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Tuesday, May 31, 2022

EXCESS DEATHS IN SINGAPORE IN 2021

Data from Ministry of Health showed the death rate in Singapore was 582 per 100,000 in 2021 which is an uptick of 12.16% over 2020. Assuming the resident population is 5.6m, the outright number of deaths in 2021 was 32,592. 

I'm just trying to make sense of the May 9 Straits Times report, It headlined : 

"1,535 excess deaths in Singapore in 2021, of which 804 were due to Covid-19"

"The 804 deaths due to Covid-19 accounted for 52 per cent of this figure, said [Health Minister]Mr Ong, who was responding to Workers' Party MP Leon Perera (Aljunied GRC) on the number of excess deaths due to Covid-19 and how the authorities derived this figure."

"Excess death" is a WHO creation to describe the deaths in excess of what it should have been had an epidemic not occurred. In other words, deaths in excess of a normalised projection, which, for 2021 could have been (my estimation, in the absence of data) 32,592-1,535 = 31,057.

The Singapore death rate (the green line in the chart) creeps up gently reflecting our greying demographics. During the pandemic, there was a pronounced uptick in 2021.

The Health Minister said the 804 was due to covid19. Three things are not clear here:

(1) Was the 804 derived mathematically i.e. by taking the actual aggregate death numbers and deducting it from a computed normalised projection, just like I tried to do above? Or was it actual collated numbers from actual data? I think it is a mathematically derived number at this stage. Which would be disheartening as it is now 5 months post fact and actual data is still not available.
(2) It is not clear if the Minister made a distinction between "deaths from Covid" and "deaths with Covid"?
(3) What about the other part of the excess death (1,535-804 = 731). If the normalised projection is 31,057, this excess represents an increase of 2.4%. Is this statistically significant compared to historical data?

What is glaring from the chart is the uptick commenced from the beginning of 2021, right after the commencement of our vaccination programme on 30 Dec 2020. The Minister was silent on this. The notation of vaccination in the chart is my insertion. The implication is pretty obvious, but it is something one is not allowed to talk about.


This chart above is from 'Ourworldindata.org' and it begets a question. Singapore excess death rate began climbing after the end of August 2021 and peaked on 31 Oct 2021. Yet, it was from November onwards, with the explosion of Omicron, that we saw alarming daily reports of new cases and deaths. Adding to the puzzle is the fact that Omicron has been found to be highly infectious but very mild compared to prior variants of SARS-Cov2. Something doesn't add up here.

MOH requires more time to study the data to determine the actual causes of death. This is understandable and we wish them Godspeed and hope there is transparency, unlike many other countries, particularly UK and US where the public distrust of data from health officials is great as they have been caught cheating on their reports on several occasions.

Read about "Silent Weapons For Quiet Wars" -- a regime where suppressed information and propaganda is used by governments to control public awareness.
Compared to all the tragic deaths and very serious vax events we hear, and see in videos, happening in other parts of the world, it would indeed seem Singapore is a miracle blessed with zero casualties caused by the genetic theraphy vax. Straits Times 30 May 2022 reported on "Woman gives up care of children to former husband after side effects from Covid-19 jab" was the first time we hear of a serious vaccination event in Singapore from government mouth-piece. (We have been informed anecdotes from friends and relatives are misinformation). Ahem! Did this article slip past the editor, or is this the new Straits Times? In any case, the main story was about the sad family issue, the vax event was just a side note with no further details. I mean, being hospitalised for 7 months as a result of the jab, ought to be a good story in there for a reporter, wouldn't it?


Thursday, May 26, 2022

INFLATION, INTEREST RATES, EXCHANGE RATES, INTERNATIONAL TRADE - WHAT THE HECK IS GOING ON

Currently, every nation in the world is battling the same enemy -- INFLATION. Other than World War II, there has never been a time when inflation visits all countries at the same time. First world or third world, advanced or emerging economies, all are facing inflation although to different extent. This is a global inflation.

Inflation can be demand driven -- higher national growth makes people richer, economy heats up, consumerism prevails, and more demands chasing the same goods and services. Inflation may be supply side problems -- depletion of extractive commodities, crop failures from natural disasters, etc resulting in same demand chasing after too little supply. Or it could be the result of printing too much money, turning the country into a banana republic, like Weimar Republic or Argentina,

In his first month in office, Joe Biden set in motion inflationary pressures by cancelling the Keystone pipeline project. By further crippling the US fracking industry, Biden turned US from a net-energy exporter to a buyer, which set the path for the rise in price of oil and gas. The supply chain was badly disrupted by the pandemic lockdowns. Now the war in Europe has brought oil prices to greater heights and threatens to cripple supply chains, leading to food shortages and price increases in other commodities. With the Fed primed to increase interest rates up to 2.75% by year end, the US is ready to add to the woes of other countries by exporting their inflation.

US inflation in March was 8.5%, the highest it has ever been since 1982. Singapore inflation was 5.419% in April, the highest since 2011.

With rising inflation, wealth gets eroded. And if pay cheques remain the same, rising cost of living becomes a social problem. As price levels rise, people's purchasing power diminishes. Businesses loose customers and the economy takes a hit. It's a nasty cycle.

Central banks fight inflation in one of 2 ways -- increase interest rates, or adjust their exchange rates. MAS uses the exchange rate to manage price levels. By allowing the SGD to appreciate, our imported goods will be cheaper and thus keep prices down. This assumes that general inflation is an exogenous problem. Of course there may be some specific price increases due to other causation that needs different solution. Other central banks, like the Fed, increase interest rates which has the same effect as strengthening their currency, as well as cooling an overheated economy as funding costs become more expensive for businesses. In a global inflation, with all central banks tending to work in the same direction, the situation may be exacerbated.

As a matured economy, productivity is no longer the workhorse to push growth for Singapore. The government resorted to rely on what worked in the past -- keeping exchange rates down and cheaper imported labour to stay competitive. As the economy remains strong, the upward pressure on the SGD rate is natural. MAS controls this by ensuring volatility stays within an official band. With pressure on the upper bands, MAS had to persistently intervene in the FX markets to buy foreign currencies and sell SGD to keep the rates down. This resulted in MAS built up of high foreign reserves. Persistent high foreign reserves has 2 effects:

    (1) Those who don't understand finances think this is highly positive. In fact, many erroneously think this foreign reserves is MAS profit and Singapore reserves, such as one popular Singapore-based Polish blogger and his cohort of supporters in his Facebook echo chamber who sucker up his fawning articles on all government policies. When MAS persistently buys foreign currencies to keep the rates down, it is indicative of currency manipulation.  MAS had chosen to be opaque about these activities. The recent amendment to the MAS Act to facilitate the transfer of excess foreign reserves to GIC so it can be better invested, could in part be due to the desire to camouflage the excessive balances. Currency manipulation attracts negative responses and tariff wars. The US has placed Singapore on the watch list for currency manipulation on quite a few years. It was only in April 2020 that MAS started to publish a report on their market intervention transactions. The adoption of more transparency was obviously a consequence of external pressures.

    (2) MAS has unlimited capacity to buy foreign currencies because it simply prints SGD to pay for it. To avoid excessive money supply which causes inflation, MAS sterilises its SGD printing by issuing MAS bills. This means that in reality, it is domestic savings that is used to purchase the foreign reserves. Suppressing the strength of SGD in this manner cannot go on forever. While this mechanism controls the volatility of the exchange rate and keeps the aggregate supply of SGD intact, the increase in public debt has a downward pressure on interest rates and impacts the SGD yield curve. 

Thus MAS has to adjust the bands to allow the SGD to appreciate from time to time. It did this in October 2021 and again in January 2022.

In 2021 Singapore exported goods of US$451B (S$614B) vs imports of US$401B (S$546B). We had a trade surplus of US$50B. Our trade in services for 2021 was more or less even - export of US$227B (S$309B) vs imports of US$220B (S$300B). Trade surpluses underlie the strength of an economy and its currency.

Let's take a look at the table below which shows SGD rates and trade figures with some countries and try to make some sense of it.

(1) SGD appreciated against most major currencies. It is in line with the narrative for the build up of foreign reserves by MAS. In its April 2022 policy statement, MAS expects a continued monetary tightening stance to slow the momentum of inflation. Expect further appreciation of the SGD.

(2) The general explanation that currency appreciation is due to trade imbalances does not seem to work out here. The glaring examples are Japan, Taiwan, Malaysia, EU and UK where Singapore had huge trade deficits and yet SGD appreciated against their currencies. On the other hand, with Indonesia and Hongkong, we had huge trade surpluses but the SGD depreciated.

(3) Data for trade in services are hard to come by. However, with the exception of US, inclusion of trade in services is unlikely to significantly alter the trade surplus or deficit status in (2) above.

(4) The huge depreciation of Yen, Won, Eur and Gbp clearly reflects underlying economic weaknesses and problems in these countries.

(5) The rise of the RUB is a one-trick pony play. Rxxxxx has a commodity in great demand in the world. Buyers are forced to pay in RUBs for gas, demand for the currency forces it to strengthen.

(6) The strength of the USD seems puzzling amidst the many expert predictions for the demise of the greenback soon. I expand on this below.

How does FX rates come about? We need to differentiate forward and spot rates.

In the case of forward rates, the interest parity principle applies. Eg if SGD/MYR rate is now 3.2000 and 3 month interest is MYR at 5% pa, SGD at 1% pa. You have SGD100,000 which you convert to MYR and place the MYR320,000 on 3-month fixed deposit to earn higher interest. To play safe, you hedge the 3 month exposure with a forward contract to buy back the SGD. The forward rate is computed at (principal + interest of MYR320,000 x 5% x 3 months) / (principal + interest of SGD100,000 x 1% x 3 months) = (324,000/100,250) = 3.2319202. At the end of 3 months the P+I of MRY324,000 converted back at the hedged rate of 3.2319202 = SGD100,250. This is exactly the same value if you had simply kept your funds in SGD and place it for 3 months at 1% pa. This is the interest parity. Thus a fully hedged swap offers no additional gains. If you bet the spot rate in 3 months time will remain the same then you may want to swap the currencies without hedging with a forward deal. In 3 months time, if the spot rate indeed remains unchanged at 3.2000, then the P+I MYR324,000 converted back at 3.2000 is SGD101,250, which provides an additional return of SGD1,000. That's the risk reward.

The spot rates are driven by the market forces of supply and demand. The foreign exchange market is the single biggest financial market, bigger than all the other markets combined, and more. And the SGD is one of the most highly traded currency, in both the fiat and the crypto markets. Whilst the vitality of a country's economy underlies the strength of its currency, the market forces at play are not simply international trade. In other words, the FX market is not driven solely by commercial transactions. In fact, of daily global FX turnover of USD6.6T (per BIS in April 2019), commercial-based transactions comprised only 7%. Hedging, arbitraging and speculative trades make up 93% of daily turnover. This is a fact that most people outside the industry do not understand. It explains for the anomaly in (2) above. Understanding this separates the ivory tower economists from the treasury and operations folks who work in the trenches of trading rooms. This, I'm afraid, is also something the popular Polish blogger refuses to accept as fact.

Now about the strength of the USD.

The USDT index measures the strength of the USD against a basket of currencies with 100 as the base. Since 2003 the USDT has been hovering at the 90s level, breaking the 100 level for a short while in 2017 and 2020 (when Trump delivered good GDP numbers).  Since mid 2021, the USDT began its upward swing and breached the 100 mark in early April this year. It peaked at 104 on May 8, and has dropped back to 102 at time of writing. The USD strengthened on market expectation of Fed raising rates. Rates were raised by 25 basis points in March and 50 basis points on May 4. Fed Chair Jerome Powell has indicated further hikes up to 2.75% by year end.

You can see how interest rates easily impact USD strength in the Paul Volcker years as Fed chair. President Jimmy Carter mismanaged the economy and brought inflation to a high of 14.5% in 1980. To fight the inflation, Volcker audaciously raised Fed rates from 11.2% in 1979 to 20% in 1981. That caused massive unemployment and recession, but finally tamed the beast of runaway inflation. The USDT climbed from the 80s level in 1979 to peak at 114 in 1981 under Volcker..

Reaganomics took the USDT to its record highest of 162 in 1985 on the back of good economic numbers and balanced budgets. Thereafter it was downhill all the way as USD printing madness and the era of cheap money and deficit budgets took over to where the country is today, USD30T in national debt.

Is the rate increase by Powell a right move to tame US inflation? Here, we are in strictly personal opinion territory.

The market was jittery about a possible Volcker style massive increase in rates. Fed Chair Powell and Treasury Secretary Janet Yellen played down the hype by talks of the inflation as transitory. Following the May 4 hike of 50 basis points, Powell announced a one time hike of 75% is not in play. That was well received by a massively over-sold market and equities. However, many felt the US is already in recession. Q1 of 2022 has already registered negative GDP. If Q2 registers another negative number, it will officially be in recession. It seems the market has factored this in as equities have taken a beating in the past 3 weeks. Housing market is still holding up due to low inventory and increase in more expensive mortgage rates have not yet bitten in. Not to forget Powell had also indicated that he will start Quantitative Tightening, probably in June. There was still Quantitative Easing this month, but only a small aggregate. With Quantitative Tightening, the Fed starts shrinking balance sheet selling government securities, thus sucking liquidity out of the market. Leveraged plays will exit in droves forcing lowered asset valuations. Equities and housing market may tank.

The Fed is known to do things too little, too late. This time, it might even be totally wrong. This inflation is supply-driven, not a heated economy. No amount of increase in interest rates is going to bring down the price of gas, fertilisers or wheat. When it becomes apparent this 50 basis points increase is not working, Powell will be forced with further increases. As higher funding cost works its way into the economy, marginal business will be forced to close, exacerbating the recession. All this at a time when massive Democrat spending spree brings fear of currency over-printing, a contumelious attitude to the overhang of the huge national debt. When many countries are taking defensive steps to marginalise the use of USD, it may well be the catalyst to bring the mighty Dollar down at last, a fate that many analyst have been warning for the past several years.

Is currency appreciation a good or bad thing?

It depends on whether you are an importer or exporter, and the elasticity of the products. For importers, the cost of goods are lowered, but for exports, the products become more expensive and less competitive to sell. Elasticity refers to the stickiness of demand. A product is inelastic if the demand remands more or less the same despite price changes. In the case of SGD appreciation, the cost of imported foodstuff is lowered, which is good. But Singapore's exports are finished products which are now more costly, making it less competitive. This is a problem because manufactured products are elastic. Buyers will seek out other sources. It helps if major components are imported which reduces the overall cost of finished product. In the case of Rxxxxx, it is laughing all the way to the bank. The RUB has appreciated tremendously, but their major exports are gas, fertilisers and agri-products which are in-elastic and their customers continue to come to shop. Their imports are now at record cheap prices in terms of RUB.

The impact of persistent currency appreciation comes with huge problems in the long run. Cheaper import substitutes out-compete producers for domestic consumption which hollows out local industry. The export industry can no longer compete and is forced to relocate overseas, resulting in loss of jobs. This was the experience of Japan in the 1980s which they have never recovered from.


What a pity that the pain of global inflation is festered upon the whole world by one single person, an incoherent old man sitting in the White House, who is incapable of understanding what he has done.



Monday, May 23, 2022

CRUDE OIL PRICES DOWN, SINGAPORE PUMP PRICES UP


Oil prices are currently about 15% lower than in March. Yet prices at the pumps increased dramatically. Diesel is about S$3/litre, up 15% and petrol (92-Octane as example) is about S$3.20/litre, up 7%.

In the usual cartel-like manner, the various brands all up prices about the same time at roughly the same percentages.

Consumer Association of Singapore (CASE) tracks these prices but remains silent.

Meanwhile, Strains Times quoted USAToday reporting major oil companies raking in massive profits. " Shell trebled its first-quarter earnings to US$9.1 billion, while BP posted a first-quarter profit of US$6.2 billion – its highest in over a decade. Exxon ... more than doubled its earnings in the first three months of the year to US$5.48 billion, and Chevron ... posted first-quarter earnings of US$6.26 billion – more than four times what it made at the same time last year."

Over in the US, Gas prices reached US$4.59 , a new all-time record high for gas prices in America.

The Biden admin has admitted a math error caused long delays in the issue of federal offshore oil and gas development permits, preventing a supply side response. It seems "National Marine Fisheries Service — has used faulty modeling on such impacts and, as a result, overestimated wildlife effects, delaying permitting on existing leases."

One wonders if a somewhat similar miscalculation occured in Singapore. Afterall, we all know how complicated the pump price computation is.



 


Friday, May 20, 2022

GOVERNMENT DOING NOTHING TO MITIGATE HIGH ELECTRICITY PRICES

As electricity prices hit the roof, has our government done much to mitigate the situation? The fact that exogenous factors (Biden destroying US fracking industry, increased demand for oil/gas due to world economy emerging from pandemic lockdowns, the situation in Europe) that caused fuel prices to increase is beyond government control. The Ministry of Trade and Industry has explained the local gas supply situation is the major problem. Less availability means generators cannot produce to their full capacity and as they cut back on their offers, auction prices go up. So the MTI had tasked itself to help generators have sufficient gas supply for day-to-day operations. But is this the major problem?

In my previous blog, I suggested the decrease in the supply cushion motivates generators to up their offer prices at the auction. This is a natural free market price discovery function. Supply cushion is the access of offers at the auction. In turn, this is affected by the generation capacity. The Singapore power generation industry has been suppressed by massive over capacity for several years. Generators offered low prices at the auction in order to get despatch for their plants. This led to under-priced retail electricity for many years (something ordinary consumers are unwary and not grateful for). It was left to natural attrition to reduce the over capacity. Older plants that reached run-out date were not replaced. Thus in the past 3 quarters, we have seen a reduction in the supply cushion with resultant increased auction offer prices which of course meant higher wholesale prices.

I posit the high electricity prices is a result of a combination of higher fuel cost and reduced supply cushion. The days of massive over capacity of power generation is running out, with resultant higher electricity prices. In economic lingo, the 'short run marginal cost' is rising to the level of 'long run marginal cost' in the industry. The MTI recognises this and it's the reason why the government is legislating to provide the ministry the capability to build a reserve plant when necessary.

A price comparative with other countries is necessary to have an idea of where Singapore stands. Such a task is very difficult due to differences in types of power generation (coal, gas, renewables), tariff structures, type of market, state subsidies, and data availability. Nevertheless, it provides a general idea.

The data is from Statistica and for Sep 2021, just when the oil prices exploded. Singapore electricity prices is amongst the highest in the world. If this is bad, just see how we compare to Africa.
There are 54 countries in the African continent. They face many problems in their electrification programmes, especially in the sub-Sahara regions. The data is for Sep 2021 showing tariff/kWh. Many of these countries have been left out in the statistica data. Singapore ranks 10th most expensive in Africa. Just imagine, 44 of these poverty-driven African states manage to provide electricity cheaper than the Lion city.

When oil prices exploded in Q3 of 2021, all consumers world-wide suffered huge increase in electricity bills. Let's see closer to home, what Asean governments are doing.

Malaysia:
Sep 2021 : Average rate was US$0.05 kWh (from Statistica)
Malaysian electricity is regulated, with private power generators and Tenga Nasional Bhd as the single purchasing entity. TNB has monopoly on transmission and distribution. They use stratified tariffs, cheaper for poorer segments. Rates are also split for domestic (residents) and non-domestic (industry/commerce) which are priced higher. They use a 'base rate' which are adjusted with a surcharge or debate every 6 months due to actual fuel impact on generation cost. The average base rate in Jul-Dec 2021 was MYR 0.394 (US$0.0893)/kWh with a rebate of MYR 0.02.

What did the govt do? They hold the base rate till 2024. For Jan-Jun 2022, the MYR 0.02 rebate remains for domestic consumers, but non-domestic will pay surcharge of MYR 0.037.

Indonesia:
Sep 2021 : Average rate was US$0.099 kWh (from Statistica)
Perusahaan Listrik Negara (PLN) is government utility agency. It holds monopoly for transmission and distribution, and owns about 73% generation capacity. Other generators are privately-owned. PLN is the single purchaser.

Indonesia's tariff is very stratified. Like Malaysia, Indonesia is holding the tariff unchanged. It will spend IDR134 trillion (US$9 m) on energy subsidies this year. Indonesia is a net oil-importer. Pertamina, the state oil company, will purchase cheaper gas from Rxxxxa. Indonesia is not on Rxxxxa's list of unfriendly countries.

Philippines:
Sep 2021 : Average rate was US$0.17 kWh (from Statistica)
Power generation is deregulated and Philippines has a wholesale market since 2001. Transmission asset is public under National Power Corp, operation is bidded out under 25 year franchise. Distribution is deregulated and run by many franchisees, of which Meralco is the largest operator.

Wholesale prices expected to increase in line with rising fuel cost. Transmission rate has been decreasing yearly when private enterprise franchisee took over operations in 2009. It is expected to drop further. Distribution rates are determined by regulatory body. For Meralco, there is a refund of PHP 18.7 trillion (US$357m) in respect of difference between actual weighted and interim distribution tariff for years 2015 to 2020. Meralco bills will carry a rebate from Dec 2020 till Mar 2023. This will significantly cushion electricity bills.

Thailand
Sep 2021 : Average rate was US$0.11 kWh (from Statistica)
There are some small power generators. The industry is regulated and basically, the government monopolises generation, transmission and distribution. Prices are expected to continue to rise. In March, the government announced a subsidy of 22 satang/kWh for consumers of less than 300kWh per month. The subsidy runs from May to August.

Vietnam
Sep 2021 : Average rate was US$0.08 kWh (from Statistica)
The government holds substantial generation capacity and it has monopoly on transmission and distribution. There are no mitigation programmes to meet the rising cost of electricity. However, Vietnam's electricity prices are still ridiculously cheaper in Asean due to substantial hydro-power.

Singapore
Sep 2021 : Average rate was US$0.18 kWh (from Statistica)
From S$23.38/kWh (before tax) in Sep 2021, the tariff has risen to S$27.94 in 2nd qtr of 2022. Faced with the exit of many retailers, the government's focus have been on the orderly exercise of supplier of last resort function by the Marker Support Services Licensee, ie Singapore Power. Next, the Energy Market Authority took all necessary steps to ensure sufficiency of gas for the generation plants for day-to-day needs.

Singapore government never believes in subsidies. There has never been any feed-in-tariffs and the early solar pv generators received no benefits. Singapore is the only country in Asean to impose carbon tax since 2019. Last year, carbon tax pulled in S$207m for the government's coffer. While the government has done nothing for household consumers to mitigate the high energy cost, it offers financial support to businesses who invest in solar pv installations with its 'Go Green Schemes'. In 2020, the government gave S$23m grants to 3 power generation companies YTL, Tuas and Senoko for 'energy efficiency projects'.  The whole idea of carbon tax is to induce all consumers to reduce their carbon footprints and to take steps to aim for carbon neutrality. Why is the government funding such private efforts?


Regulated and De-regulated markets

In a fully regulated market, the government controls all 3 segments -- generation, transmission and distribution. It is thus in a position to determine the tariff. With deregulation, market forces determine the rates. None of the Asean countries are fully de-regulated. Only Singapore and Philippines have de-regulated power generation. Philippines have further privatised distribution services, and allowed private franchisee to operate the grid, but both transmission and distribution assets remain public. Most countries do not de-regulate transmission for national security reasons. Transmission and distribution remains regulated in Singapore.

Whether generation, transmission or distribution, there are basically 2 costs -- operating expenses (Opex) and capital expenditure (Capex).

With Opex, major cost is fuel in the case of fossil-based plants, whether coal, gas or oil. In the case of renewables (wind, solar, hyrdo, geothermal, nuclear), except for nuclear, there is zero fuel cost. It does not mean countries with fuel resources can easily subsidise their Opex cost because governments are contract bound in the price-sharing arrangements in resource extraction. Malaysia, Indonesia, Philippines and Vietnam are net-importers but they do produce some gas. Philippines' Malampaya gas fields supply their local needs, yet their wholesale electricity prices are just as costly. None of them are using their advantage of gas production to directly subsidise high electricity prices. Thus in terms of the tariff setting, Singapore is on a level playing field with them -- and we are the most expensive.

Subsiding fuel cost has huge political and security risks. Both Malaysia and Indonesia used to subsidise gas pump prices in days of yore when they had lots of petrol dollars. There comes a time when the revenue plunges as commodity prices do, or when gas fields dry up, and the subsidies burn a big hole in the national budget. When subsidies became unsustainable, withdrawing it at a time of high prices, will see riots in the streets. Both Malaysia and Indonesia deferred withdrawing gas pump subsidies until the time when oil prices took a dive.    

In the case of Capex, all these are sunk cost. They have already been expended. In deregulated markets private enterprises price their products with a fixed cost depreciation charge to make sure they have a profit margin. In regulated markets, it is all about cost recovery. Government tariffs carry a cost in a formulated structure meant to recover investment in the infrastructure. It is in a recomputation of the formula that Philippines' Meralco has to refund Php18.7 trillion to consumers in respect of cost recovery of distribution infrastructure. (Just to clarify - Meralco is private enterprise, and this portion of the distribution tariff is a pass through cost for them. They simply collect and hand to the government which owns the assets. Thus it is in effect the government making the refund).

It is in Capex in a regulated market that governments can offer relief to hard pressed consumers. The cost recovery can simply be deferred, suspended, or put on a moratorium. In the case of Singapore, the transmission/distribution is regulated. The licensee is SP PowerAssets Limited (government-owned). SPPA earns for the SP Group S$1 billion each year, easily S$500m is from Singapore operations. In a regulated market, cost recovery is meant just that, to recover the infrastructure cost. That SPPA can make S$500m profit simply means the recovery formula has a high profit factor built-in. Of the current tariff of S$27.94/kWh, 22% or S$5.77 is transmission/distribution charge. It is here that the government can offer some relief -- by a deferment of cost recovery and a reduction in their margins.

Capex is a sunk cost. A deferment requires no cash outlay by the government and thus no demands on the budget. It does however, mean no profits, and has cashflow effects on SPPA, which cascades down to SP Group and Temasek. But overall, its impact on the Temasek's NIRC (net investment returns contribution) to the budget will be minimal. SPPA can live with a diminished cashflow by simply putting some of their projects on hold.


Conclusion

For years, the Singapore electricity market has operated with massive power generation over-capacity. This has seen the wholesale electricity prices consistently lower than regulated tariff. The upsurge in oil prices since Q3 of 2021 has brought about a paradigm shift. The short term marginal cost is now higher than the long term marginal cost. Wholesale prices will now tend to be higher than regulated tariff. The ministry has explained away the rising fuel cost and supply shortage as the problem. However, a contributing factor, in my opinion, is the lowered supply cushion that motivates higher offer rates at the wholesale market auction. Whilst the government has done nothing for consumers to mitigate the high electricity cost, here's hoping it will at least monitor for excessive profits by power generation companies.


Monday, May 16, 2022

THE COLLAPSE OF STABLECOIN UST, LUNA TOKEN, ANCHOR DEFI EXPLAINED


In the second week of May all hell broke loose in the crypto market as Terra's UST and LUNA tokens, as well as its decentralised finance platform, Anchor Protocol, went spiraling out of control.  Crypto pundits have always maintained their decentralised blockchains do not have the weaknesses of regulated central banking systems. Yet what happened to Terra was akin to a bank run in the fiat economy.  And in the unregulated crypto universe, there is no lender of last resort to stop the run.


What is UST and LUNA :

Terraform LABS (Terra for short) from South Korea owns the Terra blockchain. Luna Foundation Guard (LPG), which is Singapore-based, is the governing body for the development of LUNA. Both LUNA and UST are tokens issued by Terra. UST is a stablecoin. LUNA is the native token on the Terra blockchain. 'Native' means it is the base token on a blockchain, and which is also used to settle transaction fees. LUNA also serves as the treasury token that enables UST to peg to USD to maintain 1:1 parity.


What are stablecoins :

Stablecoins are tokens which are pegged 1:1 to fiat, mostly USD. That means the tokens have backing, somewhat similar to MAS using the foreign exchange reserves to back the SGD. The difference is SGD is not pegged to anything.

Stablecoins are differentiated by the way it is collaterised:
1. Stablecoins backed by reserves in fiat (bank deposits, bonds, other securities, held by custodians). The assets are off-chain. Eg Tether (USDT) and Circle & Coinbase (USDC).
2. Stablecoins backed by other tokens, i.e. the collaterals are on-chain. Eg MakerDAO's stablecoin DAI is collaterised by Ether (ETH).
3. Stablecoins backed by another native token and an algorithm controls the relationship between the two such that the stablecoin is pegged 1:1 to fiat. This is call an algorithm stablecoin.

Type (1) are known as centralised stablecoins. (2) and (3) are decentralised, which means the mining function underlies their mechanism.


Why stablecoins are important in crypto ecosystem :

Because they are pegged to fiat, stablecoins are not volatile. They serve 2 very important functions -

* When trading cross cryptos and there is no such pairs in the exchange, stablecoins provide the liquidity for the trades. Eg if users want to move from crypto XXX to crypto YYY and there is no XXX-YYY pair, users can do UST/XXX and then a UST/YYY trades. This avoids the necessity of using a fiat go between which is slow and expensive.
* Stable coins allow players to park their cryptos if they want to remain in the market but temporarily inactive in trading, ie when they want to sit it out for a while.

The demand for stablecoins has seen UST grown in a matter of 2 years to the 4th highest traded stablecoin token with a market capitalisation of US$15B.


What is arbitrage :

A profit opportunity exists when a product is priced differently in 2 markets. Eg if 2 oranges cost S$1 in Singapore and in Johore Bahru the equivalent of S$1 can buy 3 oranges. Buying the oranges in JB and selling in Singapore gives an arbitrage profit. The relationship between UST and LUNA is driven by the investment strategy of arbitrage.


How UST maintains 1:1 peg to USD :

An algorithm is simply some codes to execute a process. It is on auto-mode. This algorithm works dynamically to make sure the UST hovers very near 1:1 rate to USD.

The price of UST is a function of supply and demand. If demand rises, its price increases. When supply increases, its price falls. Terra allows users to swap between UST and LUNA at a guaranteed price of US$1.00 for each UST. In other words, users can swap 1 UST for US$1.00 worth of LUNA.

* When the price of UST rises, say to US$1.03, users swap LUNA for UST. At whatever the market price of LUNA, if the user swaps say US$1.00 worth of LUNA, then he receives 1 x UST. What is the impact of this?
1. The LUNA traded in are destroyed, in crypto language, 'burnt', and new UST mined or 'minted'.
2. Users receive from Terra 1 UST @ US$1.00 which they can sell at market price of US$1.03 thus making an arbitrage profit US$0.03.
3. As more users take advantage of the arbitrage opportunity and swap LUNA for UST, the supply of UST increases. As supply increases, the price of UST will decrease till it reaches parity with USD again.
4. Meanwhile, as LUNA are burnt. its supply decreases and its price increases.

* When the price of UST drops, say to US$0.95, users swap UST for LUNA. At whatever the market price of LUNA, if the user swaps say 1 x UST (at whatever its price), then he receives US$1 worth of LUNA. What is the impact of this?
1. The UST traded in are, 'burnt', and new tokens of LUNA are 'minted'.
2. Users swap 1 x UST @ US$0.95 (discount) for US$1.00 worth of LUNA thus making an arbitrage profit of US$0.05.
3. As more users swap UST for LUNA, the supply of UST decreases. As supply decreases, the price of UST will increase till it reaches parity with USD again.
4. Meanwhile, as more LUNA are minted. its supply increases and its price decreases.

Note the UST/LUNA relationship:
* To manage the price of UST up, the price of LUNA is forced down.
* To manage the price of UST down, the price of LUNA is forced up.
* Terra cannot protect both UST and LUNA at the same time.

In summary, algorithm stablecoins work on the basis of mint and burn of the coin and its native token, using the arbitrage motivation for the market to re-establish parity with the fiat.


Bitcoin (BTC) backing for LUNA :

Algorithm stablecoins is a relatively new concept. To allay risks, the LPG made a policy announcement in Feb 2022 to build a reserve holding of US$10B worth of BTC to back LUNA. This is of course a positive development. Some sources put their current BTC reserves at US$3.5B. This will also mean the price of LUNA will be sensitive to BTC volatility.


Terra's Anchor Protocol :

Anchor is Terraform LAB's DeFi (decentralised finance) protocol built on top of the Terra blockchain. Anchor allows users to deposit UST into a pool for lending out. Practically every DeFi offers a dynamic rate based on demand-supply. Anchor offers a fixed rate of close to 20% annualised percentage yield (APY) to depositors. Revenue is from interest charged to borrowers, stake rewards on loan collaterals (other tokens), and redemption fees. Excess revenue after paying depositors' interest is retained in a Yield Reserve to be tapped in future periods of negative net revenue.

Anchor was launched in March 2021. It quickly became apparent not many players will take expensive UST loan to seek higher yields elsewhere. On the other hand, players are attracted by the high deposit interest offered. Players can leverage on cheap US$ fiat and swap into UST to earn 20% APY. As at 6 May, there were 10 times more deposits than borrowings.

The big picture was clear. A fixed 20% APY is not sustainable and the Yield Reserve will be depleted very fast. In March 2022 the LPG announced a change to the rate. It was to be refixed monthly. If the Yield Reserves drop by 5%, the rate will be reduced by 1.5%. This was not good enough and in May 9 the LFG proposed a rate cut to about 4%.


The collapse of UST and LUNA :

UST depeg on May 6 and is currently at US$0.183811. LUNA plunged from US$80 on May 6 to US$0.000265 on May 15.

What happened in that tumultous week? Was it an attack by crypto whales, or was it a black swan event? The answer is most like a convergence of several factors.

The Fed battles inflation
The era of cheap money comes to an end as the Fed grudgingly takes meaningful steps to fight Bidenflation. US is having an inflation rate of 8.3%, the highest since Jimmy Carter's disastrous years. Market expectation is interest rates will be raised from 0.2% to 2.75% by the end of the year. On May 4, the Fed raised rates by 50 basis points, the highest in 40 years. Another 4 rounds of similar increases is expected up to year end. The Fed has also announced it will reduce its balance sheet drastically with Quantitative Tightening. It will start disposing US$30B of securities per month commencing June. The effect is a decrease in liquidity in the fiat economy

This has great impact on the high leverage investment gamers in the financial markets, including cryptocurrencies. Investors will start to restructure their portfolios and valuations will go down.

Bitcoin performance
As the pre-eminent token, BTC movements has a psychological impact on the crypto market.

Following the Fed announcement May 4, BTC has sheded about 25% from the 40,000 range to current 31,000. This impacts LUNA's BTC reserves holding and thus its price.

Exodus from Terra Anchor Protocol
Data shows as much as 70% of UST issues were locked away in the Anchor Protocol. It means investors were simply buy-and-hold players. Buy UST and deposit in Anchor to earn the high 20% interest. When the LPG decided to reduce the interest rate in March, the raison d'etre for UST vapourised. Depositors exited in droves and Anchor collapsed.

To get rid of the UST, investors will want to swap it for LUNA and move to other cryptos or ramp-off to fiat. This resulted in the burning of UST and minting of LUNA. As more and more of LUNA tokens were minted, its price tanked.

The burn and mint mechanism cannot cope with the sudden increase in transactions and the system had to pause withdrawals many times.

Desperate UST holders have another avenue to dispose of the token. Seasoned players move to Circle Finance, another platform which has a stablecoins pool. This allows users to swap one pegged stablecoin with another. Eg UST can be swapped to Tether (USDT) or Circle's USDC. As UST tokens poured in, soon the pool's stablecoins became severely mismatched. There were simply too many UST vs the other stablecoins in the pool. In order to promote the swap. UST had to be offered at discounts. Due to poor take up, the discounts grew larger and larger, and UST price tanked.

Crypto whales at it again
The foreign exchange market is so huge it is quite impossible for a single speculator to influence it. The crypto market is not that big. Crypto whales are investors who hold large positions and whose actions can affect the market. Whether they are attacking the market, or simply making legit investment decisions, who knows.

On May 8, an investor swapped 85,001,010 of UST for 84,509,387 USDC at a small 0.6% discount. This probably unnerved the market and UST began to depeg after this.

What are reserves for
By May 10 UST had depegged to 0.64 level. Terra deployed its reserves of Bitcoins to mop up the USTs flooding the market. For a while this worked and UST moved back again to 0,94. But it was not enough and UST slipped down. As the saying goes, no one is big enough to go against the market. 

Black Swan event
This is an event that is unexpected and which creates severe consequences. According to Terra CEO Do Kwon, the algorithm for the burn and mint to manage the UST-LUNA arbitrage transactions could not be executed fast enough to get ahead of the market and return UST to its 1:1 peg. The codes can be revised to improve the system.


Conclusion :

Like many crypto failures before them, Terra's technology were brought to the market without serious stress testing. This is the problem of an unregulated market. Whilst many crypto billionaires have seen their net-worth dropped severely during the week that was, it is the retail investors who are hurt the most, Many have had their life-savings wiped out. The tragedy is that many retail investors probably do not even understand the complexities in the UST-LUNA-Anchor relationships.

Confidence has been shaken. Will the trio of UST-LUNA-Anchor go to the graveyard of failed cryptos?


 

Saturday, May 7, 2022

SILENT WEAPONS FOR QUIET WARS - A HOAX OR GUIDEBOOK FOR ELITES?

In 1979, an unknown person wrote a booklet called "Silent Weapons For Quiet Wars -- An Introductory Programming Manual". It gained no traction until the 1990s and fairly recently it's all over the internet. SWQW is about the elite class using social and economic engineering to manipulate mass behaviour up to a point where the lower class population, the cattle, capitulate and willingly subjugate themselves to slavery under a one world government ruled by the rich. Would have sounded ridiculous 43 years ago, but today, Klaus Schwab and his World Economic Forum have basically been telling us that is exactly their agenda. The disintegration of family unit, debasement of education, destruction of America, creation of wars, eugenics, information control, keeping the people distracted with all sorts of divisive issues, use of sociopathic processes to induce paranoid behavior (think mass formation psychosis in the pandemic), etc, as described in SWQW, are exactly what we are witnessing in real time today.

Is SWQW a hoax or is it really a guidebook for the globalist elites?

The greater part of the text dealt with input–output modelling that can be used to achieve desired economic outcomes. The writer expects that with improved data collection capabilties in the future, input-output modelling approach will become more compelling. (He has been absolutely correct as we see today Google, Facebook, Twitter, etc, capture the minutest of details and the use of AI and big data analytics provide capabilities unimaginable 40 years ago). The booklet was written at a time when input-output modelling as a field of study was having huge interest amongst economists and Wassily Leontiel had just won the Nobel prize on his thesis in 1973. Input-output modelling is a way of studying the interdependencies between different sectors of the economy. The writer grounded his claims of social and economic manipulation by elites using input-output modelling. However, his mish-mash of socioeconomic interaction functions with electronic circuitry formulas and diagrams and that the untold secret is that they work in similar fashion, took the idea into wonky land. It is the second portion of the book which is reminiscent of New World Order machinations that is fascinating.

You can read SWQW in the text box below. I repacked to make it easier to read. Sorry my html coding is not that great. If you want to see the original photostated version, I found it in the web achieve here

As the original booklet had no author nor copyrights, pliagiarism had a field day. Many took to publishing the book and putting their name to it. A google search throws up long lists of sites, no doubt the conspiratorial nature of the story is appealing to many. The story is compelling, but I wasn't going to be suckered. So I did some sleuthing. The purpose of my blog is simply to suggest in a world where misinformation is normalised, we need to make an effort at authenticating stuff we like. We should avoid sharing recklessly. This is an illustration.

The original booklet has no Foreword or Preface. Depending on which version you come across, there may be slight difference in the Foreword or Preface. I jot down here my discovery, not in chronology of publication dates, but the sequence of my journey.


Lawful Path:

I came across this article in an authentic site called "The Lawful Path" which is a forum for discussing legal matters. They published the story (date unknown) based on 2 sources - a book "Behold A Pale Horse" and a "crudely copied booklet" (which must be the same original I found in internet archive). Pale Horse was published in 1991, so Lawful Path could not have published earlier than that.

Lawful Path version has a Foreword which they could only have lifted off Pale Horse. The Foreword is troubling in 2 ways. Firstly, it talked about the booklet as a technical manual, has a military feel to it. They (who?) had it verified by 4 Military Intelligence personnel who confirmed it appears to have been written by military technical writers. This was probably simply to add more zing to a conspiracy. Secondly, the Foreword was signed off by "Delamer Duverus". It seems DD was actually Edward Aloysius Roberts. He was the owner of a weekly paper called Seligman Sunbeam, later changed to American Sunbeam. It was a small town weekly publication which Roberts used to publish his anti-semitic, evil spirits and corrupt government opinions. He was a self-proclaimed prophet who claimed a deity named Delamer Duverus spoke through him. DD died in 1986.

It is very probable DD published the SWQW article in the Seligman Sunbeam which incorporated his Foreword.

The Preface carried the story of the origin of the booklet - a Boeing engineer found it in the IBM copier he bought at a surplus sale on 7 July 1986. Did DD pen this preface too? It appears not, as we shall see later.

As for content, Lawful Path copied from the original booklet because Pale Horse left out all those formula illustrations.


Behold a Pale Horse (1991):

This book was written by Milton William Cooper who has spent some time with Naval Intelligence. He is basically a known crank conspiracy theorist. Pale Horse is a collection of several conspiracy theories and SWQW is in Chapter 1. Cooper padded conspiracy names into SWQW, like Bildenburg Group, Illuminati, New World Order, Amschel Mayer Rothschild, etc. This creates an oxymoron status - is SWQW a government technical manual (written in military technical style), or secret conspirators' guidebook?

The Foreword places SWQW as of government origin, a technical manual for public agencies working with elites against the people. Both DD and Cooper purvey distrust of government narratives and they have an audience of a small fringe group of self-styled patriot cranks. Their works have dark undertones as they feed the psyche of fringe groups with insane ideologies such as Theodore Kaczynski aka the Unabomber, and Tim McVeigh.

Cooper was a low level personnel in Naval Intelligence and he certainly has no access to the many files he claimed to have seen.

Historian Nicholas Goodrick-Clarke described the book as a "chaotic farrago of conspiracy myths interspersed with reprints of executive laws, official papers, reports and other extraneous materials designed to show the looming prospect of a world government imposed on the American people against their wishes and in flagrant contempt of the Constitution."


Paranoia Magazine (2003):

PM carried an excerpted Pale Horse version of SWQW in their issue nbr 33 in 2003. PM is a magazine on mental health issues. It made a psychotic analysis of the book, and suggested Cooper left out the modelling formula due to his incapacity to understand the concepts. The magazine requested anyone having knowledge of the author to contact them.


America's Promise Newsletter (Nov 1986):

APN ran the SWQW article with a note that the IBM copier was purchased by a Boeing engineer at an auction at McChord Airforce Base in Washington State. This proves Delamer Duverus could not have penned the Preface. I managed to track down to a blog that mentioned DD was buried on 21 Jun 1986. Read here.


Hartford Lye Van Dyke:

The mystery is solved.

In 2003 Hartford was in prison when he read the Paranoia Magazine article. He wrote to PM claiming he was the author of SWQW. Hartford provided his background and explained why he wrote SWQW, why he did not put his name to the booklet, the codes and signature he left in SWQW, the sources for the book, all these convinced PM he was really the author. PM then published Hartford's letter. Read here.

Hartford explained he had to keep a low profile for SWQW as he was then working some contracts with the government, and it was for same reasons he was in prison. I managed to track down a news clipping dated 2 Oct 2003 which had a couple of lines on the sentencing of Hartford to 8 years in prison. But he lied. He was apparently guilty of a felony of issuing bogus currency. Read here.

There are other conspiracy type books that he has written, including one relating to the Japanese bombing of Pearl Harbour where many said the government actually had knowledge of imminent attack several hours before it happened, but for reasons unknown, took no action. I shall ignore all these as my concern here is only on SWQW. A few important points he made on SWQW:

- He maintained it was a montage of writings from a few sources. His role was merely to assemble them into a cohesive form.
- It is not a hoax but "a study in human nature; of motivation, psychological impulse and momentum, and force of habit; of control of social energy by influence, suggestion, and hypnosis; of the use of sociopathic processes to induce paranoid behavior".
- He printed only a few copies which he gave to friends.
- He thought America's Promise Newsletter was the first to publish SWQW.
- About McChord Airforce Base - he remembered clearly about giving a lift to a military personnel hitch-hiker trying to get back to his base. Hartford went out of his way to send the soldier to McChord base camp and before parting, he handed a copy of SWQW to the young man. It must be this copy of SWQW that was found in the IBM copier machine.
- Due to concerns that SWQW was being peddled as misinformation, he had appeared in 1996 in a radio talk show to announce he was the authour. (Can't verify this)

Hartford seems like a very intelligent man but skewed towards the insane. He has a colourful past with lots of run-ins with the law. He went into pseudolaws and created his own currency in a scheme he called public wealth rebate notes. That's where he got into serious trouble with the law. He issued US$3 million of these notes, a felony that got him an 8 year prison term. That he is a brilliant mind which veered towards insanity is borne out by the fact he served most of his 8 years in prison in the psychiatric ward.

However his flaws, it does not take away the brilliance of SWQW. Whilst many hijacked his writing to sell a conspiracy theory, Hartford's effort was to warn us to remain vigilant and that our individual sovereignty cannot be preserved if we do not use our intelligence. He put it in cold reality that those who choose to abandon their intelligence " Such a people are beasts of burden and steaks on the table by choice and consent." Hillary Clinton called them "deplorables" and to Kissinger, these are "useless eaters".

However you may find the economic concepts laughable, you cannot deny that the globalist elites have in fact employed a lot of the ideas of SWQW. In fact, it does appear SWQW is a guidebook for the elites. Who is to say it is coincidental, a case of wise men think alike. Then then again, what is one to make of the fact the Rockefeller Foundation was a funder for the initial research project on the economic structure of America by Harvard College, headed by Wassily Leontiel,  which has drawn contributions from industry and military think-tanks.

The answer to the question is SWQW a hoax. The author had intended it as a wake-up call to the public but crackpot purveyors of conspiracy theories had pushed the narrative of a government waging a silent war on its citizens. However, in the past few years, it has become crystal clear that what Hartford feared has actually taken place in may Western countries, especially the US.

I shall end by quoting Hartford's parting shot :
"Those who will not use their brains are no better off than those who have no brains, and so this mindless school of jellyfish, father, mother, son, and daughter, become useful beasts of burden or trainers of the same."


Enjoy your read :



Silent Weapons for Quiet Wars


An Introduction Programming Manual

Operations Research Technical Manual TW-SW7905.1



Welcome Aboard

This publication marks the 25th anniversary of the Third World War, called the "Quiet War", being conducted using subjective biological warfare, fought with "silent weapons."

This book contains an introductory description of this war, its strategies, and its weaponry.

May 1979 #74-1120


Table of Contents
    Security
    Historical Introduction
    Political Introduction
    Energy
    Descriptive Introduction of the Silent Weapon
    Theoretical Introduction
    General Energy Concepts
    Mr. Rothschild's Energy Discovery
    Apparent Capital as "Paper" Inductor
    Breakthrough
    Application in Economics
    Summary 1
    The Economic Model
    Industrial Diagrams
    Three Industrial Classes
    Aggregation
    The E-model
    Economic Inductance
    Inductive Factors to Consider
    Translation
    Time Flow Relationships and Self-destructive Oscillations
    Industry Equivalent Circuits
    Stages of Schematic Simplification
    Generalisation
    Final Bill of Goods
    The Technical Coefficients
    The Household Industry
    Household Models
    Economic Shock Testing
    Introduction to the Theory of Economc Shock Testing
    Example of Shock Testing
    Introduction to Economic Amplifiers
    Short List of Inputs
    Short List of Outputs
    Table of Strategies
    Diversion, the Primary Strategy
    Diversion Summary
    Consent
    Amplification Energy Sources
    Logistics
    The Artificial Womb
    The Political Structure of a Nation - Dependency
    Action/Offense
    Responsibility
    Summary 2
    System Analysis
    The Draft
    Enforcement


Security


It is patently impossible to discuss social engineering or the automation of a society, i.e., the engineering of social automation systems (silent weapons) on a national or worldwide scale without implying extensive objectives of social control and destruction of human life, i.e., slavery and genocide.

This manual is in itself an analog declaration of intent. Such a writing must be secured from public scrutiny. Otherwise, it might be recognized as a technically formal declaration of domestic war. Furthermore, whenever any person or group of persons in a position of great power and without full knowledge and consent of the public, uses such knowledge and methodologies for economic conquest - it must be understood that a state of domestic warfare exists between said person or group of persons and the public.

The solution of today's problems requires an approach which is ruthlessly candid, with no agonizing over religious, moral or cultural values.

You have qualified for this project because of your ability to look at human society with cold objectivity, and yet analyze and discuss your observations and conclusions with others of similar intellectual capacity without the loss of discretion or humility. Such virtues are exercised in your own best interest. Do not deviate from them.


Historical Introduction


Silent weapon technology has evolved from Operations Research (O.R.), a strategic and tactical methodology developed under the Military Management in England during World War II. The original purpose of Operations Research was to study the strategic and tactical problems of air and land defense with the objective of effective use of limited military resources against foreign enemies (i.e., logistics).

It was soon recognized by those in positions of power that the same methods might be useful for totally controlling a society. But better tools were necessary.

Social engineering (the analysis and automation of a society) requires the correlation of great amounts of constantly changing economic information (data), so a high-speed computerized data-processing system was necessary which could race ahead of the society and predict when society would arrive for capitulation.

Relay computers were to slow, but the electronic computer, invented in 1946 by J. Presper Eckert and John W. Mauchly, filled the bill.

The next breakthrough was the development of the simplex method of linear programming in 1947 by the mathematician George B. Dantzig.

Then in 1948, the transistor, invented by J. Bardeen, W.H. Brattain, and W. Shockley, promised great expansion of the computer field by reducing space and power requirements.

With these three inventions under their direction, those in positions of power strongly suspected that it was possible for them to control the whole world with the push of a button.

Immediately, the Rockefeller Foundation got in on the ground floor by making a four-year grant to Harvard College, funding the Harvard Economic Research Project for the study of the structure of the American Economy. One year later, in 1949, The United States Air Force joined in.

In 1952 the grant period terminated, and a high-level meeting of the Elite was held to determine the next phase of social operations research. The Harvard project had been very fruitful, as is borne out by the publication of some of its results in 1953 suggesting the feasibility of economic (social) engineering. (Studies in the Structure of the American Economy - copyright 1953 by Wassily Leontief, International Science Press Inc., White Plains, New York).

Engineered in the last half of the decade of the 1940's, the new Quiet War machine stood, so to speak, in sparkling gold-plated hardware on the showroom floor by 1954.

With the creation of the maser in 1954, the promise of unlocking unlimited sources of fusion atomic energy from the heavy hydrogen in sea water and the consequent availability of unlimited social power was a possibility only decades away.

The combination was irresistible.

The Quiet War was quietly declared by the International Elite at a meeting held in 1954.

Although the silent weapons system was nearly exposed 13 years later, the evolution of the new weapon-system has never suffered any major setbacks.

This volume marks the 25th anniversary of the beginning of the Quiet War. Already this domestic war has had many victories on many fronts throughout the world.


Political Introduction


In 1954 it was well recognized by those in positions of authority that it was only a matter of time, only a few decades, before the general public would be able to grasp and upset the cradle of power, for the very elements of the new silent-weapon technology were as accessible for a public utopia as they were for providing a private utopia.

The issue of primary concern, that of dominance, revolved around the subject of the energy sciences.


Energy


Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping.

All science is merely a means to an end. The means is knowledge. The end is control. Beyond this remains only one issue: Who will be the beneficiary?

In 1954 this was the issue of primary concern. Although the so-called "moral issues" were raised, in view of the law of natural selection it was agreed that a nation or world of people who will not use their intelligence are no better than animals who do not have intelligence. Such people are beasts of burden and steaks on the table by choice and consent.

Consequently, in the interest of future world order, peace, and tranquillity, it was decided to privately wage a quiet war against the American public with an ultimate objective of permanently shifting the natural and social energy (wealth) of the undisciplined and irresponsible many into the hands of the self-disciplined, responsible, and worthy few.

In order to implement this objective, it was necessary to create, secure, and apply new weapons which, as it turned out, were a class of weapons so subtle and sophisticated in their principle of operation and public appearance as to earn for themselves the name "silent weapons."

In conclusion, the objective of economic research, as conducted by the magnates of capital (banking) and the industries of commodities (goods) and services, is the establishment of an economy which is totally predictable and manipulatable.

In order to achieve a totally predictable economy, the low-class elements of society must be brought under total control, i.e., must be housebroken, trained, and assigned a yoke and long-term social duties from a very early age, before they have an opportunity to question the propriety of the matter. In order to achieve such conformity, the lower-class family unit must be disintegrated by a process of increasing preoccupation of the parents and the establishment of government-operated day-care centers for the occupationally orphaned children.

The quality of education given to the lower class must be of the poorest sort, so that the moat of ignorance isolating the inferior class from the superior class is and remains incomprehensible to the inferior class. With such an initial handicap, even bright lower class individuals have little if any hope of extricating themselves from their assigned lot in life. This form of slavery is essential to maintain some measure of social order, peace, and tranquillity for the ruling upper class.


Descriptive Introduction of the Silent Weapon


Everything that is expected from an ordinary weapon is expected from a silent weapon by its creators, but only in its own manner of functioning.

It shoots situations, instead of bullets; propelled by data processing, instead of chemical reaction (explosion); originating from bits of data, instead of grains of gunpowder; from a computer, instead of a gun; operated by a computer programmer, instead of a marksman; under the orders of a banking magnate, instead of a military general.

It makes no obvious explosive noises, causes no obvious physical or mental injuries, and does not obviously interfere with anyone's daily social life.

Yet it makes an unmistakable "noise," causes unmistakable physical and mental damage, and unmistakably interferes with the daily social life, i.e., unmistakable to a trained observer, one who knows what to look for.

The public cannot comprehend this weapon, and therefore cannot believe that they are being attacked and subdued by a weapon. The public might instinctively feel that something is wrong, but that is because of the technical nature of the silent weapon, they cannot express their feeling in a rational way, or handle the problem with intelligence. Therefore, they do not know how to cry for help, and do not know how to associate with others to defend themselves against it.

When a silent weapon is applied gradually, the public adjusts/adapts to its presence and learns to tolerate its encroachment on their lives until the pressure (psychological via economic) becomes too great and they crack up.

Therefore, the silent weapon is a type of biological warfare. It attacks the vitality, options, and mobility of the individuals of a society by knowing, understanding, manipulating, and attacking their sources of natural and social energy, and their physical, mental, and emotional strengths and weaknesses.


Theoretical Introduction

"Give me control over a nation's currency, and I care not who makes its laws." -- Mayer Amschel Rothschild, 1743 - 1812)
Today's silent weapons technology is an outgrowth of a simple idea discovered, succinctly expressed, and effectively applied by the quoted Mr. Mayer Amschel Rothschild. Mr. Rothschild discovered the missing passive component of economic theory known as economic inductance. He, of course, did not think of his discovery in these 20th-century terms, and, to be sure, mathematical analysis had to wait for the Second Industrial Revolution, the rise of the theory of mechanics and electronics, and finally, the invention of the electronic computer before it could be effectively applied in the control of the world economy.


General Energy Concepts


In the study of energy systems, there always appears three elementary concepts. These are potential energy, kinetic energy, and energy dissipation. And corresponding to these concepts, there are three idealized, essentially pure physical counterparts called passive components.

    1. In the science of physical mechanics, the phenomenon of potential energy is associated with a physical property called elasticity or stiffness, and can be represented by a stretched spring. In electronic science, potential energy is stored in a capacitor instead of a spring. This property is called capacitance instead of elasticity or stiffness.

    2. In the science of physical mechanics, the phenomenon of kinetic energy is associated with a physical property called inertia or mass, and can be represented by a mass or a flywheel in motion. In electronic science, kinetic energy is stored in an inductor (in a magnetic field) instead of a mass. This property is called inductance instead of inertia.

    3. In the science of physical mechanics, the phenomenon of energy dissipation is associated with a physical property called friction or resistance, and can be represented by a dashpot or other device which converts energy into heat. In electronic science, dissipation of energy is performed by an element called either a resistor or a conductor, the term "resistor" being the one generally used to describe a more ideal device (e.g., wire) employed to convey electronic energy efficiently from one location to another. The property of a resistance or conductor is measured as either resistance or conductance reciprocals.

In economics these three energy concepts are associated with:

    a. Economic Capacitance - Capital (money, stock/inventory, investments in buildings and durables, etc.)
    b. Economic Conductance - Goods (production flow coefficients)
    c. Inductance - Services (the influence of the population of industry on output)

All of the mathematical theory developed in the study of one energy system (e.g., mechanics, electronics, etc.) can be immediately applied in the study of any other energy system (e.g., economics).


Mr. Rothchild's Energy Discovery


What Mr. Rothschild had discovered was the basic principle of power, influence, and control over people as applied to economics. That principle is "when you assume the appearance of power, people soon give it to you."

Mr. Rothschild had discovered that currency or deposit loan accounts had the required appearance of power that could be used to induce people (inductance, with people corresponding to a magnetic field) into surrendering their real wealth in exchange for a promise of greater wealth (instead of real compensation). They would put up real collateral in exchange for a loan of promissory notes.

Mr. Rothschild found that he could issue more notes than he had backing for, so long as he had someone's stock of gold as a persuader to show his customers. Mr. Rothschild loaned his promissory notes to individual and to governments. These would create overconfidence. Then he would make money scarce, tighten control of the system, and collect the collateral through the obligation of contracts. The cycle was then repeated. These pressures could be used to ignite a war. Then he would control the availability of currency to determine who would win the war. That government which agreed to give him control of its economic system got his support.

Collection of debts was guaranteed by economic aid to the enemy of the debtor. The profit derived from this economic methodology mad Mr. Rothschild all the more able to expand his wealth. He found that the public greed would allow currency to be printed by government order beyond the limits (inflation) of backing in precious metal or the production of goods and services.


Apparent Capital as "Paper" Inductor


In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. It is therefore an economic inductance instead of an economic capacitance, and if balanced in no other way, will be balanced by the negation of population (war, genocide). The total goods and services represent real capital called the gross national product, and currency may be printed up to this level and still represent economic capacitance; but currency printed beyond this level is subtractive, represents the introduction of economic inductance, and constitutes notes of indebtedness.

War is therefore the balancing of the system by killing the true creditors (the public which we have taught to exchange true value for inflated currency) and falling back on whatever is left of the resources of nature and regeneration of those resources.

Mr. Rothschild had discovered that currency gave him the power to rearrange the economic structure to his own advantage, to shift economic inductance to those economic positions which would encourage the greatest economic instability and oscillation.

The final key to economic control had to wait until there was sufficient data and high-speed computing equipment to keep close watch on the economic oscillations created by price shocking and excess paper energy credits - paper inductance/inflation.


Breakthrough


The aviation field provided the greatest evolution in economic engineering by way of the mathematical theory of shock testing. In this process, a projectile is fired from an airframe on the ground and the impulse of the recoil is monitored by vibration transducers connected to the airframe and wired to chart recorders.

By studying the echoes or reflections of the recoil impulse in the airframe, it is possible to discover critical vibrations in the structure of the airframe which either vibrations of the engine or aeolian vibrations of the wings, or a combination of the two, might reinforce resulting in a resonant self-destruction of the airframe in flight as an aircraft. From the standpoint of engineering, this means that the strengths and weaknesses of the structure of the airframe in terms of vibrational energy can be discovered and manipulated.


Application in Economics


To use this method of airframe shock testing in economic engineering, the prices of commodities are shocked, and the public consumer reaction is monitored. The resulting echoes of the economic shock are interpreted theoretically by computers and the psycho-economic structure of the economy is thus discovered. It is by this process that partial differential and difference matrices are discovered that define the family household and make possible its evaluation as an economic industry (dissipative consumer structure).

Then the response of the household to future shocks can be predicted and manipulated, and society becomes a well-regulated animal with its reins under the control of a sophisticated computer-regulated social energy bookkeeping system.

Eventually every individual element of the structure comes under computer control through a knowledge of personal preferences, such knowledge guaranteed by computer association of consumer preferences (universal product code, UPC; zebra-striped pricing codes on packages) with identified consumers (identified via association with the use of a credit card and later a permanent "tattooed" body number invisible under normal ambient illumination).


Summary 1


Economics is only a social extension of a natural energy system. It, also, has its three passive components. Because of the distribution of wealth and the lack of communication and lack of data, this field has been the last energy field for which a knowledge of these three passive components has been developed.

Since energy is the key to all activity on the face of the earth, it follows that in order to attain a monopoly of energy, raw materials, goods, and services and to establixh a world system of slave labor, it is necessary to have a first strike capability in the field of economics. In order to maintain our position, it is necessary that we have absolute first knowledge of the science of control over all economic factors and the first experience at engineering the world economy.

In order to achieve such sovereignty, we must at least achieve this one end: that the public will not make either the logical or mathematical connection between economics and the other energy sciences or learn to apply such knowledge.

This is becoming increasingly difficult to control because more and more businesses are making demands upon their computer programmers to create and apply mathematical models for the management of those businesses.

It is only a matter of time before the new breed of private programmer/economists will catch on to the far reaching implications of the work begun at Harvard in 1948. The speed with which they can communicate their warning to the public will largely depend upon how effective we have been at controlling the media, subverting education, and keeping the public distracted with matters of no real importance.


The Economic Model


Economics, as a social energy science has as a first objective the description of the complex way in which any given unit of resources is used to satisfy some economic want. (Leontief Matrix). This first objective, when it is extended to get the most product from the least or limited resources, comprises that objective of general military and industrial logistics known as Operations Research. (See simplex method of linear programming.)

The Harvard Economic Research Project (1948-) was an extension of World War II Operations Research. Its purpose was to discover the science of controlling an economy: at first the American economy, and then the world economy. It was felt that with sufficient mathematical foundation and data, it would be nearly as easy to predict and control the trend of an economy as to predict and control the trajectory of a projectile. Such has proven to be the case. Moreover, the economy has been transformed into a guided missile on target.

The immediate aim of the Harvard project was to discover the economic structure, what forces change that structure, how the behavior of the structure can be predicted, and how it can be manipulated. What was needed was a well-organized knowledge of the mathematical structures and interrelationships of investment, production, distribution, and consumption.

To make a short story of it all, it was discovered that an economy obeyed the same laws as electricity and that all of the mathematical theory and practical and computer know-how developed for the electronic field could be directly applied in the study of economics. This discovery was not openly declared, and its more subtle implications were and are kept a closely guarded secret, for example that in an economic model, human life is measured in dollars, and that the electric spark generated when opening a switch connected to an active inductor is mathematically analogous to the initiation of war.

The greatest hurdle which theoretical economists faced was the accurate description of the household as an industry. This is a challenge because consumer purchases are a matter of choice which in turn is influenced by income, price, and other economic factors.

This hurdle was cleared in an indirect and statistically approximate way by an application of shock testing to determine the current characteristics, called current technical coefficients, of a household industry

Finally, because problems in theoretical electronics can be translated very easily into problems of theoretical electronics, and the solution translated back again, it follows that only a book of language translation and concept definition needed to be written for economics. The remainder could be gotten from standard works on mathematics and electronics. This makes the publication of books on advanced economics unnecessary, and greatly simplifies project security.


Industrial Diagrams


An ideal industry is defined as a device which receives value from other industries in several forms and converts them into one specific product for sales and distribution to other industries. It has several inputs and one output. What the public normally thinks of as one industry is really an industrial complex, where several industries under one roof produce one or more products.

A pure (single output) industry can be represented oversimply by a circuit block as follows:
The flow of product from industry #1 (supply) to industry #2 (demand) is denoted by 112. The total flow out of industry "K" is denoted by Ik (sales, etc.).

A three industry network can be diagrammed as follows:
3 Industry Network

A node is a symbol of collection and distribution of flow. Node #3 receives from industry #3 and distributes to industries #1 and #3. If industry #3 manufactures chairs, then a flow from industry #3 back to industry #3 simply indicates that industry #3 is using part of its own output product, for example, as office furniture. Therefore the flow may be summarized by the equations:

Three Industrial Classes


Industries fall into three categories or classes by type of output:

Class #1 - Capital (resources)
Class #2 - Goods (commodities or use - dissipative)
Class #3 - Services (action of population)

Class #1 industries exist at three levels:
    1. Nature - sources of energy and raw materials.
    2. Government - printing of currency equal to the gross national product (GNP), and extension of currency in excess of GNP.
    3. Banking - loaning of money for interest, and extension (inflation/counterfeiting) of economic value through the deposit loan accounts.

Class #2 industries exist as producers of tangible or consumer (dissipated) products. This sort of activity is usually recognized and labeled by the public as "industry."

Class #3 industries are those which have service rather than a tangible product as their output. These industries are called (1) households, and (2) governments. Their output is human activity of a mechanical sort, and their basis is population.


Aggregation


The whole economic system can be represented by a three-industry model if one allows the names of the outputs to be (1) capital, (2) goods, and (3) services. The problem with this representation is that it would not show the influence, say, the textile industry on the ferrous metal industry. This is because both the textile industry and the ferrous metal industry would be contained within a single classification called the "goods industry" and by this process of combining or aggregating these two industries under one system block they would lose their economic individuality.


The E-Model

A national economy consists of simultaneous flows of production, distribution, consumption, and investment. If all of these elements including labor and human functions are assigned a numerical value in like units of measure, say, 1939 dollars, then this flow can be further represented by a current flow in an electronic circuit, and its behavior can be predicted and manipulated with useful precision.

The three ideal passive energy components of electronics, the capacitor, the resistor, and the inductor correspond to the three ideal passive energy components of economics called the pure industries of capital, goods, and services, respectively.

    * Economic capacitance represents the storage of capital in one form or another.
    * Economic conductance represents the level of conductance of materials for the production of goods.
    * Economic inductance represents the inertia of economic value in motion. This is a population phenomenon known as services.


Economic Inductance


An electrical inductor (e.g., a coil or wire) has an electric current as its primary phenomenon and a magnetic field as its secondary phenomenon (inertia). Corresponding to this, an economic inductor has a flow of economic value as its primary phenomenon and a population field as its secondary field phenomenon of inertia. When the flow of economic value (e.g., money) diminishes, the human population field collapses in order to keep the economic value (money) flowing (extreme case - war).

This public inertia is a result of consumer buying habits, expected standard of living, etc., and is generally a phenomenon of self-preservation.


Inductive Factors to Consider


    1. Population
    2. Magnitude of the economic activities of the government
    3. The method of financing these government activities (See Peter-Paul Principle - inflation of the currency.)


Translation


(a few examples will be given.)

    * Charge: coulombs; dollars (1939).
    * Flow/Current: amperes (coulombs per second); dollars of flow per year.
    * Motivating Force: volts; dollars (output) demand.
    * Conductance: amperes per volt; dollars of flow per year per dollar demand.
    * Capacitance: coulombs per volt; dollars of production inventory/stock per dollar demand.


Time Flow Relationships and Self-Destructive Oscillations


An ideal industry may be symbolized electronically in various ways. The simplest way is to represent a demand by a voltage and a supply by a current. When this is done, the relationship between the two becomes what is called an admittance, which can result from three economic factors: (1) foresight flow, (2) present flow, and (3) hindsight flow.

    1. Foresight flow is the result of that property of living entities to cause energy (food) to be stored for a period of low energy (e.g., a winter season). It consists of demands made upon an economic system for that period of low energy (winter season). In a production industry it takes several forms, one of which is known as production stock or inventory. In electronic symbology this specific industry demand (a pure capital industry) is represented by capacitance and the stock or resource is represented by a stored charge. Satisfaction of an industry demand suffers a lag because of the loading effect of inventory priorities.

    2. Present flow ideally involves no delays. It is, so to speak, input today for output today, a "hand to mouth" flow. In electronic symbology, this specific industry demand (a pure us industry) is represented by a conductance which is then a simple economic valve (a dissipative element).

    3. Hindsight flow is known as habit or inertia. In electronics this phenomenon is the characteristic of an inductor (economic analog = a pure service industry) in which a current flow (economic analog = flow of money) creates a magnetic field (economic analog = active human population) which, if the current (money flow) begins to diminish, collapse (war) to maintain the current (flow of money - energy).

Other large alternatives to war as economic inductors or economic flywheels are an open-ended social welfare program, or an enormous (but fruitful) open-ended space program.

The problem with stabilizing the economic system is that there is too much demand on account of (1) too much greed and (2) too much population.

This creates excessive economic inductance which can only be balanced with economic capacitance (true resources or value - e.g., in goods or services).

The social welfare program is nothing more than an open-ended credit balance system which creates a false capital industry to give nonproductive people a roof over their heads and food in their stomachs. This can be useful, however, because the recipients become state property in return for the "gift," a standing army for the elite. For he who pays the piper picks the tune.

Those who get hooked on the economic drug, must go to the elite for a fix. In this, the method of introducing large amounts of stabilizing capacitance is by borrowing on the future "credit" of the world. This is a fourth law of motion - onset, and consists of performing an action and leaving the system before the reflected reaction returns to the point of action - a delayed reaction.

The means of surviving the reaction is by changing the system before the reaction can return. By this means, politicians become more popular in their own time and the public pays later. In fact, the measure of such a politician is the delay time.

The same thing is achieved by a government by printing money beyond the limit of the gross national product, and economic process called inflation. This puts a large quantity of money into the hands of the public and maintains a balance against their greed, creates a false self-confidence in them and, for awhile, stays the wolf from the door.

They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor, and the politicians are the publicly hired hit men that justify the act to keep the responsibility and blood off the public conscience. (See section on consent factors and social-economic structuring.)

If the people really cared about their fellow man, they would control their appetites (greed, procreation, etc.) so that they would not have to operate on a credit or welfare social system which steals from the worker to satisfy the bum.

Since most of the general public will not exercise restraint, there are only two alternatives to reduce the economic inductance of the system.

    a.  Let the populace bludgeon each other to death in war, which will only result in a total destruction of the living earth.
    b. Take control of the world by the use of economic "silent weapons" in a form of "quiet warfare" and reduce the economic inductance of the world to a safe level by a process of benevolent slavery and genocide.

The latter option has been taken as the obviously better option. At this point it should be crystal clear to the reader why absolute secrecy about the silent weapons is necessary. The general public refuses to improve its own mentality and its faith in its fellow man. It has become a herd of proliferating barbarians, and, so to speak, a blight upon the face of the earth.

They do not care enough about economic science to learn why they have not been able to avoid war despite religious morality, and their religious or self-gratifying refusal to deal with earthly problems renders the solution of the earthly problem unreachable to them.

It is left to those few who are truly willing to think and survive as the fittest to survive, to solve the problem for themselves as the few who really care. Otherwise, exposure of the silent weapon would destroy our only hope of preserving the seed of the future true humanity.


Industry Equivalent Circuits


The industry 'Q' can be given a block symbol as follows:
Block Diagram of Industry 'Q'

Terminals #1 through #m are connected directly to the outputs of industries #1 and #m, respectively.

The equivalent circuit of industry 'Q' is given as follows:
Equivalent of 'Q'
Characteristics:
All inputs are at zero volts.
A - Amplifier - causes output current IQ to be represented by a voltage EQ.
Amplifier delivers sufficient current at EQ to drive all loads Y10 through YmQ and sink all currents i1Q through imQ.

The unit transconductance amplifier AQ is constructed as follows:
Transconductance amplifier

* Arrow denotes the direction of the flow of capital, goods, and services. The total demand is given as EQ, where EQ=IQ.

The coupling network YPQ symbolizes the demand which industry Q makes on industry P. the connective admittance YPQ is called the 'technical coefficient' of the industry Q statingthe demand of industry Q, called the industry of use, for the output in capital, goods, or services of industry P called the industry of origin.

The flow of commodities from industry P to industry Q is given by iPQ evaluated by the formula:
iPQ = YPQ* EQ

When the admittance YPQ is a simple conductance, this formula takes on the common appearance of Ohm's Law,

iPQ = gPQ* IQ

The interconnection of a three industry system can be diagrammed as follows. The blocks of the industry diagram can be opened up revealing the technical coefficients, and a much simpler format. The equations of flow are given as follows:

Stages of Schematic Simplification


Generalization

All of this may now be summarized.
Let Ij represent the output of industry j, and
ijk, the amount of the product of industry j absorbed annually by industry k, and
ijo, the amount of the same product j made available for 'outside' use.
Then

Substituting the technical coefficiences, yjk
which is the general equation of every admittance in the industry circuit.


Final Bill of Goods

is called the final bill of goods or the bill of final demand, and is zero when the system can be closed by the evaluation of the technical coefficients of the 'non-productive' industries, government and households. Households may be regarded as a productive industry with labor as its output product.


The Technical Coefficients


The quantities yjk are called the technical coefficients of the industrial system. They are admittances and can consist of any combination of three passive parameters, conductance, capacitance, and inductance. Diodes are used to make the flow unidirectional and point against the flow.
gjk = economic conductance, absorption coefficient
yjk = economic capacitance, capital coefficient
Ljk = economic inductance, human activity coefficient


Types of Admittances

admittance schematic

The Household Industry

The industries of finance (banking), manufacturing, and government, real counterparts of the pure industries of capital, goods, and services, are easily defined because they are generally logically structured. Because of this their processes can be described mathematically and their technical coefficients can be easily deduced. This, however, is not the case with the service industry known as the household industry.


Household Models

When the industry flow diagram is represented by a 2-block system of households on the right and all other industries on the left, the following results:
The arrows from left to right labeled A, B, C, etc., denote flow of economic value from the industries in the left hand block to the industry in the right hand block called 'households'. These may be thought of as the monthly consumer flows of the following commodities. A - alcoholic beverages, B - beef, C - coffee, . . . . , U - unknown, etc. . .

The problem which a theoretical economist faces is that the consumer preferences of any household is not easily predictable and the technical coefficients of any one household tend to be a nonlinear, very complex, and variable function of income, prices, etc.

Computer information derived from the use of the universal product code in conjuction with credit-card purchase as an individual household identifier could change this state of affairs, but the U.P.C. method is not yet available on a national or even a significant regional scale. To compensate for this data deficiency, an alternate indirect approach of analysis has been adopted known as economic shock testing. This method, widely used in the aircraft manufacturing industry, develops an aggregate statistical sort of data.

Applied to economics, this means that all of the households in one region or in the whole nation are studied as a group or class rather than individually, and the mass behavior rather than the individual behavior is used to discover useful estimates of the technical coefficients governing the economic structure of the hypothetical single-household industry.

Notice in the industry flow diagram that the values for the flows A, B, C, etc. are accessible to measurement in terms of selling prices and total sales of commodities.

One method of evaluating the technical coefficients of the household industry depends upon shocking the prices of a commodity and noting the changes in the sales of all of the commodities.


Economic Shock Testing

In recent times, the application of Operations Research to the study of the public economy has been obvious for anyone who understands the principles of shock testing.

In the shock testing of an aircraft airframe, the recoil impulse of firing a gun mounted on that airframe causes shock waves in that structure which tell aviation engineers the conditions under which some parts of the airplane or the whole airplane or its wings will start to vibrate or flutter like a guitar string, a flute reed, or a tuning fork, and disintegrate or fall apart in flight.

Economic engineers achieve the same result in studying the behavior of the economy and the consumer public by carefully selecting a staple commodity such as beef, coffee, gasoline, or sugar, and then causing a sudden change or shock in its price or availability, thus kicking everybody's budget and buying habits out of shape.

They then observe the shock waves which result by monitoring the changes in advertising, prices, and sales of that and other commodities.

The objective of such studies is to acquire the know-how to set the public economy into a predictable state of motion or change, even a controlled self-destructive state of motion which will convince the public that certain "expert" people should take control of the money system and reestablish security (rather than liberty and justice) for all. When the subject citizens are rendered unable to control their financial affairs, they, of course, become totally enslaved, a source of cheap labor.

Not only the prices of commodities, but also the availability of labor can be used as the means of shock testing. Labor strikes deliver excellent tests shocks to an economy, especially in the critical service areas of trucking (transportation), communication, public utilities (energy, water, garbage collection), etc.

By shock testing, it is found that there is a direct relationship between the availability of money flowing in an economy and the real psychological outlook and response of masses of people dependent upon that availability.

For example, there is a measurable quantitative relationship between the price of gasoline and the probability that a person would experience a headache, feel a need to watch a violent movie, smoke a cigarette, or go to a tavern for a mug of beer.

It is most interesting that, by observing and measuring the economic models by which the public tries to run from their problems and escape from reality, and by applying the mathematical theory of Operations Research, it is possible to program computers to predict the most probable combination of created events (shocks) which will bring about a complete control and subjugation of the public through a subversion of the public economy (by shaking the plum tree).


Introduction to the Theory of Economic Shock Testing

Let the prices and total sales of commodities be given and symbolized as follows:
Let us assume a simple economic model in which the total number of important (staple) commodities are represented as beef, gasoline, and an aggregate of all other staple commodities which we will call the hypothetical miscellaneous staple commodity 'M' (e.g., M is an aggregate of C, S, T, U, etc.).


Example of Shock Testing

Assume that the total sales, P, of petroleum products can be described by the linear function of the quantities B, G, and M, which are functions of the prices of those respective commodities.

P = aPG B + aPG G + aPM M

Then where B, G, and M are functions of the prices of beeM affect the sales, P, of petroleum products. We are assuming that B, G, and M are variables independent of each other.

If the availability or price of gasoline is suddenly changed, then G must be replaced by G + G. This causes a change in the petroleum sales from P to P + P. Also we will assume that B and M remain constant when G changes to G + G.

(P + P) = aPB B + aPG (G + G) + aPMM.

Expanding upon this expression, we get

P + P = aPB B + aPG G + aPG G + aPM M

and subtracting the original value of P we get for the change in P

Change in P = P = aPG G

Dividing by G we get

aPG = P / G .

This is a rate of change in P due only to an isolated change in G, G.

In general, ajk is the partial rate of change in the sales effect j due to a change in the causal price function of commodity k. If the interval of time were infinitesimal, this expression would be reduced to the definition of the total differential of a function, P.
When the price of gasoline is shocked, all of the coefficients with round G (2G) in the denominator are evaluated at the same time. If B, G, and M were independent, and sufficient for description of the economy, then three shock tests would be necessary to evaluate the system.

There are other factors which may be represented the same way.

For example, the tendency of a docile sub-nation to withdraw under economic pressure may be given by
where G is the price of gasoline, WP is the dollars spent per unit time (referenced to say 1939) for war production during 'peace' time, etc. These quantities are presented to a computer in matrix format as follows:
Finally, inverting this matrix, i.e., solving for the Xk terms of the Yj, we get, say,

[bkj] [Yj ] = [Xk]

This is the result into which we substitute to get that set of conditions of prices of commodities, bad news on TV, etc., which will deliver a collapse of public morale ripe for take over.

Once the economic price and sales coefficients ajk and bkj are determined, they may be translated into the technical supply and demand coefficients gjk, Cjk, and 1/Ljk.

Shock testing of a given commodity is then repeated to get the time rate of change of these technical coefficients.


Introduction to Economic Amplifiers

Economic amplifiers are the active components of economic engineering. The basic characteristic of any amplifier (mechanical, electrical, or economic) is that it receives an input control signal and delivers energy from an independent energy source to a specified output terminal in a predictable relationship to that input control signal.

The simplest form of an economic amplifier is a device called advertising.

If a person is spoken to by a T.V. advertiser as if he were a twelve-year-old, then, due to suggestibility, he will, with a certain probability, respond or react to that suggestion with the uncritical response of a twelve-year-old and will reach into his economic reservoir and deliver its energy to but that product on impulse when he passes it in the store.

An economic amplifier may have several inputs and output. Its response might be instantaneous or delayed. Its circuit symbol might be a rotary switch if its options are exclusive, qualitative, "go" or "no-go", or it might have its parametric input/output relationships specified by a matrix with internal energy sources represented.

Whatever its form might be, its purpose is to govern the flow of energy from a source to an output sink in direct relationship to an input control signal. For this reason, it is called an active circuit element or component.

Economic Amplifiers fall into classes called strategies, and, in comparison with electronic amplifiers, the specific internal functions of an economic amplifier are called logistical instead of electrical.

Therefore, economic amplifiers not only deliver power gain but also, in effect, are used to cause changes in the economic circuitry.

In the design of an economic amplifier we must have some idea of at least five functions, which are:

    (1) the available input signals
    (2) the desired output-control objectives,
    (3) the strategic objective,
    (4) the available economic power sources,
    (5) the logistical options.

The process of defining and evaluating these factors and incorporating the economic amplifier into an economic system has been popularly called game theory.

The design of an economic amplifier begins with a specification of the power level of the output, which can range from personal to national. The second condition is accuracy of response, i.e., how accurately the output action is a function of the input commands. High gain combined with strong feedback helps to deliver the required precision.

Most of the error will be in the input data signal. Personal input data tends to be specified, while national input data tends to be statistical.


Short List of Inputs

Questions to be answered:
    * what
    * where
    * why
    * when
    * how
    * who

General sources of information:
    * telephone taps
    * analysis of garbage
    * surveillance
    * behavior of children in school

Standard of living by:
    * food
    * shelter
    * clothing
    * transportation

Social contacts:

    * telephone - itemized record of calls
    * family - marriage certificates, birth certificates, etc.
    * friends, associates, etc
    * memberships in organizations
    * political affiliation

The Personal Paper Trail

Personal buying habits, i.e., personal consumer preferences:

    * checking accounts
    * credit-card purchases
    * "tagged" credit-card purchases - the credit-card purchase of products bearing the U.P.C. (Universal Product Code)

Assets:
    * checking accounts
    * savings accounts
    * real estate business
    * automobile, etc.
    * safety deposit at bank
    * stock market

Liabilities:
    * creditors
    * enemies (see - legal)
    * loans

Government sources (ploys)** * Welfare
    * Social Security
    * U.S.D.A. surplus
    * food doles grants
    * subsidies * Principle of this ploy -- the citizen will almost always make the collection of information easy if he can operate on the "free sandwich principle" of "eat now, and pay later."

Government sources (via intimidation):
    * Internal Revenue Service
    * OSHA
    * Census
    * etc.

Other government sources -- surveillance of U.S. mail.

Habit Patterns -- Programming

Strengths and weaknesses:
    * activities (sports, hobbies, etc.)
    * see "legal" (fear, anger, etc. -- crime record)
    * hospital records (drug sensitivities, reaction to pain, etc.)
    * psychiatric records (fears, angers, disgusts, adaptability, reactions to stimuli, violence, suggestibility or hypnosis, pain, pleasure, love, and sex)

Methods of coping -- of adaptability -- behavior:
    * consumption of alcohol
    * consumption of drugs
    * entertainment
    * religious factors influencing behavior
    * other methods of escaping from reality

Payment modus operandi (MO) -- pay on time, etc.:
    * payment of telephone bills
    * energy purchases
    * water purchases
    * repayment of loans
    * house payments
    * automobile payments
    * payments on credit cards

Political sensitivity:
    * beliefs
     * contacts
    * position
    * strengths/weaknesses
    * projects/activities

Legal inputs -- behavioral control (Excuses for investigation, search, arrest, or employment of force to modify behavior):
    * court records
    * police records -- NCIC
    * driving record
    * reports made to police
    * insurance information
    * anti-establishment acquaintances

National Input Information

Business sources (via I.R.S., etc):
    * prices of commodities
    * sales
    * investments in
    * stocks/inventory
    * production tools and machinery
    * buildings and improvements
    * the stock market

Banks and credit bureaus:
    * credit information
    * payment information

Miscellaneous sources:
    * polls and surveys
    * publications
    * telephone records
    * energy and utility purchases


Short List of Outputs

Outputs -- create controlled situations -- manipulation of the economy, hence society -- control by control of compensation and income.

Sequence:
    1.   allocates opportunities.
    2.   destroys opportunities.
    3.   controls the economic environment.
    4.   controls the availability of raw materials.
    5.   controls capital.
    6.   controls bank rates.
    7.   controls the inflation of the currency.
    8.   controls the possession of property.
    9.   controls industrial capacity.
    10. controls manufacturing.
    11. controls the availability of goods
    12. controls the prices of commodities.
    13. controls services, the labor force, etc.
    14. controls payments to government officials.
    15. controls the legal functions.
    16. controls the personal data files - uncorrectable by the party slandered.
    17. controls advertising.
    18. controls media contact.
    19. controls material available for T.V. viewing
    20. disengages attention from real issues.
    21. engages emotions.
    22. creates disorder, chaos, and insanity.
    23. controls design of more probing tax forms.
    24. controls surveillance.
    25. controls the storage of information.
    26. develops psychological analyses and profiles of individuals.
    27. controls legal functions [repeat of 15]
    28. controls sociological factors
    29. controls health options.
    30. preys on weakness.
    31. cripples strengths.
    32. leaches wealth and substance.


Table of Strategies


Diversion, the Primary Strategy


Experience has prevent that the simplest method of securing a silent weapon and gaining control of the public is to keep the public undisciplined and ignorant of the basic system principles on the one hand, while keeping them confused, disorganized, and distracted with matters of no real importance on the other hand.

This is achieved by:

* disengaging their minds; sabotaging their mental activities; providing a low-quality program of public education in mathematics, logic, systems design and economics; and discouraging technical creativity.
* engaging their emotions, increasing their self-indulgence and their indulgence in emotional and physical activities, by: * unrelenting emotional affrontations and attacks (mental and emotional rape) by way of constant barrage of sex, violence, and wars in the media - especially the T.V. and the newspapers. * giving them what they desire - in excess - "junk food for thought" - and depriving them of what they really need.

* rewriting history and law and subjecting the public to the deviant creation, thus being able to shift their thinking from personal needs to highly fabricated outside priorities.

These preclude their interest in and discovery of the silent weapons of social automation technology.

The general rule is that there is a profit in confusion; the more confusion, the more profit. Therefore, the best approach is to create problems and then offer solutions.


Diversion Summary


Media: Keep the adult public attention diverted away from the real social issues, and captivated by matters of no real importance.

Schools: Keep the young public ignorant of real mathematics, real economics, real law, and real history.

Entertainment: Keep the public entertainment below a sixth-grade level.

Work: Keep the public busy, busy, busy, with no time to think; back on the farm with the other animals.




A silent weapon system operates upon data obtained from a docile public by legal (but not always lawful) force. Much information is made available to silent weapon systems programmers through the Internal Revenue Service. (See Studies in the Structure of the American Economy for an I.R.S. source list.)

This information consists of the enforced delivery of well-organized data contained in federal and state tax forms, collected, assembled, and submitted by slave labor provided by taxpayers and employers.

Furthermore, the number of such forms submitted to the I.R.S. is a useful indicator of public consent, an important factor in strategic decision making. Other data sources are given in the Short List of Inputs.

Consent Coefficients - numerical feedback indicating victory status. Psychological basis: When the government is able to collect tax and seize private property without just compensation, it is an indication that the public is ripe for surrender and is consenting to enslavement and legal encroachment. A good and easily quantified indicator of harvest time is the number of public citizens who pay income tax despite an obvious lack of reciprocal or honest service from the government.


Amplification Energy Sources


The next step in the process of designing an economic amplifier is discovering the energy sources. The energy sources which support any primitive economic system are, of course, a supply of raw materials, and the consent of the people to labor and consequently assume a certain rank, position, level, or class in the social structure, i.e., to provide labor at various levels in the pecking order.

Each class, in guaranteeing its own level of income, controls the class immediately below it, hence preserves the class structure. This provides stability and security, but also government from the top.

As time goes on and communication and education improve, the lower-class elements of the social labor structure become knowledgeable and envious of the good things that the upper-class members have. They also begin to attain a knowledge of energy systems and the ability to enforce their rise through the class structure.

This threatens the sovereignty of the elite.

If this rise of the lower classes can be postponed long enough, the elite can achieve energy dominance, and labor by consent no longer will hold a position of an essential energy source.

Until such energy dominance is absolutely established, the consent of people to labor and let others handle their affairs must be taken into consideration, since failure to do so could cause the people to interfere in the final transfer of energy sources to the control of the elite.

It is essential to recognize that at this time, public consent is still an essential key to the release of energy in the process of economic amplification.

Therefore, consent as an energy release mechanism will now be considered.


Logistics


The successful application of a strategy requires a careful study of inputs, outputs, the strategy connecting the inputs and the outputs, and the available energy sources to fuel the strategy. This study is called logistics.

A logistical problem is studied at the elementary level first, and then levels of greater complexity are studied as a synthesis of elementary factors.

This means that a given system is analyzed, i.e., broken down into its subsystems, and these in turn are analyzed, until by this process, one arrives at the logistical "atom," the individual.

This is where the process of synthesis propery begins, at the time of birth of the individual.


The Artificial Womb


From the time a person leaves its mother's womb, its every effort is directed towards building, maintaining, and withdrawing into artificial wombs, various sorts of substitute protective devices or shells

. The objective of these artificial wombs is to provide a stable environment for both stable and unstable activity; to provide a shelter for the evolutionary processes of growth and maturity - i.e., survival; to provide security for freedom and to provide defensive protection for offensive activity.

This is equally true of both the general public and the elite. However, there is a definite difference in the way each of these classes go about the solution of problems.


The Political Structure of a Nation - Dependency


The primary reason why the individual citizens of a country create a political structure is a subconscious wish or desire to perpetuate their own dependency relationship of childhood. Simply put, they want a human god to eliminate all risk from their life, pat them on the head, kiss their bruises, put a chicken on every dinner table, clothe their bodies, tuck them into bed at night, and tell them that everything will be alright when they wake up in the morning.

This public demand is incredible, so the human god, the politician, meets incredibility with incredibility by promising the world and delivering nothing. So who is the bigger liar? the public? or the "godfather"?

This public behavior is surrender born of fear, laziness, and expediency. It is the basis of the welfare state as a strategic weapon, useful against a disgusting public.


Action/Offense


Most people want to be able to subdue and/or kill other human beings which disturb their daily lives, but they do not want to have to cope with the moral and religious issues which such an overt act on their part might raise. Therefore, they assign the dirty work to others (including their own children) so as to keep the blood off their hands. They rave about the humane treatment of animals and then sit down to a delicious hamburger from a whitewashed slaughterhouse down the street and out of sight. But even more hypocritical, they pay taxes to finance a professional association of hit men collectively called politicians, and then complain about corruption in government.


Responsibility


Again, most people want to be free to do the things (to explore, etc.) but they are afraid to fail.

The fear of failure is manifested in irresponsibility, and especially in delegating those personal responsibilities to others where success is uncertain or carries possible or created liabilities (law) which the person is not prepared to accept. They want authority (root word - "author"), but they will not accept responsibility or liability. So they hire politicians to face reality for them.


Summary 2


The people hire the politicians so that the people can:
1. obtain security without managing it.
2. obtain action without thinking about it.
3. inflict theft, injury, and death upon others without having to contemplate either life or death.
4. avoid responsibility for their own intentions.
5. obtain the benefits of reality and science without exerting themselves in the discipline of facing or learning either of these things.

They give the politicians the power to create and manage a war machine to:
1. provide for the survival of the nation/womb.
2. prevent encroachment of anything upon the nation/womb.
3. destroy the enemy who threatens the nation/womb.
4. destroy those citizens of their own country who do not conform for the sake of stability of the nation/womb.

Politicians hold many quasi-military jobs, the lowest being the police which are soldiers, the attorneys and C.P.A.s next who are spies and saboteurs (licensed), and the judges who shout orders and run the closed union military shop for whatever the market will bear. The generals are industrialists. The "presidential" level of commander-in-chief is shared by the international bankers.

The people know that they have created this farce and financed it with their own taxes (consent), but they would rather knuckle under than be the hypocrite.

Thus, a nation becomes divided into two very distinct parts, a docile sub-nation [great silent majority] and a political sub-nation. The political sub-nation remains attached to the docile sub-nation, tolerates it, and leaches its substance until it grows strong enough to detach itself and then devour its parent.


Systems Analysis


In order to make meaningful computerized economic decisions about war, the primary economic flywheel, it is necessary to assign concrete logistical values to each element of the war structure - personnel and material alike.

This process begins with a clear and candid description of the subsystems of such a structure.
The Draft (As Military Service)


Few efforts of human behavior modification are more remarkable or more effective than that of the socio-military institution known as the draft. A primary purpose of a draft or other such institution is to instill, by intimidation, in the young males of a society the uncritical conviction that the government is omnipotent. He is soon taught that a prayer is slow to reverse what a bullet can do in an instant. Thus, a man trained in a religious environment for eighteen years of his life can, by this instrument of the government, be broken down, be purged of his fantasies and delusions in a matter of mere months. Once that conviction is instilled, all else becomes easy to instill.

Even more interesting is the process by which a young man's parents, who purportedly love him, can be induced to send him off to war to his death. Although the scope of this work will not allow this matter to be expanded in full detail, nevertheless, a coarse overview will be possible and can serve to reveal those factors which must be included in some numerical form in a computer analysis of social and war systems.

We begin with a tentative definition of the draft.
"The draft (selective service, etc.) is an institution of compulsory collective sacrifice and slavery, devised by the middle-aged and elderly for the purpose of pressing the young into doing the public dirty work. It further serves to make the youth as guilty as the elders, thus making criticism of the elders by the youth less likely (Generational Stabilizer). It is marketed and and sold to the public under the label of "patriotic = national" service."
Once a candid economic definition of the draft is achieved, that definition is used to outline the boundaries of a structure called a Human Value System, which in turn is translated into the terms of game theory. The value of such a slave laborer is given in a Table of Human Values, a table broken down into categories by intellect, experience, post-service job demand, etc.

Some of these categories are ordinary and can be tentatively evaluated in terms of the value of certain jobs for which a known fee exists. Some jobs are harder to value because they are unique to the demands of social subversion, for an extreme example: the value of a mother's instruction to her daughter, causing that daughter to put certain behavioral demands upon a future husband ten or fifteen years hence; thus, by suppressing his resistance to a perversion of a government, making it easier for a banking cartel to buy the State of New York in, say, twenty years.

Such a problem leans heavily upon the observations and data of wartime espionage and many types of psychological testing. But crude mathematical models (algorithms, etc.) can be devised, if not to predict, at least to predeterminate these events with maximum certainty. What does not exist by natural cooperation is thus enhanced by calculated compulsion. Human beings are machines, levers which may be grasped and turned, and there is little real difference between automating a society and automating a shoe factory.

These derived values are variable. (It is necessary to use a current Table of Human Values for computer analysis.) These values are given in true measure rather than U.S. dollars, since the latter is unstable, being presently inflated beyond the production of national goods and services so as to give the economy a false kinetic energy ("paper" inductance).

The silver value is stable, it being possible to buy the same amount with a gram of silver today as it could be bought in 1920. Human value measured in silver units changes slightly due to changes in production technology.


Enforcement


Factor I

As in every social system approach, stability is achieved only by understanding and accounting for human nature (action/reaction patterns). A failure to do so can be, and usually is, disastrous.

As in other human social schemes, one form or another of intimidation (or incentive) is essential to the success of the draft. Physical principles of action and reaction must be applied to both internal and external subsystems.

To secure the draft, individual brainwashing/programming and both the family unit and the peer group must be engaged and brought under control.

Factor II - Father

The man of the household must be housebroken to ensure that junior will grow up with the right social training and attitudes. The advertising media, etc., are engaged to see to it that father-to-be is pussy-whipped before or by the time he is married. He is taught that he either conforms to the social notch cut out for him or his sex life will be hobbled and his tender companionship will be zero. He is made to see that women demand security more than logical, principled, or honorable behavior. By the time his son must go to war, father (with jelly for a backbone) will slam a gun into junior's hand before father will risk the censure of his peers, or make a hypocrite of himself by crossing the investment he has in his own personal opinion or self-esteem. Junior will go to war or father will be embarrassed. So junior will go to war, the true purpose not withstanding.

Factor III - Mother

The female element of human society is ruled by emotion first and logic second. In the battle between logic and imagination, imagination always wins, fantasy prevails, maternal instinct dominates so that the child comes first and the future comes second. A woman with a newborn baby is too starry-eyed to see a wealthy man's cannon fodder or a cheap source of slave labor. A woman must, however, be conditioned to accept the transition to "reality" when it comes, or sooner.

As the transition becomes more difficult to manage, the family unit must be carefully disintegrated, and state-controlled public education and state-operated child-care centers must be become more common and legally enforced so as to begin the detachment of the child from the mother and father at an earlier age. Inoculation of behavioral drugs [Ritalin] can speed the transition for the child (mandatory). Caution: A woman's impulsive anger can override her fear. An irate woman's power must never be underestimated, and her power over a pussy-whipped husband must likewise never be underestimated. It got women the vote in 1920.

Factor IV - Junior

The emotional pressure for self-preservation during the time of war and the self-serving attitude of the common herd that have an option to avoid the battlefield - if junior can be persuaded to go - is all of the pressure finally necessary to propel Johnny off to war. Their quiet blackmailings of him are the threats: "No sacrifice, no friends; no glory, no girlfriends."

Factor V - Sister

And what about junior's sister? She is given all the good things of life by her father, and taught to expect the same from her future husband regardless of the price.

Factor VI - Cattle Those who will not use their brains are no better off than those who have no brains, and so this mindless school of jelly-fish, father, mother, son, and daughter, become useful beasts of burden or trainers of the same. This concludes what is available of this document.

THE END