- Escobar: America's 'Blue Dot' Barely Visible From New Silk Roads
Escobar: America’s ‘Blue Dot’ Barely Visible From New Silk Roads
Authored by Pepe Escobar via The Saker blog,
The US-Australia-Japan alternative to Belt and Road helps explain why the US sent a junior delegation to Thailand and why India opted out of RCEP…
China’s President Xi Jinping waves during the opening ceremony of the China International Import Expo in Shanghai on November 5. Photo: AFP/Hector Retamal
Chinese President Xi Jinping six years ago launched New Silk Roads, now better known as the Belt and Road Initiative, the largest, most ambitious, pan-Eurasian infrastructure project of the 21st century.
Under the Trump administration, Belt and Road has been utterly demonized 24/7: a toxic cocktail of fear and doubt, with Beijing blamed for everything from plunging poor nations into a “debt trap” to evil designs of world domination.
Now finally comes what might be described as the institutional American response to Belt and Road: the Blue Dot Network.
Blue Dot is described, officially, as promoting global, multi-stakeholder “sustainable infrastructure development in the Indo-Pacific region and around the world.”
It is a joint project of the US Overseas Private Investment Corporation, in partnership with Australia’s Department of Foreign Affairs and Trade and the Japan Bank for International Cooperation.
“The development of critical infrastructure—when it is led by the private sector and supported on terms that are transparent, sustainable, and socially and environmentally responsible—is foundational to widespread economic empowerment,” said Bohigian. “Through Blue Dot Network, the United States is proud to join key partners to fully unlock the power of quality infrastructure to foster unprecedented opportunity, progress, and stability.”
“This endorsement of Blue Dot Network not only creates a solid foundation for infrastructure global trust standards but reinforces the need for the establishment of umbrella global trust standards in other sectors, including digital, mining, financial services, and research,” said Krach. “Such global trust standards, which are based on respect for transparency and accountability, sovereignty of property and resources, local labor and human rights, rule of law, the environment, and sound governance practices in procurement and financing, have been driven not just by private sector companies and civil society but also by governments around the world.”
“Australia is committed to promoting high-quality infrastructure, inclusive approaches, and facilitating private sector investment in the Indo-Pacific region,” said Maude. “I’m pleased that this commitment is shared by East Asia Summit Leaders, and we look forward to working closely with our regional partners to develop Blue Dot Network to take action on this commitment.”
“Blue Dot Network is an initiative that leads to the promotion of quality infrastructure investment committed by G20 countries,” said Maeda. “As JBIC has a long history of infrastructure finance all over the world, JBIC is pleased to share such experience and contribute to further development of Blue Dot Network.”
Now compare it with what just happened this same week at the inauguration of the China International Import Expo in Shanghai.
As Xi stressed:
“To date, China has signed 197 documents on Belt and Road cooperation with 137 countries and 30 international organizations.”
This is what Blue Dot is up against – especially across the Global South. Well, not really. Global South diplomats, informally contacted, are not exactly impressed. They might see Blue Dot as an aspiring competitor to BRI, but one that’s moved by private finance – mostly, in theory, American.
They scoff at the prospect that Blue Dot will include some sort of ratings mechanism that will be positioned to vet and downgrade Belt and Road projects. Washington will spin it as a “certification” process setting “international standards” – implying Belt and Road is sub-standard. Whether Global South nations will pay attention to these new ratings is an open question.
The Japanese example
Blue Dot should also be understood in direct comparison with what just happened at the summit-fest in Thailand centered on the meetings of East Asia, the Association of Southeast Asian Nations and the Regional Comprehensive Economic Partnership (RCEP).
The advent of Blue Dot explains why the US sent only a junior delegation to Thailand, and also, to a great extent, why India missed the RCEP train as it left the pan-Asian station.
Indian Prime Minister Narendra Modi is still between a rock – Washington’s Indo-Pacific strategy – and a hard place – Eurasia integration. They are mutually incompatible.
Blue Dot is a de facto business extension of Indo-Pacific, which congregates the US, Japan, Australia – and India: the Quad members. It’s a mirror image of the – defunct – Obama administration Trans-Pacific Partnership in relation to the – also defunct – “pivot to Asia.”
It’s unclear whether New Delhi will join Blue Dot. It has rejected Belt and Road, but not, finally and irrevocably, RCEP. ASEAN has tried to put on a brave face and insist differences will be smoothed out and all 16 RCEP members will sign a deal in Vietnam in 2020.
Yet the bottom line remains: Washington will continue to manipulate India by all means deemed necessary to torpedo – at least in the South Asian theater – the potential of Belt and Road as well as larger Eurasia integration.
And still, after all these years of non-stop demonization, the best thing Washington could come up with was to steal Belt and Road’s idea and dress it up in private bank financing.
Now compare it, for instance, with the work of the Economic Research Institute for ASEAN and East Asia. They privilege the ASEAN Outlook on the Indo-Pacific, an original Indonesian idea, instead of the American version. The institute’s president, Hidetoshi Nishimura, describes it as “a guideline for dialogue partners” and stresses that “Japan’s own vision of the Indo-Pacific fits very well with that of ASEAN.”
As much as Nishimura notes how “it is well known that Japan has been the key donor and a real partner in the economic development of Southeast Asia throughout the past five decades,” he also extols RCEP as “the symbol of free trade.” Both China and Japan are firmly behind RCEP. And Beijing is also firmly stressing the direct connection between RCEP and Belt and Road projects.
In the end, Blue Dot may be no more than a PR exercise, too little, too late. It won’t stop Belt and Road expansion. It won’t prevent China-Japan investment partnerships. It won’t stop awareness all across the Global South about the weaponization of the US dollar for geopolitical purposes.
And it won’t bury prevailing skepticism about the development project skills of a hyperpower engaged on a mission to steal other nation’s oil reserves as part of an illegal Syrian occupation.
Tyler Durden
Sat, 11/09/2019 – 23:30 - A Visual Timeline Of AI Predictions In Sci-Fi
A Visual Timeline Of AI Predictions In Sci-Fi
They say you shouldn’t believe everything you see on the big screen.
However, as Visual Capitalist’s Iman Ghosh explains below, in the case of science fiction, the human imagination has gotten a few things right – especially when it comes to futuristic forecasts. Today, the artificial intelligence (AI) revolution is transforming everything, but it turns out we had a hunch about it all along.
When AI Comes to Life
Today’s infographic from Noodle.ai takes a look at how some movie and television predictions for AI’s capabilities have taken hold in the real world.
Many early “predictions” about future technologies certainly missed the mark—but it seems science fiction was able to accurately forecast a thing or two about AI.
AI Basics: Making Life Better
Artificial intelligence is all about equipping machines with the ability to mimic human decision-making processes. It has a wide range of applications, from basic automation to advanced machine learning models.
AI has proliferated into virtually every aspect of life, and in the graphic, it’s clear that several sci-fi-turned-real inventions are aimed at making things more convenient for us humans.
Of course, these have had varying degrees of success. While Google Glass didn’t initially resonate with the wider public, the augmented reality smart glasses have now proved useful in businesses such as manufacturing.
Elsewhere, sci-fi-inspired advances in industries like healthtech are providing a new lease of life for many patients—and continuously reinventing the frontier of what we think is possible.
Sci-Fi Helps Us Push Boundaries
One monumental event in AI history occurred in 1997, when IBM’s Deep Blue beat a chess master at his own game. This event shook the world when we realized what AI could truly be capable of—even though sci-fi had in fact anticipated it 20 years prior.
But as the graphic shows, not all is rosy in science fiction’s likeness of AI. It’s often depicted as something to fear, and certain predictions have proved to be eerily accurate.
While not all of these are causes for alarm, they clearly demonstrate that sci-fi has the capacity to influence the breakthrough technology we could end up seeing a few years down the line. However, turning reel to real can raise some curious dilemmas.
Rights for Robots?
Last year, the European Parliament debated an interesting question: do robots qualify as people?
The resolution considered granting “personhood” to sophisticated, autonomous robots. However, over 150 AI experts strongly warned against this proposal, arguing it would “blur the relation between man and machine” in a way that is too unethical.
Nevertheless, this thought experiment proves that artificial intelligence is matching our wildest imagined predictions for it.
AI is whatever hasn’t been done yet.
– Tesler’s Theorem
As we move ever closer towards a world where AI is inextricably linked with the everyday, how else could science fiction shape our expectations of the future?
Tyler Durden
Sat, 11/09/2019 – 23:00 - J.P.Koning: The Gamification Of Bitcoin
J.P.Koning: The Gamification Of Bitcoin
Authored by J.P.Koning via The American Institute for Economic Research,
Eleven years ago, Satoshi Nakamoto announced the bitcoin whitepaper to the world. Coinbase, a large cryptocurrency exchange, recently celebrated this milestone with a retrospective.
I’m going to remix Coinbase’s narrative to tell a different account of bitcoin’s last 11-years.
The thing that fooled us all for a while, myself included, is that we all thought bitcoin was solving a monetary or payments problem. It was labelled a coin, after all, and coins fall within the realm of monetary economics. To further complicate matters, Satoshi told his story using phrases like “electronic cash system” and “non-reversible transactions”. Perhaps we deserve to be forgiven for not seeing bitcoin’s underlying nature. After all, tearing down the existing monetary system and building a new one was a fresh and exciting narrative.
Anyways, Coinbase still believes this old tale.
“As with other technologies, money has gone through many upgrades over the years,” its marketing team writes.
“Bitcoin is the latest breakthrough in a technology that’s millennia old.”
What is now apparent is that bitcoin was never a monetary phenomenon. No, bitcoin is a new sort of financial betting game. It is a digital, global, highly-secure, and fairer version of the old-fashioned chain letter.
The premise behind bitcoin-the-game is that the current wave of buyers must guess when (or if) a subsequent wave of buyers will emerge, this second next wave’s participation being contingent on when (or if) they believe a third wave of buyers to emerge. If they guess right, the early birds win at the expense of the late ones. And they can win a lot of money, as Coinbase points out in its post:
Think of bitcoin as a pure mind game, a Keynesian beauty contest in which we “devote our intelligences to anticipating what average opinion expects the average opinion to be.” Those old fashioned chain letters that you (or your parents) used to get in the mail were an early type of beauty contest. The price that Alice was willing to place on a chain letter was a function of whether she expected the next recipient, Bill, to play by the rules and send it on, Bill’s expectation in turn depending on the odds that Jack would join the game.
But chain letters had a major flaw. The chain order could be easily compromised by a fraudster who miscopied the list and put their name at the front. Bitcoin fixes this by introducing robustness to chain letter-type games. Bitcoin’s blockchain is an unbreakable public record of where in line game players stand. Altering this chain order would require tremendous amounts of computer power, as Coinbase illustrates in this chart:
Bitcoin-the-game has been spectacularly successful. As Coinbase points out, it “went from an idea in 2008, and a first transaction in 2009, to over 27 million users in the US alone in 2019, or 9% of Americans.” Below, Coinbase has charted the number of active bitcoin addresses that have been created over the years:
Why did bitcoin-the-game succeed?
First, it’s a fun and cutting-edge game. Many people dream of thrusting themselves out of financial obscurity into millionaire land. Bitcoin is a technologically-sophisticated way to get there. No one wants to play grandpa’s lottery.
Secondly, the way that bitcoin is designed helps it spread. Most of the legacy financial games that bitcoin competes with (poker, lotteries, sports betting) are regulated by the government. Strict rules prevent game providers from reaching a wide audience. For instance, online casinos may be prevented from serving out-of-state players, problem gamblers may be banned, and those who are under 18 must be excluded. These financial games are usually centralized. This means they are hosted on a single website, or at a physical location like a casino, or by a government-run lottery corporation. Which makes it easy for regulators to shut down game providers who break the rules.
But bitcoin is different. Because it is a decentralized and digital financial game, it can’t be regulated or shut down. And so it can serve the entire globe with impunity. Which it has done by spreading into every crack and cranny on earth. As is illustrated by another of Coinbase’s charts:
Based entirely on whisps and storms of psychology, the price of bitcoin is inherently volatile. Its core volatility has stayed pretty much constant over the last 11-years. Users should expect the same for the next 11 years. Even if more people join a Keynesian beauty contest, the average opinion of the average opinion will always be a fickle, inconsistent thing, and so price will always be jittery.
So what about bitcoin-as-money? Yes, people do use bitcoin for payments. But this gets dwarfed by its popularity as a financial game. The problem is this. Bitcoin payment functionality is implemented on top of a highly volatile chassis, a fun but fickle beauty contest. Which hobbles the effectiveness of the payments platform. Regular folks won’t use the stuff to pay. They don’t want the value of their spending stash to fall by 20% overnight. And game players don’t want to waste their tokens on buying goods & services. That could mean potentially missing out on a life changing jackpot. That’s why the promise of mainstream bitcoin payments has died a thousand deaths over the last 11 years.
That being said, the demand for bitcoin in economically volatile regions such as Venezuela has hit record highs. Coinbase suggests that thanks to inflation and capital controls, bitcoin is finally being used as the electronic cash for which it was originally designed.
Coinbase could be right. In places like the U.S. with functioning monetary systems, bitcoin is just too awkward to serve as a payments alternative. But in places where monetary breakdowns have occurred, regular folks may be more willing to put up with the inherent pitfalls of transacting with bitcoin. And so we finally get to see bitcoin-as-money emerging.That’s a good thing.
But bitcoin’s popularity in Venezuela is also consistent with the bitcoin-as-game narrative. When people are desperate to improve their lives, they may have little other option but to roll the dice. In Run Lola Run, Lola needs to quickly make 100,000 Deutschmarks to save her boyfriend’s life. She races to a casino and plays roulette. Likewise, in the face of societal collapse, Venezuelans may simply be gambling on whatever potentially life-changing bet they can find. Bitcoin is one such a bet. Unwinding what portion of Venezuelan usage is due to bitcoin-as-game versus bitcoin-as-money is tricky.
Coinbase goes on to spout the typical cryptocurrency industry nonsense about legacy payments. It claims that “sending an international wire transfer by major US banks costs around $45, can take days to process, and can be done only during banking hours.” And here is the chart it uses:
That may be a good critique from ten years ago. But with SWIFT gpi having rolled out a few years back, multinationals can make near real-time cross border payments using the traditional correspondent banking system. For individuals and small businesses, fintech Transferwise offers instant remittances over fiat rails. These can settle on weekends in nations like the UK, which have real-time retail payments systems. I’ve touched on this before.
Continuing along with hyperbole, Coinbase makes the claim that bitcoin remittance fees are minimal compared to fiat. But this ignores the sizable foreign exchange fees that one must pay when converting fiat into bitcoin and back into fiat. I’ve gone into this calculus before.
What’s next for Bitcoin? asks Coinbase in closing. Let me give it a shot. It’s possible that bitcoin-as-game will stay popular for a very long time. And if it does, that could be a good thing. As I’ve suggested before, there is a demand as-such for financial games and bets, specifically early-bird bets. Compared to many of the fly-by-night games out there, bitcoin provides a fair and trustworthy option.
What about the original vision that got us all so excited, bitcoin-as-money? Crippled by bitcoin’s game-based engine, bitcoin payments are probably never going to move beyond the niche role that they currently occupy. That’s better than nothing. When those on the fringes are temporarily cut off from the conventional payments system, they’ll always have an option for making transactions. It might not be a user-friendly option, but at least it’s there.
Tyler Durden
Sat, 11/09/2019 – 22:30 - 53 Million Americans Drowning In Cycle Of Low-Wage Work
53 Million Americans Drowning In Cycle Of Low-Wage Work
It’s the “Greatest Economy Ever,” right? Well, it depends on who you ask.
For instance, a new report sheds light on 53 million Americans, or about 44% of all US workers, aged 18 to 64, are considered low-wage and low-skilled.
Many of these folks are stuck in the gig economy, making approximately $10.22 per hour, and they bring home less than $20,000 per year, according to a Brookings Institution report.
An overwhelmingly large percentage of these folks have insurmountable debts if that are student loans, auto loans, and or credit card debt. Their wages don’t cover their debt servicing payments as their lives will be left in financial ruin after the next recession.
While the top 10% of Americans are partying like it’s 1999, most of whom own assets, like stocks, bonds, and real estate, are greatly prospering off the Federal Reserve’s serial asset bubble-blowing scheme and President Trump’s stock market pumping on Twitter.
Today’s artificial economy isn’t working for everyone as the wealth inequality gap swells to crisis levels.
The US is at the 11th hour, one hour till midnight, as the wealth inequality imbalance will correct itself by the eruption of protests on the streets of major metro areas, sort of like what’s been happening across the world in Chile, Hong Kong, Lebanon, and Barcelona.
An uprising, a revolution, people are waking up to the fact that unelected officials and governments have ruined the economy and has resulted in their financial misery of low wages and insurmountable debts.
The report shows almost half of all low-wage workers are clustered in ten occupations, such as a retail salesperson, cooks and food preparation, building cleaners, and construction workers (these are some of the jobs that will get wiped out during the next recession).
Shown below, most of these low-wage workers are centered in areas around the North East, Mid-Atlantic, and Rust Belt.
As we’ve detailed in past articles, millions of these low-wage and low-skilled jobs will never be replaced after the next recession, that’s due in part to mega corporations swapping out these jobs with automation and artificial intelligence.
The solution by the government and the Federal Reserve, to avoid riots in the streets, will be the implementation of various forms of quantitative easing for the people.
There’s a reason why you already hear the debate of universal income, central banks starting to finance green investments, and other various forms of short/long term stimulus, that is because the global economy is grinding to a halt — and the only solution at the moment is to do more of the same.
Tyler Durden
Sat, 11/09/2019 – 22:00 - David Stockman On How The Deep State Really Works
David Stockman On How The Deep State Really Works
International Man: Last year, President Trump took the unusual step of bypassing his advisors to announce his intention to withdraw all US troops from Syria quickly. The decision rattled Washington and the mainstream media. It caused former Defense Secretary Mattis to resign. Almost a year later, the US has withdrawn only a token number of soldiers. It still has thousands of troops occupying the part of the country where oil fields are located. What is going on here?
David Stockman: Well, that’s the Deep State at work.
Donald Trump is all by his lonesome. He’s home alone in the Oval Office. Now, half of it, he can blame himself. If he hires someone, a known idiot like John Bolton, what does he expect is going to happen except that everything he wanted to do is going to be undermined.
Nevertheless, he can’t seem to find anybody who can articulate on a day-to-day basis a pathway to the more restrained America First posture that he had in mind.
He’s surrounded by people who constantly countermand his orders. You have James Jeffery, the US Ambassador and special envoy to Syria saying, “Well, Trump didn’t mean that when he said he wanted the troops out of Syria.”
We have the same thing with North Korea. Trump finally said, here we are, 66 years after the armistice and we still don’t have a peace treaty, and we’re still occupying the Korean peninsula, which is of no interest to our national security one way or the other.
You have to do what I would call “contrafactual history.” In other words, if you understand what could have happened the other way, then maybe you’re not going to be so impressed with all this threat inflation.
I go back to why the Korean War happened, because I think it’s important to this whole thing going on now, with Trump trying to make a deal with Kim Jong-un.
In the late ’40s, Washington officials said that Korea is outside our sphere of influence, the line between North and South hastily drawn at the Potsdam war conference in July 1945. Dean Acheson, the US secretary of state in the late 1940s, said it was a mere surveyor’s line; it’s of no strategic influence. What if common sense had prevailed, instead of the hot-headed advice that President Truman got?
What if Truman had said, “Okay, we’re vacating this damn peninsula”? Well, it would have become a quasi-province of China, just like all the rest of them.
They’d probably be making all kinds of stuff, sending it to Walmart today, and nobody would know the difference.
Instead, we had a war. If I remember right, 54,000 servicemen were killed. The whole peninsula was pummeled, carpet bombed, and literally destroyed. It was like a wasteland in the north. There are reasons why the Kim family has survived all these years, because they hate us for what happened. People remember. It was really scorched earth. I mean, it was in some sense genocide, even then.
So, all of that happened, and Eisenhower comes in and is astute enough to say that we don’t really have national security on the line. He negotiated an armistice, and yet the War Party kept tension on the DMZ for all those years because it had to be in the playbook of threats.
I remember well when I was fighting the big Reagan defense build-up, back when I was budget director. It was always, we need all these different new tanks and attack aircraft and resupply logistics capabilities, because we have to have the ability to fight two and a half wars.
Well, where was the half war? I knew where the other ones were. The half war was in Korea. Well, why did we have to have a half war in Korea? But nevertheless, that was part of the rationalization—justification—for this massive military force that really is a tool of empire and not a tool of homeland defense.
Today, we have Trump finally saying, let’s let the Koreans decide how to run the future of Korea—and back off this long-running, 65-year confrontation.
And yet as courageous in some ways as he has been, he’s constantly being undermined by his own people, who as soon as he’s not looking send real nasty messages to the North Koreans—that will only set Kim back on his heels—and therefore nothing gets done. Even though it could very easily be done.
When you have a regime change policy—and this was the one real positive thing Trump brought to the table. He said regime change has failed; we’re not going to do it under my policy.
Why do you think the North Koreans are quasi-starving? And I know the Communist elite and Kim’s family and so forth live a pretty fat life, but nevertheless they’re in dire straits economically.
Why do they invest all this money in developing nuclear capability and missile capability? Because they don’t want to be regime changed. Kim is a young man, he’s in his mid-30s, and he doesn’t want to be another Muammar Gaddafi or Saddam Hussein.
He knows what happens. You get hung on national TV if you’re a Hussein, or you get tortured and drugged behind a Jeep if you’re a Gaddafi.
Obviously, this stuff has consequences. These idiots in Washington and all these think tanks that talk about regime change and bringing democracy to the world and so forth—never even think about the consequence—the message that these violent episodes send—and the unfortunate reaction that people take in order to defend themselves.
International Man: With John Bolton out of the picture, do you see US talks with North Korea bearing fruit for Trump?
David Stockman: I think it’s touch and go.
The problem is there’s lasting damage when you engage in all this regime change over so many years and episodes. They don’t trust you.
Trump has worked very hard, using an odd, idiosyncratic personal diplomacy to build up trust with Kim. It seems to be working, but there are just so many forces at work behind the scenes that are aiming to undermine that trust-building so that nothing happens.
They want to keep 29,000 troops in South Korea, in harm’s way, as a tripwire, so that the North Koreans obey us as we tell them to behave. It’s crazy.
I would give it a 50/50 chance. I know he wants a big victory, a foreign policy win. He’s desperate for one, because not much is happening elsewhere and what he intended to do is being totally undermined.
Maybe there’s a chance that something could happen here, but I am so distrusting of the Deep State machinery and their need for perennial threats.
If you take away the Korean threat, if you recognize the Iranians aren’t a threat, if you see that Russia is a tiny little country that’s not going to invade Western Europe and crash through the Brandenburg Gate in Berlin, and so forth—
All of a sudden somebody is going to do the math as we get into the coming fiscal crisis and say, “We can’t afford all this defense that we don’t need. Let’s cut it back dramatically.”
They don’t want this to happen. And so, they have to keep these hot spots burning and these threats maintained or inflated, because they know if the real truth of the world were considered by Congress, the defense budget would be slashed dramatically.
International Man: So far, President Trump has had a very different foreign policy than Candidate Trump. What will happen to Trump’s chances for re-election if he doesn’t make any progress on ending the war in Afghanistan, withdrawing from Syria, and bringing peace to Korea?
David Stockman: I think his re-election is binary.
If the stock market holds up and the economy manages to skirt recession, he’ll be in good shape. But I don’t think that’s going to happen.
I think the stock market is in its last days of bubble excess. I think the economy is slouching toward recession within a matter of a few quarters or months. If that happens, Trump is toast. Elizabeth Warren becomes president, and then that’ll be a whole new ball game that is hard to figure.
International Man: What kind of role do you see foreign policy playing in the 2020 election?
David Stockman: It won’t be the normal sense of debating policy—where there’s usually the bipartisan duopoly, with nuanced shades of difference that they like to debate and pretend are meaningful.
That isn’t even going to happen this time. Foreign policy has been totally taken over by the Democratic paranoia about Russia and Putin and meddling in our elections.
Now it’s extended to the whole impeachment inquiry and Ukraine-gate. That’s what the whole debate is going to be about. The debate is going to be about a sideshow.
The underlying issues are why we are constantly steaming warships into the Black Sea. That’s like the Gulf of Mexico to Russia.
Why are we sending warships into the Baltic?
Why are we constantly doing big maneuvers in Poland and in the Baltic states, right on Russia’s doorsteps with these tens of thousands of forces going through these maneuvers and exercises? What the hell are we doing all this for?
Those are the issues. But they’re not even going to get debated.
One last point: Trump had raised the question, isn’t NATO obsolete? The Soviet Union is gone. The 50,000 tanks allegedly on the central front facing western Europe have been melted down for scrap. And yet, he can’t even do anything about NATO.
He’s had to double-talk his way into saying, “Well, the other countries are going to commit some more money they don’t have. They’re going to waste more money on defense.” That’s all that’s come of it.
The point is we ought to be debating what the hell are we doing with NATO 25 years after the Soviet Union disappeared from the face of the earth?
Why isn’t Washington and the president leading the world with this disarmament conference so that we can begin to reduce this massive expenditure for weapons that nobody can afford?
This is what Washington should be doing. The president of the United States should be leading the great global disarmament conference of 2021, and yet that won’t even come up. It’s not even on the radar screen.
It’s not even mentioned because, as I say, the Warfare State machinery essentially squelches any kind of debate, suffocates any kind of thought that at all deviates from the status quo.
The big issue in the world today is war and peace, and we’re facing a campaign in 2020 where it won’t even be mentioned.
* * *
Unfortunately most people have no idea what really happens when a government goes out of control, let alone how to prepare… The coming economic and political crisis is going to be much worse, much longer, and very different than what we’ve seen in the past. That’s precisely why bestselling author Doug Casey and his team just released an urgent new report with all the details. Click here to download the PDF now.
Tyler Durden
Sat, 11/09/2019 – 21:30 - California Approves $3.2 Billion Bond For High Speed Train To Nowhere
California Approves $3.2 Billion Bond For High Speed Train To Nowhere
The high speed train is dead, long live the high speed train.
Less than a year after California Gov. Gavin Newsom brought California’s dreams for a LA to San Fran bullet train crashing down, when he said in February that he is ending the state’s hugely expensive and hopelessly quixotic high-speed rail line fiasco (which would have been completed in 2033 at a staggering cost of $77 billion), California is about to unleash another high speed train project, and this one is even more idiotic.
The California Infrastructure and Economic Development Bank (IBank) has authorized a $3.2 billion tax-exempt, fixed-rate revenue bond issuance to help DesertXpress Enterprises, an affiliate of Virgin Trains USA, build a high-speed train from Victorville, California, to Las Vegas. The new XpressWest service, at speeds of up to 180 miles per hour, will take about 90 minutes one way.
There is just one problem: Victorville, located in SoCal’s high desert, is quite literally in the middle of nowhere.
More on that in a second.
DesertXpress will be able to use the money to pay for the 135 miles of the project located within the state of California. This, according to ConstructionDrive, includes the costs of design, development, construction, operation and maintenance of the rail system itself; a passenger station; a maintenance facility; train cars; and electrification infrastructure. DesertXpress will also be able to use the bonds, which are sponsored by the California county of San Bernardino, to establish a debt service reserve fund, as well as pay for interest and other bond-related expenses. While total spending is listed at around $4.8 billion, “hard construction costs” are $3.6 billion.
Construction, which is expected to begin in the second half of 2020 and wrap up in 2023, according to an IBank staff report, will generate more than 15,800 temporary construction jobs.
That’s the good news. The bad news is… what the hell are they thinking?
In theory, it’s not a terrible idea: California has for decades sought to find a fast path between Los Angleles and Las Vegas. In practice, the fact that the train runs to Victorville assures that the project is DOA.
The XpressWest between California and Las Vegas, according to the IBank staff report, will take about half the time of a car trip, but Randal O’Toole, a senior fellow at the Cato Institute, thinks that there simply won’t be enough potential passengers — at least enough to make the new bullet train a success.
“If you’re driving from Los Angeles to Victorville, by the time you get there, you’re pretty much halfway to Vegas,” O’Toole said, “so why would you stop and leave your car somewhere and take a train and then have to walk to wherever your destination is — or take a cab or an Uber or Lyft — when you can just drive your car there?”
That’s probably a question the creators of the project should have asked first.
Here’s the problem: the distance between Los Angeles and Victorville is about 90 miles and about 190 miles from Victorville to Las Vegas.
“Driving from Los Angeles to Victorville,” O’Toole said, “you’re driving through all the traffic — you’re driving over the mountains … and you get to Victorville and it’s just a straight shot to Las Vegas. It’s more miles, but there’s very little traffic.
“If they were going to go from Los Angeles to Las Vegas, they might have a chance of attracting some customers, but going through the mountain would be extremely expensive,” he said. “They’re building the easy part of the rail line but not the part that they need to build to actually attract customers.”
Virgin Trains USA is a majority owner of Virgin Trains USA Florida, formerly known as Brightline, and currently owns and operates an express rail passenger rail system that runs from Miami to West Palm Beach. The company is building a $4 billion extension to Orlando International Airport. The estimated completion date is sometime in 2022.
And while the company’s projects may be viable in Florida, they will be another epic waste of funds in California.
Meanwhile, when we said that the first high speed train is dead, well that wasn’t quite right: the construction of the original California bullet train is still chugging along, albeit on a reduced scale. While Governor Gavin Newsom shelved the California High-Speed Rail Authority’s plans for a $77 billion rail line between San Francisco and Los Angeles after amid concerns over escalating costs and schedule delays, the governor limited work to the $20 billion Central Valley portion of the project that will take passengers between Bakersfield and Merced.
In other words, another high speed train going from nowhere to nowhere.
So why does California continue to press along with not one but two train projects it knows will be a disaster? The answer is simple: “free” Federal money. The High-Speed Rail authority is trying to beat a Dec. 31, 2022 deadline in order to not lose a $929 million Federal Railroad Administration grant for that particular segment.
In other words, instead of saving almost a billion dollars in taxpayer funds, and applying them to something useful, California is willing to begin a project which everyone knows will be a catastrophic waste of funds, but since the money has to be spent, even if it means digging holes just to fill them up again… well, so be it. After all, this is the government hard at work.
Tyler Durden
Sat, 11/09/2019 – 21:01 - CA Wildfires Make Homeless Crisis Even Worse
CA Wildfires Make Homeless Crisis Even Worse
Authored by Jenny Jayne via The Organic Prepper blog,
Homelessness in California has already reached a state of crisis, but with the winter approaching and the homeless population growing, the problem continues to worsen. A lack of affordable housing coupled with the national opioid crisis has resulted in a growing homeless population that lives on the streets of California.
California homeless populations live in squalor in makeshift homes made of tarps, tents, and discarded scrap wood. Sanitation for that many people living outside is virtually non-existent and feces and urine are left in the open next to filthy bedding.
Filth in the streets, particularly “Skid Row”, has lead to the comeback of “Medieval Diseases” once thought to be eradicated.
The housing situation in California shows no signs of improving.
As Californians continue to witness the desolation camped right outside their front doors, their patience grows thin and their tolerance dissipates.
The New York Times reports:
California may pride itself on its commitment to tolerance and liberal values, but across the state, record levels of homelessness have spurred a backlash against those who live on the streets. (source)
The homeless arrive on the streets of California for various reasons, but lack of housing is the resounding cry. Affordable housing is scarce and lower-income citizens are forced out as rents continue to rise. But another huge factor has resulted in new homeless that have overrun the already overwhelmed resources: wildfire evacuees. As a result, more recent homeless are clashing with the older homeless population. Many of the State’s “new” homeless have nowhere to go after their houses went up in flames. The two camps may have come to homelessness in different ways, but their needs are the same. And these two camps of homeless are fighting for dwindling resources.
The wildfires are contributing to the housing problem.
Wildfire destruction is making the lack of affordable housing into a bigger and more urgent problem. Wildfires are wreaking havoc on the already limited housing, forcing families displaced by fires onto long waiting lists for even temporary shelter. Even if families had the resources to move into permanent housing, there’s little left available. The fires are torching what little housing there is left and making already insanely priced housing even harder to come by. Compounding the problem is the lack of affordable home owner’s insurance. Even longtime homeowners are being forced out due to insurance companies dropping property coverage in “high risk” areas and tripling rates. This is displacing even more Californians.
Wildfires continue to rage and take housing with them. The already out-of-control California fire situation is only getting worse. It’s so bad that California is issuing a “severe red flag” warning for the risk of wildfire with some areas getting hurricane-force winds. These winds only increase the chances of fires starting and spreading faster.
And the homeless, an already fragile population with few resources, are growing exponentially in conjunction with the devastation of housing in wildfire areas. Displaced from their homes and housing already at a crisis point, the evacuees from wildfires have nowhere to go and few places to turn to for help. They have resorted to living in tents in open fields or Walmart parking lots as they wait on interminably long lists for available and affordable housing. Many, including a disproportionate number of elderly citizens, are simply turned away and left on their own.
The Governor of California has offered a solution: rent control. This has been met with backlash from their citizens who have opposed this. Even where rent control has already been instituted, the homeless population has continued to grow, lending credibility to the opinion that the only real solution is construction, which is hampered by price controls, wildfire, and the exodus of home and property insurers.
Rent control has been a proven failure in addressing housing problems. It prompts landlords to convert their properties into owner-occupied homes, and deters investment in the housing market, aggravating the shortages that caused them in the first place. (source)
The situation is dire for people who cannot find housing.
While fires continue to ravage homes and cause billions in damage, the homeless population continues to grow and winter is coming. Surprisingly, the state with the most homeless deaths due to hypothermia is The Sunshine State.
What does that mean for those who cannot find shelter? The homeless, including those who are refugees from the devastation caused by wildfires, will still be on the streets when the temperatures drop. Compassion from their fellow Californians has worn thin. There are fewer options for warm shelter and more people fighting for those few resources provided.
Little has been done to address the fast-approaching problem of “where will they go?” when it gets too cold to be outside. We can only hope that they will find shelter before more tragedy strikes.
Tyler Durden
Sat, 11/09/2019 – 20:30 - D.C. Braces For Erdogan Visit Next Week: Here's What Happened Last Time
D.C. Braces For Erdogan Visit Next Week: Here’s What Happened Last Time
Earlier this week both Ankara and Washington confirmed that President Erdogan’s upcoming Nov. 13th visit to the White House on Trump’s invitation will happen as planned, despite US-Turkey relations being at their lowest point ever. This due to a host of issues including the S-400 and F-35 controversy, as well as the ‘Operation Peace Spring’ incursion into northern Syria which has seen Turkish forces fire dangerously close to US troop positions.
D.C. is now bracing for Erdogan and his security entourage’s visit. This will no doubt include the heightened alert of Capitol Police and the Secret Service, given what happened during the Turkish president’s prior two-day visit in 2017, when this shocking scene played out:
Erdoğan’ın Korumaları Kavgaya Karıştı @VOATurkish https://t.co/hXkxzy7b9g pic.twitter.com/03RC5XVFME
— Mutlu Civiroglu (@mutludc) May 17, 2017
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A massive brawl, caught on video, had been instigated by Erdogan’s security detail at the Sheridan Circle in front of the Turkish ambassador’s residence.
The bodyguards literally attacked a group of pro-Kurdish protesters, which included Americans, on US soil. But now with tensions between the US and Turkey at boiling point, will we witness such an attack play out again?
At the time Turkey even had the gall to accuse U.S. law enforcement of failing to quell an “unpermitted” and “provocative” demonstration, in an international incident which put pressure on Trump to condemn it.
US police at the time accused Erdogan’s bodyguards of viciously attacking the peaceful protesters. The State Department had called the conduct of Erdogan’s body guards “deeply disturbing” and has “raised concerns about those events at the highest levels,” according to a spokeswoman, and even later sought to bring charges against eleven among Erdogan’s detail, who later left the country.
The 2017 “Protest Beat down” drove international headlines at the time and was highlighted in foreign media:
#Erdoganbodyguards may go unpunished after DC attack on protesters
Read more: https://t.co/ORPJk1aU5U pic.twitter.com/EyshKEdc8d
— RT America (@RT_America) May 18, 2017
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Even apart from those shocking scenes in 2017, The Washington Post on Friday detailed the following which has not been publicly reported at the time:
But newly revealed State Department memos show the two-day visit in 2017 was filled with other troubling antics and discord. D.C. police and federal officers who were supposed to be helping protect a visiting head of state were instead entangled with his security forces from the moment the delegation’s two planes touched down at Joint Base Andrews.
At one point, U.S. authorities intervened in a squabble among the Turkish guards. In another case, they seized a guard’s weapon and handcuffed him. They later admonished a security officer who accosted a passerby filming the entourage on a downtown street and barred a guard from traveling in a State Department car. In the course of the visit, several U.S. officers and federal agents were hurt, and at least one was punched.
Considering this past behavior, and given what’s playing out in northern Syria with Kurdish forces under attack and facing ethnic cleansing by pro-Turkish forces, it is likely we’re in for more.
Pro-Kurdish groups in the US are already planning major protests, and DC police have begun preparations.
Police Chief Peter Newsham was quoted in the Post as saying his department “will take every measure possible to make sure we don’t have another conflict like we had the last time.” They are also coordinating with the State Department and Secret Service.
No doubt Erdogan’s goons and synchphants are also taking note, and making their own preparations for what will likely be another rumble in Washington..
Tyler Durden
Sat, 11/09/2019 – 20:00 - Scientists In China Are Using Live Pigs As Crash Test Dummies
Scientists In China Are Using Live Pigs As Crash Test Dummies
Authored by John Vibes via TruthTheory.com,
A recent case study of crash test simulations in China has shown that some researchers are involved in extremely inhumane animal testing. Images released with the case study show live pigs being used as crash test dummies.
The study highlighted the case of one test that involved 15 young pigs, who were strapped into car seats and used as dummies for high-speed simulations. Many of these pigs were still very young, having only been alive for 70 or 80 days before they were used in the tests. In the tests, the animals were strapped into various different seatbelts for impact testing.
Half of the animals died in the tests, and the others were badly injured and likely traumatized from the experience.
The researchers said that it was necessary to use the young pigs because their bodies are very similar to that of a human child, and they were hoping to actually see what these crashes would do to a living creature’s organs.
The scientists responsible for these experiments say that they were compliant with US guidelines and claimed that their study was approved by an ethics committee. However, it seems that they may not be very familiar with what the laws in the US are, because it has been illegal to use pigs and other animals in these types of experiments in the states since the 1990s.
Zachary Toliver of PETA said that these experiments were senseless and cruel.
“Despite the existence of sophisticated animal-free models, experimenters continue to fasten abused, frightened animals into car seats and crash them into walls until their bodies are bloody, bruised, and mangled. Live pigs are pulverised in these tests, leaving them with broken bones and severe internal injuries before they’re killed and dissected,” he said.
“Pigs don’t naturally sit up in car seats. Their anatomy is also very different from that of humans, so the data obtained from these horrific animal experiments aren’t applicable to human car-crash victims. Car companies figured out years ago that these kind of experiments are worthless and tell us nothing about a human experience in a car crash,” he added.
Earlier this month, Truth Theory reported on the disturbing footage that was recently leaked from a German pharma laboratory, showing monkeys and other animals being tortured and abused. The facility is now under criminal investigation for charges related to animal cruelty.
[ZH: we have one question… aren’t they facing a massive pig shortage?]
Tyler Durden
Sat, 11/09/2019 – 19:30 - CTAs Are Almost Done Selling Bonds: Why The Market's "Great Rotation" Is Almost Over
CTAs Are Almost Done Selling Bonds: Why The Market’s “Great Rotation” Is Almost Over
In his latest note, which we covered on Friday, JPMorgan Marko Kolanovic discussed how much higher he thinks 10Y yields can rise “before they become a potential problem” for stocks (his answer: 150bps, although an even more important question is how fast they get there, and lately they have been surging).
The JPM quant also explained why he thinks stocks are primed to rise further from current levels: in short, an unwind of the massive defensive “recession is coming” trade that defined much of 2019, as active managers rush to dump losers and scramble to make up for underperformance in the last 7 weeks of the year, in the form of a “chasing beta” rotation, to wit:
There is still extreme crowding in defensive styles and momentum that we illustrated in our previous reports. An additional illustration is shown in Figure 1 below. It shows two strategies that in theory should have little to do with each other: one is equity long-short selection of winning/momentum stocks (momentum factor) and the other is CTA macro investing that doesn’t even hold any individual stocks, but rather mostly fixed income instruments. One can see that recently they are nearly 100% correlated. This is yet another indication of the prevalence of groupthink and crowding across investment strategies. The most recent crowding episode was largely driven by bond yields, and fears of the trade war impact and recession. A similar level of crowding can be illustrated by the performance of small-large factor and value equity factor. In theory these should be uncorrelated, but they are effectively one and the same, and they are just the inverse of the previously described momentum strategies. Our view is that the best hedge for a continued unwind of this investment groupthink is to overweight deep cyclicals like energy, metals/mining, as well as small cap stocks.
Shortly after Kolanovic laid out his thesis, Bloomberg followed suit with “Get Ready as ‘Beta-Chasing’ Stock Managers Try to Make Up Ground.”
It’s been the same trade all year. A recession is coming, so get defensive. Now the strategy is unwinding and stock managers who toed the line all the way into November have furious catching up to do.
We disagree.
While we discussed previously why we find issues with Kolanovic’s assessment that cyclical and value stocks are set to explode higher at the expense of defensive/momentum names, here is an alternative take, one from Nomura, which looks at ‘the main driver behind the main driver’ of the recent stock market move, so to speak.
As a reminder, the biggest catalyst for September’s violent rotation out of momentum/growth names and into value stocks was the sudden spike in Treasury yields as the market repriced the probability of a near-term recession. As such, it was the sharp move in yields that catalyzed the quant crash of early September, resulting in the violent reversal between cyclicals and defensives…
… and specifically the sudden reversal in that most aggressive investor class, CTAs.
So looking at the role CTAs played in the sharp yield moves of 2019, what becomes clear is that it was the aggressive build up of net long positions by CTAs starting in September 2018 and culminating in September 2019, before a violent reversal saw CTAs puke their long bond positions, in the process crashing pure momentum portfolios…
… as trend-following strategies were clobbered as a result of the kneejerk moves in the 10Y:
So what happened since?
For the answer we go to Nomura, which points out that while the period through August was characterized by selling (shorting) of high-risk assets and factors and buying of low-risk assets and factors, these tendencies were thrown into reverse by hedge funds liquidating positions in advance of their November results announcements. Of course, DM sovereign debt stands as the classic example of a low-risk asset.
Why does this matter? Because trend-following CTAs, which are more technically minded than other hedge funds and also quicker to act, have since September been unwinding the substantial net long positions in DM government bonds that they had accumulated.
But how much? And here is the punchline: after hitting a near record high net long exposure in sovereign rates which peaked right around the time $17 trillion in global bonds traded with a negative yield, the same CTAs have now shrunk their aggregate net long position in major DM government bond futures (US, Japan, Germany, UK) by about 80% from the late August peak!
In other words, there is just over 20% left in the great rate unwind before CTAs turn neutral, and there is no more impetus for them to liquidate positions.
Meanwhile, as the 10yr UST yield broke above 1.90% earlier this week, which Nomura estimates to be the average cost of CTAs’ cumulative net buying of TY since April, this drew CTAs into further loss-cutting, and even more negative rates in a higher yield – greater liquidation feedback loop.
* * *
Yet even as the forced liquidation of CTA bond net longs – the primary catalyst behind the violent cyclical/defensive rotation – comes to an end, the big question is what happens next: do they resume accumulating long positions, or do they turn short.
Here Nomura points out that if the last trigger line at around 2.05% (average cost of net buying since March) gets knocked out, CTAs would be pressed not only into the final phase of unwinding their TY long positions, but potentially moving net short, something they haven’t done since last summer. In that event, Nomura estimates that the systematic selling pressure on bond futures could lift 10yr UST yields well into the 2.0-2.5% range.
If that happens, then the violent reversal of consensus trades predicted by Kolanovic will be fully in place, resulting in a potentially shattering surge in value stocks (the question whether any value funds are left to take advantage of such a move is worth pursuing). After all, as we showed yesterday, the correlation between 10Y yields and YTD consensus trades has never been more negative.
Here, we repeat the final point we made yesterday: since it is the consensus trades that get crushed as yields and cyclicals rise and as defensive stocks fall, hedge funds should be praying that Kolanovic is wrong. Because if he is right, 2019 will be another year in which the vast majority of hedge funds not only underperform the market, but post negative absolute returns, and find themselves out of a job.
Tyler Durden
Sat, 11/09/2019 – 19:00 - The One Metric That Matters For Electric Cars
The One Metric That Matters For Electric Cars
Authored by Leonard Hyman and William Tilles via OilPrice.com,
Looking beyond the dramatic headlines – the cliff-hanger nature of Tesla’s financial statements and the Trump administration’s efforts to re-engineer the auto industry – we need to focus on one number that determines when electric vehicles (EVs) will make economic sense. So says a report out of Argonne Laboratories sponsored by the Department of Energy.
That number, according to researcher George Crabtree, is the price of the battery (as measured in $ per kwh), which he says has to halve in order to make EVs competitive with conventional cars. Not promising one might think. Well, researchers now believe that battery prices could reach the magic level somewhere between 2022 and 2026.
But, there is more to come. Researchers are working on lithium ion-solid state batteries. These would not only eliminate the unfortunate flammability issue that dogs lithium batteries but also possibly double the mileage per charge. Toyota hopes to have such a battery ready in the early 2020s.
Still, what about the potential shortage of minerals required to build the batteries? Crabtree points out that the key to making sure we do not have a lithium shortage is to recycle the batteries. At present we recycle almost 100% of lead acid automotive batteries and less than 5% of lithium batteries. However, figuring out how to recycle the latter economically will require research.
What all this says is that the electric vehicle could emerge from its present position in the United States as a well subsidized status symbol to a commercially competitive vehicle within five years. It looks as if the automobile manufacturers will be ready.
But how about the electricity producers? This requires new modes of power distribution for charging stations as well as an ongoing commitment to fossil-free energy sources. This is not a trifling issue for electricity producers. Electric vehicles could eventually account for 30-40% of US electricity sales. This is huge. But these sales will not be made unless the industry has in place an infrastructure to deliver the power to the right places at the right time.
That brings up the perennial chicken-or-the-egg question.
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Should we incur the expense and build EV infrastructure hoping demand will eventually follow?
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Or should we first allow car manufacturers to first build and sell their cars while hoping electric utilities move fast enough to satisfy the demand for EV charging infrastructure?
In real estate for example, developers build roads and lay water pipes rather than tell prospective home buyers to do the job after they have taken possession. Electric utilities have in the past put in necessary infrastructure or made commitments to customers ahead of demand. But this has typically occurred only after receiving the blessing of state utility commission regulators who would permit these new assets to be added to rate base and earn incremental monies for the utility. In that way, the utility recovers its initial, considerable investment. Without the regulator’s blessing, we believe risk adverse utilities will be loath to invest in a seemingly speculative venture, especially when the Federal administration seems so averse to the new technology.
But aside from limitations of batteries, energy density and mineral shortages, the electrification of transportation has the potential to eliminate roughly one quarter of US carbon emissions. This also assumes electric utilities install EV charging infrastructure while continuing to decarbonize base load power generations (which would knock another quarter off carbon emissions). And it now looks as if electricity producers and distributors have little more than five years to get their acts in order. This means that near term utility capital allocation decisions should be reflecting these changes. If not then perhaps another entity will assume responsibility for this aspect of the energy transition.
Tyler Durden
Sat, 11/09/2019 – 18:30 -
- "It's As If JPMorgan And Goldman Vanished…"
“It’s As If JPMorgan And Goldman Vanished…”
The equity-ification of the bond market has been closely followed by Bloomberg News and other financial journalists. Unfortunately for the big banks, it’s a trend that has largely been led by fintech firms like TradeWeb and Bloomberg. Many corporate bonds from investment grade to deep in speculative territory can be found trading on-the-run on both platforms.
This trend virtually guarantees that, even as trading volume increases (thanks to the growing prevalence of HFT “market makers”) banks’ trading revenue will likely continue to decline, though in its early years in the pre-crisis days some believed the pullback in bank trading revenue might be temporary.
Trading revenue has been sliding since the financial crisis. According to BBG data, trading revenues at the largest banks have fallen for six out of the past seven quarters to their lowest levels in decades, with 2019 expected to set a new low.
Last year’s $110 billion revenue haul at the 12 largest global banks was down from $149 billion in 2010, and the biggest firms are down more than 5% through the first nine months of 2019. If we add the expected slide from 2019, that’s roughly equivalent to Goldman and JPM disappearing from the market.
In its story, BBG contends that the loss of some of the most lucrative pre-crisis products, like synthetic CDOs and their ilk, is another factor driving the fall in trading revenues among the big banks. But although markets for these securities are much smaller, and the products themselves slightly less lucrative, we’ve written extensively about their slow, creeping return (albeit in a “safer” packaging guaranteed to not spark the implosion of the global financial system).
It’s only a matter of time before banks really ratchet up the marketing of these products. Investors’ reaction to bank earnings this season proved once again that they’re not ready to simply accept the drop in trading revenues as a secular trend affecting the entire industry. No, the big banks will face tremendous pressure to do whatever they can to revive the business. Some might try to buy their way out of it by gobbling up some of the smaller firms who BBG says account for one-third of the $39 billion drop in banking revenue mentioned above (BBG blamed lower fees and spread-compression driven by electronic trading for the other two-thirds of the drop).
Larry Tabb, the founder of research firm Tabb Group, told BBG that the buy side is, in many cases, taking advantage of new regulatory restrictions on SIFI (systemically important financial institutions) banks to muscle in on their territory.
“Their business model is being attacked from multiple directions,” Tabb said.
Of course, the one-way momentum of QE-driven markets over the past decade, which has artificially depressed interest rates, has hurt both fixed-income and equity trading, while squeezing banks’ all-important net interest income, a key variable that tracks how much banks can earn from lending.
The Trump Administration could make their jobs a whole lot easier by finally relaxing Dodd-Frank, particularly the provisions banning proprietary trading, a practice that once brought in as much as $5 billion in revenue a year on some trading desks.
Passive investing hasn’t only hurt the wealth-management and fund-management industries, it’s also contributed to the drop in banks’ trading revenue by triggering the decline of the hedge fund industry. Hedge funds once were banks’ largest clients. But in recent years they’ve suffered outflows while trying, and often failing, to outperform significantly cheaper passive funds. Risk constraints are also making this a big problem for banks. At Goldman Sachs, the regulatory limit for value-at-risk – i.e. the measure of how much a bank’s traders can theoretically lose in a day – was just $55 million during the first nine months of the year, making large trades impossible.
Moreover, new financial regs that put restraints on bank capital, QE, a near-zero interest rate environment, political uncertainty and the ongoing debate about whether there is too much, or not enough, volatility, are also choking banks’ trading revenues. Job cuts in those areas have followed, as banks like Citigroup, DB, HSBC & SocGen have slashed thousands of positions.
“There’s a lot of things going on in the world,” Marty Chavez explained in a Bloomberg Television interview shortly after announcing he was stepping down from his role as co-head of Goldman Sachs’s trading business. “I would say regulatory change is a part of it; interest rates; quantitative easing for very long periods of time; the cleanup, the aftermath of the financial crisis; the rise of technology — one of the most deflationary things that exists; the availability of data, broadly disseminated, to everybody; and derived data or analytics on the data. All of these things have combined.”
To be sure, there are some signs that one or two of the largest banks might end up with the bulk of market share as its rivals exit. Just look at JPM’s Q3 earnings report.
Focusing on JPM’s Corporate and Investment Bank, it is here that the bank surprised with an impressive FICC revenue print, which rose a whopping 25% Y/Y to $3.56BN, up $713MM compared to the year-ago quarter “which reflected less favorable market conditions.”
At the same time, JPM reported Equity Markets revenue of $1.52BN, missing expectations of $1.66BN and down 5% compared to a strong prior year, “reflecting lower revenues in derivatives, partially offset by higher Cash Equities.”
Meanwhile, several major banks, including Goldman, announced plans to pull back from FICC (fixed income, currencies and commodities) trading this year.
Tyler Durden
Sat, 11/09/2019 – 18:00 - Technology Spurs On Our Ability To Deceive
Technology Spurs On Our Ability To Deceive
Authored by Bruce Wilds via Advancing Time blog,
Caught between the forces of mainstream media and government propaganda it seems we can believe nothing we see or hear. Much of this problem is rooted in the agendas of large companies and those who control them. These companies have become so big and powerful that they now influence government’s message and direction. Fake news and false flags have left many of us having a difficult time deciding what is real, adding to this is the rapidly growing ability of computers to generate and alter human images. This is all about to go to a whole new level.
Margrethe Vestager, the European Union Antitrust Chief, is busy touting that the EU’s influence gives it the opportunity and power to shape the world. She insists the EU is ready to take on companies like Google, Facebook, and Amazon which she contends has used their power to undermine competition, keep out innovation and collect data on us. This has given these companies great power to manipulate society. Google did this when it used the power of its search engine to favor its own comparison shopping service. While the EU has signaled it is going to make several big companies use their power in a way that’s fair and doesn’t discriminate the fact is this is easier to say than do.
The EU plans to do this by flexing its muscle with a combination of competition policy and regulation changes, however, whether it will be successful remains to be seen. Like many people, I remain dubious. These powerful companies already are overly involved with shaping the message of media and government propaganda are about to unleash upon society a great deal more computer-generated models and images. These have advanced to where they blur reality and diminish the need for humans to act as spokespeople or to represent organizations.
Back in 2011, Swedish fashion chain H&M admitted to using computer-generated models to showcase collections on its website. Since that time the ability to create computer-generated images has only gotten better. We have advanced to where it is difficult, no, it would be more accurate to say impossible to know if what you are seeing is really a person or simply the image of one. Drilling down into this issue forces us to where creativity, marketing, and price-point intersect and that has huge implications for society going forward. We have reached the point where what we are asked to believe in a world of fake news and false flags is only limited by our imagination.
Real Or Not? Click here to take the test
An example of this and somewhat harmless can be seen in the virtual models H&M has generated for use in ads. These images look completely human, but upon inspection, if you look closely, they might all have the same body shape and pose with a real model’s head superimposed on the body where the skin tone has been digitally altered to match her complexion. This step which moves past “photoshopping” has created a bit of controversy. H&M has drawn criticism for creating a false reality and creating an unrealistic body image for women to live up to. The Swedish website Aftonbladet first noticed the uncanny similarities of the models. Hacan Andersson, a spokesman from H&M, confirmed the deception by saying:
“It’s not a real body, it is completely virtual and made by the computer. We take pictures of the clothes on a doll that stands in the shop, and then create the human appearance with a program on a computer.”
Andersson argued the company made the choice to use the images of computer-generated models because it simplified the process of the photoshoot and also that it allowed customers to focus on the clothes rather than the models. He acknowledged, “The result is strange to look at, but the message is clear: buy our clothes, not our models.”
The Fact Is Computer-Generated Images Often Appear More Real Than Reality
Computer-generated imagery, known as CGI, encompasses the tricks and the ability to generate and manipulate images. This creates some interesting possibilities going forward as well as greasing an already slippery slope with endless possibilities. Eventually, this could lead to a form of “Photoshop” on steroids. Anyone familiar with Photoshop knows it delivers the magic that helps people bring their creative vision to life. By editing raw image files and photos using state-of-the-art photo editing not only can people create compelling high-dynamic-range images (HDRI) they can also mislead viewers as to what is real.
Expect a lot more of this in the future. By adding distinct characteristics from individuals that society views in a very positive light to a CGI it is not difficult to imagine that we might extend some of that same positive feeling to that image. If this is true then it is not difficult to envision both politicians and others “scrubbing” their voice and persona ever so slightly as to improve the impact they have on advancing their cause. Slowing their speech, deepening the tone of their voice, shaving off a few unwanted pounds. Manipulating people in this way could be looked at as a form of propaganda but in reality, it is only one step farther than we already go when we do extreme editing of a news clip to sway public opinion.
The future of TV news could be very different in that it could be completely computer-generated. Take, for instance, the many imitation sounds engineered into some electronic keyboards today. While an audiophile may be able to tell the difference the average listener cannot and most people don’t care if it results in a less expensive download for their iPod. Since the same thing can be said about music and even art this can be scary, especially if you are the person suddenly discovering that a robot could take your job. In Vegas, stage shows used to all have live orchestras but now many musicians have a difficult time finding work on the strip. We have also seen the electronic equivalent of human-generated music gain a foothold as a genre and become a market all its own. Voice actors are already feeling the heat as the encroachment of synthetic voices hit the industrial/corporate market and push into audiobooks.
The ability to produce a human-sounding voice with all the inflections, nuances, and timing that makes it interesting often requires as much technical artistry from a software engineer as it does from an experienced voice actor, however, at some point computers will be able to take over and perform this task as routine. This should not come as a surprise to anyone who has been watching recent trends in technology. A quick search for the words “voiceover” and “computer voice” will bring you rapidly up to speed. Apple has even designed into its iPhone a feature called voiceover which the visually impaired find very valuable, it reads the words on the screen out loud in what Apple calls a “spoken English interface.”
Much of this is happening beneath the surface with little fanfare because most people consider it harmless. The fact is we now have computers that sound more human than humans and on a positive note speak more clearly. It is not difficult imagining such figures saving media networks money by delivering the news. All this takes us to a time in the future when computers have the ability to generate images that deliver dialog and can act with emotion. By mimicking figures of the past or their best qualities and traits it would be possible to create false figures with compelling personalities.
In life most people never meet or hear their Senator or President speak in person, this means a “gentle concealed” enhancement could go a long way to make them appear more appealing. It is important to consider that if this technology can be used to enhance the stature of a person it could also be used to diminish their standing or even as a tool for character assassination. This makes this sometimes deceptive and potentially dangerous area of technology ripe for abuse. Sadly, it appears in the future it will become even more difficult to determine what is real and what is false.
Tyler Durden
Sat, 11/09/2019 – 17:30 - 'Greta' Uber Alles?
‘Greta’ Uber Alles?
Forget Big Brother, in San Francisco it’s Big Sister as the uber-liberal city that prides itself on its eco-consciousness is poised for the completion of a massive mural of teenage climate-fearmonger Greta Thunberg staring down judgmentally on all those over the age of 16 who refuse to ditch their private jets, cars, and cows…
The Guardian reports that the Argentinian muralist Andres Iglesias, who signs his art with the pseudonym Cobre, is expected to complete the work next week.
“Climate change is real,” Cobre told SFGate.
“This girl Greta is awesome and she knows what she’s doing. I hope with this mural people will realize we have to take care of the world.”
Some have suggested some eery similarities…
Putin?
Or ISIS Executioner?
Don’t dismiss it – you never see them in the same place at the same time…?
* * *
It’s not the first time Thunberg has been immortalized in street art. Earlier this year, the UK-based aerosol artist Jody Thomas painted a 50ft portrait of the teenager on the face of the historic Tobacco Factory in Bristol.
And, as we noted recently, a mural of Thunberg was defaced in Edmonton, Alberta, with the vandal telling Thunberg to stop lecturing him on how to live his life.
Tyler Durden
Sat, 11/09/2019 – 17:00 - Pentagon: We'll Shoot Any Syrian Official Who Tries to Access Syrian Oil
Pentagon: We’ll Shoot Any Syrian Official Who Tries to Access Syrian Oil
Authored by Andrea Germanos via CommonDreams.org,
Pentagon officials asserted Thursday U.S. military authority over Syrian oil fields because U.S. forces are acting under the goal of “protecting Americans from terrorist activity” and would be within their rights to shoot a representative of the Syrian government who attempted to retake control over that country’s national resource.
The comments came from Pentagon spokesperson Jonathan Hoffman and Navy Rear Admiral William D. Byrne Jr. during a press briefing in which the two men were asked repeatedly about the legal basis the U.S. is claiming to control Syrian oil fields.
Syrian soldiers are seen deploying in an oil-rich area in the countryside of Qamishli, northeastern Hasakah province, in early November. Image source: Xinhua/via Getty Images The briefing came less than two weeks after Defense Secretary Mark Esper said, “That’s our mission, to secure the oil fields” in the Deir ez-Zor area of eastern Syria. President Donald Trump’s comments before and after that remark —”We’re going to be protecting [the oil], and we’ll be deciding what we’re going to do with it in the future,” and “The oil… can help us, because we should be able to take some”— were seized on by critics who claimed Trump was suggesting violating international law by plundering another country’s resources and openly saying the U.S. was pursuing war for oil.
Hoffman, in his comments Thursday, gave a different message—that “the revenue from this is not going to the U.S. This is going to the SDF,” referring to the Kurdish-led and U.S.-allied Syrian Democratic Forces, who are battling ISIS. Byrne claimed that the U.S. has been waging the oil field control mission alongside SDF and that the goal was to prevent ISIS from obtaining the oil revenue.
But, as one reporter pointed out, ISIS fighters “have no armor. They have no aircraft.”
“Do they have the capability to actually seize the oil fields?” the reporter asked. “And isn’t this really about Russia and Syria seizing those oil fields?”
* * *
Hoffman replied that the goal was “to prevent a resurgence” of ISIS which would be facilitated if the terrorist group had access to the oil revenue.
When the Pentagon officials were pressed on whether “U.S. troops have the… authorization to shoot if a representative of the Syrian government comes to the.. oil fields and says, ‘I am here to take property of these oil fields,’” Byrne said, “our commanders always retain the right and the obligation of self-defense when faced with a hostile act or demonstrated hostile intent.”
The officials were reminded by a reporter that “the government of Syria is still, based on international law… [the] recognized legitimate government.” Hoffman said, “Everyone in the region knows where American forces are. We’re very clear with anyone in the region in working to deconflict where our forces are. If anyone — we work to ensure that… no one approaches or has — shows hostile intent to our forces, and if they do, our commanders maintain the right of self-defense.”
Hoffman later said that the oil field mission couldn’t be separated from the fight to defeat ISIS. Operations in “Syria are done under the commander-in-chief’s authorities to — with regards to protecting Americans from terrorist activity.”
Pressed again by a reporter about the “legal basis for… the United States military to take and control the natural resources inside the boundaries of another country,” Hoffman responded, “the legal basis for this comes under the commander-in-chief’s authority for us to be conducting counter-terrorism efforts against ISIS. And I — I get your point when you’re trying to decouple the ISIS issue from the Syria issue, but it is not a decoupled issue.”
Later Hoffman was asked by a reporter if “President Trump [has] legal authority to take over these oil fields or is the United States stealing the oil?”
Image via AFP/DW Hoffman repeated his stance that the operations were a part of the effort to defeat terrorists and stopping “ISIS from obtaining the oil fields is an effort to prevent them from obtaining revenue so that they can fund their terrorist operations globally.”
The Pentagon official also appeared to push back against the notion that the mission to control the oil fields is new. “Just to be clear, we’ve been in this area with the same mission of preventing ISIS from getting those oil fields for the last four years. This is not a new mission. Everybody seems to be — believe that that has changed. That is not —that is not the case.”
U.S. forces may also stay with that effort for years to come, Hoffman suggested.
“We’re committed to [the defeat of ISIS], and we’re committed to staying in the region,” he said. “We’re committed to, in this particular case, having troops in Syria in a way that helps us continue the D-ISIS mission as long as we believe it’s necessary.”
Tyler Durden
Sat, 11/09/2019 – 16:30 - America's Richest 1% Now Own As Much Wealth As The Middle And Lower Classes Combined
America’s Richest 1% Now Own As Much Wealth As The Middle And Lower Classes Combined
Two weeks ago we pointed out that even as (or rather, because) stocks hit daily all time highs, we now have mass public unrest (on and off) in: France, Spain, Algeria; Iraq: Lebanon; Egypt; Russia; Hong Kong; Venezuela; Chile; Ecuador; and Bolivia.
The is a simple reason for this social anger: an unprecedented wealth and income divide as a result of constant central bank interventions in capital markets, which have made upward social mobility virtually impossible and stagnant wage growth the norm, and nowhere more so than in the US, where as Bloomberg reports citing the latest Fed data, “one-percenters” now hold almost as much wealth as the middle- and upper-middle classes combined, as a result of the relentless ascent in stocks which added another $1 trillion in market value in just the past week, bringing the total to $82.7 trillion.
Here are the facts: as the NBER recently reported, in 2016 the richest one percent of households held more than half of all outstanding stock, financial securities, trust equity, and business equity, and 40 percent of non-home real estate. The top 10 percent of families as a group directly owned over 93% of all stock and mutual fund ownership.
Moreover, despite the fact that almost half of all households owned stock shares either directly or indirectly through mutual funds, trusts, or various pension accounts, the richest 10 percent of households controlled 84 percent of the total value of these stocks, though less than its 93 percent share of directly owned stocks and mutual funds.
And with the stock market soaring to new highs, it will hardly be a surprise that the “top 1%” of American households have enjoyed huge returns in the stock market in the past decade, ironically enough using data from the Federal Reserve, which is directly responsible for this unprecedented wealth distribution. And, as Bloomberg notes, “those fat portfolios have America’s elite gobbling up an ever-bigger piece of the pie.”
In specific terms, this means that the very richest 1% had assets of about $35.4 trillion in the second quarter, or just shy of the $36.9 trillion held by the tens of millions of people who make up the 50th percentile to the 90th percentile of Americans — much of the middle and upper-middle classes.
Commenting on this unprecedented wealth divergence that was last observed a few years before World War II, Lakeview Capital’s chief market strategist Stephen Colavito said that people can’t get much of a return on certificates of deposits and other passive investments, “so they’ve pumped money into stocks and propped up the market overall.”
Actually, the one who is “propping up the market overall” is the Fed, which following a mini repo market crisis sparked by JPMorgan launched “NOT QE”, and injected $280 billion in fresh liquidity in just the past two months, pushing the Fed’s balance sheet above $4 trillion for the first time since February.
At this point, wealth becomes a feedback loop: “The wealthier that the wealthy get, the more opportunity they have,” Colavito said.
It’s also why angry populist movements have become an ever more powerful force on both the left and right, demanding either wealth redistribution, higher taxation of outright punishment of those billionaires who have benefited from the Fed’s artificial levitation of the stock market. In many countries around the globe, this anger has spilled over on the streets as millions protest for social change, on many occasions with violence.
Their anger is only set to grow, because as Bloomberg notes it may not be long before “1-percenters” surpass the middle and upper-middle classes combined. Household wealth in the upper-most bracket grew by $650 billion in the second quarter of 2019, rising to $35.5 trillion, while Americans in the 50th to 90th percentiles saw a $210 billion gain.
One step below the top 1%, those Americans in 90th to 99th percentiles, still control the biggest share of wealth, with $42.6 trillion in assets.
What about the bottom end of US society? Well, if the super rich own almost all stocks, the “bottom 90%”, i.e., 90% of the entire US population, owns the vast majority of debt, some 72.4% of the total pile.
There is one final twist: the wealthy vs poor conflict is increasingly being drawn along age groups: Baby Boomers born between the end of the Second World War and 1964 currently hold wealth that was 11 times higher than that of millennials as of the second quarter.
So how are millennials protesting this unfair age wealth divide? Are they rioting, becoming political activists and voting in droves, unionizing or participating in mass labor strikes? None of the above: after all, even refusing to work is apparently too much work; instead America’s youth has flooded social media with the pinnacle of passive-aggressive revolt in the form of the now ubiquitous “OK Boomer.”
We doubt the Boomers are losing too much sleep over this rebellion by the avocado toast generation.
Tyler Durden
Sat, 11/09/2019 – 16:00 - Is China's Embrace Of Blockchain A Warning Shot To The West?
Is China’s Embrace Of Blockchain A Warning Shot To The West?
Authored by Fan Yu, op-ed via The Epoch Times,
China has high ambitions for its state-controlled digital currency.
I wrote two months ago that its central bank digital currency could be imminent. And since foreign adoption of the yuan has been tepid so far, the technology also represents a massive bid to accelerate the internationalization of yuan.
In hindsight, that timing was too aggressive. Beijing likely will introduce its digital currency within 12 to 18 months. China has also doubled down on its conviction. Recently, Chinese Communist Party (CCP) leader Xi Jinping further fanned the flames by extolling blockchain technology—which underpins cryptocurrencies such as Bitcoin—as a “breakthrough that can facilitate China’s progress.”
That endorsement prompted a rally in cryptocurrency prices, which was perhaps undeserved. But its effect on cryptocurrencies, the yuan’s global adoption, Facebook’s Libra project, and Western banking hegemony can’t be understated.
What It Means for Central Banks
China’s strong endorsement of a blockchain-based central bank currency and the West’s relative aversion to the technology opens an interesting new front in the growing U.S.–China technology rivalry.
And it’s a new front on which the United States may not be prepared to fight.
Developments in fintech, payments, and blockchain digital currencies are receiving support from the highest levels of the Chinese central government. The U.S. government—which seeded development of the internet in the 1960s via the ARPANET project—has so far shunned the technology.
Whether blockchain can be a successful technology underpinning global payments is still an open question. Current blockchain technologies still have speed and volume limitations. But what it allows China to do is bypass the dollar-based global banking system and intermediary banks.
There’s another application China is potentially working on. Max Keiser, the host of the Keiser Report, a financial news show on the Russian state network channel RT, recently suggested that China’s digital currency has even greater ambitions.
“I can tell you that the cryptocurrency that China’s rolling out will be backed by gold,” Keiser told Kitco News, a gold-focused website.
“It’s a two-pronged announcement. Number one, China’s got 20,000 (metric tons) of gold, and number two, they’re rolling out a crypto coin backed by gold, and the dollar is toast.”
If true, that could be a game-changer, as currently, no government currency is backed by gold. The United States abandoned the last remnants of pegging the dollar to its gold reserves in 1971. The ramifications of this are beyond the scope for this article, but it’s a development that Western central banks need to pay attention to.
What It Means for Crypto Market
Bitcoin prices jumped almost 16 percent on Oct. 25, the day after Xi made his pro-blockchain comments at a Politburo meeting on that technology. The Politburo is a body of 25 of the Party’s most elite officials.
But Beijing was quick to tamp down the correlation.
“Rise of blockchain technology was accompanied by that of cryptocurrencies, but innovation in blockchain technology does not mean we should speculate in virtual currencies,” according to an Oct. 28 commentary published on the CCP mouthpiece People’s Daily.
As of Nov. 3, bitcoin prices have declined slightly since that initial rally, and for good reason. Beijing’s affirmation of blockchain isn’t an affirmation of cryptocurrencies. Chinese authorities banned initial coin offerings and domestic cryptocurrency exchanges in 2017, and there’s speculation about a crackdown on cryptocurrency miners.
Any cryptocurrency market reaction to recent developments should be neutral to negative, as China’s state-controlled digital currency could become a legitimate competitor to existing cryptocurrencies.
What It Means for State Control
China has long argued that cryptocurrencies create chaos and disorder. Cryptocurrencies’ key benefits are hugely negative for the CCP: They can’t be centrally controlled and users must sell fiat currency (e.g., the yuan) to purchase digital currencies.
China’s state digital currency affords several benefits for the CCP regime. It’s a digital currency that it can control, the government can track where it’s going, and it’s a domestically developed technology that doesn’t rely on foreign entities.
Beijing undoubtedly has plans to use its digital currency to exert more control and surveillance on users. Unlike paper money, state-controlled digital currency can be used to track consumer spending extremely accurately and also to enforce strict capital controls. Its potential for surveillance is far greater than existing mobile payment apps such as WeChat or Alipay, which are owned by private Chinese companies.
Such tactics can easily be exported abroad, once foreign countries begin to adopt China’s digital currency.
The West doesn’t seem to have many viable alternatives. Cryptocurrencies inherently bypass central banks and therefore, are unlikely to be legitimized by authorities. Absent advancements in blockchain by Western central banks, Libra is perhaps the most logical challenger to China’s proposed currency.
Facebook founder and CEO Mark Zuckerberg argued in his remarks in front of the U.S. House Financial Services Committee on Oct. 23:
“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader, that it will always get to be the leader if we don’t innovate.”
But the Libra project is having trouble getting off the ground as some initial corporate backers such as eBay, Mastercard, PayPal, and Visa have withdrawn their participation. And lawmakers have so far criticized the project as an effort by Facebook to gain more influence and improve financial returns.
During Zuckerberg’s testimony, he appeared to hedge his bet, conceding that Facebook and himself are perhaps “not the ideal messenger” given the circumstances. He described Libra as one “potential approach” to digitizing payments.
U.S. lawmakers are right to fear Facebook’s growing ambitions, and there must be other alternative solutions. One thing is clear: Beijing isn’t slowing down.
Tyler Durden
Sat, 11/09/2019 – 15:30 - Activist Shrinks Want To Tell Impeachment Panel Trump Is Crazy
Activist Shrinks Want To Tell Impeachment Panel Trump Is Crazy
A group of medical professionals who claim that President Trump is mentally unfit for office want to testify during House Democrats’ impeachment probe, according to the Washington Examiner, the latest development in an ongoing effort to explore removing Trump via the 25th amendment.
Led by Dr. Brandy Lee – a Yale forensic psychologist (who remains unlicensed in Connecticut), the group includes three other psychologists, a clinical neuropsychologist, a neurologist and an internist – who will announce their availability next week to members of Congress and the media.
Notably, the group didn’t avail themselves during the closed-door impeachment hearings – so this is clearly more about influencing public opinion than genuine concern.
Lee and those prepared to testify say there is enough information from the president’s public appearances, tweets, interviews, and also from special counsel Robert Mueller’s 448-page report, to make the determination that, as Lee put it, “the president lacks mental capacity to fulfill the duties of his office.“
“There is very little that a personal examination will add,” Lee said. –Washington Examiner
A wide-eyed Dr. Brandy Lee explains why Trump is crazy. “We think that hearing about mental health aspects in the context of the impeachment hearings is critical, partly because, for the past 2.5 years we have been very deeply concerned about mental instability of the president, and pretty much all that we have said has born out to be true,” said Lee – who previously diagnosed Trump with a “mental impairment” for “going back to conspiracy theories, denying things he has admitted before,” and “his being drawn to violent videos.”
#FraudNewsCNN #FNN pic.twitter.com/WYUnHjjUjg
— Donald J. Trump (@realDonaldTrump) July 2, 2017
Earlier this year Lee spearheaded a group of experts which conducted a mental health analysis of Trump using the Mueller report, concluding that he doesn’t have the mental capacity to be president and recommended he lose his war powers and access to nuclear weapons.
The psychiatrists who are making themselves available for consultation are Dr. James Merikangas, Dr. Jerrold Post, Dr. John Zinner, and Dr. Allen Dyer, all of whom teach at George Washington University. Sara Pascoe, a clinical neuropsychologist who is a former member of the National Academy of Medicine, is also part of the panel. Lee doesn’t yet have permission from the neurologist and internist to name them publicly.
The experts plan to share findings from the mental health analysis if called in to testify. Post, who spent two decades at the CIA and compiled psychological profiles of world leaders, also has a book coming out called Dangerous Charisma: The Political Psychology of Donald Trump and His Followers to use as part of the testimony. Dyer, who helped author the American Psychiatric Association’s “Goldwater Rule,” which says it’s unethical for a psychiatrist to offer a professional opinion of public figures they haven’t personally examined, will help navigate ethical rules, Lee said. –Washington Examiner
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“We don’t believe there is the need for any further evaluation, and we are making ourselves available for the impeachment hearing because we believe that mental health issues will become critical as pressures from the impeachment hearings mount,” said Lee. “In other words, the more successful the impeachment proceedings become, the more dangerous the psychological factors of the president will become.”
Lee calls her group the “Independent Expert Panel for Presidential Fitness.”
She is also the editor of The Dangerous Case of Donald Trump, a compilation of testimonials from 27 psychiatrists and mental health experts weighing in on Trump’s level of “dangerousness.”
Tyler Durden
Sat, 11/09/2019 – 15:00 - The Economics Behind The Fall Of The Berlin Wall
The Economics Behind The Fall Of The Berlin Wall
Authored by Ryan McMaken via The Mises Institute,
This week marks the thirtieth anniversary of the fall of the Berlin Wall. Like most historical events that are commemorated as if they took place on a single day, the fall of the Berlin Wall on November 9, 1989, was just one of many interrelated events that led to the end of the system of Soviet client states in Eastern Europe, and the end of the Soviet Union itself, in December of 1991.
With the fall of the Berlin Wall, East Germans, who had lived under severe restrictions on travel and emigration, were able to freely travel to West Berlin, which continued a chain of events already begun earlier that year in which many anti-Soviet dissidents throughout Eastern Europe became emboldened and met with unprecedented success. Meanwhile, East Germans flooded into neighboring countries by the thousands, seeking refuge from Soviet-sponsored oppression in Austria and West Germany.
Why It Was Different in 1989
Throughout the mid-twentieth century, Eastern Europe was home to numerous anti-Soviet revolts and acts of civil disobedience. In Hungary in 1956, Prague in 1968, and especially in Poland throughout the 1970s and 1980s, resistance flared up, but was reliably crushed with Soviet-sponsored martial law and outright military intervention.
But in the summer of 1989, the Poles held an election that essentially overthrew the Soviet-approved regime in Poland. This, time, however, instead of sending tanks to crush the Polish agitators, the USSR did nothing.
By November of that year, dissidents had become emboldened by Soviet inaction. Hungary and Czechoslovakia haphazardly opened their borders, allowing East Germans to stream into Austria and on to West Germany. East Berliners began to demand free passage to the West. The “fall” of the wall, soon followed.
Americans today, and especially American conservatives, like to claim that the end of the Soviet bloc and the Soviet Union was America’s doing; that the Soviet oligarchs feared American military might, and simply decided to give up and vote themselves out of existence, as they did two years later. This tale makes for nice domestic propaganda in America, but the fact that regimes virtually never just “give up” without firing a shot when faced with a threatening foreign power makes it rather unlikely.
We are far more likely to find an answer if we ask ourselves not why the American state was so strong in the 1980s, but why the Soviet state was so weak. If the Soviets were more than capable of maintaining “order” in Eastern Europe during the 50s, 60s, and 70s, why was it unable or unwilling to do the same in the 1980s?
An inquiry along these lines quickly leads us to find that by the 1980s, the soviet economy, and most of the economies of Eastern Europe were economic basket cases. Housing was in disrepair. Vehicles and appliances were incredibly old-fashioned and unreliable. The standard of living was a fraction of what it was in the “West.” Basic items like soap and women’s pantyhose were often luxuries.
In other words, the centrally-planned economies of the Soviet bloc produced little actual wealth, and as the regimes siphoned off more and more of what little wealth was being produced, the people, as well as the regimes, became poorer and poorer.
This economic weakness meant not only that the legitimacy of the regime was imperiled, but that the Soviets no longer enjoyed a military “surplus” with which they could simply roll into every rebellious neighborhood and re-establish order.
In other words, the USSR was too poor to pay the political bills.
Mises and the Calculation Problem
None of this would have surprised Ludwig von Mises. Decades before, Mises had shown that a socialist economy (by which he meant a centrally planned economy) could not possibly know what to produce, when to produce it, or for whom to produce. In explaining this, Mises proved that the Soviet Union, regardless of any victories it might have in remolding human nature, was economically impossible. Rothbard explains:
Before Ludwig von Mises raised the calculation problem in his celebrated article in 1920, everyone, socialists and non-socialists alike, had long realized that socialism suffered from an incentive problem. If, for example, everyone under socialism were to receive an equal income, or, in another variant, everyone was supposed to produce “according to his ability” but receive “according to his needs,” then, to sum it up in the famous question: Who, under socialism, will take out the garbage? That is, what will be the incentive to do the grubby jobs, and, furthermore, to do them well? …
But the uniqueness and the crucial importance of Mises’s challenge to socialism is that it was totally unrelated to the well-known incentive problem. Mises in effect said: All right, suppose that the socialists have been able to create a mighty army of citizens all eager to do the bidding of their masters, the socialist planners. What exactly would those planners tell this army to do? How would they know what products to order their eager slaves to produce, at what stage of production, how much of the product at each stage, what techniques or raw materials to use in that production and how much of each, and where specifically to locate all this production? How would they know their costs, or what process of production is or is not efficient?
Mises demonstrated that, in any economy more complex than the Crusoe or primitive family level, the socialist planning board would simply not know what to do, or how to answer any of these vital questions. Developing the momentous concept of calculation, Mises pointed out that the planning board could not answer these questions because socialism would lack the indispensable tool that private entrepreneurs use to appraise and calculate: the existence of a market in the means of production, a market that brings about money prices based on genuine profit-seeking exchanges by private owners of these means of production. Since the very essence of socialism is collective ownership of the means of production, the planning board would not be able to plan, or to make any sort of rational economic decisions. Its decisions would necessarily be completely arbitrary and chaotic, and therefore the existence of a socialist planned economy is literally “impossible” (to use a term long ridiculed by Mises’s critics).
The Soviet central planners never had an answer to this critique. Indeed, their “answer” only came in 1991 when the USSR finally shut itself down. And even up to the end, American Keynesians never figured it out either, and Paul Samuelson still claiming in 1989 that a “socialist command economy can function and even thrive.”
Why Did it Take So Long?
In response to Mises’s claim of the impossibility of central planning, some then ask “well, if central planning was impossible, why did it last so long?”
The answer can be found in the fact that even in a centrally planned state, capital does not simply vanish overnight. The soviet planners were not starting with nothing. They had the accumulated capital of centuries of savings and investment by Russians, Ukrainians, Germans, Poles, and others under their control.
True, it was not possible for them to correctly plan or determine non-arbitrarily what goods should be produced. But they nevertheless had large amounts of capital at their disposal, and even if the centrally planned state produced zero wealth (which was not true since even the Soviet state produced some things people wanted), the state still had plenty of wealth to redistribute until it was all gone.
This is all the more true for regimes that are only partly centrally planned, as in the case of Venezuela, on which Nicolás Cachanosky observed:
[I]f one of the wealthiest and developed countries in the world were to adopt Cuban or North Korean institutions overnight … [t]he wealth and capital does not vanish in 24 hours. The country would shift from capital accumulation to capital consumption and it might take years or even decades to drain the coffers of previously accumulated wealth. In the meantime, the government has the resources to … enjoy the wealth, highways, electrical infrastructure, and communication networks that were the result of the more free-market institutional realities of the past.
Eventually, though, the “reserve fund,” as Mises called it, is used up:
An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself.
In addition to this, the Soviets made money for the regime by selling oil (and other goods) in international markets, and high oil prices in the 1970s propped up the regime so well, that had it not been for Soviet oil sales, it’s quite possible the regime would have collapsed a decade earlier.
Conclusion
As the mainstream news outlets cover the anniversary of the Berlin Wall’s fall this year, they will surely spend much time discussing the role of various American politicians, and military programs, and international relations. It is quite possible that all of these things had an effect on the regimes of Eastern Europe that were non-trivial.
Nonetheless, such analysis ignores the huge elephant in the room which is the inevitable failure of regimes that are built on central planning and wealth re-distribution. Without markets and prices, there can be no planning, and without planning, no wealth creation, and ultimately, no political durability. The rebels and demonstrators of Eastern Europe deserve immense credit for courageously standing up to the state. But in the end, those who were successful were helped immensely by good timing and bad economics.
* * *
This article was first published in 2014 to mark the 25th anniversary of the fall of the Berlin Wall. It has been slightly updated for the 30th anniversary.
Tyler Durden
Sat, 11/09/2019 – 14:30
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