Archive for May 18th, 2010

Colorado Needs Good Jobs…

…not subsidized “green energy jobs.”

Colorado needs to take advantage of its 300 days of sunshine and its good locations for wind energy.  But subsidizing these energies’ end markets – paying people to use them, or forcing electric companies to use them – is going to cost Colorado jobs in any number of ways.

Now, the model for President Obama’s Green Energy strategy, and for Governor Ritter’s “New Energy Economy” is admitting as much, privately (the original Spanish Government report is here).

In any industrialized economy, energy costs far outstrip labor costs, which makes employment much more vulnerable to increases in the price of electricity.  And wind and solar are exceptionally expensive to produce.  Which means that the jobs they create actually significantly reduce employment in those and other industries.

Colorado is lucky in its abundance of clean natural gas and clean coal.  While continuing to help along the research end of solar and wind, we should make full use of our coal and natural gas resources, to get our economy back to full employment.

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Backbone Business

We launched the Backbone Business subfranchise of Backbone Radio on Sunday night.  It’s an hour a month devoted to business, finance, and economic topics, from a mostly non-political standpoint.

The first installment was on financial derivatives, and we have it posted as streaming audio.

The schedule, in deference to the options markets, it the Sunday after the 3rd Friday of the month – kind of like the Tuesday after the first Monday of November – so our next show will be on June 20, and while the date would suggest something about astrology or astronomy, we’re probably going to talk about bubbles.

Take a listen, and tell me what you think.

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German Shorts

No, not liederhosen.

The German government has announced that it will ban short-selling of 10 major financial institutions, government debt, and CDSs on government debt.  It roughly parallels our three-week ban on short-selling about 800 financials in the fall of 2008, and is likely to be about as effective, pretty much like all short-selling bans throughout history.

It’s already had the effect of appearing more like panic than prudence, driving the Euro down over a penny against the Dollar today, since the announcement, and probably increasing short interest today in all three areas it seeks to shore up.

Short-sellers, as apparently has to be endlessly repeated, provide liquidity and more information to the market than the long side alone can provide.  The fact that this action will have to go to the options market for satisfaction is likely to increase transaction costs.  It may reduce naked short-selling, but it will also similarly increase transaction costs for those who are merely hedging, as well.

Similarly, it’s like to decrease the liquidity for Euro-zone government debt, raising interest rates; probably not the effect that the Germans are looking for here.  And remember, being short the CDS means being the counter-party for someone who’s looking to parcel out some of the risk, which takes even more liquidity off the table.

Good move, Germany.

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