The General Economics Thread

Last I heard, the Panama Canal had to reduce the amount of traffic going through by 40% since drought is reducing how much fresh water can be used to operate the locks, leading to shipping delays and slowing down supply chains. Not sure if that's what Morning Star 1337 is talking about, but that was the latest news I've heard about the Panama Canal. And if you're wondering why this is happening, two words with the initials CC. Just another example in how this can have knock on effects of the world economy.

Edited by HeyMikey on Feb 2nd 2024 at 8:21:58 AM

That's a little weird, on the face of it. Why do they need to use freshwater to raise the ships? Can't they just use the water level from the ocean they are trying to travel to?

@Risa. For clarity's sake I was not implying the early Dems were more egalitarian I was instead saying that the party grew more egalitarian (relatively speaking) as a cause and effect of Nixon's southern strategy successfully fitting the racists that longed for the CSA's maligned ethos to become mainstream again.

This relates to the context of my post about Florida trying to force 16 year olds to work, but that is all I will say on the matter, as it is not that germane to the thread.

The canal isn't cut all the way down to sea level, as I understand it, at all. It goes over high ground and uses locks, which use the stored water from a higher reservoir for the lifting and power. That takes a lot of water, as you can imagine. That water is first lifted by the water cycle, of course, raining down on Panama. Pumping that amount of seawater up... I'm not sure if it's even possible, and if it was, if it's feasible, and if either, pretty sure they haven't designed the canal for the capability.

Lake Gatun also supplies fresh water for half of Panama's population, particularly Panama City and Colon — you can't introduce salty seawater into it without jeopardizing that. Indeed, Panama has already indicated it is prioritizing providing water for its citizens by introducing capacity restrictions on canal traffic rather than water restrictions on its citizens.

Longer term, Panama knows that the unreliability due to climate change plus other potential alternatives being developed to varying extents is a threat to their current standing — they're proposing damming up other rivers and diverting those waters as replenishment, but those are already incurring local opposition as well.

Source: I found a Real Life Lore video discussing the Canal's current situation published a few days ago.

Edited by megarockman on Feb 2nd 2024 at 1:25:48 PM

The issue with pumping water from the sea has multiple issues. One, the locks built the gravity feed water from higher up downward into the various locks to raise and lower ships. In order to pump it higher would require updating the locks and that would be a major investment in itself. Two, updating the locks to pump water up and down cost power, especially for that amount of water. This may make it more water efficient, but the power required will make it more expensive. It would be able to maintain throughput, but the cost of use will increase. Three, pumping saltwater comes with environmental issues. With using freshwater and draining it down, that's less of an issue, it was going to do that anyways. But if you pump up saltwater uphill and it leaks into the freshwater rivers and lakes, that will greatly devastate the local environment. So the options are to either reduce traffic to save water or perform major investments to make the locks more water efficient at certain areas where the salinity mixture isn't an issue, at greater cost to shipping.

What got my attention from the RLL vid was the alternatives to the Canal being developed across Latin America, as in the short term the only alternatives are either pay to skip the line (usual wait time for ships showing up without a reservation was 2 days, now it can be 12 to 21) or go around South America and add 18 days to your trip:

• Chile, Argentina, Paraguay, and Brazil are looking to develop a highway network connecting the Atlantic and Pacific across the Southern Cone. RLL points out Paraguay is especially eager to gain easier access across the Andes and the Lithium Triangle stands to provide up to half of the world's lithium mining for use in batteries as EV demand rises in the next couple of decades.
• Colombia is looking to expand their rail network to allow a continuous journey of cargo between the Caribbean and Pacific — their rail network is currently in disjointed pieces.
• Nicaragua Canal proposal was mentioned with Chinese backing, but RLL doesn't consider it a plausible project in the near term due to Nicaragua's very bad corruption problem (second-worst in the Americas after Venezuela), massive protests about the risk of salt water getting into Lake Nicaragua, and the main Chinese businessman losing 90%+ of his wealth due to his stock holdings tanking.
• A rail and port improvement project in southern Mexico spearheaded by ALMO which is estimated to be able to transfer almost as much cargo as the Canal could in 2022 once it is fully completed in the early 2030s.

Edited by megarockman on Feb 2nd 2024 at 1:49:23 PM

@Morning Star I see. I was confused because "GOP begun with slavery" sounds like you meant the origins of GOP rather than post-Southern Strategy "longing for CSA legacy".

Let's steer off the topic of US politics that has nothing to do with economics (even if the two topics are inherently joined at the hip, there's very much non-economic factors at play in this discussion).

I do not plan on continuing in that direction.

Patrick Boyle (The Plain Bagel) weighs in on the Evergrande liquidation.

For those who haven't been following along recently, Evergrande is, or was, China's second largest real estate developer, riding a wave of public investment from the Chinese government to a massive market share. Over the past few years, we learned that it borrowed so extensively to fund its operations that it is now hundreds of billions of dollars in debt and has no chance of completing its already sold housing projects without massive new financing that the government is refusing to provide.

I could go into more detail, and have in the past, but the news of the week is that a Hong Kong court has ordered Evergrande to liquidate, finding its debt restructuring plan to be inadequate. The mainland Chinese courts have to agree for the liquidation to proceed, but if they do, it means that all of the company's assets will be sold off to satisfy creditors, including in-progress projects.

Patrick doesn't expect a Lehman Brothers-like contagion, however, as the global financial system has relatively little exposure to Chinese real estate. What happens in China, stays in China. However, China's own economy may suffer serious impacts, as it has a huge amount of overinvestment — especially in the real estate sector.

Country Garden, the country's largest private developer, has a similar degree of exposure and seems likely to head down the same path as Evergrande.

Thanks to those who provided detailed information on the problems facing the Panama Canal. Is it doomed, then?

From what I've seen I'm not ready to sign its death certificate, but at minimum I can see a couple of projects proceeding and undermining the current monopoly the Panama Canal has on Atlantic/Pacific shortcutting so that it can no longer charge $300-$600K per cargo ship (in particular in my mind, the Southern Cone one has the lithium mining aspect and so has reasons other than being a Panama alternative to proceed). The Canal's main draw in that situation is that cargo wouldn't need to be offloaded then reloaded onto trains or trucks, so there could be a selling point in some situations.

Isn't it also rather unfortunately designed so that it's single file and a ship can only pass in one direction at a time? Since there's no way to pass in the middle, which would double the throughput for any given volume of water.

That's only really relevant in the locks themselves — Gatun Lake has a good amount of room to maneuver around, there's already two sets of locks to allow traffic going in both directions, and a third set of locks is being constructed.

I think the locks do technically allow travel in both directions, but ships have always grown in size to fill the full lock.

The issue with the Southern Cone, if I'm not mistaken, is that it cuts off much less time from a journey. I'm rather excited about the Mexican cargo rail, though. Sure, there's loading times, but I'm a gamer so I take those for granted and it seems like a rather good alternative if the Panama Canal can't take the traffic anymore.

True, though it'd still be useful if your destination is Brazil's Southeast/Argentina or want to avoid the notoriously treacherous Drake Passage.

I saw this meme on Tumblr and I never thought about it like this, but it's totally true:

I don't think it necessarily is. Housing is a necessity, the others are luxury goods. That seems like a pretty big difference between the practices.

"Without ever using or modifying it" would, I imagine, be the key point here. Someone who buys a house, lets it sit, and then just passes it on later...

What does it matter it's a commodity? We've had people scalping toilet paper and hand sanitiser, remember?

Yeah scalping a necessity rather than a luxury item just makes it worse.

The complicating factor is that when buying a house it isn't obvious that it hasn't been used or modified. Even discounting any renovations or expansions, maintaining the house to the same condition as it was when first bought will cost a good amount of money.

That's if you're lucky and the owners actually did do that. My city is having a problem with house flippers who like...don't actually do the flipping, sit on the house for two years and barely do anything to keep it in shape before selling it. And then make it as difficult as possible to contact them when problems they're still liable for show up.

Isn't a scalper someone who buys up a large number of some limited item for the purpose of reselling it at an artificially elevated price? Not sure how that would apply to a house.

Edited by DeMarquis on Feb 8th 2024 at 6:26:17 AM