The gig: At 65, Robert Reyes is living his childhood dream of running a vineyard and winery. Reyes owns Reyes Winery in Agua Dulce, situated on a 17-acre hillside near the Angeles National Forest in northern Los Angeles County. His reds and whites, whi…
California taxpayers have never paid more for public worker pensions, but it’s still not enough to cover the rising number of retirement checks written by the state’s largest pension plan.
Ruth Porat has been on a tear since joining Google in May as its chief financial officer. The former Morgan Stanley CFO was cheered by investors after the company’s second-quarter earnings report, when her remarks – which included hints about more fisc…
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There’s a good chance that either you, or someone you know, has played “Candy Crush.” It’s the addictive puzzle game where you match brightly coloured sweets to increase your score. It turns out that Candy Crush fans are able to buy edible sweets just …
A view shows the logo of a Suzuki truck for sale at a Suzuki dealership in National City, California November 6, 2012.
TOKYO Japan’s Suzuki Motor Corp (7269.T) said on Sunday it will buy back the 19.9 percent stake it sold…
Citing time lost to a tropical storm, the government of Puerto Rico on Saturday postponed by one week a plan for a â€œnegotiated moratoriumâ€ on $72 billion of debt.
Officials have been working on the plan since the end of June, when Gov. Alejandro GarcÃa Padilla announced that Puerto Ricoâ€™s economic decline had become self-feeding, and that without profound structural changes, the island would never be able to pay back its debt. He spoke in general terms about slowing Puerto Ricoâ€™s scheduled debt payments while sweeping economic changes took place.
A detailed plan was to be completed by Sunday, but on Saturday evening the governorâ€™s chief of staff, VÃctor SuÃ¡rez MelÃ©ndez, said it was not ready. â€œThe governmentâ€™s efforts in the past days have been focused on preparing for the possible impact of Tropical Storm Erika,â€ he said in a statement. The new due date is Sept. 8.
Gov. Chris Christie campaigned at a Greek festival in Manchester, N.H., on Saturday. Credit Michael Dwyer/Associated Press
Mr. Christie, who is far back in the pack of candidates for the Republican presidential nomination, said at a campaign event in New Hampshire that he would ask the chief executive of FedEx, Frederick W. Smith, to devise the tracking system.
Immigration has become a top issue in the Republican campaign, with the front-runner, Donald J. Trump, having vowed to deport the estimated 11 million illegal immigrants in the country and to build a wall along the United Statesâ€™ southern border.
â€œAt any moment, FedEx can tell you where that package is. Itâ€™s on the truck. Itâ€™s at the station. Itâ€™s on the airplane,â€ Mr. Christie told the crowd in Laconia, N.H. â€œYet we let people come to this country with visas, and the minute they come in, we lose track of them.â€
He added: â€œWe need to have a system that tracks you from the moment you come in.â€
He said 40 percent of illegal immigrants are allowed into the United States legally with a visa and then stay longer than their visa allows.
â€œHowever long your visa is, then we go get you,â€ Mr. Christie said. â€œWe tap you on the shoulder and say, â€˜Excuse me. Thanks for coming. Time to go.â€™Â â€
Mr. Christie has been lagging in recent opinion polls and is in danger of not being one of the top 10 candidates who will be invited to participate in the next official Republican debate, on Sept. 16.
With Mr. Trump taking a hard line on illegal immigration, other Republican presidential candidates have sought to toughen their stances as well.
Mr. Christie did not say specifically how a system would track people the same way packages are tracked by FedEx, which scans a bar code on the package at each step of its delivery.
A FedEx spokeswoman declined to comment on Mr. Christieâ€™s remarks.
A version of this article appears in print on August 30, 2015, on page A16 of the New York edition with the headline: Christie Proposes Immigrant Tracker Similar to FedEx .
The Wednesday morning murders of 24-year-old Roanoke TV reporter Alison Parker and cameraman Adam Ward, 27, were a racist atrocity, a hate crime. Were they not white, they would be alive today.
Their killer, Vester L. Flanagan II, said as much in his farewell screed. He ordered his murder weapon, he said, two days after the slaughter of nine congregants at the African-American AME church in Charleston, South Carolina.
“What sent me over the top was the church shooting,” said Flanagan.
To be sure, racism does not fully explain why Flanagan, fired from that same WDBJ7 station, committed this act of pure evil.
Black and homosexual, he said he was the target of anti-gay slurs from black males and racial insults from white colleagues. He had gotten himself fired from other jobs in broadcasting. He carried a grab bag of grudges and resentments.
Yet, in the last analysis, The Washington Post headline got it right: “Gunman’s letter frames attack as racial revenge.”
Other news organizations downplayed the racial aspect. But had those murdered journalists been young and black, and their killer a 40-something “angry white male,” the racial motivation would have been front and center in their stories.
Now, Black America is surely as sickened by this horror outside Roanoke as was White America by the Charleston massacre.
But it is hard to see how and when we come together as a people. For racial crimes and race conflict have become “the story” that everyone seizes upon — since Ferguson in the summer of 2014.
On the first anniversary of Michael Brown’s death, protesters blocked public buildings in St. Louis and St. Louis County, shut down I-70 at rush hour. In Ferguson, hoodlums rioted and looted for days.
What justification was there for such lawlessness?
Explained some in the press, it was to protest the failure to prosecute a white cop who had killed an “unarmed black teenager.”
Left out of most stories was that Brown, 18, had knocked over a convenience store, throttled a clerk half his size, and was unarmed only because he failed to wrest a gun away from Officer Darren Wilson, whom a grand jury declared had acted in self-defense when he shot the charging 290-pound Brown.
Since then, we have had the Eric Garner incident on Staten Island, where a 345-pound black man, suffering from diabetes, asthma, obesity and heart disease, died of heart failure after being wrestled to the ground by five cops, none of whom was charged.
Came then the death of Freddie Gray in Baltimore, while in police custody.
There, six officers have been charged. Then came the death of a 12-year-old black kid in Cleveland, who was waving a toy gun.
As the incidents pile up, with white cops shooting black suspects, and black criminals killing white cops, the news goes viral and America divides along the lines of race and color, and between black and blue.
Though, let it be said, the violence in Ferguson and Baltimore was child’s play compared to Watts in ’65, Detroit and Newark in ’67, and D.C. and 100 other cities after Dr. King’s assassination in 1968.
“Can we all get along?” pleaded Rodney King, when South Central exploded in rioting, arson and looting after the L.A. cops who had beaten King were exonerated.
Answer: Probably not.
For what seems certain, ensuring that our racial divide widens and deepens, is that more incidents like those involving Michael Brown, Eric Garner and Freddie Gray are inevitable.
First, violent crime, declining since the early 1990s, is rising again. And violent crime in black communities is many times higher than in the white communities of America.
Collisions between black suspects and criminals and white cops are going to increase, and some of these collisions are going to involve shootings. And such shootings trigger fixed, deep-seated beliefs about cops, criminals and injustice, they also cause an instantaneous taking of sides.
Moreover, this is the sort of “news” that instantly goes viral through the Internet, Facebook and 24-hour cable TV.
Liberals and Democrats take sides with the black community out of solidarity and to solidify their political base, while Republicans stand with the cops, law-and-order conservatives, and the Silent Majority in Middle America.
The race issue has even begun to split the Democrats.
When former Maryland Governor Martin O’Malley, a card-carrying liberal, attended a conference of Netroots Nation and responded to a chant of “Black Lives Matter!” with the more inclusive, “Black Lives Matter! White Lives Matter! All Lives Matter!” he was virtually booed off the stage.
O’Malley proceeded to apologize for including the white folks.
To many Americans, even many who did not vote for him, the election of Barack Obama seemed to hold out the promise that our racial divide could be healed by a black president.
Even Obama’s supporters must concede it did not happen, though we would, again, argue angrily over why.
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The only way one can be held responsible for a debt that was “passed,” signed, and put forth by others, is by way of violence–tyranny. I.e. the FedRes, and “National Debt,” are tyranny.
The so-called national debt is the responsibility of those in …
No one should attempt to treat Ayn Rand and Murray N. Rothbard as uncomplicated and rather similar defenders of the free society although they have more in common than many believe. As just one example, neither was a hawk when it comes to deploying military power abroad.* There is evidence, too, that both considered it imprudent for the US government to be entangled in international affairs, such as fighting dictators who were no threat to America. Even their lack of enthusiasm for entering WW II could be seen as quite similar.
Ayn Rand, famed writer and founder of the Objectivist movement
Photo credit: Cornell Capa / Magnum
And so far as their underlying philosophical positions are concerned, they both can be regarded as Aristotelians. In matters of economics they were unwavering supporters of the fully free market capitalist system, although while Rand didn’t find corporations per se objectionable, arguably Rothbard had some problems with corporate commerce, especially as it manifest itself in the 20th century. One sphere in which they took very different positions, at least at first glance, is whether government is a bona fide feature of a genuinely free country. Rand thought it is, Rothbard thought it wasn’t. Yet the reason Rothbard opposed government was that it depended on taxation, something Rand also opposed, so even here where the difference between them appears to be quite stark, they were closer than one might think.
Murray Rothbard, introducing his students to French economist Anne-Robert-Jacques Turgot (widely regarded as a “proto-Austrian” today)
Photo credit: Roberto Losada Maestre
When intellectuals such as Rand and Rothbard have roughly the same political-economic position, it isn’t that surprising that they and their followers would stress the difference between them instead of the similarities. Moreover, in this case both had a similar explosive personality, with powerful likes and dislikes not just in fundamentals but also in what may legitimately be considered incidentals–music, poetry, novels, movies and so forth.
Yet what for Rothbard might be something tangential, even incidental, to his political economic thought, for Rand could be considered more germane since Rand thought of herself–and many think of her–as a philosopher (roughly of the rank of a Herbert Spencer or Auguste Comte). Rothbard wrote little in the sphere of metaphysics and epistemology, although he was well informed in these branches of philosophy, while Rand chimed in, quite directly, on several philosophical issues, having written what amounts to a rather nuanced long philosophical essay on epistemology and advanced ideas in metaphysics, such as on free will, causality, and the nature of universals. Her followers, such as Nathaniel Branden, Leonard Peikoff, Tara Smith, Alan Gotthelf, James Lennox, and David Kelley, among others, have all made contributions to serious discussions in various branches of philosophy.
The central dispute, however, between Rothbard and his followers and Rand and hers focuses, as I have already noted, on whether a free country would have a government. The debate is moved forward in the volume edited by Roderick Long and me, Anarchism versus Minarchism; Is Government Part of a Free County (Ashgate, 2006).
A scene from John Carpenter’s famous documentary “They Live” – the State ultimately enforces its diktats and demands by threatening and exercising violence.
Photo credit: John Carpenter
Even apart from their disagreement about the justifiability of government in a bona fide free country, there is the difference between them about the subjectivity of (some) values. Rothbard holds, for example, that “’distribution’ is simply the result of the free exchange process, and since this process benefits all participants on the market and increases social utility, it follows directly that the ‘distributional’ results of the free market also increase social utility.” The part here that shows the difference between Rothbard and Rand is where Rothbard says that the “free exchange process … benefits all participants on the market.”
Maybe most of them benefit in such exchanges, but some do not. Suppose someone exchanges five ounces of crack cocaine for an ounce of heroin. Arguably, at least as Ayn Rand would very likely maintain, neither of these traders gains a benefit in this exchange, assuming that both commodities being traded are objectively harmful to the traders’ health. Both are, then, harmed, objectively speaking, even if they believed they would benefit.
This may be a minor matter but it isn’t, not at least if Rothbard’s idea is generalized to apply to all market exchanges. True, from a purely economic viewpoint both parties in free exchanges tend to take it or believe that they are benefited by these. But this belief could well be false.
Now of course Rand would agree with Rothbard that just because people engage in trade that’s harmful to them, it doesn’t follow that anyone, least of all the government, is authorized to ban such trade or otherwise interfere with it. Such matters as what may or may not harm free market traders from the trades they choose to engage in are supposed to be dealt with in the private sector. Family, friends, doctors, nurses, et al., or other agents devoted to advising people what they should and should not do are the only ones who may launch peaceful educational or advisory measures to remedy the private misjudgments and misconduct of peaceful market participants. Such an approach sees public policies such as the war on drugs as entirely unjustified even if consuming many drugs is objectively damaging to those doing so.
In any case, the Randian view doesn’t assume that all free trade benefits those embarking on them. Let me, however, return to the major bone of contention between Murray Rothbard and Ayn Rand, namely, whether government is (or could be) part of a free country. Given that Rothbard believes government cannot exists without deploying the rights-violating policy of taxation, his view is understandable, but the underlying assumption that gives rise to it is questionable.
Rand did indeed question it in her discussion of funding government in the chapter “Government Financing in a Free society” in The Virtue of Selfishness, at least by implication, when she argued that government can be financed without taxation. If she is correct, then Rothbard or his followers need to mount a different attack on the idea that the free society can have a government. (And some have indeed made this argument, including me in, for example, my “Anarchism and Minarchism, A Rapprochement,” Journal des Economists et des Estudes Humaines, Vol. 14, No. 4 [December 2002], 569-588).
Rand proposed that instead of taxation, which involves the rights-violating policy of confiscation of private property, a government could be funded by way of a contract fee, a lottery, or some other peaceful method. Whether this is so cannot be addressed here but it shows that Rand and Rothbard were not very distant from each other on the issue of the justifiability of government in a free country. Perhaps the term “government” is ill advised when applied to whatever kind of law-enforcement institution would be involved in bona fide free countries. But this is not what’s crucial–a rose by any other name is still a rose and a law-enforcement, judicial or defense agency in a free society is what is at issue here, not what term is used to call it. So, again, Rand and Rothbard seem closer than usually believed.
Yet it’s not just about taxation for many who follow Rothbard. Most also hold that the idea is mistaken that government–or whatever it is called–needs to serve a society occupying a continuous instead instead of Swiss cheese like region. The idea of a disparately located country, without a continuous territory and with the possibility of all parts being accessible by law enforcers without the need of international treaties, makes sense to Rothbardians. Not, however, to Randians, it can be argued, not unless the familiar science fiction transportation option of being “beamed up” from one area to anther (so that law enforcement can reach all those within its jurisdiction) is available. Otherwise enforcement of the law can be easily evaded by criminals.
Again, this isn’t the place to resolve the dispute between Rand & her followers and Rothbard and his. This brief discussion should, however, indicate where their differences lie. It doesn’t at all explain, however, why the different parties to the debate tend often to be quite acrimonious toward each other. What may explain this, though, is a simple point of psychology. Nearly all champions of a fully free, libertarian society are also avid individualists and often tend to insist on what might be called the policy: My way or the highway! Even when their differences don’t warrant it.
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The Sense is a lightweight, comfortable on-ear headphone that delivers very good sound for Bluetooth and has strong features, with dual microphones and a sensor that knows when you have the headphone on or off.
Battery life is good and the headphone works well for making calls.
Low-end may not be strong enough for those looking for fatter bass.
At less than $200, the well-designed Sense is one of the best on-ear headphones available.
Beats Studio Wireless Headphones
Very comfortable over-the-ear wireless headphone that offers excellent sound and features active noise-canceling technology.
The headphone folds to be more compact and battery life is decent at 12 hours of listening.
If the integrated rechargeable battery dies, the music dies.
While pricey, the the Beats headphone is excellent.
The Bose is compact, comfortable and sounds excellent.
The Bose is pricey, but it’s also one of the best — if not the best — on-ear wireless headphones.
Has elements of a wireless sports headphone but isn’t really a sports headphone (the ear tips don’t fit securely enough for running).
Battery life is decent (8 hours), but not as good as LG Tone Infinims.
For more reviews of personal technology products, visit www.cnet.com.
Having recently explained (in great detail) why QE4 (and 5, 6 & 7) were inevitable (despite the protestations of all central planners, except for perhaps Kocharlakota – who never met an economy he didn’t want to throw free money at), we found it fascinating that no lessor purveyor of the status quo’s view of the world – Citigroup’s chief economist Willem Buiter – that a global recession is imminent and nothing but a major blast of fiscal spending financed by outright “helicopter” money from the central banks will avert the deepening crisis. Faced with China’s ‘Quantitative Tightening’, the economist who proclaimed “gold is a 6000-year old bubble” and cash should be banned, concludes ominously, “everybody will be adversely affected.”
China has bungled its attempt to slow the economy gently and is sliding into “imminent recession”, threatening to take the world with it over coming months, Citigroup has warned. As The Telegraph’s Ambrose Evans-Pritchard reports, Willem Buiter, the bank’s chief economist, said the country needs a major blast of fiscal spending financed by outright “helicopter” money from the bank to avert a deepening crisis.
Speaking on a panel at the Council of Foreign Relations in New York, Mr Buiter said the dollar will “go through the roof” if the US Federal Reserve lifts interest rates this year, compounding the crisis for emerging markets.
“So why it matters is that the competence of the Chinese authorities as managers of the macro economy is really in question – the messing around with monetary policy, the hinting on doing things on the fiscal side through the policy banks. But I think the only thing that is likely to stop China from going into, I think, recession – which is, you know, 4 percent growth on the official data, the mendacious official data, for a year or so – is a large consumption-oriented fiscal stimulus, funded through the central government and preferably monetized by the People’s Bank of China.
Well, they’re not ready for that yet. Despite, I think, the economy crying out for it, the Chinese leadership is not ready for this.
So I think they will respond, but they will respond too late to avoid a recession, and which is likely to drag the global economy with it down to a global growth rate below 2 percent, which is my definition of a global recession. Not every country needs go into recession. The U.S. might well avoid it. But everybody will be adversely affected.”
Or translated from ‘economist’ to English – a massive helicopter drop of cash (well 1s and 0s) into the inflating hands of Chinese soon-to-be-consumers is al lthat can the world from another recession… and The Chinese leadership may need to stare into the abyss before they actually pull the trigger. Just think of the pork prices?
Mr Buiter had some more to add on the idiocy of Chinese Equity markets. He said the stock market crash in Shanghai and Shenzhen…
…is a sideshow. Consumption effects, you know, wealth effects, minor. Almost no capex in China is funded through share issue. And so it is a symbol of the policy failure rather than intrinsically economically important.
China’s problems are excessive leverage in the corporate sector, in the local government sector, and the very fragile banking system, and shadow banking system. As Chen pointed out, it won’t be allowed to collapse because it is underwritten by the government, but it won’t be a source of great funding strength.
There is excess capacity and a pathetically low rate of return on capital expenditure, right? Invest 50 percent of GDP and get, even in the official data, 7 percent growth. The true data is probably something closer to 4 ½ percent or less. So it is an economy that, I think, is sliding into recession.
And what the stock market reminds us of, I think, especially this sequence of the government first cheerleading the stock market boom and bubble – because quite a few of the local pundits believed that this was a great way of deleveraging without paying for the corporate sector, to have a stock market bubble. And then, of course, the rather panicky and incompetent reaction in response.
So, once again, why it matters is that the competence of the Chinese authorities as managers of the macro economy is really in question.
* * *
So, it seems, all of a sudden – despite the permabulls, asset-gatherers, and commission-takers saying otherwise – China matters! As Bloomberg notes, China’s deepening struggles are starting to make a bigger dent in the global economic outlook.
“We’re seeing evidence that the slowdown is broader than expected” in China, saidMarie Diron, a London-based senior vice president at Moody’s and one of the report’s authors. “It’s long been clear that there’s a slowdown in the manufacturing and construction sector, but the service sector was more resilient. That’s still the case, but we’re seeing some signs of weakness in the labor market.”
“We continue to believe that the greatest risks to our growth forecasts remain to the downside,” Schofield wrote. Actual growth is “probably even lower” because of “likely mis-measurement in China’s official data,” he wrote.
* * *
Which, is exactly what we have been saying for the last 2 years as the rolling collapse of China’s ponzi becomes ever more evident (and hidden by ever more manipulation)…
Here, for those curious, are links to previous discussions:
And so on and so forth.
In short, stabilizing the currency in the wake of the August 11 devaluation has precipitated the liquidation of more than $100 billion in USTs in the space of just two weeks, doubling the total sold during the first half of the year.
In the end, the estimated size of the RMB carry trade could mean that before it’s all over, China will liquidate as much as $1 trillion in US paper, which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields.
And don’t forget, this is just China.
The potential for more China outflows is huge: set against 3.6trio of reserves (recorded as an “asset” in the international investment position data), China has around 2trillion of “non-sticky” liabilities including speculative carry trades, debt and equity inflows, deposits by and loans from foreigners that could be a source of outflows (chart 2). The bottom line is that markets may fear that QT has much more to go.
What could turn sentiment more positive? The first is other central banks coming in to fill the gap that the PBoC is leaving. China’s QT would need to be replaced by higher QE elsewhere, with the ECB and BoJ being the most notable candidates. The alternative would be for China’s capital outflows to stop or at least slow down. Perhaps a combination of aggressive PBoC easing and more confidence in the domestic economy would be sufficient, absent a sharp devaluation of the currency to a new stable. Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China’s evolving QT.
* * *
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It’s been noticed more than a few times that there aren’t many substantive differences between the Republicans and Democrats. While this is true in many ways for the parties themselves, the Left and Right certainly differ on a range of issues from welfare to abortion to gay rights.
What they have in common — at least the mainstream varieties — is a desire to use the state to shape society in whatever way they see fit. As Andrew Napolitano put it, “We have migrated from a two-party system into a one-party system, the big-government party. There’s a democratic wing that likes taxes and wealth transfers and assaults on commercial liberties and there’s a republican wing that likes war and deficits and assaults uncivil liberties.” And both parties love prohibition, just of different things.
There aren’t many people left who believe the prohibition of alcohol in the 1920s was a good idea. Interestingly enough, it was the progressives of the time that pushed for that. As historian William Leuchtenburg noted, “It was a movement that was embraced by progressives.” On the other side, in the words of historian Daniel Okrent, were the “… economic conservatives who … pushed so hard for repeal.”
Prohibition turned out to be a disaster. A report from the Cato Institute found that after Prohibition passed in 1920, homicide rates increased, corruption increased, alcohol-related deaths were unchanged and after a short dip in 1921, alcohol consumption returned to what it had been before the law was passed. Furthermore, in the midst of this chaos, Al Capone and organized crime came to power. Indeed, black markets and prohibition go together like peas and carrots.
In the past, it was usually the progressives who wanted to use the state to tell people what they could and could not put in their own bodies. However, something must have changed among conservatives as the Right has generally been at the vanguard of the War on Drugs (although, with plenty of help from many on the Left). In 1971, Richard Nixon decided to try prohibition all over again, but this time with cocaine, heroin, and marijuana.
And of course, it has failed in every way imaginable.
According to the National Institute of Drug Abuse, “Illicit drug use in America has been increasing.” In 2012, “9.2 percent of the population” had used illicit drugs in the last month “… up from 8.3 percent in 2002.” So drug use has actually gone up despite spending over a trillion dollars on this massive boondoggle.
Meanwhile, the United States has the largest prison population in the world. Despite having only 5 percent of the world’s population, the United States has 25 percent of the world’s prison population. A large percentage of these prisonere are in prison for nothing more than non-violent drug charges.
Some think this is counterproductive and immoral. Others, like Michael Gerson, believe that those who want to legalize drugs have “second-rate values.” First-rate values include locking drug addicts in cages. So in accordance with Gerson’s first-rate values, instead of trying to help these poor addicts rebuild their lives, the government declared war on the substances, and thereby, the addicts themselves.
And to wage this war has required a massively invasive police state. “Victimless” crimes don’t leave many witnesses (or at least not many who want to talk about it). So the government must use more bellicose means. According to the ACLU, there are an estimated 45,000 SWAT raids every year and only about 7 percent are for hostage situations. The vast majority are for drugs. These raids sometimes end tragically. For example, David Hooks was shot twice while face down on the ground in one raid and a baby was put into a coma when a flash bang was dropped in another.
The evidence also shows that legalization works. Glenn Greenwald notes that “Since Portugal enacted its decriminalization scheme in 2001, drug usage in many categories has actually decreased when measured in absolute terms” and Forbes points out that “drug abuse is down by half.”
And despite some haranguing from conservatives, Colorado has done just fine since decriminalizing marijuana in 2014.
While conservatives have taken some notes from the progressives of old, progressives certainly haven’t given up on the idea of molding society through prohibition. Fortunately, in the United States, most of the debate about guns has to do with regulation and not prohibition. This is not the case in many other countries. And it has also not been the case in several US cities, until Supreme Court decisions overturned the gun bans in Washington, DC and Chicago. Still, many US cities have extremely arduous gun laws on the books.
John Lott did an extensive study and noted that,
The odds that a typical state experiences a drop in murder or rape after a right-to-carry law is passed merely due to randomness is far less than 0.1 percent. … The average murder rate dropped in 89 percent of the states after the right-to-carry law was passed. … There was a similar decline in rape rates.
Further, to make sure he controlled for every variable imaginable (or didn’t control for variables that would incorrectly skew the data) he ran “20,480 regressions” using every imaginable arrangement of possible criteria and concluded,
… all the violent-crime regressions show the same direction of impact from the concealed-handgun law. The results for murder demonstrated that passing right-to-carry laws caused drops in the crime ranging from 5 to 7.5 percent.
John Lott found twenty-six peer reviewed studies on concealed-carry laws, sixteen showed a reduction in crime and ten were inconclusive. Not one showed that crime rates increased.
We can all mourn tragic events such as the recent mass shooting in Charleston. But what is obviously problematic about restricting civilian gun use is that only law-abiding citizens will comply, criminals will not. (Like many other such massacres, the Charleston shooting took place in a “gun free” zone.) Indeed, criminals will likely have no harder a time getting guns then they do getting drugs, which means that restricting guns just disarms potential victims. A survey by Gary Kleck made him conclude that there were approximately 2.5 million incidents of defensive gun use each year. Although that number is almost certainly way too high, defensive gun use is still relatively common. For example, during a school shooting in Oklahoma, Mikael Gross and Tracey Bridges retrieved the guns from their vehicles and stopped the shooter before he could kill anyone else.
As stated above, while there are some in the United States who call for extreme restrictions on guns, or bans altogether, for the most part, outright prohibition is only an issue in other countries. Many will point to the higher murder rates in the United States than Britain as proof that gun prohibition stops murder (interestingly they don’t point to the property crime statistics as they are actually higher in Britain than the US).
But there are major problems with this simplistic analysis. For example, gun ownership has been increasing rapidly in the United States while gun crime has been falling. In addition, most guns are owned by people in rural areas, then suburban, then urban. Crime rates are exactly the opposite. Further, as Thomas Sowell points out in Intellectuals and Society,
Russia and Brazil have tougher gun control laws than the united States and much higher murder rates. Gun ownership rates in Mexico are a fraction of what they are in the United States, but Mexico’s murder rate is more than double that in the United States.
Handguns are banned in Luxembourg but not in Belgium, France or Germany; yet the murder rate in Luxembourg is several times the murder rate in Belgium, France or Germany.
And what about that lower murder rate for Britain? Well, Thomas Sowell again, “London had a much lower murder rate than New York during the years after New York State’s 1911 Sullivan Law imposed very strict gun control, while anyone could buy a shotgun in London with no questions asked in the 1950s.” What matters are the trends, not simplistic and vulgar comparisons. Instead, an international study done at Harvard noted,
To bear that burden would at the very least require showing that a large number of nations with more guns have more death and that nations that have imposed stringent gun controls have achieved substantial reductions in criminal violence (or suicide). But those correlations are not observed when a large number of nations are compared across the world.
Finally, when it comes to gun bans, the results are predictably terrible. John Lott again, “Every place around the world that has banned guns appears to have experienced an increase in murder and violent crime rates.” This includes Washington, DC, Chicago, Britain, Ireland, and Jamaica. One British newspaper ran the darkly humorous article “Gun Crime Soaring Despite Ban.” Change the “Despite” to “Because” and you have an accurate article.
Penn Jillette has half-joked, “If you can convince the gun nuts that the potheads are ok and the potheads that the gun nuts are ok, then everyone’s a libertarian.” Arguments about whether these things should be regulated and how much so would be the subject for a different article. But it’s hard to understand why many liberals think that prohibiting drugs creates black markets with drugs, but that it wouldn’t happen with guns. Does one really think that drug cartels couldn’t add guns to their list of products to push? And the same goes for conservatives in the reverse.
It’s really quite simple; prohibition doesn’t work. Freedom does.
By now virtually every prominent financial authority or pundit has chimed in and told the Fed not to hike rates: these include the IMF, Larry Summers (who for some reason lost the fight with Yellen for the Fed chair because he was seen as “too hawkish” – oops, irony), and even China. Yet all of these are irrelevant, because when it comes to soliciting opinions, the NY Fed in general, and former Goldmanite Bill Dudley in particular, care about just one group of “advisors” – the Investor Advisory Committee on Financial Markets (a group created in July 2009 after the 2008 market crash) also known as the billionaires who run the country’s biggest hedge funds, prop desks and PE firms, including JPM, Credit Suisse, Apollo, Blackrock, Blue Mountain, Brevan Howard, Tudor, Fortress, and lo and behold, David “Balls to the Wall” Tepper.
The next IACFM meeting is scheduled to take place in October, as such it will be too late to change the Fed’s opinion for a potential September 17 rate hike. Which is why we have to revert to the latest advisory committee meeting which took place on June 25, just before the Greek referendum was announced and two months before the Chinese devaluation, the July FOMC minutes and subsequent market correction. It will have to do.
This is what the “smartest people in the room” told Bill Dudley and his minions about a potential September rate hike. From the June 25, 2015 minutes:
Committee attendees discussed the outlook for the U.S. economy and their expectations for monetary policy. Overall, they noted that real economic activity has gradually improved after a lackluster first quarter. Committee attendees characterized indicators of realized inflation as improving, but subdued relative to FOMC objectives. Meanwhile, the labor market was viewed as at or near full employment.
Committee attendees suggested that the FOMC is likely to increase the federal funds target range during 2015, with September cited as the most likely timing of liftoff. Some felt that financial markets are well positioned for liftoff, while others expected volatility following the first increase in the target range. Most Committee attendees suggested that the path of the policy rate would be more impactful on financial conditions than the timing of liftoff. They expected the path of monetary policy to be data dependent, but noted that they expect the FOMC to be cautious during normalization.
A quick primer on what “discounting” means – since all the participants expected a September rate hike, and since most expected volatility “following” the rate hike, some of these “smartest people in the room” decide to frontrun the volatility (a polite way for violent selling), and sell first before everyone else did. Just in case there was still some confusion about the recent market selloff.
But back to the advisory committee minutes, and what it said about global developments including China:
The sharp rise in core euro area yields during the second quarter was mostly attributed to positioning dynamics, with some feeling low yield levels were too extended. Committee attendees suggested relative value considerations prompted the coordinated move in global developed market rates. Better-than-expected economic data in the euro area and, to a lesser extent, shifting expectations for the ultimate size of the ECB asset purchase program were cited as contributing factors.
Committee attendees suggested that the euro area economy is improving, but that inflation indicators remain below mandate consistent levels and are likely to remain there for a considerable time. They felt that the ECB was doing its part, but fiscal and labor market policies across the region were likely to inhibit the euro area from reaching its inflation mandate in the near term. Most felt that that further euro depreciation was necessary to stimulate the economy.
Committee attendees generally concluded that the Japanese economy has also improved, highlighting the strength of the labor market and the improvement in inflation indicators. A few cited concerns about the Bank of Japan’s exit strategy, given the size of their balance sheet.
China was the focus of the emerging markets discussion. Committee attendees characterized the Chinese economy as slowing, with most believing GDP was running below the target level. Most concluded that recent PBOC easing measures were executed to combat the slowing economy, but noted that financial conditions were not easing much in response. Committee attendees acknowledged officials’ efforts to internationalize Chinese markets, but suggested some of those efforts may run counter to easing initiatives. Beyond China, Committee attendees did not consider emerging markets, on the whole, well prepared for liftoff by the Federal Reserve given that few countries have made structural changes necessary to absorb higher rates.
Well, they were right: emerging markets have since been paralyzed by the biggest currency collapse since the Asian Crisis of 1998 in the aftermath of the Chinese devaluation. However, if the June minutes are to be trusted, then none of what is going on in China is a surprise to any of these smartest people in the room, which is why “Committee attendees suggested that the FOMC is likely to increase the federal funds target range during 2015, with September cited as the most likely timing of liftoff”, unless…
What appears to have happened in the ensuing 2 months is that none of these so-called “smartest” people hedged against anything that they warned may happen. Well, actually we take that back: recall from August 14, or just two weeks ago: “Did David Tepper Just Call The Market Top” – the S&P tumbled some 10% since then.
In fact, what has happened is that none of these “smartest people” were actually hedging anything – only Nassim Taleb was actually prepared and ready to capitalize from a market crash, and as we reported last night, his affiliated hedge fund, Mark Spitznagel’s Universa made $1 billion last Monday. As for everyone else, well, just look at the table below which including many of the “advisors” listed above:
In fact, the hedge fund performance ranking above is the only thing anyone has to care about when evaluating the chance of a Fed rate hike: if and when the hedge fund losses become too unbearable, any rate hike – September, December, or whenever – will be indefinitely delayed. And that is all Bill Dudley will hear from the only group of advisors whose opinion, and offshore bank accounts, he cares about.
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HANOI Soldier-turned-tycoon Nguyen Huu Duong is a fierce patriot still fighting to protect his country, four decades after battling American forces in the Vietnam War.
The construction mogul has amassed a war chest of tens of millions of dollar…
Last weekend, we explained why it really all comes down to the death of the petrodollar.
China’s transition to a new currency regime was supposed to represent a move towards a greater role for the market in determining the exchange rate for the yuan. That’s not exactly what happened. As BNP’s Mole Hau hilariously described it last week, “whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix, [thus] the role of the market in determining the exchange rate has, if anything, been reduced in the short term.” Of course a reduced role for the market means a greater role for the PBoC and that, in turn, means FX reserve liquidation or, more simply, the sale of US Treasurys on a massive scale.
The liquidation of hundreds of billions in US paper made national headlines this week, as the world suddenly became aware of what it actually means when countries begin to draw down their FX reserves. But in order to truly comprehend what’s going on here, one needs to look at China’s UST liquidation in the context of the epochal shift that began to unfold 10 months ago. When it became clear late last year that Saudi Arabia was determined to use crude prices to bankrupt US shale producers and secure other “ancillary diplomatic benefits” (think leverage over Russia), it ushered in a new era for producing nations. Suddenly, the flow of petrodollars began to dry up as prices plummeted. These were dollars that for years had been recycled into USD assets in a virtuous loop for everyone involved. The demise of that system meant that the flow of exported petrodollar capital (i.e. USD recycling) suddenly turned negative for the first time in decades, as countries like Saudi Arabia looked to their stash of FX reserves to shore up their finances in the face of plunging crude. Of course the sustained downturn in oil prices did nothing to help the commodities complex more broadly and as commodity currencies plunged, the yuan’s dollar peg meant China’s export-driven economy was becoming less and less competitive. Cue the devaluation and subsequent FX market interventions.
In short, China’s FX management means that Beijing has joined the global USD asset liquidation party which was already gathering pace thanks to the unwind of the petrodollar system. To understand the implications, consider what BofAML said back in January:
During the oil-boom era, oil-exporters used oil earnings to finance imports of goods and services, and channeled a portion of surplus savings into foreign assets. ‘Petrodollar’ recycling has in turn helped boost global demand, liquidity and asset prices. With the current oil price rout, external and fiscal balances of oil exporters are undermined, and the threat of lower imports and repatriation of foreign assets is cause for concern.
Recycling of Asia-dollars might partly replace the recycling of petrodollars. Asian sovereign wealth funds ($2.8tn) account for about 39% of total sovereign wealth funds, and will likely see their size increase at a faster clip. Sovereign wealth funds of China (CIC & SAFE), Hong Kong (HKMA), Singapore (GIC & Temasek) and Korea (KIC) rank in the Top-15 globally
Yes, the “recycling of Asia-dollars might partly replace the recycling of petrodollars.” Unless of course a large Asian country is suddenly forced to become a seller of USD assets and on a massive scale. In that case, not only would the recycling of Asian-dollars not replace petrodollar recycling, but the “Eastern liquidation” (so to speak) would simply add fuel to the fire – and a lot of it. That’s precisely the dynamic that’s about to play out.
A careful reading of the above from BofA also seems to suggest is that looking strictly at official FX reserves might underestimate the potential size of the petrodollar effect. Sure enough, a quick check across sellside desks turns up a Credit Suisse note on the “secular downtrend in EM reserves” which the bank says could easily be understated by focusing on official reserves.
First, note the big picture trends (especially Exhibit 2):
And further, here’s why the scope of the unwind could be materially underestimated.
Taken into context, the year-to-date fall in EM reserves accounts for only 2% of the total stock of EM reserves. However, the change in the behavior of EM central banks from persistent buyers to now sellers of reserve assets carries important implications. Importantly, official reserves will likely underestimate the full scale of the reversal of oil exporters’ “petrodollar” accumulation.
Crucially, for oil exporting nations, central bank official reserves likely underestimate the full scale of the reversal of oil exporters’ “petrodollar” accumulation. This is because a substantial part of their oil proceeds has previously been placed in sovereign wealth funds (SWFs), which are not reported as FX reserves (with the notable exception of Russia, where they are counted as FX reserves).
- Currently, oil exporting countries hold about $1.7trn of official reserves but as much as $4.3trn in SWF assets.
- In the 2009-2014 period, oil exporters accumulated about $0.5trn in official reserves but as much as $1.8trn of SWF assets.
Now that the tide has turned, it is likely that not only official reserves drop but that SWF asset accumulation slows to nil or even reverses. SWF selling may be a slower process as assets tend to be less liquid, but the opportunity might still be taken to repatriate some investments, for instance to boost domestic rather than foreign infrastructure projects.
In other words, looking at the total amount of official reserves for oil exporters understates the potential for petrodollar draw downs by around $2.5 trillion. Now obviously, it’s unlikely that exporters will exhaust the entirety of their SWFs. Having said that, the fact that EM FX reserve accumulation turned negative for the first time in history during Q2 underscores how quickly the tide can turn and how sharp reversals can be. If one fails to at least consider the SWF angle then the effect is to underestimate the worst case scenario by $2.5 trillion, and if 2008 taught us anything, it’s that failing to understand just how bad things can get leaves everyone unprepared for the fallout in the event the situation actually does deteriorate meaningfully.
So that’s the big picture. In other words, the above is a discussion of the pressure on accumulated petrodollar investments and is an attempt to show that the pool of assets that could, in a pinch, be sold off to finance things like massive budget deficits (Saudi Arabia, for instance, is staring down a fiscal deficit that amounts to 20% of GDP) is likely being underestimated by those who narrowly focus on official reserves. Switching gears briefly to consider what $50 crude means for the flow of petrodollars (i.e. what’s coming in), RBS’ Alberto Gallo has the numbers:
If petroleum prices continue in to year end at their current YtD average ($52), this would represent a 60% decline in Petrodollar generated in 2015 vs between 2011 and 2014. Assuming that 30% of gross Petrodollars generated per year are invested in financial markets, this would imply $288bn ready for investments in 2015 vs a $726bn average between 2011 and 2014. Lower purchasing power from oil-exporting countries may in turn reduce demand for $-denominated fixed income assets, including $ IG and $ HY. US IG and HY firms have issued $918bn and $220bn YtD, which in total marks a record-high vs past years.
And while all of this may seem complex, it’s actually quite simple: less petrodollars coming in without a commensurate reduction in what’s going out means the difference has to be made up somewhere and that somewhere is in the sale of USD reserve assets which are prone to being understated if one looks only at official FX reserves. Contrast this with the status quo which for years has been more petrodollars coming in than what’s going out (in terms of expenditures) with the balance being reinvested in USD assets.
Simplifying even further: the virtuous circle (for the dollar and for USD assets) has not only been broken, but it’s now starting to reverse itself and the potential scope of that reversal must take into account SWF assets.
Where we go from here is an open question, but what’s clear from the above is that between China’s FX reserve drawdowns in defense of the yuan and the dramatic decrease in petrodollar flow, the self-feeding loop that’s sustained the dollar and propped up USD assets is now definitively broken and we are only beginning to understand the consequences.
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