The Department of Health and Human Services says the Trump administration’s pending ban on flavored e-cigarettes is necessary because of recent increases in underage vaping. The department cites “preliminary numbers from the National Youth Tobacco Survey” (NYTS) that “show a continued rise in the disturbing rates of youth e-cigarette use.” Yet those data also show that smoking by teenagers continues to fall, which undermines the claim that e-cigarettes are a gateway to the real thing and suggests that vaping is actually a substitute for smoking.
According to the NYTS, the prevalence of past-month cigarette smoking among high school students fell from 8.1 percent in 2018 to 5.8 percent this year, even as the prevalence of past-month vaping rose from 20.8 percent to 27.5 percent. Since 2011, the smoking rate has fallen by 63 percent, while the vaping rate has increased more than 18-fold. Based on these data, Boston University public health professor Michael Siegel found a negative correlation of –0.89 between vaping and smoking among high school students.
Those opposing trends suggest not only that more vaping does not result in more smoking but that teenagers who otherwise would be smoking are instead vaping, a much less dangerous habit. In fact, a 2018 study, based on data from the NYTS and other surveys, found that the decline in smoking among teenagers and young adults accelerated as vaping became increasingly common.
The National Survey on Drug Use and Health shows a similar pattern. “Fewer than 1 in 6 people aged 12 or older in 2018 were past month cigarette smokers,” the Substance Abuse and Mental Health Services Administration, which oversees that survey, noted last month. “Cigarette use generally declined between 2002 and 2018 across all age groups. Some of this decline may reflect the use of electronic vaporizing devices (‘vaping’), such as e-cigarettes, as a substitute for delivering nicotine.” (Emphasis added.)
The Monitoring the Future Study likewise shows that smoking rates among teenagers have hit record lows in recent years. The prevalence of past-month cigarette smoking among high school seniors, for example, fell from 18.7 percent in 2011 to 7.6 percent in 2018, a 59 percent drop. While the rising popularity of vaping does not account for the entire decrease, it certainly seems to have helped.
By banning the kinds of e-cigarettes overwhelmingly preferred by adults who used to smoke, the Food and Drug Administration (FDA) will drive many of them back to a far more hazardous source of nicotine. The same sort of harm-maximizing substitution is apt to occur among teenagers, who may respond to the ban by switching from vaping to smoking. If so, the fear that vaping is a gateway to smoking will become a self-fulfilling prophecy.
Former FDA Administrator Scott Gottlieb, whose concerns about vaping by teenagers started this ball rolling, acknowledged that some teenagers who vape might otherwise be smoking. “It’s probable,” he told me last year. “It’s implausible for me to say that there aren’t kids out there who are using e-cigarettes instead of combustible tobacco and probably, if they never had this opportunity, would have used combustible tobacco.” But that reality, Gottlieb said, does not figure in the FDA’s decisions. Maybe it should.
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On Wednesday, California lawmakers approvedAB 1482, which caps rent increases at 5 percent per year plus inflation, and prevents landlords from evicting tenants without citing a government-approved reason.
Wednesday’s vote makes California the latest state to pass a rent control bill. Oregon passed a statewide cap on rents in February. In June, the New York legislature passed a bill strengthening existing rent controls in New York City while giving other cities in the state the ability to pass their own rent regulations.
Economists and other policy experts have long criticized rent control for reducing the supply and quality of rental housing in the long-run. California’s rent control bill is no exception says Michael Hendrix, state and local policy director at the Manhattan Institute.
“What we are going to get is a reason for landlords to convert apartments to condos,” says Hendrix. “The net result of that is potentially more units being taken off the market, and long-term this housing crisis getting worse, not better.”
Hendrix argues that landlords, when faced with limits on how much they can raise their rents, will simply take their rental units off the market, converting them into condominiums that can be sold at market price.
A study of rent control in San Francisco published in the journal American Economic Review this month found that “while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.”
Supporters of rent control counter that they protect current tenants from rent spikes.
“These anti-gouging and eviction protections will help families afford to keep a roof over their heads, and they will provide California with important new tools to combat our state’s broader housing and affordability crisis,” said Democratic Governor Gavin Newsom in a statement following the bill’s passage.
Newsom’s support for AB 1482 appears to have been crucial in securing its passage, and in removing some amendments that would’ve lessened the impact of the bill.
Back in Many, lawmakers agreed to raise the annual rent cap in AB 1482 to 7 percent plus inflation and to include a 2023 expiration date. Other amendments exempted housing newer than 15 years old and most single-family homes from its rent caps.
Those provisions were roughly in line with the rent control bill passed by Oregon early in the year and were enough to get the powerful California Realtors Association (CAR) to take a neutral stance on the bill.
In late August, however, Newsom announced that he had hashed out a deal with legislative leaders to lower annual allowable rent caps to 5 percent and extend the bill’s life to 2030.
That flipped the CAR back into opposition but proved to be enough to get AB 1482 passed just two days before the legislature’s deadline for passing legislation.
Members of California’s pro-development Yes in my backyard (YIMBY) faction also supported the bill which saw the bill, arguing that it, along with an increase in actual housing supply, would help address the state’s pressing housing affordability problems.
The California Apartment Association (CAA)—which represents landlords—was also convinced to drop their opposition to the bill in the final days of the legislative session.
The support from YIMBYs is both misguided and somewhat disappointing says the Manhattan Institute’s Hendrix, given that AB 1482, at best, does nothing to boost housing supply.
“One concern that YIMBYs in California should have is that we may very well find ourselves five or 10 years down the line with nothing to show for housing deregulation except more rent regulation,” he says.
Sen. Scott Weiner’s (D–San Francisco) promising, YIMBY-backed bill to upzone residential areas near transit and job centers stalled in the state senate earlier this year.
California’s housing crisis has been years in the making, and fixing it will require substantial deregulation of housing development. The rent control bill passed by legislators this week, while benefitting some current tenants, is ultimately a step in the wrong direction
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Twitter has suspended multiple large Cuban media accounts for reasons the social media platform has yet to explain as of this writing, a move which journalist Dan Cohen has described as “the equivalent of silencing CNN, Fox, WaPo and NPR’s accounts” for that nation. The Union of Cuban Journalists has denounced the move as censorship.
Last month we saw Twitter suspend hundreds of accounts which it claims originated in mainland China for engaging in “covert, manipulative behaviors” against the Hong Kong protests, with Facebook and Google/YouTube following suit in the creepy, uniform coordination we’ve come to expect between these social media giants. In June of this year Twitter removed thousands of accounts it claims were associated with the governments of Iran, Russia and Venezuela, as well as 130 accounts reportedly tied to the Catalan independence movement in Spain. In May Twitter removed 2,800 of what it claimed were “inauthentic accounts originating in Iran.” Earlier this year, Twitter and Facebook coordinated with each other to remove hundreds of accounts they claim were tied to “coordinated influence operations” in Iran, Russia, and Venezuela.
Cuba, China, Russia, Iran, Venezuela, and the Catalan independence movement. Noticing a pattern here?
Twitter just suspended the accounts of the biggest media outlets in Cuba and has given no reason. This is the equivalent of silencing CNN, Fox, WaPo and NPR’s accounts, but Cuba is a target of the empire so these arbitrary suspensions don’t generate outrage. https://t.co/0fgEiX8bjL
If you’ve been paying any attention at all to the dynamics of empire, you will immediately recognize all of these purges as having targeted groups which are not aligned with the US-centralized power alliance. There have been no comparable mass social media purges of groups that are aligned with the US-centralized empire; a few accounts critical of Beijing were accidentally suspended from Twitter in June and replaced with a hasty apology, and a few Saudi bots were removed for defaming Jamal Khashoggi after his death, but that’s as close as you’ll find to any non-empire-aligned purge.
“But Caitlin!”, you may protest. “That’s because the US and its allies are free democracies which never engage in propaganda or coordinated influence operations. Those other governments that got their accounts purged are evil authoritarian regimes whose dishonest manipulations must be curtailed!”
And to you my hypothetical friend I say bull boogers. I can prove to you that propaganda and coordinated influence operations are at least as prevalent in the so-called free democracies of the western empire as they are in the so-called authoritarian regimes of unabsorbed nations, and I can do it without even looking up from the story I’m already reporting on.
Cuba denounces suspension of multiple official media Twitter accounts during a live TV address by President Diaz-Canelhttps://t.co/ktBMrfXZTJ
See that hyperlink I put at the beginning of this essay when I first told you about the suspended Cuban media accounts? It links to an article that as of this writing is the only report in written English-language media on that story. The archived link says it’s from Yahoo News, but that’s actually just the outlet that picked it up; the story itself was from the news agency AFP, which is one of the mere three news agencies that are responsible for most of the news media reports in the western world.
So to recap, the narrative management operation which calls itself a “watchdog” claimed that “watchdogs” criticize Cuba for internet censorship, and that “watchdog” organization is in fact funded by the US government, yet the news agency disclosed only that their source is “New York-based”. In an article about internet censorship.
To put it another way, one of only three news agencies responsible for generating most western news media asked a US government-funded PR firm that was specifically created to make news-friendly propaganda which literally meddles in other countries’ governments to validate the claim that the news of a country that they target conducts propaganda, while omitting the fact that it is a propaganda organization.
This is Inception-level propaganda. This article, the only one available as of this writing to anyone who is interested in Twitter’s censorship of Cuban media outlets, is infinitely recursive, fractal, nesting doll-level propaganda, a pure coordinated influence operation, from top to bottom. And yet all the parties known to have been involved in crafting this piece of propaganda still have their Twitter accounts up, from Yahoo News, to AFP, to Freedom House, to the National Endowment for Democracy. Because the free democracies of the west do not engage in propaganda.
Again, that’s just literally the first example I reached for because of the story I happen to be writing about here. It’s one of endless possible examples, because it’s happening constantly.
We need to stop pretending FB & Twitter aren’t arms of the US state. For over a year they’ve deleted accounts of Iranians, Venezuelans, Russians, & Chinese simply for daring to voice opinions different from the imperialist narrative, under the aegis of combating “disinformation.” pic.twitter.com/bML58Ufpe0
Whenever I criticize these Silicon Valley tech giants for de-platforming voices which dissent from establishment narratives, I always get a deluge of pushback from establishment loyalists and capitalism cultists who insist that Twitter, Facebook and Google are private organizations who are free to do as they like with their personal property, and, since they are not government bodies, what they are doing cannot strictly be labeled censorship. But we see time and time again that their behavior absolutely does fall in line with the agendas of the CIA and the US State Department, and continually discover more and more evidence of extensive overlap between these corporations and government power.
“And these big tech giants… have basically gotten into bed with the US state,” journalist Alan MacLeod recently told The Canary’s Slava Zilber. “I mean, we’ve seen Facebook partnering with the Atlantic Council, which is an offshoot of NATO, whose board includes people like Henry Kissinger, Colin Powell, Condoleezza Rice, and six or seven different former or current heads of the CIA. That’s the group that’s deciding what is ‘fake news’ and what is ‘real news’, and how the algorithms that dictate how billions of people around the world are going to see news. That’s who’s deciding what you see and what you don’t.”
Journalist Morgan Artyukhina noted this past May that FireEye, the very cybersecurity firm that Facebook and Twitter are relying upon to determine which accounts are inauthentic and require removal, was in fact “founded in 2004 with money from the CIA’s venture capital arm, In-Q-Tel.” As noted in 2016 by journalist Yasha Levine, FireEye itself feeds into anti-Russia narratives while simultaneously funding neoconservative narrative management firms which are hawkish toward Russia. As Sputniknoted last year, FireEye also happens to be “one of the few cyber firms to forensically analyze the alleged hack of the Democratic National Committee.”
“We need to stop pretending FB and Twitter aren’t arms of the US state,” Artyukhina said in a popular Twitter thread last month after another purge. “For over a year they’ve deleted accounts of Iranians, Venezuelans, Russians, and Chinese simply for daring to voice opinions different from the imperialist narrative, under the aegis of combating ‘disinformation’.”
“These reports often claim the accounts were ‘used to promote content from inauthentic news sites,’ but that simply refers to outlets like PressTV and TeleSUR, which don’t toe the Western MSM line,” Artyukhina added. “As always, it’s only propaganda when somebody else does it.”
“Inevitably, when the US targets a country for standing up to it, we’re bombarded with stories of evil deeds to justify US action against them,” Artyukhina continued. “This is not propaganda, to them, it’s simply ‘facts.’ However, try to counteract the massive MSM infowar — that’s disinformation.”
In a corporatist system of government, which has no meaningful separation between corporate power and state power, corporate censorship is government censorship. There are manifold distortions that have been put in place to mask the reality that the same power structures which control the US government are also dictating the behaviors of the handful of social media platforms upon which the public has become dependent for networking and gathering information about what’s going on in the world, but that is indeed the reality and we do indeed need to regard it as such.
Just because there are no official connections between these corporations and the government doesn’t mean we have to make believe we can’t see actual connections right there in front of our faces, plain as day. There is no legitimate reason to go on pretending that these plutocratic Silicon Valley institutions are meaningfully separate from the US government. The only way to keep that illusion in place would be to continue swallowing all the lies that the propagandists have been shoving down our throats.
* * *
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On Wednesday, California lawmakers approvedAB 1482, which caps rent increases at 5 percent per year plus inflation, and prevents landlords from evicting tenants without citing a government-approved reason.
Wednesday’s vote makes California the latest state to pass a rent control bill. Oregon passed a statewide cap on rents in February. In June, the New York legislature passed a bill strengthening existing rent controls in New York City while giving other cities in the state the ability to pass their own rent regulations.
Economists and other policy experts have long criticized rent control for reducing the supply and quality of rental housing in the long-run. California’s rent control bill is no exception says Michael Hendrix, state and local policy director at the Manhattan Institute.
“What we are going to get is a reason for landlords to convert apartments to condos,” says Hendrix. “The net result of that is potentially more units being taken off the market, and long-term this housing crisis getting worse, not better.”
Hendrix argues that landlords, when faced with limits on how much they can raise their rents, will simply take their rental units off the market, converting them into condominiums that can be sold at market price.
A study of rent control in San Francisco published in the journal American Economic Review this month found that “while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.”
Supporters of rent control counter that they protect current tenants from rent spikes.
“These anti-gouging and eviction protections will help families afford to keep a roof over their heads, and they will provide California with important new tools to combat our state’s broader housing and affordability crisis,” said Democratic Governor Gavin Newsom in a statement following the bill’s passage.
Newsom’s support for AB 1482 appears to have been crucial in securing its passage, and in removing some amendments that would’ve lessened the impact of the bill.
Back in Many, lawmakers agreed to raise the annual rent cap in AB 1482 to 7 percent plus inflation and to include a 2023 expiration date. Other amendments exempted housing newer than 15 years old and most single-family homes from its rent caps.
Those provisions were roughly in line with the rent control bill passed by Oregon early in the year and were enough to get the powerful California Realtors Association (CAR) to take a neutral stance on the bill.
In late August, however, Newsom announced that he had hashed out a deal with legislative leaders to lower annual allowable rent caps to 5 percent and extend the bill’s life to 2030.
That flipped the CAR back into opposition but proved to be enough to get AB 1482 passed just two days before the legislature’s deadline for passing legislation.
Members of California’s pro-development Yes in my backyard (YIMBY) faction also supported the bill which saw the bill, arguing that it, along with an increase in actual housing supply, would help address the state’s pressing housing affordability problems.
The California Apartment Association (CAA)—which represents landlords—was also convinced to drop their opposition to the bill in the final days of the legislative session.
The support from YIMBYs is both misguided and somewhat disappointing says the Manhattan Institute’s Hendrix, given that AB 1482, at best, does nothing to boost housing supply.
“One concern that YIMBYs in California should have is that we may very well find ourselves five or 10 years down the line with nothing to show for housing deregulation except more rent regulation,” he says.
Sen. Scott Weiner’s (D–San Francisco) promising, YIMBY-backed bill to upzone residential areas near transit and job centers stalled in the state senate earlier this year.
California’s housing crisis has been years in the making, and fixing it will require substantial deregulation of housing development. The rent control bill passed by legislators this week, while benefitting some current tenants, is ultimately a step in the wrong direction
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And that’s probably an undercount. The numbers—873 legal vs. 2,835 unlicensed—come from a marijuana dispensary trade association that made its calculations by looking at who is advertising on Weedmaps, a site helping pot users order marijuana from dispensaries online. There’s probably more than a few unlicensed dispensaries out there who don’t advertise on Weedmaps either.
The trade association that provided this count, the United Cannabis Business Association (UCBA), has a mad-on for Weedmaps because it has been allowing unlicensed dispensaries to use its platform. The UCBA, which already pushed through a law increasing the fines on unlicensed vendors, is now lobbying for a bill that would prohibit sites like Weedmaps from hosting advertisements from unlicensed dispensaries, enforced by even more fines.
The Los Angeles Timesreports that the state has served 19 search warrants and has seized more than $16.5 million in unlicensed marijuana products this year. That’s barely even a drop in the bucket. One marijuana industry market research firm predicts about $3 billion in marijuana sales through licensed dispensaries in California and a whopping $8.7 billion in sales through illegal pot operations this year.
Both the state and local governments lump a host of taxes on legal marijuana sales, driving the prices up by more than 30 percent in many places. And in Los Angeles, the city has been dragging its feet when it comes to actually licensing people who want to open legally operating storefronts. The city has received more than 1,600 applications to operate legally, but it has licensed only 187 so far this year. Only now, in September—nine months after it became legal to operate recreational marijuana dispensaries—is it going to approve 100 additional licenses.
If these folks are going through the effort to invest in storefronts or in on-call delivery services and apply for licenses rather than lurking on street corners, it would seem like they actually want to operate legally. But the government has made it too costly for them to do so. And rather than making it easier for these folks to get licenses, UCBA and city leaders are promoting punitive responses, calling for bigger fines and more enforcement. The City of Los Angeles even went so far as to shut down the utilities of illegal dispensaries and do perp walks of the people they arrested. Yet it’s largely the city’s own fault that it can’t get its act together to hand out the licenses people are asking for.
Meanwhile, the UCBA is acting like the taxi cartels that fight ridesharing services because they don’t want to lose customers to cheaper competitors. It is true that UCBA members followed the regulations to operate legally. It’s also clear that they have a lot of influence on what those regulations are. Their team includes several lobbyists and lawyers who are experts on licensing. These organizations stand to gain by punishing unlicensed dealers and the sites that help advertise them. They want more of that $8.7 billion flowing in their direction.
We’re talking about marijuana here. After decades of a failed drug war, it’s comically absurd to think a state or city can somehow wipe out illegal pot sales now when it was unable to do so before. Black markets persist when it becomes too difficult for consumers to purchase what they want legally. How many times do we need to learn this lesson?
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Israel Accused Of Spying On White House: Trump Ignores While Bibi Denies
A shocking exposé in Politico reveals the Israelis have for years been planting spy devices near the White House. The report cites former senior US officials, who describe that forensic analysis of recovered cell phone surveillance devices point back to Israeli intelligence, which is believed to have conducted the operation for the past two years.
“It was pretty clear that the Israelis were responsible,” one former senior intelligence official told Politico. The report spells out, citing officials, that the planted devices are believed by the FBI and US intelligence agencies “likely intended” to spy on President Trump and his top aides.
Via The Times of Israel
Though it’s easy to imagine the outpouring of fury and wall to wall media coverage — complete with urgent Congressional hearings — should such allegations center on any other foreign country caught spying on the White House (let’s say Russia for example), the bombshell Politico report has barely made a dent in the mainstream media or big cable networks’ coverage.
This is partly because the administration’s own reaction has been muted, as the report notes that “the Trump administration took no action to punish or even privately scold the Israeli government” after being informed by US intelligence that Israel likely planted the devices.
Politico’s sources in most instances held top intelligence and national security posts, who describe the following of the recovered spy devices:
The miniature surveillance devices, colloquially known as “StingRays,” mimic regular cell towers to fool cell phones into giving them their locations and identity information. Formally called international mobile subscriber identity-catchers or IMSI-catchers, they also can capture the contents of calls and data use.
The devices were likely intended to spy on President Donald Trump, one of the former officials said, as well as his top aides and closest associates— though it’s not clear whether the Israeli efforts were successful.
From the moment the report was unveiled early Thursday, Israel’s stance has been to vehemently deny, and to even suggest the accusations are tinged with “anti-Semitism”.
StingRay surveillance devices have long been known and used by the FBI and other law enforcement agencies, driving controversy and concerns over illegal domestic eavesdropping.
Amos Yadlin, the former head of the IDF Military Intelligence Directorate, drove headlines by posting a statement online saying Politico’s reporting is “fake news spiced with anti-Semitism”— and further cited a longtime Israeli government directive that bans all Israeli espionage and spying in the United States.
Israeli Prime Minister Benjamin Netanyahu issued a firm denial while on a trip to Russia to meet with President Putin, calling the report“a blatant lie”. The statement from the prime minister’s office added, “There is a longstanding commitment, and a directive from the Israeli government not to engage in any intelligence operations in the U.S. This directive is strictly enforced without exception.”
It’s not the first time it has been reported that Israel spies on the United States including industrial espionage as was reported back in 2014 during the Obama Administration: https://t.co/i3GhRCcDOm
While on the ground in Sochi, Netanyahu told reporters the allegations are a “complete fabrication,” and that he’d previously issued a blanket ban on Israeli intelligence spying on the US.
Israeli intelligence is likely most interested in getting a leg up on the Trump administration’s intent regarding Iran as the White House mulls new nuclear talks with President Hassan Rouhani without preconditions.
By all recent indicators, Tel Aviv hopes to disrupt a bettering of relations between Washington and the Islamic Republic.
Tailing 30Y Auction Prices At Lowest Yield In 3 Years
Following a mediocre 10Y auction, which tailed yet whose internals were far stronger than the smallish tail would indicate, moments ago the US Treasury sold $16 billion in 30Y paper, in a auction that was in many ways a carbon copy of yesterday’s benchmark sale (in virtually every way besides the sharp negative rate in repo).
The 30Y paper sold at a yield of 2.270%, which while below August’s 2.335% and the lowest since July 2016, tailed the When Issued 2.254% by 1.6bps; this was also the third consecutive ultra long auction that has tailed and 2nd in the last seven.
However, just like yesterday, the tail masked the fact that the auction metrics were not terrible, with the bid to cover almost unchanged from August, and at 2.22% it was just below the six auction average of 2.23%. Meanwhile, for all fears of a foreigner boycott of US paper, the Indirect takedown was 60.3%, just below last month’s 61.3%, and above the recent auction average of 58.5%. And with Directs taking down 13.3%, Dealers were left holding 26.4% of the final takedown.
Overall, a mediocre auction which however served to push the curve to session wides, with the 10Y knocking on 1.80%’s door at last check, as numerous funds are caught nursing a very painful VaR shock hangover.
And that’s probably an undercount. The numbers—873 legal vs. 2,835 unlicensed—come from a marijuana dispensary trade association that made its calculations by looking at who is advertising on Weedmaps, a site helping pot users order marijuana from dispensaries online. There’s probably more than a few unlicensed dispensaries out there who don’t advertise on Weedmaps either.
The trade association that provided this count, the United Cannabis Business Association (UCBA), has a mad-on for Weedmaps because it has been allowing unlicensed dispensaries to use its platform. The UCBA, which already pushed through a law increasing the fines on unlicensed vendors, is now lobbying for a bill that would prohibit sites like Weedmaps from hosting advertisements from unlicensed dispensaries, enforced by even more fines.
The Los Angeles Timesreports that the state has served 19 search warrants and has seized more than $16.5 million in unlicensed marijuana products this year. That’s barely even a drop in the bucket. One marijuana industry market research firm predicts about $3 billion in marijuana sales through licensed dispensaries in California and a whopping $8.7 billion in sales through illegal pot operations this year.
Both the state and local governments lump a host of taxes on legal marijuana sales, driving the prices up by more than 30 percent in many places. And in Los Angeles, the city has been dragging its feet when it comes to actually licensing people who want to open legally operating storefronts. The city has received more than 1,600 applications to operate legally, but it has licensed only 187 so far this year. Only now, in September—nine months after it became legal to operate recreational marijuana dispensaries—is it going to approve 100 additional licenses.
If these folks are going through the effort to invest in storefronts or in on-call delivery services and apply for licenses rather than lurking on street corners, it would seem like they actually want to operate legally. But the government has made it too costly for them to do so. And rather than making it easier for these folks to get licenses, UCBA and city leaders are promoting punitive responses, calling for bigger fines and more enforcement. The City of Los Angeles even went so far as to shut down the utilities of illegal dispensaries and do perp walks of the people they arrested. Yet it’s largely the city’s own fault that it can’t get its act together to hand out the licenses people are asking for.
Meanwhile, the UCBA is acting like the taxi cartels that fight ridesharing services because they don’t want to lose customers to cheaper competitors. It is true that UCBA members followed the regulations to operate legally. It’s also clear that they have a lot of influence on what those regulations are. Their team includes several lobbyists and lawyers who are experts on licensing. These organizations stand to gain by punishing unlicensed dealers and the sites that help advertise them. They want more of that $8.7 billion flowing in their direction.
We’re talking about marijuana here. After decades of a failed drug war, it’s comically absurd to think a state or city can somehow wipe out illegal pot sales now when it was unable to do so before. Black markets persist when it becomes too difficult for consumers to purchase what they want legally. How many times do we need to learn this lesson?
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There is renewed hope in the markets after central banks, most-recently the ECB and China, have added easing measures. The working narrative is that these will, once again, renew global growth and allow governments, corporations and consumers to go even more deeply into debt. But will the increase in liquidity work this time around?
Several arguments can be made indicating that the answer is “no”. It’s likely that this ‘liquidity pulse’ may provide a temporary boost to the markets, but not the real economy. This is an extremely hazardous combination.
The end of the cycle
As we explained in our June forecasts, the nascent economic downturn did not start as a result of trade issues, but rather from the diminution of massive Chinese debt-stimulus, which ran from around late 2015 till July 2017. This stimulus was conducted through the shadow-banking sector and especially through the local government financing vehicles, or “LGFVs”. During 2016, the size of the shadow banking sector tripled.
Funds from the shadow-banking sector were directed towards infrastructure investments and housing, supporting both the Ponzified Chinese economy and its related housing bubble. The effect of this debt-binge is clearly visible in a sharp rise in the Chinese leading economic indicator from late 2015 through the summer of 2017 followed by a rise in the indicators of other countries (see Figure 1). In essence, China pulled the world economy back from the brink of recession.
Figure 1. The amplitude adjusted composite leading indicator of the OECD for China, Germany, euro area and the United States. Source: GnS Economics, OECD
Why did China stop the stimulus?
For two simple reasons.
First, China has inflated a massive debt bubble used to finance unproductive investments, which has secondly resulted in the stagnation of China’s productivity growth (see Figure 2).
Figure 2. The growth of total factor productivity in China. Source: GnS Economics, Conference Board
The Chinese leadership was almost-certainly acutely aware in 2017 that the relentless pace of debt growth was leading the country to a debt crisis. So, after the 19th Congress of the Communist Party of China in October 2017 (actually around two months earlier) they hit the brakes, and the world economy started to slow. This is clearly visible in the leading indicators above.
Early this year, Chinese leaders again panicked and started to push more debt into the economy. During H1, the debt-to-GDP ratio rose by 5.8 percentage points to 249.5 percent after falling for most of 2018.
What is notable is that, unlike in 2015/2016 when the economy quickly responded to the stimulus, the rebound has been lacklustre this time around. The combination of fiscal, credit and monetary stimulus early this year produced only mediocre growth of 6.2 percent in Q2, the slowest since 1992, and private data implies that the economic situation is worse that the official figures show.
China seems to have reached the point where a moderate (normal) stimulus does not support the real economy anymore, and a flat-out debt-binge, á la 2015/2016, would flare up a debt crisis. This, quite simply, means that the global business cycle is at its end.
Central planning, squared
Throughout this cycle, central planners have tried to postpone the downturn by all possible means. This marks the current expansion as the most manipulated business cycle, ever. This is actually rather understandable if one considers that the fate of the global banking system, the Eurozone, the legitimacy of Communist Party of China and even the very existence of central banks themselves possibly hangs in the balance.
Now, with the lead of the ECB and the Fed, central banks are again attempting to provide more stimulus. In their desperation, they are trying to wrestle the global economy back to growth with more easing. But they overlook that:
China has been driving this cycle, and its economy is stagnating.
The world is already “drowning” in debt.
Unconventional methods, like negative interest rates, are wreaking havoc in the banking sector and the real economy.
The first point makes it impossible for any monetary easing to sustain the current economic expansion. The second makes any fiscal stimulus highly questionable (while it may help for a short while).
The third is the most crucial one. The European banking sector is especially unlikely to survive deeper negative rates, as several major European bank chiefs made a very clear in their recent extraordinary public communiques. We also already know that the asset purchase programs (“QEs”) increase the fragility in the banking system.
Central banks are undermining the foundations of the economy with more stimulus, especially in Europe. The ”open-ended” QE of the ECB will keep eroding financial stability in the Eurozone and the ”two-tier” system is unlikely to fix the profitability issues of banks. One might argue that the ECB is, in effect, demolishing Europe with its “bazooka”.
Recession, and the crisis, are coming
The re-escalation of the trade war since May has deadened corporate sentiment across the globe. Therefore, it has acted as an accelerator for the downturn, and even if trade disputes can be settled quickly, which is unlikely, the damage may already have been done. Moreover, as we have contended for over two years, the real issues behind the global slowdown are more malevolent than simple trade disputes.
The ‘unconventional means’ of central banks have, quite simply, sabotaged the engine that drives economic growth, while massive and increasingly-unproductive debt stimulus by China has hollowed-out the global economy. If China and central banks manage to resuscitate the asset markets, but not the real economy, which is unfortunately quite probable, the end-result cannot be anything less than a crash, as in 1929.
Thus, while additional stimulus may provide some relief or even short-term euphoria for the markets, it will only be a mirage, a “Bull Trap”. After a brief uptick, the global economy will continue to sink, until the fragile European banking system breaks and global stock markets and economy follow. And then, collapse.
The SmileDirectClub IPO Did Something Not Seen Since The Financial Crisis
Has the unprecedented greed and stupidity of WeWork and its CEO Adam Neumann burst the IPO bubble?
One look at the just IPOed stock of SmileDirectClub would suggest that the answer is yes: after going public at a price of $23/share, pricing above range, the stock has tumbled 12% on its first day of trading, after it sold 58.5 million Class A shares on Wednesday for $23 each, above the $19 to $22 offering range, valuing the company at $8.9 billion.
The Invisalign alternative (the company delivers teeth strengthening kits to your doorstep) raised $1.35 billion in this year’s fifth-largest IPO, which priced Wednesday night above its indicated range. The stock joins Uber – which priced within its indicated range – as the only 2019 debut above $1 billion to open lower.
And not just that: as Bloomberg points out that it has become the first U.S. firm since the financial crisis to raise more than $1 billion and price its IPO above range, yet sink in its opening trades.
More notably, with other mega-IPOs like Peloton – i.e. an exercise bike with an iPad superglued to it – and WeWork on deck, SmileDirectClub provides the first test in months on whether IPO investors will endorse a large, unprofitable firm surrounded by buzz despite a broader rotation into value trades.
The answer appears to be unsatisfactory.
Some more details from Bloomberg on the initial offering: SmileDirectClub is the first to US listing to raise at least $1 billion since Chewy on June 13 (it has since tumbled after hitting an all time high on the day of its IPO), but at least three more are expected in the coming weeks. CloudFlare Inc. is scheduled to debut Friday, Peloton on Sept. 26 and WeWork possibly by the end of this month.
