Downsizing the U. S. government this way will destroy its effectiveness without increasing its efficiency

Before cutting the ranks of U. S. government employees who safeguard the nation's nuclear material and respond to nuclear accidents, it would seem wise to ask them exactly what tasks they are assigned and how they accomplish them. Apparently, that was not a consideration when the Trump administration through its U. S. Department of Government Efficiency Service (currently run by billionaire Elon Musk) began firing personnel at the National Nuclear Security Agency (NNSA).

What is happening at the NNSA is a window into why merely downsizing an organization does not necessarily increase its efficiency. On its website the NNSA explains that it has the following missions:

1. To ensure the United States maintains a safe, secure, and reliable nuclear stockpile.


2. To prevent terrorists from acquiring nuclear or radioactive material that could be used in an attack on the United States, its interests, or allies.


3. To provide effective nuclear propulsion plants to the U. S. Navy.


4. To prepare for nuclear and radiological incidents and accidents through planning, training, and exercises and respond to nuclear and radiological incidents and accidents worldwide.

Why Musk's access to U. S. Treasury payment systems risks a global financial meltdown

Whether or not you share the zeal for cuts in government spending embraced by President Donald Trump and his billionaire sidekick Elon Musk, you should know that giving Musk and his callow team of computer coders access to payment systems at the U. S. Department of Treasury risks a global financial meltdown. It doesn't make such an event certain, but it lowers the odds considerably.

Here's why:

First, the U.S. Department of Treasury processes some $6 trillion in payments each year. If that system were to come to a halt for even a relatively short period of time, the consequences would be devastating, not only for the U.S. economy but for the global economy as well.

It is also important to grasp that the Treasury Department stands behind the entire U.S. banking system. It is the lender of last resort in a banking crisis to the Federal Deposit Insurance Corporation which insures bank deposits nationwide, and because the Treasury Department has the full faith and credit of the United States government behind it, the department is a potent force for forestalling panic and crisis in the banking system.

After DeepSeek, AI developers are wrong that The Jevons Paradox will bail them out

In 1865 British economist William Stanley Jevons explained to the public that increased efficiencies in the use of resources per unit of production do not generally lead to lower consumption of those resources. Rather, these efficiencies lead to higher consumption as many more people can now afford the more efficiently produced goods which carry a lower price tag. Jevons was referring to coal, the cost of which was falling and demand for which was rising due to increased efficiencies in production. His idea became known as The Jevons Paradox.

When the Chinese-based artificial intelligence (AI) upstart DeepSeek demonstrated last week that complex and powerful AI can be delivered for a tiny fraction of the cost and resources of current AI tools, DeepSeek's competitors cited The Jevons Paradox and told investors not to worry. Demand for AI would now grow even more rapidly in response to greater efficiencies and thus lower costs.

What those competitors failed to mention is that DeepSeek's breakthrough is great news for buyers of AI tools, but very bad news for current developers who are sellers of those tools. DeepSeek is giving away free or at only 3 percent of competitors' prices (for those needing application programming interface services) something comparable to the very expensive products of its competitors. This suggests that the hundreds of billions of dollars spent developing those expensive tools may have just gone up in smoke. That investment may never be recouped.

Democratization of AI spurts ahead: More power to individuals for mischief

While the world was focused on the actions of the Trump administration in its first week, a little-known Chinese startup startled the tech world last week with the release of an open source artificial intelligence tool that for a fraction of cost and resources of American competitors such as ChatGPT matches and in some cases outperforms its American rivals.

The company, DeepSeek, has gone even further, making its eponymous tool available for download for free. Only those seeking to use the company's application programming interface―something which allows the tool to interface more easily with existing programs—must pay a fee that is only about 3 percent of that of other tools.

DeepSeek sheds light on two important issues. First, U.S. export controls on advanced computer technology, both hardware and software, are meaningless against a rival that has a highly educated population with the training and tools to work around such controls. The lack of resources essentially forced the DeepSeek team to solve problems related to efficiency that they would not have bothered to tackle if U.S. technology had been available. The team ended up producing a superior, much more cost-effective product as a result. In my December 2024 piece "U.S. China trade war: Is the latest battle really tit for tat?" I wrote:

Wishful thinking? Sweden building nuclear waste site to last 100,000 years

The sensible Swedes like planning ahead. This time its storage for nuclear waste from its own nuclear industry—storage that is supposed to last 100,000 years. Nuclear power currently provides 40 percent of Sweden's electricity from six operating reactors. The Swedes expect to fill the storage site—"60 km of tunnels buried 500 metres down in 1.9 billion year old bedrock"—sometime by 2080 at which time it will be closed.

For understanding whether the target of 100,000 years of successful storage is plausible, I suggest a trip back 100,000 years to understand what surprises might be in store over such an interval. One hundred thousand years ago the Bronze Age, the age when humans first started to refine and work with metal, was still 97,000 years in the future.

It might seem that not much happened in those 97,000 years, but actually a lot that could challenge such storage schemes did. For example, somewhere around 71,000 to 74,000 years ago Mount Toba, located in modern-day Indonesia, erupted in a supervolcano thought to be the largest in human history. The eruption was two orders of magnitude (100X) larger than another famous Indonesian volcanic eruption, Mount Tambora, which caused what is now referred to as "the year without a summer" in 1816.

Elevator 'crisis' as symptom of our infrastructure predicament

I recently noticed that the elevator at my favorite cinema has been out of order for weeks now. The less mobile patrons need that elevator to transport them downward to this underground theater. I then learned of America's "elevator crisis" and my mind wandered to the struggle to maintain the Roman Empire. I'll explain the connection below. But first a refresher on Rome's predicament:

The Roman emperor Trajan brought the Roman Empire to its greatest extent during his reign (98 to 117 A.D.) with his successful conquests in what we today would call the Middle East. Rome's many conquests had been financed by booty taken from the conquered.

But its hold on the sprawling empire—one that reached from northern England to southern Egypt, from Spain in the west to what today is called Iraq in the east—would henceforth have to be financed by rising taxes and inflated currency. The money was needed to pay for armies and naval forces to defend the empire's very long land and maritime borders. Building an empire turned out to be less expensive than maintaining one, including building and maintaining the infrastructure of roads and military and political outposts needed to protect and administer it.

What happened to Rome's maintenance bill happens in any system of infrastructure as it expands. The existing infrastructure must be maintained even as new infrastructure is built. Eventually, it becomes very expensive 1) to pay collectively for maintenance of all existing infrastructure and 2) to pay for increasingly aging infrastructure that requires extra expense.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, January 12.

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.