76-Year-Old Joe Biden Is Officially The Frontrunner For 2020 Democratic Nomination

With just over 400 days left until the Iowa caucuses (set for Feb. 3, 2020), a recent poll confirmed what many Americans probably already suspected: despite the growing popularity of progressives and Democratic Socialists like Alexandria Ocasio Cortez (who won’t be eligible to run for president until 2024), Vice President Joe Biden remains the most popular 2020 presidential contender.

Biden

To wit, a CNN/Des Moines Register poll released Saturday showed that former Vice President Joe Biden would likely win the Iowa caucuses if they were held tomorrow. He was followed by Bernie Sanders in second place, and Texas Congressman Beto O’Rourke in third.

Here’s Bloomberg:

The poll shows Biden leading among a field of 20 potential candidates, followed by Vermont Senator Bernie Sanders and Texas Representative Beto O’Rourke. The poll asked likely caucusgoers who their top choice for president would be among potential candidates for their party’s nomination.

[…]

The Iowa poll found 32 percent of likely caucusgoers prefer Biden, with 19 percent selecting Sanders as their first choice, and O’Rourke at 11 percent. Featured lower in the list of possible Democrats were Senators Elizabeth Warren, Kamala Harris and Cory Booker.

Featured lower in the list of possible Democrats were Senators Elizabeth Warren, Kamala Harris and Cory Booker.

Brexit

Of course, as the last few Republican nominating contests have demonstrated, winning in Iowa, the first contest of the primary season, is no guarantee that a candidate will go on to secure the party’s nomination (though Hillary Clinton won Iowa in 2016 and Barack Obama won it in 2008).

And despite all of the talk about how the Democrats need “new blood” to have a shot at beating Trump, nearly half of poll respondents – 49% – said they would prefer a “seasoned hand”, while 36% favored a “newcomer.”

At 76, Biden is reportedly consulting friends and political allies about whether he is too old to run for president. If elected, he would be 78 years old when taking office, making him the oldest president-elect in US history. Meanwhile, O’Rourke said at a town hall in El Paso, Texas, on Friday that he hadn’t made a decision about whether to seek the presidency, according to the Associated Press.

And coming in at No. 7, former First Lady and once-and-future candidate Hillary Clinton still ranked higher than Michael Bloomberg and Amy Klobucher, which will likely keep Clinton’s dreams of a return to the presidential arena alive – for now, at least.

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Deplatforming Paves The Way For Cryptocurrency

Authored by Tom Luongo,

The recent deplatforming of Sargon of Akkad by Patreon has a lot of people very nervous.  I became worried we’d get to this state the first time they went after Gab by not allowing their app in the Google or Apple stores.

It became obvious then that we would wind up here today.  It starts with saying that certain things are unacceptable based on arbitrary enforcement of Terms of Service and ends with backroom pressure to cut a person off from making money.

Google began demonetizing channels which were politically unpalatable to its senior management.  So, a lot of demonetized YouTubers moved to Patreon, asking subscribers to support them directly rather than deal with intrusive ads. 

And now Patreon has gotten into the game.  But, we always knew that they would.  They went after Laura Southern last year.  

Alex Jones was simultaneously thrown off every platform and then Gab was taken down over a 48-hour period with no warning over having a particular user on its platform.  

Yes, that guy shot up a synagogue.  That’s not Gab’s problem.

It didn’t matter that Twitter still hosts all manner of violent and disgusting content or Facebook hosting sites of terrorist groups.  Political opposition to the globalist plan of universal serfdom for us and unchecked power for them was to be snuffed out with extreme prejudice.

Alternatives Rise

Alternative platforms needed to be marginalized to blunt their growth.  Steemit is in trouble due to poor governance and the crushing of the cryptocurrency markets now that Wall St. can use the futures market to disrupt the actual market.  

The truth, however, is that by trying to marginalize these alternative voices and raise their cost of capital for growth all that they’ve done is made them more popular than they likely would have been otherwise.  

Gab is closing in on a million accounts now. 

Gab User Growth

But, make no mistake, the deplatforming was meant to be unfair.  It was done on purpose to inflame conservatives and libertarians to scream for a solution – more regulation, more control over the companies who control the on-ramps to the modern internet.

This was the desired solution all along.

To put the blame squarely on capitalism run rampant and keep making the stupid Marxist arguments for total control over speech and the economy.  As well to give failing governments a legitimate reason to arrogate even more power to themselves.

Deplatforming is real.  And Patreon’s removal of Sargon of Akkad over flimsy reasons is understandable if it was simply a compliance system gone wrong.  But, from what I understand of the situation, it’s well beyond that.  Patreon was simply looking for an excuse to axe Sargon.  

And the reason to go after his Patreon account is to raise the costs of his doing what he does beyond his threshold of continuing.  And it is a stark warning to the rest of us that if once you get successful, you’ll be attacked as well.

So, what do we do about it?

Crypto-Solutions

Jordan Peterson talked about this yesterday on his Patreon

We thought about moving to alternatively crowd-funding platforms such as SubscribeStar, but it isn’t obvious that will constitute a long-term solution. Dave Rubin and I (and others) have been discussing the establishment of a Patreon-like enterprise that will not be susceptible to arbitrary censorship, and we are making progress, but these things cannot be rushed without the possibility of excess error.
But I am seriously displeased about the removal of Sargon (and many other people) and will definitely do something about it.

But, is that enough?  Likely not.  Because the first alternative, SubscribeStar, has already had its payment channels shut down.

These people are serious about taking us out of the conversation.  I’ve been championing people to use alternative platforms for months but inertia keeps them where they are, not wanting to have to rebuild their brand all over again. 

But, it is time to embrace the new platforms and find new ways to circumvent these attacks on our ability to make a living.  They haven’t gone after me yet, but you have to think in these terms while building a business.

This, to me, is where a cryptocurrency shows its true worth.  By being an unstoppable medium of exchange, a cryptocurrency becomes the payment layer that companies like Stripe and PayPal have built their businesses on to this point.  But they are no longer serving their customers, they are abusing them.

The problem is, of course, bringing those assets back into the real world to deal with real world issues like paying your rent, electric bill, hosting fees etc.  

There are real demands which at this point can only be met with dollars.  So, that means a couple of things.  The first is that once the payment is made in some cryptocurrency, say Bitcoin, it then has to be converted to dollars, which has become difficult as the same players — PayPal, Stripe etc. — will not exchange cryptocurrency for dollars.

Coinbase will for individuals, but does not do business with companies.  The truth is that the solution is in front of us but barriers have been erected to make it difficult or raise costs prohibitively.

And, again, that’s the point.  But, that’s where we need to ‘stand up straight with our shoulders back’ as Dr. Peterson would put it and build a supply chain with full U.S. dollar convertibility, even if it means going offshore to do it.  

I’ll start with the words from Gab CEO Andrew Torba:

This is the face of the future and the means to change the current dynamic.  But, it starts with people recognizing the problem and building workarounds which should be unnecessary and in a free society anathema to contemplate, but which are sadly reality.

If it isn’t Torba and his crew it’ll be someone else.   Of that I’m sure. The market provides because there is a profit waiting for someone brave enough to build something someone else wants.  

But, as content creators we need to recognize that it starts with us taking responsibility for our businesses and building in redundancy to make them anti-fragile.  

This story of internet censorship is no different than the one playing out between countries right now.  Russia and Iran are openly defying U.S. diktats on their behavior, utilizing the dollar as the preferred weapon of choice.  Every day that they survive to bill another good or another service in rubles or rials is another step closer to being free of the tyranny of the political imperatives of U.S. and European oligarchs.

These platforms were built as loss-leaders to reel in customers to collect their data and study their habits.  The costs to us were put off into the future.  The costs being they could kick us off whenever we were inconvenient to them.

That future is today. 

*  *  *

Join my Patreon to help us find a solution to the current censorship problem

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May’s Cabinet Denies “Second Referendum” Rumors As MPs Wonder: “What On Earth Do We Do Next?”

After the Brexit-related developments of the past few days, Prime Minister Theresa May will have a lot of explaining to do during what’s likely to be another contentious round of PMQs Monday morning. Following reports that members of May’s cabinet have been reaching across the floor to discuss the feasibility of calling a second Brexit referendum (what supporters have shrewdly branded as a “People’s Vote”), members of the prime minister’s government have scrambled to make clear that they have absolutely zero intention of resorting to such a callous disregard of the popular will (despite the fact that it’s probably the only sensible option available to May if she wants to avert a hard Brexit).

The logic behind a second vote makes sense: Either the people will deliver a popular mandate for MPs to accept Theresa May’s deal, or they will cancel Brexit all together (because thanks to “Project Fear”, the prospect of allowing a ‘no deal’ Brexit is just unthinkable.

May

Minister for the Cabinet Office and PM May’s de facto deputy David Lidington denied a Sunday Times report about his back-door negotiating for a second referendum, warning in a tweet that a “People’s Vote” would only risk further harm to the public consciousness.

Meanwhile, Trade Secretary Liam Fox appeared on the BBC to advocate for a vote in Parliament on alternatives if May’s deal is defeated in a vote that’s now expected to happen before Christmas. Since the notion that May’s supremely unpopular deal has no chance of passing has been widely expected for weeks, this would effectively delegate the decision on whether to hold a second referendum, or not, to MPs.

Fox said he “wouldn’t have a huge problem with Parliament as a whole having a say on what the options were” and the votes could be without specific instructions, or unwhipped, so lawmakers wouldn’t have to vote along party lines,” making Fox the first Brexiteer to advocate such a move.

“It wasn’t the government given an instruction in the referendum, it was Parliament,” he said. “They gave us an instruction and its time Parliament carried it out.”

“It’s not one that cabinet has discussed yet, but when you look at the options that we have, we’ve got to recognize there are a limited number of real-world options here,” he said.

Education Secretary Damian Hinds has also suggested “flushing out” the levels of Parliamentary support for different Brexit options although he insisted that there was no majority for any of them.

Remainer MPs have seized on these comments to suggest that Brexit is in jeopardy.

Lib Dem MP Tom Brake (a backer of the pro-remain “Best for Britain” campaign), said that “when even Dr. Fox does not rule out free votes and encourages the idea of indicative votes in Parliament, the Brexit project is clearly in jeopardy.”

But current members of the government aren’t the only ones out there stirring the pot while May struggles with her impossible dilemma. On Saturday, the prime minister blasted her predecessor, former Labour PM Tony Blair, who has been openly advocating (see this Reuters piece) for another vote. May accused him of “undermining Brexit”, per the BBC.

“For Tony Blair to go to Brussels and seek to undermine our negotiations by advocating for a second referendum is an insult to the office he once held and the people he once served.”

Given that the possibility of holding an “indicative vote” appears to be gaining momentum, BBC political reporter Chris Mason offered his analysis of what, exactly, this means:

What we are witnessing is a bursting out in public of conversations that have been happening for a while, at a senior level, in private.

They can be summarised like this: ‘What on earth do we do next?’

One idea, now floated by three cabinet ministers in public, and others privately, is a series of so called “indicative votes”.

These would flush out Parliament’s view on a range of options which could include different models of Brexit: something akin to Norway’s relationship with the EU for instance, or Canada’s looser one. Another referendum and no deal are other possibilities.

Some ponder doing this before the vote on the prime minister’s deal, in the hope it highlights that her plan is the only workable Brexit deal achievable now.

“Things are not as hopeless as they look,” one cabinet minister told me.

It’s important to remember that, if Parliament does back a clear Brexit alternative – like a Canada-style or Norway-style trade deal – it would still need to be accepted by the EU for the UK to avoid a hard Brexit. So far, the EU has given no indication that it would any deal other than the one that has been negotiated with May (though a “secret alliance” of MPs and EU officials have reportedly been working to bolster support for a Brexit ‘plan B’). Given that opting for another deal would grant no guarantees of May finding a workable alternative, a second referendum, or Article 50 delay, are the most secure alternatives for stopping the UK from crashing out of the EU and reverting to WTO rules come the beginning of Q2.

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Donald Trump Suggests Unfair Media Coverage of His Presidency Could Be Illegal

President Trump has once again taken the position that criticism of him is, or ought to be, illegal.

On Sunday morning, he railed against “one-sided coverage” of his presidency, tweeting this:

No, the real scandal is the president’s oft-stated desire to censor his opponents.

Trump’s tweet is as wrongheaded as it is incoherent. (Collusion? What?) The First Amendment protects the right of the people to speak out against the government, even if the president thinks such speech is one-sided or unfair. This has already been tested in court numerous times throughout the Bill of Rights’ 200-year-history.

It’s true that not all speech enjoys legal protection. But as a general rule, speech is only considered defamatory if it meets certain criteria: reckless disregard for the truth, actual malice, etc. And obviously, true statements of fact can’t be defamatory. Just because Trump doesn’t like what NBC and SNL are saying about him, this does not mean what they are saying is wrong, let alone defamatory.

Trump has First Amendment rights, too, and thus he is free to make appalling statements. But everyone in the conservative camp ought to condemn his remarks. Press freedom is a cornerstone of American democracy, and while it’s true that many presidents have sought to undermine it—including recent presidents George W. Bush and Barack Obama—few have proclaimed their desire so openly.

[Related: Corie Whalen, former communications director for libertarian-friendly Rep. Justin Amash (R–Mich.), recently penned a worthwhile essay about Trump’s takeover of the conservative movement and how it has harmed—perhaps destroyed—the libertarian Republican cause.]

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Is The Market On The Naughty List?

Authored by Lance Roberts via RealInvestmentAdvice.com,

Is The Market On The Naughty List?

Two weeks ago, I warned that the “G-20 rally” had exhausted a bulk of the “oversold” condition which had existed at that time. I also recommended remaining cautious until the underlying technical backdrop had improved.

While that turned out to be very good advice, the market is now reversed from where it was then. Markets are back to deeply oversold conditions and are sitting on important support. As shown in the chart below, these conditions have been previously present when markets have bounced.

On Tuesday, we discussed the potential for a “Santa Claus” rally as we head into the end of the year. In case you missed it, here was the important takeaway of that discussion:

“The following graph shows, in orange, aggregate cumulative returns by day count for the 28 Decembers we analyzed plotted alongside daily aggregated average returns by day.” 

“IF ‘Santa’ is going to visit ‘Broad & Wall’ this year, it will most likely occur between the 10th through the 17th trading days of the month. Such would equate to Friday, December 14th through Wednesday, December 26th.”

While the current oversold condition is supportive of a rally over the next couple of weeks, that does not mean this is a “stocking” you should stuff everything into. Given the macro-backdrop, any rally may be short-lived going into 2019 unless some of the pressure from weaker economic data, Brexit, Washington politics, “trade wars”, balance sheet reductions, and softer-earnings growth is relieved.

So far, such relief has yet to be the case as economic data both globally and domestically continues to weaken. As noted on Friday, this weakness is occurring at a time where the Federal Reserve continues to extract liquidity from the market. To wit:

“While the Fed’s rate hikes do indeed raise borrowing costs and slow economic growth, it is the extraction of liquidity from the markets which is most important. As shown in the chart below, the Fed is now reducing their flows by $50 billion each month. This is in direct contrast to the billions they were injecting previously which corresponds with the markets decade-long bull market despite weak revenue growth due to a sluggish economic expansion.”

“But it is no longer just the Fed. On Thursday, the European Central Bank made two important announcements.

  1. They will stop adding to its stock of government and corporate bonds at the end of December, and;
  2. They are seeing signs of weaker inflation and economic growth.

In other words, as world markets are beginning to struggle as the driver of the decade-long bull market is being removed.”

Last week, as we noted at RIA PRO, we put on a small S&P 500 (IVV) trading position for a potential oversold rally. As I noted on Friday, that trade has left much to be desired as the market simply has not been able to muster a sustainable bounce. On Friday, the market closed right at critical support levels.

Given the Fed meets next week, we are going to give our trade just the smallest margin of movement currently for three reasons:

  1. The market is deeply oversold which will contribute to a bounce on any bit of good news.
  2. The index closed lower than where it opened for 4-consecutive days. Such selling is often met with a one or two day bounce.
  3. Lastly, as noted previously, distributions for mutual funds are now mostly complete and they have to rebalance portfolios before the end of the reporting year. With next week having the highest historical probability for a rally, a more “dovish” than expected Fed could spark a bit of buying frenzy. 

While we are expecting an oversold rally, remember after having reduced exposure in portfolios previously, and carrying a much heavier weighting in cash, we are giving the market time to figure out what it wants to do. Given the consolidation range over the last couple of months, it is too risky to be either overly short, or aggressively long, currently. Cash remains the best hedge currently.

But let me repeat the most important point:

“The expected rally IS NOT the next version of the ‘bull market.’ Nor does a rally mean the ‘bear market’ is over. It will be a counter-trend rally to sell into.”

But it is not just the S&P 500 where this is occurring. As shown, every market is now trending negatively.

As I have noted previously, the weakness in the market continues to be a process that has gripped markets over the last several months as the Federal Reserve has steadily increased their extraction of liquidity. As shown in the chart above, the market has continued to build multiple tops as the 50-dma deepens its divergence from the 200-dma. Currently, downside stop losses are holding, but there isn’t much wiggle room here currently before further actions need to be taken.

While we are certainly hoping that Santa Claus will indeed come and visit “Broad & Wall” over the next two weeks, there isn’t much reason to take on an excessive amount of risk currently.

Lack Of Experience

A lot of my articles and newsletters get picked up and republished by great sites like Seeking Alpha, Advisor Perspectives, Equities.com, Investing.com, Zerohedge, and many others. What is interesting to read are the comments that are posted as they show the “lack of experience” most individuals have in the markets today.

But such shouldn’t surprise you. Roughly 70% of Americans have very little or no participation in the financial markets currently. Even more than that have little or no understanding about how markets and investing actually work. Lastly, given that most don’t survive bear markets, most individuals in the markets today started their investing journey after 2008.

My investing journey started prior to 1987 and this note by Carl Swenlin at Decision Point (h/t Mr. Obrien) put a fine point on the single biggest problem which exists currently.

“The chart below shows the entire period during which I have been involved in stock market analysis, and, as you can see, the title of this article definitely does not apply to me. If a decline of -20% or more qualifies as a bear market, then I have experienced seven of them. Additionally, there were three periods which, while not qualifying as bear markets, were sufficiently unpleasant to qualify them for ‘honorable mention.’ I have identified the current decline with a question mark, because we won’t know if it qualifies as a bear market until the benchmark -20% decline is in; however, bear market evidence continues to appear, and I believe we’re in a bear market now.”

“By comparison, anyone with 10 years experience in the market has only seen the 2011 baby bear and a mild correction. A person with such limited experience is at a serious disadvantage.”

“I was going to say that he/she cannot imagine what lies ahead in a real bear market, but that would be wrong. Using technical analysis, a determined individual can study past bear markets and imagine very well what the experience might have been like. In particular, apply favored indicators to bear market periods and observe how they behave.”

Here is the important point, if you have never been through a real “bear market,” it is a lesson which you DO NOT want to learn the “hard way.” 

It is always better to err to the side of caution with your hard earned savings than to try and replaced both lost capital and time. As I noted in the “Exit Problem:”

“The markets function much the same way as yelling ‘fire’in a theater filled to capacity with only one exit. Those closest to the exit will likely get out safely, but once the ‘bottleneck’ forms, there is an inability to exit before the damage is done.”

It is likely no longer the time to remain fully invested in the financial markets without a thorough understanding of your “risk exposure.” Most likely, returns over the next decade will be far worse than those in the last.

As I have stated often, my job is to participate in the markets while keeping a measured approach to capital preservation. Since it is considered “bearish” to point out the potential “risks” that could lead to rapid capital destruction; then I guess you can call me a “bear.” 

Just make sure you understand I am still in “theater,” I am just sitting much closer to the “exit.”

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Stunning Images Emerge After Massive Restaurant Explosion In Japan; Dozens Injured

Over 40 people were injured following a major explosion at a two-story izakaya bar in the Japanese town of Sapporo, Hokkaido on Sunday evening. 

Police are investigating the cause of the blast, currently believed to be a gas explosion at approximately 8:30 p.m. local time at the izakaya Umi Sakura – a bar close to the Sapporo subway line’s Hiragishi station. 

The explosion caused the 66-seater eatery to collapse. It also shattered the windows of nearby apartments and food and beverage outlets. The Hiragishi district is less than 15 minutes by train from the main Sapporo station that serves the capital city of Hokkaido, Japan’s northernmost prefecture. –Straits Times

Evacuation orders have been issued to nearby diners and residents who were warned of further explosions by police and first responders.  

Local residents likened the blast to a missile strike, thunderbolt, or an earthquake, while those on the street reported a lingering, pungent gas smell.  

A women in her 70s was quoted by the Mainichi Daily as saying “The restaurant entirely disappeared without a trace, while the roof of the family restaurant next door also collapsed,” adding “I’m at a loss for words to describe how I feel about the scale of this catastrophe.”

A waitress was told to jump off the second floor to escape the inferno according to NHK, citing her older sister. “She was told to jump off from the second floor, where she had been, and so she did. It seems like she broke her leg, but I am just thankful that she is alive.”

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Tim May, Father of ‘Crypto Anarchy,’ Is Dead at 67

Tim May, 2017Tim May, co-founder of the influential Cypherpunks mailing list and a significant influence on both bitcoin and WikiLeaks, passed away last week at his home in Corralitos, California. The news was announced Saturday on a Facebook post written by his friend Lucky Green.

In his influential 1988 essay, “The Crypto Anarchist Manifesto,” May predicted that advances in computer technology would eventually allow “individuals and groups to communicate and interact with each other” anonymously and without government intrusion. “These developments will alter completely the nature of government regulation [and] the ability to tax and control economic interactions,” he wrote.

A deeply private person, May’s aversion to outside intrusions defined his philosophical outlook. “‘Leave me alone,'” he wrote, is “at the root of libertarianism more so than formal theories about the nature of man.”

“My political philosophy is keep your hands off my stuff….Out of my files, out of my office, off what I eat, drink, and smoke,” he once told journalist Andy Greenberg.

Born in 1951, May grew up in in a suburb of San Diego before his family moved to Washington, D.C., when his father, a naval officer, was transferred there. At the age of 12, he joined a local gun club at the urging of his father and would become a lifelong collector. May was a loner, a science prodigy, and a voracious consumer of science fiction. In the summer of 1967, when entering his junior year in high school, he picked up a copy of Ayn Rand’s Atlas Shrugged. “It just spoke to me,” he said in a 2017 unpublished video interview with Reason, which is being incorporated into a documentary. “I read it nonstop for three days, and to the disdain of my teachers in school, I would write articles about the Anti-Trust Act and the evils of the Sherman Act.”

May went to college at U.C.–Santa Barbara, took graduate physics classes, and got a job at Intel. He solved a crucial issue plaguing the functioning of memory chips, publishing his findings in a 1979 paper, and then retired in 1986 at the age of 34, cashing in his stock options. He would never have to work again.

In 1987, May’s friend Chip Morningstar introduced him to the economist and entrepreneur Phil Salin—a meeting that would lead May to formulate the concept of crypto anarchy.

Salin was building the American Information Exchange, or AMiX, the first online marketplace for buying and selling information. “It was clear he was a strong libertarian of the Hayek sort,” May recalled. “We all shared the same views.” But Salin’s vision of an e-commerce platform that would reduce transaction costs, facilitate cross-border trade, and make localized expertise more widely available didn’t resonate with May’s anarchism.

“People aren’t going to be selling meaningless stuff like a surfboard recommendations,” May told Salin. Instead he expected “a high-tech version of Bradley Manning or Edward Snowden. Or someone who can exfiltrate bomber plans for that B-1 Bomber.” May later fleshed out his idea, calling “BlackNet,” where “nation-states, export laws, patent laws, national security considerations and the like [are considered] relics of the pre-cyberspace era.”

Tim May, ca. 1994He also perceived a crucial flaw: BlackNet couldn’t function without a non-governmental digital currency. “I admitted to Phil the big problem was untraceable payments,” he recalled. “They can be tracked when they send their Visa information.” The next day, May dug up a copy of the October 1985 copy of Communications of the ACM featuring a cover story by cryptographer David Chaum, titled “Security Without Identification: Transaction Systems to Make Big Brother Obsolete.”

“It was an epiphany,” May recalled. “It was like standing on top of the mountain and seeing that this is out there.”

Chaum’s work applied the tools of cryptography—mathematical techniques for sending secret messages—to real-world problems. His 1985 article sketched out a new digital currency system that used cryptography to hide a purchaser’s identity. May saw Chaum’s scheme as deeply flawed, but came away convinced that a decentralized, non-governmental digital money system was possible. Chaum’s work also led him to focus on the political implications of public-key cryptography, a system first described in a 1976 paper that allowed perfect strangers to exchange secret messages and establish provable, pseudonymous identities.

May became convinced that public-key cryptography combined with networked computing would break apart social power structures. It would create a virtual space that May compared to “Galt’s Gulch,” the fictional Colorado community in Atlas Shrugged where Rand’s heroes go to escape government intrusion and establish a capitalist paradise.

In September of 1988, May sat down at his Macintosh Plus “for an hour and a half” to bang out an essay loosely patterned after The Communist Manifesto. He titled it “The Crypto Anarchist Manifesto.” Running 497 words, it was his most influential piece of writing.

“Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure,” he wrote, “so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions.”

In September 1992, May and his friends Eric Hughes and Hugh Daniels came up with the idea of setting up an online mailing list to discuss their ideas. Within a few days of its launch, a hundred people had signed up for the Cypherpunks mailing list. (The group’s name was coined by Hughes’ girlfriend as a play on the “cyberpunk” genre of fiction.) By 1997, it averaged 30 messages daily with about 2,000 subscribers. May was its most prolific contributor.

May and Hughes, along with free speech activist John Gilmore, wore masks on the cover of the second issue of Wired magazine accompanying a profile by journalist Steven Levy, who described the Cypherpunks as “more a gathering of those who share a predilection for codes, a passion for privacy, and the gumption to do something about it.”

Wired, May/June 1993The Cypherpunks list, which dissolved shortly after September 11, 2001 (“a lot of people got cold feet about talking about this stuff”), was deeply influential at a time when the U.S. government was fighting to keep public-key cryptography out of the hands of the public. WikiLeaks founder Julian Assange was an active reader and participant on the list, contributing his first posts in 1995 under the name “Proff.”

Assange’s 2012 book Cypherpunks: Freedom and the Future of the Internet restated May’s theory in grandiose terms, describing how “a strange property of the physical universe that we live in” (cryptography) made it possible to create “new lands barred to those who control physical reality.”

Did bitcoin’s pseudonymous creator, Satoshi Nakamoto, contribute to the Cypherpunks list under a different name? There’s no way of knowing, but the core components of his invention incubated in its voluminous, technical correspondence. From the outset of their project, May and his fellow travelers were focused on creating an internet-based cryptographic currency shielded from government interference—completing the technical challenge Chaum had only begun to solve.

The British cryptographer Adam Back first proposed HashCash on the list, a system for creating digital scarcity (known as “proof of work”) that was later cited in Nakamoto’s white paper. Nick Szabo—the creator of “Bit Gold,” who coined the phrase “smart contracts”—discussed his ideas on the list. Wei Dai, who Nakamoto contacted while formulating bitcoin, proposed his digital cash system, “b-money,” on the list, citing May as a major influence.

Another major contributor was computer scientist Hal Finney, who died in 2014. Finney came up with the idea of using Back’s technology to create an e-money; along with, Nakamoto he was the most important figure in bitcoin’s early days.

May himself brought the attention of his fellow cypherpunks to a digital timestamping system developed by Stuart Haber and W. Scott Stornetta, a primitive version of what would become known as a blockchain. “I can see these connections that are not fully formed,” May recalled. “I can just tell something is going to be important.”

After the Cypherpunks list dissolved, May’s influence faded—until Nakamoto’s 2008 bombshell. Bitcoin and cryptocurrency spawned a new generation of techno-libertarians self-identifying as Cypherpunks. May’s writings started recirculating, and the movement found a new home: Parallel Polis, a three-story building in Prague, home to the Institute of Cryptoanarchy, which puts on an annual Hacker’s Conference to advance the ideas of May and his fellow travelers.

May recently expressed disgust with the current state of the cryptocurrency community, citing its overpriced conferences and the advent of “bitcoin exchanges that have draconian rules about KYC, AML, passports, freezes on accounts and laws about reporting ‘suspicious activity’ to the local secret police.”

“I think Satoshi would barf,” he told CoinDesk in his last published interview. In my last exchange with May in November, he told me that he was done granting interviews with reporters, feeling burned out on the space. He preferred to spend his time playing with his new MIDI keyboard.

Did May’s prediction of crypto anarchy turn out wrong, or is it too early to tell? In 2017, he was optimistic that many of the changes he foresaw in the late 1980s were beginning to take shape, speaking of a fork in the road—the world was moving toward either Leviathan or an “anarchic-type system.” There would be no in-between.

More recently, he quoted the epitaph found on Ancient Roman gravestones: “I was not. I was. I am not. I don’t care.”

Rest in peace, Tim May.

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Das: “The Bubble Is Losing Air. Get Ready For A Crisis”

Authored by Satyajit Das,

The shift to tighter monetary policies in the West is weakening credit markets. Over-indebted emerging markets face headwinds from rising borrowing costs and dollar shortages… Investors need to focus on their response to financial stresses in an era in which policymakers will be constrained.

The “everything bubble” is deflating. The fact that it’s happening relatively slowly shouldn’t blind us to the real threat: The world is dangerously underestimating how hard it’ll be to deal with the fallout once it pops.

Frothy markets can’t disguise the warning signs. The shift to tighter monetary policies in the West is putting pressure on global equity and real estate values. Even more critically, it’s weakening credit markets. Over-indebted emerging markets face headwinds from rising borrowing costs and dollar shortages.

At the same time, investors are underestimating how disruptive trade conflicts and sanctions could turn out to be. That’s not to mention rising non-financial risks — from the legal difficulties of the US administration, to the UK’s Brexit debacle, to political instability in France, Germany, Italy and even Saudi Arabia. Uncertainty will impact the real economy, primarily through the wealth effect of declining asset values and a reduced supply of credit.

Investors need to start focusing on how best to respond to a new crisis. The choices are more limited than many realize. Historically, central banks have needed to slash official rates as much as 4-5% in order to offset the effects of a financial crisis or an economic slowdown. That’s why former US Federal Reserve Chair Janet Yellen talked about the need to raise rates in good times — to provide room to cut when necessary.

Yet, even after recent US interest rate hikes, the Fed has nowhere near enough room to cut rates that much without going negative. In Europe and Japan, where rates are already less than zero, easing would require substantially negative levels, which would likely be politically impossible. Even current levels are controversial. Negative rates are a disguised way of writing down debt; they penalize savers and weaken the banking system.

Fiscal policy doesn’t offer much of an alternative. In most major economies, it’s already expansionary, albeit to differing degrees. The US government deficit is forecast to rise to $1 trillion as a result of tax cuts and higher public spending, according to the Congressional Budget Office. Most economies are pushing against high and rising government debt levels, as well as substantial unfunded liabilities for pensions and health care.

Reversing the planned reduction of central bank balance sheets and restarting quantitative easing isn’t an option everywhere. The Fed can easily purchase government bonds given the increasing financing needs of the US government. But the European Central Bank is restricted by the capital key that governs the proportion of each EU member’s bonds that can be purchased. The Bank of Japan is already buying more than the government is issuing in new debt.In theory, central banks could aggressively expand the asset classes they buy to include corporate and bank debt, or real estate trusts and shares. The ECB, BOJ and the Swiss National Bank have already implemented such programs. But the ECB’s losses on bonds of troubled retailer Steinhoff International Holdings NV show how risky such a strategy can be.

Ultimately, central banks might have to resort to QE variations such as “helicopter money.” Originally a thought experiment of Milton Friedman, the government would print money and distribute it to the public to stimulate the economy. To make it palatable, the measure could be packaged as a way to rationalize welfare systems by reducing frictions and administration costs.

Helicopter money would at least deflect criticism of QE programmes as favouring the wealthy and exacerbating inequality, as benefits would accrue to a wider spectrum of the population. Direct intervention, such as lending to or investing in businesses, or taking over banks and large parts of the economy to restart activity, are also possible.

Those would be awfully desperate measures, however, which points to the real problem. Since 2008, governments and central banks have stabilized the situation without fundamentally addressing high debt levels, weak banking systems and excessive financialization. Growth and inflation won’t recover until they’re dealt with. The surprise is that this comes as a surprise to policymakers, given that Japan’s experience since 1990 highlights the limits of available policy tools.

In any new crisis, then, policymakers are likely to be badly exposed. Central bank purchases of real estate and equities, helicopter money and more direct intervention could well fail to boost economic activity. That would contribute to a collapse in confidence in authorities, as the sight of governments forced to print money and throw it out of the window or take over markets increases people’s anxiety about the future.

There is already a crisis of trust – a democracy deficit – in many advanced economies, accompanied by rising political tensions. A loss of faith in the supposed technocratic abilities of policymakers to manage economies will compound these pressures.

The political economy could then accelerate towards the critical point identified by John Maynard Keynes in 1933, where “we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.”

Governments that want to avoid that dystopian prospect need to address the key underlying problems now, before it’s too late.

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“No Wall In Any Form”: Govt Shutdown Odds Explode Amid Trump-Schumer Standoff

With a potential government shutdown just days away, Senate Democratic Leader Chuck Schumer (NY) dug in on Sunday, telling Meet The Press that President Trump is “not going to get the wall in any form.” 

Last Tuesday Trump, Schumer and House Minority Leader Nancy Pelosi (D-CA) clashed over Trump’s $5 billion demand for border wall funding in an awkwardly televised argument in the Oval Office, prompting Schumer to later declare on the Senate Floor: “I want to be crystal clear. There will be no additional appropriations to pay for the border wall. It’s done.

The New York Democrat echoed his comments on Meet The Press Sunday, telling host Chuck Todd that Trump doesn’t have the votes in the House or the Senate – saying that the president is having a “temper tantrum” over the wall. 

“They do not have the votes to pass the president’s proposal — $5 billion or whatever it is for the wall,” said Pelosi at a recent news conference. “So … if nothing is going to change in that regard, I don’t know why we just don’t proceed to keep government open so that people can be home for the holidays.”

Meanwhile, the odds of a shutdown spiked to 58% on PredictIt, nearly double what it was 24 hours ago. 

Rep. Paul Mitchell (R-MI) thinks the odds are even higher. “The odds are 65/35 we’re shutting down. I’m not optimistic we’re going to see some kind of compromise on appropriations on Homeland Security,” said Mitchell, the freshman representative for the Republican leadership team. “I don’t see that they’re going to get done bickering.”

“Trump will get the blame, but he won’t care,” added an unnamed GOP lawmaker quoted by The Hill. “And the base will love him for it.”

Yesterday we reported that Republicans are growing frustrated with Trump’s holdout over funding the wall, after the president shockingly declared that he would be “proud” to take credit for a shutdown if he doesn’t get his wall. 

“If we don’t get what we want, one way or the other … I will shut down the government. Absolutely,” said Trump during an awkward argument broadcast live. “I am proud to shut down the government for border security.

With the two sides at an impasse, it appears that the partial shutdown is a foregone conclusion unless someone blinks. 

There is no discernable plan. None that’s been disclosed,” said #2 Senate Republican John Cornyn of Texas. “Everybody’s looking to [Trump] for a signal about what he wants to do. So far, it’s not clear.”

The last time the government shut down in January, the GOP-controlled House was able to pass a short-term spending solution until February 16 – only to be blocked by Schumer and Democratic Senators because it did not have provisions for immigrants in the Deferred Action for Childhood Arrivals (DACA) program. 

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California Troubled Utility Proposed $2 Billion Rate Hike To Fund “Wildfire Safety”

One month after the stock and bonds of troubled California Utility Pacific Gas & Electric cratered after the company hinted of a liquidity crisis as a result of mounting legal obligations following California’s destructive Camp Fire, shocking and infuriating its investors…

… PG&E is now set to reap the ire of its clients as well after a demand for a rate hike of almost $2 billion from customers, saying more than half will go toward wildfire safety.

In a proposal submitted late last week to the California Public Utilities Commission, PG&E asked for $1.1 billion in new revenue in 2020, including $576 million for the Community Wildfire Safety Program, $273 million toward liability insurance, and $209 million for core gas and electric operations. The proposal also asks for another $454 million in 2021 and $486 million in 2022.

If the commission approves the hike, California clients of PG&E could see their bills jump more than $10 a month, a troubling development for Californians who already pay one of the highest prices in the nation for electricity. According to the US Energy Information Administration, last year’s average monthly bill was $101.49.

PG&E claims the money for the Community Wildfire Safety Program would go toward reducing wildfire threats. According to Fox6, parts of those efforts will include installing “stronger poles, introducing technology to respond faster to fallen power lines, enhancing weather forecasting models, and increasing coverage in high-threat areas by adding close to 600 cameras.

“We understand and embrace our responsibility to safely provide electricity and gas to the communities we have the privilege to serve,” PG&E Senior Vice President of Energy Supply and Policy Steve Malnight said in a news release.

“As California experiences more frequent and intense wildfires and other extreme weather events, we must take necessary, bold and urgent steps to protect our customers. The prudent investments we are proposing will help build a safer and more resilient energy system for the future.”

While the explanation will hardly mollify the angry clients, PG&E’s legacy liquidity problems still remain as the proposal does not include money for potential claims from the 2017 and 2018 California fires, PG&E said.

The proposed rate increase will have an even more difficult time to pass in light of the company’s operational negligence to date. A class action lawsuit filed last week accuses the utility of negligence and poor maintenance of electrical infrastructure.

“Even though PG&E knew that its infrastructure was aging, unsafe, and vulnerable to weather and environmental conditions, it failed to fulfill these duties, and failed to take preventative measures in the face of known high-risk weather conditions, such as de-energizing its electrical equipment,” the lawsuit states.

Another suit calls the Camp Fire an “inevitable byproduct of PG&E’s willful and conscious disregard of public safety.”

Meanwhile, as the company heads toward legal collision course which analysts believe will cost it tens billions, in a PG&E report this week the company outlined employee reports of damaged power towers minutes before the Camp Fire broke out. One employee called 911 the day the wildfire started after spotting flames close to a high-voltage tower in Butte County. That was 15 minutes after a transmission line went out near that location.

On Wednesday, the state’s insurance commissioner reported $9 billion in insured losses from the 2018 wildfires.

“The tragic deaths of 88 people and over $9 billion in insured losses to date are shocking numbers — behind the insured loss numbers are thousands of people who’ve been traumatized by unfathomable loss,” Insurance Commissioner Dave Jones said.

The utility could see $26.5 billion in liability costs, co-head of Utilities, Power Equipment & Renewable Energy at SSR, Hugh Wynne said. It might be less if the company isn’t found to have started one or more of the 2017 and 2018 fires, although according to its own admission at least in regard to the latter, that seems unlikely.

“PG&E may also be able to avoid liability for certain claims (but not claims for property damage) if it is found not to have been negligent in the operation and maintenance of its equipment,” he said. “Plaintiffs bringing claims for damages due to loss of business revenue, loss of wages, pain and suffering or death would have to file these claims in court and would be required to prove PG&E’s negligence to collect them.”

For now however, PG&E faces an even more uphill climb: convincing its clients that they should pay for PG&E’s negligence. The upcoming battle will surely be incendiary.

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