Airborne Lasers and Algae Jet Fuel

A high-powered laser aboard a modified Boeing Co 747 jumbo jet shot down an in-flight ballistic missile for the first time, highlighting a new class of ray guns best known from science fiction.1

It's still unknown whether this will have any 'real world' value, but it does show that the U.S. is quite capable of dominating sectors which receive government support. For the U.S., this is military equipment and weapons systems.
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Just read this, and it's probably a better example:

The brains trust of the Pentagon says it is just months away from producing a jet fuel from algae for the same cost as its fossil-fuel equivalent.

The claim, which comes from the Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise.3

1'Flying laser zaps missile in first for U.S.' ; Reuters; Wolf
2'Airborne Laser Testbed Successful in Lethal Intercept Experiment' - Department of Defense Press Release
3'Algae to solve the Pentagon's jet fuel problem' - UK Guardian

Economists and Pretty Models

It's interesting to note how we are told 'the models' still work , but for those brief periods when there is crisis. Too many professional economists seem to cling to models and dogma as if stranded on a lifeboat in the Pacific. The truth is that, in the United States, the Great Moderation was a fraud of flat living standards supported by mountains of debt. And the models weren't just wrong during a brief period from 2008-2009; they have been wrong for a long time.

Once upon a time I was involved with formulating statistical models that predicted baseball players future careers based upon their past performance. And the statistics we have for a baseball player are more comprehensive and empirical than what we have for the economy.

But models were only marginally useful in detecting unseen patterns. Usually they told you that if a player was good, he would continue to be until he aged. In real life, exceptions were the rule, even when throwing out unforeseen injuries from the sample. Humans beings are difficult to predict and control, it's just life, and it's good.

Models are fun to play around with, but it's best to not view them as sacrosanct. And though lecturing amateurs can feel - well - 'really good', it doesn't mean much in the end.

As a professional musician, I deal with amateurs all the time - and learn quite a bit from them. Amateurism is a sign of health in a profession. It means people are interested. And when one's field has failed at many of its basic tasks, and basic forecasts, it always a good idea to discard dogma.

Subtext : A Strongman to Make the United States Governable

Is this desperate talk about governing opening up the option for a strong leader, to come clean things up ? It's not like the United States has ever been easy to govern.

I suspect ruling class frustration has to do with its inability to break the popularity of entitlements, and the general failure of neo-liberalism. In the United States, neo-liberalism has resulted in stagnant living standards, but it has not been successful at dramatically reducing them. And while resistance is not the type associated with class struggle, like the strikes in Greece last week, it is still persistent in a peculiarly atomized American way. Institutions have become so openly corrupt that people are suspicious about whatever the political class wants.

I wonder if Obama was a last gasp, a last attempt, to put forward a democratic vision of U.S. imperial power. If he fails, pretensions may thrown aside in a way that would make Dick Cheney smile.

1'"We’ve got a Problem in Governing in this Country"' - Financial Times; Paul Volcker Q&A
2'Never Heard That Before' NY Times Opinion, Friedman (the Beijing Consensus)

The Next Phase of the Crisis

It will occur when investors, business, governments, the public - realize that China cannot pick up the baton from a debt weary Western consumer.

What tied China over during the last few years, after the collapse of exports, is bank lending on a massive scale. It stabilized their economy and the always important political situation.

But now stabilized, China is basically not concerned with taking the baton that Western business so eagerly hopes to hand them. The recent moves to constrain new bank lending in 2010 mean that there will be less of a long-term overhang of debt , but also less of an ability to power growth. And China's economy, sans exports, is mostly dependent on investment. Consumption remains stagnated at 35 % of GDP.

Market weakness in the last month is related more to a slowdown in China's credit binge than anything out of the EU. A world of overcapacity without a new consumer of last resort will lead to a new and deeper phase of the crisis.


1'China slowdown fears hit markets- Financial Times; Dyer
2'Growing Bearish' Forbes; Meredith

Silicon Valley Worries

Silicon Valley, facing a slowdown in innovation and a shortage of funding, may lose its competitive advantage to emerging U.S. technology hotbeds such as Huntsville, Alabama, and Washington, D.C., a study found.

A certain arrogance and belief has existed in the Valley that they are indispensable to the US economy. But centers of economic power are as capable of shifting in the United States as they are internationally. Silicon Valley benefited from a previous shift when it took over US economic leadership from the industrial Midwest. And this largely came on the back of government investment:

The government is a growing source of funding for new technologies, as venture funding remains sluggish, said Emmett Carson, CEO of Silicon Valley Community Foundation in Mountain View, California. Communities outside Silicon Valley, such as Washington, Huntsville and Austin, Texas, are doing a better job getting these funds, he said...

Silicon Valley received $6.7 billion in federal procurement spending in 2008, about 1.3 percent of the total, according to the report. In 1993, that figure was more than 2 percent.

“If you look at the history of Silicon Valley, we benefited in the past from defense spending and other spending,” Carson said. “It didn’t happen because of a garage -- that’s a great mythology -- but it happened because people took advantage of federal investments and what that meant for offshoots.”

A government in disarray and large public debts, are two obvious problems in California. But I would also point to futures challenges of its port dominance, such as the widening of the Panama Canal, and proposed mega-ports in northern Mexico, as equally troubling.

1'Silicon Valley Struggling to Keep Competitive Edge, Study Says' - Bloomberg; Flinn

Iran Isn't Going Away

The 'markets' are seemingly oblivious to this fact. Military action against Iran is growing more likely each and every day, with all of its potential consequences.

The Wall Street Journal lends out its pages for some hard-right red meat:

If there is a war, a large part of the responsibility will rest with Beijing. China has assumed the status of a great power, including a veto at the U.N. Security Council. But instead of becoming a responsible member of the community of leading states, acting jointly with other powers to avert the prospect of wars, China is using its new-found power in ways that make war more likely.

1'Blame China for Iran's Nukes' - WSJ

Vietnam is Now the Weak Link in Asia

With much of the finance world's attention focused on Greece, Vietnam just abruptly devalued their currency for the fourth time since 2008. The cause is a widening trade gap and an overvalued dong currency which is draining dollar reserves from the central bank. It's doubtful this official devaluation will be enough to match declines ongoing in the black market.

If Greece is the weak link in Europe, Vietnam could very well be the same in Asia. And though Greece's budget deficit is now estimated at 12% percent of GDP, Vietnam's is at a Portugal-like 7%.

Currency devaluations could trigger copycatting in a region still tied to the dollar:

The devaluation will help make Vietnam's key exports, which include shoes, coffee and rice, cheaper than those of many other Asian countries, potentially improving its relative position in global trade. That could increase tensions with some neighbors, especially Thailand, with which it competes heavily in global markets. Thailand has already complained that some currencies in the region, including the Chinese yuan, may be undervalued.(2)

1'Vietnam Dong Weakens to Record Low After Devaluation' - Business Week
2'Vietnam to Devalue Dong 3.4%' - WSJ
3'Panicked Gold Buying Forces Vietnam To Devalue Currency' - Business Insider
4'Vietnam devalues dong for second time in 3 months' - AFP; Minh Ha

European Chamber of Commerce Warns on China Protectionsim

"Foreigners don't have the money anymore," said the European Chamber. "They just have the know-how. And there is a feeling that China can develop the know-how on its own. What we are seeing is almost an isolationist stance."

Meanwhile, a manager at a retail company put it more bluntly: "The idea that China was one day going to be a lucrative market for foreign companies was just an illusion." 1

China was never going to fully open their economy to the West, particularly their financial sector. And domestic companies will always be favored, and potential profits for foreign run companies shaky. China can't open up too much because of the geographic scale and size of the country. Their leaders aren't idiots and they know fragmentation has historically doomed Chinese empires. Therefore, a powerful central government is of the utmost importance.

Ultimately, an authoritarian government can not integrate into the leadership of global capitalism. Capitalism requires a particular brand of bourgeoisie democracy to be successful - on its own terms - over the long run. This is not to applaud the West for its form of government, which of course is quite imperialistic in its foreign affairs. But China is ultimately a single party system that is going to restrict the 'rights' of private capital and the growth of an independent business class. No matter how much the City of London or Wall Street have stomped their feet, China has maintained control of its banking sector.

Meanwhile, Andy Xie has a presented rather detailed set of ways that trade war could be avoided, few of which look likely to be implemented. The various elites of the world seem to be preparing for war, and ready to drag the rest of humanity along with them.

1'UK businesses threaten to pull out of China over protectionism' - UK Telegraph; Moore, Foster
2'Steering Out of a Smash-Up No One Wants'- Caixin; Xie

A Riff on Playing Music for a Living

Here in the U.S., one has to wonder about the future of music schools and conservatories with tuition rates of $20,000 a year, when available jobs are dwindling. Many orchestras are in severe crisis now, with large deficits and no apparent way to make them up. And orchestras are traditionally the largest source of employment in the private sector for classical musicians. The decline of the orchestra in the U.S. has to eventually impact opportunities for musicians in the education system. Yet, people in positions of authority seem pretty much oblivious.

This is not just restricted to classical music. One could throw in jazz, as well, where opportunities are even more scarce. It's sad to see people who regularly played with Coltrane and Miles Davis living in rent-by-the month hotels as they struggle with the difficulties of age. Yet I know such people, who made much more thirty years ago than now. We are throwing away our history and cultural legacy.

Music schools have the standard jazz studies department, but who goes into fields such as these, when the opportunities to make money are limited and dwindling ? More and more it's exclusively children of the rich, who know they will be taken care of if things don't work out. But you're not going to get much vitality in an art that way.

Musicians don't go into the field to get rich, but one has to survive. The field is demanding, and requires one's full attention to improve and succeed. You simply can not be a top flight musician and have a 'day job'. This can apply to any segment of music, not just the above mentioned categories of classical and jazz. As economies decline, so to do the arts. People feel the pinch and have to survive, even if it means limiting their artistic pursuits. The Renaissance was an economic as well as an artistic flowering. They go hand in hand.

Those who celebrate their ability to get free music are pretty much celebrating the destruction of another economic base, though of course no one is 'pure' in this regard. As with any situation, there are success stories, but the general drift in the music field over the last decades has been towards less : less live music opportunities and less money through recordings (with or without evil record companies). Comparing our world of copyrights with Mozart's world is ridiculous. There were no recordings in Mozart's time, so live music was needed. Restaurants couldn't re-run a CD all day as they can now.

Everything cannot be about promotion - giving something away for free for a future reward. There eventually has to be a pay off. Bills have to be paid, teeth have to be fixed, shelter provided for. If musicians can not get their basic needs met by playing music, many will move to other fields, and a whole lot of interesting ideas will never be heard.

Yes There is a Ruling Class, No You're Not Invited

It's hard to find articles about this meeting organized by the Bank of International Settlements.

The world's top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow (2/7) at a secret location, the Herald Sun reports.

1'Secret summit of top bankers'- news.com.au

Palin is Still Around

Despite being the standard joke at liberal dinner parties, Sarah Palin's poll numbers are not too bad. Her most recent Gallup poll, in December, had her at 44-47 , or a -3 % in favorability. In contrast, Obama's current Gallup 'Job Approval' is 49-44, or +5. Slightly different types of polls, but it is interesting how small the gap is. Incumbents usually need to crack 50% job approval to be favored in a re-election.

The election of an incipient fascist like Palin is some ways off - it would require continued deterioration in the economy and political establishment - but she is not going to just fade away. In the meantime she can build her base through shock troop movements such as the Tea Party. And stay in the media advocating another 'American revolution' (from the right), and war with Iran:

Say he decided to declare war on Iran, or decided to really come out and do whatever he could to support Israel, which I would like him to do.1

It will be interesting to see if she continues developing ties to the 'intellectual' far-right of U.S. politics, such as hardliner John Bolton.

1'Palin: Barack Obama needs to ‘toughen up’ if he wants to be re-elected' - Orlando Sentinel
2'Palin says US 'ready for another revolution'' - Financial Times; Luce

Toyota and Military Bases in Japan

The recent media crackdown on Toyota is a bit suspicious given that it comes at the same time Japan's new government is considering whether to force the U.S. military off of Okinawa. Toyota's problems have been known for years, but it is only now that the U.S. government is getting involved with serious investigation. And with that, the U.S. media is starting to pile on.

Toyota and Japanese exporters need the US market, and negative publicity like this could damage the entire Japan brand.

1'Toyota Recall Fails to Address 'Root Cause' of Many Sudden Acceleration Cases, Safety Expert Says' - ABC, Rhee
2'LaHood: Toyota Resisted Safety Fix' - CBS News
3'U.S. ambassador stresses need for troops on Okinawa' - Stars and Stripes; Weaver