- The Establishment Will Never Say No To A War
Authored by Andrew Sullivan via New York Mag’s Intelligencer,
The question before us is a relatively simple one: What would be the criteria for removing our remaining troops from the Iraqi, Syrian, and more general Middle Eastern conflicts? Or, for that matter, from Afghanistan, where we have been trapped for more than 17 long years of still open-ended occupation?
If the answer to that question is that only when each of these countries is a healthy pro-American democracy, and Islamist terrorism has ceased to be an “enduring” threat to the West, then the answer, as the old Bob Mankoff joke has it, is “How about never — is never good for you?”
Or consider what a shocked Lieutenant General Kenneth F. McKenzie Jr. of the Marines, the incoming commander of Central Command opined after hearing the news of Trump’s withdrawal of 7,000 troops from Afghanistan yesterday:
“If we left precipitously right now, I do not believe [the Afghan forces] would be able to successfully defend their country. I don’t know how long it’s going to take. I think that one of the things that would actually provide the most damage to them would be if we put a timeline on it and we said we were going out at a certain point in time.”
Get that? After 17 years, we’ve gotten nowhere, like every single occupier before us. But for that reason, we have to stay. These commanders have been singing this tune year after year for 17 years of occupation, and secretaries of Defense have kept agreeing with them. Trump gave them one last surge of troops — violating his own campaign promise — and we got nowhere one more time. It is getting close to insane.
Neoconservatism, it seems, never dies. It just mutates constantly to find new ways to intervene, to perpetuate forever wars, to send more young Americans to die in countries that don’t want them amid populations that try to kill them. If you want the most recent proof of that, look at Yemen, where the Saudi policy of mass civilian deaths in a Sunni war on Shiites is backed by American arms and U.S. It’s also backed by American troops on the ground — in a secret war conducted by Green Berets that was concealed from Congress. There is no conceivable threat to the U.S. from the Houthi rebels in Yemen; and there was no prior congressional approval. Did you even know we had ground troops deployed there?
The same for liberal internationalism, which also never seems to die, however many catastrophes it spawns. There’s always an impending “massacre” somewhere to justify intervention, which is why we have been dutifully told that withdrawing from Syria would lead to a “slaughter” of the Kurds. Remember the massacre that gave Hillary Clinton a chance to launch another Middle Eastern war in Libya? How many more innocents were slaughtered after we toppled Qaddafi than those in danger before? And all because Clinton refused to learn a single thing from Iraq. (If Clinton had actually won in 2016, we would probably have far more troops occupying Syria today, and be digging in for the long haul, and we’d probably have even more troops in yet another doomed surge in Afghanistan. That goes some way to explaining why Clinton has a massive 31/62 negative approval rating in the latest, Democrat-friendly Quinnipiac poll, much worse than even Trump.)
So it was not surprising that the usual suspects — the people who brought you the Iraq War — blanketed the mainstream media these past couple of days with the usual threats and bluffs and bluster, and that the mainstream media amplified their message. Jake Tapper reported yesterday that “senior officials across the administration agree that the president’s decision-by-tweet will recklessly put American and allied lives in danger around the world, take the pressure off of ISIS allowing them to reconstitute, and hand a strategic victory to our Syrian, Iranian, and Russian adversaries … It’s a mistake of colossal proportions and the president fails to see how it will endanger our country.”
Sorry, but I also fail to see how it will endanger the United States. I’ve heard these arguments so many times before — and I used them myself, to my eternal shame, before the Iraq catastrophe. But unlike most of the authors of that catastrophe, I learned my lesson. I simply do not believe that the West has the knowledge, the will, or the ability to shape the extremely complicated and endlessly vicious politics of the Middle East. And I defy anyone to show otherwise. It’s an unwinnable game of whack-a-mole. If we haven’t learned that by now, after spending $6 trillion so far in this forever war on terror, and wreaking chaos and havoc across the region, we never will. Of course, there is a moral case for not destroying a country and then walking away. But ending a conflict that began in 2003? Isn’t 15 yearsenough? That’s three times as long as the war against Hitler.
And what if the Syrian nightmare does become owned by Russia? Getting another imperial power to live with that albatross seems to me rather shrewd, does it not? (I’d be happy to see Russian troops reoccupy Afghanistan for that matter. An occupation of that imperial graveyard might do to Putin’s regime what it did to the Soviet Union.) And why, oh why, do we care if Iran wants to champion Shiite forces in Syria and Iraq? The U.S. has no national interest in the outcome of a Sunni-Shiite war, as long as neither side wins. We did very well by staying out of the Iran-Iraq war all those years ago, did we not? And when we did get involved, via Iran-Contra, it was a disaster.
As for Israel — which is, of course, the real motivation for most neoconservative dreams of controlling the Middle East — it can surely defend itself at this point. Israel has massive military, technological, intelligence, and economic advantages over its neighbors, and, unlike Iran, also has nuclear weapons, refuses to admit it, and will not sign (again unlike Iran) the Treaty on the Non-Proliferation of Nuclear Weapons. And the Israelis need U.S. troops to occupy the Middle East permanently as well? Why? It’s high time the U.S. called their bluff.
But Washington never learns this lesson, cannot relinquish the imperial temptation, even as it has bankrupted us, killed and maimed thousands of young Americans, and turned us into a country that commits war crimes. If you want to understand why we have a resurgence of populism and why a patently unfit person like Trump became president, it’s because most Americans know when their government refuses to do what its people want.
And it’s worth pointing out that in the last three consecutive presidential elections, the winners explicitly vowed to get us out of Iraq and/or Afghanistan — let alone Syria — and defeated their interventionist opponents. Obama was elected and reelected to end the Iraq occupation, and was then sucked back in by the exact same arguments we are hearing today. Trump was even more adamant in ending imperial overreach, but after two years, guess what? We are still in Syria and we have more troops in Afghanistan (and are currently conducting an air campaign there as ferocious as any in the past) and we have — more than ever before — jumped into the eternal Sunni-Shiite war by supporting the Saudi royal dictatorship. In the Syrian case, there is no constitutional defense at all: no congressional authorization whatever. And if there had been a congressional vote to start a new war in Syria, does anyone believe it would have passed?
But what’s astonishing this time is how the Democrats and much of the liberal Establishment now supports an unending occupation of yet another Middle Eastern country. David Sanger’s New York Times “analysis” is a perfect distillation of such thinking. It contains not a sentence about the costs of long-term occupation of the Middle East or the endless failures in Afghanistan. It reads as if the Iraq War never happened. It even regards non-interventionism as “a contrarian’s view of American military power.” That’s how impenetrable the Establishment bubble is! Then Sanger actually repackages the George W. Bush doctrine that “we fight them over there so we don’t have to fight them here,” as if it were the key lessoned learned from the Iraq War! Here’s Sanger’s actual paraphrase:
“deployed forces are key to stopping terrorists before they reach American shores.”
Just let that sink in.
According to the New York Times, the lesson of the Iraq War is that we need to intervene more in the Middle East, not less. Seriously.
The Syrian occupation is not a minor thing. The Washington Post reported a week ago, long before Trump’s tweet, that “US troops will now stay in Syria indefinitely, controlling a third of the country, and facing peril on many fronts.” A third of an entire country! How many Americans knew or know this? Very, very few. I didn’t. And this was not designed to fight ISIS. It was explicitly defended as part of a long-term pushback on Iranian and Russian influence in the region. It seems to me that this kind of shift in rationale — again with no congressional approval — is almost a definition of mission creep. We should not be asking why Trump has decided to nip this in the bud, following his clear and popular mandate to get us out of the region. We should be asking how on earth did the Establishment find a way to occupy yet another Middle Eastern country without any democratic buy-in at all. At least there was a congressional debate before the Iraq War and a robust public discussion. This time, they have launched a new war, occupied a third of another country, changed the rationale so they stay for ever, and tried to hide it!
The resignation of Defense Secretary Jim Mattis is the icing on this blood-drenched cake. Yes, Mattis was a vital obstacle to some of Trump’s criminal and impulsive tendencies. In his resignation letter, he cited the need to sustain alliances across the world, and the need to constrain Russia. Fair enough. But it is telling, is it not, that he didn’t resign when Trump told NATO that Article 5 was effectively void; he didn’t resign when Trump launched his bizarre love-in with Kim Jong-un; he didn’t quit after the disastrous G7 meeting this year, or after the staggering Helsinki press conference; he didn’t quit when Trump openly tried to break up the European Union; he didn’t quit when Trump moved to change his plans on transgender troops by fiat; he didn’t resign when his Afghan surge failed yet again; and he didn’t resign when Trump ordered 5,000 troops to the Mexican border as a political stunt. He quit when he was told to end a failing, forever war and an indefinite occupation of yet another country. That’s the red line: any retrenchment of the ever-expanding American empire.
Yes, Trump’s foreign policy is a chaotic, incoherent, dangerous mess. Yes, he is clearly and manifestly unfit for office, and should have been removed a long time ago. Charting a new course in a war should never be done without proper consultation with allies and the top brass. (Trump did, of course, consult with Netanyahu and Erdogan.) U.S. troops, fighting these unwinnable wars, deserve to hear of a change in course from their commanders, not Twitter. There are always debates to be had over the specific timing and pace of withdrawal. I’m alarmed by the absence of any adviser who doesn’t want a war with Iran, and predicted that at some point, the wannabe tyrant would throw all the sane people out of the nest. There is no defense of this deranged form of decision-making from a clearly psychologically disturbed person.
But I find Trump’s persistence in following his electoral mandate against so much Establishment pressure in this particular respect to be rather admirable. There comes a point when a president has to say no to the neo-imperial blob, to cut bait in wars that have become ends in themselves, generating the very problems they were launched to resolve. There is never a good time to do this. There wasn’t in Vietnam and there isn’t in Afghanistan and the Middle East. Sometimes, you just have to do it. I wish Obama had been able to. But he got trapped in agonizing rationalizations of the indefensible, paid too much respect to the architects of failure (not to speak of torture), and thereby failed after eight long years to fulfill his core campaign promise to disengage from these quagmires. Maybe it takes an impulsive, dangerous nutjob like Trump to finally do it, to end the wars the American people want to end. And that, I think, is less an indictment of him than of those who let this madness go on for so long.
- Will These Puzzles Be The Next Crypto Trend To Go Mainstream?
The cryptocurrency mania that drove the price of a bitcoin to $20,000 last year has come and gone, leaving a legion of deeply disappointed marginal buyers in its wake. But anybody who still believes in the long-term promise of crypto – and is looking to pick up some coins on the cheap – should try their luck at a crypto puzzle.
What’s a crypto puzzle? Put simply, it’s a burgeoning genre of artwork where viewers race against one another to solve a puzzle embedded in the picture. Whoever wins is rewarded with a purse of crypto.
Though the phenomenon first emerged in 2014, when @coin_artist, the pseudonym of Marguerite deCourcelle, created Dark Wallet Puzzle, the first known cryptopuzzle, Business Week claimed in a recent feature about the trend that cryptopuzzles are still thriving – with buyers even paying hefty sums for pieces even after they have been solved.
Marguerite deCourcelle lives at the peculiar intersection of Bitcoin and art. Under the pseudonym @coin_artist, she’s credited with inventing the crypto-art puzzle, a genre of images hiding complicated ciphers that reward the first solver with a walletful of virtual currency. The most famous of these is an @coin_artist oil pastel from 2015 called Torched H34R7S, the final work in a series known as The Legend of Satoshi Nakamoto. Depicting a turtledove, chess pieces, and a phoenix surrounded by flames, the painting incorporates symbolic references to Bitcoin’s creator, as well as to Shakespeare and deCourcelle’s personal life. An anonymous person solved the riddle in 2018, unlocking 5 Bitcoins, at the time worth about $50,000.
DeCourcelle started the Bitcoin-art-puzzle phenomenon in 2014 with Dark Wallet Puzzle, a painting of two leading crypto anarchists that hides a key. It led to a 3.4-Bitcoin reward. “I created it after realizing that without a third party litigating how money moves, that money could be ‘pulled out’ of anything,” she says.
The result is a strange amalgam of the crypto and art-world universes, as crypto puzzles are beginning to “enter the mainstream through galleries, museums, international exhibitions, and even video games.” In a way, winning crypto purses from solving these visual puzzles isn’t that much different than the process of crypto mining – the only difference is that humans are solving the puzzles and not computers.
The Whitney Museum of American Art is planning to display its first crypto puzzle next spring. Until recently, most hidden-crypto-key artworks had been known only to nerdy collectors, their images circulated on websites such as Reddit and BitcoinTalk. Now they’re starting to enter the mainstream through galleries, museums, international exhibitions, and even video games. Many of the puzzles are also getting a bit easier to solve, giving more people a chance to crack the code and claim the coins. Some collectors are buying the art even after the puzzle has been solved and the digital currency extracted.
This spring artist Andy Bauch showcased “New Money,” a collection of mosaics, at the Castelli Art Space in Los Angeles. The patterns in the pieces, which were made of thousands of Lego blocks and included a 4-by-9-foot horizontal triptych, contained clues to troves of Bitcoin and other cryptocurrencies. “How seemingly arbitrary art prices are, and seeing crypto prices fluctuating wildly, I was curious,” Bauch says. “Will the cryptocurrency I put in this art appreciate? Will the art itself appreciate regardless of the cryptocurrency?” Three of his works have sold – one of them for $14,000 – though the virtual coins hidden within one had already been taken before the show began. Per the unspoken rules of the crypto-art crowd, Bauch had posted photos of the works online, where anyone could view them and try to decipher their riddles.
The pieces are also getting some high-profile attention from the art world. The Whitney Museum of American Art in New York plans to show a 16-millimeter film by Jennifer and Kevin McCoy that offers clues to a Bitcoin address. The first solver will be named as one of the official donors of the piece, a distinction that can be resold or traded. At Bitcoin Art (r)evolution in Paris this fall, some 1,000 visitors in the course of a week viewed 40 works from @coin_artist and others, organizer Pascal Boyart says. He plans to embed crypto-art puzzles in his murals in the city’s streets.
As the genre gains prominence in the mainstream art world, DeCourcelle is finding new ways to monetize the concept, including digital puzzles that resemble video games and selling pieces to collectors who are looking to own a piece of crypto history.
DeCourcelle, who has an art degree from Eastern Oregon University, made the final piece of The Legend of Satoshi Nakamoto series when she found herself suddenly single and parenting two small children, living in a rented room at a friend’s house with no steady means of support. She spent four months working at night, during her boys’ naptimes, and between freelance projects to finish the painting, for which she’d already pledged 3.5 of her own Bitcoins in prize money. She survived in the meantime by selling the original Dark Wallet Puzzle painting for 10 Bitcoins, or about $3,000 at the time.
“I just wanted a piece of that history,” says buyer Brooke Royse-Mallers, a Bitcoin investor and avid crypto-puzzle-solver. “The history of Bitcoin’s evolution and my evolution with it, I guess. That painting helped me learn more about the technology without being a coder.”
Though most crypto puzzles aren’t worth much, DeCourcelle says she’s been offered as much as $1 million for her work over the years. That should give remaining crypto entrepreneurs hope: If they’re dissatisfied with the retail price, they can try packaging it with a visual puzzle to boost the price.
- Swiss National With "Extremist Ideology" Arrested In Brutal Beheading, Stabbing Of Scandinavian Tourists
A Swiss national who follows an “extremist ideology” has been arrested in connection with the murder of two Scandinavian women on Morocco – one of whom was beheaded in a graphic film.
The arrested individual is also suspected of “involvement in recruiting Moroccan and sub-Saharan nationals to carry out terrorist plots in Morocco against foreign targets and security forces in order to take hold of their service weapons,” according to the Central Bureau for Judicial Investigations (BCIJ), adding that the man also held a Spanish nationality along with residency in Morocco.
Maren Ueland, 28, of Norway and Louisa Vesterager Jespersen, 24, of Denmark were murdered while backpacking in the High Atlas mountains of Morocco. Both girls were stabbed multiple times, while one of them was beheaded on video.
Nineteen other men are under arrest in connection with the case, including four primary suspects who can be heard pledging allegiance to the Islamic State and its leader Abu Bakr Al-Baghdadi. That said, police and domestic intelligence spokesman Boubker Sbik has described the men as “lone wolves,” and that “the crime was not coordinated with Islamic State.”
As we reported on Friday, the men gloated over the graphic murders, while images of the killing were posted to the Facebook page of Ueland’s mother, and the video was sent via Private Message to Ms. Jesperson’s friends, according to the Daily Mail.
The clip, in which a suspected ISIS terrorist shouts ‘it’s Allah’s will‘, was also sent to friends of Ms Jespersen via ‘private messenger’, it has been claimed.
It has since been revealed that horrific images of the slain tourists have been posted on the Facebook page of Ms Ueland’s mother Irene. Some Moroccans bizarrely posted the images in a misguided bid to express sympathy along with calls for the killers to be executed.
Earlier, it was claimed that footage itself had been sent to friends of Ms Jespersen. While it is not clear exactly who sent them the footage, there will be strong suspicions it would have been from warped ISIS sympathisers. –Daily Mail
Jespersen and Ueland had been studying outdoor activities at the University of Southeastern Norway and had taken a month-long holiday in Morocco on December 9. They traveled to North Africa’s highest peak, Mount Toubkal, where they camped until they encountered the killers. Both of their bodies were found in their tent, while the graphic beheading video quickly went viral.
In the aftermath of the slayings, Swedish state broadcaster SVT outraged viewers after they ran an article claiming that the gruesome ISIS-inspired murder of two Scandinavian girls in Morocco “had nothing to do with Islam,” before warning Swedes that sharing the beheading video could result in up to four years of imprisonment.
- The Growing Poverty Of Political Debate
Submitted by Amir Taheri of the Gatestone Institute
As the year 2018 draws to a close, what are the trends that it highlighted in political life?
The first trend represents a growing global disaffection with international organizations to the benefit of the traditional nation-state. Supporters of the status quo regard that trend as an upsurge of populism and judge it as a setback for human progress whatever that means.
Today it is not the United Nations alone that is reduced to a backseat driver on key issues of international life. Its many tentacles, including the International Monetary Fund (IMF) and World Bank, too, have been reduced to a shadow of their past glory. In the 1990s, the two outfits held sway on the economies of more than 80 countries across the globe with a mixture of ideology and credit injection. Today, however, they are reduced to cheer-leading or name-calling from the ringside.
The European Union, too, is clearly on the decline. Despite Pollyannish talk of creating a European army and closer ties among member states, the EU has lost much of its original appeal and faces fissiparous challenges of which the so-called Brexit is one early example. I believe that the only way for the EU to survive, let alone prosper, is to recast itself as a club of nation-states rather than a substitute for them.
Less than a decade ago, the German philosopher Jürgen Habermas and the German Pope Benedict XVI claimed that the nation-state was dead and that in Europe at least, the way to salvation was a revival of Christianity as a cultural bond if not as a traditional faith.
The weakening of political parties, trade unions, international organs, and institutions like parliaments that provided platforms for debate and decision-making, has deprived many societies of both a space and a mechanism for the battle of ideas and the competition among different policy options. (Image source: iStock) However, the trend towards decline has also affected almost all Christian churches, especially where and when they tried to cast themselves as political actors.
A similar decline could be seen in all other international groupings ranging from the African Union to the Organization of the American States, and passing by the Arab League, the Russian-led Eurasian bloc, the Gulf Cooperation Council, and the South American Mercosur.
Another significant trend concerns the virtual collapse of almost all political parties across the globe. Even in the United States and Great Britain, which have the oldest and most solidly established tradition of party politics, the system has been severely shaken.
In the US the Democrat Party has morphed into a hodgepodge of groups from crypto-Marxists to bleeding-heart liberals held together by little more than their common hatred for President Donald J Trump. For its part, the Republican Party, first shaken by the so-called Tea Party, has been reduced to second fiddle for the Trumpist “revolution”.
In Great Britain, Brexit has divided the two main parties, Conservative and Labour, into three factions that could, in time, morph into separate parties. For at least two centuries, Britain’s power was mainly based on the stability of its institutions and the ability of its political elite to meet every challenge with a firm attachment to the rule of law plus moderation. All that edifice has been shaken by Brexit.
In France and Italy, insurrectionary parties have wrested power away from the traditional ones. In France, the Gaullist and Socialist parties that governed the country for seven decades have been pushed to the sidelines by the République En Marche movement of Emmanuel Macron which, in turn, is now shaken by the “Yellow Vests” insurrectionary outfit.
In Italy, too, all traditional parties, have been driven off stage by populist groupings of both left and right.
In Germany, the Alternative für Deutschland(AFD) has cut across the left-right divide to win a leading role in national politics. Even a well-established regional party such as Christian Social Union (CSU) is now in decline in its home-base of Bavaria.Within the year now ending, a number of mostly new parties forced their ways into the center of power in several European countries notably Hungary, Poland, Czech Republic, Slovakia, Holland and Sweden.
Interestingly, the more ideological a party is, the more vulnerable it is to the current trend of decline in party politics. This is why virtually all Communist and nationalist parties have either disappeared or been reduced to a shadow of their past glory.
Separatist parties, including in the Basque country and Catalonia in Spain, have achieved nothing but an upsurge of chauvinism within the ethnic Castilian majority.
Another trend that took shape in 2018 concerns the emergence of single-issue politics, replacing debate on large overarching policies, as the norm in many countries.
Once again, Brexit in Britain was the most glaring example. Those seeking withdrawal from the European Union appeared prepared to ignore all other issues provided they could promote that single quest, not to say obsession.
The massive development of cyberspace has given single-issue politics an unexpected boost. Today, almost anyone anywhere in the word could create his or her own echo-chamber around a pet subject from Frisian secession to saving the polar bears from extinction, shutting out the outside world and its many other concerns. Here, the aim is to fight for one’s difference with as much passion as possible.
That trend is in contrast with another trend, promoted by the traditional, or mainstream media, offering a uniform narrative of events.
Turn on any TV or radio channel and go through almost any newspaper and you will be surprised by how they all say the same thing about what is going on. Thanks to a sharp decline in field reporting, mostly caused by financial constraints, mainstream media today have to depend on a narrow compass provided by a few agencies and/or “citizen” journalists.
That, in turn, encourages the growing belief that facts are nothing but opinions expressed in the manner of shibboleths.
All that leads to an impoverishment of political debate. The weakening of political parties, trade unions, international organs, and institutions like parliaments that provided platforms for debate and decision-making, has deprived many societies of both a space and a mechanism for the battle of ideas and the competition among different policy options.
The bad news is that 2018 was not a good year for pluralist politics. The good news is that 2019 may expose the fundamental flaws of fissiparous populism.
- Chinese Schools Monitor Students With "Smart Uniforms"
Education facilities in China have rolled out “intelligent uniforms” embedded with microchips to better monitor students’ attendance and whereabouts, said the Global Times. Eleven schools in Southwest China’s Guizhou Province and Guangxi Zhuang Autonomous Region have introduced smart uniforms, which are developed and manufactured by Guizhou Guanyu Technology.
As students arrive on school grounds, facial recognition cameras identify the time and date of arrival along with a short video that school administrators and parents can access via a mobile app.
If the student attempts to skip class, the mobile app will inform teachers parents of the truancy. A GPS system embedded in the uniform can even track the student beyond the school limits.
The microchips within each uniform can withstand up to 500 washes and 150 degrees Celsius, the company told Global Times.
Guizhou Guanyu Technology released a public statement via the Chinese social media site Weibo stating the uniforms “focus on safety issues”, and provide a “smart management method” that benefits students, teachers and parents. The company’s marketing manager boasted the uniforms’ capabilities on a personal Weibo account:
“You go to any school and ask the security guard how many students there are in the school today. He definitely can’t give you an answer, but we can,” the post read.
On its website, the company said the suits were designed to “fully implement the state policy of actively constructing smart campuses and smart education management for the development of education”.
Beijing has recently made statements calling on all education facilities to develop “smart campuses” in a move to digitize education. Lin Zongwu, principal of Number 11 School of Renhuai in Guizhou where more than 800 students have been wearing smart uniforms since 2016, told the Global Times that administrators could track students at all times, though the technology was used sparingly.
“We choose not to check the accurate location of students after school, but when the student is missing and skipping classes, the uniforms help locate them,” Zongwu said, adding the attendance rate had increased since the intelligent uniforms were introduced.
Guanyu Technology responded to sharp criticism on Weibo, saying the “the smart uniform does not track students’ every single move all the time,” adding that we “respect and protect human rights.”
In parallel with China’s development of a digital dictatorship to exert its authority over school children, the government is also rolling out its Social Credit System, a “ranking system” that monitors the behavior of its massive population, and ranks everyone based on their worthiness to the government, confirming that even George Orwell was an abject amateur in predicting just how far government would go to have supreme control over, well, pretty much every aspect of people’s lives.
- The Depression Of 2019-2021?
Submitted by Brendan Brown, the Head of Economic Research at Mitsubishi UFJ Securities International via Mises.org
The profound question which transcends all this day-to-day market drama over the holidays is the nature of the economic slowdown now occurring globally. This slowdown can be seen both inside and outside the US. In reviewing the laboratory of history — especially those experiments featuring severe asset inflation, unaccompanied by high official estimates of consumer price inflation — three possible “echoes” deserve attention in coming weeks and months. (History echoes rather than repeats!)
Will We Learn from History — And What Will Soon Be History?
The behavioral finance theorists tell us that which echo sounds and which outcome occurs is more obvious in hindsight than to anyone in real time. As Daniel Kahneman writes (in Thinking Fast and Slow):
The core of hindsight bias is that we believe we understand the past, which implies the future should also be knowable; but in fact we understand the past less than we believe we do – compelling narratives foster an illusion of inevitability; but no such story can include the myriad of events that would have caused a different outcome .
Whichever historical echo turns out to be loudest as the Great Monetary Inflation of 2011-18 enters its late dangerous phase. Whether we’re looking at 1927-9, 1930-3, or 1937-8, the story will seem obvious in retrospect, at least according to skilled narrators. There may be competing narratives about these events — even decades into the future, just as there still are today about each of the above mentioned episodes. Even today, the Austrian School, the Keynesians, and the monetarists, all tell very different historical narratives and the weight of evidence has not knocked out any of these competitors in the popular imagination.
The Stories We Tell Ourselves Are Important
And while on the subject of behavioral finance’s perspectives on potential historical echoes and actual market outcomes, we should consider Robert Shiller’s insights into story-telling (in “Irrational Exuberance”):
Speculative feedback loops that are in effect naturally occurring Ponzi schemes do arise from time to time without the contrivance of a fraudulent manager. Even if there is no manipulator fabricating false stories and deliberately deceiving investors in the aggregate stock market, tales about the market are everywhere….. The path of a naturally occurring Ponzi scheme – if we may call speculative bubbles that – will be more irregular and less dramatic since there is no direct manipulation but the path may sometimes resemble that of a Ponzi scheme when it is supported by naturally occurring stories.
Bottom line: great asset inflations (although the term “inflation” remains foreign to Shiller!) are populated by “naturally occurring Ponzi schemes,” with the most extreme and blatant including Dutch tulips, Tokyo golf clubs, Iceland credits, and Bitcoins; the less extreme but much more economically important episodes in recent history include financial equities in 2003-6 or the FANMGs in 2015-18; and perhaps the biggest in this cycle could yet be private equity.
Echoes of Past Crises
First, could 2019-21 feature a loud echo of 1926-8 (which in turn had echoes in 1987-9, 1998-9, and 2015-17)?
The characteristic of 1926-8 was a “Fed put” in the midst of an incipient cool-down of asset inflation (along with a growth cycle slowdown or even onset of mild recession) which succeeds apparently in igniting a fresh economic rebound and extension/intensification of asset inflation for a while longer (two years or more). In mid-1927 New York Fed Governor Benjamin Strong administered his coup de whiskey to the stock market (and to the German loan boom), notwithstanding the protest of Reichsbank President Schacht).
The conditions for such a Fed put to be successful include a still strong current of speculative story telling (the narratives have not yet become tired or even sick); the mal-investment and other forms of over-spending (including types of consumption) must not be on such a huge scale as already going into reverse; and the camouflage of leverage — so much a component of “natural Ponzi schemes” — must not yet be broken. The magicians, otherwise called “financial engineers” still hold power over market attention.
Most plausibly we have passed the stage in this cycle where such a further kiss of life could be given to asset inflation. And so we move on to the second possible echo: could this be 1937-8?
There are some similarities in background. Several years of massive QE under the Roosevelt Administration (1934-6) (not called such and due ostensibly to the monetization of massive gold inflows to the US) culminated in a stock market and commodity market bubble in 1936, to which the Fed responded by effecting a tiny rise in interest rates while clawing back QE. Under huge political pressure the Fed reversed these measures in early 1937; a weakening stock market seems to reverse. But then came the Crash of late Summer and early Autumn 1937 and the confirmed onset of the Roosevelt recession (roughly mid-1937 to mid-1938). This was even more severe than the 1929-30 downturn. But then there was a rapid re-bound.
On further consideration, there are grounds for skepticism about whether the 1937-8 episode will echo loudly in the near future.
In 1937 there had been barely three years of economic expansion. Credit bubbles and investment spending bubbles (mal-investment) were hardly to be seen. And the monetary inflation in the US was independent and very different from monetary conditions in Europe, where in fact the parallel economic downturn was very mild if even present. And of course the re-bound had much to do with military re-armament.
It is troubling that the third possible echo — that of the Great Depression of 1930-2 — could be the most likely to occur.
The Great Depression from a US perspective was two back-to-back recessions; first the severe recession of autumn 1929 to mid-1931; and then the immediate onset of an even more devastating downturn from summer 1931 to summer 1932 (then extended by the huge uncertainty related to the incoming Roosevelt Administration and its gold policy). It was the global credit meltdown — the unwinding of the credit bubble of the 1920s most importantly as regards the giant lending boom into Germany — which triggered that second recession and snuffed out a putative recovery in mid-1931.
It is possible to imagine such a two-stage process in the present instance.
Equity market tumble accompanies a pull-back of consumer and investment spending in coming quarters. The financial sector and credit quakes come later as collateral values plummet and exposures come into view. In the early 1930s the epicentre of the credit collapse was middle Europe (most of all Germany); today Europe would also be central, but we should also factor in Asia (and of course China in particular).
And there is much scenario-building around the topics of ugly political and geo-political developments that could add to the woes of the global downturn. Indeed profound shock developments are well within the normal range of probabilistic vision in the UK, France and Germany — a subject for another day. And such vision should also encompass China.
- What Social Trends Told Us About The Economy In 2018
When trying to determine exactly how America’s economy changed during 2018, Bloomberg decided to abandon legacy macroeconomic data in favor of taking a look at the most prevalent social trends throughout the year – and subsequently, what they told us about the economy.
One trend that emerged in 2018 was the American population moving away from small metropolitan areas towards cities. The sidewalk scooter – once a mainstay back around the year 2000 – has made a comeback in cities like Washington and Los Angeles, signaling the changing demographic.
The saga over where Amazon was going to place their headquarters also told us something about the economy in 2018: job creation for big technology industries is concentrating as it grows.
The top 10 metropolitan areas for digital services held 44.3% of all jobs in 2017, but captured 49.1% of jobs added in the sector from 2015 to 2017.
2018 was also the year when the broader population realized that rent inflation was significantly outpacing wage gains. This was confirmed by the rising number people who live in urban areas that are struggling to pay bills. As a result, we’ve seen adults move into dorm-like home-sharing areas and WeWork-style shared working locations.
Naturally, social media like Instagram continues to play a big role in the economy, as online shopping continued growing in 2018. One of the most searched fashion brands of the year was Fashion Nova, which is a budget friendly clothing company that has made itself famous solely via social media. It was a more popular search on Google this year than brands like Louis Vuitton and Versace.
Sneakers also became a growing “alternative investment” in 2018. As we have written in the past about things like art and fine whiskeys, investors are looking to speculate in different markets and those who have been purchasing exclusive sneakers released in small batches have benefited from prices rising over the course of the last year.
And what would a year of social trends be without mentioning bitcoin? While the digital currency has fallen significantly over the course of the year, down from about $17,000 to about $3800 now, it has raised many questions about central banking and the economy that have acted as undertones for the economy this year. Namely: what will the future of money be?
Google searches for the term “self-care” also moved higher this year as items like vitamins, plant-based diets, blankets and even jade facial rollers became popular. The fact that consumers (probably millennials) have money to shell out for conspicuous
feel good crapproducts like essential oils means that discretionary spending is likely still chugging along – at least, for now.Finally, the job market has gotten so strong that it has put those looking for open positions in full control. Long gone are the days of courtesy and the traditional two week’s notice. Job seekers feel so empowered that some of those who have been dissatisfied with their jobs have even started the trend of “ghosting” employers by simply failing to turn up to work upon finding better employment.
It should be interesting to see how this trend continues in 2019, when the job market is predicted to remain extremely tight even as the economy slows down notably. We’ll check back in twelve months from now, when many of today’s “empowered” job seekers will likely be unemployed, holding out for positions they think they’re worth – in Mom or Dad’s basement.
- NBC's Chuck Todd: "We're Not Going To Give TV Time To Climate Deniers"
NBC host Chuck Todd kicked off a full hour of discussion about Climate change on Sunday by telling “Meet the Press” viewers that there would be no debate over the topic – as the “science is settled.”
“We’re not going to debate climate change, the existence of it. The Earth is getting hotter. And human activity is a major cause, period,” said Todd. “We’re not going to give time to climate deniers. The science is settled, even if political opinion is not.”
Meanwhile, outgoing Democratic California Governor Jerry Brown was on the show to discuss global warming – calling it a serious threat akin to what Americans faced at the beginning of WWII, and that the United States is not doing enough to address the problem.
“[N]ot even close, and not close in California, and we’re doing more than anybody else, and not close in America or the rest of the world,” said Brown, adding “We’ve got to get off this idea, ‘it’s the economy, stupid.’ No, it’s the environment.”
Brown also knocked President Trump over his skepticism regarding climate change.
“[Trump] is very convinced of his position,” said Brown. “And his position is that there’s nothing abnormal about the fires in California or the rising sea level or all the other incidents of climate change.”
Former New York City Mayor and potential 2020 presidential candidate Michael Bloomberg echoed Brown’s sentiment, telling Todd “I will be out there demanding that anybody that’s running has a plan. And I want to hear the plan, and I want everybody to look at it and say whether it’s doable,” said the billionaire philanthropist.
As the Daily Caller’s Chris White notes:
congressional Democrats are wrestling with a new flock of activist lawmakers who are pushing the party further to the left on climate policies. One of the ideas comingfrom Sen. Bernie Sanders of Vermont and Democratic Rep.-elect Alexandria Ocasio-Cortez of New York is the Green New Deal.
Sanders, a self-avowed socialist, and Ocasio-Cortez want to move the U.S. to 100-percent green energy, federal job guarantees for workers forced out of their fossil fuel jobs, guaranteed minimum income and universal health care. Analysts warn the Green New Deal could come with a monster price tag.
Eliminating fossil fuels and transitioning to a 100-percent renewable electric grid could cost as much as $5.2 trillion over two decades, according to a 2010 study by the conservative Heritage Foundation. That’s about $218 billion to move the grid away from coal and natural gas. –Daily Caller
Last month Todd was criticized after “Meet the Press” hosted a panelist who denied the existence of climate change.
- China Beige Book Issues Dire Fourth-Quarter Preview
By Rahul Vaidyanath of The Epoch Times
Just about every economic measure is trending down in China, and not surprisingly, deflation fears are mounting. The China Beige Book (CBB) fourth-quarter preview, released Dec. 27, reported that sales volumes, output, domestic and export orders, investment, and hiring all fell on a year-over-year and quarter-over-quarter basis.
A much-weaker 2019 appears to be in the offing for China, but it’s not solely due to trade tensions with the United States. The domestic economy was already on weak footing and the CBB argues that government support is unlikely.
The CBB is a research service that speaks to thousands of companies and bankers on the ground in China every quarter. It contends that deflation is the bigger threat compared to inflation.
“Because of China’s structural problems, deflation has very clearly emerged as the bigger threat in a slowing economy than inflation. Consumer demand has weakened, and you see that reflected in retail and services prices,” said Shehzad Qazi, CBB managing director, in an interview.
While lower prices look good for consumers, policy-makers don’t like deflation for a number of reasons. With prices falling, companies produce less, often lay off workers, and reduce investment, leading to a vicious circle of sorts. While the trade war hurts export-sensitive regions, local orders have now weakened for two straight quarters.
Hiring fell for the first time since early 2016. Worse still, the fall was concentrated in services and retail, two sectors being counted upon to pick up the slack left by manufacturing’s woes.
Also, debt—of which China has plenty—becomes more problematic under deflation, as its value adjusted for inflation rises.
And it’s an issue for central bankers, who typically target 2 percent inflation for price stability. Rate cuts to spur the economy and inflation are less effective, since the real interest rates are higher when accounting for deflation.
“China is an aging, leveraged country, with excess industrial capacity. Appearances by inflation should be cheered,” according to the CBB Q4 preview. “They are also rare.”
Qazi says that the only inflation is in agriculture commodities, which is not what Beijing wants.
The early signs of deflation are broad-based. Wages, sale prices, and input costs are all trending lower, according to CBB surveys. The November reading on Chinese inflation showed a drop of 0.3 percent. The statistic showed four months of deflation earlier this year before turning positive again.
China’s 10-year government bond yield has been trending lower since the start of the year, partially reflecting the market’s anticipation of deflation worsening and the economy slowing.
Two metals symbolic of global growth—copper and aluminum—are languishing. The CBB reports that the net share of copper firms raising production capacity fell to 30 percent from 60 percent two quarters prior, while aluminum firms raising capacity fell to 18 percent, which is half the Q3 figure.
“Dr. Copper” is not far from its lowest level in a year. Aluminum prices are at their lowest in 18 months.
No Help
“A major misconception presently is that China will announce another massive stimulus plan in the coming weeks,” Qazi said.
He added that further measures to stimulate the economy are unlikely. This is because true fiscal stimulus has never been attempted, and government spending distributed via state banks ends up being akin to monetary accommodation, which is what the Chinese authorities insisted would not happen again under their watch.
“The bottom line is that we see pervasive weakness in the economy as we look to 2019,” Qazi said.
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