A próxima recessão europeia será russo-energética - Robert Romano (Limited Government Foundation)

 Os conservadores americanos aproveitam a crise energética na Europa para atacar as políticas setoriais do governo Biden.

Mas a matéria contém elementos informativos quantitativos, úteis para avaliar a dimensão do desafio energético europeu, sobretudo para a Alemanha.

Nord Stream natural gas pipeline sabotage brings Europe to point of no return 

 

By Robert Romano

Americans for Limited Government Foundation, September 27, 2022

The Nord Stream natural gas pipelines, which until the war in Ukraine had supplied 1.9 trillion cubic feet a year to Europe, and 55 percent of Germany’s gas alone, appears to have been sabotaged after two recorded blasts resulted in massive gas leaks into the Baltic sea.

Owned and operated by Nord Stream AG, a subsidiary of Russia state-owned energy giant Gazprom, in 2005, former German Chancellor Gerhard Schroder approved construction of the Nord Stream 1 pipeline, which was finished and went online in 2012. Nord Stream 2 was built from 2018 and finished construction in Sept. 2021 at a cost of $11 billion, and would have doubled the current pipelines’ distribution of 1.9 trillion cubic feet a year to 3.9 trillion cubic feet a year.

In Nov. 2021, Germany delayed final regulatory approval of the pipeline project to about March 2022, right as Russia began moving its forces to its border with Ukraine throughout 2021. After the war began in Feb. 2022, Germany cancelled Nord Stream 2 and by the end of 2022 Russia had completely shut off Nord Stream 1, restricting supplies to Europe as prices went to the moon.

When the wider war in Ukraine began in February, Title Transfer Facility (TTF) in the Netherlands were already up to $25.72 per 1,000 cubic feet, according to the U.S. Energy Information Administration. Prices had peaked in early September at $83.62 before beginning to settle back down as the U.S. and other nations sought to boost production as an offset, down to $56.63 per 1,000 cubic feet before the explosions on Nord Stream.

For comparison, the U.S.-based Henry Hub natural gas is currently trading at $6.79 per 1,000 cubic feet. Even with prices somewhat down, they're still almost 10 times as expensive in Europe compared to here. 

Now, prices are rising once again, as should be expected, as markets contemplate the new chessboard that just lost 3.9 trillion cubic feet a year of potential production from the equation, perhaps permanently. 

Russia has played a major role in supplying European energy for years. In 2020, the European Union imported 9.1 trillion cubic feet of natural gas, according to Eurostat. And about 41 percent Europe’s imports come from Russia, or about 3.73 trillion cubic feet a year, 24 percent from Norway at 2.2 trillion cubic feet and 11 percent from Algeria at 1 trillion.

Thus, the loss of Nord Stream as a potential source of energy only appears to deepen Europe’s ongoing energy crisis that, combined with the war in Ukraine, grain shortages, and the post-Covid global supply crisis, is plunging the continent into recession.

A good question appears to be who blew up the pipelines. If Nord Stream is permanently damaged, that increases the importance of Russia’s pipelines that currently run through both Belarus and Ukraine, and then from there, through Slovakia and Poland.

Here, Russia seemingly lost a piece of leverage. If the Nord Stream pipelines were the carrot for Germany — i.e. “do what we want and we’ll turn on Nord Stream” — then the pipelines through Belarus and Ukraine are the stick — i.e. “do what we want or we’ll turn off the other pipelines, too”. Now, all Moscow has left is the stick.

The impact, therefore, is to close off Germany from Russian natural gas, perhaps for its own “good,” if, say, the West, or the U.S. or just Ukraine, or some other third party, were responsible for the attack. Germany’s stake in the conflict has dramatically changed without the possibility of further imports from Russia.

Bizarrely, if Russia blew up its own pipeline that it had already turned off, the message could be “the other pipelines are next” and are moving to cut off all European access before the winter.

Or, if it was not Russia, Moscow could still move to now shut off the other pipelines in response, thus further escalating the conflict.

Either way, the implication is that the war in Ukraine is now reaching the rest of Europe in a major escalation. It's the point of no return. Sadly, there are just about two things for nation-states to do with one another in the world: commerce or war. Unfortunately for Europe, as can be seen in the Baltic Sea with the gas rushing to the surface, they are mutually exclusive.

Robert Romano is the Vice President of Public Policy at Americans for Limited Government Foundation. 

A era de "depressao" permanente, ou da Grande Estagnacao? - Robert Romano

Será?
Vamos ver...
Paulo Roberto de Almeida

Is the era of economic growth ending?
By Robert Romano
Americans for Limited Government, February 9, 2016

The economy of Japan has not grown nominally in 20 years, according to data published by the Statistics Bureau of Japan.

Nor has its population aged 15 to 64 —those in the prime working years of their lives — which has declined from 86.9 million in 1995 to 76.7 million today.

Inflation has barely budged, too, averaging just 1.1 percent a year the past 20 years, even with a torrent of monetary expansion by the Bank of Japan.

Interest rates have also declined on a long-term basis, from an average of 3.4 percent in 1995 to just 0.04 percent today. Those may even go negative in the near future, chief bond strategist at Tokai Tokyo Securities Co., Kazuhiko Sano, predicts. Sano accurately called the rate dropping below 0.5 percent, 0.25 percent and 0.1 percent.

Just imagine that. For the privilege of lending money to the Japanese government, it costs banks and investors money. The only way it might pay to buy the bonds is in an outright deflationary environment, prices declined even faster than the interest rates. But even then, keeping cash would seem to be a better deal.

It all coincides with the Bank of Japan charging banks for excess reserves with a negative interest rate.

Is the Bank of Japan forecasting deflation in Japan? Certainly wouldn't be the first time.

But in a broader context, do the rapidly falling interest rates project a no-growth, or slow-growth environment?

Certainly something to question over here in the U.S., where the economy has not grown above 4 percent since 2000, and not above 3 percent since 2005, according to the Bureau of Economic Analysis. As for 2015, it came in at a tepid 2.4 percent growth.

The average annual growth from 2006 to 2015 was 1.41 percent, the worst decade since the Great Depression.

U.S. 10-year treasuries stand at just 1.75 percent.

The consumer price index only increased 0.7 percent in 2015.

The working age population in the U.S. has certainly been slowing, and will be growing at an even slower pace for the next few decades.

The labor force participation rate for 16- to 64-year-olds has not been faring much better, according to data compiled by the Bureau of Labor Statistics. It peaked in 1997 at 77.37 percent and has dropped to 72.61 percent in 2015, accounting for 9.7 million people who otherwise might have been in the labor force since then but are not.

Note that excludes those of retirement age, correcting for drops in labor participation associated with Baby Boomers retiring. Yes, that has reduced the participation rate some, but so has the working age population exodus from the work force too.

What emerges is a spiral of slower growth, less asset price appreciation, lower interest rates and fewer jobs.

What's to like?

But worse still, could this point to a longer trend where the global economy itself is slowing down until, one day, it stops growing all together?

Is the era of growth ending? Never mind the degrowth movement.

Perhaps Japan and Europe, too, which is in a similar stagnation, are just windows into the future.

What is most alarming, however, may be the declines the U.S. is seeing in labor participation. Slower growth might be seen as a benign indicator if it still proportionately produced the same number of jobs.

But it is not, with the 16- to 64-year-old labor participation rate dropping to levels not seen since 1981 when women were still entering the work force. Slower growth has been toxic.

All this, after the U.S. has invested hundreds of billions of dollars in college educations with students with tens of thousands of dollars of debt predicated on the idea that there would be enough jobs for everyone. Well, there aren't, every year it keeps getting worse and we need to start asking ourselves why.

Robert Romano is the senior editor of Americans for Limited Government.

Acordos comerciais simples ou tratados internacionais por inteiro? Discussao constitucional nos EUA - Robert Romano

Stop pretending Pacific trade deal is not a treaty
By Robert Romano
Americans For Limited Government, April 24, 2015

Since passage of the Trade Act of 1974, every trade agreement the U.S. has entered into under trade promotion authority has not been considered a treaty under U.S. law. This includes the currently-being-negotiated Trans-Pacific Partnership between the U.S. and Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

It is not a treaty, says the president and members of Congress; and, as such, it is not subject to a two-thirds ratification vote in the Senate. Our trade partners certainly seem to think it's a treaty, like Australia, but let's leave that aside for the time being.

But that is not how commercial treaties were originally treated under the U.S. Constitution.

In 1795, Supreme Court Chief Justice John Jay negotiated a commercial treaty with Great Britain, "The Treaty of Amity, Commerce, and Navigation, Between His Britannic Majesty and The United States of America."

It was put to the Senate for ratification by a two-thirds vote, which eventually came on June 24, 1795. But not before the House of Representatives raised several objections, chiefly, that the treaty could not be binding if the House did not approve, too, since it regulated commerce with foreign nations, a power the Constitution vested in all of Congress.

Heretofore, the congressional foreign commerce power had simply been thought to include tariffs and sanctions and the like. But not treaties, which was the sole province of the president and Senate. This was a new argument and was led, oddly enough, by James Madison, the so-called Father of the Constitution and leader of the then-Republican Party in the House.

Oddly, because throughout the entire ratification process for the Constitution, nobody had considered the House would have any role in approving treaties, let alone commercial treaties.

In fact, countered the Federalist Party, if the Virginia ratifying convention, led by Madison, had thought that commercial treaties required additional House approval to be binding, then why did it propose an amendment that would have required commercial treaties to only be ratified by two-thirds of all sitting senators, rather than those present. This clearly indicated the ratifying conventions believed the treaty power also included trade agreements with foreign nations.

The matter was such a controversy that, even after the treaty's ratification, then-President George Washington had to send a letter to the House dated March 30, 1796 to address it.

Treaties, including commercial treaties, were only to be put to the Senate for ratification, per Washington, as a matter of federalism and states' rights. Because, he wrote, "the smaller states were admitted to an equal representation in the Senate with the larger states, and that this branch of government was invested with great powers, for on the equal representation of those powers the sovereignty and political safety of the smaller states were deemed essentially to depend."

That is to say, the smaller states would not — and did not — agree to a Constitution where the proportionally-represented House of Representatives would have final say on treaties. Including commercial treaties.

In fact, according to Washington, at the convention a motion was made "that no treaty should be binding on the United States which was not ratified by law," and, wrote Washington, "the proposition was explicitly rejected."

So, everyone at the convention agreed that commercial treaties had to be put to the Senate for ratification. The state ratifying conventions, even ones that raised objections to the provision asking for a higher threshold for commercial treaties, agreed that these agreements had to be put to the Senate for ratification. The constitutional convention, which Washington chaired, even considered the question of including the House in the treaty process, and explicitly rejected it.

Thus, Washington said, "The assent of the House of Representatives is not necessary to the validity of a treaty."

That more or less settled the matter such that when it came time for President James Madison to submit his own commercial treaty with Great Britain, the United Kingdom Commerce and Navigation Treaty of 1815, which was a free trade agreement, it too required a two-thirds Senate majority to ratify. By that time, Madison had ceded the argument.

200 years later, however, the two-thirds vote in the Senate constitutional requirement for commercial treaties is nowhere to be found.

Thanks to the Trade Act of 1974, which created an entirely new method of enacting trade agreements. It was signed into law by Gerald Ford. Now, the House and Senate authorize the President to negotiate trade deals, and then they are adopted by simple majority votes in the House and the Senate on an expedited basis — so-called fast track legislation.

Consider that not even the Madisonians denied that the two-thirds vote in the Senate was necessary. Their only quibble was that the House had no say. But they never would have considered a construction that allowed a commercial treaty to be adopted by simple majorities in both houses.

As Americans for Limited Government President Rick Manning recently noted, "Trade promotion authority via an executive-legislative branch agreement is an unconstitutional fabrication of the modern administrative state."

Yet, every single trade agreement the U.S. has entered into for the past 40 years was somehow not considered to be a treaty, was not submitted to the Senate as such, and was adopted via this dubious process. This raises the worrisome prospect that every one of those trade deals is unconstitutional. Too bad.

The point is, members of Congress who claim fidelity to the Constitution, and to be an originalist, cannot in good conscience embrace trade promotion authority for any president. It is an aberration under the constitutional framework set forth in 1787, designed to get around the two-thirds majority requirement for treaty ratification in the Senate. Nothing more.

So stop pretending.

Robert Romano is the senior editor of Americans for Limited Government.