The Great Debate

– John Kemp is a Reuters columnist. The views expressed are his own –

U.S. refiners have emerged as the biggest losers from the previous surge in oil and push for cleaner energy. The industry’s brief golden age has swiftly given way to a prolonged dark period of adjustment and decline.

What went wrong? Like other sectors, refiners have been hit by the cyclical downturn, which has cut trade volumes and the related demand for transport fuels such as aviation fuel and marine diesel especially hard.

But cyclical factors are compounding a structural decline in consumption that began around 2007 and has continued through the recession, as high prices and legislative responses force greater conservation and a shift towards biofuels.

Even as the economy recovers, U.S. consumption of petroleum-derived gasoline and distillate fuels is unlikely to exceed the record set in 2007. The resulting “demand peak” has left up to 10 percent of total U.S. refining capacity (around 1.8 million barrels per day) surplus to requirements.

– Wei Gu is a Reuters columnist. The opinions expressed are her own –

Everyone agrees that China’s economy must be rebalanced, but few have bothered to delve into the costs. Japan’s experience has shown that even well-meant changes could sow the seeds for a bubble.

China cannot stay with its current economic model forever. But as the economy has become extremely unbalanced, to some extent even more so than Japan’s in the 1980s, rocking the boat too much risks tipping it over. Instead of rushing into changes, it would be better to make reforms gradually.

- Erik Kirschbaum is a Reuters correspondent in Berlin. -

Will the party that traces its roots to Communist East Germany's SED party that built the Berlin Wall soon be in power in a west German state?

Or is the rise of the far-left "Linke" (Left party) in western Germany to the brink of its first role as a coalition partner in a state government with the centre-left Social Democrats (SPD) simply a political fact-of-life now so many years after the Wall fell and the two Germanys were reunited?

Will a "red" government in Saarland scare away investors and doom the state, as its conservative state premier Peter Mueller argues in a desperate fight to his job?

– James Saft is a Reuters columnist. The opinions expressed are his own –

Rising pay in the finance sector in the wake of the global financial crisis is no surprise and is driven partly by the government’s bailout itself and the underwriting of banks that are too big to fail.

News that some financial firms benefitting from government largesse actually increased the share of revenue they pay their employees sparked a lot of outrage but more heat than light.

– Christopher Swann is a Reuters columnist. The views expressed are his own –

Recession historians on Wall Street often consider a downturn over when job declines fall to half their peak.

The July employment report, with its revisions, takes us past this milestone. The numbers were better than expected in almost every respect. There was even a tick up in hours worked, especially in manufacturing. The output component of the recession has probably already ended.

– James Saft is a Reuters columnist. The opinions expressed are his own –

The explosion in company pension fund shortfalls in Britain nicely illustrates issues which will dominate economics and investment in coming years: the re-pricing of risk, a disillusionment with equity markets, and the boom in savings these shortfalls will help to drive.

Under current accounting rules, the pension funds of companies in Britain’s FTSE 100 index are together 96 billion pounds ($170 billion) underfunded, more than double the deficit of a year ago and an all-time record, according to a report from pension fund consultants Lane, Clark & Peacock.

– John Kemp is a Reuters columnist. The views expressed are his own –

The Bank of England’s decision to continue with its asset purchase programme, or quantitative easing (QE), at the rate of 50 billion pounds per quarter in Oct-Dec, unchanged from Jul-Sep, shows bank officials are more worried about ending support for the recovery too soon than about risking inflation by leaving it too late.

The problem with QE is that you have to keep buying the same amount of assets each month to maintain the same monetary stance. With interest rates, the Bank can cut them and they stay cut. If asset prices drop with QE, it represents a tightening of monetary policy.

– Bernd Debusmann is a Reuters columnist. The views expressed are his own. –
Nobody ever landed on the moon, the televised images are a hoax. John F. Kennedy was murdered in a complex plot involving the Mafia and the CIA. Elvis Presley lives. Barack Obama was born outside the United States and therefore is ineligible to be president.

All these claims stem from conspiracy theories and myths born in the U.S. and they throw a question mark over the long-held view of experts that such ideas flourish most in societies where news is controlled, access to information difficult and barriers to independent inquiry difficult to overcome.

This kind of restrictive environment  applies to many Third World countries – conspiracy theories are particularly abundant in the Middle East and Africa — but not to the technologically and economically advanced United States. Yet there is a parallel universe inhabited by millions and millions of Americans immune to facts, logic and common sense.

– Christopher Swann is a Reuters columnist. The views expressed are his own –

Cash-strapped politicians are more willing to play Robin Hood than at any time in a generation. Tax rates on the rich may soon hit levels not seen since the 1980s.
The wealthy, alas, are not easy prey. Backed by highly paid lawyers and accountants, no other group is better able to run circles around the taxman. As a result, America’s politicians may get less cash than they bargained for and more economic distortions.

There are many easier and less disruptive ways to get the cash.

Of course, the temptation to launch a direct strike on the rich is understandable. The past three decades have been very good to the affluent. The top 1 percent of earners now account for 19 percent of America’s income, up from 9 percent in 1980. This elite group has also been quiescent, dutifully paying 40 percent of all income tax, according to the non-partisan Congressional Budget Office.

– This article by Paul Smalera originally appeared in The Big Money. The views expressed are his own. –

Indulge me in a thought experiment. Pretend that drinking something called “lethalcoffee” has been found to cause cancer. There are five or six kinds of gross-flavored lethalcoffees that hardly anyone drinks, like chocolate, cherry, banana, and vanilla. But there’s one flavor, mint, that 30 percent of all lethalcoffee drinkers are hooked on. And there’s one particular group of lethalcoffee drinkers—let’s call them investment bankers—who drink mint lethalcoffee like there’s no tomorrow.

Allow 40 years for several million lethalcoffee-related deaths to pile up before the pandemic is taken seriously by the government. (Try to put aside any negative feelings you harbor about investment bankers.) Finally, Congress introduces a Lethalcoffee Safety Act that has a chance of becoming law. Would you imagine that law would:

A) Order the FDA to regulate lethalcoffee but withhold from the agency the power to ban it?
B) Ban every flavor of lethalcoffee except mint, the one most people drink?
C) Make it really hard for people to sell badcoffee, a new but much less hazardous cousin of lethalcoffee?
D) Be co-authored by Starbucks (SBUX)?