Chinese ag theft, pathogen research only point up dangers of GMO crops and monoculture

I'm shocked, shocked, to find out that the Chinese are stealing America's agricultural technology!

It can hardly come as a surprise that the Chinese government actively encourages and organizes the theft of intellectual property from other nations and their companies, in this case, agricultural technology in the United States. College students are some of the most active players in these thefts as between 250,000 and 300,000 routinely attend U.S. colleges and universities in any given year, most of them studying in scientific and engineering fields.

Not only is the theft of proprietary seeds an issue, but also research on and transportation of plant pathogens. No one has been accused of actively introducing pathogens into America's farm fields so far. But the combined problems of theft and possible biological attacks on crops merely lays bare the bankruptcy of the modern conventional agricultural system.

Will the U. S. curtail oil exports as fuel prices rise?

President Donald Trump may soon feel the need to "blockade" U. S. crude oil exports after those exports hit a record high recently, a trend which, if it continues, will increase the price U. S. consumers pay for gasoline, diesel and other petroleum-related products.

Nations around the world are scrambling to secure oil supplies that have been dramatically reduced by Iran's closing of the Strait of Hormuz to oil tankers of "hostile" countries which include major oil exporters such as Kuwait, Saudi Arabia, and the United Arab Emirates. In addition, the U. S. Navy has placed a blockade on ships from Iranian ports leaving the Strait of Hormuz, though the effectiveness of the blockade is in dispute.

In an April 1 televised address Trump said: "To those countries that can’t get fuel — many of which refused to get involved in the decapitation of Iran, we had to do it ourselves — I have a suggestion. Number one, buy oil from the United States of America; we have plenty. We have so much."

The Iran conflict and our Wile E. Coyote moment

I believe the global financial markets are now in what I would call a Wile E. Coyote moment frequently depicted in the old Warner Bros. animated series called "The Road Runner Show."  In this cartoon series a coyote while pursuing a roadrunner would inevitably end up running off a cliff and be suspended in mid-air until he looked down and hurtled to the bottom.

I say this because in case you didn't notice, last week we had the first public admission that fear is starting to grip monetary officials as a result of the Iran conflict. The United Arab Emirates (UAE) asked the United States government for a currency swap line, essentially a loan in dollars collateralized by the UAE's own currency.

I believe this event could be the leading edge of a financial panic that will ripple through the global financial system in the coming weeks, one that will bring various markets back into alignment with physical reality. That physical reality consists of an ongoing serious energy shortage and badly broken supply chains which are only getting worse as Iran continues to prevent critical energy and chemical supplies from exiting the Strait of Hormuz (except for its own).

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, April 26.

Why most economists vastly underestimate the economic damage of the Iran conflict

A priest, an engineer and an economist are stranded on a desert island. The first order of business is to get some food. The priest suggests that they all pray. The practical-minded engineer suggests that the three men make a net to catch some fish. But where will they find the necessary materials? The priest and the engineer turn to the economist and ask him if he has any ideas. The economist replies, "Assume a fish."

This well-worn economist joke summarizes one of the chief flaws in contemporary economic theory. That theory almost completely ignores the role of physical resources, assuming they will always be available in the quantities we need at prices we can afford at the time we need them. When those resources aren't available, that theory begrudgingly accepts that there will be some damage to economic activity, but tends to greatly underestimate the impact. This conceptual flaw explains why economists in most financial institutions and governments and thus investors are not especially alarmed at the loss of energy resources as stock market indices remain not too far from their recent highs.

For a good summary of how contemporary economic theory goes off the rails, Australian economist Steve Keen offers a mercifully brief and comprehensible explanation. Here I will relate one critical part of that explanation. About 5.7 percent of U.S. GDP is devoted to procuring and distributing energy. Most economists will tell you that a 10 percent decline in energy availability would have a small effect on the U.S. economy. They would take the percentage of the economy devoted to energy, in this case 5.7 percent, and multiply it by 10 percent to arrive at a 0.57 percent reduction in economic activity.

Martin Act to the rescue: Insider trading on Trump reversals in the legal crosshairs

Currently unknown investors netted tens of millions of dollars in profit by placing huge trades in the oil futures markets just 15 minutes before President Donald Trump announced he was extending the deadline for strikes on Iran's energy infrastructure by five days to allow for nonexistent "negotiations" (which then turned into an additional 10 days—which meant little since U.S. and Israeli bombing simply continued). Because these investors bet on a fall in oil prices, they made money when the price of oil dropped sharply after the announcement.

The same or other investors traded heavily in stock index futures before the Iran announcement and profited handsomely as stock futures soared. All these investors could end up in legal jeopardy for engaging in insider trading if they were somehow given a heads up about the announcement. Were their trades just coincidental to the announcement? It seems unlikely, but that's the big question an investigation would answer.

Iran to Trump: If you destroy us, you destroy yourself

In the American streaming series "Bosch," the main character, a police detective named Harry Bosch, kills two bad guys in a plane who are trying to kill him. He then goes to the cockpit holding a pistol taken from one of the dead men. The pilot looks at him and says, "You kill me, you kill yourself." Bosch says, "I'm a f--king cop, asshole." The plane lands safely and the pilot is taken into custody.

In this analogy, President Trump is Harry Bosch; the pilot is the Supreme Leader of Iran, Mojtaba Khamenei; and the plane is the world economy. Khamenei can crash the plane, that is, kill the world economy by destroying the oil and gas infrastructure throughout the Persian Gulf so that it would take years to rebuild. Khamenei could go even further and destroy desalination plants in the following countries with noted dependencies on such plants for drinking water: Saudi Arabia (70%), Oman (86%), United Arab Emirates (42%), and Kuwait (90%). Doing this would make these countries largely uninhabitable. It's important to recognize that the Iranian military has demonstrated that it can hit precisely what it wants to hit with missiles and drones and destroy it.

Sticking with the Bosch analogy, it's still possible for Trump to let the plane land and save the world economy from complete destruction. The difference is that the pilot—in this analogy, Iran in the person of its Supreme Leader—must be allowed to go free and live undisturbed. That is what Trump believes he cannot allow because it would be a humiliating loss.

Is the complacency in global financial markets warranted?

Shortly before the war with Iran began, I wrote that the seeming complacency among government officials and financial market participants was based on two assumptions which I argued were unlikely to turn out to be true: 1) President Donald Trump would make a last-minute deal with the Iranians and declare victory and 2) even if Trump didn't make such a deal, the Iranians would not do all the things which they threatened to do if attacked.

Here we are three weeks into the conflict between the United States and Israel and Iran. There was, of course, no last-minute deal and the Iranians have done exactly what they threatened to do. Here is what I reported before the war were Iran's threats:

Those threats include attacking U.S. bases in the region, attacking any country that assists the U.S. and Israeli war effort, attacking U.S. naval vessels, and, most important, closing the Strait of Hormuz through which passes 20 percent of the world's exported oil and liquefied natural gas.

Oil price manipulation, an unrecognized stratagem and an unhinged plan

Governments around the world are desperate to bring down oil prices in the wake of a cutoff of about one-fifth of the world's supply due to the Iran war. Here are some of the moves we've seen so far:

1. The International Energy Agency, a consortium of 32 countries which coordinate energy policy and emergency readiness, called an emergency meeting to discuss release of strategic petroleum reserves to ease prices. The countries agreed to a release of 400 million barrels from reserves held in underground caverns and above ground in storage tanks, the largest release ever of such reserves.
   
   With about 20 million barrels per day no longer available from Persian Gulf exports because of the Iranian closure of the Strait of Hormuz, the narrow passage from the gulf to the open sea, this release represent just 20 days of oil deliveries. But it is unlikely that the daily release of oil will be more than a fraction of the lost barrels given constraints on how fast the reserve can be accessed. So it's not surprising that oil prices actually went up after the announcement.


2. Of course, I would be remiss in not pointing out that Iran's closure of the Strait of Hormuz was the initial manipulation of the world oil price as it vowed to push oil prices to $200 per barrel.

Iran war: What we're in for and why logic is your friend

Two weeks ago I suggested that the complacency regarding war with Iran was misplaced and that that complacency was likely soon to be replaced by panic in the world's capitals and financial markets. The general belief was that President Donald Trump would relent, make a deal with Iran, and declare victory. Even if he didn't, the Iranian regime would be quickly overwhelmed by a combined American and Israeli attack and possibly be overthrown in a popular revolt or in the alternative, sue for peace within days.

Of course, neither of those things turned out to be the case. The complacency has now vanished. Leaders in at least some capitals are panicking though the financial markets continue to respond in a surprisingly muted way to the risks this war poses for the world economy.

Here is the most important thing readers should understand about this war: Iran defines winning the war very narrowly. Victory for the Iranian regime is that the regime survives. Israel and the United States define winning as the fall of the current regime leading either to a new friendly regime or a break-up of the country into various parts. And just last Friday President Trump added that the "unconditional surrender" surrender of Iran is the only acceptable outcome. Now consider the remarks of the Iranian foreign minister to NBC: "We are not asking for a cease-fire and we don't see any reason why we should negotiate with the U.S." He pointed out that the United States has used two previous negotiations as a deceptive cover for attacks. So, it looks like this conflict will be a fight to the finish.

Could AI lead to the destruction of civilization?

When it comes to the dangers of artificial intelligence (AI) and now artificial superintelligence (ASI) (sometimes called artificial general intelligence), I feel as if we've been transported onto the set of the 1983 film "WarGames."

In the film teenage hacker David Lightman stumbles onto the military's most sensitive war scenario planning computer while believing he has simply found a soon-to-be-released game called "Global Thermonuclear War" on the server of a computer game company.  Lightman activates the game which ultimately makes personnel at the North American Air Defense Command (NORAD) mistakenly believe that the Soviet Union is preparing for an attack. On big screens throughout the war room, Soviet movements and preparations become ever more threatening by the hour. As we are told later, the object of the game is to win and so the computer sets out to win a thermonuclear war.

When Lightman realizes what he's done, he seeks out the one person he believes can stop the madness. (I'm skipping a lot of steps here.) He catches up with the architect of that war planning computer system, Stephen Falken. Falken is living a solitary, anonymous existence (under a different name) in a home that Falken says is near a primary nuclear target. He explains to the young hacker: "A millisecond of brilliant light and we're vaporized. Much more fortunate than the millions who'll wander sightless through the smouldering aftermath. We'll be spared the horror of survival."

Wars and rumors of wars: Iran edition

Last September I produced a brief survey of major conflict across the globe in which I wrote the following about the conflict with Iran and Israel, one which is now referred to as the 12-Day War: "[T]here is every reason to believe that the conflict between Israel and Iran is not over and that the United States may be drawn in again."

It appears the next phase of this war is about to begin. In fact, by the time you read this, attacks may already have begun.

It puzzles me that the rest of the world has treated the run-up to this second phase of the war as a non-event. Although the vast build-up of U.S. military forces has been covered in the media, other stories concerning the U.S. Supreme Court overturning tariffs imposed by the Trump administration and the ongoing fallout from the Epstein files are covered with equal if not greater weight. The financial markets have been barely roiled except for a relatively small uptick in oil prices.

The chemical society and its discontents: Ozone layer edition

The history of chlorofluorocarbons (CFCs), their danger to the ozone layer, and the drive to replace them reminds me of an observation from former CBS news correspondent and commentator Eric Sevareid: "[T]he real cause of problems is solutions."

When chemists F. Sherwood Roland and Mario Molina asked where chlorofluorocarbons (CFCs) go after leaking from refrigerators and air conditioners or being intentionally released from aerosol cans, they did not know that the answer would lead to the world-shaking discovery that these chemicals were threatening the Earth's ozone layer with destruction. Since this layer protects the Earth's surface from most of the Sun's ultraviolet radiation—radiation that would threaten all life if unchecked—the countries of the world agreed to phase out the use of these chemicals in what is known as the Montreal Protocol.

Substitute propellants for aerosol cans—mostly what is called liquid petroleum gas—represent an explosion hazard, but no longer threaten the ozone layer. But the first substitute for refrigerators and air conditioners, hydrochlorofluorocarbons (HCFCs), still had some potential to damage to ozone layer. So, now those are being phased out and being replaced by hydrofluorocarbons (HFCs) "which contain no chlorine, and therefore pose no risk to the ozone layer."

Taking a break - no post this week

Your humble author has been so overwhelmed with work that he has been unable to find time to write a post this week. He promises to return next week Sunday, February 15.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, February 8.

World oil and natural gas consumption vs discoveries: Diverging trends mean trouble

Herbert Stein was an American economist who served in both the Nixon and Ford administrations. He is probably most famous for formulating Stein's Law, namely, "If something cannot go on forever, it will stop." This is, of course, an obvious statement. But I think it cannot be stated too often in a global society that believes in infinite economic growth.

I propose to take a subset of that growth to demonstrate Stein's point. The subset is world oil and natural gas consumption versus discoveries. It turns out that Rystad Energy, a major consulting firm at the heart of the global oil and gas industry, has taken note of the fact that "just 25–30% of the oil consumed each year is currently being offset by new discoveries."

In a separate piece on both oil and natural gas, the advisory firm notes:

Venezuela's goo-in-the-ground isn't usable oil at current prices (and may never be)

In the wake of Trump administration's prosecution of a war and blockade against Venezuela and the administration's promise to vastly increase oil production in the country, it's worth knowing why claims about Venezuela's oil "reserves" being the largest in the world are problematic. It's also important to understand what this implies for the future of oil production in Venezuela.

Consider the following:

1. Official oil reserves are just that. They are numbers reported by official government sources. Where these numbers come from large state-owned oil companies—as is the case with Venezuela—they are rarely verified through independent audits. And, those numbers tell you nothing about the economic viability of the claimed reserves.


2. There is a pattern among several OPEC countries including Venezuela of suddenly claiming vast increases in oil reserves without evidence of additional economically viable discoveries. Just to be clear, reserves are known deposits of minerals demonstrated to be extractable using current technology and profitable at current prices. The term "reserves" does not appear to apply to most of Venezuela's extra heavy crude at current prices which is believed to be 90 percent of its supposed reserves. This is true especially if upgrading facilities have to be built from scratch—Venezuela has only one extra heavy crude facility that began production in 1947. Such expensive long-term investment requires a belief that prices will reach and maintain much higher levels than today and that political and social conditions will remain calm and favorable over long periods. (For a comparison of Venezuelan crude oil with others in the world, see this infographic.)

Venezuela and Greenland: 'Smash-and-grab' diplomacy in the age of scarcity

The United States is now engaged in what I am calling "smash-and-grab" diplomacy in Venezuela, and it will perhaps soon do the same in Greenland, a territory of the Kingdom of Denmark. In case you have never heard the term, smash-and-grab refers to robberies undertaken by smashing store windows and/or display cases and taking what is readily available without concern about alarms going off or people on the street or in the store seeing what the robbers are doing. The phrase seems more descriptive than the older one of "gunboat diplomacy" in which, not infrequently, the mere display of force was used rather than actual attacks to obtain concessions from a weaker nation.

The current practitioners of the U.S. form of smash-and-grab diplomacy leave little to the imagination, prefering big displays of violence and simply taking what they want with no pretext that the target country is accepting terms through negotiation. Witness the brazen taking of all exported oil from Venezuela, the proceeds from which are supposedly going to be used "for the benefit of the American people and the Venezuelan people" (whatever that means), according to U.S. President Donald Trump.

Readers certainly know that in the past there have been other more subtle ways that major powers have taken the resources they need for their industries and militaries. For instance, what followed the era of gunboat diplomacy—which more or less ran from the late 19th century through early 20th century—was a era of less direct bullying of weaker countries by major powers. As empires crumbled, newly independent countries were strongly encouraged to install leadership friendly to American and European foreign policy and economic interests—or else! One of the "or else's" was detailed in a book called Confessions of an Economic Hit Man, written by one of the unofficial emissaries from the United States who carried a message of consequences if the target countries' leaders did not acquiesce. The author began the book with this:

Autonomous vehicles: Is necessity really the mother of invention?

Aesop's Fables date back to the 7th century BCE and may be the first known written expression of an often repeated proverb, namely: Necessity is the mother of invention. In the story called "The Crow and the Pitcher," during a terrible drought a thirsty crow finds water in a partially full water pitcher. But the mouth of the pitcher is too small to allow the crow to reach the water. The crow discerns that if it drops enough pebbles in the pitcher, this will raise the water level. So the crow proceeds with this plan and finally gets a drink.

Aesop's Fables come in many versions which often include a "moral" or "application" at the end. Hence, we have the summary of the lesson of the story that we recognize today.

Trouble is, it's all too easy to apply this idea to any invention and assume that "necessity" refers to some common problem that, if solved, helps the entire community or society. So, when I saw that Waymo's autonomous taxis had shut down, not once, but twice about five days apart in the same city—the first time from a power outage that darkened about one-third of San Francisco and the second due to concerns that a coming storm would create flash floods—I asked myself what necessity is pushing the deployment of autonomous vehicles forward. (To state the obvious, cars with drivers were still able to move about San Francisco during the blackout and adapt to the outage of traffic signals.)