Courtesy of Emiliana Duarte, I give you the Venezuelan ambassador to the Republic of Trinidad and Tobago:
She is very good at all parts of her job. Trini-Venezuelan relations are better than they have been for years.
Courtesy of Emiliana Duarte, I give you the Venezuelan ambassador to the Republic of Trinidad and Tobago:
She is very good at all parts of her job. Trini-Venezuelan relations are better than they have been for years.
It looks as if Managua may be losing patience with HKND over the delays in starting the canal. According to source from within Albanisa, the company that handles Venezuelan aid and investment to Nicaragua, “We are hoping they will release the money to compensate landowners in the canal route, but so far they have only made excuses and want the government to provide the funds.” The source went on to allege that Albanisa has been financing HKND’s operations thus far. “My understanding is that the government already told HKND that they should stop using Albanisa funds and now invest their own money.”
That is triply interesting. Albanisa is 49%-owned by Nicaragua’s state oil company (Petronic) and 51% owned by PDVSA. Petronic buys oil from PDVSA at market rates, financed via Petrocaribe. Petronic then resells the oil and hands over the resulting revenue to Albanisa. 50% of the money goes back to PDVSA, while the remainder is split between a social fund administered by the Bolivarian Alliance and Albanisa itself. In other words, Albanisa and the social fund are financed by cheap loans from Venezuela. (The details can be found here, an English interview with the then-head of Petronic.)
Albanisa then uses that revenue to finance investment projects. (Details here.) The flow is around $400 million per year; as of June 2014 the company had received a total of $3.1 billion. Given that all the activity so far has consisted of some rather desultory roads around Brito, it is certainly plausible that Albanisa is financing everything.
The story has three implications. (1) Venezuela has been keeping the project moving forward, at least indirectly; (2) HKND is having real trouble finding investors; and (3) Managua is having second thoughts.
I would have thought that HKND would be able to get going on the free trade zone; after all, they will need it. But it seems as though they are having trouble getting even the funds to start that. Maybe Beijing does not think this is such a good idea after all.
If I look at a picture of it backlit by sunlight, it looks white-and-gold. If I look at it under artificial light or sunlit from the front, it is clearly a washed-out blue-and-black.
I feel better at having the illusion be systematic.
It is a fine article, but I am wounded for all the obvious self-indulgent reasons. Hey, I get calls, but still, Mr. Plumer. Carlos and I quite literally wrote the book on the economic history of Isthmian canals.
The article gets one historical detail wrong: fear of volcanoes did not scuttle U.S. plans for a Nicaragua Canal. It is true that volcanoes were used as one of the talking points to approve the Panama route, but it was not determinative. Goddammit, I get no respect from these young folks.
It also only avers that the Canal might be a financial boondoggle. I have numbers, available upon request. (They have already been passed on, so feel free.)
And it fails to present evidence that the Canal is likely a Trojan Horse for other projects, which is a big detail to miss in an explainer. Nor is there anything about the concession itself, save a mention that it is for 50 years. (HKND will in fact have a unilateral option for 100.)
I get to post this picture from ‘09, though, so not all bad. And the article really does a good job of covering most of the issues, so go read.
Or designed something similar?
My understanding is that close air support is a mission, not an aircraft. It is useful to have pilots close to the action, of course. But precision munitions were in their early stages back in 1984, when we stopped building A-10s. And drones operated by pilots wearing excellent VR helmets and aided by artificial intelligence are on the way, even if I do not like it.
I understand the counterarguments, but I cannot help thinking that if the A-10 were so effective in terms of cost and combat, somebody else would be building it. Or at least fielding an imitation. (France and Russia the U.K. come to mind; Russia has the Su-25.) Why don’t they?
ADDENDUM: Apparently the Iraqi government has purchased Su-25s from the Russian Federation. Iran also fields them and the Ivoirian air force idiotically used them to attack French troops in 2004. (Idiotic because although the attack succeeded, the French proceeded to destroy the entire Ivoirian air force on the ground.) So I may have answered part of my question: there is a market for an A-10 equivalent! Still, why is there no A-10 export market and why haven’t other Western countries with expeditionary militaries picked it up?
Fine. I’m internet meming. Sue me.
Yesterday I said that the dress looked blue-and-black and then switched to white-and-gold within seconds, where it remained. I had the television on while I worked yesterday — I am a child of the second half of the 20th century, it helps me concentrate — and the dress still looked white-and-gold. In the afternoon I went down to the hotel gym. Of course, one of the televisions in the gym was showing the dress. (Along with a pair of llamas, the dress appears to be dominating the news across the English-speaking world. I was in a place that could be loosely-defined as English-speaking.) I glanced up ...
... and it looked blue-and-black.
It still looks blue-and-black. I can’t make myself see it as white-and-gold. Yet until late yesterday afternoon it was clearly white-and-gold.
Jesus. I am sure the reason is because I now know that it is blue-and-black, but why did it take half a day to have my brain’s visual center make the switch?
OK, here is what happened to me. I called up the picture, not knowing anything other than that it was some sort of trick question about the color of the dress. It looked blue-and-black at first and then in a manner of seconds turned white and gold. I stared at it waiting for it to change back, figuring that was the illusion. When it didn’t, I figured that I was immune.
Apparently not. What seems to have happened is that my brain registered the true colors but took a moment to adjust to what it thought the ambient light was like in the photo. At which point it settled on an interpretation that my conscious mind could not undo, even when I saw the truth.
I would be curious to re-run the experiment. If I had known that it was really blue and black, would I have seen that bizarre color shift a few seconds into my stare regardless?
Ah well. The metaphysics are perturbing, so I am going to go back to working on Ecuadorian finances now. Happy viral meme.
But a foreshadowing: I do not agree with Mr. Drum that Senator Rubio gave that bad an answer to the question of what U.S. strategy against the Islamic State should be. The Islamic State also control Syrian territory, so Baghdad’s opposition is not a deal-breaker. Moreover, it might be worth trying to persuade the Iraqis to cooperate if a suitable Sunni force can be raised. It is hard to see which countries could put up the troops, but Bangladesh certainly has a long-standing tradition of hiring out their armed services. So does Pakistan. And it is not crazy to try to persuade Jordan and Saudi Arabia, even if I doubt that it would work.
I am not saying that I agree with Senator Rubio. To be honest, I think it would be impossible to persuade Sunni nations to put up the forces. And if it were, I would worry about Phase V operations: can a combination of Arab Sunni forces and Muslim peacekeepers from South Asia establish order? Would their governments be willing to bear to cost in blood of a prolonged operation, even if the United States paid the cost in treasure? I do not think that I would try to set up such an operation, were I somehow elected president.
But it is not crazy on its face. Even if Senator Rubio thinks the effort to raise such a force will fail, it is not unreasonable for him to suggest it.
I agree with Steve Benen that the Senator is trying too hard to distinguish himself from the President, but Mr. Benen is being completely disingenuous. He knows exactly why the Senator has to do that. The weird Iran flub is more disconcerting, but it does not strike me as dealbreaking or a sign that Senator Rubio is clueless. Rather, it strikes me as a simple gaffe, understandable in the heat of a CPAC conference, where Iran policy is a separating issue for the gathered faithful.
Messrs Benen and Drum strike me as bringing up small potatoes in a (gulp) slightly partisan way. Go ahead, talk me into why I should disrespect the good Senator from the great state of Florida regarding his Levantine policy. Because right now I don’t.
This blog has long taken the position that Hugo Chávez was uniquely incompetent. There was a time, back in 2008, where we gave him political props for building an effective machine. That admiration began to fade with the electricity crisis. Then some of this blog’s old readers (where have you gone?) made good arguments that the Chávez boom wasn’t all that it was cracked up to be, although we remained on the positive side of neutral. Sure, there were some shortages caused by price controls. But other than the insanity in the electricity sector, the controls could be justified as a means of income redistribution in a country that lacked the administrative ability to impose punishing income taxes. (This gets to a question from Randy that I will try to get back to.)
Unfortunately, the Socialists proceeded to run completely off the rails. Their cardinal sin was keeping the bolívar pegged at 6.3 to the dollar. The resulting capital controls have led to massive shortages of imported goods. Had the exchange rate regime been liberalized after the 2013 elections, living standards would have been hit, but the economy would be in better shape now. As importantly, the Maduro administration would have the space to engineer a mini-boom before the midterm elections. As it stands, however, Venezuelan exchange rate policy stands as an incredible example of economic and political incompetence.
After all, in a another world the people lined up to buy cheap goods at a state-owned supermarket would be grateful to the government which got it for them. But in this world they are quite angry at the government. Here is a good article by David Smilde of Tulane University that argues that it is too late to effectively reform. The Socialists are going to (a) lose the next election; (b) pull some sort of hat-trick involving Chinese money and a short-election season; or (c) actually turn Venezuela into a dictatorship. (The link goes to an earlier post here that argues that the Polity IV score ranking Venezuela as already dictatorial is bullshit. But we were would agree that it is not far-fetched to imagine Maduro abandoning democracy, possibly via unconstitutionally postponing the midterm elections. That Polity IV ranker may have been prescient.)
Or maybe Trinidad will come to the rescue? On Wednesday, the Trini prime minister, Kamla Persad-Bissessar, offered to swap tissue paper for bitumen. “The government of Trinidad and Tobago will purchase goods identified by the government of Venezuela from T&T’s manufacturers, such as tissue paper, gasoline, and parts for machinery.” It is part of the Trinidadian charm offensive that just enabled a deal for joint exploration for natural gas in the Gulf of Paria.
But as strange as it is to see T&T riding to the of the Bolivarian Republic, I would argue that it is probably too late for (b). The government certainly has started to throw a lot of opposition leaders in jail. That is more (c) than (b), even if they manage to pull off a win without election fraud. (Stealing elections, we have to add, is hard to do in Venezuela. Some things Chávez did right.)
So what does all this have to do with Panama? Well, mainly a demonstration that I am not an orthodox right-wing buzzword-of-the-day.
When President Juan Carlos Varela took office on July 1st, 2014, Panama faced an inflationary spiral. (See page 4.)To some extent, the idea of inflation in Panama sounds odd: the country uses the U.S. dollar. There has been no sign of inflation in the United States, so why were prices escalating in Panama? Simple: Panama was in the middle of a huge economic boom. (See page 19.) Incomes were rising fast and pulling up prices.
The traditional diagnosis in such a situation is that supply bottlenecks are the cause of the inflation. In that view, the right answers are (a) wait it out; or (b) slow economic growth via austerity. There were two problems with (a). First, the inflation hit the poor hard. In Panama, unlike the United States, overall turnout tops 75% and most people are still relatively poor ... governments cannot safely ignore them the way they do in North America. Second, prices are sticky. Increases in the price of food will translate into wage increases. In a dollarized economy, that means a loss of competitiveness and a serious adjustment problem ahead. (To some extent, that is what happened to Spain during the early years of the euro.) If you can keep inflation from escalating, you should.
The problem with solution (b), of course, is that austerity is painful. And there is a diagnosis in which austerity is unnecessary. What if the bottlenecks aren’t physical? Rather, what if they are caused by an uncompetitive wholesale sector? In that world, rising demand leads to rising prices not because goods are scarce but because wholesalers and retailers are using the opportunity to take profits. If that view is correct, a big if, then the government can use price controls to break the inflationary spiral. Merchants will have lower profits, but there will be no shortages: it will still pay for them to provide goods.
My esteemed colleague in what remains of the blogosphere, Fausta, confidently predicted that shortages would result if Panama imposed price controls. (She is correct in pointing out that former-president Martinelli was a supermarket magnate!) Economists were more divided (the headline of the article is misleading) although they did universally insist that the controls should be temporary.
President Varela went ahead with his campaign promise and imposed controls. The decree with the list of the prices can be found here. The ones I recognize are lower but not that different from the price in D.C.: frex, we buy chicken breasts for about 90¢ a pound.
So what happened? No shortages. Lots of fines. A dramatic fall in inflation. The Varela administration has decided to extend the controls until July 2015. For more details you can find an August 2014 analysis from the Economics and Finance Ministry here.
In short, a victory for economic heterodoxy, hooray! (FWIW, President Varela is from the conservative party in Panama.)
Of course, with no independent monetary policy, nobody in Panama has any incentive to take advantage of the controls to, say, print money and engineer an electoral boom. But still.
So there. I am against the Chavistas because they are incompetent and authoritarian, not because they are left-wing or heterodox. May there be an election in Venezuela and may the Socialist Party lose.
As part of another job, in another place, I wrote that Ecuador would probably come out okay from the recent oil price crash. Their debt is low and they can borrow from China.
And now we know the details. $5.3 billion over thirty years at 2% interest. Wow!
Now, you should be careful with that. The money is a commitment; only some will arrive this year, along with another $1.5 billion from the China Development Bank at terms we do not yet know.
But still. Wow. This guy will be 32 years old by the time it all comes due. Kudos, Mr. Correa.
For more detail on how much Ecuador gets from its putatively subordinate relationship with China, see here.
1. Immediate and total ceasefire in the Donetsk and Lugansk regions from February 15.
This did not happen.
The most dramatic evidence of this is the dramatic loss of Debaltseve. The Ukrainians were pummeled and were forced to withdraw. In fact, it was a rout. This should not be a surprise: Putin argued in Minsk that Debaltseve should be exempt from the ceasefire. On paper, Putin lost that argument.
In practice, not so much. Debaltseve sits on the road and rail junction between the rebel territories in Lugansk and Donetsk. Without it, the rebels are logistically divided. Additionally, Debaltseve is a knife pointed at both halves of “Novorossiya” from which the Ukrainians could, if rearmed and reorganized, launch an offensive. The rebels could not leave the town in Ukrainian hands.
Attacking Debaltseve, however, ran the risk that it could become the next battle of Donetsk airport. As folks who have been following the conflict know, the Ukrainians held the airport until very recently. It took the rebels four months to dislodge them. In fact, the fighting grew so fierce that the a young rebel soldier said in an interview that the only way the Ukrainians could hold out for so long is because they were “cyborgs like Schwarzenegger.” The “cyborg” monicker stuck and the Ukrainian defenders became national heroes. The rebel victory ultimately turned pyrrhic: by the time the Ukrainians withdrew there was nothing left to defend.
In short, the last thing the rebels and the Russians wanted was another fight which would boost enemy morale, turn into a bleeding humiliating sore, and end with the complete destruction of the local infrastructure.
The Russians appear to have intervened directly in order to avoid such a debacle. There is credible evidence large formations of the Russian army participated: the 136th Motor Rifle Brigade from the North Caucasus was identified based on vehicle markings. (In general, the source of the second link should be approached with some caution.) In addition, the Russian Spetznaz appear to have made little effort to hide. Weapons not operated by the Ukrainians (frex, SA-22s) continue to appear in rebel territory. Moreover, Russian opsec is pretty lax: Russian soldiers’ posts from eastern Ukraine continue to show up on social media.
Fighting continues outside of Donetsk and, especially, Mariupol.
2. Withdrawal of all heavy weapons to create a buffer zone at least 50 kilometers (30 miles) for artillery with a caliber of 100 mm or more, 70 kilometers for multiple rocket launch systems, or 140 kilometers for Tornado multiple rocket launch systems and others. The withdrawal of heavy weapons must begin on the second day after the ceasefire, i.e. February 17, and take no more than 14 days.
This also did not happen.
3. The OSCE will check the ceasefire and heavy weaponry withdrawal from day one, and can use satellites and drones.
The Ukrainians have impeded the OSCE at least once and the rebels have done so repeatedly.
4. On the first day after withdrawal of heavy weapons, dialogue must start on holding local elections in Lugansk and Donetsk as well as the future “regime” in the rebel-held areas, based on Ukrainian legislation giving them temporary self-rule. Ukraine’s parliament must within 30 days pass a decree defining the geographical area that will have self-rule, based on the September agreement. The separatist regions have the right to decide which language they use.
Well. We were skeptical, but now the leader of the DNR has stated the no pro-Ukrainian parties will be allowed to take part.
5. A law must enter force ensuring pardons and amnesty for those involved in the conflict in Donetsk and Lugansk, who will have immunity from prosecution and punishment.
No word yet. Pretty sure this is DOA.
6. Release and exchange all hostages and illegally detained prisoners on an “all-for-all” basis, starting five days after withdrawal of heavy weapons.
Exchanges in or near Debaltseve have taken place. Note: the Russians hold an Ukrainian soldier (Nadya Savchenko), captured earlier in the war. She is accused of having killed two Russian journalists and is currently on trial. The Russians have made it plain that she is not covered by the ceasefire and will not be returned.
7. Ensure distribution and access to humanitarian aid.
More Donbas factories have been stripped down and moved east. After the Soviet Union broke up, most Russian weapon system continued to require components built in Ukraine. Torpedoes, the gas turbine engines for Russia’s new frigates, the Dnepr rocket, etcetera. Thus the Russians have sent in aid in very large but lightly loaded convoys which return with the contents of the Donbas factories.
Points 8 through 13 of the Minsk II plan have made no progress, so we will not dwell on them.
The only possible way this can be spun as a victory for Europe is if the point of the exercise was to demonstrate Russia was never going to give peace a chance, even when Russia gets almost all of its public demands. We shall see. The test will be whether European governments, particularly Germany’s, reverse their stand against arming the Ukrainian forces.
There is an overwhelming amount of evidence that the European empires did very little right in Africa. I will admit that these results came as a surprise to me; my prior would have been that the Europeans would have left behind some institutional innovations or physical infrastructure of value. That case, however, turns out to be extremely hard to demonstrate outside of Southern Africa.
The slave trade, of course, was one of the most egregious ways in which the Europeans managed to play havoc with Africa. It follows, of course, that ending it should have positive effects. And it did! The Middle Passage was a horrifying meatgrinder ... no possible cost could outweigh the reduction in human suffering from insuring that fewer people would suffer in it.
But the passage of the U.K. Slave Trade Act of 1807 may have had the consequence of boosting conflict in Africa. James Fenske (Oxford) amd Namrata Kala (Yale) argue that it did, by weakening the authorities whom had enriched themselves off slave exports. They take advantage of the fact that the British were rather more successful in reducing human trafficking from West Africa than elsewhere as a form of natural experiment to test their hypothesis.
The time series evidence is fairly compelling that something happened around then:
But I am not wholly convinced of the validity of their experiment. First, look at the above figure: there are a disconcerting number of zeroes among the controls. Second, look at the map to the right, which shows the treatment area in red and the control in blue. Are they really comparable regions?
The authors do vary the treated area and find the same result. In the map, the treated area consists of everything within 1,000 kilometers of a slave-trading port. They varied that distance to as low as 250 kilometers, with the same result. They also defined the treated zone as the current borders of countries with historical slave ports; again, similar results. Finally, they threw out the four territories annexed by European powers in 1807-40: Sierra Leone, Gambia, and Côte d’Ivoire. They also threw out Liberia for similar reasons. Again, the results hold.
Nonetheless, it still seems as though there may be a data problem: we know less about conflicts in the interior. And even if we did have comparable information, the interior likely had a radically different state structure and a much lower population density. The comparison seems forced.
Even without the experiment, the time series certainly make it seem like something happened to increase conflict in coastal Africa in 1807! The Slave Trade Act is the most probably culprit. Moreover, it is hard to argue reverse causality, i.e., that the Act was a response to rising levels of intra-African conflict. They do a good job of demonstrating that British interest in the slave trade had no correlation with interest in African conflict. (Google Ngrams is pretty neat.) In short, the experiment may be unconvincing ... but it also may be unnecessary. Read the paper!
But if they are right, it is depressing to think that ending the slave trade may have done as much to weaken African states as the trade itself.
There is a long literature stating that war contributed to state building. Here, for example, you can find a paper by Nicola Gennaioli (Bocconi) and Hans-Joachim Voth (Zurich). It argues that European states needed money to win wars. Thus, states got better at raising money or resigned themselves to irrelevance.
It a powerful thesis, so much that even Paul Collier alluded to the possibility that Africa might be better off if the post-1945 world allowed for violent border changes. Let Rwanda expand! In extremis, you might even want to create institutions (like the ones in the pre-1914 West) that would encourage cohesive states like Rwanda to expand.
Or perhaps not. Did war encourage state-building in Africa before the Europeans invaded? If so, then it might be true that the continent would be better off had that process been allowed to continue. If not, however, then the implication is that European conquest did not abort local state building ... and unless something has changed radically, there would be little reason to believe that allowing that process to restart today would result in anything other than more death and destruction.
Mark Dincecco (Michigan), James Fenske (Oxford), and Massimiliano Gaetano Onorato (IMT Lucca) have done the work. They coded up 1,750 conflicts in Africa, Asia, and Europe between 1400 and 1799. In Europe and Asia, more war in the past predicted stronger and richer states in the present. But not in Africa! In Africa, more war before 1799 has no effect on economic development today ... and is in fact associated with more civil war.
The result is strong and intriguing. Go read the paper! Africa is different. Past war does not improve present results on that continent. The unanswered question is why. Section 6, where they try to address that question, is the weakest part of the paper.
There has been a recent spate of papers in the category of “history only happens once.” They generally take the form of showing that some long-ago historical event continues to reverberate in the present. Two of the best in the genre are Nathan Nunn’s (Harvard) work on the effect of the slave trade on Africa or Nico Voigtlaender (UCLA) and Hans-Joachim Voth’s (Zurich) work on the medieval origins of anti-semitic violence in Nazi Germany. I had the honor of criticizing an early version of the latter paper; the authors effectively dealt with all my complaints. Amazing work.
But sometimes it can go too far. For example, many have argued that Latin America’s extreme level of inequality has its roots in the colonial past, when my people (oh, my people, at least some of them) arrived and managed to botch everything up. Except here comes my friend and colleague Jeffrey Williamson (Harvard and UW-Madison) to point out that it isn’t true. From the abstract:
Most analysts of the modern Latin American economy have held the pessimistic belief in historical persistence — they believe that Latin America has always had very high levels of inequality, and that it’s the Iberian colonists’ fault. Thus, modern analysts see today a more unequal Latin America compared with Asia and most rich post-industrial nations and assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. The recent leveling of inequality in the region since the 1990s seems to have done little to erode that pessimism. It is important, therefore, to stress that this alleged persistence is based on an historical literature which has made little or no effort to be comparative, and it matters. Compared with the rest of the world, inequality was not high in the century following 1492, and it was not even high in the post-independence decades just prior Latin America’s belle époque and start with industrialization. It only became high during the commodity boom 1870-1913, by the end of which it had joined the rich country unequal club that included the US and the UK. Latin America only became relatively high between 1913 and the 1970s when it missed the Great Egalitarian Leveling which took place almost everywhere else. That Latin American inequality has its roots in its colonial past is a myth.
In other words, something good happened in the North Atlantic during the 20th century. (Well, good in terms of inequality: there is evidence that it took a lot of depression and war to get there.) That good thing did not happen in Latin America. This is a very different view than one which dates the region’s inequality to the 16th century ... and a much more hopeful one, I think.
Grexit, yes, still on the list. (And were I a Greek minister, I suspect I would prefer capital controls followed by Grexit to sucking an additional 1.5% of GDP out of my economy this year and 3.0% the next.) But Brexit? Nope.
First, the polls do not favor it now. Second, I suspect that David Cameron will campaign against it, just as he did against electoral reform. With the election behind him, he would be insane not to do so.
We know that European colonization affected Africa in multiple ways. The direct effects were generally, well, at best neutral. Outside a few long-standing enclaves (like Dakar) and (maybe) Tunisia and South Africa, it’s difficult to imagine a counterfactual in which the Europeans never extend sovereignty and the Africans have a harder time of it in the 20th century.
One understudied way in which the Europeans might have affected Africa negatively is through gender norms. If there were benefits to, for example, learning English or French, but the colonial authorities only taught men, then gender inequality would increase. One can imagine many other channels in which this effect could have operated.
On the other hand, it is far from given that pre-colonial Africa was a paragon of gender equality, relative to Europe. It hard to see how colonization might have improved the situation, but it is possible.
So what was the effect? Well, Felix Meier (Utrecht) and Jacob Weisdorf (Southern Denmark) have an answer! It turns out that the Protestant churches in Kampala kept incredibly detailed occupational data going back to the 19th century. They found that the initial impact of colonialism was what you’d expect … but it didn’t last:
“We find that the arrival of Europeans in Uganda ignited a century-long transformation of Kampala involving a gender Kuznets curve. Men rapidly acquired literacy and quickly found their way into white-collar (high-status) employment in the wage economy built by the Europeans. Women took somewhat longer to obtain literacy and considerably longer to enter into white-collar and waged work. This led to increased gender inequality during the first half of the colonial period. But gender inequality gradually declined during the latter half of the colonial era, and after Uganda’s independence in 1962 its level was not significantly different from that of pre-colonial times. Our data also support Boserup’s view that gender inequality was rooted in indigenous social norms: daughters of African men who worked in the traditional, informal economy were less well educated, less frequently employed in formal work, and more often subjected to marital gender inequality than daughters of men employed in the modernized, formal economy created by the Europeans.”
In other words, the British conquest had little overall effect at the end of the day … or at least by the end of the 20th century. Thoughts?
The Greek situation is near incomprehensible. These posts are just me thinking out loud, sometimes in the hope that somebody wiser will chime in. (In this case, someone did! But where is the old SHWI crew? Insights wanted.)
To start, let me make my previous post clearer. It is not about the money: even a full default would net the Greeks only 0.7% of GDP per year in additional spending. This is the same number that Tom Warner calculated for the Greek primary surplus. (Go read the link.)
So the imbroglio is not about enabling a spending spree in 2015. There is no money for that. What then is it about?
I think of it this way: (1) What do the Greeks want? (2) Why do they need European cooperation to get it?
What do the Greeks want? Simple: they do not want to have to hit an impossible fiscal target in 2015 and beyond. Their economy has been absolutely crushed, much harder than Ireland or Portugal. And the Greeks have implemented more austerity. It is entirely reasonable for them to want to avoid sucking an additional 1.5% of GDP out of their economy over the rest of 2015.
Why can’t they get it without European cooperation? Two reasons. First, Greece doesn’t just owe interest this year. It has to make a whole lot of principal repayments. That debt needs to be rolled over or refinanced. Some of it is due the IMF, which might be cooperative; it was with Argentina in 2003. Some of it is due private creditors. That debt would be need to be restructured unless official finance was forthcoming. Mitu Gulati is the expert, and I have every intention of asking him his thoughts on the matter, but I think that should be doable.
And if neither refinance nor legal restructuring for private debt is an option, then Greece can just default. What are they the private holders of Greek bonds gonna do? Sue? Good luck with that.
But the IMF and private parties are not the main creditors: most of that money Greece’s public debt is owed to the European Union in one way or another. So Greece would need to get the Europeans (read: Germany) to agree to a rollover.
Why not just default on the Europeans? Well, here is the second reason the Greeks need European cooperation: Greek banks depend on special finance from the ECB. Pull that, and the Greek banking system collapses.
The question seems to be, then, would the Europeans actually send Greece spiraling into another depression, even before the country emerged from the last one? I was extremely doubtful a month ago. My opinion is changing, however. Not because the Germans are proving more intransigent than I expected. Rather, the center-right governments of Portugal, Ireland and Spain are proving more intransigent than I expected. In the words of Noel Whelan: “Centre-right governments have no interest in seeing this new left-wing Greek government succeed.”
Whelan argues mostly for Ireland (it is worth reading) but the logic applies to Portugal and certainly to Spain, where both the People’s Party and the Socialists have an interest in heading off the rise of Podemos.
That said, I still think this will be resolved with a haircut and without Grexit. Here is the French finance minister, Michel Sapin: “It is a problem of wording, although the legal tool cannot be anything else than an extension of the program. What [Greek finance Minister Yanis] Varoufakis has told us, what I have understood, is that he agrees in principle with the extension of the program. Everyone agrees on this: you have a 1.5 percent primary surplus, you cannot do anything in this period that worsens that surplus.” There are also some pro-Greek noises coming from the Italian finance minister, Pier Carlo Padoan.
If the Europeans can agree to call a violation of the bailout program a new program, rather than insisting that it be called an extension, then everyone should be able to strike a deal.
Unless J.H. is right.
Much of the answer has to do with what is called casinghead gas. (Aka “associated” gas.) That is, natural gas produced as part of oil drilling operations, and separated at the casing head. I do not know of good national figures for this, but Texas keeps good records. You can see from the below chart how natural gas production has declined with low prices, but the boom in unconventional oil has caused casinghead gas production to skyrocket. The end result has been stability in total output despite the low prices:
What happens if oil prices stay low for a prolonged period of time? New oil drilling will fall off — this has already happened. If prices remain low for more than a year or two, then production oil will fall. Associated gas will fall along with it. And that will drive gas prices up.
In short, a prolonged period of low oil prices will cause natural gas prices to rise.
The problem is that all this operates with long and uncertain lags. Which means that I cannot predict when prices will rise or how long they will remain high. What I can predict is that low oil prices mean more volatility in the natural gas market.
Buckle your seat belts!
One day, I hope, Brooklyn will no longer stand for anything other than a large urbanized area in the southwestern corner of Long Island, hopefully still with the funny accent. But until that day, I give you Bushwick, 2015.
Brooklyn? Like I tell people, I’m from Fort Lee, New Jersey. Now, what’s the name of the junior high in that town?
My son is sitting on the toilet reading a book about how to demolish a building. (Or at least looking at the very cool pictures of buildings being demolished.) I’m outside. Suddenly he yells, “I’m mad!”
So I walk over. “Why are you mad?”
“I’m mad at John Boehner!”
You cannot make this stuff up. What has my wife been telling him?
Later that day we were looking at the newspaper. He asks me, “Is that President Obama?” pointing at a picture of President Obama. (Think something the President has recently done. On the internet.) I say, “Yes, son, that is.”
“He’s mad at John Boehner!” he says.
Now, my son knows what John Boehner looks like. That is because we live in D.C. We ride the subway every day, and he likes to grab Politico from the newspaper machines in front of the Jenifer Street elevators at the Friendship Heights metro. He looks at the pictures and I identify the people. “Who’s that?” “That’s Marco Rubio!” “Who’s that?” “That’s a random fellow in an insurance advertisement!” Etcetera.
But I have no idea how he picked up the mad part. He’s right, of course. But how? He also mysteriously told my wife one day, “You don’t have your wallet!” with no way of knowing. ESP? Probably not. And certainly not how he knows that the President is mad at the Speaker. But it’s amusingly weird.
I guess it’s an occupational hazard of growing up in the District of Columbia. I guess it’ll only get worse from here. We’ll try to protect his sister.
A few weeks ago, I wrote about a review of my book by Elizabeth Cobbs Hoffman. I thought that she had a lot of good points, intriguing notions worth thinking about.
But I was very annoyed that she just plain ignored the facts of my argument. She wrote, “It’s hard to see how the horse-trading that achieved partial compensation for dispossessed investors was terribly different from any other bruising business transaction.” Only I presented lots of evidence that there was no horse-trading! The American investors got everything they wanted, and more.
Now along comes Arnold Kling to write about the decline of American empire hegemony. He writes of a possible cycle in which the U.S. feels less prosperous because there is less globalization, making its government less willing and able to intervene in the world, leading to more disorder and less globalization ... repeat. It is an intriguing notion, worth thinking about.
Only he goes on to just plain ignore the facts. He writes, rather unbelievably, “On a related note, what should we make of the fact that in response to the murder of one of its citizens, the United States is less forceful than Jordan?”
What??? Between February 5 and February 8, Jordan launched 56 airstrikes. And as of January 19, the United States Air Force alone had launched 9600, not counting sorties by U.S. Navy aircraft. Moreover, our F-22s escorted all of the Jordanian F-16s on those retaliatory raids that have Kling all kvelling.
So what in the name of God is Arnold Kling talking about? I find his speculations interesting and I am fine with his opinion. But I am very annoyed that he is just plain ignoring the facts.
... this is just crazy hyperventilation.
For the last few weeks there have been three models in the running:
1. The Greek government is calling the Germans Nazis because they figure Grexit is coming no matter what and they want to get the populace riled up as a distraction from the disasters, or
2. The Greek government will cave so cravenly on the substance that they want to have it on the record books that they supplied some expressive goods for a few weeks’ time, namely insulting the Germans and claiming that the Troika is dead and buried, or
3. The Greek government is simply full of out-of-control, ideological maniacs.
Right now it is looking like #2 — however unlikely it may sound as a model of retrospective voting and intertemporal substitution — is closest to reality. What the relevant legislatures will go along with, however, still remains to be seen. Arguably the insults and posturing have narrowed the possible bargaining space by hurting feelings all around.
Seriously, Professor Cowen? There are several other options, you know. I really would like you to explain your logic. I still don’t understand why a Greek default would lead the ECB to sink their banking system. And if that’s what you think will happen, I still don’t understand why I shouldn’t consider that to be an expression of out-of-control ideology from a bunch of maniacs in Frankfurt and Berlin.
Help! I am honestly confused.
Here is a rather more sedate look at the same events.
Obviously, given that the government just devalued the bolívar (sort of) and is in the middle of a self-imposed and completely unnecessary economic meltdown, there are reasons to think that this is all bullshit.
But let’s say that the plot is real. What does it imply that eleven officers believed that they could take down the entire government with a single close-attack aircraft?
See Boz for the answer.
So why would seven Air Force officials believe that they could take down the government? Because Chavez’s military doctrine and the lessons from 4 February 1992 in some way taught them that they could and should. What should concern the Maduro government, but doesn’t, is that there are thousands of other military officers in Venezuela who have been taught the same lesson. There must be a few dozen more out there, soldiers who probably consider themselves good Chavistas, who wonder if they could do it better than Chavez in 1992, actually succeed where he failed.
February 4th, 1992, is when a young Hugo Chávez launched his failed coup attempt against the Venezuelan government. Once he became President that coup attempt came to be lauded as a noble failure, the Día de la Dignidad Nacional, rather than a regrettable error of judgment.
Read the whole thing.
The British Privy Council just handed the opposition in St. Kitts and Nevis (SKN) a huge victory. Basically, the Labour government altered electoral boundaries on January 16, one month before the next general election. The fragmented opposition cried foul. (There is something quite amazing about the idea of a “fragmented opposition” in a country of only 55,000 people.) So they sued.
A judge immediately granted an injunction. The problem was that she granted it too late. Governor-General Edmund Lawrence signed the redistricting law at 6:20pm, whereas the judge issued her order at 7:38pm. Since you aren’t supposed to be able to injunct an action that’s already been taken, the injunction was discharged on January 27th.
But that was not the end of that! SKN, you see, is a part of the Organization of Eastern Caribbean States. The OECS has a common judicial system, so the SKN opposition took the case to the Eastern Caribbean Supreme Court in St. Lucia. The opposition argued that Section 119, Article 1 of the Constitution of the Federation of SKN defined “proclamation” as “a proclamation published in the Gazette.” Since the law had not been published in the Gazette, they argued, the injunction was valid.
The Eastern Caribbean Supreme Court found for the government. “The Constituency Boundaries Commission reviewed the boundaries of the constituencies in the Federation and recommended alterations to the constituency boundaries; a draft proclamation giving effect to the recommendations of the Commission was thereafter approved by the National Assembly; the Governor General then signed a proclamation which (according to the evidence of the Attorney General) was published in the Official Gazette. All of this happened on Friday, 16th January 2015, and though one may say that the process was hurried through by the relevant authorities to gain an unfair political advantage, that is an issue of political morality and not constitutional validity, which is not suitable for judicial enquiry.”
But that was still not the end of that! SKN, like most of the Commonwealth Realms of the Caribbean (save Barbabos but including Trinidad), still uses the British Privy Council as its highest court of appeal. And so, the case went to London. Where the opposition won!
I can’t wait to read the final decision.
Anyway, this is not a huge piece of news. After all, SKN is just a small group of islands with only 55,000 people. But it is a striking example of how the microstates of the Caribbean survive by contracting out so many state functions to other polities and organizations, be it the OECS, the CSME, or the United Kingdom.
But this post is not to tell you to stay off my lawn. (Right now, with two young kids, I am very happy for neighborhood children to come over and play on our lawn uninvited.) This post is to tell you all to go read the thread! Even if Will isn’t currently still active on it, it’s fascinating. Go, read.
Will Baird here, from The Dragon’s Tales. Today I awoke to find that an accord had been struck between the various parties involved in the negotiations to try to bring about a ceasefire in Ukraine and, hopefully, bring an end to the war going on in the Donbass. Apparently, there was a marathon negotiating session. The end result appears to have been a colossal waste of paper. I am very unclear as to what it is the Europeans think they are doing.
Let’s take it point by point.
(1) Immediate and total ceasefire in the Donetsk and Lugansk regions from February 15.
Remember, this is not the first attempt at a ceasefire. The first attempt was in September. That ceasefire was simpler to implement. It failed almost immediately because the separatists did not find respecting it to be in their interest. The “rebels” have stated they want all of the Donbass, not just the territory they currently occupy. In fact, they’ve made noises that they want to drive all the way to Odessa and Kharkov, but they have made it clear that the Donbass proper is a non-negotiable. So why with no change in the correlation of forces would they negotiate it away now?
(2) Withdrawal of all heavy weapons to create a buffer zone at least 50 kilometres (30 miles) for artillery with a calibre of 100 mm or more, 70 kilometres for most multiple rocket launch systems, and140 kilometres for Tornado multiple rocket launch systems and others.
The zone for Ukrainian troops has to start, by definition, from the de facto frontline. But for rebel forces it starts from the September 19 frontline according to last year’s Minsk pact. The separatists have however since pushed deeper into government held areas. So this is in effect requires the separatists to pull back their forces. The withdrawal of heavy weapons must begin on the second day after the ceasefire, i.e., February 17, and take no more than 14 days.
The removal of the artillery seems like a fine thing to do and it is. The problem is these can all be moved back within an hour or two. In fact, I expect what you will see is the OSCE will sweep an area and then the artillery will come back, albeit hidden. It is perfectly possible to hide from satellites and aerial reconnaissance.
In short, this is cosmetic. At best it could be taken as a sign of rebel goodwill. For which, see point (1) above: September ceasefire, collapse of.
(3) The OSCE will check the ceasefire and heavy weaponry withdrawal from day one, with satellites and drones.
First, see point (2) above: aerial reconnaissance, camouflage from.
Second, the OSCE has been useless. The constant reports of “we see nothing crossing the border” and then the Russians moving their troops in ... gah. Past performance may not predict future results for mutual funds, but I think it does here.
(4) On the first day after withdrawal of heavy weapons, the two sides must start talking about holding local elections in Lugansk and Donetsk as well as the future “regime” in the rebel-held areas. Ukraine’s parliament must within 30 days pass legislation defining the geographical area that be granted temporary self-rule, based on the September agreement. The separatist regions have the right to decide which language they use.
One only needs to look at the last set of “elections” held in the Donbass . They absolutely did NOT meet any criteria as being free and fair. They were a farce.
Moreover, at this point a combination of population movements, sustained propaganda, and the anger that comes from being in the middle of a shooting war means that pro-Ukrainian candidates would likely have little chance even in a fair election. All the rebels will need to do is steal the vote from slightly-less-crazy separatists.
As for the language, there’s been more stupidity on both sides than I know what to do with. Bavarian German is more different from High German than Ukrainian is from Russian. Hell, I have more trouble understanding the Scots or the Trinis than my Ukrainian-speaking in-laws do understanding Russian.
(5) A law must enter force ensuring pardons and amnesty for those involved in the conflict in Donetsk and Lugansk, who will have immunity from prosecution and punishment.
You could get away with the amnesty. However, its likely to cause bad blood in other ways. It is going to be tough to get the national guard and volunteer battalions to comply with this. In fact, I am almost 100% sure this will fail on the Ukrainian side. Remember the member of the Rada who ran around arresting folks for being traitors?
(6) Release and exchange all hostages and illegally detained prisoners on an “all-for-all” basis, starting five days after withdrawal of heavy weapons.
This could actually happen without too many hiccups.
(7) Ensure distribution and access to humanitarian aid.
Ack. The Russians have been using aid convoys to bring supplies and weapons then stripping factories in the east and shipping the equipment back to Russia in the trucks. Good work there.
(8) Both sides must work towards the restoration of social and economic links including payment of pensions, taxes. Ukraine will restore the banking system in the conflict zones, with the possibility of an international mechanism to facilitate money transfers. Kiev will be expected to restore pensions and salaries to the rebel areas.
Oh, give me a break. And the rebels will not pay taxes to Kiev.
(9) Ukraine must be given full control of its state border across the conflict zone. The process should start the day after local elections and must be completed by the end of 2015, on condition that constitutional reforms under point 11 have been implemented.
The rebels will not allow Kiev to have the border back. Period.
(10) Withdrawal of all foreign armed groups, military equipment and mercenaries from Ukraine, observed by the OSCE. Disarmament of all illegal groups.
Hahahahahahah! Ahem. If you have been listening to the russophonic internet at all, there are numerous reports from Russian soldiers stating the only thing holding up the military forces of the Donetsk and Luhansk People’s Republics has been the presence of foreign fighters and Russian soldiers. The few Ukrainians who were involved on their side are largely dead. Since allowing Russian forces to withdraw from rebel territory is the equivalent of an unconditional surrender, then there is there no way that those foreign fighters and the Russian troops will be allowed to withdraw.
See point (9): border return, unacceptability of.
(11) A new Ukraine constitution, agreed with Donetsk and Lugansk representatives, must enter force by end-2015 allowing for decentralisation. Legislation on the separatist regions’ special status must also be adopted also by the end of 2015.
This is a dead letter for the rest of Ukraine. Autonomy is part of the reason Crimea could be snatched away. There is no way the rest open that box up for the Donbass. And don’t bother with logical explanations of how this could be made to work in the interest of both Ukraine and Ukraine’s ruling coalition. This is an emotional issue. Think letting the Mexican tricolor fly over San Antonio or giving the gringos special rights in Baja California. Not gonna happen.
(12) Local elections in separatist regions to be held, monitored by the OSCE, but no date specified.
See point (4) above: local elections, fairness of.
(13) Intensify activity of the trilateral contact group including creation of working groups to implement the peace plan.
Oh my, yes, how reassuring.
There are a number of points that are problematic at best and batshit crazy at worst. The plan is so full of nonsense I have trouble believing that Merkel and Hollande pushed for it ... the agreement is DOA for both sides. The rebels have not kept their word on anything. The Ukrainians are calling up their reserves. The Russians don’t see any additional risk to staying the course.
This isn’t over and the Minsk meeting was a waste of time.
Full text here. Minus stylistically-awful preamble below:
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That
SECTION 1. SHORT TITLE. This joint resolution may be cited as the “Authorization for Use of Military Force against the Islamic State of Iraq and the Levant.”
SECTION 2. AUTHORIZATION FOR USE OF UNITED STATES ARMED FORCES.
(a) AUTHORIZATION.—The President is authorized, subject to the limitations in subsection (c), to use the Armed Forces of the United States as the President determines to be necessary and appropriate against ISIL or associated persons or forces as defined in section 5.
(b) WAR POWERS RESOLUTION REQUIREMENTS.—
(1) SPECIFIC STATUTORY AUTHORIZATION.—Consistent with section 8(a)(1) of the War Powers Resolution, Congress declares that this section is intended to constitute specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution.
(2) APPLICABILITY OF OTHER REQUIREMENTS.—Nothing in this resolution supersedes any requirement of the War Powers Resolution.
(c) LIMITATIONS.— The authority granted in subsection (a) does not authorize the use of the United States Armed Forces in enduring offensive ground combat operations.
SECTION 3. DURATION OF THIS AUTHORIZATION. This authorization for the use of military force shall terminate three years after the date of the enactment of this joint resolution, unless reauthorized.
SECTION 4. REPORTS. The President shall report to Congress at least once every six months on specific actions taken pursuant to this authorization.
SECTION 5. ASSOCIATED PERSONS OR FORCES DEFINED. In this joint resolution, the term ‘‘associated persons or forces’’ means individuals and organizations fighting for, on behalf of, or alongside ISIL or any closely-related successor entity in hostilities against the United States or its coalition partners.
SECTION 6. REPEAL OF AUTHORIZATION FOR USE OF MILITARY FORCE AGAINST IRAQ. The Authorization for Use of Military Force Against Iraq Resolution of 2002 is hereby repealed.
Regarding that preamble, when did the endless list-of-whereas style become the norm? They’re really horrible to read. The AUMF for the Spanish American War limited itself to one:
Whereas, the abhorrent conditions which have existed for more than three years in the Island of Cuba, so near our own borders, have shocked the moral sense of the people of the United States, have been a disgrace to Christian civilization, culminating, as they have, in the destruction of a United States battleship, with 266 of its officers and crew, while on a friendly visit in the harbor of Havana, and can not longer be endured, as has been set forth by the President of the United States in his message to Congress of April 11th, 1898, upon which the action of Congress was invited:
Therefore, Resolved, by the Senate and House of Representatives of the United States of America in Congress assembled,
First. That the people of the Island of Cuba are, and of right ought to be, free and independent.
Second. That it is the duty of the United States to demand, and the Government of the United States does hereby demand, that the Government of Spain at once relinquish its authority and government in the Island of Cuba, and withdraw its land and naval forces from Cuba and Cuban waters.
Third. That the President of the United States be, and he hereby is, directed and empowered to use the entire land and naval forces of the United States, and to call into the actual service of the United States, the militia of the several States, to such extent as may be necessary to carry these resolutions into effect.
Fourth. That the United States hereby disclaims any disposition or intention to exercise sovereignty, jurisdiction, or control over said Islands except for the pacification thereof, and asserts its determination, when that is accomplished, to leave the government and control of the Island to its people.
Approved, April 20, 1898.
Returning to the current proposal, what is “enduring offensive ground combat operations” is supposed to mean? Sounds to me like Congress is authorizing anything including invasion, as long as we do not stay there forever. Not that the current administration has any desire to invade, of course. But why spell out the list of grievances in agonizing length only to leave vague the limits on the action? Go ahead, Congress! Take a whole page to spell out exactly what’s okay and what’s not!
I also have to wonder why there are no geographic limits on the current resolution. For example, “Within the territory of the Syrian Arab Republic or, with the permission of their internationally-recognized governments, the territory of any States bordering on the Syrian Arab Republic.” Instead we got, well, nothing. (FWIW, the 1898 resolution was also pretty vague. We did, however, follow it up with an actual declaration of war two days after Spain declared war on us.)
Is this just kabuki?
It is a good thing to repeal the 2002 AUMF. And it is a good thing for Congress to weigh in. But this strikes me as an open-ended check.
The real new thing here is the three-year limit ... which I think is not kabuki. But I am open to arguments.
There are a lot of questions about how modern technology is transforming society and social interactions. (For modern technology, read smartphones mediated by social media software.) What is remarkable, however, is how little we really know about how older technologies affected society and social interaction.
For example, television. How much do we really know?
This paper investigates the impact of television and radio on social capital in Indonesia. I use two sources of variation in signal reception — one based on Indonesia’s mountainous terrain, and a second based on the differential introduction of private television throughout Indonesia. I find that increased signal reception, which leads to more time watching television and listening to the radio, is associated with less participation in social organizations and with lower self-reported trust. Improved reception does not affect village governance, at least as measured by discussions in village meetings and by corruption in village road projects.
That does not seem good. Maybe my Luddism does not go a far enough.
Elisabeth, I should add, has a neat paper on the effect of free rural mail service on politics in the early 20th century. From its abstract:
The rollout of Rural Free Delivery (RFD) in the early twentieth century dramatically increased the frequency with which rural voters received information. This paper examines the effect of RFD on voters’ and Representatives’ behavior using a panel dataset and instrumental variables. Communities receiving more routes experienced higher voter turnout and spread their votes to more parties. RFD shifted positions taken by Representatives to ones in line with rural communities, including increasing support for pro-temperance and anti-immigration policies. Our results are stronger in counties with newspapers, supporting the hypothesis that information flows play a crucial role in the political process
Her blog is here.
Since I am really not well versed on Greek finances, I’ve been looking at the numbers. The bottom line is that debt forgiveness will help the Greeks, but not by a whole lot this year. They just do not have a lot of money to spend.
Greece needs to make interest payments of 2.9% of GDP in 2015, assuming zero growth. It also needs to make principal payments worth 8.6% of GDP. Greece will receive payments from the ECB via the Outright Monetary Transactions program (formerly the Securities Market Programme) worth 2.2% of GDP.
Upshot: unless there is growth in tax revenues (good luck) the country will have only 0.5% of GDP to use for stimulus. (1.2% primary surplus + 2.2% from the ECB − 2.9% interest = 0.5% total balance.) That assumes that all of its principal due is rolled over or refinanced.
On the other hand, the Greeks still do not have a whole lot of room for manuever. A full default would net them only 1.2% of GDP and even that would depend on default being orderly. Moreover, their primary surplus jumps around a lot, so they will still need a lot of short term borrowing to keep the lights on.
In numerical terms, the whole battle is over 0.7% of Greece’s GDP.
Of course, that isn’t really the battle. The Greeks want two things (1) independence from Brussels/Frankfurt/Berlin and (2) avoiding the further spending cuts and tax hikes that the troika wants for this year. Much more austerity would be needed to hit the 3.0% primary surplus the troika demands for 2015.
It would seem to me that it would not be terribly hard for the Germans Europeans to relax the austerity targets for this year and next. No need for write-downs or anything that would disturb a cranky German voter. In fact, it would seem to be easy to concede 0.7% of GDP to the Greeks in a way designed to avoid offending German sensibilities. But instead we are in full fire drill mode. Why? Is the answer really only that the Greeks have been too loud about asking?
Somehow I doubt that China will replace its imports from Europe and the Middle East with imports from the east coast of the Americas. I also doubt that in any realistic scenario export channels to the east coast of the United States (where Nicaragua and Suez really are substitutes) would be disrupted enough to make it worth the cost.
But who knows? Like I said, the only way this thing gets built is if China backs it with sovereign wealth. Maybe they will risk it.
In line with our post speculating about reasons for the Chinese government to back a Nicaragua Canals, comes a thesis by an Argentine air force colonel that tries to quantify the costs to world trade from interdicting various naval choke points. Since he lacked actual point-to-point trade volumes, he was forced to estimate volumes based on data from country-to-country trade flows. I am not clear what sorts of biases that introduces. He also assumed a cost per ton-mile of 0.2¢, which is rather low. (See page 18.)
That said, his estimate of the annual cost from closing the straits of Malacca, Sunda and Lombok (e.g., a complete blockade of all traffic through Indonesian waters) comes to about $10.5 billion. Shutting down the Bab-el Mandeb (the strait between Djibouti and Yemen) would cost about $13.4 billion. It is not clear what percentage of that would fall on Chinese consumers, producers or shippers.
Let’s pull a number out of the sky and say that half the cost would fall on China one-way-or-another. Is a $50 billion canal in Nicaragua worth it as insurance? 30-year U.S. treasuries are yielding about 2.6%. Assuming that the canal comes in at cost and hits its projections it should be able to earn that through 2045. In that sense, maybe building it would have no opportunity cost, assuming that the money would have been otherwise plonked into American federal debt. The Gran Canal is still a terrible business proposition, but it would make cheap insurance against a possible $5.2 billion loss if Indonesia goes up in flames or some terrible conflict erupts across the Indian Ocean.
Only ... there is still no sign of official Chinese backing for the Canal Rojo!
Am I succeeding?
It appears that the recent attempt at Greek financial diplomacy did not go well. The link is to Wolfgang Münchau writing that the crisis is coming to a head. Münchau lists four options for Greece:
This all made sense, until I went to the Greek ministry of finance and pulled up monthly data on revenues and expenditures, not including interest or debt repayments. Here you have it, for all levels of the Greek government, including municipalities:
When Münchau writes that the money will not be “enough,” what does he mean? It certainly won’t be enough to make the country’s debt repayments. But the figures graphed above indicate that it should be enough to cover its current spending.
The solid line is the primary balance. It occasionally goes into the red, but it was positive for all of 2014, to the net tune of €2.2 billion. Greece has a smoothing problem, but unless these numbers are wrong it should be able to cover it easily through short-term borrowing. I have not been able to find data on the Greek government’s cash reserves. All I can tell you is that they went up by €0.9 billion in 2013 and down by €2.2 billion in 2014.
Now, the ECB may do what it can to prevent Greece from any short-term borrowing. And it may decide to deliberately wreck the Greek banking system. But from here it seems like Greece will only have to resort to option (4) if the European imperial authorities decide to take deliberate action to force it to do so.
Even if the parties involved can’t compromise on debt, it would be relatively easy to just let the Greeks default while letting them still have banks that function and a government that can pay its current bills. If that default then crashes the Greek economy, fine. So why all this threatening of additional sanctions that will serve only to push Greece out of the eurozone while costing the European government central bank a boatload of money?
The weird thing is that Greece doesn’t even want more money. It just wants an extension on loans that certainly won’t repay if the Germans Europeans unload on them with both barrels.
My initial guess would be that this is just bad public diplomacy on the Greeks’ part. They could have tried to frame the issue in a way that Merkel could accept without enraging the more irrational parts of her electorate.
But that guess assumes that the Germans would have been willing to make the obvious compromise that leaves everyone better off. I am not sure that assumption is correct. I therefore implore my co-blogger to write a post explaining what in the name of Mary is going on, because this all looks eminently super-easy to resolve to the satisfaction of all parties. Help?
ADDENDUM: One very perspicacious view can be found here. In this view, the Europeans won’t destroy the Greek banking system. Rather, they will inflict just enough pain to make the Greeks suffer for their inevitable default and debt write-down, but not so much that they leave the eurozone. The success of such a plan, of course, depends on Greece being able to pay its current expenditure. It also, if I understand it, involves the Greeks not paying their current debts. So I am still unclear as to what is gained, but it does seem like a plausible strategy. Go click the link.
He also lays out the obvious compromise here.
So, once again I call upon our co-blogger to explain why the obvious compromise does not seem to have the backing of the imperial leader of Europe chancellor of Germany.
I do not think the Canal Rojo will be built. It makes no commercial sense. Most independent observers concur. Here, for example, is an article from the South China Morning Post, in which Andy Lane arrives at the same conclusion using different data. Mr. Lane has another good analysis here which doesn’t quite pan the project, but certainly leads towards skepticism.
All that said, I would like it to be built! Simply because it would be cool. But that will only happen if the government of the People’s Republic of China wants it to happen.*
So why might the government of the People’s Republic of China want it to happen?
Well, consider what China might gain from a Nicaragua Canal. Right now, it is nearly a wash between using Panama and using Suez from the East Coast of the U.S. to southern Chinese ports. Using Suez, however, also means going through the South China Sea. Most scenarios in which the South China Sea was closed to shipping would likely also involve fighting around the First Island Chain ... but not all. (An Indonesian collapse? A war with India?) And there are multiple scenarios in which Suez might be closed. A Nicaraguan Canal would provide an insurance route for cargoes to and from the east coasts of North America and Brazil.
The problem? An expanded Panama Canal would do the same thing at lower cost. Remember: there is no way on God’s green earth that China could use the Nicaragua Canal in a situation in which Panama was closed to it. In addition, there would be political benefits to financing a second Panama Canal expansion over building a Nicaragua Canal. Financing a fourth set of Panamanian locks would set off some huffing among the usual suspects here in America, but serious observers (e.g., most plausible U.S. administrations) would be reassured by the fact that a Panama expansion would fall under the rubric of the Neutrality Treaty. Which means a greatly reduced chance of antagonizing Washington. Moreover, another Panama Canal expansion would be uncontentious in Panama ... the same cannot be said of the Gran Canal project in Nicaragua. In other words, all the security gains at less financial cost and less political risk.
In fact, Chinese companies in August of last year broached the possibility of financing a new Panamanian expansion.
There is a second possible reason to build a Nicaragua Canal. Note that Lane does not think that the new canal will lead to price competition with Panama. His logic, however, assumes that the Nicaragua Canal is run as a business. Perhaps China does not plan to run the Canal Rojo as a money-making operation at all. Rather, it could run it as a piece of necessary public infrastructure, operating at cost. In that scenario, a price war with the Panama Canal leading to HKND’s bankruptcy would be a feature, not a bug.
The problem with the second reason? Well, for China to want to do that, it would need to believe that the rates charged by the Panama Canal are a significant drag on commerce. There is not a lot of evidence for that proposition. Would reducing canal tariffs really cause Chinese consumers to buy much more raw material from the east coast of South America or prompt Chinese producers to sell many more goods to the east coast of North America? I have my doubts.
Moreover, how would China insure that its commerce captured the lion’s share of the gains from the Nicaragua Canal? As Carlos Yu and I showed in our book, when the United States tried to give preference to its own ships in the Panama Canal in 1912, British pressure forced the country to change tack. The only reason that the benefits of the Panama Canal went overwhelmingly to the United States during its first 25 years was that the Panama Canal overwhelmingly carried domestic traffic. Maybe China will be able to get away with favoring its commerce over other nations, but I doubt that too. Or maybe geography implies that most of the ships using a low-cost Nicaragua Canal will be carrying Chinese commerce. Maybe ... it would be a hell of a $50 billion bet.
That leaves you with a third possibility: the project would be the 2020s equivalent of the 1960s landing on the Moon. China would be metaphorically planting its flag on the American continent. Sure, the U.S. Navy would remain in complete control of the sea lanes and the People’s Republic would have no sovereignty. But the opening of the Canal Rojo would trumpet the end of America’s informal empire more than anything ...
... other than the actual end of America’s informal empire. Which will not (inasmuch as it survives) be altered in a any substantive way by this project. As stated above, the U.S. Navy will still control the Western Hemisphere. Moreover, I do not see how building this project would win China diplomatic gains in Latin America worth the $50 billion cost. Perhaps I underestimate the power of symbolism?
In short, the Chinese state would obtain at least three advantages from the construction of a money-losing Nicaragua Canal:**
Are those advantages enough for the Chinese government to lend billions of billions of dollars to an entreprise that will likely go bankrupt?
I have been tinkering with my mickey-mouse financial model for the Nicaragua Canal.
There is one way to make the Nicaragua Canal look like a decent investment: assume that it comes in on-time and on-budget (which we did) hits all its transit targets (which we did) and that the ships are all sized at the maximum possible (which we did) but also that the Nicaragua Canal will be able to raise average tolls at the same 6.8% rate that the Panama Canal has managed since the 1999 handover. If you believe that is possible, then you can manage a positive 6.1% return through 2030 and a respectable 12.2% return through 2040; breakeven happens in 2027.
Do I believe that is possible? No. Do I believe that equity investors would accept that return? No. Do I believe that with enough debt equity investors might be persuaded to that they could get an acceptable return? Uh ... maybe.
We come back to that whole government-involvement thing. The Nicaragua Canal will need a lot o low-cost debt to be viable even under the most heroic assumption. The project only flies if Beijing decides that it wants it to and is willing to back that up with government money. A whole lot of government money.
Stephen Kaplan is just down the metaphorical hall. I should ask him if he thinks the Chinese government would want to back this ... and if so, why. One colleague of mine suggested “colonization” as a goal of its own. Me, I don’t think the Chinese government thinks that way, at least not in this hemisphere. So I am back to thinking that this project isn’t going to happen.
I have no special insight into Chinese strategic thought. I have heard that it might be about secure access to Venezuelan oil or Trinidadian natural gas, but if I were in the Chinese leadership I would not think building the Canal Rojo a sensible way to attain that goal. Is there any Chinese strategic question to which the Nicaragua Canal is the answer?
By now I suspect anyone reading this is well aware of the Nisman saga in Argentina. For those of you who are not, Chris Hayes had a pretty good synopsis:
But that isn’t the weirdest thing. Nor are President Fernández’s weird rambling Facebook posts the weirdest thing. Not even her bizarre tweets are the weirdest thing. No, the weirdest thing, if correct, is a story for which I have not been able to find corroboration. According to Mercopress, when the House Foreign Affairs Committee announced that it would send a group of low-level staffers to Argentina to find out what the hell was going on, Ambassador Cecilia Nahon delivered an angry message saying: “Argentina will not tolerate any United States intervention in the investigation of prosecutor Alberto Nisman’s death, and will consider any attempt as an interference in the country’s domestic affairs and a violation of Argentine sovereignty.”
If true, and I am not yet sure that it is, that would be an incredibly dumb response to a pro-forma investigation by a House committee. It makes it sound like they are worried. But if they are, then they should not show that they are.
But then again, this is the administration of the president that publicly mocked the accents of her Chinese hosts when trying to whomp up investment from that country. So who knows? The political incompetence is interesting to watch ... but I have the luck to not be Argentine. I suspect I would feel more strongly about it if I were; there is a reason why the apocryphal Chinese curse is considered a curse.
Many have speculated that drought set off the Syrian Civil War. We presented some evidence from Mexican history that supports the hypothesis ... but we also showed that the Mexican results were highly sensitive to how you defined “revolutionary activity.”
Is there more evidence that drought causes unrest?
Does the same pattern hold in modern Francophone West Africa? No! First, they find some correlation for rainfall but none for temperature. In fact, for temperature the effect is sometimes reversed. Second, it no longer matters whether the area was part of a 19th-century kingdom; that part of the past really does seem to be past.
I am not sure if the results have a direct application to Syria. The Syrian drought does appear to have been record-breaking; the West African shocks are not of the same magnitude. But they do imply that the correlation between unrest and drought is not one-to-one. They also provide a useful corrective to the recent spate of articles that in effect argue that history matters once: history matters, a lot, but its effects are not permanent.
The zero-bound is a situation where nominal interest rates hit, well, zero. In theory, they cannot then be lowered any further. After all, why would someone lose money by depositing their wealth into an account that shrank over time when they could just hold cash?
Well, it turns out that there are some reasons. Interest rates are turning negative in Europe. Holding cash has a cost.
The higher that cost, the more people will be forced into the financial system. So how can we make it really high? Well, you could ban cash, but that’s draconian.
Our suggestion? Abolish paper money. Make the largest denomination a $10 coin, weighing a full ounce. (That would be about 28 times the weight of a $10 bill.) That would $100,000 weigh about three tons. You could still store cash in your basement, but it would be hard.
Of course, eventually someone would start to allow you to deposit coins with them and write drafts against the coin piles. Oh, wait, there already is an institution that does that ...
There has been a lot of worry that the increasingly penurious Venezuelan government may cancel the Petrocaribe program that helps Caribbean nations (and El Salvador) buy Venezuelan oil. The fear is that fragile Caribbean economies will collapse if Caracas withdraws its support.
I think these worries are misplaced.
Petrocaribe finances Caribbean oil purchases on a sliding scale. When the price is between $30 and $40 per barrel, it will finance 25% of the purchase price. When the price is $90 per barrel (as it was back in July), Petrocaribe finances 40% of the purchase price. The terms are laid out in Article IV the Petrocaribe Cooperation Agreement.
Upshot: the price of Venezuelan oil is currently $39 per barrel with no subsidy. Six months ago, Caribbean countries had to shell out $59 in cash for a barrel of oil valued a hair below $99. It is true that if Petrocaribe holds the Caribbean countries will have to stump only $29 in cash ... but at the end of the day, $39 < $59.
Meaning that even if Venezuela abandons its Bolivarian ideals and dumps its Caribbean allies, the Caribbean countries will still be better off than they were last year.
The new EIA projections show that even with falling rig counts, production will stay high. They have a great chart attached:
It is hard to see, but the new wells have very high depletion rates. Consider the dark brown band: wells that will be drilled in the first quarter of this year. Their production is estimated to fall by 54% in their first year and then another 38% in their second, for a total two-year decline of 71%. Yet production is still expected to rise, because we are getting much better at drilling: initial production is going up. Consider the Bakken in North Dakota:
Or the Eagle Ford in South Texas:
Or my favorite, the Permian in West Texas:
Of course, rig counts could go lower. How low would they need to go? Well, once again the indispensable bureaucrats at the EIA have done the work:
In other words, we have a long way to go before American production starts to fall. You heard it here.
And let me say that if I know this, then the very good technical people at Saudi Aramco also know this! Saudi oil strategy is not about trying to kill American unconventional production, no matter how much they head fake. It is, as we said here, about trying to kill substitutes for oil, including conservation.
And I am gratified to see that story make the front page of the Washington Post today!
The Nicaragua Canal project is a little crazy. I’ve been canoodling around with some numbers and I just can’t make it work.
The project is estimated to cost $50 billion. According to HKND, the Red Canal will have an average bottom width of 280 meters. (Page 5.) That is only enough for one-way traffic. (Page 8.) Given the amount of time that it will take ships to pass through the two three-chambered locks, that means about 14 transits per day. (Page 72.) That is reasonable. 14 transits per day means 103 minutes for a ship to transit one set of locks. (Only one ship can through the locks at once, but there can be a ship in both the Brito and Camilo locks at the same time.) The new Panama Canal lock chambers are designed to take about ten minutes to fill or empty; call it an hour then for each transit, plus 40 minutes to enter and leave.
OK, then. In 2020, HKND expects 3,576 transits, rising to 4,138 by 2030. (Also page 72.) That’s about a third of the roughly 12,000 recorded by the Panama Canal. So it is certainly a plausible number.
In 2012, the Panama Canal collected approximately $160,000 in tolls per transit, or $5.67 per ton. (Eight dollars for container ships, around five for reefers, and roughly four for tankers and dry bulk.) The new Nicaragua Canal is intended to handle ships of up to 18,000 TEU; ships on the current Panama Canal is limited to around 5,000. (The expansion will take that up to 13,000.)
If you ever wondered what a Panamax container ship looked like going through the Miraflores locks, well there’s one right behind me in the picture up there. That’s a ship, not a warehouse. Yes, the current locks are a tight fit.
Now imagine one three times the size.
So let’s calculate a ridiculous upper bound for the Nicaragua Canal. Assume that all the container vessels are at the maximum size for the new passageway. At the current rates charged by the Panama Canal, that’s $1.4 million per container transit. Then assume that all other vessels (save tankers) are equivalently oversized. That gets you about $500,000 per dry bulk transit and $1.1 million for vehicle carriers. We’ll further assume that all the “other” vessels in the HKND report are vehicle carriers. For crude oil, imagine that everything is a ULCC with almost 7× the capacity of a Panamax tanker. Ditto the LNG ships. Refined products, on the other hand, are currently shipped in Panamax-sized vessels, so even in this silly projection we’ll leave them the same.
And opex? Well, huh. I’ll take current Panama Canal costs and divide ‘em by the ratio of projected Nicaragua Canal traffic to current Panama Canal traffic. That does not, of course, make sense, but it is a lower bound. (And one that comes to $75,000 for each of the Nicaragua Canal’s projected 3700 permanent employees; a ridiculous number by any standard.)
What do we get? A real internal rate of return through 2030 of negative 1.8%. If you take it out to 2040, then you can eke out 4.1%. A steely investor willing to bet against global war, the Singularity, and the chance that climate change will open the Northwest Passage could get 5.6% through 2050.
If this thing gets built, it will not be to generate profits for shareholders. Rather, it will be because the Chinese government sees some sort of security benefit. But other than, I dunno, access to the natural gas that the United States is not going to export in large amounts I could not tell you what that might be.
The U.K. goes a little bit further than the United States in letting people use its courts against foreign sovereigns. The basic law is laid out in the State Immunity Act of 1978. First, the British law does not require that any state-owned property must have some sort of economic connection with the activity that gave rise the underlying claim. (E.g., there is no equivalent of Section 1610(a)(2) in the British law.)
Second, in general it is a little easier to “pierce the corporate veil” and go after the assets of state-owned companies. For example, 2006 a British company went after the Congolese Republic for unpaid debts. The Congolese government tried to sell oil through the state0owned Société Nationale des Pétroles du Congo (SNPC), which then sold it through a web of holdings. The British courts held that SNPC was an “organ of state” because:
Other than maybe the first half of the third clause, that would certainly apply to PDVSA.
Now, that case did not involve sovereign debt per se, but a similar one did in 2005. That year, a British vulture fund managed to grab the revenues from Congolese oil sales. Now, the Congolese had done a good job of protecting themselves. SNPC established a subsidiary, Cotrade. Cotrade sold oil to the Africa Oil & Gas Corporation (AOGC), incorporated in Canada. AOGC then sold the oil to a company called Sphynx, which in turn sold it to Glencore. The vulture fund successfully intercepted the money that Glencore owed Sphynx by arguing that SNPC and Cotrade had no independent existence from the Congolese state and AOGC was nothing more than a convenient front. (This is the best link for the story.) That seems rather more direct than what happened in Texas!
Now, to be fair, a similar attempt to go after a joint venture part-owned by the government of the Democratic Republic of the Congo failed in 2012. So while easier than in America, it is not a sure thing.
Finally, there is the global Mareva injunction. British courts can freeze assets in advance of a judgment. No sneaking things out of the country here!
I AM NOT A LAWYER! I have no idea how difficult it would be to wield these tools against Venezuela in the advent of a default. I kinda think it would be hard, since the bonds were issued under New York law and Citgo assets are in the United States. But Mareva injunctions can be global. So I suspect U.K. courts will play a role in whatever happens.
Which will be default --> legal mess --> restructuring. Hold on to your hats.
If PDVSA defaults on its debts, then yes. It would be a standard commercial dispute. Once a court made its final ruling, U.S. officials would seize Citgo shares, sell them, and give the proceeds to the creditors after deducting expenses and taxes.
But if the Bolivarian Republic defaults, not PDVSA, then it gets harder. Let’s say I own shares in a company and I default on my debts. Creditors can go after my shares in the company, but they cannot go after the company’s assets. This is true even if I am the only shareholder in the company. (Limited liability goes both ways.)
This principle applies to companies owned by foreign states. An official House of Representatives report (see footnote 185 on page 196) bluntly stated: “Section 1610(b) [of the Foreign Sovereign Immunities Act of 1976] will not permit execution against the property of one agency or instrumentality to satisfy a judgment against another, unrelated agency or instrumentality. There are compelling reasons for this. If U.S. law did not respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions between different U.S. corporations or between a U.S. corporation and its independent subsidiary.”
So far, so clear. Citgo is safe from creditors of the Venezuelan government.
But here’s the thing: I can’t hide from creditors by creating a separate me-controlled firm and transferring my assets to it. In the words of the Supreme Court, “where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, we have held that one may be held liable for the actions of the other.” Morever, there is a “broader equitable principle that the doctrine of corporate entity, recognized generally and for most purposes, will not be regarded when to do so would work fraud or injustice.”
In 1983, the Supreme Court specifically extended that principle to foreign state-owned entities in First National City Bank v. Banco para el Comercio Exterior de Cuba (Bancec).
Here’s the backstory. In 1960, Bancec arranged to sell some Cuban sugar to a Canadian company. Citibank issued a letter of credit to Bancec for the sugar. Bancec handed it to the Cuban central bank (the Banco Nacional) for collection. On September 15, 1960, the Banco Nacional presented the letter to Citibank. The next day, the Cuban government nationalized all Citibank branches. (This was remarkably poor timing.) Citibank, not surprisingly, did not pay Bancec. Bancec sued in the Southern District of New York. The Cubans let the claim sit around until 1975. When they picked it again, they argued that Bancec was an independent state-owned company; why should it be liable the Cuban government’s actions?
The case went all the way up to the Supreme Court. The Supreme Court upheld the lower court ruling: “Bancec is not a mere private corporation, the stock of which is owned by the Cuban government, but an agency of the Cuban government in the conduct of the sort of matters which even in a country characterized by private capitalism, tend to be supervised and managed by government. Where the equities are so strong in favor of the counter-claiming defendants, as they are in this case, the Court should recognize the practicalities of the transactions. . . . The Court concludes that Bancec is an alter ego of the Cuban government.”
Alright, then. Easy! It might be impossible to seize Citgo assets because Citgo is clearly not an agent of Caracas, but it might be possible to take Citgo shares away from PDVSA. After all, it would not be hard to argue that PDVSA has not been an independent commercial entity since 2002.
So I ran this past a lawyer friend of mine who works on this stuff.
And ... oh boy ... PDVSA does not own Citgo directly. It owns it through PDV America Inc which is in turn a subsidiary of PDV Holding Inc, both incorporated in Delaware. And those two companies are not legally beholden to PDVSA.
So now you have to show that PDVSA has no independence and that PDV Holding Inc and PDV America Inc have no independence. That ain’t so easy. In short, Lex is too sanguine about the prospects for seizing Citgo. It could happen, and my lawyer friends think it will happen ... but only after a long delay.
But there’s another problem! Venezuela has ICSID judgments against it. Unless Venezuela pays them, then ExxonMobil and ConocoPhillips will be sniffing around those assets. Their claims rank higher than claims by bondholders, since uncompensated expropriation, unlike default, involves a clear denial of justice.
In short, you have a mess. Sure, the fact that Citgo is there will make the Bolivarian Republic think six times about defaulting. But the economic mismanagement in that country is of such a scale (sorry, Shah8
☺) that Caracas no longer really has any other options.
Now, creditors have another recourse.
The creditors could go after Venezuelan oil exports directly. There is a recent history of this. In 2007, Texas courts ordered American companies to turn over not only royalties but also physical oil due the Congolese Republic. (See here and here; the decision itself is here.) Now the legal approach used in Texas did not have legs. But to be fair, the suits were quite different than the suits that might happen regarding Venezuela.
The Venezuelans could sell their oil at the point of embarkation and try to hide it, but that opens up foreign refineries to lawsuits. With the world awash in oil, many will be behooved to avoid going anywhere near the Venezuelan stuff.
So here is the upshot: a default will cause much pain in Venezuela but it will not make creditors whole. Having Citgo as a target does not cancel out all the problems with legal enforcement of sovereign debt because even if the creditors win it will take forever and a day to collect. But because of the legal challenges to oil sales, default be a big enough disaster for Venezuela that the country will likely make an offer that 75% of its creditors will accept. They will then abandon any attempts to go after Citgo.
Given what Venezuelan bonds are yielding, I’m tempted to buy them. How bad could the restructuring be?
Or not. There are some numbers in the second link. At first you’ll see a claim of $4,800 for a 2,100 square foot house. That is ... hard to believe. It is also contradicted later on in the same article, where they claim a total construction cost of $161,000. So the $4,800 is probably the cost of the printed construction materials.
$4,800 is not a dramatic decrease in materials cost. In South Florida, your typical concrete construction costs about $6 per square foot of living space. (That is not the cost of the poured concrete; it’s the cost of the concrete needed for the walls in a house of that size.) That comes to about $12,000 in total. Now, $4,800 is less than $12,000, but it isn’t clear how much of that reduction is due to the technology and how much is due to other things. Consider that in California, concrete walls cost about $11 per square foot of interior space: almost twice their Floridian cost! Building codes matter a lot. I suspect that a Miami builder could halve their costs if they built to Shanghai standards.
The article reports a “total cost” of $161,000 further down, which is a far-from-revolutionary $74 per square foot. And it isn’t clear if that’s the total construction cost or just the cost of the printing materials when you make the correct all-in calculation, although given cheap labor in China I would guess the former.
I think this is either a publicity stunt or a marginal improvement. Maybe both.
Saudi Arabia wants oil prices to remain low for a while. The reason is that they hope to avoid demand destruction. A period of low prices could set back attempts to switch away from oil. The reason for the could is that such an effect is not inevitable. It will only happen if (a) regulators ease up on efficiency requirements; (b) consumers believe that prices will stay low forever and start making long-term wasteful investments.
I would not read too much into that last; these numbers are noisy. And I suspect that the EPA will hold firm to the new standards. (Current law requires the agency to review the 54.5 mpg-by-2025 mandate over 2016-18.)
But it is worrisome.
In this case, I mean that quite literally. The planned route of the Canal Rojo appears to have taken a small twist in response to either local opposition or ecological concerns, take your pick. The announcement came last Saturday in an almost offhand manner, with no details.
Here is a close-up of the original route, as stated by HKND. El Tule is the town that protested vociferously. The blue-striped area is a Ramsar-designated wetland. (Ramsar is a U.N. convention that protects wetlands; negotiations finished in 1971 and the convention came into force in 1975.) The brown-striped areas are where HKND intends to dump material from the canal excavation.
On January 15th, a Ramsar delegation arrived to study the effect of the Canal on the San Miguelito wetlands, which would seem an odd thing to do if the Canal was now expected to bypass them. (Here is a link to the July 2014 presentation by ERM, which confirms the above route ... and says that HKND intends to consult with Ramsar over compensation for the wetlands, not over how to avoid them.) Below is a map from Nicaragua Dispatch showing the new dog-leg in the route, although I am not sure where they got it from.
It all seems a little ad hoc for a $50 billion project that has supposedly already started.
I am late to the party here, but better late than never.
I am confused as to why there is so much talk of Grexit these days. For example, at the previous link, Tyler Cowen writes, “So I think Germany will play brinksmanship with Syriza and, when the time comes, simply pull the plug and leave them high and dry.”
But what does it mean to “pull the plug ”on the Republic of Greece? Let’s say Alexis Tsipras is elected Prime Minister and promptly proceeds to tell all foreign creditors (save the IMF) to get stuffed. He would certainly lose access to foreign credit ... but the Greek government is running a primary budget surplus, so why would he care?
More concretely, according to the IMF (page 45), in 2015 will Greece run a budget deficit of €3.5 bilion, but it will have to make interest payments on its debts of €9.1 billion. Eliminate those interest payments, and the Greek government will not have to a borrow a dime, save for very-short term expenditure smoothing. Of that €9.1 billion, only €743 million is due the IMF, so as long as the IMF agrees to roll over its debt then Greece can remain in that organization’s good graces while stiffing everyone else, public or private.
(Our hypothetical radical Tsipras government, if it were smart, would issue special instruments to the banks to enable them to continue to collect interest on their holdings of government debt.)
So Angela Merkel cannot muscle Greece by threatening to deny new credit. What else? Well, Greek banks need support from the ECB. Well, if I understand these procedures correctly, the governing council of the ECB would need a ⅔rds supermajority to cut off the Greek banks from emergency liquidity assistance. Could the Germans muster a ⅔rds supermajority? I am having trouble seeing how.
Moreover, cutting off the Greek banks would generate huge losses for the ECB. It has lent about €44 billion to Greek banks and the Greek central bank owes the rest of the Eurosystem around €38 billion. Sure, as far as I can tell those losses would have no economic meaning ... but we’ve got ample evidence these days that European policymakers, elected and otherwise, put great stock in avoiding them.
Add to that the systemic risk of letting the Greek financial system go down the tubes, and it is really hard to imagine that particular plug being pulled.
Note that the Greeks will almost certainly not default in the big bang described here. But even if they did, I do not see what the Germans could do to force them out of the eurozone. The Greek government might choose to leave, of course, but that is a different issue.
So what am I missing? Help!
Courtesy of Randy McDonald, the International Astronomical Union is organizing a contest to name exoplanets and the stars they orbit.
A long time ago, when my friend JKR and I were thinking about these things, it seemed obvious that habitable planets discovered by Americans would be named after famous fictional worlds: Barsoom, Krypton, Trantor, Vulcan, Coruscant, Tatooine. (Did I miss any, JKR?)
Are any of those under copyright? If they are, then the IAU rules will prevent using them.
I still think that the first planet we discover with an oxygen-rich atmosphere that is not a water world should be named Barsoom. I mean, obviously. So please, do not vote for Barsoom until we know.
As mentioned in my last post, Dave Evans of Georgia took issue with my characterization of the Confederate flag as the “slaveowning banner.”
I should point out that Mr. Evans isn’t alone in thinking this. Even comparatively-normal Texas has this completely backwards monument to the Southern Confederacy on the lawn of the Capitol. “Confederate dead,” it says, “Died for state rights guaranteed under the Constitution. The people of the South, animated by the spirit of 1776, to preserve their rights, withdrew from the federal compact in 1861. The North resorted to coercion. The South, against overwhelming numbers and resources, fought until exhausted.”
So it is a common belief that the war was about something other than preserving the abomination of slavery. But Mr. Evans presents one of the silliest possible arguments in favor of that proposition. Over to him:
If it really had been “all about” slavery then why did Lincoln endorse and get the Northern dominated Congress to pass the Corwin Amendment which would have enshrined slavery in the US constitution making it irrevocable? Why did the original 7 seceding states not readily agree to re-enter the union with irrevocable slavery protected by the US Constitution?
The Corwin Amendment was a strange constitutional amendment that made it out of Congress in the dying days of the Buchanan Administration. A last ditch effort to prevent secession, it banned any future constitutional amendments to alter slavery: “No amendment shall be made to the Constitution which will authorize or give to Congress the power to abolish or interfere, within any state, with the domestic institutions thereof, including that of persons held to labor or service by the laws of said state.”
It was strongly backed by William Seward and President-elect Lincoln endorsed it in a letter. Why would they do that if they hated slavery?
Simple: they knew the Corwin Amendment would be toothless. In 1861 there were 15 slave states. That was enough to do a pretty good job of preventing any anti-slavery amendments to the Constitution, at least until the number of free states hit 45 ... which was not going to happen anytime soon. (There were 19 free states at the beginning of the war.) Even you think that Delaware and Maryland were going to abolish slavery in the immediate future, then the abomination of slavery would still be safe from constitutional amendments until the number of free states reached 39, even without the Corwin Amendment.
In other words, the Corwin amendment was complete bullshit. It prevented Congress and the states from doing what the current constitutional set-up already prevented them from doing. Devoted abolitionists knew that they were giving away precisely nothing by endorsing it. What it was, was a political Hail Mary pass ... maybe the secessionists would be dumb enough to be conciliated, even though it did nothing to guarantee the expansion of slavery and it did nothing to prevent Congress and the free states from continuing to whittle away at forced labor short of changing the Constitution.
The South did not fall for it.
There was a real “compromise” proposal out there that would have satisfied the South: the Crittenden compromise. It allowed for the expansion of slavery and insured that escaped slaves would not become automatically free in the North. The Republicans were not having any of that. So it foundered.
Note what nobody offered to try to make peace: a deal to reduce tariffs. Not even an agreement to, say, turn over tariff revenues to state governments rather than fund internal improvements. That is because secession had nothing to do with trade policy or infrastructure spending.
I doubt that much of this is new, although most of the easily accessible stuff fails to point out why the Corwin Amendment conceded nothing to the South. So I hope that I have added at least a little value. If not, enjoy the pictures of Austin!
Further thoughts always welcome.