May 06

Today’s News 6th May 2018

  • As US Military Effectiveness And Diplomacy Fade, Many Countries Start Ignoring Washington

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    Diplomatic work continues in some of the areas with the highest geopolitical tensions in the world. In recent days there have been high-level meetings and contacts between Turkey, Iran and Russia over the situation in Syria; meetings between Modi and Xi Jinping to ease tensions between India and China; and finally, the historic meeting between Moon Jae-in and Kim Jong-un. The common component in all these meetings is the absence of the United States, which may explain the excellent progress that has been seen.

    The last seven days have brought a note of optimism to international relations.

    The meeting between Modi and Xi Jinping in China offered a regional example, confirmed by the words of Wang Yi, member of the State Counsel of the People’s Republic of China:

    “Our [India and China] common interests outweigh our differences. The summit will go a long way towards deepening the mutual trust between the two great neighbors. We will make sure that the informal summit will be a complete success and a new milestone in the history of China-India relations”.

    Given the tensions in August 2017 in the Himalayan border area between the two countries, the progress achieved in the last nine months bodes well for a further increase in cooperation between the two nations. Bilateral trade stands at around $85 billion a year, with China as India’s largest trading partner. The meeting between Modi and Xi also serves to deepen the already existing framework between the two countries in international organizations like BRICS, the Asian Infrastructure Investment Bank (AIIB), and the Shanghai Cooperation Organization (SCO), in which they are integral participants. It is imaginable that negotiations on the Belt and Road Initiative (BRI) will be in full swing, with Beijing keen to involve New Delhi more in the project. Such a prospect is particularly helped by three very powerful investment vehicles put in place by Beijing, namely, the New Development Bank (formerly the BRICS Development Bank), the AIIB, and the Silk Road Fund.

    Xi Jinping will be seeking to ​​progressively entice India closer to the BRI project through attractive and mutually beneficial commercial arrangements. However, this objective remains complicated and difficult to implement. Beijing is aware of this and has already expressed its intention not to impose the BRI on the neighboring country. With much of the future global and regional architecture depending on these two countries, the good understanding shown between Xi Jinping and Modi bodes well, especially given the commonly aligned objectives represented by the multitude of international organizations and frameworks on which China and India sit side by side.

    Another bit of important news for the Asian region has been the meeting between Moon Jae-in and Kim Jong-un, which was recently examined in an article published in Strategic Culture Foundation. As discussed in that article, the intention of the two leaders is to reunite the two Koreas, to denuclearize the peninsula, and to sign a peace treaty between the North and South, whose unprecedented implications entail such questions as whether there is a future role of for the United States on the peninsula. As stated before, the rapprochement between the two Koreas does not play into Washington’s favor, which relies on the South as a strategic foothold to contain China, justifying its presence on the purported need to confront North Korea. With an all-encompassing peace agreement, this justification would cease to exist. It seems that the goal for US policy-makers will be to find an opportunity to sabotage the North-South agreement and blame Kim Jong-un for its failure. Without engaging in a diplomatic tiff with its South Korean ally, the deep state in Washington does not intend to surrender one inch of its military presence on the peninsula, and would even look favorably on the negotiations failing to further damage Trump and his administration.

    This is an internal deep-state war that has been going on for years. Obama wanted to abandon the Middle East in order to focus on containing China, altering the military’s structure accordingly to return to a more Cold War stance. This explains the agreement with Iran in order to free the US from its Middle East involvement so as to be able to focus mainly on Asia and to promote it as the most important region for the United States. This strategic intention has met with enormous opposition from two of the most influential lobbies in the American political system, the Israeli and Saudi Arabian. Without the United States, these two countries would be unable to stop Iran’s peaceful but impressive ascent in the region.

    Listening to four-star generals like Robert Neller (Commandant of the Marine Corps) and others less distinguished, one comes to appreciate the extent to which the US military is in strategic chaos. The military has been the victim of epochal changes with each presidency. Pentagon planners would like to simultaneously confront countries like Russia, China and Iran, but in the process only decrease effectiveness due to imperial overstretch. Other politicians, especially from the neocon area, argue for the need to transform the US armed forces from a force suitable for fighting small countries (Iraq, Afghanistan, Syria), Middle Eastern insurgencies, or terrorist groups (a pretext originating from the 1990’s and the first Gulf War), to a military able to face its peer competitors with all weapons available. Such a realignment does not occur over a short period of time and requires an enormous amount of money to reorganize the armed forces.

    In this struggle between components of the deep state, Trump lumbers into a policy that stems from his electoral campaign rather than a considered strategy. Trump showed himself in his campaign to be strongly pro-Israel and strongly pro-armed forces, which has had the practical result of increasing military spending. Tens of billions of dollars worth of agreements have been realized with the richest country in the Middle East, Saudi Arabia, for arms purchases, and the Joint Comprehensive Plan of Action (JCPOA) is viewed negatively. Trump’s interventions in Syria confirm that he is under the strong influence of that part of the deep state that is adamant that the United States should always be present in the Middle East, should openly oppose Iran, and, above all, should prevent the Shiite arc from extending its influence to cover Iraq, Syria and Lebanon.

    The reasoning employed by Trump and his administration confirms this direction in Washington’s strategy, involving greater cooperation with Beijing to solve the Korean issue; less of an effort to decrease Moscow’s influence in Syria and in the Middle East in general; and greater belligerence towards Iran, with a general shift away from Asia and towards the Middle East, backtracking away from Obama’s pivot to Asia.

    Trump seems to give the impression of wanting to face China from an unprecedented direction, with a trade war that would inevitably end up damaging all sides.

    In this ad hoc strategy, the European allies play an important role in Washington’s intention to cancel or modify the Iranian nuclear agreement. Following the meetings in Washington between Trump and Macron, and then with Merkel, both European leaders seem more or less open to a modification of the JCPOA, provided that Trump backs away from placing tariffs on European countries, an appeal to which the English premier Theresa May adds her name. It seems a desperate tactic, given that one of the issues Trump is pinning his 2020 campaign on is being able to fix the trade imbalances between the US and the EU, without which he will be unable to claim to have kept his promises.

    The United States has many cards to play, but none is decisive. In Korea, the peace process depends very little on Trump’s intentions and more on the willingness of the two key parties to reach a historic agreement to improve the lives of all citizens of the peninsula. I predict the deep state will try to blame the DPRK for a failure of the negotiations, thereby bringing to Asia the chaos in international relations that the US has successfully brought to other parts of the world. The People’s Republic of China will therefore try to replace the United States in negotiations in order to bring the two negotiating parties closer together.

    In the same way, an attempt to sabotage the JCPOA will only drive Russia, China and Iran into a strategic triangle, about which I was writing more than a year ago. A unilateral exit from the nuclear agreement will help delegitimize Washington’s international role, together with the sabotage by the deep state of the peace agreement in Korea. It will be a pincer effect resulting from the chaos and the internal struggle of North American and European elites.

    Success in the negotiations in Korea could pave the way for a protection umbrella for the DPRK guaranteed by China and Russia, in the same way the two could grant Iran all the diplomatic support necessary to resist the American and European pressure to cancel the JCPOA. Ultimately, the rapprochement between India and China, in view of important agreements on the BRI, could seal comity and cooperation between the two giants, leading the Eurasian area under the definitive influence of India, China, Russia and Iran, and guaranteeing a future of peaceful economic development to the most important area of ​​the globe.

    The United States finds itself divided by a war within the elite, where Trump’s presidency is continually attacked and de-legitimized, while the coordinated assault on the dollar continues apace through gold, the petroyuan, and blockchain technology. US military power is showing itself to be a paper tiger unable to change the course of events on the ground, as seen recently in Syria. The loss of diplomatic credibility resulting from the sabotage of the JCPOA, and Washington’s inability to sit down and sincerely negotiate with the DPRK, will deliver the final coup de grace to a country that is struggling to even remain friendship with her European allies (sanctions imposed on Russia, sanctions on European companies participating in the North Stream 2, and tariffs in a new trade war).

    The US deep state remains on this path of self-destruction, perennially torn between opposing strategies, which only accelerates Washington’s unipolar decline and the emergence in its place of a multipolar world order, with New Delhi, Moscow, Beijing and Tehran as new poles over an immense area  comprising the Middle east and all of Eurasia.

  • "To His Dying Breath": McCain Regrets Picking Palin, Wants Pence But Not Trump At Funeral

    The New York Times has given John McCain (R-AZ) quite the sendoff – detailing a trip made by Joe Biden and his wife Jill to the dying senator’s Arizona ranch last Sunday where the former Vice President “wanted to let him know how much I love him and how much he matters to me and how much I admire his integrity and his courage.“

    The NYT‘s longtime op-ed writer Frank Bruni, meanwhile, lauds McCain and trashes Trump in an article entitled Battling Donald Trump With His Dying Breaths.

    As Bruni makes it quite clear, McCain may be near the end of the road, he’s far from done making his mark.

    Mr. McCain, 81, is still in the fight, struggling with the grim diagnosis he received last summer: He has been leading conference calls with his staff in a strained voice, grinding out three-hour physical therapy sessions and rewarding himself most days with a tall glass of Absolut Elyx on ice. –NYT

    Inbetween tall glasses of iced vodka, “most days,” McCain also filmed a nearly two-hour HBO documentary at his Hidden Valley Ranch, and is coming out with what he acknowledges will be his last book, “The Restless Wave,” both set for release this month. 

    The film and the book, a copy of which The New York Times obtained independently of Mr. McCain, amount to the senator’s final say on his career and a concluding argument for a brand of pro-free trade and pro-immigration Republicanism that, along with his calls for preserving the American-led international order, have grown out of fashion under President Trump. –NYT

    Some highlights from the New York Times coverage: 

    • McCain is suffering “debilitating side effects” from aggressive cancer treatment as he spends his final days in Arizona
    • He has few regrets – though one is that he chose Sarah Palin as his 2008 running mate instead of tapping Democrat-turned-independent Joe Lieberman. 

    “It was sound advice that I could reason for myself…But my gut told me to ignore it and I wish I had.”

    He calls the decision not to pick Mr. Lieberman “another mistake that I made” in his political career, a self-indictment that includes his involvement in the Keating Five savings and loan scandal and his reluctance to speak out during his 2000 presidential bid about the Confederate battle flag flying above the South Carolina Capitol.

    • McCain doesn’t want Trump at his funeral – instead insisting that Vice President Mike Pence attend the service in Washington’s National Cathedral. 

    His intimates have informed the White House that their current plan for his funeral is for Vice President Mike Pence to attend the service to be held in Washington’s National Cathedral but not President Trump, with whom Mr. McCain has had a rocky relationship. –NYT

    • McCain’s associates have been quietly spreading the word that they want a “McCain person” to eventually fill his Senate seat – “a roster that includes his wife, Cindy.“

    The matter of succession for the McCain seat — a topic of such intense discussion that Republicans officials here joke that Washington lawyers know Arizona election law better than any attorney in the state — is officially verboten among party officials and the senator’s friends. They are determined to reward him with the same good ending that his friend Senator Edward M. Kennedy enjoyed before he succumbed to brain cancer in 2009.

    McCain’s Dying Breaths

    In a second Saturday article, Frank Bruni details the Arizona Senator’s battles with President Trump – who McCain has criticized for his “half-baked, spurious nationalism.”

    The fight isn’t really between two men. It’s between two takes on what matters most in this messy world. I might as well be blunt: It’s between the high road and the gutter. McCain has always believed, to his core, in sacrifice, honor and allegiance to something larger than oneself. Trump believes in Trump, and whatever wreckage he causes in deference to that god is of no concern.

    “Trump is in every single way the opposite of John McCain,” Bob Kerrey told me recently. “He may be the opposite of every president we ever had.” Kerrey and McCain both served in Vietnam, they overlapped in the Senate and they stay in touch. So Kerrey knows that Trump has caused McCain no small measure of anguish, but less because of Trump’s crassness and the daily tragicomedy of his administration — this, too, shall pass — than because of “the impact on democracy.” It could be enduring, and it could be profound. –Frank Bruni, NYT

    Which, Bruni writes of McCain, is “why a patriot like him could never sit this one out.”

    Bruni also suggests that Trump is threatened by McCain’s biography, then goes on to mention Trump’s allegedly falsified health report, his multiple draft deferments due to bone spurs, and Trump’s claim that Barack Obama was born outside the United States. 

    Trump jump-started his political career with the lie that Barack Obama was born outside the United States and thus an illegitimate president. During the last weeks of Trump’s presidential campaign, he branded Hillary Clinton a criminal and encouraged supporters to chant, “Lock her up.”

    During the last weeks of McCain’s 2008 presidential campaign, he grew so concerned about supporters’ hostility to and misconceptions about Obama that he corrected and essentially chided them. “He is a decent person,” he told a man who had volunteered that he was “scared” of an Obama presidency. When a woman at that same campaign event chimed in that Obama was “an Arab,” McCain told her that she was wrong. “He’s a decent family man,” he added. –NYT

    Other choice words for the sitting President include: 

    • “Trump is never to blame and quick to malign onetime allies who have grown inconvenient.”
    • “Trump demands instant gratification.”
    • “Trump invites pity for all the slights he suffers plus plenty that he only imagines, and he readily boasts about achievements actual and hallucinated.”
    • “Such grace is unimaginable from Trump. That’s why it’s so vital that McCain is using his waning time to model it.”

    Meanwhile, other journalists, such as Australia’s Caitlin Johnstone, can’t wait for McCain to “Please Just Fucking Die Already,” writing – (before his cancer diagnosis) “This evil man has supported every US military bloodbath in his obscenely long lifetime, and has been actively involved in both promoting and manufacturing support for every single despicable act of military invention throughout his entire career.”

    I sincerely, genuinely hope that Arizona Senator John McCain’s heart stops beating, and that he is subsequently declared dead by qualified medical professionals very soon. I don’t wish him a painful death, I don’t wish him a slow death, I don’t wish him an unnatural or violent death; I only wish that he becomes incapable of facilitating the merciless slaughter of any more human beings.

    Johnstone sums up precisely why the left (in this case the New York Times) has taken up a defense of McCain in his waning years: 

    Like all neocons have done since the advent of neoconservatism, McCain promotes a very hawkish, anti-detente position toward Russia, which he has been advancing like a good little horseman of the apocalypse at every possible opportunity, from Syria to sanctions to NATO provocations. For this reason he has found himself in what is hopefully the twilight of his life the sudden darling of the Democratic party, which, in its relentless striving to do literally anything other than move left, has been trying to make red-baiting and McCarthyism cool again. –Caitlin Johnstone

    “So yeah, if John McCain could go ahead and die sooner rather than later, that would be awesome.”

    Johnstone’s reply to McCain’s cancer diagnosis? “Good“

  • The "Dark Arts" Of Artificial Intelligence (Or Can Machines Really Think?)

    Authored by Alasdair Macleod via GoldMoney.com,

    Artificial intelligence (AI) is seen as both a boon and a threat. It uses our personal data to influence our lives without us realising it. It is used by social media to draw our attention to things we are interested in buying, and by our tablets and computers to predict what we want to type (good). It facilitates targeting of voters to influence elections (bad, particularly if your side loses).

    Perhaps the truth or otherwise of allegations such as electoral interference should be regarded in the light of the interests of their promoters. Politicians are always ready to accuse an opponent of being unscrupulous in his methods, including the use of AI to promote fake news, or influencing targeted voters in other ways. A cynic might argue that the political class wishes to retain control over propaganda by manipulating the traditional media he understands and is frightened AI will introduce black arts to his disadvantage. Whatever the influences behind the debate, there is no doubt that AI is propelling us into a new world, and we must learn to embrace it whether we like it or not.

    To discuss it rationally, we should first define AI. Here is one definition sourced through a Google search (itself the result of AI):

    “The theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.”

    This description is laced only with the potential benefits to us as individuals, giving us facilities we surely all desire. It offers us more efficient use of our time, increasing productivity. But another definition, which might ring alarm bells, is Merriam-Webster’s: “A branch of computer science dealing with the simulation of intelligent behaviour in computers. The capability of a machine to imitate intelligent human behaviour.”

    Now we are imitating humans, particularly when we add in the ability of machines to learn and adapt themselves to new stimuli. Surely, this means machines are taking over jobs and even our ability to command. These are sensitive aspects of the debate over AI, and even the House of Lords has set up a select committee to report on it, which it did last week. Other serious issues were also raised, such as who do we hold accountable for the development of algorithms, and the quality of the data being input.

    This article is an attempt to put AI in perspective. It starts with a brief history, examines its capabilities and potential, and finally addresses the ultimate danger of AI according to its critics: the ability of AI and machine learning to replicate the human brain and thereby control us.

    AI basics

    AI has always been an integral part of computer development. As long ago as 1950, Alan Turing published a paper, Computing Machinery and Intelligence, which posed the question, “Can machines think?”. It was the concept of a “Turing Test” that determined whether a machine has achieved true AI, and the term AI itself originated from this period. The following decade saw the establishment of major academic centres for AI in the US at MIT, Carnegie Mellon University, Stanford, and Edinburgh University in the UK.

    The 1980s saw governments become involved, with Japan’s Fifth Generation project, followed by the UK Government launching the Alvey Programme to improve the competitiveness of UK information technology. This effort failed in its central objective, and the sheer complexity of programming for ever-increasing rule complexity led to a loss of government enthusiasm for funding AI development. In the US, the Defence Advanced Research Projects Agency also cut its spending on AI by one third.

    However, in the late-1980s, the private sector began to develop AI for applications in stock market forecasting, data mining, and visual processing systems such as number plate recognition in traffic cameras. The neural method of filtering inputs through layers of processing nodes was developed to look for statistical and other patterns.

    It was only since the turn of the century that the general public has become increasingly familiar with the term AI, following developments in deep learning using neural networks. More recently, deep learning, for example used for speech and image recognition, has been boosted by a combination of the growing availability of data to train systems, increasing processing power, and the development of more sophisticated algorithms. Cloud platforms now allow users to deploy AI without investing in extra hardware. And open-source development platforms have further lowered barriers to entry.

    While the progress of AI since Turing’s original paper has been somewhat uneven, these new factors appear to promise an accelerating development of AI capabilities and applications in future. The implications for automation, the way we work, and the replacement of many human functions have raised concerns that appear to offset the benefits. There are also consequences for governments who fail to grasp the importance of this revolution and through public policy seek to restrict its potential. Then there is the question of data use and data ownership. I shall briefly address these issues before tackling the philosophical question as to whether AI and machine learning can ultimately pass the Turing test in the general sense.

    The work-AI balance

    AI and machine learning are already with us in more ways than most of us are aware. A modern motor car can now drive itself with minimal human input, and these abilities are no longer just experimental, becoming increasingly common on all cars. Navigation systems use AI to determine route choices in the light of current traffic congestion. Border controls use iris recognition to match passport data with the person. Airlines price their seating dynamically, and AI is increasingly used for health diagnosis, detecting early signs of cancer being one example. Hidden from us, businesses are increasingly using AI embedded in their internal systems to deliver services more efficiently. AI and machine learning are rapidly becoming ubiquitous.

    These applications are all narrow in scope, in the sense they perform specific tasks that would require intelligence in a human. They involve one or two categories of data and often both, depending on the application. The first type is general data, such as that used to generate weather and price forecasts, the second being personal to individuals.

    Privacy laws for personal data are becoming more and more restrictive, as governments clamp down on their use. The more aggressively governments do this, the less flexibility a business has in devising AI solutions for those whose data they use. Therefore, a government which takes account of both personal privacy issues and the benefits of narrow-scope AI is likely to see more economic advancement in this field than one that fails to make the distinction. The British and American governments appear to be friendlier to the leaders in the field in this respect than the EU. The EU has fined nearly all the big US tech companies, often on questionable grounds, hardly displaying a constructive attitude to future technological development. And while there are pockets of entrepreneurship in Continental Europe, they come nowhere near competing with the twin nexus of London and Oxford.

    This may be important, post Brexit. Last month, the UK Government announced a £1bn investment programme with the ambition to make Britain the best place to start and grow an AI business. Meanwhile, the EU’s attitude is broadly parochial, protectionist, anti-change and appears to be particularly antagonistic against the large American corporations that have done so much to advance AI.

    AI is becoming critical for job creation. Every technological change in recorded history has been condemned in advance as destroying jobs, and every technological change has ended up creating them instead and improving both the quality of life and earnings of the average person. There’s no reason to think that AI will be any different. It is that unmeasurable thing, called progress, that ensures jobs are created, and job creation is always the result of positive change.

    Like nearly every other invention deployed for the ultimate benefit of the consumer, AI is a creature of the private sector, not government. It is never the function of a democratic government to innovate, so it must resist the temptation to prevent change arising from the private sector, particularly when it comes to protecting jobs. Furthermore, unnecessary regulation serves to hand progress in AI on a plate to other jurisdictions, such as China, whose government is semi-entrepreneurial and is aggressively developing and deploying AI for its own national interest.

    Those who have a limited grasp of free markets fail to understand that AI, in the narrow sense we are addressing here, will produce its own solutions to concerns over data and automation. For example, Sir Tim Berners-Lee is currently developing with MIT a project to result in “true data ownership as well as improved privacy”, which if successful will not only make recent privacy regulation redundant, but also address the use of personal data by unscrupulous operators exploiting loopholes in the regulations, and ensure the jurisdictional limits of the law can no longer be exploited.

    The balance between work and AI, so long as governments take a minimalist approach to regulation, promises to be enormously beneficial to ordinary people, improving life-quality, much as the data revolution through the internet has done over the last twenty-five years. We cannot forecast the precise outcome, because the development of new technologies is always progressive in nature, with one step leading to others not yet in view. However, the limitation of AI so far has been its application is always narrow in context, for the ultimate benefit of consumers. The application of AI in the general sense, where computers and robots acquire the ability to control humans in a nightmarish brave new world is perhaps what frightens the uninformed, with comments such as, “where will it all end?” This is our next topic.

    General AI

    All AI has been developed for applications in the narrow sense, in other words to perform specific tasks intelligently. By intelligently, we refer to machine learning and deep learning applied in a specific context only. A computer can now beat a chess grandmaster, and in a more recent achievement DeepMind, a UK-based Google subsidiary, mastered the game of Go.

    These achievements suggest that AI is now superior to the human mind, but this is only true for defined tasks. So far, little or no progress has been made in AI for non-specific, or general applications. This could be partly because there is little demand for a machine with non-specific applications, or the data and processing required is uneconomically substantial. Perhaps it is a question for the next generation of AI, which might attempt the algorithms. However, the practical hurdles are one thing, and whether it can ever be achieved is essentially a philosophical question.

    There is a clash of sciences involved, between the world of physics, which works to rules, formulae and laws, and human nature, which is only guided by them. Machine and deep learning relies on continual updating from historic data to detect patterns of human behaviour from which outcomes can be forecast. The fact that machines have to continually learn from new inputs tells us that AI is in a sense a misnomer: Alan Turing’s test, can machines think, is and always should be answered this way: they only appear to think.

    This is a vital distinction. Yes, we all use data and experience to help form our decisions, and yes, deep learning allows a machine to always process that information better than a human. But where the two diverge is over choice. A machine must always choose a true/false output from all its inputs. A human always has a choice, which when taken may appear irrational to an observer. And we can then ask the question, is it the chooser or the observer who is irrational? To make this point another way, if the machine makes a choice that a human does not accept, the human can ignore it, use it as a basis for making an entirely different choice, or even switch the machine off.

    This is the fundamental difference between machine learning and human thought processes. A machine produces outputs that are essentially binary: act or not act, turn inputs into an image which is recognised or not recognised, and so on. A human can be logical, illogical or even a combination of the two, and is rarely tied to binary outcomes.

    For these reasons we can be confident that machines will never take us over, in the sense that is often predicted in science fiction. But this still leaves the unanswered question as to why is it that algorithms are so successful in trading financial instruments, which involves forecasting the human action that sets tomorrows prices. Far from being proof of a machine’s intellectual superiority, it provides a good example of the difference between human intelligence and AI, and the latter’s limitations.

    Computer, or algorithmic trading comes in two different objectives in mind. There is the trading that involves dealing at a human’s behest, such as rebalancing an index-tracker, or reallocating ETF inflows and outflows to and from investments is accordance with the objective. We will put this mechanical function to one sides. Alternatively, it is used for automated trading for profit, which is where the controversy lies.

    Automated trading is not intelligent in the human sense, being based on rules applied to historic data, continually modified as new data is added. It assumes that past trading patterns will be repeated, and then through the magic of electronics beats slower human thinkers and rival machines by placing orders and having them executed in milliseconds. Humans trading involves their experience, pattern recognition, factors external to the price such as news, innate ability and emotion. The combination of these factors makes human performance both successful and unsuccessful and introduces intuition. The strength and success of computer trading is down to the lack of human factors in securities trading, not because it replicates them.

    The increasing presence of computer trading in markets probably extends cyclical trends further into overvaluation and undervaluation territories than would otherwise be the case. This statement is conditioned by the lack of firm counter-factual evidence to prove it, but if a significant portion of total trading in a particular instrument is conducted purely on an extension of past trends, this seems likely. In other words, AI ends up driving earlier AI-driven prices, reducing the human element in pricing instead of forecasting it.

    The wider implications of these distortions are beyond the scope of this article, which is to debate whether AI is a boon or a threat. We have established that AI and machine learning is and will be an enormous assistance to mankind, and that the fears of a brave new world where machines are the masters and humans the slaves is incompatible with science. Fears over job losses from AI, in common with fears over job security with all pervious technological developments, are misplaced.

    And if Alan Turin were alive today, it would be interesting to know if his question, can machines think, has been answered to his satisfaction. The evidence is it has not and perhaps never will be.

  • When Money Dies: In Venezuela, A Haircut Costs 5 Bananas And 2 Eggs

    For Venezuela’s economy, the ascent into socialist paradise did not turn out quite as planned: in fact, under the Maduro regime, the country with the world’s biggest petroleum reserves somehow reversed course, and crashed through every single circle of economic hell, and now that its hyperinflation has hit levels that would make even Mugabe and Rudy von Havenstein blush, all that’s left is barter.

    And, as Fabiola Zerpa explains as part of Bloomberg’s fascinating “Life in Caracas” series, i.e., watching economic and social collapse in real-time, in Venezuela, a haircut now costs 5 bananas and 2 eggs.

    Read on for what really happens when money dies, coming to a banana monetary regime near you in the near future.

    In Venezuela, a Haircut Costs 5 Bananas and 2 Eggs

    The other day, I made a baguette-for-parking swap. It worked out brilliantly

    I had time but, as usual, no bolivars. The attendant at the cash-only lot had some bills but no chance to leave his post during the fleeting moments the bakery nearby put his favorite bread on sale. The deal: He let me leave my car, and I came back with an extra loaf, acquired with my debit card. He reimbursed me—giving me a bonus of spare change for my pocket.

    That’s how we make do in our collapsing economy. If somebody has lots of one thing and too little of another, an arrangement can be made. I’ve exchanged corn meal for rice with friends from high school, eggs for cooking oil with my sister-in-law. Street vendors barter, too, taking, say, a kilo of sugar as payment for one of flour. There are Facebook pages and chat-room groups devoted to the swap-ability of everything from toothpaste to baby formula.

    Amid widespread food shortages, street vendors are selling small portions of groceries. Photographer: Carlos Becerra/Bloomberg

    A barber in the countryside cuts hair for yuccas, bananas or eggs. Moto-taxi drivers will get you where you need to go for carton of cigarettes. The owners of one of my favorite Mexican restaurants offer a plate of burritos, enchiladas, tamal and tacos in return for a few packages of paper napkins. At a fast-food joint near my office, the guy working the register let me walk away with a carry-out order of chicken, rice and vegetables without paying the other day, relying on my promise to come back with the 800,000 bolivars.

    Acting on that kind of trust was unheard of just a few years ago. Charity is also something new. I didn’t grow up with the traditions of canned-food drives and volunteerism that are common in the U.S. Now parents from my kids’ school collect clothes for the poor, and neighbors gather toys for a children’s hospital. My friend Lidia, a property-rights lawyer, delivers homemade soup to the homeless.

    I like to think of all of this as a noble expression of solidarity, as evidence of the decency of my fellow caraquenos at a time of mind-numbing shortages of basic goods and exploding inflation. I know that in most cases the motivation is necessity, even desperation. But that’s all right. Handing that freshly baked baguette to the parking lot attendant made both of us smile, even if for just a second.

    * * *

    For more true stories on daily life in Venezuela read:

  • Happy Birthday Karl: Top 10 Goals Of Marx' Manifesto Accomplished In America

    By Joe Jarvis Via The Daily Bell

    Plenty of stupid ideas kill people. But one man’s stupid ideas have killed over a hundred million people.

    Karl Marx was born 200 years ago today. And despite the utter failure of his communist philosophy in practice, the cult lives on. Still people want to try again… this time they will get it right.

    Karl Marx and Friedrich Engels originally published The Communist Manifesto in 1848. It laid out the beliefs and action plan of the Communist Party. The goal was to get communists of every nationality to rise up and unite to overthrow their “capitalist oppressors.”

    Little did they know their words would be used by the likes of Stalin and Mao as justification for over 100 million murders meant to supposedly move society forward.

    In America, the goals of the communists have crept their way into society with little fanfare. Many people have no idea that public schools, the graduated income tax, and even a central state-controlled bank (like the Federal Reserve) were tenets of the Communist Manifesto.

    The points are boiled down in one section of the manifesto to a list of ten main goals. These are the goals, in Marx and Engels’ own words, followed by an analysis of how deeply they have seeped into the United States governing structure.

    “1. Abolition of all public land and application of all rents of land to public purposes.”

    Also known as property taxes. Can you really say you own land if you must pay the government every year in order to keep it? Fail to pay your rent, and they will eventually confiscate “your” land. This money is then used for “public purposes” like public schools(just wait for #10) and police, who will remove you from the government’s land if you fail to pay your rent.

    And if the local government can fine you for keeping a front yard garden, or backyard chickens, do you really own the land anyway? Sounds like the proletariat traded capitalist oppressors for government oppressors.

    The federal government owns outright 28% of all land in the United States, 640 million acres. This includes the Bureau of Land Management’s 248 million acre turf used to control or oppress political dissidents like Cliven Bundy. “The BLM is also responsible for subsurface mineral resources in areas totaling 700 million acres.” That means they control almost three times as much land as they own.

    Each state government owns an average of 8.7% of its state’s land. This source claims the feds own over 31% of the U.S. landmass, which brings the combined state and federal total ownership to almost 40% of all land in the USA.

    And let’s not forget about eminent domain, where the government can just take your land for “public use” (or public benefit) with “just compensation.” If the compensation isn’t just, simply take the most powerful government on Earth to court–courts that they own. I’m sure you will be treated fairly.

    “2. A heavy progressive or graduated income tax.”

    Even after the latest tax cuts, the federal income tax rates range from 10% to 37%.

    According to the Wall Street Journal, the top 20% of income earners in the U.S. will pay 87% of all income taxes this year. These people who earn $150,000 or more account for 52% of the income earned in the USA, but will pay almost all of the income taxes, 87%.

    The top 1% of earners– the evil bourgeois making over $730,000 per year–will actually pay over 43% of all income taxes this year.

    So 1% of earners who make 16% of the country’s total income will pay 43% of the total income tax.

    Sounds like way more than their “fair share” to me, but the communists won’t be satisfied until everything is owned by the state.

    “3. Abolition of all right of inheritance.”

    They want to fleece the rich one more time when they die, even though all that wealth was taxed already as income or capital gains.

    Estate Tax, or Death Tax, is one of the more egregious oppressions of the federal government.

    There is a hefty exemption–the first $11 million is not taxed. While that means few typical people will be affected, it still fits with the communist strategy of demonizing the rich.

    And every dollar over that exemption is taxed at 40%.

    When you think about it, $11 million is not so much money when you are talking about a business, even relatively small family businesses that might be passed down through inheritance.

    If a business is worth $15 million, the family of the deceased would owe $1.6 million. If they don’t have $1.6 million hanging around, they might have to dismantle the business in order to pay the taxes. That could mean a loss of good proletariat jobs and a hit to the economy.

    The same could happen to a piece of land or estate that has been in the family for generations.

    State level estate taxes add additional costs, sometimes with lower exemptions.

    But the communists are smart, they demonize the people they rob. So no one feels bad for “the rich” because they will have plenty left over when the government is done with them. Although that too could change…

    “4. Confiscation of the property of all emigrants and rebels.”

    Let’s start with the Exit Tax.

    Why don’t you just move out of America if you don’t like the taxes?

    Well, America taxes it’s citizens worldwide, even if they do not live or work in the USA.

    Why not renounce your citizenship then?

    That is one option. But it’s actually not free. In fact, the U.S. confiscates a serious percentage of property from emigrants.

    It is called the Exit Tax. It gets complicated, but basically, the government is going to tax you on your net worth, as if you just sold all your assets.

    If you don’t have the liquid cash to cover that, you would actually have to start selling assets–property, stocks, etc.–in order to pay the Exit Tax. Of course, you would be taxed on the income or capital gains first, and then would have to pay the exit tax with what is left over… The good news (?) is you would have less overall net worth to be taxed upon your renunciation.

    Okay, but again, a big part of being a communist is hating rich people. People with less than $700,000 of capital gains in their net worth are much less affected by the exit tax.

    So let’s turn to confiscation of rebel’s property that affects the poorest proletariat… civil asset forfeiture.

    This is often used again poor people who cannot afford to defend themselves in court. The police simply steal property or cash that they “suspect” was involved in some type of crime, without having to prove anything. You have to prove your innocence if you want your car, house, or cash back.

    So if cops think a wad of cash came from selling drugs, it’s theirs. If they think your car was bought with the proceeds of drug sales, maybe because they found an ounce of weed and some baggies, they can take the car, without charging you with a drug dealing.

    Police seized over $50,000 from a Christian Rock band that had collected donations for an orphanage. Between 2001 and 2016, “more than $2.5 billion in cash seizures had occurred on the nation’s highways without either a search warrant or an indictment.”

    And that’s not even counting the more than $3.2 billion the DEA has seized since 2007without filing civil or criminal charges.

    Just having cash is a pretty low bar to be considered a rebel. Then again, what should we expect from a communist doctrine?

    “5. Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.”

    I wonder if today’s communists are aware of this one. They can’t possibly think the Federal Reserve helps the proletariat, yet that is exactly what the manifesto describes.

    Some people might disagree that the Federal Reserve is state owned. Technically it has a private board, although board members are appointed by politicians. I suppose in that sense you could call it more fascist than communist–the government doesn’t own the bank, the bank owns the government.

    The Fed sets the interest rates, prints money, and finances much of the debt of the United States government. Without the Fed, it would be much harder for the government to control the people–the homes they buy, the loans they get, the interest on their savings, and even how much of that savings is robbed through inflation.

    “6. Centralisation of the means of communication and transport in the hands of the State.”

    FCC, FTC, DOT, FAA, TSA, CBP–oh it’s an alphabet soup of communications and transport regulators.

    They regulate the phone lines, the roadways, air traffic, rails, mail and package delivery.

    This is nothing new. Around the same time, Marx was writing the manifesto, Lysander Spooner was doing something productive with his time. Spooner started the American Letter Mail Company to compete with the U.S. Postal Service. He undercut their prices and provided better customer service, but was fined and cited for breaking laws which protected the government monopoly. He was forced out of business in 1851.

    The government doesn’t quite have control over the internet, but they did create the conditions to allow a handful of companies control access to the internet.

    The NSA monitors every communication, and the Department of Homeland Security commissioned a database to track all journalists and media influencers who mention the DHS. Customs and Border Protection performs unconstitutional searches at the border,whether you are an American or foreign.

    And of course, you can’t go out in public without running the risk of being harassed by local, state, and federal police. You don’t have the right to travel without justifying every action to a police officer, while they often get off scot-free for murder.

    “7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.”

    The state has certainly dabbled in factory ownership, like the GM bailout. They control utilities like water and power. And they have certainly subsidized their fair share of business from oil and solar panels to sugar and corn.

    We can refer back to #1 to see how much land the government controls, often under the auspices of improving soil and protecting wastelands.

    Then there are plenty of government contractors which are basically the same thing as a government-owned company. If 100% of their revenue comes from the government, they are not a private company. This is especially prominent in the defense industry, which is where the term military-industrial-complex comes from. And then think about the roads the government contracts out to build.

    The government spends about 34% of the GDP every year. That is a significant percentage of the economy which the government owns.

    “8. Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.”

    Yes, the Communist Manifesto proposes enslaving all those unwilling to work.

    Now, it might not seem like the U.S. government forces people to work. But you have to make money just to park your ass on a plot of land. Local governments want property taxes, which means you must make a certain amount of money just to have a place to live.

    Otherwise, you could conceivably save up for a piece of land, and once you buy it outright, you would be done. But even renting has the built-in costs of property tax.

    And the fact that the government claims the authority to tax you on everything you earn basically means you have a liability to labor for the government if you want to labor at all.

    Most of us cannot go through life without earning something to pay for necessities. But we can’t just earn what we need, we must earn way more than we need because the government will take a huge chunk of our income.

    We tend to think about taxes as a percentage of our income. But what about as a percentage of our time? The government forces you to work as its slave from about January through April every year. In a typical career, you will spend in total more than 14 full years working as a slave for the government.

    “9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.”

    The government helped create factory farming by regulating all the small-scale producers out of business.

    Reason reports that USDA regulations have forced small slaughterhouses to close in favor of large factory-style slaughterhouses. This might sound like a good idea at first. But consider that when one infected animal makes its way to a slaughterhouse, it can contaminate so much meat.

    Having many slaughterhouses distributed across the U.S. meant that any infections were localized, and affected far fewer people. Plus when the slaughterhouse is local, it is easier to know the owners and see the conditions for yourself. The animals are raised closer to home, also providing more opportunity for market oversight of the process. No hiding away from the consumers on a vast gated factory ranch.

    The U.S. government has long subsidized large crop producers, which makes it that much harder for smaller farms to compete.

    It started with the Farm Bill in 1933 and continues to this day.

    What we get is cheap, but unhealthy products. And even though the products on the shelf look cheap, we already paid for them with our tax dollars.

    The problem is, I don’t want to buy unhealthy things loaded with high fructose corn syrup. But my money will pay for that crap whether I like it or not. Then I have to spend my money on healthy items that are more expensive because they have to compete with subsidized products.

    That’s where the government incentives for factory farming have got us.

    “10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production.”

    This may be tenth on the list, but it is number one in ensuring all the rest fall into place.

    American communists got this goal in place just four years after the Communist Manifesto was published, with Massachusetts enacting the first compulsory public education law in 1852. After that, it was only a matter of time until the population was indoctrinated to believe whatever the government taught them.

    The book Teen 2.0: Saving Our Children and Families from the Torment of Adolescence delves in depth into the history and injustice of compulsory schooling.

    It was designed so that the state and corporations could work together to train an obedient workforce, with the public footing the bill.

    The point was not open minds and a desire to learn. The aim of the education was setting students up for whatever mediocre to low paying jobs the industrialists wanted them to fill.

    The communists succeeded in getting exactly what they wanted out of American schools. And today we see the growing gap between what people learn in school, and what skills they actually need for good jobs. The communists have got the American education system stuck in a stagnant philosophy of industrial labor.

    Of course, they did it with supposedly the best intentions. Sounds like a good idea to save kids from dangerous work. But in the process, they also robbed children and young adults of their autonomy and choice. They forced kids against their will into a government institution and set the course for their entire lives.

    And that is the most important lesson that the communists want to teach in schools. It is all about obedience to government.

    Karl Marx is like the anti-Midas. Everything his philosophy touches turns to shit. Is it any wonder that America is stagnating? You cannot grow with a communist philosophy. It doesn’t take into account the beautiful creative independence of individuals. It treats people like cattle. It robs people of the rewards of their labor.

    I rue this day, 200 years ago.

    You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.

  • Russell Napier: The Rising Dollar Will Trigger The Next "Systemic Banking Crisis"

    Fresh off his successful call earlier this year that the US dollar would strengthen in the coming months, macroeconomic strategist and market historian Russell Napier joined MacroVoices host Erik Townsend to discuss why he favors deflation and why he has such a bullish view on the US dollar.

    Echoing David Tepper’s concerns that the equity highs for the year might already be in, and that a 10-year yield above 3.25% could lead to market chaos, Napier said he sees interest rates rising sharply in the coming months as the dollar strengthens – a phenomenon that will push the US back into deflation.

    Napier’s thesis relies on one simple fact: With the Fed and foreign buyers pulling back, who will step into the breach and buy Treasurys?

    The answer is – unfortunately for anybody who borrows in dollars – nobody. In fact, the Fed is expected to allow $228 billion in Treasury debt to roll off its balance sheet this year.

    Fed

    This “net sell” will inevitably lead to higher interest rates in the US, as well as a stronger dollar. And once the 10-year yield reaches the 4% area, signs of stress that could be a lead up to a global “credit crisis” could start to appear.

    We know what the Federal Reserve plans to sell this calendar year, $228 billion. We know what the rise in global foreign reserves is, and about 64% of that will flow into the United States’ assets. Slightly less of that will flow into Treasuries. $228 billion, at the current rate at which foreign reserves are accumulating, we are not going to see foreign central bankers offsetting the sales from the Fed.

    So that’s a net sell. We don’t know what that net sale will be, but it’s a net sale from central bankers at a time when the Congressional Budget Office forecasts a roughly $1 trillion fiscal deficit. This is the first time in my investment career that savers will have to fund the whole lot. And it’s perfectly normal that real rates of interest have to go higher to attract those savings.

    $1 trillion is still a large amount of money. It can come from anywhere in the world. It can come from outside the United States. It can come from inside the United States. But it’s a liquidation of other assets or a rise in the savings rate, which is necessary to fund this. Either of these things is positive for the dollar.

    And that’s a huge problem – not for the US so much as the rest of the world, where higher US interest rates could lead to a global credit crisis which Napier believes could begin in China or Turkey, then emanate out from there.

    One symptom of the rising dollar, Napier says, is it could force China into a corner and finally help China bears like Kyle Bass who have countenanced brutal losses over the past couple years as the greenback as weakened. While Bass has cut back some of his positions, he says he remains committed long-term to his bearish thesis. 

    So the strong dollar, if it continues and if it comes to pass, really could force China into a corner. That, combined with the trade tariff policies of the president, may be leading us to a more flexible exchange rate. Or at least what will be billed as a more flexible exchange rate but, for all intents and purposes, is likely to be a weaker Chinese exchange rate. So I was just going to read you the list of those emerging market economies where the debt-to- GDP ratio has been going so strongly that actually the BIS suggests there is a risk of a systemic banking crisis. China is top of the list; you’re absolutely right to point to China.

    But China isn’t the only economy that could be facing a financial blowup driven by a stronger dollar…

    I think there is definitely a role already being played by higher US rates. So if the dollar goes higher as well, it’s definitely playing a role in creating vulnerabilities. We’ve seen a couple of large Chinese companies unable to pay their US dollar credit. As I’ve mentioned, there’s a lot of Turkish companies that really can’t pay it. And that is already something to do with the rise in US yields. They’ve gone from incredibly low levels to low levels. But it’s enough at the margin when global debt to GDP is to shine the light on particularly vulnerable economies and particularly vulnerable companies.

    A strong dollar should be negative for global equities, Napier said. But the outlook for European and EM equities would be far worse than the outlook for the dollar if US interest rates climb above 4%.

    So all I would add – let’s say I’m wrong on US rates and these yields continue to rise, I think that’s particularly bearish for those outside of America who borrowed dollars, people we’ve already focused on. I think United States growth may be good. United States inflation may be rising.

    I wouldn’t specifically see any particularly bad credit issues in America. I don’t see it being anything like we’ve seen in the past. But outside of America, I think there would be an awful lot of pain going on as interest rates go higher and higher and higher. Remembering that, roughly, the European banks – I should say non-US global banks – have got a loan book in dollars of about 4.5 trillion.

    That’s a big loan book for people who don’t really take US dollar deposits. And the implications of higher US rates and a higher dollar mean that the pain may not be so America specific, but it could be very emerging market specific.

    Listen to the rest of the interview below:

  • Leaked Transcripts Reveal Courtroom Showdown Between Manafort Judge And Mueller Attorney

    Yesterday we told you about an intense courtroom battle that played out on Friday between the judge in Paul Manafort’s case and an attorney for Special Counsel Robert Mueller, in which the judge said that Mueller shouldn’t have “unfettered power” to prosecute Manafort for charges that have nothing to do with collusion between the Trump campaign and the Russians.

    Manafort’s lawyers had asked the judge in the Virginia case to dismiss an indictment filed against him in what was their third effort to beat back criminal charges by attacking Mueller’s authority. In addition to pushing back against the Special Counsel’s argument for why Manafort’s bank fraud charges are related to the Russia investigation, the judge also questioned why Manafort’s case could not be handled by the U.S. attorney’s office in Virginia, rather than the Special Counsel’s office, as it is not Russia-related. 

    Today, a transcript of that hearing was leaked to Twitter user @Techno_Fog, a New York attorney who eloquently dissected the intense back-and-forth between Eastern District of Virginia Judge T.S. Ellis, a Reagan appointee, and Mueller attorney Michael Dreeben.

    The transcript reveals an unimpressed Ellis repeatedly pushing back against Dreeben’s attempts to tie Manafort’s bank fraud case to Russia, while an arrogant Dreeben suggests that the power vested in Ellis is dwarfed by the Special Counsel’s omnipotence. 

    Ellis then calls out the case as an attempt by Mueller to gain leverage over Manafort.

    “You really care about what information Mr. Manafort can give you that would reflect on Mr. Trump or lead to his prosecution or impeachment or whatever. That’s what you’re really interested in.” –Judge Ellis

    Ellis then points out to Dreeben that the Special Counsel’s indictment against Manafort doesn’t mention:

    (1) Russian individuals
    (2) Russian banks
    (3) Russian money
    (4) Russian payments to Manafort

    To which Dreeben looped back to the argument that “the money that forms the basis for the criminal charges” comes from Manafort’s “Ukraine activities,” which is tied to Manafort’s Russia activities (which still doesn’t answer the Judge’s question).

    Manafort’s attorney hit back, calling the Special Counsel’s arguments “absolutely erroneous.”

    Ellis has given prosecutors two weeks to show what evidence they have that Manafort was complicit in colluding with the Russians. If they can’t come up with any, he may, presumably, dismiss the case.  Ellis also asked the special counsel’s office to share privately with him a copy of Deputy Attorney General Rod Rosentein’s August 2017 memo elaborating on the scope of Mueller’s Russia probe. He said the current version he has been heavily redacted.

    Without further introduction, Techno_Fog’s breakdown of the transcripts (with full copy at bottom):

    Read the entire exchange below:

  • How China Became The World's Number One International Financial Donor

    Authored by Valentin Katasonov via The Strategic Culture Foundation,

    At the spring meeting of the International Monetary Fund (IMF) and the World Bank (WB), the head of the US Treasury Department, Steven Mnuchin, touched upon a delicate subject: the financing of IMF and WB members by China and several other developing countries.

    He called these countries “non-transparent creditors” that do not coordinate their operations with the IMF, thereby destabilising the international loan market. Mnuchin noted that this practice creates problems for the debtor countries when it comes to the debt restructuring process. 

    These arguments are a cover for the US official’s barely disguised irritation at the fact that China is going against Washington’s usual way of doing things on the international loan market, where it has reigned supreme for many years and directed the market using the US-controlled International Monetary Fund.

    Steven Mnuchin then implied that Washington expected Beijing to coordinate its loan decisions for certain countries with the IMF. 

    Here are a few figures to give you some idea of just how worried Washington is by Beijing’s active involvement in the international arena as a financial donor.

    The information is taken from a study by the AidData research lab at the College of William & Mary in America in conjunction with experts from Harvard University in the US and Heidelberg University in Germany. Data was gathered and analysed from a total of 4300 projects that received Chinese funding in 140 countries around the world. The time frame of the study is 2000­–2014 (fifteen years).

    The total amount of funding these projects received from China during this time period was $350 billion, and the scale of the funding increased steadily over the fifteen years, from $2.6 billion in 2000 to $37.3 billion in 2014. The largest amount was $69.6 billion in 2009. 

    The amount of funding given to foreign countries under various arrangements by the United States during the same period equalled $394.6 billion.

    This figure is slightly higher than that of China, but one should keep in mind that the volume of US funding did not increase as sharply as China’s. In 2000, the US provided $13.4 billion in overseas loans, which increased to $29.4 billion by 2014. In the final four years (2011-2014), China was already consistently exceeding the US in terms of the amount of overseas funding.

    There are qualitative differences between the international financing policies of China and the US.

    First of all, China focuses on credits and loans (repayable funding), with financial aid (non-repayable or partially repayable funding) playing a lesser role.

    For America, however, financial aid dominates.

    The authors of the study categorise as financial aid those agreements and projects in which the share of the grant exceeds 25 percent, while repayable funding includes those agreements and projects in which the share of the grant is less than 25 percent. The researchers have categorised the agreements and projects involving China where it has not been possible to determine the share of the grant as vague finance. The distribution of China’s international financing across the three categories for the entire period was (billions of dollars): financial aid – 81.1; repayable funding – 216.3; vague finance – 57.0. The structure of America’s international financing was (billions of dollars): financial aid – 366.4; repayable funding – 28.1. Thus financial aid accounted for 92.5 percent of America’s total international financing, but just 21 percent of China’s. 

    So how is it that China has managed to focus on repayable funding, i.e. loans? At the beginning of the 21st century, the country discovered a huge niche that wasn’t being filled by the loans of America, other Western countries, the IMF or the WB. Many developing countries of Asia, Africa and Latin America were in dire need of overseas funding, but were unable or did not want to meet the stringent conditions of the “Washington Consensus”. Washington’s approach was politically motivated, while Beijing’s was commercial. Beijing declared a principle of non-intervention in the domestic affairs of the recipient countries, and it turned out to be more appealing than America’s so-called financial assistance that was like free cheese in a mousetrap. What’s more, in the 2000s China was issuing loans at 2.5 percent per annum (far more favourable terms than were being offered by the West). 

    In its external financing policy, China focuses on those industries and economic sectors of the recipient countries that directly or indirectly boost the Chinese economy. So the distribution of China’s external financing according to industry and sector between 2000 and 2014 looks like this (billions of dollars): energy – 134.1; transport and logistics – 88.8; mining and manufacturing, construction – 30.3; agriculture and forestry – 10.0; and other industries – 74.3. 

    The geography of China’s external financing is also interesting. The following countries were the main beneficiaries of financial aid (billions of dollars): Cuba – 6.7; Côte d’Ivoire – 4.0; Ethiopia – 3.7; Zimbabwe – 3.6; Cameroon – 3.4; Nigeria – 3.1; Tanzania – 3.0; Cambodia – 3.0; Sri Lanka – 2.8; and Ghana – 2.5. And here is the geographical distribution of China’s repayable funding (billions of dollars): Russia – 36.6; Pakistan – 16.3; Angola – 13.4; Laos – 11.0; Venezuela – 10.8; Turkmenistan – 10.1; Ecuador – 9.7; Brazil – 8.5; Sri Lanka – 8.2; and Kazakhstan – 6.7. As can be seen, Russia is the biggest recipient of Chinese money in the form of repayable loans (almost 17 percent of China’s total repayable funding). 

    The main recipients of Chinese money include countries that Beijing is planning to make (or has already made) key players in the transcontinental “One Belt, One Road” project. China is too heavily dependent on its eastern seacoast and the narrow Strait of Malacca near Singapore through which most of its imports and exports pass. As an example, more than 80 percent of the oil purchased by China passes through this strait. The construction of trade routes through Pakistan and Central Asia increases China’s resilience to political and military pressure from Washington. The “Belt and Road” project will also allow Beijing to start using its enormous currency reserves (more than $3 trillion), provide Chinese businesses with orders, and support employment in the country. According to some estimates, more than $300 billion has already been spent on the project. And in the coming decades, China plans to spend a further $1 trillion on the “Belt and Road” project, creating an extensive transport and logistics infrastructure in Eurasia within the next decade. 

    In recent years, the West has surrendered its position as a lender in many Asian, African and Latin American countries, which has weakened its political influence significantly. But most striking is the speed with which China has come to the forefront. At present, China is issuing more loans to developing countries than the World Bank, and yet in the 1980s and 1990s, China itself was the biggest recipient of loans from the World Bank and the Asian Development Bank. 

    China is investing large amounts of money in countries that, by Western standards, are considered to be, if not “pariahs”, then “despotic”, “corrupt” and so on, countries like Zimbabwe, North Korea, Niger, Angola, and Burma. Ugandan President Yoweri Museveni has said he likes Chinese money because “the Chinese don’t ask too many questions and they come with big money, not small money”. In North Korea, meanwhile, only 17 Chinese projects were discovered over the entire period, for which the total amount of funding was just $210 million. This picture may be incomplete, however, since information is highly classified. 

    In some countries there is intense competition for influence between the US and China. Pakistan is a prime example. In 2014, Pakistan was the third largest recipient of US money (after Iraq and Afghanistan). In the same year, Pakistan was the second largest recipient of Chinese money after Russia. 

    In 2015, Beijing began to have an additional influence by way of the Asian Infrastructure Investment Bank (AIIB). The authorised capital of AIIB is $100 billion. China, India and Russia are the three biggest shareholders with 26.06, 7.5 and 5.92 percent of the voting power respectively. As can be seen, China’s position is much stronger than, say, America’s position in the IMF and the organisations that make up the World Bank Group (the International Bank for Reconstruction and Development, the International Finance Corporation, and the International Development Association). America’s stake in these is around the 16-17 percent mark. 

    Beijing’s international finance activities should not be regarded as “anti-imperialist”, of course. In the countries that Beijing is starting to befriend, what is left of their local industry is crumbling under the pressure of cheap Chinese imports. The projects to develop deposits or build roads and other infrastructure facilities involve predominantly Chinese contractors and suppliers. As often as not, construction and other onsite work uses Chinese labour. 

    Finally, China is slowly introducing tougher conditions for lending money to other countries. The interest rate has risen from 2.5 to 5 percent per annum and there is already a sense that many countries will not only be unable to repay, but also to service their Chinese loans. Beijing is not worried, however: the deposits, real estate, infrastructure facilities built using Chinese money, and businesses serve as collateral. So it will all belong to China in the end. Then the competitive struggle between Washington and Beijing will become fiercer than ever.

  • Colorado Eviction Courts Overwhelmed As Housing Crisis Unfolds

    It is official. Consumers in Colorado appear to be tapped out.

    This comes at a time when the recovery is now tied for the second-longest economic expansion in American history. The stock market is near an all-time high, unemployment is the lowest in two decades, consumer confidence is beyond euphoric, and Trump tax cuts are stoking the best earnings quarter since 2011 — unleashing a record amount of corporate stock buybacks.

    While a real economic recovery could be plausible this late in the business cycle, the unevenness of the recovery has left many residents in Colorado without a paddle. Accelerating real estate and rent prices across Colorado are squeezing residents out of their homes at an alarming pace.

    According to ABC Denver 7, Denver metro area’s skyrocketing cost of living, stagnate wage growth, and lack of affordable real estate has fueled an enormous housing crisis — overwhelming the state’s eviction courts.

    Colorado Center on Law and Policy (CCLP), which has spent decades advocating for tenant rights, warns that an eviction crisis is underway in the Denver region.

    ABC Denver 7 said, “27 percent of all civil cases filed in Colorado in 2017 were evictions, which represents 45,000 cases.” In Denver alone, eviction cases accounted for nearly 18 percent (8,000 eviction cases) of all evictions across the state. Arapahoe County, the third-most populated county outside of Denver, experienced the most significant number of eviction cases at nearly 22 percent (10,000 eviction cases) in 2017.

    Jack Regenbogen, attorney and policy advocate for the Colorado center on Law and Policy, told ABC Denver 7 that most tenants are underrepresented in eviction court cases. In return, this has led to more evictions forcing tenants out onto the streets. He says about 90 percent of landlords are represented by legal counsel during an eviction process, but less than one percent of tenants have legal assistance.

    “Traditionally, Colorado has been a very friendly state towards landlords. We really need our policymakers to begin investing meaningful resources to address this issue,” said adds.

    ABC Denver 7 indicates that more than 50 percent of Coloradans are renting, and as court dockets continue to expand with evictions in 2018, the crisis is far from over.

    According to the Denver Metro Association of Realtors (DMAR) May housing trends report, the average cost of a single-family home in the Denver metro area edged up, as it hit $543,059 in April. More and more homes are listing in the range between $500,000 to $750,000 than all of the price ranges below $500,000 combined. A spokesman from DMAR said homes priced between $500,000 and $749,000, is now considered the “new norm.”

    All-Transactions House Price Index for Colorado

    “This demonstrates homebuyer demand remains robust,” said Steve Danyliw, Chairman of the DMAR Market Trends Committee. “As new listings poured into the market, buyers that were waiting for them quickly gobbled them up, driving the average days on market down to 20 days.”

    Danyliw, further said housing activity remains stable, but increasing interest rates could have an eventual impact on the real estate market.

    Evidence continues to build that housing affordability is getting worse, particularly for everyday Americans. Colorado is the latest example of consumers physically tapping out, as they can no longer afford soaring real estate/rent prices – which is now overwhelming state courts in Denver. 

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