Saturday, May 27, 2017

Nasa announces 2022 mission to explore metal asteroid so valuable it could crash the world economy

Nasa announces 2022 mission to explore metal asteroid so valuable it could crash the world economy

It is valued at 10 quintillion dollars.

19 comments:

  1. I know Murdoch's people are economic illiterates, but this is total nonsense.

    Compare. Saudi Arabia pays about $2.33 for every kiloliter of water its residents drink. (See http://en.wikipedia.org/wiki/Water_supply_and_sanitation_in_Saudi_Arabia and do some back of the envelope math.) Europa has enough cubic water to make a ball with a radius of 877 km. (See http://apod.nasa.gov/apod/ap120524.html)

    So, by the logic of the above article, if you sold all of the water in Europa to Saudi Arabia, it would be worth $6.58 Quintillion dollars, or 1000 times more than Psyche.

    This is lunacy, of course, because dropping a ball of water with a radius of 877 on Riyadh would not only eliminate the water shortage there that makes the stuff so expensive, it would also eliminate the city, Arabia, and most of life on Earth.

    But sending a space mine out to Psyche or a space desalinizer to Europa is still a losing proposition because the cost of transporting the resultant goods back to the market for them on Earth is astronomical. (Literally.) So, for that matter, is building a pipeline from New Orleans to Riyadh to dispose of Louisiana's frequent glut of freshwater in the Saudi market. By happy accident, kiloliter of water weighs about a ton, and it costs about 1.5 cents to pump a ton of oil one mile (https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_03_21.html), so since Riyadh is 8000 miles away from New Orleans, pumping freshwater between the two would cost about $120 per kiloliter for a profit margin of ~-98%.

    Pipelines are cheap compared to space transportation. Now IF you could get a complex and automated mining facility up to Psyche, it would take very little fuel to get the mined ore back to the surface of the Earth... provided you don't mind that it crashes into the Earth. So you need a way to move cargo to the surface in a controlled manner.

    The space mining companies, unlike the author, aren't idiots, they probably know that this is only going to be feasible with a big space elevator and fusion power. But suppose that we have magic instead, and can summon gold, platinum, iron and nickel down from Psyche in basically unlimited amounts for a cost that is less than 1/10th the current market price. This happened once before with steel prices during the industrial revolution, and the effect was NOT "crashing the world economy".

    Would that "crash the world economy"? No, not really. What it would do is out a deflationary pressure on the world's economy by lowering the price of every good and service that has these raw materials as a factor in their production. So for a steel pot set that costs $25 on Amazon and has maybe five pounds of iron in it, the iron would cost 1 cent instead of 10 cents, saving the consumer a whopping 9 cents. Cheaper metal is not a big deal any more. Most industry has labor and energy as its primary cost components rather than heavy metal raw materials, so the downward pressure this would put on CPI is minute. We're talking a couple tenths of a percentage point less inflation than would otehrwise occur, meaning the Federal Reserve would be able to keep a little less unemployment or the government could run a slightly bigger deficit. The only noticeable difference between our world and one where asteroids can be mined is that gold jewelry becomes worthless, as do all investments in gold bullion by the kind of morons who think that's a good idea. So less drug dealer bling and weeping Zero Hedge readers.

    You know what WOULD utterly change our economy? Fusion power and a space elevator.

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    1. Correction: "The only noticeable difference between our world and one where asteroids can be >>magically<< mined..."

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    2. I don't know about the cost of metal, but everything else you've written is absolutely correct.

      Also, even if we had all the magical abilities you wrote about to make it possibly to actually mine this asteroid profitably, it's not like the owner of the asteroid would sell all the metals from the asteroid all at once.

      Diamonds are very plentiful, but DeBeers is able to control the supply and they also generate the demand with their false advertisements that a marriage proposal being sealed with a diamond has been a tradition for hundreds of years.

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    3. Clarification:
      I meant I don't know anything about the cost of metals. I did not mean to imply that what you wrote might not be correct.

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    4. I did, in fact, take a look at the unit price per metric ton of pig iron ($60-$70 in two Chinese Markets), the price of some metal pots on Amazon, guesstimated the weight of iron in the pots at 5 pounds and came up with 10 cents. One website on the price of steel in the 19th century said that the price dropped from $170 per US ton in 1867 to $14 per ton in 1900 based on technological improvements, which is roughly on par with the prices quoted for raw steel today when you adjust for inflation. You can google "price of pig iron" and "price of steel in the 19th century" if you want.

      The practical upshot is that iron and steel are already dirt cheap, and we don't use nickel, gold, and platinum for all that many products that comprise the CPI. Probably: Industrial Electromagnets, Catalytic Converters, Some Computer Chips would be the big ticket items for each, off the top of my head.

      Now that's not to say that there might not be incredible new uses for cheaper new versions of these metals, I'm not an engineer so I have no idea, it's just that none of them are likely to be in products that will have a big short to middle run impact on the CPI.

      One other effect that might be worth noting is that pig iron falling from $60 a metric ton to $6 might be a big deal in place where local wages are dirt low. Meaning an African farmer might be able to buy a much better tractor, or any tractor at all.

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    5. Another mistake. The nonsense number for Psyche was $10 quintillion, not $10 quadrillion. Oh well.

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    6. Three posts

      Given my interest (bordering on obsession) in economic history, the Industrial Revolution is one of my favorite topics. it's basically the start of the modern economy, and, as such, it can be used to observe changes in the economy before the modern economy got too complicated. This covers the period from about 1775 with the completion of James Watt's steam engine to the invention of railroads in the 1820s, which is when most historians consider to be the end of the Industrial Revolution and the beginning of the Age of Industrialization.

      Watt's steam engine lowered the cost of production for all sorts of goods but especially for raw materials like iron and steel that were used in all sorts of production, like other machinery, engineering projects for public (and private) works and for some consumer goods.

      Yet, contrary to what this article implies, and to back up you wrote earlier, Watt's steam engine and the Industrial Revolution did not 'crash' the economy, but expanded it enormously.

      The reason is that economics is (mostly) not a zero sum game. Lowering the cost of production (or increasing productivity) is the sole long term driver of increasing economic growth. Lowering production costs for, in this case, raw materials, lowers the input costs for new and existing products which makes them more affordable and either opens up new markets or expands existing markets.

      The writer of this article was likely thinking back to, after Spain conquered South America and found a great deal of gold, that the price of gold dropped significantly, especially in Spain, and that led to a great deal of inflation which ended up greatly harming the Spanish economy.

      This was because the Spaniards either used the Gold Standard or they used gold directly as currency. In that case, it was a situation of too much (new) money chasing too few goods.

      This is nothing like a situation of a large increase in raw resources lowering the costs of raw resources.

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    7. Two

      As my post suggests, the real fascinating part about economics (to me anyway) is the complex interactions involved. Oddly enough, since economists seem to have a term for every situation, there doesn't seem to be a good name for this. I've seen parts of these complex interactions referred to as 'network externalities' or 'network effects' or 'second order effects' or 'economic interdependence.'

      These interactions which mostly happen without any planning are what Adam Smith was mostly referring to with his phrase 'as if by an invisible hand.'

      All of those who think that there are conspiratorial forces who control the economy or think that a central government should control the interactions in an economy need to understand how the complex interdependence involved and how market signals (usually pricing signals) are the only real possible way to organize markets.

      However, with the rise of Behavioral Economics, economists now have a better understanding of why Adam Smith's invisible hand sometimes fails to act. James Watt actually had completed the design for his steam engine about 5-10 years before he could build it. The reason for this is his steam engine required precisely timed actions that required far more precisely made machine parts than were made at the time. It took about 5 years for Watt and his financier to convince parts makers to start making more precise parts. (This ultimately led to standardized parts which then led to mass production.)

      According to Behavioral Economics, most people, including manufacturers are unwilling to spend a great deal on upfront costs when the future returns are very uncertain. In hindsight it seems obvious that the Industrial Revolution should have made these parts manufacturers very wealthy, but at the time, they could not be certain of that.

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    8. Three
      From the past to the future.

      Fusion power or any sort of virtually 'free energy' would absolutely change the economy. As Einstein proved with his E=MC^2, energy and matter are the same thing.

      With virtually free energy it would likely be possible to mass manufacturer every good simply by altering the molecules in the air (or something like that) at virtually no cost.

      Given that the all economic theory ultimately is based on the concept of 'scarce resources' with resources being virtually practically limitless, economic concepts no longer apply, at least to the economy.

      As there have been a few books like Freakenomics that have tried to point out, economic theory apples to virtually everything in a person's life, and as long as the main scarce resource of time remains a scarce resource, economic theory will still apply to life.

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  2. Dude this is The Sun - says so right in the url. It needs a detailed takedown as much as why that coyote can never catch the roadrunner.

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    1. I have way too much free time.

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  3. Ummm...price is determined by supply...guess what happens to price when supply suddenly goes way up...

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  4. Adam T kind of beat me to this as I was typing, but "supply" partly depends upon who controls it. If *I* have a large quantity of an otherwise high-demand/low-supply product, I can simply choose to not release said supply, and I only need to match or slightly beat market price to stay viable. Then there's the matter of multiple suppliers colluding as with OPEC.

    Mining the asteroid in any practical matter is fantasy at this point (and the article should be digested with that in mind), but IF a company could hypothetically claim ownership and pull it off, it'd be their choice as to how much of the metal to put on the market at any given time.

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    1. That's be a salient point. IF there weren't a couple million other asteroids besides Psyche. Psyche might have the highest concentration of heavy metal in the belt, but there are others out there and mining a smaller one would produce meaningful amounts of gold and platinum, etc. In any realistic asteroid mining scenario it's going to be basically impossible from stopping some gang of space cowboys from setting up operations on a few other asteroids and undercutting the cartel.

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    2. I dunno. Even in the fantasy universe of asteroid mining, the expense involved would be such that the industry would be exclusive to high-dollar corporations long before any space cowboys (all named Maurice, obviously) could have the capability.

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    3. The capital investment would be a lot less than you'd think. And my "Space Cowboys" would be another large corporation.

      DeBeers works because the number of diamond mines is relatively small and the ones it doesn't control are in areas with major political instability.

      OPEC is not a conglomerate of corporate interests but a bunch of governments, and oil/energy is MUCH bigger business.

      It's practically impossible for large corporations to maintain a cartel indefinitely without the active support of government. If they're making large profits, that's basically an advertisement to other people with lots of money to go out and undercut the cartel. And even when the cartel has got government interests, they won't be able exploit it forever under a Democracy.

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    4. There are a few natural monopolies, as economists call them.

      Natural monopolies exist where there are very high start up costs or where only one company can exist profitably. In the movie The Aviator, Howard Hughes is told by the evil U.S Senator played by Alan Alda that 'only one airline can fly profitably between the U.S and Europe and we didn't choose your airline.'

      Many of these monopolies tend to get displaced by new inventions, but there are some that have lasted for many years, though I can't think of any of the top of my head.

      There are also monopolies that exist due to a business getting there first. Ebay is a great example of this. Even though there are likely very few barriers to entry for a new online auction site, because Ebay was there first, everybody goes there so nobody is interested in selling on a startup competitor. I guess there are a few speciality auction sites and maybe Amazon could compete if it wanted to, but other than that, I don't know what could compete with Ebay.

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    5. In your imaginary example, you didn't mention how much the company(s) could mine at any one time, so for the sake of simplicity I decided to make it into a monopoly situation.

      Even if it's not a monopoly, the companies involved would have limits to the amount they could mine at any one time.

      First, there might be limits to the amount that could be physically mined at any one time and, more importantly, the price they sell out can't, over the long run, drop below the cost of production.

      There are some cases in the short term, like some companies in the oil sector that are likely selling at a loss, but obviously no business can sustain that for a long time.

      Businesses are willing to sell at a loss in the short term mainly to keep market share and to keep employees.

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