"Trump Can’t “Win” Trade War Without A Severe Recession"

Following on "Tariffs have a Laffer curve, too".

From Japan Economy Watch, March 28:

His Goal Is A Zero Trade Deficit 

Source: Bureau of Economic Analysis https://tinyurl.com/46434kvn Note: See explanation below

Donald Trump and his acolytes may not be smoking something. But they are certainly living in a pipedream. In their fevered visions, America has eliminated its trade deficit, and this has doubled factory jobs. The real problem is that they’re forcing everyone else to live in the same dream. Their efforts to make their futile dream come true could cause a severe recession.

Trump’s goal is to double the number of factory jobs to 20% of all jobs, because this is the share in Germany. He thinks he can do this by bringing the trade deficit to zero. He imagines that, if America cuts its imports of cars, machinery, semiconductors, consumer goods, and so forth, then manufacturers will make these things in the US. In reality, even if the trade deficit disappeared, there is no way factory jobs will double. I’ll explain the reasons in the next post, but the short answer is that manufacturing already suffers a big shortage of skilled labor, including indispensable engineers. But first, let’s see why Trump cannot bring the trade deficit to zero without causing a very serious recession.

Trade Deficit Shrinks Most When US Growth Slows or Goes Into Recession

Trump believes that the bigger America’s trade deficit, the slower American growth, particularly manufacturing growth. Actually, the reverse is true. America’s trade deficit is highest when America is growing rapidly and is smallest when America is in recession. When the US is at full employment and growing well, its imports grow faster than its exports, causing the trade deficit to expand. Conversely, the deficit shrinks when the economy slows and unemployment rises. That’s because, when both consumer spending and business capital investment slow down, the country needs fewer imports, and they fall faster than exports.

A look at the data for the past 60 years proves the point (see chart at the top of this post.) Between 1965 and 2024. GDP grew fastest in the eight years when the trade deficit worsened by at least 0.5% of GDP, e.g., expanding from 2% of GDP to 2.5%. In those years, GDP growth averaged 4.5% per year. Of course, the worsening trade deficit did not cause the economy to grow faster. Rather, faster GDP growth led to more rapid import growth. The second fastest growth came in the 30 years when the trade deficit worsened between 0% and 0.5% of GDP. In those years, GDP growth averaged 2.9%. Conversely, the trade deficit shrank when GDP growth slowed. The deficit shrank between 0% and 0.5% of GDP when growth averaged only 2.2% per year. And the slowest growth was in the eight years when the trade deficit shrank by more than 0.5%: average GDP growth of just 1.5%.

Today, the trade deficit stands at 4.5% of GDP (see chart below)....

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He won't get the trade deficit to zero but we are already seeing foreign manufacturers coming to the U.S. to avoid tariffs.

Maybe $100 billion so far and a couple hundred billion to follow.

"On This Day In History: Army Of Tsar Alexander I Of Russia Enters Paris – On March 31, 1814"

From Ancient Pages, March 31, 2016:

Tsar Alexander I of Russia, at the head of the Coalition Army, triumphantly marched into Paris, forcing Napoleon to abdicate a few days later.

The Coalition armies, including Russian, Prussian, and Austrian, entered France earlier that year and, after several battles, reached Paris's gates. By this time, Napoleon's army was weakened.

Previous battles caused massive casualties, and the nation was tired and discouraged. After 25 years of Napoleonic wars, only older men and children remained in some departments, and resources to support the war were scarce.

Russian and Prussian armies were the driving and decisive force behind the Coalition. The King of Prussia and Alexander I supported each other in the war against Napoleon. Alexander was determined; he wished to enter Paris just as Napoleon had entered Moscow on his failed invasion of Russia in 1813. Alexander promised, 'I shall not make peace as long as Napoleon is on the throne.'

It was a great move by Alexander, who deceived Napoleon.

During the battles on the outskirts of Paris, Alexander directed the main Coalition armies to march on to Paris. At the same time, a Russian general with a vast mass of 10,000 cavalrymen rode towards Saint Pizier, where Napoleon was in battle with the Austrian allies. Napoleon realized too late that a divisionary detachment was sent, not the main army. By this time, Russian and Prussian troops were nearing Paris....

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Former New York Fed Head Bill Dudley: "Why the Fed Wants to Keep More US Government Debt"

Sometimes the man sounds like a political hack and sometimes he sounds like a judicious and trustworthy counselor. The trick is to figure out which hat he's wearing on any given day.

From Bloomberg Opinion, March 26:

Why the Fed Wants to Keep More US Government Debt
It’s just making sure Congressional wrangling over the debt limit doesn’t destabilize interest rates. 

The Federal Reserve has raised some questions with its recent decision to slow the pace at which it’s shrinking its more-than-$4-trillion pile of Treasury securities. For example: Is it merely preparing for an adjustment to the federal debt limit, or is it trying to avert a crisis in the US government bond market?

With apologies for dampening the drama, I’m going with the mundane explanation.

Over the past couple decades, the Fed’s holdings of Treasury and mortgage securities have played a crucial role in monetary policy. After the 2008 financial crisis, and during the global pandemic, its asset purchases — known as quantitative easing — pushed down long-term interest rates and increased the reserves that banks held at the Fed. Since March 2022, it has been unwinding that stimulus, allowing its holdings to run off gradually with the aim of reaching the level of reserves banks need to satisfy their liquidity needs, with a buffer above that for safety.

Now, though, the impending Congressional fight over raising the federal debt limit is complicating things. When the government hits the limit, it can’t borrow to finance deficit spending. To make payments, the Treasury will have to draw down its balance at the Fed, potentially adding hundreds of billions of dollars in reserves to the banking system. Later, when Congress agrees to increase the limit as it always has, the Treasury will replenish its Fed account, depleting reserves at a rapid pace that — if the level drops too low — could force banks to scramble for cash.

The Fed doesn’t want a repeat of September 2019, when a shortage of reserves caused interest rates to spike. It considers the current supply to be well above “ample,” the level required to ensure that short-term fluctuations in reserves don’t destabilize rates, but it can’t know precisely how much banks will need. Hence, out of an abundance of caution, to ensure that reserves remain plentiful as the Treasury rebuilds its cash balance, it’s adjusting the pace of quantitative tightening. Beginning next month, it’ll reduce the cap on the monthly runoff of its Treasury securities, to $5 billion from $25 billion. The cap on mortgage securities will remain the same, at $35 billion (though the actual runoff has been slower, at about $15 billion a month).

Granted, the Fed’s move will have a small marginal impact on the US government’s borrowing needs. Once the debt limit is raised, the Treasury will have to issue slightly less debt to replace the smaller run-off from the central bank. But it’s a pittance in the context of a budget deficit running at roughly $2 trillion annually. It should have no bearing on whether bond investors will freak out about America’s fiscal outlook, which I agree is dire. The implications for monetary policy are also negligible....

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Calm, judicious, well-reasoned.

Advice From Nvidia's CEO: Everyone Should Use This Free Type Of AI

News you can use. Or not. Your call.

From CNBC, February 26:

Nvidia CEO: ‘I would encourage everybody’ to use this type of AI—it’s free and can teach you ‘anything you like’

Nvidia CEO Jensen Huang has some advice, and he says that nearly everyone would benefit by following it: Get an AI tutor.

“I have a personal [artificial intelligence] tutor with me all of the time. And I think that feeling should be universal,” Huang told journalist Cleo Abram’s YouTube interview show “Huge Conversations,” in an episode that aired last month.

That’s a virtual tutor powered by AI, not a human who can teach you how to use AI more effectively. “If there’s one thing I would encourage everybody to do, [it’s] to go get yourself an AI tutor right away,” said Huang, whose company makes computer chips that have helped power recent AI tech advances.

Huang’s preferred tutor is Perplexity’s AI-powered search engine, which he called a “really helpful” tool in an interview with the Bipartisan Policy Center last year. He uses it daily to learn about a multitude of subjects, including digital biology, he added. The search engine, like many other generative AI tools, offers users both free and paid subscription options.

Other AI platforms are designed to act more specifically as tutors, like free tutoring service Sizzle and Khan Academy’s Khanmigo AI tutor, which costs $4 per month....

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"Tariffs have a Laffer curve, too"

A lot of smart people, including the author of this piece, David Goldman, seem to be treating the Trump tariffs as old-school protectionist and or old-school revenue-raising measures. As best as I can tell the current administration is using them and the threat of more as a blunt instrument to force a lower trade deficit. From Politico February 5:

....U.S. goods imports in 2024 totaled $3.3 trillion, a record high, while exports were nearly $2.1 trillion, producing a 14 percent jump in the trade gap to $1.2 trillion.

The United States still runs a surplus in services trade, such as banking, travel and transportation. When that is included, the combined goods and services trade deficit totaled $918 billion in 2024, up 17 percent from 2023 and the second highest on record.

The report showed the U.S. trade deficit with China increased to $295 billion in 2024, but remained well below the record level of $418 billion set in 2018....

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And the headliner from Asia Times, March 30:

Tariffs in the 10%-15% range likely will generate significant amounts of new revenue without much damage to economic activity 

Legend has it that the supply-side revolution – Ronald Reagan’s 1981 cut in the US top income tax rate to 40% from 70%– began in a Washington restaurant, when economist Arthur Laffer drew his eponymous curve on a cocktail napkin for then White House Deputy Chief of Staff Dick Cheney.

At a tax rate of zero, the government has no tax revenues, but it also has no revenues at a tax rate of 100%, because the economy would shut down. Somewhere in between, there’s a tax rate that generates the maximum revenue.

The US can’t continue to run trillion-dollar trade deficits without dire consequences. The US net international investment position has sunk to negative $25 trillion, about equal to the sum of US deficits over the past 30 years. During the past decade, foreigners poured into US tech stocks. If the tech boom fades, for example, the US will have to persuade foreigners to buy bonds, and that implies higher interest rates to attract funds.

Tariffs are a tax, and Laffer’s simple illustration applies to the impact of tariffs as well, although more variables are in play. A reasonable guess is that tariffs in the 10% to 15% range would yield a meaningful amount of revenue without undue disruption of economic activity.

Tariffs have multiple effects: Domestic production will replace some imports, but some consumers and businesses will have to absorb higher import prices. Some exporters will build plants in the US to avoid tariffs, as US President Trump proposes....

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Our boilerplate mini-bio for Mr. Goldman:

...The author of this piece, David Goldman, is Deputy Editor (Business) at Asia Times.
Prior to taking that position he was:

• Global head of credit strategy at Credit Suisse
• Global Head of Fixed Income Research for Bank of America
• Global Head of Fixed Income Research at Cantor Fitzgerald
  

In addition to apparently not being able to hold onto a job I think one of his requirements for moving on was a "Global Head" title. (JK, young Master. G.)

He's pretty sharp. From February 11, 2022:

"Worse to come from worst US inflation in 40 years"

The author of this piece, David Goldman has been quite vocal (and quite accurate) about inflation not being "transitory." (I think the word deserves the scare quotes by this point, don't you?)

He has also been among the voices pointing out that the shelter component of the CPI, rent and owners equivalent rent, is not reflecting the real-time high-frequency data that we get on rent increases and house price appreciation. 

Although he does not go this far, saying instead that shelter inflation will show up later this year, I am starting to wonder if there isn't a methodological flaw in the CPI....

***** 

Previously:

January 22
"More inflation shoes to drop on NASDAQ by end-2022"
Soaring rent increases will hit the Consumer Price Index with a lag of up to eight months
January 20
David Goldman Looks At The Housing Component Of Official Inflation Statistics
October 2021
"Inflation depresses – later will clobber – stocks"
September 2021
Prices: "Rent blowout mysteriously missing from US report"
August 2021
"Home rents set to turbocharge US inflation"

Its almost as though he's trying to tell us something.

“Energy transition is the strongest commercial trend since the beginning of industrialization” ”There is an estimated $275 trillion capital need over the next 25 years"—Sweden's EQT

From Bloomberg via Advisor Perspectives, March 29:

EQT Raises €21.5 Billion for Its Latest Infrastructure Fund 

EQT AB has raised €21.5 billion ($23.2 billion) for its latest infrastructure fund — a sum a top executive for the Swedish investment firm says underscores how the energy sector’s funding needs trump an uncertain market for deals.

“The capital need for the next 20 to 25 years to transform energy and digital systems is so large, and there are only about five competitors that are as substantial and large as us, so we don’t see any roadblocks to dealmaking,” Lennart Blecher, head of real assets at EQT, said in an interview.

“Energy transition is the strongest commercial trend since the beginning of industrialization,” he said. There is an estimated $275 trillion capital need over the next 25 years, he said.

EQT Infrastructure VI, which had targeted €20 billion, met its hard cap, according to a statement Friday. It includes €21.3 billion in fee-generating assets under management. The vehicle is about 35% larger than its predecessor, which closed at €15.7 billion in 2021.

Bullish dealmaking predictions have been rare with global activity slowing in the wake of sweeping policy changes in the US. Infrastructure should buck the tend, according to Blecher.

“Most of the infrastructure services we provide are to domestic populations, so we don’t currently expect to see a large impact from tariffs,” Blecher said in the interview. “People need energy and connectivity in good and bad times.”

While fundraising for infrastructure strategies has been relatively easier than raising money for buyouts, challenges are emerging as contributions from institutional investors are flatlining after years of large commitments.

EQT, which has €75 billion of global infrastructure assets under management, has been raising money for its latest fund since 2022 and has already closed 10 investments....

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Capital Markets: "Equities and Rates: Look Out Below"

From Marc Chandler at Bannockburn Global Forex: 

Overview:  The US dollar begins the new week mostly firmer. The dollar-bloc currencies and Scandis are the weakest. Sterling and the euro are little changed, while the continued drop in the US 10-year yield has helped lift the yen by nearly 0.5%. Emerging market currencies are mixed as well. A handful of Asian currencies, including the Chinese yuan, are higher. The Turkish lira is also firmer, after falling nearly 4% over the past two weeks. Russia, which apparently has disappointed US President Trump, who has threatened secondary tariffs its oil if it does not accept the cease fire with Ukraine, has seen the ruble soften today.

The knock-on impact from the US tariff offensive is taking a toll on equities. Japan's Nikkei 225 stumbled by 4%, as did Taiwan's Taiex. South Korea's Kospi dropped 3%. Australia's ASX 200 was off 1.75%. The Hang Seng lost 1.3% and China's CSI 300 fell 0.7%. India is off less than 0.5%. Europe's Stoxx 600 is down for its fourth consecutive session and its nearly 1.3% loss is greater than the loss of the past two sessions put together. It gapped lower today and US index futures are poised to do so too. Some of the flows out of equities is finding a haven in the government bond markets. The 10-year JGB yields fell five basis points to 1.48%, while European benchmark rates are mostly 2-4 bp lower. The 10-year yield Treasury is below 4.20%. It settled only once since last December below 4.20%, and that was on March 3. Gold jumped to a new record near $3128. It settled around $3011 a week ago. May WTI is firm slightly below $70 but has been in a $68.80-$70.15 range today....

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Britain's 'Just Stop Oil' Declares Victory

 First up, From Politics UK:

🚨 BREAKING: Just Stop Oil announces an end to protests after the Government adopted its policy of halting new oil and gas licenses

“It is the end of soup on Van Goghs, cornstarch on Stonehenge and slow marching in the streets”

— Politics UK (@PolitlcsUK) March 27, 2025

The press release from juststopoil.org:

Just Stop Oil is hanging up the hi vis

Press / March 27, 2025

Three years after bursting on the scene in a blaze of orange, at the end of April we will be hanging up the hi vis. 

Just Stop Oil’s initial demand to end new oil and gas is now government policy, making us one of the most successful civil resistance campaigns in recent history. We’ve kept over 4.4 billion barrels of oil in the ground and the courts have ruled new oil and gas licences unlawful.

So it is the end of soup on Van Goghs, cornstarch on Stonehenge and slow marching in the streets. But it is not the end of trials, of tagging and surveillance, of fines, probation and years in prison. We have exposed the corruption at the heart of our legal system, which protects those causing death and destruction while prosecuting those seeking to minimize harm. Just Stop Oil will continue to tell the truth in the courts, speak out for our political prisoners and call out the UK’s oppressive anti-protest laws. We continue to rely on small donations from the public to make this happen. 

This is not the end of civil resistance. Governments everywhere are retreating from doing what is needed to protect us from the consequences of unchecked fossil fuel burning. As we head towards 2°C of global heating by the 2030s, the science is clear: billions of people will have to move or die and the global economy is going to collapse. This is unavoidable. We have been betrayed by a morally bankrupt political class....

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Meanwhile, in China, from The State Council Information Office of the People's Republic of China, March 31:

China discovers major oilfield in South China Sea

The China National Offshore Oil Corporation (CNOOC) announced on Monday that it has discovered a major oilfield in the eastern South China Sea, with proven reserves exceeding 100 million tonnes.

The newly discovered Huizhou 19-6 oilfield marks a breakthrough in China's offshore oil exploration, as it is the country's first large-scale integrated clastic oilfield discovered in deep to ultra-deep layers, CNOOC said.

Situated about 170 km from Shenzhen in south China's Guangdong Province, the oilfield sits at an average water depth of 100 meters. Test drilling has yielded a daily production of 413 barrels of crude oil and 68,000 cubic meters of natural gas, demonstrating its potential....

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Factoids:

A rough definition of a "giant" oil field is anything 500 million barrels and above.

100 million tons is a bit over 700 million barrels.

Inside China the State Council Information Office is known as the Central Propaganda Department of the Chinese Communist Party.

Is France Considering Tariffs On Cocaine Imports?

I'm being facetious but the problem is all too real.

From Le Monde, March 27:

Cocaine prices at their lowest since 2014 

A gram of the drug now costs €58, compared with an average of €65 over the last 10 years. This unprecedented drop is due to the abundance of the product and competition between criminal networks and also reflects the increase in the number of consumers. 

Is it the result of a commercial strategy by drug trafficking networks or the start of a long-term trend? For the first time since 2014, the price of a gram of cocaine has dropped in France, according to a confidential memo from the French Anti-narcotics Office, seen by Le Monde. While a gram of the narcotic traded at between €65 and €66 for more than 10 years – with a peak at €70 in 2018 – the price fell in 2024 by more than 10% to an average of €58, an unprecedented price.

The abundance of the product partly explains the drop, as the global supply of cocaine seems to be continuing its upward trend since the record production levels in 2022. Published in January, the annual report of the United Nations Office on Drugs and Crime showed that that year had seen "the manufacture of more than 2,700 tons [of cocaine], 20% more than the previous year and three times more than in 2013 and 2014."

The growing number of consumers may also contribute to this fall in prices, amid a context of strong competition between market players. On January 15, in its 10th edition of "key figures" relating to "drugs and addictions," the French Monitoring Center for Drugs and Drug Addiction (OFDT) considered "the wider diffusion of psychostimulants," including cocaine, to be "one of the major trends of recent years." In 2023, the period studied for this overview, 1.1 million French people had used cocaine at least once.

'No monopoly'
According to researcher Christian Ben Lakhdar, a professor at the Université de Lille and an expert in the narcotics market, the fall in cocaine prices reveals other phenomena, indicative of the state and structure of the market. In his view, this downturn illustrates the continuing high level of "competition between organizations involved in the resale of narcotics" and, consequently, proof of the "absence of a monopoly or cartel."

While the diversification of marketing methods, including the rise of delivery, should have automatically led to an increase in price per gram, "as logistics costs increase with the last kilometer," competition between networks seems to be abolishing this constant in the setting of retail prices. In other words, drug resale organizations are cutting back on their profits in the hope of not losing customers – or gaining new ones. 

This strategy includes new ways in which cocaine is packaged, no longer in one-gram sachets, but in specially-designed packages for smaller quantities, affordable to all – and highly attractive to the youngest customers. In 2024, the OFDT already observed the evolution of packaging facilitating "the accessibility of cocaine (...) through fractional sales (by the half-gram at €30 or €40 or, for small amounts, [through] smaller bags sold for €15 or €20)."

Standard consumer product
While the average price has fallen, significant disparities remain between regions. In the Nord department (northern France), on the border with Belgium and the Netherlands, where Antwerp and Rotterdam ports are among the main entry points for drugs into Europe, prices fell even more sharply in 2024, with a gram costing €53.20. In Corsica, on the other hand, despite the considerable spread of narcotics over the past 15 years, remoteness, difficulties in transporting the product, the limited size of the local market and several blows dealt by law enforcement to traffickers mean that the island is the most expensive region for cocaine, with a retail price of €61 per gram....

....MUCH MORE

Also at Le Monde, January 2025: "Study says cocaine use in France nearly doubled in 2023".

The supply does seem to be quite ample and ripe for tariffs:

"7 tons of cocaine found buried underneath farm in Spain..."
Is that a lot? That seems like a lot.

Distribution/Logistics: "Flanders, the hub for international cocaine trafficking"

Criminal Entrepreneurship: "How Drug Cartels Operate Like Silicon Valley Startups" (N.B. not exactly like Silicon Valley but close)

Logistics: "Colombian caught in Spain with cocaine under toupee"
Kids, don't do drugs. They make you do things like this.
And then the cops take pictures.

Berlusconi Blames Stock Market Volatility On Cocaine (and a look at neurotransmitters)  

"Cocaine Will Survive Global Warming"
Blowhounds everywhere rejoice. 

"Balkan Operation Nets Pink Panther Boss, Cocaine Kingpin"

Unwanted Side Effect: Cocaine Vaccine Leads Addicts to Take 10 Times More Cocaine 

So yes, a real problem, with demand increasing rapidly and supply increasiing even faster.

"Recession’s Role In Disruption"

One example we've looked at a few times was brassieres.*

From Nick Colas' DataTrek (though this piece is seven years old the points made are evergreen): 

The first lead-managed equity deal I ever worked on was saving Chrysler from bankruptcy in 1991. Investment banks led by the old Salomon Brothers and First Boston (where I worked) raised $140 million for the near-dead automaker in November 1991. Money was so tight at Chrysler that our capital markets desk had to wire proceeds directly from the settlement account to some of the company’s parts suppliers, who themselves were days from insolvency.

The biggest reason investors bought into the deal: Chrysler was about to launch the Grand Cherokee, a direct competitor to Ford’s successful and highly profitable Explorer. Four door SUVs were rare back then, and consumers loved them. So much so, in fact, that the average gross margin/unit was +$15,000 versus a corporate average of $3,000.

That experience, and many more equity deals in the years after, taught me 3 things about the auto industry:

• Cyclicality is brutal on profits, but at least that cuts both ways. The Chrysler deal went off at $5/share because the company was losing $1/share in earnings. Five years later (in a better economy and with a raft of new products) the company was earning close to $5 in EPS.
• That volatility in earnings can play havoc with product development. Research & development/tooling costs for a new vehicle start at $1 billion. In 1991 Chrysler was still selling “K cars”, a platform developed in the 1970s, because it had delayed new car development during the 1988 – 1991 downturn.
• The auto global auto industry is deeply dysfunctional. Chrysler was a simple story: one region (US) and one product segment (trucks like SUVs and minivans). The worldwide auto industry is far more complex. Product preferences vary depending on everything from government regulation to fuel taxes. And, worst of all, there are far too many automakers and overcapacity leaves industry returns well below the cost of capital.

How all this relates to tech-based innovative disruption: autonomous vehicle (AV) development, design and production sits squarely atop the global auto industry’s cyclical (and fundamentally shaky) foundations. Three thoughts here:....

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*January 2008:
Lazard Notes Bare Escentuals As Recession-Resistant (BARE) and Climateer thinks of Bras

I feel pretty.
This is a bit off-topic, although with some tortured logic I could make a green case for BARE. Lazard's analysts are pretty sharp and don't throw terms like "recession resistant" around just to flap their lips. Plus for some reason I was thinking of Maidenform this morning.

And no, it doesn't tell you as much about me as might be assumed. Maidenform was one of the most solid companies in the country during the Great Depression:

...By 1928 Maidenform was making nearly 500,000 brassieres a year. Sales declined only in the Great Depression year of 1932....More

and from the PBS series "They Made America":

Narrator: In 1928, Maiden Form sold a half million bras. That year Enid Bisset left the business in poor health. The fate of Maiden Form rested on the Rosenthals' shoulders.

Koehn: She's savvy, and she understands business, and she wants to be a businesswomen. It's less clear that he's on the channel, but what is clear is that he has a very creative, very imaginative mind, as well, and so you have one plus one, but in a very unusual entrepreneurial partnership equals three.

Narrator: With William providing the product, and Ida the sales the company kept growing through the stock market crash, when glamorous boutiques like Ida's previous business seemed to disappear overnight, and through the Depression, when businesses folded around them but they continued to hire.

Coleman: Maidenform did okay in the Depression. This business was really not so sensitive to economic fluctuations. Because as it became an item that women felt they needed, and it's also an indulgence that isn't that expensive. It was something that women could buy when they didn't feel that economically powerful.

And that's my investment thesis for Bare Escentuals. Lazard's is a bit more sophisticated.

Via 24/7 Wall Street:

Bare Escentuals, Inc. (NASDAQ: BARE) may be one sweet spot that is at least partially immune from the ups and downs of consumer spending. Today we are getting word out of Lazard Capital Markets that its analyst Jacklyn Rider, its Healthy Lifestyles analyst, is reiterating her Buy rating on Bare Escentuals with a $27.00 target as she feels the growth story is unchanged.

This is fairly new coverage from Lazard Capital Markets as it appears the firm initiated it with a Buy rating earlier this month. This call is after the company's management presented at the ICR Xchange conference in California last week to a standing-room only crowd. The company reiterated its long-term growth opportunities to acquire customers, cross-sell products, and expand its points of distribution and international business.

Some of the points noted was a back to basics approach for new products and this note even discusses a recession-resistant product line that "is less sensitive to economic factors and that women will give up other discretionary items before makeup." Ms. Rider also noted that channel checks indicate that customer demand and enthusiasm for Bare Escentuals' products have not seen any slowdown....MORE

The stock's up a dime with the market down a hundo.

If interested here's a list of "150 Highly Successful Companies Started During a Recession"

"Are We Under-Bubbled?"

From The New Atlantis, Spring 2025 

Why the future needs more people willing to be duped  

For Byrne Hobart and Tobias Huber, partners at the tech investment firm Anomaly, a financial bubble is the closest that human beings can get to spooky action at a distance. Their provocatively titled new book Boom: Bubbles and the End of Stagnation aims to make the case that the visionary cascades, which almost always end in collapse, are on balance actually good. A few massive successes, in their argument, more than pay for the short-term rise and falls. Bubble dynamics are marked, the authors write, by “definite optimism.” Bubbles, at their best, are a mechanism for trust and collaborative action. Major technological breakthroughs of the past century would have been impossible without them.

The several definitions of bubbles provided in the book don’t leave a reader totally clear on what counts as one. While in general use a “bubble” often has a fraud at its heart, for the authors it doesn’t have to. It can even involve an endeavor as tightly coordinated and official as the Manhattan Project. They offer little discussion of conventional bubbles like the Dutch tulip mania or the blood-testing fraud Theranos.

Instead, what the reader gets is an inside view of belonging to a growing bubble, and of what good the authors think society and the individual can derive from these moments of intense collaboration. Participating in a bubble can feel like being in on a secret, belonging to a sworn confederacy whose actions reinforce each other. Hobart and Huber see “a belief system oriented toward self-reference and self-fulfillment” as core to a bubble’s dynamic. Epistemic closure is a feature, not a bug, as long as you’re closing ranks around some not-yet-widely-appreciated truth. The insular nature of the bubble gives members the chance to abandon persuasion and focus on living out the consequences of their possible insight — for better or for worse.

If the reading experience of Boom seems a little deliberately alienating — in stark contrast to Stripe Press’s beautiful, pick-me-up construction of the physical book — perhaps that’s the authors imposing a “you must be this crazy to enter” filter of their own. Before readers get to consider the authors’ case for bubbles, they’ll need to get through lengthy recriminations over the end of the Bretton Woods monetary system and the rise of fiat currency. Hobart and Huber care deeply about inflation as a risk inhibitor — they feel that a world where money loses value moment to moment leads to a general devaluation of and disinvestment in the future.

A nation of calm, prudent index fund investors (guilty!) is limiting what the authors see as the proper flow of money and talent toward the projects that reshape the world. Hobart and Huber aren’t interested in breakthroughs by a lone genius. They are interested in the achievements that require many different people, operating with limited communication and little coordinating authority, pouring time and treasure into a project that requires them all to keep faith. A bubble, as they see it, is a way of meeting in the cooperate–cooperate cell of a prisoner’s-dilemma matrix.

Hobart and Huber identify Moore’s Law as an example of a straightforwardly positive bubble that required this sort of solidarity to stay true. Gordon Moore, the co-founder of Fairchild Semiconductor and Intel, noted in 1965 that the number of transistors on an integrated circuit doubled about every year and a half, and that he expected this trend to continue. His industry took his claim and reified it to a law. Software makers planned projects that presumed that chips would continue to increase in potency and decrease in price. Chip manufacturers pushed past the present state of the art, trusting that their customers would innovate in a way that required better than the current best.

If it hadn’t been for Moore’s pronouncement, progress might have been more halting. It takes a certain appetite for risk to build something your customers do not yet know to desire....

....MUCH MORE

If interested see also December 2024's William Janeway: "Productive Bubbles".

The railway mania of the 1840's is often pointed to as a productive bubble. We have on offer:

New York Fed's Crisis Chronicles: Railway Mania, the Hungry Forties, and the Commercial Crisis of 1847

The Time Charles ('Popular Delusions...') MacKay Thought 'This Time it's Different' 

Winton on the Railway Mania 

"This time is different: An example of a giant, wildly speculative, and SUCCESSFUL investment mania"

"The World Speculation Made"

Finally, as Adam Smith put it in his book on the 'sixties bull market, The Money Game:

“Now you know and I know that one day the orchestra will stop playing and the
wind will rattle through the broken window panes, and the anticipation of this
freezes us. All of these kids but one will be broke, and that one will be the multi-
millionaire, the Arthur Rock of the new generation. There is always one, and
maybe we will find him.”

—As seen in February 2024's "JPMorgan's Jamie Dimon On The Business Case For AI: "This Is Not Hype" (JPM)" 

"Can We Build a Five Gigawatt Data Center?"

That's a lot o'leccy.

From Asterisk Magazine, Issue No. 9:

By 2030, leading AI labs will need data centers so massive they will require the power equivalent of some of America’s largest cities. Will they be able to find it?

We access AI through our screens as part of the ephemeral digital world that makes up the internet. But AI doesn’t actually live in the cloud. 

AI lives in data centers. Tens of thousands of computers racked in rows hum away in buildings the size of several football fields. It's louder than you would expect. Industrial fans push in a constant breeze of chilled air, funneling away the waste heat. Thick bundles of fiber optic cables snake along ceiling tracks like mechanical veins, carrying unfathomable streams of data. 

This is a 100-megawatt data center — a facility that consumes as much electricity as a small city, all to keep the digital world spinning. It’s impossible to say exactly how many exist today — companies prefer to keep their data centers private — but estimates put the number of hyperscale data centers worldwide at over 1,000. Yet, despite their footprint, they are already being outclassed in the constant need for more compute capable of training future generations of AI. We have reached the point where, if we don’t build bigger centers soon, tech giants will be forced to stretch training runs over multiple years. In short, AI has already outgrown its starter home.

GPT-4 was reportedly trained with 30 MW of power. Forecasts predict that in the next five years large training runs will require 5-gigawatt data centers ¹ — facilities at least 10 times the size of today’s largest data centers. That is roughly the average energy needed to power all of New York City. 

Tech leaders seem confident that they’ll be able to build centers of a size that even a few years ago would have seemed unprecedented. Mark Zuckerberg said a 1-GW data center is “only a matter of time.” Meta has broken ground on their largest data center yet, where they hope to bring one gigawatt online in 2025. Microsoft and OpenAI are reportedly planning a 1- to 5-GW “Stargate” facility supposedly launching in 2028. Sam Altman even pitched the White House on the construction of multiple data centers that each require up to 5 GW. Tech, in short, is betting on a YIMBY future for AI training. 

But how realistic are these plans? For all of the big talk, most GW proposals are still in the planning and permission stages. And actual sites in the United States that could support 1-GW — let alone 5-GW — projects are scarce for several reasons....

....MUCH MORE

"The prehistoric psychopath"

 From Works In Progress, March 13:

Life in the state of nature was less violent than you might think. Most of our ancestors avoided conflict. But this made them vulnerable to a few psychopaths.

We are naturally a highly violent species with a thin veneer of civilization that masks a brutal proclivity for violence – or so many people think. In the seventeenth century, Thomas Hobbes said that human life without government is ‘solitary, poore, nasty, brutish, and short’. William Golding’s novel, The Lord of the Flies, which won the Nobel Prize for literature in 1983 and many of us read in school, suggests that boys will rapidly descend into mob violence and brutal cruelty without oversight from authority. To know whether this is true, we need to understand the rates of violence among our ancestors. 

There is longstanding disagreement on this issue among scholars: many hold the cultural assumption that humans are by nature bellicose, but there is also a ‘noble savage’ camp that believe the opposite. Stephen Pinker’s influential 2011 book The Better Angels of Our Nature tipped the scales by using a data-oriented approach to demonstrate that prehistoric people tended towards extremely high violent death rates, with average rates of violence higher than during the peak years of World War Two.

However, Pinker’s data also showed that prehistoric hunter gatherers seem to have been less violent than prehistoric agriculturalists. This is of critical importance in understanding human history because for 96 percent of our evolutionary history, we were hunter gatherers. 

Comprehensive new research has emerged with much more archaeological data on violence in prehistory. Analysis indicates that prehistoric hunter gatherers were considerably less violent than the orthodoxy previously held. This finding also seems to be borne out by ethnographic data on modern hunter gatherers with lifestyles relatively similar to their prehistoric ancestors.

Hunter gatherers were not non-violent noble savages by any stretch of the imagination. They were relatively violent when compared with modern standards and even when compared with rates of violence experienced by other primates and mammals in general. However, we think this is primarily because human conflict is so lethal, not because it happens so often. On the contrary, hunter gatherers typically exhibit non-violent norms, with amoral and atypical sociopaths accounting for a disproportionate share of violence, just as in our own societies today.

Understanding this matters. Our extraordinary capacity to inflict lethal violence on each other is normally held in restraint by the natural aversion most people have to violence. If we fail to cooperate, we are vulnerable to falling into vicious cycles of violence that don’t benefit anyone. But we should be more optimistic about our capacity for peacemaking. Despite living in states of political anarchy, hunter gatherers were normally able to cooperate and exist peacefully together. 

The debate over hunter gatherer violence

For the first 290,000 years of our species’ approximately 300,000 year history, everyone was a hunter gatherer. In The Better Angels of Our Nature, Steven Pinker argued that hunter gatherers were extremely violent. Better Angels claims that at least 14 percent of prehistoric hunter gatherers died violently. This equates to a violent death rate of at least 420 per 100,000 people per year, using data on typical hunter gatherer mortality rates.

This is a much higher rate of violence than almost anywhere in the modern world in the twentieth and twenty-first centuries. To put it in perspective, global deaths from all types of violence between 2004–21 were around 8 per 100,000 people per year. Even the most violent cities in the world today, in Northern Brazil, South Africa, and on the Mexican side of the US-Mexico border, have murder rates of only around 100 per 100,000 per year.

The implication in Better Angels is that the human mind evolved and developed in a world plagued by constant, endemic violence. 

Our 2022 study examined both the ethnographic data – contemporary studies of groups that existed until some modern contact – and archeological data on hunter gatherer violence, much of which comes from data gathered after the publication of Better Angels. We reviewed quantitative estimates of rates of violence in ethnographies, filtering for groups that are most representative of our pre-agricultural ancestors. Our archeological estimates are based on reanalyzing a dataset developed by Gomez et al. (which was released after Better Angels was published and has dozens of extra samples), which attempts to measure rates of violent death by looking for evidence of trauma to skeletal remains. Our study produced estimates for lethal violence around four times lower than Pinker’s figures....

....MUCH MORE

Possibly also of interest:

"Why your boss' preference for black coffee could mean they're a psychopath"
The Upside of Lying, Cheating and Arrogance
Sodom, LLC: The Marquis de Sade and the Modern Office Novel
If You Think You’re a Genius, You’re Crazy
"New Study Suggests Not Sharing Laughter is an Early Sign of Psychopathy"

Review--"The Wisdom of Psychopaths: What Saints, Spies and Serial Killers Can Teach Us About Success"

Yuck. For a more lighthearted look at abnormal psychology there's that time a researcher in a state mental institution brought together three paranoid schizophrenics who thought they were Jesus, written up as The Three Christs of Ypsilanti. After a rather tense beginning they each became slightly more accepting of the others but eventually it all broke down:

....The relative friendliness that the men showed to each other – which Rokeach put down to the patients attempting to appear amenable, as befitting their status as the son of God – soon broke down and led to verbal and physical fights between the three "Jesuses".

In one meeting, Clyde declared that Leon "oughta worship me, I'll tell you that" ....

The Upside Of Your Psychopathic Tendencies
Psychopaths as marginalized community.

Ace Greenberg: "never make fun of a millionaire, never hit a cripple, and never have sex with an idiot."

 "Contrary to stereotypes, study of hedge fund managers finds psychopaths make poor investors"

"Psychopaths in the Netherlands are different from psychopaths in the US"
Yes.
They say verzekering and herverzekering rather than insurance and reinsurance.

"The Chinese are doing everything right, and they're still going to lose"

From the demography-is destiny-folks at EXIT, February 12:

The Chinese have been on a generational bull run.

Like the Japanese, they spent thirty years clawing their way up from bottom-of-the-barrel low-cost, low-skill manufacturing, to become a genuine military, industrial, and technological challenger to the United States.

In fact, on the performance indicators that defined power in the 20th century, China already dwarfs the USA. Their standing army is roughly one-third larger. They produce nearly twice America’s overall manufacturing output, 10x our steel production, and 230x our shipbuilding capacity.

Of course, those indicators may not define success in the 21st century — but China has also reached parity or better in AI, robotics, and even the quintessentially American game of social media. They aren’t a low-tech, brute-force player anymore — they are approaching full-spectrum economic leadership.

Like America at the beginning of the 20th century, China has been peacefully expanding under the defensive umbrella of a declining naval and economic hegemon. Like the British Empire before it, America’s imperial commitments are becoming expensive and domestically unpopular, and China is openly preparing to take the wheel.

China is advancing on every front — except one.

According to Chinese government statistics, China’s population began declining in 2021, from a peak of 1.412 billion. Their workforce has been in decline since 2015.

This makes their situation massively different from America’s in 1914, because there are only two ways an economy can grow: through increased productivity per worker, or through natural increase (producing more workers.)

When a nation’s population is growing, they don’t just get more workers — they also get the natural stimulus of increased demand, as the growing, youthful workforce demands more homes, more electrical generation, more manufactured goods, expanded infrastructure, etc.

Conversely, when the population is declining, speculative and expansive investments become much more dangerous.

For instance, if you bought a house at the top of the inflated US real estate market in 2008, you could wait a few years for demand to catch up — but if you bought one of China’s 80 million vacant apartments, allegedly enough to house 3 billion people — those homes will never be occupied in your lifetime. They’ll literally rot and be reclaimed by nature first.

America has made empty promises to its retirees in the form of unfunded Social Security and Medicare entitlements — but China is performing a similar shell game in real estate.

China’s social programs for seniors are minimal, so workers must retire from their personal savings — but China severely restricts retail financial investing and capital outflows overseas, so most Chinese households’ primary investment vehicle is domestic real estate: 70% of Chinese household wealth is in their home(s), compared with 29% for US households.)

This is not equivalent to an “overheated” market that will crash and then recover: these investments are worth zero yuan, they will never be used by anyone. Building these fake projects “in the real world” with heavy machinery is arguably better than doing it with confabulated financial instruments (at least the machinery and labor training are theoretically good for something) — but the investments themselves are 100% fake.

And real estate is only an example of the larger phenomenon: capital markets depend on the promise of growth....

....MUCH MORE

Over the years we've had quite a few posts on demography, both regarding China in particular and the the world more generally.

Among the former the most stunning forecast is in January 2024's "How Serious Is China's Demographic Doom? Almost Beyond Comprehension".

The outro was How does a country lose 80% of their working-age population in 86 years?

"America Is Missing The New Labor Economy – Robotics Part 1"

 From SemiAnalysis, March 11:

China's Dominance Playbook, General Purpose Robotics Is The Holy Grail, Robotic Systems Breakdown, Supply Chain Hardships, The West Is Positioned Backward And Covering Their Eyes, China's Clear Path to Full Scale Automation, Call For Action

SemiAnalysis is hosting an Nvidia Blackwell GPU Hackathon on Sunday March 16th. It is the ultimate playground for Blackwell PTX tech enthusiasts, offering hands-on exploration of Blackwell & PTX infrastructure while collaborating on open-source projects. Speakers will include Philippe Tillet of OpenAI, Tri Dao of TogetherAI, Horace He of Thinking Machines, and more. Sponsored by: Together, Lambda, Google Cloud, Nvidia, GPU Mode, Thinking Machines, OpenAI, PyTorch, Coreweave, Nebius. Apply to be part of the fun.

This is a Call for Action for the United States of America and the West. We are in the early precipice of a nonlinear transformation in industrial society, but the bedrock the US is standing on is shaky. Automation and robotics is currently undergoing a revolution that will enable full-scale automation of all manufacturing and mission-critical industries. These intelligent robotics systems will be the first ever additional industrial piece that is not supplemental but fully additive– 24/7 labor with higher throughput than any human—, allowing for massive expansion in production capacities past adding another human unit of work. The only country that is positioned to capture this level of automation is currently China, and should China achieve it without the US following suit, the production expansion will be granted only to China, posing an existential threat to the US as it is outcompeted in all capacities.

This is the manufacturing playing field that China has dominated for years now. The country has one of the most competitive economies in the world internally, where they will naturally achieve economies of scale and have shown themselves to be one of most skilled in high-volume manufacturing, at the same time their engineering quality has grown to be competitive in several critical industries at the highest level. This has already happened in batteries, solar, and is well underway in EVs. With these economies of scale, they are able to supply large developing markets, like Southeast Asia, Latin America, and others, allowing them to extend their advantage and influence. 

The impact of this in robotics will be exponential compared to their last strategic industry captures. These will be robotics systems manufacturing more robotics systems, and with each unit produced the cost will be driven down continuously and the quality will improve, only strengthening their production flywheel. This will repeat ad infinitum and as quality inevitably increases it will make it extraordinarily difficult for other countries to compete. Due to the fact that robotics is a general purpose technology, this will have horizontal impacts on all manufacturing sectors and all other currently advantaged industries as well–textiles, electronics, consumer goods, etc. At the moment, the West is caught flatfooted: South Korea and Japan have a birth rate crisis that is throttling their manufacturing capabilities, European industrial sectors are being eaten alive by China and their inability to generate power, and the US is focused on other markets and procuring cheap overseas production, all the while China’s manufacturing capacity has gotten stronger and robotics is catching fire. 

Source: SemiAnalysis, IFR.org.

China’s robotics localization effort is well underway. Local firms are taking over the world’s largest market, approaching a 50% market share, compared to just 30% in 2020. While Chinese manufacturers are currently on par with Western giants in the low-end market, our supply chain review leads us to believe that local firms are beginning to take over the higher-end market segments. The rise of Unitree exemplifies this shift: the only viable humanoid robot on the market, the Unitree G1, is now entirely decoupled from American components.

Source: SemiAnalysis, IFR.org.

Today, building an identical robot arm (modeled after the Universal Robots UR5e) in the US is ~2.2x more expensive than in China. Under the hood, the situation is even more alarming. Even if those components are labeled “Made in USA”, they rely heavily upon China-made parts and materials – with no viable scalable alternative.

Source: SemiAnalysis

Drones, DJI, GoPro, and How Iteration Speed Paves Victory’s Path
The commercial drone market exemplifies China’s scale/oversupply playbook in every strategic industry it has entered, however, this is the first example of the strategy in a robotics-adjacent market. Local leader DJI today accounts for over 80% of the global commercial drone market… and 90% in the American consumer market! While the company was a first-mover, it maintained and consolidated its market position for over a decade thanks to China’s manufacturing dominance and economies of scale/oversupply strategy.

Source: SemiAnalysis, Industry Estimates

Let us explain how. To properly develop a functional and robust piece of hardware, the creation + recreation (i.e. manufacturing) must be iterated repeatedly and rapidly to work out the kinks and perfect the product before competitors. However, the most challenging thing for Western competitors is that Chinese markets are built to reward the company that can scale the fastest, so before a Chinese competitor ever enters the Western market it has already outclassed them in cost, all that’s left is for the quality to refine over the coming iterations. 

GoPro tried to compete in the consumer drone market despite having most of its manufacturing based in China, Malaysia, and Japan, which meant that each iteration of their drone took several weeks – likely starting the design in California, sending over the details to the manufacturers in China and having them build it, and shipping it back to the USA before ever finding out what needed to be ironed out in this attempt. Contrast this with DJI, which was based in Shenzhen, meaning the company could get any needed part from any factory in Shenzhen within hours of ordering and iterate at an unreal speed.

As a result, in 2016, GoPro’s Karma Drone + Hero5 were outclassed by DJI’s drones. At $999 vs $1,099, DJI was slightly cheaper, had a battery life 50% longer, had obstacle avoidance already implemented, and the launch of the Karma was plagued with hardware issues and a recall/refund program for their faulty product, which sometimes lost power during operation. GoPro likely could have solved these problems through enough work, but the company simply didn’t have the time, as DJI had already surpassed them in every way. 

Quickly after entering the Western markets, DJI’s incredible cost advantage and sheer production capacity quickly led to oversupplying the market, and capturing a massive amount of market share. Every other major drone company was quickly undercut heavily by DJI’s aggressive pricing. GoPro cited “margin challenges” being a reason for disbanding their Karma program, and many other companies crashed alongside. DJI was the only one to understand that this was a competition of scale and had long been prepared before entering the Western markets. 

In the world of Robotics, manufacturing dominance is key. To build a complete and functional robot means recreating the robot countless times and fine-tuning each minor mistake until a solid, scalable, and cost-effective product. This luxury is readily available to those who have the manufacturing capacity nearby and at an affordable cost, and its absence means a disadvantage. With a share of GDP three times higher than that of the US, China’s industrial base outcompetes that of America’s in every possible way.

Source: Worldbank, FRED

Our goal with this multi-part Robotics series is to illuminate landscape of the robotics and manufacturing industry, and convey the magnitude of the labor transformation it is poised to unleash. In Part One, we examine the current state of the market and take a deep dive into the hardware architecture of commercially available industrial robots. Our analysis demonstrates that China is rapidly taking over the market, leaving competing nations behind and preparing to capture a revolutionary technology. We also explore the broader repercussions for the Western trailing-edge semiconductor ecosystem.

China’s ascendancy positions it perfectly to lead next-generation robotics—a field we anticipate will generate significantly higher macroeconomic benefits. In Parts Two and Three of our series, we will delve into the intricate hardware and software architectures of next-generation systems and address the remaining challenges on the path to achieving “Robotics AGI” across form factors. We will also pinpoint the likely frontrunners in this emerging market.

For now, let’s start with some basics and explain how why robots are more difficult to build than most understand.

More Than Just A “Robot”
Robotics is a systems engineering problem with the end goal being a machine, or multiple machines, that can produce one or more human unit of work at equal or lower cost than that of a human. The feat is designing both a system of hardware with many many interconnected individual parts integrated with the software layer, where the software layer understands how to move and plan with the hardware. Repeated iterations are necessary to identify the discrepancies between the two systems and resolve them toward perfect accuracy. In essence, this is a delicate dance between two systems, with each iteration of choreography carving synchronicity from complexity. What happens as each etch gets closer to resolution?....

....MUCH MORE

It's The Cold That'll Get You: "Seven Ages of Western Eurasia"

From Peter Nimitz's Nemets substack:

A brief outline of the 11,700 years from the Anatolian Farmers to the Present 

In the beginning, it was cold. Glaciers covered most of North America and a large part of northern Europe and Russia. Sea levels were 120 meters lower than today, leaving vast expanses of now-drowned lands open to terrestrial life. The Sahara Desert was even vaster then than in the present. Most of mankind lived in coastal or riparian lowlands around the world, taking advantage of the nutritional wealth that flowed to them from the water.

The races of man in the Ice Age were more diverse than those of the present. While the last expansion out of Africa ~70,000 BC absorbed or exterminated all of the other hominids of Eurasia, the great mixings caused by agricultural states, metalworking tribes, and wheeled transportation had yet to occur. Societies thrived not through intense specialization allowing for exploitation of a wide range of ecological niches, but through exploitations of specific ecologies alien to their neighbors and rivals. The fishermen, foresters, or big game hunters might slay each other in battle; but without knowledge of the fish-hook, edible forest plants, or megafaunal behavior held by others they could do little to seize each other’s homes. Indeed, certain ecologies in Africa may have provided a refuge for the last remnants of non-human hominids even after the end of the Ice Age. Men evolved apart, as they had many times before.

Many Ice Age men undoubtedly dreamed of civilization - at the time perhaps understood as an orderly life with predictable and reliable sources of food and water. A few men tried to make civilization in the Last Ice Age. An underwater megalith off of the coast of Sicily and a paleolithic village in Israel are signs of such failed attempts more than twenty thousand years ago. There are undoubtedly others in the drowned lands which in time will be found by underwater exploration. The colder, sparser, and unpredictable climate doomed them all.

While the uncertainty of human life in the Ice Age appeared a curse, it was in some senses a blessing. Man was taller than he would be again until modernity, and likely more intelligent too. The human population of the world was only a few million, so there was plentiful game. While life was violent, brutish, and short - it was well fed. Evidence that genetic selection for disease resistance occurred mostly after 2,500 BC suggests that disease burdens in the paleolithic may have been have less severe for man as well.

The end of the last Ice Age coincided with the the rise of the Natufians. The Natufians were hunter-gatherers in the Levant who harvested wild cereals to supplement their diets - an important step towards a sedentary lifestyle and civilization. The Levant had become a crossroads of North Africa, Europe, and Asia towards the end of the Last Ice Age. The ancestors of the Natufians interacted with peoples as far east as Tajikistan, as far west as Morocco, and as far north as Greece. Those Ice Age contacts left little (if any) genetic impact to the east and north (genetic connections between the Natufians and the peoples of North Africa remain debated), suggesting that they were indirect and ephemeral even if they left lasting cultural influences.

The earliest known censuses date to the Bronze Age, which complicates historical population estimates. Archaeologists, geneticists, and paleobotanists have come up with a number of methods of estimating relatives prehistoric population sizes. One is the summed calibrated radiocarbon probability method. The summed calibrated radiocarbon probability method is based on the idea that the number of identified and dated archaeological sites can be used as a proxy of past population size in well studied regions. While sensibly criticized for a number of reasons, it is nonetheless a useful approach that can sometimes corroborated by other methods.

Per that method, the Natufian population grew gradually in the 2,000 years after the end of the last Ice Age (about 12,800 to 10,700 BC), as did the population of the rest of the Middle East. The Younger Dryas period (10,900 to 9,700 BC) ushered in colder climatic conditions that caused a decline in population in much of the world. The Levant was an exception. Its population, the Natufians, multiplied fivefold over that ~1,200 year period due to their successful exploitation of wild cereals expanding their food supply. Part of the Natufian success was due to the climate change’s moderation in the Levant. Elsewhere, peoples who embraced similar cultural shifts towards intensive harvesting of cereals or outright agriculture in the period between the Ice Age and the Younger Dryas died off in the renewed cold or reverted to hunting and gathering. Those almost-civilizations of 12,800 to 10,700 BC, such as the one in the Horton Plains of Sri Lanka, are only dimly known through palynology.

It was at the end of the Younger Dryas around 9700 BC that the fire of civilization was rekindled successfully. It flickered and dimmed at a number of points across the next 11,700 years, but was never altogether extinguished as it had been in the Ice Age. Indeed, the dimmest periods of the later ages are brighter than the most illuminating periods of the earlier. The forces of Progress could be retarded or destroyed in large parts of western Eurasia, but they always survived somewhere to spread again. In the Ice Age the areas that could support agriculture were quite limited, so when a civilization fell its memory and legacy was unlikely to survive on the barren periphery. In the Holocene (the last 11,700 years that have followed the Younger Dryas cold period), the warmer climate has allowed for the periphery of civilization to be large enough that it provide refuges from which it can again be restored.

The First Age of civilization in western Eurasia lasted from the end of the Younger Dryas in 9700 BC to the First Fall in 8300 BC. It is also known as the Pre-Pottery Neolithic A. The population of the northern Levant perhaps doubled in the two centuries immediately following the end of the Younger Dryas. The warmer, wetter, and more consistent climate increased plant biomass in the region much as it did elsewhere. The greater population allowed for the construction of ritual sites like Göbekli Tepe and fortified towns with populations in the thousands such as Jericho.

First Age life was still hard in spite of improved climactic conditions. Wild wheat and barley shatter upon becoming ripe, scattering their seeds around. For farmers, that is quite undesirable. They want the seeds to stay in the plant upon ripeness so that they can be harvested and eaten. In the early 10th millennium BC, only about a quarter to a fifth of harvested einkorn wheat didn’t shatter upon ripeness. By the beginning of the seventh millennium BC, about nineteen-twentieths of heads of wheat didn’t shatter. Farmers were breeding (intentionally and accidentally) tougher rachis in cereal crops to prevent shattering, but it would take thousands of years for their project to come to fulfillment. While the farmers of the First Age could grow more calories per acre than their hunter-gatherer predecessors, their crop yields were still considerably lower than their successors....

....MUCH MORE

Previously from Mr. Nimitz:

September 2, 2023 - "Do the seeds of long-term progress sprout from the embers of collapse?"

September 9, 2023 - Climate Change and Civilization: "Crisis of the 23rd Century" 

And more generally:

April 2019 - An Empire Brought Down By Dust

October 2019 - "Lessons From The Last Time Civilization Collapsed"

September 2020 - Ten Civilizations or Nations That Collapsed From Drought

February 2021 - "How A Eurasian Steppe Empire Coped With Drought"

August 2022 - The Correlation of Rainfall And Assassination In Ancient Rome (plus the Moche people go bust)

March 2024 -  "Why Civilizations Collapse"

Usually it's drought. A couple times it was a drought by-product, dust. More after the jump.*

And why, wary yet inquisitive reader may be wondering, are we going on about this stuff?

Because you don't want to be taken by surprise. Live one's life, take care of one's business, be aware of what's possible, roll with the changes....

November 2024 - "How Late Zhou China Reverse-Engineered a Civilization"

And though not directly related, the quite fascinating "Global Warming, It’s Always a Shore Thing":

Cute title. I was going to try to get even cuter with "On this day in history, Jericho founded 9600 B.C.", the joke being that no one knows when/what day Jericho was founded, just that it's been around for a long, long time. 

As a joke it is not all that funny. Sorry....

Possibly also of interest: 

Last touted December 31, 2023 in: The Economist: "When civilisation collapses, will you be ready?" 

....If you're into the recreating civilization thing see Open Source Ecology's Global Village Construction Set: Machines: Global Village Construction Set

Finally: "What was the longest-lasting civilization?"

My Chinese friends and acquaintances say it is the Chinese civilization. When I ask why that happened they say it is because Chinese people are superior.

When I tell them that is racist they laugh....