Category Archives: Technology

Artificial Intelligence, Business, Digital Economy, Technology

The next casualty of the Iran War has arrived

GLOBAL DIGITAL ECONOMY

Intro: The Iran War has led to shortage of helium, vital for AI but also for many of Britain’s smaller businesses. If the Strait of Hormuz blockade continues, a chip shortage could well be on the cards

The world has lost 40pc of its helium supply since the start of the latest war in the Gulf, first from Qatar and then from Russia.

We will soon find out whether the global digital economy can shrug off losses of such a critical gas on this scale and whether our political leaders will allow the AI boom to keep gobbling up an ever-greater share.

Industry cannot make advanced AI chips or semiconductors below 10 nanometres without ultra-high purity helium to cool the wafers and stabilise the plasma for etching. Even workhorse chips for cars and computers require lower-grade helium at 99.999pc purity.

But we also need helium for other high priorities: in nuclear power, advanced weaponry, aerospace, fibre-optic cables, quantum computing, chromatography, or to cool superconducting magnets in MRI machines. There are no easy substitutes. Liquid helium is the coldest known substance on Earth, with a boiling point of -269°C. Hence, why everybody is scrambling around trying to scoop up whatever they can find in the world.

It cannot be synthesised artificially – it comes from the radioactive decay of thorium and uranium – and is hard to store. China has strategic stockpiles of everything but not for this one vital input.

Helium is a small cost for digital behemoths with the deepest pockets, relying on “fabs” or foundries that cost $20bn (£15bn) a shot. Wafer fabs are not going to close, so with supply shortages, the larger conglomerates will be prepared to pay more than anybody else.

Another insidious process is at work. The semiconductor industry is in effect hoarding its scarce supply for the most lucrative AI fabs while rationing helium for routine “mature-node” chips that play a far bigger role in the day-to-day economy.

Triaging has taken hold. The industry reserves what they have for AI accelerators, high-bandwidth memory, and advanced logic chips for data centres.

There is less left for chips in cars, laptops, and the consumer electronics that we all rely on. Everybody is talking about petrol prices but nobody is talking about helium.

The fear is that there could be a repeat of the chip shortage that shut down European car factories during the pandemic. A Covid lockdown at a plant in Malaysia caused crippling losses on the other side of the globe. If a semiconductor factory anywhere in the world says that it won’t be able to supply more chips, then implicitly, the car industry is going to have big problems in the third and fourth quarters.

Qatar normally supplies a third of the world’s helium, a by-product of natural gas production at its giant North Field. Not a single shipment has moved through the Strait of Hormuz since the war began.

Some 200 cryogenic containers are stranded in the Persian Gulf and are slowly heating up, causing gas to leak out through the pressure valves to avert a lethal explosion.

Vladimir Putin has compounded the shortage by imposing what amounts to a ban on helium exports outside the Eurasian Economic Union, purportedly to secure supply for Russia’s domestic economy and fibre-optic industry. This endangers another 9pc until the end of 2027.

For once, it is China that is taking the immediate brunt of the supply chain shock. It produces barely 15pc of its own helium needs. All the rest comes from Qatar and Russia.

America is sitting pretty in one sense. It is the world’s biggest helium producer with two-fifths of the market.

But that does not shield the US from the larger supply-chain consequences any more than US oil supremacy spares it from rising crude prices and mounting shortages of jet fuel and diesel, leaving aside fertilisers, sulphur, and aluminium.

The US subcontracts most of its chip production to Asia. Its share of global semiconductor output has collapsed to 10pc from 37pc in the 1990s. It will be years before the US chips act and manufacturing rearmament turn this around.

More than 75pc of the world’s semiconductors are made in the Far East. Nvidia either makes or finishes all of its most advanced Blackwell chips at TSMC plants in Taiwan, while Samsung makes high-bandwidth AI chips for Google in South Korea. Both countries normally rely on Qatar for two-thirds of their helium.

Large volumes of workhorse chips for just about everything else are made in Vietnam, Malaysia and Thailand, often at arms-length operations for China.

Analysts say the world had plenty of helium before the war broke out and can probably cover half the loss from Qatar at a pinch.

The industry has an informal system for allocating scarce supply to the most critical needs. The top of the food chain are MRI machines, chip manufacturing, aerospace, and nuclear power. At the bottom end are things like welding. There is no doubt that some people are going to get badly hurt.

One thing we should have learnt from Covid is that once the world’s just-in-time (J-I-T) supply chain goes into convulsions, with ships scattered to the four winds and stuck in the wrong place, the effects can be drastic, long-lasting, and out of all proportion to the nominal value of the goods.

If the war drags on for a few more weeks – as it may do so since both Donald Trump and Iran’s Revolutionary Guards think they are winning – there are only two solutions. Either the market destroys demand in its own ruthless way or governments step in with emergency measures and make hard choices, something that Britain seems incapable of under Sir Keir Starmer.

For aviation fuel, diesel, or naphtha, it may mean a taste of wartime rationing. For helium, it may soon be a question of whether liberal democracies allow billionaire tech giants to outbid everybody and hoard scarce gas for unpopular AI expansion.

Do politicians finally face down the hyper-scalers and redirect helium supplies to the urgent priorities of military and energy rearmament, as well as to sustain routine sectors that employ infinitely more people?

Just days ago, Marco Rubio, the US secretary of state, more or less, admitted that Iran’s regime now has enormous power to do harm and that Washington has no coherent plan to restore the status quo ante, let alone to reach a better outcome that vindicates the war. “The Strait of Hormuz is basically an economic nuclear weapon that they’re trying to use against the world,” he said.

But what is to be done about it?

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Artificial Intelligence, Arts, Intellectual Property, Publishing, Technology

Authors should be protected over big tech

COPYRIGHT LAWS AND AI

Intro: Creative artists and writers are voicing their anger at AI theft of their work with ‘Human Authored’ logos and an empty book. The government must listen

DURING last week’s London Book Fair, The Society of Authors stamped its books with “Human Authored” logos, in scenes that might have come from a dystopian novel. They described its labelling scheme as “an important sticking plaster to protect and promote human creativity in lieu of AI labelled content in the marketplace”.

Entrants to the fair were also given copies of Don’t Steal This Book, an anthology of some 10,000 writers including Nobel laureate Kazuo Ishiguro, Malorie Blackman, Jeanette Winterson, and Richard Osman. The pages of the book are completely blank, but the back cover states: “The UK government must not legalise book theft to benefit AI companies.” The message is clear and simple: writers have had enough.

The book fair arrived before the government is due to deliver its progress report on AI and copyright, after proposals for a relaxation of existing laws caused outrage last year. Philippa Gregory, the novelist, described the plans for an “opt-out” policy, which puts the onus on writers to refuse permission for their work to be trawled, as akin to putting a sign on your front door asking burglars to pass by.

– 10,000 authors publish an empty book to protest against the theft of books by tech companies to train AI models

According to a University of Cambridge study last autumn, almost 60% of published authors believe their work has been used to train large language models without consent or reimbursement. And nearly 40% said their income had already fallen as a result of generative AI or machine-made novels, a digital incarnation of Orwell’s Versificator in Nineteen Eighty-Four.

Factual books are clearly most susceptible to ChatGPT and other AI generative tools. While sales in fiction are rising, sales of nonfiction were down 6% last year compared with 2024. But three nonfiction books, all by female authors, bucked the trend: Nobody’s Girl, Virginia Giuffre’s posthumous memoir of abuse; A Hymn to Life, Gisèle Pel icot’s testimony and account of her ordeal at the hands of her ex-husband; and Careless People, Sarah Wynn-Williams’s exposé of working at Facebook. The success of these first-person narrations show the powerful reach of nonfiction beyond the world of publishing. These are painfully human stories; readers must be able to trust in the authenticity of their voices.

Last year, novelist Sarah Hall requested that her publisher Faber, print a “Human Written” stamp on her latest book, Helm. “AI might mimic the words more rapidly, but . . . it hasn’t bled on the page,” she said. “And it doesn’t have a family to support.”

Writers’ livelihoods must not be sacrificed to the promise of economic growth. The UK’s creative industries contributed £124bn to the UK economy in 2023, of which £11bn came from publishing. The Society of Authors is requesting consent and fair payment for use of work, and transparency as to how a book was “written”. These are hardly radical propositions. But in an era of fake news and AI slop, they are sadly necessary. Writers and creative artists need more than sticking plasters. They need robust legislation.

A House of Lords report recently published lays out two possible futures: one in which the UK “becomes a world-leading home for responsible, legalised artificial intelligence (AI) development” and another in which it continues “to drift towards tacit acceptance of large-scale, unlicensed use of creative content”. One scenario protects UK artists, the other benefits global tech companies. To avoid a world of empty content, the choice is clear.

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Britain, Digital Economy, Financial Markets, Society, Technology, United States

A digital payments system is undermined by cryptos crash

DIGITAL CURRENCIES

Intro: Digital payments systems are taking hold in China and America, and the eurozone is chasing hard to set one up. The Bank of England’s lack of enthusiasm for a digital pound is a blessing in disguise

China already has one, and envious of the near monopoly American companies enjoy in European digital payments systems, the eurozone is chasing hard in setting one up.

Trump’s America has made it illegal for the Federal Reserve to pursue such a project, and instead has set its sights on privately sponsored stablecoins.

We’re talking here about so-called central bank digital currencies (CBDC) – in effect, digital versions of physical cash.

On this issue, the UK and the Bank of England stand pretty much nowhere. It might surprise you to learn that’s faintly reassuring. Digital money is not an issue to set the pulse racing, but what is amazing is how people are so exercised by it.

A Bank of England consultation on proposals for a digital pound provoked an unprecedented tidal wave of more than 50,000 responses, overwhelmingly negative in nature.

It wasn’t just issues over privacy posed by a digital currency that many respondents seemed to be upset about. Nor was it the complex and costly logistical problems in providing universal access to central bank money.

Still less was it the threat that a digital pound would pose to the future of fractional reserve banking.

Rather, it was the creeping encroachment on physical cash that people feared most.

Plain and simple, people still like the idea of notes and coins, even if they hardly ever use them.

No decision has yet formally been taken on whether to establish a digital pound, but the sense is that any appetite the Bank of England might once have had for such an enterprise has all but disappeared.

Nor does the Bank appear to be that eager on the supposed alternative of sterling-based stablecoins. Its proposed framework for regulating stablecoins has gone down in the industry like a lead balloon, and although the Bank has rowed back on some of the regime’s more costly features, is still widely thought of as too demanding to allow for the creation of a significant stablecoin presence.

George Osborne, a former UK chancellor, has claimed that Britain is in danger of being left behind in a payments revolution which is taking the rest of the world by storm.

But then, he would say that, wouldn’t he? Among a seemingly ever-widening portfolio of positions enjoyed by Osborne, he is an adviser to the US-based crypto exchange, Coinbase, which has a powerful vested interest in as lightly a regulated stablecoin environment as possible. Since Osborne went public with his concerns, Bitcoin and much of the crypto universe has crashed, and many so-called stablecoins – theoretically backed by the real-world, ultra safe, fiat currency assets – have faltered too.

At least half a dozen of them have “broken the buck”, or lost their dollar peg. Some have fallen to as low as a few cents in the dollar, resulting in losses running to hundreds of millions of dollars.

There’s plenty more damage still to come from that sell-off, so if the Bank of England has been asleep at the wheel in failing wholly to embrace the ecosystem of decentralised finance, we may have much to thank it for.

Instead, the Bank has focused its attention on its plain vanilla business of updating its systems for making direct, account-to-account payments between buyers and sellers.

It’s a kind of muddling through alternative to the European Central Bank’s (ECB) empire-building on the one hand, and Trump’s enthusiastic embrace of crypto on the other.

This should not be read as a derogatory view, but the Bank of England regards payments as a simple utility, not as either a way of maintaining the Central Bank’s grip on the “moneyverse”, which seems to be the ECB approach, or as a fintech opportunity for money-making, which is the current White House approach.

Critics complain that the Bank is further condemning the pound – and indeed the City – to the slow lane. Others would say that its safety-first approach is actually what you want out of a digital payments system.

Certainly, it needs to be faster, even instantaneous if possible, and to cost as little as possible. Above all, though, you want it to be robust, so that it acts as a wholly reliable means of exchange.

Four years ago, the House of Lords economic affairs committee concluded after a lengthy inquiry that a digital pound managed by the Bank of England was “a solution in search of a problem”.

Nothing has happened since then to change that verdict.

The vast majority of sterling transactions are already digital in nature, in any case, but they take place between commercial banks or on card networks, not via the central bank.

The benefits of a central bank digital currency are far from obvious, yet there are clear cut risks to financial stability, privacy, credit provision and security, to name just some of them.

Why then is the European Central Bank fixated on establishing a digital euro? In the main, it’s about monetary sovereignty and parallel fears of US dominance.

All the main card networks are American-owned, while existing systems for direct bank-to-bank settlement in retail transactions are clunky and inefficient in many euro-dominated countries.

And it’s about the threat posed by dollar-denominated stablecoins as an alternative means of payment.

The ECB and its political masters do not want this particular Trojan horse at the centre of the eurozone payments system.

Indeed, Scott Bessent, the US treasury secretary, has openly admitted that part of the purpose of the Genius Act, which sets out a regulatory framework for stablecoins, is to attract money into US treasuries, thereby underpinning dollar hegemony in international markets. Financing the US treasuries market is not what Frankfurt has in mind when thinking about the future of money.

Instead, the digital euro is proposed as part of Europe’s wider, statist approach to “strategic autonomy”, or making the continent less dependent on rival jurisdictions for core industrial, agricultural, and monetary functions.

The idea that money can in some way be reinvented is what really lies behind developments such as CBDCs and stablecoins.

So here’s the truth: it cannot. The Bank of England is no doubt guilty of many failings, but it does at least properly understand this basic maxim. Its overarching responsibility is to ensure that a pound is worth a pound, no more, no less.

Like cryptocurrencies, stablecoins are at root just another mechanism for rent extraction. And as long as there is scope for improving existing pubic infrastructure for digital payments, which is where the Bank of England is focusing its efforts, it is also hard to see the point of digital cash.

Paul Volcker, a one-time chairman of the Fed, had it about right when he said that the only socially useful innovation to come out of finance in the past several decades was the ATM.

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