Quotulatiousness

May 8, 2012

“If this drought continues much longer, we’re going to run out of umbrellas”

Filed under: Britain, Environment, Government — Tags: , , — Nicholas @ 10:40

Rob Lyons on the amusing juxtaposition of a “hosepipe ban” in the south of England and the wettest April since record keeping began:

It never rains but it pours scorn. That must be how many of England’s water companies feel as millions make fun of them. Having just declared a hosepipe ban and spent a fortune on posters declaring ‘WE ARE IN DROUGHT’, the heavens have opened. Result? The surreal combination of drought restrictions on water use going side-by-side with the wettest April since records began in 1910.

It is as if the declaration of drought were a latter-day raindance. Comedian Jimmy Carr quipped what everyone was thinking: ‘If this drought continues much longer, we’re going to run out of umbrellas.’ The combination of dramatic flooding in some parts of the country that are under drought restrictions caused one friend of mine to coin the term for our current water status: ‘flought’. Pictures of Thames Water’s bus adverts juxtaposed with people in the street huddling under brollies made newspaper front pages.

Yet, while the current situation is bizarre, the water companies do have a point. If the current storage sites are running low of water after two years of well-below-average rainfall, then we need to start preserving stocks. One month of heavy rain is welcome, but unless we have a particularly sodden summer and, more importantly, a damp-and-dreary winter, supplies could start to look very sparse indeed. That’s particularly true in the south and east of England, which depend on underground aquifers to store a large proportion of water supplies. The levels in these aquifers rely on winter rain to drip through the rocks above. Summer rain tends to run off, evaporate or get absorbed by growing plants. A quick look back to February and the warnings coming from Thames Water and others show how serious the problem had become before the deluge.

May 7, 2012

Chicago and the everlasting rail bottleneck

Filed under: Economics, Railways, USA — Tags: , — Nicholas @ 15:36

Chicago is where rail traffic goes to get delayed:

When it comes to rail traffic, Chicago is America’s speed bump.

Shippers complain that a load of freight can make its way from Los Angeles to Chicago in 48 hours, then take 30 hours to travel across the city. A recent trainload of sulfur took some 27 hours to pass through Chicago — an average speed of 1.13 miles per hour, or about a quarter the pace of many electric wheelchairs.

With freight volume in the United States expected to grow by more than 80 percent in the next 20 years, delays are projected to only get worse.

The underlying reasons for this sprawling traffic jam are complex, involving history, economics and a nation’s disinclination to improve its roads, bridges, and rails.

Six of the nation’s seven biggest railroads pass through the city, a testament to Chicago’s economic might when the rail lines were laid from the 1800s on. Today, a quarter of all rail traffic in the nation touches Chicago. Nearly half of what is known as intermodal rail traffic, the big steel boxes that can be carried aboard ships, trains or trucks, roll by, or through, this city.

April 18, 2011

Malinvestment the next big problem for China?

Filed under: China, Economics, Government — Tags: , , — Nicholas @ 09:54

Nouriel Roubini thinks that the Chinese central planners are missing the clues about overinvestment in their infrastructure binge:

China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible — most likely after 2013 — China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium.

Despite the rhetoric of the new Five-Year Plan — which, like the previous one, aims to increase the share of consumption in GDP — the path of least resistance is the status quo. The new plan’s details reveal continued reliance on investment, including public housing, to support growth, rather than faster currency appreciation, substantial fiscal transfers to households, taxation and/or privatization of state-owned enterprises (SOEs), liberalization of the household registration (hukou) system, or an easing of financial repression.

China has grown for the last few decades on the back of export-led industrialization and a weak currency, which have resulted in high corporate and household savings rates and reliance on net exports and fixed investment (infrastructure, real estate, and industrial capacity for import-competing and export sectors). When net exports collapsed in 2008-09 from 11 percent of GDP to 5 percent, China’s leader reacted by further increasing the fixed-investment share of GDP from 42 percent to 47 percent.

Thus, China did not suffer a severe recession — as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 — only because fixed investment exploded. And the fixed-investment share of GDP has increased further in 2010-2011, to almost 50 percent.

The problem, of course, is that no country can be productive enough to reinvest 50 percent of GDP in new capital stock without eventually facing immense overcapacity and a staggering nonperforming loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.

H/T to Publius for the link.

April 17, 2011

China’s real estate bubble

Filed under: China, Economics, Government — Tags: , , , — Nicholas @ 09:24

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