Authored by Petr Svab via The Epoch Times (emphasis ours),

Documents revealed by Twitter’s new owner, tech billionaire Elon Musk, show the social media company intertwined with a government-private censorship apparatus.

Twitter suppressed or removed content on various subjects, including irregularities in the 2020 elections, mail-in voting issues, and various aspects of the COVID-19 pandemic. The company was under government pressure to purge such content and its purveyors from the platform, though most of the time it was cooperating with the censorship requests willingly, the documents indicate.

INFOGRAPHIC (Click on image to enlarge or Click Here to download)

Musk took over Twitter in October, taking the company private. He then fired around half of the staff and much of the upper management, vowing to take Twitter in a new direction. The “#TwitterFiles” releases have been part of his promised focus on transparency for the company.

He allowed several independent journalists to submit search queries that were then used by Twitter staff to search through the company’s internal documents, sometimes under the condition that the resulting stories would be first published on the platform itself.

The two journalists primarily responsible for the releases have been journalists Matt Taibbi, a former contributing editor for Rolling Stone magazine, and Bari Weiss, a former editor at both The New York Times and The Wall Street Journal. Both are liberals who have expressed disillusionment with the more extreme currents of progressivism and neoliberalism.

Others involved in the releases have been independent journalists Lee Fang and David Zweig, former New York Times reporter Alex Berenson, as well as author and environmentalist Michael Shellenberger.

The journalists have only released a fraction of the documents they reviewed. They’ve also redacted the names of employees involved, other than some high-level executives.

The documents show that the FBI and other state, local, and federal agencies have been scrutinizing the political speech of Americans on a significant scale, and trying to get lawful speech suppressed or removed online. Many conservative and traditionally liberal commentators have deemed that a violation of the First Amendment.

Twitter, a major hub of political speech, has been among the main targets of censorship. Many news stories have broken on Twitter in recent years and a significant portion of the nation’s political debate takes place on the platform, as it allows an efficient way for direct and public interaction between all on the platform, from the most prominent to the least.

Twitter resisted some censorship requests, but there was little sign the company did so as a matter of principle. Rather, executives sometimes couldn’t find a policy they could use as a justification. Prior Twitter chief executive Jack Dorsey was under pressure from his lieutenants to expand the policies to allow more thorough censorship, the documents show.

“The hypothesis underlying much of what we’ve implemented is that if exposure, e.g., misinformation directly causes harm, we should use remediations that reduce exposure, and limiting the spread/virality of content is a good way to do that (by just reducing prevalence overall),” said Yoel Roth, then Twitter’s head of Trust and Safety, which governs content policy, in a 2021 internal message published by Weiss.

“We got Jack on board with implementing this for civic integrity in the near term, but we’re going to need to make a more robust case to get this into our repertoire of policy remediations—especially for other policy domains.”

In many cases, Twitter leaders de facto allowed the government to silence its critics on the platform.

Many censorship requests came in with an imperious attitude, particularly those from the Biden White House, but also some from the office of Rep. Adam Schiff (D-Calif.), who at the time headed the powerful House Intelligence Committee.

Around November 2020, Schiff’s office sent a list of dema to Twitter, including for the removal of “any and all content” about the committee’s staff and suspend “many” accounts including that of Paul Sperry, a journalist with RealClearInvestigations.

Schiff’s office accused Sperry of harassment and promoting “false QAnon conspiracies.”

Sperry rejected the allegation, asking Schiff to show evidence for his claims and announced he was considering legal action.

Schiff’s demands were apparently a response to Sperry’s articles that speculated on the identity of the White House whistleblower that alleged a “quid pro quo” between President Donald Trump and Ukrainian President Volodymyr Zelenskyy.

Sperry reported, using anonymous sources, that the whistleblower was likely then-CIA analyst Eric Ciaramella, who was overheard talking in the White House with Sean Misko, a holdover staffer from the Obama administration. Misko later joined Schiff’s committee.

Twitter rejected Schiff’s demands, save for reviewing “again” Sperry’s account activity. Sperry’s account was suspended months later. Taibbi said he wasn’t able to find out why.

Under Pressure

The many censorship requests Twitter received via the FBI were phrased as merely bringing information to its attention, leaving it up to the company to decide what to do with them. But Twitter executives clearly felt compelled to accommodate these requests, even in cases where they internally struggled to justify doing so, the documents show.

The government pressure took several forms. The FBI would follow up on its requests and if they weren’t fulfilled, Twitter had to explain itself to the bureau. If Twitter’s position on an issue differed from the one expected by the government, company executives would be questioned and made aware that the bureau, and even the broader intelligence community, wasn’t happy. That would send the executives into triage mode, rushing to salvage the relationship, which it apparently considered essential.

Corporate media served as another pressure point. If Twitter wouldn’t do what it was told fast enough, the media would be provided with information portraying Twitter as ignoring some problem of paramount importance, such as possible foreign influence operations on its platform.

One censorship request, for instance, targeted an account allegedly run by Russian intelligence, though Twitter wasn’t given any evidence of it.

“Due to a lack of technical evidence on our end, I’ve generally left it be, waiting for more evidence,” said one Twitter executive that previously worked for the CIA, according to Taibbi.

“Our window on that is closing, given that government partners are becoming more aggressive on attribution and reporting on it.”

The internal email suggests that Twitter, despite having no concrete evidence to back it, wouldn’t dare to disobey the request because of the media fallout of the government publicly labeling the account as run by Russian intelligence.

Congress was perhaps the heaviest sword of Damocles hanging over Twitter’s head. Lawmakers could not only spur negative media coverage, but also tie up the company in hearings and investigations, or even introduce legislation that could hurt Twitter’s bottom line.

For instance, just as Sen. Mark Warner (D-Va.) was pushing Twitter to produce more evidence of Russian influence operations on its platform in 2017, he also teamed up with Sens. Amy Klobuchar (D-Minn.) and John McCain (R-Ariz.) to propose a bill that would have required extensive disclosures of online political advertising.

In the meantime, Twitter managers were convinced that lawmakers were leaking information Twitter provided them and seeding negative news stories, even as the company was trying to placate them with increasingly stringent actions toward actual and alleged Russia-linked accounts.

Even though the FBI was officially only alerting Twitter to activities of malign foreign actors, many of the censorship requests were simply lists of accounts with little to no evidence of malign foreign links. At times, Twitter tried to ask for more information, noting that it couldn’t find any evidence on its end, but often it simply complied. It was impossible for Twitter to do its due diligence on each request—there were simply too many, according to Taibbi.

One request revealed by Taibbi claimed that “the attached email accounts” were created “possibly for use in influence operations, social media collection, or social engineering.”

“Without further explanation, Twitter would be forwarded an excel doc,” Taibbi said.

Censorship requests were lopsided against the political right. Some researchers said that the right was much more involved in spreading misinformation, but the documents indicate that the censorship wasn’t so much a matter of a right-left dichotomy, but rather a pro- and anti-establishment one. Even some left-leaning accounts were targeted if they strayed too far from the official government narrative.

Moreover, the right didn’t appear too keen on demanding censorship to begin with. Taibbi couldn’t find a single censorship request from the Trump campaign, Trump White House, or even any Republican, though he was told there were some.

On the other hand, there seemed to be no appetite across the board for targeting misinformation coming from the establishment itself

Hunter Biden’s Laptop

Twitter’s suppression of the 2020 New York Post exposé on Hunter Biden, son of then-candidate Joe Biden, was dissected in the Twitter release in particular detail. Apparently, some Twitter executives, particularly Roth, head of Trust and Safety, were regularly invited to meetings with the FBI and other intelligence agencies to receive briefings on the online activities of foreign regimes. In the several months prior to the 2020 election, Roth had been conditioned to expect a “hack-and-leak” Russian operation, possibly in October and involving Hunter Biden.

The FBI alleged there was some evidence of Russian influence operation related to Hunter Biden’s dealings in Ukraine. But the bureau was also aware that Hunter Biden left his laptop with a trove of explosive information in a New York repair shop and that a copy of it was handed to Trump’s then-lawyer, former New York Mayor Rudy Giuliani. The FBI picked up the laptop from the repair shop in December 2019 and had Giuliani under surveillance in August 2020, when the repairman gave him the copy. As the FBI knew, the laptop information was neither hacked, nor a figment of a Russian plot.

When the Post broke the story, Twitter executives were left with no doubt it was exactly what the FBI had been warning about.

“This feels a lot like a somewhat subtle leak operation,” Roth commented in an internal email, despite acknowledging he had no evidence for such a claim, save for “questionable origins” of the laptop, which was apparently abandoned by Hunter Biden at a computer repair shop.

Roth noted that the story didn’t actually violate any Twitter rules. Nevertheless, it was marked “unsafe” and blocked on Twitter under its policy against hacked materials, despite there being no evidence the materials were hacked.

Twitter’s then-Deputy General Counsel James Baker backed the censorship move, saying it was “reasonable” to “assume” the Hunter Biden information was hacked.

Baker was FBI General Counsel until May 2018. He joined Twitter in June 2020. At the FBI, Baker was closely involved in the Russia investigation scandal where the FBI embroiled the Trump campaign and later the Trump administration in exhaustive investigations based on paper-thin and fabricated allegations that Trump colluded with Russia to sway the 2016 election. The allegations were produced by operatives funded by the campaign of Trump’s opponent, former Secretary of State Hillary Clinton.

The FBI was in fact aware of no intelligence suggesting a “hack-and-leak” operation ahead of the 2020 election, as testified in November 2022 by Elvis Chan, head of the cyber branch at the FBI’s San Francisco Field Office, which was responsible for communications with Twitter and other tech companies with headquarters in its jurisdiction.

Twitter itself found very little Russian activity ahead of the 2020 election, Shellenberger reported, citing internal communications.

Shadowbanning

Twitter has long denied the practice of shadowbanning—suppressing the reach of an account without informing the user. The denial, however, specifically defined shadowbanning as making the person’s content invisible to others. What people have been complaining about is that Twitter would suppress how many people see their content without making it invisible altogether—Twitter has been doing that a lot, the internal materials show.

One Twitter engineer told Weiss: “We control visibility quite a bit. And we control the amplification of your content quite a bit. And normal people do not know how much we do.”

Among those whose accounts were surreptitiously throttled was Jay Bhattacharya, Stanford University professor of medicine and one of the early critics of the COVID-19 lockdowns.

Others included Dan Bongino, conservative podcaster and former Secret Service agent, and Charlie Kirk, founder of Turning Point USA, the country’s largest conservative youth group.

COVID-19

Twitter has extensively suppressed information regarding the COVID-19 pandemic. Anything about the origin of the virus, its treatment, the vaccines developed for it, and public policies to mitigate its spread had to align with the official position of the federal government, as promulgated by the Centers for Disease Control and Prevention (CDC).

Zweig said he “found countless instances of tweets labeled as ‘misleading’ or taken down entirely, sometimes triggering account suspensions, simply because they veered from CDC guidance or differed from establishment views.”

Twitter user @KelleyKga, a self-described fact-checker, criticized a tweet that falsely claimed that COVID-19 was the leading cause of death by disease in children. @KelleyKga pointed out that such a claim would require cherry-picking data, backing his argument with data from the CDC. His criticism, however, was labeled as “misleading” and suppressed. On the other hand, the tweet that contained the false claim was not suppressed.

All physician Euzebiusz Jamrozik did was write on Twitter an accurate summarization of study results on COVID-19 vaccine side effects. The tweet was labeled “misleading” and suppressed.

Sometimes, it appears, Twitter suppressed the information on its own, but many of the COVID-19-related requests came from the government and even directly from the Biden White House, internal files show.

In one email, White House Digital Director Rob Flaherty accused Twitter of “bending over backwards” to resist one of his censorship requests, calling it “total Calvinball”—a game where rules are made up along the way. The email wasn’t part of the Twitter files. It came out during an ongoing lawsuit against the Biden administration filed by the attorneys general of Missouri and Louisiana.

Another White House staffer wanted Twitter to censor a tweet by Robert Kennedy, Jr., a long-time critic of vaccination. The staffer mused whether Twitter could “get moving on the process for having it removed ASAP.”

“And then if we can keep an eye out for tweets that fall in this same genre that would be great,” he said in the Jan. 23, 2021, email.

The administration wasn’t always trying to get such content removed. People who merely expressed “hesitancy” about the vaccines were supposed to only have their content suppressed from reaching any significant audience, the documents indicate.

The Biden administration had a lot at stake as the vaccine rollout was one of its first and most high-profile tasks. There were other stakeholders as well.

Several censorship requests came from Scott Gottlieb, board member and head of the regulatory and compliance committee at Pfizer, the pharmaceutical giant that made the most popular COVID-19 vaccine and raked in tens of billions of dollars on sales of it over the past two years.

Gottlieb sent Twitter at least three requests. One targeted a doctor who argued on the platform that naturally acquired immunity to COVID-19 is superior to vaccination. Twitter suppressed the tweet, even though the doctor was correct.

Another request targeted author Justin Hart, who argued on Twitter against school closures, pointing out that COVID-19 fatalities among children are extremely rare. Gottlieb sent the request shortly before Pfizer received approval for the use of its vaccine on children. Twitter didn’t comply with the request.

Yet another request targeted former NY Times reporter Berenson. Gottlieb claimed that Berenson’s criticism of Dr. Anthony Fauci, the head of COVID-19 response in the Biden administration, was causing threats of physical violence toward Fauci. Twitter suspended Berenson’s account shortly after.

Gottlieb sent his requests to the same Twitter official who served as a contact person for censorship requests coming from the White House.

Trump Deplatforming

Trump was particularly effective on Twitter. His soundbites, honed over decades of dealing with the New York press, played well on the brevity-oriented Twitter, earning the president some 90 million followers and lending him the power to bypass media filters and instantly grab national attention. Trump’s Twitter presidency, however, brewed scorn in the beltway, especially among the foreign policy crowd that was used to diplomatic subtlety.

Twitter’s removal of Trump a few days after the Jan. 6, 2021, protest and riot at the U.S. Capitol appears to be one of those instances where Twitter executives acted on their own, breaking the platform’s content policies in suppressing the voice of a sitting American president, internal documents indicate.

Twitter suspended Trump’s account on Jan. 8, 2021, after the president made two posts.

“The 75,000,000 great American Patriots who voted for me, AMERICA FIRST, and MAKE AMERICA GREAT AGAIN, will have a GIANT VOICE long into the future. They will not be disrespected or treated unfairly in any way, shape or form!!!” said one of Trump’s tweets.

“To all of those who have asked, I will not be going to the Inauguration on January 20th,” read the other.

Twitter moderators and supervisors agreed that the Tweets didn’t violate any rules.

“I think we’d have a hard time saying this is incitement,” wrote one staffer. “It’s pretty clear he’s saying the ‘American Patriots’ are the ones who voted for him and not the terrorists (we can call them that, right?) from Wednesday.”

Higher executives, under pressure from their many anti-Trump employees, wouldn’t accept that conclusion and continued to push for construing Trump’s comments as malicious.

“The biggest question is whether a tweet line the one this morning from Trump, which isn’t a rule violation on its face, is being used as coded incitement to further violence,” Vijaya Gadde, Twitter’s Head of Legal, Policy, and Trust, argued in an internal message.

Another Twitter moderation team quickly furnished Gadde’s argument with a narrative. Trump was a “leader of a violent extremist group who is glorifying the group and its recent actions,” the team concluded, according to internal messages.

Undermining the Nunes Memo

In January 2018, then-Rep. Devin Nunes (R-Calif.) submitted his memo detailing FBI surveillance abuses in pursuit of the Trump-Russia investigation. The memo was correct on virtually all points of substance, as later confirmed by DOJ Inspector General Michael Horowitz.

The memo was dismissed by the corporate media as a “joke,” but gained significant traction on social media nonetheless. Legacy media and several lawmakers then came out claiming the memo was boosted online by accounts linked to Russian influence operations.

However, Twitter found no evidence of Russian influence behind the #ReleaseTheMemo hashtag.

The claims were all sourced to the Alliance for Securing Democracy (ASD), a group set up in 2017 under the German Marshall Fund, a think tank funded by the American, German, and Swedish governments.

The ASD is closely linked to the U.S. foreign policy and national security establishment. It was headed at the time by Laura Rosenberger, a former Clinton campaign adviser who held various roles at the State Department and the National Security Council. Its Advisory Council includes former Clinton campaign chairman John Podesta, former CIA head Michael Morell, and former Department of Homeland Security (DHS) head Mike Chertoff.

Twitter officials were at a loss as to how the ASD came to its conclusions.

“We investigated, found that engagement was overwhelmingly organic and driven by strong VIT [Very Important Tweeters] engagement (including Wikileaks, [Donald Trump, Jr., Rep. Steve King, and others),” Trust and Safety head Roth wrote in an internal message.

In fact, the “dashboard” ASD used to make its claims had already been reverse-engineered by Twitter—a fact Roth didn’t want to disclose to the media.

Twitter tried debunking the story behind the scenes without giving out such details, but to no avail. Initially, reporters ran with the story without even reaching out to Twitter, Roth wrote.

The initial letter on the matter from Schiff and Sen. Diane Feinstein (D-Calif.), the top Democrat on the Judiciary Committee at the time, also came out before giving Twitter a chance to respond, internal messages say.

Twitter tried to stop Sen. Richard Blumenthal (D-Conn.) from piling on with his own letter, but again failed.

“Blumenthal isn’t always looking for real and nuanced solutions. He wants to get credit for pushing us further. And he may move on only when the press moves on,” commented Carlos Monje, Twitter’s then-Public Policy director, in an internal message. Formerly a Department of Transportation official, Monje returned to the department under the Biden administration.

In the end, Twitter never publicly challenged the Russia narrative.

Aiding Pentagon Psyops

In 2017, a Pentagon official asked Twitter to “whitelist” several accounts the Defense Department was using to spread its message in the Middle East. Twitter obliged, giving the accounts similar privileges it was reserving for verified accounts.

Later, however, the Pentagon removed any apparent connections between the accounts and the U.S. government, making them de facto surreptitious. Even though the accounts should have been removed under Twitter’s inauthentic activity policy, the company left them up for several years, independent journalist Fang reported.

Federal ‘Belly button’ of Investigation

The FBI served as a conduit for other government agencies to pass information to Twitter and ask for favors, according to Taibbi.

In one exchange, FBI cyber head Chan explained that the bureau would funnel to Twitter communications from the U.S. intelligence community (USIC), but other election-related communications would come from the DHS’s Cybersecurity and Infrastructure Security Agency (CISA).

“We can give you everything we’re seeing from the FBI and USIC agencies,” Chan said. “CISA will know what’s going on in each state.”

He then asked if Twitter would like to communicate with CISA separately or if it would prefer to “rely on the FBI to be the belly button of the [U.S. government].”

Twitter executives were surprised to learn that the FBI had agents specifically dedicated to searching Twitter and flagging content policy violations.

Since 2017, Twitter has employed at least 15 former FBI agents, further entangling the agency with the platform. The practice is so common, there was an internal discussion group at Twitter for former agents.

The FBI responded to the Twitter files disclosures in a statement that labeled the reporting “misinformation” spread by “conspiracy theorists and others … with the sole purpose of attempting to discredit the agency.”

Department of Homeland Censorship

The DHS has managed to shoehorn speech policing into its mandate to protect critical infrastructure. In January 2017, shortly before leaving the White House, President Barack Obama designated elections as critical infrastructure. The DHS’s CISA then made it its job not only to protect elections from hackers, but also from misinformation and disinformation.

Read more here…

After President Biden’s lawyers found classified documents at an office he used at a DC think tank, His Justice Department considered, and then declined, a plan to have FBI agents monitor a search for classified documents at his residences, in order to ‘avoid complicating later stages of the investigation,’ and because Biden’s attorneys ‘had quickly turned over a first batch and were cooperating,’ the Wall Street Journal reports, citing people familiar with the matter.

Instead, the DOJ decided that it would be just fine for Biden’s lawyers to conduct the additional searches by themselves, and would agree to immediately notify the Justice Department if they found any other potentially classified records – after which law-enforcement authorities would take them.

The arrangement meant that FBI agents wouldn’t bear witness to things such as the volume, or contents, of whatever might turn up. This is, of course, the same FBI that participated in a plan (and fabricated evidence) in a plot to frame former President Trump as a Russian asset, and then ran cover for the Bidens during the 2020 US election – telling social media companies that Hunter Biden’s laptop, or anything like it, was likely Russian disinformation.

In the week since news reports first surfaced about the documents, the incident has drawn parallels to the discovery of a much larger number of documents at former President Donald Trump’s Mar-a-Lago home in Florida, which federal agents obtained a warrant to search in August after more than a year of negotiations between Mr. Trump’s lawyers, the National Archives and the Justice Department and after Mr. Trump’s lawyers said all documents had been returned. -WSJ

After the initial finding at the Penn-Biden Center in early November (and not disclosed until last week), classified materials were discovered on three separate occasions in Biden’s Wilmington house in December and January, in the garage and a room adjacent to it, White House lawyer Richard Sauber said last week.

According to Sauber, the documents were “inadvertently placed” at the locations.

Trump supporters have accused the DOJ of a double standard in the handling of the Biden situation vs. Trump’s. And of course, as President, Trump’s ability to declassify the documents obtained in the raid remains a constitutional grey area. 

Biden’s supporters have pointed to the president’s cooperation, however the DOJ’s willingness to let Biden’s lawyers conduct unsupervised searches is obviously fraught with concern.

According to the White House, it’s no big deal.

NBC News’ Peter Alexander repeatedly presses Karine Jean-Pierre about the White House claiming that Republicans are “faking outrage” over Biden’s classified document scandal.

“Why shouldn’t Americans be upset about documents found in a garage?” he asks.

She can’t answer. pic.twitter.com/zTdd3SkkmN

— Ryan Saavedra (@RealSaavedra) January 17, 2023

NBC News’ Peter Alexander repeatedly presses Karine Jean-Pierre about the White House claiming that Republicans are “faking outrage” over Biden’s classified document scandal.

“Why shouldn’t Americans be upset about documents found in a garage?” he asks.

She can’t answer. pic.twitter.com/zTdd3SkkmN

— Ryan Saavedra (@RealSaavedra) January 17, 2023

Authored by Peter Castle via The Epoch Times,

An obvious barrier to adopting wind and solar power for electricity supply is their intermittency – when the wind isn’t blowing, and the sun isn’t shining, substitute sources are required. This issue is given much attention by conservative media, as it should.

Yet one of the less well-known roadblocks for these renewable technologies is frequency control, even though it becomes a critical concern much sooner.

Since the 1890s, electricity networks and devices all around the globe have used alternating current (AC) systems, which means that the flow of electricity in the system is repeatedly changing direction.

In Australia, it alternates 50 times a second, that is, at a frequency of 50 Hertz (in the USA, it is 60 Hertz).

Supplying electricity at a consistent frequency is very important because appliances and electronics on the network are designed for a specific frequency/voltage input. Therefore, they can be damaged by the wrong electricity supply.

As a rule, networks would rather supply no electricity than bad electricity. Automated controls through the electricity system will disconnect the supply if the frequency or voltage is “off-spec.”

A technician monitors electricity levels in front of a giant screen showing the eastern German electricity transmission grid in the control centre at Neuenhagen bei Berlin, Germany, on Dec. 17, 2015. (Sean Gallup/Getty Images)

South Australians will not soon forget when this happened to the entire state network in 2016. The state-wide blackout started late in the afternoon during some poor weather conditions, and thousands of people had to drive out of the city without any streetlights or traffic signals.

There were a range of contributing causes, including gusty winds taking down some transmission lines and a lightning strike on a power station.

After those physical causes, automated protection systems took over. Wind turbines disconnected themselves from the network. The system naturally started drawing more load from all remaining supplies, which maxed out the capacity of the interconnector to the rest of the East Coast network, which consequently disconnected.

From that point, the shutdowns cascaded throughout the whole network. This all happened in less than a second.

The potential for a cascading shutdown can never be entirely eliminated; automated protection systems must make decisions at a speed that prevents any human involvement.

Nevertheless, the vulnerability of the whole system can vary, and increasing intermittent renewables contribute to decreasing the system’s stability.

Traditional vs Renewable Generators

Traditional generators use turbines—steam turbines, open-cycle turbines, and water turbines (hydroelectricity). This equipment is called “synchronous” because the frequency of the electricity they produce is directly linked to the speed that the shafts of the turbines rotate.

Because these machines are large and heavy, it takes time and energy to speed them up or slow them down, which means that the frequency of the electricity cannot change too quickly. This is called “inertia.”

As you may imagine, solar panels, having no moving parts, do not provide inertia. They match whatever frequency is already in the system; they do not help stabilise it.

Wind turbines, though they do have large spinning components, change speed all the time merely due to wind conditions. Hence they are not designed to synchronise with the AC network. So they do not provide inertia either.

If a system does not have inertia, then instead of gently responding to a change in load, the frequency can flail about like a cyclist getting speed wobbles (any engine can have the same problem if it doesn’t have a sufficiently heavy flywheel).

Sheep graze in front of wind turbines on Lake George on the outskirts of Canberra, Australia, on Sep. 1, 2020. (David Gray/Getty Images)

After the 2016 blackout, energy security gained its rightful place as the highest priority for a few glorious and brief weeks.

A package of actions was taken by the South Australian government over the next couple of years, including the installation of a large-scale battery (following a promise by Elon Musk to construct it within 100 days or provide it for free), the building of a new diesel power station, and providing incentives for new natural gas exploration and production.

Additionally, two synchronous condensers were installed. Synchronous condensers are large, heavy rotating shafts, similar to what is contained in a turbine, but they don’t produce electricity—they just help to stabilise the frequency of the network.

In the subsequent years, each of these responses was vindicated. The diesel generator has been used at several critical times. It was also found that the primary value of the large-scale battery was to stabilise the network.

Though it stores comparatively little energy, the battery responds rapidly to faults originating anywhere in the east coast network, even in Queensland. It has since been programmed to provide “virtual inertia.”

Technology for 100 Percent Renewable Network Is Not Here Yet

Advances in technology and network management have meant that renewables can provide more significant and larger portions of supply without unacceptably destabilising the network frequency.

Nevertheless, it remains true that almost no system can ever afford to operate on 100 percent renewables without keeping at least a few traditional rotating generators online.

Wind and solar generators are often switched off or “curtailed,” even when there are still some gas or coal generators active. The network operator cannot afford to turn off the synchronous generators without losing frequency control.

In the Northern Territory, which has a stand-alone electricity network, about 60 MW of solar farms have been constructed and yet have never once been switched on because the system cannot accommodate them.

Though the 2016 blackout triggered a suite of improvements to South Australia’s network, energy security still falls dangerously far down the list of priorities for Australian governments.

Important actions that support energy security, such as the construction of the Kurri Kurri peaking generator in New South Wales, often face opposition from the media and politicians.

Visitors gather to see light installations at Sydney Harbour at the start of the Vivid Sydney festival in Sydney on May 24, 2019. Vivid Sydney is an outdoor cultural festival featuring light installations and projections. (Saeed Khan/AFP via Getty Images)

Several times, Australia has come dangerously close to another cascading shutdown. Incidents have occurred in smaller networks but failed to gain national attention—such as the 2019 Alice Springs shutdown, in which the central-Australian network was shut down for several hours merely due to unanticipated cloud cover.

A recent example of a near-miss occurred in late November 2022. During a significant weather event, the main transmission line connecting South Australia to the rest of the east coast was broken near Tailem Bend.

South Australia’s electricity network became an island. For system stability, several rotating generators had to remain online. Yet the amount of solar energy the state can generate during the day can exceed demand. The network operator needed to curtail more solar generation than they have direct control over.

In response, the market operator began phoning behind-the-meter solar power providers and using social media to ask commercial and residential solar panel owners to switch off their panels. Thanks to these phone calls, they managed to turn off about half of South Australia’s solar power and thus prevent another shutdown.

The system was highly vulnerable, yet the whole event barely made the evening news.

Despite the lack of traction from that news story, the media loudly celebrated a fairly meaningless milestone a month later when the state’s renewables generation was 100 percent of demand for 10 days, which would have been impossible without exporting most of the generation to neighbouring states.

It seems that until the lights actually turn out, the decision maker will keep their gaze firmly fixed on the renewable mirage.

There are multiple reasons why renewables are not a simple panacea for electricity supply around the world:

• the weather-dependence problem,

• the energy storage problem,

• the end-of-life replacement and recycling problem,

• the land-area problem,

• the materials-of-construction and scarcity problem.

Now you can add the frequency control problem to your list.

Via The Cradle, 

Russian nationals have become the largest buying group of real estate in Dubai since the war in Ukraine, driving sales to a new record high according to Sputnik.

In 2022, Dubai recorded more than 86,000 sales, surpassing the previous record in 2009 with 80,000 sales, according to Dubai-based Better Homes brokerage. The estimated worth of real estate bought in 2022 is a staggering $56.6 billion, an increase of nearly 80 percent since 2021.

However, the real estate market in Dubai not only saw a boost in sales due to geopolitical events unfolding in Europe, but it also became a haven for bankers fleeing strict lockdown rules in Asia, Israeli investors that have taken advantage of the Abraham Accords, crypto investors, and hedge fund managers.

In addition, the city’s new lenient laws have also made it easier for foreigners to invest in real estate, as well as the easing of COVID-19 restrictions much earlier than the rest of the world. Real estate is one of the city’s most critical sectors, accounting for about a third of the economy.

Dubai’s “real estate sector has demonstrated its ability to sustain its rapid growth and enhance its attractiveness as an investment magnet,” said Sultan Butti bin Mejren, director general of the government’s Dubai Land Department.

“The sector is set to achieve even greater growth in the future,” he added.

The UAE is a neutral ground for Russian investors and even participates actively in negotiations between the warring countries.

Russians were the biggest international buyers of Dubai real estate last year, according to brokerage Betterhomes https://t.co/lwPXY7dcXu pic.twitter.com/22veLG4Iiv

— Bloomberg Middle East (@middleeast) January 17, 2023

In October, the Spokesman of the Russian Presidency, Dmitry Peskov, confirmed the UAE’s integral role in a prisoner exchange between Moscow and Kiev.

UAE President Sheikh Mohammed bin Zayed al-Nahyan (MbZ) informed his Russian counterpart Vladimir Putin of the Ukrainian consensus on several issues.  Putin, in return, thanked MbZ during a meeting in St. Petersburg for his mediation in the prisoner exchange and his dedication to resolving regional and humanitarian issues.

A former deputy director for the Defense Intelligence Agency (DIA) admitted that he knew a “significant portion” of Hunter Biden’s laptop “had to be real,” but signed an October 2020 letter attacking the NY Post‘s bombshell report anyway, the Post reports.

The official, Douglas Wise, was one of 51 former intelligence officials who said the Post‘s report had the appearance of a Russian disinformation campaign.

“All of us figured that a significant portion of that content had to be real to make any Russian disinformation credible,” in a comment to The Australian. “The letter said it had the earmarks of Russian deceit and we should consider that as a possibility,” he continued.

“It did not say Hunter Biden was a good guy, it didn’t say what he did was right and it wasn’t exculpatory, it was just a cautionary letter.”

Except, the letter concluded that “It is high time that Russia stops interfering in our democracy,” and referenced “[o]ur view that the Russians are involved in the Hunter Biden email issue.”

The Oct. 19 letter — whose signatories included former Defense Secretary Leon Panetta, former Director of National intelligence James Clapper, and former CIA Director John Brennan — went out of its way to cast doubt on the legitimacy of The Post’s scoop, devoting five paragraphs to explaining “factors that make us suspicious of Russian involvement” while slipping in the caveat that “we do not know if the emails … are genuine or not and … we do not have evidence of Russian involvement.” -NY Post

And as Jonathan Turley notes,

The infamous letter from the former intel officials (including such Democratic figures like John Brennan, James Clapper, Leon Panetta and Jeremy Bash) was used by the media to assure the public that there was nothing to see in the scandal. It was the perfect deflection in giving a cooperative media cover to bury the story of how the Biden family engaged in influence peddling worth millions with foreign figures, including some with foreign intelligence connections.

It worked beautifully. It was not until two years later that NPR, the New York Times, and other media outlets got around to telling the public the truth.

Now some of the signatories are trying to rehabilitate themselves. It is not hard. Figures like Bash have been rewarded for their loyalty. Others like Brennan and Clapper have become regulars on CNN to continue to give their takes on intelligence.

Wise, however, has tried to find some redeemable role in the letter. He told The Australian that “All of us figured that a significant portion of that content had to be real to make any Russian disinformation credible.” So the emails and photos showing criminal acts with prostitutes and thousands of emails on influence peddling was likely true, but that truth only made them more dangerous forms of Russian disinformation.

It is that easy. True or not, the story was dangerous in detailing the corruption of the Biden family before the election. Done and done.

It also means that, under this dubious logic, you can spike any true story that is embarrassing to the President or the party as presumptive disinformation.

Indeed, Wise says that it was “no surprise” to learn that the emails that he helped spike were actually genuine.

He is not alone. Washington Post columnist Thomas Rid wrote that  “We must treat the Hunter Biden leaks as if they were a foreign intelligence operation — even if they probably aren’t.”

Let that sink in for a second. It does not matter if these are real emails and not Russian disinformation. They probably are real but should be treated as disinformation even though American intelligence has repeatedly rebutted that claim.  It does not even matter that the computer was seized as evidence in a criminal fraud investigation or that a Biden confidant is now giving his allegations to the FBI under threat of criminal charges if he lies to investigators.

Yet, they still wanted the media to treat the story before the election as part of “Russian overt and covert activities that undermine US national security” as a story with “all the classic earmarks of a Russian information operation.”

Keep in mind that these “experts” literally had nothing beyond a potentially damaging story against the Bidens before an election. That was all that it took for these experts to rush out their letter.

Wise does not address that American intelligence reached the exact opposite conclusion and found no evidence — none — of Russian involvement or some foreign disinformation conspiracy.

Wise and the other signatories did not want to wait for any facts to support their claim. They rushed out the letter to an eagerly awaiting media to spike the story before the election. Now, they are seeking plausible deniability that they were political operatives sent on a political hit job. It is as implausible as calling a presumed true story “disinformation.”

Late last March, FreightWaves CEO Craig Fuller was the first to correctly call the coming freight industry recession, a byproduct of the vicious “bullwhip effect” snapback. Overnight, and a little over 9 months later, Fuller is out with another notable call, arguing that while the freight market recession may still be a factor, it is now on the backfoot as the freight market has “likely bottomed.”

The freight market has likely bottomed is the theme of my latest article https://t.co/lcp5UOgyPk

— Craig Fuller 🛩🚛🚂⚓️ (@FreightAlley) January 16, 2023

Below we republish Fuller’s latest observations explaining how “High-frequency truckload data suggests the freight market is stabilizing.”

Did the first quarter lull come early, in November and December of 2022? 

For carriers, the first quarter is always the most difficult period in the annual freight calendar, when retailers clear their excess holiday inventory, construction takes a pause for the frigid weather and everything is gloomy and cold. The soft first quarter often follows a robust fourth quarter, in which freight companies enjoy the annual peak season and make an outsized portion of their profits. Carriers look forward to spring for some market stability and potential market accelerations. 

Is it possible that winter came early this year? Did the freight winter start in November and now we are experiencing an early thaw? 

Early freight data and channel checks would suggest the freight market could be stabilizing and clearer skies are ahead. 

Over the past week, we’ve spoken with numerous freight executives who have mentioned that the first two weeks of the first quarter are shaping up better than expected, granted, expectations were incredibly low after such a weak peak. 
Going into the quarter, executives we spoke with predicted a significant collapse in freight for the first quarter, with a seasoned veteran executive of a large trucking technology firm predicting that the first quarter would be the worst in his four-decade career. It was a fair bet considering how challenging the second half of the 2022 was for most in the freight market.

Truckload spot rates, according to the FreightWaves National Truckload Index, hit a low of $1.67 on Nov. 17, 2022, and have since bounced back to $1.98 per mile.

Trucking tender volumes also suggest that the direst of predictions have not played out. Tender volumes on the Outbound Tender Volume Index (OTVI), an index that tracks the volumes of load requests from shippers to carriers, show that volumes briefly dipped below 2019 and 2020 levels, but they have since broken away from this baseline. 

If the first few weeks of the new year are an early omen, then the freight market may have bottomed in the fourth quarter and carriers can look forward to a far less volatile market in 2023. 

Federal electric vehicle rebates in Canada went 153% over their originally intended budgets, a new report out last week unveiled.

Ottawa had shelled out $759 million on EV rebates by March of last year, according to a report by True North. The “unprecedented” number of people claiming the rebates pushed Canada’s government well over its allocated spending. 

Analysts in the Audit Of Incentives For Zero Emission Vehicles Program said: “The uptake of the program was higher than expected and funding was an ongoing concern.”

“The program’s main risk is not having sufficient funding to meet the demand,” they continued.

In Canada, beginning in 2019, anyone who bought an EV below the price of $45,000 is allowed to claim a rebate of up to $5,000. The government then moved that threshold up to $70,000. 

Liberals first claimed the program would cost $300 million, True North reported.

But an audit of the spending found far different results: “The program exhausted its original funding of $300 million and received two subsequent funding top-ups of $287 million and $172 million to continue the program until March 31, 2022 as planned.”

136,940 buyers in total have claimed rebates and Canada has extended the budget for the program to $1.6 billion until March 2025. The country is trying to fulfill environment minister Steven Guilbeault’s plan to make all vehicles sold by 2035 electric or hybrid.

The cost for such a program amounts to $100 billion a new analysis found. 

By Russell Clark of the Capital Flows and Asset Markets substack

I first went to Japan in 1991 as a 17 year old high school exchange student. I went on to do a degree in Asian Studies (and Economics), and a university exchange to Japan in 1994. When I start working in finance in 2000, one of the things that struck me was how different the Japanese experience was to elsewhere. We were taught that equities always outperform bonds, that large fiscal deficits would imply a weak currency, and inflation was inevitable part of life. When I pointed out that this did not hold in Japan, I was usually told to either shut up, or that Japan was special, so could be ignored. This always struck me as a odd way to do treat the second largest economy in the world, and the largest holder of foreign exchange reserves. For long time readers, you should be aware of my “Japan as the Saudi Arabia of savings” theory, which explained Japanese experience from 1994 up to 2016 very well, but not so well since. I have been contemplating a different way of thinking about Japan.

To follow this analysis, you are going to have to accept a few basic assumptions. First of all is that the US has a very high level of influence on Japanese policy making. This leads to unusually close relationship both economically and politically. One of the distinct features of this is that not only is Japan the largest owners of treasuries, almost uniquely, it ONLY holds US Treasuries as foreign reserves.

This is very different to everywhere else in the world, even countries with very similar economic and political arrangements, like South Korea.

The point of this is to show that Japanese policymakers hew very closely to US policy. With this observation, perhaps we can look at the Japanese economic experience of the last 40 year or so through an American political lens and see if it makes sense. One of the first economic problems that the US faced after World War II was that the US economy was increasingly uncompetitive against its European and Japanese peers. The most visible sign of this was the falling gold reserves of the US.

It is very easy to see the Japanese agreeing a deal to allow the Yen to appreciate, and to go along with the idea of holding treasuries instead of gold as foreign reserves. This led to the first mega trade with Japan – long yen from 1970 to 1990. Since 1990, it has been a wash trade.

In 1980, Ronald Reagan came to power, and we saw politics in the US shift to pro-capital away from pro-labour. One of the key tenets of pro-capital policies is the freedom to buy from wherever is cheapest, with no regard of any political cost. That is, if Japan was cheaper at making cars, then why not buy Japanese cars, for example, but broadly speaking the ideals were of freedom and efficiency were pursued.

Allowing Japanese car makers to compete rigorously with US auto makers also had a secondary benefit. US union power was disproportionally strong in auto makers. By opening up this sector to foreign competition, it should help reduce the power and influence of the unions in the private sector. That is Japan was used as the hammer to break US union power. That is to reduce the political power of pro-labour proponents.

The boom in Japanese manufacturing also led Japan to overtake the US semiconductor industry in the 1980s. As late as 2010, Japan was still a similar size to the US.

As Japanese semiconductor market is dominated by Japanese semiconductor makers, this meant in the late 1980s, Japan producers also had the largest market share. And this is where Japanese problems began. If Japan maintained its technological lead over the US, it would likely face increasing political pressure from the US. It would need to either succumb, or return to the disastrous policies of the 1930s and begin to compete with the US.

Asian sales ex-China has been larger than the US for many years, although US companies have much larger market share outside of Japan, which is probably why even though Asia ex China sales are larger than the US, US market share from above totals more than Japan, Korea and Taiwan combined. It should be remembered that not only are Korea and Taiwan strong military allies of the US, both are former colonies of Japan, and Japanese engineers were instrumental in the setting up of their semiconductor industries. It should be pointed out that neither Korea or Taiwan have an equivalent to Tokyo Electron (semiconductor equipment maker).

In essence, in late 1980s Japan was beginning to look like a strategic competitor to the US, and choose stagnation, and a peaceful life, rather than rupture with the US. I think this makes sense to me. Turning Japan from a strategic competitor back into a natural ally of the US is good statecraft, and given the disaster that World War II was for Japan, an understandable decision. Using this line of thought, Abenomics did indeed mark a political change in Japan, away from managed decline to something else. Where exactly, will be subject of another post.

Authored by Christoph Gisiger via TheMarket.ch,

Speculation is mounting that the Bank of Japan is losing control of the bond market. Jim Grant, editor of «Grant’s Interest Rate Observer», believes this could trigger a shock to the global financial system. He also explains why he expects further surges in inflation and why gold should be part of your portfolio.

The news caught markets off guard: On December 20th, the Bank of Japan surprisingly extended the target range for the yield on ten-year government bonds to plus/minus 0.5%. A move that not a single economist had expected.

This week, the Bank of Japan could announce a major policy shift amid rising government bond yields and a strengthening yen. Although barely a month has passed since the BoJ’s last meeting, the bond market is already testing the new upper limit of the yield curve control regime.

«To us, Japanese interest rate policy resembles the Berlin Wall of the late Cold War era, a stale anachronism that must sooner or later fall,» says Jim Grant. For the editor of the iconic investment bulletin «Grants’ Interest Rate Observer,» recent developments in Japan pose an underestimated risk to global financial markets. Not least because virtually no one is talking about it.

In an in-depth interview with The Market NZZ, which has been slightly edited for clarity, Mr. Grant explains what it means for financial markets if the Bank of Japan is forced to scrap its yield curve control policy. But first, he says why he doesn’t believe inflation will end soon, why bonds may be at the start of a long bear market, and why he believes gold is the best choice as a store of value.

«If the past is prologue and if the great bond bull market is over, then on form, we are looking at what could be a very prolonged and perhaps gradual move higher in interest rates»: Jim Grant.

What do you observe when you look at the financial world today?

Well, it’s always the same, and – here’s the catch – it’s always a little different. The trick is to identify the unique or unusual feature of a familiar cycle. In this regard, it helps to know a little bit of financial history, and to just that extent it helps to be a little old. But what is not helpful is to mistake the past for a certain roadmap to the future.

What are currently the most important developments from a historical perspective?

The essential driver of so much of today’s news are the consequences of the monetary regime in place worldwide. That regime has given us artificially low, indeed suppressed rates of interest, and it has given us the consequences of those false rates which include rampant misallocation of capital and great gusts of speculation; some of which are a lot of fun, and some of which are quite lucrative to the clever people who can get in on them.

However, in the wake of the surge in inflation last year, interest rates have risen rapidly. Now inflation seems to be subsiding. Was the rise in prices only temporary after all?

Plainly, the rate of change has subsided, but what is often ignored is the level of inflation. The rate of change is everyone’s preoccupation, but the loss in purchasing power is never recovered. This is the nature of a fiat currency regime. Way back under the gold standard, prices would rise on average and they would fall on average, but at the end of very long cycles, they would be unchanged. In contrast, a fiat currency regime is characterized by the fact that prices ratchet ever higher and never are allowed to correct to the downside. So what we have is a very elevated level of average prices and a somewhat lower rate of rise in these prices.

Then again, the tension in the markets has eased somewhat recently. Stocks have made a surprisingly good start to the new year.

Certainly, the slowing rate of the rise in inflation is to be celebrated. It’s nice, but we are still left with a system that is inherently inflationary. Here in the United States, it’s a system given to very free and loose public spending, given to great entitlements for one and all, and it’s a system that has flourished in recent years with very low, suppressed rates of interest. To me, that’s the essence of an inflation generating system: Politically, inflation is kind of something for nothing, and that seems to be part of the political zeitgeist. That’s why I would be a little bit guarded in pronouncing the end of this inflationary episode.

Why do you think the issue of inflation could keep us on the edge for some time?

Inflation in such a system resembles one of these inextinguishable long-burning underground coal mine fires. I’m not sure if you have them in Switzerland, but in Pennsylvania for example there has been such a fire that’s been going on for around fifty years. You don’t always see it, but it flares to the surface from time to time. It’s always there, it’s always latent, leaking smoke, warming the soles of your shoes. To me, that is a good analogy for inflation in a free spending and paper currency issuing social democracy.

So are we at a fundamental inflection point heading into a new cycle, characterized by higher inflation and rising interest rates?

Yes, and I say that with well deserved humility because «Grant’s Interest Rate Observer» was calling the end of the secular bull bond market at least a decade before it ended. Looking back, the last great secular bond bear market began in the spring of 1946 in the US and most of the world. It ended in the fall 1981, 35 years later. What followed, of course, was the still greater and more prolonged bond bull market. It began in October 1981 and perhaps ended in 2020 when the ten-year treasury yield got down to 0.5%.

What kind of scenario could now be in store?

If the past is prologue and if the great bond bull market is over, then on form, we are looking at what could be a very prolonged and perhaps gradual move higher in interest rates. We ought to remember that the first ten years of the last bond bear market were characterized by a very gradual increase. It was hardly noticeable. Yields on long-term bonds rose by about ten basis points a year. The treasury yield started off at 2.25% in 1946, and then in 1956 it was at around 3.25%. So with all these qualifications: Yes, I think the bond bull market is over and a bond bear market has begun.

Why do bond market cycles last such a long time?

I’m a little weary of saying that the bond market does these things as opposed to that it has done them in the past. But it has exhibited that tendency. At the risk of being pathetic, I would say that since at least the middle of the 19th century bonds have exhibited the tendency to move up and down in yield over the course of decades or generations. I’m not sure anyone can fully explain why. And, because we can’t explain it, we can’t be dogmatic about it continuing in just this way. But again, if past is prologue, we are in for a very long phase or cycle of rising interest rates.

However, supply chain problems seem to be largely resolved; in the semiconductor industry, for example, there is already overcapacity and full inventories. What are the drivers of inflation in the next few years?

One of the things I’ve learned in the fifty years in this business is to be a little bit less doctrinaire about such things as the cause of inflation. Milton Friedman famously said it’s «always and everywhere a monetary phenomenon». At some trivial level, that is undeniable because inflation involves money. Then again, you could also argue that it cannot be a monetary phenomenon because the purchasing power of money by definition is a casualty of inflation. As to the cause of inflation, there is a whole new school now arguing that it is a fiscal phenomenon. I think there is something to that, as there is something to the Friedmanite view. There is something to the idea that it is a political phenomenon, it’s a characteristic of politically weak societies.

But the Federal Reserve assures us that it can bring inflation under control.

I think that we have not seen the last of this inflationary outburst. But one needs to be quite humble in the face of something that very few central bankers anticipated or even could have imagined. It wasn’t just that the Fed didn’t predict it, but when the Fed saw it, when it saw the whites of inflation’s eyes, it still couldn’t believe it and continued with its QE program until the end of March 2022.

It looks like markets are now gradually shifting their focus to the threat of recession. Does Fed Chair Jerome Powell have the stamina to «get the job done» in curbing inflation, as he says?

Hardly a day passes without one regional Fed president or another declaring that the FOMC will most definitely push the funds rate to 5% or higher and hold it there for six months or a year or maybe two. What I object to these pronouncements is the unseemly certitude that they convey. The Fed seems so sure of itself. It was so sure of itself when it was predicting just as confident in 2021 that a 10 basis-point funds rate was a lock through 2023. Their cocksureness does not become them. The future is a closed book, not an open book. Especially, it is a closed book to people who mobilize pseudo-scientific mathematical models of the workings of the financial economy because they really don’t understand it.

Usually, the Fed raises interest rates until there is an «accident» somewhere in the financial system or the economy. Is that going to be the case this time as well?

The Fed is not a believer in the likelihood of accidents. I’m not sure that it understands the risks its previous QE regime has introduced into the financial system, specifically the heavy leverage in Corporate America, and still more particularly the leverage in private equity for example. Of course, a lot of speculation has been wrung out of the system already, certainly in cryptocurrencies, in SPACs and such things.

Where could such an accident occur?

I think Japan is perhaps the most important risk in the world, not least because it is among the least discussed risks, certainly in the Western press. Mostly, it’s very much an afterthought. The risk is this: Every business day, the Bank of Japan is spending tens of billions of dollars worth of yen to enforce governor Kuroda’s yield curve interest rates suppression program. To put this into perspective: In the UK, when the little crisis over liability driven pension investing in late September happened, the Bank of England spent around $5 billion. The BoJ does that before breakfast.

The Bank of Japan already introduced its policy of yield curve control in the fall of 2016 by keeping the yield on ten-year government bonds within a target range through direct interventions in the bond market. Why should it change its monetary policy now?

Governor Kuroda, who’s term is up on April 8, insists that yield curve control is here to stay. But to us, Japanese interest rate policy resembles the Berlin Wall of the late Cold War era, a stale anachronism that must sooner or later fall.

And why specifically now?

What’s different is that the market is on to something. I say that because the Bank of Japan has already lifted the allowable ceiling on ten-year JGB yields to 0.5% from 0.25% at the end of last year. Kuroda said it was nothing more than a means to the end of ensuring the success and stability of a permanent regime of yield suppression. But the market is like a very ill-behaved dog at the end of a leash. It’s wheezing and frothing, and the Bank of Japan is yanking ever harder and tighter to control this beast.

Why do you think this beast will finally break free?

Kuroda stated that the Bank of Japan is not going to stop until there is inflation. Well, Tokyo’s consumer prices which precede the national CPI rose to 4% in December versus expectations of 3.8%. What’s more, Uniqlo and other corporate leaders are out announcing that they are raising wages significantly. You will find other stories to this effect, signs and precursors of a change. Some former governors of the Bank of Japan are now venting their views that this has gone far enough and the consequences will be devastating. So I think this is a huge risk just offstage and the world has to pay closer attention to it.

What’s the risk if the Bank of Japan gives up control of the yield curve?

What makes it a risk for everybody, whether you are Swiss, American, German or Japanese, are two things. First of all, suppressed rates prompt leveraged individual and corporate balance sheets which at the shock of a rise in interest rates will get into trouble. There are troubles buried in the financial statements of Japanese companies that have borrowed too much. Sure, Japanese businesses are not as inclined as, say, American ones to borrow excessively, but there are also risks regarding a lot of bank saving schemes or structured products in Japan. For instance, you get a yield of 0.75% for five years, but in the fine print there is some caveat that if rates go above a certain level then the duration of this product extends to ten years. I’m making these numbers up, but it’s essentially what the risk is.

And what is the second risk?

The Japanese are a frisky nation. They have an immense amount of net savings, and some $3 trillion of Japanese assets are invested in non-Japanese markets, of which half are domiciled in the United States. In other words, the Japanese, the proverbial Mrs. Watanabe, search the world for yield opportunities. According to Bloomberg, expressed as a percentage of the GDP of the country in which they are invested, Japanese stock and bond holdings break down to 7.3% of America, 7.5% of France, 8.3% of Australia and 9.5% of the Netherlands. What is going to happen if suddenly Japanese yen denominated rates become rather attractive? Well, a lot of this money may be repatriated and the result of that repatriation will be a rise in volatility in markets we can’t really identify now. So the risk of a volatility upsurge is considerable. I think the time is getting ripe for a big change in Japanese rates structure and therefore in interest rates and in the risk presented to bond holders worldwide.

What is your advice to investors in this environment?

Having just mocked the central banks for their pretending to know what they can’t know, I’m in a very compromised position if I were to say what is going to happen. But allow me to suggest that I’m somewhat of a broken record on gold. I’m going to continue with this broken record and observe that people have not yet come to terms with the essential inherent weaknesses of the monetary system that has been in place since 1971. We have all gotten used to it. I mean, you have to be a person of a certain age, indeed you have to be as old as I am, to really recall the debates surrounding the abandonment of Bretton Woods. People have grown up with the idea that money is what they print, and if the Japanese can print $50 billion a day with which to suppress interest rates, that doesn’t shock many people. But I think such shocks do lay ahead.

And gold can help protect a portfolio against such shocks?

I think that the strains that are already obvious will become more so. People will be looking around not for a better brand of paper or digital money, but rather for the real McCoy. In every issue of «Grant’s» we have something to say about a stock, so I don’t want to sound too much of a nutcase. We do live in the real world. But when I look at the very big picture, the money the central banks produce in such profusion is unsound. It may not be now, but in time, people will look around for an alternative and that alternative may just be gold – the thing that has been more or less a shadow cast by Bitcoin, Ethereum, and all the other crypto currencies.

Against this background, how do you assess the general outlook for the stock market?

The market has come down from extremely overvalued to nearly expensive, and my observation is that an extremely overvalued market does not normally bottom out at nearly expensive. So I’m not sure that’s the end of things. I don’t find a whole lot of compelling values in the stock market. Sometimes, one has great conviction, but not now with regard to stocks for me.

Are there any exceptions that appear attractive from a value perspective?

In one of our recent issues, we had a story on Transocean. The stock had a little move, it’s gone up from $2.50 to $5 or something in that order, but we’re still bullish. It’s a high-tech story. The technology happens to pertain to fossil fuels, therefore it’s beyond the pale for «properly sensitive fiduciaries» to put it this way. But it is a very impressive business which happens to have the flaw of a highly leveraged balance sheet. So there is considerable risk, but I think the risk is less compelling now than the reward. So if you ask about something to be bullish on, I would suggest Transocean.

Southwest Airlines’ disastrous operational meltdown over the Christmas holiday canceled thousands of flights and left tens of thousands of passengers stranded at airports across the US. The airline was operating an antiquated computer crew-assignment software called “SkySolver,” which couldn’t match crew members and flights due to the magnitude of the disruption sparked by a winter storm. 

Southwest’s software wasn’t designed to solve large flight disruptions. And that’s why Chief Executive Officer Bob Jordan announced Tuesday morning that the airline budgeted $1 billion to upgrade the computer system to ensure this mishap never happens again. 

“We are currently budgeted to spend more than $1 billion of our annual operating plan on investments, upgrades, and maintenance of our IT systems. The recent disruption will accelerate our plans to enhance our processes and technology as we continue to focus on adding capabilities to bring rapid improvements for you, our valued Customers,” Jordan wrote in a statement. 

He continued: “We fell short of your expectations and the high standards we have of ourselves, and for that we are deeply sorry. It is our steadfast commitment to making the necessary changes to address the issues we faced and to regain your trust and confidence.” 

Here is Jordan’s complete statement:

Jan 17, 2023

Dear Valued Rapid Rewards® Members,

During the week between Christmas and New Year’s Day, our Customers and Employees–including some of you–endured operational issues that greatly disrupted holiday and end-of-year plans. We want you to know that we are making every effort to prevent that from happening again.

Emerging from some of the most challenging days in our Company’s history, we are highly focused on our Customers, our recovery, and our plan going forward. Our immediate task has been to stabilize our operation, and we are pleased to report that since the disruptions, we’ve operated our expected flight schedule with the Southwest® Reliability that we’ve upheld for 51 years.

Taking Care of Customers: We’ve worked with great urgency to take care of the Customers directly impacted by the disruption by returning their bags, processing refunds and expense reimbursements, and offering those most significantly impacted 25,000 Rapid Rewards points as a gesture of goodwill for their inconvenience. As of the end of last week, we have returned virtually all of the bags we had on hand from the event, have processed nearly all refunds, and are processing tens of thousands of reimbursement requests a day.

Immediate Actions: Following the disruption, we moved swiftly to put mitigation elements in place to further reduce the risk of future operational disruptions that could impede Customer travel plans. Some of those efforts already in progress include:

• Establishing supplemental operational staffing that can quickly mobilize to support Crew recovery efforts
• Enhancing our Crew engagement technology to efficiently communicate with large numbers of Crew Members during frequent schedule changes
• Updating and upgrading our Crew recovery system to not only solve current and future schedules, but also provide the ability to optimize established schedules as we revise them during irregular operations

Going Forward: While we have mitigated risks in the short-term, we are taking additional steps to review the events and make thoughtful recommendations on future actions.

• We’ve engaged a third-party global aviation consulting firm, Oliver Wyman, to complete an assessment of the event and make recommendations of additional mitigation elements for us to consider.
• Our Board of Directors appointed an Operations Review Committee that is working with management to understand the events and help oversee the Company’s response.
• We commit to keep you updated as we make progress on these efforts as well as additional steps to prevent an event like this from happening again.

Southwest has a long history of innovation and continuous improvement. We are currently budgeted to spend more than $1 billion of our annual operating plan on investments, upgrades, and maintenance of our IT systems. The recent disruption will accelerate our plans to enhance our processes and technology as we continue to focus on adding capabilities to bring rapid improvements for you, our valued Customers.

We fell short of your expectations and the high standards we have of ourselves, and for that we are deeply sorry. It is our steadfast commitment to make the necessary changes to address the issues we faced and to regain your trust and confidence. We will continue down our path of providing you the exceptional service you expect and deserve from us. It’s a passionate and personal pursuit for our entire Southwest Family, and we look forward to welcoming you onboard one of our flights very soon with the Heart and Hospitality we’ve been famous for delivering for 51-plus years.

With appreciation,

Bob Jordan

President & Chief Executive Officer

Southwest’s meltdown might push forward some desperately needed modernization of its outdated and ineffective operating systems.