David Foster

Where Are They Now?

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Regarding the events in Georgia, Neptunus Lex has some questions:

Millions marched in San Francisco, Rome, Barcelona and London when a US-led coalition of democracies prepared to depose a murderous tyrant – where are they now, when a tyrant seeks to depose a democratically elected government?

Millions more protested when a wretchedly afflicted people attempted to shake off the chains of 30 year’s oppression, tribalism and superstition to create for themselves and their children a sense of security and a representative government, answerable to the people – where are they now, that a free people has been reacquainted with the rod and beaten back to the yoke?

Others protested in Florence and Glocestershire when NATO bombers intervened to stop a genocide in Kosovo – where are they now, when bombers and helicopter gunships rain death upon innocents?

Read the whole thing.

A Scary Ratio

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Barrons (7/14) contains the following sentence:

Even more impressive is the value of the oil reserves of petroleum-exporting countries, which now total an estimated $140 trillion, nearly three times the size of global equity markets, which have a combined market value of around $50 trillion. (emphasis added)

There are a couple of things wrong with this comparison. It is not correct, IMNSHO, to compare a cash flow stream which will be recognized over years/decades to a current market value–the cash flow stream should be discounted to present value. (Equity market values already represent, at least in theory, the discounted present value of their corresponding free cash flow streams.) Also, I’m pretty sure reserve value is a gross value, which doesn’t take production costs into account. For a place like Saudi Arabia, these may be minimal at present, but they will not remain minimal over the life of the asset.

But even after these adjustments are applied, you will probably come out with something like:

The value of the oil reserves of petroleum-exporting countries is equal to the size of global equity markets.

Think about what this means. Ownership of the land under which oil resides is roughly equal in value to ownership of the equity interest in all the world’s publicly-traded companies, with their factories, mines, brand values, and intellectual capital…the accumulated work and knowledge of centuries.

This represents in a sense a return to the pre-industrial age, in which the ownership of land was the predominant form of wealth. If this situation is sustained, it will represent a tremendous change in the world economic order, and not at all a positive one.

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Blam! Sock! Pow!

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In June, a pack of University of Chicago professors sent a letter to the university’s President, objecting to naming a new Institute after the Nobel-prize-winning economist Milton Friedman.

Comes now John Cochrane, a UC economics professor, with a brutal and effective deconstruction of the bad writing and bad thinking in this letter. (Via Newmark’s Door)

The Sermon to the Germans

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Obama’s sermon to the Germans has been much discussed in the blogosphere. In this post, I’d like to focus on one thread of the speech: Obama’s words about the Berlin Airlift:

Sixty years ago, the planes that flew over Berlin did not drop bombs; instead they delivered food, and coal, and candy to grateful children. And in that show of solidarity, those pilots won more than a military victory. They won hearts and minds; love and loyalty and trust – not just from the people in this city, but from all those who heard the story of what they did here.

Actually, of course, a very large number of bombs had been dropped on Berlin and other German cities, just a few years earlier. Americans were in Berlin at all only due to the application of military force, without which, Berlin would have continued to be a Nazi city–and one in which a Barack Obama, if he were allowed to continue living at all, would certainly not have been allowed to give a political speech.

And Berlin–along with the rest of West Germany–avoided Soviet invasion and domination only because of American military force. The unarmed transport planes that supplied Berlin would not have survived had the Soviets not been aware of the armed fighters and bombers–and nuclear weapons–that were in American possession.

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The Return of Commercial Sail?

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In a post on Ships and the Global Economy, I mentioned a sail-assist technology which has been develope by a German company. Operating something like a kite, the SkySails system is said to be capable of lowering vessel fuel costs by 10-35%.

Comes now Compagnie de Transport Maritime à la Voile which has entered the cargo transportation business with a pure-sail approach. The 106-year-old Kathleen & May will be running wine from Bordeaux to Dublin. CMTV has chartered several additional sailing ships and will be using them to ship products such as coffee and jam. The company also intends to have new vessels built to its specifications.

Here’s CMTV’s website. Note that shippers get a “logo sticker” that they can attach to their products, certifying that “goods are transferred to consumers in a clean and socially responsible way that contributes to sustainable development, without neglecting the requirement to exchange necessary goods between people.”

I doubt if pure sail will ever recapture a significant portion of the world ocean transportation industry, but it may well thrive in some niche markets, serving people who want to buy products which are defined as “green” or “sustainable” and who may also enjoy the association with the romance of sail.

Sail-assist technologies for powered vessels, on the other hand, may have a significant role to play, particularly if oil prices continue to climb and if environmental restrictions mandate the replacement of bunker fuel with the more-expensive distillates.

Here’s a report on the test on the SkySails system on the multipurpose cargo ship Michael A. Note the interesting comparison of the tractive force from the sail with the thrust from an Airbus A318 turbine engine.

CMTV item via Checks with Chart.