1,465 karma · joined February 27, 2013
Without singling you out, why is the suggestion always to reduce consumption as opposed to producing energy in less hostile locales? Current geopolitical events (and associated suffering) are occurring precisely because efforts to produce fossil fuels in the West have been undermined by activists pushing anti-consumption ideology.
There are multiple exchanges where stocks are traded, and order routing is typically transparent when using retail brokerages. The exchanges only provide the matching engine, while brokers handle custody. The process of transferring the ownership between brokerages is the clearing step which is handled by the DTCC.
Cryptocurrency exchanges provide both the matching engine and custody, so transferring ownership can be done instantly by updating records in the exchange’s database. The clearing step occurs when transferring coins to another wallet or exchange, when the transaction actually hits the blockchain.
> How hard is decrementing the shares of one user and incrementing the shares of another.
It’s surprisingly difficult. Clearinghouses (centralized) and blockchains (decentralized) exist to solve this very problem.
The Fed frames its policy response in terms of the somewhat nebulous natural rate, which implies that there is some exogenous component to rate policy. Additionally, rates have consistently trended downwards for 500 years, well before the invention of central banks [0], supporting the notion that rates are driven by exogenous factors.
[0] https://econreview.berkeley.edu/the-long-decline-of-global-i...
How much does Fed actually consider the shape of the yield curve? Powell's recent comments indicated they focus on front of curve, as opposed to something like 2s10s. Aren't central banks like ECB/BoJ more attentive to overall shape?
The Fed purchases securities like treasuries, mortgage backed securities, and (in emergencies under 13(3)) things like commercial debt. NY Fed offers a breakdown of policies taken during covid [0].
[0] https://www.newyorkfed.org/medialibrary/media/research/blog/...
The Fed doesn't make decisions about treasury issuance. Congress decides to spend money and instructs the Treasury to figure out how to finance it. That determines the net level of issuance.
QT entails reducing the size of the Fed's balance sheet, which means Fed reduces net purchases of these treasuries. These treasuries must be purchased by other market participants who do so at whatever price the market clears.
The Fed doesn't issue treasuries. That's the job of the US Treasury, which is responsible for making decisions about how to issue debt. When Fed purchases treasuries, it increases the quantity of bank reserves (which are less fungible) and also increases flows of capital to money markets.
I always recommend the book Floored! by George Selgin for those who want to understand current Fed policy. It’s a few years old at this point but does a fantastic job explaining things.
> the Fed has no mechanism to enforce the rate banks offer to each other or to consumers -- as in, there's no legal enforcement anywhere
The Fed can affect rates directly by transacting directly with the market (open market operations). Ultimately, all bond prices (and correspondingly yields) are driven by supply and demand. The Fed has unlimited capacity to purchase bonds (driving yields down) and currently has about $9T of bonds that it can sell (pushing rates up). The Fed doesn’t need to force any market participant to change yields, it can do it mechanically. The Bank of Japan explicitly does this.
The Fed also has regulatory authority over US banks, which conceivably can impact rates (think RRR and stress tests). It (along with other regulators like FDIC) can even specify the composition of bank portfolios (which determines where flows go).
> Instead, they have various levers that predictably cause rational actors to voluntarily change their own rates
Certainly rational actors respond to Fed actions of their own volition, but don’t underestimate the mechanical aspects of markets (e.g. dealers need to hedge risk and changes in rates change duration, risk parity funds and CTAs have mandates to follow, etc.)
To clarify, they are still purchasing securities, but at a rate that does not increase the size of their balance sheet. As debt matures, they reinvest the principle in new securities to maintain the size of the balance sheet. When the Fed discusses QT right now, they’re talking about reducing these purchases, so the net impact is a smaller balance sheet.
As an aside, it’s possible to get a sense of how much the Fed intends to reduce the size of the balance sheet this year based on Powell’s comments today. He indicated the impact on financial conditions would be roughly equivalent to an extra rate hike. IIRC every $100B is estimated to shift rates by 3bps. At 25bps a hike, the balance sheet reduction would be roughly $800B.
It’s been using an ample reserve regime for much longer than that. The Fed received congressional approval to implement a floor system around 2007 (it had been seeking it since the 80’s, I think), and has used it since the GFC. Are you possibly referring to the average inflation targeting framework?
The Fed does explicitly set certain interest rates. IORB is an interest rate that gets paid out every single day to market participants. “Federal reserve rate” does not exist; what you’re probably referring to is the fed funds rate. The Fed sets a target range for this, and, if the effective fed funds rate does not stay within the target corridor, the Fed will conduct open market operations to push it there.
It's not clear cut as to what degree interest rates are exogenous inputs that central banks respond to, but the Fed absolutely does set interest rates, allowing some variability between upper and lower bounds.
Today, Fed adjusted interest on reserve balances (IORB, formerly IOER/IORR) to 40bps from 15bps. This rate determines how much interest banks are paid for reserves kept at the Fed. In theory, this rate acts as a floor for the effective fed funds rate. In practice, it's somewhat murkier.
The Fed also sets the discount rate (now 50bps), which is meant to act as a ceiling on rates. Banks are able to borrow money from the Fed's discount window if they need it; however, there's a stigma associated with utilizing this facility. The Fed now maintains standing repo and reverse repo facilities to help banks manage liquidity.
These policies all target the front end of the yield curve, which is where Fed has the most control. To manipulate the long end of the curve, Fed implemented QE. Other central banks (e.g. BoJ) have gone further, using yield curve control to explicitly impact the term structure.
> Instead they purchase and sell treasuries to member banks, such that those banks' balance sheets change in such a way as to make money more or less expensive to trade amongst themselves, which has knock-on effects for consumers.
Repo rates are determined by the market, but are bounded by the rates at Fed's repo facilities. A catch here is that not all market participants have direct access to these. While repo rates may impact behavior, the Fed's intended mechanism is IORB, which (ignoring steepness of the yield curve) influences how attractive banks find loaning money to clients.
> the mechanism that causes banks to have to borrow from each other (to meet the nightly reserve requirement, historically)
This market used to be the Fed Funds market, which consisted of uncollateralized loans between banks. The fed funds market is basically dead, replaced by the repo market, which is collateralized. IIRC, the remaining participants are GSEs like Fannie Mae and Freddie Mac, which can't collect IORB. They sweep their cash to banks and split the interest (which is why IORB can act as a ceiling instead of a floor).
[0] https://www.who.int/news-room/feature-stories/detail/vaccine...
[1] https://coronavirus.jhu.edu/pandemic-data-initiative/data-ou...
That’s not quite how vaccine efficacy works. Suppose the risk of getting sick is 0.5% per thousand person hours when unvaccinated. A 90% vaccine efficacy means that the risk of getting sick is reduced to 0.05% per thousand person hours, not that 10% of people who get vaccinated are still vulnerable.
The full quote from [1]:
> No evidence of Neanderthal mitochondrial DNA has been found in modern humans. This suggests that successful Neanderthal admixture happened in pairings with Neanderthal males and modern human females.
The full quote from [2]:
> A 2016 study presented evidence that Neanderthal males might not have had viable male offspring with AMH females. This could explain why no modern man to date has been found with a Neanderthal Y chromosome.
Also from [2]:
> Positive evidence for admixture was first published in May 2010. Neanderthal-inherited genetic material is found in all non-African populations and was initially reported to comprise 1 to 4 percent of the genome. This fraction was later refined to 1.5 to 2.1 percent.
This is a form of subsidy (namely a tax break). Tesla also benefits from subsidies in the US.
That's a form of subsidy.
> Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, accelerated depreciation, rent rebates).
But the Great Depression began in late 1929. FDR's decision in 1933 retroactively extended the depression by 3 years?
You mean The Great Depression of 1929 wasn’t a great depression?
Alternative sources all appear to be contemporary to that report. I’m happy to consider other data, but I’m hesitant to give Calderón’s policies the benefit of the doubt, given the dramatic increase in cartel violence [0] under his tenure and his solicitation of bribes from cartels while in office [1].
> The activities that I mentioned specifically oil robberies started after it and that generates way more than marihuana
Oil theft in Mexico cost Pemex $1.5bln in 2016 [2]. Assuming cartel revenues from marijuana have fallen 50% since 2007, oil theft revenues would still need to grow 3x to rival those from marijuana.
[0] https://www.nytimes.com/2020/01/06/world/americas/mexico-dru...
[1] https://mexiconewsdaily.com/news/chapos-lawyer-claims-cartel...
[2] https://www.insightcrime.org/news/brief/mexico-state-oil-com...
As of a 2007 report, it was estimated that marijuana contributed up to 60% of cartel revenues [0].
> According to the National Drug Intelligence Center, drug proceeds in Mexico in 2005 ranged from... $3.9 billion to $14.3 billion for marijuana... Mexican drug traffickers also grow marijuana in the United States; therefore, the amount of proceeds returned to Mexico is likely greater than the reported estimates.
> Adding up the midpoints for each range, the total would be roughly $15.5 billion, though we note there’s a wide disparity in the marijuana estimates.
This portion has likely decreased substantially with increasing legalization of marijuana in the US, but it was not minuscule by any standard. The drop in revenue has pushed cartels to other income stream (e.g. avocado protection rackets) [1].
> Cartels not only sell marihuana, cocaine and pills, they control human trafficking, prostitution, oil robberies, kidnapping, etc.
I think of cartels as companies whose product is criminal activity. Drug prohibitions make it possible to overcome the initial hurdle needed to build such an organization, but once established it will seek to diversify revenues and adapt to changing markets by offering new services. While legalization of drugs would likely cut cartel revenues, it would not entirely eliminate them.
[0] https://www.washingtonpost.com/politics/2019/06/24/do-mexica...
[1] https://www.latimes.com/world-nation/story/2019-11-20/mexico...
The (decade old) source you provided for energy subsidies appears somewhat dishonest, as the date ranges appear cherry picked. Why is it that the source only looks at nuclear subsidies up until 1999, while subsidies to other energy sources are considered through 2009?
The choice of units in this source is also odd. What have the subsidies been in terms of energy output? At its peak, nuclear was producing some 16-20% of US power. I imagine normalizing on a $/MWh basis could paint a different picture.
Looking at a more recent source [0], it appears that recent nuclear subsidies have been marginal and are far outpaced by renewable subsidies. If we consider prior subsidies a sunk cost, it doesn’t necessarily make sense to subsidize a new, less environmentally friendly, source of energy when our best in class is already excellent.
[0] https://blogs.ei.columbia.edu/2019/09/23/energy-subsidies-re...
However, it does require lead, cadmium, and other dangerous materials. Solar power can produce up to 300x the toxic waste as nuclear power does.
[0] https://www.cfact.org/2019/09/15/the-solar-panel-toxic-waste...
Alternative sources of energy also require materials to produce them. Natural gas plants require similar amounts of concrete and steel but have lower energy yields. Renewable sources like wind and solar require immense amounts of materials, including heavy metals and other toxic, non-recyclable materials. Because they are far less dense (~50 watts per sq. meter versus 2000-6000 watts per sq. meter from nuclear), they have a substantially greater environmental impact.
> As for the "efficiency" of hydrogen, the only efficiency that matters is economic efficiency, and all indications point to hydrogen storage of wind/solar to be more economically efficient than nuclear.
Solar and wind are heavily subsidized, at least in the United States, while nuclear is subject to expensive and arbitrary regulatory burdens. There’s not a level playing field to support the argument that nuclear energy is not economically competitive.
From the perspective of physics, hydrogen is necessarily less efficient than other energy sources. Generating the initial source of electricity to produce the hydrogen has a given level of inefficiency. Then actually producing the hydrogen compounds the amount of energy wasted. Finally, utilizing the hydrogen as an energy source also loses some energy. There’s no scenario where it’s more efficient to use hydrogen as an intermediary than it is to use the original source.
Nuclear power is a zero emissions source of power. Alternative renewables (e.g. wind, solar) require fossil fuels to power the electrical grid when they are not able to generate power. The sources you mention are also substantial less effective from an energy density perspective. The amount of energy they output, relative to the energy input to construct them and the amount of land they consume, is orders of magnitude less than that produced by nuclear.
Storing energy is incredibly expensive. If we were to use lithium ion batteries to store electricity, it would cost trillions of dollars to produce and maintain the batteries. This does not include the immense environmental damage that would occur as a consequence of this policy (land usage, mining, waste products, etc.)
> If nuclear could compete on cost, we should go for it, but it can't without a major tech breakthrough
Nuclear energy is more cost effective than alternatives. The main issue is that antinuclear activists, funded by the fossil fuel industry, have lobbied to make it cost prohibitive to build nuclear power plants by way of onerous regulation and prolonged legal battles. Countries that have reduced their reliance on nuclear power, for example France, have seen their electricity prices and carbon emissions rise as a consequence. We also know that nuclear power plants can operate for longer than previously believed — at least 80 years, as opposed to the 40 years that was previously assumed. This understanding further drives down the cost of electricity derived from nuclear energy, as it reduces the need to construct new facilities.
> For example, we will definitely need to start producing hydrogen
Why? Producing hydrogen is inefficient and unnecessary if you have a consistent source of energy, which nuclear provides.
> As it is, it's a dinosaur from the past, a legacy of a time before we had better tech.
Nuclear energy is safe, causing fewer deaths and adverse health impacts than alternative sources of energy. It is cleaner, cheaper, and more reliable than alternatives while also being far more environmentally friendly. If it is a dinosaur, then so are the transistors that make up computer processors, which are roughly as old and somehow are still the subject of cutting edge research.