The US and UK are pressuring Germany to print Euros and guarantee Greek Debt

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Greece is in a world of hurt.  Their government spends too much money.  And their people answer calls for austerity with riots.  They simply refuse to address the problem that got them where they are.  Too much spending.  If they continue to reject austerity measures to bring their spending in line with their ability to pay for it they’re going to be cut off from future loans.  And broomed out of the Eurozone.  That won’t be pretty.  Because if others don’t prop them up they simply won’t be able to service their debt.  They will default on their sovereign debt obligations.  And the banks who have loaned large sums of Euros to them will struggle to recover from these losses.  Many of them simply won’t be able to.  Once the banks start failing the contagion will spread throughout Europe.  And the world.  Bringing on a worldwide recession.  That could easily slide into a depression.  And all of this because of excessive government spending.  There’s a lesson to learn here.  STOP SPENDING SO MUCH.  But no one ever learns this lesson.  Especially when Keynesians are running the government.

They’re talking about your typical Keynesian solutions.  More of the same that got Greece into the trouble they’re in.  Quantitative easing.  Printing money.  To stimulate these troubled economies with…wait for it…more government spending.  As if they can fix their debt troubles with higher consumer prices.  Which is what you get when you print more money.  Especially when the supply of money grows at a rate greater than its economy grows.  So prices will rise while the value of the Euro will fall.  It’ll make their exports cheaper.  But it’ll also make the value of all those outstanding sovereign Euro bonds worth less.  Those bonds all those banks are holding.  Giving them a negative return on their investment.  Pushing these banks closer to insolvency.

And it doesn’t end there.  The strongest economy in the Eurozone is Germany.  They know a thing or two about inflation thanks to the hyperinflation in Weimar Germany that gave the world Adolf Hitler.  So the Germans have governed responsibly.  By living within their means.  And their people have been paying a lot of taxes to pay for all of those Eurozone bailouts.  A nation that has truly gone above and beyond.  Their reward for responsible governing and selfless sacrifice?  They’re asking the German taxpayer to assume the Greek debt (see David Cameron and Barack Obama lead charge to save the eurozone by James Kirkup posted 5/19/2012 on The Telegraph).

Angela Merkel of Germany came under intense pressure to do more to support the struggling currency by putting German economic credibility behind the debts of weaker economies like Greece…

There is growing agreement among G8 leaders that the answer to the eurozone crisis is for members of the single currency to “mutualise” their debts, meaning strong members like Germany partly guarantee the debts of weaker ones like Greece.

Mrs Merkel has resisted any such plans, reluctant to ask German taxpayers – who already resent the bill for helping other eurozone countries – to underwrite the budgets of indebted southern Europeans…

That’s fair.  Except to the Germans, of course.  The problem is if the Greeks don’t reduce their government spending the underlying problem will remain.  Excessive spending.  Which means they will need bailout after bailout.  One or two or three just won’t do it.  And it will delay the inevitable.  And take more people with them when this Keynesian house of cards implodes.

Giving people benefits is easy.  People love you for your generosity.  Taking benefits away is very, very difficult.  People will hate you.  The longer you wait to start the more difficult it will be to cut these benefits.  And the more the people will hate you.  Which is why it is so difficult to govern responsibly.  Because politicians find it is easier to buy votes with generous benefits than it is win votes with good ideology.  This is why governments everywhere embrace the failed policies of Keynesian economics.  Because it gives legitimacy for the easy way of winning elections.  Buying votes with excessive government spending.

And this is the ultimate problem in the Eurozone.  Keynesian economics.  For if governments did not deficit spend or ‘stimulate’ their economies with monetary policy there would be no Eurozone sovereign debt crisis.  Being debt free makes everything easier.  Because you don’t have to borrow.  Service your debt.  Or roll it over.  You have none of those headaches when you live within your means.  Just look at the Germans.

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If the Laws of Supply and Demand can lower the Price of Coal it can lower the Price of Oil

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Even energy responds to the laws of supply and demand.  Which is treating Australian coal pretty poorly now.  On top of being demonized and punished by their government.  Poor energy.  What has it ever done to deserve this?  All it has ever done was to make our lives better.  By increasing our standard of living.  And the thanks it gets?  It is reviled.  Ostracized.  And bullied.  Governments hate energy but they have no problem taking its money.  And they just keep taking more (see DJ Queensland Government Pulls Support For Coal Port Expansion by Cynthia Koons, DOW JONES NEWSWIRES, posted 5/19/2012 on London Stock Exchange).

The Queensland government has withdrawn its support for a 9 billion Australian dollar (US$8.86 billion) coal port expansion in the northern part of the state, in a sign the country’s resources boom is losing steam…

Rio and fellow mining giant BHP Billiton Ltd. (BHP.AU, BHP) have been complaining about the challenges and cost of doing business in Australia lately. The federal government has recently passed new mining and carbon taxes that will add to miners’ tax burdens. Labor shortages have driven up wages and labor disputes are hurting production at BHP Billiton’s Mitsubishi Alliance Queensland coal mines…

The price of Australian thermal coal has fallen recently, to around US$98 a ton, down 21% from its average price in the first quarter of 2011. Concerns about slowing demand from China have weighed on the price. A glut of natural gas in the U.S. has also pushed some U.S. coal into export markets while other major global thermal coal suppliers like Colombia and Russia are sending coal that would have normally sold in Europe into Asian markets.

The lesson to take away from all of this?  Besides governments demonizing energy so they can tax it more.  Energy responds to the laws of supply and demand.  Australian coal prices fell because demand has fallen in China.  And America is sitting on so much natural gas (and their government hates coal) that they’re putting more coal onto international markets.  More abundant the supply the lower the price.  And this bumper supply of coal is hurting the Australian coal industry.  (On top of their government hurting it, too).  The same would work for oil.  If only we drilled for it.  Yes.  Drill Baby drill.  Because if we bring more oil onto the international market we can lower the price of oil.  Just like we’ve lowered the price of coal.  It works.  Drill baby drill.  Because energy responds to the laws of supply and demand. 

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British Electric Bills will rise by 27% to Subsidize Wind Farms and other Renewable Energy Initiatives

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Saving the planet isn’t cheap.  It takes a lot of taxes.  Subsidies.  And a significant reduction in your standard of living.  But that’s a small price to pay for not making a difference, isn’t it?  That’s what the British government thinks.  And they are willing to suck the quality of life right out of their people to prove it (see Electricity bills set to rise to pay for wind farm subsidies by Robert Mendick posted 5/20/2012 on The Telegraph).

This week the Department of Energy and Climate Change (DECC) will publish its draft energy bill, setting out how it plans to reform the electricity market and reduce the cost to households.

DECC has insisted that energy bills will begin to fall from next year and will be reduced by seven per cent – or £94 – by 2020 because of new energy efficiency policies.

These include the Green Deal, which will provide loans to fund loft and wall insulation; the roll-out of ‘smart’ meters to help control and monitor energy consumption; and the improvement in the energy efficiency of kettles and other appliances.

But a study of the Government’s own figures by the Renewable Energy Forum (REF), a specialist renewable energy consultancy, has accused DECC of deliberately misleading the public.

REF claims its analysis of the Government’s own figures shows that two-thirds of households, about 17 million in all, will be worse off – even if energy efficiency targets are met in full…

REF estimates that the UK’s climate change policies – which promote wind farms and other forms of renewable energy – will be responsible for ‘major increases’ in the retail price of electricity and gas.

It estimates that electricity prices on domestic bills will rise by 27 per cent by 2020 and by 34 per cent on bills for medium-sized companies. Gas prices will rise by seven per cent and 11 per cent respectively…

Earlier this year, 101 backbench Tory MPs wrote to David Cameron demanding that the £400 million a year subsidies paid to the onshore wind turbine industry be “dramatically cut”. In all, REF estimates that £1.5 billion a year is paid out in subsidies for all forms of renewable energy – including on and offshore wind – and that figure will rise to £8 billion a year by 2020.

The UK budget deficit in April of 2012 was £18.17 billion ($26.76 billion).  So spending £1.5 billion ($2.37 billion) a year they don’t have will not reduce their deficit.  It will only increase their debt.  And the interest they must pay on their debt.  Requiring higher taxes.  A bitter pill to swallow when the cost of electricity is rising at the same time.  Going green is going to impoverish the British people.  And by 2020 things will be over 5 times worse.

And all of this to save the planet.  Funny, really.  Because what the British do won’t be able to offset what the Chinese and Indians are doing.  Their economies are likely to continue to grow.  Pumping far more carbon into the air than the British can ever hope to remove.  So the British green policies will only hurt the British people.  Reduce their standard of living.  Without changing the world in the least.

And all the talk about insulating the UK from energy shocks?  Here’s something to think about.  Let’s say it’s winter. And the UK gets 25% of its electricity from wind farms.  Now let’s say a cold spell sets in.  And the wind stops blowing.  What do you think would happen if a fourth of the available electricity disappeared?  Can you say rolling brownout?  And blackout?  Not a problem you think?  Because your furnace uses natural gas?  Well, it takes electricity to run that furnace.  It takes electricity to pump hot water and blow hot air.  Anyone who lost their electric power in the winter can attest to that.  But the power companies can get the electricity back on line in a day or so.  Of course, you can’t do anything to make the wind blow.  Talk about irony.  To lose your power not from a storm with high winds.  But from a calm day.  Imagine worrying about losing your power whenever the winds don’t blow.  Instead of worrying the few days they blow really hard.  Of course, that risk doesn’t go away either.  Losing your power during a storm.  Sort of damned if the wind blows.  And damned if it doesn’t blow.  Which means you’re pretty much damned all of the time.

And if that wasn’t bad enough (and don’t you think it should be?), the British will be paying higher electric bills.  And higher taxes.  All while making no difference to the environment.  But at least they have the consolation of knowing that the people that are ruining their lives had good intentions.  Sort of makes everything worthwhile, doesn’t it?  Just remember that when you’re huddled under your blankets waiting for the wind to blow again so you can have some heat.

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Gas Prices Stay High along the Environmentalist West Coast due to a Lack of Refinery Capacity

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Take a look at an electoral map.  Say from the 2008 national election.  What do you see?  Blue (i.e., Democrat) on the coasts.  Red (i.e., Republican) in the middle.  And blue in the union Midwest.  Okay, now what else do you associate with the blue on the coasts?  That’s where there are high concentrations of liberals.  (The blue in the Midwest is more organized labor than liberal).  And what is one of the biggest issues with liberals?  That’s right.  The environment.  (I’ll just assume you said the environment).  Especially in California.  Where they have tougher emission standards than the federal government has. 

They take their environmentalism serious on the coasts. So much so that they punish the use of fossil fuels through high taxes and excessive regulations.  It is for these reasons you don’t see them building many new refineries in these regions.  For there are few things they hate more than petroleum oil.  From drilling it out of the ground.  To transporting it.  To refining it.  Their basic attitude towards the oil industry is, “Sure, you’re welcomed to do business here.  But you will pay.  And pay.  And pay.”  So with that in mind here’s a little story about high gas prices on the West Coast (see Unlike the East, gas prices stay stubbornly high out West by William M. Welch posted 5/18/2012 on USA Today).

“We are seeing a tale of two coasts,” says Michael Green, spokesman for AAA, which monitors pump prices. “On the West Coast, gas prices are rising steadily, while on the East Coast they are steadily decreasing.”

Oil analysts blame a refinery slowdown in western states for sending retail prices in the opposite direction of wholesale costs.

In California and Oregon, the average price of regular gas has increased 20 cents a gallon so far in May, AAA reports. Average pump prices were down 19 cents in Florida and 18 cents in Virginia…

Tupper Hull, spokesman for Western States Petroleum Association, blamed unexpected maintenance and other problems at refineries…

“Our concern is a lack of competition at the refinery level in California,” says Charles Langley, gasoline analyst at Utility Consumers’ Action Network in San Diego. “We’re not saying there’s a conspiracy. It’s just that with this few competitors, it’s very easy to game prices by turning off capacity.”

Bob van der Valk, petroleum analyst in Terry, Mont., said gasoline inventories are at a 20-year low in California for May. Supplies will return to normal, he said, but perhaps not in time for upcoming holiday travel.

The high prices on the West Coast are of their own making.  Prices have fallen on the southern half of the East Coast.  Because they aren’t as blue as they used to be.  They love their environment there.  Which is why they live there.  But they know they need petroleum oil and gasoline to live.  And they know that there is a direct correlation between anti-oil policies and the price at the pump.  Something they apparently don’t know on the West Coast.  For they hate oil.  Don’t want anything to do with oil in their state.  And yet almost everyone drives a car in California. 

If they want lower gas prices they have to make it easier to do petroleum business there.  That means they need to make it easier to refine gasoline in California.  Which means backing off on the taxes.  And the excessive environmental regulations.  They can do that.  Bring the price at the pump down.  And still have a beautiful environment.  Like they do on the southern half of the East Coast.

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Big Inflation in Canada hidden by Steep Fall in Natural Gas Prices

Posted by PITHOCRATES - May 20th, 2012

Week in Review

Canada is doing energy right.  They’re pulling it out of tar sands and shale.  And bringing it to market.  To meet real demand.  For energy is the mighty Atlas of the Canadian economy.  Carrying the rest of the economy along on its broad shoulders.  Because it’s solid economic growth.  And the only part of the economy they’re NOT driving with monetary policy (see Inflation increase in April fueled by gas, car prices by Randall Palmer, Reuters, posted 5/18/2012 on The Vancouver Sun).

Inflation in Canada was slightly higher than expected in April, pushed up in part by gasoline prices, providing the Bank of Canada with more reason to launch the interest-rate hike it has hinted at recently.

On an annual basis, the overall inflation rate rose to two per cent in April from 1.9 per cent in March, Statistics Canada said on Friday. The core rate, which excludes volatile items, climbed to 2.1 per cent from 1.9 per cent…

The median forecast in a Reuters survey of analysts had been for both inflation measures to stay at 1.9 per cent. Only five of 24 analysts had expected the overall rate to rise, and none had foreseen a core rate as high as 2.1 per cent.

Interesting.  Only 5 Keynesian economists guessed right.  Which means about 80% were wrong.  Which means the consensus opinion was wrong.  Typical for Keynesian economic projection.  Yet we still turn to them for their ‘expert’ opinion.  But it’s never their fault when they’re wrong.  There’s always something to blame.  And they sound so intelligent when they explain they were actually right.  It was just the market that was wrong.

Though several data points have bolstered the case for the central bank to raise rates, recent economic figures have not all been positive.

The latest reports for manufacturing, jobs, trade, housing and wholesale trade have been strong, while February gross domestic product and retail trade were weak.

In the past month, the bank has said several times it may have to withdraw stimulus from the economy…

A 3.2-per-cent rise in gasoline prices and 1.3 per cent in passenger vehicle prices pushed up the monthly inflation data, but this was tempered by an 8.2-per-cent fall in natural gas prices.

Could they be creating a bubble with those low interest rates?  Are people hopping aboard the Keynesian train and borrowing money at cheap rates to expand production?  And most likely inventories.  For if the consumers aren’t buying this stuff the stimulus is making it must be collecting somewhere.  Just waiting to turn profits into losses.  As the bubble will inevitably burst.  As all bubbles do.  Causing prices to fall because the stimulus created a surplus of unsold goods in the market.  Requiring deep price discounting to clear those bloated inventories.  Kind of like the price of natural gas is falling because there is so much of it on the market.  Thanks to shale gas and hydraulic fracturing.

It is interesting to note how much higher the inflation would be if it wasn’t for all that cheap natural gas holding it back.  Probably the one thing in the economy they’re producing to meet a real demand.  For consumers can skip the retail stores.  But they can’t live without energy.  Whether it’s the electricity they use (generated from natural gas).  Or the gas that cooks their meals.  Or the gas that heats their homes.  And their hospitals, universities, coffee shops, restaurants, businesses, etc.  Energy moves the modern economy.  And our personal lives.  So energy needs no stimulus.  But to encourage us to move into a bigger house we don’t need?  That takes stimulus.  It’s this inflation that exceeded the deflation in natural gas prices that gives them their overall increase in the inflation rate.  And why 80% of Keynesian economists guessed wrong on inflation.  Because they always do. 

So if you want to know what the best economic policy is for a nation just ask a Keynesian.  And then do the opposite.

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Michael J. Fox admits Embryonic Stem Cell Research may not hold Cure for Parkinson’s Disease

Posted by PITHOCRATES - May 20th, 2012

Week in Review

During the 2006 midterm elections Rush Limbaugh and actor Michael J. Fox were at the center of a Missouri initiative to allow funding for embryonic stem cell research.  Limbaugh claimed Fox went off of his meds in political campaign ads to exaggerate the effects of the disease.  A webcam showed Limbaugh even mimicking Fox’s appearance.  Which did not make Limbaugh very popular. 

The ads said that embryonic stem cell research held the best possible chance to find a cure.  Opponents said that it would lead to harvesting human fetuses for medical research.  And contrary to the claims and media blitz embryonic stem cell research showed no such promising hope.  There were successes with adult stem cell research.  But not with embryonic stem cell research.  But the Left championed embryonic stem cell research as the Holy Grail to cure all that ails us.  Now some 6 years later even Michael J. Fox admits this research path may not yield the cure (see Michael J. Fox Looks Past Stem Cells to Internet for Parkinson’s Cure by Russell Goldman, ABC News, posted 5/18/2012 on Yahoo! News).

Michael J. Fox, whose turn from Parkinson’s disease patient to scientific crusader made him one of the country’s most visible advocates for stem cell research, now believes the controversial therapy may not ultimately yield a cure for his disease, he told ABC’s Diane Sawyer in an exclusive interview.

There have been “problems along the way,” Fox said of stem cell studies, for which he has long advocated.   Instead, he said, new drug therapies are showing real promise and are “closer today” to providing a cure for Parkinson’s disease, a degenerative illness that over time causes the body to become rigid and the brain to shut down.

 “Stem cells are an avenue of research that we’ve pursued and continue to pursue but it’s part of a broad portfolio of things that we look at. There have been some issues with stem cells, some problems along the way,” said Fox, who suffers from the diseases’ telltale tics and tremors.

 “It’s not so much that [stem cell research has] diminished in its prospects for  breakthroughs as much as it’s the other avenues of research have grown and multiplied and become as much or more promising. So, an answer may come from stem cell research but it’s more than likely to come from another area,” he said.

So why did the Left build up such false hopes?  Why did they insist that embryonic stem cell research held the secrets to cure people suffering from everything from Parkinson’s disease to paralysis?  They didn’t base it on medical research.  So what was it based on?  Politics.  I mean, if it was not good science what else could it be?  So what are the politics in this issue?  One can only guess it had to do with the source of those embryonic stem cells.  Abortions.  Perhaps the number one issue on the Left. 

Could this have all been about trying to give a higher and nobler purpose for all of those abortions?  That these aborted lives did not die in vain?  That they sacrificed so others may live?  Perhaps.  There is a reason why the Left championed this cause.  And this would explain why they would have given false hope to so many.  To further entrench abortion into our lives.

Everyone likes Michael J. Fox.  Whether you agree with his politics or not.  He deserved far better than to use his celebrity and his disease for political gain.

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