The case on which the CCJ ruled goes back to 21 December 2018, when in an extraordinary effort to survive a no-confidence motion and remain in power, Guyanese President David Granger attempted to legally redefine how a valid majority of votes in the 65-seat Guyanese Parliament should be calculated, raising the threshold from 33 votes to 34, which would allow his party to dismiss the results of the body’s 33-32 no-confidence vote that went against them.
The case had gone to the CCJ after a judicial panel in Guyana ruled in favor of the government’s bad math.
The President of the Caribbean Court of Justice (CCJ), the Honorable Mr. Justice Adrian Saunders, delivered the opinion of the court regarding the no-confidence vote held in the Guyanese Parliament on December 21, 2018, which the court held to be valid under the Constitution of Guyana. The Court’s decision upholds the decision of the Speaker of the National Assembly, Dr. Barton Scotland that the motion was carried by a majority of 33 votes. The contention between the parties was whether 33 or 34 votes constituted a majority. The Attorney General, Mr. Basil Williams, contended that the formula for achieving a majority, as like in other Parliamentary systems with an odd number of representatives, that the majority constitutes one half of the members plus one, which would hold that 34 votes are required to form a majority….
The resulting no-confidence vote by a majority of the 65 member National Assembly against the coalition government requires the government, including the President and his cabinet, to resign immediately and to hold new elections within three months.
The ruling party’s position depended upon erroneously applying the order of operations from mathematics. In a 29 March 2019 letter to the Guyana Times, economics and statistics professor Dev Rawana explained why the lower judicial panel’s ruling was wrong:
The controversial Appeal Court’s ruling against the No Confidence Motion (NCM) resolves around the meaning of the word “majority” as intended by Article (106). No one in the Appellate disagrees that the greater number in the National Assembly constitutes a majority. The median or the 50th percentile of a set of numbers, by statistical and mathematical reasoning, is half the sum of all numbers plus one, or equivalently ½(n+1).
In the case of the fifty (52) Members of Parliament of the Republic of Vanuatu, one half of 53 (26.5) and then rounded up yield 27 as the majority. In the case of Guyana with 65 sitting Members of Parliament, one half 66 (65+1) is 33, the number that constitutes the majority as in the case of the Republic of Vanuatu.
However, in the Guyana case, the median was not applied. Instead, Chancellor Cummings-Edwards and Justice Gregory disaggregated the median formula into two overlapping stages to define the majority by taking one-half, rounded-up and then plus one to yield a majority of 34. This two-stage hybrid is mathematically and statistically flawed by international standards.
Why? In the first stage, the number is rounded-up, and again the rounded value is added to one to overstate the majority by one. Therefore, based on the median principles in determining the 50th percentile, 33 is the majority of 32 in the 65-Member Parliament; and, reflects the true effect of the constitution.
The correct application of the order of operations in calculating what constitutes a majority in the Guyanese Parliament that Professor Rawana describes is what the Caribbean Court of Justice upheld in its ruling confirming the success of the no-confidence motion. Guyana’s next government will now be determined by the outcome of elections to be held in the next three months.
via ZeroHedge News https://ift.tt/300oVHk Tyler Durden
The software at the heart of the Boeing 737 MAX crisis was developed at a time when the company was laying off experienced engineers and replacing them with temporary workers making as little as $9 per hour, according to Bloomberg.
In an effort to cut costs, Boeing was relying on subcontractors making paltry wages to develop and test its software. Often times, these subcontractors would be from countries lacking a deep background in aerospace, like India.
Boeing had recent college graduates working for Indian software developer HCL Technologies Ltd. in a building across from Seattle’s Boeing Field, in flight test groups supporting the MAX. The coders from HCL designed to specifications set by Boeing but, according to Mark Rabin, a former Boeing software engineer, “it was controversial because it was far less efficient than Boeing engineers just writing the code.”
Rabin said: “…it took many rounds going back and forth because the code was not done correctly.”
In addition to cutting costs, the hiring of Indian companies may have landed Boeing orders for the Indian military and commercial aircraft, like a $22 billion order received in January 2017. That order included 100 737 MAX 8 jets and was Boeing’s largest order ever from an Indian airline. India traditionally orders from Airbus.
HCL engineers helped develop and test the 737 MAX’s flight display software while employees from another Indian company, Cyient Ltd, handled the software for flight test equipment. In 2011, Boeing named Cyient, then known as Infotech, to a list of its “suppliers of the year”.
One HCL employee posted online: “Provided quick workaround to resolve production issue which resulted in not delaying flight test of 737-Max(delay in each flight test will cost very big amount for Boeing).”
But Boeing says the company didn’t rely on engineers from HCL for the Maneuvering Characteristics Augmentation System, which was linked to both last October’s crash and March’s crash. The company also says it didn’t rely on Indian companies for the cockpit warning light issue that was disclosed after the crashes.
A Boeing spokesperson said: “Boeing has many decades of experience working with supplier/partners around the world. Our primary focus is on always ensuring that our products and services are safe, of the highest quality and comply with all applicable regulations.”
HCL, on the other hand, said: “HCL has a strong and long-standing business relationship with The Boeing Company, and we take pride in the work we do for all our customers. However, HCL does not comment on specific work we do for our customers. HCL is not associated with any ongoing issues with 737 Max.”
Recent simulator tests run by the FAA indicate that software issues on the 737 MAX run deeper than first thought. Engineers who worked on the plane, which Boeing started developing eight years ago, complained of pressure from managers to limit changes that might introduce extra time or cost.
Rick Ludtke, a former Boeing flight controls engineer laid off in 2017, said: “Boeing was doing all kinds of things, everything you can imagine, to reduce cost, including moving work from Puget Sound, because we’d become very expensive here. All that’s very understandable if you think of it from a business perspective. Slowly over time it appears that’s eroded the ability for Puget Sound designers to design.”
Rabin even recalled an incident where senior software engineers were told they weren’t needed because Boeing’s productions were mature. Rabin said: “I was shocked that in a room full of a couple hundred mostly senior engineers we were being told that we weren’t needed.”
Any given jetliner is made up of millions of parts and millions of lines of code. Boeing has often turned over large portions of the work to suppliers and subcontractors that follow its blueprints. But beginning in 2004 with the 787 Dreamliner, Boeing sought to increase profits by providing high-level specs and then asking suppliers to design more parts themselves.
Boeing also promised to invest $1.7 billion in Indian companies as a result of an $11 billion order in 2005 from Air India. This investment helped HCL and other software developers.
For the 787, HCL offered a price to Boeing that they couldn’t refuse, either: free. HCL “took no up-front payments on the 787 and only started collecting payments based on sales years later”.
Rockwell Collins won the MAX contract for cockpit displays and relied in part on HCL engineers and contract engineers from Cyient to test flight test equipment.
Charles LoveJoy, a former flight-test instrumentation design engineer at the company, said: “We did have our challenges with the India team. They met the requirements, per se, but you could do it better.”
via ZeroHedge News https://ift.tt/2RI0ICx Tyler Durden
Coinbase went down. The price plummeted 25% and my blood pressure didn’t even move. I’ve been a gold and crypto guy so long ‘heart-stopping’ volatility is for other people.
That said, Bitcoin’s volatility is real and that’s because it is an asset in the process of becoming fully capitalized. It’s an asset that goes through the most extreme emotional roller coasters because it is also trading in immature and unregulated markets.
That volatility is used by some in the hard money/Austrian economics community to argue against Bitcoin and/or cryptocurrencies as potential money. But that is simply specious argumentation.
Sounding Off on Bitcoin
Bitcoin has all the attributes of a sound money like gold — scarce, hard to produce, property right is guaranteed, immune to counterfeiting — with the exception of it having its transaction history kept digitally.
Gold has no transaction history like Bitcoin. In fact, in that respect, blockchain-based digital assets have a clear history of title transfer. My only regret with Bitcoin is that Satoshi Nakamoto didn’t publish the white paper before Murray Rothbard died.
Because Rothbard would have loved Bitcoin. He would have seen, as I did, nearly immediately, that Bitcoin, while radical, was the answer to the limitations of gold as a reserve asset while still having most all of gold’s advantages.
I wrote this back in June 2010 about these “digits” that are as “good as gold.”
So, yes, digits, which I said I believe to be the future of money, sadly. But, these are digits whose movements are verified by hundreds of incentivized auditors 24/7/365. Hell, the FED won’t submit to a one-time audit by those for whom they supposedly work! Yet we are loath to stop using their product.
I see Bitcoin as a metaphor for the Web itself. It is what happens when people of common tastes are able to find each other over vast distance to find their niche in the division of labor. Synthesizing cryptography, programming and monetary theory into a unique offering could not have happened without the Web; itself that which subverts attempts at control as a natural consequence of its own structure. Any success Bitcoin enjoys exists as a means to an end (improving how humans interact via mutual exchange), not the end itself (adoption in the marketplace).
When I wrote that final point I never thought in a million years Bitcoin would be as successful as it has been. It’s light-years ahead of what I thought it could become.
The Enthusiastic Skeptic
I was skeptical about it even though I dabbled in the community from the very beginning. Believe me, I wish I had the courage of my initial intuitions.
So even when it became successful and I’d lost my initial stash of them I was never bitter about Bitcoin. When gold peaked in 2011 and then crashed in 2014, crushing any hope of a return to bull status until, literally this week, I wasn’t envious of the Bitcoin millionaires running around.
I’m just glad I woke up from my skepticism to see that the world grew up while I was lost in the desert for a few years.
That said, I’d like to believe I had a small hand in helping early adoption of it by forward-thinking Austrian economists to put it through the rigors of Mises’ Regression Theorem, which, to me, came easily.
The best book on the subject I’ve read is Saifedean Ammous’ The Bitcoin Standardand for those who still don’t get it, I recommend it highly. And none of this is to take anything away from gold as an asset.
You do note the title above the by-line right?
But given the digital world we live in we have to admit to ourselves that digital money is the future, even if that digital money is a tokenized form of physical gold. An economy that is capable of coordinating the actions and desires of people all over the world demands a money that is settled at the speed of light.
I don’t think anyone is in doubt about this. The question is who should be in control of the settlement? The Fed? SWIFT? The banks? All of these people have a fiduciary interest in protecting their businesses. All of them are corrupt to the core because all of them have access to the money spigot.
Flowers for Bitcoin
The analysis that gold is a cure for this is the correct one. But as Lew Rockwell taught me while working with me on the above article about Bitcoin (he made me rewrite the ending before publishing it), there is no one solution to any societal problem.
The phrase he uses is “Let a thousand flowers bloom.” In other words, because you see a solution doesn’t mean it has to be the solution. The implications for that statement are profound, by the way. They cut to the core of what is wrong with our politics.
Twenty people running for the Democratic nomination and all of them raised their hands about supporting Medicaid for illegal aliens.
“Yes we are all individuals!” (Life of Brian)
It reminds us to remain humble while searching for answers. Because while we may not have a good answer to a problem that doesn’t mean one 1) doesn’t exist or 2) hasn’t been found by someone else.
In my enthusiasm the first draft of that article had Bitcoin cast as the solution to the problem of central banks. Lew slowed my roll, and rightly so.
Because today even in cryptocurrency circles there is real dissension as to which coin will rule them all or what the right blockchain should look like.
The best answer is, as always, let the market decide.
The fact that there are thousands of cryptocurrencies out there and no less than a dozen high-quality projects looking to improve on Bitcoin’s original alpha code that went viral is proof positive of Lew’s initial insight.
The Dismal Science
That’s why I am still so taken aback by good Austrian economists who simply don’t get it. From my blog at Money and Markets:
Even if you hate Bitcoin with a purple passion you can’t ignore the fact that hands down over the past few years it has been one of the best performing assets in the world. Peak to peak or trough to trough analysis has Bitcoin at a twenty-bagger.
In late 2012 Bitcoin hit a high of $1093. In January 2018 it hit a high of just over $20000 on some exchanges. According to Investing.com’s Bitcoin Index, the January 2015 low was $157.30 and the December 2018 low was $3177.00.
Gold, by contrast, went on a seven-fold run from 2001 to 2011. Only the worst case of envy would have you still reflexively bearish on Bitcoin at this point especially as a hard-money advocate.
The idea that Bitcoin is just like gold is utter nonsense. Bitcoin is nothing like gold. It’s fool’s gold. There is not a single use case where Bitcoin can be used as a substitute for gold. Plus the gold price never falls by over 25% in less than 24 hours!
But, then again, there’s no cure for being Peter Schiff.
And that’s sad to say because a decade ago Schiff was someone I looked up to. Now he’s just another Wall St. punter wedded to his single solution, gold.
And he’s not alone in the Austrian community.
When you’ve wedded yourself to a particular idea long enough,gold, it’s easy to misread the changes staring you in the face. Technology changes the definition of money all the time. It is a constant of history.
And the thing about the free market is that it doesn’t care about your opinions or ‘muh fealz.’ It just does its thing, responding to the needs of the people who make it up.
The Money Choice
Bitcoin is an asset that is in the throes of the market exploring the limits of its capitalization.
It started at near zero and is now firmly above $10000. Could it go higher? Absolutely. Is it stealing some of gold’s thunder as a safe-haven asset? Resoundingly, yes.
Is that stealing some of Peter Schiff’s business? Oh, you betcha.
And I suspect that’s the real reason he hates it the way he does. He can see the writing on the wall. Gold will do well in this next bull market, but Bitcoin has already surpassed it and has the potential to do much better, if Dr. Ammous’ arguments in his book about the ratio of money supply to inflation rate are correct.
Schiff, to me, looks like the guy who built the perfect buggy in a world of the Model T and a great example of what Lew Rockwell cautioned me about nearly a decade ago.
The lesson here is don’t be that guy. There is nothing I’ve learned more forcefully from the market than the futility of my own arrogance. It’s why I advocate holding cash, gold and a basket of cryptos.
And it’s why I refuse to take seriously anyone who tells me there is only one solution to a problem.
As discussed previously, while the kneejerk reaction to the Trump-Xi ceasefire is that global markets will likely be positive, even as a formal trade deal remains elusive as ever, a more detailed take could lead to problems as now the Fed will feel far less pressure to ease in July, and since in June stocks exploded higher on hopes that Powell will cut rates as much as 50bps next month, a positive reversal in US-China relations could prevent Powell from capitulating and leave the Fed on hold, an outcome which would lead to a sharp risk off phase.
Does Wall Street agree with this assessment? Here, courtesy of Bloomberg, is how markets will likely react when they open on Monday, according to strategists and investors:
Mansoor Mohi-uddin, senior macro strategist at NatWest Markets in Singapore:
“Investor sentiment is set to be buoyed in the week ahead by a truce in the U.S.-China trade war.”
“Financial markets are unlikely to significantly reduce their expectations for Federal Reserve rate cuts despite global trade tensions easing. Thus risk assets — stocks, commodities and emerging markets — are set to rally while the safe-haven dollar, yen and Swiss franc underperform.”
Stephen Innes, managing partner at Vanguard Markets in Bangkok:
The “reset button” being hit on trade talks was the markets’ base-case scenario, and this is supportive for risk, but the lack of a timeline for progress may cap “bullish topside ambitions.”
“With no news reading algorithms to steamroll the markets on Saturday, traders will have a 36-hour cooling off period to quantify their next move. And I would expect the markets to be very orderly on Monday open.”
The extensive lists of demands from both sides may be “a bridge too far.”
“Underlying sentiment remains quite bearish in terms of the medium-term outlook for a U.S.-China trade deal as well the global growth outlook.”
Chris Weston, head of research at Pepperstone Financial in Melbourne:
“I can’t see this meeting doing risk assets any harm, but there is still a lot of work to do to convince central banks they don’t need to act to keep the economic expansion in check.”
“A few weak shorts may look to close out on Monday” given the tariff reprieve, prospects for negotiations to restart and that both sides “actually appear more united than expected.”
Watch Sunday’s China PMI data.
Alfonso Esparza, senior market analyst at Oanda in Toronto:
“Everybody played their part without any additional drama and until more details emerge we are back at square one.”
“Oil is positioned to rise after the positive trade news.”
“Gold will be pressured as trade optimism reduces the appeal of the yellow metal as a safe haven.”
Jean-Charles Sambor, deputy of head of emerging-market fixed income at BNP Paribas Asset Management in London:
“This is of course good. Investors have been generally negative on both the probability of a meeting and the probability of a positive outcome following this meeting.”
“High-yield spreads should do well. China high yield remains very cheap especially, and emerging-market currencies should continue to rally on the news.”
Banny Lam, head of research at CEB International Investment in Hong Kong:
The outcome is “exactly” what the market had expected so the impact will be neutral.
“I would say the G-20 summit delayed the escalation in trade tension, rather than solved the problem.”
The U.S. and China will probably want to reach a deal soon amid pressures on their economies, but it will be “very difficult.”
An instinctive free-trader, Boris Johnson, is almost certain to be elected as the next UK Prime Minister. His immediate mission will be to extricate the UK from the EU. If he does that successfully, his next task will be to stop and reverse the drift into socialism in Britain. If this is neglected, the prospect of a Marxist-led Labour Party forming a government will continue to grow. It will not be easy, but it can be done. He will have to take command of the free-market narrative and drive it away from state interference. It requires a clear political head informed by classical economics, not the Keynesian variety which has led us all to economic disaster. But first, he has to deliver Brexit.
Delivering Brexit
Leaving the EU will not be a slam-dunk. The Government’s permanent staff, comprised of civil servants who know nothing else, are with few exceptions convinced Remainers. They have demonstrated they find it unnatural to regard Brexit positively. For this reason, Johnson must surround himself with ministers who are firm Brexiteers to ensure the Cabinet’s resolve remains intact through the process, despite conflicting advice from senior civil servants. And into the run-up to the leaving date (31 October), he must put first and foremost the legal and democratic case for leaving, playing down EU trade fears. To put it in context, in 2017 exports of British goods to the EU at £164bn represented only 6.25% of GDP. Yes, that’s what Mrs May wasted three years arguing about.
Project Fear is over, Project Positive must follow. That way, public controversy on Brexit will diminish as the leaving date approaches, leaving diehard Remainers in Parliament isolated.
While Project Fear is still with us, it is being touted that Johnson’s Brexit government will face a vote of No Confidence. With a handful of Remainer rebels threatening to resign the Conservative whip if he is elected, the arithmetic for his survival looks tricky. However, there is nowhere for Remainers to go, as the abject failure of the Change Party clearly demonstrated. Furthermore, there are Brexiteers on the Labour benches likely to ignore the Labour whip. In any event, Labour would probably not want to face a general election so long as their northern seats are likely to be lost to Farage’s Brexit Party. Nor would they want to have an uncompleted Brexit to deal with.
Johnson is therefore likely to have some breathing space. He should be able to capitalise on his mandate, turning it into a momentum for a clean Brexit. With the agreement of the EU, the strategy is likely to involve a standstill arrangement in accordance with GATT Article XXIV, which will permit current free trade to continue with the EU while negotiations for a permanent free trade agreement to be agreed. Without the agreement of the EU to Article XXIV and in the event of No Deal, the preparations for it have been done on both sides anyway.
Following 31 October, Brexit will no longer be an issue, and a Johnson government will face a future without a clear majority. With or without a general election, the objective then should be to destabilise the Labour Party, which can only be done by undermining socialism itself. It will require clarity of purpose, and an understanding of why people vote for socialism. To seek a consensus, which has been the traditional one-nation Tory approach to government, has always led to more socialism. Socialist myths versus free market reality must now be tackled head-on, because the unchallenged politics of the far-left is gaining electoral traction.
This article identifies two key issues out of many. If both free trade and the abolition of inflationary financing are Johnson’s guiding stars, the rest will follow. There almost certainly will be a global credit crisis before these fundamental matters are resolved, but that must not deflect a Johnson administration from its purpose. Rather, such a crisis is proof these policies are desperately needed.
Unravelling the socialist myth
First, a future Prime Minister must have a clear understanding of his enemy, the socialist myth, why it fails, and why free markets succeed.
Successful societies all have one thing in common: the freedom of individuals to cooperate socially in the pursuit of their needs and desires. Uniquely in the animal world, the human race deploys individual skills to produce what others want, and those others reward the individual on the basis of his or her ability to do so. Despite his inferior physical characteristics compared with other animals, it is through specialisation, the division of labour, that the human race has become dominant. The key to human success is the ultimate democracy inherent in the division of labour. It means the customer is king and all economic effort is expended towards his satisfaction. Individual success is rewarded by the improvement in living conditions for all. It defines human progress.
Truly, it is proof that free-market competition is more successful than any form of consensus.
The full economic potential of a free society is hardly ever realised. Island states, such as Hong Kong and Singapore have achieved it, but in the larger nations the development of true economic liberalism reached its zenith in Britain following the repeal of the Corn Laws and eventually all other tariffs. The improvement in living standards for the British people was truly remarkable, and the subsequent accumulation of productive wealth was unprecedented.
In twentieth-century Britain, the success of free markets bred a peculiar form of envy, based on the erroneous idea that the accumulation of wealth was at the expense of the labouring classes. It also played to intellectual and middle-class guilt. In defiance of all the evidence, it was popularised by the followers of Karl Marx. This was the basis upon which the Labour Party became a force in British politics.
Karl Marx held that all property should be ceded to the state and the state should direct the employment of individuals and allocate the distribution of all production. The Labour party was guided by these principles, sworn to nationalise all industry, and is now resuscitating these defunct ideals.
In all forms of socialism, the state becomes the master of its people, instead of the democratic state being the servant and guarantor of a free society. This role-reversal is at the heart of the conflict in the Brexit debate, exposing British society as already enmeshed in statist chains. As the party whose mission has always been to protect personal property, the Conservative Party itself has been exposed as socialistic in all but name.
Socialism fails because it lacks the basis of economic calculation. Only free markets provide the means of establishing prices. With a knowledge of what sells and for how much an entrepreneur single-mindedly invests his resources in the production of tomorrow’s products. None of this hard-won skill is available to the socialising state. It has to refer to foreign capitalistic markets for guidance, in a tacit admission of failure.
Socialism is incapable of fostering progress, because it cannot exercise commercial judgement unfettered by non-commercial considerations. It is a monopoly becoming less efficient by the day. The state is only able to assume that what happened in the past will happen in the future. There is no room for progress in the state’s static calculations.
Progress is the defining feature of dynamic free markets. In socialism we observe the state removing productive resources from the individual by confiscating his property, and in free markets the individual in his own interests serves his fellow men to their greatest satisfaction. The baker bakes bread for the builder; the builder builds shelter for the tech entrepreneur; the tech entrepreneur provides the media for the baker and the builder to enjoy their leisure. The state simply cannot devise an economic role for itself by interposing in these transactions.
Public support for socialism is not based on reason, but emotion. It draws on Christian values and morality, in which a concern for the welfare of the common man is expressed. As a competitor to religion, socialism replaces the deity with the head of the state: this was Karl Marx’s creed, considering himself as the head of a unified world state and Engels as his enforcer. Christians were the useful idiots on the way to this godless nirvana.
By recruiting the masses with their Christian ethics, socialism abuses basic Christian decency, conflating religious morality with statist objectives. It plays on a comfort factor, offering an alternative to the perceived dangers of a free market jungle, while failing to mention that the alternative to rich variety is the waterless desert of socialism.
In combating socialism, a wise politician must understand the principles upon which it fails. Only then can he or she proceed with the potential for success. If we examine President Trump’s attempt to reverse the tide of socialism in America, the evidence suggests he has failed to grasp the fundamental qualities of free markets that must be preserved and enhanced. He appears to be guided more by his own beliefs and prejudices than he is by a rational understanding of free markets. He demonstrably fails to understand international trade and the importance of denying inflationary financing. He thinks that manipulating interest rates lower is an economic panacea. Trump is a statist.
If Boris Johnson is to succeed in “Making Britain Great Again” he must understand the fundamental differences between socialism and free markets. He must observe and learn from Trump’s errors to not fall into the traps Trump has set for himself. He must be guided by free market principles, despite the howls of outrage that will continue to be a feature of his premiership, just as they have been of Trump’s presidency. A nation is only successful despite its government.
Free markets thrive with free trade
Tariffs are a consumer tax, not a tax on foreign producers. They are protection for domestic producers against foreign competition. Consequently, a tariff regime makes domestic producers less competitive over time. The error is to associate a trade deficit with unfair competition. It is the result of a combination of monetary inflation and a lack of saving.
The EU has some 12,500 tariffs, protecting diverse EU-based producers. Dropping those on Brexit will give British consumers an immediate boost and producers will respond. It will not, as President Trump believes, lead to a surge in the trade deficit. That is a consequence of monetary inflation at the consumer level.
A politician who wishes to see a balance of trade in goods and services should introduce policies to favour increased savings and eliminate the budget deficit. Tariffs have no economic justification whatsoever. Though government revenue from tariffs is forgone by their abolition, the improvement in the economy from free trade more than makes up for its loss. That is the conclusion of properly thought-out economic theory and confirmed by empirical evidence. Both demonstrate that what is gained from the comparative advantage of buying goods and services from the most competitive supplier, irrespective of location, leads to the redeployment of uncompetitive production into other avenues for the greater benefit of society as a whole.
The theory of competitive advantage was convincingly proved through the abandonment of tariffs by the British Government in three steps: 1846, 1853 and 1860. Tariff-free trade drove the British economy enabling it to grow to dominate global trade. The standard of living for all Brits improved greatly. Furthermore, the British success encouraged much of Europe to adopt similar trade policies.
The freedom to trade without tariffs is the greatest legacy that Brexit offers. Only those who understand the benefits can prevail over the vested interests demanding continuing protectionism. Britain needs a reforming Robert Peel with a Churchillian determination.
Post-Brexit, it is anticipated that Britain will seek to secure trade deals, not only novating existing EU trade treaties, but entering into free trade agreements with the US, Commonwealth nations and others. That is a matter of practical politics, but by far the best economic solution is free trade without any agreements at all. That must be the end-objective.
Inflationary financing into an economic dead-end
Before Margaret Thatcher became Prime Minister in 1979, Britain’s epithet was the sick man of Europe. The preceding drift into ever-greater socialism was accompanied by monetary inflation, which was driven in part by unionised labour in nationalised industries striking, or threatening to do so, for wages which were uneconomic. The differences between cause and effect during periods of monetary inflation only serve to conceal the root of the problem, and that is inflationary financing.
Without any factual basis, central bankers claim that some price inflation is a good thing. They set an inflation target to aim at, commonly agreed at two per cent. There is no control over the expansion of money and credit, which is permitted to run riot, so long as the inflation target is not too obviously violated. But the fact remains that inflationary financing has become central to the state’s finances.
Since 2010, the UK’s government debt has increased by 59% of 2010’s GDP. This has been financed by the expansion of money and bank credit. While statisticians often argue that so long as government borrowing is financed by private sector savings, it is non-inflationary. But this argument ignores the fact, that if savings are diverted from their use in the private sector, the gap is filled, one way or another, by the expansion of bank credit. And as we should know, the expansion of bank credit is simply monetary inflation.
Therefore, the expansion of both bank credit and base money is a good measure of the degree of a government’s inflationary financing, and we can confidently conclude that the dilution of people’s money is far greater than suggested by government price inflation statistics.
This lack of apparent price inflation can only be for two reasons. Either statistics fail to reflect the degree of loss of purchasing power of the currency, or people have collectively increased their preferences for money over goods and services. But given the increase in consumer debt and the inability of eight out of ten British workers to survive between paydays without credit, it is hard to see that preferences for money relative to goods have actually increased.[i]
Monetary inflation is barely understood by the public, which is why governments love printing money. They don’t let on that monetary inflation dilutes everyone’s earnings and savings. Instead, they promote a belief in easy money and cheap credit for businesses so they can employ more people. And because, as Keynes put it, not one man in a million will detect the theft, monetary inflation is irresistible to spendthrift governments.[ii]
We can put inflationary financing in the same category of nonsense as believing a weaker exchange rate makes exporters more competitive and stimulates job creation. But any economist with a modicum of observation will know that an economy with a strong currency, such as Germany and Japan in the post-war years, achieves a strong economy more successfully than a state which has a policy of weakening the currency.
Of course, the empirical evidence, that in the long run a sound currency is always better than a weak one, takes some explaining to a neo-Keynesian audience. Confusingly, Japan has managed to expand the quantity of yen in circulation without appearing to undermine its purchasing power. Much of the explanation is found in the Japanese propensity to save, which put another way is the same as saying the population of Japan uses the expansion of money and bank credit to increase their bank balances instead of spending it. This contrasts with Keynesian consumption theories that abhor saving, preferring inflationary financing. It has predictably resulted in persistent trade deficits and a weak currency.
In the UK, a combination of fiscal and monetary policies aimed at discouraging savings dissuades ordinary people from accumulating wealth through thrift. No wonder an estimated 78% of the UK’s working population have no financial reserves and are unable to make ends meet between pay-days. We appear to have arrived at the end-point in Keynesian economics.
Unless something is urgently done to reverse this trend, the economic condition of low-income Britons will worsen. Furthermore, in the slightest down-turn more of them will become dependent on the state. The state then scrambles for more revenue, taking it from the productive middle-classes by higher taxes and yet more monetary inflation. Wealth, the life-blood of any economy, is destroyed at an increasing pace, and with it the ability of society as a whole to maintain a reasonable standard of living.
The solution is to halt the destruction of wealth and savings and have faith in the ability of ordinary people to manage their own affairs without government intervention. Central to these free-market policies is sound money. There are other policies that must accompany it, such as eliminating taxes on savings. Government must be downsized. It must rescind the tide of regulation. The banking system must be reformed so as to address destructive cycles of credit expansion and contraction. But central to it all is sound money.
The greatest resistance to a sound money policy will come from neo-Keynesian economists, whose beliefs are riddled with contradictions. Thiers are the policies that have ensnared the UK and other welfare states in debt traps, from which there is no easy escape. They are already discredited by the results of their dogmas. The political task facing a Johnson government will be not so much to convince economists of their errors but to promote the concept of sound money and associated policies over their heads to the general public. Card-carrying socialists may not like it, but properly presented the silent majority almost certainly will.
It may be too late in the cycle to avoid an overdue credit crisis, likely to be made worse by American trade policies. In which case, a proper understanding of the destructive forces of monetary inflation compared with the economic benefits of sound money is urgently required. It has been done before: the UK emerged from the destruction and debt of the Napoleonic Wars to a gold standard under which the government reduced its debt burden and the economy boomed in an industrial revolution. It defied modern Keynesian explanation.
Conclusion
If it is to succeed, the magnitude of the task facing a Johnson government is enormous and goes well beyond Brexit. Patience and the passage of time will be required, because the establishment is heavily socialistic and will need to be steered firmly in a free-market direction. But free trade and sound money policies, spearheaded by a determination to avoid budget deficits, will do much of the heavy lifting, and the rest should naturally follow.
via ZeroHedge News https://ift.tt/2xlE3m4 Tyler Durden
The “worst case” trade war scenario was avoided in Osaka on Saturday when Trump agreed to restart trade talks with Xi, holding off new tariffs on Chinese exports, and signaling a pause in the trade hostilities between the world’s two largest economies; Trump added that while existing tariffs would remain in place the US president eased restrictions on Huawei as part of what is now the second ceasefire between the two superpowers in two months, removing an immediate threat looming over the global economy even as a lasting peace remains elusive.
“We’re right back on track and we’ll see what happens,” Trump told reporters after an 80-minute meeting with Chinese President Xi Jinping on the sidelines of a summit of leaders of the G-20 major economies in Osaka, western Japan.
President Trump meets with China’s President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan
Trump said while he would not lift existing import tariffs, he would refrain from slapping new levies on an additional $300 billion worth of Chinese goods – which would have effectively extended tariffs to everything China exports to the America.
“We’re holding back on tariffs and they’re going to buy farm products,” he said vaguely at a news conference, without giving any details of China’s future agricultural product purchases. “If we make a deal, it will be a very historic event.” He gave no timeline for what he called a complex deal but said he was not in a rush. “I want to get it right.”
Whereas Trump and top admin officials alleged that Beijing had reneged on provisions of a tentative trade deal, it was not immediately clear if Xi agreed to return to previous agreements as part of the new truce.
Trump, however, did relent on one of the major sticking points, saying U.S. firms would be allowed to sell components to Huawei, the world’s biggest telecom network gear maker, where there was no national security problem. The president said the U.S. commerce department would meet in the next few days on whether to take it off a list of firms banned from buying components and technology from U.S. companies without government approval.
“I like our companies selling things to other people, so I allowed that to happen,” Trump said. “We’re talking about equipment where there’s no great national security problem with it.” In recent months, the Trump administration has been lobbying allies around the world not to buy Huawei equipment, which the U.S. says could be used for Chinese espionage.
Huawei was delighted by the news on its verified Twitter account: “U-turn? Donald Trump suggests he would allow #Huawei to once again purchase U.S. technology!”
Predictably, China also welcomed the step. “If the U.S. does what it says, then of course, we welcome it,” said Wang Xiaolong, the Chinese foreign ministry’s envoy for G20 affairs.
Trump said he had not yet decided how to allow U.S. companies to continue selling to Huawei or whether to remove the tech giant from the Commerce Department’s entity list. He said he would meet with advisors next week to determine how to proceed.
U.S. microchip makers also applauded the move. “We are encouraged the talks are restarting and additional tariffs are on hold and we look forward to getting more detail on the president’s remarks on Huawei,” John Neuffer, president of the U.S. Semiconductor Association, said in a statement. Recently, Broadcom warned of a broad slowdown in demand as a result of Huawei sanctions and slashed its revenue forecast.
And yet, it was not clear how long the exemption would last. Trump said he had agreed with Xi to wait until the very end of trade talks to resolve broader issues around Huawei, including Washington’s lobbying campaign against allies buying its 5G equipment.
“Huawei is a complicated situation,” Trump said. “We’re leaving Huawei toward the end. We’ll see where we go with a trade agreement.”
The concession will likely draw criticism in Washington where national security hawks have urged Trump not to ease any pressure against Huawei. The company has long been the target of concern at the Pentagon and intelligence agencies in part over what the U.S. claims are its close ties to the Chinese military.
By agreeing to weaken restrictions on #Huawei, Trump not only undermined his own government, he undermined the entire argument #Huawei is a real national security threat. #facepalmhttps://t.co/BzuM8QA0Na
In exchange for his Huawei concession, Trump said Xi Jinping had promised to buy “tremendous” amounts of U.S. agricultural products. “We’re going to give them a list of things we’d like them to buy,” Trump said at a news conference following the Group of 20 summit in Osaka, Japan. However, as Bloomberg notes, the first indications the second fragile truce will collapse soon is that the Chinese official media reports said only that the U.S. president hopes China will import more American goods as part of the truce, without an actual confirmation it will do so.
For now, however, the second truce, after a similar ceasefire was announced on December 1 at the Buenos Aires G-20 summit, has been achieved, offering relief from a nearly year-long trade standoff in which the countries have slapped tariffs on billions of dollars of each other’s imports, disrupting global supply lines, roiling markets and dragging on global economic growth.
In a lengthy statement on the two-way talks, China’s foreign ministry quoted Xi as telling Trump he hoped the United States could treat Chinese companies fairly. On the issues of sovereignty and respect, Xi said that “China must safeguard its core interests.”
“China is sincere about continuing negotiations with the United States … but negotiations should be equal and show mutual respect,” the foreign ministry quoted Xi as saying.
Trump had threatened to extend existing tariffs to almost all Chinese imports into the United States if the meeting brought no progress on wide-ranging U.S. demands for reforms.
The return to the negotiating table ends a six-week stalemate that has unnerved companies and investors, and at least temporarily reduces fears that the world’s two largest economies are headed into a new cold war, which they still are but only after the current stalemate ends allowing the S&P to rise above 3,000 in the the meantime. Because, as Bloomberg notes, it’s unclear how they can overcome differences that led to the collapse of a previous truce reached at the G-20 in November.
* * *
While Trump and Xi were all smiles at their press briefing, the bad blood between the two leaders behind the scenes is clearly still there. Xi spent much of the summit’s first day Friday promising to open up the Chinese economy, and attacking the U.S. (without naming it) for its attack on the global trading system. As Bloomberg reported, Xi took a “not-so-subtle swipe” at Trump’s “America first” trade policy in remarks to African leaders on Friday, warning against “bullying practices” and adding that “any attempt to put one’s own interests first and undermine others’ will not win any popularity.” Xi also called out the U.S. over Huawei and said the G-20 should uphold the “completeness and vitality of global supply chains.”
For now, however, there is optimism.
“Returning to negotiations is good news for the business community and breathes some much needed certainty into a slowly deteriorating relationship,” said Jacob Parker, a vice-president of China operations at the U.S.-China Business Council. But “now comes the hard work of finding consensus on the most difficult issues in the relationship, but with a commitment from the top we’re hopeful this will put the two sides on a sustained path to resolution,” he said.
Others were more skeptical, and warned the pause – just like the first ceasefire – will not last.
“Even if a truce happens this weekend, a subsequent breakdown of talks followed by further escalation still seems likely,” Capital Economics said in a commentary on Friday, quoted by Reuters.
The United States says China has been stealing American intellectual property for years, forces U.S. firms to share trade secrets as a condition for doing business in China, and subsidizes state-owned firms to dominate industries. Meanwhile, China has said the United States is making unreasonable demands and must also make concessions.
The talks collapsed in May after Washington accused Beijing of reneging on reform pledges. Trump raised tariffs to 25% from 10% on $200 billion of Chinese goods, and China retaliated with levies on U.S. imports.
The U.S.-China feud had cast a pall over the two-day G20 gathering, with leaders pointing to the threat to global growth. In their communique, the leaders warned of growing risks to the world economy but stopped short of denouncing protectionism, calling instead for a free, fair trade environment after talks some members described as difficult.
* * *
Finally, global markets will breathe a sigh of relief on news of the resumption in U.S.-China trade talks, even as an official deal remains elusive, and there is no indication of how the two countries will bridge the most difficult aspect of a feud that has emerged beyond simple trade and now affects most aspects of US and Chinese life.
The flip-side is that with trade talks back on, the Fed will feel far less pressure to ease in July, and since in June stocks exploded higher on hopes that the Fed will cut rates as much as 50bps next month, such a reversal in US-China relations could potentially prevent Powell from capitulating, and leave the Fed on hold, an outcome which would lead to a sharp drop in US capital markets. Indeed, in recent weeks, the S&P has returned to record highs, treasury yields have tumbled to their lowest level in years. The Japanese yen, a traditional beneficiary of flight to quality, has gained, while the U.S. dollar has slipped across the board, including against China’s yuan.
via ZeroHedge News https://ift.tt/2IXivmw Tyler Durden
Boston’s beloved beer gardens are in jeopardy thanks to a bill introduced by Massachusetts lawmakers earlier this year. The bill, An Act Relative to One Day Alcoholic Beverage Licenses, would curtail (and perhaps derail) the ability of many breweries to operate beer gardens in the state.
“Pop-up beer gardens have been flourishing in Boston,” notedAmerican Craft Beer earlier this year. “But now the restaurant lobby is working with politicians to put the squeeze on them.”
Boy, are they. In fact, the licensing bill was written by Bob Luz, the president and CEO of the Massachusetts Restaurant Association.
The restaurant association is particularly opposed to the comparatively low cost of beer garden licenses—which run under $100 per day—and by the ease with which breweries currently may skirt a frivolous cap on the number of such licenses that can be issued to a business: “[B]reweries and others can skirt that provision by simply having different employees apply for the permits,” Boston.com reported this week.
A Boston magazine feature this spring lamented the fact that restaurants are “waging war” on beer gardens in the state and seeking “to regulate [them] into oblivion.”
“For the past year, Boston’s restaurateurs have been seething with envy as beer-garden mania has rapidly taken hold, and they’re now preparing to wage war,” the magazine reports. “At the State House, the restaurant industry is backing a proposed limit on one-day licenses for outdoor drinking to 14 a year per company, which would close a loophole that allows permitted beer-garden operators to stay open all summer long.”
Beer gardens have quickly reshaped and improved Boston’s summer drinking scene. Since debuting in the city in 2017, they’ve become, says writer Jeff Bernstone, “an indisputable fixture of city life.” Last year American Craft Beer dubbed Boston “America’s Beer Garden Capital.”
According to Boston.com, the city currently boasts nine beer gardens, with about the same number operating outside the city. This summer has also seen the debut of the first wine garden in the city.
The draw of a beer garden is obvious. Drinking outside is the best thing about both drinking and being outdoors. Beer gardens are fun. A typical pop-up beer garden might run several nights each week, and feature games, music, food trucks, and—of course—beer. They’re a great use of underutilized space. Beer gardens typically pop up in a vacant lot or a strip of public park. Many are family friendly. Kids and pets are often welcome. Others have embraced high culture. Tree House Brewing, the top-rated brewery in Massachusetts, is featuring musicians from the famed Berklee College of Music at its beer garden.
Beer gardens aren’t just good for drinkers. They’re good for Boston itself. The Boston magazine piece notes that they generate revenue for the city’s parks department and are “doing wonders for our city’s stodgy reputation.”
But the stodgy restaurant association says restaurateurs spend hundreds of thousands of dollars for alcohol licenses, and that beer gardens—what with their cheap licenses and low overhead—enjoy an unfair competitive advantage.
Yet the restaurateurs complaining about an uneven playing field don’t appear even to be interested in taking the field. After all, restaurants are free to apply for the same one-day beer garden licenses they’re moaning about breweries using.
(Well, this is the same Massachusetts Restaurant Association, after all, that’s a longtime opponent of lifting the state’s ridiculous ban on happy hour drink specials.)
State Sen. Nick Collins, who co-sponsored the bill to kill beer gardens, says he introduced it to “jump-start a conversation about [beer gardens’] long term sustainability.”
I’d hope Sen. Collins, a lawmaker, would know the difference between legislation and conversation. I encourage Sen. Collins and his co-sponsor, State Sen. Ed Kennedy, to “jump-start a conversation” with one another about what appears to be the only real obstacle to the “long term sustainability” of beer gardens in Massachusetts: lawmakers.
If there are problems with booze laws in Massachusetts, the state has only its lawmakers (certainly not just Sen. Kennedy or Sen. Collins) to blame. If seasonal liquor licenses sound like a solution, it’s one that lawmakers have foreclosed upon. As WGBH reported this spring, “seasonal liquor licenses aren’t available in Boston, thanks to a decades-old state law that bans the city from issuing them.”
Boston Mayor Marty Walsh, very much to his credit, has taken a firm stand against any beer garden crackdown. Walsh also wants more liquor licensees in the city.
In the aforementioned Boston magazine piece, staff writer Spencer Buell closes with a stern warning against cracking down on beer gardens. Instead, he writes, the state should look to reform the alcohol licensing process for restaurants.
He’s right. When innovators help expose the inanity and uselessness of a set of regulations, the solution isn’t to subject more businesses to the bad rules but to scrap them altogether.
This echoes a suggestion I made in Reason in 2011, when restaurant associations were (more) busily trying to force cities to stifle completion from mobile food trucks.
“Instead of cracking down on the successful food trucks,” I wrote, “[cities] should look to those businesses’ success as a reason to cut the red tape that engulfs entrepreneurs who want to launch brick-and-mortar restaurants.“
If lawmakers really want a conversation starter, they can start right there.
from Latest – Reason.com https://ift.tt/2ZYqbua
via IFTTT
Boston’s beloved beer gardens are in jeopardy thanks to a bill introduced by Massachusetts lawmakers earlier this year. The bill, An Act Relative to One Day Alcoholic Beverage Licenses, would curtail (and perhaps derail) the ability of many breweries to operate beer gardens in the state.
“Pop-up beer gardens have been flourishing in Boston,” notedAmerican Craft Beer earlier this year. “But now the restaurant lobby is working with politicians to put the squeeze on them.”
Boy, are they. In fact, the licensing bill was written by Bob Luz, the president and CEO of the Massachusetts Restaurant Association.
The restaurant association is particularly opposed to the comparatively low cost of beer garden licenses—which run under $100 per day—and by the ease with which breweries currently may skirt a frivolous cap on the number of such licenses that can be issued to a business: “[B]reweries and others can skirt that provision by simply having different employees apply for the permits,” Boston.com reported this week.
A Boston magazine feature this spring lamented the fact that restaurants are “waging war” on beer gardens in the state and seeking “to regulate [them] into oblivion.”
“For the past year, Boston’s restaurateurs have been seething with envy as beer-garden mania has rapidly taken hold, and they’re now preparing to wage war,” the magazine reports. “At the State House, the restaurant industry is backing a proposed limit on one-day licenses for outdoor drinking to 14 a year per company, which would close a loophole that allows permitted beer-garden operators to stay open all summer long.”
Beer gardens have quickly reshaped and improved Boston’s summer drinking scene. Since debuting in the city in 2017, they’ve become, says writer Jeff Bernstone, “an indisputable fixture of city life.” Last year American Craft Beer dubbed Boston “America’s Beer Garden Capital.”
According to Boston.com, the city currently boasts nine beer gardens, with about the same number operating outside the city. This summer has also seen the debut of the first wine garden in the city.
The draw of a beer garden is obvious. Drinking outside is the best thing about both drinking and being outdoors. Beer gardens are fun. A typical pop-up beer garden might run several nights each week, and feature games, music, food trucks, and—of course—beer. They’re a great use of underutilized space. Beer gardens typically pop up in a vacant lot or a strip of public park. Many are family friendly. Kids and pets are often welcome. Others have embraced high culture. Tree House Brewing, the top-rated brewery in Massachusetts, is featuring musicians from the famed Berklee College of Music at its beer garden.
Beer gardens aren’t just good for drinkers. They’re good for Boston itself. The Boston magazine piece notes that they generate revenue for the city’s parks department and are “doing wonders for our city’s stodgy reputation.”
But the stodgy restaurant association says restaurateurs spend hundreds of thousands of dollars for alcohol licenses, and that beer gardens—what with their cheap licenses and low overhead—enjoy an unfair competitive advantage.
Yet the restaurateurs complaining about an uneven playing field don’t appear even to be interested in taking the field. After all, restaurants are free to apply for the same one-day beer garden licenses they’re moaning about breweries using.
(Well, this is the same Massachusetts Restaurant Association, after all, that’s a longtime opponent of lifting the state’s ridiculous ban on happy hour drink specials.)
State Sen. Nick Collins, who co-sponsored the bill to kill beer gardens, says he introduced it to “jump-start a conversation about [beer gardens’] long term sustainability.”
I’d hope Sen. Collins, a lawmaker, would know the difference between legislation and conversation. I encourage Sen. Collins and his co-sponsor, State Sen. Ed Kennedy, to “jump-start a conversation” with one another about what appears to be the only real obstacle to the “long term sustainability” of beer gardens in Massachusetts: lawmakers.
If there are problems with booze laws in Massachusetts, the state has only its lawmakers (certainly not just Sen. Kennedy or Sen. Collins) to blame. If seasonal liquor licenses sound like a solution, it’s one that lawmakers have foreclosed upon. As WGBH reported this spring, “seasonal liquor licenses aren’t available in Boston, thanks to a decades-old state law that bans the city from issuing them.”
Boston Mayor Marty Walsh, very much to his credit, has taken a firm stand against any beer garden crackdown. Walsh also wants more liquor licensees in the city.
In the aforementioned Boston magazine piece, staff writer Spencer Buell closes with a stern warning against cracking down on beer gardens. Instead, he writes, the state should look to reform the alcohol licensing process for restaurants.
He’s right. When innovators help expose the inanity and uselessness of a set of regulations, the solution isn’t to subject more businesses to the bad rules but to scrap them altogether.
This echoes a suggestion I made in Reason in 2011, when restaurant associations were (more) busily trying to force cities to stifle completion from mobile food trucks.
“Instead of cracking down on the successful food trucks,” I wrote, “[cities] should look to those businesses’ success as a reason to cut the red tape that engulfs entrepreneurs who want to launch brick-and-mortar restaurants.“
If lawmakers really want a conversation starter, they can start right there.
from Latest – Reason.com https://ift.tt/2ZYqbua
via IFTTT
One of the most importantenergybattlesof the future will be fought in the field of liquid natural gas (LNG).Suggested as one of the main solutions to pollution, LNG offers the possibility of still managing to meet a country’s industrial needs while ameliorating environmental concerns caused by other energy sources.At the same time, a little like the US dollar, LNG is becoming a tool Washington intends to use against Moscow at the expense of Washington’s European allies.
To understand the rise of LNG in global strategies, it is wise to look at a graph (page 7) produced by the International Gas Union (IGU) where the following four key indicators are highlighted: global regasification capacities; total volumes of LNG exchanged; exporting countries; and importing countries.
From 1990 to today, the world has grown from 220 million tons per annum (MTPA) to around 850 MTPA of regasification capacity. The volume of trade increased from 20-30 MTPA to around 300 MTPA. Likewise, the number of LNG-importing countries has increased from just over a dozen to almost 40 over the course of 15 years, while the number of producers has remained almost unchanged, except for a few exceptions like the US entering the LNG market in 2016.
There are two methods used to transport gas.
The first is through pipelines, which reduce costs and facilitate interconnection between countries, an important example of this being seen in Europe’s importation of gas. The four main pipelines for Europe come from four distinct geographical regions: the Middle East, Africa, Northern Europe and Russia.
The second method of transporting gas is by sea in the form of LNG, which in the short term is more expensive, complex and difficult to implement on a large scale. Gas transported by sea is processed to be cooled so as to reduce its volume, and then liquified again to allow storage and transport by ship. This process adds 20% to costs when compared to gas transported through pipelines.
Less than half of the gas necessary for Europe is produced domestically, the rest being imported from Russia (39%), Norway (30%) and Algeria (13%). In 2017, gas imports from outside of the EU reached 14%. Spain led with imports of 31%, followed by France with 20% and Italy with 15%.
The construction of infrastructure to accommodate LNG ships is ongoing in Europe, and some European countries already have a limited capacity to accommodate LNG and direct it to the national and European network or act as an energy hub to ship LNG to other ports using smaller ships.
“All of Europe’s LNG terminals are import facilities, with the exception of (non-EU) Norway and Russia which export LNG. There are currently 28 large-scale LNG import terminals in Europe (including non-EU Turkey). There are also 8 small-scale LNG facilities in Europe (in Finland, Sweden, Germany, Norway and Gibraltar). Of the 28 large-scale LNG import terminals, 24 are in EU countries (and therefore subject to EU regulation) and 4 are in Turkey, 23 are land-based import terminals, and 4 are floating storage and regasification units (FSRUs), and the one import facility in Malta comprises a Floating Storage Unit (FSU) and onshore regasification facilities.”
The countries currently most involved in the export of LNG are Qatar (24.9%), Australia (21.7%), Malaysia (7.7%), the US (6.7%), Nigeria (6.5%) and Russia (6%).
Europe is one of the main markets for gas, given its strong demand for clean energy for domestic and industrial needs. For this reason, Germany has for years been engaged in the Nord Stream 2 project, which aims to double the transport capacity of gas from Russia to Germany. Currently the flow of the Nord Stream is 55 billion cubic meters of gas. With the new Nord Stream 2, the capacity will double to 110 billion cubic meters per year.
The South Stream project, led by Eni, Gazprom, EDF and Wintershall, should have increased the capacity of the Russian Federation to supply Europe with 63 billion cubic meters annually, positively impacting the economy with cheap supplies of gas to Bulgaria, Greece, Italy, Serbia, Hungary, Austria and Slovenia. Due to the restrictions imposed by the European Union on Russian companies like Gazprom, and the continuing pressure from Washington to abandon the project and embrace imports from the US, the construction of the pipeline have slowed down and generated tensions between Europe and the US. Washington is piling on pressure on Germany to derail Nord Stream 2 and stop the construction of this important energy linkage.
Further tension has been added since ENI, an Italian company that is a leader in the LNG sector, recently discovered off-shore in Egypt one of the largest gas fields in the world, with an estimated total capacity of 850 billion cubic meters. To put this in perspective, all EU countries demand is about 470 billion cubic meters of gas in 2017.
ENI’s discovery has generated important planning for the future of LNG in Europe and in Italy.
Problems have arisen ever since Donald Trump sought to oblige Europeans to purchase LNG from the US in order to reduce the trade deficit and benefit US companies at the expense of other gas-exporting countries like Algeria, Russia and Norway. As mentioned, LNG imported to Europe from the US costs about 20% more than gas traditionally received through pipelines. This is without including all the investment necessary to build regasification plants in countries destined to receive this ship-borne gas. Europe currently does not have the necessary facilities on its Atlantic coast to receive LNG from the US, introduce it into its energy networks, and simultaneously decrease demand from traditional sources.
This situation could change in the future, with LNG from the US seeing a sharp increase recently. In 2010, American LNG exports to Europe were at 10%; the following year they rose to 11%; and in the first few months of 2019, they jumped to 35%. A significant decrease in LNG exports to Asian countries, which are less profitable, offers an explanation for this corresponding increase in Europe.
But Europe finds itself in a decidedly uncomfortable situation that cannot be easily resolved. The anti-Russia hysteria drummed up by the Euro-Atlantic globalist establishment aides Donald Trump’s efforts to economically squeeze as much as possible out of European allies, hurting European citizens in the process who will have to pay more for American LNG, which costs about a fifth more than gas from Russian, Norwegian or Algerian sources.
Projects to build offshore regasifiers in Europe appear to have begun and seem unlikely to be affected by future political vagaries, given the investment committed and planning times involved:
“There are currently in the region of 22 large-scale LNG import terminals considered as planned in Europe, except for the planned terminals in Ukraine (Odessa FSRU LNG), Russia (Kaliningrad LNG), Albania (Eagle LNG) – Albania being a candidate for EU membership – and Turkey (FSRU Iskenderun and FSRU Gulf of Saros).Many ofthese planned terminals, including Greece (where one additional import terminal is planned – Alexandroupolis), Italy (which is considering or planning two additional terminals – Porto Empedocle in Sicily and Gioia Tauro LNG in Calabria) , Poland (FSRU Polish Baltic Sea Coast), Turkey (two FSRUs) and the UK (which is planning the Port Meridian FSRU LNG project and UK Trafigura Teesside LNG).LNG import terminal for Albania (Eagle LNG), Croatia (Krk Island), Cyprus (Vassiliko FSRU), Estonia (Muuga (Tallinn) LNG and Padalski LNG), Germany ( Brunsbüttel LNG), Ireland (Shannon LNG and Cork LNG), Latvia (Riga LNG), Romania (Constanta LNG), Russia (Kaliningrad LNG) and Ukraine (Odessa).Nine of the planned terminals are FSRUs: Albania, Croatia, Cyprus, Greece, Ireland, Poland, Russia, Ukraine and the UK.“In addition, there are numerous plans for expansion of existing terminals, including in Belgium, France, Greece, Italy, the Netherlands, Poland, Spain, Turkey and the UK.”
Washington, with its LNG ships, has no capacity to compete in Asia against Qatar and Australia, who have the lion’s share of the market, with Moscow’s pipelines taking up the rest. The only large remaining market lies in Europe, so it is therefore not surprising that Donald Trump has decided to weaponize LNG, a bit as he has the US dollar. This has only driven EU countries to seek energy diversification in the interests of security.
The European countries do not appear to be dragging their feet at the prospect of swapping to US LNG, even though there is no economic advantage to doing so. As has been evident of late, whenever Washington says, “Jump!”, European allies respond, “How high?” This, however, is not the case with all allies. Germany is not economically able to interrupt Nord Stream 2. And even though the project has many high-level sponsors, including former chancellor Gerhard Schröder, the project constantly seems to be on the verge of being stopped – at least in Washington’s delusions.
Even Eni’s discovery of the gas field in Egypt has annoyed the US, which wants less competition (even when illegal, as in the case of Huawei) and wants to be able to force its exports onto Europeans while maintaining the price of the LNG in dollars, thereby further supporting the US dollar as the world’s reserve currency in the same manner as the petrodollar.
The generalized hysteria against the Russian Federation, together with the cutting off of Iranian oil imports at Washington’s behest, limit the room for maneuver of European countries, in addition to costing European taxpayers a lot. The Europeans appear prepared to set whatever course the US has charted them, one away from cheaper gas sources to the more expensive LNG supplied from across the Atlantic. Given the investments already committed to receive this LNG, it seems unlikely that the course set for the Europeans will be changed.
via ZeroHedge News https://ift.tt/2Xi4MiQ Tyler Durden
As fears continue to mount of a military clash between the U.S. and Iran, the Strait of Hormuz has swiftly become one of the most dangerous areas worldwide for commercial shipping. Two weeks ago, two tankers were allegedly attacked by the Islamic Revolutionary Guards Corps while Iran shot down a sophisticated U.S. surveillance drone on last Thursday.
However, as Statista’s Niall McCarthy notes, while tensions mounted in the Strait of Hormuz, a report about a growing threat to shipping in a different part of the world largely flew under the radar.
One Earth Future’s annual State of Maritime Piracy report highlights incidents of hijacking, kidnapping, robberies and boarding attempts on the high seas. It recorded a steady decline in the number of incidents in East Africa and around Somalia in particular which was notorious for years for its high number of pirate attacks.
Largely thanks to effective international naval operations, the number of piracy incidents dropped from 54 in 2017 to just nine last year. The Malacca Strait is another area with a bad reputation for pirates and progress is also being made there. Asia experienced 199 attacks in 2015 and that fell to 98 last year.
The downward trend in those regions has helped West Africa become the world’s new piracy hotspot. It saw 54 incidents in 2015, 95 in 2016, 97 in 2017 and 112 in 2018. Aside from the falling number of attacks elsewhere, there are several reasons for the increase in West Africa including poverty, political instability, a lack of proper law enforcement and a plentiful targets.Nigeria has seen the most incidents due to an increase in “petro-piracy” where vessels involved in oil and gas transportation are targeted.
via ZeroHedge News https://ift.tt/2YkoVkU Tyler Durden
