Background
On September 22, 2022 at a House of Representatives’ hearing, Rep. Rashida Tlaib asked JPMorgan Chase CEO Jamie Dimon, “Please answer with a simple yes or no, does your bank have a policy against funding new oil and gas products.” Dimon responded, “Absolutely not and that would be the road to hell for America.”
Rep. Tlaib did not ask where these new oil and gas products might be located, and Dimon, a savvy and experienced banker, did not elaborate. Oil is a finite resource. The term peakoil, introduced in 1956 by geophysicist M. King Hubbert, posits that extraction of a finite resource in any large region rises along a bell-shaped curve that peaks when approximately half of the commodity has been extracted. Although the Department of Energy has not publicly disclosed the specific date when this will occur, inevitably oil will become prohibitively expensive to extract. At that point, absent an as yet nonexistent global market of high-tech fuels such as cold fusion or anti-gravity, consumers will be forced to pay increasingly higher prices for energy generated from petroleum and natural gas. In addition, profound complications, incipient changes, the historical record of today’s main players, the ever-present (and growing) probability of nuclear war, and the immutable gorilla in the room –climate change- require global cooperation, not confrontation.
Concerns
The U.S. has good reason to be concerned about China’s rise. The former is a new nation that has never had to contend with a comparable economic power with a much larger population. In addition, no one knows, including China’s present leadership, how it is going to behave if and when it achieves full nominal parity with (or surpasses) the U.S. and President’s Xi’s mandate inevitably ends.
Where Things Stand
The recent agreements signed by Saudi Arabia and China, include, among other things, possible payment by China for Saudi oil in yuan, not dollars and production of green hydrogen. This is a seismic event neither the United States nor the rest of the world should ignore. Absent effective long-term market-based countermeasures (not military, which would end life on this planet as we know it), the yuan is set to challenge the U.S. dollar for reserve currency of the world. If that happens, it would bestow on China the unique privilege to overspend big time in its military-industrial complex and to export part of its inflation just as the U.S. has done since the advent of the petrodollar. Conversely, it would deprive the U.S. from continuing to do so . In addition, given China’s fourfold advantage in tax paying consumers, a bigger GDP in terms of PPP and a larger manufacturing sector, it is difficult to discern how the U.S. would be able to compete, under present policies, with China’s rapidly expanding navy, as of this writing the largest in the world.
Purpose of These Suggestions
The political and economic beliefs and policies that shaped the Twentieth Century are water under the bridge. Not only have they failed to perpetuate America’s economic hegemony, they won’t contain China and India’s economic growth and their consequent insatiable demand for energy. Accordingly, to avoid falling into the abyss of irrelevance that has devoured all other great empires, the U.S. might want to consider a new approach designed to render inert the increasing danger of thermonuclear war, replace all fossil fuels, nuclear fission and even fusion with green hydrogen drastically reduce the extreme inequality in wealth and income among and within nations , create a mechanism to permanently relieve the lack of affordable housing for the lower and middle income classes , restore job security (today’s extreme job insecurity is not compatible with 30-year fixed mortgages that require borrowers to rely on jobs they may lose at any time, for any reason, at their employer’s discretion and with little or no warning), and upgrade health care (in the U.S.) to a guaranteed right for all.
The Solution – Symbiotic Trade
The logical way to compete peacefully and effectively is to emulate China in terms of trade. We should sell them (and India) that which neither they nor anyone else other than the U.S. can produce on a scale commensurate with their needs: green hydrogen. While its advantages over fossil fuels are many, nine are particularly important. (1) Unlike electricity, which cannot be exported overseas, hydrogen can. So, for example, green hydrogen produced in Hawaii could be exported to China, India, Europe and Japan (which are not self-sufficient in energy) where it would be burned to generate electricity and power vehicles. (2) When used to generate electricity, its byproduct (steam) could be collected, condensed and used where needed; this would greatly lessen the impact of drought, increase production of food, and plant trees. (3) There would be no greenhouse emissions, essential to combat climate change. (4) The U.S. trade deficit would either become a surplus or be reduced on an unprecedented scale. (5) The surplus would strengthen the dollar and increase demand for it. (6) If done on this scale, millions of new jobs would be created in the U.S. (7) If properly distributed, a portion of the income from the hydrogen could be used to fund, over time, a plan to mass produce affordable housing for the poor and the middle class. (8) Since hydrogen would replace fossil fuels, control of existing oil and gas reserves would no longer be a bone of contention among the great powers. As a result, the probability of thermonuclear war would be greatly reduced.