Posts Tagged ‘Economics’

Autogolpe Aborted

Thursday, December 8th, 2022

There have been some interesting developments in Peru, as lefty President
Pedro Castillo attempted his own autogolpe.

It didn’t go well for him.

Peru’s Congress on Wednesday voted to remove President Pedro Castillo after he attempted to dissolve the legislative body following their third attempt to remove him from office.

Lawmakers voted 101-6 with 10 abstentions to remove Castillo from office for reasons of “permanent moral incapacity.”

I love the phrase permanent moral incapacity. If it caught on here, half of our political class would be forcibly retired.

Vice President Dina Boluarte was quickly sworn in to replace Castillo. The 60-year-old lawyer took the oath of office and became the first female leader in Peru’s history.

Her swearing-in capped hours of uncertainty as both the president and Congress appeared to exercise their constitutional powers to do away with each other. She said her first order of business would be to address government corruption.

They did it to him before he could do it to them.

Peru President Pedro Castillo announced the dissolution of congress and called for legislative elections to draft a new constitution hours before an impeachment debate, greatly escalating a political crisis and putting the Latin American nation’s democracy under threat.

“We took the decision of establishing a government of exception toward reestablishing the rule of law and democracy,” Castillo said in a televised speech Wednesday, adding that the incoming congress will draft a new constitution within nine months. “From today and until the new congress is established, we will govern through decrees.”

“Government of exception” is an awful fancy way of saying “dictatorship.”

Castillo’s move was met with nationwide protests and outrage by the Peruvian constitutional court which called the dissolution of Congress a coup, and said that Castillo is no longer president. Meanwhile, the Congress – which apparently did not get the memo that it has been dissolved – started the Castillo impeachment session early, and will most likely vote to remove the president.

Castillo’s move was hardly unprecedented, as previous Peruvian President Alberto Fujimori famously conducted his own successful autogolpe (auto coup) to purge the Peruvian government (and judiciary) of corruption. He would then defeat the Maoist Shining Path insurgency, be elected to two more terms as President, and then flee the country and resign by fax before being indicted on his own corruption charges. (He would eventually return to serve his prison term and receive a pardon that was later annulled by a court.)

This offers us an opportunity to look at the history of Peru’s governments from the sort of deep, informed vantage point that only 15 minutes of browsing Wikipedia can provide. Even if you limit it to Post-WWII presidents, that history is not a happy one.

  • Manuel Prado Ugarteche: Served without much upheaval throughout pretty much the entirety of World War II and passed the office to democratically elected successor Jose Luis Bustamante y Rivero. But his second term (July 28, 1956 to July 18, 1962) ended in a coup d’état and he died in exile. Speaking of which:
  • Jose Luis Bustamante y Rivero: After the assassination of a bitter political rival, a rebellion broke out.

    After troops loyal to the government crushed the revolt, President Bustamante suspended all civil rights.

    The insurrection, he declared, had been the work of the APRA Party. Under the President’s orders, government troops occupied the APRA headquarters, seized the plant of its newspaper, La Tribuna, and arrested several prominent Apristas. But for the Military Cabinet, those moves were not enough. Postwar economic problems and strife caused by strong labor unions led to a military coup on October 29, 1948, which led Gen. Manuel A. Odria to become the new President.

    Bustamante went into exile, then returned. Despite that whole “suspended civil rights and crushed rival political parties” thing, “In 1960 he was elected a member of the International Court of Justice in The Hague and served as its President from 1967 to 1969.” Died in Lima.

  • Manuel A. Odria: Ruled as a dictator, then:

    After two years, he resigned and had one of his colleagues, Zenon Noriega, take office as a puppet president so he could run for president as a civilian. He was duly elected a month later as the only candidate.

    So much democracy!

    Odriua came down hard on APRA, momentarily pleasing the oligarchy and all others on the right. Like Juan Peron, he followed a populist course that won him great favor with the poor and lower classes. A thriving economy allowed him to indulge in expensive but crowd-pleasing social policies. At the same time, however, civil rights in the nation were severely restricted and corruption was rampant throughout his regime. People feared that his dictatorship would run indefinitely; they were surprised when Odria legalized opposition parties in 1956 and called fresh elections. He did not run for office. He was succeeded by a former president, Manuel Prado.

    Stayed active in politics, died in Peru. After:

  • Ugarteche II: Peruvian Boogaloo came:
  • Ricardo Perez Godoy.

    Three main candidates participated in the Peruvian presidential elections of 10 June 1962: Victor Raul Haya de la Torre, founder and leader of the APRA, future president Fernando Belaunde, and former dictator Manuel A. Odria. Haya de la Torre gained most of the votes according to the official results, one percentage point ahead of Belaúnde.

    However, none of the candidates reached the margin of one-third of the votes needed to become president.[citation needed] Therefore, the final decision lay with the Peruvian Congress. Haya de la Torre and Odría formed an alliance in order to install Odria as the new president.

    At 3:20 in the morning of 18 July 1962 at the Presidential Palace, one of the thirty tanks stationed outside gunned its engine and rammed through the black wrought-iron gates. Manuel Prado, the constitutional President of Peru, was thrown out of office in a coup, just ten days short of completing his six-year term.

    Perez Godoy, as Chairman of the Joint Chiefs of Staff, headed the military junta formed by high-ranked members of the Peruvian Military Force: General Nicolas Lindley, commander of Peru’s army; Vice Admiral Juan Francisco Torres Matos, Admiral of the Navy; and General Pedro Vargas Prada, chief of the air force. Once in the Palace, the four-man junta administered its own swearing-into office. The soldiers then suspended all constitutional guarantees, dissolved Parliament, arrested Electoral Tribunal officials “for trial” and promised “clean and pure elections” scheduled for June 9, 1963.

    Snip.

    Promising a “New Peru”, Pérez Godoy pushed through a 24% increase in the budget and decreed new taxes to pay for it, including a one dollar-a-ton levy on anchovies that provoked a strike and threatened to close down the thriving fishmeal industry.

    And when he refused to approve the construction of a new hospital for Vargas Prada’s Air Force and six new ships for Torres Matos’ national steamship line, the other junta members turned on him.

    What a tragedy it is when there’s no honor among coup leaders! If only Shakespeare had warned us…

    He was deposed by the junta’s next man in line, Army General Nicolas Lindley, who swiftly moved into the presidency on March 3. Lindley restored the schedule for democratic elections and turned over the office of president to election winner Fernando Belaúnde.

  • Nicolas Lindley Lopez: Served a year as dictator then stepped down for a civilian government. Served as ambassador to Spain and died in Peru.
  • Fernando Belaunde: Served two non-continuous terms, the first of which involved a controversial settlement with Standard Oil. Want to guess how that term ended? “Belaunde himself was removed from office by a military coup led by general Juan Velasco Alvarado.”
  • Juan Velasco Alvarado: Served as dictator of Peru for seven years. “He pursued a partnership with the Soviet bloc, tightening relations with Cuba and Fidel Castro and undertaking major purchases of Soviet military hardware.” Followed by nationalizing American assets, etc. “Economic difficulties such as inflation, unemployment, food shortages.” Try to contain your shock. If you’ve been reading along so far, want to guess how Alvarado left office? “On August 29, 1975, a number of prominent military commanders initiated a coup…Prime Minister Francisco Morales Bermudez was then appointed president, by unanimous decision of the new military junta.” Live by the coup, die by the coup. Already in ill health, he died in 1977. Inspired Venezuelan commie scumbag Hugo Chavez.
  • Francisco Morales Bermudez:

    Politically pressured from all sides, [he] failed in enacting successful political and economic reform.

    A Constituent Assembly convened by the Morales Bermudez administration was created in 1978, which replaced the 1933 Constitution enacted during Oscar R. Benavides’s presidency. After elections were held in 1980, he returned power over to the first democratically elected government after 12 years of military rule, headed by President Fernando Belaunde.

  • Belaunde 2:

    One of his first actions as President was the return of several newspapers to their respective owners. In this way, freedom of speech once again played an important part in Peruvian politics. Gradually, he attempted to undo some of the most radical effects of the Agrarian Reform initiated by Velasco, and reversed the independent stance that the Military Government of Velasco had with the United States.

    Snip. “During the next years, the economic problems left over from the military government persisted.” Followed by:

  • Alan Garcia, another “two non-consecutive terms” president. Was his first term a success? Not so much.

    His economic policy was based on APRA’s initial anti-imperialist values with García distancing Peru from international markets, resulting in lower investment in the country. Despite his initial popularity among voters, Garcia’s term in office was marked by bouts of hyperinflation, which reached 7,649% in 1990 and had a cumulative total of 2,200,200% over the five years, which destabilized the Peruvian economy. Foreign debt under Garcia’s administration increased to $19 billion by 1989. Owing to this chronic inflation, the Peruvian currency, the sol, was replaced by the inti in February 1985 (before his presidency began), which itself was replaced by the nuevo sol (“new sun”) in July 1991, at which time the new sol had a cumulative value of one billion (1,000,000,000) old soles.

    According to studies by the National Institute of Statistics and Informatics and the United Nations Development Programme, around the start of his presidency, 41.6% of Peruvians lived in poverty. During his presidency, this percentage increased by 13% (to 55%) in 1991. Garcia also made an attempt to nationalise the banking and insurance industries. The International Monetary Fund and the financial community recoiled after Garcia’s administration unilaterally declared a limit on debt repayment equal to 10% of the Gross National Product, thereby isolating Peru from international financial markets.

    His presidency was marked by world-record hyperinflation with the annual rate exceeding 13,000 percent per year. The administration devastated the local economy as well as all governmental institutions. Hunger, corruption, injustice, abuse of power, partisan elitism, and social unrest raised to dramatic levels spreading throughout the whole nation due to Garcia’s misdeeds and incompetence, spurring terrorism. The economic turbulence exacerbated social tensions and contributed in great part to the rise of the violent Maoist rebel movement known as the Shining Path, which launched the internal conflict in Peru and began attacking electrical towers, causing a number of blackouts in Lima. The period also saw the emergence of the Tupac Amaru Revolutionary Movement (MRTA).

    He was so unpopular he didn’t even run in 1990, so he was succeeded by Alberto Fujimori, a surprise winner in a runoff against the free-market oriented novelist (and later Nobel Prize laureate) Mario Vargas Llosa.

  • Alberto Fujimori: We’ve already covered him. Disgraced and imprisoned, he’s still a strong candidate for the most effective postwar Peruvian President. After his resignation, the Presidency passed to:
  • Valentin Paniagua, despite being third in line for succession, because one guy had resigned and the other was too much of a Fujimori loyalest. Served for a year, formed a national unity government and pulled back on a lot of the “secret judge and jury” tribunals Fujimori had instituted, and was able to do so mainly because Fujimori was so successful at crushing Shining Path. Followed by:
  • Alejandro Toledo.

    His administration was characterized by the beginning of the country’s macroeconomic boom, promoting foreign investment, the signing of free trade agreements, and the implementation of various investment projects in infrastructure and human development. At the same time, Toledo suffered a governance crisis, scandals in his personal life, and allegations of corruption against his inner circle, signs that hit his popularity until he fell to 8% of popular approval.

    Snip.

    On 16 July 2019, Toledo was arrested in the United States for an extradition order to Peru, as reported by the Peruvian Public Ministry. On 8 August, attorney Graham Archer, requested a request for release on bail before judge Thomas Hixson. On 12 September, the judge ruled his request for reconsideration inadmissible. On 19 March 2020, he was released on bail.On 28 September 2021, a U.S. District Court approved the extradition of Toledo, ruling that evidence presented in the case against Toledo were “sufficient to sustain the charges of collusion and money laundering” under the U.S. Peru Extradition Treaty.

    Followed by:

  • Alan Garcia 2. Did it work out better than the last time? Not really, but it started off better:

    Throughout Garcia’s second term, Peru experienced a steady economy, becoming the fastest growing country in Latin America in 2008, surpassing China in terms of rising GDP. The economic success of his presidency would be acclaimed as a triumph by world leaders, and poverty was reduced from 48% to 28% nationally. In addition, Peru signed free trade agreements with the United States and China during García’s presidency, but accusations of corruption would persist throughout his term and beyond.

    After leaving office: “Died from a self-inflicted gunshot to the head as police officers under a prosecutor’s orders were preparing to arrest him” on corruption charges as part of the Odebrecht scandal. Next up:

  • Ollanta Humala: “Originally a socialist and left-wing nationalist, he is considered to have shifted towards neoliberalism and the political centre during his presidency.” How did it end? “In 2017, Humala was arrested by Peruvian authorities on corruption charges.” Next:
  • Pedro Pablo Kuczynski. This is already too long, so let’s cut to the chase:

    First impeachment
    Main article: First impeachment process against Pedro Pablo Kuczynski

    On 15 December 2017, the Congress of the Republic initiated impeachment proceedings against Kuczynski, with the congressional opposition stating that he had lost the ″moral capacity″ to lead the country after he admitted receiving advisory fees from scandal-hit Brazilian construction company Odebrecht while he was Peru’s Minister of Economy and Finance between 2004 and 2005. Kuczynski had previously denied receiving any payments from Odebrecht, but later confessed that his company, Westfield Capital Ltd, had been receiving money from Odebrecht for advisory services, while still denying that irregularities existed in the payments.

    Fujimori pardon snipped.

    Second impeachment, Kenjivideos and resignation

    After further scandals broke out surrounding Kuczynski, a second impeachment vote was to be held on 22 March 2018. Two days before the vote, Kuczynski stated that he would not resign and decided to face the impeachment process for a second time. The next day on 21 March 2018, a video was released of Kuczynski allies, including his lawyer and Kenji Fujimori, attempting to buy a vote against impeachment from one official.

    Followed by:

  • Martin Vizcarra. Who was also impeached twice, and also tried to dissolve congress.

    On 9 November 2020, the Peruvian Congress impeached Vizcarra a second time, after declaring him “morally incompetent”; he was removed from office.[9] The President of Congress and opposition leader, Manuel Merino, succeeded him as President of Peru the following day. Vizcarra’s impeachment incited the 2020 Peruvian protests, as many Peruvians and political analysts believed the impeachment was unsubstantiated, with several Peruvian media outlets labeling the impeachment a “coup”. Vizcarra was banned from holding public office for 10 years after allegedly jumping the line to get a COVID-19 vaccine, with an 86–0 vote in congress.

  • Manuel Merino. He only served six days before resigning. Followed by:
  • Francisco Sagasti: Managed to run a caretaker government from November 7, 2020 to July 28 2021, and carried out successful elections without being indicted, deposed or killing himself, which has to count as a success.

    Bringing us back, finally, to:

  • Pedro Castillo:

    Castillo was noted for appointing four different governments in six months, something which had no precedent within Peruvian political history. He faced two impeachment proceedings in the Peruvian Congress, although both failed to reach the necessary votes to remove him from office.

    Following the second failed impeachment vote, a series of protests across the country took place due to the rising fuel prices and instability allegedly generated by Castillo’s administration, which largely affected transportation workers. His administration was not able to find a solution to the political crisis, as it escalated in addition to mining protests as the country’s economy plummeted. Castillo ultimately left the Free Peru party in June 2022 to govern as an independent. In July 2022, a fifth inquest was launched into Castillo’s alleged corruption involvements.

    Bringing us to the third impeachment and his removal from office.

  • It’s a rich tapestry of political dysfunction.

    Well, that’s more like three hours of Wikipedia reading, but it does drive home the point that the very moment anyone takes office as President in Peru, the deck is stacked against them…

    LinkSwarm for December 2, 2022

    Friday, December 2nd, 2022

    Howdy! Hope everybody had a great Thanksgiving! I spent six days up in the Dallas/Fort Worth Metroplex, visiting relatives and buying some 180 books, some for myself and some to deal. Enjoy a Friday LinkSwarm!
    

  • We keep hearing that it’s impossible rig government unemployment statistics, but something funny is going on.

    A superficial take of today’s jobs report would note that both jobs and earnings “blew past expectations, flying in the face of Fed rate hikes”, and while that is accurate at the headline level, it couldn’t be further from the truth if one actually digs a little deeper in today’s jobs numbers.

    Recall that back in August, September, and October we showed that a stark divergence had opened between the Household and Establishment surveys that comprise the monthly jobs report, and since March the former has been stagnant while the latter has been rising every single month. In addition to that, full-time jobs were plunging while part-time jobs were surging and the number of multiple-jobholders soared.

    Fast forward to today when the inconsistencies not only continue to grow, but have become downright grotesque.

    Consider the following: the closely followed Establishment survey came in above expectations at 263K, above the 200K expected – a record 7th consecutive beat vs expectations – and down modestly from last month’s upward revised 284K…

    … numbers which confirm that at a time when virtually every major tech company is announcing mass layoffs…

    … the BLS has a single, laser-focused political agenda – not to spoil the political climate at a time when Democrats just lost control of the House as somehow both construction (+20K) and manufacturing (+14K) added jobs according to the BLS, when even ADP now reports that these two sectors combined shed more than 100,000 workers in November.

    Alas, there is only so much the Department of Labor can hide under the rug because when looking at the abovementioned gap between the Household and Establishment surveys which we have been pounding the table on since the summer, it just blew out by a whopping 401K as a result of the 263K increase in the number of nonfarm payrolls (tracked by the Household survey) offset by a perplexing plunge in the number of people actually employed which tumbled by 138K (tracked by Household survey). Furthermore, as shown in the next chart, since March the number of employed workers has declined on 4 of the past 8 months, while the much more gamed nonfarm payrolls (goalseeked by the Establishment survey) have been up every single month.

    What is even more perplexing, is that despite the continued rise in nonfarm payrolls, the Household survey continues to telegraph growing weakness, and as of Nov 30, the gap that opened in March has since grown to a whopping 2.7 million “workers” which may or may not exist anywhere besides the spreadsheet model of some BLS (or is that BLM) political activist.”

  • Senate passes bill to avoid rail strike.
  • “Zuckerberg, Soros Bankrolling Left-Wing Think Tank Conducting Racial Census of Hill Staff.”

    A non-profit bankrolled by some of the nation’s largest corporations and left-wing billionaire George Soros is conducting a racial census of House and Senate staff as part of its effort to establish a “Bipartisan Diversity and Inclusion Office,” according to internal emails obtained by the Washington Free Beacon.

    Senate and House staff received emails from a researcher at the Joint Center for Political and Economic Studies starting in July asking them to confirm their “racial and ethnic identity” as part of an alleged data collection effort. In at least two cases, senior congressional staffers who declined to provide their races were told by the researcher that the organization’s current data indicated they “may identify as white” and asked the staffers to update if the information was incorrect.

    Information collected by the group will be used in its annual report that lobbies for “structural changes on Capitol Hill that would allow for more people of color to be hired in senior positions,” a previous report from the group states. That report is made possible in part by millions of dollars in donations to the Joint Center for Political and Economic Studies from Apple, Google, Meta, Pfizer, the Soros-backed Open Society Foundation, among dozens of other large corporations and nonprofits.

    The Joint Center for Political and Economic Studies’ survey is part of a broader trend by left-wing organizations to pressure workplaces and governments to increase affirmative action policies. Often couched in promoting “diversity, equity, and inclusion,” those policies have received criticism for coming at the expense of competence and offering advantages based on race instead of merit.

    (Hat tip: Instapundit.)

  • “Collin County Ends Automatic Deduction of Union Dues.” Good.
  • “‘Philadelphia is a war zone’: Moment thug casually strolls up to parking officer and shoots him in the head in broad daylight in Dem-led city.” (Hat tip: Stephen Green at Instapundit.)
  • Speaking of Blue Zone violence, some occurred only a few miles from my house, when lawyer Gavin Rush walked into the bar where his ex-girlfriend worked and tried to shoot her before patrons wresteled him to the ground.

    Rush was charged with a second-degree felony, aggravated assault with a deadly weapon family violence. An emergency protection order was issued against him, and he was soon back on the streets after making a $40,000 bond, KVUE reported.

    “For $4,000, you can get out, go home, watch Netflix after trying to murder your ex-girlfriend — are you kidding me?” one of the customers said.

    So in addition to aggravated assault with a deadly weapon and possible attempted murder, our super-genius lawyer also violated section 46.03 of the Texas penal code by carrying a gun into a bar. And he bonded out. For all that Democrats blather about “gun violence,” they don’t seem top treat gun felonies with any seriousness when they actually occur. Thanks, Soros-backed DA Jose Garza!

    But it turns out that Rush didn’t just go go home to watch Netflix, as he was found dead on Thursday.

  • Slippery, meet slope. “Assisted suicide plans for children unveiled at Toronto’s Sick Kids hospital.” (Hat tip: Sarah Hoyt at Instapundit.)
  • “Wisconsin School Counselor Sues District after Firing over Objections to Child Gender Transition.” Bend the knee, peasant.
  • Newly Elected Conservative School Board Fires Superintendent, Bans Critical Race Theory.”

    In one meeting, Deon Jackson went from South Carolina’s Berkeley County school superintendent to unemployed.

    His firing came at the hand of a newly-elected school board, which appears to have declared a judgment day for woke practices in its district.

    In its first meeting after the Nov. 8 election, the board fired superintendent Jackson and school counsel Tiffany Richardson. Then it hired Anthony Dixon as superintendent and retained Brandon Gaskins as counsel. And before the day was over, the board banned teaching critical race theory and created a board to review library books for pornographic content.

    Moms for Liberty, an activist group that supports parental rights in education, endorsed six of the board’s nine members. Many Moms for Liberty candidates won school board elections this November.

    Faster, please.

  • The road portion of the Kerch Strait bridge has been repaired.
  • Reality continues to outpace The Babylon Bee: “Former White House ‘Disinformation Czar’ Nina Jankowicz Registers As Foreign Agent.”
  • Speaking of disinformation, CNN carries out more mass layoffs, including Chris Cillizza. Let’s have a moment of silences for his careerOK that’s enough.
  • Today’s hate crime hoax comes to you from pedo-friendly California Democratic State Senator Scott Weiner.
  • Legal Insurrection conducts a 2024 presidential preference poll. Not surprisingly, DeSantis comes in first and Trump second. Nikki Haley third over Ted Cruz is a mild surprise. Greg Abbott ranked dead last, tied with Liz Chaney, is a much bigger one.
  • The B-21 Raider strategic bomber was officially rolled out today.
  • San Francisco police to arm robots with bombs. The Robocop joke are already made at the source.
  • U.S. defeats Iran in EuroFlopBall.
  • I used to joke “becoming a book reviewer for riches and fame is like becoming a monk for the kinky sex and hard drugs.” I may need to amend that joke.
  • Sarah Hoyt on bad feminist worldbuilding.
  • Epic fail: Crashing your car. SuperEpicMegaFail: Into a fireworks store. (Hat tip: Dwight.)
  • Pilot builds tiny home out of a scissor lift airline snack truck.
  • Here’s your chance to pick up a shooting script for Citizen Kane.
  • World’s oldest cat dies in Texas at age 30.
  • Colin Furze turns himself into a Weeble.
  • The Ukraine War Is Crushing Germany’s Green Energy Delusions

    Tuesday, November 22nd, 2022

    The combination of pretending to transition to a green energy future combined with dependence on Russian gas and the fallout of the Russo-Ukrainian War has Germany looking at some very tough choices:

  • “Europeans have chosen to largely remove natural gas from their industrial space, and so we are seeing huge amounts of industrial closures across the entire industrial space.”
  • “Natural gas isn’t just part of their electricity system, it’s part of their petrochemical system, which is what makes their manufacturing sector possible. So in shutting all this stuff down the Europeans are choosing, maybe not consciously, but they are choosing a general de-industrialization trend for the entire continent.”
  • “No one is making nitrogen-based fertilizer in Europe anymore. No one is smelting aluminum anymore. A lot of the steel foundries are shutting down.”
  • And so far it’s a relatively mild winter in Europe. Next year will be worse.
  • Zeihan talks about how Germany “fudges” some of it’s green energy pledges. (In a previous video he mentioned some bit of legerdemain where they don’t count fossil fuel baseload power that spins up to take over for solar at night.) So exactly what has Germany’s much-vaunted green energy programs accomplished? Not much.

    In 2000, Germany obtained 84 percent of its energy from fossil fuels. By 2019, it was 78 percent. As Vaclav Smil pointed out a couple of years ago, at this rate, Germany would still be deriving 70 percent of its energy from fossil fuels by the year 2050.

    Sure, Germany hasn’t managed to transition away from fossil fuels, but they have managed to make their energy infrastructure expensive and unreliable…

    China’s Rich Potemkin Socialist Village

    Monday, November 21st, 2022

    Much of China’s last two decades of apparent prosperity seems to be an illusion designed to fool both its own people and outside investors. But the Potemkin village of Huaxi takes China’s illusory prosperity to the next level.

    “Huaxi in east China, is a mysterious socialist town that once believed that the residents were entitled to extraordinary amenities, including free healthcare, education, luxurious homes, cars, and at least $250,000 in their bank accounts. The so-called richest village in China is now running into debt with villagers waiting in the rain to claim their money back from Huaxi.”

    Potemkin prosperity is a poor substitute for an actual productive economy.

    FTXed Up

    Wednesday, November 16th, 2022

    Let me start out by explaining how cryptocurrency works: You exchange your money for digital strings of numbers based on math you don’t understand, for one of the following reasons:

    A. You believe those digital strings of numbers will be worth more money at some point in the future.
    B. You want to buy drugs online in a theoretically untraceable manner (said theoretical untraceability being a key property of the math you don’t understand).
    C. You want to place your money beyond the reach of your national government.

    There are exceptions to the above (say, you’re mining your own cryptocurrency, or you know enough math to understand exactly the mathematical properties of how blockchain-based cryptocurrency works), but I’m going to guess that one of the three above use cases apply to 95% people using cryptocurrency.

    I’m somewhat sympathetic to C, and even understand how A might be tempting (hey, crypto has dropped so much I might buy a couple thousand worth of Dogecoin, just for the hell of it, as a pure speculation play), but cryptocurrencies as a whole are not a proven store of worth on par with, say, a bar of gold, a share Apple stock, or a

    Is cryptocurrency money? Sort of.

    Cryptocurrency offers something that sometimes acts like money, offers anonymity like money, and offers an alternative to government-backed fiat currencies. Instead of being backed by the full faith and credit of the federal government, cryptocurrency is backed by the full faith of millions of technologically savvy individuals who believe the math is sound.

    The math may indeed be sound, but that didn’t save it from the loss of investor confidence of the Crypto Winter we’re now experiencing. And that winter is absolutely slamming the business models of people who sought to make crypto more like other forms of money.

    Enter Sam Bankman-Fried and FTX, whose crypto empire just collapsed.

    Here’s the 99 second summary.

    Here’s the story in a bit more depth.

    Amid all the jubilation and gloating by Joe Biden, Chuck Schumer and pals over the Democrats’ better-than-expected showing in the midterms comes a disturbing story that may explain something about how they won such a curious election.

    Biden’s second-biggest donor, cryptocurrency billionaire wunderkind Sam Bankman-Fried, a k a SBF, saw his business file for bankruptcy days after the election, but not before pumping $40 million into the Democratic Party to spend on “get-out-the-vote” and other shadowy ballot-harvesting mechanics for the midterms.

    The shambolic 30-year-old whiz kid, once said to have been worth $16 billion, had spent $10 million helping get Biden elected in 2020.

    SBF’s mother, Stanford law professor Barbara Fried, also is co-founder of left-wing political action committee Mind The Gap, which has raised a reported $140 million to help Democrats win elections through the same “get-out-the-vote” grift.

    Tree. Acorn. Distances.

    A more unlikely billionaire you could not find — and of course his money was built on thin air. A math genius with poor social skills, SBF reportedly lived in a “polycule” — a polyamorous relationship with multiple people — in a luxury penthouse with about 10 co-workers in the tax haven of the Bahamas, where his collapsed crypto exchange FTX was headquartered.

    Otherwise, he was sleeping on beanbags in his office, eating vegan fries and, according to his own Twitter feed, popping amphetamines and sleeping pills to regulate his chaotic sleeping habits.

    Just the sort of person you want to entrust billions in currency to!

    Now Reuters is reporting that between $1 billion and $2 billion of customer funds have vanished from FTX, conveniently after the Democrats safely spent his money.

    At last report, SBF and his mysterious co-founder, Gary Wang, were being held “under supervision” by Bahamian authorities after reportedly planning to flee to Dubai, according to fintech publication Cointelegraph.

    It is a stunning fall to earth. The financial media and big investors have feted the young billionaire as a saint who shunned earthly pleasures like Lamborghinis and Rolexes, but lived only to give away all his money and make the world a better place.

    He was the most famous millennial adherent of a cult known as “Effective Altruism,” which originated at Oxford University, found fertile ground in Silicon Valley — and now has gone down in flames along with him.

    “Indulgences! Buy your Social Justice Indulgences here!”

    EA is a disguised form of socialism, because all the “good” that is done just happens to match up perfectly with the left’s obsessions, whether climate change, social justice, equity, banning meat or his favorite, “pandemic preparedness.”

    In a Nas Daily online video, an awkward Bankman-Fried was featured this year as a role model of altruism for young people: “Sam is not a traditional billionaire because he believes in the concept of ‘earn to give’ … Next decade he will probably give away more than $10 million … He wants to get rich in order to impact the world and change it.”

    Some detail snipped.

    The sinister neo-socialists at the World Economic Forum (WEF) loved SBF so much, they made FTX a “corporate partner” — but that page on the WEF website has vanished in the last 48 hours, leaving an error message.

    Venture capital firm Sequoia was a big backer, investing over $200 million in SBF, a lot of which he then invested back in Sequoia, whose chairman and managing partner Michael Moritz is a big donor to the Dems as well as to anti-Trump hate group the Lincoln Project, and reportedly is a neighbor of Nancy Pelosi in San Francisco.

    It’s like a Voltran of Globalist Grift!

    One important part the Post piece leaves out is how Alameda Research, Bankman-Fried’s other firm, was trading billions of dollars from FTX accounts and leveraging the exchange’s native token as collateral, according to a source.”

    Embezzling, Ponzi scheme, security and exchange violations…it’s a rich, cross-hatched tapestry of fraud.

    Here’s Joe Rogan on the Brokeman-Fraud scandal:

    And here’s Ben Shapiro:

    Every generation gets the Bernie Madoff it deserves…

    Is China’s GDP Overstated By 60%?

    Thursday, October 27th, 2022

    I’ve long thought that, based on the fragmentary evidence we have (the huge debt load, the ghost cities, the known mismanagement and calculation problem of planned communist economies, etc.), the size of China’s economy is overstated by 40%. Now, according to the measurements of one pretty good proxy for economic activity, it appears that I was too trusting and optimistic about the size of China’s economy, in that it’s probably overstated by 60%.

    Takeaways:

  • Building on the work (caveat: paywalled) of University of Chicago economist Luis R. Martinez, economist and YouTuber Joeri Schasfoort (guest lecturer at Vrije Universiteit Amsterdam) calculates that China’s economy is overstated by 60%.
  • Martinez’s original paper calculates the visible difference between official stated GDP growth in 184 different countries between 1992 and 2008, and compared those numbers to the visible nighttime light from satellite imagery, and mapped the correlation. You know that South Korea/North Korea image comparison? That, but for the entire world, and mapped over time.
  • “Autocratic countries typically reported a whopping 35% higher GDP growth numbers compared to nighttime lights growth. And for China specifically, Martinez states that, based on his analysis, China’s GDP growth between 1992 and 2008 was likely 4.9% per year, rather than its average reported growth of 6.3%.”
  • “This would mean that instead of soon becoming the second largest economy in the world, China’s economy is only about a third of the size of the mighty US economy. And it also means that predictions such as those made by billionaire investor Ray Dalio that China is soon to overtake the US as the world’s next superpower are way overblown.”
  • “For China specifically, Martinez states that, based on his analysis, China’s GDP growth between 1992 and 2008 was likely 4.9% per year, rather than its average reported growth of 6.3%.”
  • “Based on how much authoritarian countries overstate in GDP growth compared to night light growth, Martinez produced what he calls a GDP deflator. This GDP deflator is basically a number by which to reduce official GDP numbers each year based on how authoritarian a country is using his deflator. We extend Martinez’s analysis to the year 2021, and while between in 1992 and 2021, China reported a sky high GDP growth between 14% and 8%, Martinez’s analysis suggests that China actually only grew between 6% and 2%.”
  • Still impressive growth by world standards.
  • “You should take these adjusted numbers with a big grain of salt. But that being said, I do actually think that the adjusted numbers are closer to the truth than the official numbers.”
  • “China is quite unique in that the central government used to set GDP growth targets for provincial governors. And if any of you ever worked in a company with a growth target, you probably know that while they can be effective, they typically also produce a lot of unwanted side effects.”
  • “Research has already shown that China’s GDP growth targets led to both wasteful investment projects and, more importantly, to us manipulated GDP numbers. Similarly to Martinez’s study, another economist uncovered that in the years that Chinese provincial governments needed to be selected, there were huge differences between the reported GDP figures for that province and data that could not be manipulated such as electricity consumption.”
  • “When I myself looked into the nightlife data of a paper published in Nature and compared that to the World Bank GDP data, I found that indeed China has reported much higher GDP growth compared to nightlight growth. And for example, its more democratic also rapidly growing and larger neighbor India. So yeah, there is a lot of evidence that China is manipulating its GDP data just as much, if not more, than other autocratic countries.”
  • “And this is why, with the caveat that this is an extremely rough calculation, in my opinion, China’s GDP is likely 40% of its official figure.”
  • (Note: Normally I say “Watch the whole thing.” However, there’s some unrelated tragic news at the very end, so if you’re prone to I Haz A Sadz, you might want to stop at 13:08.)

    That’s quite a bombshell. We might quibble about just how much China’s GDP is manipulated, but 40-60% seems a pretty solid guesstimate, and explains a whole host of observable facts, from banking and mortgage problems to tofu dregs buildings to their inability to manufacture advanced semiconductors.

    The question isn’t whether China is massively manipulating their GDP numbers, the only question is by how much.

    Bonus video one: How China’s land value collapse has screwed local Chinese governments:

    Bonus video two: Chinese stock prices crashed this week:

    Semiconductors: China Is Fucked

    Monday, October 17th, 2022

    I already touched on this story in Friday’s LinkSwarm, but lots of other people are now twigging to just how huge a story this is. Let’s start with that: “US Firms Pull Staff From China’s Top Chip Maker As Economic War Worsens.”

    The Biden administration’s new technology restrictions are already causing disruptions in China as US semiconductor equipment suppliers are telling staff based in the country’s top memory chip maker to leave, according to WSJ, citing sources familiar with the matter.

    State-owned Yangtze Memory Technologies Co. has seen US chip semiconductor equipment companies, including KLA Corp. and Lam Research Corp., halt business activities at the facility. This includes installing new equipment to make advanced chips and overseeing highly technical chip production.

    The US suppliers have paused support of already installed equipment at YMTC in recent days and temporarily halted installation of new tools, the people said. The suppliers are also temporarily pulling out their staff based at YMTC, the people said. –WSJ

    It’s hard to overemphasize how badly fucked China’s chip industry is with this latest move. Semiconductor equipment not only needs regular maintenance, but extremely specialized expertise when something goes wrong and your yields crash, wizards who can look at a wafer defect chart and determine by experience what’s gone wrong with which tool. Without support and spare parts from the western semiconductor equipment giants, expect yields to start crashing in a matter of months, if not weeks, especially if Applied Materials and Tokyo Electron join the pullout.

    I just put in a call to the Applied Materials press office to ask them about this. I’ll let you know if I hear back.

    As Peter Zeihan notes, these sanctions screw not only China’s semiconductor industry, but every segment of the high tech assembly chain that depends on them.

    Takeaways:

  • Not only is China now unable to import the equipment to make semiconductors, or the tools to maintain and operate the equipment, or the software that’s necessary to operate the equipment, or any mid or high level chips at all. Now any Americans who want to assist with the Chinese semiconductor industry have to make a choice: you can have your job with China or you can have your citizenship.

    I’ve read this elsewhere: “One of the provisions of President Joe Biden’s executive order is that any U.S. citizen or green card holder working in China cannot work in the Chinese semiconductor industry or risk of losing American citizenship.” The thing is, I don’t think such sanctions are constitutional, and I’m pretty sure stripping citizenship over trade regulations with a country we’re not at war with would fail the Ninth Amendment “necessary and proper” test.

    Back to Ziehan:

  • “Within about 48 Hours of the policy being adopted last Friday, every single American citizen who was working in China in the industry either quit, or their companies relocated their entire division so they wouldn’t have to lose their staff.”
  • “For all practical purposes the Chinese semiconductor industry of everything over Internet of Things level of quality is now dead, and that has a lot more implications than it sounds.”
  • “Chinese have proven incapable over the last 25 years of advancing sufficiently [to run the technology required] to operate this industry, beyond being able to simply operate the facilities that make the low end chips, and even that had to be managed by foreigners. So there is no indigenous capacity here to pick this up and move on.”
  • “In terms of industrial follow-on, this doesn’t just mean that the Chinese are never going to be able to make the chips that go into cars or computers, it also means that any industry that is dependent upon the hardware dies.”
  • China can’t do anything remotely high tech (hypersonic missiles, AI, Great firewall, etc.) without buying chips on the gray market.
  • “This is a deal killer not just for the industry, but for a modern technocratic system from a technological point of view. China is done.”
  • What’s China going to do about it? “I would expect this kind of ‘bag of dicks’ diplomacy that has evolved in China to get this hard, and loud, which will probably only encourage the Americans to act more harshly.”
  • One sign of that pullout is that Apple has shifted iPhone manufacturing from China to India, and has scrapped plans to use YMTC chips in iPhones.

    In many ways, the Biden Administration’s approach to China has been a continuation and escalation of the Trump approach: No More Mister Nice Guy, with sanctions and reshoring of American industry.

    Short of actual military action, it’s hard to see how China can effectively retaliate against America over these moves. American companies are already leaving, and China has built up so much ill will in various international trade organizations that it’s difficult to see how they could lodge a complaint with one of those and prevail.

    Previously:

  • China’s Chip Industry Is Doomed
  • Top Chinese Chip Executives Arrested
  • China’s Semiconductor Industry: Shell Games All The Way Down
  • China’s Semiconductor Play
  • Why Hasn’t Isopropyl Alcohol Gone Back Down In Price?

    Saturday, October 15th, 2022

    This is a question I don’t know the answer to, so I thought I’d throw it out to my general readership.

    Why hasn’t isopropyl alcohol dropped back down to its 2019 prices?

    Back then, I remember isopropyl alcohol being priced about on par with hydrogen peroxide, somewhere under $1 for 16 oz bottles of 50% isopropyl alcohol.

    But during The Great Flu Manchu Panic of 2020, the price of isopropyl alcohol spiked and it became scarce as untold millions of households tried to disinfect every possible surface in hopes of eradicating the then-novel virus.

    But now that the pandemic is over, and store shelves are back to being stocked, why is the price of isopropyl alcohol stuck as twice as high as what is used to be? While hydrogen peroxide seems to be back around 86¢, HEB no longer seems to have 50% isopropyl alcohol at all, only the 70% at $1.94 a bottle. But 50% seems just as pricey online at Amazon.

    Earlier this year, HEB was blowing out those off-brand hand sanitizers (which are mostly alcohol anyway) companies started producing during the pandemic for 10¢ each. So why has the price on the real one remained stuck so stubbornly high?

    I have no idea why, so I’m throwing the question out to my readers. If you know, share it in the comments below.

    LinkSwarm for October 7, 2022

    Friday, October 7th, 2022

    I hope all BattleSwarm readers are safe from the Joe Biden Armageddon thus far. Today’s LinkSwarm features Democrats disdaining the rules followed by the little people, the UN is delusional enough to think they can run the world and defy the laws of economics, and petting dogs is good for you.

  • The UN is demanding that central banks forget everything everyone learned about inflation in the 1970s and institute price controls instead of raising interest rates.

    UNCTAD, the UN agency dealing with global trade, demanding *all* central banks stop rate hikes and instead switch to price controls. They argue, “policymakers appear to be hoping that a short sharp monetary shock – along the lines, if not of the same magnitude, as that pursued… under Paul Volker – will be sufficient to anchor inflationary expectations without triggering recession. Sifting through the economic entrails of a bygone era is unlikely, however, to provide the forward guidance needed for a softer landing given the deep structural and behavioural changes that have taken place in many economies, particularly those related to financialization, market concentration and labour’s bargaining power.”

    I am not playing tennis with them either, but note the radicalism. Indeed, their latest report also argues, “supply-chain disruptions and labour shortages require appropriate industrial policies to increase the supply of key items in the medium term; this must be accompanied by sustained global policy coordination and (liquidity) support to help countries fund and manage these changes.” So, industrial policy. And Fed swap-lines. Expect both ahead.

    They also ask why we haven’t regulated shadow-banking, and why we allow speculators in global commodity markets who have nothing to do with underlying trade. On the latter they note, “Market surveillance authorities could be mandated to intervene directly in exchange trading on an occasional basis by buying or selling derivatives contracts with a view to averting price collapses or deflating price bubbles.” I expect nothing but that ahead – and geopolitically driven to boot.

    This boils down to: “Hey, we need to institute economic policies proven to fail, because otherwise lots of rich people will lose money!” Wage and price controls were tried in the 1970s and they failed miserably. The longer governments try to defy the market, the more terrible the snapback when those efforts fail.
    

  • Speaking of the UN, they think they own science.
  • Ukraine troops are using spoofed tracking systems and deception to infiltrate Russian lines. (Hat tip: .357 Magnum.)
  • “NYT ‘Right Wing Conspiracy Theory’ Comes True In Less Than 24 Hours.”

    On Tuesday, the New York Times framed a story circulating on the right over a software company’s connection with the Chinese Communist Party as a “right-wing conspiracy theory.”

    “At an invitation-only conference in August at a secret location southeast of Phoenix, a group of election deniers unspooled a new conspiracy theory about the 2020 presidential outcome,” was the Times’ original lede (via the Daily Caller).

    In it, the Times wrote that “right-wing” election deniers in Arizona had fabricated a conspiracy theory that election software company Konnech had secret ties to the CCP, and was passing them information on around two million US poll workers.

    “In the two years since former President Donald J. Trump lost his re-election bid, conspiracy theorists have subjected election officials and private companies that play a major role in elections to a barrage of outlandish voter fraud claims,” reads the article. “But the attacks on Konnech demonstrate how far-right election deniers are also giving more attention to new and more secondary companies and groups. Their claims often find a receptive online audience, which then uses the assertions to raise doubts about the integrity of American elections.”

    The next morning, Konnech executive Eugene Yu was arrested for the alleged theft of poll workers’ personal information.

  • New Orleans’ Democrat mayor wants you to know that laws are for the little people.

    New Orleans Mayor LaToya Cantrell is facing the threat of a recall election and it’s not just the city’s rising crime that has petition signers enraged.

    The two people behind the petition are both Democrats demanding the Democrat mayor leave office for her “failure to put New Orleans first and execute the responsibilities of the position,” according to Fox News.

    In 2021, more than 150 officers left the New Orleans Police Department, despite a surge in murders and carjackings. Carjackings so far this year stand at 217, an increase of over 200 percent since 2019, according to the Metropolitan Crime Commission weekly bulletin.

    But it’s the mayor’s exorbitant travel spending that has people up in arms.

    She traveled to sister cities Ascona, Switzerland, and Juan Antibes-les-Pins on the French Riviera this summer, costing the City of New Orleans close to $45,000, including first-class international airfare with lie-flat seating.

    The city’s travel policy requires employees to pay the difference in cost for work-related airfare upgrades, stating “employees are required to purchase the lowest airfare available … employees who choose an upgrade from coach, economy, or business class flights are solely responsible for the difference in cost,” Fox News reported.

    But Cantrell hasn’t paid the near $30,000 bill from her first-class international flight upgrades over the summer.

    She has claimed the visits are an investment in the city and necessary for her safety.

    “My travel accommodations are a matter of safety, not of luxury,” The Times-Picayune/The New Orleans Advocate reported. “As all women know, our health and safety are often disregarded and we are left to navigate alone. As the mother of a young child whom I live for, I am going to protect myself by any reasonable means in order to ensure I am there to see her grow into the strong woman I am raising her to be. Anyone who wants to question how I protect myself just doesn’t understand the world Black women walk in.”

    Yes, I’m sure the men and women who walk the streets of New Orleans at night have never know unthinkable fear of having to fly coach to Switzerland.

    (Hat tip: Ed Driscoll at Instapundit.)

  • “Federal Law Does Not Exempt LGBT Employees From Bathroom, Dress Code, Policies, Judge Rules…A U.S. Equal Employment Opportunity Commission (EEOC) policy document from June 2021 overreached in its interpretation of the Supreme Court’s ruling forbidding employment discrimination based on sexual preference and gender identity, Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas found. Texas sued over the guidance.”
  • Instapundit Glenn Reynolds: “Biden hates Republicans so much, he would rather give oil money to Venezuela and Saudi Arabia than Texas.”
  • Related: “Politico reports that Democrats are ‘seething’ about the decision by OPEC+ to cut oil production by 2 million barrels per day.”

    Well, fellas, if you don’t want OPEC+ to be in a position where it can influence U.S. gasoline prices a month before the election, you need policies that minimize the U.S. market’s dependence upon the global oil market. This means maximizing U.S. oil production and expanding U.S. refinery capacity.

    It would be a mild exaggeration to declare that the Biden administration hascompletely stopped issuing leases for oil and gas drilling on federal lands and in federal waters, but only a mild one. As the Wall Street Journal reported last month, “President Biden’s Interior Department leased 126,228 acres for drilling through Aug. 20, his first 19 months in office, the analysis found. No other president since Richard Nixon in 1969-70 leased out fewer than 4.4 million acres at this stage in his first term.” It’s not a complete halt, but it’s very close to one. This means that the U.S. is almost entirely dependent upon oil production from private lands.

    The good news is that there’s still a lot of oil beneath private lands. As of July, the U.S. was producing 11.8 million barrels per day, an increase from the 11.1 million barrels per day produced in January 2021, the month President Biden took office. But before the pandemic hit in early 2020, the U.S. was producing 12.8 million barrels per day, and it even hit 13 million barrels per day in November 2019. We have the proven ability to produce about 1.2 million more barrels per day than we are, if we want to do so and our public policies encourage it. But right now, they do not.

    The Biden administration keeps insisting that it’s doing everything it can to bring gas prices down, including releasing oil from the Strategic Petroleum Reserve — which is now at its lowest level in 40 years. But what’s in the SPR is oil, not gasoline, and oil must still be refined. You can’t just pump the stuff out of the ground and put it in your car.

    U.S. refineries are running at full capacity, or just short of full capacity. This is why oil from the Strategic Petroleum Reserve releases got sent to Europe and Asia, because they had the room and equipment to turn it into actual usable fuel. The U.S. currently has no more spare ability to turn the oil from the reserve into stuff that will actually make your car move; yelling at the oil companies isn’t going to change what is fundamentally an engineering problem.

    And Democrats absolutely refuse to let anyone build new oil refineries.

  • Possibility: Nortstream2 explosion could have just happened because Russians suck at maintenance.

    Multiple sources have confirmed that Nord 2 was full of natural gas; that it was full for at least months; and that said natural gas had never moved.

    It. Just. Sat. There. For — allegedly — months.

    During normal operations of a pipeline, you run a pig through fairly regularly. A “pig” is a bit of equipment pushed by the gas flow, and as it moves along it shoves water and hydrate slurry down to where it can be removed; and it scrapes compounds off the inside walls (hydrogen sulphide, I’m looking at you) that might be are probably eating your pipe.

    Note the part above where the pigs are pushed by the gas. The gas in Nordstream 2 never moved. That means no pig ever went down the line to shove water out, move hydrate slurry, or stop H2S from corroding the steel of the pipeline.

    As I said in the previous post — and I will continue to say — none of this rules out intentional Acts of War. There are idiots enough in that region that sabotage can’t be discounted.

    How-some-ever … hydrate plugs.

    (Hat tip: Sarah Hoyt at Instapundit.)

  • “A lot of folks are running the White House. Joe Biden just isn’t one of them.” “Biden is surrounded with longtime D.C. power players, such as Ron Klain, Susan Rice, Anita Dunn, John Podesta, Gene Sperling – a veritable “who’s who” of Beltway knife fights and insider skullduggery. Throughout their long careers, they’ve never sought credit or voter approval. Just power.”
  • “NYC Mayor Declares State of Emergency over Influx of Illegal Immigrants. [New York City mayor Eric Adams] said at least 17,000 asylum seekers have arrived in the city by bus from other parts of the country since April.” Oh, a million illegal aliens come over the border into Texas and it’s no big deal, but 17,000 show up in your “sanctuary city” and suddenly it’s a problem!
  • “Vermont High School Girls Volleyball Team Banned From Locker Room For Objecting To Changing With Biological Male.”
  • “NYU Fires Chemistry Professor After Students Launch Petition Claiming His Course is Too Hard.” The lesson here seems to be that businesses shouldn’t hire NYU grads…
  • “Meta ordered to pay $175M for copying Green Beret veteran’s app.”
  • Chris Cuomo loses to Paw Patrol. (Hat tip: Dwight.)
  • British blogger eats on £1 for a single day and has a very tough time of of it, even with foraging and scavenged condiments. Despite the dollar-pound exchange rate being so favorable, I don’t think I could do that on $1 a day shopping at HEB, and even if you made it $1.25, it would have to be three meals of ramen. Also, I don’t think I can even buy a single carrot at HEB (if I had wanted to), spaghetti is considerably more than 23¢ for 500 grams. $5 for $5, that I could do, and $30 for 30 days would be grim but very doable (price, pasta, and beans).
  • Dispatches from Sad Trombonia: “$1.5 Million Floating Home Prototype Sinks Into The Water Just As It’s Unveiled.”
  • Epic basketball player name.
  • Petting a dog can be good for your brain.” Agrees:

    (Hat tip: Stephen Green at Instapundit.)

  • Will Dollar-Pound Parity Unleash Weirdness?

    Wednesday, September 28th, 2022

    A variety of maladies (global inflation, soaring energy costs due to the Russo-Ukrainian War, and post-Brexit trade wrangles, among others) has the English pound approaching parity with the U.S dollar.

    Can the pound reach parity versus the dollar? It’s now a one-in-four chance when it comes to options pricing.

    The UK currency is heading for its biggest daily loss since early May after Chancellor of the Exchequer Kwasi Kwarteng outlined the government’s plans to stimulate the economy with tax cuts and spending. The simultaneous sharp sell off in Gilts [historical term for UK government bonds – LP] suggests that tackling inflation will be a very hard task for UK authorities and that the currency market sees no easy way out for the Bank of England.

    To attract foreign investors, a weaker pound may be the answer and that is what FX traders are betting on.

    Cable fell as much as 2.1% to touch $1.1021, the lowest since March 1985, and was at $1.1036 as of 12:38pm in London. Risk reversals, a barometer of market positioning and sentiment, show that traders see the greatest downside risks for the pound over the medium term in two years.

    According to Bloomberg’s options pricing model, the pound holds a 26% chance of touching parity versus the greenback in the next six months. That compares to a reading of 14% Thursday.

    I think the real odds are probably higher than that.

    Dollar-pound parity is something that’s never happened, with the nearest it came to some 1.05 dollars to the pound in the mid-1980s. But there’s always a first time for everything, and with the Bank of England doing more quantitative easing and the UK government going on a spending spree during soaring inflation while the Fed ratchets up interest rates, now is as good a time as any.

    Besides making imports from the UK less expensive, what effects will dollar-pound parity have on the financial world? Hard to say for sure, but my prediction is: Weird things.

    There are a variety of reasons for this, starting with the fact that currency trading is itself a weird thing. You may think “American financial houses buy pounds to purchase English goods, while UK financial houses buy dollars to purchase American goods,” but there’s a whole ecology of counter-party trades, hedging strategies, currency reserve requirements, portfolio balancing, and a host of other considerations.

    Here’s a brief video that cover some of the basics for how brokerages handle FX trading:

    That’s a fairly streamlined view, as it doesn’t cover how liquidity pools are set up, different hedging strategies, etc.

    There are even traders who specialize in just trading different duration T-Bills, selling the eight-week-out and buying the four-week-out (or vice versa) for esoteric arbitrage reasons.

    None of that will change if the market hits dollar-pound parity. So where’s the danger? That comes from the possible non-linear effects of the market doing something that a lot of algorithmic instrument designers never considered a possibility.

    For a simple example, let’s talk about the swaps cases. To summarize a whole lot of very complex cases, a whole bunch of local UK governments entered into interest rate swap agreements. Interest rate swap agreements are a legitimate hedging strategy to minimize exposure to interest rate swings, but a few municipalities saw it as a license to print money. To quote Wikipedia, the source of all vaguely accurate knowledge:

    The position of Hammersmith and Fulham London Borough Council was quite different from most of the other local authorities. From about 1985 onwards Hammersmith had entered into interest rate swap transactions on an extremely large scale. At one stage it was calculated that Hammersmith was a counterparty to 0.5% of the global trade in swaps, and 10% of the sterling denominated trade. Moreover, quite exceptionally, all of Hammersmith’s positions in the swap market were betting on a fall in interest rates. Most large participants in the swap market have their exposure balanced by taking positions on both sides and across multiple currencies, but Hammersmith was essentially repeatedly entering into one-way bets that sterling interest rates would fall; a bet that they would end up losing spectacularly when interest rates climbed from around 8 per cent to 15 per cent in the space of ten months.

    This was, to put it in technical terms, “a really fucking stupid thing to do.” The swaps cases were unwound with great expense and difficulty, and various English banks ended up taking a bath (which you know they must have regarded as some sort of diabolical violation of the natural order) after courts determined that the authorities in question didn’t have the authority under English law to enter into such agreements.

    The possibility that interests rates can rise should be an obvious one. But the idea that the pound might be worth less than the dollar is one that people have probably thought about a good deal less, since it hasn’t happened ever. It’s quite possible it hasn’t been contemplated in some percentage of the trillions in derivatives markets and hedging instruments around the world.

    For many financial systems, this is going to be an untested use case. Some systems may work just fine, others may break down, and still others may experience race conditions or cascading failures; think of the flash crash of 2010, or the 1987 Black Monday crash. Somewhere, somehow, something is likely to go off the rails.

    Hopefully, whatever does blow up won’t be big enough to take down the entire market, or at least not for long. Hopefully it won’t uncover massive problems like the 2008 subprime meltdown uncovered, and there won’t be a firm of systemic importance like AIG was there.

    Hopefully.