Tag Archives: economics

Compensation

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Germany has decided to compensate two major utility companies for the government-forced shutdown of their nuclear power plants, shutdowns caused by government diktat, not by any plant failure or unsafe performance.

Sometime in the future, that is, in an amount to be determined.

The precise compensation sums depended on the development of electricity prices in Germany, the government said, adding that a concrete figure could only be calculated in 2023.

Those electricity prices already is rising rapidly from the loss of cheap, reliable electricity sources—coal-fired plants are being forced to close, too, in favor of wind- and solar-generated electricity.

The cabinet’s decision Wednesday was in line with a 2016 ruling by the Federal Constitutional Court in Karlsruhe, which said that the utilities in question were entitled to compensation for investments rendered useless by the government’s drastic change in energy policies.

Who, though, will compensate the German people for the much higher costs they’ll have to absorb for electricity for their homes and businesses?  Those higher costs will come from unreliable wind-sourced energy as winds often exceed the limits of the windmills used to generate electricity—or winds that don’t blow sufficiently.  Those higher costs will come, also, from solar energy produced in cloudy Germany.  Those higher costs will come, also,  from energy storage facilities that don’t exist yet, even in a demonstrable design stage, but are necessary to span those periods of no energy production.

Student Loan Delinquency

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…rates are declining.  Or so a headline number implies.

The share of new delinquencies on student loans has fallen to the lowest level in more than decade—and it’s not just due to the healthy labor market.

In the first quarter, slightly over 9% of student debt outstanding was newly delinquent….

Aside from employment rates, which encourage jobs as trade-off for college, the decline is laid off to a couple of causes.

[F]forbearance[] allows borrowers to go months without making a payment while remaining in good standing on their debt.

And

[I]ncome-driven repayment[] sets borrowers’ monthly payments as a share of their income….

These are legalist sophistries only; the debts still aren’t being repaid along the timelines nominally agreed.  The lenders—us taxpayers—still are being hurt by these legal shenanigans, and there’s no real expectation that these loans actually will be repaid, even in the long (much longer) run.  Nor is there any serious hope that the opportunity cost of the forgone monies, tied up as they are in those practically, if not legally, nonperforming loans, will be repaid at all.

How Bad is a Vocational Education?

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Especially compared with a formal college education?  Oren Cass, Senior Fellow at the Manhattan Institute, had some thoughts on that in a recent Wall Street Journal piece.

Elevating vocational education, and prioritizing its students, must begin with a substantial reshaping of American high schools. Vocational education will not succeed so long as culture and public policy consign it to second-class status—a dumping ground for students who interfere with what school districts consider their real mission, college prep.

It’s absolutely true that we shouldn’t be deprecating the status of those with or who prefer, for any reason, vocational educations.  These folks—the VoTech graduates, the OO graduates—the trades and secretaries are critical to our economy. What road gets built, what office buildings or houses get built, what communications networks get laid out without the trades?  What office is operable without the secretaries and office managers who do the actual nitty-gritty of running things?

What will a designer or an engineer or an architect do without the trades and secretaries to turn ideas into action?

Cass is spot on.

Italy and the Eurozone

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Since the last Italian election all those interminable months ago, which yielded no party with even a serious plurality, the several (and I do mean several) political parties have been trying to form a coalition of some sort so they could form an actual government with which to operate the country.  The coalition most likely to succeed in forming a government, if not in actual governing, consists of the far-left 5Star Movement and the equally far-right League (Lega Nord, Northern League).  What’s of interest to me is less the irony of these two parties trying to govern together and more the impact on the eurozone and the EU if these two parties actually succeed in allying and governing Italy.  They want

renegotiation of EU treaties, including the Stability and Growth Pact, the cancellation of €250 billion in Italian government debt by the European Central Bank, and a revision of Italy’s contribution to the EU budget.

Although formally walking back much of that, they’re not walking that far back.  Among the things included in those three items, and one that directly impacts Italy’s debt, is the 3% of GDP limit on government deficit that every eurozone nation’s government must meet.  The coalition wants that waived for Italy.  Not raised, gotten rid of.

The coalition didn’t include a commitment to hold a national referendum on whether Italy should remain in the eurozone, or even the European Union, if Italy doesn’t get satisfaction these items, but you can bet that’s still there in the background.  A significant fraction of the population would vote to leave, too; although whether that fraction is large enough to reach a majority is iffy so far.

I’ve suggested before that all of the nations of Europe are a bad fit when jammed together under one imitation government.  Italy is one of those nations that, in concert with the rest of the Mediterranean EU members, would be better off outside.

US Corn Exports

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The Trump administration is working on a deal with the People’s Republic of China to reduce the trade imbalance we have with them (whether the trade imbalance really is a bad thing and whether the PRC is working the deal as hard as the Trump administration are questions outside this post).  American farmers would have trouble producing enough to meet their part of the goal, were the deal to go through.

US corn exports could jump from $150 million to about $10 billion annually within a few years if China vastly expanded its quotas and reduced its duties that are as high as 65%, according to one estimate.

The farmers—particularly corn farmers—would get a great deal of help in ramping up their exports if they weren’t…encouraged…to divert significant fractions of their crop to ethanol production.  This is another consequence of ethanol mandates and another reason to get rid of them.

Update: In 2016, the US diverted 5.28 billion bushels of corn to ethanol production, or 36% of our total corn production that year. At roughly $3.45/bushel, that works out to $18.2 billion of corn production that was diverted.  Simply eliminating this useless diversion would seem to cover that production jump cited in the quote above.  It also would seem to leave $8 billion of production to mitigate food costs that are inflated by the diversion.  This, in turn, would help our poor and mitigate the need for food stamps and therewith reduce the tap on taxpayer pocketbooks.