So here we are, another day and another Euro.
David Cameron comes back from Europe having not signed anything and is being accused of "selling us down the River" according to no lesser authority than Ed Milliband.
meanwhile in the real world, the next President of France, Francois Hollande, has said he will re-negotiate the treaty anyway..
But what is this treaty - a final fix to the debt crisis, a burst of liquidity and debt forgiveness to restore some vitality to the PIGS? No, nothing of the sort, it is a treaty to stop Countries from borrowing too much in the future (Europe had one of these before, called the Stability Pact, which worked so well in the 2000's that we are where we are today).
The real deal will have to wait as this one is to help Angela Merkel persuade the Germans that they can put more money up to save the Euro. Safe in the knowledge that they will get it back again in the future.
I can't really see any progress since March 2010 when the problems in Greece first emerged and showed signs of being terminal. That makes the crisis nearly 2 years old and with nothing but hot air created to try and fix it.
Amazing to watch such inept people in action.
 A quick round-up on shale gas, in the UK and a couple of bigger-picture developments.
Firstly, while UK shale is looking as prospective as ever - indeed, another new discovery has been announced - activity levels are hardly frenetic. In particular, Cuadrilla has voluntarily suspended drilling in Lancashire in the wake of (a) accepting it caused two tiny tremors, and (b) having achieved what it really wanted to, namely boosting its own value by announcing what it has found already. Their interests are clear: they'll be selling out as soon as a decent price is on the table from one of the majors with the capacity to conduct proper production operations.
Yes, Cuadrilla is purely an exploration company - a very small one. And it shows: read this account of their inept handling of the locals in Sussex, where they'd like to drill in another exploration-licence area. (They have even contrived to screw up a big presentation to the rather favourably-inclined Energy Institute.) Good drillers they may be, but the PR side of things is completely beyond them and they are being left to twist in the wind by the rest of the industry.
Why ? Firstly, because right now there is absolutely no shortage of gas available, and prices are set to fall as recession kicks in. Secondly, and rather cynically, every boot applied to Cuadrilla's shins reduces the cost of buying them out in due course. There's no hurry for the majors: that gas has been under the ground for a while and it's quite safe where it is.
So - barring war in the Gulf, don't expect anything more than sporadic activity on the home front.
Elsewhere, though, there are some interesting straws in the wind. In France, there is a moratorium on shale gas exploration, but Total (effectively the French national oil company) is not impressed. They will eventually get to work on the politicians in France; and meanwhile are piling $2.3 billion into US shale, to gain both technology and experience.
Perhaps even more interesting is the evolution of Gazprom's position. For the past couple of years and with obvious motivation they have been vocal opponents of shale (always amusing to hear of their 'environmental concerns'); but to avid Kremlin-watchers a Board meeting at the end of November marked a subtle shift, following which they ran ran a section on their website (since taken down) hosting a range of perfectly balanced views on shale from various commentators.
Did anyone really expect Total or Gazprom to get left behind on a gas industry development as important as this ? All the big players will be there when the time - and the money - is right.
ND
"We need more leadership and monitoring when it comes to implementing the reform course. If the Greeks aren't able to succeed themselves with this, then there must be stronger leadership and monitoring from abroad, for example through the EU" Philip Roesler, German Economy Minister, in an interview with Bild today.
And so it rolls on. Greece, unable to really pay its debts back to Germany or anyone, is struggling to follow the orders from Berlin. Even the newly appointed 'technocratic' Government, sanctioned by the EU, cannot follow the orders from German.
Why? Well when the orders are the to slash your public sector, wages and increase taxes to push up, induce a large recession and destroy pensions arrangements - well these are difficult to enact. The Greeks themselves in all the interviews I have seen are fearful of falling out of the Euro and the huge disruption that would cause.
What they can't see is that at least for them there would be light. Post-adjustment (50% devaluation, yikes) their economy may start to grow, tourism would pick up as would domestic industry. The Cityunslicker clan would book a now affordable summer holiday there. Better would be a Euro devaluation to enable adjustment alongside the current default talks. At the moment the default option is not being done to help Greece, but Europe. how can Greece default and yet still have GDP debt ratio of over 120% (by 2020, even higher today!)
I don't see this a good outcome very likely, even more worryingly is the quote above from a senior German minister. The Germans are clearly getting desperate as their ludicrous plans fall apart. Mario Draghi's huge lending spree by the ECB has prevented a 2008 style collapse in this quarter. The German plans would have ensured this. But what next for them as they continue to insist that everyone else is not only wrong but that they must follow our rules. What next, tanks to be dispatched to the Acropolis?
This scary posturing by someone who should know better is another huge attack on Democracy in Europe and of course at its heart is the contrarian German doublethink:
Germany will not countenance a debt union for the currency union nor give up any of its own democratic powers over its economy, but all other EU States must comply with Germany's instructions and follow their economic ideology to become good 'EU' Countries.
This ludicrous position is only going to end in tears for all.
Quiz question. - When Britain and France and the US government began to ask for military aircraft and tanks from the US aircraft manufacturers and car giants in 1938/9, they were met with a lukewarm response. Even though there were plant idle and there was a near record number of unemployed labour, and the governments were offering cash. Why would that be?
The answer is that the industry was small. The US aircraft industry produced about 6,000 planes a year, of all types, for civil and military use, including export orders. An order from France for 200 fighters was welcome. And order for 600 was not as it was beyond the capacity to build without buying in new machine tools, reconfiguring existing production, training more workers etc. Once the order was completed the factories would have been left with all the new equipment they'd just invested in, idle, unused, and possibly unwanted. There was no profit it it. US government tended to order in small batches. And aircraft became obsolete quickly.
The other problem was executives resisted converting to military use, fearful that they would lose the private market to rivals who didn't convert.
The same was true of the UK and France. There was an astonishing array of types and vintages of aircraft in the pre war RAF, as the government handed out small orders to all the different companies to keep them in existence. The Soviet Union, after a successful five year plan, centralised planning and allocation of strategic materials, dedicated to aircraft production had produced 20,000 aircraft of all types, by 1938. Unfortunately they were not very good and were destroyed in their thousands.
The aircraft industry wanted long production run orders, with repeat orders, if it was to be worth making them at all. This is what eventually happened.
The statistics are remarkable. During 1939-1945, the industry became the largest single industry in the world and rose from 41st place to first among industries in the United States. In the first half of 1941, it produced 7,433 aircraft, more than had been produced in all of 1940. From January 1, 1940, until V-J Day on August 14, 1945, more than 300,000 military aircraft were produced for the U.S. military and the Allies. Total factory space, including engine and propeller production, was 175 million square feet (16 million square meters). Peak workforce, reached at the end of 1943, was 2,102,000. The dollar value of the industry's 1939 output rose from $225 million to some $16 billion for 1944.
In May 1940, President Roosevelt stated that he wanted the U.S. aircraft industry able to turn out at least 50,000 planes a year. This involved expanding from little more than 2,000 planes per year to 4,000 per month.
Beginning in the spring of 1942, factories ran 24 hours a day, six to seven days a week. Aircraft production became more efficient. In 1941, 55,000 individual work hours were needed to turn out a B-17. By 1944, this had dropped to 19,000 hours.
To solve the problem of what to do with post war excess aircraft assembly plants the government bought the plants and leased them back to the aircraft manufacturers. The industry that had been in only 5 states pre 1939 was made national, so helping the government's New Deal. Companies own existing plant were expanded by the government's taxes. Engine plants were massively expanded. Nationalised Electricity that was sold with a 30% margin pre war, was made available at cost. Extra dams were built to enable power to become available in regions where there was none. The cap on profits/aircraft was reasonably generous to the private companies, worker's wages rose, until it was capped by the government to control inflation, union membership increased immeasurably, and workers earned through virtually unlimited overtime. And with the overtime so came the taxes.
The number of Americans required to pay federal taxes rose from 4 million in 1939 to 43 million in 1945. With such a large pool of taxpayers, the American government took in $45 billion in 1945, an enormous increase over the $8.7 billion collected in 1941 .. Over that same period, federal tax revenue grew from about 8 percent of GDP to more than 20 percent.Can't help feeling there is a lesson for the stimulus, or Plan B or whatever in all this. The picture is 'Willow run' The most productive ww2 bomber plant in the USA. Owned by Ford. It finally closed in 2009 when GM went bankrupt.
 Following on from lessons of history -Keynesian Economics, comes lessons 2: War.
So many good comments in the last thread. History doesn't repeat. {but the lessons do ..just they may not be the lesson that was thought it was going to be}. History can't be used to parallel modern society- its just too different {absolubtely true. In our grandparents day a cause for a celebration could be having saved enough to buy a new hat. Not something likely to even warrant a text nowadays. But causes and effects can be looked at. And politics and military history change much more slowly.}
And, what we could look at in light of Iran is, as EK said, World War Two was inevitable.
It certainly wasn't. But an awful lot of events had to go differently for it not to have been.
The main reason for all three of the Axis powers in declaring war was time. All three had got the drop on their enemies. They had a comfortable margin of superiority in some arms {tanks/planes} in the arms race. {Not so Italy which was always inferior. But it had shrunk the gap.} The Nazi regime had expanded its arms to the point where it could use the military to dominate Europe, if not by war, but by fear of war. And this worked better, and for longer, than anyone expected. But the very success was unsustainable.
The Germans had built a war machine larger than their ability to maintain. All those troops needed barracks. All those planes needed hangars and airfields. All the factories needed raw materials. The German's 2:1 superiority in aircraft, that so frightened European politicians in 1936/37 had to be sustained for their policy of fear to be successful. Once the Allies started rapidly increasing their own arms the Axis also had to expand theirs, at a time when they were already at their peak, if they were to maintain their numerical advantage. They were ahead because they started first. Not because they were better at production. Only the USSR was out producing the UK in aircraft in 1940. The Luftwaffe never did.
So Hitler's biggest fear was that war wouldn't come soon enough. That's why he took the gambles that shocked his own military. Because he thought, rightly, that Germany was in a good as its going to get position, so it might as well fight sooner, rather than later. Relative strength was only going to decline.
The exact same was true of Imperial Japan. The resources used to build a military and a navy were even more unsustainable. Steel and oil had to be imported. Mostly from the USA.{80%} By the time Japan felt strong enough to threaten appeasement was seen to have been a failure. And so the Americans refused the Japanese demands for metals and aviation fuel. They ended up with an even smaller window than Hitler's. They were already at war in China, had lost a war against the USSR and had a maximum of six months reserves.
Despite being unwinable, they decided on war.
Here comes the Iran thought:
Iran is building a nuclear bomb. Has been for ages. Similar to Nazi Germany building an illegal airforce in the '30s. Its been found out and threats have been made. So Iran can either call off the project. Pretend to call off the project. Or delay, hope that its almost ready, so they can produce it and forestall an attack.
This is the politics of the fearful fascist economies. And Iran is making the same mistakes.
The ww2 strategic material embargo of 1941 led directly to America's involvement in WW2 and is a conspiracy theory favourite. The President signed and approved strong sanctions on Japan, cutting off aviation fuel and aircraft parts and machine tools, knowing what the consequences might be. But as has been said, appeasement was out. Standing up to bullies was in. Germany had a tiny chance to win WW2. Japan had none. Yet both went to war.
Iran has its window. America's preoccupation with Iraq has let Iran get away with supplying arms, stirring trouble and building nuclear missiles. Now President Ahmadinejad in the same position as the Axis powers were. If the allies apply real sanctions now, his regime might not survive them. As he waits the west uses more and more subversion and funding of opponents and builds a coalition against him.
Iraq is currently heading for the long expected civil war. That must be good news for Iran. Keeps the Americans out. Leaves a potential neighbouring enemy unable to attack or even offer safe haven to Iran's enemies.
America is financially weak. Its run out of war money. There is no appetite for any more foreign wars. The military budget must be cut. But in a few years, who knows what the situation might be?
Iran is making the same suicidal mistakes that a small country like Japan made. It believes that if it has enough military {nuclear} power, it will be immune from attack, and immune from constraints. It must look at North Korea and think that they can do as they please because they are powerful and have a bomb. Libya, on the other hand, was attacked by Nato, and Gaddaffi killed. Iran may only want a bomb so it can threaten Israel without fear of nuclear retaliation. To shore up failing popular support for the regime as the Argentina junta did in the 1980's. Or just to keep aggressors away. Who knows?
But for Iran the real lesson of WW2 must be that appeasement was a total failure. That sanctions early would probably have worked to prevent war at all.. A military response certainly would. And that even though sanctions and threats were very risky, in the end, the allies were fully prepared to back them up because they knew they would win eventually.
And Iraq forgets that its own fears cause fear in other nations. Israel is a real danger because unlike us, they have a bomb they might actually use.
Quiz question. - When Britain and France and the US government began to ask for military aircraft and tanks from the US aircraft manufacturers and car giants in 1938/9, they were met with a lukewarm response. Even though there were plant idle and there was a near record number of unemployed labour, and the governments were offering cash. Why would that be?
The BBC, alleged guardians of truth and responsible reporting, currently have as their lead story:
"OUTRAGE OF HESTER BONUS"
I do wonder, who's outrage though? What exactly is the going rate for running an organisation of over 100,000 people and being tasked with turning round a company that lost £28 billion shortly before you joined, into one that can be sold for double its current shareprice and deliver back to taxpayers £35 billion whilst also removing £250 billion of liabilities from the UK national debt.
I don't think any rational person would say this is a median wage job. In fact the majority of FTSE bosses get far more than this - yes we can argue that they are paid too much. But really, I am hoping that this is the top of the media circus. Stephen Hester is not Sir Fred Goodwin, he is already a rich man and took on a difficult job, failure at which will cost the Country tens of billions of pounds.
Things do need to calm down in the UK on the pure money envy front. Lots of people get paid too much, footballers, bankers z-list celebrities and lost of people earn very little too. it's never been any different and the general howling at people who have got on however lucky they have been is a vision of a society that I don't want to see.
That way lies communism and the utter failure of socialism, valuing equality over achievement, trying to go directly against the human condition and desire of competition - attributes that capitalism does so well to focus to positive rather than negative ends.
Finally, the BBC of all organisations, is also a large public entity, has many people on its pay roll - like say Alan Hansen at £1.5 million - who perhaps do not have the Country's financial future in their hands and yet are paid even more directly by the taxpayer...
David Dimbleby is joined in Plymouth by Jeremy Browne MP,met him a few times. Nice chap.. for a Liberal.He has one of those ministerial jobs that is just 'whatever is left over that no one else fancies.'
David Lammy,MP for Tottenham, and far too sensible to be in the Labour party.
Liz Truss,new breed Tory MP who wants a more business friendly society.
Mark Steel , one of my favourite comedians. Like to do historical sets.
Wrote a book on the French revolution that I didn't much agree with, but was very funny. For an ultra socialist he comes across as quite balanced, which is good.
and Melanie Phillips. British journalist who is regarded by the left as a traitor since defection from the Guardian to the Daily Mail. Considered by everyone except herself as ultra right.
BQ THINKS 1. The benefit cap and the barmy bishops. {Think on this Bish. If child benefit is included on top of the £26,000, then those on the highest rate are in danger of being given child benefit whilst those who work to earn the same equivalent amount not only pay 40% tax, but can't receive their own child benefit as they are considered too rich. Madness!} 2. Iran and oil. Is the west about to attack another poor defencless country to seize their oil? 3. -0.2% growth says Britain is heading for disaster/recovery. Is it time for plan A/B? 4. Devo-max/Independence. Is the wording important? 5. NHS leaked report. the NHS is not safe in the government's hands.
26/1/12
Cityunslicker - 18Miss S-J - 16
Nick Drew 15
Dick the Prick - 14
Malcolm Tucker - 13
Measured -12
Timbo614 -12
Botogol - 11
GSD - 11
Sebastian Weetabix - 10
Amy 10
Hopper - 10
Bill Quango MP - 10
Jan - 9
Budgie - 9
appointmetotheboard - 9
Philipa - 8
Hovis - 7
Andrew - 6
Measured - 6
Miss CD - 5 Mark Wadsworth -1
Dearieme - 1
CU is romping away. He was 200/1 before the start.
{any errors report to the steward in the comments}
 If you put five economists in a room and ask a question, you'll get seven definitive answers. The IMF seems to have covered all its bases by suggesting ever more stimulus for America, a little stimulus for the UK and austerity for PIGS.
Three economists on Newsnight debated the merits of Keynesian economics. The New Deal got its usual airing. What surprised was that they never seemed to point out that all the major combatants of world war two had a different approach to resolving the great depression. And all were cut short before the effects of whether they were a success or a failure could be realistically measured.
The Fascist Germans pursued arms production with a vengeance, but needed to have an export market to obtain the hard currency to buy the missing rubber, steel, copper and oil to feed the factories. So Germany's pre war boom was accompanied by frequent busts as it struggled to balance its economy. Germany funded its boom with a mixture of taxation, confiscation, restriction and promises. The Mefo bills his 12 billion RM of debt. Unemployment was tackled by removing women, by benefits for staying at home having children, and Jews and undesirables, by imprisonment and death, from the workforce. What would have happened to Germany if they hadn't embarked on war? The opinions at the time were that it was running such unsustainable spending that it would eventually be unable to continue funding its war machine and the cost of all the arms and armaments that it had created, and just implode. But at the same time Germany's 1930's recovery was seen as a miracle, similar to West Germany's.
The Japanese devalued. Abandoning the gold standard that had trapped them, the Japanese devalued the Yen by about 40% and Japanese exports, especially textiles, soared. Large Japanese stimulus spending was used for large drainage, irrigation, land reclamation. Arms spending was also great of course. The worlds third biggest navy had to come from somewhere. All this was funded by government issued bonds. The government issued bonds to the banks and the banks sold them to private investors. Japan was on a Keynesian road to recovery by 1933. Unfortunately in attempting to control inflation and an overheating economy, the finance minister , Takahashi Korekiyo, cut military spending and so was assassinated by militarist radicals that destroyed the Japanese during the 1930s/40s. It is not known if the Japanese economy could have been deflated successfully without setting off a second recession. It wasn't tried. Military spending followed Germany and went ever upwards. And as all countries found rearmament forced up the price of raw materials, so forced up the costs of rearmaments, so increased inflation..
The British Empire tried austerity. Austerity first was the UK solution. The decision to rejoin the gold standard in 1926 had caused harm to the only slowly recovering export trade. Wages and jobs were cut to make factories more competitive and led to unemployment and the general strike. And from then it just got worse. the Wall Street crash was followed up with government tax rises and wage cuts which just removed purchasing power from the economy and unemployment soared to 3 million at a time when the population was just 50 million and women were not working in many workplaces at all. Coming off the gold standard and trade tariffs with the empire helped, but did not end, the damage done, and the recovery was a very long time in coming. Chancellor Neville Chamberlin was a firm believer in controlling overspending and defending the value of the pound. His limited rearmanent policies had not created the booms experienced in Japan and Germany, but hadn't created the debts either. Great Britain could have not have fought long if it had gone into WW2 with an empty treasury.
Even so, with the stimulus in arms spending from 1938 unemployment still failed to fall significantly in the UK, probably as much of the money went on air defences. The aircraft industry, unlike the navy, requiring fewer, higher skilled, workers.
France tried everything in the late 1930's and failed at all of them. It reversed policies so many times it ended up with debt, austerity, unemployment, giant stimulus spending, frightful unproductivity, devaluation and shortages. France was in a terrible position to try and resist the German arms race, partly from having fallen into the depression last and pursued policies that meant it didn't emerge until last either. In 1936, in France, the Keynesian stimulus was spent on increased wages and social benefits rather than increased output and so caused ever increasing inflation that ate up all of those 1936 wage gains by 1938, without the necessary investment to lead to increased productivity. A reminder of how government spending in the 1970's didn't raise living standards, but actually decreased them through stagflation.
And the USA. The New Deal. Well, we know it worked. Sort of. The slowing of the stimulus spending in 1937 led to a big rise in unemployment. up by around 5% to 20%. The US economy stalled that led the right to complain that all the government spending had done was to push up wages, cause thousands of strikes at a time when workers were desperate for jobs, and lead to too high taxes on business. It all got very acrimonious. But what can't be denied is that stimulus had not ended the great depression of 1929. Even the orders for arms from Britain and France that poured in from 1938 didn't sort the economy. What would have happened if the war had not broken out? Could Roosevelt have just continued priming the pump indefinitely? If any country could, the USA could. But would it have worked? Or would each time government spending was reduced, economic measures fall?
World War Two turned all democracies into totalitarian, centralised, bureaucratic economies. Debt and consequences weren't an issue and so the answers to which countries were the most right in ending the depression can't be known.
|
|
Posts
