domingo, julio 07, 2019

WHY BE FREE FROM THE KNOWN? / THE IMMEASURABLE

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Why Be Free from the Known?


Why do we ask this question? What kind of mind asks the question: “Why be free from the known?”

To be free from the known could mean many different things, and what it means really depends on the quality of the mind that asks the question. It seems that, ultimately, the question of freedom from the known is in a class of questions different than most questions that we ask about ourselves because it is a question that points directly to the structure of ourselves. So it is not a question of who or what we think we should be, but it is a question of the very structure of what we are and how that interacts with the world. In that sense, it is a very different question than it may appear to be initially.

Along with the scientific and philosophical components to this question, hopefully, there is another component that is more intimate to us. There is somehow something about this question—and I think that’s why we’re all here—that is important to us in our daily lives.

There is a reality to this question that goes beyond philosophizing about how one should live, but on the ground, in daily life, what is the activity of our lives.


Conflict


Quote by Krishnamurti


To start, “We take conflict for granted.” Conflict is something that, in general, seems to be the basis for a lot of the activity of our lives, both internally and externally.

There is a sense somehow that knowledge fills a space between us, and though that could be an evolutionary shortcut that may help us to relate in some ways, it could be a shortcoming that may inhibit us from relating in others. That’s something that I notice is a recurring theme throughout this presentation: What may be a shortcut for the brain in some ways is a shortcoming in others. And that I think is a key component to our question: Is it possible for the brain to be free of the shortcomings of its shortcuts?

To a brain that is evolutionarily built to use these shortcuts to relate to its environment and those around it, knowledge can be very valuable. But the environment and the people in it are constantly changing. There is not anything that is static, except for our knowledge about what we are and where we live.

We know from studying the brain that it tends to see what it expects to see, and this is because the brain is uses its previous knowledge as a way to predict and interact with the world.

If the brain is conditioned to see what it expects to see, does it always see what it needs to see to have the right information to respond directly to what is going on?

You, Me, & the World


Quote by Krishnamurti


 
Could our personal problems and the problems of the world have a common element? At the root of these problems, there is a brain that attempts to solve them but this brain is caught in what it knows, what it is seen before. Can it actually meet a problem that it is never seen before? The problem may be personal, or may be global—but the question is how knowledge acts in the present, in the world, both personally and globally, and if there is a common element in how knowledge functions.
 
We’ll unpack it more when we go into knowledge more specifically, in Krishnamurti’s work, there are different classes of knowledge. Some classes of knowledge are functional and absolutely necessary. So there is never at any point a complete denial of the fact that knowledge has a very real place in the life of human beings. But, particularly in regard to how we relate to one another, knowledge seems to be problematic. Not only in terms of ‘yesterday’ knowledge—that you said something to me yesterday that hurts, and I carry that with me, and that informs our relationship—but also in terms of our evolutionary knowledge about who is a part of you and who is not a part of you, or who is allowed in your group and who is not allowed in your group.
 
So it is not only a personal, short-term kind of knowledge but a really long-term, relational kind of knowledge that we may not even realize is functioning because we are built to be related in this way. As social beings, we have developed to take so many cues and to relate to one another through so many different kinds of information, and that information is stored to make future predictions. Yet, in terms of our direct relationship with one another, this predictive knowledge may overstep its functional boundary and restrict our actual relationship.


Knowledge & Freedom




This slide is not really defining what Krishnamurti meant by these terms, but it is more about pointing out that, when Krishnamurti spoke about the ‘known’ and ‘freedom,’ he’s speaking about them in quite a different way than we commonly do.

We could define knowledge as the sum total of the organism’s software to function in an environment. It is the accumulation of experience. Personal and impersonal. Often in Krishnamurti’s work, the known is synonymous with the past. This suggests a component of how we interact with our world in the present is directly influenced by what we know about ourselves and about our world from the past. All of our experiences from the past are constantly informing how we interact with the present. In this way, knowledge is a physical thing that functions in the world. It lives in the brain and in the body. Therefore knowledge isn’t just a functional, dictionary-like reference; it has a feeling component. And that really comes into play when you realize how it acts in the present, and how it directly affects our relationships. 

It is important to reiterate that there are aspects of knowledge that are absolutely necessary to survive.

You need to know how to get home. You need to know your name. You need to know who you are related to. You need to know how to eat, what to eat. This is functional knowledge. This kind of knowledge is not called into question in terms of Krishnamurti’s work, and we’ll go into that more when we unpack what knowledge is.

Freedom, in the way that Krishnamurti speaks about it, is an ending—which is not how we commonly look at freedom. Freedom, defined this way, is the end of conflict. I think that’s one of the cruxes of why the question of freedom from the known is so important.  We take conflict for granted as a force in our lives, but Krishnamurti’s proposal is the possibility of ending conflict. 

Krishnamurti says freedom is denied by desire. Often, and especially in our society, freedom is seen as an ability to choose what you desire. The more choices you have to avail yourself of what you want or desire is seen as a kind of freedom. This is antithetical to what Krishnamurti is speaking about with regards to freedom, because the freedom to choose is in itself conditioned by what you’re conditioned to choose. It is a subtle but clear distinction: for Krishnamurti, your “freedom” to choose is a direct consequence of how you’re bound to your choices that you’re conditioned to make. So in Krishnamurti’s sense, this is the opposite of freedom.

Consciousness

Quote by Krishnamurti

Krishnamurti’s notion of consciousness is in many ways analogous to what he means by knowledge and the known. This is very different from our common understanding of what consciousness is, and the difference is exactly the difference to our common understanding of knowledge.

In our common definitions of consciousness and knowledge, there is always an assumed entity that consciousness or knowledge belongs to. In Krishnamurti’s work, this is not the case. This assumed entity that consciousness or knowledge would belong to is itself built out of the consciousness and knowledge that it presumes to own.  There is never a distinction between the owner of the knowledge and the knowledge that it owns. That in itself is a whole, a sum total that is itself knowledge. The same with consciousness. So, consciousness itself is the sum total of the content of the movement of your mind, which includes what you think you know, but also the one that thinks it knows.

This distinction between knowledge and the one who knows is what we’ve grown up with and developed through— an entity separate from and aware of what it knows and how it feels, that can act on and deal with what it knows and how it feels. The claim here is that, that very essential distinction is the root of why knowledge can be conflictual and divisive. Krishnamurti suggests this distinction may very well be incorrect but is not seen or observed or understood in this way. So it continues to act and has power not only because of its assumed reality but because of its inability to be directly perceived.

Past & Present


Quote by Krishnamurti


What gives knowledge its power but also what gives memory its utility is the fact that it functions in the present. Knowledge is not a dead thing that lives in the past that you can recall when you desire; it is an active process so deeply ingrained into who you are and how you interact with the world. It functions and revitalizes itself actively in the present.

Again, there is no full blanket denial of the fact that knowledge is valuable. But the reason knowledge is valuable and the reason that memories are valuable is that they actually act in the present. You remember where you live right now so you can go there now—which is a very functional, real, living value to what memory is. But at the same time, this shortcut to memory is its shortcoming. So, you remember what happened yesterday between you and a friend, and that remembrance may color and affect how you relate to them today. And that may, in turn, affect how you relate to them forever.

And those memories may not be the best way for us to relate to one another. So there is a value and a danger in how knowledge acts.


Security & Order


Quote by Krishnamurti


The brain constantly seeks security and order: a constant navigation of one’s experience to turn negative experiences into good ones and good experiences into ones that last. There is a constant manipulation of one’s experiences to maintain a certain order. There may be a kind of security that has nothing to do with the manipulation of one’s experience, and that seems to come out of an understanding of the limits of knowledge. To see that knowledge is the factor of your own manipulation of your experience may be a different kind of security that’s founded in something that’s beyond your own limited experience of your past.

What is Freedom?




Basically, by freedom, Krishnamurti refers to the process in which the brain’s responses to contemporaneous events are not necessarily influenced or conditioned by the known, but this is specifically in relation to what is deemed psychological knowledge—freedom from this entity that assumes it has the ability to act upon knowledge and the state of the mind.

Functional Knowledge vs Psychological Knowledge


Quote by Krishnamurti

 
Often, Krishnamurti talks about the right place for knowledge, which seems to be born of an understanding of the limits of functional knowledge and where knowledge and its action tends to move in the direction that becomes psychological. So memories and ideas are stored as an entity that can then work on ideas and memories and the brain. And this entity, this psychological being, is where knowledge becomes dangerous. Somehow there is a misinterpretation of what action is, especially in terms of my own ability to interfere with my experiences and my mind. And this is essentially what Krishnamurti is pointing out as psychological knowledge.

To zoom in to this entity,  we could say that: what is psychological  is the movement of desire and will, that there is a constant activity of the avoidance of pain and the pursuit of pleasure, and the totality of this movement of the mind is what we typically refer to as “psychological.”





So it is not to say that “psychological” is anything separate from physical, but more that there is a subset of knowledge that is rooted in an activity born of desire that is deemed psychological.

It is not necessarily not physical; it has more to do with this activity of a ‘me’ that feels it is an actor in the realm of knowledge and experience.

A key component of this actor in the realm of experience and the reason that it has a tendency to create conflict is called many things—psychological time, the factor of becoming—but it is basically this: You have a certain experience, and feel that experience is unsatisfactory, so, out of that sense of ‘unsatisfactory-ness’, there is a projection of what the experience should be or would be or can be and that projection is something that this psychological being can move towards within its own bounds. This movement within the confines of my experience, between what is and what should be is Krishnamurti’s definition of psychological time.

This presumed entity within knowledge “acts” as it projects a future state that it can move towards.

Here, what we assume is action is merely a kind of reaction that is born out of what we already know and understand about ourselves.

Freedom Is the End of Becoming


Quote by Krishnamurti


Krishnamurti points to freedom as being the ending of this process of moving from something that is occurring to something that should be or would be occurring. It is the ending of a movement of desiring or any sort of aversion to what is occurring.

“Freedom means the ending of the observer, because the observer is all tradition, established order, social acceptance, morality. It is the ending of the self. The images I have about myself, and then when the brain is free, only then is there supreme intelligence.” 

“Freedom is the ending, completely, of becoming something.”

Freedom isn’t a state that’s achieved within which new kinds of experiences happen; it is the ending of the necessity for experiencing at all. It is the end of the necessity for certain kinds of experiences versus others. Often, when we attempt to observe or look, the observer or the looker has some quality of judgment or interpretation of the experience. So what freedom is, is when there is absolutely no critique or preconceived condition upon any kind of experience, moment to moment.


Negation


Negation is the denial of this activity of projection altogether. To see that moving towards anything requires that I know something about it from the very beginning. The truth is that in moving towards anything [psychologically], I’m only moving towards my own projection of what I assume is at the end of my goal. This process of negation is to see this whole activity and consistently deny it as it attempts to move. So negation is the denial of reaction against what is.

Choiceless Awareness

There is a possibility of the mind that sees that if it is attempting to move in any direction, it is choosing for or against certain experiences. So that choice in itself is already built into the program.

Is it possible for there to be no choice at all? This absence of choice is related to this non-projective movement. There is an active quality to being aware of what is going on, and without choice, there is no movement away or against what is occurring.

Perception

This move brings us to what Krishnamurti speaks about in terms of perception, and I think this is one of the most interesting bits and something that is difficult to understand in our common terms because really what Krishnamurti means by perception is that, the act of perception is itself the value of perception. What is perceived is not important. There is something about perception itself that has value in and of itself because it is not related to or dependent on what is perceived.

Freedom and perception really are not two things; they are not one before the other but freedom and perception are themselves one action, and Krishnamurti proposes that real action itself is perception. It is not what is perceived but the very act of perception which is not based on previous knowledge, that has value, and that value itself is because it is an action of itself.

 

Rare earths: Beijing threatens a new front in the trade war

China believes its near-monopoly gives it leverage over the US but supply cuts would spur rival producers

Lucy Hornby in Beijing and Henry Sanderson in London


© Electric cars, lasers, hard drives, electronic devices, oil refining, MRI scans, wind turbines and jet engines are among the inventions that are dependent on rare earth metals



Nine years ago, Ian Higgins’ company in the north-west of England was jolted by bad news from Volkswagen. Prices for rare earths were rising, so Europe’s largest carmaker warned it was planning to discontinue use of all rare earth alloys in its magnets.

Mr Higgins braced for other clients to take a similar step, threatening his metal alloy maker Less Common Metals if the car industry moved away from the technology. Instead, to his relief, the scare died down.

Until now. Rare earths — a group of 17 obscure minerals that are embedded in our digital lives — have been thrust into the centre of the US-China trade war following warnings by Beijing that it could cut off supply. Just as in 2010, when the price rise accompanied a dispute between China and Japan, Mr Higgins is again facing disruption to the supply of raw materials.

During the past month, the trade tensions between the US and China have been raised to a new level. The US decision to in effect ban Chinese telecoms company Huawei from the US market is not just a short-term blow to China’s exports but could also hamper its long-term efforts to boost innovation. Beijing is looking for ways to retaliate in kind and believes that rare earths could be an important strategic weapon.




Rare earth elements are readied for export in Jiangsu province, China. The Chinese president’s talk of self-sufficiency in rare earths reopened a debate about China’s dominance over the supply chain © Reuters


On May 21, Xi Jinping visited a rare earths magnet-maker in Ganzhou, southeastern Jiangxi province, rattling global markets. The president’s talk of self-sufficiency reopened a furious debate about China’s dominance over a supply chain crucial to the military and high-tech industries.

“If you do get prices spiking again for a second time the fundamental question is how much damage it could do to the rare earth magnet industry,” says Mr Higgins. The magnets used in electric vehicles are almost all reliant on rare earths mined in China. Prices for neodymium and praseodymium, the two main rare earths used in magnets, have risen from about $32 per kilogramme in early May to about $42/kg, according to UBS. In 2011, prices rose to over $160/kg.

Rare earths — the 15 lanthanide elements on the periodic table, plus two other related elements, scandium and yttrium — are an integral part of modern life. Used in smartphones, lasers, instrument panels, wind turbines and MRI machines, they are incorporated so far up the manufacturing chain that most consumers are not aware of them. They will become even more important as new technologies take root. Over 90 per cent of hybrid and electric cars use rare earth-based magnets in their motors.

China accounts for almost 80 per cent of the global mined supply of rare earths, thanks to especially rich deposits and a high tolerance for the toxic and sometimes even radioactive process of mining and extracting. It enjoys an even higher share of the manufacturing of powerful rare earth magnets.

Mr Xi’s visit, which came five days after the Huawei announcement, was a reminder that if the rest of the world threatens China, China can punch back.

A few days later, China’s powerful state planning body threatened to use rare earth exports as leverage in the trade war with the US. “Will rare earths become China’s counter-weapon against the US’s unwarranted suppression?” the National Development and Reform Commission wrote.

The People’s Daily weighed in with a phrase that presaged the India-China war of 1962 and a short war with Vietnam in 1979. “Don’t say you were not warned,” it wrote. “I think this is an attempt by China to cause second thoughts in Washington in hopes of moderating what has become a very aggressive US position towards China on all fronts,” says John Seaman, research fellow at the Institut Français des Relations Internationales in Paris.






















































Long before rare earths became a cottage industry for security strategists, former Chinese leader Deng Xiaoping saw them as a way to earn export dollars. “The Middle East has oil, China has rare earths,” he noted during a 1987 tour of Baotou, Inner Mongolia, site of one of the country’s two large deposits.

During the following decade China overtook the US as the largest producer of rare earths, although at a heavy environmental cost. It was a “race to the bottom”, according to Julie Michelle Klinger, assistant professor of international relations at Boston University, with low environmental oversight allowing China to export at the cheapest prices. A toxic lake grew in Baotou, while the cost of cleaning the soil and water in Ganzhou runs to billions of dollars.

Cheap and dirty, rare earths were not on the radar of anyone outside the industry until a provocative 2006 proposal published in China suggested restricting exports of rare earths to Japan on national security grounds. The author, minerals expert Sun Lihui, touted the environmental benefits of curbs on mining, as well as the idea of luring processing technology to the country to take advantage of China’s lower costs. Soon after, Beijing imposed annual quotas on rare earth exports.

China rare earth metals


A few years later the global financial crisis caused demand for rare earths to plummet. Seeing that 2009 export quotas had not been fully used, state planners cut quotas for the second half of 2010. When demand started to recover after the crisis, exporters with full order books were unable to secure quotas. Prices rose, just as sparring between China and Japan over the East China Sea came to a head in September 2010. International media reported that China had cut off supply to Japan.

In fact, both Chinese and Japanese customs data show rare earths continued to be shipped to Japan throughout the fall of 2010. But the mere suggestion of an interruption, combined with the price rise, had a profound impact on the way government and industry thought about rare earths. Countries realised that China had the ability to use its market dominance as a bargaining chip.

Mindful of its vulnerability, Japan poured money into finding substitutes. Last year Toyota announced new magnet technologies that would “significantly reduce” the proportion of neodymium, a rare earth used in magnets for electric and hybrid vehicles, needed to make its electric motors.

Although companies like Mr Higgins’ in the UK were saved once the crisis subsided, the US defence department also took notice. Rare earths are used in lasers, radar, sonar, night vision systems, missile guidance, jet engines and alloys for armoured vehicles. Last September, a Pentagon report claimed that China had “strategically flooded the global market with rare earths at subsidised prices”.

“China’s domination of the rare earth element market illustrates the potentially dangerous interaction between Chinese economic aggression guided by its strategic industrial policies and vulnerabilities and gaps in America’s manufacturing and defence industrial base,” it added.




A rare earth mine in Inner Mongolia. Former Chinese leader Deng Xiaoping noted on a visit to the area in 1987: 'The Middle East has oil, China has rare earths' © Reuters


The tussle over rare earths is more complicated in 2019 than it was in 2010, but just as emotional. Back then, it revolved around minerals and oxides supply to Japan. This time, tensions with the US play out over longer and much more complex supply chains.

“It would be difficult to make it hit just the US,” Yujia He, of Hong Kong University of Science and Technology’s Institute for Emerging Market Studies, says of any eventual Chinese restrictions on exports.

To begin with, the US imports very little of the raw material directly from China: the value of Chinese rare earths imports was about $160m in 2018, mostly for the oil and gas industry. Export restrictions would directly impact Japan and other Asian countries, which Beijing is not trying to antagonise. The US imports rare earth compounds, an intermediate product, from China or from Europe, where they are processed from raw materials mined in China.

China will meet “the legitimate needs” of other countries, commerce ministry spokesman Gao Feng said last week. It just would not countenance its own rare earths supply being used “to crack down on China’s development”.

David Abraham, a senior fellow at the New America think-tank in Washington and author of a book on rare earths, believes that Beijing is trying to ensure “that no rare earth material should end up in the US military supply line”.

China rare earth metals


In his view, “some kind of complicated vague requirement” to ensure that their products do not end up in US military equipment “would be impossible to certify and [would] introduce uncertainty in supply lines”.

Such a mechanism would be difficult to operate. The amount of rare earths used in metal alloys is too small to be easily tracked. Exports of lanthanum oxides and carbonates are destined for a wide range of products, including medicine to treat kidney disease, which makes it hard to filter out exports that end up in military applications.

A more effective threat would be to restrict exports of rare earth magnets, a much larger industry that China dominates with a market share of more than 80 per cent. That would hamper the transition to electric cars. US and possibly European carmakers would be forced to buy from Japan, which would rapidly push up prices. Analysts note that JLMag, the Chinese company that Mr Xi visited last month, is a major exporter of rare earth magnets.

“If these bans do move further downstream that would impact the US electric vehicle manufacturing industry or act as a barrier to that industry forming in the US,” says David Merriman, an EV analyst at Roskill in London.

China rare earth metals

Disruptions in Chinese rare earth supply would, however, stoke concerns in Europe and Japan that the country is not a reliable supplier. That would hasten moves already under way to reduce reliance on Chinese supply — just as it did last time.

Already, rare earths mining is diversifying. Last year China became a net importer of rare earths, as it looked to other countries to provide raw materials, while it prioritised emerging high-tech industries such as rare earth magnets and electric motors.

“Do they really want to weaponise it?” asks Will Smith, founder of Westbeck Capital Management in London, which invests in the raw materials needed by the electric car industry. “If there was a bigger and more secure supply of these things then the use of permanent magnets would be higher. The last time China limited supply it was to their detriment, the demand evaporated.”

During the 2010 scare, prices for rare earths rocketed as much as tenfold, prompting a global flood of new mining projects. At one point there were over 100 listed rare earth companies, each claiming to be the answer to Chinese dominance, says Mr Smith. “I didn’t expect that only one would survive.”

But one did: Australian-listed Lynas, which owns the Mount Weld mine in Western Australia as well as a processing facility in Malaysia. Its shares have risen by more than 90 per cent this year as a result of the trade tensions, and it made a profit for the first time last year. Its survival has been contingent on support from magnet makers in Japan.

“The US never looked at it in that same strategic way that the Japanese did and were reluctant to get involved in a single company,” says Mr Merriman.

China’s threats may finally push the US to revive its own rare earth industry. Last month Lynas announced it would build a rare earths processing plant in Texas, with Blue Line Corporation. The only US rare earths mine, the Mountain Pass mine in California, expects to start a processing facility next year.

Mr Xi must balance the need to present the US with credible consequences for the trade war against the need to maintain the trust of the magnets and motors markets.

“If rare earths were completely cut off it would definitely damage the Chinese market as well,” Mr Merriman says. “But don’t rule out China slightly damaging itself to push the bigger national strategic picture. They can use this bargaining chip to impact decisions on a more macro scale.”


Additional reporting by Archie Zhang in Beijing


Mountain Pass: new mine owner targets ‘transformation’ in supply


© Bloomberg


High up in the mountains of California on the border with Nevada, the US’s only rare earth mine encapsulates the twin histories of the US and China over the past 70 years.

Discovered in 1949 amid a hunt for uranium to supply the American nuclear arsenal, the Mountain Pass mine produced the bulk of the world’s rare earths after 1960. But Chinese material hit the market in the 1980s.

Edward Nixon, president Richard Nixon’s brother, sold rare earth magnet technology to China. So did Archibald Cox, then chief executive of rare earth magnet maker Magnequench, who went on to become chairman of Barclays Americas in 2008.

In 1998, regulators found that radioactive wastewater had spilled into the desert from the mine.

Facing fines for environmental violations and price pressure from China, Mountain Pass halted processing operations in 2002, Julie Michelle Klinger wrote in her book Rare Earth Frontiers.

Chevron sold the mine to Molycorp in 2008. After an initial public offering in 2010 at the height of the hype over rare earths, Molycorp reached a market capitalisation of more than $5bn in 2011. By June 2015, it was bankrupt. Hedge funds JHL Capital and QVT Capitalteamed up with Shanghai-listed Shenghe Resources to buy the mine for $20.5m in 2017. It restarted last year. “We’re in the beginning of a decade-long transformation. We’re going to see a lot of the supply chain come back to the US,” says James Litinsky, co-chairman of mine operator MP Materials. Plans are afoot to restart processing capacity next year.

For the moment, though, a reopened Mountain Pass has not provided any independence of supply. Without processing capacity of its own, it must export its rare earth concentrate to China.

Investors Are Trapped in Bizarro World

Poor stock market reaction to Friday’s upbeat jobs report shows misplaced confidence in power of monetary stimulus

By Spencer Jakab


June was the 105th straight month of job gains, according to Friday’s jobs report. Photo: chris keane/Reuters


Imagine an economically sophisticated time traveler from the middle of the last decade trying to make sense of Friday’s jobs report.

Nonfarm payrolls grew by 224,000, well in excess of the 165,000 consensus expectation of economists polled by The Wall Street Journal. Unemployment ticked just a smidgen above last month’s 50-year low, but for the right reason—labor force participation grew. It was the 105th straight month of job gains and the economy just entered its longest expansion in history. For good measure, the stock market is at an all-time high and a possibly ruinous trade dispute just became less likely following President Donald Trump’s rapprochement with his Chinese counterpart Xi Jinping a week ago.

Nonetheless, the Dow Jones Industrial Average opened with a triple-digit loss. Traders are still pricing in near 100% odds of a 0.25 percentage point cut at the next Fed meeting, as implied by futures contracts, but the odds of half-point cut have faded to zero from around 25%.

The explanation for what must strike our time traveler an economic Bizarro World is an economic policy-making community still haunted by the financial crisis of a decade ago and frustrated by a monetary tool kit that seems to have lost potency. The U.S. is, relatively speaking, an island of monetary tightfistedness at the moment simply by virtue of the fact that its debt pays interest. Some $13 trillion of debt globally is currently carrying negative yields—another fact that would astound the traveler.

Investors have, in the decadelong bull market since the financial crisis, become conditioned to buy and sell stocks on the cheapness or tightness of money, respectively. A half percent cut is now off the table and some forecasters—Capital Economics, for example—even think a rate cut might now wait until September.

The last time the Fed began a cycle of rate cuts in September 2007 the effect on equity markets was electric but short-lived. The Dow gained 3% over two sessions, but stocks would peak less than a month later as the stimulus proved too little, too late. A recession began just two months after that.

To our time traveler, unaware of all that, the roughly 95% odds of a July rate cut would seem like madness, and perhaps the Fed will even stand pat this month. Even so, the odds of the Fed cutting rather than raising in its next move are close to a sure thing, and investors probably will cheer when it does. What they should grasp, though, is that monetary policy didn’t save them last time, and it has lost most of its punch since then.

In other words, investors should cheer signs like Friday’s jobs report showing the expansion continuing. We may soon be back to a world in which bad economic news really is bad.

China, Corn and Caterpillars

An invasion of armyworm could force China to import more corn.

By Xander Snyder



As if China’s African swine fever outbreak wasn’t enough to worry about, its agricultural sector is now facing down armyworm. The name of this invasive pest is a misnomer: It’s actually a caterpillar, but so named because the swarm progresses methodically plant by plant, destroying large swaths of economically vital crops.

Armyworm feeds on 80 different species of plants, including corn. China is the world’s second-largest producer of corn and the plant’s myriad uses – for human consumption, animal feed and other derivative products – means that any impact on the corn supply will affect other related agricultural products in China.

Armyworm is endemic to North and South America. It was first found outside of its native habitats in 2016 in West Africa, after which it quickly spread across the African continent; only 10 African countries have thus far been spared. By 2018, it had made its way to India. The pest was first spotted in China in Yunnan province earlier this year.


 
It’s hard to find data on how destructive armyworm has been to crops in Africa, in part because much of the on-the-ground data collected has come from one-on-one surveys with farmers, which require them to make a value judgment on how they think the crop would have fared otherwise. Still, estimates of corn crop losses resulting from armyworm’s invasion of the African continent range from 10 percent to 53 percent, a sign that it can cause major damage especially to areas where food scarcity is already a problem.

Most of the corn China produces is consumed domestically. In 2018, China produced 257 million tons and consumed 275 million tons – that already puts it at a deficit of about 18 million tons. If the losses sustained by Chinese farmers were comparable to the most conservative estimates for African farmers (10 percent), China would be forced to import more corn or attempt to substitute other crops. But China does not, for now, appear to have a handle on the situation – armyworm has already spread to 18 provinces and is expected to reach the country’s corn belt in the northeast by the end of this month or early next.



If its corn crop is ravaged, where else could China get corn? One obvious option would be the United States, which is the largest corn producer in the world. But, of course, agriculture has been one of the hot-button issues in the U.S.-China trade war. This year, the U.S. passed a $16 billion aid package for farmers to help them deal with losses related to both the trade war and heavy rains experienced in the Midwest (more on this later). Some $14.5 billion will go directly to agricultural producers; the remainder will be used to purchase surplus commodities and distribute them to food banks and schools. This is on top of the $12 billion aid package approved last year to help farmers deal with the damage caused by the trade war. (Unlike last year’s bill, which was paid out based on the number of acres devoted to specific crops, the 2019 bill will pay out lump sums to individual counties.)

Compounding the losses from the trade war, heavy rains and flooding in the United States’ major agricultural regions have led to significant underplanting; only 58 percent of land was planted this year compared to the 2018 and 5-year average of about 90 percent. Many states are planting even less than the national average; Indiana is at 22 percent, behind its 5-year average of 85 percent, and Illinois at 35 percent, behind its 98 percent 5-year average. Although many farmers carry insurance that covers lower-than-expected crop yield, it requires that farmers actually plant a crop to receive a payout if the business runs a loss. This has left many farmers with a difficult decision: plant the crop despite the poor weather and run the risk of a low yield in hopes of an insurance payout, or don’t plant at all and try to find prevented planting insurance coverage, which pays when farmers are unable to plant crops. All told, the anticipated corn shortage has driven corn prices up to nearly $4.24 per bushel (as of June 3), a nearly two-year high.


 
Between the shortage anticipated from a poor U.S. crop and Washington’s desire to limit agricultural exports to China during the trade war, it seems like a less-than-ideal source for Chinese corn purchases. China could turn instead to the third-largest producer of corn, Brazil, which, unlike China, produces a surplus and exports a significant amount of corn each year. In 2017-18, Brazil produced a record 82 million tons of corn and consumed only 65 million tons, according to the U.S. Department of Agriculture. In 2019, corn production in Brazil is expected to increase by 22 percent to 100 million tons, with exports growing 27 percent to 32 million tons. Argentina, too, while a smaller producer of corn at 32 million tons in 2017-18, consumed about 12 million tons and is expected to increase its production and exports this season by 53 percent and 20 percent, respectively. Both countries are expected to produce and export even more for the 2019-20 season (although these growth figures are somewhat lower).

Even if China’s armyworm-related losses are at the low end of estimates – a 10 percent loss of 26 million tons for the 2018-19 season – it would eat up nearly all of either Argentina or Brazil’s surplus. At the high end – closer to 50 percent – neither Argentinian nor Brazilian corn exports could cover China’s shortfall. Only the U.S. could.

China’s armyworm infestation looks like it’s going to make a bad situation worse, putting even greater strain on the country’s food supplies at a time when one of its main suppliers is making it more difficult to buy. Armyworm will likely give the U.S. greater leverage in ongoing trade negotiations with China, but it could also create an area for compromise between the two – more Chinese purchases of American corn.

Cruise ships are hurting the high seas

The industry needs to be cleaner and more sensitive to the places where it sails

John Gapper



This has not been a happy week for cruise operators. On Sunday morning, a large cruise ship collided with a dock in Venice, injuring four people. On Monday, a judge in Miami approved a $20m settlement with Carnival Corporation, the world’s biggest cruise operator, for repeatedly polluting oceans.

The footage of the out of control MSC Opera barging into a small pleasure cruiser in Venice, with tourists fleeing along the dockside by the Giudecca Canal, was an unfortunate image for the sector. It evoked the fear of many when cruise ships sail into historic ports — the tourist horde has arrived.

It is not just their thousands of passengers, but how the vessels operate. “If you all did not have the environment, you would have nothing to sell,” Judge Patricia Seitz observed sharply to Arnold Donald, chief executive of Carnival, in Miami. Carnival pleaded guilty to having dumped waste and oily water into the sea, despite a previous criminal conviction for the same offence.

Cruise operators need to clean up their act. They face protests at the most popular spots such as Venice, Dubrovnik and the Norwegian fjords for sailing behemoths there — the Opera looks big but is only half the size of MSC Cruises’ latest vessels, which can take 5,000 passengers. Now they are under scrutiny for their emissions and the waste they generate.

It is unfair in some ways. Cruising is a growing form of tourism but still tiny compared with the industry as a whole: 28m people took cruises last year out of about 1.4bn tourist arrivals in foreign countries. It suffers the curse of the visible — cruise ships, with what the Miami court settlement monitor called “all the myriad needs of a small free-floating city”, are hard to ignore.

Every tourist needs places to rest and eat, transport and facilities for waste; cruises merely bundle them together, mixing security with exoticism in a way that appeals to many. Zygmunt Bauman, the Polish sociologist, wrote that a tourist’s home “is part of the safety package, for the pleasure to be unclouded and truly engrossing”.

Adventure tourism such as white water rafting, trekking in the Himalayas, and mountain climbing sits at the other end of the scale. Yet even such adventures are packaged, and the deaths of 11 climbers on Everest in May is not the only form of destruction they can wreak. The Sagarmatha National Park around Everest suffers from erosion and dumping of waste.

“The more people cruise the world, the more the world becomes a better place,” Carnival claims in its 2017 sustainability report. There is something to that — McKinsey & Co estimates that travel and tourism generated $7.9tn, or 10 per cent of global gross domestic product, in 2017, and more than 1,000 crew can be employed on a cruise ship. But it is not unalloyed gain.

One problem is emissions. Cruise ships use heavy oil for fuel, like other commercial ships, and the shipping industry is estimated to create 13 per cent of sulphur dioxide emissions, causing 400,000 cases of premature death globally a year. There are sulphur control areas along coasts, yet one Carnival ship was found to have burnt oil inside Iceland’s protection zone.

Operators including Carnival use filters to curb emissions and some are turning to liquefied natural gas as a fuel — Carnival’s AIDAnova, a liner powered by LNG that can carry 6,600 passengers, went into service last year. But the sector as a whole remains a polluter.

A second problem is waste disposal. Carnival was originally fined $40m in 2017 after a whistleblower on a ship operated by Princess Cruise Lines, one of its subsidiaries, disclosed that its crew had secretly dumped oil-contaminated bilge water into the sea through a “magic pipe” since 2005. Cruise ships also collect a lot of “grey water” from showers and “black water” sewage.

No cruise ship is allowed to dump untreated waste into the sea, even beyond the 12-mile coastal zone imposed by maritime law, and modern ships have extensive treatment facilities. The Cruise Lines International Association estimates that ships recycle 60 per cent more waste per person than on land, but the Carnival case shows that breaches are common.

Compared with tourism as a whole, the cruise industry is a limited cause of ecological concern. But it is growing beyond the baby-boomer market in Germany and the UK, where the average passenger is 57. Virgin is launching a cruise ship next year aimed at a younger crowd, promising a “sailor experience that balances the duality of enjoying the earth and caring for it”.

This growth, and the fact that cruise ships are contained environments that could become leaders in sustainable tourism, make it vital to avoid repetitions of the Venice crash and the Carnival case. Taking them out of the Giudecca Canal, where they overshadow Venice, is a start, but other ports need to ask themselves how much they need sail-by visits from the giants.

Most of the environmental responsibility lies with the operators themselves, which have raised their standards but need to do more. It is tempting to behave badly at sea, when no one is watching, but it is ugly.

The End of the World As We Know It

Last month, under pressure from US President Donald Trump’s administration, Google terminated its cooperation with Huawei, thereby depriving the Chinese smartphone maker of the license to use Google’s Android software and related services. The move marks both a new pinnacle in the Sino-American conflict and the end of US-led globalization.

Joschka Fischer

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BERLIN – After three decades of moving toward a single global market governed by the rules of the World Trade Organization, the international order has undergone a fundamental change. The United States and China are locked in a tariff war that at first seemed to be about the bilateral trade balance, but has turned out to be about much more. Until recently, one could find hope in the fact that, despite frequent exchanges of threats, the two countries were negotiating. Not anymore.

Last month, under pressure from US President Donald Trump’s administration, Google terminated its cooperation with Huawei, thereby depriving the Chinese smartphone maker of the license to use Google’s Android software and related services. The move poses an existential threat to Huawei. But, more than that, it marks both a new pinnacle in the Sino-American conflict and the end of US-led globalization. The message from the US is clear: technology and software exports are no longer just a matter of business; they are about power. From now on, the US will put might over market.

Now that the conflict has assumed the form of a hegemonic struggle, China may have to pull out all the stops to protect its national champions. That means withdrawing as quickly as possible from all supply chains that rely on US-made high-tech inputs, particularly semiconductors. China would have to start sourcing all the necessary components domestically, or from safe partners within its orbit.

In the medium term, this adjustment would effectively divide the world into two spheres of economic competition. Sooner or later, all smaller powers dependent on global markets would have to choose a side, unless they are somehow strong enough to withstand both American and Chinese pressure. With China and the US both demanding clarity, even economic giants like the European Union, India, and Japan would be faced with an intractable economic dilemma.

Assuming that an open, unified global market does indeed become a thing of the past, the question, then, will be how China plays its cards. As America’s largest creditor, would it see a currency war as its ace up the sleeve? If so, an already dangerous struggle for global technological preeminence would become a broader and more immediately perilous conflict.

The danger is not just that economic rivalry, protectionism, and trade restrictions would threaten global prosperity; it is that these developments also would raise the risk of a serious political confrontation. Technological sovereignty would take the place of trade and exchange, and the nationality of corporations – even major multinationals – would become just as important as their business model.

Still, it would be a mistake to conclude that this whole conflict was brought on solely by Trump and his neo-nationalist agenda. Two days after Google announced its decision, the New York Times published a commentary by Thomas L. Friedman, author of The World is Flat, echoing many of Trump’s attacks on China’s unfair trade practices. If that is where the previous ideological high priest of globalization now stands, China is facing off against not just Trump’s America, but liberal America, too.

The Trump administration’s latest move is meant to signal that the US will not hand over its dominant global position without a fight. Yet by precipitating a break in the existing trade relationship with China, the US will incur immense costs of its own.

No doubt turbulence awaits Europe, too. A rupture in the global economy would pose a fundamental challenge to the European – and especially the German – export model. Though the European Union will remain dependent on the American security guarantee and trade with the US, the bloc’s exporters have become increasingly reliant on the Chinese market. A scenario in which they are forced to decide between the two would thus produce a lose-lose outcome. True, in a full-scale technology war, the EU’s value as an ally to the US would increase, and the risks of punitive US tariffs on European exports would decline. But European exporters that have become more dependent on China would be squeezed.

Past experience has shown that Europe usually needs a crisis in order to move to the next stage of its development. If there is any silver lining in the current situation, it is that Europe may now have no choice but to develop a geopolitical strategy for the twenty-first century. The EU was largely spared a populist upset in the recent European Parliament election. Now it must get to work safeguarding its prosperity and sovereignty in an age of Sino-American rupture.


Joschka Fischer was German Foreign Minister and Vice Chancellor from 1998-2005, a term marked by Germany's strong support for NATO's intervention in Kosovo in 1999, followed by its opposition to the war in Iraq. Fischer entered electoral politics after participating in the anti-establishment protests of the 1960s and 1970s, and played a key role in founding Germany's Green Party, which he led for almost two decades.