Remember the bank runs in China story after all those bank accounts in Hunan were frozen? I’ve been looking for signs of wider contagion amidst the Chinese banking sector, and mostly haven’t seen it. But I have seen a lot of other cracks appear in China’s overall economic system, so here’s a roundup.
One reaction to the frozen accounts: “Chinese Bank Run Turns Violent After Angry Crowd Storms Bank of China Branch Over Frozen Deposits.”
A large crowd of angry Chinese bank depositors faced off with police Sunday in the city of Zhengzhou, and many were injured as they were taken away, amid the freezing of their deposits by some rural-based banks.
The banks froze millions of dollars worth of deposits in April, telling customers they were upgrading their internal systems. The banks have not issued any communication on the matter since, depositors said.
According to Chinese media the frozen deposits across the various local banks could be worth up to $1.5 billion and authorities are investigating the three banks.
On Sunday, about 1,000 people gathered outside the Zhengzhou branch of China’s central bank on Sunday to demand action; they held up banners and chanted slogans on the wide steps of the entrance to a branch of China’s central bank in the city of Zhengzhou in Henan province, about 620 kilometers (380 miles) southwest of Beijing.
China’s communist government reacted to the protests with their usual tact and understanding:
But it looks like some of them will finally get some money back:
(Plus more on the property slump.)
The official line on the Hunan account freeze: “Henan police said in a statement on July 10 that further investigations showed that, since 2011, a criminal group led by a suspect named Lu Yi had gradually taken control of several rural banks, through companies including the Henan New Wealth Group, to illegally transfer out funds. The police said they had arrested more suspects and seized more assets involved in the case.” I have no doubt the aforementioned were probably guilty, but I bet a whole lot more bank officials, regulators, and CCP officials (to the extent that those are separate groups and not mostly-overlapping Venn circles) were in on the scheme, plus a whole bunch more in dozens of other schemes that siphoned off depositor money into various pockets and a host of entirely different schemes. As I’ve said before, it’s smoke and mirrors all the way down.
Another thing driving unrest: “Rotten tail buildings,” that is residential buildings on which all construction is stopped, but for which those with mortgages for individual units are still expected to pay for:
A rapidly increasing number of “disgruntled Chinese homebuyers” are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system as countless mortgages default.
According to researcher China Real Estate Information, homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies Financial Group Inc. analysts including Shujin Chen.
And that was over a week ago.
According to Citi analysts, average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years. Meanwhile, it’s only getting worse as China’s home prices fell for a ninth month in May, with June figures set for release Friday.
The crisis engulfing Chinese developers is reaching a new phase, with a debt selloff expanding to firms once deemed safe from the cash crunch, including investment-grade names such as Country Garden Holdings, the largest builder by sales.
The payment refusals, which come at a time when China’s economy is set to post what may be a negative GDP print due to the latest economic shutdown over Xi’s catastrophic zero covid policies, underscore how the storm engulfing China’s property sector is now affecting hundreds of thousands of average citizens, posing a threat to social stability ahead of a Communist Party Congress later this year. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults.
As a result of the unprecedented push for a debt jubilee, shares of China’s banks extended their recent decline Thursday, with the CSI 300 Banks Index falling as much as 3.3% before closing down 2.2%. A Bloomberg Intelligence index of Chinese developer stocks slid as much as 2.7%, even though Chinese lenders were quick to try and dispel fears that the movement could crash the economy: according to Bank of Communications, its outstanding balance of overdue mortgage loans linked to housing projects with risks of delayed delivery is 99.8 million yuan, accounting for 0.0067% of its domestic housing mortgage balance. The bank added that its housing mortgage loan quality is stable and risks are controllable, the Shanghai-based lender says in an exchange filing. At the same time, Postal Savings Bank of China says its overdue mortgage loans linked to halted housing projects is 127m yuan, and risks are controllable. Of course, it’s not like Chinese banks would ever lie, now is it?
The Great Debt Jubilee is picking up speed: China’s homebuyer mortgage boycott, which prompted Beijing to scramble to avoid a potentially devastating crash in what is the world’s biggest asset is spreading, and according to Bloomberg, some suppliers to Chinese real estate developers are now also refusing to repay bank loans because of unpaid bills owed to them, a sign that the loan boycott that started with homebuyers is starting to spread.
In a jarring case study of what happens when a ponzi scheme goes into reverse, hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers including China Evergrande Group still owe them money, Caixin reported, citing a statement it received from a supplier Tuesday.
Similar to homebuyers who have taken a stand and refuse to pay for properties that remain uncompleted, one group of small businesses and suppliers circulated a letter online saying they will stop repaying debts after Evergrande’s cash crisis left them out of pocket.
“We decided to stop paying all loans and arrears, and advise our peers to decline any requests to be paid on credit or commercial bill,” the group said in the letter dated July 15, which was sent to the developer’s Hubei office. “Evergrande should be held responsible for any consequence that follows because of the chain reaction of the supply-chain crisis.”
As Bloomberg oh so perceptively puts it, “the payments protest is the latest sign of how a movement by homebuyers to boycott mortgages on unfinished homes in China is spreading to affect other sectors in the economy.”
Yes it is, and it’s also why Beijing should be freaking out (if it isn’t), because what is taking place in China is far worse than what took place in March 2020 when the global credit machinery ground to a halt, only back then it’s because there was no other option, now it’s a voluntary development and not even fears of reprisals from China’s ruthless, authoritarian, Lebron-beloved dictatorship is stopping millions of people from calling for a systemic boycott, one which can topple China’s entire $60 trillion financial system in moments.
Probably an overstatement, just because it takes a whole lot to overcome the inertia of the average Chinese citizen just wanting to keep their head down and not be the nail that sticks up.
Embattled Chinese real estate giant Evergrande is expected to deliver a preliminary restructuring plan this week, following the exit of two bosses.
The firm says its chief executive and finance head have resigned, after an internal probe found that they misused around $2bn (£1.7bn) in loans.
Chinese businessmen misusing funds? Try to contain your shock.
Evergrande has more than $300bn in liabilities and defaulted on its debts late last year.
The crisis has spooked traders who fear contagion in China’s property sector.
On Friday, Evergrande said it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting 13.4bn yuan ($2bn; £1.7bn) in loans secured by its property services unit to the wider group.
The firm said in a filing to the Hong Kong Stock Exchange that Mr Xia and Mr Pan had resigned because of their “involvement in the arrangement of the pledges”.
Getting caught trying to cook the books even after it’s hit the fan. Classic Chinese management.
The U.S. Securities and Exchange Commission has started the process, compelled by a 2020 law, and investors have started to pay attention. So has China, which moved to potentially clear a big hurdle that stymied U.S. regulators for years.
1. Why does the U.S. want access to audits?
The 2002 Sarbanes-Oxley Act, enacted in the wake of the Enron Corp. accounting scandal, required that all public companies have their audits inspected by the U.S. Public Company Accounting Oversight Board. According to the SEC, more than 50 jurisdictions work with the board to allow the required inspections, while two historically have not: China and Hong Kong. The long-simmering issue morphed into a political one as tensions between Washington and Beijing ratcheted up during the administration of President Donald Trump. The Chinese chain Luckin Coffee Inc., which was listed on Nasdaq, was found to have intentionally fabricated a chunk of its 2019 revenue. The following year, in a rare bipartisan move, Congress moved to force action.
2. Where does it stand?
As required by the law, known as the Holding Foreign Companies Accountable Act or HFCAA, the SEC in March started publishing its “provisional list” of companies identified as running afoul of the requirements. While the move had long been telegraphed, the first batch of names fueled a sharp decline in U.S. shares of companies based in China and Hong Kong as it dashed hopes for some kind of compromise. In all, the PCAOB has said it’s blocked from reviewing the audits of more than 200 of those businesses. The companies say Chinese national security law prohibits them from turning over audit papers to U.S. regulators. SEC Chair Gary Gensler said in late March that the Chinese authorities faced “a hard set of choices.” Days later, China announced it would modify a 2009 rule that restricted the sharing of financial data by offshore-listed firms, potentially clearing one obstacle.
3. What is China changing?
The China Securities Regulatory Commission said the requirement that on-site inspections should be mainly conducted by Chinese regulatory agencies or rely on their inspection results would be removed. It said it would provide assistance for cooperation with foreign regulators. The CSRC said it’s rare in practice that companies need to provide documents containing confidential and sensitive information. However, if required during the auditing process, they must obtain approvals in accordance with related laws and regulations.
4. What’s the broader issue?
Critics say Chinese companies enjoy the trading privileges of a market economy — including access to U.S. stock exchanges — while receiving government support and operating in an opaque system. In addition to inspecting audits, the HFCAA requires foreign companies to disclose if they’re controlled by a government. The SEC is also demanding that investors receive more information about the structure and risks associated with shell companies — known as variable interest entities, or VIEs — that Chinese companies use to list shares in New York. Since July 2021, the SEC has refused to greenlight new listings. Gensler has said more than 250 companies already trading will face similar requirements.
5. How soon could Chinese companies be delisted?
Nothing is going to happen this year or even in 2023, which explains why markets initially took the possibility in their stride. Under the HFCAA, a company would be delisted only after three consecutive years of non-compliance with audit inspections. It could return by certifying that it had retained a registered public accounting firm approved by the SEC.
6. How many companies will be affected?
There’s not much discretion. If a company from China or Hong Kong trades in the U.S. and files an annual report, it will soon find itself on the SEC’s list simply because those have been identified as non-compliant jurisdictions. In the March interview, Gensler pointed out that the law focuses on non-compliant countries, rather than specific companies.
For that and other reasons, Beijing is looking to impose more controls to prevent capital flight.
What would a “China is screwed” roundup be like without a Peter Zeihan video?
“Demographically they’re in collapse…China’s not even going to survive this decade. They don’t even have the numbers to try…China doesn’t have the naval capacity to secure markets and resources….Xi Jinping has enacted a cult of personality that is tighter than anything that has existed through Chinese history. It’s gotten so tight that no one wants to bring him information about anything…This is how countries die.” Plus: China doesn’t know how to store grain.
The widely acclaimed globalization of the post-Cold War era is now running in reverse. A protracted slowdown in global trade has been reinforced by persistent pandemic-related supply-chain disruptions, ongoing pressures of the US-China trade war, and efforts to align cross-border economic ties with geostrategic alliances (“friend-shoring”). These developments tighten the noose on China, arguably the country that has been the greatest beneficiary of modern globalization.
Of the many metrics of globalization, including financial, information, and labor flows, the cross-border exchange of goods and services is most closely tied to economic growth. Largely for that reason, the slowdown in global trade, which commenced in the aftermath of the 2008-09 global financial crisis and intensified in the COVID-19 era, points to a sea change in globalization. While global exports went from 19% of world GDP in 1990 to a peak of 31% in 2008, in the thirteen years that followed (2009-21), global exports have averaged just 28.7% of world GDP. Had world exports expanded on a 6.4% trajectory – halfway between the blistering 9.4% pace of 1990-2008 and the subdued post-2008 rate of 3.3% – the export share of global GDP would have soared to 46% by 2021, far above the actual share of 29%.
China’s gains from the globalization of trade have been extraordinary. In the decade prior to China’s 2001 accession to the World Trade Organization, Chinese exports averaged just 2% of total world exports. By 2008, that share had risen nearly fourfold, to 7.5%. China had timed its WTO membership bid perfectly, just when the global trade cycle was on a major upswing. While the financial crisis took a brief toll on Chinese export momentum, the interruption was short-lived. By 2021, Chinese exports had surged to 12.7% of world exports, well above the pre-2008 peak.
China is unlikely to maintain this performance. Overall growth of global trade is slowing, and China’s slice of the trade pie is under mounting pressure.
The ongoing trade war with the United States is especially problematic. During the first phase of China’s export-led growth surge in the aftermath of WTO accession, the US was consistently China’s largest source of external demand. Largely due to former US President Donald Trump’s tariffs, that is no longer the case. By 2020, US imports of Chinese goods and services had fallen 19% below the peak levels of 2018. Despite rebounding sharply on the heels of the US economy’s post-pandemic snapback, in 2021, US imports from China remained 5% below the 2018 peak. Partial tariff rollbacks for selected consumer products, which President Joe Biden’s administration is apparently considering as an anti-inflation gambit, are unlikely to jump-start bilateral trade.
At the same time, enduring pandemic-related supply-chain disruptions are likely to take a sharp toll on China and the rest of the world.Over the six months ending in April, a “global supply chain pressures index” constructed by researchers at the Federal Reserve Bank of New York averaged 3.6, well above the 2.3 reading in the first 21 months following the February 2020 onset of pandemic-related lockdowns, and sharply higher than the “zero” reading associated with the absence of supply-chain disruptions.
This is a big deal for a world connected by supply chains. Global value chains accounted for more than 70% of the cumulative growth in overall global trade from 1993 to 2013, and China has enjoyed an outsize share of this GVC-enabled expansion. As supply-chain disruptions persist, exacerbated by China’s zero-COVID policies, pressures on Chinese and global economic activity are likely to remain intense.
Mounting geostrategic tensions are the wild card in deglobalization, especially their implications for China. “Friend-shoring” in effect turns Ricardo’s efficiency calculus of cross-border trade into an assessment of the security benefits that come from strategic alliances with like-minded countries. China’s new unlimited partnership with Russia looms especially relevant in this regard. With China edging closer to crossing the line by providing support to Russian military efforts in Ukraine, the US has recently moved to impose sanctions on five more Chinese companies through its so-called Entity List.
You’ve heard about the ghost cities. Did you hear about the failed ghost developments that were built as weird, cheap imitations of western structures?
Is Xi Jinping in danger from a coup?
No doubt I’ve missed many other examples of cracks in China’s economic edifice. Feel free to share them in the comments below.
Going to the dentist always makes me tired, and I already wasn’t feeling up to any intellectual heavy lifting today, so instead let’s turn to one of the laziest of lazy blogger tropes: Talking about the weather.
With Austin on the verge of wrapping up its warmest July on record, Mother Nature appears to be assembling the ingredients for the city’s hottest summer ever.
Austin’s average temperature in July as of Sunday was 90.7 degrees, which is not only 5.2 degrees higher than normal but also a full degree warmer than the July record set in 2011, the year drawing the most comparisons to our blistering summer.
The historic weather of 2011 bore memorable disasters and set a benchmark for drought and heat records for Central Texas, including:
90 days of 100-degree weather, a record that holds up to this day — but could be broken this year.
The Bastrop Complex Fire, which started in September and burned 34,000 acres and 1,600 homes in central Bastrop County about 30 miles east of Austin, becoming the most destructive fire in Texas history.
Austin’s warmest year ever with an average temperature of 72 degrees. Six years later, 2017 became the warmest year, but only by a tenth of a degree.
A drought that reached record levels across the state in 2011, according to data from the U.S. Drought Monitor, a joint effort of the National Drought Mitigation Center, the U.S. Agriculture Department and the National Oceanic and Atmospheric Administration. Exceptional drought — the drought monitor’s most severe level, typified by crop loss and extreme sensitivity to fire danger — had spread to as much 87.8% of Texas in mid-September and 88% in early October that year.
It’s not the hottest temperatures we’ve had on record: In September of 2000, it hit 112°. In 2011, we had the worst drought in recorded history. So maybe we’re just in the “Every 11 years Austin gets really screwed” cycle.
And we’re not even having the worst of it. Drought has Lake Mead at record lows. (Evidently China has gotten all our rain and is suffering record floods.)
We’re used to 100° summer days, we’re just not used to so many above 100° days in a row. A certain sense of lassitude slips in.
Still, we soldier on. Dogs still get walked three times a day, and I did my usual Sunday bike ride, since it was only 100°.
Amid fears of worldwide food shortages due to the Russo-Ukrainian war, Russia and Ukraine signed an agreement to reopen sea corridors to allow food exports from the Ukrainian port of Odessa to recommence.
World leaders swiftly condemned the Russian missile strike on a Ukrainian port, a dramatic revelation amid a U.N.-brokered deal that secured a sea corridor for grains and other foodstuff exports.
A day prior, representatives from the U.N., Turkey, Russia and Ukraine signed an agreement to reopen three Ukrainian ports, an apparent breakthrough as the Kremlin’s war on its ex-Soviet neighbor marches into its fifth month.
The deal, signed in Istanbul and set to be implemented in the next few weeks, follows a months-long blockade of dozens of Ukrainian ports sprinkled along the Sea of Azov and the Black Sea.
The strike on Odesa, Ukraine’s largest port, illustrates yet another anxious turn in fruitless efforts to mitigate a mounting global food crisis.
Given how many agreements and treaties Putin violated by occupying parts of Ukraine and then launching the current war, there’s no reason to believe that Putin will adhere to the terms of any agreement.
The path to lasting peace in Ukraine is complete destruction and ejection of invading Russian forces.
Paying people not to work makes them worse off, Democrats sleepwalk toward disaster, another would-be assassin of a Republican congressman walks away without bail, more Democratic judicial officials who refuse to obey the law, and a disturbing number of pedophiles in our school systems. Welcome to a special Saturday LinkSwarm!
The “experts” didn’t expect it to turn out this way. An experiment conducted by Harvard University and University of Exeter social scientists found no-strings-attached handouts harmed low-income recipients rather than help them.
Funded by an anonymous nonprofit, the study centered on an experiment in which 2,073 low-income people were randomly selected to receive a single, unconditional cash transfer of either $500 or $2,000. Another 3,170 low-income study subjects received no money from the study.
The experiment was conducted from July 2020 to May 2021. On average, the subjects were earning roughly $950 a month while receiving another $530 in food stamps and other government benefits. A little over half were unemployed and 80% had children.
Over a 15-week period, participants were periodically surveyed about their financial, physical and mental health. Across a wide range of financial and non-financial attributes, researchers found no positive effects on those who received free money — but plenty of negative ones.
For a few weeks, people who received the extra money spent more than the control group — $182 a week for the people who received $500, and $574 a week for the ones given $2,000.
The additional spending didn’t bolster their financial health. The handout recipients reported the same rate of overdraft fees, late-payment charges and cash advances as did those who didn’t receive the extra money. And it was all downhill from there. The handout recipients reported:
Less earned income
Less job satisfaction
Lower work performance
More financial stress
Less liquidity
Worse sleep
Worse physical health
More anxiety
More loneliness
The Wall Street Journal’s Allysia Finley writes:
“It’s no surprise that people who received a large percentage of their monthly income for doing nothing were less motivated to work and less satisfied with their work.
Earning a paycheck can give workers a sense of personal agency that encourages them to make better financial and health decisions. Receiving a handout may do the opposite.”
The editors of The Economist beg the Democratic Party’s leaders to “wake up” to the fact that they’re about to get demolished in the upcoming midterms. Politico reports that, “The gubernatorial race in Pennsylvania has begun to look more competitive than either party expected.” The Economist blames the loud voices of the hard-left fringe, and warns that Democrats must “moderate, or die.” But this is just about the least likely moment for centrist Democrats to launch a new fight against the Alexandria Ocasio-Cortez types, and Democrats won’t have that fight until a midterm thrashing forces them to — and even then, Democrats may well choose to learn the wrong, but more comforting lessons, from a sweeping defeat.
The editors of The Economist, sensing an impending midterm blowout and the ensuing empowerment of a Trump-friendly GOP, beg the Democratic Party’s leaders to distance themselves from their fringe elements:
Fringe and sometimes dotty ideas have crept into Democratic rhetoric, peaking in the feverish summer of 2020 with a movement to “defund the police”, abolish immigration enforcement, shun capitalism, relabel women as birthing people and inject “anti-racism” into the classroom.
Snip.
First, out of all the possible times for the leaders of the party and its centrist members to embrace a fight with their hard-left grassroots, four months before Election Day is perhaps the worst time. Right now, Democrats desperately need progressives — the Bernie Bros, the Squad fans, and your crazy Aunt Edna with the Ruth Bader Ginsburg prayer candles — to turn out in November; they’re disappointed enough with Joe Biden already. The future of Senators Raphael Warnock of Georgia, Catherine Cortez Masto of Nevada, Maggie Hassan of New Hampshire, and Mark Kelly of Arizona depends upon frustrated and impatient progressives in those states.
Second, rebuking the fringe Left is going to be difficult, and few people embrace difficult change until they hit bottom. Nobody likes admitting that they got something wrong, and nobody in politics wants to admit that their approach didn’t work — until after they’ve paid a high price at the ballot box.
The disappointing results of 2020 were clearly not enough. Shortly after the election, Representative Abigail Spanberger of Virginia seethed about her party’s left wing: “Tuesday was a failure, it was not a success. . . . If we don’t mean defund the police, we shouldn’t say that. . . . And we need to not ever use the word ‘socialist’ or ‘socialism’ ever again. Because while people think it doesn’t matter, it does matter, and we lost good members because of that. If we are classifying Tuesday as a success from a congressional standpoint, we will get f***ing torn apart in 2022.”
Do the Democrats seem more centrist and results-focused now than they did in 2020?
Democrats can’t rebuke their social justice warrior radicals because the shock-troops of that “fringe” has taken control of vast swathes of the party machinery. The SJW faction is willing to endure electoral disaster as along as it lets them sieze full control of the party machinery and thus all the spigots party patronage.
How bad is it? Ruy Teixeira, whose “emerging Democratic majority” thesis is is so central to Democratic administrations refusing to enforce border controls, is leaving the Center for American Progress because it’s gotten too radical.
Ruy Teixeira, a prominent scholar at the left-leaning think tank Center for American Progress (CAP), is leaving his job for a conservative organization because of liberals’ obsession with race, gender and other identity issues, according to Politico.
The obsession with identity politics at CAP made it difficult for him to do work involving class and economics, he told the outlet, so he’s leaving for the conservative think tank American Enterprise Institute. Left-leaning think tanks have given in to demands of junior staffers and made it difficult for scholars to discuss crime, immigration and other issues beyond a narrow set of default assumptions, according to Teixeira.
The culture within left-leaning organizations “sends me running screaming from the left,” Teixeira told Politico. “It’s just cloud cuckoo land … the fact that nobody is willing to call bullshit, it just freaks me out.”
Attack a Republican congressman? Enjoy your Get-Out-Of-Jail-Free card. “A 43-year-old man [David G. Jakubonis] accused of attacking Representative Lee Zeldin (R., N.Y.) with a sharp object at a campaign stop in upstate New York on Thursday evening was charged with a felony and released from custody just hours after his arrest, police said…Jakubonis was charged with attempted assault in the second degree and was released on his own recognizance.”
The groomer plague is not your imagination. “At least 181 K-12 teachers, principals, and staff have been arrested for child sex crimes in the United States so far this year.”
“Self-Proclaimed Socialist Judge in Harris County Facing Removal by Judicial Conduct Commission. Judge Franklin Bynum allegedly ordered the sheriff not to collect DNA samples required by law and repeatedly dismissed domestic and family violence cases for no probable cause.”
Cost of living index for cities worldwide. Weirdly, Austin is still pretty affordable in relation to purchasing power compared to most of the world. Also weirdly, New York City is the index city…
Gascón’s prosecutors sued him so they could “charge repeat offenders to the fullest extent of the law.” The DA wants to appeal in front of the California Supreme Court:
In June, the Second Appellate District Court upheld portions of a lower court’s injunction that said Gascón cannot refuse to charge three-strike cases, which can dramatically increase prison sentences for some of the most serious repeat offenders.
Gascón is hoping to have the court’s order overturned, arguing that it is “draconian,” creates “a dangerous precedent” and amounts to “taking the charging decision out of a prosecutor’s hands.”
“The district attorney overstates his authority,” the Second Appellate District ruling reads. “He is an elected official who must comply with the law, not a sovereign with absolute, unreviewable discretion.”
Don’t the peasants know that laws are for the little people?
Good. “San Francisco’s New DA Goes On Firing Spree After Voters Recall Soros-Backed Predecessor…”The new district attorney in San Francisco fired at least 15 employees from the prosecutor’s office after her left-wing predecessor Chesa Boudin was recalled last month.
“Charlene Carter, a flight attendant who had worked at Southwest Airlines for 20 years but was fired in 2017 because she had publicly opposed the use of her union dues to fund pro-abortion protests, has now won a $5.1 million lawsuit against both Southwest and her union.” Good. Coerced speech violates the First Amendment. (Hat tip: Sarah Hoyt at Instapundit.)
Beto O’Rourke gets a $1 million donation from George Soros. Well, at least that’s $1 million that won’t go toward burning down small businesses and defunding the police. Also, remember how Democrats are always saying they want to get money out of politics? They never mean it.
The title overstates the case, but this story of the red-tape cutting, round-the clock efforts to field a bunker busting bomb during the Gulf War is fascinating stuff.
(Today has been a bear for a variety of uninteresting reasons, so no LinkSwarm today. Hopefully tomorrow…)
If you’re wondering whether a true sea-change in the way America thinks about marijuana legalization, Republican Texas Agriculture Commissioner Sid Miller coming out for medical marijuana is an interesting signpost.
Miller likened regulation of medical marijuana to national prohibition of alcohol in the U.S. from 1920-1933.
“The history of cannabis prohibition reflects the failed alcohol prohibition of the 1920’s. Complete with gangs, corruption, and widespread violence against the lives and liberties of American citizens,” Miller wrote.
“As I look back, I believe that cannabis prohibition came from a place of fear, not from medical science or the analysis of social harm. Sadly, the roots of this came from a history of racism, classism, and a large central government with an authoritarian desire to control others. It is as anti-American in its origins as could be imaginable,” he continued.
Keep in mind the Miller is hardly Rand Paul on the conservative-to-libertarian spectrum, with tons of cultural conservative endorsements over the years. The fact he’s willing to talk about the issue in a year he’s up for reelection indicates that it’s far from a forbidden notion on the right.
In 2015, Texas passed the Compassionate-Use Act, which allowed for the prescription of low-THC cannabis to patients with intractable epilepsy. It was later expanded to include patients with autism, seizure disorder, cancer, post-traumatic stress disorder and a number of other conditions.
Miller said he wants to make medical marijuana available to all Texans “who are suffering.”
“I worked diligently to bring hemp farming to Texas and supported the development of products such as hemp oil for medical use. These products are making a difference in the lives of many where other medicines have failed,” Miller wrote. “It is my goal next year to expand access to the compassionate use of cannabis products in Texas so that every Texan with a medical need has access to these medicines.”
Caveat: Miller isn’t for full legalization.
Despite the move by several states, including Colorado and Nevada, Miller is not in favor of recreational marijuana being legalized in Texas, writing, “Eighteen states, including conservative western states like Arizona, Montana, and Alaska, have legalized commercial cannabis sales to ALL adults. While I am not sure that Texas is ready to go that far, I have seen firsthand the value of cannabis as medicine to so many Texans.”
I’m in the “remove federal prohibition (on Tenth Amendment grounds), then let each state vote on legalizing, regulating and taxing it” camp. While I might vote for that, I suspect a small majority of Texas voters might still reject outright legalization. But I suspect actual legalization of marijuana (and not the dishonest “you want legal” dispensary scheme some states instituted) might well pass.
In any case, if the Republican Agriculture Commissioner of Texas can come out for marijuana legalization, you know it’s no longer the third rail it once was.
In an attempt to subvert the Supreme Court’s clear directions in the Bruen decision, California’s gun grabbing Democrats have actually made their case weaker through their own arguments. Armed Scholar Anthony Miranda:
Some takeaways:
“The state of California just backed themselves into a major corner in the California ‘assault weapons’ ban case, Miller v Bonta.”
California “requested that the Ninth Circuit vacate Judge [Roger] Benitez’s ruling and remand the case back down to him for him to have to completely rehear the case all over again from square one. This was the State of California’s effort to stall this case out as long as possible because that’s really one of the only cards they have left.”
“[Firearms Policy Coalition] just obliterated all the State of California’s arguments in their reply, and they completely trapped the State of California with their own words.”
In short, California was still trying to argue that the two-step approach to exercising Second Amendment would be upheld on appeal despite the fact that the Supreme Court had explicitly bitch-slapped the two-step approach into oblivion.
California also falsely announced that in striking down the two-step approach, the Supreme Court had created a new legal framework, when in fact they had merely explicitly affirmed the existing framework of Heller.
The district court “found that California’s ban on modern firearms was not one of the presumptively lawful measures that was identified in Heller, and also found that the ban on modern firearms has no historical pedigree.”
To whit: “Prior to the 1990s, there was no national history of banning weapons because they were equipped with features like pistol grips, collapsible stocks, flash hiders, flare launchers or barrel shrouds.”
“Benitez ultimately found that those arguments were exactly the type that the Supreme Court and Heller broadly caution courts against when deciding whether analogous regulations were long-standing. Something that was put in place or didn’t pop up until the 1930s or the 1940s or 50s doesn’t actually align with the historical pedigree that the supreme
court commands that courts must look at.”
California “acts as if Judge Benitez did not consider text as informed by history, when in fact he actually did in his original ruling. Also, all the harm California claims that will be suffered if the state is lifted has also been found 100% illegitimate prior by Benitez himself.”
It would be nice if the citizens of California could enjoy the Second Amendment rights enjoyed by American citizens in the overwhelming majority of the other 49 states…
After intense backlash from local bodega workers and city tabloids, Manhattan district attorney Alvin Bragg on Tuesday dropped all charges against bodega clerk Jose Alba, who was allegedly acting in self-defense when he fatally stabbed a man who was attacking him.
The liberal DA’s decision comes after weeks of criticism of Bragg’s decision to send the 61-year-old to Riker’s Island and charge him with second-degree murder in the death of 35-year-old Austin Simon. Bragg first requested Alba’s bail be set at $500,000 before it was lowered to $50,000 in response to criticism from the community. He was later released on a $5,000 bail bond.
Snip.
Bragg’s office said Tuesday that “a homicide case against Alba could not be proven at trial beyond a reasonable doubt” after further investigation, according to the New York Times.
This is obviously the correct decision, but this was obviously justifiable self-defense from the very beginning, and that didn’t keep Soros-backed DA Alvin Bragg from charging Alba with murder in the first place. Indeed, chances are good that if it weren’t not for widespread outcry from other politicians (like Mayor Eric Adams), it’s quite possible that Alba would still be languishing in Riker’s Island awaiting trial.
The Defund The Police wing of the Democratic Party won’t give up their war on legal self-defense without a lot more fights.
Enough links have filtered into the semiconductor bucket to be worth doing a roundup. This one touches on China and the corruption of our political elites.
The congressional Democrats’ attempt to throw money at the problem is going nowhere fast.
The Biden administration is laser-focused on sending Ukraine billions of dollars in weapons, including the latest round of anti-ship systems, artillery rockets, and rounds of 105 mm ammo for howitzer cannons that it has entirely lost focus on reshoring efforts to boost semiconductor production Stateside.
Multiple manufacturers of semiconductor wafers have announced plans for new multi-billion dollar factories across the U.S. but are contingent on Congress allocating funds to aid in building facilities under the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.
Congress passed the CHIPS Act in January 2021 as part of last year’s National Defense Authorization Act, which proposed $52 billion in funding for increasing the domestic capacity of chip production, though the House and Senate have come to a standstill over disagreements on certain parts of the bill that have sparked so much uncertainty among companies set to build new factories.
In a letter on June 15, dozens of technology executives from IBM, Intel, Microsoft, Analog Devices, Micron, Amazon, and Alphabet called on Congress to move quickly on the CHIPS Act. They wrote, “the rest of the world is not waiting for the U.S. to act,” and funding for new chip factories must be achieved immediately.
Taiwan’s GlobalWafers announced a new $5 billion factory in the U.S. on Monday, but contingent on subsidies from the federal government.
“This investment that they’re making is contingent upon Congress passing the CHIPS Act. The [GlobalWafers] CEO told me that herself, and they reiterated that today,” U.S. Commerce Secretary Gina Raimondo told CNBC, the same day GlobalWafers announced its development plan.
Notes:
IBM doesn’t own any fabs any more, having sold them all to GlobalFoundries.
Intel runs a huge number of very profitable fabs (troubles with their sub-10nm process yields notwithstanding) and doesn’t need federal subsidies.
Microsoft doesn’t own any fabs and is deeply unlikely to build any; their flagship Xbox Series X uses a custom AMD Zen 2 fabbed by TSMC as its CPU.
Analog Devices is an Integrated Device Manufacturer that owns several fabs with pretty old technology; they don’t have any 300mm fabs. They closed a small fab in Milpitas they got from their acquisition of Linear Technology last year. Designing analog chips is its own black art, and not everything that applies to shrinking digital circuits applies to the analog realm.
Amazon has no fabs and probably won’t be building any, but they do have a chip design division to support Amazon Web Services, and recently designed a cloud computing chip. They work closely with AMD (fabbed at TSMC), Intel (own their own fabs) and Nvidia (another fabless design house that also gets their chips fabbed at TSMC).
Alphabet AKA Google has no fabs and probably won’t be building any, though they do have a lot of AI chip design work going on.
GlobalWafers isn’t a semiconductor manufacturer, it’s a silicon wafer manufacturer. Making such wafers (the substrates upon which semiconductor fabrication depends) has its own challenges, but they are several orders less difficult than cutting edge chip fabrication. Maybe I’m quite far out of the loop, but I’m deeply suspicious that GlobalWafers planned wafer plant in Sherman, Texas will cost $5 billion. That’s a relatively piddling sum for a new semiconductor fab, but extremely expensive for a wafer factory. This makes me suspect a subsidy grab is afoot.
So of the companies mentioned, Intel could suck up government funding to build a fab they were going to build anyway, I’m sure Analog Devices would build a fab with government money, but chances of them running an under 10nm process in said theoretical fab is extremely slim, none of the other mentioned copies are going to build a fab, and none of that government money is going to alleviate the main problem that the overwhelming majority of cutting edge chip designs have to flow through TSMC fabs in Taiwan. What will solve that problem is TSMC opening a state-of-the art fab in Arizona in 2024. No amount of U.S. taxpayer money will make that already-under-construction fab start producing chips any quicker.
$250 billion in taxpayer subsidies wouldn’t get you a single additional wafer start this year, and probably would accomplish little more than channeling money to politically connected firms and sticky pockets in a state (New York) that no one wants to build fabs in any more because of high costs, high taxes and union rule requirements.
So who expects to earn immediate gains from the taxpayers subsidizing semiconductors? Would you believe Nancy Pelosi?
I bet you would.
This past week it hit the terminal that House Speaker Pelosi was doing a little portfolio re-jiggering, including exercising $8 million of call options in Nvidia and selling Apple and Visa calls. The data was per CongressTrading.com and was reported on by Bloomberg.
The Nvidia LEAPS were bought June 3, 2021 with $100 strikes, set to expire June 17, 2022 and the position appeared to be disclosed on Thursday morning for the first time. $8 million trades seem a little odd for members of Congress to begin with, but who are we to judge?
But then, what did Speaker Pelosi do just hours after disclosing the trade, on Friday?
She threw her weight behind a stalled $50 billion CHIPS PLUS bill that “would provide $52 billion in funding for semiconductor manufacturing grants and investment tax credits for the chip industry.”
We tend to discuss leading-edge nodes and the most advanced chips made using them, but there are thousands of chip designs developed years ago that are made using what are now mature process technologies that are still widely employed by the industry. On the execution side of matters, those chips still do their jobs as perfectly as the day the first chip was fabbed which is why product manufacturers keep building more and more using them. But on the manufacturing side of matters there’s a hard bottleneck to further growth: all of the capacity for old nodes that will ever be built has been built – and they won’t be building any more.
Not strictly true. Remember, Bosch just finished building a 65nm fab.
As a result, TSMC has recently begun strongly encouraging its customers on its oldest (and least dense) nodes to migrate some of their mature designs to its 28 nm-class process technologies.
Nowadays TSMC earns around 25% of its revenue by making hundreds of millions of chips using 40 nm and larger nodes. For other foundries, the share of revenue earned on mature process technologies is higher: UMC gets 80% of its revenue on 40 nm higher nodes, whereas 81.4% of SMIC’s revenue come from outdated processes.
That’s because UMC has fallen woefully far behind TSMC, and no one trusts them because they let Chinese spies walk out the door with other company’s IP. SMIC is on Mainland China, sucks even more, and is trusted even less.
Mature nodes are cheap, have high yields, and offer sufficient performance for simplistic devices like power management ICs (PMICs). But the cheap wafer prices for these nodes comes from the fact that they were once, long ago, leading-edge nodes themselves, and that their construction costs were paid off by the high prices that a cutting-edge process can fetch. Which is to say that there isn’t the profitability (or even the equipment) to build new capacity for such old nodes.
This is why TSMC’s plan to expand production capacity for mature and specialized nodes by 50% is focused on 28nm-capable fabs. As the final (viable) generation of TSMC’s classic, pre-FinFET manufacturing processes, 28nm is being positioned as the new sweet spot for producing simple, low-cost chips. And, in an effort to consolidate production of these chips around fewer and more widely available/expandable production lines, TSMC would like to get customers using old nodes on to the 28nm generation.
“We are not currently [expanding capacity for] the 40 nm node” said Kevin Zhang, senior vice president of business development at TSMC. “You build a fab, fab will not come online [until] two year or three years from now. So, you really need to think about where the future product is going, not where the product is today.”
This video asks whether China can produce their own chips:
Obviously, they already produce some of their own chips, but the video covers most of the issues China has with fabbing more complex chips that I’ve already discussed here and here. They’re still dependent on the same three leading fab companies (TSMC, Intel and Samsung) everyone else is for sub 10nm feature chips, and are overwhelmingly dependent on both foreign talent and foreign semiconductor equipment manufacturers like ASML and Applied Materials.
Speaking of TSMC and Intel, India would really like them to build fabs there. The problem is, despite a whole lot of technical talent there, it doesn’t have a terribly large domestic electronics manufacturing base.
Following the Russian capture of Severodonetsk, the Russo-Ukranian War seems to have gone into an operational pause. Ukraine has now received and fielded its first HIMARS multiple rocket launch systems from the U.S. This video makes the case that that’s very bad news for Russian logistics.
Some takeaways:
HIMARS can hit targets at 80kms with high accuracy, far superior to Russia’s Uragan system (40km and less accurate) and Smersh systems.
The high accuracy makes 6 HIMARS missiles equal to 70 rounds of Russian artillery.
Systems move at 90kph.
Five minute reload time.
Crew of three.
“Just a few highmars can cut off a 100 kilometer long front line from supply and control.”
“Ukraine has already been able to destroy more than 20 large ammunition depots and several command posts.”
All well and good, but I have some caveats with the contention that HIMARS can drive the enemy before it and hear the lamentations of their women.
So far, Ukraine has fielded precisely four HIMARS. Four may be able to change the course of a battle, but certainly not a war.
There’s no reason to believe that Russia can’t adapt by dispersing ordinance to smaller and less dense ammo depots, or by restarting air sorties (which they seem to have largely abandoned) to hit HIMARS. Knowing the Russian military, the rate of adaptation will be very slow, but it’s not beyond their abilities.
While HIMARS help? Yes. Will they completely destroy Russian command and logistics? Color me very skeptical.
Thus far I have seen no signs of any real Ukrainian counter-offensive in the last month. Until that changes, we still look to be in for a long, bloody stalemate.