BUY BONDS? (RENEW AMERICA BONDS)

In The Renew America Bond; A Blueprint for American Energy Renewal, John Floegel, president of Fishcreek Capital, describes the purpose behind his idea: “America needs a national mission: We must finally overcome our oil addiction, reinvigorate our industrial base and leave our country a better place for the next generation. We would accomplish this by issuing Renew America Bonds, the proceeds of which would be invested in, and returns from which would be linked to, the success of a rapid clean energy transformation. Broad ownership of Renew America Bonds among citizens would give every American a stake in the energy revolution, and an incentive to help the economic transition succeed…”

During World War II, selling bonds was a patriotic duty proudly carried out by celebrities and leaders. Buying them was a patriotic investment made by citizens from Wall Street to the classroom and church pew. The bonds helped fund the greatest industrial mobilization in history, the mobilization that won the war and broke the stranglehold of the Great Depression on Western economies. Floegel believes his Renew America Bonds can do the same for the 21st century.

It’s an imaginative solution, to be sure. But the situation, as Tom Friedman pointed out in his Sunday New York Times column, is both urgent and requires imagination. People are beginning to respond to low gas pump prices by once again buying big cars. This may satisfy individual ambitions but will do nothing to meet the nation’s real needs. Yet the policies that might interrupt this destructive response to short term circumstances, a gas tax or a carbon tax, are not politically likely in a floundering economy.

Friedman, Win, Win, Win, Win, Win, NY Times: Of course, it’s a blessing that people who have been hammered by the economy are getting a break at the pump. But for our long-term health, getting re-addicted to oil and gas guzzlers is one of the dumbest things we could do…I believe the second biggest decision Barack Obama has to make — the first is deciding the size of the stimulus — is whether to increase the federal gasoline tax or impose an economy-wide carbon tax…[but] the Obama team has no intention of doing either at this time…Raising taxes in a recession is a no-no…”

Friedman is probably right. Yet standing by and watching the nation go back to its affair with oil is exactly like watching a loved one return to an abusive relationship. It may be necessary, but only if every alternative is exhausted. Friedman says he’s out of alternatives.

Friedman, Win, Win, Win, Win, Win: “…I’ve wracked my brain trying to think of ways to retool America around clean-power technologies without a price signal — i.e., a tax — and there are no effective ones. (Toughening energy-effiency regulations alone won’t do it.) Without a higher gas tax or carbon tax, Obama will lack the leverage to drive critical pieces of his foreign and domestic agendas…”

He’s absolutely right. But if the electorate that chose Barack Obama rises to the occasion, Floegel’s Renew America bonds might just be a part of a workable alternative.

Floegel, on the impact of his bonds: “Purchasing the bonds would be both an act of patriotism and of economic rationality. Productive investment of the bond proceeds would help fulfill our generational duty to leave this country, and the world, better than we found it.”

It’s a really intriguing idea, especially in the current, credit-constrained economic circumstances. It is also something the nation has long lacked, a challenge that does not involve bombs and killing. Floegel imagines teachers leading their classrooms in bond drives, churches and communities taking up the cause and affluent citizens - prodded by celebrity sellers - seeing the bonds as a sensible place to put a portion of their money.

Floegel: “America needs a cause, an uplifting and nonpartisan mission, which harnesses our courage, patriotism, innovation and willingness to sacrifice to build a better future for our children. We are tired of rote partisanship and long for a defining cause greater than consumerism. We are in awe of and inspired by the World War II generation and the Civil Rights crusaders that came together, sacrificed and defeated common enemies and left a legacy of pride and prosperity for their children and grandchildren…”

The details of such a plan would be completely determinative. Floegel imagines the portfolio of investments, overseen by a blue-ribbon panel of intermediaries, being broad and balanced between big and small companies, staid and start-up companies, public and private companies, as carefully selected as the most conservative fund. He also sees a moderate “price stabilization” gas tax to back the plan, a tax people might accept because they would know it is backing their own investments.

The country could use some renewal, let's face it. (click to enlarge)

Opinion: Clean Energy Should Be Our Cause
John Floegel, December 19, 2008 (The Street)
and
Win, win, win, win, win
Thomas L. Friedman, December 27, 2008

WHO
John Floegel, president of Fishcreek Capital & H.B. Mertz, small business owner, co-originators of the bond idea


WHAT
Renew America Bonds would be an investment vehicle analogous to World War II’s war bonds by which Americans could support and invest in New Energy.

It IS the "moral equivalent of war..." (click to enlarge)

WHEN
Just like the war bonds issued during World War II, the Renew America Bonds would be 30-year, zero-coupon U.S. government bonds.

WHERE
- Floegel’s Fishcreek Capital is in Summit, New Jersey
- Floegel’s investment program would be national.
- The bonds would be marketed (like war bonds in World War II) from the President, via investment conduits like Wall Street and Silicon Valley financial institutions, to the communitarian, religious and educational spaces across the country.

WHY
- The bonds would be available in denominations from $25 on up, allowing even small investors to share in the adventure.
- Each bond’s principal would be redeemable at maturity or could be converted to a payout based on the long-term performance of the New Energy economy the bonds fund.
- The bonds would not pay interest but be redeemable on maturity at either the value of the “alternative energy investment basket” (AEB) – the companies in which the money is at work – or at the value of the money invested, whichever is a larger amount.
- The AEB would be chosen according to “…what works…”
- The bonds would be backed by a trust account supported by moderate gas tax.
- The money would be invested in companies that develop and commercialize New Energy, through conduits like venture capital firms and possibly banks.
- The conduits would be required to match the bond investment.
- The bonds would give their holders a direct economic stake in New Energy, stimulating commitment, use and further participation.

And it's just as much about THEM now as it was then. (click to enlarge)

QUOTES
- John Floegel, co-originator, Renew America Bonds: “We need to declare our independence from oil, rebuild our industrial economy and reestablish our national prestige. We can do this with our own savings, and profit handsomely from the economic transformation.”
- Floegel, on where the money would be put to work: “Plug-in hybrid electric vehicles are available now. Wind, solar array, geothermal and safe nuclear technologies, with sufficient investment in rolling them out and in building/upgrading transmission capacity, could compensate for the additional capacity needed to electrify the transportation fleet. Combined with effective purchase incentives for electric vehicles, the American car and truck fleet could turn over within ten years, and oil would largely be displaced as a fuel in this country. If the Renew America Bond plan accomplished only that, it would be well worth it…”