Month: June 2016

Submitted by via TheAntiMedia.org,

Got a bullshit parking ticket? Now you can appeal it in less than a minute. The new chatbot tool, DoNotPay, uses previously successful appeal letters to draw up a customized template, allowing users to avoid courts, legal fees, stress, and having to use a lawyer.

So far, the free app has overturned 160,000 parking tickets in London and New York. With a success rate of 64%, DoNotPay has appealed $4 million in parking fines in just two cities in only nine months of operation. In 2014, New York City collected $546 million in revenue from parking tickets.

Stanford freshman Joshua Bowder created the app after spending an exorbitant amount of time crafting his own appeals for parking tickets. He read thousands of pages of documents related to parking tickets released under the Freedom of Information Act and consulted a traffic lawyer. Then, using PHP and Javascript, he created a conversation algorithm that aggregates keywords, pronouns, and word order. Like many chatbots, Browder’s app becomes more intelligent each time it is used.

DoNotPay is not commercial and Josh plans to keep it that way. In an interview with Anti-Media, Josh said he was driven by a sense of social justice and a desire to help vulnerable people who are exploited by policing-for-profit schemes. Josh also wants to use technology like artificial intelligence for humanitarian purposes.

He finds it “irritating and disappointing” that bots are usually created for vapid commercial uses. In reality, he says, algorithmic intelligence and chatbots are a “humanitarian goldmine.”

 

Value in bots is not to order pizzas. Great story about my bot in context of human rights https://t.co/kq2ueUp5ei http://pic.twitter.com/TAocQdxknD

— Joshua Browder (@jbrowder1) May 21, 2016

 

DoNotPay also assists with delayed or canceled flights, payment-protection insurance (PPI) claims, and even legally disclosing an HIV-positive health status.

Josh describes his creation as “the first robot lawyer.” People are describing him as the “Robin Hood of the Internet.”

“If it is one day possible for any citizen to get the same standard of legal representation as a billionaire,” Browder says, “how can that not be a good thing?”

Josh says government agencies have actually been supportive, even using it to test for glitches. He also received support from his friends, one of whom he says has created an app for scanning blood to test for the likelihood of malaria.

Josh wants to continue developing artificial intelligence applications for the public good. He’s spoken with entrepreneurs about how to use apps like this in conjunction with driverless cars.

What’s on the horizon? Josh’s summer project is an app to help Syrian refugees seek legal asylum. The chatbot he is planning would translate Arabic to English and then draw up legal paperwork.

Josh also plans to expand DoNotPay to Seattle.

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As we noted today, the rumors of an Italian bank bailout, which started on Monday morning, and were promptly shot down by Merkel the next day, got louder today after a Reuters report that the government is considering more creative ways to inject liquidity into Italy’s banks. However that was just an appetizer to a main course, which came later today when as the WSJ reported citing a spokeswoman for the European Union’s executive arm that the “European Commission has authorized Italy to use government guarantees to create a precautionary liquidity support program for their banks.”  

How did this happen so quietly under the table and without Merkel’s blessing? WSJ says that the program was approved under the bloc’s “extraordinary crisis rules for state aid.”

And here we thought that Italy’s banks are actually doing so very well.  Oh wait, no we didn’t.

As the WSJ notes, the proposed “crisis” plan is the “other leg of an intervention plan considered by the government” namely, the direct capital injection into Italian banks that would add up to €40 billion in capital to the banking sector”, the one we profiled previously. It is also the plan that Merkel supposedly shut down before it got off the ground. However, Europe had a Plan B up its sleeve.

What are the details of this latest “crisis” program?

According to an EU official, the liquidity support program includes up to €150 billion ($166 billion) in government guarantees. The WSJ adds that the commission spokeswoman declined to comment on the amount of guarantees that were authorized, but said that the budget requested by the Italian government had been found to be proportionate. The Italian economy ministry declined to comment.

An amusing sidebar: “only solvent banks would qualify for the liquidity support program, which has been authorized until the end of the year.” The problem is that with €360 billion in NPLs, every bank in Italy is insolvent, which implicitly means that they will all be found to be solvent or otherwise nobody will benefit.

Confirming the severity of the Italian fiasco, is that the decision which was taken on Sunday, had not been previously disclosed until the WSJ reported on it and “appears to be a first indication of governments moving to shore up banks in the wake of market turbulence following the Brexit referendum in the U.K.”

In other words, just as we said before, Brexit was nothing more than a Europe-blessed “crisis” ploy designed to achieve two things: unleash more QE, which the BOE admitted will happen (most likely with the involvement of the ECB), and ii) to facilitate the bailout of insolvent Italian banks. To wit:

Brexit will be just the scapegoat used by Renzi and Italy to circumvent any specific eurozone prohibitions. And if it fails, all Renzi has to do is hint at a referendum of his own. Then watch as Merkel scrambles to allow Italy to do whatever it wants, just to avoid the humiliation of a potential “Italeave.”

And while Angela Merkel apparently shut down the original proposal pitched by Italy, Europe – surely under the guidance of Mario Draghi – has found a way to circumvent her veto power.

“As this decision and other precedents demonstrate there are a number of solutions that can be put in place in full compliance with EU rules to address market turbulence,” the spokeswoman said.

To be sure, Italy’s market has indeed been turbulent: Italian banks have lost more than half of their market capitalization since the beginning of the year, as investors fret about the lenders’ huge exposure to bad loans. That compares to an average decline of less than one third for European lenders. Some Italian banks have seen their shares drop by some 75%.

But what is most stunning is the WSJ’s conclusion of what the plan is supposed to prevent – it is not to halt the stock price collapse, it is to prevent a bank run:

A person familiar with the Italian government plans said the cabinet of Prime Minister Matteo Renzi hoped to use a liquidity backstop to contain investor panic, which could result in a run on deposits and affect banks’ liquidity.

Needless to say, for Italy’s Prime Minister to be contemplating how to avoid “investor panic” and prevent a “run on deposits“, then Italian banks must truly be on the verge of collapse.

Finally, for those curious about timing and how soon until it all unravels, we quote the European Commission spokesman who said that “there is no expectation that the need to use this scheme should arise.”

What this statement really means, and whether a preemptive plan to bailout Italy’s insolvent banks will “boost confidence”, we leave up to readers decide.

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Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

Money, generally accepted medium of exchange, acts as a veil that confuse and blurs economic relations. This is especially true when it comes to intertemporal considerations. Whilst probably the most important institution in a free market, money can be highly destructive when politicized. Why? Because politics is about power and distribution of real wealth. And since money affect almost every single transaction, politics can span throughout society with ease when in control of money. Amchel Rothschild was spot on when he allegedly said “[g]ive me control of a nation’s money supply, and I care not who makes its laws.” Power over money is power over people and power over people is, well, pure power. Money is thus the most sacred tool in a statist’s toolbox and has become instrumental in their quest to control society and allocate resources as they see fit.

It is within this context the monstrosity called the euro need to be analyzed. By pooling Western European countries within the realm of one central bank, power over people increases immensely. There is a catch though; as power increases, greed and corruption increases with it and the temptation to go too far is obvious for all to see.

Money coordinates production with consumption, saving with investment and properly done, money will create the means for a smooth flow of resources among the millions or even billions of people transacting with each other. Politicize money and economic imbalances, between economic agents and even over time, will grow and destabilize the system. It is no exaggeration to say that the welfare and prosperity of the populace depends on a well-functioning monetary system.

The most important function money has, in our view, is its ability to create recessions, or as we like to call it, disruptions of unsustainable resource flows. In a sound system, money will make sure recession occur before the imbalance will even be felt by the broader public. Sound money will remove tensions in fault lines before they turn into a massive earthquake with devastating consequences. However, it is true that economic imbalances can be fed for years if sound money is replaced with a politicized fiduciary medium. And herein lies the crux of the problem, no power hungry politician will voluntarily end the economic prosperity a boom apparently foster. Therefore, they feed it with money created ex nihilo instead; chipping away trust and letting the bubble grow larger and larger. As imbalances becomes ever more entrenched in the economic system, the mere thought of terminating it becomes terrifying. Abruptly ending today’s imbalances will be a truly cataclysmic event, so the once greedy money masters feel they have no choice but to keep the boom going; petrified of the pitchforks that may come their way if they do not.

This is where we are today. Central bankers are painting themselves further and further into the proverbial corner with no chance of getting out unscathed.

When the euro was first created it looked like a boon to all members. In the chart below we depict Irish and Greek contribution to euro area M3. Prior to the crisis these metrics grew at an astounding pace; between 2006 and mid-2007 the Irish M3 grew by an average of 30 per cent annual rate, and by 20 per cent in the two years prior. How was this even possible? In the pre-euro era the Irish punt would surely depreciate dramatically in value if they created new currency units at what would have then been considered a reckless rate. In a sound commodity based monetary regime recipients of new money would before soon exchange them for gold and the monetary inflation would come to a screeching halt before it could do too much damage.

Not within the euro system though. Irish banks created new loans so its customers could buy houses, which helped bring the price of real estate to new highs and naturally so did the value of the collateral posted to banks for new credit. Higher collateral valuations were obviously used to back even more loans ad infinitum. Inevitably, large sums leaked out of Ireland as every European, or even global citizen, would accept the Irish euros as a safe payment – whether the euro was manufactured in Ireland or Germany did not matter as they were both an equal claim on euro area production and assets.

Unsurprisingly, the current account deficit quickly got out of control. Other peripheral countries fared even worse. There were absolutely no correcting mechanisms to halt these grossly unsustainable capital flows. As long as banks kept within easily manipulated capital standards, and they did because collateral values rose alongside the monetary inflation, they could produce euros as there were no tomorrow. The whole edifice actually turned into a tragic of the commons where the manufacturing base in Europe should be exploited to the fullest through money printing, before someone else did the same thing.  Also note that the European Central Bank (ECB) was, as every central bank is, fixing the price of its money. Increased demand for monetary reserves would normally put pressure on its price, but with zero cost supply, the ECB met increased demand by creating more money. It is the only “market” that actually works according to Keynesian principles where demand creates its own supply. There were essentially no checks on the amount of euros that could be created.

Naturally there is a limit to this madness; when Germans finally started to question the prudence of sending all the euros they received from peripheral countries back to the same countries to fund their current account deficits the vendor funded flow stopped and the boom came to an abrupt end. In enter the ECB with all sorts of backstops and promises to do “whatever it takes” to maintain the imbalances.

Somehow, the periphery still manages to fund current account deficits for years, even in the midst of crisis. Who on earth would be willing to fund this perversion?  

TARGET2 – or Trans-European Automated Real-time Gross settlement Express Transfer system – facilitates payments between euro area countries and quickly became an unintended, but highly convenient, way to continue funding deficits by forcibly allocate German surpluses to the task. Where the Germans once said enough is enough, the euro system of central banks kept going.

TARGET2 creates a liability for, say, the Bank of Spain, when a Spaniard sends money to a German bank through the Bundesbank, which in turn receives an asset on their balance sheet. These balance sheet items are cancelled when the final German recipient deposits his money at the bank if the bank then uses the proceeds to “invest” in Spanish banks, bonds, stocks or whatever it might be. However, if there are no reverse capital flows, if say the German bank or depositors are not willing to fund Spanish deficits anymore, balance sheet items at the national central banks accumulate. Instead of a much-needed restructuring of unsustainable resource flows, the TARGET2 allows the old ways to continue. In other words, even after taking away the correcting mechanism a sound commodity based money would have or the effect from a deprecating fiat money, the euro system allow trade to continue when people refuse to fund these imbalances.

We have followed TARGET2 for a long time as it essentially morphed into one of the largest bail-out facilities in Europe and give us a good indication on the stresses building in Europe. TARGET2 assets and liabilities peaked in August 2012, incidentally at the time Draghi gave his infamous speech. Since Draghi promised to bail-out everyone in need, Germans, half-heartedly believed him and started to send euros back to the periphery. TARGET2 imbalances shrank until the end of 2014, but then started to climb again and are now close to record levels.

What the TARGET2 chart shows us is a breakdown of the central bank narrative. Despite the alphabet soup of bail-out facilities provided by the ECB, people still do not trust the system. In our view, the TARGET2 chart is the best way to assess trust in central banks and as it clearly shows, the narrative is failing.

Linking this back to our introduction the TARGET2 chart actually confirms and substantiates what we see in politics. The recent Brexit vote, with all its subsequent noise about following the Brits out of the EU witnessed in continental Europe and the general Pasokification of the political center is clear testimony off waning power by the elite. People are gradually rebelling against the failed status quo.

It seems impossible for Draghi to reestablish monetary confidence. While it looked promising back in 2012, the crisis of confidence keeps lingering on and the big reset seems to come closer by the day. Expect even more destructive creativity, from all central banks around the world, in the coming months. You know the global central bank narrative have failed completely when the Fed cut rates and the dollar rallies. Then it is too late to buy your gold coins.

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CLSA’s Chris Wood, author of the popular Greed and Fear newsletter, chimes in on the consequences for Brexit with a note titled “Disintegration Dynamic” in which he focuses not so much on Britain as Italy and specifically the proposed Italian bailout which was first reported here and which circumvents European bailout rules, however which Renzi hopes will pass as a result of scapegoating Brexit (even if Angela Merkel was quick to shut down).

This is what he says, excerpted: 

GREED & fear continues to believe that the real flash point in the EU is likely to be Italy. GREED & fear was reminded of this reading this week that Italian Prime Minister Matteo Renzi is now seeking Europe’s agreement for a €40bn state-funded recapitalisation of the country’s banking system. This would seem in conflict with the EU’s new rules that taxpayer money cannot be used for bank bailouts before bank shareholders and, critically, bank bondholders are first bailed in. The tricky point here is that 29% of Italian bank bonds were still owned by retail depositors as at the end of 2015 (see Figure 1).

This Italian issue was discussed in more detail here a few months ago (see GREED & fear – The Eurozone and newborn economics, 3 March 2016). Renzi is doubtless hoping that the market turmoil created by Brexit, or at least the sense of political crisis, creates the pressure for Berlin and Brussels to agree to a breaking of the new rules. But if Berlin does agree to such a concession it will strengthen the electoral appeal of eurosceptics within Germany, just as further debt relief for Greece would – and the eurosceptics, primarily in the form of the AfD in Germany, have enjoyed a surge of support ever since last summer’s refugee crisis. Indeed Renzi’s plan has reportedly already been rebuffed by Frau Merkel and ECB board member Benoit Coeure.

The conclusion from all of the above is that it will take a political genius to hold the EU together in the next few years. And geniuses are in short supply. In this sense Brexit will only have accelerated something that was going to happen anyway.

Meanwhile, from a market standpoint, to repeat the point made here already, Brexit will serve as an excuse by G7 policymakers to accelerate the next wave of easing which in GREED & fear’s view is likely to be some form of monetisation of fiscal stimulus. Logically, this should only happen after the November US presidential election. But if markets are bad enough it can happen before.

 

 

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Submitted by John Mauldin via MauldinEconomics.com,

It is one of the great ironies of life that each generation believes its experiences are unique. The reality is that we have seen this movie before—with different actors, plot twists, and technological advancements.

The basic plot seems to push along a hauntingly familiar path.

In 1997, Neil Howe and William Strauss introduced the concept of Fourth Turning. They divided the population into four generational archetypes: Hero, Artist, Prophet, and Nomad. (read more about the archetypes and their characteristics here)

Each generation consists of people who were born and came of age at the same period in history. They had similar experiences and thus gravitated toward similar attitudes.

The change of control from one generation to the next is called a “turning” in the Strauss/Howe scheme. On a Fourth Turning, the cycle repeats, sparking a generational crisis.

When Howe uses that word, he doesn’t mean a short period of difficulty. He means an existential crisis—one in which society’s strongest institutions collapse (or are severely challenged and stressed) and national survival is in serious doubt.

By Neil Howe’s timeline, we are today about halfway through the Fourth Turning’s Crisis phase. If this Fourth Turning is like previous ones, here is what we should see.

See how the following Fourth Turning characteristics match today’s landscape…

Rising community

Notice in the Orlando shooting coverage how often people use the word community to designate the different groups with which people identify.

Following the tragic nightclub events, Orlando’s communities drew together to support their members and each other. We see the same behavior in other stressful events. “Je suis Charlie,” the motto that emerged from the January 2015 Paris shootings, comes to mind.

Think of all the other disasters we have seen in recent times, and the public response to them. I am not suggesting that community comes to the fore only during a Fourth Turning—far from it. But it does gain strength during such periods.

Strengthening government

Small-government conservatives like me, and possibly you, are on the defensive. We live in a time when most voters would rather enlarge government than shrink it. We can expect to see stronger government action regardless of who wins this year’s presidential election.

Party realignment

Donald Trump is obviously changing the Republican Party into something quite different than it was just four years ago. Bernie Sanders may have done the same to the Democrats. I don’t think this is over yet. We will see a lot of shifting and movement between the two parties as they redefine themselves.

I am really quite taken with an interview that Trump did a few weeks ago where he talked about his vision that the Republican Party would be a “workers’ party” within four to eight years.

You spring that on me four years ago, and I smile indulgently. Now, within the framework of the Protected versus the Unprotected, I wonder…

Introverted foreign policy

Fifteen years on, the US is increasingly tired of the War on Terror. Donald Trump and Bernie Sanders both gained traction in the primaries with a less aggressive approach to foreign engagement.

Technology to scale

The Internet has outgrown its adolescence and entered adulthood. The technology industry now views the Internet as a platform on which to build new capabilities: virtual reality, home automation, and more.

Rising income Equality

The years of ZIRP and QE served mainly to drive up asset prices, enriching those who are already wealthy and doing little for everyone else. Now a backlash is building against wealth concentration.

We may see attempts to raise taxes on the wealthy, higher working-class wages, and other measures intended to “level the playing field.”

Wage disruption

We’ve seen major retailers hike hourly pay in the last year; $15/hour minimum wages passed in California and elsewhere; and there are growing calls for labor to get a bigger piece of the pie.

Fertility bust

Birth rates are now near or even significantly below replacement rate throughout the developed world. Much of the Millennial Generation feels financially or otherwise unprepared for parenthood.

Falling immigration

Both the US and Europe are trying to control immigrant flows. Refugees from the Middle East are the exception in an otherwise less migratory world.

Falling crime

Criminal activity varies tremendously depending on where you are, but overall rates are down considerably from the 1980s and 1990s.

Strengthening family

This one may seem counterintuitive with birth rates down and young people reluctant to marry. My observations are that people delay marriage today precisely because they respect it so much.

They want to do it right or not at all. And once they do have kids, they take parenting very seriously. My Millennial Generation children and their friends, Howe’s Hero archetype, are amazingly protective of their children.

They seemingly script every moment of their children’s lives. My three-year-old granddaughter just started school, for God’s sake. My generation just didn’t approach child rearing like that.

Practical culture

The financial crisis has set a new standard of frugality, which has evolved into the “sharing” economy… think Uber and Airbnb. We even see the trend in fashion: Millennials have little interest in prestige labels and much prefer the low-priced “fast fashion” they can buy at Zara or H&M.

Rediscovered norms

The Fourth Turning is a time when people rediscover values and norms. That process can take many shapes, of course, but we may again see the “all-together” ethos that brought the US through the Depression and World War II.

Overprotective parenting

My Baby Boomer peers and I love to recall the unsupervised play and relative independence of our childhood years. Growing up as a country boy on the edge of a small West Texas city, I roamed the woods and ranches of our neighbors.

The barbed wire fences were built to keep the cattle in, but they didn’t keep the kids out. We knew which fields had the bulls we wanted to steer clear of. We explored quarries and lakes and rivers, clambered down into caves, and in general did things that would scare the pants off of today’s younger parents.

Today’s cautious parents won’t let children out of their sight—and often with good reason. As the crisis unfolds, we should see growing concern for protecting children from harm.

The worst is yet to come

So after Neil Howe explained all this at the conference, it was time for questions. Naturally, I voiced the question that we all want to know the answer to: “Will the crisis be over soon?”

Neil’s answer was succinct and not encouraging. He thinks we are only halfway through; and if the next few years play out like past Fourth Turnings, the worst is yet to come.

The message is, make sure you’re ready. The good news is that we still have some time (even if we don’t know how much time). We can prepare our portfolios and lives to deal with the coming changes.

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