Economic oddities

I’ve been following the economic news pretty closely since December 2006, when Pastor Thomas McConnell sent out an email that awoke me from my dogmatic slumbers. I deliberately avoid writing about items in the news that are well known and more or less self-explanatory. But occasionally I read a report that I can’t immediately understand, that doesn’t fit in well with what I already knew, that makes me stop and think “Hmm, what the heck does that imply?” Those are the ones I tend to post about. So don’t be bothered if you read one of these posts and end up puzzled about what I’m getting at; it’s probably news that puzzles me as well.

Of all the economic turbulence that’s been reported on this week, it was this tidbit about coal prices that gave me pause: coal prices have nearly doubled in the past three months.

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Coal is used to generate about 50% of the electricity used in the U.S. But as Byron King says, it is China where the increase in demand is most dramatic:

China’s coal consumption is mind-bending. China is currently building giant, 500-megawatt coal-fired power plant systems in an almost assembly line fashion. And China is installing and commissioning these coal burners at an astounding rate of THREE per WEEK!!!

Each year as of late, China has added more electrical generation capacity than the entire nation of Germany. And Chinese electrical generation capacity has been growing at a steady rate of over 15% per year for the past five years.

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3 thoughts on “Economic oddities

  1. I have enjoyed reading several of your posts on “folk economics,” and I am wondering if you would share your opinion on all of the recent interest rate cuts by the Fed?
    It seems to me that they are just postponing a major crash. Personally, I don’t really think that it is any of the government’s business to come up with financing to save huge corporations. (such as Bear Sterns) If the Fed stayed out of it wouldn’t the crash (presuming there is one coming) happen more gradually?
    I see it being the same for subsidizing farmers. If the government stayed out, it seems to me, that the cash crop farmers who did poorly would be gradually weeded out , rather than all the huge farming enterprises coming down together when the government runs out of money.

    Thanks for all the good information you have presented,
    Matthew

  2. Matthew,

    I don’t have any opinion worth sharing about the Fed’s recent actions. But there are recent examples worth studying of how governments have dealt with similar crises. In the early 90s the Japanese did more or less what the Fed is doing now, and their economy was in the tank for about eighteen years (it may still be). The Scandinavians addressed a similar crisis somewhat differently, and after some intense short-term pain recovered nicely. (Because of the government’s actions? I don’t know.)

    Other crises that have various parallels to our own circumstances: the Asian crisis of 1997, starting in Thailand; the Argentine crisis of 1999-2002; and, of course, the Russian economic collapse in the 1990s.

  3. I enjoyed your post and accompanying chart as well as the quote from Byron King. I have been following his writings for several years now. He recently started contributing to Energy and Oil blog (http://www.energyandoil.com), I thought you and your readers may be interested in more of his postings. Thanks again and best wishes.
    -The Daily Reckoning Fan!

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