Fuzzy Little Things I Find Interesting

More photos here.

Two related Wall Street Journal stories:

A Bank China Built to Challenge the Dollar Now Needs the Dollar

A development bank China launched with its fellow Brics countries was supposed to reshape international finance. Russia’s invasion of Ukraine now risks turning it into a zombie bank.

Eight years after Chinese leader Xi Jinping and his counterparts from Brazil, Russia, India and South Africa established the New Development Bank, with headquarters in a swanky Shanghai skyscraper, it has all but stopped making new loans and is having trouble raising dollar funds to repay its debts, according to an examination of its finances and interviews with bankers and others familiar with the matter.

The Global Economy Looks Like It’s Out of Sync

In just 24 hours this past week the central banks of the world’s three biggest economic blocs came to starkly different conclusions, with the eurozone raising rates, the U.S. on hold and the Chinese cutting. It’s getting harder for investors to understand the global economy—and potentially getting harder for the Federal Reserve to put a lid on inflation.

The conflicting moves are caused by economies increasingly moving to local rhythms. Europe is in a technical recession, but the central bank expects inflation to last. China has no inflation problem but is suffering from the aftermath of its extended lockdowns and property bubble. The U.S. economy is doing surprisingly well, and inflation has plunged, but underlying price increases remain stubbornly high.

At its core, the fundamental problem is that the Chinese Yuan is not trusted because the Chinese Communist Party is not trusted–and for good reason: the Chinese Communist Party seeks to control the economy rather than to provide liquidity and allow the chaos of the markets to sort out where the world’s economy is going.

Of course the Chinese Communist Party can’t let go; in many ways it has the bull by the tail with all of the demographic changes that were fueled by Chinese meddling in its own society, and by promising China to the west as an emerging marketplace. And China has fueled the pump on property construction, which has so distorted the Chinese economy that, to let go means for a growing Chinese middle class to realize it is considerably poorer, both in absolute terms and in relative terms, to Mexico.

And of course the European Union’s Euro is backed by an economic block that has shown lackluster results since the formation of the Euro, in part because of structural problems with the way the Euro is managed, and in part because of European regulators who just can’t help but meddle, but whose regulations are inherently inefficient. Structurally, the Euro zone is not actually a free trade zone; nominally goods and services may flow across borders without restriction, but Europe tracks internal trade imbalances between member countries. (States within the United States do not track trade imbalances; there is no record, for example, of just how much in debt Mississippi is to New York, for example.) The European Union, however, cannot eliminate this tracking, because to do so would be to remove all monetary policy inputs from member nations. It would also require, to some extent, for member countries in the European Union to give up their identity: it would require Europe to become as comfortable with (say) Greeks moving to Germany as it is with (say) West Virginians moving to California.

Further, the European Union is caught in a bind with passing regulations: The Microeconomic Dimensions of the Eurozone Crisis and Why European Politics Cannot Solve Them

There are standard economic arguments as to why structural economic reforms affecting labor and product markets can be difficult: in particular, organized special interests often seek to block such changes. However, in Europe, where structural reforms are even more crucial given the absence of an exchange rate adjustment, they are actually more difficult. This is because countries joining the European monetary union were promised that their membership would not affect their social models and because the well-intended movement of economic policy discussions to the highest political level in Europe (observed increasingly in recent years) creates a “European political overlay” that actually distracts from national reform.

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In order to be an internationally accepted global currency, you essentially need two things:

(1) You need a currency controlled by an organization whose primary purpose is simply to provide liquidity, and to allow the market to shape itself, rather than run by an organization which seems more intent on using that currency for non-economic political objectives.

(2) You need a currency backed by an economy that is relatively healthy and relatively dynamic, and relatively large enough so as to successfully dominate global transactions.

In both those cases, that points to the US dollar.

And it points to something else: the dominance of the US dollar in global transactions was never a deliberate plan for global hegemony. Certainly with the Bretton Woods Agreement, the dollar was established as a global currency, backed by gold bullion and with exchange rates between other currencies and the US dollar at fixed rates pegged to the convertibility to gold. But that system is long gone: the ending of the gold standard and the dismantling of the Bretton Woods Agreement in 1976 ended that era. Today, we have free floating exchange rates and no one currency theoretically dominates all transactions.

Meaning if you wanted to, so long as you do all the appropriate book keeping, you can decide to convert your entire international corporation’s currency operations to Brazilian Reals.

But today, decades after the death of Bretton Woods, the US dollar still dominates, for the simple reason that our government generally does not meddle all that much in the economy (though policies adopted first by President Trump and continued by President Biden point towards more future meddling, and the COVID-19 pandemic lockdowns showed to the degree our leaders are willing to meddle, even if it means the destruction of various local economies or even a fundamental reshaping of consumer behavior), and for the simple reason that the US still represents ~24% of the total world economy.

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All this points to the simple fact that if China wants to rule the world, they have to give up on trying to rule the world.

And if Europe wants to rule the world, it needs to get its shit together first.

U.S. Grapples With Potential Threats From Chinese AI

The Biden administration is grappling with how to identify artificial intelligence that poses a threat to national security, a central challenge as the U.S. moves to curb investment in advanced technology companies in China.

Biden administration officials have been preparing a new executive order for months that will restrict U.S. investment into some geopolitical rivals, namely China. Their goal is to prevent U.S. private equity and venture capital from contributing to China’s development of cutting-edge technology that could aid Beijing’s military.

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“AI is in many ways a meaningless category. It encompasses everything from Netflix recommendation algorithms to autonomous weapon systems and a bunch of stuff in between,” said Martin Chorzempa, who studies capital and technology controls at the Peterson Institute for International Economics. “It’s extremely hard to define.”

I think a large part of the problem is that when it comes to the “sudden” release of LLMs like ChatGPT onto the world, people are thinking “the rise of Skynet”–but what we’re seeing is an amazing bit of automation that can manipulate words very well. But the more we see it in action, the more we realize the text it generates is mediocre and full of cliches, and prone to hallucinations and providing false data. And the best advice I’ve seen so far on using ChatGPT is as a way to find all the common tropes, so as to avoid them. (That is, if ChatGPT tries to take your story one way, figure out how to take it a different way.)

And none of this is likely to change outside of some very specialized fields (such as with mathematics) simply because we have yet to figure out how to model reality beyond language.

Though it does give a lot of insight into how wrong philosophers were with respect to structural linguistics, or rather, with the theory that human thought and human perception is entirely shaped by language. It’s clear we have a model of the world below ‘language’ that allows us to understand things like cause and effect, or object relationships, that LLMs like ChatGPT simply don’t have.

And all this makes any sort of executive order rather stupid.

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These Pandemic-Era Habits Just Won’t Die

We’re now entering what might be called a “hybrid” era of tech-based conveniences, in which consumers modify their behavior to reflect a changing balance of cost against time and effort saved. For example, ordering food from apps is more popular than ever, but more people are opting to save themselves a few bucks by picking it up rather than having it delivered.

The implications of these shifts are all around us, and represent a profound change for many parts of our economy. To put it in terms a social psychologist might appreciate, habits are hard to acquire, but also hard to extinguish. The biggest barrier to adoption of new technology is typically our own ingrained ways of doing things. But that same stubbornness and inertia means that once we’re forced to adopt new tools and ways to get our needs met, we aren’t about to abandon them.

I said this elsewhere at the start of the pandemic: anything you do for more than a few months becomes a habit. And we did the lockdown thing for two years, with some places doing it for more than three years. Once you do something for more than a year, it’s not just a habit; it’s a new lifestyle.

It’s why places like downtown San Francisco are in a ‘doom loop’: people asking workers to return back to the office in downtown San Francisco are asking them to give up their current lifestyles for the economic benefit of wealthy land-owners. Hell, some of those workers don’t even live in California anymore.

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The IRS Makes Another House Call.

We all know there are bad cops.

We forgot, however, that there are bad agents regardless of the branch of government or the agency. And that includes IRS agents.

Remember: IRS agents (as well as other agents of the government) are all restricted by the same rules that restrict law enforcement officers: if an IRS shows up at your door, it is entirely within your right to tell them to go pound sand and come back with a warrant. And that warrant had better be signed by a judge; no just showing up and waving paperwork in your face. Further, that warrant must describe the place and items to be searched for.

More pictures here.

Downtown San Francisco: AT&T To Close Flagship Store:

Telecommunications giant AT&T will close the company’s Downtown San Francisco flagship store, the company told The Standard.

“Consumer shopping habits continue to change, and we’re changing with them,” AT&T spokesperson Chris Collins said on Thursday, confirming the closure. “That means serving customers where they are through the right mix of retail stores, digital channels and our phone-based care team.” 

Collins said there are still two AT&T locations within one mile of 1 Powell St., the Financial District store at 425 Market St. and the Chinatown store at 851 Clay St. AT&T has over 10 stores and licensed retailers across San Francisco.

The closure isn’t unique to San Francisco. The Union Square store will shutter Aug. 1, a similar store in Chicago on Michigan Avenue will close the same day, leaving the nation’s only AT&T flagship store in Dallas.

Will the last ones out please turn off the lights?

Most People Who Want To Immigrate to the U.S. Have No Legal Option:

A foreigner who wants to secure a green card—which allows them to live and work in the U.S. indefinitely and later apply for citizenship—must qualify for one of five selective categories, says Bier. There’s the refugee program, where “qualified refugees have less than a 0.1 percent chance of being selected for resettlement” and only some nationalities are eligible; the diversity lottery, where “applicants have a 0.2 percent chance of receiving a green card”; family sponsorship, which is capped for relatives beyond spouses, minor children, and parents; employment-based self-sponsorship, which requires high professional or financial standing; and employer sponsorship, a pathway so byzantine that very few employers actually use it.

Many factors keep foreigners from qualifying for those categories. Those include low annual visa caps, a lack of U.S.-based sponsors (whether employers or qualifying family members), narrow definitions of eligible nationalities, and cost. Some groups, including Indian nationals, can face decades long or lifelong waits for green cards—even if they’re already in the U.S. on renewable work visas.

One major reason for the illegal immigration is that for most people around the world, there simply is no legal path for them to immigrate to the United States.

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as “bad luck.”

– Robert A. Heinlein

A Tale of Unwanted Disruption: My Week Without Amazon | by Brandon Jackson | Jun, 2023 | Medium:

In the end, my account was unlocked on Wednesday, with no follow-up email to inform me of the resolution. This incident stands as a stark reminder of the need for better customer service and a more nuanced approach to incident management.

Or, it’s a stark reminder that perhaps we don’t need the Internet of Shit.