Bird flu: Will it be the biggest story of 2025?

Amid ongoing wars in Ukraine and the Middle East; the collapse of governing coalitions in Europe; the return of Donald Trump to the presidency of the United States promising to downsize its federal government radically and end or pare down its commitments to Europe and Ukraine; the hottest year on record in 2024 and worse to come including more violent and destructive storms due to relentless climate change; amid all this turbulence, a tiny virus may break through to become the biggest story of 2025.

KFF Health News reports that "at least 875 herds [of dairy cattle] across 16 [U.S.] states have tested positive" for bird flu and that "the virus shows no sign of slowing." As I discussed previously, for obvious self-interested economic reasons, the dairy and beef cattle industries did their best to thwart quick action to contain the virus when it began spreading earlier this year. Now, it seems, it is too late, and the foolish attempt to limit the economic damage to the beef and diary industries has instead turned the bird flu into a major and expanding calamity for both those industries.

There are two developments that could end up making this the biggest story of 2025. First, the availability of beef and dairy products may be curtailed as production declines due to sick and dying animals. So far, most dairy cattle survive the infection—only 2 to 5 percent die—but milk production declines by 20 percent. That kind of decline would be a big hit for the dairy market as the disease spreads to cattle practically everywhere.

When governments speculate: Orange County, British gold and Bitcoin reserves

There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present. Only after the speculative collapse does the truth emerge.

               —John Kenneth Galbraith, A Short History of Financial Euphoria, 1990

All the recent talk about government Bitcoin reserves has gotten me thinking about what happens when governments speculate.

By the time governments decide to take the plunge to make money by speculating, whatever craze they are joining is likely nearing an important and very bad turning point that will lead to regret. This is because in their actions governments are by nature conservative in the ordinary sense of the word and tend to follow rather than lead investment trends after long delays. (Sometimes, as you will see below, the opposite happens: Governments sell assets at the bottom believing low prices signal that such assets are no longer useful or relevant. They thereby miss out on the next bull market proving that their timing is backwards at both market extremes.)

Government employees' conservatism in action comes from being constrained by a web of rules that tell them what to do and when to do it. This is no more the case than in the management of government treasuries. That money is there to be spent on things the elected representatives decide to spend it on. In the meantime, it should be invested in low-risk securities with a very low likelihood of default, and that usually means investing in government securities of short duration. That also means low returns. But accepting such returns is said to be justified by the desire to make sure no money is lost.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, December 22.

U.S.-China trade war: Is the latest battle really tit for tat?

The United States and China moved closer to an all-out trade war as China last week banned export of the key high-tech metals antimony, gallium and germanium to the United States. That was in response to the United States banning exports to China of computer chip-making equipment, software and high-bandwidth memory chips (used for advanced applications).

It should come as no surprise that the three metals listed above are all implicated in the production of high-performance chips of the very type the United States won't send to China. Which leads me to ask: Which is more important for making advanced computer chips, the actual chemical elements needed to make them or the machines required to manufacture them?

More than two years ago I wrote a piece entitled "East vs West, 'Stuff' vs 'Finance'". My premise was that the United States and European countries ("The West") have hollowed out their economies by focusing on the finance, insurance and real estate sectors, the so-called FIRE economy, to the neglect of manufacturing, mining and agriculture.

President of the Titanic

Four years from now Vice President Kamala Harris may be glad she didn't get the promotion she was seeking from the American electorate. In fact, all those vying for high office around the world may find that the going from here on out will be much more difficult. What few of them realize is that global society has not only become a version of the Titanic, but that we're at the place in the story where the Titanic has already hit an iceberg.

Of course, government leaders around the world generally believe that—whatever our current troubles—the technological progress of humanity will continue unabated and our lives will get better. The world system we've created is, well, unsinkable. At least that is what they are conveying to voters; politicians generally know better than to suggest that under their watch people are going to have to make sacrifices. The last politician to do that was U.S. President Jimmy Carter and he was defeated for re-election.

Carter seemed to understand that we live in an age of resource limits and was attempting to prepare us for the necessary transition. But Americans didn't want to turn down the heat and wear sweaters indoors; they preferred gym shorts and T-shirts instead. Thirty-six years after what came to be called Carter's "Malaise Speech" one writer opined that "President Carter made the unforgivable error of treating the American people like adults."