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25 July 2022 1 August 2022 (update: the coronavirus has swept through our house so we're delaying the launch by a week). If you have any feedback, please get in touch.
An anonymous book review of The Future of Fusion Energy (2019) provided a timely update on the state of fusion, which is once again topical given the energy crisis engulfing the east coast of Australia (and many other parts of the world!). According to the US government's 1970s-era "plan", we could have had it already – but we:
"...as a civilization, never decided that it was a priority. Fusion funding is literally peanuts: In 2016, the US spent twice as much on peanut subsidies as on fusion research."
Plenty more inside the full review (~20 minute read).
2—Assange to be deported
"On Friday, the British government formally ordered the WikiLeaks founder to be extradited — but Assange has two weeks to appeal that order from the U.K.'s Home Office."
The linked NPR article quoted above goes into much more detail about the background of the case and what might happen next, with Assange's appeal likely hinging on whether or not extradition to the US will restrict his "freedom of expression".
Assange is still an Australian citizen so it'll be interesting to see how Albo responds (even a non-response would send a strong signal of US appeasement). After all, the US has a stellar track record of protecting the freedom of expression for non-citizens who it accuses of exposing war crimes... 🙄
Catch the full story here (~4 minute read).
3—Where does the wealth go?
Noah Smith wrote an article explaining where the wealth goes when stocks, crypto and other prices, such as housing, crash:
"The short answer is: It didn't 'go' anywhere. It vanished. It stopped existing."
Noah went on to explain that's the case, which he correctly puts down to the fact that prices are determined by only the small fraction of shares or assets are actually traded, while "ALL shares or units of an asset are valued at the market price".
What Noah didn't get into is the combination of the mark-to-market accounting he describes above, large amounts of debt and a crisis trigger of some sort – say rapidly rising inflation and a war in Ukraine.
When wealth is wiped out, debt doesn't change. If enough households and businesses mistakenly took on large amounts of debt in the belief that higher prices or stronger business conditions were permanent, and they start defaulting on that debt, it opens the door to the possibility of a financial crisis, which a Bank for International Settlements report said "tend[s] to usher in deep recessions, as falling asset prices, high debt burdens and balance sheet repair drag down growth".
Read Noah's full article here (~8 minute read).
4—A blast from the past
Former US Secretary of the Treasury and President of Harvard University Larry Summers published a new working paper with economists from the IMF warning that "the current inflation regime is closer to that of the late 1970s than it may at first appear":
"In particular, the rate of CPI disinflation engineered in the Volcker-era is significantly less when measured using today's treatment of housing. In order to return to 2 percent core CPI today, we need nearly the same 5 percentage points of disinflation that Volcker achieved."
The US Fed raised interest rates by 0.75% on 15 June, its largest increase since 1994. The 5 percentage points of disinflation cited by Summers is "large by historical standards", raising the likelihood of further large rate hikes, and eventually (monetary policy works with a lag of ~9-18 months), a significant downturn in the economy.
The paper deals purely with the US but inflation is now a global problem, including here in Australia. And unfortunately the medicine will be similar – we can only hope that politicians don't fall back on some of the failed voodoo economics of the 1970s, such as price controls.
Read Larry's full paper here (~20 minute read).
🦠 A new Harvard study found that SARS-CoV-2 spike proteins remain circulating in the blood of people with prior infection "up to 12 months post-diagnosis, suggesting the presence of an active persistent SARS-CoV-2 viral reservoir".
🏡 The Reserve Bank of Australia's Saunders-Tulip model suggests that current market pricing of the cash rate points "to a large correction of about 30% in national home prices over the next four years".
📣 Elon Musk sat down with Twitter's employees – "tweeps" – for a Q&A session which revealed... well, not much other than that layoffs are likely and Musk really wants people in the office (although "exceptional" staff may be allowed to keep their slippers on).