"Rapid-Onset Political Enlightenment: How Barack Obama Buiilt An Omnipotent Thought-Machine, And How It Was Destroyed"—David Samuels

Our readers may remember Mr. Samuels for his interview of Martin Luther King and Barack Obama biographer David Garrow in August 2023's "MLK Historian David Garrow Looks At Former President Barack Obama":

The guy does have some biographer cred. His 2017 book Rising Star: The Making of Barack Obama (2017) is 1078 pages of text followed by 300 pages of small-print footnotes.
Nine years of research and writing.(here's Politico's book review: Why So Many Critics Hate the New Obama Biography)

The interviewer's (Samuels') Q&A's with Boris Johnson and Edward Luttwak are just as in-depth and have some deep insight into the Russia-Ukraine war.

And the headliner from Tablet Magazine, December 2024:

If anyone in the future cares enough to write an authentic history of the 2024 presidential campaign, they might begin by noting that American politics exists downstream of American culture, which is a deep and broad river. Like any river, American culture follows a particular path, which has been reconfigured at key moments by new technologies. In turn, these technologies, which redefine both space and time—canals and lakes, the postal system, the telegraph, railroads, radio and later television, the internet, and most recently the networking of billions of people in real time on social media platforms—set the rules by which stories are communicated, audiences are configured, and individuals define themselves.

Something big changed sometime after the year 2000 in the way we communicated with each other, and the means by which we absorbed new information and formed a working picture of the world around us. What changed can be understood as the effect of the ongoing transition from the world of 20th-century media to our current digital landscape. This once-every-five-centuries revolution would have large effects, ones we have only just begun to assimilate, and which have largely rendered the assumptions and accompanying social forms of the past century obsolete, even as tens of millions of people, including many who imagine themselves to reside near the top of the country’s social and intellectual pyramids, continue to imagine themselves to be living in one version or another of the long 20th century that began with the advent of a different set of mass communications technologies, which included the telegraph, radio, and film.

The time was ripe, in other words, for a cultural revolution—which would, according to the established patterns of American history, in turn generate a political one.

I first became interested in the role of digital technology in reshaping American politics a decade ago, when I reported on the selling of Barack Obama’s Iran deal for The New York Times Magazine. By the time I became interested in the subject, the outcome of Obama’s campaign to sell the deal, which had become the policy cornerstone of his second term in office, was a fait accompli. The Deal seemed odd to me, not only because American Jews were historically a key player in the Democratic Party—providing outsized numbers of voters, party organizers and publicists, in addition to huge tranches of funding for its campaigns—but because the Deal seemed to actively undermine the core assumptions of U.S. security architecture in the Middle East, whose goals were to ensure the steady flow of Middle Eastern oil to global markets while keeping U.S. troops out of the region. A Middle East in which the U.S. actively “balanced” a revisionist anti-American power like Iran against traditional U.S. allies like Saudi Arabia and Israel seemed guaranteed to become a more volatile region that would require exactly the kinds of active U.S. military intervention that Obama claimed to want to avoid. Nor did turning over major shipping lanes to Iran and its network of regional terror armies seem like a recipe for the steady flow of oil to global markets that in turn helped ensure the ability of U.S. trading partners in Europe and Asia to continue to buy U.S.-made goods. Seen through the lens of conventional American geopolitics, the Iran deal made little sense.

In the course of my reporting, though, I began to see Obama’s plans for the Middle East not simply as a geopolitical maneuver, but as a device to remake the Democratic Party—which it would do in part by rewiring the machinery that produced what a brilliant young political theorist named Walter Lippmann once identified, in his 1922 book, as “public opinion.”

Lippmann was a progressive Harvard-educated technocrat who believed in engineering society from the top down, and who understood the role of elites in engineering social change to be both positive and inevitable. It was Lippman, not Noam Chomsky, who coined the phrase “manufacturing consent,” and in doing so created the framework in which the American governing class would understand both its larger social role and the particular tools at its disposal. “We are told about the world before we see it,” Lippmann wrote. “We imagine most things before we experience them. And those preconceptions, unless education has made us acutely aware, govern deeply the whole process of perception.” Or as he put it even more succinctly: “The way in which the world is imagined determines at any particular moment what men will do.”

The collapse of the 20th-century media pyramid on which Lippmann’s assumptions rested, and its rapid replacement by monopoly social media platforms, made it possible for the Obama White House to sell policy—and reconfigure social attitudes and prejudices—in new ways. In fact, as Obama’s chief speechwriter and national security aide Ben Rhodes, a fiction writer by vocation, argued to me more than once in our conversations, the collapse of the world of print left Obama with little choice but to forge a new reality online.

When I wrote about Rhodes’ ambitious program to sell the Iran deal, I advanced the term “echo chambers” to describe the process by which the White House and its wider penumbra of think tanks and NGOs generated an entirely new class of experts who credentialed each other on social media in order to advance assertions that would formerly have been seen as marginal or not credible, thereby overwhelming the efforts of traditional subject-area gatekeepers and reporters to keep government spokespeople honest. In constructing these echo chambers, the White House created feedback loops that could be gamed out in advance by clever White House aides, thereby influencing and controlling the perceptions of reporters, editors and congressional staffers, and the elusive currents of “public opinion” they attempted to follow. If you saw how the game worked from the inside, you understood that the new common wisdom was not a true “reflection” of what anyone in particular necessarily believed, but rather the deliberate creation of a small class of operatives who used new technologies to create and control larger narratives that they messaged to target audiences on digital platforms, and which often presented themselves to their targets as their own naturally occurring thoughts and feelings, which they would then share with people like themselves.

To my mind, the point of the story I was reporting, in addition to being an interesting exploration of how the tools of fiction writing could be applied to political messaging on social media as an element of statecraft, was twofold. First, it usefully warned of the potential distance between an underlying reality and an invented reality that could be successfully messaged and managed from the White House, which suggested a new potential for a large-scale disaster like the war in Iraq, which I—like Rhodes and Obama—had opposed from its beginning.

Second, I wanted to show how the new messaging machinery actually operated—my theory being that it was probably a bad idea to allow young White House aides with MFA degrees to create “public opinion” from their iPhones and laptops, and to then present the results of that process as something akin to the outcome of the familiar 20th-century processes of reporting and analysis that had been entrusted to the so-called “fourth estate,” a set of institutions that was in the process of becoming captive to political verticals, which were in turn largely controlled by corporate interests like large pharmaceutical companies and weapons-makers. Hillary Clinton would soon inherit the machinery that Obama and his aides had built along with the keys to the White House. What would she do with it?....

....MUCH MORE

I would be very cautious counting Barack and Michelle Obama out of the Democrtic/D.C. power matrix as many seem to be doing 52 days after the election. A lot can happen before 2028 rolls around.

 

Related, on messaging, October 2023 (and 2020 and 2017):

Giant of American Journalism Walter Lippmann Looks At Fake News
Lippman has been called the "Father of Modern Journalism." He knew his trade.

"France Is Living in Zemmour’s World"

From Palladium Magazine, February 2, 2022:

On the 5th of December, Éric Zemmour held his first official political rally. It was an intense affair, with 13,000 “Zemmouristes” assembled to listen to the newly minted candidate for the French presidency deliver a barnstorming speech in which he blasted the “eternal adolescent,” Emmanuel Macron. Despite some chaotic moments—several left-wing militants were punched by far-right opponents—the rally was a triumph for Zemmour, and it cemented his transformation from political commentator to presidential candidate. Zemmour is a descendant of ethnically Berber Jews from Algeria. Once, this would have made his new position as a leading politician on the French far-right unthinkable. Times have changed even in these political quarters.

Zemmour held his rally in the Parisian suburb of Villepinte, a favorite rendezvous point of all the historic figures of the right, from Jacques Chirac to Nicolas Sarkozy. But Zemmour, a former political journalist who knows both of those men personally, does not belong to what remains of the center-right Gaullist party, now known as Les Républicains. Instead, he blasts its leadership for betraying the French right. With a small cadre of dedicated supporters, Zemmour launched his own presidential campaign, riding high on the massive commercial success of his latest book, La France n’a pas dit son dernier mot (in English, France Has Not Said Its Final Word). Despite growth in his campaign’s numbers, Zemmour remains outflanked in the polls by French President Emmanuel Macron, the center-right Valérie Pécresse, and rival far-right leader Marine Le Pen. His rejection numbers are higher than any of these opponents.

And yet, amid this electoral jockeying, Zemmour’s views are not just popular among the population but increasingly reflect a turn within the French political establishment itself. This Zemmourization is most evident on the flashpoint issues Zemmour himself calls the “four I’s”: immigration, identity, insecurity, and Islam. France’s politicians, including its current government, are steering sharply to the right to adjust to this new political reality. While a Zemmour presidency still seems unlikely, his ideas will shape France’s politics for years to come.

The Cassandra of France’s Death

Zemmour believes France is on the verge of extinction. It is an existential dread that can be found in Michel Houellebecq’s novel Soumission, published in 2015 on the day of the Charlie Hebdo terrorist attack. Set in the near future, an Islamist politician wins the presidential election, sparking a mass exodus of French Jews toward Israel. This fictional account already reflects a reality in France: the number of French Jews making aliyah to Israel has accelerated in the past two decades. Houellebecq’s main character, a white agnostic French man, comes to the realization that “there isn’t an Israel for people like me,” and ends up embracing the new Islamist order in France. It is a thought that haunts Zemmour, who argues that the 2022 presidential election is France’s last chance before demographic trends become overwhelming and any prospect of maintaining its republican political order disappears.

Zemmour endorses the concept of the “Great Replacement,” developed by the far-right intellectual Renaud Camus. It refers to the argument that political elites are using immigration to progressively substitute native Europeans with immigrants, especially those from the Middle East and Africa. Zemmour believes that France will face a civil war in the near future—or at the very least, some form of profound ethnic and religious partition—if the vast demographic change that has occurred over the past 50 years is not checked.

One of his most ardent beliefs is that Islam will never be compatible with French culture. Pointing to the rise of France’s Muslim population, which is believed to comprise between 6 and 10% of the country, Zemmour has argued for years that a clash of civilizations exists within France itself. He recently capitalized on a study by France Stratégie, an institution under the authority of the Prime Minister, that showed that the share of non-European immigrants and their children in French cities has been surging in the past decades. The proportion of non-European youths in the Parisian banlieues of Clichy-sous-Bois has risen to 84% and has become as high as 61% even in the relatively provincial city of Limoges.

The term “Great Replacement” taps into a larger cultural and physical insecurity in France. Since 2015, hundreds of public figures have been living under close police protection over their criticism of political Islam, a list that includes Instagram influencers, philosophers, Charlie Hebdo journalists, prominent ex-Muslims who have left their religion, and Zemmour himself. Over the past decade, those killed by Islamic fundamentalists include priests, journalists, and teachers. Tactics for these killings have included beheadings, mass shootings, and suicide bombers. The fear of a Lebanonization of France looms large and is no longer unique to the far-right.

The Zemmourization of Public Opinion

Zemmour’s own career is a marker of how open the French population has become toward narratives of societal crisis. While only 12-18% officially back him in the presidential race, both his books and his media presence enjoy a much wider audience. He has sold around 300,000 copies of his 2014 political tract Le Suicide français, and his latest book, published in 2021, has already sold over 200,000 copies. Unlike their equivalents in the U.S., the books French political leaders put out actually have a popular readership. In 2016, it was Macron himself who gave France one of that year’s best-sellers with his book Révolution, which sold around 200,000 copies—the same as Zemmour’s latest release. Zemmour has also built his brand as a public commentator on television: his talk show boosted ratings on the CNEWS network that hosted it, rising from 270,000 viewers in 2019 to 852,000 in 2021. Rival networks now invite Zemmour-adjacent commentators such as Le Figaro’s Eugénie Bastié or Valeurs Actuelles’s Geoffroy Lejeune.

Polls continually identify high levels of support for Zemmourian positions among the French populace. This includes topics like stopping immigration from Muslim-majority countries, perceived judicial lenience, and even support for the “Generals’ Letter” in which 20 retired generals and around 1000 members of the military declared that France faced a threat of civil war.

This convergence between Zemmourian ideas and French public opinion is not confined to the center-right. A recent Harris Interactive poll concluded that 67% of the general population are concerned to some degree about the idea of a “Great Replacement,” including 61% of supporters of La Republique en Marche (LREM), Macron’s political party. When asked whether they believed such a development would actually occur, 61% of the general population and 52% of LREM supporters responded that they did. The mainstream of French society—including the Macronist base—has shifted toward a consensus that, only a few years ago, was too radical even for Marine Le Pen to endorse publicly....

....MUCH MORE

Also at Palladium, December 14, 2018:

A Promenade with the Gilets Jaunes in Paris

Which reminds me, now that winter is here you may want to swap-out your vest for a Louis Vuitton puffy jacket:

Perhaps over a Louis Vuitton-canvas + leather bullet-resistant vest:

Via Poshmark, $2000. 

Possibly also of interest, January 1, 2024's:

French Politics From New Left Review
From the former editorial director of Le Monde diplomatique, Serge Halimi at New Left Review....

"Looking Back at the Future of Humanity Institute"

 From Asterisk Magazine:

The rise and fall of the influential, embattled Oxford research center that brought us the concept of existential risk.

On April 16, 2024, the website of the Future of Humanity Institute was replaced by a simple landing page and a four-paragraph statement. The institute had closed down, the statement explained, after 19 years. It briefly sketched the institute’s history, appraised its record, and referred to “increasing administrative headwinds” blowing from the University of Oxford’s Faculty of Philosophy, in which it had been housed.

Thus died one of the quirkiest and most ambitious academic institutes in the world. FHI’s mission had been to study humanity’s big-picture questions: our direst perils, our range of potential destinies, our unknown unknowns. Its researchers were among the first to usher concepts such as superintelligent AI into academic journals and bestseller lists alike, and to speak about them before such groups as the United Nations. 

To its many fans, the closure of FHI was startling. This group of polymaths and eccentrics, led by the visionary philosopher Nick Bostrom, had seeded entire fields of study, alerted the world to grave dangers, and made academia’s boldest attempts to see into the far future. But not everyone agreed with its prognostications. And, among insiders, the institute was regarded as needlessly difficult to deal with — perhaps to its own ruin. In fact, the one thing FHI had not foreseen, its detractors quipped, was its own demise.

Why would the university shutter such an influential institute? And, to invert the organization’s forward-looking mission: how should we — and our descendants — look back on FHI? For an institute that set out to find answers, FHI left the curious with a lot of questions. 

***

In 1989, a seventeen-year-old Swede named Niklas Boström (he would later anglicize it Nick Bostrom) borrowed a library book of 19th-century German philosophy, took it to a favorite forest clearing, and experienced what The New Yorker would later describe as “a euphoric insight into the possibilities of learning and achievement.” Damascene moments aren’t generally how people decide to become academics, but from this day forward, Bostrom dedicated his life to intensive study. He retreated from school in order to take his exams at home, and he read widely and manically. At the University of Gothenburg, he received a BA in philosophy, mathematics, mathematical logic, and artificial intelligence. After that, he pursued postgraduate degrees in philosophy, physics, and computational neuroscience. In what little spare time he had, Bostrom emailed and met up with fellow transhumanists: people enthusiastic about radically improving human biology and lifespans. 

As early as 2001, he was studying little-known phenomena called “existential risks,” writing that nanotechnology and machine intelligence could one day interfere with our species’ ascent to a transhuman future. He also, in 2001, formulated the “simulation hypothesis,” advancing in Philosophical Quarterly the theory that we might be living in a computer simulation run by humanity’s hyper-intelligent descendants. ¹ By this point, Bostrom had arrived at Oxford as a postdoctoral fellow at the Faculty of Philosophy. 

Some years later, the faculty would become his bête noire. But it was Bostrom’s membership in it that enabled a stroke of luck that would change his life. At some point in the early aughts, Bostrom had met James Martin, an IT entrepreneur. Martin had become a prescient futurist, and in 2006 produced a documentary featuring Bostrom. But Martin was also becoming a deep-pocketed philanthropist. Through Julian Savulescu, another young philosopher interested in human enhancement, Bostrom learnt that Martin was planning to fund future-minded research at Oxford. Hoping that this could encompass work on his interests, Bostrom made his case to the university’s development office.

Twenty years later, the details are hazy. FHI lore has it that, at one of dinners hosted by Oxford for its biggest donors, Bostrom was seated next to Martin, creating the perfect conditions for what we now call a nerdsnipe. Some time later, in 2005, Martin made what was then the biggest benefaction to the University of Oxford in its nine-century history, totaling over £70 million. A small portion of it funded what Bostrom decided to call the Future of Humanity Institute. “It was a little space,” Bostrom told me, “where one could focus full-time on these big-picture questions.”

That seed grant was enough to fund a few people for three years. Because his team would be small, and because it had such an unconventional brief, Bostrom needed to find multidisciplinarians. He was looking, he told me, for “brainpower especially, and then also a willingness and ability to work in areas where there is not yet a very clear methodology or a clear paradigm.” And it would help to be a polymath. 

One of his earliest hires was Anders Sandberg. As well as being a fellow Swede, Sandberg was a fellow member of the Extropians, an online transhumanist community that Bostrom had joined in the Nineties. Where Bostrom is generally ultra-serious, Sandberg is ebullient and whimsical. (He once authored a paper in which he outlined what would happen if the Earth turned into a giant pile of blueberries). But the two men’s differences in personality belied their similarity in outlook. Sandberg, too, was an unorthodox thinker interested in transhumanism and artificial intelligence. (Sandberg was particularly interested in the theoretical practice of whole-brain emulation, i.e. the uploading of a human mind to a digital substrate.)

Sandberg was interviewed in the Faculty of Philosophy’s Ryle room, named for the philosopher Gilbert Ryle. ² He explained some neuroscience to the faculty staff who were assessing him and communicated his aptitude in another little-known area of human endeavor: web design. He was hired, and he returned in January 2006 to take up a desk at FHI and a “silly little room in Derek’s house.” 

Sandberg was lodging, with Bostrom, in the home of Derek Parfit, a wild-haired recluse who was also one of the most influential moral philosophers of the modern era. Bostrom had the master bedroom and collected rent from the rotating cast of lodgers. ³ Parfit, Sandberg recalled, slept in “a little cubby hole” of a bedroom, and would scuttle at odd hours between it and his office at All Souls, the highly selective graduate college seen as elite even relative to the rest of Oxford.

Including Sandberg, Bostrom hired three researchers, and began to sculpt a research agenda that, in these early years, was primarily concerned with the ethics of human enhancement. An EU-funded project on cognitive enhancement was one of FHI’s main focuses in this period. The institute also organized a workshop that resulted in Sandberg and Bostrom’s influential roadmap for making whole-brain emulation feasible. 

At the same time, FHI staff were beginning to publish work on the gravest perils facing humanity, a topic that was not yet an established academic discipline. An FHI workshop brought together hitherto disparate thinkers such as Eliezer Yudkowsky, who went on to become one of the most prominent theorists concerned by superintelligent AI. Bostrom co-edited the 2008 book Global Catastrophic Risk, a collection of essays on threats such as asteroid impacts, nuclear war, and advanced nanotechnology....

....MUCH MORE

Previously:

Oxford's Future of Humanity Institute Has Shut Down

Well. I guess that's that. It's over. Fin. I wonder if they saw it coming?....

We've visited Bostrom and the Future of Humanity Institute at Oxford off and on for a decade. Although he sometimes comes off as a bit whack-a-doodle I did make this comment on one of our posts:

...If interested we mentioned Bostrom in last week's "The Roubini Cascade: Are we heading for a Greater Depression?". His Future of Humanity Institute at Oxford seems to have moved on from the mundane climate cataclysm or cosmic fireball ending everything, to a very real, very serious examination of whether or not Artificial Intelligence may be the nail in humanity's coffin, so to speak....  

That was in "Risk/Prop Bets: How unlikely is a doomsday catastrophe?"  which also included this bonus advice:

Before we get into the meat of the matter, some things to know upfront. From the introduction to 2018's "Tips And Tricks For Investing In 'End of the World Funds'":

As unauthorized representatives for Long or Short Capital's End of the World Puts this is an area of profound interest from which we have gleaned some insight:

1) Should the world end, collecting on your bet can be a challenge. Know your counterparty!
     And possibly more important, demand collateral!
2) The swings in end of the world product prices can be dramatic.
3) Prognosticators have predicted 100,000 of the last 0 termination events....

And from arXiv (astrophysics) at Cornell:

How unlikely is a doomsday catastrophe?

Max Tegmark (MIT), Nick Bostrom (Oxford)

Numerous Earth-destroying doomsday scenarios have recently been analyzed, including breakdown of a metastable vacuum state and planetary destruction triggered by a "strangelet'' or microscopic black hole. We point out that many previous bounds on their frequency give a false sense of security: one cannot infer that such events are rare from the the fact that Earth has survived for so long, because observers are by definition in places lucky enough to have avoided destruction. We derive a new upper bound of one per 10^9 years (99.9% c.l.) on the exogenous terminal catastrophe rate that is free of such selection bias, using planetary age distributions and the relatively late formation time of Earth....

All in all it is good to see he's flipped 180 degrees and has gone far beyond even the upbeat message of Keynes' "Economic Possibilities for our Grandchildren" and Churchill's 'broad sunlit uplands'. I believe I shall I shall have this bit tattooed  in an appropriately discreet location:

"If humans remain the owners of this capital, the total income received by the human population would grow astronomically, despite the fact that in this scenario humans would no longer receive any wage income. The human species as a whole could thus become rich beyond the dreams of Avarice."

Related:

Puny Human, I Scoff At Your AI, Soon You Will Know The Power Of Artificial 'Super' Intelligence. Tremble and Weep
[insert 'Bwa Ha Ha' here, if desired]

Russell Napier: «We Are Headed Towards a System of National Capitalism»

Geez I hope not.

From Neue Zürcher Zeitung's TheMarket.ch, December 13:

Market strategist and historian Russell Napier outlines a future in which governments mandate where investors should deploy their capital. The global monetary system that has existed since 1994 is being radically restructured. 

Deutsche Version

When Russell Napier speaks, investors around the world listen closely. The long-standing market strategist – formerly with the Hong Kong brokerage CLSA – and author of the Solid Ground Report was one of the earliest warning voices of an impending wave of inflation in the summer of 2020. When The Market NZZ spoke with him two years ago, he predicted a boom in global capital investment.

Napier remains convinced that the global financial system is in the process of fundamental change. «We are talking about nothing less than a collapse of the global monetary system as we have known it for the last three decades», he says.

In an in-depth conversation with The Market NZZ, which has been lightly edited for clarity, Napier explains what this means and how investors should prepare for it.

When we last spoke, you said that governments had found the magic money tree: That by guaranteeing bank loans, they could create money at will, paving the way to financial repression and inflating away their debt. Is that still your view?

In the long term, yes. Financial repression and inflating away bloated debt levels will be with us for years, even decades. But I think we’re experiencing a hiatus first. Governments did exactly what I said in 2021. They created money on a massive scale. Their actions, quite predictably, led to inflation. But then they panicked. So they handed the ball back to the central bankers and said do something about this. In my opinion, central banks have done too much, they hit the brakes too hard. Hence my fear that we might be facing a deflation shock in the short term.

You’re saying central banks have tightened too much?

Yes. We’ve seen a collapse in the growth of broad money in a magnitude that we hadn’t seen since the 1930s. Now, you might say this doesn’t matter since so much broad money was created between 2020 to 2022, and clearly it hasn’t mattered for the past two years. But now it’s starting to bite. That’s my evidence that they have overtightened.

Both in the US and in Europe, M2 growth has picked up again. Central banks have started cutting rates. Why do you still fear a deflation shock?

You’re right, M2 growth has picked up a bit, but it is growing too slowly. It would need to accelerate. The level of M2 growth in relation to the current level of interest rates is just not compatible with what would be needed to sustain economic growth.

Inflation, especially in the US, shows signs of stickiness. Don’t you think another inflationary wave might be in the making?

I can’t reconcile that with the growth rate of broad money. Sure, if we were to suffer a supply shock, then inflation would go up, regardless of what broad money does. But absent that, if broad money is not going up, it suggests that economic activity is going to weaken. I always look at things through a monetary prism. In my view, the next shock is more likely to be deflationary.

Where could that shock come from?

You and I could hypothesise about that all day. It could be a spike in French bond yields. It could be China floating its exchange rate, which would cause the yuan to devalue. It could be the yen carry trade unraveling again. And there’s a fourth possibility, which is the unknown unknown. Somebody somewhere gets into trouble, and we’ll see something break in the financial system.

So basically you are saying that we first might experience a deflation shock before we go back to a world of higher inflation?

Yes, my longer term view of financial repression remains unchanged. That’s the only way I see that will lead us out of the record high levels of debt. Mind you, I use the term deflation shock, but I’m not sure we’ll see outright deflation. Deflation shocks are bad for the economy, they are ugly for equities, and they are very dangerous for high levels of debt. You don’t make money as an investor by trying to predict deflation shocks, you make money by anticipating the government reaction to deflation shocks. And I am convinced that governments will react swiftly by forcing banks to lend, by suppressing interest rates and by using national savings to invest in things they want.

What are the signs that tell you this is happening?

On April 26th, President Emmanuel Macron of France held a speech at the Sorbonne, titled «Europe – It Can Die». Read it. It’s a sea change. In a telling bit of his speech, Macron says that every year, Europeans send 300 billion euros to the US to fund the American government and American corporations. In other words, he's outlining a concept of national savings, and they should be used for the national good. Mario Draghi in his report to the EU Commission also outlines all the things that should be done with new money. The British, meanwhile, are talking about mandation, which posits that pension funds in Britain must invest a certain percentage of their funds domestically. That’s what lies ahead. Governments will tell investors how and where to invest their capital.

And that would conform to your definition of financial repression?

Yes. I say we are headed towards a system of national capitalism. Interestingly, the term ‹national capitalism› has been used before, by a man who used to live in Zurich for a while: his name was Lenin. In a system of national capitalism, governments direct national savings towards national purposes. And our purposes today are investments, as outlined by Macron or Draghi and also by industrial policy initiatives in the US: Investments in energy infrastructure, in defense, in new productive capacity in order to de-risk from China. If we get into a bad Cold War with China, this will have a high national priority.

Do you expect a continuation of the boom in capital expenditures that you outlined two years ago?....

....MUCH MORE

Our most recent visit with Mr. Napier was November 22's Russell Napier: "America, China, and the Death of the International Monetary Non-System" from American Affairs Journal.

We've referenced his capex/construction/infrastructure interview a couple times, here's 

Russell Napier Called It: "The Eyepopping Factory Construction Boom in the US"

And a reminder from Crestmont Research that inflation is historically (USA, last 100 years) kindest to equity valuations (P/E) at 0% to 4% with 1% to 2% being the the sweet-spot. The sweet spot used to be higher if well enough understood to take advantage of what was transpiring. Back in the day (1914 - 1924) Hugo Stinnes was able to borrow in rapidly depreciating Papiermarks and purchase real assets: plant, property and equipment, that held its value during the WWI inflation and the Weimar hyperinflation. For a while he became the richest person in the world.

That trade seems to have disappeared with the current economy's skew toward asset-light businesses.  

Here's Crestmont:

The Relationships Between Inflation Rates, P/E Multiples, and Expected Future Returns

....Here's another way to look at the relationship between inflation and P/E's. Note that both the highest inflation and deflation rates correspond with the lowest multiples accorded the earnings:

.

And a different way to look at the information:

....MUCH MORE

 

 

 

The Sinking Of The Russian Cargo Ship In The Mediterranean Dealt A Blow To Russia's Arctic Plans

From the Barents Observer, December 24:

Cargo vessel sinks with reactor hatches to Rossiya icebreaker
The sinking of the Russian cargo vessel Ursa Major in the Mediterranean is a big blow to the construction of Rosatomflot’s giant icebreaker which already is years behind schedule. 

The state-owned ship sank in international waters between Spain and Algeria on December 23. 14 members of the crew were rescued, while two are still missing.

The Ursa Major belongs to Oborologistics LLC, a Defense Ministry structure aimed at transporting military and special purpose goods. 

Up North, the vessel is known for sailing cargo to Russia’s Arctic petroleum projects as well as military infrastructure cargo from Murmansk to Franz Josef Land. The vessel has also been running weapons between Russia's Black Sea ports and Moscow's (former) navy stronghold in the Syrian port of Tartus. 

This time, she was heading to Vladivostok with cargo from St. Petersburg, according to the tracking data posted on VesselFinder. 

Among the cargo was two big cranes, photos of vessel shows. Newspaper Kommersant also confirms that Ursa Major had the two 45-tons hatches to cover the top of the two reactors for a new icebreaker. 

Such hatches are used when maintenance work on the reactors are needed, like reloading of spent nuclear fuel. 

The two heavy hatches can be seen on photos of the Ursa Major before sinking, covered under blue tarp in the rear end of the cargo deck. It is unclear if there are more gear to the nuclear-powered icebreaker onboard the sunken vessel....

....MUCH MORE

"Iron Ore Hits Five-Week Low as Traders Fret About Chinese Demand"

One of the most basic measures of manufacturing/industrial health and probably a necessary component of  any future version of the Li Keqiang index.*

From Bloomberg, December 26: 

Iron ore sank to the lowest in more than five weeks — dipping below $100 a ton — as poor industrial profits in China highlighted the nation’s economic weakness, although mills’ performance did improve.

Futures fell toward $99 a ton in Singapore, on course for a second weekly loss. As a whole, China’s industrial firms saw profits drop in November for a fourth month, putting them on track for the sharpest annual decline since records began in 2000. Still, steelmakers’ profitability ticked higher last month.

Iron ore has slumped 29% this year, hurt by the prolonged slowdown of China’s economy, particularly its property sector, despite repeated attempts by the authorities to draw a line under the crisis. At the same time, supplies from miners in Australia and Brazil — the biggest exporters — have been rising....

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*If interested see March 2024's "How to measure China’s true economic growth: In search of a successor to the Li Keqiang Index"
Last week, in a post on the conflicting messages about China's economy being sent by iron ore, copper and the smaller "teapot" oil refineries, I mentioned "We need a new Li Keqiang index."

It turns out The Economist was at least a year ahead of me....
*****
Premier Li was very sharp and we grew rather fond of the old boy....

"New York to fine fossil fuel companies $75 billion under new climate law"

Huh.

From Reuters via MSN, December 26: 

New York state will fine fossil fuel companies a total of $75 billion over the next 25 years to pay for damage caused to the climate under a bill Governor Kathy Hochul signed into law on Thursday.

The law is intended to shift some of the recovery and adaptation costs of climate change from individual taxpayers to oil, gas and coal companies that the law says are liable. The money raised will be spent on mitigating the impacts of climate change, including adapting roads, transit, water and sewage systems, buildings and other infrastructure.

"New York has fired a shot that will be heard round the world: The companies most responsible for the climate crisis will be held accountable," New York Senator Liz Krueger, a Democrat who co-sponsored the bill, said in a statement.

Fossil fuel companies will be fined based on the amount of greenhouse gases they released into the atmosphere between 2000 and 2018, to be paid into a Climate Superfund beginning in 2028. It will apply to any company that the New York Department of Environmental Conservation determines is responsible for more than 1 billion tons of global greenhouse gas emissions....

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Boxing Day 1898: The Curies Announce Their Discovery Of Radium

First up, from ScienceMuseum.org.uk, 26December2018:

Radiant Radium: A Christmas Gift 

26 December 2018 marked the 120th anniversary of Marie and Pierre Curie’s announcement of a new element - radium. Associate Curator of Chemistry Rupert Cole explores the Curies’ discovery and its legacy.

Boxing day, a holiday named by the Victorians after the tradition of giving a ‘Christmas box’ – a gift or money – to the less fortunate.

Today, it might be marked by left-over-turkey sandwiches and general rest from the previous day’s festivities and feasting.

Not so for the Curies. On this day in 1898, Marie and her husband Pierre Curie announced the discovery of a new element, which they christened ‘radium’.

Their discovery was relayed to the French Academy of Sciences by Henri Becquerel, who two years earlier had discovered radioactivity, the process by which heavy, unstable atoms decay, emitting radiation.

The Curies’ Boxing-day paper noted the ‘radioactivity of radium … must be enormous’, having not yet managed to fully isolate the element.

They weren’t wrong. Radium is about a million times more radioactive than uranium. A white, luminescent substance, when radium is heated it gives off an eerie blue-green glow – over Christmas 1898 the Curies enjoyed watching this light in the evening....

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Physicist Henri Becquerel shared the 1903 Nobel Prize in Physics with Pierre and Marie Curie. Marie would also go on to be awarded the 1911 Nobel Prize in Chemistry.

From NobelPriz.org:

Marie and Pierre Curie and the discovery of polonium and radium 

Introduction
Marie and Pierre Curie‘s pioneering research was again brought to mind when on April 20 1995, their bodies were taken from their place of burial at Sceaux, just outside Paris, and in a solemn ceremony were laid to rest under the mighty dome of the Panthéon. Marie Curie thus became the first woman to be accorded this mark of honour on her own merit. One woman, Sophie Berthelot, admittedly already rested there but in the capacity of wife of the chemist Marcelin Berthelot (1827-1907).

It was François Mitterrand who, before ending his fourteen-year-long presidency, took this initiative, as he said “in order to finally respect the equality of women and men before the law and in reality” (“pour respecter enfin …l’égalité des femmes et des hommes dans le droit comme dans les faits”). In point of fact – as the press pointed out – this initiative was symbolic three times over. Marie Curie was a woman, she was an immigrant and she had to a high degree helped increase the prestige of France in the scientific world.

At the end of the 19th century, a number of discoveries were made in physics which paved the way for the breakthrough of modern physics and led to the revolutionary technical development that is continually changing our daily lives.

Around 1886, Heinrich Hertz demonstrated experimentally the existence of radio waves. It is said that Hertz only smiled incredulously when anyone predicted that his waves would one day be sent round the earth. Hertz died in 1894 at the early age of 37. In September 1895, Guglielmo Marconi sent the first radio signal over a distance of 1.5 km. In 1901 he spanned the Atlantic. Hertz did not live long enough to experience the far-reaching positive effects of his great discovery, nor of course did he have to see it abused in bad television programs. It is hard to predict the consequences of new discoveries in physics.

On November 8, 1895, Wilhelm Conrad Röntgen at the University of Würzburg, discovered a new kind of radiation which he called X-rays. It could in time be identified as the short-wave, high frequency counterpart of Hertz’s waves. The ability of the radiation to pass through opaque material that was impenetrable to ordinary light, naturally created a great sensation. Röntgen himself wrote to a friend that initially, he told no one except his wife about what he was doing. People would say, “Röntgen is out of his mind”. On January 1, 1896, he mailed his first announcement of the discovery to his colleagues. “… und nun ging der Teufel los” (“and now the Devil was let loose”) he wrote. His discovery very soon made an impact on practical medicine. In physics it led to a chain of new and sensational findings. When Henri Becquerel was exposing salts of uranium to sunlight to study whether the new radiation could have a connection with luminescence, he found out by chance – thanks to a few days of cloudy weather – that another new type of radiation was being spontaneously emanated without the salts of uranium having to be illuminated – a radiation that could pass through metal foil and darken a photographic plate. The two researchers who were to play a major role in the continued study of this new radiation were Marie and Pierre Curie.

Marie Sklodowska, as she was called before marriage, was born in Warsaw in 1867. Both her parents were teachers who believed deeply in the importance of education. Marie had her first lessons in physics and chemistry from her father. She had a brilliant aptitude for study and a great thirst for knowledge; however, advanced study was not possible for women in Poland. Marie dreamed of being able to study at the Sorbonne in Paris, but this was beyond the means of her family. To solve the problem, Marie and her elder sister, Bronya, came to an arrangement: Marie should go to work as a governess and help her sister with the money she managed to save so that Bronya could study medicine at the Sorbonne. When Bronya had taken her degree she, in her turn, would contribute to the cost of Marie’s studies.

So it was not until she was 24 that Marie came to Paris to study mathematics and physics. Bronya was now married to a doctor of Polish origin, and it was at Bronya’s urgent invitation to come and live with them that Marie took the step of leaving for Paris. By then she had been away from her studies for six years, nor had she had any training in understanding rapidly spoken French. But her keen interest in studying and her joy at being at the Sorbonne with all its opportunities helped her surmount all difficulties. To save herself a two-hours journey, she rented a little attic in the Quartier Latin. There the cold was so intense that at night she had to pile on everything she had in the way of clothing so as to be able to sleep. But as compensation for all her privations she had total freedom to be able to devote herself wholly to her studies. “It was like a new world opened to me, the world of science, which I was at last permitted to know in all liberty,” she writes. And it was France’s leading mathematicians and physicists whom she was able to go to hear, people with names we now encounter in the history of science: Marcel Brillouin, Paul Painlevé, Gabriel Lippmann, and Paul Appell. After two years, when she took her degree in physics in 1893, she headed the list of candidates and, in the following year, she came second in a degree in mathematics. After three years she had brilliantly passed examinations in physics and mathematics. Her goal was to take a teacher’s diploma and then to return to Poland.

Now, however, there occurred an event that was to be of decisive importance in her life. She met Pierre Curie. He was 35 years, eight years older, and an internationally known physicist, but an outsider in the French scientific community – a serious idealist and dreamer whose greatest wish was to be able to devote his life to scientific work. He was completely indifferent to outward distinctions and a career. He earned a living as the head of a laboratory at the School of Industrial Physics and Chemistry where engineers were trained and he lived for his research into crystals and into the magnetic properties of bodies at different temperatures. He had not attended one of the French elite schools but had been taught by his father, who was a physician, and by a private teacher. He passed his baccalauréat at the early age of 16 and at 21, with his brother Jacques, he had discovered piezoelectricity, which means that a difference in electrical potential is seen when mechanical stresses are applied on certain crystals, including quartz. Such crystals are now used in microphones, electronic apparatus and clocks.....

....MUCH MORE

The Curie's daughter Irène Joliot-Curie, was awarded her own Nobel Prize in Chemistry in 1935 (with hubby Frédéric Joliot-Curie). 

Finally, from Open Culture, November 15, 2023 - "Marie Curie’s Research Papers Are Still Radioactive a Century Later"

The Indian Ocean Earthquake and Tsunami Happened 20 Years Ago Today

It seems like yesterday.

The Wikipedia entry has most of the superlatives, deadliest recorded tsunami, deadliest natural disaster of the 21st century, strongest earthquake in Asia etc.

A couple later reflections; The outro from August 2023's "Singapore's Navy Has Taken Delivery Of The First Of Four New German-Built Attack Submarines":

....After the Indian Ocean earthquake (magnitude 9.1) and tsunami (up to a reported 100 feet high) killed 228,000 people, the world rushed in to search for and rescue the survivors. The United Nations contingent did the United Nations thing as recounted in a 2020 post on the big hospital ship, USNS Mercy:

...WFP (World Food Program) has "arrived" in the capital with an "assessment and coordination team." The following is no joke; no Diplomad attempt to be funny or clever: The team has spent the day and will likely spend a few more setting up their "coordination and opcenter" at a local five-star hotel. And their number one concern, even before phones, fax and copy machines? Arranging for the hotel to provide 24hr catering service. USAID folks already are cracking jokes about "The UN Sheraton." Meanwhile, our military and civilians, working with the super Aussies, continue to keep the C-130 air bridge of supplies flowing and the choppers flying, and keep on saving lives -- and without 24hr catering services from any five-star hotel . . . . The contrast grows more stark every minute.

—Diplomad via Volokh Conspiracy, link rotted

 As noted at the time:
 
The American and Royal Australian Navies were actually saving lives:
[don't forget the Singaporean helicopter pilots shuttling to the carrier and Mercy 24/7]

Aceh, Sumatra, Indonesia (Jan. 3, 2005) - Lt. Jody Weinstein helps an injured Indonesian woman into a medical evacuation vehicle after she was transported from a coastal village on the island of Sumatra, Indonesia. Medical teams from USS Abraham Lincoln (CVN 72), Carrier Air Wing Two (CVW-2) and the International Organization for Migration (IOM) set-up a triage site located on Sultan Iskandar Muda Air Force Base, in Banda Aceh, Sumatra. The two teams worked together with members of the Australian Air Force to provide initial medical care to victims of the Tsunami-stricken coastal regions. The Abraham Lincoln Carrier Strike Group is currently operating in the Indian Ocean off the waters of Indonesia and Thailand. U.S. Navy photo by Photographers Mate Airman Jordon R. Beesley (RELEASED)

In all, the American Task Force numbered more than twenty ships, headed up by the U.S.S. Abraham Lincoln (CVN-72 or "Abe"):

USS Abraham Lincoln follows hospital ship USNS Mercy to station near
Banda Aceh, Sumatra, Indonesia

The USS Abraham Lincoln follows the Military Sealift Command hospital ship USNS Mercy after arriving on station near Banda Aceh, Sumatra, Indonesia, Feb. 3, 2005. The Abraham Lincoln Carrier Strike Group has been operating in the Indian Ocean off the waters of Indonesia in support of Operation Unified Assistance, the humanitarian relief effort to aid the victims of the tsunami.
-U.S. Navy photo by Petty Officer 3rd Class Gabriel R. Piper

I don't have much time for self-appointed "elites". 

The thing I remember about those Singaporean pilots is: they wouldn't stop. It was always "one more flight", "one more village to check", one more landing and take-off in a freshly cleared landing zone. If the Singaporean submariners are anything like those pilots anyone going up against them will have their hands full, to say the least.

"Behind Closed Doors: The Spy World Scientists Who Argued Covid Was a Lab Leak"

From the Wall Street Journal via MSN Dec 26:

A car and driver had been readied to whisk Jason Bannan from FBI headquarters early one morning in August 2021 to brief the White House on a novel virus that was killing hundreds of thousands of Americans and had stopped the world in its tracks.

Bannan had been told by his superiors to be on hand in case the Federal Bureau of Investigation was asked to join a top intelligence community briefing for the president. But the White House summons never came.

Bannan, a Ph.D. in microbiology, had joined the bureau after the September 2001 terrorist attacks in New York and Washington when the agency bulked up its expertise to deal with the threat of germ weapons, toxins and other weapons of mass destruction.

But for more than a year he had spent most of his waking hours on the Covid-19 virus that had seeped out of China in 2019.

Frustrated by China’s stonewalling, President Biden had ordered an urgent assessment by the U.S. intelligence agencies and national laboratories on whether the virus had leapt from an animal to a human or had escaped from a Chinese lab that had been doing extensive work on coronaviruses.

The dominant view within the intelligence community was clear when Avril Haines, the director of national intelligence, and a couple of her senior analysts, briefed Biden and his top aides on Aug. 24. The National Intelligence Council, a body of senior intelligence officers who reported to Haines and that organized the intelligence review, had concluded with “low confidence” that Covid-19 had emerged when the virus leapt from an animal to a human. So did four intelligence agencies.

At the time, the FBI was the only agency that concluded a lab leak was likely, a judgment it had rendered with “moderate confidence.” But neither Bannan nor any other FBI officials were at the briefing to make their case first hand to the president.

“Being the only agency that assessed that a laboratory origin was more likely, and the agency that expressed the highest level of confidence in its analysis of the source of the pandemic, we anticipated the FBI would be asked to attend the briefing,” Bannan recalled in his first on-the-record interview on the subject. “I find it surprising that the White House didn’t ask.”

A spokeswoman for the Director of National Intelligence’s office said that it wasn’t standard practice to invite representatives from individual agencies to briefings for the president and that divergent views within the intelligence community were fairly represented.

“The Office of the Director of National Intelligence and the National Intelligence Council’s work on Covid-19 origins complied with all of the Intelligence Community’s analytic standards, including objectivity,” the spokeswoman said.

But an investigation by The Wall Street Journal shows that the disagreements among intelligence experts over what should be included in the report ran deeper than is publicly known. Nor were the FBI scientists the only ones who believed that the intelligence directorate’s review didn’t tell the whole story.

Three scientists at the National Center for Medical Intelligence, part of the Pentagon’s Defense Intelligence Agency, conducted a scientific study that concluded that Covid-19 was manipulated in a laboratory in a risky research effort. But that analysis was at odds with the assessment of their parent agency, the Defense Intelligence Agency, and wasn’t incorporated in the report presented to Biden.

The DIA Inspector General’s office opened an inquiry in the spring into whether the scientists’ assessment was mishandled or suppressed, people familiar with the matter said. A spokesman for the agency declined to comment on whether this inquiry was continuing, had been completed and what it might have included.

Five years after Covid-19 first emerged, the origin of the virus that killed more than 1.2 million Americans and over seven million worldwide has yet to be established. The pace of U.S. intelligence investigation has slackened, as many intelligence analysts who were assigned to the crash effort have shifted to other priorities.

Congressional efforts to establish a national task force to investigate the origin and response to Covid-19 that would be styled after the 9/11 Commission floundered, a victim of political infighting. Senate and House committees that dug into the pandemic unearthed some significant leads but their work often became mired in partisan attacks.

Now some current and former officials say a fresh look is needed, including at the analysis that wasn’t included in the 2021 intelligence report.

‘The sprint’

The U.S. was deep in the grip of the pandemic in May 2021 when Biden ordered an urgent study by the intelligence community into Covid’s origins, which he said should be completed in 90 days. The effort became known as the “90-day sprint.”

At that point, the question of the virus’s origins was dividing the scientific community. The debate came down to two prominent theories. The zoonotic theory held that the Covid virus, like other deadly pathogens before it, had jumped to humans from an infected animal, possibly as a result of China’s extensive wildlife animal trade. The other scenario, known as “lab leak,” was based on the idea that the virus had escaped from a research facility, such as the Wuhan Institute of Virology, which conducted coronavirus research.

The debate over the virus’s origins was politically divisive. Then-President Trump said in May 2020 that he had evidence that the virus had emerged from a Chinese lab, but insisted the information was too sensitive to disclose. Trump’s critics said the White House was trying to divert attention from its management of the response to the pandemic.

Those two theories have also divided the scientific community. In February 2020, more than two dozen scientists published a statement in the medical journal Lancet, calling the lab leak hypothesis a conspiracy theory that would jeopardize global cooperation in the struggle against the virus. One of the authors was Peter Daszak of EcoHealth Alliance, a nonprofit that has worked extensively on coronavirus research with the Wuhan institute.

That statement was followed a month later by a March 2020 paper on the “proximal origins” of Covid-19, in which Kristian Andersen of the Scripps Research Institute and four other scientists argued that the virus wasn’t “purposefully manipulated” in the laboratory and had almost certainly had natural origins.

But the lab theory has gained credibility. Ralph Baric, a professor at the University of North Carolina who had done pioneering work on coronaviruses with Shi Zhengli, the Wuhan institute’s leading bat coronavirus expert, told Congress earlier this year that the facility’s procedures for carrying research on bat viruses was “irresponsible” since it was done in a laboratory with inadequate precautions for containing biological agents.

By the time Biden ordered his review in 2021, two U.S. intelligence organizations supported the zoonotic theory, and one, the FBI, suspected a lab mishap. Other intelligence agencies said at the time they didn’t have enough information to render a judgment.

The intelligence agencies that drilled into the issue brought a range of capabilities, from the National Security Agency, which intercepts foreign communications, to the FBI, which has a cadre of experts, including some who worked in the National Bioforensic Analysis Center, a laboratory for handling biological agents at Fort Detrick, Md.

One of those experts was Bannan, who had a doctorate from the University of Arizona. He was serving as a senior scientist in an agency lab in Quantico, Va., when he got a call from a superior who wanted to know if he was prepared to come to work at the bureau’s headquarters for the directorate for weapons of mass destruction....

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There are a lot of secrets just waiting to be exposed.

"Confessions of a Michelin Inspector"

Originally posted October 2021.

From LuxeEat, February 28, 2021:

Gaining a Michelin star, or three, isn’t simply a mark of excellence, it means your restaurant status goes automatically from a great choice to a must. We had the great pleasure to speak to Chris Watson, ex-Michelin Guide inspector, about the complexity of this rating system, the weight of allocating stars, what it takes to get the highly-coveted three star rating at the oldest European hotel and restaurant reference guide. Hailing from Scotland where, as a child, he was regaled with some of the world’s best meats and produce, Chris spent his Michelin tenure covering the UK and Europe regions. He is as passionate and insightful on the topic of cuisine as ever, despite leaving the guide to become an entrepreneur, food writer and consultant, now based in Bangkok.

Can you tell us about the recruitment process to be a Michelin inspector?

It started with an interview process, which was gruelling, around 150-200 questions about food, answers should be written down in one and a half hours. Then, an interview with the deputy editor and various other staff and then the final kind of blessing, you go for lunch with the editor. We went to “La Tante Claire” which was Pierre Koffmann’s three-star restaurant, two-stars at that time. So you are asked questions during lunch, it was daunting, but I got through it.

You don’t get rich when you are a Michelin inspector, obviously, it’s about quality of life and the experience. The average length of stay in the position is 5 years, very few do more than that. Largely your seniority comes from length of service, you join as an inspector, you leave as an inspector. But your opinions and the restaurants you visit, you gain more experience and you get better restaurants to go to, or have more complicated decisions to take. I did about 4.5 years, after that time you’ve nearly reached the end. 

What does an inspector’s schedule look like?

The schedule is very tight. You have to do largely two weeks away per month, with almost no weekends. If you go to Ireland or Channel  islands, those are expected to be three-week trips. three weeks alone, with probably the only highlight, in the middle of your trip – you will do a Michelin star restaurant in your region, and one of the other inspectors will come and join you. Usually, I had to dine alone, for breakfast, lunch and dinner…

And the restaurants you would go, are not the most fabulous as we all imagine…

There are many good restaurants without a star which you are quite happy to go to. And there are great opportunities, you go and stay in country house hotels, small establishments, where the room, in those days (20 years ago) was 150-200 pounds a night, these days 500-600 pounds a night. You are staying there, your expenses covered with “American Express”. My expenses were 2000-3000 pounds per month, my salary was 600-700 pounds. You are kind of in a different world, it’s truly a fabulous experience!

What people don’t understand fully, your 10 meals a week, you are probably lucky to get one starred restaurant a week or a star contender, and the other meals are pretty mediocre. And that’s kind of a drudge. And you get into awkward situations, when at the end of you finishing your region, you have an extra restaurant to go to where you haven’t factored it in. So you do dinner at 6 pm, and you do another dinner at 8 pm. So it’s lunch, dinner and dinner. I have done it a couple of times. You know, you are careful, you eat half of the dessert, you eat sensibly. I’m not talking about eating at Michelin starred restaurants twice in a row, usually, these are fairly ordinary restaurants....

....MUCH MORE

'Debanking' In The USA (crypto and other businesses)

From crypto/trad-banking maven Nic Carter on X:

everyone is familiar with 'debanking' but many are curious as to the precise mechanism through which bank regulation causes debanking. it's obscure and complex which is why we don't have a ton of "evidence". this is be design. I will explain here the specific regulatory developments that led us to this current moment.

1) incorporation of reputational risk into supervisory bank ratings

if you follow bank regulation, you are probably familiar with CAMELS. that's the rubric bank regulators like the FDIC use to evaluate banks. it refers to Capital Adequacy, Asset Quality, Management Quality, Earnings, Liquidity, and Sensitivity to market risk.

however, in 2009, a new letter, R, was added. call it, CRAMELS. the R stands for Reputational risk. Reputational risk is particularly insidious because it can refer to anything. regulators can assign the reputational risk tag to any aspect of a bank's operations. if a regulator doesn't like something a bank is doing, they can call it risky. and of course, facing an enforcement action or consent order adds actual risk to the bank, as clients might desert it. so the regulators can actually create risk by calling a bank's activities risky. this is a literal catch-22!

in 2011, the FDIC put out a circular listing 30 different industries as "high risk". this wasn't explicit regulation or law, just a list of industries they felt were risky for banks to serve. this was the foundation for what became known as Operation Choke Point.

around 2013, the DoJ found a new creative strategy to crack down on non-illegal but distasteful industries, starting with payday lending, then moving on to gun shops, coin dealers, and many others. the way this was actually imposed was through bank regulators like the FDIC calling banks and telling them that certain industries, you guessed it, posed a reputational risk to the banks supporting them. this was totally arbitrary. but it worked. the banks didn't want to fall afoul of the FDIC, so they largely dropped support for the industries deemed "risky".

there's a good paper on why reputational risk is a bad addition to CAMELS courtesy of @ProfJulieHill
: https://scholarship.law.ua.edu/fac_articles/152/

this is why the FDIC's bank oversight model is so insidious – it's indirect. bank regulators don't go to banks and say "debank this specific client". instead, they say "industry x is high risk". high risk means you have to incur much higher compliance costs to support firms in that industry. for many banks, the high risk tag means that it's often simply not economical to support that industry. (and this is also why the biggest firms are still able to be banked. they can stomach the higher costs and compliance demands of banks. debanking mostly hurts the little guy - early stage startups).

2) elimination / effective prohibition of specialist banks

in response to the reputational risk framework, some banks developed a boutique practice devoted to serving "high risk" industries. in the crypto space, infamously, Signature and Silvergate built their practices around serving crypto firms. in my opinion, both banks were taken out by regulators in spring 2023. Signature was being sent into receivership while solvent (and stripped of their crypto practice during the sale). Silvergate was stripped of their entire business, via the imposition of the 15% effective threshold on crypto deposits, making it impossible for them to continue.

other banks cropped up to serve crypto, like Customers and Cross River, but they ended up facing consent orders from regulators. the message was clear: serve crypto, and be executed, or subject to lawfare.

some new banks, like Caitlin Long's Custodia, also emerged to try and serve crypto directly. Custodia was denied access to a Federal Reserve master account and left largely unable to operate.

it makes sense, given the risk framework, that specialists would emerge. an ordinary bank with a small crypto practice (or any other "risky" sector) may not deem it worth it to incur the high fixed compliance costs and likely would choose to offboard those clients. it might be an unnecessary headache to risk regulator scrutiny if crypto is only 5% of your business. so naturally, some banks would come along that would craft their businesses around this "risky" sector and make it clear up front what they were doing. and build a compliance function entirely around supporting that industry. but post march 2023, this became a prohibited activity, as banks were told to keep their crypto practice to only "ancillary" levels (i.e. around 15% of their total deposits). so no specialists could exist.

Since Dodd Frank, new bank charters are vanishingly rare and hard to get. thus, the market cannot clear: there's clearly an opportunity to serve an industry that other banks won't touch, but new banks are effectively prohibited from entering the business.

3) incorporation of "stakeholder capitalism" into bank supervision

following the GFC, bank regulators started to think more about "stakeholder capitalism" in bank regulation. banks aren't just banks, they're instruments of economic policy, and that should stretch to encompass virtually everyone.

in 2023, the FDIC decided to expand the set of entities that banks have to consider in their actions beyond just clients and shareholders, to ... potentially everyone. anyone is potentially a "stakeholder" in a bank's activities, even if they aren't a bank client or shareholder.

the proposed guidelines asked banks to consider "the interests of all its stakeholders, including shareholders, depositors, creditors, customers, regulators, and the public." as the WSJ said, "progressives apparently believe bank directors have a fiduciary duty to government regulators." banks have to care about the effect of their actions on anyone and everyone. this is a massive expansion of the FDIC's mandate.

ironically, if the FDIC itself were subject to this framework, Chair Gruenberg would have resigned long ago, because he presided over a long scandal pertaining to pervasive misconduct at the agency (see: https://archive.li/Ufy1q)

4) veil of secrecy via Confidential Supervisory Information

conversations between bank regulators and banks are considered "confidential supervisory information" or CSI. this is actually meant to protect the banks. if a bank is having a private conversation with a regulator over some issue they're encountering, it makes sense to give them some privacy until they can figure it out. however, perversely, CSI has now been weaponized to protect regulators. banks are prohibited from publicly sharing the kind of guidance they are getting from bank supervisors. this is why you didn't hear much about the FDIC's pressure campaign against crypto (aside from a few pieces from myself and others sourced from bank execs). CSI is the legal mechanism keeping a lid on this whole scandal. many of the most affected bankers were also embroiled in enforcement actions, which in my view, was also an attempt to cover up the summary executions of Silvergate and Signature. naturally, executives couldn't say much while they were still litigating or negotiating settlements....

....MUCH MORE

Nic Carter home (blog posts and op-eds):

My latest

Bitcoin Magazine, I don’t support a Strategic Bitcoin Reserve, and neither should you (Dec. 2024)
I make the case against the US Government acquiring additional Bitcoins

Fortune, Debanking hurts everyone. It’s time to end it once and for all, with Austin Campbell (Dec. 2024)
My op-ed in Fortune giving a general overview of the debanking of crypto firms

Medium, Marc Andreessen and the CFPB: Debunking the Debanking Debunkers (Nov. 2024)
A discussion of Marc Andreessen’s comments on crypto debanking and the role of the CFPB

Coindesk, Why You Should (Still) Care About Silvergate (Oct. 2024)
My retrospective on the Silvergate affair and how events have become much clearer with the passage of time

---

Operation Chokepoint 2.0

My four-part series in Piratewires on the Biden administration’s crackdown on crypto firms via cover bank regulation

Part I: Operation Choke Point 2.0 Is Underway, And Crypto Is In Its Crosshairs (March 2023)
I notice the origins of a coordinate crackdown on crypto banking in the wake of the FTX crisis

Part II: Did The Government Start A Global Financial Crisis In An Attempt To Destroy Crypto? (May 2023)
Amidst the banking crisis of 2023, pro-crypto banks Silvergate and Signature are suspiciously shut down

Part III: Inside the Biden Admin’s Plot to Destroy Silvergate and Debank Crypto for Good (Sep. 2024)
More revelations from the Silvergate bankruptcy filings and subsequent action by regulators confirms my suspicions

Part IV: Marc Andreessen and the CFPB: Debunking the Debanking Debunkers (Dec. 2024)
I assess Marc Andreessen’s explosive new claims about debanking

Part V: Operation Choke Point 2.0 Goes Mainstream (Dec. 2024)
Piratewires’ Brandon Gorrell summarizes my reporting on OCP2.0 and covers the mainstreaming of the thesis

Overview: Debanking hurts everyone. It’s time to end it once and for all, with Austin Campbell (Dec. 2024)
My op-ed in Fortune giving a general overview of the debanking of crypto firms in Fortune