EUCOM Economic Analysis - Part I

**Surferbeetle** · 01-10-2013

Originally Posted by davidbfpo

The European political elite have failed to persuade most voters IMO that the EU - which is a federal state - is necessary, even preferable. Along came the recession plus further weakening public belief in politicians.

David,

Appreciate your insights and point that 'the brussels political elite' have failed to convince many that the EU as structured or as proposed can/will provide the highest and most authoritative good for the polis. Here across the pond we also have questions regarding 'the washington political elite' and their (apparent lack) of ability to concentrate on providing the highest and most authoritative good for the polis.

Ran a quick google search and found that France, Ireland, and the Netherlands all have had significant questions regarding the EU Constitution. As you have noted previously, Nigel Farage seems to be one of the stronger/more effective communicators on this topic of late. I am not sure about Taoiseach Kenney's latest. Nonetheless it's reassuring to see that civil discourse and the democratic process (as flawed and messy as it is) are the preferred method to examine and address concerns.

Meanwhile, back at the armchair, I have pulled out my quadrangle graph paper & pen and started drafting up likely trading & investing scenarios involving Brixit and the latest US debt ceiling debacle...

Although you are likely more familiar with the topics at hand than am I, here are a few of this evening's search links that I found to be of interest:

Plato, Aristotle, and the Purpose of Politics, Dr Kevin M. Cherry, University of Richmond, http://www.cambridge.org/aus/catalog...7021679&ss=exc
French European Constitution referendum, 2005, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/French_...ferendum,_2005
Irish European Constitution referendum, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Irish_E...ion_referendum
Dutch European Constitution referendum, 2005, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Dutch_E...ferendum,_2005
Nigel Farage, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Nigel_Farage
Enda Kenny: “Brixit” would be “disaster”, By Pierre Lemoine in Dublin | Wednesday 09 January 2013, Europolitics, http://www.europolitics.info/europol...346907-46.html
Goodbye Europe, The Economist, Dec 8th 2012, http://www.economist.com/news/leader...ld-be-reckless
Britain needs to lead in a strong, reformed EU, From Mr Roland Rudd, Sir Richard Branson and others, January 8, 2013 10:01 pm, Letter to the FT, www.ft.com
Banks Win 4-Year Delay as Basel Liquidity Rule Loosened, By Jim Brunsden, Giles Broom & Ben Moshinsky - Jan 7, 2013 9:23 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-0...roup-deal.html
Japan’s Abe Urges 2% Inflation as Shirakawa Attends Meeting, By Andy Sharp & Keiko Ujikane - Jan 9, 2013 7:09 PM MT, Bloomberg News, http://www.bloomberg.com/news/2013-0...-meetings.html
If the tide goes out, investors beware, By James Mackintosh, January 9, 2013 8:35 pm, Financial Times, www.ft.com

**Fuchs** · 01-10-2013

This may interest you

http://delong.typepad.com/sdj/2013/0...ecessions.html

**Firn** · 01-11-2013

Interesting. Thanks for the links.

**Surferbeetle** · 01-13-2013

Energiewende, spare economic capacity, what the heck is FRED, linkages between soft & economic power, Japan, trillion dollar coins, France's economy...

Der zweifelhafte Erfolg der deutschen Stromexporte, Matthias Benz, Berlin, 13.1.2013, NZZ, http://www.nzz.ch/aktuell/wirtschaft...rte-1.17937315

Deutschland hat im vergangenen Jahr so viel Strom ins Ausland geleitet wie nie zuvor. Dies geht aus einer neuen Schtzung des Bundesverbandes der Energie- und Wasserwirtschaft (BDEW) hervor. Demnach exportierte Deutschland 2012 Strom im Umfang von 23 Mrd. kWh. Im Vorjahr war dieser Wert auf 6 Mrd. kWh gesunken. Als Hauptgrund fr das Exportwachstum wird der starke Ausbau der erneuerbaren Energien, vor allem von Windkraft- und Solaranlagen, angefhrt.

Der Chef des deutschen Energiekonzerns E.On, Johannes Teyssen, betont etwa schon seit lngerem, dass man in Polen und Tschechien die Stabilitt des Netzes gefhrdet sehe, wenn die deutschen Windkraftwerke im Norden zu viel Strom lieferten. Beide Lnder wollen deshalb ihre Netze mit sogenannten Phasenschiebern zeitweise abschotten. Dies luft freilich der Idee eines integrierten europischen Binnenmarkts fr Strom entgegen.

How much spare capacity does the world have left?, January 13, 2013 5:12 pm by Gavyn Davies, Financial Times, http://blogs.ft.com/gavyndavies/2013...rld-have-left/

What does all this imply for the future? In the short term, it suggests that any rise in nominal demand, stemming from expansionary policy or a recovery in private spending, is much more likely to be reflected in rising real output than in higher inflation. Demand management policy can be expansionary.

However, in the longer term, it does not support the view that the developed economies can easily return to their pre-2008 trendlines for GDP through demand expansion alone. Perhaps they can never get there, or perhaps there is a speed limit which cannot be safely exceeded [2]. In either case, supply constraints would not be as remote as the use of linear trendlines would imply.

Federal Reserve Economic Data, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Federal..._Economic_Data

British tin ears leave EU deaf to demands, By Tony Barber in London, January 13, 2013 4:46 pm, Financial Times, www.ft.com

On January 22 Angela Merkel and Franois Hollande, the German chancellor and French president, will lead celebrations marking the 50th anniversary of the Elyse treaty of postwar Franco-German reconciliation. Only tin diplomatic ears, or minds closed by arrogance, can explain why British policy makers fail to care that Paris and Berlin might be offended if David Cameron, the UK prime minister, were to choose this almost sacred date for his long-awaited speech on Europe.

Notes on Japanese Numbers (Boring), Paul Krugman, January 13, 2013, 11:28 am, NYT Blog, http://krugman.blogs.nytimes.com/201...umbers-boring/

In a way, recent developments can be seen as a demonstration of a point I’ve tried to make about bond vigilantes: even if they show up, they won’t drive interest rates up, they’ll drive the dollar down, which is a good thing. In Japan’s case, you can think of what’s happening as a growing belief on the part of investors that Japan will end up inflating away part of its debt. This has led to a currency drop; it has *not* led to an interest rate spike:

Debt Limit Showdown Spurs Debate On Trillion-Dollar Coin, By Ian Katz - Jan 8, 2013 11:33 AM MT, http://www.bloomberg.com/news/2013-0...llar-coin.html

The proposal for the Treasury Department to mint a platinum coin worth $1 trillion and deposit it at the Federal Reserve to give the U.S. enough money to pay its debts...

The Treasury will run out of funds to pay its bills between Feb. 15 and March 1, the Washington-based Bipartisan Policy Center said in a report yesterday.

IMF Concerned With the Pace of France’s Economic Reform, By: Domenico Lombardi, January 8, 2013, Brookings, http://www.brookings.edu/research/op...onomy-lombardi

While the IMF had hoped for a “competitiveness shock” reform package, Paris has responded with selective and incremental measures to be put in place gradually. On the whole, the Hollande presidency has yet to put forward a convincing reform agenda. And yet, experience teaches us that the first months of government are the most fruitful in terms of reform.

Bloomberg Risk Brief, 01.11.13, http://www.bloombergbriefs.com/files/RiskP1_011113.pdf

The 10 largest U.S. money-market funds’ holdings of French bank securities overtook their British counterparts for the first time in at least 16 months on growing confidence in the euro region and cheap U.K. state funding that lessened the need to issue short-term debt.

The funds’ French bank holdings increased by $9.6 billion to $42.8 billion in December, while British banks were cut by $11.2 billion to $29.4 billion, according to a survey of the funds’ bank holdings by Bloomberg Brief: Risk Newsletter. The bank with the largest increase was Natixis SA, the investment-banking unit of Groupe BPCE, France’s second- largest lender by branches.

**Firn** · 01-13-2013

Originally Posted by Surferbeetle

Energiewende, spare economic capacity, what the heck is FRED, linkages between soft & economic power, Japan, trillion dollar coins, France's economy...

Der zweifelhafte Erfolg der deutschen Stromexporte, Matthias Benz, Berlin, 13.1.2013, NZZ, http://www.nzz.ch/aktuell/wirtschaft...rte-1.17937315

I will have to drop a couple of questions to my uncle, an engineer, who manages a couple of hydro power plants on this issue which is highly interesting. (Water being a hot topic as a source of potential kinetic energy storage). I personally understand all too little about the issue. It seems to me that an old and quite proven interplay of entities is heavily unbalanced by the influx of this renewable energy revolution. Adaption is necessary to overcome this, but how to do it and who pays for it?

Of course, and needless to say E.on is also one of the players and suffered heavily by the Merkel switch which was partly an expropriation for the owner of it's stock which saw their value go down a great deal. (I invested quite recently in E.On IIRC I also wrote so in this thread) So we have to take everything they say with a pinch of salt. Still the basic problem is, I guess, quite clear: The demand does often not match the (forced) supply.

With wind and solar energy the supply side does get of course determined by exogenous variables which can partly be planned for but not positively influenced. A better interBund infrastructure could spread the shocks better, but much more so a European one. As usual the solution will best come at many levels. For example energy-intensive industries might be attracted by a plain lower price to consume more on sunny and windy hours. This will mean some head-scratching and some € invested but may give a good return on it. Or for example boilers might get increasingly get switched on during the day.

**Surferbeetle** · 01-13-2013

Firn,

I owe you a thought out reply regarding the energiewende.... perhaps there are some worthwhile comparisons with the economics of hydropower rich countries?

In the meantime, here is a link to an extraordinary article by Herr. Dr. Schauble in the FAZ:

Institutioneller Wandel und Europische Einigung, Wofgang Schaulble, 11.01.2013, FAZ, http://www.faz.net/aktuell/wirtschaf...-12021794.html

Um weitere Integrationsschritte in Europa zu schaffen, werden wir auf pragmatische - also suboptimale, aber derzeit erreichbare - Schritte in Richtung weiterer Integration und damit auch auf Flexibilitt angewiesen bleiben. Das ist in der realen Welt besser als Stillstand und hufig auch Wegbereiter fr knftige systemgerechtere Lsungen

Gotta go do some chores....no rest for the wicked.

**Fuchs** · 01-13-2013

EON and RWE suffer because they're fossilized.

Energy storage with potential energy stores is very limited for geographic reasons and inefficient anyway.
The real promise lies AFAIK in electrified individual traffic.

Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners.

OK, this was but an example of the kind of non-traditional thinking about energy that fossilised corporations are capable of using for PR and presentations, but not capable of actually exploiting economically.
They're even bad at properly setting up the largest wind power investment projects, the offshore wind parks.

We have asimilar fossilised corporation problem in the automotive sector. German car makers (the big OEM brands) pretend to be innovative, but the French ones have been more innovative since the 1930's.
The real capability to develop novelties other than in internal combustion powerpacks has moved to the tier one suppliers anyway, and the OEMs are too timid in making use of their innovations, pressing for ever lower costs instead (FU Lopez!).

The result is the rise of companies such as Fisker, Tesla.
The Tier Ones could build an electric car easily (they completed functional conventional concept cars at ease), but fear that such a move up the value added chain will incur a boycott by the OEMs. It's basically a rarely described form of market failure.

**Surferbeetle** · 01-14-2013

Originally Posted by Fuchs

Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners

Israel's Shai Aggassi* is someone to watch on this topic. He has been covered in HBR from time to time and it appears that his incremental rollout of a network of battery changing stations is moving forward:

Better Place, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Better_Place

Better Place is a venture-backed international company. It is formally based in Palo Alto, California, but the bulk of its planning and operations has been steered from Israel, where both its founder Shai Agassi and its chief investors reside. Better Place develops and sells battery-charging and battery-switching services for electric vehicles. Israel is also the location of the company's first large-scale commercial pilot for battery-switching services, launched to the public in early 2012.

Renault Fluence Z.E., From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Renault_Fluence_Z.E.

Energy CEO Shai Agassi on recognizing a “sliding-doors” moment, A Conversation with Shai Agassi by Josette Akresh-Gonzales, May 2009, HBR, http://hbr.org/2009/05/energy-ceo-sh...rs-moment/ar/1

Speeding Ahead to a Better Place, by Elie Ofek, Alison Berkley Wagonfeld, Harvard Business School , Publication date: Jan 19, 2012, http://hbr.org/product/speeding-ahea...512056-PDF-ENG

Better Place Plans Electric-Car IPO Within 2 Years, Agassi Says, By Gwen Ackerman & Jonathan Ferziger - Jan 25, 2012 7:34 AM MT, http://www.bloomberg.com/news/2012-0...assi-says.html

Better Place LLC, a U.S. startup developing charging stations for electric vehicles that started putting cars on the road this week, expects to go public in the next two years, Chief Executive Officer Shai Agassi said.

“We’re probably not going to go for another private round between now and the initial public offering,” Agassi, 43, who founded the business, said yesterday at Better Place’s test track and showroom north of Tel Aviv. “We have enough capital to go all the way until then.”

Startup to Capture Lithium from Geothermal Plants, FRIDAY, NOVEMBER 18, 2011, Science, http://science-wired.blogspot.com/20...hium-from.html

As portable electronics get more popular and the market for electric vehicles takes off, demand for lithium—a critical element in rechargeable lithium-ion batteries—could soar. Yet just two countries, Chile and Australia, dominate global lithium production.

The Lithium Rush, By Antonio Regalado on December 21, 2009, Technology Review, http://www.technologyreview.com/phot...-lithium-rush/

In the Bolivian Andes lies a vast salt flat that may shape the future of transportation.

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*Hmm it seems Shai Agassi is no longer the CEO or on the board of Better Place...

http://www.betterplace.com/Our-Story