Stock market bubble fueled by printed money

So the Dow Jones has hit 15,000, it was 14,000 just over two months ago, with the S & P reaching a record level, the FTSE is at its highest since 2007, and the German DAX index reaching levels not seen since before the global financial crisis.

It is like the crisis didn't happen, but oddly enough there isn't a huge amount of evidence to demonstrate that this is due to performance, rather than cheap credit.

Yes there has been a bit of a recovery, and yes some stock prices were low compared to expected revenues.

However, as Allister Heath of City AM says:

"Ultra-loose and interventionist monetary policy globally is one of the main causes of this resurgence. Pretending that it isn’t, and that economies – even those like America’s which have liquidated many past malinvestments – could immediately and easily readjust to neutral interest rates and zero intervention is a dangerous delusion.

Much of the central-bank induced madness that led to the last two bubbles is reaching ever more dangerous proportions, not least the Fed’s hubristic determination to prop up markets..."

It was the perpetual issuing of fiat money by central banks that fueled the crisis, with CPI inflation hidden by a combination of plummeting prices from Chinese imports (a scenario that has come to an end, as China no longer offers lower costs) and the inflation being largely seen in stock and property prices.

The new bubbles will be stores of future problems. 

Increases in stock prices due to good performance and optimistic earnings based on improved productivity and market growth are one thing,  increases due to banks, flooded with cheap money from central banks, seeking somewhere to put it, are another.

No one has learned anything.

Not all austerity is equal...

Allister Heath of City AM:

Spending cuts are austerity of the public sector  (as it has to reduce its activity)

Tax increases are austerity of the private sector

Think about which one is more likely to decrease employment, and which one is more likely to reduce economic growth.

Self-driving cars could transform land transport

In the UK the talk is about taxpayers paying for an extensive high speed railway network between London, Birmingham, Manchester and Leeds.  It would cost £35 billion to build and would lose money.   It will mostly service well-heeled business people (the fares will be too high for families, who will drive, or the poorer, who will take the multiple competing privately provided coach services).  90% of its users will be those using trains now, or people who wouldn't have travelled in the first place.  It will make next to no impact on domestic flights or road traffic.  One of the main objectives is to free capacity on the existing lines, so that more loss making commuter services can operate on the lines close to London.

In Auckland the talk is about an underground rail loop to enable its commuter rail service, soon to be electrified, to have more capacity during the peak hours.  Roughly 45,000 trips a day are taken on that system, roughly the entire average daily trips of Fenchurch Street station in London (yep that busy) (and 10% less than Wellington's network, despite Wellington's region having at least a quarter of Auckland's population.  It would cost NZ$2 billion to build and would lose money.  

In both cases the projects are expensive, not financially viable, and serve relatively few people.

They are 20th century solutions to perceived transport problems, but another is on its way, and it could transform land transport between and within cities.

Self-driving cars. Allister Heath says it makes big rail schemes like HS2 outdated.

The technology exists now.  Cars can already park themselves, emergency brake, follow road lines and follow other vehicles and brake automatically.  Several US states are already changing laws to allow for fully autonomous road vehicles, and the technology now being trialled enables vehicles to navigate safely along existing roads.

What could that mean?

Road vehicles that actively avoid collisions, both with other vehicles, and cyclists and pedestrians.

Road vehicles that operate in convoys, in close formation on major roads, increasing the capacity of those roads by a factor of three to four, rivalling railways.

Road vehicles that don't need a driver, that can be sent to be parked anywhere, called up on command by mobile phone.

Motorways that operate like trains of vehicles, except that the vehicles have the ultimate flexibility of starting and ending trips anywhere on the road network.

Traffic lights will no longer need to keep traffic stopped, but rather interweave traffic to maximise capacity.

Speeds can be faster where it is safe to do so, and better managed where there are many pedestrians.

Cars could be parked with a far higher density.

Let's not pretend there are barriers to this.

Technology needs to be refined, it needs to be secure.  Nobody wants autonomous cars diverting onto footpaths and mowing people down.

Laws need to be changed, so that owners of vehicles are liable for accidents when there is no driver or active driver.

Roads need to be better managed, so lines are maintained, databases about road rules, traffic signals adapted and systems in place so the network is actively managed.   

However, it can transform transport.

Buses can have the capacity of commuter railways (with the exception of high frequency metro services, which Auckland will never have).

Roads can have much more capacity, so there is far less need to build more capacity, and there is far less need to build safety into the roads with barriers and signs and speed limits that reflect driver behaviour.  

Roads would be so much safer that incidents of accidents causing congestion would be rare, and thousands of lives would be saved from serious injuries, and hundreds of millions of dollars of property damage and health costs avoided.

Vehicles would be much more fuel efficient, as vehicles become more efficient anyway, reducing emissions and the environmental impacts from transport.

Roads would be more like networks akin to telecommunications and energy networks, and politicians choosing projects to expand capacity would be rightly treated as amateur fools.  Who today would listen to a politician who says that a specific switch needs to be installed on a network, or a substation or that cable capacity be added somewhere?

Railways are bespoke inflexible networks that have a lot of capacity best suited for a narrow range of transport tasks.  The range of those tasks will narrow even more with automated road transport.

Of course some will still choose to drive, and will have options to do so, for leisure, but probably pay much more for insurance to do so without driving assistance.   What happens ought to be up to market demand, for vehicles and for roads.

Unfortunately, roads are managed by politicians and bureaucrats.  If anything is going to get in the way of setting them free, it will be them.

Auckland road pricing?

Some questions:

- Is there a funding gap if large totemic projects that the users would never pay for themselves are dropped? (yes rail and road)

- Why does Auckland Council assume fuel tax will still exist in 30 years time when multiple states in the US and the Australian Federal Government are considering whether it has a future at all when vehicle engines become so fuel efficient that the tax would have to be very high to collect enough money at all?

- Why does Auckland Council think that two road pricing options, both highly criticised in a previous report are still worth considering, especially since technology has moved in leaps and bounds since then?

- Why does Auckland Council think that if there is user pays on the roads, directly, not through fuel tax, that there shouldn't be user pays on the railways?

- Why do options to fund transport in Auckland automatically exclude any evolution of the existing road pricing type system in the form of national road user charges?  A system that now has increasing numbers of people paying through a privately provided electronic system that measures where and when vehicles use the roads, and has competitive delivery.

- Why did Auckland Council completely ignore other road pricing options used elsewhere?  Is it because its consultants know nothing about them? (I very strongly expect this)

- Why does Auckland Council think roads shouldn't be run like a business?  Just because Auckland Transport Blog wants to plan, tax motorists and subsidise public transport in its eager bright eyed bushy-tailed attempt to push people into doing what it thinks is best for them, doesn't mean people will comply, or that it is good for them.

- What is Auckland Council's view on the automation of road transport, including the increasing likelihood that road vehicles will increasingly be self-steering and self-driving, at least part of the time?  Given this could treble the capacity of existing roads,  virtually eliminating congestion, dramatically cut pollution and eliminate one of the few advantages of rail over road, why ignore it?

Syria - Time for difficult decisions

Let's make some points very clear.

Syria's government is reprehensible.  It is a softer version of the north Korean crime family one-party state, but only in scale and depth of totalitarianism.  Bashar Assad inherited the supreme leader role from his murderous tyrant of a father.  That family, from the Alawite minority sect has run the place for my entire lifetime.

Bashar Assad loosened the screws somewhat, but has demonstrated the typical attitude of any dictator when challenged by his subjects.  He wont step down, wont disband the secret police, wont abolish the state monopoly on media, wont legalise free speech, wont legalise competing political parties, wont hold elections.

He has spread nationalist-sectarian fear amongst Alawites, fearful that anything other than the dictatorship of his family will mean their slaughter.  He has encouraged the view that anyone who opposes his "secular" rule, is an Islamist.

Assad's regime torture and executes political opponents, and it is clear that it has used its own military to attack civilian populations to repress political dissent.  By no measure can it possibly be said to claim any moral authority, unless one adapts Mao's statement to claim morality comes from the barrel of a gun.  Human Rights Watch estimated 17,000 people 'disappeared' in Syria in the first decade of his father's rule.  In 1982 he bombed the city of Hama, slaughtering between 10,000 and 40,000 people as he suppressed an uprising by the Muslim Brotherhood.   Yes, one can't argue that the Islamists would be better, but the indiscriminate oppression was brutal on a scale that Western "peace" advocates would usually decry.

Bear in mind Syria has previously invaded and occupied Lebanon, and assassinated Lebanese politicians.  It is far from being a non-aggressive actor in the region, a point thrown by its supporters against Israel, but ignored in Syria.

Assad's regime has long been supported by the USSR and more recently Russia, and has always been anti-Western.

It is perfectly moral for Syrians to fight to overthrow this regime.  It kills, torture and imprisons those who challenge it.  Its apparent use of chemical weapons does cross a threshold, one of degree.  As chemical weapons kill and harm over a wide area indiscriminately in a way that is almost impossible to defend against.  It is a tool of mass slaughter, beyond that of conventional bombs and firearms which have very localised effects.

Providing arms or other support for the Syrian regime is being a party to this.  Russia already does this, it maintains a military base there and openly supports the regime.   Hardly surprising, since Russia is an authoritarian faux-democracy that arrests and imprisons its opponents, and has little compunction about using force against those challenging its corrupt corporatist crony-capitalist state.  

So let's not pretend that Syria should not be subject to international intervention in its civil war, it already has it.

Similarly, Qatari, Saudi and other Arab states have been arming and funding different rebel groups.  The very same states which would cite "state sovereignty" as a reason to oppose anyone interfering in their politics.

So the genie of intervention is already out of the proverbial bottle.

Should something be done?