- Religion & The Simulation Hypothesis, Part 2: Is Karma A Questing Algorithm?
Authored by Riz Virk via Hackernoon.com,
“Know all things to be like this:
A mirage, a cloud castle, a dream, an apparition, without essence, but with qualities that can be seen;
As a magician makes illusions of horses, oxen, carts, and other things, nothing is at it appears.”
– Buddha
In Part I of this series, Religion and the Simulation Hypothesis: Is God an AI?, we looked at the implications of the Simulation Hypothesis, the theory that we are all living inside a sophisticated video game, as a model for how many things that are religious in nature might actually be implemented using science and technology. We looked briefly at the groundbreaking film, the Matrix, and how it brought this idea forward into popular consciousness with its release 20 years ago. We also looked at some of the central tenets of the Western (or more accurately, Middle Eastern or Abrahamic) religious traditions to show how they were not only consistent with this new theory, but this theory provided a way to bridge the ever-widening gap between religion and science.
In this second part of the series, we turn to the Eastern religious traditions, Hinduism and Buddhism in particular (and some of their offshoots), and look at some of its central tenets. While we had to search for ways that simulation hypothesis might be implied in some of the core beliefs of the Western religions, the simulation hypothesis (or more specifically, the video game version of the simulation hypothesis) seem almost tailor made to fit into these traditions.
In the video game version of the simulation hypothesis (which is not agreed upon by all simulation theorists), there are PCs (player characters) inside the rendered world who are associated with and controlled by conscious beings (biological or otherwise) outside of the rendered world. In the other version of the simulation hypothesis, everyone in the simulation is an NPC, or non-player character, and are basically AI which are being simulated. While Bostrom’s simulation argument seemed to fit the latter, my interpretation leans towards the former, and this article exploring religion and the simulation hypothesis relies on the video game version with PCs (“player characters”) while the NPCs are there to do what good NPCs do in video games: assist the players in some way to achieve (or hinder) their goals!
The Eastern mystical texts, as a general rule, are on the one hand, older than the Western religious texts. On the other hand, they might be considered newer because the teachings do not stop with Buddha or any particular sage, nor do they rely on any one “book”. There have been sages and swamis in the many years since the original Vedas were written (the originals were thought to be written in the Vedic period, from 1500 BC to 500 BC), while Buddha’s discourses took places around 500 BC. While many of the original Buddhist texts haven’t been preserved in India, they have been preserved in Tibetan and Chinese. One branch of the Tibetan teachings trace their lineage back to Naropa, an Indian scholar from Kashmir, and with commentaries that continued to the time the Dalai Lama and his monks were forced to flee Tibet.
What have these mystics been telling us all these long years?
While everyone has heard of the many gods of Hinduism, when we look further at Buddhism, which grew out of the Hinduism of its time (not unlike Christianity grew out of Judaism), scholars tell us that Buddha didn’t say much about God. It wasn’t so much that he said there was or wasn’t a God or gods– he was just silent on the subject. Instead, he seemed more concerned with the mechanics of how life, reincarnation, karma worked and what this meant for each of us. As we said in Part I, what happens after we die and how that relates to our behavior here, in this world is central the reason religions form in the first place and this is what we will delve into in this article.
What both traditions agree on is that the world around us is a kind of illusion, like a dream, and that we “download” to bodies to play out different roles in each of our multiple lives. If this sounds familiar it’s because it sounds a lot like a super sophisticated video game a la the Matrix!
Eastern Central Tenet #1: The World is an illusion or a Dream
This branch of the Eastern religions explicitly tell us that the world around us is maya, or an illusion, and that all of our actions are recorded and have repercussions which must be played out (albeit in future lives).
What is the nature of this illusion? According to the Hindu Vedas, it is the lila, the grand play that we become so involved with that we take it for reality. Of course, a stage play is a metaphor that would make sense at the time — each subsequent generation uses the technology of its time to describe God and religious metaphors — and video games may be the most powerful yet. This play is not just like a movie that we watch, but that we actively participate in and change events of.
In Buddhism, the whole point is to recognize the illusory nature of the world around us — as if we were in a dream. In fact, in the Tibetan traditions there is a whole practice, Dream Yoga, whose goal it is to help you recognize that you are in a dream while asleep.
Once you have recognized the illusory nature of the “dream-world”, which is like a little simulation that takes place while you are asleep, you are then prepared to the do the same while awake. It is one of the Six Yogas of Naropa, which has been preserved in the Tibetan traditions.
In a multiplayer game like Second Life or Minecraft, we create objects which are made out of raw materials which are in fact, just pixels. Pixels consist of “information” that is then lit up using light when they are rendered. What seem like permanent things really are only visible and rendered while the game servers are up and running, which gives us new insight into the “impermanence of all things”.
While this metaphor of a dream or mirage has been used for hundreds (even thousands of years), what this might actually mean from the perspective of science has never been fully explored. It means that what we think is real is actually a kind of projection — like a film, or more likely, an interactive synthetic experience, reminiscent of a dream. In today’s terminology, we would say it’s just like a video game!
In Buddhism, the whole idea is to reach enlightenment, to get off of the wheel of reincarnation, by “waking up”. In fact, Buddha literally means “one who is awake”. Just like the “red pill” from the Matrix wakes up Neo from his illusory reality, the practices of Meditation and Yoga have been created by the sages over the years for a singular purpose: to wake us up from the illusory nature of reality around us!
Figure 1: Buddha’s Endless Wheel of samsara, driven by karma
Eastern Central Tenet #2: Reincarnation, Karma and Buddha’s Endless Wheel
Multiple lives are common in video games — anyone who was around in the early days of arcade games remember putting in a quarter for a certain number of lives and then putting in another quarter to “continue playing” the previous life, or to start over. The first widely available arcade game was Pong, built by Atari, founded by Nolan Bushnell in the heart of the counter-culture of Silicon Valley in the 1970’s.
No one knows if he was seriously thinking about the idea of reincarnation of metaphor of multiple lives from Eastern traditions when the term started to be used in side video games, but the terminology caught on. Today, we take multiple lives inside video games for granted.
In the Eastern traditions, the tenet of reincarnation is one of the fundamental precepts that underlies various religions. In fact, reincarnation may be a mis-translation — the literal translation is transmigration of the soul from one body to the next.
The basic idea in these religions is that there is a soul that “downloads” to a physical body. In some traditions, there is the colorful metaphor of crossing the River of Forgetfulness so we don’t remember our past lives. We then “inhabit” this body and in so doing, we create new karma as we go through the actions in this “play” or dream. The Buddhist philosophy is expressed in Buddha’s endless wheel of wandering, or samsara, a depiction of which is shown in Figure 1.
The reason we re-incarnate, the thing that keeps the wheel spinning, is karma. In the West, we are used to thinking of karma in gross physical terms (someone stabs you in this life, you get to stab them back in another life). It is more accurately the law of cause and effect.
Assuming for a moment that these religions are describing a real phenomenon, how would it work? How could it be implemented?
It is basically describing something so similar to playing an MMORPG that we barely have to draw an analogy. In video games, particularly MMORPG’s, we are players who live outside the rendered world. We play “characters” in the game world, and we can pause the character or keep playing it until it dies.
Figure 2: An information model for reincarnation and karma
In the Eastern traditions, where is karma stored? It is information stored outside the rendered world (like a cloud server) in video games. Basically, it functions like a scorecard, but even more so like a set of quests. When we take actions in this life, we are creating a new set of quests for our player to complete in this or a future life. Cause and effect. Each time we play the game, we generate more quests.
You can think of Buddha’s endless wheel as an endless stream of quests. As you play, you create more quests for you to fulfill. These quests range from “little karma”, which we can fulfill easily in our dream-state (mental impressions or what the Tibetans call “karmic traces”), or “big karma” which requires us to go through actual experiences in our “big dream”, what we call “waking reality”.
Who decides what challenges or quests we have to take on next? Metaphorically, the Lords of Karma dip into our past karma, which is stored somewhere outside of the physical world, find other “characters/players” for us to interact with (kind of like a multi-life “friends list”).
The more you looik into karma, the more it looks like an impersonal force and doesnt’ required the Lords of Karam, just as we saw with the recording angels in the Islamic or Christian traditions in Part 1. It is more like a “function that gets implemented” than a series of personified deities keeping watch and making decisions for us.
Figure 3: A Video Game Quest Engine for Karma (explored in detail in my book)
As a video game designer, I spent some time thinking about how this might be implemented. Figure 3, which is explained in detial in my book, is the result.
It turns out that “Individualized quests” which are accepted by multiple players is about as good of a description as you can have for this process. Far from needing the “Lords of Karma”, if we have billions of souls (on this planet alone!) and each has their own set of karma, what better to keep track of it then an AI or algorithm that adheres to these laws?
Each piece of karma can be thought of as a quest in a tree-like structure, each of which unlocks additional quests. This is a common structure used in video games, though no video game to date has implemented such a sophisticated quest engine. Each person has their own set of quests, and the system would decide, based upon who else is in the physical scene or vicinity of a player, which of the pieces of karma (or quests) that should be fulfilled now.
If both players (who we can think of as the souls of two characters in the game) accept the quest, then an interaction is set up. Free will and choice are of course, there, but there is an invisible force that is guiding you towards certain people and certain actions, which leads to the idea that we have souls with whom karma must be fulfilled.
While there is some disagreement in these traditions about whether there is such a thing as an “immortal soul” — in general, Hinduism leans toward an indestructible soul, while Buddhism tends to lean towards a more functional description. In Buddhism, some scholars have told us that the “thing that reincarnates” is more appropriately a “bag of karma”, rather than a separate indestructible soul. When someone awakens to the reality of the illusory state, the “bag of karma” is emptied and the individual consciousness, like a drop is free to return to the ocean. The wheel of wandering stops turning and they are in their last incarnation here in the game.
In using the model of the simulation hypothesis, it almost doesn’t matter which of these two is correct– since the soul is downloaded as information and the “bag of karma” is stored somewhere outside the rendered world — just like a cloud server in a game like Fortnite or Minecraft!
Regardless of which particular interpretation of reincarnation, there is no doubt that what is basically being described is like a very sophisticated video game, with a rendered world that we “enter”, downloading consciousness into a body at birth and uploading it at death. We don’t need actual beings as the Lords of Karma, Buddha’s Endless Wheel may be much better characterized as an algorithm for the lila, the grand play, or the grand video game, of Life!
Conclusion: The Simulation Hypothesis Explains the Unexplainable
While it was once fashionable for scientists to invoke God and religion in their findings about how the world works, today this has receded and religion and science are thought of as two separate fields of study and endeavor. In fact, trying to explain religion scientifically, or using science as the basis for religion, is frowned on by both sides.
But we see that the simulation hypothesis may be the one theory that provides a bridge between those who believe in “something else” and those who believe in the laws and rules of science and the promise of technology.
With the simulation hypothesis those of us who are scientifically oriented can understand what the religions have been telling us all along: that we live in an illusory dream-like rendered world, that our actions are being recorded by beings (or processes) outside the rendered world, and that, like Neo in The Matrix, we can “wake up” from this simulated reality to the world beyond!
Einstein once wrote that “science without religion is lame, and religion without science is blind.”
Thanks to video games and science fiction like The Matrix, we may have a framework, a model, which lets us bridge the ever-widening gap between these worlds.
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NOTE: On the 20th anniversary of the release of the movie, the Matrix, MIT and Stanford grad Rizwan Virk is releasing his book, The Simulation Hypothesis: An MIT Computer Scientists Shows Why AI, Quantum Physics and Eastern Mystics Agree We Are In a Video Game, which explores the scientific, philosophic and religious implications of this important theory. Visit www.zenentrepreneur.comto learn more.
- Pentagon Warns "Next Major Conflict Maybe Won Or Lost In Space"
“The next major conflict may be won or lost in space,” Acting Defense Secretary Patrick Shanahan said at the Space Symposium in Colorado Springs, Colorado, Tuesday. “We must confront reality. Weapons are currently deployed by our competitors that can attack our assets in space.”
Shanahan said that the U.S. Military “is not moving fast enough to stay ahead” of its rivals China and Russia in the space race. He warned that both countries have already acquired weapon technologies with the intent to strike American spy satellites in the event of conflict.
“The PLA [Chinese People’s Liberation Army] is also deploying directed-energy weapons, and we expect them to field a ground-based laser system aimed at low-earth orbit space sensors by next year,” Shanahan told the audience. “They are also prepared to use cyber attacks against our space systems and have deployed an operational ground-based ASAT [anti-satellite] missile system.”
He said that current U.S missile defense shields are “not capable of tracking” Chinese and Russian hypersonic missiles.
“Because of their actions, space is no longer a sanctuary — it is now a war-fighting domain. This is not a future or theoretical threat; this is today’s threat,” Shanahan said.
The acting defense secretary endorsed President Trump’s Space Force, will allow the military to combat hypersonic attacks more effectively.
“By creating the new service inside the Air Force, the additional cost is less than one-tenth of 1 percent of the DoD budget. Or put another way, the Space Force will cost about $1.50 per American per year,” Shanahan said, claiming that cost of the new service is relatively small compared to America’s $19 trillion economy.
The Pentagon currently spends more on defense than any other country.
“We are starting now because we refuse to fall behind. We can outpace our competitors and make it impossible for them to contest our dominance in space,” Shanahan concluded.
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“Pity the nation whose people are sheep
And whose shepherds mislead them
Pity the nation whose leaders are liars
Whose sages are silenced
And whose bigots haunt the airwaves
Pity the nation that raises not its voice
Except to praise conquerors
And acclaim the bully as hero
And aims to rule the world
By force and by torture…
Pity the nation oh pity the people
who allow their rights to erode
and their freedoms to be washed away…”
—Lawrence Ferlinghetti, poet
War spending is bankrupting America.
- The Weakening Of Earth's Magnetic Field Has Greatly Accelerated
Authored by Michael Snyder via The Economic Collapse blog,
Earth’s magnetic field is getting significantly weaker, the magnetic north pole is shifting at an accelerating pace, and scientists readily admit that a sudden pole shift could potentially cause “trillions of dollars” in damage. Today, most of us take the protection provided by Earth’s magnetic field completely for granted. It is essentially a colossal force field which surrounds our planet and makes life possible. And even with such protection, a giant solar storm could still potentially hit our planet and completely fry our power grid. But as our magnetic field continues to get weaker and weaker, even much smaller solar storms will have the potential to be cataclysmic. And once the magnetic field gets weak enough, we will be facing much bigger problems. As you will see below, if enough solar radiation starts reaching our planet none of us will survive.
Previously, scientists had told us that the magnetic field was weakening by about 5 percent every 100 years.
But now we are being told that data collected from the SWARM satellite indicate that the rate of decay is now 5 percent per decade…
It’s well established that in modern times, the axial dipole component of Earth’s main magnetic field is decreasing by approximately 5% per century. Recently, scientists using the SWARM satellite announced that their data indicate a decay rate ten times faster, or 5% per decade.
In case you didn’t quite get that, 5 percent per decade is 10 times faster than 5 percent per century.
If the rate of decay continues at this pace, or if it speeds up even more, we could be looking at a mass extinction event that is beyond what most people would dare to imagine.
As more solar radiation reaches Earth, we would expect to see a rise in cancer rates, and this is something that even National Geographic has acknowledged…
However, if the magnetic field gets substantially weaker and stays that way for an appreciable amount of time Earth will be less protected from the oodles of high-energy particles that are constantly flying around in space. This means that everything on the planet will be exposed to higher levels of radiation, which over time could produce an increase in diseases like cancer, as well as harm delicate spacecraft and power grids on Earth.
Of course we are already seeing this. Cancer rates have been rising all over the world, and if you live in the United States there is a one in three chance that you will get cancer in your lifetime.
But as the magnetic field continues to weaken, things will get worse.
A lot worse.
The weaker the magnetic field gets, the amount of solar radiation that will reach us will rise, and eventually it would get so bad that the entire human race would be in jeopardy. The following comes from Futurism…
Radiation and cosmic rays are a real concern for NASA, especially when it comes to long-term spaceflight. Astronauts on a mission to Mars could undergo up to 1000 times the exposure to radiation and cosmic rays that they would get on Earth. If Earth’s magnetic field disappeared, the entire human race – and all of life, in fact – would be in serious danger. Cosmic rays would bombard our bodies and could even damage our DNA, increasing worldwide risk of cancer and other illnesses. The flashes of light visible when we close our eyes would be the least of our problems.
And even if some of us found a way to survive underground for a while, we still wouldn’t be able to survive because solar winds would strip away our planet’s atmosphere and oceans…
Without Earth’s magnetic field, solar winds — streams of electrically charged particles that flow from the sun — would strip away the planet’s atmosphere and oceans. As such, Earth’s magnetic field helped to make life on the planet possible, researchers have said.
So could such a scenario actually happen?
Well, some scientists are saying that our magnetic field “could be gone in as little as 500 years”, but they are telling us not to worry because Earth’s magnetic poles will “flip” and things will eventually return to normal…
The magnetic field surrounding Earth is weakening, and scientists say it could be gone in as little as 500 years.
The result? Earth’s magnetic poles could, literally, flip upside down.
Of course most scientists believe that a pole flip takes hundreds or thousands of years to happen, but they don’t actually know because they have never seen one take place.
They also believe that we would potentially be facing “trillions of dollars in damage”to our power grid and electrical infrastructure because the magnetic field would be so weak during a flip…
Storms far less powerful than these could cause much more damage if they happened to hit while Earth’s magnetic field was in the midst of a reversal, Roberts said. The result would likely be trillions of dollars in damage to our electrical infrastructure, and right now, there’s no plan for dealing with an event of that magnitude.
“Hopefully, such an event is a long way in the future and we can develop future technologies to avoid huge damage,” Roberts concluded. Keep your fingers (but not your magnetic-field lines) crossed.
Most of the experts also believe that a pole flip is still a long way off, but what everybody agrees on is that the magnetic north pole is moving toward Russia at an accelerating pace…
But what’s really catching attention is the acceleration in movement. Around the mid-1990s, the pole suddenly sped up its movements from just over 9 miles (15 kilometers) a year to 34 miles (55 kilometers) annually. As of last year, the pole careened over the international date line toward the Eastern Hemisphere.
And earlier this year, authorities had to issue an emergency update to global positioning systems because “the magnetic field is changing so rapidly”…
The most recent version of the model came out in 2015 and was supposed to last until 2020 — but the magnetic field is changing so rapidly that researchers have to fix the model now. “The error is increasing all the time,” says Arnaud Chulliat, a geomagnetist at the University of Colorado Boulder and the National Oceanic and Atmospheric Administration’s (NOAA’s) National Centers for Environmental Information.
I know that I must sound like a broken record by now, but this is important. Our planet is becoming increasingly unstable, and we are seeing things happen that we have never seen before.
Everyone agrees that the Earth’s magnetic field is rapidly getting weaker, and that is making us more vulnerable with each passing day.
Most of the experts are trying to put a happy face on things and are assuring us that everything is going to be okay.
Hopefully they are right, but I wouldn’t count on it.
- Lonely Millennials Are Becoming Friends With Houseplants
Millennials are already the butt of many modern day jokes, being blamed for ruining things like beer, golf, restaurants and even cereal. And it now appears the laughter coefficient is about to ramp up a notch, with Bloomberg reporting that increasingly more lonely millennials are becoming friends… with houseplants.
In addition to providing comedic material to the masses, the newfound obsession has actually boosted the economy, resulting in a revenue bump for the houseplant market. U.S. sales have surged almost 50% to $1.7 billion over the last 3 years, according to the National Gardening Association. In fact, plants are gradually becoming the new “pets”, as many millennials choose to delay having kids and seek to fulfill their desire to connect with nature.
Plants are mostly still being purchased from big, evil, capitalist corporations like Home Depot and Walmart, because they carry inexpensive varieties that are tailored to novice buyers. But there are some startup companies that are targeting this newfound demand. Upstart company The Sill sells most of its plants online and offers care advice, free returns and a slogan for plant-care novices: “Can’t Kill It. Just Try.”
Hipsters in places like Brooklyn also have shops like Tend, Tula and Soft Opening to graze for new “friends”. Eliza Blank, The Sill’s founder, said: “We are talking about an antiquated industry that hasn’t changed and a consumer that has. Millennials don’t want to go to Walmart to buy their plants.”
The houseplant industry last saw a boom back in the 1970’s when hippies accounted for purchases of spider plants that they crafted custom hangers for. Today, millennials are buying plants like the monstera deliciosa and fiddle-leaf fig that have become so popular that many owners consider them children and give them names.
“If we don’t have a fiddle-leaf fig, it’s a missed sale,” said Joe Ferrari, owner of Tend. Darryl Cheng, whose runs House Plant Journal on Instagram said: “I know what people who buy plants feel like.” He has answered thousands of questions on plant care on Instagram, many times under the hashtag #plantsofinstagram, which aggregates 2.7 million posts on plants.
Social media has been the catalyst for the ongoing plant craze, spraying buyers to sits like Etsy and eBay. Even Amazon has benefited from the craze, opening its own dedicated site for plants. Instagram, which recently added a shopping feature to its app, could be next to try and cash in.
Bloomberg says “the industry is ripe for disruption” because its supply chain hasn’t changed much in the last 50 years. Growing is mostly done in Florida and operations are widespread throughout Latin America. Many growers, who work with a network of wholesalers, brokers and retailers, don’t even have cell phones and often have zero contact with consumers. As a result it’s tough for them to shift what they are growing based on industry trends.
The variegated monstera, a mutation whose leaves are a blend of green and ghostly white, is among one of the sought after plants that’s difficult to grow commercially. Costa Farms, a major grower whose plants are found in places like Amazon and Walmart, employs “plant hunters” who look at distant places like Tanzania to find new varieties to grow.
Often times, it’s difficult to get growers to switch varieties. Kay Kim, co-founder of Rooted, a plant company based in Brooklyn said: “It’s hard to convince a grower to do something new. It’s a chicken-and-egg problem.” This can lead to volatility in pricing and availability of some plants. Variegated monsteras sell for $200 on Etsy and monstera deliciosa seeds have more than doubled in price over the last 12 months.
Florida grower Matt Metzler said he had “never seen anything like this.” Grower Maxwell Sherer said simply: “It’s a good time to be in plants.”
The Sill has closed $7.5 million in venture funding and its sales quadrupled last year.
- Is There A "Porn Tax" In Your Future?
Authored by Mark Nestmann via InternationalMan.com,
The pornography (porn) industry is worth almost $100 billion. Laws that banned porn were struck down more than 50 years ago, so in all 50 states, you can download adult content all you want. Or consume porn the old-fashioned way by reading dirty magazines.
Companies that distribute pornography, of course, already pay taxes on their profits. But legislators in at least 18 states are anxious to ensure they’re getting their “fair share” of the financial bonanza.
One recent effort is in my home state of Arizona. Republican state senator Gail Griffin has introduced HB 2444, the “Human Trafficking and Child Exploitation Prevention Act.” The bill would require any manufacturer or supplier of any product that provides access to the Internet to block residents of Arizona from accessing adult content. The filters would need to block all forms of porn and “any hub that facilitates prostitution.”
The only way that those living in our fair state could have uncensored Internet access would be to prove they are at least 18 years old and pay a $20 unblocking fee to the state. Revenues from fees would go into a fund called the John McCain Human Trafficking Fund. The fund would make grants for projects that “uphold community standards of decency.” The highest-priority grant would be to help pay for construction costs in Arizona of President Trump’s proposed wall along the US-Mexico border. This seems odd, since McCain criticized the border wall.
Approximately 5.2 million of the residents of Arizona are over 18 and could legally watch porn under Griffin’s bill. If every one of us were to buy a “porn license,” the state would raise around $104 million. This won’t go far to fund the border wall, which is estimated to cost more than $25 billion. It’s unlikely, though, that all 5.2 million residents would pay the fee.
Of course, if Griffin amended her proposal to require a $20 annual license fee, the state could create a significant continuing revenue stream.
The Electronic Frontier Foundation has tracked similar proposals in several states. They appear to all be the brainchild of disbarred attorney Mark Christopher Sevier, who has filed numerous lawsuits against technology companies (blaming them for his porn addiction) and several states (seeking permission to marry his laptop to protest same-sex marriage).
Proponents of porn licensing compare it to excise taxes on cigarettes or alcohol – so-called sin taxes. If the government wants to both raise revenues and reduce the frequency of a certain behavior, it can impose an excise tax on it. And in fact, excise taxes on cigarettes have raised immense revenues for states and reduced demand for tobacco products.
To date, none of the states in which legislation requiring porn viewers to obtain a license has been proposed have enacted it. And that’s a good thing, because imposing porn filters on consumers is a terrible idea.
One reason it’s a terrible idea is that it forces consumers to purchase technology they don’t necessarily want. And manufacturers and suppliers are likely to over-censor content for fear of accidentally failing to identify adult content. Even then, these companies would need to employ an army of human censors to troll through borderline websites.
What’s more, the filters would need to block virtual private networks (VPNs), since they can be used to evade Internet censorship. Anyone concerned about hackers or online identity theft would need to pay the porn tax merely to maintain Internet security.
But the biggest problem with these proposals is they put us on a slippery slope for further Internet censorship. If our Internet connections are censored by default for porn, what’s next? For a preview of what could develop, look no further than the sophisticated Internet filtering system in China.
China’s government now employs an estimated two million people to monitor and censor the Internet. They’re called “Internet public opinion analysts.” Their job is to identify and remove objectionable web postings, such as any critique of the government, and to insert hundreds of millions of favorable comments about the Communist Party. The Chinese government has also banned most VPNs.
Is that the future we want to emulate in the US? I think not. Still, I wouldn’t be surprised if at least one or two states enact a porn tax along the lines suggested by Sevier. But I hope they don’t. States shouldn’t use porn as an excuse to quash free choice, free speech, and impose an impossible burden on manufacturers and suppliers of products that connect people to the Internet.
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Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.
- "That's Something China Can't Tolerate": Tensions Erupt As China Slams Australia's "Irresponsible Comments"
It all started in late February when we reported that a political row had erupted between China and Australia, with Beijing cracking down on imports of coal from Australia, cutting off the country’s miners from their biggest export market and threatening the island nation’s economy at a time when it and its fellow “Five Eyes” members who have sided with the US by blocking or banning Huawei’s 5G network technology.
In the weeks that followed, while Beijing disputed such a draconian export crackdown, China was overtly targeting Australian coal imports with increased restrictions – what Beijing claims were quality checks – that delayed their passage through northern ports. Given Australia has the highest level of income dependency on China of any developed nation as 30.6% of all Australian export income came from China last year, equivalent to US$87 billion (twice the trade volume with Japan, Australia’s next biggest trading partner), and Australia’s coal industry is deeply dependent on its exports to China, which account for 3.7% of Australia’s GDP, this prompted much speculation that Beijing is punishing coal companies as retribution for political acts by Canberra, one of Washington’s closest allies. “The last time Australia was so dependent on one country for its income was in the 1950s when it was a client state of Britain,” Sydney Morning Herald’s international editor, Peter Hartcher Hartcher said in March, according to the SCMP.
To be sure, Beijing had numerous issues that it was smarting over: Australia’s blocking of the Chinese telecoms firm Huawei from building its national 5G network; accusations that China has been involved in spying on its parliament; and the denial of Australian citizenship to billionaire political donor Huang Xiangmo.
And while tensions simmered largely in private for the subsequent two months, they finally boil over in public when a Chinese coal industry official criticized Australia for biting the hand that feeds it at a coal conference in Beijing, in what the Sydney Morgning Herald declared was “a rare public acknowledgement that diplomatic tensions could be the cause of slowing trade.”
“You can’t earn Chinese money and then politically make irresponsible comments about China and become unfriendly,” said Cui Pijiang, director of the China Coking Industry Association. “I’m afraid … this is something the Chinese government can’t tolerate.”
As noted above, since the Huawei scandal erupted in January the Chinese government has denied any ban on Australian coal, and instead blamed the slowdown in unloading of Australian coal at Chinese ports on tougher environmental inspections. But Cui’s comments in a speech at the Global Coking Coal Summit in Beijing, to an audience that included Australian embassy officials, and representatives from BHP, was a rare public articulation that political factors are at least partly behind Australian coal facing extended inspections.
“Although businesses can conduct effective, friendly and reasonable cooperation between the two countries, the political factors have to be considered,” he said adding that politics and the economy are always indispensable to each other.
Immediately before his comments, the SMH reported that Cui pointed out the Australian embassy was in the audience, saying Australia was the largest coking coal exporter to China.
What was most stunning to analysts and observers is that what until now was a diplomatic conflict that was only acknowledged in private, spilled out in the public and the audience were stunned by the political attack in a business forum.
One audience member, clearly one who can’t put 2 and 2 together and needs everything presented on a silver platter, said: “We’ve all been chasing this phantom of what’s driving this behaviour and this was a much clearer articulation – in an inappropriate forum.” While “one audience member” may have been amazed by China confirmation that its behaviour was purely a political retaliation, we can only hope that it was clear to everyone else.
What is ironic is that Chinese steel mills had actually preferred Australia’s higher quality imported coal amid a government crackdown on emissions and implementation of tougher environmental policies. Cui said China consumes 600 million tonnes of coking coal each year and imports 69 million tonnes, but argued China should meet its domestic needs.
Meanwhile, what we said above about how this situation should have been obvious to everyone, well strike that because as the SMH adds, Australian diplomats “have attended a spate of coal industry conferences across Beijing and Shanghai in the past fortnight to try to understand why Australian coal was facing a slowdown and try to determine how long it will last.”
And while Australia may now “know” what is behind the boycott of Australian coal, that doesn’t mean the situation will get any better; in fact, it is only set to get even worse, as the conference heard that a restriction policy on overall imported coking coal levels would become tougher in 2019.
Fenwei Energy Information vice-general manager Sarah Liu said China’s coal imports were 280 million tonnes last year, but the policy would restrict annual imports to 200 million tonnes by 2020. This target was “quite challenging”, she said. And as imports of coal fell in 2019, domestic coking coal production would increase, she forecast.
Australia was the top coking coal importer in 2018 at 28 million tonnes, but Mongolia was catching up at 27 million. Russia saw coal imports fall 4.2 per cent last year, but would increase this year, she predicted.
But one place that is sure to benefit from the escalation in trade tensions between Beijing and Canberra, is yet another Latin American nation that is slated to become China’s next vassal colony. As S&P Global reports, Clombian thermal coal is proving attractive to Chinese buyers, who are picking up “super cheap” offers from producers and traders with around 1 million to 1.35 million mt of coal on its way to China from the South American exporter, plus additional cargoes to northeast Asian countries including South Korea.
In addition to not being politically charged, one other benefit of Colombia coal is that it is much cheaper: June-arrival Capesize cargoes of Colombian thermal coal are trading at $65/mt CFR China on a 5,500 kcal/kg NAR basis, which is cheaper than equivalent grade Australian cargoes priced at $68/mt.
And with Australian purchase set to collapse – should the nation continue to antagonize Beijing with its pro-US bias – Chinese traders are wasting no time, and one of them is understood to have booked three Colombian cargoes for June arrival, adding up to nearly 500,000 mt, S&P sources.
“There is 1 million mt of Colombian coal on its way to China,” said one market source.
Meanwhile, there is a lot of Australian coal also on its way to China, the only problem is that due to the escalating diplomatic scandal, it just can’t depart: one market source estimated that about 4 million mt of Australian thermal coal was waiting to enter Chinese ports in May and June.
And while some have have expressed hope that China will lift its restrictions on Australian coal shipments at the end of May, this looks increasingly unlikely, especially after China’s foreign ministry on Thursday criticized Australia’s telecommunications legislation that allows “backdoors” to be installed.
Australia had barred Huawei from participating in the 5G network because of fears China installed backdoors on Huawei.
“It is baffling how the country concerned could whip up ‘security threats’ posed by other countries or companies … while engaging in acts that endanger cyber security themselves,” said Chinese foreign ministry spokesman Lu Kang, sending a clear message to Australia: if you continue to side with the US on the Huawei – or any other issue – you can keep your coal.
- Tverberg: The True Feasibility Of Moving Away From Fossil Fuels
Authored by Gail Tverberg via Our Finite World blog,
One of the great misconceptions of our time is the belief that we can move away from fossil fuels if we make suitable choices on fuels. In one view, we can make the transition to a low-energy economy powered by wind, water, and solar. In other versions, we might include some other energy sources, such as biofuels or nuclear, but the story is not very different.
The problem is the same regardless of what lower bound a person chooses: our economy is way too dependent on consuming an amount of energy that grows with each added human participant in the economy. This added energy is necessary because each person needs food, transportation, housing, and clothing, all of which are dependent upon energy consumption. The economy operates under the laws of physics, and history shows disturbing outcomes if energy consumption per capita declines.
There are a number of issues:
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The impact of alternative energy sources is smaller than commonly believed.
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When countries have reduced their energy consumption per capita by significant amounts, the results have been very unsatisfactory.
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Energy consumption plays a bigger role in our lives than most of us imagine.
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It seems likely that fossil fuels will leave us before we can leave them.
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The timing of when fossil fuels will leave us seems to depend on when central banks lose their ability to stimulate the economy through lower interest rates.
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If fossil fuels leave us, the result could be the collapse of financial systems and governments.
[1] Wind, water and solar provide only a small share of energy consumption today; any transition to the use of renewables alone would have huge repercussions.
According to BP 2018 Statistical Review of World Energy data, wind, water and solar only accounted for 9.4% 0f total energy consumption in 2017.
Figure 1. Wind, Water and Solar as a percentage of total energy consumption, based on BP 2018 Statistical Review of World Energy.
Even if we make the assumption that these types of energy consumption will continue to achieve the same percentage increases as they have achieved in the last 10 years, it will still take 20 more years for wind, water, and solar to reach 20% of total energy consumption.
Thus, even in 20 years, the world would need to reduce energy consumption by 80% in order to operate the economy on wind, water and solar alone. To get down to today’s level of energy production provided by wind, water and solar, we would need to reduce energy consumption by 90%.
[2] Venezuela’s example (Figure 1, above) illustrates that even if a country has an above average contribution of renewables, plus significant oil reserves, it can still have major problems.
One point people miss is that having a large share of renewables doesn’t necessarily mean that the lights will stay on. A major issue is the need for long distance transmission lines to transport the renewable electricity from where it is generated to where it is to be used. These lines must constantly be maintained. Maintenance of electrical transmission lines has been an issue in both Venezuela’s electrical outages and in California’s recent fires attributed to the utility PG&E.
There is also the issue of variability of wind, water and solar energy. (Note the year-to-year variability indicated in the Venezuela line in Figure 1.) A country cannot really depend on its full amount of wind, water, and solar unless it has a truly huge amount of electrical storage: enough to last from season-to-season and year-to-year. Alternatively, an extraordinarily large quantity of long-distance transmission lines, plus the ability to maintain these lines for the long term, would seem to be required.
[3] When individual countries have experienced cutbacks in their energy consumption per capita, the effects have generally been extremely disruptive, even with cutbacks far more modest than the target level of 80% to 90% that we would need to get off fossil fuels.
Notice that in these analyses, we are looking at “energy consumption per capita.” This calculation takes the total consumption of all kinds of energy (including oil, coal, natural gas, biofuels, nuclear, hydroelectric, and renewables) and divides it by the population.
Energy consumption per capita depends to a significant extent on what citizens within a given economy can afford. It also depends on the extent of industrialization of an economy. If a major portion of industrial jobs are sent to China and India and only service jobs are retained, energy consumption per capita can be expected to fall. This happens partly because local companies no longer need to use as many energy products. Additionally, workers find mostly service jobs available; these jobs pay enough less that workers must cut back on buying goods such as homes and cars, reducing their energy consumption.
Example 1. Spain and Greece Between 2007-2014
Figure 2. Greece and Spain energy consumption per capita. Energy data is from BP 2018 Statistical Review of World Energy; population estimates are UN 2017 population estimates.
The period between 2007 and 2014 was a period when oil prices tended to be very high. Both Greece and Spain are very dependent on oil because of their sizable tourist industries. Higher oil prices made the tourism services these countries sold more expensive for their consumers. In both countries, energy consumption per capita started falling in 2008 and continued to fall until 2014, when oil prices began falling. Spain’s energy consumption per capita fell by 18% between 2007 and 2014; Greece’s fell by 24% over the same period.
Both Greece and Spain experienced high unemployment rates, and both have needed debt bailouts to keep their financial systems operating. Austerity measures were forced on Greece. The effects on the economies of these countries were severe. Regarding Spain, Wikipedia has a section called, “2008 to 2014 Spanish financial crisis,” suggesting that the loss of energy consumption per capita was highly correlated with the country’s financial crisis.
Example 2: France and the UK, 2004 – 2017
Both France and the UK have experienced falling energy consumption per capita since 2004, as oil production dropped (UK) and as industrialization was shifted to countries with a cheaper total cost of labor and fuel. Immigrant labor was added, as well, to better compete with the cost structures of the countries that France and the UK were competing against. With the new mix of workers and jobs, the quantity of goods and services that these workers could afford (per capita) has been falling.
Figure 3. France and UK energy consumption per capita. Energy data is from BP 2018 Statistical Review of World Energy; population estimates are UN 2017 population estimates.
Comparing 2017 to 2004, energy consumption per capita is down 16% for France and 25% in the UK. Many UK citizens have been very unhappy, wanting to leave the European Union.
France recently has been experiencing “Yellow Vest” protests, at least partly related to an increase in carbon taxes. Higher carbon taxes would make energy-based goods and services less affordable. This would likely reduce France’s energy consumption per capita even further. French citizens with their protests are clearly not happy about how they are being affected by these changes.
Example 3: Syria (2006-2016) and Yemen (2009-2016)
Both Syria and Yemen are examples of formerly oil-exporting countries that are far past their peak production. Declining energy consumption per capita has been forced on both countries because, with their oil exports falling, the countries can no longer afford to use as much energy as they did in the past for previous uses, such as irrigation. If less irrigation is used, food production and jobs are lost. (Syria and Yemen)
Figure 4. Syria and Yemen energy consumption per capita. Energy consumption data from US Energy Information Administration; population estimates are UN 2017 estimates.
Between Yemen’s peak year in energy consumption per capita (2009) and the last year shown (2016), its energy consumption per capita dropped by 66%. Yemen has been named by the United Nations as the country with the “world’s worst humanitarian crisis.” Yemen cannot provide adequate food and water for its citizens. Yemen is involved in a civil war that others have entered into as well. I would describe the war as being at least partly a resource war.
The situation with Syria similar. Syria’s energy consumption per capita declined 55% between its peak year (2006) and the last year available (2016). Syria is also involved in a civil war that has been entered into by others. Here again, the issue seems to be inadequate resources per capita; war participants are to some extent fighting over the limited resources that are available.
Example 4: Venezuela (2008-2017)
Figure 5. Energy consumption per capita for Venezuela, based on BP 2018 Statistical Review of World Energy data and UN 2017 population estimates.
Between 2008 and 2017, energy consumption per capita in Venezuela declined by 23%. This is a little less than the decreases experienced by the UK and Greece during their periods of decline.
Even with this level of decline, Venezuela has been having difficulty providing adequate services to its citizens. There have been reports of empty supermarket shelves. Venezuela has not been able to maintain its electrical system properly, leading to many outages.
[4] Most people are surprised to learn that energy is required for every part of the economy. When adequate energy is not available, an economy is likely to first shrink back in recession; eventually, it may collapse entirely.
Physics tells us that energy consumption in a thermodynamically open system enables all kinds of “complexity.” Energy consumption enables specialization and hierarchical organizations. For example, growing energy consumption enables the organizations and supply lines needed to manufacture computers and other high-tech goods. Of course, energy consumption also enables what we think of as typical energy uses: the transportation of goods, the smelting of metals, the heating and air-conditioning of buildings, and the construction of roads. Energy is even required to allow pixels to appear on a computer screen.
Pre-humans learned to control fire over one million years ago. The burning of biomass was a tool that could be used for many purposes, including keeping warm in colder climates, frightening away predators, and creating better tools. Perhaps its most important use was to permit food to be cooked, because cooking increases food’s nutritional availability. Cooked food seems to have been important in allowing the brains of humans to grow bigger at the same time that teeth, jaws and guts could shrink compared to those of ancestors. Humans today need to be able to continue to cook part of their food to have a reasonable chance of survival.
Any kind of governmental organization requires energy. Having a single leader takes the least energy, especially if the leader can continue to perform his non-leadership duties. Any kind of added governmental service (such as roads or schools) requires energy. Having elected leaders who vote on decisions takes more energy than having a king with a few high-level aides. Having multiple layers of government takes energy. Each new intergovernmental organization requires energy to fly its officials around and implement its programs.
International trade clearly requires energy consumption. In fact, pretty much every activity of businesses requires energy consumption.
Needless to say, the study of science or of medicine requires energy consumption, because without significant energy consumption to leverage human energy, nearly every person must be a subsistence level farmer, with little time to study or to take time off from farming to write (or even read) books. Of course, manufacturing medicines and test tubes requires energy, as does creating sterile environments.
We think of the many parts of the economy as requiring money, but it is really the physical goods and services that money can buy, and the energy that makes these goods and services possible, that are important. These goods and services depend to a very large extent on the supply of energy being consumed at a given point in time–for example, the amount of electricity being delivered to customers and the amount of gasoline and diesel being sold. Supply chains are very dependent on each part of the system being available when needed. If one part is missing, long delays and eventually collapse can occur.
[5] If the supply of energy to an economy is reduced for any reason, the result tends to be very disruptive, as shown in the examples given in Section [3], above.
When an economy doesn’t have enough energy, its self-organizing feature starts eliminating pieces of the economic system that it cannot support. The financial system tends to be very vulnerable because without adequate economic growth, it becomes very difficult for borrowers to repay debt with interest. This was part of the problem that Greece and Spain had in the period when their energy consumption per capita declined. A person wonders what would have happened to these countries without bailouts from the European Union and others.
Another part that is very vulnerable is governmental organizations, especially the higher layers of government that were added last. In 1991, the Soviet Union’s central government was lost, leaving the governments of the 15 republics that were part of the Soviet Union. As energy consumption per capita declines, the European Union would seem to be very vulnerable. Other international organizations, such as the World Trade Organization and the International Monetary Fund, would seem to be vulnerable, as well.
The electrical system is very complex. It seems to be easily disrupted if there is a material decrease in energy consumption per capita because maintenance of the system becomes difficult.
If energy consumption per capita falls dramatically, many changes that don’t seem directly energy-related can be expected. For example, the roles of men and women are likely to change. Without modern medical care, women will likely need to become of the mothers of several children in order that an average of two can survive long enough to raise their own children. Men will be valued for the heavy manual labor that they can perform. Today’s view of the equality of the sexes is likely to disappear because sex differences will become much more important in a low-energy world.
Needless to say, other aspects of a low-energy economy might be very different as well. For example, one very low-energy type of economic system is a “gift economy.” In such an economy, the status of each individual is determined by the amount that that person can give away. Anything a person obtains must automatically be shared with the local group or the individual will be expelled from the group. In an economy with very low complexity, this kind of economy seems to work. A gift economy doesn’t require money or debt!
[6] Most people assume that moving away from fossil fuels is something we can choose to do with whatever timing we would like. I would argue that we are not in charge of the process. Instead, fossil fuels will leave us when we lose the ability to reduce interest rates sufficiently to keep oil and other fossil fuel prices high enough for energy producers.
Something that may seem strange to those who do not follow the issue is the fact that oil (and other energy prices) seem to be very much influenced by interest rates and the level of debt. In general, the lower the interest rate, the more affordable high-priced goods such as factories, homes, and automobiles become, and the higher commodity prices of all kinds can be. “Demand” increases with falling interest rates, causing energy prices of all types to rise.
Figure 6.
The cost of extracting oil is less important in determining oil prices than a person might expect. Instead, prices seem to be determined by what end products consumers (in the aggregate) can afford. In general, the more debt that individual citizens, businesses and governments can obtain, the higher that oil and other energy prices can rise. Of course, if interest rates start rising (instead of falling), there is a significant chance of a debt bubble popping, as defaults rise and asset prices decline.
Interest rates have been generally falling since 1981 (Figure 7). This is the direction needed to support ever-higher energy prices.
Figure 7. Chart of 3-month and 10-year interest rates, prepared by the FRED, using data through March 27, 2019.
The danger now is that interest rates are approaching the lowest level that they can possibly reach. We need lower interest rates to support the higher prices that oil producers require, as their costs rise because of depletion. In fact, if we compare Figures 7 and 8, the Federal Reserve has been supporting higher oil and other energy prices with falling interest rates practically the whole time since oil prices rose above the inflation adjusted level of $20 per barrel!
Figure 8. Historical inflation adjusted prices oil, based on data from 2018 BP Statistical Review of World Energy, with the low price period for oil highlighted.
Once the Federal Reserve and other central banks lose their ability to cut interest rates further to support the need for ever-rising oil prices, the danger is that oil and other commodity prices will fall too low for producers. The situation is likely to look like the second half of 2008 in Figure 6. The difference, as we reach limits on how low interest rates can fall, is that it will no longer be possible to stimulate the economy to get energy and other commodity prices back up to an acceptable level for producers.
[7] Once we hit the “no more stimulus impasse,” fossil fuels will begin leaving us because prices will fall too low for companies extracting these fuels. They will be forced to leave because they cannot make an adequate profit.
One example of an oil producer whose production was affected by an extended period of low prices is the Soviet Union (or USSR).
Figure 9. Oil production of the former Soviet Union together with oil prices in 2017 US$. All amounts from 2018 BP Statistical Review of World Energy.
The US substantially raised interest rates in 1980-1981 (Figure 7). This led to sharp reduction in oil prices, as the higher interest rates cut back investment of many kinds, around the world. Given the low price of oil, the Soviet Union reduced new investment in new fields. This slowdown in investment first reduced the rate of growth in oil production, and eventually led to a decline in production in 1988 (Figure 9). When oil prices rose again, production did also.
Figure 10. Energy consumption per capita for the former Soviet Union, based on BP 2018 Statistical Review of World Energy data and UN 2017 population estimates.
The Soviet Union’s energy consumption per capita reached its highest level in 1988 and began declining in 1989. The central government of the Soviet Union did not collapse until late 1991, as the economy was increasingly affected by falling oil export revenue.
Some of the changes that occurred as the economy simplified itself were the loss of the central government, the loss of a large share of industry, and a great deal of job loss. Energy consumption per capita dropped by 36% between 1988 and 1998. It has never regained its former level.
Venezuela is another example of an oil exporter that, in theory, could export more oil, if oil prices were higher. It is interesting to note that Venezuela’s highest energy consumption per capita occurred in 2008, when oil prices were high.
We are now getting a chance to observe what the collapse in Venezuela looks like on a day- by-day basis. Figure 5, above, shows Venezuela’s energy consumption per capita pattern through 2017. Low oil prices since 2014 have particularly adversely affected the country.
[8] Conclusion: We can’t know exactly what is ahead, but it is clear that moving away from fossil fuels will be far more destructive of our current economy than nearly everyone expects.
It is very easy to make optimistic forecasts about the future if a person doesn’t carefully examine what the data and the science seem to be telling us. Most researchers come from narrow academic backgrounds that do not seek out insights from other fields, so they tend not to understand the background story.
A second issue is the desire for a “happy ever after” ending to our current energy predicament. If a researcher is creating an economic model without understanding the underlying principles, why not offer an outcome that citizens will like? Such a solution can help politicians get re-elected and can help researchers get grants for more research.
We should be examining the situation more closely than most people have considered. The fact that interest rates cannot drop much further is particularly concerning.
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- Stephen Moore Set To Challenge Fed Status Quo
Trump’s proposed nominee to the seven-member Federal Reserve board, Stephen Moore, is planning to challenge the status quo at the US central bank, at a time when it needs continuity and stability the most. Moore said on Bloomberg that he is seeking to debunk the idea that growth causes inflation and that he is also going to “try to demystify monetary policy so it’s not conducted within a temple of secrecy.”
Moore said yesterday: “I’ll say that again: Growth does not cause inflation. We know that. When you have more output of goods and services, prices fall. And I think the Fed has been afraid of growth — there’s “growth-phobiacs” over there and I think they’re wrong.” Whether or not the FOMC committee will agree with that remains to be seen, it would be perhaps more interesting to hear his position on whether debt causes growth, which is far more topical in a world where to “buy” one dollar of GDP, nations have to increase debt by $3, $4 or more.
Last month, President Trump said that he’s planning to nominate Moore for a seat on the Fed’s board of governors. Trump’s intentions drew ire and criticism from some circles as a move motivated by politics instead of “sound” economics.
Another of Moore’s missions that’s sure to be a hit with current Fed governors is his intentions to make the Fed more transparent.
“I’m going to run on an agenda of transparency, openness. Why shouldn’t Bloomberg and C-Span and others be able to cover everything they do? Why does there have to be this temple of secrecy? So, I want openness and sunlight on the Fed,” Moore said, assuring that his future colleagues (assuming he succeeds in the nomination process) isolate him from any off the record, decision-making huddles. He certainly will never be invited to conference room E at the BIS tower in Basel where all the really important decisions are made every few weeks.
Moore further raised eyebrows for pushing the Fed to set monetary policy in response to falling commodity prices and criticizing its rate hikes for undermining Trump’s economy, after slamming it when Barack Obama was in the White House for keeping rates too low. He also called for Fed Chairman Jerome Powell to be fired, though he later said he regretted that remark.
Of course, Moore still has to undergo FBI clearance and financial disclosures before being nominated, a process that usually lasts about a month.
That said, if he’s interested in transparency, perhaps he can start by explaining his recent comments, when he referred to himself as a “growth hawk”, a term that nobody seems to understand.
“We want wage increases, I want workers to be better off but I’ve said repeatedly when I get at the Fed I’m going to be the growth hawk there. I’m one of these people, I don’t believe in secular stagnation, it’s the stupidest idea I’ve ever heard,” Moore told FOX Business yesterday.
Even if he is nominated, he is certain to get the cold shoulder from his Fed colleagues: as Bloomberg reported today, Fed officials, “in their polite and coded way”, have already issued a veiled warning for the political loyalists that President Donald Trump is trying to insert into their ranks: We don’t do flimsy economics, which of course is hilarious for a central bank which last October said the neutral rate was “far away”, and just two months later had to make a humiliating U-turn after the market slumped into a very brief bear market.
“There’s a lot of analysis that goes into these decisions and a lot of dispassionate judgment about a variety of matters about the macro economy,’’ St. Louis Fed President James Bullard said Thursday in Tupelo, Mississippi, apparently without a shred of self-referential sarcasm. “Even if somebody comes in with strong political views, they get converted into technocrats pretty quickly.”
And by technocrats, he means people who check the S&P several times every hour, ready to launch QE or issue a dovish soundbite should the “wealth effect” ever be threatened and jeopardize the social order with even a modest correction.
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Providing some perspective on Moore’s thought process is Cornell professor, libertarian and self-described gold bug Dave Collum who saw Moore speak earlier this week, and had the chance for a 20 minute one-on-one conversation with the potential nominee. Collum described Moore as a “remarkably genuine person displaying serious humility.” He continued, “I didn’t detect even a twinge of arrogance”:
(3) First, my impressions of Steve Moore. I was certainly ready to disagree with him. What I met was a remarkably genuine person displaying serious humility. I didn’t detect even a twinge of arrogance. Quite the opposite.
— Dave Collum (@DavidBCollum) April 11, 2019
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Collum note that Moore told students to question authority. “Experts can be dead wrong,” Moore said.
(4) He opened urging the students to question authority: “Experts can be dead wrong.” Don’t we all know THAT one. A kid in Q&A said “I would defer to a professor.” I blurted out “Nooooooo!”
— Dave Collum (@DavidBCollum) April 11, 2019
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Moore also apparently stressed a goal of zero inflation and holding prices fixed.
(6) In stream of consciousness series of pros and cons, I was hopeful when he stressed the goal of ZERO inflation. Holding prices fixed. Period. I, of course, doubt the Fed’s ability to do this but I heard no 2-3% inflation target. cc @McClellanOsc on THAT one.
— Dave Collum (@DavidBCollum) April 11, 2019
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Moore also didn’t seem to loathe or laugh at the gold standard, like almost every other Fed governor and academic over the past few decades.
(7) Pressed on his support for the gold standard, his answer seemed to back peddle from a strong pro-gold stance years ago, but he finished fairly warm to the idea: “we could do a lot worse.”
— Dave Collum (@DavidBCollum) April 11, 2019
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He also noted that he “detests corporate welfare” and ended his conversation with a great one liner: “Monetary policy cannot correct for bad economic policy.” Moore also called MMT the “most insane concept imaginable”.
(21) Great line: “Monetary policy cannot correct for bad economic policy.” I’m using that one.
— Dave Collum (@DavidBCollum) April 11, 2019
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(23) Moore brought up MMT and denounced it as the most insane concept imaginable. A bunch of us were laughing at mere mention of it.
— Dave Collum (@DavidBCollum) April 11, 2019
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You can read Collum’s entire interaction with Moore in this thread.
- It Seemed Like A Good Idea At The Time…
Submitted by Eric Peters of Rabobank
Let’s face it, there are some pretty dumb ideas out there in markets right now. The economic assumptions that underpin the macro view of how the world works, and hence where value is likely to sit in the long run, is a great place to start.
For example, aggregate demand curves don’t exist, as was shown by Sonnenshein-Mantle-Debreu decades ago: yet almost all economics still relies on aggregate demand curves regardless. For another, economic theory says firms stop producing goods when diminishing productivity means marginal cost of production equals marginal cost: except that is demonstrably untrue, as has been known since Sraffa (1926), and underlined every time actual firms are asked what their actual marginal cost of production is (fixed after a certain point) and when they actually stop production (when there is no demand). Or how about efficient markets hypothesis – that asset prices fully reflect all available information and it is impossible to “beat the market” consistently on a risk-adjusted basis? Forget the debunking work of psychologists like Kahneman and Tversky: has anyone who agrees with that theory ever worked in a market? (I vividly recall one former salesman in another bank in the early 2000s asking me for my views on the Hungarian Florin.) The simple point, dear readers, is that markets can be built on intellectual foundations of sand. It might be a while before everyone realizes that and prices adjust violently, but we get there in the end. (And then the same silly economic theories keep being taught in universities regardless.)
But then we get examples rammed in our faces. For example, bond issuance by an energy-producing company so incredibly profitable it somehow needs to tap international capital markets for billions, the pricing for which then trades inside the sovereign which owns it. Or a major transportation company that loses money with every journey it makes whose IPO is massively over-subscribed and then slumps…to be followed by the IPO of a rival firm with exactly the same money-losing business model. Or how about sovereign bond yields that are negative and yet highly sought-after? Or Chinese bank perpetual bonds at 4.5% that never give you your principle back? Or a cash-strapped Chinese firm that had to repay bond holders in ham, not cash, then ran low on pigs, and whose shares are up 78% YTD? Or USD/CNH flat as a pancake at 6.70 and volatility collapsing when the political backdrop, economic fundamentals, and CFETS currency basket all say CNH should be closer to 7? One could make an argument that all of the above also belong in the ‘It seemed like a good idea at the time…’ file.
However, the latest news simply takes the breath away: Chinese scientists have put human brain genes in monkeys—and yes, they may be smarter. Yes, the story is exactly as printed. Chinese scientists –and not the same ones who have permanently altered the DNA of babies with unforeseen future impacts on the human gene pool in what is either dangerous ‘mutant’ or, even worse, eugenics territory– have deliberately altered monkey brains to try to increase simian intelligence.
Can I politely suggest that it is the Chinese scientists whose intelligence needs to be raised? Technologyreview.com quotes James Sikela, a geneticist who carries out comparative studies among primates at the University of Colorado: “The use of transgenic monkeys to study human genes linked to brain evolution is a very risky road to take. It is a classic slippery slope issue and one that we can expect to recur as this type of research is pursued.” He is concerned the experiment will soon lead to even more extreme modifications. And how could that end badly?!!! Haven’t we just had a series of Hollywood movies pointing out in detail what kind of horrible scenarios could play out there – and, yes, they were even released in China. (Though the classic episode of The Simpsons with super-intelligent space chimps probably wasn’t.) And, of course, the idiot-savant human-genome-editing/monkey-genome-editing crowd is joined by scientists trying to bring back dinosaurs. Again, it’s not as if we haven’t been saturated with movies telling us what an appalling-stupid idea that would be. As Jeff Goldblum’s character Dr Ian Malcolm says in the first Jurassic Park adventure: “Your scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.” Folks, that applies not only to X-Men, Superman, and Planet of the Apes scenarios in China, but to so, so much that one sees around you in the markets daily. Frankly, as I’ve said before and will say again:
Stop the Planet of the Apes, I Want to Get Off. From Chimpan A to Chimpan Z, you’ll never make a monkey out of me.
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