Yes Virginia...It's a Bubble...

[jk]

Re: Yes Virginia...It's a Bubble...

APS and SRP have similar problems in Phoenix. Because the majority of the year is quite temperate and the summers are searingly hot, they can fight the regulators and the public to keep extra equipment on hand to handle these extraordinary heating days or they can keep energy prices low, (12 cents a kWh average), and deal with a few unlucky people. Unless the trend changes soon, this is only going to get worse over the next 20-30 years.

i suppose the national grid isn't good enough for the southwest's summer cooling demand to be offset by generation capacity in regions with the opposite seasonality. why can't that work?

[santafe2]

Re: Yes Virginia...It's a Bubble...

Yesterday during our 122 degree heatwave, 861 homes lost power around 5:30 PM, only about a mile from where I live. Half of them were still without power at 10 PM. The electric company has all year to prepare for high demands on the power grid, but this happens every summer.

APS and SRP have similar problems in Phoenix. Because the majority of the year is quite temperate and the summers are searingly hot, they can fight the regulators and the public to keep extra equipment on hand to handle these extraordinary heating days or they can keep energy prices low, (12 cents a kWh average), and deal with a few unlucky people. Unless the trend changes soon, this is only going to get worse over the next 20-30 years.

[Polish_Silver]

Utility frustration

Yesterday during our 122 degree heatwave, 861 homes lost power around 5:30 PM, only about a mile from where I live. Half of them were still without power at 10 PM. The electric company has all year to prepare for high demands on the power grid, but this happens every summer.

Is it a grid distribution problem, or a power production problem?

The California brown outs of the 1990's were primarily production problems, exacerbated by some illegal deals by Enron and the like. The local utility
had been trying to build a power plant for years before the shortages began, but the Nimbyism was downright suffocating---even for a natural gas generator.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Yesterday during our 122 degree heatwave, 861 homes lost power around 5:30 PM, only about a mile from where I live. Half of them were still without power at 10 PM. The electric company has all year to prepare for high demands on the power grid, but this happens every summer.

I don't know about down there, but up here where I live the power companies have their hands tied. Coal is being legislatively phased out (at least two major coal fired power plants in Alberta have been shut down in past year) and trying to get approvals for any new power projects is a lengthy, costly process - doesn't matter if it is a nat gas fired turbine, new transmission lines, wind farms, run-of-river hydro or anything else. We Canadians have decided that everyone who has no financial skin in the game is a "stakeholder" and therefore must be consulted before anything can be started. In addition, the project proponent company must pay all the costs for the public hearings, including the costs of the interveners, so there is every incentive to tie up every project for as long as possible as it supports the "protest industry" that has sprung up here. And I continue to marvel at the amount of recently discovered First Nations sacred territory - could never have conceived that in a nation as vast as Canada, but then what do I know.

Solar on the rooftop (with a good broom to clean off the snow) and burning wood to heat your house in winter are starting to look like the default options up here.

[shiny!]

Re: Yes Virginia...It's a Bubble...

i don't think a big infrastructure build in the u.s. would necessarily or even likely be the kind of misallocation done in japan and china. i don't see the u.s. building many bridges to nowhere or ghost cities. u.s. infrastructure sucks, and there's a lot of productivity enhancing work to be done before we have people digging holes so that others can fill them in.

Yesterday during our 122 degree heatwave, 861 homes lost power around 5:30 PM, only about a mile from where I live. Half of them were still without power at 10 PM. The electric company has all year to prepare for high demands on the power grid, but this happens every summer.

[GRG55]

Re: Yes Virginia...It's a Bubble...

What did Japan waste money on ?

"Bridges to nowhere" is a metaphor for Japan's post-bubble Big Project infrastructure spending program that was supposed to prevent the economy from going into deflation.

Here's an excerpt from a 2009 NYT article (which is right about the time China was gearing up to take its already magnificent and out of control infrastructure spending into hyper-overdrive in the aftermath of the global financial crisis). And as you will see from the second article posted below that thinking is still largely intact. Despite the very visible and quantifiable failures in Japan and now China, I am fascinated by the comparisons that suggest that nations that did not follow this prescription are somehow deficient or missing out on these oh-so-easy-prescriptions for the nirvana hat-trick of job creation, higher sustainable GDP growth and, of course, the ultimate prize of a magical cure-all 2% inflation rate.

Necessary and appropriate public infrastructure, and the maintenance and periodic rejuvenation/upgrading/replacement of same has always been a key component to economic competitiveness. But the idea that massive and invariably indiscriminate infrastructure spending, aided by gobs of cheap Central Bank induced money from helicopters is somehow going to pave the way for sound, sustainable, competitive economic growth? Count me a sceptic.

Japan’s Big-Works Stimulus Is Lesson

By MARTIN FACKLER

FEB. 5, 2009

HAMADA, Japan — The Hamada Marine Bridge soars majestically over this small fishing harbor, so much larger than the squid boats anchored below that it seems out of place.

And it is not just the bridge. Two decades of generous public works spending have showered this city of 61,000 mostly graying residents with a highway, a two-lane bypass, a university, a prison, a children’s art museum, the Sun Village Hamada sports center, a bright red welcome center, a ski resort and an aquarium featuring three ring-blowing Beluga whales.

Nor is this remote port in western Japan unusual. Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s. During those nearly two decades, Japan accumulated the largest public debt in the developed world — totaling 180 percent of its $5.5 trillion economy — while failing to generate a convincing recovery...

...Moreover, it matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than infrastructure spending.

“It is not enough just to hire workers to dig holes and then fill them in again,” said Toshihiro Ihori, an economics professor at the University of Tokyo. “One lesson from Japan is that public works get the best results when they create something useful for the future.”

In total, Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, according to the Cabinet Office. The spending peaked in 1995 and remained high until the early 2000s, when it was cut amid growing concerns about ballooning budget deficits. More recently, the governing Liberal Democratic Party has increased spending again to revive the economy and the party’s own flagging popularity.

In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations...

Vacant Japan Homes Show Holes in Abenomics’ Push for Housing

September 18, 2013 — 3:25 AM MDT

Broken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment.

More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years.

Prime Minister Shinzo Abe’s plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan’s demographics. Rural, suburban and less-desirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world’s fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties.

“Even when the number of vacant homes is on the rise, more and more new homes are being built,” said Hidetaka Yoneyama, a senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan’s housing market. “That’s absurd.”

Home vacancy in Japan, estimated at about 18 percent of housing nationwide, may reach 24 percent by 2028, he said...

[GRG55]

Re: Yes Virginia...It's a Bubble...

In canada, are many consumer level items manufactured in China? If not, then where do they come from. A friend in Germany told me that
they also get many items from the far east.

We have the usual Chinese stuff in Wal-Mart and a lot of the mass market electronics and small appliances are also Chinese or Korean made (my D-Link router, my laser printer, my iPad, my iPhone, my electric tooth brush, my 3 Samsung computer screens, the VIRZoom bike, and so forth) But if you look closely across the spectrum a very large part of what we consume is made in the USA and Mexico (NAFTA zone). The highest end products if not made in Canada come almost exclusively from the USA or western Europe including all 3 vehicles in our family, my airplane and the new avionics in it, most of the cosmetics and pharma products and most everything that went into making the GRG55 bunker.

[shiny!]

Re: Yes Virginia...It's a Bubble...

i don't think a big infrastructure build in the u.s. would necessarily or even likely be the kind of misallocation done in japan and china. i don't see the u.s. building many bridges to nowhere or ghost cities. u.s. infrastructure sucks, and there's a lot of productivity enhancing work to be done before we have people digging holes so that others can fill them in.

Our bridges, power grid, water and sewer systems are in dire need of work. Phoenix's power grid, for example, has almost no capacity to handle extra loads in hot summers. If even one transformer tower blows we're in serious trouble.

I'd like to see a major national infrastructure program from the next president, along with a resurrection of the Civilian Conservation Corps to give jobs and structure to the unemployed, at-risk youth of America.

[jk]

Re: Yes Virginia...It's a Bubble...

More pablum and nonsense from the same cohort that gave us QE, NIRP, ZIRP, Credit Easing, and a rigged bond market. None of that worked to create sustainable economic growth, so why does anybody believe that emulating the "helicopter money" infrastructure overinvestment thesis that failed in Japan, China and Australia (to use the examples from the prior post) will work anywhere else?

Nobody disagrees that society needs public infrastructure, or that the nature of that infrastructure changes with time and technology (fiberoptic replacing copper wires, rapid transit instead of more arterial routes, etc.). But suggesting other nations should match the imprudent capital misallocations of Japan and now China is ridiculous.

i don't think a big infrastructure build in the u.s. would necessarily or even likely be the kind of misallocation done in japan and china. i don't see the u.s. building many bridges to nowhere or ghost cities. u.s. infrastructure sucks, and there's a lot of productivity enhancing work to be done before we have people digging holes so that others can fill them in.

[Polish_Silver]

Trade and inequality

Yes, the export-mercantile strategy . . .

The U.S. economy was able to absorb the output of roughly ~50 million people in Japan, ~10 million people in Taiwan, ~3 million people in Singapore, and ~25 million people in Korea; all the while becoming poorer. .

I don't think it made the US as a whole poorer. What it did was increase inequality.

The people formerly employed making shoes, clothing, furniture, toys, cooking pots, and TVs had to do something else. The imports of goods and people affect certain classes of people more than others. I think there are fewer jobs requiring low levels of skill--the kind of positions that young and disadvantaged people need.

Looking at the electronics industry, employment is still fairly good for people who work on product development (technicians, engineers) , but employment is almost non-existent for manufacturing consumer level electronic items. When I was in Taiwan a flat screen TV factory opened, and had trouble finding workers--a sign that the same thing could be happening to them.

California has far more immigrants than South Carolina. I noticed that, in California, almost all the yard work, and a great deal of the construction and retail work is done by immigrants, of various legal status. In South Carolina, many more natives, including WASPS, work in these kinds of positions.

[Polish_Silver]

Re: Yes Virginia...It's a Bubble...

china is capable of producing high quality goods, but only when they're forced to. e.g. foxconn's work for apple. they won't develop an internal market until and unless they have a much stronger social safety net, which doesn't appear to be anytime soon. they are getting older faster than they are getting rich, and as the dependency ratio rises they will have big problems.

The Atlantic just had an article on that very question--saying that the days of China's grandiose military and economic expansion are over (if they ever had them). They population is aging so rapidly, it's all they can do to figure out what to do with the elderly, many of whom have no personal savings.

[Polish_Silver]

Re: Yes Virginia...It's a Bubble...

More pablum and nonsense from the same cohort that gave us QE, NIRP, ZIRP, Credit Easing, and a rigged bond market. None of that worked to create sustainable economic growth, so why does anybody believe that emulating the "helicopter money" infrastructure overinvestment thesis that failed in Japan, China and Australia (to use the examples from the prior post) will work anywhere else?

Nobody disagrees that society needs public infrastructure, or that the nature of that infrastructure changes with time and technology (fiberoptic replacing copper wires, rapid transit instead of more arterial routes, etc.). But suggesting other nations should match the imprudent capital misallocations of Japan and now China is ridiculous.

What did Japan waste money on ?

[Polish_Silver]

Re: Yes Virginia...It's a Bubble...

That may be the perception, but the data do not support it. Although there has been a measurable increase in the past 35 years, the USA remains one of the absolute least trade (imports + exports) dependent nations on earth. That means a large part of what is consumed in the USA is made in the USA, and a large part of what is made in the USA is consumed in the USA.

I was born and raised in Canada, a country that has a trade dependence at ~60% that is roughly double the USA's trade dependence.

Here's a link to some comparative data that may be of interest in that regard:

http://data.worldbank.org/indicator/NE.TRD.GNFS.ZS

In canada, are many consumer level items manufactured in China? If not, then where do they come from. A friend in Germany told me that
they also get many items from the far east.

[GRG55]

Re: Yes Virginia...It's a Bubble...

In the end investment in inrastructure is not a credit-monetary matter. You must divest-defer consumption to be able to invest.
Of course the Chinese are investing too much, particularly in infrastructure. The other way round, there is not such thing as economic development without a sound infrastrucure creation policy.

More pablum and nonsense from the same cohort that gave us QE, NIRP, ZIRP, Credit Easing, and a rigged bond market. None of that worked to create sustainable economic growth, so why does anybody believe that emulating the "helicopter money" infrastructure overinvestment thesis that failed in Japan, China and Australia (to use the examples from the prior post) will work anywhere else?

Nobody disagrees that society needs public infrastructure, or that the nature of that infrastructure changes with time and technology (fiberoptic replacing copper wires, rapid transit instead of more arterial routes, etc.). But suggesting other nations should match the imprudent capital misallocations of Japan and now China is ridiculous.

[jk]

Re: Yes Virginia...It's a Bubble...

In the end investment in inrastructure is not a credit-monetary matter. You must divest-defer consumption to be able to invest.

if there are underutilized resources available, such as people looking for work or too discouraged to look for work, underutilized steel capacity, factories running 1 shift instead of 2 or 3, construction equipment sitting unused, and so on, all it takes is printing money to put them all in motion.