Month: May 2021

Billionaire Robert Brockman was indicted last year on the “biggest U.S. tax-evasion case ever against an individual”. Now, prosecutors are looking to seize his assets, including a $15 million fishing lodge in Colorado and $77.9 million in a Swiss bank account, according to Bloomberg.

The 80 year old Brockman is being accused of failing to report $2 billion in income and using a foreign company to buy secondary debt in his own software firm at a deep discount. The government says that assets tied to the debt fraud can be forfeited, which includes the fishing lodge on the Frying Pan River. It’s the government’s first attempt at taking his property since he was indicted last October. 

The 143 acres were used by Brockman as he “spent parts of his summers fly fishing for rainbow and brown trout”. He built the property to avoid the 30 minute drive from Aspen to the Frying Pan River. 

“If you’re a fisherman, it’s just a wonderful place to live,” John Gierach, the author of “Sex, Death, and Fly-Fishing” told Bloomberg, calling the area “one of Colorado’s best trout streams.” 

Now, the burden is on the government to show the land was “the product of tainted funds”, Bloomberg reports. Internal Revenue Service special agent Ted Lair said in a court filing that Brockman laundered illicit proceeds through funds managed by Vista Equity Partners.

That firm is run by Robert Smith, who already agreed to a deal with prosecutors to help deliver Brockman in exchange for avoiding prosecution for his own tax evasion crimes. He’s also paying $139 million in back taxes. Lair noted that Smith was “unaware” of the debt fraud being perpetrated by Brockman. 

Swiss prosecutors have frozen more than $1 billion held in bank accounts belonging to Brockman. 

Brockman has pleaded not guilty and denies wrong doing. His lawyers have claimed he has dementia and can’t aid in his defense. Prosecutors, meanwhile, think he “may be faking the illness”, bringing to the court’s attention that Brockman worked at his software company up to and through the date of his indictment. 

A judge is set to rule on the asset seizure, review expert testimony from medical experts and determine where and when Brockman should stand trial, later this year.

Authored by John Tamny via The American Institute for Economic Research,

Let’s travel back in time to March of 2020, when predictions of mass death related to the new coronavirus started to gain currency. One study, conducted by Imperial College’s Neil Ferguson, indicated that U.S. deaths alone would exceed 2 million. 

The above number is often used, even by conservatives and libertarians, as justification for the initial lockdowns.

“We knew so little” is the excuse, and with so many deaths expected, can anyone blame local, state, and national politicians for panicking?

The answer is a resounding yes.  

To see why, imagine if Ferguson had predicted 30 million American deaths. Imagine the fear among the American people then—which is precisely the point: The more threatening a virus is presumed to be, the more superfluous government force is. Really, who needs to be told to be careful if a failure to take precautions could reasonably result in death? 

Death predictions aside, the other justification bruited in March of 2020 was that brief lockdowns (two weeks was the number often thrown around) would flatten the hospitalization curve. In this case, the taking of freedom allegedly made sense as a way of protecting hospitals from a massive inflow of sick patients that they wouldn’t have been able to handle, and that would have resulted in a public health catastrophe.

Such a view similarly vandalizes reason. Think about it. Who needs to be forced to avoid behavior that might result in hospitalization? Better yet, who needs to be forced to avoid behavior that might result in hospitalization at a time when doctors and hospitals would be so short-staffed as to not be able to take care of admitted patients? Translated for those who need it, the dire predictions made over a year ago about the corona-horrors that awaited us don’t justify the lockdowns; rather they should remind the mildly sentient among us of how cruel and pointless they were. The common sense that we are to varying degrees born with, along with our genetic predisposition to survive, dictates that a fear of hospitalization or death would have caused Americans to take virus-avoidance precautions that would have well exceeded any rules foisted on them by politicians. 

To which some will reply with something along the lines of “Not everyone has common sense. In truth, there are lots of dumb, low-information types out there who would have disregarded all the warnings. Lockdowns weren’t necessary for the wise among us; rather they were essential precisely because there are so many who aren’t wise.”

Actually, such a response is the best argument of all against lockdowns.  

Indeed, it cannot be stressed enough that “low information” types are the most crucial people of all during periods of uncertainty. Precisely because they’ll be unaware of, misunderstand, or reject the warnings of the experts, their actions will produce essential information that the rule-followers never could. In not doing what the allegedly wise among us will, low information citizens will, by their contrarian actions, teach us what behavior is most associated with avoidance of sickness and death, and more important, what behavior is associated with it. 

One-size-fits-all decrees from politicians don’t enhance health outcomes as much as they blind us to the actions (or lack thereof) that would protect us the most—or not. Freedom on its own is a virtue, and it produces crucial information. 

But wait, some will say, “how elitist to let some people act as Guinea Pigs for the rest of us.” Such a statement is naïve. Heroin and cocaine are illegal, but people still use both. Thank goodness they do. How could we know what threatens us, and what doesn’t, without the rebellious? 

Still, there’s the question of “elitism.” The lockdowns were the cruelest form of elitism, by far. The implication of the lockdowns was that those who had the temerity to have jobs that were destinations—like restaurants and shops—would have to lose them. The lockdowns destroyed tens of millions of destination jobs, destroyed or severely impaired millions of businesses, not to mention the hundreds of millions around the world who were rushed into starvation, poverty, or both as a consequence of nail-biting politicians in countries like the U.S. that chose to take a break from reality. Talk about elitist actions. The very idea of wrecking the economy as a virus-mitigation strategy will go down in history as one of the most abjectly stupid policy responses the world has ever endured. 

That’s the case because economic growth is easily the biggest enemy death and disease have ever known, while poverty is easily the biggest killer. Economic growth produces the resources necessary so that doctors and scientists can come up with answers to what needlessly sickens us, or shortens our lives altogether. 

In the 19th century, a broken femur brought with it a 1 out of 3 chance of death, while those lucky enough to survive the break had only one option: amputation. A child born in the 19th century had as good a chance of dying as living. A broken hip was a death sentence, cancer most certainly was, but most didn’t die of cancer because tuberculosis and pneumonia got them first. 

So what happened? Why don’t we get sick or die as easily as we used to? The answer is economic growth. Business titans like Johns Hopkins and John D. Rockefeller created enormous wealth, only to direct a lot of it toward medical science. What used to kill us became yesterday’s news. 

Even though freedom is its own wondrous virtue, even though freedom produces essential information that protects us, and even though free people produce the resources without which diseases kill with sickening rapidity, panicky politicians erased it in 2020 on the supposition that personal and economic desperation was the best solution for a spreading virus. Historians will marvel at the abject stupidity of the political class in 2020.

It was literally raining oil in St. Croix a couple weeks ago – and not in the good “newly discovered oil”-type way most people know from movies and TV.

The oil falling from the sky was the result of a “flare incident” that took place Limetree Bay refinery; the incident shot oil up into the sky and it was carried west by the wind before raining down on parts of the island, according to CNN. 

As a result of the incident, the US Environmental Protection Agency ordered an emergency, 60-day shutdown of the plant, citing an “imminent risk” to public health, the report says. The incident sent sulfur dioxide and hydrogen sulfide into the air. 58 year old resident Dyline Thomas said: “The smell was so strong, like sulfur, like rotten eggs.”

As a result of the “incident”, she said she had an upset stomach, running nose and sore throat. 

The release of oil has the island reconsidering whether or not its economic future is worth keeping the refinery on the island. While it has provided jobs and revenue for the island’s battered economy, residents are starting to question whether the “price is too high”. 

Jennifer Valiulis, the executive director of the St. Croix Environmental Association, told CNN: “We are at a crossroads. We have an opportunity to examine what we want our economy to look like, what we want St. Croix to be in a world that’s moving away from fossil fuels as its primary energy source.”

The island had its first refinery – responsible for helping its citizens raise their quality of life – open in 1966, managed by Hess. The same petroleum refinery paid $5.3 million in fines in 2011 for environmental violations. It then filed for bankruptcy and shut down before being re-opened via a grant issued by the Trump administration. It produces about 200,000 barrels of oil per day. 

Virginia Clairmont, who runs a nonprofit working to revitalize the town of Frederiksted on the island’s western end, has spoken out about the refinery: “If you talk about it, you’ll be attacked for trying to deprive other people of jobs.”

Covid-19 also struck a blow to the island, crippling its cruise industry just years after Hurricanes Irma and Maria “devastated” the island. 

The restart of the plant created 400 full time jobs and will generate about $7 million in annual tax revenue. 

Local senator Nellie Rivera-O’Reilly pushed for the re-opening of the plant. She told CNN: “As a business owner now, I see the benefits of the refinery, or any employer of that magnitude, remaining viable on the island of St. Croix.” 

But the EPA received “hundreds of calls and emails” complaining about the plant since it reopened. Tysha Henry, who grew up on St. Croix, said smells from the plant woke her up at night: “It felt like I was going to asphyxiate or something. I will not be going back home as long as this smell is there,” 

EPA Administrator Michael Regan said of the decision to shut down the plant: “This already overburdened community has suffered through at least four recent incidents that have occurred at the facility, and each had an immediate and significant health impact on people and their property.”

Speaking about the spill, Rivera-O’Reilly concluded: “These things happen in these types of industries. The thing to do is to make sure we learn and put in place measures to prevent this from happening.”

Submitted by Mark Jeftovic, Co-founder and CEO, easyDNA technologies.

Today’s post is an excerpt from the monthly edition of The Crypto Capitalist Letter. To learn more about TCC and receive a free copy of The Crypto Capitalist Manifesto, join the Bombthrower list here.

I had a reader ask me about Silvergate Capital. They’re a bank holding company with a lot of exposure to the crypto currency space. I hadn’t yet analyzed them deeply, but I did notice that they recently announced a partnership with Facebook on their DiemUSD stablecoin.

Diem is Facebook’s rebrand of Libra. Libra was a private crypto currency Facebook proposed to launch which in my mind was a transformative event for nation states and central banks. That was the moment when the establishment elites realized that non-state money had arrived and it posed an existential threat to the status quo.

They were able to hold off Facebook’s Libra, for awhile. They fought dirty. US Senators sent straight up extortion letters to members of Facebook’s Libra Consortium threatening to investigate them for ostensible ties to child pornography on Facebook’s platform if they went through with the project. They all dropped out.

My heart didn’t exactly bleed for Facebook, but the incident was instructive. I wrote about it at the time, but I will repeat the salient point here:

Should a gigantic platform like Facebook successfully launch their own digital currency, a person’s Facebook account will become more important in their day-to-day lives than their nation state issued passport. Especially if we’re entering an era of drastically curtailed travel for plebeians. The battle between the US, France, et al and Facebook over Libra was an early round in the struggle between waning Nation States and ascendent Network States.

Facebook kept working on their Libra, first under a wallet program called Novi and now as Diem, and Diem USD will be their stablecoin.  One can only surmise that behind the scenes something has shifted so that Facebook thinks they can proceed with launching a new stablecoin.

This partnership with Silvergate, as well as relocating their Diem Association, which oversees their digital currency projects, from Switzerland back to the United States may be part of that calculus.

There have been some rumblings that the US is losing the Central Bank Digital Currency race and that one way to jumpstart a program would be to partner with a private entity who is already further down the road with it.

Who would be uniquely situated to provide a solution in some manner of public-private partnership? Facebook, for one.

When we think about what Fedcoin could reasonably be expected to do, my guess is:

• Provide the rails for UBI and other entitlement programs

• Be fully programmable (an example is Australia’s cashless Centrelink card which will provide welfare benefits that cannot be spent on booze, cigarettes or gambling)

• Be fully trackable: with everybody walking around with Facebook installed on their smartphone, it’s already baked-in.

• Ubiquitous: There are more Facebook users in the USA (190 million) than had voted in the last election (161 million).

Consider this, what everybody knows from all camps (pro fiat, pro Bitcoin, establishment, anti-establishment, et al), is that the days of the petrodollar are numbered. For an excellent summary of how the current petrodollar regime arose and has been enforced over the past 50 years, listen to “From the Petrodollar to a Bitcoin Standard” with Nic Carter and Alex Gladstein on a recent What Bitcoin Did episode hosted by Peter McCormick.

As pointed out in that episode, the US has a track record of militarily enforcing USD primacy when countries like Iraq or Libya wanted to sell their oil for some other currency than USD.

What is different between Facebook’s Libra and Facebook’s Diem? Libra was to be backed by a basket of currencies, Diem is a stable coin pegged to USD. US lawmakers moved swiftly to kill Libra in the crib. So far there’s been at least silent assent on Diem.

It may be that the US policymakers  hope that USD stable coins may be the way for the US to preserve its Exorbitant Privilege and extend its run at the helm of a world reserve currency.

(But make no mistake: CBDCs will be pathways to dependancy and poverty by design. The antidote to being trapped in a system constructed to preclude wealth and capital formation are crypto-currencies. That’s our focus at The Crypto Capitalist, and you can read the overall thesis here).

Almost three months after markets stumbled when after China’s top banking regulator said he’s “very worried” about risks emerging from bubbles in global financial markets (and China’s property sector) sparking concerns about further tightening in the world’s second-biggest economy and slamming risk assets, China has done it again and on Saturday Liang Tao, vice chairman of China Banking and Insurance Regulatory Commission, said at the International Finance Forum in Beijing that recent interest rate hikes by emerging economies could lead to a bursting of global financial asset bubbles which have been made even bigger by unprecedented pandemic easing measures by developed countries (i.e., Biden’s trillions). And just in case it wasn’t clear whose fault this is, Tao added that developed countries are sticking with ultra-low rates even as emerging economies raised their borrowing costs, “potentially resulting in the re-pricing of global assets.”

In short, China is already pre-emptively pointing the finger at the US and western central banks as the parties responsible not only for bursting the biggest asset bubble in history, but for creating it in the first place.

Tao’s comments are almost a verbatim repeat of what his boss, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said during a briefing back on March 1 when he said he’s “very worried” about risks emerging from bubbles in global financial markets and the nation’s property sector. Again blaming everyone but China, Guo said that bubbles in U.S. and European markets could burst because their rallies are heading in the opposite direction of their underlying economies and will have to face corrections “sooner or later.”

So what is the solution? None really: instead, the Chinese regulator suggested that all countries should take a page out of China’s totalitarian and centrally-planned playbook and that countries should coordinate financial regulation and improve the monitoring of cross-border fund flows, while emerging markets must prevent risks from large movements of the so-called hot money. He also said that organizations such as the IMF, the World Bank and the WTO should better represent developing countries (but China’s subsidiary known as the World Health Organization?). As if every emerging market has a capital firewall like China which can be shut down at a moment’s notice.

The official also said China – whose debt has absolutely exploded in the past year – has managed risks from new hidden local government debt, and contained bubble risks in property finance. He also claimed – erroneously – that financial sector leverage has declined, while a disorderly expansion of capital has been corrected. Neither is true…

… with China’s debt level the highest among major emerging markets…

… although it is true that China’s credit expansion has slowed down to the point where China’s credit impulse has now turned negative.

Which means that if anyone is looking for the deflationary catalyst that tips the global financial system into contraction – now that all developed central banks are primed to print metric tons of digital money in order to flood the world with inflation – and crashes the stock market, look no further than China.

Authored by Mark Tapscott via The Epoch Times (emphasis ours),

In Virginia, Loudoun County Public Schools officials were warned Friday to revoke their suspension of a teacher for declining to use students’ preferred pronouns or face further legal action.

Tanner Cross, who taught at Leesburg Elementary School, was suspended after speaking publicly May 26 during a school board meeting in opposition to the system’s proposed policy that teachers must use the pronouns preferred by students rather than the pronouns consistent with their biological sex.

Cross was informed May 28 that he was being suspended “pending an investigation of allegation that [he] engaged in conduct that had a disruptive impact on the operations of Leesburg Elementary School.”

On Friday, Alliance Defending Freedom (ADF) Senior Counsel Tyson Langhofer told school officials in a letter that they must either revoke the suspension and excise all records of it from Cross’s personnel file or he will take further legal action.

“The First Amendment prohibits retaliation against public employees for speaking on matters of public concern. ‘A  teacher’s  exercise  of his  right  to speak on issues of  public importance  may not furnish  the  basis for his dismissal  from public employment.’ Pickering v. Bd. of Educ. of Twp. High Sch. Dist. 205,391 U.S. 563, 574 (1968),” Langhofer explained in his letter to school officials.

“Mr. Cross’s expression during public comment time at an open school board   meeting was undoubtedly expression in his private capacity on a matter of public concern. Id. (teachers’ public expression regarding school board actions is protected speech); Janus v. Am. Fed’n of State, Cnty. & Mun. Emps., 138 S. Ct. 2448, 2476 (2018) (listing examples of matters of public concern); see also, Meriwether v.Hartop, 992 F.3d 492, 506-07 (6th Cir. 2021) (teachers’ use of pronouns is protected speech on a matter of public concern),” Langhofer continued.

“Immediately suspending an employee and launching an investigation for engaging in First Amendment-protected expression, creates an atmosphere of fear and is intended to send a message to Mr. Cross and other teachers that they must toe the line or face the consequences …The First Amendment does not countenance such retaliation.”

Langhofer added that “we demand that you immediately (1) rescind the suspension, (2) reinstate Mr. Cross so that he can return to class on Tuesday, June 1, (3) remove the suspension letter from his file, and (4) refrain from any future retaliation against protected speech …

“Absent the complete revocation of this suspension, Mr. Cross will be forced to pursue other legal options to safeguard his rights.”

A spokesman for the school system could not be reached for comment for this news story.

While he is suspended, Cross is barred entirely from being on school property or participating in any school activities without obtaining prior permission. He is also required to make himself available to school officials for conversation by telephone or in-person meetings during official business hours.

Loudoun County is one of the nation’s most affluent counties and has been the focus of serious controversies in its education system as officials here have adopted extensive politically correct policies, educational materials and programs that have sparked major public opposition, including those based on Critical Race Theory (CRT).

As The Epoch Times has previously reported, Loudoun County parents began to organize in June 2020, asking for the reopening of schools that had been shuttered in response to the CCP (Chinese Communist Party) virus pandemic.

However, it was the remote learning the district put in place that allowed parents to learn more about what their children are being taught, which raised some red flags.

“We’re seeing what our kids are learning and our goal changes from opening schools to ‘Oh my gosh. What are we sending our children back to?’” one parent, who asked to remain anonymous because of concern about reprisals, told The Epoch Times.

“Basically, they’re categorizing children by race to determine the quality of education each will have, which is absolutely unacceptable,” she added. She said her children won’t be returning to that school.

Loudoun County Public Schools spokesman Wayde Byard denied that the schools are determining the quality, level, or resources for education based on skin color.

“Our goal is to ensure equity based on this definition as outlined by the Virginia Department of Education: Education Equity is achieved when we eliminate the predictability of student outcomes based on race, gender, zip code, ability, socioeconomic status or languages spoken at home,” he told The Epoch Times via email.

With reporting by Petr Svab

A north Missouri businessman who was involved in the largest organic fraud scheme in American history has been sentenced to probation and fined. According to KTTN, federal prosecutors in Cedar Rapids, Iowa, sentenced Steven Whiteside of Chilicothe to three years probation and a fine of 45-thousand dollars.

Two other Northwest Missouri men were sentenced to federal prison for their roles in the 142-million dollar grain fraud scheme, which federal prosecutors describe as the “Field of Schemes.”

Steven Whiteside of Chillicothe pleaded guilty in December to signing a document that allowed Randy Constant to sell conventionally raised grain as certified organic and receive a higher premium.

Federal prosecutors say Whiteside received $177-thousand for grain that Constant resold to animal feed producers. They had asked for a one-year term in prison for Whiteside. His defense attorney argued he received a lesser sentence for having a clean record and having family obligations.

Constant, also of Chillicothe, killed himself in 2019, three days after being sentenced to 10 years in federal prison for wire fraud. Four other farmers, one from Missouri and three from Nebraska, received prison sentences for their role in the long-running scheme.

Back in December, the DOJ said that Constant admitted the fraudulent scheme involved at least $142,433,475 in grain sales, and the vast majority of those sales were fraudulent. From 2010 to 2017, Constant misled customers into thinking they were buying certified organic grain when the grain he was selling was not organic. Constant admitted falsely telling customers the grain he sold was grown on his certified organic fields in Nebraska and Missouri when the grain was not organic either because he purchased the grain from other growers, the certified organic fields were sprayed with unauthorized chemicals, or organic grain was mixed with non-organic grain. As part of the plea, Constant also agreed to forfeit $128,190,128 in proceeds from the fraudulent scheme.

Constant’s grain was mostly used as animal feed, primarily for chickens and cattle. That livestock was then sold as organic meat or products from the livestock were sold as organic products. Because of Constant’s fraud, most of the livestock that was fed his grain was not organic, causing millions of consumers to purchase what they thought was organic meat for a premium price across the country.

It is unclear how much of the billions in exorbitantly expensive “organic” food sold every year by the likes of Whole Foods and other overpriced outlets, is just plain, ordinary, off-the-shelf “inorganic” produce with a “ceritifed” sticker slapped on it to part the gullible with their money.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Change the incentives, and the outcomes change.

Ecologist Howard Odum provided a profound insight into human expansion, stagnation and collapse. He argued that humans are wired to maximize power output (i.e., consumption) rather than maximize efficiency.

In other words, humans are wired to strip the tree of every ripe fruit and throw a party, have more children and use the surplus food to feed an army of conquest. Efficient use of resources is simply not part of what I term Wetware 1.0, the set of tools that was selected and optimized over the past 200,000 years for small hunter-gatherer tribes roaming an apparently near-infinite world.

We’ve squandered the surpluses enabled by hydrocarbons to maximize energy output (consumption) rather than achieve efficiency. 

That is finally coming around to haunt the entire “infinite growth on a finite planet” status quo.

Here’s the happy story being promoted by the status quo: we can keep overconsuming / wasting resources on a vast scale by electrifying everything that is currently powered by hydrocarbons: The Electrification of Everything: What You Need to Know.

There are a great many problems with this fantasy. One is that per Odum, humanity doesn’t replace hydrocarbons with wind-solar, it consumes all the alt-energy being added, too. Adding energy just increases consumption.

Another is that the quantity of scarce minerals and resources needed to replace hydrocarbons with so-called renewable energy is so vast that it’s unrealistic.

As I’ve noted many times, per analyst/educator Nate Hagens, “renewables” are actually ‘replaceables’, as solar panels and wind turbines wear out and need to be replaced every 20-25 years, if not sooner.

The scale of energy consumption is so vast and the percentage supplied by solar and wind is so insignificant. Most charts lump solar and wind with hydropower and biofuels (wood), but wind and solar provide at best 3% of global energy, after all the tens of billions of dollars that have been invested.

To provide the majority of global energy consumption, we’d need to increase solar-wind 20-fold, from 3% to 60%. The problem, as Tim Watkins explains, is the Earth doesn’t have enough scarce minerals to build this monstrous global system, and then replace it every 20-25 years: Are you still buying this?

“Net-zero carbon dioxide by 2050 would require the deployment of ~1500 wind turbines (2.5 MW) over ~300 square miles, every day starting tomorrow and continuing to 2050.”

“Challenges of using ‘green energy’ to power electric cars: If wind farms are chosen to generate the power for the projected two billion cars at UK average usage, this requires the equivalent of a further years’ worth of total global copper supply and 10 years’ worth of global neodymium and dysprosium production to build the windfarms.”

“To replace all UK-based vehicles today with electric vehicles, assuming they use the most resource-frugal next-generation NMC 811 batteries, would take 207,900 tonnes cobalt, 264,600 tonnes of lithium carbonate (LCE), at least 7,200 tonnes of neodymium and dysprosium, in addition to 2,362,500 tonnes copper. This represents, just under two times the total annual world cobalt production, nearly the entire world production of neodymium, three quarters the world’s lithium production and at least half of the world’s copper production during 2018.”

Every kilogram of these scarce minerals must be mined, transported and processed with hydrocarbons.

The problem with wind and solar is intermittency: modern industrial economies require steady electrical power 24/7 or they fail. Wind and solar generate power intermittently, meaning they can’t generate a steady supply 24/7 nor can they generate electricity when consumers want to use it.

So the intermittency problem becomes a storage problem: how can we store surplus electricity in quantities large enough to power our vast consumption when the wind dies and the sun goes down?

There are no cheap, easy answers to storage, and ideas such as converting it all to hydrogen are not realistic due to cost and safety issues. There isn’t enough lithium and other scarce minerals to build batteries for 2 billion vehicles and storage for every electrical grid on Earth. (And note that lithium batteries have very limited lifespans and need to be replaced every decade, if not sooner. Very few batteries are recycled, so recycling billions of batteries is also a fantasy.)

As Gail Tverberg observes in her recent post, How the World’s Energy Problem Has Been Hidden:

“So-called renewable fuels tend to be very damaging to the environment in ways other than CO2 emissions. This point is made very well in the new book Bright Green Lies: How the Environmental Movement Lost Its Way and What We Can Do About It by Derrick Jensen, Lierre Keith and Max Wilbert. It makes the point that renewable fuels are not an attempt to save the environment. Instead, they are trying to save our current industrial civilization using approaches that tend to destroy the environment. Cutting down forests, even if new trees are planted in their place, is especially detrimental. Alice Friedemann, in her new book, Life after Fossil Fuels: A Reality Check on Alternative Fuels, points out the high cost of these alternatives and their dependence on fossil fuel energy.”

Many people I respect see thorium nuclear reactors as the answer, but like all the other proposals to replace the staggeringly large consumption fueled by hydrocarbons with some other source, it’s not as easy in the real world as it is conceptually.

India has reserves of thorium and has an ambitious plan to build thorium reactors. But the thorium nuclear fuel cycle is extremely non-trivial, and despite billions of rupees invested, India has yet to complete a single large-scale thorium reactor–and neither has any other nation. There are seven research reactors scattered around the world, but no actual power plants. India’s Ambitious Nuclear Power Plan–And What’s Getting in Its Way:

“With the commercialization and enhanced use of renewable energy technologies, the per unit cost of electricity produced from renewables has gone down significantly. The cost of solar power in India right now is Rs 2.62 per unit, almost half of the per unit cost of electricity being produced by the recently operational Kudankulam nuclear power plant (Rs 4.10 per unit).”

The problem is we’ve based our entire global economy on maximizing consumption, not efficiency, so that waste = growth = maximizing profits.

Consider this chart of energy consumption, and the chart of energy efficiency, which reflects the appalling inefficiency of our consumption.

Given that we incentivize profits earned from increasing waste (i.e. “growth”), this shouldn’t surprise us.

As Tim Morgan has explained, our entire financial system presumes that money-finance is the master system that controls everything in the real world, when in fact the financial system is an overlay on the energy system. In essence, the entire financial system is nothing but abstract claims on energy that unlike energy can be endlessly multiplied.

Claims (currency and debt) can be created out of thin air, but energy systems cannot be created out of thin air.

The answer isn’t to attempt to replace a disastrously inefficient and wasteful system with replaceable energy sources–a delusional fantasy. The answer is to set aside our Wetware 1.0 programming to maximize energy output and consumption in favor of maximizing energy efficiency and conservation.

There are a number of ways this transition could be made. For example, rather than tax human labor, we could tax the consumption of non-renewable resources.

UnTax–Taxing Away Climate Change:

“Yet the reason for this inertia is simple: the price we pay for fossil fuels, and most other non-renewable resources, is far too low, because we don’t pay for their creation which took hundreds of millions of years, but only for their extraction. To make matters worse, more than 90% of all taxes are paid on labor in most countries, which discourages employment and forces automation into every part of the economy.

This mix-up, a by-product of the industrial revolution, leads to pollution, greenhouse gas emissions, waste production and the unnecessary use of automation, which damages our ecosystems and at the same time deprives future generations of their right to access those scarce resources.”

Do we really want to return to the “normal” of waste = growth = maximizing profit if this “normal” is destroying the planet?

Cutting consumption is anathema in the current mindset of waste = growth = maximizing profit, but the Pareto Distribution suggests we could cut consumption by 80% and still retain 80% of the essentials for a good life such as clean water, healthy food, basic shelter, etc.

As I posted in Musings #9, consider this short film of Market Street in downtown San Francisco shot a few days before the catastrophic earthquake and fire of 1906. A trip down Market Street before the fire (Library of Congress).

Life was pretty good in 1906 San Francisco and many other cities. Now look at the energy consumption around 1900: it was around 15 TWh compared to today’s 160 TWh, roughly 10% of current consumption. And the engines and machines of 1906 were by today’s standards extremely inefficient. Adjust for increases in population and efficiency and it’s clear lower-consumption life is not necessarily a return to living in caves.

Do we really want to return to “normal” if “normal” is destroying the planet?

Waste is everywhere in our way of life because waste is profitable in the current arrangement. What would happen if waste was taxed at very high rates and efficiency was the sole means of maximizing profits?

Charlie Munger (head of Berkshire Hathaway) famously said: “Show me the incentive and I will show you the outcome.” That’s how humans operate: we respond to the incentives presented, even if they destroy the planet.

Change the incentives, and the outcomes change. What if efficiencies and conservation earned the biggest rewards and human labor was freed from taxation? The outcomes would improve very dramatically–and that’s just the start.

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A Hacker’s Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

China launched an automated cargo rocket hauling supplies for the country’s new space station late Saturday from the tropical island of Hainan in the South China Sea. 

A Long March-7 Y3 rocket carrying the Tianzhou-2 cargo spacecraft blasted off at 8:55 pm local time from the Wenchang Satellite Launch Center, state-run media Global Times reported. 

China launched the cargo spacecraft Tianzhou-2 on Saturday, which is scheduled to dock with the space station core module Tianhe to deliver supplies, equipment and propellant. #GLOBALink pic.twitter.com/GElRRa7NZd

— China Xinhua News (@XHNews) May 29, 2021

The Tianzhou spacecraft is tasked with refueling the Tianhe space station core cabin for maintenance in orbit and also provides living necessities for future crewed missions at the space station. 

The Chinese space agency expects 11 launches through the end of this year to deliver two more modules for the Tiangong Space Station, additional supplies, and a three-member crew. Today’s launch marks the second within a month. 

Apart from launch and eventual docking at the new space station, the rocket itself is set to fall back to Earth in an uncontrolled manner. Well, that’s at least what happened earlier this month after the launch. There was no statement from Beijing about reentry plans for the rocket. 

Beijing isn’t part of the International Space Station (ISS), primarily due to the U.S. The ISS has been in low Earth orbit for a little more than 22 years and could reach its lifespan by the end of this decade. Russia has already announced it would be withdrawing from the ISS to build its own. 

Authored by Louis-Vincent Gave via Evergreen Gavekal blog,

“Whenever I hear numbers like this, I look back to my childhood growing up in Hungary, where…[the] value of money meant nothing. I’m very worried this is an unstoppable situation because the longer the Fed waits, the more they will have to raise rates. So, we’re basically painting ourselves into a box, and I don’t see how we’re going to get out of it.”

– Thomas Peterffy, chairman and founder of Interactive

The 1986 oil price crash, to an extent, fired the starting gun on 30 years of global deflation. As commodity prices collapsed, so did the Soviet Union, giving the West a deflationary peace dividend. By the early 1990s, Japan’s real estate and equity market busts threatened its banks. The rollout of the North American Free Trade Area and the 1995 “tequila crisis” helped make Mexico a competitive manufacturing hub. Soon after, the 1997-98 Asian crisis made producing abroad even cheaper, while China’s 2001 entry into the World Trade Organization greatly simplified outsourcing. In 2008, the US mortgage bust spurred China to build more infrastructure, unleashing 500mn more workers into the global economy. Europe’s 2011-13 crisis caused another deflationary hit, while the US’s shale energy boom stopped oil and gas prices rising.

So today, as inflation expectations move toward generational highs, a relevant question is: where might the next deflationary shock come from?

Europe.

 If vaccine rollouts let Europeans vacation freely this summer, it is unlikely to spur deflationary forces. The effect should be steeper eurozone yield curves, outperformance by financials and a firmer euro. Yet, if Europeans are told to stay home, another deflationary eurozone crisis could still ensue. Citizens deprived of a vacation may register their protest at the ballot box or, more likely, on the streets. For this reason, the odds are high that Europe re-opens, just as last year’s large fiscal stimulus gets rolled out. We should thus assume that—for now at least—Europe will not be a deflationary black hole.

Commodities.

With Europeans set to hit the beach and Americans looking to crank up the vehicle miles, energy prices should stay well bid. And as about a third of the cost of producing commodities is attributable to energy, the broader complex is unlikely to provide any kind of deflationary shock in the near future.

The US dollar.

As big projects in emerging economies are mostly funded in US dollars, any strengthening of the unit reduces their growth and depresses commodity prices. So, could a rising dollar unleash deflationary forces? For now, the US currency is making lower highs and lower lows, in spite of higher yields. This is perhaps not surprising, as the Federal Reserve has promised to add US$120bn of fresh dollars to the global system each month. Given such generosity, the threat of a US dollar short squeeze has now greatly receded. Hence, the dollar seems unlikely to be a deflationary force in the near future.

The renminbi.

With so much production capacity centered in China, the renminbi’s value is vital for manufacturers. When it is weak, few Western industrial firms can compete with China but when strong, foreign producers can expand margins and/or compete on price. Whether viewed on a three-year, five-year or 10-year basis, the renminbi has been the world’s best-performing major currency on a total return basis, which shows that, structurally, there is little appetite in Beijing for a devaluation. Moreover, as China’s trade surplus hits new highs and the authorities there tighten both fiscal and monetary policies, there seems little reason, cyclically, for this to happen.

US real estate. 

Homes are getting expensive, with median prices relative to incomes near the highs seen in 2006-07. The difference now is low supply as the stock of existing homes available for sale is at an all time low. Add into the mix the soaring cost of skilled labor and surging prices for building materials and it is hard to see why US real estate prices should crater anytime soon.

Putting it all together, in the coming few years those “usual suspects” that previously unleashed deflation are now more likely to raise the inflationary temperature. Hence, if deflationary forces are going to carry the day, there will need to be impressive productivity gains. Somewhere in the system, someone will have to produce a whole lot more, with a whole lot less. But is this likely given the following trends that have been covered in recent Gavekal reports?

1. Globalization rollback: productivity gains from outsourced production are under threat as its true social costs have become more apparent.

2. Semiconductor shortage: robots have been touted as replacements for low-end labor everywhere, but as car factories are shuttered for want of chips one has to wonder where robot-makers will find the semiconductors they need to build the robots that will then build the cars.

3. Labor markets: workers across Western economies are being incentivized to stay home and, unsurprisingly, wages are now starting to rise. Indeed, 2020 saw the first meaningful US recession in which wage growth barely fell.

This leaves us in the situation of seeing the price of everything from meat, corn, gasoline and lumber to shipping rates rise without a clear countervailing deflationary force. In an environment of rising government intervention, expanded public hand-outs, higher corporate taxes and more protectionism (and that is just the US!), it is possible that a surge in productivity provides an offset to the growing inflationary wind. But like an Elizabeth Taylor marriage, this seems to represent the triumph of hope over experience.