Month: July 2019

Via InternationalMan.com,

International Man: Economically, politically, and socially, the United States seems to be headed down a path that’s not only inconsistent with the founding principles of the country but accelerating quickly toward boundless decay.

The word “decadence” is often associated with the fall of the Roman Empire, which became morally corrupt—its people lazy, wasteful, and lacking discipline. Many observers have pointed out the US is similarly becoming decedent. How do you see it?

Doug Casey: There’s no question about it; the culture in the US is changing. Where to start? It’s a book-length subject. One thing that absolutely amazes me is that the term “cultural appropriation” has become a buzzword for a lot of people today. The concept is actually completely insane.

It’s bizarre—perverse, really—that the people doing the most whining about cultural appropriation by Americans don’t actually have worthwhile cultures themselves. The fact of the matter is that the only culture in the history of the world that amounts to anything is that of Western civilization. The West has given all of humanity concepts like freedom of speech, freedom of thought, freedom of the press, free markets, individualism, science, and rationality. In addition, the West has created almost all of the world’s great music, literature, architecture, and philosophy

People trying to make cultural appropriation on the part of Americans into a scandal are basically scam artists and race hustlers. I’m talking about blacks who are outraged about white women wearing African earrings. Or Hispanics picketing a couple of white girls who set up a taco stand after visiting Mexico.

I’ve spent a lot of time in the Spanish-speaking world south of the US border. Other than quaint sombreros, some local food, and some basically primitive handicrafts, they don’t have a culture that’s worth anything.

That’s absolutely true of Africa. Africans should be eternally grateful to the West if, when da Gama was rounding the Cape in the 15th century, he’d just thrown out a wheel. But he would have also had to throw out an instruction book. But nobody could read it, because the entire continent south of the Sahara was illiterate.

This is true of most of the primitive world. I hesitate to say “developing world” because development is solely due to imported capital and expertise. If that inflow stops, Africa could go back to the bush, with mass starvation.

The only cultures in the world that can compete with Western civilization are those in the Orient. But what do they have? Frankly, not much, apart from Taoism, Zen, yoga, martial arts, and some great cuisines. Some things of value but not much by comparison to the West.

The fact that Westerners are ashamed of their culture is a sign of the collapse of the West. Most Europeans and Americans are so intimidated by these people squalling about ridiculous things that they don’t even try to defend themselves.

Instead, they agree with their attackers, stick their tails between their legs, and wander off. I don’t doubt Americans will agree to pay “reparations” to blacks for slavery. It’s an absurd concept, about as ridiculous as the English paying me reparations because of what they did to my ancestors in Ireland 200 years ago.

In fact, the Africans exported to the New World were the lucky ones. Their descendants have a standard of living and opportunities 10 or 20 times greater than those still on the continent.

But the fact these things are even discussed is a definite sign of the collapse of the West. It’s very much like what happened in the late Roman Empire.

When Rome was in its ascendancy and at its height, the leaders of Rome were all native Romans or at least native Italians. If they were born in other parts of the Empire, they were of Roman culture and had Roman names and Roman values. They had a stake in their civilization.

But as time went on, all of this started changing.

By the time the barbarians invaded the Empire wholesale—starting with the battle of Adrianople in 378 AD—the handwriting was already on the wall. Within 30 years, the barbarians controlled the entire Empire.

The old political structure had completely collapsed. Native Romans were leaving the Empire, going to barbarian lands, to avoid onerous taxation. The currency was worthless. The economy was in a shambles. The military structure had completely collapsed. None of the soldiers were Italians; they were all barbarians hired as mercenaries. Likewise, here in the US, few Americans in the diminishing middle class want to join the military. The city of Rome itself was sacked in 410 AD and it never really recovered.

International Man: Economically, the US government continues to spend ever-increasing amounts of money. In 2018 alone, the federal deficit was $779 billion—a $113 billion increase from the year before. Politicians on both sides of the aisle are falling over themselves to offer new government freebies that could pay for college, medical care, and the list goes on.

How does this play into the theme of US decadence?

Doug Casey: Well, whether you’re an individual or a family or a country, when you live above your means, you’re almost by that very fact decadent. You’re not planning for the future.

But the US government’s debt and reported deficits represent only current cash outlays, not obligations in the form of future spending. If the deficits were represented with accrual accounting—which is what businesses have to do—the annual deficits would probably be more like $3 trillion.

Not to mention that interest rates are artificially suppressed to about 2% in the US. At more normal levels of, say, 6%, the annual deficit would be about $800 billion higher. So the financial situation is actually much, much worse than it seems.

On top of all this is the fact that these deficits come during a time of supposed recovery. But the “recovery” has been ramped up by creating trillions of new dollars and allowing people to borrow at effectively negative interest rates, certainly after inflation. This is all very decadent.

Eat, drink, and be merry, for tomorrow we die. That’s not the attitude of a rising civilization.

The opposite of “decadent” is to be constructive, disciplined, forward-thinking, and self-respecting. You produce more than you consume and save the difference.

That’s exactly the opposite of what Americans are doing today.

We’re completely decadent.

Small comfort that the Europeans are even worse off than we are.

International Man: On an individual level, Americans are living beyond their means. Many Americans have less than $1,000 in savings.

What does this say about a society?

Doug Casey: It augurs very poorly.

The average American is one paycheck from not being able to pay his rent. When the distortions that have been cranked into the economy over just the last 10 years unwind and the economy as a whole goes downhill again, there are going to be millions of people who can’t pay their rent. Many millions more are going join the 42 million Americans now living on food stamps.

The social repercussions of this are predictable.

The population will get angry; many will go into the streets and riot. They’re going to vote overwhelmingly for some politician who says that he—or quite possibly she—can cure all their problems by giving them free stuff stolen from rich people.

In a way it’s understandable, because the fact of the matter is the rich have indeed been getting richer at an accelerating rate.

Why?

Because they’re the ones that get to stand next to the firehose of money that’s coming out of Washington. They get it first; they get most of it. It’s another sign of a society in decline: the dominance of cronies. That creates a lot of class antagonism.

It’s going to explode and be really ugly. Perhaps one thing keeping a lid on the situation is the huge number of Americans on psychiatric drugs: Zoloft, Prozac, and a hundred others. Perhaps millions of others don’t care as long as their internet connection enables them to play video games.

International Man: Aside from the financial aspect of decadence, what is happening culturally and intellectually in the United States? For example, many Americans are rejecting biological facts in favor of the politically correct fad of the day. Is this a sign of decline?

Doug Casey: The PC types say there are supposed to be 30 or 40 or 50 different genders—it’s a fluid number. It shows that wide swathes of the country no longer have a grip on actual physical, scientific reality. That’s more than a sign of decline; it’s a sign of mass psychosis.

There’s no question that some males are wired to act like females and some females are wired to act like males. It’s certainly a psychological aberration but probably has some basis in biology.

The problem is when these people politicize their psychological peculiarities, try to turn it into law, and force the rest of the society to grant them specially protected status.

Thousands of people every year go to doctors to have themselves mutilated so that they can become something else. Today they can often get the government or insurers to pay for it.

If you want to self-mutilate, that’s fine; that’s your business even if it’s insane. To make other people pay for it is criminal. But it’s now accepted as normal by most of society.

The acceptance of politically correct values—“diversity,” “inclusiveness”—trigger warnings, safe spaces, gender fluidity, multiculturalism, and a whole suite of similar things that show how degraded society has become. Adversaries of Western civilization like the Mohammedan world and the Chinese justifiably see it as weak, even contemptible.

As with Rome, collapse really comes from internal rot.

Look at who people are voting for. It’s not that Americans elected Obama once—a mob can be swayed easily enough into making a mistake—but they reelected him. It’s not that New Yorkers elected Bill de Blasio once, but they reelected him by a landslide. All of the Democratic candidates out there are saying things that are actually clinically insane and are being applauded.

International Man: In fact, in the recent Democratic debate, candidate Julián Castro even mentioned giving government-funded abortions to transgender women—biological men. It received one of the loudest bouts of applause from the audience.

That’s not to mention that two other candidates spoke in broken Spanish when responding to the moderator’s questions.

Doug Casey: As you said, it got a lot of applause.

US presidential candidates speaking in Spanish would be very much like an ancient Roman addressing the Forum in Gothic, not Latin. It’s all over for a culture when it starts using the language of its conqueror. In a restaurant here in Aspen, the owners have a sign in Spanish that refers to the progress of the Reconquista—the recapture of the American Southwest from the Anglos. Perhaps someone will speak Arabic in the next debates.

I hate to sound defeatist, but it’s all over for what was once known as American civilization. The celebrity of AOC is indicative. How else could a 29-year-old Puerto Rican waitress, poorly educated and not very bright, set the political tone for the whole country?

International Man: Is America’s late-stage decadence a product of its political and economic decline or vice versa?

Doug Casey: The decadence we see all around us is arising from every source. Cultural, economic, and political. Cultural decline is the most basic area. Massive immigration of people with different cultures, languages, and religions guarantee it. Especially if they’re coming because of free benefits. Many actually despise traditional American culture, as well as holding the current culture in contempt.

Their views are then reflected in a corruption of the politics. We see that with the apparent acceptance of the Squad—although I prefer to call them the “Gang of Four.” Politics engenders economic distortions. Part of the problem is that politics completely dominates the economy today.

For Trumpers to think that building a wall is going to change things is naïve. A wall will be about as effective as a kid’s sandcastle on the beach to hold back the waves.

The barbarians are already within the gates.

*  *  *

As Doug Casey discussed, the late stage decadence in the US is contributing to a growing wave of misguided socialist ideas and politicians. All signs point to this trend accelerating until it reaches a crisis… one unlike anything we’ve seen before. That’s exactly why Doug and his team just released this urgent video. Click here to watch it now.

via ZeroHedge News https://ift.tt/2yhHryU Tyler Durden

A giant ‘city-killer’ asteroid that just whizzed past earth seemingly appeared “out of nowhere” has stunned astronomers after only being discovered last week, days before it flew within around 45,000 miles from earth – or less than 20% of the distance to the moon, according to the Washington Post. 

“I was stunned,” said Alan Duffy – lead scientist at the Royal Institution of Australia. “This was a true shock.” 

This asteroid wasn’t one that scientists had been tracking, and it had seemingly appeared from “out of nowhere,” Michael Brown, a Melbourne-based observational astronomer, told The Washington Post. According to data from NASA, the craggy rock was large, an estimated 57 to 130 meters wide (187 to 427 feet), and moving fast along a path that brought it within about 73,000 kilometers (45,000 miles) of Earth. That’s less than one-fifth of the distance to the moon and what Duffy considers “uncomfortably close.” –Washington Post

“It snuck up on us pretty quickly,” said Michael Brown, an associate professor at Australia’s Monash University School of Physics and Astronomy, adding later “People are only sort of realizing what happened pretty much after it’s already flung past us.”

This is the video of the close encounter of Asteroid 2019 OK we have been Twitting all day with the Earth: https://t.co/bjT7uhQJuO pic.twitter.com/3e4UyPcdPl

— ASAS-SN (@SuperASASSN) July 25, 2019

The asteroid was discovered by separate astronomy teams in the United States and Brazil – while information on the ‘city-killer’ was announced only hours before it shot past Earth.

“It shook me out my morning complacency,” said Brown. “It’s probably the largest asteroid to pass this close to Earth in quite a number of years.”

How did we not see this coming?

For starters, while Asteroid 2019 OK (as it’s been named) is large enough to destroy a city, it’s nowhere near the half-mile-wide or larger asteroids which NASA and its international partners have scientists think they’ve identified 90% of. 

“Nothing this size is easy to detect,” said Duffy. “You’re really relying on reflected sunlight, and even at closest approach it was barely visible with a pair of binoculars.”

Brown said the asteroid’s “eccentric orbit” and speed were also likely factors in what made spotting it ahead of time challenging. Its “very elliptical orbit” takes it “from beyond Mars to within the orbit of Venus,” which means the amount of time it spends near Earth where it is detectable isn’t long, he said. As it approached Earth, the asteroid was traveling at about 24 kilometers per second, he said, or nearly 54,000 mph. By contrast, other recent asteroids that flew by Earth clocked in between 4 and 19 kilometers per second (8,900 to 42,500 mph).

“It’s faint for a long time,” Brown said of Asteroid 2019 OK. “With a week or two to go, it’s getting bright enough to detect, but someone needs to look in the right spot. Once it’s finally recognized, then things happen quickly, but this thing’s approaching quickly so we only sort of knew about it very soon before the flyby.” –Washington Post

“It should worry us all, quite frankly,” Duffy added. “It’s not a Hollywood movie. It is a clear and present danger.“

The reason Asteroid 2019 OK is referred to as a ‘city-killer’ is because it’s large enough that if it struck earth, most of it would likely have reached the ground, resulting in catastrophic damage. 

“It would have gone off like a very large nuclear weapon,” with enough energy to level a city,” said Duffy. “Many megatons, perhaps in the ballpark of 10 megatons of TNT, so something not to be messed with.”

In 2013, a much smaller meteor (around 65 feet across) broke up over the Russian city of Chelyabinsk – the shockwave from which shattered windows, collapsed roofs, caused car accidents, and provided some amazing footage to boot. Around 1200 people were injured. 

According to the report, “The last space rock to strike Earth similar in size to Asteroid 2019 OK was more than a century ago, Brown said. That asteroid, known as the Tunguska event, caused an explosion that leveled 2,000 square kilometers (770 square miles) of forest land in Siberia.“

What to do? 

Turning his attention to the topic of planetary defense, Duffy warns against trying to “blast it with a nuke” to avert disaster. 

“It makes for a great Hollywood film,” he said. “The challenge with a nuke is that it may or may not work, but it would definitely make the asteroid radioactive.”

Instead, he recommends a ‘gravity tractor’ which would use the gravity of a spacecraft – something Duffy calls an “elegant solution.” 

In light of Asteroid 2019 OK, Duffy stressed the importance of investing in a “global dedicated approach” to detecting asteroids because “sooner or later there will be one with our name on it. It’s just a matter of when, not if.”

“We don’t have to go the way of the dinosaurs,” he said. “We actually have the technology to find and deflect certainly these smaller asteroids if we commit to it now.”

Emily Lakdawalla, senior editor of the Planetary Society, which promotes space exploration, said the recent near miss is a reminder that “it’s an important activity to be watching the skies.” The more that can be learned about an asteroid, the better prepared people can be to prevent potential disasters, she told The Post. –Washington Post

“It’s the kind of thing where you learn about something that you didn’t know about, like things flying close by us, and your inclination is to be scared,” said Emily Lakdawalla. “But just like sharks in the ocean, they’re really not going to hurt you and they’re really fascinating to look at.”

Sure, until one lands on your house.

via ZeroHedge News https://ift.tt/30Zx9zM Tyler Durden

With the most important week for newsflow set to begin shortly, with the Fed expected to launch its first easing cycle in over a decade on July 31, the only question investors want answered is whether the Fed will cut rates by 25bps (while this is now fully priced in, many suggest it may be too little and lead to a sharp drop in risk assets) or by 50bps (which many see as overkill considering the relatively stable state of the US economy).

While the NY Fed recently and unceremoniously slapped down its president, John Williams, in an unprecedented example of the Fed’s failure to communicate, for suggesting it was now accepted that a 50bps rate cut is FOMC consensus, in effect sharply lowering the odds of a 50bps rate cut, the truth is that nobody knows what will Powell will announce on Wednesday. So, in order to give some further perspective on where the US economy is now, compared to September 2007 – when the Fed also started an easing cycle by cutting rates by 50bps to insure against uncertainty resulting from tighter financial conditions, and just two months before the last recession officially began in December 2007 – Morgan Stanley compared some of the key leading and market indicators now and back in September 2007.

As Morgan Stanley credit strategist Matthew Hornbach writes, one needs to look at the first cut in 2007 without the benefit of hindsight – meaning, the Fed’s decision to cut 50bp had nothing to do with the coming financial crisis. It was about lessening downside risks coming from tighter financial conditions. Fast forward to today when it’s about downside risks coming from global growth and trade uncertainty.

And here Hornbach makes a the stunning observation: as shown in the exhibit below, things look worse today than at the September 2007 meeting on every metric.

Of course, as MS admits, not everything looks worse than it did in September 2007, like some of the nonmanufacturing (services) PMI data (which the Fed isn’t focusing on when it comes to downside risks). The US labor market data also look better today than in late 2007. In particular, a very weak nonfarm payroll report occurred in early September 2007 (August NFP -4k vs. 100k expected; July revised down 125k to -33k.

On the other hand, developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Putting it all together, Morgan Stanley firmly believes, as we first noted last Sunday in “A 25bps Cut Won’t Be Seen As Aggressive, And Will Disappoint The Market“, that it will be hard for the FOMC to look at the chart above and think a 25bp cut would be enough at this point.

Perhaps, MS is right, and the consensus is actually too hawkish at the moment, and Powell will indeed cut 50bps at 2pm on July 31. While we don’t know what the Fed’s ultimate decision will be, we have a nagging feeling it won’t matter much as we will simply remind readers of what happened back in Sept 2007 when the Fed did cut 50bps.

• First, the S&P hit an all time high just after, in October 2007: that high would not be revisited until 6 years later, and at the cost of trillions in central bank QE.
• Second, just three months after the Fed cut 50bps, the recession started in December 2007, which then promptly mutated into the greatest financial crisis since the Great Depression.
• Third, after hitting a record – for the time high – the S&P then proceeded to plunge 60% lower by March 2009, and only the coordinated effort of all the world’s central banks managed to restore faith in the Western financial system.

It will be delightfully ironic if the Fed’s rate cut in three days unleashes a similar chain of catastrophic events.

via ZeroHedge News https://ift.tt/2YpXCov Tyler Durden

On the same day the large British warship HMS Duncan arrived in the Persian Gulf to assist the MHS Montrose in providing safety escorts to UK-flagged ships against the threat of Iranian seizure in the vital oil transit waterway, Tehran has again slammed the UK-led initiative of a joint European fleet patrolling the region. 

An Iranian government spokesman warned on Sunday that a joint European task force operating so close to Iran’s coast “sends a hostile message” and is “provocative and will increase tensions,” according to semi-official Fars News Agency. The rhetoric is nothing new; however what is new and poses immense danger for the prospect of stumbling toward major conflict is the frequency of US and UK warships’ movement in the increasingly “crowded” narrow Strait of Hormuz. 

.@HMSDuncan has arrived in the Gulf, where she will support the safe passage of British-flagged ships along with @HMS_MONTROSE, which has already accompanied 35 merchant vessels. Read more: https://t.co/6kHvZ1Jw2A pic.twitter.com/9nj8tMY3Ut

— Ministry of Defence 🇬🇧 (@DefenceHQ) July 28, 2019

Britain’s controversial call for a “European-led maritime protection mission” quickly gained the support last week of key EU nations France and Germany, with Denmark and The Netherlands also joining the initiative. 

The BBC reports that the HMS Montrose has thus far escorted 35 vessels through the strait, according to the Ministry of Defence (MoD). The larger HMS Duncan frigate will further join what Britain has dubbed “freedom of navigation” operations not just for UK vessels but “also our international partners and allies,” according Defence Secretary Ben Wallace.

This as London has kept up pressure for the release of the still impounded Stena Impero, and after Iran’s leaders last week appeared to offer an “exchange” of vessels of sorts, demanding the release of the Grace 1, which had been seized by Royal Marines early this month off Gibraltar. Iranian Government Spokesman Ali Rabiyee said further on Sunday that Iran “welcomes” the mediation of certain countries, but that ultimately “seizure of the British tanker was based on legal principles but Britain should release our oil tanker as soon as possible.”

Rabiyee added, “Iran believes that security of the region should be established by the regional states and we are the biggest guardian of security for customers in the Persian Gulf” — while addressing reports of the joint European patrol mission. 

But considering that it appears the US and Europe stand ready to increase patrols close to Iranian waters, the potential for an explosive spark which ignites greater conflagration remains higher than ever. 

via ZeroHedge News https://ift.tt/2SNZzdd Tyler Durden

The New York Times has reported that Trump’s Director of National Intelligence Dan Coats is expected to step down in the coming days, with Texas Congressman John Ratcliffe — an outspoken supporter of the president — as Trump’s top pick to replace him. Minutes after the NYT story hit, Trump confirmed via Twitter that he has nominated Ratcliffe to the nation’s top intelligence post overseeing America’s seventeen intel agencies. 

….be leaving office on August 15th. I would like to thank Dan for his great service to our Country. The Acting Director will be named shortly.

— Donald J. Trump (@realDonaldTrump) July 28, 2019

Admin officials close to the matter said Coats spent his time as DNI clashing with Trump over issues ranging from Russian meddling and US-Moscow relations to the president’s well-known attacks on members of the intelligence community. 

Coats’ own criticisms and public contradictions of Trump had at times reportedly sent the president to rant against the former Indiana senator and diplomat, especially when during congressional testimony early this year the media gleefully seized upon Coats’ words to point out glaring policy contradictions among Trump’s cabinet. 

Coats had told Congress at a sensitive and stalled point in White House-North Korea dialogue that Pyongyang was unlikely to ever “completely give up its nuclear weapons and production capabilities” — words which had angered Trump.

Coats has also been deeply critical of Trump’s meetings Russian President Vladimir Putin in the past, which the Times report notes as follows:

Mr. Trump has weighed firing Mr. Coats since he took issue with the president’s assertions, after a 2018 meeting in Finland with President Vladimir V. Putin of Russia, challenging the intelligence community’s conclusions that Moscow interfered in the 2016 presidential race. Mr. Coats also questioned the wisdom of a potential White House meeting between the two leaders.

Some of the president’s political advisers have encouraged him to oust Mr. Coats, but he had been shielded by Vice President Mike Pence, a longtime protégé. Mr. Coats served as a senator from Indiana, and Mr. Pence was the state’s governor.

Also interesting is that during a July 2018 interview with NBC’s Andrew Mitchell, Coats was informed of plans for the White House to invite Putin to Washington, something which never materialized. 

“Say that again?” a visibly perplexed Coats had asked NBC’s Andrea Mitchell at the time. “OK. …That is going to be special.” This and other instances reportedly set Trump off and assured Coats’ days and DNI were numbered. 

As for Rep. Ratcliffe, now slated to replace Coats, the loyal Trump ally had publicly slammed Mueller and his politically charged investigation during last week’s testimony. 

via ZeroHedge News https://ift.tt/2Ybfs3r Tyler Durden

Step aside Baoshang Bank, it’s time for Chinese bank bailout #2.

Last Thursday, when reporting on the imminent failure of yet another Chinese bank in the inglorious aftermath of Baoshang Bank’s late May state takeover, we dusted off a list of deeply troubled Chinese financial institutions that had delayed their 2018 annual reports…

… and noted that the #2 bank on this list, Bank of Jinzhou, recently met financial institutions in its home Liaoning province to discuss measures to deal with liquidity problems, and in a parallel bailout to that of Baoshang, the bank was in talks to “introduce strategic investors” after a report that China’s financial regulators are seeking to resolve its liquidity problems sent its dollar-denominated debt plunging.

Fast forward just three days later, and it’s official: three months after Baoshang Bank was seized by the government in a historic first, Bank of Jinzhou was just bailed out, winning government-backed reinforcement on Sunday as three state-controlled financial institutions said they would take at least 17.3% in the troubled lender, whose shares have been suspended since April.

Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, China Cinda Asset Management and China Great Wall Asset Management, two of China’s four largest distressed debt managers, said on Sunday they would take stakes in Bank of Jinzhou, Reuters reports.

To avoid further repo market lockups and freezing in the interbank funding market, and amid rising concern about the bank’s viability and potential bank runs, Jinzhou said on Thursday it was in talks with multiple parties for possible investments.

As part of the rescue package, ICBC’s ICBC Financial Asset Investment unit signed an equity transfer agreement to invest up to 3 billion yuan ($436 million) in a 10.82% stake of Bank of Jinzhou, it said in a statement filed to the Shanghai Stock Exchange. Hours after the state lender’s announcement, Cinda said in a statement to the Hong Kong Stock Exchange that its wholly owned Cinda Investment Co would invest in a 6.49% stake in Bank of Jinzhou, though it didn’t give the value of the deal.

China Great Wall also said it would take a stake in Bank of Jinzhou, according to a statement sent to Reuters. It did not elaborate on the value of the deal or the size of the stake.

The investments come as regulators scramble to diversify their approach to supporting highly indebted smaller banks and contain financial risks.

On Friday, Reuters reported that China’s banking and insurance regulator told the country’s biggest distressed debt managers to prepare contingency plans to take over or invest in high-risk small and medium-sized Chinese banks as fractures in the inter bank funding market emerged.

“The investment is to serve country’s supply-side reform in the financial sector and enhance the bank’s capability to serve the real economy,” the ICBC said in its statement. The deal will be conducted with the unit’s own funds, ICBC added.

Back in May, a shock government-led takeover of the little-known (at the time) Baoshang Bank revived concern about the health of hundreds of small lenders as the slowing economy results in more sour loans, testing their capital buffers and draining their reserves.

“For Baoshang Bank, the government took a state takeover, while for Bank of Jinzhou, the government introduced some state-owned strategic investors,” said Dai Zhifeng, analyst with Zhongtai Securities Co; in reality both were government rescues, only in the latest case Beijing used state-owned bank intermediaries.

“The latter approach is more market-oriented and showcased the determination of regulators to resolve problematic banks, while injecting confidence into the market,” Dai said, although when stripped of all the pig lipstick, what just happened in China is that another major bank, one with $100 billion in assets, just collapsed and received a government-backed rescue. For how this impacts the overnight funding market, keep a close eye on various Chinese repo rates once the market opens.

via ZeroHedge News https://ift.tt/2OmGW1m Tyler Durden

Authored by Ryan McMaken via The Mises Institute,

Many critics of capitalism have given up trying to claim capitalism makes people poorer. Faced with so many obvious gains in the standard of living, and in reducing poverty worldwide, markets have won the economic debate over whether or not capitalism is the path to material riches.

But the doctrinaire anti-capitalists have other strategies. They’ve now branched out into blaming capitalism for a host of other social, ecological, and psychological ills.

Sometimes, the tactic is to blame capitalism for destroying the earth. Other times, it’s to claim that capitalism, in spite of the material plenty it delivers, makes us miserable.

For example, George Monbiot, columnist at The Guardian blames pro-capitalist ideology for making people, sad, lonely, and unhealthy. Writers cite polls claiming people in richer countries — i.e., more capitalistic ones — are more miserable than people elsewhere. Holly Baxter at The Independent suggests capitalism is the reason elderly people are now so lonely and isolated: capitalism makes us more concerned with buying things than with visiting poor, dying Aunt Ethel.

Claim: Capitalism Wants Us to Be Sad, Needy Consumers

And it’s all by design, it seems. According to Monbiot and other critics of “neoliberalism” — by which they just mean anything resembling a market system — the capitalist ideology is designed to isolate us, and turn us into soulless consumers. This then paves the way for an endless cycle of misery and consumption.

For a more academic phrasing of this idea, we could consult Ankita Singh’s article “Capitalism, Consumerism, and Popular Culture” which examines how capitalism creates a downward cycle of despair. This persistent unhappiness, Singh explains, “is caused [by] the sense of alienation one feels in today’s urban corporate culture.” Consequently, consumers attempt to “compensate” for their capitalism-caused “emptiness” by “indulg[ing] in inanimate objects offered by the consumerist culture.”

At this point, all that is left for the capitalists to do is to tell us what products to buy. And fortunately for the capitalists, Singh tells us: “The power of advertising is such that it can create a demand where none exists, of a commodity which is not needed.”

Much of this general concept can be traced back to Marxist psychologist Erich Fromm, who in Escape from Freedom (1941) wrote:

In capitalism economic activity, success, material gains, become ends in themselves. It becomes man’s fate to contribute to the growth of the economic system, to amass capital, not for purposes of his own happiness or salvation, but as an end in itself.

That is, through capitalism and its propagandists (i.e., advertisers) human beings are reduced to “a cog in the vast economic machine” who no longer pursues his own happiness, but only serves the interests of “capitalism.”

There are a couple of problems with this theory, though.

One is that a capitalist economy does not rely on endless consumption to sustain itself.

The second is that advertising doesn’t work the way many assume it does.

Capitalism Doesn’t Cause Consumerism

For starters, it is not the case that the capitalist system is built on consumption or that it requires us to mortgage our future in order to buy ever-larger amounts of consumer goods. After all, it is for a good reason that capitalism has historically been much associated with misers — the quintessential literary example being Ebenezer Scrooge — who shunned consumerism. Saving (i.e., deferred spending) is every bit as essential to capitalism as is consumption. It is governments and their central banks, not markets, that seek to maximize consumption always and everywhere.

Moreover, saving and investment are key ingredients in increasing wages, growing the capital stock, and increasing future consumption. In a market economy, many firms, such as retirement funds and banks, directly profit from more saving and investment.

Spending every last dime on another trinket or bauble is not a recipe for robust capitalism.

How Advertisers Are Supposedly Making Us Miserable

At this point, the purveyor of the capitalism-makes-you-sad theory could still insist: “sure, maybe capitalism overall doesn’t require us to relentlessly consume. But certainly there’s a portion of the capitalist system, such as toy sellers and auto makers, who need us to consume. And to get us to do so, they use advertising designed to keep us hoping we can fill that hole in our souls with just one more trip to the mall.”

There’s a (small) kernel of truth to this. Many capitalists do indeed want us to buy consumer goods, without much regard to the consequences to each consumer personally. In hopes of getting us to spend, they employ advertising. And advertising often promotes feelings of inadequacy to get us to consume more.

This particular kind of advertising was developed at least as early as the nineteenth century. It was then perfected in the 1920s.

Typical examples of the formula include:

• Why be ugly … when you can use Zenith Cold Cream?

• Why be fat … when you can take Acme Diet Pills?

This formula was so widespread by the 1920s and 1930s, in fact, that Sigmund Freud joked the “boldest and most successful piece of American publicity” would be an ad using the phrase “Why live if you can be buried for ten dollars?”2

Nowadays, a lot of modern advertising is more nuanced and less in-your-face than this formula. Modern advertising often appeals to humor. Nevertheless, advertisers nowadays still rely on the strategy of presenting consumption as a sort of self-improvement. They offer a glimpse of a life of better looking people, more luxurious cars, and more fulfilling friendships. It’s the life you might have if you only consume the right products and services.

But do people actually believe what advertisers tell them?

Clearly, people don’t buy everything advertisers tell them to. If they did, as Ludwig von Mises noted, candle makers could convince us to abandon light bulbs with a few ad campaigns.

Indeed, studies conducted to determine the effectiveness of ads have never been conclusive. A 1931 consumer survey revealed the “only 5 percent of the public believed any of the more obviously outrageous claims made by ads.” Only 37 percent believed any ads at all.3

A 2013 survey concluded only 21 percent of consumers agreed “ads are somewhat accurate.” 21 percent also said they will even “refuse to purchase products due to brand advertising.”

Some might claim this is only survey data, and thus questionable. But then there are countless cases in which ad campaigns failed to achieve results. A 2015 study from the University of Texas, for example, showed alcohol ads have increased 400 percent over the past forty years. Meanwhile, per capita alcohol consumption has gone down. Yes, advertising can be helpful in promoting a certain brand. But it hasn’t been shown to increase a person’s overall spending.

So, it seems people don’t spend more just because capitalists tell them to. And its unclear that many even believe what ads have to say. If this is the case, it’s hard to see how “capitalism” has succeeded in its nefarious plan to make us miserable consumers, assuaging our loneliness with another round of mindless spending.

Are We More Miserable than Our Forebears?

In spite of the unconvincing reasoning behind the capitalism-makes-you-sad narrative, many continue to find it plausible. This is largely because many people remain convinced that people were happier — or at least had an easier time — in the past.

Certainly, there’s no statistical data to support this. Those happiness measurements we sometimes read about in the popular media (such as this one) are usually based on totally subjective self-reported survey data and offer absolutely no means of comparing the present with the past. Attempts to systematically asses “happiness” in the past were virtually nonexistent.

Quality-of-life indicators reconstructed from the past (such as working hours, living space, life expectancy, and homicide rates) don’t often make the era of our grandparents or great-grandparents look especially wonderful. The nineteenth century — an era before modern methods of mass marketing and mass consumption — wasn’t an era of carefree indifference to the requirements of daily work and toil. The poverty of the “good old days”was not exactly a source of personal fulfillment and contentment.

But perhaps we need to look deeper into the past?

On this, Murray Rothbard suggests the imagined Golden Age before capitalism existed. It was, according to the myth, an era of “Happy Craftsmen and Happy Peasants” who had a “sense of belonging” and all were “sure of his station in life.” No one suspected he ought to be buying a new car or a new bedroom set. No such options were available at all.

Was living in poverty with no access to advertisements or capitalism the real key to happiness? Rothbard is skeptical and notes that people — should they really want to flee capitalism — are largely free to pursue this supposedly happier type of living in communes like the utopians or hippies of old. He concludes:

Not only has almost no one abandoned modern society to return to a happy, integrated life of fixed poverty, but those few intellectuals who did form communal Utopias of one sort or another during the nineteenth century abandoned these attempts very quickly. And perhaps the most conspicuous nonwithdrawers from society are those very critics who use our modern “alienated” mass communications to denounce modern society.

It’s comforting to think there is some time or place in which human beings were not troubled by feelings of unhappiness, emptiness, or inadequacy. It’s unclear, however, where or when this place has existed. In the mean time, few seem willing to give up their modern amenities to investigate first-hand.

via ZeroHedge News https://ift.tt/2LLzWJg Tyler Durden

Authored by Chetan Ahya, Morgan Stanley Chief economist and Global head of economics

Is the outlook, in the words of ECB President Mario Draghi, “getting worse and worse” or is there cause for optimism? Based on the evidence at hand and our assessment of the key drivers of the outlook, we think it is more the former than the latter, and we hold on to our base case prognosis of sub-par global growth.

Weaker fundamentals… Economic indicators around the world have been weakening, and the early data flow for July continues to paint a picture of softness. Sentiment surveys such as the flash PMI readings for the US and Europe, the German Ifo survey and the Japan manufacturing and non-manufacturing Tankan surveys, as well as Korean exports for the first 20 days of the month, have weakened further relative to June. All in all, global growth is now tracking at the 2015-16 cycle lows.

…meet stronger easing: Just like the data, central banks are moving back into the easing mode we last saw in 2015-16. The ECB has signalled it will cut rates and is assessing its options for QE (which we think will restart in 4Q19). Next week, we expect the Fed to cut by 50bp. Policy-makers in China will continue to implement their existing fiscal stimulus plans, and efforts to liberalise interest rates will likely result in a de facto reduction. Indeed, by year-end, we forecast that 21 central banks (out of the 34 we cover) will have eased monetary policy.

Can easing drive a strong recovery? A period of strong growth in 2017-1H18 followed the last easing cycle. Investors are asking whether we could be looking at a repeat performance. We’re sceptical. Easing helps to prevent financial conditions from tightening and avoids a non-linear market reaction that has a similar impact on growth. However, by itself, easing won’t suffice to power a strong recovery. As we learned from the 2012-16 experience, the key to reviving corporate confidence and growth lies in addressing the fundamental economic headwind of the day (deleveraging earlier in this cycle and trade tensions today).

Capex is key: A near-term revival in capex, which has been the key drag on growth, looks less likely. As things stand, trade tensions have seriously damaged corporate confidence globally, dampened the effectiveness of China’s tax cuts, weakened global demand and increased uncertainty as to the demand outlook. Capacity utilisation ratios are starting to fall, reducing the immediate need for investment.

What’s more, while companies may now need to alter their supply chains in light of trade tensions, we expect the increased capex from this channel to play out only over the medium term. Given China’s scale and efficiency advantages, at the moment no single-country alternative exists for its low-cost, high-scale and robust ecosystem. Hence, these decisions require a longer gestation period, with careful deliberation and planning.

Trade tensions: Small steps forward, but hurdles to a comprehensive deal remain: Investors cite developments on the trade tension front as another cause for optimism. Hopes for a resolution have been rekindled – trade talks will continue in Shanghai next week, China has approved a new guidance document on intellectual property rights law and is resuming purchases of US agricultural products, while the US is looking to loosen some restrictions on technology exports to China. While these moves may curtail immediate escalation risks, disagreements over key sticking points are still an obstacle to reaching a comprehensive deal quickly.

Trade policy uncertainty seems unlikely to abate, particularly considering the broader context – Japan reinstating an application process for select exports to Korea; France approving a bill imposing a new tax on services provided by large internet companies; and the US announcing a Section 301 investigation in response, while concerns persist regarding both tariffs on EU autos and Mexico. Hence, we think the overhang on the macro outlook from corporate confidence and capex will continue.

Sub-par growth environment to persist: On the current evidence, we think that our base case outlook – global growth stays weak in 2019 before gradually recovering to still-below trend levels in 2020 – remains intact.  Notwithstanding this weak growth backdrop, asset markets have continued to hold up well. As our chief US equity strategist Mike Wilson notes, this disconnect between fundamental data and actual/promised future central bank easing is more pronounced in the equity market than has been typical in the past.

The growth and market impact of trend-following systematic strategies over the past decade may have driven this sharp divergence. In this context, Mike cautions that any reversal in stock prices could lead to a faster and deeper drawdown than many are expecting.

If we are wrong and a stronger and faster recovery does play out, we think it would either be because:

1. Trade tensions are completely resolved within the next 2-3 months, removing the key overhang on the macro outlook; or…
2. China moves to enact further stimulus directed towards public spending (versus a greater emphasis on tax cuts earlier this year), with a more immediate impact on growth.

Have a great Sunday.

via ZeroHedge News https://ift.tt/30WJCUI Tyler Durden