Hal Scott and John Gulliver ask a very good question in an op-ed in the Wall Street Journal. Why didn’t the Securities and Exchange Commission stop crypto exchange FTX?

In 2008, after Bernie Madoff’s Ponzi scheme was revealed, SEC Chairman Christopher Cox promptly initiated an internal investigation into the commission’s failures to uncover the fraud. Gary Gensler, the current chairman, has so far failed to do the same. Madoff’s evasion of applicable SEC regulations was a surprise. FTX’s state of nonregulation was the reddest of flags. Madoff was largely cheating rich sophisticated investors. FTX’s retail investors were left helpless.

Congress should begin by asking a very basic question: Why wasn’t FTX subject to any SEC regulation and enforcement? Mr. Gensler has said the laws governing the securities industry provide the SEC with the legal authority to regulate crypto exchanges and to bring enforcement actions against them for fraud. The SEC’s view, as reflected in its recent civil actions against FTX executives, is that FTX was trading securities, specifically tokens, or crypto issued by the company itself.

If the SEC has the authority to regulate crypto exchanges, it should have done so long before now. The SEC could have simply prohibited U.S. customer assets from being held by unregulated crypto exchanges. Instead, as we have written in these pages, the SEC’s only action made the problem worse by blocking banks and brokers from taking custody of crypto assets.

and here’s what looks to me like a smoking gun:

Congress also needs to investigate the missed opportunities to catch the alleged fraud. Mr. Gensler and his staff met with Mr. Bankman-Fried and FTX executives repeatedly in the months preceding FTX’s failure. Those meetings were reportedly focused on providing FTX with a regulatory license as a securities exchange, apparently without probing their operations at the same time.

In early 2022, the SEC also sent FTX inquiries related to its handling of customer assets—the heart of the alleged fraud—but these inquiries clearly didn’t lead to an enforcement action. What was FTX’s response to these inquiries? Did the SEC follow up? Congress needs to investigate all SEC meetings and communications with Mr. Bankman-Fried and his staff.

Their call for an investigation should be music to the incoming Congress’s ears since they’re already showing signs of being Investigations R Us. IMO there are more fundamental questions. What is the purpose of the SEC? What is it actually doing? Do we need a federal agency to accomplish what they’re actually doing?

In the past I have posted numerous times on how the SEC is chronically unable to satisfy its notional responsibilities which are to protect investors for a simple reason: regulatory capture. I have also proposed strategies for addressing that although I have no illusion that any of them will ever be adopted. The SEC is too cushy a gig in its present form.

They already have the authority and the mandate. What they lack are will and direction.

There’s an old wisecrack that once is happenstance, twice is coincidence, and three times is a pattern. At the Wall Street Journal Harriet Torry reports that U. S. retail sales declined 1.1% in December:

Retail sales, a measure of purchases at stores, restaurants and online, declined a seasonally adjusted 1.1% in December from the prior month, the Commerce Department said Wednesday. That was the biggest monthly decline in a year and marked the second consecutive month of falling sales. November retail sales were revised lower, to a 1% decline, marking a soft close to the holiday shopping season.

The decline in retail spending late last year adds to signs that the U.S. economy is slowing. Hiring and wage growth eased in December, U.S. commerce with the rest of the world declined significantly in November, and existing-home sales have fallen for 10 straight months.

The economy is cooling as the Federal Reserve pushes up interest rates to combat inflation. Economists surveyed by The Wall Street Journal this month expect higher interest rates to tip the U.S. economy into a recession in the coming year.

“The lag impact of elevated inflation weighs heavily on U.S. households, it’s very clear that the median American consumer is still reeling from the loss of wages in inflation-adjusted terms,” said Joseph Brusuelas, chief economist at RSM US LLP. “We’re moving towards what I would expect to be a mild recession in 2023,” he added.

However, there’s another possibility. Retail sales declined in December 2021, too:

but not in 2020.

1.1% if a pretty big decrease, considerably bigger than in 2021. I hope it’s not a pattern. It might be the “new normal”. How significant is this? The U. S. economy is highly dependent on retail sales. Too dependent in my opinion but that’s a separate issue.

So far this morning I’ve seen two Washington Post columns, a Washington Post editorial, and a Wall Street Journal column all calling for an escalation of the war in Ukraine so I guess that’s the prevailing wisdom. Here are some snippets from William Galston’s WSJ column:

For months, Western countries have rebuffed urgent Ukrainian requests to send heavy tanks, such as the American M1 Abrams, the German Leopard and the British Challenger 2. Now the wall of resistance is crumbling. The British government has said that it will send 14 Challenger 2s to Ukraine, and the Poles have announced that they intend to send 14 Leopards—if Germany, which must authorize these transfers, consents.

But the real action is in Washington and Berlin. Last week Laura Cooper, a deputy assistant defense secretary, said that “we absolutely agree that Ukraine does need tanks.” Still, the U.S. has declined to provide the Abrams, citing fuel and maintenance issues. Published reports suggest that the U.S. has about 4,800 of these weapons, including more than 400 freed up by the Marine Corps’ decision to transform its war-fighting strategy. Surely we can spare some to help Ukraine break through Russian lines. It is hard to see a more important and urgent use for them.

and

Along with tanks, Ukraine needs weapons that can counter Russia’s bombardment from the air. The deadly attack on Dnipro last week showed that Russia is prepared to use heavy, inaccurate ballistic missiles armed with 2,000-pound warheads against Ukrainian civilians in large cities. Only the most advanced antimissile systems can protect against these weapons.

Last month the Biden administration agreed to include one battery of the Patriot missile system as part of the latest package of aid to Ukraine. This is a good start, but it isn’t enough. According to a report from the International Institute for Strategic Studies, the U.S. military has 16 Patriot battalions with a total of 50 batteries. No doubt some batteries are out of service for repairs or other reasons. Still, the U.S. can send Ukraine more than one battery, and it should do so as fast as possible. It will take time to train Ukrainians on this system, though they have proved to be quick studies. At the same time, NATO should endorse Warsaw’s request that two German Patriot batteries designated for Poland be sent to Ukraine instead.

Is this the right thing at the right time? The Russians are saying that they’re encountering an increasing number of NATO troops in Ukraine, presumably a consequence of casualties among the Ukrainians. That has prompted French anthropologist Emanuel Todd to declaim that “World War II has already begun”.

Update

More calls for escalation: Eliot Cohen in The Atlantic, Jed Babbin in The American Spectator, Jacob Heilbrunn in The National Interest.

Over the period of the last 150 years the annual rainfall in Paso Robles, north of Santa Barbara in California, has varied from 5 inches per year to 30 inches per year. If there’s a pattern, it’s a complex one. Last year they got about 7 inches. They’ve been getting quite a bit of rain this month but not in unheard of amounts. The editors of the Wall Street Journal say that California has a water management problem:

California’s political leaders are obsessed with climate, so why don’t they prepare for droughts or deluges? The atmospheric rivers that are sweeping the parched Golden State should be a cause for relief, but they’ve instead given way to catastrophic floods and enormous water waste.

Scientists last fall forecast another warm and dry winter following three of California’s driest years on record. Yet storms this winter have already dropped tens of trillions of gallons of water across the state and more than a dozen feet of snow in the Sierra Nevada mountains. Alas, little of the storm runoff is getting captured.

One problem is the state’s lack of investment in public works, especially storage and flood control. Drought has recurred throughout California history, punctuated by wet winters like this one. Two seven-year droughts that started in the late 1920s and 1940s spurred the construction of a massive system of canals, dams and reservoirs.

But few large water projects have been built since the birth of the modern environmental movement in the 1970s. Species protections for salmon and the three-inch smelt limit how much water can be pumped south through the Sacramento-San Joaquin River Delta, which receives runoff from rivers in the North and the Sierra mountains.

The amount of water surging into the Delta on Friday could have filled a reservoir the size of Yosemite’s Hetch Hetchy almost every 24 hours. Instead, nearly 95% of the Delta’s storm water this year has flushed into the Pacific Ocean. Such waste occurs whenever there’s a deluge and is why some reservoirs south of the Delta remain low despite the storms.

California isn’t unique in this regard but, as is not unusual, the split personality that afflicts many Americans is present in particularly exaggerated form in California. On the one hand they’d like the state to remain as wild as it’s always been. On the other they don’t like it when the wildness is inconvenient as it has been this rainy season.

There’s an old wisecrack. Sure California has four seasons: fire, flood, mud, and drought. With a small population that wasn’t so bad but now California’s population is huge.

I have the same question as Hugh Hewitt asks in his Washington Post column. What is the Republicans’ “ask” for raising the debt limit?

But without a shared set of reasonable demands, Republicans will appear confused and divided, and after weeks of massive media pummeling, the GOP will likely give in. “What’s the ask?” is the key question for Republicans right now.

Sen. Tom Cotton (R-Ark.) argues that the debt-ceiling legislation traditionally includes measures to control spending. The “sequestration” of the 2011 BCA is widely regarded as having been a disaster for Pentagon preparedness and national security, so a replay of that is off the table. But a rollback of nondefense discretionary spending to pre-pandemic levels? That makes sense.

Rep. Chip Roy (R-Tex.), a leading debt hawk, would go further and give the Pentagon a budget haircut as well, rolling defense spending back to 2019 levels. GOP defense hawks will not agree. They think it is 1938 again, with mortal threats rising in Europe and Asia. They won’t budge.

So what can the GOP ask for, if not a new sequestration? Along with Cotton’s proposal, the party can insist on undoing the authorization and first appropriation for about 87,000 new IRS staff over the next decade. The idea that the economy will grow through better, faster, bigger tax collections is absurd. The GOP could also argue that the debt limit will continue to rise until the flood of migrants into the country ebbs, pointing to the quite obvious costs of uncontrolled migration. Saying that the debt limit won’t go up until the border wall goes up is concise, catchy and compelling, and would focus the country on the border crisis. (A genuine “crisis.”) Defunding NPR and PBS would excite the base — the first cut should be the least necessary thing the federal government pays for. In this age of a thousand media outlets, no one needs a government subsidy.

For the sake of clarity, Republican priorities should be limited to a list of three items or fewer. Lay them on the table for the public to see. Hammer them relentlessly, until every swing voter can recite the list by heart. If that moment comes, all the pressure to make a deal will shift to Biden and Senate Majority Leader Charles E. Schumer (D-N.Y.). Will they risk the full faith and credit of the United States because they want a bigger IRS and a porous southern border?

I don’t have any sense of the mood of the Republican caucus. If the battle over the speaker is any gauge, they’re in a Network-y sort of mood, hence the title of this post. They might keep in mind that, Howard Beale, the character who gives that tirade, is assassinated at the end of the movie.

or, more precisely, it’s not just willpower. At SciTechDaily there’s an article about how Stanford researchers have found that weight loss is more complicated than generally assumed:

Strictly following a diet— either healthy low-carb or healthy low-fat — was what mattered for short-term weight loss during the first six months. But people who maintained long-term weight loss for a year ate the same number of calories as those who regained weight or who did not lose weight during the second six months.

Basically,

1. The “simple thermodynamics” (weight loss = calories consumed – calories expended) is wrong.
2. The same diet doesn’t work equally well for everybody.
3. Willpower doesn’t explain the differences, either.

Researchers were able to predict who would maintain their weight loss based on a few “biomarkers”.

It’s always gratifying when they can determine experimentally what you’ve been saying all along.

I might mention that BMI is similarly garbage or, more fairly, it’s a first order approximation at best.

I was astonished by this article by Michael Dhar at LiveScience:

Evolution has produced stunningly complex features, from neuron-studded octopus arms to the mammalian ear. Can evolution ever go “backward,” though, reverting complex creatures to previous, simpler forms?

In so-called regressive evolution, organisms can lose complex features and thus appear to have evolved “back” into simpler forms. But evolution doesn’t really go backward in the sense of retracing evolutionary steps, experts say.

“The chances that the same tape [of evolutionary changes] would be … reversed in the same way is highly improbable,” William R. Jeffery(opens in new tab), a biologist at the University of Maryland, told Live Science.

for the simple reason that the question is meaningless. The only “direction” that evolution has is towards greater fitness with an organism’s environment as the quote that concludes the piece says:

“Evolution is always progressive in that it’s selecting for features that improve the fitness of the individuals in which that variation is being expressed,” Okamura said.

There are examples of “regressive evolution” other than those in the article. Whales, dolphins, and seals, for example. Anteaters and pangolins.

One thing we might consider is that our notion of intelligence and opposable digits as complexity is basically just an assumption. There is little evidence that the human species is evolving towards big-headed brains with tiny vestigial bodies. Our species might as well lose intelligence as gain it, depending on the environment.

At Wired Gaia Vince argues that climate change will drive a mass migration the “global south” to the developed countries of the north:

The global map of today’s climate impacts, and those modeled for the coming decades as temperatures continue to rise in this century, makes it clear that people will have to retreat from large swathes of the tropics, which will become unlivable for at least parts of the year, from coastlines as sea levels rise and weather becomes more extreme, and from low-lying islands. Infrastructure adaptations will not save us, and agriculture will become impossible in places which are now breadbaskets supplying millions of people. Where will they move to? Largely, northwards, to expanded cities, and entirely new cities that will need to be built on the habitable fringes of Europe, Asia, and North America. Managed well, this migration could supply a much-needed population boost to countries with worker shortages due to low birth rates, and it could help reduce poverty in some of the worst-hit nations. Managed badly, it will be a catastrophic upheaval with huge loss of life.

I agree that the mass migration from south to north is inevitable but I don’t think you need to resort to anthropogenic climate change to get there. Climate change for any reason whatever is sufficient and, frankly, the climate is always changing. The enormous and growing populations in the “global south” are moving to Europe, the United States, Canada, Australia and New Zealand whatever we do to reduce carbon emissions. There are many reasons for the move. The utter dysfunction of their governments resulting in weak economies. The perception that there are jobs and/or government handouts to be had here.

We are likely to see considerable migration from Central and South America for the foreseeable future while Europe is likely to see immigration from Africa and the Middle East. A little back-of-the-envelope calculation shows the economic burden that will create. My estimates suggest that if just 10% of Central and South America’s children and their parents come here it will increase our government spending by about a half trillion per year.

The graph above is from Visual Capitalist. Notice that Illinois is one of the few states whose main source of electricity releases no greenhouse gasses. Some would say that hydroelectricity fits that definition, too, but it is incorrect. The standing ponds behind dams emit considerable amounts of methane, considerably more problematic than carbon dioxide.