Monday Wake Up Call – June 7, 2021

The Daily Escape:

Sunset, Paines Creek Beach, Cape Cod MA – May 2021 photo by Kristen Wilkinson Photography

People worldwide are finally waking up to the tax mischief of multinational corporations. When Treasury Secretary Janet Yellen announced earlier this year that it was time to end the “race to the bottom” and implement a global minimum tax for corporations, few took her seriously.

But now we could be on the cusp of a once-in-a-generation moment that would benefit funding of our public services immensely.

On Saturday at the G7 meeting, the members agreed to back a new global minimum tax rate of 15% for companies to pay on income, regardless of where they are based. The deal is focused on two main changes: reallocating taxes towards countries where economic activity takes place, rather than where these firms choose to book their profits, along with setting a minimum tax rate.

If enacted, the agreement would stop large multinational companies from locating in tax havens, which will force them to pay more taxes. This is clearly revolutionary. The winners would be large economies where multinationals sell a lot, but where they book little taxable profit, thanks to tax loopholes that allow them to siphon off income into low-tax jurisdictions.

This has become a larger problem since the rise of the digital giants like Apple and Google, companies with mostly intangible assets. The most obvious losers will be the tax haven countries that, more than half a century ago, started taking advantage of globalization by drastically lowering their tax rates.

The most sophisticated firms, those with battalions of tax lawyers and accountants, have for years employed tax loopholes in individual countries’ tax laws to minimize their total tax liability. While not all tax loopholes deal with international sales, they are a prime method that the biggest firms use to avoid income taxes.

The NYT cites a report from the EU Tax Observatory which estimated that a 15% minimum tax would yield an additional $58 billion in tax revenue per year.

Between 2011 and 2020, Amazon, Facebook, Alphabet (the owner of Google), Netflix, Apple, and Microsoft paid roughly $219 billion in income taxes, which amounted to just 3.6% of their more than $6 trillion in total revenue, according to the Fair Tax Foundation.

Had these six firms paid the prevailing tax rates in the countries in which they operate, they would have given global tax authorities over $149 billion more than they did over the past decade.

But tax reform isn’t a sure thing. Next month, the G7 must sell the concept to finance ministers from the broader G20 group of nations. If that is successful, officials hope that a final deal can be signed by the Group of 20 leaders when they meet next in October. Ireland, which has a tax rate of 12.5%, has come out against the global minimum tax. China has been quiet, but is considered unlikely to buy in.

G7 finance officials think that if enough advanced economies sign on, other countries will be compelled to follow suit. They plan to exert political pressure on Ireland to join the agreement.

The Biden administration has been eager to reach an agreement because a global minimum tax is an ingredient in its plans to raise the US corporate tax rate to 28% from the current 21%, to help shave the deficit. While Republicans and corporations think that increasing taxes would make American companies less competitive, getting other countries to go along with a minimum tax rate on overseas profits would minimize the home field disadvantage to American companies.

Time to wake up, America! We need our Congress, along with world leaders, to step up and enact this new tax policy. Changes to the tax code requires approval from both Houses of Congress, so this may never happen.

To help you wake up, listen to a cover of Bob Dylan’s “Everything Is Broken” by RL Burnside, with an all-star supporting cast including Buddy Guy with the first guitar solo, Derek Trucks with the second guitar solo and James Cotton on solo harmonica.

You may not be aware that Rolling Stone has a list of their top 80 Dylan covers . Here’s Burnside’s blues take on Dylan:

Sample lyric:

Broken hands on broken ploughs,

Broken treaties, broken vows,

Broken pipes, broken tools,

People bending broken rules.

Hound dog howling, bull frog croaking,

Everything is broken.


Monday Wake Up Call – May 24, 2021

The Daily Escape:

Sun, clouds and Saguaros, North Scottsdale AZ – photo by rayredstonemedia61

After three decades of digital technology development, it’s evident that cybersecurity isn’t being adequately ensured by Mr. Market’s “invisible hand.” In remarks at the White House last Thursday, Biden said:

“…private entities are in charge of their own cybersecurity…and we know what they need. They need greater private-sector investment in cybersecurity.”

Wrongo’s last assignment was as CEO for a division of a F500 defense contractor. We were targeted by Chinese and other hackers thousands of times per day. By 2005, the parent company was investing tens of millions annually on cybersecurity. Most non-defense firms have come to investing in cybersecurity slowly and without large funding.

We again became painfully aware of the issue when hackers shut down the Colonial pipeline on Mother’s Day, bringing back gas shortages and long conga lines of cars trying to fill up. We subsequently heard that Colonial paid the hackers $4.4 million in Bitcoin to regain control of their networks.

From the New Yorker:

“…we are a country that has seen nearly a thousand reported ransomware attacks on our critical infrastructure since 2013. This includes transportation services, wastewater facilities, communications systems, and hospitals. The average recovery cost of a ransomware attack for businesses is around two million dollars.”

Even though private companies are most vulnerable to counterattacks, they continue to set their own cybersecurity standards largely based on operational and economic priorities, even if their negligence exposes the public to risks. So why won’t companies fix their mess?

Most in the private sector think that cybersecurity regulations will cost too much, which they do not want to pay, or may be incapable of paying. Many in the private sector also consider requirements for better cybersecurity to be yet another form of government regulation.

Mostly, it’s about money and secondarily, about a shortage of IT skills. Some argue that the incentive structure is backwards. Companies often think the costs of adding robust cybersecurity to be higher than their likely losses from a cyber theft. In a way, they are self-insuring, but that ignores the harm to their customers that occurs when personal information is stolen, or when you can’t buy gasoline.

CEOs are concerned primarily with the short-term profits and stock prices of their corporations. Companies have regularly absorbed losses incurred by security breaches, rather than reveal weaknesses in their internal cybersecurity systems, all in the name of protecting management reputations.

In 2015, Obama’s DHS designated dams, defense, agriculture, health care, and twelve other sectors of the economy as “critical infrastructure,” meaning that they:

“…are so vital to the US that their incapacity or destruction would have a debilitating impact on our physical or economic security or public health or safety.”

But while the DHS issued cybersecurity guidelines to those sectors, most companies operating critical infrastructure (like Colonial) are privately owned, and they ignored them. That includes 80% of the energy sector, including pipelines, power generation, and the electricity grid. DHS said in 2015 that those industries needed to develop a common vision and framework to deal with cyber threats.

But corporate America never developed that vision and framework.

In 2019, a European cybersecurity researcher using open-source tools available to anyone, identified and mapped the location of twenty-six thousand industrial-control systems across the US whose internet configurations left them exposed and vulnerable to attack. But you know, they would be prohibitively expensive to fix.

On May 12th, Biden issued an executive order that directed federal agencies and their contractors to abide by a host of stringent new cybersecurity regulations and reporting requirements. The order also required IT service providers and companies that operate industrial-control systems, to inform the government about cybersecurity breaches that could affect American networks.

Biden’s order is a significant workaround for the lack of government control of cybersecurity in the private sector. Many of the cloud services and software packages used by government agencies are also used in the private sector. So, Biden is creating the likelihood that those standards and requirements will be more broadly adopted. That would be similar to auto-emissions standards: When California raised its standards, 12 other states decided to adopt those requirements, and five automakers agreed to design all their new cars to meet them.

Something similar could occur with cybersecurity. Like with Covid, we’re again learning that there’s a very good reason for a robust central government that has the will to write and enforce 21st Century regulations.

Time to wake up America! Corporations aren’t your friends. From sending jobs abroad, to out-of-control share buybacks, to failing to invest in cybersecurity, they need much closer scrutiny. To help you wake up, let’s dust off Depeche Mode with their 1989 hit “Personal Jesus”:


US Banks Want Another Bailout

The Daily Escape:

Beach near Avon Fishing Pier, NC – April 2021 photo by Greg Kiser

Many of you know that Wrongo spent many years as a banker for one of the top-three US banks. Banks have several challenges when trying to make a buck. They must first find a borrower. The borrower must be able to afford and repay the loan, and when the loan is repaid, the banker must find another borrower. That summarizes the raison d’etre for loan officers and banks in general. Full disclosure: Wrongo receives a pension from the big bank.

That background may help with the following story from the NYT:

“The Biden administration’s efforts to provide $4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors.”

This debt relief is part of the $1.9 trillion stimulus package that Congress passed in March. It is intended to make amends for the discrimination that Black and other farmers of color have faced from lenders and the United States Department of Agriculture (USDA). More from the NYT:

“But no money has yet gone out the door. Instead, the program has become mired in controversy and lawsuits. In April, white farmers who claim that they are victims of reverse discrimination sued the USDA over the initiative.

Now, three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — are complaining about the cost of being repaid early.”

The impacted banks will receive 120% of the outstanding loan balances. They are getting that additional amount to help cover their costs and taxes. Their complaint is that 120% isn’t enough, that they have been short changed because they won’t receive future interest on a loan that will no longer exist.

What has happened to corporate America if this is really a legitimate issue?

When a bank loan is repaid early, the bank now has that money available to lend again. The bank isn’t losing money, they’re losing the ability to earn the total return they projected when they originally made the loan. Most loans have a right of prepayment, usually without penalty. So, once repaid, the bank has an opportunity to create new loans and a new earnings stream with a new borrower.

Where’s the problem unless Wall Street requires another bail-out because they can no longer operate profitably under their basic business model?

A glitch is that the banks do not always hold the loans they originate to maturity. Instead, they package them and sell them to other investors. The bank lobbying groups have been asking the USDA to step in and make the loan repayments on behalf of the borrower. Of course, this makes what was a loan to a Black (or other minority) farmer a riskless US government security.

The USDA says that obliging the banks would put an undue burden on taxpayers and that the law doesn’t allow the agency to pay interest costs or reimburse secondary market investors. This quote from Bill Bridgeforth, a farmer in Alabama who is on the board of the National Black Growers Council says it all: (brackets by Wrongo)

“Look at the two groups: You have the Black men and women who have gone through racism and discrimination and [some] have lost their land and their livelihood….And then you have the American Bankers Association, which represents the wealthiest folks in the land, and they’re whining about the money they could potentially lose.”

In addition to the banks, a group of white farmers in Wisconsin, Minnesota, South Dakota, and Ohio are suing the USDA, arguing that offering debt relief on the basis of skin color is discriminatory. The lawsuit was filed by a group led by (who else?) the former Trump administration troll Stephen Miller. Miller’s fear of people of color getting anything is at the diseased heart of America’s economic, justice, and social systems.

Investing involves risk, including the risk of losing money. These banks aren’t going to “lose” money. And they’re ignoring the historical injustices visited on these farmers while focusing on their bottom lines. They’re also ignoring that they were an important part of that systemic racism.

This is another example of a huge flaw in our national ethos: The notion that maximizing business profits must always be a primary consideration when formulating government policy, and that enriching shareholders should take precedence over everything else.

The banks protesting debt relief for Black farmers says plenty about their sense of entitlement, particularly when their profits are soaring. It’s more proof that we need revolutionary change to American capitalism.


Monday Wake Up Call – May 10, 2021

The Daily Escape:

Lone Juniper, Black Canyon, Gunnison NP, CO – 2020 photo by Mattbnet

Isn’t it time that corporations paid decent wages?

After the Labor Department released its April jobs report, the US Chamber of Commerce blamed last month’s weak employment growth on the $300 weekly supplemental jobless benefit. They then urged lawmakers to eliminate the enhanced unemployment payments that were extended through early September by Biden’s American Rescue Plan.

This, from the dudes who willingly spend $300 on a lunch.

According to the US Chamber’s analysis, the extra $300 unemployment insurance (UI) benefit results in roughly one in four recipients taking home more pay than they earned working. But, if one in four recipients are making more not working than they did working, that’s not an indictment of $300 a week in UI benefits. It’s an indictment of corporations who pay less-than-living wages.

We could blame Asia for this, or we can blame our managerial and ownership class who engineered the outsourcing deals that made it possible. They built factories in Asia as an economic-production-economic-aggression platform to disintermediate American workers by sending higher wage jobs to lower wage locations in the Far East. And in many cases, the same companies who closed the American plants owned the Asian factories.

It’s sickening to hear these big business types complain that raising wages will destroy the economy! That’s the same argument which was used in the South against ending slavery (it would hurt the economy).

The US Chamber isn’t alone. South Carolina is cutting off extended unemployment benefits starting on June 30. From the SC governor:

“South Carolina’s businesses have borne the brunt of the financial impact of the COVID-19 pandemic. Those businesses that have survived — both large and small, and including those in the hospitality, tourism, manufacturing, and healthcare sectors — now face an unprecedented labor shortage,”

South Carolina’s unemployment rate was 12.8% in April of last year. But this March, it was down to 5.1%, significantly below the 6.1% national rate. Still, these Governors (Montana has done this too) are simply acting as shills on behalf of corporations to force workers back into low wage jobs.

Many studies have shown that the employees of big box stores like Walmart and Target cannot meet their basic economic needs on the money they make at their minimum wage job. Many turn to community social services just to feed their families.

It’s not China (or other Asian countries) that are to blame. We demand ever-lower prices, so something had to give. That something was middle-class American jobs. The American public was never part of the discussion about the pros and cons of offshoring manufacturing to lower wage countries, or how that would both lower costs for goods, but also destroy American jobs.

A lot of the people who now shop at Walmart and Target lost their jobs to Mexico, China, or Bangladesh. At which point, they needed some form of welfare, and/or another part time job at Walmart-type wages. And now that they’re on Walmart wages, Walmart prices are all they can afford.

Time to wake up America! We should be asking how can it be that food banks are overwhelmed while the Dow Jones Industrial Average hits an all-time high? Simply, the stock market isn’t the whole economy. The stock market is about corporate profits, while food banks are about minimum wage jobs and unemployment.

We should be asking: Why do these corporations (the small as well as the large) persist with business models that don’t allow them to pay living wages?

We could also ask whether more red states will try to “solve” the employment problem by hurting the unemployed rather than treating the root cause: paying living wages.

To help you wake up, listen to Rag’n’Bone Man and P!nk on Rag’n’Bone Man’s new release, “Anywhere Away from Here”. We often feature music to have fun with, or to dance to. And then there are tunes like this, music for the heart and soul:


Nomadland Is Best Picture

The Daily Escape:

Desert Lilies, Desert Lily Preserve, Desert Center, CA – photo by Bob Wick for BLM

The film “Nomadland” won best film, best director, and best actress at this year’s Oscars. Wrongo and Ms. Right kept our tradition, and didn’t watch the Oscars, but we have seen the film twice.

If you haven’t seen it , the film is worth your time. It offers a sympathetic view of what’s happening to the American working class in what’s becoming a de-industrialized America. It shows the hollowing out of middle America, and the growing regional inequality that stems from the US economy being concentrated in fewer and fewer corporate hands, and often, in fewer places.

Our changing economy has left wide swaths of rural America in decay. The movie’s story centers on Fern, an older widow. She worked in the US Gypsum plant in Empire, Nevada until the Great Recession reduced demand for drywall, and thus the mine and the plant were closed.

Once the factory went, so did the town. It became so de-populated that it even lost its zip code. Now, Fern, (played by Frances McDormand), sleeps in an old, converted van and works a seasonal job with one of the few employers left in the area: An Amazon shipping center.

But the film isn’t about Amazon. It’s about coping with downward mobility. Fern travels the southwest mountains, working a variety of gig jobs: In addition to Amazon, she’s kitchen help in a Wall Drug. She works at a beet processing plant throwing cases of beets into a hopper. She helps run a small RV park.

The film avoids clichés about the formerly middle-class, mostly White Americans it depicts. None of them blame Black people or immigrants or the left-wing media for their problems. They simply no longer play by the norms of an economy that ruined their lives.

Ironically, these characters don’t follow the usual White working-class stereotypes. Unlike Trump voters interviewed by the media in diners across America, they don’t turn to racism or blind acceptance of patriotism because of their economic uncertainty. Fern and the rest of the characters in “Nomadland” demonstrate dignity, decency, and stoicism in the face of the structural forces grinding them down. They teach each other how to survive while living off grid. They help each other when the chips are down.

Eric Cortellessa at Washington Monthly offers great insight:

“Unlike JD Vance’s flawed Hillbilly Elegy…this film does not blame the victims for their own downward mobility. It doesn’t point to bad habits (drugs and laziness), bad morals (racism and Trumpism), or bad attitudes (toxic masculinity and perverted Christianity). Instead, it shows humble men and women who don’t scapegoat others and who manage to preserve their dignity and, to a large extent, their own personal freedom in the face of systemic forces that are exploiting them.”

Let’s point out that since 1985, the average Wall Street bonus has increased 1,217%, from $13,970 to $184,000 in 2020. If the minimum wage had increased at that rate, it would be $44.12, instead of $7.25. And $7.25 equates to $15,080/year, nowhere near enough to make a payment on the US median home that’s priced at $301,000. It’s not even enough for a tiny dump of a house, like the one Fern left in Empire NV, which probably cost one-third of the median price.

Jessica Bruder, the author of “Nomadland: Surviving America in the Twenty-First Century,” that the movie is based on, wrote over the weekend about her exploration of this growing subculture. Bruder says a scene depicting Fern spending a night in her van when she hears “the knock” is chillingly accurate:

“No overnight parking! You can’t sleep here.”

The knock, Bruder explains, “is a visceral, even existential, threat,” one that nomads try to evade by hiding in plain sight: “Make yourself invisible. Internalize the idea that you’re unwelcome.”

Some places forbid overnight parking. Others outlaw living in a vehicle. Penalties can pile up fast. Unpaid, they can lead to the cruelest punishment of all: Your home gets towed. Failing to pay the impoundment fee means losing your home. Bruder says that people ask her what they can do for the nomads:

“Letting vehicle dwellers exist in peace would be a fine start. Individuals have the power to help. When you see someone living in a car, van, or RV, don’t call the police.”

Wrongo was struck by how the nomads helped each other. In our little New England town, people do the same, they try to help. The bystanders at George Floyd’s murder tried to help prevent Floyd’s death.

The only people who don’t seem to care about helping one another are corporate executives and Republican politicians. How did they get like that?

See the film.


The New Housing Bubble

The Daily Escape:

Shakers Creek flowing into the Mohawk River, Colonie NY – April 2021 photo by M’ke Helbing.

We’re hearing about bidding wars for single family homes, often with winning bids that are substantially above already high asking prices. In fact, house prices have risen by 11.2% from a year ago, the largest increase since housing bubble #1 in 2006, according to the National Case-Shiller Home Price Index for January.

The Home Price Index measures “house-price inflation” by comparing the sales price of a house in the current month to the price of the same house when it sold previously. It’s tracking the dollars it takes to buy the same house over time.

But house price inflation isn’t part of the Consumer Price Index (CPI). While about one-third of CPI is based on housing costs, it only tracks rents, not home prices. So, you can see what’s going on: Everybody knows that the costs of home ownership are surging, but only a portion are included in our inflation measures, so inflation is being understated.

Let’s look at the NY metro area. It covers NYC and numerous counties in the states of New York, New Jersey, and Connecticut. Here’s the spike in prices over the past six months:

House prices rose 11.2% for the year. There were big differences between price tiers, with low-end house prices surging by 14.9%, while condo prices remained in a tight range for the past three years, and the NYT reports that Manhattan condo developers are selling units at big discounts.

There’s another factor driving prices. The WSJ reports that: (brackets by Wrongo)

“From…individuals [with]a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.”

The WSJ quotes John Burns, a real estate consultant: (emphasis by Wrongo)

“You now have permanent capital competing with a young couple trying to buy a house.” Burns estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in.”

Houston is a favorite location, with investors accounting for 24% of home purchases. More from Burns: (emphasis by Wrongo)

“Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble…”

This is the second try by institutional investors to play in the single-family home market. Starting in 2011, they bought foreclosed homes at steep discounts, accounting for about a third of sales in some markets and setting a floor for then-falling home prices.

It turned out that renting suburban homes proved very profitable. The pandemic has brought a new race for suburban housing. And the big new-home builders like DR Horton and Lennar Corp, are working directly with institutional investors. They’re building blocks of homes, and selling them to the investors, who rent them out.

Horton built 124 houses in Conroe, Texas, rented them out and then put the whole community up for sale. It was purchased by an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.

Lennar just announced a rental venture with investment firms including Allianz and Centerbridge Partners to which it will sell more than $4 billion of new houses.

This is late-stage capitalism at work. Young working couples are increasingly shut out of buying homes, and that’s both depressing and disturbing.  America has failed them. It would be helpful for families to buy homes instead of renting, and pricing families out of home ownership carries risks to a cohesive society.

And the Right wonders why young people are turning to socialism. Freezing young people out of the housing market could have disastrous social consequences.

We should have tax policies that disincentivize ownership of multiple single-family homes, especially by investment funds. The way to remedy this is to steer investors to other assets that don’t directly impact individual welfare to the same degree as housing.

Back in the 2006-2009 housing bubble, we had plenty of speculators and an excess of housing inventory. It was so bad that Wrongo’s barber owned nine rental houses in three states before the bust.

This time around, we have very low inventory, the lowest rates ever, and big money chasing yield. Once pension funds are investing in an appreciating asset class, you know the bubble is about to burst


Saturday Soother – March 27, 2021

The Daily Escape:

Stinson Beach, Marin County, CA – photo by Merrill Dodd

A single-point-of-failure in the global economy failed last week when the Ever Given, one of the world’s largest container ships, ran aground in the Suez Canal shutting down traffic in both directions. It’s now stuck sideways in the Canal.

And the Suez Canal isn’t just any waterway; it links the factories of Asia to the customers of Europe. It’s also a major conduit for crude oil. The WaPo reports that 12% of the world’s cargo travels through the Suez Canal. That this vast flow of cargo could come to a halt because a gust of wind blew a ship off course makes the brittleness of our global system of trade apparent.

That one mishap could spread chaos from Los Angeles to Rotterdam to Shanghai underscores the extent to which commerce today is tightly intertwined with the global supply chain. From the WaPo:

“By Friday, more than 160 ships were anchored in the Mediterranean and the Red seas. Egyptian officials appeared confident the canal could reopen within days, while salvage engineers cautioned that freeing the stuck ship might take weeks.”

A delay of two weeks could strand at sea one-fourth of the supply of containers that would normally be in European ports.

The NYT reports that a surge of Covid-related goods orders for items like exercise equipment has exhausted the supply of available containers at ports in China. The cost of shipping a container from Asia to North America has more than doubled since November. And on the US west coast, container unloading has been slowed as dockworkers and truck drivers were infected with Covid-19 or forced to stay home to attend to children who are out of school.

For decades, economists have lectured us about the virtues of “economic efficiency”. But, as the initially poor response of the global supply chain to the Covid-19 showed, economic resilience is also particularly important. We couldn’t get PPE for essential workers because we followed just-in-time inventory management and relied on China as our primary supplier. We’ve also seen shortages of computer chips for cars.

From the NYT: (brackets by Wrongo)

“It [just-in-time] has also yielded a bonanza for corporate executives and other shareholders: Money not spent filling warehouses with unneeded auto parts is, at least in part, money that can be given to shareholders in the form of dividends.”

Once again, we’re learning that the neo-liberal economic solution fails the people. So the economists and the CEOs have gotten it wrong. And the canal blockage, like the PPE shortages, show that they can be spectacularly wrong sometimes. More from the WaPo:

“And the grounding of the Ever Given has exposed how complex ownership structures in global shipping make it difficult to hold anyone accountable: The Ever Given is operated by Taiwan-based shipping company Evergreen Maritime. Evergreen charters the ship from a Japanese firm; a Dubai-based company acts as the agent for the ship in ports; and the ship flies the flag of Panama.”

So, accidents will happen, and they’re nobody’s fault.

The challenges presented by the Suez blockage come directly from the ‘just-in-time’ mantra. While a crisis cannot be predicted, it can be prepared for. Corporations and nations need to stop sticking their head in the sand about long-term planning, and get back to doing what the MBA’s call “resilience planning.”

Resilience planning’s been devalued by our push for short-term profits and stock market gains. If you doubt that, read about the massive cyberhack of US government agencies and major corporations, perhaps the biggest in history, that was discovered in early December by the security firm FireEye. Much of that was preventable by better management and planning.

Globalization isn’t our only problem. Add to it our short-term mindset which, when combined with greed, has endangered America.

It is unclear how long it will take for the Ever Given to be refloated and the flow of the canal traffic can resume. CNN reports that it may be freed over the weekend. But to do that, more than this level of effort will be required:

Credit: Reuters

As the clock ticks, Egypt isn’t collecting tolls for ships’ passage. And many ships, including some operated by Evergreen, have begun to re-route around the Cape of Good Hope. Multiple shipping firms have contacted the US Navy for protection against pirates on their rerouted trip, according to the Financial Times (paywalled).

Enough of the world’s problems for now. It’s time for our Saturday Soother, when we take a break and either watch the Sweet Sixteen if so inclined, or do more spring yardwork, since today is supposed to be the better of the weekend days.

Before pulling on the gloves, let’s take a few moments and listen to “Cloudburst” by George Winston, from his album, “Plains”. The video is of springtime in the northern Idaho plains. It’s a meditation on a few of our feathered friends in spring:


Japan’s Botched Response to Fukushima

The Daily Escape:

Winter’s end, NH – photo by Betsy Zimmerli

Today marks ten years since a tsunami rolled over the Fukushima Dai-ichi nuclear power plant on Honshu, Japan’s main island. The disaster was bad enough that the event is still known as 3/11 in Japan.

The tsunami and the earthquake that triggered it killed nearly 20,000 people, destroyed over 100,000 homes, and threw Japan into turmoil. The estimated remediation costs so far are about $300 billion, larger than that for any other natural disaster the world has seen.

We remember it largely for the core melt-down at the nuclear plant. That was caused by poor design: The tsunami easily topped the plant’s sea walls, flooding the underground bunkers that contained its emergency generators. The earthquake had cut any outside source of electricity, meaning that water couldn’t be pumped in to cool the reactor cores. The nuclear fuel began to meltdown.

In 2011, nuclear power provided about one-third of Japan’s electricity. Today, only four of 33 commercial nuclear reactors are operating, and only nine have met safety standards set after the disaster.

Across Japan, 53% are opposed to restarting the nuclear power plants. Naturally, that number is worse for people who opted not to return to Fukushima: just 16% said they were in favor of further restarts.

Overall, the Japanese think that both Fukushima plant’s operator, the Tokyo Electric Power Company (Tepco), and the government have lied to them. At the time of the disaster, a botched response cost then prime minister Kan his job, opening the way for Shinzo Abe.

Tepco didn’t even confirm that the meltdowns had occurred until two months after the disaster. At the time, the government and Tepco said it was a natural disaster, but a 2012 inquiry found that it was a “profoundly man-made disaster”, in part due to the chummy relationship between the Japanese regulator and Tepco.

Credibility hasn’t improved. There are 1,000 metal tanks that store contaminated water used to cool the still-hot molten cores of the three reactors. The tanks contain nearly 1.25 million tons of spent cooling water, that’s still radioactive. Tepco and the government are running out of space to build more tanks, so they want to gradually release the water into the sea (after it is decontaminated and diluted) over the next 30 years.

However, in 2018, Tepco acknowledged that 70% of the water stored at the site contained extremely dangerous radioactive contaminants such as strontium-90, rather than just the tritium Tepco said it contained, another huge black eye for the state’s and Tepco’s credibility.

Tritium is a naturally occurring isotope of hydrogen that isn’t considered dangerous to human health. It’s routinely released into the ocean by nuclear power plants worldwide.

So, just like in the US state of Texas, Japan has favored the utilities over public health, and still is doing so today. This is important since Japan’s new prime minister, Yoshihide Suga, has committed to carbon neutrality by 2050. Japan’s renewable energy sector currently produces nearly 24% of its electric needs, but the government thinks that nuclear’s contribution will need to rise from today’s 6% to 20% within 10 years to meet the goal.

But growing nuclear’s contribution to Japan’s energy needs will require rebuilding public trust in nuclear energy. There needs to be more straight talk about how to expand safely, along with clear thinking about the very cozy government-business relationship.

Japan’s handling of the immediate crisis and the long-term solutions makes any discussion of adding additional nuclear power difficult. A survey by Edelman, a public-relations firm, found that the percentage of Japanese expressing trust in their government plunged from 51% before the disaster to 25% after. It now stands at 37%. As Azby Brown of Safecast, a Tokyo NGO says:

“Trust is not a renewable resource. Once you lose it, that’s it.”

Nuclear’s weakness is that it’s expensive and dangerous, which makes new nuclear power a hard sell. It is increasingly being deployed in autocratic nations; exactly where careful regulation is least likely. Russia is exporting nuclear power plants.

China’s nuclear plants are growing as part of an effort to reduce reliance on coal. China produced four times as much nuclear energy in 2019 as it did in 2011 and has 16 reactors under construction.

Countries wanting new nuclear plants now look to China and Russia as suppliers.

Skeptical people always ask nuclear power utilities one simple question: “What will you do with the radioactive waste?” Radioactive waste has always been, and remains, an intractable problem.

And now here we are, wanting zero-emissions power. But we’re faced with the intractable problems of what will resolve the after-effects of the Fukushima disaster, and how to store the radioactive waste from other power plants.


Limbaugh and Texas

The Daily Escape:

Observation Deck, Niagara Falls – Feb 9, 2021 photo via Darcy Bowers

A quick thought about the death of Rush Limbaugh, and a few thoughts about the Texas power outage.

Many on the right are angry because others are happy about Limbaugh’s death. But we’re under no obligation to tolerate what we perceive as evil. Make no mistake, Rush Limbaugh promoted evil, and Wrongo celebrates the passing of that evil. As Bette Davis said:

“I was told only to speak good of the dead. Joan Crawford is dead. Good!”

On to Texas, and their electric grid disaster. Texas governor Abbott tried to blame the disaster on the “green new deal” and renewable energy sources. That’s a ludicrous argument. No part of the “green new deal” has been passed in Texas, and while Texas is the Saudi Arabia of wind power, only about 33% of its outage came from offline wind power.

A few facts: America is divided into three grids: one covers the eastern USA, another the western states and the third is the Texas grid, which covers most of the state. The Electric Reliability Council of Texas, (ERCOT), manages about 90% of the state’s power for 26 million customers.

The real reason for the sustained outage is that Texas Republicans made sure that Texas had its own electric grid. That was because they wanted to be outside the regulatory reach of the federal government, to set their own rules. So Texas doesn’t follow the maintenance protocols of the other two grids. The other grids have protocols for all power generation equipment in winter weather, including for wind turbines. Of course, Texas doesn’t follow them.

An expert told the Houston Chronicle:

“The ERCOT grid has collapsed in exactly the same manner as the old Soviet Union…It limped along on underinvestment and neglect until it finally broke under predictable circumstances.”

Texas mistakenly thought that by seceding from the power grid, they would provide the benefits of a market solution to delivering power to the state. What really happened is that a lack of capable governing allowed an important and life-sustaining system to rust.

In 2011, Texas faced a similar storm that froze natural gas wells and affected coal plants and wind turbines, leading to power outages across the state. And 10 years later, Texas power companies still have not made the necessary investments to keep plants online during extreme cold. From the Texas Tribune:

“Texas officials knew winter storms could leave the state’s power grid vulnerable, but they left the choice to prepare for harsh weather up to the power companies — many of which opted against the costly upgrades.”

Texas Republicans thought that squeezing more profits out of the power grid for wealthy energy interests was more important than protecting the grid. They were wrong, and Texas consumers are paying the price.

We’ve become the can’t do nation: Can’t stop the plague, even with great vaccines, can’t keep our Capitol safe, can’t keep the heat on in Texas. But once Ted Cruz gets back from his fact-finding mission in Cancun, Texas will fix this in no time.

Wrongo has been to Cancun. It’s good, but not destroy-your-reputation good.


Are the Wrong People Manipulating the Market?

The Daily Escape

Green River covered bridge in Guildford, VT photo by jackalatch

Out of nowhere, we’re all hearing about “GameStop”. From The NYT:

“Traders on the Reddit message board, r/wallstreetbets, a community known for irreverent market discussions, made GameStop their cause du jour and rushed to buy out-of-the-money GameStop options.”

GameStop (GME) is a struggling, mid-size retailer stuck in a legacy business. They sell physical video games in a world where you buy and play them online. The financial fundamentals for GameStop suggest that its price should be below $20. It’s a real company, with about 53,000 employees, but it’s not worth anything close to its current valuation. It began the year at $19, got as high as $350, and is currently dropping like a stone, at about $196 right now.

Here’s how the r/wallstreetbets crowd made it happen: A hedge fund shorted GME — betting the price would go down — and thousands of retail investors banded together on Reddit to buy the stock, driving the price up. That caused the hedge funds to lose money, since they had to buy the stock for more than they had sold it for.

The r/wallstreetbets crowd numbers about 2 million subscribers. They realized that GME’s float (the number of shares physically available to trade) was very small, small enough that any large order or volume of buy orders would greatly affect its share price.

They knew that GME’s stock could be driven up to the point where the hedge funds that shorted the stock would have to panic-buy them to cover their short positions and contain their losses. They also understood that this could seriously damage those hedge funds.

This is known as a short squeeze, and Wall Street players do it all the time. What’s different is that a bunch of day traders got in on the action. A well-executed short squeeze is a thing of beauty, and in this case, it’s out in the open, and probably legal.

No one seems to be managing this effort. It’s a self-organized campaign with people using message boards to communicate with each other. What’s interesting is that this time, it’s the institutions that were caught with their pants down.

R/wallstreetbets is drawing on techniques used during the 2016 presidential election. Over the course of that campaign, a loosely organized community of alt-right meme pushers and their followers, located on sites like 4chan and Reddit, used social media to barrage Hillary Clinton with an endless flow of memes targeting her supposed inauthenticity and corruption.

They exploited social media to disrupt the normal workings of the US political system, just like these traders are doing this week to the pros on Wall Street. Interestingly, the traders on r/wallstreetbets, describe themselves as “Like 4chan found a Bloomberg Terminal”. It’s a remarkable testament to the internet’s ability to facilitate collective action.

From Bloomberg:

“This is all fascinating. In the space of 12 years, the role of the short-seller has turned on its head. Back in 2008, it was the shorts who upset the status quo, revealed what was rotten in the state of Wall Street, and brought down the big shots. They were even the heroes of a big movie. It was the Wall Streeters who attacked them.”

Now, short-selling hedge funds are seen as part of a corrupt establishment (as they should). And there is a deep generational divide: those unable to own their own home, who have student debt up the wazoo, and are forced to plan retirement without a pension have a stunningly unfair deal, compared to those of an older generation. That percolates into anger, in this case, partly directed at hedge funds.

Anger, at least as much as greed, has the capacity to make us throw caution to the winds. Many of us have a lot to be angry about. It’s impossible to foresee the consequences of similar angry bubbles driven by social media.

It also made a few titans of Wall Street angry. Here’s Leon Cooperman:

This is hilarious! Short positions get squeezed all the time, but the fact that he’s losing to a bunch of losers, who are “sitting at home getting their checks from the government, trading their stocks.” is unacceptable!

For God’s sake these people didn’t even go to Wharton!

And early on Thursday, Wall Street got a measure of revenge, when the trading platform Robin Hood suspended trading in GME. More than half of all Robinhood users own at least some GameStop stock.

No shortage of irony when you’re named Robin Hood, but you protect the rich by blocking everyday citizens from trading.

It’s almost as if capitalism is a tyrannical system arranged to benefit a select few.