Dec 28

Today’s News 28th December 2017

  • China Beige Book Warns Economic Slowdown Has Begun

    When it comes to the global economy, few things matter as much as China, the trajectory of its economy and especially the pace and impulse of its credit creation, which is ironic because virtually all data coming out of China is fabricated and manipulated, and thoroughly untrustworthy, either on purpose or “by accident.”

    The latest example of the former was highlighted over the weekend, when we discussed that a nationwide Chinese audit found some local governments inflated revenue levels and raised debt illegally, once again making a mockery of China’s credibility on the global stage. As Bloomberg reported ten cities, counties or districts in the Yunnan, Hunan and Jilin provinces, as well as the southwestern city of Chongqing, inflated fiscal revenues by 1.55 billion yuan, the National Audit Office said in a statement on its website dated Dec. 8.

    An even more blatant example of the former was highlighted in October ahead of China’s Communist Party Congress, when the local securities watchdog literally “advised” some loss-making companies to avoid publishing quarterly results ahead of the Congress as authorities sought to ensure stock-market stability during the critical gathering of China’s political elite.  As a result, at least 17 Shenzhen-listed companies announced delays to their earnings reports from Oct. 20 to Oct. 24, up from three during the same period last year.

    However, now that the Party Congress is long over, China’s recent economic data offer a “warning for 2018” now that Beijing’s leaders are less motivated to prop up fake “growth” for purely optical purposes. That is the opinion of China Beige Book, and its president Leland Miller who said that “Incentives to ensure the economy was growing smartly at the time of the Communist Party Congress do not apply as next year wears on,” CBB president Leland Miller and chief economist Derek Scissors said in a report released on Wednesday.

    According to a private survey by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve’s Beige Book, Q4 results already show some signs of a transition to slower growth,  The most recent sampling of 3,300 Chinese businesses showed:

    • Hiring stopped accelerating due to a strong base of comparison
    • Manufacturing orders also stopped accelerating 
    • Inventory accumulation “is too fast for comfort”
    • Sales-price inflation is weaker than in the second quarter
    • Wage gains have stopped accelerating

    Come to think of it, the CBB data is not that different from the official Chinese data which showed continued slowdown across most economic verticals:

     

    “None of these is genuinely alarming yet, and none would be out of place in a typical quarter,” the CBB’s Miller wrote. “But the first results after a CPC are not a typical quarter. If you expect a noticeable slowdown in 2018, the first post-Congress returns support those expectations.”

    To be sure, even here there is confusion: while at the 19th Party Congress, which marked the start of President Xi Jinping’s second five-year term, top leaders signaled less emphasis on pursuing economic growth at all costs, and greater dedication to deleveraging, during the main economic planning conclave in December which set priorities for 2018, they pledged to focus on “critical battles” against financial risk, pollution and poverty in coming years. Meanwhile, deleveraging – Xi Jinping’s endless crusade – was strangely forgotten. Indeed, as Goldman observed last week, “there was no explicit mention of deleveraging” as “recent policy statements increasingly use the phrase “control of leverage”, in our view likely a reflection of increasing realism in policy making.” This significant policy reversal prompted the WSJ last week to report that Beijing has effectively given up on its deleveraging pledge.

    Leverage or not, the table below – courtesy of Bloomberg – shows CBB’s breakdown of how support for the expansion may erode:

    Furthermore, evidence from the retail sector doesn’t support the government’s claims of a consumption boom, CBB said. While some large firms have strong sales and profitability improved this quarter, retail revenue growth finished last among major sectors, Miller and Scissors wrote.

    “Retail’s performance is decidedly uninspiring. Revenue, capex, and hiring are inferior to manufacturing, while inventory growth is much higher.”

    The good news: overall hiring has held up and was generally in line with the prior quarter, with 48% of firms staffing up and 3% cutting workers. “Job growth remained stronger at state firms than private, regardless of company size,” CBB’s survey found, although as we will show in a subsequent post, while hiring may remain strong, wages are tumbling in a troubling indication that China’s middle class is set for imminent disappointment and anger.

    Meanwhile, inflation in wages, prices, and input costs were also roughly the same as in the prior quarter, and were moderately faster than last year, the report said. Profit growth improved.

    That said, despite predictions of gloom as we enter 2018, the world’s second-largest economy proved bears fully wrong this year, exceeding analyst estimates in the first and second quarters, and is now on pace for the first full-year acceleration in growth since 2010, with GDP seen growing at 6.8% this year and 6.5% in 2018. There is a problem: this growth was on the back of a near record credit impulse since the February 2016 Shanghai accord, an impulse which is now over.

    Which means that all else equal, and absent another gargantuan credit injection in the coming months, China’s bears are about to have their day in the sun all over again.

  • Lacy Hunt On The Unintended Consequences Of Federal Reserve Policies

    Authored by Mike Shedlock via www.themaven.net/mishtalk,

    The Financial Repression Authority interviewed Lacy Hunt, Chief Economist at Hoisington Management on Fed policies.

    The interview below first appeared on the FRA website along with a video.

    The emphasis in italics is mine.

    FRA: Hi, welcome to FRA’s Roundtable Insight. Today, we have Dr. Lacy Hunt. He’s an internationally recognized economist and the Executive V.P. and Chief Economist of Hoisington Investment Management Company, a firm that manages over $4.5 billion USD and specializing in the management of fixed income accounts for large institutional clients. He also served in the past as Senior Economist for the Federal Reserve Bank of Dallas, where he was a member of the Federal Reserve System Committee on Financial Analysis. Welcome. Dr. Hunt.

    Dr. Lacy Hunt: Nice to be with you, Richard.

    FRA: Great. I thought we’d have a discussion on a variety of topics relating to the economy and the financial markets. You recently mentioned that you thought this was the worst economic expansion recovery in U.S. history since 1790. Wow. Can you elaborate?

    Dr. Lacy Hunt: If you calculate the average growth rate in the expansions since 1790, this is a long-running expansion, but it’s the slowest and in the last 10 years the household sector lagged very, very badly. The rate of growth in real disposable household income per capita is only 0.9 percent per year. And in the last 12 months, we’re up only 0.6 percent per year. So it’s a long-running expansion, but it’s been a poor expansion. There are certainly problems with some of the earlier data, but this appears to be the slowest expansion since the turn of the 18th Century and our households are the main problem for the growth rate lag.

    FRA: And do you point a finger for this cause as primarily on the Federal Reserve or do you see structural changes happening to the economy?

    Dr. Lacy Hunt: I think that the main element suppressing growth is the heavily leveraged U.S. economy. We have too much public and private debt, and this debt does not generate an income stream for the aggregate economy. As a result of the prolonged indebtedness, which is on the verge of going much higher because of problems in the governmental sector, the economy is now experiencing very poor demographics. We have a baby bust, a household formation bust, and the lowest birth rate since 1937. These demographics are exacerbating the problems because we have too much of the wrong type of debt and thus the velocity of money has been falling since 1997. Velocity this year is only 1.43 percent, which is the lowest since 1949. Furthermore, the debt creates a situation where monetary policy capabilities are asymmetric. In other words, a lot of action is needed to provoke even a muted impact on the economy, whereas the slightest monetary tightening goes a long way in depressing economic activity. So the root cause of this underperformance is extreme indebtedness.

    FRA: And what about the Federal Reserve? How has it undermined the economy’s ability to grow?

    Dr. Lacy Hunt: The Fed’s most serious mistake was made in the 1990s up until 2006 during which they allowed the private sector to become extremely over-indebted with the wrong type of debt. And, in essence, I think that quantitative easing, through the push for higher stock prices, created more problems than it has solved for the economy. QE caused the corporate executives to switch funds from real capital investments into financial investments through the paying of higher dividends, buying shares of their own companies, and buying back their shares from others. While this type of action does produce a higher stock market; it doesn’t generate a higher standard of living. And so, Federal Reserve policy has not improved the economy, although it certainly has well served components of the economy.

    FRA: And due to that do you think that there’s been too much financial investment versus real economy investment in terms of diverting the economic financial resources away from the real economy?

    Dr. Lacy Hunt: I think that’s the principal problem. Business debt last year reached a record high relative to GDP. As I said earlier, Fed policies have created a higher stock market but have not generated an improved standard of living. When the Reserve undertook quantitative easing, it was a signal to the corporate executives that the Fed preferred and would protect financial investments. But that meant financial assets were preferred over real side investments. And so QT is intermingling with the growth-depressing effects of too much debt. And the debt levels are getting ready to move substantially higher in our governmental sector. Government debt is already approaching 106 percent of GDP, a record high with the exception of a brief period during World War II. And by 2030, federal debt will be approximately 125 percent of GDP. For a long time, we’ve known about the issues that would inflate the entitlements — such as the prior-mentioned demographic problems — but there is an increasing likelihood that new federal programs with expenditure increases will further accelerate the growth in federal debt. I think there is clear evidence that increases in federal debt at these high levels relative to GDP over any measurable length of time, reduces economic activity. Thus, the multiplier is not a positive but negative figure, or otherwise exactly what economist David Ricardo hypothesized in his 1821 work. I have looked at the relationship between per capita changes in real GDP and government debt per capita and the relationship is negative, not positive. And so, we’re trying to solve an indebtedness problem by taking on more debt. You can get intermittent spurts of economic activity and inflation, but ultimately the debt is a millstone around the economy’s neck.

    FRA: So would you say that we have migrated to a sort of financial economy?

    Dr. Lacy Hunt: Let me give you a couple of examples. There’s so much liquidity in the financial markets, particularly the stock market, that a lot of the economic news is constructively interpreted even when it’s unconstructive. Virtually the world believes that the United States is experiencing large job gains and the idea that such productivity may be incorrect is hardly considered. But the rate of growth in payroll employment on a 12-month basis peaked at 2.4 percent in early 2015 and for the last 12 months, has sunk to 1.4 percent. What is even more critical — if you look at just the expansions and don’t include the recessions since 1968 – is that the average growth in employment in an expansion year was 1.9 percent. And in the last 12 months, we are half a percentage point under that figure. Yet, given these numbers, there is an erroneous perception that the employment gains are strong. And this view undermines the improvement in the standard of living. And because of the liquidity and the need of some investors to fully participate in the rising stock market, investors tend to overlook other important developments. If we go back to the 12 months ending November of 2015, real average hourly earnings were up about 2.5 percent. And in the latest 12 months, real average hourly earnings gained a miniscule 0.2 percent. The liquidity tends to push the focus away from the more realistic interpretation of the economy for certain types of assets.

    However, the weak performance overall and the deceleration in some of the indicators that I just referred to is not unnoticed by the bond market. So, we have a dichotomy in which the stock market is strongly up but the long-term bond yields are down. Now, the short-term yields are up because they are under the control or heavy influence of the Federal Reserve. The Federal Reserve is in the process of raising the short-term rates and winding down their portfolio. They sold 20 billion dollars of government agency securities in October and November, pushing up the short-term rates. Erstwhile, the long-term rates — which look at some of the more important economic fundamentals — are actually declining.

    Another element not in the public understanding, since the Federal Reserve no longer produces this sort of monetary analysis, is a very sharp slowdown in the money supply’s rate of growth, bank loans, and within important credit aggregates. Last year, the M2 money supply was up 7 percent. In the latest 12 months, it decelerated to less than 4.5 percent. The rate of growth in bank loans and commercial paper, which topped out on a 12- month basis about 9 percent, is now under 4 percent. So the Fed is raising the short-term rates, reducing the monetary base, and causing a tightening in the financial side of the economy. Some investors understand what is happening and yet it’s not in the general psyche because such monetary analysis is increasingly rare.

    However, another more public indicator is the very dramatic flattening of the yield curve. And when the yield curve flattens in such a way, first of all, it’s a symptom that monetary restraint is beginning to bite. Now, the slowdown in money supply growth and the bank credit flattening of the yield curve will occur well before there is any noticeable impact on a broad array of economic indicators or long lags in monetary policy. But when the yield curve starts flattening, that intensifies the effect of the monetary tightening because it takes away or, at the very least, greatly reduces the profitability of the banks and all those that act like banks. Banks make a profit by borrowing short and lending long. When those spreads recede, bank profitability is hurt, particularly for the higher, riskier types of bank loans since not enough spread exists to cover the risk premium. So the banks begin to pull back, further intensifying the restraint pressing on economic growth. To the vast majority of investors, we have an economy that is apparently doing well, but in fact there are elements right beneath the surface that strongly suggest to me that the outlook for 2018 is considerably more guarded than conventional wisdom implies.

    FRA: And do you see the potential for an inverted yield curve in the near future?

    Dr. Lacy Hunt: I’m not sure that we will have to invert because the economy is so heavily indebted and the velocity of money is its lowest since 1949. Now, a number of people have pointed out that we typically invert before a recession and historically such inversions have been the case most of the time — but not always if you go back far enough in time — and you should since this is not a normal economy. For example, money supply growth since 1900 has averaged about 7 percent per annum, whereas, currently, the rate of growth in M2 is about 36 percent below the long-term average, indicating a very weak growth rate. And the velocity of money is lower than all of the years since 1942 — with the exception of 7 years — and the economy has never been this heavily indebted. And so the yield curve could possibly approach inversion, but it may or may not occur or stay there very long because at that stage of the game, the flattening of the yield curve will greatly intensify all the other effects — the reduction in the reserve, monetary, and credit aggregates, as well as the weakness in velocity. And when this reduction becomes apparent, the Federal Reserve will not be able to reverse gears quickly enough to ameliorate the impact produced upon future economic growth.

    FRA: So do you still see a secular low in bond yields on the long into the yield curve remaining in the future sometime?

    Dr. Lacy Hunt: The lows have not been seen. The path there will remain extremely volatile. We will have episodes in which the long yields rise. My attitude is that the long yields can go up over the short run for any number of causes. While many elements work out of the system in the long end, yields cannot stay up. When yields go up — especially now that the yield curve is flattening — this intensifies monetary restraint, which puts downward pressure on commodities. This puts upward pressure on the value of the dollar and cuts back on the lending operations. Something I think has been somewhat overlooked in general euphoria over the strength of economic indicators, is the that commercial and industrial loans for all of the banks in the United States are now only up one-tenth of one percent in the last 12 months. There are forward-looking elements that have historically been very important for signaling that change is ahead. They don’t tell us the timing — timing is always difficult — but they are flashing signals that should be observed.

    FRA: And as this plays out, do you see monetary policy and fiscal policy is changing, like will we get fiscal policy stimulus? Will there be a change in monetary policy and how will that look like?

    Dr. Lacy Hunt: Here’s my attitude: the new federal initiatives, whether tax cuts or infrastructure or otherwise will not provide a boost to the economy if they are funded with increases in debt — that’s where we’re at. And by the way, it’s been that way for some time. If you go back to 2009, we had a one-trillion-dollar stimulus package that was said to be inflationary and was going to boost economic growth, but yet we still had this very poor expansion and little inflation except for intermittent bouts here and there, largely from highly-priced inelastic goods. All the while, the inflation rate has trended lower.

    For example, when President Reagan cut taxes, government debt was 31 percent of GDP and now that’s 106 percent on its way to 120-125 percent. And so if you go back and if you read Ricardo’s great article in 1821, he was asked whether it made a difference as to whether the Napoleonic wars were financed by taxes or by borrowing. Ricardo said that, theoretically, either way private sector activity was going to be suppressed. Now we have a lot of evidence, including some that I produced, that the government multiplier is negative, not positive, over a three-year period. Thus, the tax cuts may work for a very short while, but not on balance. And if the tax cuts were revenue-neutral and financed by reductions in government expenditures that would be a positive since the evidence shows tax multipliers are more favorable than expenditure multipliers. Such a theoretical proposal would provide greater efficiency for private sector spending and government spending. There’s also evidence that you would lower the cost of capital, but that’s not what we’re talking about is it? We’re talking about a debt-financed tax cut and we’re not talking about a revenue-neutral infrastructure plan, just as we were not talking about a revenue-neutral stimulus package in 2009. We’re talking about the debt-financed variety of tax cuts and at this stage of the game, this will make us more vulnerable, except for a few fleeting instances.

    I will say this: when you have a debt-financed infrastructure program or tax cut, there will be pockets within the economy that will benefit, but the aggregate economic performance will not benefit and so fiscal policy, as I see it, is not really going to be helpful. The risk is that the debt buildup will add to the problems. There is extensive academic research indicating that when government debt rises above 90 percent of GDP for more than five years, this trend will reduce the economy’s growth rate by a third. Remember, we’re at 106 percent debt to GDP and there’s evidence these higher levels of debt have a non-linear effect. In other words, we use up growth at a faster pace. And there’s a lot of evidence from the available data that we’re even losing a half of our growth rate from the trend. For example, GDP has risen at 2.1 percent per capita since 1790. The latest 10 years produced a reduction to 1.0 percent. And so we should have lost only seven-tenths or come down at 1.3 over 1 but we didn’t and this is a consequence that we have to deal with. We’re not in a position to ignore the debt levels. Fiscal policy can be talked about, we can debate about it, and we can proclaim its benefits, but I don’t see them in the current environment just as I didn’t see them in 2009. I would change my tune if they were revenue-neutral, but that’s not the issue here.

    To me, inflation is a money-price-wage spiral not a wage-price spiral as with the Phillips curve. The way inflations begin is by money supply growth acceleration not being offset by weakness in velocity, which shifts the aggregate demand curve inward. Remember, the aggregate demand curve is equal to money times the velocity by algebraic substitution as evidenced in all the leading textbooks on macroeconomics. So you have declines in the money supply and velocity, which will make the aggregate demand curve shift inward over time. This shift gives you a lower price level and a lower level of real GDP. It doesn’t happen every quarter or even every year, but it’s the basic trend. Thus, monetary policy is in the process not of decelerating money supply growth and by a significant amount. If the Fed adheres to their schedule of quantitative tightening, I calculate M2 will grow by the end of the first quarter – it’s currently running around four and a half percent – and the year over year growth rate will be down to less than 3 percent. And so monetary policy is taking steps to lower the reserve monetary and credit aggregates, and these actions will further flatten the curve because they can press the short rates upward. But I think the long-term investors will understand that the inflationary prospects on a fundamental basis are weakening not strengthening.

    FRA: And do you see these trends as being exacerbated on the emerging government pension fund crisis? Could there be more debt used to solve that like for bailouts? Do you see that potentially happening?

    Dr. Lacy Hunt: Well the main problem with government debt is that we’re going to have approximately one million folks a year reach age 70 in the next 14 to 15 years and we’ve known that this was coming, but we didn’t prepare for it. We’ve made a lot of promises under Social Security Medicare and the Affordable Care Act and government debt will have to be used to fund the entitlement benefits — I don’t see any other way around it. Another overlooked problem is that the actual federal fiscal situation is much worse than these surface numbers. For example, in the last three years, the budget deficit worsened each year. If you sum the budget deficits for 2015, 2016 and 2017, the sum is 1.2 trillion, but a lot of what was previously called “outlays” have been moved off budget — we call them investments (such as student loans) and there are other examples. The actual increase in federal debt in the last three years is 3.2 trillion. So the budget deficit is actually greatly understating what is happening to the level of federal debt which wasn’t always the case. Furthermore, the deficit was made worse by a 2015 bipartisan deal between Congress and the White House. And while neither party is blameless — they both agreed on the deal — yet it doesn’t change the fact that the federal situation is deteriorating and at a much worse rate than the deficit numbers themselves indicate.

    FRA: And what about for state and local jurisdiction locales, in terms of their government pension funds? Could there be federal level bailouts at that level?

    Dr. Lacy Hunt: Again, what are they going to bail them out with? You’re going to have to sell Federal Securities. And one of the multipliers on new sales of Federal debt is negative, not positive. Forget what was taught you in your macroeconomic class 30, 20, or even 15 years ago. When I was in graduate school, I was taught that the government multiplier was somewhere between four and five percent. Now, it looks like the multiplier is at best zero and even possibly slightly negative.

    FRA: Great insight as always. How can our listeners learn more about your work, Dr. Hunt?

    Dr. Lacy Hunt: We put out a quarterly letter as a public service. Write to us at hoisingtonmgt.com and we’ll put your name on the subscription list. We don’t spam you with marketing so please go ahead and subscribe.

    FRA: Okay, great. Thank you very much for being on the Program, Dr. Hunt. Thank you.

    Dr. Lacy Hunt: My pleasure Richard. Nice to be with you

    Economics as Taught

    Note Lacy's comments on what he learned in graduate school. Lacy once told me that he had to "unlearn" nearly everything he was taught in school about economic.

    Multiple generations of economists have been trained to believe inflation is a good thing, saving is bad, that there are no consequences for piling up debt.

     

  • Vanity Fair Editors Relentlessly Attacked Over "Don't-Run-Again-Hillary" Satirical Video

    It appears the McResistance is on the warpath once again, and this time they're going after Vanity Fair, which to the surprise of many published a satirical video about Hillary Clinton's future prospects in the days just before Christmas with the caption, "Maybe it's time for Hillary Clinton to take up a new hobby in 2018" as part of a broader series on New Year's resolutions. 

    "Take up a new hobby in the new year," suggested Vanity Fair writer Maya Kosoff. "Volunteer work, knitting, improv comedy – literally anything that will keep you from running again."

    Editor John Kelly, meanwhile, suggested that Clinton "finally put away your James Comey voodoo doll." And added further with cheerful snark, "We all know you think James Comey cost you the election and he might have, but so did a handful of other things. It’s a year later and time to move on."

    https://platform.twitter.com/widgets.js

    Editors from the magazine’s politics and business section, Hive, published the one-minute video entitled "Six New Year's Resolutions for Hillary Clinton" featuring themselves holding Champagne flutes while giving New Year's advice, which includes telling the former secretary of state and failed presidential candidate to give up and retire in 2018.

    Though the video is fast approaching one million views via twitter, it more noticeably has evoked an avalanche of anger and outrage in the form of over 10,000 twitter comments – the overwhelming majority of which express shock and indignation, with repeat calls for Vanity Fair to remove the video. 

    https://platform.twitter.com/widgets.js

    At the same time Hillary supporters including celebrities, journalists, and political commentators voiced their anger using the "#CancelVanityFair" hashtag which garnered over 30,000 tweets. And predictably it didn't take long for sexism to become the driving critique with Peter Daou, a former Clinton adviser, slamming the magazine for insulting “one of the most accomplished women in the history of the United States” while adding that he's long defended Clinton from such "sexist attacks."

    But it appears the magazine caved by issuing a vague blanket apology, though the video hasn't been removed. A Vanity Fair spokesperson said, "It was an attempt at humor and we regret that it missed the mark." 

    Of course, this didn't placate the trolls as "the resistance" thinks Hillary Clinton should remain uniquely immune from being the object of satire and didn't take the magazine to task over any other satirical videos in the same series. The New Year’s resolution video for Trump, for example, advises the president to delete his Twitter account and drink more Diet Coke in 2018. The Hive editors also took shots at Sarah Huckabee Sanders and Gary Cohn among others.

    Meanwhile the creators of the video, which in its mockery is no harsher than your average Saturday Night Live skit, have been trolled relentlessly by Hillary supporters forcing at least one to lock her social media accounts. According to The Intercept's Glenn Greenwald, "One of the reporters for Vanity Fair who appeared in the 'don't-run-again-Hillary' video, Maya Kosoff, has locked her account after being subjected to the most foul vitriol and abuse, endlessly, over several days."

    Below are a handful of select tweets which capture the outrage over the simple satirical Hillary video… it appears the resistance mob will attack even Vanity Fair for crossing narrowly enforced boundaries. With such sensitivity 2018 is sure to be loads of fun.

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

    https://platform.twitter.com/widgets.js

  • Hannity Promises To Expose CNN & NBC News In "EpicFail"

    "Tick tock."

    In a mysterious tweet yesterday evening to his 3.19 million followers, Fox News' Sean Hannity offered a preview of what is to come from his show next week, warning that he "will expose" CNN and NBC News for what he calls a "#EpicFail."

    He followed up last night's tweet…

    https://platform.twitter.com/widgets.js

    With another tonight, highlighting the "fake news" being spewed forth from various media entities…

    https://platform.twitter.com/widgets.js

    We will just have to be patient to discover what he has in store for CNN and NBC, but as The Hill notes, Hannity has focused on what he calls "the destroy Trump fake news media" on most nights during his Fox News prime-time opinion program, particularly during his opening monologues that invariably include clips of CNN and MSNBC hosts and pundits going after the president in hyperbolic fashion.

    Like many cable news hosts this week, Hannity is on vacation the week between Christmas and New Year's Day. He will return to the airwaves on Jan. 2.

    The past year has been a good one for the 55-year-old staunch conservative, with his candidate of choice in Trump taking office, his move from 10 p.m. to the more-watched time slot of 9 p.m. and his finish on top of the cable news ratings race following the move, averaging 3.2 million viewers.

  • The Herd Mind

    Authored by Dan Sanchez via The Foundation for Economic Education,

    The State is a state of mind; it is the herd mindset itself.

    Randolph Bourne famously wrote, “War is the health of the State.” This has long been the byword for anti-war, anti-state libertarians, and rightly so. But Bourne did not mean exactly what most libertarians take this phrase to mean. To understand the maxim’s original meaning, as Bourne used it in his great unfinished essay “The State,” one must understand his distinctions among three concepts that are often conflated: Country, State, and Government.

    For Bourne, a Country (or Nation) is a group of individuals bound together by cultural affinity. A State is a Country/Nation collectively mobilized for attack or protection. As he distinguished between the two:

    “Country is a concept of peace, of tolerance, of living and letting live. But State is essentially a concept of power, of competition: it signifies a group in its aggressive aspects.”

    The State and the Government 

    And Government, according to Bourne, “is the machinery by which the Nation, organized as a State, carries out its State functions” and “a framework of the administration of laws, and the carrying out of the public force.”

    What libertarians commonly refer to as “the State,” Bourne termed “the Government” instead. So, the way libertarians often interpret his famous aphorism is what Bourne would have expressed if he had written, “War is the health of the Government.” This also happens to be true, but it is not what he meant.

    For Bourne, the State is not a distinct ruling body subsisting extractively on the ruled, i.e., a “gang of thieves writ large,” as the great Murray Rothbard incisively conceived it. Rather, he saw it as a certain orientation of a whole people: a spiritual phenomenon pervading an entire populace that animates and empowers such a ruling body. As Bourne expressed it:

    “Government is the idea of the State put into practical operation in the hands of definite, con­crete, fallible men. It is the visible sign of the invisible grace. It is the word made flesh. And it has necessarily the limitations inherent in all practicality. Government is the only form in which we can en­vis­age the State, but it is by no means identical with it. That the State is a mystical conception is some­thing that must never be for­got­ten. Its glam­or and its significance linger be­hind the frame­work of Government and direct its activities.”

    In peacetime, Bourne explained, the State is largely relegated to the background; individuals are then more concerned with their own affairs and purposes. But during the build-up to war, and especially following its breakout, the foreign enemy looms large in the public imagination. Hence, the Country is overtaken by war fever and develops what Garet Garett called a “complex of vaunting and fear.” This hybrid mania of boastful belligerence and timorous terror (“fight-or-flight”) causes the populace to regress from a civilization to a herd. The people seek safety in numbers: in a multitude unified for a single purpose (a “great end”) and directed by a single agency. The varied dance of individuals gives way to the uniform huddle and stampede of the unitary drove, with the Government as drover.

    As Bourne wrote:

    “The State is the organization of the herd to act offensively or defensively against another herd similarly organized.”

    And in wartime, the “mystical conception” of the State “comes into its own” as the “herd-sense” becomes dominant in the Country and the “aggressive aspects” of the group come to the fore. This is what Bourne meant by, “War is the health of the State.” The dictum speaks to the flourishing of an ideal and the resulting transformation of a whole society, not merely the aggrandizement of a Government.

    Yet, war is also the health of the Government, which is the single directing agency to whose banner the State-minded masses flock. Under the perceived exigencies of war, the people:

    “…proceed to allow them­selves to be regimented, coerced, de­ranged in all the environments of their lives, and turned into a solid manufactory of destruction to­ward whatever other people may have, in the appointed scheme of things, come with­in the range of the Government’s disapprobation. The cit­i­zen throws off his con­tempt and indifference to Government, identifies him­self with its purposes, revives all his military memories and symbols, and the State once more walks, an au­gust presence, through the imaginations of men.”

    Economically, this means that the manpower and resources of the Country undergo “mobilization”: a vast redirection away from the provision of individual consumer wants and toward the all-important war effort. In this way too, the Government swells in power and grandeur, as the consumer-directed market economy is supplanted by the Government-directed “War Economy,” or even “War Socialism” (Kriegssozialismus, as the Germans called it in World War I).

    The "General Will"

    In the fever of war, the individual will is sacrificed for the “General Will,” which ostensibly expresses itself through the Government. Individuals renounce their identities for the sake of uniting Voltron-like into a State, like the gestalt “Leviathan” pictured on the cover of Thomas Hobbes’s book by that name.

    As Bourne put it:

    “War sends the cur­rent of purpose and activity flow­ing down to the lowest lev­els of the herd, and to its re­mote branches. All the activities of society are linked together as fast as possible to this central purpose of making a military offensive or military defense, and the State be­comes what in peace­times it has vainly struggled to be­come—the inexorable arbiter and determinant of men’s businesses and attitudes and opinions.”

    The herd is mobilized, not only against the foreign foe, but against any dissidents within the group who resist assimilation into the Borg-like hive- or herd-mind and who refuse to join the swarm or stampede into war: in other words, against “enemies foreign and domestic.”

     As Bourne explained:

    “The State is a jealous God and will brook no rivals. Its sovereignty must pervade every­one and all feel­ing must be run into the stereo­typed forms of romantic patriotic militarism which is the traditional expression of the State herd-feeling. (…) In this great herd-machinery, dis­sent is like sand in the bearings. The State ideal is primarily a sort of blind animal push to­wards military unity. Any interference with that unity turns the whole vast impulse to­wards crush­ing it.”

    The State crushes dissent through Government policies restricting civil liberties, but also through private citizens acting as “amateur agents” of the Government: who berate skeptics into silence, report critics to the authorities for “disloyalty,” or even take the security of Herd and Homeland into their own violent hands. Remember that in Bourne’s framework, the Government is by no means identical with the State. As such, the State can animate a private citizen even more than it does an officeholder. As Bourne remarked:

    “In every country we have seen groups that were more loyal than the King—more patriotic than the Government—the Ulsterites in Great Britain, the Junkers in Prussia, l’Action Francaise in France, our patrioteers in America. These groups exist to keep the steer­ing wheel of the State straight, and they pre­vent the nation from ever veer­ing very far from the State ideal.”

    This an extremely apt description of the Fox News types who castigate Barack Obama for his lack of “patriotism” and the insufficiency of his war-making. The spirit of the State dwells within Sean Hannity even more so than it dwells within the President of the United States. What is ironic is that a war-drumming jingo like Hannity usually imagines himself a paragon of manhood; yet his dull, stampeding herd mindset marks him out as less of a man, and more of a beast.

    Bourne's Legacy 

    Randolph Bourne was not a libertarian, but a dissident progressive. Still, we libertarians can learn a great deal from him. For instance, perhaps our terminology, as penetrating and illuminating as it is, has led us to focus too much on the herdsmen in office who drive, shear, milk, and butcher us, and not enough on the more fundamental problem: our society’s bovine propensity to become a manipulable herd in the first place, especially when spooked. Occasionally thinking in terms of Bourne’s typology can be a useful corrective in this regard.

    Bourne’s terminology and analysis also shed light on the all-important question of how to achieve liberation. The State lives in the minds of the Government’s victims. Simply overthrowing a Government will only spook the herd even worse. The State will not only survive such an overthrow, but it will likely even feed off of it, as the panicked herd acts even more herd-like in the crisis, granting new herdsmen even more tyrannical power than the old ones had.

    The State is a state of mind; it is the herd mindset itself. As such, it can only be overthrown in the battleground of the mind. Once the State is spiritually dethroned and the populace fully transfigures from herd to civilization, the “Government,” like a shepherd without a flock, will no longer even merit its designation. It will then merely be a heavily armed, but even more heavily outnumbered, gang of rustlers writ small.

    Accomplishing this becomes ever more urgent as Americans are driven into ever more calamitous wars. It is increasingly apparent that breaking the spell of the State that turns men into beasts may be the only way we can avoid being driven to self-destruction by alarmist warmongers and their terrorist symbionts, like buffalo being stampeded off a cliff by herd-spooking hunters.

     

  • Top Russian General Accuses US Of Training ISIS At Syrian Border Base

    From ISIS To US-Backed "New Syrian Army" – "They Change Their Spots" Russia Alleges

    According to a new Reuters report, the chief of the Russian General Staff has accused the United States of hosting a training facility for ISIS fighters in Syria along the Syria-Iraq border. Al-Tanf base on Syria's southeast side has been under the control of the US-backed "New Syrian Army" and their US special forces advisers since the area was captured from ISIS in August of 2016.

    Russia has previously called the base a 100km wide “black hole” operated by the US wherein an assortment of unaccountable armed groups and militants can operate freely. That American troops have long been deployed there was previously confirmed through multiple photographs and videos released early in the summer of 2017 which showed US elite soldiers on active patrols with Syrian rebel factions associated with the Free Syrian Army (or FSA, elements of which were more recently renamed the New Syrian Army).


    Photos above and below were made public last summer which shows ongoing training of "New Syrian Army" fighters by US military advisers. Russia now alleges ISIS members have sought the protection of the base and area under its control. Russia's top general said this week, "They are practically Islamic State. But after they are worked with, they change their spots and take on another name." The images were originally published through Hammurabi’s Justice News, a news outlet affiliated with Maghaweir al Thowra (MaT) – a faction which is the latest incarnation of the US-created New Syrian Army. Via the Long War Journal


    Image produced by Maghaweir al Thowra (MaT) – the latest incarnation of the US-created New Syrian Army.

    The head of Russia’s General Staff, Valery Gerasimov, made the allegations in an interview on Wednesday with Komsomolskaya Pravda newspaper, saying that the US base is illegal (and presumably the other roughly up to 10 or more known bases) as the Americans have no right to violate Syrian sovereignty and have not been invited to be there by Damascus in the first place. Russian military officials have recently indicated that the Syrian Army has essentially cut off the area and isolated US-backed forces' ability to expand. If true this raises significant doubts concerning how the presumed "anti-ISIL" mission of US coalition forces are valid or relevant, or how a direct US military presence in the remote southeast region could be justified.

    Early this month Russian President Vladimir Putin declared that the Islamic State had been destroyed and no longer holds cities or significant territory, though insurgent pockets remain. And at the same time the Russian "mission accomplished" announcement was being widely reported, the Pentagon said US forces would stay in Syria "as long as we need to, to support our partners and prevent the return of terrorist groups." Meanwhile, this week Russia has moved forward with plans brokered with the Syrian government to maintain two permanent Russian military bases on the Mediterranean – the naval station at Tartus and Khmeimim airbase outside of Latakia.

    General Gerasimov told the Russian newspaper that the defense ministry possessed drone and satellite footage confirming large numbers of ISIS-affiliated fighters at the US base at Tanf. "They are in reality being trained there,” Gerasimov said, and continued “They are practically Islamic State. But after they are worked with, they change their spots and take on another name. Their task is to destabilize the situation."

    Thus the allegation appears to be that as ISIS loses territory and is rooted out of various pockets in the east, its fighters then conveniently declare their allegiance to US-backed FSA/New Syrian Army factions, after which they enter training programs hosted by US advisers. 

    Gerasimov further indicated that some 400 militants recently left a town in the southern al-Hasakah Province for al-Tanf, launching an offensive on the Syrian forces from the eastern bank of Euphrates, after the main ISIS forces were routed there. Russia has over the past months accused the US coalition of essentially relocating ISIS fighters in order to allow their redeploying to locations where they could attack and pressure Syrian and Russian aligned forces.

    In one major instance related to the coalition and SDF victory over ISIS in Raqqa, a bombshell investigative report produced by no less than BBC News confirmed that Russia has certainly had reason to be suspicious of the Pentagon's motives and strategy inside Syria. According the November BBC report:

    The BBC has uncovered details of a secret deal that let hundreds of Islamic State fighters and their families escape from Raqqa, under the gaze of the US and British-led coalition and Kurdish-led forces who control the city. A convoy included some of IS's most notorious members and – despite reassurances – dozens of foreign fighters. Some of those have spread out across Syria, even making it as far as Turkey.

    And concerning the latest accusations of US-ISIS complicity in al-Tanf, Gen. Gerasimov further said the pattern continues: "The most important is that we have been seeing the militants advancing from there for several months. When the control [of the Syrian forces] loosened, as many as 350 militants left the area." He further said of the Russian-Syrian fight against ISIS in the area, "We took timely measures…they have suffered a defeat, these forces were destroyed. There were captives from these camps. It is clear that training is underway at those camps."

    And he continued, "Instead of the New Syrian Army, mobile ISIS groups, like a jack in the box, carry out sabotage and terrorist attacks against Syrian troops and civilians from there." And though the pretext for the Tanf base’s creation was "the need to conduct operations against ISIS" – the rapid recent demise of ISIS proves that the Americans have ulterior motives, according to the Russian general.

    Meanwhile, Syrian President Bashar al-Assad has heightened his rhetoric of late regarding uninvited foreign forces operating on Syrian soil. He said last week in a televised interview which was subsequently posted to multiple Syrian official social media channels: "Those who work with foreigners against their army are traitors." Assad has also on multiple occasions promised to return all of natural Syria to the control of the Syrian government and army.

  • "$1MM Per Minute In Salaries, $22BN Per Year In Vacation Pay" And Other Fun Facts About The Federal Workforce

    The folks at Open The Books decided to take a deep dive into the salaries of 1.97 million federal employees, using data collected from the Office Of Personnel Management and the USPS via FOIA requests, and the endless examples of excessive pay and pure waste are sure to make you sick, if not downright suicidal.  Here are just some of the key takeaways as summarized by OTB:

    1. The federal government pays its disclosed workforce $1 million per minute, $66 million per hour, and $524 million per day. In FY2016, the federal government disclosed 1.97 million employees at a cash compensation cost of $136.3 billion.

     

    2. Over a six-year period (FY2010-2016), the number of federal employees making $200,000 or more has increased by 165 percent; those making $150,000 or more has grown by 60 percent; and those making more than $100,000 has increased by 37 percent.

     

    3. On average, federal employees are given 10 federal holidays, 13 sick days, and 20 vacation days per year. If each employee used 13 sick days and took 20 vacation days in addition to the 10 federal holidays, it would cost taxpayers an estimated $22.6 billion annually.

     

    4. In FY2016, a total 406,960 employees made six-figure incomes – that’s roughly one in five disclosed federal employees. Furthermore, 29,852 federal employees out-earned each of the 50 state governors receiving more than $190,823.

     

    5. At 78 out of the 122 independent agencies and departments we studied, the average employee compensation exceeded $100,000 in FY2016.

     

    salaries

     

    6. With 326 employees at a total cash compensation of $28.8 million, we found a federal agency in San Francisco – Presidio Trust – paid out three of the top four federal bonuses including the largest in the federal government in FY2016. The biggest bonus went to an HR Manager in charge of payroll for $141,525.

     

    7. Together, the United States Postal Service (USPS) and the Department of Veterans Affairs (VA) employ more than half of the disclosed federal workforce. As the largest civilian employer within the federal government, the USPS employed 32 percent of all disclosed federal employees, totaling 621,523 people on payroll in FY2016. The VA employed the second most employees with 372,614 or 19 percent of the disclosed federal workforce.

     

    8. Only one-third of the 35,000 lawyers in the federal workforce work at the Department of Justice. The entire staff of federal lawyers earned $4.8 billion in FY2016.

     

    9. The Department of Veterans Affairs (VA) employed 3,498 police officers at a total cost of $172 million in FY2016. When asked about corresponding crime statistics, the VA was unable to provide any information on the number of crimes or incidents.

     

    10. There are an additional 2 million undisclosed employees at the Department of Defense and in the active military. Their estimated cash compensation value, combined with $1 billion in undisclosed bonuses and $125 billion in hidden pension data, amounts to roughly $221 billion in undisclosed federal cash compensation per year.

    So where is all the money going?  As it turns out, federal employees working in “the beltway” and California receive 22% of all federal compensation dollars.  Meanwhile, employees located in just the top 10 states received 41% ($55.5 billion).  Of course, out of that top 10, only two states, Georgia and Texas, consistently vote ‘red’ in national elections which may help to explain why the Trump administration has struggled with leaks from a variety of agencies since moving into the White House.

    The growth in the number of federal employees earning over $150,000 per year is simply mind numbing.  Keep in mind, these salaries are doled out regardless of whether or not these employees take advantage of their 8 weeks of paid time off every year. 

    There are now 29,852 federal employees who out-earn every governor of the 50 states, receiving more than $190,823 each. Over a six-year period (FY2010-2016), the number of federal employees making $200,000 or more has increased by 165 percent, those making $150,000 or more has grown by 60 percent, and those making more than $100,000 has increased by 37 percent.

     

    Of the roughly 2 million disclosed federal employees, 406,960 made six figures in cash compensation in FY2016. Additionally, 24,799 federal employees earned $200,000 or more while 3,154 made $300,000 or more. The top-paid federal employee overall, Dr. David Harpole, made $403,849 as a thoracic and cardiac surgeon for the Department of Veterans Affairs. This department employs more top earners than any other department or independent agency

    As if the above isn’t bad enough, things get really disturbing when you learn that various agencies employee an army of “Interior Designers” making up to $150,000 per year…

    The Department of State displayed the most egregious trends in regards to interior designers, doling out – on average – $122,093 to each of its 24 interior designers. The highest-paid interior design employees, however, worked for the Department of Treasury, earning $132,438, on average. In all, the federal government paid 40 interior designers more than $100,000 each.

    …and an even larger army of “Gardeners” making up to $160,000.

    Perhaps it’s time for a career change?  Here’s an idea…you could pick up a job mowing the lawn at the State Department for 40 hours a week at a salary of $141,555 and then use the other 128 hours of every week to get an Interior Design gig at Treasury for $152,687…all the while collecting two pensions and making nearly 5x the average American household yet still working less hours despite having two jobs…

    Here is the full report from Open The Books:

  • Five Things Professors Actually Said In 2017

    Via Campus Reform,

    Most Americans expect college professors to be beacons of knowledge and wisdom, or at least to exercise more maturity than their teenage students.

    Every year, however, Campus Reform comes across professors who unashamedly make outrageous, preposterous, and downright absurd remarks in their classrooms and on social media, denigrating conservatives and their viewpoints.

    In 2017, President Trump’s first year in the Oval Office brought academic rage to new heights as professors frequently blasted the Commander-in-Chief and berated his voters, traditional conservatives, and anyone who does not embrace progressivism.

    Here are five things that professors actually said in 2017:

    1) Prof suggests Texans deserve hurricane for supporting Trump

    A University of Tampa professor was so upset about the outcome of the 2016 presidential election that he publicly suggested that Texans deserved Hurricane Harvey because the state voted Republican last year.

    “I don’t believe in instant Karma but this kinda feels like it for Texas,” Professor Ken Storey tweeted in August. “Hopefully this will help them realize the GOP doesn’t care about them.”

    Shortly after the controversial remarks, the university announced that it had fired the professor.

    2) Prof says House GOP ‘should be lined up and shot’

    An Art Institute of Washington professor was so furious about the House GOP’s effort to repeal and replace Obamacare that he said GOP lawmakers “should be lined up and shot” for their actions.

    “They should be lined up and shot,” Professor John Griffin wrote on his Facebook page. “That’s not hyperbole; blood is on their hands.”

    3) Prof calls whites 'inhuman assholes,' says 'let them die'

    In June, Trinity College professor Johnny Eric Williams made national headlines after appearing to suggest that the first responders should have let the victims of the congressional shooting "fucking die” because they are white.

    “It is past time for the racially oppressed to do what people who believe themselves to be ‘white’ will not do, put end to the vectors of their destructive mythology of whiteness and their white supremacy system. #LetThemFuckingDie,” Williams wrote in a Facebook post, including the hashtag as an apparent reference to an op-ed with the same title that he had shared two days earlier.

    Following his controversial remarks, Williams was placed on leave but is slated to return to teaching in 2018.

    4) Prof says Otto Warmbier 'got exactly what he deserved'

    A University of Delaware professor claimed that Otto Warmbier, a young American who died after being held in a North Korean prison camp, “got exactly what he deserved.”

    Professor Katherine Dettwyler made her remarks on her personal Facebook page and in the comments section of an article published by National Review.

    Dettwyler maintained that Warmbier behaved like a “spoiled, naive, arrogant U.S. college student who never had to face the consequences of his actions” when he visited North Korea, and that he had a “typical mindset of a lot of the young, white, rich, clueless males” she teaches.

    5) Drexel prof blames 'whiteness' for Texas massacre

    George Ciccariello-Maher, an assistant professor at Drexel University who made headlines by calling for “white genocide” last year, was at it again in 2017.

    In early November, the academic pinned the blame for the Texas massacre that killed 26 people on what he called “whiteness” and “entitlement.”

    “Whiteness is never seen as a cause, in and of itself, of these kinds of massacres, of other forms of violence,” Ciccariello-Maher said in an interview with Democracy Now!, asserting that “whiteness is a structure of privilege and it’s a structure of power, and a structure that, when it feels threatened, you know, lashes out.”

  • One-Third Of The 2016 Spike In U.S. Homicides Came From Just 5 Chicago Neighborhoods

    Authored by Thomas Lifson of American Thinker,

    The full evil of the anti-cop hysteria pushed by left wing groups like #BlackLivesMatter will take many years to be understood, in no small part because of political and media support for the notion that racism on the part of cops is the sole cause for disproportionate numbers of black perpetrators in our crime statistics.

    But every now and then, a statistic appears that cannot be easily dismissed. Jared Sichel of The Daily Signal brings one such figure to our attention.

    Murders in the U.S. rose nearly 9% last year, and one-third of that increase came from just a few neighborhoods in Chicago, according to a Wall Street Journal analysis of the FBI’s annual 2016 publication, Crime in the United States.

     

    While violent crime (homicide, rape, assault, and robbery) also rose nationwide from 2015 to 2016 — over 4% — the data show the increase was not uniform, but rather concentrated in cities like Chicago and Baltimore.

    Chicago

    (Chart per HeyJackAss!)

    Other big cities, including Los Angeles and Washington, DC, saw meaningful declines in violence. So there is no broad trend, but rather local factors that must be accounted for. For instance:

    Interestingly, the paper’s neighborhood-by-neighborhood analysis claimed that areas where homicides spiked had a “lighter street presence by police following officers’ high-profile killings of young black men.” (snip)

     

    In Baltimore, violent crime rates were going down until 2015, when police officers “pulled back from a more proactive approach” following widespread city riots after the death of Freddie Gray, a 25-year-old black man who suffered a severe spinal injury while being transported in a police van on April 1, 2015, and died one week later.

    But for the real statistical weight affecting overall crime stats, one has to look at Chicago, where the police have been under severe restrictions and where gang activity is out of control:

    In Chicago last year, homicides jumped to 771, 58% higher than in 2015, and more than the number of murders in Los Angeles and New York combined. Half of that increase, the analysis showed, came from just five neighborhoods, and is largely attributable to gang warfare. In a “roughly four-mile radius of West Garfield Park,” for example, there are at least 30 gangs. (snip)

     

    In Chicago, as in Baltimore, police became less proactive following protests against the fatal 2014 shooting of a black teenager, Laquan McDonald, by a white police officer, Jason Van Dyke, who has been charged with first-degree murder.

     

    A FiveThirtyEight analysis found that in Chicago and other cities with high-profile deaths of black men involving police officers, a “pullback in policing was accompanied by a sharp increase in gun violence.”

    All the anti-cop self-righteousness in the world won’t save one victim from gang violence. The BLM protestors, along the with hands up-don’t shoot crowd have been enablers of horrific violence that mostly is claiming black lives. Progressive politics often involves sacrificing the powerless for the purported greater good, even as the poseurs claim to be their righteous protectors.

Digest powered by RSS Digest