Friday , July 19 2019
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Yves Smith



Articles by Yves Smith

Everything’s Fine Until Suddenly it Isn’t: How a “Leveraged Loan” Blows Up

12 hours ago

Yves here. Wolf’s account of the price collapse of a particular leveraged loan is both a good primer as well as reminder as to how lending goes bad: gradually, then suddenly.
Also bear in mind that a lot of junk bond funds hold leveraged loans, along with a lot of public pension funds, both directly and through credit funds….managed by those friendly private equity firms.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.
Golden Gate Capital – the private equity firm now infamous for asset-stripping its portfolio company Payless ShoeSource into bankruptcy and liquidation – strikes again with another of its portfolio companies, Clover Technologies, whose

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Why Are Billionaires Like Jeff Bezos So Interested in Space?

16 hours ago

By Marshall Auerback, a market analyst and commentator. Produced by Economy for All, a project of the Independent Media Institute
The 50th anniversary of the Apollo 11 lunar landing is this year, and it’s worth recalling the memo that then-Vice President Lyndon Johnson wrote to President John F. Kennedy: “If we do not make the strong effort now, the time will soon be reached when the margin of control over space and over men’s minds through space accomplishments will have swung so far on the Russian side that we will not be able to catch up, let alone assume leadership.”
That sense of urgency has shifted over the decades from government to the private sector, where billionaires like Elon Musk, Richard Branson and Jeff Bezos, among others, are displaying profound enthusiasm in regard to the

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Agroecology as Innovation

16 hours ago

By Timothy A. Wise, a Senior Researcher on the Land and Food Rights Program at Small Planet Institute and a researcher at the Global Development and Environment Institute at Tufts University. He is the author of Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food (New Press, 2019). Originally published at Triple Crisis
Recently, the High Level Panel of Experts of the U.N. Food and Agriculture Organization (FAO) released its much-anticipated report on agroecology. The report signals the continuing shift in emphasis in the UN agency’s approach to agricultural development. As outgoing FAO Director General Jose Graziano da Silva has indicated, “We need to promote a transformative change in the way that we produce and consume food. We need to put forward

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Banks Again Hoist on Their Cost-Cutting Petard: Burgeoning Credit Card Fraud

18 hours ago

It’s hard to miss the regular stories about data, including sometimes financial account details, being hacked. But in addition to that, credit card companies also face ongoing attacks from fraudsters who obtain credit card information and put through bogus charges.
You’d think the banks that participate in the Visa and Mastercard networks would be vigilant about this issue. After all, the customer is liable only for $50 of loss even if his credit card goes missing. In my experience of actually having had my wallet stolen and having big charges run up with impressive speed, the banks don’t even hit customers with that allowed $50. On top of that, the merchant charges on credit cards are hefty, which you’d think would give them more than enough in the way of funding to create decent

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As Flood Risks Rise Across the US, It’s Time to Recognize the Limits of Levees

1 day ago

By Amahia Mallea, Associate Professor of History, Drake University. Originally published at The Conversation
New Orleans averted disaster this month when tropical storm Barry delivered less rain in the Crescent City than forecasters originally feared. But Barry’s slog through Louisiana, Arkansas, Tennessee and Missouri is just the latest event in a year that has tested levees across the central U.S.
Many U.S. cities rely on levees for protection from floods. There are more than 100,000 miles of levees nationwide, in all 50 states and one of every five counties. Most of them seriously need repair: Levees received a D on the American Society of Civil Engineers’ 2018 national infrastructure report card.
Levees shield farms and towns from flooding, but they also create risk. When rivers rise,

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Links 7/17/19

2 days ago

Hungry elephants fight climate change one mouthful at a time Science Magazine (guurst)
Researchers think they know what’s killing London’s iconic sparrow Science Magazine (David L)
Florida’s Corals Are Dying Off, But It’s Not All Due To Climate Change, Study Says NPR (David L)
Research shows black plastics could create renewable energy PhysOrg (Robert M)
House orders Pentagon to say if it weaponized ticks and released them Roll Call (Chuck L)
The secret Swiss Agent: Puzzling comments reveal new twist to the Lyme disease saga Stanford Medicine (Micael)
China?
WTO rules against US in tariff dispute with China Financial Times. Hoo boy. Predates Trump tariffs.
Trump Says He Could Impose More China Tariffs If He Wants Bloomberg
Chinese and Vietnamese ships in South China Sea stand-off Financial

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CalPERS’ Long-Term Care Policy Train Wreck – Is Bankruptcy the End Game?

2 days ago

It doesn’t look like there will be a happy ending for the over 100,000 CalPERS long-term care policy holders who are represented in the class action lawsuit, Wedding v. CalPERS. That doesn’t mean there’s a good outcome for CalPERS either. However, things should work out for the plaintiffs’ attorneys.
The bone of contention is that CalPERS approved an eye-popping 85% increase in premiums in 2013, hitting only the policies with the most generous payment features. The plaintiffs contend that these increases weren’t permissible and are seeking substantial damages.
Even though the case, which has been grinding through the California courts since 2013, Judge William Highberger, in his decision from a June 10 trial, explicitly called on the legislature and state government to bail out the

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The Numbers Are In, and Trump’s Tax Cuts Are a Bust

2 days ago

By Marshall Auerback, a market analyst and commentator. Produced by Economy for All, a project of the Independent Media Institute
The most commonly heard refrain when Donald Trump and the GOP were seeking to pass some version of corporate tax reform went something like this: There are literally trillions of dollars trapped in offshore dollar deposits which, because of America’s uncompetitive tax rates, cannot be brought back home. Cut the corporate tax rate and get those dollars repatriated, thereby unleashing a flood of new job-creating investment in the process. Or so the pitch went.
It’s not new and has never really stood up to scrutiny. Yet virtually every single figure who lobbied for corporate tax reform has made a version of this argument. In the past, Congress couldn’t or wouldn’t

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The ‘New Right’ Is Not a Reaction to Neoliberalism, but Its Offspring

2 days ago

By Lars Cornelissen, who holds a PhD in the Humanities and works as a researcher and editor for the Independent Social Research Foundation. Originally published at openDemocracy
The ongoing and increasingly intense conservative backlash currently taking place across Europe is often understood as a populist reaction to neoliberal policy. The neoliberal assault on the welfare state, as for instance Chantal Mouffe has argued, has eroded post-war social security even as it destroyed people’s faith in electoral politics. Coupled with a sharp increase in inequality and rapid globalisation, the technocratic nature of neoliberal government has angered electorates across the continent. Wanting to “take back control” of their political life, these electorates have turned away from traditional

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Links 7/16/19

3 days ago

Cats are like tiny, judgmental camels Massive Science (David L)
Off the hook: Manta ray asksdivers for helping hand PhysOrg (Robert M)
Harlech street takes record as steepest in the world BBC (David L)
A material way to make Mars habitable Science Daily (Kevin W). Help me. Different gravity, different spectrum of light….look at the physical harm to astronauts just for the time they spend in space stations.
Ireland importing biomass from….. Australia RTE (PlutoniumKun)
An extraordinary Twitter Exchange with Richard Tol Steve Keen (UserFriendly). Today’s must read.
The Effect of Vitamin D on Cancer Incidence and Survival Orthomolecular News (furzy). Smallish sample, though.
China?
Hong Kong protests inspire Taiwan to amp up resistance to China Nikkei
Adani demands names of CSIRO

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Taxes for Revenue Are Obsolete

3 days ago

UserFriendly chided me for not having reproduced this classic, as I did for Michal Kalecki’s 1943 essay on the obstacles to reaching full employment. Apparently this classic article by Beardsley Ruml on why what we would now call a sovereign currency issuer doesn’t need taxes in order to spend doesn’t show up well on the Internet (for instance, links to full versions don’t have a preview, which is an impediment to sharing it on Twitter). So to encourage you to read and share it, we’re reproducing it below. Enjoy!
This article was first published in the January 1946, issue of American Affairs.
TAXES FOR REVENUE ARE OBSOLETE
by Beardsley RumlChairman of the Federal Reserve Bank of New York
Mr. Ruml read this paper before the American Bar Association during the last year of the war [World War

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The Big Blue Gap in the Green New Deal

3 days ago

By Dr. Ayana Elizabeth Johnson, a marine biologist, founder and CEO of the consulting firm Ocean Collectiv, and founder of Urban Ocean Lab, a think tank for coastal cities, Dr. Chad Nelsen, CEO of Surfrider Foundation, the largest grassroots organization dedicated to coastal and ocean protection, and Bren Smith, founder of GreenWave and author of Eat Like a Fish: My Adventures as a Fisherman Turned Restorative Ocean Farmer (Knopf). Originally published at Grist
In February, Representative Alexandria Ocasio-Cortez and Senator Ed Markey introduced a resolution to Congress calling for an ambitious re-imagining of the U.S. economy — one that would tackle both climate change and inequality. Now with 94 co-sponsors in the House, 12 in the Senate, and broad support among Democratic presidential

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Why Social Mobility Is a Lousy Idea

3 days ago

By Hadas Weiss, an anthropologist and the author of We Have Never Been Middle Class: How Social Mobility Misleads Us (Verso, 2019). Originally published at openDemocracy
If you want a more just society, don’t accept that you’re a competitor in a rat race.
Jeremy Corbyn’s announcement last month that a Labour government would replace social mobility with social justice as a policy benchmark raised more than a few eyebrows. It goes against received wisdom and bipartisan consensus that social mobility is a good thing. But Corbyn is right to insist that singling out the lucky few leaves the structures of inequality intact, and he is right to place the emphasis on further-reaching motions, such as revamping the education system, to achieve social justice. However, the real problem with social

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CalPERS Sleaze Watch: Showcases Criminal Ex-General “Betray-Us” as Keynote Speaker at Offsite

4 days ago

CalPERS, an agency with former CEO Fred Buenrostro in prison and current CEO Marcie Frost who flagrantly misrepresented her educational attainment during and after her hiring, again shows its true colors in its shameless selection of disgraced former general David Petraeus as a keynote speaker at its board offsite later today.
CalPERS, which attempts to wrap itself in a mantle of “environmental, social and governance” virtue-signaling, proves that that’s just a cheap PR stunt. Apparently Petraeus’ connection to private equity kahuna KKR makes it all OK.
But CalPERS tries to maintain the fiction that it has ethics, despite its deeply-rooted culture of casual lying. After all, its ESG pretenses allow for staff grifting in the form of wasting beneficiary and ultimately taxpayer monies by

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Links 7/13/19

6 days ago

A New Study Uses Camera Footage To Track the Frequency of Bystander Intervention CityLab
A Feud Between Japan and South Korea Is Threatening Global Supplies of Memory Chips CNN
Carbon Nanotube Device Channels Heat Into Light PhysOrg
A Massive Hunk Of Ice Will Reshape The World’s Coastlines Sooner Than We Thought Forbes (David L)
Streaming Online Pornography Produces as Much CO2 as Belgium New Scientist
Explainer: What is post-quantum cryptography? PhysOrg
B vitamin content of rice declines with rising CO2 Harvard Magazine (furzy)
Billions of Air Pollution Particles Found in Hearts of City Dwellers Guardian
The trouble with fruit juice Mayo Clinic (Chuck L)
Blossom’s Fake Video Exposed by food scientist | How To Cook That Ann Reardon YouTube. UserFriendly:
Even if people haven’t seen the

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Is There a Global Future for Unions?

6 days ago

Yves here. This personal account of the rise and fall (and hopeful rebirth) of unions correctly gives prominent play to the right-wing anti-labor effort whose strategy was set forth in the 1971 Powell Memo.
By Leo W. Gerard, the international president of the United Steelworkers Union (USW). Produced by the Independent Media Institute

In March 2010, a rally by thousands of striking USW workers at the Vale mine and smelter in Sudbury, Canada, was joined by allies from Brazil, Australia and countries around the world. Photo courtesy of United Steelworkers
I was raised in a company house in a company town where the miners had to buy their own oilers—that is, rubber coveralls—drill bits and other tools at the company store.
That company, Inco Limited, the world’s leading producer of nickel

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A World Without Ice

6 days ago

By Thomas Neuburger. Originally published at DownWithTyranny!
In a new book, The End of Ice: Bearing Witness and Finding Meaning in the Path of Climate Disruption, author Dahr Jamail writes about the coming world without any standing glacial ice anywhere on earth. He capsulizes his thoughts in this interview with Dharna Noor at the Real News Network:
DHARNA NOOR: These indicators of the climate crisis are often presented as just statistics— sometimes ones that have implications maybe for the ecosystems around ice melting, rarely ones that are wreaking havoc on all life on Earth. But in this book, in The End of Ice, you write, “The reporting in this book has turned out to be far more difficult to deal with than the years I spent reporting from war torn Iraq.” And later you even say that,

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Deutsche Bank Highlights a Society at Risk

6 days ago

Yves here. This article broaches a very large issue, and it pains me to be able to offer only a few additional thoughts.  I don’t think risk aversion is quite the right frame for why destructive conduct has become so pervasive. For instance, as we’ve documented, casual lying is pervasive at CalPERS even though nearly everyone below the CEO is a civil service employee. Generally speaking, that means they are hard to fire. At CalPERS, the motivation seems to be that a lot of people find lying to be much easier than doing things well.
Some of the factors that I believe have contributed to the increase in the propensity to bury problems under rugs, even when everyone can see the rug is lumpy and moving, are:
Diffusion of responsibility. Some of that is not accidental, but you have a great

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Michael Hudson: De-Dollarizing the American Financial Empire

7 days ago

Yves here. Another meaty Michael Hudson interview on Guns and Butter. However, I have to vehemently disagree with the claim made by Bonnie Faulkner at the top of the discussion. No one holds guns to other countries’ heads to make them hold dollars. The reason the dollar is the reserve currency is the US is willing to export jobs via running persistent trade deficits.  The US moved away from  having rising worker wages as the key metric of sound economic policy in the 1970s, when labor was blamed for stagflation (too powerful unions supposedly hobbling US manufactures, when the performance of Toyota at the famed NUMMI joint venture showed that to be false; formal or informal cost of living adjustments to pay credited with institutionalizing inflation). Recall also that the Democrats had

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Brexit: Will Boris or Won’t He?

7 days ago

ConservativeHome declared yesterday that their survey of Tory Party members finds that Boris Johnson has already won the leadership contest. He’s also embraced the proud UK leadership practice of promoting Brexit unicorns. A few examples:
The EU will blink with him when it didn’t with Theresa May because Johnson serious about being willing to exit, declaring the odds of no deal as “a million to one”.
The EU will give the UK what Johnson’s allies call a standstill, as in a transition period, just because the UK needs one. The UK has asked and has been firmly told no, that the only way to get a transition period is to approve the Withdrawal Agreement.
The cost of a crash out is “vanishingly inexpensive if you prepare”
As the campaign has progressed, Johnson has become firmer in his

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Hospitals Block ‘Surprise Billing’ Measure In California

7 days ago

Yves here. This article demonstrates the power of health care industry incumbents. “Surprise billing” is pure and simple price gouging, particularly since hospitals routinely game the system, such as by scheduling doctors who are not in a patient’s network on his operation, even when the patient has gone to considerable lengths to try to prevent that.
All these hospitals did was the equivalent of yelling “Boo” at the legislature, and the legislation to combat surprise billing was yanked, even though there has been a great deal of deservedly critical press coverage of this abuse.
By Ana B. Ibarra, a Sacramento-based for California Healthline, who previously covered at the Merced Sun-Star. Originally published at California Healthline
Citing fierce pushback from hospitals, California

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A Way Out from Rock Bottom: Economic Policies Can Reduce Deaths of Despair

7 days ago

By William H. Dow, Professor of Health Economics, University of California, Berkeley; Anna Godøy, Research Economist, University of California, Berkeley; Chris Lowenstein, PhD student in Health Economics, University of California, Berkeley; and Michael Reich,Professor of Economics, University of California, Berkeley. Originally published at VoxEU
Policymakers and researchers have sought to understand the causes of and effective policy responses to recent increases in mortality due to alcohol, drugs, and suicide in the US. This column examines the role of the minimum wage and the earned income tax credit – the two most important policy levers for raising incomes for low-wage workers – as tools to combat these trends. It finds that both policies significantly reduce non-drug suicides among

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Links 7/11/19

8 days ago

Holland covers hundreds of bus stops with plants as gift to honeybees Independent (David L)
Japan’s famous Nara deer dying from eating plastic bags Guardian (resilc)
Ross Perot’s Lasting Legacy Atlantic
UserFriendly: “LOL, he gave Bernie a sword for sticking up for vets dealing with Gulf War syndrome.”

Ross Perot was a champion for veterans’ rights and ahead of his time on disastrous trade policies. During his campaign, he explained, in depth, how he would address our national problems and spurred serious discussion. Ross Perot was a one-of-a kind American. He will be missed. pic.twitter.com/qXukirfwcL
— Bernie Sanders (@SenSanders) July 9, 2019

Moons That Escape Their Planets Could Become ‘Ploonets’ ScienceNews
Glacial Melting In Antarctica May Become Irreversible, NASA-Funded Study

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It Is Time To Start Forgiving Student Loans – And Here Is What It Will Cost

8 days ago

Yves here. Reader Bob Hertz sent his proposal for a multi-pronged student debt forgiveness program. One of his motivations was his belief that forgiving all loans isn’t affordable. The Federal government in fact does not need to raise taxes to fund this expenditure, but you’d need to give a harder look to see how much inflation it might generate.
However, there are other reasons to favor a more targeted plan. One is perceived fairness. A surprising number of our readers objected to the Sanders student debt forgiveness proposal because they had dutifully repaid their student loan. A few were offended on general principle.
By contrast, a more tailored program with a smaller price tag should alienate fewer people and thus have greater odds of getting done.
A second issue is that cancelling

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Transfer (Mis)pricing, the Jewel in Every Multinational Enterprise’s Crown

8 days ago

By Tanya Rawal-Jindia, a researcher at Tricontinental: Institute for Social Research. Originally published at openDemocracy as part of ourEconomy’s ‘Decolonising the economy’ series.
Amazon.com Inc. was brought to court by the U.S. Internal Revenue Service (IRS) in 2017 for transfer pricing discrepancies. In 2005 and 2006, the multinational tech company had transferred $255 million in royalty payments to its tax haven in Luxembourg, but according to the IRS these royalty payments should have amounted to $3.5 billion. This transfer pricing adjustment would have increased Amazon’s federal tax payments by more than $1 billion.
Even for the U.S., a country with decent (although waning) infrastructure, the loss of this much cash in federal tax revenue is substantial. Take for instance the water

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PG&E Neglected Maintenance for Years Despite Known Fire Risk; Judge Demands Prompt and Clear Answers to WSJ Expose

8 days ago

Even though one of our regular lines is that “Everything is like CalPERS,” sometimes “Everything is like Boeing” is more apt. PG&E has become a prime, if not the number one, case study in the human cost of corporate penny pinching. But not only have more people died and been injured at the hands of PG&E than at Boeing, the utility also had a much longer history of regulators choosing to ignore its corners-cuttting. And again unlike Boeing, it’s not as if PG&E was an admired institution in recent memory and could therefore run on brand fumes.
Yesterday, the Wall Street Journal published a major story based on extensive Freedom of Information Act disclosures, providing evidence of PG&E’s systematic, willful neglect not just of maintenance but even of inspections of its transmission lines,

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Martin Wolf v. Trumponomics Whiffs Due to Fealty to Orthodoxy

9 days ago

There’s a lot not to like about what passes for Trump’s economic policy. But theFinancial Times Martin Wolf’s critique of it, in Donald Trump’s boom will prove to be hot air, leaves a lot to be desired. The fact that “boom” appears in the headline is a big tell.
It’s a reasonable surmise that Trump will be re-elected unless the economy falls out of bed. Despite his long and ever-growing list of offenses and crappy policies, Trump is a master at keeping the spotlight turned on him.
Democratic Party leaders, by contrast, seem to think that Trump is so obviously odious that Being Not Trump and other forms of virtue signaling will prove sufficient for them to retake the White House. Never mind that the party is doing as little as it possibly can to address issues that affect ordinary

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Is Industrial Policy Finally Legitimate?

9 days ago

Yves here. It’s become more and more respectable in development economic circles to acknowledge that formerly taboo ideas like trade barriers and other forms of support to emerging industries are sound policy. The reversal by the IMF on the value of industrial policy is nevertheless significant. And that’s before you get to the fact that countries that lack explicit industrial policy wind up having ones by defaul
By Jomo Kwame Sundaram, a former economics professor, was Assistant Director-General for Economic and Social Development, Food and Agriculture Organization, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007. Originally published by Inter Press Service
For decades, the two Bretton Woods institutions have rejected the contribution of

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Liquidity Fears Hit Other UK “Equity Funds” as Investors Remain Trapped in Woodford Fund

9 days ago

Yves here. I have a soft spot for stories about financial train wrecks, even though I suspect Americans will snigger at UK investors who didn’t read the fine print on their “equity funds.” However, the overwhelming majority of retail investors rely on sales pitches and are lucky enough that US securities laws are so strong that even our pathetic SEC has not yet made them a dead letter.
But consider: those short and leveraged ETFs that remain popular with small traders were a cause of concern before the crisis, since in many cases their liquidity backstops were coming from hedge funds (usually in the form of options). I knew several small fund managers who were sitting on very nice paper ETF profits who were worried the funds might not perform when they were ready to close out their

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Links 7/9/19

10 days ago

Snowball the dancing parrot stuns scientists with 14 separate moves to Eighties classic hits Telegraph. Snowball may be more accomplished, but I like this cockatoo for his enthusiasm.
Thousands of dead fish litter Kentucky River after Jim Beam warehouse fire CBS 🙁
As NASA Aims For The Moon, An Aging Space Station Faces An Uncertain Future NPR. Kevin W: ” Maybe they can relocate those Hydrogen Fluoride plants here.”
It’s the End of the World as They Know It Mother Jones (UserFriendly)
A Ferocious Heat in Delhi New York Review of Books (Anthony L)
Earth’s Ancient Life Forms Are Awakening After 40,000 Years in Permafrost ScienceAlert (Kevin W). Um, sounds like the plot of a lot of horror movies.
Today’s Deep Learning Is Like Magic – In All The Wrong Ways Forbes (David L)
E-scooters: a

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