Wed 16 March

Fed Decision Day!

The Fed raised the Federal Funds Rate (which, I think, is also the interest rate on excess reserves) to 50bp. This was exactly what the market was expecting. The decision was well telegraphed by Powell and others, so no major reaction in the market was triggered.

Equities responded positively. Oil slumped. Gold went up. The Dec 22 eurodollar future is trading at 97.74, which implies a FF rate of 2.25 by the end of the year, which is not entirely consistent with the Fed median forecast of 1.9% at end 2022, and 2.8% end 2023, according to my limited understanding of these matters.

AUD.USD is up about 1%, but this is probably down to reassuring noises coming out of China.

The Apollo Programme

When I was six months old, in 1957, Sputnik 1 was successfully launched into orbit. This tremendous technological achievement galvanized the US military industrial complex into action. Three and a half years later, President Kennedy of the USA gave a speech to Congress in which he undertook to put a man on the moon and bring him back safely. Privately, he was not convinced that this was a good idea, but it was what the military wanted, and then as now what the military wants it gets.

I didn’t know any of this. I do recall the saturation coverage of the Apollo program when I was a kid, and I do recall wondering why we were doing it. Although I was interested in science, I was not interested in science fiction. I wanted to read stuff that was actual science, not fantasy. It seemed to me that we knew a great deal about space from observations from earth, and from unmanned space exploration, and that putting actual men in the very hostile environment of the moon was a huge cost for no obvious differential benefit.

Although I didn’t know the figures at the time, the NASA programme was, at its peak, costing something of the order of 5% of US GDP. It was obviously costing a lot of money. I think I already had some latent interest in economics, and I felt in my bones that the money could be deployed to better use. In my youth, I was against war, and I had a nagging suspicion that spending more money on arms was simply increasing the likelihood of conflict.

Although I was not that impressed, I did watch James Burke and Patrick Moore enthusing endlessly about the space missions. There was some genuine science coverage in these programmes, and they probably had some influence on me and my contemporaries to study science at a higher level than we would have otherwise. Thinking back, I am pretty sure that the real reason for the existence of the Apollo programme, to get ahead of the Russians in missile technology, was never revealed or discussed. The Russians did send up their own rockets, and got to the moon, but using unmanned craft (if I am not mistaken) which were perfectly capable of collecting some moon rock and taking a few photos. As every scientist had predicted, the moon was a dead and deadly dull lump of rock. No commercial benefit was ever likely as a result of travelling there. Laughably, it was claimed that the space programme had spinoff benefits outside of military technology, but the only ones people mentioned were Teflon (PTFE) for non-stick frying pans (a great innovation in the 60’s) and ball-point pens that could write upside down.

After many years of studying science in university, I ended up working on nuclear power. After I started, I discovered that generating electricity from nuclear power stations like the UK Magnox design was a complete afterthought. The reactors were designed to produce plutonium, a fissile material for bombs. The idea of using them to drive turbines and generate electricity was just a ruse to sell the construction of these things to the general public. Although this is now well known, I still haven’t seen anything in the mainstream press which explicitly acknowledges this official deceit.

The big question is whether the space program or the nuclear power program could be sold to the public now as it was when I was growing up. One part of me thinks that reduced control of the mainstream press by the government would make it impossible. I am not so sure. The general population is uncurious about these matters, or maybe you could say that it is rationally ignorant. The common attitude is that whoever is notionally in power, it doesn’t matter because those who pull the strings (e.g. Klaus Schwab or Rupert Murdoch) remain in control of the levers of power. I don’t believe this, but I acknowledge that I am less convinced now than I was.