Coyote Blog

One of the amazing aspects of our new post-modern outlook on personal responsibility and obligations is that folks who are profligate and take on too much debt are increasingly considered victims to which other people owe something (generally a bailout).

We see this no only among US mortgage holders but in Greece as well

Greek Prime Minister Lucas Papademos told lawmakers to back a deeply unpopular EU/IMF rescue in a vote on Sunday or condemn the country to a “vortex” of recession.

He spoke in a televised address to the nation, ahead of Sunday’s vote on 3.3 billion euros ($4.35 billions) in wage, pension and job cuts as the price of a 130-billion-euro bailout from the European Union and International Monetary Fund.

The effort to ease Greece’s huge debt burden has brought thousands into the streets in protest, and there were signs on Saturday of a small rebellion among lawmakers uneasy with the extent of the cuts.

So outsiders generously agree to pay for 130 billion Euros of past Greek spending if only the Greeks will cut their current spending by 3.3 billion Euros (at which spending level the country would still be running large deficits).  And people riot as if they have been gang-raped.  Incredible.

Let the Greeks go.  Of course, this is not actually about bailing out Greece, but about bailing out, indirectly, European banks that invested in Greek bonds.  The banks seem to run public policy in Europe, even more so than in the US.

Kevin Drum apparently believes the reason Republicans are not passing further stimulus spending is because such a stimulus would be too likely to have immediate results improving the economy and thus will help Democrats in the next election.

This is the kind of politcal bullshit that drives me right out of the system.  I am perfectly capable of believing Drum honestly thinks that further deficit spending will improve the economy this year.  I think he’s nuts, and working against all historic evidence, but never-the-less I believe he is sincere, and not merely pushing the idea as part of some dark donkey-team conspiracy.  Why is it that he and his ilk, from both sides of the aisle, find it impossible to believe that their opponents have similarly honest intentions?

I mean, is it really so hard to believe — after spending a trillion dollars to no visible effect, after seeing Europe bankrupt itself, and after seeing the American economy begin to recover only after crazy stimulus programs have mostly stopped — that some folks have an honest desire to see economic improvement and think further stimulus programs are a bad idea?

Folks on the Left prefer public institutions over private ones because they percieve them as more “fair.”  But the power of lawmaking and police and prisons allows public institutions to be far more abusive than private entities could ever be.  We spent months and years torturing ourselves about accounting abuses at Enron, but these are trivial compared the accounting shenanigans state institutions engage in every day.

Or consider this, from Europe, particularly the first bit

“In the event of default (i) any non-official bond holder is junior to all official creditors and (ii) the issuer reserves the right to change law as needed to negate any rights of the nonofficial bond holder.

.

“We should not underestimate the damage these steps have inflicted on Europe’s €8.4 trillion sovereign bond markets. For example, the Italian government has issued bonds with a face value of over €1.6 trillion. The groups holding these bonds are banks, pension funds, insurance companies, and Italian households. These investors bought them as safe, low-return instruments that could be used to hedge liabilities and provide for future income needs. It was once hard to imagine these could ever be restructured or default.

.

“Now, however, it is clear they are not safe. They have default risk, and their ultimate value is subject to the political constraint and subjective decisions by a collective of individuals in the Italian government and society, the ECB, the European Union, and the International Monetary Fund (IMF). An investor buying an Italian bond today needs to forecast an immediate, complex process that has been evolving in unpredictable ways. Investors naturally want a high return in order to bear these risks.

.

“Investors must also weigh carefully the costs and benefits to them of official intervention. Each time official creditors provide loans or buy bonds, the nonofficial holders become more subordinated, because official creditors including the IMF, ECB, and now the European Union continue to claim preferential status.”

This is not to say that bondholders in private entities don’t get crammed down in a refinancing or bankruptcy.  But here we are talking about differential treatment of holders of the exact same class, even issue, of securities.

If I were any good at the two minute sound byte interview, I would have summarized this about the superiority of the current US private rail system vs. the systems in Europe and Japan:

Link here (sorry, for some reason the link did not show up the first time, probably something to do with my iPad)

My new column is up at Forbes, and discusses solutions to the European debt crisis.  The problem is that there are really only three, and all are bad, so most solutions being proposed either attempt to disguise that they are bad or to disguise that they are not really doing anything.  An excerpt:

The default option will almost certainly wipe out a lot of powerful banking and financial interests as well as make it very hard for governments to keep spending money at their historic pace.  This will certainly have a bad effect on the larger economy, but we should be careful accepting forecasts of economic catastrophe as most of these come from these same powerful bankers and politicians.   Every group, down to the local dog catchers, argue that the world will suffer a calamity if their particular profession is harmed.  What we do know is that large banks and financial companies are even more intertwined with the political elite in Europe than they are in the US.   We can be pretty certain that, push come to shove, a solution that saves the banks and allows politicians to keep spending will be preferred.

That is why the Europeans will likely end up printing money to pay off the debt.  They almost certainly would be doing so already,were it not for Germany’s strong memories of its Weimar inflation years, when exactly this kind of money printing to pay down government debt led to hyperinflation and political instability.  But the appeal to politicians of shifting the costs from themselves and banks to the average consumer is simply too great to pass up.  If Germany can be convinced, then the European Central Bank will print Euros.  If Germany cannot be convinced, then countries will leave the Euro and print Lira and Drachma.

I found this 2009 graph and comment by Paul Krugman (dredged up by Megan McArdle) to be a hilarious call to arms for all his fellow lemmings to follow him over the cliff

[from November 2009]:  Why, people ask, would I want to compare us to Belgium and Italy? Both countries are a mess!

Um, guys, that’s the point. Belgium is politically weak because of the linguistic divide; Italy is politically weak because it’s Italy. If these countries can run up debts of more than 100 percent of GDP without being destroyed by bond vigilantes, so can we.

Today I spent time arguing with a group of folks about global warming and the precautionary principle.  The others all argued that a slim chance of a catastrophe justified immediate action.  I argued, of course, that they were understating the cost of the intervention, but that is another story.

Its amazing to me that so many on the Left squawk about the precautionary principle in the case of climate, but are ready to continue running up government spending and deficits despite the fact that the disaster of this approach, given the experience in Europe, is no longer even debatable.  Its simply math.

Our problem will play out differently than in Europe.  Long before interest rates on US securities run up to the 6% or so tipping point, the Fed will be running the printing presses.  Don’t believe me, well, they already have been.

Savers beware, our path will be devaluation and inflation.

By the way, the speed with which hyperinflation can take hold is astounding.  Here is the inflation rate in the Weimar Republic.  As with the Fed today, the central bank of the Weimar Republic was buying up government debt with printed currency.  Look how fast the inflation took hold:

(source)  Imagine a quarterly meeting of the Fed in August of ’22.  They are probably looking at month-old data, and in July it looks like everything is under control.  Boom, three months later, by the next schedule quarterly meeting, inflation is already out of control.  Krugman would say not to worry about inflation, they will have plenty of time to act.  Coincidently, this is exactly what Italy and France and Spain said about their sovereign debt, but in a flash, the crisis was upon them and so far out of control there is nothing they can do.

I propose two lessons learned from the last five years:

• There is no such thing as a risk-free return
• There is no such thing as a perfect hedge

Perhaps I do not give Sarah Palin enough credit, because this is a really good passage, from one of her recent speeches (emphasis added by Mickey Kaus)

We sent a new class of leaders to D.C., but immediately the permanent political class tried to co-opt them – because the reality is we are governed by a permanent political class, until we change that. They talk endlessly about cutting government spending, and yet they keep spending more. They talk about massive unsustainable debt, and yet they keep incurring more. They spend, they print, they borrow, they spend more, and then they stick us with the bill. Then they pat their own backs, and they claim that they faced and “solved” the debt crisis that they got us in, but when we were humiliated in front of the world with our country’s first credit downgrade, they promptly went on vacation.

No, they don’t feel the same urgency that we do. But why should they? For them business is good; business is very good.  Seven of the ten wealthiest counties are suburbs of Washington, D.C. Polls there actually – and usually I say polls, eh, they’re for strippers and cross country skiers – but polls in those parts show that some people there believe that the economy has actually improved. See, there may not be a recession in Georgetown, but there is in the rest of America.

Yeah, the permanent political class – they’re doing just fine. Ever notice how so many of them arrive in Washington, D.C. of modest means and then miraculously throughout the years they end up becoming very, very wealthy? Well, it’s because they derive power and their wealth from their access to our money – to taxpayer dollars.  They use it to bail out their friends on Wall Street and their corporate cronies, and to reward campaign contributors, and to buy votes via earmarks. There is so much waste. And there is a name for this: It’s called corporate crony capitalism. This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk. No, this is the capitalism of connections and government bailouts and handouts, of waste and influence peddling and corporate welfare. This is the crony capitalism that destroyed Europe’s economies. It’s the collusion of big government and big business and big finance to the detriment of all the rest – to the little guys. It’s a slap in the face to our small business owners – the true entrepreneurs, the job creators accounting for 70% of the jobs in America, it’s you who own these small businesses, you’re the economic engine, but you don’t grease the wheels of government power.

So, do you want to know why the permanent political class doesn’t really want to cut any spending? Do you want to know why nothing ever really gets done? It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed – a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.

I find the Left’s opinions on Greece to be fascinating.  After all, Greece is essentially the logical end result of all of their love for deficit spending, so what kind of cognitive dissonance is necessary to write about Greece on the Left?  This kind:

OK, but they’re spending too much money. Surely they know they have to cut back?

Sure, but the deals on offer are pretty unattractive. Europe wants to forgive half of Greece’s debt and put them on a brutal austerity plan. The problem is that this is unrealistic. Greece would be broke even if all its debt were forgiven, and if their economy tanks they’ll be even broker.

But that’s the prospect they’re being offered: a little bit of debt forgiveness and a lot of austerity.

Well, them’s the breaks.

But it puts Greece into a death spiral. They can’t pay their debts, so they cut back, which hurts their economy, which makes them even broker, so they cut back some more, rinse and repeat. There’s virtually no hope that they’ll recover anytime in the near future. It’s just endless pain. What they need is total debt forgiveness and lots of aid going forward.

I certainly agree that Greece is now in a death spiral, but this analysis is just amazing.  The only way for other countries to avoid sharing Greece’s fate is to, very simply, spend within their means.  If they do, problem avoided.  If they don’t, and get hooked on deficit spending, then Greece is their future, the only question is when.

So what does Drum do?  He calls the spending withing their means strategy “unrealistic” and “brutal austerity.”    So he occupies a long post lamenting what a totally SNAFU’d situation Greece is in, but takes off the table the only possible approach for other counties to avoid the same fate.   And in fact advocates a strategy that will push a few others over the cliff sooner, or even cause a few to jump on their own (after all, if the punishment for spending your way into financial disaster is to get, as Drum recommends, all your debt forgiven and years of aid payments, why the hell would anyone want to be fiscally responsible?)

And it is amazing to me that he calls forgiving half their debt, the equivalent in the US of our creditors erasing about $7 trillion, as “a little bit of debt forgiveness” while cutting government spending a few percent of GDP is “a lot of austerity.”

His solution, of course, is not for Greece to face up to its problems but to transfer the costs of its irresponsibility to others and then remain nearly perpetually on the dole.

His mistake is to assume Greece faces endless pain.  It does not.  History has shown that countries that are willing to rip off the bandage quickly rather than over a few decades can recover remarkably quickly if sensible policies are put in place.  Heck, the Weimar Republic, which had inflation so bad people got paid 3 times a day so their family could buy something before the money became worthless a few hours later, got its house in order in a matter of months.

Especially when the government is doing all it can to damp the forces of evolution and extinction.  Via Mickey Kaus

Dysfunctional–or at any rate, not-functional-enough–corporate cultures are hard to change. That would include both the culture of the Old GM and that of many of its suppliers. Obama should have been more skeptical about “New GM’s” ability to turn itself around with its same old workforce and same old union

I warned of something similar long before GM was rescued by Bush and Obama:

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM’s DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

So what if GM dies?  Letting the GM’s of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM’s DNA has a less than one multiplier, then releasing GM’s assets from GM’s control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe’s productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe’s most productive human and physical assets into organizations with DNA multipliers less than one.

David Roberts (via Kevin Drum) gives us a simply outstanding view of the mind of a statist:

In these grim economic times, one U.S. industry has defied gravity. Not only is it growing, it’s thefastest growing industry in the country. It now employs 100,000 Americans at 5,000 mostly small businesses spread across all 50 states. Unlike in so many others, in this industry the U.S. has a positive trade balance with China; it is a net exporter of high-tech manufactured products….

The startling counter-cyclical growth of this industry had been unleashed by a modest bit of economic stimulus: a cash grant program that helps project developers compensate for the crippling credit crunch. In contrast to the familiar tax credits — which tend to go to large, mature companies that have enough profit to benefit from them — cash grants help small, innovative, growing businesses that are plowing revenue into growth. In fact, a recent study found that they work twice as well as tax credits. In 2009, this cash grant program pulled in $4.50 of private capital for every public dollar it invested.

The cash grant program expires at the end of the year. Extending it for a single year could support 37,000 additional jobs over and above the industry’s baseline. And here’s the capper: Since the cash grant program is simply repurposing money that’s already devoted to a tax credit program, it requires no new federal revenue.

So you’d think this would be a home run, right? At a time when jobs are at the top of every politician’s mind, surely a bit of low-cost economic stimulus that doesn’t increase the deficit and leverages tons of private capital and creates tens of thousands of jobs can serve as the rare locus of bipartisan cooperation. Right?

Except the industry in question is the solar industry. And because this industry involves clean energy rather than, I dunno, tractor parts, it has been sucked into conservatives’ endless culture war. Rather than lining up to support the recession’s rare economic success story, Republicans are trying to use the failure of a single company — Solyndra — as a wedge to crush support for the whole industry. Odds are they’re going to succeed and the cash grant program (Sec. 1603) won’t be renewed next year.

Do you see the basic assumption — if we don’t take money from taxpayers and give it to businesses in a certain industry, that means we don’t like that business.  Really?  That means that there is not a single industry in this country that I like, since I don’t support subsidies for any of them.   Unless you believe the state is mother and father to us all, the fact that I don’t support state subsidies does not mean that I don’t like the industry somehow.  Kevin Drum even goes so far as to say that opposition to solar power subsidies is an aspect of the culture wars.  Huh?   Oh and by the way, the politicization of this loan process is just amazing to me.  More and more people at Solyndra seem to be fund raisers for Obama, and here is a story of how a cleaning products company turned donations to Democratic candidates into taxpayers subsidies for themselves.

It is interesting that he would mention tractor parts.  Guess what, folks who don’t like the solar subsidies probably don’t support subsidies for tractor parts either.  I was going to say something like, “guess what, we don’t subsidize tractor parts” but in our screwed up corporate state, we probably do at some level, like with some special export program snagged by a John Deere lobbyist.  But I can pretty much guarantee that we don’t subsidize anywhere near the total value of the tractor parts industry like we do the solar industry.

In one silly passage, he says

“In addition to being successful, this industry is wildly popular with the American public, across regions, demographics, and political parties. It has been embraced by mainstream institutions from Walmart to the U.S. military”

I could say the same thing for iPods too, but no one is rushing to provide grant programs for their manufacture.  If it is so wildly popular, why does its use require so many government incentives and subsidies.  Because the author pulls the trick of looking at one narrow solar program, and attributing the entire solar industry growth to that one program.  And then he says, see, look how much benefit we get from this tiny sensible expenditure.

But solar’s growth (I don’t have the data, but I am willing to be real money that his “fastest growing industry” claim is BS) is due not to just this tiny programs but to a plethora of federal, state, and local subsidies and mandates.  The government gives money to capitalize companies, and then then provides tax credits for up to 30-50% of their customer’s purchase, and then through public utility commissions enforce above-market feed-in tariff rates for solar power.  One reason we export so much (the export market for US solar is nearly entirely to Europe) is that European governments have feed-in tariffs for solar power more than 5 times higher than the market rate for electricity.   They are paying something like 70 cents a kilowatt for solar electricity.

So of course solar is growing.  If the government were to buy small cars for $150,000 each, there would be big growth in car manufacturing. This does not mean the product makes sense — in fact, the necessity for so many government supports at every step of the process means almost by definition that it does not make sense economically.  Look at corn ethanol.  Corn ethanol is the stupidest product ever, but it has grown like crazy due to the same combination of government subsidies, price floors, and mandates.

By the way, I am a huge fan of solar, in theory.  I honestly think that solar will some day be the power system of choice in this country, as companies figure out how to roll solar sheets out of the factory as cheaply and quickly as carpet comes out of Dalton, Georgia.  We are not there yet, and I am not at all convinced that the current approaches are anything but dead end technologies.  Beyond wasting a lot of money, there is a real risk the government actually slow ultimate implementation of sensible and economic solar, just as I would argue they did by forcing manned space flight and the transcontinental railroad ahead of their time.

I am amazed that the US equity market can fall for the same load of BS over and over again

Stocks finished with strong gains amid optimism about plans to recapitalize euro-zone banks.

Two thoughts

1. There is simply no source of money (and will) anywhere large enough to fill in the European debt hole.  Heck, there isn’t enough money and will to fix Greece, and that is a small percentage of the problem
2. Even if the current hole could nominally be recapitalized, it would be virtually meaningless because the no one in Europe is fessing up to anywhere near the total extent of the problem.

Countries are going to start to default in Europe, and I don’t see any way around it.  The Euro isn’t toast but its going to have a lot fewer members in 3 years.  And speaking of bad news, I don’t see any way to avoid a massive Chinese bubble burst in the next 3 years either.

I get grief in hard core libertarian circles for supporting a basic, no-frills government safety net.  However, in watching Europe right now, I may change my opinion.  Folks in this country use the European rioting as a sort of threat to warn us that we need to continue to be profligate in government spending or else face the same kind of riots here.  I come to the opposite conclusion — if people are going to riot when the charity they receive has to be reduced, isn’t that a reason not to get them hooked on the charity in the first place?

When it comes to high speed rail, the Left tends to have a Santa Clause mentality.   They want the rail, but refuse to even discuss its costs vs. benefits, as if it is going to be dropped in place by Santa Clause.

I have actually had pro-high-speed rail writers call me a dinosaur for taking a cost-benefit approach.  After a reasoned article on why our rail system, with its focus on freight, makes more sense than China and Europe’s focus on high speed passenger rail, Joel Epstein wrote me that I should get out of the country more, as if I am some backwoods rube that would just swoon if I saw a nifty bullet train.  For the record, my actual experience on a high-speed rail train in Europe confirmed that it was a nice experience (I knew it would be) and that it was a financial mess, as my son and I were the only passengers in my car.  I would be all for HSR if Santa Clause dropped in down from the North Pole, but it costs a lot of real money.

How much money?  Well take the system in China that Friedman and Epstein and many others have begged the US to emulate:

The rail ministry that builds and operates the trains has an incredible 2.1 million employees, more than the number of civilians employed by the entire U.S. government. Moreover, the ministry is in debt to the tune of 2.1 trillion yuan ($326 billion), about 5 percent of the country’s GDP.

For some reason I do not fully understand, there are two worlds of gaming – the Wal-Mart/Target/Toys R Us world of Monopoly and Risk, and the geeky world of strategic gaming.

It used to be that the strategic gaming world was just too complicated and arcane for prime time.  I once spent a whole summer playing through a game called “War in Europe” from SPI.  It had a 42-square foot map of Europe, thousands and thousands of counters, hundreds of pages of instructions, and simulated WWII in weekly turns.

However, there is now a whole slew of games in the strategic arena, mostly from Europe, that are very accessible.   A number are not much harder to learn than Risk but are more fun and play a lot faster.  Unfortunately, few of these have migrated to mainstream stores, so you may be missing them.  Here are a few my family plays that are excellent places to start.  I have put them in approximate order of complexity, from low to high.

[By the way, don't have a family or friends?  Your in luck!  At least 3 of the games below have very high quality iPad game apps with good to very good AI competitors]

1. Ticket to Ride. Very easy to learn.  Even visiting kids get the idea immediately.  This is a railroad line building game.  Start with the original North American version, it is the least complicated.  Also, if you have an iPad, there is a very good game app port of this game.
2. Small World. This is an absolute freaking classic. Totally fun, pretty easy to learn, fast to play.  Sort of a wargame ala Risk but it doesn’t feel like Risk.  Very repayable because the army or race (e.g. dwarves, elves, giants, etc) you play changes each game as special powers are mixed and matched.  As important to taking territories will be recognizing when your race has become senescent and when it is time to start a new race.  If you have an iPad, there is an awesome Small World game app I heartily recommend.
3. 7 Wonders. A new game that has quickly become a favorite.    This game is typical of many modern strategy games — there are many ways to score and you only have a limited number of actions, so the trick is figuring out your priorities.  The play rules of this game are dead simple.  The complicated part is deciding what action to take among many alternatives, since the scoring is complicated.  Here is my advice on this game and for many of these games that follow.  Just play the game once.   This is what my kids and I did with 7 Wonders.  They yelled at me at scoring time that they hadn’t understood that such and such scored so well or poorly, but they understood it better with one play-through than by any number of times parsing the rules.  This is our current favorite.  Interesting dynamic here as after each card play, everyone passes his or her whole hand to their neighbor.
4. Dominion.  Similar to 7 Wonders in that it is a card game building to victory points.  There is a constant tradeoff of getting victory points now or building up “infrastructure” that will allow more scoring later.  It is more complex than 7 wonders as it has even more options and paths.  I play it with my family but both this and the next game fall out of what are typically called “family” games.
5. Race for the Galaxy.  Again, similar to 7 Wonders and Dominion, just more complicated.  A planet development game.

Here are some other family accessible games I can’t recommend as much

1. Settlers of Catan. This is a popular strategy classic, and is simple to learn.  My kids think its kind of meh.  It has a diplomacy negotiating element that does not seem to work well in my family for games
2. Cargo Noir. I have only played this once, so I can’t say how it wears.  My kids liked it better than I did.  It is easy to learn, but I thought the strategic options were a bit thin.
3. Carcasonne.  There are very few games I don’t care for, but I have tried this game several times and it just does not click for me.  But it is wildly popular, so what do I know?  A game where you add tiles of roads and cities to try to score based one where you have put your mini people (meeple in euro-game speak).   There is a high quality port of this game on iPad.

Here are some games I really love but are not appropriate for the entry level family

1. Twilight Struggle – replay the cold war.  My son and I played this and it was awesome, but it took some time to learn and was pretty wonky.
2. Agricola – one of the reigning kings of hard-core Euro-style strategy games, this game is fairly complicated to learn (not helped by instructions that really need a re-write) and very complicated to master.   The concept — trying to keep a medieval family alive – bored the hell out of my kids but it is similar to many of the games above in that there are far more ways to score than one can pursue in a turn, and it has a very strong element of balancing immediate returns against investments in the future.   I have never played Puerto Rico but my sense it is in a similar genre.

The Boardgame Geek website is a great place to learn about these games (I have just listed a few of the most popular of literally thousands of games).  Their ranking of top family games is here.  To give you an idea, Monopoly is rates #781 in family games and #7148 overall by their readers (though there is some geek snob factor in this, it really is not a very good game), so you probably have some good games to discover.

PS- Most all of these are on Amazon.

I have to take this with a grain of salt, because it is coming from GE, the current American poster-child for rent-seeking, particularly in attempting to be a magnet for green energy subsidies.   But since the statement can be seen as under-cutting the subsidy argument, I have to take it more seriously:

Solar power may be cheaper than electricity generated by fossil fuels and nuclear reactors within three to five years because of innovations, said Mark M. Little, the global research director for General Electric Co.

“If we can get solar at 15 cents a kilowatt-hour or lower, which I’m hopeful that we will do, you’re going to have a lot of people that are going to want to have solar at home,” Little said yesterday in an interview in Bloomberg’s Washington office.

….GE, based in Fairfield, Connecticut, announced in April that it had boosted the efficiency of thin-film solar panels to a record 12.8 percent….The cost of solar cells, the main component in standard panels, has fallen 21 percent so far this year, and the cost of solar power is now about the same as the rate utilities charge for conventional power in the sunniest parts of California, Italy and Turkey.

I am all for that.  I have always had faith that solar would make sense someday, and that we would be ranking out cheap solar conversion surfaces like carpet out of Dalton, Georgia, but every time I have priced it to date on my house, even with huge government subsidies, it has not made sense.    In Europe, it requires 50-60 cent feed in tariffs (basically a subsidy in the form of above-market electricity prices paid by the utility for solar-sourced electricity) to get solar capacity installed, so 15-cents would be great and is approaching the cost of electricity in some high cost areas.

Here in Phoenix, FirstSolar does a ton of thin film.  I have always had mixed feelings about FirstSolar.  On the one hand, they live off subsidies and would basically not be in business if it were not for huge European subsidies of various forms.  On the other, though, they have been one of the few solar companies that actively have talked for years of a development path to a cost position that does not require subsidies.

Don Boudreaux had these two rejoinders to the notion that the GM bailout is a success simply because GM is making a profit.

Economically literate opponents of the Detroit bailout never denied that pumping hundreds of millions of taxpayer dollars into Detroit automakers would restore those companies to health.  Instead, they argued, first, that bailing out Detroit takes resources from other valuable uses.  Because he doesn’t even recognize that other valuable uses were sacrificed by this bailout, Mr. Dionne offers no reason to think that the value of saving Detroit automakers exceeds the value of what was sacrificed to do so.  No legitimate declaration that the bailout is successful is possible, however, without evidence that the value of what was saved exceeds the value of what was sacrificed.

Economically literate bailout opponents argued also that it sets a bad precedent.  By signaling to big corporations that government stands ready to pay the tab for the consequences of their poor decisions, big corporations will more likely make poor decisions in the future.  It’s far too early for Mr. Dionne to conclude that this prediction is mistaken.

I would offer a third concern — that the government has kept hundreds of thousands of skilled workers and billions of dollars of physical assets under the management of the same group that have decidedly underutilized these assets in the past.  A bankruptcy without Federal intervention would likely have shifted assets and skilled workers into new companies with different management teams and cultures pursuing different strategies with different information.

I always have trouble explaining this issue to people.   Think of a sports team with great players but a lousy coach and management team.  Having the government ensure that the lousy management stays in control of the great players is a waste for everyone.  I explained it more in depth in this post, where I concluded

A corporation has physical plant (like factories) and workers of various skill levels who have productive potential.  These physical and human assets are overlaid with what we generally shortcut as “management” but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc.  In fact, by calling all this summed together “management”, we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys.  This is not the case – Just ask Ross Perot.  You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it.

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA…

So what if GM dies?  Letting the GM’s of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM’s DNA has a less than one multiplier, then releasing GM’s assets from GM’s control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe’s productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe’s most productive human and physical assets into organizations with DNA multipliers less than one.

My Forbes column this week focuses on the US rail system, and argues that despite all the angst that we are somehow missing the boat in emulating Europe, Japan and China in building expensive bullet trains, we actually have the best rail system in the world.

These writers worry that the US is somehow being left behind by China because its government builds more stuff.  We are “asleep.”  Well, here is my retort: Most of the great progress in this country occured when the government was asleep.  The railroads, the steel industry, the auto industry, the computer industry  -  all were built by individuals when the government was at best uninvolved and at worst fighting their progress at every step.

In particular, both Friedman and Epstein think we need to build more high speed passenger trains.  This is exactly the kind of gauzy non-fact-based wishful thinking that makes me extremely pleased that these folks do not have the dictatorial powers they long for.   High speed rail is a terrible investment, a black hole for pouring away money, that has little net impact on efficiency or pollution.   But rail is a powerful example because it demonstrates exactly how this bias for high-profile triumphal projects causes people to miss the obvious.

Which is this:  The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital.  It is operated privately, and runs without taxpayer subsidies.    And, it is by far the greatest rail system in the world.  It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s).  But here is the real key:  it is almost all freight.

As a percentage, far more freight moves in the US by rail (vs. truck) than almost any other country in the world.  Europe and Japan are not even close.  Specifically, about 40% of US freight moves by rail, vs. just 10% or so in Europe and less than 5% in Japan.   As a result, far more of European and Japanese freight jams up the highways in trucks than in the United States.  For example, the percentage of freight that hits the roads in Japan is nearly double that of the US.

You see, passenger rail is sexy and pretty and visible.  You can build grand stations and entertain visiting dignitaries on your high-speed trains.  This is why statist governments have invested so much in passenger rail — not to be more efficient, but to awe their citizens and foreign observers.

The sun follows an (approximately) 11-year cycle as sunspots ebb and flow.  The peak of these cycles, ie the number of sunspots at the cycle’s maximum, is thought to correlate with the strength of the sun’s output.  In the past, periods with very low sunspot activity through an entire cycle have correlated with very cold temperatures (e.g. the Maunder Minimum and the Little Ice Age).

Well, NASA has updated its forecast for this cycle and it does not look good:

Current prediction for the next sunspot cycle maximum gives a smoothed sunspot number maximum of about 62 in July of 2013. We are currently over two years into Cycle 24. The predicted size would make this the smallest sunspot cycle in nearly 200 years.

The low cycle 200 years ago coincided with a decade or more of wicked-cold temperatures, particularly in Northern Europe  (think Napoleon’s army freezing to death in 1812).

One of the reasons this probably has not gotten much coverage is that climate scientists have worked hard in the media to attribute the vast majority of past warming, particularly in the period 1978-1998, to ppm changes in CO2 concentration.  But this same 2-decade period saw extremely high solar activity (as measured by sunspots) and ocean cycles like the PDO in the warm phase.  To maximize how much past warming was attributed to CO2, warming alarmists had to take the fairly absurd position that these ocean cycles and changes in solar output had only trivial effects on temperatures (much more here).

Well, we may find out over the next few years just how trivial Mr. Sun is or is not to the climate.  And we may well find out something else many skeptics have said for years — for activities like agriculture, cooling is way more damaging than warming.  In the Middle Ages, agriculture boomed from 1100-1300 even as temperatures rose higher than they are today (at least in Europe).  In the first decades of the 1300′s, cooling led to agricultural failure and famine, famines that are often credited for weakening the population and thus increasing the mortality from the Black Death a few years later.

Corn ethanol

The United States spends about $6 billion a year on federal support for ethanol production through tax credits, tariffs, and other programs. Thanks to this financial assistance, one-sixth of the world’s corn supply is burned in American cars. That is enough corn to feed 350 million people for an entire year.

Government support of rapid growth in biofuel production has contributed to disarray in food production. Indeed, as a result of official policy in the United States and Europe, including aggressive production targets, biofuel consumed more than 6.5 percent of global grain output and 8 percent of the world’s vegetable oil in 2010, up from 2 percent of grain supplies and virtually no vegetable oil in 2004.

This chart, from a book by Branko Milanovic via Carpe Diem reinforces a point about income distribution I make all the time –  for all we talk about income distribution in this country, our poorest 20% would be middle class in many countries of the world.  While I would love to see our poor doing even better, it begs the question of whether distribution or absolute prosperity is more important.

Just to give you a feel for reading the chart, the US’s lowest ventile, or bottom 5%, have income that would put them in the 68th percentile worldwide.    Our poorest 20% (the first 4 ventiles) would be upper middle class or better in Brazil, China, and India.

When comparing to European social democracies, it turns out that while the US’s income distribution is wider, that is almost entirely due to the top end being higher.  The poorest 10% make about the same as the poorest 10% in Europe, and I would argue that this analysis (from a leftish think tank) actually underestimates a quality of life advantage for American poor, who come out higher even than the middle class in Europe on things like living space and appliance ownership.

Perhaps more importantly than income inequality, income mobility remains high in this country. More on income inequality concerns here.

I kid you not

So how did Genghis Khan, one of history’s cruelest conquerors, earn such a glowing environmental report card? The reality may be a bit difficult for today’s environmentalists to stomach, but Khan did it the same way he built his empire — with a high body count.

Over the course of the century and a half run of the Mongol Empire, about 22 percent of the world’s total land area had been conquered and an estimated 40 million people were slaughtered by the horse-driven, bow-wielding hordes. Depopulation over such a large swathe of land meant that countless numbers of cultivated fields eventually returned to forests.

In other words, one effect of Genghis Khan’s unrelenting invasion was widespread reforestation, and the re-growth of those forests meant that more carbon could be absorbed from the atmosphere.

Weirdly, the author equates cooling the Earth with “a glowing environmental report card?”  How did cold become green?

In fact, the world did substantially cool in the 14th century.  The previous 300 warm years had brought prosperity and growth to Western Europe, in fact the first population growth in Europe since as early as 300AD.  The commercial and intellectual regression that is often called the Dark Ages or the early Middle Ages (say 700-1000AD) is often attributed to a demographic collapse in Western Europe.  There are many who credit, at least in part, this collapse for the fall of the Western Roman Empire.

The years 1000-1300 saw a real recovery, the first population growth for hundreds of years, and a number of important (though to us prosaic) technological, intellectual and societal advances. There are several factors behind this boom, but a large one is the Medieval Warm Period, where we can find records of certain crops (e.g. grapes in England) being grown far north of where they can be even today.

The early 1300′s coincided with the return of cold, wet weather to Europe.  Whether this is in part attributable to Genghis Khan’s killing rampage, I can’t say.  But the effects were clear.  The 1320′s and 1330′s saw a series of terrible harvests and resulting famines.   By the 1340′s, much of Europe was hungry and malnurished, weakening the population for the arrival of some rats carrying Bubonic Plague.  Again, not a few historians have noted that the climate-change-induced famines of the early 1300′s likely made the early plagues more virulent.

This world of failed harvests, starving, and plagues — this is a greener world we should aspire to?

(HT:  A reader)

The Thin Green Line reports that Renault recently fired a number of employees for espionage related to electric vehicles.  The site concludes:

The stakes are high: The French automaker, now partnered with Nissan, is betting its future on the popularity of the electric vehicle. It plans to introduce no fewer than three electric cars in Europe this year: a sedan, a light commercial vehicle, and a city car.

Unless the espionage thwarts its plans, Renault’s gamble is probably a good one. Also last week, the judges of the Detroit auto show gave all their top awards to EVs and hybrids — proof, according the Guardian, that “analysts [are] bet[ting] on rising oil prices and wider acceptance of electric cars.” Nissan’s Leaf took second place to the Chevy Volt.

As I wrote in the comments, electric cars are a huge opportunity – there are tens of billions of dollars of corporate welfare from countries around the world to be captured. When it is the Left that is actively supporting huge transfers of funds from taxpayers to large corporations, that is an unprecedented rent-seeking opportunity that European companies, already well-schooled in how to be successful within a corporate state, are sure to avidly pursue. Not since corn ethanol has there been a similar gold-rush for taxpayer funds.

I have argued for a while that Obama is building a European-style corporate state, where a troika of powerful government officials, unions, and the largest corporations run the country for their own benefit.  As far as the economy is concerned, this means legislation that cements the position of large, powerful competitors against smaller competitors or future upstarts.  You can see this in Europe, where for decades the list of largest corporations seldom turns over, as they have entrenched themselves in government to protect their position  (description of the model in more depth here).

Here is today’s episode, from the Obamacare law:

Under the headline, “Construction Stops at Physician Hospitals,” Politico reports today that “Physician Hospitals of America says that construction had to stop at 45 hospitals nationwide or they would not be able to bill Medicare for treatments.” Stopping construction at doctor-owned hospitals might not seem like the best way to boost the economy or to promote greater access and choice in health care, but that exactly what Obamacare is doing.

Kenneth Artz of the Heartland Institute explains, “Section 6001 of the health care law effectively bans new physician-owned hospitals (POHs) from starting up, and it keeps existing ones from expanding.” Politico adds, “Friday [New Year's Eve] marked the last day physician-owned hospitals could get Medicare certification covering their new or expanded hospitals, one of the latest provisions of the reform law to go into effect.”

This little-noticed but particularly egregious aspect of Obamacare is, by all accounts, a concession to the powerful American Hospital Association (AHA), a supporter of Obamacare, which prefers to have its member hospitals operate without competition from hospitals owned by doctors.

We have all heard environmentalists and other American intellectual snobs lamenting that we just are not as smart as Europeans because we have so much less passenger rail.  But because freight and high-speed passenger rail service does not coexist well on the same tracks, urging more passenger rail on the US rail net is effectively asking for more freight to be dumped onto the highways.

Megan McArdle writes:

Moving freight by rail rather than by truck is an enormous carbon saving; one locomotive can haul as much as hundreds of trucks.  It also reduces highway congestion.  Unfortunately, it’s hard for passengers and freight to share tracks.  In part, it’s difficult simply because it’s expensive to upgrade track to handle passenger speeds, but also because freight moves much more slowly, and on an irregular schedule.
I might well argue that if we were simply trying to maximize environmental benefit, we’d ignore passenger rail, and focus on upgrading our freight systems, which sorely need it.  Moreover, these upgrades could largely be made without the massive procedural obstacles that block new high speed rail lines.

But freight rail is not sexy.  It does not excite donors, and it does not excite most of the voters who are motivated by high speed rail.  Politicians win votes by delivering (or at least promising) highly visible improvements; not by silently enhancing the movement of goods from port to Wal-Mart.