STCMA – 27th April 2021

I read this strongly worded article in FT on the ‘bogus’ claims (as per the FT authors) of Bitcoin being environmentally not-unfriendly. Clearly, as the FT authors pointed out, the folks who wrote such a report had a natural conflict of interest. They were heavily invested in Bitcoin. Bruno Maçães countered it here. He has a point that, over time, the energy consumption of Bitcoin would or could come down. Two, Bitcoin farms can be located near sources of renewable energy that have surplus energy to sell. All that is fair.

He also highlights the case of petrodollars. He is right. Petrodollars were earned by extracting and burning fossil fuels and they were re-invested in US assets, including Treasuries. Of course, that was that. Now, the world has changed. When the West changes its ways, it wants others to change their ways too. But, it does not acknowledge that it has been guilty of similar conduct and has profited from it, while it wants to shut others’ access to such profits now. Some see it as hypocritical, arbitrary and self-serving. There is something to be said for it.

Stephen Roach’ mea culpa does not come across as inauthentic or as disguised self-praise. He is writing about how he got his forecast of a double-dip recession in 2021 for America wrong. Of course, he proudly recalls some of the big calls he made. Nothing wrong with that.

On the topic of the booming consumer, here is the latest global consumer confidence dipstick by Ipsos Mori. Consumer confidence is booming. For macroeconomists, that is a boost to aggregate demand. 

You have to believe these stories. Bubbles are not inferred from valuations alone. But, from such stories as well. It is a bubble psychology that matters. Or, for that matter, the blog post by Matt Levine – I had covered it as a separate post a short while ago – on the business model of helping businesses to be set up to to defraud individual investors – these are tell-tale signs of an euphoric market.

On market psychology, check out Robin Wigglesworth’s long article on the bubble in US stocks vs. not-so-much in UK stocks. The Shiller P/E for US stocks at 37 times is not just shy of the peak reached during the dotcom era of 1996-2000. Tobias Levkovich of the Citigroup also has a cautionary tale to tell about investing at current levels. 

It is always interesting to read that investors cannot see obvious triggers for a correction, let alone a crash. Tobias mentions that their clients tell him that. But, what they don’t seem to get is that the trigger is never obvious, except in hindsight.

The header for the article leaves no one in doubt as to what NYT Editors think of the subject: ‘A global tipping point for reining in tech. has arrived.’ The article discusses the emerging thinking, regulatory actions and their successes in different parts of the world, against the technology giants. On this one, I hope NYT has got it right. 

Shellenberger on climate change

A good friend had shared with me the story that Forbes pulled an article by Michael Shellenberger on climate change. He had revised his views on it being the most important existential threat that the world faces. What makes it interesting is that he has been a life-long activist. His full original article can be found here. If one wished to read it online, here is another link.

I mentioned it to a friend who lives in Coonoor and believes in the impact of climate change. He remained sceptical of Shellenberger’s new-found scepticism. I want to read his book, ‘Apocalypse, Never’. As of now, I have mixed feelings about his apology. Mind you, I am yet to read the book.

(1) His endorsement of industrial agriculture does not square with the rising tide of obesity in some societies and incidences of cancer. Does the world need to produce so much food?

(2) ‘Free range’ beef production prevents animals from being frightened on their way to being slaughtered. In their frightened state, their bodies produce chemical reactions that could be one of the causes of meat-eating creating human health disorders.

(3) This critique of ‘climate change’ activism should not give rise to a sense of free pass to even air and water pollution in places like India. Their impact is rather apparent. Just a week of walking around in Indian cities is enough to cause sore throat and accumulation of phlegm. Therefore, he may be right that wood-burning is more problematic but it should not be construed as giving a free pass to fossil fuels.

(4) ‘Climate change’ sceptics/repudiationists also believe in growth at all costs. For them, climate does not matter; debt does not matter and deficit does not matter. So, it is a package deal. If one pulled back on one of them, they would take it as a ‘green signal’ for the rest of the package. There is ‘sustainable financing’, sustainable living and sustainable economics. The word, ‘sustainable’ need not only be relevant to climate change.

(5) Of course, it is also true that the Left & Climate Change activists also overlap with deficit monetisation because the government has access to the ‘virtual/electronic printing press’ and hence, even they believe in having the cake and eating it too. So, both sides are guilty of believing in different kinds of free lunches.

Yes, one can become sceptical about climate change and yet remain a pollution fighter. But, industrial and fossil fuel pollution also play their part in inducing climate change. We saw evidence of human activity on air when pandemic-induced shutdowns gave us blue skies in places that have long since ceased to see blue skies and people could see Himalayan peaks some 200 kms. away from Chandigarh in India.

I am aware that climate change has been used as a bogey to prevent developing countries certain economic growth options that western nations took for granted in their development phase. So, to that extent, climate change repudiation is welcome.

But, all told, I am left with mixed emotions. I have to read the book to form my own view of how credible his arguments sound to an (hopefully) intelligent reader but who is not a climate specialist. I read two reviews. One is from ‘The Guardian’ newspaper and one is from the ‘Wall Street Journal’. Somewhat predictably and yet disappointingly the reviews are what one would expect. The review in ‘The Guardian’ is critical of the book and the review in ‘Wall Street Journal’ praises the book.

The reviewer in ‘The Guardian’ calls Shellenberger’s book and Bjorn Lomborg’s book political propaganda although he did have several areas of agreement with Shellenberger.

As with many things, there is polarisation here. It would have been interesting had the reviews switched their platforms. Now it is difficult to make out if the reviews are to be taken at face-value or merely reflect entrenched views rather than being critiques of the book.

Interesting but difficult times. Trusting has become a lot harder. Cynicism rules.

STCMA – 24th November 2019 edition

CNN has a long article on the travails of the pension system in The Netherlands in a world of zero to negative interest rates [Link]

Indonesia supposedly has an advantage in a world where fashions are disappearing fast (or changing fast?). I am not sure I understand this world, however:

The journey of an Adidas or Nike garment produced by Tuntex in Indonesia, for instance, can begin almost 4,000 km away in the company’s textile plant in Taiwan. The fabrics can take nearly a week to reach the sewing factories. The model worked well enough when retail stores dictated trends and operated in clearly delineated seasons. But when clothing retailers need to react to a sudden trend driven by Instagram, it creates a daunting barrier. [Link]

Simon Kuper lists eight things we could learn from beautiful minds. I like the list [Link]. Good read.

Brilliant article in ‘The Guardian’ (ht: my former student Arjun) on what home delivery mean to the world and what ‘last mile’ really means:

Progress today consists of having our food and materials wing their way to each of us individually; it is indexed to our immobility. ….

Implicit in this fixation with time is the thesis that the opportunity cost of regular shopping is too high – that the hours spent driving to the better bookstore in the next town can be spent doing something more valuable. …..

Of course, the principle of opportunity cost assumes that we will earn the value of that fee back in some way in those 12 minutes – whereas the truth is that we are most likely to squander them on Instagram. The internet promises us time, then takes it right back….

…. Online, each of us functions as a one-dimensional identity: as consumer or vendor, to consume or sell in our own bubbles, unaware of the other except as a clump of anonymised data. Even with free shipping, that is the transaction cost. …

The final triumph of home delivery will be when we forget that anything is being delivered at all. [Link]

This is similar to an article in New York Times that I had blogged on earlier, I think. The NYT article appeared in October. The story in ‘The Guardian’ appeared few days ago. My feeling is that the piece in ‘The Guardian’ is more effective. It forces reflection.

Good article in New York Times on whether reducing travel via airplanes does good things for the environment or not. I love such articles because they point out the flaws of lazy activism partly also based on ‘holier than thou’ attitudes. Remember Melisa Kwasny’s beautiful piece blogged here.

The relationship between the Czech Republic and China – good to see the changes happening. [Link]

Some very interesting recommendations for reading here.

Take your pick

In May 2019, ‘The Economist’ wrote thus:

Global meat-eating is on the rise, bringing surprising benefits: As Africans get richer, they will eat more meat and live longer, healthier lives [Link]

Fast forward, more than six months later,

How much would giving up meat help the environment?: Going vegan for two-thirds of meals could cut food-related carbon emissions by 60% [Link] – ht: Saurabh Mukherjea of Marcellus Investments