December 20, 2012 | 00:00


This is our last newsletter of the year – and we end on some hopeful, positive notes.

There has been a lot of talk of the economic crisis in Europe, understandably so. Still, we should try to keep some perspective. Real misery is when you are hit by a tsunami or hurricane, when you are homeless or live in grinding poverty or are suffering from chronic disease. Or indeed when you are the victim of violence, oppression or abuse, as so many people in the world still are.

This is not to say that some things have not gone seriously wrong, or to absolve everybody from blame. I hate it when someone says something like, "yeah, we have lived through a great time, the sky was the limit, and now we all have to do with a bit less". Sure, some people had a great time, those who were able to profit from the easy money-induced economic boom, but they are not necessarily the same individuals who are now suffering. There are questions of justice involved.

But it can be helpful to take a longer view. You don't have to be a genius to see what went wrong: the economy was thrown out of whack by loose central bank policies, which enabled both banks and governments to go on borrowing, lending and spending sprees. The various booms that followed on this criminal madness have inevitably gone bust. You cannot build prosperity on pieces of paper. If that were possible, we would never have any economic problems to begin with. Read Ludwig von Mises if you want to know how it works. (Read Paul Krugman if you want to believe in fairy tales.)

So now the economy has to adjust itself again. This process of adjustment works out differently in each sector. But people do get around eventually to getting things back in shape again, adjusting real ("sustainable") demand to real ("sustainable") supply. This process inevitably takes time. That's what the crisis is about. But just as during the good times few people were able to imagine that there were ever going to be bad times, right now during the bad times too few people are able to imagine that one day we will be back on our feet again. (Unless of course we bury our heads in the sand and try to spend ourselves out of our debts.)

Fortunately, for those of you who may be inclined to feel sombre, we have two stories for you today – or maybe three, if you include my brief book review of Dieter Helm's new book below – that may give you a bit of hope for the future. The first one is on the European gas market (which is very relevant to the electricity market as well). Our UK correspondent Alex Forbes in November attended the European Autumn Gas Conference in Vienna, and said this was just about the gloomiest gas conference that he had ever attended – and he has attended a great many!

I won't list all the problems the European gas market is facing – we have written about some of them before and Alex discusses them in detail in his article – but what I like about Alex's story is that he looks beyond the headlines and gives a number of reasons why the future may be brighter for the gas market than most people believe. Don't miss it!

The second story is from our correspondent Rudolf ten Hoedt in Tokyo who has taken stock of where the Japanese energy market – the third biggest in the world – may be headed now that the shock of Fukushima is wearing off – and a new government has come to power after the elections of 16 December.

His answer has, I think, also a distinctly positive edge to it. No, Japan will not go for a German-style Energiewende (which may be disappointing to some), but neither will it return to the business-as-usual old days when an Old Boys Network was able to divide energy spoils among themselves and keep out competition, modernization and a healthy dose of renewable energy in Japan. I don't know about you, but I like to see Old Boys Networks being ripped apart. They do not, in my view, represent the true Christmas spirit.

This is why I also very much enjoyed the latest book from crusty Oxford Professor Dieter Helm, who has no patience with the Money Changers of climate policy and makes a heroic effort to throw them all out of the Temple. More on this below.

Finally, I would like to wish you restful holidays and extend my Season's Greetings on behalf of the whole EER team. We hope to see you back on 3 January.


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