4 min read

Serious mistakes

The Reserve Bank of New Zealand came under heavy fire last week; decades of Alzheimer's research was based on a fraudulent paper; Nancy Pelosi's trip to Taiwan flares up US-China tensions; and ignore the propaganda - Russia's economy is in terrible shape.
Kiwi insiders are coming for their central bank. Is the RBA next?
Kiwi insiders are coming for their central bank. Is the RBA next?

1—Serious mistakes

The pitchforks were out in full force across the ditch last week, after two former Reserve Bank of New Zealand (RBNZ) governors claimed that the central bank "made serious mistakes during the pandemic, allowing inflation to get out of control".

Arthur Grimes gave an interview claiming there's a lack of knowledge on the RBNZ board, which followed a critical report co-authored by Graeme Wheeler with an excellent foreword by William White, former deputy Governor of the Bank of Canada:

"Central bankers have fundamentally misread the nature of the system they are trying to control. They wrongly assume that the economy is simple and static, and therefore as understandable and controllable as a machine. In contrast, it is as complex and adaptive as a forest, a system where policy can have different effects over different time horizons, many unintended consequences and where there is no "equilibrium". Humility rather than hubris should have conditioned monetary policy right from the start."

The Reserve Bank of Australia (RBA) has largely avoided mainstream criticism of its actions during the pandemic. But it's only a matter of time until it also finds itself under the spotlight, with the new government announcing a major review into its operations. It will also publish its annual report in September, which should for the first time reveal the estimated losses on its dubious bond buying programme ('quantitative easing').

You can read Wheeler's full report on the NZ Initiative's website here (13 pages).

2—Theranos level fraud

It seems medical science has been dragged into the replication crisis that first came to light in psychology and has plagued the social sciences ever since, after a 2006 study on Alzheimer's was found to contain "shockingly blatant" examples of tampering:

"This looks like Theranos level fraud. The last 16 years of Alzheimer's research looks to have been built on deliberately falsified data. It's why Alzheimer’s drugs have a 99% failure rate in trials. The thing they're trying to fix isn't the problem."

The US government spent $1.6 billion on this particular branch of Alzheimer's research in a single year (2021). Truly tragic if the claims are substantiated.

Check out the full article from the Daily Kos here (~6 minute read).

3—Tensions rising

US House of Representatives Speaker Nancy Pelosi is planning a trip to Taiwan sometime this month. China's not happy:

"On Thursday night, Chinese President Xi Jinping held a phone conversation with US President Joe Biden, during which he once again warned the US about the seriousness and significance of the Taiwan question and said, "Public opinion cannot be defied. Those who play with fire will perish by it. It is hoped that the US will be clear-eyed about this."

Sending fighter jets to intercept Pelosi's plane, declaring air and maritime zones around the island of Taiwan as restriction zones for military exercises … China's responses will be systematical and not limited to small scale given the severity of Pelosi's move and the damage to the political trust of China-US relations."

Pelosi's visit – if it goes ahead – would come shortly after claims from the US Senate's Committee on Homeland Security and Governmental Affairs that "China tried to build a network of informants inside the Federal Reserve system, at one point threatening to imprison a Fed economist during a trip to Shanghai unless he agreed to provide nonpublic economic data."

China is now conducting military exercises off its coast opposite Taiwan and despite the bluster, the US is increasingly looking to hedge its bets on Taiwan, announcing tens of billions of dollars in subsidies for the domestic production of semiconductor chips. The US is currently reliant on Taiwan for ~90% of its semiconductor needs, which is also Taiwan's largest export (>30% of the total).

Here's a link to the official Global Times (Chinese government propaganda) piece, here's the WSJ report with Fed spying claims and here's an NPR article outlining the new semiconductor subsidies.

4—In terrible shape

How has Russia's economy coped following its war in Ukraine? Not well according to a new academic paper from researchers at Yale University, who take on some of "Putin's favourite propaganda talking points", such as the strength of the rouble, which they say is largely due to "restrictive capital controls".

According to the authors, Putin has resorted to "unsustainable, dramatic fiscal and monetary intervention to smooth over these structural economic weaknesses", and the Russian economy is now in terrible shape to support a long war effort. They conclude that:

"Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia."

And that says nothing of the state of the Russian army, which "has been using semiconductors from dishwashers and refrigerators for its military equipment".

You can download the full paper here (~70 pages plus a slide deck).

5—Further reading...

☢️ "Germany is rethinking its plan to exit nuclear power by the end of the year".

⏳ So now it'll suck twice as much: Facebook and Instagram are going to double the amount of feed content from accounts that people don't follow (currently ~15%).

🏡 Australia's banking regulator, APRA, gave the new federal government a 48-page document warning that rising inflation and rate increase are likely to put "a number of households in financial distress."

👩‍⚖️ "Judges are utilising Wikipedia, the free, volunteer-driven online encyclopedia, to help inform their decisions, according to a study released Thursday."

🤖 Google fired the researcher who claimed that LaMDA, its in-house AI, was sentient and "openly questioning whether it possessed a soul".