Sunday, June 30, 2024

"Michelle Obama for president? Ted Cruz thinks she could be the Democratic nominee"

Before we get to the headline story a comment on the character traits of President Biden's Cabinet officers. The nation is obviously in 25th Amendment territory where the President is not capable of executing the duties of his office but has not acknowledged what the entire world has seen and known for the last few years. And while the Chief Executive and Commander-in-Chief is right now incapacitated, Democrat honchos and mega-donors are talking about the November election, over four months away. This is where the Cabinet is supposed to live up to the power and place in society they have been elevated to, and execute section IV of the Amendment. And they haven't. More after the jump.

From the Fort Worth Star-Telegram via Yahoo News, June 27:

U.S. Sen. Ted Cruz, a Texas Republican, doubled down on his prediction that Democrats will “dump Biden” and tap former First Lady Michelle Obama as their party’s nominee.

“Watching Biden’s excruciating debate performance tonight, I believe the odds are now greater than 80% that the Dems dump Biden,” Cruz said in a post on X, formerly called Twitter, during Thursday’s presidential debate. “Nine months ago, on Verdict I predicted that the Dems would replace Biden with Michelle Obama. I think that’s going to happen.”....


Here's the last section of the 25th Amendment, the one that is applicable in this situation.

Via Cornell Law School's Legal Information Institute:

Section 4.

Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.

Thereafter, when the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that no inability exists, he shall resume the powers and duties of his office unless the Vice President and a majority of either the principal officers of the executive department or of such other body as Congress may by law provide, transmit within four days to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office. Thereupon Congress shall decide the issue, assembling within forty-eight hours for that purpose if not in session. If the Congress, within twenty-one days after receipt of the latter written declaration, or, if Congress is not in session, within twenty-one days after Congress is required to assemble, determines by two-thirds vote of both Houses that the President is unable to discharge the powers and duties of his office, the Vice President shall continue to discharge the same as Acting President; otherwise, the President shall resume the powers and duties of his office.

It is the cabinet's job to put country above party and they have failed.

Previously on Michelle as President. First up, the introduction to a May 30, 2023 post:

"Democrats: Save Us Michelle!"

You may have noticed that for the last year or so the former First Lady's press peeps have kept her mentions on a low simmer, nothing dramatic or flamboyant or controversial but enough to keep the public from forgetting her. For example, our last post re: Michelle was in January of this year:

"Top secret documents reportedly found in Biden cache"

For the purposes of the powers that be, President Biden has to hang in there until January 20. If he were to leave office prior to that date Vice-President Harris could only fill-in for his remaining term and run for President once, in 2024. Should the transition take place more than half-way into President Biden's term, the Veep can fill out the remainder of his term and run herself in 2024 and 2028.

It gets really interesting if President Harris chooses a V.P. and steps aside herself and/or Michelle Obama, despite her protestations to the contrary, decides to run for Prez (no Veep for her, I'm sure). President (Barack) Obama didn't become the first ex-President to buy a house in D.C. for the:

 "Northern charm and Southern efficiency"
—Senator Warren G. Magnuson, 1945

And before that November 2021.*

The fact that deep embed Susan Rice just left the O'Biden-Harris administration without discussing her future plans certainly is in keeping with the possibility of a fourth and fifth Obama term (placeholder Joe being #3 and fall guy should one be required)....

And  March 6, 2024

"Michelle Obama's office says the former first lady 'will not be running for president' in 2024"

That statement seems carefully worded, it's obvious she's not running. And it is not exactly General Sherman's "I will not accept if nominated and will not serve if elected."

It's also not another Sherman quote (my fave) regarding his friend and superior officer General Grant: 
"Grant stood by me when I was crazy, and I stood by him when he was drunk, and now we stand by each other."
but then again the former First Lady probably wouldn't say something like that regarding President Biden.

I wonder though if she would accept her party's nomination at the convention in Chicago.
President Biden would have a whole bunch of delegates he could release if he were to retire from the field. 

On the other hand, I'm not sure you would want to be President during the next four years, there are so many problems that have been growing and metastasizing just beneath the surface of the daily news that the person in the hot seat could end up just plain reviled....

A couple weeks later in "Hotshot Wharton professor sees $34 trillion debt triggering 2025 meltdown as mortgage rates spike above 7%: ‘It could derail the next administration’"  we took the idea a bit further:

This is the sort of stuff I was thinking about in the intro to March 6's "Michelle Obama's office says the former first lady 'will not be running for president' in 2024":

...On the other hand, I'm not sure you would want to be President during the next four years, there are so many problems that have been growing and metastasizing just beneath the surface of the daily news that the person in the hot seat could end up just plain reviled.

If I were a Democrat strategist I would propose letting Donald Trump win a second term while concentrating on House and especially Senate (to bottle up judicial, including Supreme Court, nominees) races.

A Trump win would give an excuse for riots (for the visuals) and if he is handcuffed by the Legislative branch to limit the range of possible responses, you go beyond polycrisis to the omnicrisis. Throw in a bit of Frances Fox Piven with her "overwhelm the system" and "motor voter" strategies and you could see one-party rule for thirty years.

There are probably a dozen ways things could come to a head, Joe steps down, Kamala is elevated, appoints Gavin or Michelle as Veep, steps down herself etc.

After Nixon resigned the country ended up with Gerald Ford and Nelson Rockefeller in the top two spots, with neither of them having run for their respective position. So all sorts of possibilities.

Stay tuned!

"The Advanced Economies are headed for a downfall" (plus Vaclav Smil does a drive-by)

But you knew that.

The proprietor of the Our Finite World blog, Gail Tverberg, is an actuary, so a rather gimlet-eyed, no-nonsense approach to energy and numbers. Compare that to the cheerleaders of the American economy who can rattle off a dozen ways the economy is better than it looks, yet never mention that this is because the government is running deficits at the rate of 6.8% of GDP, a huge stimulus and also, in a conceptual sense, somewhat akin to a maturity transformation with all the risks that bit of financial legerdemain entails.

From Our Finite World, June 22:

It may be pleasant to think that the economies that are “on top” now will stay on top forever, but it is doubtful that this is the way the economy of the world works.

Figure 1. Three-year average GDP growth rates for Advanced Economies based on data published by the World Bank, with a linear trend line. GDP growth is net of inflation.

Figure 1 shows that, for the Advanced Economies viewed as a group (that is, members of the Organization for Economic Co-operation and Development (OECD)), GDP has been trending downward since the early 1960s; this is concerning. It makes it look as if within only a few years, the Advanced Economies might be in permanent shrinkage. In 2022, the expected annual GDP growth rate for the group seems to be only 1%.

What is even more concerning is the fact that the indications in the graph are based on a period when the debt of the Advanced Economies was growing. This growing debt acted as an economic stimulus; it helped the industries manufacturing goods and services as well as the citizens buying the goods and services. Without this stimulus, GDP growth would no doubt appear to be falling even faster than shown.

In this post, I will look at underlying factors that relate to this downward trend, including oil consumption growth and changes in interest rate policies. I will also discuss the Maximum Power Principle of biology. Based on this principle, the world economy seems to be headed for a major reorganization. In this reorganization, the Advanced Countries seem likely to lose their status as world leaders. Such a downfall could happen through a loss at war, or it could happen in other ways.

[1] The major factor in the downward trend in GDP growth seems to be the loss of growth of oil supply.

In the 1940 to 1970 period, the price of oil was very low (less than $20 per barrel at today’s prices), and oil supply growth was 7% to 8% per year, which is very rapid. The US was the dominant user of oil in this era, allowing the US to become the world’s leading country both in a military way (hegemony), and in a financial way, as the holder of the “reserve currency.”

Data on year-by-year oil consumption growth is not available for the earliest years, but we can view the trend over 10-year periods (Figure 2).

Figure 2. Smil estimates are based on estimates at 10-year intervals by Vaclav Smil in Appendix A of Energy Transitions: History, Requirements and Prospects. Energy Institute estimates are based on amounts in 2023 Statistical Review of World Energy.

With the rapid growth in the world oil supply in the 1940 to 1970 timeframe, the US was able to help Europe and Japan rebuild their infrastructure after World War II. The US also did a great deal of building at home, including adding electricity transmission lines, oil and gas pipelines, and interstate highways. It also added a Medicare program to provide healthcare for the elderly. The emphasis at this time was on building for the future.

In the 1960s, the Green Revolution was started, aimed at increasing the quantity of food produced. This revolution involved greater mechanization of farming, the use of hybrid seeds that required more fertilizer, the use of genetically modified seeds, and the use of herbicides and pesticides. With these changes, farming became increasingly dependent on oil and other fossil fuels. The green revolution led to lower inflation-adjusted prices for food, as well as greater supply.

The 1970s was a time of adaptation to spiking oil prices and declining growth in oil supplies. At the same time, wages were increasing, and more women were entering the workforce, making the rise in oil prices more tolerable. There were also advances in computerization, changing the nature of many kinds of work.

The 1980s marked a shift to an emphasis on how to get costs down for the consumer. There was more emphasis on competition and leverage (the euphemism for borrowing). Instead of building for the future, the emphasis was on using previously built infrastructure for as long as possible.

Also in the 1980s, the Advanced Economies started to shift toward becoming service economies. To do this, a significant share of manufacturing and mining was moved to lower-wage countries. Transferring a significant share of industry abroad had the additional benefit of holding down prices for the consumer....


Meanwhile, In Europe: The Trees Sync Up

From Quanta Magazine, June 18:

Across a Continent, Trees Sync Their Fruiting to the Sun
European beech trees more than 1,500 kilometers apart all drop their fruit at the same time in a grand synchronization event now linked to the summer solstice.

Each summer, like clockwork, millions of beech trees throughout Europe sync up, tuning their reproductive physiology to one another. Within a matter of days, the trees produce all the seeds they’ll make for the year, then release their fruit onto the forest floor to create a new generation and feed the surrounding ecosystem....


Our last visit to Quanta:
"The Enduring Mystery of How Water Freezes"

And a hundred more, back to when the Foundation of Jim and Marilyn Simons began publishing a standout little math nerd platform.

"Monster 310-mile automated cargo conveyor will replace 25,000 trucks"

That's five times longer than the conveyor belt that moves phosphate in Western Sahara. 

From New Atlas, June 27:

The Japanese government is planning to connect major cities with automated zero-emissions logistics links that can quietly and efficiently shift millions of tons of cargo, while getting tens of thousands of trucks off the road.

According to The Japan News, the project has been under discussion since February by an expert panel at the Land, Infrastructure, Transport and Tourism ministry. A draft outline of an interim report was released Friday, revealing plans to complete an initial link between Tokyo and Osaka by 2034. 

Japan's well-known population collapse issues foretell severe labor squeezes in the coming years, and one specific issue this project aims to curtail is the continuing rise in online shopping, with a forecast decline in the numbers of delivery drivers that can move goods around. The country is expecting some 30% of parcels simply won't make it from A to B by 2030, because there'll be nobody to move them....


As the Russian Rouble Strengthens Against Both The Dollar And The Yuan, How Long....

....can Madame Nabiulina keep this up?

The fact the rouble is strengthening against the yuan is especially interesting. Though the stated reason for current Russian interest rate levels is tamping down an overheating economy, there is another effect.

China has Russia in a position where Putin has to acquiesce to some pretty tough trade terms imposed by Xi, a function of selling into an oligopsony market. The Russian Central Bank can recover some of the revenue lost due to sanctions-related Chinese bargaining power through currency changes.

Here's how many roubles it takes to buy the Chinese currency, down is a stronger rouble:

Chart Image


Same trend for the rouble vs the dollar:

Chart Image


And from The Economist's 1843 Magazine, May 30:

Meet the poetry-loving banker who keeps Putin’s war going
How long can Elvira Nabiullina work her magic?

On August 14th 2023 Moscow was a city on edge. Ukrainian drones were flying into its buildings. Yevgeny Prigozhin, the warlord who had marched a mutinous army towards the capital a few weeks previously, was still at large. But what most unnerved Muscovites that warm Monday was the state of the rouble.

Tracking the ups and downs of the local currency, which is highly sensitive to global energy prices, is a national pastime in Russia. When it falls below 100 to the dollar people start to worry. I watched my acquaintances sit grimly glued to their screens as the rouble crashed through the psychological watershed. Where, people muttered, were the umnyi professionali (clever professionals) at the central bank?

There is one “clever professional” in particular that Russians have come to rely on in recent years: the bank’s 60-year-old chief, Elvira Nabiullina. Nabiullina is a bespectacled technocrat whose unassuming demeanour conceals a ferocious intellect and drive. A protégée of one of Russia’s most influential liberal economists, she has spent most of her 11 years in the job trying to foster an open, stable, well-regulated economy in a country more used to either communism or chaos.

Nabiullina is one of the few central bankers whose mere presence at the helm can be enough to calm markets, and she’s dealt deftly with the dramas generated by Vladimir Putin’s geopolitical ambitions. After Western countries imposed a range of sanctions on Russia in 2014 following Putin’s annexation of Crimea, she steered the rouble through the ensuing confidence shock with minimal damage. Her passion for data-driven decision-making and willingness to stick to liberal economic policies under pressure led Christine Lagarde, then the chief of the International Monetary Fund (IMF), to celebrate her for making “central banking sing”.

A presenter on state TV went on air raging that the “bloody central bank” hadn’t 
even explained “why the hell the rouble exchange rate has jumped so high”

Such compliments came to an abrupt halt after Moscow’s full-scale invasion of Ukraine in 2022. Unprecedented sanctions ensued, including restrictions on the sale of Russian oil and gas in Europe. Rumour has it that Nabiullina feared for the arrest of her deputies at the bank if she didn’t stay on to safeguard the economy. Whatever her motivation, she helped cushion Russian banks from the initial shock (over time the country’s vast oil and gas firms proved surprisingly adept at finding new, non-Western customers). Putin’s critics saw her and other technocrats as complicit in the subsequent bloodshed in Ukraine.

By August 2023 the country’s economic resilience seemed to be flagging. Chinese purchases of Russian oil had helped mitigate the effect of Western sanctions, but Beijing’s own slowdown affected its energy consumption, hurting the rouble.

Nabiullina didn’t rush to protect the currency – her instinct is to let it stand on its own two feet as much as possible. The absence of intervention provoked harsh criticism. Vladimir Solovyev, a presenter on state TV, went on air raging that the “bloody central bank” hadn’t even explained “why the hell the rouble exchange rate has jumped so high that they’re laughing at us abroad”. At lunchtime on August 14th, Putin’s economic adviser, Maxim Oreshkin, published a piece which went even further, explicitly blaming the central bank for the currency’s fall, and implying that it should have raised interest rates to give the rouble a temporary boost. It seems unlikely that two such high-profile political figures would have attacked Nabiullina without at least tacit support from the Kremlin.

In fact the bank had posted a statement on its website shortly before Oreshkin’s op-ed came out announcing that an emergency meeting would take place the next day. Evidence that Nabiullina was on the case seemed to provide enough reassurance to reverse the rouble’s trajectory. It closed the day at about 98 to the dollar – still low, but on the right side of the all-important 100 mark.

In an attempt to keep it there Nabiullina went on to institute a series of massive interest-rate hikes (the rate currently stands at an eye-watering 16%). She also had to go along with capital controls, a protectionist measure that runs contrary to everything she had previously tried to do with the economy. The latter were ordered by Putin himself, who required Russian exporters to convert their foreign profits into roubles in October 2023. Very unusually, Nabiullina publicly criticised the policy, which she said could “only be a short-term remedy”.

Nabuillina’s friends say she is one of the few advisers granted leeway to speak candidly to Putin, which he appreciates. Their unlikely partnership has lasted 20 years and weathered numerous crises. Since 2022 her macroeconomic dexterity has given Putin room to increase war spending. During his re-election campaign this year he was able to – not inaccurately – tout the Russian economy as the fastest-growing in Europe.

But managing the demands of the war machine and the ever-evolving impact of sanctions makes Nabiullina’s job increasingly challenging. War spending has kept the economy growing, but raised the possibility of dangerous levels of inflation. Lately, Nabiullina finds herself working to entrench an economic and political configuration which takes the country further from her early dreams of a transparent, well-regulated free market.

“She can’t tell him this is wrong, this destroys what I’ve been doing for 30 years,” said Konstantin Sonin, a Russian economist who used to work with Nabiullina. “She’s not using her acumen, she just does what Putin says.”

There are no outward signs that Nabiullina is anything less than committed to her job. However, there is chatter in Russian business circles that she submits her resignation at regular intervals, only to have it rejected. Insiders say it would be too dangerous for her to leave before Putin wants her to go.

As a studious teenager Nabiullina fell in love with opera and poetry, especially the French writer Paul Verlaine

Putin’s war economy may face a reckoning at some point, regardless of what Nabiullina does. But she is crucial to delaying that moment. Fiona Hill, a former Russia adviser to America’s National Security Council, believes she could even be the bridge between Russia and the global economy. “When the West comes back to do business with Russia, which will happen sooner or later when the war is over, Nabiullina may be the person they feel they can do business with,” said Hill.

Can she keep the ship on course until then? And as a state-led war economy takes hold, does a poetry-reading technocrat like her have what it takes to push back against the “patriots”?....


An odd little connection between war and Verlaine: the first three lines of his poem, "Chanson d'automne";

Les sanglots longs
Des violons
De l’automne

was the signal broadcast to the French resistance unit, Ventriloquist, working south of Orléans on June 1, 1944 to signal that D-Day was imminent and to be alert for the coming signal to begin destroying rail lines in earnest. That signal, the second three lines of the poem was broadcast by the BBC on June 5.

Blessent mon coeur
D'une langueur

It worked, Ventriloquist caused so much chaos on the rail lines that two panzer divisions sent to fight the Allies took as long to cross France to the western battle zone as it had taken them to move from the Russian front to the French border.

And back to Nabiulina, we are fans of her skills and understanding of central banking and wish she were running the U.S. Federal Reserve. Previously:

Here's one from January 2024's "How China talked markets out of a run on the yuan":

 If a country is spending $1 trillion to defend its currency, they are doing it wrong. As was pointed out in June 2022's "An Analysis of The Wartime Actions Of Governor Elvira Nabiullina and The Russian Central Bank":

....The key to any currency operation by a central bank is the art of patience. You can't go burning through your FX reserves attempting to support your fiat. See any number of examples with Soros v. Bank of England being the first that comes to mind. You have to wait for that inflection point where the speculative raid is running out of momentum and then go huge, sweeping any offers and coming back and saying "What else ya got?"
This is apparently what Nabiullina did, minus the American colloquialism, of course.
And another from that month:
Sometimes It's Easy To Foretell The Future

This piece was posted 2 1/2 months before Russia invaded Ukraine

Tuesday, December 7, 2021
Former Swedish Prime Minister Bildt: "It’s time to let Russia know once and for all that Ukraine is off limits"

That was the headline on his December 6 Washington Post OpEd.

The question, of course, is how are you going to enforce it?

Reuters reported earlier today: "West could cut Russia from SWIFT, sanction Nord Stream, Latvia says"

Do they think Russia hasn't thought of this possibility? Of course they did, a decade ago.

We're dealing with a nation of chess players. They've gamed out four possibilities, sixteen countermoves and 64 counter-countermoves. Meanwhile the American military have been working on their pronouns.

And the Russians also have a secret weapon: Elvira Nabiullina, the head of the Russian central bank.

Imagine having to do a high wire act, allowing the rouble to fall, keeping rates up to counteract the inflationary tendency that introduces, trying to account for the huge asset flows in the underground/oligarch economy while all the while Putin is yelling at you from the sidelines.
She is very good at what she does.

She has already considered and put on the back-burner a proposal to use the Orthodox Church as an internal payment system,  It's there, just in case, you know, the electronic stuff goes down.

Here's the introduction to 2018's "Russia’s central bank quietly raised its key interest rate by 0.25 percentage points on Friday":

If you think having Donald Trump question the Fed head for raising rates is playing rough, just imagine working for Vlad Putin as his popularity drops.
Considering the hand she's been dealt, the chief of the Russian central bank, Ms. Nabiullina, should have garnered a couple more Euromoney Central Banker of the Year awards to sit next to the one she received in 2015.

Seriously, since she took over in 2013 oil prices collapsed, then doubled, the annexation of Crimea led to the first set of sanctions, the rouble fell 50%, the U.S. Treasury threatened Russian banks with exclusion from SWIFT, the second set of sanctions on companies and oligarchs led to the retraction of multi-billion dollar credit facilities which had to be replaced internally and a couple other things that I'm having trouble remembering....

She has payment systems in place with China and together with the oil & gas honchos is ready to redirect those flows. 

And finally, if things escalate, what is to stop the Chinese from attacking Taiwan at the same time Russia moves its border west. With a two-front war, NATO and the U.S. would be shown to be paper tigers.

Here's an ungated version of the WaPo OpEd at the University of Pennsylvania.

And a final thought. When the SWIFT threat was being bandied about, Russia had no alternatives so she needed both an emergency solution and a longer term solution,

The emergency plan was to use the Church, as mentioned above
The longer term plan became the Mir payment system which inspired China's CIPS.

An attempt to use SWIFT sanctions would result in the creation of a parallel system.

 And a couple weeks earlier: Russia's Central Banker And Ukraine's War Dead

The highlight of the currency vs. oil price is very intriguing and understanding that goes a long way toward understanding Russia's economy and government and the war in Ukraine. 

The underlying facts are that Russia is balancing three legs of a trilemma stool, adjusting one leg, then another in an attempt to find an equilibrium.

The Governor of Russia's central bank, Elvira Nabiullina knows the oil price-currency interplay.

And all the while Vladimir is looking over your shoulder....

That was one of many posts that we gathered in 2020's "Russia's Central Bank Gamed This Scenario Out Years Ago, Did Yours?".

Saturday, June 29, 2024

Beryl Becomes First Hurricane Of The 2024 Season

From the National Hurricane Center

"Europe wants to send data centers into space — study says it’s possible"

From CNBC, June 27:

  • The EU’s $2.1 million ASCEND study concluded that launching data centers into orbit is technically, economically and environmentally feasible.
  • The total global electricity consumption from data centers could reach more than 1,000 terawatt-hours in 2026 — that’s roughly equivalent to the electricity consumption of Japan, according to the International Energy Agency.
  • ASCEND’s space-based data storage facilities would benefit from “infinite energy” captured from the sun and orbit at an altitude of around 1,400 kilometers (869.9 miles). 

The rise of artificial intelligence is skyrocketing demand for data centers to keep pace with the growing tech sector — and pushing Europe to explore space options for digital storage, in a bid to reduce its need for energy-hungry facilities on the ground.

Advanced Space Cloud for European Net zero emission and Data sovereignty, a 16-month-long study that explored the feasibility of launching data centers into orbit, has come to a “very encouraging” conclusion, according to Damien Dumestier, manager of the project.

The 2 million euro ($2.1 million) ASCEND study, coordinated by Thales Alenia Space on behalf of the European Commission, claims that space-based data centers are technically, economically and environmentally feasible.

“The idea [is] to take off part of the energy demand for data centers and to send them in space in order to benefit from infinite energy, which is solar energy,” Dumestier told CNBC.

‘Data tsunami’
Data centers are essential for keeping pace with digitalization, but also require significant amounts of electricity and water to power and cool their servers. The total global electricity consumption from data centers could reach more than 1,000 terawatt-hours in 2026 —that’s roughly equivalent to the electricity consumption of Japan, according to the International Energy Agency.

The industry is about to be hit with a “wave of data tsunami,” said Merima Dzanic, head of strategy and operations at the Danish Data Center Industry Association.

“AI data centers need something like three times more energy than a traditional data center and that is a problem not just on the energy side, but also the consumption side,” she told CNBC.

A “whole different approach to how we build, design and operate data centers,” is required, Dzanic added....

Tooze+: "The Dreyfus Affair and the Origins of the Tour de France"

From Foreign Policy, June 28:

The grueling cycling competition has a rich political history.

By , a deputy editor at Foreign Policy, and , a columnist at Foreign Policy and director of the European Institute at Columbia University. Sign up for Adam’s Chartbook newsletter here

This year’s Tour de France cycling race will be 3,492 kilometers traversed over 21 grueling stages, across a mix of flat, hilly, and mountainous terrain. It is the leading event on the men’s professional cycling calendar, with riders from around the world training their entire careers to win the event—or even just to finish it.

How does the Tour make money today? How have working-class politics polarized the event? What sort of technological improvements has the bicycle seen over time?

Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast that we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: The Tour de France has its origins in a business competition between two rival sports newspapers. It was also a competition that was tied to early 20th-century far-right politics. Could you unpack what exactly was going on?

Adam Tooze: Yeah, it’s an amazing story that I wasn’t familiar with until we embarked on this. At the turn of the century, the Third Republic in France was a notoriously divided polity. And in the 1890s, it split bitterly over the so-called Dreyfus affair, which was a situation when, in 1894, a Jewish officer in the French Army was scapegoated as a German spy by reactionary antisemitic groups. And the left wing and the liberal press sided with Dreyfus and eventually secured a retrial and his acquittal. And so it became like a key rallying point of the French center and left. It’s the precursor to the Popular Front of the 1930s, which is now being reprised again in the effort to try to keep [National Rally leader Marine] Le Pen and her party away from power in France. But there’s always been a right-wing, aristocratic, pro-business, and profoundly antisemitic politics in France, and they struck back in the early 1900s.

And the leading sports newspaper of the day, Velo, was a pro-Dreyfus paper. And the anti-Dreyfus folks, including notable industrialists like Michelin, the tire company, and de Dion, who’d made cars and bicycles, were infuriated that the dominant sports newspaper of the day was pro-Dreyfus. They found themselves imbibing, if you like, radical pro-Dreyfus news while just trying to get the scores and decided to set up their own newspaper, their own sports newspaper called Auto-Vélo, which, when they set up in 1903, was kind of floundering against incumbents. And so they were looking for a big coup, some sort of publicity affair. And being nationalists and modernist because, you know, de Dion, Michelin, they’re in the business of modernizing France. France was a huge producer of bicycles and motor cars in the early 20th century. And so they thought, how about having a self-consciously modernist exploration of France by the relatively new-fangled device of a bicycle?

And so it became this tour of France. By the ’30s it was hugely successful. The right-wing sports newspaper was garnering 800,000 circulation during the Tour of 1933. Predictably, given their politics, they ended up then collaborating during the Nazi period. They were shut down in the aftermath of the war, but L’Équipe, which is, to this day, France’s main sports newspaper associated with the Tour, emerges from the wreckage and is still associated with the Tour all the way down to the present day. And one of the things about all professional bike racing is that you can’t successfully compete as an individual. You have to compete as part of a team, because it’s crucial to maintaining the momentum of a very fast, very long ride. Long riding is having a team around you for psychological support, but also aerodynamic. You can sit behind your other riders and spare your legs. And what’s really striking about the Tour is that very, very many of the teams are corporate teams. They ride for Telecom, for, you know, the Emirates. They ride for brands, though the individual riders, as you say, are heroes of particular stages or the race overall.

CA: Today, the Tour is now run by a private company that’s called the Amaury Sport Organization. How does the Tour make money these days?....

"The Future of Fashion Commerce Is a Designer’s AI Bot Saying You Look Great and Your Personal AI Bot Sifting Through the Bullshit"

As noted over the last few years, due to budget cutbacks* at Climateer Investing we've had to combine our sports/fashion/investing departments.

From Hunter Walk (self-aware self-promotion), June 24:

Maybe I should be more worried about Artificial General Intelligence but these days it’s the probability of Artificial General Bullshit that leaves me wondering about AI-powered everything. Given that the enshittification of the web is largely driven by economic incentives, why do we believe AI will be any different? I mean it’s largely the same people, same companies doing the building anyway.

Back in 2016 when agentic consumer tech was just starting to pique interests I wrote “What Happens When Bots Learn to Lie?” Was the post about electronic disinformation? Wrong. About the massive security and hacking threats ahead from machine-generated deceptions? Ha, I wish I was that smart. Nope, rather my intellectual horsepower focused on the implications of hyper sophisticated ‘sales people,’ powered by AI and optimized for transaction. Eight years later, with the GPTs and LLMs advancing faster than a cheetah on prey, I’m even more sure this is coming. It’s our future – at least for a period of time and for some people/industries.

Ok what do I mean? The best commerce platforms will be constantly grooming you, priming you, shaping you to buy. The combination of short-term and long-term value that leads to the optimal financial outcome for the business. Imagine a helpful shopping bot sitting on StockX or Gucci with as much information as possible about your demographics, purchase history, and so on. All that information exists today and is used to tailor mostly asynchronous (email marketing) or low fidelity (recommended for you) personalization. But when it can be turned into conversational real-time sales, we unlock the best salesperson who ever existed! Before you know it, instead of one item, you have three in your basket, assured that it’s a fierce look, and paired with a BNPL offer....

See for example:  
As we've mentioned, due to budget cutbacks we've had to combine some previously free-standing subject areas e.g. here, accounting and fashion....  
Because human models are so last season
As we said in "IRAN reacts to U.S. President's Comments On Colin Kaepernick By Launching Missles While North Koreans Chant ‘Death to Trump’ Over Steph Currey Dis":
Due to threatened budget cutbacks we are considering consolidating our politics, sports, national security and fashion coverage....
Well, the cutbacks weren't just a threat, departments are being combined, which is why you've seen posts on the St. Louis Fed's FRED clothing line, 3D printed couture and such stories as:

European Bankers on Top of The League Tables For Fashion Sense

Barney's New York Introduces a $375 Antifa Jacket

This Father's Day, #Boycott Dolce & Gabbana.... this $245 #Boycott Dolce & Gabbana t-shirt....

So, unfortunately for patient reader, the trend continues as the powers that be decree the cat video pivot now has to be combined with something as well. So here's strutting the catwalk. I am so sorry....

Updated—Marc Andreessen: "The true story -- as best I can remember -- of the origin of Mosaic and Netscape."

From Mr. Andreessen's substack:

The true story -- as best I can remember -- of the origin of Mosaic and Netscape. by Marc Andreessen


Read on Substack

HT: r/hypeurls

Here's a better version of the video from YouTube:

The Supreme Court's Other Business-Focused Decision: "SECURITIES AND EXCHANGE COMMISSION v. JARKESY ET AL."

Following on yesterday's post re: 'Chevron Deference': "Supreme Court delivers blow to power of federal agencies, overturning 40-year-old precedent"  the court also ruled in SEC v. Jarkesy, which, if you read some of the headlines will open the nation to rape, pillage and plunder by hedge funds. Or something:

In late November as the Court was about to hear the arguments in Jarkesy The Atlantic went with: "The Case That Could Destroy the Government"

CBS News: "Supreme Court strips SEC of key enforcement power to penalize fraud

New York Times: "The Supreme Court Neuters a Vital Public Watchdog"

Good grief, get a grip.

The decision was pretty straightforward: In many instances where regulators bring an  enforcement action, tribunals hear the case without juries. The Court said that is unconstitutional in some cases, that the Seventh Amendment guarantees a jury trial in a court.

Here's Bloomberg reporting:

US Supreme Court Curbs SEC’s In-House Judges in Fraud Cases

  • 6-3 decision is a blow to commission’s administrative system
  • Majority held that damages claims should go before a jury

The US Supreme Court curbed the Securities and Exchange Commission’s ability to press complaints before in-house judges, saying defendants have a constitutional right to make their case to a federal jury when the agency is seeking financial penalties.

The 6-3 decision could reduce the commission’s leverage to extract high-dollar settlements. It deals a blow to an administrative system the SEC once used to adjudicate more than 100 cases a year before scaling back amid legal challenges.

The ruling could ripple across the government, potentially affecting the Federal Trade Commission, Agriculture Department and Environmental Protection Agency. A Justice Department lawyer said during arguments that more than two dozen agencies now impose penalties through administrative proceedings and that only some of those bodies have the option to go to federal court instead.

Dissenting Justice Sonia Sotomayor said the ruling will unleash “chaos” across the government. 

The dispute is part of a Supreme Court term likely to have broad implications for federal regulators. The justices are also considering whether to overturn a precedent that gives agencies leeway when they interpret ambiguous congressional commands. The court’s conservative majority has been broadly skeptical of what it views as overreach by regulatory agencies.

The majority said that the SEC’s “antifraud provisions replicate common law fraud” and that it was “well established” that those types of claims should be heard by a jury.

“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” Chief Justice John Roberts wrote for the majority. “Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch. That is the very opposite of the separation of powers that the Constitution demands.”....


Here's the opinion, headed by the syllabus, via Cornell Law School's Legal Information Institute:

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.




certiorari to the united states court of appeals for the fifth circuit

No. 22–859. Argued November 29, 2023—Decided June 27, 2024

In the aftermath of the Wall Street Crash of 1929, Congress passed a suite of laws designed to combat securities fraud and increase market transparency. Three such statues are relevant: The Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. These Acts respectively govern the registration of securities, the trading of securities, and the activities of investment advisers. Although each regulates different aspects of the securities markets, their pertinent provisions—collectively referred to by regulators as “the antifraud provisions,” App. to Pet. for Cert. 73a, 202a—target the same basic behavior: misrepresenting or concealing material facts.

  To enforce these Acts, Congress created the Securities and Exchange Commission. The SEC may bring an enforcement action in one of two forums. It can file suit in federal court, or it can adjudicate the matter itself. The forum the SEC selects dictates certain aspects of the litigation. In federal court, a jury finds the facts, an Article III judge presides, and the Federal Rules of Evidence and the ordinary rules of discovery govern the litigation. But when the SEC adjudicates the matter in-house, there are no juries. The Commission presides while its Division of Enforcement prosecutes the case. The Commission or its delegee—typically an Administrative Law Judge—also finds facts and decides discovery disputes, and the SEC’s Rules of Practice govern.

  One remedy for securities violations is civil penalties. Originally, the SEC could only obtain civil penalties from unregistered investment advisers in federal court. Then, in 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act authorized the SEC to impose such penalties through its own in-house  proceedings.....


A couple earlier posts on Jarkesy (who, as far as I can tell is guilty as hell):

April 2023
"Is the Securities and Exchange Commission Unconstitutional?"
There was a purpose behind all our blather about dismantling the Administrative State last year. If interested see after the jump.

November 2023
"SEC's in-house enforcement powers at risk in US Supreme Court case" 

If they are doing the job that Congress or the Courts are supposed to be doing they should be at risk.
The whole issue comes down to the vast amount of power that has been abandoned to the executive branch. If interested see April 2023's:
"Is the Securities and Exchange Commission Unconstitutional?"
And a slightly different case from 2016: "Appeals Court Holds That SEC Administrative Law Judges Are Unconstitutional"

And the American Academy of Arts & Sciences journal, Dædalus, Summer 2021 issue, tying all these cases together a few years ago, linked in 2022:

July 3, 2022:
Background On The Supreme Court's EPA/CO2 Ruling: The Administrative State

As part of  our look at what the Court actually decided in the decision released on June 30 we will be diving into the nuts and bolts of government bureaucracy, AKA the Administrative State, AKA The Swamp....

First though, a recapitulation of the introduction to last Thursday's "Supreme Court curbs EPA climate authority":

The headline is a bit of a mischaracterization. The Court ruled the EPA did not have the authority it claimed to have, a different situation from reining in an existing authority, and that the EPA could not simply adopt the Affordable Clean Energy rule; that the agency had exceeded its mandate under the Clean Air Act with the proposal  and that if Congress wanted the outcome of the Rule under CAA it would have to legislate same rather than have the administrative state simply write rules.

However, as the Washington Post quoted a proponent of the EPA's action:

Richard Lazarus, a Harvard environmental law professor, said in a statement that by insisting that an agency “can promulgate an important and significant climate rule only by showing ‘clear congressional authorization’ at a time when the Court knows that Congress is effectively dysfunctional, the Court threatens to upend the national government’s ability to safeguard the public health and welfare at the very moment when the United States, and all nations, are facing our greatest environmental challenge of all: climate change.”
It is not the Court's place to solve the problem of Congress being dysfunctional....

The people writing the hysterical headlines know all this is a big deal. They prefer to have bureaucrats who can't be fired by the voters make the rules, but the media peeps can't really come out and say that.

Legislators have the same preference with the additional motivations of offloading their responsibility and responsibilities, freeing up time for campaign fundraising and schmoozing with their future lobbyist employers.

"China's Credit Impulse Loses Its Mojo"

This is a real problem, whether you call it "Marginal Productivity of Debt" or "Debt Saturation" or "Bang-for-the-Buck". China and the world are running faster and faster just to stay in place.

From BCA Research via ZeroHedge:

By Dhaval Joshi of BCA Research

Many economists and strategists emphasize the importance of China’s credit impulse as the driver of China’s – and the world’s – economic growth. A key question for them is: what is happening to China’s credit impulse – is it increasing, decreasing,  stabilizing, or destabilizing? For many years, this was indeed the key question to ask.

Not anymore.

After the global financial crisis of 2008-09, China unleashed a stimulus bazooka. A stimulus so big that China’s credit impulse peaked at a massive and unprecedented 25% of China’s GDP. In the subsequent stimuluses of 2013 and 2017, China’s credit impulse peaked at a sizable, albeit lower, 15% of GDP. Then in 2020 came the global pandemic. Yet even after this once-in-
a-century shock, China’s credit impulse peaked at a still-lower 10 percent of GDP, less than half of the post-GFC peak.

In the so-called ‘stimulus’ that has come more recently, the impact has truly dwindled. China’s credit impulse has peaked at little more than 3 percent of GDP, equating to barely a tenth of the post-GFC impact (Chart 1).

Of course, China is a bigger part of the world economy now than it was during the global financial crisis. Nevertheless, a peak stimulus of 25% of China’s GDP in 2009 equaled 2% of the world economy. Whereas a peak stimulus of 3% of China’s GDP today equals less than 0.5 percent of the world economy. It follows that China’s credit impulse is becoming less relevant, both for its own economy and for the world economy.

Exponential Credit Growth Fueled China’s Boom

China’s peak credit impulse mattered a lot because, as might be expected, China’s nominal GDP growth accelerated by a commensurate amount to the associated peak credit impulse. A peak credit impulse that was well into double digits would cause nominal growth to accelerate by double digits. But with a peak impulse that has now dwindled into the low single-digits, China can no longer repeat such sharp stimulus-driven accelerations (Chart 2).

China’s credit impulse also mattered because, until the late-2010s, it rarely went negative (Chart 3). Meaning it was almost always a tailwind to growth, and almost never a headwind. Given that the credit impulse is the change in the change in credit, this raises an interesting question. If the second derivative of the curve is always positive, then what is the underlying curve? Any schoolboy mathematician will tell you the answer is an exponential curve. In fact, the very definition of an exponential curve is that all its derivatives must be positive.

Guess what? China’s stock of credit was an exponential curve. In fact, we can describe it as exponential-plus because, until the mid-2010s, it looked exponential even on a logarithmic scale! There, in a nutshell is the recipe for China’s spectacular growth of the past few decades: exponential credit growth (Chart 4).

The trouble is that exponential credit growth cannot last forever because credit must be put to productive use, and credit cannot  be put to productive use exponentially.

Absent China’s Exponential Credit Growth, World Growth Will Slow To Sub-3 Percent

For several decades, China’s exponential credit growth funded a housing and construction boom that fulfilled Chinese households’ insatiable demand for investment properties.

Without a comprehensive pension or welfare system, Chinese households save a lot. It was rational to channel those savings into the double-digit gains coming from investment properties. Once those double-digit gains became seemingly risk-free, it was also ‘rational’ not to require a rental yield.

The result: house price-to-rent ratios, at 75, that dwarfed even the peak bubble valuations in Japan, Spain, and Australia; a Chinese real estate market valued at $100 trillion, making it by far the largest asset class in the world; plus 130 million empty Chinese homes – a stock of unoccupied investment properties equal to the entire housing stock of the United States.

But with Chinese house prices falling for two years now, the illusion of risk-free property investment has been shattered, and investment property demand has collapsed. China’s command economy will ensure that its housing market adjustment comes from a reduction in housing development and construction activity to equilibrate supply with collapsing demand. Yet this carries huge implications for the world economy – because China’s construction and infrastructure boom, fuelled by exponential credit growth, was the world’s main growth engine.

Absent exponential credit growth, China’s trend growth rate will fall to 4 percent and the world’s trend growth rate will fall to sub-3 percent (Chart 5).

One important consequence will be for commodity demand, and there is a subtle point that most people do not grasp. Commodity demand growth tracks economic growth less a deflator for efficiency gains. For copper, the efficiency deflator is around 3 percent a year. Hence, as the world’s trend growth falls to sub-3 percent, the trend growth in copper demand will flip from positive to negative.

The perma-bulls point to new sources of copper demand that will come from the de-carbonisation of the world economy. Yet they ignore that the main engine of existing demand is dying. With new demand, at best, just substituting for this dying demand, world copper demand is set to underperform the recent ramp-up in supply (Chart 6).


One of the oddest failures of analysis of the past two years is the apparent belief that Chinese central bank and government stimulus would do anything for future construction and thus demand for the inputs that go into construction. 

They have their hands full just trying to mitigate a multi-trillion USD black hole of real estate that sucks up any money that comes near it.

Regarding bottles of cash in played-out coal mines, China already builds bridges that fall down, a type of uber-Keynesian stimulus, which, as M. Bastiat pointed out, is great for nominal GDP, not so much for actually building national wealth.

July 10, 2023: "China May Face A Dreaded 'Balance Sheet Recession'":
Of course it is, this is the classic central bank "pushing on a string" scenario....

Which was re-iterating June 18's "Goldman Sachs cuts China GDP forecast for 2023":

That 'the country’s ongoing stimulus was incapable of generating a strong “growth impulse,"' line is what we were trying to communicate last week. From June 14's "What's that Got To Do With The Price Of Pork In China?"....

"The Enemy and the Libidinal Economy of the Apocalypse"

Professor Fabio Vighi (Critical Theory and Italian at Cardiff Uni.) can get heavy/borderline tedious but I think he's on to something. Plus, where else are you going to find sentences like:

"At the heart of this process is the reliance on the toxic fetish of the speculative bubble: trillions (quadrillions if we count derivatives) of insubstantial money orbiting above our heads at the speed of light."

There is a good chance that I will purloin "...the toxic fetish of the speculative bubble"

From The Philosophical Salon, June 24:

The figure of the Enemy is probably the most precious asset of the imploding West. Just consider the recent celebrations for the 80th anniversary of the D-day, which, courtesy of the ubiquitous Volodymyr Zelensky (who a few days later turned up at the G7 meeting in Italy, and then at the bogus “peace summit” in Switzerland),[i] were transformed into yet another commercial against Russia – who in the fight against Nazism, supported by Ukraine, sacrificed around 27 million people (as USSR). Dressed up as Normandy, Ukraine was once again consecrated as the ontological frontier in the struggle of Good against Evil. The point to ponder here is the causal link between a panicky empire teetering on the verge of bankruptcy and the evocation of an Enemy to be fought, in this specific case, to the last Ukrainian (and to the detriment of the European vassals).

So, let’s confront reality head-on instead of fixating on its “political actors”. Russian disinformation, we are told, is everywhere. But what about Western disinformation? No mainstream media tells us that, after the new sanctions and the G7 decision to use frozen Russian assets to finance a new $50 billion package for Ukraine, the rouble has actually appreciated against the dollar. Why is the Russian currency strengthening? Weren’t we told for months on end that the sanctions would turn the rouble into toilet paper, which would then bring down Putin Ceausescu-style? In fact, how is it that the Russian economy is growing by more than 3%? And why does the Financial Times feel compelled to report that, in May this year, more Russian gas was exported to Europe than US liquefied gas (LNG)? Is it a coincidence that, after such “revelation”, the EU’s 14th sanctions package against Russia for the first time included gas – thus dealing the final blow to European industrial production? Also, why aren’t we informed that US debt securities worth approximately $10 trillion are due to mature in 2024? Isn’t it clear yet that, behind the Manichean media narratives we are fed, the West is engaged in an internal struggle for survival, which, as such, needs sacrificial lambs?

Anything can make the news these days except what would reveal that the matrix is no longer “sustainable.” This, of course, doesn’t mean that the world will fall off its axis tomorrow. Rather, more soberly, it means that Western economies will continue their race to the bottom while inflation ticks higher. Not only is inflation now structural, but it also serves to mitigate the costs of refinancing the ever-growing tsunami of debt which erodes the “sustainability” of the financial house of cards. In short, an economic model that thrives on artificial monetary expansion and endless debt securitization – a model of capitalism in an advanced stage of decay – can only attempt to capitalize on the currency devaluation it spontaneously engenders. Regardless of what one thinks of Russia, China, and other capitalist autocracies, can we really blame the growing number of countries from the Global South that are rushing to join the BRICS alliance? After all, these nations are seeking to escape the economic stranglehold imposed by their dependency on the US dollar, which has persisted for decades.

The dominance of the Western financial sector has imposed a model of “destructive creation” rather than “creative destruction” (as famously theorised by Joseph Schumpeter). “Creation” here refers to the leveraged expansion of derivative-driven speculative capital which necessitates the abandonment of the traditional framework of liberal-democratic values designed to safeguard industrial capitalism. This means that the Western elites (the 0.1 percenters) manage the terminal crisis of capital by inflicting its consequences upon increasingly impoverished masses, who are also “distracted” by relentless eschatological hype: catastrophic scenarios originating in the “misbehaviour” of an external Enemy (Virus, Russia, Iran, China, Climate Change, etc.). So, what does “sustainability” actually refer to? 

One thing is clear: it bears no relation to the United Nation’s 17 “sustainable development” goals (defeating poverty and hunger, increasing health and well-being, fighting climate change, gender equality, etc.) – those, unfortunately, are just decoys. “Sustainable development” concerns an elitist economic model that pushes Wall Street to record-breaking highs while making ordinary folks pay for such achievement through real economic contraction and the erosion of purchasing power. The question, then, is: are we happy to take the hit to protect the wealth of the ultra-rich and their sinister idea of “the best of possible worlds”?

A sinister idea like “sustainable neo-feudal capitalism” requires sinister (and often farcical) ceremonies. After decades of stable decline, the Western “advanced” economies are now accelerating toward collapse, and simultaneously grappling with a delusion-of-omnipotence complex which exploits the threat of ineffable exogenous Enemies. For around three decades after WWII, the capitalist matrix functioned by cajoling surplus-value producers through the carrot of social mobility and consumerism, while also using violence when necessary. It was almost effortless, then, to pretend to be good, democratic, and liberal. The choreography that obscured the collective prison was still credible, almost realistic, even attractive. The bloodstains on the walls were erased by strokes of paint called “progress”, “democracy”, “growth”. In short, capital and its bureaucrats managed to represent the aspirations of the Western masses that they also exploited, or worse, that they persistently looted in various regions of the “Third World.”

But now the party is over. The most powerful social illusion in modern history dupes only the dupers, and all those who believe they can still cash in on an obsolescent system. As the American Dream slowly morphs into a nightmare also for the middle classes, the only realistic option left is to turn the screw on entire populations: propaganda, censorship, war escalations, daily administrations of calamitous scenarios, ethnic cleansing, even the return of political violence against the non-aligned. This, to be sure, is the autopilot of a socioeconomic discourse which represses its destructive madness by turning every vision of the future – therefore, of the possible – into a vision of terror. The logic at work is as cunning as it is desperate. The eschatological kernel of a financial simulation of growth driven by quantum machine learning algorithms, which forces entire societies into stagnation, is first disavowed and then released into the geopolitical scene. The combination of accelerating financial metastasis and depressive social inertia is now steadily offset by the threat of exogenous catastrophes.

Amin Samman and Stefano Sgambati have noted that ‘the current financial system operates on the basis of a “rolling apocalypse”, perpetually scheduling and deferring millions of endpoints around which lives and livelihoods are organised.’ More precisely:

“The financialisation of capitalism in this way installs eschatology at the heart of daily life, binding the contemporary subject to the ends of finance through the unending circulation and leveraging of debt. We all live under the shadow of the financial eschaton, no matter how we find ourselves plugged into the financial machine, and the result is a transference onto indebtedness of all the psychological charge previously reserved for the end of history.”[ii]

This perceptive argument could be developed further through the following observation: insofar as it is increasingly fragile and unmanageable in financial terms alone, the apocalyptic threat that haunts the “leveraged economy” of the West is now deployed directly as a bio- or geopolitical weapon. This brings to light the repressed content of Francis Fukuyama’s “end of history” thesis, for his famous claim that Western liberal democracy is the final form of human government comes true in the ongoing collapse of the future into a claustrophobic present trapped amidst the violent dynamics of debt and the continuous threat of global disasters. This way, the financial eschaton morphs into a discourse of explicit social and geopolitical end-time. With the sustained and deliberate promotion of war theatres like the Russo-Ukrainian conflict and the Palestinian genocide, the eschatological dimension inscribed in the libidinal economy of leverage spills over into what I have called “emergency capitalism,” or the “libidinal economy of the apocalypse”.

It is vital to reiterate that the disabling of the future, which binds us to a depressive presentism (while also erasing traces of the past), originates in the terminal crisis of capital, as best represented by the insubstantial character of money in our hyper-financialised universe. As the real value of capital is shrinking, so does capital’s capacity to reproduce our societies. Money capital is now emerging as the nothing of self-reflexive performativity, the endless circulation of rolled-over debt that vainly attempts to hide its own void – de facto accomplishing nothing except its own proliferation. In the era of financial capitalism, money is created ex nihilo as electronic bytes on banks’ computer screens, and the faster it circulates as debt, the more it reveals its ruinous destiny. While debts are not supposed to be settled but instead packaged and invested as assets in a potentially infinite loop,[iii] in truth their proliferation is exposed to growing systemic fragilities – which is why, I argue, the financial eschaton needs to promote fear of Armageddon by breeding conflicts and emergencies that must be perceived as part of an apocalyptic destiny devoid of redemption. The main feature of contemporary Power is a type of totalitarian rule based on the weaponization of impending doom.

At the heart of this process is the reliance on the toxic fetish of the speculative bubble: trillions (quadrillions if we count derivatives) of insubstantial money orbiting above our heads at the speed of light. The virtualization of the economy – monetary capital that multiplies without valorising itself, that is, without passing through the living bodies of commodity-producing workers – now generates terrifying “returns in the Real”. It is therefore no surprise that Western capitalism, which on account of its advanced financial structure is the first to experience implosion, increasingly resembles a drunk looking for a fight. This is somewhat inevitable, as an empire that parts ways peacefully with the idols that have marked its history is hard to fathom....


If interested see also:
"Red Pill or Blue Pill? Variants, Inflation, and the Controlled Demolition of Society"
The Philosophical Salon has had some of the most interesting explorations of the interplay between the torrents of both fiscal and monetary liquidity, lockdowns, and the nagging sense that something much larger than official explanations is going on. Some previous links after the jump....

Friday, June 28, 2024

"How to harvest the windfall profits from Russian assets in Europe"

Though international thinking on odious debt is pretty much hammered out and agreed upon—at least in principle if not in principal, depending on who has to take the write-off—the construct of odious assets is much newer and obviously more fun.

From the Bruegel think tank, June 24:

The challenge still remains of crafting a syndicated loan for Ukraine backed by G7 members that strikes a fair deal on burden sharing  

After months of bickering over whether and how to confiscate Russian sovereign assets, G7 members on 14 June agreed to use future profits from frozen funds held by Euroclear in Belgium to prop up a loan for Ukraine of up to €50 billion 1 . That makes sense, as a full-blown confiscation policy would be plagued with legal pitfalls. Yet, the challenge still remains of crafting a syndicated loan backed by G7 members that strikes a fair deal on burden sharing.

Three issues must be dealt with. First, the European Union will be at the centre of confiscation efforts and as such will have more to lose than the United States. Fair burden-sharing therefore suggests that the US should take on a disproportionately high share of the syndicated loan’s repayment guarantee.

Second, the EU budget must provide surety against the risk that future revenue streams from windfall profits from frozen Russian assets – approximately €3 billion annually – turn out to be insufficient to repay the loan.

Third, the uncertainty created for G7 partners by sunset dates in EU asset-freezing decisions (and hence uncertainty over the appropriation of windfall profits) should be addressed by replacing such dates with review clauses. This will reduce the risk of unpredictable voting behaviour by certain EU members.

What belongs to whom?

In unpicking these issues, the first question is who owns the windfall profits from Russia’s assets, expected to amount to €3 billion annually (after Belgian corporate tax). One answer is that the profits are Euroclear property (differently from the principal assets owned by Russia), simply because revenue from reinvesting matured bonds does not accrue to Russia. Depositories like Euroclear usually transfer their customers’ cash balances out before the end of the day without any remuneration for the customers.

What makes this case unique however, is that the EU and Russia both deny that Euroclear is entitled to retain the profits. According to the EU, Euroclear “cannot expect to gain an undue and unintended economic benefit from” EU sanctions 2  – a claim Russia would agree with. The EU denies Euroclear’s entitlement to the profits based on the EU having the competence to impose sanctions on Russia, while Russia sees the windfall profits as unjustified enrichment following the maturing of Russian assets. In pursuit of its claim, Russia could initiate proceedings under the Belgium-Russia bilateral investment treaty, possibly claiming the violation of fair and equitable treatment, or outright expropriation. While such a lawsuit would likely fail because of the overriding public interest of sanctioning violations of international law, some legal insecurity remains on the entitlement to windfall profits.

EU vulnerability

On the delicate issue of burden-sharing among G7 members, it should be noted that about €191 billion ($205 billion) in Russian assets is held at Euroclear, while only $5 billion is held in the United States. This imbalance makes the skimming of windfall profits in the EU a much more likely target of Russian retaliation, as Russia has warned repeatedly 3 . Russia’s easiest riposte will be to confiscate assets held by European companies.

According to the Kyiv School of Economics 4 , European and US companies have pulled out approximately 40 percent of their assets in Russia since the full-scale war in Ukraine began. The rest decided to stay, but stopped operating or are still in the process of trying to sell their assets. What remains in Russia are foreign assets worth $194 billion. Of this, $90 billion is owned by European companies, nearly three times more than the amount owned by US-headquartered companies ($32 billion). If Russia’s warnings of retaliation are serious, European companies could end up footing the bill for funding Ukraine.

With the EU facing greater risks of retaliation, the US should at least accept to take on the main burden in providing guarantees to underpin the Ukraine loan. This will be pivotal in crafting the syndicated loan.

It will have to be decided whether the syndicated loan will be repaid from the proceeds of a dedicated bond backed by future windfall profits as collateral. The disadvantage of this approach is that it will lead investors to ask for a high discount, making borrowing expensive. A better option would be back-to-back lending by the G7, as is EU practice already in lending via Multilateral Financial Assistance to Ukraine. Whether G7 members provide their guarantees jointly, through a third-party institution or through bilateral loans to Ukraine is secondary. In order to ‘Trump-proof’ the loan, it could be wise to first pay the loan to a multilateral institution, such as the World Bank, where it could then be sent onwards to Ukraine. This would prevent Trump from cancelling the US share to the loan 5

Most important is to agree on the design of a ‘sharing clause’ to underpin the syndicated loan agreement, and which will define the pro-rata exposure of G7 members in case windfall profits are not enough to repay the loan....