Financial Illiteracy Post author By Philip Lane Post date October 11, 2013 Simon Nixon writes here. Categories In Uncategorized 46 Comments on Financial Illiteracy ← Google’s Tax Planning → Draghi: Europe’s pursuit of ‘a more perfect Union’ 46 replies on “Financial Illiteracy” Wow. Saved. Apart from the 26% unemployment, mentioned only in the context of “yeah, its still there”. There we all were, thinking that this was a real problem. Phew. Wonder what he will find when he comes here. I guess its true, a hundred million or so does make you see the world differently. Brian, it’s not the http://moneysupermarket.com guy methinks. @ BL And it has been there for a long time! http://www.tradingeconomics.com/spain/unemployment-rate Spain faces a major structural problem with regard to employment (dual market between temporary and permanent employment). It is up to Spain to fix it. @ BL A good place to start the chart would be at the beginning, 1987, the year after Spain joined the EU. The change in unemployment peaks has been between 20% and 27% (1995 25%). Saved by “Private Equity” . That 85 billion a month coming out of the FED has to find a home. On the positive side it will save some Spanish banks. Everything relies on a recovery starting before Rajoy is voted out. Spanish property looks like a bargain if the country stays together long enough to realise the gains. With Catalonia eyeing the exit the country could lose a proven cash cow. Take a flyer on Barcelona but not on Madrid. “… classic financial panic ..” Financial panic, certainly; how classic?_ I’m not too sure. http://www.irishtimes.com/news/politics/budget-measures-will-lead-to-surplus-says-enda-kenny-1.1558244 “Taoiseach Enda Kenny has said he is confident next week’s budget will help the State to record a primary surplus in 2014 and allow the Government to begin reducing the national debt. Addressing the Fine Gael national conference in Limerick last night, Mr Kenny said …….. “The €2.5 billion adjustment will deliver a deficit of 4.8 per cent next year and a primary surplus also, which means our debt can start to reduce,” he said.” Gilding the lily or was this, illiterate!! The illiterate word seems to be in vogue this week. Even Dunphy, last night, accused the new Irish manager (that didn’t take long this time) of illiteracy. IMHO, it was by no means the worst of Irish performances in recent years. @DOCM re; Spain’s unemployment rate, like the poor, will always be with us. How will the transfer of rigidly permanent jobs into temporary throw away tissue jobs, increase overall employment given static or falling demand, assuming that those in the rigidly permanent jobs actually do something. While it is very disheartening for young people to experience being shut out of the future by the previous generation, and while changing that job allocation system would rebalance the unemployment scales between young and old, it is difficult to see such ‘restructuring’ having any significant overall impact. “Investors are “clamoring” to buy up Spanish real estate and banking assets …” Are they indeed! And prices paid are ….? Yeah! I thought so. Next! “Cash is pouring into the Spanish stock market too.” Well golly gee on that one. Now would that be because of significant improvements in earnings? Or maybe its just a teeny weeny asset bubble – like when you have access to ‘free’ money and creating your own money is a risk-free breeze? Next! “There is an enormous amount of unsold property to shift.” Simon old son, that’s the understatement of the century! Portugal? Ireland? And …? Next! This is becoming really BORING! “Further falls in property prices, leading to further bad debt charges for the banks, cannot be ruled out.” Got it right again there Simon! But not to worry old chap, we have these things called ‘citizens’. They have lots and lots of surplus moolah to ‘invest’ in zombie banks. Indeed. “Can we stop here?” “No! It gets interesting from here on.” ” … [the] speed with which productivity and competitiveness have improved as a result of tough decisions by companies and a determined program of structural reforms …” Tough decisions. That’s my man Simon! Let those lazy good-for-nothing wage earners (aka: consumers) just suck it up! To hell with consumer demand – long live producer supply! Eh! Simon. May I interject a concept at this juncture? How do income constrained folk buy more stuff? Just asking, you understand? “It is now blindingly obvious that the global financial crisis was first and foremost a classic financial panic and that one of the biggest supply-side constraints faced by crisis countries is the provision of credit.” Blindingly obvious. Now Simon, I have this very good line in D+G Snow Goggles. Very effective against the glare they are. A snip at 200 a pair. I’ll even throw in a pair for the missues! (they’re actually cheap oriental knock-offs – but that’s economics for ye!) ” … macro forecasters have often found themselves playing catch-up with real money investors whose keener understanding of liquidity conditions and collateral values has typically made them a more reliable judge of economic conditions.” Keener understanding? Like they are professional looters? Yep, I’ll buy that one Simon! Especially if the Rule of Law has been trashed and there are minimal consequences for financial thievery. Nice one there Simon! Sorry, but who called this poor lad an ‘illiterate’? I reckon that was an insult to us genuine illiterates. But no matter. The score: Ideology Folk United 1: Little Folk United 0. Amidst the gloom, there are some points of light but Spain has had an unemployment problem for decades and as in Ireland, there are no magic solutions. Centralised wage bargaining from the Franco era gave companies no incentive to move to poor high jobless regions with unemployment rates above 30%, while more recently, the temporary low paid young sector accounted for a quarter of the workforce. The good news is in the impressive gains in the export sector. However, there is a limit to the potential of the export sector because of the relative small number of big firms, as in Ireland. The FT says that Exports, which accounted for 20% of GDP before the crisis, now make up to almost one third of national output. What is more, Spanish exports are moving steadily up the value chain – sales of chemicals, pharmaceuticals and machinery are up – and heading increasingly to fast-growing countries outside the eurozone. Shipments from the port of Barcelona in H12013 to east Asia, Latin America and other fast-growing regions rose particularly sharply, with container traffic to Algeria up 22%, to Brazil up 15% and to Mexico up 13%. The eurozone absorbed 60% of Spanish exports in 2001 but only 50% in 2012. The share of Spanish exports to Asia and Africa, in contrast, has increased to 8.5% (from 6%) and 7% (from 3.5%), respectively. Exports to the Community of Independent States (CIS) rose from 3.8% to 6.4% of Spain’s total exports. BNP Paribas says that in 2011, Spanish exports increased 15.4% in value. Two thirds of this increase was generated by sales outside of the eurozone. The strongest growth was to the CIS, up 34%, the European Union excluding the eurozone, up 27% and Asia, up 21%. Together these three markets contributed nearly 45% of Spanish export growth in 2011. Despite strong growth since 2009, exports accounted for only 32% of GDP in 2012, compared to 46% for the Eurozone countries on average. The textile sector employed around 400,000 workers in the nineties, but after the flight of most producers to Asia and North Africa there only remain 166,000 on its payroll. Spain’s car sector accounts for 10% of the country’s GDP and is key to driving its economic recovery. Spain is Europe’s second biggest car manufacturer and will produce more than 2m units this year led by VW-owned SEAT. The car sector employs 280,000 people in Spain, including parts suppliers, and accounts for a tenth of the country’s economic output. About 85% of the industry’s workers are on long-term contracts. Problems yes but also some positive news. Rejoice!! Financial Distributions: Global wealth inequality: top 1% own 41%; top 10% own 86%; bottom half own just 1% http://thenextrecession.wordpress.com/2013/10/10/global-wealth-inequality-10-own-86-1-own-41-half-own-just-1/ h/t nakedcapitasism.com @ Joseph Ryan For everything you wanted to know about Spain and were afraid to ask, refer to MH above. I think, however, that it may be a bit early to break out the cava. On the subject of financial and/or economic illiteracy, I cannot venture an opinion not being technically versed in either area of activity. However, to concede interpretation of the world around us to so called experts in both areas would be the rather foolish IMHO. There are not enough of such experts to go around and, as they invariably disagree with one another in any case, the question of whether they should be listened to in the first place is raised. For the officials and politicians directly involved, however, it is another matter. http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_11/10/2013_522603 Is Christine Lagarde dropping acid or is this the new IMF stance. http://www.afp.com/en/node/1118281 Today’s illiterates might be tomorrow’s sages. http://www.imf.org/external/pubs/ft/fm/2013/02/fmindex.htm theautomaticearth.com/Finance/the-imf-proposes-a-10-supertax-on-all-eurozone-household-savings.html Economics is an evolving art except in Ireland where we got bogged down on the ould bohereen (frequently unpaved and rural). A ‘one-off’ tax? Gee, that’s nice. But those stable doors are padlocked open! And the keys are kinda gone missing. You’d have to abolish all tax havens (which is improbable) and introduce draconian capital flow controls (also most improbable). Now those stable doors might (well, maybe mostly) be welded shut with the gee-gee inside. How about a plain vanilla Jubilee, and let those ‘bad’ banks go down the tubes – where they belong. If 70% of those trillions of debt are ‘only’ virtual (leveraged funds) – then what’s the problem? Who loses? Well it sure ain’t the poor and the non-invested sector. Except of course we have a reprise betrayal of the citizens by looting their savings. The really wealthy have no ‘savings’ – they have ‘investments’, and since these are deemed to be private property, they cannot be legally looted. Lovely stuff! ” [the] sustainability of the debt levels of developed nations …” Debt is sustainable? Since when? Debt might be if day-to-day government spending = tax revenues (that is, no more borrowing or log-rolling existing debts), and aggregate economic output and income provided a sufficient surplus to pay down the principle amounts owing – plus the accumulating interest on the existing loans. This situation was just about feasible from 1945 to the mid-sixties. Then the production/consumption economic paradigm blundered into a debt swamp. The first-responders encouraged us to ‘struggle harder’ – “Create more credit! Credit leads to Growth!” As if credit was some form of a flotation device and debt was buoyancy neutral. Indeed! Well, we’re still in that swamp and a tad deeper and we have discovered that debt is actually a leaden weight – and the fluid level in that debt swamp is up to our nostrils! Or maybe its actually over our heads and we are sucking air through hollow tubes! And that’s considered sustainable? “Dream on folks!” Fossil fuels (especially the liquid sort) are essential for any sort of modern economic activity. There is an emerging (decade or two) problem with supply. Production is barely keeping pace with demand and production decline rates are greater that the rate of discovery of new resources. Exponential increases in the populations of the major producers mean increased domestic consumption and decreased nett exports. Absent a continuous, and increasing, supply of these fuels – at reasonable relative cost, our economies will plunge over that Seneca cliff – whose edge is being obscured by an ongoing political Whiteout! “Party on folks!” Try to pay less attention to our credit deficit and pay more attention to our emerging energy deficit. @Brian Woods Snr,you already looking at a one off tax.I know the weather was good this year but one wonders what the allure of the oul sod is to these people,are maidens still dancing at the crossroads… http://www.irishtimes.com/news/social-affairs/department-of-finance-refuses-to-back-scheme-for-wealthy-tax-exiles-1.1558067 This is a good read,MH if you have not,interesting stuff on Ireland the banks vig is borderline usurious.,Spain here too. http://www.bain.com/Images/REPORT_Restoring_financing_and_growth_to_Europe's_SMEs.pdf If for some reason the US Bain site requires a login or is blocked as appears to happen a lot,the IIF have a version here. http://www.iif.com @ jg: I have it – on that most excellent, reliable and authentic of sources (Alfred E Neumann of Mad Magazine!) that the Irish Poteen 2013 crop will surpass all expectations! Headaches are not included! John, I reckon that those in the ‘know’ have known, for quite some time, what the real economic predicament is – and are now starting a sneaky PR campaign of NSA-style disinformation. They are a bunch of lying sacks-of-sh*t! And that is my polite comment! Cheers. @ JG When the Too Big to Fail Club AKA the IFI starts getting exercised about lending to SMEs one immediately gets a trifle suspicious, especially when the word “guarantee” enters the discussion. In any case, the problem lies with the “vicious circle” between sovereigns and banks, a problem which will not be fixed immediately (cf.comments by Regling linked to above). Berlin has lent a billion to Spain to help SMEs. While it is still Amateur Hour with regard to Ireland’s budgetary process, the boost in the fortunes of our nearest and biggest trading partner should be a help; even if it may be based on what some would view as economic illiteracy. http://www.telegraph.co.uk/news/matt/?cartoon=10365584&cc=10345727 @BW,Snr,Hi Brain as always inquiring about the garden,it’s a long weekend over here,I’m out in the “garden” of NY.Funnily enough they are taking the potatoes out the ground now,but no “poteen” to warm the soul! It could all go awfully wrong,I don’t like the way the NTMA is playing its hand at all.There really is a significant impasse over here,I certainly hope there is some resolution but as the days go on the likelihood of default gets more real. Irl is exciting “naked” no back up or LC,or line of credit really ! Recap off banks not happening,the mtg mess worsening yet the NTMA is on garden leave…why ? @DOCM I thought SME was something you could catch in Amsterdam,we call them mom and pop companies,but there is often references on here to it. Printed it out during the week had a quick read this morning over coffee. Was surprised at the spread irish SME’s pay i think 300 to 400 basis points more than German ! But agreed that’s why I put Bains report on this thread,MH will probably enjoy it,I was quite surprised reading it,not that bad at all. Conclusion was quite complementary on Irl. We are all a bit “nervous” over here,some people are getting into cash it was kinda fun watching the circus but not any more it’s getting very real…politico is a great resource free too! @DOCM-the cartoon was good,there was a quite interesting Fed paper this week,no idea if any research in Irl on this topic. “In a recent paper, Karl E. Case, John M. Quigley, and Robert J. Shiller (hereafter CQS) find effects in the 2–6 percent MPC range. Their paper looks at quarterly U.S. home prices and retail sales, by state, from 1975 through second-quarter 2012. CQS estimate that, on average, when housing wealth increases, consumption rises by about 2 percent, and when housing wealth falls, consumption falls by as much as 6 percent. These findings suggest that it may not be easy for the wealth effect from a housing market recovery to be the primary spark to strong economic growth—home prices would have to rise much higher than 2005 levels to compensate for lost ground. Going back to our August 2013 data, the CQS estimates suggest that a 12.4 percent increase in housing wealth should correspond to a 0.4 percent increase in retail sales, which is not far off from what we are seeing: consumption growth that nonetheless falls short of a full recovery.” http://realestateresearch.frbatlanta.org/rer/2013/10/when-will-housing-market-recovery-boost-retail-consumption.html From the Atlanta Fed piece: ” … home prices would have to rise much higher than 2005 levels to compensate for lost ground.” Perhaps the author should have continued, and added this: – ‘Median income would have to rise much higher than 1980s levels to compensate for lost ground.’ 2005 saw the height of the US RE boom. That’s an eight-year gap. And ‘they’ want even higher home prices? The US median wage has been stagnant for near enough 30 years! Who’s the joker here? Are the folk that are buying not income restrained? Now who would they be then? Hedgies with leverage looking to goose asset values, then churn them. Hoping to get some dopey suckers to ‘invest’ in the inflated asset – “They can only go up!” This looks familiar. @BW,Snr it’s not really bout that… “In green, the chart also shows homeowners’ equity as a percentage of real estate. This gives a sense of how homeowners’ assets have recovered relative to liabilities—or perhaps another way of thinking about it is as a measure of total loan-to-value. We can see there has been strong recovery in homeowner equity, due to the combined effects of deleveraging, write-downs, and price recovery (given the timing of the strong uptick in late 2011, the last is likely the most important). But on aggregate, we’re still 10 percentage points lower than the precrisis average of 60 percent. To the extent that the wealth effect of housing is driven by cash flows and the use of houses as collateral for loans, this channel could be considered “blocked.” If so, perhaps all that is needed is for home prices to recover a bit more.” @BWS “Fossil fuels (especially the liquid sort) are essential for any sort of modern economic activity. There is an emerging (decade or two) problem with supply. Production is barely keeping pace with demand and production decline rates are greater that the rate of discovery of new resources. Exponential increases in the populations of the major producers mean increased domestic consumption and decreased nett exports. Absent a continuous, and increasing, supply of these fuels – at reasonable relative cost, our economies will plunge over that Seneca cliff – whose edge is being obscured by an ongoing political Whiteout! “Party on folks!”” Nuclear has always provided the answer to this question. Problem these days post Fukashima is insurance. So States will have to ante up. And take any downside. However there is not any great likelihood of significant issues as far a nuclear goes. Statistically it is one of the safest forms of energy. Add to this a now more febrile scientific quest for reduced carbon emissions and Nuclear is in a league of its own. No emissions and low carbon footprint through the commissioning phase. Three or four years ago I was banging on about this in these threads with what’s his name…..Tol, and getting nowhere. Maybe today a few might cop on to the truth. Post carbon era = fission era. As to economic literacy? Until ABCT is taught in our schools there will never be any. Henry Hazlitt should be mandatory in 1st year of secondary school. Follow with Bastiat, Say, Menger, Von Mises and Rothbard, among others. This is economic literacy. Everything else is Socialist propaganda. @ jg: OK, lets just buy some popcorn on this one. I opine that its a heroic ‘dead-cat’ bounce. Loser buys the beers! Cheers for now. @ RG: Admire your guts Robert. Nuc may indeed be the way to go, but it will chew up a large slice of fossil energy on the way. And it needs a mandatory liquid fuel input. to maintain. Its not about safety, or the emissions its really about the nature of the energy that’s generated: electricity. This form of energy will never power the sorts of fleets of private vehicles we now have, nor any form of heavy road transport. So that leaves us with the problem of upgrading our rail (light and heavy) networks. We seem to be a tad slow on this one. We have, perhaps, a decade to move on this energy predicament. Its not something that is going to ‘go away’. Its coming toward us! In the meantime … … with respect to SME spreads, it would be really nice, if somebody would have some (solid) data AFTER OMT announcement, like 1 or 2Q2013 with respect to nuclear, the last thing I heard was that EDF demands a solid floor of 10 c/kWh from the UK for a new one, and full risk sharing @BWC Moving people and goods is undoubtedly the big problem. But we do not know how much efficiency can be achieved. In a worst case situation where we are faced with a sudden loss of fossil fuel sources, say war, we will certainly be thrown back into the dark ages. However nuclear will provide us with enough clean cheap power to allow us retain a large measure of our tonnage shifting potential. But before that we must make the decision to go for nuclear. Obviously. So where is the debate? Brian I despair of this country ever growing a pair. We need to make some key decisions. Democracy is killing us at present. Nothing will get done until it is too late. If we miss the boat on energy we forfeit life itself. For most of us anyway. Don’t forget that what hits us hits the English harder. There are 65 million of them on that small island to our east. Who feeds them when tshtf? NB. They are pushing past 900% of GDP in debt. Not far from where we are on that surreal measure. Three big pots will do it for us. That is 3.9Gw. We are energy exporters after that. Anything is possible if enough (cheap) energy is available. Propaganda around NP is hugely exaggerated in the negative for the most part. Getting bogged down in this is tantamount to picking at a euro coin in front of the advancing steam roller. Suicide. with a base wattage price of 4.3 c/kWh http://www.eex.com/de/ a minimum markup of > 100% doesnt exactly look like “cheap nuclear” to me @francis As compared to what? Robert 10 c EDF demand to 4.3 market and trying to be a nice dependable resourceful german data guy, I looked up http://www.theguardian.com/politics/2013/jul/05/davey-minister-nuclear-power-hinkley-point “strike price of £95-£100 per megawatt hour of electricity, while the government would rather settle around £80-£85. The current wholesale price is about £48/MWh.” OK the Brits are negotiating with the French on a deal that on the face of it screws the Brits. Shop around why don’t they? But you still have not answered my question. Is it your contention that the cost overall of nuclear power is higher in Europe than coal or gas or other sources of base load? 8-9c kW/h is cheap. Compared to everything else. I do not know what the cost of nuclear is in Ireland, but I do know what it is in Germany: social peace As long as at least 2/3 of my people are willing to pay 30 c/ to avoid nuclear, because they would NOT “abends beruhigt schlafen gehen” (cheap hint to a parallel thread : -) and probably > 50% 50 c or more AND we are very able to pay that price, I and Merkel do know what to do. The foofarah about the cost of energy has become a bit overblown. In business one thinks primarily about how to maintain a level playing field. If the cost of energy goes up in Ireland it goes up for all of the EU leaving Ireland and all member states in equilibrium. I have spoken to engineers working for gov’t in Ireland about the main benefit of nuclear power being control of pricing for 30+ years. The response has always been the public are against nuclear power and you cannot blame them because Irish gov’t is not competent and cannot be trusted to ensure safety in design or construction. From this I gather that some time has to be spent freezing in the dark before any attempt to change energy policies can even begin. Granted Germany has fallen into a trap set by short term thinking and political opportunism on the part of Merkel when she decided to phase out nuclear power plants. At the time I spoke to FDP members who were literally foaming at the mouth with rage. Politically Merkel won and the FDP lost, at least in the short term. German manufacturing will be weakened when the price of gas used in generators rises to the point where France benefits from its lower cost nuclear generating base. Brown coal is one solution but an extremely dirty one. England has a supply of sub metallurgical coal but better than brown coal so they can compete with Germany. The CO2 argument goes out the window when cold and darkness comes in the door. Poor Ireland has a smidgin of poor quality coal near Kilkenny as well as a declining quality and quantity of peat land. No nuclear whatsoever since Rutherford almost split the atom and then buggered off to New Mexico in time to help develop the atom bomb. On the whole there are many countries as badly off as we are, badly governed, suspicious electorate, resistant to change. On a bright note our youth do cut the apron strings and head abroad which many other Europeans are reluctant to do. Although Portuguese emigrate to Brazil, Angola, Venezuela and Colombia and the Spanish go to Argentina, Venezuela, Colombia. Why not Germany? Chinese take on US fiscal cliff. This would have been unthinkable a few short months ago. Remember “old Europe” and China “on the verge of collapse”. Remember that old Patsy Cline number Who’s Sorry Now, it’s playing in my head. news.xinhuanet.com/english/indepth/2013-10/13/c_132794246.htm I couldn’t resist. This can be had as a ringtone. WHO’S SORRY NOW WHO’S SORRY NOW WHO’S HEART IS ACHING FOR BREAKING EACH VOW WHO’S SAD AND BLUE WHO’S CRYING TOO JUST LIKE I CRIED OVER YOU RIGHT TO THE END JUST LIKE A FRIEND I TRIED TO WARN YOU SOMEHOW YOU HAD YOUR WAY NOW YOU MUST PAY I’M GLAD THAT YOU’RE SORRY NOW RIGHT TO THE END JUST LIKE A FRIEND I TRIED TO WARN YOU SOMEHOW YOU HAD YOUR WAY NOW YOU MUST PAY I’M GLAD THAT YOU’RE SORRY NOW @ RG: I note your 9.15 of last evening. Whether nuc is good, bad or indifferent only leads us into a bog of controversy. Ireland is not going nuc, that’s basically the bottom line. Mind you, the Thorium route is feasible, relatively in-expensive and less hazardous. We would need about 20 installations – and a quite significant re-vamp of our transmission lines. Maybe. What is essential is a sustained campaign to use less and less electricity. Much tougher building regulations – and stiff ‘or else’ consequences. Eliminate the ‘stand-by’ function on all domestic appliances and only allow A or B grade appliances to be available. There are many areas in which we could act. But that would require the application of intelligence and political courage – both of which are conspicuously absent at present. @ MH: “Why not Germany?” Maybe its a ‘language’ thingy? Not to worry, make our First Official language mandatory, and all will be order. Immigration will cease immediately! Sure, where would those gaelic speaking apron string cutters emmigrate to? On second thoughts, better keep with that Second language – for the moment anyhows. I love this hubris about an impossible event: a US default. That’s not the issue. The real issue is about they’re increasing domestic deficits (entitlement programmes, military spending, etc.). If the debt ceiling remains as it is – the budgets for those programmes will have to be curtailed – significantly! – and/or taxes raised. Austerity US? Unlikely. Marxian (as in bros.). Robert, did you get it with the prices by now? I basically said it 3 times. From my point of view, there are 3 aspects to it: 1. NPV 2. cluster risk / granularity 3. long term perspective 1. NPV Let us just write down a most elementary net present value (NPV) model comparison Market price 5 c, let it increase by 1% over a 2.0% inflation, the EDF demands to be protected for, for 35 years, German PhotoVoltaics (PV) now at 10 c, nominal price guaranteed for 20 years, assume for after that market price, discount rate 4%. Basically EDF gets overpaid by a factor of 2, PV is just 32% more expensive 2. cluster risk / granularity A modern nuc plant, like the ones planned for wiki/Hinkley_Point_C_nuclear_power_station, has 1600 MW output, or 40% in comparison to an Irish consumption of 3900. That is one hell of a cluster risk. In comparison, not one single block in Germany is more than 1%, similar for UK,FR, US. Please take a look at wiki/List_of_power_stations_in_the_Republic_of_Ireland When even the UK, with a couple of operating plants, regulators and experienced engineers in place, is not even attempting to produce this technology for national safety reasons on its own, but buy from 85% French state owned EdF, with some rather heroic claim of an alternative by Hitachi (Fukushima), and such power plant in Ireland would be owned and operated by EdF. Read the wiki and look for “over the barrel” in the guardian link. The german version actually has an interesting note, that in 1961 a worker peed against a tube, and in combination with the always interesting impact of neutrons, they had to shut down the plant to replace a tube, which was designed and expected to last for ever. Could I give you an impression in what a much more complicated world you would dive into with that? Of course Siemens would love to sell you HVDC connections to bring you into the safety of the European grid (wiki/Wide_area_synchronous_grid) 100 times larger than Ireland alone. 3. long term perspective Over the last 15 years we drove down PV production costs from about 50c to 10c/kWh (e.g. wiki/Erneuerbare-Energien-Gesetz for lots of interesting data), at a cost of 150 b Euro and counting. That opens now the economical feasible demand for overnight storage with a delta of 30c retail to 10c production. That will drive the next 15 years the demand for the storage, localized, but connected. Driving also the demand for coordination in the near future. Some things like off-shore wind are turning out more difficult/expensive (> 15 c) than hoped for, may be delaying it, or some dead side track, we will see. How far can we drive down the cost of storage, over what periods, we also have to see. But Mickey Hickey calling this “Germany has fallen into a trap set by short term thinking and political opportunism on the part of Merkel” is soo far off, of what we are doing with our long term 50 – 100 year social consensus industrial policy, WTO conform, and threatening no one. Xinhua is the official People’s Republic of China news agency. The link is to a number of articles on the US fiscal cliff with linked extensions. I don’t see it as the gospel according to St Patrick but more as an indicator of what matters to the Chinese Gov’t. Requires Google translate or similar. http://www.xinhuanet.com/world/jrch/20131014.htm @Francis So you are saying the German energy costs have fallen from 50c to 10c in the last 15 years.? Storage is not the panacea. The technology does not exist that will preserve large scale base load for future use. In addition all prices are dependent on foreign supply remaining stable. We live in very unstable times as you may have noticed. If Russia where to become embroiled in a hot war in the Middle East, what then? Same question applies to us. The whole point about Nuclear is that it gives us cheap secure base load (in times of trouble, crucially). The only Europeans well placed in terms of energy are the French. But the French are wedded to Socialism and have serious economic problems as a result. 52 plants (I think) will however not meet the needs of neighbouring countries when the cash runs out or worse happens. @mickey I regard the loss of our children overseas as defeat. Most do not come back. Contrary to popular misconception our emigrants do not come back. Perhaps one in five. @ Robert 1. Russia Syria is not within the NATO defense sphere. I don’t see any bad feelings between the fatherland and mother Russia at all. Putin is very welcome here, he gives programmatic speeches in German in the Bundestag (see youtube), and Angela and my Saxonian Prime Minister Stanislaw joke with him in Russian. I think we even keep his old KGB desk here ready for him. Who speaks only English? This week we commemorate the 200th anniversary of the Völkerschlacht (wiki/Battle_of_Leipzig), the largest battle in Europe until WWI, when we defeated, together with our Russian and Swedish allies, Napoleon, another guy who tried to unite Europe at gunpoint. The exhibition “Bloody Romantik” at the war museum here, with a memorial for the Russian 5th guard division in front of it, is impressive. The French wounded were treated the same as our own, but in those times dead and wounded were not counted separately, because it was nearly the same. In the local TV mdr.de/voelkerschlacht/index.html they actually try to reenact this in a modern day live reporting style, every evening 19:50 CET, an interesting experiment. That the French don’t do either, what the FT crowd wants, doesn’t mean that this keeps me from buying more French stock : – ) 2. Energy Nobody says our long term energy strategy is easy. It is difficult and expensive, half to one trillion, but we believe it will deliver a renewable, home grown, resilient, low risk energy supply, and all of mankind can then profit from it, it is not some proprietary approach. It drives many changes, not only technology, but settlement structures, housing infrastructure, transport (electro mobility), etc. Robert, I wish you would read a little more carefully, what I write here, but this is not a thread about energy anyways. I just pointed people here to some aspects of this complex, not everybody might be fully aware of, cluster & risk, markets & cost developments of certain parts of it, next steps we take here, for further study. 3. Back to Topic : illiterate What we have seen in the last few years, was an assault on the rule of law and treaties, and property rights on a large scale, in the name of some little IS-LM models. Together with insults, name calling (Krugtron even tried his hand on “Mellonite”), and a solid dose of panic and hate mongering. This is coming to end now, cooler and calmer heads prevailed, and the world did not end, the Euro still exists. Sovereign risk spreads are coming down nicely, on average about 1% in the last 2 quarters. People like Schäuble, Draghi, the Euro 5, Nixon, people who understand how things work in longer terms, and not just for the next 1 – 3 years, are now pointing this out and remind the name callers, like Münchau, politely of what they have done. @francis “I just pointed people here to some aspects of this complex, not everybody might be fully aware of, cluster & risk, markets & cost developments of certain parts of it, next steps we take here, for further study.” I was suggesting initially that Ireland stand as an energy provider. Strategically this would make sense for many people. The issue of clustering ie. distribution of risk, is not relevant in Ireland. With three plants there is the minimum necessary redundancy. In other words two stay in full operation while one plant is down for maintenance. However the provision of large scale nuclear energy is very relevant to everyone else in Europe. The key benefit to Ireland of cheap scalable base load is industrial development in areas where we have been excluded up to now, such as large scale engineering etc. And with need for vast new energy provision in transport Ireland would be ideally placed. As to the “illiterate” issue? Francis, I am frankly appalled. These people you revere, Draghi et al, are the archangels of evil eminating from modern monetary policy and finance. Goldman alumni do not make for good guardians of the nation. As to the Euro? There are issues. Ever read a book by Phillip Bagus “The Tragedy of the Euro”? He is an Austrian School rising star. Hits the nail on the head, I think. The Euro will collapse. You are right about the rule of law and the failure to protect property rights. The problem is debt. Way too much debt. Something must give. @ Robert, all You vastly underestimate the required redundancy / risk. Please draw up your plan, for a) how many stations (1600 MW each) to built, and where b) what size other capacity you want to keep, and c) how many HVDC lines you want to built It does NOT have to be perfect, just some first rough guess !!! useful links – CIA worldfactbook for average consumption (26.1 b kWh/a) and capacity (7.4 GW), utilization 40%, because peak load is about 2.0 average – wiki/High-voltage_direct_current for costs of those HVDC lines, to the UK, downtime about 1%, assume 10% transmission losses for 2x converting, and line length – wiki/Liste_der_Kernreaktoren_in_Deutschland, average downtime 10%, assume unscheduled 1% assume for cost fractions 1/3 each for building, keeping operational, fuel, or bring your own figures assume that the UK charges you either way just 10% to use them as a backbone to feed into, or to take at your schedule, an offer I would see as pretty generous Now, in the US I had typical 2x in summer brownout for 0.5 hours, makes for a downtime fraction of 10^-4, but for some repair of a local transformer, they built their transmission real cheap. In continental Europe we spent more on that, and have a downtime fraction of, lets say 10^-6 With what kind of configuration do you achieve high enough reliability? And how much is the cost of this to you? You need some more numbers ? Ask me http://www.eex.com/en/Market%20Data/Trading%20Data/Power/Hour%20Contracts%20%7C%20Spot%20Hourly%20Auction/spot-hours-table/2013-10-17/PHELIX can this be read? a peak price of 7c from 9-10 am on Thu 10 oct to a base price of (way below fuel of) 1.2 c 23-24 tonight ? @Robert Glynn I agree that it is a defeat for Ireland. However the low emigrant return rate indicates that they are successfully fitting in abroad. They are doing even better now than in the pick and shovel era. Based on my own experience it is much easier to thrive abroad than in Ireland. Something to do with rising lakes lifting all boats. Individual success is very much dependent on the immediate business environment. We are well accepted everywhere I have been, not many countries enjoy a reputation good enough to give their people a positive edge. @ Robert to may be shorten this in a more general way, beyond Ireland: wiki/Economics_of_new_nuclear_power_plants: “Cooper said the lesson here for policy makers and economists is clear: “nuclear reactors are simply not competitive” but if somebody wants to play the combinatorics of plants / transmission lines, I would be available, because thats the easy part of a way more tricky game of renewables, with extremely fat tail distributions, and cylcic cutoffs. Anybody interested? @ Mickey Hickey the latest PEW and BBC surveys showed objective data for Germany and Merkel ranked repeatedly first or second for popularity and reliability Comments are closed.