Saturday, August 31, 2024

"The CIA And The Media" By Carl Bernstein

First published at Rolling Stone, this version hosted at CarlBernstein.com: 

After leaving The Washington Post in 1977, Carl Bernstein spent six months looking at the relationship of the CIA and the press during the Cold War years. His 25,000-word cover story, published in Rolling Stone on October 20, 1977, is reprinted below.

THE CIA AND THE MEDIA
How Americas Most Powerful News Media Worked Hand in Glove with the Central Intelligence Agency and Why the Church Committee Covered It Up

WORKING PRESS — CIA STYLE

To understand the role of most journalist‑operatives, it is necessary to dismiss some myths about undercover work for American intelligence services. Few American agents are “spies” in the popularly accepted sense of the term. “Spying” — the acquisition of secrets from a foreign government—is almost always done by foreign nationals who have been recruited by the CIA and are under CIA control in their own countries. Thus the primary role of an American working undercover abroad is often to aid in the recruitment and “handling” of foreign nationals who are channels of secret information reaching American intelligence.

Many journalists were used by the CIA to assist in this process and they had the reputation of being among the best in the business. The peculiar nature of the job of the foreign correspondent is ideal for such work: he is accorded unusual access by his host country, permitted to travel in areas often off‑limits to other Americans, spends much of his time cultivating sources in governments, academic institutions, the military establishment and the scientific communities. He has the opportunity to form long‑term personal relationships with sources and—perhaps more than any other category of American operative—is in a position to make correct judgments about the susceptibility and availability of foreign nationals for recruitment as spies.

“After a foreigner is recruited, a case officer often has to stay in the background,” explained a CIA official. “So you use a journalist to carry messages to and from both parties”

Journalists in the field generally took their assignments in the same manner as any other undercover operative. If, for instance, a journalist was based in Austria, he ordinarily would be under the general direction of the Vienna station chief and report to a case officer. Some, particularly roving correspondents or U.S.‑based reporters who made frequent trips abroad, reported directly to CIA officials in Langley, Virginia.

The tasks they performed sometimes consisted of little more than serving as “eyes and ears” for the CIA; reporting on what they had seen or overheard in an Eastern European factory, at a diplomatic reception in Bonn, on the perimeter of a military base in Portugal. On other occasions, their assignments were more complex: planting subtly concocted pieces of misinformation; hosting parties or receptions designed to bring together American agents and foreign spies; serving up “black” propaganda to leading foreign journalists at lunch or dinner; providing their hotel rooms or bureau offices as “drops” for highly sensitive information moving to and from foreign agents; conveying instructions and dollars to CIA controlled members of foreign governments.

Often the CIA’s relationship with a journalist might begin informally with a lunch, a drink, a casual exchange of information. An Agency official might then offer a favor—for example, a trip to a country difficult to reach; in return, he would seek nothing more than the opportunity to debrief the reporter afterward. A few more lunches, a few more favors, and only then might there be a mention of a formal arrangement — “That came later,” said a CIA official, “after you had the journalist on a string.”

Another official described a typical example of the way accredited journalists (either paid or unpaid by the CIA) might be used by the Agency: “In return for our giving them information, we’d ask them to do things that fit their roles as journalists but that they wouldn’t have thought of unless we put it in their minds. For instance, a reporter in Vienna would say to our man, ‘I met an interesting second secretary at the Czech Embassy.’ We’d say, ‘Can you get to know him? And after you get to know him, can you assess him? And then, can you put him in touch with us—would you mind us using your apartment?”‘

Formal recruitment of reporters was generally handled at high levels—after the journalist had undergone a thorough background check. The actual approach might even be made by a deputy director or division chief. On some occasions, no discussion would he entered into until the journalist had signed a pledge of secrecy.

“The secrecy agreement was the sort of ritual that got you into the tabernacle,” said a former assistant to the Director of Central Intelligence. “After that you had to play by the rules.” David Attlee Phillips, former Western Hemisphere chief of clandestine services and a former journalist himself, estimated in an interview that at least 200 journalists signed secrecy agreements or employment contracts with the Agency in the past twenty‑five years. Phillips, who owned a small English‑language newspaper in Santiago, Chile, when he was recruited by the CIA in 1950, described the approach: “Somebody from the Agency says, ‘I want you to help me. 1 know you are a true‑blue American, but I want you to sign a piece of paper before I tell you what it’s about.’ I didn’t hesitate to sign, and a lot of newsmen didn’t hesitate over the next twenty years.”

“One of the things we always had going for us in terms of enticing reporters,” observed a CIA official who coordinated some of the arrangements with journalists, “was that we could make them look better with their home offices. A foreign correspondent with ties to the Company [the CIA] stood a much better chance than his competitors of getting the good stories.”

Within the CIA, journalist‑operatives were accorded elite status, a consequence of the common experience journalists shared with high‑level CIA officials. Many had gone to the same schools as their CIA handlers, moved in the same circles, shared fashionably liberal, anti‑Communist political values, and were part of the same “old boy” network that constituted something of an establishment elite in the media, politics and academia of postwar America. The most valued of these lent themselves for reasons of national service, not money.

The Agency’s use of journalists in undercover operations has been most extensive in Western Europe (“That was the big focus, where the threat was,” said one CIA official), Latin America and the Far East. In the 1950s and 1960s journalists were used as intermediaries—spotting, paying, passing instructions—to members of the Christian Democratic party in Italy and the Social Democrats in Germany, both of which covertly received millions of dollars from the CIA. During those years “we had journalists all over Berlin and Vienna just to keep track of who the hell was coming in from the East and what they were up to,” explained a CIA official.

In the Sixties, reporters were used extensively in the CIA offensive against Salvador Allende in Chile; they provided funds to Allende’s opponents and wrote anti‑Allende propaganda for CIA proprietary publications that were distributed in Chile. (CIA officials insist that they make no attempt to influence the content of American newspapers, but some fallout is inevitable: during the Chilean offensive, CIA‑generated black propaganda transmitted on the wire service out of Santiago often turned up in American publications.)

According to CIA officials, the Agency has been particularly sparing in its use of journalist agents in Eastern Europe on grounds that exposure might result in diplomatic sanctions against the United States or in permanent prohibitions against American correspondents serving in some countries. The same officials claim that their use of journalists in the Soviet Union has been even more limited, but they remain extremely guarded in discussing the subject. They are insistent, however, in maintaining that the Moscow correspondents of major news organizations have not been “tasked” or controlled by the Agency.

The Soviets, according to CIA officials, have consistently raised false charges of CIA affiliation against individual American reporters as part of a continuing diplomatic game that often follows the ups and downs of Soviet‑American relations. The latest such charge by the Russians—against Christopher Wren of the New York Times and Alfred Friendly Jr., formerly of Newsweek, has no basis in fact, they insist.

CIA officials acknowledge, however, that such charges will persist as long as the CIA continues to use journalistic cover and maintain covert affiliations with individuals in the profession. But even an absolute prohibition against Agency use of journalists would not free reporters from suspicion, according to many Agency officials. “Look at the Peace Corps,” said one source. “We have had no affiliation there and they [foreign governments] still throw them out”

*****

In 1953, Joseph Alsop, then one of America’s leading syndicated columnists, went to the Philippines to cover an election. He did not go because he was asked to do so by his syndicate. He did not go because he was asked to do so by the newspapers that printed his column. He went at the request of the CIA.

Alsop is one of more than 400 American journalists who in the past twenty‑five years have secretly carried out assignments for the Central Intelligence Agency, according to documents on file at CIA headquarters. Some of these journalists’ relationships with the Agency were tacit; some were explicit. There was cooperation, accommodation and overlap. Journalists provided a full range of clandestine services—from simple intelligence gathering to serving as go‑betweens with spies in Communist countries. Reporters shared their notebooks with the CIA. Editors shared their staffs. Some of the journalists were Pulitzer Prize winners, distinguished reporters who considered themselves ambassadors without‑portfolio for their country. Most were less exalted: foreign correspondents who found that their association with the Agency helped their work; stringers and freelancers who were as interested in the derring‑do of the spy business as in filing articles; and, the smallest category, full‑time CIA employees masquerading as journalists abroad. In many instances, CIA documents show, journalists were engaged to perform tasks for the CIA with the consent of the managements of America’s leading news organizations.

The history of the CIA’s involvement with the American press continues to be shrouded by an official policy of obfuscation and deception for the following principal reasons:

■ The use of journalists has been among the most productive means of intelligence‑gathering employed by the CIA. Although the Agency has cut back sharply on the use of reporters since 1973 primarily as a result of pressure from the media), some journalist‑operatives are still posted abroad.

■ Further investigation into the matter, CIA officials say, would inevitably reveal a series of embarrassing relationships in the 1950s and 1960s with some of the most powerful organizations and individuals in American journalism.

Among the executives who lent their cooperation to the Agency were Williarn Paley of the Columbia Broadcasting System, Henry Luce of Tirne Inc., Arthur Hays Sulzberger of the New York Times, Barry Bingham Sr. of the LouisviIle Courier‑Journal, and James Copley of the Copley News Service. Other organizations which cooperated with the CIA include the American Broadcasting Company, the National Broadcasting Company, the Associated Press, United Press International, Reuters, Hearst Newspapers, Scripps‑Howard, Newsweek magazine, the Mutual Broadcasting System, the Miami Herald and the old Saturday Evening Post and New York Herald‑Tribune.

By far the most valuable of these associations, according to CIA officials, have been with the New York Times, CBS and Time Inc.

The CIA’s use of the American news media has been much more extensive than Agency officials have acknowledged publicly or in closed sessions with members of Congress. The general outlines of what happened are indisputable; the specifics are harder to come by. CIA sources hint that a particular journalist was trafficking all over Eastern Europe for the Agency; the journalist says no, he just had lunch with the station chief. CIA sources say flatly that a well‑known ABC correspondent worked for the Agency through 1973; they refuse to identify him. A high‑level CIA official with a prodigious memory says that the New York Times provided cover for about ten CIA operatives between 1950 and 1966; he does not know who they were, or who in the newspaper’s management made the arrangements.

The Agency’s special relationships with the so‑called “majors” in publishing and broadcasting enabled the CIA to post some of its most valuable operatives abroad without exposure for more than two decades. In most instances, Agency files show, officials at the highest levels of the CIA usually director or deputy director) dealt personally with a single designated individual in the top management of the cooperating news organization. The aid furnished often took two forms: providing jobs and credentials “journalistic cover” in Agency parlance) for CIA operatives about to be posted in foreign capitals; and lending the Agency the undercover services of reporters already on staff, including some of the best‑known correspondents in the business.....

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Related, past and future:

I hope the people who spent over two years on their covid jihad, destroying lives and livelihoods, retarding the education of an entire generation of children, twisting facts to fit a corrupt agenda, I hope they understand there were millions of people keeping receipts, and that the receipt-keepers won't be trying to shame their persecutors, for they know they feel no shame. They will be seeking justice, and possibly vengeance, against the entire class that oppressed them.

I think I will retreat to the castle keep for a couple years and just observe how things play out.

If you'll excuse me, there's a drawbridge to be raised, can't take too many precautions against the risk of misidentification. I'd prefer the last sound I hear not be the mob baying "À la lanterne!"....

That's from the introduction to November 1, 2022's "Nuremberg II: What a Real Inquiry into the Response to Covid Would Look Like"

"Big Fish: The Aquacultural Revolution"

A multi-story serial from Hakai magazine, August 24, 2020

As the world’s population swells to 9.7 billion, industry and governments say aquaculture is the way to provide protein to the people—if that’s true, can we learn from the past and avoid screwing over the planet and each other?

Congratulations to the whole team on winning a Canadian Online Publishing Award and a Society of Environmental Journalists Award for this series.

To raise fish in captivity is not easy.

A fish farmer has to figure out how to ensure a pond or container has enough oxygen; how to keep birds and other predators away; how to feed the fish, keep them disease free, and manage their waste.

This has not changed since Fan Li was fighting predators—mythical flood dragons that flew away with his carp—at his ponds in China in 475 BCE, when he wrote the first document on aquaculture. What has definitely changed is technique. No longer do aquaculturists insist on releasing fish into a pond without a splash on the seventh day of the second month of the year, as Fan did.

Today, technology has turned aquaculture—the cultivation and harvest of fish, bivalves, crustaceans, algae, and aquatic plants—into the world’s fastest growing food production sector. From 1990 to 2018, global aquaculture production rose 527 percent. The Food and Agriculture Organization of the United Nations (FAO) is betting that aquaculture will be a critical source of nutrition for the world’s population, which is estimated to reach 9.7 billion by 2050.

The challenge is how to farm aquatic species sustainably. Thanks to our ability to share information, we have some foresight into the problems we may face, unlike when humanity took the leap into plant cultivation with wheat about 12,000 years ago, or when we domesticated sheep and goats a few thousand years after, in what is today Turkey. The world’s total human population at the dawn of agriculture was anywhere from four million to 10 million or so—today the population of Tokyo falls around the upper end of that estimate.

The Agricultural Revolution was a gradual process, unplanned, and arising independently around the world. For hunters and foragers to continue their ways of life proved difficult amidst a bunch of people hell-bent on farming. As Colin Tudge wrote in Neanderthals, Bandits and Farmers, “People did not invent agriculture and shout for joy. They drifted or were forced into it, protesting all the way.”

Farming is hard work. Humans had no clue that all that effort would lead to mechanization and industrialization and would transform 50 percent of the Earth’s habitable space into agricultural lands. Nor did they anticipate that irrigating crops would take 70 percent of global water use, or that producing food would directly contribute to 26 percent of global greenhouse gas emissions. The cultivation of cows has been particularly problematic—they generate more emissions than any other animal species except for humans.

As is the case with terrestrial plants and animals, the environmental impacts of growing aquatic species run the spectrum of benign to malign. Bivalves, plants, and algae? Relatively benign. Finfish and crustaceans? Not so much. Feed, disease, and pollution issues plague these industries. Open-net salmon farms, for example, can contaminate the surrounding seabed with waste and pesticides. An overreliance on antibiotics is common in some industries, for instance, in shrimp farming where disease can wipe out 40 percent or more of the product globally in any given year. And farmers of fish—particularly carnivorous species, such as salmon—have traditionally leaned heavily on the world’s wild forage fisheries to make fish meal....

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Including: "Show Me the Money Fish" and "Hold the Salt: The Promise of Little Fresh Fishes"

Scholasticism, Peer Review and Joy

From the blog of the Journal of the History of Ideas:

Back to Scholasticism?

In Europe, scholasticism was the dominant mode of teaching for at least five centuries. Yet all we tend to hear about it is how useless it was. It has come down to us as a joke and a warning: do not let your learned knowledge ossify into self-referential learned doggerel.

I first encountered this depiction of scholasticism in François Rabelais’ sixteenth-century novel Gargantua,where the learned theologian Janotus de Bragmardo is sent to bargain with the eponymous protagonist for the return of the bells of Notre-Dame, which our hero had purloined in a previous chapter. Bragmardo’s speech reaches a climax with this gem of a sentence:

Hem, hem, hem, haikhash! For I prove unto you, that you should give me them. Ego sic argumentor. Omnis bella bellabilis in bellerio bellando, bellans, bellativo, bellare facit, bellabiliter bellantes. Parisius habet bellas. Ergo gluc, Ha, ha, ha.

Omnis bella bellabilis in bellerio bellando—there is a nursery-rhyme catchiness to it, which has made it stick in my memory for a decade and a half. You do not need to speak Latin to understand that this is not how Latin is supposed to be spoken. What does it mean? Nothing, really. The learned man plays around with the language, creating a sentence that almost makes sense—every bell-able bell belling in the belfry—expressing little except that he is familiar with Latin declensions. In his book, Rabelais lets this oration be met with laughter.

A very different emotion characterizes current-day philosopher Alexander Douglas’ description of peer-reviewed journal articles:

During my doctorate, exposure to peer-reviewed journal articles nearly put me off the whole idea of philosophy. Having been philosophically raised on the exciting narrative that began with Descartes shining a ray of clear light through the accumulated fog of Scholastic decadence, I was disheartened to discover a whole industry churning out reams of (largely unread) philosophical literature so dull and lifeless it would shame the most pedantic monk of the darkest age.

Douglas’ tone is tongue-in-cheek, but the image he sketches—the brilliant light of reason shearing through centuries’ worth of scholastic dust—is a recognizable one. Many of us were raised on that same narrative....

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Consultant

 From n+1, issue 48, Fall 2024:

The Contingency Contingent
My fake job in Y2K preparedness

In rare moments within the history of capitalism, too few workers exist. Not as an absolute, of course: in total, workers always outnumber paid possibilities for work; that’s how our economy functions. But in a specific industry, a shortage may emerge, if only for a brief time. In 1998, on my first day of work as an analyst with the accounting and consulting firm Arthur Andersen LLP, it was clear that some aberration in accumulation had placed me in the twenty-fourth-floor conference room of a Manhattan skyscraper, overlooking the Museum of Modern Art’s sculpture garden, staring at a PowerPoint presentation for new hires. On one slide was a cartoon duck, bespectacled and presented in profile, standing on the tiptoes of its webbed feet. In its hands was a sledgehammer, held overhead, ready to smash a desktop computer.

I would learn soon enough that this—my first professional and only corporate work experience—was a fake job. It was fake because although I worked with Arthur Andersen, I never worked for them. (Their shade of blue-chip firm would never have hired the likes of me: they recruited from places like Harvard; I’d recently graduated from Hampshire College. They required new hires to have impeccable GPAs; my school didn’t confer grades.) Instead, I was employed by a global advertising conglomerate that had hired Andersen on a consultancy project and then placed me alongside the Andersen team—the result of a confluence of staffing shortages.

It was, moreover, a fake job because Andersen was faking it. The firm spent the late 1990s certifying fraudulent financial statements from Enron, the Texas-based energy company that made financial derivatives a household phrase, until that company went bankrupt in a cloud of scandal and suicide and Andersen was convicted of obstruction of justice, surrendered its accounting licenses, and shuttered. But that was later.

Finally, it was a fake job because the problem that the Conglomerate had hired Andersen to solve was not real, at least not in the sense that it needed to be solved or that Andersen could solve it. The problem was known variously as Y2K, or the Year 2000, or the Y2K Bug, and it prophesied that on January 1, 2000, computers the world over would be unable to process the thousandth-digit change from 19 to 20 as 1999 rolled into 2000 and would crash, taking with them whatever technology they were operating, from email to television to air-traffic control to, really, the entire technological infrastructure of global modernity. Hospitals might have emergency power generators to stave off the worst effects (unless the generators, too, succumbed to the Y2K Bug), but not advertising firms.

With a world-ending scenario on the horizon, employment standards were being relaxed. The end of the millennium had produced a tight labor market in knowledge workers, and new kinds of companies, called dot-coms, were angling to dominate the emergent world of e-commerce. Flush with cash, these companies were hoovering up any possessors of knowledge they could find. Friends from my gradeless college whose only experience in business had been parking-lot drug deals were talking stock options.

The employment agency through which I got my fake job made no epistemological distinction between knowing something and knowing about something. JavaScript, for example, a computer programming language: I knew about it but did not know it. Fine. Was I aware that the modern world might go on a catastrophic hiatus of unknown duration at the end of 1999? I had heard of something to that effect, although if pressed I couldn’t have explained. The Conglomerate was not much more stringent. My interview consisted of about twelve minutes with a laconic, mustachioed, middle-aged Arthur Andersen manager named Dick. (One of the services Andersen had been asked to provide was to help hire the Conglomerate’s Y2K team.) “On a scale of one to ten, what’s your knowledge of computer software?” he began. I paused for a moment, unsure of whether our interview would include a demonstrative component, as had so many previous interviews for jobs I had not gotten. But his office was empty. I couldn’t see how he would test me. I said eight.

“And what’s your knowledge of computer hardware, on a scale of one to ten?” Dick continued. The moment called for both boldness and modesty. I felt committed to eight, a number I had long appreciated for its intimations of infinity when turned sideways. So I repeated myself: “Eight.” It was true that one of my campus work-study jobs had been as a computer lab monitor. I could restart a PC or refill a printer’s paper tray if the situation demanded it, although it rarely did. I’d had the weekend evening shifts.

Dick’s next question would determine the development of my nascent career. “And what’s your level of problem-solving, on a scale of one to ten?” I sensed, suddenly, an opportunity to pass through a corporate loophole, to surmount my lack of credentials, training, and touch-typing skills and lean into my historical moment. “Nine,” I replied.

“That was it?” my girlfriend chirped when I reported to her the climax of my interview. The Conglomerate had hired me on the spot.

I was placed on the quality assurance team, assisting with work the Conglomerate had contracted to be carried out exclusively by the Arthur Andersen contingent. They weren’t called “a contingent” around the Y2K office. The consultants were referred to as the Andersen people, a term that exaggerated the partition between them and other Conglomerate employees, from whom they commanded both bewilderment and respect and, as often follows from the first two, a certain amount of resentment. These contradictory feelings stemmed from the fact that management consultants constituted then—and still do now—the vanguard of corporate work. They flit between companies and industries, parachuting in to diagnose problems and suggest, although rarely implement, “best-practice” solutions. It’s management consulting lingo, best-practice, and it indicates that the good is not enough: this isn’t Winnicott’s consulting room. Instead, management consultants aim for superlatives. They hire the best. They practice the best. They claim Pete Buttigieg among their alumni ranks. At the Conglomerate they had their own offices, their own meetings, their own schedules. They worked from the Conglomerate’s office space while they were on its project, but when they “rolled off” (they had their own terminology, too) they would take up residence within the ambit of another Andersen client.

“You’ve been selected because you’re Andersen quality but not Andersen price,” explained Cindy, the chipper data-warehousing expert who served as the quality assurance team’s Andersen-employed leader, on my second day of work. I felt like a piece of organic fruit found in the conventional produce bin....

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Friday, August 30, 2024

Carbon: "Two scammers, a web of betrayal, and Europe’s fraud of the century"

Also known as Tuesdays, in Brussels.

From The Atavist Magazine, no. 148:

Watch it Burn

A good scammer sees opportunity everywhere, including their own downfall. In 2006, the police showed up at Gustav Daphne’s house in Beverly Hills. They had come once before, when a neighbor complained about his trash. Daphne happened to be swimming in his pool at the time, and because he is French, he came to the front door in a tiny little bathing suit. The police were appalled; they gave him a reprimand about storing his garbage more tidily and scurried away.

This time was different. The cops came straight into the house. There were a dozen of them, wearing bulletproof vests. They took him outside in handcuffs and put him in a car. Maybe he was paranoid, having built a multimillion-dollar empire on fraud and deceit, nurturing connections with international criminal rings, but at first he thought that he was being kidnapped. When he saw the jail, he was relieved.

The feeling was short-lived. The jail was cleaner than those in Europe where he’d been held, but after a couple of hours he demanded a cigarette and was informed that smoking was prohibited. OK, he thought. There must be a way. There’s always a way. He would find the right people, negotiate the right conditions. He had to smoke! He loved to smoke. He loved it more than anything, except for women. He loved women! And smoking, and art, and shopping.

He found someone in the prison whom everyone called El Gordo, a Mexican guy who could hook people up with anything. Daphne asked for cigarettes and was given an address on the outside where he would need to have $300 delivered. This was not a problem. He didn’t crave money, but it was useful, so he accrued it. His mansion had once belonged to a silent film star; he sometimes commuted by helicopter. There wasn’t much Daphne couldn’t afford.

After Daphne’s cousin drove a Bentley to a shady neighborhood and made the cash drop on his behalf, Daphne went back to El Gordo to collect his cigarettes. El Gordo looked at him, then gave him a nicotine patch. “No smoking in prison,” El Gordo said.

By the time Daphne was extradited to Europe to face money laundering charges, which was the reason he’d been arrested in the first place, he had kicked his cigarette habit. He felt great. He was buoyant with health. He boarded a plane to Switzerland in handcuffs, was whisked to a prison near the Alps, and was put in a cell. Waiting for him there was a pouch of tobacco. He resisted for a few hours. Then he smoked the whole thing.

Eventually, Daphne was sent to a prison in France, where he could get anything he wanted: magazines, special meals, the Israeli cigarettes he preferred. His lawyer could also bring him things. So when he saw a segment on TV about climate change policy, he asked his lawyer to bring him more information about France’s plans to reduce emissions. Daphne had a preternatural ability to sniff out criminal prospects, and he’d caught a familiar whiff.

When Daphne read the materials his lawyer provided him, he learned about Europe’s carbon-emissions trading system, the first of its kind in the world. It had grown out of the Kyoto Protocol, the landmark international agreement to reduce global emissions. Sure enough, Daphne told me, he saw the blueprint for what would become his next illicit enterprise. As soon as he’d finished his time in prison, he began gaming the new emissions-trading system.

The scam would help Daphne accrue even more money, and it would make him famous. In the media he cut a dashing figure, partying with celebrities and oligarchs. He maintained his slim physique by avoiding carbohydrates like they were venom and dressed in blazers cut from blue velvet or embroidered with shimmering brocade flowers. He liked to wear a diamond-encrusted Chopard sun pendant on his partially bared chest and was rarely photographed without one of his hundreds of pairs of Tom Ford sunglasses, all aviator-style with gradient lenses. Always, it seemed, he had a cigarette hanging out of the side of his mouth.

Reporters dubbed Daphne the “prince of carbon,” but it wasn’t just his flamboyant charisma that elevated him to criminal royalty. So did the nature of his new fraud. Daphne was scamming the fight against climate change by exploiting a policy flaw that left billions for the taking. 

No one was ever sure who was working with whom, who might be 
screwing someone else over, or who had started the whole thing.

I should say here that Gustav Daphne is a pseudonym. He remains a wanted man in France, so when I traveled to meet with him at his gated villa in Tel Aviv, he agreed to speak on the condition that I not use his name—any of his names. (He has a few aliases.) He kept saying what a bad idea it was to talk to me. He had turned over a new leaf, he insisted, and like a freshly avowed ascetic, he nurtured a few simple pleasures: taking his impeccably trained Belgian Malinois on sunset walks along the beach; going horseback riding with his daughters. He tried to steer clear of trouble, though it occasionally sought him out. A few weeks before we met, some masked guys on a motorcycle drove by firing guns at his home; when I visited, the front door was being replaced.

Still, his name is all over the French media. I warned him that, at least in some circles, a pseudonym would be a pretty weak shield for his identity. That was OK with him. He said that he wanted to put the past behind him and focus on his new ventures, like crypto investing. So, no name.

During my visit, Daphne took calls from his lawyers and asked favors of his wife and flirted with acquaintances over WhatsApp. He wore his Tom Ford sunglasses indoors and out. He showed me his art: a large Kandinsky painting in the foyer, a few Chagalls downstairs. The villa had some burly guys on staff and a cleaner from Sri Lanka who picked up after two fluffy indoor dogs that liked to avail themselves of the plush white carpets.

All this is part of Daphne’s downsized lifestyle. He used to have a bigger mansion, with a swimming pool and a tennis court, a gym and a movie theater. He once parked his yacht in the glittering harbors of the Côte d’Azur. But he has fashioned a new life for himself in Israel, which has yet to grant France’s request for his extradition.

Daphne wanted me to know that to him the carbon scam was a negligible chapter in a long and successful criminal career. It wasn’t his most lucrative scheme; it wasn’t even the first opportunity he’d pursued in the lumpish market of environmental interventions conceived by a civilization in ecological peril. Plus, he was just one of many people who ripped off the emissions-trading system.

Daphne and other scammers’ pillaging of Europe’s carbon market constitutes what the media have called “the fraud of the century”—billions of euros were stolen in a matter of months. The shadowy scheme attracted established crime rings and amateur hucksters alike, many of whom knew each other. But the scam lent itself to duplicity: No one was ever sure who was working with whom, who might be screwing someone else over, or who had started the whole thing. Its web reached the boxing rings of Las Vegas, the offices of Germany’s biggest bank, the caves along the border of Afghanistan and Pakistan where Osama bin Laden was hiding, and the gilded restaurants of Paris, where it also left blood spattered on the streets. It pulled in a playboy demi-celebrity, an Afghan refugee, a flashy street hustler who couldn’t accumulate enough bling, an immaculate businessman who hobnobbed with the queen of England, the doyenne of Marseille’s underground, and a man some people called the Brain.....

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LRB: Wolfgang Streeck On The Federal Office for the Protection of the Constitution

Our boilerplate introduction to the author of this piece, Wolfgang Streeck:

Streeck is a German economic sociologist and emeritus director of the Max Planck Institute for the Study of Societies.
If you can plow through some of the econo-political rhetoric in this essay to the core ideas you get the sense he may be on to something.

From the London Review of Books, August 15:

Anti-Constitutional
Wolfgang Streeck 

Verfassungsschutz: Wie der Geheimdienst Politik macht 
by Ronen Steinke.
Berlin Verlag, 221 pp., €24, June 2023, 978 3 8270 1471 9

The​ Federal Office for the Protection of the Constitution (Bundesamt für Verfassungsschutz, or BfV) owes its existence to the Allies. When the Western powers gave the green light for the creation of the Federal Republic of Germany in their zones of occupation in 1949, they also gave the constituent assembly permission to set up ‘an office to collect and disseminate information on subversive activities against the federal government’. According to Ronen Steinke, the intention was to nip in the bud any attempt at a coup d’état, whether fascist or communist, that would have given the Soviet Union an excuse to invade western Germany. (Instead, the Soviets founded their own German state, the German Democratic Republic.) In post-fascist Germany, where memories of the Gestapo were still vivid, setting up a domestic intelligence agency for political surveillance was a politically sensitive move. The Allies had already passed a statute in 1946 disbanding ‘any German police bureaux and agencies charged with the surveillance and control of political activities’. Three years later, writing to the constituent assembly, they reiterated that the new agency ‘must not have police powers’.

This injunction is still observed. BfV agents aren’t allowed to arrest people; they don’t wear uniforms or carry guns. ‘They’re meant to listen as inconspicuously as possible,’ Steinke writes, ‘and take notes.’ Their job, as stated in the legislation, is ‘the collection and evaluation of information ... on activities against the free democratic basic order’. Defending the state against threats to this order is the domain of the police and public prosecutors, sometimes acting on information provided by the BfV. The BfV is subordinate to the Ministry of the Interior, and is therefore subject to political instruction, in a way that, say, the office of the public prosecutor is not. Today, nudged by its masters, it has extended its responsibilities from the observation of subversive activities to their prevention.

The BfV was founded in 1950 with a staff of 83. Little is known about its early activities, other than that the majority of its staff were former Nazis, as was the case in most branches of the federal bureaucracy. Its first president, Otto John, had been active in the resistance, escaping to London after the failed putsch of 1944. In 1954 he popped up in East Berlin and revealed in a press conference that the soon-to-be West German Ministry of Defence and the foreign intelligence service that was about to become the BND both employed former SS leaders. After two years in the GDR he returned to West Germany, claiming that he hadn’t gone east voluntarily, or switched sides, but had been abducted. He was sentenced to four years in prison for treason and conspiracy.

Within a few years, the BfV had helped the federal government ban two political parties that had been deemed anti-constitutional, the Socialist Reich Party (SRP) in 1952 and the Communist Party (KPD) in 1956. The categorisation of political parties as anti-constitutional and their subsequent outlawing is peculiar to the German system. Cases are brought by the government and adjudicated by the constitutional court using evidence collected, typically, by Verfassungsschutz officers. The Allies shared the state’s interest in seeing the SRP and the KPD disbanded – the SRP was by its own admission a successor to the Nazi Party and the KPD was essentially the West German branch of the GDR’s ruling party, the Socialist Unity Party (SED). German governments have always viewed party bans as primarily a political, rather than a legal, matter. This was made clear in 1968 when the then minister of justice, Gustav Heinemann, a Social Democrat, invited two representatives of the KPD to his office to inform them that if a new communist party were founded nothing would be done to suppress it. Shortly afterwards that party came into being – as the DKP – and lasted until German unification, when it merged with the SED to form the party now known simply as Die Linke (‘The Left’).

Under Willy Brandt, who became chancellor in 1969, and his successor, Helmut Schmidt, the BfV thrived. Its staff more than doubled from around one thousand in 1969 to more than two thousand in 1980. It expanded again during the war on terror, and then in the wake of Angela Merkel’s opening of the German border in 2015. By 2022 it had a staff of more than four thousand and a budget of €440 million. In the meantime all sixteen federal states, the Länder, had established Verfassungsschutz offices of their own, employing an estimated 2600 officials. Add to this the unknown number of so-called V-Leute – paid informers who spy and report on suspected anti-constitutional activities; Steinke estimates that there are around 1500 of them – and you get roughly 8400 fighters for the constitution fielded by the seventeen governments of the Federal Republic of Germany.

Steinke gives a fascinating account of the way the BfV’s activities and concerns have changed over time. Unsurprisingly, the former Nazis tasked with protecting the democratic constitution in its early years were keen to go after the left, and this remained the BfV’s priority well into the years of student revolt. In 1972, the Brandt government and the Länder passed a decree banning the employment of ‘enemies of the constitution’ (Verfassungsfeinde) in the public sector, aimed primarily at a new generation of teachers and academics who were seen as potentially lacking loyalty to the state. Under the decree, which was rescinded at the federal level in 1985 and by the final Land, Bavaria, in 1991, 3.5 million people, both applicants for and holders of public sector jobs, were subjected to loyalty checks, carried out by the relevant Verfassungsschutz office. In total, 1250 applicants were refused employment and 260 employees dismissed, almost all of them deemed too far to the left to be capable of serving the public interest.

After the collapse of the GDR, and with the post-communist transformation of leftism into what Jürgen Habermas has called ‘constitutional patriotism’, the BfV’s attention began to shift to the right. After unification, right-wing ‘populist’ political parties came to be seen as electoral competition by Germany’s centre-right and centre-left: the Christian Democratic Union (CDU), the Christian Social Union (CSU) and the Social Democratic Party (SPD). In 2001, Gerhard Schröder’s government and both chambers of parliament filed a joint motion to the constitutional court to outlaw the far-right National Democratic Party (NPD), which seemed close to crossing the threshold – 5 per cent of the vote – that would give it representation in parliament. As in the 1950s, it fell to the BfV to assemble the evidence. The case was thrown out by the constitutional court in 2003, on the basis that it was impossible to know how much of this evidence – mostly speeches and party resolutions – had been produced by undercover V-Leute who had joined the party. The problem was exacerbated by the refusal of the BfV to identify its agents, for fear of retribution by genuine party activists. It transpired that the federal and Länder bureaux had kept their agents secret from one another. They continued to do so during the trial, raising the possibility that a majority of those serving on the NPD’s internal committees may have been V-Leute who didn’t know who was and who wasn’t on their side. The BfV was ridiculed for allowing its spies to become indistinguishable from the party they were spying on.

In 2012, when Merkel was chancellor, there was another attempt to have the NPD banned....

....MUCH MORE

Previous visits with Streeck:

Imperial Rome and the Antonine Plague

From the Bulletin of the Atomic Scientists, May 15:

A ‘plague’ comes before the fall: lessons from Roman history 

The Pax Romana—the 200-year “golden age” of the Roman Empire—was a marvel of diversity, connectivity, and unchallenged hegemony. By the middle of the second century AD, imperial Rome ruled territory across three different continents. Roughly one-quarter of the Earth’s population, some 60 million people, lived under Rome’s vast aegis, and the emperors of the age—most notably Marcus Aurelius—enjoyed the consent of those they governed. The Empire’s elites—witnessing the disciplined legions, widespread religiosity, cultural efflorescence, and dominant economy—likely expected their world order to endure forever.

In the year 166 AD, however, seemingly eternal Rome was caught completely off-guard as a deadly novel disease swept across the Eurasian landmass. It ransacked Rome’s cities for at least a decade and preceded centuries of decline. This major biological event—now known as the Antonine plague—appears to have been the world’s first pandemic.

Historians hotly debate its death toll—with estimates ranging from 2 percent to 35 percent mortality—and its broader social and economic effects. The disease itself remains undiagnosed. The great Greek physician Galen described its main symptoms as fever, throat ulcers, and a pustular rash. Some have suspected it was measles or smallpox, but modern analysis provides reasons to doubt these as the possible culprits. Human remains from the Antonine plague period, meanwhile, have thus far failed to yield genetic evidence sufficient to identify the pathogen.

Although the plague did not on its own cut short Rome’s dominance, it struck an empire that was confronting multiple challenges beneath a veneer of prosperity and growth—factors that modern-day infectious disease experts might recognize as creating the ideal conditions for pandemics. Much remains unknown about the Antonine plague; in some ways, modern scholars are just as in the dark about this first pandemic as its contemporary victims. But interdisciplinary researchers, trying to understand how the plague could have helped push such a powerful empire to the breaking point, have recently been unravelling some of its mysteries.

Probing the plague. Historians, archaeologists, and scientists have been sharing data and expertise, working together to develop histories of past pandemics—including the Antonine plague—that are surprisingly comprehensive and nuanced. Paleogenetic and paleoclimatological evidence reveal the crucial role of environmental and demographic factors in the pandemic. Insights from modern economics and sociology have improved historians’ understanding of how the institutions of the Roman Empire were affected by disease mortality. Even before the pandemic arrived, the pre-existing ecological, economic, and demographic context of mid-second century Eurasia prepared the way for the disease that would accelerate the end of Rome’s era of efflorescence.

Research assessing the severity of modern anthropogenic climate change, for example, has compiled a vast array of climatological data dating back to the Roman period, and well before. Such research offers historians an increasingly detailed and comprehensive view of the ecosystems of ancient Eurasia and Africa. The ancient Mediterranean was (and still is) polka-dotted with microclimates; meanwhile, ice cores from Greenland, ancient tree rings from northern Europe, and sediment cores from Egypt and Italy suggest that some regions in and around Roman territory endured cooler temperatures and droughts about a decade ahead of the Antonine plague pandemic. These climatological shifts were hardly severe, nor did they affect the entire Mediterranean Basin. Many of the affected regions, however, happened to play outsized roles in supplying Roman cities with grain.

The annual Nile flood in Egypt, for instance, reliably nourished well-irrigated grainfields with nutrient-rich water from the Ethiopian highlands. The resulting harvests, often abundant, were stored and then shipped in massive vessels across the Mediterranean to Rome for distribution to the city’s masses. But from the 150s onward, a series of droughts near the Nile headwaters in equatorial east Africa disrupted the flood, reducing the productivity of Rome’s main breadbasket. Meanwhile, at the same time, increased storm activity in the western Mediterranean—as confirmed by sediment cores extracted from the coast of southern France—made shipping already scarce grain far riskier than in previous centuries. As a result, denizens of Rome and several other major cities, and possibly also some of Rome’s soldiers, endured greater food insecurity and malnutrition—weakening their bodies ahead of the pandemic’s arrival in the 160s.

An interconnected, vulnerable ancient world. Historians still don’t know exactly where and when the pandemic entered Roman territory. But, again, historical circumstances conspired in favor of the novel disease.

An outbreak today can jump continents as quickly as an airplane can fly. Travel and transportation can facilitate the spread of infectious diseases. It may not be coincidental, therefore, that by the time of the Antonine plague, the Eurasian landmass was better-connected than ever before. In 166 AD, for the first time in recorded history, the imperial Han court in Luoyang, China, received visitors from the Roman Empire. Merchants from India, sub-Saharan Africa, Arabia, and Egypt rode the trade winds to ports all around the Indian Ocean. Roman soldiers, seeking to police and tax such abundant trade, ventured well outside Roman borders—as Latin inscriptions in the Farasan Islands of southern Arabia attest. In short, there were plenty of opportunities for novel diseases to cross political and geographic barriers into new populations, transforming what might have otherwise been a regional epidemic into a pandemic that spread across three different continents.

In the Roman Empire, an impressive transportation infrastructure—once a source of economic and military power—became a sudden liability once the pandemic breached its borders....

....MUCH MORE

One of the scariest things The Bulletin has written about is the cobalt bomb, "‘Doomsday’ Nuclear Submarine Armed With Nuclear-Powered, Nuclear-Tipped Torpedoes Delivered to Russian Navy". If interested it's right after this pull-quote:

"Now Most Dreaded Weapon, Cobalt Bomb, Can Be Built

It is this type of hydrogen bomb of which Albert Einstein said: "If successful, radioactive poisoning of the atmosphere, and hence annihilation of any life on earth will have been brought with in the range of technical possibilities."

Scroll down.

Now that's "doom-scrolling."

Followup: "Fed Favored Annual Core PCE Price Index Slightly Up, at 2.6%: Core Services Inflation 3.7%, Durable Goods Deflation -2.5%"

Following on the earlier "Inflation: BEA personal Consumption Expenditures Price Index, July 2024".

From Wold Street, August 30: 

Month-to-month, core services inflation jumped while durable goods deflation deepened, and so core PCE price index hits Fed’s target.

The “Core” PCE price index, the Fed’s primary yardstick for its 2% inflation target, rose by 2.62% from a year ago in July, a hair up from the June reading of 2.58% (red in the chart below). This “core” index attempts to show underlying inflation by excluding the components of food and energy as they can be very volatile, spiking and plunging with commodity prices (red in the chart below).

The overall PCE price index, which includes the food and energy components, rose by 2.50% year-over-year in July, also a hair up from June’s 2.47% (blue). Within it, energy prices edged up year-over-year by 0.2%, and food prices rose 1.4%.

The “core services” PCE price index rose by 3.72% in July, down a hair from June’s 3.81% increase (yellow). But the durable goods PCE price index fell less than in the prior two months, in July by -2.5% year-over-year. May’s drop of -3.2% had been the biggest drop since 2004 (green):

https://wolfstreet.com/wp-content/uploads/2024/08/US-PCE-inflation-2024-08-30-combo.png

The month-to-month moves.

The “core” PCE price index rose by 2.0% annualized in July from June (not annualized, +0.16%), same as in June. Both months were right on the Fed’s target (blue in the chart below).

Within it, core services inflation accelerated sharply in July from June (+3.3% annualized), while the durable goods index dropped deeper into the negative (-3.7% annualized). Those two forces combined, pulling in opposite directions, caused the index to rise by 2.0% annualized.  And that has also been the dynamic we’ve seen so far this year: Durable goods prices are deflating sharply from the pandemic spike while services inflation is still uncomfortably high.

The six-month annualized core PCE price index, which irons out the month-to-month squiggles and revisions, and which Powell cites a lot, decelerated to 3.3%, as the January spike fell out of the index (red):....

....MUCH MORE

We are looking for a re-ignition of both CPI and PCE in 2025. More on that as we get closer to year-end.

Inflation: BEA personal Consumption Expenditures Price Index, July 2024

From the Bureau of Economic Analysis:

Friday, August 30, 2024

BEA 24–39Personal Income and Outlays, July 2024

Personal income increased $75.1 billion (0.3 percent at a monthly rate) in July, according to estimates released today by the U.S. Bureau of Economic Analysis (tables 2 and 3). Disposable personal income (DPI), personal income less personal current taxes, increased $54.8 billion (0.3 percent) and personal consumption expenditures (PCE) increased $103.8 billion (0.5 percent).

The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent (table 5). Real DPI increased 0.1 percent in July and real PCE increased 0.4 percent; goods increased 0.7 percent and services increased 0.2 percent (tables 3 and 4)....

.... Prices

From the preceding month, the PCE price index for July increased 0.2 percent (table 5). Prices for goods decreased by less than 0.1 percent and prices for services increased 0.2 percent. Food prices increased 0.2 percent and energy prices increased by less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent. Detailed monthly PCE price indexes can be found on Table 2.4.4U.

From the same month one year ago, the PCE price index for July increased 2.5 percent (table 7). Prices for goods decreased by less than 0.1 percent and prices for services increased 3.7 percent. Food prices increased 1.4 percent and energy prices increased 1.9 percent. Excluding food and energy, the PCE price index increased 2.6 percent from one year ago....

....MUCH MORE

and more to come.

Thursday, August 29, 2024

"Chinese icebreaker makes port call in Murmansk"

That's a long way from Hainan island.

From The Barents Observer, August 29:

The Russian Arctic region actively seeks to strengthen ties with Beijing. This week, a Chinese icebreaker for the first time paid a visit to Murmansk.  

The Xue Long 2 set out from the Chinese port city of Qingdao on the 7th July and subsequently set course for the Bering Strait. Following its passage into the Chukchi Sea, the 122 meter long ship is believed to have sailed towards the North Pole.

One and a half month later it sailed into the Kola Bay and moored in a downtown port. Locals in the Russian Arctic city could on the 28th of August see the vessel being assisted by tugs into the harbour area....

....At the same time, China is expanding its research activities in the far northern region, including in the Norwegian Arctic archipelago of Svalbard....

....MUCH MORE

Previously:

September 2018: "China Launches Its First Domestically Built Icebreaker"  

if you read Xinhua's translation of January's "Full text: China's Arctic Policy" you'll note they call themselves a ‘Near-Arctic state’.
This is to counter people like me using the 'non-polar' or 'non-Arctic' phrasing.

Additionally China is couching their interest in terms of research:

States from outside the Arctic region do not have territorial sovereignty in the Arctic, but they do have rights in respect of scientific research, navigation, overflight, fishing, laying of submarine cables and pipelines in the high seas and other relevant sea areas in the Arctic Ocean, and rights to resource exploration and exploitation in the Area, pursuant to treaties such as UNCLOS and general international law. In addition, Contracting Parties to the Spitsbergen Treaty enjoy the liberty of access and entry to certain areas of the Arctic, the right under conditions of equality and, in accordance with law, to the exercise and practice of scientific research, production and commercial activities such as hunting, fishing, and mining in these areas....

and is dedicating 1100 square feet of space on the latest planned icebreaker to laboratories.

For some reason I'm reminded of the time the Chinese bought their first aircraft carrier from Ukraine....

*****

... Again, this is just a little guy, 1.5 meters capability is nothing in the world of icebreakers.
The Venta Maersk that just became the first container ship to transit Russia's Northern Sea Route can get through 2-3 feet of ice and Teekay's new LNG carrier, the Eduard Toll, was breaking through 1.8 meters of ice on its inaugural  run from Yamal in January.

The thing that is impressive about the Xue Long 2 is that the Chinese built it themselves.
As noted in the outro from the nuclear-powered ship, the strategy is similar to the one they used to pursue their aircraft carrier dreams.
Here's the short version of the time the Chinese bought their first aircraft carrier from Ukraine.

The Ukrainians wouldn't sell if the big boat were going to be used for military purposes.
So the Chinese said "Ahhh...casino"
"That's it, we're only going to use it as a floating casino, Chinese people like to gamble, come on lucky 8, that's the ticket!"

Here's the Casino:

Image result for aircraft carrier Liaoning


As can be seen, gamblers are able to fly right in for the action, Pai Gow to starboard, baccarat to port.
I can't wait to see what's cookin' in the icebreaker laboratories.
After reverse engineering everything on the casino, Xinhua announced in December 2015: "China building second aircraft carrier".based on the Varyag plans.

They will use the experience gained building that ship to build their second Chinese-made carrier (third total) which will be built to an entirely new plan.
Same thing with the icebreakers.  The new one refines construction expertise for the next homemade ship and away they go,
China still has a way to go to match their new BFF:
Russia To Introduce Nuclear-Powered Ice-Breaking Submarines
Because, why not?
 
And many, many more.

"Did wages rise 10-fold to match the 10-fold rise in the cost of a modest house? No"

A nasty little fact that is studiously ignored in discussions of inflation.

From Charles Hugh Smith's Of Two Minds blog, August 23:

The Social Recession Is Accelerating

Did wages rise 10-fold to match the 10-fold rise in the cost of a modest house? No. That is social recession in a nutshell.

A reader asked about the term social recession which he'd noted in my book Get a Job, Build a Real Career and Defy a Bewildering Economy. Here is the paragraph:

"Stagnation in opportunities to work and earn (i.e. a financial recession) leads to social recession, a loss of opportunities for adulthood: a rewarding career, family, and a home of one's own. In a social recession, unemployed young people may be mired in adolescent narcissism, eschewing ambitions not just in work but in romance and marriage."

The reader asked if I could recommend any further reading on social recession and I replied that I could not, as the topic is not well-recognized or studied.

In my analysis, social recession refers to the narrowing of opportunities to marry and raise a family, own a home and have a secure livelihood from the vast majority of the populace to an elite selected by fierce competition--a competition few have the means to win, as the winners tend to win by choosing their parents wisely.

In the purely financial / economic terms of growth of GDP, household income, corporate profits and the value of assets, the US has only been in an economic recession for a few months in 2008-09 and at the start of the pandemic lockdown. But when measured by the ability of just about anyone willing to work hard and practice basic frugality to buy a house and start a family, the US has been in a social recession since 2009.

Demographics / economics analyst Chris H., who tweets as CH @economica, recently posted charts which reflect this social recession, most strikingly in the collapse of the US birthrate that started in 2009. He asked: "The largest childbearing population in US history has gone on strike...maybe we should know why?"

https://www.oftwominds.com/photos2024/births-crash-westUS9-23a.png 

Some might argue that this decline in births is coincidental to the Global Financial Crisis , but since social recession has its roots firmly in the economic opportunities available to the average worker, that argument is specious....

....MUCH MORE

 Earlier today: "The Housing Market And Interest Rates: 3.4% Is The Magic Number"

And as noted in June 2022's "Redefining the Working Class Beyond white men in hard hats":

There seems to be something akin to an actual plan to charge the plebs everything they earn to cover food, shelter, and basic necessities and further, to drive them into debt servitude to the tune of 5% - 10% of annual income per year....  

Or, going back to 2013: 

"Ben Franklin on Labor Economics (or how to create an underclass)":
The easiest way to create a dependent class is to price them out of the real estate markets.

"In countries fully settled…those who cannot get land must labor for others that have it; when laborers are plenty, their wages will be low; by low wages a family is supported with difficulty; this difficulty deters many from marriage, who therefore long continue servants and single...."
 
And many, many more. If interested use the 'search blog' box upper lwft.

Nvidia And The Keynesian Beauty Contest (NVDA)

Following on yesterday's "Nvidia Beats On Top And Bottom Lines, Shares Drop (NVDA)" and "Nvidia Q2 2025 Earnings Call Transcript, August 28, 2024 (NVDA)":

A repost from August 21 i.e. a week before NVDA released their Q2 numbers:

"Nvidia is nearing another milestone that would showcase its stunning growth" (NVDA)

We try to be careful with this type of writing. Speculating about a speculative investment out in public is an exercise fraught with downsides, among which is the Keynesian Beauty Contest aspect of  information on an asset price. You not only have to be right about the underlying story but also on the market's reaction to that story should it come to pass.

With that caveat, and with an awareness that NVDA has from time to time shown an almost perverse reversal of the price trend going into earnings.... One of the most dramatic was in February 2024 when a short-but-sharp downtrend reversed in dramatic fashion:

Chart Image

TradingView

That gap by the way is the one major gap that has not been filled,* the other big one from the May earnings report was filled in the early August ructions. Over the years - and we are talking every earnings report back to 2015, we've also seen the opposite occur, an up-move into Nvidia earnings reversed when the report didn't hit the whisper numbers.

So, with that cautionary tale ringing in our ears, here's MarrketWatch, August 21, 2024:

Several analysts see the company hitting the $30 billion revenue mark when it reports earnings next week. The company crossed the $20 billion threshold two quarters ago.

Nvidia Corp. keeps moving the bar higher. This time around, that could mean a new revenue milestone.

Raymond James analyst Srini Pajjuri sees the possibility of Nvidia NVDA topping $30 billion in revenue when the semiconductor company posts earnings next Wednesday afternoon. His projection is above the consensus view, which calls for $28.7 billion.

A revenue total above the $30 billion mark would highlight just how rapidly Nvidia has been able to grow — and at scale. The company first exceeded $10 billion in quarterly revenue a year ago, and it topped $20 billion in quarterly revenue during the January quarter.

Analysts see the potential for a $40 billion revenue quarter a year or so from now. The FactSet consensus models $39.6 billion in revenue for next year’s July quarter, and $42.3 billion in revenue for next year’s October quarter.

Nvidia has beaten consensus revenue expectations each quarter going back at least five years. But even if Nvidia weren’t to hit Pajjuri’s $30 billion-plus revenue mark this quarter, merely meeting the consensus view would be an impressive show of growth as it would mean revenue more than doubled from a year before. Nvidia’s growth is slowing as the company starts to lap periods that also benefitted from explosive demand for artificial-intelligence hardware, but to be able to double revenue at current levels is a rare feat....

....MUCH MORE
*
To fill that gap will take something that JPM's David Kelly called out in July:

"JPMorgan’s Kelly Says Only a Bear-Market ‘Shock’ Can Upend Tech"

$128.04 up $0.79 (0.62%) last.

*****

Well, revenues came in at $30.04 billion for the quarter but the judges of the beauty contest were all over the place in their appreciation of what they were seeing.

Our judgement: If you want to own the future, own this company. That is not a new opinion.

In late pre-market trade the stock was last at $121.56  down $4.05 (-3.22%).

*****

June 18, a walk down Memory Lane:
"Nvidia overtakes Microsoft as most valuable stock in the world" (NVDA)

Huh.

From Yahoo Finance, June 18, 2024: 

Nvidia (NVDA) overtook Microsoft (MSFT) on Tuesday as the most valuable company in the world just two weeks after it took the No. 2 spot from Apple (AAPL).

Nvidia's stock price rose about 3.5%, eclipsing $135 per share and giving the chipmaker a market capitalization over $3.33 trillion. With a 0.4% slide on Tuesday, Microsoft's market cap stood at nearly $3.32 trillion.

Shares of Nvidia are up more than 215% over the last 12 months and more than 3,400% over the last five years. Year to date, Nvidia has gained 175%; Microsoft stock is up just less than 19% in 2024.

Nvidia first crossed a $1 trillion market cap on June 13, 2023. The stock advanced north of $2 trillion on March 1, and then rapidly crossed the $3 trillion mark for the first time on June 5. The company's advance from a $1 trillion to a $3 trillion market cap was the fastest on record.

Nvidia's surge has made it a top weighting in the S&P 500 (^GSPC), and the chipmaker has served a pivotal role in the benchmark index hitting record highs in 2024.

Up until May, the S&P 500 had traded with a near-perfect correlation to Nvidia's price movement, meaning that as Nvidia's stock rose, so did the broader index. As of Monday, Nvidia's stock gains alone had contributed about one-third of the S&P 500's year-to-date rise, according to data from Citi's equity research team.

Nvidia completed a 10-for-1 split on June 10.

The company's rise comes amid the generative AI explosion that kicked off when OpenAI debuted its ChatGPT platform in late 2022. Nvidia's chips, modified graphics cards, and CUDA software platform are designed to both train and run AI programs, giving it a strategic advantage that experts say will take rivals AMD (AMD) and Intel (INTC) years to overcome.

Nvidia is the tech industry's go-to supplier for AI chips and integrated software....

....MUCH MORE

It seems like yesterday we were pitching Nvidia as the brains of your car, but it was actually going-on a decade ago:

May 2015
Nvidia Wants to Be the Brains Of Your Autonomous Car (NVDA)

We've mentioned, usually in the context of the Top 500* fastest supercomputers, that:
Long time readers know we have a serious interest in screaming fast computers and try to get to the Top500 list a couple times a year. Here is a computer that was at the top of that list, the fastest computer in the world just four years ago. And it's being shut down.
Technology changes pretty fast. 
That was from a 2013 post.

Among the fastest processors in the business are the one's originally developed for video games and known as Graphics Processing Units or GPU's. Since Nvidia released their Tesla hardware in 2008 hobbyists (and others) have used GPU's to build personal supercomputers.
Here's Nvidias Build your Own page.
Or have your tech guy build one for you.

In addition Nvidia has very fast connectors they call NVLink.
Using a hybrid combination of IBM Central Processing Units (CPU's) and Nvidia's GPU's, all hooked together with the NVLink, Oak Ridge National Laboratory is building what will be the world's fastest supercomputer when it debuts in 2018.

As your kid plays Grand Theft Auto....

 A bit more troubling was April 2018's "UPDATED—NVIDIA Wants to Be the Brains Behind the Surveillance State (NVDA)"

In 2015 we started using a boilerplate intro to the company, here's a 2016 version saying "Focus on the AI/Machine Learning":

NVIDIA: Don't Buy the Stock For The Autonomous Car Stuff (or virtual reality) NVDA; TSLA; IBM

The stock is up $2.21 (+2.64%) at $85.85. [divide that by 4 to account for the stock split in 2021] {also divide by 10 for the most recent split}
Yesterday the usually very reliable Investor's Business Daily headlined a story "Nvidia Upgraded On Growth In Car, Cloud, Virtual Reality Fields". As we say in our standard intro to the stock:
Before we go any further, our NVIDIA boilerplate:  
We make very few calls on individual names on the blog but this one is special. 
They are positioned to be the brains in autonomous vehicles, they will drive virtual reality should it ever catch on, the current businesses include gaming graphics, deep learning/artificial intelligence, and supercharging the world's fastest supercomputers including what will be the world's fastest at Oak Ridge next year.
 
Not just another pretty face.  
Or food delivery app.

It worked out.

NVDA NVIDIA Corporation monthly Stock Chart

 March 22, 2024:

I Have Heard Of This Nvidia You Speak Of (first call for a $10 trillion market cap) NVDA

I have heard wondrous tales of immense wealth,

Of amazing deeds performed as if by magic.

Yes I have heard*of all of this....but hang on one 'effin minute with the $10 trillion talk. Let's get to $1000 on the stock before we join Coleridge at the hookah. [In Xanadu did Kubla Khan...]