The Question
Are you getting ads from Chick-fil-A or Whole Foods?
Talking Points
- Alex Jones ordered to pay $956m to Sandy Hook families
- LA council rocked by racist recordings and corruption allegations
- Trump subpoenaed by the January 6 committee
- NASA's DART mission confirmed a success
- The latest from Brazil election: Satanism and Freemasonry
- Russia evacuating Kherson ahead of Ukrainian advance
- Liz Truss already facing the possibility of a confidence motion
- Musician Rex Orange County charged for sexual assault
- Study revealed a 70% decline in wildlife since 1970
- Japan reopened its borders to tourists
Deep Dive
On Monday the Sveriges Riksbank prize (the Nobel Prize for Economics) was awarded to Ben Bernanke. We can trace the last century of American economics in his life's work. He's often described as the saviour of the last recession. But what about this one?
The boy from Dillon
There's not much to write home about in Dillon, South Carolina (pop. 6,000) these days. There was even less 60 years ago. But Ben Bernanke, son of Jewish emigres from Poland, ascended from the obscurity of the rural Carolinas into the pantheon of global economics. It's the type of nourishing story that helps Americans keep the Dream alive. The local high school didn't offer calculus classes so he taught himself. A scholarship lofted him into Harvard to study economics where he shared a house with Lloyd Blankfein. A few years later, at MIT, Bernanke was advised on his thesis by a future central banker. He was among the class which, it wouldn't be too impolite to suggest, now runs the world.
At MIT, he was swept away by Milton Friedman and Anna J. Schwartz's A Monetary History of the United States . The book challenged the prevailing view that monetary policy had not played a central role during the Great Depression. Friedman and Schwartz turned the theory on its head by identifying discrete examples where monetary settings impacted output and stock prices. It was considered an electrifying read at the time, and has held its own since: the Great Depression was intensified and prolonged by bad monetary policy. In Bernanke's own words, given at a speech in honour of Friedman in 2002, "I was hooked, and I have been a student of monetary economics and economic history ever since".
By the time of that speech, (a very good one,) Bernanke had taken public service leave from his high profile university economics jobs to join the Fed. He finished the address with a few lines that have aged gorgeously... "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: regarding the Great Depression. You're right. We did it. We're very sorry. But thanks to you, we won't do it again."
Cometh the hour
During the Global Financial Crisis Bernanke would have a chance to make good on that sentiment. In 2007, the subprime mortgage crisis threatened to bring down the whole show. A huge housing bubble had expanded in the preceding years, as swathes of low-quality "subprime" mortgages were bundled up and securitised. A deregulated environment had allowed for frothy speculation. Everyone bet the ranch on interest rates staying low, and house prices continuing to rise. But interest rates began to rise, sparking mortgage delinquencies and foreclosures of subprime mortgages. Several major financial institutions were found to be dangerously exposed. Lehmann Brothers disappeared. Bear Stearns and Merrill Lynch followed.
As chair of the Fed, Bernanke was given an opportunity that most academics can only dream of: total control over the outcome of a real-world crisis, in his specific area of expertise. He said that he wasn't "going to be the Federal Reserve chairman who presided over the Second Great Depression". In 2007, he started to reduce interest rates at an unheard-of pace. They fell from 5% to 0% in the space of less than 12 months. But house prices continued to fall, millions still lost their jobs, and consumer sentiment collapsed. Bernanke's study of the Great Depression had led him to believe that banks needed to be shored up at all costs. He vigorously pursued a policy of quantitive easing: printing $1.3tn in two years, and plowing the cash into the open market. By 2010, he had quadrupled the size of the Fed's balance sheet. The banks made it through the storm and were there to help with the long recovery.
Barrack Obama had this to say when he nominated Bernanke for a second term as chair of the Fed, "Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and out-of-the-box thinking that has helped put the brakes on our economic free fall".
The next recession
Bernanke's actions helped shift the balance of power in the world of money. It's a central bankers world now . We all just live in it. Which is why his Nobel prize couldn't be more timely. Today the US is suffering from the worst inflation in 40 years. It is central bankers whose hands are once more on the tiller. This week, disappointing consumer price index figures necessitated yet another significant rise in interest rates. Americans will see their mortgage rates rise to 7% or more. Millions more foreclosures could be on the way.
Bernanke's legacy can be seen in both the crisis, and the response. Mimicking his influential and unorthodox approach, Bernanke's predecessors Janet Yellen and Jerome Powell continued to keep rates as low as possible, and deploy humongous sums of capital. The Fed's balance sheet today stands at $9tn.
Monetary policy cannot be held responsible for the pandemic, or for Russia's invasion of Ukraine. But a decade of cheap money has made today's crisis even more pronounced. The medicine of one generation has become the ailment of the next.
We'll end with this quote uttered by Friedrich Hayek as he accepted the Nobel Prize for Economics in 1974, the award "confers on an individual an authority which in economics no man ought to possess".
Worldlywise
Election season: Beijing style
On Sunday, 2,300-odd apparatchiks will gather in Beijing for the 20th National Congress of the Communist Party. The quinquennial event is a study in control: black suits, red flags, and predictable votes. At hand is the crucial job of electing the new leaders of the world's largest population and its second-largest economy. The seven-man (and yes, it's always men) Politburo Standing Committee is the high table. Anything expressed as a vote of "collective leadership" is de facto law. This year will offer a fascinating peek into China's thinking for the next five years.
Premier Li Keqiang, the number two on the PSC, retires in March. Wang Yang has been put forward as a successor — the former liberal Guangdong party boss has previously served as vice-premier. Another candidate came from the enormous economic engine of Guangdong: Hu Chunhua . Hu spearheaded the poverty eradication program that President Xi Jinping has built his reputation around. Chen Miner is an outside chance; he lacks the qualifications of the first two but is a staunch ally of Xi.
This should also be the year that Xi's successor is elected. It won't be. Since abolishing term limits in 2018, China's Paramount Leader has settled himself in for a long, long reign . At home he appears determined to press ahead with Covid Zero even as cases rise sharply. This stiff measure is weighing down the economy at the same time that the housing bubble is popping. There is a lot more pain to come with Beijing (at least for now) continuing to prop up enormous developers. Maintaining China's technological edge will be of total importance as great power rivalry increases this decade. Xi has decided that the only path through is continuity of leadership and he knows just the guy for the job .
Lastly, we can't help but note the unintentionally humorous refrain that crops up in the universally negative coverage of Xi's third term: not even Mao did this. Yes, this is true, but on the other hand 45 million people died during the Great Leap Forward and the Cultural Revolution...
Rat Pong brain
At inkl, we call the gap between science fiction promises and scientific realities 'the flying car delta'. We were promised an efficient, wondrous new axis of travel; we're still getting beeped for holding up traffic with a bad reverse-parallel park. This week, the flying car delta manifested in a pair of experiments.
The first came to us from the unusual minds at Stanford who have been giving rats autism . And schizophrenia. As it happens we've gotten awfully good at growing brain cells in petri dishes. But, like an orca in an aquarium, these just aren't great conditions to grow in: neurons are stunted by the artificial environment. And so Segiou Pascu's team began implanting human brain tissue inside the skulls of young rats. It successfully vascularised — the rats fed nutrients to the foreign matter. Incredibly, the researchers were able to communicate messages to the rat through the grafted human brain cells. Sure, this is a huge breakthrough in studying disorders of the brain . But it's also super grim.
The other experiment, less bizarre but somehow more threatening, came live from inkl's hometown: Melbourne. Cortical Labs, alongside brainiacs from Melbourne and Monash Universities, taught 800,000 human brain cells in a petri dish how to play the cult arcade game Pong. A specially built "DishBrain" monitored the cells and stimulated them when they hit the ball. Within minutes the mass of neurons began 'learning' and over time improved at the simple game. It is an act of pure hubris that we filed this story under Good News this week.
If this research follows the path of least resistance we'll have rats beating us at video games within a few years.
The Best Of Times
A Platonic Good
Last Friday, for five glorious hours, Greece ran on 100% renewable energy . Substantial investment in pumped hdyro over the last decade has lifted Hellas higher than its neighbours.
Neuroplasticity and newborns
That young mothers' brains undergo dramatic changes is established science. The default mode network (a typically dry name for the home of empathy) and the subcortical areas associated with reward and threat processing are transformed. A team from the University of Southern California has published a curious new study into the brains of expectant and new fathers. Yes, there is growth in the empathy bit (great) but also a clear remodelling of the outer layer (the site of attention, planning, and executive decision making )! Fellas, you don't need YouTube study playlists to get in the zone: you need to procreate.
The Worst Of Times
Scents and sensibility
The US Centre for Disease Control is all well and good but the gold standard for tracking Covid is the Amazon comments section of candles . Users buying the potent, sickly sweet scents favoured by North Americans (yes, we're talking about Pumpkin Spice) have again started complaining, "too subtle... doesn't even fill one room" and "it was a disappointment... zero scent". Babes, you've all got the novel coronavirus .
Shame job
This week executives from Airbus and Air France pled not guilty to involuntary manslaughter over the 2009 Flight 447 disaster. 228 passengers and crew died when the A330 dove into the Atlantic. Known issues with airspeed sensors (they were prone to icing up) are at the heart of the case. The executives were met with calls of "shame" from the families of victims. Those left behind claim that both companies have neglected them for 13 long years. A painful, crucial trial.
Highlights
The Image
The supreme leader looking wistful, if not a little disinterested, as a ballistic missile is fired from an underwater silo. Hands-in-pockets. Is he thinking about the road not taken? The weight of the crown? Lunch? Hang it in the Louvre. Photo supplied by The Independent .
The Quote
Prime Minister Liz Truss: Your Majesty, great to see you again.
King Charles: Back again?
Truss: Well, it's a great pleasure.
Charles: Dear, oh dear. Anyway.
– Up until quite recently, and in most parts of the world, so clearly irking a monarch would have been intolerably shameful. The subject would need to display some form of ritualised self-flagellation (or worse). Thankfully we're past all that, and so the prime minister can walk away with her head held high and sublimate any negative feelings into taking a pair a scissors to welfare benefits.
The Number
US$4.04 a gallon
- Pump prices had been falling from the June peak. But three weeks ago they reversed and are steadily climbing again. A handful of refineries going offline for routine maintenance has put a dent in supplies. But that's not the whole story. The OPEC+ decision to cut 2% of global production capacity is a clear swipe at Democrats ahead of the midterms. MbS doesn't get a vote, but he does get a say.
The Headlines
"Kanye West Returns to Twitter, Welcomed by Elon Musk" — Bloomberg . *Start timer*.
"Kanye West's Instagram and Twitter accounts locked over antisemitic posts" — The Guardian . Just shy of 24 hours.
The Special Mention
Vale, Angela Lansbury. What can we say? Depending on your vintage she was either Nancy Oliver, Jessica Fletcher, or Mrs Potts . Ridiculous staying power and a renowned sense of humour to boot . This weekend you ought to soak up some of it .
The Best Long Reads
- The Economist begs Britain to sort itself out
- Businessweek quits its job at Exxon
- The Atlantic tames lions with Siegfried & Roy
