Searchingtoo,

I see your point.  Its why a straight carbon tax won't work.  It would kill heartland coal users with its regressiveness.  I buy into the man made arguement behind carbon's accumlation and, like others, I might put a lower limit on the costs to all of us of imposing C&T.  I don't know that its worth it, while respecting a belief that it is man made and worth some mitigating cost.

My understanding of the allowances is that those who receive them will get them according to the carbon they produced in 2005.  NY/CA didn't produce as much carbon as the states inbetween and they won't be getting nearly as many allowances as a result.  That's where the "cap" comes from.  Each state won't get close to the same amount and the first 85% are free (house bill).  A. Spector is conservatively arguing for PA to put a cap of 10-15$ on each of the remaining per ton CO2 emissions sold at auction.  From there, it won't be until 2025 before they cut back from giving 85% away.  Futher added cost would come from growth beyond each producers 2005 level.

Because of the economy and a convergence of natural gas and coal prices, CO2 emissions have already dropped ~5% from the 2005 level.  I agree its hard to see a long term net cost not being born upon "coal states", but would argue that, if anything, it will cost everybody.  It won't be a massive wealth transfer.  The transfer is going to be to the technology that in the end wins.

JDog, I don't like to see the printing presses roll like they are, either and, yeah, I'd say a 1+tt deficit is a head scratcher.  But a lot of what QE is doing by buying mortgage and government bonds and, therefore fueling the deficit, is not so bad when you consider that unwinding QE will mean selling for a surplus effect.  The money isn't gone, like it is with entitlement spending.  The only concern is the damage done to the bond prices from higher interest rates when we sell.

Heck, I'm just impressed with cog's use of the word "forward". We may have more in common than initially thought.

I would argue that a 'forward' is nothing more than a cost-of-carry trade, and a 'Future' would be more indicative of market expectations of future events, but hey, doesn't take away from me being impressed with the mere usage of the term.

Stick around cog, I love to post about economics, but my posts usually garner few comments. I suspect because few here have the in depth economic knowledge to truly understand what is going on. That's not a knock against anyone, just a personal observation.

Maybe we could get a post going on the Governments 'Quantitative Easing' program, and how the heck they intend to get out of it... without causing significant disruption to the markets? Tell me the yield curve isn't pricing in the effects of a government exit!

I said C&T's execution would remove A downward pressure on the dollare, not that it's absence was THE 12% move in the dollar.

I don't know what the current account deficit is outside of a range of 500-800bb, but much of that is oil.  And FWIW, a dollar rally would show up in the forward market for an event that hasn't yet happened.