China Catalyst To Send Gold Over $10,000 Per Ounce?

China Catalyst To Send Gold Over $10,000 Per Ounce?

Jim Rickards is on record forecasting $10,000 gold.

But is China about to provide the catalyst to send gold even higher? And by how much?

Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…

China — the world’s largest oil importer — struck lightning through international markets recently.

According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.

Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.

Not only would the plan bypass the dollar entirely… it would restore gold’s role in international commerce for the first time since 1971, when Nixon hammered the last nail through Bretton Woods.

If the rumors hold true, China’s plan could enter effect by the end of this year.

Billionaire business magnate and sound money advocate Hugo Salinas Price ran China’s plan through his calculator.

It turned up a basic math problem that spells drastically higher gold prices — if the plan is to work.

Details to follow.

But first some background on oil and gold… a brief detour down Bretton Woods Lane…


By 1970, it was evident to those running the U.S. that it would very soon be necessary to import large quantities of oil from Saudi Arabia. Under the Bretton Woods Agreements of 1945, the immense quantities of dollars that would shortly flow to Saudi Arabia in payment of their oil would be claims upon U.S. gold, at the time quoted at $35 an ounce. Those claims would surely deplete the remaining gold held by the U.S. Treasury in short order.

Washington found itself on the sharp hooks of a dilemma…

Dramatically raise the price of gold to limit redemptions — and devalue the dollar in the process — or repudiate its commitments under Bretton Woods.

Dishonor, that is… or dishonor.

It chose dishonor.

Price again:

To continue under the Bretton Woods monetary system would have meant that the U.S. would have been forced to raise the price of gold to an enormous figure in order to reduce the amount of gold payable to the Saudis to a tolerable level. But raising the dollar price of gold in that manner would have constituted a great devaluation of the dollar and collapsed its international prestige; that in turn would have ended the predominance of the U.S. as the No. 1 power in the world. The U.S. was not willing to accept that outcome. So Nixon “closed the gold window” on Aug. 15, 1971.

If China is willing to trade gold for oil under its latest plan, a similar dynamic enters play.


China takes aboard some 8 million barrels of oil a day.

That’s 2.92 billion barrels per year — nearly 3 billion in all.

But China holds only a few thousand metric tons of gold (officially about 1,850. Some estimate the true figure much higher).

You see the problem, of course.

China rapidly depletes its gold reserves if too many oil exporters choose to exchange yuan for gold.

If the plan’s to be sustainable at all, gold must rise — drastically — in order to balance the vast amounts of oil it’s supporting.

As Price explains, “To balance the mass of oil received by China against a limited amount of available gold… it will be necessary for gold to skyrocket upward in yuan terms and, necessarily, in dollar terms as well.”

Price crunched the numbers…

One ounce of gold (about $1,300) currently fetches 26 barrels of oil (about $50 per).

One barrel of oil is worth 1.196 grams of gold.

Price calls this ratio “an unsustainably low purchasing power of gold vis-a-vis oil.”

Only a drastically higher gold price would render the plan plausible.

How far would gold have to climb before the relationship was stable in Price’s estimate?

Ten times. Thus, Price arrives at a reasonable gold price:

$13,000 per ounce.


At $13,000 per gold ounce, one barrel of oil, at $50, will be bought with 0.1196 grams of gold; perhaps we may see $13,000 per oz gold in the not distant future.

Here, a road map to $13,000 gold.

We don’t know if Price’s figure is correct.

But if not $13,000, it seems gold would have to rise dramatically if Price’s thesis is correct — or else China’s plan collapses.

We can only conclude that China knows the implications of the math.

$13,000 gold also means a massive devaluation of the yuan.

China prefers a weak yuan to goose exports. But a worthless yuan?

The plan may prove a mirage in the end for all we know.

But if the plan does proceed… Jim Rickards’ $10,000 gold prediction might be vindicated — fully and then some.

By Brian Maher, Managing editor, The Daily Reckoning


Gold Prices (LBMA AM)

28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce

Silver Prices (LBMA)

28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce

Recent Market Updates

– Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
– “Gold prices to reach $1,400 before the end of the year” – GoldCore
– Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
– Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
– Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
– Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
– “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
– Global Debt Bubble Understated By $13 Trillion Warn BIS
– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

via GoldCore

Journalism Is Broken – Twitter, Trump, & The NYTimes

Authored by Chris Arnade via,

Leaving Twitter means people send you articles about others who leave Twitter, so I saw the story of a NY Times reporter leaving Twitter, and then the follow-up analysis of what that means. That analysis article ended with these helpful guides:

My reaction was

  1. Congrats to the NY Times reporter!
  2. That the bullet points need to be stated is sad.

Five years ago I was a progressive that fully bought into the idea journalism was on the nasty end of a disingenuous conservative campaign to discredit it.

Then I joined Twitter.

Now I flip between two theses:

  1. On a good day: Journalism has been badly degraded by the twin forces of economic loss and the immediacy and brutality of Twitter.
  2. On a bad day: Journalism is fundamentally slanted, narrow, and nasty. Many journalists are removed, smug, know-it-alls who don’t understand or like voters.

When I joined Twitter I also changed jobs, leaving Wall Street to document addiction and poverty. This brought me to places that few journalists visit, beyond the quick jump-in jump-out for some breaking news.

I ended up spending roughly five years doing this, hanging in McDonald’s and drug traps and churches and community colleges and cheap motels. I ended up talking to countless voters about their pains, frustrations, fears, hopes, and dreams. I started writing about politics for the first time in my life, not because I cared all that much about politics, but because what I was seeing out in the country was so so so different than what the political journalist were writing.

They said Trump had no chance, they said Trump voters were just idiots or racists.

I was seeing that Trump had a damn good chance, if not this election, then the next election. His ideas, his brand of chaos, anger, and “Lets knock it all over and start again because everything sucks” was selling like, well, McFlurries.

I also was seeing that his voters were not this big blob of unrepentant dumb racists. I mean, I spent time in about 20 counties that voted twice for Obama, and then voted for Trump. I cannot tell you how many folks I met who voted for Trump and also voted twice for Obama. I guess they all were unrepentant racists who thought Obama was white. Or maybe voters were so desperate for something different that they voted twice for an inexperienced black outsider who promised change and when he failed to deliver they went with the next outsider who promised to shake shit up.

They were angry at politicians from both parties who came in and said they were gonna do something about the lost jobs, the open borders, the stagnant wages, and did nothing about them. Both parties promised them stuff and didn’t deliver. All they wanted was to find anyone who promised to really really listen to them. Even if he was crazy.

The other lesson was just how damn slanted and biased journalism was. Both sides. Conservatives and Liberals. The experience of talking to voters in places journalists on Twitter were laughing at, mocking, snidely calling the “real America,”, or “fly-over,” or whatever was the condescending Twitter meme of the day that they trafficked in. That was a damn eye-opening experience. One that made me realize that the cliched talking point of an out of touch biased media wasn’t entirely wrong or cynical or manipulative. Some of it was, but there was more than a grain of truth to it. A pretty big ball of truth to it.

Journalism is broken. No necessarily out of bad intentions, but because many journalists don’t understand how bubbled they are, and sadly Twitter is only making everyone, and them, more bubbled. And sadly many journalists have little choice but to be bubbled.

To succeed in journalism means you have to join the elites in NYC or DC, you have to play the game. You have to get on Twitter and signal how journalisty you are. That means joining in on the reindeer games. Blasting the meme of the day. Or comment on breaking news regardless of the validity of the information. You have to pile on the tweet everyone else is jumping on. The one where someone says something against the grain, or naive, or makes a mistake. You have to mock those who hold different views. You have to be snide. You have to be nasty. You have to signal to everyone else just how in the know you are.

You have to show you deserve to be in the little inner circle that elite journalists think they are in.

Doing that means you get rewarded for that. Stunningly so. You get more followers, bigger jobs, and bigger platforms.

Most damning, you have to make the news about you. You have to tell everyone how you see it. How you view it. How it impacts you. Not how it impacts, you know, the voters. That seems pretty much the opposite of what good journalism is about, which in my mind is how news impacts the country, not the person writing the story.

Twitter has made everyone into an op-ed writer, all the time. And now with almost everyone in journalism constantly on Twitter being op-ed-ey, it has revealed their biases. It has also exaggerated them, pushing them further and further into group think.

That was my own experience. Twitter was good to me because it gave me a platform to share the stories of those I was talking to. That was when I used it well. It was bad for me, and bad for others, when I let it become a platform to tell the world what I thought about everything.

As I have written before gut reactions are hardly ever good things and Twitter makes it easy to broadcast your gut reaction. So I found myself talking less and less about the people I met and more and more about my gut reactions. This became more pronounced when I wasn’t traveling and wasn’t talking to voters. So I left Twitter, at least until I start traveling again.

All of this is sad because there are a lot of great journalists out there, a lot of well-intended smart people who go into the business for all of the right reasons. But more and more the industry, especially now that it has become intertwined with Twitter, doesn’t work in their favor. It works for those less well intended, those who show they can build an audience, no matter how they do it, no matter how nasty, how biased, how disingenuous, how shallow, how selfish, they are.

And to finish with Trump, because Twitter.

Trump exploits this, not necessarily out of genius, but because exploiting things is who he is. He sees that many voters don’t trust journalists, and why should they, especially if they are on Twitter. They log on and see them mocking their way of life and their reality. They see how out of touch from them they are.

They see journalist say, “just trust the experts, like us.” Well a lot of Americans have good reasons not to trust experts. They have heard that line far far too long.

Trump sees that, sees how the blue check marks jump on every little thing he says and attack it and retweet it and make a mountain out of it. They are the dog with the Frisbee that won’t let it go, and it is good for Trump.

So when he needs to show he is draining the swamp he makes blue check mark Twitter yell. Because to much of America the outraged yells of the media IS the sound of the swamp being drained. Regardless of if the actual swap is being drained. And right now the actual swamp is NOT being drained.

So he tweets about absurd, nasty, gross, and divisive things and it makes waves and waves on Twitter and becomes a Tsunami that overtakes everything else.

No the media isn’t the source of the problem. I am not here to let Trump off the hook, but hopefully to think about how to lessen his impact. Trump is the problem. But his brand of divisiveness gets a lot more traction and does more damage because few trust the media.

And they have some very good reasons to not trust the media. And their behavior on Twitter is part of that.

So. To the NY Times reporter who quit twitter. Congrats! I hope more journalists follow. Or at least stick to talking about the news. Or cats. Or baseball.

via Tyler Durden

Meanwhile, Bitcoin Soars 40% From Post Dimon, China Lows

Whatever doesn’t kill bitcoin – and many have tried in the past month to do just that – has a habit of making it stronger, and two weeks after the cryptocurrency crashed 40% from an all time high of $5,000 to less than $3,000 when first China banned ICOs and exchange trading of cryptocurrencies, then Jamie Dimon called it a fraud, the BIS said it has no future unless it is subsumed by central banks, days after South Korea likewise ordered an end to ICOs, the SEC filed the first ever civil charges against companies raising capital through ICOs and Switzerland announced it too was cracking down on ICOs, bitcoin has soared over 40% from its lows, and its price is now back where it was before the Chinese crackdown.

… while ethereum, now back over the resistance level of $300, has staged a similar remarkable rebound despite constant attempts to crush both cryptocurrencues and end ICOs (which as we said several months ago, will likely make ethereum more attractive in the long run as the outright criminal scams associated with ICOs become a distant memory).

As Mate Cser points out, Bitcoin is “getting closer to the $4400 resistance after leaving behind the $4150 level, with the most valuable cryptocurrency being in the forefront of the advance yet again. BTC is the closest to its all-time high among the majors, as it is up by more than 40% since hitting the bottom. With several strong support/resistance levels already below the current price, $4000, $3800, and $3500, the coin looks poised to test the all-time high near $5000 in the coming weeks.”

Meanwhile, as if responding directly to a recent report from Macquarie’s Viktor Shvets who said that “modern finance” – with global financial instruments of $500 trillion, or 5x global GDP, not bitcoin, is the true fraud...


… and that the real danger is not bitcoin, but the reserve status of the dollar, on Friday, Philly Fed president Harker said that Bitcoin and other cryptocurrencies are “unlikely to weaken the Fed Reserve’s influence on the U.S. economy.” He is right: the Fed is perfectly capable of doing that on its own, especially if Yellen makes a few more admissions how inflation is a mystery.

Harker spoke at a fintech event hosted by the Philadelphia Fed.

While some have worried that the rise of a cryptocurrency would make it harder for the Fed to manage the rate of inflation, Harker showed that he isn’t concerned about the prospect. Onstage, he went so far as to contend that bitcoin has yet to be tested by a real catastrophe, but that when one happens, people will be more likely to flock to government-backed money.

The paper that’s in your pocket, that we call money, only has value because we believe it has value, because we believe the government stands behind it. It’s all trust issues,” Harker said.

“And so, when cryptocurrencies and other forms of currency emerge, I think the basis of that has to be how do they create that trust?”

Some could counter that the Fed’s $4.5 trillion in QE has also yet to be tested by a real catastrophe, and should it fail the test, the consequences for the US currency would be catastrphic.

Harker also acknowledged that while citizens have put varying degrees of trust in what he called the “sovereign states” that stand behind currencies today, other currency models might be possible. This includes, he said, ways in which trust might come from another “large player,” or as in the case of bitcoin, an algorithm.

But, as Coindesk noted, his most pertinent critique was perhaps that cryptocurrencies have not been significantly tested enough to ensure confidence. Despite issues such as the collapse of Mt. Gox, once the bitcoin’s network’s largest exchange, or the ongoing bitcoin scaling debate, Harker argued that cryptocurrency has been largely insulated from “bad times.”

“Everything can work in good times,” he added, although he may have been envisioning the global stock market which is at all time highs only thanks to trillions in liquidity injections by central banks.

This leads to the second reason Harker said he’s not concerned about cryptocurrency hamstringing the Fed’s monetary influence: If – and, according to Harker, when – things go wrong, the Federal Reserve and other state agencies will likely be asked to get involved anyway.

“When things really go bad, where do Americans turn?” he asked “Well, they’re going to come back to the government. That’s the history of the country.”

Translated: when, not if, a new crisis comes it will be up to US taxpayers to inject trillions to keep the system going. Again.

Separately, Harker also discussed cryptocurrency regulation. The Philly Fed president was asked how the Federal Reserve might assist or advise on such a strategy. (The Federal Reserve has previously noted that it does not have the authority to directly regulate the technology.) On this point, he was inconclusive, suggesting any ideation is today in early stages.

“How do you regulate an algorithm?” he asked, drawing laughs from the audience. “I don’t know yet. The answer is we have to continue to study this.”

Still, that doesn’t mean there aren’t possible next steps. For example, those studies might include looking more closely at how another algorithm, perhaps one created by the Federal Reserve, might ensure fairness in mathematical form, something Harker said is crucial to any potential cryptocurrency controls.

He concluded: “Before we even think about how you regulate an algorithm, how would you even build an algorithm that would have that sense of fairness in it? It is a fairly deep technical question.”

Ah yes, the Fed which itself admitted last week it has made America’s “Top 1” 70% wealthier than the “Bottom 90%”


… opining on matters of fairness. Brilliant.

Meanwhile, the cryptosurge continues.

via Tyler Durden

The Financialization Of America… And Its Discontents

Authored by Charles Hugh Smith via OfTwoMinds blog,

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly.

This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.

Down, Down, Down

Given the gravity of the consequences of this trend, mainstream economists have been struggling to explain it, as a means of eventually reversing it.

The explanations include automation, globalization/offshoring, the high cost of housing, a decline of corporate competition (i.e. the dominance of cartels and quasi-monopolies), a failure of our educational complex to keep pace, stagnating gains in productivity, and so on.

Each of these dynamics may well exacerbate the trend, but they all dodge the dominant driver of wage stagnation and rise income-wealth inequality: our economy is optimized for financialization, not labor/earned income.

What does 'our economy is optimized for financialization' mean?

It means that capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit — the engines of financialization.

Financialization funnels the economy’s rewards to those with access to opaque financial processes and information flows, cheap central bank credit and private banking leverage.

Together, these enable financiers and corporations to get the borrowed capital needed to acquire and consolidate the productive assets of the economy, and commoditize those productive assets, i.e. turn them into financial instruments that can be bought and sold on the global marketplace.

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

Meanwhile, the official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade.

In other words, those with fixed incomes that don’t keep pace with inflation will have lost a third of their income after a decade of central bank-engineered inflation.

But in an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing.

There is a core structural problem with engineering 3% annual inflation. Those whose income doesn’t keep pace are gradually impoverished, while those who can notch gains above 3% gradually garner the lion’s share of the national income and wealth.

Wages for the bottom 95% have not kept pace with official inflation (never mind real-world inflation rates for those exposed to real price increases in big-ticket items such as college tuition and health care insurance).

Most households are losing ground as their inflation-adjusted ( real) incomes stagnate or decline.

The stagnation of wages is structural, the result of multiple mutually reinforcing dynamics.

These include globalized wage competition (everyone in tradable sectors is competing with workers around the world); an abundance/oversupply of labor globally; the digital industrial revolution’s tendency to concentrate rewards in the top tier of workers; the soaring costs of labor overhead (health care insurance, etc.) that diverts cash that could have gone to wage increases to cartels, and the dominance of credit-capital over labor.

The only possible output of pushing inflation higher while wages for the vast majority are stagnating is increasing wealth-income inequality — precisely what’s happened over the past decade of Federal Reserve policy.

The stagnation of wages isn’t supposed to happen in conventional economics. Once unemployment drops to the 5% range, full employment is supposed to push wages higher as employers are forced to compete for productive workers.

Alas, conventional economics is incapable of grasping the fluid dynamics of labor, automation, capital, globalization and cost structures dominated by monopolies and cartels in the 4th (digital) industrial revolution.

In sector after sector, employers can’t afford to pay more wages as labor overhead costs march ever higher while prices are held down by competition and oversupply. In other sectors, the rigors and supply, demand, stagnant sales and productivity push employers to automate whatever can be automated, and push tasks that were once performed by employees onto customers.

So why are central banks obsessed with pushing inflation higher?

The conventional answer is that a debt-fueled economy requires inflation to reduce the debtors’ future obligations by enabling them to pay their debts with constantly inflating currency.

This same dynamic enables the central state to pay its obligations (social security, interest on the national debt, etc.) with “cheaper” currency.

After a decade of 3% inflation, a $100 debt is effectively reduced to $67 by the magic of inflation. If wages rise by 3%, the worker who earned $100 at the start of the decade will be earning $133 by the end of the decade, giving the worker 33% more cash to service debts.

The government benefits from inflation in another way: incomes pushed higher by inflation push wage earners into higher tax brackets, and their higher incomes generate higher taxes.

All this wonderfulness of inflation is negated if wages can’t rise in tandem with inflation. In the view of the central banks, deflation (i.e. wages buy more goods and services every year) is bad, and it’s not hard to understand why.

The private banking sector benefits from inflation as well. The lifeblood of banking profits is transaction and processing fees from issuing new credit. Since inflation enables households to buy more stuff with credit and service more debt, banks benefit immensely.

Deflation, on the other hand, is Kryptonite to bank profits – households earning less every year are more likely to default on existing debt and eschew new debt. As wages stagnate, an increasing percentage of the populace becomes uncreditworthy, i.e. a marginal borrower who isn’t qualified to borrow (and thus spend) more.

Unfortunately for the Fed and other central banks, there is no way they can push wages higher to keep pace with inflation. Short of creating $1 trillion in new currency and sending a check for $10,000 to every household (something central banks aren’t allowed to do), central banks can’t force employers to pay higher wages or force customers to pay higher prices to enterprises.

Pushing inflation higher while wages stagnate can be charitably called insane. Less charitably, it’s evil, as it strips purchasing power and wealth from all whose income isn’t keeping pace with central bank-engineered inflation.

via Tyler Durden

Watch Live: Catalans Occupy Schools, Blockade Roads Amid Police/Government Threats, “History’s About To Be Written”

Live Feed:

The Spanish ambassador to UK, Carlos Bastarreche, has warned Catalan government’s move will have ‘serious implications’ for European stability…

Europe is watching “a slow-motion, low-cost coup d’etat” by the Catalan government.


“If the Catalan government succeed it will be a drama for Europe, starting with the UK, because it will mean that a region can disobey the rule of law.


“This is not a dispute between Madrid and Catalonia. On the one side is a democratic Spain and its independent judicial system, and on the other side not Catalonia, but a group of radical nationalists and leftwing extremists in the regional power that are not complying with the law,”

Which perhaps explains how aggressive Spanish authorities are in their efforts to stop any voting taking place.

The Civil Guard, acting on orders from the High Court in Catalonia, entered and shut down 29 database and census applications at the Catalan government's telecommunications centre on Saturday.

Additionally, as DPA reports, the central authorities in Madrid have shut down the electronic vote-counting system in Catalonia in a further effort to prevent Sunday's planned vote on independence for the region.


By blocking the counting system, Madrid had effectively "cancelled" the referendum which it had already declared illegal, government spokesman Inigo Mendez de Vigo told journalists on Saturday.


This "further strike against the illegal proclamation" of the referendum "was carried out within the scope of the law," the spokesman said.

But as tensions come to a boiling point across Catalonia, separatists are occupying more than 160 schools designated as polling stations on Saturday in an attempt to keep them open ahead of Sunday’s referendum on independence from Spain.

“The history of my country is going to be decided in the next few hours, so there’s no way I’m going to be staying at home in bed and watch it on TV,” said Eduard Elías, 50, a computer science engineer at a school in the Raval neighborhood of Barcelona, adding that he would leave only if the confrontation became violent.


“Imagine you would have been offered the chance to fight alongside George Washington,” Mr. Elías said.


“At that time, revolution meant weapons and war, but we’re now in the 21st century and we will have our paper ballots instead to bring about real change.”

But, as The FT reports, a top Spanish official in Catalonia said that police had sealed off more than half of the 2,315 designated polling stations.

Spanish national police and their Catalan counterparts have orders to close all polling stations in the region by 6am on Sunday.

Spanish courts have ruled the referendum illegal and the central government in Madrid has voted to stop it.

Pro-independence supporters are hoping the police will be unable or unwilling to physically stop them voting them if they gather in sufficient numbers.

Catalan’s regional government, elected in 2015, has said that it will declare independence within 48 hours of a Yes vote.

This could force the Spanish state to step in and temporarily suspend Catalan autonomy, taking Madrid into uncharted constitutional territory.

During a demonstration in Barcelona on Friday night, regional president Carles Puigdemont said that the Catalan nation had “already won” ahead of Sunday’s vote.

“We have already won, we have won over the fears and the threats of an authoritarian state that didn’t want to let us get this far and tried to make us surrender at the first sign of difficulty,” he said.


“On Sunday we have a date with the future, and on Monday we will begin to take that path,” he said, although he gave no indication of how exactly they would go about trying to take independence in the event of a Yes vote.

Sunday’s vote is illegal and a declaration of independence would have little international support. However, a strong turnout and a majority Yes vote could embolden the long-term separatist cause.

Analysts also warn of the danger of increased anti-Madrid sentiment in the region if Spanish authorities crack down hard.

But not everyone supports this 'illegal' vote…

*  *  *

Last week, Mises Institute President Jeff Deist took a pro-secessionist, decentralist position in regards to the current secession movement in Catalonia. See "Let Catalonia Decide" from September 19.

In response, many have claimed that the current secession movement should be blocked. Below we present a column by one reader, without modification. We have not edited it for content, and, like all articles, the article should not be interpreted as an official position of the Mises Institute.

A Spanish Libertarian's View of Catalonian Independence

Authored by Marta Hidalgo via The Mises Institute,

Unfortunately, the nationalists approach history in another temper. For them the past is not a source of information and instruction but an arsenal of weapons for the conduct of war. They search for facts which can be used as pretexts and excuses for their drives for aggression and oppression. If the documents available do not provide such facts, they do not shrink from distorting truth and from falsifying documents.


~ Mises, 1944. Omnipotent Government

The Catalan nationalist movement in favour of independence is not driven by an urgent need of freedom to establish a libertarian paradise of free market and low taxes. It does not look for the creation of a smaller and more decentralized government. It is the creation of powerful special interests in the region for the purposes of getting even more power, concessions, grants and money from the rest of Spain, while they control Catalonians even more though indoctrination and the creation of an evil foreign oppressor. Independence is not an end for them, it is a political tool. Independence is not an end for them, it is a political tool.

Spain is divided into Autonomous Communities and today each one has an Estatuto, similar to a constitution, which has given Catalonia, among others, regional autonomy. Catalonia controls its education and healthcare systems and it can impose taxes over events that are not already taxed by the central government or the councils, with some exceptions. Through this, Catalonia currently imposes 17 different taxes, and has one of the communities with the highest income taxes in the country.

Recent attempts at independence have been sought via changes to Catalonia's estatuto — it's constitution. The region's first estatuto was voted on in 1979 by 59.7% of the population with 88.15% voting for approval. After years of claiming separate nationhood, and poor treatment at the hands of Madrid, Cataloinian leaders presented a new estatuto to increase regional independence in 2006. 49.42% of the voters turned out, with 73.9% voting for approval. In 2014, the first illegal referendum on independence took place, paid with taxpayers' money from all of Spain. 37% of voters turned out, with 80% voting to approve. This means only 30% if potential voters voted for independence. 

The Origins of the Separatist Movement 

During the time of the ever-growing Spanish Empire, Spain was made up of kingdoms, but Catalonia was not one of them. It was made up of counties and there was a figure called the Count of Barcelona. The first time there is a mention of the term Cataluña is in the 12th century, when the King Alfonso II acknowledges it in a donation document to his wife. In 1714, the Bourbons and the House of Austria fought for the throne of Spain. Catalonians sided with the Austrians. There was no such thing as an invasion from Castilla; it was a Succession war, not a Secession War. In fact, one of the nationalist heroes, Rafael Casanova, famously called Barcelona to fight against the Bourbons for their honour, their nation and the freedom of all of Spain.

The Catalonian nationalist movement that rules today in the region started in the 19th century, at the time of the Romantic Era, and received the name of Reinaxença. It was a movement that focused on land and tradition, and its main goal was reviving the Catalan language. One of the founders of this movement, Francisco Cambó, became the leader of the Lliga Regionalista, a political party that existed from 1901 to 1936. After the death of Prat de la Riba in 1917. Cambó was part of the government of Spain in 1918 as Minister. In Cambó's memoirs, he explained that the nationalist movement was of ridiculously small size when he started, almost like a cult. He explained that, as with all big collective movements, the quick expansion of Catalonian nationalism was due to propaganda based on some exaggerations and some injustices.

The Current Movement 

In 2012, something called Liquidity Fund for Autonomies was created to give communities access to grants and debt at almost 0% interest. Around 33% of this money has gone to Catalonia, even when they claim to be one of the richest, most innovative, civilised, and cosmopolitan regions of Spain. 

One of the biggest cases of political corruption is that of the Pujol family. Jordi Pujol was the president of the Catalan government for 23 years and considered one of the fathers of the Catalan nation. It has been discovered that his family and he have a fortune of about 3.3 billion euros in tax havens. This money was hidden from the taxing authorities, and its origin is being investigated. The court exposed it came from political activities, mainly from illegal payments from business owners in search of a public contracts. Sadly, it is not the only case of this kind.

The idea that the Catalan language is being endangered, continues to be spread by the nationalist movement. The reality is only half of Catalonians have Spanish (i.e., Castilian) as a mother tongue, a fact that has been fought through the immersion system. The law says parents can choose the language they want their children to study in, but it is not being applied, even after favourable rulings from the Supreme Court. Moreover, it is required by law in Catalonia that the name of your business must be in Catalan, or you risk a fine, and that you must speak it if you want a public job as policeman or doctor, even when 98% of the population speaks Spanish.

I want freedom for Catalonia, and if it means they are out of Spain, so be it. But it must be done legally. The Spanish constitution established the country is a democratic and constitutional monarchy, and sovereignty resides in the Spanish people.

More than 90% of Catalonians voted yes to the Spanish constitution. To change the current political system, a referendum should start in the national Congress, with a law approved by the absolute majority in Parliament. Via this system, it would be possible to call a referendum in Catalonia to check the reality of the secessionist claims among the people, but this possibility is not entertained by the nationalists. The Constitution, and the opinion of those who are not in favour of secession, who feel both Spanish and Catalonian, who don't get involved in the political agenda of Catalonian nationalists as we saw in 2014, must be respected too. But if nationalists carry out that referendum, they might lose; propaganda only gets you so far.

*  *  *

Still, as ABC reports, Barcelona is bracing for what could be the worst civil confrontation since democracy was restored in the 1980s.

"Neither side is listening to the other side anymore," Carles Castellanos, a 75-year-old retired teacher and prominent political activist, said.


"If the Spanish government had properly addressed the requests of Catalonia in the past and not rejected negotiations, it wouldn't have come this far. Now both sides have become more extreme in their positions."

via Tyler Durden

NBA Orders Players: Stand For The National Anthem

With the NFL finding itself trapped in a vise of sliding viewership on one hand, and a sudden plunge in its favorability as a result of the ongoing “kneeling” feud with President Trump, which according to a just released POLITICO/Morning Consult poll has plunged from 30% on September 21 to just 17% on September 28, the most unfavorable in history


… other sports franchises are desperate to avoid the backlash that NFL Commissioner Roger Goodell appears to have unleashed upon his league.

As a result, the NBA which has seen a similar steep drop in viewership in recent years, is taking emergency proactive measures, and according to the Associated Press, NBA Commissioner Adam Silver said he expected players would stand for the anthem, followed up by a memo in which the NBA “recommended teams address fans or show videos expressing themes of unity before their first home games,” while again reminding them of the rule that players must stand for the national anthem.

In the memo, obtained by the Associated Press, Deputy Commissioner Mark Tatum suggested teams use their opening games “to demonstrate your commitment to the NBA’s core values of equality, diversity, inclusion and serve as a unifying force in the community.” He recommended an address by a player or coach to fans before the anthem, or a video featuring players or community leaders speaking about important issues and showing photos from past community events.

Tatum said the league supports and encourages players to express their views on matters that are important to them, while reminding of the rule that players, coaches and trainers stand respectfully for the anthem.

“The league office will determine how to deal with any possible instance in which a player, coach or trainer does not stand for the anthem. (Teams do not have the discretion to waive this rule),” the memo says.

The memo comes as the NBA’s preseason schedule is set to begin on Saturday with two games, including the NBA champion Golden State Warriors hosting Denver. As a reminder, the feud between Trump and certain sport players escalated last Saturday, when Trump withdrew an invitation to Warriors’ Stephen Curry: 

This in turn prompted the entire Warriors team to announce that “while we intended to meet as a team at the first opportunity we had this morning to collaboratively discuss a potential visit to the White House,” the statement read, “we accept President Trump has made it clear that we are not invited.”

As the AP adds, the memo builds on discussions held by the NBA’s Board of Governors this week, and follows up on one Silver and players association executive director Michele Roberts sent to players recently. It recommends that teams organize internal discussions to hear the players’ perspectives, if they haven’t already, and to start or expand programs within their communities.

“The players have embraced their roles in those efforts and we are proud of the work they do in our communities,” Tatum wrote.

While the NFL never made an explicit demand of players to stand for the national anthem, prompting many teams to do the opposite, or simply not leave the locker room, now that the NBA has taken the extra step of reminding players of what the rules are, it will be especially interesting to observe how many players will flaunt the commissioner’s demand, what the NBA’s response to said rule violation will be, and whether the NBA’s viewership and ad revenues will see a similar sharp decline which ultimately will have an adverse impact on the players’ own bank accounts.

via Tyler Durden

Studies Confirm, Free People are Happier

Via The Daily Bell

If you don’t feel free, chances are you don’t feel happy either.

Both of these words, free and happy, are pretty loose in their official definitions. Scientific studies have used various metrics to measure happiness; self-reporting, brain waves, psychological evaluations, and family member surveys. As for freedom, the studies mainly use the self-reported metric, how free a person feels.

When people feel less restrained by outside forces, when people feel that their life is their own to do as they please, they are happier.

Even when holding income, sex, education, race, religion, politics, and family status constant, we find that people who felt free were about 18 percentage points more likely than others to say that they were very happy.

Even people who think that the government should be less involved in daily life are happier than people who think society needs more rules. And it might be tempting to chalk this up to people who are poor feeling unhappy, regardless of freedom. It makes sense to think they would want the government to intervene in order to make them more wealthy, and thus happier.

But when you look at countries overall, you still find that freer countries are happier countries.

…in 1990, at the end of the Communist era, one cross-country survey found that 41 percent of Americans said that they were very happy—contrasted with just 14 percent of East Germans, 6 percent of Russians and Czechs, and 2 percent of Latvians. Of course, regimes behind the Iron Curtain were not just economically unfree; they were politically unfree as well.

Of course, this could also just point to the fact that the freer the country, the more prosperous the people. So you could say that being prosperous makes you happy. Except this would prove that free economies deliver more prosperity. So no matter how you slice it, more freedom means more happiness–even if prosperity is a necessary step in between.

But another study found that even prosperity might not matter as much as freedom when it comes to happiness.

Swiss economists Bruno Frey and Alois Stutzer made this point convincingly in the 1990s, comparing happiness levels across various Swiss cantons, which vary dramatically in how much political participation they afford their citizens. Cantons that allowed citizens more direct democratic rights, as well as meetings with leaders to discuss political and financial matters, proved significantly happier than cantons where political access was more restricted.

Now there may very well be some very special people, who even in a prison cell would still mentally “feel free.” But for most of us, factors of our environment come into play as much as our mental attitude.

But then we get to the chicken or the egg thing. If you don’t feel free, is it because of your environment? Or does your environment not feel free because of your mentality? Either way, you can fix this. You can either change your environment, or you can change your attitude. But it takes recognizing the root of the issue.

If you don’t feel free, and it is making you unhappy, you should start getting specific. Identify exactly what is making you feel unfree. Not “government” but “high taxes or illegal marijuana.” You can legally set up your finances to drastically cut your tax rate. And you can move to a place where marijuana is legal.

And don’t say “society” makes you feel unfree. Is it watching the news or scrolling facebook? Stop. Living in a city with a country heart? Move. Is it Sunday dinner with terrible relatives? You’re under no obligation, although the choices they force on you may be tough. Still, it is their choice how to react. You have the ability to make yourself free of things that keep you constrained.

Let’s address the claim that people who have too many choices are less happy.

Some studies have found that when given too many options, people get freedom overload, and are more anxious, finding it harder to make any choice at all. In one instance, two sample booths were set up to sell jam. One gave away 24 samples, and that one attracted more tasters. Another booth gave away 6 samples, and even though fewer people stopped to try the jam, they actually sold more.

The idea is that people are attracted to freedom, but in the end, it makes them stagnate and shut down with an overload of choice.

But there are a couple factors to consider.

One is that people are naturally constrained by their circumstances to some extent. Maybe you are technically free to do anything you want. But at any one point in your life, there are really only a few choices to be made.

It gets overwhelming to think, I could move anywhere I want, start a business or get a job, find a lover or play the single life, or hike the Appalachian Trail and write a book. That train of thought makes it seem like there are too many choices. You may choose to stay in a situation that doesn’t make you happy because you have no idea what choice of the infinite possibilities will actually make you happier.

But you don’t really have that many choices right now. Do you want to move, or do you like where you are? That is only two choices.

If you choose to move, that clearly opens up more choices. You say, where should I move? Is every square inch of the earth truly an option? No. You should be able to identify why you want to move. Then you simply need to make another series of small choices that are not overwhelming when you take them one at a time. Warm or cold? City or country? Coastal or inland?

Second, most people are naturally constrained by their own unique morality. Some people adopt moralities from religion or spirituality, and some people create their own. It doesn’t really matter, there are some things you will be willing to do, and some things you definitely will not. You probably don’t truly have a choice between becoming a doctor, lawyer, teacher, meth dealer, or pimp. Some of those options probably don’t align with your morals–like becoming a lawyer.

When you break things down to a step by step process of where you are going from here, the choices for what to do with life become much less overwhelming. It is great to have a 5 or even 10-year plan, but things are going to change. Most choices don’t require a steadfast decision in the present. Your smaller choices in the present will instead present new opportunities to choose from later.

And if you have some general philosophy or morality that you live by, certain choices are off the table altogether.

So by if you limit your own choices, you may very well be happier. But if someone else limits your choices for you, you are likely to feel less free, and thus be unhappy.

But again, don’t let the feeling of being unfree convince you that you are actually unfree. If you aren’t convinced that you have this much control over your own life, start by reading the 1973 classic, How I found Freedom in an Unfree World, by Harry Browne.

via TDB

Upon The Next Crisis, The Rules Will Suddenly Change

Authored by Charles Hugh Smith via OfTwoMinds blog,

…For the benefit of the elites; not the rest of us…


We can add a third certainty to the two standard ones (death and taxes): The rules will suddenly change when a financial crisis strikes.

Why is this a certainty? The answer is complex, as it draws on human nature, politics and the structure of societies/economies ruled by centralized states (governments).

The Core Imperative of the State: Expand Control

As I explain in my book, Resistance, Revolution, Liberation, the core (i.e. ontological) imperative of every central state is to expand its reach and control.  This isn’t just the result of individuals within the state seeking more power; every centralized state views whatever is outside its control as a threat.  The way to reduce or neutralize a threat is to take control of the mechanisms that generated it.

Once the state has gained control of these mechanisms, it is loath to relinquish them; to relinquish control is to invite chaos.

There is of course an intensely self-serving dynamic to extending state control: those being paid to enforce this state control have an immense vested interest in the state retaining (or even extending) this control, as their livelihoods now depend on the state doing so.

The higher-ups in the state also have a vested interest in retaining these new controls, as more control means more wealth and power accrue to those at the top of the centralized power pyramid: this extension of state control means private enterprise must now lobby the state for favors, and it gives the higher-ups more perquisites and favors to dispense—for a price, of course.

This vested interest arises throughout the power pyramid, from the bottom functionary with newfound power over common citizens to the managers of the departmental bureaucracy tasked with enforcing the new control to the apex of state authority.

This hierarchy of state power creates another threat to the central state; the corralling of state power by fiefdoms within the state itself.  In other words, fiefdoms can become semi-autonomous agencies that are only nominally under the control of central authority.  The answer is of course additional layers of oversight, compliance, investigation and enforcement within the state itself.

The State Serves Elites First and Foremost

Though modern states always claim to serve the common citizenry, in reality the state serves the wealth/power elites who need state complicity to maintain their wealth/power.  These power elites function as the modern-day equivalent of aristocracy: everyone is equal, but some or more equal than others, to use Orwell’s timeless phrase.

This reality leads to a non-formalized two-tier system: one for commoners and one for the power elite/New Aristocracy.  A formalized two-tier system would incite political disorder, so the system is nominally “everyone is equal under the law” but in practice there are two tiers.

Tax collection is a good example. The corporate/financier power elite have access to complex tax avoidance schemes that are unavailable to commoners, who have few tax reduction tools.  The judicial system is another: power elites can play the system via high-cost attorneys while commoners are left to plea-bargain a reduced sentence, even when they are innocent.

When crises arise, the state first protects its own authority and control. Its second priority is securing the wealth and power of the elite.

The Self-Serving Savior State

Human nature being what it is, there are two motivations for state authorities to expand their reach and control.  Some of those with state authority feel it is their prerogative (or even their responsibility) to expand state control to protect the commoners who are likely to suffer should a crisis erupt. This do-good impulse may be genuine in some, but by and large it is not compassion that dominates decision-making but the dynamic of a central state having so much power in the first place: you have the power, so do something to save us from the consequences of crisis.

In other words, once power is concentrated in the hands of a few, those few are responsible for handling crises that would have otherwise fallen on a decentralized system with many levels of response.

Then there is the Machiavellian impulse to use crisis as the cover for a power-grab, a dynamic encapsulated in the phrase, never let a good crisis go to waste. This dynamic doesn’t have to be passive; power elites don’t have to wait for a crisis, they can engineer one by exploiting their control of state and private-sector mechanisms.  This process of engineering a crisis can be policy-driven (as described in Naomi Klein’s book The Shock Doctrine) or propaganda-driven (the sinking of the battleship Maine, Nazi Germany’s Lebensraum, etc.).

Though many call an expansive state The Nanny State, I prefer the term The Savior State, as the state claims its expanding powers under the guise of saving us from a variety of threats—including those that arise from the socio-economic system the state oversees. In other words, The Savior State’s guiding ideology is to save us from ourselves.

If we might harm ourselves with addictive drugs, the state’s solution is to imprison everyone caught with addictive drugs—except of course those addictive drugs that enrich the Power Elites (nicotine, alcohol, synthetic opioids, etc.).

If the state deems it risky for children under the age of ten to play outside unattended, the state’s solution is to treat the parents/guardians as criminals.

Each extension of control creates new layers of vested interests—more functionaries who gain not from solving problems but insuring they fester into the future as a form of guaranteed employment, and more opportunities to dispense favors in the informal two-tier system of powerless commoners and influential elites.

The Crisis Toolbox: Political Expediency

History teaches us that authorities view crises as first and foremost a threat to state authority, secondarily as a threat to elites’ wealth and power, and then lastly as a threat to the socio-economic system they rule.

Given these crisis management priorities, their first response is to extend their authority by whatever means are necessary.  Once these new powers are in hand, the state deploys them to limit the threat posed to the power elites and the structure that supports state and elite wealth/power.

In a centralized power structure, this crisis management manifests as change the rules without warning to increase the reach and power of the state.  The justification is something along the lines of these emergency powers are needed to protect the nation—powers that all too often become permanent, as powers once taken are rarely relinquished for all the reasons outlined above.

While the rule changes are presented as both necessary and well-planned, in actuality the process is one of political expediency:  a hurried rush to do whatever limits the risks to the power elites’ wealth and power before opposition can be organized, and to cloak the power-grab in the usual Savior State garb: we are acting to save the system that benefits you.

But this expediency comes back to haunt both the state and the power elites, as expedient power grabs designed to protect the state and elites do not actually address the dynamics that spawned the crisis in the first place. Rather, they exacerbate the problem by introducing self-serving fixes that paper over the problem as a quick-and-dirty way of protecting the power and wealth of the state and private-sector elites.

These fixes end up crippling the mechanisms that are needed to actually solve the systemic sources of the crisis.

The Continuing Financial Crisis

Financial crises are inevitable, and the state (which includes the central bank) seeks to limit the crisis by taking control of the market

Examples include: closing the stock market, declaring a bank holiday, issuing a new currency, fixing wages and prices, and banning short selling.

In the current financial crisis that started in 2008 (and that has yet to end), central banks and states have largely avoided these outright takeovers of the market in favor of a more subtle strategy of controlling the markets while maintaining the appearance of “free markets.”

In Part 2: How To Defend Against An Unfair Re-Set Of The System, we’ll examine the ways the U.S. state and central bank have already extended control over the market—for example, via the mass purchase of assets by central banks (see accompanying chart)– and what additional controls they will likely impose as the simmering crisis erupts anew in the years ahead.

We’ll also look at what we mere commoners can do to protect ourselves from the inevitable risks and unanticipated calamities this centralized control will unleash.

Click here to read the report (free executive summary, enrollment required for full access)


via Tyler Durden

Is That Poll That Found College Students Don’t Value Free Speech Really ‘Junk Science’? Not So Fast

a college graduation“It should never have appeared in the press,” blared an article from The Guardian‘s Lois Beckett last week—seeming to refer to the findings of a recent Brookings Institution survey of college students that had been reported on widely, including here at Reason.

According to the lead researcher in that study, John Villasenor of the University of California, Los Angeles (UCLA), “The survey results establish with data what has been clear anecdotally to anyone who has been observing campus dynamics in recent years: Freedom of expression is deeply imperiled on U.S. campuses.” Among other things, the poll found that 44 percent of students at four-year universities don’t know the First Amendment protects so-called hate speech from censorship.

Beckett’s suggestion—amplified by a number of others, including Daniel Drezner at The Washington Post—is that these numbers should not be trusted. The Brookings poll “was not administered to a randomly selected group of college students nationwide, what statisticians call a ‘probability sample,'” she wrote. “Instead, it was given to an opt-in online panel of people who identified as current college students.”

So what? Should you disregard the findings? Do we consider the survey “debunked”? My answer is no. The meat of Beckett’s critique—that the poll didn’t draw a random sample of college students—is grounded in real science. Random sampling is the gold-standard methodology in survey research, and this study did not use it. But it would not be accurate to say there’s a consensus in the field that no other kinds of polls are ever valid or worth citing, something the Beckett piece strongly implies.

These days, lots of well-respected outfits are doing sophisticated work outside the confines of traditional probability polls. All surveys can be done well or poorly, and some online surveys really are garbage. Nonetheless, it’s a stretch to claim that any poll that uses an opt-in panel is necessarily junk, and it’s far from clear from the facts presented in the Guardian story that the study in question should be included among the bad ones.

That’s the short answer, and perhaps I should leave it there. But for those who might be interested in the nitty-gritty details behind this dispute, I’ll go a little further below the fold.

The charges being leveled here are threefold: that the methodology section appended to the study is overly vague; that because the poll was done via an opt-in nonprobability web panel, its findings are not trustworthy; and that Villasenor estimated a “margin of error” for the poll, a no-no for this type of research.

The first complaint is fair enough. The author says that he “requested that UCLA contract with a vendor for the data collection,” omitting whom the school contracted with and how the survey was actually conducted. Disclosing that sort of thing is an important part of research transparency, so it’s understandable that its absence raised questions. But of course, this doesn’t necessarily mean the results are bad, only that there’s good reason to seek more clarity. Catherine Rampell did that, and laid out her findings, in this piece for The Washington Post.

The second complaint is the serious one. And here it helps to have a sense of the history of online polling efforts.

For years, most good survey researchers eschewed nonprobability polling on the grounds that drawing a random sample (i.e., one where everyone has an equal chance of being interviewed) is how you know that the opinions of the relatively small number of people you actually hear from are reflective of the opinions of the population as a whole.

“I think most of us who have been part of the survey research community for more than 10 years were trained with exactly that notion—that the center of truth starts with random sampling,” says Mark Blumenthal, the founder who now heads election polling at SurveyMonkey, a company that (in addition to the peer-to-peer web surveys you may be familiar with) offers an online nonprobability panel like the one the Brookings survey relied on. “But many of us have evolved in our thinking​.”

Probability sampling is indeed the ideal. Unfortunately, as I’ve written about fairly extensively, getting a truly random group of people to answer your questions is difficult to the point of being almost impossible in an age when so many refuse to pick up their phones and answer their doors. Even the very best polling companies have seen response rates plummet into the single digits, meaning their raw numbers have to be adjusted (“weighted,” in pollster parlance) more aggressively to try to approximate a representative sample. And it’s becoming more and more expensive over time.

Under these conditions, researchers began to look for creative alternative ways to estimate public opinion—silver standards, one might say, to random sampling’s gold. One of the main methods that has emerged is the online nonprobability panel–based poll.

“All forms of surveys today—whether they start with a probability sample or not—the completed sample is not truly random, and there has to be some sort of correction,” Blumenthal says. “We believe we can offer something of similar quality, at a very different price point [compared to traditional probability sampling], and with more speed.”

A number of companies are now working in this sphere. The British firm YouGov, probably the best in class when it comes to this type of online panel research, partners with such outlets as The New York Times, CBS News, and The Economist to conduct surveys. In 2013, the American Association of Public Opinion Research (AAPOR) cautiously authorized nonprobability polling and began building out a framework to govern its use. Sandy Berry of Rand Survey Research Group, the company UCLA brought in to oversee Villasenor’s study, tells me the methodology they used “is consistent with” AAPOR best practices.

None of which means there are no legitimate critics of nonprobability survey research still out there. Cliff Zukin, a former AAPOR president quoted in the Guardian story, says nonprobability research should be reserved for internal decision-making purposes. If a number is going to be released publicly, he believes it should employ the best methodology available—and for now, that means probability sampling.

“I might not feel the same way in two years,” Zukin says. “There’s a lot of research being done, and [nonprobability surveys have] gotten much better than they used to be, but there’s still a gap​.”

How big of a gap? It’s extremely hard to say. In 2016, Pew Research Center released a landmark report on the state of nonprobability survey research. Interestingly, it found that Pew’s own probability-based panel (where researchers go to great lengths and enormous expense to try to reach a truly random sample of people) did not outperform all of the nonprobability polls on all of the metrics. “While the differences between probability and nonprobability samples may be clear conceptually,” the authors concluded, “the practical reality is more complicated.”

Among other things, that report saw what researchers have long understood: that web-only research is, for obvious reasons, weakest at estimating the opinions of groups that aren’t as active online, such as the elderly, Latinos, and very low-income populations. On the flip side, tech-savvy college kids (the population the Brookings study was looking at) are arguably particularly well-suited to being reached this way.

And that brings us to the third complaint.

It’s accurate to point out, as Beckett does, that it doesn’t make sense to report a margin of sampling error for a survey that wasn’t drawn from a random sample. I emailed AAPOR Vice President David Dutwin, who confirmed that “AAPOR does not advocate using margin of error in non-probability samples.” He hurried to add, however, that “some form of error estimation has to be used to assess statistical inference [and] at this time there is no universally accepted measure of error that survey researchers use to apply to non-probability samples.”

So Villasenor deviated from the standard of not using the same term (“margin of error”) to discuss the uncertainty associated with nonprobability surveys as is customarily used for probability surveys. Rand SRG’s Berry concedes this was a mistake on his part. But is that enough to render the poll “junk science”?

Personally, I think not.

from Hit & Run

China Announces RRR Cut Of At Least 50 bps; First Since February 2016

In a sign that China’s ongoing attempts to delever the economy may have gone a bit too far, on Saturday morning China’s central bank announced a targeted reserve requirement ratio (RRR) cut, its first since February 2016 and which will go into effect in 2018, in an attempt to boost lending to struggling smaller firms and energize China’s lacklustre private sector, Xinhua reported

The People’s Bank of China said on its website that it would cut the reserve requirement ratio for some banks that meet certain requirements for lending to small business and the agricultural sector. According to the PBOC, the vast majority of China’s banks would be eligible for at least a 50 bps cut to their required reserve ratio. As a reminder, the RRR is the amount of cash as a percentage of deposits that banks must park at the central bank as reserves. The current rate for major banks was set at 17.0% after the last general RRR cut that took effect in March 2016.

The PBOC explained that the reserve requirement rate will be cut by 50 bps for banks whose loans to the targeted groups account for 1.5% of their outstanding loan balance or their newly added loans for the previous year. A much higher bar is set for a further 100 bps cut: 10% of loans must be to the designated “inclusive finance” groups, the PBOC said. Banks that meet the 10%  requirement will see their RRR cut by 150 bps.

The PBOC also said the move was made to encourage more small loans – those under 5 million yuan – to small firms, loans to individual proprietors and lending that supports agricultural production, innovation, the poor and education.

While the central bank explained that the “targeted” RRR cut is a structural adjustment that does not change the country’s overall monetary policy stance, stressing that it would continue to implement “prudent and neutral” policy to guide reasonable credit and financing growth, analysts at Lianxun Securities said that “the size of the cut is big, it covers all big banks, and 90 percent of small and mid-sized banks. Conservatively we estimate 700 billion yuan in liquidity could be freed up.

Perhaps more notably, analysts observed that the cut was different from previous changes to RRR in that it was a “delayed” cut that will not go into effect until next year, which could lead to disappointment for a banking sector that has already seen significant liquidity withdrawn in recent weeks.

“Clearly, the market will be disappointed as this cut will not help ease the liquidity conditions in the onshore banking system in the short term,” Zhou Hao, a Singapore-based analyst at Commerzbank, wrote in a note after the announcement.

The RRR cut will likely not come as a surprise as China’s cabinet, gearing up for the most important Communist party Congress in 5 years starting next month, had recently flagged a possible move, saying “the government would take a number of measures, including tax exemptions and targeted reserve requirement ratio cuts to encourage banks to support small businesses.”

The policy action is in line with ongoing attempts to delever the economy and encourage more targeted lending to more vulnerable sectors of the economy, even as the government tries to cut down on speculative investment in the financial sector and property and rein in a rapid buildup in overall corporate debt. However, the RRR cut is departure from the PBOC’s recent approach of setting policy using new tools such as short- and medium-term lending facilities for a similar purpose….

… as well as daily changes to interbank liquidity via reverse repo open market operations.

Lianxun Securities also said the RRR cut would help to offset negative impacts to smaller firms from strict environmental protection measures and capacity cuts, while also offering some liquidity relief to small and mid-sized financial firms. Additionally, the move comes amid increasingly more aggressive attempts by China to delever its shadow banking system.

As Deutsche Bank noted several days ago, in its latest monthly credit data report, “the financial deleveraging campaign has continued to make progresses: banking assets growth softened further; loan and TSF beat estimates but the overall credit growth actually moderated; shadow banking size was shrinking while loan growth stayed resilient. As such from the financial system’s perspective we see improving transparency and lower liquidity risks. While the deleveraging has contributed to a modestly slower economy, the growth momentum is in line with our house view.”

That said, DB said that “we do not foresee policies to ease and we expect the deleveraging to carry on orderly,” so one wonders how today’s significant easing will impact the German bank’s outlook on China’s economy.

Separately, to offset the shrinkage in China’s shadow banking sector, in February the PBOC extended a preferential programme that allows financial institutions that support rural finance and small enterprises to apply for a lower required level of cash reserves.  But despite still-strong credit growth nationwide, many small businesses and farmers remain in desperate need of funds and do not have easy access to ample cheap credit that state-run firms enjoy.

Also on Saturday, the central bank said it will maintain prudent and neutral monetary policy and use multiple monetary policy tools to keep liquidity basically stable. The statement, which came after the third quarter meeting of the PBOC’s monetary policy committee, said “China will continue with interest rate and exchange rate reform while keeping the yuan basically stable.”

via Tyler Durden