Comment by robmccoll
18 hours ago
The idea of selling things like our strategic helium supply for $460M to "pay off the debt" would be like me selling bricks from the foundation of my house for a penny to "pay off my mortgage".
18 hours ago
The idea of selling things like our strategic helium supply for $460M to "pay off the debt" would be like me selling bricks from the foundation of my house for a penny to "pay off my mortgage".
$460M was for what was left after the large majority had already been sold.
In the best case, "strategic reserves" are the government speculating on commodity prices. They use tax dollars to buy a commodity -- raising the price on everyone so they can hoard it -- and then more tax dollars to pay for a storage facility, and if they're lucky the price goes up by enough to pay for the storage and the time value of money by they time they sell it again. That frequently doesn't happen.
In the common case it's the government subsidizing corporations -- including foreign ones -- by using tax dollars (at government contractor rates) to operate a storage facility at a loss so the industry doesn't have to do it themselves. Then, when they go to unload it, they generally unload enough to lower the market price on purpose, practically guaranteeing that the taxpayer is getting a below-market return. This unloading also has a statistical correlation with the election cycle (see also "strategic petroleum reserve") which is extra stupid. And the expectation that it will happen deters others who aren't paying government contractor rates from storing the commodity, so from a "strategic" perspective you don't get anywhere near as much of a buffer as you're paying for.
If the tech industry wants a reserve of helium then they should buy some land, install some tanks and fill them with helium in years when there isn't a shortfall.
That strategic helium reserve was from WWI, IIRC.
I've heard it claimed that it was a massive oversight to sell that much helium at such a low price. Helium is a non-renewable resource. When it escapes, it just floats off into space.
And it's an absolutely critical resource for MRIs, advanced science and research, and industry. And we are selling it at a price that's attractive as an amusement for children.
> That strategic helium reserve was from WWI, IIRC.
That may have been when it opened but the current war machine has little use for dirigibles.
> I've heard it claimed that it was a massive oversight to sell that much helium at such a low price. Helium is a non-renewable resource. When it escapes, it just floats off into space.
Helium is produced within the earth by radioactive decay. It then gets trapped in the same pockets as natural gas, which is why it gets extracted along with the natural gas. But most natural gas doesn't undergo helium extraction. If we wanted more, we could do helium extraction on more of the natural gas. Not doing it releases significantly more into the atmosphere than was present in the reserve. But doing it is expensive so we only do it more if there is demand for more helium.
The first mistake was the government hoarding that much of it to begin with. It doesn't make a lot of sense to pay a high cost for extraction in an earlier year and then pay a high cost for storage for an indefinite period of time if you're already discarding (i.e. not separating) most of it and could just extract more once you actually want it.
The second mistake was unloading such a massive amount over a relatively short period of time, because then you crash the short-term price and cause people to waste the thing you spent a lot of money to extract.
> In the best case, "strategic reserves" are the government speculating on commodity prices.
A horrendously misinformed take. Strategic reserves have broadly one of two primary purposes. First, providing the government with the ability to stabilize market prices in the short term when volatility strikes. Second, providing a supply of an essential resource to an essential industry in the event that external supplies are unexpectedly cut off temporarily.
Supply shocks are bad. The economy grinding to a halt at the whim of a geopolitical adversary or natural disaster is also bad. Ensuring a stable market is one of the most fundamental purposes of having a government at all.
> First, providing the government with the ability to stabilize market prices in the short term when volatility strikes.
Which is the thing they don't really even do, because their existence is not a secret, but then knowing of their existence discourages anyone else from setting up a reserve because they expect the government to unload right when they'd be trying to recover the costs of operating it. Then the market has less slack in it and the government has to tap into the reserve more frequently and in larger amounts, causing the reserve to be much more easily exhausted than you would intuitively expect because the whole world is now expecting you to bail them out when the time comes.
Worse, it encourages companies to rely on its existence instead of making contingencies, and then if it does get exhausted or you get something that looks more like unexpectedly high demand than unexpectedly low supply, you now have an inadequate reserve and a market full of people operating under the impression they would never have to deal with that.
> Second, providing a supply of an essential resource to an essential industry in the event that external supplies are unexpectedly cut off temporarily.
This isn't a different thing from the first thing. There being less supply is what causes the price to go up. But encouraging the market to take all the slack out causes there to be less supply.
The basic problem is this: If the government keeps a moderate reserve, it's going to cause other people to not do that, and then it's going to run out and Cause Problems. If the government keeps an enormous reserve, they're going to cause the price to be higher even when nothing is wrong and burn through a disproportionate amount of tax money doing it.
> Supply shocks are bad.
The correct answer to this is to diversify supply and be ready with substitutes, not government hoarding.
What if it's not actually your house, but some unspecified "somebody else's", and you only stand to profit from it? Starts to make sense why some unscrupulous people would go that way, shitty as it is.