- Escobar: How New Silk Roads Are Shaping Southwest Asia
Authored by Pepe Escobar via The Asia Times,
Businesses in the Middle East have begun to think ‘Make trade not war’ and being part of China’s Belt and Road scheme
Singapore, aiming high for the status of Asia’s unofficial capital, seems like the ideal venue for a conference to discuss how the Middle East could learn a few lessons from ASEAN’s multi-layered relations with China, especially involving partnership in the New Silk Roads, or Belt and Road Initiative (BRI).
But first, let’s get things straight. The “Middle East” is, of course, a Eurocentric, Orientalist denomination. From Asia’s – and China’s – cultural and geographical point of view, the “Middle East” is correctly seen as Southwest Asia.
It’s enlightening to evaluate two Chinese informed perspectives on how China is deploying its geopolitical soft power across Southwest Asia in contrast to the Trump administration’s immensely muddled strategy.
Duke University professor Bai Gao, also a visiting professor at Peking University, stresses how ASEAN privileges “a stronger regional identity that often unites these countries together to pursue their common interests when they deal with external great powers.” That’s in sharp contrast with Southwest Asia, where nations, geopolitically, are extremely selfish and eschew aligning on common interests.
Peking University Professor Wu Bingbing, also Qatar Chair Professor in Middle Eastern Studies, for his part, stresses how “China believes in partnerships and does not take sides with any single country.”
Enter, inevitably, BRI, which Wu describes as a “network of partnerships (and) projects” uniting a vast array of nations, aiming at win-win outcomes all across Southwest Asia. The objective is not “competition with the US, but cooperation.”
Beyond ASEAN and Southwest Asia that also happens to be the exact emphasis of the December 2018 China policy paper on the EU. Make trade, not war.
The Chinese think of the Middle East as Southwest Asia. Map: iStock
Watch those BRI figures
Contrary to rumors, BRI is not exactly a walking dead “debt trap” – as a constant update on business deals attest.
Trade flows between China and BRI partners are still set to grow by $117 billion in 2019, after an estimated $158 billion last year. China’s exports to BRI-related markets should grow by $56 billion in 2019, after $76 billion last year. From China’s point of view, even if the figures are smaller, the Big Picture remains. That means economic upgrading, internationalization of the yuan and reduction of internal Chinese imbalances.
BRI partners have already captured over $410 billion in Chinese investment in the period 2014-2018, always taking into consideration that BRI is still, officially, only in the planning stage.
BRI partners are also set to profit from over $61 billion in additional exports to China in 2019. This Asia-wide infrastructure expansion translates into lower transaction and transportation costs. Not only ASEAN, but Southwest Asia is also ideally positioned to take advantage from BRI’s non-stop expansion.
A measure of BRI’s challenges in Southwest Asia is offered, for instance, by the development of connectivity projects involving Israel. This study argues that for projects to work, China needs to turbo-charge its political “engagement” – something that for Beijing is a definitive red line.
By comparison, in ‘Gold at the End of the Rainbow? The BRI and the Middle East’, Anoushiravan Ehteshami of Durham University argues that “it is in the outlying regions such as Central Asia and the Middle East that the BRI’s metal will be tested, as indeed China’s resilience as a major power. If China is able to overcome the geopolitical, cultural, institutional and socio-economic barriers of these Asian regions then it will have made some headway towards creating Asia’s first international community, arguably an ‘Asian international society’.”
Asian international society
As it picks up speed in the next decade, BRI is certainly set to shake up the balance of power from ASEAN to Central Asia and to Southwest Asia. Ehteshami is right when he predicts BRI “will generate counter-forces as it traverses Asia’s sub-regions, and nowhere more so than in South Asia, where both Middle East countries and China are actively engaged in developing security and economic links.”
But Beijing’s ultimate target is way more ambitious. It wants to develop an “Asian international society” capable of rivaling, and surpassing, the West.
A key lab to watch will be the Gulf Cooperation Council. Geoeconomically, the GCC – as well as Iraq and Iran – are focusing on Asia much more than the West. China is their top – or near top – energy buyer. Arrays of Chinese companies are heavily investing across the GCC.
A glimpse of what’s to come is offered by China’s online Silk Road offensive in the UAE – a masterpiece of geo-connectivity.
The tall buildings of Abu Dhabi. Business people in the United Arab Emirates and other parts of the Middle East are thinking about being part of the Belt and Road scheme. Image: iStock
Tech consultant Sam Blatteis sums it all up:
“Simply put, China is rewriting the rules on how to rise in influence in the Middle East. Because of the UAE’s Goliath-sized ports and the country’s geographic position almost sandwiched between Saudi Arabia to its West and Iran to its East, the UAE is thinking at-scale too about how to contribute to both Silk Road routes.”
Investors from ASEAN to Southwest Asia are increasingly convinced that China is the only game in town for new ideas and major capital investment, way ahead on 5G and just about every technology. Moreover, the Chinese have not yet commercialized all their advances. That’s something even Singapore, the “capital of Asia”, has not been able to crack.
- Visualizing The 7 Major Flaws Of The Global Financial System
Since the invention of banking, the global financial system has become increasingly centralized.
In the modern system, central banks now control everything from interest rates to the issuance of currency, while government regulators, corporations, and intergovernmental organizations wield unparalleled influence at the top of this crucial food chain.
There is no doubt that this centralization has led to the creation of massive amounts of wealth, especially to those properly connected to the financial system. However, as Visual Capitalist’s Jeff Desjardins notes, the same centralization has also arguably contributed to many global challenges and risks we face today.
FLAWS OF THE GLOBAL FINANCIAL SYSTEM
Today’s infographic comes to us from investment app Abra, and it highlights the seven major flaws of the global financial system, ranging from the lack of basic access to financial services to growing inequality.
Courtesy of: Visual Capitalist
1. Billions of people globally remain unbanked
To participate in the global financial sector, whether it is to make a digital payment or manage one’s wealth, one must have access to a bank account. However, 1.7 billion adults worldwide remain unbanked, having zero access to an account with a financial institution or a mobile money provider.2. Global financial literacy remains low
For people to successfully use financial services and markets, they must have some degree of financial literacy. According to a recent global survey, just 1-in-3 people show an understanding of basic financial concepts, with most of these people living in high income economies.Without an understanding of key concepts in finance, it makes it difficult for the majority of the population to make the right decisions – and to build wealth.
3. High intermediary costs and slow transactions
Once a person has access to financial services, sending and storing money should be inexpensive and fast.However, just the opposite is true. Around the globe, the average cost of a remittance is 7.01% in fees per transaction – and when using banks, that rises to 10.53%. Even worse, these transactions can take days at a time, which seems quite unnecessary in today’s digital era.
4. Low trust in financial institutions and governments
The financial sector is the least trusted business sector globally, with only a 57% level of trust according to Edelman. Meanwhile, trust in governments is even lower, with only 40% trusting the U.S. government, and the global country average sitting at 47%.5. Rising global inequality
In a centralized system, financial markets tend to be dominated by those who are best connected to them.These are people who have:
- Access to many financial opportunities and asset classes
- Capital to deploy
- Informational advantages
- Access to financial expertise
In fact, according to recent data on global wealth concentration, the top 1% own 47% of all household wealth, while the top 10% hold roughly 85%.
On the other end of the spectrum, the vast majority of people have little to no financial assets to even start building wealth. Not only are many people living paycheck to paycheck – but they also don’t have access to assets that can create wealth, like stocks, bonds, mutual funds, or ETFs.
6. Currency manipulation and censorship
In a centralized system, countries have the power to manipulate and devalue fiat currencies, and this can have a devastating effect on markets and the lives of citizens.In Venezuela, for example, the government has continually devalued its currency, creating runaway hyperinflation as a result. The last major currency manipulation in 2018 increased the price of a cup of coffee by over 772,400% in six months.
Further, centralized power also gives governments and financial institutions the ability to financially censor citizens, by taking actions such as freezing accounts, denying access to payment systems, removing funds from accounts, and denying the retrieval of funds during bank runs.
7. The build-up of systemic risk
Finally, centralization creates one final and important drawback.With financial power concentrated with just a select few institutions, such as central banks and “too big too fail” companies, it means that one abject failure can decimate an entire system.
This happened in 2008 as U.S. subprime mortgages turned out to be an Achilles Heel for bank balance sheets, creating a ripple effect throughout the globe. Centralization means all eggs in one basket – and if that basket breaks it can possibly lead to the destruction of wealth on a large scale.
THE FUTURE OF THE GLOBAL FINANCIAL SYSTEM?
The risks and drawbacks of centralization to the global financial system are well known, however there has never been much of a real alternative – until now.
With the proliferation of mobile phones and internet access, as well as the development of decentralization technologies like the blockchain, it may be possible to build an entirely new financial system.
But is the world ready?
- GE, Boeing, T-Mobile Among Latest Victims Of Chinese IP Theft
As US and Chinese negotiators prepare to begin their seventh round of trade talks this week, more reports are being leaked to the media about China’s efforts to steal trade secrets from US companies via “Operation Cloudhopper”, the Ministry of State Security-backed infiltration campaign that used service providers in the US and Europe to infiltrate the systems of their clients.
According to a report in the New York Times that detailed how China and Iran have ramped up their hacking efforts since 2015, when the now-abandoned Iran deal was initially struck, and China promised the Obama administration that it would pull back on its cyberespionage efforts. After an 18-month lull, China’s 10-year-long commercially motivated campaign was revitalized in the midst of growing trade tensions between the US and China (tensions that predated Trump’s trade war).
Among the latest targets of China’s hacks, according to the NYT’s military and private sources, were GE Aviation, Boeing and T-Mobile.
A summary of an intelligence briefing read to The New York Times said that Boeing, General Electric Aviation and T-Mobile were among the recent targets of Chinese industrial-espionage efforts. The companies all declined to discuss the threats, and it is not clear if any of the hacks were successful.
Offering some background on China’s hacking strategy in recent years, sources described how China has managed to carry out more sophisticated attacks that have been increasingly difficult to detect.
But the 2015 agreement appears to have been unofficially canceled amid the continuing trade tension between the United States and China, the intelligence officials and private security researchers said. Chinese hacks have returned to earlier levels, although they are now stealthier and more sophisticated.
“Cyber is one of the ways adversaries can attack us and retaliate in effective and nasty ways that are well below the threshold of an armed attack or laws of war,” said Joel Brenner, a former leader of United States counterintelligence under the director of national intelligence.
Federal agencies and private companies are back to where they were five years ago: battling increasingly sophisticated, government-affiliated hackers from China and Iran – in addition to fighting constant efforts out of Russia – who hope to steal trade and military secrets and sow mayhem. And it appears the hackers substantially improved their skills during the lull.
[…]
Mr. Segal and other Chinese security experts said attacks that once would have been conducted by hackers in China’s People’s Liberation Army are now being run by China’s Ministry of State Security.
These hackers are better at covering their tracks. Rather than going at targets directly, they have used a side door of sorts by breaking into the networks of the targets’ suppliers. They have also avoided using malware commonly attributed to China, relying instead on encrypting traffic, erasing server logs and other obfuscation tactics.
[…]
“The fingerprint of Chinese operations today is much different,” said Priscilla Moriuchi, who once ran the National Security Agency’s East Asia and Pacific cyber threats division. Her duties there included determining whether Beijing was abiding by the 2015 agreement’s terms. “These groups care about attribution. They don’t want to get caught.”
One of Beijing’s primary motivations in carrying out these attacks has been to bolster its latest five-year economic plan to make China a leader in AI and other cutting edge technology.
But Chinese hackers have resumed carrying out commercially motivated attacks, security researchers and data-protection lawyers said. A priority for the hackers, researchers said, is supporting Beijing’s five-year economic plan, which is meant to make China a leader in artificial intelligence and other cutting-edge technologies.
“Some of the recent intelligence collection has been for military purposes or preparing for some future cyber conflict, but a lot of the recent theft is driven by the demands of the five-year plan and other technology strategies,” said Adam Segal, the director of the cyberspace program at the Council on Foreign Relations. “They always intended on coming back.”
This is only the latest in a string of leaks about China’s espionage efforts since 2015. But the constant stream of evidence being leaked to the press, all of which seems to corroborate Robert Lighthizer’s claims that China’s cyberespionage efforts have continued unabated since the trade war began, are happening at an interesting time. Which would seem to raise serious questions about the US’s ability to strike a sweeping trade compromise without President Trump looking like he has caved to the Chinese.
- The 'Disappearing Democrat' Scandal – Part 2
Authored by Tim Donner via Liberty Nation,
This is the second of a two-part series on a massive scandal which has gone largely unreported, based on an interview on Liberty Nation Radiowith Luke Rosiak, author of Obstruction of Justice: How the Deep State Risked National Security to Protect the Democrats. In part one, Mr. Rosiak described how the scandal unfolded and jeopardized the security of more than two dozen Democratic members of Congress.
The media, the DOJ, and the Democrats: A powerful axis with the ability to shape what we perceive as the issue of the day…
It was a scandal that threatened to metastasize and blow up in the face of Democrats in a presidential election year like no other. But with the Hillary Clinton email scandal growing by the day, Democrats willing to do almost anything to avoid the specter of a Donald Trump presidency, the FBI burying their findings and a drive-by media behaving with a distinct lack of curiosity, few people took notice.
Imram Awam, an IT specialist and Pakistani national with a checkered past, yet unvetted by the many congressional Democrats who employed his services, took advantage of the unfettered access he was granted to their computer files to hack, steal, blackmail – and even threaten to kill his wife’s family – in the process placing national security in distinct jeopardy.
We were joined on Liberty Nation Radio by Luke Rosiak, an investigative reporter at the Daily Caller, who has just released the definitive book on this scandal, Obstruction of Justice: How the Deep State Risked National Security to Protect the Democrats.
Tim Donner: This scandal went relatively unnoticed, because it came to a head in the heat of the 2016 presidential campaign. Do you think it would have been in the headlines and stayed there for some time if it happened at another time? Or would it have been written off like all the revelations about the FBI’s covert investigation of Trump, which we now know began before the presidential election?
Luke Rosiak: That’s an interesting question because the media is a big part of this story, isn’t it? I mean, and what I basically learned through the reporting of this is I approached it first as what I just said. It’s a remarkable national security story that I thought surely everyone would be interested in. I had The Washington Post right behind me following my leads.
Soon, I saw that no one was looking. I would write these stories, and I would say, “Look at the court documents from civil court. Look at these government records, these photographs, all this proof, and all this evidence.” There was basically just a campaign of concealment. And the media gladly went along with it, and they kind of bought the idea of fake news. You can just kind of say that now whenever it’s convenient. Politicians can get away with a lot by just saying, “It’s fake news.” And they do that on both sides, of course.
The other thing is really just the lack of investigative reporting, especially when it’s not something that a lot of the media is interested in. It just turned out that, as you said, there was a much bigger appetite for this Russia story that is really kind of running on fumes here. No one can tell us exactly who was … the Trump campaign did what with Russia? But the media is very, very interested.
Meanwhile, we’ve got direct evidence, and this is investigators on Capitol Hill. The Capitol police wrote a memo saying that after they caught this guy hacking Congress and actually hacking a particular server called the House Democratic Caucus server, the Capitol police wrote a memo saying that that server disappeared. It’s like holy cow, an important Democratic server disappeared while it’s evidence in a hacking probe. This is huge stuff. It’s documented by government investigators. And the media had no appetite for it. So ultimately, the Democrats kind of worked the FBI, and the FBI goes along with making this thing go away despite all the evidence. Then the media says, “No need to look into this. The FBI says there’s nothing there.”
So my book documents, and the readers can see for themselves and judge for themselves, what happened on Capitol Hill with this Pakistani hack and the frightening ties to foreign governments and the track record of blackmail, and then the FBI basically conspiring to rig a political case.
But the other thing that’s really important for people to learn from it is it shows you how they work behind the scenes to manipulate what we hear about and manipulate the system of justice here in America.
Tim: What conclusions have you personally drawn from your extensive research about the pervasiveness of official corruption in Washington?
Luke Rosiak: I’m shocked by how corrupt Congress is. I’ve been an investigative reporter here in Washington for a decade, and I’ve seen a lot. But the cynicism on Capitol Hill and the willingness to put personal reputation above all else. This may not sound … maybe everyone’s saying, “Yes, we already know that.” But this particular case, it kind of underscored. I saw things with my own eyes that were shocking.
So this guy was taking all this equipment from Congress, for example, and sending it over to Pakistan. In one congresswoman’s office, a tenth of her budget disappeared. That’s enough for ten computers for every staff. They had invoices and so on proving this on Capitol Hill. They put out the statements, and we’re not going to seek any charges in this case.
There is no way to justify it. They want to act like, “That one reporter. He must be doing fake news.” But it’s documented. So it’s remarkable to see the people we trust, and in other words, okay, you’ve got this Pakistani guy. He’s a horrible guy. Things happen. There are always bad people out there in the world. But what really shook me is to see the people that we trusted, the ones we elected and also the ones that we task with enforcing the law with the FBI and the DOJ, to see those people letting us down, it really shook my faith in some of the fundamental institutions that we count on in America.
I think anyone who reads the book is going to see that it’s actually a remarkably sympathetic and empathetic portrait of what happened in Capitol Hill and a lot of people who were struggling with the decision of, “Should I do the right thing even if it puts my job at risk?” So this is a story about human beings, that a lot of times who chose convenience over speaking out. Then there’s also a few heroes in that mix who came forward and tried to do the right thing despite all the retaliation. They retroactively try to spin it as partisan, but when you read the book, it’s all Democratic whistleblowers who first were calling attention to the wrongdoing that they had witnessed on Capitol Hill.
Tim: What lesson should be learned? What should voters take away from what you’ve uncovered in this book?
Luke Rosiak: I think that to question everything is really one of the lessons, I think, because the techniques that they use, the Democrats working with the DOJ and the media, that’s a powerful axis right now. That trifecta, the three of them working together have the ability to shape a lot of what we perceive as being the main issues of the day or the biggest things. It turns out that it’s kind of a big PR operation with a lot of very savvy people. I call them puppeteers on Capitol Hill, and I go into how they’re manipulating us. So identifying the ways in which we are being manipulated, I think, is key for Americans. Because these kind of tricks are going on all the time, and it’s important for us to be able to see what they’re doing to us.
- The Wealthiest And Poorest County In Every U.S. State
Submitted by Visual Capitalist
The average U.S. state is made up of 62 counties.
With so many counties spread throughout each state in the nation, it’s not surprising that we can find counties that exemplify almost any part of the American experience.
In this case, we’re comparing county-level data to look at the differences in economic opportunity within each state. More specifically, we are looking at the range of median household income, which is one proxy for the difference in economic status between counties.
Disparity By State
Today’s infographic comes to us from TitleMax, and it looks at the wealthiest and poorest counties in each individual U.S. state based on the measure of median household income.
Here are the five states with the biggest disparity between rich and poor counties:
1. Virginia: $102,800
Loudoun is about an hour’s drive to D.C., and it also happens to be the richest county in the U.S. in terms of median income. Further west in the state, bordering Kentucky and West Virginia, lies Buchanan County, which has a median household income of just $31,800.
2. New Mexico: $86,500
In Los Alamos, known as the birthplace of the atomic bomb, median household income has exploded to $114,700 – meanwhile, along the Mexico border lies Luna, the poorest county in the state.
3. Colorado: $85,200
Just like the Colorado has a difference in elevation, it also holds a large difference in median income. Folks in Douglas County, which lies between Denver and Colorado Springs, take home $112,400 in income on average, while folks in Costilla bring in about $27,200 per year.
4. Maryland: $80,900
Howard County, which lies between Baltimore and Washington D.C., has the highest median household income in the state. Meanwhile, it’s Somerset County at the south of the Delmarva Peninsula that has the lowest.
5. Tennessee: $79,700
Just to the south of the Music City sits Williamson County – a wealthy part of the state with $107,900 in median income. Hancock County is the poorest, and it’s tucked away in the northeast corner of the state.
A note on Cost of Living
While median household income can help point to disparities between counties, it is just one indicator.
It’s worth noting that the cost of living can often be cheaper in counties with lower median incomes, and this can partially offset the difference in some instances. For example, while Trinity County is the poorest county in California by median income, it’s also far away from San Francisco, Los Angeles, or Sacramento, and has a much cheaper cost of living and a different way of life.
In some ways it is comparing apples to oranges. Trinity County is completely rural, holds zero incorporated cities, and holds just 3,600 people in its largest community (Weaverville) – a far cry from the urban sprawl of L.A. or the booming Bay Area.
- What A Way To Go? Hackers Can Turn Sex Robots Into Killing Machines, Security Expert Warns
Authored by John Vibes via The Mind Unleashed,
According to Nicholas Patterson, a cybersecurity lecturer at Deakin University in Melbourne, Australia, humanoid sex robots that have recently hit the market could potentially be hacked and turned into killing machines.
Patterson gave this warning in a string of interviews with various UK publications:
“Hackers can hack into a robot or a robotic device and have full control of the connections, arms, legs, and other attached tools like in some cases knives or welding devices. Often these robots can be upwards of 200 pounds and very strong. Once a robot is hacked, the hacker has full control and can issue instructions to the robot. The last thing you want is for a hacker to have control over one of these robots. Once hacked they could absolutely be used to perform physical actions for an advantageous scenario or to cause damage.”
Similar warnings surfaced last year in response to the growing popularity of Bluetooth-enabled sex toys. It was revealed that hackers could control the devices from remote locations, and even use them to spy on unsuspecting pleasure seekers.
Realistically, any device connected to the internet can be programmed to do harm, or at the very least spy on you. In fact, most smart devices are specifically designed to spy on users for data mining purposes.
The primary reason sex robots evoke a special fear when it comes to hacking potential is because they are made in the likeness of humans. These devices are some of the very first humanoid robots that everyday consumers have the opportunity to interact with, which is naturally causing a great deal of anxiety for some. It has been predicted that humanoid robots will become a part of our everyday lives in the near future, but in reality they are far less dangerous than their formless counterparts.
We have been trained to believe that the threat of artificial intelligence (AI) will come in the form of a Terminator-like robot that looks indistinguishable from an actual human, while invisible AI algorithms have been silently taking over our lives for the past decade, right under our noses. The real AI threat is disembodied, and comes in the form of algorithms that are sending the wrong people to jail, controlling the information you see online, and even writing the news.
The idea of a rogue robot that can walk and talk is indeed scary, but having every service and product being controlled by invisible algorithms is far worse. While this technology could be used to make positive change in the world, it is unfortunately true, as many experts have pointed out, that the ethics of these devices are only as good as the humans who programming them.
An article published last year in Nature, explores the ethical framework of technology like self-driving cars. The article notes that the ethics of self-driving cars are based on the trolley problem, an ethical lifeboat scenario that would prove extremely unlikely in the real world.
A self-driving car has a choice about who dies in a fatal crash. Here are the ethical considerations https://t.co/ZcEgDQfxhh #automation pic.twitter.com/XzLWQWDzcr
— World Economic Forum (@wef) November 3, 2018
https://platform.twitter.com/widgets.js
According to the ethics of self-driving cars, informed by the trolley problem, the lives of old people are less valuable than those of younger generations, and the life of an athlete is likewise more valuable than a “large” woman or homeless person.
- US Army Patents "Net Warhead" To Combat Drones
A team of Army researchers has designed a 40mm grenade round with a net embedded inside the warhead to take down enemy unmanned aerial vehicles, according to patent number 10,197,365.
The new, high-tech round, which was patented on Tuesday, brings an entirely new approach for the Army to combat the proliferation of drones on the modern battlefield.
The “net warhead” was invented by Tomasz Blyskal, Richard Fong, and LaMar Thompson of the Armament Research, Development, and Engineering Center at the Picatinny Arsenal in New Jersey. The round is designed to ensnare the propellors of a drone rather than using expensive electronic or kinetic countermeasures.
“As the round nears the target, a signal from a control board activates a servo. The servo pulls on a central lock plunger to release a ball mechanism. This releases the ogive section, which in turn allows the ejection spring means to eject the petals and weights along with the net stowed there within,” according to the patent.
Here is how the round works:
More importantly, the new round is compatible with the M320 Grenade Launcher Module that can be mounted on the standard issue M4 carbine and M16 rifle.
*Pic of rifles
Initial testing showed the round outperforms other net-centric counter-drone weapons like pulling a net from another larger drone, according to the Army, because that requires trained pilots and does not work in countering drone swarms.
Army commanders and civilian officials have expressed concerns over the increased availability of small drones to the public.
Last month, the Newark Liberty International Airport experienced delays after two commercial airline pilots spotted a drone in the airspace. Moreover, drone sightings at London’s Gatwick Airport, UK’s second largest airport, in December, caused the airport to shut down for several days.
Army officials are preparing tactics, techniques, and procedures for field units to counter drones on the modern battlefield. The use of conventional surface-to-air weapons like shoulder-fired rocket launchers designed to take out aircraft and tanks might be an expensive overkill against drones that can easily be purchased online.
- Credit Exhaustion Is Global
Authored by Charles Hugh Smith via OfTwoMinds blog,
Europe is awash in credit exhaustion, and so is China.
The signs are everywhere: credit exhaustion is global, and that means the global growth story is over: revenues and profits are all sliding as lending dries up and defaults pile up.
What is credit exhaustion? Qualified buyers don’t want to borrow more, leaving only the unqualified or speculators seeking to save a marginal bet gone bad with one more loan (which will soon be in default).
Lenders are faced with a lose-lose choice: either stop lending to unqualified borrowers and speculators, and lose the loan-origination fees, or issue the loans and take the immense losses when the punters and gamblers default.
Europe is awash in credit exhaustion, and so is China. China’s situation is unique, as credit expansion has been propping up the entire economy, from household wealth to corporate speculation to the export sector.
As this article explains, The China Story That Is Far Bigger Than Apple, China’s trade balance–trade surpluses for decades–is close to slipping into trade deficits.
At the same time, China’s once-mighty pool of savings has diminished as consumption has risen. As a result, China now needs foreign investment more than it did in the previous era.
Chinese businesses have borrowed around $2 trillion in US dollar-denominated debt, requiring the acquisition of dollars to service the debt.
So far this sounds like a typical case of a fast-growth economy maturing into a trade-deficit, debt-dependent consumption economy.
What the article misses is the staggering rise in the cost of living in China over the past two decades. Some services are still affordable to the masses–subway fares are extremely cheap–and private healthcare is a mere fraction of healthcare costs in the U.S.
But other costs–housing, food, clothing, etc.–have shot up to the point that our on-the-ground correspondents report that many living expenses aren’t much different than in the U.S.
Officially, inflation is low in China, but the reality is not so cheery. “Domestic sentiment is definitely very bad, perhaps even worse than during the 2008 global financial crisis,” said Fred Hu. Chinese Professor Censored After Admitting Real GDP Growth Is Below 2%
Recall that wages for college graduates are around $1,100 per month (7600 RMB), with $1,500 per month (10,000 RMB) being an above-average salary.
While white-collar wages are $13,000 annually, apartments in first and even second tier cities are similar in cost to desirable U.S. cities. Rent for a small flat is $800 USD in Shanghai, more than half the average salary, and typically cost hundreds of thousands of dollars to buy.
As I’ve noted before, roughly 3/4 of all household wealth in China is tied up in real estate, where it is effectively dead-money, earning no yield and completely illiquid.
Reflecting a broad malaise, China’s stock market has dropped by 25% in 2018 while its currency weakened against the USD (by official design, of course).
Echoing Tolstoy, every economy in a credit-fueled boom is happy in a similar way, but every economy in a credit-exhaustion decline is unhappy in its own way. The euro’s internal contradictions and the EU’s political “irreconcilable differences” are about to manifest in a unique way, and China’s credit bubble bursting is about to deflate bubbles in shadow banking, housing, speculation and confidence in China’s central planning model.
* * *
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- 16 States File Lawsuit Challenging Trump Border Emergency
After making the rounds on seemingly every cable news show that would have him over the weekend and on Monday, California Attorney General Xavier Becerra led a coalition of 16 states in challenging Trump’s national emergency declaration, according to the Washington Post.
California Attorney General Xavier Becerra
The states are seeking a preliminary injunction to stop the order in the suit, which has been filed – just as Trump anticipated – in the Ninth Circuit, which has already struck down several key Trump policies.
The lawsuit, brought by states with Democratic governors except for Maryland, could stall the president’s ability to build the wall for weeks or even months.
Accusing the president of “an unconstitutional and unlawful scheme,” the suit alleges that the states are trying “to protect their residents, natural resources, and economic interests from President Donald J. Trump’s flagrant disregard of fundamental separation of powers principles ingrained in the United States Constitution.”
The states participating in the lawsuit:
California
Colorado
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Virginia https://t.co/rlhe4UMHoW— Kyle Griffin (@kylegriffin1) February 19, 2019
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Having sued Trump dozens of times already, Becerra, who noted the irony of filing a challenge to one of the president’s signature policies on President’s Day, said he was challenging Trump now because the president “admitted there’s no crisis at the border” – a reference to a remark made during Trump’s Friday press conference where he said that he “didn’t need” to declare the national emergency.
“The president admitted that there’s not a basis for the declaration. He admitted there’s no crisis at the border. He’s now trying to rob funds that were allocated by Congress legally to the various states and people of our states,” Becerra told Andrea Mitchell on MSNBC Monday afternoon.
“The separation of powers is being violated, we’re going to go out there and make sure that Donald Trump cannot steal money from the states and people who need them, since we paid the taxpayer dollars to Washington, D.C., to get those services,” he said.
The Trump administration is already faces a litany of lawsuits over the national emergency declaration that have been filed by special interest groups. Over the weekend, the Center for Biological Diversity, Border Network for Human Rights and the American Civil Liberties Union all announced lawsuits. According to Bloomberg, another group called Public Citizen, which represents landowners in Texas along the US-Mexico border – who are worried about their property being taken by Eminent Domain – is reportedly preparing to file a suit. The eminent domain issue could become a problem for Trump in a state that supported him in the 2016 presidential race by a wide margin because, as one analyst told BBG, Texans are “very supportive of property rights.”
It’s also looking increasingly likely that Congress will pass a resolution to terminate the emergency by simple majorities in both chambers of Congress, thanks to the support of several Republicans who oppose the emergency declaration, which could force Trump’s first-ever veto.
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