Warren Buffett versus the Soccer Moms

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Warren Buffett versus the Soccer Moms

(This short article of mine was recently published on Financial Sense, and I thought it might be of interest here too. I suppose that I also want to use it to introduce myself.  I was an old lurker, and am now a new poster.)

Warren Buffett versus the Soccer Moms

US Economy to be rebuilt around rail links?

by Michael Hampton, AKA Dr.Bubb

"If you need a car to live there, Do not buy there!" - how long before we hear that advice across America?

Last week Warren Buffett's Bershire Hathaway invested $44 billion in a railroad. This represented BH's largest investment yet. Mr. Buffett characterized it as a "bet on America's future." Much of the investment is his own money and so Mr. Buffett must be right about the rationale. But if the investment is a "bet on America", it is a bet on a different sort America than we have today. Dig deeper and you will see that Buffett is betting on higher energy prices and a different transport focus.

Approximately half of Americans live in the suburbs. In fact, this living arrangement, which has received so many trillions of investment from Americans over the past 8 or 10 decades, can be seen as a huge bet on cheap oil prices. This is a bet that many Americans may have feared they were losing when oil prices shot up to $146 last year, and gasoline pushed through $4. Oil prices fell back 12 months ago, only to start rising again when the economy stopped its freefall in 2009. People should be able to see, that if we do have an ongoing recovery, then eventually a recovery will bring back higher oil. Thinking suburbanites must be worried, and the deeper thinking ones, may realize that Warren Buffett's huge investment is a warning that the days of cheap oil are truly ending.

"We live here for our children," is a response that you are likely to hear from many US suburbanites if you ask why they live so far from the cities, and maybe with a long drive to their jobs too. Giving a lawn and space to young children, may seem like the right and caring thing to do, and it involves various sacrifices on the part of the parents, especially the ones who commute. A typical pattern might be where one or both partners drive long distances to work, dependent on a car and regular gasoline purchases for transport to the office. Where there is "a full time Mom," her life maybe be dedicated to chauffeuring her children to school, and various other activities. Hence, she calls herself a "soccer mom", and she may drive an SUV or some other vehicle large enough for herself and her children. This is not the sort of America that Warren Buffett is betting upon. In fact, as James Howard Kunstler has put it, "the American suburban living arrangement has no future," It seems that Buffett agrees. Cars and trucks will be the vehicles that lose out to railroads.

Ironically, those who live in the suburbans may have done a disservice to their children and their grandchildren. An America addicted to foreign oil, is an America with a bleak future. The US now imports almost 2/3rds of its oil requirement, with most of that used for transportation fuel. And that addiction is not going to go away as long as Americans live in the suburbs and commute by car. For the first time in history, the number miles driven fell in 2008. So a recession may seem like a partial cure for the addiction. But we live in a world of global oil demand. The US has 76 times as many cars per capita as China. But new car sales in China are expected to be 29,000 cars per day in 2009, which surpasses the US by about 10%. India, too is showing a big increase in car sales; up 5% to an expected 3,300 cars per day. Once they have a car, the new drivers will need fuel for it, and oil consumption in emerging countries will grow, whatever happens in the US. In a Post-Peak oil world, we cannot afford even one oil consumer on America's scale, let alone two or three.

The real nightmare scenario for America will come when the oil price rises as the dollar falls. A collapse in the dollar, is inevitable given the rate at which America is borrowing and spending money from overseas creditors. When the dollar collapse happens, the dollar oil price is going to go much higher. Knowledgeable observers like Matthew Simmons have spoken about $400 oil and $10 a gallon gasoline prices.

Many companies are looking for alternative ways for powering the auto fleet. Hybrids may help, and so may electric cars, but that is not going to change the fact that car owners in other countries will keep pushing the oil price up. The real long term solution is to change where Americans live, and severely curtail the amount of driving that they do. This will mean an end to many American suburbs, especially those in the far away "outer rings." Cities and small town will need to densify around their inner cores, and around their rail hubs.

That is the real bet that Warren Buffet has made. He has bet against the Soccer Moms. The suburban car users had better see that they and their families are losing the bet on cheap oil. The sooner they begin to examine their lives, where they live, and how dependent they are on a scarce global resource, and begin to make the dramatic adjustments that are needed, the greater the chance they and their children will survive the inevitable changes that Warren Buffett has so clearly signaled by his largest ever investment.

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Re: Warren Buffett versus the Soccer Moms

Nicely done, DrBubb.  Esp this:

"The US has 76 times as many cars per capita as China. But new car sales in China are expected to be 29,000 cars per day in 2009, which surpasses the US by about 10%. India, too is showing a big increase in car sales; up 5% to an expected 3,300 cars per day. Once they have a car, the new drivers will need fuel for it, and oil consumption in emerging countries will grow, whatever happens in the US. In a Post-Peak oil world, we cannot afford even one oil consumer on America's scale, let alone two or three."

This is the kind of point (clearly made) that can penetrate the heads of regular folks, even if they don't know of/believe in Peak Oil.  The sheer numbers of extra cars on those roads (in China/India [and by extension, Brasil etc.]) will put price pressure on oil -- not to mention all the other oil they would use (or want to use) to pursue a standard of living more like ours.   

And welcome to the (non-lurking) party!

Viva -- Sager

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Re: Warren Buffett versus the Soccer Moms

Thanks, Sager.

No doubt, such an article is not really needed here - It is like "preaching to the converted", a bit of a wasted effort.

The issue for readers on this website is:  How do we the message out to those who are still in denial, and would rather not know.  

I would have wanted to see a large gasoline tax imposed in the US decades ago.  It might have saved us from investing trillions of dollars in absurd things like: McMansions in the outer ring suburbs.  Some of these homes, possibly most of them, will wind up as farmhouses, slums, or firewood.  The resources wasted in building them, and the debt expended in financing them... represent a very sad waste of wealth and scarce material.  The writedowns hit the reckless individuals, banks, and even the US as a whole.

The changes that are needed look obvious, once you begin to understand the problem, but the political consensus needed to tackle "the dilemma" in an adult fashion, is still beyond us.  How can we change that?

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Re: Warren Buffett versus the Soccer Moms

Drbubb asks:

The issue for this website is:  How do we the message out to those who are still in denial, and would rather not know.

I'm becoming increasingly convinced that the way to spread the word is to be well informed on all related topics as much as we can so as to be prepared to amicably engage in discussion if the opportunity presents itself, and to subtly spark the  discussion if it doesn't. Therefore I would tend to disagree that your article, while "preaching to the choir", is not needed. It would, IMHO reinforce, and flesh out the topic for us as well as provide additional perspective. So bring it on.

By the way, most folks I present these topics to are not so much in denial as ignorance. Most reactions I get are acknowledgement of a problem, then a moving on with their life. Therefore I think a repetitive approach might be useful in that if folks get the same alarm sounding from different sources, eventually through osmosis, they might come to a recognition of greater awareness and urgency. That's the approach I'm trying presently. It has been only marginaly successful, but no worse than anything else I've seen or heard being tried.

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Re: Warren Buffett versus the Soccer Moms

"The issue for this website is:  How do we the message out to those who are still in denial, and would rather not know."

The people I speak with will give a nod of the head, and a grunt to indicate that they heard me.  I think that most people only want to deal with what is in front of their face, and they don't really want things to change.

Has anyone tried contacting their congresspersons?

btw I am a soccer mom.

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Re: Warren Buffett versus the Soccer Moms

This thread is morphing into zealotry, of an almost religious nature. I try to convince few, learning the futile effort is negative energy discharge.

robie,

an acute "I" myers-briggs

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Re: Warren Buffett versus the Soccer Moms

"I think a repetitive approach might be useful in that if folks get the same alarm sounding from different sources, eventually through osmosis, they might come to a recognition of greater awareness and urgency."

The thing the communicates the message best ... is a SHOCK.  

We got a shock from $146 Oil prices in mid-2008. But when prices fell back down, people's sense of urgency faded.  Today we are now dealing with another shock - the weak global economy.  Many wanted someone or something to save them from job losses, or reduced wealth.  They cried came out to government: "Do something!"  And the politicians responded, with a huge stimulus program.  Many people now think, we are headed "back to normal."  And they are switching off again.  Complacent, they are now feeling that they will need to do nothing to change their lives, and the way they waste resources.  They want to go on, just as the always have done, living like cheap oil and cheap resources, and a stable climate would last forever.

The sad truth is this : For most, only a Big Shock (!) communicates the message.  But if the majority wait for the really final big shock, before considering to change their lives - it will be too late.  Too late for them, and for most of the people on our planet. When the majority wakes up, they will find that they are trapped, and there will be very few choices left to them.  Only if we can get enough people onboard before it is too late, can we forge an consensus to make bigger and more meaningful changes.

Something I personally would like to see is higher taxes on oil, carbon, and maybe even on water.  Higher prices is one thing that would surely change behavior.  If people have to pay more for resources, they will use them more carefully, with less waste.

I have founded a website, called GreenEnergyInvestors dotcom.  It has over 2,000 members.  Most are based in the UK, where I used to live.  We discuss many of the same issues, that you discuss on this website.  In fact, the Chris Martenson course has been recommended by many of our posters.  And that is what led me to register on this site over 12 months ago.

When I mention the idea of raising taxes on energy and other resources on GEI, I get a common reaction: "Don't do that!  Governments only waste money.  A higher tax would put more money in the hands of government, and that's a bad idea."  This comes from people who are mostly sympathetic to the idea of Peak oil.  When I tell them, well look what has already happened, gasoline taxes were raised in Europe to much higher levels years ago, and the result is that Europe uses much less oil: 9 barrels per annum per capita, versus 27 barrels in the US.  This comment usually elicits silence.  Or a few say, doesnt that prove the point - governments will just waste the money.  European governments are at least as wasteful with tax revenues as is the US government.

This fear of government waste is one of the problems that has doomed carbon reform efforts in Copenhagen.  People were afraid that governments would just waste the tax revenues, or that Cap-and-Trade revenues would wind up in the pockets of investment banks like Goldman Sachs.  No one wants to see that.  Now there is serious talk about "cap and dividend" as an alternative.  This is more appealing to me also.  Let the heavy users pay more, and split the "cap" revenue with everyone.  The wasteful reward the virtuous.  And maybe that will work.  But people remain suspicious of any system where revenues pass through sticky fingers of governments, and so they should be.  A program like that would need to be very skillfully legislated, to keep the voracious appetites of near-bankrupt governments from grabbing it all.

Perhaps there is another way, which can complement the larger efforts needed to seek political remedies.

Many here are struggling to "Get the message out, before it is too late" within their own communities.   Such efforts are valiant and valuable.  But I truly like the idea that we can change our own behavior, and then lead by example.  And that idea is what has led me back to this website.  

I am truly impressed by the example that the Martensons have provided with their own lives, the way that they live within a sustainable community.  And I think that many others here are doing the same.  (Listening to some podcasts on the TwoBeersWithSteve website has brought that home to me: Well done, Steve!)

Let's join forces: you and I, GEI and the CM website, and others here and around both sites.  We can get the word out in 2010 in fresh ways: new podcasts, new videos, new courses and events.  There's much to be done, and not so much precious time to do it.  2010 can be a great year for positive and bright changes in our lives, even as the global economy drifts towards a darker future.

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Re: Warren Buffett versus the Soccer Moms
fiatagogo wrote:

Has anyone tried contacting their congresspersons?

btw I am a soccer mom.

Not so easy for me, since I live in Hong Kong, where a lower carbon and energy footprint is easier to sustain.

BTW, I have no problem with Soccer Moms, per se.  They do not all drive SUVs.

However, I would be interested in your reaction to this comment within the article:

"We live here for our children," is a response that you are likely to hear from many US suburbanites if you ask why they live so far from the cities, and maybe with a long drive to their jobs too. Giving a lawn and space to young children, may seem like the right and caring thing to do...

Ironically, those who live in the suburbans may have done a disservice to their children and their grandchildren. An America addicted to foreign oil, is an America with a bleak future."

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Re: Warren Buffett versus the Soccer Moms

 

People were afraid that governments would just waste the tax revenues, or that Cap-and-Trade revenues would wind up in the pockets of investment banks like Goldman Sachs.

Gee, why would anybody think that?

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Re: Warren Buffett versus the Soccer Moms

I'm thinking as we move into the future, the population is only going to get bigger. What better way to transport people than mass transit system like a railroad or a rail system. Maybe thats the thinking behind investing in a railroad. This may be especially true in a metropolitan when there are too many cars and traffic which is happening here in southern Calif where I live.

But this post peak oil thing you guys keep talking about, when can we really expect this to affect us? Again, where I live the prices have gone up, but then down. Any idea when this peak oil thing will really affecting us? I don't see it or feel it one bit at the moment.

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Re: Warren Buffett versus the Soccer Moms
fiatagogo wrote:

"The issue for this website is:  How do we the message out to those who are still in denial, and would rather not know."

The people I speak with will give a nod of the head, and a grunt to indicate that they heard me.  I think that most people only want to deal with what is in front of their face, and they don't really want things to change.

First off, fiatagogo, your screen name cracks my UP.  Thanks!

Secondly, yes, the nod/grunt.  I know it well.  But as Earthwise said in post #3, I too have found that the message can penetrate once people are getting it from more than 1 person/source.  (It worked like that for my wife -- once upon a year ago, she didn't want to hear squat about the coming conflagration from me.  Now, 12 months later, when she discovers a half-dozen other folks in our social circle think like I do, my ideas are suddenly less threatening/crazy.  Funny, that.)  SO:  to the extent you can see your (currently futile) efforts as a 'planting seeds' kinda thing, keep it up.  

fiatagogo wrote:

 they don't really want things to change.

Methinks very soon, they really will want things to change.  The temperature's going up in this here sociopoliticoeconomicenviromental sauna.  Everybody's gonna be lunging for the controls before long.  IMO.

Welcome to the forums!

Viva -- Sager

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Re: Warren Buffett ... what do we do in 2010?

Let's join forces: you and I, GEI and the CM website, and others here and around both sites.  We can get the word out in 2010 in fresh ways: new podcasts, new videos, new courses and events.  There's much to be done, and not so much precious time to do it.  2010 can be a great year for positive and bright changes in our lives, even as the global economy drifts towards a darker future.

DrBubb - welcome and congrats on your first post, it's a beauty!

I want to comment on your final paragraph there - this is exactly my focus for the year.  Let's join forces and put all our efforts behind something substantial.

Instead of hundreds of individual messages and goals, let's find one or two that we can all roughly agree on and pursue those.  Let's set some targets and then strategize about how we can achieve them. 

I have some enormous opportunities coming up to get a message out to both political and business leaders.  What is that message?  What shall I advocate if I only have the chance to advocate one thing?

The most immediate opportunity will be at the Commonwealth club on January 26th.  While there may only be 80 or fewer people in the audience, there's a strong chance that the talk will be widely broadcast across the NPR network. 

I am crafting the speech now and would love to get everyone's feedback on the tone, the tenor and the message. 

2010 has to be a time where we secure more intellectual territory and real gains in winning over hearts and minds than ever before.

Next I will be in the UK talking to both government and business leaders and then delivering a few seminars in the US.  Along the way I have to get my book completed while also producing new materials for this site and the world.  Time is at a premium and each engagement takes on more importance than the last.

So, the question becomes, what does 'joining forces' really mean and what is our first step?  I think a summit of the thought leaders in these fields would be an excellent first step.  Perhaps a weekend meeting this spring in some easy to get to place?  The goals would be to identify and agree on common goals and messages.  We'd hear about each others trials and tribulations and become the networking and support organization for those who are seeking to promote an aggressive program of social change, which is never an easy task.

Thoughts?

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Re: Warren Buffett versus the Soccer Moms

Dr. Bubb,

Thanks for joining our community! I very much enjoyed your interview with Mish:

Predictions for 2010, Number 3: Mish and Dr Bubb

 

and I look forward to more of your posts....Jeff

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Re: Warren Buffett versus the Soccer Moms

cmartenson, have you tried working with John Mauldin? He has an audience of over a million subscribers and makes a great deal of economic  sense (rants about faking statistics and sees thing coming a mile away.) I only subscibe to his newletter but he makesw a lot of sense. He also runs a hedge fund, but don't hold that agaist him! http://www.frontlinethoughts.com/learnmore

And do you get updates from George Friedman's Stratfor? They have kept me up-to-date-on how international banking is doing (badly), and are putting forth the stats on how unsustainable various international government retirement plans are.

http://www.stratfor.com/about_stratfor

As to the tone of your speach, I vote for your official theme word to be "unsustainble" but I think it already is. The fact that US government statistics are simultaneously lying about the amounts of inflation and unemployment--at the same time--is very believeble to most folks nowadays.

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Re: Warren Buffett ... what do we do in 2010?
cmartenson wrote:

So, the question becomes, what does 'joining forces' really mean and what is our first step?  I think a summit of the thought leaders in these fields would be an excellent first step.  Perhaps a weekend meeting this spring in some easy to get to place?  The goals would be to identify and agree on common goals and messages.  We'd hear about each others trials and tribulations and become the networking and support organization for those who are seeking to promote an aggressive program of social change, which is never an easy task.

Thoughts?

I think the Summit is a fine idea.  As for the tone of the message going forward, I believe the current tone is fine but it'd be crucial to add the meme "There are things we can all do, and here is what [I myself, others around me] am/are up to."  And a sense of urgency, no?

Viva -- Sager

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Re: Warren Buffett ... what do we do in 2010?

Thanks, for the reply, Chris.

I shall be sending you a PM, or email, with some thoughts about a meeting, and where and when it may happen.

I love your impetus towards action:

"2010 has to be a time where we secure more intellectual territory and real gains in winning over hearts and minds than ever before.

Next I will be in the UK talking to both government and business leaders and then delivering a few seminars in the US.  Along the way I have to get my book completed while also producing new materials for this site and the world.  Time is at a premium and each engagement takes on more importance than the last.

So, the question becomes, what does 'joining forces' really mean and what is our first step?  I think a summit of the thought leaders in these fields would be an excellent first step.  Perhaps a weekend meeting this spring in some easy to get to place?  The goals would be to identify and agree on common goals and messages.  We'd hear about each others trials and tribulations and become the networking and support organization for those who are seeking to promote an aggressive program of social change, which is never an easy task."

I have been think much about this since I read you post, and I have come up with the following notes, which I have also posted on my own thread:

Here's a look at an outline of my thoughts initial thoughts, with a also posted on my GEI website.

Martenson's Global challenge, to meet & achieve change
Building a network of leaders amongst "green web people"

-================================================-

Global cooperation is not working well at the level of political leadership.

Many of us would say, it is someone else's responsibility to lead the change. But if you think about it: we are "someone else."

Can people who are "aware and involved" get a new message and a new agenda "out there" (onto the web and into the world)?
Can "We, the people" (green web people) provide the catalyst towards essential changes, and within an acceptable time frame?

... I have been thinking further along the lines proposed by Chris.
Here's a look at an outline of my thoughts intial thoughts.

Bulletpoints / The big message:
+ The experiment in floating exchange rates and debt-fueled consumption is faltering
+ Trust in political leadership is breaking down
+ Real limits to growth, and shortages of resources, are hitting us
+ We need to move to a sustainable existence, which means less rampant growth
+ We don't need new technology (although it may help), but we do need new leadership
+ Copenhagen was an attempt at global leadership on a key issue, and it failed
+ Politicians seem to be co-opted or controlled by corporate influences, who are fighting change
+ The citizens of the world have big stake in this, and we cannot wait for the politicians
+ Most important movements of the past started amongst citizens and were spread to political centers
+ We need to hit the tipping point, the "100th monkey", that "vital 8%", from which proceeds change

Diagnosis:
+ We are out of balance in many critical areas; Energy use, and capital flows are two key areas
+ After years of debt-fueled over-consumption, we are facing at least some years of under-consumption
+ Debt defaults, through writedowns and/or high inflation, appear to be inevitable
+ Because of wealth differences and globalisation, it is cheaper to do most things in emerging economies
+ Given the global nature of our economy, and the imbalances, we need a global solution
+ Currencies of western debtor nations are too highly valued, but exporter creditor nations do not want
to undermine their export markets, by appreciating their currencies.
+ A sharp decline in the Dollar and European currencies may be inevitable
+ A sharp rise in Oil prices, and other energy prices may be inevitable
+ Putting these together a very sharp rise in Dollar and Euro priced oil prices appears inevitable,
and the likely impact would be a shutdown of economies highly dependent on oil (ie. the suburbs)
+ America and some other countries are highly unprepared for the scale of change, and it is virtually
impossible that substantial prepartions can be made before the next major crisis hits
+ Chaos, starvations, and massive losses of wealth may lie dead ahead, within 2010-13

Where to go:
+ The goal is thriving with "Sustainable Prosperity", not creating more imbalances with "Rapid Growth"
+ We need to change some of the metrics for how we measure success & conceptualise economics

Action Items:
+ A global summit of transition-oriented leaders and those with a voice on alternative media (?)
+ A coordinated message from the summit
+ The networking and support mechanisms need to be put in place on a global basis
+ People involved need to commit to making real changes in their own lives (providing examples)
+ Definite action steps towards societal change and political change should be mapped

 

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Re: Warren Buffett versus the Soccer Moms

JR Central Chairman Aims to Bring Shinkansen to U.S.
By MARIKO SANCHANTA And YOSHIO TAKAHASHI

TOKYO—The chairman of Central Japan Railway Co. said the company is aiming to work with U.S. companies such as General Electric Co., as part of an aggressive bid to see its platypus-billed shinkansen whiz its way through the state of Florida.

At the same time that the company is aggressively ramping up to do business in the U.S., Yoshiyuki Kasai, the 69-year-old head of JR Central, said in an interview Monday that he will never try to sell his world-leading product in China—a strategy at odds with many Japanese companies focusing increasingly on their rapidly growing neighbor.

"It's not possible to export our trains to China. They would steal our technology and they would not respect it," said Mr. Kasai, who has worked in Japan's rail business for 48 years and has become a larger-than-life figure who doesn't mince his words, a rarity in corporate Japan. Known as an outspoken nationalist, he said bluntly: "The risks are too high—if there was an accident they would blame us and it would be the end."

"JR East uses the cheap version of their train in China. I told them not to do it," Mr. Kasai added, referring to East Japan Railway, an independent company operating the shinkansen in central and northern Japan. JR Central and JR East are two of six former state-owned rail companies that were privatized in 1987.

Mr. Kasai also took a swipe at global competitors, notably French firms looking to export their own high-speed railway systems. "In France, if a train is five minutes late, then it's just on time. In Japan, if it's one minute late then it's late," said Mr. Kasai, who got his master's degree in economics from the University of Wisconsin-Madison in 1969. "In 45 years of operation, we have had 4.5 billion passengers and zero casualties as a result of a train accident."

A spokeswoman for French engineering company Alstom SA, a major French train maker, declined to comment.

As for the U.S., "we would make the cars in America and operate a factory in Florida," said Mr. Kasai. "We could partner with American firms, such as General Electric, and engage in technology transfers—these would be 50-50 joint ventures."

Mr. Kasai, however, made clear that these discussions had not reached official stages yet. "We have not received any information on [a proposed tie-up]" said a GE spokeswoman in Tokyo.

Mr. Kasai is vying to export the N700I version of the Japanese shinkansen to the U.S. If his bid is successful, it would mark the first time its total system—including the track, rolling stock, signal equipment and railway management systems—would be used outside of Japan.

Mr. Kasai said he wants to do so in the spirit of what could be called shinkansen diplomacy, or fostering better ties between two nations due to technology transfers and joint infrastructure development projects. "Japan and the U.S. should pursue a free trade agreement or an economic partnership agreement—people should be able to move freely between both countries," said Mr. Kasai. "As a private company we want to improve U.S.-Japan relations."

/MORE: [url="http://www.greenenergyinvestors.com/index.php?showtopic=9275"]http://www.greenenergyinvestors.com/index.php?showtopic=9275[/url]
 + + +

THIS STORY is interesting for a number of reasons

+ The US has finally decided to do something to speed up its rail network (as Warren Buffett foresaw)

+ The US does not have the fast train technology itself, and needs to get it from: Japan, China, or France

+ China has been approached by GE to license its fast train technology

+ Japan now sees China as a threat, and is waking up to the fact that the US is a more reliable partner.
(Maybe the US will wake up to see that they have outrsourced far too much of their economy and their
technology to China, and have had very little in return, except on Wall Street.)

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