David Hendry weighs in on climate change, citing me out of context, but otherwise in his usual sound way.
Keynes’ famous lecture on economic experimentation, delivered at UCD in April 1933, has recently become available online.
The European Union aims to reduce its greenhouse gas emissions to 80% of their 1990 levels by 2020, and to 70% if there is a meaningful international treaty on climate policy.
These targets were set well in advance of Copenhagen, and the EU thus excluded itself from the negotiations. If you know what someone is going to say, why talk to them?
So as to underline the point that environmentalists do not understand much about negotiations, there is now a push for the 30% reduction target anyway. It’s as if someone walks into your shop, sees something they like but decide it’s too expensive, and then you decide to give it away for free! What a brilliant strategy to further undermine Europe’s standing in the world.
Fortunately, the 30% plan has been shelved again — for the time being.
Martin Wolf has a really nice column here. For those of you who can’t access the article, the bottom line is that German and Asian savers have (via their banks) invested their savings in an exceptionally foolish manner — that is, by lending to the likes of us, to finance our excessive consumption habits. There is a clear possibility that they are, sooner or later, going to lose a lot of money as a result.
This brings to mind Keynes’ famous line that
“If the Grand Trunk Railway of Canada fails its shareholders by reason of legal restriction of the rates chargeable or for any other cause, we have nothing. If the underground system of London fails its shareholders, Londoners still have their underground system.”
At least 19th century Britain was investing in overseas railways, rather than in overseas housing bubbles!
One wonders whether the threat of ‘restructuring’ will eventually prompt the ants of Germany and Asia to start investing more of their savings in domestic investment projects, which might provide them with the foundations of sustainable growth.
Morgan Kelly’s recent Irish Times article covers a lot of ground; this post is just about a single dimension of his contribution.
One point he makes is to look at the US TARP:
We can gain a sobering perspective on the impossible disproportion between the bailout and our economic resources by looking at the US. The government there set aside $700 billion (€557 billion) to buy troubled bank assets, and the final cost to the American taxpayer is about $150 billion. These sound like, and are, astronomical numbers.
The estimated cost of TARP has fluctuated quite a bit over time (the US Treasury helpfully releases valuation updates four times a year). The most recent release is from last Friday, with the current estimated cost at $105.4 billion. It is especially noteworthy that the TARP components related to the banking sector per se are projected to make a profit, while the main losses relate to AIG, assistance to homeowners and assistance to the US automobile industry.
The release is here (see also the links there to the underlying calculations).
Of course, the realised fiscal cost of TARP does not provide sufficient information to judge the overall effectiveness of TARP, since it is important to take into account the impact of early repayment of TARP funds on the behaviour of US banks, plus other broader factors.
Finally, the main point remains – the size of the Irish banking intervention (relative to the size of the economy) is much larger than the TARP, reflecting the much more generalised banking crisis here.