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TALLRITE BLOG 
ARCHIVE
This archive, organized into months, and indexed by time and alphabet,
contains all issues since inception, including the current week.

ISSUE #191 - 5^th April 2009 [288+1152=1440]

Stimulated Curse on Baby-Boomers

Occasionally, I have got into trouble over debts, specifically not paying them or not paying them in time.  Usually this was due to forgetfulness in which case I would pay promptly when reminded, but sometimes it was because the money wasn't there, and wasn't even coming in.  I do not recall, however, a single instance where I was advised that the cure for my unpaid financial obligations was to borrow even more and to spend more and worry about settling my - by then much increased debt - at some indeterminate date in the future.  The universal advice was to stop spending and start earning and repay my creditors, a cure which never failed. 

I am no financial guru, but that is essentially why I feel very uncomfortable by the solutions proposed by Barack Obama, Gordon Brown and others more learned than I.  They say that the problem of financial institutions collapsing under gigantic toxic loans that will never be repaid and the associated world recession will be solved

This money will be repaid through future taxes once the global economies recover.  Like Colgate, this has a certain ring of confidence to it, but when you ponder why the solution to debt is additional debt it's looks more like a smear of toothpaste. 

You could argue that there might be some merit in a financial stimulus if funded by money you already have.  But certainly not if it requires trillions of dollars of debts so large that they can never be repaid via existing workers but must be passed on to their children and grandchildren.  If it's wrong for children to filch money from their mother's purse or their granddad's pocket, you have to wonder why the reverse is apparently OK, for that is what will have to happen.  Furthermore, with Europe's demographic suicide now well underway (birthrates of 1.3-1.9 babies per woman vs replacement rate of 2.1), there will not be any - or at least insufficient - grandchildren to pick up the tab. 

To the extent that there is virtue in a stimulus, however, there is already a huge one underway, and it's not costing the West a penny.  Consider -

Energy

A year ago the price of a barrel of oil was in the $140s; it averaged $99.6 for the year, according to the US Energy Information Administration.  Today it's in the $40s and is forecast to average around $42.1.

A year ago OECD consumption was averaging 47.8 million barrels per day; this year it's predicted to be down about 4% to 45.8m b/d.  When you do the sums, this means that the OECD spent $1.74 trillion on its oil in 2008, but this figure will be only $0.70 trn this year.  In other words, oil price alone will provide a stimulus to OECD economies of over a trillion dollars this year - roughly what the G20 has just agreed to give the IMF. 

But the OECD as a whole consumes in total some 240 quadrillion Btu of energy a year.  Oil's 45.8m b/d (equivalent to 97 qdrn Btu per year) thus works out at a 40% market share.   Since all energy prices roughly track that of oil, this means the total energy stimulus this year is in the order of $2½ trn. 

This could be compared to President Obama's $3.3 trn, except his is spread over several years and will have to be repaid by future generations, whereas the $2½ trn energy stimulus is happening in 2009 alone with no repayments at all. 

And this energy stimulus will continue

which is exactly the period for which you want and need a stimulus. 

People often say these days that money is the lifeblood of the economy which is why banks must be saved at all costs. 

Personally, I think oil is as much the lifeblood because it permeates through to every corner of business and life and therefore so will the energy stimulus. 

The energy price reductions that were seeing today will make everything else cheaper from food to logistics to agriculture to industry to construction; the effect is already  noticeable, which brings me to the next point. 

Deflation

Throughout my long and disreputable lifetime, prices have inexorably risen, sometimes fast, more often slowly.  But this year looks like being the first time that average prices could actually fall, for very many decades. 

On the one hand, this can have the negative effect of slowing spending as people wait to see can they buy the same thing more cheaply tomorrow.  On the other, however, lower prices make goods and services more accessible than they were a year ago. 

Though I can't begin to quantify it, this too would amount to a big financial stimulus: the same money being able to buy more than it could before. 

House Prices

The economic meltdown began when it became clear that householders in America with so-called sub-prime mortgages were going to default in large numbers.  These were people who had been granted mortgages even though it was clear that they did not, and were not likely to, have the means to repay them unless house prices continued to boom above the inflation rate ad infinitum.  They were very foolish to take out the loans; the lending institutions were equally foolish to provide them, though continually pressed to do so by posturing politicians anxious to show they “cared” about the less well off. 

But all price booms eventually burst.  For house prices the bursting began in America last year, first with those sub-prime properties, then with all American properties, and then across the globe.  The bigger the house price boom, the bigger the bust.  

For developers with acres of unsold properties this has been an unmitigated disaster, and only slight less so for millions of householders who have found themselves in negative equity.  And yet, this process too has its silver lining.

For the past decade, housing has become more and more out of reach for more and more people, especially the young; politicians have been devising ever more fancy wheezes to help “first-time buyers” by knocking a few percent off through tax breaks and other subsidies.  But with prices now crashing by up to 50% - both purchase prices and rents - such efforts are redundant.  Suddenly houses are worth closer to what it costs to build them. 

For would-be house buyers and renters, this too amounts to a huge financial stimulus that enables people to buy and rent accommodation at realistic prices for the first time in a decade, despite the associated misery of those who are foreclosed upon.  Nobody said Capitalism was merciful; just that it is the best and fairest system of wealth creation compared to all the others. 

Again, it is impossible to quantify the housing crash stimulus but it's definitely there and definitely huge.  And people will be better able to take advantage of it thanks to ...

Near Zero Interest Rates

Historically low interest rates are hurting prudent savers who are have been putting away deposits for years and conserving their accumulated wealth in cash rather than equities, but since they have nowhere else to go no-one else cares about them. 

However near zero interest rates also mean not only cheaper loans, but excellent margins for banks.  As well putting more cash in the pockets of existing borrowers, there is thus now a double incentive to borrow and invest anew, whether in homes or in industry, whilst the much-chastened banks are likely to stress-test their lendings far more scrupulously than during the boom. 

This adds up to yet another giant stimulus, again relatively cost-free if you discount the under-rewarded savers. 

People keep saying interest rates cannot go below zero, but I wonder.  Banks are, or should be, safe havens for our money.  It seems entirely plausible to me that they might one day decide to charge us for the privilege, just as we might have to pay a company to store our personal effects if, for example, we move abroad. 

Charging customers to store their money is in effect to impose a negative interest rate, which then raises the beguiling prospect of paying people to take out a mortgage, while still leaving a spread for the bank to make a profit!

So perhaps the interest-rate stimulus has still to get even bigger. 

Curse on the Baby-Boomers

I cannot calculate how many trillions the non-energy part of all these bonanzas will amount to, in addition to energy's $2½ trillion this year.  But it is remarkable that they are all, effectively, “do-nothing” stimuli. 

Suffice it to ask: why are OECD governments so keen to create further, artificial stimuli through debt, when they stay silent about the far bigger stimuli already coursing through their economies? 

For today’s baby-boomers will surely and righteously be cursed by their progeny for the massive stimulated debt legacy that we are unapologetically bestowing upon them with such cavalier nonchalance. 

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Windpower Can Never be Economic

A recent visitor to Venice exhorted me to go and have a look at that magical city before it sank beneath the sea.  No doubt a victim, I mused, of Nobel Laureate ex-VP Al Gore's global warming while not yet a beneficiary of POTUS#44 Barack Obama's promise to make the oceans recede.  But no, I was corrected, Venice's is a problem not of rising sea levels but of falling land, an altogether different challenge unrelated to man-induced climate change. 

Actually, more and more evidence, from all quarters, is emerging all the time that climate change itself is unrelated to “man-induced climate change”.  And that man's attempts to change “man-induced climate change” by doing clever green things is as ineffectual as his CO2 emissions and other anti-green activities. 

If you are a member of the climate changeology cult, it must be so embarrassing when you view the evidence. 

 Here are a few interesting recent reputable articles that back up the first three of these assertions. 

As for the fourth, I have reproduced an article “A heavy blow to wind power strategy” from the Offshore Engineer (where “offshore” means in the actual ocean rather rather than distant tax havens).  It was written last month by Michael Economides, a much respected engineering professor in Houston, whom I have met a number of times during consultancy activities in the Middle East.  (It's also available online but kind of awkward to get to.)  He makes a handful of points that are at the same time blindingly obvious yet - because they destroy the case for wind power - have remained largely unknown to the general populace. 

Wind power is “free” only to the extent that you ignore the price of installing and maintaining it, and - above all - the cost of construction, operation and fuel for back-up fossil-fuelled power for when the wind fails.  For it is an inconvenient truth that Mother Nature's wind is intrinsically unreliable.  Even in the UK which - like Ireland - has plenty of wind and coastline, the average load factor is only 27%.  Therefore you have to fall back on conventional power generation whenever the wind drops.  So for every megawatt of windpower you install,

Either way, regardless of whether you regard a landscape of wind turbines to be a visual abomination or a thing of beauty, it is a far more expensive option than convention power generation. 

Moreover, since windfarm backup power plants are usually built to the cheapest of standards, and such plants never like being continually started up and shut down again, they are inefficient, high-maintenance facilities that burn almost as much fuel as if you had no windpower at all. 

Due to this need for back-up power or power-storage, windpower can never, ever be economic in its own right.   

The result is that it is only viable when boosted by hefty, permanent taxpayer subsidies.  Last year, these amounted to a billion dollars in the UK alone, which will rise to six billion pa by 2020 to support 25 gigawatts of windpower.  That's how much the UK needs to meet its CO2 reduction obligations under the diabolical Kyoto protocol, having achieved a reduction from 1997 to 2005 of precisely zero percent. 

As Prof Economides summarises,

“Independent reports have consistently revealed an industry plagued by high construction and maintenance costs, highly volatile reliability and a voracious appetite for taxpayer subsidies ... Wind power [is] expensive, unreliable and it won’t [even] save natural gas.”

The necessary subsidies are, of course, all part of the extortionate $100 billion annual cost of meeting the CO2 demands of the Kyoto protocol on its 162 ratifiers. 

A colleague tells me he has installed a solar panel in the roof of his house.  With generous government green grants his payout is apparently three years, after which the savings on his electricity bills will go straight to his pocket.  No wonder everyone wants to emulate him.

But without the subsidies - another little chunk of Kyoto's $100 bn - the payout would be 29 years, which would obviously interest no-one.  This means that those taxpayers who do not avail of these subsidies are lining the pockets of those that do, all in the name of fighting climate change. 

If only all things that had a cost were paid for by someone else.  Let's start with my mortgage ... 

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Kow-Tow President

At the G20 summit in London, why does the elected president of the world's most successful democracy, one founded on “we the people”, feel he has to bow, bend his knee, kow-tow and grovel before the second-generation feudal monarch of one of the world's worst tyrannies? 

In Buckingham Palace he felt no such urge to even nod his head when introduced to the current incumbent of an ancient hereditary monarchy stretching back more than a thousand years.  A monarchical head of a fellow-democracy. 

No wonder France's president is laughing at him. 

Red-blooded Americans find their president's fawning behaviour offensive. 

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Armless Fun

What a heart-warming story the Sun put out last month. 

Wounded members of the British armed forces were invited to join the England soccer squad, during a break from training, for lunch at a hotel near Arsenal's training ground close to Watford. 

In the midst of the merriment, David Beckham was introduced to Commando Ben McBean from the Royal Marines, who had had a leg blown off in Afghanistan.  As Mr Becks commiserated with him over his disabling loss, they shook hands warmly.  But he went pale as Officer McBean screamed, “My arm! My arm!”, for it had come off in his hand.  It was of course a prosthetic arm and Officer McBean was performing his latest party piece, with no sense of self-pity whatsoever. 

England were preparing for a couple of World Cup qualifier matches against Slovakia and Ukraine, which would be a very arduous and stressful process.  But England captain, John Terry, had it exactly right when he observed that it was the Servicemen and the Servicewomen in the battlefields of Afghanistan and Iraq who are the real lionhearts. 

As we cheer our favourite sports teams and sporting personalities to victory or lament their defeats, we should remember that these are just games.  What is going on in Afghanistan, Iraq and elsewhere is real life - and real death.  And that is where the real heroes, such as Officer McBean, are to be found and where many have given their brave young lives. 

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Naked Vaulter

French pole vaulter Romain Mesnil, silver medallist at the 2007 World Championships and also (according to himself) Vice Champion of Europe and of the World, has lost his clothing sponsorship from Nike, if not his clothing.  So he has come up with a novel way of publicising his plight in an effort to find a replacement sponsor.

He has posted on his website this video of him running naked through the streets of Paris, carrying a giant phallic symbol his pole as if about to vault, or something.  Naturally this quickly found its way to YouTube and several TV news bulletins.

There's no doubting the spread of his message, but you would think that the best thing is for the IAAF to ask him to compete in the nude. Judging from the expression on the faces of the people he runs past in the street, it would be a massive crowd puller.

But what would they pull? 

Hat tip: Graham in Perth

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Quotes for Issue 191

- - - - - -G 2 0 - - - - - -

Quote: “I think I can say that in an important conference we have found a very good, almost historic compromise in a unique crisis.  This time the world does not react as in the 1930's.”

German chancellor Angela Merkel
gives an encouragingly upbeat assessment
of the outcome of the G20 meeting in London.

The French president, Nicolas Sarkozy,
said the result was “more than we could have hoped for”.

Quote [private source]: “Don't worry mate, we've got them all on film and we'll pick them all up later and give them a good kicking in the back of the van.” 

An unnamed policeman, when asked
why the cops were not arresting people
who had just trashed a London branch of the Royal Bank of Scotland
as part of G20 demonstrations.
[Hat tip: Philip in Dublin]

Four young people were indeed later arrested for the offence
No news about the kicking.

- - - - - - O B A M A - - - - - -

Quote: “The Taliban fighters of the Mullah Dadullah Front in Afghanistan have rejected the offer of talks from US President Barack Obama to moderate Taliban and have said they are not ready to hold negotiations with Obama.”

The Taliban respond to president Barack Obama's
“call for negotiations with moderate Taliban”

Quote: “Today, thanks to great achievements, the threat to Iran has been lifted, and no power in the world entertains the notion of taking action against the Iranian nation.”

Iran's president Mahmoud Ahmadinejad
responds to Mr Obama's “unclenched fist”

Quote: “President Barack Obama must stop Iran from acquiring nuclear weapons — and quickly — or an imperilled Israel may be forced to attack Iran’s nuclear facilities itself.”

Benyamin Netanyahu, the new Israeli prime minister
and an ex-Commando,
lays it on the line for the new American president:
stop Iran - or I will.

Mr Netanyahu believes history has shown that
Jews cannot afford to take a benign view of existential threats.

Quote: “We were seeing the same mismatch between the regulatory regimes that were in place and er ... pause [I'VE LOST MY TRAIN OF THOUGHT AGAIN] ... the highly integrated, er, global capital markets that have emerged ... pause [I'M REALLY WINGING IT NOW].... Dealing with the, er, problem of derivatives markets, making sure we have set up systems, er, that can reduce some of the risks there. So, I actually think ... pause [FANTASTIC. I'VE LOST EVERYONE, INCLUDING MYSELF] ... there's enormous consensus that has emerged in terms of what we need to do now and, er ... pause [I'M OUTTA HERE. TIME FOR THE USUAL CLOSING RUBBISH] ... I'm a great believer in looking forwards than looking backwards.”

President Obama, at his joint G20 press conference with Gordon Brown,
explains who is  to blame for the financial crisis
[Hat tip: Mark in New Hampshire]

Quote: “Did you know your first name means ‘Peach’ in Hungarian?  No? Well, now you do.”

A young lady from Heidelberg
sheds a fruity light on Barack Obama
during his “town hall” meeting in Strasbourg

- - - - - - U K - - - - - -

Quote: “Yesterday we had a very British coup d'état when the Governor of the Bank of England sent his tanks down the Mall, effectively seized control of the British economy through his command of monetary policy, and put the Government under house arrest.”

Vince Cable, the Liberal Democrat's Treasury spokesman,
terrifies the British Government
after Governor Mervyn King warned last month
that proposed Government debt was unsustainable.

Quote:  “The senior officer in charge is confident we handled this incident as professionally as possible. In a situation like that you could end up with more deceased bodies than you had in the first place.”

A South Yorkshire Police spokeswoman explains
why the police prevented neighbours
from rescuing three-year-old Louis Colly from his burning house
thereby ensuring that he was frazzled to death,
as were his father and mother
 who had been screaming
“Please save my kids!” 

Far from trying to rescue the child themselves,
South Yorkshire Police are not happy, it would seem,
unless the number of “deceased bodies” is high enough
to meet their exacting standards, in this case three.

Oh, and there were of course
no “deceased bodies in the first place”.

- - - - - - I R E L A N D - - - - - -

Quote: “Our constitution does not allow us to take on any non-nationals at the moment.” 

Derry Coughlan, Chairman of the Cork Taxi Drivers’ Association
claims that his 350-strong Association is neither discriminatory nor racist.

Lama Niankowe a Cork taxi driver from Nigeria says
he was told the Association was for Irish drivers only.

Quote [Setanta TV, not online]: “If Munster were in charge of the banks, we'd still all be rich.”

Daire O'Brien, TV sports commentator,
after Munster's rugby team had just scientifically and clinically
demolished their Irish arch-rivals Leinster, 22-5

Gift Idea
Cuddly Teddy Bears
looking for a home

Good to report that as at
14th September 2009
he is at least alive.

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Blog-Irish (defunct)

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Gavin's Blog 

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Jawa Report

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Mark Humphrys 

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Discover the World

My Columns in the

 What I've recently
been reading

“The Lemon Tree”, by Sandy Tol (2006),
is a delightful novel-style history of modern Israel and Palestine told through the eyes of a thoughtful protagonist from either side, with a household lemon tree as their unifying theme.

But it's not entirely honest in its subtle pro-Palestinian bias, and therefore needs to be read in conjunction with an antidote, such as

See detailed review

+++++

This examines events which led to BP's 2010 Macondo blowout in the Gulf of Mexico. 

BP's ambitious CEO John Browne expanded it through adventurous acquisitions, aggressive offshore exploration, and relentless cost-reduction that trumped everything else, even safety and long-term technical sustainability.  

Thus mistakes accumulated, leading to terrifying and deadly accidents in refineries, pipelines and offshore operations, and business disaster in Russia.  

The Macondo blowout was but an inevitable outcome of a BP culture that had become poisonous and incompetent. 

However the book is gravely compromised by a litany of over 40 technical and stupid errors that display the author's ignorance and carelessness. 

It would be better to wait for the second (properly edited) edition before buying. 

As for BP, only a wholesale rebuilding of a new, professional, ethical culture will prevent further such tragedies and the eventual destruction of a once mighty corporation with a long and generally honourable history.

Note: I wrote my own reports on Macondo
in May, June, and July 2010

+++++

A horrific account of:

More details on my blog here.

+++++

This is nonagenarian Alistair Urquhart’s incredible story of survival in the Far East during World War II.

After recounting a childhood of convention and simple pleasures in working-class Aberdeen, Mr Urquhart is conscripted within days of Chamberlain declaring war on Germany in 1939.

From then until the Japanese are deservedly nuked into surrendering six years later, Mr Urquhart’s tale is one of first discomfort but then following the fall of Singapore of ever-increasing, unmitigated horror. 

After a wretched journey Eastward, he finds himself part of Singapore’s big but useless garrison.

Taken prisoner when Singapore falls in 1941, he is, successively,

Chronically ill, distraught and traumatised on return to Aberdeen yet disdained by the British Army, he slowly reconstructs a life.  Only in his late 80s is he able finally to recount his dreadful experiences in this unputdownable book.

There are very few first-person eye-witness accounts of the the horrors of Japanese brutality during WW2. As such this book is an invaluable historical document.

+++++

“Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies”

This is a rattling good tale of the web of corruption within which the American president and his cronies operate. It's written by blogger Michele Malkin who, because she's both a woman and half-Asian, is curiously immune to the charges of racism and sexism this book would provoke if written by a typical Republican WASP.

With 75 page of notes to back up - in best blogger tradition - every shocking and in most cases money-grubbing allegation, she excoriates one Obama crony after another, starting with the incumbent himself and his equally tricky wife. 

Joe Biden, Rahm Emmanuel, Valerie Jarett, Tim Geithner, Lawrence Summers, Steven Rattner, both Clintons, Chris Dodd: they all star as crooks in this venomous but credible book. 

ACORN, Mr Obama's favourite community organising outfit, is also exposed for the crooked vote-rigging machine it is.

+++++

This much trumpeted sequel to Freakonomics is a bit of disappointment. 

It is really just a collation of amusing little tales about surprising human (and occasionally animal) behaviour and situations.  For example:

The book has no real message other than don't be surprised how humans sometimes behave and try to look for simple rather than complex solutions.

And with a final anecdote (monkeys, cash and sex), the book suddenly just stops dead in its tracks.  Weird.

++++++

A remarkable, coherent attempt by Financial Times economist Alan Beattie to understand and explain world history through the prism of economics. 

It's chapters are organised around provocative questions such as

It's central thesis is that economic development continues to be impeded in different countries for different historical reasons, even when the original rationale for those impediments no longer obtains.  For instance:

The author writes in a very chatty, light-hearted matter which makes the book easy to digest. 

However it would benefit from a few charts to illustrate some of the many quantitative points put forward, as well as sub-chaptering every few pages to provide natural break-points for the reader. 

+++++

This is a thrilling book of derring-do behind enemy lines in the jungles of north-east Burma in 1942-44 during the Japanese occupation.

The author was a member of Britain's V Force, a forerunner of the SAS. Its remit was to harass Japanese lines of command, patrol their occupied territory, carryout sabotage and provide intelligence, with the overall objective of keeping the enemy out of India.   

Irwin is admirably yet brutally frank, in his descriptions of deathly battles with the Japs, his execution of a prisoner, dodging falling bags of rice dropped by the RAF, or collapsing in floods of tears through accumulated stress, fear and loneliness. 

He also provides some fascinating insights into the mentality of Japanese soldiery and why it failed against the flexibility and devolved authority of the British. 

The book amounts to a  very human and exhilarating tale.

Oh, and Irwin describes the death in 1943 of his colleague my uncle, Major PF Brennan.

+++++

 
Click on the logo
to get a table with
the Rugby World Cup
scores, points and rankings.

After 48 crackling, compelling, captivating games, the new World Champions are, deservedly,
SOUTH AFRICA

England get the Silver,
Argentina the Bronze.  Fourth is host nation France.

No-one can argue with
the justice of the outcomes