Week in Review
During the Roaring Twenties the American economy was giving the economies of Europe a run for their money. The Europeans, accustomed to running the world for so long, looked at the economic prowess of America with concern. And began to talk about a United States of Europe to compete with the economic juggernaut across the pond. But when Calvin Coolidge chose not to run for a second term the progressives got back into power. And Herbert Hoover put an end to that surging economy. Causing a stock market crash. And throwing the country into recession. Which FDR turned into the Great Depression.
So there was no United States of Europe. But there would be a European Union one day. And after that, a currency union. The Eurozone. To compete against the economic prowess of the United States. But a currency union without a political union. Without a single fiscal and monetary policy to support that currency union. Which turned out to be a problem. For without that political union the currency union was only as strong as its weakest state. In the Eurozone that state was Greece. Whose unrestrained government spending caused a debt crisis that threatened to bring down the entire Eurozone. Unless the other members stepped in to bail out Greece. Which they have. But the crisis hasn’t gone away. For the central governing authorities can only ask Greece to cut their spending. Which there is a lot of opposition to in Greece. Putting a lot of pressure on the Euro.
Greece isn’t the only problem. There was Ireland. Spain. Portugal. And Cyprus. All sovereign nations. Sharing a common currency. Making it all but impossible to maintain a uniform fiscal policy throughout the Eurozone. Like they can in the United States. Because the United States of America is a political union. With one central government. One central fiscal authority. And one central monetary authority. Making it hard for any one state to undermine the currency. (Though California is making a valiant effort.) Which is the problem they’re having in the Eurozone. Many of the states are threatening to undermine the common currency. Making a very strong case against future currency unions without a political union. Which is something they are considering with an upcoming referendum on Scottish independence (see UK says “no clear reason” to let independent Scotland use the pound by David Milliken posted 4/23/2013 on Reuters UK).
The euro zone’s experience of countries sharing a currency but not a government shows there is no clear case for an independent Scotland to use the pound, the Treasury said on Tuesday.
The nation of 5 million will hold a referendum on September 18 next year to decide whether to split from the United Kingdom, at the instigation of the Scottish National Party that runs the country’s devolved government.
Pro-independence campaigners want Scotland to keep sterling, at least in the early years of independence, and then to decide later whether to switch to its own currency.
But in a report on Tuesday, the Treasury said there was no clear case for the United Kingdom to agree to a formal currency union with an independent Scotland, which would have an economy of a similar size to New Zealand’s…
“The recent experience of the euro area has shown that it is extremely challenging to sustain a successful formal currency union without close fiscal integration and common arrangements for the resolution of banking sector difficulties,” it added.
Scotland and England have a long history. Not all of it good. But if we’ve learned anything from history it is that large economic blocs do better than smaller counties. As the United States demonstrated. And as the Eurozone tried to duplicate with their currency union. But as that experiment showed us a currency union without a political union is a recipe for disaster. If Scotland breaks from the United Kingdom they will have to go all of the way. And leave sterling. Which will make independence more difficult. Having to set up a new currency with everything else they will have to do. (Such as dealing with separating their military forces from the UK’s. And providing for their own defense. Or forming a military union with the UK. Which will tie them closely to the UK. Something many Scots no doubt will consider before voting in the referendum.)
Of course if they do and they devalue their new currency it would make their exports cheaper to those nations with a stronger currency. But that weak currency will make anything they import more expensive. As Scotland exports and imports a lot of stuff they won’t get a clear advantage in devaluing their new currency. So they may peg their new currency to sterling. The next best thing to keeping sterling. Which will tie them closely to the UK. Something many Scots no doubt will consider before voting in the referendum. Perhaps choosing to stay in the UK. As Quebec chose to stay in Canada in their past referendum. Who had less in common with the rest of Canada than the Scots have with the UK. For they don’t even speak the same language.
They could join the Eurozone. But recent events in the Eurozone does not make that option as appealing as setting up a new currency. Or staying a part of the UK. It would probably be best for the rest of the world if Scotland remained part of the UK. For the world will need at least one strong reserve currency. As the Euro is making itself less attractive by the day. The U.S. dollar may hit the wall soon with the amount of debt the Americans are racking up. And the Chinese are likely to go the way of Japan before the decade is out. And have their own Lost Decade with all their malinvestments. The ultimate cause in the fall of state-capitalism.
Now the UK has its problems. But their decision to stay out of the Eurozone was clearly sound as a pound. And pound sterling may grow even more attractive as a reserve currency as these other countries continue to rely on easy credit and debt to pay for their burgeoning welfare states. And/or their malinvestments. But one thing the UK is doing that none of these other bloated states are doing is making real cuts in spending. Even in their venerated NHS. Giving the UK the edge in responsible governing these days. And really making a strong argument against Scottish independence at this time. Even for those who hate England. For it is better to deal with the devil you know than the devil you don’t. Especially during uncertain times.
Tags: currency, currency union, debt crisis, England, European Union, Eurozone, Greece, political union, pound, referendum, reserve currency, Scotland, Scottish independence, sterling, UK, United Kingdom, united states of Europe, welfare state
Week in Review
Debtors love inflation. They love to borrow cheap dollars. And love even more to repay their loans with even cheaper dollars. Creditors, on the other hand, hate inflation. Because they are on the other side of that borrowing equation from the debtor. And when a debtor repays a loan with depreciated dollars the creditor who loaned that money loses purchasing power. Causing the creditor to lose money. Just because they had the kindness to loan money to someone who needed it. Which is a strong disincentive for making future loans.
This has long been at the heart of all banking wars. And banking crises. The fight between paper money and hard money. Printed dollars versus specie (gold and silver). People who want to borrow money love paper. Because banks could make a lot of it to lend. Something they can’t do with gold and silver. Because it takes a lot more effort and costs to bring new gold into the economy. Those who want to borrow money argue that hard money hinders economic activity. Because there is a shortage of money. And because governments are always interested in boosting economic activity they are always in favor of expanding the paper money supply. This generous expansion of credit is currently miring the Eurozone in a sovereign debt crisis. And launched a confiscation of wealth in Cyprus. Greatly threatening the banking system there. As few depositors trust their money will be safe in their bank. Causing people to return to specie (see Cypriot bank crisis boosts demand for gold by Ian Cowie posted 3/27/2013 on The Telegraph).
The Cypriot banking crisis reminds even the most trusting savers that not all banks or jurisdictions are safe – and is boosting demand for gold, bullion dealers claim.
As if to prove the old adage that it’s an ill wind that blows no good, enthusiasts for the precious metal argue that financial shocks in the eurozone are reminding savers of gold’s attractions…
[Daniel Marburger, a director of Jewellers Trade Services Partners (JTS)] said: “The situation in Cyprus has reignited the wider Eurozone sovereign-debt crisis. At a time like this, people are attracted to gold because it is the ultimate crisis commodity.
“The proposed levy on deposits of Cyprus’s savers has not only shaken confidence in the single-currency Eurozone, it illustrates the fragility of savings held within the banking system. In our experience, clients are attracted to gold because it offers insurance against extreme movements in the value of other assets. Unlike paper currency, it will never lose its intrinsic value…”
“The events in Cyprus prove once again that bank customers do face risks as creditors who are owed money…”
When you deposit your money into a bank you become a creditor. You are loaning your money to the bank. Who pays you interest to loan your money to others. If the inflation rate is greater than the interest you earn your money actually shrinks in value. And the more they print money the more it shrinks in value. That’s why as a creditor you won’t like the harmful effects of inflation. Even if it makes the people happy who borrow your money from the bank. Because they get a real cheap loan at your expense.
Which is why people are drawn to gold. Because they can’t print gold. So it holds value better than paper. And the government can’t just confiscate a percentage of your savings if it isn’t in the bank. Another reason why people are drawn to gold. If the banking system collapses, or if the government seizes people’s retirement savings to ward off a banking system collapse, people can take their gold and move somewhere else that isn’t having a financial meltdown. And not lose any of their wealth.
Which is, of course, the last thing you want to happen in a country. For a sound banking system is essential for a prospering middle class (if it weren’t for banks only rich people would own homes, cars, go to college, etc.). Which is why a responsible monetary policy, and responsible people in government, is a prerequisite for a sound banking system. Which few nations in the Eurozone have. As few nations throughout the world have. For they all want to buy votes by giving away free stuff. And having the power to print money allows them to give away a lot of free stuff. Pensions. Health care. College educations. Lots and lots of government jobs. Etc. But there comes a point when you give away too much. And you have sovereign debt crises. As well as confiscations of wealth.
This was the advantage of a gold standard. Like when we coupled the value of our world’s currencies to the price of gold. It did not allow any nation to inflate their currency. For if they did people would exchange that devalued currency for the fully-valued gold. A strong incentive not to devalue your currency. Which was nothing more than a promise to pay in gold. The gold standard kept governments responsible. But because it made it so difficult to buy votes everyone cheered when President Nixon decoupled the dollar from gold. Putting an end to the last vestiges of a gold standard. Allowing governments everywhere to be irresponsible. Bringing on financial crises. And the confiscation of wealth. As we see happening in Cyprus. And will no doubt see elsewhere.
Tags: bank, banking system, confiscation of wealth, creditor, Cypriot banking crisis, Cyprus, debtor, Eurozone, gold, gold standard, hard money, inflation, paper currency, paper money, savings, silver, sovereign debt crisis, specie
Week in Review
In the U.S. some state governments are lamenting the fuel efficiencies of today’s cars. They don’t like them. Because unlike the gas-guzzlers of yesteryear fuel efficient cars don’t burn a lot of fuel. And you’re probably thinking isn’t that the point of making cars more fuel efficient? So they burn less fuel? So this is a good thing, yes? Well, if you’re thinking like that you’re obviously a selfish person. For these states have expensive union pay and benefit packages they must for their government workers. And their retired government workers.
Cars that are buying less gas are paying less state fuel taxes. Which is forcing these states to spend less on maintaining roads. As there just isn’t enough cash left over after paying pensions and health care costs. It’s getting so bad that states want to tax drivers by the mile they drive and not by the gallon of gas they buy. So these selfish people driving fuel efficient cars will pay the same taxes those driving gas-guzzlers pay. So whenever anyone talks about the economic benefits of new governmental regulations they’re probably not telling the whole story (see European Car-Efficiency Rule Would Cut Fuel Bill by 25% by Alex Morales posted 3/17/2013 on Bloomberg)
A European Union plan to tighten emissions standards on cars would cut auto-fuel costs by almost a quarter in 2030, according to a report e-mailed by a group promoting policies to reduce carbon emissions in the region.
Fuel bills would fall 57 billion euros ($75 billion) from a projected cost of 245 billion euros in 2030, said the European Climate Foundation, which contributed to the report prepared by Cambridge Econometrics and Ricardo-AEA. Producing fuel-efficient vehicles would add 22 billion euros of capital costs, it said.
“The effect of reduced spending on fuel more than outweighs the impact of increased spending on vehicle technology to reduce carbon emissions,” according to the e-mailed report. “Most of the money spent on fuel leaves the European economy, while most additional money spent on fuel-saving technology remains in Europe as revenues for the technology suppliers…”
Today’s report for The Hague-based foundation, examines the effects excluding taxes in 2030 of meeting the proposed car and van standards for 2020, plus improved efficiency of less than 1 percent a year for the following decade. The policy would add 356,000 jobs to the EU economy by 2030, even after accounting for lost posts in refining, according to the report’s authors.
Gas prices are higher in Europe because they tax their gas more. Europe is in the midst of a sovereign debt crisis. As excessive budget deficits raise borrowing costs. So Europeans are not going to see any savings with these more fuel efficient cars. For countries running chronic deficits are just not going to allow a major source of tax revenue wither away.
Only a Keynesian could put together such a report. For Keynesians don’t know the first thing about business. All they know is tax, borrow, print and spend. The very things that got Europe into their sovereign debt crisis. Spending money they don’t have. No. Increasing the cost of business does NOT help a business. It forces them to make cuts elsewhere. Directing capital to where the government wants it. Not the market. So while the government forces them to spend money on tightening emissions standards they will spend less money on adding things people want in their cars. If you add a few thousand in new emission systems they may have to eliminate the music system or some other creature comfort. Unless people can afford to spend a few thousand more on their cars.
They won’t be able to afford these higher priced cars. So they, instead, will buy less expensive cars. Either smaller cars. Or foreign made cars. Or they will just not buy a car at all. Leaving them little more than toys for the rich. Who can afford to pay no matter what the government decrees. And any savings in fuel costs? There will be none. When the governments see all that loss tax revenue they’ll find something else to tax. They’ll have to. Because they’re all running chronic deficits.
This is yet another example of why we should never listen when a Keynesian is talking. Or anyone that says higher taxes and more regulations will create economic activity. For they are either completely ignorant of business and economics. Or they’re just lying to help advance an anti-business government agenda.
Tags: emissions standards, fuel efficient, fuel efficient cars, fuel taxes, gas, Keynesian, sovereign debt crisis
Week in Review
It is interesting that countries that get into trouble using Keynesian economic policies tend to go to countries that relied on Keynesian policies less for help. States with high government spending and bloated public sectors turn to countries with less government spending and less bloated public sectors for help. Yet Keynesian economic policies are still the dominant polices of many nations. Including the US, the UK, China, countries within the Eurozone, Bulgaria and Romania (see German warning over Romanian and Bulgarian migration by Rosa Silverman posted 2/6/2013 on The Telegraph).
German cities have warned that an influx of Romanian and Bulgarian economic migrants will cost them dear and put the “social peace” at risk…
Berlin, Hamburg, Dortmund and Hanover have seen a six-fold increase in economic migration from the two countries since 2006, which they say has left them struggling to cope…
The warning comes amid fears in Britain that tens of thousands more Romanians and Bulgarians will come here each year after formal restrictions on the numbers of low-skilled workers from the two countries end next year.
A report by the campaign group Migration Watch UK warned last month that up to 70,000 migrants could arrive annually from then.
Of course the question that just begs to be asked is why are Romanians and Bulgarians leaving their countries in the first place? The Cold War is over. The communists are gone. These are beautiful countries. Blessed with farm land. And natural resources. With some great people. And a lot of history. So why leave? Because they caught the Keynesian contagion during the Nineties. Their central banks kept interest rates artificially low to stimulate economic activity. Which they did. But a lot of that economic activity was artificial. A bubble. Times were good. They expanded government employment. And government pay and benefits. And then the 2007-2008 financial crisis came along. Bursting that bubble. Leaving these nations with budget deficits.
Both nations were on track to join the Eurozone. Working hard to meet the Maastricht criteria. Conditional for entry into the common currency of the Eurozone. After the financial collapse meeting the Maastricht criteria became more difficult. As the fall in economic activity and the rise in the unemployment rates of these countries caused tax revenue to fall. Creating deficits that approached or exceeded those permitted under the Maastricht criteria. And the Keynesian cure for a recession, easy credit and more government spending, just made those deficits worse. And it caused inflation to rise to or above that permissible under the Maastricht criteria. They had to borrow money to meet their spending obligations. And a condition of those loans was to bring their spending down to acceptable levels. Like that to meet the Maastricht criteria.
Long story short the damage these Keynesian policies caused required very painful austerity to fix. High unemployment and austerity makes people want to leave home for sunnier economic climes. As Germany has been the bedrock of the Eurozone because of their more responsible governing and restraint in government spending these people went to Germany. And to the UK. Who didn’t join the Eurozone. And aren’t mired in the Eurozone sovereign debt crisis. Though they are implementing a little austerity of their own to bring down their budget deficits.
High government spending and large deficits cause trouble. The U.S. has numbers worse than both Bulgaria and Romania. Which means there is trouble ahead. But unlike other nations the United States’ population won’t be able to travel to sunnier economic climes. For no country will be able to absorb that amount of migration. Not even Germany. Or the UK. Combined.
Tags: artificial, austerity, bloated public sectors, bubble, budget deficit, Bulgaria, economic migrants, Eurozone, Germany, government spending, Keynesian, Keynesian economic policies, Keynesian policies, Maastricht criteria, Romania, Romanian and Bulgarian migration, unemployment
Week in Review
People used to hate Great Britain. And their imperialist British Empire. Despite that very same British Empire giving us great countries like Australia, Canada and the United States. And other great British Empire spinoffs that are some of the best places to live today. All they see is a country that exploited others for their own interests. But some of that hate appears to be turning into love. For as Britain is preparing to hold a referendum on whether to remain in the EU some of these very same people are begging Britain not to leave the EU. Leaving the EU, they say, could hurt Britain. And being so concerned for the well being of Great Britain they beg that Britain remains in the EU. For Britain’s sake. How selfless and loving these people are (see German MPs warn UK EU exit would be ‘economic disaster’ by Bridget Kendall posted 1/10/2013 on BBC News UK Politics).
A new, strongly worded warning against Britain leaving the EU has come from a delegation of visiting German MPs…
Briefing reporters at the German Embassy in London, Gunther Krichbaum, a member of Chancellor Angela Merkel’s ruling CDU party, said: “Losing the single market for the UK would be an economic disaster.”
He added that more business leaders in Britain needed to make the case for continued membership.
Mr Krichbaum also argued that Britain would suffer a significant loss of global prestige if it left the EU club.
“Britain leaving [the EU] would weaken the European idea, but it would weaken Britain’s position in the world more,” he said…
Mr Krichbaum added that from his point of view, any attempt by Britain to renegotiate its position to reach a “new settlement” for continued membership would be resisted by its European partners.
Negotiate a new settlement? Sounds like there is money involved. Could this be the real reason why they don’t want Britain to leave? Perhaps (see Banks fear ‘risk to City’ of EU exit by Kamal Ahmed posted 12/29/2012 on The Telegraph).
“The best way to strengthen our economy would be for Britain to leave the EU,” UKIP’s economics spokesman, Tim Congdon, said at the time of the Chancellor’s Autumn Statement.
“We would quickly save the money now being sent by the Government to the EU, which will total almost £30bn over the next five years.
“That figure of £30bn is bad enough. But it does not include the far more serious damage done by the loathsome acquis communautaire [the body of EU legislation which candidate countries must first adopt], with its hundreds of rules and regulations that cause larger businesses to invest outside Europe altogether, bankrupt small businesses and destroy jobs.”
£30bn? That comes to about $48.4 billion US. That’s a lot of money. To put that in perspective in Britain the NHS spent about £106 billion in 2012. And is trying to save £20 billion over 4 years ending in 2014. So do you think Britain could use an additional £30 billion over the next 5 years? Yes. I believe they could. It would help Britain take care of Britons. Instead of sending that money to Brussels. To help Europeans. And in doing so they could also make their businesses more competitive by getting rid of hundreds of rules and regulations. Which is another reason they don’t want Britain to leave the EU. For if they do not only will the EU lose £30 billion over the next five years they will become less competitive than Britain. Making a bad situation worse.
It would appear they love Britain when Britain can’t be Britain. They want Britain’s money. And they want to keep Britain as uncompetitive as they are. That’s when they love Britain. Not when they want to do what is best for the British taxpayer.
Tags: Britain, British Empire, EU, Great Britain, leave the EU, rules and regulations, £30bn
Week in Review
With the price of natural gas falling some providers are capping their wells until prices go up. During the Eighties the price of oil soared, pulling oil producers into the oil business left and right. Resulting with the oil glut of the Eighties as supply greatly outpaced demand. OPEC tried to set the price of oil by limiting production. But they sometimes fail as member states often cheat, selling a little more than their quota to profit from those high prices. In America, when John D. Rockefeller was selling refined oil products cheaper than any of his competitors it was his competitors who urged the government to bring antitrust actions against him. Not the people buying his products at low prices. President Obama has shut down most drilling on federal lands. But because of demand drilling on private lands is soaring.
Trying to maintain monopoly control is difficult. And rarely can be done without the help of government (even with the help of government it’s not that easy). Or by selling at a price below your competition. Which rarely hurts consumers. No, low prices hurt those who can’t sell at low prices. Those who want consumers to pay their higher prices. This is the power of market forces. And greed. For when prices go up greed lures others into the market place to cash in on those high prices. Which brings prices down. Supply and demand. It’s how we have pretty much whatever we want in a complex economy. Even just the right amount of zinc (see EU steelmakers unhappy with EU conditions on Glenstrata deal by Silvia Antonioli posted 11/22/2012 on Reuters).
EU steelmakers said Europe’s antitrust conditions for Glencore (GLEN.L) to go ahead with its $33 billion takeover of Xstrata (XTA.L) are not sufficient to prevent the dominant influence of one zinc supplier…
“The European steel industry, which uses the lion’s share of zinc metal traded in Europe, will still have to face a leading provider effectively controlling the zinc supply chain from mining to warehousing operations,” Eurofer said in a statement.
Post-merger, the parties will still have a share of around 35 per cent of the European zinc market and the vertical integration of the new entity, which includes mining, smelting, trading, logistics and warehousing, is also concerning according to Eurofer.
What’s really of concern here? Economies of scale. The bigger Glencore gets the lower its production costs per unit become. And the lower their selling price can be. This is what economies of scales get you. Not monopoly power. And who is hurt by lower selling prices? Glencore’s competition. And those supplying the other 65% of the European zinc market.
Of course, the argument always goes once someone corners the market (by driving their competition out of business with low prices) they’ll then start raising their prices. A lot. Oh my. Imagine what would happen if zinc prices soared. It would pull zinc suppliers into the European zinc market left and right to cash in on those high prices. Can anyone name a supplier who cornered the market with low prices and now is selling at high prices that isn’t propped up by the government?
No. Because it doesn’t happen. Because it can’t happen. Not with free markets. Because of greed. For if prices go up more people enter the market out of greed. And the greater this greed the greater the supply brought onto market. And the greater prices fall.
Tags: antitrust, demand, economies of scales, Eurofer, European zinc market, free market, Glencore, greed, high prices, low prices, market forces, monopoly, supply, zinc, zinc market
Week in Review
The Eurozone is wallowing in a sovereign debt crisis that just won’t end. Caused by spending obligations made during good economic times. On the assumption that those good economic times would last forever. But they created a lot of that economic activity with expansionary monetary policy. Keeping interest rates artificially low. By expanding the money supply. Encouraging consumers and businesses to borrow and spend. Which they did. Leaving them with massive amounts of debt. And inflation. Which they fought the only way you can fight inflation. By raising interest rates. And contracting the money supply. Or, in other words, with a recession. Which reduces tax revenues. Forcing governments to borrow more to pay for these ever expanding spending obligations. Which led to rising borrowing costs. And debt crises. Leaving these Eurozone countries starving for cash.
Enter the Emissions Trading Scheme. Making high energy uses buy permits to exhaust carbon. Ostensibly to reduce global warming. But really just a massive wealth transfer from the private sector to the public sector. To help those countries with debt crises to pay for their ever expanding spending obligations without having to govern responsibly. So they can continue to pander and buy votes and advance their liberal agendas. But there has been some push back. In particular from other nations flying into the European Union (EU) airspace who don’t want to subsidize the irresponsible governing of the EU countries. Because of possible retaliation (like China threatening to cancel their Airbus orders for new airplanes) the European Commission is delaying the implementation of their airline emissions law (see Britain says it may review carbon permit auctions for airlines by Nina Chestney posted 11/12/2012 on Reuters).
The UK government will review its forthcoming auctions of European Union carbon permits for the aviation sector when it gets more details from the European Commission about its plan to delay the bloc’s airline emissions law, a minister said.
The UK plans to hold two auctions of around 3.5 million EU carbon permits for the aviation sector on November 26 and December 10…
The EU Commission said on Monday it will conditionally put on hold its rule that all airlines must pay for their carbon emissions for flights to and from EU airports.
Why is the UK reviewing their auction of carbon permits? Because these permits are basically new taxes for the airlines. That the airlines will pass on to their passengers. Raising the cost of flying. Which, in turn, will make some people forgo flying. Hurting the airline industry. Further exasperating a weak economy.
Of course those in the Eurozone rioting against austerity would love to see the EU go ahead with taxing other nations for flying into their airspace. Because they don’t like austerity. And would love to pass on their costs to other nations’ taxpayers. Something other nations’ taxpayers are none too keen on. So it’s a mess. And the Emissions Trading Scheme only compounds the problem. As it does nothing to address the source of the problem. Excessive spending obligations that these nations cannot afford.
Tags: airline emissions law, austerity, carbon emissions, carbon permits, debt crises, Emissions Trading Scheme, spending obligations
Week in Review
Capital punishment is a contentious issue. Some people enthusiastically support it. While others vehemently oppose it. While others do both (see Vietnam says it’s unable to execute its criminals because EU refusing to export lethal drugs by Associated Press posted 11/1/2012 on The Washington Post).
Vietnam says it can’t execute its hundreds of death row criminals because the European Union is refusing to export the lethal drugs used in the executions…
Vice Chairman of the National Assembly Huynh Ngoc Son was quoted as saying the EU is trying to pressure Vietnam to give up capital punishment.
The EU doesn’t want Vietnam to execute people. Presumably for humanitarian reasons. Yet they make the drugs that states use to execute people. Which isn’t very humane. So they are both for and against capital punishment. Interesting.
After Dien Bien Phu (where the Viet Minh massacred the French) you’d think the French would be all for selling lethal drugs to Vietnam. While on the other hand, if they harbor no ill will to the current generation for what happened more than a generation ago you’d think they would respect the sovereignty of Vietnam. Choosing not to interfere in their domestic policies. And sell these lethal drugs to Vietnam.
They could probably buy these drugs from the United States. For they use these drugs in capital punishment there. But perhaps relations haven’t normalized enough yet for that to happen. America’s involvement in Vietnam was a bitter one. As they were winning. Until the college protesters and Walter Cronkite defeated them from within. Allowing the Vietnamese to turn to a Fabian strategy. Staying in the war long enough until they made the US grow weary and quit. Much like the Americans did to the British during the Revolutionary War. But that was then. More than a generation ago. And the Vietnamese and the Americans are normalizing relations. So they could probably buy these lethal drugs from the United States. But if they’re talking about making their own drugs it doesn’t look like they’ve gone to the United States. Or the US already said “no.”
Perhaps it’s just collective guilt with outside involvement in Indochina. Who knows? It just seems strange that a manufacturer of lethal drugs refuses to sell what they manufacture. Which kind of defeats the purpose of making those drugs.
Tags: capital punishment, EU, lethal drugs, Vietnam
Week in Review
To increase the money supply central banks can do a few different things. To stimulate economic activity. They can lower reserve requirements to stimulate money creation via fractional reserve banking. They can print money. And they can buy bonds with money they create that they inject into the economy with their bond purchases. These actions will put more money into the economy. In hopes people will use it to generate economic activity. Of course there is a tradeoff. Increasing the money supply can also create inflation. And often does. Unless the economy is so far into the toilet that no one spends any money even with all of this new money in the economy (see ECB in ‘panic’, say former chief economist Juergen Stark posted 9/22/2002 on The Telegraph).
“The break came in 2010. Until then everything went well,” Juergen Stark, the German who resigned from the ECB in late 2011 after criticising its earlier round of buying up of sovereign debt, told Austrian daily Die Presse in an interview.
“Then the ECB began to take on a new role, to fall into panic. It gave in to outside pressure … pressure from outside Europe.”
Mr Stark said the ECB’s new plan to buy up unlimited amounts of eurozone states’ bonds, announced on September 6, on the secondary market to bring down their borrowing rates was misguided.
“Together with other central banks, the ECB is flooding the market, posing the question not only about how the ECB will get its money back, but also how the excess liquidity created can be absorbed globally,” Mr Stark said.
“It can’t be solved by pressing a button. If the global economy stabilises, the potential for inflation has grown enormously.”
The European Central Bank (ECB) wasn’t trying to stimulate economic activity with these bond purchases. What they were trying to do was throw a lifeline to those nations in the Eurozone about to go belly up because no one will buy their bonds. Because the chances of them ever repaying their enormous debts are slim to none. Because of this these indebted countries have to offer very high interest rates to entice anyone to take a chance buying their risky bonds. These high interest rates, though, were hurting these countries. Increasing their financial woes. And pushing them ever closer to bankruptcy. So the ECB caved. And bought their worthless bonds. By doing something only a central bank can do. Create money out of thin air.
These additional Euros thrown into the money supply could very well end up depreciating the Euro. And sparking off inflation. Which monetary expansion ultimately does. Unless an economy is so far into the toilet that no one will spend this additional money. And it just sits in the bank. But if the economy does turn around there will be a lot more money available to borrow. At exceptionally low interest rates. So low that some will borrow it because of those low interest rates. Which could spark off inflation. Helping the Eurozone to settle back into recession.
This is not going to help anyone in the Eurozone. Especially those staring down bankruptcy. Because this won’t cut spending. This won’t reduce any deficits. And this won’t lower any debt. All of the old problems that caused their problems will still be there. Along with a new problem. Inflation. Guaranteeing that things will get worse in the Eurozone before they get better.
Tags: bond purchases, bonds, central bank, debt, ECB, economic activity, Euro, European Central Bank, Eurozone, inflation, interest rates, monetary expansion, money supply, recession, sovereign debt, stimulate
Week in Review
Fighting global warming is one thing. But hurting aircraft sales is another. Which will happen if the EU goes ahead with their Emission Trading System. So Airbus is begging the EU not to ruin the aviation industry (see Airbus ministers seek EU CO2 plan delay: Hintze by Maria Sheahan and Victoria Bryan posted 9/14/2012 on Reuters).
Aerospace officials of the European countries where Airbus (EAD.PA) makes its planes will push for a suspension of the European Union’s Emission Trading System (ETS) for airlines to avert retaliation from China, an official said on Tuesday…
Michael Fallon, new business minister in Britain, said at the ILA Berlin Air Show on Tuesday: “Airbus has left us with no doubt that the threat of retaliatory action is a clear and present danger to its order list.”
There is harsh opposition to the ETS from European air travel companies and countries outside the EU such as the United States, Australia and Brazil that have said they want a global agreement to curb carbon emissions rather than a European law that extends to non-EU companies.
Which is a nice way of saying they should scrap the whole ETS. But if they said that the environmentalists would say they hate the planet. That they’re global warming deniers. And that they, of course, hate children. So by saying we should have a global system instead of just a European one sounds like they believe in global warming. While at the same time knowing there will never be a global system because the world can’t agree on anything. And that China is not going to fall for any of this nonsense. Because they play hardball.
China has threatened retaliation – including impounding European aircraft – if the European Union punishes Chinese airlines for not complying with its emissions trading scheme (ETS), intended to curb pollution.
The dispute between China and the EU froze deals worth up to $14 billion, though China signed an agreement with Germany for 50 Airbus planes worth over $4 billion during Chancellor Angela Merkel’s visit to Beijing last month.
If the dispute is not resolved, Airbus will have to cut its production target for the A330 “pretty soon”, Airbus Chief Executive Fabrice Bregier said late on Monday.
Cancel billion dollar orders AND impound European aircraft? That’s right. The Chinese don’t take crap from anyone. Especially from a bunch of whiny global warming alarmists. Airlines everywhere are thanking China (behind closed doors, of course) for playing the heavy here. So they can act like they really want to do what is right for the planet. Without losing billions in business.
The airline industry has said the ETS distorts competition, forcing European carriers to pay more simply because of the fact they are based in the EU.
“We feel we are being discriminated against,” Hintze said. “We demand a global solution from an industrial policy point of view because we could otherwise put ourselves at a disadvantage in major markets…”
Airbus sales chief John Leahy suggested at a separate news conference on Tuesday that one possible solution could be that all airlines around the world pay a tax to ICAO for carbon emissions, regardless of where they are based.
The ETS is nothing but a way to generate revenue for a cash-strapped European Union. For what will they do with the money they raise from their ETS? Pretty much anything they want. And one of the things they most desperately want is to close their budget deficits. And the EU thought they had a real winner in the ETS. Collect money from EU members. And collect money from non-EU members. Effectively transferring some EU costs onto nations outside of the EU. It was perfect. Except for one thing. It required other countries to voluntarily pick up the tab for some EU spending. And some are choosing not to no matter how worthy the cause.
A global carbon tax payable to the ICAO? The United Nations’ International Civil Aviation Organization? And what, pray tell, will the UN do with that money? Spend it on grants to green manufacturers to see if they can make jet fuel out of sea weed? The aircraft manufacturers are doing everything they can to reduce jet fuel consumption because a plane that burns less fuel is a plane that sells better. They don’t need a grant to do that. Planes are carrying and burning less fuel per passenger mile than they ever have. And they still have an incentive to reduce that even more. Without any grants from the UN to improve fuel efficiency.
As countries around the world are suffering through economic problems the last thing they need is a new tax. If anything they need a tax cut. So the ETS should be the last thing we should be doing. The earth will get by just fine without it. In fact, it might even do better. For the rise in global temperatures interestingly correspond to the time we began to fight global warming. Back in the days when industry, trains and home furnaces belched coal smoke, soot and ash into the air we didn’t have a global warming problem. Our cities were covered with coal smoke, soot and ash but the temperatures were just fine. Perhaps a little more of the same would reverse this warming trend. Say, encouraging our airplanes to burn a dirtier fuel so they put more emissions into the atmosphere that can block those warming rays from reaching the earth’s surface. It works with volcanoes. Perhaps it’ll work with manmade emissions, too.
Tags: Airbus, aircraft, airline industry, airlines, ash, carbon emissions, carbon tax, China, Chinese airlines, Emission Trading System, emissions, ETS, EU, EU Airlines, European Union, Global Warming, ICAO, impounding European aircraft, smoke, soot
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