Posts tagged ‘spain’

When Regulation Makes Things Worse -- Banking Edition

One of the factors in the financial crisis of 2007-2009 that is mentioned too infrequently is the role of banking capital sufficiency standards and exactly how they were written.   Folks have said that capital requirements were somehow deregulated or reduced.  But in fact the intention had been to tighten them with the Basil II standards and US equivalents.  The problem was not some notional deregulation, but in exactly how the regulation was written.

In effect, capital sufficiency standards declared that mortgage-backed securities and government bonds were "risk-free" in the sense that they were counted 100% of their book value in assessing capital sufficiency.  Most other sorts of financial instruments and assets had to be discounted in making these calculations.  This created a land rush by banks for mortgage-backed securities, since they tended to have better returns than government bonds and still counted as 100% safe.

Without the regulation, one might imagine  banks to have a risk-reward tradeoff in a portfolio of more and less risky assets.  But the capital standards created a new decision rule:  find the highest returning assets that could still count for 100%.  They also helped create what in biology we might call a mono-culture.  One might expect banks to have varied investment choices and favorites, such that a problem in one class of asset would affect some but not all banks.  Regulations helped create a mono-culture where all banks had essentially the same portfolio stuffed with the same one or two types of assets.  When just one class of asset sank, the whole industry went into the tank,

Well, we found out that mortgage-backed securities were not in fact risk-free, and many banks and other financial institutions found they had a huge hole blown in their capital.  So, not surprisingly, banks then rushed into government bonds as the last "risk-free" investment that counted 100% towards their capital sufficiency.  But again the standard was flawed, since every government bond, whether from Crete or the US, were considered risk-free.  So banks rushed into bonds of some of the more marginal countries, again since these paid a higher return than the bigger country bonds.  And yet again we got a disaster, as Greek bonds imploded and the value of many other countries' bonds (Spain, Portugal, Italy) were questioned.

So now banking regulators may finally be coming to the conclusion that a) there is no such thing as a risk free asset and b) it is impossible to give a blanket risk grade to an entire class of assets.  Regulators are pushing to discount at least some government securities in capital calculations.

This will be a most interesting discussion, and I doubt that these rules will ever pass.  Why?  Because the governments involved have a conflict of interest here.  No government is going to quietly accept a designation that its bonds are risky while its neighbor's are healthy.  In addition, many governments (Spain is a good example) absolutely rely on their country's banks as the main buyer of their bonds.  Without Spanish bank buying, the Spanish government would be in a world of hurt placing its debt.  There is no way it can countenance rules that might in any way shift bank asset purchases away from its government bonds.

European Auster-Yeti

There are people who will swear to this day that, despite all evidence to the contrary, Bigfoot exists and they have seen it.  Paul Krugman similarly is just sure he has seen European austerity.  The rest of us are left scratching our heads for the evidence -- he doesn't even have a blurry photo or footprint.  Just tales from a friend of a friend, who is not only sure there has been austerity, but that it caused an old lady to dry her cat in a microwave and that if you swim 20 minutes after eating you will get cramps.

The official Keynesian story is that the PIIGS of Europe (Portugal, Italy, Ireland, Greece and Spain) have been devastated by cutbacks in public spending. Austerity has made things worse rather than better – clear proof that Keynesian stimulus is the answer. Keynesians claim the lack of stimulus (of course paid for by someone else) has spawned costly recessions which threaten to spread.  In other words, watch out Germany and Scandinavia: If you don’t pony up, you’ll be next.

Erber finds fault with this Keynesian narrative. The official figures show that PIIGS governments embarked on massive spending sprees between 2000 and 2008. During this period, their combined general government expenditures rose from 775 billion Euros to 1.3 trillion – a 75 percent increase. Ireland had the largest percentage increase (130 percent), and Italy the smallest (40 percent). These spending binges gave public sector workers generous salaries and benefits, paid for bridges to nowhere, and financed a gold-plated transfer state. What the state gave has proven hard to take away as the riots in Southern Europe show.

Then in 2008, the financial crisis hit. No one wanted to lend to the insolvent PIIGS, and, according to the Keynesian narrative, the PIIGS were forced into extreme austerity by their miserly neighbors to the north. Instead of the stimulus they desperately needed, the PIIGS economies were wrecked by austerity.

Not so according to the official European statistics. Between the onset of the crisis in 2008 and 2011, PIIGS government spending increased by six percent from an already high plateau.  Eurostat’sprojections (which make the unlikely assumption that the PIIGS will honor the fiscal discipline promised their creditors) still show the PIIGS spending more in 2014 than at the end of their spending binge in 2008.

As  Erber wryly notes: “Austerity is everywhere but in the statistics.”

Statists Write History

In today's history lesson, we have something called the "Addled Parliament."  Surely that cannot be a good name to have, and in fact the name was given as a term of derision, very like how the Left describes the current Congress as obstructionist and ineffectual.

So why did it gain the name "addled"?  It turns out, for about the same reasons the current Congress comes under derision from Obama:  It did not give the King all the money he wanted.  Via Wikipedia:

The Addled Parliament was the second Parliament of England of the reign of James I of England (following his 1604-11 Parliament), which sat between 5 April and 7 June 1614. Its name alludes to its ineffectiveness: it lasted no more than eight weeks and failed to resolve the conflict between the king, who wished to raise money in the form of a 'Benevolence', a grant of £65,000 and the House of Commons (who were resisting further taxation). It was dissolved by the king.

Parliament also saw no reason for a further grant. They had agreed to raise £200,000 per annum as part of the Great Contract and as the war with Spain had reached its resolution with the 1604 Treaty of London, they saw the King's continued financial deficit as a result of his extravagance (especially on Scottish favourites such as Robert Carr) and saw no justification for continued high spending.

Moreover there remained the continuing hostility as a result of the kings move of setting impositions without consulting Parliament.

Wow, none of that sounds familiar, huh?  In fact, James was an awful spendthrift.  Henry the VII was fiscally prudent.  Henry the VIII was a train wreck.  Elizabeth was a cheapskate but got into expensive wars, particularly in her declining years, and handed out too many government monopolies to court favorites.  But James came in and bested the whole lot, tripling Elizabeth's war time spending in peace time, mainly to lavish wealth on family and court favorites, and running up debt over 3x annual government receipts.   History, I think, pretty clearly tells us that Parliament was absolutely correct to challenge James on spending and taxes, and given that it took another century, a civil war, a Glorious Revolution, a regal head removal, and a lot of other light and noise to finally sort this issue out, it should not be surprising that this pioneering Parliament failed.  Yet we call it "addled".

Some Potential Good News on Solar

This is terrific, if true.  My fear, of course, is they are getting subsidized through a back door somewhere, but if they really think they can make subsidy-free solar work financially, that's awesome:

Two German solar energy developers are planning to build photovoltaic plants in southern Spain that will earn a return without government subsidies.

Wuerth Solar GmbH & Co. intends to build a 287-megawatt plant in the Murcia area for 277 million euros ($363 million), according to the regional authority. Gehrlicher Solar AG said it plans to develop a 250-megawatt solar park in the Extremadura region for about 250 million euros.

The projects, about three times larger than any European solar plant, may be the first that don’t rely on feed-in tariffs and compete with wholesale power prices. All plants in the region so far depend on fixed premium rates for solar power, which can be several times higher than wholesale prices.

Spain suspended the tariffs on Jan. 27 as part of government austerity measures, threatening the survival of the industry. Tariffs for large-scale solar were set at 121 euros per megawatt-hour. Developers now look to build plants without this support, helped by falling equipment prices.

Flash: European Finances Still Screwed Up

As I predicted, the various highly touted European debt and currency interventions last month did squat.  This is no surprise.  The basic plan currently is to have the ECB give essentially 0% loans to banks with the implied provision that they use the money to buy sovereign debt.  Eventually there are provisions for austerity, but I wrote that I don't think it's possible these will be effective.   It's a bit unclear where this magic money of the ECB is coming from - either they are printing money (which they refuse to own up to because the Germans fear money printing even more than Soviet tanks in the Fulda Gap) or there is some kind of leverage circle-jerk game going where the ECB is effectively leveraging deposits and a few scraps of funding to the moon.

At this point, short of some fiscal austerity which simply is not going to happen, I can't see how the answer is anything but printing and devaluation.  Either the ECB prints, spreading the cost of inflation to all counties on the Euro, or Greece/Spain/Italy exit the Euro and then print for themselves.

The exercise last month, as well as the months before that, are essentially mass hypnosis spectacles, engineered to try to get the markets to forget the underlying fundamentals.  And the amazing part is it sort of works, from two days to two weeks.  It reminds me of nothing so much as the final chapters of Atlas Shrugged where officials do crazy stuff to put off the reckoning even one more day.

Disclosure:  I have never, ever been successful at market timing investments or playing individual stocks, so I generally don't.  But the last few months I have had fun shorting European banks and financial assets on the happy-hypnosis news days and covering once everyone wakes up.  About the only time in my life I have made actual trading profits.

Thought problem:  I wish I understood the incentives facing European banks.  It seems like right now to be almost a reverse cartel, where the cartel holds tightly because there is a large punishment for cheating.  Specifically, any large bank that jumps off the merry-go-round described above likely starts the whole thing collapsing and does in its own balance sheet (along with everyone else's).  The problem is that every day they hang on, the stakes get higher and their balance sheets get stuffed with more of this crap.  Ironically, everyone would have been better getting off a year ago and taking the reckoning then, and certainly everyone would be better taking the hit now rather than later, but no one is willing to jump off.  One added element that makes the game interesting is that the first bank to jump off likely earns the ire of the central bankers, perhaps making that bank the one bank that is not bailed out when everything crashes.  It's a little like the bidding game where the highest bidder wins but the two highest bidders have to pay.  Anyone want to equate this with a defined economics game please do so in the comments.

Over the Cliff, My Fellow Lemmings!

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

DESCRIPTION

[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.

How Governments Solve Problems

This is hilarious, all the more so because the actors involved have absolutely no self-awareness of just how bad this looks

This week alone has seen a ratings downgrade for Spain as well as a threat by agencies to review France's AAA status -- and the markets have taken notice. Once again, it would seem, ratings agencies are making things difficult for European countries.

Now, the European Union is considering doing something about it.

European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis, according to a report in Thursday's issue of the Financial Times Deutschlandnewspaper

This is not even a content neutral ban on speech - it obviously will only be applied to bad reports, not positive ones.  No wonder Obama has always been so admiring of the Europeans.

Seen and Unseen

Every time you see a politician claiming he created jobs with some expenditure of taxpayer money, you have to ask yourself, what would private investors have done with that money had it not been taken away from them?  Via John Stossel

In a new article, "The Myth of Green Energy Jobs: The European Experience", the environmental scientist and a resident scholar at the American Enterprise Institute writes,

"Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy."

Room Temperature Ice

Some scientists claim to be able to make room temperature ice (yes, I presume at 1 atm pressure).  Not sure what to make of it:

Earth's climate is strongly influenced by the presence of particles of different shapes and origins "” in the form of dust, ice and pollutants "” that find their way into the lowest portion of the atmosphere, the troposphere. There, water adsorbed on the surface of these particles can freeze at higher temperatures than pure water droplets, triggering rain and snow.Researchers at Spain's Centre d'Investigació en Nanociència i Nanotecnologia (CIN2) have studied the underlying mechanisms of water condensation in the troposphere and found a way to make artificial materials to control water condensation and trigger ice formation at room temperature. Described in the Journal of Chemical Physics, which is published by the American Institute of Physics, their work may lead to new additives for snowmaking, improved freezer systems, or new coatings that help grow ice for skating rinks.

The next step? The researchers' goal now is to produce environmentally-friendly synthetic materials for efficiently inducing snow. "If water condenses in an ordered way, such as a hexagonal structure, on such surfaces at ambient conditions, the term "˜room temperature ice' would be fully justified," adds Verdaguer. "The solid phase, ice, would be produced by a surface effect rather than as a consequence of temperature. In the long term, we intend to prepare smart materials, "˜intelligent surfaces,' that will react to water in a predefined way."

I remember some work on how water boiling could be suppressed by polishing surfaces where bubbles form (watch a pot of water boiling, the bubbles appear on the pan surfaces).  I presume this may be a related effect.

"Green Jobs" Are Starting To Sound a Lot Like Those Jobs At The Museum of Science and Trucking on the Sopranos

Via Christopher Horner:

Spain's Dr. Gabriel Calzada "” the author of a damning study concluding that Spain's "green jobs" energy program has been a catastrophic economic failure "” was mailed a dismantled bomb on Tuesday by solar energy company Thermotechnic.

Says Calzada:

Before opening it, I called [Thermotechnic] to know what was inside "¦ they answered, it was their answer to my energy pieces.

Dr. Calzada contacted a terrorism expert to handle the package. The expert first performed a scan of the package, then opened it in front of a journalist, Dr. Calzada, and a private security expert.

The terrorism consultant said he had seen this before:

This time you receive unconnected pieces. Next time it can explode in your hands.

Dr. Calzada added:

[The terrorism expert] told me that this was a warning.

The bomb threat is just the latest intimidation Dr. Calzada has faced since releasing his report and following up with articles in Expansion (a Spanish paper similar to the Financial Times). A minister from Spain's Socialist government called the rector of King Juan Carlos University "” Dr. Calzada's employer "” seeking Calzada's ouster. Calzada was not fired, but he was stripped of half of his classes at the university. The school then dropped its accreditation of a summer university program with which Calzada's think tank "” Instituto Juan de Mariana "” was associated.

Additionally, the head of Spain's renewable energy association and the head of its communist trade union wrote opinion pieces in top Spanish newspapers accusing Calzada of being "unpatriotic" "” they did not charge him with being incorrect, but of undermining Spain by daring to write the report.

Green Rent Seeking

I am a little late on this but want to link it none-the-less:

As predicted was inevitable, today the Spanish newspaper La Gaceta runs with a full-page article fessing up to the truth about Spain's "green jobs" boondoggle, which happens to be the one naively cited by President Obama no less than eight times as his model for the United States. It is now out there as a bust, a costly disaster that has come undone in Spain to the point that even the Socialists admit it, with the media now in full pursuit....

La Gaceta boldly exposes the failure of the Spanish renewable policy and how Obama has been following it. The headline screams: "Spain admits that the green economy as sold to Obama is a disaster."

This is a failure of every single number ever published by supporters of government stimulus programs.  They always fail to acknowledge that the money for these programs came from somewhere.  It was being employed by someone to buy something or to invest in something or to pay someone's wages.  Every private company in the world seems to understand this concept of opportunity cost, so it is amazing that it is so hard to grasp in the media which breathlessly reports every BS number Obama has spit out.

Window Repair Jobs

Tyler Cowen links to a good article that gets at the fallacy that suddenly obsoleting our energy infrastructure and having to rebuild it will be of net economic benefit.

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain's experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created

Includes 1 million euros in government subsidies per wind job created.

In my mind, the green jobs mantra is a result of the CO2 abatement case becoming fatally weak, with supporters of legislation casting about for other justificaitons.  From the very beginning, many of the most passionate folks are on the AGW bandwagon not because they really understand the science, but because the theory provided justification for a range of government actions (reduced growth, limited technology, reduced energy use, reduction in global trade -- even vegetarianism) that they supported long before AGW made the news.

Update: A quick note on a theme I harp on a lot - nameplate capacity for wind and solar is really, really misleading.  In Spain in the study cited, wind operates at 19% of nameplate over the course of a year and solar operates at 8% (figure 3).  The actual CO2 reduction is even worse, because, particularly for wind, fossil-fuel fired turbines have to be spinning on hot backup for when wind suddenly dies.  Germany, the largest wind user in the word, found only 1,000MW of reduced fossil fuel plant needs from every 24,000 MW of wind capacity.

Absolutely Inevitable

If you move solar panels out of the Arizona desert, they are going to produce less electricity.  You almost don't have to tell me where they are going -- if they are currently close to the optimal spot for maximum solar energy production, then moving them is bound to reduce their output.

Seems obvious, huh?  So why is it so difficult to understand that when the government moves capital and other resources away from the industries where the forces of market optimization have put it, output is going to go down.

Subsidizing renewable energy in the U.S. may destroy two jobs for every one created if Spain's experience with windmills and solar farms is any guide.

For every new position that depends on energy price supports, at least 2.2 jobs in other industries will disappear, according to a study from King Juan Carlos University in Madrid.

U.S. President Barack Obama's 2010 budget proposal contains about $20 billion in tax incentives for clean-energy programs. In Spain, where wind turbines provided 11 percent of power demand last year, generators earn rates as much as 11 times more for renewable energy compared with burning fossil fuels.

The premiums paid for solar, biomass, wave and wind power - - which are charged to consumers in their bills -- translated into a $774,000 cost for each Spanish "green job" created since 2000, said Gabriel Calzada, an economics professor at the university and author of the report.

"The loss of jobs could be greater if you account for the amount of lost industry that moves out of the country due to higher energy prices," he said in an interview.

We all know from reading the media that the Obama administration is 1) full of brilliant people way smarter than the rest of us and 2) driven by science.  So this insightful exchange between a reporter and White House spokesman Robert GIbbs vis a vis this Spanish study should come as no surprise:

Q: Back on the President's speech today, a Spanish professor, Gabriel [Calzada] Álvarez, says after conducting a study, that in his country, creating green jobs has actually cost more jobs than it has led to: 2.2 jobs lost, he says, for every job created. And he has issued a report that specifically warns the President not to try and follow Spain's example.

MR. GIBBS: It seems weird that we're importing wind turbine parts from Spain in order to build "” to meet renewable energy demand here if that were even remotely the case.

Q Is that a suggestion that his study is simply flat wrong?

MR. GIBBS: I haven't read the study, but I think, yes.

Q Well, then. (Laughter.)

In two sentences, Mr. Gibbs demonstrates that 1) He is an idiot and 2) He has no respect for science.  The correct, intelligent response would be "I can't comment, I have not read the study yet."  Mr. Gibbs does deserve credit for being an apparent master of the non-sequitur.  I have been trying to think of an eqivilent formulation.  The best I can come up with is to suppose someone said that "publicly funded sports stadiums generate no new economic activity and are just a taxpayer subsidy of sports owners, players, and ticket holders" and getting the response that  "how can this be when people still go to the games?"

I was afraid that all this braininess in the White House was going to eliminate the humor from Administration pronouncements but I see that won't be the case.

Historical Revisionism

I think regular readers know that I am not one to see Islamic terrorists hiding under every rock.  In fact, I am not sure I have written a single post on the current state of Islam or ties to terrorism.  I don't see the world primarily in terms of some great culture war with Islam.  Certainly a number of fundamentalist Islamic states suck in terms of human rights, and some of that is probably due to ties with Islam, but many other states suck nearly as much without any Muslim help.

That being said, I must say as someone interested in history that this argument from Dr. Mahmoud Mustafa Ayoub of Berkeley, as reported from the Canadian human rights tribunal by Andrew Coyne, strains credulity:

What is jihad? Article equates it with Al Qaeda: fighting,
suicide bombing etc. But word actually means, originally, "to strive,
to do one's best." Koranic sense is that religious struggle we must all
engage in within our souls against evil tendencies. There is also
"social jihad," the obligation to change things that are wrong. This does not mean violence. The Koran is not a book of violence.

The notion of armed struggle, or violent jihad, is
mentioned in the Koran. "Permission has been given to those who have
been wronged only because they say God is our lord that they fight in
self-defence." (Sura 22.) So jihad is not limited to fighting "” it's just one type of jihad,
and should only be done in self-defence. The extremist, violent types
are an anomaly. "They are more a problem for us than for the west."

I have no problem with modern folks interpreting the Koran in this way for themselves.  But this is absurd from a historical context.  This portrayal of jihad as a sort of peaceful civil rights movement may be how moderate Muslims want to make the Koran relevant to their modern life, but it is outrageous in the historic context of if the 7th century.  People of all faiths in this era didn't have sit-ins to correct social wrongs -- they gathered up their friends and some swords and went out to try to chop up the folks who did them wrong.  Muhammad was a brilliant military leader, uniting disparate Arab tribes out of nowhere to carve out a huge part of the western world as their empire.  His (and his successors') achievement is roughly equivalent to an unknown set of tribes suddenly bursting out of the Amazon and taking over modern North America.

The concept of jihad as originally applied in the 7th and 8th centuries was bloody and militaristic -- and effective.  So much so that the Catholics copied many of the key parts for their crusades.  The 7th century was a totally different world in its outlook and assumptions.  Here is one example:  We have heard many times of the slave revolts in Rome, and most of us have seen Spartacus.  But not a single person in the 1000 years of the Roman empire, slave or not, is recorded to have ever advocated the elimination of slavery.  They may have wanted to be free themselves, or treated better, but everyone accepted the institution of slavery even while trying not to be a slave themselves.  We, with our 19th century anti-slavery movement, see the slave revolts of Rome as something they simply were not.  I believe a similar revisionism is at work here on jihad.

All that being said, I have no opinion on whether or not the militaristic concept of jihad animates any substantial number of modern Muslims or not.  I simply am not well enough informed, and currently find it hard to find any text discussing this issue that is trustworthy on either side.

Postscript:  It is true that the Muslims showed special respect in their lands to Jews and Christians  - in part for religious reasons and in part for practical reasons related to special taxes.  The Spain of three religions under Muslim rule was certainly more dynamic and tolerant than the counter-reformation Catholic Spain.  But this fact does not obviate the militaristic origins of jihad.  Islam respected Christians and Jews .... in the lands where the Muslims had taken over and ruled. Where Muslims did not yet rule but wanted to, all bets were off.

The Most Fanciful Thing I Have Read Today

Conservatives were all over Keith Ellison for his comments about 9/11.  While I think that many of the arguments by 9/11 "truthers" are scientifically bankrupt, I kind of respect the general lack of trust and respect for the government that their skepticism stems from.  And as to Ellison's comments about impeaching the vice-president, I can't imagine anything I would enjoy more than watching Congress tie itself up for months impeaching a largely irrelevant office holder.

However, I thought this was pretty fanciful:

You'll always find this Muslim standing up for your right to be atheists
all you want," Ellison, the first Muslim to serve in Congress, said in a speech to more than 100 atheists at the Southdale Library in Edina. . . .

Does anyone really think that if they showed up at the Tehran airport tomorrow proclaiming that "I'm an atheist - let's be pals" that they would be treated with respect?  If I made up a list of countries not to visit as an atheist, 15th Century Spain would be first, but my guess is that several modern Islamic countries would crack the top 10.

Parochialism from the NY Times

I was reading the NY Times' International Herald Tribune today here in Paris, and saw something funny at the end of an article about the crazy process underway to select the 2012 Olympic venue.  By the way, this is the big issue in Paris right now - you can't walk anywhere without finding yourself in the middle of some sort of Paris promotional event, presumably being simulcast back to the selection committee in Singapore.

Anyway, the IHT had this funny line:

The last days of the race drew the president of France, the prime minister of Russia and the queen of Spain here.  New York City pulled Senator Hillary Rodham Clinton away from a busy schedule to lend her star power.

Uhh, you mean the president of France and the prime minister of Russia don't have busy schedules?  And wouldn't a more correct formulation be "while other cities were represented by their head of state, NY City could only muster a junior member of Congress"?  I hope any city but New York wins, because, given past history, NYC will likely get themselves into some financial hole hosting the Olympics that the rest of the country will have to bail them out of.

By the way, apparently in a bid to head off past corruption, the International Olympic Committee has banned its members from actually visiting host cities and their facilities ahead of the selection.  This seems kind of extreme - you have to pick between cities but you can't learn anything useful about them.  Its depressing that the members of the Olympic committee are so untrustworthy that the only way to prevent them from collecting bribes from potential host countries is to not allow them anywhere near the country.

Bailing out Euro Disney

This, from Marginal Revolution, is kind of funny for its irony value:

For years, France has fought what is sees as an American cultural invasion, powered by Hollywood movies, U.S. pop music and giant brands like Coca-Cola.  Now, it is going to great lengths to save an American cultural icon in its backyard: Disneyland

The French government has just finished helping Walt Disney Co. bail out Euro Disney SCA, the operator of two Disney theme parks outside Paris.  A state-owned bank is contributing around $500 million in investments and local concessions to save Euro Disney from bankruptcy.  This comes after 17 years during which French leaders have spent hundreds of millions of dollars and countless hours to ensure that the land of Money [ed: Monet?] could keep Mickey Mouse.  Still saddled with debt, Euro Disney is gambling that expensive new attractions and an improved tourism climate will deliver a turnaround.

I am not sure the Euro Disney site will ever work.  The main problem is that it was put in the wrong place.  The plurality of European tourists go to Spain for vacation - Spain is the Florida/California of Europe, with its warm weather and nice beaches.  Putting a theme park in northern France may seem geographically logical, on the transportation nexus between England, France, and Germany, but it makes no sense for tourism -- its in a great place for a distribution warehouse, but no one wants to take their vacation there. 

The equivalent would be putting a Disney theme park in Chicago.  Chicago is a wonderful town and sits astride the #1 transportation hub in the US, but few people want to go there on their vacations, at least not for about 9 months of the year (by the way, due to ocean currents the situation is not that comparable, but note that Euro Disney is actually NORTH of Chicago!)

Giving Thanks For the Lack of Gold and Silver

Hey, what does a good capitalist have against gold and silver?  Nothing, per se, but I have been reading John Steele Gordon's An Empire of Wealth and it got me to thinking how important for the eventual success of the US it was the English and the Dutch, rather than the French and the Spanish, colonized most of the eastern US.

Very few countries colonized by Spain have been able to recover from the experience, even hundreds of years later.  When people decry imperialism, they should be thinking first of the old Spanish empire.  Their colonization was nearly entirely extractive - focused on pulling out gold and silver and some tropical agricultural products.  There was no thought of developing a colony that might grow in value over time through investment and entrepreneurship.  Perhaps worse, Spanish and French imperialism were entirely micro-managed top-down by the state, leaving a legacy of bad statist economics in the countries they colonized.  My previous post, though it focused on France rather than Spain, shows through statistics the legacy of poverty and bad government that this approach left behind.

So, how does silver and gold come into play?  Well, the US eastern seaboard is singularly devoid of precious metal ore deposits, which kept Spanish attention to the south, seeking more lucrative immediate spoils in Mexico and South America.  The lack of abundant fur animals like beaver kept the French to the north.  As a result, the US was left to be colonized by the Dutch and the English.  Unlike the Spanish and the French, most of this colonization was not military or state-run.  Most of the major colonization pushes were actually for-profit private enterprises.  Though these early colonies would have loved to find gold and silver, lacking this they had to find ways to develop the land and the New World to make returns for their investors.