Monthly Archives: February 2009

Facing the facts (about banks)

’It may be nec­es­sary to tem­porar­i­ly nation­alise some banks in order to facil­i­tate a swift and order­ly restruc­tur­ing,’ [Allan Greenspan] said. ‘I under­stand that once in a hun­dred years this is what you do.’” Extract from Finan­cial Times

The most incon­ve­nient fact is the ques­tion­able sol­ven­cy of the banks, which has frozen cred­it mar­kets.

Transparency as stimulus


This is a great idea that the Rudd gov­ern­ment should adopt.

…The ‘Amer­i­can Recov­ery and Rein­vest­ment Act,’ bet­ter known as our nation­al Hail Mary stim­u­lus bill, … also con­tains a mea­sure pro­mot­ing a less-not­ed type of eco­nom­ic infra­struc­ture: gov­ern­ment data. In the name of trans­paren­cy, all the Fed’s stim­u­lus-spend­ing data will be post­ed at a new gov­ern­ment site,“Extract from Wired Mag­a­zine

Lack of trans­paren­cy (in finan­cial mar­kets) has turned a cycli­cal down-turn into a deep, world-wide, reces­sion. Noth­ing bet­ter demon­strates the cru­cial role of trans­paren­cy in mar­kets. But trans­paren­cy in gov­ern­ment can stim­u­late growth, too.

Spring-time for state captialists

It’s much more than Rio and Oz Min­er­als. Now Chi­na is secur­ing a 20-year sup­ply from the stum­bling Russ­ian oil indus­try.

The deal, the largest trade financ­ing agree­ment between the two coun­tries, alle­vi­ates the mas­sive refi­nanc­ing needs of Russia’s two state ener­gy giants as they seek to weath­er the cred­it cri­sis with the coun­try fac­ing its first reces­sion in 10 years. It will also pro­vide Chi­na, the world’s num­ber two oil importer, with an impor­tant new secured sup­ply of oil to fuel eco­nom­ic growth.” Extract from Finan­cial Times

Chi­na is on a shop­ping spree, tak­ing advan­tage of an his­tor­i­cal oppor­tu­ni­ty; its strong and strength­en­ing exter­nal bal­ances and the plunge in com­mod­i­ty prices. Yes, you read that right… while the rest of the world strug­gles to main­tain it’s trade grip, China’s exter­nal reserves will like­ly grow dur­ing the reces­sion.

The evidence on cap-and-trade

The prob­lem in Aus­tralia is not that the wrong pol­i­cy won in the bat­tle of ideas. The prob­lem is that the bat­tle nev­er took place. We need to have this debate. If the Gov­ern­ment is deter­mined to intro­duce fur­ther cli­mate change pol­i­cy, there are plen­ty of rea­sons a car­bon tax may be bet­ter than a trad­ing sys­tem.” Op Ed by John Humpreys in The Aus­tralian


A coal quiz

Here’s a lit­tle quiz about coal. You prob­a­bly know that there are two kinds; cok­ing coal, which pro­vides the car­bon in car­bon-steel and ther­mal coal that dri­ves the pow­er-sta­tions and adds CO2 to the atmos­phere. You might also know that Aus­tralia exports four times more cok­ing coal than the #2 glob­al sup­pli­er (Indone­sia) and maybe you were aware that Aus­tralia is the #2 ther­mal coal exporter after…Indonesia, which exports more than twice the vol­umes that Aus­tralia exports.

Well, you know now, at any rate.

So here’s the quiz: First ques­tion: who is the biggest cus­tomer for our export coals (cok­ing, ther­mal)? Chi­na? Europe? Japan? North Amer­i­ca? Korea? India? If you know the answer, you can prob­a­bly also answer the sec­ond ques­tion: Which rel­a­tive­ly small cus­tomer for our coal sets the prices we can charge and how? The prize for know­ing the cor­rect answer to these ques­tions is… a big headache.

Naive forecasts outperform IPCC

Mean and maximum errors in a naive forecast of temperature 1850-2008 [Green et. al.]

In a straight­for­ward but impor­tant paper, Green, Arm­strong and Soon demon­strate that there is no rea­son to devel­op elab­o­rate ‘fore­casts’ of tem­per­a­ture. The fore­casts of the CGM mod­els, they pre­dict, will be no bet­ter over pol­i­cy-rel­e­vant peri­ods of 20, 50 or even 100 years than a naive fore­cast that assumes future tem­per­a­tures will be the same as today’s.

Glob­al mean tem­per­a­tures were found to be remark­ably sta­ble over pol­i­cy-rel­e­vant hori­zons. The bench­mark fore­cast is that the glob­al mean tem­per­a­ture for each year for the rest of this cen­tu­ry will be with­in 0.5°C of the 2008 fig­ure.”

This con­clu­sion accords with com­mon-sense. You need only look at tem­per­a­ture records on a decadal or epochal scale to see that it goes down about as often as it goes up. The paper also reminds us of some impor­tant prin­ci­ples of pol­i­cy fore­cast­ing, espe­cial­ly the impor­tance of bas­ing fore­casts on the evi­dence, not on the spec­u­la­tion inher­ent in ‘sce­nar­ios’ and elab­o­rate mod­els.

Staticulation on rainfall from the BOM

Dr David Jones, head of the Bureau of Meteorology’s (BOM) Nation­al Cli­mate Cen­ter, if accu­rate­ly report­ed, relies on sta­tic­u­la­tion rather than evi­dence in remarks about drought and cli­mate change:

While cli­mate sci­en­tists warn a sin­gle event such as Victoria’s dead­ly bush­fires can­not be blamed on cli­mate change alone, Dr Jones said the con­di­tions were ‘total­ly typ­i­cal of cli­mate change at the most pes­simistic end of the mod­els’ ” Extract from The Age

It’s wor­ry­ing to hear insin­u­a­tions like this from senior gov­ern­ment sci­en­tists on the eve of the planned bush­fire Roy­al Com­mis­sion. Dr Jones seems to be mis­us­ing the BOM’s own sta­tis­ti­cal reports to sug­gest an alarm­ing con­clu­sion that is not sup­port­ed by the evi­dence.