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QE goes global

QE goes global

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Historically, one of the defining characteristics of emerging market (EM) economies has been that they generally have not been able to use monetary policy to stimulate their economies during crises in the way developed markets (DM) have. Usually, they have had to hike rates to limit capital outflows and defend their currencies, in doing so making economic recovery more difficult.

This is why it has been particularly interesting to observe the actions of emerging markets during the Covid-19 crisis that has just swept the world. We witnessed most EM central banks easing policy by cutting rates, some quite aggressively  (see chart below), and I believe there could still be room for more. This is a very welcome development, and will be helpful in supporting economic activity during these difficult times. This is particularly true as local financing has gradually become more important across many EM countries that used to issue debt predominantly in foreign currencies, Brazil being a good example. While many EM currencies fell sharply during the first stage of the crisis, most have rallied significantly since then despite these cuts. One of the main reasons this has been possible is the low inflation we have seen in the recent past across most EM countries, and given expectations that inflation should remain low in the near future as demand has collapsed with the pandemic. The fact that the Fed has dropped rates to near zero has also been particularly helpful.

While this has resulted in interest rates in EM dropping to historical lows, potentially providing less support for EM currencies, the differential between EM rates and DM rates remains elevated, with most EM real rates still in positive territory (unlike those in developed markets). In my view, emerging markets therefore remain one area of the market in which investors looking for yield should be able to find it.

Perhaps even more surprisingly, several EM central banks have engaged in purchases of sovereign bonds, aka quantitative easing (QE), until now a tool used only by major developed market central banks (see below table for more details). As can be expected, the size of these purchases remains significantly lower than in developed markets, and in most cases is below 2% of GDP. Central bank balance sheets in EM remain smaller that in DM, and those with large balance sheets are typically those with large FX reserves rather than government assets. Another important difference is that central banks in EM typically have not reached the zero bound when setting interest rates, and most are unlikely to be able to do so. This raises the question of the relative effectiveness of QE given that conventional monitory policy is not yet exhausted.

To date, most EM central banks have been carrying out QE by buying sovereign bonds on the secondary market, as opposed to the primary market.  While it can be argued that the end result is very similar, purchasing through the secondary market can help allay concerns that EM central banks are directly financing governments deficits, and can instead be seen as operations aiming to provide liquidity and support to the market in a period of stress.

The majority of those countries that have engaged in QE benefit from a relatively high credit quality  (most of them have investment grade ratings) and have developed their local markets, gaining credibility in their ability to set fiscal and monetary policy. The actions of some countries, like South Africa and Turkey for instance, which are also engaging in asset purchases but were already suffering from some lack of credibility and questions about central bank independence, may raise more questions with investors in the longer run.

Taking into account the unprecedented nature of the current crisis, this stimulus has been very helpful in supporting local markets, and QE could be an important tool in the short term to help finance increasing budget deficits resulting from the crisis. However, at the end of the day, QE can be seen as a form of printing money. This could become problematic in the longer run if investors believe countries are using it as an alternative to fiscal discipline, and could lead to significant outflows from local markets if the market loses confidence, in turn fueling potential currency depreciation and imported inflation. The fact that asset purchases have slowed since March in most countries as the market stabilised and asset prices recovered is a positive sign, as is the fact that EM countries have been able to issue significant amounts of local debt in the last two months. However, how easy it will be to reverse course remains an open question, and the track record of developed markets in winding down QE does not set a particularly encouraging precedent.

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Elon Musk’s says the Boring Company to reach $1 trillion market cap by 2030

Musk said there’s really only one roadblock to this company achieving this mega-cap value.

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Elon Musk wants to create and control an artificial superintelligence and guide humanity in an effort to colonize Mars. But before we get there, he wants to solve the problem of traffic right here on Earth. 

In 2016, the tech billionaire tweeted himself into a new company: "Traffic is driving me nuts. I am going to build a tunnel boring machine and just start digging..." he wrote. A series of tweets followed this proclamation as the idea germinated and cemented in Musk's head: "It shall be called 'The Boring Company.' I am actually going to do this."

Related: Elon Musk is frustrated about a major SpaceX roadblock

The firm's goal is to "solve the problem of soul-destroying traffic," by creating a series of underground transportation tunnels. Taking transportation underground, the company says, should additionally "allows us to repurpose roads into community-enhancing spaces, and beautify our cities."

The tunneling company broke ground on its first project in Feb. 2017 and has since completed three projects: the Las Vegas Convention Center (LVCC), the Hyperloop Test Track and the R&D Tunnel. It is currently working on a 68-mile Las Vegas Loop station that will eventually connect 93 stations between Las Vegas and Los Angeles. Once in operation, the Vegas Loop will transport 90,000 passengers every hour, according to the company. 

More Elon Musk News:

Part of Musk's proposition is that, with the right technology, he can make tunneling a quick and relatively inexpensive process. The company's Prufrock machine allows Boring to "construct mega-infrastructure projects in a matter of weeks instead of years." The machine can mine one mile/week, with new iterations expected to further increase that output. 

Elon Musk is looking to transform traffic and transportation with one of his many ventures. 

Bloomberg/Getty Images

By 2030, Youtuber and investor Warren Redlich wrote in a post on X, Boring will have more than 10,000 miles of tunnel. By 2035, he said, that number will rise to 100,000. With that increase in tunnel space, Redlich thinks that Boring will IPO by 2028 and hit a $1 trillion market valuation by 2030. 

Musk said that this bullish prediction might actually be possible. 

"This is actually possible from a technology standpoint," he wrote in response. "By far the biggest impediment is getting permits. Construction is becoming practically illegal in North America and Europe!"

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Jellyfish shown to learn from past experience for the first time

Even without a central brain, jellyfish can learn from past experiences like humans, mice, and flies, scientists report for the first time on September…

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Even without a central brain, jellyfish can learn from past experiences like humans, mice, and flies, scientists report for the first time on September 22 in the journal Current Biology. They trained Caribbean box jellyfish (Tripedalia cystophora) to learn to spot and dodge obstacles. The study challenges previous notions that advanced learning requires a centralized brain and sheds light on the evolutionary roots of learning and memory.

Credit: Jan Bielecki

Even without a central brain, jellyfish can learn from past experiences like humans, mice, and flies, scientists report for the first time on September 22 in the journal Current Biology. They trained Caribbean box jellyfish (Tripedalia cystophora) to learn to spot and dodge obstacles. The study challenges previous notions that advanced learning requires a centralized brain and sheds light on the evolutionary roots of learning and memory.

No bigger than a fingernail, these seemingly simple jellies have a complex visual system with 24 eyes embedded in their bell-like body. Living in mangrove swamps, the animal uses its vision to steer through murky waters and swerve around underwater tree roots to snare prey. Scientists demonstrated that the jellies could acquire the ability to avoid obstacles through associative learning, a process through which organisms form mental connections between sensory stimulations and behaviors.

Learning is the pinnacle performance for nervous systems,” says first author Jan Bielecki of Kiel University, Germany. To successfully teach jellyfish a new trick, he says it’s best to leverage its natural behaviors, something that makes sense to the animal, so it reaches its full potential.”

The team dressed a round tank with gray and white stripes to simulate the jellyfish’s natural habitat, with gray stripes mimicking mangrove roots that would appear distant. They observed the jellyfish in the tank for 7.5 minutes. Initially, the jelly swam close to these seemingly far stripes and bumped into them frequently. But by the end of the experiment, the jelly increased its average distance to the wall by about 50%, quadrupled the number of successful pivots to avoid collision and cut its contact with the wall by half. The findings suggest that jellyfish can learn from experience through visual and mechanical stimuli.

“If you want to understand complex structures, it’s always good to start as simple as you can,” says senior author Anders Garm of the University of Copenhagen, Denmark. “Looking at these relatively simple nervous systems in jellyfish, we have a much higher chance of understanding all the details and how it comes together to perform behaviors.”

The researchers then sought to identify the underlying process of jellyfishs associative learning by isolating the animals visual sensory centers called rhopalia. Each of these structures houses six eyes and generates pacemaker signals that govern the jellyfishs pulsing motion, which spikes in frequency when the animal swerves from obstacles.

The team showed the stationary rhopalium moving gray bars to mimic the animal’s approach to objects. The structure did not respond to light gray bars, interpreting them as distant. However, after the researchers trained the rhopalium with weak electric stimulation when the bars approach, it started generating obstacle-dodging signals in response to the light gray bars. These electric stimulations mimicked the mechanical stimuli of a collision. The findings further showed that combining visual and mechanical stimuli is required for associative learning in jellyfish and that the rhopalium serves as a learning center.

Next, the team plans to dive deeper into the cellular interactions of jellyfish nervous systems to tease apart memory formation. They also plan to further understand how the mechanical sensor in the bell works to paint a complete picture of the animal’s associative learning.

Its surprising how fast these animals learn; its about the same pace as advanced animals are doing,” says Garm. Even the simplest nervous system seems to be able to do advanced learning, and this might turn out to be an extremely fundamental cellular mechanism invented at the dawn of the evolution nervous system.”

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This work was supported by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation), the Danish Research Council (DFF), and the Villum Foundation.

Current Biology, Bielecki et al. “Associative learning in the box jellyfish Tripedalia cystophora” https://www.cell.com/current-biology/fulltext/S0960-9822(23)01136-3

Current Biology (@CurrentBiology), published by Cell Press, is a bimonthly journal that features papers across all areas of biology. Current Biology strives to foster communication across fields of biology, both by publishing important findings of general interest and through highly accessible front matter for non-specialists. Visit http://www.cell.com/current-biology. To receive Cell Press media alerts, contact press@cell.com.


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AI increases precision in plant observation

Artificial intelligence (AI) can help plant scientists collect and analyze unprecedented volumes of data, which would not be possible using conventional…

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Artificial intelligence (AI) can help plant scientists collect and analyze unprecedented volumes of data, which would not be possible using conventional methods. Researchers at the University of Zurich (UZH) have now used big data, machine learning and field observations in the university’s experimental garden to show how plants respond to changes in the environment.

Credit: UZH

Artificial intelligence (AI) can help plant scientists collect and analyze unprecedented volumes of data, which would not be possible using conventional methods. Researchers at the University of Zurich (UZH) have now used big data, machine learning and field observations in the university’s experimental garden to show how plants respond to changes in the environment.

Climate change is making it increasingly important to know how plants can survive and thrive in a changing environment. Conventional experiments in the lab have shown that plants accumulate pigments in response to environmental factors. To date, such measurements were made by taking samples, which required a part of the plant to be removed and thus damaged. “This labor-intensive method isn’t viable when thousands or millions of samples are needed. Moreover, taking repeated samples damages the plants, which in turn affects observations of how plants respond to environmental factors. There hasn’t been a suitable method for the long-term observation of individual plants within an ecosystem,” says Reiko Akiyama, first author of the study.

With the support of UZH’s University Research Priority Program (URPP) “Evolution in Action”, a team of researchers has now developed a method that enables scientists to observe plants in nature with great precision. PlantServation is a method that incorporates robust image-acquisition hardware and deep learning-based software to analyze field images, and it works in any kind of weather.

Millions of images support evolutionary hypothesis of robustness

Using PlantServation, the researchers collected (top-view) images of Arabidopsis plants on the experimental plots of UZH’s Irchel Campus across three field seasons (lasting five months from fall to spring) and then analyzed the more than four million images using machine learning. The data recorded the species-specific accumulation of a plant pigment called “anthocyanin” as a response to seasonal and annual fluctuations in temperature, light intensity and precipitation.

PlantServation also enabled the scientists to experimentally replicate what happens after the natural speciation of a hybrid polyploid species. These species develop from a duplication of the entire genome of their ancestors, a common type of species diversification in plants. Many wild and cultivated plants such as wheat and coffee originated in this way.

In the current study, the anthocyanin content of the hybrid polyploid species A. kamchatica resembled that of its two ancestors: from fall to winter its anthocyanin content was similar to that of the ancestor species originating from a warm region, and from winter to spring it resembled the other species from a colder region. “The results of the study thus confirm that these hybrid polyploids combine the environmental responses of their progenitors, which supports a long-standing hypothesis about the evolution of polyploids,” says Rie Shimizu-Inatsugi, one of the study’s two corresponding authors.

From Irchel Campus to far-flung regions

PlantServation was developed in the experimental garden at UZH’s Irchel Campus. “It was crucial for us to be able to use the garden on Irchel Campus to develop PlantServation’s hardware and software, but its application goes even further: when combined with solar power, its hardware can be used even in remote sites. With its economical and robust hardware and open-source software, PlantServation paves the way for many more future biodiversity studies that use AI to investigate plants other than Arabidopsis – from crops such as wheat to wild plants that play a key role for the environment,” says Kentaro Shimizu, corresponding author and co-director of the URPP Evolution in Action.

The project is an interdisciplinary collaboration with LPIXEL, a company that specializes in AI image analysis, and Japanese research institutes at Kyoto University and the University of Tokyo, among others, under the Global Strategy and Partnerships Funding Scheme of UZH Global Affairs and the International Leading Research grant program of the Japan Society for the Promotion of Science (JSPS). The project also received funding from the Swiss National Science Foundation (SNSF).

Strategic Partnership with Kyoto University

Kyoto University is one of UZH’s strategic partner universities. The strategic partnership ensures that high-potential research collaborations will receive the necessary support to thrive, for instance through the UZH Global Strategy and Partnership Funding Scheme. Over the last years, several joint research projects between Kyoto University and UZH have already received funding, among them “PlantServation”.


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