At The Week Harry Kazianis argues that the U. S. should consider the challenge posed by North Korea’s nuclear and ICBM development programs as part of the larger set of problems in the relationship between the United States and China:

It’s time for the United States to stop separating two clear and present dangers in the Asia-Pacific region and lump them together as one problem that must be confronted immediately.

The evidence is overwhelming that a rising and defiant China, and a rogue North Korea — now armed with what appears to be an intercontinental ballistic missile, or ICBM — must become Washington’s top joint foreign policy priority. Everything else — whether it’s the Islamic State, Russia, Iran, or even the horrific Syrian civil war — pales in comparison.

But before we start analyzing the dangers America and its allies face today in Asia and what to do about it, we need to know how we got here.

That makes sense. His proposal to enlarge the U. S. military footprint in the region doesn’t.

If it were up to me, I’d publicly recommend to China that they deal with North Korea and privately tell them that if they don’t we will with deadly consequences for North Korea and costly ones for China and leave it at that. Stop clutching our pearls at every new test but be prepared to act decisively if North Korea actually attacks us or our allies, attempts to blackmail us, or starts selling the technology they’ve developed. Minimalist or even proportional responses will be inadequate in dealing with North Korea. We might also want to advise the South Koreans that they should start digging.

Here’s an interesting technology. nanotechweb.org reports that researchers have found a way to convert carbon dioxide to carbon monoxide, a useful precursor to hydrocarbons useful as fuel, using available energy and cheap catalysts:

Researchers in Switzerland and Spain have developed a solar-driven electrolyser that converts CO2 to CO using only Earth-abundant elements in place of precious metals. Reducing emissions of CO2 by converting it electrochemically to CO is an attractive prospect due to the potential use of CO as a precursor to fuels and high-value chemicals. The work leads the way to further exploration of Earth-abundant metals that might perform comparably to the rare elements used until now.

The conventional method to convert CO2 to CO uses precious-metal catalysts (gold, silver, palladium) at considerable overpotentials and also requires electrolyte additives. What this research has demonstrated is an innovative, inexpensive and stable alternative using a bifunctional system of SnO2-modified CuO electrodes separated by a bipolar membrane and driven by a solar cell. This newly developed system constitutes a milestone for the catalysis community as it avoids the requirement – until now – of noble metals.

There’s lots of work remaining before a viable product emerges, of course. For one thing the technology must be scaleable. Something that works in the lab isn’t the same thing as something that will work in production. But it’s still an interesting technology.

The ongoing soap opera over Illinois’s budget hasn’t ended with the governor’s veto or the legislature’s likely override of his veto today. CNNMoney reports that the credit agencies may, as I warned, reduce Illinois’s credit rating to junk anyway:

Bruce Rauner, governor of Illinois, left, delivers a budget address in the House Chamber of the State Capitol building in Springfield, Illinois, U.S., on Wednesday, Feb. 18, 2015.

Even if Illinois’ House of Representatives takes action to enact a new budget on Thursday, the state still risks a downgrade in its credit rating to junk, Moody’s Investors Service warned on Wednesday.

The Democratic-controlled House on Thursday will attempt to overturn Republican Governor Bruce Rauner’s vetoes of spending and tax increase measures aimed at ending the state’s unprecedented two-year budget impasse.

Moody’s said it placed Illinois’ Baa3 rating, which is one step above the junk level, on review for a possible downgrade.

The $36 billion fiscal 2018 budget and $5 billion income tax increase passed by lawmakers over the extended Fourth of July holiday weekend, may fall short in addressing the state’s financial woes, particularly its huge unfunded pension liability and $15 billion unpaid bill backlog, according to Moody’s.

“On both those fronts, it’s not yet clear if the legislation being enacted will have a substantial and clear positive effect,” said Moody’s analyst Ted Hampton.

The legislators decided that the very smallest step they could take to head off junk status was to enact a budget, even one that fell short of the reform that Illinois needs, to reassure the ratings agencies that the state wouldn’t default immediately. That may not have been enough.

Meanwhile, I’m surprised at the narrow focus that the editors of the Wall Street Journal have taken:

Credit-rating agencies are now backing off their threat to downgrade Illinois debt to junk status after the state’s Democratic Senate with GOP support overrode Governor Bruce Rauner’s veto of a tax increase this weekend. But bondholders beware: Politicians will happily throw them over as easily as Republicans dumped their reform principles.

The three major rating agencies— Moody’s , S&P and Fitch—are constructive in highlighting fiscal deficits, but they often underestimate credit risk. Downgrades are lagging indicators of fiscal and economic stress. Puerto Rico’s debt wasn’t slashed to junk until 2014—seven years into a decade-long recession and after politicians had borrowed tens of billions to tape up structural deficits. And as they demonstrated again in Illinois, credit raters don’t much care how deficits are closed. Tax increases are fine, even desirable, if spending cuts are too politically difficult.

Earlier this year the big three credit raters cut Illinois’s rating to just above junk and warned the state would lose its investment grade if politicians didn’t pass a budget reducing its $15 billion backlog of bills. While the yield on Illinois’s 10-year general obligation bonds is 4.4%, servicing its debt is twice as expensive as for highly rated governments—and watch out if interest rates rise.

What surprises me is that they don’t point out that there’s a big difference between near-junk and junk status. Many institutions have governance rules which require them to put money only in securities that are investment grade. Junk status narrows the pool of possible purchasers of Illinois’s debt.

The additional drag that higher costs of debt servicing would place on Illinois’s budget isn’t the only consideration; whether Illinois can refinance its debt at all is a much more serious concern.

Gettysburg – A Fourth Of July Long Ago 

 WoW! Forum: Trump’s Tweets – Effective Communication Or National Embarrassment? 
 

My wife’s project for this summer was to have our backyard re-landscaped. She was tired of our having a pond three inches deep over much of it whenever it rained.

We had it regraded and resodded and had them neaten up our beds and put in some new planting.

BTW, on the left of the shed we’ve got tomatoes and peppers planted. On the right side of the shed is my herb garden.

This article at the New York Times, which attempts to explain the developments in thinking about the origins of our species, Homo sapiens sapiens, and how it’s related to other subspecies of the same species, Homo sapiens neanderthalensis (Neanderthals) and Homo sapiens denisova (Denisovans), would be a lot clearer if it explained some of the controversies in classification.

Are we, the Neanderthals, and the Denisovans different subspecies of the same species? Or are we different species, i.e. the proper nomenclature is Homo sapiens, Homo neanderthalensis, and Homo denisova? Consider this paragraph:

The expert consensus now is that Homo sapiens evolved at least 300,000 years ago in Africa. Only much later — roughly 70,000 years ago — did a small group of Africans establish themselves on other continents, giving rise to other populations of people today.

It makes no sense unless you assume the second nomenclature. However, if my understanding is correct, that’s not the way the wind is blowing. Present thinking is trending towards considering us, Neanderthals, and Denisovans as members of the same species rather than three different species.

All of this illustrates why communicating science is hard. Not only is the terminology itself difficult (and in another language) but the understanding changes over time.

Seeking Alpha’s recent story on Tesla is highly critical:

What this above analysis tells us is that the opex is accelerating more rapidly than the installed base – even for existing products. Combined with anemic sales, we have accelerated cash burn, worse than expected operating cash flow and free cash flow. The need for cash has become direr.

We continue to highlight that Tesla does not have a sustainable business model and is completely dependent on capital infusions for survival.

The management narrative is increasingly fantastic and not credible.

All it takes is a dislocation in capital markets to have Tesla spiraling towards a disaster. The chances of bankruptcy remain significant.

The prevailing narrative about Tesla is of a fantastically innovative company on the cusp of revolutionizing the automobile industry. I’m skeptical. I think it’s more like a rent-seeking con man trying to coax more money out of credulous investors. Could it be both?

I’m inclined to agree with the conclusion Mark Bowden reaches in his piece in Atlantic on possible responses to North Korean provocations. He lists the options as

1. Prevention, i.e. preemptive attack
2. Turning the screws, i.e. punishing NK short of war
3. Decapitation, i.e. assassinating key members of the regime
4. Acceptance

although I’d phrase it a bit differently. Read the whole thing.

What I’d say is that doing nothing is sometimes the best option. In the absence of an actual attack or serious threat, we should do nothing about North Korea. No threats. No saber-rattling. No ratcheting up of sanctions. Just ignore them.

However, if a North Korean missile is sold to another state or non-state actor or if North Korea actually attacks us or one of our allies, the situation would be very different.

I disagree with Neil Irwin’s interpretation, expressed here at his Upshot feature, of the discrepancy between the various confidence indices and the performance of the economy:

After Donald J. Trump won the presidential election, Americans’ optimism about the economic future soared. But midway through the year, that optimism has not translated into concrete economic gains.

This seeming contradiction exposes a reality about the role of psychology in economics — or more specifically, how psychology is connected only loosely to actual growth. It will take more than feelings to fix the sluggishness that has been evident in the United States and other major economies for years. Confidence isn’t some magic elixir for the economy: Businesses will hire and invest only when they see concrete evidence of demand for their products, and consumers intensify their spending only when their incomes justify it.

What I believe the discrepancy illustrates is just how far separated the financial economy has become from the real economy and that CEO confidence levels in particular are nearly entirely predicated on the financial economy—which makes sense when you recognize that’s where most of their pay comes from.

As to his claim about businesses hiring and investing, etc. it would be nice to think that but that isn’t the case, either. There’s been plenty of consumer spending (if you like nominal PCE better that’s here). Domestic hiring and investing have lagged anyway. In a globalized world with lots of domestic retail overcapacity more spending doesn’t translate into domestic hiring and investing.