We do think these worries over critical minerals are overblown
There’s a certain hype over supplies of critical minerals out there. The EV revolution will require much more of this and that and t’other and dearie us, where will it all come from? As we’ve pointed out at book (even if short book and free) length there is no shortage of the elements themselves. Whatever shortage there is remains limited to active producers.
Take lithium, one of those oft talked about metals required. What gets missed is the sheer scale of activity already going on. The London Stock Exchange alone has half a dozen companies. That’s just those with lithium in their names. Another one, Bacanora, was just bought out. We can think of another half dozen at least that are listed, are looking for or even producing, and yet they just don’t use lithium in their corporate title. New York has more than another handful and the Toronto Exchange, long a rival to London for mining exploration companies, has a positive rash of them. All before we even get to the still private companies.
This is before we even get into the technological changes going on. Traditionally lithium has been provided either by the mining of spodumene (which is “hard rock” mining, which means just what you think it does) or the evaporation of brines. Neither of which is in short supply at all. Investment in Chilean brines has been held back by a strange quirk of that country’s mining law (as lithium can be used in hydrogen bombs it’s necessary to gain a licence to mine it from the nuclear ministry, they’ve never granted one, only grandfathered licences have been allowed) and over the border in Bolivia they have been insisting that not just the batteries, but the cars themselves, must be made up on the altiplano if the lithium is to be extracted. This has been limiting the enthusiasm to mine there, of course.
It is true that China has something of a lock on the processing of that spodumene (actually, the concentrate from it) into usable lithium salts. A position that it maintains by trying to buy into every new spodumene deposit that folk think of exploiting. Which is a terrific source of capital for those with a spodumene deposit.
But the frenzy for the metal has led to a distinct investment in alternative sources as well. The zinnwaldite (a mica) of the Ore Mountains has been proven as a resource - at current lithium prices it certainly is. Various companies are showing that Li in geothermal waters is extractable - we know at least three and know of another half a dozen. We’ve seen a claim - one that we don’t believe even at current inflated prices but it is a claim that has been made - that the Red Sea contains a high enough concentration for modern membrane technologies to extract. Desalination plants - technically feasible to extract from, economically, well, possibly.
Then there’re the clay deposits that abound.
Our point is not that nothing needed to be done. It is that what needed to be done has been done. The temptations of those predictions of higher use combined with free market capitalism have done it. Free markets mean that anyone with an idea may try it. Capitalism that those who have a good idea gain riches and hot and cold running Ferraris from having done so. The combination means that the world is awash with lithium production plans. More mines using the old tech, new techs to exploit previously unthought of sources.
That is, it’s all already done. Just through that system we’ve got of channelling greed. No plans nor bureaucracy desired - or perhaps less of both like that Chilean nuclear ministry or the Bolivian car factories.
Bolstering us in these beliefs is that the last time everyone got excited by lithium, back in 2012/3, a number of projects got financed. One of which built a perfectly good spodumene mine and has also recently gone bust. Because there was so much new material flooding the market that expectations were dashed.
The TL:DR version of this is that sure, lithium, important stuff, we need a plan, a system, to extract more of it. Good, we’ve got one, free market capitalism. The joy of this plan is that it actually works. Further, while every bureaucrat in the world is typing up plans for the national lithium industry that free market capitalism has already solved the problem.
This is not investment advice, we hope you understand, but our prediction is that there’s going to be a glut of lithium in about 5 years. Simply because that terribly simple system of freedom and incentives does in fact work.
As we keep saying, prices are information, Minette
Minette Batters seems to have a certain problem in absorbing information from the universe around her. It’s this failure to understand that prices are information again.
The price of animal feed wheat, relative to bread milling wheat, has risen. Ms. Batters therefore insists that something must be done to ensure that farmers continue to plant bread wheat:
Minette Batters, president of the National Farmers’ Union, warned that there was a "real danger in this world that farmers actually just decide to produce wheat to feed pigs and poultry, because they know they're going to be guaranteed a good price".
"That will leave the bread market short. We must be making sure that farmers are not just producing feed wheat, and that we are incentivising them in those decisions that will be made in the next few months."
That is, of course, entirely the wrong thing to be doing. The change in the relative prices is exactly the signal that we should not in fact be doing that.
We all get richer when economic assets are moved from lower valued uses to higher. Economic assets here include arable land, tractors, fertiliser, seed, the labour of farmers and so on. If the value brought in by those assets producing feed wheat is higher than that created by bread wheat then we don’t want to stop farmers switching, we positively lust after their doing so. For that is exactly what makes us all collectively richer. Our scarce economic resources are now producing more value - we’re richer.
If bread wheat is of lower value then we desire the bread wheat market to gain smaller supplies.
Of course, that Ms. Batters is of the National Farmers Union could be the explanation, just a preparation for another raid on our collective wallet. But we fear that it really could be just not grasping the importance of the information provided by prices. If feed wheat is now worth more relative to bread wheat we don’t want to plan - or force - farmers to produce more bread wheat, we want them to follow those price incentives and produce more of the more valuable varietal.
Surely this isn’t that difficult to understand?
Banning big bets
The government’s review of gambling, designed to update gambling regulation for the digital age, has been long drawn out, derailed by distractions like partygate and much else. But a gambling White Paper is at last being ‘finalised’ and is expected to appear soon. And one of the proposals, a little bird tells me, is to limit the amount of money that punters can gamble online. This, the idea is, will prevent people from gambling more than they can afford online.
I should declare an interest — or lack of it: I don’t receive any money from betting companies, online or traditional. But I still think this is a very bad idea.
For a start, it tries to solve the problem that a few people have by putting restrictions on everyone, not just the few. We don’t tackle alcohol addiction by restricting the number of bottles that anyone can buy in the supermarket, any more than we combat heavy smoking by restricting how many cigarettes people can buy. Instead we use well-placed warnings, and ensure that resources — public and private — are focused on the few at most risk.
If you come into a windfall and decide to bet it all in an online casino, that should be your affair. But this proposal will stop large bets like this, even if they are infrequent or one-off. Remember too that some people make their living by betting — mostly by using their specialist knowledge to get the edge over other gamblers, and the gambling companies. So that is their livelihood effectively taken away.
And talking about livelihoods, 60% of online gambling operates from Gibraltar — a well-regulated British overseas territory. Preventing large bets, even from people who know what they are doing, will make a big dent in Gibraltar’s economy. It’s basically a rock, and apart from tourism, it hasn’t much else going for it. I can’t imagine that the Foreign Secretary would be particularly pleased by this prospect.
In fact, online gambling companies already have ways to deal with problem gamblers, methods that are far more subtle and effective than any government-designed blanket spending limit. Many companies allow customers to set their own limits, for example. And companies can (and do) use algorithms to detect when people seem to be overdoing things, and pause their gambling. After all, it is better for their reputation if they do this rather than let customers get into problems.
It’s certainly better that problem gamblers patronise responsible companies that can help them control their spending and maybe even advise on treatment for gambling addiction. Spending limits on everyone will simply drive them towards illegal and unregulated sites where they will have no such protection or help. Even responsible but large gamblers might well be prompted into the illegal sector too, if they find themselves blocked by legal companies. That will do them no good, only potential harm.
The government’s proposal would require a big bureaucracy to police it, though no doubt it will try to load the cost onto the gambling providers. That just means less attractive odds for customers. But even so, government will need its own bureaucracy to check that the online gambling companies are actually and effectively setting the limits.
As I say, I haven’t taken the shilling of any gaming provider. Nor have they taken mine — I don’t gamble because I just can’t see the point, particularly of casino-type games. But I still think that this idea, if the government really is contemplating it, is an assault on all our liberties and will prove ineffective and indeed counterproductive in terms of its purpose.
Suppliers going bust is evidence that markets are working
This is not, to put it mildly, the conventional view yet it is true all the same. If the cheap end of a market features firms continually going bust then that’s a sign that the market is working:
Households risk being cut off from the internet as runaway inflation threatens to cause a wave of bankruptcies among broadband networks.
Ofcom is drawing up contingency plans with BT which could take on thousands of customers if a number of the smaller suppliers, so-called 'alt-nets', begin to fail.
More than 150 BT challengers backed with billions of pounds of private investment have entered the market to try and capitalise on the upgrade to ultrafast speeds.
Private equity, pension funds and sovereign wealth have been pouring money into broadband start-ups in the hope of securing steady, long-term returns from the shift to speedier connectivity.
However, concerns are mounting that the fierce levels of competition will begin pushing some firms to the brink, as they struggle to compete with the might of BT's Openreach and Virgin Media O2.
Our aim in having a market at all is that those folk can indeed try their new ideas about how to do things. Most of them will fail - most new companies do - but out of that wreckage comes those few new ways of doing things better, more efficiently, more inline with consumer desires. It being those few that are the mark of the advance of society in doing things better, more efficiently, more inline with consumer desires.
That people are constantly testing that low end of the market with new ideas is evidence that there is free entry into that marketplace. That most of these news ideas fail is evidence that the current market players are relatively efficient and inline with consumer desires.
That there are no $100 bills on the sidewalk is evidence that $100 bills get picked up. That new competitors can’t gain a foothold in a market is evidence that the current market structure doesn’t leave room - there is no fat to be cut - for new competitors.
That there are continued new attempts to enter a specific marketplace and also that most of those attempts fail is evidence that markets are working.
Sadly, Oxfam aren't even understanding their own numbers
Oxfam tells us that:
Food prices, which are up more than 30% over the past year on average, are likely to push more than 263 million more people into acute poverty than before the pandemic. That would take the number of people living on less than $1.90 a day to 860 million by the end of the year.
This is not wholly and precisely true. The $1.90 a day measure of that extreme, abject, poverty is the value of consumption. It isn’t cash income, it’s value of consumption. Most of those abjectly poor are in fact subsistence peasants. That means they produce their own food and eat their own production of their own food. If food prices rise then the value of their consumption of their own production rises.
No, this isn’t true of all of those 860 million but it is so of a large portion of them. They are food producers on whatever tiny scale. Therefore rising food prices increase the value of their consumption.
If your analysis starts out getting matters so abjectly wrong then your solutions are also likely to be more than a little ropey.
Oxfam is calling for a tax of 90% on excess profits134 on a temporary basis, to capture the windfall profits of corporations across all industries; this will reduce today’s profiteering and create significant funds for investment. In September 2020, Oxfam estimated that such a tax on just 32 super-profitable corporations during the COVID-19 pandemic could have generated $104bn in revenue.
As Maya Forstater has pointed out, global tax revenues are of the order of $23 trillion. An increase in such tax revenues of 0.45% - well, that’s going to solve a lot, isn’t it?
Oxfam started out with the simple aim of getting food to those who were hungry. Now it has an equally simple message, more tax. It’s not obvious that this is an improvement in the message being proferred. But then that long march through the institutions has been going on for a long time, hasn’t it?
This doesn't work as a policy
The aim of having an economy, of having a society even, is that more people get to have more of what those people want. In the absence of there being third party harm from their getting it of course.
This idea, this policy, fails that test:
The legal smoking age in England could reportedly be raised from 18 to 21 after a “radical” review into plans to make the country smoke-free by 2030.
An independent review commissioned by the health secretary, Sajid Javid, and led by Javed Khan, the former chief executive of the children’s charity Barnardo’s, is also expected to support new taxes on tobacco company profits,
If consenting adults wish to smoke then that’s up to those consenting adults - that’s exactly one of those things that they desire to have more of and the purpose of the whole having an economy, a society, thing.
Taxing cigarettes ferociously, sure, why not? Demand is pretty inelastic, we’ve got to gain tax revenues from somewhere, taxing things where demand is inelastic is a great idea. Pointing out the very large private costs to the smoker of smoking is equally justifiable. A free and vibrant market in alternatives - vaping, snus, heated not burnt products - is again just the standard liberal line. Folk want more of these things, there’s no harm to others, why not?
No, we cannot justify anti-smoking drives by “costs to the NHS” as people who die young from relatively swift complaints like lung cancer save the NHS money - as they do save cash for any lifetime health care system.
Eighteen year olds are indeed consenting adults. They have the vote, even if they are likely to vote for Jezza. So, they have to be trusted with the decisions - properly informed decisions of course - they make.
The driver of this mooted policy is in fact that we think you shouldn’t do that. A profoundly illiberal idea and therefore one that fails in the basic task of governance. As at the top, the aim of the entire idea and system is that folk get more of what folk want. Not, as here, more of what some clerisy will allow them to have.
No.
Isn't this lovely?
We would expect that, soon enough, there will be cries that we, too, should do this:
Millions of Germans are expected to take advantage of a summer of cheaper travel from next month under government plans to boost public transport use and give financial relief to consumers facing a cost of living crisis.
A €9 a month ticket scheme is to be introduced from 1 June allowing travel on all modes of city and regional transport. A different ticket will apply for each region and it will be available for three months until the end of August.
Nothing wrong with a bit of loss leading marketing. Well, unless of course it’s about food given that BOGOFs are to be banned. Get people to try out that public transport, why not?
Well, there is this:
The scheme will cost the government €2.5 bn as it is due to pay back to transport companies the shortfall in income as well as the cost of administering the sale, including giving back to commuters who already have season tickets, the amount they are effectively out of pocket.
It doesn’t in fact cost the government that. It costs taxpayers that. No, even that MMT explanation doesn’t work here, that they can simply print the money, for being inside the euro Germany can’t print its own money.
So, with 80 million Germans this costs every man, woman and child in the country some 32 euro each.
As a loss leader and advertising, why not? Perhaps it will be made up over time. But as a permanent idea that 32 euros is why not. Because such subsidies making tickets cheaper transfer the costs from those who do ride public transport to those who do not.
As with the British railways where ticket prices are indeed higher than in many other countries. Because British ticket prices, largely (to perhaps 99% in normal times) cover the operating costs of the railways. Which seems to us fair and reasonable. Those who get to ride on the choo choo pay the price of riding on the choo choo.
The same should be true of public transport more widely - those who use it should be the ones paying for it. And why not?
We're distinctly unimpressed by these emergency powers
This does not bode well:
President Biden has invoked emergency powers to hasten the production of baby milk as the US scrambles to address the disappearance of almost half of the products from the shelves and a panic among parents.
Assuming authority under the Defence Production Act, which gives the government sweeping powers to direct industries
The point of the Defence Production Act - and other similar emergency powers worldwide - is to do an end run around those boring liberty, freedom and property things when there truly is an emergency. If the Parisian hordes were indeed about the ransack Dover then yes, it might be valid to allow government to direct more of life than they normally do.
But once government has a power it doesn’t remain an emergency one limited only to extreme circumstances. There is a problem with baby formula in the US and it’s one that’s easily solved, just prevent the FDA from not allowing imports. As so often, the solution to a government problem is that government should stop doing what it currently does. But instead we’ve this invocation of the Defence Production Act.
This allows the Feds to sidestep all of the usual controls and restrictions on the exercise of that government power. To beat Hitler and Tojo that might be fair enough. To sort out the FDA’s restrictions on the labelling of artificial moo juice might be thought a fairly trivial invocation.
But then that’s the warning. Once these powers exist then they will be used for ever more trivial definitions of “emergency” and so our freedoms and liberties will die.
There are, after all, both here and in the US, calls for the declaration of a “climate emergecny”. Which would mean exactly those restrictions of civil liberty so that the enthusiasts could do as they wish.
The simple existence of emergency powers does not bode well over the long term.
That puts paid to another fashionable explanation
America is in the grips of another of those fashionable delusions. Inflation is the result of an outbreak of greed among the capitalist and management classes. They’re raising prices in order to feed the bottom line and it’s nothing, nothing at all, to do with excessive government spending, the soared deficit or incontinent money printing. No Siree, it’s them, over there:
Target, a retailer with almost 2,000 stores, lost a quarter of its market value, falling $53.67 to $161.61, after warning of higher wage and fuel costs, as well as supply chain disruption. It came a day after Walmart, the world’s biggest bricks-and mortar-retailer, cut its profit forecast.
Oh. Umm, you mean that profits and margins at these retailers - the two together are a measurable portion of the entire retail spend of the US - are down? Lower than they were?
Gosh:
Operating profit will amount to only about 6% of sales this year, 2 percentage points below the previous forecast
Umm:
Neverthless, the company’s net income fell to $2.05 billion, or 74 cents per share. That’s down from $2.73 billion, or 97 cents per share, from a year ago.
Oh Woes and deary us. Profit margins are decreasing, meaning that it’s not the greed for increased profits pushing up inflation then. So dies another of those economic fashions - or as we’d put it, delusions.
Don’t forget, when theory, or even political artifice, disagrees with reality it is always, but always, reality that wins.
Down with this sort of thing
That those who err should be fined is entirely acceptable to us. But that the fines go to those who decide both upon the erring and the size of the fine? No, that’s a system pregnant with problems:
The proceeds of the £14.4 million fine imposed on KPMG last week for forging documents in connection with its audit of the collapsed construction group Carillion is to go to the trade body for accountants, with none of the money going to taxpayers or other creditors.
The Institute of Chartered Accountants in England and Wales (ICAEW) is set to receive the entire proceeds of the fine in another example, critics say, of it profiting from the misconduct of members while victims receive nothing.
The body, whose stated aim is to maintain professional and ethical standards, will have received at least £49.4 million of fines in recent years once it banks the Carillon-related penalty, under a controversial system known as the accountancy scheme.
Slippery slope arguments are logical fallacies unless that downward slide is a necessary outcome of those first steps. The incentives here are such that this is not a fallacy but a prediction.
We don’t allow the judge to partake of the fines in criminal court, nor are juries compensated from sums levied upon guilty verdicts. We even have a phrase containing the folk wisdom of not allowing such to be so - being judge and jury is a synonym for an unfair outcome.
Those who decide upon error, decide what the fine should be for error, collect the fines for having identified and quantified error, the incentives are indeed the same. Leaving the system as it is will inevitably lead to the abhorrence of the American system of near random confiscation of cash and assets by local police forces and the rest. Where the confiscee has to prove legal ownership of what is confiscated, reversing that burden of proof. Not for any reason other than that when the incentives are set that way then that’s what institutions will do. Collect the cash and dare those in their sway to come get it.
Fines that go into the general Treasury pot, perhaps. Fines that go to those financially abused, possibly. Fines that go into the coffers of those who decide whether there should be a fine, and how much if there should?
No, gerroutovit, do these people know nothing of human behaviour and incentives?