<Drumbeat: May 9, 2009 The Oil Drum Transitioning to A Society of Sloth?>

42 comments on Vinod Khosla at Milken Institute: Interview Excerpts

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Gail the Actuary on May 8, 2009 - 9:57pm Permalink | Subthread | Comments top

Many thanks to Robert for taking the time to transcribe this interview, and to add his own comments. One comment I found interesting is

There's not a viable nuclear plant at 15% IRR or 15% debt, which is what the solar guys contend with. It's only because of 5% loan guarantees from the federal government that keeps nuclear in business.

At this point, the government is holding debt costs down to very low levels in general with its current policies, if businesses can get the debt. This means that wind is now being financed at 5%, at least where financing is available, according to Jerome a Paris.

It is hard to see how interest rates can stay this low can last very long. Costs will be considerably higher once interest rates rise. Also, the total quantity of debt available is pretty low now. It seems like the quantity of debt available will decline, as banks try to rebuild their balance sheets.

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Luke H on May 10, 2009 - 8:29pm Permalink | Subthread | Parent | Comments top

But if this reduction of available credit puts downward pressure on prices (as it certainly has in housing) deflation occurs. Interest rates can be very low, zero or even less than zero(theoretically) in deflationary scenarios since the principal itself gains value as time passes.

Of course increasing scarcity of commodities puts upward pressures on prices, creating an inflationary scenerio that pushes up interest rates.

Who is to say that for a while (2? 3? 5? 7? years) these two competing pressures can't more or less balance and keep interest rates moderate. Tricky stuff.

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42 comments on Vinod Khosla at Milken Institute: Interview Excerpts

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