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Getting A Sense of the Economy’s Current Hole and How the Government’s Measures To Fill It (Don’t) Add Up

Getting A Sense of the Economy’s Current Hole and How the Government’s Measures To Fill It (Don’t) Add Up



The numbers just don’t add up. Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That’s the thing about “stimulus” talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first.

You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on “haphazardly.”

Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn’t big enough. Paul Krugman most of all (seriously, in November 2009, long afterward, he wrote Obama’s plan was awesome but it wasn’t “nearly enough”). If you don’t know how big is the abyss, if you can’t even size the thing up properly while it’s unfolding, how can you even attempt to call it “stimulus?”

What we are dealing with today is an economic disruption the proportions of which are an historical outlier. That means an unfathomable number of workers are not getting paid and therefore consumers not spending, businesses don’t collect that revenue which destroys their profit levels, and then business investment which doesn’t get done on top of both consumers and businesses far more likely to save and act differently than before.

The federal government (we’ve done the Fed’s “stimulus” a million times over already) is attempting to bridge this enormous divide by making up what it hopes ends up being the vast majority of this difference. For workers that aren’t working and therefore not being paid, the government offers souped-up unemployment benefits and safety nets. “Helicopter” payments to citizens. Business loans and grants in lieu of revenue that will never happen.

The feds aren’t adding to an economy experiencing a mild downturn, and therefore create an excess, they’re trying desperately to redistribute a sufficient amount just to be able to hope they can keep this thing afloat long enough (For what? No one wants to answer, the goalposts continue to shift.)

The stock market like many commentators are all saying the government’s done more than enough, perhaps too much (inflation). That all depends first upon the scale of the hole.

We’re going to use unadjusted nominal GDP in this pro forma exercise because that’s really what ends up being lost. Inflation, or deflation, as this case may be, doesn’t factor as much on the ground since we’re trying to figure out the level of gross activity that won’t happen – and then compare the government’s efforts to it.

What gets reported in the media as real GDP is really inflation-adjusted, seasonally-adjusted at an annual rate. The unadjusted figures provide us with a more suitable basis; in Q1, for example, the headline estimate for nominal GDP was $21.5 trillion when, unadjusted, total output was actually a shade less than $5.3 trillion.

And, as you can see above, the trend in US output was unfavorable to begin with. The American economy, like the rest of the world, slowing down considerably before the end of 2019. For our purposes, then, we’ll use a conservative 4% nominal growth rate as our forward-looking baseline (rather than a more realistic “boom” of closer to 7% or 8% like before 2008).

This gives us what GDP might’ve looked like if COVID-19 hadn’t happened and the prior slowdown hadn’t become worse.

Now, the tricky part. According to several sources, including the Atlanta Fed’s GDPNow tracking model, Q2 GDP is looking like -40% to -45% right now. Those estimates are for real GDP seasonally-adjusted, so we’ll conservatively use -35% year-over-year in our pro forma unadjusted set, giving us a cushion of error in the government’s favor (smaller relative “hole”).

In Q3, we’ll expect an “explosion” of growth, the best ever seen (without context), which leaves nominal unadjusted GDP 10% less than Q3 2019, and then 5% below the previous year in Q4. These latter two quarters don’t matter as much as you might think.

This would put nominal output back in the right direction very quickly and sharply, leaving the economy very nearly equal to Q1 when this whole thing started.

But it’s not about what the level might be by Q1 2021, the entire issue is what amount gets lost in between – and how much the government must try to make up for it – for the rest of this year (and into next year, probably).

For Q2 alone, the gap is $2.1 trillion – as a starting point. Two point one TRILLION in lost direct economic output. Not an annual rate, not seasonally-adjusted, gross nominal dollars.

If we tally up the rest of the year, quarters one through four, this scenario leaves us expecting just $18.9 trillion in total output compared to the $22.3 trillion under our 4% growth baseline – for a yearly difference in lost activity of somewhere around $3.4 trillion.

On this scale, it really doesn’t make much difference if it ends up being something like $2.5 trillion. But it certainly does if, using less moderate estimates, the gap really does tally $4 trillion or more.

That’s, in my view, a conservative estimate for a difference the government’s got to try and make up for; lost economic activity that much of which we will never get back.

The hopes for a “V” instead rest almost entirely upon the CARES Act. The proportions of this “stimulus” spending amount to about $2.2 trillion give or take. Why give or take? Because this stuff is done in round numbers, haphazardly slapped together by guesses and pork barrels. Which industry wants the bailout the most by hiring the best lobbyists?

In terms of direct payments to consumers, workers and small businesses, that comes out to just less than $1 trillion (red above). Then it gets more questionable with tax cuts and local/state government bailouts (blue), not quite the kinds of federal “spending” that becomes actual spending.

Beneath those, loan guarantees for governments as well as larger businesses; more liquidity and cash-sourcing than stimulus (orange). Finally, the substantial add-ons (green) at the end, the list of “other” which includes the airline bailout, healthcare spending, education grants (!), as well as huge money ($45 billion) directed to FEMA for “disaster assistance.”

A mish-mash of activities that don’t exactly re-create the flow of income and revenue a normal, healthy economy transmits.

Even if we consider every single dollar as if it gets issued and becomes a dollar spent or distributed into this enormous real economic gap (which won’t happen), that’s a little over $2.2 trillion combined which barely covers the second quarter’s deficit. And that’s if everything goes right and before we even consider the differences in timing (something about “shovel-ready” rings a bell).

Economists will try to claim there are multiplier effects through all of this activity, which are supposed to further boost the impact of these big numbers even if they don’t end up being one-to-one. But even if there is some positive multiplier, how much of it is, as experience has shown, canceled out by negative multipliers associated with a -35% nominal decline?

The country’s experience with ARRA should have been enough to put that myth to bed for good (as well as the Bush “tax credits” payments, up to two-thirds of which were saved rather than spent).

Again, even if we assume dollar for dollar the government’s spending hits the real economy in gross nominal output, that still leaves a deficit of substantially greater than $1 trillion.

To put this into context, let’s compare it to the same exercise run using the Great “Recession.”

Keeping it to only the six quarters officially declared as recession (Q1 2008 up to and including Q2 2009), the total amount of lost output back then was about $900 billion (assuming the same conservative 4% baseline). And, importantly, we have to stop with those six quarters because, as you can see above, the recovery never came; the economic deficit was never filled, not even close, and had continued onward until the present time.

The ”L”, in other words, where before all the Fed’s and feds’ “inflationary” “stimulus” was assumed to be effective, too. Wrongly, as it turned out.

When dealing with numbers this big, precision isn’t nearly so important. Rough guesses and spit-balling are a good place to start because in this size ballpark even getting close should open your eyes.

Under what I’d consider the best possible scenario, dollar for dollar government stimulus, un-multiplied but parred up, this would still leave us with a gap somewhat bigger than the one (on a percentage basis) we call the Great “Recession.” If everything goes just perfectly, including the best economic “growth” ever seen in Q3, we’ll be lucky if it totals up to be a repeat of the 2008 and early 2009 experience in the economy.

That’s not a “V” and just the scale of these numbers were a big reason why the Great “Recession” didn’t produce one, either.

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Ancient technology turns plant-based cheese into ‘something we want to eat’

Credit: Photo: Department of Food Science To produce plant-based cheeses that feel and taste like dairy cheese, scientists have their sights set on fermentation….



Credit: Photo: Department of Food Science

To produce plant-based cheeses that feel and taste like dairy cheese, scientists have their sights set on fermentation. In a new research result, University of Copenhagen scientists demonstrate the potential of fermentation for producing climate-friendly cheeses that people want to eat. 

Nearly thirty kilos of cheese are eaten by the average dairy-loving Dane every year. But increasing pressure on Earth’s resources and climate change call for our food system to turn in a more plant-based direction. As a result, scientists are looking into how to transform protein-rich plants like peas and beans into a new generation of non-dairy cheeses that possess the similar sensory properties as the dairy-based ones that humans have enjoyed for thousands of years.

Several plant-based cheeses are already on the market. The challenge is that plant proteins behave differently than milk proteins when trying to make cheese from them. To meet this challenge, producers add starch or coconut oil to harden plant cheeses, as well as an array of flavourants to make them taste like cheese.

But it turns out that this can be done with the help of nature’s smallest creatures. In a new research result from the University of Copenhagen’s Department of Food Science, researcher Carmen Masiá has succeeded in developing plant-based cheeses made from yellow pea protein with a firm texture and improved aroma profile. She was able to do so by using the same natural fermentation process with bacteria that we have used with cheeses made from milk for thousands of years.

“Fermentation is an incredibly powerful tool to develop flavour and texture in plant-based cheeses. In this study, we show that bacteria can serve to develop firmness in non-dairy cheese in a very short period of time while reducing the bean-like aroma of yellow pea protein, which is used as the main and only protein source,” explains Carmen Masiá. 

Fresh cheese after eight hours

The result builds upon a research result from last year by the same researcher, who found that yellow pea protein constituted a good “protein base” for making fermented plant-based cheese. In the new result, the researcher examined twenty four bacterial combinations made from bacterial cultures supplied by the biotech company Chr. Hansen, where Carmen Masiá is completing her Industrial PhD.

“The whole point of this study has been to combine the commercially-available bacterial cultures that are suitable for the fermentation of a plant-based raw material, and test them in a pea protein matrix to develop both taste and texture that would be suitable for a cheese-like product. And, even if some bacterial combinations performed better than others, all of them actually provided firm gels and reduced beaniness in the samples” says the researcher.

To study the behavior of the bacterial combinations, the scientist inoculated them in a protein base made of yellow pea protein. After only eight hours of incubation, the result was a firm “cheese-like gel” reminiscent of a fresh soft white cheese.

“All bacterial blends produced firm gels, which means that one can get a fermentation-induced gel without necessarily adding starch or coconut oil to the base. From an aroma perspective, we had two goals: To reduce the compounds that characterize the beaniness of yellow peas, and to produce compounds that are normally found in dairy cheese. Here we saw that some bacteria were better at producing certain volatile compounds than others, but that they all worked great to reduce beaniness – which is a very positive outcome. Furthermore, all blends acquired dairy aroma notes to different degrees” explains Carmen Masiá.

Taste and feeling is everything

The researcher points out there is still a way to go to before achieving this plant-based cheese, but that research is on the right track. According to her, tailored bacterial compositions and cultures must be developed in order to achieve the optimal cheese-like characteristics. Furthermore, the plant-based cheese might need to mature over time so that it develops flavor and character, just as dairy-based cheeses do.

Finally, the new generation of fermented plant-based cheeses must be judged by consumers, so that the flavour is perfected. All in all, this is to make plant-based cheeses so delicious that people seek them out and purchase them.

“The most challenging thing for now is that, while there are a lot of people who would like to eat plant-based cheese, they aren’t satisfied with how it tastes and feels in the mouth. In the end, this means that no matter how sustainable, nutritious, etc. a food product is, people aren’t interested in buying it if it doesn’t provide a good experience when consumed,” says Carmen Masiá, who adds:

“One needs to remember that dairy cheese production has been studied over many years, so it’s not something that we can just mimic overnight with totally different raw materials. Nevertheless, there are many scientists and companies out there doing great progress in the field; I hope that we will get closer to making non-dairy cheeses that taste good over the next few years. We are getting there.”

The study was conducted in collaboration between the Department of Food Science and microbial ingredients supplier Chr. Hansen, a bioscience company that produces ingredients for the food and pharmaceutical industries, among other things. 

What is fermentation:

Fermentation is an ancient technique which originated in China. Today, it is used to make beer, wine, cheese, pharmaceuticals and much more. Fermented foods are preserved by initiating a fermentation process in which natural lactic acid bacteria and enzymes are formed. This is done as microorganisms convert sugars in the selected food into lactic acid, acetic acid and carbon dioxide. This makes food acidic and prevents the growth of putrefactive and pathogenic bacteria.

The first textual evidence of cabbage fermentation is found in China’s oldest collection of poems, Shi Jing (Book of the Odes), which dates back to approximately 600 BC.

About the study:

  • The researchers tested twenty four different bacterial compositions on a protein base made from yellow pea protein.
  • The study shows that all of the bacterial compositions produce a firm cheese-like gel, reduced the beaniness, and produced dairy-related volatile compounds.
  • The study was conducted in collaboration between the Department of Food Science and microbial ingredients supplier Chr. Hansen, a bioscience company that manufactures microbial ingredients for the food and pharmaceutical industries.
  • The study has been published in the scientific journal Future Foods
  • The research is funded by Innovation Fund Denmark (grant 0153-00058B)

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BGI Genomics breaks new ground in Saudi Arabian precision medicine

The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic…



The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic conference on precision medicine in the Kingdom, this conference attracted global experts worldwide.

Credit: BGI Genomics

The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic conference on precision medicine in the Kingdom, this conference attracted global experts worldwide.

One of the highlights of the conference was the presentation entitled “Spatial-temporal sequencing and some large-scale application of precision medicine technologies,” delivered by Dr. Louis (Renyuan) Luo, VP of BGI Genomics West Asia, at the invitation of the Saudi Society of Medical Genetics.

Dr. Luo’s presentation discussed the importance of spatiotemporal sequencing technology in the field of precision medicine and its potential large-scale applications, introduced the company’s case studies, such as the world’s first multi-center project of newborn genetic screening, large-scale regional noninvasive prenatal testing (NIPT) coverage and extensive early screening project of colorectal cancer at Wuhan, Hubei province, China.

Besides sharing BGI Genomics research achievements and innovative applications in enhancing medical outcomes, Dr. Luo highlighted Genalive, BGI Genomics joint venture laboratory in the Kingdom of Saudi Arabia. This is the result of a localized strategic partnership aiming to provide cutting-edge precision medicine services, promote development and contribute to improving the country’s healthcare system.

The success of Dr. Luo’s presentation paves the way for deepening future localized collaboration and innovation in Saudi Arabia. BGI Genomics will continue to support the realization of Saudi Vision 2030 through active participation in global cooperation and exchanges in the field of precision medicine to enhance patients’ health outcomes.

About BGI Genomics:

BGI Genomics, headquartered in Shenzhen, China, is the world’s leading integrated solutions provider of precision medicine. Our services cover more than 100 countries and regions, involving more than 2,300 medical institutions. In July 2017, as a subsidiary of BGI Group, BGI Genomics (300676.SZ) was officially listed on the Shenzhen Stock Exchange.

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Bitcoin mining restricted to legal entities in Uzbekistan: Official

Cryptocurrency mining in Uzbekistan can only be carried out by legal entities with the use of solar power, the local crypto watchdog has reiterated.



Cryptocurrency mining in Uzbekistan can only be carried out by legal entities with the use of solar power, the local crypto watchdog has reiterated.

Cryptocurrency mining in Uzbekistan is overcoming major changes as the country’s major crypto market supervisor has approved a framework for licensing crypto mining operations.

Uzbekistan’s National Agency for Perspective Projects (NAPP) issued a decree on licensing cryptocurrency mining operations, limiting such activities exclusively to legal entities.

Apart from banning individual miners’ operations, the NAPP has also required firms to only use solar power to mine cryptocurrencies like Bitcoin (BTC). However, miners can still use the unified power system of Uzbekistan in certain cases stipulated by the legislation. The document doesn’t mention what cases are meant.

Among other requirements, Uzbekistan’s cryptocurrency watchdog demanded companies set up a dedicated room for installing mining equipment and only mine crypto by the registered address. The rules also require crypto mining firms to provide timely and full payment or mining fees established by regulators.

Additionally, the NAPP has banned miners from mining “anonymous” cryptocurrencies, or those referred to as working based on anonymity and hiding transactions. The authority was referring to privacy-focused cryptocurrencies like Monero (XMR), which allow users to obfuscate network transactions.

Related: Kazakh crypto miners plead with president to cut energy prices

“All mining operations and services are only possible after obtaining a permitting document and license in the prescribed manner,” the NAPP wrote, adding:

“The agency also asks all citizens to act within the framework of the law and refrain from attempting to organize activities in the field of circulation of crypto-assets without obtaining the appropriate license.”

It's unclear whether the NAPP’s latest crypto-mining document is a final decree establishing a framework for mining in Uzbekistan. The local government has issued multiple similar documents in recent years, repeatedly prohibiting individual miners from operating in Uzbekistan. One such decree was signed by Uzbekistan’s President Shavkat Mirziyoyev in April 2022, reiterating that local people are not allowed to pay with crypto or to mine digital currencies.

The NAPP did not immediately respond to Cointelegraph’s request for comment.

Magazine: Web3 Gamer: Minecraft bans Bitcoin P2E, iPhone 15 & crypto gaming, Formula E

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