Pentecost steam

by DoDo Thu May 23rd, 2013 at 03:13:09 AM EST

I visited the Kismaros–Királyrét narrow-gauge railway again today [Monday 20 May]. I showed a diesel railcar in mid-April and a solar-powered railcar in early May, but today, the spectacle was steam traction.

An Irish mile.

by Colman Tue May 21st, 2013 at 05:10:53 AM EST

It appears that the mythical Irish disregard for distance when giving directions to tourists extends to our financial overlords: it turns out that not only is Irish GDP distorted beyond recognition by the retained profits of multinationals with European headquarters in Ireland, so is GNP, GNI, balance of payments and the export figures, distorting all the statistics used by the government and EU to report the stunning progress of the five-year plan. Ten-year plan. Adjustment programme.

Irish Economy and RTÉ have good starting points for the numbers. Note that the current account surplus needs to be adjusted down to 0.5% from 5%!

It seems to me that the economy here is recovering, somewhat, but I have an awful fear that it's bifurcating into a recovery for the middle income groups that are in relatively protected areas - including those working for the multinationals - and a continuing slide into poverty for the underclass as government supports and services are cut away from them.

Glue

by afew Mon May 20th, 2013 at 03:14:01 AM EST

Wolfgang Münchau in the FT makes the case that there has been too much rationalisation in the defence of a united Europe, and not enough emotion.

It doesn’t make much sense but I’m a eurofanatic - FT.com

Where I differ from many pro-Europeans in the UK is that I simply do not need any economic reason to arrive at this position, or any rational reason at all for that matter. I am like a six year old in this respect. I want the EU because I want it. Maybe it is a cultural thing, maybe the result of learning Latin as a first foreign language, some trip abroad in my youth or a long forgotten encounter. I have no idea. Whatever it was that turned me into a pro-European a few decades back, it was not the joyful anticipation of productivity gains from a single market.

There is no hope of persuading anyone to support the European idea (let alone the EU as presently constituted) on the basis of economics alone. As Münchau says, economic errors abound in the history of the EU. One is tempted to add the epithet "crippling". Neither is another "rational" argument convincing: that European economic integration has ensured peace on the continent. On the contrary, the current Eurozone situation of economic violence should lead any rational or irrational observer to fear for the future.

It doesn’t make much sense but I’m a eurofanatic - FT.com

If you just base it on rationality, you may find that people consider it rational to enter into an alliance when the benefits are clear and then leave it when they are not. Without any emotional glue, the EU is very hard to defend as an institutional framework designed to last forever.

Issues don't matter

by DoDo Sat May 18th, 2013 at 07:23:19 AM EST

[Hoisted from the Weekend Newsroom]

For some time now, there is strong lobbying for a transatlantic free-trade zone (as if the EU itself and European national governments wouldn't do enough undermining all of their non-free-trade foundations already). On Thursday (16 May), it was the European Business Summit's turn, as reported in EurActiv. But the article also lists several transatlantic disputes that limit the prospects of such initiatives, such as those about financial services, hormone-treated beef, GMOs, culture and ACTA. Now what's the take of the attending EU Commissioner?

“If you spend too much time on issues you might never achieve results,” said Trade Commissioner Karel De Gucht, speaking at the European Business Summit.

Issues don't matter! And never mind defining what "results" you mean.

Fuck it Dude, let's go bowling

by dvx Wed May 15th, 2013 at 04:56:36 PM EST

[Hoisted from today's Newsroom]

I try to stay optimistic. Or at least hopeful.

But just days ago, we were treated to this wakeup call:

Global carbon dioxide levels set to pass 400ppm milestone | Environment | The Guardian

The concentration of carbon dioxide in the atmosphere has reached 399.72 parts per million (ppm) and is likely to pass the symbolically important 400ppm level for the first time in the next few days.

And what's the first response of a major power since that news breaks?

China angles for Arctic power as ice melts - Features - Al Jazeera English

Ice is melting away at a record-breaking rate in the Arctic, exposing valuable natural resources and opening up new shipping routes. Measurements taken last August found levels of Arctic sea ice were at their lowest levels since satellites began measuring the ice in 1979.

China doesn't own any Arctic territory - in fact, its northernmost point is more than 1,400km south of the Arctic Circle. But it's nevertheless taking a strong interest in the region, building a physical presence there and using diplomacy and trade ties to gain a foothold.

China’s actions in the region have paid off as it, along with five other non-Arctic states, have been granted permanent observer status to the Arctic Council, an intergovernmental forum of eight countries with Arctic territory.

Gaining observer status does not allow China any voting rights on the Arctic Council. But it does give it sway in an increasingly important region. Not only does the shrinking ice have climate implications; warming temperatures at the poles have raised the possibility of access to as much as 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas.

To position itself to burn some more. D'uh.

Sometimes it feels like Walter's response is the only one that makes sense:

Bloodletting Proceeding Normally

by afew Wed May 15th, 2013 at 02:58:18 AM EST

The French statistics institute INSEE announces this morning that the French economy is in recession.

French Economy Slips Into Recession, Adding Pressure on Hollande - Bloomberg

The French economy fell into its third recession in four years, increasing pressure on President Francois Hollande to adopt policies to revive growth.

Gross domestic product shrank 0.2 percent in the three months through March, following a revised 0.2 percent contraction in the previous quarter, national statistics office Insee said today.

At the same time, INSEE publishes national accounts for 2012 (in French) that show a fall in the purchasing power of household income of 0.9% for that year.

The automatic stabilizers are losing their rosy complexion and looking increasingly pale.

Not to worry, Olli Rehn has the solution:

French Economy Slips Into Recession, Adding Pressure on Hollande - Bloomberg

“France badly needs to unblock its growth potential and create jobs,” European Economic Affairs Commissioner Olli Rehn told reporters in Brussels on May 3. The country needs to “put a renewed and strong emphasis on structural reforms in the labor market, in the pension systems, by opening up closed professions and services markets.”

That will surely do the trick.

Standing on the Shoulders of Giants - Europe and the Mongol Empire

by Metatone Tue May 14th, 2013 at 01:38:44 AM EST

Since Niall Ferguson is back in the news it seemed like a good time to write about Jack Weatherford's excellent book - Genghis Khan and the Making of the Modern World as it is a great antidote to many previous attempts by Ferguson and others to rewrite the history of the world and create a narrative of inherent European superiority. As usual, serendipity was the key element.

Fundamentally, Europe's renaissance was built on the flowering of civilisation inside the Mongol Empire:

Although never ruled by the Mongols, in many ways Europe gained the most from their world system. The Europeans received all the benefits of trade, technology transfer, and the Global Awakening without paying the cost of Mongol conquest. The Mongols had killed off the knights in Hungary and Germany, but they had not destroyed or occupied the cities. The Europeans, who had been cut off from the mainstream of civilization since the fall of Rome, eagerly drank in the new knowledge, put on the new clothes, listened to the new music, ate the new foods, and enjoyed a rapidly escalating standard of living in almost every regard.

Of course, Ferguson and his ilk would leap to the "never ruled by the Mongols" as the first evidence of European superiority. However, this seems to be a real misunderstanding. Rather, when the Mongols invaded in the East of Europe they won some huge victories and large areas of territory. However, the booty gained was not on the scale found in other areas neighbouring the Mongol Empire - notably the Sung Kingdom in China and the Muslim states in the Middle East. Thus, the Mongols turned their armies back towards more profitable regions. In effect, Europe escaped being part of the Mongol Empire because it was too poor and backward to be a target.

This turned out to be a stroke of luck, because Europe was able to receive the benefits of all the cultural and technological advances in the Mongol Empire through trade, but it was separate when a cataclysm destroyed the fabric of the Empire.

front-paged by afew

Rail News Blogging #24

by DoDo Sun May 12th, 2013 at 06:27:34 AM EST

This time, I'll bring a string of rapid transit news, another bunch of short updates on open access and rail privatisation, and a third string of news on line construction.

It is a frequently seen (and frequently lampooned) sign of neo-liberalism when public services get private sponsorship. Now here is a blatant example from the Madrid Metro, which is under an austerity regime:

MADRID Metro announced on April 23 it will rename one of its lines Line 2 Vodafone and the city's most central station Vodafone-Sol after reaching a three-year €3m agreement with the mobile telephone company.

For a company the size of the Madrid Metro, €1 million a year is not even a lot. (The article says this boosts advertisement income by 10%.)

Balancing Act

by afew Fri May 10th, 2013 at 04:12:04 AM EST

Comments to Martin Wolf's FT column the other day included some brash assertions that Germany hardly had a current account surplus with Eurozone countries, particularly peripherals. In his FT blog today, Gavyn Davies supplies this chart:

The IMF forecasts against a blue background can probably safely be set aside, but the present position shows a considerable fall in peripheral current account deficits. Davies spends some time examining, in a fairly friendly fashion, the hypothesis that German medicine is curing the patient, but his main point is already stated in the introduction:

The dramatic adjustment in eurozone trade imbalances | Gavyn Davies

Largely unnoticed by some, eurozone trade imbalances have in fact improved dramatically in recent years. But this has happened mainly for the wrong reasons, ie recession in the south rather than any large narrowing in the competitiveness gap.

In expanded form:

What's the story?

by dvx Wed May 8th, 2013 at 06:50:32 PM EST

[Hoisted from today's Newsroom]

It Is in Our Nature to Need Stories | Guest Blog, Scientific American Blog Network

It is in our nature to need stories. They are our earliest sciences, a kind of people-physics. Their logic is how we naturally think. They configure our biology, and how we feel, in ways long essential for our survival.

Like our language instinct, a story drive—an inborn hunger for story hearing and story making—emerges untutored universally in healthy children. Every culture bathes their children in stories to explain how the world works and to engage and educate their emotions. Perhaps story patterns could be considered another higher layer of language. A sort of meta-grammar shaped by and shaping conventions of character types, plots, and social-rule dilemmas prevalent in our culture.

“Stories the world over are almost always about people with problems,” writes Jonathan Gottschall. They display “a deep pattern of heroes confronting trouble and struggling to overcome.” So a possible formula for a story = character(s) + predicament(s) + attempted extrication(s). This pattern transmits social rules and norms, describing what counts as violations and approved reactions. Stories offer “feelings we don’t have to pay [full cost] for.” They are simulated experiments in people-physics, freeing us from the limits of our own direct experience.

The “human mind is a story processor, not a logic processor,” says Jonathan Haidt. Certainly we use logic inside stories better than we do outside. Leda Cosmides and John Tooby have shown that the Wason Selection Test can be solved fewer than 10% as a logic puzzle, but by 70-90% when presented as a story involving detection of social-rule cheating. Such social-rule monitoring was evolutionarily crucial because as Alison Gopnik notes “other people are the most important part of our environment.” In our ultra-social species, social acceptance matters as much as food. Indeed violating social rules can exclude you from group benefits, including shared food.

It seems to me that one of the stories we tell ourselves is that if people rationally understood their situation, they'd necessarily agree with us (or "us", if you prefer).

But what if that's only a story?

And aside from that, isn't this a scary foundation on which to base complex societies?

Origins of German Neo-Austerianism

by marco Tue May 7th, 2013 at 02:35:59 AM EST

A great piece by Mark Blyth on the roots of the "The Austerity Delusion: Why a Bad Idea Won Over the West" in general zeroes in on a question that I have been asking myself eversince this madness started in 2008:  Why the peculiarly German impetus to austerity?

Yes, I had heard the proverbial explanation based on collective memory of Weimar hyperinflation and the Nazi nightmare that ensued.

But Blyth's account post-war, practical and policy-based, and while nothing new for readers of this forum, is worth quoting for its clarity:

Given Germany's history with inflation and deflation in the 1920s and 1930s, financial stability has always been the watchword of postwar German economics. But what has really distinguished German economic thinking is its dismissal of Keynesianism -- because the theory never made much sense to German policymakers considering the way the German economy actually functions.

front-paged by afew

Ferguson hates on Keynes

by Migeru Mon May 6th, 2013 at 02:30:01 AM EST

From everyone's favourite sorry excuse for a historian: An Unqualified Apology (05/04/2013)

During a recent question-and-answer session at a conference in California, I made comments about John Maynard Keynes that were as stupid as they were insensitive.

I had been asked to comment on Keynes's famous observation "In the long run we are all dead." The point I had made in my presentation was that in the long run our children, grandchildren and great-grandchildren are alive, and will have to deal with the consequences of our economic actions.

But I should not have suggested - in an off-the-cuff response that was not part of my presentation - that Keynes was indifferent to the long run because he had no children, nor that he had no children because he was gay. This was doubly stupid. First, it is obvious that people who do not have children also care about future generations. Second, I had forgotten that Keynes's wife Lydia miscarried.

Niall Ferguson omits the third and important way his comments were stupid: he should not have suggested that Keynes advocated deficit spending when the economy is far from full employment because he was indifferent to the long run.

front-paged by afew

Weimar Greece

by DoDo Sat May 4th, 2013 at 05:17:30 AM EST

[Hoisted from the weekend Newsroom]

Here are a couple of recent news from Greece:

Greek far-right party in clash with Athens mayor - Europe - World - The Independent

An attempt by the far-right Golden Dawn party to hand-out food to Greeks only in Athens, in defiance of a municipal ban, degenerated with the city’s mayor saying a party member tried to punch him and draw a gun. The punch missed its target, landing instead on a 12-year-old girl, Greek media said.

Press freedom index marked by downgrades for Hungary, Greece, Bulgaria | EurActiv

Greece fell 14 positions and occupies the 84^th rank. The report says that in this country journalists work in catastrophic social and professional conditions and are exposed to popular discontent. Media workers also face the risk of violent reprisals from the neo-Nazi Golden Dawn party.

Based on reports from the ground by our readers from Greece, the popular discontent is also grounded in the pro-elitist propaganda of especially the private televised media.

EUobserver.com / Justice & Home Affairs / High prison populations result of policy, not crime: study

More people on average are incarcerated in the Nordic countries than in Italy or Spain but serve much shorter sentences.

...Greece handed out 20 year sentences and over in 37.7 percent of the cases.

Austerity isn't just an economic instrument that is a failure at its alleged goal (by squeezing not just government expenditure but income, too), but destroys society – just as it did in Chancellor Brüning's time.

Anglo Or Not, It's A Disease

by afew Fri May 3rd, 2013 at 05:48:37 AM EST

In a special issue (offline) of Alternatives Economiques, Christian Chavagneux argues that too great a size of the financial sector slows economic growth, and cites evidence from recent BIS and IMF working papers in support.

Though the development of financing circuits is indispensable to the functioning and growth of economies, the recurrent tendancy towards bubbles of credit and asset prices (stocks, real estate...) shows that beyond a certain threshold, finance has a very negative impact on the dynamics of activity.
(My translation)

An excessive financial sector reduces the rate of productivity increase, according to BIS working paper Reassessing the Impact of Finance on Growth (Cechetti and Kharroubi, pdf), which shows that a level of credit to the private sector at 75-100% of GDP (or greater) causes drag on average GDP-per-worker growth. To take into account differences between economies (developed, high-finance economies grow more slowly than less developed ones for a variety of reasons), the authors present this scatter plot based on deviation from the country mean (data from 1980-2009):

A falling-off in credit to the private sector/GDP (predictably, if one considers pro-finance common wisdom) correlates to a slowing of GDP-per-worker gains, but so does an increase. The effect, according to Cechetti and Kharroubi, is even more marked when only bank credit to the private sector is considered.

An IMF working paper, Too Much Finance? (Arcand, Berkes, Panizza) reaches similar conclusions: starting from 80-100% private-sector credit/GDP and beyond, economic growth is negatively impacted.

Chavagneux explains the negative impact by the mechanics of bubbles, see below the fold.

Kruganomics 101

by Frank Schnittger Tue Apr 30th, 2013 at 05:02:33 AM EST

Paul Krugman is arguably becoming not just the most influential economic commentator on the planet, but also one of the more influential political commentators. That's partly because it's hard to gainsay the economic credentials of a Nobel Prize winning economist, but also because he has a way of putting often complex ideas quite simply. Here he gives a handy summary of his economic philosophy for the benefit of those economic simpletons who claim he is an out of touch "high fallutin'" intelectual:

The Ignoramus Strategy - NYTimes.com

1. The economy isn't like an individual family that earns a certain amount and spends some other amount, with no relationship between the two. My spending is your income and your spending is my income. If we both slash spending, both of our incomes fall.

2. We are now in a situation in which many people have cut spending, either because they chose to or because their creditors forced them to, while relatively few people are willing to spend more. The result is depressed incomes and a depressed economy, with millions of willing workers unable to find jobs.

3. Things aren't always this way, but when they are, the government is not in competition with the private sector. Government purchases don't use resources that would otherwise be producing private goods, they put unemployed resources to work. Government borrowing doesn't crowd out private borrowing, it puts idle funds to work. As a result, now is a time when the government should be spending more, not less. If we ignore this insight and cut government spending instead, the economy will shrink and unemployment will rise. In fact, even private spending will shrink, because of falling incomes.

4. This view of our problems has made correct predictions over the past four years, while alternative views have gotten it all wrong. Budget deficits haven't led to soaring interest rates (and the Fed's "money-printing" hasn't led to inflation); austerity policies have greatly deepened economic slumps almost everywhere they have been tried.

5. Yes, the government must pay its bills in the long run. But spending cuts and/or tax increases should wait until the economy is no longer depressed, and the private sector is willing to spend enough to produce full employment.

front-paged by afew

Corporate Profits and Aggregate Demand

by Metatone Sun Apr 28th, 2013 at 04:16:31 AM EST

Some random reading on the internet got me thinking today:

Apple's new pitch to investors | Felix Salmon

Apple is trading at an astonishingly low valuation, with a p/e ratio in single digits, because it has now become that animal investors like least: a slow-growing tech stock. Either one is fine on its own, and both slow-growing stocks and fast-growing tech stocks can support much higher multiples than Apple is seeing right now. But conservative investors, who like slow-growing stocks with high dividends, are constitutionally uncomfortable with the volatility inherent in the tech world. And technology investors, who are happy taking that kind of risk, want to see substantial growth. Apple, notwithstanding the fact that it's one of the most valuable companies in the world, is falling through the capital-markets cracks.

front-paged by afew

They should bribe the locals

by DoDo Sat Apr 27th, 2013 at 04:55:05 AM EST

[Hoisted from the Weekend Newsroom]

Disregarding environmental destruction and signs that the US boom is a bubble and the vision of gas abundance is a mirage, many of our energy companies are keen to bring fracking technology to Europe. One big problem is local opposition. So what is the reaction of politicians supposedly representing that recalcitrant population? Here is the position of the energy and climate change committee of the UK parliament:

Fracking firms should offer sweeteners to locals, say MPs | Environment | The Guardian

Tim Yeo, chairman of the committee, said: "We believe the UK's shale resources should be exploited, but that looks difficult given local opposition to drilling. There has to be a way of getting to communities."

...The incentives that could be made available to communities must be substantial, Yeo said, if opposition was to be overcome. "It's not just a question of building a new car park or a bypass. It might be cash incentives, and it might have to be very local – not to a borough council but to individual villages near the sites."

Hey, let's just bribe the locals! At least Mr. Yeo also warned against treating shale gas as the solution to all our energy problems (well, at least until 'we know enough about it'...). Meanwhile, global insurance broker Marsh warned energy companies that the risk of accidents during fracking is a risk to their reputation.

The Intellectual Foundations of Austerity destroyed

by Frank Schnittger Fri Apr 26th, 2013 at 03:26:16 AM EST

Ken Rogoff in Davos

Reinhart and Rogoff wrote the single most influential economic paper supporting the Austerity policies introduced by Governments around the world. Now a paper by some graduate students reduces their findings to rubble - saying they were caused by some elementary arithmetic coding errors in Excel, the selective exclusion of available data, and some highly questionable averaging methods. Is this what "thought leadership" in the western world is reduced to?

Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff - WP322.pdf

Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff  by Thomas Herndon, Michael Ash, and Robert Pollin. April 15, 2013.

Abstract

We replicate Reinhart and Rogoff (2010a and 2010b) and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. Our finding is that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as published in Reinhart and Rogoff. That is, contrary to RR, average GDP grow that public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower. We also show how the relationship between public debt and GDP growth varies significantly by time period and country. Overall, the evidence we review contradicts Reinhart and Rogoff's claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth

front-paged by afew

EU In Autodestruct Mode

by afew Thu Apr 25th, 2013 at 04:02:35 AM EST

Crisis for Europe as trust hits record low | World news | The Guardian

Figures from Eurobarometer, the EU's polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European.

The six countries surveyed – Germany, France, Britain, Italy, Spain, and Poland – are the EU's biggest, jointly making up more than two out of three EU citizens or around 350 million of the EU's 500 million population. (...)

In Poland the other day, Angela Merkel was pushing for more power to the EU to take final decisions. Fat chance of that, Angela.

Crisis for Europe as trust hits record low | World news | The Guardian

"The damage is so deep that it does not matter whether you come from a creditor, debtor country, euro would-be member or the UK: everybody is worse off," said José Ignacio Torreblanca, head of the ECFR's Madrid office. "Citizens now think that their national democracy is being subverted by the way the euro crisis is conducted."

(h/t Eurointelligence)

An Arbitrary World Order

by dvx Wed Apr 24th, 2013 at 03:49:07 PM EST

[Hoisted from today's Newsroom]

We already knew British Conservatives have it in for the European Convention on Human Rights. But this is pretty cynical even by their standard:

UK may withdraw from European rights convention over Abu Qatada | Law | guardian.co.uk

David Cameron is examining the possibility of withdrawing on a temporary basis from the European convention on human rights as the government seeks to deport the radical Islamist preacher Abu Qatada, Downing Street has confirmed.

As the home secretary, Theresa May, prepares to make a statement to MPs, the prime minister's spokesman said that the possibility of a temporary withdrawal was discussed by the prime minister and senior ministers on Tuesday.

Asked whether the prime minister would rule out withdrawing from the convention on a temporary basis, the spokesman said: "The prime minister met with the home secretary, the justice secretary and the attorney general yesterday to discuss the case. I am not going to get into specifics on the details of what the government is considering. We are going to explore every option."

It is obviously lost on some people that treaties mean accepting some inconvenience for the sake of a more stable international order.

Or that, for a tier-2 power, international influence also depends on whether it can be depended on to stand by its commitments even when it might not be opportune domestically.

News and Views