The clinical trial of a combination treatment of hydrochloroquine and
azithromycin was announced on March 22 with a start date of Tuesday March 24. Here's our link to the UPI story, there are many other sources, Governor Cuomo made a pretty big deal out of the announcement.
So this ABC News story on Thursday was a bit of a shocker:
Clinical trials may begin next week in New York for coronavirus treatments: Health official Gov. Cuomo announced this week that he was eager to get the trials started.
By Josh Margolin
March 26, 2020, 12:54 PM
Officials are working out final details in plans to begin clinical
trials next week for a malaria drug combination that appears to hold
some promise for confronting the coronavirus pandemic.
New York
state Health Department officials are making arrangements to determine
what patients at which hospitals will be allowed to participate in
trials with hydroxychloroquine, Zithromax and chloroquine, a senior
official at the department with knowledge of the plan told ABC News. The
bulk of the patients are expected to be in the New York City metro area because the region has the biggest cluster of cases.
"We’re in the midst of getting info from hospitals across the state to
determine interest and number of patients," the official said. "Supplies
will be going out by end of week."
New York Gov. Andrew Cuomo announced earlier this week that he was eager
to get the trials started. By Tuesday, the drugs were in New York and
officials were working to identify who could participate....MORE
How farsighted was the leadership at the Federal Reserve as the world
economy was heading toward a steep decline more than five years ago?
Outside the Fed’s marble halls, the answers to that question are only
now becoming known, and the verdict is perhaps surprisingly positive.
In December 2008, a few months after the Lehman Brothers collapse
threw the world economy into crisis, participants in the Fed’s steering
group, the Federal Open Market Committee (FOMC), met to discuss their
policy options. It was widely agreed that the conventional policy
instrument, the federal funds rate target, would have to be lowered to
zero. The big question was “what should we do next?” A recently released
transcript
of the meeting shows that the FOMC was already considering most of the
monetary policy options that are still being debated by economists and
pundits today. The transcript frequently mentions a package of 21 memos
on monetary policy at the zero bound that were prepared by Fed staff
just before the meeting. The Peterson
Institute for International Economics has obtained those memos through
the Freedom of Information Act and is making them available to the
public on its website[pdf] as of today. In the interest of full disclosure, I was a coauthor of three of those background memos.
Together, the transcript and background memos display that FOMC
participants understood the severity of the economic outlook they faced
and that they and their staff had a good grasp of the pros and cons of
the options available. That is not to say that Fed policy over the past
few years could not have been improved upon, but simply to recognize
that the Fed was not flying blind and indeed was already cognizant of
many of the issues that would come to dominate the public debate about
monetary policy. Is 0.25 Zero?
The primary tool the Fed had to achieve its federal funds rate target
at that time was the interest rate on bank reserves at the Fed, which
was 1 percent in early December 2008. Almost all participants wanted to
lower this rate and a few argued for a rate of zero percent. But most
wanted a rate slightly above zero and they settled on 0.25 percent,
which has remained constant to this day. The primary reason for a rate
slightly above zero was concern that banks and money market funds needed
to earn a spread between deposit and lending rates in order to pay
their operating costs and they would find it difficult to impose
negative interest rates on their depositors. In addition, there was some
concern about reduced liquidity and disruptions in the bond markets
that were already evident at low interest rates. The possible harm from
further disruptions in banking and securities markets was judged to
outweigh any small macroeconomic benefit from an even lower interest
rate.
The FOMC did not discuss the possibility of a negative interest rate
on bank reserves, but it is widely agreed that a significantly negative
interest is not feasible because banks would convert their reserve
balances to paper currency. A lingering puzzle is why the Fed never
lowered interest on reserves to zero in subsequent years, when financial
strains had diminished and depositors and market participants had
gotten used to the low rate environment, but standard macroeconomic
models imply that the benefits of such a small decline would have been
correspondingly small....MORE
Another idea generated by conversation with the Malaysian gentleman, keep an eye on palm oil.
And no, it's not Jho Low of 1MDB fame. He is reputed to be in Wuhan.
Anyhoo, palm oil, very important, ecologically risky (deforestation, monoculture).
From Bloomberg, March 2:
Breakthrough
Energy Ventures, helmed by Bill Gates, is leading an investment round
of $20 million for C16 Biosciences, a New York-based startup, which is
working on making sustainable alternatives for palm oil.
The
three-year-old startup uses microbes to convert food waste and
industrial byproducts into synthetic palm oil, which it claims can
replace the plant-derived version. The investment will be used to grow
the team and scale up the technology. It’s one of a growing number of
startups working on developing alternatives.
Interest
in alternatives to palm oil is growing as curbing its environmental
impact becomes more critical. Most palm oil is produced in the tropics,
where companies often destroy carbon-rich forests to make space for
plantations. What’s even worse is that many producers light fires as a
cheap way to clear forests and agricultural land, which adds to the
greenhouse-gas emissions from the process and wrecks the region’s rich
biodiversity.
The
palm oil market is expanding rapidly and could be worth almost $93
billion next year. Starting in the mid-1990s, following research showing
vegetable oils are bad for health, big food brands switched over to
using palm oil, which does not contain harmful trans fats. Now
it’s found in more than 50% of consumer products, according to
non-profit Palm Oil Investigations.
Breakthrough
Energy Ventures wants to invest in companies that have the potential to
cut emissions by as much as 500 million metric tons each year. The
fund's investors include Amazon.com Inc. founder Jeff Bezos, Virgin
Group boss Richard Branson and Michael Bloomberg, the founder and
majority owner of Bloomberg LP.
Sustainable Alternatives
Sustainable
palm oil is available in the market today, but its production is small
and it isn’t cheap. That’s why startups, such as C16, are trying
something different.
C16
uses a proprietary yeast which it feeds with carbon-containing waste.
This could include excess food from supermarkets and homes or glycerol
from biofuels production. The startup can make about 10 kg of its
synthetic palm oil each week, which it plans to ramp up to 1,000
kilograms using the money invested. This would allow it to supply large
businesses, starting with cosmetics companies and then the food
industry....MORE
The umbrella-like balanced lift method is brilliant.
Structural engineers have built a new bridge using an unfolding, umbrella-like technique.
The engineers say the process is ideal for unusual terrain and reduces time and cost.
Hollow steel girders are lowered slowly and steadily into place by a hydraulic lift.
A new kind of bridge construction opens and unfolds
like an umbrella, creators say. Structural engineers at the TU Wien, or
Vienna University of Technology, have built a prototype bridge
mechanism with a central umbrella handle and two opposite spokes
controlled by a slider. The example bridge spans a river in Austria.
The
umbrella method is a completely new way to construct a static final
bridge. This TU Wien team first worked on the idea in 2006, and it’s
been experimenting and fine tuning since then. Instead of traditional
kinds of bridge building—i.e. putting up long-term scaffolding as rebar
is laid and concrete is filled into structures—this mechanism is built
like a “closed” umbrella and then unfolded into its final position. From
there, its hollow girders are filled with concrete and the rest of the
structural elements are completed.
“Erecting
bridges using scaffolding usually takes months,” designer Johann
Kollegger said in a statement. “The elements for the balanced lowering
method, on the other hand, can be set up in two to three days, and the
lowering process takes around three hours.” But this process, he says,
is less invasive for bridges through protected or uneven terrain. The
team's sample bridge over the Lafnitz River touches a nature preserve.
The resulting bridge section has a span of 72 meters (about 236
feet)—enough to span many rivers and highways. Sections can also be
daisy-chained and connected into longer bridges. Each girder weighs over
50 tons, and they’re lowered carefully and symmetrically over a pretty
long time. Traditionally constructed bridges are also often built out
symmetrically, because even small imbalances can break the foundations
that have been constructed....MUCH MORE, including video
And speaking of video, here's a post from last July:
They are the largest developer of renewables and they are the largest developer of nuclear and they are
the largest developer of coal and will be the largest developer of
natural gas if they can steal a bit of Japan's cutting edge technology
for extracting methane clathrates or American fracking tech.
From Xinhua's twitter feed, a fancy piece of engineering:
Stunning aerial view of China's longest coal transport route, a heavy-loaded #railway scheduled to be completed later this year pic.twitter.com/KHd9DyUohw
November 9, 2019 The 1918 Parade That Spread Death in Philadelphia
In six weeks, 12,000 were dead of influenza.
The influenza pandemic of 1918-19 killed between 50 and 100 million people around the world, more than died in the battles of World War I.
In the United States, the hardest-hit city was Philadelphia, where the
spread of the disease was spurred by what was meant to be a joyous
event: a parade.
Writing in PennsylvaniaHistory: A Journal of Mid-Atlantic Studies,
the historian Thomas Wirth explains what happened: “On September 28,
despite the increased infiltration of the disease among the civilian
population, a rally for the Fourth Liberty Loan Drive proceeded with minimal debate about the repercussions for public health.” The head of Philadelphia’s Naval Hospital told the Public Ledger
in the days before the parade: “There is no cause for further alarm. We
believe we have it well in hand.” So, the parade went forward. “In the
streets of downtown Philadelphia 200,000 people gathered to celebrate an
impending allied victory in World War I. Within a week of the rally an
estimated 45,000 Philadelphians were afflicted with influenza.”
While frequently called Spanish flu, the disease did not originate in
Spain. Rather, the country’s wartime neutrality contributed to higher
reports of its escalation in its newspapers. Exactly where and when it
started in 1918 is still under speculation. But by the fall of that year, it had arrived in Philadelphia.
“At first, Philadelphia’s epidemic did not differ from that in other
major American cities,” the historian James Higgins writes in Pennsylvania Legacies. “Yet by the first week of October, roughly five weeks into the outbreak, Philadelphia’s mortality rate accelerated in a climb unmatched by any city
in the nation—perhaps by any major city in the world.” And that spike
is attributed to the patriotic event, one of several Liberty Loan
rallies organized in Philadelphia to raise money for the war. This time
it was joined by a baneful guest: “The virus, an invisible presence at
the parade, had enjoyed an unprecedented opportunity to spread
throughout the city and in the coming days announced its presence in a
skyrocketing wave of sickness and death.”
Soon hospitals were at capacity, as were the morgues and cemeteries. In a study published in 2009 in the Proceedings of the National Academy of Sciences
on the incidence curves of the 1918 epidemic in Philadelphia,
researchers note that, 72 hours following the parade, all the beds in
the city’s 31 hospitals were filled and by “the evening of October 3,
the closure of schools, churches, and places of public amusement was
adopted by the Philadelphia city council.”
In six weeks, 12,000 were dead. The smell of bodies left to rot in
homes while they waited to be removed permeated the streets. The spread
of the virus was exacerbated by existing conditions in the city: a
booming population drawn by the wartime industries, a density of
housing, and a lack of sanitation services and safe drinking water in
these working-class neighborhoods....
I've mentioned over the years that we like business journalists. We get some of our best ideas from them.
Here's one from FT Alphaville's Jemima Kelly that stood out enough that we headlined it:
I haven't paid as much attention to fintech as maybe I should have.
For our purposes it started dropping off the radar a couple years ago
when it seemed every little wannabe entrepreneur had dispensed with
making the case for what they were doing and how their
product/idea/dream would help the end user and those said wannabe
entrepreneurs would cut directly to the chase:
"Just give us some money"
We'll get to a couple of the headline takeaways but first here's the FT's Jemima Kelly to give us the lay of the land:
This year, it has felt like hardly a week has passed without some
fintech declaring nonchalantly that it’s raised another few hundred
million pounds.
On Monday, it was the turn of a little-known (to
us anyway) start-up called Hastee, which gives employees access to their
pay as they earn it. It announced that it had raised £208m in its latest funding round.
Challenger bank Revolut, meanwhile, is in the process of trying to raise $500m in equity and $1bn via a convertible loan from investors, in a fundraise that could value the company at as much as $10bn.
This comes despite the fact that, like many fintechs, the company has
never been profitable (apart from a brief period in early 2018 during
peak crypto-mania, when Revolut launched crypto trading).
So we must be in the midst of peak fintech-mania, right?
Actually,
possibly not. Take a look at this chart, from Ian Green, principal
consultant for data and technology at The Disruption House, a firm that
provides benchmarking and data analytics to the financial sector:
The chart shows that after a huge increase in the number of fintech
start-ups founded between 2004 and 2015, there has since been a rapid
decline: from 390 in 2015 to just 71 in 2018....
The fact the bubble was in the number of start-ups rather than
price-in-the-public-markets means we may have extended the length of the
overall bull market.
Just as all the trade talk sturm und drang dramatically slowed the rate
of ascent of the wider market over the last couple years:
Well, it didn't completely cut the "top off of extinction event cliff-edge waveforms"now did it. My bad.
I may have been optimistic but the thing that really stood out and the reason I went back to check my memory was the amazing resemblance of that very same cliff edge in both the chart in Jemima's piece and the subsequent chart of the Dow Industrials.
However, and this is the takeaway, after the S&P 500 crossed through the 3300 figure that we had been touting for a few years—first achieved January 16, 2020, we pulled way back on the equity stuff—both in real life and here on the blog, and I'm thinking the fact that a leading group like fintechs had fallen out of favor was part of the background picture, subconscious or as some might say, unconscious, but there nonetheless, because a journo decided to hit "Publish" back in December.
As coronavirus ravages his native New York, media mogul David Geffen
observes a sunset from his $400 million superyacht: ‘I’m hoping
everybody is staying safe’
If ever there were doubts about how the superaffluent are faring amid a
pandemic for the ages, media mogul David Geffen wants to make it
abundantly clear that, for his part, he’s doing just fine — and he
wishes us all the best
Geffen, whose net worth is estimated at $7.5 billion, according to Forbes, tweeted a number of images of his resplendent $400 million superyacht, Rising Sun,
apparently adrift off the coast of the Grenadines, a chain of small
Caribbean islands in the lesser Antilles, about 2,085 miles south of New
York, which has emerged as the epicenter of the U.S. coronavirus
outbreak....MORE
Not "from" his superyacht, overlooking his superyacht.
My first guess was from his helicopter but the water doesn't look ruffled-up enough so probably from shore on one of the islands.
Since it came to light that Edge.org was close enough to Jeffrey Epstein that there was no way they didn't know he was raping underage girls we haven't linked to what had been a sometimes interesting, sometimes pretentious intellectual hangout. It is, simply put, bad for you to associate in any way with people who condone this behavior.
So, if you are not in a position to put a stop to this kind of thing the very least you should do, simply for your own sake, is to avoid the enablers at all costs.
This is the case for the political crowd that hung out on pedo island, this is the case for the Rotherham authorities and this is the case for the Hollywood crowd that covered for Weinstein.
They all knew and if you have any association with those people it is just bad for you.
As the young people say: bad juju.
But I wanted to revisit the author of this piece for his thoughts on complexity as a set up for some posts on complexity risk next week. What to do?
That is what the Wayback Machine is for. I'll do something that is probably bad karma in its own right, link to the internet archive rather than give Edge.org the click.
Ha! You can justify pretty much anything you do if you think hard enough, just ask 90% of the people in prison. So without further ado, a repost from August 2018:
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.
From Edge.org:
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.
***
COLLECTIVE AWARENESS
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....
A provocative new view of international relations
puts global networks – and how they can be weaponized – at its center.
What’s the future of regulation in this new landscape?
Students
of international relations tend to focus on nations as separate
entities with sovereignty, borders, economies. They examine the formal
and informal institutions through which they cooperate, compete and
coerce. The power of states to regulate in areas such as commerce and
immigration is a key subject of interest.
Globalization
wrought an irrevocable shift. Markets were liberated and made more
efficient. Mutual advantages were mined from deep interconnectedness.
The stakes of sovereignty and the effectiveness of coercive force
seemingly were diminished. And yet, researchers largely continued to
interpret these explosive effects within inherited conceptual
architectures.
Scholars
Henry Farrell and Abraham Newman now argue that globalization has
created a much different world than its proponents and detractors have
trumpeted. The new pathways of connection forged in recent decades are
lopsided, extending vast powers of surveillance and coercion over
markets and security to a few countries that control key strategic
positions within these networks.
"The debate we see at the moment is never going to be about trade and open markets in the same kind of way anymore."
The
newly-developed asymmetric information and financial networks yield
what the authors call “panopticon” and “chokepoint” effects. The
“weaponization” of these networks promises – at minimum – to transform
traditional notions of statecraft, the role of corporations in national
security, and the global projection of hard and soft power.
Farrell
and Newman’s paper closely examined the immense power wielded by the
United States in areas such as global payment systems and web traffic.
But among the piece’s most thought-provoking conclusions was that this
power would not go unchallenged.
"The
United States and its allies find themselves in a new and uncertain
world,” write Farrell and Newman, “where rival powers and adversaries
are seeking to insulate themselves from global networks, or perhaps over
the long run to displace these networks."
“There’s a lot that’s been happening in the world economy,” says Farrell in an interview with the WQ.
“So that people have been able to figure out that there's a ‘there
there,’ but not be able to put a name on it. So I think that we – for
better or worse – turned out to be some of the very early people to try
to put a name on it – and try and identify it.”
Farrell and Newman have extended their arguments in broader venues such as Foreign Affairs and Harvard Business Review.
In mid-March, as the coronavirus pandemic swept from outbreaks in China
and Italy and into the United States and many other nations throughout
the world, they examined the sweeping implications of the pandemic for
supply chain networks in Foreign Affairs:
As
policymakers around the world struggle to deal with the new coronavirus
and its aftermath, they will have to confront the fact that the global
economy doesn’t work as they thought it did. Globalization calls for an
ever-increasing specialization of labor across countries, a model that
creates extraordinary efficiencies but also extraordinary
vulnerabilities. Shocks such as the COVID-19 pandemic reveal these
vulnerabilities.
“We are starting to think about fragility in the supply chain system,” says Newman to the WQ.
“You do see that in the pharmaceutical industry with India, but they’re
not weaponizing that to a strategic end. You just notice that these
supply chains that everybody thought were redundant are not redundant.”
Bigger Isn’t Stronger
Farrell
and Newman’s work also has implications for how we evaluate the
efficacy of state regulation. Even if they take a roundabout to get
there.
“We’re
proceeding from a direction I think is orthogonal to most of the
regulation literature,” says Farrell, “because that literature has been
primarily a literature about markets and the best ways to achieve
various kinds of policy outcomes…. Rather than thinking about regulation
and how it might lead to a different way of thinking about
interdependence, we instead started with network structure and start
thinking about interdependence from that perspective – which has all of
these interesting consequences for regulation.
“When
you start thinking about the world through this perspective, you really
begin to think that a lot of the standard arguments about regulation
and the benefits or lack of benefits are basically kind of misconceived
-- or miss the point of how regulations will emerge or work – for better
or for worse – in the future.”
A
key element in their research is a rejection of the notion that
globalization diffuses or democratizes power evenly – or, in many cases,
at all. “A country's ability to leverage these new tools is very much
dependent on the institutions that oversee markets,” says Newman. “It’s
not just about having a big market. China has a big market. Japan has a
big market. But in many areas, they do not have the leverage over the
global economic networks that the U.S. does. A lot relies on what we
would call regulatory capacity – the ability to monitor, defend, define,
and sanction a set of political objectives that you have.”
The International Security
paper fastened tightly on the advantages that the U.S. and other
industrialized economies possess in a world of asymmetric networks. Edward Snowden’s revelations in 2013
revealed that the U.S. has a window into global web communications that
makes the authors’ choice of the panopticon apt. The paper also
explored how the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system has become another key chokepoint in global networks that is controlled by the U.S. and key European allies.
“There
aren't that many countries aside from the United States and Europe that
really have access to those key chokepoints in the networks,” says
Newman. “China is doing it in the 5G debate. That's what the 5G debate
is all about. They are encroaching. Can they establish the next hub? I
don't think either Russia or India play that role.”....
Although many people have hailed Ben Bernanke’s response to
the current financial crisis for going outside of the box and using
unorthodox policies to avoid a financial collapse, in reality, similar
policies were used by Tiberius during the Financial Crisis of 33 AD,
almost 2000 years ago.
Tiberius ruled the Roman Empire from 14 AD to 37 AD. He was frugal in
his expenditures, and consequently, he never raised taxes during his
reign. When Cappadocia became a province, Tiberius was even able to
lower Roman taxes. His frugality also allowed him to be liberal in
helping the provinces when, for example, a massive earthquake destroyed
many of the famous cities of Asia, or when a financial panic struck the
Roman Empire in 33 AD.
As with many financial panics, this one began when
unexpected events in one part of the Roman world spread to the rest of
the Empire. To quote Otto Lightner from his History of Business
Depressions, “The important firm of Seuthes and Son, of Alexandria, was
facing difficulties because of the loss of three richly laden ships in a
Red Sea storm, followed by a fall in the value of ostrich feather and
ivory. About the same time the great house of Malchus and Co. of Tyre
with branches at Antioch and Ephesus, suddenly became bankrupt as a
result of a strike among their Phoenician workmen and the embezzlements
of a freedman manager. These failures affected the Roman banking house,
Quintus Maximus and Lucious Vibo. A run commenced on their bank and
spread to other banking houses that were said to be involved,
particularly Brothers Pittius.
“The Via Sacra was the Wall Street of Rome and this thoroughfare was
teeming with excited merchants. These two firms looked to other bankers
for aid, as is done today. Unfortunately, rebellion had occurred among
the semi civilized people of North Gaul, where a great deal of Roman
capital had been invested, and a moratorium had been declared by the
governments on account of the distributed conditions. Other bankers,
fearing the suspended conditions, refused to aid the first two houses
and this augmented the crisis.”
At the same time, agriculture had been on the decline for several years,
and Tiberius required that one-third of every senator’s fortune be
invested in Italian land. The senators had 18 months to make this
adjustment, but by the time the period was up, many senators had failed
to make the proper adjustment. This deadline occurred at the same time
as the events above occurred, placing a further squeeze on the financial
sector.
When Publius Spencer, a wealthy noblemen, requested 30 million sesterces
from his banker Balbus Ollius, the firm was unable to fulfill his
request and closed its doors. Over the next few days, prominent banks
in Corinth, Carthage, Lyons and Byzantium announced they had to
“rearrange their accounts,” i.e. they had failed. This led to a bank
panic and the closure of several banks along the Via Sacra in Rome. The
confluence of these seemingly unrelated events led to a financial
panic.
To protect themselves, banks began calling in some of their loans. When
debtors could not meet the demands of their creditors, they were forced
to sell their homes and possessions, and with money unavailable even at
the legal limit of 12%, prices of real estate and other goods collapsed
since there were so few buyers. A full scale panic followed. The panic
occurred not only in Rome, but throughout the Empire. If anyone thinks
that it is only in recent times that financial markets have been so
fully integrated that the failure of the Creditanstalt in 1931 or Lehman
in 2008 could precipitate a panic, they clearly have not read their
history. By their nature, financial markets have always been
integrated, and failure in one part can create the domino effect which
created the Great Depression and was witnessed in 2008....
(2020-03-27) — The British public awakened this morning shocked to
see the devastating impact of COVID-19 on Prime Minister Boris Johnson
who just tested positive for the novel Coronavirus....MORE
The bloodstained leveller Throughout history, plagues and wars have left greater equality in their wake. Can we get there again without violence?
Blame inequality on climate change. Until the end of the last Ice
Age, some 12,000 years ago, our ancestors lived in small foraging
groups. They moved around a lot, owned very little, and passed on even
less to the next generation, sharing any windfalls on the spot. The
Holocene changed all that. Rising temperatures allowed humans to settle
down to farm the land and domesticate livestock; collective management
of resources gave way to private property rights, and new norms made
assets hereditary. Over time, the cumulative rewards of brain, brawn and
luck came to separate the haves from the have-nots.
This process
of stratification was reinforced by the creation of states, as political
power and military muscle aided the acquisition and preservation of
fortunes and privilege: more than 3,000 years ago, the ancient
Babylonians were well aware that ‘the king is the one at whose side
wealth walks’. With the emergence of mighty empires, and as slow but
steady increases in the stock of knowledge expanded economic output, the
concentration of income and wealth reached previously unimaginable
heights.
The principal sources of inequality have changed over
time. Whereas feudal lords exploited downtrodden peasants by force and
fiat, the entrepreneurs of early modern Europe relied on capital
investment and market exchange to reap profits from commerce and
finance. Yet overall outcomes remained the same: from Pharaonic Egypt to
the Industrial Revolution, both state power and economic development
generally served to widen the gap between rich and poor: both archaic
forms of predation and coercion and modern market economies yielded
unequal gains.
Does this mean that history has always moved in the
same direction, that inequality has been going up continuously since
the dawn of civilisation? A cursory look around us makes it clear that
this cannot possibly be true, otherwise there would be no broad middle
class or thriving consumer culture, and everything worth having might
now be owned by a handful of trillionaires. Did democracy and
progressive reform save us from this unenviable fate; or was it the
labour movement, or mass education? All of these developments played an
important role, and yet, at best, furnish only part of the answer. For
inequality had already dipped steeply on several occasions, long before
any of these modern breakthroughs had begun to appear.
From time
to time, it turns out, history has pushed a reset button, driving down
inequality in marked, if only temporary fashion. It is only by surveying
its full sweep, over thousands of years, that we can discover the
dynamics that drove this process. And these dynamics turn out to be very
disturbing indeed: every time the gap between rich and poor shrank
substantially, it did so because of traumatic, often extremely violent
shocks to the established order. Catastrophic plagues, the collapse of
states and, more recently, mass-mobilisation war and transformative
revolution, are the only forces that ever levelled on a grand scale. No
other – and less bloody – mechanisms have even come close. In a time of
rising inequality, what does this imply for our own future?
But let us start at the beginning, in
the very distant past. Europe is by far the best-documented case (see
Figure 1 below). Economic inequalities emerged as farming spread from
the Middle East around 9,000 years ago, and grew as the land filled up
and small communities coalesced into larger societies. Archaeologists
have discovered enough elite burial sites with luxury goods that had
been manufactured for the privileged few and traded over long distances
to support this reconstruction. The Roman empire was the culmination of
this very drawn-out process. To the present day, no one state has come
as close to monopolising political power in Europe as Rome did: for
centuries, as many as four out of every five Europeans were ruled by the
Caesars.
Figure 1: Inequality trends in Europe (all graphs from Walter Scheidel, The Great Leveller)
Wealth concentration at the very top far outpaced the growth of the
economy: between 200 BCE and 100 CE, the largest reported fortunes of
Roman plutocrats rose by close to a hundredfold while the population of
the empire went up merely tenfold. Some aristocrats owned thousands of
slaves, more than even the biggest planters of the antebellum South. In
terms of personal net wealth, the richest among them were as remote from
the common man as Bill Gates is from the average American today. By
some measures, this trend continued all the way up to the fall of the
Roman empire, as private palaces replaced mansions, and estates
swallowed up entire towns and villages.
Until it all fell apart.
In the 5th century CE, a terrifying array of disasters – internal
strife, barbarian invasions, climate change – brought down the western
half of the empire. The vast fortunes of the super-rich (early
globalisers who owned property and invested capital all over the
Mediterranean) vanished. To make matters worse, 100 years later bubonic
plague first entered Europe, a raging pandemic that carried off a large
share of its population. The disease killed so many workers that the
price of labour soared, while that of land, now abundant and bereft of
cultivators, plummeted, leaving the masses better off and landlords
poorer. In Constantinople, the Byzantine emperor Justinian tried in vain
to hold down wages by government decree. Papyrus documents from nearby
Egypt show that the real incomes of ordinary farm hands rose by 150 per
cent. A millennium of raging Roman inequality was undone in prolonged
agony and dislocation, a period somewhat unfashionably but not entirely
misleadingly known as the Dark Ages....
First posted in February 2017.
From Inverse, February 15: Income Inequality Is Likely Here to Stay Author Walter Scheidel explains why it's so hard to level the playing field.
Scheidel says that’s because violence is the only force in history that has truly managed to liberate wealth
from the upper stratum of society. He frames his historical analysis of
trends in inequality around what he calls the Four Horsemen:
“mass-mobilization warfare, transformative revolutions, state collapse,
and catastrophic plagues.” Only these “shocks” have the transformative
power required to reduce inequality. It’s a grim, grisly prospect, one
that raises more questions than it answers about how to move forward.
Inverse talked with Professor Scheidel about just that: the inequality of the past and what it means for the solutions of the future.
Your idea of the “Four Horsemen” — will those always look the same going forward?
Well
so much has changed over time. State collapse and plagues, they’re not
currently on the table. States are much more resilient now, very
difficult to dislodge unless you’re in Sub-Saharan Africa or the Middle
East. We’re not going to have another Black Death … probably. Even the
others don’t currently apply, right? There is no Communist Revolution on
the horizon and if there’s another war, it’s not going to be a mass
mobilization war with millions of people in trenches. In a sense,
history is over. That raises a very big question about future mechanisms
of equalization. Nobody wants the old ones to come back, but are there
others that are equally powerful? If they exist, they didn’t occur in
history. It doesn’t mean we can’t one day discover them or design them.
Do you think something like state collapse
would take on a new form? Might we define it differently than we would
have previously?
Maybe. But if you
think of some lower degree of disturbance, it doesn’t seem to be enough
to have an effect on inequality. The overall state as an institution is
not going to go away. You could say that in the next few decades there
will be more violence or violent dissent, but that’s not going to bring
down the state, wholesale, in the West.
Do you think advancements in technology would be something that add to inequality?
Yeah.
You can think in particular of genetics. That would be both within
societies and between societies. It’s no longer totally futuristic. If
you can have designer babies and you have to pay for it, that may be
available only to a certain group, a particular class in a country or
one country rather than another. That could create inequalities like
we’ve never seen before. Now, we are still all “people,” but that could
change....MORE
Warning: Do Not Self Medicate (or immolate).*
From the New York Post:
A local Florida politician has apologized for telling a public meeting that blowing a hairdryer up your nose can cure the coronavirus.
Okeechobee County Commissioner Bryant Culpepper bragged about his
background as a paramedic as he hailed the madcap “cure” that he saw
“one of the foremost doctors who has studied the coronavirus” reveal on
cable TV.
“This sounds really goofy — and it did to me too — but it works,” he
told Friday’s meeting of his commission, as caught on video.
“The answer was you use a blow dryer. You hold a blow dryer up to
your face and you inhale with your nose and it kills all the viruses in
your nose,” he insisted....MORE
*Don't be like the Arizona man who drank the chloroquine phosphate and died.
"He has a name you know."
"What is it?"
"Aquarium cleaner guy"
—actual conversation
....To the wider market, and Wuhan’s got us all in check. Nearly everything (except the Malaysian latex glove sector) is down after the advance of the coronavirus,
or 2019-nCoV, failed to slow through an extended Chinese New Year. The
outbreak has reached “a grave and complicated stage”, Beijing officials
said at a presser on Sunday. Most worryingly the virus appears to be
contagious during the incubation period, when there are no visible
symptoms, which means the Sars comparisons we’ve been using over the
past few weeks may be optimistic.
To which our interlocutor, a Malaysian gentleman of Chinese extraction responded, also casually, yet proudly:
"Malaysia is also home to the largest condom manufacturer in the world."
Which prompted first the quick-on-the-uptake "Saaaay" reaction and then the placement of an order that (hopefully) may have raised some eyebrows at our favorite purveyor.
And today's story from Reuters:
A global shortage of condoms is looming, the world’s biggest producer
said, after a coronavirus lockdown forced it to shut down production.
Malaysia’s Karex Bhd (KARE.KL)
makes one in every five condoms globally. It has not produced a single
condom from its three Malaysian factories in the past 10 days due to a
lockdown imposed by the government to halt the spread of the virus.
That’s
already a shortfall of 100 million condoms, normally marketed
internationally by brands such as Durex, supplied to state healthcare
systems such as Britain’s NHS or distributed by aid programs such as the
UN Population Fund.
“We are going to see a global shortage of
condoms everywhere, which is going to be scary,” Karex Chief Executive
Goh Miah Kiat told Reuters this week.
“My concern is
that for a lot of humanitarian programs deep down in Africa, the
shortage will not just be two weeks or a month. That shortage can run
into months.”
Malaysia is Southeast Asia’s worst affected
country, with 2,161 coronavirus infections and 26 deaths. The lockdown
is due to remain in place at least until April 14....
“Students at the New York
University Tisch School of the Arts want some of their tuition money
back because they say virtual classes aren’t what they paid for — but
instead of addressing the situation, the school’s dean sent them a video of herself dancing to REM’s ‘Losing My Religion.’”....
One positive, one troubling.
The City of New York publishes various statistics each day including new cases, location (which borough) age, sex and other demographics and number of hospitalizations.
First the good news.
The number of new cases appears to be slowing.
Reporting date, 8:30 am each day:
4414 on March 25
3101 on March 26
2461 on March 27
And the troubling news.
Through Thursday at 5pm there have been 4720 hospitalizations.
Bad enough on its own but when combined with the reports of hospitals being overwhelmed you have to ask, what if something really, really big happened?
New York is one of the top two or three terrorism targets in the United States. How would the system respond if there were say 25,000 bioterrorism or biochemical terrorism victims in one day?
Or even 10,000?
After the world gets through all this there will be a need for people a lot smarter than I to figure out what lessons we have been given and what we should learn.
with all the hoo-haw in equities yesterday we decided to put off posting the storage report until this morning.
First up, the estimates going into the report via FX Empire:
Ahead of the report, a Bloomberg survey showed a median prediction for a
30 Bcf withdrawal, while a Wall Street Journal poll showed an average
estimate of minus 27 Bcf. A Reuters survey landed on a 25 Bcf
withdrawal, matching the 25 Bcf pull predicted by Natural Gas
Intelligence’s model. Estimates ranged from minus 14 Bcf to minus 36
Bcf.
And from the EIA: Weekly Natural Gas Storage Report for week ending March 20, 2020
|
Released: March 26, 2020 at 10:30 a.m
Summary
Working gas in storage was 2,005 Bcf as of Friday, March 20, 2020, according to EIA estimates.
This represents a net decrease of 29 Bcf from the previous week. Stocks were 888 Bcf higher than last year at this time and 292 Bcf above the five-year average of 1,713 Bcf.
At 2,005 Bcf, total working gas is within the five-year historical range....MORE
And the reaction in the futures from the CME:
Soon to be front-month May's 1.666 down 0.023 today.
Overview: Officials appear to have persuaded investors that they have put into place measures that will cushion the economic blow and ensure that the financial system continues to function. After seemingly goading officials into action, investors are choosing not to resist. Moreover, there is a recognition that many programs are scalable.
Risk assets dipped initially yesterday and came roaring back. Good follow-through buying was seen in the Asia Pacific region. Australia and Taiwan were exceptions to the general move. Australia's benchmark had begun off with around 2% gains before slumping and finished off more than 5%. European bourses are paring this week's gains.
The Dow Jones Stoxx 600 is down 2%, leaving it up around 6.8% on the week. The benchmark fell 2% last week. US shares are also more than 2% lower after the S&P 500 staged its biggest three-day advance in nearly a century. It was up 14% for the week coming into today after tumbling 15% last week. Core bond yields are softer in Europe by 2-3 bp, though the peripheral yields are a bit firmer after the ECB-induced decline that saw Greek bonds bought by officials and yields are off 90 bp this week. Italy, Spain, and Portugal's 10-year yields are off 20-30 bp this week.
The 10-year US Treasury yield is flat for the week with today's seven basis point decline (to 78 bp). The dollar is paring this week's decline. It is firmer today against all the major currencies, but the Japanese yen. The Norwegian krone is the strongest currency this week, recouping 11%, even after today 1.2% pullback. None of the major currencies rose less than 1.75% against the dollar this week. JP Morgan's Emerging Market Currency Index is off about 0.5% today, but it snapping a five-week 11%+ slide with a 1.8% advance. Gold is trimming this week's gains a bit, but its 8% rise is its largest weekly advance since 2008. Light sweet oil for May delivery is flat on the week coming into today, having given up the week's gains with a 7.8% slide yesterday.
Asia Pacific With the help of US swap lines, the three-month cross-currency basis dollar-yen swaps snapped a nine-week drop and halved the dollar premium to about 41 bp this week, which is near the 200-day moving average. The dollar had stalled through mid-week near JPY111.60 before pulling back yesterday and today, reaching a six-day low today near JPY108.25. The surge in the yen is seen as a function of fiscal year-end related flows.
India's central bank slashed the repo rate by 75 bp (to 4.40%) and cut the reverse repo rate by 90 bp (to 4.0%) ahead of next week's meeting. It cut rates five times last year, and this is the first cut this year. Required reserves were cut by 100 bp (to 3%). The move reflects an escalation of India's response to the crisis in which the country has been shut down. Yesterday, the government unveiled near measures of support worth an estimated INR1.7 trillion. The central bank estimates that its liquidity provision since last month's review is worth about 3.2% of GDP.....
Finnish technology group Wärtsilä has started testing ammonia as a
potential fuel to help the shipping industry reduce its greenhouse gas
emissions.
“The first tests have yielded promising results and we will continue
to optimise combustion parameters,” said Kaj Portin, General Manager,
Fuel & Operational Flexibility, Wärtsilä Marine. “This is an
important step in making sure that Wärtsilä can provide the engine and
fuel systems that ship owners need, whichever fuel they choose in the
future.”
As part of the tests, ammonia was injected into a combustion research
unit to better understand its properties. Based on initial results, the
tests will continue on both dual-fuel and spark-ignited gas engines,
followed by field tests in collaboration with shipowners from 2022, says
Wärtsilä. Tests may also be carried out with energy customers in the
future.
The use of ammonia has emerged as a possible carbon-free alternative
fuel as the shipping industry seeks ways to meet with International
Maritime Organization’s long-term goal of cutting greenhouse gas
emissions from ships by 50% from 2008 levels by 2050. Although ammonia
is derived mainly from fossil sources today, down the road ammonia’s
greenhouse gas footprint can be nearly eliminated if it is produced
using electricity from renewable sources.
Wärtsilä is aiming to develop a complete ammonia fuel solution that comprises engines, fuel supply and storage....
See: Feb. 2019 Shipping: "UK Department of Transport recommends launch of ammonia / hydrogen powered vessels within 5-15 years" Ammonia, it's what everyone is talking about.
And if your crowd isn't, you'll be the best-informed next-gen energy
storage/transport-medium connoisseur at the Thursday afternoon salon! Feb. 2019 Electricity: Here Come The Big Batteries This is a very tricky time for end users weighing their options for long-lived energy storage infrastructure.
This article focuses on lithium ion batteries but there are a couple
other battery technologies that work for large scale uses that don't
work for vehicle applications, see links below.
Additionally the use of ammonia (for the hydrogen) as an energy storage
medium is being persued by some very big players, Yara, Siemens, and the
U.S. ARPA-E researchers to name just three.
And as Australia is finding out with their giant Tesla lithium battery,
the things don't work so well in extreme heat. Ditto for extreme cold as
the owners of electric vehicles found during the recent polar vortex
experience....
And many, many more.
Use the 'search blog' box if interested.
On
Thursday, Goldman’s commodities research team, headed by Damien
Courvalin, offered some further insight into the issue and the
inflationary pressures that are likely to come about as a result.
Here are the key pars from their report, with our emphasis:
Global
isolation measures are leading to an unprecedented collapse in oil
demand which we now forecast will fall by 10.5 mb/d in March and by 18.7
mb/d in April (our 2020 yoy demand forecast is now -4.25 mb/d). A
demand shock of this magnitude will overwhelm any supply response
including any potential core-OPEC output freeze or cut.
Such a
collapse in demand will be an unprecedented shock for the global
refining system with margins simply not low enough given the required
level of run cuts. Product storage saturation at refineries is therefore
set to occur over the next several weeks. At that point, the product
surplus will become a crude one and we expect its unprecedented velocity
will create similar logistical crude storage constraints. This is the point at which crude prices will fall below cash-costs to reflect producers having to shut-in production.
While seaborne crudes like Brent can remain near $20/bbl in 2Q, many
inland crude benchmarks where saturation will prove binding are likely
to fall much further (US, Canada, Russia, China).....
While most analysts see prolonged pain for oil prices, one forecasts a rebound for another energy commodity -- natural gas.
Goldman Sachs analyst Samantha Dart sees prices doubling by
next winter, which could make natural gas stocks a more attractive
investment than oil producers.
Natural gas prices had fallen to multiyear lows even before the coronavirus hit the U.S. economy.
Prices have sunk even further since as demand has dried up. Exports of
liquefied natural gas, a major growth driver for the industry, have been
falling, and other industrial uses will be hurt by the weak economy.
Natural gas futures were trading up about 2%, to $1.64 per million
British thermal units, on Tuesday, after falling to their lowest level
since 1995 on Monday.
Electricity use, another major driver of natural gas demand, is
also dwindling as offices throughout the country have emptied of
workers.
“U.S. electricity demand is beginning to rapidly decline due to
coronavirus-related containment measures,” Andy Weissman, CEO of EBW
AnalyticsGroup, wrote in a daily update on the industry Tuesday.
“Wholesale markets like [regional transmission organization] PJM have
already observed meaningful reductions in peak and around-the-clock
demand. Lower demand is translating into weaker power pricing,
negatively impacting revenues for gas- and coal-fired resources and
denting the independent generation sector’s credit outlook.”
But there is a silver lining for the industry in all this
misery. Natural gas prices have been depressed in the past couple of
years because of an enormous supply glut. Oil drillers in places like
Texas produce gas while they drill for oil, and that “associated gas”
has flooded the market, even causing prices to briefly fall below $0
last year at one pipeline.
Oil producers are now preparing to sharply decrease production
in response to a decline in oil prices, which means a lot of that
“associated gas” will disappear. By next year, prices could snap back,
Goldman’s Dart says....
Ha!
That crash positions post is timestamped 2:08 PM PDT, Sunday March 8
i.e. before the futures started trading on Henry Hub natty and the fact
the opportunity was still there very early Monday morning led the
computers (and yours truly) to question whether it was just a mirage.
See The Big Apple for many refs and cites of this old chestnut:
The efficient market hypothesis (EMH) assumes such efficiency that it
has led to a popular economics joke. Two economists are walking down the
street and one of them notices what appears to be a $20 bill (or a $100
bill—the monetary amounts vary) on the sidewalk. “It’s not a real $20
bill,” the other economist declares. “If it were a real $20 bill,
someone would have picked it up off the sidewalk already.”
In the case of the natural gas example the market wasn't rational and
the futures went from $1.61 to $1.99 in three days. At $100 per penny on
your $1450 initial margin for outrights.
As the retail guys say "And Mr. Bigg, if you annualize that...."
A sawtooth wave represented by a successively larger sum of trigonometric terms and smoothing via Brilliant.org
See: