Click on the headline (link) for the full text.
Many more articles are available through the Energy Bulletin homepage
Sea of troubles
Economist
FROM the sheltered waters of Subic Bay in the Philippines to Falmouth on the south coast of England, a vast, swelling armada lies idle. In Asia’s deep-sea havens 750 vessels—container ships, bulk carriers, tankers, car carriers and others—are laid up. A further 280 are sheltering in European waters. According to Lloyd’s Marine Intelligence Unit, nearly 10% of the world’s merchant ships are swaying gently at anchor because of a collapse in global trade.
Since the recession bit hard last autumn a lot of attention has been paid to the plunge in the Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal. It fell by over 90% between June and October last year, although it has since recovered slightly and is hovering at just above a quarter of its peak. World trade in general remains in its worst slump for generations, although it too is no longer falling. Two of the biggest shipping banks (RBS and HBOS) are in state-backed rehab. The parlous state of the world economy could mean more shipping companies following Eastwind Maritime, which went bankrupt in June. On July 28th Hapag-Lloyd, Germany’s largest container-shipping company, secured a €330m ($468m) bail-out from its shareholders while it seeks up to €1.75 billion to keep it from sinking altogether.
Worse, there is a huge supply of new ships on order and due off the slipways over the next four years. For bulk carriers alone, the backlog is equivalent to more than two-thirds of existing capacity. Philippe Louis-Dreyfus, departing president of the European Community Shipowners’ Associations, has called for an industrywide scrappage scheme to shrink the surplus. Warning of a “bloodbath”, he said in June that shipping capacity would exceed the needs of the market by between 50% and 70% in the near future.
…Yet a ray of sunshine is breaking through the storm clouds. The world’s shipbuilders are unlikely to convert all of their huge backlog of orders into deliveries given their unrealistic workloads and likely cancellations. Drewry Shipping Consultants estimates that nearly half the ships due to be delivered last year are still sitting on the slipway or the drawing board. Analysts at ICAP Shipping Research in London shrug off the idea that there will be a glut, since shipments of cheap Australian coal and iron ore to China have for years been constrained by a lack of big ships. More giant bulk carriers will lower the prices of ores delivered to China and stimulate trade growth, they say.
(30 July 2009)
Averting the Worst
Paul Krugman, New York Times
So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.
And the job market still hasn’t turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.
For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.
…So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.
Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.
All of this has helped support the economy in its time of need, in a way that didn’t happen back in 1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that budget deficits — which are a bad thing in normal times — are actually a good thing right now.
In addition to having this “automatic” stabilizing effect, the government has stepped in to rescue the financial sector. You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse.
(9 August 2009)
Where did that bank bailout go? Watchdogs aren’t sure
Chris Adams, McClatchy Newspaper
Although hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation’s financial sector, it’s still difficult to answer some of the most basic questions about where the money went.
Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don’t have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it’s essentially worthless.
“TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested,” a special inspector general over the program reported last month. The “very credibility” of the program is at stake, it said.
…TARP was passed in the midst of last fall’s financial meltdown as a way to keep American banks from falling deeper into the abyss.
The program was controversial from the start. Its supporters say it’s helped spark bank lending in the country, but critics say it’s unfairly rewarded the big banks and Wall Street firms that pushed the economy to the brink.
The program also has undergone a major transformation. When the Bush administration first went to Congress for the money, TARP’s main purpose was to buy up hundreds of billions of dollars in bad mortgages and so-called mortgage-backed securities that were bought and sold on Wall Street.
Today, TARP consists of 12 programs that sent those hundreds of billions of dollars to big banks, but it’s also bailed out auto companies, auto suppliers, individuals delinquent on their mortgages, small businesses and American International Group, the big insurance company.
The watchdogs now must oversee the maze that TARP has become…
(9 Aug 2009)
