Monday, July 31, 2023

"The Chip War might just be what China needs right now"

From the Baiguan substack, July 31:

“The Chip War cannot be rushed, but the War of AI cannot be delayed”

Today, we are presenting an interesting article on China-US tech rivalry, because in our eyes it reflects how many of the Chinese elite look at the US technology ban on China. These are the main ideas of the article:

  • One important consequence of the US embargo is that it helps create a huge market demand for China’s semiconductor industry, so the market mechanism replaces government subsidies as the main driving force.

  • Building a domestic semiconductor industry is hard, and will take very long time, but China is no stranger to this type of development. It’s only a matter of when and how fast.

  • However, the revolution in artificial intelligence adds a new variable to the game, something China must seize on as quickly as possible (you may read here on how Chinese government is responding with the final version of AIGC regulation).

The original article is written by Boss Dai 戴老板, a famous technology and business influencer in China. Our translation is not reviewed by the author.

关于芯片战争的二三事 A few things about the Chip War

By Boss Dai

Recently, Janet Yellen visited China with reportedly many "tasks" to accomplish. Foreign media summarized one of her tasks as "convincing Chinese officials that the series of measures taken by the US to prevent China from accessing sensitive technologies such as semiconductors in the name of national security is not intended to harm the Chinese economy."

It is already 2023, and the US has launched more than ten rounds of bans on China's chip industry. The number of mainland enterprises and individuals on the entity list has exceeded 2,000. It is heartwarming that they can still come up with such a noble reason.

It is estimated that even the Americans cannot stand it anymore. This statement was soon refuted by another article on the New York Times.

Four days after Yellen left China, Alex Palmer, a well-known China reporter for foreign media, published an article in the NYT that explained the essence of the US chip blockade in the title: "This is an Act of War."

Alex Palmer graduated from Harvard and was among the first Yenching Scholar at Peking University. He has been reporting on China for a long time, covering topics such as Xu Xiang, fentanyl, and TikTok. He is a familiar figure who has been “hurting the feelings of the Chinese people”. However, in the matter of chip technology, he managed to extract the truth from the Americans.

In the article, one interviewee bluntly stated, "Not only will we not allow China to make any technological progress, but we will also actively reverse their current technological level." The chip ban is essentially aimed at eradicating China's entire advanced technology ecosystem.

The Americans used the word "eradicate," which carries the meanings of "exterminate" and "uproot," often associated with diseases like smallpox or Mexican drug cartels. Now, this word is being used to describe China's high-tech industry. The author predicts in the article that if these measures succeed, it could impact the progress of an entire generation in China.

Anyone who wants to understand the severity of this war only needs to repeatedly ponder the word "eradicate."

An upgraded war

The rules of competition and the rules of war are two completely different things. Business competition is a contest under legal framework, but war is different. The opponent will almost never consider any rules or restrictions and will do whatever it takes to achieve their strategic objectives. Especially in the chip industry, the United States can even keep changing the rules - as soon as you adapt to one set, it will immediately switch to a new one to deal with you.

For example, in 2018, the US Department of Commerce sanctioned Fujian Jinhua by using the "Entity List," directly leading to the latter's shutdown (which has since resumed operations); after this kind of small success, [The US Government] also included Huawei in the Entity List in 2019, restricting US companies from providing products and services to it, such as EDA software and Google's GMS.

After discovering that these methods were not enough to completely "eradicate" Huawei, the US changed the rules: starting in May 2020, all companies using US technology could not supply Huawei, such as TSMC's foundry. This directly led to the stagnation of HiSilicon and the significant decline of Huawei's smartphones, bringing more than 100 billion yuan in losses to the Chinese industrial chain every year.

Afterward, the Biden administration escalated its targets from "companies" to "industries," and a large number of Chinese companies, universities, and research institutions were subsequently included in the ban list. On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued new export control regulations, effectively imposing a "ceiling" on Chinese semiconductors. Logic chips below 16nm or 14nm, NAND storage with 128 layers or more, and integrated circuits (DRAM) below 18nm are restricted from export. Additionally, computing chips with a performance exceeding 4800 TOPS and interconnection bandwidth exceeding 600GB/s are also restricted from supply, whether through manufacturing or direct sales.

Using the words of a Washington think tank: Trump targeted companies, while Biden is targeting industries.

When reading the novel "The Three-Body Problem," ordinary readers can easily understand the plot of the Trisolarans to lock down Earth's technology [Baiguan note: This novel is a widely-read and widely-cited Chinese sci-fi series, in which the aliens, called the Trisolorans, used a super technology to keep a lid on basic science research on Earth]. However, in real life, many non-industry individuals tend to have a certain perception when observing the chip ban: as long as you comply with U.S. rules, you won't be targeted; if you are targeted, it means you did something wrong.

Having such a perception is normal because many people's thinking is still within the framework of "competition." However, in a “war”, this perception may be just an illusion. In recent years, many semiconductor executives have expressed that when a company ventures into advanced fields in R&D (even just in preliminary research), they will encounter an invisible barrier.

The development of high-end chips is based on a global technology supply chain. For example, to make a 5nm SoC chip, one needs to license from ARM, software from Cadence or Synopsys, patents from Qualcomm, and coordinate production capacity with TSMC. By doing these actions, one will come under the purview of the BIS’s regulations....

....MUCH MORE, the Baiguan outro analysis is food for thought as well.

I think I'll consult Alanis Morissette on the topic, "Isn't it ironic."

"The first US nuclear reactor built from scratch in decades enters commercial operation in Georgia"

You can't build them one-at-a-time, much less one every few decades and expect them to be anywhere near cost competitive. First off, you get no economies of scale, something that was hard enough to come by in the 1960's and 1970's much less today.* Secondly, as with military/defense industries, if you don't have a minimum level of production you lose the workers who have the skills and institutional memory, two factors of production that are very expensive to develop from scratch.

From The Associated Press, July 31:

The first American nuclear reactor to be built from scratch in decades is sending electricity reliably to the grid, but the cost of the Georgia power plant could discourage utilities from pursuing nuclear power as a path to a carbon-free future.

Georgia Power Co. announced Monday that Unit 3 at Plant Vogtle, southeast of Augusta, has completed testing and is now in commercial operation, seven years late and $17 billion over budget.

At its full output of 1,100 megawatts of electricity, Unit 3 can power 500,000 homes and businesses. A number of other utilities in Georgia, Florida and Alabama are receiving the electricity, in addition to the 2.7 million customers of Southern Co. subsidiary Georgia Power.

“This hadn’t been done in this country from start to finish in some 30-plus years,” Chris Womack, CEO of Atlanta-based Southern Co. said Monday in a telephone interview. “So to do this, to get this done, to get this done right, is a wonderful accomplishment for our company, for the state and for the customers here in Georgia.”

A fourth reactor is also nearing completion at the site, where two earlier reactors have been generating electricity for decades. The Nuclear Regulatory Commission on Friday said radioactive fuel could be loaded into Unit 4, a step expected to take place before the end of September. Unit 4 is scheduled to enter commercial operation by March.....

*As the Economist put it, using France as the poster child:
....To understand France’s nuclear predicament consider its roots in the oil shock of 1973. At the time, most French power plants ran on petroleum. As the fuel became scarce, French politicians concluded that true sovereignty required an energy source France could control. Nuclear power fitted the bill. France knew something about the technology, having built an atom bomb and nuclear submarines. It boasted a cohesive corps of engineers, most of whom attended the same university, the École Polytechnique. And a centralised political system allowed the powerful executive branch to ram through the ambitious programme with little input from the French public or their elected representatives.

This rapid ramp-up enabled France to enjoy what industry types call the “fleet effect”. Building a reactor is complex and requires a lot of learning by doing. So long as you keep doing, the expertise grows, making each new project easier. Between 1974 and the late 1980s EDF brought reactors online at a rhythm of up to six a year, with construction crews moving swiftly from one plant to another (see chart).

However, the French approach has created lingering problems. On the technical side, squeezing a lot of construction into a few years means that reactors undergo their big decennial refit (le grand carénage) around the same time. And since they are built to the same standard, problems found in one trigger repairs in others. As a result, French reactors’ “load factor”, a measure of whether a plant is running at full capacity, hovers at 60% or so, compared with more than 90% in America....

The War In Ukraine And A Small Russian City

From The Barents Observer, July 28:
“It’s a horror” - Line of fresh new graves of Russian servicemen in Syktyvkar shocks locals
Because of the losses, experts warn of the new wave of mobilization. 

Read in Russian | Читать по-русски

Resident of the northern Russian city of Syktyvkar - Komi Republic capital - Inna Makatrova posted in the Russian social media Vkontakte a video from the local cemetery Verkhny Chov.

The video, that was published on July 23 in the comment section on the Komi governor official VK page, shows a long line of fresh new graves of the Russian servicemen, who died in Ukraine.

Screenshot from the video from the cemetery Verkhny Chov in Syktyvkar. 

“Oh my god. Our boys. How many of them are here?”, a female voice exclaims in the background.

“They are so young”, another female voice continues.

“I’m crying, - says a female voice again - It’s a horror”.

In the video is clearly visible graves of the Russian servicemen Bekker German and Valery Arteev - earlier in July Komi region governor Vladimir Uyba made a post about their death:....


And a look at the horrors faced by the Ukrainian conscripts and recruits, July 28:
"Former Special Forces engineer says Russian minefields are unlike anything he has ever seen and battling these hidden death traps is 'exhausting'"

"Fact Check: 'Top WEF Official' Did NOT Say That 'Dangerous Conspiracy Theorists Must Be Eliminated'"

He's not a WEF official, 'top' or otherwise. He does seem to be the flagpole some WEF members use to run the flag up, just to see if anyone salutes but he has no official position. Actually he seems like a nice-enough second tier historian who got famous when his book Sapiens became popular in certain academic "influencer" groups.

From Lead Stories, July 27:

Did a top World Economic Forum official call for the "elimination" of conspiracy theorists? No, that's not true: The man described as a "top WEF official" in the article making the claim doesn't work for them and doesn't have any authority to decide things on behalf of the Forum; more importantly, that person never said "dangerous conspiracy theorists must be eliminated" in the interview cited as the main source.

The claim originated from an article (archived here) published by the People's Voice on July 25, 2023, under the headline:

Top WEF Official: 'Dangerous Conspiracy Theorists Must Be Eliminated.'

Here is what it looked like at the time of writing:

Screen Shot 2023-07-27 at 3.19.12 PM.png

(Source: The People's Voice screenshot taken on Thu Jul 27 19:19:12 2023 UTC)

The headline does not match the content of the article -- that quote never appears again in the published material:

Screen Shot 2023-07-27 at 3.04.23 PM.png

(Source: The People's Voice screenshot taken on Thu Jul 27 19:04:23 2023 UTC)

Contrary to the headline, the very first opening paragraph discussed access to the internet, not "elimination" as claimed:

A top World Economic Forum (WEF) official has called for so-called 'conspiracy theorists' to be banned from accessing the internet due to their 'dangerous' belief that a global cabal of elites control the world.


Well there you go. 

(sort of) Not eliminationist. Unless you count the censoring as eliminationist. As some pretty serious scholars do.

If interested see also an April 2022 post on that topic:

....This piece and yesterday's picture of the San Francisco drug store where everything is locked up except the sunscreen reminded me of some happy time eliminationist rhetoric that was very popular a few years ago, at least in some circles....
....Next up a pretty good definition of eliminationism via Marquette University Law Review:

Eliminationist Discourse in a Conflicted Society: Lessons for America from Africa?

1. The phrase ―eliminationist has been used by David Neiwert, a journalist who has long covered right-wing discourse and action in the United States. Joshua Holland, The Terrorist Threat: Right-Wing Radicals and the Eliminationist Mindset, AlterNet (June 12, 2009), Niewert credits the phrase to DANIEL GOLDHAGEN, HITLER‘S WILLING EXECUTIONERS: ORDINARY GERMANS AND THE HOLOCAUST (1996). Holland, supra. The book explains the rhetorical mechanisms and socio-economic dynamics that led Germany‘s non-radical majority to acquiesce, then accept the race politics of the Nazi regime. See generally GOLDHAGEN, supra. ―Eliminationism claims a moral purpose, holding that political opponents are ―a cancer on the body politic that must be excised—either by separation from the public at large, through censorship, or by outright extermination—in order to protect the purity of the nation.

That's a footnote! 

To repeat:

"―Eliminationism claims a moral purpose, holding that political opponents are ―a cancer on the body politic that must be excised—either by separation from the public at large, through censorship, or by outright extermination—in order to protect the purity of the nation."

The phrase is used in Holocaust and other genocide studies, as here re: the study of the Einsatzgruppen, the Ordnungspolizei "German Order Police" and their henchmen, the Ukrainian Auxiliary Police and the Trawniki Men in the Generalgouvernement in occupied Poland; and in the Ukrainian Soviet Socialist Republic and the Byelorussian SSR.

This was the Holocaust by bullets, the murder of some 1.5 to 2 million people outside the Nazi murder factories system (Auschwitz, Belzec, Chelmno, Sobibor and Treblinka.)

The Holocaust by bullets included the two day killathon of 33,771 souls at Babi Yar outside of Kyiv and the less-well-known Aktion Erntefest (Harvest Festival) outside Lublin Poland when 43,000 were shot to death, also in two days. Along with the Odessa Ukrainian SSR massacre in 1941 by Germans, Romanian allies and Ukrainian collaborators where over 30,000 people were murdered, those were three of the ten thousand locations across Eastern Europe where populations were simply annihilated in place.

It would also apply to the Hamburg scum in Christopher Browning's Ordinary Men: Reserve Police Battalion 101 and the Final Solution in Poland and Father Desbois, whose book Holocaust by Bullets notes some of the 1744 slaughter sites his work has uncovered,

I bring up all this history because the use of eliminationist talk is a direct precursor to genocide. Which makes the series of Medium posts by Peter Leyden and Ruy Teixeira back in 2017-2018 so interesting.

The Great Lesson of California in America’s New Civil War
Why there’s no bipartisan way forward at this juncture in our history — one side must win....

"Traders Brace for $102 Billion Wave of Treasury Bond Sales"

Following on the post immediately below, "JP Morgan on the 'stealth stimulus' supporting the US economy even after rapid rate hikes". 

From Bloomberg via Yahoo Finance, July 31:

The US Treasury is set this week to begin a ramp-up in issuance of longer-dated securities that’s likely to stretch into next year, forced by a rapidly deteriorating budget deficit and soaring interest rates.

For the first time since early 2021, the Treasury will boost its so-called quarterly refunding of longer-term Treasuries, to $102 billion from $96 billion, the consensus among dealers suggests. While down from the record levels hit during the Covid-19 crisis, that’s well above pre-pandemic levels.

Wednesday’s announcement will likely also see debt managers hoist regular auction sizes for securities across the yield curve — with potential exceptions or smaller bumps for notes less in demand. Dealers will be on watch separately for an update on a coming program to buy back older Treasuries.

Public borrowing needs are on the rise thanks in part to Federal Reserve rate hikes that have taken its policy benchmark to a 22-year high — in turn driving up yields on government debt, making it more costly. The Fed is also shrinking its holdings of Treasuries, obligating bigger government sales of them to other buyers. It all raises the risk of bigger volatility swings when the government auctions its securities.

“There’s just a lot of supply coming,” said Mark Cabana, head of US interest-rate strategy at Bank of America Corp. “We’ve been surprised by the deficit numbers, which are sobering.”....


"JP Morgan on the 'stealth stimulus' supporting the US economy even after rapid rate hikes"


Lifted in toto from ForexLive, July 26:

JP Morgan on the US deficit and how its supporting the economy. Main points from their note:

  • The FY23 deficit is tracking about US$1.5 trillion, but only thanks to the odd accounting of student debt forgiveness
  • Excluding student debt, the deficit would be closer to $1.8tn, and almost $1tn larger than in FY22
  • This widening should partly reverse as we move into FY24, when we project a deficit around $1.6tn
  • This year's "stealth stimulus" may help explain the economy's resilience to rapid interest rate hikes

ForexLive home

If interested see also:

July 16: "Why Does The U.S. Economy Need $154 Billion-737 Million In Stimulus PER MONTH?"  which ended with our market recommendation: Keep on Dancing. 

July 26: Spoiler Alert: "It's All Been A Pack Of Lies"

And a random sampling of related posts:

The Diminishing Marginal Productivity of Debt in the U.S. 

Congressional Budget Office: "US will add $19 trillion to the national debt in the next decade" Annual Interest Payment To Reach $1.4 Trillion

The Real Problem With Stimulus  

Mohamed El-Erian: "The Growth Engines Are Sputtering"

We are in a situation where years worth of economic growth have been pulled forward from future years by deficit spending, call it stimulus, call it sweet, sweet Biden love, whatevs; and the only way to keep the hamster wheel spinning is to keep feeding money into the system.
And have I mentioned marginal productivity of debt?* ....

And as patient reader is well aware the smallest state is Delaware we have been beating this drum since the bailouts of the Great Financial Crisis.

Sorry about the Delaware ref, I was thinking about something else.

Goodbye Incandescent Light Bulbs: The Department of Energy Will Begin To Fully Enforce (including fines) The Rules

From Energy & Environment News, July 25:

Lights out for incandescent bulbs

The incandescent lightbulbs that have been illuminating American homes and businesses since Thomas Edison first unveiled them in 1879 are finally coming off U.S. shelves.

After years of political and regulatory fights over everything from the bulbs’ costs to their effect on former President Donald Trump’s face color, the Department of Energy is starting this month to fully enforce rules that phase out nearly all the products.

Along with prohibiting the manufacture, import and retail sales of most incandescent bulbs, the rules finalized last year authorize DOE to slap penalties of $542 on companies per each violation. That could mean millions of dollars in fines for large incandescent orders.

DOE enforcement is expected to further entrench U.S. market dominance for more efficient, light-emitting diode (LED) lightbulbs. Environmentalists and efficiency advocates, who have long touted the regulations as important for cutting greenhouse gas emissions, are now taking a victory lap.

“For the garden variety lightbulb, the era of the incandescent bulb has come to an end,” Andrew deLaski, executive director of the Appliance Standards Awareness Project, said in an interview.

The lightbulb regulations, which DOE says could cut 222 million metric tons of carbon dioxide emissions, are part of a wave of Biden administration efficiency rules on home appliances ranging from gas stoves to consumer water heaters. DOE says “past and planned” efficiency rules under the administration will, over the next 30 years, cut $570 billion from U.S. utility bills and avert 2.4 billion metric tons of greenhouse gas emissions.

Industry representatives say the sweep of regulations on various appliances will spike upfront costs for consumers in the market for appliances. Republican lawmakers on Capitol Hill argue the Biden administration is waging a back-door campaign to ban gas stoves and other appliances....


The twists and turns of this legislation and rule-making, including the repeal of the edicts for a short while in 2011, have been quite amazing. This is from 2007:

How Wal-Mart and the government are killing the incandescent light bulb.

And 2009:
America's On-Again, Off-Again Light Bulb Affair

2014's "Industry, Not Environmentalists, Killed Traditional Light Bulbs" on the U.S. light bulb law, the Energy Independence and Security Act, which led to a bit of an uproar, some hoarding and quite a few posts on Climateer Investing e.g.,

December 2011
For Sale Cheap--1MM 100-watts: "Congress overturns incandescent light bulb ban"

That'll teach me.
When the little voice in my head said "Go long 100-watts, they're the most popular" I should have remembered the Great Pork Fiasco of aught-eight when the Chinese threw open the doors to their Strategic Pork Reserve and I ended up eating BLT's for a year.

But no, instead the little voice says "If you buy 'em by the freight car load you'll make even more when the phase-out hits".
Fuckin' little voice.

Congressional negotiators struck a deal Thursday that overturns the new rules that were to have banned sales of traditional incandescent light bulbs beginning next year.

That agreement is tucked inside the massive 1,200-page spending bill that funds the government through the rest of this fiscal year, and which both houses of Congress will vote on Friday. Mr. Obama is expected to sign the bill, which heads off a looming government shutdown....

And 2006 at the beginning of General Electric's "Ecoimagination" branding:

Green-Conscious GE Develops Hybrid Lightbulb

One year after pledging to develop more energy-efficient products, General Electric Co. unveiled a product it is calling its most eco-friendly lighting source to date: the first-ever gasoline-electric hybrid lightbulb.

"With the price of gas escalating as its supply dwindles, now is the perfect time to introduce innovative lighting technology that only relies on this fast-depleting, nonrenewable resource for a portion of its power," GE chairman Jeff Immelt said in a statement released Monday....,f_auto,g_center,q_60,w_490/ptb2aqdvemhmrip86hde.jpg


There were still a few kinks to be worked out in the campaign.

In Case You Missed It, Victoria Nuland Just Got A Promotion

From Responsible Statecraft, July 25:

Uber Russia-hawk Victoria Nuland rises to acting deputy secretary of state

She’s done as much as anyone to sour US-Russia ties; now, she is one of Washington’s top diplomats.

In a little-remarked move, the Biden administration announced Monday that Victoria Nuland will take over as the acting second-in-command at the State Department. She replaces Wendy Sherman, who plans to retire at the end of this week.

Nuland’s appointment will be a boon for Russia hawks who want to turn up the heat on the Kremlin. But, for those who favor a negotiated end to the conflict in Ukraine, a promotion for the notoriously “undiplomatic diplomat” will be a bitter pill.

A few quick reminders are in order. When Nuland was serving in the Obama administration, she had a now-infamous leaked call with the U.S. ambassador to Ukraine. As the Maidan Uprising roiled the country, the pair of American diplomats discussed conversations with opposition leaders, and Nuland expressed support for putting Arseniy Yatseniuk into power. (Yatseniuk would become prime minister later that month, after Russia-friendly former President Viktor Yanukovych fled the country.) At one memorable point in the call, Nuland said “Fu–k the EU” in response to Europe’s softer stance on the protests.

The controversy surrounding the call — and larger implications of U.S. involvement in the ouster of Yanukovych — kicked up tensions with Russia and contributed to Russian President Vladimir Putin’s decision to seize Crimea and support an insurgency in eastern Ukraine. Her handing out  food to demonstrators on the ground in Kyiv probably didn’t help either. Nuland, along with State Department sanctions czar Daniel Fried, then led the effort to punish Putin through sanctions. Another official at State reportedly asked Fried if “the Russians realize that the two hardest-line people in the entire U.S. government are now in a position to go after them?”

Nuland’s hawkish inclinations continued after she left the Obama administration. Back in 2020, she penned a Foreign Affairs essay entitled “Pinning Down Putin” in which she called for a permanent expansion of NATO bases in the alliance’s eastern flank, a move that would be sure to ratchet up tensions between the United States and Russia. As I’ve previously noted, Nuland also opposed the idea of a “free rollover of New START” — the only remaining agreement that limits Washington and Moscow’s nuclear weapons stockpiles — when it was set to expire in 2021.

Since returning to the State Department under President Joe Biden, she has showed little interest in a dovish turn. In an interview earlier this year, Nuland called Putin a “19th century autocrat” and justified Ukrainian attacks in Crimea, which Russia has called a red line. “If we don’t [defeat Putin], every other autocrat on this planet is going to go looking to bite off pieces of countries and destabilize the order that has largely kept us safe and prosperous for decades and decades,” she argued.

To recap, Nuland 1) was allegedly involved in a conspiracy to overthrow Ukraine’s president, 2) was definitely behind a strict sanctions regime on Russian officials, and 3) has never softened her uber-hawkish stances since. With U.S.-Russia tensions at their highest point in decades, there should be little doubt as to how her appointment would be received in Moscow....


We have quite a few posts on Victoria Nuland. Here's one from January 15, 2022 i.e. six weeks before Russia invaded Ukraine:

"The Ukraine Mess That Nuland Made"
Victoria Nuland is back at it, this time with the extremely broad yet nebulous portfolio of Under Secretary of State for Political Affairs. That position allows her to do pretty much whatever she thinks is needed in terms of U.S. foreign relations. In terms of everyday people it means she is going to get us into a war. See both the Financial Times and Bloomberg after the jump for her latest, for now here is Consortium News via the very left-of-center TruthOut, July 15, 2015 i.e. a bit over a year after she and her merry band conceived and executed the overthrow of the Ukrainian government....

This September 2022 post on the other participant in the "F**K the EU" phone call had a few links in the outro:

Former U.S. Ambassador To Ukraine Tipped For Promotion To Assistant Secretary of State for Energy Resources

....I think our last mention of the ambassador was June's:

We Are Governed By Idiots and Psychopaths: Fertilizer Edition

I don't mean President Biden. He's a nasty, corrupt old perv with anger and cruelty issues but he's not the one running the show.

I'm talking about the people around him, the advisors from BlackRock and WestExec and the retreads from the Obama administration. They've had eight years since Nuland and Pyatt and the rest of the gang put together the Maidan coup in Ukraine, eight years to game out: "If Putin does this, we do that."

And all they've seemed to accomplish is wrecking the U.S. economy and absolutely destroying the economies of our European allies....

If interested here's the  BBC:
Ukraine crisis: Transcript of leaked Nuland-Pyatt call

And previously:

And a more broadly focused July 2022 post that may be of interest:

RAND Corporation on Fourth Industrial Revolution Technologies And Influence Campaigns/Information Warfare   

There are a couple dozen more on Nuland but for the interested reader these are solid background.

Oil: A Looming 2 Million Barrel-per-Day Deficit

This piece is four days old. Oil is now over $81 (WTI) and $85 (Brent)

From ZeroHedge, July 27:

Oil Jumps Over $80 Ahead Of Looming 2 Million Bpd Q3 Deficit

Having been crushed for much of 2023, and left for dead by momentum chasers, oil has staged a long-overdue rebound from the YTD lows in the mid-60s in late June, rising almost 20% to a three month high of $80 earlier today, and back over the 200DMA, something it hadn't done since August of 2022.

And while there are numerous reasons for oil's sharp bounce (which will flow through into headline CPI next month, slamming the brakes on any hope that the Fed will reverse its tightening posture soon) including expectations of Chinese stimulus, near record low futures positioning...

...the most recent bullish thesis is that as a result of the recent sharp cut in OPEC+ production which is only now starting to emerge (especially when it comes to Russian output), oil markets are set for large supply deficits over the next two months as a seasonal increase in demand combines with producer output restraint.

One proponent of this theory is long-running commodities bull Goldman Sachs whose chief commodity strategist Daan Struyven told CNBC's “Squawk Box Asia” that the bank expects record demand in oil markets to send deficits soaring and drive crude prices higher in the near term.

“We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high" Struyven said and added that the bank forecasts Brent crude to rise from just above $80 per barrel on Monday to $86 per barrel by year-end. It's already at $84 and rising fast....



If You Watch Inflation Professionally, This May Be Of Interest

Gasoline Is Surging All Over the World in Fresh Inflation Blow

PCE Inflation Up 0.2% in June, Up 3.0% Year-over-Year

There was a fleeting chance for a rapprochement with the Saudis in that long ago first week of June:

June 4, 2023

"Oil Surges After Saudis Make Additional 1 Million Bpd Voluntary Production Cut"

President Biden should immediately, right now, today, make some sort of agreement with Saudi Arabia to refill the U.S. Strategic Petroleum Reserve over the next six or eight months, coincidentally an implied rate of around 1mm Bpd .

But he and his handlers probably won't see the opportunity and our Energy Secretary is an energy moron and much like the Transportation Secretary, was promoted far past her/his abilities, so who's left to push for the prize and seize the opportunity?....

Emphasis added.

Capital Markets: "BOJ Moves to Slow JGB Sell-Off, while Month-End is Making for Subdued Price Action in FX outside the Yen"

From Marc to Market:

Overview:  The Bank of Japan took the market by surprise with its adjustment of the cap on the 10-year yield before the weekend, and then stepped in to buy the government bond as yields rose in reaction today. The move helped lift the dollar to JPY142.50. from where it had settled on Friday (~JPY141.15). The dollar is mostly softer, however, with only the yen and Swiss franc weaker. The Australian dollar is leading the other currencies higher ahead of tomorrow RBA meeting. Emerging market currencies, outside of a handful of central European currencies and the Malaysian ringgit and South Korean won are lower.

Asia Pacific equities rallied with Taiwan being the only notable exception. Europe's Stoxx 600 has edged higher after falling 0.2% before the weekend. US index futures are narrowly mixed. Benchmark 10-year yields are higher. In Japan, the 10-year JGB is near 0.60%. European yields are mostly 3-4 bp higher. The 10-year US Treasury yield is near 3.98%, up 3.5 bp. Gold is a little lower but inside the pre-weekend range, which itself was inside last Thursday's wide range (~$1942.65-$1982.15). September WTI has rallied for the past five consecutive weeks and is higher today, pushing above $81. The contract reached $81.75 in January and $81.45 in April.

Asia Pacific
China's July PMI softened in line with expectations. The manufacturing PMI firmed to 49.3 from 49.0 and is the fourth consecutive month it is hovering around 49.0. The non-manufacturing PMI continued to slow as it has done since the peak in March. The 51.5 (from 53.1) is the lowest of the year. The slippage in the composite to 51.1 from 52.3 also brings it to a new low for the year. The data may not be relevant in the aftermath of last week's Politburo meeting and new even if vague efforts to bolster the private sector, property market, and foreign investment. The CSI 300 rallied 4.5% last week, the most since in nearly eight months. It was up another 0.55%t today.

The Bank of Japan adjusted its Yield-Curve Control stance ahead of the weekend. The 0.50% cap is now a reference point, and the central bank will conduct fixed-rate purchases at 1.0%....


Sunday, July 30, 2023

"Ban Private Jets? Or Give Private Jets to All?"

You may remember this story, here via the Irish Times a couple years ago:

Corporate jets to escape EU’s ‘green’ aviation fuel tax

I believe that raised enough of an uproar that changes were proposed but I don't see that the EC has yet implemented the additional fuel surcharge on private jets.

And the headliner from the Breakthrough Institute, July 23:

In your ideal society, do you imagine there would be no private jets anymore, or would there be private jets for all?

This was the provocation that the late sociologist Erik Olin Wright issued to his hosts at a San Francisco lunch following a talk promoting his book “Envisioning Real Utopias” at a housing cooperative in 2016. A hardware engineer and entrepreneurial acquaintance of mine who happened to be at the meal recounted to me some of the flavor of the conversation. It was no idle, contrarian stratagem for prompting entertaining post-prandial intellectual repartee. Wright was a specialist in social stratification and his work has profoundly influenced contemporary left thinking on economic classes in recent years.

The way in which one answers the question speaks to vital considerations for any progressive regarding political strategy, policy design, social structure and even worldview. It’s not just about private jets, but about everything.

How the professor answered his own question was somewhat more complex than the binary he posed, and that interesting position will be described shortly. But the Private Jet Question in recent months has passed from the mealtime conversation piece to popular interest due a series of celebrity scandals relating to the sector’s relatively outsized greenhouse gas emissions, which have in turn prompted a flurry of opinion pieces, think-tank reports, climate activist protests at private-jet airports and even a legislative crackdown in France.

Relatively outsized are the key words here: it is not that private jets come close to being a significant source of atmospheric carbon in absolute terms (they amount to just 4% of aviation’s emissions, which in turn are 3.5% of all emissions), but rather that they are just so outlandishly, cartoonishly carbon intensive in terms of emissions per passenger-mile—gargantuan volumes of the villain gases for the transport of just a handful of extremely wealthy travelers, and sometimes just one at a time, or even none. An average member of this jet set produces more than 10 times the carbon pollution that a passenger traveling with a commercial airline does.

An analysis of private jet flights taken by celebrities and carried out by digital marketing firm Yard concluded that in 2022, the worst offender was singer Taylor Swift, who took 170 trips in her $40 million Falcon 7X. This meant that this one person had emitted over the course of the year just shy of 1,200 times the average airline passenger’s volume of emissions. (Her weak defense amounted to pointing out that she had lent her jet to friends a few times, so the carbon emissions were not technically all her own.) Other celebrities in the private-jet-offender top 10 include Mark Wahlberg, Steven Spielberg and Oprah Winfrey—who, by the way, also says that the environment is the thing she values most in her life. Across the pond, the climate scandal of multimillionaire and billionaire private-jet use has been provoked by the Paris Saint-Germain football club taking a private flight to Nantes, a mere two and a half hours from the capital by train, and by Bernard Arnault, the head of luxury-goods giant LVMH Moët Hennessy Louis Vuitton. Arnault, who surpassed Elon Musk this year to become the world’s richest individual, had taken 18 such flights in one month, mostly between Paris and Brussels, an even shorter train distance of just an hour and 22 minutes....


"The Secret Life of the 500+ Cables That Run the Internet"

From cnet, July 24:

Multimillion-dollar cables crisscrossing the bottom of the ocean have become the vital connections of our online lives. 

The concert is in London. You're watching it live from your home in Atlanta. What makes that possible is a network of subsea cables draped across the cold, dark contours of the ocean floor, transmitting sights and sounds at the speed of light through bundles of glass fiber as thin as your hair but thousands of miles long.

These cables, only about as thick as a garden hose, are high-tech marvels. The fastest, the newly completed transatlantic cable called Amitié and funded by Meta, Microsoft and others, can carry 400 terabits of data per second. That's 400,000 times faster than your home broadband if you're lucky enough to have high-end gigabit service.

And yet subsea cables are low-tech, too, coated in tar and unspooled by ships employing basically the same process used in the 1850s to lay the first transatlantic telegraph cable. SubCom, a subsea-cable maker based in New Jersey, evolved from a rope manufacturer with a factory next to a deep-water port for easy loading onto ships.

Though satellite links are becoming more important with orbiting systems like SpaceX's Starlink, subsea cables are the workhorses of global commerce and communications, carrying more than 99% of traffic between continents. TeleGeography, an analyst firm that tracks the business, knows of 552 existing and planned subsea cables, and more are on the way as the internet spreads to every part of the globe and every corner of our lives.

You probably know that tech giants like Meta, Microsoft, Amazon and Google run the brains of the internet. They're called "hyperscalers" for operating hundreds of data centers packed with millions of servers. You might not know that they also increasingly run the internet's nervous system, too.

"The whole network of undersea cables is the lifeblood of the economy," said Alan Mauldin, an analyst with TeleGeography. "It's how we're sending emails and phone calls and YouTube videos and financial transactions."

Two thirds of traffic comes from the hyperscalers, according to Telegeography. And the data demands of hyperscalers' subsea cable is surging 45% to 60% per year, said SubCom Chief Executive David Coughlan. "Their underlying growth is fairly spectacular," he said.

Hyperscalers' data demands are driven not just by their own content needs, like Instagram photos and YouTube videos viewed around the world. These companies also often operate the cloud computing businesses, like Amazon Web Services and Microsoft Azure, that underlie millions of businesses' global operations.

"As the world's hunger for content continues to increase, you need to have the infrastructure in place to be able to serve that," said Brian Quigley, who oversees Google's subsea and terrestrial networks....



November 2022
Security: "The Most Vulnerable Place on the Internet"
March 2019
"A several thousand kilometer long fiber optic cable is to be laid along the Russian Arctic coast as part of the Armed Forces’ building of a new closed internet."
March 2019
"America’s Undersea Battle With China for Control of the Global Internet Grid"

November 2020
"Google plans fiber-optic cable linking Israel and Saudi Arabia"
January 2021
"New Undersea Cables Could Become a Flashpoint in the Arctic"
September 2021
"Facebook Backs Two Major Undersea Cable Projects, Google Joins Forces For One"
That's it.
If Zuckster and the Goog are going to stand astride major communication choke points it's time to work out the details of the shortwave radio setup.

October 2021
"Biggest Tech Companies Now Building the Biggest Data Pipes"
The last time we looked at this topic was September 3's "Facebook Backs Two Major Undersea Cable Projects, Google Joins Forces For One" in which I somehow veered off to Gilligan's Island and how the Professor kept the castaways' radio working.
February 2022
Skulduggery: "'Human activity' behind Svalbard cable disruption"
October 2022
Damaged Cable Leaves Mainland Cut Off From Shetland

And a different sort of cable that didn't happen:

And one that did:
Subsea Power Cable Between Norway and U.K. Goes Live

"There Would Be No 'Star Wars' Without This Wild French Comic From the '60s"

From Thrillist, July 19:;webp=auto;jpeg_quality=60;progressive.jpg

In 1969, a French comic book took readers to the stars. Eight years later, Star Wars took everyone else on the same ride.

That book was Valerian and Laureline. In it, "temporal agent" Valerian and his partner Laureline travel in a ship that looks just a little like the Millennium Falcon, the spacecraft introduced in the original 1977 Star Wars. In the 1971 volume Empire of a Thousand Planets, Valerian and Laureline scuttle through an ice world, a jungle world, a desert world, and the Death Star-like industrial bowels of the planet "Stryte the Magnificent." They encounter bog creatures and villains who wear masks to protect their radiation burnt faces. At one point, Valerian becomes encased in a hard resin that would remind any Empire Strikes Back fan of Han Solo's carbonite prison. In the next volume, The World Without Stars, Valerian rescues Laureline from an overweight criminal emperor, who forced her to wear a metal bikini, just as the mobster's floating barge explodes. The adventure On the False Earths involves the dup getting swept up in a war of... clone armies....


"Russian Central Bank Governor Elvira Nabiullina and Head of “BRICS Bank” Throw Cold Water on BRICS Currency Project"

[fork tapping on wine glass]...."Ahem"...

From naked capitalism, July 25:

We’re late to a story that interestingly has been very much under-reported, perhaps because it is contrary to the anti-globalist narrative….already a minority faction in the Anglosphere. We’ve said for some time that the prospects for replacing the dollar are a long way away, even more so with a newly-created, reserve currency aspirant.

Our views have been confirmed by none other that Russian central bank governor Elvira Nabiullina, who has effectively cleared her throat to sanity check the desire of some BRICS leaders, including Vladimir Putin, to announce a splashy breakthrough on the “new currency” front at a late August BRICS summit.

Keep in mind that wanna-be dollar refusniks have already been able to achieve a key aim, that of escaping dollar sanctions, by engaging in bi-lateral trade in each other’s currencies. This isn’t as tidy as it seems, since unless the two countries trading with each other also happens to have close to a trade balance, one will wind up holding the other’s currency and not have any use for it. Russia has been grumbling a bit about all the Indian rupee it now has.

The reason the dollar was not perceived to be problematic as a currency to retain is the dollar has very deep investment markets, including of course Treasuries, and robust and well-settled laws and institutions so investors aren’t worried about, say, using a dollar depositary or clearing firm. Dollars can also be swapped readily into other currencies. As a result, investment flows in dollars dwarf trade flows. The Bank of International Settlements once found they were over 60x trade flows.

Needless to say, the need for ready tradeadility, investible assets, and reliable institutions/legal regime work against China as a successor any time soon. For starters, China likes capital controls.

Now to Nabiullina’s remarks. From

Bank of Russia Governor Elvira Nabiullina talked about the proposed BRICS currency on the sidelines of the central bank’s annual Financial Congress, which took place on July 6-7 in St. Petersburg…

The proposal gained much attention over the past week when Russian news outlet RT reported that Russia has confirmed the BRICS is launching a gold-backed currency. However, no BRICS officials have officially announced or corroborated the news.

The Russian central bank chief told reporters (translated by Google) that the idea of a BRICS currency “deserves attention.” However, she stressed that this project “will be quite difficult to implement,” emphasizing: “Like any idea of ​​a supranational currency, it requires the consent of many parties. This is not a simple project at all.” Nabiullina continued:....


"10 people and 10 hats (an old problem)"

When drawing inferences using probability theory it is crucial to understand whether events are dependent or independent. In gambling games this is the difference between a slot machine where the last spin does not influence the outcome of the next spin and blackjack where each card that is dealt changes the composition of the deck of remaining cards.

In investing, misunderstanding this concept can lead to disaster as when the beautiful, well-trimmed hedge you have constructed from seemingly uncorrelated assets turns into a garden of weeds as the correlation you either didn't see or didn't understand makes itself apparent.

From Standard Wisdom:

Problem: 10 people walk into a party and give their hats to the coat and hat check guy. When the party finishes, their hats are returned in no specific order and with no specific intent. What is the probability that no one gets their own hat back? (This is an old problem, and a standard one in combinatorics and probability.)

First, an approximate solution: probability that a person gets his hat back is 1/10, so the probability that the person does not get his hat back is 9/10. So the probability that no one gets their hat back is 0.9^10 = 0.34868. Why is this solution imperfect? Well, because the events aren’t really independent. If one person gets their hat back, it increases the chance that the remaining people will get their hats back (easy to see that with two people 😉 ).  We can’t really multiple the event probabilities, if the events are not independent.

The solution: The correct solution comes from combinatorics. Total number of ways in which hats can be returned is 10! (10 factorial = 10 x 9 x 8 x … 1). If we can count the number of ways in which no guest receives their hat back, then we can deduce the probability by dividing that number by 10!. To count that, we can use the principle of inclusion and exclusion. Say A1 is the set of cases in which the first guest receives his own hat back. Then, we can enumerate:

The cases in which some guest(s) receive their own hats back are: A1 U A2 U … U A10...


Saturday, July 29, 2023

Scientific Journals: You Can't Trust The Lancet


We so prefer the British Medical Journal to the Lancet that we almost never link to the Lancet. 

Starting with the 1998 vaccine/autism paper, to the fact it took the Lancet 12 years to retract it, to the  two Iraq death toll papers, papers based on models that were refuted with the simple question: Where are the bodies?, to the fraudulent hydroxychloriquine paper (and retraction) used by the WHO to halt clinical trials, to the letter published by the Lancet organized by Daszak stating the Wuhan Institute of Virology could not have been the source of WuFlu (with 26 of the 27 co-signers having undisclosed connections to the Wuhan Institute), and three or four more instances that have slipped my memory at the moment.

The TL;dr is, sadly, after all these years, you can't trust the Lancet.

It's Not Rocket Surgery: "Rocket Scientists vs Brain Surgeons: Who Do You Think Is Ultimately Smarter?" (plus the BMJ Christmas issue), December 14, 2021 

And the latest:

That's not some cutesy "chart crime." That is straight up scientific fraud, published with the intent to deceive.

HT: Izabella Kaminska and/or Dario Garcia Giner at The Blind Spot which has once again dropped the paywall for the weekend linkfest:

Dear Subscribers,

This is another ‘lite’ (and therefore free) edition of the newsletter as I finish off my annual leave. Thanks to Dario Garcia Giner for putting the bulk of it together. We will be back with proper analysis and commentary next week. For those curious about my thoughts on the Farage affair, you can check out my latest Twitter X extended post thingy here. But there’s nothing in it I haven’t stated in this newsletter before....


Water: It's A Problem Being Downstream From China

These are some big rivers.  Irrawaddy, Mekong, Brahmaputra and and...

From Nikkei Asia, July 24:

China dams make 'upstream superpower' presence felt in Asia
Enormous water diversion projects spark concern across region

Drought in China dried up parts of the Yangtze river last year – but the largest water transfer apparatus ever built still drew from it to supply Beijing’s needs.

More than a billion cubic meters flowed through the colossal South-to-North Water Diversion Project in 2022. It traveled from a reservoir in central China to millions of households in the capital 1,200 kilometers away. The journey, via underground tunnels and canals that cross the Yellow River, roughly equaled the distance between Amsterdam and Rome.

The movement highlights the scale of China’s measures to shore up water security – and the profound potential effects these have on neighboring countries.

    Many of Asia’s transboundary rivers originate in the Indo-Tibetan plateau in China. They flow into 18 downstream nations such as India, Kazakhstan, Bangladesh and Vietnam, delivering water to a quarter of the world's population.

That alone makes the world's second most populous nation an upstream superpower with enormous influence over irrigation of much of the continent. Projects such as building dams and hydropower plants potentially fuel existing regional political tensions – and create new ones.

This article is the first in a three-part series in which Nikkei Asia will explore the effects that the actions of upstream nations – exacerbated by climate change – have on countries downstream.

"These [measures] of course have created major concerns from the downstream countries, such as environmental concerns that have potential impacts on water resources and the ecosystems," said Dr. Hongzhou Zhang, a water specialist at Nanyang Technological University.

China’s problems are part of a growing global threat of water shortages. By 2030, half the world will face water stress or outright shortages, manifested primarily through food insecurity and access to electricity, the United Nations forecasts.

Asia, home to more than half the world's population, will feel the pressure most intensely because of the imbalance of demand and supply, according to the think tank Asia Society.

Countries that neighbor China – including India, Bangladesh and Vietnam – rely on the Third Pole, the area with the most glaciers outside Antarctica and the Arctic. It includes the Tibetan Plateau and the surrounding Hindu Kush Himalayan mountain ranges....


We've looked at different aspects of what's up with Asian H₂O, hydrology, geopolitics, industry and agriculture previously:

 "China Is Weaponizing Water"
If demography isn't destiny, geography might be.

"Mekong's falling water level riles China's downstream neighbors"

"Countries worldwide tackle water stresses"
More On China And Their Fetishization of Sand
"Himalayan dams become economic burdens"
"Laos the latest China debt trap victim "
"China’s plans for gigantic Brahmaputra dam strains relations with India further"
"China Eyes Hydropower Projects Around The World"

Uh Oh: "Indonesia blindsided by Musk snub on Tesla plant "

Elon better get this right. Maybe, if the Indonesian government actually gets going on the project to shift the capital to Borneo Mr. Musk could be something of an employment anchor, but whatever he does he should make amends to Indonesia.

A deep dive from Asia Times, July 29:

Widodo had courted the billionaire but Malaysia snagged the deal after Jakarta blocked social media outlet ‘X’ 

JAKARTA – Indonesian Maritime Affairs and Investment Coordinating Minister Luhut Panjaitan is seeking a meeting with Elon Musk after the multibillionaire carmaker left him with egg all over his face by spurning Indonesia and choosing Malaysia for his Southeast Asian headquarters. 

Panjaitan had made the world’s richest man an irresistible target of the Indonesian government’s efforts to attract heavyweight investors to a country on the way to a major expansion into nickel-based batteries and electric vehicles (EVs).

But the talks went quiet in the latter part of 2022 and Malaysian Prime Minister Anwar Ibrahim’s announcement that Musk’s Tesla auto company was establishing a regional office and service center in Selangor, the state surrounding Kuala Lumpur, took the Indonesians by surprise.

Malaysia sweetened the pot by allowing Tesla to import its latest Model 3 and Model Y models, whose launch contributed to the firm raising its EV production to 441,000 units in the first quarter of this year, an 86% increase over the same period in 2022.

Anwar apparently revealed nothing when Panjaitan accompanied President Joko Widodo on a visit to Kuala Lumpur in early June which focused mainly on border issues and the welfare of Indonesian migrant workers in Malaysia.

Sources close to Panjaitan said he only had an inkling of Musk’s move several days before the announcement, but that did little to diminish his annoyance at being blindsided.

Only days later, Indonesia’s Ministry of Communication and Informatics blocked Musk’s X, the social-media site previously known as Twitter, because it did not yet conform with the country’s strict laws against pornography, gambling and other online infractions.

Analysts sense a possible payback. Indonesia has 24 million Twitter users, the fifth-highest in the world after the United States (95.4 million), Japan (67.5 million), India (27.3 million) and Brazil (24.3 million).

Musk is clearly looking at Malaysia as a potentially fast-growing retail market, which may not preclude him from looking at Indonesia as a growing future source of EV batteries or other components derived from the processing of its rich sources of nickel, cobalt and copper.

Malaysia head of car industry game
Malaysia has long had a mature auto industry. Toyota, Nissan, Honda, Volvo, Porsche, BMW and Mercedes-Benz already operate in Selangor and the government recently launched a Battery Electric Vehicle Global Leaders initiative to attract EV makers, which Musk termed “forward looking.”....

....MUCH MORE   

Look, it's the center of the world. Plus: Orangutans!

Peninsular Malaysia and Singapore on the left, Borneo island shared between Brunei, Malaysia and Indonesia and Jakarta on Java to the southwest.

"All the people, so many people: most of the growth in emerging markets"

From Bond Vigilantes, July 11:

Today is World Population Day, an event accompanied by some mind-blowing stats. Whilst demographics shift too slowly to matter in a given year, when viewed over a longer time horizon they are a megatrend that investors cannot ignore.

First to note is that the world population clock recently ticked past the 8 billion mark, double the number of inhabitants in 1973 (according to the United Nations). That spectacular growth over 50 years was driven by hard-won improvements in healthcare and longer lifespans.

Second, India has passed China as the world’s most populous country this year. One of many movements occurring among the relative sizes of the largest countries.  

Third, over past 20 years population growth has slowed further from peak global population growth recorded in the 1960s at around 2.3% per year. Since 2003, population growth has slowed in many countries characterised by ageing populations, while on the other hand many countries continue to grow rapidly on the back of success in meeting their development goals. Trends in this multi-speed world can create opportunities for emerging market investors.

Fourth, the global population is forecast to continue its growth until a peak at around 10 billion people at the end of the century, according to the United Nations. But predictions about the point when the global population will begin to fall are very sensitive to hard-to-predict demographic trends in many large frontier markets.

Fifth, migrants get a lot of coverage in the press, being too often presented as the scapegoat for politicians trying to divert attention from their policy failings. As defined by the World Bank, only 2.3% of the world population are living abroad (about 184 million people, of which about 37 million are refugees).

Changes in the table
The largest 20 countries by population are home to 70% of world population. That list has long been dominated by emerging markets, and is forecast to become more so over the next 20 years. For example, Japan and Germany are forecast to drop down the list, while Egypt, Vietnam, and Tanzania are forecast to climb into their places. With population size typically comes greater national income, but there is also potential to secure a demographic dividend, a period when a big boost economic progress can occur....


"Most of the 100 million people who signed up for Threads stopped using it" (META)

From Ars Technica, July 28:

"We're seeing more people coming back daily than I'd expected," Zuckerberg said.

Meta's new Twitter competitor, Threads, is looking for ways to keep users interested after more than half of the people who signed up for the text-based platform stopped actively using the app, Meta CEO Mark Zuckerberg reportedly told employees in a company town hall yesterday. Threads launched on July 5 and signed up over 100 million users in less than five days, buoyed by user frustration with Elon Musk-owned Twitter.

"Obviously, if you have more than 100 million people sign up, ideally it would be awesome if all of them or even half of them stuck around. We're not there yet," Zuckerberg told employees yesterday, according to Reuters, which listened to audio of the event.

Third-party data suggests that Threads may have lost many more than half of its active users. Daily active users for Threads on Android dropped from 49 million on July 7 to 23.6 million on July 14, and then to 12.6 million on July 23, web analytics company SimilarWeb reported.

"We don't yet have daily numbers for iOS, but we suspect the boom-and-bust pattern is similar," SimilarWeb wrote. "Threads took off like a rocket, with its close linkage to Instagram as the booster. However, the developers of Threads will need to fill in missing features and add some new and unique ones if they want to make checking the app a daily habit for users."

Although losing over half of the initial users in a short period might sound discouraging, the Reuters article said Zuckerberg told employees that user retention was better than Meta executives expected. "Zuckerberg said he considered the drop-off 'normal' and expected retention to grow as the company adds more features to the app, including a desktop version and search functionality," Reuters wrote.....


 Related from Elle, April 12, 2018:

Quick Reminder: Zuckerberg Once Called People Who Trust Him With Their Data 'Dumb F*cks'

Pilkington: "The coming European recession may be worse than 2008"

From Philip Pilkington, free range economist, here via UnHerd, July 28:

Bank lending data paints a grim picture for the Eurozone economy

The European statistics agency Eurostat has released its bank lending survey and the data does not look good. The survey tracks the credit conditions and amount of loan demand seen in the European banking system: as it is based on a survey of lenders, it is typically seen as a “forward-looking” indicator. That is, it picks up on trends before they emerge in the official data.

The release makes for grim reading. Credit supply across the board is tight, with banks reluctant to lend in the face of rising interest rates. Credit demand is poor, too, with Europeans reluctant to take out bank loans. But it is in the commercial sector that the picture looks particularly concerning: demand for loans among businesses is now at historic lows.

“Euro area firms’ net demand for loans decreased strongly in the second quarter of 2023,” the authors write, “dropping to an all-time low since the start of the survey in 2003.” This means that commercial loan demand is now lower than it was in the depths of the credit crunch of 2008-09, particularly worrying since high energy prices are currently putting pressure on European firms. This data is wholly consistent with the idea that Europe might be undergoing a profound deindustrialisation.

This may just be survey data, but it correlates clearly with the hard data typically released later by statistics agencies, enabling forecasts of future developments. The chart below shows the “soft” lending data together with the “hard” data of European fixed investment. It is not hard to see that the two are strongly correlated....


"Psychologists say a good life doesn’t have to be happy, or even meaningful"

That was a page at the World Economic Forum.

The WEF removed the page:

Sorry, but we can’t find the 
page you were looking for

I'm still waiting for them to replace the 404 with something a bit more upbeat: 

"Shut up. You've got your beer, haven't you?"
—Hermann Goering at Munich's Burgerbrau Keller, November 8, 1923

In the meantime the Internet Archive has the page:

"Bank of Japan tiptoes toward financial bedlam"

Because Japan has the potential to really, really (really) change market perceptions and realities (for they are far from being the same) this is the most dangerous of the known macro risks.*

From Asia Times via MENAFN July 21:

Has Bank of Japan (BOJ) Governor Kazuo Ueda, 103 days into the job, already blown it?

Inquiring minds in trading pits everywhere can't help but wonder as inflation and gross domestic product (GDP) diverge in dangerous ways. And markets are getting exactly the last thing you'd want from Ueda's BOJ: crickets.

Data released on Friday (July 21) showed that core inflation, which excludes fresh food, rose 3.3% in June year on year, faster than in the US. Japan's inflation surge shows how quickly price dynamics can shift - and perhaps get away from a central bank.

This adds an economic exclamation point to next week's BOJ policy meeting. The two-day event ending July 28 is shaping up to be the BOJ's last chance to salvage its reputation in world markets.

The odds the BOJ will do just that aren't great.“Although we don't rule out some yield-curve-control-related change at the BoJ's upcoming policy meeting, our base case is for the central bank to stick to its guns,” says Stefan Angrick, senior economist at Moody's Analytics.

Norman Villamin, group chief strategist at Union Bancaire Privée, adds that“the Bank of Japan may once again be forced to defend the policy via liquidity injections moving through the summer.”

Given Ueda's recent comments, Mitsuhiro Furusawa, a former vice minister of finance for international affairs, told Bloomberg:“It's unlikely that the bank will modify the instrument at the upcoming meeting. In the past, I thought July is possible, but the way he's speaking, if he moves next week, it'll be a major surprise.”

This crisis of confidence confronting the BOJ has many fathers, of course. Blame must be shared by Prime Minister Fumio Kishida's ruling Liberal Democratic Party (LDP) for squandering the last decade. The same goes for a succession of BOJ leaders who forget about what William McChesney Martin said about punch bowls 70 years ago.

It was in 1951 when Martin, then chairman of the US Federal Reserve, famously quipped that a central banker's job is to remove the punchbowl just as the party gets going. Far from internalizing this mindset as, say the Bundesbank of old did, the BOJ has been refilling and refilling the punchbowl for decades.

First, with the quantitative easing that the BOJ pioneered in 2000 and 2001, just after cutting rates to zero in 1999. The unsurprising result is a level of financial intoxication that no Group of Seven (G7) economy had ever known.

Easy money: Japan has a long history of quantitative easing Photo: Agencies

Twenty-plus years ago, when then-BOJ leader Masaru Hayami served up quantitative easing (QE), it was meant to be a special monetary cocktail available for a limited time only. Over time, though, the Tokyo political establishment got hooked on loose monetary policy.

One government after another prodded the BOJ leader at the moment to keep the liquidity flowing - and to up the dosage. This cycle got supersized in 2013, when the LDP hired Ueda's predecessor, Haruhiko Kuroda.

At the time, then-prime minister Shinzo Abe said he was mixing up his own cocktail of badly needed structural reforms to end deflation. Abe promised a mix of Ronald Reagan and Margaret Thatcher with Japanese characteristics. Mostly, though, Abe just prodded Kuroda to add more punch bowls.

It backfired. As Kuroda fired his monetary“bazooka,” the yen plunged and exports soared. That generated a corporate earnings boom, one that propelled the Nikkei Stock Average up 57% in 2013 alone.

But those gains never made it to the average Japanese as wages flatlined. That's because Abe's party failed to implement the supply-side revolution it promised.

Moves fell by the wayside to cut red tape, liberalize labor markets, increase innovation and productivity, empower women and restore Tokyo's place as Asia's financial hub. Instead, Abe bet it all on ultraloose central bank policies, the likes of which modern economics had never seen before.

In short order, the Kuroda-led BOJ drove the yen down 30%, hoarded more than half of all outstanding Japanese government bonds and morphed the BOJ into a giant hedge fund by gorging on stocks. By 2018, the BOJ's balance sheet topped the size of Japan's US$5 trillion economy, a first for G7 members.

None of it generated real inflation, though. That took Vladimir Putin's invasion of Ukraine. The massive boost to oil prices had Japan importing too much inflation too fast via an undervalued exchange rate. The Putin factor collided with Covid-19 era supply chain price pressures.

Japan suddenly had the inflation it sought for a decade. It was the“bad” kind, though, generated more by supply shocks than rising consumer demand. It also came too quickly, catching BOJ officials flat-footed....

*ZeroHedge was so concerned that in the 18 hours after the Friday BoJ meeting they had seven stories either addressing or referencing the Bank, an approach they usually reserve for high-traffic U.S. political stories: