analysis about the flows of TIC, SWF, ADIA, KIA,GIC,Temasek, Coustodial Holdings, PBoC, Bills and Notes, GDP and debt, ..

    I mean, i get almost confused without your perspective…

    And now, there is one more: the Libyan Investment Authority
    (فاينانشال تايمز )

    What the hell should i do? (irony!)

    I hope and am sure you first get a truck-load of information and joy in your daily work
    and hope second you will soon make the “Simon Johnson” and come back to the forum and help us walking to the desert.

    Thank you for having told us all your excursions in the economic “big”-world and have a nice day.

  • Posted by Teething Necklace

    I know it’s been a while but thanks for a great blog.

  • Posted by John Jones

    Bernanke likes to remind everyone that he is an expert on the great depression and knows how to prevent it from happening again in the US. Apparently he is also an expert on Japan and its struggle with chronic deflation following its housing bubble in the 1980’s. In fact Bernanke wrote an article in 2000 titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis,” where he goes on to lecture BOJ officials about what they could and should have done differently in order to to avoid a deflationary outcome. He goes on to postulate that the BOJ was not trying hard enough to stimulate the economy and that 0% interest rates are just one tool to beat deflation. The Fed Chairmen even goes so far as to assert that he knows how to escape a liquidity trap caused by 0% interest rates. The reason I bring this up is because it gives people a good idea of what Bernanke’s next move may be. The US is dangerously close to falling into the dreaded “liquidity trap” as deflation takes hold and monetary policy loses its effectiveness.

    Here are some of his suggestions to the BOJ:

  • Posted by Vladimir Atehortúa

    Mr Setzer.

    I know you moved onto something new, but I really miss your economic hindsight and I wonder if perhaps after a year away you could give us another post of yours, perhaps on the subject of the alleged risk of deflation in the US Economy.