Paying the staff to have more babies doesn't work

At least, paying the staff to have more babies so that there will then be more customers for the business at some future date doesn’t work:

The Chinese company behind Skyscanner and Trip.com will hand its employees £5,000 if they have more children in an effort to turn around the country’s plummeting birth rate.

James Liang, Trip.com group company’s founder and chairman, announced that staff will receive an annual cash bonus of RMB 10,000 (£1,090) for every newborn until they reach the age of five.

It’s possible to view this the same way many view Ford’s introduction of the $5 a day wage. That - incorrect - view is that the wage meant that the workers could buy the products they made. As we’ve pointed out before (and elsewhere) this doesn’t work even as a piece of basic arithmetic, let alone a business proposition.

Where this might well work is that it reduces the turnover of staff - as with Ford - or even attracts more and better staff to the company.

As long as everyone understands what’s going on here of course we think it’s fine. Not for any other reason than that markets work. Folk get to try out stuff. That which works others will copy and we’ll all get richer. That which doesn’t dies on the vine and again we all get richer by not making that mistake.

We’ve absolutely no idea whether staff bonuses for ‘avin’ a babbie is a good idea or not. We are absolutely certain that the decision making system on the subject is already in place - markets.

British Lithium - we'd just like to note, again, how lovely free market capitalism is

One of those little stories that bolsters our faith in the basic underpinning of our society - that free market capitalism. This:

French miner Imerys to help develop UK’s largest lithium deposit

Note what we’re not praising - the FT’s reporting nor understanding. Imerys owns the deposit. It is allowing someone to have a go at exploiting it. But, you know, they got the name of the metal right.

Lithium is often found in granites and the like. Granites can, sometimes, weather down into clays - kaolins, kaolinites maybe (yes, our lack of really detailed knowledge will shock geologists but this is part of the overall point here). China Clay is a form of such weathered down granite. So, it’s possible that the China clay pits of Cornwall might have lithium in them. You know, maybe?

Ah:

The granites of South-West England are a potential source of lithium which is generally found within the mica mineral, zinnwaldite. It is mainly found in the central and western end of the St. Austell granite. When kaolin extraction occurs in these areas a mica-rich waste product is produced which is currently disposed of in tailings storage facilities. In this study a tailings sample containing 0.84% Li2O…

0.84%, if someone else has already done the grinding the rock down to get it out, is pretty good for an Li source (1.3, maybe 1.4%, is something that you’re willing to grind down the rock to get, like all those spodumene mines).

Imerys took over English China Clay, therefore owns all those slag piles (maybe gangue pits, again, the technical language slightly escapes us) where that lithium enriched zinnwaldite sits unloved and awaiting attention.

So, what next? The statist (we’d possibly say Mazzo) idea is that government then plans everything and so - but that’s ludicrous. It is true that government is feeding some cash into this but that’s also ludicrous. Because there is no way, no way at all, that this potential source of lithium is not going to be explored given that the lithium price is $50,000 a tonne and the like. We can also prove that. There are two - at least - companies quoted on the London Stock Exchange (Zinnwald Lithium, European Metals) that have raised private sector money to extract lithium from zinnwaldite under the village of, umm, Zinnwald. The same sort of mica - hey, it’s even got the same name! - which is sitting there as waste in the old China clay pits.

Well, yes, that’s an exploration that’s going to happen then, isn’t it?

But here’s our real point here. So, we all decide that EVs are the very thing. This means much more lithium is required. So, what happens then? Well, there used to be two methods of gaining lithium. Extraction from salt brines and mining spodumene. Mineral reserves around the world were of those two that were already licensed, already proven to be profitable at then current prices. Mineral resources were those that we were pretty sure could be so but hadn’t bothered to fully prove.

At which point some say we can’t have EVs because mineral reserves weren’t enough. Or, the slightly more awake, that resources weren’t.

Umm, well, yes. We’ve seen one list of 200 companies looking for traditional - brines and spodumene - lithium sources. Yes, they’re finding them. But there’s more than that. As with Cornish Lithium there’s the idea of extraction from geothermal waters. Or, here, from mica in the wastes of old processes - or as in Germany/Czechia, from new mining of that same mineral. That is, we’re not just finding new deposits of those old minerals, we’re working out new minerals to get our target from.

And how has this happened? Well, the price of lithium changed. So every geologist, capitalist and general wide boy started to think about how to produce more lithium. Ain’t free market capitalism great? And this really does work. In fact it is working.

Because what’s really happening here at British Lithium. The change in price has meant people are going looking for that change that slipped down the back of the sofa. We’ve known for decades the lithium is there, it just needs that push of the price change to do something about it.

‘Ere, Jethro, there might be money at the bottom o’ that slurry pit. Best be we look.

It’s a hell of a system, isn't it?

The water companies and environmental insolvency

Another day and there’s another Professor Richard Murphy report. This one is “Cut the Crap” and it suffers from the usual problem, it’s by Professor Richard Murphy. The claim that it’s by the Corporate Accountability Network shouldn’t be taken seriously - other than Professor Murphy there’s no input from anyone other than the Fat Controller figurine on the model railway set.

The claim, as laid out by The Guardian:

England’s water companies are “environmentally insolvent” because they do not have the financial means to raise the £260bn needed to deal with their sewage spillages, academic research has found.

The report, by Prof Richard Murphy of the Corporate Accountability Network and Sheffield University, recommends nationalisation without compensation and raising the necessary funds through government ISAs for the public and higher charges for heavy water users.

Even in just that brief summation we can see the usual Professor Murphy problem - as the report has been written entirely solo no external checks on basic logic have been made. The claim is made that the current system cannot finance the required charges. Therefore the system must be done away with. Then the suggestion is that more finance be made available. But if more finance must be made available then doesn’t that mean that the current system could manage the finance - after all, more finance is to be made available?

In more detail the report - sorry, Professor Murphy - looks at England and shrieks in horror at what is found. Without then doing the most basic of logical checks - OK, so what about other, similar systems? Like, say, Scotland where exactly the same problems of Victorian infrastructure and rising population are to be found? With that interesting difference that the water there is done by an already nationalised company.

Well, the informed will know why Professor Murphy doesn’t make that comparison. Because the situation in Scotland with sewage overflow is worse - they’re even worse at monitoring it let alone preventing it. Given that state owned is worse than capitalist therefore it cannot be true that nationalisation is the answer - despite that being the preconceived conclusion that Professor Murphy desires to work toward.

The muttering about capital, borrowings and dividends is an irrelevance. As Murphy says “ total investment exceeding £91.5 billion had taken place over this period.” which does seem like a fairly large amount. Given that the suggested new financing method is more borrowings (however tax privileged through ISAs) it cannot be that borrowing to invest is a problem. We cannot solve a problem of people borrowing to invest by then insisting that people borrow to invest.

But here’s the great gaping hole in the logic being used. Apparently, to make sure that the rivers are as clean as some campaigners would like would cost £260 billion. At which point everyone’s insolvent because they can’t raise £260 billion. But the correct response to £260 billion is that the rivers aren’t going to become as clean as some campaigners would like. As we’ve said about Feargal Sharkey and Surfers Against Sewage. The costings of the demands - whoever pays for them, however - are such that they’re a frivolous waste of societal resources.

There are, close enough, 25 million households in England. Rounding a bit both ways, this makes £260 billion a charge of £10,000 per household. The only people to pay this £10,000 are households - whether through tax or water charges makes no difference. In order to clean up sewage overflows enough that folk may swim in the river at Hebden Bridge every household must pay £500 a year for 20 years (before any finance charges, recall). The rational answer from households is that the Hebdenites can go use a swimming pool like everyone else.

This is not entirely frivolous either. Sure we’d all like a cleaner environment and we’d all, possibly, be willing to pay something to get it. But that much? For that little difference? Double everyone’s water bill, at least, to make a marginal improvement in the rivers?

Do note that not even Murphy claims this will solve all storm overflows. We already deal with 95%, perhaps 98%, of the crud and this £260 billion will only take that to perhaps 99%. There will still be sewage overflows even after this spending. So, will people be happy to be charged this much to make Feargal happy?

No, no they won’t and that’s nothing, at all, to do with the ownership structure of the industry. It’s that the target is wrong in and of itself.

Then there is this issue of nationalisation which is political posturing at best. The claim is that water companies currently constrained by how much they may charge cannot solve this problem. Therefore nationalise them and then lift the control on what may be charged. But if the amount to be charged is to rise - as Professor Murphy insists it will have to - then the water companies are not environmentally insolvent, the basis of his claim that they must be nationalised. Further, the nationalisation doesn’t change the basic fact that to meet the - too strict - targets then households must pay more. And to repeat, if charging more is the solution anyway then where’s the insolvency?

At which point we can become rational again rather than following the lacunae in Professor Murphy’s logic. Take the occasional sight of reality rather than remain inside the ideological blinkers.

We have two suggested systems here. Capitalist companies and a state owned water company. Either of those will, in order to meet those desired by some water standards, have to charge very much more than the current costs. OK. So, which of those two organisational structures should we use to deploy those greater funds to improve the water standards?

Presumably we should use whichever system is more efficient at deploying funds to cleaning up the water. Which means using the English system of capitalist companies. Because the English companies have cleaned up the water more than the Scottish state owned company since the reorganisation at the time of the English privatisation. At lower cost too. In fact, we have four organisational models to look to. England capitalist, Wales a cooperative, Scotland state owned corporate and NI remaining with local councils. In terms of the three interesting measures, price, water quality in the taps, water quality in the rivers, the greatest improvements have come in England, followed in this order by Wales, Scotland and NI.

The further away from a vibrant capitalism it gets the worse it gets that is. The solution therefore cannot be to abandon the vibrant capitalism, can it?

The conspiratorially minded will now start asking why Professor Murphy does not do that comparison with the other water systems of the Home Nations and we’d have to say no, don’t do that. There is no conspiracy here. Just the obvious reason. Comparisons across ownership structures are not made because everyone, even Professor Murphy, knows that such a comparison would hole the desired argument below the waterline. The Enmglish water companies are more efficient in the deployment of funds which is why they must never be compared with mutuals and state owned companies because that would destroy the argument to make them mutuals or state owned.

But then as we said at the beginning, we’ve another Professor Richard Murphy report here, the problem being that it’s a report by Professor Richard Murphy. Cut the crap, really.

The Government is deliberately bankrupting Thames Water. So, you know, stop doing that

Apparently Thames Water requires more capital. Well, we believe in capitalism so why not, if that’s what it needs? Because the government is deliberately, with malice aforethought, preventing Thames Water from raising more capital.

Of course, it’s possible that the government doesn’t realise this, is instead snookered by its own bureaucracy. If it’s that second then the solution is easy. Simply stop preventing the raising of new capital by putting the bureaucracy back in its kennel and we’re done. If this is all purposeful then that’s something else - one aspect of which would be as with constructive dismissal in employment law. The pain and grief of the compensation payments to those robbed, by policy, of their investments would be large.

The papers are full of the story, Telegraph, Guardian and so on. It’s the FT which gives the crucial clue.

First, OFWAT:

Ofwat has today announced new powers that will enable it to stop the payment of dividends if they would risk the company’s financial resilience, and take enforcement action against water companies that don’t link dividend payments to performance.

The change will require company boards to take account of their performance – for customers and the environment – when deciding whether to make dividend payments. It will also require companies to maintain a higher level of overall financial health.

Then the FT:

The big problem for Thames Water was a rule that from April 2025, regulated opcos couldn’t pay dividends if their credit rating is Baa2(opens a new window)/BBB(opens a new window) with a negative outlook. Since Moody’s has the Thames Water holdco at Baa2 with a stable outlook,

OfWat has deliberately and specifically changed the rules. Thames Water cannot pay dividends - even if it is profitable, it cannot pay dividends. But Thames Water requires more capital, so we are told. Who would put capital into a company that cannot pay a dividend? Even if profitable?

Which brings us to the Telegraph report:

The Ontario Municipal Employees Retirement System, which owns a 32pc stake in Thames, is said to be reluctant to inject fresh capital into the business after a series of poor investments in the UK.

City sources said they were aware that another of Thames’s nine predominantly overseas investors was yesterday also still yet to decide whether to pump in money to save the company, which has 15 million customers.

Hope remains that a deal can yet be done, however. The Universities Superannuation Scheme (USS), Britain’s biggest pension fund and Thames Water’s only UK shareholder, is supportive of injecting fresh money into the business, senior sources added.

Why would foreigners put more capital into Thames Water if the government is deliberately, with that malice aforethought, preventing them from gaining dividends from their investments? Or, of course, government preventing them because government doesn’t understand what its own bureaucracy is doing.

Government, though those changes to the rules at OfWat, has caused this problem. The solution is not for government to make further mistakes, it’s to undo the one already made. If a return can be made on more capital put in then more capital will be put in - the problem of not having enough capital will be solved.

It really is all incredibly simple if only we can get over that near impossible hurdle - of getting government to admit to a mistake which needs to be reversed.

Rising water bills - well done to Feargal Sharkey, Surfers Against Sewage

The Times suggests that water bills are going to have to rise, substantially:

Water companies are drawing up plans to increase household bills by up to 40 per cent to pay for the cost of tackling the sewage crisis and the consequences of climate change.

In a move that has alarmed ministers, England’s privatised utilities said that they needed the extra money to meet strict pollution targets.

We’d just like to say well done here, well done to Feargal Sharkey and Surfers Against Sewage. They, and others (Hello! to Mr. Monbiot), have been shouting that the rivers and oceans should be cleaner than they are. Well, maybe they should be.

But every benefit comes at a cost. It is not possible to have two entirely separate water drainage systems, one for sewage and the other for storm run off, without there being some expense associated with having two separate water drainage systems. That expense seems to be 40% on water bills.

No, there is no way out of this - there’re only us chickens here to pay those bills. It doesn’t matter whether it’s government or capitalists who fund the upgrades. Either the capitalists do and they make a return, the government does and it does, or government does then charges us the cost in our tax bills. The cost of that upgrade to the system is a few hundred pounds a year, forever, on every household bill for water, whether it appears directly on the water bill or not.

It’s even possible to suggest that perhaps we don’t in fact want to clean up the rivers. Sure there’s a joy in wild swimming in the river at Hebden Bridge. But perhaps 25 million households will baulk at each paying £250 a year for that to be possible - Hebdenites might need to use a swimming pool instead.

We could even call into evidence that standard economic observation, the difference between expressed and revealed preferences. Plenty of people will say they’d like cleaner rivers. But if they’ll not pay for it then they don’t really mean it, do they?

And again, we do insist that this is nothing, at all, to do with who owns, operates or funds the water system. If Britain wants cleaner rivers then Britain will have to pay for cleaner rivers.

The rises are due to be announced next year and could result in annual bills increasing from an average of about £450 to £680,

Hey, maybe people do want to pay this much. We do tend to doubt it though.

The larger point here being that there’s an optimal amount of pollution and it isn’t none. What that optimum is depends upon how much it costs to not have it as compared to how much people are willing to pay to not have it. That’s just how reality works. Sorry about that but there it is. Stuff costs money so, how much are you willing to pay to get what you say you want?

Cornish Lithium and the failure to understand capitalism

Cornish Lithium is a plucky little attempt to extract lithium - that new “white gold” for EV batteries - from the geothermal waters underneath Cornwall. With our weird metals hat on yes, there’s lithium under them thar’ hills, yes it can be extracted. Whether it can be done economically, well, that’s going to be the interesting bit.

At which point we’d like to mutter something about how the country’s got a much greater problem than local lithium for local people. For the three major papers that we might hope would understand at least something about business and the economy seem not to. The FT, The Times, The Telegraph. They’re all bleating about how Cornish is giving off an alarm signal, that it might go bust!

Err, yes, this is how capitalism works. In order to do some new thing, in order to try to do some new thing, it’s necessary to have a big pile of money. Capital. Which is gained from other people - the capitalists. When you’re trying to sort out some new method of extracting lithium you might burn through £50 million - £100 million! - of that capital, that other peoples’ money.

The aim, of course, is that at the end there will be lithium which can be sold to provide a return to the capitalists.

However, at this stage of this game the process, the organisation, simply eats capital. Which it needs to gain a constant supply of. For no one funds a project to completion, it’s always funded to stages. Is there lithium in the water, can it be extracted, can we get licences to do so and so on - each is a funding stage. For failure at the earlier stage means there’s no point in bothering to fund later ones.

Every junior miner (that is, one not producing yet) is, by definition, in danger of going bust if the next chunk of capital doesn’t turn up. Always has been, always will be because that’s the way the system works, that’s capitalism.

And as we say if we’ve the three major broadsheets (no one expects The Guardian to understand this sort of stuff) can’t even recognise capitalism in action then we’d suggest that we’ve something of a societal problem. You know, given that we are, at least nominally, still a capitalist society?

Sorry, these Broken Plate people are insane, no, really, they are

As we’ve pointed out before, the very idea behind the Broken Plate idea is, umm, broken. To the point that we’d have to conclude that actual adults seriously proposing this as a method of measurement have lost the plot to the point of requiring some of that care in the community stuff. From the PR email for today’s report:

“More healthy foods are over twice as expensive per calorie as less healthy foods”

They are attempting to measure the costs of food by calorie count. They also claim that veggies or salads - say lettuce - are “healthy” foods and that potatoes and or rice are not. Which is how they gain their result that healthy foods are more expensive - per calorie, recall - than unhealthy.

This is insane. Or, as we could also put it, knock our old Granny down with a wet feather. There really was a reason why she placed a balanced meal in front of us. A wodge of calories from some stodge - potatoes, bread, rice, whatever to be recipe and culturally conformant - and some meat, possibly soya, peas, eggs, for the protein and then some veggies or salad to give us the vitamins and micronutrients. Granny also knew that you didn’t get your calories from the lettuce, nor the protein or the vitamins from the tatties. The idea was that the plateful fed across all those major nutrients by also including components from across the food groups.

These people, now, today, are measuring the cost of lettuce by the calorie content. No, really, that is what they’re doing.

At which point we really should be doing some analysis as to who is displaying the insanity. Sure, there are always those wearing tin foil caps somewhere out there. But a healthy society manages to ignore - or tender mercifully to - them instead of taking their claims as a useful basis for government policy.

These people are measuring the price of lettuce by the calorie content. Are they mad for saying it or us for listening?

A little prediction about what's to happen next here

This amuses:

A string of offshore wind projects meant to power Britain are in jeopardy after the global race to net zero sent costs soaring, casting doubt over the industry’s future as a cheap source of energy.

A surge in supply chain costs has pushed up the price of wind turbines, while increases in global interest rates have raised refinancing costs substantially.

Ah, so that terribly cheap wind power isn’t, in fact, cheap. The reason why is obvious and no, it’s not supply chains. It’s the price of money.

The vast majority of wind farm costs are upfront. Capital costs that is, which are then paid back over the operating lifetime. To be crude about it, the cashflow from the last 18 months (or whatever) of the 15 year installation is the profit, everything that comes before it is just paying back the capital plus interest. When interest rates rise that 18 months becomes 12 and 6 and negative 12 and so on.

The basic financial economics is exactly the same for solar - the costs are near entirely upfront meaning that interest rate changes hugely change the viability of an installation.

This just is so. Therefore we’re going to see shrieking that something must be done. We’ve actually already seen it being floated, the idea that there should be some special - lower - interest rate for green projects. No, there shouldn't be, for we’re already including all those externality costs of fossil fuels in the other things - carbon permits, etc - that we’re doing. To then insist upon lower interest rates is double counting - or double subsidy.

But there will be those calls, we guarantee it. It is after this that we make our prediction. For that basic fiscal set up is also shared by nuclear. High upfront costs, low running costs, the real determinant of the cost of the entire project being the interest rate applied. So, logically, if we are to have a special low interest rate for wind and solar then we should for nuclear. And we will not.

Which is the prediction - we will be told we must have low interest rates for 15 year wind projects, for 20 year solar and not for 50 year nuclear. And that is how we will know they are lying.

Vaping and the peak of the Snowdon Curve

We have pointed out before that there is that corollary to the Laffer Curve, the Snowdon Curve. It is possible for regulation to be so strict that it makes the problem worse, not better. It’s therefore necessary to make sure that the regulation of even things that we all agree need to be regulated is at that sweet spot, the Goldilocks point.

Our original example of the Snowdon Curve was about vaping:

Millions of illegal and potentially harmful vapes have been seized by trading standards in the last three years, data shows, with experts warning this is the “tip of the iceberg” and a “tsunami” of products is flooding into the UK.

Freedom of information requests to 125 local authorities revealed that more than two and a half million illicit e-cigarettes were collected since the beginning of 2020.

If people think it’s worth smuggling vapes in then clearly we are regulating enough that people think it worth smuggling. So, what are we regulating?

The e-cigarettes are not-compliant with UK legal regulations and could have higher nicotine concentration levels, contain banned ingredients or have oversized tanks for nicotine liquid. Previous analysis found illicit vapes to contain high levels of lead, nickel and chromium.

Umm, why don’t we not regulate tank size, nicotine concentration? So that the only incentive to smuggle is to be able to claim a higher lead, nickel or chromium level? Which, and call us picky here if you like, we tend to think isn’t one of those things that would be a great selling point.

That is, if we’re getting smuggling in volume then we’re over that peak of the Snowdon Curve. Reducing regulation would thus make us safer - and since being safer is rather the point of the regulation then why don’t we do that?

In which we do celebrity with Meghan and Harry

Tho’ we do insist that we’re just using celebrity with Meghan and Harry to illustrate a point about Gell Mann Amnesia. That last being that when we read a newspaper artcile on a subject we really know about we oft find that it’s really not right at all. But said experts will then turn the page and go on to believe the entirety of the next article upon which they think they are being informed by the journalist rather than knowing they’re being misinformed.

At which point:

The Duke and Duchess of Sussex’s attempt to patent Archetypes was rejected by US officials in the latest setback to hit their podcast business.

Well, no, even that pair aren’t stupid enough to try to patent the name of a podcast series. Given that they are capable of walking and breathing at the same time they really can’t be that daft.

But the British press seems to think they are. There’s that above from the Telegraph, from LBC, The Mail, Daily Express, The Royal Observer (?!) and so on. It’s necessary to turn to the Hindustan Times to get the truth of the matter:

Trademark application for exclusive right for their podcast name “Archetypes” was denied by the U.S. patent and trademark office.

A podcast name would be a trademark, not a patent, even though both are delivered - or not as the case may be - by the US Patent and Trademark Office, USPTO.

Given that it’s most of the UK press that has got this wrong we’d very strongly suggest that the mistake is actually in a Press Association piece from which everyone’s drawing their story.

We could just say this is an example of what Granny always said - you don’t want to go believing what’s written in the paper. But we’d want to be a bit more emphatic than that we think. If they’re like this on something so simple then how much are they getting wrong on complicated things like inflation, climate change, resources, political plans and all the rest?

Quite, if they’re not getting it right on things we know about then why are we trusting them to inform us on things we don’t, as Mr. Gell Mann pointed out.