Month: July 2019

The Nationalist Right Is Wrong: More Immigration Doesn’t Reduce Wages

Alongside claims that immigrants are a “cultural” and “demographic” threat to the United States, some prominent members of the new nationalist right argue that increased immigration will hurt working-class Americans in the pocketbook.

“These new arrivals compete primarily with the very Americans most likely to have lost their jobs, and the effect is lower wages,” Tucker Carlson declared during an anti-immigrant monologue on his Fox News show last year. Academics like the controversial University of Pennsylvania law professor Amy Wax have argued that immigration, particularly low-skilled immigration, has undercut working-class American wages.

At first blush, this seems to make intuitive sense. But new a new paper in the Journal of Development Economics helps show why new immigrants do not, in fact, tend to hurt native workers. After reviewing the flow of Syrian refugees into Jordan, researchers found that “Jordanians living in areas with a high concentration of refugees have had no worse labor market outcomes than Jordanians with less exposure to the refugee influx.”

That’s particularly eye-opening given the scale of the migration. Over 1.3 million Syrians moved to Jordan from the beginning of the Syrian civil war in 2011 to 2015. That’s a huge influx into a country of 6.6 million Jordanians.

The study’s result is consistent with the vast majority of economic research about immigration’s impact on wages. The Mariel Boatlift in 1980 is a common case study. 

In 1980, amid especially bad domestic economic conditions, Cuban dictator Fidel Castro allowed about 125,000 people to leave the country. They fled to southern Florida, increasing the size of Miami’s labor force by 7 percent in a matter of weeks. Given the sudden nature of this change, and given that most of these migrants were not particularly high-skilled, the Mariel Boatlift a good place to examine how immigration affects wages. And most studies of the boatlift find that the boatlift did not reduce native-born Americans’ pay. A 1990 paper by the Berkeley labor economist David Card, for example, found that the boatlift had “virtually no impact on the wages or employment rates” of lower-skilled Miami workers.

The Harvard economist George Borjas reached a different conclusion. His paper, published in 2017, found that the wages of high school dropouts in Miami fell by between 10 and 30 percent after the boatlift. But now a new study in The Journal of Human Resources finds that the wages of high school dropouts in Miami didn’t change relative to the wages of high school dropouts in other cities that did not experience a large immigration influx. 

How, you might ask, is that possible? After all, the basic laws of economics suggest that an increase in the supply of labor should lower the price of labor. But increased immigration doesn’t just increase the supply of labor—it also expands the demand for labor. Immigrants aren’t just workers. They also help start businesses, and they purchase goods and services from existing businesses. 

Indeed, immigrants play a substantial role in American entrepreneurship. Immigrants make up 15 percent of the U.S. population but start around 25 percent of new businesses. And while high-skilled immigrants disproportionately found the largest American companies, less-skilled newcomers are also disproportionately responsible for low-income entrepreneurship.    

So that’s why native wages didn’t drop. If you look at immigrants as contributing only to labor supply and not labor demand, you are committing what economists call the lump of labor fallacy. Given how entrepreneurial immigrants tend to be, letting more foreigners into United States might actually be a partial solution to slow wage growth, not its cause. 

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Are Free-Riding Investors Setting Up Markets For A Major Collapse?

Authored by James Rickards via The Daily Reckoning,

Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.

The best example is a parasite on an elephant. The parasite sucks the elephant’s blood to survive but contributes nothing to the elephant’s well-being.

A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant’s stamina, but the elephant carries on.

Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It’s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run.

A driver who uses a highway without paying tolls or taxes is a free rider. An investor who snaps up brokerage research without opening an account or paying advisory fees is another example.

Actually, free-riding problems appear in almost every form of human endeavor. The trick is to keep the free riders to a minimum so they do not overwhelm the service being provided and ruin that service for those paying their fair share.

The biggest free riders in the financial system are bank executives such as Jamie Dimon, the CEO of J.P. Morgan. Bank liabilities are guaranteed by the FDIC up to $250,000 per account.

Liabilities in excess of that are implicitly guaranteed by the “too big to fail” policy of the Federal Reserve. The big banks can engage in swap and other derivative contracts “off the books” without providing adequate capital for the market risk involved.

Interest rates were held near zero for years by the Fed to help the banks earn profits by not passing the benefits of low rates along to their borrowers.

Put all of this (and more) together and it’s a recipe for billions of dollars in bank profits and huge paychecks and bonuses for the top executives like Dimon. What is the executives’ contribution to the system?

Nothing. They just sit there like parasites and collect the benefits while offering nothing in return.

Given all of these federal subsidies to the banks, a trained pet could be CEO of J.P. Morgan and the profits would be the same. This is the essence of parasitic behavior.

Yet there’s another parasite problem affecting markets that is harder to see and may be even more dangerous that the bank CEO free riders. This is the problem of “active” versus “passive” investors.

An active investor is one who does original research and due diligence on her investments or who relies on an investment adviser or mutual fund that does its own research. The active investor makes bets, takes risks and is the lifeblood of price discovery in securities markets.

The active investor may make money or lose money (usually it’s a bit of both) but in all cases earns her money by thoughtful investment. The active investor contributes to markets while trying to make money in them.

A passive investor is a parasite. The passive investor simply buys an index fund, sits back and enjoys the show. Since markets mostly go up, the passive investor mostly makes money but contributes nothing to price discovery.

The benefits of passive investing have been trumpeted by the late Jack Bogle of the Vanguard Group. Bogle insisted that passive investing is superior to active investing because of lower fees and because active managers can’t “beat the market.” Bogle urged investors to buy and hold passive funds and ignore market ups and downs.

The problem with Bogle’s advice is that it’s a parasitic strategy. It works until it doesn’t.

In a world in which most mutual funds and wealth managers are active investors, the passive investor can do just fine. Passive investors pay lower fees while they get to enjoy the price discovery, liquidity and directional impetus provided by the active investors.

Passive investors are free riding on the hard work of active investors the same way a parasite lives off the strength of the elephant.

What happens when the passive investors outnumber the active investors? The elephant starts to die.

Since 2009, over $2.5 trillion of equity investment has been added to passive-strategy funds, while over $2.0 trillion has been withdrawn from active-strategy funds.

The active investors who do their homework and add to market liquidity and price discovery are shrinking in number. The passive investors who free ride on the system and add nothing to price discovery are expanding rapidly. The parasites are starting to overwhelm the elephant.

There’s much more to this analysis than mere opinion or observation. The danger of this situation lies in the fact that active investors are the ones who prop up the market when it’s under stress. If markets are declining rapidly, the active investors see value and may step up to buy.

If markets are soaring in a bubble fashion, active investors may take profits and step to the sidelines. Either way, it’s the active investors who act as a brake on runaway behavior to the upside or downside.

Active investors perform a role akin to the old New York Stock Exchange specialist who was expected to sell when the crowd wanted to buy and to buy when the crowd wanted to sell in order to maintain a balanced order book and keep markets on an even keel.

Passive investors may be enjoying the free ride for now but they’re in for a shock the next time the market breaks, as it did in 2008, 2000, 1998, 1994 and 1987.

When the market goes down, passive fund managers will be forced to sell stocks in order to track the index. This selling will force the market down further and force more selling by the passive managers. This dynamic will feed on itself and accelerate the market crash.

Passive investors will be looking for active investors to “step up” and buy. The problem is there won’t be any active investors left or at least not enough to make a difference.

The market crash will be like a runaway train with no brakes.

The elephant will die.

via ZeroHedge News https://ift.tt/32Q5qTX Tyler Durden

The Nationalist Right Is Wrong: More Immigration Doesn’t Reduce Wages

Alongside claims that immigrants are a “cultural” and “demographic” threat to the United States, some prominent members of the new nationalist right argue that increased immigration will hurt working-class Americans in the pocketbook.

“These new arrivals compete primarily with the very Americans most likely to have lost their jobs, and the effect is lower wages,” Tucker Carlson declared during an anti-immigrant monologue on his Fox News show last year. Academics like the controversial University of Pennsylvania law professor Amy Wax have argued that immigration, particularly low-skilled immigration, has undercut working-class American wages.

At first blush, this seems to make intuitive sense. But new a new paper in the Journal of Development Economics helps show why new immigrants do not, in fact, tend to hurt native workers. After reviewing the flow of Syrian refugees into Jordan, researchers found that “Jordanians living in areas with a high concentration of refugees have had no worse labor market outcomes than Jordanians with less exposure to the refugee influx.”

That’s particularly eye-opening given the scale of the migration. Over 1.3 million Syrians moved to Jordan from the beginning of the Syrian civil war in 2011 to 2015. That’s a huge influx into a country of 6.6 million Jordanians.

The study’s result is consistent with the vast majority of economic research about immigration’s impact on wages. The Mariel Boatlift in 1980 is a common case study. 

In 1980, amid especially bad domestic economic conditions, Cuban dictator Fidel Castro allowed about 125,000 people to leave the country. They fled to southern Florida, increasing the size of Miami’s labor force by 7 percent in a matter of weeks. Given the sudden nature of this change, and given that most of these migrants were not particularly high-skilled, the Mariel Boatlift a good place to examine how immigration affects wages. And most studies of the boatlift find that the boatlift did not reduce native-born Americans’ pay. A 1990 paper by the Berkeley labor economist David Card, for example, found that the boatlift had “virtually no impact on the wages or employment rates” of lower-skilled Miami workers.

The Harvard economist George Borjas reached a different conclusion. His paper, published in 2017, found that the wages of high school dropouts in Miami fell by between 10 and 30 percent after the boatlift. But now a new study in The Journal of Human Resources finds that the wages of high school dropouts in Miami didn’t change relative to the wages of high school dropouts in other cities that did not experience a large immigration influx. 

How, you might ask, is that possible? After all, the basic laws of economics suggest that an increase in the supply of labor should lower the price of labor. But increased immigration doesn’t just increase the supply of labor—it also expands the demand for labor. Immigrants aren’t just workers. They also help start businesses, and they purchase goods and services from existing businesses. 

Indeed, immigrants play a substantial role in American entrepreneurship. Immigrants make up 15 percent of the U.S. population but start around 25 percent of new businesses. And while high-skilled immigrants disproportionately found the largest American companies, less-skilled newcomers are also disproportionately responsible for low-income entrepreneurship.    

So that’s why native wages didn’t drop. If you look at immigrants as contributing only to labor supply and not labor demand, you are committing what economists call the lump of labor fallacy. Given how entrepreneurial immigrants tend to be, letting more foreigners into United States might actually be a partial solution to slow wage growth, not its cause. 

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The Article II Executive Power and the Rule of Law (Part 4)

This post deals with the field in which claims of constitutionally-conferred and inviolable executive discretion are most often made and accepted: foreign relations.  Those claims are buttressed by practical imperatives and the long-standing practice of the government.  From the beginning, Presidents have conducted the foreign relations of the United States, and have exercised considerable discretion in doing so.  Unlike the vast bulk of the federal executive’s operations, foreign-affairs activities are not based on an institution or program created by statute, like the Post Office.  Administration and control of foreign affairs as an inherent and inviolable aspect of the executive power can explain that practice.  A conceptualization of executive power that does not attribute to it such strong foreign-relations authority should also be able to explain that practice.

One virtue of the version of the Whig executive power I have described is that it can explain how the President can conduct foreign affairs with no statutory support.  That explanation in turn illuminates another important issue.  If the executive power itself brings with it no discretion, where do Presidents derive the discretion that they have in fact exercised so long as to foreign affairs?  The answer—that discretion arises as the residue of the duties imposed on officials—operates with respect to foreign relations and elsewhere, and so is important in understanding executive power generally.

The Whig executive power enables the President to conduct foreign relations because the international legal personality of the United States is an asset of the government.  The executive exercises the government’s legal personality, international and domestic, pursuant to the law.  When the President announces that this country is neutral in a foreign war, or directs that a vote be cast in the Security Council, he is performing the international version of the Whig executive function: administering the government by exercising its juridical powers.

Foreign relations differ from, for example, postal operations, because no statute is needed to create the United States as a person under international law.  International law itself creates that personality, and thereby adds to the legal environment in which American executive officials operate.  In acting for the United States on the international plane, executive officials perform their standard function of administering the government pursuant to the applicable law.

That conclusion does not, however, imply any inviolable executive autonomy with respect to foreign policy.  Executive officials administer the government in accordance with the law.  Insofar as Congress has power to add to the legal environment by adopting laws concerning foreign relations, and has done so, the executive must comply with those laws.  Insofar as Congress cannot or has done so, executive officials have discretion.  As luck is the residue of design, discretion is the residue of duty.  The question of the scope of congressional authority regarding foreign affairs is purely one of enumerated congressional power, not one of invasion of a sphere of presidential discretion conferred by the Constitution.  The Constitution in effect creates a default position in favor of considerable executive discretion regarding foreign relations.  Congress can change that position when it uses an enumerated power to add to the legal environment in which the executive operates.

Whether Congress has an enumerated power concerning any particular foreign-relations decision may be a difficult question.  An important example involves U.S. votes in the Security Council.  Under the U.N. Charter, the Security Council can create binding international-law obligations for member states, so its decisions are very important.  The United States’ vote in the Security Council is a juridical asset of the United States, to be administered by executive officials.  A Senator could not cast that vote, but that is not to say that the House and Senate by statute cannot direct how it is to be cast.  Finding a congressional power to direct the U.S. Representative to the Security Council is not easy, but not necessarily impossible.  For example, the second part of the Necessary and Proper Clause may empower Congress in this connection; it gives the legislature power to make laws necessary and proper for carrying into execution all powers vested by the Constitution “in the government of the United States.”  Power to act for the United States on the international plane may meet that description, and so be subject to congressional control through legislation concerning its execution.

Foreign relations provide an example of a broader phenomenon: some questions that are often seen as turning on inherent executive power actually turn on the reach of congressional power.  Similar issues arise concerning control of the armed forces.  Presidents have long argued that their status as commander in chief gives them control of military tactics, as opposed to strategy, that Congress may not invade.  Commanders, whether in chief or not, operate in a legal environment as other executive officials do.  Whether Congress may control tactical discretion depends on Congress’s power, not the President’s.  That question is not an easy one, because none of Congress’s powers concerning the forces is well adapted to that function.  Making rules for their “government and regulation” might encompass directing tactics, but its primary point is to establish military discipline.  If the Constitution does create presidential autonomy regarding tactical decisions, that autonomy is a residuum left by congressional power.  It does not come from any affirmative grant, so the issue is wholly about what Congress may do.

Similar reasoning applies to another possible source of executive autonomy: the supposed principle that Congress may not “micro-manage” executive decisions.  At some level of detail, the reasoning goes, decisions become “inherently executive” and so not subject to congressional control.  Executive power is always constrained by applicable law, which may be highly specific.  The Social Security Act requires specific payments to specifically identifiable persons, and if Congress passes a private bill providing for payment to a named individual, the executive’s function is to make the payment.  Here too, the question is about legislative and not executive power: in how much detail may Congress legislate?  As private bills show, sometimes the answer is, in as much detail as a proper name.  Perhaps some powers may not be exercised so specifically.  Some highly specific laws are bills of attainder.  Executive power, however, does not limit legislative specificity.  It does not create a sphere of discretion that pushes back against congressional power.  Article II does not, for example, confer some degree of prosecutorial discretion.

The impression that some highly specific decisions are inherently executive in this sense derives, I think, from the belief that they are not legislative because legislation must be general.  I do not think legislation must be general, but the claim that legislatures must operate through general rules concerns legislative power, not executive.  Executive discretion, when not affirmatively granted by some source other than the executive power, is a residuum.  The place to look is congressional power, which is primary here, and not executive power, which is a remainder.

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The Article II Executive Power and the Rule of Law (Part 4)

This post deals with the field in which claims of constitutionally-conferred and inviolable executive discretion are most often made and accepted: foreign relations.  Those claims are buttressed by practical imperatives and the long-standing practice of the government.  From the beginning, Presidents have conducted the foreign relations of the United States, and have exercised considerable discretion in doing so.  Unlike the vast bulk of the federal executive’s operations, foreign-affairs activities are not based on an institution or program created by statute, like the Post Office.  Administration and control of foreign affairs as an inherent and inviolable aspect of the executive power can explain that practice.  A conceptualization of executive power that does not attribute to it such strong foreign-relations authority should also be able to explain that practice.

One virtue of the version of the Whig executive power I have described is that it can explain how the President can conduct foreign affairs with no statutory support.  That explanation in turn illuminates another important issue.  If the executive power itself brings with it no discretion, where do Presidents derive the discretion that they have in fact exercised so long as to foreign affairs?  The answer—that discretion arises as the residue of the duties imposed on officials—operates with respect to foreign relations and elsewhere, and so is important in understanding executive power generally.

The Whig executive power enables the President to conduct foreign relations because the international legal personality of the United States is an asset of the government.  The executive exercises the government’s legal personality, international and domestic, pursuant to the law.  When the President announces that this country is neutral in a foreign war, or directs that a vote be cast in the Security Council, he is performing the international version of the Whig executive function: administering the government by exercising its juridical powers.

Foreign relations differ from, for example, postal operations, because no statute is needed to create the United States as a person under international law.  International law itself creates that personality, and thereby adds to the legal environment in which American executive officials operate.  In acting for the United States on the international plane, executive officials perform their standard function of administering the government pursuant to the applicable law.

That conclusion does not, however, imply any inviolable executive autonomy with respect to foreign policy.  Executive officials administer the government in accordance with the law.  Insofar as Congress has power to add to the legal environment by adopting laws concerning foreign relations, and has done so, the executive must comply with those laws.  Insofar as Congress cannot or has done so, executive officials have discretion.  As luck is the residue of design, discretion is the residue of duty.  The question of the scope of congressional authority regarding foreign affairs is purely one of enumerated congressional power, not one of invasion of a sphere of presidential discretion conferred by the Constitution.  The Constitution in effect creates a default position in favor of considerable executive discretion regarding foreign relations.  Congress can change that position when it uses an enumerated power to add to the legal environment in which the executive operates.

Whether Congress has an enumerated power concerning any particular foreign-relations decision may be a difficult question.  An important example involves U.S. votes in the Security Council.  Under the U.N. Charter, the Security Council can create binding international-law obligations for member states, so its decisions are very important.  The United States’ vote in the Security Council is a juridical asset of the United States, to be administered by executive officials.  A Senator could not cast that vote, but that is not to say that the House and Senate by statute cannot direct how it is to be cast.  Finding a congressional power to direct the U.S. Representative to the Security Council is not easy, but not necessarily impossible.  For example, the second part of the Necessary and Proper Clause may empower Congress in this connection; it gives the legislature power to make laws necessary and proper for carrying into execution all powers vested by the Constitution “in the government of the United States.”  Power to act for the United States on the international plane may meet that description, and so be subject to congressional control through legislation concerning its execution.

Foreign relations provide an example of a broader phenomenon: some questions that are often seen as turning on inherent executive power actually turn on the reach of congressional power.  Similar issues arise concerning control of the armed forces.  Presidents have long argued that their status as commander in chief gives them control of military tactics, as opposed to strategy, that Congress may not invade.  Commanders, whether in chief or not, operate in a legal environment as other executive officials do.  Whether Congress may control tactical discretion depends on Congress’s power, not the President’s.  That question is not an easy one, because none of Congress’s powers concerning the forces is well adapted to that function.  Making rules for their “government and regulation” might encompass directing tactics, but its primary point is to establish military discipline.  If the Constitution does create presidential autonomy regarding tactical decisions, that autonomy is a residuum left by congressional power.  It does not come from any affirmative grant, so the issue is wholly about what Congress may do.

Similar reasoning applies to another possible source of executive autonomy: the supposed principle that Congress may not “micro-manage” executive decisions.  At some level of detail, the reasoning goes, decisions become “inherently executive” and so not subject to congressional control.  Executive power is always constrained by applicable law, which may be highly specific.  The Social Security Act requires specific payments to specifically identifiable persons, and if Congress passes a private bill providing for payment to a named individual, the executive’s function is to make the payment.  Here too, the question is about legislative and not executive power: in how much detail may Congress legislate?  As private bills show, sometimes the answer is, in as much detail as a proper name.  Perhaps some powers may not be exercised so specifically.  Some highly specific laws are bills of attainder.  Executive power, however, does not limit legislative specificity.  It does not create a sphere of discretion that pushes back against congressional power.  Article II does not, for example, confer some degree of prosecutorial discretion.

The impression that some highly specific decisions are inherently executive in this sense derives, I think, from the belief that they are not legislative because legislation must be general.  I do not think legislation must be general, but the claim that legislatures must operate through general rules concerns legislative power, not executive.  Executive discretion, when not affirmatively granted by some source other than the executive power, is a residuum.  The place to look is congressional power, which is primary here, and not executive power, which is a remainder.

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Kamala Harris Says Trump Advocacy for A$AP Rocky ‘Needs to End’

Harris breaks from other Democrats on A$AP Rocky’s release. It’s not unusual to see senator, former prosecutor, and Democratic presidential candidate Kamala Harris arguing to keep people incarcerated. So it’s no surprise that she hasn’t joined fellow Democrats in protesting Sweden’s questionable detainment of musician A$AP Rocky.

Nor is she simply sitting this one out. Harris apparently sees this as an opportunity to score points against President Donald Trump, who has been fighting for Rocky’s release.

The entertainer has been detained in Sweden since July 3, following a physical altercation that he claims was self-defense on his part. “Video of the incident posted to Instagram does show [A$AP Rocky] and his entourage repeatedly telling two men to leave them alone,” notes Vice.

Authorities in Stockholm have yet to bring any charges against Rocky and his friends—but they also are declining to let him go, and they reportedly have held him in solitary confinement part of the time. A court hearing to determine next steps is scheduled for today.

In the meantime, everyone from Kim Kardashian and Justin Bieber to members of Congress have been advocating for A$AP Rocky’s release. Several Democratic members of the House of Representatives even put out a formal statement expressing concern. “The widely circulated video evidence clearly show that these men were accosted, harassed, and followed, all while maintaining tremendous poise,” it says.

“This is not justice and this particular instance sheds light on how men of color, particularly black and brown men, are often detained, targeted and incarcerated despite their innocence, including in European countries,” said Rep. Adriano Espaillat (D–N.Y.) at a press conference earlier this month. “We’re concerned that there is a deliberate and premeditated attempt from the prosecutor to indict these young men, who were victims themselves, not the aggressors.”

But when Harris was asked about A$AP Rocky during an NAACP presidential forum on Wednesday, she had nothing to say about the potential misuse of power by Swedish prosecutors. Instead, she used the opportunity to slam Trump for his advocacy on the musician’s behalf.

“There’s no question that this White House is, has been playing politics with his role of leadership, and it has to end,” Harris responded.

“So you’re saying this is another piece on the rap sheet of Donald Trump, this misuse of power in the A$AP Rocky case?” moderator April Ryan followed up.

Harris agreed. Then, asked to speak up, she pivoted away from the actual issue at hand and try for another rah-rah viral clip moment. Mediaite reports:

“Okay. All right, say it loud,” Ryan said.

“Yes,” Harris said, louder this time, then added with a laugh “And I’m black and I’m proud!”

“Wait say that again, I didn’t hear you. What did you say?” Ryan said.

“Say it loud, I’m black and I’m proud!” Harris replied.

“Alright, then,” Ryan said.

QUICK HITS

  • Russian trolls can’t sue Facebook for booting them—thanks, Section 230!
  • Trump vetoed a bill that would have stopped the U.S. from selling weapons to Saudi Arabia.
  • Sen. Ted Cruz is asking the FBI to investigate Antifa as a criminal enterprise.
  • It’s unclear whether an imprisoned Jeffrey Epstein was assaulted or attempted to harm himself, but Manhattan jailers found him “injured and in a fetal position” last night, reports The Daily Beast.
  • The Justice Department’s “Big Tech” antitrust investigation is political theater, writes Reason‘s Eric Boehm.
  • The Baltimore Sun is apparently under the impression that libertarians want children-accessible vending machines to be stocked with “oxycodone, packs of Camels and cans of Miller Lite.”
  • J.D. Tuccille on ICE and resisting illegitimate authority.

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Epstein Visited Clinton White House Multiple Times In The 1990s

Bill Clinton’s attempts to distance himself from convicted pedophile Jeffrey Epstein have taken yet another blow – after a Daily Beast investigation reveals that the financier – who came highly recommended by Lynn Forester de Rothschild – visited the Clinton White House multiple times. 

As early as 1993, records show, Epstein donated $10,000 to the White House Historical Association and attended a donors’ reception hosted by Bill and Hillary Clinton. Around the same time, according to a source familiar with the connection, Epstein visited presidential aide Mark Middleton several times at the White House. Two years later, businesswoman Lynn Forester de Rothschild wrote a personal letter to Clinton thanking him for their talk about the financier. –Daily Beast

On July 8, the former president sought to distance himself from Epstein, claiming that the two crossed paths just six times beginning in 2002; “four flights on the billionaire’s private jet, a single trip to his Harlem office, and one “brief visit” to his New York apartment, all with staff and security detail in tow,” per the Beast. 

“President Clinton knows nothing about the terrible crimes Jeffrey Epstein pleaded guilty to in Florida some years ago, or those with which he has been recently charged in New York,” Clinton spokesperson, Angel Ureña, told the Beast. “Any suggestion to the contrary is both factually inaccurate and irresponsible.” 

Clinton’s denial flies in the face of flight logs from Epstein’s now-sold ‘Lolita Express’ 727 jet at least 26 times.

When the president released his initial statement on Epstein, he did not explain the multiple other trips he appears to have taken on the financier’s plane—including one flight to Westchester with Epstein, his alleged madam Ghislaine Maxwell, and an “unnamed female.” –Daily Beast

And according to the Beast, “Clinton also failed to mention the intimate 1995 fundraising dinner at the Palm Beach home of Revlon mogul Ron Perelman, where Clinton hobnobbed with the likes of Epstein, Don Johnson, and Jimmy Buffett. (Nearby, at Epstein’s own Palm Beach mansion, the money man allegedly abused hundreds of underage girls.)”

While Politico claimed in a piece last week that the Clintons and Epstein connected through Epstein’s longtime confidant and alleged procurer of young women – Ghislaine Maxwell, after Clinton left office, documents in the Clinton Library attest to much earlier links. 

In late September of 1993, Bill and Hillary Clinton hosted a reception for supporters who had contributed to recent White House renovations. The nearly $400,000 overhaul—which included new gold draperies and a 13-color woven rug for the Oval Office—was funded entirely by donations to the White House Historical Association, a private organization that helps preserve and promote the White House as a historical monument.

The reception took place at the White House residence from 7:30 to 9:30 p.m., according to a copy of the president’s daily schedule. White House Social Secretary Ann Stock—who appears in Epstein’s little black book of phone numbers—was listed as the point of contact. According to multiple attendees, the evening included an intimate tour of the newly refurbished residence, followed by a receiving line with the president and first lady. Dessert was served in the East Room, where the couple thanked everyone for attending and announced the Committee for the Preservation of the White House.

Guests for the event, according to the invitation list, included the journalist and philanthropist Barbara Goldsmith, heiress Jane Engelhard, political consultant Cynthia Friedman, and “Mr Jeffrey Epstein and Ms. Ghislaine Maxwell.” Epstein and Maxwell do not appear on the ‘regret list,’ and there is a letter ‘A’ next to both of their names, indicating they planned to attend. A press release from the event, put out by Hillary Clinton’s office, lists Epstein as a White House Historical Association donor. –Daily Beast

 

Meanwhile, Clinton’s college friend A. Paul Prosperi visited Epstein at least 20 times while he was in the Palm Beach county jail after pleading guilty to procuring an underage prostitute in 2008. Prosperi was also present at a 1995 Perelman fundraiser at which both Clinton and Epstein were present. 

Another Clinton connection with Epstein comes through White House aide Mark E. Middleton – a friend of Clinton’s from his beginnings in Arkansas who joined the administration in 1993 as special assistant to Chief of Staff Mack McClarty (another Arkansas insider, per the Beast). Middleton would rise to the level of “Deputy to the Counselor” in 1994. 

Over that same time period, a source with knowledge of the situation told The Daily Beast, Middleton met with Epstein in the White House at least three times. It is unclear what they discussed, or for how long. Middleton did not respond to repeated calls and emails for comment, or to a reporter who visited his home in Arkansas. 

Middleton and Epstein also appear to have shared a famous friend in common. Donald Trump—who once called Epstein a “terrific guy”—sent Middleton a signed copy of his book, The Art of the Deal, while the lawyer was working in the White House. The inscription read, “To Mark — Best wishes. Your mom is the best.”

Hobnobbing with businessmen like Epstein and Trump was part and parcel of Middleton’s White House job, according to a 1999 report from the House Committee on Government Reform. (“In the course of his duties, Middleton was in contact with many prominent business people and contributors to the President,” the report states.) But it also got the lawyer in trouble with the administration once he left. –Daily Beast

Rothschild letter

In 1995, Lynn Forester de Rothschild writes ““Dear Mr. President: It was a pleasure to see you recently at Senator Kennedy’s house. There was too much to discuss and too little time. Using my fifteen seconds of access to discuss Jeffrey Epstein and currency stabilization, I neglected to talk to you about a topic near and dear to my heart. Namely, affirmative action and the future.” 

Of note, former Epstein attorney and pal Alan Dershowitz previously said that Forester de Rothschild introduced him to Epstein at a party on Martha’s Vineyard for Lord Rothschild in the summer of 1996. 

“He was feisty, he was utterly politically incorrect,” said Dershowitz in a recent interview with New York magazine. “He was interesting to be with.”

He was also sexually molesting underage girls. 

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Kamala Harris Says Trump Advocacy for A$AP Rocky ‘Needs to End’

Harris breaks from other Democrats on A$AP Rocky’s release. It’s not unusual to see senator, former prosecutor, and Democratic presidential candidate Kamala Harris arguing to keep people incarcerated. So it’s no surprise that she hasn’t joined fellow Democrats in protesting Sweden’s questionable detainment of musician A$AP Rocky.

Nor is she simply sitting this one out. Harris apparently sees this as an opportunity to score points against President Donald Trump, who has been fighting for Rocky’s release.

The entertainer has been detained in Sweden since July 3, following a physical altercation that he claims was self-defense on his part. “Video of the incident posted to Instagram does show [A$AP Rocky] and his entourage repeatedly telling two men to leave them alone,” notes Vice.

Authorities in Stockholm have yet to bring any charges against Rocky and his friends—but they also are declining to let him go, and they reportedly have held him in solitary confinement part of the time. A court hearing to determine next steps is scheduled for today.

In the meantime, everyone from Kim Kardashian and Justin Bieber to members of Congress have been advocating for A$AP Rocky’s release. Several Democratic members of the House of Representatives even put out a formal statement expressing concern. “The widely circulated video evidence clearly show that these men were accosted, harassed, and followed, all while maintaining tremendous poise,” it says.

“This is not justice and this particular instance sheds light on how men of color, particularly black and brown men, are often detained, targeted and incarcerated despite the innocence, including in European countries,” said Rep. Adriano Espaillat (D–N.Y.) at a press conference earlier this month. “We’re concerned that there is a deliberate and premeditated attempt from the prosecutor to indict these young men, who were victims themselves, not the aggressors.”

But when Harris was asked about A$AP Rocky during an NAACP presidential forum on Wednesday, she had nothing to say about the potential misuse of power by Swedish prosecutors. Instead, she used the opportunity to slam Trump for his advocacy on the musician’s behalf.

“There’s no question that this White House is, has been playing politics with his role of leadership, and it has to end,” Harris responded.

“So you’re saying this is another piece on the rap sheet of Donald Trump, this misuse of power in the A$AP Rocky case?” moderator April Ryan followed up.

Harris agreed. Then, asked to speak up, she pivoted away from the actual issue at hand and try for another rah-rah viral clip moment. Mediaite reports:

“Okay. All right, say it loud,” Ryan said.

“Yes,” Harris said, louder this time, then added with a laugh “And I’m black and I’m proud!”

“Wait say that again, I didn’t hear you. What did you say?” Ryan said.

“Say it loud, I’m black and I’m proud!” Harris replied.

“Alright, then,” Ryan said.

QUICK HITS

  • Russian trolls can’t sue Facebook for booting them—thanks, Section 230!
  • Trump vetoed a bill that would have stopped the U.S. from selling weapons to Saudi Arabia.
  • Sen. Ted Cruz is asking the FBI to investigate Antifa as a criminal enterprise.
  • It’s unclear whether an imprisoned Jeffrey Epstein was assaulted or attempted to harm himself, but Manhattan jailers found him “injured and in a fetal position” last night, reports The Daily Beast.
  • The Justice Department’s “Big Tech” antitrust investigation is political theater, writes Reason‘s Eric Boehm.
  • The Baltimore Sun is apparently under the impression that libertarians want children-accessible vending machines to be stocked with “oxycodone, packs of Camels and cans of Miller Lite.”
  • J.D. Tuccille on ICE and resisting illegitimate authority.

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What Do Google Search Trends Tell Us About The Coming Recession

Submitted by Nick Colas of DataTrek

Today we add domestic Google search volumes to our ever-growing list of US recession indicators and find that the US economy still looks pretty solid. Searches for “coupon” continue to decline (and feed the Fed’s concern about subpar inflation). Queries for “unemployment”, which led actual joblessness in 2007, are flat/down. Searches for media (TV, YouTube and Netflix), which also led traditional economic indicators in 2007 (because fewer overtime hours means more media consumption), are declining.

We have had a great response to our “Recession Predictors” reviews over the last 2 weeks, showing this is a top-of-mind topic for many of you. Once we log a few more we will do a reprise of what they collectively have to say.

Today we continue the theme with a look at the volume of specific Google search terms that were leading indicators of the Great Recession. Since Google was much less ubiquitous pre-early 2000s, we really only have 2 economic cycles of data to consider. Google Trends itself only presents data from 2004 to the present.

Here are relevant 3 search terms we found with charts of the Google Trend US data for each:

#1: “Coupon”. Our rationale for thinking this is a leading indicator is that US consumers will start looking for product/service discounts as economic uncertainty increases. Deferring or eliminating purchases – what traditional indicators measure – comes later, once unemployment is actually rising.

  • Search volumes here rose by 18% in 2005 and 10% in 2006, before really taking off by 23% in 2007 and 45% in 2008. “Peak coupon” was in 2011, 200% above 2005.
  • Now, US Google searches for “coupon” have been in decline since 2012 and June 2019 query volumes were 7% lower than last year’s equivalent period.

#2: “Unemployment”. People search for this term when they fear a layoff is imminent, allowing Google Trends to act as a useful leading indicator. Both the weekly initial claims data and the monthly Jobs report only capture employment trends after layoffs start.

  • Even though the BLS data says US unemployment troughed in 2H 2006 – 1H 2007, Google searches for the term started increasing in January 2007 (+5% year over year). Every month after showed a 3-5% increase in “unemployment” searches versus the prior year.
  • Today there is no change in Google search volumes for “unemployment”. June 2019 is flat to last year’s comparable month, and April/May are also the same or slightly lower than 2018.

#3: “TV” and other media sources “YouTube” and “Netflix”. When overtime hours get cut back, workers have more time to consume media. In 2007 that would have meant Googling for “TV” shows. Now we must include other sources of home entertainment like “youtube” and “netflix” in our analysis.

  • Searches for “tv” started increasing early in 2H 2007 (+15% for September), long before the typical Holiday peak from searches for “buy a TV”. “Peak TV” was in December 2009 and US Google searches here have been in decline ever since.
  • Comparing “tv” to “youtube” and “netflix” searches now finds that all three are flat or declining. While there are likely some secular reasons for this – most notably users engaged on mobile platforms with no need for a Google query bar – we still believe that once unemployment starts to increase media-related search volumes will follow suit. Veteran readers will recall this happened pre-Internet with cable television viewership.

Summing up: if the Federal Reserve looked at Google Trends they might not be so inclined to cut rates next week. OK – maybe declining “coupon” searches does feed their concern about subpar inflation, and that’s fair enough. But taken as a whole these 3 indicators give us little cause for concern just now.

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Is VIX Whale ’50-Cent’ Back? Volatility Collapse Sparks Huge Bearish Bets

In the last two days, someone, or more than one, has been aggressively buying VIX Calls (bearish market bets that gains as risk re-emerges) relative to puts (bullish bets)…

Sending the Call/Put ratio soaring…

It seems these notable spikes in VIX Call buying coincide with severe market turning points. Major build up of large VIX bullish (market bearish or hedging) bets…

As Bloomberg’s Luke Kawa points out, the activity is similar to moves by the infamous volatility buyer known as “50 Cent,” so dubbed for the practice of purchasing protection priced at half-a-dollar a piece in considerable size. This player was active throughout 2017, the most tranquil year for U.S. stocks in over 50 years, yet was finally able to reap a massive payday on the trade to the biggest one-day jump in implied equity volatility in history on Feb. 5, 2018. But this type of buying behavior has been seen only sparingly since then.

“The large VIX call buying over the past two days is a definite change of character in the VIX options market in an otherwise sleepy tape,’’ said Patrick Hennessy, head trader at IPS Strategic Capital.

“There hasn’t been many of these chunky 50,000-plus contract prints in the VIX space this year, which was a theme that dominated the VIX options market back in 2017 when ‘50 Cent’ was present.’’

“Over the past few days we’ve seen big buyers of VIX call options,’’ said Pravit Chintawongvanich, Wells Fargo’s equity derivatives strategist.

“It’s especially notable since hedging with VIX call options had kind of gone out of fashion since the 2018 VIX blowup.’’

 

The VIX Whale – we tend to agree that is is likely ’50-cent’ or a generic model of him – among various other big VIX players, are not alone, as NorthmanTrader.com’s Sven Henrich notes the recent VIX collapse won’t end well.

In the new normal world in which we live – of QEternity across the globe – no wonder the $VIX gets crushed in mechanical fashion this week:

That’s a lot of $VIX crushing for very little marginal gains I would argue, but nevertheless there it is.

But what has been the pattern over the last 4 years? $VIX compression leading to $VIX breakouts:

I would argue what we’re seeing now is no different:

While not all index gaps fill, not the same can be said for $VIX: All $VIX gaps fill eventually.

And there is an open gap in the 24/25 area courtesy Jerome Powell when he delivered his ‘flexible’ speech in early January leading to the renewed compression phase we’re in now, a clearly defined descending wedge pattern again. Note the cute fake breakout earlier in the week.

I may not be alone in the view that $VIX is setting up for another breakout this summer. Over 359,000 calls on the August 21 $20 $VIX strike were traded today easily dwarfing the put volume by 10:1.

$VIX may still drift lower to the lower trend line, but the pattern strongly suggest a VIXplosion is still to come this year, and perhaps not that far away.

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