Monday, February 17, 2020

Apple Says It Does Not Expect To Meet the Revenue Guidance For the March Quarter Because of the Coronavirus Outbreak" (AAPL)

From Apple:

Investor update on quarterly guidance 
Cupertino, California — February 17, 2020 — As the public health response to COVID-19 continues, our thoughts remain with the communities and individuals most deeply affected by the disease, and with those working around the clock to contain its spread and to treat the ill. Apple is more than doubling our previously announced donation to support this historic public health effort.  
Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.
The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province — and while all of these facilities have reopened — they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide. 
The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout. 
Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations....MORE
Headline from and HT to: SlashDot

What Electronics Companies Are Saying About Wuhan Coronavirus Impacts

From EE Times:

The coronavirus epidemic is likely to have a negative impact on general markets, especially consumer markets. Global GDP is going to take at least a minor hit.

The coronavirus outbreak in China is already affecting electronics industry business. A new analysis published by IDC predicts a drop in smartphone sales in China of more than 30% in the January-March quarter. Canalys Researchers estimated that “Technology vendors are likely to pause marketing activities; they are unlikely to focus on launching new products, including 5G devices. “It will take vendors time to change their roadmap for product launches in China, and this will probably decrease the number of 5G smartphones distributed in 2020.

S&P Global has estimated the impact of the coronavirus epidemic on the global economy. “The speed and spread in the last two months pose a risk to the global economy and credit,” said the rating agency, which estimates that the slowdown in China, whose gross domestic product (GDP) forecast has been reduced from 5.7 to 5 percent, will impact 0.3 percent of global gross domestic product in 2020.

In an attempt to contain the epidemic, the Beijing government has extended the Chinese New Year holidays, leaving offices and factories closed for longer. But these measures, combined with quarantines, are having an impact on the global supply chain as most companies around the world manufacture in China or buy components manufactured in the Asian country.

For manufacturing industries, many companies are reopening selectively after performing a targeted health check where the workplace could be a risk of virus spread. The company must comply with a series of instructions established by the government: in particular, they must dedicate a corporate quarantine area of people for every need.

Not least, the cancellation of the Mobile World Congress. The GSMA released the following statement: “With due regard to the safe and healthy environment in Barcelona and the host country today, the GSMA has canceled MWC Barcelona 2020 because the global concern regarding the coronavirus outbreak, travel concern and other circumstances, make it impossible for the GSMA to hold the event.”

Semicon Korea and Semicon China had already been canceled. ISSCC, being held here this week, is relatively unaffected, though a handful of presenters were unable to attend due to travel restrictions.

What the companies say
I reached out to some companies to get their comments and how they are dealing with this epidemic. “We haven’t seen any tangible impact from the Coronavirus on our supply chain,” said Fabio Violante, Arduino’s CEO. “Like the majority of companies in the electronics world,” Fabio continued, “we depend on components that, in many cases, are supplied by Chinese factories, hence we may expect some shortages in the future. We have received some advisory notes from distributors in the supply chain about potential minor slowdowns in supply, but we believe they will not substantially affect our ability to deliver. We will continue monitoring the situation and we are putting in place providing some countermeasures to mitigate the effects.”

Infineon maintains a sales office in Wuhan, where business activities are reduced to a minimum.
“Currently, we are not aware of any infections among Infineon employees. If symptoms should occur, employees are advised to stay at home and contact our medical service for further assistance,” an Infineon spokesman said.

“Infineon is closely following the development of corona infections,” he continued, “especially in the Hubei region of China. The safety of our employees and business partners is our top priority. Infineon, therefore has comprehensive guidelines regulating travel to and from the affected regions.”
“Infineon does not own production facility or a production partner in the Hubei province. Where restrictions by the authorities and airfreight limitations may have an impact to our supply chain and may result in delays of deliveries, we will be in contact with affected customers to mitigate any impacts,” the spokesman concluded.

EPC is the leading provider of gallium nitride (GaN)-based power management technology and is doing more than just improving the efficiency of electrical power.

Alex Lidow, CEO at EPC, said “The markets have considerably slowed down in China.  The Chinese New Year holiday was extended a full week, and supply chains are disrupted.  We are all hopeful for a quick ending of all the dangers and quarantines, but nobody is willing to make a prediction.“....

Presidents' Day JibJab Style

Although not originally created for a holiday in mid-February both of these JibJab creations are worth remembering.
First up, President's do the Star Spangled Banner:

note: there are two versions of this piece, the above and a later one that includes President Obama. Unfortunately the sound quality of the latter sucks (it isn't directly from JibJab)
And from a simpler time (2004), Woody Guthrie's This Land Is Your Land:

Unilever (Ben & Jerry's, Breyers etc.) To Stop Marketing Ice Cream To Kids

From Fortune:
Major ice cream makers vow to stop marketing to kids
Ice cream might be the favorite treat of many kids, but the parent company of some of the best known ice cream brands says it plans to stop advertising to children by the end of the year.
Unilever, which owns Ben & Jerry’s, Breyers, Klondike, Good Humor, Talenti, Magnum, Cornetto, Viennetta, Choc Ice and others, has announced plans to stop television and print marketing to children younger than 12, and will curb any social media promotions for children under 13.
Rising child obesity rates are behind the decision.

"The World Health Organization names childhood obesity as one of the most serious public health issues of the 21st century," the company said in a statement. "And it’s a key reason why Unilever is committing to new principles on marketing and advertising foods and beverages to children."

Unilever pledged to change its practices before the end of the year, offering an extensive list of new marketing principles. Children under 12 will not appear in ads. And parents will always be "portrayed in control of the access to the product," the company said....

"Is Ben & Jerry's misleading consumers? Lawsuit says 'happy cow' representation not quite true" (UNA:EN Amsterdam)
Apparently only some of the cows are happy.
Many of the rest are moody through morose to borderline suicidal while some turn it outward into hostility and violence. Plotting and scheming in their herds and hordes.
So much for that placid, benign ruminator image.

From the Burlington Free Press, Nov. 7:

Is Ben & Jerry's misleading its customers about the type of milk and cream used in its ice cream? 
Environmental advocate and former gubernatorial candidate James Ehlers says yes, and that its parent company, Unilever, is profiting because of the false advertising, according to a recent lawsuit filed in U.S. District Court in Burlington. 
According to the federal complaint, filed Oct. 29, Winooski resident Ehlers alleges that Unilever violated its customers' trust by saying Ben & Jerry's products were made with milk and cream sourced from "happy cows" on Vermont dairy farms that participate in its humane "Caring Dairy" program.
Only a minority of the cream and milk used in the ice cream comes from these types of farms, the complaint alleges....
....MUCH MORE, including a discussion of what makes a cow happy and Unilever's culpability in the alleged bovine distress. 

"Mac Pro with 1.5 TB of RAM can open 6,000 Chrome tabs"

Step away from the keyboard, we're going to get you some help.*
From BizChina:
Apple’s Mac Pro is one of the most powerful (and expensive) desktop computers you can buy today. That’s especially if you opt for a configuration with a large number of processors, memory and storage.
The Mac Pro can be configured with up to 1.5 TB of RAM, which means that in theory, it should be able to keep almost any application you launch in memory. Of course, everything has its limits, including 1.5 TB of RAM, and the youTuber Jonathan Morris has discovered it.

Morris has pushed a Mac Pro configured with 1.5 TB of RAM to the limit by opening 6,000 tabs in Google Chrome. If you use this browser, you’ll know that Chrome tends to take up a lot of memory....
*If interested see also 2018's "It’s Time to Give Firefox a Fresh Chance (GOOG)":

...We noted the start of Firefox's turnaround in last July's "Firefox vs Chrome: "Firefox’s blazing speed with huge numbers of tabs leaves Chrome in the dust"  followed by "Close Those Tabs!":
I know we have sent conflicting messages on the subjects of tabs and bookmarks.

On the one hand pitching the fact researchers had tested the latest version of Firefox with 1,691 tabs open at the same time - "a power user's dream" - while on the other hand posting "Hey, You at the Computer, Hoarding Links is a Mental Illness":
Step away from the keyboard, we're going to get you some help....
If you switch and feel some anxiety about not sending Google enough personal information, the GOOG does have a couple non-Chrome options:

1) 'Optical sensors' embedded in everyday objects could assess cardiovascular function and help users improve heart health" (GOOG)
Well isn't this a dream come true:
I am not putting cameras* behind the mirrors in the bathrooms, sorry.
Maybe behind the ones in the long hall.....

Why Africa Has Found It So Difficult To Industrialize

There are development experts who believe it is already too late for Africa to industrialize, that the model which allowed Taiwan, South Korea, Malaysia, China and Singapore to escape the poverty trap may never happen again and the experts could be right.
On the other hand the Wuhan coronavirus may be offering one last opportunity for Africa to become part of worldwide supply chains at a level other than that of the extractive industries.
Here's some background from Delancey Place:

Today's selection -- from Africa Since 1940 by Frederick Cooper. Why Africa has found it so difficult to industrialize:
"The cure for a colonial economy dependent on sales of a narrow range of agricultural or mineral products and on purchase from outside of manu­factured goods seemed -- to economists and political leaders in the 1950s and 1960s -- to be industrialization. It didn't work out so simply.

"Africa has long had great difficulty in attracting capital, given its spread­out population divided by colonial and post-colonial borders, the conti­nent's generally low income levels, and the uncertainties of labor force development among people whose long and bitter experience encouraged them to avoid subordination to an employer by keeping other options open. The mining industry -- in gold, copper, and other minerals -- has been the biggest exception, but only in South Africa and, to an extent, in Southern Rhodesia did it spawn broad regional industrial develop­ment. Even in the early 1950s, French and British officials were noticing that private overseas investment was not following in the wake of their public development investments. African political leaders thought that independence would make a decisive difference; they could build their own industries.

"And to an extent they did. States used tariff barriers, taxing imported finished products heavily and inputs lightly, to get investors to manufac­ture products within their borders. Much investment in the 1960s was import substitution industrialization (ISI), relying on transnational cor­porations headquartered in the United States, Europe, and Japan. States also founded parastatal corporations in sectors that they hoped would stimulate a wide range of private activity or else built industries that they hoped would constitute the core of a socialist economy. But in either case, the constraints were severe: industry demands technical knowledge as well as finance, and that is highly concentrated in the world economy. Transnational companies often bargained to keep competitors out, and state-owned industries were given protected markets, so that ISI usually meant that producers were sheltered and inefficient, and that citizens were stuck with products more expensive and of lower quality than available on the world market. Continual importation of machinery and supplies was necessary for industry to function. The economics of industrialization in countries with small markets and little infrastructure were bad enough; the politics were worse, for politicians were tempted to use protected in­dustries to enrich themselves and their clients and to distribute relatively well paying jobs....MUCH MORE
The analysis is a bit dated, the book was published in 2002, but it is very interesting how much of this still holds up. And dated or not, catching money in motion, in this case in the form of supply chains is always an opportunity.
"Agriculture in Africa will rise to $1 trillion"
Spears' Magazine on Africa

And a few of our prior posts
January 2020
"African economies will outperform global growth in 2020 despite a lag from its biggest countries"
October 2017
Needed: 800 Million Jobs For Africa
By now most of our readers have seen a version of the U.N. projections for world population in 2050 and 2100. If not, here's a post from April with the graphic:

IMF: Sub-Saharan Africa has Just Completed One of its Best Decades of Growth--It's Not Enough (UPDATED)

Update below.
Original post:
This may be one of the more important graphics you are likely to come across today.
Africa's population is projected by the United Nations to reach 2 billion people by 2045, 4 billion before the end of the century:

We followed up with "To Jumpstart Development, Should We Give Africa Bonds a Whirl?"
The problem, as always, is keeping the money from sticking to the hands of the kleptocrats,
And whether investment will actually do any good.

Following on "IMF: Sub-Saharan Africa has Just Completed One of its Best Decades of Growth--It's Not Enough" here are a couple women who have thought about this stuff, Ngozi Okonjo-Iweala a former two-time Finance Minister of Nigeria and World Bank Managing Director, currently a senior advisor at Lazard and Nancy Birdsall, former EVP at the Inter-American Development Bank where she ran a $30 billion loan portfolio....
And today it's the population analysts at Populyst, September 28:

Africa: 800 Million Jobs Needed
African economies are in a race to get ahead of the demographic boom.....MORE
Up to 500 Million Sub-Saharan Africans Would Like to Move to Europe; Mayfair, Monte Carlo Favored

Sunday, February 16, 2020

Hydrogen: French Defense Contractor, Naval Group, Has Successfully Tested Next Generation Submarine Fuel Cell Propulsion

From Strategy Page, February 13:

Submarines: Second Gen AIP
A French firm (Naval Group, formerly DCNS) has successfully tested what it calls FC2G (Fuel Cell 2nd Generation) AIP (Air Independent Propulsion) system for 18 days in a mock-up of the complete system in an 8 meter long circular structure identical to the space it would occupy in a submarine.

The FC2G performed efficiently for three weeks. This test will be repeated several times as preparations are made to install FC2G in a submarine. The FC2G is safer, more efficient and easier to operate than earlier fuel cell AIP systems, including the widely used DCNS first-generation AIP.

Fuel cell tech has been around for decades, long enough to become a proven technology. But fuel cells require dangerous fuels like hydrogen. Hydrogen is currently stored in cylinders outside the pressure hull of the sub. FC2G eliminates that with a two-stage system that extracts hydrogen from diesel fuel, which is also used for the sub’s diesel engines and purifies the hydrogen to a very high degree. The high-quality hydrogen gets more electricity out of the standard fuel cell technology. At the same time, the need for hydrogen storage is eliminated because only as much hydrogen is obtained from diesel fuel as would be in the sub if the hydrogen were brought in from external storage tanks. The oxygen is obtained from the same supplies used for the crew to breathe while submerged....MORE

"Arctic sea ice reaches the largest early February ice area in the past 11 years! It even exceeds the 2001-2010 average size"

The scenario we were babbling about back in September 2019, "Some Potentially Positive News For The Arctic Ice Cap This Winter" seems to be playing out. Cross your fingers, toes and other body parts that it continues, it is a very good thing.

Our standard boilerplate on measuring sea ice: despite this good news, extent is not as important as thickness, and in that dimension there are still problems this season. More after the jump.

From Severe Weather Europe, February 12:
*Rapid ICE growth* Arctic sea ice reaches the largest early February ice area in the past 11 years! It even exceeds the 2001-2010 average size

Overall, winter was rather mild across much of Eurasia and North America, with the exception of Alaska and parts of Canada. But, that means that a lot of cold air has stayed in the polar circle, helping to freeze more of the Arctic ocean and the surrounding areas.
The latest sea ice analysis shows that during this rather mild winter in the mid-latitudes, the trapping of the colder air in the polar circle was beneficial to the growth and recovery of the polar icecap. Every winter the Arctic ocean freezes, reaching a maximum sea ice extent around March. below is the graphic from NSIDC, showing the ice growth progress and a comparison with 2012, which had the lowest sea ice extent on record in September. We can see that the freezing season began at rather low levels, lower than 2012, but the stronger than normal polar vortex has helped to keep more cold air in the polar regions, promoting ice growth. The second graphic is a temperature anomaly analysis for the polar circle, showing the colder than normal phases during winter, and especially currently, greatly aiding in the sea ice growth process....
....The latest analysis from NSIDC shows the sea ice area and extent compared to the long term average. In most places, the extent is not far behind the long term averages. The greatest individual deficit is in the Sea of Okhotsk.

....MUCH MORE, a very detailed look at the ice.

And the problems?
First off, the ice on the western side of the Svalbard archipelago should be much thicker.
You would really like to see the dark grey and reds extending across the Fram Strait toward Greenland on the left side. The Strait is the exit into the Atlantic for ice pushed by storms coming over the top of the world and the more ice acting as a plug the better.

Secondly, you would expect thicker ice along the Russian coast (right side of map below) by this date. Although the ice will continue building through April it's the thickness that raises the odds of the ice making it to next season and becoming sweet, sweet multi-year ice.
From the Danish Meteorological Institute

And it's that lack of thickness that leads to the lower overall volume, despite the extent.
One final positive, the other Strait of interest, the Bering - top center in this view is doing better on both extent and thickness than it has in at least three years.

Previously in this northern saga: 
Feb. 2 
Jan. 7 
Nov. 7

"Tibet Donated 50 Tons of Yak to Hubei"

Full disclosure: I've stated right up front that I have kind of a soft spot for the Maasai and not just because they gave Charles, HRH Prince of Wales, Duke of Cornwall, Prince and Great Steward of Scotland etc, etc., another title, but also because of what they did after the murderous events of September 11, 2001.

First though, Tibet via China Daily's Facebook page: 
China Daily
The Tibet autonomous region has sent donations to #Wuhan, donations include 50 tons of yak meat and 1,826 tons of bottled water, worth over 8.5 million yuan ($1.2 million), the goods are expected to arrive in Wuhan’s cities of Huangshi and Shiyan by Feb 19. #coronavirus #COVID19
Tibetan yak all dressed up
Possibly also of interest:
The Strange Business of Subsidized Yak Insurance

And the Maasai? 
A couple days before the tenth anniversary of the mass murders in New York, Washington and Shanksville we posted:

To the Maasai People: On The Anniversary of 9/11, Thanks For the Cows 
There are groups of people I put in the mental filing cabinet with the label Bad Ass.

In "Just a Friendly Heads-up: Don't Mess With a Gurkha, They Think 1 on 40 is a Fair Fight"  I of course linked to the story of the Gurkha who decided to stop a gang rape.
He killed three, wounded eight and chased the other 29 off.
He had a knife against firearms.

That post also had my recollection of a conversation with an old Turkish dude. He told me that during the Korean war the Turks didn't think they were outnumbered by the Chinese until the odds got over
5 or 6 to 1....

...In the same league are the Maasai folks of Kenya and northern Tanzania.
They live in some rugged spots and relate to their cows the way Plains Indians related to the Bison:
big critter = life.

They no longer make the boys prove their manhood by killing a lion but they do expect them to protect the cattle and, if the lion is hungry and the kid only has a spear, the old-timers figure it's a fair fight.
Serious bad ass.

Here's a story from 2002 via the New York Times:
Where 9/11 News Is Late, but Aid Is Swift
ENOOSAEN, Kenya, June 2 — Skyscrapers are a foreign concept to the Masai who live in this corner of Kenya, where the tallest things on the vast horizon are the acacia trees and giraffes that feed on them....MORE

Palladium Futures: "Goodbye to All That"

Apologies to the Robert Graves literary estate for purloining the headline.
Now back to work.
With automobile production shrinking around the world there probably won't be as much demand for catalytic converters as there might have been. Which leads us to what looks like a triple top in palladium futures:

Those are March futures. June futures are almost the same price. We didn't do anything with them on the way up, beyond our usual slack-jawed grins which is our default when we observe major moves, moving without our participation. Just watching, just waiting, like the panther, for the moment to pounce, biding our time, like the panther waiting....just a little bit closer and....

Sorry. Where was I?
Here with additional commentary is Patty Smyth with some guys who look more Miami Vice than Miami Vice, more Wham! than Wham!

March futures $2335.20 -15.80
June futures   $2335.30 -11.90
September's    $2300.80 -35.30 so a bit o'backwardation

Energy Storage: "Void Shaft Electricity"

The bottom line question is always about the efficiency of the system.
Some proposals are so fantastical they remind one of the Soviets and their mega-engineering projects:
"Okay comrades, we reverse the flow of the river, da?"
On the other hand something like pumped storage hydropower does make sense in localities with enough verticality:

And truth be told I didn't make fun of the reversal of the Chicago River.
Although there is now talk of re-reversing it which may be deserving of some minor mockery and snark.
Anyhoo, Void Shaft Electricity.

From BLDG BLOG, Feb. 9:
A Scottish firm called Gravitricity wants to turn abandoned mine shafts into gravity-driven, underground electrical batteries. Power could be generated and stored, the Guardian reported back in late 2019, “by hoisting and dropping 12,000-ton weights—half the weight of the Statue of Liberty—down disused mine shafts.”

By timing these drops with regional energy demand, Gravitricity’s repurposed mines could act as “breakthrough underground energy-storage systems,” a company spokesperson explains in a video hosted on their site.

“Gravitricity said its system effectively stores energy by using electric winches to hoist the weights to the top of the shaft when there is plenty of renewable energy available, then dropping the weights hundreds of meters down vertical shafts to generate electricity when needed,” the Guardian continues.
[Image: From the Gravitricity website.]
In Subterranea: The Magazine for Subterranea Britannica, where I initially read about this plan, some of the proposal’s inherent design limitations are made clear. “What would be required for the Gravitricity scheme,” SubBrit suggests, “would be very deep, wide, and perhaps brick-lined shafts clear of ladderways, air ducts, cables and the like. On what sort of surface the weights might land, time and time again, is another consideration.”...

More Academic Journals (and others) Drop Paywalls For Coronavirus Research and Reporting:

We noted STAT yesterday:
STAT on Coronavirus
Two articles that are part of STAT's dropped-paywall coverage.

And Nature on February 9: "The Journal Nature Has Dropped Its Paywall for Coronavirus Reporting and Research".

Here are more, via The Scientist, February 13:
Journals Open Access to Coronavirus Resources
Nearly 100 academic journals, societies, institutes, and companies sign a commitment to make research and data on COVID-19 freely available, at least for the duration of the outbreak.
The World Health Organization announced that the novel coronavirus disease, now known as COVID-19, was a public health emergency of international concern on January 30. By then, 9,826 cases and 213 deaths had been confirmed. Yesterday, February 12, those numbers rose to 45,171 cases and 1,115 deaths.

Scientists and medical professionals around the globe have been relying on freely available studies, resources, and datasets to quickly inform treatment strategies, public health initiatives, and drug development.

Even before the outbreak was declared an international public health emergency, researchers in the US and elsewhere commended the speed with which scientists in China shared the first genome of the 2019-nCoV virus, recently dubbed SARS-CoV-2. The first reports of the disease came from Wuhan at the end of December, and by January 8, scientists in China sequenced the viral genome and made it public. “Progress with research on this virus has been amazingly rapid,” says Stanley Perlman, a microbiologist at the University of Iowa.
We’re getting up to 20 submissions per day on coronavirus.
—Edward Campion, NEJM
On January 31 this year, a day after the novel coronavirus was designated a public health emergency of global concern, 94 academic journals, societies, institutes, and companies signed a commitment to making research and data on the disease freely available, at least for the duration of the outbreak.
“The responsible thing to do is to make all research freely available during epidemics or possibly pandemics where there are people at risk,” says Edward Campion, the executive editor of the New England Journal of Medicine (NEJM), which signed on to the commitment. Papers on other diseases, “all of which are important,” he adds, remain behind a paywall. “It’s a balancing act. . . . Our expenses are paid mainly by subscribers.”

Other signatories, such as PLOS, are open-access all the time, charging fees to authors instead of readers. “PLOS is well-positioned to respond to any outbreak,” says Joerg Heber, the editor-in-chief of PLOS One. In addition to being open-access, the journal requires all data necessary to replicate the study to be published alongside it. Still, it takes time to peer-review studies, Heber adds, so PLOS “strongly encourages all researchers submitting coronavirus-related papers to us to post these as preprints so that they are available as soon as possible.”

While some paywalled journals have made studies free during previous outbreaks such as the 2009 flu pandemic, the WHO called for journals to develop special protocols for situations deemed to be global public health emergencies during the 2014–2016 Ebola epidemic in West Africa. In the Fall of 2015, the WHO met with stakeholders from the BMJ, the Nature journals, the NEJM, and the seven PLOS journals, who all agreed in a statement that journals should “encourage or mandate public sharing of relevant data,” and that sharing said data—even before publication—should not prevent journals from accepting and publishing those authors’ studies....MORE

Document IX: "A Notice from the Central Committee of the Communist Party of China’s General Office"

A personal bookmark for now, we'll be referring back to it.
From ChinaFile:

Document 9: A ChinaFile Translation
 How Much Is a Hardline Party Directive Shaping China’s Current Political Climate?
November 8, 2013
This weekend, China’s leaders gather in Beijing for meetings widely expected to determine the shape of China’s economy, as well as the nation’s progress, over the next decade. What exactly the outcome of this Third Plenum of the Eighteenth Party Congress of the Chinese Communist Party will be remains shrouded in no small measure of secrecy, like most matters of high politics in China. President Xi Jinping has signaled that a significant new wave of economic liberalization may be in the works. But in the realm of political reform, Xi also has signaled a deep reluctance. In fact, many of the actions taken and techniques used under his year of leadership suggest a return to ideas and tactics that hark back to the days of Mao Zedong.

One such signal came during this past spring, when reports began to appear that the Party leadership was being urged to guard against seven political “perils,” including constitutionalism, civil society, “nihilistic” views of history, “universal values,” and the promotion of “the West’s view of media.” It also called on Party members to strengthen their resistance to “infiltration” by outside ideas, renew their commitment to work “in the ideological sphere,” and to handle with renewed vigilance all ideas, institutions, and people deemed threatening to unilateral Party rule. These warnings were enumerated in a communiqué circulated within the Party by its General Office in April, and, because they constituted the ninth such paper issued this year, have come to be known as “Document 9.”

What suggests the significance of Document 9 is the fact that a worrisomely harsh crackdown against human rights lawyers, media outlets, academics, and other such independent thinkers has followed. But, whether Document 9 is the expression of one faction or that of the central Chinese leadership itself is still uncertain.

Mingjing Magazine, a U.S.-based Chinese-language magazine, obtained and published the full text of the document in September 2013 in print. We are confident it is authentic and translate and re-publish it here with Mingjing’s permission. To skip the communiqué’s wordy preamble and go straight to its key sections click here.
—The ChinaFile Editors
Communiqué on the Current State of the Ideological Sphere
A Notice from the Central Committee of the Communist Party of China’s General Office
Provinces, autonomous regions, municipalities directly under the Party committee, Central ministries and state organs, Party ministries, People’s Liberation Army headquarters, major Party committees, and Party leadership groups of civilian organizations: This notice “A Communiqué on the Current State of the Ideological Sphere” has been approved by the central leadership, and is herewith distributed to you. Please thoroughly implement its suggestions.
April 22, 2013
(This document has been sent to local divisional levels)
Introduction Since the Party’s Eighteenth National Congress, under General Secretary Xi Jinping’s strong central leadership, the nation triumphantly convened the National People’s Congress and the Chinese People’s Political Consultative Conference, the Party’s and nation’s various undertakings have made a good start, and the general mood of the Party and Government has been constantly improving. Cohesion among our nation’s people has become stronger and our confidence in our path, our theory, and our system has become more resolute. Mainstream ideology is becoming healthier and more vigorous. The spirit of the Party’s Eighteenth National Congress and General Secretary Xi Jinping’s series of important speeches have unified the thought of the entire Party, the entire country, and the entire people enormously. The ideological foundation of our united struggle is unceasingly solidifying.

The new session of the central leadership group has: put forth a series of new principles for conduct in political administration, furnished an interpretation of the Chinese dream of the great rejuvenation of the Chinese nation, improved our work-style, maintained close ties with the masses, rigorously enforced diligence and thrift, opposed extravagance and waste, increased vigor in the fight against corruption, and won the widespread endorsement of cadres and the masses. We persist in upholding scientific development as the main theme, accelerating economic transformation as the main thread, and increasing the quality and efficiency of the economy as the core. The outlook for our nation’s economic development continues to be favorable, and the people’s faith in China’s economic prospects has risen. In an effort to improve the people’s livelihood, we are putting forth new measures to benefit the people so they may look forward to a better future: disseminating thought on the cultural front as the most important political task; studying, implementing, and advancing the spirit of the Eighteenth Party Congress; rapidly arousing mass fervor, proclaiming that socialism with Chinese characteristics and the Chinese dream are the main theme of our age; expanding and strengthening positive propaganda; strengthening guidance on deep-seated problems; strengthening the management of ideological fronts; promoting unification of thought; concentrating our strength and implementing the development of a positive atmosphere and providing spiritual strength to the party and nation.
Noteworthy Problems Related to the Current State of the Ideological Sphere While fully approving of the ideological mainstream, we must also clearly see the ideological situation as a complicated, intense struggle. Currently, the following false ideological trends, positions, and activities all deserve note:

1. Promoting Western Constitutional Democracy: An attempt to undermine the current leadership and the socialism with Chinese characteristics system of governance.
Western Constitutional Democracy has distinct political properties and aims. Among these are the separation of powers, the multi-party system, general elections, independent judiciaries, nationalized armies, and other characteristics. These are the capitalist class’ concepts of a nation, political model, and system design. The concept of constitutional democracy originated a long time ago, and recently the idea has been hyped ever more frequently.

This is mainly expressed the following ways: In commemorating the thirtieth anniversary of the enactment of the [Chinese] Constitution, [some people] hold up the banners of “defending the constitution” and “rule of law.” They attack the Party’s leaders for placing themselves above the constitution, saying China “has a constitution but no constitutional government.” Some people still use the phrase “constitutional dream” to distort the Chinese dream of the great rejuvenation of the Chinese nation, saying things like “constitutional democracy is the only way out” and “China should catch up with the rest of the world’s trend toward constitutional governance.” The point of publicly proclaiming Western constitutional democracy’s key points is to oppose the party’s leadership and implementation of its constitution and laws. Their goal is to use Western constitutional democracy to undermine the Party’s leadership, abolish the People’s Democracy, negate our country’s constitution as well as our established system and principles, and bring about a change of allegiance by bringing Western political systems to China.

2. Promoting “universal values” in an attempt to weaken the theoretical foundations of the Party’s leadership.
The goal of espousing “universal values” is to claim that the West’s value system defies time and space, transcends nation and class, and applies to all humanity.

This is mainly expressed in the following ways: [The people who espouse universal values] believe Western freedom, democracy, and human rights are universal and eternal. This is evident in their distortion of the Party’s own promotion of democracy, freedom, equality, justice, rule of law, and other such values; their claim that the CCP’s acceptance of universal values is a victory for universal values,” that “the West’s values are the prevailing norm for all human civilization,” that “only when China accepts Western values will it have a future,” and that “Reform and Opening is just a process of gradually accepting universal rights.”

Given Western nations’ long-term dominance in the realms of economics, military affairs, science, and technology, these arguments can be confusing and deceptive. The goal [of such slogans] is to obscure the essential differences between the West’s value system and the value system we advocate, ultimately using the West’s value systems to supplant the core values of Socialism.

3. Promoting civil society in an attempt to dismantle the ruling party’s social foundation.
Civil society is a socio-political theory that originated in the West. It holds that in the social sphere, individual rights are paramount and ought to be immune to obstruction by the state. For the past few years, the idea of civil society has been adopted by Western anti-China forces and used as a political tool. Additionally, some people with ulterior motives within China have begun to promote these ideas.
This is mainly expressed in the following ways:

Promoting civil society and Western-style theories of governance, they claim that building a civil society in China is a precondition for the protection of individual rights and forms the basis for the realization of constitutional democracy. Viewing civil society as a magic bullet for advancing social management at the local level, they have launched all kinds of so-called citizen’s movements....

Nine in Roman numerals is Xi spelled backwards. Coincidence?
I think not. 

Attention, Interest, Desire, Conviction

A repost from a simpler time, July 20, 2014:

The headline is by Frank Hutchinson Dukesmith when he was editor of 'Salesmanship Magazine' who also wrote "Modern Air-brake Practice: Its Use And Abuse; A Book Of Instruction On The Automatic High Speed And Straight Air Brake. Together With Questions And ... For Enginemen, Trainmen And Motormen" (1906)

Dukesmith's phrasing eventually morphed into marketing's AIDA acronym.
From Flowing Data:

...4. Changes over time and space
Several mini-explosions are going off in your head at this very moment, so brace yourself for what comes next. The most telling of maps is the one that ebbs and flows with the people who reside in the area. The data flows like water in a bendy river with a lot of rocks. This is a picture of life as we know it — random, unorganized, and unpredictable. When life gives you lemons, you make a map of those lemons, because the result blows your mind every single time.
Animated map.
The animated map above is only a snapshot of the millions of lives that the lines and shapes represent. The animation likely shows something interesting. Sometimes a state turns orange, others turn black, and the rest turn white. What will happen in the next frame? It is hard to say. Just like tomorrow.
-19 Maps That Will Blow Your Mind and Change the Way You See the World. Top All-time. You Won’t Believe Your Eyes. Watch.

Strange Mafia Histories: New York Bans Artichokes

Continuing what has turned into a little series, this time from Gastro Obscura:

In 1930s New York, the Mayor Took on the Mafia by Banning Artichokes
Gangs and mafiosos have a long history with food crime. 
In the early hours of December 21, 1935, New York mayor Fiorello LaGuardia walked into the Bronx Terminal Market with a cadre of cops. As the police played a horn fanfare, he hopped onto the back of a vegetable truck and addressed the assembled farmers and peddlers. Starting December 26, New York City would institute a total ban on the sale, display, or possession of a commodity that posed a “serious and threatening emergency to the city.” This substance, at the time available in any city market, was controlled by “a monopoly of doubtful legality” (in other words, the mafia). To control its price and distribution, these criminals were engaged in violence and intimidation that the tough-on-crime mayor wanted to root out.

The product in question was the small, or baby, artichoke, a food introduced to the city just decades earlier and especially beloved by its Italian Americans and Italian immigrants.

Even then, some observers found LaGuardia’s claims about a vast artichoke underworld bizarre. “It is impossible not to conclude the world today is a bit mad,” a reporter covering the ban for the New York Herald Tribune wrote.

But LaGuardia was right. By 1935, the Sicilian American mafia had controlled the American artichoke market for at least two decades, wresting millions of dollars from growers, distributors, and consumers. And this was just one of their food-based rackets. Many other agromafia operations, which profited from citrus fruits, olive oil, avocados, and more, persisted or emerged over the following decades. In fact, there is a good chance that you—regularly and unwittingly—eat foods that have passed through artichoke cartel-like operations.

Artichokes have been a hot commodity in the Mediterranean since the age of antiquity, especially among Italians. (In the first century, Romans pickled artichokes in honey and feasted on them year round.) But artichokes are finicky plants, thriving only in specific climes. So while early Americans—including George Washington and Thomas Jefferson—cultivated and appreciated artichokes on a small scale, a U.S. industry only emerged around 1900, when Italian immigrant farmers in northern California realized the region’s potential for artichoke cultivation. Today, around 99 percent of American commercial artichokes come from California, mainly from Monterey County....

A Very New York Story: "How New York’s Bagel Union Fought — and Beat — a Mafia Takeover"

"How the Mafia got to our food"

"Sicily’s mafia sprang from the growing global market for lemons – a tale with sour parallels for consumers today"

The Sicilian Mafia and the International Lemon Cartel

Four Mexican Cartels Battling for Control of Avocado Trade

Saturday, February 15, 2020

So Claire Jones, Henry George and Adam Smith Walk Into A Bar...

....and the barkeep says "What is this, some kind of a joke?"

Nah, its economics.

"Every increase in the real wealth of the society, 
every increase in the quantity of useful labour employed within it, 
tends indirectly to raise the real rent of land."
-Adam Smith, "The Wealth Of Nations"
Book I, XI. Of the Rent of Land, Conclusion

That was one of the first things I thought of when I started reading Ms Jones' post at FT Alphaville on Thursday:

As unsafe as houses
Few industries show more visible signs of the extremes of the economic cycle than construction. During the frenzy, skylines are full of cranes. When the bubble bursts, we’re left with ghost estates.
This perception matches reality, according to an IMF research note published Wednesday. Stretching back to the 70s, not only is the construction sector the most prone to booms and busts, according to the data, but also its frothiness on the way up is also a decent predictor of the scale of the impending crash:
We find that the worst booms — that is, the costliest among bad booms in terms of subsequent growth (or lack thereof) — are associated with higher growth in the construction sector during the boom phase. A recession following a bad boom that features fast construction growth is more than 1.4 percentage points worse than one following a bad boom with low construction growth.
The riskiness inherent in construction booms may seem obvious.
Few people borrow several multiples of their income to fund purchases of any other asset than property. Yet the IMF research finds that construction growth in a boom also outperforms metrics such as household debt, via the note:
We find that a significant number of bad booms in emerging markets did not feature any rapid increase in household debt . . . However, almost all the bad booms were accompanied by strong expansion of the construction sector.
(Though credit booms in advanced economies with well developed mortgage markets were a good indicator of subsequent busts.)

So what makes construction booms so likely to lead to spectacular busts, besides simple over-indebtedness? Two things.

The first is that construction produces tangible things which can be used as collateral. If the initial debt to fund the development is partially paid off, or the asset appreciates, equity can be released to raise more funds and increase investment. Lenders – from banks to private equity – are often far more willing to fund real estate investment as a result. This leads to a misallocation of capital, which – due to the social value attached to housing, especially – is politically difficult to curb.
The second is that it tends to skew the labour market....

If interested here's the Harvard Classics 1909 version of Smith's book I, chapter XI, via Bartleby which begins:
RENT, considered as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. In adjusting the terms of the lease, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more....
Smith has some conflicting views on rent and land that he had not worked out by the time the great book was published.
Our last member of the trio did not suffer from Smith's failing. Henry George thought things out.
Unfortunately these days he is remembered, when he is remembered, mostly for his tax proposals.
Here's the introduction to a 2016 post:
Forgetting History: "Nothing Like This Has Ever Happened Before" 
Back in 2012 there occurred one of those eruptions of comment* that seem to happen for no discernible reason other than some combination of network effects and echo chambers.

The eruptions peak and die away as the crowd moves on leaving almost imperceptible ripples where there had been much thunder and fury.

This is a reflection on one of them, Henry George and the land tax, updated for current values and valuations....
Which is a pretty good primer. Alternatively, for a more academic treatment  there is:
The Metropole
The Official Blog of the Urban History Association

But for the closest tie-in to what Claire Jones was highlighting here's economist Mason Gaffney:

Henry George 100 Years Later: The Great Reconciler
M. Mason Gaffney
Prepared for Henry George Centennial, 1997
Henry George (1839-1897) is best known today for Progress and Poverty (1879). Eloquent, timely and challenging, this book soon became and remains the all-time best-seller on economic theory and policy. 
In 1879, George electrified the world by identifying one underlying cause for two great economic plagues: chronic poverty arising from insufficient demand for labor, and cycles of boom and bust. These twin plagues arose from concentrated ownership of land, compounded by land speculation. Large landowners and speculators (often one and the same) held the best land idle or underused, forcing labor onto marginal land and driving down wages. Collapse of speculative land price bubbles caused periodic slumps.

(By "land" George meant exclusive rights to use natural resources in a specified territory. It included mining, water, fishing, and timber rights, road and rail rights-of way, and some patents. George emphasized the high value and productivity of urban land, which facilitated communication and trade. Today, we would add to "land" such items as taxi medallions, telecommunications licenses and pollution "rights".)....
Which leads us back to the Henry George Society and their page on Land Speculation and the Boom/Bust Cycle

That's what I thought of when reading Claire's post.

"Norway Claims Chinese Intelligence Has Repeatedly Acquired Its Space Technology"

China is not making a lot of friends with their creative acquisitions.
Of course "countries don't have friends, only interests."
—Henry Kissinger who lifted it from Charles de Gaulle who got the idea from The Viscount Palmerston.
(Alex, who are three people who know more about foreign relations than I could learn in three lifetimes?)

From Sputnik, February 12:
Norway plays an important role in space exploration for key military space facilities used by the US, including the Globus II radar in Finnmark County, sometimes referred to as the world's most advanced radar for tracking satellites.
In recent years, the Chinese intelligence service has succeeded in obtaining advanced Norwegian technology several times, the Scandinavian country's intelligence service has stressed, warning that China is en route to becoming “a military superpower in Norway's neighbourhood”.
“With growing interest in the Arctic, we believe that China will continue to influence the situation, even in our proximity”, the head of the intelligence service, Lieutenant General Morten Haga Lunde, said, as quoted by national broadcaster NRK.
According to Haga Lunde, advanced technology with military application is especially sought after.
For instance, the Andøya Space Centre at Andenes in Nordland County, which is vying to become the first in Europe to launch satellites, has admittedly noticed penetration attempts.
“We notice that the interest and awareness of our sector is only getting bigger, even when it comes to penetration attempts”, Odd Roger Enoksen, Managing Director of the Andøya Space Centre, told High North News.
Focus 2020, the new threat assessment by the Intelligence Service (E-Tjenesten), also lists Norwegian space research facilities among the main targets for the Chinese intelligence service, which, it claims, has shown a high interest in dual-use technology. According to Focus 2020, Chinese intelligence has on several occasions succeeded in obtaining this type of advanced technology....

"The 'Race To 5G' Is A Giant Pile Of Lobbyist Nonsense"

The folks at Techdirt are rather cynical about much of what passes for technology these days.
From Techdirt, January 27:
We've noted for a while that the "race to 5G" is largely just the byproduct of telecom lobbyists hoping to spike lagging smartphone and network hardware sales. Yes, 5G is important in that it will provide faster, more resilient networks when it's finally deployed at scale years from now. But the society-altering impacts of the technology are extremely over-hyped, international efforts to deploy the faster wireless standard aren't really a race, and even if it were, our broadband maps are so terrible (by design) it would be impossible to actually determine who won.

The idea that we're "racing China to 5G," and need to mindlessly pander to U.S. telecom giants to win said race, has also become a mainstay in tech policy circles and tech coverage for two or three years now. We're at the point where 5G (like the blockchain or AI) now exists as a sort of policy pixie dust to be sprinkled around generously by lobbyists and K Street beggars looking to wow luddite lawmakers, even if the underlying arguments often make no coherent sense. When 5G is fused with overheated national security concerns, it becomes even more incoherent.

Enter former Representative Mike Rogers, who last week announced he was heading a new 501(c)4 group dubbed 5G Action Now. 5G Action Now frames itself as an objective third party outfit that is just apparently really excited about 5G, insisting its goal is to "educate members of Congress and the American people" to better understand the "race to 5G":
"5G Action Now was founded to establish the United States as the worldwide leader in 5G. Our goal is to elevate the conversation regarding American national security and the economic benefits of winning the 5G innovation and deployment battle against China. 5G will spur economic growth in rural America, create an environment for technological expansion, and put the U.S. on strong national security footing for generations to come."
Mike's bio around the internet usually reveals how he's also a "security advisor" for AT&T, though oddly his bio over at the 5G Action Now website excludes this fact. The ambiguous venture appears to have numerous telecom backers, including a coalition of European and Canadian satellite companies looking for all the usual fare: weakened regulatory oversight, more subsidies, and a bigger slice of the publicly-owned airwaves to make a profit off of. It's more of a "race to government protection" or a "race to fatter revenues" than any kind of race to meaningful 5G domination or consumer benefit.

The group's website is filled with rhetoric about how the US is in a battle with China for 5G domination, hinting at some immense unforeseeable calamity should the Chinese government deploy 5G quickly to human beings you'll never meet, half a world away: 
Press outlets that buy into this rhetoric usually "forget" to mention that while the US technically "won" the race to 4G (by being first to deploy it) that didn't wind up mattering much. U.S. consumers pay some of the highest prices for wireless service in the developed world, for 4G services that are routinely ranked as some of the slowest in the OECD. Thanks to regulatory capture, corruption, and mindless M&A mania (like the looming Sprint T-Mobile merger), it's a problem that's not going away anytime soon. 5G is not, contrary to what you'll be told by industry and stenographing journalists and evangelists, some mystical panacea....

"Agriculture in Africa will rise to $1 trillion"

From PoAndPo Agrifish, February 10:

President of the African Development Bank (AfDB) Akinwumi Adesina has disclosed that the size of food and agriculture in Africa will rise to $1tr by 2030.
He said the population of Africa, which stands at 1.2 billion, would double to 2.5 billion by 2050, adding that it is only through food and agribusiness that the feat can be achieved.
Topics: Agriculture Africa
Adesina who disclosed this at the Federal University of Agriculture, Abeokuta (FUNAAB), while being conferred with an honorary doctorate degree, in honour of his work in agriculture and food security across the continent, commended the Federal Government’s efforts to promote agriculture and agribusiness in the country.

While pledging to continue the work of transforming Nigeria’s agriculture sector, Adesina, described agriculture as the most important profession and business in the world.

Adesina said the African Development Bank was spearheading efforts to feed Africa and has invested $25 billion in 10 years to transform the agricultural sector....

"How the Coronavirus Made Globalization a Deadly Threat"

Considering how much of Germany's economy is export oriented it's a bit surprising to see major German media even raising the issue of the downside to globalization.
From Der Spiegel, February 4:

The new coronavirus in China has spread at an alarming rate, unsettling citizens and epidemiologists alike. It poses substantial challenges for our modern way of life – and threatens our globalized world where it is most vulnerable.
On the evening of Dec. 30, a young doctor in the Chinese city of Wuhan sent a short text message to a group of colleagues. "Seven cases of SARS have been confirmed at the seafood market in Huanan," he wrote. SARS, the viral disease that broke out in November 2002, claimed 774 lives.

The BIS Versus Larry Summers

From Inference Review:

A Lingering Crisis
Ten years ago, as the Great Recession drew to a close, the consensus among experts was that the losses incurred during the crisis would be absorbed quickly during a short period of strong recovery. In this, they were, no doubt, influenced by Kenneth Rogoff, who had just published a masterly study of the many financial crises since the Second World War. The greater the recession, Rogoff concluded, the stronger the recovery that followed.1 Nobody doubted that the same pattern would be repeated.

The recovery never arrived—not really. Growth has been positive but sluggish. During the eight years following the end of the recession, the average US growth rate was reduced by half. In Europe, aside from Germany, the GDP of the eurozone only returned to its 2007 level in 2016, nine years after the start of the crisis; the US required six years.

A comparison to the 1930s is even more telling. Despite the extent of the decline in European production during the Great Depression, 1929 levels were regained by 1935. In the US, the rate of recovery between 1933 and 1941 was twice that of the last eight years. From this point of view, the period following the most recent crisis should be seen as a quasi-stagnation, a breakdown of sorts, or even, at worst, a latent depression.

The Origins of Secular Stagnation
In 2011 and again at the end of 2014, American observers believed that the long-awaited recovery was finally underway. They were disappointed. Growth proved to be short-lived. If growth proved short-lived, not so optimism. The US media relies on the unemployment rate, currently at historically low levels, as the basis for believing in the possibility of a return to full employment. If so, there should be tell-tale signs of acceleration across a variety of indicators for more than a few exceptional quarters. This is not what has been observed. On the contrary, all the evidence suggests that what is taking place now is a third, and weakened, repetition of what has already happened twice.2
Why do we seem to be stuck in this long period of slow growth?

Lawrence Summers has offered the most popular explanation, appealing to ideas first formulated by Alvin Hansen in the aftermath of the 1937 recession.3 Hansen was largely responsible for popularizing the ideas of John Maynard Keynes, and, as such, is an important, although little-known, figure in the history of economics. Hansen believed the great stagnation of the interwar period was due to an exhaustion of the three main drivers of American growth during the nineteenth century: territorial expansion, population growth, and technological innovation. When economic expansion returned during the 1950s, Hansen’s predictions were quickly forgotten. If Hansen had been mistaken, Summers argued, it had only been because he was several generations ahead of his time.

According to Summers, the single most important economic indicator of the current era is the declining trend in interest rates. Without this decline, nothing that has occurred since 2007 would have taken place. Rates are today close to zero, the result of a process that began in the late 1980s. Although the actions of central banks have played a role in depressing interest rates, three long-term structural factors are of greater importance: an aging population and declining birth rate; increasing income and wealth inequality; and a decline in the relative cost of capital. Although Summers does not mention it directly, there is a fourth factor that should be added to this list: the slowdown in productivity since the 1970s. This has been documented statistically by Robert Gordon, who regards the slowdown as a point in Hansen’s favor.4 These four factors are very much in keeping with the spirit, if not the details, of Hansen’s analysis.

Summers has suggested that this combination of long-term factors has led to a deficit in aggregate demand that is likely to continue beyond the short term. This deficit had long been disguised by an increasing indebtedness among households, businesses, and public authorities. These groups artificially maintained their levels of consumption at the cost of colossal financial imbalances, which made it inevitable that some bubble or other would eventually burst. In theory, changes in interest rates during the crisis should have then led to a reset and a fresh start. As it turned out, the excessively low levels of interest rates effectively neutralized this mechanism. Borrowers kept borrowing.

During the early twentieth century, Knut Wicksell argued for the importance of a natural interest rate. If nothing else, a natural rate would make it possible to define an equilibrium state for the economy corresponding to normal growth. That equilibrium defined, interest rates could be changed, either to slow down the economy, or to revive it. Despite it serving as a compass, of sorts, for monetary policy, we have no empirical means of knowing precisely what a natural interest rate might be. In response to this problem, the central banks have developed rules of thumb for managing rates from inflationary trends. If inflation is increasing, interest rates are too low. Conversely, if inflation is trending downwards and approaching zero, interest rates are too high.

When nominal rates are already close to zero, adjustment mechanisms no longer work. This was the case at the end of the Great Recession, and inflation has continued to decline ever since. If interest rates became negative, economic players would have every incentive to hoard their wealth in cash instead of using it to refinance the economy. This scenario is known as a liquidity trap—the traditional tools of monetary intervention are rendered ineffective in an economy hamstrung by low inflation and lasting stagnation.5

These are the circumstances, Summers is persuaded, into which the developed capitalist economies have gradually settled since the crisis. There is only one possible solution: largescale state intervention in the form of major works and massive public investment in order to boost global demand. The twin perils of the liquidity trap and excessive debt would be overcome by a return to higher rates of inflation. If these policies are not instituted, there is little point hoping for a miracle. The risk of a new and even deeper financial crisis will be ever-present, and the world will have to become accustomed to a new era of slow growth, or secular stagnation. It is this scenario that Summers, along with Paul Krugman and others, feel best reflects the economic breakdown observed since 2008.

The BIS versus Summers
The influence of these ideas can be clearly seen in the medium-term forecasts published by the US Congress Budget Office and the US Federal Reserve Board. The specter of secular stagnation has shaped their vision of the future. Even the venerable Banque de France recently organized a symposium devoted to this theme.6 Nonetheless, this view is the subject of intense controversy among economists, particularly those working at the Bank for International Settlements (BIS) in Basel, the world’s oldest international financial organization.7 The BIS is owned and operated by 60 central banks and monetary authorities.

The rise of the internet and the information economy, Jean-Pierre Chamoux observed, has had a deforming effect on statistical economic analysis based on traditional industrial economies.8 Unless adapted for this new era, existing measurement and accounting tools may no longer provide a reliable image of economic activity. As the Brookings Institution has pointed out, this is reason enough to question the veracity of the productivity data relied upon by Summers and Gordon.9

Mainstream views of the economy are based on a number of hypotheses around which there is a genuine consensus in academic circles. These are now being contested, both by researchers favoring alternative frameworks and by the BIS. Consider the neutrality of money. Contemporary models assume that the effects of monetary policy are transitory. The dynamics of medium- and long-term economic processes are exclusively dependent on a set of real variables: demography, investment, savings, productivity, and so on. Money is seen only as an artifact that conceals underlying dynamics, but not an integral part of them. This explains why even the most complex and detailed current macroeconomic models do not consider financial data essential to the activities of most corporations.

The neutrality of money is a thesis now in doubt. In considering the last decade, the Economic and Monetary Analysis Department at the BIS studied whether econometric models can be enriched by including monetary and financial data among the equations describing credit, indebtedness, asset prices, or the structure and evolution of balance sheets. This work has shown that models augmented in this manner would have identified in advance the increasing financial imbalances that triggered the 2008 crisis.10 This is, of course, a remarkable result. It has also led to the accumulation of a considerable body of data, the analysis of which has cast doubt on the basis for the secular stagnation scenario advanced by Summers.

The natural interest rate is a purely virtual value: it must be measured by means of complex calculations deduced from a theoretical model. Economists at the BIS have shown that an econometric model incorporating their additional monetary and financial indicators leads to a new view of the natural rate. It should be significantly higher than it is, and not, in any case, negative, as Janet Yellen has suggested—based on studies by the Federal Reserve Bank of San Francisco.11 The liquidity trap, which plays such a central role in the arguments advanced by both Summers and central banks to justify monetary policy choices, should be much less restrictive than previously imagined.....

If interested see also one of the Letters to the Editor responding to this piece:
Money for an Open Global Economy