Sunday, August 19, 2018

"Norway to Map Deep Sea Mineral Deposits"

From Maritime Executive:
The Norwegian Petroleum Directorate is readying to map potential deep sea mineral deposits in the Norwegian Sea, with an expedition due to get underway this month.

The Directorate has engaged Swire Seabed, which partners with Ocean Floor Geophysics, to carry out mapping of potential sulfide minerals on the seabed over the Mohns Ridge in the western Norwegian Sea. This is a spreading ridge in the Atlantic Ocean that separates two oceanic plates, where potential valuable minerals have been formed through hot volcanic sources. The focus of the expedition is not the active hydraulic systems such as “black smokers,” but rather non-active extinct systems that are now left as mineral-rich piles of gravel on the seabed.

The mapping will be carried out using an autonomous underwater vehicle, a Kongsberg Hugin AUV, which will map the seabed using a bottom-penetrating echo sounder, multibeam bathymetry, synthetic aperture sonar data, magnetometry and spontaneous potential field data.

After the data is processed on board, mineral samples will be taken from the seabed where the data indicates the presence of deposits. Sampling will be carried out using an underwater remotely operated vehicle with a depth capability of 3,000 meters (9,800 feet).

Earlier studies by the Norwegian Research Council have indicated that the region could contain resources worth as much as $110 billion. Around 6.4 million tons of copper metal in addition to zinc (6.5 million tons), gold (170 tons) and silver (9,901 tons) have been estimated to be present in the region....MORE
Meanwhile, at the other end of the Northern Sea Route, also via Maritime Executive:

Dredging for Gold in the Bering Sea 
By U.S. Coast Guard News 2018-08-15 12:36:24
The snow has thawed enough for the gold dredging season to kick off, and dredgers in Nome, Alaska, are ready to be on the water in search of hidden treasures on the Bering Sea floor. With boats in the water and deckhands aboard, these gritty and independent men and women are ready to hit the season hard in hopes of finding their lucky cache.

However, before these pioneers can seek out their awaiting treasures on their unique vessels, they must first obtain an inspection from the U.S. Coast Guard. An approved Coast Guard vessel inspection is also required by the Department of Natural Resources in order for dredgers to obtain a seasonal permit to dredge in Nome. They are off to a later start than usual this year, which made for a bustling week of inspections that picked up steam as the week went on...MORE
I still have trouble wrapping my head around the Nome gold rush.

Compared to the horrors of walking to the Dawson/Yukon/Klondike gold rush:

Where most of the 100,000 or so adventurers struck out completely and those that did find some 'color' suffered freezing in the winter and mosquitos in the summer along with backbreaking labor to vary the misery, the discovery of gold at Nome was a day at the beach.

From Wikipedia:
The Nome Gold Rush was a gold rush in Nome, Alaska, approximately 1899–1909.[1] It is separated from other gold rushes by the ease with which gold could be obtained. Much of the gold was lying in the beach sand of the landing place and could be recovered without any need for a claim....
Although some who had come up the Dawson trail and failed ended up crossing Alaska along the Yukon river, other later arrivals took ships up from Seattle which deposited them at the beach.

Shipping: "Tariffs Will Hurt U.S. More Than Rest of World, Maersk Says"

From Hellenic Shipping News;
The U.S. economy will be hit many times harder than the rest of the world by an escalating global trade war, according to the chief executive officer of A.P. Moller-Maersk A/S.

Soren Skou, who runs the world’s biggest shipping company from Copenhagen, said the fallout of the current protectionist wave “could easily end up being bigger in the U.S.” Tariffs could slow global annual trade growth by 0.1 to 0.3 percent, though for the U.S. the effect could be “perhaps 3 or 4 percent,” he said at Maersk’s headquarters on Friday. “And that would definitely not be good.”
The company transports about 20 percent of the world’s seaborne consumer goods, putting it in a unique position to gauge the fallout of tariffs on trade flows. Maersk has in the past broken with its culture of steering clear of any political debate to criticize the trade policies of U.S. President Donald Trump.

Maersk focuses on trade flows between Europe and Asia and so far its industry hasn’t been directly hurt by tariffs. In fact, demand grew 4 percent in the second quarter. But Skou says that may change if the U.S. starts targeting consumer goods.

Maersk’s Final Energy Divestment Will Be a Tough Sell, CEO Says

“The first thing the American importers would do if tariffs are put on Chinese consumer goods would be to buy in Vietnam, in Indonesia or elsewhere in Asia,” Skou said. “Big U.S. consumer brands like Nike produce in all of Asia, not just in one country, so there will be a substitution effect.”...MORE
July 23
Shipping: "Amid Trade War, Rare Hedge Fund Bet Targets the World’s Biggest..." (MAERSKB:DC; AMKAF)

In the month since that post the shorts have seen the stock 
trade up from 8,346 DKK to 8,794 at Friday's close
July 12 
"World’s Biggest Shipping Company Already Feeling Pain from Trade War"
Ditto, but from 7,596 
May 18 
Signposts: "Maersk warns on trade risks as disappointing first quarter earnings hit share price"
By 1241 GMT the shares were down 8.8 percent at 9,262 Danish crowns.

An Essay On France

From Zeihan Geopolitics, June 12, 2018:

I Think They Get It Now, Part Deux: France
French President Emmanuel Macron is a bit aggravated these days. He went out of his way to court a personal relationship with U.S. President Donald Trump with the belief that chumminess would enable him to tilt American policy decisions. Between the Iran nuclear deal, steel and aluminum tariffs, the Paris Climate Accords and now the G7 debacle, Macron has learned otherwise. Social lubricant in international politics can be important, but it rarely trumps policy and national interests. The Americans have shifted from an alliance-based to a transactional foreign policy, and a parade followed by a firm handshake and a nice dinner just isn’t strong enough currency.
So, atmospherics aside, let’s talk about the French strategic position.

The French think of the European Union as theirs, and with good reason. They are, after all, the people who made it. With the end of World War II the Austrians, Germans and Italians were occupied, the Low Countries were rebuilding from rubble, the Swedes and Swiss were neutral, the Spanish were languishing under a local despot, and all Central Europe was locked away on the other side of the Iron Curtain. The strategic competition that had dominated the past millennia of European history was on hiatus, and the French found it almost too easy to force their political will on a shattered continent. And so Paris pulled together Italy, Germany, the Netherlands, Belgium and Luxembourg to create the European Coal and Steel Community, which a dozen treaties later evolved into what we now know as the European Union.

But for the French it was never about economics. The French metropolitan territories are rich. Phenomenally productive farmland. A wealth of inhabitable climate zones. Great rivers for industry and internal transport. A population far younger and aging far more slowly than the European norm. The French economy has always been held mostly in house, and the Cold War era was no exception.

France also boasts easy access to the North Sea, Atlantic Ocean and Mediterranean Sea, giving France – and France alone – fingers in every pot that matters to Europe. France’s position near the westernmost extreme of the European Peninsula even grants it good strategic depth, even if that “depth” belongs to other countries.

French strategic isolation freed up French defense planning to focus on the far horizon, as evidenced by France’s nuclear aircraft carrier and nuclear missile force. Nearly alone among the European states, the French do not need someone to defend them. It all means that the French didn’t really see a huge attraction to the Americans’ Bretton Woods plan.

The French know full well that should the Americans walk away from Bretton Woods, the global security that enables the European Union – which is at heart a union of exporters dependent upon global access – would no longer be possible. That obviously upsets Macron, but it doesn’t overly hurt France. Just as the Americans designed the world order for strategic reasons and so never lashed their economy to Bretton Woods, the French designed the EU for strategic reasons and so never lashed their economy to Europe.

Any global breakdown, even a European breakdown, is one that France can survive without the sort of catastrophic and transformative economic, political, cultural and strategic shocks that will so ravage almost everyone else....MORE

"The Graying of 'The New York Review of Books'"

From the Chronicle of Education:
January 06, 2014
In a world of disappearing and diminishing book reviews, every two weeks The New York Review of Books slaps to the table with a satisfying thud. Printed in a large format, its 60 pages—at least!—reassure those of us obsessed with books that the world is not totally lost. Here are serious essays by serious reviewers on serious books. A recent issue contains, for instance, a lengthy review of fabliaux, 12th- and 13th-century verse ditties, and a biography of the Empress Dowager, as well as reflections on Syria ("The Road to Genocide?") and a short piece on the fate of New York's "stop and frisk" program. A mix of long reflective reviews with left-leaning political commentary has marked the NYRB from its beginning. Neither academic nor populist, its unapologetic devotion to earnest reviews and political reportage has enriched our culture.

To a point. The year 2013 marked the 50th anniversary of the NYRB, and a series of events in New York and London celebrated the magazine, and especially Robert Silvers, who has edited it since its beginning in 1963. The assessments of the 50-year run consist of wall-to-wall encomiums. "Silvers is the wise emperor of a brilliant literary empire" is the gist of the articles and interviews. Perhaps this is not surprising. More than a thousand issues of a magazine crammed with heavy-duty reviews and essays impress critics. How can one question such an enterprise?

But something else thwarts a critical assessment. Timidity. "There is often to be found in men devoted to literature," declared Samuel Johnson several centuries ago, "a kind of intellectual cowardice." Writers and professors parade their toughness, their credo of "speaking truth to power." But when it comes to talking truth to mini-power, the magazines in which they might publish and editors who might allow it, laryngitis strikes. Who criticizes the professional journals or the general book reviews? Few or no one. The reason is obvious. We all hope to be reviewed or noticed. Even the most specialized sociologist of adolescent dating patterns harbors dreams of a major book review. Some public words about the dismal quality of reviewing in this or that journal may not help that cause. Less courage is required to attack the architects of American foreign policy than the editors of Foreign Policy.

In fact the NYRB began by way of a rare critique of The New York Times Book Review. In 1959, the novelist and essayist Elizabeth Hardwick, who went on to cofound the NYRB, published an essay in Harper's, "The Decline of Book Reviewing," which lacerated the Times book review for its "torpor" and "sluggishness." Edmund Wilson, America's pre-eminent man of letters, chimed in, remarking that the printer strike of 1963, which closed down the Times book review for three months, "made us realize it had never existed."...MUCH MORE
Complacent equals replaceable:

"Death by Derivatives"

From Damn Interesting:

The opening of a canal in 1848 led to the birth of modern financial derivatives, and the early demise of some of the men who traded them
In April of 1873, an unhappy man walked along Clark Street in downtown Chicago. His name was Aymar de Belloy. There was a gun in his pocket, and a nickel – enough for one final glass of beer.
He entered Kirchoff’s tavern and sat at a table, then changed his mind about the beer. He drew his gun, pointed it at his forehead, and pulled the trigger.
The bullet careened along the inside of his skull like a speed skater on a banked turn. It stopped at the left temple, sparing his brain. Belloy rose and staggered to the bar, shaking hands with the horrified men he passed along the way. Upon reaching the bartender, he apologized in all sincerity for the inconvenience he had just caused. Then he collapsed.
Belloy was a speculator, or “plunger” as they were then known, at the Chicago Board of Trade, where traders negotiated contracts for the future sale of wheat and other such goods. The value of these contracts was based on, or derived from, the current price of wheat. Hence they would one day take the name we use today: derivatives.
In the 1870s, with few rules in place, a man could make a fortune plunging wheat. He could also lose a fortune, and with it the will to live. Indeed, the string of early derivative traders taking their own lives grew long enough that one writer gave it a name: the “crimson thread of suicide.”
The scale of today’s derivatives market is almost too vast to comprehend. It’s measured in trillions of dollars. Traders, aided by the most sophisticated software money can buy, place bets — billions per second — on the future prices of every manner of stuff. The market hardly exists in any tangible physical sense; most trading takes place across a network of countless devices at data centers around the world.
But in 1873, the global derivatives market was centered in one building on LaSalle Street in Chicago. And it would not have existed at all were it not for the digging of a very long ditch some 25 years earlier.
In 1848, an army of Irish immigrants finished digging the Illinois and Michigan Canal. It was ninety-six miles long and surprisingly shallow—a tall man could stand on the bottom and not dampen his bowler. The canal connected the Chicago River with the Illinois River, which in turn fed the mighty Mississippi, opening an inland waterway from New Orleans to New York. 1848 was also the year Chicago saw its first railway, and stockyard. Its first telegraph and steam-powered grain elevator? Same year.

Indeed, a city’s annus mirabilis (“wonderful year”) doesn’t get much more mirabilis than Chicago’s 1848. These advances would soon turn the city into, well, Chicago, simply by making it so much easier for stuff to move between east and west.

And boy oh boy did stuff thus move: grain, lumber, salt, sugar, pigs, and cattle began floating or rolling into this town on the southern tip of Lake Michigan like never before. There it was unloaded, weighed, graded, sold, stored, and reloaded onto boats or trains heading the other way.

In March of 1848, a dozen or so businessmen gathered to form an alliance of business interests, or what we would today call a trade association. It was a brilliant idea whose only problem was the apparent lack of anything for these fellows to actually do. Founders of the Chicago Board of Trade were determined to find something, but interest soon began to wane. To persuade members to show up for meetings, the founders began offering a free lunch of crackers, cheese and ale. Lines soon formed at the door, filled with men from all walks of life who were only too happy to attend meetings in exchange for free booze—or what we would today call, well, a trade association. The Chicago Board of Trade hired a bouncer to keep the freeloaders at bay, but this still left the nascent organization with very little to do. That would soon change.

Before 1848, farmers carted sacks of wheat into the city, behind horses on unpaved roads, and then sold it directly to buyers. When the canal and railroads lowered shipping costs, far more of the golden grain poured into the city, where it was loaded into grain elevators in exchange for a receipt.
With wheat no longer associated with an individual farmer, it became an exchangeable common good, or commodity, with one bushel of a given grade as good as any other. This at last gave the Chicago Board of Trade something to do: It provided an exchange, a place where buyers and sellers could gather in pits and shout out prices at which they were willing to trade.

It didn’t take long for traders to innovate in this new space. In addition to trading wheat already in an elevator, known as physical wheat, they made deals for so-called future wheat not yet in an elevator but expected to arrive at some later date. Such “to-arrive” contracts would eventually take the name used today: futures. Anyone planning to buy or sell future wheat could lock in a price days, weeks, or months in advance. This, of course, required someone to be on the other side of the trade. Sometimes a miller could find a farmer willing to sell, or vice versa, but not always. Enter the plungers.

These fellows had no interest in actually buying or selling grain. They wanted only to profit on price changes, caring not a whit about wheat. They would buy an elevator receipt simply on a hunch that prices would rise, at which time they could sell it at a profit. Or, if the trader foresaw a price decline, he could borrow someone’s receipt, sell it for cash, and later buy it back at a lower price in order to return it to its lender, keeping the difference as a profit. (This is known as shorting a market and is precisely how short selling of stock works today.)

One such plunger was Aymar de Belloy. A French nobleman, scion of one of the oldest and most prominent families in France, Belloy started adulthood with an inheritance of $300,000 ($9 million in today’s dollars)—most of which he immediately proceeded to squander. In 1868, he brought the remnants of his fortune to Chicago to speculate on wheat. He managed to stay afloat long enough to marry and father a number of children, then his luck ran out. And so did the last of his money....MORE

"What Your Car Knows About You: Auto makers are figuring out how to monetize drivers’ data"

Is this behavior pathological? I'm starting to think it's pathological.
Yeah, it's pathological.

From the Wall Street Journal, August 18:

Car makers are collecting massive amounts of data from the latest cars on the road. Now, they’re figuring out how to make money off it.

With millions of cars rolling off dealer lots with built-in connectivity, auto companies are gaining access to unprecedented amounts of real-time data that allow them to track everything from where a car is located to how hard it is braking and whether or not the windshield wipers are on.
The data is generated by the car’s onboard sensors and computers, and then stored by the auto maker in cloud-based servers. Some new cars have as many as 100 built-in processors that generate data.

Already, some car makers are gathering this data to provide feedback to help improve a car’s performance, refine features and alert them to any potential quality problems early on. They’re also using it to create new and more personalized services for drivers.

But many car makers have bigger plans, including using the data to craft targeted in-car advertisements or selling it to mapping firms looking to provide more accurate traffic information.
General Motors Co. , Ford Motor Co. and other major car makers are hoping these connected-car services will generate new revenue streams that can help them diversify beyond their core business of building and selling cars. While it is still early days, McKinsey & Co. estimates monetizing data from connected cars will be worth up to $750 billion by 2030 as more cars are shipped with pre-installed modems and other internet-connected devices.

“To some extent, the sky is the limit for what could be done with the data,” said Cason Grover, Hyundai Motor Co.’s senior group manager for vehicle technology planning.

Hyundai early next year will launch a new program that gathers data from vehicles on driving habits—such as how hard a car brakes or the miles it travels in a day—and use it to help owners get discounts on auto insurance. Hyundai says the data is only collected with the owner’s permission and shared with the auto insurer as a score rating the driver’s performance. Ford, GM and other car makers are also working with auto insurers to offer discounts based on driving data.

GM, through its Marketplace app, uses location and other vehicle data to help drivers find parking and schedule service appointments at nearby dealerships. The auto maker also uses location data and a vehicle’s keyless entry feature to offer in-car delivery of Amazon packages.

Later this year, GM also plans to introduce a new feature that can detect when a vehicle’s fuel tank is low and then offer a coupon on the car’s display for a discount at a nearby gas station, said Brian Hoglund, a business development director for GCCX, GM’s connectivity unit. Retailers then pay GM a fee for steering customers their way.

The Marketplace app is currently available in more than 2 million GM vehicles in the U.S. That number is expected to expand to 4 million by the year’s end.

Mr. Hoglund said customers benefit from sharing the data by having access to these services. But they must opt in first to each new app or feature before it can collect any data.

Ford recently launched a new service that contracts with companies and municipalities to gather data generated by vehicles used in fleets, such as police cars and delivery vans. The service can track fuel consumption and miles traveled, as well as monitoring driver behavior, such as whether the car is speeding or the seat belt is in use. The auto maker then sells the data and analytics to the fleet operators as a service.

Employers determine whether a driver can opt out of the monitoring, a Ford spokeswoman said.
Ford is also looking at other ways to monetize vehicle data, estimating that in the longer term, the effort could generate up to $100 per vehicle each year in additional value, said Don Butler, Ford’s executive director for connected vehicle and services....MUCH MORE
After the AP reported that Google is tracking your location even if you turn off location history the GOOG said:
“There are a number of different ways that Google may use location to improve people’s experience, including: Location History, Web and App Activity, and through device-level Location Services,”
That's pathological.

"When China Rules the Web: Technology in Service of the State"

From Foreign Affairs, September/October 2018:
For almost five decades, the United States has guided the growth of the Internet. From its origins as a small Pentagon program to its status as a global platform that connects more than half of the world’s population and tens of billions of devices, the Internet has long been an American project. Yet today, the United States has ceded leadership in cyberspace to China. Chinese President Xi Jinping has outlined his plans to turn China into a “cyber-superpower.” Already, more people in China have access to the Internet than in any other country, but Xi has grander plans. Through domestic regulations, technological innovation, and foreign policy, China aims to build an “impregnable” cyberdefense system, give itself a greater voice in Internet governance, foster more world-class companies, and lead the globe in advanced technologies.

China’s continued rise as a cyber-superpower is not guaranteed. Top-down, state-led efforts at innovation in artificial intelligence, quantum computing, robotics, and other ambitious technologies may well fail. Chinese technology companies will face economic and political pressures as they globalize. Chinese citizens, although they appear to have little expectation of privacy from their government, may demand more from private firms. The United States may reenergize its own digital diplomacy, and the U.S. economy may rediscover the dynamism that allowed it create so much of the modern world’s technology.

But given China’s size and technological sophistication, Beijing has a good chance of succeeding—thereby remaking cyberspace in its own image. If this happens, the Internet will be less global and less open. A major part of it will run Chinese applications over Chinese-made hardware. And Beijing will reap the economic, diplomatic, national security, and intelligence benefits that once flowed to Washington.

Almost from the moment he took power in 2012, Xi made it clear just how big a role the Internet played in his vision for China. After years of inertia, during which cyber-policy was fragmented among a wide array of government departments, Xi announced that he would chair a so-called central leading group on Internet security and informatization and drive policy from the top. He established a new agency, the Cyberspace Administration of China, and gave it responsibility for controlling online content, bolstering cybersecurity, and developing the digital economy.

Cyberpower sits at the intersection of four Chinese national priorities. First, Chinese leaders want to ensure a harmonious Internet. That means one that guides public opinion, supports good governance, and fosters economic growth but also is tightly controlled so as to stymie political mobilization and prevent the flow of information that could undermine the regime.

Second, China wants to reduce its dependence on foreign suppliers of digital and communications equipment. It hopes to eventually lead the world in advanced technologies such as artificial intelligence, quantum computing, and robotics. As Xi warned in May, “Initiatives of innovation and development must be securely kept in our own hands.”

Third, Chinese policymakers, like their counterparts around the world, are increasingly wary of the risk of cyberattacks on governmental and private networks that could disrupt critical services, hurt economic growth, and even cause physical destruction. Accordingly, the People’s Liberation Army has announced plans to speed up the development of its cyber-forces and beef up China’s network defenses. This focus on cybersecurity overlaps with China’s techno-nationalism: Chinese policymakers believe they have to reduce China’s dependence on U.S. technology companies to ensure its national security, a belief that was strengthened in 2013, when Edward Snowden, a former contractor with the U.S. National Security Agency, revealed that U.S. intelligence services had accessed the data of millions of people that was held and transmitted by U.S. companies.

Finally, China has promoted “cyber-sovereignty” as an organizing principle of Internet governance, in direct opposition to U.S. support for a global, open Internet. In Xi’s words, cyber-sovereignty represents “the right of individual countries to independently choose their own path of cyber development, model of cyber regulation and Internet public policies, and participate in international cyberspace governance on an equal footing.” China envisions a world of national Internets, with government control justified by the sovereign rights of states. It also wants to weaken the bottom-up, private-sector-led model of Internet governance championed by the United States and its allies, a model Beijing sees as dominated by Western technology companies and civil society organizations. Chinese policymakers believe they would have a larger say in regulating information technology and defining the global rules for cyberspace if the UN played a larger role in Internet governance. All four of Beijing’s priorities require China to act aggressively to shape cyberspace at home and on the global stage.

The Xi era will be remembered for putting an end to the West’s naive optimism about the liberalizing potential of the Internet. Over the last five years, Beijing has significantly tightened controls on websites and social media. In March 2017, for example, the government told Tencent, the second largest of China’s digital giants, and other Chinese technology companies to shut down websites they hosted that included discussions on history, international affairs, and the military. A few months later, Tencent, the search company Baidu, and the microblogging site Weibo were fined for hosting banned content in the run-up to the 19th Party Congress. Officials ordered telecommunications companies to block virtual private networks (VPNs), which are widely used by Chinese businesses, entrepreneurs, and academics to circumvent government censors. Even Western companies complied: Apple removed VPNs from the Chinese version of its App Store. Beijing also announced new regulations further limiting online anonymity and making the organizers of online forums personally accountable for the contributions of their members.

Chinese censors are now skilled at controlling conversations on social media. In 2017, as the dissident and Nobel Peace Prize laureate Liu Xiaobo became increasingly ill, censors revealed that they could delete his image from chats. In an even more Orwellian move, authorities have rolled out a sophisticated surveillance system based on a vast array of cameras and sensors, aided by facial and voice recognition software and artificial intelligence. The tool has been deployed most extensively in Xinjiang Province, in an effort to track the Muslim Uighur population there, but the government is working to scale it up nationwide....MUCH MORE

This Means War (Lobster War)

This is far from the only case of Canadian aggression, see also after the jump.

From the WaPo via Keene New Hampshire's Keene Sentinel, August 12:
OTTAWA — Canadians often boast that their 5,525-mile boundary with the United States is the longest undefended border in the world. But tempers have frayed on at least one small stretch.

Machias Seal Island is a 20-acre, treeless island teeming with puffins, razorbills, terns, eiders and other seabirds, making it a mecca for birdwatchers. Both Canada and the United States claim sovereignty over the island, which is about 10 miles off the shore of Maine, and the surrounding 277-square-mile Gray Zone, where fishermen from both countries compete over valuable lobster grounds.
In late June and early July, Canadian fishermen said, U.S. Border Patrol agents in high-speed boats intercepted Canadian lobster boats in the Gray Zone.

“I have no idea where they came from,” said Laurence Cook, a lobsterman and representative of the Fishermen’s Association from nearby Grand Manan Island. “We’ve never seen U.S. Border Patrol in the Gray Zone before.”

Cook said at least 10 Canadian boats were stopped and interrogated about whether they were carrying drugs and illegal immigrants.

The incident comes at a low point in U.S.-Canada relations. The United States in May slapped tariffs on imports of Canadian steel and aluminum, prompting retaliation from Canada on the same metals and a range of other U.S. exports. President Donald Trump has lashed out at Canadian Prime Minister Justin Trudeau, calling him “dishonest and weak.”

The two countries are also in the midst of tense negotiations over NAFTA, the North American agreement Trump has called “the worst trade deal ever made.”

Canada’s Foreign Ministry said in a statement it is investigating the incidents that it said “occurred in Canadian waters.”

“Canada’s sovereignty over Machias Seal Island and the surrounding waters is long-standing and has a strong foundation in international law,” the statement said....MUCH MORE
Canada is also waging war over another island, this time against the Danes.
From Your Fact Boy:
Ever heard of Hans Island? Unless you are an overzealous Scandinavian legal scholar, chances are you haven’t. In short, It is a disputed rock.(or Island, call it what you will)

Within the Nares Strait (Between Greenland and Ellesmere) is half-a-square mile piece of rock called Hans Island, notable for absolutely nothing. No one lives there and while the area, generally, was once an Inuit hunting ground, there is little evidence that Hans Island itself is anything more than a dry rest stop across the Strait. To call Hans Island non-notable would, perhaps, be an understatement.

Nevertheless, Hans Island’s legal status is ‘disputed ‘: it is subject to conflicting claims, one by Denmark and another by Canada.

Which, of course, requires a colossally silly “war” which deserves to go down in history as either the most creative use of cross-border understanding to create a living satire out of territorial disputes or as the most humorous conflict of all time. But then again these are Danes and Canadians we are talking about.

But first, lets have some background. After all, we can’t study a ‘conflict’ without understanding the ‘severe’ political grievances behind it. It all began in 1973 when Denmark and Canada endeavored to map out the continental shelf dividing Greenland and Ellesmere. They ended up with the map, below, as a result, which placed Hans Island collinear with the points creating the boundary:
So why do you deserve to know about this conflict over a piece of rock ? Well, because of ‘how’ the conflict has turned out.
War ships from both sides patrol the area, and when they encounter each other they…wait-for-it…show their flags.
When the soldiers leave the ships they…wait-for-it…take the other side’s flag down and raise their own.
If this sounds terribly boring then read on. As successive Danish and Canadian landings on the island erect and dismantle flag poles and markers, they leave Bottles of Whiskey for the next contingent. This ‘whiskey war’ was initiated in 1984, when the Danish minister for Greenland landed on the island leaving a bottle of schnapps and a sign proclaiming “Welcome to the Danish Island.”
Peter Takso Jensen, head of international law department of the Danish Foreign Ministry, noted that
“When Danish military go there, they leave a bottle of schnapps. So when Canadian military forces come there, they leave a bottle of Canadian Club and a sign saying ‘Welcome to Canada’”

Revisiting Stratfor's Decade Forecast For 2015 - 2025

Stratfor seems to have settled on a five year periodicity for their decadal forecasts, meaning the next one will be for the period 2020 -2030 and also meaning we are ~halfway between forecasts.
Let's see how they're doing.

From Stratfor:

Decade Forecast: 2015-2025
Feb 23, 2015 | 10:08 GMT
This is the fifth Decade Forecast published by Stratfor. Every five years since 1996 (1996, 2000, 2005, 2010 and now, 2015) Stratfor has produced a rolling forecast. Overall, we are proud of our efforts. We predicted the inability of Europe to survive economic crises, China's decline and the course of the U.S.-jihadist war. We also made some errors. We did not anticipate 9/11, and more important, we did not anticipate the scope of the American response. But in 2005 we did forecast the difficulty the United States would face and the need for the United States to withdraw from its military engagements in the Islamic world. We predicted China's weakness too early, but we saw that weakness when others were seeing the emergence of an economy larger than that of the United States. Above all, we have consistently forecast the enduring power of the United States. This is not a forecast rooted in patriotism or jingoism. It derives from our model that continues to view the United States as the pre-eminent power.

We do not forecast everything. We focus on the major trends and tendencies in the world. Thus, we see below some predictions from our 2010 Decade Forecast:
We see the U.S.-jihadist war subsiding. This does not mean that Islamist militancy will be eliminated. Attempts at attacks will continue, and some will succeed. However, the two major wars in the region will have dramatically subsided if not concluded by 2020. We also see the Iranian situation having been brought under control. Whether this will be by military action and isolation of Iran or by a political arrangement with the current or a successor regime is unclear but irrelevant to the broader geopolitical issue. Iran will be contained, as it simply does not have the underlying power to be a major player in the region beyond its immediate horizons.
The diversity of systems and demographics that is Europe will put the European Union's institutions under severe strain. We suspect the institutions will survive. We doubt that they will work very effectively. The main political tendency will be away from multinational solutions to a greater nationalism driven by divergent and diverging economic, social and cultural forces. The elites that have crafted the European Union will find themselves under increasing pressure from the broader population. The tension between economic interests and cultural stability will define Europe. Consequently, inter-European relations will be increasingly unpredictable and unstable.
Russia will spend the 2010s seeking to secure itself before the demographic decline really hits. It will do this by trying to move from raw commodity exports to process commodity exports, moving up the value chain to fortify its economy while its demographics still allow it. Russia will also seek to reintegrate the former Soviet republics into some coherent entity in order to delay its demographic problems, expand its market and above all reabsorb some territorial buffers. Russia sees itself as under the gun, and therefore is in a hurry. This will cause it to appear more aggressive and dangerous than it is in the long run. However, in the 2010s, Russia's actions will cause substantial anxiety in its neighbors, both in terms of national security and its rapidly shifting economic policies.
The states most concerned — and affected — will be the former satellite states of Central Europe. Russia's primary concern remains the North European Plain, the traditional invasion route into Russia. This focus will magnify as Europe becomes more unpredictable politically. Russian pressure on Central Europe will not be overwhelming military pressure, but Central European psyches are finely tuned to threats. We believe this constant and growing pressure will stimulate Central European economic, social and military development.
China's economy, like the economies of Japan and other East Asian states before it, will reduce its rate of growth dramatically in order to calibrate growth with the rate of return on capital and to bring its financial system into balance. To do this, it will have to deal with the resulting social and political tensions.
From the American point of view, the 2010s will continue the long-term increase in economic and military power that began more than a century ago. The United States remains the overwhelming — but not omnipotent — military power in the world, and produces 25 percent of the world's wealth each year. 

The Decade Ahead

The world has been restructuring itself since 2008, when Russia invaded Georgia and the subprime financial crisis struck. Three patterns have emerged. First, the European Union entered a crisis that it could not solve and that has increased in intensity. We predict that the European Union will never return to its previous unity, and if it survives it will operate in a more limited and fragmented way in the next decade. We do not expect the free trade zone to continue to operate without increasing protectionism. We expect Germany to suffer severe economic reversals in the next decade and Poland to increase its regional power as a result.

The current confrontation with Russia over Ukraine will remain a centerpiece of the international system over the next few years, but we do not think the Russian Federation can exist in its current form for the entire decade. Its overwhelming dependence on energy exports and the unreliability of expectations on pricing make it impossible for Moscow to sustain its institutional relations across the wide swathe of the Russian Federation. We expect Moscow's authority to weaken substantially, leading to the formal and informal fragmentation of Russia. The security of Russia's nuclear arsenal will become a prime concern as this process accelerates later in the decade.

We have entered a period in which the decline of the nation-states created by Europe in North Africa and the Middle East is accelerating. Power is no longer held by the state in many countries, having devolved to armed factions that can neither defeat others nor be defeated. This has initiated a period of intense internal fighting. The United States is prepared to mitigate the situation with air power and limited forces on the ground but will not be able or willing to impose a settlement. Turkey, whose southern border is made vulnerable by this fighting, will be slowly drawn into the fighting. By the end of this decade, Turkey will emerge as the major regional power, and Turkish-Iranian competition will increase as a result.

China has completed its cycle as a high-growth, low-wage country and has entered a new phase that is the new normal. This phase includes much slower growth and an increasingly powerful dictatorship to contain the divergent forces created by slow growth. China will continue to be a major economic force but will not be the dynamic engine of global growth it once was. That role will be taken by a new group of highly dispersed countries we call the Post-China 16, which includes much of Southeast Asia, East Africa and parts of Latin America. China will not be an aggressive military force either. Japan remains the most likely contender for the dominant position in East Asia, both because of its geography and because of its needs as a massive importer....

Saturday, August 18, 2018

All Your Apps Are Belong To Us: Apple Pushes Developers To Sell Apps As Subscriptions (AAPL; EVIL)

From Business Insider, August 12:

Apple's secret charm offensive: How an invite-only meeting at Apple's luxury loft in New York helped transform how software is sold on the iPhone
  • Apple's App Store may be the world's largest software distribution platform.
  • But there are concerns that the competitiveness of the marketplace may make it difficult to maintain high-quality utility apps.
  • Apple is strongly encouraging developers to transition to a subscription, software-as-a-service model, and held an invitation-only meeting in the spring of 2017 to convince developers to lean in to the new business model.
In April 2017, a group of over 30 software developers gathered at a luxury loft in New York City's trendy Tribeca neighborhood after receiving an invitation from Apple. They didn't know exactly why they had been summoned, but all of them had one thing in common: they developed apps for Apple's devices, according to people who attended the event.

The developers at Apple's loft soon realized the hardware giant needed something from them: Apple was a few months into a major shift in the App Store's core business model, and it needed buy-in from developers.

Developers, Apple said, needed to realize the business model of apps was changing. Successful apps tended to focus on long-term engagement instead of upfront cost. Indie developers who wanted to capitalize on this needed to move to a subscription model, as Apple had made possible in the past year in a splashy announcement.

Why Apple, one the strongest forces in the world of technology, held an invite-only meeting for smaller, often one-or-two person indie developers is a story that goes back to the beginning of the App Store in 2008. Shortly after the App Store was turned on for iPhones, people realized that the market for apps had a tendency to drive prices for software down.

Eventually, iPhone owners got used to apps costing only $1 or $2.

Months after the App Store launched, former Apple CEO Steve Jobs referenced the shifting market for apps in a 2008 interview that was recently unearthed.

"I think some of the folks have come down from $10 to $5, and see their sales go up more than 2X. I think these guys are trying to maximize revenue and they're experimenting," Jobs said at the time. "They could ask us, 'What should we do?' and we're going to say, 'We don't know.' Our opinions are no better than yours because this is so new."

10 years later, the App Store isn't new anymore, and Apple continues to tweak its rules so that developers can create sustainable business models, instead of selling high-quality software for a few dollars or monetizing through advertising. If Apple can't make it worthwhile for developers to make high-quality utilities for the iPhone, then the vibrant software ecosystem that made it so valuable could decay.

Apple's main tool to fight the downward pricing pressure on iPhone apps is subscriptions.

Some apps are "hammers" Some software is like a network, and other software is like a hammer.

For example, an app for connecting you to friends and family, like Facebook or Snapchat, is a network. On the other hand, an app that allows you to, say, crop or alter a photo is more of a tool, like a hammer.

The advent of the App Store in 2008 made most software for iPhone and iPads ever-cheaper as Apple's userbase was exploding, which was great for network-style apps: they got access to a huge userbase, and since they make money through advertising or other methods, the race to the bottom in terms of pricing didn't hurt them.

But the App Store put a lot of stress on hammer makers, people and small businesses who developed tools for people to draw, or write, or program — basically, apps called "utilities" in the App Store. These developers would sell an app for a few dollars in a one-time transaction, and then they were stuck paying server costs and upkeep indefinitely with free updates.

"Once the customer is acquired and they pay the money, they don't get charged again. So what keeps the app up?" Ish Shabazz, an indie iOS developer, said.

In response, in 2016 Apple introduced what was reportedly internally called "Subscriptions 2.0," a way for developers that made utilities and other kinds of apps to bill their customers on a regular, recurring basis, creating the cashflow necessary to keep a hammer-style app up-to-date and effective.
It also, according to developers that Business Insider spoke to, made it possible to create a large and sustainable software business based on App Store sales.

This September, "Subscriptions 2.0" turns two year old. Subscription-based apps remain a very small fraction of the 2 million apps available from the App Store, but Apple is pleased with the uptake....

For our younger readers, the "...are belong to us" in the headline  was a meme in the early part of this century. It's on the internet, you can look it up if you wish.

"Supermarket Sadism: How to Navigate the Deadly Food Jungle"

This may be a bit over-the-top but not inaccurate.

From The Daily Bell via ZeroHedge:
Let’s imagine the dangers of the ancient jungles and forests our ancestors once hunted and gathered in. Navigating deadly animals, poisonous plants and treacherous landscapes is risky business, no doubt!

Today, I think of the modern Supermarket as insidious as the deepest, darkest jungle. As I enter, the swing gates shut behind me. There is no turning back.

Immediately I see the fresh produce promising a natural food fix. Don’t be fooled, this only masks the lies that lurk within. Bagging up some irradiated apples I’m thrown into what appears to be an orgy of choice, isles upon isles. First I notice the packaging- Pavlov’s stimuli – so many brands, so much brilliant color all competing for my eyes, my gut, my wallet. This is the first real test, running the psychological gauntlet called the grocery aisle. What will I choose?

Expensive items sit at eye level. Cheap brands down below, forcing prostration. Cartoon characters in the cereal isle make eye contact with the children, luring them like strangers promising candy.

Finding the bakery I pick up a loaf and inspect the ingredients. All kinds of shit I don’t recognize. But this is supposed to be bread. What the hell is E927? Its azodicarbonamide – shoe rubber. Oh.

Operation Clean Label
Food Cartels like Nestle are renaming the ingredients list to hide the truth from the 21st-century informed consumer. Instead of E320 Butylhydroxyanisole (promotes tumors), E910 L-cysteine (human & animal hair), E407 Carrageenan (cancer-causing), you’ll see Rosemary “Extract”, Yeast “Extract” and “Functional” Flour, respectively. Classic bait and switch – don’t be fooled.

As I exit the grocery isle labyrinth, my cart stocked with pristinely packaged slow-kill poison I reach the check-out isles. This is where the Supermarket hyper-targets the children. An infinite variety of sugary shit sucks the attention from them like a vampire sucks blood.

With the children suddenly crippled with sugary lust, the magazine rack full of Tabloids distract the adults. The promise of cheap, low-class thrills gives way to insecurity and self loathing. Seeking comfort, I find a temporary high in that perfectly placed estrogen mimicking, liver scarring Snickers candy bar. I deserve it....

Giving up Facebook? "The Being and Nothingness Network: Social Media for Existentialists"

From McSweeney's:
How Do You Begin Your Being and Nothingness Experience?
You already have. You were born, and your inheritance is pain. Make sure you are connected to the Internet.

Your Being and Nothingness Network Friends List
It is empty. It will always be empty. BNN is a social network designed to connect you with people who have not joined—and never will join—the Being and Nothingness Network. Your loneliness is transcendent and almost holy, so do you want to allow pop-up ads from this website? Your browser must support Flash.

Your Being and Nothingness Profile
Enter your relationship status and the BNN will list you as “radically free.” Your body is a prison and you are surrounded by nothingness. You only have your conscious choices. Your birthday also doesn’t matter....MORE

Following Up On "Commodity traders superior to chimpanzees": The Importance of Pockets

We left Thursday's "Commodity traders superior to chimpanzees, research shows" with the observation that any advantage commodity traders had over their simian cousins could probably be ascribed to pockets or other forms of storage:
...The report becomes particularly readable when it speculates on the reasons why [chimps are lousy traders]: because of their lack of property ownership norms...

...or, for that matter, pockets.... ...chimpanzees in nature do not store property and thus would have little opportunity to trade commodities...
Here is further discussion of the importance of pockets and the disadvantage society places on half its members.
From The Pudding, August 2018:

Someone clever once said Women were not allowed Pockets
There are few things more frustrating than collecting your belongings only to realize that the pockets in your pants are too small to hold them. Or worse, the fabric designed to look like a pocket is merely for decoration and doesn’t open at all.

For wearers of women’s clothes, this struggle is so real. You don’t have to look far to find Twitter-rants, articles, and videos in which people are either complaining about not having pockets or rejoicing over that rare gem that is the “dress with pockets”. And sure, we could all carry handbags, which is likely what the 8 billion dollar purse industry hopes we’ll do, but not everyone wants to carry a bag. After all, men’s pants pockets are basically the pockets of our dreams.
But, like so many things on the internet, we could find complaints and anecdotes galore but little data illustrating just how inferior women’s pockets really are to men’s. So, we went there.
We measured the pockets in both men’s and women’s pants in 20 of the US’ most popular blue jeans brands. Take a look at what we found....
...MORE, the results of the investigation are actually a bit troubling.

HT: MetaFilter's Pockets Long suspected, now proven

If interested see also:

To Create A "1%" In A Social Hierarchy You Don't Need An Economic Surplus, Just A Storable Form Of Wealth 

So there I was, reading the abstract of "Hazelnut economy of early Holocene hunter–gatherers: a case study from Mesolithic Duvensee, northern Germany", thinking about Nutella and Frangelico when this grabbed my eye:
...High-resolution analyses of the excellently preserved and well-dated special task camps documented in detail at Duvensee, Northern Germany, offer an outstanding opportunity for case studies on Mesolithic subsistence and land use strategies. Quantification of the nut utilisation demonstrates the great importance of hazelnuts. These studies revealed very high return rates and allow for absolute assessments of the development of early Holocene economy. Stockpiling of the energy rich resource and an increased logistical capacity are innovations characterising an intensified early Mesolithic land use...
Stockpiling, storage, commodities, well that's right in our wheelhouse,* and if I can combine it with the last remnants of interest in Piketty's approach to inequality.....maybe I can synthesize something halfway original...

Yeah, it's already been done....Cereals, appropriability, and hierarchy...

It Wasn't 'Ecocide': What Happend On Easter Island

Jared Diamond has some explaining to do.*

From Chicago's Field Museum of Natural History, August 13, 2018 via PhysOrg:

Easter Island's society might not have collapsed
You probably know Easter Island as "the place with the giant stone heads." This remote island 2,300 miles off the coast of Chile has long been seen as mysterious—a place where Polynesian seafarers set up camp, built giant statues, and then destroyed their own society through in-fighting and over-exploitation of natural resources. However, a new article in the Journal of Pacific Archaeology hints at a more complex story—by analyzing the chemical makeup of the tools used to create the big stone sculptures, archaeologists found evidence of a sophisticated society where the people shared information and collaborated....MUCH MORE
I personally prefer the carvings in fancy dress.
From December 2017's:
Apparently the Easter Island Giant Heads had Giant Hats.

...Pukao stones.
Like this:

Back to the latest research, this time at Inverse, Aug 13:

Easter Island: A Popular Theory About Its Ancient People Might Be Wrong
'Rapa Nui is not a story about collapse."
Easter Island, also known as Rapa Nui, is a 63-square-mile spot of land in the Pacific Ocean. In 1995, science writer Jared Diamond popularized the “collapse theory” in Discover magazine story about why the Easter Island population was so small when European explorers arrived in 1772. He later published Collapse, a book hypothesizing that infighting and an overexploiting of resources led to a societal “ecocide.” However, a growing body of evidence contradicts this popular story of a warring, wasteful culture....MUCH MORE
*We've posted on Diamond a few time's going back to 2011's commentary:
"The Worst Mistake In The History Of The Human Race" – 1987 article by Jared Diamond
Diamond, at least since Guns, Germs and Steel, has struck me as lightweight, just coasting, trying to force observations into a prejudiced worldview. I know his impressive c.v. but it had gotten to the point where any time I read something of his I thought of Churchill's comment:

A fanatic is one who can't change his mind and won't change the subject.

It turns out that he was like that a quarter century ago.
More spleen venting below....
I didn't remember getting so worked up but after a snip of the 1987 article the rant continues:
... This neo-Rousseau-ish babble makes me want to grab a mongongo nut and crack it on his head.

Painting the image of hunter-gatherer superiority he makes no mention of the agricultural peasants of the middle ages who worked between 180 and 260 days per year, the rest of the time being taken up with Sundays, feast days, holidays, fair days etc.

Denigrating the division of labor he makes no mention of the benefits that he has personally derived. I would estimate his Sasquatch-sized ecological footprint to be equivalent to 500-1000 Bushmen.

In many ways the best thing he could do, if he truly believed what he writes, is join the Voluntary Human Extiction Movement instead of jetting off to his next book-signing.

In the meantime we have 7 billion people to feed.
I really don't recall suggesting Professor Diamond kill himself. Here's a December 2017 piece without the rant: Do civilisations collapse? 

And an actual collapse:

"Lessons From The Last Time Civilization Collapsed"
 “1177 B.C.: The Year Civilization Collapsed.”  

And a different actual collapse, the demise of the Moche people in April 2008's
"Food Riot Watch: Haiti. Just Wait for the Moche Climate

Still a bit surprised at the vehemence in that 2011 post.

Complexity, Modeling, and Forecasting: Oxford's J. Doyne Farmer

Not the other J. Doyne Farmer.
This 'un is Oxford's, thus the second comma in the headline,

From his Edge bio:

J. DOYNE FARMER is director of the Complexity Economics programme at the Institute for New Economic Thinking at the Oxford Martin School, professor in the Mathematical Institute at the University of Oxford, and an external professor at the Santa Fe Institute.

His current research is in economics, including agent-based modeling, financial instability and technological progress. He was a founder of Prediction Company, a quantitative automated trading firm that was sold to the United Bank of Switzerland in 2006. His past research includes complex systems, dynamical systems theory, time series analysis and theoretical biology.

During the eighties he was an Oppenheimer Fellow and the founder of the Complex Systems Group at Los Alamos National Laboratory. While a graduate student in the 70s, he built the first wearable digital computer, which was successfully used to predict the game of roulette.


Collective Awareness
Economic failures cause us serious problems. We need to build simulations of the economy at a much more fine-grained level that take advantage of all the data that computer technologies and the Internet provide us with. We need new technologies of economic prediction that take advantage of the tools we have in the 21st century.

Places like the US Federal Reserve Bank make predictions using a system that has been developed over the last eighty years or so. This line of effort goes back to the middle of the 20th century, when people realized that we needed to keep track of the economy. They began to gather data and set up a procedure for having firms fill out surveys, for having the census take data, for collecting a lot of data on economic activity and processing that data. This system is called “national accounting,” and it produces numbers like GDP, unemployment, and so on. The numbers arrive at a very slow timescale. Some of the numbers come out once a quarter, some of the numbers come out once a year. The numbers are typically lagged because it takes a lot of time to process the data, and the numbers are often revised as much as a year or two later. That system has been built to work in tandem with the models that have been built, which also process very aggregated, high-level summaries of what the economy is doing. The data is old fashioned and the models are old fashioned.

It's a 20th-century technology that's been refined in the 21st century. It's very useful, and it represents a high level of achievement, but it is now outdated. The Internet and computers have changed things. With the Internet, we can gather rich, detailed data about what the economy is doing at the level of individuals. We don't have to rely on surveys; we can just grab the data. Furthermore, with modern computer technology we could simulate what 300 million agents are doing, simulate the economy at the level of the individuals. We can simulate what every company is doing and what every bank is doing in the United States. The model we could build could be much, much better than what we have now. This is an achievable goal.

But we're not doing that, nothing close to that. We could achieve what I just said with a technological system that’s simpler than Google search. But we’re not doing that. We need to do it. We need to start creating a new technology for economic prediction that runs side-by-side with the old one, that makes its predictions in a very different way. This could give us a lot more guidance about where we're going and help keep the economic shit from hitting the fan as often as it does.
I'm thinking about collective awareness, which I think of as the models we use to collectively process information about the world, to understand the world and ourselves. It's worth distinguishing our collective awareness at three levels. The first level is our models of the environment, the second level is our models of how we affect the environment, and the third level is our models of how we think about our collective effect on ourselves.

Understanding the environment is something we've been doing better and better for many centuries now. Celestial mechanics allows us to understand the solar system. It means that if we spot an asteroid, we can calculate its trajectory and determine whether it's going to hit the Earth, and if it is, send a rocket to it and deflect it.

Another example of collective awareness at level one is weather prediction. It's an amazing success story. Since 1980, weather prediction has steadily improved, so that every ten years the accuracy of weather prediction gets better by a day, meaning that if this continues, ten years from now the accuracy for a two-day weather forecast will be the same as that of a one-day weather forecast now. This means that the accuracy of weather prediction has gotten dramatically better. We spend $5 billon a year to make weather predictions and we get $30 billion a year back in terms of economic benefit.
The best example of collective consciousness at level two is climate change. Climate change is in the news, it's controversial, etc., but most scientists believe that the models of climate change are telling us something that we need to pay serious attention to. The mere fact that we're even thinking about it is remarkable, because climate change is something whose real effects are going to be felt fifty to 100 years from now. We're making a strong prediction about what we're doing to the Earth and what's going to happen. It's not surprising that there's some controversy about exactly what the outcome is, but we intelligent people know it's really serious. We are going to be increasingly redirecting our efforts to deal with it through time.

The hardest problem is collective awareness at level three—understanding our own effects on ourselves. This is because we're complicated animals. The social sciences try to solve this problem, but they have not been successful in the dramatic way that the physical and natural sciences have. This doesn’t mean the job is impossible, however.

Climate prediction had the big advantage that it could piggyback on weather prediction. As weather predictions got more accurate, climate models automatically got more accurate, too. There is a way in which climate prediction is actually easier than weather prediction. You don't try to say what's going to happen three days in the future, you try to say what's going to happen, on average, if things change. If we pump 100 parts per million more CO2 into the atmosphere, how much is that going to warm things up? A climate model is just a simulation of the weather for a long time, but under conditions that are different from those now. You inject some greenhouse gases into the atmosphere, you simulate the world, and you measure the average temperature and the variability of the weather in your simulation.

Climate predictions get a huge benefit from all the effort that's gone into weather prediction. I've been trying to get a good number on how much we've invested in weather prediction, but it is certainly $100 billion dollars or more. Probably more. It's probably closer to $1 trillion that we've invested since 1950, when we did the first numerical weather predictions. It sounds like a lot of money, but the benefits are enormous.

I've been thinking about how we can make better economic models, because a lot of the problems we're having in the world right now are at least in part caused by economics and the interaction of economics with mass sociology. Our cultural institutions are lagging technological change, and having a difficult time keeping pace with them. The economy plays a central role. Since the '70s, the median wage in the US has been close to flat. At the same time, the rich have been getting richer at a rate of two or three percent per year. A lot of the factors that are driving the problems we're having involve the interaction of the economy with everything else. We need to pursue some radically different approaches to making economic models.

It's interesting to reflect on the way we do economic modeling now. How do those models work? What are the basic ideas they're built on? We got an unfortunate taste of the ways in which they don't work in 2006, when some prescient economists at the New York Fed asked FRB/US, the leading econometric model, "What happens if housing prices drop by twenty percent?" This was 2006—their intuition was right on target—over the next two years, housing prices dropped by almost thirty percent. FRB/US said there'd be a little bit of discomfort in the economy, but not much. The answer FRB/US gave them was off by a factor of twenty. It made such bad forecasts because the model didn’t have the key elements that caused the crisis to happen.

Since then, economists have focused a lot of effort on adding these key elements, for example, by coupling financial markets to the macroeconomy. FRB/US didn’t model the banking system, and couldn’t even think about the possibility that banks might default. Issues like that are now in those models. The models have gotten better. But there is still a good chance that when we have the next crisis, we'll get similarly bad answers. The question is, how can we do better?

The first thing one has to say is that it's a hard problem. Economics is a lot harder than physics because people can think. If you make a prediction about the future of the economy, people may respond to your prediction, automatically invalidating it by behaving in a way that creates a different future. Making predictions about economics is a lot harder than using physics to predict the behavior of the natural world.

Fortunately, the most interesting things we want to do aren't to predict what GDP is going to do next month, but to make predictions about what happens if we tinker with the system. If we change the rules so that, say, people can't use as much leverage, or if we put interest rates at level X instead of level Y, what happens to the world? These are conditional forecasts, in contrast to predicting tomorrow's weather, which is an unconditional forecast. It's more like climate prediction. It’s an easier problem in some ways and harder in others because it is necessary to simulate a hypothetical world and take into account how people will behave in that hypothetical world. If you have a system like the economy that depends on thinking people, you have to have a good model for how they think and how they're going to respond to the changes you're making.
When I was a graduate student, Norman Packard and I decided to take on the problem of beating roulette. We ended up building what turned out to be the first wearable digital computer. We were the first people to take a computer into a casino and successfully predict the outcome of roulette and make a profit. We were preceded by Claude Shannon and Ed Thorpe who built an analog computer that allowed them to predict roulette in Shannon’s basement, but they never successfully took it into the casino. My roulette experience changed the rest of my life because it set me on a career path in which I became an expert on prediction. This never would have occurred to me before that.

If a system is chaotic it means that prediction is harder than it is for a system that isn’t chaotic....

Friday, August 17, 2018

"The Bear’s Lair: China’s coming Austrian collapse"

That's Austrian economics, not the 1918 collapse of the Habsburg-Lorraine Austro-Hungarian Empire.
Coincidentally though,  the writer worked at, among other places, Credit-Anstalt which has some collapse history itself.

From Martin Hutchinson, August 13, 2018:
“The coming collapse of China” has been predicted many times. Indeed, an excellent book of that title was a best-seller back in 2001. Yet the fictitiousness of Chinese economic statistics remains, and the over-leverage in the economy worsens. Like several other successful non-market economies, China has successfully sought rents from other countries through flaws in the global economic system. Thanks to President Trump, that is now changing, and the result for China will not be pretty.
Conventional wisdom is that China is the most successful growth story ever seen, that it will overtake the United States in terms of GDP in the early 2020s and (for some China optimists) that it will overtake the U.S. in terms of GDP per capita by 2050. Certainly, that’s what Xi Jinping is aiming at, with his removal of the limits on his tenure and his attempt to dominate the world’s intellectual property by 2025.

There is just one problem: China’s economic statistics are largely fictitious, and the gap between statistics and reality is growing ever larger. If the statistics are nonsense, then probably the economic power is nonsense as well.

The most egregious flaw in China’s statistics is the savings rate. For decades we have been told that the Chinese people are extraordinary savers, with a savings rate of some 46% of GDP, according to the latest figures, compared with around 6.8% of GDP (Itself a figure recently and dubiously inflated by the Bureau of Economic Analysis) in the United States. Touchingly sentimental pictures are painted of the noble impoverished Chinese, earning one fiftieth of a Western wage but nevertheless saving nearly half of that pittance, seven times the American rate of saving, because of the country’s notorious lack of social services for the elderly.

If China really had a savings rate of 46%, the economy would look quite different. There would be very little debt in the system; the banks would have a very low loans to deposits ratio and low leverage, like banks in nineteenth century Britain. Consumer debt would be almost non-existent, while the Chinese market would have an enormous variety of saving and investment schemes, to take care of all the accumulated wealth. New company formation would be very high, but “venture capital” would be very scarce, because new companies would be capitalized from the savings of the founders’ relatives and friends. Overall, China might well have a rapid growth rate, but it would be a very contented, stable economy.

A recent Financial Times examination of China’s economy illustrates the problem; it shows consumer debt almost doubling as a share of GDP, from roughly 20% to 40% in the last five years and tells pathetic stories of young, highly educated Chinese who max out their credit cards, desperately hoping to boost their earnings sufficiently to pay that debt back. But Chinese elite youths brought up in a society with a 46% savings rate would have neither the desire nor the need for heavy credit card usage. First, they would have been brought up in families with a fanatical devotion to deferring consumption, so would regard the over-indebted Western Millennial lifestyle with undiluted horror. Second, because of their families’ savings habits, such elite youths would be beneficiaries of very substantial trust funds from their relatives, and so would have no need of credit cards.

If the savings rate is fiction, then so are all China’s economic statistics. GDP is at least one third lower than claimed, to account for the missing savings, and growth rates over the last decades correspondingly lower, On the other hand, China’s foreign debt is all too real, and most of the domestic debt also appears to be solid, so China’ s gross debt, already alarmingly high at 299% of GDP according to the Institute for International Finance, is in reality about 450% of true GDP, substantially higher than that of any other country. With such a level of debt, China is not about to overtake the West, it is in imminent danger of collapse. Indeed, it is at first sight something of a mystery why it has not collapsed already under the weight of its excesses.

As often in these questions, some history is useful here. China is not a market economy, nor anything close to one. Instead it is an economy that has been benefiting from two sources of unearned foreign increment: the “unequal deals” it has been able to impose on Third World countries that provide it with raw materials and seizure of Western intellectual property without paying for it.
There are three previous examples of societies that appeared to become very successful by non-market looting of foreigners, two of which used military means to achieve it and the third used a mixture of military and economic means. Those societies were Napoleonic France, the Third Reich and the Soviet Union. Of those examples, the Third Reich is not very relevant to modern China because its looting was mostly (though not entirely) military and its economic hegemony was remarkably brief and probably not sustainable.

Napoleonic France is an interesting precedent. This is a society that has been excessively admired by recent British conservative historians, yet the Empire’s economy rested on looting its subject states and Napoleon himself was economically illiterate, dismissing Jean-Baptiste Say, one of the two best French economists ever (no, the other is not Thomas Piketty!) from the public service.

However, the great Lord Liverpool noticed in 1809 that Napoleon’s Empire was unstable; it relied upon loot from a continued supply of new victims to maintain itself. Consequently, a steady and moderate pressure, as applied by the economically stable Britain through the Peninsular War, caused Napoleon to adopt the desperate expedient of invading Russia, after which the Empire collapsed, economically and militarily.....MUCH MORE

The Akrasia Effect: Why We Don’t Follow Through on What We Set Out to Do and What to Do About It (plus belated El Nino info)

From James Clear:
By the summer of 1830, Victor Hugo was facing an impossible deadline. Twelve months earlier, the famous French author had made an agreement with his publisher that he would write a new book titled, The Hunchback of Notre Dame.

Instead of writing the book, Hugo spent the next year pursuing other projects, entertaining guests, and delaying his work on the text. Hugo's publisher had become frustrated by his repeated procrastination and responded by setting a formidable deadline. The publisher demanded that Hugo finish the book by February of 1831—less than 6 months away.

Hugo developed a plan to beat his procrastination. He collected all of his clothes, removed them from his chambers, and locked them away. He was left with nothing to wear except a large shawl. Lacking any suitable clothing to go outdoors, Hugo was no longer tempted to leave the house and get distracted. Staying inside and writing was his only option.

The strategy worked. Hugo remained in his study each day and wrote furiously during the fall and winter of 1830. The Hunchback of Notre Dame was published two weeks early on January 14, 1831.

The Ancient Problem of Akrasia
Human beings have been procrastinating for centuries. Even prolific artists like Victor Hugo are not immune to the distractions of daily life. The problem is so timeless, in fact, that ancient Greek philosophers like Socrates and Aristotle developed a word to describe this type of behavior: Akrasia.
Akrasia is the state of acting against your better judgment. It is when you do one thing even though you know you should do something else. Loosely translated, you could say that akrasia is procrastination or a lack of self-control. Akrasia is what prevents you from following through on what you set out to do.

Why would Victor Hugo commit to writing a book and then put it off for over a year? Why do we make plans, set deadlines, and commit to goals, but then fail to follow through on them?...

Sometimes the answer is something more mundane.

Let's say it's Tuesday and you hit 'Publish' on a post titled, let's say, "Insurance: "NOAA lowers 2018 Atlantic hurricane forecast, as El Nino chances rise" and which you end with "We'll be back with the IRI ENSO 'Quick Look' later today." and which commitment you promptly forget.

Here's Columbia University/IRI's:

IRI ENSO Forecast
2018 August Quick Look
Published: August 9, 2018
A monthly summary of the status of El Niño, La Niña, and the Southern Oscillation, or ENSO, based on the NINO3.4 index (120-170W, 5S-5N)

Use the navigation menu on the right to navigate to the different forecast sections
In early August 2018, the east-central tropical Pacific waters reflected ENSO-neutral conditions, with near-average SST, slightly lower than a month ago. The key atmospheric variables also suggested neutral conditions. However, the subsurface water temperature continued to be above-average. The official CPC/IRI outlook calls for neutral conditions through the rest of northern summer season, with a 60% chance of El Niño development during fall, rising to 70% for winter 2018-19. An El Niño watch is in effect. The latest forecasts of statistical and dynamical models collectively favor weak El Niño development by early fall, growing to weak or moderate strength during late fall and winter; forecasters are buying into this scenario now that the spring barrier is passed.

Figures 1 and 3 (the official ENSO probability forecast and the objective model-based ENSO probability forecast, respectively) are often quite similar. However, occasionally they may differ noticeably. There can be several reasons for differences. One possible reason is that the human forecasters, using their experience and judgment, may disagree to some degree with the models, which may have known biases. Another reason is related to the fact that the models are not run at the same time that the forecasters make their assessment, so that the starting ENSO conditions may be slightly different between the two times. The charts on this Quick Look page are updated at two different times of the month, so that between the second and the third Thursday of the month, the official forecast (Fig. 1) has just been updated, while the model-based forecasts (Figs. 3 and 4) are still from the third Thursday of the previous month. On the other hand, from the third Thursday of the month until the second Thursday of the next month, the model-based forecasts are more recently updated, while the official forecasts remain from the second Thursday of the current month.

Click on the for more information on each figure.