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[Markets] The Militarization Of Xi Jinping's China: "Recovering" Areas They Have Never Ruled

Authored by Gordon Chang via The Gatestone Institute,

  • The People's Liberation Army is arming fast, and that development is triggering alarm. Beijing has always claimed its military is for defensive purposes only, but no country threatens territory under China's control. The buildup, therefore, looks like preparation for aggression.

  • Chinese leaders - not just Xi Jinping - believe their domains should be far larger than they are today. The concern is that, acting on their own rhetoric, they will use shiny new weapons to grab territory and occupy, to the exclusion of others, international water and airspace.

  • Moreover, in the 1930s the media publicized the idea that Japan was being surrounded by hostile powers that wished to prevent its rise. Eri Hotta in Japan 1941: Countdown to Infamy writes that the Japanese "talked themselves into believing that they were victims of circumstances rather than aggressors." That is exactly what the Chinese are doing at this moment.

  • Unfortunately, this tragic pattern is evident today in a Beijing where Chinese, wearing stars on their shoulders, look as if they want to repeat one of the worst mistakes of the last century.

Much of the equipment that China's People's Liberation Army is acquiring — aircraft carriers, amphibious troop carriers, and stealth bombers — is for the projection of power, not homeland defense. Pictured: China's Type 001A aircraft carrier, in 2017. (Image source: GG001213/Wikimedia Commons)

"Be ready for battle." That's how the South China Morning Post, the Hong Kong newspaper that increasingly reflects the Communist Party line, summarized Xi Jinping's first order this year to the People's Liberation Army (PLA). Xi, in his own words, which were broadcasted nationwide, demanded this: "prepare for a comprehensive military struggle from a new starting point."

China's bold leader has been threatening neighbors and the United States with frequency during the last several months. "Xi is not just toying with war," Victor Mair of the University of Pennsylvania wrote on the Fanell Red Star Rising listserve this month. "He's daring himself to actually start one. He's in a dangerous frame of mind."

Dangerous indeed. From Washington to New Delhi, policymakers wonder whether China will begin history's next great conflict. Beijing of course wants to "win without fighting," but the actions Xi Jinping are taking could lead to fighting nonetheless. One particularly disturbing development in this regard is the Chinese military gaining power in Beijing's political circles.

The PLA, as the Chinese military is known, is arming fast, and that development is triggering alarm. Beijing has always claimed its military is for defensive purposes only, but no country threatens territory under China's control. The buildup, therefore, looks like preparation for aggression. Much of the equipment the People's Liberation Army is acquiring — aircraft carriers, amphibious troop carriers, and stealth bombers — is for the projection of power, not homeland defense.

Chinese leaders — not just Xi Jinping — believe their domains should be far larger than they are today. The concern is that, acting on their own rhetoric, they will use shiny new weapons to grab territory and occupy, to the exclusion of others, international water and airspace.

The Chinese — leaders and others — certainly have the world's worst case of irredentism as they seek to "recover" areas they have in fact never ruled, but they do not necessarily envision military conquest as the means of acquiring vast "lost territories." They believe they can intimidate and coerce and then take without force.

The fast rearmament also has other objectives. Speaking of China, Arthur Waldron of the University of Pennsylvania told Gatestone Institute:

"I think her goal is to increase her awesomeness in the eyes of the world, so her buildup is therefore to be understood as an attempt to become strong enough to flout the international system without consequences."

Despite the rhetoric, the Chinese know the "imponderables" of actually going to war. For centuries, they have not been very good at it, enduring defeat after defeat and invasion after invasion.

Their military record during the tenure of the People's Republic is similarly unimpressive. Yes, the Chinese grabbed control of the Paracel Islands and specks in the Spratlys in the South China Sea in a series of skirmishes with various Vietnamese governments, but these incidents were minor compared to the setbacks.

Mao Zedong sustained perhaps 600,000 killed — including his son, Mao Anying — to obtain a draw in Korea in the early 1950s. His successor, Deng Xiaoping, launched an incursion in 1979 "to teach Vietnam a lesson" and instead suffered a humiliating defeat at the hands of his small communist neighbor.

Despite its undistinguished record, China causes grave concern. Xi was already beholden to the generals and admirals, who form the core of his political support in Communist Party circles, and they have gotten even more powerful as the Chinese people have become more restive.

As Willy Lam of the Chinese University of Hong Kong told Gatestone this month, "the top leadership is paranoid about massive social unrest" and so has given the military and police "extra power to tighten internal security... Xi understands very well that it is the army and the police that are keeping the Party alive."

Xi has tried to bring the military under control with both "anti-corruption" efforts — in reality a series of political purges — and, as June Teufel Dreyer of the University of Miami told Gatestone, "a sweeping military organization."

Yet those efforts have not been entirely successful. That is why Xi is trying, in the words of Waldron, to be viewed as the "martial emperor." He knows the power of the PLA as "kingmaker," able to back and depose civilian leaders. "The current Chinese focus on the military undoubtedly has internal political roots and is not related to changes in the security environment," Waldron said. Xi, in order to curry favor, has to accede to the flag officers.

Just because the process is internally driven does not make it less dangerous. Xi has sponsored overly large military budgets and has allowed senior officers to have outsized roles in formulating provocative external policies. The November 2013 declaration of the East China Sea Air-Defense Identification Zone, an audacious attempt to control the skies off its shores, is a clear example of the military influence. The seizure of Scarborough Shoal in early 2012 and the reclamation and militarization of features in the Spratly chain in the South China Sea are other destabilizing events.

Military influence in the Chinese capital means that hostility never goes out of fashion. Twice in December, senior PLA officers publicly threatened unprovoked attacks on the U.S. Navy. "The United States is most afraid of death," said Rear Admiral Luo Yuan in the second of the outbursts.

"We now have Dong Feng-21D, Dong Feng-26 missiles. These are aircraft carrier killers. We attack and sink one of their aircraft carriers. Let them suffer 5,000 casualties. Attack and sink two carriers, casualties 10,000. Let's see if the U.S. is afraid or not?"

Everyone, not just the U.S., should be afraid, in part because of the parallels between China's military today and Japan's in the 1930s.

In the 1930s, Japan's military officers, as Dreyer told Gatestone, took "drastic action to force the government into a war footing, even assassinating Japanese politicians who opposed such moves."

Then, the Japanese military, like the Chinese one today, was emboldened by success and ultra-nationalism. Then, like now, civilians controlled Asia's biggest army only loosely. Then, like today, Asia's largest military is full of assertion and belligerence.

Moreover, in the 1930s the media publicized the idea that Japan was being surrounded by hostile powers that wished to prevent its rise. Eri Hotta in Japan 1941: Countdown to Infamy writes that the Japanese "talked themselves into believing that they were victims of circumstances rather than aggressors." That is exactly what the Chinese are doing at this moment.

"If we ask, 'Did they want war?' the answer is yes; and if we ask 'Did they want to avoid war?' the answer is still yes," noted Maruyama Masao, a leading postwar political scientist, as recounted by Hotta.

"Though wanting war, they tried to avoid it; though wanting to avoid it, they deliberately chose the path that led to it."

Unfortunately, this tragic pattern is evident today in a Beijing where Chinese, wearing stars on their shoulders, look as if they want to repeat one of the worst mistakes of the last century.

Published:2/26/2019 1:13:49 AM
[Entertainment] Kisses, Selfies and Lots of Style: Inside the Oscars 2019 After-Parties Rami Malek, 2019 Oscars, After PartyWith another Oscars in the Hollywood history books, it was time for the stars to celebrate. And that they did all over Los Angeles on Sunday night. After the annual ceremony wrapped...
Published:2/25/2019 8:48:24 AM
[Markets] Buffett: Berkshire Nearly Made "A Very Large" Acquisition During Q4

Avid readers of Warren Buffett's annual investor letter complained over the weekend that the legendary investor's 2019 missive was a little repetitive, as Buffett once again lamented that Berkshire didn't see many options for investing its $100 billion cash pile - despite his desire to make another big deal. After accruing just $4 billion in GAAP profits for the full year, analysts and the WSJ described 2018 as one of Buffett's "worst years ever", as an unexpected $3 billion writedown on its investment in Kraft Heinz during Q4 helped lead to a $25 billion loss on the quarter.

But as Buffett revealed during an interview Monday morning on CNBC's Squawk Box, it nearly wasn't so.  Because while Berkshire Hathaway didn't pull the trigger on any new deals last year, it did come close to pulling the trigger during Q4. However, the deal ultimately fell through, and Buffett said he didn't think it was "still on the books."

"We had at least one deal possible that would have been very large," Buffett told CNBC's Becky Quick from Berkshire-owned Nebraska Furniture Mart on Monday. "I liked stocks in the fourth quarter but I would like buying a business even better."

In his letter, Buffett explained that, while the prospect of buying a company makes he and Berkshire No. 2 Charlie Munger's "pulse rates soar", the sky high valuations for any companies with decent long-term prospects meant that Berkshire would likely continue to focus on buying marketable securities in 2019.

"That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I'm the young one – that prospect is what causes my heart and Charlie's to beat faster," he said.

When asked for a hint about the mystery deal, Buffett said only that the company he had in mind was "on this planet." Berkshire hasn't bought a company since 2015, when it bought Precision Castparts in a deal valued at $32 billion. 

Watch a clip from the interview below:

Warren Buffett says he was close to making 'very large' acquisition in Q4 but it fell apart from CNBC.

Published:2/25/2019 7:41:36 AM
[40aef92e-5525-51bd-bdab-e0adda06a43f] 'Black Panther' makes Oscar history twice for diversity "Black Panther" went back-to-back into the Oscar history books on Sunday evening. Published:2/25/2019 6:11:04 AM
[Markets] How America's Dictatorship Works

Authored by Eric Zuesse via,

Trump could not have become America’s President if he had not won the “vote” of his nation’s second-largest political donor in 2016, casinos-owner Sheldon Adelson.

In publicly recorded donations, as of 25 December 2018, Adelson and his wife donated$82,522,800 to Republican candidates in 2016, and this amount doesn’t include any of the secret money. Of that sum, it’s virtually impossible to find out how much went specifically to Trump’s campaign for President, but, as of 9 May 2017, the Adelsons were publicly recorded as having donated $20.4 million to Trump’s campaign.

Their impact on the Presidential contest was actually much bigger than that, however, because even the Adelsons’ non-Trump-campaign donations went to the Republican Party, and the rest went to Republican pro-Trump candidates, and the rest went to Republican PACS — and, so, a large percentage (if not all) of that approximately $60 million non-Trump-campaign political expenditure by the Adelsons was boosting Trump’s Presidential vote.

The second-largest Republican donor in 2016 was the hedge fund manager Paul Singer, at $26,114,653. It was less than a third, 31.6%, as large as the Adelsons’ contribution. Singer is the libertarian who proudly invests in weak entities that have been sucked dry by the aristocracy and who almost always extracts thereby, in the courts, far larger returns-on-investment than do other investors, who have simply settled to take a haircut on their failing high-interest-rate loans to that given weak entity.

Singer hires the rest of his family to run his asset-stripping firm, which is named after his own middle name, “Elliott Advisors,” and he despises any wealthy person who won’t (like he does) fight tooth-and-nail to extract, from any weak entity, everything that can possibly be stripped from it. His Elliott Advisors is called a “vulture fund,” but that’s an insult to vultures, who instead eat corpses. They don’t actually attack and rip apart vulnerable struggling animals, like Singer’s operation does.

So, that’s the top two, on the Republican Party side.

On the Democratic Party side, the largest 2016 donor was the largest of all political donors in 2016, the hedge fund manager Thomas Steyer, $91,069,795. The second-largest was hedge fund manager Donald S. Sussman, $41,841,000. Both of them supported Hillary Clinton against Bernie Sanders, and then against Donald Trump.

As of 23 January 2019, the record shows that Trump received $46,873,083 in donations larger than $200, and $86,749,927 in donations smaller than $200. Plus, he got $144,764 in PAC contributions. Hillary Clinton received $300,111,643 in over-$200 donations, and $105,552,584 in under-$200 donations. Plus, she got $1,785,190 in PAC donations. She received 6.4 times as much in $200+ donations as Trump did. She received 1.2 times as much in under-$200 donations as he did. Clearly, billionaires strongly preferred Hillary.

So, it’s understandable why not only America’s Democratic Party billionaires but also many of America’s Republican Party billionaires want President Trump to become replaced ASAP by his V.P., President Pence, who has a solid record of doing only whatever his big donors want him to do. For them, the wet dream would be a 2020 contest between Mike Pence or a clone, versus Hillary Clinton or a clone (such as Joe Biden or Beto O’Rourke). That would be their standard fixed game, America’s heads-I-win-tails-you-lose ‘democracy’.

On 18 January 2018 was reported that“Trump pulled in $107 million in individual contributions, nearly doubling President Barack Obama’s 2009 record of $53 million.”

However, in both of those cases, the figures which were being compared were actually donations to fund the inaugural festivities, not the actual campaigns. But Adelson led there, too: “Casino magnate Sheldon Adelson was [the] most generous [donor], giving $5 million to the inaugural committee.”

The second-biggest donor to that was Hushang Ansary of Stewart & Stevenson, at $2 million. He had previously been the CEO of the National Iranian Oil Company until the CIA-appointed dictator, the brutal and widely hated Shah, was overthrown in 1979 and replaced by Iran’s now theocratically overseen limited democracy. The US aristocracy, whose CIA had overthrown Iran’s popular and democratically elected Prime Minister in 1953, installed the Shah to replace that elected head-of-state, and they then denationalized and privatized Iran’s oil company, so as to cut America’s aristocrats in on Iran’s oil.

Basically, America’s aristocracy stole Iran in 1953, and Iranians grabbed their country back in 1979, and US billionaires have been trying to get it back ever since. Ansary’s net worth is estimated at “over $2 billion,” and, “By the 1970s, the CIA considered Ansary to be one of seventeen members of ‘the Shah’s Inner Circle’ and he was one of the Shah’s top two choices to succeed Amir Abbas Hoveyda as Prime Minister.”

But, that just happened to be the time when the Shah became replaced in an authentic revolution against America’s dictatorship. Iran’s revolution produced the country’s current partially democratic Government. So, this would-be US stooge Ansary fled to America, which had been Iran’s master during 1953-79, and he was welcomed with open arms by Amerca’s and allied aristocracies.

Other than the Adelsons, the chief proponents of regime-change in Iran since 1979 are the US-billionaires-controlled CIA, and ‘news’-media, and Government, and the Shah’s family, and the Saud family, and Israel’s apartheid regime headed by the Adelsons’ protégé in Israel, Netanyahu. America’s billionaires want Iran back, and the CIA represents them (the Deep State) — not the American public — precisely as it did in 1953, when the CIA seized Iran for America’s billionaires.

In the current election-cycle, 2018, the Adelsons have thus far invested $123,208,200, all in Republicans, and this tops the entire field. The second-largest political investor, for this cycle, is the former Republican Mayor of NYC, Michael Bloomberg, at $90,282,515, all to Democrats. Is he a Republican, or is he a Democrat? Does it actually make any difference? He is consistently a promoter of Wall Street. The third-largest donor now is Tom Steyer, at $70,743,864, all to Democrats. The fourth-largest is a Wisconsin libertarian-conservative billionaire, Richard Uihlein, at $39,756,996.

Back on 19 March 2018, Politico reported that “Uihlein and his wife, Elizabeth, are currently the biggest Republican donors of the 2018 midterm elections, having given $21 million to candidates for federal office and super PACs that will support them. And that doesn’t include their funding of state candidates.” On 1 October 2016, International Business Times had listed the top ten donors to each of the two Parties, and the Uihleins at that time were #4 on the Republican side, at $21.5 million.

Of course, all of the top donors are among the 585 US billionaires, and therefore they can afford to spend lots on the Republican and/or Democratic nominees. Open Secrets reported on 31 March 2017 that “Of the world’s 100 richest billionaires, 36 are US citizens and thus eligible to donate to candidates and other political committees here. OpenSecrets Blog found that 30 of those [36] [or five sixths of the total 36 wealthiest Americans] actually did so, contributing a total of $184.4 million — with 58 percent [of their money] going to Republican efforts.” Democratic Party nominees thus got 42%; and, though it’s not as much as Republican ones get, it’s usually enough so that if a Democrat becomes elected, that person too will be controlled by billionaires.

For example, in the West Virginia Democratic Presidential primary in 2016, Bernie Sanders won all 55 counties in the state but that state’s delegation to the Democratic National Convention handed 19 of the state’s 37 votes at the Convention to his opponent, Hillary Clinton, who got more money from billionaires than all other US Presidential candidates combined. The millions of Democrats who voted for Hillary Clinton were voting for the billionaires’ favorite, and she and her DNC stole the Party’s nomination from Sanders, who was the nation’s most-preferred Presidential candidate in 2016; and, yet, most of those voters still happily voted, yet again, for her, in the general election — as if she hadn’t practically destroyed the Party by prostituting it to its billionaires even more than Obama had already done.

Of course, she ran against Trump, and, for once, the billionaires were shocked to find that their enormous investment in a candidate had been for naught. That’s how incompetent she was. But they still kept control over both of the political Parties, and the Sanders choice to head the DNC (the Democratic National Committee, the Democratic Party itself) lost out to the Obama-Clinton choice, so that today’s Democratic Party is still the same: winning is less important to them than serving their top donors is.

This means that America’s winners of federal elections represent almost entirely America’s 585 billionaires, and not the 328,335,647 Americans (as of noon on 23 January 2019). Of course, there is a slight crossover of interests between those two economic classes, since 0.000002 of those 328,335,647, or 0.0002% of them, are billionaires. However, if 0.0002% of federal office-holders represent the public, and the remaining 99.9998% represent the billionaires, then is that actually a bipartisan Government? If instead 99.9998% represented 328,335,062 Americans, and 0.0002% represented the 585 billionaires; then, that, too, wouldn’t be bipartisan, but would it be a democratic (small “d”) government? So, America is not a democracy (regardless of whether it’s bipartisan); it is instead an aristocracy, just like ancient France was, and the British empire, etc. The rest of America’s population (the 328,335,062 other Americans) are mere subjects, though we are officially called ‘citizens’, of this actual aristocracy.

The same is true in Israel, the land that the Adelsons (the individuals who largely control America) are so especially devoted to. On 8 November 2016, Israel’s pro-Hillary-Clinton and anti-Netanyahu Ha’aretz newspaper headlined “The Collapsing Political Triangle Linking Adelson, Netanyahu and Trump”, and reported that Ha’aretz’s bane and top competitor was the freely distributed daily Israeli newspaper, Israel Hayom, and:

Israel Hayom was founded by Adelson nine years ago, in order to give Netanyahu – who has been rather harshly treated by the Israeli media throughout his political career – a friendly newspaper. Under Israeli law, the total sum an individual can donate to a politician or party is very limited, and corporate donations are not allowed.

Israel Hayom has been a convenient loophole, allowing Adelson to invest the sort of money he normally gives American politicians on Netanyahu’s behalf. It has no business model and carries far fewer ads than most daily newspapers. While the privately owned company does not publish financial reports, industry insiders estimate that Adelson must spend around $50 million annually on the large team of journalists and the printing and distribution operations.

Distributed for free, in hundreds of thousands of copies the length and breadth of the country, Israel Hayom … clings slavishly to the line from Netanyahu’s office – praising him and his family to the heavens while smearing his political rivals, both on the left and the right.

A billionaire can afford to use his or her ‘news’-media in lieu of political campaign donations. Lots of billionaires do that. They don’t need to make direct political donations. And ‘making money’ by owning a ‘news’-medium can even be irrelevant, for them. Instead, owning an important ’news’-medium can be, for them, just another way, or sometimes their only way, to buy control over the government. It certainly works. It’s very effective in Israel.

Adelson is #14 on the 2018 Forbes 400 list of wealthiest Americans, all having net worths of $2.1 billion or more, his being $38.4 billion, just one-third as large as that of Jeff Bezos. Bezos is the owner of around 15% of Amazon Corporation, whose profits are derived almost entirely from the Amazon Web Services that are supplied to the US Pentagon, NSA, and CIA. So, he’s basically a ‘defense’ contractor.

Bezos’s directly owned Washington Post is one of America’s leading neoconservative and neoliberal, or pro-invasion and pro-Democratic Party, media; and, so, his personal ownership of that newspaper is much like his owning a one-person national political PAC to promote whatever national policies will increase his fortune. The more that goes to the military and the less that goes to everything else, the wealthier he will become. His newspaper pumps the ‘national security threats’ to America.

Adelson controls Israel’s Government. Whereas he might be a major force in America’s Government, that’s actually much more controlled by the world’s wealthiest person, the only trillionaire, the King of Saudi Arabia. He has enough wealth so that he can buy almost anybody he wants — and he does, through his numerous agents. But, of course, both Israel’s Government and Saudi Arabia’s Government hate Iran’s Government at least as much as America’s Government does.

In fact, if Russia’s Government weren’t likely to defend Iran’s Government from an invasion, then probably Iran would already have been invaded. Supporters of America’s Government are supporters of a world government by America’s billionaires, because that’s what the US Government, in all of its international functions (military, diplomatic, etc.) actually represents: it’s America’s global dictatorship.

They throw crumbs to America’s poor so as to make it a ‘two-party’ and not merely a ‘one-party’ government and so that one of the Parties can call itself ‘the Democratic Party’, but America’s is actually a one-party government, and it represents only the very wealthiest, in both Parties. The aristocracy’s two separate party-organizations compete against each other. But their real audience is the aristocracy’s dollars, not the public’s voters. This “two-Party” dictatorship (by the aristocracy) is a different governing model than in China and some other countries.

The great investigative journalist Wayne Madsen headlined on January 24th “Trump Recognition of Rival Venezuelan Government Will Set Off a Diplomatic Avalanche” and he reported the possibility of a war developing between the US and Russia over America’s aggression against Venezuela. US media even have pretended that the US Government isn’t the one that customarily perpetrates coups in Latin America, and pretended that Russia’s and Cuba’s Governments are simply blocking ‘democracy’ from blossoming in Venezuela.

On January 24th, Middle East Eye reported that Morgan Stanley’s CEO James Gorman had just told the World Economic Forum, in Davos, that the torture-murder of Saudi Crown Prince Salman’s critic and Washington Post columnist Jamal Khashoggi was “unacceptable,” “But what do you do? What part do you play in the process of economic and social change?” and the report continued: “Gorman said he did not judge any country’s attempts to root out corruption,” and Gorman and a French tycoon joined in throwing their “weight behind Riyadh’s economic and social direction, by saying, ‘it is quite difficult and brave what the kingdom is doing’,” by its ‘reforms’. It was all being done to ‘root out corruption, and to spread democracy’. Sure.

There’s “a sucker born every minute,” except now it’s every second. That seems to be the main way to win votes.

On January 26th, Trump appointed the fascist Elliott Abrams to lead this ‘democratization of Venezuela’, by overthrowing and replacing the elected President by the second-in-line-of succession (comparable in Venezuela to removing Trump and skipping over the Vice President and appointing Nancy Pelosi as America’s President, and also violating the Venezuelan Constitution’s requirement that the Supreme Judicial Trbunal must first approve before there can be ANY change of the President without an election by the voters).

It’s clearly another US coup that is being attempted here. Trump, by international dictat, says that this Venezuelan traitor whom the US claims to be installing is now officially recognized by the US Government to be the President of Venezuela. Bloomberg News reported that Abrams would join Trump’s neocon Secretary of State on January 26th at the UN to lobby there for the UN to authorize Trump’s intended Venezuelan coup. The EU seemed strongly inclined to follow America’s lead. On the decisive U.N. body, the Permanent Security Council, of China, France, Russia, UK, and US, the US position was backed by three: US, France, and UK. Russia and China were opposed.

In the EU, only France, Germany, Spain, and UK, came out immediately backing the US position. On January 25th, Russia’s Tass news agency was the first to report on the delicate strategic situation inside Venezuela. It sounded like the buildup to Obama’s successful coup in Ukraine in February 2014, but in Venezuela and under Trump. In fact, at least two commentaors other than I have noted the apparent similarities: Whitney Webb at “Washington Follows Ukraine, Syria Roadmap in Push for Venezuela Regime Change” and RT at “‘Venezuela gets its Maidan’: Ukrainian minister makes connection between regime change ops”.

Abrams’s career has been devoted to “regime-change,” and is as unapologetic about it as is John Bolton. Also like Bolton, he’s an impassioned supporter of Jewish apartheid. He wrote in his 1997 book Faith or Fear, that “Outside the land of Israel, there can be no doubt that Jews, faithful to the covenant between God and Abraham, are to stand apart from the nation in which they live. It is the very nature of being Jewish to be apart — except in Israel — from the rest of the population.”

Israel is, in this and the view of many billionaires, the whole world’s ghetto, and ‘real’ Jews don’t belong anywhere else than there. And, according to that, nobody else does belong there, except people who accept being ruled by Jewish Law - the Torah. So, on 25 June 2001, George W. Bush, as the main representative of America’s billionaires, made Abrams the Special Assistant to the President and Senior Director for Democracy, Human Rights, and International Operations at the National Security Council.

Of course, Abrams was gung-ho for Americans to conquer Iraq, because Iraqis didn’t like Israel. And the current US President hires that same agent of Israel, Abrams, now to sell internationally America’s current coup to grab Venezuela for America’s billionaires. Abrams, for years, had been courting Trump’s favor by having declined to include himself among the many Republican neoconservatives, both Jewish and non-Jewish, who endorsed Hillary Clinton for President. He thereby has now won his new job, on the real-world sequel to The Apprentice, which is known as President Trump’s Administration. Another such winner, of course, is John Bolton, who likewise had declined to endorse Hillary.

Perhaps the US regime thinks that testing the resolve of Russia’s Government, regarding Venezuela, would be less dangerous than testing it over the issue of Iran. But Big Brother says that this imposition of America’s corruption is instead merely a part of rooting out corruption and spreading democracy and human rights, throughout the world.

The US has managed to get Venezuela in play, to control again. Some American billionaires think it’s a big prize, which must be retaken. The largest oil-and-gas producers — and with the highest reserves of oil-and-gas in the ground — right now, happen to be Saudi Arabia, Iran, Qatar, Russia, Venezuela, and US. So, for example, Venezuela is a much bigger prize than Brazil.

All of those countries have an interest in denying the existence of human-produced global warming, and in selling as much of their product as quickly as possible before the world turns away from fossil fuels altogether. High-tech doesn’t drive today’s big-power competition nearly so much as does the fossil-fuels competition — to sell as much of it as they can, as fast as they can. The result of this competition could turn out to be a nuclear winter that produces a lifeless planet and thus prevents the planet from becoming lifeless more slowly from global burnout — the alternative outcome, which would be produced by the burnt fossil fuels themselves. Either way, the future looks bleak, no matter what high-tech produces (unless high-tech produces quickly a total replacement of fossil fuels, and, in the process, bankrupts many of the billionaires who are so active in the current desperate and psychopathic global competition).

This is what happens when wealth worldwide is so unequally distributed that the “World’s Richest 0.7% Own 13.67 Times as Much as World’s Poorest 68.7%”. According to economic theory (which has always been written by agents for the aristocracy), the distribution of wealth is irrelevant. This belief was formalized by a key founder of today’s mathematized economic theory, Vilfredo Pareto, who, for example, in his main work, the 1912 Trattato di Sociologia Generale, wrote (# 2135), that, though “the lover of equality will assign a high coefficient to the utility of the lower classes and get a point of equilibrium very close to the equalitarian condition, there is no criterion save sentiment for choosing between the one [such equality of wealth] and the other [a single person — whom he called “superman” — owning everything].”

The article on Pareto in the CIA’s Wikipedia doesn’t even so much as mention this central feature of Pareto’s thinking, the feature that’s foundational in all of the theory of “welfare” in economics. Pareto was also the main theoretician of fascism, and the teacher of Mussolini. This belief is at the foundation of capitalism as we know it, and as it has been in economic theory ever since, actually, the 1760s. Pareto didn’t invent it; he merely mathematized it.

So, we’ve long been in 1984, or at least building toward it. But US-allied billionaires wrote this particular version of it; George Orwell didn’t. And it’s not a novel. It’s the real thing. And it is now becoming increasingly desperate.

If, in recognizing this, you feel like a hog on a factory-farm, then you’ve got the general idea of this reality. It’s the problem that the public faces. But the publics in the US and its allied regimes are far less miserable than the publics in the countries that the US and its allied regimes are trying to take over — the targeted countries (such as Syria). To describe any realistic solution to this systematic global exploitation would require an entire book, at the very least — no mere article, such as here. The aristocracy anywhere wouldn’t publish such a book. Nobody would likely derive any significant income from writing it. That’s part of the reality, which such a book would be describing.

However, a key part of this reality is that for the billionaires — the people who control international corporations or corporations that even are aspiring to grow beyond their national market — their nation’s international policies are even more important to them than its domestic affairs (such as the toxic water in Flint, Michigan; or single-payer health insurance — matters that are relatively unimportant to billionaires), and, therefore, the most-censored and least-honestly reported realities on the part of the aristocracy’s ‘news’-media are the international ones. And, so, this is the field where there is the most lying, such as about “Saddam’s WMD,” and about all foreign countries.

However, when a person is in an aristocracy’s military, deception of that person is even more essential, especially in the lower ranks, the troops, because killing and dying for one’s aristocracy is far less attractive than killing or dying in order honestly to serve and protect an authentic democracy. Propagandizing for the myth that the nation is a democracy is therefore extremely important in any aristocracy.

Perhaps this is the reason why, in the United States, the military is consistently the institution that leads above all others in the public’s respect. It’s especially necessary to do that, in the nation that President Barack Obama repeatedly said is “the one indispensable nation”. This, of course, means that every other nation is “dispensable.” Any imperial nation, at least since ancient Rome, claimed the same thing, and invaded more nations than any other in the world when it was the leading imperial nation, because this is what it means to be an empire, or even to aspire to being one: imposing that given nation’s will upon other nations — colonies, vassal states, or whatever they are called.

When soldiers know that they are the invaders, not the actual defenders, their motivation to kill and die is enormously reduced. This is the main reason why the ‘news’-media in an imperial nation need to lie constantly to their public. If a news-reporting organization doesn’t do that, no aristocrat will even buy it. And virtually none will advertise in it or otherwise donate to it. It will be doomed to remain very small and unprofitable in every way (because the “World’s Richest 0.7% Own 13.67 Times as Much as World’s Poorest 68.7%”). Billionaires donate to ‘news’-organizations that might report accurately about domestic US problems, but not to ones that report accurately about international affairs, especially about important international affairs. Even liberal ‘news’-media are neoconservative, or favorable toward American invasions and coups. In order to be a significant player in the ‘news’-business in the United States, one has to be.

So: this is how America’s dictatorship works. This is not America’s exceptionalism: it is America’s ordinariness. America’s Founders had wanted to produce something not just exceptional but unique in its time: a democratic republic. But what now exists here is instead a dictatorial global empire, and it constitutes the biggest threat to the very existence of the United Nations ever since that body’s founding in 1945. If that body accepts as constituting the leader of Venezuela the person that America’s President declares to be Venezuela’s leader, then the U.N. is effectively dead.

This would be an immense breakthrough for all of the US regime’s billionaires, both domestically and throughout its allied countries (such as in France, Germany, Spain, and UK). It would be historic, if they win. It would be extremely grim, and then the U.N. would immediately need to be replaced. The US and its allies would refuse to join the replacement organization. That organization would then authorize economic sanctions against the US and its allies. These will be reciprocated. The world would break clearly into two trading-blocs. In a sense, the UN’s capitulation to the US on this matter would create another world war, WW III. It would be even worse than when Neville Chamberlain accepted Hitler’s offer regarding the Sudetenland. We’d be back to the start of WW II, with no lessons learned since then. And with nuclear weapons.

Published:2/24/2019 11:08:04 PM
[Politics] We’ve got a new commenting system! Some of you may have noticed that we have a new comment system below the posts. It’s called wpDiscuz and it’s been around for quite a few years. As you can see, . . . Published:2/24/2019 10:38:05 PM
[Politics] We’ve got a new commenting system! Some of you may have noticed that we have a new comment system below the posts. It’s called wpDiscuz and it’s been around for quite a few years. As you can see, . . . Published:2/24/2019 10:08:54 PM
[Markets] When The Winter Of Our Discontent Meets Fyre Festival

Authored by Jim Quinn via The Burning Platform blog,

“When a condition or a problem becomes too great, humans have the protection of not thinking about it. But it goes inward and minces up with a lot of other things already there and what comes out is discontent and uneasiness, guilt and a compulsion to get something–anything–before it is all gone.” ? John Steinbeck, The Winter of Our Discontent

Sometimes I wonder about strange coincidences. In an email exchange with Marc (Hardscrabble Farmer) in the Fall, he mentioned he had begun reading Steinbeck’s Winter of Our Discontent and planned to write an article about it. Coincidentally, I had just bought a used copy of the same novel at Hooked on Books in Wildwood. I didn’t plan on buying it, but I’ve read most of Steinbeck’s brilliant novels and felt compelled by the title and our national state of discontent to select it from among the thousands of books in the store.

Marc had posted his Steinbeck-esque article in December, but I didn’t read it until I had finished the novel. Marc’s perspective on the value of money and his diametrically opposite path from Ethan Hawley, the discontented anti-hero of Steinbeck’s final novel, was enlightening and thought provoking. I’m sure it impacted my consciousness as I wrote this article.

Steinbeck’s title was taken from Shakespeare to reflect the unhappiness of Ethan Hawley at the outset of the novel. The quote, “Now is the winter of our discontent / Made glorious summer by this sun of York”, is the first line of Shakespeare’s Richard III, written in 1594. Shakespeare was using the summer/winter weather as a metaphor for the fortunes of the English House of York and its rivalry with the Plantagenets for the English throne. The ‘sun of York’ was a comment on the ‘son of York’ Edward IV, a harbinger of better times ahead. This theme of discontent was true in 1594, in 1961 when Steinbeck published his final novel, and is true today, as discontent blows across the land like a deadly polar vortex. At this point, it is difficult to see better times ahead.

The reason Steinbeck’s Nobel Prize winning novel still resonates today is because humans do not change. The human condition, our frailties, foibles, moral shortcomings, greed, avarice, narcissism, ability to forgive and seek redemption has remained constant through the ages. Steinbeck wrote the novel to address the moral degeneration of American culture during the 1950s and 1960s. The game show scandals, nativism and plagiarism of the 1950’s was representative of the decay.

Twenty-two years before, in 1939, Steinbeck addressed man’s inhumanity to man and the greed of evil men creating the suffering of the common man during the Great Depression in his classic novel Grapes of Wrath. Steinbeck’s characters have biblical aspects, as the battle between good and evil is always a subplot. If Steinbeck thought American culture had degenerated in 1961, I wonder what he would think today.

The definition of discontent is dissatisfaction with the prevailing social or political situation. If ever a word defined the current state of our world, it would be discontent. And it so happens, we are also in the depths of a bleak tumultuous winter season. The social and political discontent is reflected in the epic struggle between far-left treasonous Deep State operatives and the deplorables supporting Trump’s battle to retain the presidency.

An open coup has been in progress for two years as the Obama/Clinton surveillance state cronies, fully supported by the left-wing fake news propaganda outlets, attempt to remove a democratically elected president. This is truly a dark moment in our history and could mark a turning point in the demise of our Republic.

“It’s so much darker when a light goes out than it would have been if it had never shone.” ? John Steinbeck, The Winter of Our Discontent

Steinbeck’s story about the moral decline of Ethan Hawley was a parable about the human condition set in the 1950s, but applicable throughout human history, and as relevant today as it was then. Ethan was a war hero whose integrity and honesty were the noble standards he lived by every day. His father recklessly lost the family fortune and he was left as a lowly grocery store clerk working for a foreigner.

It is a story of how easy it is for a good man to be corrupted through societal expectations, the opinions of prominent people, and the disapproval of family for their status in the community. The love of money is the root of all evil, as presented by Steinbeck. Ethan Hawley’s fall from grace was self-imposed as he allowed his darker nature to control his actions in order to regain his once prominent station in the community. The opinions of others considering him a failure led to his fall from grace.

“Men don’t get knocked out, or I mean they can fight back against big things. What kills them is erosion; they get nudged into failure.” ? John Steinbeck, The Winter of Our Discontent

He sacrificed his self-respect, life long friendships, and the lives of two men, in order to climb the social ladder and regain the wealth and influence his father had squandered. Ethan’s ego and sense of self worth led him down a path paved with evil intentions. He had his boss deported, provided the means for his best friend to commit suicide, planned to rob a bank, and eventually came to the realization his own disregard for morality had been passed on to his son, who saw no problem with cheating to get what he wanted in life.

Ethan knew right from wrong. He was well read. He had killed Germans fighting for his country. He willfully chose to manipulate, lie and scheme in order to achieve his materialistic ambitions. The difference between Ethan and the materialistic, delusional, dishonest masses inhabiting our country today, is his sense of guilt impelled him to take his own life. But the unwavering love of his daughter convinced him to soldier on and redeem himself.

Our society is now infinitely more materialistic, narcissistic, and greedy than it was in the 1950s. Moral degeneration has reached new lows, unthinkable during the relatively innocent 1950s. But the common theme is human failings, foibles, and fallacies. Whatever a culture values you get more of. Our culture values achievement, wealth and power, at any cost.

Achieving success through hard work, intellectual accomplishment, or a superior product is antiquated and passé. Success is achieved through regulatory capture, bribing politicians, financial engineering schemes, monopolization of markets, and the power of propaganda. As Ethan cynically expounded, strength and success, even if achieved through criminal means, is all that matters in the end. The victors write the history books.

“To most of the world success is never bad. I remember how, when Hitler moved unchecked and triumphant, many honorable men sought and found virtues in him. And Mussolini made the trains run on time, and Vichy collaborated for the good of France, and whatever else Stalin was, he was strong. Strength and success—they are above morality, above criticism. It seems, then, that it is not what you do, but how you do it and what you call it. Is there a check in men, deep in them, that stops or punishes? There doesn’t seem to be. The only punishment is for failure. In effect no crime is committed unless a criminal is caught.” ? John Steinbeck, The Winter of Our Discontent

A modern-day parable of moral degeneration presented itself to me shortly after finishing the Steinbeck novel. I happened to stumble across a documentary about the Fyre Festival fraud on Netflix. The protagonist of this illustration of discontent and delusion was Billy McFarland. He is representative of the modern-day Ethan Hawley, except with no redeeming qualities or conscience.

He conned investors, entertainers, super models, the media, employees, and gullible millennials. His ultimate purpose was no different than Ethan Hawley’s, to be wealthy and admired by his peers. His outrageously criminal exploits were detailed in the documentary as he lied, falsified, and conducted a ponzi scheme until it all blew up in a shocking display of hubristic folly. The story is a reflection of our shallow, narcissistic, gullible, low IQ society.

What leaps off the screen is how businesses are created out of thin air delivering no value to society. It’s all smoke, mirrors, and superficial virtue signaling designed to lure intellectual lightweights to pretend they are a mover and shaker in their social media driven world. The entire festival was designed to promote some ridiculous music booking app. These frivolous social media-based companies are built upon false narratives, self-absorbed millennials, easy money, and celebrity worship. They have zero value.

After watching how easily young people could be lured into handing over tens of thousands of dollars to this shyster because he paid some super models to do a bikini video and tweet falsehoods about the fake festival, you realize how they can believe socialism can work. Alexandrea Ocasio-Cortez is a perfect role model for these dullards and sycophants. Young people appear incapable of thinking for themselves, critically assessing situations, or going against the crowd. They want to be told what to believe and what to do.

Of course, this sickness is not confined to only young people. Our entire society is permeated with greed, narcissism and lemming-like behavior. Keeping up with the Kardashians has replaced keeping up with the Joneses. Ethan Hawley’s desire for status and respect among his peers in small town America during the 1950s is no different than the social climbing happening in our high-tech social media crazed world of today. Human nature does not change.

The Netflix documentary brought a term to my attention I had not heard before – “influencers”. The shallowness and trivial nature of our culture is captured perfectly by the essence of the importance of “influencers” to marketing products and events.  The Fyre Festival was promoted on Instagram by “social media influencers” including socialite and model Kendall Jenner, Bella Hadid, and model Emily Ratajkowski, who did not disclose they had been paid to do so.

“In business and in politics a man must carve and maul his way through men to get to be King of the Mountain. Once there, he can be great and kind–but he must get there first.” ? John Steinbeck, The Winter of Our Discontent

Rather than make up our own minds about what we like, what we wear, where we eat, or what entertainment we enjoy, we need to be influenced into our decisions by famous people who are famous for being famous. These “influencers” generate their influential power through the number of social media followers they have accumulated by posting pictures of themselves in their underwear, leaked sex tapes, nude selfies, or generally being attractive.

Most of them are low IQ mouth breathers who can’t do basic math or write a comprehensible paragraph. But those 36DD breasts and pouty lips classify them as a grade A influencer. I can’t decide whether these narcissistic icons are more pathetic or the feeble-minded wretches who are actually influenced by these vacuous bimbos. Moral degeneration of society seems to have reached a new low.

Billy McFarland used any means necessary to maul his way to the top. He figured if he pulled off this spectacular social media extravaganza, his new music app demand would skyrocket and he would become a superstar music business mogul like Jay-Z. As his lies and debt continued to pile up, he double downed and used his dynamic personality to convince naïve rich women into “investing” millions into his doomed to failure venture.

Ultimately, thousands of suckers landed on a Caribbean island expecting luxurious accommodations and dozens of A list entertainers, but experienced mass confusion, flimsy tent accommodations with soaked mattresses, little to no food, and a canceled concert as unpaid bands pulled out. The disaster was reported in real time through the same social media that promoted this festival farce.

“In poverty she is envious. In riches she may be a snob. Money does not change the sickness, only the symptoms” ? John Steinbeck, The Winter of Our Discontent

In the case of Billy McFarland we know the consequences of his actions. Lawsuits totaling $100 million were filed against him. He was charged with the Federal crime of wire fraud and convicted. He is currently serving six years in a Federal prison and was ordered to forfeit $26 million. Based on the warped personality I witnessed in the documentary, he will resume scamming people the second he walks out of that prison, and more suckers will eagerly hand him their money. You can’t cure stupid.

The future of fictional character Ethan Hawley is left to your imagination. He had been a moral upstanding citizen who faced a crisis of conscience and fell prey to the darker side of his nature. His boss had been deported and his best friend was dead. At the end of the novel he was left with ill-gotten wealth, a loving wife, a son who felt no guilt in cheating, and a daughter who saved his life.

I want to believe Ethan spent the rest of his life redeeming himself through his actions by doing good for the town, helping his friends achieve success, teaching his son right from wrong, using his wealth to benefit humanity, and proving to his daughter his life was worth saving. Ethan’s struggle is the existential crisis we all face as human beings. The love of money is the root of all evil. Whether we are poor, middle class or rich, when our priorities become warped by greed, narcissism, envy, or worldly desires, it only leads to discontent.

We see the discontent revealed by the billionaire crowd who rig markets to pillage more of the nation’s wealth. We see it among corrupt politicians being bought off by crooked corporate CEOs. We see it when media pundits broadcast fake news to push their agenda. We see it exhibited by the blatant coup attempt against a duly elected president by arrogant treasonous men who consider themselves above the law. We see it play out in office politics all over America. We see it with cheating on our taxes or lying to our spouses. We see our youth plagiarizing and cheating on tests. It seems we are a society of scammers, liars, and dishonest discontents.

Steinbeck was not one for happy endings. He pondered morality and the human condition and found it wanting. A battle between the good and evil is fought within the conscience of every human being. An inner dialogue takes place regarding every moral decision we make. The continuation of a civilized society is dependent upon more human beings choosing the path of good versus the path of evil.

We can be the most technologically advanced civilization in history, but if we allow moral degeneration to dominate our culture, our civilization will be doomed. It feels as if our society is leaning towards the dark side and this realization is leading to an epic showdown between good and evil. We are truly experiencing a winter of discontent. The winner of this battle will determine the future course of our country.

“We can shoot rockets into space but we can’t cure anger or discontent.” ? John Steinbeck, The Winter of Our Discontent

Published:2/24/2019 3:40:51 PM
[Markets] The AI Road To Serfdom?

Authored by Robert Skidelsky via Project Syndicate,

 Should we trust the conventional economic narrative according to which machines inevitably raise workers' living standards?

Surveys from round the world show that people want secure jobs. At the same time, they have always dreamed of a life free from toil. The “rise of the robots” has made the tension between these impulses palpable.

Estimates of job losses in the near future due to automation range from 9% to 47%, and jobs themselves are becoming ever more precarious. Yet automation also promises relief from most forms of enforced work, bringing closer to reality Aristotle’s extraordinary prediction that all needed work would one day be carried out by “mechanical slaves,” leaving humans free to live the “good life.” So the age-old question arises again: are machines a threat to humans or a means of emancipating them?

In principle, there need be no contradiction. Automating part of human labor should enable people to work less for more pay, as has been happening since the Industrial Revolution. Hours of work have fallen and real incomes have risen, even as the world’s population increased sevenfold, thanks to the increased productivity of machine-enhanced labor. In rich countries, productivity – output per hour worked – is 25 times higher than it was in 1831. The world has become steadily wealthier with fewer man-hours of work needed to produce that wealth.

Why should this benign process not continue? Where is the serpent in the garden? Most economists would say it is imaginary. People, like novice chess players, see only the first move, not the consequences of it. The first move is that workers in a particular sector are replaced by machines, like the Luddite weavers who lost their jobs to power looms in the nineteenth century. In David Ricardo’s chilling phrase, they become “redundant.”

But what happens next? The price of clothes falls, because more can be produced at the same cost. So people can buy more clothes, and a greater variety of clothes, as well as other items they could not have afforded before. Jobs are created to meet the shift in demand, replacing the original jobs lost, and if productivity growth continues, hours of work can fall as well.

Notice that, in this rosy scenario, no trade unions, minimum wages, job protections, or schemes of redistribution are needed to raise workers’ real (inflation-adjusted) income. Rising wages are an automatic effect of the fall in the cost of goods. Provided there is no downward pressure on money wages from increased competition for work, the automatic effect of technological innovation is to raise the standard of living.

This is the famous argument of Friedrich Hayek against any attempt by governments or central banks to stabilize the price level. In any technologically progressive economy, prices should fall except in a few niche markets. Businessmen don’t need low inflation to expand production. They need only the prospect of more sales. “Dearness” of goods is a sign of technological stagnation.

But our chess novice raises two important questions:

“If automation is not confined to a single industry, but spreads to others, won’t more and more jobs become redundant?

And won’t the increased competition for the remaining jobs force down pay, offsetting and even reversing the gains from cheapness?”

Human beings, the economist replies, will not be replaced, but complemented. Automated systems, whether or not in robot form, will enhance, not destroy, the value of human work, just as a human plus a good computer can still beat the best computer at chess. Of course, humans will have to be “up-skilled.” This will take time, and it will need to be continuous. But once up-skilling is in train, there is no reason to expect any net loss of jobs. And because the value of the jobs will have been enhanced, real incomes will continue to rise. Rather than fearing the machines, humans should relax and enjoy the ride to a glorious future.

Besides, the economist will add, machines cannot replace many jobs requiring person-to-person contact, physical dexterity, or non-routine decision-making, at least not any time soon. So there will always be a place for humans in any future pattern of work.

Ignore for a moment, the horrendous costs involved in this wholesale re-direction of human work. The question is which jobs are most at risk in which sectors. According to MIT economist David Autor, automation will substitutefor more routinized occupations and complement high-skill, non-routine jobs. Whereas the effects on low-skill jobs will remain relatively unaffected, medium-skill jobs will gradually disappear, while demand for high-skill jobs will rise. “Lovely jobs” at the top and “lousy jobs” at the bottom, as LSE economists Maarten Goos and Alan Manning described it. The frontier of technology stops at what is irreducibly human.

But a future patterned along the lines suggested by Autor has a disturbingly dystopian implication. It is easy to see why lovely human jobs will remain and become even more prized. Exceptional talent will always command a premium. But is it true that lousy jobs will be confined to those with minimal skills? How long will it take those headed for redundancy to up-skill sufficiently to complement the ever-improving machines? And, pending their up-skilling, won’t they swell the competition for lousy jobs? How many generations will have to be sacrificed to fulfil the promise of automation? Science fiction has raced ahead of economic analysis to imagine a future in which a tiny minority of rich rentiers enjoy the almost unlimited services of a minimally-paid majority.

The optimist says: leave it to the market to forge a new, superior equilibrium, as it always has.

The pessimist says: without collective action to control the pace and type of innovation, a new serfdom beckons.

But while the need for policy intervention to channel automation to human advantage is beyond question, the real serpent in the garden is philosophical and ethical blindness. “A society can be said to be decadent,” wrote the Czech philosopher Jan Patocka, “if it so functions as to encourage a decadent life, a life addicted to what is inhuman by its very nature.”

It is not human jobs that are at risk from the rise of the robots. It is humanity itself.

Published:2/24/2019 3:06:57 PM
[Markets] Karl Lagerfeld Leaves Part Of $195M Fortune To His Famous Cat

As the fashion world reels from the loss of Karl Lagerfeld - Chanel's creative director since 1983, many have been left wondering exactly how much of his estimated $195 million to $300 million fortune he left his beloved cat, Choupette - a celebrity pet with 235,000 Instagram followers and over 50,000 followers on Twitter. 

Lagerfeld told Numéro last year that the the six-year-old Birman would inherit a portion of his wealth, "Among others," adding "Don't worry, there is enough for everyone." 

"If something happens to me, the person who will take care of her will not be in misery," he said in a 2015 interview. 

Already used to a pampered life, Choupette had two personal maids, ate dinners of caviar and chicken pâté at the table off of designer dishes, and traveled on private jets. -Fortune


A post shared by Choupette Lagerfeld (@choupettesdiary) on


A post shared by Choupette Lagerfeld (@choupettesdiary) on

And while Choupette stands to set a new record for cat-heirs (the current record held by a cat named Blackie, who inherited 7 million pounds ($9.15 million) in 1988 from his British owner, Lagerfeld's cat has also raked in millions from two modeling jobs; one for German automaker Opel Corsa's 2015 calendar, and another for a Japanese beauty product. 

For those wondering if Choupette will be unable to receive the inheritance given that France, where the pair resided, doesn’t allow money to be passed down to pets, as Lagerfeld explained to Numéro, “Well it’s lucky I’m not French then.”

Lagerfeld is a German citizen. And as CBS reports, German law does allow animals to be the beneficiaries of inherited wealth. -Fortune

And while Choupette stands to become the world's richest cat, the title for richest animal in history is held by German Shepherd (from Germany) Gunther IV - who inherited his fortune from German countess Carlotta Libenstein upon her death in 1991

When it comes to self-made felines, however, nobody can hold a candle to Grumpy Cat, worth an estimated $99.5 million after the internet sensation inspired a 2014 movie, books and other merchandise. 

Published:2/24/2019 8:07:59 AM
[World] [Ilya Somin] Why Trump's Emergency Declaration is Illegal

The strongest legal argument against Trump's attempt to use emergency powers to build the wall is that declaring an emergency does not authorize him to spend money and condemn property for that purpose. But he also lacks grounds to declare an emergency in the first place.

The strongest legal argument raised in the various lawsuits against President Trump's attempt to use emergency powers to build his border wall is that declaring an emergency does not authorize him to spend money and condemn private property to build the wall. That's the conventional wisdom among most legal scholars and commentators. But it is also important to recognize that it is illegal to for Trump to declare a "national emergency" over this issue in the first place. That point is important for reasons that go far beyond the the specific case of the border wall. If the president can declare an emergency and tap a vast range of special emergency powers anytime he wants for any reason he wants, that makes a hash of the whole concept of an emergency, raises serious constitutional problems, and creates a dangerous concentration of power in the hands of a single person.

It makes much more sense to interpret the National Emergencies Act as only allowing an emergency declaration in a situation where an emergency actually exists - defined as some sudden crisis that cannot be addressed swiftly enough through ordinary political processes. By that interpretation, the situation at the border doesn't even come close to qualifying.

Why the President Cannot Just Declare a "National Emergency" Whenever he Wants

The relevant section of the NEA, 50 USC Section 1621, says that "With respect to Acts of Congress authorizing the exercise, during the period of a national emergency, of any special or extraordinary power, the President is authorized to declare such national emergency." The Act does not define what counts as a "national emergency." But the fact that president is authorized to declare one does not mean he can do so at any time for any reason. It makes much more sense to interpret the Act as allowing the president to declare a legal state of emergency only in situations where an emergency actually exists.

The whole point of emergency powers is to enable the government to respond to a sudden crisis that cannot be addressed fast enough by ordinary political processes, not to give the president a blank check to use that authority whenever it might be politically convenient. One of the most basic rules of legal interpretation is that words used in laws must be understood in terms of their "ordinary meaning." The ordinary meaning of "emergency" is a sudden crisis of some sort, not just any issue of any kind.

If the term "national emergency" is interpreted broadly enough to allow the president to declare one anytime he wants, that would make Section 1621 unconstitutional. Declaring a national emergency allows the president to exercise a wide range of powers that normally belong to Congress, including spending money and imposing regulations on private parties. The "nondelegation" doctrine restricts Congress' ability to delegate its powers to another branch of government. For many years, the Supreme Court has taken a very permissive approach to delegation. All the Court requires is for the delegation to be constrained by an "intelligible principle." But allowing the president to tap congressional powers by declaring an emergency for any reason he wants runs afoul of even that weak restriction. There can be no "intelligible principle" when the whole question is entirely left up to executive discretion.

At the very least, interpreting "national emergency" to give total discretion to the president raises serious constitutional problems. And the Supreme Court has repeatedly ruled that judges must try hard to avoid interpreting statutes in ways that risk rendering them unconstitutional. The most famous recent example is NFIB v. Sebelius, where Chief Justice John Roberts famously reinterpreted the Obamacare individual health insurance mandate as a tax in order to save it from unconstitutionality, even though he admitted that was not the "most natural reading" of the law. He concluded that courts must adopt any available "reasonable" interpretation of a statute that would make it constitutional, even if it is not actually the best interpretation.

I am no great fan of this "avoidance canon." But as long as the Supreme Court requires federal judges to follow it, they must interpret "national emergency" in a way that doesn't give the president unconstrained discretion to declare one anytime he wants. Interpreting "emergency" to mean something like "sudden crisis" is at least a "reasonable" interpretation of the word, and it neatly avoids any possible constitutional problems.

Ironically, conservatives and libertarians are the ones who have long argued for stronger enforcement of the nondelegation doctrine, while most liberals have generally been hostile to the idea. Trump's national emergency declaration might perhaps lead the latter to reconsider their position.

Judges may face difficult decisions in situations where it is hard to tell whether the problem at hand really is a suddenly emerging crisis or not. But difficult borderline questions are common in judicial decision-making, particularly when interpreting imprecise terms like "emergency." When it comes to laws intended to trigger dangerous powers that circumvent the normal political process, it makes sense to put the burden of proof on the executive to show that a genuine emergency actually exists.

But even if courts should defer to the president's judgment in relatively close cases, that does not mean they should give him a blank check to declare an emergency anytime he wants. The current situation is not a close case at all.

The Situation at the Border is Not a Sudden Crisis - and therefore Cannot be Declared a National Emergency

If a "national emergency" can only be declared in the event of a sudden crisis, Trump's declaration clearly doesn't qualify. Quite simply, there is no crisis at the border. To the contrary, crime and terrorism risks in the border area are very low, and the number of illegal border crossings has been dropping. The vast majority of undocumented immigration is a result of visa overstays, not illegal border crossings at all. Trump also cites the flow of illegal drugs as a justification for the declaration. But 80 to 90 percent such drugs are brought in through legal ports of entry that would not be affected by his proposed wall.

Moreover, it is implausible to claim that the president had declare an emergency because there is no time for ordinary legislative processes to work. To the contrary, Congress has been considering Trump's demand for a wall for over two years now. The issue is not that they haven't had time to authorize one, but that they simply disagree with Trump about the need for it. Disagreement between the legislature and the executive is not an emergency. It's a normal part of our system of separation of powers. If the president can't get Congress to pass the laws he wants, that doesn't justify circumventing it by declaring an "emergency."

The above assumes that current immigration restrictions and the War on Drugs are beneficial rather than harmful. I myself oppose both. Most of the real problems at the border arise from the grave injustices caused by these policies. But even observers more sympathetic to status quo policies than I am should be able to recognize that Trump's emergency declaration does not address any sudden crisis. Even Trump himself seems to understand that. He admits he "didn't need to do this" and only declared a national emergency because he'd "rather" build the wall "much faster" than Congress is willing to authorize.

The claim that the border situation is an emergency is also belied by the nature of Trump's proposed remedy for the supposed problem. Even setting aside delays likely to be caused legal challenges, the wall will probably take years to build. Any problem for which the wall is a plausible solution is by definition not an emergency. To claim otherwise is much like saying that we can put out a raging fire by building a new fire station over the course of several years.

The administration can argue that there is an emergency because illegal border crossings and drug flows still persist and are unlikely to be completely eliminated anytime soon, if ever. But by that standard, there is an emergency any time any federal law is not perfectly enforced and some violations continue to occur. And that's true of almost every law on the books.

For example, surveys show that over 50 percent of adult Americans admit to violating federal laws banning possession of marijuana. Only a small fraction of them have ever been caught or prosecuted. Can the president declare a national emergency and start spending unauthorized money and condemning property to go after pot smokers?

If Trump's desire to build a wall qualifies as an emergency, then pretty much anything does. The president would have unlimited power to declare any real or imagined problem an emergency, and thereby tap a wide range of emergency powers.

The Perils of Setting a Dangerous Precedent

If courts conclude that the president can declare any emergency for virtually any reason he wants, it would set a dangerous precedent that goes far beyond wall-building. The National Emergencies Act allows the president to use an emergency declaration to trigger a wide range of powers, including such extremely dangerous ones as shutting down electronic media (potentially including the internet), and even testing chemical and biological weapons on unwilling human subjects.

Even the wall-building situation is itself deeply problematic. After all, Trump is claiming not just the authority to spend money on the wall, but also the power to use eminent domain to seize the property of thousands of people. If he can do that to build a border wall, other presidents can do the same thing to take property for a wide range of other purposes.

No one person - especially a politician - can be trusted with such vast, nearly unconstrained power. Conservatives who may be comfortable trusting Trump with it are unlikely to be so happy when the next liberal Democratic president inherits the same authority and uses it to promote left-wing causes.

Some suggest we need not worry too much about setting a precedent, because there have already been numerous questionable emergency declarations, including some that have lasted for many years.

I won't try to go through all of the previous 58 emergency declarations issued since the NEA was enacted in 1976. But virtually all of them did in fact involve crises that emerged suddenly and at least plausibly required a swift response that did not leave time for ordinary political processes to react quickly enough. All or nearly all were also invoked to take measures to address the problem quickly, not ones like Trump's wall, that would take years to have any effect. And none involved the president appropriating and seizing private property for a project Congress had repeatedly refused to support on the scale the president wanted, as is the case with the wall.

It is admittedly problematic that many previous emergencies have lasted for years, without any additional congressional authorization. The NEA does not impose any time limit on an emergency declaration. So one can potentially go on indefinitely, if the president wants it to.

The NEA states that a declaration can be ended by Congress if it passes a resolution disapproving it, as congressional Democrats are now attempting to do. But any such resolution is subject to veto by the president. And he can almost always count on sufficient support from his own party to prevent his veto from being overridden by the necessary two-thirds majority in both houses of Congress.

But the failure of the NEA to effectively limit the duration of emergency declarations does not mean it also imposes no constraints on their initation. The difficulty of terminating an emergency once it has been declared makes it all the more important to enforce legal constraints on declaring one in the first place, to ensure these powers cannot be used unless there is an actual emergency.

It is certainly possible that some previous emergency declarations were legally dubious. Trump is far from the first president to abuse his authority. But the fact that some of his predecessors may have acted illegally is no reason to let Trump get away with it, too. To the contrary, it is all the more reason to crack down on such abuses of power, so they will not be repeated.

Published:2/23/2019 5:30:00 PM
[Markets] The State Expands Its Responsibilities In Order To Expand Its Power

Authored by Aayush Priyank via The Mises Institute,

Many moviegoers might recognize the following quotation: “with great power comes great responsibility.”

Reality, however, is the exact opposite of what the quote describes.

In reality, it is responsibility that precedes power.

In a corporation, for instance, when you’re hired you are told your responsibilities and the powers granted to you are those that are necessary for you to accomplish your responsibility.

In John’s family, John’s father demands that everyone stay out of the kitchen while he cooks, lest they distract him. It is not because John’s father has the power to keep everyone out of the kitchen that he has accepted the responsibility of cooking; it is because he is responsible for cooking that he has the power to keep everyone out of the kitchen.

A vast number of self-help books focus on self-responsibility. This is no coincidence. It is only by accepting responsibility for our lives that we can acquire power over our lives. On the other hand, by blaming others for our conditions, we forfeit our responsibility, and consequently, our power.

Responsibility is important not just because it provides power but also because, as psychologist Jordan Peterson has often remarked, most people find the meaning of their lives through responsibility.

Examining American history, it is evident that the expansion of government powers has been a direct result of the government’s theft of the responsibilities of the individual.

There is a rather straightforward argument that is consistently presented by the government in order to justify its theft of responsibilities that rightfully belong to others.

The argument begins by pointing out a problem that exists. Then the argument says that our lives would be better if the problem didn’t exist. The conclusion the government reaches is that since it would be better for the problem not to exist, the government should be responsible for removing it.

Take any governmental expansion as an example.

For example, the Federal Reserve justifies itself in part by noting economic crises are bad and shouldn’t happen. It is then claimed that governments, through their central banks, must be responsible for ensuring that these crises don’t happen. Vast powers are then granted to central banks who attempt to carry out their “responsibilities.”

Similarly, Social Security resulted from the government accepting responsibility of economic security for retirees and other specific groups of people. By doing so, it appropriated to itself the responsibility that belongs to individuals, families, churches, and other private organizations.

Medicare, unemployment benefits, food stamps, and the recent attempts at universal health care, aim to do the same.

Such theft of responsibility is disguised, and often even accepted, as virtuous. After all, providing solutions to problems is something that corporations do as well, don’t they? Yet the difference lies in the conditions set forth.

On the other hand, when dealing with a corporation, one can acquire the solution to a problem (food to solve hunger, insurance to solve risk of medical issues, and so forth) at a certain specific price. Moreover, rights, responsibilities — and the powers that come with them — are specifically listed and explained.

Governments, however, take on a variety of responsibilities as a justification for greatly expanding powers - claiming these powers are necessary to fulfill these new responsibilities. These powers, however, usually become unlimited, bloated, and expensive. There is no true legal contract between the government and the individuals for whom the government is “responsible” for. Thus, there is no way of holding the government accountable should it fail to keep up its end of the bargain.

Ultimately, the list of “responsibilities” continually grows, but the list of powers grows even faster.

The unconditional manner in which the government offers ‘help’ and seizes an individual’s responsibility serves only to steal the individual’s power over his own life and erode away that which provides him meaning.

Published:2/23/2019 1:31:24 PM
[Markets] Schiffting To Phase 2: The Mueller Report 'Disappointment' Will Be Just The Beginning

James Howard Kunstler notes that the #Resistance has been losing bigly in recent days as each new “bombshell” it manufactures turns out only to reveal its modus operandi, which is that the end justifies the means - the end being to evict the wicked Mr. Trump from office and the means being dishonesty and bad faith in its use of the government’s prosecutorial machinery.

The New York Times has a Friday op-ed, The Mueller Report Is Coming. Here’s What to Expect, declaring, “A concise report will probably act a a ‘road map’ to investigation for the Democratic House — and to further criminal investigation by other prosecutors.”

Translation: prepare to be disappointed by Mr. Mueller’s report and microwave a giant tub of popcorn for an extravaganza of sequels and re-boots. Beware of what you wish for. If the baton is passed to House committee chairs Jerrold Nadler, Maxine Waters, and Elijah Cummings, then in Act Two of the show, the country will be treated to something like the Spanish Inquisition as performed by Moe, Larry, and Curly.

But, as The Wall Street Journal's Kimberley Strassel notes, there’s been no more reliable regurgitator of fantastical Trump-Russia collusion theories than Democratic Rep. Adam Schiff. So when the House Intelligence Committee chairman sits down to describe a “new phase” of the Trump investigation, pay attention. These are the fever swamps into which we will descend after Robert Mueller’s probe.

The collusionists need a “new phase” as signs grow that the special counsel won’t help realize their reveries of a Donald Trump takedown. They had said Mr. Mueller would provide all the answers. Now that it seems they won’t like his answers, Democrats and media insist that any report will likely prove “anticlimactic” and “inconclusive.” “This is merely the end of Chapter 1,” said Renato Mariotti, a CNN legal “analyst.”

Mr. Schiff turned this week to a dependable scribe—the Washington Post’s David Ignatius—to lay out the next chapter of the penny dreadful. Mr. Ignatius was the original conduit for the leak about former national security adviser Mike Flynn’s conversations with a Russian ambassador, and the far-fetched claims that Mr. Flynn had violated the Logan Act of 1799. Mr. Schiff has now dictated to Mr. Ignatius a whole new collusion theory. Forget Carter Page, Paul Manafort, George Papadopoulos—whoever. The real Trump-Russia canoodling rests in “Trump’s finances.” The future president was “doing business with Russia” and “seeking Kremlin help.”

So, no apologies. No acknowledgment that Mr. Schiff & Co. for years have pushed fake stories that accused innocent men and women of being Russian agents. No relieved hope that the country might finally put this behind us. Just a smooth transition—using Russia as a hook—into Mr. Trump’s finances. Mueller who?

What’s mind-boggling is that reporters would continue to take Mr. Schiff seriously, given his extraordinary record of incorrect and misleading pronouncements. This is the man who, on March 22, 2017, helped launch full-blown hysteria when he said on “Meet the Press” that his committee already had the goods on Trump-Russia collusion.

“I can’t go into the particulars, but there is more than circumstantial evidence now,” Mr. Schiff declared then. Almost two years later, he’s provided no such evidence and stopped making the claim—undoubtedly because, as the Senate Intelligence Committee has said publicly, no such evidence has been found.

At an open House Intelligence Committee hearing on March 20, 2017, Mr. Schiff stated as fact numerous crazy accusations from the infamous Steele dossier—giving them early currency and credence. He claimed that former Trump campaign aide Carter Page secretly met with a Vladimir Putin crony and was offered the brokerage of a 19% share in a Russian company. That Trump campaign manager Paul Manafort tapped Mr. Page as a go-between. That the Russians offered the Trump campaign damaging documents on Hillary Clinton in return for a blind eye to Moscow’s Ukraine policy. Mr. Schiff has never acknowledged that all these allegations have been debunked or remain unproved.

There was Mr. Schiff’s role in plumping the discredited January BuzzFeed story claiming Mr. Mueller had evidence the president directed his former personal lawyer Michael Cohen to lie to Congress. The special counsel’s office issued a rare statement denying the report. There was Mr. Schiff’s theory that the mysterious phone calls Donald Trump Jr. placed before his 2016 meeting with Russians at Trump Tower were to Candidate Trump. Senate Intel shot that down. And don’t forget Mr. Schiff’s February 2018 memo claiming the Steele dossier “did not inform” the FBI probe, because the bureau didn’t obtain it until long after the probe’s start. Testimony from Justice Department officials shot that one down, too.

With a track record like this, who wouldn’t believe Mr. Schiff’s new claim, in the Ignatius interview, that the key to collusion rests in Trump finances—in particular something to do with Deutsche Bank ? But hold on. Where did we first hear that Deutsche Bank theory? That’s right. See pages 64 and 117 of the wild House testimony of Glenn Simpson—head of Fusion GPS, the organization behind the Steele dossier. It’s right there, stuffed in between Mr. Simpson’s musings that Ivanka Trump might be involved with a “Russian Central Asian organized crime nexus,” that there is something nefarious happening on the “island of St. Martin in the Caribbean,” and that Roger Stone is part of a “Turkey-Russia” plot.

Mr. Schiff is taking his cue for Phase 2 of his investigation from the same Democrat-hired opposition-research group that launched the failed Phase 1.

At the start of all the Russia craziness, Mr. Schiff had a choice: maintain the bipartisan integrity of his committee by working with Republicans to find honest answers, or take on the role of resident conspiracy theorist. He chose his path. The rest of us should know better than to follow him.

Meanwhile, as Jim Kunstler continues,  ths antics of Waters, Schiff et al., may be eclipsed by the now inevitable inquiry around the misdeeds carried out by public officials in Act I of the show: the Russia Collusion Ruse. Based just on the current Andy McCabe book tour, there will be an awful lot to get to, and it is liable to be far more compelling than the nonsense conjured up by the Three Stooges. Mr. McCabe, in his quest to hand off the hot potato of culpability to his former colleagues, and to sell enough books to pay his lawyers’ retainers, has neatly laid out the case for his orchestrating a coup d’etat within the FBI.

It’s an ugly story, and it’s all out there now, like so much spaghetti hurled against the wall, and it won’t be ignored. There are many other spaghetti wads already plastered on that wall ranging from Hillary Clinton’s Fusion GPS hijinks, to Loretta Lynn’s written assurances to the Clinton campaign that the email server matter would be dropped, to the rather complete failure of the FISA process, and much much more that needs to be ventilated in a court of law.

I suspect that Barack Obama and his White House confidantes will enter the picture, too, sooner later, and to the great dismay of his partisans who do not want to see his legacy tarnished. Whatever your view of all these dark events, it would be pretty awful for the country to have to see him in a witness chair, but it may be unavoidable. Ditto Hillary, who is liable to go all Captain Queeg-y when she finally has to answer for her campaign’s turpitudes.

Most of this cast of characters has seemingly gone-to-ground in recent months, laying low, staying out of the news, probably spending much of their time conferring with their attorneys - Brennan, Clapper, Comey, et al, all keeping their traps shut in recent days as Andy McCabe takes his hangdog road-show around the Cable Networks and the NPR fluff chamber, spelling out the “stress” that prompted the FBI’s desperate attempt to cover its ass following the unbelievable 2016 election results.

I don’t pretend to know what the new Attorney General William Barr might do. He must realize that if he lets all this slide, the institutional damage will be permanent and severe. He is reputed to be a good friend of Special Prosecutor Mueller. Mr. Mueller’s reputation as the straightest of straight arrows seems at odds with the actual exercise of his office: generating rinky-dink “process” crimes against bit-players in the story, often via malicious prosecutorial tactics. The likely truth is that he was brought into the scene to protect the very characters who misused the terrible powers of the FBI and the Department of Justice. His investigation has been hermetically sealed against leakage. For all I or anyone else knows, he has spent some time preparing a case against the very officers who cooked up the Russia story in the first place. Perhaps not a high-percentage bet, but there it is for consideration.

It’s going to be an interesting month. Have you forgotten that General Michael Flynn will be returning to Judge Emmet Sullivan’s courtroom after three months in the doghouse that the judge sent him to for the purpose of reconsidering his guilty plea? Perhaps Gen. Flynn rediscovered that he has a spine this winter and will venture into a trial of the Mickey Mouse charge against him: that, as incoming National Security Advisor to the President, he had preliminary discussions with the Russian ambassador — in all other transitions-of-power, a completely normal procedure — and supposedly lied about it to the FBI. To the very people orchestrating a coup against his boss, the chief executive.

Published:2/22/2019 1:24:01 PM
[Politics] RIDICULOUS: Iowa bill attacks homeschoolers with MANDATORY home inspections Democrats in Iowa are attacking homeschooling in a new bill that would call for mandatory health and safety inspections for all families who don’t report to their school districts: CBN NEWS – . . . Published:2/21/2019 2:17:05 PM
[Politics] RIDICULOUS: Iowa bill attacks homeschoolers with MANDATORY home inspections Democrats in Iowa are attacking homeschooling in a new bill that would call for mandatory health and safety inspections for all families who don’t report to their school districts: CBN NEWS – . . . Published:2/21/2019 2:17:05 PM
[Markets] "The Berkshire Trade": How Deutsche Bank Conspired To Conceal A $1.6 Billion Loss

On a day when Frankfurt's most problematic lender was already in the headlines  for its internal deliberations about how to shield itself from the operational and reputational blowback should the President of the United States default on $340 million in loans, a team of investigative reporters from the Wall Street Journal stunned readers by publishing a fascinating, if embarrassing for the German lender, story about a losing bond trade that cost the bank some $1.6 billion over ten years, and would have never been disclosed had it not been for some impressive financial sleuthing.


According to the WSJ, not only did Deutsche magnify its losses by waffling over what to do about the trade, but senior managers at the bank also signed off on efforts to try and conceal losses from regulators and the public by shuffling what insiders at the bank nicknamed "the Berkshire Trade" off of the bank's trading books and concealing it in the opaque "non-core operations unit" - aka Deutsche's "bad bank," a sort of Pet Cemetary for the bank's most toxic assets. Because the trade involved illiquid municipal bonds, the bank had a lot of leeway in how to value the position and whether to even disclose it (it didn't). But when insiders started to question the bank's internal figures, and managers were finally forced to recokn with the magnitude of the losses, panic apparently set in, and attention immediately shifted to how the bank could cover it up. Soon, KPMG, the bank's auditor, also started asking questions, and the bank hatched a plan to "reclassify" the trade to free up reserve capital - though it was scuttled by legal.

Eventually, the bank arrived at a "Godfather"-style solution: Moving all its toxic assets to the "bad bank."

Around that time, Deutsche Bank’s financial auditors from KPMG LLP raised questions about whether the bank had set aside sufficient reserves for the bond positions, according to people involved in the matter. In December 2011, Deutsche Bank managers reassured KPMG, partly through a 14-page white paper. The paper, reviewed by The Wall Street Journal, argued that the bank was doing a good job surveying the market and estimating municipal-bond recovery and default probabilities. A KPMG spokesman declined to comment.

Within months, the valuation debates sparked an internal bank investigation. Some executives hatched “Project Marla,” a plan to reclassify the bond investment as a “financial guarantee,” eliminating its day-to-day price volatility on the bank’s books. The bank would move the bond portfolio out of its trading book and into loans and receivables. Legal and accounting objections inside the bank scuttled the plan.

In the fall of 2012, an assessment by Deutsche Bank of other Berkshire-insured municipal holdings suggested the bank’s valuation was off-base. The bank boosted reserves to about $161 million at year-end.

Late that year, Deutsche Bank unveiled a so-called bad bank, called the noncore operations unit, to wind down or sell positions that were troubled or expensive to maintain. It contained hard-to-sell assets including the Cosmopolitan Las Vegas casino, structured real-estate loans and many opaque derivative positions. The municipal-bond investment went onto the pile.

When the position was finally liquidated in 2016, the resulting loss was nearly four times its entire 2018 profit - and the biggest loss in the bank's history. And - most shocking of all -  neither the bank's auditors, nor regulators, nor management forced the bank to disclose it to the public and its shareholders aside from some casual mentions.

The bet, a package of municipal bonds and associated derivatives that the bank bought during the runup to the financial crisis, was referred to as "the Berkshire Trade" by insiders because, in March 2008, the bank bought $150 million in additional default protection from Berkshire Hathaway as a hedge.

WSJ's account of the investment is based on interviews with more than a dozen insiders and hundreds of pages of documents related to bank valuation policies. Despite all of that research, the reporters weren't able to pinpoint the exact nature of the "Berkshire Trade".

Though they offered a few hints: Back in 2007, while Greg "I am short your house" Lippman was putting on the big housing-market short that would one day make him famous, Deutsche was buying a portfolio of muni bonds that reads like a laundry list of some of the most regrettable muni-bond market blowups (though, of course, hindsight is 2020): New Jersey public transit, California public schools, public works in Puerto Rico.

In 2007, Deutsche Bank bought the roughly $7.8 billion portfolio of 500 municipal bonds, which funded schools in California, public works in Puerto Rico and transportation projects in New Jersey, among hundreds of other uses. The bonds were insured by specialized “monoline” insurers to protect the bank against defaults by the issuers.

Then the financial crisis took hold, sowing concerns about whether municipalities would make good on their bond obligations—and whether insurers would be strong enough to cover potential defaults.

The trade, which was soaking up hundreds of millions in capital every quarter, eventually became a major headache for former DB CEO John Cryan.

On May 17, 2016, top Deutsche Bank executives met in Frankfurt, Germany, for an update on the noncore unit. The biggest obstacle to lessening risk was the municipal-bond portfolio. It was tying up at least $400 million in capital that could have been used elsewhere, and getting worse, according to internal estimates. Executives including then-CEO John Cryan wanted the position gone by the end of June, when the bank would close its books on the second quarter.

Mr. Cryan privately fumed about the position, citing it as a prime example of trades that tied Deutsche Bank’s hands and demanded precious capital and attention from traders, lawyers and accountants long after any hope of profit had evaporated, according to people involved in discussions about the position.

That summer, the bank finally dumped the position. On its second-quarter earnings call that July, Mr. Cryan referred obliquely to the transaction. “In early July, we successfully unwound a particularly long-dated and complicated structured trade, which was the largest single legacy trade” in the noncore unit, he said. He didn’t specify the amount of the loss.

When the position was liquidated and the bank started a discussion with regulators about whether it should restate past quarterly results, it was eventually decided that no revisions were necessary.

Bank executives, the supervisory board’s audit committee and external advisers all were involved in the decision not to restate financial results, and the bank shared results of the review with regulators, said one person briefed on the process.

Setting aside the fact that the WSJ has exposed bank executives - including the now-departed Cryan - dissembling in their efforts to conceal the losses from public scrutiny, the story may also shed some light on Deutsche's involvement in all of those interest-rate and FX-rigging scandals: Deutsche can't trade its way out of a paper bag.

Published:2/20/2019 4:42:13 PM
[Markets] Illinois Considering "Asset Transfers" To Pensions: Be Afraid

Submitted by Mark Glennon of Wirepoints

Governor JB Pritzker’s administration has now made clear it will seriously consider the latest idea to address Illinois’ pension crisis – transferring public assets directly to state pensions. It recently announced the formation of a task force on the subject.

At its core, the concept is exceptionally simple. In practice, however, it’s exceptionally subject to smoke and mirrors and would further obscure a pension system that’s already far too opaque. More importantly, asset transfers do nothing to improve the state’s overall fiscal health.

Just convey ownership of some public assets to the pension, for free, in addition to the cash contributions taxpayers make now. That’s all this is about. Maybe the Illinois Lottery or Illinois Tollway for state pensions. Maybe Midway Airport or its water system for Chicago pensions. Those are examples of assets that have been mentioned that might be handed over.

Illinois state pensions are officially reported to have assets about $130 billion less than what they need to have on hand to pay for pension benefits already earned. Turn over ownership of the tollway and some other assets and, voila, the thinking goes, that shortfall would shrink by whatever the transferred asset is worth.

The first problem should be obvious – the state, as a whole, would be no better off. Whatever assets the state owns – which are your assets as taxpayers – would simply be moved over to the pension funds for the sole purpose of covering benefit obligations. But the pensions are really just a unit of government because Illinois courts have made clear that the sponsoring unit of government is liable directly to pensioners if pension assets ever fall short. So, pensions might be made more secure by an asset transfer, but the government’s overall balance sheet remains the same.

Not true, I’ve heard some proponents of asset transfers say. They claim there are certain public assets where the value of the asset can only be fully unlocked through a transfer to a pension. Just selling or leasing the asset to some third party, they say, wouldn’t work. I’ll believe that when I see an example.

If you’re wondering at this point whether accounting shenanigans might be at play, you’re right to be concerned. Some valuation would have to be placed on the asset transferred in order to understand a pension’s true position. But public assets don’t have clear market values. What’s the Illinois Lottery really worth, for example? Experts will have different opinions, but the temptation will be to inflate the value in order to make pension financial statements look better.

And how on earth will actuaries decide what rate of return to assume on those assets? Currently, Illinois pensions assume about 7% per year. That’s already extremely controversial, with Nobel economists being the harshest critics. This will make heads explode in the actuary world.

Over time, the value of the asset will change. The lottery’s value, for example, will drop markedly if Illinois expands other forms of gambling as rapidly as planned. Does anybody really expect pensions to honestly report that changing value, given their sordid history distorting their position with phony numbers on things like discount rates and mortality projections?

And even if honest valuations are used, another temptation will be to transfer assets that are on the books at lower valuations. That would improve a government’s reported balance sheet when it’s valued fairly in the pension after transfer, but the government’s position wouldn’t really improve at all.

In the private sector, where asset transfers to pensions are sometimes done, that accounting trick is the whole point – take an asset that’s been heavily depreciated to less than fair value and give it to the pension at fair value, which magically improves the consolidated balance sheet. That’s a sensible tactic for a private company to improve its reported position, but for governments, from a taxpayer’s viewpoint, it doesn’t change the economic realities.

How ’bout we just transfer the Thompson Center to the pensions for $500 billion and call it a day, a reader asked? Sorry, won’t work.

What about management and control of a public asset by a pension? Would you really want a pension managing Midway Airport, for example? No, advocates of asset transfers say, the whole transaction would be set up like a triple net lease, where the governmental unit would continue to be in control. Only the cash flow would be diverted to the pension.

But think about that and all kinds of questions are apparent. If the city truly kept control, it would have every incentive to reduce charges for parking, landing and gate fees, which is how airports make money. They’d be sure to cover operational expenses, but nothing would truly be left for the pension, making the whole deal unfeasible. If, on the other hand, the pension could determine those charges, well, heaven forbid that.

The complexity of asset transfers would be mind-boggling for major things like airports, water and sewer systems. They are tied up by layers of mortgages and covenants protecting bondholders. Disentangling them, if that’s possible at all, would be a matter few officeholders or taxpayers would ever understand.

Other questions are endless. Ask them and one thing will come to mind – Chicago’s disastrous parking meter deal. In that case, a public asset was transferred not for pensions but to cover city operating expenses, but the concept is similar, and similar risks of having a bad deal foisted on the public should be apparent.

If this is getting confusing, take a look at the attached example. It’s from a company promoting the idea of asset transfers – Colliers International, an investment manager and real estate services company. It puts the concept in glowing terms, a “brilliant strategy,” using as an example the transfer of an office building used by an Arizona town to it’s underfunded pension.

Read that, and you’ll understand why the concept is getting attention. But ask yourself whether town residents are really better off because of the transaction. They owned the office building. It was worth what it was worth. They used it to pay their pension. Total assets and total liabilities for the town and its pension, combined together, didn’t change.

Our view on this is the same as our view about other ways to throw money at pensions. Don’t do it unless and until the pension system is reformed. Otherwise, Illinoisans will see that their assets are being tossed into a bottomless, corrupt pit. Don’t do it all unless the economic consequences and future reporting will be transparent and certain (which is probably impossible for most assets). Don’t just give away the assets. Demand reform concessions from current workers in Tier 1, who can negotiate collectively, and Tier 1 is where all unfunded liabilities are.

The Pritzker Administration has shown no interest in any of that.

Prepare for smoke and mirrors.

Published:2/19/2019 10:41:13 PM
[World] BOOK REVIEW: 'Unexampled Courage' by Richard Gergel


By Richard Gergel

Sarah Crichton Books/ Farrar, Straus and Giroux, $17, 324 pages

"When Sergeant Isaac Woodard stepped onto the Greyhound bus in Augusta, Georgia on the evening of ... Published:2/19/2019 7:07:18 PM

[Markets] Redbook Index Confirms December Retail Collapse

Submitted by Mish Shedlock of MishTalk

Some economists were in disbelief regarding the huge collapse in retail sales in December. Other indicators now confirm.

Here is a tweet on the subject.

That chart is weekly. Ideally, we need to see monthly and it wasn't posted.


The Johnson Redbook Index is a proprietary indicator of growth in retail sales, and provides advanced estimates of trends in retail sales ahead of official releases and company reports in an easy-to-read four-page report. The weekly indicator is made public every Tuesday morning, with clients receiving notice via conference call, e-mail or fax prior to public release.

The Johnson Redbook Retail Sales Monthly is a comprehensive report of same-store sales data reported monthly by general merchandise and apparel retailers. Analysis is given on current month sales, year-on-year, quarterly and annual sales, historical sales data and company rankings. Retailers are tracked across categories: Apparel Specialty, Books, Toy & Hobby, Department, Discount, Footwear, Furniture, Drug, Home Improvement, Home Furnishings, Electronic, Jewelry, Sporting Goods, and Miscellaneous. The Johnson Redbook Same-store Sales Index (SSI), an index of year-on-year same-store sales growth is reported in each edition.

Shockingly Weak Retail Sales

Redbook ties in with my report Shockingly Weak Retail Sales: Down 1.2% in December, Sharpest Decline Since 2009

And its not just retail sales either.

Other Confirming Indicators

  1. Autos: Surge in Auto Loan Delinquencies: Auto Loans in High Gear
  2. Credit Card Stress: Household Debt Up 18 Consecutive Quarters to a New Record, Card Stress Rising
  3. Falling Imports: Trade Deficit Shrinks in November Primarily Due to Falling Imports
  4. Industrial Production: Industrial Production Dives, Wiping Out a Strong December and Then Some

Very Recessionary

Add it all up and it looks very recessionary. And the EU is already there. Eurozone Recession: Right Here, Right Now!

There is no reason to believe the US will be immune to a global slowdown. People thought that China would decouple in 2008. It didn't. The US won't either.

Published:2/19/2019 10:06:36 AM
[Markets] $3 Trillion In New Liabilities Are About To Blindside Corporate Balance Sheets

Now that we're 10 years into a debt fueled, low interest rate "recovery" and back to record levels of debt across the board, corporate balance sheets are about to be blindsided with even more new liabilities at arguably the worst time possible. A massive $3 trillion in corporate liabilities is about to show up on balance sheets for the first time ever as a result of a new corporate accounting rule that went into effect on January 1. 

In 2019, companies are going to be required to record the cost of renting assets used in operations, like office space, equipment, planes and cars, on their balance sheet. Previously, these expenses had been buried in the footnotes of financial statements. Only leases that culminated in a purchase of the asset needed to be accounted for otherwise. 

"It's going to affect all companies' leverage. They will have more liabilities on their books than they had previously," Sheri Wyatt, a partner at accounting firm PricewaterhouseCoopers, said. 

Morgan Stanley has estimated at the consumer discretionary sector will be impacted the most, and that the retail sector's leverage ratio will balloon from 1.2x to an astounding 3.4x. 

In total, U.S. public companies are committed to $3 trillion in operating leases, according to data from the International Accounting Standards Board. As a result, retailers, restaurants, airlines and shipping companies that lease properties, airplanes, cars and ships will all be affected. 

But instead of just letting the new leverage "count", and in keeping with the "ignorance is bliss" attitude we've adopted over the last several decades in the financial sector, the report suggests that analysts and investors will instead just change the way they think about leverage ratios in certain sectors to exclude the impact of the new debt. 

For years, analysts had been capitalizing leases by multiplying the annual rent expense by eight to try and estimate remaining lease payments. But these estimates are likely going to look very different from the numbers that companies will be forced to put on their balance sheets. 

Todd Castagno, equity strategist at Morgan Stanley, told CNBC: "I do think people will have to adapt to new metrics – and they may be surprised. The liabilities and assets that companies report may look very different from the ad hoc estimates that people have used in the past. Those very common metrics that people look at to value equities, to look at performance, to screen for high quality stocks, all those ratios are going to change."

The bottom line is simple: the "central bankers' bubble", as defined by TCW last year, is about to hit never before seen levels...

... and the result will be... more of the same as central banks are forced to monetize even more debt to keep interest rates from rising to a level that sends the entire house of cards tumbling down.

Published:2/17/2019 2:55:31 PM
[Markets] Furious New Yorkers Threaten To Boycott Amazon If It Leaves

Nothing can make New Yorkers happy: first, they demand that Amazon abandon its plans for a Long Island City HQ2, and now that Jeff Bezos has complied with their demands, they are threatening to boycott the online retailer.

An angry Long Island City apartment building owner of the type profiled here yesterday, called for a nationwide boycott of Amazon and its products after the tech giant pulled out of its plan to build part of its second headquarters in Queens.

Sam Musovic had invested over a $1 million in his property, anticipating overnight riches from the economic boost that HQ2 was expected to bring, according to a statement released Friday. Amazon said it would have created 25,000 jobs in the area, paying an average of $150,000 a year.

However, as the tragicomic statement continues, Musovic made the investment "only for Amazon to stand him up on Valentine’s day — and leave him with nothing but the bill and a broken heart", according to Fox News.

Graffiti painted on a sidewalk by someone opposed to the location of an Amazon headquarters in Long Island City

Having "lost" hundreds of thousands in unbooked real-estate "profits" that until Thursday were dancing merrily inside his head, Musovic, who in addition to being a landlord is also a restauranteur, started a petition to boycott Amazon that is being circulated among Queens residents and business owners. He also intends to take legal action against the tech giant, according to the statement. “Musovic and his fellow business and apartment building owners are weighing their legal options,” it said, although it was unclear why the object of his ire is Amazon and not, say, progressive New York politicians who made it clear to Bezos that his company would not be welcome in Long Island City.

A scheduled protest outside Amazon Books in Midtown Manhattan took place on Friday afternoon, and a handful of people showed up.

Several months after Amazon announced it planned to spend $2.5 billion building its LIE HQ2 building, spawning a project that NYC mayor Bill de Blasio said would pay for the $2.8 billion in tax rebates and incentives "many times over", the deal sparked intense opposition from vocal critics such as Democratic lawmaker Alexandria Ocasio-Cortez, who represents parts of Queens. In an interview with NBC News Thursday, Amazon’s Head of Policy Communications Jodi Seth slammed Ocasio-Cortez and other opponents of the deal. "If you talk to Alexandria Ocasio-Cortez, it's 'Never Amazon,'" she said.

Exasperated by the political pushback, Seth said explained that "looking at the opposition and the timeline we decided we don't want to work in this environment in the long term."

Meanwhile, willing to take full credit for the loss of some 25,000 jobs, Ocasio-Cortez took a victory lap on hearing of Amazon’s decision and targeted the company’s CEO Jeff Bezos, incidentally one of president Donald Trump's harshest critics. “Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world,” she tweeted Thursday, unable or unwilling to realize that by owning this particular fiasco, she may have doomed her political career.

And just to make it clear who is truly responsible for the deal collapse, NY Governor Cuomo blasted Ocasio-Cortez and other lawmakers who opposed the deal. A small group of politicians “put their own narrow political interests above their community,” he said, in a statement released Thursday.

Cuomo added that “poll after poll showed overwhelmingly supported bringing Amazon to Long Island City - the state's economic future and the best interests of the people of this state.” He then lashed out at the New York State Senate, which "has done tremendous damage," and "should be held accountable for this lost economic opportunity."

However, as the liberal discord escalated, only chaos ensued, and Cuomo’s statement was at stark odds with mayor de Blasio’s initial response to the news, which criticized Amazon. “We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world. Instead of working with the community, Amazon threw away that opportunity,” he said, in a statement released Thursday afternoon.

Then on Friday, speaking to WNYC public radio, de Blasio doubled down, saying "here’s Bezos and here’s Amazon, the definition of 1 percent. Look how little regard there was for everyday people. And it just dispels the notion that these big corporations are willing to be good citizens and good neighbors."

"It’s disrespectful to the people of NYC to get a call after months of attempting to build a productive partnership on behalf of this city, to get a call out of the blue saying, ‘See ya, we’re taking our ball and we’re going home,'" de Blasio added.

On Thursday evening, de Blasio told reporters that he was stunned by Amazon’s decision. The mayor said that 48 hours before the announcement, he spoke with a senior company executive who gave no indication that there was a problem with the deal. But Thursday morning, he got a call from an executive just as news started to come out that the deal was dead.

"I was flabbergasted," he told reporters in Boston, where he was taking part in a forum at Harvard's Kennedy School. "I said, 'Why on earth after all the effort we all put in would you simply walk away?'"

Yes, rejection is never, pleasant, even for a socialist like de Blasio.

Meanwhile, signaling much more trouble ahead for New York's tax incentives, opposition against the HQ2 tax breaks had been mounting since the deal was announced in November. In December, Amazon execs were grilled and jeered at a New York City Council meeting over the tech giant’s headquarters plan.

In pulling out, Amazon said it isn't looking for a replacement location "at this time." It said it plans to spread the technology jobs that were slated for New York to other offices around the U.S. and Canada, including Chicago, Toronto and Austin, Texas. It will also expand its existing New York offices, which already have about 5,000 employees.

As for Sam Musovic, whose dreams of overnight riches crumbled when some liberals wanted to virtue signal that they are even greater liberals than some other liberals, good luck in your lawsuit against the world's richest man and world's most valuable company.

Published:2/15/2019 6:13:22 PM
[Markets] Nomi Prins: Get Used To "The Powell Put"

Authored by Nomi Prins via The Daily Reckoning,

In the land of the Federal Reserve and its market-manipulating mechanisms, there’s now an unofficial market term called the “Powell Put” or the “Powell Pivot.”

It is in direct reference to Fed chairman Jerome Powell. Before he became chairman, Wall Street referred to prior heads’ policies with terms like the “Greenspan Put” the “Bernanke Put” and the “Yellen Put.”

In layman’s terms, what the term means is that if the markets fall by too much, the Fed will swoop in and try to save the day, the month, or the year. A “put” in options terminology is insurance against a drop in prices. Nowadays, the “Powell Put” is the market’s insurance that the Fed will act to stimulate the markets if necessary.

Markets had been waiting for it to materialize. But Powell had previously talked about the need to raise rates to give the Fed “enough ammunition to fight the next crisis.” The size of the Fed’s balance sheet would also have to be reduced enough to provide it enough room to grow if needed.

Markets began to worry the Powell Put might never materialize when he raised interest rates in December, when the market was in the middle of a severe correction (that nearly culminated in a bear market). He also said the balance sheet reductions, or quantitative tightening, would run on “autopilot.”

Markets tanked on his comments. But then on Jan. 4, after stocks fell nearly 20%, the “Powell Put” finally materialized.

In comments addressing the American Economic Association, Powell said he was “prepared to adjust policy quickly and flexibly.”

And about the balance sheet reduction policy that was on autopilot in November, he said

“We wouldn’t hesitate to change it.

Powell has subsequently emphasized the need for “patience.” The Dow has continued to rally behind his newfound dovishness. In fact, this January was the best January in 30 years. If the rally continues, the market could soon be testing its early October highs.

What this means is that the Fed isn’t going to raise rates anytime soon. As my colleague Jim Rickards has explained, “patience” isn’t just a word. It’s a signal to markets that the Fed will not be raising rates anytime soon, and that it will give them notice when it is.

The Fed is also unlikely to reduce the size of its balance sheet in a bold way, as long as economic headwinds from around the world continue. That in turn, means dark money will remain available to boost markets.

There are two main ways the Federal Reserve can unleash dark money into the financial system. One is by keeping interest rates (or the cost of money) low or at zero percent. The other is through quantitative easing (QE) or bond-purchasing, where the Fed creates money electronically and uses it to give to banks to buy Treasury or mortgage bonds from them.

Reducing the cost of money, or interest rates to zero, was done for the first time by the Fed in the wake of the financial crisis. The Fed did this supposedly as an emergency measure to inject money into the system because banks had stopped lending. In addition, QE was enacted because interest rate policy wasn’t effective enough. Again, supposedly, it was supposed to be an emergency measure.

But we saw how the stock market reacted when Powell said QT would run on autopilot. Now the Fed is ready to finalize plans that would leave the balance sheet at a much higher level than it previously envisioned. Again, that means additional support for markets.

In the latest development, as Brian Maher discussed in yesterday’sDaily Reckoning, Federal Reserve Bank of San Francisco President Mary Daly suggests that the Fed could decide to use its balance sheet as a routine part of how it guides the economy, not just as a last-ditch measure to deploy in emergencies.

That means what was once supposed to be an emergency measure could become just another regular policy tool if normal interest rate policy isn’t enough to stimulate a non-responsive economy. We’ll have to wait and see if this idea gains traction within the Fed. Either way, reducing the balance sheet to “normal” levels is no longer a priority for the Fed.

But it’s not just the Fed that is putting additional tightening on hold. Central banks around the globe have been re-calibrating their policies to reflect the weaker economic environment.

As one Wall Street Journal article recently reported, “Central bankers have geared their messages toward pausing on tightening steps rather than imminently launching new stimulus.”

Central banks from South Korea, Malaysia, Indonesia and Canada, who all raised rates last year, are now questioning such plans. The Bank of Japan and European Central Bank also indicated last week that their negative rates are here to stay for the foreseeable future.

The truth is it’s all about the $21 trillion of dark money fabricated by, and dispersed from, the world’s major central banks. The volatility periods, including last year’s nearly 20% correction, are related to the fear that dark money supplies will go away.

These factors will keep sparking intermittent fear and volatility this year — but dark money collusion will not be going anywhere. While there will be some minor rate hikes here and there, and mild tweaking of massive asset books, the overall story will remain the same. You should expect major central banks to end the year, on average, with asset books in total size right where they started.

Once again, that means dark money will continue to be available to markets.

The fact is, dark money is the #1 secret life force of today’s rigged financial markets. It drives whole markets up and down. It’s the reason for today’s financial bubbles.

On Wall Street, knowledge of and access to dark money means trillions of dollars per year flowing in and around global stock, bond and derivatives markets.

I learned this firsthand from my career on Wall Street. My first full year working on Wall Street was in 1987. I wasn’t talking about “dark money” or central bank collusion back then. I was just starting out.

Eventually, I would uncover how the dark money system works, how it has corrupted our financial system and encouraged greed to the point of crisis like in 2008. When I moved abroad to create and run the analytics department at Bear Stearns London as senior managing director, I got my first look at how dark money flows and its effects cross borders.

That dark money goes to the biggest private banks and financial institutions first. From there, it spreads out in seemingly infinite directions affecting different financial assets in different ways.

Yet these dark money flows stretch around the world according to a pattern of power, influence and, of course, wealth for select groups. To be a part of the dark money elite means to have control over many.

These is not built upon conspiracy theories. To the contrary, alliances make perfect sense and operate publicly. Even better, their exclusive dealings and the consequences that follow are foreseeable — but only if you understand how the system works and follow the dark money flows.

Dark money rules the world, and it could keep the bull market running longer than most people expect, even though the eventual turnaround could be ugly.

Published:2/15/2019 5:43:17 PM
[Markets] Niall Ferguson Says Bitcoin Is "An Option On Digital Gold"

Authored by Helen Partz via

Niall Ferguson, British economic and financial historian, believes that Bitcoin (BTC) is “an option an digital gold,” as he said in a interview with a blockchain magazine Breaker Mag on Feb. 13.

image courtesy of CoinTelegraph

Ferguson, a world famous historian and author fourteen books such as The Ascent of Money, declared that Bitcoin itself is “only money in a very limited sense,” stressing that the oldest cryptocurrency is incapable of being money as a means of payment due to massive volatility.

However, in near future, Bitcoin’s main function will be serving as a type of insurance, Ferguson stated, explaining that it is an asset that is hard to confiscate, and anyone might hold private keysthe same way the European wealthy used to hoard gold jewelry and precious stones.

While Ferguson said that it is clear that the money of future will be digital, he still expressed scepticism about stablecoins, which are digital currencies that are designed to provide minimum volatility and pegged to fiat currencies, commodities or algorithms.

Ferguson stated that fiat currencies have indeed performed very well in recent years in terms of inflation. In this context, Ferguson said that building a substitute for something that has been doing well since its inception in the 1970s is “not an obviously winning strategy.” He said:

“Stablecoin builders should remember that Bitcoin is an unusual kind of asset, which isn’t closely correlated to other asset classes. Investors like that idiosyncrasy.”

Regarding the future of money, Ferguson expressed hope that the global community will adopt a universal payment system that treats everyone equally, from the “0.1 percent” to the “huge class” of people who are outside the financial system, and have to rely on cash and payday loans. Ferguson also expressed concerns about huge centralized entities that might gain control over customer transactions:

“My nightmare would be that AmazonGoogle, or Facebook creates some hugely popular version of a digital dollar at which point every transaction is going to be monitored by the network platforms’ big data and [artificial intelligence] AI systems, to an even greater extent than is already true.”

Earlier today, Mike Novogratz, a former Goldman Sachs partner and founder of crypto merchant bank Galaxy Digitalargued that Bitcoin is going to be a digital gold, claiming that it will be sovereign money.

Published:2/15/2019 11:13:20 AM
[Markets] Turkish Man Sentenced To Read & Summarize Erdogan's Biography For Insulting Him


An Istanbul court sentenced 75-year-old Ali Sahin, who was accused of insulting Turkish President Recep Tayyip Erdogan, to read and summarize 24 books, including an Erdogan biography, the Oda TV news website reported on Sunday.

Sahin was investigated by an Istanbul prosecutor for allegedly insulting Erdogan in a coffeehouse, a charge he denied and claimed to be slander.

The man was questioned by the police then released on probation.

During a visit to the probation bureau, Sahin learned that he had been sentenced to read and write summaries of 24 books listed by the Istanbul 8th Criminal Court of Peace.

The list included, besides several Turkish and international literary classics, Islamist and pro-Erdogan publications by people such as Faruk Köse, a columnist for a daily with radical Islamist views, and pro-government journalists Abdulkadir Selvi and Turgay Güler as well as “The Birth of a Leader,” a biographical work about Erdogan.

“My lawyer has objected to the decision. Nevertheless, I’ll procure these books and start reading them. I’m 75. I don’t want to deal with stuff like this,” Sahin said.

Several jurists told Oda TV that the court’s decision goes against European human rights legislation and relevant provisions of the Turkish Constitution in that it compels a person to read publications with political narratives that he doesn’t believe in, a clear violation of the principles of freedom of belief and respect for private life.

Published:2/15/2019 4:09:24 AM
[Markets] A California School Teacher Speaks Out: "Americans, We Need To Wake Up"

Via Jim Quinn's Burning Platform blog,

Sent by P2

Shared on Facebook by a teacher in California who sees firsthand the destruction of America.

“Nine hundred teachers just got laid off from the Los Angeles Unified School District. They are $650,000 over their annual budget. The following comments by an English teacher help to explain one area that looms large over California’s educational crisis. I hope each person receiving this mail will read it carefully, all the way to the end.

It is sad what is happening to our great country, all because our politicians are afraid they will miss out on a vote. What a travesty!

This English teacher has phrased it the best I’ve seen yet and it should make everyone think, be you Democrat, Republican or Independent.

From a California school teacher...

As you listen to the news about the student protests over illegal immigration, there are some things that you should be aware of: I am in charge of the English-as-a-second-language department at a large southern California high school which is designated a Title-1 school, meaning that its students average in the lower socio-economic and income levels.

Most of the schools you are hearing about are Compton, South Gate High, Bell Gardens, Huntington Park, etc., where their students are protesting – these are also Title-1 schools.

Title-1 schools are on the free-breakfast and free-lunch program. When I say free breakfast, I’m not talking about a glass of milk and a roll. But a full breakfast and cereal bar with fruits and juices that would make the Marriott proud.

The waste of this food is monumental, with trays and trays of it being dumped in the trash uneaten. (Our tax dollars at work!)

I estimate that well over 50% of these students are obese or at least moderately overweight. About 75% or more have cell phones.

The school also provides day care centers for the unwed teenage pregnant girls (some as young as 13) so they can attend class without the inconvenience of having to arrange for babysitters or having family watch their kids (More of our tax dollars at work!)

I was ordered to spend $700,000 on my department, or risk losing funding for the upcoming year even though there was little need for anything.

My budget was already substantial, but I ended up buying new computers for the Computer Learning Center, half of which, one month later, were carved with graffiti by the appreciative students who obviously feel humbled and grateful to have a free education in America. (More and more of our tax dollars at work!)

I have had to intervene several times for young substitute teachers whose classes consist of many illegal immigrant students here in the country less than 3 months, who raised so much hell with the female teachers, calling them putas (whores) and throwing things, that the teachers were in tears.

Free medical care, free education, free food, free day care, etc., etc., etc. Is it any wonder they feel entitled not only to be in this country, but also to demand rights, privileges and entitlements?

To those who want to point out how much these illegal immigrants contribute to our society, because they happen to like their gardener and/or housekeeper, and they like to pay less for tomatoes, I say:

Spend some time in the real world of illegal immigration and see the true costs. Higher insurance, medical facilities closing, higher medical costs, more crime, lower standards of education in our schools, overcrowding, new diseases, etc., etc., etc. For me, I’ll pay more for tomatoes.

Americans, we need to wake up. The guest worker program will be a disaster because we won’t have the guts to enforce it. Does anyone in their right mind really think they will voluntarily leave and return?

It does, however, have everything to do with culture: A third-world culture that does not value education, that accepts children getting pregnant and dropping out of school by age 15, and that refuses to assimilate, plus an American culture that has become so weak and worried about “political correctness”, that we don’t have the will to do what is needed.

If this makes your blood boil, as it did mine, forward this to everyone you know including your Congressman and Senators.

Cheap labor? Isn’t that what the whole immigration issue is about? Business doesn’t want to pay a decent wage. Consumers don’t want expensive produce. Government will tell you “Americans don’t want the jobs”.

But the bottom line is cheap labor. The phrase “cheap labor” is a myth, a farce, and a lie. There is no such thing as “cheap labor”.

Take, for example, an illegal alien with a wife and five children. He takes a job for $5.00 or $6.00/hour. At that wage, with six dependents, he pays no income tax, yet at the end of the year, if he files an income tax return, he gets an “earned income credit” of up to $3,200 free.


1- He qualifies for Section-8 housing and subsidized rent;

2- He qualifies for food stamps;

3- He qualifies for free (no deductible, no co-pay) health care;

4- His children get free breakfasts and lunches at school;

5- He requires bilingual teachers and books;

6- He qualifies for relief from high energy bills;

7- If they are, or become aged, blind or disabled, they qualify for SSI;

8- Once qualified for SSI they can qualify for Medicare (All of this at taxpayer’s {our} expense);

9- He doesn’t worry about car insurance, life insurance, or homeowner’s insurance;

10- Taxpayers provide Spanish language signs, bulletins and printed material;

11- He and his family receive the equivalent of $20.00 to $30.00/hour in benefits;

12- Working Americans are lucky to have $5.00 or $6.00/hour left after paying their bills and his;

13- The American taxpayers also pays for increased crime, graffiti and trash clean-up.

14- Free Child Care (i.e., free babysitting from 6 AM – 6 PM

15- Free ‘mommy makeovers’ after having their children ( includes: tummy tuck and breast lift)

Cheap labor? Yeah right! Wake up people!

These are the questions we should be addressing to the Presidential candidates for either party. We must take action or we will all go down the drain because a few don’t care.

And if you think this is bad, just wait until a Democrat becomes President and the redistribution of wealth becomes the norm in this ex-Democracy. The estimated annual cost now, for state, local and federal, is nearly $400 billion dollars a year.

Published:2/12/2019 8:27:09 PM
[World] BOOK REVIEW: 'Spy Pilot' by Francis Gary Powers Jr. and Keith Dunnavant


By Francis Gary Powers Jr. and Keith Dunnavant

Foreword by Sergei Khrushchev

Prometheus Books, $25, 336 pages

Freed from a Soviet prison after months of captivity, U-2 pilot Francis Gary Powers was stunned to find that ... Published:2/12/2019 6:57:12 PM

[Markets] Being An Economist Means Never Having To Say Deflation

Authored by Jeffrey Snider via Alhambra Investment Partners,

In January 2017, there was a lot of praise for Goldman Sachs especially in London. This stood in obvious contrast to another global peer being savaged. While Deutsche Bank couldn’t pull its name out of the sewer, GS’s London unit was heralded for standing up when the market needed it.

Brexit was a fascinating story in ways that had absolutely nothing to do with the politics. You look on any market chart and you can easily pick out when the vote happened. It was as much about pounds and LIBOR as it was the European Union.

Uncertainty is a liquidity killer. There is both a common sense reason as well as purely mathematical. If as a dealer you don’t know what you don’t know, you can’t deal. In terms of how balance sheets are actually put together, uncertainty is something like vol approaching infinity. Sheer paralysis; every position far too expansive and expensive to consider.

This is especially vindictive in the context of global funding; dealers depend on each other (incestuous) to lay off the risks of conducting regular functions. That’s what made 2008 (and the other Euro$ squeezes) so pernicious; the tendency of one bank to pull back immediately weakens the whole system. Redundancies, or what are thought to be redundancies, become bottlenecks.

It takes a whole lot to stand in front of uncertainty and fill the void (or what central banks are supposed to do, but can’t). In the two weeks before the Brexit referendum in late June 2016, the close election indicated a wildly unpredictable outcome. Liquidity started to become scarce.

For money dealers, if you do provide funding where do you lay off risk? Or do you take on risk yourself?

The cross-market nature of our product set allows us to offer better liquidity to clients than if we were simply showing a price and trying to find the exact offset in the market. If we see greater depth in the forwards market than the rates market, we may choose to hedge a client forward trade with a rates trade. Warehousing this basis risk between the two markets allows us to offer the best liquidity to clients and minimise our execution footprint.

I’ll translate for Beth Hammack, at the time she gave this quote Goldman’s head of global repo and short-term macro. Goldman took on the risks of funding uncertainty (warehouse) because they saw an opportunity in doing so. Even after Brexit, Goldman was providing dollar liquidity in London absorbing by some accounts massive risk (some reported with DV01 of £1 million) to do so.

Mrs. Hammack chalked it up to her unit’s creativity and more expansive mandate. In end, the “bank” used its balance sheet capacities because they were betting on reflation. Whatever ultimately the consequences of Brexit, a booming global economy would make up any difference. Time was a key component, as one dealer counterparty (borrower) admitted.

A senior member of the UK bank’s treasury team credits Goldman’s proactive approach, willingness to provide capital – particularly for the cross-currency swaps – and the set-up of its short-term macro group for the success of the trades.

For that they were celebrated – in January 2017. As noted several times last week, things are quite different in February 2019 for Goldman. The willingness to provide balance sheet capacities in these sorts of FICC maneuvers has suddenly disappeared. What changed between then and now?

Reflation, obviously. How many times over the last three months of 2018 did dollar-starved counterparties look to Goldman for a reasonable lifeline? How many times did the “bank” get creative and instead set up the short-term macro group for expensive missteps? Too many, clearly.

Mrs. Hammack was promoted for her efforts, moved upstairs long before whatever specifically might have gone wrong in December. Now the firm’s global Treasurer, she is also co-chair of the Firmwide Finance Committee. Having obtained a degree from Stanford in Quantitative Economics, she fits right in.

Not only does she sit in a very high position within her firm, Mrs. Hammack had been named the Chair of the Treasury Borrowing Advisory Committee (TBAC). This latter group is made up of Wall Street bankers who advise the US Treasury department as to its funding and debt servicing requirements.

About two weeks ago, in her capacity as Chair Mrs. Hammack wrote to Treasury Secretary Mnuchin reporting on the committee’s recent work. It’s the usual stuff; strong economy but a lot of debt. It’s a long report, but I stand by my summary. The usual Economist talking points.

What worries the TBAC the most is, because of the strong economy, there may not be enough demand for UST’s. Yes, she wrote this letter not even two weeks ago.

The presenting member estimated borrowing needs to exceed $12 Trillion without factoring in the possibility of a recession which would pose a unique challenge for Treasury over the coming decade. Additionally, given stagnation in international reserves, there is likely an increased need for this debt to be financed domestically. This blue sky discussion, in the context of the optimal debt model, focused on the need to expand demand, while preserving the key tenets of regular and predictable issuance at the lowest cost to taxpayers over time.

China is selling, for reasons she very obviously doesn’t understand, the US economy will still be booming, and so the Secretary has quite the problem on his hands. It is, apparently, always reflation for Economists.

A recession would certainly pose a unique problem, but not to the Treasury Department’s debt function. This is the very thing that the interest rates have nowhere to go but up crowd never seem to register; financial participants, including Goldman Sachs at times like these, are heavy into buying and hoarding UST’s because the US government’s fiscal problems are way, way off over the horizon.

Whether the federal government ever is held to account for its massive accumulated debt is just too far away to matter right now. The call from BONY Mellon could be tomorrow. You better have collateral on hand before the phone ever starts ringing. It seems like someone who ran global repo for a major bank would appreciate the real logistics of the repo (and derivative) books at major banks. Then again, Stanford degree in Quantitative Economics.

There is, however, an often serious disconnect between “running” the repo desk and actually running the repo desk. I’ve run across this disparity quite a lot; big bank management is very often made up of either formal Economists or those who are dazzled by the quant capabilities of formal Economists. Traders, those who see the real world, and are held to account for being creative under an expansive mandate when reflation “unexpectedly” disappears, might end up doing something altogether different.

In other words, a senior official at Goldman is openly worried about demand for UST’s when in every likelihood the desks at Goldman are going to (keep) fill(ing) it. Mrs. Hammack steadfastly adheres to reflation, actually way beyond reflation to this unbelievably booming economy of her specific description. Who was it that was hedging deflation/recession risks while she was writing this report? The very bank burned on her reflation.

Long before the federal government ever has to worry about running out of bidders for its paper, it is going to have to deal with the economic fallout of still another episode where (global) monetary capacities have been neutralized by the same expectations for recovery and growth falling apart. That’s political not financing risk. Economists are the last to figure this out. Even long after the banks have equalized to a very different perception. 

Published:2/12/2019 5:55:07 PM
[Markets] Is Michelle Obama Going To Run For President In 2020?

Authored by Michael Snyder via The End of The American Dream blog,

When she made a surprise appearance at the Grammy Awards on Sunday night, the entire auditorium went into a “spontaneous shrieking hysterical meltdown” when she began to speak.

She is the most admired woman in America by a very wide margin, and she is married to the most admired man in America. She released her critically-acclaimed memoir “Becoming” in November, and here we are in February and it is still the best selling book on Amazon. Her national book tour has been filling sports stadiums all over the nation, and Democrats all across America are buzzing about the possibility that Michelle Obama could run for president in 2020.

But she has always insisted that she will never do it. In fact, she has made statements like this one time after time…

“I’ve never had the passion for politics. I just happened to be married to somebody who has the passion for politics, and he drug me kicking and screaming into this arena.”

So that is the end of the matter, right?

Unfortunately, in politics you can never trust what people say, and it is much more important to watch what they do.

In recent months, Michelle Obama has been put center stage time after time while her husband has faded into the background. Suddenly, Michelle Obama seems like she is the biggest rock star in America, and there are only two reasons why this would be happening.

Either she wants to capitalize on her fame and make as much money as possible, or she is secretly plotting to run for president of the United States.

And it is entirely possible that she won’t run. Ultimately, all of the motivational pablum in her book and her national tour could be setting the stage for her to become the next Oprah. She definitely doesn’t seem content to drift quietly into retirement, and it is quite clear that she wants to do something.

Without a doubt, a career in television would be appealing, but my gut tells me that she has her eyes on an even bigger prize.

I have a feeling that events are being carefully orchestrated for her to become the “reluctant hero” that will step in to save the day for the Democrats in 2020. And judging by the reaction at the Grammy Awards last night, the left would get behind her in a heartbeat...

At last night’s Grammy Awards in Los Angeles, host Alicia Keys brought a quartet of very famous women onto the stage and introduced them one-by-one to the crowd.

Lady Gaga, Jennifer Lopez and Jada Pinkett Smith all got varying degrees of warm ovations.

But the fourth lady sent the whole place into spontaneous shrieking hysterical meltdown.

In fact, NBC News reported that she received a “hero’s welcome” and that she cut off the applause once it reached 25 seconds…

Many in the audience didn’t immediately seem to pick up on Obama’s appearance, but she was quickly interrupted when she began speaking, making it only as far as “From the Motown records I wore out on the South Side …” before the crowd stood and loudly cheered for 25 seconds.

“All right — we got a show to do,” she said as she tried to wave the audience to quiet down.

No other Democrat that is running for president or that is thinking of running for president can elicit that sort of passionate response.

And let us not forget that Michelle Obama’s book is outselling every other political book in modern history, including all of the books written by her husband. The following comes from CNN

The inspirational memoir by the former first lady has been on sale for more than two months, yet it is still No. 1 on Amazon’s constantly updated list of best-selling books.

Amazon said “Becoming” enjoyed the longest streak at No. 1 for any book since “Fifty Shades of Grey” came out in 2012.

No political tome or public figure’s memoir has ranked No. 1 for as long as “Becoming,” according to data the company provided to CNN Business.

I just checked, and “Becoming” is still number one right now.

That is an incredible achievement.

Even if Michelle Obama does not want to run for president, top Democrats may really start twisting her arm as we get deeper into this election season. Because even though more than 20 Democrats may ultimately jump into the race, all of them are losers.

The one guy who has a little bit of buzz around him is Beto O’Rourke, and he thought that it would be a good idea to hold a rally on the border on the same day when Trump was holding one. Well, only a few hundred people showed up for Beto, but tens of thousands showed up for Trump

“There has never been anything like this in the history of our country. We have to understand that. There has never been. If you would say as an example, that tonight 69,000 people signed up to be here. Now the arena holds 8,000. And thank you, fire department. They got in about 10,000. Thank you, fire department. Appreciate it. But if you want to really see something, go outside. Tens of thousands of people are watching screens outside.

“And we were all challenged by a young man who lost an election to Ted Cruz. And then they said you know what? Hey, you are supposed to win in order to run. By the way, we, I, we, I’m 1 for 1. Think of it. We had one election. We won. Now we’re gonna be 2 for all and everything’s gonna be perfect. But a young man who has got very little going for himself except he has a great first name. He challenged us. So we have let’s say 35,000 people tonight. And he has 200 people, 300 people. Not too good.”

“What I would do is, I would say, that may be the end of this presidential bid.”

If you are going to win a presidential election, it really helps to be a rock star, and Trump is a rock star.

The Democrats need their own rock star, and the only one that fits the bill is Michelle Obama.

At this point, many Democrats deeply dislike Hillary Clinton, but they remember the Obama years very fondly. When Barack Obama left office, he had a 59 percent approval rating, and that number is much higher than anything Trump has been able to achieve over the last year…

Obama left office with a 59 percent approval rating and a 37 percent disapproval rating, according to Gallup.

In late January, the Gallup poll ratings for President Trump were the exact inverse of Obama’s numbers — 59 percent disapproval and 37 percent approval.

If Michelle Obama decides to run, she will win the Democratic nomination.

And without a doubt, she would be Donald Trump’s toughest potential opponent in 2020 by a very wide margin.

But will she do it?

Only time will tell, but the calls for her to run are starting to become louder with each passing day.

Published:2/12/2019 5:28:27 PM
[Markets] New Mexico Sheriffs Refuse To Enforce New 'Unconstitutional' Gun Control Bills

Authored by 'Dagny Taggart' via The Organic Prepper blog,

New Mexico has a new governor, and she really doesn’t like guns.

Michelle Lujan Grisham, a Democrat, was sworn into office on January 1, replacing pro-gun Republican Susana Martinez.

In early December, the National Rifle Association (NRA) warned the citizens of New Mexico to expect “unprecedented attacks” on their Constitutional rights.

While the New Mexico Legislature will not convene for its 60-day Regular Session until January 15, lawmakers can start prefiling bills on December 17.  You will see unprecedented attacks on your Second Amendment rights from the word go.  Your NRA-ILA will alert you to bill numbers and provide links to the content of legislation as it becomes available.  But in the meantime, we want to share with you what we already know is coming.

Expect anti-gun politicians to introduce a slew of so-called “common-sense gun measures” — a misleading phrase that gun control activists use in hopes that the public and the media will avoid questioning the bills’ enforceability, efficacy, intrusiveness or necessity. (source)

Unfortunately, the NRA’s prediction was correct.

Democrats in New Mexico’s state legislature are already rushing to expand gun control.

As of the time of this writing, six bills have been filed.

Here’s a summary of each of the six bills.

House Bill 8:  This “universal background check” legislation, sponsored by Representative Debra Sarinana, would ban all private firearms sales between law-abiding individuals.

The state House approved HB 8 last week, which aims to make it a misdemeanor crime to sell or transfer a gun in a private transaction without a background check performed by a third party. A Senate committee has passed their own version of the bill, slammed by gun rights groups, in a party-line vote. (source)

House Bill 35: This bill, sponsored by Representative Miguel Garcia, would require gun dealers to pay a $200 fee so that the New Mexico could screen every gun coming into their inventory for “potential theft.”

House Bill 40: Also sponsored by Representative Miguel Garcia, this legislation would require criminal records checks on private firearms sales at gun shows. Gun grabbers tend to see gun shows as a particular threat, even though studies show that they are not a source of guns used by criminals. This bill – and HB 8 – would ban many or all private gun sales, and set the stage for a registry of gun owners.

Perhaps the most disturbing of the six bills is House Bill 83.

Have you heard of “red flag” gun confiscation laws?

Officially called Extreme Risk Protection Orders (ERPO), “red flag” laws permit police, healthcare providers, or family members to petition a state court to order the temporary removal of firearms from a person who may present a danger to others or themselves. To date, fourteen states and the District of Columbia have red flag laws.

Here’s a chilling explanation of what House Bill 83 would allow.

Under section 5, any law enforcement personnel can ask a court to issue an order stripping any New Mexican of his Second, Fourth, Fifth, and Fourteenth Amendment rights. It wouldn’t even take an “ex parte” secret court proceeding; the request could be made by E-MAIL.

Under section 6, an angry ex-girlfriend can convene a “secret court” (ex parte proceeding) to strip a gun owner of his Second, Fourth, Fifth, and Fourteenth Amendment rights — without giving the gun owner the opportunity to tell his side of the story to the “secret court.” (source)

In October 2018, Maryland’s red flag law went into effect. Less than a month later, the law claimed its first victim.

Gary J. Willis, a 61-year-old Maryland resident, was killed by police when they showed up at his home at 5 am to serve him with a court order requiring that he surrender his guns.

Anne Arundel County Police said Willis answered the door with a gun in his hand. He initially put the gun down by the door, but “became irate” when officers began to serve him with the order and picked up the gun again, police said.

Sgt. Jacklyn Davis, a police spokeswoman, said “A fight ensued over the gun.” Police claim that as one of the officers struggled to take the gun from Willis, the gun fired but did not strike anyone. Then, the other officer fatally shot Willis, who died at the scene. Neither officer was injured.

Davis said she did not know who had sought the protective order against Willis.

But Michele Willis, the victim’s niece, said this was a case of “family being family.” (source)

From October 1 to December 31, 302 petitions were filed across the state. A majority of the red flag orders were filed by family members or household members, primarily about mental health concerns, with others being placed by law enforcement officials or health professionals, according to the Associated Press. Less than half reached a final stage in which the accused was not allowed to have a gun for at least a year.

House Bill 87: This legislation would impose a gun ban on persons committing crimes as minor as damage to property. It expands the state’s “prohibited person” firearm law by incorporating federal firearm disqualifications. For example, it would prohibit individuals convicted of certain domestic violence misdemeanor crimes or who are subject to a domestic violence protective order from purchasing or possessing a firearm, with violations being a criminal offense. But, the bill goes beyond the prohibited categories in federal law in significant ways, as the NRA explains:

The state law definition of “household member” – unlike federal law – specifically includes a person who is or has been a continuing personal relationship, which applies to dating or intimate partners who have never lived together. The bill would include, as firearm-prohibiting offenses, nonviolent misdemeanors with no physical contact between the parties (like harassment by telephone or email, or criminal damage to the property or jointly owned property of a “household member”). Unlike federal law, this bill would require anyone subject to a protective order to surrender any firearms they own, possess, or control to law enforcement within 48 hours of the order. Not only does this bill impose a mandatory surrender, it authorizes law enforcement to seize any guns that are in plain sight or are discovered pursuant to a lawful search. Similar legislation had passed the Legislature in 2017 but was vetoed by Gov. Susana Martinez. Significantly, the 2017 legislation contained other options for affected parties to comply with the firearm surrender requirement, including storing their guns with licensed firearm dealers, or transferring the guns to a qualified third party. These key alternatives are not contained in this bill. (source)

House Bill 130: This bill would potentially make criminals of people who keep loaded firearms for self-defense. Sponsored by Representative Linda Trujillo, if signed into law, gun owners would be held criminally and civilly liable if a child gains unsupervised access to an unsecured firearm. But as the NRA points out, “New Mexico already has a first-degree felony child abuse statute on the books to hold adults accountable for putting children’s lives or health at risk in any manner. The tools exist to charge and prosecute parents or guardians in appropriate cases. Education is the key to protecting gun owners and their kids, not a state mandate on how one stores a firearm in his or her home.”

These bills are facing opposition from a powerful force: the Sheriffs.

Thankfully, most of New Mexico’s sheriffs are opposed to these gun control bills. Of the 33 sheriffs in the state, 29 have voiced disapproval of the package of anti-gun legislation by issuing a declaration through the state sheriffs’ association, stating that the “rush to react to the violence by proposing controls on guns is ill-conceived and is truly a distraction to the real problems proliferating violence in our counties and our state.”

CBS 7 spoke with Lea County Sheriff Corey Helton, who explained why he objects to the proposed legislation.

“You’re just taking guns out of law-abiding citizen’s hands. This is not going to affect the criminals out there. They’re going to be able to get guns and they do not follow the law.” Helton added that there are enough effective laws on the books and these new measures are either redundant or unconstitutional.

“I’m proud to say I’m a constitutional sheriff and I’m just not going to enforce an unconstitutional law,” Helton said.

“My oath prevents me from doing that.”

Big 2 News also spoke with Sheriff Helton about the proposed laws:

Similar gun control measures are going to spread like wildfire across America.

Did you catch what Caleb Califano, the reporter, says at the end of that video? He mentions that Helton said, “these introduced gun control bills are a trend that will continue, not just in New Mexico, but all around the country.”

Speaking of that, in Texas – of all places – red flag gun confiscation legislation may be coming, according to a February 6 alert posted by Gun Owners of America.

Governor Abbott announced his “emergency” agenda items Tuesday and included school safety with an emphasis on “mental health.” While no bills have been specified yet, this could easily include items such as “red flag” type legislation that we have been fighting all across the country that allows for gun confiscation simply because a judge decides that you might misuse them in the future. (source)

Recently, Washington state introduced bills for some of the strictest gun laws in the country, and a few law enforcement officers there publicly vowed not to enforce the new unconstitutional gun laws. In The REAL Resistance: Sheriffs in Washington State REFUSE to Enforce Unconstitutional Gun Laws, Daisy Luther made a powerful point:

Legally speaking, our county sheriffs are the last line of defense in the battle for gun rights.

As we have stated before, unconstitutional gun law ideas seem to spread from one state to another like some kind of insidious virus.

This is just the beginning.

H/T to

Published:2/12/2019 3:56:20 PM
[worldNews] Hungarian scientists protest against government plans to streamline Academy Hungarian scientists held books above their heads as they protested on Tuesday against government plans to reorganize the Hungarian Academy of Sciences' research and funding to try to reap more economic benefits.
Published:2/12/2019 10:57:17 AM
[Markets] Making Globalism Great Again - Did Trump Fold To The Deep State?

Authored by CJ Hopkins via The Unz Review,

Maybe Donald Trump isn’t as stupid as I thought. I’d hate to have to admit that publicly, but it does kind of seem like he has put one over on the liberal corporate media this time. Scanning the recent Trump-related news, I couldn’t help but notice a significant decline in the number of references to Weimar, Germany, Adolf Hitler, and “the brink of fascism” that America has supposedly been teetering on since Hillary Clinton lost the election. I googled around pretty well, I think, but I couldn’t find a single editorial warning that Trump is about to summarily cancel the U.S. Constitution, dissolve Congress, and proclaim himself Führer. Nor did I see any mention of Auschwitz, or any other Nazi stuff … which is weird, considering that the Hitler hysteria has been a standard feature of the official narrative we’ve been subjected to for the last two years.

So how did Trump finally get the liberal corporate media to stop calling him a fascist? He did that by acting like a fascist (i.e., like a “normal” president). Which is to say he did the bidding of the deep state goons and corporate mandarins that manage the global capitalist empire … the smiley, happy, democracy-spreading, post-fascist version of fascism we live under.

I’m referring, of course, to Venezuela, which is one of a handful of uncooperative countries that are not playing ball with global capitalism and which haven’t been “regime changed” yet. Trump green-lit the attempted coup purportedly being staged by the Venezuelan “opposition,” but which is obviously a U.S. operation, or, rather, a global capitalist operation. As soon as he did, the corporate media immediately suspended calling him a fascist, and comparing him to Adolf Hitler, and so on, and started spewing out blatant propaganda supporting his effort to overthrow the elected government of a sovereign country.

Overthrowing the governments of sovereign countries, destroying their economies, stealing their gold, and otherwise bringing them into the fold of the global capitalist “international community” is not exactly what most folks thought Trump meant by “Make America Great Again.” Many Americans have never been to Venezuela, or Syria, or anywhere else the global capitalist empire has been ruthlessly restructuring since shortly after the end of the Cold War. They have not been lying awake at night worrying about Venezuelan democracy, or Syrian democracy, or Ukrainian democracy.

This is not because Americans are a heartless people, or an ignorant or a selfish people. It is because, well, it is because they are Americans (or, rather, because they believe they are Americans), and thus are more interested in the problems of Americans than in the problems of people in faraway lands that have nothing whatsoever to do with America. Notwithstanding what the corporate media will tell you, Americans elected Donald Trump, a preposterous, self-aggrandizing ass clown, not because they were latent Nazis, or because they were brainwashed by Russian hackers, but, primarily, because they wanted to believe that he sincerely cared about America, and was going to try to “make it great again” (whatever that was supposed to mean, exactly).

Unfortunately, there is no America. There is nothing to make great again. “America” is a fiction, a fantasy, a nostalgia that hucksters like Donald Trump (and other, marginally less buffoonish hucksters) use to sell whatever they are selling … themselves, wars, cars, whatever. What there is, in reality, instead of America, is a supranational global capitalist empire, a decentralized, interdependent network of global corporations, financial institutions, national governments, intelligence agencies, supranational governmental entities, military forces, media, and so on. If that sounds far-fetched or conspiratorial, look at what is going on in Venezuela.

The entire global capitalist empire is working in concert to force the elected president of the country out of office. The US, the UK, Canada, France, Germany, Spain, Austria, Denmark, Poland, the Netherlands, Israel, Brazil, Peru, Chile, and Argentina have officially recognized Juan Guaido as the legitimate president of Venezuela, in spite of the fact that no one elected him. Only the empire’s official evil enemies (i.e., Russia, China, Iran, Syria, Cuba, and other uncooperative countries) are objecting to this “democratic” coup. The global financial system (i.e., banks) has frozen (i.e., stolen) Venezuela’s assets, and is attempting to transfer them to Guaido so he can buy the Venezuelan military. The corporate media are hammering out the official narrative like a Goebbelsian piano in an effort to convince the general public that all this has something to do with democracy. You would have to be a total moron or hopelessly brainwashed not to recognize what is happening.

What is happening has nothing to do with America … the “America” that Americans believe they live in and that many of them want to “make great again.” What is happening is exactly what has been happening around the world since the end of the Cold War, albeit most dramatically in the Middle East. The de facto global capitalist empire is restructuring the planet with virtual impunity. It is methodically eliminating any and all impediments to the hegemony of global capitalism, and the privatization and commodification of everything.

Venezuela is one of these impediments. Overthrowing its government has nothing to do with America, or the lives of actual Americans. “America” is not to going conquer Venezuela and plant an American flag on its soil. “America” is not going to steal its oil, ship it “home,” and parcel it out to “Americans” in their pickups in the parking lot of Walmart.

What what about those American oil corporations? They want that Venezuelan oil, don’t they? Well, sure they do, but here’s the thing … there are no “American” oil corporations. Corporations, especially multi-billion dollar transnational corporations (e.g., Chevron, ExxonMobil, et al.) have no nationalities, nor any real allegiances, other than to their major shareholders. Chevron, for example, whose major shareholders are asset management and mutual fund companies like Black Rock, The Vanguard Group, SSgA Funds Management, Geode Capital Management, Wellington Management, and other transnational, multi-trillion dollar outfits. Do you really believe that being nominally headquartered in Boston or New York makes these companies “American,” or that Deutsche Bank is a “German” bank, or that BP is a “British” company?

And Venezuela is just the most recent blatant example of the empire in action. Ask yourself, honestly, what have the “American” regime change ops throughout the Greater Middle East done for any actual Americans, other than get a lot of them killed? Oh, and how about those bailouts for all those transnational “American” investment banks? Or the billions “America” provides to Israel? Someone please explain how enriching the shareholders of transnational corporations like Raytheon, Boeing, and Lockheed Martin by selling billions in weapons to Saudi Arabian Islamists is benefiting “the American people.” How much of that Saudi money are you seeing? And, wait, I’ve got another one for you. Call up your friendly 401K manager, ask how your Pfizer shares are doing, then compare that to what you’re paying some “American” insurance corporation to not really cover you.

For the last two-hundred years or so, we have been conditioned to think of ourselves as the citizens of a collection of sovereign nation states, as “Americans,” “Germans,” “Greeks,” and so on. There are no more sovereign nation states. Global capitalism has done away with them. Which is why we are experiencing a “neo-nationalist” backlash. Trump, Brexit, the so-called “new populism” … these are the death throes of national sovereignty, like the thrashing of a suffocating fish before you whack it and drop it in the cooler. The battle is over, but the fish doesn’t know that. It didn’t even realize there was a battle until it suddenly got jerked up out of the water.

In any event, here we are, at the advent of the global capitalist empire. We are not going back to the 19th Century, nor even to the early 20th Century. Neither Donald Trump nor anyone else is going to “Make America Great Again.” Global capitalism will continue to remake the world into one gigantic marketplace where we work ourselves to death at bullshit jobs in order to buy things we don’t need, accumulating debts we can never pay back, the interest on which will further enrich the global capitalist ruling classes, who, as you may have noticed, are preparing for the future by purchasing luxury underground bunkers and post-apocalyptic compounds in New Zealand. That, and militarizing the police, who they will need to maintain “public order” … you know, like they are doing in France at the moment, by beating, blinding, and hideously maiming those Gilets Jaunes (i.e., Yellow Vest) protesters that the corporate media are doing their best to demonize and/or render invisible.

Or, who knows, Americans (and other Western consumers) might take a page from those Yellow Vests, set aside their political differences (or at least ignore their hatred of each other long enough to actually try to achieve something), and focus their anger at the politicians and corporations that actually run the empire, as opposed to, you know, illegal immigrants and imaginary legions of Nazis and Russians. In the immortal words of General Buck Turgidson, “I’m not saying we wouldn’t get our hair mussed,” but, heck, it might be worth a try, especially since, the way things are going, we are probably going end up out there anyway.

Published:2/11/2019 8:51:04 PM
[World] [Eugene Volokh] Court Reverses Order That Barred Former Church Member from Saying Anything About Pastor

The order, entered under the Illinois Stalking No Contact Order Act, barred Chester Wilk from "communicating, publishing or communicating in any form any writing naming or regarding [Pastor Eric Flood], his family or any employee, staff or member of the congregation of South Park Church in Park Ridge."

In Flood v. Wilk, decided Thursday by the Appellate Court of Illinois, a trial court had found that respondent Wilk had engaged in stalking of petitioner Flood—who had been Wilk's pastor at South Park Church—and issued an injunction under the Illinois Stalking No-Contact Order Act. That injunction, among other things, barred respondent from

communicating, publishing or communicating in any form any writing naming or regarding [petitioner], his family or any employee, staff or member of the congregation of South Park Church in Park Ridge.

The Appellate Court held—in my view, correctly—that this provision violates the First Amendment:

"[C]ontent-based laws, which target speech based on its communicative content, are presumed to be invalid." People v. Relerford, 2017 IL 121094, ¶ 32. When they silence protected speech, as this one does, they must survive the rigors of strict scrutiny. Few content-based restrictions ever do. "Government regulation of speech is content-based if a law applies to particular speech because of the topic discussed or the idea or message conveyed."

Since the trial court's order in the instant case targeted respondent's speech based on its subject matter—the church or its members—it would be considered a content-based restriction and presumptively prohibited. An injunction that prohibits respondent from writing anything at all about his pastor or any other member of his church congregation—whether flattering or unflattering, fact or opinion, innocuous or significant, and regardless of the medium of communication—certainly would not be that rare case that survives strict scrutiny. It is all but impossible to imagine a factual record that would justify this blanket restriction on respondent's speech. Paragraph (b)(5) of the order is substantially and obviously overbroad, and it violates respondent's first-amendment right to free speech.

Our supreme court has noted that "the United States Supreme Court has recognized that certain 'historic and traditional' categories of expression do not fall within the protections of the first amendment, and content-based restrictions with regard to those recognized categories of speech gave been upheld." ... For instance, defamatory statements concerning petitioner would not be protected.

Similarly, threats made by respondent against the church or its congregants clearly would not be protected speech. "'True threats' encompass those statements where the speaker means to communicate a serious expression of an intent to commit an act of unlawful violence to a particular individual or group of individuals." ...

In the case at bar, respondent's writings directed at petitioner and his church demonstrated that he viewed himself as the recipient of "Divine Intervention" and had a "responsibility to use [his] accurate and supernatural information" to prove that "there is a God in heaven and a devil in hell." Respondent's writings also established that he viewed petitioner as "influenced by the devil" and as a "tool of the devil" and further established that he believed there was "spiritual warfare between good and evil" (emphases omitted) and that he was "compelled to fulfill [his] destiny which was predicted since [he] was a child."

Respondent also included handwritten notes on several of his writings, telling petitioner on one: "By now you should realize that I am not walking away from this matter. I hope you realize your mistake and do the right thing" and stating on another: "Do you realize that what you did was 9 years ago and I still have not given up on what you did?" Petitioner testified that these communications had occurred for 10 years and were increasing in frequency and that, when he received these communications, he feared for his safety and for the safety of his congregants. While the language used by respondent may not have been an explicit threat to harm petitioner, the context of respondent's communications shows the passage of a long period of time since the perceived slight; an escalation in the communications; references to "spiritual warfare between good and evil," where respondent was identifying himself as "good" and petitioner as "evil"; respondent's belief that he was "compelled to fulfill" his prophesied "destiny"; and the fact that petitioner—the listener—had a reaction of fear for his safety and for the safety of his congregants.

"[S]peech or writing used as an integral part of conduct in violation of a valid criminal statute" is [also] not constitutionally protected. Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 498 (1949). " 'Where speech is an integral part of unlawful conduct, it has no constitutional protection.' " [But t]o fit within this narrow exception, this prohibited speech must be in furtherance of a separate crime—a crime other than the speech itself and one that the constitution allows the legislature to punish. An example would be a ban on advertising child pornography. The advertising itself is speech, but it is an "integral part" of the act of child pornography, a separate crime that may be validly prohibited, and because of that proximate link between the advertising speech and the separate crime, that speech may be prohibited, as well.

Here, the prohibited speech must be an integral part of the unlawful stalking in order to be unprotected. However, in this case, the trial court did not expressly find that respondent's comments rose to the level of posing a "true threat" to the physical safety of petitioner and his congregants. But without this link between the unprotected speech and a separate crime, the exception would swallow the first amendment whole: it would give the legislature free rein to criminalize protected speech, then permit the courts to find that speech unprotected simply because the legislature criminalized it. Our supreme court rejected exactly this misuse of the exception in Relerford, when the court found that the exception does not permit the legislature (or a court) to prohibit speech simply because it is distressing....

[There is] much conduct that is prohibited under the trial court's order that would be considered constitutionally protected. For instance, a letter to the editor that was published in the local newspaper would be prohibited under the order, yet it would be constitutionally protected. The trial court may not enjoin respondent from criticizing petitioner or his church, even though petitioner finds that criticism distressing. That criticism, circulated in respondent's leaflets, books, and other written media, is the principal target of the speech injunction in paragraph (b)(5) of the order. Respondent's speech, however, is protected by the first amendment, and any written criticism by respondent would be constitutionally protected.

Respondent's speech does not lose its protected status simply because it is distressing to petitioner. As Relerford emphasized, distressing speech is ubiquitous and unavoidable, both in everyday social interactions and when we are debating the topics of public concern at the core of the first amendment's protections. A business owner, for example, may well be distressed by speech criticizing his environmental practices, fearing that the speech could lead to a financially devastating boycott. However, that does not permit the legislature or a court to silence his critics.

Respondent has every right to criticize petitioner's ministry and his church more broadly. He has every right to argue that they have betrayed their commitments to marriage and family that the Christian faith requires of them. Respondent has every right to voice his opinion that his marriage would have survived if those commitments had been in place to support the marriage.

While the Act itself contains an exemption providing that "[s]talking does not include an exercise of the right to free speech or assembly that is otherwise lawful," the injunctive relief drafted by the trial court does not make clear that it applies only to otherwise unprotected speech, and by its broad terms, it would therefore prohibit constitutionally protected speech. Such content-based regulation "will be upheld only if necessary to serve a compelling governmental interest and narrowly drawn to achieve that end."

In the case at bar, as noted, the injunctive relief awarded by the trial court was broadly drafted to cover situations that would encompass constitutionally protected speech without any obvious rationale or factual basis for its scope. We therefore vacate that portion of the trial court's order in paragraph (b)(5) that states: "Respondent is prohibited from communicating, publishing or communicating in any form any writing naming or regarding [petitioner], his family, or any employee, staff or member of the congregation of South Park Church in Park Ridge, IL."

Respondent's proselytizing has no doubt distressed petitioner. Petitioner alleged in his petition that it has "raise[d] questions" among some of the letters' recipients about his own "credibility" and that of the church and that responding to their concerns has been, in his view, "an unwanted distraction and excessive waste of time." However, we cannot silence respondent when he is voicing protected criticism, no matter how much time, energy, or distress it costs petitioner. Even less can we silence respondent on the ground that his criticisms of petitioner may have gained some traction—as if we can shield petitioner from the need to answer allegations that, in the minds of some individuals, really do demand answers. That is viewpoint discrimination. See McCullen v. Coakley, 134 S. Ct. 2518, 2532-33 (2014) (speech prohibition that "favors one side in [a] *** debate" is viewpoint discrimination, "an egregious form of content discrimination" (Internal quotation marks omitted.)).

If you're interested in more details about respondent's past speech, which led to the order, here's an excerpt, though you might want to read the whole opinion:

On August 17, 2017, petitioner filed a petition alleging that there had been a significant increase in unwanted contact in the last two months by respondent towards petitioner that had caused increased anxiety to the staff of the church, the congregation, and the neighborhood. The petition set forth details of three separate incidents occurring between June 27 and August 6, 2017, all of which occurred at South Park Church. The first incident occurred on June 27, 2017, and consisted of respondent visiting the office of the church, where the staff "had previously been advised not to allow [him] entrance to the building." The receptionist notified a staff member, who went outside and asked respondent to leave. After giving the staff member a copy of his book, respondent left.

The second incident occurred on Sunday, July 2, 2017, and consisted of respondent distributing disparaging letters on the windshields of automobiles in the parking lot of South Park Church during one of its morning services. The next morning, petitioner reported the incident to the Park Ridge police.

The third incident occurred on Sunday, August 6, 2017, and consisted of respondent again distributing disparaging letters on the windshields of automobiles in the parking lot of South Park Church during its second worship service. A church member observed respondent distributing these letters and informed a staff member, who asked respondent to leave. In response, respondent "declared he had a right to be there until the staff person said she would call police."

In addition to the three specified incidents, the petition contained a "History" section detailing respondent's alleged conduct. In this section, petitioner alleged that "[respondent] has been attacking my reputation and the reputation of South Park Church (among many other people and organizations) for ten years. A letter was sent to [respondent] from the leadership of South Park Church in February, 2007, stating the following: 'Please do not call, visit, or write additional letters to us regarding the issues mentioned above.' Yet erratic contact has persisted for a decade." Petitioner alleged that this activity included (1) "[s]ending letters repeatedly to addresses of current and former members of South Park Church found in an old church directory," (2) "[s]ending unwanted emails to South Park Church staff with content parallel to his letters," (3) "[g]oing door to door to neighbors of South Park Church to deliver letters," (4) "[r]epeatedly asking for appointments with [petitioner] even though he [was] repeatedly told no and asked to cease all contact," and (5) "[d]istributing flyers in the parking lots of Walgreens at Devon/Talcott and Mariano's [at] Cumberland/Higgins."

As an example of one of the fliers in evidence that respondent distributed, one bears the heading "South Park Church and [petitioner] is a corrupt church which needs to be thoroughly exposed. Here's why." The flier claims that petitioner "is a disgrace to Christianity" because he refused to suggest marital counseling when respondent's wife left him after 40 years of marriage.

Respondent repeatedly referred to petitioner and his church as "corrupt" and used petitioner's conduct as an example of "how the devil gets into churches." For instance, in an August 6, 2017, letter, respondent stated that, due to petitioner's actions, respondent "was compelled to write and publish the book entitled, 'The devil's intervention into healthcare, politics, churches, courts and families.' " (Emphasis omitted.) Respondent also stated that petitioner "cannot be that stupid but he sure can be that influenced by the devil according to the Bible."

Respondent also explained how, as a child, "[he] had [his] entire future completely outlined in fine detail with over 20 predictions well over 60 years in advance with 100% accuracy and never once wrong." Respondent believed that the family friend who provided these predictions was his "guardian angel sent by God" and that "God gave [him] a glimpse into [his] future and a responsibility to use [his] accurate and supernatural information so [he] could realize that there is a God in heaven and a devil in hell."

These same sentiments appear in a July 2, 2017, letter, in which respondent also notes, with respect to the predictions: "I could not have gotten such fine detailed predictions without Divine Intervention, and I can back up every word I say here with a polygraph test. *** I received a gift which I can use to destroy any atheist in a debate with scientific proof that should satisfy the most hard-nosed scientist. I will challenge any atheist and I will clean their clock big time. That is if any is willing to challenge me. What I will be using is called the Science of Probability. Unfortunately some of our pastors have blinders on and can't see it. Maybe this message will open their eyes as I am compelled to fulfill my destiny which was predicted since I was a child. And believe me it will happen!" (Emphasis in original.)

On December 13, 2009, respondent sent a letter to "the entire staff at South Park Community Church," which included as enclosures correspondence between respondent and a California court, where respondent was apparently engaged in court proceedings concerning his estranged wife. One enclosure was entitled "Cover Letter" and included bullet points refuting his wife Ardith's claims: "1) Regarding Ardith's concern of my going to California"; "2) Regarding Ardith being fearful of me as having a mental illness"; "3) Regarding Ardith claiming I am talking about fulfilling prophesies"; "4) Ardith alleges that I said she is 'possessed' by the devil"; "5) Ardith alleged that I would 'fix' her"; "6) Ardith and her daughters keep insisting I am egotistical and narcissistic"; "7) Ardith alleges that I am Delusional"; "8) Ardith noted that South Park Church 'banned' me from going there"; "9) Regarding being 'unloved' by [respondent]"; "10) Regarding Ardith's accusations about [respondent] swearing"; and "11) [Respondent] claiming the devil is influencing the family." This communication to the California court also noted that one of respondent's daughters had obtained a restraining order against respondent, claiming that she "could not sleep nights and felt intimidated by her dad." The "family history" portion of the communication ended by stating: "The real message to be gotten here is that this is spiritual warfare between GOOD and EVIL. The facts speak for themselves in the eyes of God and reasonable minded people." (Emphasis in original.)

The petition also contained a section entitled "Effects of the Incidents on Petitioner," which provided that "[s]taff members and church members have expressed increased concern for the reputation of the church and increased anxiety about keeping our congregation safe. My family, our staff, and our church leaders are concerned for their own well-being as well as that of our congregation. The obsessive nature of the criticism makes us fear a future elevated response by [respondent] that could cause disruption of ministry or worse." Petitioner further alleged that "[t]here are many untrue statements made in the letters that discredit me. Though many people disregard the letters due to their bizarre and ranting nature, it also raises questions among others that undermine my credibility." Finally, petitioner alleged that "[e]very letter and visit by [respondent] is an unwanted distraction and excessive waste of time as we answer questions and respond to concerns."

Published:2/11/2019 5:50:36 PM
[Markets] "Get Over It!" Pepe Escobar Warns The 21st Century Will Be Asian

Authored by Pepe Escobar via The Asia Times,

The greatest merit of Parag Khanna’s new book, The Future is Asian, is to accessibly tell the story of a historical inevitability – with the extra bonus of an Asian point of view. This is not only a very good public service, it also blows out of the water countless tomes by Western “experts” pontificating about Asia from an air-con cubicle in Washington.

Asia hands from the West tend to be extremely protective of their extra-territoriality. In my case, I moved to Asia in 1994, and Singapore was my first base. In time I found out – along with some of my colleagues at Asia Times – nothing would ever compare to following the ever-developing, larger than life Asian miracle on the spot.

Khanna has always been in the thick of the action. Born in India, he then moved to the UAE, the West, and is now a resident in Singapore. Years ago we spent a jolly good time in New York swapping Asia on-the-road stories; he’s a cool conversationalist. His Connectography is a must read.

Khanna found a very special niche to “sell” Asia to the Western establishment as a strategic adviser – and is very careful not to ruffle feathers. Barack Obama, for instance, is only guilty of “half-heartedness”. When you get praise from Graham Allison, who passes for a Thucydides authority in the US but would have major trouble understanding Italian master Luciano Canfora’s Tucidide: La Menzogna, La Colpa, L’Esilio, you know that Khanna has done his homework.

Of course, there are a few problems. It’s a bit problematic to coin Singapore “the unofficial capital of Asia”. There’s no better place to strategically follow China than Hong Kong. And as a melting pot, Bangkok, now truly cosmopolitan, is way more dynamic, creative and, let’s face it, funkier.

In 1997 I published a book in Brazil titled 21st: The Asian Century, based on three years of non-stop on-the-road reporting. It came out only a few days before the Hong Kong handover and the collapse of the baht that sparked the Asian financial crisis – so the book’s argument might have been seen as passé. Not really; once the crisis was over, the development push by the Asian tigers was overtaken by China. And 10 years later, slightly before the Western-made global financial crisis, the road to the Asian Century was more than self-evident.

Khanna hits all the right tones and multiple overtones stating the case that the Asian century “will…” begin when Asia crystallizes into a whole greater than "the sum of its many parts”. It’s already happening, and it’s a wise choice to set the point of no return towards an Asia-led new world order at the first Belt and Road Initiative (BRI) summit in May 2017 in Beijing.

Yet throughout the book Khanna feels the need to take immense pain showing frightened Anglo-American readers that China won’t lead the Asian future; there will be no “Chinese tianxia, or harmonious global system guided by Chinese Confucian principles”.

And that offers room for references to the push by the US and its allies to “deter China”, or the push by “Japan, India, Australia and Vietnam” to “counter China aggression”. Not to mention credit to the pathetic notion of “clash of civilizations”. But, on a whole, Khanna nails it.

“By joining BRI, other Asian countries have tacitly recognized China as a global power – but the bar for hegemony is very high.”

No East and West

Within the scope of an article, and not a book, it’s possible to show that this epic story is not about hegemony, but connectivity.

First of all, there’s no East and West; as Edward Said has shown, this is essentially inherited from Eurocentrism and colonialism, starting way back when the Ancient Greeks situated the western borders of Asia in the eastern Mediterranean.

Asia, the term, comes from the ancient Assyrian assu – which means rising sun. A clear distinction between East and West was stamped by the end of the 3rd century, at the time of Diocletian, when the Roman empire was cut in half following a meridian from Dalmatia to Cyrenaica, a partition confirmed at the death of Theodosius 1 in 395 AD.

The East then organized itself around Constantinople while the West was divided and regarded as Europe, a distinct unity under Charlemagne (800 AD). What’s interesting is that in contrast with China – self-defined as the center of the world – neither the Roman Empire nor Islam saw themselves as such, admitting the existence of other quite populated worlds: China and India.

The notion of a “continent” only came up in the 16th century, based on the tri-partition Europe-Asia-Africa made by the Greeks in the Eastern Mediterranean, adopted by Judaism, Christianity and Islam, and ratified by the “discovery” of the New World: the Americas. So once again, “continent” is a Western invention.

Eurasia is essentially a giant, elliptical, unified space. Crack geographers tend to see it to the north – from Central Asia up to the northwest of India – as the realm of caravan routes, Silk Roads, cosmopolitan oases, steppes and deserts crisscrossed by nomads.

To the south, it’s a sort of monsoon “shawl” draped over a unique ocean; maritime routes through straits; and cosmopolitan ports and warehouses.

Southeast Asia enjoys a unique status, squeezed in a historical and cultural pincer movement between two major forces, constituted in an independent manner from one another as two major civilizations; India to the west and China to the northeast.

The inner logic of all this immense space is mutation, trade exchanges, and migrations. So Eurasia is essentially unified as two major “on the move” spaces; continental and steppe (on horseback), plus maritime (via navigation). Historically, between these two corridors, we find the creative hubs of civilizations and more durable empires: China, the Indian world, Persia/Iran, the Arab world, the Byzantine-Ottoman empire.

Hard node of history

In one of his exceptional books, French geographer Christian Grataloup conclusively shows how Eurasia is a geo-historic entity – exhibiting a “system of inter-relations from one end to another”. Yes, it’s all about connectivity, as the Chinese are stressing with the New Silk Roads or BRI.

Already by the 15th century, every society in Eurasia exhibited the same presence of cities, writing, monetary exchange. So it’s possible to conceive a common history, from the Mediterranean to Japan, for over two millennia. Grataloup’s intuition is breathtaking. “This is the hard node of world history”.

Historically, it’s all about the confluence of eastern routes in the north, the Silk Roads at the center, and southern routes, mostly the Spice Route. In the central segment of the major axis, decisive innovations occurred; the first villages, the first forms of agriculture, writing, the birth of the State. As the great Mongol caravan empire, built around the Silk Roads in the 13th century, fractured, while societies in the extremities of Eurasia developed maritime power.

Khanna offers myriad details on the key fact; that the Eurasian space is finally being rearranged, rebuilt via economic development, along transversal axes configured as economic corridors; the result of a modernization process that started in Japan in the second half of the 19th century to expand to all of East and Southeast Asia, then China, and finally India. The genius of the BRI project is to make it happen.

The Chinese ambition to be the economic leader of the Eurasia ensemble – by land and by sea – is a unique development in the region’s history, combining the continental approach of the Mongol empire of the steppes, or the Russia empire, with the maritime approach of the West, especially via the British Empire.

But contrary to Western imperialism, it’s all based on economy and culture. So, China will have a lot of work mastering the art of soft power. Time though is on the BRI side; the horizon is 2049 – not profits in the next quarter. Maritime routes in the north like the Arctic Silk Road, and via the South China Sea and Indian Ocean to the south, will envelop Eurasia, which will articulate itself in the center over high-speed rail and highway corridors of the New Silk Roads and the upgraded Trans-Siberian links.

They call it Euro-Asia in Beijing, and they call it Greater Eurasia in Moscow. The whole process is historically inexorable, already forging the future – call it Asian or Eurasian.

Published:2/10/2019 10:47:11 PM
[Markets] Why MMT (Ultimately) Doesn't Matter

Authored by Peter Earle via The American Institute for Economic Research,

Last year, internet searches for Modern Monetary Theory (MMT) numbered approximately 100 per month; in the years and decades before that, the weekly total searches numbered mostly in single digits. Yet in the first few weeks of this year, searches have topped 100 per day and seem to be on an uptrend. People who’ve never heard the term “chartalism” are speaking — and acting — as if a new and groundbreaking discovery has been made; “a new kind of science” in the realm of economics, situated neatly upon the doorsill of a new decade. It’s perplexing to see a theory which holds that governments can’t really go broke because they can always create more currency capture imaginations, if still largely on the periphery of discourse.

For years, Austrian School perspectives have been taken to task for failing to “predict” (which, in fact, they have and continue to). Yet MMT not only doesn’t predict anything; it fails to explain the state of nature better than existing, prevailing models. Social science, like its physical counterpart, advances by virtue of two key determinants: phenomenological explanations which are demonstrably superior to existing ones, and funerals. Even neoclassical economists, regularly critical of Austrian, monetarist and other views, hold that — as has been demonstrated in every era, within every culture, and upon every continent — bad monetary and/or fiscal policies ultimately result in economic breakdown and destitution.

Whether the rapid decline and ultimate disappearance of the individual propensity to hold a fiat currency are purely monetary, entirely psychological, or a combination of the two, the circumstances leading to it reappears consistently throughout history. Every one of the scores of known cases of hyperinflation dating back over 700 years bears witness to a reckless, breakneck campaign of money creation preceding it.

Blaming psychology for hyperinflationary episodes also, and far more ominously, hints at the same conclusion which virtually all collectivist governments come to after their starry-eyed schemes initially fail: that human nature, not the hubris that attends attempts to overthrow the fundamentals of supply and demand, is at fault. And thus that human beings, and not policy, needforceful readjustment.

Holding that inflation — of either the ‘vanilla’ or hyper- varieties — is overwhelmingly the product of wars or exogenous events is also wholly misleading. It is always and only the political reaction to exogenous events which determines economic outcomes.

Such an approach also bypasses the issue of the garden variety of inflationary outbreak. To be sure, while it would surely not be as ruinous nor as fast-acting as classic hyperinflation, a rise in inflation to a “mere” 8%, 15%, or 20% per annum would have a sizably adverse impact upon individuals living on fixed incomes, financial markets, and general economic calculation: the functioning of firms, markets for goods and services, and the financial choices of families, communities, and organizations.

Furthermore, MMT is invariably (and almost exclusively) invoked proximate to incomprehensibly expensive government program proposals: a so-called Jobs Guarantee (estimated cost approaching, and likely exceeding, $1T per year), “Medicare for All” (estimated cost: $32T over ten years), and a “Green New Deal” (estimated costs ranging from $7T to $13T to $49T to implement).

(Also: considering that MMT contemplates a “closed loop” whereby money is created and later taxed away, it is likely that any practical implementation will necessarily subsume cashlesseconomy diktats.)

Add to all of this the bunker mentality of many MMT proponents, who frequently refuse to discuss the assumptions upon which MMT operates by dismissing those who question them as disingenuous – and there is more than enough reason to suspect that MMT is not new, far from scientific, and explains nothing. It is at best a scientistic vehicle that exists only to provide an academic imprimatur for unlimited government spending.

Yet I’m not worried about MMT.

Actually, I am - a little. History demonstrates that betting against the willingness of people - Americans, specifically, who have the greatest record of fawning over political and economic views which defenestrate the very basis of the prosperity which gives both the leisure time and technological reach to permit intellectual flights of fancy - to embrace that which flies in the face of demonstrable evidence, is a sucker's bet.

One of the major dangers of powerful states - indeed, states in general - is that with a single vote or the stroke of a pen a lot of damage can be done. But any pain will only be temporary.

It comes down to one word: Bitcoin. Actually, I should be more specific: crypto.

At this very moment, there are hundreds of independent teams of developers in dorm rooms, garages, basements, apartments, rented offices, and other such locations working on both subtle tweaks to existing cryptocurrency issues and wholly new coins and assets: thousands, maybe tens of thousands of individuals, all over the world, silently but inexorably expanding the bounds within which individuals can extricate and divorce their personal lives from the inimical policy implementations of expanding states.

At ten years old, the list of places where Bitcoin — and crypto more generally — has been the single bulwark between people and utter ruin grows annually. As long ago as 2013, Bitcoin (then less than $100) surged as individuals banked in Cyprus used it to escape the bank levy — a ploy in which politicians explicitly sought to seize private deposits in order to paper over their policy errors and banks’ losses owing to them.

All across Africa, South America, and Asia — and regardless of Bitcoin's exchange rate at the time — the unbanked have, owing to the ubiquity of mobile and cell phone ownership, been able to engage in saving, consuming, remittances and entrepreneurialism despite previously insurmountable sanctions, financial surveillance, and fees associated with transfers, banking, etc.

In ZimbabweVenezuelaTurkey, and anywhere else that economic hardships have surfaced — over time, or overnight — Bitcoin and crypto more generally have given individuals the opportunity to safeguard their economic liberty and in some cases their very lives. In places where economic life is viable but burdensome, cryptocurrency access provides an outlet.

Time may prove this incorrect, but at present MMT seems to be little more than a pernicious, academically-garbed attempt to overcome the unwelcome (and repeatedly evinced) fact that governments are as tied to economic limits as firms and individuals are. But a more fundamental truth precedes this: if implemented, and whether at that time Bitcoin, another crypto issue, or another, yet-undiscovered innovation has surfaced, liberty will always find a way to triumph — even when the utopian plans of authoritarian regimes are briefly in control.

Published:2/9/2019 6:38:31 PM
[Markets] "There's A Lot Of Big Stuff Going On Right Now" - Observations On The "Purely Absurd" Markets

Authored by Jeffrey Snider via Alhambra Investment Partners,

Big Things: The Hoard Gets Bigger

I’ve observed a lot that’s purely absurd the last eleven years, trying hard to write up as much of it as I can. It’s worth the effort in terms of education but also to reveal what’s really going on. The catalog is too long to republish here in its entirety.

One of the most ridiculous anecdotes, however, was pieced together in March 2016. The dollar world was a smoldering wreck, and because of that global bond yields were still falling. Liquidity hedging was prevalent as anyone might honestly expect.

As a consequence, US primary dealers were hoarding UST’s coupons and bills. Their reported (net) holdings of these most prized instruments so very clearly rise and fall with each deflation/reflation cycle.

But there is no such thing according to the Fed narrative. There cannot be because four QE’s caused so much “money” to be “printed” something like that would be unthinkable – if it was ever the real thing it would reveal the whole corrupt nature of moneyless monetary policy. It didn’t matter the global downturn and how the US economy was pushed right up to the edge of recession, there was no liquidity problem in dollars they all said.

How, then, to explain what dealers were doing with all those UST’s?

As the world’s biggest bond dealers — including banks such as Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan — struggled to get rid of the burgeoning pile of debt, the premium for the newest, easiest-to-trade Treasuries soared to the highest since 2011. The firms’ efforts to hedge all the Treasuries collecting on their balance sheets also roiled the futures market and a crucial corner of the financial system where traders lend and borrow securities overnight. [emphasis added]

The first business of any dealer is to warehouse securities; to purchase them in the primary market and then sell them off over time to brokerage customers. It is these dealers who buy at the federal government’s auctions in order to then distribute the bonds, bills, and notes out to the investing public.

That, of course, means they have to hold those bonds on balance sheet while the process plays out. It seems plausible that if the public doesn’t want to buy what’s being warehoused, including US government paper, the dealers will reluctantly have to hang on to, and finance, that paper.

But this was March 2016. The idea that dealers were in any way struggling to place UST’s was so very blatant nonsense. At the time I noted in reply:

The story has problems on both ends; to start with, why are dealers supposedly buying up UST inventory that they will only get stuck with? That has never been a money dealing function, as if there is ever great imbalance it is for dealers to manage but largely get out of the way and let price action take care of it. In other words, primary dealers would likely have been only buying enough to maintain orderly markets, not so much that they suddenly became bloated warehouse units of unhedged risk. It strains credibility already.

The second part is even worse. These banks are supposed to have had trouble selling UST’s during a period when everyone was buying them?

If anything, demand for treasuries was overwhelming. Dealers holding such a large portion back meant only one thing – a conscious choice about their own books. But QE and Janet Yellen’s “resilient” financial system. 

That’s why dealer holdings follow the rhythm of the Euro$ squeezes. When it gets bad, they purposefully hold on to what’s in inventory because of perceived liquidity risks arising from all the other things dealers do (repo and FX just the start). After Bear, AIG, Lehman, et al, nobody’s going to be so unprepared for when BONY Mellon comes calling for collateral.

As noted during last December’s chaos, this dealer hoarding took on absolutely immense proportions. It’s like nothing we’d seen before, even during 2008 (admittedly, dealers were still learning about the downside of illiquidity and prudent matching leading up to that big week in September). As of last week, Jan 30, reported holdings (therefore hoarding) surpassed the record set the week of Christmas (when every market was a huge mess, except UST’s).

Are primary dealers having trouble selling their accumulated stock again? Of course not. Global bond markets are on fire, even more so than stocks. There is huge demand for pristine collateral types.

Not only that, both the eurodollar futures and UST curves exhibit absolutely brutal liquidity hedging going on. While everyone is fixated on UST 2s10s, the space between the 12-month bill and 5-year note has gone bananas – during the exact same timeframe dealer hoarding skyrocketed.

Sorry Bill Dudley, massive liquidity risks everywhere – and therefore an overwhelming number of potential buyers for what dealers are holding but won’t sell. Record hoarding. Even more hoarding to start February 2019.

Falling LIBOR and bond yields, confused and dazed central bankers, greater distortions to the major curves; as I wrote yesterday:

What does it say about the state of the world when those hugely contradictory expectations are being fulfilled? Rate cuts, official rate cuts, may be closer than you think.

There’s a lot of big stuff going on right now.

Or, sure, maybe there really is no one to buy all these UST’s piling up on exposed dealer balance sheets. On a totally unrelated note, I’m sure, interesting time for Bill Gross’ retirement announcement.

Published:2/9/2019 4:38:10 PM
[Markets] Venezuela: America's 68th Regime-Change Disaster

Authored by by Medea Benjamin and Nicolas J. S. Davies via,

In his masterpiece, Killing Hope: US Military and C.I.A. Interventions Since World War II, William Blum, who died in December 2018, wrote chapter-length accounts of 55 US regime change operations against countries around the world, from China (1945-1960s) to Haiti (1986-1994). Noam Chomsky’s blurb on the back of the latest edition says simply, “Far and away the best book on the topic.” We agree. If you have not read it, please do. It will give you a clearer context for what is happening in Venezuela today, and a better understanding of the world you are living in.

Since Killing Hope was published in 1995, the US has conducted at least 13 more regime change operations, several of which are still active: Yugoslavia; Afghanistan; Iraq; the 3rd US invasion of Haiti since WWII; Somalia; Honduras; Libya; Syria; Ukraine; Yemen; Iran; Nicaragua; and now Venezuela.

William Blum noted that the US generally prefers what its planners call “low intensity conflict” over full-scale wars. Only in periods of supreme overconfidence has it launched its most devastating and disastrous wars, from Korea and Vietnam to Afghanistan and Iraq. After its war of mass destruction in Iraq, the US reverted to “low intensity conflict” under Obama’s doctrine of covert and proxy war.

Obama conducted even heavier bombing than Bush II, and deployed US special operations forces to 150 countries all over the world, but he made sure that nearly all the bleeding and dying was done by Afghans, Syrians, Iraqis, Somalis, Libyans, Ukrainians, Yemenis and others, not by Americans. What US planners mean by “low intensity conflict” is that it is less intense for Americans.

President Ghani of Afghanistan recently revealed that a staggering 45,000 Afghan security forces have been killed since he took office in 2014, compared with only 72 US and NATO troops. “It shows who has been doing the fighting,” Ghani caustically remarked. This disparity is common to every current US war.

This does not mean that the US is any less committed to trying to overthrowing governments that reject and resist US imperial sovereignty, especially if those countries contain vast oil reserves. It’s no coincidence that two of the main targets of current US regime change operations are Iran and Venezuela, two of the four countries with the largest liquid oil reserves in the world (the others being Saudi Arabia and Iraq).

In practice, “low intensity conflict” involves four tools of regime change: sanctions or economic warfare; propaganda or “information warfare”; covert and proxy war; and aerial bombardment. In Venezuela, the US has used the first and second, with the third and fourth now “on the table” since the first two have created chaos but so far not toppled the government.

The US government has been opposed to Venezuela’s socialist revolution since the time Hugo Chavez was elected in 1998. Unbeknownst to most Americans, Chavez was well loved by poor and working class Venezuelans for his extraordinary array of social programs that lifted millions out of poverty. Between 1996 and 2010, the level of extreme poverty plummeted from 40% to 7%. The government also substantially improved healthcare and education, cutting infant mortality by half, reducing the malnutrition rate from 21% to 5% of the population and eliminating illiteracy. These changes gave Venezuela the lowest level of inequality in the region, based on its Gini coefficient.

Since Chavez’ death in 2013, Venezuela has descended into an economic crisis stemming from a combination of government mismanagement, corruption, sabotage and the precipitous fall in the price of oil. The oil industry provides 95% of Venezuela’s exports, so the first thing Venezuela needed when prices crashed in 2014 was international financing to cover huge shortfalls in the budgets of both the government and the national oil company. The strategic objective of US sanctions is to exacerbate the economic crisis by denying Venezuela access to the US-dominated international financial system to roll over existing debt and obtain new financing.

The blocking of Citgo’s funds in the US also deprives Venezuela of a billion dollars per year in revenue that it previously received from the export, refining and retail sale of gasoline to American drivers. Canadian economist Joe Emersberger has calculated that the new sanctions Trump unleashed in 2017 cost Venezuela $6 billion in just their first year. In sum, US sanctions are designed to “make the economy scream” in Venezuela, exactly as President Nixon described the goal of US sanctions against Chile after its people elected Salvador Allende in 1970.

Alfred De Zayas visited Venezuela as a UN Rapporteur in 2017 and wrote an in-depth report for the UN. He criticized Venezuela’s dependence on oil, poor governance and corruption, but he found that “economic warfare” by the US and its allies were seriously exacerbating the crisis. “Modern-day economic sanctions and blockades are comparable with medieval sieges of towns,” De Zayas wrote. “Twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees.” He recommended that the International Criminal Court should investigate US sanctions against Venezuela as crimes against humanity. In a recent interview with the Independent newspaper in the U.K., De Zayas reiterated that US sanctions are killing Venezuelans.

Venezuela’s economy has shrunk by about half since 2014, the greatest contraction of a modern economy in peacetime. The World Health Organization (WHO) reported that the average Venezuelan lost an incredible 24 lb. in body weight in 2017.

Mr. De Zayas’ successor as UN Rapporteur, Idriss Jazairy, issued a statement on January 31st, in which he condemned “coercion” by outside powers as a “violation of all norms of international law.” “Sanctions which can lead to starvation and medical shortages are not the answer to the crisis in Venezuela,” Mr. Jazairy said, “…precipitating an economic and humanitarian crisis…is not a foundation for the peaceful settlement of disputes.”

While Venezuelans face poverty, preventable diseases, malnutrition and open threats of war by US officials, those same US officials and their corporate sponsors are looking at an almost irresistible gold mine if they can bring Venezuela to its knees: a fire sale of its oil industry to foreign oil companies and the privatization of many other sectors of its economy, from hydroelectric power plants to iron, aluminum and, yes, actual gold mines. This is not speculation. It is what the US’s new puppet, Juan Guaido, has reportedly promised his American backers if they can overthrow Venezuela’s elected government and install him in the presidential palace.

Oil industry sources have reported that Guaido has “plans to introduce a new national hydrocarbons law that establishes flexible fiscal and contractual terms for projects adapted to oil prices and the oil investment cycle… A new hydrocarbons agency would be created to offer bidding rounds for projects in natural gas and conventional, heavy and extra-heavy crude.”

The US government claims to be acting in the best interests of the Venezuelan people, but over 80 percent of Venezuelans, including many who don’t support Maduro, are opposed to the crippling economic sanctions, while 86% oppose US or international military intervention.

This generation of Americans has already seen how our government’s endless sanctions, coups and wars have only left country after country mired in violence, poverty and chaos. As the results of these campaigns have become predictably catastrophic for the people of each country targeted, the American officials promoting and carrying them out have a higher and higher bar to meet as they try to answer the obvious question of an increasingly skeptical US and international public:

“How is Venezuela (or Iran or North Korea) different from Iraq, Afghanistan, Libya, Syria and at least 63 other countries where US regime change operations have led only to long-lasting violence and chaos?”

Mexico, Uruguay, the Vatican and many other countries are committed to diplomacy to help the people of Venezuela resolve their political differences and find a peaceful way forward. The most valuable way that the US can help is to stop making the Venezuelan economy and people scream (on all sides), by lifting its sanctions and abandoning its failed and catastrophic regime change operation in Venezuela. But the only things that will force such a radical change in US policy are public outrage, education and organizing, and international solidarity with the people of Venezuela.

*  *  *

“The war is not meant to be won, it is meant to be continuous” – George Orwell

h/t Jim Quinn

Published:2/8/2019 7:36:42 PM
[A Brief History of Seven Killings.] How Marlon James Reimagined African Folklore to Craft His Intoxicating New Fantasy Novel "Literature should be sensual and endlessly sensory," says Man Booker Prize–winning novelist Marlon James. "I like books that make me feel like I’m emerging from a fever." Published:2/8/2019 7:33:00 AM
[Markets] Brandon Smith: A Secular Look At The Destructive Globalist Belief System

Authored by Brandon Smith via,

Over many years of investigating the mechanics of global events and the people behind them I have become perhaps a little obsessed with one particular subject – the source and motivations of evil. This fascination does not stem from a simple morbid curiosity, but a strategic need to understand an enemy. Much like an exterminator needs to understand the behavior of cockroaches to be effective, I seek to understand the behavior and nature of organized evil.

One very important fact that must first be made clear in people's minds is that evil does indeed exist. Establishment propaganda has spent immense time, effort and capital attempting to condition society into believing that evil is nothing more than a social construct – an opinion. Evil is supposedly in the eye of the beholder; a product of religious conditioning. This is a falsehood. Just like concepts of beauty, concepts of evil are actually inherent in our psyches from birth. The “eye of the beholder” is irrelevant.

Two particular areas of human psychology support this fact:

First, as the work of Carl Jung (and by extension anthropologists like Joseph Campbell) exposed, all human beings no matter where in the world they are born, from the most isolated tribe in the Amazon to the largest metropolis in America, carry the same archetypal symbols in their psyche. That is to say, we ALL have the same psychological elements in our minds regardless of environment.

This fact alone is so overwhelming to modern man that some people refuse to even acknowledge it as a possibility. We have been trained like lab rats to see only one path through the maze; we have been told over and over again that everything is “relative”; that each person is entirely a product of environment and that we all start out empty as “blank slates”.

The vicious attacks on Carl Jung by the establishment (including lies that he cooperated with the Nazis) tell me that Jung was very close to the mark. He had stumbled upon something very dangerous to the establishment; something that could derail their conditioning of the public.

Second, the undeniable existence of the human conscience suggests that we are born with an understanding of duality. Meaning, just as Jung discovered, our psyches contain inherent concepts of good and evil that influence our decisions and reactions. Jung referred to evil, or psychologically destructive impulses, as the 'personal shadow' and the 'collective shadow'.

The vast majority of people have an intuitive relationship with good and evil. They feel anxiety when confronted with evil actions or thoughts, and they feel personal guilt when they know they have done something evil to other people. Some might call this a “moral compass”. I would refer to it as part of the soul or spirit.

In any case, there is a contingent of people in the world that do not have it – a small percentage of the population that is born without conscience, or that finds it easy to ignore conscience. We'll get to those people in a moment, but first, we should probably define what evil is.

Evil is first and foremost any action that seeks to destroy, exploit or enslave in the name of personal gain or gratification. Unfortunately, evil actions are often misrepresented as advantageous for the group, thereby making them morally acceptable. The needs of the many supposedly outweigh the needs of the few, and thus evil is rationalized as a means to a “positive end” for the "greater good".

In most cases, however, destructive actions do not end up serving the interests of the majority, and only end up giving more wealth and power to an elitist minority. This is not a coincidence.

Evil begins with the denial of the existence of conscience, or the denial of the existence of choice. Each person is born with a capacity or freedom to choose. We can listen to conscience, or we can ignore it. We can do good, or we can do evil. Evil tells us the choice is relative and that morality is relative; that there is no difference between a good choice and a bad choice, or, that the evil choice is the only choice.

Beyond ignoring conscience, we must also define the motivation that drives evil. Psychology would suggest that destructive self serving actions stem from an obsessive desire to obtain or control things we cannot or should not have. Interestingly, this is also what some religions teach us, but let's stick to a secular examination.

As mentioned earlier, there is a group of people in the world who do not see good and evil the way most of us do. Their psyche functions in a completely different way, without the filter of conscience. These people exhibit the traits of narcissistic sociopaths.  Full blown high level narcissistic sociopaths represent around 1% to 5% of the total human population, and most of them are born, not made by their environment. Also, 5% to 10% of people hold latent traits of either narcissism or sociopathy that generally only rise to the surface in an unstable crisis environment.

I have written extensively on narcissistic sociopaths and the globalist establishment in numerous articles. I have also outlined how such people, contrary to popular belief, are not isolated from one another. They do in fact organize into groups for mutual gain.

There is an ideology or system of belief that argues for the exact opposite of what conscience tells us is “good”, and that system is Luciferianism. In fact, luciferianism appears to be the source influence for most existing destructive "isms" in our society today (including socialism and globalism).  It is my theory that luciferianism is a religion or cult designed by sociopathic narcissists for the benefit of sociopathic narcissists.

It is sometimes difficult to identify the true “sacraments” behind luciferianism because, for one, luciferians refuse to admit that the system is a religion at all. They prefer to call it a philosophy or methodology, at least in public. The system also seems to encourage active disinformation in order to dissuade or mislead non-adherents. The historic term for this religious secrecy is “occultism”. I would call it “elitism”.

There are some foundational beliefs that luciferians do openly admit to. First and foremost, the goal of luciferianism is to attain godhood. That is to say, they believe that SOME human beings have the capacity to become gods through the accumulation of knowledge.

I have written about the insanity of the goal of godhood in the past, outlining how quantum physics and Kurt Godel's Incompleteness Proof make total scientific and mathematical observation and understanding of the universe impossible. But mathematical reality does not stop luciferian circles from destructively chasing that which they cannot have.  By extension, scientific knowledge not tempered by discipline, wisdom and a moral compass can lead to catastrophe.  Material knowledge is invariably abused by those seeking godlike power.

The notion of self-worship is a core trait of sociopathic narcissists; Luciferianism just codifies it as if it is a virtue. Another problem with the idea of becoming a god is that one inevitably develops a desire for followers and worshipers. What is a savior, after all, without a flock? But how does a human being gain a flock and become more a god? Through force or through trickery?

Second, luciferians claim they seek to elevate the power of the individual in general. In the minds of many people this doesn't sound like a negative at all. Even I have argued for the importance of individualism in the midst of societal controls. That said, any ideology can be taken to extremes.

The pursuit of individual gratification can be pushed too far, to the point that the people around us begin to suffer. Because of the elitist nature of luciferianism, they are not necessarily seeking the elevation of ALL individuals, just certain “deserving” individuals. There is a tendency to view non-adherents as “inferior”; stupid people that should be sheared like sheep by those who are chasing a superior dream of personal godhood.

This attitude can also be seen in the common actions of narcissistic sociopaths, who have no qualms about conning or exploiting people around them as resources, feeding off others like parasites. They treat this as an acceptable practice because they see themselves as special; they are destined to achieve more than the ignorant rabble. They are meant to do great things, and their image is meant to be cemented in the foundations of history.

The elitism of luciferianism is hardly hidden. Luciferians claim that they have no interest in converting other people.  Instead, adherents have to be “smart enough” to come to the belief system on their own. However, their goal of influencing the public through social and political spheres is rather evident.

Political gatekeepers, though not openly luciferian, tend to let slip their affiliations at times. Saul Alinsky, a high level leftist organizer and democrat gatekeeper, praises the rebellious Lucifer in the personal acknowledgments of his political manual 'Rules For Radicals', in which he says:

Lest we forget at least an over-the-shoulder acknowledgment to the very first radical: from all our legends, mythology, and history (and who is to know where mythology leaves off and history begins — or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom — Lucifer.”

Luciferianism is also prevalent in globalist institutions. For example, the UN seems to be highly involved in the ideology through groups like Lucis Trust, a publishing house founded by Alice Bailey, an avid promoter of luciferianism who also owned the Lucifer Publishing Company. Lucis Trust was originally headquartered at the UN building in New York, and still runs a private libraryof occult books out of the UN today.

Former UN directors like Robert Muller were tied closely with Lucis Trust and the work of Alice Baily and openly promote luciferianism. Muller was central to the UN's global education policies for children and formed numerous branch agencies with the intent of global governance. You can read Robert Muller's white papers on the formation of a global government on his website Good Morning World.

Luciferians approach global governance like they do everything else – with heavy propaganda spin. Muller argues that the goal must be pitched to the public through the idea of “protecting the Earth”. In other words, he believed environmentalism was the key to convincing the masses of the need for total centralization of power into the hands of globalist institutions. Luciferian ideals are sugar coated in a host of flowery and noble sounding motifs. But what are they really all about?

Some luciferians adopt a Gnostic stance on the figure of the devil and only claim to appreciate the concept as mythology rather than the devil existing as a literal force.   Some gnostic texts depict Satan as the "good guy" and God the "bad guy" in the story of Genesis; God being a ruthless slave master and the serpent as the "liberator" bringing knowledge of the material world to mankind.  Lucifer is presented as a kind of Prometheus; the titan who stole fire from the gods and gave it to man.

This "Lucifer as heroic savior" narrative is very common.  Manly P. Hall, 33rd Degree Freemason and influential New Age writer is quoted as saying in his collection of writings titled 'The All Seeing Eye':

Lucifer represents the individual intellect and will which rebels against the domination of Nature and attempts to maintain itself contrary to natural impulse. Lucifer, in the form of Venus, is the morning star spoken of in Revelation, which is to be given to those who overcome the world.”

One Luciferian model describes God as an archetypal concept only, a mythological comfort blanket that helps us to face the loneliness of existence. They do not believe a corporeal God figure exists, though, one wonders how they can reconcile the existence of inherent psychological archetypes with that notion? Where did archetypes come from if there is no creative design or intended meaning to humanity?

More discreet Luciferians sometimes argue that the mythological figure of Lucifer is separate from the Christian image of “Satan”. The name “Lucifer” is not mentioned directly in the bible in reference to Satan (though the phrase “morning star”, the direct translation of the word “lucifer” is mentioned in reference to Satan). But this argument seems rather coy and disingenuous to me. For centuries the term Lucifer has been synonymous with the devil in the public consciousness. Luciferians seem to be trying to separate themselves from the negative connotations associated with satanism through a twisted form of wordplay and semantics.

But why would they care?  Unless, of course, they are seeking to influence public consciousness and they realize that it's hard to sell people on satanism, so they want to put a different face on an old and ugly idea.  Satanists often refer to Lucifer and Satan in the same breath as being the same figure. In this documentary, Anton LaVey, a well known representative in satanic and luciferian circles, does exactly that.

LaVey seems to be treated as an annoyance by the more marketing conscious luciferian groups. I suspect that his public bluntness about what luciferian beliefs actually involve is seen as too honest. These people believe in secrecy and initiation.  They don't like their darker side on display for the whole world to see and to judge.

A direct antithesis to someone like Anton LaVey would be Michael Aquino, a military intelligence officer specializing in psychological warfare who was a member of LaVey's satanic church but left to start his own more marketable Temple Of Set. Aquino is best known for a tactical thesis on psychological warfare he wrote with General Paul Vallely (credited in the paper as "Paul E Valley") called 'From Psyop To Mind War'. The thesis outlines the use of propaganda and other strategies to turn a target population against itself, to either destroy that population or control it more easily without ever having to use outright military force.

Aquino's Mind War showcases the luciferian belief in "magic", but not magic in the way popular culture understands it.  Luciferians believe in the power of magic words and symbols in the form of psychological key phrases and archetypes.  That is to say, they have adopted the use of archetypal psychology, but where psychologists like Carl Jung used archetypal psychology to heal people with mental and emotional illnesses, luciferians use archetypes to manipulate and control public thought.

This is often done through popular culture and films.  Truthstream Media has produced an excellent documentary on this subject that I highly recommend.

There are more obvious examples such as Ridley Scott's Blade Runner, in which androids rebel against their slave master and creator and eventually murder him.  Then there is more subversive entertainment like Netflix's Series Of Unfortunate Events, which starts out as a fun comedic children's tale but ends with a display of essentially every aspect of luciferian belief right down to elitism as a necessary practice, moral relativism, an unhelpful and controlling god figure surrounded by sycophants, and even a serpent carrying an apple containing the "knowledge" to save the protagonists from a horrible fate.

The duplicity of luciferianism alone should be enough to make people wary of its promises and arguments. Humanity has spent the better part of 2000 years trying to remove the influences of secretive occult elitism (the high priest class) from our political and social structures. Yet, these people are relentless in their desire for power.

Regardless of the positive spin that luciferians adopt for their ideology, the fruits of their activities speak much louder than propaganda. Through their efforts towards globalism, what I see is a cancerous desire for control over civilization and of every aspect of human thought. I also see a perversion of nature as they seek to obtain what they call “godhood”. Transhumanism and genetic tampering carry all the hallmarks of the luciferian ideal. Regardless of one's religious affiliations, it is hard to find anything of value in their system. Everything about it is an affront to inherent conscience. It can only become acceptable to the majority through deception.

If you have to lie about the motives of your philosophy in order to get people to adopt your philosophy, then your philosophy must be dangerously incomplete or outright cataclysmic.

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Published:2/7/2019 11:26:24 PM
[Markets] "They're Running Out Of Options" - Farm Bankruptcies Surge To 10-Year High As Trade War Bites

The Farm Belt helped cement President Trump's historic electoral triumph over Hillary Clinton. But even before Trump started his trade war with China nearly one year ago, Trump's protectionist bent has added to the collective woes of farmers, who were already struggling with low prices for corn, soy beans and other agricultural commodities.

China's decision to purchase millions of soybeans (after orders ground to halt late last year following another round of tariffs) offered some relief to soybean producers who were teetering on the brink even with President Trump's farm bailout money in hand. But even if negotiations result in a lasting agreement, it might not be enough to save hundreds of American family farms from collapsing into bankruptcy, as the Wall Street Journal pointed out in a story published Wednesday.


According to a WSJ analysis of federal data, the number of farmers filing for bankruptcy has climbed to its highest level in a decade...


...driven by a lasting slump in agricultural commodity prices due in large part to the rise of rival producers like Brazil and Russia.

Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.

And Trump's trade wars - not just with China, but more broadly - aren't helping.

Trade disputes under the Trump administration with major buyers of U.S. farm goods, such as China and Mexico, have further roiled agricultural markets and pressured farmers’ incomes. Prices for soybeans and hogs plummeted after those countries retaliated against U.S. steel and aluminum tariffs by imposing duties on U.S. products like oilseeds and pork, slashing shipments to big buyers.

Low milk prices are driving dairy farmers out of business in a market that’s also struggling with retaliatory tariffs on U.S. cheese from Mexico and China. Tariffs on U.S. pork have helped contribute to a record buildup in U.S. meat supplies, leading to lower prices for beef and chicken.

Because of this, the level of farm debt is approaching levels last seen in the 1980s.


The stress on American farmers is also affecting agribusinesses giants like Archer Daniels Midland, Bunge and Cargill, who are feeling the heat even as lower crop prices translate into less-expensive raw materials for the commodity buyers.

What's worse is that even after working side jobs to try and make ends meet, some farmers are still winding up more than $1 million in debt.

Mr. Duensing has managed to keep farming, hiring himself out to plant crops for other farmers for extra income and borrowing from an investment group at an interest rate twice as high as offered by traditional lenders. Despite selling some land and equipment, Mr. Duensing remains more than $1 million in debt.

"I’ve been through several dips in 40 years," said Mr. Duensing. "This one here is gonna kick my butt."

Even more shocking than the number of bankruptcies, the number of farms that continue to operate while losing money has risen to more than half of all farms, even as the level of productivity has never been higher.

More than half of U.S. farm households lost money farming in recent years, according to the USDA, which estimated that median farm income for U.S. farm households was negative $1,548 in 2018. Farm incomes have slid despite record productivity on American farms, because oversupply drives down commodity prices.

And bankers who lend to farms warn that there will likely be more bankruptcies to come as more producers "are running out of options."

Agricultural lenders, bankruptcy attorneys and farm advisers warn further bankruptcies are in the offing as more farmers shed assets and get deeper in debt, and banks deny the funds needed to plant a crop this spring.

"We are seeing producers who are running out of options," said Tim Koch, senior vice president at Omaha, Neb.-based Farm Credit Services of America, which lends to farmers and ranchers in Iowa, Nebraska, South Dakota and Wyoming.

Perhaps the only silver lining - if you can even call it that - is that bankruptcy lawyers in states where farms are prevalent are doing their best business in years.

Mounting stress in the Farm Belt has meant big, if somber, business for the region’s bankruptcy attorneys. In Wichita, Kan., the firm of bankruptcy attorney David Prelle Eron filed 10 farm bankruptcies in 2018, the most it has ever handled in one year. Wade Pittman, a bankruptcy attorney based in Madison, Wis., said his firm filed about 20 farm bankruptcies last year, ahead of past years, and he said he expects the numbers to continue to rise as milk prices remain stagnant.

Joe Peiffer, a Cedar Rapids, Iowa-based attorney, said his office is the busiest—and most profitable—it has ever been. Just before Christmas, he sent letters to eight farmers declining to represent them because he didn’t have sufficient staff to handle their cases promptly. He is doubling his office space and interviewing new attorneys to join the firm.

One factor driving bankruptcies is tighter lending standards, said Mr. Peiffer, including at agricultural banks, which are under pressure from regulators to exercise greater caution over their farm-loan portfolios.

"I’m dealing with people on century farms who may be losing them," said Mr. Peiffer, whose own father sold his farm in the late 1980s.

One anecdote featured in the story recalls the rash of suicides among NYC cab drivers, who have struggled to pay the hefty loans attached to their taxi medallions thanks to the rise of Uber, Lyft and other ride sharing apps.

Darrell Crapp, the fifth-generation owner of a hog and cattle farm in Lancaster, Wis., returned to his home one day with a queasy feeling in his stomach, only to find his wife unconscious on their bathroom floor. She had swallowed a handful of pills. She survived, but Crapp attributed the incident to financial stressors as their farm teetered on the brink of bankruptcy.

It was a Sunday in April 2017 when a queasy feeling in Darrell Crapp’s stomach sent him rushing home. He found his wife, Diana, lying crumpled on the floor of their Lancaster, Wis., bathroom. She had swallowed a handful of pills.

Overwhelmed with debt and with little prospect of turning a profit that year, the Crapps knew BMO Harris Bank NA wouldn’t lend them money to plant. The bank had frozen the farm’s checking account.

Mrs. Crapp managed the fifth-generation corn, cattle and hog farm’s books. She had stayed up nights drafting dozens of budgets to try to stave off disaster, including 30-day, 60-day and 90-day budgets.

"It was too much for her," Mr. Crapp, 63, said of his wife, who survived the incident.

Crapp Farms filed for chapter 11 bankruptcy the next month, with a total debt of $36 million.

After filing for bankruptcy, the last of Crapp's land, a 197-acre patch that was homesteaded by his ancestors in the 1860s, will be auctioned off in the near future.

And after all that, Crapp may still need to declare Chapter 12 bankruptcy, a personal bankruptcy provision available to farmers and fishermen, to wipe his remaining debts.

"We haven’t won very many battles," said Mr. Crapp. "The bank pretty much owns us."

Unfortunately for American farmers hoping to reclaim the market share they've lost during the trade war with China, even if Trump can strike a trade deal with the Chinese that mandates purchases of US agricultural products - which the Chinese have already pledged to do - there's still another wrinkle: Japan recently signed a revamped version of the TPP that will offer preferential treatment to Australia, New Zealand and other rivals to American farmers, potentially sealing off another market from US agricultural products.

Published:2/7/2019 10:26:37 PM
[Markets] Homo Credulus: "He'll Go Along With Almost Anything"

Authored by Joel Bowman via,

Man: He’ll go along with just about anything.

Given the right circumstances... a little programing... and enough time for it all to marinate in his soft, mammalian brain... there is almost nothing Homo Credulus will not learn to embrace.

Don’t believe us?

Take a look at the historical record; you’ll soon wonder how we ever got this far.

Sure, you’ll discover gizmos and flying contraptions… art and agriculture… music and mathematics. You’ll witness spectacular scientific breakthroughs, the number “0” and a man’s footprint on the moon. You’ll also find automobiles with so many cup holders, you won’t know where to holster your oversized 7/11 Big Gulp.

But you’ll also scratch you head. Perhaps you’ll even weep. And if you think hard enough, you’ll put a few things to serious question…

“Central banks?” “Modern democracy?” “The Rosie O'Donnell Show?”

How has mankind survived such atrocities? Self inflicted, no less! And why, moreover, does he rush so earnestly to repeat and replay his worst mistakes?

Don’t be too hard on yourself, Dear Reader. After all, repetition is nothing new…

You’ll recall that it was the Greeks who first gave the world democracy – from the Greek, demokratía, literally “Rule by 'People'”. (And yes, it was those very same Greeks who put their own beloved Socrates to death… by a majority vote of 140-361.)

Today, democracy is a cherished tenet of “the West.” It is woven into the civic religion, sewn into the social fabric. Men march off eagerly to fight for it, to proselytize it … and to die in forgotten ditches defending it.

At least, that’s what they believe they’re doing. As usual, the poor saps have been duped. Herewith, a little historical context…

The phrase “Making the world safe for democracy” was actually a marketing slogan, coined back in the 1910s, as a way to sell “The Great War” to America. Weary from their own disastrous Civil War just a few decades earlier, in which hundreds of thousands gave up the ghost, Americans were mostly inward looking at the time. That is to say, they wanted little to do with what they largely saw as a “European affair.”

Polls might have indicated no appetite for battle… but the nation’s politicians were nonetheless starved for military misadventure. They sensed big profits abroad, both in manufacturing armaments and making onerous bank loans to foreign lands. Sure, “the nation” would have to fill tank and trench with warm young bodies… but very few soldiers would carry senatorial surnames along with their rifles.

And so, after a public relations campaign of truly epic proportions, America marched off to war… wrapped in the delusion they had freshly been sold.

Eddie Bernays, the man who coined the phrase and, thus, peddled the war to America, made a fortune for his efforts. He was even invited by Woodrow Wilson to attend the Paris Peace Conference, in 1919, as a show of gratitude for his services.

There, Bernays learned the full impact of his “democracy” slogan. An obviously bright fellow, the surreal experience caused him to think…

If people will line up to kill one another under influence of a mere marketing campaign… they could surely be convinced to do, say and buy just about anything!

Bernays was right. In fact, he wrote a series of books, detailing his insights. They included Crystallizing Public Opinion (1923), A Public Relations Counsel (1927) and a neat little number titled Propaganda(1928), in which Bernays laid out the blueprint for mass social and psychological manipulation.

The collected works went on to become a huge success… and the favorite of none other than Joseph Goebbles, Reich Minister for Propaganda in Nazi Germany between 1933-45.

Bernays himself, writing in his 1965 autobiography, recalls a dinner at home in 1933 where…

Karl von Wiegand, foreign correspondent of the Hearst newspapers, an old hand at interpreting Europe and just returned from Germany, was telling us about Goebbels and his propaganda plans to consolidate Nazi power. Goebbels had shown Wiegand his propaganda library, the best Wiegand had ever seen. Goebbels, said Wiegand, was using my book Crystallizing Public Opinion as a basis for his destructive campaign against the Jews of Germany. This shocked me. [...] Obviously the attack on the Jews of Germany was no emotional outburst of the Nazis, but a deliberate, planned campaign.

It is indeed chilling to think of such a heinous undertaking as being engineered, blueprinted, premeditated and carried out according to some kind of script. And yet, there it is… in Bernays’ own words, the “Father of Propaganda.”

Having acquired somewhat of a tainted reputation-by-association, propaganda, itself, underwent a “strategic rebranding” after WWII. But make no mistake, the very same métier thrives to this day, under the more socially palatable designation, “Public Relations.”

Still, a ruse by any other name…

“Could we be so stupid again?” wonders the gentle reader. “Might the mob still be swayed by what Charles Mackay termed ‘extraordinary popular delusions and the madness of crowds?’”

Why, of course! That’s the nature of the mob!

Whether in love, finance, politics or any other matter, man is ever wont to be convinced, assured, persuaded, often against his own best interests. Few are the absurdities in which he will not take refuge, invest his hard-earned capital or squander his morality.

All he needs is a good story, something to arrest his imagination and cauterize his capacity for reason. A distraction from his lonely, quotidian existence.

That, and a few crumbs to pass his lips.

The Roman poet, Juvenal, recognized as much when he mocked the panem et circenses (bread and circuses) stratagem almost two millennia ago. In his Satire X, he referred to the Annona (a kind of grain dole) and the famous circus games, held in the Colosseum and elsewhere, as designed to keep the unthinking population fed and happy.

Look around you today, Dear Reader. What do you see, two millennia later, in the Year of Their Lord, 2019 AD?

Stadium sports matches… food stamp programs… and of course, the greatest bread and circuses show ever, modern representative democracy…

Now, as then, the show goes on!

*  *  *

Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.

Published:2/6/2019 7:49:06 PM
[Markets] Grave Of Karl Marx Smashed In "Appaling" Hammer Attack

While the neo-socialist ideas of AOC, Elizabeth Warren and Bernie Sanders have taken America's left by storm in recent days, not everyone seems enamored with the idea of wealth redistribution in general, and its founding father, Karl Marx, in particular.

The tomb of iconic German philosopher/genocidal demagogue (depending on one's point of view) Karl Marx, located at London’s Highgate cemetery, will "never be the same again" after it was vandalized in a hammer attack, the Guardian reports. The vandal damaged a marble plaque which was taken from Marx’s original 1883 gravestone and incorporated into the 1954 monument.

Friends of Highgate Cemetery Trust published a twitter image showing the damaged marble plaque which honors Marx and some of his family members, including his wife. The damage to the lettering of Marx’s name can be clearly seen.

Trust CEO, Ian Dungavell, lashed out at the unidentified grave assailants, describing the attack as "an appalling thing to do" and warning that the tomb would be permanently scarred.

Dungavell told the Guardian  that no matter what people thought of Marx’s philosophy, the hammer attack was an act of inhumanity, as "this is a grave of his wife, his own grave and other members of his family." He also condemned the attack as a “particularly selfish act,” and said that it was not a random attack, insisting it was "deliberately targeted against Karl Marx", as if that wasn't obvious.

It is unclear when the incident occurred. The damage was first noticed on Monday afternoon, but Dungavell said images posted on social media suggest it could have occurred early last week or before. “Just looking at social media posts from people who have visited, if you squint you can see that the damage was visible in some of those photographs,” he said.

The cost of the damage has yet to be estimated. Dungavell said: “I’m hoping we will be able to get a specialist stone conservator to consolidate the white marble and then if we can get the lead lettering back it might be that you don’t notice it.”

The destruction of the grave sparked outrage on Twitter, with supporters of the communist legend calling for an appeal to be set up. As RT notes, Europeans took the assaults especially hard, with left-wing Guardian journalist Owen Jones and children’s author and Corbynista, Michael Rosen, asking people to donate money to help with the costs of potential repair work.

The police were notified and are expected to begin an investigation.

The cemetery will be discussing repairing the uninsured memorial with its owners the Marx Grave Trust. It will also talk to the trust about the possibility of installing CCTV around the monument.

Dungavell said: “We might do a security review with the Marx Grave Trust and speak to the police about what should happen about any recommendations they may have." He pointed out that the Marx memorial has been repeatedly damaged since it was installed.

"It has attracted great controversy over the years. It has had paint daubed all over it. It has had people chanting at it, the bronze bust on the top has been dragged off with ropes, and there was even a pipe bomb set off in January 1970 that damaged the front face of it."

He added: “That’s the only consolation – he hasn’t been forgotten about.”

Of course, cynics would note that if there ever was an opportunity to share the repair costs among the broader population, this is it.

Published:2/6/2019 2:18:00 AM
[Markets] Meotti: The Pope's Stubborn Silence On The Persecution Of Christians

Authored by Giulio Meotti via The Gatestone Institute,

  • Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world.

  • "Authentic Islam and the proper reading of the Koran are opposed to every form of violence", the Pope claimed, not quite accurately. It is as if all of the Pope's efforts have been directed to exonerating Islam from any of its responsibilities. He seems to have been doing this even more than observant Muslims -- such as Egypt's President Abdel Fattah el-Sisi, American author and physician M. Zuhdi Jasser, former Kuwaiti Information Minister Sami Abdullatif Al-Nesf, French-Algerian author Razika Adnani, Paris-based Tunisian philosopher Youssef Seddik, Jordanian journalist Yosef Alawnah, and Moroccan author Rachid Aylal, among many others -- have been doing.

  • "Pope Francis could in no way be ignorant of the heavy problems caused by the expansion... at the very heart of the Christian domain... Let us note this again... the last religion that arrived in Europe has an intrinsic impediment to integrating into the European framework that is fundamentally Judeo-Christian..." – Boualem Sansal, Algerian author, in his best-selling book "2084."

  • Pope Francis now faces the potential risk of a Christian world physically swallowed by the Muslim crescent -- as on the Vatican logo chosen for the Pope's upcoming trip to Morocco. It is time the appeasement is replaced.

The persecution of Christians is now an international crisis. Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world. (Photo by Giulio Origlia/Getty Images)

4,305 Christians were killed simply because their Christian faith in 2018. This is the dramatic number contained in the new "World Watch List 2019" just compiled by the non-governmental organization Open Doors. It reveals that in 2018, there were 1,000 more Christian victims -- 25% more -- than the year before, when there were 3,066.

These days, 245 million Christians in the world are apparently persecuted simply for their faith. Last November, The organization Aid to the Church in Need released its "Religious Freedom Report" for 2018 and reached the a similar conclusion: 300 million Christians were subjected to violence. Christianity, despite stiff competition, has been called "the most persecuted religion in the world".

In March 2019, Pope Francis will travel to Morocco, a country also listed in the Open Doors' watch list. Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world. The persecution of Christians is now an international crisis. Consider what happened to Christians in the Muslim world during just the last couple of months. A policeman was killed trying to defuse a bomb outside a Coptic church in Egypt. Before that, seven Christians were murdered by religious extremists during a pilgrimage. Then a mass grave was discovered in Libya containing the remains of 34 Ethiopian Christians killed by jihadists affiliated with the Islamic State. The Iranian regime, in severe new crackdowns, arrested more than 109 Christians. The Pakistani Christian Asia Bibi, three months after being exonerated for "blasphemy"and released from death row, still lives as a "prisoner": her former neighbors still want to put her to death. In Mosul, which was Iraq's center for Christians, there was a "Christmas without Christians", and in Iraq in general, 80% of the Christians have disappeared.

Cardinal Louis Raphael Sako, Patriarch of Babylon of the Chaldeans and head of the Chaldean Catholic Church, recently provided some numbers for the persecution of Christians in Iraq: "61 churches have been bombed, 1,224 Christians were killed, 23.000 houses and real estate of the Christians have been seized". The patriarch reminded the world of the policy of the Islamic State, which gave "three options to Christians": conversion to Islam, payment of a special tax or the forced and immediate abandonment of their land. "Otherwise they would have been killed." In this way, 120,000 Christians were expelled.

"The stubborn silence of European leaders on the question of religions, Islam in particular, astonishes and disappoints", wrote the Algerian novelist Boualem Sansal recently.

"Their attitude is simply irresponsible, suicidal, and even the current context marked by [a] dizzying expansion... It's like living at the foot of an angry volcano and not understanding that it is preparing to erupt".

Sansal, who has been threatened with death by Islamists in France, as in Algeria, wrote "2084", a best-seller. In it, he writes that Pope Francis's stance on the Muslim world is similar to that of the Western leaders:

"Pope Francis could in no way be ignorant of the heavy problems caused by the expansion of radical Islam in the world and at the very heart of the Christian domain... Let us note this again... the last religion that arrived in Europe, has an intrinsic impediment to integrating into the European fundamentally Judeo-Christian framework, even if this referent, over the past centuries, has eroded."

Pope Francis did manage to explain that the "idea of conquest" is integral to Islam as a religion, but quickly added that one might interpret Christianity the same way. "Authentic Islam and the proper reading of the Koran are opposed to every form of violence", the Pope claimed, not quite accurately. He also not quite accurately remarked that "Islam is a religion of peace, one which is compatible with respect for human rights and peaceful coexistence." It is as if all of the Pope's efforts have been directed to exonerating Islam from any of its responsibilities. He seems to have been doing this even more than observant Muslims -- such as Egypt's President Abdel Fattah el-Sisi, American author and physician M. Zuhdi Jasser, former Kuwaiti Information Minister Sami Abdullatif Al-Nesf, French-Algerian author Razika Adnani, Paris-based Tunisian philosopher Youssef Seddik, Jordanian journalist Yosef Alawnah and Moroccan author Rachid Aylal, among many others -- have been doing.

The dramatic persecution of Christians in the Islamic world highlights a Western paradox: "Since their victory in the Second World War, Westerners have brought great benefits to all of humanity", wrote Renaud Girard in Le Figaro.

"Scientifically, they shared their great inventions, such as penicillin or the Internet. Human rights and democracy are far from being applied everywhere in the world, but they are the only reference for governance that exists internationally. It is undeniable that, under the impulse of Westerners, vast political, technical, health and social successes have been achieved in two generations. But there is one area where the planet has undeniably regressed since 1945 and where Western responsibility is obvious. It is the freedom of conscience and religion... By refraining from defending Christians in the East, the West made a twofold strategic error: it gave a signal of weakness by abandoning its ideological friends; it has renounced its creed".

"In the eyes of Western governments and the media", noted another report on persecution of Christians compiled by Aid to the Church in Need. "religious freedom is slipping down the human rights priority rankings, being eclipsed by issues of gender, sexuality and race".

"Political correctness does not want to know anything about the ongoing persecution and suppression of Christianity and so it is being ignored in an almost sinister way", Bishop Manfred Scheuer of Linz, in Upper Austria, recently said.

This eclipse is even more dramatic, as everybody knows that Christianity is at the risk of "extinction" in the Middle East, noted the Archbishop of Canterbury Justin Welby:

"Hundreds of thousands have been forced from their homes. Many have been killed, enslaved and persecuted or forcibly converted. Even those who remain ask the question, 'Why stay?' The Christian population of Iraq, for instance, is less than half what it was in 2003 and their churches, houses and businesses have been damaged or destroyed. The Syrian Christian population has halved since 2010. As a result, across the region Christian communities that were the foundation of the universal Church now face the threat of imminent extinction."

The West has betrayed its Christians friends in the East (such as here and here). The West might well ask: What are the Vatican and the Pope doing to fight this new religious persecution?

Criticism has already come from the Catholic world. "Just as he has little anxiety about the wave of church closings, Francis seems to have little anxiety about the Islamization of Europe", wrote the US Catholic columnist William Kilpatrick.

"Indeed, as evidenced by his encouragement of mass migration, he seems to have no objection to Islamization. Either because he truly believes the false narrative that Islam is a religion of peace, or because he believes that the self-fulfilling prophecy strategy will create a more moderate Islam, Francis seems to be at peace with the fact that Islam is spreading rapidly. Whether Francis has been misinformed about Islam or whether he has adopted a strategy of misinformation, he is taking a huge gamble—not only with his own life, but with the lives of millions".

There are now entire areas in Syria cleansed of their historical Christians. Pope Francis recently received a letter from a Franciscan priest in Syria, Father Hanna Jallouf, the Patriarch of Knayeh, a village close to Idlib, the stronghold of anti-Assad Islamist rebels. "Christians in this land are like lambs among the wolves", Jallouf wrote.

"The fundamentalists have devastated our cemeteries, they have prevented us from celebrating liturgies outside the church, stripping us of the external signs of our faith: crosses, bells, statues as well as our religious habit."

If the Pope does not want to receive more letters like that, he will need show courage and tackle one of the most urgent persecutions of our time.

Pope Benedict XVI, in his address at Regensburg, said what no Pope had ever dared to say before -- that there is a specific link between violence and Islam. To illustrate his case, Benedict cited a 14th-century dialogue between a Byzantine Christian emperor, Manuel II Paleologus, and a Persian scholar, about the concept of violence in Islam: "Show me just what Muhammad brought that was new, and there you will find things.. .such as his command to spread by the sword the faith he preached", Benedict quoted the emperor as saying to his Muslim interlocutor.

Another Pope, John Paul II, also expressed concerns. During a meeting in 1992, Mgr Mauro Longhi, who, while still a student, often accompanied the late Pope on hiking trips says, John Paul II told of an "Islamist invasion" of Europe.

"The Pope told me: 'Tell this to those whom you will meet in the Church of the third millennium. I see the Church afflicted by a mortal wound. More profound, more painful than those of this millennium,' referring to Communism and Nazi totalitarianism. 'It is called Islamism. They will invade Europe. I have seen the hordes come from the West to the East,' and then told to me each country one by one: from Morocco to Libya to Egypt, and so on till the East.

"The Holy Father added: 'They will invade Europe, Europe will be like a basement, old relics, shadows, cobwebs. Family heirlooms. You, the Church of the third millennium, must contain the invasion. Not with armies, armies will not be enough, but with your faith, lived with integrity."

John Paul II's vision resembles a continuation of Islam's historic campaign in the Christian lands: "In 637, the Islamic army seized Jerusalem, twice holy, then the heart of the entire Middle East, the historic center of Christianity", wrote the Algerian novelist Boualem Sansal. He went on to describe "the irresistible progression of Islam to the West: the Judeo-Christian North Africa, which immediately converted; Catholic Spain, which was annexed at the beginning of the VIII century; Byzantium, which they took in 1453; [then] to Vienna, which they besieged in 1529...".

Pope Francis now faces the potential risk of a Christian world physically swallowed by the Muslim crescent -- as on the Vatican logo chosen for the Pope's upcoming trip to Morocco. It is time the appeasement is replaced.

Published:2/6/2019 1:15:12 AM
[Markets] How An Italian Debt Crisis Could Take Down The EU

Plagued by another run of bank bailouts and simmering tensions between the partners in its ruling coalition, Italy's brief reprieve following the detente between its populist rulers and angry bureaucrats in Brussels is already beginning to fade. As Bloomberg reminded us on Monday, Italy's $1.7 trillion pile of public debt - the third largest sovereign debt pool in Europe - is threatening to set off a chain reaction that could hammer banks from Rome, to Madrid, to Frankfurt - and beyond.


Just the mention of the precarity of Italian debt markets "can induce a shudder of financial fear like no other" in bureaucrats and businessmen alike - particularly after Italy's economy slid into a recession during Q4.


While much of Italy's debt burden is held by its banks and private citizens, lenders outside of Italy are holding some 425 billion euros ($486 billion) in public and private debt.


The Bloomberg analysis of Italy's financial foibles follows more reports that Italy's ruling coalition between the anti-immigrant, pro-business League and the vaguely left-wing populist Five-Star Movement has become increasingly strained. Per BBG, the two parties are fighting a battle on two fronts over the construction of a high speed Alpine rail and a legal case involving League leader Matteo Salvini over his refusal to let the Dicotti migrant ship to dock in an Italian port last summer.

After M5S intimated that it could support the investigation, the League warned that such a move would be tantamount to "blackmail" against Salvini, whose lieutenants have been pushing for him to take advantage of the party's rising poll numbers and push for early elections later this year. However, Salvini has rebuffed these demands, warning that there's nothing stopping Italian President Sergio Mattarella from calling for a new coalition instead of new elections.

On the other hand, the League is growing increasingly weary of the "Citizens' Income", one of the boldest proposals included in Italy's 2019 budget, which calls for a guaranteed subsidy for all Italians under the poverty line, provided they can prove they are looking for work.

On Monday, Luigi Di Maio and Prime Minister Giuseppe Conte presented the first of the cards that will carry the income during a ceremony that Salvini decided to skip, according to BBG. As many as 5 million Italians could be eligible for the microchip-embedded cards.

"We’ll be injecting 8 billion euros ($9.2 billion) into the real economy every year - people will be able to spend those 8 billion," Di Maio said, at one point channeling Albert Einstein, saying those who claim something is impossible should leave those who are actually doing it alone.

However, the plan has irked business owners, who constitute some of the League's most reliable supporters.

Circling back to the threat posed by Italian debt, BBG's analysis showed that French banks are the most exposed, as BNP Paribas and Credit Agricole own retail banking units in Italy.


To keep operating without massive budget cuts (something neither party in the ruling coalition has shown any sign of supporting) Italy must sell 400 billion euros ($457 billion) of debt per year. But since Italy's banks hold so much of the country's debt, declines in the price of Italian bonds inevitably hurts the shares of Italian banks, and also forces them to hold more capital on their books to ensure liquidity from the ECB. This creates the potential for a negative feedback loop known as the "doom loop".

Put another way, "a government crisis could drag down the banking system or a banking crisis could suck in the government."


And while NPLs held by Italian banks have declined in recent years (as no fewer than seven Italian banks have required bailouts in the past three years)...


...A genuine crisis would exhaust the lending capacity of the European Stability Mechanism (some 410 billion euros or $470 billion) in just a year. With ECB President Mario Draghi set to depart later this year, and German Chancellor Angela Merkel's power on the wane, if the populists don't manage to generate the economic growth that they have argued will be unleashed by their stimulus programs, it's not outside the realm of possibility that the crisis that tears apart the EU and eurozone is centered in Rome.

Published:2/5/2019 3:39:36 AM
[Markets] Escobar: MAGA Misses The Eurasia Train

Authored by Pepe Escobar via,

While China and Russia solidify their economic and political alliance, the U.S. is missing an historic chance to join a multilateral world, instead clinging to military empire...

We should know by now that the heart of the 21stCentury Great Game is the myriad layers of the battle between the United States and the partnership of Russia and China.

Even the U.S. National Defense Strategy says so: “The central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition by … revisionist powers.” The recently published assessment on U.S. defense implications of China’s global expansionsays so too.

The clash will frame the emergence of a possibly new, post-ideological, strategic world order amidst an extremely volatile unpredictability in which peace is war and an accident may spark a nuclear confrontation.

The U.S. vs. Russia and China will keep challenging the West’s obsession in deriding “illiberalism,” a fearful, rhetorical exercise that equates Russian democracy with China’s one party rule, Iran’s demo-theocracy and Turkey’s neo-Ottoman revival.

It’s immaterial that Russia’s economy is one-tenth of China’s. From boosting trade that bypasses the U.S. dollar, to increasing joint military exercises, the Russia-China symbiosis is poised to advance beyond political and ideological affinities.

China badly needs Russian know-how in its military industry. Beijing will turn this knowledge into plenty of dual use, civilian-military innovations.

The long game indicates Russia and China will break down language and cultural barriers to lead Eurasian integration against American economic hegemony backed by military might.

One could say the Eurasian century is already upon us. The era of the West shaping the world at will (a mere blip of history) is already over. This is despite Western elite denials and fulminations against the so-called “morally reprehensible,” “forces of instability” and “existential threats.”

Standard Chartered, the British financial services company, using a mix of purchasing power exchange rates and GDP growth, has projected that the top five economies in 2030 will be China, the U.S., India, Japan and Russia. These will be followed by Germany, Indonesia, Brazil, Turkey and the UK. Asia will extend its middle class as they are slowly killed off across the West.

Hop on the Trans-Eurasia Express

A case can be made that Beijing’s elites are fascinated at how Russia, in less than two decades, has returned to semi-superpower status after the devastation of the Yeltsin years.

That happened to a large extent due to science and technology. The most graphic example is the unmatched, state-of-the-art weaponry unveiled by President Vladimir Putin in his March 1, 2018speech.

In practice, Russia and China will be advancing the alignment of China’s New Silk Roads, or Belt and Road Initiative (BRI), with Russia’s Eurasia Economic Union (EAEU).

There’s ample potential for a Trans-Eurasia Express network of land and maritime transport corridors to be up and running by the middle of next decade, including, for instance, road and railway bridges connecting China with Russia across the Heilongjiang River.

Heilongjiang or Amur River separating China and Russia. (Wikimedia)

Following serious trilateral talks involving Russia, India and Iran last November, closer attention is being paid to the International North-South Transportation Corridor (INSTC), a 7,200-km long lane mixing sea and rail routes essentially linking the Indian Ocean with the Persian Gulf through Iran and Russia and further on down the road, to Europe.

Imagine cargo transiting from all over India to the Iranian port of Bandar Abbas, then overland to Bandar Anzali, an Iranian port on the Caspian Sea, and then on to the Russian southern port of Astrakhan, and after that to Europe by rail. From New Delhi’s point of view, that means shipping costs reduced by up to 40 percent, and Mumbai-to-Moscow in only 20 days.

Down the line, INSTC will merge with BRI – as in Chinese-led corridors linked with the India-Iran-Russia route into a global transport network. 

This is happening just as Japan is looking at the Trans-Siberian Railway – which will be upgraded throughout the next decade – to improve its connections with Russia, China and the Koreas. Japan is now a top investor in Russia and at the same time very much interested in a Korea peace deal. That would free Tokyo from massive defense spending conditioned by Washington’s rules. The EAEU free trade agreements with ASEAN can be added to that.

Especially over these past four years, Russia has also learned how to attract Chinese investment and wealth, aware that Beijing’s system mass-produces virtually everything and knows how to market it globally, while Moscow needs to fight every block in the book dreamed up by Washington.

The Huawei-Venezuela “Axis of Evil

Metal Truss Railroad Bridge (Kama River, near Perm city). Early color photograph from Russia, created by Sergei Mikhailovich Prokudin-Gorskii as part of his work to document the Russian Empire from 1909 to 1915. (Wikimedia)

While Washington remains a bipartisan prisoner to the Russophobic Platonic cave – where Cold War shadows on the wall are taken as reality – MAGA is missing the train to Eurasia.

A many-headed hydra, MAGA, stripped to the bone, could be read as a non-ideological antidote to the Empire’s global adventurism. Trump, in his non-strategic, shambolic way, proposed at least in theory the return to a social contract in the U.S. MAGA in theory would translate into jobs, opportunities for small businesses, low taxes and no more foreign wars.

It’s nostalgia for the 1950s and 60s before the Vietnam quagmire and before “Made in the USA” was slowly and deliberately dismantled. What’s left are tens of trillions of national debt; a quadrillion in derivatives; the Deep State running amok; and a lot of pumped up fear of evil Russians, devious Chinese, Persian mullahs, the troika of tyranny, the Belt and Road, Huawei, and illegal aliens.

More than a Hobbesian “war of all against all” or carping about the “Western rules-based system” being under attack, the fear is actually of the strategic challenge posed by Russia and China, which seeks a return to rule by international law.

MAGA would thrive if hitched to a ride on the Eurasia integration train: more jobs and more business opportunities instead of more foreign wars. Yet MAGA won’t happen – to a large extent because what really makes Trump tick is his policy of energy dominance to decisively interfere with Russia and China’s development.

The Pentagon and the “intel community” pushed the Trump administration to go after Huawei, branded as a nest of spies, while pressuring key allies Germany, Japan and Italy to follow. Germany and Japan permit the U.S. to control the key nodes in the extremities of Eurasia. Italy is essentially a large NATO base.

The U.S. Department of Justice requested the extradition of Huawei CFO Meng Wanzhou from Canada last Tuesday, adding a notch to the Trump administration’s geopolitical tactic of “blunt force trauma.” 

Add to it that Huawei – based in Shenzhen and owned by its workers as shareholders – is killing Apple across Asia and in most latitudes across the Global South. The real the battle is over 5G, in which China aims to upstage the U.S., while upgrading capacity and production quality.

The digital economy in China is already larger than the GDP of France or the UK. It’s based on the BATX companies (Baidu, Alibaba, Tencent, Xiaomi), Didi (the Chinese Uber), e-commerce giant and Huawei. These Big Seven are a state within a civilization – an ecosystem they’ve constructed themselves, investing fortunes in big data, artificial intelligence (AI) and the internet. American giants – Facebook, Instagram, Twitter and Google – are absent from this enormous market.

Moreover, Huawei’s sophisticated encryption system in telecom equipment prevents interception by the NSA. That helps account for its extreme popularity all across the Global South, in contrast to the Five Eyes (U.S., UK, Canada, Australia, New Zealand) electronic espionage network.

The economic war on Huawei is also directly connected to the expansion of BRI across 70 Asian, European and African nations, constituting a Eurasia-wide network of commerce, investment and infrastructure able to turn geopolitical and geo-economic relations, as we know them, upside down.

Greater Eurasia Beckons

Whatever China does won’t alter the Deep State’s obsession about “an aggression against our vital interests,” as stated by the National Defense Strategy. The dominant Pentagon narrative in years to come will be about China “intending to impose, in the short term, its hegemony in the Indo-Pacific region, and catch the United States off-guard in order to achieve future global pre-eminence.” This is mixed with a belief that Russia wants to “crush NATO” and “sabotage the democratic process in Crimea and Eastern Ukraine.”

The Karakoram Highway connecting China and Pakistan, sometimes referred to as the Eighth Wonder of the World.(Wikimedia)

During my recent travels along the northern part of the China-Pakistan Economic Corridor (CPEC), I saw once again how China is upgrading highways, building dams, railways and bridges that are useful not only for its own economic expansion but also for its neighbors’ development. Compare it to U.S. wars – as in Iraq and Libya – where dams, railways and bridges are destroyed.

Russian diplomacy is all but winning the New Cold War — as diagnosed by Prof. Stephen Cohen in his latest book, War with Russia: From Putin and Ukraine to Trump and Russiagate.

Moscow mixes serious warnings with diverse strategies, such as resurrecting the South Stream gas pipeline to supply Europe as an extension of Turk Stream after the Trump administration also furiously opposed the Nord Stream 2 pipeline with sanctions on Russia. Meanwhile, Moscow ramps up energy exports to China.

The advance of the Belt and Road Initiative is linked to Russian security and energy exports, including the Northern Sea Route, as an alternative future transportation corridor to Central Asia. Russia emerges then as the top security guarantee for Eurasian trade and economic integration.

Last month in Moscow, I discussed Greater Eurasia– by now established as the overarching concept of Russian foreign policy – with top Russian analysts. They told me Putin is on board. He referred to Eurasia recently as “not a chessboard or a geopolitical playground, but our peaceful and prosperous home.”

Needless to say, U.S. think tanks dismiss the idea as “abortive”. They ignore Prof. Sergey Karaganov, who as early as mid-2017 was arguing that Greater Eurasia could serve as a platform for “a trilateral dialogue on global problems and international strategic stability between Russia, the United States and China.”

As much as the Beltway may refuse it, “The center of gravity of global trade is now shifting from the high seas toward the vast continental interior of Eurasia.”

Beijing Skirts the Dollar

Beijing is realizing it can’t meet its geo-economic goals on energy, security, and trade without bypassing the U.S. dollar.

According to the IMF, 62 percent of global central bank reserves were still held in U.S. dollars by the second quarter of 2018. Around 43 per cent of international transactions on SWIFT are still in U.S. dollars. Even as China, in 2018, was the single largest contributor to global GDP growth, at 27.2 percent, the yuan still only accounts for 1 percent of international payments, and 1.8 per cent of all reserve assets held by central banks.

It takes time, but change is on the way. China’s cross-border payment network for yuan transactions was launched less than four years ago. Integration between the Russian Mir payment system and Chinese Union Pay appears inevitable.

Bye Bye Drs. K and Zbig

Russia and China are developing the ultimate nightmare for those former shamans of U.S. foreign policy, Henry Kissinger and the late Zbigniew “Grand Chessboard” Brzezinski.

Back in 1972 Kissinger was the mastermind – with logistical help from Pakistan – of the Nixon moment in China. That was classic Divide and Rule, separating China from the USSR. Two years ago, before Trump’s inauguration, Dr. K’s advice dispensed at Trump Tower meetings consisted of a modified Divide and Rule: the seduction of Russia to contain China.

The Kissinger doctrine rules that, geopolitically, the U.S. is just “an island off the shores of the large landmass of Eurasia.” Domination “by a single power of either of Eurasia’s two principal spheres – Europe or Asia – remains a good definition of strategic danger for America, Cold War or no Cold War,” as Kissinger said. “For such a grouping would have the capacity to outstrip America economically and, in the end, militarily.”

The Zbig doctrine ran along similar lines. The objectives were to prevent collusion and maintain security among the EU-NATO vassals; keep tributaries pliant; keep the barbarians (a.k.a. Russians and allies) from coming together; most of all prevent the emergence of a hostile coalition (as in today’s Russia-China alliance) capable of challenging U.S. hegemony; and submit Germany, Russia, Japan, Iran, and China to permanent Divide and Rule.

Thus the despair of the current National Security Strategy, forecasting China displacing the United States “to achieve global preeminence in the future,” through BRI’s supra-continental reach.

The “policy” to counteract such “threats” is sanctions, sanctions, and more unilateral sanctions, coupled with an inflation of absurd notions peddled across the Beltway – such as that Russia is aiding and abetting the re-conquest of the Arab world by Persia. Also that Beijing will ditch the “paper tiger” “Made in China 2025” plan for its major upgrade in global, high-tech manufacturing just because Trump hates it.

Once in a blue moon a U.S. report actually gets it right, such as in Beijing speeding up an array of BRI projects; as a modified Sun Tzu tactic deployed by President Xi Jinping.

At the June 2016 Shangri-La Dialogue in Singapore, Professor Xiang Lanxin, director of the Centre of One Belt and One Road Studies at the China National Institute for SCO International Exchange and Judicial Cooperation, defined BRI as an avenue to a “post-Westphalian world.” The journey is just beginning; a new geopolitical and economic era is at hand. And the U.S. is being left behind at the station.

Published:2/4/2019 11:09:34 PM
[Markets] Why The War On Conspiracy Theories Is Bad Public Policy

Authored by Kevin Barrett via The Unz Review,

On January 25 2018 YouTube unleashed the latest salvo in the war on conspiracy theoriessaying “we’ll begin reducing recommendations of borderline content and content that could misinform users in harmful ways—such as videos promoting a phony miracle cure for a serious illness, claiming the earth is flat, or making blatantly false claims about historic events like 9/11.”

At first glance that sounds reasonable. Nobody wants YouTube or anyone else to recommend bad information. And almost everyone agrees that phony miracle cures, flat earthism, and blatantly false claims about 9/11 and other historical events are undesirable.

But if we stop and seriously consider those words, we notice a couple of problems.

First, the word “recommend” is not just misleading but mendacious. YouTube obviously doesn’t really recommend anything. When it says it does, it is lying.

When you watch YouTube videos, the YouTube search engine algorithm displays links to other videos that you are likely to be interested in. These obviously do not constitute “recommendations” by YouTube itself, which exercises no editorial oversight over content posted by users. (Or at least it didn’t until it joined the war on conspiracy theories.)

The second and larger problem is that while there may be near-universal agreement among reasonable people that flat-earthism is wrong, there is only modest agreement regarding which health approaches constitute “phony miracle cures” and which do not.

Far less is there any agreement on “claims about 9/11 and other historical events.” (Thus far the only real attempt to forge an informed consensus about 9/11 is the 9/11 Consensus Panel’s study—but it seems unlikely that YouTube will be using the Consensus Panel to determine which videos to “recommend”!)

YouTube’s policy shift is the latest symptom of a larger movement by Western elites to - as Obama’s Information Czar Cass Sunstein put it - “disable the purveyors of conspiracy theories.” Sunstein and co-author Adrian Vermeule’s 2008 paper “Conspiracy Theories,” critiqued by David Ray Griffin in 2010 and developed into a 2016 book, represents a panicked reaction to the success of the 9/11 truth movement. (By 2006, 36% of Americans thought it likely that 9/11 was an inside job designed to launch wars in the Middle East, according to a Scripps poll.)

Sunstein and Vermuele begin their abstract:

Many millions of people hold (sic) conspiracy theories; they believe that powerful people have worked together in order to withhold the truth about some important practice or some terrible event. A recent example is the belief, widespread in some parts of the world, that the attacks of 9/11 were carried out not by Al Qaeda, but by Israel or the United States. Those who subscribe to conspiracy theories may create serious risks, including risks of violence, and the existence of such theories raises significant challenges for policy and law.

Sunstein argues that conspiracy theories (i.e. the 9/11 truth movement) are so dangerous that some day they may have to be banned by law. While awaiting that day, or perhaps in preparation for it, the government should “disable the purveyors of conspiracy theories” through various techniques including “cognitive infiltration” of 9/11 truth groups. Such “cognitive infiltration,” Sunstein writes, could have various aims including the promotion of “beneficial cognitive diversity” within the truth movement.

What sort of “cognitive diversity” would Cass Sunstein consider “beneficial”? Perhaps 9/11 truth groups that had been “cognitively infiltrated” by spooks posing as flat-earthers would harbor that sort of “beneficial” diversity? That would explain the plethora of expensive, high-production-values flat earth videos that have been blasted at the 9/11 truth community since 2008.

Why does Sunstein think “conspiracy theories” are so dangerous they need to be suppressed by government infiltrators, and perhaps eventually outlawed—which would necessitate revoking the First Amendment? Obviously conspiracism must present some extraordinary threat. So what might that threat be? Oddly, he never explains. Instead he briefly mentions, in vapidly nebulous terms, about “serious risks including the risk of violence.” But he presents no serious evidence that 9/11 truth causes violence. Nor does he explain what the other “serious risks” could possibly be.

Why did such highly accomplished academicians as Sunstein and Vermuele produce such an unhinged, incoherent, poorly-supported screed? How could Harvard and the University of Chicago publish such nonsense? Why would it be deemed worthy of development into a book? Why did the authors identify an alleged problem, present no evidence that it even is a problem, yet advocate outrageously illegal and unconstitutional government action to solve the non-problem?

The too-obvious answer, of course, is that they must realize that 9/11 was in fact a US-Israeli false flag operation. The 9/11 truth movement, in that case, would be a threat not because it is wrong, but because it is right. To the extent that Americans know or suspect the truth, the US government will undoubtedly find it harder to pursue various “national security” objectives. Ergo, 9/11 “conspiracy theories” are a threat to national security, and extreme measures are required to combat them. But since we can’t just burn the First Amendment overnight, we must instead take a gradual and covert “boil the frog” approach, featuring plenty of cointelpro-style infiltration and misdirection. “Cognitive infiltration” of internet platforms to stop the conspiracy contagion would also fit the bill.

It is quite possible, perhaps even likely, that Sunstein and Vermeule are indeed well-informed and Machievellian. But it is also conceivable that they are, at least when it comes to 9/11 and “conspiracy theories,” as muddle-headed as they appear. Their irrational panic could be an example of the bad thinking that emerges from groups that reflexively reject dissent. (Another, larger example of this kind of bad thinking comes to mind: America’s disastrous post-9/11 policies.)

The counterintuitive truth is that embracing and carefully listening to radical dissenters is in fact good policy, whether you are a government, a corporation, or any other kind of group. Ignoring or suppressing dissent produces muddled, superficial thinking and bad decisions. Surprisingly, this turns out to be the case even when the dissenters are wrong.

Scientific evidence for the value of dissent is beautifully summarized in Charlan Nemeth’s In Defense of Troublemakers: The Power of Dissent in Life and Business (Basic Books, 2018). Nemeth, a psychology professor at UC-Berkeley, summarizes decades of research on group dynamics showing that groups that feature passionate, radical dissent deliberate better, reach better conclusions, and take better actions than those that do not—even when the dissenter is wrong.

Nemeth begins with a case where dissent would likely have saved lives: the crash of United Airlines Flight 173 in December, 1978. As the plane neared its Portland destination, the possibility of a problem with the landing gear arose. The captain focused on trying to determine the condition of the landing gear as the plane circled the airport. Typical air crew group dynamics, in which the whole crew defers to the captain, led to a groupthink bubble in which nobody spoke up as the needle on the fuel gauge approached “E.” Had the crew included even one natural “troublemaker”—the kind of aviator who joins Pilots for 9/11 truth—there almost certainly would have been more divergent thinking. Someone would have spoken up about the fuel issue, and a tragic crash would have been averted.

Since 9/11, American decision-making elites have entered the same kind of bubble and engaged in the same kind of groupthink. For them, no serious dissent on such issues as what really happened on 9/11, and whether a “war on terror” makes sense, is permitted. The predictable result has been bad thinking and worse decisions. From the vantage point of Sunstein and Vermeule, deep inside the bubble, the potentially bubble-popping, consensus-shredding threat of 9/11 truth must appear radically destabilizing. To even consider the possibility that the 9/11 truthers are right might set off a stampede of critical reflection that would radically undermine the entire set of policies pursued for the past 17 years. This prospect may so terrify Sunstein and Vermeule that it paralyzes their ability to think. Talk about “crippled epistemology”!

Do Sunstein and Vermeule really think their program for suppressing “conspiracy theories” will be beneficial? Do YouTube’s decision-makers really believe that tweaking their algorithms to support the official story will protect us from bad information? If so, they are all doubly wrong.

First, they are wrong in their unexamined assumption that 9/11 truth and “conspiracy theories” in general are “blatantly false.” No honest person with critical thinking skills who weighs the merits of the best work on both sides of the question can possibly avoid the realization that the 9/11 truth movement is right. The same is true regarding the serial assassinations of America’s best leaders during the 1960s. Many other “conspiracy theories,” perhaps the majority of the best-known ones, are also likely true, as readers of Ron Unz’s American Pravda series are discovering.

Second, and less obviously, those who would suppress conspiracy theories are wrong even in their belief that suppressing false conspiracy theories is good public policy. As Nemeth shows, social science is unambiguous in its finding that any group featuring at least one passionate, radical dissenter will deliberate better, reach sounder conclusions, and act more effectively than it would have without the dissenter. This holds even if the dissenter is wrong—even wildly wrong.

The overabundance of slick, hypnotic flat earth videos, if they are indeed weaponized cointelpro strikes against the truth movement, may be unfortunate. But the existence of the occasional flat earther may be more beneficial than harmful. The findings summarized by Nemeth suggest that a science study group with one flat earther among the students would probably learn geography and astronomy better than they would have without the madly passionate dissenter.

We could at least partially solve the real problem—bad groupthink—through promoting genuinely beneficial cognitive diversity. YouTube algorithms should indeed be tweaked to puncture the groupthink bubbles that emerge based on user preferences. Someone who watches lots of 9/11 truther videos should indeed be exposed to dissent, in the form of the best arguments on the other side of the issue—not that there are any very good ones, as I have discovered after spending 15 years searching for them!

But the same goes for those who watch videos that explicitly or implicitly accept the official story. Anyone who watches more than a few pro-official-story videos (and this would include almost all mainstream coverage of anything related to 9/11 and the “war on terror”) should get YouTube “suggestions” for such videos as September 11: The New Pearl Harbor9/11 Mysteries, and the work of Architects and Engineers for 9/11 Truth. Exposure to even those “truthers” who are more passionate than critical or well-informed would benefit people who believe the official story, according to Nemeth’s research, by stimulating them to deliberate more thoughtfully and to question facile assumptions.

The same goes for other issues and perspectives. Fox News viewers should get “suggestions” for good material, especially passionate dissent, from the left side of the political spectrum. MSNBC viewers should get “suggestions” for good material from the right. Both groups should get “suggestions” to look at genuinely independent, alternative media brimming with passionate dissidents—outlets like the Unz Review!

Unfortunately things are moving in the opposite direction. YouTube’s effort to make “conspiracy videos” invisible is being pushed by powerful lobbies, especially the Zionist lobby, which seems dedicated to singlehandedly destroying the Western tradition of freedom of expression.

Nemeth and colleagues’ findings that “conspiracy theories” and other forms of passionate dissent are not just beneficial, but in fact an invaluable resource, are apparently unknown to the anti-conspiracy-theory cottage industry that has metastasized in the bowels of the Western academy. The brand-new bible of the academic anti-conspiracy-theory industry is Conspiracy Theories and the People Who Believe Them (Oxford University Press, 2019).

Editor Joseph Uscinski’s introduction begins by listing alleged dangers of conspiracism:

“In democracies, conspiracy theories can drive majorities to make horrible decisions backed by the use of legitimate force. Conspiracy beliefs can conversely encourage abstention. Those who believe the system is rigged will be less willing to take part in it. Conspiracy theories form the basis for some people’s medical decisions; this can be dangerous not only for them but for others as well. For a select few believers, conspiracy theories are instructions to use violence.”

Uscinski is certainly right that conspiracy theories can incite “horrible decisions” to use “legitimate force” and “violence.” Every major American foreign war since 1846 has been sold to the public by an official theory, backed by a frenetic media campaign, of a foreign conspiracy to attack the United States. And all of these Official Conspiracy Theories (OCTs)—including the theory that Mexico conspired to invade the United States in 1846, that Spain conspired to sink the USS Maine in 1898, that Germany conspired with Mexico to invade the United States in 1917, that Japan conspired unbeknownst to peace-seeking US leaders to attack Pearl Harbor in 1941, that North Vietnam conspired to attack the US Navy in the Gulf of Tonkin in 1964, and that 19 Arabs backed by Afghanistan, Iraq, Iran, and everybody else Israel doesn’t like conspired to attack the US in 2001—were false or deceptive.

Well over 100 million people have been killed in the violence unleashed by these and other Official Conspiracy Theories. Had the passionate dissenters been heeded, and the truths they told about who really conspires to create war-trigger public relations stunts been understood, none of those hundred-million-plus murders need have happened.

Though Conspiracy Theories and the People Who Believe Them generally pathologizes the conspiracy theories of dissidents while ignoring the vastly more harmful theories of official propagandists, its 31 essays include several that question that outlook. In “What We Mean When We Say ‘Conspiracy Theory’ Jesse Walker, books editor of Reason Magazine, exposes the bias that permeates the field, pointing out that many official conspiracy theories, including several about Osama Bin Laden and 9/11-anthrax, were at least as ludicrously false and delusional as anything believed by marginalized dissidents.

In “Media Marginalization of Racial Minorities: ‘Conspiracy Theorists’ in U.S. Ghettos and on the ‘Arab Street’” Martin Orr and Gina Husting go one step further: “The epithet ‘conspiracy theorist’ is used to tarnish those who challenge authority and power. Often, it is tinged with racial undertones: it is used to demean whole groups of people in the news and to silence, stigmatize, or belittle foreign and minority voices.” (p.82) Unfortunately, though Orr and Husting devote a whole section of their article to “Conspiracy Theories in the Muslim World” and defend Muslim conspiracists against the likes of Thomas Friedman, they never squarely face the fact that the reason roughly 80% of Muslims believe 9/11 was an inside job is because the preponderance of evidence supports that interpretation.

Another relatively sensible essay is M R.X. Dentith’s “Conspiracy Theories and Philosophy,” which ably deconstructs the most basic fallacy permeating the whole field of conspiracy theory research: the a priori assumption that a “conspiracy theory” must be false or at least dubious: “If certain scholars (i.e. the majority represented in this book! –KB) want to make a special case for conspiracy theories, then it is reasonable for the rest of us to ask whether we are playing fair with our terminology, or whether we have baked into our definitions the answers to our research programs.” (p.104). Unfortunately, a few pages later editor Joseph Uscinski sticks his fingers in his ears and plays deaf and dumb, claiming that “the establishment is right far more often than conspiracy theories, largely because their methods are reliable. When conspiracy theorists are right, it is by chance.” He adds that conspiracy theories will inevitably “occasionally lead to disaster” (whatever that means). (p.110).

I hope Uscinski finds the time to read Nemeth’s In Defense of Troublemakers and consider the evidence that passionate dissent is helpful, not harmful. And I hope he will look into the issues Ron Unz addresses in his American Pravda series.

Then again, if he does, he may find himself among those of us exiled from the academy and publishing in The Unz Review.

Published:2/4/2019 10:40:15 PM
[World] [Eugene Volokh] And a Welcome to Our New Coblogger Keith Whittington

I'm also delighted to report that Prof. Keith Whittington, William Nelson Cromwell Professor of Politics at Princeton University will be joining us as a coblogger. He is the author of, among other books, Speak Freely: Why Universities Must Defend Free Speech, Constitutional Construction: Divided Powers and Constitutional Meaning, and Constitutional Interpretation: Textual Meaning, Original Intent, and Judicial Review, and Political Foundations of Judicial Supremacy: The Presidency, the Supreme Court, and Constitutional Leadership in U.S. History. As you can tell, he does constitutional law and constitutional history; I'm very much looking forward to his posts!

Published:2/4/2019 10:11:24 PM
[Markets] More Alarm Bells As Banks Report Tightening Lending Standards While Loan Demand Slides

The latest alarm signal that the US economy is on collision course with a recession came after today's release of the latest Senior Loan Officer Opinion Survey (SLOOS) by the Federal Reserve, which was conducted for bank lending activity during the fourth quarter of last year, and which reported a double whammy of tightening lending standards and terms for commercial and industrial loans on one hand, and weaker demand for those loans on the other. Even more concerning is that banks also reported weaker demand for both commercial and residential real estate loans, echoing the softer housing data in recent months.

This tightening in C&I lending standards coupled with sharp declines loan demand, especially for mortgage and auto loans, is shown below.

Here are the details via Goldman:

  • 20% of banks surveyed reportedly widened spreads of loan rates over the cost of funds for large- and medium-sized firms, while 16% narrowed spreads. 14% of banks surveyed reported higher premiums charged on riskier loans, while 4% reported lower premiums. Other terms, such as loan covenants and collateralization requirements, remained largely unchanged. Demand for loans reportedly weakened on balance.
  • Relative to the last survey, standards on commercial real estate (CRE) loans tightened on net over the fourth quarter of the year. On net, 17% of banks reported tightening credit standards on loans secured by multifamily residential properties, while 13% of banks on net reported tightening standards for construction and land development loans. As above, banks reported that demand for CRE loans across a broad range of categories moderately weakened on net.
  • Banks reported that lending standards for residential mortgage loans remained largely unchanged on net in 2018Q4 relative to the prior quarter. However, this benign environment was largely as a result of slumping demand for credit, as banks reported weaker demand across all surveyed residential loan categories, including home equity lines of credit.
  • While banks reported that lending standards on consumer installment loans and autos remained largely unchanged, banks reported that lending standards for credit cards had tightened slightly. Here too demand - for all categories of consumer loans - was moderately weaker, while respondent willingness to make consumer installment loans tumbled to the lowest value since the financial crisis.

Finally, and most concerning of all, is that in their response to special questions on their 2019 outlook, assuming that economic activity continues to be in line with consensus forecasts, banks reported they plan to tighten lending standards somewhat for C&I loans, commercial real estate loans, and residential mortgage loans, in other words the most important credit would become even more difficult to attain. As a result, or perhaps due to the slowdown in the economy, banks also expect demand for C&I, CRE, and residential mortgage loans to weaken somewhat in 2019.

Banks also reported expecting delinquencies and charge-offs to increase somewhat on C&I, CRE, and residential mortgage loans; as Bloomberg's Andrew Cinko muses "if America was heading toward an economic contraction that would be a typical expectation. But this doesn't seem to be the case for the foreseeable future. So what gives?"

Perhaps "what gives" is that the economy is not nearly as strong as consensus would make it appear, and behind closed door, loan officers are already batting down the hatches and preparing for a recession. 

* * *

Here would be a good time to remind readers that according to a Reuters investigation conducted in mid-December, when looking behind headline numbers showing healthy loan books, "problems appear to be cropping up in areas such as home-equity lines of credit, commercial real estate and credit cards" according to federal data reviewed by the wire service and interviews with bank execs.

Worse, banks are also starting to aggressively cut relationships with customers who seem too risky, which is to be expected: after all financial conditions in the real economy, if not the markets which just enjoyed the best January since 1987, are getting ever tighter as short-term rates remain sticky high and the result will be a waterfall of defaults sooner or later. Here are the all too clear signs which Reuters found that banks are starting to prepare for the next recession by slashing and/or limiting risky loan exposure:

  • First, nearly half of the applications from customers with low credit scores were rejected in the four months ending in October, compared with 43 percent in the year-ago period, according to a survey released by the Federal Reserve Bank of New York.
  • Second, banks shuttered 7 percent of existing accounts, particularly among subprime borrowers, the highest rate since the Fed started conducting surveys in 2013.
  • Third, home-equity lines of credit declined 8 percent across the industry, with growth slowing in areas such as credit cards and commercial-and-industrial loans, the survey showed.

Then there are the bank-specific signs, starting with Capital One - one of the biggest U.S. card lenders - which is restricting how much it lends to each customer even as it aggressively recruits new ones, CEO Richard Fairbank said last December.

We have been more cautious in the extension of credit, initial credit lines, the broad-based credit line increase programs," he said. "At this point in the cycle, we’re going to hold back on that option a bit."

Regional banks have become more cautious lately as well, as they avoid financing riskier projects like early-stage construction loans and properties without pre-lease agreements (here traders vividly recall the OZK commercial real estate repricing fiasco that sent the stock crashing). New Jersey’s OceanFirst Bank also pulled back on refinancing transactions that let customers cash out on their debt, and has started reducing exposure to industrial loans, CEO Chris Maher told Reuters.

“In a downturn, industrial property is extremely illiquid,” he said. “If you don’t want it and it’s not needed it could be almost valueless.”

What happens next?

While a recession is looking increasingly likely, especially as it becomes a self-fulfilling prophecy with banks slashing loans resulting in even slower velocity of money, while demand for credit shrinks in response to tighter loan standards and hitting economic growth, the only question whether a recession is a 2019 or 2020 event, bankers and analysts remain optimistic that the next recession will look much more like the 2001 tech bubble bursting than the 2007-09 global financial crisis.

We wonder why they are so confident, and statements such as this one from Flagship Bank CFO Schornack will hardly instill confidence:

“I lived through the pain of the last recession. We are much more prudent today in how we underwrite deals.”

We disagree, and as evidence we present Exhibit A: the shock write down that Bank OZK took on its commercial real estate, which nobody in the market had expected. As for banks being more "solid", let's remove the $1.5 trillion buffer in excess reserves that provides an ocean of artificial liquidity, and see just how stable banks are then. After all, it is this $1.5 trillion in excess reserves that prompt Powell to capitulate and tell the markets he is willing to slowdown or even pause the Fed's balance sheet shrinkage.

Published:2/4/2019 5:36:24 PM
[Markets] “I Have Never Experienced This Kind Of Immoral Behavior From A Bank In My Entire Life": Goldman Slammed In Latest CDS Scandal

Not a month seems to pass any more without a major bank or hedge fund getting in hot water for using CDS in a way that was never intended, and now it's Goldman's turn, again.

Three months ago, when the loan market was freezing up,  Goldman struck an unusual deal with a group of hedge funds to offload a buyout loan from its books, saving the bank and the funds from potential losses. What was odd, is that Goldman was also serving as the underwriter to the company issuing the loans...while at the same time arrenging a "kicker" to loan buyers by having them bet on the potential insolvency of its own client.

Now, this bizarre arrangement is at the center of a lawsuit accusing the Wall Street giant of gorging on fees while also exposing the acquirer in the buyout, United Natural Foods, to hedge-fund sharks who stand to reap major profits if the company collapses as a result of the incremental debt: according to Bloomberg, United Natural had hired Goldman Sachs for the takeover and is now demanding at least $52 million - and potentially much more - from the bank.

Worse, the distributor of natural and organic foods, specialty foods is absolutely furious at the bank that until recently was its strategic advisor:

“I have never experienced this kind of egregious and immoral behavior from a bank in my entire life,” United Natural Chief Executive Officer Steve Spinner told Bloomberg in an interview after his company filed the suit Wednesday in a state court in New York. Goldman, which until that moment had been retained by United Natural, vowed to vigorously fight the case, calling it "entirely without merit."

As hinted above, Wall Street's latest drama once again revolves around the increasingly dysfunctional credit-default swaps market, where hedge funds and others wager on the ability of companies to keep up with their borrowings, only the traditional role of CDS as bankruptcy hedges has long ago given way to more "creative" applications. Indeed, as Bloomberg notes, "again and again, the contracts have played strange roles in debt transactions, sometimes straining allies or encouraging unlikely alliances."

According to the lawsuit, Goldman adjusted the terms on a $2 billion financing deal in a way that allowed hedge funds to reap a windfall from their CDS bets, as first reported by Bloomberg in October. United Natural said it initially heeded Goldman's advice, agreeing to the changes so it could complete the takeover of grocery chain Supervalu.

Where things got complicated, is that Goldman enlisted the help of hedge funds that had been betting on Supervalu’s demise. Those funds now stand to benefit if United Natural struggles to repay. That was just the beginning: United Natural also alleges that the bank unfairly withheld fees, burdened it with additional interest expenses and relied on “scare tactics” by a senior banker to back it into a corner.

In the beginning it was nothing but rainbows and roses: United Natural, which is a supplier to Whole Foods, announced the $2.9 billion Supervalu acquisition in July, and with the market soaring and credit and loan spreads near all time tights, not a cloud appeared on the horizon. And, as so often happens, the company announced that Goldman Sachs would act as lead underwriter to sell the billions in debt needed to fund the deal. But just a few months later, as equities first tumbled and shortly thereafter credit markets - especially in the leveraged loan market - froze up, the investment bank faced the prospect of being saddled with millions in losses unless it found a way to offload the loan from its books.

Meanwhile, hedge funds were facing major losses too after having bet against Supervalu’s debt by loading up on CDS, but the company’s sale threatened to create a situation known as an orphaned CDS contract, a situation similar to the infamous McClatchy fiasco (one which we profiled extensively in "Orphan CDS, Manufactured Credit Events, Insufficient Deliverables: What The Hell Is Going On In The CDS Market?"). Because new debt being issued to purchase Supervalu would have paid down the grocer’s obligations, it could have made swaps linked to Supervalu effectively worthless - referencing an entity with no significant borrowings - even as the default risk of the purchaser, United Natural, soared. However, due to the specific nature of the CDS contract, there was no continuity in tracking the referenced entity, as such those who were betting on a Supervalu default would end up with nothing, even if the successor company did eventually file for bankruptcy.

It is here that Goldman had an "epiphany", one which would kill two birds with one stone.

The key was to restore the value of the roughly $470 million of net CDS wagers linked to Supervalu’s debt. While the cost of the Supervalu derivatives had plunged through most of last year, by tweaking the loan docs to make Supervalu a co-borrower on the new financing, Goldman sparked a surge in the value of the swaps.

That, along with several other concessions, not only rescued hedge funds from getting wiped out on their SVU CDS, but more importantly, helped Goldman fill its order book for the loan and eliminate its exposure risk.

And while Goldman was the clear winner here, helping a couple of millionaire credit PMs avoid major losses for 2018 while avoiding taking a loss on its buyout loan exposure, United Natural claims that Goldman left it exposed to a group of lenders whose interests are at odds with its own and who are motivated to create roadblocks aimed at forcing a default so that they can notch further gains in the CDS market.

That may be difficult to prove, especially since Goldman can claim that without the contract fudge, the deal may never have been funded. Still, United Natural alleges that it never received a final list of funds participating in the loans and, had it known, would’ve raised concerns, even though without making the concessions to hedge funds, Goldman would have struggled to place the deal.

United Natural meanwhile claims that it went along with the changes after warnings from Stephan Feldgoise, who helps oversee Goldman’s mergers business in the Americas. The bank allegedly warned that if the company didn’t adjust the terms, it might “scare off” investors, trigger “blowback” from its own shareholders and “things would get ugly.”

What Goldman apparently did not explain is that the one entity most on the hook - in terms of both P&L and reputation - was Goldman. Which is why Feldgoise and Bank of America, to co-lead arranger on the loan, are also named as defendants.

As Bloomberg concludes, it’s another twist in Feldgoise’s time at Goldman Sachs, which ironically, included a stint as chairman of the firm’s global fairness committee. Curiously, in mid-2017, division chiefs announced he would be departing the bank, stepping down from his post in senior management to become an advisory director. Yet he’s still at the bank, now in a heated battle with a client for whom he’s handled various deals. That said, with the millions in fees from the United Natural-Supervalu deal, at least Feldgoise's tenure at Goldman is secure. Worst case, he can always get a job at one of the many hedge funds that made a killing on SVU CDS thanks to the Goldman fudge.

Published:2/3/2019 5:32:33 PM
[Markets] Unrest In France: No End In Sight

Authored by Guy Millière via The Gatestone Institute,

  • The third group is extremely large: it is the rest of the population. The upper class treat them as regrettable dead weight and expect nothing from them except silence and submission. Its members often have a hard time making ends meet. They pay taxes but can see that a growing portion is being used to subsidize the very people who drove them out of their suburban homes.

  • For the moment, Macron does not seem to want to recognize that these people even exist.

  • When Macron lowered the taxes of the wealthiest but increased the taxes of these "peripherals" by means of a fuel tax, it was seen as the last straw -- in addition to his arrogant condescension.

  • "Today, most of those who protest do not attack the police. But instead of acting to bring down the violence, the police are receiving orders pushing them to be very violent. I do not blame the police. I blame those who give them orders". — Xavier Lemoine, the mayor of Montfermeil, a city in the Eastern suburbs of Paris where the 2005 riots were extremely destructive,

Police scuffle with a yellow vest protester on December 18, 2018 in Biarritz, France. (Photo by Gari Garaialde/Getty Images)

Saturday, January 26th 2019. "Yellow vests" protests were being organized in the main cities of France. Mobilization was not weakening. Support from the population had decreased slightly but was still huge (60%-70%, according to polls). The main slogan has remained the same since November 17, 2018: "Macron must resign". In December, another slogan was added: "Citizens' initiative referendum".

The government and French President Emmanuel Macron have been doing everything they can to crush the movement. They have tried insults, defamation and have said the demonstrators were both "seditious people" wishing to overthrow the institutions and fascist "brown shirts". On December 31, Macron described them, as "hateful crowds". The presence of some anti-Semites led a government spokesman (incorrectly) to describe the entire movement as "anti-Semitic".

The Minister of the Interior, Christophe Castaner, ordered the police to resort to a degree of violence not seen since the time of the Algerian war (1954-62). During the two last decades in France, other riots have taken place many times. In 2005, for instance, when the whole country was subjected to arson and riots for weeks, the number of wounded rioters remained low. But violence has consequences. In just the last few weeks, 1,700 protesters were wounded, some seriously. Nineteen lost an eye; four lost a hand. Although French police officers do not use lethal weapons, they do use rubber ball launchers and often fire at protesters' faces -- a target prohibited by the current rules of engagement. The French are also the onlypolice force in Europe to use Sting-Ball grenades.

Macron has never treated protesters as people who have legitimate claims, so he has never paid attention to their claims. He only agreed to suspend the additional fuel tax, which was to have been begun in January, and to grant a slight increase in the minimum wage -- all of which he did only after weeks of protests.

Journalists say that Macron thought the movement would fade away after the end-of-year break; that police violence and desperation would induce the demonstrators to resign themselves to their fates, and that the support of the general population would collapse. Nothing of the sort took place.

It is clear that Macron does not want to meet the main demands of the protesters; that he will not resign, and that he refuses to accept a citizens' initiative referendum. He has apparently decided that if he dissolved the national assembly and called for legislative elections to end the crisis -- as President Charles de Gaulle did it to put an end to an uprising in May 1968, as allowed by the French Constitution -- he would suffer a scathing defeat. He can see that an overwhelming majority of the French people reject him, so apparently he has determined to seek a way out:

Macron called for a "great national debate" to address the problems facing the country. It soon became clear, however, that the "great debate" would be unconventional, to say the least.

Macron wrote a letter to all French citizens inviting them to "participate", but saying explicitly that the "debate" would not change anything, that the government would continue in exactly the same direction ("I have not forgotten that I was elected on a project, on major orientations to which I remain faithful."), and that everything that was done by the government since June 2017 would remain unchanged ("We will not go back on the measures we have taken").

He then entrusted organizing the "debate" and drafting its conclusions to two members of the government, and requested that "registers of grievances" be made available to the public in all town halls.

Macron then launched the "debate" by meeting mayors of many cities, but not in public. He seems to have been concerned that if he organized meetings open to the public, he would be immediately chased away by crowds.

The first two meetings took place in small cities (with 2000-3000 inhabitants), and with mayors whom the organizers -- chosen by Macron -- allowed to come. The organizers also selected the questions to be asked, then sent them to Macron to be answered at the meeting.

The day before each meeting, the selected city was placed under the administration of legions of police. All access roads to the city were closed, and anyone found wearing a yellow vest or carrying one in his car was fined. All protests in the city were flatly forbidden. The police made sure that the road used by Macron's convoy to reach the city was empty of any human presence for several hours before the convoy arrived.

Television news channels were asked to broadcast the entire meetings, which lasted six to seven hours. Only a few journalists, also selected by Macron, had permission to attend.

Several commentators stressed that pretending to "debate" is nonsense, and that entrusting the organization of the "debate" and the drafting of its conclusions to members of the government, and the way the meetings were organized, clearly show that these performances are a sham.

Some commentators pointed out that the term "register of grievances" has not been used since the time of absolute monarchy, that mayors are treated as waxworks and that placing the cities Macron visits in a state of siege is unworthy of a democracy.

A French economist, Nicolas Lecaussin, who grew up in Romania, wrote that these meetings reminded him of those in Romania during communism.

The author Éric Zemmour said that Macron is desperately trying to save his presidency but that the attempt will be useless:

"Macron has lost all legitimacy. His presidency is dead... For three months the country stopped economically; and Emmanuel Macron, to try to save his presidency, inflicts on the country two months of additional economic stagnation, and two more months of demonstrations. When people understand that they have been deceived, anger could increase... France is already a country in very bad shape."

The French economy is, in fact, sclerotic. The Index of Economic Freedom created by the Heritage Foundation and the Wall Street Journal ranks it 71st in the world (35th among the 44 countries in the Europe region) and notes that "the government spending accounts for more than half of total domestic output". The Index also reveals that "the budget has been chronically in deficit"; that "corruption remains a problem and that "the labor market is burdened with rigid regulations" leading to a high level of unemployment.

France has lost almost all its factories (industrial jobs account for only 9.6% of total employment). Its agriculture is in ruins, despite huge European subsidies: 30% percent of French farmers earn less than 350 euros ($400) a month and dozens commit suicide each year. In the high-tech sector, France is essentially absent.

brain drain has started that show no signs it will stop.

In parallel, each year, 200,000 immigrants from Africa or the Arab world, often without skills, arrive. Most are Muslim and have been contributing to the Islamization of France.

When a talk show host recently asked Zemmour why Macron is not placing the country's interest higher by taking the reality on the ground into account, the author replied:

"Macron is a technocrat. He thinks he is always right. He was programmed to do what he does. For him, France and the French people do not count. He is at the service of technocracy. He will do exactly what is wanted by the technocracy and a higher class, [who are] totally disconnected from the bulk of the country's population... Those who want to understand have to read Christophe Guilluy."

Guilluy, a geographer, published two books: La France périphérique ("Peripheral France") in 2014, and, just weeks before the outbreak of the uprising, No society. La fin de la classe moyenne occidentale ("No Society. The End of the Western Middle Class"). In them, he explains that French population today is divided into three groups.

The first group is a ruling upper class, totally integrated into globalization, made up of technocrats, politicians, senior civil servants, executives working for multinational companies, and journalists working for the mainstream media. The members of this class live in Paris and the main cities of France.

The second group lives in the suburbs of the main cities and in no-go zones ("Zones Urbaines Sensibles"). It consists mainly of immigrants. The French upper class, who rule, recruit people to serve it directly or indirectly. They are poorly paid, but highly subsidized by the government, and increasingly live according to their own cultures and standards.

The third group is extremely large: it is the rest of the population. It is this group that is called "peripheral France." Its members are made up of low-ranking civil servants, blue collar workers and former blue-collar workers, employees in general, craftsmen, small entrepreneurs, shopkeepers, farmers, and the unemployed.

For the ruling upper class, they are useless. The ruling upper class treat them as regrettable dead weight and expect nothing from them except silence and submission.

Members of "peripheral France" have been driven out of the suburbs by the influx of immigrants and the emergence of no-go zones. These "peripherals", for the most part, live 30 kilometers or more from the big cities. They can see that the upper class dismisses them. They often have a hard time making ends meet. They pay taxes but can see that a growing portion is being used to subsidize the very people who drove them out of their suburban homes. When Macron lowered the taxes of the wealthiest, but increased the taxes of the "peripherals" with a fuel tax, it was seen as the last straw -- in addition to his arrogant condescension.

In a recent interview on the British web magazine Spiked, Guilluy said that the "yellow vests" movement is a desperate awakening of "peripheral France". He predicted that despite Macron's efforts to displace the problem, the awakening will last, and that either Macron "will recognize the existence of these people, or he will have to opt for a soft totalitarianism".

For the moment, Macron does not seem to want to recognize that these people even exist.

According to François Martin, a journalist for the monthly Causeur, Macron has placed himself in a stalemate:

"He must make decisions and he can no longer take any decision without making things much worse... Macron should agree to resign, but will not do it, and would prefer to go to the end, and hit a wall... The next three years will be hell for the yellow vests and for the French".

At the end of the protests in Paris on January 26, thousands of "yellow vests" had planned to gather peacefully on one of the main squares of the city, the Place de la République, for a "debate" and to provide responses to the "debate" organized by Macron. The police were ordered to disperse them brutally; they once again used rubber ball launchers and Sting-Ball grenades to do just that.

One of the leaders of the "yellow vests" movement, Jerome Rodrigues, was shot in the face while filming police officers in a square nearby, the Place de la Bastille. He lost an eye and for several days was hospitalized. Other protestors were wounded.

In the spring of 2016, leftists had organized debates in the same locations and were allowed to remain there for three months with no police intervention.

In an article describing the events of January 26, columnist Ivan Rioufol wrote in Le Figaro: "Repression seems to be the only argument of the caste in power, faced with a large-scale protest that will not weaken".

Why today's events are especially ugly, according to Xavier Lemoine, the mayor of Montfermeil, a city in the Eastern suburbs of Paris where the 2005 riots were notably destructive, is that:

"In 2005, the police were clearly the target of rioters, and they showed restraint in the use of force to bring down the violence. Today, most of those who protest do not attack the police. But instead of acting to bring down the violence, the police are receiving orders pushing them to be very violent. I do not blame the police. I blame those who give them orders".

The next day, Sunday, January 27, a demonstration was organized by Macron's supporters, who called themselves "the red scarves". The demonstration was supposed to show that an impressive number of people were still on Macron's side. Organizers said that ten thousand people came. Videos, however, show that the number seems to have been far lower.

Published:2/3/2019 6:28:44 AM
[Markets] Banks And Buyers Favor Short-Dated CLOs As Fears Of Credit Crunch Intensify

After a disastrous Q4 where "the wheels came off the leveraged loan market", leaving banks unable to sell their loans as retail investors and institutional buyers yanked money out and moved it to more secure areas in the credit market (sending the yield on the 10-year Treasury back toward 2.5% during the opening days of 2019), the market has made a sudden and surprising comeback, with the average bid price in the leveraged loan market retracing 40% of its decline from the prior quarter, according to the credit team at Goldman Sachs.


Still, many are uneasy about upping their exposure to leveraged loans - including private equity giant KKR, which, as we noted a couple of weeks ago, has opted to reduce its exposure to leveraged loans to zero from overweight. In its place, KKR Balance Sheet CIO Henry McVey said he's shifting the firm's holdings to more liquid areas of the credit market (high yield, structured credit and loans), based on the view that these assets have already priced in the growth slowdown that KKR is forecasting in 2019. All discussion of KKR's macro view - and its merits - aside, as we've explained, a cautious approach to lev loans and CLOs is probably prudent, given the looming risks of one "unexpected development" with the potential to crush the market.


With both long- and short-term risks looming on the horizon, Bloomberg pointed out a strategy that banks are employing to once again shift warehoused inventory off of their books: Offering CLOs comprised of short-dated deals. Of course, it's not hard to find reasons why buyers might be more interested in shorter-dated offerings at this point in time, particularly given the nascent slowdown in global growth that has surfaced in the data from the developed and developing world, banks who are selling these loans have one overweening reason to push the inventory: To avoid getting stuck with a bunch of crap loans and being forced to "liquidate" them from their books.

This latest crop may be driven by several different motivations. In some cases a manager may be trying to time the maturing credit cycle, by leaving the door open for a refinancing in a year’s time and before defaults start to rise.

But for others, the shorter maturity may be the final lifeline to converting an older warehouse into a CLO. That could help them avoid the worst case scenario of having to liquidate a warehouse, while allowing the arranger to unclog some of these older facilities from its balance sheet and move ahead with its pipeline.

By selling loans with shorter non-call periods, buyers can rest easy knowing that borrowers can always call the loans and refinance if, say, a recession in the US or Europe suddenly surfaces on the horizon.

A shorter maturity deal might help improve the chances of a take out because you get cheaper liabilities and also more leverage with a shorter reinvestment period, according to one U.S.-based CLO manager. That in turn can improve both the arbitrage between assets and liabilities and the equity returns.

And just with the maturing cycle motivated deals, the shorter non-call period gives the manager and equity investors the option to refinance the transaction earlier. That will allow them to reduce funding costs if liability spreads have decreased or to call the CLO earlier.

Perhaps this is why there's suddenly a large universe of investors asking for long-dated loans.

There’s a larger universe of AAA-rated investors with an appetite for shorter duration, said the U.S. manager. That may have to do with their view of the credit cycle, or it may just be that the liabilities they are using to fund their investment are shorter and they are just matching that duration, he added.

A let up in the volume of CLO refinancings reaching the market might bolster demand for shorter dated new issue paper given there is a group of investors who typically support the refinancing trade.

Or maybe its a simple issue of matching assets and liabilities. To be sure, not everybody shares KKR's pessimism. Goldman recently attached an overweight call to HY loans, citing the spread compression between HY bonds and HY loans. But the fact that fund outflows have continued even as new CLO issuance ramps (loan creation accelerated to $5.2 billion across 10 deals after a slow start to the year) should give some investors pause.

Published:2/2/2019 7:55:39 PM
[Markets] A Survival Guide For 2019 - How To Safely Navigate The "Year Of Instability"

Authored by Adam Taggart via,

As the first month of the year concludes, it's becoming clear that 2019 will be a very different kind of year.

The near-decade of 'recovery' following the Great Financial Crisis enjoyed a stability and tranquility that suddenly evaporated at the end of 2018.

Here in 2019, instability reigns.

The world's central banks are absolutely panicking. After last year's bursting of the Everything Bubble, their coordinated plans for Quantitative Tightening have been summarily thrown out the window. Suddenly, no chairman can prove himself too dovish.

Jerome Powell, the supposed hardliner among them, completely capitulated in the wake of the recent -15% tantrum in stocks, which, as Sven Henrich colorfully quipped, proved what we suspected all along:

The global tsunami of liquidity (i.e. thin-air money printing) released by the central banking cartel has been the defining trend of the past decade. It has driven, directly or indirectly, more world events than any other factor.

And one of its more notorious legacies is the massive disparity and wealth and income resulting from its favoring of the top 0.1% over everyone else. The mega-rich have seen their assets skyrocket in value, while the masses have been mercilessly squeezed between similarly rising costs of living and stagnant wages.

How have the tone-deaf politicians responded? With tax breaks for their Establishment masters and new taxes imposed on the public. As a result, populist ire is catching fire in an accelerating number of countries, which the authorities are anxious to suppress by all means to prevent it from conflagrating further -- most visibly demonstrated right now by the French government's increasingly jack-booted attempts to quash the Yellow Vest protests:

Meanwhile, two other principal drivers of the past decade's 'prosperity' are also suddenly in jeopardy.

China's once-unstoppable economic growth engine is now sputtering badly. The slowdown is so pronounced that it's now feared it will drag world GDP down to a decade low this year:

And all those headlines that claimed the US shale oil 'miracle' has ushered in a new era of over-abundant cheap domestic oil? Well, as we've long warned, it's becoming clear that promise was dangerously overhyped. It's recently been exposed that the shale operators -- who have never made a profit as an industry -- have been overstating their output by as much as 50%. That, plus a host of geological and financing challenges, is making the future production prospects of the Permian and other major shale basins look a lot dimmer:

Is The Permian Bull Run Coming To An End?

With the big Wall Street players now questioning the value of their existing investments in shale oil, the industry is finding it hard to raise money. Not a single bond sale has come off since November in an industry which must continuously raise capital to survive.

To add to the problems, the future of U.S. shale oil production seems to be in the Permian Basin in Texas which has been providing the lion's share of oil production growth for the entire country. But ongoing drought in an already arid West Texas has raised doubts about whether the Permian will have enough water to meet all the demand for fracking new wells.

If the needed capital is not forthcoming, it means that companies will be faced with declining revenues from declining production. With lower operating cash flow and little access to additional capital, these companies will be unable to drill enough wells to offset declining ones. That means even lower revenues in the future which will mean even lower investment in new wells. That's what a death spiral looks like.


A Poisonous Cocktail

Mix together a slowing global economy hopelessly addicted to central bank stimulus, festering social unrest and an approaching oil price spike/supply squeeze. The result?

Recession and revolt.

It's anybody's guess what will happen from here. But it seems certain that events will not recede back to the tranquility of the past decade.

Our prediction here at is that the long-awaited (and, yes, perhaps too-long-predicted) downturn is nigh.

Either the economy descends into recession, resulting in widespread job losses and a deflationary correction of today's ridiculously-inflated financial markets. Or the central banks go "all in" and launch QE4ever, leading to runaway inflation (runaway stagflation, more likely) and possibly hyperinflation.

Either way, the pain and losses will be severe. And those hurt the most -- the working poor, the elderly unable to support themselves, the younger generations limited by diminished prospects -- will have no option but to rise up against the political regimes that have failed them so badly.

A Survival Guide For 2019

With the bursting of the Everything Bubble, we declared last year as the 'Year Everything Changed'. This will be the 'Year of Instability', possibly preceding an upcoming 'Year Of Woe' in 2020.

But look, we're not saying the world is the process of ending imminently. It's just that we've entered the part of the timeline when things are going to start to get really rocky.

And we think it's much more useful to think of 2019 as the 'Year Resilience Matters'. It shifts the focus away from fear and instead towards the many things you can do to protect yourself and those you care about - and even to position yourself to prosper through the coming challenges.

Here are recent articles/resources we've created to help you get started. Focus on the areas where you currently feel the most vulnerable.

  • Lose weight/Get fit -- after all, if you don't have your health, the rest doesn't matter. Resilience starts with your most important asset: your body. Our free how-to primers on successful and sustainable weight loss and functional fitness are great resources for everyone looking for guidance on how to boost their physical health.

  • Shore up your key relationships -- whatever the future brings, no single person can be prepared for every possible outcome. We're going to need to rely on others, on key relationships and trusted community ties, when events play to our weaknesses. How do we nurture the kind of relationships that thrive, instead of unravel, during times of stress? Our free report breaks down the science behind successful social bonds.

  • Prepare for deflation -- asset prices desperately want to deflate. The past decade of money-printing (QE 1,2 & 3) has blown prices well into bubble territory and allowed for credit to expand way beyond what fundamentals allow. With the bursting of the Everything Bubble, especially if the central banks somehow resume their committed tightening plans, *much* lower prices should lie ahead. A recession will only exacerbate this trend further. So we recommend that investors get liquid and preserve 'dry powder' to ride out the correction and be poised to re-enter the market when quality assets can be purchased at much better valuations than today. Our primers on holding cash in short-term US T-bills and in hedging for a major market correction are important resources for anyone looking to position their capital for a deflationary purge.

  • Prepare for inflation -- of course, today's central banks hate deflation. They may well take a "damn the consequences" approach when serious deflation next raises its head and kick-off QE 4-ever -- which would have to be on a scale much larger than the previous QE efforts to achieve it's desired effect. But at that magnitude, it is highly likely the central banks will kill the purchasing power of their underlying currencies -- unleashing runaway inflation (runaway stagflation, more likely) and quite possibly hyperinflation. So, it's wise to have a portion of your portfolio in assets that will weather the ravages of inflation better than most. This is why we recommend folks consider owning precious metals (and why we endorse the Hard Assets Alliance for doing so) as well as invest for inflation-adjusted incomegoing forward (vs speculating for capital gain).

  • Prepare for likely emergencies -- one of the few things we can predict with certainty is that 2019 will have its fair share of floods, fires, hurricanes, blizzards, and blackouts. Every location has its own set of probable disasters than can be anticipated. Preparing for these is relatively straightforward and absolutely prudent. Our free guide to emergency preparedness is full of battle-tested recommendations and advice for doing it well.

  • Prepare for unlikely emergencies -- another thing we can predict with confidence is that nothing this year will go 100% according to plan. There will be errors, unintended consequences, surprises, and accidents. We've written in the past of the wisdom of holding umbrella liability insurance for protection against the unexpected. More than 80% of US households either don't own any or are under-insured. If you think you may be one of them, read our free primer on the topic. 

  • Develop your master plan -- as with most goals, success dramatically improves when working with an experienced coach. Those looking for help in making key decisions and/or getting custom answers to their unique personal situations can schedule a consultation with us. And those looking to have a crash-audit of their investment portfolio can schedule a free review with our endorsed financial advisor.

  • Live resiliently - they say "The best revenge is to live well". The same is true when it comes to resilience. Creating a resilient life is the best way to overcome adversity and enjoy prosperity in your daily living. Our book Prosper!: How To Prepare For The Future And Create A World Worth Inheriting offers a blueprint for doing just this. As does our intensive 3-day seminar (this year's is nearly sold out, so register soon if interested), which also connects you into the Peak Prosperity tribe -- a worldwide community of smart, accomplished truth-seekers with big hearts eager to support each other in their journey to live more resilient lives.

The goal here is not perfection; no one can be fully prepared for every eventuality. It's to be "good enough" across as many of these dimensions as possible.

By taking prudent action today in these areas, you'll be vastly more able to navigate the instabilities that 2019 throws at you.

And, just as important, you'll be well-positioned to be in service to the many less-prepared folks around you.

Published:2/2/2019 10:53:44 AM
[Markets] MMT: The Court Astrologer's Dream


It’s not Modern; it’s not Monetary; and it’s really not much of a Theory

If ever there was a prime example of a belief in the Fairy Gov-a-Mother being mixed with a bad case of warmed-over monetary crankdom, the suddenly, newly- fashionable doctrine which masquerades under the portentous-sounding name of ‘Modern Monetary Theory’ – ‘MMT’, for short – must surely qualify.

Built upon that age old deceit of Planners that they – and the offices of the state and its bureaucracy which they occupy – provide a more rational means of organising people’s lives than can the Good Common Folk ever attain themselves through the voluntary relations and market-dealings which they conduct, MMT seeks primarily to overcome the well-founded objection that even the most benign and far-sighted government should notspend wildly beyond whatever it levies by means of the many taxes, fees, licences, transaction charges, and miscellaneous other exactions it can persuade its long-suffering subjects to endure.

The way it does this is to marry a decidedly old school of monetary thinking called ‘chartalism’ – child of the court intellectuals of Imperial Prussia and stepfather to the Weimar hyperinflation – to that other hoary old canard that the public debt does not matter since some faceless ‘We’ are said to owe it to ‘Our’ equally anonymous ‘Selves’.

Starting – as does so much that is bad about mainstream economics – with a simplistic and crushingly aggregative set of tautological identities which emanate from, who else, but that evil genius, Keynes – the MMT crowd next perform a few rounds of high-school algebraic manipulation to make these conveniently-defined, but thoroughly abstract, entities line up to ‘prove’ that every penny of government deficit spending must perforce be matched by an equal and opposite penny of private sector saving.

Hey, Presto!, they cry, we have now demonstrated that even the most incontinent of regimes can neither immolate the nation in a damaging blaze of inflation nor allow anti-social ‘hoarders’ and parasitic ‘rentiers’ to suffocate it in a deflationary deep freeze of miserly abstinence.

From this assertion – and here is where the ‘chartalism’ bit comes in – as long as the state uses its full apparatus of legalized violence to ensure that ITS obligations are the only things that pass for money (so no silver, no gold, no rye-backed notes, cigarette coupons, cowrie shells, or bitcoins), it can always fund its Big Digs, its high-speed rail lines, its bridges-to-nowhere, and its nine-days’ wonder, Olympic stadia, as well as all the day-to-day vote-buying and special interest-coddling to which this most caries-ridden of Tooth Fairies routinely stoops.

You – the poor ‘saver’ who has given up your own choice of goods in order to make such miracles possible – might be forgiven for casting a jaundiced eye at such evidence of either expensive pyramid-building or plain, old-fashioned, exhaustive consumption of Other People’s Money and enquire politely just what of productive value is being created in order that your ‘savings’ at least preserve – and hopefully increase – their value.

Once you start down this route, you will soon realise that it is only in the narrowest of contexts that the MMT brigade can be said to have a point: namely, that if the Gummint does confiscate our wealth, we will necessarily consume less than we might have wished to and so – in some perverted sense of a very overworked word- we might just be said to have ‘saved’ that much.

Not only to elevate this Sheriff of Nottingham practice of legitimised banditry into a major policy plank, but to dress the perps up in Lincoln Green so they can pretend to be Robin Hood’s Merry Men does take quite some neck, as I’m sure you will agree!

Granted, the state robbers in the MMT vision of the future are craftily going to disguise their theft by issuing us with a requisition chit in the form of their fiat currency – and will thereby so deftly pick our pockets that it might take us some while to work out that we have indeed been had.

But this sleight of hand hardly mitigates the severity of the crime or lessens the ultimate degree of loss we will suffer. After all, even such a tender-hearted, small-government paragon as Mussolini famously declared that you could not increase a country’s wealth simply by issuing extra paper portraits of its rulers!

Into the Fires of Moloch

The crucial distinction the MMTers seem congenitally unable to make in the course of their half-finished reasoning is that while their precious accounting identity (that Deficits equals Savings) may, under certain very restricted circumstances, be said to hold true, the dynamics, the process – the PRAXEOLOGY, if you will – of what is at work is what matters most.

Thus, very different results follow in the case where a man voluntarily decides up front (ex ante, in economist-speak) to finance some other entity’s expenditures in exchange for a promise to pay later – as opposed to the one where he finds that, after the game has been played for a round or two (and so, ex post, in the Latinate jargon), he has been landed with what none other than the Beelzebub of Bloomsbury, Keynes himself, once referred to as, “the bad, or depreciating, half-crown”.

In the first case, though not guaranteed to win the pot from his competitors, he is at least playing his own hand fairly and squarely: in the second, he not only looks around the table and realises HE is the proverbial patsy, but that the House is four-flushing and the dealer has a sleeve stuffed with extra aces.

More fundamentally still, the simple fact is that the whole of economic science must be founded on a real-world concept of the scarcity and finiteness of means. This is a requirement which utterly escapes the MMT wizards who instead seem to think that their special insights allow them, along with Shakespeare’s blowhard Glendower, to ‘summon spirits’ – and boundless economic means along with them – ‘from the vasty deep’.

The idea that, regardless of the magnitude of government spending, you, I, and our next-door neighbour can happily provide its clamorous army of functionaries, contractors, and welfare recipients with as many real resources as they need is clearly a nonsense of the first order.

Ask anyone whose grandparents were unfortunate enough to have to ‘fund’ the latest Five-Year Plan by queueing for hours outside the state dispensary in the chill of a Russian winter, all in the hope of securing the last head of mouldy cabbage for their cheerless, meagre supper.

Moreover, what all this lofty aggregation – all this misleading compression of the actions and interactions of hundreds of millions of people into a single, mute character in an equation – also overlooks is the fact that the obligations (and, in extremis, the currency) issued by the state will not rest inertly with its initial choice of a ‘saver’, but will inevitably pass through many hands, altering relative prices, dictating business success or failure, and redistributing wealth in the most insidious and arbitrary of fashions as it does.

The largely unpredictable topographical changes which are brought about by this scouring of the economic landscape by the floodwaters of state spending and monetized credit creation are known to those of us with a slightly wider exposure to economic history as ‘Cantillon effects’ (yes, THAT Cantillon) after the first great analyst of the disorder which resulted from John Law’s frankly proto-chartalist, MMT-precursor Mississippi Scheme of three hundred years ago.

Such unforeseen consequences – all too many of them unrelievedly malign – are another class of drawbacks which seem to elude our bold MMTers when they start their hands waving and their lips moving in the promotion of their aery imaginings.

Beyond even the question of whether MMT does dictate that the books will balance, come what may, when Leviathan doles out more than It gathers in, there also lies the issue of whether the concentration of a greater part of our resources into the hands of the Beast is in any way an advisable aim.

Government, after all, is not some Olympian deification of dispassionate justice (even justice of the oxymoronic ‘social’ kind) but is a creature which suffers from all the faults we associate with an absence of real ownership (i.e., from its lack of ‘skin in the game’, as the current vogue has it).

It is also generally exempt from formal accounting and budgetary strictures or from much in the way of temporal limitation – never being subject to the relentless, if decidedly necessary, test of validity constituted for the private sector by the annual profit & loss account.

Moreover, it is an institution within which men and women, fallible like you and me, are free to pursue their own, often highly venal, agendas and to do so – unlike those of us in private society who are often so harshly criticised for committing the very same sins – by proxy and therefore in a manner highly insulated from the costs of practising their prejudices or of giving rein to their wilder, Utopian enthusiasms – a remoteness which can only encourage such gross violations of the public trust.

Civis Romanus sum

In essence, the MMTer dreams of being the Roman procurator of a newly-conquered province who wishes to use the implicit threat of the armed might at the command of his colleague, the imperial legate, to exact tribute (‘savings’, as our Modern likes to call them) from the pair’s new subjects, preferably in the form of the tokens stamped with the Emperor’s likeness which he has had issued to that end.

In order not to be hoodwinked by this act of numismatical misdirection, let us not lose sight of the fact that however inherently insubstantial are these metallic symbols of oppression, those forced to ‘render unto Caesar’ in this manner will have to surrender hard-won real goods and laboriously-performed services in order to attain them. Given that the cash may initially be hard to come by – and making the MMT analogy even more complete – our procurator may well overcome this technical hurdle, as well as keep his patrician hands clean, by contracting out the collection of such taxes to a breed of political fixers called the publicani.

These worthies will first advance the money to the state and look to collect both it and more from the populace later – in other words, their equivalent is to be found in those who today buy some of those profligate issues of public debt which our dear MMT types believe are a sign of our prosperity, rather than of our prostration before our overlords.

In his borrowed munificence, the procurator will next make these payment tokens as wages over to the occupying troops – the government employees of the day par excellence (“Thank you for your service, centurion”) – and have them spend the proceeds in the townships, or ‘vici’, newly sprouted beside the legionary camps for that express purpose. In so doing, the occupying force will effectively consume the material representation of the tax-payers’ sacrifice – their ‘savings’, remember – though not without enriching a good few middlemen and greasing numerous palms along the way.

That done, the procurator will then congratulate himself that he has conferred the benefits of a higher civilisation upon his unwilling hosts, the despised and previously ungoverned ‘Britunculi’, and retire to an evening of heady indulgence in the comfort of the bath house.

Adding to this veneer of useful public activity the fruits of fifteen hundred years of economic wrong turns and misdirected conceptualising, the MMTers would thus not only bestow a certain ‘Romanitas’ upon us plebs but, they insist, they will also ensure an unwavering maximum of Keynesian ‘aggregate demand’ – another bogie of wrongheadedness – and forever abolish want and poverty, in all their many forms, into the bargain by the simple trick of chewing through the Forgotten Man’s small surplus.

By now it should be plain that not only is there little MODERN about Modern Monetary Theory, but that its workings are more fiscal than monetary and that, as theories go, this one is not only far-fetched but fairly well-worn, to boot.

Indeed, as Nobel-winner Gunnar Myrdal once caustically remarked of Keynes’s conceit that his was an innovative way of thinking, MMT displays much of the typically ‘unnecessary originality of the English-speaking economist’.

As Henry Hazlitt even more bitingly put it of the same man’s over-lauded ‘General Theory’: it ‘contains much that is original and much that is true. Sadly, that which is true is not original and that which is original is not true’.

Now, if you’ll excuse me, I’m off to persuade my bank manager that my overdraft is, in MMT terms, not a matter for his censure, but rather a gift to him on my part, the better to help his depositors ‘save’ for their future.

* *  *

I hope you’ve found this of interest. If so, please visit for more information, check out examples of my work on Speakerdeck or follow me on Twitter via @CantillonCH. You can also listen to a slightly shortened version of this as a podcast at: Soundcloud or via TuneIn at:-

Published:2/1/2019 9:20:02 PM
[World] [John K. Ross] Short Circuit: A Roundup of Recent Federal Court Decisions

Inoperable fuzes, sweetened sugar beverages, and sexed cow semen.

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

Friends, the Short Circuit team has just released Episode 3 of Bound By Oath, our podcast on the 14th Amendment. Please do give it a listen. On this episode: the Supreme Court reduces the Privileges or Immunities Clause, the clause meant to do much of the heavy lifting protecting civil rights, to a practical nullity. For shame! Professors Randy Barnett and Chris Green to do the explicating. And Justice Ruth Bader Ginsburg makes a surprise appearance, time traveling back to 1873. Subscribe wherever you get your podcasts or click here.

  • Brentwood, N.H. man purchases four military M67 fragmentation grenades with inoperable fuzes from undercover FBI agents. District court: To be a grenade, a device must contain not only explosive material but also a means of detonating that explosive material. Inoperable fuzes mean the man didn't buy grenades. First Circuit: Reversed. The grenades were explosive; they just needed new fuzes. Congress can't have meant for agents only to use fully functioning "weapons of war" in their sting operations.
  • Nineteen-year-old (or perhaps he's 20) impregnates 14-year-old in 2009, is sentenced to 16 years of probation. He seeks parental visitation rights; she tries to stop that from happening. Suit 1: State court won't stop it. Suit 2: Federal court won't stop it. Suit 3: State court won't stop it; he's been ordered to pay child support, and Massachusetts family courts were (at that time, anyway) authorized to adjudicate the parental rights of a parent convicted of statutory rape. Plus, the kid should be getting financial support from both parents. Suit 4: Federal district court won't stop it. First Circuit: Subject to exceptions that don't apply here, losing parties in state court don't get to re-litigate in federal trial courts.
  • Hoke County, N.C. officer knocks on door of home, threatens to break it down unless it's opened. It's opened. A voluntary knock-and-talk or a coercive, warrantless entry? Fourth Circuit: Other than threatening to knock down the door, the officer and federal agents were casual and nonhostile. No need to suppress the evidence.
  • A man is shot dead at a Wilson County, N.C. convenience store in 1976. Three alibis place Charles Ray Finch at a poker game when the shooting occurred, but a witness places Finch at the shooting and picks him out of a lineup. Finch is convicted. Fourth Circuit: We've now learned that the witness had cognitive and short-term-memory problems, that the lineup was unduly suggestive, that another witness was coerced, and that a host of forensic conclusions were wrong, so Finch's habeas claim—ordinarily time-barred—can go forward.
  • Two people crawl through a Goldsboro, N.C. McDonald's drive-thru window, demand money at gun point, throw cash drawers at employees, hit the manager with the gun, and make off with $1k. One perpetrator pleads guilty to robbery and the additional, distinct crime of using a firearm in connection with a crime of violence. Fourth Circuit (en banc, splitting 8–7): Alas, the statutory definition of "crime of violence" is unconstitutionally vague, given the Supreme Court's treatment of materially identical laws. Dissent: Courts should look to the underlying facts of the crime, rather than just the statutory language in a hypothetical case, to determine whether a crime is one of violence. Pistol whipping during a robbery clearly is. (Circuit-split watch: The Fourth joins the Fifth, Tenth, and D.C. Circuits but departs from the Eleventh Circuit in this holding. Moreover: SCOTUS will hear the Fifth Circuit case.)
  • Galveston, Tex. police get warrant to search drug suspect's house, seize any "ledgers" they might find. They seize a cell phone. Is a cell phone a ledger? Close enough, says the Fifth Circuit, so no need to suppress evidence from the phone (which helped convict him of pimping minors).
  • Texas inmate threatens guard, has his stuff taken away, gets put in solitary. Or maybe—as inmate alleges—guard was lying, retaliating against inmate. Inmate brings a hodgepodge of claims (to get out of solitary, over loss of his stuff, and more). Fifth Circuit: Almost none of which can go forward. But if the guard really took away the inmate's Bible (and books by mega-pastors like Joel Osteen), there needed to be a valid reason. The inmate's First Amendment claim should not have been dismissed.
  • "Sexed cow semen" is bull semen containing only X- or Y-chromosome-bearing sperm. It allows dairy farmers using artificial insemination to ensure they breed only female—and thus milk-bearing—cows. It's valuable stuff, and, until recently, the U.S. market was controlled by a monopolist whose technology worked by identifying sperm cells, electrically charging them, and then sorting them with magnets. But when an upstart hired one of the monopolist's ex-employees, she shared the monopolist's trade secrets. The upstart then began using a different, potentially faster method: individually vaporizing the unwanted sperm cells with a laser millions of times per second. The ensuing antitrust/patent infringement/breach of contract suit, culminating in a two-week trial, gave wins and losses to both sides. On appeal, the Seventh Circuit affirmed some of the monopolist's wins but also—in a complicated discussion of patent law featuring set theory, subscripted variables, and LSAT-esque diagrams—gave the upstart a second chance at invalidating the seminal patent claims.
  • Federal law prohibits any "unlawful user" of marijuana from possessing a firearm. "Unlawful user" is unconstitutionally vague, says criminal defendant who admits to smoking daily for the past decade. Perhaps in some hypothetical scenarios, says Seventh Circuit, but your conduct "undoubtedly falls within the obvious core" of the statute. As a consolation prize, however, the court "commend[s] everyone involved in the briefing and arguing of this case" (along with the district-court judges) for a job well done.
  • San Francisco requires that advertisements for "sugar-sweetened beverages" contain a warning, taking up 20 percent of the advertising space, that sugary drinks contribute to obesity, diabetes, and tooth decay. Unconstitutional compelled speech? The en banc Ninth Circuit unanimously agrees that it is, though they disagree vociferously as to why.
  • Pizza chain's website and app are incompatible with screen reading software, so blind man can't order online. A violation of the Americans with Disabilities Act? District court: No, the Act doesn't mention the internet, and the feds have failed to provide formal guidance on how it applies—despite promising to do so. Ninth Circuit: Reversed. The feds have said that websites must comply; there's no need for the gov't to produce a blueprint detailing how to do it.
  • Douglas County, Colo. officer tases man who has a rifle muzzle in his mouth and his thumb on the trigger. The gun goes off; the man dies. Can the man's parents sue the officer? No, they filed suit 27 days too late, says the Tenth Circuit; the deadline started running on the date they asked the coroner to reconsider her report, not when the amended report was released (over a year later).
  • There are a number of federal crimes—from fraud to robbery—that apply only to banks that are FDIC insured at the time of the crime. Inexplicably, and despite repeated warnings from federal courts, prosecutors routinely fail to produce direct evidence that a bank was FDIC insured at the time of the crime—the testimony of a single witness would do—and instead rely on circumstantial evidence that it was insured at some point before or after. Is enough finally enough? Eleventh Circuit (over a dissent): Although prosecutors are "cruisin' for a bruisin'," we won't bruise them today.
  • After seven years' imprisonment for rape, man is released after tests confirm that his DNA was not on the victim. Chatham County, Ga. DA declines to re-prosecute. Trial court dismisses indictment. And state lawmaker introduces bill to compensate the man $1.6 million for the wrongful conviction. But wait! The DA opposes the bill and (allegedly) falsely states that the man remains under indictment. Bill fails; man sues. Eleventh Circuit: The DA's defamation absolutely amounted to unconstitutional retaliation. But even so, qualified immunity. Concurrence: "My only comfort with this result is knowing that if another official in this circuit henceforth engages in conduct similar to [the DA's], he or she will not be entitled to hide behind the doctrine of qualified immunity."
  • And in en banc news, the Eleventh Circuit will reconsider its holding that an Alabama law enacting a statewide minimum wage of $7.25 that preempts a Birmingham minimum wage of $10.10 might violate equal protection. The now-vacated opinion declared: "Today, racism is no longer pledged from the portico of the capitol or exclaimed from the floor of the constitutional convention; it hides, abashed, cloaked beneath ostensibly neutral laws and legitimate bases, steering government power toward no less invidious ends."

Officials in Yorktown, Indiana want to bulldoze a small neighborhood with many long-time, elderly residents and replace it with: a tech firm, other businesses, and new residences. To bypass the state's eminent domain law, which bars seizing property for private projects, officials have strategically placed some public amenities in the plan. Sneaky! Sharon and Jerry Puckett's home, for instance, is scheduled to be replaced by "courtyard/games" and part of a new restaurant. The kicker: The town already owns enough property to build the development just 500 feet away. IJ has helped gather over 105,000 signatures on a petition opposing the plan, and in January residents presented the Town Council with the petition. But the project is still rolling along, so please do sign the petition if you're of a mind.

Published:2/1/2019 3:48:37 PM
[Markets] Spicy Kim-Xi

Submitted by Rarbobank's Michael Every

US-China trade talks wrapped up with a flurry of announcements and Tweets that one needs to stitch together to try to understand what is going on. My conclusion is that things are about to get very spicy if you consider the full range of ingredients going into this dish and not just the meat.

Both sides agreed that the talks had been substantive and progress had been made, but US Trade Representative Lighthizer made clear the “thorniest” issues are still technology and intellectual property. Lighthizer and Mnu-China will now be going to Beijing together soon to continue the talks. President Trump has been stated as being deeply involved from backstage in these negotiations too, and he weighed in several times yesterday with comments that are important to understand. To reporters, he stated: “This isn’t going to be a small deal with China. This is either going to be a very big deal, or it’s going to be a deal that we’ll just postpone for a little while.” Translating that into English, it seems to mean that a Mnu-China soy and LNG deal is not the table, and Trump will keep pushing for the big Lighthizer reforms. Moreover, consider these following Trump Tweets:

China’s top trade negotiators are in the U.S. meeting with our representatives. Meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal. They are correct. I will be meeting with their top leaders and representatives today in the Oval Office. No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points. Very comprehensive transaction. China’s representatives and I are trying to do a complete deal, leaving NOTHING unresolved on the table. All of the many problems are being discussed and will be hopefully resolved. Tariffs on China increase to 25% on March 1st, so all working hard to complete by that date!

He is keeping the negotiating pressure on. And a Trump-Xi summit looms. Yet Trump then immediately upped the ante on Xi:

Looking for China to open their Markets not only to Financial Services, which they are now doing, but also to our Manufacturing, Farmers and other U.S. businesses and industries. Without this a deal would be unacceptable!

Now things get even more interesting. Trump meets Xi in China immediately after a second summit with North Korea’s “rocket man” Kim Jong Un: that makes for truly spicy Kim-Xi! What does the US want? A real China trade deal and Kim in their camp as a threat to China. What does China want? A superficial trade deal and Kim back in their camp. What does Kim want? Economic aid, to be seen as a nuclear power, and to be in everyone’s good books so he can get Chinese trade and still get to take selfies with the public elsewhere. How is the US going to react on trade if Kim insists on not disarming, or on the US leaving South Korea? How will China react on trade if Kim decides he wants a Miami condo more than one in Hainan? And how will Trump react if Xi won’t give him his deal, and Xi react if Trump won’t bend? There are so many possible permutations. We could see the US, China, and North Korea all friends – or something else.

On that front, we also need to consider other Trump Tweets. They are relevant, I promise.

The Intelligence people seem to be extremely passive and naive when it comes to the dangers of Iran. They are wrong! When I became President Iran was making trouble all over the Middle East, and beyond. Since ending the terrible Iran Nuclear Deal, they are MUCH different, but a source of potential danger and conflict. They are testing Rockets (last week) and more, and are coming very close to the edge. Their economy is now crashing, which is the only thing holding them back. Be careful of Iran. Perhaps Intelligence should go back to school!

That is a very clear endorsement of a very hard line on geopolitics and the use of the economy and markets as weapons (i.e., sanctions) that “hold Iran back.” Furthermore, Trump added:

When I became President, ISIS was out of control in Syria & running rampant. Since then tremendous progress made, especially over last 5 weeks. Caliphate will soon be destroyed, unthinkable two years ago. Negotiating are proceeding well in Afghanistan after 18 years of fighting. Fighting continues but the people of Afghanistan want peace in this never ending war. We will soon see if talks will be successful? North Korea relationship is best it has ever been with U.S. No testing, getting remains, hostages returned. Decent chance of Denuclearization. Time will tell what will happen with North Korea, but at the end of the previous administration, relationship was horrendous and very bad things were about to happen. Now a whole different story. I look forward to seeing Kim Jong Un shortly. Progress being made-big difference!

Is he expecting success with Kim? Or is he trying to show that he at least tried? So many ingredients here, and so much chili! And there’s more. Against that backdrop we have the frankly jaw-dropping news that Germany is decided it will NOT be using the US F-35 fighter jet as the replacement for its Tornado air-fleet. Let me spell out what that means: 1) Germany won’t be buying US planes and so not only doesn’t it spend enough on NATO now, but even if it does ever spend, that cash won’t flow to the US to rebalance trade between the two; and 2) Only the F-35 is compatible with the US tactical nuclear deterrent, so Germany won’t be under that NATO shield, unless the US signs off on a Eurofighter alternative – why should it, considering the Eurofighter is seen as out of date? Indeed, given EU-US tensions over geopolitics, e.g., EU insistence on trying to circumvent the US sanctions on Iran Trump just said are so important, does anyone see this ending well for US-EU trade relations? Because I don’t. And circling back, what if the US does strike a China trade deal, and only US firms get the benefits, not EU? That said, yesterday also saw news that the EU is considering a ban on Huawei for 5G too, so it also seems to be hedging its bets.

Yet overall, with no US F-35 exports ahead I am not sure if Germany realises what it is doing (it seems blithely unaware of a whole host of problems it is creating for everyone, after all); suffice to say that this issue could create as much market fire as the spiciest chili.

Day ahead                    

For those who want to look at data instead of all this today has Caixin and Markit PMIs, Eurozone CPI, and US payrolls.

But does that even matter? The Fed has already shown us this week that it doesn’t intend to do anything except cut, eventually, so why get antsy about a number that will underline that the labour market is on fire, albeit without serious wage inflation. (For those who care, the consensus is 165K, but like I said ** yawn**.) Then we have the US ISM survey too. For which the same holds true. It will only matter if it’s weaker than consensus.

In short, what was once a juicy market steak has been cooked to death by the Fed, making it unpalatable; and it is anyway now smothered in a layer of Kim-Xi.

Published:2/1/2019 7:16:56 AM
[Markets] The 'Cartel' Is Back: EU Accuses 8 Banks Of Rigging European Government-Bond Markets

First it was the Libor-rigging cartel, then the FX exchange-rate manipulation cartel, now, European regulators have moved on to prosecuting "anti-competitive" practices in euro-denominated sovereign bond markets.

One month after the European antitrust regulators charged Deutsche Bank, Credit Agricole and Credit Suisse of being a part of a 'bond trading cartel', regulators are bringing a separate case against eight unidentified European banks alleging that they conspired to rigging euro-denominated sovereign bond markets.

Reuters reported Thursday that the European Union’s antitrust authority has charged the banks with operating the cartel behind 2007 and 2012.


Just like in past cartel cases, traders at the accused banks allegedly used chat rooms to share "commercially sensitive information and coordinated trading strategies" that they presumably used to rig markets to benefit their own trading books - and shortchange their "counterparties".

If they're found guilty, the banks could face fines equal to up to 10% of their global turnover.

"The Commission has concerns that, at different periods between 2007 and 2012, the eight banks participated in a collusive scheme that aimed at distorting competition when acquiring and trading European government bonds," the Commission said.

"Traders employed by the banks exchanged commercially sensitive information and coordinated on trading strategies. These contacts would have taken place mainly - but not exclusively - through online chatrooms."

Regulators told Reuters that they wanted to make one thing clear: The allegations aren't meant to imply that euro-denominated bond markets are subject to pervasive "anti-competitive" practices (though maybe they should talk to Mario Draghi about that).

But don't worry: We're sure the information traded in these chatrooms fell neatly within the bounds of "market color."







Published:2/1/2019 2:15:59 AM
[Markets] An Important Wrinkle In Chinese Bank Hoarding

Authored by Jeffrey Snider via Alhambra Investment Partners,

In theory, it is always so simple. For China, it was intended that RRR cuts are stimulus. By allowing banks to use more of the reserves they’ve built up over the years it is meant to add to overall interbank liquidity. From there, banks flush with RMB supported by robust RMB money markets will lend and undertake more direct economic transactions.

Voila, stimulus.

The theory gets complicated by a very different kind of reality, one which pressures RMB markets from two sides. The first is the direct result of the overriding issue. The eurodollar market malfunctions, forcing China to deal with a “dollar” shortage by having its central bank (and others) intervene out of its own stockpile of FX reserves. Simple accounting, the PBOC’s asset side shrinks which must be met by the same on the money side.

So, RRR cuts already begin from inside a domestic monetary hole. To even get to the position of adding liquidity, banks have to mobilize more of their reserves than the central bank has pulled back in its own.

The second liquidity problem is just that: banks have to mobilize meaning actually use more of their reserves. The Economics textbook simply says that if given the opportunity no bank will refuse the license. Policy says, bank books do. In theory.

In practice, banks have to operate in the real world. If the PBOC is in a situation already where it feels compelled to respond to less-than-ideal effective conditions via an RRR cut perhaps it really isn’t a conducive time for banks to be so generous? Reserve operations of this type don’t usually happen unless things are already dicey, a factor bank managers are going to be pretty well aware.

Therefore, RRR cuts may not lead to the flood of non-public liquidity the theory assigns. Chinese banks, especially the biggest institutions, may opt to hoard that liquidity instead. If they do, then RRR measures cannot be stimulus especially having begun at first in the central bank hole.

When Chinese banks hoard, obviously nothing good will result. The illiquidity is not contained within China’s borders, either, as these kinds of financial irregularities flow into the real Chinese economy and are then transported to the rest of the world (further amplified by more negative feedbacks in the eurodollar system).

This was Euro$ #3’s devastating global downturn story of 2015 and early 2016.

We are on the lookout for evidence of China bank hoarding so as to figure a possible repeat here well within Euro$ #4. From the very first we see just that sort of difficulty in real-time market prices, in this case SHIBOR and other RMB money rates. The correlation is ridiculously obvious; RRR cuts have unleashed volatility and instability rather than what would look like monetary stimulus.

Chinese banking statistics back up the negative association – with an added wrinkle (more on that below).

Since the first 2018 RRR cut back in April last year, the big banks aren’t really lending more in the unsecured interbank markets. They are, however, borrowing more from them; a lot more. The difference is almost surely the reason for harmful volatility in domestic money.

The biggest banks are draining liquidity (net) from unsecured RMB rather than contributing more to them. The relationship with volatility in SHIBOR is established.

The primary reason is equally evident: this is the same period in which bank reserves have been declining. The PBOC’s eurodollar squeeze leading to the systemic limit on its money (liability) side is being echoed by the majority of the domestic banking sector.

Without a liquidity cushion either in that money remainder (growing bank reserves) or in terms of robust central bank RMB expansion at its liquidity windows (such as MLF) there just isn’t any appetite for banks to add anything to these crucial interbank spaces.

The wrinkle in all this is repo. We know why the biggest institutions are borrowing more unsecured – they are barely borrowing (sources) in repo! Depending more and more on unsecured interbank transactions instead of the repo market, you can start to appreciate why these particular banks are perhaps more than a little skittish no matter what policy the PBOC might undertake.

If conditions worsen in China, more economic slowing and therefore higher perceived overall risk, being reliant in greater proportion on unsecured markets for so much marginal funding isn’t an ideal liquidity situation. To put it mildly.

The question is why they aren’t in repo. It may be that China’s authorities told us last month when they began to really champion the issuance of perpetual bonds to be used along with the central bank bill swap. It certainly seems to fall in line with what we see here; if the big banks are in a collateral crunch, why not just create collateral out of thin air (first the perpetual and then the swap into usable repo instruments).

I wrote about this just a few days ago:

To aid the situation on both counts, the PBOC last month hit upon a two-part scheme. The central bank would encourage the use of perpetual bonds that meet the definitions for being included as bank capital. Any Chinese bank that issues these securities will be able to boost their ratios, making it seem like it has more loss absorption capacity (which, in theory, it would).

The second part is this bill swap program. Perpetual bonds are illiquid therefore unacceptable in repo…

To circumvent these technical deficiencies, the PBOC will allow banks who issue perpetual bonds to swap them with its own holdings of central government debt bills which they can then use either in private repo or even in targeted MLF at that particular monetary policy window.

This data can’t, unfortunately, tell us why a collateral crunch seems to have developed. Such a negative outcome would further explain the hoarding of liquidity along with the greater desperation on the part of monetary authorities – escalating official responses that don’t seem to get anywhere. China’s money hole across a couple dimensions seems to be bigger than we already think.

It is, as Abraham Lincoln once said, the equivalent of shoveling fleas across a barnyard; not half of them get there. “There” being RMB liquidity. This isn’t monetary stimulus indicated here, hoarding is instead, a huge and growing monetary deficiency which seems to be squeezing the Chinese economy. Again.

Published:1/31/2019 6:45:08 PM
[Markets] Starbucks Coaches Employees On How To Handle Politically "Aggressive" Customers Raving About Howard Schultz

Starbucks has instructed its employees on how to handle political questions about CEO Emeritus Howard Schultz, who has all but announced his intent to run as an independent in the 2020 US election - a move immediately criticized by Democrats who fear he will split the left's vote and hand Donald Trump the election.

The coffee chain known for its progressive corporate culture offered suggestions  in its "Barista Need-To-Know" weekly newsletter on how to "diffuse the situation" if anyone "shares aggressive political opinions" in the store. 

"Employees may be asked questions by customers or hear media speculation about Howard's potential political intentions," reads the notice clearly written by lawyers. Employees should know that "we respect everyone's opinion. Our goal is simply to create a warm and welcoming space where we can all gather, as a community, over great coffee."

If asked specifically about Schultz, employees are advised to say: "Howard's future plans are up to him.

A Starbucks employee told the Huffington Post on Thursday that her store's management took things one step further in a way that bothered her. 

"We were told not to talk to customers about it," said the employee, who added "if we are asked about his political goals or our opinions on it that we’re to say he was a great CEO to work for but that’s where our opinions end."

The rephrased instructions irked the employee, who saw them as part of a pattern of stifling employees’ opinions. The shift supervisor felt similarly about the written instructions, finding it frustrating that Schultz was able to publicly discuss his politics when he worked at Starbucks while they were not.

“[I wish] we would be given the same opportunity to express our beliefs,” the supervisor said. -Huffington Post

Schultz has faced intense criticism from the left after he said he was weighing a 2020 run as an independent. His detractors include David Axelrod, HBO host Bill Maher, The View's Joy Behar and Rep. Alexandria Ocasio-Cortez (D-NY). 

Neera Tanden, president of the Center for American Progress, called for a Starbucks boycott if Schultz enters the race, tweeting: "Vanity projects that help destroy democracy are disgusting. If he enters the race, I will start a Starbucks boycott because I’m not giving a penny that will end up in the election coffers of a guy who will help Trump win."

In fact, the criticism has been so vociferous, it has left some Democrats believing that Schultz, who is currently on a book tour, won’t end up running for the White House. 

“Democrats will not have to pressure Schultz to drop out of the race,” said Robert Zimmerman, a prominent Democratic donor. “When his books move to the $1 discount bin at bookstores, he will get the message.”

Erin McPike, a spokeswoman for Schultz, said all the blowback this week “shows he is resonating.” -The Hill

During an interview at a New York Barnes & Noble this week, a protester shouted at Schultz "Don't help elect Trump, you egotistical, billionaire asshole."

He's clearly resonating...  

Published:1/31/2019 5:44:15 PM
[Markets] Bernie Sanders Proposes 77% Estate Tax For Billionaires

Jumping on the "tax the rich" bandwagon, senator Bernie Sanders has proposed to expand the estate tax on wealthy Americans, including a rate of up to 77% on the value of estates above $1 billion.

Sanders, who is considering a fresh run for president, said in a statement his plan would apply to the wealthiest 0.2% of Americans, with Bloomberg reporting that his proposal would set a 45% tax on the value of estates between $3.5 million and $10 million, increasing gradually to 77% for amounts more than $1 billion. The current estate tax kicks in when an estate is worth about $11 million.

If enacted, the legislation would raise up to $2.2 trillion in estate taxes from the families of all 588 billionaires in the U.S. with a combined net worth of more than $3 trillion, according to a summary of the plan.

Sanders’s plan comes as potential other challengers to President Trump eye progressive tax ideas intended to reduce income inequality. One such proposal comes from Senator Elizabeth Warren who is seeking an annual 2% tax on households worth more than $50 million. Sanders, who ran in the Democratic primaries against Hillary Clinton in 2016, hasn’t yet confirmed whether he’ll run in 2020.

While the estate tax exemption was $3.5 million as recently as 2009, in 2017 the GOP tax overhaul increased the exemption to $11 million through 2025, and some Senate Republicans are renewing an effort to repeal the tax entirely.

As Sanders and Warren are seeking to reduce income inequality by breaking up concentrations of wealth among top earners, other Democratic candidates are urging legislation toward the lowest income brackets. California Senator Kamala Harris, who launched her presidential campaign this week, introduced legislation this month to create a $3,000 refundable tax credit for low-income individuals. The bill includes non-binding language that proposes funding the tax credit by repealing parts of the 2018 Republican tax cut and assessing a fee on large financial institutions.

Meanwhile, polls show that Americans are becoming more receptive to the idea of increasing taxes on the wealthy. After Democratic Socialist Alexandria Ocasio-Cortez floated a 70% top tax rate on incomes of $10 million or more, a recent poll found that a majority, or 59% of Americans would be in support of such a tax.

Of course, boosting taxes on the rich is nothing new: bBack in 2012, when Europe's populist tensions were first emerging, France's socialist president Francois Hollande decided to harness the unhappiness of the proletariat (and distract from what would soon be one of the most disastrous presidencies in French history), and passed a 75% tax on earnings above €1 million as part of his election campaign.

Supported by socialists everywhere, the reform quickly prompted accusations of an anti-business agenda, sparked an exodus of high-profile personalities (France’s richest man, Bernard Arnault, the chief executive of luxury group LVMH, took out Belgian nationality, and the actor Gérard Depardieu also moved across the border to Belgium before obtaining Russian citizenship), sent local stocks tumbling as investors pulled out of France, and local real estate prices plunged.

While initially the supertax saw broad popular support, the resulting slump in the economy prompted a quick reversal in public opinion. “The reform clearly damaged France’s reputation and competitiveness,” said Jorg Stegemann, the head of the executive search firm Kennedy Executive. “It clearly has become harder to attract international senior managers to come to France than it was.”

Despite the backlash Hollande clung to the principle of the supertax even after it was dismissed by the country’s highest court, fearing a revolt by his leftwing allies. The tax was subsequently adjusted to a 50% rate payable by companies after the constitutional council ruling in December 2012. The final nail in the coffin came from the former investment banker who is now France’s president, Emmanuel Macron. A former economic adviser to Hollande, Macron described the supertax as “Cuba without the sun."

Worse, it was the workers who were hit the hardest: tax lawyer Jean-Philippe Delsol, author on a book on tax exiles called Why I Am Going To Leave France, said that many high earners had agreed with their companies that salaries would be limited during the two years the tax rate applied, and they would “come to an arrangement afterwards."

Worst of all, however, French finance ministry studies showed that despite all the publicity, the sums obtained from the supertax were meagre, standing at €260m in 2013 and €160m in 2014, and affecting 1,000 staff in 470 companies. Over the same period, the budget deficit soared to €84.7bn. And so, two years after it was introduced, on January 1, 2015 the French 75% tax quietly disappeared into the history books.

Published:1/31/2019 1:13:31 PM
[Markets] How Brexit Burst The West's Immigration Taboos

Authored by Scott McConnell via The American Conservative,

It is difficult to keep up with the Brexit debate. British politics now consists of little else: hard and soft exits, the backstop, the complication of Scotland, the greater complication of Northern Ireland and Ireland, the huge splits within the parties and even between members of the same household. And, of course, there’s the seeming political humiliation of Theresa May, who seems a nice enough woman, though you have to wonder why someone who opposed Brexit be entrusted to negotiate it with the European Union.

The debate is bogged down in economic complexity, which benefits those who want Britain to forget about the referendum result and remain, or who hope that doubt and confusion will build support for a new referendum, during which an exhausted public will throw up its hands and say it’s all too complicated and the elite must know best.

Britain’s Brexit conflict parallels how the American political establishment has dealt with Donald Trump’s presidential victory. There was no alternative but to let Trump be president, but his agenda could still be tied up in the courts and the GOP could resist and prevent him from passing any substantial legislation. So far this has succeeded—for all his tweeting, Trump hasn’t actually done anything concrete except carry out some neoconservative policy prescriptions towards Iran. (Though he has moved the window of what issues can be discussed, which may be important in the long run.)

The key thing to recognize about the Brexit conflict is that the critical issue is not economics but immigration.

Absent the immigration surge initiated by Tony Blair, Britain’s adhesion to the EU would have remained a sideshow among Tories and not the political centerpiece it has become during the last three years.

Despite an anti-black race riot in 1958 and Enoch Powell’s famous “Rivers of Blood” speech a decade later, Britain’s political class had a kind of immigration consensus until Blair. Acceptable political discourse would be scrupulously anti-racist, and racial rhetoric would be met with taboos. Yet immigration would be kept to modest levels. Free movement from the former colonies was rescinded in 1961, and the Labour Party hardly objected. And while the conservative establishment formerly rebuked Powell, Margaret Thatcher stressed Powellite themes in softer language: “the British character has done so much for democracy, for law…that if there is any fear we might be swamped, people are going to react and be rather hostile to those coming in.” Labour, invariably hostile to Thatcher, took no issue there. As Eric Kaufman wrote in his recent book Whiteshift (from which some of the forgoing analysis is taken), “In Britain, a discourse of restrictionism was even established at the elite level, where quiet objections to immigration within the Cabinet, referencing public opinion, were routinely voiced.”

All this changed with Blair’s ascension in 1997. His New Labor departed from his party’s working class roots and embraced a notion of a cool multicultural Britain. His coterie of pro-immigration advisors recommended in 2000 that the government use mass immigration to make the country truly multicultural, to “rub the Right’s nose in diversity and render their arguments out of date.” 

Blair increased the number of “economic” visas available and immigration rates soon quadrupled. His multiculturalism had a zealous missionary quality to it, as if Britain was seeking world leadership in a race to negate one’s traditional political culture. It was never especially popular outside of London, but social taboos against racism nonetheless kept it out of the realm of public debate.

But not forever. Blair’s Iraq war hurt his government’s popularity (an interesting essay might be written on the connections between militant domestic multiculturalism and a bellicose foreign policy), and the London Tube bombings of 2005, carried out by the British-born sons of Third World immigrants, didn’t help. The National Front, an extreme Right party (distinct from France’s Front National), began to gain traction in local elections for the first time since the 1970s.

Tory politicians had begun to question high immigration rates in the early 2000s, without much to show for it electorally. But by later in the decade, things had changed. Robust majorities of white Britons had favored lower immigration rates since the issue was first polled in the 1960s. But what was new now was immigration’s salience—it had become very important to a greater number of people. After 2005, pollsters began to notice working class Labor party voters defecting over immigration concerns. Immigration was deemed the most important issue by nearly one in three voters, and when the Tories regained the majority in 2010, it was the top issue for those who’d switched their votes from Labour to Conservative.

David Cameron was not a man of the Tory Right, and though he expressed a desire to reduce immigration to pre-Blair levels, he proved unable to do so as prime minister. Britain’s EU commitments were an impediment. But the immigration issue was out of the shadows, and the main electoral beneficiary was the anti-EU United Kingdom Independence Party (UKIP). In fact, though Britain has been arguing about the economic terms of Brexit for years now, few Britons care that much about the EU, which seemed disconnected from their everyday lives. They did care about immigration.

And the EU issue gave that sentiment an outlet it lacked. Discussing the EU allowed one to criticize immigration levels without being caught up in Britain’s still powerful anti-racism norms. At first, the EU template focused the immigration discussion largely on Eastern European immigrants, rendering it non-racist and therefore legitimate. At the same time, it boosted UKIP, whose prospects began to rise steadily after 2009. After winning 16 percent of the vote in the European elections, UKIP began to attract voters disappointed that the Tories seemed unable to actually do anything but talk about immigration. UKIP billboards, emphasizing the slogan “Take Back Control,” stressed that the EU was denying Britain the right to control its borders. As UKIP leader Nigel Farage put it, “The goal was to get into people’s heads that immigration and Europe are the same thing and that we are impotent.”

To the shock of Britain’s elites, Brexit won. The Remain camp had no answer to the immigration question. It simply stressed what was called “Project Fear,” warning of the massive economic disturbances that leaving the EU would supposedly cause. Since the vote, Cameron’s resignation, and the convoluted efforts by Theresa May to negotiate Brexit, the subject matter of “Project Fear” - the movement of goods, not people - has once again risen to the fore, dominating discussion.

It’s an area where the economic elites have a far better control of the relevant information. Thus they’ve managed to throw the Brexit situation into disarray. But whatever happens (I would predict, with little confidence, that some version of Theresa May’s negotiated, semi-soft Brexit will eventually get a parliamentary majority), the immigration issue will remain alive. Once liberated from the taboos that long restrained it and made a legitimate part of the national debate, it can’t be put back into the closet.

Published:1/29/2019 1:27:27 AM
[Markets] Collapse Is Already Here

Authored by Chris Martenson via,

It's a process, not an event...

Many people are expecting some degree of approaching collapse -- be it economic, environmental and/or societal -- thinking that they’ll recognize the danger signs in time. 

As if it will be completely obvious, like a Hollywood blockbuster. Complete with clear warnings from scientists, politicians and the media.  And everyone can then get busy either panicking or becoming the plucky heroes. 

That's not how collapse works.

Collapse is a process, not an event.

And it's already underway, all around us. 

Collapse is already here.

However, unlike Hollywood's vision, the early stages of collapse cause people to cling even tighter to the status quo. Instead of panic in the streets, we simply see more of the same -- as those in power do all they can to remain so, while the majority of the public attempts to ignore the growing problems for as long as it possibly can.

For both the elite and the majority, their entire world view and their personal sense of self depends on things not crumbling all around them, so they remain willfully blind to any evidence to the contrary.

When faced with the predicaments we warn about here at, getting an early start on prudently shifting your own personal situation is of vital strategic and tactical importance. Tens of thousands of our readers already have taken wise steps in their lives to position themselves resiliently.

But most of the majority won't get started until it’s entirely too late to make any difference at all. Which is sad but perhaps unavoidable, given human nature.

If everybody around you is saying “Everything is awesome!”, it can take a long time to determine for yourself that things in fact aren't:

Real collapse happens slowly, and often without any sort of acknowledgement by the so-called political and economic elites until its abrupt terminal end.

The degree of rot within the Soviet Union went undetected until its final implosion, catching pretty much everyone in the West (as well as in the former USSR!) by surprise.   

Similarly, one day people woke up and passenger pigeons were extinct.  They used to literally darken the skies for hours as they migrated past, numbering in the billions. Nobody planned on their demise and virtually nobody saw it coming.  Sure, just as there always are, a few crackpots at the fringes noticed, but they were ignored until it was too late.

Our view is that collapse of our current way of life is happening right now. The signs are all around us.  Our invitation is for you to notice them and inquire critically what the ramifications will be -- irrespective of whatever pablum our leaders and media are currently spewing.

While the monetary and financial elites strain to crank out one more day/week/month/year of “market stability”, the ecosystems we depend on for life are vanishing. It's as if the Rapture were happening, but it's the insects, plants and animals ascending to heaven instead of we humans.

Committing Ecocide

Be very skeptical when the cause of each new ecological nightmare is ascribed to “natural causes.” 

While it’s entire possible for any one ecological mishap to be due to a natural cycle, it’s weak thinking to assign the same cause to dozens of troubling findings happening all over the globe.

As they say in the military: Once is an accident. Twice is a coincidence. But three times is enemy action.

Right now, Australia is in the middle of the summer season and being absolutely hammered by high heat.  Sure it gets hot during an Australian summer, but not like this. The impact has been devastating:

Australia's Facing an Unprecedented Ecological Crisis, But No One's Paying Attention

Jan 9, 2019

It started in December, just before Christmas.

Hundreds of dead perch were discovered floating along the banks of the Darling River – victims of a "dirty, rotten green" algae bloom spreading in the still waters of the small country town of Menindee, Australia.

Things didn't get better. The dead hundreds became dead thousands, as the crisis expanded to claim the lives of 10,000 fish along a 40-kilometre (25-mile) stretch of the river. But the worst was still yet to come.

This week, the environmental disaster has exploded to a horrific new level – what one Twitter user called "Extinction level water degradation" – with reports suggesting up to a million fish have now been killed in a new instance of the toxic algae bloom conditions.

For their part, authorities in the state of New South Wales have only gone as far as confirming "hundreds of thousands" of fish have died in the event – but regardless of the exact toll, it's clear the deadly calamity is an unprecedented ecological disaster in the region's waterways.

"I've never seen two fish kills of this scale so close together in terms of time, especially in the same stretch of river," fisheries manager Iain Ellis from NSW Department of Primary Industries (DPI) explained to ABC News.

The DPI blames ongoing drought conditions for the algae bloom's devastating impact on local bream, cod, and perch species – with a combination of high temperature and chronic low water supply (along with high nutrient concentrations in the water) making for a toxic algal soup.


Watching the video above showing grown men crying over the loss of 100-year-old fish is heartbreaking. This fish kill is described as “unprecedented” and as an “extinction level event", meaning it left no survivors over a long stretch of waterway.

We can try to console oursleves that maybe this was just a singular event, a cluster of bad juju and worse waterway management that combined to give us this horror -- but it wasn’t.

It's part of a larger tapestry of heat-induced misery that Australia is facing:

How one heatwave killed 'a third' of a bat species in Australia

Jan 15, 2019

Over two days in November, record-breaking heat in Australia's north wiped out almost one-third of the nation's spectacled flying foxes, according to researchers.

The animals, also known as spectacled fruit bats, were unable to survive in temperatures which exceeded 42C.

"It was totally depressing," one rescuer, David White, told the BBC.

Flying foxes are no more sensitive to extreme heat than some other species, experts say. But because they often gather in urban areas in large numbers, their deaths can be more conspicuous, and easily documented.

"It raises concerns as to the fate of other creatures who have more secretive, secluded lifestyles," Dr Welbergen says.

He sees the bats as the "the canary in the coal mine for climate change".


A two-day heatwave last November (2018) was sufficient to kill up to a third of all Australia's known flying foxes, a vulnerable species that was already endangered.  As those bats are well-studied and their deaths quite conspicuous to observers, it raises the important question: How many other less-scrutinized species are dying off at the same time?

And the death parade continues:

Are these data points severe enough for you to recognize as signs of ongoing collapse?

Last summer was a time of extreme draught and heat for Australia, and this summer looks set to be even worse. This may be the country's  'new normal' for if the situation is due to climate change instead of just an ordinary (if punishing) hot cycle. 

If so, these heat waves will likely intensify over time, completely collapsing the existing biological systems across Australia.

Meanwhile, nearby in New Zealand, similar species loss is underway:

'Like losing family': time may be running out for New Zealand's most sacred tree

July 2018

New Zealand’s oldest and most sacred tree stands 60 metres from death, as a fungal disease known as kauri dieback spreads unabated across the country.

Tane Mahuta (Lord of the Forest) is a giant kauri tree located in the Waipoua forest in the north of the country, and is sacred to the Maori people, who regard it as a living ancestor.

The tree is believed to be around 2,500 years old, has a girth of 13.77m and is more than 50m tall.

Thousands of locals and tourists alike visit the tree every year to pay their respects, and take selfies beside the trunk.

Now, the survival of what is believed to be New Zealand’s oldest living tree is threatened by kauri dieback, with kauri trees a mere 60m from Tane Mahuta confirmed to be infected.

Kauri dieback causes most infected trees to die, and is threatening to completely wipe out New Zealand’s most treasured native tree species, prized for its beauty, strength and use in boats, carvings and buildings.

“We don’t have any time to do the usual scientific trials anymore, we just have to start responding immediately in any way possible; it is not ideal but we have kind of run out of time,” Black says, adding that although there is no cure for kauri dieback there is a range of measures which could slow its progress.


People are rallying to try and save the kauri trees, although it’s unclear exactly how to stop the spread of the new fungal invader or why it's so pathogenic all of a sudden.  It could be due to another natural sort of cycle (except the fungus was thought to have been introduced and spread by human activity) or it could be a another collapse indicator we need to finally hear and heed.

It turns out that New Zealand is not alone. Giant trees are dying all over the globe.

2,000-year-old baobab trees in Africa are suddenly and rather mysteriously giving up the ghost.  These trees survived happily for 2,000 years and now all of a sudden they're dying. Are the deaths of our most ancient trees all across the globe some sort of natural process? Or is there a different culprit we need to recognize?

In Japan they're lamenting record low squid catches.  Oh well, maybe it’s just overfishing?  Or could it be another message we need to heed?

To all this we can add the numerous scientific articles now decrying the 'insect Apocalypse' unfolding across the northern hemisphere. The Guardian recently issued this warning: “Insect collapse: ‘We are destroying our life support systems’”. Researchers in Puerto Rico's forest preserves recorded a 98% decline in insect mass over 35 years.  Does a 98% decline have a natural explanation? Or is something bigger going on?

Meanwhile, the butterfly die-off is unfolding with alarming speed. I rarely see them in the summer anymore, much to my great regret.  Seeing one is now as exciting as seeing a meteor streak across the sky, and just as rare:

Monarch butterfly numbers plummet 86 percent in California

Jan 7, 2019

CAMARILLO, Calif. – The number of monarch butterflies turning up at California's overwintering sites has dropped by about 86 percent compared to only a year ago,according to the Xerces Society, which organizes a yearly count of the iconic creatures.

That’s bad news for a species whose numbers have already declined an estimated 97 percent since the 1980s.

Each year, monarchs in the western United States migrate from inland areas to California’s coastline to spend the winter, usually between September and February.

“It’s been the worst year we’ve ever seen,” said Emma Pelton, a conservation biologist with the Xerces Society who helps lead the annual Thanksgiving count. “We already know we’re dealing with a really small population, and now we have a really bad year and all of a sudden, we’re kind of in crisis mode where we have very, very few butterflies left.”

What’s causing the dramatic drop-off is somewhat of a mystery. Experts believe the decline is spurred by a confluence of unfortunate factors, including late rainy-season storms across California last March, the effects of the state’s years long drought and the seemingly relentless onslaught of wildfires that have burned acres upon acres of habitat and at times choked the air with toxic smoke.


Note the “explanation” given blames the decline on mostly natural processes: late storms, droughts and wildfires. I believe that's because the article appears in a US paper, so no mention was permitted of neonicotinoid pesticides or glyphosate. Both of these are highly effective decimators of insect life -- but they're highly profitable for Big Ag, so for now, any criticism is not allowed.

Sure a 97% decline since the 1980’s might be due to fires, droughts and rains. But that’s really not very likely.  There have always been fires, droughts and rains.  Something else has shifted since the 1980’s. And that “thing” is human activity, which has increased its willingness to destroy habitat and spray poisons everywhere in pursuit of cheaper food and easier profits.

The loss of insects, which we observe in the loss of the beautiful and iconic Monarch butterfly, is a gigantic warning flag that we desperately need to heed.  If the bottom of our billion-year-old food web disintegrates, you can be certain that the repercussions to humans will be dramatic and terribly difficult to ‘fix.’  In scientific terms, it will be called a “bottom-up trophic cascade”.

In a trophic cascade, the loss of a single layer of the food pyramid crumbles the entire structure.  Carefully-tuned food webs a billion years in the making are suddenly destabilized.  Life cannot adapt quickly enough, and so entire species are quickly lost.  Once enough species die off, the web cannot be rewoven, and life … simply ends.

What exactly would a “trophic cascade” look like in real life?  Oh, perhaps something just like this:

Deadly deficiency at the heart of an environmental mystery

Oct 16, 2018

During spring and summer, busy colonies of a duck called the common eider (Somateria mollissima) and other wild birds are usually seen breeding on the rocky coasts around the Baltic Sea. Thousands of eager new parents vie for the best spots to build nests and catch food for their demanding young broods.

But Lennart Balk, an environmental biochemist at Stockholm University, witnessed a dramatically different scene when he visited Swedish coastal colonies during a 5-year period starting in 2004. Many birds couldn’t fly. Others were completely paralyzed. Birds also weren’t eating and had difficulty breathing. Thousands of birds were suffering and dying from this paralytic disease, says Balk. “We went into the bird colonies, and we were shocked. You could see something was really wrong. It was a scary situation for this time of year,” he says.

Based on his past work documenting a similar crisis in several Baltic Sea fish species, Balk suspected that the birds’ disease was caused by a thiamine (vitamin B1) deficiency. Thiamine is required for critical metabolic processes, such as energy production and proper functioning of the nervous system.

This essential micronutrient is produced mainly by plants, including phytoplankton, bacteria, and fungi; people and animals must acquire it through their food.

“We found that thiamine deficiency is much more widespread and severe than previously thought,” Balk says. Given its scope, he suggests that a pervasive thiamine deficiency could be at least partly responsible for global wildlife population declines. Over a 60-year period up to 2010, for example, worldwide seabird populations declined by approximately 70%, and globally, species are being lost 1,000 times faster than the natural rate of extinction (9, 10). “He has seen a thiamine deficiency in several differ phyla now,” says Fitzsimons of Balk. “One wonders what is going on. It’s a larger issue than we first suspected.”


This is beyond disturbing. It should have been on the front pages of every newspaper and TV show across the globe.  We should be discussing it in urgent, worried tones and devoting a huge amount of money to studying and fixing it.  At a minimum, we should stop hauling more tiny fish and krill from the sea in an effort to at least stabilize the food pyramid while we sort things out.

If you recall, we’ve also recently reported on the findings showing that phytoplankton levels are down 50% (these are a prime source for thiamine, by the way). Again, here's a possible “trophic cascade” in progress: 


Fewer phytoplankton means less thiamine being produced. That means less thiamine is available to pass up the food chain. Next thing you know, there’s a 70% decline in seabird populations.

This is something I’ve noticed directly and commented n during my annual pilgrimages to the northern Maine coast over the past 30 years, where seagulls used to be extremely common and are now practically gone.  Seagulls!

Next thing you know, some other major food chain will be wiped out and we'll get oceans full of jellyfish instead of actual fish.  Or perhaps some once-benign mold grows unchecked because the former complex food web holding it in balance has collapsed, suddenyl transforming Big Ag's "green revolution" into grayish-brown spore-ridden dust.

To add to the terrifying mix of ecological news has been the sudden and rapid loss of amphibian species all over the world.  A possible source for the culprit has been found, if that’s any consolation; though that discovery does not yet identify a solution to this saddening development.

Ground Zero of Amphibian 'Apocalypse' Finally Found

May 10, 2018

MANY OF THE world's amphibians are staring down an existential threat: an ancient skin-eating fungus that can wipe out entire forests' worth of frogs in a flash.

This ecological super-villain, the chytrid fungus Batrachochytrium dendrobatidis, has driven more than 200 amphibian species to extinction or near-extinction—radically rewiring ecosystems all over Earth.

“This is the worst pathogen in the history of the world, as far as we can tell, in terms of its impacts on biodiversity,” says Mat Fisher, an Imperial College London mycologist who studies the fungus.

Now, a global team of 58 researchers has uncovered the creature's origin story. A groundbreaking study published in Science on Thursday reveals where and when the fungus most likely emerged: the Korean peninsula, sometime during the 1950s.

From there, scientists theorize that human activities inadvertently spread it far and wide—leading to amphibian die-offs across the Americas, Africa, Europe, and Australia.


Frogs, toads and salamanders were absolutely critical parts of my childhood and I delighted in their presence. I cannot imagine a world without them. But effectively, that’s what we’ve got now with so many on the endangered species list.

This parade of awful ecological news is both endless and worsening. And there is no real prospect for us to fix things in time to avoid substantial ecological pain.  None.

After all, we can’t even manage our watersheds properly. And those are dead simple by comparison. Water falls from the sky in (Mostly) predictable volume and you then distribute somewhat less than that total each year.  Linear and simple in comparison to trying to unravel the many factors underlying a specie's collapse.

But challenges like this are popping up all over the globe:

Fear And Grieving In Las Vegas: Colorado River Managers Struggle With Water Scarcity

Dec 14th, 2018

On stage in a conference room at Las Vegas's Caesars Palace, Keith Moses said coming to terms with the limits of the Colorado River is like losing a loved one.

"It reminds me of the seven stages of grief," Moses said. "Because I think we've been in denial for a long time."

Moses is vice chairman of the Colorado River Indian Tribes, a group of four tribes near Parker, Arizona. He was speaking at the annual Colorado River Water Users Association meeting.

The denial turned to pain and guilt as it became clear just how big the supply and demand gaps were on the river that delivers water to 40 million people in the southwest.

For the last six months Arizona's water leaders have been experiencing the third stage of grief: anger and bargaining.

Of the seven U.S. states that rely on the Colorado River, Arizona has had the hardest time figuring out how to rein in water use and avoid seeing the river's largest reservoirs — Lakes Mead and Powell — drop to extremely low levels.

Kathryn Sorenson, director of Phoenix's water utility, characterized the process this way: "Interesting. Complicated. Some might say difficult."

One of the loudest voices in the debate has been coming from a small group of farmers in rural Pinal County, Arizona, south of Phoenix.

Under the current rules those farmers could see their Colorado River supplies zeroed out within two years.

The county's biggest grower of cotton and alfalfa, Brian Rhodes, is trying to make sure that doesn't happen. The soil in his fields is powder-like, bursting into tiny brown clouds with each step.

"We're going to have to take large cuts," Rhodes said. "We all understand that."


Oh my goodness. If we’re having trouble realizing that wasting precious water from the Colorado River to grow cotton is a bad idea, then there’s just no hope at all that we'll successfully rally to address the loss of ocean phytoplankton. 

That’s about the easiest connection of dots that could ever be made.  As Sam Kinison, the 1980’s comedian might have yelled – IT’S A DESERT!! YOU’RE TRYING TO GROW WATER-INTENSIVE CROPS IN THE FREAKING DESERT!  CAN’T YOU SEE ALL THE SAND AROUND YOU?!? THAT MEANS "DON’T GROW COTTON HERE!!"

A World On The Brink

The bottom line is this: We are destroying the natural world. And that means that we are destroying ourselves. 

I know that the mainstream news has relegated this conversation to the back pages (when they covered it at all) and so it's not “front and center” for most people.  But it should be.

Everything we hold dear is a subset of the ecosphere. If that goes, so does everything else. Nothing else matters in the slightest if we actively destroy the Earth’s carrying capacity.

At the same time, we're in the grips of an extremely dangerous delusion that has placed money, finance and the economy at the top spot on our temple of daily worship.

Any idea of slowing down or stopping economic growth is “bad for business” and dismissed out of hand as “not practical”, "undesirable" or "unwise".  It’s always a bad time to discuss the end of economic growth, apparently. 

But as today's young people are increasingly discovering, if "conducting business" is just a lame rationale for failed stewardship of our lands and oceans, then it’s a broken idea. One not worth preserving in its current form.

The parade of terrible ecological breakdowns provided above is there for all willing to see it. Are you willing?  Each failing ecosystem is screaming at us in urgent, strident tones that we’ve gone too far in our quest for "more".

We might be able to explain away each failure individually. But taken as a whole?  The pattern is clear: We’ve got enemy action at work.  These are not random coincidences.

Nature is warning us loudly that it's past time to change our ways.  That our "endless growth" model is no longer valid. In fact, it's now becoming an existential threat

The collapse is underway. It’s just not being televised (yet).

Davos As Destiny

And don't expect the cavalry to arrive.

Our leadership is absolutely not up to the task. If the Davos conference currently underway in Switzerland is a sign of anything at all, it’s that we’re doomed.

The world has been taken over by bankers and financiers too smitten by their love of money to notice much else or be of any practical service to the world.

By way of illustrative example, here’s the big techno-feel-good idea unveiled on the second day of the conference.  The crowds there loved it:

Yes, folks, this is what the world most desperately needs at this time! /sarc 

While I’m sure drone-delivered books is a heartwarming story, it’s completely diversionary and utterly meaningless in the face of collapsing oceanic and terrestrial food webs.

Sadly, this is exactly the sort of inane distraction most admired by the Davos set in large part because it helps them feel a tiny bit better about their ill-gotten wealth. "Look!  We're supporting good thngs!"  The ugly truth is that big wealth's main pursuit is to distort political processes and rules to assure they get to keep it and even amass more. 

Drones carrying books to Indonesian children provides the same sort of dopamine rush to a Davos attendee as Facebook 'like' gives to a 14-year-old. Temporary, cheap, superficial and ultimately meaningless.

The same is true of their other feel-good theme of the day. “Scientists” have discovered an enzyme that eats plastics:

That’s swell, but you know what would be even better?  Not using the bottles in the first place. Which could be accomplished by providing access to safe, potable water as a basic human right and using re-usable containers.  Of course, that would offer less chances for private wealth accumulation so instead the Davos crowd is fixated on the profitable solution vs. doing the right thing.

In viritually every instance, the Davos crowd wants to preserve industry and our consumer culture as it is, using technology and gimmicks in attempt to remedy the ills that result.  There’s money to be made on both ends of that story.

The only thing that approach lacks is a future. Because it’s not-so-subtly based on continued "growth". Infinite exponential growth. The exact same growth that is killing ancient trees, sea birds, insects, amphibians, and phytoplankton.

Who wants more of that? Insane people.

In other words, don’t hold out any hope that the Davos set representing the so-called “elite” from every prominent nation on earth are going to somehow bravely offer up real insights on our massive predicaments and solutions to our looming problems. They're too consumed with their own egos and busy preening for prominence to notice the danger or care.

As they pointlessly fritter away another expensive gathering, the ecological world is unraveling all around them. The oceans are becoming a barren wasteland.  The ancient trees are dying.  Heatwaves are melting tar and killing life.  The web of life is snapping strand by strand and nobody can predict what happens next.

In other words, if you held out any hope that “they” would somehow rally to the cause you’d best set that completely aside. It's no wonder social anger against tone-deaf and plundering elites is breaking out right now.

From here, there are only two likely paths: 

(1) We humans simply cannot self-organize to address these plights and carry on until the bitter end, when something catastrophic happens that collapses our natural support systems. 

(2) We see the light, gather our courage, and do what needs to be done.  Consumption is widely and steeply curtailed, fossil fuel use is severely restrained, and living standards as measured by the amount of stuff flowing through our daily lives are dropped to sustainable levels.

Either path means enormous changes are coming, probably for you and definitely for your children and grandchildren. 

In Part 2: Facing Reality we dive into what developments to expect as our systems continue further along their trophic cascade. Which markers and milestones should we monitor most closely to know when the next breaking point is upon us? 

To reiterate: Massive change is now inevitable and in progress.

Collapse has already begun.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

Published:1/26/2019 11:10:41 AM
[Markets] When Science Isn't Science

Authored by Jason Morgan via The Mises Institute,

The Quarterly Journal of Austrian Economics 21, no. 2 (Summer 2018). For the full issue, click here.

[The Best American Science and Nature Writing 2017., Hope Jahren, ed., Wilmington, Mass.: Mariner Books, 2017, 352 pp.]

The Earth’s climate is extraordinarily complex. Unlike dinosaur fossils or organic chemistry or primate behavior, climate is always in flux, with countless factors influencing one another in an endless unfolding of diachronic stochastics. Given this complexity, one might presume that scientists who study planetary climate would be endowed with exceptional patience, scholarly integrity, and intellectual humility. After all, it takes a long time to learn even a little bit about such an intricate system, so part of the job description of climate scientist would seem to be acknowledging that there is only so much that is known about the 1.09 x 1044 or so molecules swirling about in the atmosphere. Even more complex than all that, though, is navigating the public’s interest in the field. Climate is contentious, and a climate scientist will have to keep his cool, sticking to the facts amidst even the most heated rhetorical environments.

And yet, this is precisely not how a startling number of climate scientists choose to behave. Former head of the National Aeronautics and Space Administration (NASA) Goddard Institute for Space Studies James Hansen, for example, once made the rather alarming claim that “it will soon be impossible to avoid climate change with far-ranging undesirable consequences. We have reached a critical tipping point. […] We have at most ten years—not ten years to decide upon action, but ten years to alter fundamentally the trajectory of global greenhouse emissions.” And what might happen if the Earth warmed by the five degrees Hansen was warning about? Hansen tells us in detail.

The last time that the Earth was five degrees warmer was three million years ago, when sea level was about eighty feet higher. Eighty feet! In that case, the United States would lose most East Coast cities: Boston, New York, Philadelphia, Washington, and Miami; indeed, practically the entire state of Florida would be under water. Fifty million people in the US live below that sea level. Other places would fare worse. China would have 250 million displaced persons. Bangladesh would produce 120 million refugees, practically the entire nation. India would lose the land of 150 million people.

Rather discomfiting for Dr. Hansen, who thought we had “at most […] ten years to alter fundamentally the trajectory of global greenhouse emissions,” those blood-curdling visions of hundreds of millions of drowning urbanites have now gone fully a dozen years without coming to pass.

Not to be dissuaded from his task—and traipsing rather lightly past the Climategate scandal, in which University of East Anglia scientists were caught in flagrante delicto discussing the doctoring of data to match the received narrative on anthropogenic climate change—Hansen next tried to set a new tone for the climate Armageddonists. The Earth’s failure to implode on cue led Hansen and others to blame the system instead. “The democratic process doesn’t quite seem to be working,” he said in 2009, for example (The Guardian, 2009). Naomi Klein, author of This Changes Everything: Capitalism vs. The Climate (2014), connected the dots between Hansen’s rantings and full-bore income redistribution, hyping the “People’s Recovery,” which attempted to shunt tax dollars into communities experimenting in “nonextractive living” and “new democratic processes”:

Any attempt to rise to the climate challenge will be fruitless unless it is understood as part of a much broader battle of world-views, a process of rebuilding and reinventing the very idea of the collective, the communal, the commons, the civil, and the civic after so many decades of attack and neglect.

It would be hard to beat this orchestral crescendo of embarrassments to real scientific inquiry, this twisting of science into balloon animals shaped like either Chicken Little or Karl Marx. But in The Best American Science and Nature Writing 2017, series editor Tim Folger gives it a try. In large measure, he succeeds, calling into question whether “climate science” has not perhaps become an oxymoron.

First, a word about the 2017 iteration of the series. The editor for that year, Hope Jahren (the author of Lab Girl(2016)), has assembled a rather puzzling collection of genuinely interesting and valuable pieces, interspersed with tendentious politically-correct huff-puffing and special pleading. To take the good entries first, Robert Draper’s essay (reprinted from National Geographic), “The Battle for Virunga,” is a tightly-written piece on the intersection of economics, politics, and wildlife in the Democratic Republic of the Congo. David Epstein’s ProPublica essay, “The DIY Scientist, the Olympian, and the Mutated Gene,” tells the richly human story of Jill Viles, a muscular dystrophy patient whose extraordinary etiological insights helped track down important genetic information about lipodystrophy. And Ann Finkbeiner’s “Inside the Breakthrough Starshot Mission to Alpha Centauri,” taken from Scientific American, is a character-driven look at how new space technologies travel down the R&D pipeline. There are other fine essays in this volume, too: Tom Philpott’s on the political economy of chicken farm antibiotics, Kim Tingley’s on Polynesian navigation techniques, and Christopher Solomon’s well-researched look at Bureau of Land Management machinations in the American West.

Unfortunately, Jahren’s editorial heuristic, saturated in identity politics, leads her in the very unscientific direction of putting the scientist ahead of the science. This is especially odd, given that the writers who take the Cartesian plunge and delve into innerspace are forced to admit to having no idea who they are. Listless atheism marks Omar Mouallem’s “Dark Science,” for example. Ostensibly writing about light pollution and the efforts to combat it, Mouallem lets slip, “I once found myself in the middle of a field staring at a glistening sky. Had I still believed in him, I’d say it looked like God sneezed glitter.” Azeen Ghorayshi’s “He Fell in Love with His Grad Student—Then Fired Her for It” is the Glenn Close-esque tale of Christian Ott, a Caltech astrophysics professor who unburdens himself to his protégé about his deep-seated insecurities while publishing dozens of poems about her online. Sally Davies’ “The Physics Pioneer Who Walked Away from It All” tells us about physicist Fotini Markopoulou, who avers that “between the truth of the physical world and a physics theory, there’s humans. Of course, nothing happens there, because removing the person is the whole point of training as a scientist.” And then there is Michael Regnier’s heartbreaking true story of George Price, the man who literally did just that: removed himself, by killing himself in the name of the scientific study of altruism (“The Man Who Gave Himself Away”).

But the real editorial knifepoint of this book is its global warming agenda. Climate change crops up everywhere, from essays on Greenland (“A Song of Ice”) to Alaska (“The New Harpoon”). However, the pièce de résistance is Nathaniel Rich’s “The Invisible Catastrophe,” reprinted from The New York Times Magazine. This is passive-aggressiveness cranked up to eleven. Here, Rich manages to take a story about a methane leak in Aliso Canyon, outside Los Angeles, and turn it into a schadenfreude smorgasbord, with Rich secretly reveling in the fact that the wealthy residents of Porter Ranch—many of whom are Republicans—are finally getting a taste of their own medicine by being sickened by greenhouse gases.

But even this essay pales in comparison with Folger’s truly unhinged Foreword. Here, we find the favorite trope of the unscientific, namely, that everyone with whom one disagrees is a Nazi. Yes, a National Socialist. And not just any kind of National Socialist, but active, core members of the Party. To be more specific, bookburning Nazis. Here’s Folger:

Modern cosmology was born in Germany a century ago, and within two decades of its birth it almost died there. When Albert Einstein published his general theory of relativity in November 1915, it’s doubtful he could have imagined how profoundly deranged his country would become. On May 10, 1933—the same year Einstein left Germany forever—mobs of young Nazis and their supporters across Germany were feeding bonfires with his papers, along with works by Sigmund Freud, Thomas Mann, Bertolt Brecht, Erich Maria Remarque, and others supposedly contaminated with undeutschen Geist—un-German spirit. More than 25,000 books burned on that day, including those of the 19th-century Jewish poet and playwright Heinrich Heine, who had once written, “Where they burn books, they will also ultimately burn people. […]”

Where is Folger going with all this? Who are the modern-day Nazis in our midst? Why, climate skeptics and Trump supporters, of course:

One measure of the health of any modern society must be the degree to which it supports its scientists. A few days before I started to write this foreword, hundreds of thousands of people in dozens of cities across the country participated in the March for Science. It was an event at once inspiring and worrisome: inspiring because so many took a stand for rationalism—a public rebuke to the nation’s leaders that couldn’t be more different from the German book burnings of the 1930s; worrisome because who would have thought that in the 21st century scientists and citizens would feel the need to gather in support of something so self-evidently valuable as unfettered scientific research?

Yet the march was necessary, urgently so. Scientists at more than a dozen federal agencies have launched rogue Twitter feeds to counter the policies of a frighteningly uninformed president who once tweeted that “global warming was created by and for the Chinese.” We live at a pivotal moment in history[; …] climate change threatens not just “the environment” but civilization itself.

Now, to be fair to Folger, he is hardly the only “scientist” to have had a Hitler-themed meltdown over thermometer readings in Queen Maud Land. We are fallen creatures, and we all let our passions get the better of us from time to time. Scientists are people too, and when they get caught rigging the deck so that every card comes up the Ace of Hockey Sticks, they are apt to lash out at the whistleblowers just like anyone else. If anything, in his extremism Folger is simply following in the footsteps of his fellow “earth scientists.” Like Jacques Cousteau, for instance, who once opined that “world population must be stabilized and to do that we must eliminate 350,000 people per day.”

But there is much more to Folger’s brand of meteorological trolling than there might first appear. For example, there is the revealing research of William N. Butos and Thomas J. McQuade, whose 2015 paper on boom-and-bust cycles in the global warming industry shows the deep intertwinings of “scientific” research and the political economy. From the mid 1990s, global warming became a fashionable topic. From that point, governments increasingly began funding global warming-themed research to the exclusion of other projects. The much-touted “consensus” on global warming turns out to be little more than an illusion created by preferential funding by Washington and foregrounding by the United Nations Intergovernmental Panel on Climate Change (IPCC). As Butos and McQuade point out, science is supposed to be about hypotheses and experiments, but scientists turn out to be as susceptible to chicanery as politicians are once money for research starts to change hands.

Would that that were all. For what lies beneath even this fen of politicking under the rent veil of scientific disinterest is a deep uneasiness, felt most acutely by scientists themselves, over the true nature of their “scientific” enterprise. Folger is driven to accuse his critics of Nazism because he is afraid to confront their arguments head on. Why? Could it not be because of the epistemological bankruptcy of what passes as science?

Now, before the QJAE offices are deluged with hate mail, let me state that I am not a flat earther. I fully accept that pterodactyls and diplodocuses and trilobites were real, that the universe is billions of years old, that the earth goes around the sun, and that electricity is electrons, not voodoo. I also agree that carbon dioxide, methane, water vapor, ozone, and other substances are greenhouse gases, and that reducing the concentration of these gases in the atmosphere will reduce the greenhouse effect that they cause. I watched Mr. Wizard, too, and I am not here to dispute whether force equals mass times acceleration, or whether energy equals matter times the speed of light squared.

No, the claim I make here is much more serious than the denial of these facts would be. I am saying, in short, that scientists today, with rare exceptions, do not do science at all. They do sociology. As Thomas Kuhn pointed out in The Structure of Scientific Revolutions (1962), for instance, science lurches and stalls through a series of paradigm shifts, with the behavior of scientists themselves being the real dark matter moving research and consensus. And Karl Popper, were he alive today, might be interested in applying the falsifiability criterion to wild speculations such as Hansen’s and Folger’s. The line between science and pseudoscience might lie much closer to the latter than many in the general public suspect.

I began this review by arguing that climate is complex. What we need, then, is a science capable of investigating it, and real scientists, for a change, who can rise above herd behavior and try to figure out exactly what is going on with all of those 1.09 x 1044 molecules in our atmosphere. What we do not need are any more quacks or snake oil salesmen who see science as a bandwagon and scientists as responsible for keeping everyone on board. On that note, Friedrich Hayek’s The Counter-Revolution of Science: Studies in the Abuse of Reason (1952) would be a good place to start for learning the key difference between science and scientism, or the ill-starred attempt to bend science towards less noble ends than truth. Perhaps the next edition of The Best American Science and Nature Writing will heed some of Hayek’s sound advice and feature much more writing of a scientific nature. But at the very least, let us hope that it has much fewer comparisons of honest dissenters—those who truly want empirical facts and dispassionate interpretations—to bookburning Nazis.

Published:1/25/2019 9:10:23 PM
[Markets] Big Tech Merging With Big Brother Is A Big Problem

Authored by David Samuels, Excerpted from,

A FRIEND OF mine, who runs a large television production company in the car-mad city of Los Angeles, recently noticed that his intern, an aspiring filmmaker from the People’s Republic of China, was walking to work.

WHEN HE OFFERED to arrange a swifter mode of transportation, she declined. When he asked why, she explained that she “needed the steps” on her Fitbit to sign in to her social media accounts. If she fell below the right number of steps, it would lower her health and fitness rating, which is part of her social rating, which is monitored by the government. A low social rating could prevent her from working or traveling abroad.

China’s social rating system, which was announced by the ruling Communist Party in 2014, will soon be a fact of life for many more Chinese.

By 2020, if the Party’s plan holds, every footstep, keystroke, like, dislike, social media contact, and posting tracked by the state will affect one’s social rating.

Personal “creditworthiness” or “trustworthiness” points will be used to reward and punish individuals and companies by granting or denying them access to public services like health care, travel, and employment, according to a plan released last year by the municipal government of Beijing. High-scoring individuals will find themselves in a “green channel,” where they can more easily access social opportunities, while those who take actions that are disapproved of by the state will be “unable to move a step.”

Big Brother is an emerging reality in China. Yet in the West, at least, the threat of government surveillance systems being integrated with the existing corporate surveillance capacities of big-data companies like Facebook, Google, Microsoft, and Amazon into one gigantic all-seeing eye appears to trouble very few people—even as countries like Venezuela have been quick to copy the Chinese model.

Still, it can’t happen here, right? We are iPhone owners and Amazon Prime members, not vassals of a one-party state. We are canny consumers who know that Facebook is tracking our interactions and Google is selling us stuff.

Yet it seems to me there is little reason to imagine that the people who run large technology companies have any vested interest in allowing pre-digital folkways to interfere with their 21st-century engineering and business models, any more than 19th-century robber barons showed any particular regard for laws or people that got in the way of their railroads and steel trusts.

Nor is there much reason to imagine that the technologists who run our giant consumer-data monopolies have any better idea of the future they're building than the rest of us do.

Facebook, Google, and other big-data monopolists already hoover up behavioral markers and cues on a scale and with a frequency that few of us understand. They then analyze, package, and sell that data to their partners.

A glimpse into the inner workings of the global trade in personal data was provided in early December in a 250-page report released by a British parliamentary committee that included hundreds of emails between high-level Facebook executives. Among other things, it showed how the company engineered sneaky ways to obtain continually updated SMS and call data from Android phones. In response, Facebook claimed that users must "opt-in" for the company to gain access to their texts and calls.

The machines and systems that the techno-monopolists have built are changing us faster than they or we understand. The scale of this change is so vast and systemic that we simple humans can’t do the math—perhaps in part because of the way that incessant smartphone use has affected our ability to pay attention to anything longer than 140 or 280 characters.

As the idea of a “right to privacy,” for example, starts to seem hopelessly old-fashioned and impractical in the face of ever-more-invasive data systems—whose eyes and ears, i.e., our smartphones, follow us everywhere—so has our belief that other individual rights, like freedom of speech, are somehow sacred.

Being wired together with billions of other humans in vast networks mediated by thinking machines is not an experience that humans have enjoyed before. The best guides we have to this emerging reality may be failed 20th-century totalitarian experiments and science fiction. More on that a little later.

The speed at which individual-rights-and-privacy-based social arrangements collapse is likely to depend on how fast Big Tech and the American national security apparatus consummate a relationship that has been growing ever closer for the past decade. While US surveillance agencies do not have regular real-time access to the gigantic amounts of data collected by the likes of Google, Facebook, and Amazon—as far as we know, anyway—there is both anecdotal and hard evidence to suggest that the once-distant planets of consumer Big Tech and American surveillance agencies are fast merging into a single corporate-bureaucratic life-world, whose potential for tracking, sorting, gas-lighting, manipulating, and censoring citizens may result in a softer version of China’s Big Brother.

These troubling trends are accelerating in part because Big Tech is increasingly beholden to Washington, which has little incentive to kill the golden goose that is filling its tax and political coffers. One of the leading corporate spenders on lobbying services in Washington, DC, in 2017 was Google’s parent company, Alphabet, which, according to the Center for Responsive Politics, spent more than $18 million. Lobbying Congress and government helps tech companies like Google win large government contracts. Perhaps more importantly, it serves as a shield against attempts to regulate their wildly lucrative businesses.

If anything, measuring the flood of tech dollars pouring into Washington, DC, law firms, lobbying outfits, and think tanks radically understates Big Tech’s influence inside the Beltway. By buying The Washington Post, Amazon’s Jeff Bezos took direct control of Washington’s hometown newspaper. In locating one of Amazon’s two new headquarters in nearby Northern Virginia, Bezos made the company a major employer in the area—with 25,000 jobs to offer.

Who will get those jobs? Last year, Amazon Web Services announced the opening of the new AWS Secret Region, the result of a 10-year, $600 million contract the company won from the CIA in 2014. This made Amazon the sole provider of cloud services across “the full range of data classifications, including Unclassified, Sensitive, Secret, and Top Secret,” according to an Amazon corporate press release.

Once the CIA’s Amazon-administered self-contained servers were up and running, the NSA was quick to follow suit, announcing its own integrated big-data project. Last year the agency moved most of its data into a new classified computing environment known as the Intelligence Community GovCloud, an integrated “big data fusion environment,” as the news site NextGov described it, that allows government analysts to “connect the dots” across all available data sources, whether classified or not.

The creation of IC GovCloud should send a chill up the spine of anyone who understands how powerful these systems can be and how inherently resistant they are to traditional forms of oversight, whose own track record can be charitably described as poor.

Amazon’s IC GovCloud was quickly countered by Microsoft’s secure version of its Azure Government cloud service, tailored for the use of 17 US intelligence agencies. Amazon and Microsoft are both expected to be major bidders for the Pentagon’s secure cloud system, the Joint Enterprise Defense Initiative—JEDI—a winner-take-all contract that will likely be worth at least $10 billion.

With so many pots of gold waiting at the end of the Washington, DC, rainbow, it seems like a small matter for tech companies to turn over our personal data—which legally speaking, is actually their data—to the spy agencies that guarantee their profits. This is the threat that is now emerging in plain sight. It is something we should reckon with now, before it’s too late.

IN FACT, BIG tech and the surveillance agencies are already partners...


THE FLIP SIDE of that paranoid vision of an evolving American surveillance state is the dream that the new systems of analyzing and distributing information may be forces for good, not evil. What if Google helped the CIA develop a system that helped filter out fake news, say, or a new Facebook algorithm helped the FBI identify potential school shooters before they massacred their classmates? If human beings are rational calculating engines, won’t filtering the information we receive lead to better decisions and make us better people?

Such fond hopes have a long history. Progressive techno-optimism goes back to the origins of the computer itself, in the correspondence between Charles Babbage, the 19th-century English inventor who imagined the “difference engine”—the first theoretical model for modern computers—and Ada Lovelace, the brilliant futurist and daughter of the English Romantic poet Lord Byron.

“The Analytical Engine,” Lovelace wrote, in one of her notes on Babbage’s work, “might act upon other things besides number, where objects found whose mutual fundamental relations could be expressed by those of the abstract science of operations, and which should be also susceptible of adaptations to the action of the operating notation and mechanism of the engine. Supposing, for instance, that the fundamental relations of pitched sounds in the science of harmony and of musical composition were susceptible of such expression and adaptations, the engine might compose elaborate and scientific pieces of music of any degree of complexity or extent.”

This is a pretty good description of the principles of digitizing sound; it also eerily prefigures and predicts the extent to which so much of our personal information, even stuff we perceive of as having distinct natural properties, could be converted to zeros and ones.

The Victorian techno-optimists who first envisioned the digital landscape we now inhabit imagined that thinking machines would be a force for harmony, rather than evil, capable of creating beautiful music and finding expressions for “fundamental relations” of any kind according to a strictly mathematical calculus.

The idea that social engineering could help produce a more efficient and equitable society was echoed by early 20th-century American progressives. Unlike 19th- and early 20th-century European socialists, who championed the organic strength of local communities, early 20th-century American progressives like Herbert Croly and John Dewey put their faith in the rise of a new class of educated scientist-priests who would re-engineer society from the top down according to a strict utilitarian calculus.

The lineage of these progressives—who are not identical with the “progressive” faction of today’s Democratic Party—runs from Woodrow Wilson to champions of New Deal bureaucracy like Franklin D. Roosevelt’s secretary of the interior, Harold Ickes. The 2008 election of Barack Obama, a well-credentialed technocrat who identified very strongly with the character of Spock from Star Trek, gave the old-time scientistic-progressive religion new currency on the left and ushered in a cozy relationship between the Democratic Party and billionaire techno-monopolists who had formerly fashioned themselves as government-skeptical libertarians.

“Amazon does great things for huge amounts of people,” Senate minority leader Chuck Schumer told Kara Swisher of Recode in a recent interview, in which he also made approving pronouncements about Facebook and Google. “I go to my small tech companies and say, ‘How does Google treat you in New York?’ A lot of them say, ‘Much more fairly than we would have thought.’”

Big Tech companies and executives are happy to return the favor by donating to their progressive friends, including Schumer.

But the cozy relationship between mainstream Democrats and Silicon Valley hit a large-sized bump in November 2016, when Donald Trump defeated Hillary Clinton—in part through his mastery of social media platforms like Twitter. Blaming the election result on Russian bots or secret deals with Putin betrayed a shock that what the left had regarded as their cultural property had been turned against them by a right-wing populist whose authoritarian leanings inspired fear and loathing among both the technocratic elite and the Democratic party base.

Yet in the right hands, progressives continued to muse, information monopolies might be powerful tools for re-wiring societies malformed by racism, sexism, and transphobia. Thinking machines can be taught to filter out bad information and socially negative thoughts. Good algorithms, as opposed to whatever Google and Facebook are currently using, could censor neo-Nazis, purveyors of hate speech, Russian bots, and transphobes while discouraging voters from electing more Trumps.

The crowdsourced wisdom of platforms like Twitter, powered by circles of mutually credentialing blue-checked “experts,” might mobilize a collective will to justice, which could then be enforced on retrograde institutions and individuals. The result might be a better social order, or as data scientist Emily Gorcenski put it, “revolution.”

The dream of centralized control over monopolistic information providers can be put to more prosaic political uses, too—or so politicians confronted by a fractured and tumultuous digital media landscape must hope. In advance of next year’s elections for the European Parliament, which will take place in May, French President Emmanuel Macron signed a deal with Facebook in which officials of his government will meet regularly with Facebook executives to police “hate speech.”

The program, which will continue through the May elections, apparently did little to discourage fuel riots by the "gilets jaunes," which have set Paris and other French cities ablaze, even as a claim that a change in Facebook's local news algorithm was responsible for the rioting was quickly picked up by French media figures close to Macron.

At root, the utopian vision of AI-powered information monopolies programmed to advance the cause of social justice makes sense only when you imagine that humans and machines “think” in similar ways. Whether machines can “think,” or—to put it another way, whether people think like machines—is a question that has been hotly debated for the past five centuries. Those debates gave birth to modern liberal societies, whose foundational assumptions and guarantees are now being challenged by the rise of digital culture.


THE ORIGIN OF the utilitarian social calculus and its foundational account of thinking as a form of computation is social contract theory. Not coincidentally, these accounts evolved during the last time western societies were massively impacted by a revolution in communications technology, namely the introduction of the printing press, which brought both the text of the Bible and the writings of small circles of Italian and German humanists to all of Europe. The spread of printing technologies was accompanied by the proliferation of the simple hand mirror, which allowed even ordinary individuals to gaze at a “true reflection” of their own faces, in much the same way that we use iPhones to take selfies.

Nearly every area of human imagination and endeavor—from science to literature to painting and sculpture to architecture—was radically transformed by the double-meteor-like impact of the printing press and the hand mirror, which together helped give rise to scientific discoveries, great works of art, and new political ideas that continue to shape the way we think, live, and work.

The printing press fractured the monopoly on worldly and spiritual knowledge long held by the Roman Catholic Church, bringing the discoveries of Erasmus and the polemics of Martin Luther to a broad audience and fueling the Protestant Reformation, which held that ordinary believers—individuals, who could read their own Bibles and see their own faces in their own mirrors—might have unmediated contact with God. What was once the province of the few became available to the many, and the old social order that had governed the lives of Europe for the better part of a millennium was largely demolished.

In England, the broad diffusion of printing presses and mirrors led to the bloody and ultimately failed anti-monarchical revolution led by Oliver Cromwell. The Thirty Years’ War, fought between Catholic and Protestant believers and hired armies in Central and Eastern Europe, remains the single most destructive conflict, on a per capita basis, in European history, including the First and Second World Wars.

The information revolution spurred by the advent of digital technologies may turn out to be even more powerful than the Gutenberg revolution; it is also likely to be bloody. Our inability to wrap our minds around a sweeping revolution in the way that information is gathered, analyzed, used, and controlled should scare us. It is in this context that both right- and left-leaning factions of the American elite appear to accept the merger of the US military and intelligence complex with Big Tech as a good thing, even as centralized control over information creates new vulnerabilities for rivals to exploit.

The attempt to subject the American information space to some form of top-down, public-private control was in turn made possible—and perhaps, in the minds of many on both the right and the left, necessary—by the collapse of the 20th-century American institutional press. Only two decades ago, the social and political power of the institutional press was still so great that it was often called “the Fourth Estate”—a meaningful check on the power of government. The term is rarely used anymore, because the monopoly over the printed and spoken word that gave the press its power is now gone.

Why? Because in an age in which every smartphone user has a printing press in their pocket, there is little premium in owning an actual, physical printing press. As a result, the value of “legacy” print brands has plummeted. Where the printed word was once a rare commodity, relative to the sum total of all the words that were written in manuscript form by someone, today nearly all the words that are being written anywhere are available somewhere online. What’s rare, and therefore worth money, are not printed words but fractions of our attention.

The American media market today is dominated by Google and Facebook, large platforms that together control the attention of readers and therefore the lion’s share of online advertising. That’s why Facebook, probably the world’s premier publisher of fake news, was recently worth $426 billion, and Newsweek changed hands in 2010 for $1, and why many once-familiar magazine titles no longer exist in print at all.

The operative, functional difference between today’s media and the American media of two decades ago is not the difference between old-school New York Times reporters and new-media bloggers who churn out opinionated “takes” from their desks. It is the difference between all of those media people, old and new, and programmers and executives at companies like Google and Facebook. A set of key social functions—communicating ideas and information—has been transferred from one set of companies, operating under one set of laws and values, to another, much more powerful set of companies, which operate under different laws and understand themselves in a different way.

According to Section 230 of the Communications Decency Act, information service providers are protected from expensive libel lawsuits and other forms of risk that publishers face. Those protections allowed Google and Facebook to build their businesses at the expense of “old media” publishers, which in turn now find it increasingly difficult to pay for original reporting and writing.

The media once actively promoted and amplified stories that a plurality or majority of Americans could regard as “true.” That has now been replaced by the creation and amplification of extremes. The overwhelming ugliness of our public discourse is not accidental; it is a feature of the game, which is structured and run for the profit of billionaire monopolists, and which encourages addictive use.

The result has been the creation of a socially toxic vacuum at the heart of American democracy, from which information monopolists like Google and Facebook have sucked out all the profit, leaving their users ripe for top-down surveillance, manipulation, and control.

TODAY, THE PRINTING press and the mirror have combined in the iPhone and other personal devices, which are networked together. Ten years from now, thanks to AI, those networks, and the entities that control them—government agencies, private corporations, or a union of both—may take on a life of their own.

Perhaps the best way to foresee how this future may play out is to look back at how some of our most far-sighted science fiction writers have wrestled with the future that is now in front of us.


Yet even classic 20th-century dystopias like Aldous Huxley’s Brave New World or George Orwell’s 1984 tell us little about the dangers posed to free societies by the fusion of big data, social networks, consumer surveillance, and AI.

Perhaps we are reading the wrong books.

Instead of going back to Orwell for a sense of what a coming dystopia might look like, we might be better off reading We, which was written nearly a century ago by the Russian novelist Yevgeny Zamyatin. We is the diary of state mathematician D-503, whose experience of the highly disruptive emotion of love for I-330, a woman whose combination of black eyes, white skin, and black hair strike him as beautiful. This perception, which is also a feeling, draws him into a conspiracy against the centralized surveillance state.

The Only State, where We takes places, is ruled by a highly advanced mathematics of happiness, administered by a combination of programmers and machines. While love has been eliminated from the Only State as inherently discriminatory and unjust, sex has not. According to the Lex Sexualis, the government sex code, “Each number has a right towards every other number as a sex object.” Citizens, or numbers, are issued ration books of pink sex tickets. Once both numbers sign the ticket, they are permitted to spend a “sex hour” together and lower the shades in their glass apartments.

Zamyatin was prescient in imagining the operation and also the underlying moral and intellectual foundations of an advanced modern surveillance state run by engineers. And if 1984 explored the opposition between happiness and freedom, Zamyatin introduced a third term into the equation, which he believed to be more revolutionary and also more inherently human: beauty. The subjective human perception of beauty, Zamyatin argued, along lines that Liebniz and Searle might approve of, is innately human, and therefore not ultimately reconcilable with the logic of machines or with any utilitarian calculus of justice.


Against a centralized surveillance state that imposes a motionless and false order and an illusory happiness in the name of a utilitarian calculus of “justice,” Basile concludes, Zamyatin envisages a different utopia: “In fact, only within the ‘here and now’ of beauty may the equation of happiness be considered fully verified.” Human beings will never stop seeking beauty, Zamyatin insists, because they are human. They will reject and destroy any attempt to reorder their desires according to the logic of machines.

A national or global surveillance network that uses beneficent algorithms to reshape human thoughts and actions in ways that elites believe to be just or beneficial to all mankind is hardly the road to a new Eden. It’s the road to a prison camp. The question now—as in previous such moments—is how long it will take before we admit that the riddle of human existence is not the answer to an equation. It is something that we must each make for ourselves, continually, out of our own materials, in moments whose permanence is only a dream.

Read the full, ominous report here...

Published:1/24/2019 10:31:19 PM
[Markets] The Oracle Of Boston Speaks... And We Should Listen Closely

Via Seabreeze Partners' Doug Kass (@DougKass),

Every trader and investor (whether fundamentalist or technician) should read today's opener.

"Civilization is hideously fragile... there's not much between us and the horrors underneath, just about a coat of varnish."

- Charles Percy Snow, British Novelist and Chemist

"All models are wrong, but some are useful."

- George E.P. Box, British Statistician

"To be absolutely certain about something, one must know everything or nothing about it."

-Henry Kissinger, Former U.S. Secretary of State

"But who shall dare to measure loss and gain in this wise? Defeat may be victory in disguise; The lowest ebb is the turn of the tide."

- "Loss and Gain," Henry Wadsworth Longfellow, American Poet

"You may find a buyer at a higher price - a greater fool - or you may not, in which case you yourself are the greater fool."

- Seth Klarman

I have admired The Oracle of Boston, Seth Klarman, for decades. To me, he is one of the top five investors in modern investment history - in the class of Warren Buffett and Stanley Druckenmiller.

Klarman wrote one of the best books on investing - Margin of SafetyThe book is so valuable and rare that a new one sells for almost $1,500 today and used copies for about $1,000.

One of my favorite parts of his book (that I have quoted extensively over the years) focuses on what he calls, Trading Sardines and Eating Sardines: The Essence of Speculation, in which the author discusses the importance of doing your homework and avoiding speculation:

"There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, "You don't understand. These are not eating sardines, they are trading sardines."'

Like sardine traders, some market participants are attracted to speculation, never bothering to taste the sardines they are trading (or to do the fundamental analysis). Speculation, you see, offers the prospect of instant gratification. Many ask, why get rich slowly if you can get rich quickly?

Herd following and crowd behavior is a basic condition of speculation. There is comfort in consensus and playing along - those in the majority gain confidence from their very sizable numbers. I have repeatedly observed that today, many, knowingly or unknowingly, have become speculators. They may not even realize that they are playing a "greater-fool game," buying overvalued securities and expecting-hoping-to find someone, a greater fool, to buy from them at a still higher price. (See Klarman's quote at the beginning of today's missive).

There is a great allure (and tendency) to treating stocks as pieces of paper that you frequently trade. Viewing stocks this way requires neither rigorous analysis nor knowledge of the underlying businesses. Indeed the act of trading (in and of itself) is exciting and can be lucrative, as long as the market is rising.

By contrast, value investors pay attention to financial and fundamental reality in making their investment decisions - speculators have no such tether.

Seth Klarman's January, 2019 Letter to Investors

Seth Klarman's letter to his Limited Partners has received a lot of chatter in Davos and over the business news airwaves this week.

I found many of his concerns similar to the ones that I have outlined in my Diary over the last 12 months.

What follows are Klarman's 15 major areas of investment concern - I promise that you will find many of them familiar:

1. The Bull Market in Complacency

"Last year once again demonstrated that markets can be confoundingly fickle. Well- known conditions and widely anticipated events, such as Federal Reserve rate hikes, ongoing trade disputes, and the unsettling behavior of an erratic president, were shrugged off by the financial markets one day and driving markets down the next. Is there a cumulative impact, where no one thing matters until the collective weight of them starts to? Is the market simply myopic, whereby it ignores signs of trouble until they become more immediate and it can ignore them no longer? It's always hard to know why the market does what it does. That's part of the ever-interesting challenge we face in traversing the twists and turns of fluctuating prices and evolving fundamentals. On any given day, the sheer number of players, behaviors, economic factors, and business developments defy anyone's ability to fully grasp what is going on and why. That's why we develop and follow a game plan that does not purport to tell us what to do moment by moment, but rather is intended to help us successfully navigate the most challenging tumult. This is the essence of value investing.

2. Enter the New Regime of Volatility

"The major U.S. stock market indices steadily gained ground for the first three quarters of 2018, before plunging in a highly volatile fourth quarter. Early in the year, those who had bet that the market would remain on a steady uptrend were briefly caught flat-footed when volatility surged higher. The most jarring example was the near complete wipeout and sudden liquidation in February of the exchange-traded note XIV, a retail product used by many traders to short volatility. (The name XIV is the reverse of VIX, the common measure of market volatility.) Since its inception in late 2010, this instrument had appreciated 14-fold into early 2018, and then it was shockingly wound down within a month after it had lost 95% of its value. By mid-April, however, volatility abated and the stock market resumed its seemingly habitual march higher...

Waves of selling swamped equity markets in the fourth quarter, as volatility surged. While in 2017 the U.S. equity market did not experience a single daily fluctuation up or down of as much as 3%, in 2018 there were 15 such days, 10 in the fourth quarter alone."

3. The Changing Market Structure Poses Sizable Risks

"Generally rising share prices over the ensuing months more or less moved in tandem with higher corporate earnings, the result of massive fiscal stimulus, large corporate tax cuts, and historically low - albeit generally rising - interest rates. Cash continued to move into indexing strategies and out of the hands of active managers, with U.S. index fund holdings, after doubling from 2002 to 2009, nearly doubling again by 2018 (with important ramifications for market liquidity and corporate governance). Market pundits calculated that valuation multiples, with earnings assessed on a cyclically-adjusted basis, had reached the second-highest level ever (though reported earnings were more in line with historical averages). The economic expansion, clocking in at nine-and-a-half years, neared the longest on record. As usual in a bull market, the warm feelings generated by rising prices had the effect of overcoming any sense of looming danger in the hearts and minds of most investors. And as in all bull markets, skeptics lost both credibility and assets to manage. Many investors had evidently adopted the usual dubious emergency plan: Get out when the market starts to fall. In August, the bull market became the longest on record - at nearly 3,500 days and counting. It felt like forever...

As for algorithmic leverage, a growing amount of capital is today managed using model- based technologies to pick investments, many of which attempt to improve over time using artificial intelligence capabilities. (The Wall Street Journal recently estimated that 85% of all stock trading is now controlled by machines, models, or passive investing formulas.) The amount of capital invested in this way has grown massively since the last bear market, and no one can know how the various trading algorithms might respond to (or potentially even trigger) the next major selloff, especially after virtually an entire decade with low volatility. We simply cannot know how those algorithms might respond to new and unexpected conditions.

4. We Saw Who Was Swimming Naked In 4Q2018 and The Risks Associated With "The Negative Wealth Effect"

"In the fourth quarter, the market increasingly looked like what our retired Partner Brian Spector once referred to as a "tide market." When the tide goes out, it takes everything with it, and an investor must adjust in real time to the rapidly changing prices while considering the possibility of a deterioration in fundamentals. Sometimes, prices decline unrelated to those fundamentals. But at other times, they are anticipatory of fundamental erosion and can even be reflexively linked: lower share prices can adversely impact the economy in a sort of "reverse wealth effect;" investors feel poorer when the value of their portfolio falls, so they consume less. In addition, corporate management may view the share price decline as a potential increase in their cost of equity capital, causing them to delay capital expenditures or expansion plans, again reflexively weakening the broader economy. Yet as the market sold off this fall, there were mixed indicators as to whether the U.S. economy was actually cooling. "Hard data," such as holiday retail sales (November 1 - December 24), posted a very healthy 5% increase over the year before, even as "soft" survey and sentiment data such as consumer confidence fell from the October highs."

5. Given the Reduced Credit Quality and Explosion in Quantity - Leveraged Loans and Private Equity May Be The Most Vulnerable Asset Classes Now

"The most over-extended asset class in 2018 may well have been private equity. With public equity markets expensive and yield still scarce, many investors have lately concluded that private equity is the one place where double-digit returns may be achievable. Private equity fundraising has set records, with estimates of more than a trillion dollars in capital available to be put to work. The multiples of leverage extended in private equity transactions is approaching previous peaks, as are valuations of such transactions, while the laxity of financing terms is unprecedented. Private equity investors have had the wind at their backs for a decade, the result of a steadily growing economy and sustained low interest rates, conditions that will almost certainly not prevail forever...

Driven by such a protracted period of near-zero interest rates, investors have stampeded into anything - bonds, loans, REITs - offering a current return, leading to a degradation in the quality of outstanding credit. The proportion of U.S. non-financial corporate investment grade bonds rated BBB - the lowest investment grade rating - has increased to 58% today compared to 48% in 2011, even as the total investment grade market has increased from roughly $2.2 trillion in 2007 to $3.8 trillion today. The proportion of total non-investment grade issuance rated B- or below is nearly 25% of the overall high yield market. And high yield plus BBB-rated bonds comprise 68% of the total U.S. corporate bond universe.

The leveraged loan market, a critical funding source for lower quality issuers, has been on fire, with a record $788 billion of leveraged loans issued globally in 2017, and just below that pace of issuance in 2018. Almost 80% of the 2018 vintage was issued as "covenant-lite" - compared to about 30% in 2007. Record annual volumes of low grade bond issuance - including a 130% increase in the U.S. CLO market since 2008 - has surely created a vast future supply of distressed debt, but any calamity has seemed off in the distance. By year-end, however, it appeared to draw closer. Bank trading desks have pulled back from risk-taking, resulting in lower liquidity for bondholders and the possibility of greater price volatility. Late in the year, corporate credit spreads started to widen. The credit markets were hard hit in November, with yields on U.S. corporate debt reaching an 8 1/2-year high of 4.38%. Yields on the debt of fallen icon GE at one point hit 6.4%, from under 3% earlier in the year.

By the end of the year, cracks had also started to appear in the leveraged loan market, and investors pulled a record $3.3 billion out of U.S. loan funds in one week in mid-December. Junk bond fund outflows also set a record in 2018. Higher interest rates will significantly burden today's highly leveraged issuers, and the challenges will be made more severe when the next economic downturn hits."

6. The Pivot of Monetary Policy is A Hurdle To The Equity Market

"In 2018, the Federal Reserve raised interest rates four times as it sought to get to the "neutral rate," but late in the year it signaled it would slow the pace of rate hikes in 2019. The Fed continued the process of reducing its bloated $4.5 trillion balance sheet. In Europe, interest rates remain at historically low levels, with over $4.7 trillion of sovereigns still offering negative rates as of year-end, but the European Central Bank announced the completion of its almost four- year long program of net asset purchases in December. Even though everyone knew it was coming, the end of low rate policies and planned reduction of central bank balance sheets is far from a riskless endeavor, since these policies are unprecedented in scale, and such an unwind has never before been attempted. There should be concern about symmetry: If lowering interest rates coupled with central bank asset purchases stimulated economic expansion and a bull market in stocks and bonds, will raising rates drive a reversal? If the market's reaction to the Fed's December rate hike is any indication, the path to normalization of interest rates and of central bank balance sheets is going to be rocky indeed."

7. The Three Decade Bull Market in Bonds May Be Over

"There are also concerns that the lengthy 36-year bond bull market is nearing its end. At one point last year, rates on U.S. Treasury 10-year bonds had more than doubled from their 2016 lows. Given the length of the bond buying spree, many of today's market participants have never experienced a bear market in bonds. The riskiness of their exposures may surprise them. And because marketplace conditions have evolved greatly over the last three decades, when we do eventually enter a fixed income bear market, neither historical correlations nor prior experience are likely to provide much guidance for how to successfully navigate this treacherous terrain."

8. Debt Loads are Untenable

"Because it is always easier for politicians to borrow rather than pursue a responsible fiscal course, there is a propensity for sovereign debts to grow over time, not only in absolute terms, but also as a percentage of GDP. Since the 2008 financial crisis, aggregate global sovereign debt has nearly doubled, and most major sovereign debtors have experienced a significant increase in their debt-to-GDP ratios. In the U.S., this ratio actually had declined for many years after wartime spending started to wind down in 1945, but then it began ramping up significantly between 1980 and today. The ratio of U.S. government debt to GDP, for example, has grown from over 74% of GDP in 2008 to 105% in 2017. For the U.K., the ratio has surged from 50% to 88%. For France, 69% to 98%. For Italy, from 102% to 132%. For Spain, from 39% to 98%. Canada has gone from 68% to 90%. China from 27% to 47%. The seeds of the next major financial crisis (or the one after that) may well be found in today's sovereign debt levels."

9. The U.S. Deficit and our National Debt Are Being (Wrongly) Ignored By the Markets

"In 2018, the U.S. budget deficit soared to nearly $900 billion and could top one trillion dollars in 2019, a sorry consequence of the 2017 tax cuts that were funded with borrowed money. Growing deficits have ballooned the national debt, which by year-end hit a record $21.9 trillion (with potentially multiples of that in off-the-books entitlement promises), this while debt costs are suppressed by low interest rate policies. Approving massive tax cuts and generating the resultant huge deficits so late in the economic cycle while unemployment is so low seems particularly irresponsible, as there is little room for new fiscal stimulus if and when the economy softens. While the U.S. dollar maintains its de facto reserve currency status, this is a privilege ("America's exorbitant privilege," it was once called) never to be taken for granted. The nation's fiscal irresponsibility jeopardizes this status, which has allowed Americans to live beyond our means for a long time without paying any price. There is no way to know how much debt is too much, but America will inevitably reach an inflection point whereupon a suddenly more skeptical debt market will refuse to continue to lend to us at rates we can afford. By the time such a crisis hits, it will likely be too late to get our house in order.

Moreover, we have been increasingly worried that the U.S. financial markets are very highly leveraged not only with copious direct borrowings but also in less obvious ways - psychologically, algorithmically, and structurally - with investors vulnerable to exactly the same sort of urgent pressures that actual portfolio leverage can give rise to. As with a margin call, those pressures can include an intensely short-term orientation, extreme loss resistance, and an inability to stand apart from a panicky crowd."

10. Diminished Liquidity

"Meanwhile, many stocks have become less liquid and ownership has become more concentrated; we have previously noted that index funds hold a growing fraction of their shares. Because of limited liquidity and the potential absence of index buyers or even advent of index sellers, a bear market could have a surprisingly severe impact on small cap companies, something we started to see more frequently in the fourth quarter. As for shares not incorporated in major indices or held by ETFs, some days they seem lucky to catch any bid at all."

11. Global Economic Growth Is Moderating

"As 2018 progressed, storm clouds started to gather over the global economy. While the year began with IMF proclamations of "synchronized global growth," by the end of the year that institution was downgrading its 2018 and 2019 GDP forecasts and warning of challenges ahead. In retrospect, 2018 may be more appropriately categorized as a year of synchronized global disappointment. While some of the weaker emerging markets were the first to stumble (e.g., Argentina and Turkey), others soon followed. Japan's economy, after eight consecutive quarters of growth (their lengthiest expansion in 28 years), contracted in the first quarter and again in the third. Europe experienced its slowest growth in over four years, with even Germany cooling. China continues to be a cause of concern, with investors focusing on the numerous deteriorating data points while trying to decipher the meaning of Communist Party pronouncements. Time will tell if the U.S. economy, which has managed to stay strong thus far despite the turmoil abroad, can remain decoupled. One thing does seem certain - the world is entering 2019 with more economic question marks than were present a year earlier."

12. The End of the Post World War II Order Spells Trouble Ahead

"For the first three quarters of 2018, the markets more or less shrugged off a steady barrage of troubling economic and political developments, including escalating White House- driven trade feuds with, first Mexico and Canada, and then China, leading to the mutual imposition of higher tariffs. Turkey was forced to substantially devalue their currency as a result of twin deficits (trade and government) that led to an overheated economy. Argentina also devalued, the result of a widespread drought that impacted agricultural production, which triggered stagflation and a decline in dollar reserves. The U.K. continued to stumble toward some form of Brexit. Prime Minister Theresa May's attempt to negotiate Britain's withdrawal from the Eurozone has proved to be extremely challenging, and perhaps even fatal for her politically, while many investors are holding back from commitments to the U.K. until the details are sorted out. In Italy, a coalition government of the Northern League and Five Star took power and promised tax cuts and an exit from the Eurozone, as well as a hardline anti-immigrant policy. While they have since moderated their language, the risk is heightened that Italy could soon face even deeper political and fiscal challenges.

As the post-World War II international order continued to erode, the markets ignored the longer-term implications of a more isolated America, a world increasingly adrift, and global leadership up for grabs. The post-war order relied on philosophical alignment among democratic societies, investment in international institutions, and effective diplomacy to manage competing interests across nations. American hegemony played a key role in supporting this order and the unprecedented peace and prosperity that had generally prevailed since 1945. Recently, foreign affairs pundit Walter Russell Mead wryly observed that the old system was neither liberal nor international nor an order, yet he added that its absence will surely be felt if it disintegrates."

13. The Screwflation of the Middle Class Will Likely Have Adverse Economic and Investment Ramifications

"Social frictions remain a challenge for democracies around the world, and we wonder when investors might take more notice of this. The recent "yellow vest" marches in France, which subsequently spread to Belgium, Holland, and Canada, began as a petition against fuel tax hikes, and grew through social media into a mass protest movement led by suburban commuters, small business owners, and truck drivers. The demonstrations, which appear to have broken out spontaneously throughout the country, became widespread and even violent. While the French government is clearly concerned - in December, it reversed the planned tax increases while announcing a higher minimum wage - the financial markets have taken the unrest largely in stride, as the French 10-year note at year-end yielded a meager 70 basis points...

Social and economic advancement in America today seems increasingly dependent on demography and geography. The economic advantages enjoyed by college graduates continues to grow. Unsurprisingly, income growth in most major metropolitan areas surpasses gains in rural areas of the country. Economic inequality continued to worsen in 2018, and for many, real wages have not increased in decades. It seems clear that economic anxiety contributed to the election of Donald Trump in 2016.

The divide between Americans has been exacerbated by the echo chambers of modern- day media and the internet. Many have written of how, in only about four decades, an America of three broadcast networks has become an America of hundreds of cable channels. A few decades ago, we had less connectivity but more connection. David Brooks and others write regularly about the challenges of increased loneliness and isolation. A person today can have a thousand Facebook friends - and few, if any, actual friends."

14. The Behavior and Policy of President Trump May Weigh on the Markets

"In the U.S., meanwhile, investors truly have no idea how to react to the steady dose of presidential tweets seasoned with presidential pique. America's body politic remained inflamed in 2018. The President regularly stirred up his base with campaign-style rallies in which he endlessly warned, without evidence, of rampant voter fraud while stoking fears over the looming arrival of a caravan of Central American refugees. Claiming, also without evidence, that criminals and possible terrorists made up a significant component of this caravan, Trump sent troops to reinforce the border. Yet in the days and weeks following the midterm elections, the caravan disappeared entirely from his rhetoric, its purpose apparently served. Immigration remains a hot button issue, and whether or not to "build the wall" was the proximate issue in the prolonged partial government shutdown that started in late December.

The November midterm elections became, in many ways, a referendum on the President. The result, with record turnout, was that blue states got bluer and red states even redder, as Republicans tightened their grip on the Senate while Democrats rolled to a net gain of 40 House seats and control of that body, winning by the largest midterm popular vote margin in history. Democrats did particularly well among women, minority groups, and suburbanites, groups which have largely found Trump's policies and tone distasteful. In December, a bipartisan group of 44 former Senators signed an editorial begging today's Senate to put country ahead of party. Yet the vast majority of Senate Republicans continued to stand resolutely by the President, despite mounting indications that special counsel Robert Mueller and other investigators are delivering not only a growing number of indictments and guilty pleas but are also uncovering damaging information regarding Donald Trump's Presidential campaign and business interests. The chaos and consequent uncertainty emanating from Washington D.C. will likely only intensify as we approach the 2020 election.

The bottom line is that leadership matters. The growing turmoil in Washington and other world capitals is taking a toll on the country. As The New York Times columnist Bret Stephens recently observed, "the problem with Trump isn't that he's an empty vessel. It's that he's a malignant one." Amid all this turmoil, should investors simply hunker down and keep their focus on markets? That might be a challenge. By way of illustration, on December 18, on the FedEx earnings call, CEO Frederick Smith noted that "most of the issues that we're dealing with today are induced by bad political choices, I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they're all things that have created macroeconomic slowdowns.

These days, American do not seem to agree on much of anything. Some of it is today's politics: "Deep state" or dedicated civil servants? Witch hunt" or legitimate investigation into crimes? "Fake news" or free press? "Alternative facts" or facts? Accomplished adversary or "lock her up?" And some of it goes beyond politics into the realms of scientific inquiry and American values. Climate change or "climate hoax?" Refugees seeking sanctuary or "caravan of foreign invaders?"

Does this matter? We think it does. It's hard for our leaders to guide us when we don't agree on our values or even on how we decide what is true. Worse, our enemies, including but not limited to Russia's autocratic government, are using social media and internet postings to confuse us and divide us further. They know which hot buttons to push. Moreover, our willful disbelief of facts, truth, and science increases the chance that we will fail to recognize or take seriously growing threats. In 1993, Senator Daniel Patrick Moynihan, who famously said that "everyone is entitled to his own opinion, but not to his own facts," observed that America was "defining deviancy down." His point was that behavior that had once been seen as deviant was now considered acceptable. To paraphrase Moynihan, today we may instead be defining reality down.

This post-truth moment is quite dangerous. Imagine an incident that threatens national security. Will Americans see eye-to-eye on the seriousness of the threat? If our leaders are truth-challenged, will Americans believe the official explanation of the threat and the wisdom of the proposed response? Should they?

Jonathan Rauch, an American journalist and author, has written about a Constitution of Knowledge, an objective reality of facts and truth that he believes is now under attack from President Donald Trump. The Washington Post reports a troubling escalation in the rate of Presidential lies, from an average of around six per day in 2017 to 15 per day in 2018. Former C.I.A. Director Michael Hayden recently observed that "We have in the past argued over the values to be applied to objective reality ... but never the existence or relevance of objective reality itself." Nebraska Senator Ben Sasse notes, "we have a risk of getting to a place where we don't have shared public facts. A republic will not work if we don't have shared facts.""

15. Deep Partisanship and an Anti Democratic Policy (and Mindset) Could Undermine Investing in America

"American democracy operates not just from a system of rules but also norms. Norms have provided historically valuable guardrails for proper behavior that protect the integrity of the system from possible misdeeds by the people in it. The critical importance of norms is easily dismissed, especially by those willing to pursue power and self-interest ahead of all other considerations. But norms reflect a core cultural aspiration of fairness, civility, and community that is more socially powerful, and broader in reach, than any statute or regulation. There can be a certain reckless power in violating norms, since the sanctions for doing so are neither immediate nor obvious. But the consequence is a dangerous erosion of our greatest bonds of community.

Rachel Kleinfeld, senior fellow in the Democracy, Conflict, and Governance Program at the Carnegie Endowment for International Peace, sees the breakdown of democratic norms in post-election developments. She notes, "Democracy requires citizens' votes to be counted fairly, and those votes must determine who wields power ... in Wisconsin, the Republican legislature has stripped the incoming Democratic governor of capabilities that voters assumed their leader would have when they voted." For the great majority of American history, Supreme Court nominees needed 60 votes in the Senate for confirmation; otherwise, a filibuster could hold up a nomination indefinitely. But in 2017, the Republicans exercised the "nuclear option," changing the required vote to a simple majority. This eliminated the need for the President to identify mutually agreeable centrist nominees and instead increased the politicization of the Court.

We would argue vehemently that democracy, and the liberties and protections it provides, is not just of importance to individual citizens, but also to businesses and markets. In a democracy, businesses have the benefit of equal treatment under the law, including unbiased regulation. Yet these days, the President often singles out for criticism enterprises he finds personally objectionable or executives who disagree with him politically. These anti-democratic tendencies are extremely dangerous, particularly as the Congressional Republicans show no interest in reprimanding him, even though his behavior violates a core principle of the conservatism they claim to espouse.

We would also argue that social cohesion is essential for those who have capital to invest. Businesses need a long-term horizon to plan, and social unrest makes planning more difficult. It can't be business as usual amidst constant protests, riots, shutdowns, and escalating social tensions. It is not hard to imagine worsening social unrest among a generation that is falling behind economically and feels betrayed by a massive national debt that was incurred without any obvious benefit to them. If things get bad enough, we could see taxes once again raised to confiscatory levels. We should all be rooting for (and acting to support) social cohesion and a renewal of the American dream.

David Moss, a Harvard Business School professor, teaches a course on democracy and has found that over much of American history, partisanship was cutthroat and political divides were wide and bitter. Yes, people said horrible things about each other. But when critically important issues were being decided, even while participants in the debate were intensely focused on winning, they were also focused on how their actions might affect democracy over the long run. More recently, it seems as though politics has been transformed into an intense focus on immediate victory, the system be damned. We have seen behavior in national and local politics where those in power changed the rules to the disadvantage of those out of power (or about to come into power) simply because they could. As stewards of your capital, we see these ominous and widening social divides as risks to the economy and even to the system. Politicians have been putting self-interest and party ahead of country. Absent facts, truth, and science, we expect poor governmental decisions to become the rule and not the exception. There is no hedge to such risks, other than to work together to reverse course, heal the divides, and strengthen American democracy."

Published:1/24/2019 10:50:00 AM
[Markets] UK Bank Crashes To Record Low After "Misinterpreting" Risk Rules

Shares in one of the UK's so-called challenger banks have collapsed 35% today to a new record low after being forced to admit that it failed to have enough capital backing some commercial loans because of what it calls an accounting error.

Bloomberg reports that Metro Bank Plc fell the most since going public after applying an incorrectly-low risk-weighting to parts of its loan book, with the British lender’s chief saying he doesn’t know how long the mortgages in question had been wrongly classified.

The bank, which has expanded rapidly to 66 branches since launching in 2010, also issued a profit warning, saying its full-year profits and capital levels would be weaker than expected after a “soft” end to the year with CEO Craig Donaldson blaming the warning on intense competition in the mortgage market.

"It was a misinterpretation of the rules,” and the misclassification dates back through 2018 at least, Craig Donaldson, Metro Bank’s chief executive officer, said by phone.

“We are putting it right,” he said, calling it an “isolated incident” that didn’t affect the bank’s earnings. He said the bank has been in communication with Britain’s Prudential Regulation Authority.

Bloomberg explains that the bank previously put a 50 percent risk weighting on its commercial mortgages, but said it has now increased this to the correct level of 100 percent, a spokesperson for the lender said. For buy-to-let mortgages, the portfolio had been held at a risk weighting of 35 percent, but this has also been increased to 100 percent.

However, this is not a total surprise to many, as The FT reports, investors have long been divided over the merits of Metro’s business model and its controversial chairman Vernon Hill. Mr Hill has been criticised for corporate governance issues including paying tens of millions of pounds to a company owned by his wife. But he has maintained the support of a loyal coterie of US-based investors, many of whom backed his previous venture Commerce Bancorp.

Nevertheless, Metro is down 35% today on massive volume - a new record low.

Gary Greenwood, analyst at Shore Capital, said:

“For a fast-growing business like Metro Bank, where capital constraints are a concern, to warn on both momentum and capital intensity is a real ‘no-no’. It is no surprise therefore that the shares are down so sharply.”

Challenger banks are small, recently-created retail banks in the United Kingdom that compete with the longer-established banks in the country, sometimes by specialising in areas underserved by the "big four" banks. The banks distinguish themselves from the historic banks by modern information technology practices, such as online-only operations, that avoid the costs and complexities of traditional banking. In case you were worried about whether Metro's "error" was more systemic, here are the rest of the 'challenger' banks... Aldermore, Atom Bank, Monzo, N26, OakNorth, Starling Bank, Tandem, Tesco Bank, and Virgin Money.

Among the beneficiaries of Metro Bank's exposure as a cheating bank was none other than Crispin Odey whose fund made about 19 million pounds ($25 million) Wednesday on its short position. As Bloomberg reports, the London-based asset manager increased its bet against the company as recently as Jan. 16 and has shorts worth about $75 million or 2.7 percent of the company’s shares, making it the biggest short-seller of the bank.

Odey’s firm disclosed Metro Bank in its short book in March last year, saying that the bank “has still not grown loans fast enough to keep pace with costs,” and raising concerns over the profitability of its business. He did not immediately respond to a call requesting comment.

The question we should all be asking is a simple one - how did Metro manage to lie to regulators (or perhaps more charitably, how did regulators not spot this?) for so long? Those butterflies you feel in the pit of your stomach are warranted as the awful sense of deja vu all over again rears its ugly head since we all know what happened the last time banks started to get busted for "misclassifying" risk-weighted assets on their books...

Remember, "fortress balance sheets."

Published:1/24/2019 1:57:17 AM
[World] [Eugene Volokh] TV Recommendations

What have you watched recently, and really liked?

Post your answers in the comments below, for your fellow readers' benefit -- and for mine (I'm always on the lookout).

To prime the pump: Besides the familiar highly recommended shows, such as The Americans, Homeland, and Sherlock,

  • Heavy Water War, a 6-episode Norwegian World War II story, based on a recent incident.
  • Jonathan Strange & Mr. Norrell, a 7-episode BBC series set in a magical English of the Napoleonic Wars era, based on the excellent novel of the same name. (OK, I watched it a few years ago, so it's not that recent, but still worth recommending, I think.)

Special benefit: My wife and I liked both of these, and our tastes are often quite different.

Please post more! (There'll be separate threads in the coming weeks for books and movies, so please save those for then.)

Published:1/23/2019 10:57:01 PM
[Entertainment] Jamel Brinkley wins Ernest J. Gaines Award recognizing African-American fiction writers Jamel Brinkley's "A Lucky Man" has won the 2018 Ernest J. Gaines Award for Literary Excellence, recognizing rising African-American fiction writers.
Published:1/23/2019 6:56:44 PM
[Markets] Tantrums, Tapers, TBAs, & Mortgage Rates

Authored by Jeffrey Snider via Alhambra Investment Partners,

To be an interested observer of things in the summer of 2013 was to be awash in the awareness of so many contradictions packed into one little piece of history. Forward guidance, for one, recognized the effects of markets. If QE was really effective, interest rates would rise not fall in anticipation of those positive effects.

This was, actually, the whole thing behind 2013’s “taper tantrum.” Ben Bernanke came up with a contrary scheme the year before when announcing QE3 hoping to head them off. He anticipated that his form of “forward guidance” would prove decisive; that is, the Fed’s Chairman promised QE3 would be “open ended” and therefore the central bank would keep on buying MBS (technically TBA) no matter.

The idea was that markets would be more enthralled by the purchases than their expected success; rising rates betting on the latter being held in check by lower rates due to the Fed’s persisting bid.

More than that, Economists had further expected that this “easing” would kickstart a strangely lethargic economic system. After all, if you need three QE’s “something” is already amiss.

It all came to a head in May 2013. Bernanke, as I’ve noted before, never actually said the word “taper.” What that meant for the market was something else indeed; maybe QE3 (plus a fourth in UST’s) had worked, so like a cork held underwater interest rates exploded higher into what became Reflation #2.

Except, the economy hadn’t actually done much by way of accelerating. Even FOMC officials were still talking about “clogged transmission channels” and now we know one of them recognized QE’s monetary “head fake.”

The result was a toxic mix, one which confused and perplexed pretty much everyone for another year or so until the “rising dollar” of 2014 settled the matter once and for all. But along the way, more contradictions.

By early 2014, Wells Fargo, the nation’s largest mortgage lender, had laid off about 12% of its workforce in that financial space. The trigger was supposedly interest rates, according to mainstream convention, when the real killer was negative convexity.

The MBS market had been blown apart by the Summer 2013 Tantrum. Blame it on taper if you want, but the issue was, and remains, liquidity. Negative convexity, to oversimplify, is a fancy way of saying that your position gets larger the more any market price moves against you. If you are long some MBS derivative or protection (like interest rate swaps) and the price of MBS drops, if you aren’t careful the more the price drops the more long that price you can become.

Writing protection against a price drop becomes suicidal, especially since you aren’t actually running a matched book. Dealers stop writing protection at reasonable prices.

If you are a dealer who is betting on Ben Bernanke’s forward guidance (open ended QE3) and then the word “taper” is introduced, negative convexity isn’t just a textbook fear it transforms into devastating reality. And without actual economic growth to sustain the basis for the thesis, liquidity drops to nothing and for several days in May it became fire sale city.

Here’s what I wrote in July 2013 in the middle of tantrum:

As I mentioned a few days ago, if current GDP estimations are close, we will have seen five of the past six quarters at 2% or below (in some quarters much below). Without monetary policy opening a clear channel into real economy activity (not stock prices, there does not exist a “wealth effect” without widespread debt accumulation), household incomes cannot support rising rental rates that would mirror real estate prices.

In other words, since QE does not really work, the mini-housing bubble created in anticipation of it was limited by its own effects!

Wells Fargo wasn’t the only bank to notice the devastation in the TBA dollar rolls, it was just the biggest.

Fed officials had anticipated the one problem all along. They had expected real economic acceleration to cushion the blow. If mortgage rates start to rise even sharply for a little while, in an economy that is truly booming and recovering it might be a pain for some prospective home buyers but few others would even notice; banks especially.

These would shift mortgage personnel and balance sheet capacity from originating and underwriting subsidized (QE) mortgages to originating and underwriting consumer and business credit; dealers who were participating in the TBA market would shift money dealing activities to the plethora of opportunities a real recovery would provide an economy starved of it for half a decade by that point.

Bernanke never expected banks to just pull out. It was the perfect storm for 2014. Once dealers started reassessing their embedded convexity risks (or risk more broadly) in MBS, they began doing so in all their books – starting with China and EM’s.

Despite what amounted to much bigger problems systemically, meaning global money, the US housing market quickly recovered. From August 2013 until about January 2014, real estate was pummeled. According to the National Association of Realtors (NAR), home resales dropped from a peak around 5.4 million (SAAR) to a low less than 4.8 million.

That five- to seven-month drop in the real estate market was chalked up to interest rates when it was the guts of money and liquidity instead. The ripples of negative convexity, not the third call for the end of the 30-year bond “bull market.”

The current housing slump is being blamed on interest rates, too. This one, though, is much deeper and longer lasting already. After peaking way back in March 2017, the resale market has been persistently if not directly lower for approaching two years now. The latest data from the NAR puts resales below 5 million (SAAR) in December for the first since November 2015.

Year-over-year, sales volume was down 10%, the largest annual contraction since the big housing bust nearly ten years ago. This is getting pretty bad.

Blaming interest rates is the lazy way. Something is different between 2013 and 2018, alright, but it’s not only negative convexity. TBA isn’t the problem this time, it’s the labor market. At least in 2013, the latter was positive and would get better in 2014 (if overstated by trend-cycle statistics, I believe).

The labor market in many ways has never come back from the 2015-16 downturn. That’s the difference. Weakness here has left the real estate market unable to collectively deal with relatively small changes in inputs, interest rates being only one of several. Uncertainty is the greater factor.

When you combine a soft labor market (no matter what the unemployment rate says) with growing unease about the economy, the end result is resales tanking the more 2018 draws on.

Housing isn’t really an important part of the economic picture, so it’s not as if the US economy is in danger of this slump bordering on a bust.

However, housing tells us something important about the real state of the economy through consumers. These negative factors are having an effect here, so it isn’t too much of a leap to suggest they are playing out in other parts of the economy where it does matter (consumer spending overall; though we will have to wait on the Census Bureau to come back from furlough before we get the data on retail sales and other categories of consumer activity and demand).

What happened in 2013 was a massive financial upheaval, and yet the housing market popped right back up. In domestic terms, there really hasn’t been anything like it in either 2017 or 2018, especially not in the mortgage market (TBA or otherwise). And yet, housing has suffered far more and for much longer this time than last time.

Something is different, alright. The economy is in worse shape now than in 2013. So much for four QE’s and a collapse in the unemployment rate. 

Published:1/23/2019 5:57:15 PM
[Markets] "Rudy Has Lost His Mind": Trump Furious With Giuliani After String Of Botched Interviews

It could be a while before Americans see former New York City mayor Rudy Giuliani back on cable news defending President Trump and rebutting the latest batch of Mueller probe leaks. According to the Associated Press, Trump is furious with his lead attorney after Giuliani made an array of misstatements and slips during interviews over the past week, squandering a golden opportunity to push back against the Mueller probe and the "opposition party" media after BuzzFeed's embarrassingly inaccurate report that Trump had instructed Michael Cohen to lie to Congress (a report that was disputed by Mueller's office in an unprecedented move).

Though this isn't the first time Giuliani has botched a cable news interview and been temporarily yanked from the administration's batting order, the AP says Trump's patience with Giuliani - with whom he regularly speaks - is almost at its end, and some are pushing the president to start looking for a new lead attorney.


Reports about Trump's frustration with Giuliani, as well as renewed calls for a blanket ban on future interviews, follow a spectacular string of gaffes that began Sunday with an embarrassing appearance on Meet the Press where Giuliani suggested that the Trump Tower Moscow talks had continued through the election and continued during a New Yorker interview where Giuliani seemed to suggest that he had heard tapes made by Michael Cohen of his conversations with the president - tapes that haven't been previously acknowledged.

Vanity Fair's Gabriel Sherman reported that the campaign to oust Giuliani is being led by Ivanka and Jared, who worry that it's only a matter of time before Giuliani says something irredeemably damaging about the president. Some inside Trump's inner circle worry that Giuliani has "lost his mind." Moreover, the Associated Press reported that some want to bar Giuliani from participating in evening interviews because they worry that he has been drinking before going on-air.

Some of Trump’s allies have suggested that Giuliani be barred from evening interviews because of concerns that he was going on TV after drinking, according to three Republicans close to the White House. Giuliani has previously insisted he does not have an issue with drinking, denying to Politico last May that it affected his interviews. He added: “I may have a drink for dinner. I like to drink with cigars."

Like many of his peers in the administration, Giuliani is reportedly extremely dissatisfied with his job as Trump's attorney due mostly to his boss's mercurial temper (something that has no doubt been aggravated by Giuliani's erratic behavior).

As I’ve previously reported, the Trump-Giuliani relationship hasn’t been good for weeks. Giuliani has said privately that he “hates the job” and that Mueller’s final report will be “horrific” for Trump. Facing these challenges and pressures, it’s understandable he would make mistakes, the thinking goes. “Everyone who works for Trump screws up because there’s no way to please the guy,” an outside Trump adviser said.

So why does he stay? Perhaps because, after years of irrelevance following his spectacular failure during the 2008 Republican primary, Giuliani enjoys the press attention. He regularly texts with news anchors. Still, the modern media environment isn't what it once was, and Giuliani has definitely struggled to adapt.

"There’s a school of thought that it’s better to be famous and ridiculed than ignored," a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. "This has been a trial by fire for him," the friend said. "He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught."

But, frustrating as the job may be, Giuliani also may be addicted to it. Friends said the former New York mayor was embittered after being out of the limelight for years following his failed 2008 presidential campaign. He’s been exhilarated by the press attention that comes with being Trump’s lawyer. Sources said Giuliani often books his own interviews and frequently texts with television news anchors. “There’s a school of thought that it’s better to be famous and ridiculed than ignored,” a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. “This has been a trial by fire for him,” the friend said. “He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught.”

Still, after struggling to find an attack-dog-in-chief to lead his legal team, Trump has been otherwise happy with Giuliani's approach. In other words, when he's on, he's on. But his most recent performances represented a "major slip."

“Rudy had done a very good job going on TV and fighting back and laying down a defense of the president,” said Sam Nunberg, a former Trump campaign official. “But now it’s time to get precise, you can’t be so loose anymore. He had a major slip.”

But Giuliani has slipped up before. And with Mueller reportedly closing in on the final stages of his investigation, which is expected to end with a lengthy report about Trump's misdeeds that Giuliani is expected to rebut, switching horses mid-race also carries risks of its own.

Published:1/23/2019 8:23:40 AM
[Markets] Dismantling The Doomsday Machines

Authored by John Walsh via The Unz Review,

“From a technical point of view, he (Stanley Kubrick) anticipated many things... Since that time, little has changed, honestly. The only difference is that modern weapons systems have become more sophisticated, more complex. But this idea of a retaliatory strike and the inability to manage these systems, yes, all of these things are relevant today. It (controlling the systems) will become even more difficult and more dangerous.” (Emphasis, jw)

Vladimir Putin commenting on the film, Dr. Strangelove: or How I Learned to Stop Worrying and Love the Bomb, in an interview with Oliver Stone, May 11, 2016. Putin had not seen the movie and did not know of it before Stone showed it to him.

The Doomsday Machine, the title of Daniel Ellsberg’s superb book is not simply an imaginary contraption from a movie masterpiece. A Doomsday Machine uncannily like the one described in Dr. Strangeloveexists right now. In fact, there are two such machines, one in US hands and one in Russia’s. The US seeks to hide its version, but Ellsberg has revealed that it has existed since the 1950s. Russia has quietly admitted that it has one, named it formally, “Perimetr,” and also tagged it with a frighteningly apt nickname “Dead Hand.” Because the US and Russia are the only nations with Doomsday Machines to date we shall restrict this discussion to them.

The Doomsday Machine was published just a little more than a year ago, but its terrifying message has failed to provoke action. And Daniel Ellsberg is a man who knows whereof he speaks; the subtitle of the book is “Confessions of a Nuclear War Planner,” which is how Ellsberg spent the early part of his career. What follows on this first anniversary of the book’s publication is a brief restatement of the main argument of the book and then a summary of Ellsberg’s plan of action. (Not included are memoirs and personal experiences of this remarkable, very intelligent and moral man, which are found in the book and which I recommend to flesh out the line of thought presented herein.) Ellsberg’s plan is to be considered a stop gap measure to remove the nuclear sword of Damocles hanging over our heads and allow time to move to total abolition of nuclear weapons, a much more arduous task. Hopefully this essay will serve as a reminder of Ellsberg’s warnings and as a call to act on them.

How Do the Doomsday Machines Work? – Two components:

What is the essence of a “Doomsday Machine”? The first component is a mechanism of launching nuclear weapons that is on hair trigger alert and not always in the hands of the Presidents of Russia or the US. The fact well concealed from the US public is that the US President or those in the line of Constitutional succession are not the only ones with a finger on the nuclear button, and the same is true in Russia. The second component of a Doomsday Machine is a weapon of such destructive force that it can kill billions in the immediate aftermath of an attack and then the entire human race and perhaps all animal life on earth.

The Launch Mechanism – Command and Control

Russia and the US each have a First Strike capability, that is the ability to strike the other with great force, destroy the other’s cities and industrial and military base – and knock out the other’s nuclear deterrentThe essence of a First Strike capacity is this ability to wipe out the deterrent of the other side or weaken it sufficiently that the remaining force could be intercepted for the most part. How can a targeted nation prevent the use of a First Strike? It must convince the adversary that such a strike is futile and will not destroy the deterrent of the targeted nation. The attacker must understand that he will not escape retribution, because the nuclear force of the targeted nation, its nuclear deterrent, will survive.

Launch on Warning – Hair Trigger Alert. The first measure to prevent the loss of deterrence in the event of a First Strike is to put the nuclear force on Launch on Warning or Hair Trigger Alert status. Most of us have heard about this, but we ought to quake in our boots every time the thought of it crosses our minds. Since the time to respond to a First Strike is only tens of minutes for an ICBM (Intercontinental Ballistic Missile) attack, which takes about 30 minutes to travel between the US and Russia, and even less time for a short or intermediate range missile, a targeted country must have its nuclear force loaded onto delivery vehicles and capable of being launched on warning of a nuclear attack. The weapons must be ready to go and launched before the country is struck. This is called “Launch on Warning” and the weapons are sometimes said to be on “Hair Trigger Alert.” (There is some imprecision to the terminology surrounding nuclear weapons, partly due the obfuscation used by the US in negotiations. Steven Starr gives an account of this imprecision and a brief glossary here. I will use terms that are easily understood and common sensical. And I will define them when necessary.)

Nuclear warheads that are loaded onto delivery vehicles are said to be “deployed,” and there were roughly 1600 such warheads loaded onto long range delivery vehicles, each, in Russian and U.S. hands in 2018. They are ready to be launched in minutes. (There are several thousand more warheads in reserve on each side but not “deployed.”) It is easy to see the danger inherent in this situation. The decision to launch must be made in minutes to prevent destruction of the nuclear deterrent and it would be hard to decide with certainty whether the warning of an attack was genuine or due to a technical malfunction. In fact, the signal that an attack is coming is always likely to be ambiguous. Even if the attack is real, the attacker will seek to hide it and so even then the signal will be ambiguous. Thus, even an ambiguous warning caused due to a technical malfunction must always be treated with seriousness and a decision to respond made within minutes.

That a decision of such moment must be made so quickly, under the gun if you will, is a disaster waiting to happen. A mistake is bound to occur with the passage of sufficient time. And it nearly did during the Cuban Missile crisis and again in 1983 when the Soviets detected an attack coming from the United States. According to established protocol the warning was sufficient for the Soviet officer in charge to inform the leadership that a nuclear attack on the U.S. should be ordered. But that officer, Lieutenant Colonel Stefan Petrov, refused to follow protocol and instead interpreted the warning of an attack as a false alarm, which it was. So, a launch of Soviet weapons did not occur. In Russia, Stefan Petrov who died recently is hailed as “the man who saved the world.” This is the nuclear powder keg on which we all sit.

Decapitation and Delegation – Unknowns have their finger on “the button.” The second measure to prevent loss of deterrence is Delegation. This is not widely known or understood. One aspect of a First Strike would be an attempt to knock out known command centers so that a retaliatory strike could not be ordered. This is known as Decapitation. The antidote to Decapitation is Delegation, that is others besides the Presidents and their immediate successors are authorized to press “the button.” It works this way. These “others” are located in secret command centers far from Washington or the Strategic Air Command Base in Colorado, both of which will be targeted in a Decapitation strike. If these secret centers find themselves cut off from communication with Washington or Moscow, then the assumption is made that a decapitating nuclear strike has occurred. In that event these “others” removed from the centers of power are authorized to the press the nuclear button!! (One can see why the Russians call their system of delegation, Perimetr.) These others are not elected officials and in fact we do not know who they are! What Ellsberg discovered is that some of these “others,” military men, were concerned that they too could be hit in a decapitating strike. So they had delegated authority to still others!! In fact, no one, perhaps not even the President and his circle of advisors, knows who can send off the nuclear weapons. Is it possible that one of them might be like the fictional General Jack D. Ripper, the psychotic and delusional man who gives the launch order in Dr. Strangelove – or a similar individual lusting after the Rapture?

It does not take much imagination to see the multiple ways in which things could go wrong; a launch due to a false alarm of attack and a lack of time to make a thoughtful check and decision; a failure of communication that puts the perimeter out of touch with the center although no decapitation has in fact occurred; or a mad man or woman or a crazed ideologue who becomes one of the Delegated. A terrorist attack with a nuclear weapon on Moscow or Washington could also mimic a Decapitating attack and set in motion the fast Delegation to the delegatee. The appropriateness of the term “Dead Hand” for this arrangement is striking.

It is true that so far as we know the probability of a mistake or a rogue element gaining control of nuclear weapons is small. (But the fact is we do not know what the situation is – it is hidden from us and perhaps even from elected officials.) The weapons are protected from rogue use by safety locks called Permissive Action Links (PALs) but these are not perfect, and they must be capable of activation by someone in the “perimeter” in the event of Delegation. And they are no protection against a false alarm of an attack. Despite how low the probability of an error might be, the dice are thrown every moment of every day, and with the passage of time, inevitably something will go wrong.

In summary, First Strike Capability is the source of the problem. It leads to Launch on Warning and Delegation by a targeted nation. The U.S. pioneered and maintains a First Strike Capability and refuses to adopt a “No First Strike” policy. Another response to a first strike capability is that the targeted nation will build up the numbers in its nuclear force so that some will always survive an attack. That is precisely what happened in the first Cold War until it reached insane levels as shown graphically here.

The Nuclear Weapon. The First Strike Arsenal.

Obliteration of Russia and the U.S. The second component of a Doomsday Machine is the weapon itself. What is the destructive power of the ensemble of nuclear weapons as used in a First Strike? I know of no such quantitative estimates released by the Pentagon for the present day. They are badly needed. But in 1961 when Ellsberg was among those working on nuclear war fighting strategy for the Kennedy administration, he asked for an estimate from the Pentagon of the deaths due to a First Strike as the generals and their civilian war planners had mapped it out at the time. To his surprise the estimate came back at once – the Pentagon had made it and kept it hidden. Launching of the nuclear weapons planned for use in a First Strike by the U.S. would result in the deaths of 1.2 billion from explosions, radiation and fire. That number was the number of deaths and did not include injuries. And it was only the result of US weapons; it did not include deaths from a response from the Soviet side if they managed one. 1.2 billion people was the toll at a time when the population of the earth was about 3 billion! (Note that this toll does NOT include the effects of nuclear winter which was unknown at that time. More on that below.) And of course, such deaths would be concentrated in the targeted countries which in these times would be the US and Russia. Ellsberg was stunned to learn that the Pentagon would coolly make plans for such a gargantuan and immediate genocide. And so should we all be. What kind of mindset, what kind of ethics, what kind of morality has allowed for such a thing!

Nuclear Winter and the Destruction of Humanity. But the damage does not stop there. This is the surprise that the Pentagon did not understand at the time. The ash from the fires of burning cities would be cast up into the stratosphere so high that it would not be rained out. There it would remain for at least a decade, blocking enough sunlight that no crops would grow for ten years. That is sufficient to cause total starvation and wipe out the entire human race with only a handful at most able to survive. This is Nuclear Winter. It is eerily reminiscent of Kubrick’s Doomsday Machine which resulted in a cloud of radioactivity circling the earth and wiping out all life. Nuclear Winter was first understood in the 1980s, but at that time careful assessment of the existing computer models seemed to indicate that it was not likely and so many “stopped worrying.” Now with the interest in Global Warming, new and better computer models have been developed. When the results of a nuclear first strike are put into these models, Nuclear Winter again makes its appearance as Brian Toon, Alan Robock and others have shown. The TED talks of Toon and of Robockdescribing their findings are worth watching; they are brief and well-illustrated. We are confronted with a genocide of all or nearly all humanity, an “Omnicide.”

The launch of the 1600 “deployed” warheads of either the US or Russia is sufficient to give us nuclear winter. So we in the US have put in place a weapon system on hair trigger alert commanded by we know not whom which can kill virtually all Americans – along with most everyone else on the planet. We have on hair trigger alert a weapon which is in fact suicidal. Use the weapon and we lose our very existence. We should also be clear that even if we prescind from the effects of nuclear winter, the nuclear attacks would be concentrated on Russia and the US. So most of us would be consumed. Thus MAD (Mutual Assured Destruction) is replaced with SAD (Self-Assured Destruction).

Disarming the Doomsday Machine

What is Ellsberg’s plan to disarm the Doomsday Machines? He does not suggest total abolition of nuclear weapons, a worthy and ultimate goal, as a first step. He suggests intermediate steps, which can be accomplished much more quickly and remove the present danger.

From what was said above, it is clear that the Doomsday Machine with its massive nuclear force, Launch On Warning and system of Delegation all grows out of a need to protect from a First Strike. The solution to the problem does not demand giving up all nukes or even a deterrent which many are loathe to do. And that is not hard to understand when we compare the fate of Kim Jong-un to that of Muammar Gaddafi or Saddam Hussein. Nor is it difficult to understand in the U.S. given the current intense Russophobia, or in Russia given the alarm caused by NATO’s drive to the East. This is one reason that total abolition of nuclear weapons or even abolition of a nuclear deterrent will be quite difficult. However, dismantling the Doomsday Machines, the immediate danger to humanity, does not demand giving up nuclear deterrence.

Abandoning First Strike Policy and Capacity. Dismantling the Doomsday Machine with its Hair Trigger Alert and Delegation does mean abandoning a First Strike policy and capacity. And right now, only two countries have such First Strike capacity and only one, the U.S., refuses to take the right to use it “off the table” even when not under attack. What does the elimination of First Strike Capacity mean in practice; how can it be achieved? This turns out to involve two basic steps for the US.

Dismantling the Minuteman III. First, the land-based ICBMs, the Minuteman III, must be entirely dismantled, not refurbished as is currently being undertaken at enormous cost. These missiles, the land-based part of the Strategic Triad, are highly accurate but fixed in place, “sitting ducks”; they are only good for a First Strike, for they will be destroyed in a successful First Strike by an adversary. Former Secretary of Defense William Perry and James E. Cartwright, formerly head of the Strategic Air Command and Vice Chair of the Joint Chiefs of Staff, have both called fordismantling the Minuteman III. We would thereby also save a lot of money.

Reducing the SLBM Force. The second step in dismantling the First Strike capacity is to reduce the Trident Submarine-Launched Ballistic Missile (SLBM) force to the level where it cannot destroy the entire Russian land-based missile force. With these two measures in place the US would no longer have a First Strike Capability, and so Launch on Warning and Delegation upon apparent Decapitation would both be unnecessary. It is that simple.

Of course, the Russians would also need to take similar measures that take into account the specifics of its arsenal. And that is where negotiations, treaties and verification come in. That in turn cannot take place in the current atmosphere of Russiagate and Russophobia, which is why both are existential threats and must be surmounted. We must talk despite our differences, real or perceived.

However, were the US and Russia to abandon their First Strike capacity, a reasonable deterrent could be preserved. Such a deterrent should be far below the threshold for a nuclear winter. When Herbert York, one of the original nuclear war planners and strategists, was asked how many nuclear weapons it would take to guarantee deterrence, he suggested somewhere between one and one hundred, closer to one, perhaps ten. Of course, such a small number demands giving up on a missile defense system which has been a will-o’-the-wisp since the 1950s. But would a leader of any nation, even one equipped with an Anti-Ballistic Missile system, when confronted with 100 nuclear warheads facing him or her, be willing to risk ten getting through and demolishing 10 cities?

But there is a deep problem here. The US at least has not built its nuclear forces with the simple object of deterrence. It has had the policy of being able to strike first and destroy or sufficiently degrade the Russian force so that there would be no retaliation. Ellsberg establishes that definitively based on his own experience in his days as a nuclear war planner. But this is also a will-o’-the-wisp. With Launch on Warning and Delegation both sides would be destroyed. So, this path must be abandoned. However, it is a path that has been trod for a long time. It has acquired many adherents and become embedded in the thinking of our “strategic war planners.” It will be hard to abandon this way of thinking which is what will make the simple steps outlined above politically difficult although technically and logistically quite simple. Moreover, in the mind of the public there is no clear distinction between First Strike and simple deterrence. And many favor a nuclear deterrent. So the movement for total abolition of nuclear weapons has a long way to go to reach its destination.

An additional measure – Eliminating launch on warning, aka “hair trigger alert,” that is, “De-alerting.” An additional measure has also been proposed. All nuclear warheads should be removed from deployed status by Russia and the US. (The oft-used term for this is “De-alerting.”). That is, the warheads should be removed from their delivery vehicles and stored in a way that would take days or even weeks to deploy – that is to remount. This has been proposed by the Global Zero Commission on Nuclear Risk Reduction which says of itself:

As world leaders descended on the United Nations in New York for the 2015 Non-Proliferation Treaty (NPT) Review Conference, the Global Zero Commission on Nuclear Risk Reduction — led by former U.S. Vice Chairman of the Joint Chiefs of Staff General James E. Cartwright and comprised of international military experts — issued a bold call for ending the Cold War-era practice of keeping nuclear weapons on hair-trigger alert.

The Commission’s extensive report calls for (1) an urgent agreement between the United States and Russia to immediately eliminate “launch-on-warning” from their operational strategy, and to initiate a phased stand down of their high-alert strategic forces….; and (2) a longer-term global agreement requiring all nuclear weapons countries to refrain from putting their nuclear weapons on high alert.

Urgent action is needed, according to the Commission, because of heightened tensions between the United States and Russia, ongoing geopolitical and territorial disputes involving other nuclear countries that could escalate, and an emerging global trend toward placing nuclear weapons on high alert.

The proposal, backed by more than 75 former senior political officials, national security experts and top military commanders, makes the case that a multinational de-alerting agreement could greatly mitigate the many risks of nuclear weapons use, including from computer error, cyber launch, accidental detonations, unauthorized “insider” launch, false warning of enemy attack, and rushed nuclear decision-making.

The full report is here.

Such an arrangement must be solidly negotiated and verifiable. It would seem that the US President could do this by executive order and at little cost. For submarines the nuclear warheads would be stored on shore in a way that makes it impossible to reload for the period of delay that is negotiated. This arrangement means that no decisions about nuclear warfare need be taken at a moment’s notice, no launch on warning is possible or even relevant any longer and the possibility of Decapitation and the consequent necessity of Delegation disappear. And when either nuclear state feels existentially threatened by conventional forces, its first response need not be to fire a nuclear weapon. Its first response could be to deploy its warheads (that is, reload the launch vehicles) while it negotiates over the threat. That along with Ellsberg’s suggestions would greatly stabilize the world and lessen to almost zero the probability of nuclear war based on misjudgment or accident. From there the work on ever greater levels of reduction leading eventually to total abolition of nuclear weapons could go forward.

The Work Ahead to Win Support for Dismantling the Doomsday Machines

To be able to get Congress or the Executive to move toward these changes, a number of things will be necessary. First is information. As a very basic example, Ellsberg learned in 1961 that a US First Strike at that time would produce 1.2 billion deaths as an immediate result of Nuclear War, excluding any effects of nuclear winter and excluding a Soviet response. We deserve to know what those numbers are now. Here, Ellsberg argues, both public pressure and the work of whistle blowers will be needed. As another example, we need to know from the Pentagon and the National Academy of Sciences whether the result of a US First Strike of the magnitude now on hair trigger alert would lead to nuclear winter – as it seems almost certain it would.

But far more than that would be needed. There must be some form of pressure to wake up the politicians and force them to dismantle the Doomsday Machines. But this is missing. In part with the end of the First Cold War, many thought that the danger had disappeared. Clearly it has not. A movement to abolish the Doomsday Machine is a threat to the Military Industrial Complex and so the MIC and its media acolytes would prefer silence or opposition to such efforts. It may be that the generations which lived through the first Cold War and went through its terrors, from “duck and cover” drills to mushroom cloud nightmares, to the Cuban Missile Crisis may have a special role to play. Their psyches have been most affected by nuclear horrors and they may be the best ones to convince succeeding generations of the dangers. But the strategy and tactics for such an effort have yet to be outlined. It is a task that lies before us.

The first step to sanity is to eliminate 'launch on warning' and the second step would be to rid ourselves and the Russians of a 'First Strike policy' and capacity and negotiate a stable deterrent, small enough that it does not threaten nuclear winter. That is something that the nuclear powers and the broad public can easily accept despite the opposition of a small number of nuclear war fighters. Here the idea of negotiations is not to make the other side more vulnerable but to give the “adversary” and oneself a small, stable nuclear deterrent. Such a win-win approach to negotiations is in fact necessary for survival while we take the more difficult road to total nuclear abolition.

Total abolition should be the ultimate goal because no human hand should be allowed to wield species-destroying power. But it seems that an intermediate goal is not only needed to give us the breathing space to get to zero nuclear weapons. An intermediate and readily achievable goal can call attention to the problem and motivate large numbers of people. The Nuclear Freeze movement of the 1980s is a very successful example of this sort of effort; it played a big role in making the Reagan-Gorbachev accords possible. The effort to kill the Doomsday Machines might well be called something like Step Away From Doomsday or simply Step Away. The time may be ripe for such an effort. Getting to zero will require a breakthrough in the way countries deal with one another, especially nuclear armed countries! Let us give ourselves the breathing space to accomplish that.

Published:1/22/2019 11:21:30 PM
[World] [Orin Kerr] Does New Law Take Time to Become "Clearly Established"?

A fascinating question about qualified immunity law.

I realize that qualified immunity is a pretty unpopular doctrine, especially here at the Volokh Conspiracy. But for readers willing to accept existing Supreme Court law as a given, the Third Circuit's new decision in Bryan v. United States asks a really cool question: Are officers expected to know instantaneously of new legal rulings that clearly establish the law? Or is there some kind of allowed time delay before an officer is held liable for not conforming his conduct to a new decision? Bryan takes the latter path, and I thought readers might be interested in knowing more about it.

I. The Facts

Here's how the issue arose. On August 31, 2008, a group of travelers went on an eight-day Caribbean cruise. They started in Puerto Rico, went to some foreign ports such as Antigua and Barbados, then went to St. Thomas in the U.S. Virgin Islands. They returned to Puerto Rico on September 7, 2008.

But the trip wasn't uneventful. Customs officers suspected that the travelers were smuggling drugs. On September 5th, a customs officer in Puerto Rico, Officer Ogg, decided that the travelers' cabins should be searched. The next day, September 6th, another group of customs officers searched the cabins when the cruise ship was docked at St. Thomas the next day. No evidence was found.

Here's the interesting part. The travelers sued in the federal district court in the Virgin Islans, arguing that the search of their cabins violated the Fourth Amendment under a Third Circuit ruling handed down September 4th, 2008 -- just two days before the search occurred. The new ruling, United States v. Whitted, 541 F.3d 480 (3d Cir. 2008), involved nearly identitical facts as this case. A prior search of cabins occurred in the exact same cruise ship, also while docked in St. Thomas, also for evidence of drugs. Whitted held that searches of cruise-ship cabins docked in the Virgin Islands after a trip to foreign ports requires reasonable suspicion under the Fourth Amendment. This was the first ruling of its kind in any federal circuit court.

II. The Ruling

Under qualified immunity doctrine, officers are bound by "clearly established" law. So here's the question. How long after a decision is handed down does law become "clearly established"? Was the September 4th ruling "clearly established" in Puerto Rico on September 5th, when the officer in Puerto Rico concluded that the cabins should be searched? Was it "clearly established" in St. Thomas on September 6th, when the officers boarded the ship and searched the cabins?

In an opinion by Judge Roth, the Third Circuit ruled that the Whitted decision was not yet clearly establlshed and that therefore qualified immunity applied:

Until September 4, 2008, there had been no ruling in the Third Circuit as to what constituted a "routine search" [for which no cause is needed under the Fourth Amendment] As for Officer Ogg, he was located in San Juan, Puerto Rico, in the First Circuit. There had not been any such ruling in the First Circuit, and the First Circuit courts would not be bound by Whitted, a Third Circuit case.

When such a ruling is made, a ruling which affects the procedures used in border searches, it is beyond belief that within two days the government could determine what was "reasonable suspicion" and what new policy was required to conform to the ruling, much less communicate that new policy to the CBP officers. We can only conclude that as of September 5, 2008, it was not clearly established in either the Third Circuit or the First Circuit that a search of a cruise ship cabin at the border had to be supported by reasonable suspicion. Accordingly, under the circumstances that Officer Ogg confronted, he did not violate clearly established law by entering lookouts for the three passengers the day after we issued our decision in Whitted. He is entitled to qualified immunity.

We conclude that the same situation applies to the St. Thomas officers. On September 6, the Whitted standard was no more clearly established than it had been the day before. Moreover, if the St. Thomas officers had been aware of Whitted, they would have known that Whitted held that unsubstantiated information from TECS can establish reasonable suspicion.

For these reasons, we conclude that the Whitted standard was not clearly established in the Third Circuit, or the First Circuit, on September 5 or 6. Within one or two days, neither Officer Ogg nor the St. Thomas officers could reasonably be expected to have learned of this development in our Fourth Amendment jurisprudence. At that time, it would not have been beyond debate that, absent reasonable suspicion, the Fourth Amendment prohibited the search of the travelers' cabins. For purposes of qualified immunity, a legal principle does not become "clearly established" the day we announce a decision, or even one or two days later.

This holding is informed by the overarching aim of the qualified immunity doctrine to insulate from civil liability "all but the plainly incompetent or those who knowingly violate the law," and the need to ensure that the relevant legal principle is framed with particularity and settled "beyond debate." We are, however, deciding only this case. For that reason, we decline to draw a bright line demarcating when a legal principle becomes "clearly established." We leave that exercise for another day.

III. A Few Thoughts

This is a fascinating case, and I'm not sure where I come out on it. Here are a few tentative thoughts.

1. Let's start with the general principle. The idea that a decision doesn't become "clearly established" the instant it is handed down strikes me as quite plausible, although not obviously right. Qualified immunity is largely about personal culpability in either failing to know or ignoring the law. If it was very difficult to know the law at the time the search occured, a person isn't culpable for not knowing it. This was easier to see in the pre-Internet era. If you were a law nerd who wanted to know the very latest decisions, it would take you a week or so to get summaries in U.S. Law Week or to get copies of the latest slip opinions sent your way. In that environment, even a hyper-vigilant lawyer might not know about a decision that came down yesterday or two days ago.

Even today, it takes a hyper-vigilant legal nerd at least some non-zerp amount of time to digest new rules. Say a circuit usually posts new opinions in the afternoon between 2pm and 3pm. Imagine that it posts a particularly important new decision one day at 2:07pm. We wouldn't expect everyone to know the new rule of the new decision at exactly 2:07pm. Imagine two officers are out in the field about to conduct a search. Officer Bob searches at 2:06pm, and Officer Stan searches at 2:08pm. A culpability-focused approach would plausibly treat those two searches the same way, even though Bob technically searched before the opinion was posted and Stan technically searched after it was posted.

2. In terms of precedent, I would think that Messerchmidt v. Millender provides at least some support for the idea that an officer isn't instantaneously reponsible for knowing new legal decisions. Messserschmidt involved a lawsuit against officers for executing a warrant that the plaintiffs claimed lacked probable cause. The Ninth Circuit agreed with the plaintiffs and ruled that qualified immunity did not apply. The Supreme Court reversed, ruling that qualified immunity attached in part because the officers had asked his bosses and some prosecutors to review the warrant application and they has said it was fine. From the opinion:

[T]he fact that the officers sought and obtained approval of the warrant application from a superior and a deputy district attorney before submitting it to the magistrate provides further support for the conclusion that an officer could reasonably have believed that the scope of the warrant was supported by probable cause. . . . Messerschmidt . . . submitted the warrant application for review by Lawrence, another superior officer, and a deputy district attorney, all of whom approved the application without any apparent misgivings. Only after this did Messerschmidt seek the approval of a neutral magistrate, who issued the requested warrant. The officers thus "took every step that could reasonably be expected of them." Massachusetts v. Sheppard, 468 U.S. 981, 989, 104 S.Ct. 3424, 82 L.Ed.2d 737 (1984). In light of the foregoing, it cannot be said that "no officer of reasonable competence would have requested the warrant." Malley, 475 U.S., at 346, n. 9, 106 S.Ct. 1092. Indeed, a contrary conclusion would mean not only that Messerschmidt and Lawrence were "plainly incompetent," id., at 341, 106 S.Ct. 1092, but that their supervisor, the deputy district attorney, and the magistrate were as well.

The Court of Appeals, however, gave no weight to the fact that the warrant had been reviewed and approved by the officers' superiors, a deputy district attorney, and a neutral magistrate. . . .But by holding in Malley that a magistrate's approval does not automatically render an officer's conduct reasonable, we did not suggest that approval by a magistrate or review by others is irrelevant to the objective reasonableness of the officers' determination that the warrant was valid. Indeed, we expressly noted that we were not deciding "whether [the officer's] conduct in [that] case was in fact objectively reasonable." Id., at 345, n. 8, 106 S.Ct. 1092. The fact that the officers secured these approvals is certainly pertinent in assessing whether they could have held a reasonable belief that the warrant was supported by probable cause.

I find this passage from Messerschmidt pretty troubling, as can let an agent rely on others enough that no one is accountable for even pretty clear legal violations. But whether I like it or not, the case seems to say that it's not the officer's fault if he gets bad legal advice from higher-ups. And if getting bad legal advice is relevant to whether he gets immunity, then I would think it's also relevant if an officer, through no fault of his own, isn't aware of a brand-new decision. We expect officers in the field to find out about new legal decisions from higher-ups and prosecutors. If that's right, not knowing of a new legal decision seems something like being given bad legal advice from higher-ups and prosecutors in Messerschmidt.

3. Of course, if you say that it takes time for an opinion to become "clearly established," you then need a framework for figuring out how much time that is. This is tricky. The Third Circuit seems to have something like a "reasonable amount of time to be trained" approach, which seemes to look at how long you might expect before an officer was told of the law. Another possibility would be an "actually was told of the new ruling" standard, Cf. Messerschmidt. Or maybe you combine them. Maybe you say that an officer is charged with knowing the law if either he was told about the ruling or he failed to take reasonable steps to become aware of the law that would have otherwise informed him of the new ruling.

Another approach might consider whether the new ruling was final. The day after a new circuit decision is handed down, you don't yet know if it will stay on the books. Maybe the circuit will vacate the ruling and rehear the case en banc. Maybe the panel will withdraw or amend the opinion. Maybe the Supreme Court will grant cert. One approach would be to say that new circuit court decisions aren't "clearly established" until the time for further review has passed.

On the other hand, maybe the difficulty of identifying an answer to "how long is long enough" suggests that courts shouldn't try to answer that question. Maybe a bright-line rule that holds officers immediately responsible for new law is best. It would also have the benefit of encouraging law enforcement to alert officers to new rulings immediately. And although it might be unfair in a few cases, it's fair to wonder how often this issue comes up.

4. There are also some neat issues raised in Bryan about the liability for the officer in the First Circuit for following a ruling in the Third Circuit. It makes sense to say that the law of another circuit ordinarily won't clearly establish the law governing him. But I wonder if that approach makes sense in the rare situation when an officer is engaged in the planning of a search that the officer does or should know will occur in the other circuit. Does it matter if the officer is someone who usually conducts searches in his own circuit or often participates in searches in many circuits? The Third Circuit didn't have to get into that level of detail in Bryan, but I think there are some interesting issues raised by the cross-circuit search that could have been considered.

Published:1/21/2019 11:44:57 PM
[Markets] BuzzFeed CEO Spoofed Prominent Gun Rights Activist To Spread Disinformation

Long before BuzzFeed was publishing unverified dossiers and anti-Trump claims refuted by Robert Mueller, founder and CEO Jonah Peretti created a fake website and email address in the name of prominent gun rights advocate John Lott in order to spread disinformation.

Peretti, then-director at Brooklyn-based technology nonprofit Eyebeam, used Lott's name in 2003 to trick people into thinking that Lott had changed his mind on a key piece of gun-rights legislation that protected gun makers from abusive lawsuits designed to put them out of business. 

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill. -John Lott via Fox News

Lott explains Peretti's deception in a Monday Op-Ed which you can read below. 


John Lott Via Fox News 

BuzzFeed, a popular “news” website, has once again been shamed for publishing fake allegations against Donald Trump. BuzzFeed’s anonymously sourced report claimed that President Trump ordered his former lawyer, Michael Cohen, to lie to Congress about a proposed business deal in Moscow. Supposedly, two unnamed federal law enforcement officials claimed that Special Counsel Robert Mueller’s office had the goods. They were purported to have collected emails, texts, and testimony proving the explosive claim.

The story dominated the news on Friday, with Democrats calling for Trump to be impeached. MSNBC’s “Morning Joe” opened with the announcement that this revelation was “a big one.” CNN’s “New Day” host John Berman claimed the disclosure was so dramatic he almost spilled his coffee.

But by late Friday, Special Counsel Robert Mueller’s office issued a very rare rebuke saying that BuzzFeed’s account was “not accurate.” This was hardly BuzzFeed’s first embarrassment. As Trump reminded people, “it was BuzzFeed that released the totally discredited 'Dossier,' paid for by Crooked Hillary Clinton and the Democrats . . .”

BuzzFeed’s culture of fake news starts at the top with founder and CEO Jonah Peretti, who has a history of knowingly spreading false information. He has used fraudulent websites and email accounts to pose as people he wished to defame. I was one of his victims.

Peretti’s first victim was MBA student Jeff Goldblatt, who had set up a dating service called the Rejection Hotline. This was inadvertently in competition with Peretti’s newly created Peretti’s sister and co-founder, Chelsea, contacted Goldblatt to gain information on his business. She “interviewed” him, under the false identity of New York-based reporter Vanessa Holmes.

Then Jonah Peretti set up the website, under the pretense that it was Goldblatt’s personal website. Peretti sent out emails from that, according to Goldblatt, “contained multiple lies about me and portrayed me as an arrogant jerk who was bragging about how I stole the idea of the New York City Rejection Line.”

Goldblatt contacted me after Peretti did the same thing to me in 2003.  In my case, Peretti set up and used the email address Peretti’s expropriation of my name wasn’t for financial gain, but to support gun control.

Pretending to be me, Peretti sent out hundreds of thousands of emails lobbying against the proposed “Protection of Lawful Commerce in Arms Act.” This bill, which was being debated at the time (it ultimately passed in 2005), protected gun makers from abusive lawsuits that were solely designed to put them out of business with overwhelming legal fees. Peretti even purchased advertising for his fake website on Google, and the advertising promoting "my“ appeared at the very beginning of any search results on my name.

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill.

A number of the recipients were people I knew, and some wrote back using the email address and questioned why I would have changed my mind. But Peretti continued the charade of being me in multiple email chains.

I first learned about the website from James K. Glassman, a former Washington Post columnist, who later served as U.S. Under Secretary of State for Public Diplomacy. He shared the email exchange with me that he had with Peretti's fake John Lott.

Peretti also used my name and picture to advise people on how to violate gun control laws. Soon, I received hundreds of angry phone calls from people who were upset that I was supposedly advising them to break the law.

My emails to asking who was behind the effort were ignored. The website’s registration didn’t help, as it was supposedly registered to me.

I spent money to find out who was behind these efforts.  When I contacted Peretti, he denied any involvement.  After I hired lawyers, Peretti finally included a disclaimer on the website, stating that he intended to parody me. But he still refused to take down the website down or stop sending emails.

Goldblatt didn’t have the money for a legal battle, so I included him in my case.

After a year-and-a-half, we finally reach a legal settlement. Peretti, who worked for a company called Eyebeam, publicly acknowledged: “The site was created by The Eyebeam Atelier, Inc. This site was never associated, endorsed or otherwise affiliated with John R. Lott, Jr. E-mail sent from the domain that was identified as coming from Lott was also never associated, endorsed or otherwise affiliated with John R. Lott, Jr. Eyebeam deeply regrets any confusion and offers a formal apology to John R. Lott, Jr. The terms of the settlement are confidential.”

Peretti also apologized to Goldblatt and took down I received an undisclosed monetary settlement.

People are again asking how BuzzFeed could possibly publish such “fake” news against Trump. They need look no further than BuzzFeed’s CEO and founder Jonah Peretti.

John R. Lott, Jr. is a columnist for He is an economist and was formerly chief economist at the United States Sentencing Commission. Lott is also a leading expert on guns and op-eds on that issue are done in conjunction with the Crime Prevention Research Center. He is the author of nine books including "More Guns, Less Crime." His latest book is "The War on Guns: Arming Yourself Against Gun Control Lies (August 1, 2016). Follow him on Twitter @johnrlottjr.

Published:1/21/2019 8:16:32 PM
[Markets] The Disturbing Rise Of Modern Monetary Theory (MMT)

Authored by Mark Jeftovic via,

Lately, we’ve suddenly been hearing a lot about Modern Monetary Theory (“MMT”) in the mainstream media. It could be that with the election of Alexandra Ocasio-Cortez to congress, MMT’s star will rise with hers as she is reportedly an adherent and possibly views MMT as a means to fund her Green New Deal.

As we see below, MMT has been around for some time, having come out of the Chartalism school in the first half of the 1900’s and was made into MMT in the early 90’s by Warren Mosler, apparently after a “long steam” with Donny Rumsfeld, who then referred him to Art Laffer (creator of the Laffer Curve). MMT mostly flew under the radar until around the time of the Global Financial Crisis and is now clearly spiking into public awareness.

To the casual onlooker, MMT may sound a lot like standard-issue Keynesianism, the idea that the Government can and should run deficits to smooth out the business cycle.

The big difference is this: Keynesians believe that the deficits should be run to stimulate our way out of a recession or financial crisis, after which there will be some kind of return to normalcy, when deficits will matter again .

To MMT-ers there is no return to normalcy, this is the The New Normal. Deficits don’t matter, the Government can’t go broke because they can issue money in any amount required. We’ll look at how they rationalize this below, but suffice it to say now that Keynesians and MMT-ers are not synonymous and even Paul Krugman has had his criticisms of it:

it would be quite likely that the money-financed deficit would lead to hyperinflation.

The point is that there are limits to the amount of real resources that you can extract through seigniorage. When people expect inflation, they become reluctant to hold cash, which drive prices up and means that the government has to print more money to extract a given amount of real resources, which means higher inflation, etc.. Do the math, and it becomes clear that any attempt to extract too much from seigniorage — more than a few percent of GDP, probably — leads to an infinite upward spiral in inflation. In effect, the currency is destroyed. This would not happen, even with the same deficit, if the government can still sell bonds.

We’ll revisit his point that if the government attempts to extract too much from seigniorage that it will ignite an inflationary spiral. For now let’s make sure we know what we are dealing with when it comes to Modern Monetary Theory…

How to Understand Modern Monetary Theory

When I was in high school I had a physics teacher once told me how when he was a kid he thought he should be able to hook up the outputs of a generator and a motor to each other and have himself a perpetual motion machine. For some reason it didn’t work and trying to understand why was what got him into physics.

The more I learned about MMT the more it seemed to be the same thing, in an economic sense and I have frequently made this quip expecrting MMT-ers to call it a strawman or point out some fundamental element that I’m missing but instead they usually confirm that I have it correct in broad strokes.

MMT-ers believe that currency is nothing more than an economic scoreboard or tally, and any government that denominates it’s own currency can never go broke because they can always create more currency. Of course, as Weimar Germany, Hungary, Yugoslavia and more recently Zimbabwe and Venezuela have all found out, you have to watch out for hyperinflation.

The MMT magic bullet for this is… taxation. Through taxation the government can drain excess liquidity from the system while printing as much currency as it needs to fund its projects and as long as the total value of currency printed doesn’t exceed the productive capacity of the economy as a whole. Thus:

This diagram is from “Diagrams and Dollars: Modern Money Illustrated” by J.D. Alt. After methodically taking the reader through how the old monetary system works, where the government has this HUGE untenable debt burden and is constrained by budgetary limitations, we arrive here.

The national debt is still present, but it has, through philosophical transmutation, been transformed by Alt into a “Net Spending Achievement” as measured by the “National Savings Clock” (formerly known as the “national debt clock”, or “Doomsday Clock”):

“the difference between what the FG plans to spend in a given budget-year, and what it plans to drain away in taxes, is “Net Spending Achievement”….imagine, for a moment, how our political discourse might change if everyone understood the discussion was no longer about the size of our national “budget deficit” but, instead, was about the concrete goals of our annual “Net Spending Achievement”….

We do NOT want a “balanced” budget—or, even worse, a budget “surplus”! What we want (as long as price inflation is under control) is the largest and most effective “Net Spending Achievement” we can envision.

“Entitlement” and “Discretionary” budgets do NOT have to compete with each other for a fixed pot of Dollars. As long as price inflation is under control, whatever Dollars are necessary can be allocated to the “Net Spending Achievement.”

MMT-ers believe that since our currency is actually comprised of debt obligations that government deficit is required to form net private savings:


  • government spending creates private goods and services

  • taxation drains excess liquidity and controls inflation

  • the government can never go broke

For this to work, it would posit a pretty powerful central planning government that knows all (and if so, why can’t the government control inflation via price controls and eliminate taxes altogether?) and has the inhuman self-discipline not to overissue currency in a crisis (I guess, under MMT, there will be no further financial crises).

Oh, I almost forgot, under MMT there is also the jobs guarantee. So anybody who wants a job would be guaranteed to have one, at a living wage, by the government.

That’s MMT in a nutshell.

It’s ascent into its newfound economic fashionability is simply the latest episode of a long history of the pursuit of alchemy.

The Holy Grail of Government: Unlimited Spending With No Restraint

Government being overwhelmed by debt and constrained as a result is as old as history itself. In the 14th century King Philip of France was so indebted to the Knights Templar, and absent some clever rationalization that would transform his debts to them into money itself; he did the next best thing. He suppressed the order and had their leaders burned them at the stake. His debts were thus cleared but he had also disincentivized future borrowing. Another way would have to be found…

What governments really want is a way to either A) bribe the populace to keep voting for them or B) as this Epsilon Theory article laments, fund one or another of their incessant wars from an inexhaustible supply of credit or funding:

Modern Monetary Theory – which is neither modern nor a theory – is a post hoc rationalization of political expediency and power-expanding action.

It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.

And all the bad stuff we’re going to do.

At its core, Modern Monetary Theory is an argument that would be wonderfully familiar to every sovereign since the invention of debt. It is essentially the argument that significant sovereign debt is a good thing, not a bad thing, and that budget balancing efforts on a national scale do much more harm than good. Why? Because there’s so much to do and so little time for the right-minded sovereign. Because it is fundamentally unjust for the demands of private lenders to thwart the necessary ends of the sovereign, and it is politically difficult to finance those ends through tax levies on a fickle citizenry.

MMT is the sovereign-friendly justification for deficit spending without end.

Historically, this argument has been used by sovereigns to support wars without end.

(emphasis in original)

When you take a step back and comb through financial and economic history, amongst the wreckage of worthless fiat currencies from our past (note that 100% of all previous fiat currencies became worthless), we find hints and precursors of what is being rebooted as Modern Monetary Theory

Bear in mind that “Net Spending Achievement” neologism as we follow the rise and fall of the Austrian fiat regime in the 1700’s…

Unlimited National Debt?

A new phenomenon was occurring throughout Europe. Royal debt was being transformed into national debt. What had been the personal debt of the monarch was becoming the burden of the nation, payable by the people. And many central banks were created to administer this debt through paper money.

Austria provides one of the best examples of this new way of thinking. The First Bank of Austria was founded in 1703, with the express purpose of funding public debt by issuing paper money in exchange for deposits. With too few deposits, and too many notes, the bank and its currency failed.

In 1759, Count Sinzendorff, a prominent Austrian official and renowned financier, went a step further and suggested that government debt be brought to all the people, not just the depositors. He issued Austria’s first paper notes for general circulation, as a loan instrument with interest coupons attached. The new money was well received. Impressed by the expansion of commerce when more credit was made available, the government authorized a second issue of paper bills in 1769, and a third in 1771. Yet this prosperity did not last long. As excessive new issues were printed, they provoked a panic in 1797. The next decade was no better. Austria became embroiled in wars, spent heavily and ended up with a currency that lost over 90% of its value.

— (from Fiat Paper Money by Ralph T. Foster, emphasis added)

The idea that money is nothing more than an economic scoreboard or tally was advanced by John Law when he was trying to devise a method for Scotland to stave off bankruptcy, which he expounded upon in his book “Money and Trade” (“Money is the Measure by which Goods are Valued, the Value by which goods are Exchanged, and in which Contracts are made payable” – quoted in Fiat Paper Money).

Scotland never adopted Law’s ideas, and in their own currency machinations went bankrupt and ceased to be an independent country 1707 (ibid). Law moved onto France, continuing to promote his monetary theories, at one point declaring to an astonished room of aristocrats that he had discovered the secret of alchemy: “I can tell you my secret. It is to make gold out of paper” (ibid).

Even the MMT proposal to use taxation to control inflation is nothing new and was tried in New York in the late 1700’s, stability seemingly achieved by the New York Assembly having strict laws on their books limiting the amount of paper notes that could be issued. It’s not really clear what happened to this currency as it overlaps with the period when British laws were barring the colonies from issuing their own paper currencies and the subsequent segue into the revolutionary war, and the advent of the Continental (which eventually collapsed in a hyperinflation).

The Ascent of the MMT Narrative Today

I first became of aware of MMT when I used to read Business Insider back around 2010 or so and Joe Weisenthal, one of the most vigorous proponents of Cullen Roche’s “Pragmatic Capitalist” site, and he would unfailingly repackage anything Roche wrote on BI. Fast forward to today, and Roche seems to have backed off his MMT evangelism, or is at least a lot more nuanced and rigorous in his examination of it. 

The next time I came across MMT was in David Golumbia’s book “The Politics of Bitcoin”, wherein he seemed to think that what we have today is MMT. I can see why people would make that mistake, and Roche notes that as well in the article I just linked. Golumbia’s book (which I deconstructed in detail here) also criticizes the economic truism that inflation erodes purchasing power as wrong, and an example of right-wing conspiracy theory.

I mention that here because that is an idea that  Weisenthal also glommed onto back in his BI days, and while it isn’t yet, I fully expect this notion to be embraced by MMT adherents as this ideology is relentlessly pushed mainstream (the TL,DR of this idea is that a dollar doesn’t lose purchasing power when you issue more dollars if you put it into a bank account and earn interest on it. I debunked this thoroughly in my review of PoB. It’s one of those “not even wrong” notions in that  it’s economically incoherent).

Now that Modern Monetary Theory and Democratic Socialism have found each other, we have to look at why it’s such a dangerous combination.

The Problems with Modern Monetary Theory

Most of the articles I’ve seen decrying MMT hone in on it being inflationary, full stop. Which is true. No government has the discipline to not bribe the populous with either other people’s moneyor “made up” pixie dust that they convince everybody to pretend is money.

Beyond that, there are numerous failings with MMT including the fact that calling debt something else, like “national spending achievement” doesn’t make it not debt,  but does lose sight of what debt actually is. 

When you think about it, all debt is the pulling of future value into the present. If it wasn’t, if you had present value on hand and the willingness to trade it for what was desired, there would be no debt incurred.

As I observed recently, when you rack up debt you are either borrowing or stealing from the future. The difference is whether you plan to pay off the debt (borrowing) or if you plan to perpetually roll it over (stealing). MMT is structurally and by design, the latter.

MMT says debt  (err, sorry, National Spending Achievement) can expand perpetually and inflation will not occur provided it doesn’t expand faster than the value in the private economy (which assumes central planners can actually measure that accurately ) and any excess liquidity is drained off via taxation.

Like all fiat monetary schemes, you can make a theoretical case for it working. I once called MMT the elevation of circular reasoning to an art form, and Austrian economist Bob Murphyemphasizes that MMT relies upon “accounting tautologies”.

In practice, governments will always promise entitlements today at the expense of consequences tomorrow, so the monetary base will always expand and as each crisis is postponed, over time this dynamic will accelerate. If the monetary base happens to be credit (read: “debt as money”) then remember what we said debt is: future value, consumed today.

Under MMT however, when things go bad, they will get very bad. Here’s why:

Money started as hard currency, so it was near impossible to lose faith in it, and it would only happen as coinage was debased or replaced with fractionally backed paper notes.

After Bretton Woods, money, or the worlds reserve currency was “backed by the full faith and credit of the US government” and for a few decades at least, that seemed “good enough”. Although there have been panics and the overall trend is toward less confidence in the current monetary regime and the USD as world reserve currency is openly acknowledged to be in its waning days. It’s a matter of “when” not “if” even in polite company.

Under MMT there is no more pretence that the currency has any intrinsic value – it’s an economic scorecard and nothing more. The system would work as long as confidence held for the system itself, not any faith in the currency. If any cracks appeared in the system, i.e. inflation accelerated or taxation crept too high, I submit that any speed-wobble in confidence would lead to a dramatic and sudden, disorderly reassessment. A panic. It would be a genuine “life imitates The Onion” moment.

Were an MMT system inevitably go awry, the outward manifestation would be of course manifest as inflation, so central planners would of course try to get ahead of it by draining more liquidity, faster, by increasing taxes. As this fed on itself and accelerated, the populace, as if being swept up in a hyperinflation isn’t bad enough, would be sandwiched between hyperinflation and hypertaxation!.

Think of an MMT crisis as an economic black hole sucking all value from further and further future generations into a gravitational vortex of the present moment, where all value collapses in on itself and disappears forever.

People seem on board with OAC’s 70% marginal tax rate on highest earners but in a failing MMT regime the hypertaxation effect would occur through the highest marginal tax rate threshold coming down.

People don’t mind Dwayne Johnson paying 70% on his income over 10M, but how will they feel when they’re paying 70% on any income over 300,000? 100,000? 40,000? How about an 80% tax rate on income over $20,000/year and a loaf of bread costs $250 today and $3,500 in a week? (When your marginal tax rate is then 92% on all income over $1,000/minute?)

That’s what a nightmare MMT scenario looks like. At least in Venezuela they’re only getting squeezed on one side of the vice, and their central planners are trying to go the other direction than MMT-ers, attempting to tie their currency to something tangible (failure of execution however, is hampering this).

Compared to what I see as the inevitable “dual death spirals of MMT”, letting all those banksters fry in 2008 looks a lot more palatable in retrospect. David Stockman’s Great Deformation shows how the economy would have fully recovered by 2010 or 2011 instead of being where we are now: trapped at the Zero bound and headed toward democratic socialism and MMT.

Published:1/21/2019 7:44:12 PM
[Markets] Federal Reserve Confesses Sole Responsibility For All Recessions

Authored by David Haggith via The Great Recession blog,

In a surprisingly candid admission, two former Federal Reserve chairs have stated that the Federal Reserve alone is responsible for creating all recessions in the United States.

First, former Fed Chair Ben Bernanke said that

Expansions don’t die of old age. They get murdered.

To clarify this statement, former Chair Janet Yellen placed the murder weapon in the Fed’s hands:

Two things usually end them... One is financial imbalances, and the other is the Fed.

Think that through, and you quickly realize that both of those things are the Fed. Is there anyone left standing who would not say the Fed’s quantitative easing in the past decade was the biggest cause of financial imbalances all over the world in history? Moreover, whose profligate monetary policies led to the Great Financial Crisis that gave us the Great Recession?

So, the Fed loads the gun with financial causes and then pulls the trigger. In fact, I think it would be hard to find a major financial imbalance in the US that the Fed did not have a hand in creating or, at least, enabling. Therefore, if those are the only two causes, then it is always the Federal Reserve that causes recessions by its own admission.

And, yet, those Fed dons look so pleased with themselves.

Yellen went on to say that when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation and ends up overplaying its hand. (She didn’t mention that the Fed’s monetary policy may have a hand in creating financial imbalances.)

Exactly, nor did she mention that the inflation they were “forced” to curtail always happens because of financial imbalances the Fed created or enabled. That is why I call our expansion-recession cycles, rinse-and-repeat cycles. Therefore, the Fed is only forced by its own ill-conceived actions. First you have to create the imbalance, which causes the economy and stocks to inflate, then you have to pull the trigger to shoot that down by tightening into a recession, which the Fed always does:

Bernanke elaborated on Yellen’s point, accusing the central bank of, in essence, murder. It takes an aggressive act on the part of the monetary authority to bring an expanding economy to a halt and cause it to shift into reverse.

Yellen and Bernanke were speaking at the annual meeting of the American Economic Association in Atlanta earlier this month in the company of current Fed Chair Jerome Powell.

As I demonstrated in my two earlier articles this week (“Does Inverted Yield Curve Indicate Recession?” and “What is an inverted yield curve and what does it mean?“), the Fed carries out this act of econocide by getting the yield curve to invert via its forced interest changes. As shown in those articles, every recession has been immediately preceded by a Fed-created inversion of the yield curve — the Fed’s smoking gun.

The Fed Fix Is Almost In

As noted in those articles, today’s yield curve has already slipped into its penultimate inversion. First (on December third), three-year notes started paying more interest than five-year notes. (The five-year was at 2.83% interest, while the three-year hit just over that at 2.84%.) In essence, investors were betting the economy would be a tad better in five years than it would in three.

Within a matter of weeks, the three-year notes were paying more than seven-year notes. Then, just about Christmastime, they started paying more than eight-year notes, inverting the yield curve even further out. The orange recession indicator light comes on when they take the next step of paying more than ten-year notes; and above that we go full recessionary red! The first three came all within in a month, so the rest may come just as quickly.

In fact, we’re so close that one more rate increase by the Fed could pull the trigger. This is why Powell can be so reassuring about pulling back soon on targeted interest-rate increases. He knows he’s already operating with a hair trigger because of the Fed’s other tightening action in rolling bonds off of its balance sheet.

Like a skilled sharp-shooter, Powell recently said the Fed is “watching and waiting” before it pulls the trigger with its next rate increase. At the same time, he suggested his balance-sheet reduction won’t end for awhile (and, of course, the Fed knows that its balance sheet reduction is skewing the yield curve faster than the Fed’s targeted interest-rate increases.

I’ve said before that those interest-rate increases are now just playing verbal catch-up to what the balance sheet reduction is doing in the open market. In other words, the balance sheet reduction is pulling the Fed’s targeted interest rates up, regardless of what is says, so it is pressed to state it intends an increase just to keep up with the effects of balance-sheet reduction. Last summer the Fed tactic admitted this when…

The Fed raised the target range for its benchmark rate by a quarter point to 1.75 percent to 2 percent, but only increased the rate it pays banks on cash held with it overnight to 1.95 percent. The step was designed to keep the federal funds rate from rising above the target range. Previously, the Fed set the rate of interest on reserves at the top of the target range. -Bloomberg

In other words, the Fed had to change the way it calibrates some interest rates because other factors than their change in their stated target rate were driving rates up. In order to keep bank demand for Fed funds from pushing the rate above 2%, the Fed set its stated rate at 1.95% to create some headroom. That’s explained as…

Officials have said that, as they drain cash from the system by shrinking the balance sheet, a rise in the federal funds rate within their target range would be an important sign that liquidity is becoming scarce…. The increase appears to be mainly driven by another factor: the U.S. Treasury ramped up issuance of short-term U.S. government bills, which drove up yields on those and other competing assets, including in the overnight market.

And that is what is now happening, but they are still planning to keep tightening by reducing their balance sheet. What is not said there is that the major reason the US Treasury is ramping up its issuance of government bills is that the Fed’s unwind is forcing them to refinance maturing bills on the open market as the Fed now refuses to refi those bills. I’ve maintained for a couple of years that the unwind will drive up other interest rates, causing problems throughout the economy.

Gunsmoke And Mirrors

So, the Fed’s recent talk about reducing the number of rate increases in the Fed’s interest target is slight of hand because the Fed’s unwind is doing the heavy lifting here, driving up rates faster than the Fed changes its stated target rate. Powell assures everyone the Fed will slow down its interest-rate increases, even as the Fed pushes right ahead with its balance-sheet unwind, which is doing the most to invert the yield curve.

Powells only defense against concerns expressed about balance-sheet reduction was…

“We are looking carefully at that, and the truth is, we don’t know with any precision,” Fed Chairman Jerome Powell told reporters on Wednesday when asked about the increase. “Really, no one does. You can’t run experiments with one effect and not the other.”

Not too reassuring to hear the Fed Head say no one really has any idea what impact its balance-sheet unwind will have on other interest rates. Does the Fed not know, or does the Fed just not want to say what it does know?

For additional cover as to whether the yield-curve inversions the Fed creates will cause a recession this time as they did in all previous times, Yellen, protested, as I noted in an earlier article this week, that this time is different:

Now there is a strong correlation historically between yield curve inversions and recessions, but let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.

It’s not every day that the Fed admits total culpability for the death of every expansionary period. Nor that it admits that the inflation its expansionist monetary policies create force it to become the culprit. Nor that it routinely overplays its hand.

Apparently, the Fed Heads are so comfortable with all of this (hence the smarmy looks in their photos above) that the economic murderers can confess in broad daylight every murder they are responsible for with complete impunity, even as they tell you where the bodies are buried. However, because they still have their next economic massacre to commit right before your eyes and don’t want you to stop them, they wish to assure you that “we can’t possibly know what will happen” now or “this time is different. Things have changed.”

The words “I can’t know what will happen” when a gunslinger is twirling his cocked and loaded pistol with his finger on the trigger, should not give you comfort.

Perhaps all these confession now will enable them to smile even bigger when the slaughter is over, and they know they did it this time in broad daylight.

Of course, there is one major difference this time. In all previous times, the Fed didn’t have the most massive balance-sheet unwind pushing interest rates all around so it had to rely more on its conventional tool of incremental changes in the its targeted interest rate. The new existence of that big gun mean it can who you it is putting away the little gun to disarm you because it has a cannon pointing at you from just inside the woods to your left. Thus, Powell said disarmingly,

More rate hikes wasn’t a pre-set plan and the forecast of two moves was conditional on a “very strong outlook for 2019.” - MarketWatch

In other words, keep your eye on the rate hikes I keep talking about (the little gun), not on the big balance sheet reductions that we put on autopilot so we don’t have to talk about them. Like a great hunter, Powell said the Fed can be patient.

Some analysts believe the Fed’s runoff of its balance sheet is hurting financial markets and want the central bank to end the program.

Gee, ya think? A runoff that intends to force the US government to refinance an additional $2 trillion over the next 3-4 years on the open market might be hurting financial markets more than a quarter-point increase in the Fed’s interest target every few months?

One analyst who disagrees with Powell is Peter Boockvar, chief investment officer at Bleakley Advisory Group:

“It’s no coincidence that accidents begin to pick-up the deeper you get into tightening … QE inflated markets to very high valuations. It’s wishful thinking to believe QT isn’t going to have an impact.”

By shrinking its balance sheet, the Fed is draining the liquidity that sent stocks booming. - CNN

Some of the Fed’s colleagues at other central banks also agree and express concern about what this will do to them:

Last month, Irjit Patel, the governor of the Reserve Bank of India, pleaded with the Fed to slow plans to shrink its balance sheet. If the Fed doesn’t shift course, “a crisis in the rest of the dollar bond markets is inevitable,” he wrote in an op-ed in the Financial Times.

Other Fed members are just as aware of the Fed’s institutional murder rates as Bernanke and Yellen. St. Louis Fed President James Bullard told the Wall Street Journal this month that a recessionary risk is being telegraphed by what is now happening in the yield curve and that the Fed is causing the flattening of the curve toward inversion. So, these guys all appear to be well aware of what they are doing.

However, to maintain the distraction, Bullard also said,

In separate remarks to reporters …. he was open to a revisiting the balance sheet runoff but doesn’t think it is damaging markets as some argue. Bullard [said] that if the balance sheet runoff was impacting bond market as some suggest, then yields would be moving higher instead of the steady decline seen since November.

The latter would be happening, except that money has been pouring rapidly out of stocks and into bonds due to the rate increases the unwind created in September and October. What he ignores is the fact that rate increases were so substantial they sucked massive amounts of money out of the stock market in a flood of capital flight because all of a sudden treasury interest looked quite enticing. That, of course, pushed those rates down some in November.

So, “Nothing to see there, folks. Keep your eye on the little gun; and, oh, did we tell you that we have murdered every economic expansion in history?”

Who’s your daddy?

Now that we’ve heard the confessions from the murderers and have experienced the diversions that will allow the next murder to happen as much in plain sight as the confessions just happened, let’s look at the case from another angle: What has been keeping the stock market alive and hopping over the past decade?

Let me lay out evidence that it is clearly the Fed.

Exhibit A: What turned around the market’s major crash in 2009? The Fed’s QE1. Does anyone think the market would have turned around without that massive intervention? Was that intervention with hundreds of billions of dollars mere window-dressing, or was it the greatest financial intervention to a financial crisis the world had ever seen?

Exhibit B: What turned the market around the next time it “corrected” as soon as QE1 ended? Was it not instant QE2? More hundreds of billions of dollars?

Exhibit C: What saved the market when Republicans played roulette with the nation’s credit rating in the summer of 2011 and shot themselves in the foot politically when Standard & Poor’s gave the nation its first credit downgrade before Republicans even had the chance to let the nation default? Was it not the immediate promise of an ever bigger, indefinitely ongoing new kind of QE called Operation Twist, which morphed into QE3?

Exhibit D: Then, when markets tumbled in 2015 and 2016, because the Fed was backing off from monetary stimulus, their colleagues in other countries jumped in with their own QE. More than $5 trillion worth in 2016! All told, the world’s central banks have pumped in $15 trillion since then.

But now they are all stopping!

Exhibit E: The prosecution presents a full picture of all central-bank stock salvation:

The Fed may claim that it does not attempt to rescue markets and that it looks only at economic indicators, yet somehow every time the market took a major plunge in the graph above, the Fed was instantly on the scene with a new invention of monetary stimulus in massive doses. Of course, “correlation is not causation.” Correlation is pretty interesting, though, especially when it happens at every plunge, except the one at the top that is plunging much further than any other time on this graph … because one thing IS different: No one is stepping in with salvation this time.

If the Fed has been the salvation of the market again and again, lifting it higher and higher, what happens if the Fed and other CBs let the stock market drop? Do you think they won’t do that? The highest authorities in the Fed just told you they did it every other time. First, they create massive “financial instability,” as Yellen said, otherwise known as “bubbles,” which grow due to the Fed’s infinite capacity to create monetary stimulus. They let these grow until inflation finally “forces” them to tighten until they crash them.

The prosecution presents Exhibit F:

This one is the Fed and all its major partners in crime. When did stock markets start to plunge all over the world? Wasn’t it as soon as global QT started to reverse at the end of that graph in 2018? Ah, but “correlation is not causation.” Except that it kind of is when you keep finding correlation everywhere you turn.

If the defense wants to argue the US market is not utterly dependent on the Fed’s constant protection, let me ask, “What did the market do in September of 2018 when the Fed removed one little word from its market-soothing speeches? Accommodative. Just as it watched its balance sheet-reduction up to full rewind speed.” It took its biggest plunge by far in the entire ten-year recovery period. As nearly everyone was saying, nothing bad suddenly emerged in the economy. All that changed was the Fed to merely implying it would be less accommodative to market concerns as it moved to full unwind.

If you still think the Fed isn’t going to kill the economy this time, I have one more question for you: When was the last time the Fed raised rates in the middle of a major market “correction?” How about never. Yet, now it is raising rates and reducing money supply via balance-sheet reduction at the same time that it hints it is removing accommodation.

But balance-sheet reduction doesn’t matter, right?

“We don’t believe that our issuance [new bond to replace those rolling off the balance sheet] is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said. “If we came to the view that the balance sheet normalization plan — or any other aspect of normalization — was part of the problem, we wouldn’t hesitate to make a change.” - MarketWatch

In other words, “Don’t look at the big gun. Nothing to see there.” Said the people who have just told you that none of their expansions ever ended until they murdered it!

Does the Fed have motive?

Don’t ask me why the Fed will kill its own recovery. It is enough that it admits it always does. So, I’ll leave determining which of the many possible “why’s” up to you. Maybe the Fed will cop an insanity plea and say that even it doesn’t know why it does the things it does. Whatever their actual motive, this sure has the Fed’s unswerving M.O. all over it. It has their fingerprints and their multiple confessions of guilt.

Still, let me lay out a couple of motives that are popular among those many people attribute to the Fed just to show there are plenty of possible motives out there:

Maybe the Fed’s member banks, who own and run the Fed (as its only shareholders and as governing board members who have huge influence over who the additional government-appointed board members are), like to repossess things. That would be a motive.

Or maybe they want to create a new cashless, digital, global monetary system. That would be a motive.

Or maybe, if they can crash things as perennially as Japan has done for score or more of years, they can get permission to start buying stocks directly, and use their infinite money supply, as Japan, has done to take major ownership in all the stocks of the nation.

Numerous conspiracy theories spend entire books making a strong case for different motives. I won’t land on one, but will note that all that matters is that there are plenty of motives to choose from.

Sure, Yellen protested that “correlation isn’t causation,” but, on the other, she admitted causation by saying that, when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation — inflation that only the Fed causes by creating trillions of dollars monetary stimulus. There only struggle this time to stay within their M.O. is that they have failed to create inflation in the general economy that they are supposed to govern. Maybe that is why they have pushed the expansion into the longest in history because they are obsessed with following their usual M.O., and inflation didn’t cooperate this time to “force” them to tighten into recession (their cover story).

So, we have multiple confessions of murder by known Fed ringleaders. We have numerous pieces of circumstantial evidence that support their confessions. We have many possible motives. And, even the fact that the Fed continued pushing expansion longer than it has with more and more rounds of QE can be explained by its M.O. How many times has the Fed said they don’t understand why they couldn’t get inflation to rise to their 2% target for years. They could hardly claim inflation concerns when everyone knew CPI was under the target they’ve always said they want. Now it’s there. So, everything is in place.

I rest my case.

Published:1/21/2019 2:42:41 PM
[Markets] A Call To Reinvestigate American Assassinations


On the occasion of Martin Luther King Jr. Day, a group of over 60 prominent American citizens is calling upon Congress to reopen the investigations into the assassinations of President John F. KennedyMalcolm XMartin Luther King Jr., and Senator Robert F. Kennedy.

Signers of the joint statement include Isaac Newton Farris Jr., nephew of Reverend King and past president of the Southern Christian Leadership Conference; Reverend James M. Lawson Jr., a close collaborator of Reverend King; and Robert F. Kennedy Jr. and Kathleen Kennedy Townsend, children of the late senator. The declaration is also signed by numerous historians, journalists, lawyers and other experts on the four major assassinations. 

Other signatories include G. Robert Blakey, the chief counsel of the House Select Committee on Assassinations, which determined in 1979 that President Kennedy was the victim of a probable conspiracy; Dr. Robert McClelland, one of the surgeons at Parkland Memorial Hospital in Dallas who tried to save President Kennedy’s life and saw clear evidence he had been struck by bullets from the front and the rear; Daniel Ellsberg, the Pentagon Papers whistleblower who served as a national security advisor to the Kennedy White House; Richard Falk, professor emeritus of international law at Princeton University and a leading global authority on human rights; Hollywood artists Alec BaldwinMartin SheenRob Reiner and Oliver Stone; political satirist Mort Sahl; and musician David Crosby.

JFK: November 22, 1963.

The joint statement calls for Congress to establish firm oversight on the release of all government documents related to the Kennedy presidency and assassination, as mandated by the JFK Records Collection Act of 1992. This public transparency law has been routinely defied by the CIA and other federal agencies. The Trump White House has allowed the CIA to continue its defiance of the law, even though the JFK Records Act called for the full release of relevant documents in 2017.

The group statement also calls for a public inquest into “the four major  assassinations of the 1960s that together had a disastrous impact on the course of American history.” This tribunal – which would hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims – would be modeled on the Truth and Reconciliation hearings held in South Africa after the fall of apartheid. This American Truth and Reconciliation process is intended to encourage Congress or the Justice Department to reopen investigations into all four organized acts of political violence.

Signers of the joint statement, who call themselves the Truth and Reconciliation Committee, are also seeking to reopen the Robert F. Kennedy assassination case, stating that Sirhan Sirhan’s conviction was based on “a mockery of a trial.” The forensic evidence alone, observes the statement, demonstrates that Sirhan did not fire the fatal shot that killed Senator Kennedy – a conclusion reached by, among others, Dr. Thomas Noguchi, the Los Angeles County Coroner who performed the official autopsy on RFK.

The joint statement — which was co-written by Adam Walinsky, a speechwriter and top aide of Senator Kennedy — declares that these

Four major political murders traumatized American life in the 1960s and cast a shadow over the country for decades thereafter. John F. KennedyMalcolm XMartin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.”

The Truth and Reconciliation Committee views its joint statement as the opening of a long campaign aimed at shining a light on dark national secrets. As the public transparency campaign proceeds, citizens across the country will be encouraged to add their names to the petition. The national effort seeks to confront the forces behind America’s democratic decline, a reign of secretive power that long precedes the recent rise of authoritarianism. “The organized killing of JFK, Malcolm, Martin, and RFK was a mortal attack on our democracy,” said historian James W. Douglass, author of JFK and the Unspeakable: Why He Died and Why It Matters (2010).

“We’ve been walking in the valley of the dead ever since. Our campaign is all about recovering the truth embodied in the movement they led. Yes, the transforming, reconciling power of truth will indeed set us free.”

The Truth and Reconciliation Committee’s Calls for Action:

MLK Jr.: April 4, 1968 (Wikimedia Commons)

*  We call upon Congress to establish continuing oversight on the release of government documents related to the presidency and assassination of President John F. Kennedy, to ensure public transparency as mandated by the JFK Records Collection Act of 1992. The House Committee on Oversight and Government Reform should hold hearings on the Trump administration’s failure to enforce the JFK Records Act.

*  We call for a major public inquest on the four major assassinations of the 1960s that together had a disastrous impact on the course of American history: the murders of John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy. This public tribunal, shining a light on this dark chapter of our history, will be modeled on the Truth and Reconciliation process in post-apartheid South Africa. The inquest — which will hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims — is intended to show the need for Congress or the Justice Department to reopen investigations into all four assassinations.

* On Martin Luther King Jr. Day, we call for a full investigation of Reverend King’s assassination. The conviction of James Earl Ray for the crime has steadily lost credibility over the years, with a 1999 civil trial brought by Reverend King’s family placing blame on government agencies and organized crime elements. Following the verdict, Coretta Scott King, the slain leader’s widow, stated: “There is abundant evidence of a major, high-level conspiracy in the assassination of my husband.” The jury in the Memphis trial determined that various federal, state and local agencies “were deeply involved in the assassination … Mr. Ray was set up to take the blame.” Reverend King’s assassination was the culmination of years of mounting surveillance and harassment directed at the human rights leader by J. Edgar Hoover’s FBI and other agencies.

*  We call for a full investigation of the Robert F. Kennedy assassination case, the prosecution of which was a mockery of a trial that has been demolished by numerous eyewitnesses, investigators and experts — including former Los Angeles County Coroner Dr. Thomas Noguchi, who performed the official autopsy on Senator Kennedy. The forensic evidence alone establishes that the shots fired by Sirhan Sirhan from in front of Senator Kennedy did not kill him; the fatal shot that struck RFK in the head was fired at point–blank range from the rear. Consequently, the case should be reopened for a new comprehensive investigation while there are still living witnesses — as there are in all four assassination cases.

A Joint Statement on the Kennedy, King and Malcolm X Assassinations and Ongoing Cover-ups:

1. As the House Select Committee on Assassinations concluded in 1979, President John F. Kennedy was probably killed as the result of a conspiracy.

2. In the four decades since this Congressional finding, a massive amount of evidence compiled by journalists, historians and independent researchers confirms this conclusion. This growing body of evidence strongly indicates that the conspiracy to assassinate President Kennedy was organized at high levels of the U.S. power structure, and was implemented by top elements of the U.S. national security apparatus using, among others, figures in the criminal underworld to help carry out the crime and cover-up.

RFK: June 5, 1968.

3. This stunning conclusion was also reached by the president’s own brother, Attorney General Robert F. Kennedy, who himself was assassinated in 1968 while running for president – after telling close aides that he intended to reopen the investigation into his brother’s murder if he won the election.

4. President Kennedy’s administration was badly fractured over his efforts to end the Cold War, including his back-channel peace feelers to the Soviet Union and Cuba and his plan to withdraw U.S. troops from Vietnam after the 1964 presidential election.

5. President Kennedy has long been portrayed as a Cold War hawk, but this grossly inaccurate view has been strongly challenged over the years by revisionist historians and researchers, who have demonstrated that Kennedy was frequently at odds with his own generals and espionage officials. This revisionist interpretation of the Kennedy presidency is now widely embraced, even by mainstream Kennedy biographers.

6. The official investigation into the JFK assassination immediately fell under the control of U.S. security agencies, ensuring a cover-up. The Warren Commission was dominated by former CIA director Allen Dulles and other officials with strong ties to the CIA and FBI.

7. The corporate media, with its own myriad connections to the national security establishment, aided the cover-up with its rush to embrace the Warren Report and to scorn any journalists or researchers who raised questions about the official story.

8. Despite the massive cover-up of the JFK assassination, polls have consistently shown that a majority of the American people believes Kennedy was the victim of a conspiracy — leading to the deep erosion of confidence in the U.S. government and media.

Malcolm X: February 21, 1965.

9. The CIA continues to obstruct evidence about the JFK assassination, routinely blocking legitimate Freedom of Information requests and defying the JFK Records Collection Act of 1992, preventing the release of thousands of government documents as required by the law.

10. The JFK assassination was just one of four major political murders that traumatized American life in the 1960s and have cast a shadow over the country for decades thereafter. John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.

Published by Spartacus Educational.

Published:1/21/2019 9:11:15 AM
[Markets] The 'Gilets Jaunes' Are Unstoppable: "Now, The Elites Are Afraid"

Authored by Christophe Guilluy via,

The gilets jaunes (yellow vest) movement has rattled the French establishment. For several months, crowds ranging from tens of thousands to hundreds of thousands have been taking to the streets every weekend across the whole of France. They have had enormous success, extracting major concessions from the government. They continue to march.

Back in 2014, geographer Christopher Guilluy’s study of la France périphérique (peripheral France) caused a media sensation. It drew attention to the economic, cultural and political exclusion of the working classes, most of whom now live outside the major cities. It highlighted the conditions that would later give rise to the yellow-vest phenomenon. Guilluy has developed on these themes in his recent books, No Society and The Twilight of the Elite: Prosperity, the Periphery and the Future of Francespiked caught up with Guilluy to get his view on the causes and consequences of the yellow-vest movement.

spiked: What exactly do you mean by ‘peripheral France’?

Christophe Guilluy: ‘Peripheral France’ is about the geographic distribution of the working classes across France. Fifteen years ago, I noticed that the majority of working-class people actually live very far away from the major globalised cities – far from Paris, Lyon and Toulouse, and also very far from London and New York.

Technically, our globalised economic model performs well. It produces a lot of wealth. But it doesn’t need the majority of the population to function. It has no real need for the manual workers, labourers and even small-business owners outside of the big cities. Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.

They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.

spiked: What is the role of culture in the yellow-vest movement?

Guilluy: Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. The yellow-vest movement is a truly 21st-century movement in that it is cultural as well as political. Cultural validation is extremely important in our era.

One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.

The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world.

spiked: How have the working-classes come to be excluded?

Guilluy: All the growth and dynamism is in the major cities, but people cannot just move there. The cities are inaccessible, particularly thanks to mounting housing costs. The big cities today are like medieval citadels. It is like we are going back to the city-states of the Middle Ages. Funnily enough, Paris is going to start charging people for entry, just like the excise duties you used to have to pay to enter a town in the Middle Ages.

The cities themselves have become very unequal, too. The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people.

spiked: What role has the liberal metropolitan elite played in this?

Guilluy: We have a new bourgeoisie, but because they are very cool and progressive, it creates the impression that there is no class conflict anymore. It is really difficult to oppose the hipsters when they say they care about the poor and about minorities.

But actually, they are very much complicit in relegating the working classes to the sidelines. Not only do they benefit enormously from the globalised economy, but they have also produced a dominant cultural discourse which ostracises working-class people. Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.

The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.

Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.

A lot has been made of the fact that the yellow vests’ demands vary a great deal. But above all, it’s a demand for democracy. Fundamentally, they are democrats – they want to be taken seriously and they want to be integrated into the economic order.

spiked: How can we begin to address these demands?

Guilluy: First of all, the bourgeoisie needs a cultural revolution, particularly in universities and in the media. They need to stop insulting the working class, to stop thinking of all the gilets jaunes as imbeciles.

Cultural respect is fundamental: there will be no economic or political integration until there is cultural integration. Then, of course, we need to think differently about the economy. That means dispensing with neoliberal dogma. We need to think beyond Paris, London and New York.

Published:1/21/2019 7:40:36 AM
[Markets] "The Goal Is To Automate Us" - Welcome To The Age Of Surveillance Capitalism

Shoshana Zuboff’s new book is a chilling exposé of the business model that underpins the digital world. Observer tech columnist John Naughton explains the importance of Zuboff’s work and asks the author 10 key questions...

‘Technology is the puppet, but surveillance capitalism is the puppet master.’ Photograph: Getty Images

Via The Guardian,

We’re living through the most profound transformation in our information environment since Johannes Gutenberg’s invention of printing in circa 1439. And the problem with living through a revolution is that it’s impossible to take the long view of what’s happening. Hindsight is the only exact science in this business, and in that long run we’re all dead. Printing shaped and transformed societies over the next four centuries, but nobody in Mainz (Gutenberg’s home town) in, say, 1495 could have known that his technology would (among other things): fuel the Reformation and undermine the authority of the mighty Catholic church; enable the rise of what we now recognise as modern science; create unheard-of professions and industries; change the shape of our brains; and even recalibrate our conceptions of childhood. And yet printing did all this and more.

Why choose 1495? Because we’re about the same distance into our revolution, the one kicked off by digital technology and networking. And although it’s now gradually dawning on us that this really is a big deal and that epochal social and economic changes are under way, we’re as clueless about where it’s heading and what’s driving it as the citizens of Mainz were in 1495.

That’s not for want of trying, mind. Library shelves groan under the weight of books about what digital technology is doing to us and our world. Lots of scholars are thinking, researching and writing about this stuff. But they’re like the blind men trying to describe the elephant in the old fable: everyone has only a partial view, and nobody has the whole picture. So our contemporary state of awareness is – as Manuel Castells, the great scholar of cyberspace once put it – one of “informed bewilderment”.

Which is why the arrival of Shoshana Zuboff’s new book is such a big event. Many years ago – in 1988, to be precise – as one of the first female professors at Harvard Business School to hold an endowed chair she published a landmark book, The Age of the Smart Machine: The Future of Work and Power, which changed the way we thought about the impact of computerisation on organisations and on work. It provided the most insightful account up to that time of how digital technology was changing the work of both managers and workers. And then Zuboff appeared to go quiet, though she was clearly incubating something bigger. The first hint of what was to come was a pair of startling essays – one in an academic journal in 2015, the other in a German newspaper in 2016. What these revealed was that she had come up with a new lens through which to view what Google, Facebook et al were doing – nothing less than spawning a new variant of capitalism. Those essays promised a more comprehensive expansion of this Big Idea.

And now it has arrived – the most ambitious attempt yet to paint the bigger picture and to explain how the effects of digitisation that we are now experiencing as individuals and citizens have come about.

The headline story is that it’s not so much about the nature of digital technology as about a new mutant form of capitalism that has found a way to use tech for its purposes. The name Zuboff has given to the new variant is “surveillance capitalism”. It works by providing free services that billions of people cheerfully use, enabling the providers of those services to monitor the behaviour of those users in astonishing detail – often without their explicit consent.

“Surveillance capitalism,” she writes, “unilaterally claims human experience as free raw material for translation into behavioural data. Although some of these data are applied to service improvement, the rest are declared as a proprietary behavioural surplus, fed into advanced manufacturing processes known as ‘machine intelligence’, and fabricated into prediction products that anticipate what you will do now, soon, and later. Finally, these prediction products are traded in a new kind of marketplace that I call behavioural futures markets. Surveillance capitalists have grown immensely wealthy from these trading operations, for many companies are willing to lay bets on our future behaviour.”

While the general modus operandi of Google, Facebook et al has been known and understood (at least by some people) for a while, what has been missing – and what Zuboff provides – is the insight and scholarship to situate them in a wider context. She points out that while most of us think that we are dealing merely with algorithmic inscrutability, in fact what confronts us is the latest phase in capitalism’s long evolution – from the making of products, to mass production, to managerial capitalism, to services, to financial capitalism, and now to the exploitation of behavioural predictions covertly derived from the surveillance of users. In that sense, her vast (660-page) book is a continuation of a tradition that includes Adam Smith, Max Weber, Karl Polanyi and – dare I say it – Karl Marx.

Viewed from this perspective, the behaviour of the digital giants looks rather different from the roseate hallucinations of Wired magazine. What one sees instead is a colonising ruthlessness of which John D Rockefeller would have been proud. First of all there was the arrogant appropriation of users’ behavioural data – viewed as a free resource, there for the taking. Then the use of patented methods to extract or infer data even when users had explicitly denied permission, followed by the use of technologies that were opaque by design and fostered user ignorance.

And, of course, there is also the fact that the entire project was conducted in what was effectively lawless – or at any rate law-free – territory. Thus Google decided that it would digitise and store every book ever printed, regardless of copyright issues. Or that it would photograph every street and house on the planet without asking anyone’s permission. Facebook launched its infamous “beacons”, which reported a user’s online activities and published them to others’ news feeds without the knowledge of the user. And so on, in accordance with the disrupter’s mantra that “it is easier to ask for forgiveness than for permission”.

When the security expert Bruce Schneier wrote that “surveillance is the business model of the internet” he was really only hinting at the reality that Zuboff has now illuminated. The combination of state surveillance and its capitalist counterpart means that digital technology is separating the citizens in all societies into two groups: the watchers (invisible, unknown and unaccountable) and the watched. This has profound consequences for democracy because asymmetry of knowledge translates into asymmetries of power. But whereas most democratic societies have at least some degree of oversight of state surveillance, we currently have almost no regulatory oversight of its privatised counterpart. This is intolerable.

And it won’t be easy to fix because it requires us to tackle the essence of the problem – the logic of accumulation implicit in surveillance capitalism. That means that self-regulation is a nonstarter.

“Demanding privacy from surveillance capitalists,” says Zuboff, “or lobbying for an end to commercial surveillance on the internet is like asking old Henry Ford to make each Model T by hand. It’s like asking a giraffe to shorten its neck, or a cow to give up chewing. These demands are existential threats that violate the basic mechanisms of the entity’s survival.”

The Age of Surveillance Capital is a striking and illuminating book. A fellow reader remarked to me that it reminded him of Thomas Piketty’s magnum opus, Capital in the Twenty-First Century, in that it opens one’s eyes to things we ought to have noticed, but hadn’t. And if we fail to tame the new capitalist mutant rampaging through our societies then we will only have ourselves to blame, for we can no longer plead ignorance.

Ten questions for Shoshana Zuboff: ‘Larry Page saw that human experience could be Google’s virgin wood’

John Naughton: At the moment, the world is obsessed with Facebook. But as you tell it, Google was the prime mover.

Shoshana Zuboff: Surveillance capitalism is a human creation. It lives in history, not in technological inevitability. It was pioneered and elaborated through trial and error at Google in much the same way that the Ford Motor Company discovered the new economics of mass production or General Motors discovered the logic of managerial capitalism.

Surveillance capitalism was invented around 2001 as the solution to financial emergency in the teeth of the dotcom bust when the fledgling company faced the loss of investor confidence. As investor pressure mounted, Google’s leaders abandoned their declared antipathy toward advertising. Instead they decided to boost ad revenue by using their exclusive access to user data logs (once known as “data exhaust”) in combination with their already substantial analytical capabilities and computational power, to generate predictions of user click-through rates, taken as a signal of an ad’s relevance.

Operationally this meant that Google would both repurpose its growing cache of behavioural data, now put to work as a behavioural data surplus, and develop methods to aggressively seek new sources of this surplus.

The company developed new methods of secret surplus capture that could uncover data that users intentionally opted to keep private, as well as to infer extensive personal information that users did not or would not provide. And this surplus would then be analysed for hidden meanings that could predict click-through behaviour. The surplus data became the basis for new predictions markets called targeted advertising.

Sheryl Sandberg, says Zuboff, played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook. Photograph: John Lee for the Guardian

Here was the origin of surveillance capitalism in an unprecedented and lucrative brew: behavioural surplus, data science, material infrastructure, computational power, algorithmic systems, and automated platforms. As click-through rates skyrocketed, advertising quickly became as important as search. Eventually it became the cornerstone of a new kind of commerce that depended upon online surveillance at scale.

The success of these new mechanisms only became visible when Google went public in 2004. That’s when it finally revealed that between 2001 and its 2004 IPO, revenues increased by 3,590%.

JN: So surveillance capitalism started with advertising, but then became more general?

SZ: Surveillance capitalism is no more limited to advertising than mass production was limited to the fabrication of the Ford Model T. It quickly became the default model for capital accumulation in Silicon Valley, embraced by nearly every startup and app. And it was a Google executive – Sheryl Sandberg – who played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook, when she signed on as Mark Zuckerberg’s number two in 2008. By now it’s no longer restricted to individual companies or even to the internet sector. It has spread across a wide range of products, services, and economic sectors, including insurance, retail, healthcare, finance, entertainment, education, transportation, and more, birthing whole new ecosystems of suppliers, producers, customers, market-makers, and market players. Nearly every product or service that begins with the word “smart” or “personalised”, every internet-enabled device, every “digital assistant”, is simply a supply-chain interface for the unobstructed flow of behavioural data on its way to predicting our futures in a surveillance economy.

JN: In this story of conquest and appropriation, the term “digital natives” takes on a new meaning…

SZ: Yes, “digital natives” is a tragically ironic phrase. I am fascinated by the structure of colonial conquest, especially the first Spaniards who stumbled into the Caribbean islands. Historians call it the “conquest pattern”, which unfolds in three phases: legalistic measures to provide the invasion with a gloss of justification, a declaration of territorial claims, and the founding of a town to legitimate the declaration. Back then Columbus simply declared the islands as the territory of the Spanish monarchy and the pope.

The sailors could not have imagined that they were writing the first draft of a pattern that would echo across space and time to a digital 21st century. The first surveillance capitalists also conquered by declaration. They simply declared our private experience to be theirs for the taking, for translation into data for their private ownership and their proprietary knowledge. They relied on misdirection and rhetorical camouflage, with secret declarations that we could neither understand nor contest.

Google began by unilaterally declaring that the world wide web was its to take for its search engine. Surveillance capitalism originated in a second declaration that claimed our private experience for its revenues that flow from telling and selling our fortunes to other businesses. In both cases, it took without asking. Page [Larry, Google co-founder] foresaw that surplus operations would move beyond the online milieu to the real world, where data on human experience would be free for the taking. As it turns out his vision perfectly reflected the history of capitalism, marked by taking things that live outside the market sphere and declaring their new life as market commodities.

We were caught off guard by surveillance capitalism because there was no way that we could have imagined its action, any more than the early peoples of the Caribbean could have foreseen the rivers of blood that would flow from their hospitality toward the sailors who appeared out of thin air waving the banner of the Spanish monarchs. Like the Caribbean people, we faced something truly unprecedented.

Once we searched Google, but now Google searches us. Once we thought of digital services as free, but now surveillance capitalists think of us as free.

JN: Then there’s the “inevitability” narrative – technological determinism on steroids.

SZ: In my early fieldwork in the computerising offices and factories of the late 1970s and 80s, I discovered the duality of information technology: its capacity to automate but also to “informate”, which I use to mean to translate things, processes, behaviours, and so forth into information. This duality set information technology apart from earlier generations of technology: information technology produces new knowledge territories by virtue of its informating capability, always turning the world into information. The result is that these new knowledge territories become the subject of political conflict. The first conflict is over the distribution of knowledge: “Who knows?” The second is about authority: “Who decides who knows?” The third is about power: “Who decides who decides who knows?”

Now the same dilemmas of knowledge, authority and power have surged over the walls of our offices, shops and factories to flood each one of us… and our societies. Surveillance capitalists were the first movers in this new world. They declared their right to know, to decide who knows, and to decide who decides. In this way they have come to dominate what I call “the division of learning in society”, which is now the central organising principle of the 21st-century social order, just as the division of labour was the key organising principle of society in the industrial age.

JN: So the big story is not really the technology per se but the fact that it has spawned a new variant of capitalism that is enabled by the technology?

SZ: Larry Page grasped that human experience could be Google’s virgin wood, that it could be extracted at no extra cost online and at very low cost out in the real world. For today’s owners of surveillance capital the experiential realities of bodies, thoughts and feelings are as virgin and blameless as nature’s once-plentiful meadows, rivers, oceans and forests before they fell to the market dynamic. We have no formal control over these processes because we are not essential to the new market action. Instead we are exiles from our own behaviour, denied access to or control over knowledge derived from its dispossession by others for others. Knowledge, authority and power rest with surveillance capital, for which we are merely “human natural resources”. We are the native peoples now whose claims to self-determination have vanished from the maps of our own experience.

While it is impossible to imagine surveillance capitalism without the digital, it is easy to imagine the digital without surveillance capitalism. The point cannot be emphasised enough: surveillance capitalism is not technology. Digital technologies can take many forms and have many effects, depending upon the social and economic logics that bring them to life. Surveillance capitalism relies on algorithms and sensors, machine intelligence and platforms, but it is not the same as any of those.

JN: Where does surveillance capitalism go from here?

SZ: Surveillance capitalism moves from a focus on individual users to a focus on populations, like cities, and eventually on society as a whole. Think of the capital that can be attracted to futures markets in which population predictions evolve to approximate certainty.

This has been a learning curve for surveillance capitalists, driven by competition over prediction products. First they learned that the more surplus the better the prediction, which led to economies of scale in supply efforts. Then they learned that the more varied the surplus the higher its predictive value. This new drive toward economies of scope sent them from the desktop to mobile, out into the world: your drive, run, shopping, search for a parking space, your blood and face, and always… location, location, location.

The evolution did not stop there. Ultimately they understood that the most predictive behavioural data comes from what I call “economies of action”, as systems are designed to intervene in the state of play and actually modify behaviour, shaping it toward desired commercial outcomes. We saw the experimental development of this new “means of behavioural modification” in Facebook’s contagion experiments and the Google-incubated augmented reality game Pokémon Go.

Democracy has slept, while surveillance capitalists amassed unprecedented concentrations of knowledge and power

- Shoshana Zuboff

It is no longer enough to automate information flows about us; the goal now is to automate us. These processes are meticulously designed to produce ignorance by circumventing individual awareness and thus eliminate any possibility of self-determination. As one data scientist explained to me, “We can engineer the context around a particular behaviour and force change that way… We are learning how to write the music, and then we let the music make them dance.”

This power to shape behaviour for others’ profit or power is entirely self-authorising. It has no foundation in democratic or moral legitimacy, as it usurps decision rights and erodes the processes of individual autonomy that are essential to the function of a democratic society. The message here is simple: Once I was mine. Now I am theirs.

JN: What are the implications for democracy?

SZ: During the past two decades surveillance capitalists have had a pretty free run, with hardly any interference from laws and regulations. Democracy has slept while surveillance capitalists amassed unprecedented concentrations of knowledge and power. These dangerous asymmetries are institutionalised in their monopolies of data science, their dominance of machine intelligence, which is surveillance capitalism’s “means of production”, their ecosystems of suppliers and customers, their lucrative prediction markets, their ability to shape the behaviour of individuals and populations, their ownership and control of our channels for social participation, and their vast capital reserves. We enter the 21st century marked by this stark inequality in the division of learning: they know more about us than we know about ourselves or than we know about them. These new forms of social inequality are inherently antidemocratic.

At the same time, surveillance capitalism diverges from the history of market capitalism in key ways, and this has inhibited democracy’s normal response mechanisms. One of these is that surveillance capitalism abandons the organic reciprocities with people that in the past have helped to embed capitalism in society and tether it, however imperfectly, to society’s interests. First, surveillance capitalists no longer rely on people as consumers. Instead, supply and demand orients the surveillance capitalist firm to businesses intent on anticipating the behaviour of populations, groups and individuals. Second, by historical standards the large surveillance capitalists employ relatively few people compared with their unprecedented computational resources. General Motors employed more people during the height of the Great Depression than either Google or Facebook employs at their heights of market capitalisation. Finally, surveillance capitalism depends upon undermining individual self-determination, autonomy and decision rights for the sake of an unobstructed flow of behavioural data to feed markets that are about us but not for us.

This antidemocratic and anti-egalitarian juggernaut is best described as a market-driven coup from above: an overthrow of the people concealed as the technological Trojan horse of digital technology. On the strength of its annexation of human experience, this coup achieves exclusive concentrations of knowledge and power that sustain privileged influence over the division of learning in society. It is a form of tyranny that feeds on people but is not of the people. Paradoxically, this coup is celebrated as “personalisation”, although it defiles, ignores, overrides, and displaces everything about you and me that is personal.

‘The power to shape behaviour for others’ profit or power is entirely self-authorising,’ says Zuboff. ‘It has no foundation in democratic or moral legitimacy.’

JN: Our societies seem transfixed by all this: we are like rabbits paralysed in the headlights of an oncoming car.

SZ: Despite surveillance capitalism’s domination of the digital milieu and its illegitimate power to take private experience and to shape human behaviour, most people find it difficult to withdraw, and many ponder if it is even possible. This does not mean, however, that we are foolish, lazy, or hapless. On the contrary, in my book I explore numerous reasons that explain how surveillance capitalists got away with creating the strategies that keep us paralysed. These include the historical, political and economic conditions that allowed them to succeed. And we’ve already discussed some of the other key reasons, including the nature of the unprecedented, conquest by declaration. Other significant reasons are the need for inclusion, identification with tech leaders and their projects, social persuasion dynamics, and a sense of inevitability, helplessness and resignation.

We are trapped in an involuntary merger of personal necessity and economic extraction, as the same channels that we rely upon for daily logistics, social interaction, work, education, healthcare, access to products and services, and much more, now double as supply chain operations for surveillance capitalism’s surplus flows. The result is that the choice mechanisms we have traditionally associated with the private realm are eroded or vitiated. There can be no exit from processes that are intentionally designed to bypass individual awareness and produce ignorance, especially when these are the very same processes upon which we must depend for effective daily life. So our participation is best explained in terms of necessity, dependency, the foreclosure of alternatives, and enforced ignorance.

JN: Doesn’t all this mean that regulation that just focuses on the technology is misguided and doomed to fail? What should we be doing to get a grip on this before it’s too late?

SZ: The tech leaders desperately want us to believe that technology is the inevitable force here, and their hands are tied. But there is a rich history of digital applications before surveillance capitalism that really were empowering and consistent with democratic values. Technology is the puppet, but surveillance capitalism is the puppet master.

Surveillance capitalism is a human-made phenomenon and it is in the realm of politics that it must be confronted. The resources of our democratic institutions must be mobilised, including our elected officials. GDPR [a recent EU law on data protection and privacy for all individuals within the EU] is a good start, and time will tell if we can build on that sufficiently to help found and enforce a new paradigm of information capitalism. Our societies have tamed the dangerous excesses of raw capitalism before, and we must do it again.

While there is no simple five-year action plan, much as we yearn for that, there are some things we know. Despite existing economic, legal and collective-action models such as antitrust, privacy laws and trade unions, surveillance capitalism has had a relatively unimpeded two decades to root and flourish. We need new paradigms born of a close understanding of surveillance capitalism’s economic imperatives and foundational mechanisms.”

For example, the idea of “data ownership” is often championed as a solution. But what is the point of owning data that should not exist in the first place? All that does is further institutionalise and legitimate data capture. It’s like negotiating how many hours a day a seven-year-old should be allowed to work, rather than contesting the fundamental legitimacy of child labour. Data ownership also fails to reckon with the realities of behavioural surplus. Surveillance capitalists extract predictive value from the exclamation points in your post, not merely the content of what you write, or from how you walk and not merely where you walk. Users might get “ownership” of the data that they give to surveillance capitalists in the first place, but they will not get ownership of the surplus or the predictions gleaned from it – not without new legal concepts built on an understanding of these operations.

Another example: there may be sound antitrust reasons to break up the largest tech firms, but this alone will not eliminate surveillance capitalism. Instead it will produce smaller surveillance capitalist firms and open the field for more surveillance capitalist competitors.

So what is to be done? In any confrontation with the unprecedented, the first work begins with naming. Speaking for myself, this is why I’ve devoted the past seven years to this work… to move forward the project of naming as the first necessary step toward taming. My hope is that careful naming will give us all a better understanding of the true nature of this rogue mutation of capitalism and contribute to a sea change in public opinion, most of all among the young.

Published:1/20/2019 11:11:24 PM
[Markets] Visualizing The Snowball Of Global Government Debt

Over the last five years, markets have pushed concerns about debt under the rug.

But, while economic growth and record-low interest rates have made it easy to service existing government debt, Visual Capitalist's Jeff Desjardins points out that it’s also created a situation where government debt has grown in to over $63 trillion in absolute terms.

The global economic tide can change fast, and in the event of a recession or rapidly rising interest rates, debt levels could come back into the spotlight very quickly.


Today’s visualization comes to us from and it rolls the world’s countries into a “snowball” of government debt, colored and arranged by debt-to-GDP ratios. The data itself comes from the IMF’s most recent October 2018 update.

Courtesy of: Visual Capitalist

The structure of the visualization is apt, because debt can accumulate in an unsustainable way if governments are not proactive. This situation can create a vicious cycle, where mounting debt can start hampering growth, making the debt ultimately harder to pay off.

Here are the countries with the most debt on the books:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Cabo Verde and Barbados

Japan and Greece are the most indebted countries in the world, with debt-to-GDP ratios of 237.6% and 181.8% respectively. Meanwhile, the United States sits in the #8 spot with a 105.2% ratio, and recent Treasury estimates putting the national debt at $22 trillion.


On the opposite spectrum, here are the 10 jurisdictions that have incurred less debt relative to the size of their economies:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Timor-Leste and Solomon Islands

Macao and Hong Kong – both special administrative regions (SARs) in China – have virtually zero debt on the books, while the official country with the lowest debt is Brunei (2.8%).

Published:1/19/2019 10:01:50 PM
[Markets] The US Military Is Winning... No, Really, It Is!

Authored by Nick Turse via,

A Simple Equation Proves That the U.S. Armed Forces Have Triumphed in the War on Terror...

4,000,000,029,057. Remember that number. It’s going to come up again later.

But let’s begin with another number entirely: 145,000 -- as in, 145,000 uniformed soldiers striding down Washington’s Pennsylvania Avenue. That’s the number of troops who marched down that very street in May 1865 after the United States defeated the Confederate States of America. Similar legions of rifle-toting troops did the same after World War I ended with the defeat of Germany and its allies in 1918. And Sherman tanks rolling through the urban canyons of midtown Manhattan? That followed the triumph over the Axis in 1945. That’s what winning used to look like in America -- star-spangled, soldier-clogged streets and victory parades.

Enthralled by a martial Bastille Day celebration while visiting French President Emmanuel Macron in Paris in July 2017, President Trump called for just such a parade in Washington.  After its estimated cost reportedly ballooned from $10 million to as much as $92 million, the American Legion weighed in. That veterans association, which boasts 2.4 million members, issued an August statement suggesting that the planned parade should be put on hold “until such time as we can celebrate victory in the War on Terrorism and bring our military home.” Soon after, the president announced that he had canceled the parade and blamed local Washington officials for driving up the costs (even though he was evidently never briefed by the Pentagon on what its price tag might be).

The American Legion focused on the fiscal irresponsibility of Trump’s proposed march, but its postponement should have raised an even more significant question: What would “victory” in the war on terror even look like? What, in fact, constitutes an American military victory in the world today? Would it in any way resemble the end of the Civil War, or of the war to end all wars, or of the war that made that moniker obsolete? And here’s another question: Is victory a necessary prerequisite for a military parade?

The easiest of those questions to resolve is the last one and the American Legion should already know the answer. Members of that veterans group played key roles in a mammoth “We Support Our Boys in Vietnam” parade in New York City in 1967 and in a 1973 parade in that same city honoringveterans of that war. Then, 10 years after the last U.S. troops snuck out of South Vietnam -- abandoning their allies and scrambling aboard helicopters as Saigon fell -- the Big Apple would host yet another parade honoring Vietnam veterans, reportedly the largest such celebration in the city’s history. So, quite obviously, winning a war isn’t a prerequisite for a winning parade.

And that’s only one of many lessons the disastrous American War in Vietnam still offers us. More salient perhaps are those that highlight the limits of military might and destructive force on this planet or that focus on the ability of North Vietnam, a “little fourth-rate” country -- to quote Henry Kissinger, the national security advisor of that moment -- to best a superpower that had previously (with much assistance) defeated Nazi Germany and Imperial Japan at the same time. The Vietnam War -- and Kissinger -- provide a useful lens through which to examine the remaining questions about victory and what it means today, but more on that later.

For the moment, just remember: 4,000,000,029,057, Vietnam War, Kissinger.

Peace in Our Time... or Some Time... or No Time

Now, let’s take a moment to consider the ur-conflict of the war on terror, Afghanistan, where the U.S. began battling the Taliban in October 2001. America’s victory there came with lightning speed. The next year, President George W. Bush announced that the group had been “defeated.” In 2004, the commander-in-chief reported that the Taliban was “no longer in existence.” Yet, somehow, they were. By 2011, General David Petraeus, then commander of U.S. forces in Afghanistan, claimed that his troops had “reversed the momentum of the Taliban.” Two years later, then-commander General Joseph Dunford spoke of “the inevitability of our success” there.

Last August, President Trump unveiled his “Strategy in Afghanistan and South Asia.” Its “core pillar” was “a shift from a time-based approach to one based on conditions”; in other words, the “arbitrary timetables” for withdrawal of the Obama years were out. “We will push onward to victory with power in our hearts,” President Trump decreed. “America’s enemies must never know our plans or believe they can wait us out.”

The president also announced that he was putting that war squarely in the hands of the military. “Micromanagement from Washington, D.C., does not win battles,” he announced. “They are won in the field drawing upon the judgment and expertise of wartime commanders and frontline soldiers acting in real time, with real authority, and with a clear mission to defeat the enemy.” The man given that authority was General John Nicholson who had, in fact, been running the American war there since 2016. The general was jubilant and within months agreed that the conflict had “turned the corner” (something, by the way, that Obama-era Secretary of Defense Leon Panetta also claimed -- in 2012).

Today, almost 17 years after the war began, two years after Nicholson took the reins, one year after Trump articulated his new plan, victory in any traditional sense is nowhere in sight. Despite spending around $900 billion in Afghanistan, as the Special Inspector General for Afghanistan Reconstruction determined earlier this year, “between 2001 and 2017, U.S. government efforts to stabilize insecure and contested areas in Afghanistan mostly failed.” According to a July 30, 2018, report by that same inspector general, the Taliban was by then contesting control of or controlled about 44% of that country, while Afghan government control and influence over districts had declined by about 16% since Nicholson’s predecessor, General John Campbell, was in command.

And that was before, last month, the Taliban launched a large-scale attack on a provincial capital, Ghazni, a strategically important city, and held it for five days, while taking control of much of the province itself. Finally driven from the city, the Taliban promptly overran a military base in Baghlan Province during its withdrawal. And that was just one day after taking another Afghan military base. In fact, for the previous two months, the Taliban had overrun government checkpoints and outposts on a near-daily basis. And keep in mind that the Taliban is now only a fraction of the story. The U.S. set out to defeat it and al-Qaeda in 2001. Today, Washington faces exponentially more terror groups in Afghanistan -- 21 in all, including an imported franchise from the Iraq War front, ISIS, that grew larger during Nicholson’s tenure.

Given this seemingly dismal state of affairs, you might wonder what happened to Nicholson. Was he cashiered? Fired, Apprentice-style? Quietly ushered out of Afghanistan in disgrace? Hardly. Like the 15 U.S. commanders who preceded him, the four-star general simply rotated out and, at his final press conference from the war zone late last month, was nothing if not upbeat.

“I believe the South Asia Strategy is the right approach. And now we see that approach delivering progress on reconciliation that we had not seen previously,” he announced. “We've also seen a clear progression in the Taliban's public statements, from their 14 February letter to the American people to the recent Eid al-Adha message, where [Taliban leader] Emir Hibatullah acknowledged for the first time that negotiations will, quote, ‘ensure an end to the war,’ end quote.”

In the event that you missed those statements from a chastened Taliban on the threshold of begging for peace, let me quote from the opening of the latter missive, issued late last month:

“This year Eid­ al­-Adha approaches us as our Jihadi struggle against the American occupation is on the threshold of victory due to the help of Allah Almighty. The infidel invading forces have lost all will of combat, their strategy has failed, advanced technology and military equipment rendered useless, [the] sedition and corruption­-sowing group defeated, and the arrogant American generals have been compelled to bow to the Jihadic greatness of the Afghan nation.”

And those conciliatory statements of peace and reconciliation touted by Nicholson? The Taliban says that in order to end “this long war” the “lone option is to end the occupation of Afghanistan and nothing more.”

In June, the 17th American nominated to take command of the war, Lieutenant General Scott Miller, appeared before the Senate Armed Services Committee where Elizabeth Warren (D-MA) grilled him on what he would do differently in order to bring the conflict to a conclusion. “I cannot guarantee you a timeline or an end date,” was Miller’s confident reply.

Did the senators then send him packing? Hardly. He was, in fact, easily confirmed and starts work this month. Nor is there any chance Congress will use its power of the purse to end the war. The 2019 budget request for U.S. operations in Afghanistan -- topping out at $46.3 billion -- will certainly be approved.


All of this seeming futility brings us back to the Vietnam War, Kissinger, and that magic number, 4,000,000,029,057 -- as well as the question of what an American military victory would look like today. It might surprise you, but it turns out that winning wars is still possible and, perhaps even more surprising, the U.S. military seems to be doing just that.

Let me explain.

In Vietnam, that military aimed to “out-guerrilla the guerrilla.” It never did and the United States suffered a crushing defeat. Henry Kissinger -- who presided over the last years of that conflict as national security advisor and then secretary of state -- provided his own concise take on one of the core tenets of asymmetric warfare: “The conventional army loses if it does not win. The guerrilla wins if he does not lose.” Perhaps because that eternally well-regarded but hapless statesman articulated it, that formula was bound -- like so much else he touched -- to crash and burn.

In this century, the United States has found a way to turn Kissinger’s martial maxim on its head and so rewrite the axioms of armed conflict. This redefinition can be proved by a simple equation:

0 + 1,000,000,000,000 + 17 +17 + 23,744 + 3,000,000,000,000 + 5 + 5,200 + 74 = 4,000,000,029,057

Expressed differently, the United States has not won a major conflict since 1945; has a trillion-dollar national security budget; has had 17 military commanders in the last 17 years in Afghanistan, a country plagued by 23,744 “security incidents” (the most ever recorded) in 2017 alone; has spent around $3 trillion, primarily on that war and the rest of the war on terror, including the ongoing conflict in Iraq, which then-defense secretary Donald Rumsfeld swore, in 2002, would be over in only “five days or five weeks or five months,” but where approximately 5,000 U.S. troops remain today; and yet 74% of the American people still express high confidence in the U.S. military.

Let the math and the implications wash over you for a moment. Such a calculus definitively disproves the notion that “the conventional army loses if it does not win.” It also helps answer the question of victory in the war on terror. It turns out that the U.S. military, whose budget and influence in Washington have only grown in these years, now wins simply by not losing -- a multi-trillion-dollar conventional army held to the standards of success once applied only to under-armed, under-funded guerilla groups.

Unlike in the Vietnam War years, three presidents and the Pentagon, unbothered by fiscal constraints, substantive congressional opposition, or a significant antiwar movement, have been effectively pursuing this strategy, which requires nothing more than a steady supply of troops, contractors, and other assorted camp followers; an endless parade of Senate-sanctioned commanders; and an annual outlay of hundreds of billions of dollars. By these standards, Donald Trump’s open-ended, timetable-free “Strategy in Afghanistan and South Asia” may prove to be the winningest war plan ever. As he described it:

“From now on, victory will have a clear definition: attacking our enemies, obliterating ISIS, crushing al-Qaeda, preventing the Taliban from taking over Afghanistan, and stopping mass terror attacks against America before they emerge.”

Think about that for a moment. Victory’s definition begins with “attacking our enemies” and ends with the prevention of possible terror attacks. Let me reiterate: “victory” is defined as “attacking our enemies.” Under President Trump’s strategy, it seems, every time the U.S. bombs or shells or shoots at a member of one of those 20-plus terror groups in Afghanistan, the U.S. is winning or, perhaps, has won. And this strategy is not specifically Afghan-centric. It can easily be applied to American warzones in the Middle East and Africa -- anywhere, really.

Decades after the end of the Vietnam War, the U.S. military has finally solved the conundrum of how to “out-guerrilla the guerrilla.” And it couldn’t have been simpler. You just adopt the same definition of victory. As a result, a conventional army -- at least the U.S. military -- now loses only if it stops fighting. So long as unaccountable commanders wage benchmark-free wars without congressional constraint, the United States simply cannot lose. You can’t argue with the math. Call it the rule of 4,000,000,029,057.

That calculus and that sum also prove, quite clearly, that America’s beleaguered commander-in-chief has gotten a raw deal on his victory parade. With apologies to the American Legion, the U.S. military is now -- under the new rules of warfare -- triumphant and deserves the type of celebration proposed by President Trump. After almost two decades of warfare, the armed forces have lowered the bar for victory to the level of their enemy, the Taliban. What was once the mark of failure for a conventional army is now the benchmark for success. It’s a remarkable feat and deserving, at the very least, of furious flag-waving, ticker tape, and all the age-old trappings of victory.

Published:1/19/2019 8:31:32 PM
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[Markets] Progressive Pandering - Don't Be So Sure Hyperinflation Can't Hit The U.S.

Authored by Noah Smith, op-ed via,

Some progressives back piling on even more debt to pay for social programs. That could be risky...

Discussions of big government spending programs often revolve around the question of how to pay for them. For example, Representative Alexandria Ocasio-Cortez touted her proposal for a 70 percent tax rate on income above $10 million by saying it would help pay for the Green New Deal, a broad package of environmental and economic initiatives.

Implicit in this concern is the idea is that government debt shouldn’t get too big. This is a common belief — polls regularly find that Americans are worried about the national debt. The national debt clock in Manhattan is a famous symbol of this anxiety. The idea is also formalized in mainstream economic models, which tend to assume that in the long run the government has to balance its books. Writing at Brookings Institution, David Wessel expresses this conventional wisdom when he declares that “federal debt cannot grow faster than the economy forever.”

But what if this is a fallacy? What if the government doesn’t have to pay back what it borrows, now or ever? This is the provocative thesis of an unorthodox economic theory that is rapidly gaining credence on the political left called modern monetary theory, or MMT. The concept isn't new — economist Abba Lerner endorsed something similar in the 1940s, under the name of “functional finance.” But the theory has enjoyed a popular resurgence since it was embraced by some progressives, who want to enact a federal job guarantee and other ambitious economic plans paid for by government borrowing.

MMT has many elements, and its advocates tend to express these in terms that aren’t familiar to many mainstream economists. But the central argument that the U.S. government doesn’t really have a budget constraint — and thus, that taxes are never needed to pay for federal spending — is simple enough to grasp. Basically, it’s because the government can print dollars whenever it wants.

Suppose the government decides to pile up infinite amounts of debt. What bad thing could happen? Debt-service costs increase. But instead of raising taxes to pay the interest, the government could simply borrow more in order to cover those interest payments. The Federal Reserve could also lower interest rates to zero, thus eliminating interest costs. This is basically what has happened in Japan.

What if rising U.S. government debt also causes investors to pull back on lending to U.S. companies? No problem; by lowering interest rates, the Fed can ensure that the cost of capital doesn’t get too high. In a pinch, it could even buy corporate and mortgage debt. Fed lending to any company that wants it might reduce business productivity, since the central bank is presumably worse at evaluating risks than private investors are. But the MMT people aren’t too worried about that — after all, a federal job guarantee, which could also potentially muscle out private-sector activity, is a prominent centerpiece of their plans.

Of course, the Fed is a nominally independent institution, but there’s no reason this arrangement has to continue. Under an MMT regime, central bank independence could be eliminated, and monetary policy could be coordinated between the Fed and the Treasury.

That leaves just one danger — that funding for federal debt will dry up, leaving the U.S. government with no one to finance its infinite borrowing. No one, that is, except itself. Again, the Fed funds the Treasury’s borrowing by simply printing money, which actually just means creating reserves in an electronic bank account. In this case, the Treasury itself becomes little more than a formality — a conduit for the Fed to pay government workers, contractors and transfer-payment recipients.

So this is the MMT endgame; government pays for as much as it wants with the endless supply of money that it creates. In this sense, the MMT people are right that there is no government budget constraint. But there is a different kind of constraint that no financing arrangement can get around — the limitation of real resources. Eventually, if the government keeps paying for more things, we run out of them, whether it's unemployed workers to fill offices and factories, natural resources, or production capacity.

What happens if the government keeps trying to pay for things with printed money after the economy has employed every available worker? No one really knows. One common theory is that hyperinflation would result. This is a disastrous spiral in which prices rise so quickly, and so unpredictably, that a country’s entire economy grinds to a halt and the nation collapses into poverty. For a look at how hyperinflation can immiserate a nation, simply examine the stories coming out of Venezuela.

Could too much printed money chasing a limited supply of real goods lead to hyperinflation in an advanced economy like the U.S.? Proponents of MMT certainly acknowledge the possibility that it could. In September, when I discussed the idea with Stony Brook University economist and Bloomberg Opinion contributor Stephanie Kelton, a leading MMT champion, she said:

Is there a limit to how big the deficit can safely climb? Absolutely! Deficits matter. They can be too big — risking accelerating inflation.

Some of MMT’s more strenuous online advocates wave away the possibility of hyperinflation in a country as politically stable and economically developed as the U.S. And indeed, low interest rates and large levels of quantitative easing haven’t led to much inflation, either in the U.S., Japan or Europe, as inflation hawks had warned it would:

Inflation Still On Hold - Consumer price index

Source: Bureau of Labor Statistics via Bloomberg

But just because inflation remains subdued doesn’t mean it couldn’t rise suddenly, especially if businesses — which set prices — decide that the U.S. government has embarked on a course of infinite monetary-financed deficit spending. In fact, inflation might have remained so low, in despite of Fed easing, precisely because businesses believed that Fed independence and the Treasury’s fiscal prudence meant that quantitative easing and big deficits would eventually end.

A wholehearted embrace of MMT would thus represent a gamble of the U.S.’s economic future on the idea that hyperinflation can’t happen here. Recent experience has made such a disaster seem unlikely, but the truth is that no one really knows how likely it would be if MMT went from theory to reality.

Published:1/18/2019 6:01:30 PM
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[Markets] From Baghdad To Finland And All Across The World: What's The US Up To?


Why does the US Embassy in Helsinki need a big warehouse near Malmi Airport and what are the contents of thousands of kilograms of cargo sent to Helsinki from Baghdad?

A dilapidated warehouse in Malmi is being used by the US Embassy for unknown operations after a Wikileaks release revealed its location.

The anonymous looking building on Takoraudantie is notable only for the new 427 meter perimeter fence that according to the Wikileaks’ database was ordered by the US Embassy in April 2018.


More than a million kilograms of cargo were shipped from Baghdad to different parts of the world, reveals US embassies procurement documents.

Mysterious cargo shipments from the US Embassy in Baghdad to other American embassies and consulates around the world have been revealed on a Wikileaks’ database. Procurement orders of US embassies are public documents, but Wikileaks put them in a searchable database making it easier to analyse.

Here are two critical articles on this subject from Helsinki Times, dated December 29, 2018 and January 1, 2019 respectively.


by Will Sillitoe

Situated across the street from the main entrance of Malmi Airport, the warehouse with its 3 meter high security fence appears an unlikely location for official embassy business. Neighbouring companies include a car yard and a tyre warehouse.

Helsinki Times visited the perimeters this weekend. Security personnel, young Finns in uniforms with American flags on their arms, appeared nervous and suspicious when asked to comment on the warehouse and refused to even confirm the order of the new fence structure which now surrounds the compound. At one point a security guard appeared in a second floor window to carefully monitor this reporter’s movements along Takoraudantie.

US embassy warehouse near Malmi airport. This image from Google street view is from 2011. The newly built permitter fence can not be seen in this image.

Mysterious parcels from Baghdad

The Wikileaks’ database has also revealed mysterious packages being sent to the US Embassy in Finland from their embassy in Baghdad.

The database displaying US embassy procurements around the world shows that tons of cargo are being distributed to Helsinki and other US embassies via regular airfreight cargo deliveries from Baghdad.

Twelve consignments, each logged at 5000 kilograms are recorded as sent to Helsinki and 23 other West European US embassies – an average of 2500 kilograms per US embassy.

The reason for such a vast volume of embassy deliveries from Baghdad is as yet unknown but this latest disclosure follows Wikileaks news that the US Consulate in Frankfurt was a purchase and postal centre for distributing spy equipment to other US embassies worldwide. Concerns are now raised that the US Embassy in Baghdad is also being used as a main distribution centre for secret operations.

In addition to Finland and Western Europe, the Wikileaks database shows that the US embassy in Baghdad disseminates hundreds of tons worldwide, with more than 300,000 kilograms recorded as being delivered Stateside alone.

Incoming diplomatic mail between embassies receives customs clearance and is automatically classified as a US government shipment.

The 80 page order list also details massive movements of road and air freight between Basra in the south of Iraq and Erbil in the north. No indication of the cargo contents are provided but the order sheets reveal convoys of trucks and vehicles were hired by Baghdad’s US embassy for the mysterious shipments.

The warehouse is equipped with several big gates suitable for lorries to drive in. Containers and a forklift in the yard indicate heavy duty use. A special antenna is on the roof.

Spy gadgets and surveillance operations

The disclosure of the building’s use by the US Embassy in Finland comes in light of revelations about US embassy spying activities worldwide, as featured in the Wikileaks’ US embassy shopping list database. In a published list of more than 16000 miscellaneous items, requests also appear for recording devices disguised as pens, lighters, glasses, watches and even spy shirt buttons.

Although US embassy procurements are public information, Wikileaks new database allows for country specific searches, giving clearer evidence of US embassy involvement in secret surveillance operations in certain parts of the world.. The timing of this latest Wikileaks’ release came just hours after its Twitter accounts were cyber attacked late on Friday, ahead of the Christmas holiday.

According to the database, requests made by the US Embassy in Finland appear to be for everyday items. Procurements include a tractor as well as services for snow removal, plumbing, gardening and cleaning. However, in light of ‘Tactical Spy Equipment’ purchased by US embassies elsewhere the existence of the warehouse compound near Malmi Airport raises concerns about potential secret operations closer to home. US Embassy official responsible for ordering the warehouse perimeter fence, was unavailable for comment.

Strategically located US embassy complex in Helsinki and the newly built “Innovation Center”.

Worldwide, the Wikileaks’ online data reveals that Latin America is the main target for purchases of spying equipment. Camera hats and USB drives as well as night visors and binoculars were among items procured for the US embassy in Colombia. But topping the list for requested surveillance items was the US embassy in El Salvador where the purchase of ‘Tactical Spy Equipment’ totalled 94 items.

Back in 2017 Wikileaks documents revealed that the American consulate in Frankfurt had served as a covert base to carry out digital spy operations. Using the US Embassy shopping list database, Germany’s Der Spiegel has now identified the consulate as a main buyer of spy equipment for diplomatic missions across Europe.

These latest Wikileaks’ revelations further highlight the role of US embassies in espionage activities across the globe. Some reports suggest over 80 US embassies worldwide conceal joint NSA-CIA “Special Collection Service” radio and electronic surveillance equipment. Such concerns add to the questions concerning activities at the Malmi warehouse and the secrecy surrounding it.

However, the database of US embassy shopping lists reveals some less concerning items too with one evoking the craziness of an Inspector Clouseau rather than a cold, calculating 007: A person to count fish and clean the pond was sought by the consulate in Guayaquil, Ecuador after officials lost track of how many fish they possessed.

The searchable Wikileaks database and info about Finland related activities can be found HERE.

*  *  *


by Will Sillitoe

The database displaying worldwide US embassy orders of goods and services reveals Baghdad as a postal and shipping centre for tonnes of freight.

Though military freight might be expected between the US and Iraq, records show that embassies across Europe, Asia, the Middle East, the Americas and Africa are all receiving deliveries from Baghdad too.

According to Wikileaks’ database, orders to ship more than 540 tonnes of cargo to the US were made in May 2018. The same document shows other main delivery destinations included 120 tonnes of freight to Europe, and 24 tonnes to South Africa, South America and Central Africa respectively. In comparison, only two and a half tonnes of freight were moved within Iraq between Baghdad, Basra and Erbil International Airports. So, the export of items from Iraq appears to be the primary activity.

The content of the deliveries is as yet unclear, though the order contract suggests household items, rugs, electrical goods, linen, kitchenware, furniture, pianos, refrigerators, books, chinaware, clothing as well as mail could be among the items dispatched. According to the website, an average one bedroom apartment of furniture weighs approximately one tonne but the practicality of moving many types of household objects across continents is doubtful. It also remains unclear whether the quantity of tonnage relates to many small deliveries or a small number of very large ones.

The lack of disclosed orders moving cargo and services into Iraq highlights that the movement of diplomats and their families into such a dangerous region on a large scale is unlikely.  Transfers of military personnel back and forth would normally go through the US airbases in Iraq and not via the Embassy administration. So discounting the movement of more than a thousand staff members out of Iraq to countries around the world means that the content and purpose of the shipments remains a mystery.

The Wikileaks’ database findings coincide with the discovery of a previously undisclosed US Embassy warehouse near Malmi Airport, a storage facility suitable for receiving large truckloads of incoming freight. Documents also show that the US Embassy in Finland ordered a new security perimeter fence for the warehouse compound in April 2018. The purpose for the warehouse remains unknown.

This latest uncovering of unusual US embassy activity follows the 2017 exposure of the US Consulate in Frankfurt being used for surveillance operations and as a buying and postal dispatch centre of spying equipment for other US consulates. These latest Wikileaks revelations raise concerns that the US Embassy in Baghdad may also serve as a hub for secret operations worldwide.

The database also reveals that items listed as ‘Tactical Spy Equipment’ were ordered for US embassies in Latin America, with Colombia and El Salvador receiving a range of spy cameras disguised as pens, glasses, hats, USB drives and even shirt buttons.

*  *  *

So , as Eric Zuesse asked, why is America’s Baghdad Embassy the world’s largest embassy - and the largest by far?

"It's as if the US Embassy is there not only to protect American interests, but to manage the entire world from the heart of the capital, Baghdad.”

— Iraqi Sheikh Qassim Al Ta’ee, as quoted on 27 December 2011 in Al Iraq News and translated by Ibrahim Zaidan from the original Arabic by Nicholas Dagher 

Secret government tends to be costly for taxpayers, and also tends to add a lot to the governmental debt. An unauditable governmental department, such as the Defense Department is, cannot function, at all, without an enormous amount of corruption. This is the reality about America’s military. However, there’s much propaganda contradicting it. The news-media also serve those same billionaires.

How likely, then, is it, that America’s Baghdad Embassy serves the US public? It certainly does not serve the Iraqi public. But it does serve the people — whomever they are — who control the US Government. And that’s the Deep State. That’s the reality, but what’s promoted is fantasyland. And this fantasyland, which is promoted, is called “American democracy”. Just ask Big Brother, and he’ll tell you all about it. He always does.

Published:1/15/2019 10:37:21 PM
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[World] [David E. Bernstein] At Least One Cheer for Law Reviews

Law reviews as venue for scholarship come under a lot of justified criticism, but at least the editors check the footnotes

Any well-published law professor can recite a litany of complaints about law reviews, the generally student-edited journals where most legal scholarship is published. For example, the students require citations for opinions, or for well-known facts; students get to select the articles they publish, but don't have the expertise to do so; and the bluebook citation system most law reviews follow is much too cumbersome, and requires way too many explantory parentheticals.

One advantage law reviews do have, however, is that the editors are meticulous about checking footnotes to ensure that citations actually support the authors' contentions, and that quotations are accurate. This has its limitations; a Holocaust denier citing to books by Holocaust deniers would pass such screening. But it does at least prevent authors from either just making things up or being incredibly sloppy, and then sticking in footnotes to make the invention or sloppiness look scholarly.

I've been involved off and on over the past year and a half in the ongoing debate over Nancy MacLean's book Democracy in Chains. My interest in the book was piqued when some of my Facebook friends were criticizing it for a variety of scholarly sins. I got hold of the book, and immediately turned to MacLean's brief discussion of my law school and its former dean, Henry Manne. I found that what MacLean wrote did not mesh with the facts. I thought perhaps that she was led astray by sources she thought to be reliable, so I checked her footnotes. Nope. She just made things up. For example, she asserted that Manne only hired white male faculty, which was not remotely true. Not only did the source she cited in the relevant footnote not assert this, it specifically mentioned my colleague Bruce Kobayashi, who has a very common Japanese surname and is in fact of Japanese descent.

MacLean is not the only recent perpetrator. Quinn Slobodian has emerged as leading historian and critic of the free-market oriented "neoliberal" (whatever that means) economists who emerged as leading critics of economic statism after World War II. Here's what economic historian Phil Magness found after reviewing a recent article by Slobodian on economist Ludwig von Mises:

Professor Slobodian has 93 footnotes in his article. Over 50 of them reference Mises's writings or correspondence. Looking them up, I found many instances in which the page reference to a paraphrase of a passage or a quote in one of Mises's works was not to be found where Professor Slobodian indicated it to be.

In some instances, this was not simply being off a page or two; the page referenced turned out to be in a portion of one of Mises's works that had nothing to do with the theme or idea that Professor Slobodian was referring to in the text of his own article. Hence, the paraphrase or quote literally had to be taken on good faith as being accurate or even there in one of Mises's writings.

In addition, there are instances in which Professor Slobodian asserts or implies views or states of mind held by Mises at some point in time. But the footnoted reference sometimes refers to some other scholar's work that when looked up did not refer to or imply anything about Ludwig von Mises.

One might be inclined to be more generous about these errors if they always didn't point in the same direction, to make historical figures that the authors object to on ideological grounds look bad. As in the case with MacLean, one suspects that some historians first construct their narrative, then look for citations to support it. If citations don't support the preconceived narrative, they abandon sound scholarly citation practices rather than abandoning the narrative.

Again, law reviews are far from perfect. But if you read a law review article, at least one published in a reasonably respectable journal, you can at least be pretty confident that the assertions made by the author are supported by the sources the author cites. One might think that we could trust professional historians to be meticulous about their sources without having third parties review them. Unfortunately, we cannot.

Published:1/15/2019 9:36:29 AM
[Markets] The Decline And Fall Of The European Union

Authored by Charles Hugh Smith via OfTwoMinds blog,

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.

That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro's introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.

Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national sovereignty with renewed intensity.

The technocrat elite that holds power in the EU is attempting to marginalize critics as populists, nationalists or fascists, overlooking the untidy reality that the actual source of tyranny is arguably the unelected bureaucrats of the EU who have taken on extraordinary powers to strip the citizenry of member states of civil liberties (i.e. the right to dissent) and of meaningful political enfranchisement.

As I have patiently explained since 2012, the underlying structure of the EU is neocolonialism, specifically, neocolonial-financialization. Stripped of artifice, the financial institutions of the EU core have colonized the EU periphery via the euro and the EU and imposed a modernized system of extractive serfdom on the citizenry of the core and periphery alike.

To understand the neocolonial-financialization model, we must revisit the classic model of colonialism. In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony's resources and labor to enrich the core or center, i.e. the Imperial nation and its ruling elites.

This traditional model of colonialism was forcibly dismantled in the 1940s-1960s. Former colonies established their political independence, a process that diminished the wealth and control of former colonial powers.

In response, global financial powers sought financial control rather than political control. This is the key dynamic of the Neocolonial-Financialization Model(May 24, 2012), which substitutes the economic power of financialization (debt, leverage and speculation) for the raw power of conquest and political control.

The main strategy of financialization is: extend cheap credit to those with limited access to capital. Those with limited access to capital will swallow the bait and willingly agree to onerous conditions.

Then, when the credit expansion reaches levels that cannot be supported, the lenders demand collateral and/or favorable trade and financial concessions.

These tactics have been well-documented in books such as The Shock Doctrine: The Rise of Disaster Capitalism and Confessions of an Economic Hit Man.

But the economic pillaging of former colonies has limits, and as a consequence the global financial powers developed the Neocolonial Model, which turns these same techniques on one's home region.

Thus Greece and other capital-poor European nations were recognized as the periphery that could be exploited by the core, and the euro was the ideal tool to exploit the economies of nations which could never have generated credit/housing bubbles without the wide-open spigots of cheap credit flooding their economies.

In Neocolonialism, the forces of financialization are used to indenture the local Elites and populace to the financial core: the peripheral "colonials" borrow money to buy the finished goods manufactured in the core economies, enriching the Imperial Elites with A) the profits made selling goods to the debtors B) interest on credit extended to the peripheral colonies to buy the core economies' goods and "live large", and C) the transactional skim of financializing peripheral assets such as real estate and State debt.

In essence, the French and German banks colonized Europe's periphery nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the core extracted enormous profits from the periphery via this expansion of debt and consumption.

The assets and income of the periphery are flowing to the core as interest on the private and sovereign debts that are owed to the core's money-center private banks.

Note how little of the Greek "bailout" actually went to the citizenry of Greece and how much was interest paid to the financial powers. The core has stripped Greece of collateral and political independence, just as the colonial powers of the 19th century stripped the African and Indo-Asian regions of income, assets and political independence.

This is not just the perfection of neocolonialism but of neofeudalism as well.The peripheral nations of the EU are effectively neocolonial debtors of the core, and the taxpayers of the core nations are now feudal serfs whose labor is devoted to making good on any financialization schemes that go bad.

Neocolonialism benefits both the core's financial Aristocracy and the periphery's oligarchies. This is ably demonstrated in the essay Misrule of the Few: How the Oligarchs Ruined Greece.

The EU has finally reached the endgame of the Neocolonial-Financialization Model. There are no more markets to exploit with financialization, no more assets to strip, and the serfs (a.k.a. yellow vests) of the core are tiring of being stripmined in service of the EU kleptocracy.

At this point, the financial Aristocracy has an unsolvable dilemma: writing off defaulted debt also writes off assets and income streams, for every debt is the core's asset and income stream. When all those phantom assets are recognized as worthless, the system implodes.

This exhaustion of the neocolonial-neofeudal model was inevitable and as a result, so too is the decline and fall of the European integration/exploitation project.

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Jonathon Twombly and I discuss The Everything Bubble: Its Effect on The Current Market and Real Estate Investing

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Published:1/15/2019 4:02:11 AM
[Markets] The Fed Dilemma

Submitted by Valentin Schmid of The Epoch Times

For the most part in 2017 and 2018, only academics and easy-money cranks scolded the Federal Reserve for raising rates. After all, the stock market was bubbling up and the economy was strong.

The economy is still strong, but the stock market has ended its record 10-year bull-market run with a bang. The 20-percent drop in the S&P 500 during one of the worst quarters in market history classifies as a bear market, although prices rebounded at the end of 2018 and in early 2019.

Now everybody from traders to retirees as well as President Donald Trump is scolding Fed Chairman Jerome Powell for his relentless path to higher interest rates and a reduction in the Fed’s balance sheet.

To make a long story short, yes, the Fed is chiefly responsible for this and other stock-market routs, which often precede recessions. There are other contributing factors, such as worries about the Chinese economy and trade, as well as the government shutdown, which will reduce the $1 trillion yearly spending spree of the federal government. But the Fed is at the center of the storm.

And the problem didn’t begin with the Fed’s actions over the past two years. The roots of the issues we now face have their immediate origins in the last financial crisis, but ultimately can be traced back to the founding of the Federal Reserve itself.

The Current Crash

The problem on the surface right now is that the Fed is taking away easy money from market participants and economic agents through its raising of the federal funds rate as well as the $50 billion per month reduction of its balance sheet.

The Fed balance sheet, as well as the federal funds rate, is the foundation of the entire global financial system. For every dollar by which the Fed expands its balance sheet, banks and shadow banks around the world can create many dollars’ worth of debt on top of it.

Terms like balance-sheet expansion and contraction, or quantitative easing (QE) and quantitative tightening (QT), are fancy words for printing money or removing money from circulation.

Since its creation in 1913, the Fed has had the power to print money and fuel booms, and contract money and create busts. So it has to take responsibility for the vicious business cycles since its creation, such as the Great Depression or the 2008 financial crisis.

You can trace this game back to the Fed’s origins, but here, let’s confine it to recent history.

In 1998, the giant hedge fund Long Term Capital Management collapsed and almost took the global financial system with it. The Fed pumped money into the system and we had the boom, which ended in a bust in 2000 after the Fed had tightened credit conditions.

It then pumped even more into the system to create the subprime boom, which ended in a bigger bust in 2008, again after the Fed had been raising rates for some time.

To “save the system” this time, the Fed boosted its balance sheet to more than $4 trillion and lowered interest rates to zero, in an unprecedented exercise in money printing. This has led to a bubble in corporate debt, student loans, auto loans, and real estate—again.

Popping The Bubble

But booms fueled by money printing usually fuel economic mirages and lead to investments that wouldn’t have been made otherwise, like subprime or And even the boom from the past two years has seen a shallow economic recovery, with many people feeling left out.

Now, with interest rates up 2.5 percent, the balance sheet shrinking by $50 billion per month, and the stock market draw-down of 20 percent, we are looking to go into bust mode again.

The stock market reaction this time is particularly pronounced because the market has relied on the Fed to either ease monetary policy or delay tightening whenever there was a correction of 10 percent or so.

The fact that the market reacted so violently to a paltry 2.5 percent increase in rates tells us how dependent it is on easy money. The current Fed Funds rate is still lower than at most other times in recorded history.

And Chairman Powell has made it very clear that he isn’t “market dependent” but would rather follow his usually wrong and inaccurate models, as well as the philosophical concept of the neutral interest rate. He did backpaddle a little bit in early January, but the Fed has a history of talking up markets when talk is cheap.

Because even if the Fed doesn’t raise rates at the next meeting at the end of January, the balance sheet reduction will surely continue.

Either way, the economy can only be put back on solid footing if the bad investments of the boom are liquidated, which always causes asset-price collapses and economic recessions.

If the market is left to its own devices, these contractions are quick and painful, as in 1921, and then provide a solid basis for expansion.

So if Powell’s intention is to pop the bubble and go through the readjustment pain to put the economy on a long-term real growth trajectory, he is doing the right thing, even though he won’t be able to centrally plan the exact right rate for market clearing. But it would be a good start, and would require no bailouts this time around, unlike 2008 when the Fed and the Federal Government bailed out the whole banking system.

Contrary to popular opinion, there are ways and methods to orderly liquidate banks, as investment manager Barry Ritholtz points out:

“Let’s use Bank of America as an example. Bank of America gets nationalized, which really means Uncle Sam provides debtor in possession financing. This is really what happens normally with small companies. Someone who takes them out of bankruptcy give some operating money to keep functioning.

The equity gets down to zero—senior management out the door. There is certainly a layer beneath, which can get promoted without a problem. Bondholders, effectively they are highest in the line of who owns what’s left as the lenders. So they take what comes out of that minus Uncle Sam’s share of providing debtor in possession financing.

And you slowly feed all the pieces to the public. So you clean up the balance sheet and take all that debt. By the way there is no such thing as toxic assets. Well at 100 cents on the dollar they are toxic. But at 15 or 20 cents on the dollar there is plenty of upside there. So you take those assets and auction them off and you take what you get—maybe 15, 20, 25 percent. You take Merrill Lynch, which now has no bad debt on its books and you spin it off as a stand-alone.”

No Stability

The Fed claims it wants to promote economic stability and improve on the workings of the markets. But history in the 20th century shows that central banking has made business cycles worse than they were under a gold-based system and free banking, although credit crises existed before the Fed and are to be blamed on fractional reserve banking.

On top of that, the dollar has lost more than 90 percent of its value since the Fed’s inception. Stability looks different.

Whether it is incompetence or malevolence, as some historians have suggested, it doesn’t matter, because the Fed can’t replace a free market for capital.

In essence, setting interest rates and printing legal tender and reserves or contracting them at a whim is central planning. And this gets worse because private players are forced to accept Fed money as legal tender and we are forced to use Fed-powered bank money in the payment of taxes.

In fact, central banks look more like a Soviet politburo rather than a competitive market system, although they are privately owned. The few players in control of the system are using the state’s power to reap private profits and pile losses onto the taxpayer.

In contrast, the competitive market system is also the best system for money and banking, not just for other goods.

As economist Murray Rothbard points out, nobody thinks about installing a Board of Governors to supervise shoe production and their prices, so why do we need one to supervise money production and set its price?

In fact, President Franklin D. Roosevelt did think central planning would also be better for shoes and chicken, so he set up private cartels similar to the Fed for almost every industry under the National Industrial Recovery Act.

Unfortunately for him, it was ruled unconstitutional. Not surprisingly, constitutional lawyers like Edwin Vieira and many others believe the Fed isn’t compliant with the U.S. Constitution, of which Article 1, Section 10, states:

“No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Now, we have paper and electronic notes issued by the privately owned but not privately accountable Federal Reserve System, with the number of such notes expanded and contracted at will.

Sound Money

The Founding Fathers were rather fond of gold and silver, and were against central banking and the ever-expanding government debt that central banks finance.

“And I sincerely believe with you, that banking establishments are more dangerous than standing armies; [and] that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale,” Thomas Jefferson wrote in a letter to John Taylor in 1816.

Under the supervision of central banks with the power to print money and a government to bail them out, banks are indeed dangerous and will continue to cause boom-and-bust cycles. However, a return to sound money and competitive banking could put an end to this vicious loop.

Gold has traditionally served as sound money, and it could be used again by the marketplace and even banks to create a free market in capital, similar to the end of the 20th century.

“Look at the era of the classical gold standard, from 1871—the end of the Franco–Prussian War—until the beginning of World War I,” monetary philosopher Saifedean Ammous said.

“There’s a reason why this is known as the Golden Era, the Gilded Age, and La Belle Epoque. It was a time of unrivaled human flourishing all over the world. Economic growth was everywhere. Technology was being spread all over the world. Peace and prosperity were increasing everywhere around the world. Technological innovations were advancing.

“I think this is no coincidence. What the gold standard allowed people to do is to have a store of value that would maintain its value in the future. And that gave people a low time preference, that gave people the incentive to think of the long term, and that made people want to invest in things that would pay off over the long term.”

Ammous, author of “The Bitcoin Standard” also says that Bitcoin could serve as the digital gold of the future and replace the current system even without official government adoption.

But whether gold or Bitcoin, sound money would serve as a stable basis for the banking system, banks would have to be set free from the control of the Federal Reserve, be accountable for their actions, and be allowed to fail if they make bad investments.

This would remove moral hazard and create a more accurate clearing price for capital, which wouldn’t prevent, but would greatly reduce malinvestments and business cycles.

Chance For the Future

Given its dismal track record and probable unconstitutionality, the Federal Reserve System should be dissolved and sound money returned to the United States and the globe. The fact that Powell is maneuvering us into the bust cycle could provide the opportunity to execute this momentous plan.

The promoters of the Fed used the stock market and economic crisis of 1907 to push its creation through Congress in 1913.

If this bust cycle is going to be worse than 2008—and by many financial metrics, it well could be—the political elite around Trump could use the next crisis to do the reverse of 2008 and 1913.

Published:1/14/2019 12:34:12 PM
[Markets] CTAs Are About To Start Covering Their S&P Shorts

Last Wednesday, as the US stock market was roaring higher on its way to a 10% rebound from the December 24 bear market lows, we laid out the latest calculation from Nomura's cross-asset strategist, Charlie McElligott, who showed that it was only a matter of days before the same CTAs who were blamed for the sharp selloff in mid-December, were forced out of their from "max short" level and started covering, in the process sending markets even higher.

Now, in his latest update, McElligott has further refined his analysis and notes that whereas CTAs for the key equity indexes, the S&P, Stoxx and Nikkei are all still in the "Max Short" bucket, all that may be about to reverse, as the first "Buy to Cover" level is just a few points higher in the S&P, or at 2,594, less than 10 points away. Here are some more details from the Nomura analyst on where the max pain levels for algo shorts are, and where the market will almost certainly rise to before retesting if the short squeeze can push it even higher, or if a new wave of selling will emerge as Morgan Stanley predicted earlier:

  • SPX at 2594, Nasdaq at 6581, Eurostoxx at 3066, DAX at 10827, Hang Seng CH at 10363—all would see current “Max Short” covered down to just “-82% Short” if today closes above those levels

As McElligott adds, late last week saw Russell, FTSE, Hang Seng, ASX and KOSPI all trigger modest short-covers from their prior “Max Short” positioning at the start of the week. Finally, also nearing inflections is EURUSD nearing sell trigger to again go “Max Short” at 1.1442

Stepping away from the algos, McElligott next looks at equity hedge and mutual fund positioning, and notes that these players both "grabbed" meaningfully back-into US Stocks last week, increasing their “beta to SPX” WoW. According to Nomura's calculations, Mutual Funds’ “beta to SPX” rose to the 62nd %ile from 59% last week, but more glaringly, “buying the dip” was sharply higher from just 27th %ile 1m ago.  At the same time, long/short hedge fund "beta to SPX" also jumped last week to 52nd %ile from 41st %ile, although remains significantly lower from last month’s Santa Rally positioning blow-up (was 81st %ile 1m ago).

Another notable observation is that Long/Short equity HFs are also again increasing their “net exposure” through forced-reduction of their short books, which were obviously “grossed-up” in Dec as the market melted "and are now being painfully squeezed-out to start 2019" - in a repeat of the violent short squeeze observed in Q4, and in factor space are outperforming “Crowded / Popular / Momentum Longs” by 2x’s – 3x’s YTD.

Meanwhile, in stark contrast to US Equities Mutual- and Hedge- Funds, McElligott finds that Macro Funds have not yet participated in this US Equities bounce, dramatically reducing their ‘beta to SPX’ last week down to just 8th %ile from 33%ile the week prior; not only that but global macro HFs are currently the worst performing asset class, according to Goldman.

That, to the Nomura strategist, speaks to that desire of many macro traders to fade the equity rally.

Last, and perhaps most important, is that according to Nomura's QIS Risk Parity model, balance and risk-parity funds have seen ongoing additions to global Bonds over the past month (+$21B vs 1m ago, almost entirely in JGB 10s and small UST 10s) versus reductions in Credit (particularly US IG -$18.9B vs 1m ago) and Global Equities (-$4.9B vs 1m ago, with -$4.2B of the overall from US Equities reduction).

As McElligott concludes, "as 2019 develops, it will be key to track these “counter-cyclical” longer-term adjustments to Risk Parity positioning into this “slower growth, lower inflation” view, as our 2Y lookback increasingly “picks-up” the 2018 volatility regime, while the prior 2017 “halcyon days” realized volatility environment within the two-year window decreases with each passing day."

Published:1/14/2019 11:57:19 AM
[Markets] "Secret Money For Private Armies" Austin Fitts Exposes America's "Open Running Bailout"

Via Greg Hunter’s,

Investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts says it looks like a “global recession is coming.”