Japanese researchers at the Advanced Industrial Science and Technology (AIST) research center have developed a prototype humanoid robot, the HRP-5P, designed to autonomously perform heavy labor in hazardous environments.
Standing just under 6-feet tall and clocking in at 222 lbs, the HRP-5P has “unsurpassed physical capabilities,” according to Phys.org, and is fitted with an array of sensors in order to fully assess its environment to perform various tasks.
In one demonstration, the HRP-5P shows of its skills grabbing standard 77 lb. boards of drywall typically used in construction.
In order to complete the task, the robot must:
Generate a 3-D map of the surrounding environment, detect objects, and approach the workbench.
Lean against the workbench, slide one of the stacked gypsum boards to separate it, and then lift it.
While recognizing the surrounding environment, carry the gypsum board to the wall.
Lower the gypsum board and stand it against the wall.
Using high-precision AR markers, recognize and pick up a tool.
Holding a furring strip to keep HRP-5P itself steady, screw the gypsum board into the wall.
Aside from construction, AIST’s robot has compelling applications at aircraft facilities, shipyards or any other environment in which heavy things need to be lifted or manipulated – particularly in hazardous environments.
AIST collaborated with several private companies in the development of the HRP series, including Kawada Robotics, which has assisted in the design of several prototypes leading up to the 5P. HRP-2, for example, was able to walk, lie down, stand up, walk on narrow paths, and other navigational maneuvers. Its successor, the HRP-3 was able to walk on slippery surfaces and tighten bridge bolts via remote control.
The 5P marked a significant leap over its predecessors – employing technology from Honda Motor Co, and the New Energy and Industrial Technology Development Organization (NEDO), the latest and greatest from AIST can work in “unstructured environments,” and excels at “targeting full-body motion planning based on environmental model acquisition that enables humanoid robots to adapt to unknown environments.”
At a height of 182 cm and weight of 101 kg, HRP-5P has a body with a total of 37 degrees of freedom: two in its neck, three in its waist, eight in its arms, six in its legs, and two in its hands. Except for the hands, this represents the most freedom of movement in the HRP series to date. Compared to the revised version of HRP-2, adding one degree of freedom to the waist and one to the base of the arms has enabled operations more closely resembling human motion. Accordingly, using both arms, HRP-5P can handle large objects such as gypsum boards (1820 × 910 × 10 mm, approx. 11 kg) or plywood panels (1800 × 900 × 12 mm, approx. 13 kg).
To emulate human motion by the robot without as many degrees of freedom as people, the researchers ensured a wider movable range of joints in the hip and waist areas, where multiple joints are concentrated. For example, hip joints that flex and extend the legs have a range of motion of 140° in humans and 202° in HRP-5P (Fig. 1), and waist joints that turn the upper body have a range of motion of 80° in humans and 300° in HRP-5P. This enables work by the robot in a variety of postures, such as when deeply crouched with the upper body twisted.
Joint torque and speed were approximately doubled on average relative to the revised HRP-2, by employing high-output motors, adding cooling to the drive mechanism, and adopting a joint drive system with certain joints featuring multiple motors. As a result, the robot can do work involving heavy loads, such as lifting a gypsum board from a stack. (Each arm of HRP-5P, extended horizontally, can bear a weight of 2.9 kg, compared to 1.3 kg for the revised version of HRP-2 and 0.9 kg for HRP-4.)
Using head-mounted sensors, the robot constantly acquires 3-D measurements of the surrounding environment (at a frequency of 0.3 Hz). Even if the field of view is blocked by objects used in work, stored and updated measurement results enable execution of the walking plan while carrying a panel or correction of walking when the feet slip. (Fig. 2).
Learning involves a convolutional neural network using a newly constructed image database of work objects. The robot can detect ten types of 2-D object regions at a high precision of 90 % or more even against low-contrast backgrounds or under dim lighting (Fig. 3).
It was possible to build a highly reliable robot system and maintain the quality of large-scale software (with approx. 250,000 lines of code) by arranging a virtual test environment for the robot intelligence in the Choreonoid robot simulator and monitoring software regression for 24 hours.
Great synopsis of Italy’s economic and political woes by the FT.
The country’s lagging GDP per capita is all you need to know to understand the cause of the political conflict and rise of left-right Italian populism.
We were surprised by the chart on Italy’s under-educated youth, which is another explanation why populism has taken root in Italy.
The challenge remains for the Italian government – how to get Italy out of the slow or no-growth trap it has been caught in throughout this century.
The latest OECD economic survey of Italy showed that contrary to the experience of most of the organisation’s member states, productivity among the most efficient companies in Italy is declining even faster than among the least productive ones.
Italy’s coalition government argues that its spending plans will help fuel growth. But many of the experts consulted by the FT argue the contrary: that high debt levels already crowd out growth by attracting funds for government paper that would otherwise go towards more productive investments.
The “accidental” disclosure that WikiLeaks founder Julian Assange has been secretly charged by Department of Justice in the Eastern District of Virginia has ignited a firestorm over the freedom of the press, and protections offered to journalists under the First Amendment.
Beginning in 2010, the Department of Justice under Obama began to draw a distinction between WikiLeaks and other news organizations. Former Attorney General Eric Holder insisting that Assange’s organization does not deserve the same first amendment protections during the Chelsea Manning case, in which the former Army intelligence analyst was found guilty at a court-martial of leaking thousands of classified Afghan War Reports.
Ultimately, the previous administration concluded that it could not criminally charge Assange and WikiLeaks due to First Amendment protections.
It appears, however, that the Trump Justice Department has now found a way, possibly under the Espionage Act, to indict Assange – a move which would have wide-ranging implications for journalists and news outlets alike.
Opining on the Assange news is The Intercept‘s Glenn Greenwald – the journalist and author who published a series of reports while at The Guardian from whistleblower Edward Snowden, who leaked information on global surveillance programs based on classified documents.
As the Obama DOJ Concluded, Prosecution of Julian Assange for Publishing Documents Poses Grave Threats to Press Freedom
THE TRUMP JUSTICE DEPARTMENTinadvertently revealedin a court filing that it has charged Julian Assange in a sealed indictment. The disclosure occurred through a remarkably amateurish cutting-and-pasting error in which prosecutors unintentionally used secret language from Assange’s sealed charges in a document filed in an unrelated case. Although the document does not specify which charges have been filed against Assange, the Wall Street Journal reported that “they may involve the Espionage Act, which criminalizes the disclosure of national defense-related information.”
Over the last two years, journalists and others have melodramatically claimed that press freedoms were being assaulted by the Trump administration due to trivial acts such as the President spouting adolescent insults on Twitter at Chuck Todd and Wolf Blitzer or banning Jim Acosta from White House press conferences due to his refusal to stop preening for a few minutes so as to allow other journalists to ask questions. Meanwhile, actual and real threats to press freedoms that began with the Obama DOJ and have escalated with the Trump DOJ – such as aggressive attempts to unearth and prosecute sources – have gone largely ignored if not applauded.
But prosecuting Assange and/or WikiLeaks for publishing classified documents would be in an entirely different universe of press freedom threats. Reporting on the secret acts of government officials or powerful financial actors – including by publishing documents taken without authorization – is at the core of investigative journalism. From the Pentagon Papers to the Panama Papers to the Snowden disclosures to publication of Trump’s tax returns to the Iraq and Afghanistan war logs, some of the most important journalism over the last several decades has occurred because it is legal and constitutional to publish secret documents even if the sources of those documents obtained them through illicit or even illegal means.
The Obama DOJ – despite launching notoriously aggressive attacks on press freedoms – recognized this critical principle when it came to WikiLeaks. It spent years exploring whether it could criminally charge Assange and WikiLeaks for publishing classified information. It ultimately decided it would not do so, and could not do so, consistent with the press freedom guarantee of the First Amendment. After all, the Obama DOJ concluded, such a prosecution would pose a severe threat to press freedom because there would be no way to prosecute Assange for publishing classified documents without also prosecuting the New York Times, the Washington Post, the Guardian and others for doing exactly the same thing.
As the Washington Post put it in 2013 when it explained the Obama DOJ’s decision not to prosecute Assange:
Justice officials said they looked hard at Assange but realized that they have what they described as a “New York Times problem.” If the Justice Department indicted Assange, it would also have to prosecute the New York Times and other news organizations and writers who published classified material, including The Washington Post and Britain’s Guardian newspaper.
Last year, the Trump DOJ under Jeff Sessions, and the CIA under Mike Pompeo, began aggressively vowing to do what the Obama DOJ refused to do – namely, prosecute Assange for publishing classified documents. Pompeo, as CIA Director, delivered one of the creepiest and most anti-press-freedom speeches heard in years, vowing that “we have to recognize that we can no longer allow Assange and his colleagues the latitude to use free speech values against us,” adding that WikiLeaks has “pretended that America’s First Amendment freedoms shield them from justice,” but: “they may have believed that, but they are wrong.”
Remarkably, the speech by Donald Trump’s hand-picked CIA chief and long-time right-wing Congressman sounded like (and still sounds like) the standard Democratic view when they urge the Trump administration to prosecute Assange. But at the time of Pompeo’s speech, Obama DOJ spokesman Matt Miller insisted to me that such promises to prosecute Assange were “hollow,” because the First Amendment would bar such prosecutions:
it’s also hollow. DOJ knows it can’t win a case against someone just for publishing secrets.
But the grand irony is that many Democrats will side with the Trump DOJ over the Obama DOJ. Their emotional, personal contempt for Assange – due to their belief that he helped defeat Hillary Clinton: the gravest crime – easily outweighs any concerns about the threats posed to press freedoms by the Trump administration’s attempts to criminalize the publication of documents.
This reflects the broader irony of the Trump era for Democrats. While they claim out of one side of their mouth to find the Trump administration’s authoritarianism and press freedom attacks so repellent, they use the other side of their mouth to parrot the authoritarian mentality of Jeff Sessions and Mike Pompeo that anyone who published documents harmful to Hillary or which have been deemed “classified” by the U.S. Government ought to go to prison.
During the Obama years, the notion that Assange could be prosecuted for publishing documents was regarded as so extreme and dangerous that even centrist media outlets that despised him sounded the alarm for how dangerous such a prosecution would be. The pro-national-security-state Washington Post editorial page in 2010, writing under the headline “Don’t Charge WikiLeaks,” warned:
Such prosecutions are a bad idea. The government has no business indicting someone who is not a spy and who is not legally bound to keep its secrets. Doing so would criminalize the exchange of information and put at risk responsible media organizations that vet and verify material and take seriously the protection of sources and methods when lives or national security are endangered.
In contrast to Democrats, Republicans have been quite consistent about their desire to see WikiLeaks prosecuted. As Newsweek noted in 2011: “Sarah Palin urged that Assange be ‘pursued with the same urgency we pursue Al Qaeda and Taliban leaders,’ and The Weekly Standard’s William Kristol wants the U.S. to ‘use our various assets to harass, snatch or neutralize Julian Assange and his collaborators.’” Some Democratic hawks, such as Joe Lieberman and Dianne Feinstein, joined the likes of Palin and Kristol in urging WikiLeaks prosecution, but the broad consensus in Democratica and liberal circles was that doing so was far too dangerous for press freedoms.
In the wake of the 2010 disclosures of the Iraq and Afghanistan war logs, Donald Trump himself told Fox and Friends’ Brian Kilmade that he believed Assange deserved “the death penalty” for having published those documents (a punishment Trump also advocated for Edward Snowden in 2013):
What has changed since that Obama-era consensus? Only one thing: in 2016, WikiLeaks published documents that reflected poorly on Democrats and the Clinton campaign rather than the Bush-era wars, rendering Democrats perfectly willing, indeed eager, to prioritize their personal contempt for Assange over any precepts of basic press freedoms, civil liberties, or Constitutional principles. It’s really just as simple – and as ignoble – as that.
It is this utterly craven and authoritarian mentality that is about to put Democrats of all sorts in bed with the most extremist and dangerous of the Trump faction as they unite to create precedents under which the publication of information – long held sacrosanct by anyone caring about press freedoms – can now be legally punished.
Recall that the DNC itself is currently suing WikiLeaks and Assange for publishing the DNC and Podesta emails they received: emails deemed newsworthy by literally every major media outlet, which relentlessly reported on them. Until this current Trump DOJ criminal prosecution of Assange, that DNC lawsuit had been the greatest Trump-era threat to press freedoms – because it seeks to make the publication of documents, which is the core of journalism, legally punishable. The Trump DOJ’s attempts to criminalize those actions is merely the next logical step in this descent into a full-scale attack on basic press rights.
THE ARGUMENTS JUSTIFYING the Trump administration’s prosecution of Assange are grounded in a combination of legal ignorance, factual falsehoods, and dangerous authoritarianism.
The most common misconception is that unlike the New York Times and the Washington Post, WikiLeaks can be legitimately prosecuted for publishing classified information because it’s not a “legitimate news outlet.” Democrats who make this argument don’t seem to care that this is exactly the view rejected as untenable by the Obama DOJ.
To begin with, the press freedom guarantee of the First Amendment isn’t confined to “legitimate news outlets” – whatever that might mean. The First Amendment isn’t available only to a certain class of people licensed as “journalists.” It protects not a privileged group of people called “professional journalists” but rather an activity: namely, using the press (which at the time of the First Amendment’s enactment meant the literal printing press) to inform the public about what the government was doing. Everyone is entitled to that constitutional protection equally: there is no cogent way to justify why the Guardian, ex-DOJ-officials-turned-bloggers, or Marcy Wheeler are free to publish classified information but Julian Assange and WikiLeaks are not.
Beyond that, WikiLeaks has long been recognized around the world as a critical journalistic outlet. They have won prestigious journalism awards including the Martha Gellhorn Prize for excellence in journalism as well as Australia’s top journalism award. Beyond that, it has partnered withthe planet’s leading newspapers, including the New York Times, the Guardian, El Pais and others, to publish some of the most consequential stories of the last several decades One does not need to be a “legitimate journalism outlet” to enjoy the press freedom protections of the First Amendment, but even if that were the case, WikiLeaks has long possessed all indicia of a news outlet.
Then there’s the claim that WikiLeaks does more than publish documents: it helps its sources steal them. This was the claim made last night by former CIA agent John Sipher when trying to justify the Trump DOJ’s actions in response to concerns from a journalist about the threats to press freedom this would pose:
No. Assange’s crime is aiding and abetting. He encouraged Manning to steal classified documents (similarly to how he encouraged Trump Jr. to claim the electron was rigged). He was not a place to publish whistle blowers. He was a thief and assistant to Putin.
What Sipher said there is a complete fabrication. When the Obama DOJ explored the possibility of prosecuting Assange, that was the theory it tested: that perhaps it could prove that WikiLeaks did not merely passively receive the documents from Chelsea Manning but collaborated with her on how to steal them.
But the Obama DOJ concluded that this theory would not justify prosecution because – contrary to the lie told by Sipher – there was absolutely no evidence that Assange worked with Manning to steal the documents. As the Post put it: “officials said that although Assange published classified documents, he did not leak them, something they said significantly affects their legal analysis.”
The same is true of WikiLeaks’ publication of the DNC and Podesta emails. Nobody has ever presented evidence of any kind that WikiLeaks worked on the hacking of those emails. There is no evidence that WikiLeaks ever did anything other than passively receive pilfered documents from a source and then publish them – exactly as the New York Times did when it received the stolen Pentagon Papers, and exactly as the Guardian and the Washington Post did when it received the Snowden documents.
Moreover, journalists often do more than passively receive information, but instead frequently work with sources before publication of articles: encouraging, cajoling, and persuading them to provide more information. Accepting the theory that a journalist can be prosecuted for doing more than merely passively receiving information – something that nobody has even proved Assange did – would itself gravely threaten to criminalize core aspects of journalism.
Then there’s the claim that WikiLeaks somehow stopped being a real journalism outlet because it acted to help one of the presidential campaigns at the expense of of the other. This is just another version of the false argument that only “Real Journalists” – whatever that might mean, whoever gets to decide that – enjoy the right to use a free press to disseminate information. That claim is pure legal ignorance.
But let’s assume for the sake of argument that it’s true that WikiLeaks acted to help the Trump campaign and therefore should be disqualified from the protections of the First Amendment. To see how pernicious this argument is, look at how it was recently expressed by former Pentagon official Ryan Goodman and Obama WH Counsel Bob Bauer in justifying the prosecution of WikiLeaks:
It is clear from disclosures by an internal WikiLeaks critic and othermaterials that Julian Assange targeted Hillary Clinton and sought to work with the Trump campaign and the Russians to secure her defeat. This is not a “legitimate press function.” And the conflation of Wikileaks’ plan of campaign attack with standard journalistic activity undermines important distinctions critical to the protection of the free press.
Just ponder the implications of this incredibly restrictive definition of journalism. It would mean that any outlets that favor one candidate over another, or one political party over another, are not engaged in “legitimate press functions” and therefore have no entitlement to First Amendment protections.
Does anyone on the planet doubt that outlets such as MSNBC and Vox favor the Democratic Party over the Republican Party, and the people they employ as journalists spent the last year doing everything they can to help the Democrats win and the Republicans lose? Does anyone doubt that MSNBC and Vox journalists spent 2016 doing everything in their power to help Hillary Clinton win and Donald Trump lose? No person with even the most minimal amount of intellectual honesty could deny that they did so.
Does this mean that Rachel Maddow and Ezra Klein – by virtue of favoring one political party over the other – are not real journalists, that they are not engaged in “legitimate press functions,” and thus do not enjoy the protections of the First Amendment, meaning they can be prosecuted by the Trump DOJ without the ability to claim the rights of a free press? To state that proposition is to illustrate the tyrannical impulses underlying it. As Marcy Wheeler, otherwise sympathetic to the arguments made by the Goodman/Bauer article, put it:
I agree with much of this analysis abt limits on 1A protection for Trump’s conspiring w/Russians. But this claim would threaten a lot of journalistic activity and is fundamentally at odds with the early history of journalism in this country. pic.twitter.com/nBHkU69THI
As Dan Froomkin wrote in response to that article, he finds some of Assange’s actions “despicable” and “abhorred the heedless, unedited publication of the non-newsworthy and personally hurtful” emails that were released (I have expressed similar highly critical views about WikiLeaks’ publication decisions). But Froomkin nonetheless recognizes that “Assange remains a journalist” and that “In the Trump era, when the president of the United States is using his office to attack journalists and journalism itself, the First Amendment is a key bulwark of liberty.” That’s how people who actually care about press freedom – rather than pretend to care about it when doing so suits their political interests of the moment – will reason.
But that’s exactly the point. Neither the most authoritarian factions of the Trump administration behind this prosecution, nor their bizarre and equally tyrannical allies in the Democratic Party, care the slightest about press freedoms. They only care about one thing: putting Julian Assange behind bars, because (in the case of Trump officials) he revealed U.S. war crimes and because (in the case of Democrats) he revealed corruption at the highest levels of the DNC that forced the resignation of the top 5 officials of the Democratic Party and harmed the Democrats’ political reputation.
They’re willing to create a precedent that will criminalize the core function of investigative journalism because – even as they spent two years shrilly denouncing that most trivial “attacks on press freedom” – they don’t actually care about that value at all. They want to protect only the journalism that advances their political interests, while putting people behind bars who publish information that undermines their political interests. It is this authoritarian, noxious mentality that has united the worst elements of the Trump administration and the Democratic Party that pretends to find tyrannical actions objectionable but is often the leaders in defending them.
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Event risks are rare, but they can impact markets harshly. 9/11 being an obvious example. Unpredictable, unforeseen. “Stuff happens” Donald Rumsfeld once opined about events surrounding the Iraq war.
But some event risk can be brewing for a long time. People know it’s out there, but it’s unquantifiable, it’s virtually impossible to time. A key reason is that one can never be sure of the outcome, the implications and more importantly from a market’s perspective: The reaction once the event unfolds.
For over a year the Mueller investigation has been under way. Several people have been indicted/convicted sent to jail.
Markets have largely ignored the Mueller investigation up until now, but that may be about to change. Why? Because there are signs that the investigation may be moving to a different, and perhaps more market impacting phase: Moving closer to the president and perhaps his family directly.
Perhaps the clearest sign of this potential new phase is coming from the president himself in the form of a twitter attack storm yesterday:
I won’t bother commenting on the merits of the investigation nor will I opine about the outcome or its implications. There’s no point as everyone will have their own opinion and I have no crystal ball on how this will unfold.
However, should the investigation move into a phase whereby the president himself or his family are directly implicated, then markets may react not as calmly as during previous indictments.
In terms of market precedence there is really only a sample size of one, and that is the Nixon Watergate scandal that has been beaten to death in the opinion columns I’m sure.
Different time, different events, different actors, yet the message is start and clear:
On key indictments days or high political resignations markets may react poorly, very poorly indeed. While gridlock may be preferred by markets, vast political uncertainty is not as it bleeds into confidence. And waning confidence breeds more waning confidence and before you know it you’re in a bear market. From the time of Nixon’s re-election to his resignation markets dropped 29%. It was a wild roller coaster ride with ripping rallies and steep sell-offs, but all within a downward trend that lasted until the event concluded.
Did Trump send out his tweets because of a new found urgency in regards to the Mueller investigation? I can’t say.
Markets are currently still working through the fallout from the October correction and a loss confidence is already permeating the action. AAPL, NVDA, WMT, KMT, GE, GS, AMZN, FB…. I could go on, but all are individual stocks that are already facing major confidence tests, outright crises in some cases.
If Mueller were to drop a hammer in the near term, meaning an indictment close to the President, especially in this current fragile market climate, the lower risk zone outlined last weekend in Battle Lines, may come into play quickly:
I can’t predict the event, the timing, nor its reaction and hence I can’t base a trade outlook on it. Indeed nothing may happen.
Our trade strategies are technical based. But event risk is out there and perhaps more imminently than any of us can know. But if an event on that front does happen technicals inform us ahead of time as to key risk and support levels which we can then use in deciding where and when to react.
As the Watergate chart shows: Even during such events markets don’t move in just one direction.
Amid the United States maintaining nearly 800 military bases in more than 70 countries and territories abroad, what’s one more base in the South Pacific?
At a moment when China is also reported to be eyeing deep water development around Papua New Guinea’s Manus Island, the United States and Australia have announced plans to build a joint naval base there.
VP Mike Pence and Australian Prime Minister Scott Morrison both addressed APEC on Saturday, via ABC
Vice President Mike Pence unveiled the plan on Saturday at a Asia-Pacific forum hosted by Papua New Guinea (PNG) where world leaders discussed trade and accessibility of international waters at a time when China is growing more brazen in laying claim to sea and air space in the South China Sea. The push comes as regional powers compete to firm up alliances and maintain access to key infrastructure ensuring open navigation and ease of unimpeded trade routes.
Announcing the US-Australian military base, VP Pence said, “We will work with these nations to protect the sovereignty and maritime rights of Pacific islands as well.” In what appeared a passing shot at China, Pence continued, “And you can be confident, the U.S. will continue to uphold the freedom of the seas and the skies.”
Though Australian Prime Minister Scott Morrison first discussed his country would fund a development of a base on Manus Island in partnership with the PNG government on November 1st, this is the first time the White House has formally announced the US role in its establishment.
Longtime close US ally Australia has in recent years felt China begin to compete for influence in the Pacific, ending Australia’s previously unrivaled influence in the region. China’s growing Pacific presence also has huge implications for the United States, as Reuters summarizes:
Analysts say a Chinese presence on Manus Island could impact the West’s ability to navigate the Pacific while offering Beijing close access to U.S. bases in Guam.
Manus Island was a major U.S. naval base during the Second World War, playing a key role in Washington’s Pacific strategy. Recently, it has hosted one of Australia’s two controversial offshore immigration detention centers.
Residents of Manus Island, which has a population of about 50,000, are said to be angry that no representatives of either the US or Aussie governments have consulted them, and have often been at odds with decisions of the central PNG government — something the island’s Governor, Charlie Benjamin, told reporters.
Much of the PNG’s entire navy is made up of patrol boats and landing craft supplied by Australia — a relationship cultivated over the decades given Papua New Guinea’s geographic closeness to the Australian continent.
Meanwhile assuming that Beijing perceives that the new US Pacific base is part of a broader trend of American military ships and aircraft being more active in China’s perceived backyard, this could only heighten potential aggression during future “intercept” incidents in the area of the South China Sea as it continues to lay claim to what the rest of the world recognizes as international waters.
Chinese President Xi Jinping had addressed the same forum just before the US Vice President, saying in response to White House accusations of Beijing using debt-trap diplomacy:
No-one has the power to stop people from seeking a better life. We should strengthen development cooperation.
And the Chinese president warned further against ramping up the trade war as well as potential military escalation, saying, “hot, cold or trade [war]” could spell catastrophe. “Mankind has once against reached a crossroad,” he said. “Which direction should we choose? Cooperation or confrontation, openness or closing one’s door?”
What — you exclaim with disbelief. Cryptocurrencies before Bitcoin? Yes, indeed. Don’t get me wrong, Bitcoin was the first blockchain-based currency. But by far not the first purely digital money. That one has a colorful history of dreams, prosecution and failure. The misfits of cryptocurrencies delivered the lessons-learned for Satoshi to pull a John Doe on us.
“One thing we are still lacking and will soon develop is reliable e-cash — a method by which money can be transferred from A to B on the Internet without A knowing B and vice versa”, Milton Friedman, economist in 1999.1
DigiCash: Nobody wanted digital money
David Chaum at age 62
David Chaum is a 28-year-old Ph.D. student in computer science from the University of Berkeley, California when he publishes a scientific paper in 1983. He is the first to describe digital money. Chaum comes from a wealthy US-American family, is a brilliant mathematician and is appointed head of the cryptographic department of the Mathematical Institute in Amsterdam.
In his paper, he describes the key point that his digital money differs from credit card payments through anonymity. Users receive the digital currency from their bank, but then it is made anonymous. This allows the bank to see who has exchanged how much money, but not what it is used for.
How to make a cryptocurrency without Blockchain
Chaum uses cryptography to create a blind, digital signature to make money anonymous. A metaphor best explains what this signature is: We all know the postal vote by means of which we can vote without making our cross in the cabin on election day. In the case of the election card, the electoral authority must confirm that the right person has cast their ballot and, above all, does so only once. At the same time, the authority should not know what the person has voted for.
A postal voting card in Mexico. By Lguweqaakljgh [CC BY-SA 3.0] from Wikimedia Commons
It is, therefore, a question of confirming the process without knowing the content. The voter fills out the ballot paper, puts it in an envelope and seals it. The electoral authority receives the envelope and checks with the electoral roll if the process is correct. The authority then indicates this on the envelope. The voting list says that the person has voted correctly, on the envelope only that it is a correct vote without any link to the person. Thus the envelope is “blind” and the “signature” is written on the envelope by the electoral authority.
In Chaum’s digital money, we replace voting authority with bank and voting card with the amount of money. A user buys digital money from the bank, which the bank confirms. Then every unit of money — every coin — is put into a metaphorical envelope and thus made anonymous. The user can then carry out transactions. The bank knows from its signature that it is a real digital money unit, but not who uses it. This makes digital money anonymous.
David Chaum founds a company in 1989 and invents the virtual currency DigiCash. It enables the secure and convenient payment of goods and services on the Internet. This distinguishes DigiCash from conventional credit cards, whose use is quite insecure in comparison — even today.
It is ahead of its time because it should take another 10 years before DigiCash is accepted by banks and customers. For digital money to work, it needs a demand in the form of e-commerce, i.e. online trade, which only begins in the second half of the 1990s.
But even then DigiCash has a hard time. An article in Forbes sums it up as follows:
“A beautiful idea for a beautiful new world with one problem: nobody wants it. Not the banks, not the dealers and above all, not the customers. E-commerce is flourishing [1999, the author’s note], but as it turns out, the customer’s Mastercard and Visa are his preferred currencies.2”
Digital currencies like DigiCash have the same problem as almost every technological development in its infancy: they offer solutions to a problem that users don’t yet have. DigiCash’s advantage is anonymity, but customers just want to shop conveniently online. Of course, they prefer to use credit cards, as they have known them for years.
Chaum has the misfortune of the early bird, but that is added by incompetence. The Dutch magazine Next!3 gives Chaum 1999 a bad rep: All cryptographers are paranoid and David Chaum is an excellent cryptographer. His company is more like a psychiatric institution than a tech company. He negotiates a deal with the Dutch ING Bank for months, only to refuse to sign on the day of the joint signing of the contract.
“He was so paranoid that he always thought something was wrong,” says Raymond Stofberg, CFO of DigiCash until 1996: “There were eight ING people including the CEO and David just didn’t want to sign.”
Bill Gates wants to integrate DigiCash into every Windows 95 installation, but the alleged $100 million in Microsoft’s offer is not enough. Gates withdraws, as did the operators of the then most important Internet browser Netscape.
Bill Gates (right) and a fan on DigiCash. Or not. By Joi Ito [CC BY 2.0], via Wikimedia Commons
Chaum’s managers’ mutiny and demand that he resign as CEO. He bends down and appoints two of the mutineers as new managing directors. He’s retiring. Shortly thereafter, the mutineers quarrel and most leave the company.
But despite these paranoid-chaotic conditions, investors continue to believe in the product. However, the end of DigiCash is being heralded by customers. Although e-commerce is growing worldwide, customers are not turning to DigiCash. Some do not believe that credit cards are unsafe and others are not convinced that this new type of money is safer. In 1999, the company goes bankrupt and the digital currency is mothballed.
DigiCash’s failure reveals weaknesses that future projects will eradicate: Chaum is a fan of patents and copyrights. It’s good for Chaum but bad for bringing his technology to the people. Eight years later Bitcoin will be open source. The inventor gives the technology to the whole world. On the one hand, it creates competition in the form of many imitator currencies, but it also increases interest and knowledge about the technology.
DigiCash depends on David Chaum. His errors reflect on the entire digital currency. The sum of all mistakes leads to Chaum’s product being buried and makes room for the next attempt.
e-gold: Pioneers die lonely
The glory! e-gold Office sign. Source Wikipedia By TMatthew22
1996 knows neither PayPal nor Bitcoin and has no relevant online shopping yet. But the times — they are a changing. After DigiCash, someone must be the next to try their hand at flourishing e-commerce. The oncologist Douglas Jackson and lawyer Barry Downey assume this role. Their idea: They put gold coins in a safe deposit box in Melbourne, Florida. Then they create a website where digital portions of these gold coins are sold. The shares are denominated in a new currency, which they call e-gold.
In the next four years, e-gold will break ground: the first digital payment system used by at least one million people. First non-credit card payment service that can be integrated into online shops and thus enables pure digital e-commerce.
Precious metal traders use it first, then online traders, auction houses, online casinos, political and non-profit organizations. Since E-Gold is divisible into thousandths of a gram of gold, Jackson and Downey create the first functioning micropayment system. You can use it to send your favorite blogger 10 cents as a thank you for the great article. This is not possible with credit cards and PayPal until this day because the transaction costs are too high.
Then other companies jump on the bandwagon and offer, for example, exchange services from foreign currencies to e-gold. At its peak, e-gold has a market capitalization of $2 billion.4 But its popularity is also increasing among hackers. The central systems of e-gold are not secure enough, they are hacked. Users are also unprotected by the notoriously insecure Windows and Internet Explorer. Many customers lose their deposits.
Operators are getting a grip on these problems. However, they have no chance against the US authorities, even when they act in accordance with the law. First, a competitor requests for a money exchange license. The application is rejected on the grounds that “You do not need a license, as neither gold nor virtual gold is money”. The operators of e-gold are asking the tax authorities to check whether their business model is perhaps a legal transfer of money. Authorities confirm: No money transfer, no license required. Wonderful. Wonderful? Not at all.
The Patriot Act introduced by the USA after 9 September 2001 not only allows the suspension of many civil rights such as that to privacy. The USA — land of free trade — is retroactively changing the money transfer law and bringing Jackson and Downey to justice because they have no license. Tax authorities freeze gold reserves and most users leave the e-gold platform. Douglas Jackson accepts the prosecution’s offer: he should — pro forma — plead guilty to money laundering, then apply for a license and everything will be fine.
In 2008 he is sentenced to 300 hours of community service and a fine of 200 US dollars. He seeks a license and — what a surprise — is rejected. Reason: Sentenced criminals may not possess a money transfer license.
The story of e-gold is over, Jackson is ruined. Those who want to follow in E-Gold’s footsteps have learned a lot:
Centralized management makes vulnerable to hackers
Central administration is therefore no more secure than a bank or credit card company
A monetary system based on gold may lead to state-run blackmail
A company domiciled in a country may be at the mercy of changing legislation
Founders who can be identified as real persons may be preventively arrested by the FBI
The person or persons around the pseudonym Satoshi Nakamoto also learned. Their invention Bitcoin has a market capitalization of 120 billion US dollars after nine years. And they have solved the above points. Since Bitcoin is a direct successor of DigiCash and e-gold, I want to close this story with the invention of Bitcoin itself.
The birth of Bitcoin
The public will hear about Bitcoin on 31 October 2008 at 8:10 Central European Time. Although “the public” is a little exaggerated. The metzdown.com website has a mailing list where anyone who enters their e-mail address can exchange information on cryptography. The public here consists of a few thousand computer nerds. A certain Satoshi Nakamoto sends a short mail to the mailing list starting as follows:
“ I’ve been working on a new electronic cash system that’s fully peer-to-peer (i.e. decentralized, translator’s note), with no trusted third party. (bank or government, translator’s note). (…) A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network.”5
This is followed by further explanations and the download link to a white paper, a technical explanation paper.6 It is a short 9-page document and describes, how
digital money transactions are processed,
to determine the sequence of transactions using a digital date stamp,
the public cash book is reconciled using a so-called proof-of-work concept in such a way that no fraud occurs,
a worldwide network performs this reconciliation,
the owners of matching computers are remunerated for their work,
privacy is maintained and the system is still transparent and which code is used to repel hacker attacks.
All core functions that Bitcoin has today are described in these nine pages.
Who the hell is Satoshi Nakamoto?
Not Satoshi Nakamoto. Source: Wikpedia
The white paper leaves no question unanswered, except this one: Who is Satoshi Nakamoto? A search on Google in 2008 does not reveal the person Satoshi Nakamoto. Two months before Nakamoto’s email, the Bitcoin.org domain is registered and the white paper is available for download. Usually, the owner of a domain can be searched in an international registration database (whois.int). But Bitcoin.org was registered through a service that disguises domain owners. Political activists, who must remain anonymous, but, also criminals like to use this service.
The only thing the cryptography community has found out (to date) is that there is no person named Satoshi Nakamoto. The name is a pseudonym. Is Nakamoto a man or a woman? Or is it even more than one person? It’s not even possible to determine the origin. Is Nakamoto from Japan, as the name suggests?
At the same time as Bitcoin is spreading, curious people are looking for the inventor(s). Some check the email data on the cryptography mailing list to find out at what times Nakamoto interacted with the list. For Japan the times are illogical, rather the east coast of the USA would fit, or also Great Britain.7 It is the beginning of a legend that is fueled by Satoshi himself. Nakamoto claims he was born on April 5, 1975. However, on April 5 (1933) US President Roosevelt signed special laws banning the hoarding of gold. 1975 is again the year when the US cut the very last link between the dollar and gold.8 Others analyze his name as a composition of the tech companies Samsung, Toshiba, Nakayama, and Motorola.
The language of the white paper is analyzed linguistically. It is partly formatted in British and partly in American English.
Even programmers who have been involved in the development of Bitcoin software at an early stage have little to tell. “He was the oracle we contacted with questions about the system, but he didn’t really follow standardized programming practices,” says Jeff Garzik. Colleague and pizza lover Lazlo Haynecz reports: “I’ve exchanged e-mails with whoever Satoshi is. I always had the impression that he was not a real person. “9
Not Satoshi. But Jeff Garzik. Source: Jeff’s Medium profile.
Whoever Satoshi Nakamoto is, it can be assumed that he became rich through his invention: Cryptofan Sergio Lerner tracks every single transaction down to the very first one and develops a procedure to be able to assign the original account (even if not the name) to every bitcoin. There is still one million bitcoin (6 billion US dollars in August 2018) that have never been transferred. Most likely this heap belongs to Satoshi Nakamoto.10
But we skip a lot of history. Back in 2008, it takes three months to release version 0.1 of Bitcoin after the white paper has been published. Published means that some computers are equipped with the software for the decentralized ledger. Developers conclude from the software11 that Bitcoin was written by an academic who is not a trained programmer but has a lot of theoretical knowledge.
On January 3, 2009, the first 50 Bitcoins are “generated” out of nowhere, three days later the first transaction between Satoshi Nakamoto and developer and cryptography activist Hal Finney is carried out. The world takes no notice of this groundbreaking process. Enthusiasts can research the first transactions years later by tracing the transparent public ledger. You can’t read the names of the participants, but you can read the addresses that were involved.12
In October of the same year, there was an initial exchange rate. For 1 US dollar, you get 1,309 bitcoin. The price is calculated from the cost of powering a Bitcoin computer. In the following years, Bitcoin becomes better known. As more people buy this strange currency, its value increases. After all, you can only buy Bitcoin if someone else is willing to sell it. Therefore, a buyer must always offer a higher price than the last one traded. If more people buy Bitcoin than sell it, the price rises.
The rest is history.
Not that famous Bitcoin Pizza. And not Satoshi Nakamoto. But a Pizza Napoli. By https://pizza.de/ [CC BY-SA 4.0], via Wikimedia Commons
Russian official Alexander Prokopchuk is set to become the next head of Interpol, in what The Timescalls a “significant victory for the Kremlin” in spite of concerns that Moscow has been using the international policing agency to target political opponents.
If elected, the 56-year-old Russian interior ministry veteran would replace Meng Hongwei, the still-missing former president who resigned last month amid an investigation by Chinese anti-corruption authorities.
Meng was taken for questioning by Chinese “discipline authorities” after taking a September 25 flight from Stockholm. The day he disappeared he texted his wife Grace an emoji of a knife, implying his life was in danger. She reported him missing on October 4.
After Interpol demanded to know Meng’s status, Beijing said that he was under investigation by the National Supervisory Commission (NSC) for illegal conduct. A resignation letter was also sent to Interpol. To date, China has provided no evidence that Meng is actually alive. On Friday, Interpol’s secretary general, Jürgen Stock, admitted that Interpol was in a “difficult situation” over Meng’s disappearance.
“Of course, we have been strongly encouraging China to provide comprehensive details concerning what occurred at the earliest opportunity,” Stock said in a phone interview with FT. “But again, on the other hand, we also have to accept that China says there are investigations going on and they are deciding about the next steps.”
Meanwhile, The Times reports that Prokopchuk’s appointment “would be a significant victory for the Kremlin after criticism of the Russian state for abusing the agency’s “red notice” system.”
“Red notices” are effectively international arrest warrants which restrict the ability of political opponents to travel or secure extradition. Those subject to red notices risk arrest in Interpol member countries, and can have their assets frozen.
In particular, the Times points to the case of US financier and Putin critic, Bill Browder, who was arrested in Spain in May under a Russian arrest warrant.
Browder claimed that he had been the subject of a red notice, although Interpol rejected this claim. The Spanish police suggested that Interpol had failed to delete an expired arrest warrant. At Britain’s request Interpol has issued red notices for Alexander Mishkin and Anatoliy Chepiga, the Russians accused of poisoning Sergei and Yulia Skripal in Salisbury. –The Times
News of Prokopchuk alleged ascent to the top of Interpol have already prompted bemused if bewildered commentary on Twitter.
If you are crazy, give post of Interpol head to a Kremlin official.
What the hell is the West thinking?
What about having a Chinese government official running some major international cyber security agency?
UK officials say that Prokopchuk – one of two confirmed candidates for the top job at Interpol, has “unstoppable momentum” before Wednesday’s election. They have concluded that he will win and that there is “no point in trying to stop im,” according to a Whitehall official. The other confirmed candidate is Kimg Jong Yang – the South Korean acting head of Interpol. South Africa may also nominate a candidate.
Mr Prokopchuk is one of four Interpol vice-presidents after being nominated by Russia two years ago. He has had a long career at the interior ministry and was given the rank of major-general of police in 2011. –The Times
According to former foreign office special adviser David Clark, the interior ministry had been responsible for many red notice requests during Prokopchuk’s tenure. “Mr Prokopchuk is a problem because he was the person in the Russian interior ministry who was responsible for concocting many of these fabricated red notice requests when he was a Russian government official,” said Clark.
Meanwhile, Ben Keith – a barrister who specializes in red notices, said that the potential for Prokopchuk’s appointment “beggars belief,” and that the notices are “frequently misused by unscrupulous regimes because Interpol don’t have proper checks and balances in place.”
Russia, which according to the liberal press – and Hillary Clinton – has successfully manipulated every single Western election ever since Brexit to get the desired outcome, has denied misusing red notices.
As the youngest French leader since Napoleon watches his popularity sink ever-closer to single-digit territory, the French people, who are increasingly fed up with the endless stream of gaffes, scandals and poor policy choices are rapidly getting fed up. In the latest expression of public outrage to rock the republic, one person has died and more than 200 people were injured during protests that involved some 282,000 people flooding the streets throughout France according to the French interior ministry to protest Macron’s controversial decision to hike fuel taxes.
According to RT, French police used tear gas to stop demonstrators on the Champs-Elysees. Beginning in the early hours of Saturday, tens of thousands of demonstrators took to the streets to express their grievances about the government’s decision to raise taxes on fuel. The protesters blocked roads, disrupted traffic and blocked access to gas stations.
Police tried to contain the protest by cordoning off some roads in Paris, but the crush of people kept coming. “Gasoline prices never stop rising. It’s the straw that broke the camel’s back. Macron and his buddies just let… things go from bad to worse,” one protester said.
At one point, more than 1,000 protesters pushed their way to the French president’s palace chanting “Macron resign!” They were later dispersed with tear gas.
An attempted sit-in in the vicinity of the Elysee Palace escalated into a heated confrontation between protesters and police.
Police disperse protesters with pepper spray-like substance #Paris#GiletsJaunes
All told, 282,710 people participated in some 2,000 rallies across France, according to data released by the Interior Ministry. French media described the protests as “unprecedented.” In many places, road blocks led to serious traffic jams.
With more than 225 people injured during the protest – six critically – one protester died in a road accident in Pont-de-Beauvoisin when a panicked female driver ran over the victim after protesters surrounded her car.
The only thing missing from the government’s response to Saturday’s protest was Macron’s former body guard, who infamously beat up a student protester at a rally earlier this year. He was initially let off with a brief suspension before Macron fired him in the face of a growing public backlash. Meanwhile, the popularity of Macron’s electoral opponents, the National Rally party led by Marine Le Pen, continues to grow, with some polls showing her party leading Macron’s for the first time.
After a chaotic week that saw seven of Theresa May’s senior cabinet ministers resign (including her second Brexit commissioner in six months), London business leaders poured salt in the prime minister’s wounds late Friday by leaking the text of a letter they will reportedly be sending to MPs next week urging them to reject May’s ‘best of all possible deals’ and instead advocate for a “no deal” Brexit where the UK and EU fall back on WTO rules, according to the Telegraph.
After more than a year of increasingly fraught negotiations, May has pulled off an incredible feat – she and her cabinet have produced a deal that is hated by both Brexiteers and remainers alike.
And as Bloomberg illustrates in the graphic below, even a cursory look at a possible vote breakdown shows that the odds of May passing her deal as-is are not looking good (though the EU has reportedly signaled that it might be open to reworking some of the details surrounding the backstop to make it more palatable to members of the European Research Group, the contingent of rapidly pro-Brexit conservative MPs).
And with May facing a grueling schedule between now and Brexit day…
…And myriad opportunities to stumble into a ‘no deal’ scenario…
…it’s somewhat surprising that Deutsche Bank analysts argued in a note to clients released on Friday that they still expect a ‘soft Brexit’ as their ‘base case’. Specifically, they expect a modified version of the current deal passing at the last minute after Theresa May survives a leadership challenge, but fails to push the deal in its current form through Parliament. If the EU refuses to renegotiate, any modified deal would probably favor a softer Brexit. If she can’t rally support for that deal (presumably by winning over votes from Labour), her best option at that point would be to call for another referendum. A day earlier, DB set the odds at 50% that May either calls for a second referendum or resigns.
As even the casual observer could probably intuit by now, should May resign (or be forced out via a ‘no confidence’ vote, a scenario that would be decidedly worse for markets) the odds of a ‘hard Brexit’ would climb significantly. According to DB, the top four of the five most likely successors to May are all in favor of a “no deal” Brexit that would involve the UK and EU falling back on WTO rules. But while this would greatly increase the odds of a ‘hard Brexit’, it wouldn’t be fair to interpret this as a foregone conclusion. That’s because pro-remain Torys could respond by forcing a new general election which would risk handing power to Labour. Or they could simply accept a “hard Brexit” and whatever short term economic turmoil that might bring.
With all of this in mind, May’s remaining cabinet ministers are reportedly staying on to try and influence the deal from the inside, with Liam Fox, May’s secretary for international trade, insisting that “a deal is better than no deal.”
Though, as the Spectator explained in a piece published Saturday, the Brexiteers fear that the current deal could leave the UK bound to the EU customs union indefinitely, while surrounding any say in how the trade bloc sets its rules.
In summary: The supposed ‘transition period’ could last indefinitely or, more specifically, to an undefined date sometime this century (“up to 31 December 20XX”, Art. 132). So while this Agreement covers what the government is calling Brexit, what we in fact get is: ‘transition’ + extension indefinitely (by however many years we are willing to pay for) + all of those extra years from the ‘plus 8 years’ articles.
Should it end within two years, as May hopes, the UK will still be signed up to clauses keeping us under certain rules (like VAT and ECJ supervision) for a further eight years. Some clauses have, quite literally, a “lifetime” duration (Art.39). If the UK defaults on transition, we go in to the backstop with the Customs Union and, realistically, the single market. We can only leave the transition positively with a deal. But we sign away the money. So the EU has no need to give us a deal, and certainly no incentive to make the one they offered ‘better’ than the backstop. The European Court of Justice remains sovereign, as repeatedly stipulated. Perhaps most damagingly of all, we agree to sign away the rights we would have, under international law, to unilaterally walk away. Again, what follows relates (in most part) for the “transition” period. But the language is consistent with the E.U. imagining that this will be the final deal.
560+ page draft deal document, while the controversial backstop provision has taken most of the criticism, many of the deal’s finer points remain deeply suspect.
But the language surrounding the backstop isn’t the only component of the deal that’s deeply suspect. Below is a list of the top 40 draft deal “horrors” (courtesy of the Spectator):
May says her deal means the UK leaves the EU next March. The Withdrawal Agreement makes a mockery of this. “All references to Member States and competent authorities of Member States…shall be read as including the United Kingdom.” (Art 6).
Not quite what most people understand by Brexit. It goes on to spell out that the UK will be in the EU but without any MEPs, a commissioner or ECJ judges. We are effectively a Member State, but we are excused – or, more accurately, excluded – from attending summits. (Article 7)
The European Court of Justice is decreed to be our highest court, governing the entire Agreement – Art. 4. stipulates that both citizens and resident companies can use it. Art 4.2 orders our courts to recognise this. “If the European Commission considers that the United Kingdom has failed to fulfil an obligation under the Treaties or under Part Four of this Agreement before the end of the transition period, the European Commission may, within 4 years after the end of the transition period, bring the matter before the Court of Justice of the European Union”. (Art. 87)
The jurisdiction of the ECJ will last until eight years after the end of the transition period. (Article 158).
The UK will still be bound by any future changes to EU law in which it will have no say, not to mention having to comply with current law. (Article 6(2))
Any disputes under the Agreement will be decided by EU law only – one of the most dangerous provisions. (Article 168).
This cuts the UK off from International Law, something we’d never do with any foreign body. Arbitration will be governed by the existing procedural rules of the EU law – this is not arbitration as we would commonly understand it (i.e. between two independent parties). (Article 174)
“UNDERLINING that this Agreement is founded on an overall balance of benefits, rights and obligations for the Union and the United Kingdom” No, it should be based upon the binding legal obligations upon the EU contained within Article 50. It is wrong to suggest otherwise.
The tampon tax clause: We obey EU laws on VAT, with no chance of losing the tampon tax even if we agree a better deal in December 2020 because we hereby agree to obey other EU VAT rules for **five years** after the transition period. Current EU rules prohibit 0-rated VAT on products (like tampons) that did not have such exemptions before the country joined the EU.
Several problems with the EU’s definitions: “Union law” is too widely defined and “United Kingdom national” is defined by the Lisbon Treaty: we should given away our right to define our citizens. The “goods” and the term “services” we are promised the deal are not defined – or, rather, will be defined however the EU wishes them to be. Thus far, this a non-defined term so far. This agreement fails to define it.
The Mandelson Pension Clause: The UK must promise never to tax former EU officials based here – such as Peter Mandelson or Neil Kinnock – on their E.U. pensions, or tax any current Brussels bureaucrats on their salaries. The EU and its employees are to be immune to our tax laws. (Article 104)
Furthermore, the UK agrees not to prosecute EU employees who are, or who might be deemed in future, criminals (Art.101)
The GDPR clause. The General Data Protection Regulation – the EU’s stupidest law ever? – is to be bound into UK law (Articles 71 to 73). There had been an expectation in some quarters that the UK could get out of it.
The UK establishes a ‘Joint Committee’ with EU representatives to guarantee ‘the implementation and application of this Agreement’. This does not sound like a withdrawal agreement – if it was, why would it need to be subject to continued monitoring? (Article 164).
This Joint Committee will have subcommittees with jurisdiction over: (a) citizens’ rights; (b) “other separation provisions”; (c) Ireland/Northern Ireland; (d) Sovereign Base Areas in Cyprus; (e) Gibraltar; and (f) financial provisions. (Article 165)
The Lifetime clause: the agreement will last as long as the country’s youngest baby lives. “the persons covered by this Part shall enjoy the rights provided for in the relevant Titles of this Part for their lifetime”. (Article 39).
The UK is shut out of all EU networks and databases for security – yet no such provision exists to shut the EU out of ours. (Article 8)
The UK will tied to EU foreign policy, “bound by the obligations stemming from the international agreements concluded by the Union” but unable to influence such decisions. (Article 124)
All EU citizens must be given permanent right of residence after five years – but what counts as residence? This will be decided by the EU, rather than UK rules. (Articles 15-16)
Britain is granted the power to send a civil servant to Brussels to watch them pass stupid laws which will hurt our economy. (Article 34)
The UK agrees to spend taxpayers’ money telling everyone how wonderful the agreement is. (Article 37)
Art 40 defines Goods. It seems to includes Services and Agriculture. We may come to discover that actually ‘goods’ means everything.
Articles 40-49 practically mandate the UK’s ongoing membership of the Customs Union in all but name.
The UK will be charged to receive the data/information we need in order to comply with EU law. (Article 50). The EU will continue to set rules for UK intellectual property law (Article 54 to 61). The UK will effectively be bound by a non-disclosure agreement swearing us to secrecy regarding any EU developments we have paid to be part. This is not mutual. The EU is not bound by such measures. (Article 74)
The UK is bound by EU rules on procurement rules – which effectively forbids us from seeking better deals elsewhere. (Articles 75 to 78)
We give up all rights to any data the EU made with our money (Art. 103)
The EU decide capital projects (too broadly defined) the UK is liable for. (Art. 144)
The UK is bound by EU state aid laws until future agreement – even in the event of an agreement, this must wait four years to be valid. (Article 93)
Similar advantages and immunities are extended to all former MEPs and to former EU official more generally. (Articles 106-116)
The UK is forbidden from revealing anything the EU told us or tells us about the finer points of deal and its operation. (Article 105).
Any powers the UK parliament might have had to mitigate EU law are officially removed. (Article 128)
The UK shall be liable for any “outstanding commitments” after 2022 (Article 142(2) expressly mentions pensions, which gives us an idea as to who probably negotiated this). The amount owed will be calculated by the EU. (Articles 140-142)
The UK will be liable for future EU lending. As anyone familiar with the EU’s financials knows, this is not good. (Article143)
The UK will remain liable for capital projects approved by the European Investment Bank. (Article 150).
The UK will remain a ‘party’ (i.e. cough up money) for the European Development Fund. (Articles 152-154)
And the EU continues to calculate how much money the UK should pay it. So thank goodness Brussels does not have any accountancy issues.
The UK will remain bound (i.e coughing up money) to the European Union Emergency Trust Fund – which deals with irregular migration (i.e. refugees) and displaced persons heading to Europe. (Article 155)
The agreement will be policed by ‘the Authority’ – a new UK-based body with ‘powers equivalent to those of the European Commission’. (Article 159)
The EU admits, in Art. 184, that it is in breach of Article 50 of the Lisbon Treaty which oblige it to “conclude an agreement” of the terms of UK leaving the EU. We must now, it seems, “negotiate expeditiously the agreements governing their future relationship.” And if the EU does not? We settle down to this Agreement.
And, of course, the UK will agree to pay £40bn to receive all of these ‘privileges’. (Article 138)
All is now bustle and hubbub in the late months of the year. This goes for the stock market too. If you recall, on September 22nd the S&P 500 hit an all-time high of 2,940. This was nearly 100 points above the prior high of 2,847, which was notched on January 26th. For a brief moment, it appeared the stock market had resumed its near decade long upward trend.
We actually did not believe in the validity of the September breakout attempt: the extremely large divergence between the broad market and the narrow big cap leadership was one of many signs that an internal breakdown in the stock market was well underway. It is probably legitimate to refer to the January 2018 high as the “orthodox” stock market peak – the point at which most stocks topped out.
Chartists witnessed the take out of the January high and affirmed all was clear for the S&P 500 to continue its ascent. They called it a text book confirmation that the bull market was still intact. Now, just two months later, a great breakdown may be transpiring.
Obviously, this certain fate will be revealed in good time. Still, as we wait for confirmation, one very important fact is clear. The Federal Reserve is currently executing the rug yank phase of its monetary policy. As the Fed simultaneously raises the federal funds rate and reduces its balance sheet, credit markets are slipping and tripping all over themselves.
This week, for example, seven-year investment grade bonds issued by GE Capital International traded with a spread of 2.47 percent. For perspective, this is equivalent to the spread of BB rated junk bonds. In other words, the credit market doesn’t consider GE bonds to be investment grade, regardless of whether compromised credit rating agencies say they are.
Spread of 7-year GE bond over mid-swaps – this bond retains an investment grade rating for now. We have discussed the problem posed by the proliferation of bonds rated in the lowest investment grade category in detail previously – see: “Corporate Credit – A Chasm Between Risk Perceptions and Actual Risk” [PT]
* * *
But it’s not just GE debt that’s in question. Per a tweet by Scott Minerd, Global Chief Investment Officer at Guggenheim Partners:
“The selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun.”
The fact is, there’s now around $3 trillion of bonds rated BBB, the lowest rating bracket above junk. How much of this debt – like General Electric bonds – should be rated junk that isn’t? We suspect the next liquidity event will clarify the answer to this question.
The real question, however, is how did $3 trillion of questionable debt pile up to such a perilous level to begin with? What follows is an attempt at an answer…
How Fake Capitalism Works
One popular delusion is that America operates under an economic framework of capitalism. One where businesses, and their finances, are free to succeed and fail based on their economic merits. In reality, America hasn’t had a truly capitalist economy since the 19th century.
Moreover, the encroachment of government into the economy has increased over the last several decades. The ratio of federal government spending to GDP increased from 33 percent in 1973 to about 40 percent today. How can an economy that is composed of 40 percent federal government spending and extreme central bank intervention into credit markets be an economy of private enterprise? Naturally, it can’t.
In modern times government activity is taking up an ever larger share of the economy – but where will it end? Full-fledged communism? Note that the above does not count the indirect costs of federal regulations, which are estimated to amount to around $2.5 trillion per year.
* * *
The fake capitalism of the 21st century is, in essence, a destructive form of self-cannibalism. The economic model depends on three factors: big deficits, monetary policies of extreme intervention, and a central authority with a highly visible hand to direct the supply and demand of goods and services. Taken in concert, these factors consume tomorrow’s productivity with the gluttonous appetite of pigs devouring slop.
The results are an endless collection of gross distortions, misallocations, debt pileups and vulnerabilities. Stocks, corporate bonds, residential real estate, General Electric, Washington lobbyists, student loan debt, defense contractors, digital gizmo producers, Ford Motor Company, per capita healthcare costs, Anheuser-Busch, Bryce Harper’s imminent $400 million contract, unfunded state pension liabilities, federal debt, and on and on…
This is how fake capitalism works. And what you may not know is that under fake capitalism someone, most likely you, will be left holding the bag for these liabilities – and many more. You may not want to pay for them. You may not be prepared to pay for them. But you will pay for them, nonetheless. In fact, you already are…
The Intolerable Scourge of Fake Capitalism
You see, if you own residential property in America today you really don’t own it. You are merely leasing it from your local governments. Try skipping your property tax payment, if you don’t believe us.
One implication is that your city holds an option on your house. And when push comes to shove, they’ll exercise it. The city government will raise your property taxes to cover its pension obligations. Then it will raise it some more. Many cities already are.
And if your kids are in public schools, it is likely their classrooms are more crowded than they were when you were a kid. Why? Is there a shortage of teachers? On the contrary, there is a glut of retired teachers – some of whom haven’t taught a class for over 20 years – who have a claim on today’s taxes.
On top of that, your state wants to stick you with a progressive wealth exit tax if you try to sell your house and leave the state. After a lifetime of paying down your mortgage you can no longer flee to a tax friendlier state without being taken to the cleaners. Remember, you no longer own your property. Your local and state government owns your property.
A little Illinois data and cartoon collage: this is the quasi-bankrupt state in which the political class now ponders restricting the basic human right of free movement by blackmail in the form of an “exit tax”. Your property does not belong to you. You and all you own belong to them.
* * *
So, too, under a fiat money system, you don’t own your own money. You may think you do. You can see the balance in your savings account. But at all hours of the day, including holidays, the value is being extracted from your savings through deficit spending and policies of mass money debasement. This is why working and saving money has become an unending run on a treadmill. You can never get ahead. But you can run faster and faster.
Run as fast as you like – you will never catch up with this…
Of course, the taxpayer – that’s you – will also be responsible for picking up the tab on the next round of too big to fail corporate bailouts. You can count on it. The Treasury Secretary, through smiling teeth, will even tell you it’s for your own good… that they must destroy capitalism to save it.
Yet capitalism was destroyed long ago. And we find the fake capitalism that remains to be an intolerable scourge to a just society.
