The Happy Arab News Service




Saturday, May 30, 2009




Phase II

NEW YORK (Reuters) - The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.

Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks.

. . .

. . .

On the other hand, many economists reckon the U.S. government and Federal Reserve have averted a rerun of the Great Depression by swiftly orchestrating financial rescues and monetary and fiscal stimulus to offset sagging consumer spending.

Yet even as the U.S. economy and banking system struggle to recover from two years of turmoil, Europe's banks are even more debilitated, raising the threat of a second global systemic crisis spreading back across the Atlantic to the United States, some analysts fear.

"I think the most likely origins for a major crisis would be beyond our borders," said David Levy, chairman of the Jerome Levy Forecasting Center in Mount Kisco, New York.

Source: Reuters

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 4:02 PM

0 Comments





Obama and his technocrats

US secretary of energy said gas tax is not feasible in the US at the moment. However, this is not such a big deal really, as in the coming decades petrol prices will go up "naturally".

By Carola Hoyos, Fiona Harvey and Clive Cookson in London
Published: May 28 2009

In the past Mr Chu, a Nobel laureate, has argued that if the US wanted to reduce its carbon emissions, policymakers would have to find a way to increase petrol prices to levels in Europe. But in an interview with the Financial Times, he said: "At this moment, let me be frank, it is not politically feasible."

. . .

Mr Chu's move against using taxes to raise US petrol prices is likely to frustrate environmental advocates who believe the only way to change Americans' consumption habits is through higher prices. US fuel taxes are much lower than in Europe, leading to pump prices that are often one-third lower and to the average American consuming double the amount of oil as his European counterpart.

. . .

But Mr Chu warned that Americans will have to learn to live with higher petrol prices even if Washington does not enact policy that boosts them. "Regardless of what one does in any sort of taxation, I believe that prices of oil and natural gas will go up in the coming decades," he said, adding: "They will naturally go up just because of fundamental supply and demand issues."

Source: Financial Times

What Chu is basically saying is that the US does not really need to have energy policy because the Saudis are already taking care of the matter. I would suggest that the US does not really need its own energy chief since it has the Saudi one. I would also venture to predict that in one year from now Chu will be arguing that the US does not need gas tax either as it's already paying one to the Saudis (And this may happen to be very true by the end of the next year).

It may be uncomfortable to admit for some people, but after watching the debut of this administration one can only conclude that by now it's only the Saudis who can tax the US all the way into energy independence. However, the Saudis are smart enough to be not counted with OPEC's hawks and they are generally not into trying to squeeze the last dollar out of the price. These people know how to inflict the pain of energy dependence without getting it hurt so much as to stop the US gas junkie from coming back for more. Having been in the business of running OPEC for decades, the sheikhs have learned well how to milk the stupid cow. Our hapless messiah, however, insists on making sure the Saudis are as smart as they are. They are, mr. president. Don't worry.


WASHINGTON (Reuters) – U.S. President Barack Obama said on Thursday he would discuss oil costs when he meets with Saudi Arabia's King Abdullah next week and plans to say that big price rises are not in Riyadh's interests.

"I don't think it's in Saudi Arabia's interests to have a situation in which our economy is dependent -- or disrupted constantly -- by huge spike in energy prices," Obama said when asked by a reporter what his message would be during his June 3 visit to Saudi Arabia.

Source: Reuters

Though I have to admit I find the multilateralism part of it very touching.

PS

This post is an update to How to Make Sense and Influence People. If you have any comments leave them there. This one is closed for comments.

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 12:09 PM




Saturday, May 23, 2009




Gas Tax vs Cap and Trade

One should really posses an extraordinary trust in the US political system, politicians and electorate to be ready to entrust them with something like cap and trade. A huge country America is, the US have lobbies and interest groups for just about everything in the world. That's why it should come as no surprise that the bill to be eventually presented to the Houses and Senate came out watered down to the extreme. The Economist says the price for a ton of carbon proposed by the bill is too low, let alone that the bill intends to hand out most permits for free. The bill is said to be good for coal and bad for oil with power generators getting a lion's share of free permits.

Even if the idea of such a drastically scaled down bill is to "pass it now, tighten it later", to pass such a bill means very little in practical terms. A complicated system based on per industry, if not on per facility, permits, any attempt to tighten this thing is prone to quickly degenerating into the biggest carnival ever held by lobbyists in the history of America. Given so many free permits, president Obama has supplemented the bill by announcing a major tightening of fuel efficiency standards. Despite certain enthusiasm this measure has evoked in some quarters, in practical terms it may well mean a death verdict for the US car manufacturing now hanging on government's bailouts. The car sales have all but collapsed and new cars are bound to be either vastly more expensive or of the kind Americans stubbornly avoided for decades. Tightening energy efficiency standards creates no incentives for the current owners of SUVs and other gas guzzlers to replace them, neither such a measure undermines a market for used ones in any way.

Another step under consideration may well do the trick though. The administration is considering to increase the mandatory ethanol blend from 10% to 15%. Such a blend can shorten the lifespan of the currently employed vehicles as ethanol has a certain tendency to destroy engines that were not designed with ethanol in mind. Ironically, the ethanol industry does not think it's getting any favors from the current administration and the new fuel efficiency regulation did little to abate the siege mentality ethanol producers have been developing recently. Ethanol's energy content falls short of gas by something like 30%-40%, which many interpret as the new standards basically banning ethanol from the race. Combined with repealing of tax breaks for domestic oil producers, who on top of this would be massively denied free emissions permits under the current cap and trade bill, the latest initiative may actually end by significantly undermining the US energy independence.

Such paradoxes created by this confused regulation aside, one thing that calls attention in particular is a confusion surrounding the gas tax vs cap and trade debate. Those who followed my the case for fuel tax could notice that much of my argumentation in defense of the tax has very little to do with environment. It was mostly about geopolitical costs of oil consumption, energy independence and such stuff. In fact, one of the gas tax major proponents, Charles Krauthammer, is a climate change agnostic and refers to carbonic emissions reduction as a marginal benefit of the tax. Most economists seem to agree that taxes are the most effective way to cut emissions, with the cap and trade coming only a distant second. However, the gas tax has very little to do with climate. It serves a different purpose.

Consider the fact that the US accounts for a lion's share of global oil imports. The US depends on Arab oil just as much as the Arab world depends on the US buying it. This gives the US just as much leverage over oil producers as the producers have over their customers. It's roughly comparable to the situation of a person who owes a million to a bank. As long he owes a few thousands, it's that persons' problem. When the debt grows into millions, it becomes the bank's problem. That's why such a gas tax implemented through a tax swap can benefit the US taxpayers as it discriminates against producers, which in this case are mostly based outside the US. Finally, from biofuels to hybrids we have plenty of technology to reduce consumption of autofuels for a reasonable price.

The situation is very different with coal. Coal has no geopolitical costs associated with it whatsoever. The global coal reserves are virtually unlimited. The environmental costs of coal are yet to be realized, let alone that the bulk of them is to be paid outside the US. So attaching cost to carbonic emissions produced by coal amounts to a sheer tax, a large part of which will be rolled over onto consumers, means taxpayers. Clean coal technology is expensive, alternatives are either non existent or too expensive. That's why for all practical purposes to cap and trade coal is pretty much a waste economically. This is not to say that it does not make sense in terms of environment and climate change. Making electricity expensive will encourage saving and so translate into less emissions even if pretty much nothing happens on the coal side, but it will come with a price and it's a heavy price. Other than that, coal may be ideal for cap and trade as it tends to be burned in a limited number of locations to produce electricity. There it may be even possible to measure the precise volume of carbonic emissions.

On the other hand, the distributed nature of oil consumption with gas and diesel mostly burned in vehicles and others means of transportation makes them a good subject for classic taxes instead of cap and trade. The thing is that when it comes to gas, cutting its consumption or cutting its emissions is pretty much the same thing anyway. I know about no technology in the offing for reducing carbonic emissions of gas/diesel by filtering them out and storing somewhere. To cut emissions is to cut consumption and so the gas tax is perfect for the job. Even carbon tax is not needed here. Some technologies considered for capturing and storing emissions from coal stations may justify a cap and trade for coal, though it's still open to debate if a simple carbon tax can't do the same thing better.

Basically both the gas tax and cap and trade can be implemented side by side, as there is no contradiction between the two. The first targets the nasty geopolitical consequences of oil consumption and aims at energy independence, while the cap and trade is mostly about environment. From the point of view of the gas tax, even if all emissions produced by cars are captured and stored under ground, this changes nothing. The gas tax serves a different purpose. The tax targets consumption, not emissions. Emissions reduction comes as a by-product of the gas tax. The tax's purpose is to bill both foreign policy/defense expenses associated with oil consumption and the price of energy independence into the price of gasoline/diesel. Implemented through a tax swap, it's about restructuring taxation system with a view of making it correct and more effective.

What becomes clear now is that a failure to consider the difference between the objectives of the gas tax and cap and trade and trying to pursue all of them with the cap and trade alone, even when complimented by tightening of fuel efficiency standards, leads to bizarre situations in which the US government with one hand is undoing what it's trying to achieve with the other one. Ethanol may not be very environmentally friendly, but it's instrumental in reducing the US dependence on foreign oil. You can't compare ethanol and gas only by their environmental externalities, since oil has also tremendous geopolitical ones which, unlike oil's environmental costs, make the US budget hemorrhage billions this very moment in the Middle East and elsewhere. Unless oil's geopolitical costs are factored into the price of gas, the current cap and trade thing may even end destroying the nascent biofuels industry.

The Economist and others seem to have reluctantly given up on carbon taxes, coming to terms with this vastly diluted and ineffective cap and trade bill. As Jeffrey Sachs has put it, it's still better than nothing. And yet, carbon taxes making their way down the tube, nothing has changed when it comes to the gas tax. The tax is pretty much as relevant today as it was before the cap and trade bill.

Labels: , , , ,

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 3:24 PM

31 Comments




Friday, May 22, 2009




Amalek and a hinge of history

In an interview to Jeffrey Goldberg Bibi Netanyahu said that Iran's desire for nuclear weapons represents a hinge of history.

“Iran has threatened to annihilate a state,” he said. “In historical terms, this is an astounding thing. It’s a monumental outrage that goes effectively unchallenged in the court of public opinion. Sure, there are perfunctory condemnations, but there’s no j’accuse — there’s no shock.” He argued that one lesson of history is that “bad things tend to get worse if they’re not challenged early.” He went on, “Iranian leaders talk about Israel’s destruction or disappearance while simultaneously creating weapons to ensure its disappearance.”

Bibi does not actually believe that the Ayatollahs are that suicidal to use the weapons, more like that they are looking for a nuclear umbrella for their war by proxy against Israel through Hamas/Hezbollah. In fact, these are my thoughts precisely.

Mr. Netanyahu doesn’t believe that Iran would necessarily launch a nuclear-tipped missile at Tel Aviv. He argues instead that Iran could bring about the eventual end of Israel simply by possessing such weaponry. “Iran’s militant proxies would be able to fire rockets and engage in other terror activities while enjoying a nuclear umbrella,” he said. This could lead to the depopulation of the Negev and the Galilee, both of which have already endured sustained rocket attacks by Hamas and Hezbollah.

More broadly, he said, a nuclear Iran “would embolden Islamic militants far and wide, on many continents, who would believe that this is a providential sign, that this fanaticism is on the ultimate road to triumph.”


Next follows Goldber's "analysis":

To understand why Mr. Netanyahu sees Iran as a new Amalek, it is essential to understand two aspects of his intellectual and emotional development: The scholarship of his father, and the martyrdom of his older brother.

and blah blah blah

and blah blah blah

and so on

For those who don't know what is Amalek, Goldberg has a very accessible explanation at the beginning of the article..

“Amalek,” in essence, is Hebrew for “existential threat.” Tradition holds that the Amalekites are the undying enemy of the Jews. They appear in Deuteronomy, attacking the rear columns of the Israelites on their escape from Egypt. The rabbis teach that successive generations of Jews have been forced to confront the Amalekites: Nebuchadnezzar, the Crusaders, Torquemada, Hitler and Stalin are all manifestations of Amalek’s malevolent spirit.

Source: The New York Times


The Arab version of the interview goes like this:

So when Netanyahu and Goldberg say that Iran is Amalek, the metaphor cuts both ways. Not only are the Persians considered to be the mortal enemies of Israel, but the Israelites are bound by God’s law to eradicate them, to “utterly destroy all that they have, and spare them not; but slay both man and woman, infant and suckling, ox and sheep, camel and ass.” What we’re talking about here is genocide by divine decree.

Source: The Human Province

Just like that. And you, Amos, were pitying me that some people tend to misunderstand me....

Labels:

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 4:46 PM

1 Comments





After the tigers, the dragons come

If claims that China's support was instrumental in the destruction of Tamil Tigers in Sri Lanka are true, then the sudden and abrupt end of one of the world's most ferocious and sophisticated insurgencies is a monumental event that signals the beginning of a new era. For decades Western nations and international organizations armed with Geneva conventions, relief agencies and principle of proportionality have created, turned into intractable and internationalized numerous conflicts all over the world. This trend has escalated with the end of the cold war, when the US's obsession with spreading freedom and democracy across the globe was finally liberated from the constraint of having always to consider the Soviet competition.

This is not to say that the US has never experienced bouts of this particular lunacy before. Already under Carter the US was experimenting with a more ethical approach to foreign policy that ended with the Sandinistas in Nicaragua and Khomeini in Iran. The latter was a particularly painful setback that destroyed what used to be the most Westernized and sophisticated Muslim country in the Middle East and destabilized the region for decades to come. With the arrival of George Bush and his neocon revolution the transformation was complete and the confusion of ends with means, a standard feature of idealisms of all kinds be they the "scientific liberalism" of political correctness or the "Iraqis want freedom" George Bush style, has become permanent. Pakistan was the latest victim to fall to this fallacy when the country was set on its "long march" to hell by the departure of Pervez Musharraf who, like the Shah before, was denied America's support.

A $1 billion port China is reportedly constructing in Hambantota is about more than just China attaining a foothold at India's very doorsteps. President Obama has all but retraced his steps on promises (threats?) to renegotiate NAFTA and a host of bilateral FTAs, but uncertainty still surrounds pending agreements with Colombia and Panama. In Colombia the determination of president Uribe and unwavering support of Bush administration have defeated the world's another generations long insurgency and laid waste to the notion of "there is no military solution". But cracks started developing in this alliance after the congress led by Nancy Pelosi has derailed the unlucky FTA on accusations of human rights violations. China has been recently spotted on a buying spree in Latin America and elsewhere where it's generously throwing around multi billion loans and aid packages, as the new superpower is growing desperate for better places to park its enormous reserves in than the troubled US treasuries and asset backed securities. The US should better inject a good doze of sanity into its foreign policy and soon unless it does not care to discover one day a web of China's naval bases decorating a seascape much closer to its shores than the Indian Ocean.

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 10:32 AM

29 Comments





Tempting Tax Targets

“Sugar, rum and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.”

— Adam Smith,

“The Wealth of Nations,” 1776

Source: The New York Times

For many years I used to identify myself as pro market. That was until I encountered real free market proponents. Since then I switched to identifying myself simply as not populist. My idea of free markets has never been very stable. However, it always involved a deep mistrust of financial institutions, prejudice against insurance, hedging and other means of trading and distributing risks across wider economy and firm belief in taxation as a god given tool for manipulating markets. My approach was always like: You have a problem? Tax it out of existence.

My dislike of free markets has skyrocketed after I launched my one man propaganda campaign for gas tax on my blog and countless forums from the Economist to just private blogs. It would be enough to say that I am very used to be called socialist. Without sinking into details, I would say that the primary difference between someone like me and those who pass for free market proponents these days is that I don't see free markets as something happening spontaneously in the nature. Contrary to this, I think it's one of the goals of any regulation to make real life markets resembling the textbook definition of free market. In those cases where no natural markets are possible, its is responsibility of the regulators to create them. Cap and trade is actually a very good example of commercializing social and environmental costs. My doubts about its current implementation regarding carbonic emissions are mostly driven by practical considerations. It's not opposition out of principle.

In my view much of passes for free market ideology these days has degenerated since years ago into an ideology of free lunches. Its irrational opposition to taxes of any kind can be explained by anything but the genuine belief in the efficiency of free markets. For me the quote above is an absolute validation of my tax the fucking gas campaign. Here you have a person whose invisible hand is supposedly guiding these very free markets saying just this: It's ok to have taxes and a lot of them, if your taxes make sense.

Of course some would argue that the quote above has still quite a way to go to become an unequivocal endorsement of gas tax. It's indeed open to debate whether Adam Smith would have approved of billing the expenses of foreign policy into the price of carbon fuels through taxes or that he would have been open to the idea of energy independence having its own price to be reflected by taxes. However, I tend to believe that he would. He was a smart enough person to see the point of it.


PS

This post is an update to Making Sense. If you have any comments leave them there.

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 12:13 AM




Tuesday, May 19, 2009




The Demographic History of Israel

Total Fertility Rates (1970-2007)

Source: Central Bureau of Statistics

A graph is attached to provide a historic perspective on the demographic situation of Israel. The graph does not really need explanations and, so, I will make only a few comments on its most prominent features.

The first thing that calls attention in the graph is the relative stability of Jewish fertility rate over many years. I believe the stability is misleading and conceals a very turbulent demographic history. Probably a separate graph is required to chart separately Ashkenazi, Sepharadi and ultra orthodox fertilities to show the continuously shifting underlying reality behind this stability.

Christian Arab fertility can be seen lingering for a quite a while under the Jewish rate until it finally tunnels South searching for Europe. It should be mentioned however that all groups in the graph are still well above Western averages. The Holy Land is not populated by demographic pushovers.

Now the truly interesting dynamics can be seen in the Druze and Muslim Arab sectors and this is where the mystery starts. By 1980 fertility rates of the two converged, but shortly after 1985 the Muslim Arab rate has stabilized and remained largely unchanged all the way until 2000. I was not digging professional literature for explanations, but from those bits I encountered on the Internet there is no consensus as to why this happened. What also seems to be seen clearly in the graph is the effect of 1997 when child subsidies were both increased and extended to all sectors including Muslim Arabs and Jewish ultra orthodox. There was a certain uptick in the Muslim Arab fertility immediately after 1997, but it was not particularly dramatic and quickly ran out of steam.

Meanwhile, demographic transition continued in the Druze sector uninterrupted and a few years ago the parity was achieved with the Jewish sector in fertility rates. The fertility rate seems poised to converge with the Christian Arab sector within the next few years digging a hole for the birth rate to collapse into in the near future.

To the best of my knowledge, no consensus exists either as to why the Muslim Arab fertility resumed declining around 2000. The drastic overhaul of child subsidies and other social payments under Netanyahu has certainly contributed to this, but the decline was plainly present a few years before Netanyahu's reforms went into effect. There is a certain difference between the Druze and Muslim Arabs - the former serve in the army and in general are better integrated into Israeli society. This may explain the divergence between the two sectors that happened after 1985. In this sense the later drop in the Muslim Arab fertility can be also seen as the nature resuming its course.

Another factor to consider is this. During the Oslo process the government has significantly increased funds for education in the Arab sector effectively ending what was frequently claimed to be an outright discrimination. The state was with one hand hampering demographic transition in the Muslim Arab sector through mismanagement of child subsidies and other welfare, but with the other hand it may have been preparing the ground for the transition's next stage. In fact, in my view the impact of child subsidies is overrated. While without doubt a factor, child subsidies should be less crucial than say education and integration.

The CBS per district tables generally indicate that during the last ten years Jewish demographic indicators across Israel largely remained stable or were slightly edging up amidst steadily declining Arab fertility. In Jerusalem the demographic onslaught of the ultras has already created parity in fertility rates and, given the trend of the recent years, the demographic advantage in the city and the area around may well soon shift to the Jewish sector. In this sense Jerusalem stands apart from the rest of the country. Another exception is the South, where the disparity between Jewish and Muslim Arab fertilities is still tremendous. In both cases two minorities unrepresented on the graph should be held accountable for these anomalies - the Jewish ultra orthodox and Bedouins.

Those who have patience can go to and dig the Central Statistics Bureau CBS site for more data on these two. However, the per district tables should give one a pretty good idea of the demographic situation of the Bedouin sector, given that Muslim Arabs in the South should be predominantly Bedouins. In 2007 the Muslim Arab TFR in the South was running at 7.13, which is pretty high even for Africa. It was 7.25 in 2006. To compare, the TFR was about 10 in 2000. The rate of decline may be slowing down. The TFR lost 7.3% between 2003 and 2004, 4.6% between 2005 and 2006 and only 1.6% between 2006 and 2007. For comparison the Jewish TFR in the South has remained virtually unchanged throughout that period at 2.6-2.5, very high for any developed nation but nothing compared to the Arab neighbors.

There is less information readily available on the ultra orthodox but some data released by the CBS in 2008 suggests that fertility and birth rates in the ultra orthodox sector have also sharply declined in the last few years. Nevertheless, even when compared to the Bedouins, the ultras still remain the ultimate demographic supermachine.

13/01/2008
By Shahar Ilan, Haaretz Correspondent

The total fertility rate in the country's ultra-Orthodox community has dropped sharply in the past several years, according to figures released by the Central Bureau of Statistics (CBS).

The fertility rate in the Haredi community of Beitar Illit dropped from 8.9 children per woman in 2001 to 7.7 children in 2006, a decrease of 13.5 percent. In Modi'in Illit, another ultra-Orthodox community, the total fertility rate fell from 9 to 8 in the same period.

Even after the drop, these communities still have the highest fertility rates in Israel.

Source: Haaretz


PS

This post is an update to The True Convergence. If you have any comments, leave them there.

Labels: , , , , , , ,

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 3:46 PM




Saturday, May 16, 2009




The Great Commitment of President Obama

By THOMAS L. FRIEDMAN
Published: April 7, 2009

I am really encouraged by President Obama’s commitment to clean energy and combating climate change. I just have three worries: whether he has the right policies, the right politics and the right official to sell his program to the country. Other than that, things look great!

Source: The New York Times

Here is another one in my long series "The case for fuel tax". I believe that a massive revenue neutral gas tax holds a tremendous potential to address not only almost all major challenges facing America and the West in the first half of the 21st century. Such a tax has a potential to change the world. Here I am going to examine the tax's effect in the most immediate term. For analysis of the tax's long term implications, see my earlier posts on the subject.

It's interesting that Friedman has by now changed the tactic and started arguing that incremental and delayed implementation of carbon tax can be just as effective as an immediate tax. This is absolutely correct. The purpose of such a tax is to shape anticipations, immediate economic incentives matter less. I was actually making a very similar point here. However, since then I have changed my mind as I came to be believe that an immediate and massive gas tax introduced by means of a tax swap can immediately benefit US taxpayers and the economy. It's precisely now, during recession, that such a tax reform should be considered. Here is why.

The standard microeconomic theory of tax incidence holds that regardless of where a tax is collected, unless we are dealing with totally inelastic supply or demand, tax burden is split between producers and consumers. Here is a graph illustrating this concept.


Source: Wikipedia

I provide here a modified graph. The original retail price of gas is $2 to gallon. A $1 gas tax is imposed. The retail price of gasoline rises to $2.5 per gallon. The loss is split evenly between producers and consumers, but the government fully refunds the consumers by repaying them back $1 collected on each gallon. According to this graph, such a tax swap ends with redistribution of wealth between consumers and producers benefiting the former.

In terms of wealth redistribution this means taking dozens of billions of dollars from oil producers and putting them straight into the pocket of US consumers. And when we are talking about oil producers we are talking very much about Saudi Arabia and other OPEC members. Of course, there exists an issue of demand elasticity, widely claimed to be pretty inelastic when it comes to carbon fuels, against the global energy market which for smaller nations should appear as absolutely elastic on the supply side. However, practical experience and common sense can easily send these two arguments packing.

For one, the recent experience shows that the demand for carbon fuels in the US is elastic enough with the breaking point somewhere between $3 and $4 per gallon. This was amply evident a couple of years ago when sells of hybrids and flex engines shot up. In those states that took matters into their hands the impact was even more dramatic with tax revenues collapsing as a result of collapse of demand for carbon fuels. Two, the US is no marginal oil consumer and producer. It accounts roughly for one quarter of global oil consumption and even more in terms of oil imports. It's twice as much a swing oil consumer as Saudi Arabia a swing oil producer. Of course to cut oil consumption is absolutely not the same as to cut production. Nevertheless, any move in US oil inventories tends to send the price of oil in the opposite direction.

Oil Production



Oil Consumption



Oil Imports


Source: Nation Master - Energy Statistics by country

It's easy to see from these three charts by how much the US is more a swing energy consumer than Saudi Arabia is a swing energy producer. While there may be a certain validity to the claim that demand is inelastic, in practical terms it only means that consumers take a loss equivalent not to 50% of a possible tax, but say 70%-80%. On the graph above this would be expressed as the retail price stabilizing at $2.7-$2.8. Given that taxpayers should be fully refunded for this loss through a tax swap, they just benefit less from the reform, but they still do, they don't lose. Ironically, it also means that for the gas tax to benefit the taxpayer most, it should be massive enough to put maximum pressure on the price.

America's irrationality on everything related to taxes is amply demonstrated by Friedman, Krauthammer and other supporters of the gas tax themselves. Instead of clumsily arguing that gas tax does not hurt so much, they should better blatantly tell their compatriots to have mercy on themselves and their purse and let themselves save a few dollars at the expense of oil sheikhs. For the US the gas tax is a bit like skiing. America should overcome its deeply ingrained fears by taking a plunge. It should do the opposite of what its natural fear dictates it and throw itself into it.

Some people may say that it's not right to manipulate markets, in particular, manipulating them in such ways that discourage markets from more productive modes of production. Without starting a debate about the religion of free markets and whether the markets are so sacred that they should not be manipulated, I would dismiss this whole argument as irrelevant. I have already dealt with this point here. To put it short, it's the current system that manipulates the markets. The gas tax is more like demanipulation. It's corrective and not manipulative.

Of course, the current administration has its own reasons for shunning any discussion of gas tax. For starters, Obama has repeatedly stressed his non-partisanship and called on both parties to work together. So it's only natural that he is now pushing for the cap and trade scheme that's not only absolutely unacceptable to the Republicans, but is hopeless with large chunks of his own party too. Two, Obama claimed that it's not right to slap taxes on the middle class in recession. That's why the tax swap, immediately beneficial for taxpayers, was dropped in favor of what so many, and probably correctly, suspect of being a hidden tax. Finally, gas tax is a simple and effective way to cut on oil consumption and reduce US dependence on foreign oil, but this cannot be said about the cap and trade program. For Obama this is sure yet another point in favor of the cap and trade. In short there is a certain failure here to follow public declarations with a correct practical decision. Other than that, I tend to agree with Thomas Friedman: Obama's commitments are truly impressive. Things look great. All that's missing is only right policies, right politics and right officials.


PS

This post is an update to How to Make Sense and Influence People. If you have any comments leave them there. This one is closed for comments.

Labels: , ,

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 5:02 PM





I am / was posting there . . .

June 14, 2009

Daniel Gordis

Obama is right, it’s time for honesty (Asking tough questions)

Nizo

Flee Parestine! (Make it flee!!!)


June 10, 2009

KIshkushim

Obama's Moves


May 8, 2009

Rakun

Musings on Lebanon: Beavers VS Tsunamis (Lebanon and the future of the Middle East)

Kishkushim

Natan Sharansky, from Refusenik to Likudnik to Publicist (Diversity/Multiculturalism vs Nation state)


April 23, 2009

Kishkushim

Open Thread: Halkin on Bashir (Waltz with Bashir)


March 27, 2009

Nizo

An Open Letter to Ismael Haniyeh from a Palestinian John Doe (Lieberman and Israeli fascism)


March 19, 2009

Nizo

Replace Both Palestinian Leaderships With Goats (Replacing Arabs with Goats)

"Arabs Are All Faggots" (The same)


February 19, 2009

Jeha's Nail

Kahane's own Yvette (Lieberman and the Settlers)


February 3, 2009

China Economy Watch

China Nears Recession Point As GDP Slumps (The Global Crisis moves to the East. The Chinese economy is falling off a cliff)


January 28, 2009

Blacksmiths of Lebanon

Butros Harb's Defense Strategy (Elections in June)


January 23, 2009

Nizo

Nizo's Stamp Collection: Extinct South Arabian Statelets (Hamas)


January 21, 2009


Lirun

what opportunity are we missing.. (Gaza, Dodos and the value of human life)


Jeha's Nail

Not Even Stupid... (The Saudi Peace Plan)


September 15, 2008

The Traveller Within

OPEC reduces production. Too little too late - for them?


August 20, 2008

Da Russophile

Faces of the Future (Russian Demographics: The Future of Russia)

Nizo

On Zionism, Arabs and Democracy


Jeha's Nail

Futility and Hope (Lebanon's Blame Game)


June 25, 2008

Abu Skander’s blog

Israel in the Quran (The Koranic endorsement of the Zionist enterprise in Palestine. This thread has started here)


May 14, 2008

Nizo

The Palestine Burden (Israel/Lebanon/ME)


April 10, 2008

The Sudanese Thinker

Two Swedish Chicks and a Smokey Bus (Climate change, oil and global demographics)


April 10, 2008

Jeha's Nail

Anschluß Delayed... (Peak oil, family planning and economic development in the Middle East)


February 29, 2008

The Sudanese Thinker

Muslim Leaders Write ‘Harmony’ Letter To Jews (The Islamic Reformation)


February 8, 2008

Maysaloon

1492 (The Jewish genetic pool, Ashkenazi Jews & Khazars )


January 30, 2008

Kishkushim

A Jewish State (Nationalism vs Arab Imperialism in the Middle East)


January 28, 2008

East Med Sea Peace

potential agreement.. (Palestinian refugees & Islam as a religion of tolerance and peace)


Nizo

The Prophet Jirja? (Hamas/Hezbollah movie industry)


January 23, 2008

Kishkushim

Secularism, Critique, Blasphemy, and the 2006 Jerusalem Gay Pride Parade


December 31, 2007

The Sudanese Thinker

What Will 2008 Hold? (Al-Kaida vs USA)


December 27, 2007

Chamsa

Not Nice People (Black Panthers vs Russians)


December 24, 2007

The Sudanese Thinker

Israel: Four Young Jewish Ethiopian Girls Segregated At Religious School (Racism in Israel)


December 10, 2007

Chamsa

Pride & Honor (Israeli Arabs and Israel as a Jewish State)


December 4, 2007

The Sudanese Thinker

Mohammed the Teddy Bear (Atheism vs Religion debate)


November 2, 2007

Nizo double posted a post about the right of return on his blog and the blog of Lurun.

Nizo: On the Palestinian Right of Return

Lirun: On the Palestinian Right of Return


October 6, 2007

The Sudanese Thinker

The Reason the Khartoum Government Wanted to Smack Darfur’s AU Commander (Sabra/Shatila)


Chamsa

Free Burma


Nizo's Blog

To Lirun: My Peacimistic Post


Chamsa

BethLehem or Lehem. . . ? (on poverty and secularism in Israel)


Global Voices Online

Israel: Sudanese Refugees - like Darfur, as Auschwitz


East Med Sea Peace

The fall of Gaza and the rise of Palestine . . . (Israel vs Egypt)

Via Recta

Oh Lion of the Golan!

Tossing a coin on Sunday's referendum


Kishkushim

Gaza or Bust?

"God Saved Us"


Hipster

To Roman Kalik :)


The Sudanese Thinker

6 in 10 Americans Want Withdrawal By 2008


East Med Sea Peace

muslims and terrorists are two very different things..


The Thinking Lebanese

"Foreign Agents" (The great Israel Lebanon peace round table: 'Nobody' vs Faysal)


Chamsa

the year hope withered


The Thinking Lebanese

We have crazy Sunnis too

The kidnapping of IDF Soldiers was but a Prelude. . .


Free Cedar

Puzzling (My debate with Jean. Jean was playing an Arab idiot and I also tried hard to say nothing smart)


East Med Sea Peace

thoughts of a genius..


Blacksmiths of Lebanon

Sovereignty Struggle: Georgia


The Thinking Lebanese

Hizbullah v.s. The Government

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 2:14 PM




Friday, May 15, 2009




Silly Nizo

Last updated: May 15, 2009

April 28, 2009


The Iguanas are coming



From "The revenge of Iguanas" (My response to Jews and Iguanas)


May 11, 2009

And now to the Jews...


Teahupoo Memory #1 - Laird Hamilton

Following my conversation with Lirun here, I decided that the Jewish section of this post is not going to be written. This is mainly because since my early childhood I persistently failed to get impressed by mammals. This is not to say that I am against environment and biodiversity in general, but mammals just don't do it to me. Other creatures do. For example since I was a child I have always had a big respect for the cold blood dignity of the reptile world. But when it comes to Jews, humans, rats and other mammals, all of them can go extinct as far as I am concerned. That's why I could not remained unmoved by Nizo Cuban stories in which the magnificent iguanas were reduced to begging for scraps from despicable gringos and their Latino servants.

So the Jewish part is not coming as I can't make myself today write about something so boring as Jews. However, given that I still have to finish this post somehow, let me finish it with some truly inspiring creatures. Even though I consider mammals in general as a sort of evolutionary dead end, there is still one group of mammals that I absolutely worship. These animals are invariably present on desktop wallpapers of my computers at home and at work. One species of this group is particularly overwhelming.

30 something meters long, these are living sub marines that cruise oceans at speeds approaching 50-60 km/h. They can hear each other from a distance of 1500 km by generating low frequency sounds comparable in power to commercial airliners. One particular theory is speculating that these enormous creatures use their vocalizations and echolocation to create global oceanic maps that contain underwater mountain ridges, the Bermuda triangle and the basic outline of continental coasts. Verily said one of those scientists, humans don't need to go to other planets to search for extraterrestrial life. This is another planet. These are the most alien and extraterrestrial creatures that can exist.




May 12, 2009

Silly Nizo

Nizo said...

May Allah save us.

On a related note, iguanas are mainly herbivorous..

So what? Pervatasaurus Rex was eventually proved to have been a herbivore too. But this does not make this remarkable dinosaur any less of a predator. Just wait for the iguanas to rise up against their human oppressors. They will quickly disabuse you and your friends of your many fallacies.




May 15, 2009

New Human Ancestor Found

Scientists have unearthed what is believed to be the oldest human statue yet discovered. And, well, it's an absolute pornography. The find, attributed to the previously unknown hominid Homo Pervatus, has started a massive debate in the scientific community as to whether Homo Erectus preceded Homo Pervatus or Homo Pervatus should be hailed as the oldest known human species, the true forefather of modern humans.

Source: The Economist

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 7:30 PM

28 Comments




Wednesday, May 13, 2009




From Nepal to Gaza

May 12, 2009

By HERB KEINON

A boast last week by Maoist guerrillas in Nepal that they were able to fool a UN mission headed by Ian Martin has spilled over into the Middle East, with Israel's Foreign Ministry saying that if Martin was fooled by terrorists in Nepal, he could easily have been fooled in the Gaza Strip as well.

Martin was the head of a UN board of inquiry that last week issued a damning report of Israeli actions in the Gaza Strip, saying that Israel shelled six UN installations.

In 2007, Martin was the head of the UN Mission in Nepal (UNMIN) that was involved in peace negotiations there between the government and Maoist guerrillas.

UNMIN was responsible for screening the number of guerrillas, who were then incorporated into the country's army.

In a video that surfaced last week, Pushpa Kamal Dahal, the head of the guerrillas at the time, was seen telling his fighters that their number had been greatly inflated, from 7,000-8,000 to over 30,000. Dahal went on to become prime minister, but resigned last week over differences in handling civil unrest.

"Thanks to the inflation," said the Times of India on Monday, "even after UNMIN screened the PLA [Maoist People's Liberation Army] to determine how many were bona fide fighters and how many recruited illegally after the peace pact, the number became 19,602, giving the former guerrillas a good opportunity to increase their grip on the national army once the PLA was merged with the state."

A UN spokesman said the mission in Nepal stands by the numbers included in Martin's report despite the video claims.

. . .

. . .

Source: The Jerusalem Post

This is from The Times of India: UN under fire in Nepal

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 3:54 PM

0 Comments




Tuesday, May 12, 2009




Keep Reading...

I can only hope that right people keep reading this post...

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 5:39 PM




Sunday, May 10, 2009




How to Make Sense and Influence People

Last updated: May 16, 2009

May 10, 2009


In 2007 senator Barack Obama had the following to say about energy independence in his statement on Latin America:

As it relates to our country’s drive toward energy independence, it does not serve our national and economic security to replace imported oil with Brazilian ethanol. In other words, those who advocate replacement of US-based biofuels production with Brazilian ethanol exports however well intentioned they may be, are both misunderstanding our long term energy security challenge and ignoring a valuable foreign policy opportunity. The U.S. needs to dramatically expand domestic biofuels production, not embrace a short term fix that discourages investment in the expansion of the domestic renewable fuels in industry.

Source

Some would say this is already very close to the definition of nonsense. Energy independence may just as well mean diversification of energy supplies, it does not necessarily require producing all fuel domestically. By far the biggest problem with oil was always that it cannot be grown everywhere. It's on this simple fact that OPEC cartel is based with all implications for US energy independence and not on the fact that the US does not produce all of its oil domestically. Given that ethanol can be produced from sugar cane just as well as, and even better than, from corn, and that sugar cane can be grown in a variety of countries, the US energy independence would be probably better served by encouraging imports of sugar cane ethanol from South America and elsewhere. But then why should things be done the easy way? President Obama is not a man who is afraid of difficulties.

As to the valuable foreign policy opportunity, Brazil's president Lula looks more and more pissed off by Obama's approach to energy independence. Brazil does not know what to do with its ethanol surpluses and president Lula put a lot of time and effort into trying to convince the US and Europe to open their markets for Brazilian ethanol. In fact, such an energy alliance based on combination of US technology and ethanol production in the third world could indeed create a huge foreign policy opportunity by rechanneling billions of dollars from Arab Sheikhs and Russian oligarchs to farmers and ethanol producers in the same Latin America. This could literally save some countries and even make president Lula happy. But as we said, the easy way is not an option. Never mind that given the tremendous enthusiasm for Obama in the third world, it's only fair that it's now made to pay the price for the protectionist leanings of the new US administration.

Anyway, a few days ago Barack Obama has upped his crusade for energy independence by resuming bullying US domestic oil producers.

By H. JOSEF HEBERT, Associated Press Writer - Thu May 7

Obama budget rescinds oil, gas industry tax breaks

. . .

In the budget statement, Obama said the tax breaks, which are expected to save the oil and gas industry more than $26 billion over the next 10 years, are "unjustifiable loopholes ... costly to the American taxpayer and do little to incentivize production or reduce energy prices."

Responding to the Obama budget priorities, Barry Russell, president of the Independent Petroleum Association of America, complained, "We can't tax our way to energy independence."

Source

For a president who was lately so busy burying his country under a pile of several trillions worth deficits and debts, this was quite an outbreak of fiscal conservatism. However, the fact remains that US oil is not cheap and repealing tax breaks can lead to increased imports of foreign oil. It's hard to predict the exact impact of such a step on the price, but US dependence on foreign oil will certainly increase.

This is not to say that the tax breaks cannot be eliminated without adversely affecting US energy independence. There is a very simple and efficient way of doing this - tariff on oil imports. Hit the oil imports with a tariff sizable enough and then the tax breaks can go without endangering energy independence. Of course, president Obama said it's a bad idea to raise taxes on people under recession, but such a tariff is revenue positive, never mind $26 billions saved in tax breaks. The government can use these to refund the taxpayers for any losses. Incidentally by tolerating a moderate increase in the price of gasoline, the administration can provide alternatives energies with a competitive advantage over carbon fuels. And this without losing a penny in tax breaks or subsidies. But again why to do things the easy way, when there is a hard one? Let alone that unlike Obama's many other ideas this one has a good chance to, god forbid, work and actually make America more energy independent.

So how good are Obama's chances to enhance, or better hurt, the prospect of energy independence for America? Well, it may be that not everything is lost, but this has hardly anything to do with Obama and his fantasy world, but rather with possible advances in relevant technologies. Mascoma, for example, was recently reporting a major breakthrough in cellulosic ethanol technology. Mascoma says it's no longer years away. If true, these are good news indeed since by now it's only God or technology that can save the US and its energy independence from this raving lunatic.


Last updated: May 16, 2009

The Great Committment of President Obama

By THOMAS L. FRIEDMAN
Published: April 7, 2009

I am really encouraged by President Obama’s commitment to clean energy and combating climate change. I just have three worries: whether he has the right policies, the right politics and the right official to sell his program to the country. Other than that, things look great!

Source: The New York Times

Here is another one in my long series "The case for fuel tax". I believe that a massive revenue neutral gas tax holds a tremendous potential to address not only almost all major challenges facing America and the West in the first half of the 21st century. Such a tax has a potential to change the world. Here I am going to examine the tax's effect in the most immediate term. For analysis of the tax's long term implications, see my earlier posts on the subject.

It's interesting that Friedman has by now changed the tactic and started arguing that incremental and delayed implementation of carbon tax can be just as effective as an immediate tax. This is absolutely correct. The purpose of such a tax is to shape anticipations, immediate economic incentives matter less. I was actually making a very similar point here. However, since then I have changed my mind as I came to be believe that an immediate and massive gas tax introduced by means of a tax swap can immediately benefit US taxpayers and the economy. It's precisely now, during recession, that such a tax reform should be considered. Here is why.

The standard microeconomic theory of tax incidence holds that regardless of where a tax is collected, unless we are dealing with totally inelastic supply or demand, tax burden is split between producers and consumers. Here is a graph illustrating this way of thinking.


Source: Wikipedia

I provide here a modified graph. The original retail price of gas is $2 to gallon. A $1 gas tax is imposed. The retail price of gasoline rises to $2.5 per gallon. The loss is split evenly between producers and consumers, but the government fully refunds the consumers by repaying them back $1 collected on each gallon. According to this graph, such a tax swap ends with redistribution of wealth between consumers and producers benefiting the former.

In terms of wealth redistribution this means taking dozens of billions of dollars from oil producers and putting them straight into the pocket of US consumers. And when we are talking about oil producers we are talking very much about Saudi Arabia and other OPEC members. Of course, there exists an issue of demand elasticity, widely claimed to be pretty inelastic when it comes to carbon fuels, against the global energy market which for smaller nations should appear as absolutely elastic on the supply side. However, practical experience and common sense can easily send these two arguments packing.

For one, the recent experience shows that the demand for carbon fuels in the US is elastic enough with the breaking point somewhere between $3 and $4 per gallon. This was amply evident a couple of years ago when sells of hybrids and flex engines shot up. In those states that took matters into their hands the impact was even more dramatic with tax revenues collapsing as a result of collapse of demand for carbon fuels. Two, the US is no marginal oil consumer and producer. It accounts roughly for one quarter of global oil consumption and even more in terms of oil imports. It's twice as much a swing oil consumer as Saudi Arabia a swing oil producer. Of course to cut oil consumption is absolutely not the same as to cut production. Nevertheless, any move in US oil inventories tends to send the price of oil in the opposite direction.

Oil Production



Oil Consumption



Oil Imports


Source: Nation Master - Energy Statistics by country

It's easy to the see from these three charts by how much the US is more a swing energy consumer than Saudi Arabia is a swing energy producer. While there may be a certain validity to the claim that demand is inelastic, in practical terms it only means that consumers take a loss equivalent not to 50% of a possible tax, but say 70%-80%. On the graph above this would be expressed as the retail price stabilizing at $2.7-$2.8. Given that taxpayers should be fully refunded for this loss through a tax swap, they just benefit less from the reform, but they still benefit, they don't lose. Ironically, it also means that for the gas tax to benefit the taxpayer most, it should be massive enough to put maximum pressure on the price.

America's irrationality on everything related to taxes is amply demonstrated by Friedman, Krauthammer and other supporters of the gas tax themselves. Instead of clumsily arguing that gas tax does not hurt so much, they should blatantly tell their compatriots to have mercy on themselves and let themselves to save a few dollars at the expense of oil sheikhs. For the US the gas tax is a bit like skiing. America should overcome its deeply ingrained fears by taking a plunge. It should do the opposite of what its natural fear dictates it and throw itself into it.

Some people may say that it's not right to manipulate markets, in particular, manipulating them in such ways that discourage markets from more productive modes of production. Without starting a debate about the religion of free markets and whether the markets are so sacred that they should not be manipulated, I would dismiss this whole argument as irrelevant. I have already dealt with this point here. To put it short, it's the current system that manipulates the markets. The gas tax is more like demanipulation. It's corrective and not manipulative.

Of course, the current administration has its own reasons for shunning any discussion of gas tax. For starters, Obama has repeatedly stressed his non-partisanship and called on both parties to work together. So it's only natural that he is now pushing for the cap and trade scheme that's not only absolutely unacceptable to the Republicans, but is hopeless with large chunks of his own party too. Two, Obama claimed that it's not right to slap taxes on the middle class in recession. That's why the tax swap, immediately beneficial for taxpayers, was dropped in favor of what so many, and probably correctly, suspect of being a hidden tax. Finally, gas tax is a simple and effective way to cut on oil consumption and reduce US dependence on foreign oil, but this cannot be said about the cap and trade program. For Obama this is sure yet another point in favor of the cap and trade. In short there is a certain failure here to follow public declarations with a correct practical decision. Otherwise, I tend to agree with Thomas Friedman: Obama's commitments are truly impressive. Things look great. All that's missing is only right policies, right politics and right officials.

Labels: , , , ,

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 3:49 PM

18 Comments




Saturday, May 9, 2009




Making Sense

December 10, 2008

washingtonpost.com > Print Edition > Editorial Pages

Start Making Sense

Monday, December 8, 2008

THERE IS a certain unreal quality to current debate over the state of the U.S. economy, national security and the environment. As Detroit's Big Three automakers approach bankruptcy, dangerous oil-exporting states threaten international stability and climate change continues unchecked, Congress and the incoming Obama administration ponder costly and complex proposals to address these related crises. Under consideration are tens of billions of dollars in loans to the car companies; sanctions and diplomacy targeted at Iran, Russia and others; and a cap-and-trade system for carbon emissions. Each of these may have its place. What's striking, though, is that the only idea that seems to be off the table is the one that would address all three concerns directly and efficiently: higher gas taxes. This step would stimulate the market for new fuel-efficient cars; defund mischief-making petro-states; and cut carbon emissions. Not only that, it would reduce traffic, curb urban sprawl and, by giving drivers an incentive to drive more slowly, improve highway safety.

Source: The Washington Post


December 20, 2008

Start Making Sense

This one is addressed to free market opponents of mandatory blends and carbon taxes because I see a lot of criticism directed at ethanol coming from these quarters. I should make a few reservations though right at the beginning. I am no socialist or something, I am generally pro market myself. Neither I support the ethanol subsidy, I would prefer other means to promote biofuels, such as taxes to fine gas stations that blend below targets established by the RFS and EISA. Now to the subject of this post.

There exists no coherent argumentation against either ethanol or carbon tax on the grounds of free markets. This is for a very simple reason that neither the energy market, nor agriculture (which is relevant here because of biofuels) are free markets. The first is distorted by tax breaks for oil companies, the latter by massive farm subsidies that derailed not one round of the global trade talks. Let alone that the oil market is being continuously manipulated by OPEC. That's why anybody arguing for exposing his country to the whims of the oil market should bear in mind - this is a soccer game with only one gate and the gate is on your side. The other, producing, side does not play by the free market rules.

As matter of fact, free markets simply don't exist in the nature and in this sense what we have is an approximation of free markets. One can argue for governments getting their hands off the markets and, in general, it seems to work, but we should always bear in mind that what we call free markets can be called such only with a stretch of imagination. For a market to be a free market according to the textbook definition of the term, there should exist no governments, no borders and no OPECs. No entry barriers, no taxes and no subsidies.

In a real free market no government has any business of spending billions on foreign policy and sending its armies across oceans to secure oil supplies for its citizens. Neither in a real free market anybody pays any taxes to finance wars on terror, containing Russias and Chaveces. In a real free market such things should not exist and consumers should either pay all these expenses themselves or be left on their own to suffer from the instability of these markets and their occasional inaccessibility.

Now, given that we are not living in a perfect world and the markets are never truly free, what we have is a government that imposes taxes on its citizens to finance one of the most expensive foreign policy projects in human history with the costs of this project running in trillions. It does not take a genius to see that a lion's share of the US foreign policy is connected to oil because so much of it is directed at securing stable and uninterrupted supplies of carbon fuels both to the US and the the rest of the world by policing the Middle East. Much of this foreign policy is also about containing enemies and rogue states, the overwhelming majority of which are petro-nuts. In this sense policing the Middle East, whether it's confronting enemies such as Iran or Al-Kaida or supporting America's pseudo friends in the region such as the "moderate" Arab regimes, is absolutely part of the costs involved in procuring oil for US consumers.

Containing Chavez or Russia's neo imperial ambitions should be also regarded as costs incurred on the US by its oil consumption as both can be said to receive a subsidy from the US through American drivers and other gasoline consumers. In fact, I can easily expand the list to demonstrate how most of the foreign policy costs are inflicted on the US by consumption of oil derived products.

Now I said taxes, so lets talk about taxes. Even if we admit that no economy can be called a real free market economy if it has taxes, we can still agree that taxes should make sense economically. Obviously the very fact that taxes exist is already distorting markets, but even when taxes exist, taxation system can be at least structured in a way that somehow approximates the economic reality involved in producing and consuming certain goods. And if we have a state having to bear additional costs to allow its citizens to consume something, then these costs should be somehow factored into the price of these goods unless we are talking about a welfare system which is a different story. In particular, what's relevant to the subject at hand is how much the taxes make the price of gasoline reflect its actual costs. And to put it mildly, the price has no relation to the reality whatsoever.

In an almost perfect world, almost because it's still no free market, all expenses involved in policing the Middle East, or containing Chavez and Russia, not to mention the cost of hurricane rescues and other stuff related to the global warming, would be consolidated into one single tax presented to gas consumers at the pump. Basically the government should slap a huge carbon tax on gasoline and diesel. At the same time it should drastically reduce income, VAT and other taxes, because there is really no reason to make people pay for consuming something that does not incur additional expenditures for the state.

What we have instead is a very badly designed taxation system that does not know how to bill the actual costs inflicted on the state by consumers of carbon fuels, into the market price of these goods. Basically we are talking about a massive waste of funds and resources on the part of the US government because of a subsidy with which the US government is supporting the domestic consumption of carbon fuels. This is because the US government does not make gas consumers pay the bill, but instead spreads the burden of supporting carbon consumption over the whole economy.

It's this fundamental flaw in the taxation system that does not distribute taxation burden properly which is confusing the markets and creating the illusion that free markets are all about pumping the Iranians, Arabs and Russians with petrodollars. This system is not only distorting the market, but it does so in such a way that, if left to its own devices, such a market invariably ends with a massive transfer of US wealth to rogue states and America's enemies around the globe.

Now I don't want to go into arguing about carbon tax being better than mandatory biofuels blend and such stuff, but I am ready to bet my house (a safe bet, since I have none) that a properly taxed gasoline should be way more expensive than ethanol and many other alternative energies. And I also want to say to free market opponents of carbon tax and biofuels, that whatever they have to say about all this, it has nothing to do with free markets. There is no free market in these issues because you can't call the ugly reality inflicted on us by this poorly structured and wildly hallucinating taxation system free market, but at least carbon tax and mandatory blends reflect much better what's happening in the real economy than the non existent free market adored by your free market crowd.

Labels: , , ,

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 10:19 AM

10 Comments




Tuesday, May 5, 2009




The Great Drought

In Iraq a severe drought is threatening to put an end to a UN sponsored project for restoration of the famous Marshlands.

By HADI MIZBAN, Associated Press Writer – Wed Apr 15

Last month, the U.N.'s Food and Agriculture Organization and the Iraqi government announced a new $47 million program last month to restore the marshes, focusing on the southern provinces of Maysan, Dhi Qar and Basra.

But the program's Iraq director, Dr. Fadel el-Zubi, expressed doubt that the marshes can be fully restored without a break in the drought. Also needed are new water-sharing agreements among countries in the region including Syria and Iran to give Iraq more access to water, he said.

"There is much less water coming from neighboring countries," he said. "So the amount of water going to the marshlands will be less."

Source: Drought threatens `Garden of Eden' marshes in Iraq


Recent reports by IRIN from Iraq and Syria all tell of a very similar situation of several years of uninterrupted drought devastating agriculture and triggering migration to the cities.


BAGHDAD, 28 April 2009 (IRIN) - Water shortages, high levels of salinity, and desertification appear to have badly affected agricultural production this last winter, according to officials from the Iraqi agriculture and water resources ministries.

“We are suffering from a real and serious water crisis,” Mahdi al-Qaisi, undersecretary in the Agriculture Ministry, told IRIN in Baghdad. “We are not expecting winter season crops to meet local demand, and summer crops will probably be affected as well,” al-Qaisi said

. . .

Decades of war, UN sanctions, underinvestment, military operations, and the cutting down of trees for firewood have paralysed Iraq’s agricultural sector and increased salinity and desertification to “very scary levels”, al-Qaisi said.

According to the Agriculture Ministry, salinity is affecting at least 40 percent of agricultural land, mainly in central and southern Iraq, while 40-50 percent of what was agricultural land in the 1970s has been affected by desertification.

. . .

“Things are slipping from our hands,” said Mohammed Ali Sarham, a water expert in Iraq’s southern province of Diwaniyah. “We are entering the third year of drought; water levels are falling all the time, and nothing is being done about it,” Sarham said.

“Swaths of land are being turned into desert; farmers are leaving the countryside and heading to the cities or nearby areas. We are importing almost all our food, though in the 1950s we were one of the few regional cereal exporting countries,” he said.

Source: IRAQ: Death knell for agriculture?


Because of a high level of subsistence farming in Syria, many families have lost not just their income, but their means of feeding themselves. “Many farmers’ crops failed entirely,” Abdulla Tahir Bin Yehia, FAO representative in Syria, said. “It hits them very hard. No crop means no income. And on top of that they need to buy food and seeds which are at higher prices because of the crop failure.

. . .

“Herders and farmers have sold off their assets: land, animals, houses, furniture, jewellery - all for low prices,” Bin Yehia said. “The poorest are affected most. These include many women-headed households.”

Many of those affected have migrated to urban areas, causing rural school dropout rates to rise. According to the UN, migration rates from rural to urban areas have increased by 20 to 30 percent year-on-year from 2007 to 2008.

Source: SYRIA: Drought blamed for food scarcity

The severity of the current drought no longer appears a foretaste of the things to come, but the thing itself and it's coming fast. In some areas farmers are losing patience and confidence in farming as a way of life and reliable occupation. In this sense, even an occasional break in this latest wave of droughts may fail to produce a recovery as the psychological impact of this climatic disaster may far outstrip the economic one.

The economic impact is naturally more severe in those countries where agriculture accounts for a sizable share of the GDP. In particular, Syria is one such a country. It's not only agriculture that's slipping out of Syria's hands. The exploding budget deficit amidst declining oil revenues may be a sign of the government permanently losing control over the macroeconomic situation.

The UN predictions of millions of climatic refugees swamping the area of the Middle East and Africa by the end of the next decade may in fact be already happening. If things keep going like this, the Middle East may yet end as one of the most urbanized areas of the world. This second wave of urbanization created by the rapidly unfolding climate change is heavily loaded with consequences for the region. It means increased concentration of local populations in big cities where social conflicts may flair flare up. It also means an increased potential for ethnic and sectarian strife as different communities are forced to share streets and neighborhoods inside already overpopulated urban centers. From the economic point of view, whatever achievements the Arab regimes have had during this decade in reducing or better containing the region's massive unemployment, they are all in danger of getting undone by this migration.

The long term consequences are no less tremendous. Urbanization is credited by some as one of the contributing factors to the collapse of the Arab and other fertilities across the region. With fertility rates in Iran and some Arab countries now on a par with Scandinavia, one can only wonder how low the freefalling birth rates can now get under the combined impact of many deprivations created by the climate change. The mothership of the world's worst demographic explosions may yet astonish the world with the worst demographic collapse ever recorded in human history.

Signs of a massive cultural and social shift going on under surface are easy to spot; in some Arab countries women have been recently reported to outnumber men by three to one in university enrollments and this fact has many far reaching implications too.

If women increasingly seek to join the labor force in the next few decades, that will add to the pressures of creating sufficient jobs for the youth bulge. For instance, an increase over the next decade in women's labor force participation rate by ten percentage points -- which would still leave Middle East women well below the average in other developing countries -- would almost double the number of job-seekers being added to the labor force.

Source: The Washington Institute for Near East Policy

The migration flows created by the climate change and increased women workforce participation will keep the simmering with discontent underemployed youth bulge oversized and overactive well into the next decade.

Peace makers and other well intentioned individuals may still have a few years for dreaming up their noble dreams. But the ground is burning under their feet. It literally does.

Back to HappyArabNews

Proclaimed un monstruooo muy monstruoso at 10:52 PM

13 Comments