Today’s News 1st April 2018

• Lockheed Martin Patents Nuclear Fusion-Powered Fighter Jet

  Lockheed Martin has secretly been developing a game-changing compact nuclear fusion reactor that could potentially fit into a fighter jet. The Maryland-based defense contractor recently obtained a patent associated with its design for a fully compact fusion reactor, after filing for the patent in 2014.

  If the latest patent from the defense company serves as a benchmark, nuclear fusion technology could revolutionize the aeronautic industry and eventually begin the quantum leap from fossil fuels to compact fusion reactors for the industry.

  According to CBS Washington, the prototype system would be the size of a normal shipping container but capable of producing enough energy to power 80,000 residential homes or a Nimitz-class aircraft carrier, sometime in the next year or so.

  The patent, tilted “Encapsulating Magnetic Fields for Plasma Confinement,” is dated Feb. 15, 2018. CBS indicates that Skunk Works, also known as Lockheed Martin’s Advanced Development Programs or its advanced R&D group, has reportedly been developing the compact fusion reactor since about 2014, with latest reports suggesting the technology could be ready for production by 2019.

  

  Nuclear fusion is the same process of what happens to hydrogen gas in the core of the Sun. Hydrogen gas gets squeezed into four hydrogen nuclei combine to form one helium atom; thus, nuclear fusion is created.

  Lockheed said, “Our concept will mimic that process within a compact magnetic container and release energy in a controlled fashion to produce power we can use.” Here is how Lockheed describes nuclear fusion power:

  

  Lockheed indicates that the compact size of the reactor has induced a technology revolution, which instead of taking “five years to design and build a concept, it takes only a few months.”

  “The compact size is the reason that we believe we will be able to create fusion technology quickly. The smaller the size of the device, the easier it is to build up momentum and develop it faster. Instead of taking five years to design and build a concept, it takes only a few months. If we undergo a few of these testing and refinement cycles, we will be able to develop a prototype within the same five year timespan.”

  As the technology advances, the size of the fusion reactor shrinks. Lockheed has dropped the bombshell and indicated the reactor could be ready to mount on “a truck, aircraft, ship, train, spacecraft, or submarine.” Across the board, Lockheed could revolutionize the transportation industry in the very near term.

  “Some embodiments may provide a fusion reactor that is compact enough to be mounted on or in a vehicle such as a truck, aircraft, ship, train, spacecraft, or submarine. Some embodiments may provide a fusion reactor that may be utilized in desalination plants or electrical power plants.”

  Patent FIG. 1 illustrates example applications for fusion reactors, according to certain embodiments.

  “As one example, one or more embodiments of fusion reactor 110 are utilized by aircraft 101 to supply heat to one or more engines (e.g., turbines) of aircraft 101. A specific example of utilizing one or more fusion reactors 110 in an aircraft is discussed in more detail below in reference to FIG. 2. In another example, one or more embodiments of fusion reactor 110 are utilized by ship 102 to supply electricity and propulsion power. While an aircraft carrier is illustrated for ship 102 in FIG. 1, any type of ship (e.g., a cargo ship, a cruise ship, etc.) may utilize one or more embodiments of fusion reactor 110. As another example, one or more embodiments of fusion reactor 110 may be mounted to a flat-bed truck 103 in order to provide decentralized power or for supplying power to remote areas in need of electricity. As another example, one or more embodiments of fusion reactor 110 may be utilized by an electrical power plant 104 in order to provide electricity to a power grid. While specific applications for fusion reactor 110 are illustrated in FIG. 1, the disclosure is not limited to the illustrated applications. For example, fusion reactor 110 may be utilized in other applications such as trains, desalination plants, spacecraft, submarines, and the like.”

  

  Patent FIG. 2 illustrates an example aircraft system utilizing fusion reactors, according to certain embodiments.

  “In general, fusion reactor 110 is a device that generates power by confining and controlling plasma that is used in a nuclear fusion process. Fusion reactor 110 generates a large amount of heat from the nuclear fusion process that may be converted into various forms of power. For example, the heat generated by fusion reactor 110 may be utilized to produce steam for driving a turbine and an electrical generator, thereby producing electricity. As another example, as discussed further below in reference to FIG. 2, the heat generated by fusion reactor 110 may be utilized directly by a turbine of a turbofan or fanjet engine of an aircraft instead of a combustor.”

  

  Patent FIGS. 3A illustrates an example fusion reactor, according to certain embodiments.

  

  Patent FIGS. 3B illustrates an example fusion reactor, according to certain embodiments.

  

   

   Lockheed’s potential applications of compact fusion:

  

  

  

  

  

  The Silicon Republic believes Skunk Works’ Compact Fusion Project could usher in an era of nuclear drones patrolling the skies:

  “Patents for the reactor were filed in 2014 by the company’s advanced research division, Skunk Works, with the aim of having its compact fusion reactor (CFR) ready by 2019. While it has obviously missed that deadline, the delay does not mean the technology is to be left behind. As Dr. Thomas McGuire, head of Skunk Works’ Compact Fusion Project, detailed in a 2014 report, the smaller reactor is more feasible than a large-scale one. If the system functions as expected, the CFR could take 11kg of fuel in the form of the hydrogen isotopes deuterium and tritium, and run the reactor for an entire year without needing to stop.

  Throughout that time, it would be consistently pumping out 100MW of power, enough to power up to 80,000 homes. When discussing how it could impact aircraft design, Lockheed Martin said that this amount of power would allow it to fly indefinitely and would only be hampered by the crew’s need for food and water on the ground. The likelier option is that this would translate extremely well into drone aircraft used to patrol the skies for years at a time, which, admittedly, sounds a little terrifying.”

  While a nuclear fusion powered fighter jet would certainly change the board game of geopolitics, factor in the hypersonics technologies and high energy weapons, and the high-tech weapons for the next global conflict have already been identified.

  To be sure, the global superpowers realize that the first to possess these technologies will not just revolutionize their civilian and military programs, but will also dictate the future path for civilizations on planet earth, as such the new arms race is on, just not in the same weapons that defined the first cold war.

  

• The History Of US Trade Policy In One Annotated Chart

  As narrative-ending as it may be to nattering naybobs, President Trump is not the first, and will not be the last, to enforce major trade policies. As Goldman Sachs points out in this fully annotated chart, the US has a long history of trade interventionism, and – as the WSJ recently pointed out  – what Trump has done is merely respond to China’s own protectionist policies.

  

  Source: Goldman Sachs

  Incidentally, while it is far less discussed, we showed at the start of March  that there have been extensive tariffs levied against China under both Obama’s administration, and those prior, they just didn’t get nearly as much air time. As BofAML details in the table below, Presidents Obama, Bush, and Reagan have all imposed sizable tariffs on steel in the past:

  

  In this context, some have accused Trump of being all bark and no bite, and of being a flip-flopper on this – and other – issues. For those who remain unsure of where President Trump stands on trade, here are thirty years of his quotes on the topic:

  

  Source: Goldman Sachs

  On the heels of Wilbur Ross’ comments imploring investors to “act rationally, not hysterically,” Goldman notes that, all told, their strategists expect asset implications to be modest and largely contained to specific sectors/companies with exposure to targeted products.

  But as GS global economists Jari Stehn and Nicholas Fawcett explain, “the global macro costs become significant only when a trade war really heats up, with retaliation from all sides.”

  With that in mind, the key questions are:

  What is the risk that the situation escalates further, and what might retaliation look like? So far, numerous temporary exemptions from US metals tariffs have substantially diminished the prospect of retaliation and escalation from some of the US’ largest trading partners. And China’s response has been measured, with Washington and Beijing reportedly in the midst of talks to defuse the situation.

  For now, the questions remain: the US has yet to publish its official product list for Section 301-related tariffs on Chinese goods, and is still likely to announce restrictions on Chinese investment in the US—both of which the Chinese have yet to address, and detail just how they will retaliate.

  

• What If All The Cheap Stuff Goes Away?

  Authored by Charles Hugh Smith via OfTwoMinds blog,

  Nothing stays the same in dynamic systems, and it’s inevitable that the current glut of low costs / cheap stuff will give way to scarcities that cannot be filled at current low prices.

  One of the books I just finished reading is The Fate of Rome: Climate, Disease, and the End of an Empire. The thesis of the book is fascinating to those of us interested in the rise and fall of empires: Rome expanded for many reasons, but one that is overlooked was the good fortune of an era of moderate weather from around 200 BC to 150 AD: rain was relatively plentiful/ regular and temperatures were relatively warm.

  Then one of Earth’s numerous periods of cooling–a mini ice age–replaced the moderate weather, pressuring agricultural production.

  Roman technology and security greatly expanded trade, opening routes to China, India and Africa that supplied much of Roman Europe with luxury goods. The Mediterranean acted as a cost-effective inland sea for transporting enormous quantities of grain, wine, etc. around the empire.

  These trade routes acted as vectors for diseases from afar that swept through the Roman world, decimating the empire’s hundreds of densely populated cities whose residents had little resistance to the unfamiliar microbes.

  Rome collapsed not just from civil strife and mismanagement, but from environmental and infectious disease pressures that did not exist in its heyday.

  Colder, drier weather stresses the populace by reducing their food intake, which leaves them more vulnerable to infectious diseases. This dynamic was also present in the 15th century during another mini ice age, when the bubonic plague (Black Death) killed approximately 40% of Europe’s population.

  Which brings us to the present: global weather has been conducive to record harvests of grains and other foodstuffs, and I wonder what will happen when this run of good fortune ends, something history tells us is inevitable. Despite the slow erosion of inflation, food is remarkably cheap in the developed world.

  What happens should immoderate weather strike major grain-growing regions of the world?

  Then there’s infectious diseases.  Global air travel and trade has expanded the spectrum of disease vectors to levels that give experts pause.  The potential for an infectious disease that can’t be mitigated to spread globally is another seriously under-appreciated threat to trade, tourism and cheap stuff in general.

  There are other factors that could spell the end of cheap stuff, not just food but manufactured goods:

  1. Fossil fuels could become much more costly. While I consider it highly likely that the price of oil in US dollars will fall to $40/barrel or lower in a global recession due to a sharp drop in demand (what I’ve long termed the head-fake), longer term, it’s inevitable that the cheap-to-access fossil fuels (other than coal) will become depleted and the cost of accessing, processing and transporting what’s left will rise.

  Since fossil fuels remain the backbone of industrial societies everywhere (yes, including Germany), a steady increase in fuel costs will push the cost of everything that uses energy (i.e. everything) higher.

  2. Trade restrictions/conflicts. Globalization and populism both target “unfair trade practices” in which “unfair” is in the eye of the beholder: imports hurt the domestic economy everywhere, and exports help the domestic economy everywhere.

  If trade is restricted for whatever reason, the costs of commoditized goods will likely increase, possibly by a lot.

  3. Global wages are rising. You’ve probably seen signs at Home Depot and fast-food chain outlets announcing “we’re hiring”: even though 100 million working-age people are “not in the work force” in the U.S., many of these individuals lack the skills and/or willingness to take jobs in the modern economy, which demand a lot of workers even in so-called low-skill fields such as fast food. To work in fast food, individuals must be able to handle high pressure and a fast pace; it’s not an easy job by any means.

  Many employers are reporting that they can’t find enough qualified candidates who pass drug tests, yet another fallout of the opioid epidemic. Many people are saddled with felony convictions for nonviolent drug offenses, rendering them ineligible for most corporate or government employment.

  Immigration restrictions and minimum wage laws will add to the rising cost of labor.

  Globally, the baby Boom generation is retiring, leaving worker shortages on the horizon even in China. (Note that workers tend to retire much earlier in Asia and Europe than in the U.S.: 60 or 62 is typically the mandatory retirement age in much of the global economy.)

  As Immanuel Wallerstein has observed (I’ve written about his work many times), there are systemic, secular pressures to raise wages and benefits everywhere: costs are rising, and people expect more government services such as education and income security, and as taxes increase, wages must rise to maintain the net earnings (purchasing power) of the workers.

  We in North America have become accustomed to cheap stuff; we consider it our birthright: cheap fuels, cheap manufactured goods, cheap food and cheap labor. Without even being aware of it, we feel entitled to “low prices always.” We may feel fuel, food and consumer goods are expensive now, but we are comparing prices to an extended period of extraordinarily low costs.

  Prices for energy could easily rise 50%, impacting the cost of everything; should harvests be crippled by bad weather, the cost of grains could easily double or triple from their current historic lows. Should trade be restricted and wages rise virtually everywhere, manufactured consumer goods could go up in price even as robots replace human labor: energy and raw materials will still be costly inputs even if all human labor is eliminated.

  Add in some stiff tariffs for unfair trade practices, and all the robots in the world won’t keep prices down.

  Nothing stays the same in dynamic systems, and it’s inevitable that the current glut of low costs / cheap stuff will give way to scarcities that cannot be filled at current low prices. Cheap stuff will go away, and everything will cost more. It seems highly likely that the next decade will not be like the last 10 years of abundance and cheap stuff.

  Courtesy of Incrementum AG, here is a chart of the commodity/S&P 500 ratio. Commodities are at historic lows in relation to stock market valuations. Stocks can decline, or commodities can rise, or both can occur in tandem. If history is any guide, this ratio will reverse and reach a peak within the next decade.

  *  *  *

  My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

  

• "Unprecedented" $8 Billion Verdict Against JPMorgan Cut Drastically

  JP Morgan just won an important victory in its quest to have an unprecedented $8 billion jury verdict thrown out without its hordes of lawyers having to do one single thing.

  Back in September, Jamie Dimon’s bank was hit with an $8 billion jury verdict for, a judgment large enough to negatively impact the bank’s EPS and dent its Tier 1 ratio.  On the surface, that judgment might seem excessive. But the bank’s treatment of the Hopper family was so absurdly outrageous, getting stuck with the largest jury award of 2017 appeared justifiable to many in retrospect.

  

  However, in what appears to be an attempt to stave off a laborious appeals process and exit quickly with their cash, the family of a former airline executive asked the judge to lower the punitive damages portion of the fine – what amounts to $6 billion of the $8 billion – to roughly $100 million.

  Lawyers for Stephen Hopper and Laura Wassmer asked a Dallas probate court to limit punitive damages to them and their father’s estate to about $70 million, down from a total of $6 billion awarded by the jury. Hopper and Wassmer also asked for $3.9 million for losses and attorneys’ fees.

  The widow, Jo Hopper, asked the court to lower her award to $14.4 million, according to a filing from her lawyers disclosed Friday.

  The final award could go even lower. JPMorgan is seeking to reverse the entire judgment.

  The legal saga started when Max Hopper, a former American Airlines executive, died suddenly in 2010. Hopper had no will when he passed, so his family hired JP Morgan to administer the estate.

  And so began an unbelievably infuriating process for Hopper’s family, as the bank repeatedly refused to release Hopper’s assets, taking years to perform basic due diligence that should’ve been completed in weeks. Because of the bank’s negligence, stock options belonging to the Hopper’s were allowed to expire worthless.

  JPMorgan was hired to administer the estate and the bank should have divided the assets and released them to Jo Hopper and her stepchildren, according to the lawsuit. Instead, her lawyers said in a statement, “the bank took years to release basic interests in art, home furnishings, jewelry, and notably, Mr. Hopper’s collection of 6,700 golf putters and 900 bottles of wine. Some of the interests in the assets were not released for more than five years.’’

  The plaintiffs alleged that bank representatives failed to meet financial deadlines for assets under their control, stock options were allowed to expire, and Mrs. Hopper’s wishes to sell stock were ignored. Stephen Hopper and Laura Wassmer also claimed that the bank cut them out of decisions and kept them uninformed in order to curry favor with their stepmother.

  Jo Hopper initially sued the bank, alleging breach of fiduciary duty. JPMorgan paid legal fees to defend this out of the estate account, depleting it by more than $3 million, the plaintiffs’ said in court filings.

  Initially, the Texas probate court had awarded punitive damage awards of $2 billion each to Jo Hooper, the Hopper estate, Stephen Hopper and Laura Wassmer.

  JPMorgan has denied any wrongdoing and said it acted in good faith. “Clearly the award far exceeds any possible interpretation of Texas tort reform statutes,’” said Andrew Gray, spokesman for the bank.

  

• The Grand Illusion 2.0

  Via Angry Bear blog,

  Introductory note: this is a very long epistle. But I think my point needs to be made fully and at length. Before you go further, in fairness here is the TL:DR version:

  • Advocates of free trade and globalization were taken aback a week ago by the assumption by China’s President Xi Jinping of rule for life.

  • This was because it runs completely contrary to their theory that free trade leads to economic liberalization, which in turn leads to political liberalization.

  • This theory has been repeatedly and thoroughly repudiated throughout history, most catastrophically be World War I.

  • That’s because autocrats will use the gains of economic trade for their own ends, typically the pursuit of further political and military power.

  • Historically middle classes do not revolt against autocracy when they are prospering, but rather only after a period of rising expectations has been dashed by an economic downturn in which the autocratic elite unfairly forces all of the burden onto them.

  • But since these historical facts are nowhere to be found in the economic models, they are ignored as if they do not exist. We can only hope they do not once again lead to catastrophe.

  

  First, let me pose a thought experiment.  Country A and Country B propose to enter into Agreement X. We have no idea at all what Agreement X is, but we know that the result will be that both Country A and Country B will each be richer by $1 Trillion each and every year thereafter.

  Country A, being an egalitarian paradise, is going to share out the proceeds equally among its population of 250 million, with each person getting $4,000 per year.

  The dictator of Country B is going to do the same with 1/2 of its $1 Trillion gain, making his population very happy, but — because this is his personal aim — he is going to spend the other $500 Billion each and every year in building up its military so that it can challenge and eventually vanquish Country A, and then keep all of the gains of Agreement X to itself.

  Should Country A enter into Agreement X?

  *  *  *

  A week ago The Economist opined that “The West’s Bet on China has Failed,” stating that:

  Last week China stepped from autonomy into dictatorship. That was when Xi Jinping … let it be known that he will change China’s constitution so that he can rule as president for as long as he chooses …. This is not just a big change for China but also strong evidence that the West’s 25 year long bet on China has failed.

  After the collapse of the Soviet Union, the West welcomed [China] into the global economic order. Western leaders believed that by giving China a stake in institutions such as the World Trade Organization would bind it into the rules based system … They hoped that economic integration would encourage China to evolve into a market economy and that, as its people grew wealthier, its people would come to yearn for democratic reforms ….

  CNN’s Fareed Zakaria recoiled in horror, writing in the Washington Post that

  [W]hat’s happening in China … is huge and consequential. China is making the most significant change to its political system in 35 years.

  For decades, China seemed to be getting more institutionalized…. But that trend has now been turned on its head. If term limits are abolished, which is now almost certain, Xi Jinping could stay China’s president, general secretary of the Communist Party and chairman of the Central Military Commission for the rest of his life. And he is just 64.

  … The real danger is that China is eliminating perhaps the central restraint in a system that provides staggering amounts of power to the country’s leaders. What will that do, over time, to the ambitions and appetites of leaders? “Power tends to corrupt,” Lord Acton famously wrote in 1887, “and absolute power corrupts absolutely.” Perhaps China will avoid this tendency, but it has been widespread throughout history.

  If Zakaria felt blindsided, he should not have been. Because ten years ago, after he published “The Post-American World,” arguing that because the US had successfully spread the ideals of liberal democracy across the world, other countries were competing for economic, industrial, and  cultural – but not military – power, I confronted him at the former TPM Cafe.

  For the truth is, the West’s bet on China, so ruefully mourned by The Economist and Zakaria, was always likely to fail. That free trade leads to economic and political liberalism and to peace – championed by neoliberal economists and their political retinue – has been a fantasy for over 100 years, and for 100 years it has been a lie. They would have known if their theories and equations could account for the likes of Kaiser Wilhelm II. But since their equations and theories are blind to the pursuit of power, they dismiss it — at horrible cost to the world.

  In an interview with David Frum, Minxin Pei, who a decade ago dissented, predicting that China would not transition towards true economic and political freedom, said it well:

  [M]any people were too dazzled by the superficial changes, especially economic changes, to realize that the Communist Party’s objective is to stay in power, not to reform itself out of existence. Economic reform or, to be more exact, adopting some capitalist practices and embracing market in some areas, is only a means to a political end…

  W]hen China was forced to keep the door [to liberalization] more open, it was in a weaker position relative to the forces outside—the West in general and the U.S. in particular. But when the conservative forces inside China gain strength while the West appears to be in decline, those forces are far more likely and able to close the door again, as is happening right now. So, while the logic of irresistible liberalization appears to be reasonable on the surface, it overlooks the underlying reality of power.

  I set set forth the fuller historical context a decade ago in my response to Zakaria,which I am taking the liberty of reposting in full immediately below.

  *  *  *

  Over at TPM Cafe, this week Fareed Zakaria’s new book, “The Post American World” is being discussed. In it, Zakaria repeats the theory of globalization’s most toxic and unproven claim: that countries which participate in trade together do not make war upon one another. So if you want to prevent war, just participate in deep and interwoven trade with the other country and everything will be hunky-dory.

  It’s a lie.

  Zakaria claims that We’re Living in Scarily Peaceful Times”:

  The new and most dangerous twist to all this is that our great looming danger is Russia, China, and the rising oil dictatorships…. This is a worldview bereft of any historical perspective. Compared with any previous era, there is more economic integration and even comity among the world’s major powers. The imbalance between the West and the rest is large, not complete but large and in most areas increasing. The newly emerging states want to grow within the existing world order, which John Ikenberry has nicely described as “easy to join and hard to overturn.” The world is going our way, slowly and fitfully, with some detours. No great power has an alternative model of modern life that has any real attraction?

  This is essentially the same argument that Thomas Friedman made in The Lexus and the Olive Tree’ and reiterated even a short time ago in this liveblog:

  You know in Lexus I wrote that no two countries would fight a war so long as they both had McDonald’s. And I was really trying to give an example of how when a country gets a middle class big enough to sustain a McDonald’s network, they generally want to focus on economic development. That is a sort of tipping point, rather than fighting wars.

  This argument, repeated over and over on both necoconservative and neoliberal sites, and all over the corporate media, that free trade leads to middle classes leads to democracy leads to kumbayah, is pretty simple, and it is dangerously wrong. Or as Zakaria reviewer David Rieff summarizes:

  he reads too much into into two indisputable facts of the current moment — that there are fewer major wars taking place than in living memory and that there is a greater level of global economic integration than at any time in history.

  The truth is, the free trade zealots also have spent too much of their careers seduced by neoclassical economics’ favorite mythical beast, Homo economicus, the Rational Man; and not enough time reading history.

  For a start, contrary to the free trade zealots, this is not the first period in world history in which there has been relatively “free” trade, nor is it the first time in which there has been “globalization.” For example, as is pointed out in an article entitled European Social Security and Global Politics By Danny Pieters, European Institute for Social Security Conference

  Globalisation is not a new phenomena. During the second part of the nineteenth century there was a strong move toward the liberalisation of international transactioins, and international trade expanded rapidly until the beginning of World War I

  And just which country in Europe was undergoing the most rapid growth and industrialization during the perioed from 1870-1914? As this essay states, Germany

  embarked upon an extensive education program; it specialised in technical ares and so there was a greater push in that direction. It produced more and better scientists, and so Germany began her industrial advance. Also, the French threat, even if it was superficial, spurred the Germans in authority into action, and made them make Germany stronger and superior.

  German expansion was also helped by the expansion of the railway network, so that goods and mail could get from one place to another, and to more places, faster and more efficiently.

  Needless to say,much like the mercantilist expanding autocracies now fawned over by so many of the free trade zealots, during this time Germany was a monarchy, ruled by the Kaiser.

  Even worse, this isn’t just the first time that economies have experience “globalization”, it also isn’t the first time that this exact same argument has been made. In his 1910 best-seller, “The Great Illusion” Norman Angell wrote that:

  the universal assumption that a nation, in order to find outlets for expanding population and increasing industry, or simply to ensure the best conditions possible for its people, is necessarily pushed to territorial expansion and the exercise of political force against others…. It is assumed that a nation’s relative prosperity is broadly determined by its political power; that nations being competing units, advantage in the last resort goes to the possessor of preponderant military force, the weaker goes to the wall, as in the other forms of the struggle for life.

  The author challenges this whole doctrine. He attempts to show that it belongs to a stage of development out of which we have passed that the commerce and industry of a people no longer depend upon the expansion of its political frontiers; that a nation’s political and economic frontiers do not now necessarily coincide; that military power is socially and economically futile, and can have no relation to the prosperity of the people exercising it; that it is impossible for one nation to seize by force the wealth or trade of another — to enrich itself by subjugating, or imposing its will by force on another; that in short, war, even when victorious, can no longer achieve those aims for which people strive….

  There is quite simply no difference at all between the theses of Angell a century ago, and Friedman and Zakaria now.

  And what happened only 4 years after “The Great Illusion” was published? Well, another book that Zakaria and Friedman ought to read is Vera Brittain’s autobiography, “Testament of Youth”. Vera Brittain was a comfortable affuent middle class girl who was accepted to Oxford University shortly before World War I broke out. By the time it was over, her brother, Edward; her fiance Roland Leighton; and every other young man she had been close to, had been killed. Brittain’s book is a searing documentary about the utter destruction of an entire generation of British young men caused by the war.

  Just how many people were killed by World War I?  One source puts just the number of military deaths at 10 million. Including the wounded, in some European countries over half of the entire generation of young men were casualties.  Another sourcesays:

  the percentage of a country’s population directly afflicted. During the course of World War One, eleven percent (11%) of France’s entire population were killed or wounded! Eight percent (8%) of Great Britain’s population were killed or wounded, and nine percent (9%) of Germany’s pre-war population were killed or wounded! The United States, which did not enter the land war in strength until 1918, suffered one-third of one percent (0.37%) of its population killed or wounded.

  Simply put, World War I is a thorough and devastating refutation of the argument that free trade leads to peace and democracy. Quite the contrary, had Zakaria and Friedman bothered to actually study history, they might have found out that revolutions typically do not occur in eras of increasing plenty. Rather, they occur in times where rising expectations have been dashed:

  the “J-curve” theory says that when conditions improve for a relatively long period of time, — and this is followed by a short economic reversal — an intolerable gap occurs between the changes that the people expect (dashed line) and what they actually get (solid line). Davies predicts that this is when revolution will occur (arrow).

  Support for this theory was found in a 1972 study of 84 nations. Researchers found a clear relationship between indications of political instability and economic frustration. “Frustrated countries” are those that had poor economic conditions — low economic growth, insufficient food, few telephones and physicians — while being acquainted with the higher living standards of industrialized, urbanized countries.

  These studies show that frustration is more likely to develop from relative frustration — the gap between their expectations and the reality that does not live up to these expectations. People in poor countries isolated from the outside world do not realize how poor or frustrated they are. Their frustrations are accepted merely as part of living. In contrast, the people in poorer countries exposed to modern standards feel more “frustrated.” To top this off, deprived people who have experienced some recent progress are more frustrated than those who experienced poverty and oppression.

  In short, just as Germans were hardly big agitators for democracy during the time the German state was expanding, and autocracy was resulting in greater prosperity, so we should not expect that any autocratic states today that are profiting mightily from economic growth are suddenly going to turn democratic. To the contrary, just like the Kaiser’s Germany, it is much easier to direct aggression elsewhere.

  Democratic revolutions occur when previously rising expectations have been dashed, and the populace has no outlet for their anger and frustration. In democracies, governments can be changed (as in 1932); but in autocracies, the ruler’s cronies are protected from the privations, and with no alternative avenue of recourse, and seeing the manifest injustice of the benefits of the system, the populace revolts.

  For example, Taiwan’s democratic reforms were sparked by the violence of the “Kaohsiung Incident” of 1979. Similarly, democracy finally came to South Korea in 1987 when workers finally rebelled against artificially low wages:

  South Korea is hardly a model of a free economy. The hand of government planners in setting priorities and steering companies has been heavy. The low wages that helped fuel growth did not result from market forces. For 25 years, successive governments deliberately held down pay rates. They virtually barred strikes, jailed militant labor leaders, and decreed tough guidelines for wage increases. To block development of independent unions, companies created their own and installed leaders acceptable to the government. Says a Western diplomat in Seoul: ”Union leaders were practically appointed by the national security police.” With democratic winds sweeping South Korea this summer, workers were emboldened to push for higher pay, independent unions, and the right to strike,

  [2018 update: Even the American Revolution had elements of this paradigm, as England reined in the colonist’s rising fortunes following the French and Indian War by taxing them for the costs, expanding the territory of Quebec to include all of what is now the American northern Midwest, and prohibiting expansion beyond the Appalachians.]

  It is a disgrace that we see these same discredited theses, this same Great Illusion, embraced by corporate media pundits so often. That free trade inevitably leads to peace and democracy is a Big and Dangerous Lie, to which World War 1 is the most spectacular and unequivocal counter-evidence.

  There is no guarantee, alas, that we are not now on that same catastrophic path.

  *  *  *

  In 2015, I reiterated this point more succinctly:

  A more fundamental point is about human nature.  In any economic downturn, the powerful elites are going to try to deflect all of the suffering on the powerless masses.  In a representative democracy, eventually the majority will rebel at the ballot box and elect a party which promises to end their suffering.  [Update: It might be a left-wing party, like Syriza in Greece or FDR’s New Deal democrats in the US, or it might be from the right-wing like AfD in Germany or Donald Trump.  ]

  In an authoritarian state, however, no such safety valve exists.  That’s why revolutions don’t happen in an era of rising expectations.  They happen when rising expectations are dashed.  So long as China’s economy continues to expand stoutly, expect no meaningful turbulence.  But someday China will have a recession, and then, dear reader, is when world history will get interesting.

  So here we are a decade later, and the free-trade economists and their acolytes are gobsmacked by something that was not just predictable, but actually predicted,  because there is no place in their theories for actual human behavior as revealed in history. We can only hope that when the inevitable happens, China will not lash out as Kaiser Wilhelm did a century ago.

  

• Warren Buffett Is Now America's No. 2 Real-Estate Broker

  Warren Buffett’s Berkshire Hathaway is swallowing up market share in a business that Buffett said he “hardly noticed” when the company first acquired it in 2000.

  In light of the paucity of deals Berkshire struck last year, Buffett devoted ample space in this year’s annual report to touting the success of Berkshire’s HomeServices of America, which Buffett lauded for its rapid, if long overlooked, expansion over the past decade…

  I have told you several times about HomeServices, our growing real estate brokerage operation. Berkshire backed into this business in 2000 when we acquired a majority interest in MidAmerican Energy (now named BerkshireHathaway Energy). MidAmerican’s activities were then largely in the electric utility field, and I originally paid littleattention to HomeServices.

  But, year-by-year, the company added brokers and, by the end of 2016, HomeServices was the second-largest brokerage operation in the country – still ranking, though, far behind the leader, Realogy. In 2017, however, HomeServices’ growth exploded.

  We acquired the industry’s third-largest operator, Long and Foster; number 12, Houlihan Lawrence; and Gloria Nilson. With those purchases we added 12,300 agents, raising our total to 40,950. HomeServices is now close toleading the country in home sales, having participated (including our three acquisitions pro-forma) in $127 billion of “sides” during 2017.

  To explain that term, there are two “sides” to every transaction; if we represent both buyer and seller, the dollar value of the transaction is counted twice.

  Despite its recent acquisitions, HomeServices is on track to do only about 3% of the country’s home- brokerage business in 2018. That leaves 97% to go. Given sensible prices, we will keep adding brokers in this mostfundamental of businesses.

  Unfortunately for Buffett, limited supply and inflated valuations are beginning to weigh on purchases, with pending sales down more than 4% year-over-year.

  

  And mortgage applications tumbling as rates rise.

  

  One factor contributing to this trend could be the lackluster growth in wages when compared with home valuations.

  

  The broker buyouts were some of the only deals he touted in his letter to shareholders. The deals increased HomeServices transaction volume by 34%.

  And given the $100 billion cash pile burning a hole in Buffett’s pocket, we wouldn’t be surprised to see HomeServices continue absorbing its competitors – the only reliable growth strategy in a market as fractious as the real-estate brokerage business, according to Bloomberg. 

  

  The firm is expected to have only 3% market share in 2018. That leaves ample room for growth.

  

• US Power Grid Vulnerable To "Devastating" Attack, NERC Finds

  Just as tensions between the US and North Korea are finally beginning to cool (while animosity between the US and Russia intensifies), a recent industry report argues the US government isn’t doing nearly enough to safeguard the US electric grid from a potentially devastating attack.

  In its report, the North American Electric Reliability Corporation (NERC) revealed that much of the US electricity grid is vulnerable to attack – and neither the industry or the government are doing anything about it. NERC is the organization responsible for overseeing the US’s massive electric grid, which is subdivided into eight regional entities.

  Though the report didn’t include a “comprehensive” assessment of the myriad physical threats to the US’s energy infrastructure, worries that North Korean could execute a massive electromagnetic pulse (or EMP) attack have been intensifying as the prospect of a nuclear showdown with the restive communist state looms large (Kim Jong Un’s recent actions aside). The research was also inspired by a series of gun attacks on transformers, including a rifle attack on a transformer in Utah that occurred in September 2016, according to the Washington Free Beacon.

  

  Many organizations, including recently the National Academy of Sciences, have warned of the catastrophic consequences should a malicious actor – be it a state or a terrorist organization – manage to take down the US energy grid.

  “There is widespread belief that bulk power critical assets are vulnerable to physical attack, that such an attack potentially could have catastrophic consequences, and that the risks of such attacks are growing,” according to the report. “But the exact nature of such potential attacks and the capability of perpetrators to successfully execute them are uncertain.”
  …

  “Although the electric power sector seems to be moving in the overall direction of greater physical security for critical assets, many measures have yet to be implemented and the process of corporate realignment around physical security is still underway,” according to the report, which omitted a comprehensive overview of all the pressing threats due to national security concerns.

  “The September 2016 rifle attack on a 69 kV transformer substation in Utah—which reportedly left 13,000 rural customers without power for up to eight hours—showed that similar incidents could occur almost anywhere on the grid,” the report warns.

  To be sure, the Edison Electric Institute has highlighted the fact that it would be nearly impossible to completely secure the grid (the costs would be immeasurable). However, the US could be doing a lot more than it’s doing.

  

  A massive attack on the US energy grid could leave large swaths of the country without power without weeks or months. The end result would resemble Puerto Rico following last year’s devastating hurricane season – but on a much larger and deadlier scale.

  In this scenario, hundreds of thousands – if not millions of Americans – could die.

  “While to date there have been only minor attacks on the power system in the United States, large-scale physical destruction of key parts of the power system by terrorists is a real danger,” the academy warned. “Some physical attacks could cause disruption in system operations that last for weeks or months.”

  But unfortunately for the US citizens whose security is predicated on a functioning power grid, the power industry and US government have failed to organize a cohesive response to these threats. Because of the industry’s utter lack of preparation, even crude attacks could have devastating consequences.

  And while this month’s volatility in equity markets was deeply unsettling for millions of Americans, imagine what would happen to markets if the entire Atlantic seaboard lost power in an instant.

  

• US Marines Testing Drone-Killing Future Weapons And Combat Exoskeletons

  Nearly 200 US Marines gathered at Southern California’s Camp Pendleton to test out an array of the military’s most advanced new weaponry – including several devices to disable or destroy Unarmed Aerial Vehicles (UAVs), and combat exoskeleton designed by Lockheed Martin which allows soldiers to carry loads of up to 200 lbs. over long distances.

  

  

  

  

  Other weapons include “bomb-bearing and swarm-capable drones” already deployed against Russian military bases in Syria in January.

  (DoD demonstration video, Oct. 2016)

  “103 Perdix micro-drones launched from three U.S. Navy F/A-18 Super Hornet fighter jets. It demonstrated advanced swarm behaviors such as collective decision-making, adaptive formation flying, and self-healing. “Due to the complex nature of combat, Perdix are not pre-programmed synchronized individuals, they are a collective organism, sharing one distributed brain for decision-making and adapting to each other like swarms in nature,” said Strategic Capabilities Office (SCO) Director William Roper. “Because every Perdix communicates and collaborates with every other Perdix, the swarm has no leader and can gracefully adapt to drones entering or exiting the team.” 

  

  Captain Ben Brewster’s rifle company would fight and operate under a “protective bubble” created by layering offensive and defensive UAVs – both “organic to the company” and from the larger Marine air-ground task force which would include systems and equipment designed to kill or neutralize enemy drones – reports U.S. Naval Institute News.

  

  

  “I’ve never had to deal with IEDs that can attack me…from quadcopters,” said Brewster, commander of Kilo Company, 3rd Battalion, 4th Marines.

  Three drones flitted overhead at the Range 131 Military Operations on Urbanized Terrain (MOUT) facility here, and an “enemy” drone – a bat-wing-shaped UAS – sliced through the air as Third Platoon moved among buildings around a town square.

  “Anyone of these could have a two-pound IED (improvised explosive device)” or act as a spotter or command-and-control for an enemy force, he said.

  “I need the ability for my Marines to be able to jam these drones,” he added. –USNI

  

   

  

  

  And with the expected crowded urban skies, he noted, Marines will need systems to help sort friend from foe in the air, along with counter-UAS technology with directional jamming capabilities. “Trying to figure out that part is what we’re experimenting” during U5G, he added.

  Several naval warfare centers and military laboratories joined 48 companies for U5G, showcasing 79 technologies that included sensors that see through walls, facial recognition software, “smart” networked radio, micro drones and an enhanced thermal imager with displayed information, as well as vehicles, weapons and munitions.

  The Marine Corps Warfighting Laboratory and the Deputy Assistant Secretary of the Navy for Research, Development, Test and Evaluation are hosting U5G, the latest in a series of Advanced Naval Technology Exercises (ANTX) where military research and development organizations join with industry to demonstrate rapidly-emerging technologies and concepts. It follows on last year’s Ship-to-Shore Maneuver Exploration and Experimentation Advanced Naval Technology Exercise at Camp Pendleton that solicited and examined dozens of concepts like drones, mobile networks and unmanned boats to support Marines operating at sea and landing ashore. –USNI.org

   Read more here

  

• "Huge Caravan" Of Central American Refugees Is Headed For The U.S. Border

  Over 1,500 Central Americans are on a crusade across Mexico in the hopes of being granted asylum at the U.S. border – a move which is set to pose an enormous challenge to the Trump administration’s much campaigned about immigration policies, while reminding Trump’s base that they still don’t have the wall they elected him to build 14 months into his presidency. 

  “We want to become one, supporting us shoulder to shoulder and show that together we can break down borders,” say the caravan’s organizers.

  

  

  Setting out six days ago and marching under the slogan “Migrantes en la lucha” (“Migrants in the Fight”) during holy week, the caravan comprised mostly of Hondurans was organized roughly a month ago by the mysterious group Pueblo Sin Fronteras (People Without Borders) – which solicited donations via Facebook and encouraged volunteers to contact them. 

  ”Our mission is to provide shelter and safety to migrants and refugees in transit, accompany them in their journey, and together demand respect for our human rights,” reads the group’s mission statement.

  The Central American migrants, mostly Hondurans and Guatemalans, flee their countries because of insecurity and because they are threatened by gang members, also because of the economic and political situation in the region. –proceso.hn (translated)

  “The crime rate is horrible, you can’t live there,” a migrant named “Karen” told BuzzFeed News on the side of a highway near the Southern Mexico town of Huixtla. “After the president [was sworn in] it got worse. There were deaths, mobs, robbed homes, adults and kids were beaten up.”

  “They want to reach the border and ask for asylum, the majority flee from gang violence, extortion and police abuses,” says one of the organizers named Garibo.

  

  Before setting out on the journey, the migrants were organized into groups of 10 to 15 people, and a leader was designated for each group. Five groups were then banded together in what organizers call a sector. While there are organizers from Pueblos Sin Fronteras leading the way, much of the effort to get to the US border is in the hands of the migrants themselves. –BuzzFeed

  Migrants gathered for the march in the southern Mexico border town of Tapachula in advance of the march – where Pueblo Sin Fronteras conducted introductory workshops to help the Central Americans best navigate the United States once they arrive – including security drills in which male refugees are to form a wall around any threats to the women and children.

  Help along the way

  Despite a majority of the Hondurans being in Mexico illegally – which Mexican authorities have historically been stringent about, the caravan has not been stopped on its journey, and people from Mexican towns along the way have been helping the migrants. 

  The group is also planning to take “the Train of Death” in Arriaga in order to expedite the journey north, and several towns have provided buses to help the migrants along.

  

  …children, women, and men, most of them from Honduras — have boldly crossed immigration checkpoints, military bases, and police in a desperate, sometimes chaotic march toward the United States. Despite their being in Mexico without authorization, no one has made any effort to stop them. –BuzzFeed

  The municipality we’re at now is offering buses to get us to the next town. It’s been happening at several stops, I imagine they’re more interested in getting people out of their public squares. pic.twitter.com/6ay7Rn8fzI

  — Adolfo Flores (@aflores) March 30, 2018

  A local at the town the caravan is arriving brought bread and ham for people. pic.twitter.com/xEybmayAT0

  — Adolfo Flores (@aflores) March 27, 2018

   

  Here the migrants are seen boarding covered hopper freight railcars.

  A video shows the migrants marching on the tracks and preparing to board the train in Arriaga.

  In the train boarding video, a DJI Mavic Pro drone worth $1,000 to $1,300 USD was spotted. The march is depicted as a grassroots effort, but perhaps, there is some big money behind the movement.

  

  BuzzFeed reporter Adolfo Flores has been embedded with the caravan, providing updates over Twitter:

  On the move again. pic.twitter.com/JLhgTShshm

  — Adolfo Flores (@aflores) March 28, 2018

  Everyone is in for the night. pic.twitter.com/9CA6NOTnNa

  — Adolfo Flores (@aflores) March 28, 2018

  The caravan is on day five of its trek and finally made it to Oaxaca. pic.twitter.com/x7rqWrJh4z

  — Adolfo Flores (@aflores) March 29, 2018

  This morning the caravan, anticipating a long day walk, got up at 4am to beat the sun. pic.twitter.com/Pk8URSSHP4

  — Adolfo Flores (@aflores) March 30, 2018

  The caravan of Central Americans is getting ready to settle in for the day and make dinner. pic.twitter.com/BuSSJ9AiYL

  — Adolfo Flores (@aflores) March 30, 2018

  About 80% of them are from Honduras. Many said they are fleeing poverty, but also political unrest and violence that followed the swearing in of Honduran President Juan Orlando Hernández after a highly contested election last year. The group often breaks into chants of “out with JOH.” They also chant “we aren’t immigrants, we’re international workers” and “the people united will never be defeated.”

  Still, there are no guarantees on the route or assurances that once they reach the US border they’ll be able to cross undetected or be allowed to stay under some type of protection like asylum.

  Alex Mensing, another organizer with Pueblos Sin Fronteras, made that point clear to the migrants before the group started out. He also stressed that everyone is responsible for their own food, water, and payment for vans or buses. Still, it’s far cheaper than being assaulted or falling into the hands of unscrupulous smugglers. –BuzzFeed

  Here they come! 

  

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