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‘The risks are poorly understood and can never be fully known’

The following open letter was issued by an international coalition of prominent scientists and governance scholars on January 17, 2022. It calls for an international treaty to outlaw attempts to reduce global heating by blocking sunlight from reaching earth.

Sixteen of the signatories are co-authors of Solar geoengineering: The case for an international non-use agreement, published simultaneously in the journal WIREs Climate Change. That paper concludes:

“Solar geoengineering is not necessary. Neither is it desirable, ethical, or politically governable in the current context. With the normalization of solar geoengineering research moving on with rapid speed, a strong political message to block these technologies is needed. And this message must come soon.”

OPEN LETTER

Solar geoengineering – a set of hypothetical technologies to reduce incoming sunlight on Earth – is gaining prominence in debates on climate policy. Several scientists have launched research projects on solar geoengineering, and some see it as a potential future policy option.

To us, these proliferating calls for solar geoengineering research and development are cause for alarm. We share three fundamental concerns:

First, the risks of solar geoengineering are poorly understood and can never be fully known. Impacts will vary across regions, and there are uncertainties about the effects on weather patterns, agriculture, and the provision of basic needs of food and water.

Second, speculative hopes about the future availability of solar geoengineering technologies threaten commitments to mitigation and can disincentives governments, businesses, and societies to do their utmost to achieve decarbonization or carbon neutrality as soon as possible. The speculative possibility of future solar geoengineering risks becoming a powerful argument for industry lobbyists, climate denialists, and some governments to delay decarbonization policies.

…click on the above link to read the rest of the article…

Coming Market Madness Could Take 70 Years to Recover

January 13, 2022

COMING MARKET MADNESS COULD TAKE 70 YEARS TO RECOVER

Cervantes famous classic novel Don Quixote can in simple terms be described as a fight for liberty and freedom against oppression and against the state. This book is from 1605 and considered to be one of the best books ever written.

In the midst of market madness, risk doesn’t exist because lunatics neither see, nor worry about risk. And still, 2022 will be more about risk and survival than anything else. So I will obviously talk more about “The Triumph of Survival” which I discussed in a recent piece.

“When life itself seems lunatic, who knows where madness lies.” – Don Quixote

The year 2022 will most likely be the culmination of risk. An epic risk moment in history that very few investors will see until it is too late as they expect to be saved yet another time by the Fed and other central banks.

And why should anyone believe that 2022 will be different from any year since 2009 when this bull market started? Few investors are superstitious and therefore won’t see that 13 spectacular years in stocks and other asset markets might signify an end to the epic super bubble.

The Great Financial Crisis (GFC) in 2006-9 was never repaired. Central bankers and governments patched Humpty up with glue and tape in the form of printed trillions of dollars, euro, yen etc. But poor Humpty Dumpty was fatally injured and the intensive care he received would only give him a temporary reprieve.

When the GFC started in 2006, global debt was $120 trillion. Today we are at $300t, rising to potentially $3 quadrillion when the debt and derivative bubble finally first explodes and then implodes as I explained in my previous article.

…click on the above link to read the rest of the article…

War Drums Are Beating

December 26, 2021

War Drums Are Beating

A RISK NOT DISCUSSED

It was around 2017 when I began seeing the ridiculous climate hysteria being pushed not just by dreadlocked physics deniers chaining themselves to trees but at an institutional level.

This, I thought to myself, was something very, very dangerous and which — if taken to any greater level — would ultimately bring about war.

The past two decades have seen Russia sanctioned and repeatedly threatened by Western powers. One of the many threats and arguably the most fierce has been eliminating Russia from the international payments system SWIFT.

Prepare a swift response to Russia invading Ukraine, Latvia tells west

From the article:

A swift reprisal package against Russia – including US troops and Patriot missiles stationed in the Baltics, the cutting off of Russia from the Swift banking payments system and reinstated sanctions on the Nord Stream 2 gas pipeline – must be prepared now in case it invades Ukraine, the Latvian foreign minister has said.

And this:

“If Nato fails to protect its member states or its territories,” he warned, “then it will not just be a military and political failure but a complete mental collapse of the system of values that have been built since the end of world war two. It will mean the whole transatlantic community will be in complete disarray and the glue that keeps us together has failed”.

This horse has already bolted. The “glue” holding this ball of wax together is more like slime and “isht” is falling through the cracks in every direction, while the bureaucrats desperately try to hold it all together. It won’t work.

Now, this isn’t solely an EU-Russia issue. This is a West vs East issue.

…click on the above link to read the rest of the article…

The Clouds Have Cleared in 2021, and What We Are Seeing Is a Dystopian 2022

December 22, 2021

The Clouds Have Cleared in 2021, and What We Are Seeing Is a Dystopian 2022

Photo by Javier Quiroga

This year was a doozy. Right out of the gate, millionaires were sounding the alarm that the markets were looking overvalued while reducing their risk exposure.

In February we got a taste of what could be the “end game” for the U.S. dollar as we saw it lose more of its grip as global reserve currency. Of course, it won’t collapse overnight because market psychology is still propping it up (for now).

But three big major economic influences have made 2021 one to remember. This chaotic “trifecta of market turbulence” kept the media busy and retirement savers on the edge of their seats.

So without further ado, let’s dive into the first one…

The confused Fed

Back in 2019 when the repo markets started going crazy, we reported how the Fed’s “confused” response only added fuel to a fire that continued to burn into this year.

And this year, one word you might have heard coming from Powell’s mouth with nauseating frequency to describe rising inflation was “transitory.” Over and over again, Powell’s confused Fed kept downplaying inflation…

Until it was obvious to everybody that inflation wasn’t transitory any longer. When Senator Pat Toomey challenged Powell during an appearance before Congress, the Fed chairman was forced to change his tune:

Powell explained that while the word has “different meanings to different people,” the Federal Reserve “tend to use it to mean that it won’t leave a permanent mark in the form of higher inflation.

“I think it’s — it’s probably a good time to retire that word and try to explain more clearly what we mean,” Powell added.

(We’ll discuss this in greater detail in a moment.)

…click on the above link to read the rest of the article…

Doing 90 MPH on Deadman’s Curve: A Few Thoughts on Risk

October 26, 2021

Doing 90 MPH on Deadman’s Curve: A Few Thoughts on Risk

When the wreck is recovered, witnesses will wonder why they took such heedless, foolish risks.

You’re in the back seat wedged between tipsy revelers, the driver is drunk and heading into Deadman’s Curve at 90 miles per hour. Nobody’s worried because the driver has never crashed. Before they slid into euphoric incoherence, the other passengers answered your doubts with statistics and pretty charts showing that the driver had never had an accident, so there was nothing to worry about.

They also said that the driver’s Uncle Fed had rigged the vehicle with an anti-accident device, so a crash was impossible. One passenger blurted out that a fellow named Goldy Sacks said the driver could easily “melt up” and take Deadman’s Curve at 120 miles per hour without any trouble.

You see the problem here: the risk of crashing and expiring is soaring but the giddy occupants are completely confident there’s no risk, and this confidence is the source of the danger. If you’re sure Uncle Fed’s device can protect the vehicle from any crash, then why not take Deadman’s Curve at 90 miles per hour?

And if Goldy Sacks says you could actually take it at 120 miles per hour, then taking it at 90 MPH is actually quite prudent and cautious.

This confidence inspires tremendous risk-taking that eventually ends very badly for all the revelers. The irony is rich: the greater the confidence, the greater the risk, the greater the risk, the greater the odds of a crash. The greater the risks being taken, the greater the odds that the crash will be fatal to all occupants.

…click on the above link to read the rest of the article…

Risk Was Never Low, It Was Only Hidden

October 4, 2021

Risk Was Never Low, It Was Only Hidden

The vast majority of market participants are about as ready for a semi-random “volatility event” as the dinosaurs were for the meteor strike that doomed them to oblivion.

Judging by euphoric gambler–oops I mean “investor”–sentiment and measures of volatility, risk of a market drop has been near-zero for the past 18 months. But risk was never actually low, it was only hidden. When it emerges, it’s a surprise only to those who mistakenly thought risk had vanished.

As Benoit Mandelbrot explained in his book The (Mis)behavior of Markets, crashes are an intrinsic feature of systems like stock markets. These risks are not generated by specific human actions or sentiment but by the system itself.

Just as humans make subconscious decisions and then conjure up quasi-rational justifications for their choice after the fact, market participants always conjure up some event or decision as the cause of the crash. Favorites include central bank policy error, black swan events (“bolts from the blue”), earnings surprises, technical levels were breached, and so on.

Mandelbrot’s insights reveal why markets crash without any policy error or other fabricated- after-the-fact justification: as those who witnessed the collapse of Japan’s massive credit-asset bubble in 1989-1990 observed, markets just stopped going up and started falling.

Risk is a reflection of many dynamics, but the key dynamic few participants seem to understand is the inherent instability of complex systems: surface tranquility is not an accurate reflection of the actual state of stability or risk, no mater how long the period of tranquility stretches.

The human mind rebels at the dominance of quasi-random crashes, as our hubris and need to be in charge generates an illusion of control:…

…click on the above link to read the rest of the article…

Former Lehman Trader On “China’s Lehman Moment”

September 19, 2021

Former Lehman Trader On “China’s Lehman Moment”

My name is Larry McDonald, that is the UK cover above. In the years before the failure of Lehman Brothers, I ran a successful distressed credit business at what was the 4th largest investment bank in the U.S. – becoming one of the most consistently profitable traders in the fixed income division. In late 2008, early 2009 – with Patrick Robinson, we penned “A Colossal Failure of Common Sense” – the Lehman Brothers inside story. At least once a month, I tell my wife while wearing a hopeful smile —“if we sell a million books — we´ll break even on our Lehman stock.” On September 15, 2008 – it all came crashing down in the largest bankruptcy in U.S. history. Known as, “the week that changed the world,” a very painful experience indeed. I was down on the mat looking up at the referee as he delivered the count. It was one of those fateful moments most of us face. Staring into the abyss, drenched in blood-curdling uncertainty, there are times in life when we must get up. Even when it looks like all is lost in a valley of no hope. Ultimately, the lucky ones learn there are valuable lessons in re-invention. The last 13 years have been a breath of fresh air.

Life’s Lessons

One of the important lessons in our book comes down to how to use leading credit risk indicators? In the 2007-2010 period, the global credit risk epicenter was obviously inside the US. In the 2011-2013 period, Europe´s banks were the focus during the Grexit panic. In recent years, Asia has become far more interesting, a new epicenter has been formed.

…click on the above link to read the rest of the article…

These Dangers Loom Over the Fragile U.S. Economy in the Next 12 Months

September 13, 2021

These Dangers Loom Over the Fragile U.S. Economy in the Next 12 Months

Photo by Connor Daylenko

The U.S. and most of the world is at the threshold of what I would call a nexus point in history. There are establishment forces at play that seek to impose a permanent authoritarian presence within our nation in the name of Covid “safety.” This includes lockdown mandates and restrictions on economic participation for the unvaccinated (including being unable to keep a job).

At the same time, only 53% of the public has been fully vaccinated against Covid. A significant number of the unvaccinated seem likely to dig in their heels and refuse to comply with the advice of medical professionals and the government.

We are at an impasse. With a global pandemic flaring up again in the background, the pro- and anti-vaccine groups square off. Those who see their Covid vaccination as a badge of personal responsibility and civic-mindedness versus those who believe the opposite. Unless one side chooses to stand down and walk away from the fight, our economic future will grow increasingly unstable.

This is the foreboding backdrop of our economic tale, and it is important to keep in mind that the technocratic exploitation of the covid non-crisis as a push for supremacy is going to color everything that happens in our financial system from now on. You cannot talk about our economic condition without including the effects of the pandemic theater.

I believe that the next year in particular is going to be adrenalized and chaotic beyond what we have already seen in 2020-2021. Like I said, there are two sides of America that are now at an impasse. Something is going to snap, and I suspect this will happen in 12 months or less.

…click on the above link to read the rest of the article…

Weekly Commentary: Under Fire

July 17, 2021

Weekly Commentary: Under Fire

The week had an ominous feel. Ten-year Treasury yields dropped another seven bps to 1.29% – completely disregarding much stronger-than-expected reports on consumer and producer prices. German bund yields fell another six bps to a three-month low negative 0.35%. Equities were down for the week in Europe, but the notable equities weakness was posted by the broader U.S. market. The Midcaps dropped 3.3%, and the small cap Russell 2000 sank 5.1%. Risk aversion typically leaves its initial mark at the “Periphery.”

Treasury market notwithstanding, inflation has become a problem in more ways than one. Consumer Prices (CPI) jumped 0.9% in June, versus expectations of a 0.5% increase. Year-over-year CPI was up 5.4% (expectations 4.9%), the strongest jump since 2008. And for analysts with issues with year-over-year “base-effects”, consumer inflation was up 3.3% in only five months. Core CPI also gained 0.9% for the month, with a 4.5% y-o-y increase. Producer Prices rose a data series record 7.3% y-o-y. Import Prices jumped 1% for the month and 11.2% y-o-y. University of Michigan one-year Inflation Expectations rose to 4.8%, the high since the summer of 2008. Also, at 4.8%, the New York Fed’s survey of one-year inflation expectations jumped to the highest level in data back to 2013.

To this point, inflation has not been an issue for the markets. It has become a problem for millions of Americans. For the institution of the Federal Reserve, it’s a metastasizing malignancy.

I understand why each Fed official sticks tightly with the party line “inflation will be transitory.” They don’t want to rattle the markets with thoughts of a traditional tightening cycle. And I think I understand why they adopted their framework aiming for a period of above target inflation – and why they swore off responding to incipient inflationary pressures. Again, they sought to retain flexibility to remain highly accommodative monetary policy, ensuring financial conditions would remain exceptionally loose (and markets high).
…click on the above link to read the rest of the article…

Earth tipping points could destabilize each other in domino effect: Study

June 29, 2021

Earth tipping points could destabilize each other in domino effect: Study

A new risk analysis has found that the tipping points of five of Earth’s subsystems — the West Antarctic Ice Sheet, the Greenland Ice Sheet, the Atlantic Meridional Overturning Circulation (AMOC), the El Niño–Southern Oscillation (ENSO) and the Amazon rainforest — could interact with each other in a destabilizing manner.
It suggests that these changes could occur even before temperatures reach 2°C (3.6°F) above pre-industrial levels, which is the upper limit of the Paris Agreement.
The interactions between the different tipping elements could also lower critical temperature thresholds, essentially allowing tipping cascades to occur earlier than expected, according to the research.
Experts not involved in the study say the findings are a significant contribution to the field, but do not adequately address the timescales over which these changes could occur.

When the first tile in a line of dominoes tips forward, it affects everything in front of it. One after another, lined-up dominoes knock into each other and topple. This is essentially what could happen to ice sheets, ocean currents and even the Amazon biome if critical tipping points are crossed, according to a new risk analysis. The destabilization of one element could impact the others, creating a domino effect of drastic changes that could move the Earth into an unfamiliar state — one potentially dangerous to the future of humanity and nature as we know it.

The study, published this month in Earth System Dynamics, examines the interactions between five subsystems that are known to have vital thresholds, or tipping points, that could trigger irreversible changes. They include the West Antarctic Ice Sheet, the Greenland Ice Sheet, the Atlantic Meridional Overturning Circulation (AMOC), the El Niño–Southern Oscillation (ENSO) and the Amazon Rainforest.

…click on the above link to read the rest of the article…

Don’t Go Picking Up Quarters in Front of a Steamroller

June 6, 2021

Don’t Go Picking Up Quarters in Front of a Steamroller

Do Not Pick Up Quarters in Front of a Steamroller

Photo by Leroy Evans

How did you go bankrupt?
Two ways. Gradually, then suddenly.
― Ernest Hemingway, The Sun Also Rises

Winning the lottery sounds like a dream come true, until you understand most people who win end up broke a few years later. (Most don’t invest their money properly to make it last.)

Everyone knows the possibility of making a large sum of money fast is a thrill, especially if you end up turning a small amount of money into a heap of cash. Maybe that’s why Americans on average spend over $1,000 a year on lottery tickets?

Now, you’re probably thinking that investing, especially saving for retirement, is completely different from buying a lottery ticket. Here’s the problem: your brain doesn’t really understand the difference.

When you win, whether it’s a $100 scratch-off prize, a Texas hold ’em pot or a great trade in your brokerage account, your brain rewards you. This psychological process is identical to gambling addiction. And it’s potentially just as destructive. Especially when it comes to investing or saving for retirement, gambling is a dangerous way to think Here’s why…

The way addiction works is just brutal. As Scientific American explains, over time the euphoria of winning decreases. People tend to risk more and more to recapture that feeling. And when a big bet goes wrong, you can get crushed by losses. Like a steamroller smashing your wealth into dust. Worse still, some “chase the high” by leveraging their investments on margin (and we’ve seen how that ends).

Which brings up an important question…

What makes these fast profit opportunities so tempting?

“Look! A shiny quarter! And there’s another one!”

…click on the above link to read the rest of the article…

Systemic Risks Abound

May 28, 2021

Systemic Risks Abound

If you wanted to design a system guaranteed to collapse in a putrid heap, you’d make moral hazard ubiquitous and you’d make the system 100% dependent on a hubris-soaked faux savior.

For the past 22 years, every time the stock market whimpered, wheezed or whined, the Federal Reserve rushed to soothe the spoiled crybaby. There are two consequential results of the Fed as savior:

1. The Fed has perfected moral hazard: everyone from the money manager betting billions to the punters gambling their stimmy money is absolutely confident I can’t lose because the Fed will always push the market higher.

What happens when participants are confident they can’t possibly lose? They make ever-riskier and ever-larger bets. The entire nation is in the grip of a moral hazard mania, all based on the confidence that the Fed will always push every market higher–always, without fail.

2. Organic (i.e. non-manipulated) market forces have been extinguished. There is now only one consequential force, the Fed. All markets are now 100% dependent on the Fed responding to every bleat from every punter who’s recklessly risky bet is about to go bad.

The Fed is now the perfect union of quasi-religious savior and Helicopter Parent: oh dear, our little darling got high and crashed the Porsche? Quick, let’s save our precious market from any consequences!

Every day, Fed speakers take to the pulpit to spew another sermon about the Fed’s god-like power and wisdom. The true believers soak up every word: golly-gee, the Fed is better than any god–it’s guaranteeing I can get rich if I just leverage up any bet in any market!

…click on the above link to read the rest of the article…

COLLAPSE! — Think of collapse as a drastic and chaotic reduction in energy and resource use

May 22, 2021

COLLAPSE! — Think of collapse as a drastic and chaotic reduction in energy and resource use

“… my fundamentally conservative core requires a default position that collapse is the most likely outcome,” says physicist Tom Murphy. —

Tom Murphy

“The first thing I should say is that the word ‘collapse’ freaks me out. I don’t use it often, for fear of sounding like an unhinged alarmist. Surely, respectable scientists should want nothing to do with it…. What keeps pulling me back to it — despite my innate repulsion — is not only credible elements of risk that I will get to in this post, but also that I think it’s too important to tolerate our natural tendency to hide from the prospect. Ironically, doing so only raises the odds of that ill fate: mitigation requires direct acknowledgment. Failure to speak openly and honestly about the less-than-remote possibility of collapse is not in our best interest, ultimately. So let’s grit our teeth and confront the collapse monster. What conditions make it at once likely and off most people’s radars? It is a heavy lift for one blog post to do a complete job in motivating collapse as a realistic outcome of the human enterprise. Any one argument can be picked at, but the totality should be considered. This is a long post, so buckle up. For the purposes of this post, we can think of collapse as a drastic and probably chaotic reduction in energy and resource use per person, the result looking primitive by today’s standards.” —Tom Murphy, Do the Math

Tom Murphy is an associate professor of physics at the University of California, San Diego. Murphy’s keen interest in energy topics began with his teaching a course on energy and the environment for non-science majors at UCSD…

…click on the above link to read the rest of the article…

Rabo: Please Don’t Make Us Look At The Inflation

May 12, 2021

Rabo: Please Don’t Make Us Look At The Inflation

Markets continue to reel: “Risk crumbles”, says Bloomberg. Why? Because there is a plaintive plea from everyone from the Fed and the Treasury down to simple peddlers of exotic derivatives: please don’t make us look at the inflation! Yes, it’s US inflation-data day – and nobody wants to see any. If there is an upside surprise in CPI, to reflect the surges in the prices of so much around us, it will embarrass the Fed, and the US Dollar, and Yellen, and many others. Some pre-emptive positioning may already be underway: the White House said Tuesday it takes “the possibility of inflation seriously”, or should that have been “serious inflation is possible?”; and the Fed’s Bullard added the US will see inflation in 2021 and some will “hang on” in 2022. Is that still transitory?

China’s PPI surprised to the upside, which may prove a worrying harbinger: and, anecdotally, prices for shipping between to the US this summer is now up to seven times what it was a year ago on some routes. Of course, the delayed 2020 census was a harbinger too – of mercantilism. (See “A Midwife Crisis”: and thinking Fudd not Fed, this should have been titled “A Midwife Cwisis”, with the subtitle “Be Vewy, Vewy Quiet. I’m hunting positive demogwaphics. Huh huh huh.”

The German ZEW survey (of analysts, so irrelevant) perked up too, while the US NFIB survey (of businesses, so relevant) showed that despite the weak payrolls number on Friday, it is now the most difficult to find workers ever. Crucially, “owners are raising compensation, [and] offering bonuses and benefits to attract the right employees,” the survey added…

…click on the above link to read the rest of the article…

Oil Tanker Spotted in Risky Active Pass Alarms Activists

May 10, 2021

Oil Tanker Spotted in Risky Active Pass Alarms Activists

Officials promise no repeats. But advocates say the incident raises new concerns about regulation of tankers in BC’s waters.

Narrow, twisting and busy Active Pass is no place for oil tankers, say advocates. But a loaded tanker travelled through the busy pass last month. Photo by Ruth Hartnup, Creative Commons licensed.

On a calm Friday afternoon in late April, avid naturalist Barry Swanson was watching Active Pass from his home on Galiano Island, keeping an eye out for the pod of southern resident killer whales that swim by every couple of days.

Instead of orcas, he was shocked to see an oil tanker traversing the narrow channel.

The MV Kassos was sitting low in the water, its hull heavy with petroleum products bound for Los Angeles.

Swanson is the co-founder of the non-profit Salish Sea Orca Squad, a group that works to raise awareness about the region’s killer whales. In an interview with The Tyee, he says he was very concerned to see dangerous cargo being shipped through the narrow waterway.

Active Pass sits between Mayne and Galiano Island. The channel is deep but narrow — 302 metres wide at its skinniest — and features strong currents, rip tides and a blind corner, according to Fisheries and Oceans Canada. It’s also a route favoured by BC Ferries, connecting Tsawwassen to Swartz Bay and the mainland to the Southern Gulf Islands.

It’s extremely unusual for an oil tanker to take Active Pass instead of the neighbouring Boundary Pass, favoured by almost all other commercial routes for its wider, calmer waters. Swanson says he’s never seen an oil tanker take the pass before.

“When you have a tanker travelling through these waters… there is always tremendous danger with dangerous goods being spilt in any amount. It would be a disaster for that to happen,” Swanson says.

…click on the above link to read the rest of the article…

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