Three Reforms to Protect Democracy from Election Denialism


Guardrails NCC

The acute crisis confronting American democracy right now is caused by a movement within one of the nation’s two major political parties.  This movement is appropriately called “election denialism”—meaning that its adherents are willing to deny the lawfully determined outcome of an election if their candidate is the one who lost. The election denialist movement within the Republican Party, led by former president Donald Trump, is seeking to gain control over the institutions and procedures that determine the outcome of future elections.  If election denialists prevail in this effort at taking control, self-government—whether one calls it “republicanism” or “democracy”—will no longer be possible. Ultimately, self-government depends on the lawfully determined winners of elections taking office based on those electoral results, and election denialism strikes at the heart of that most basic premise.

The effort to protect the Republic from election denialism should not be viewed as a partisan endeavor. Liz Cheney, among others, is correct when she exclaims that safeguarding the Constitution and its commitment to a “republican form of government” will require Democrats, Republicans, and independents of good will to join forces.  As our contribution to the NCC Guardrails of Democracy project explained, democracy protection requires reforms along three dimensions. First, and most immediately, there needs to be revisions to the rules that govern the declaration of winners in presidential elections. Second, there needs to be structural reforms to the nation’s electoral processes to prevent election denialists winning races even when a majority of the electorate would prefer other candidates. Third, there needs to be carefully tailored adjustments, consistent with the First Amendment, that deter election denialists from spreading intentional falsehoods about election results. What follows is an overview of these three points.

Electoral Count Act Reform.  The good news is that a bipartisan group of Senators, led by Susan Collins and Joe Manchin, have developed a revision to the dangerously antiquated Electoral Count Act of 1887, which was exploited for partisan purposes on January 6, 2021 (among other recent presidential elections).  Indeed, the exploitation of this outdated and convoluted statute by election denialist allies of Trump is what set the stage for the insurrectionary riot at the Capitol that delayed the counting of the electoral votes in the 2020 election. The Collins-Manchin bill, while not perfect (what legislative endeavor ever is?), would fix the flaws in the 1887 law and significantly reduce the risk of election denialists negating the lawful winner of a future presidential election. The Collins-Manchin bill does this by requiring Congress to accept whatever the courts determine to be the true outcome of the presidential election in each state according to the applicable law when the ballots are cast. Even if election denialist officials in a state attempt to subvert the true result, Congress must abide by what the courts say and not whatever any election denialists do. The prospects for the Collins-Manchin bill passing Congress are good, given the level of bipartisan support it already has received in the Senate.  But until the bill is enacted in the law, presidential elections remain dangerously vulnerable to subversion at the hands of election denialists. Thus, doing whatever it takes to get the Collins-Manchin bill across the legislative finish line must remain the most urgent electoral priority.

Securing the Will of Electoral Majorities. Just because an election denialist candidate wins a partisan primary and then goes on to win the general election, it does not mean that the election denialist is the candidate most preferred by a majority of the electorate. This point is not well-understood, but it needs to be to avoid election denialists holding office even when a majority of voters would prefer someone else. Right now, election denialists are able to exploit the features of the nation’s prevailing electoral system that enable candidates oppose by a majority of voters to win partisan primaries, often with less than a majority of votes in the primary, and then win the November general election because the plurality-winner rule in November prevents meaningful competition from anyone other than the nominee of the opposing major party.  Altering the structure of electoral competition, so that the will of the majority can prevail, needs to be a top priority in order to counteract the threat of election denialism prevailing even when a majority of voters do not want it to.

A few pending midterm races illustrate this point. In Arizona, election denialist Kari Lake narrowly won the Republican primary with 48%, less than a majority. Her main competitor, Karrin Taylor Robson, was not an election denialist, and perhaps might have won the GOP nomination if a runoff or “instant runoff” using ranked-choice voting had been used to identify the majority preference of the state’s GOP voters. In any event, Taylor Robson likely would be more preferred by a majority of all the state’s voters—those voting in the November general election—than the election denialist Lake. This presumption is based on the common-sense observation that virtually all the state’s Democrats would prefer non-denialist Taylor Robson to denialist Lake. Therefore, although a majority of the state’s November voters might prefer the Democratic nominee Katie Hobbs to either Republican, Taylor Robson or Lake, it is also possible that in this closely divided state a majority of the November voters this year would prefer either Republican to Hobbs. But if Hobbs doesn’t win, Democratic voters would rather have Taylor Robson than Lake, and given that almost half Republican voters also preferred Taylor Robson to Lake, it seems undoubtedly true that a majority of all the state’s voters would want Taylor Robson rather than Lake to become the state’s governor.

Yet, given the nature of the electoral system, the November race will be just Lake versus Hobbs, with Taylor Robson eliminated in the partisan primary. Lake thus might beat Hobbs and become Arizona’s governor, even though a majority of Arizona voters in November would prefer Taylor Robson over Lake. This is how the majority of the state’s voters’ actual preference can be defeated in the existing electoral system, and this is what must change to prevent election denialists from taking office even though a majority of voters would favor a different outcome.

Other midterm races illustrate the same point. Election denialist J.D. Vance won the Republican primary for Ohio’s U.S. Senate seat with less than a third of the votes, 32.2%, beating among other candidates non-denialist Matt Dolan (who came in third with 23.3%). Vance might win the November election against Democratic nominee Tim Ryan, even though a majority of Ohio’s November voters might prefer non-denialist Dolan to Vance. Again, the partisan primary knocked Dolan out of contention even though he would be the candidate that the majority of November voters would most prefer. Something similar could also be true in North Carolina’s U.S. Senate election. There, election denialist Ted Budd won the GOP primary, beating non-denialist (and former governor) Pat McCrory. Budd might beat Democratic nominee Cheri Beasley in November, even though a majority of November’s voters in the state likely would prefer McCrory to Budd.

In this way, election denialists can come to power after the November elections, in governorships and U.S. Senate seats among other major offices, even though November voters in all these states would have preferred a non-denialist alternative, who got boxed out by the partisan primary. It is imperative to change this anti-majority feature of the prevailing electoral system, and it is possible to do so through a version of ranked-choice voting that conforms to majority-maximizing electoral principles. Known as Round-Robin Voting, because it resembles a round-robin sports tournament in which each competitor faces one-on-one against every other competitor, this version of ranked-choice voting would prevent election denialists from winning office whenever they are not the candidate most preferred by a majority of all the voters in the electorate. If we want to safeguard democracy from election denialism, we need to pursue this reform (among others).

Combatting the Spread of Intentional Falsehoods about Election Results. What is most brazen about the so-called “Big Lie”—that the 2020 presidential election was stolen from Trump and that Joe Biden was not the rightful winner pursuant to the rules for conducting the election—was that at least some of the leading perpetrators of this Big Lie knew it to be false but spread the falsehood anyway. Rudy Giuliani, Trump’s lead lawyer for contesting the outcome of the 2020 election, admitted that they had no evidence to support claims they were making. Others, including Trump himself, also surely must have known the Big Lie was false if, as Attorney General Bill Barr observed, they were maintaining a connection to reality; only by being utterly detached from, or in defiance of, reality would it be possible to claim, as Trump and his supporters have, that Trump would have won the election were it not for massive fraud inflating Biden’s vote totals beyond the ballots cast for him by valid voters.

The First Amendment’s freedoms of expression are essential elements to self-government. But the First Amendment historically has never been understood to protect the “knowing lie,” and even the U.S. Supreme Court’s recent case involving the false claim of being a Medal of Honor recipient does not go so far as to protect all intentional falsehoods from well-tailored and well-justified statutes aimed precisely to protect the political process from deliberately destructive disinformation. Although the idea of using criminal prosecutions to counteract intentionally false election denialism must proceed with great caution, it is necessary to restore a political culture that causes professionals like Rudy Giuliani to exercise an appropriate measure of self-restraint in their public discourse about adverse election outcomes. Going forward, no one should think they are entitled to spread intentional untruths like the Big Lie with impunity; as has become abundantly clear since 2020, this kind of deliberate dishonesty about who really won the election does grave damage to the capacity of the country to conduct elections as a core component of republican self-government, and consistent with the First Amendment the Republic is entitled in the interest of self-preservation to take carefully drawn steps to protect itself from this kind of damage.

Additionally, social media companies have no First Amendment right to simultaneously elevate intentional falsehoods on their platforms and remain immune from the liability that intentional falsehoods cause.  No other type of publisher who exercises control over what they publish is entitled to such absolute immunity from their publication choices. Under the famous New York Times v. Sullivan standard, newspapers are liable under defamation law for the intentional falsehoods they print. So too are TV and cable broadcasters, for the intentional falsehoods they disseminate. The same should be true for social media companies—unless those social media companies exercise no control over the content of the expression that flows through their platforms, in which case then the companies should be immunized from liability in the same way that an old-fashioned telephone company would be. But as long as social media companies wish to profit from amplifying some messages over others, then they should be liable under defamation (and, where applicable, other forms of tort law) for the damages that their amplification of intentional falsehoods cause.

The Synergy of These Three Steps. Pursuing these three dimensions of reform cannot guarantee that American democracy will withstand the serious threat it currently faces from election denialism. Unfortunately, there can be no such guarantee if a majority of Americans actually become converted to the election denialism cause. But, thankfully, election denialism has not taken hold among the public to this extent, at least not yet. Thus, as long as election denialism remains a minority rather than majority position among the American electorate as a whole, these three dimensions of reform—especially if undertaken in combination, so that they can reinforce each other’s effectiveness—can go a long way to safeguarding the right of self-government that, since the Declaration of Independence itself, has been the nation’s foundational principle.

The post Three Reforms to Protect Democracy from Election Denialism appeared first on Reason.com.

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The National Constitution Center’s “Restoring the Guardrails of Democracy” Initiative


Guardrails NCC

In the wake of the 2020 election, the National Constitution Center launched its Restoring the Guardrails of Democracy initiative. We commissioned three teams—conservative, libertarian, and progressive—to identify potential reforms to address current threats to American democracy and strengthen its institutional guardrails. Team Conservative included Sarah Isgur, Jonah Goldberg, and David Frenchall of The Dispatch. Team Libertarian included Clark Neily and Walter Olson of the Cato Institute and Ilya Somin of the Antonin Scalia Law School at George Mason University. Team Progressive included Edward Foley of The Ohio State University and Franita Tolson of the USC Gould School of Law.

The three teams worked independently, but they converged in important ways. All three teams called for reforming the Electoral Count Act of 1887 (though Team Conservative’s report didn’t say this explicitly because, as Sarah Isgur explained during our launch program, it was so important they “just thought that went without saying”). The conservative and progressive teams both proposed reforms to the primary system. They also both described education as central to preserving democracy, with Team Conservative calling for reinvigorating history education and focusing on teaching students critical thinking skills, and Team Progressive calling for strengthening civic numeracy (whereas Team Libertarian focused on expanding foot voting as an alternative to increasing civic knowledge).

We hope that the Guardrails of Democracy Initiative, like other National Constitution Center projects such as the Madisonian Commission and the ongoing Constitution Drafting Project, contributes to a nonpartisan national conversation about the most important challenges facing American democracy and the best ways to meet them.

 

The post The National Constitution Center's "Restoring the Guardrails of Democracy" Initiative appeared first on Reason.com.

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Three Reforms to Protect Democracy from Election Denialism


Guardrails NCC

The acute crisis confronting American democracy right now is caused by a movement within one of the nation’s two major political parties.  This movement is appropriately called “election denialism”—meaning that its adherents are willing to deny the lawfully determined outcome of an election if their candidate is the one who lost. The election denialist movement within the Republican Party, led by former president Donald Trump, is seeking to gain control over the institutions and procedures that determine the outcome of future elections.  If election denialists prevail in this effort at taking control, self-government—whether one calls it “republicanism” or “democracy”—will no longer be possible. Ultimately, self-government depends on the lawfully determined winners of elections taking office based on those electoral results, and election denialism strikes at the heart of that most basic premise.

The effort to protect the Republic from election denialism should not be viewed as a partisan endeavor. Liz Cheney, among others, is correct when she exclaims that safeguarding the Constitution and its commitment to a “republican form of government” will require Democrats, Republicans, and independents of good will to join forces.  As our contribution to the NCC Guardrails of Democracy project explained, democracy protection requires reforms along three dimensions. First, and most immediately, there needs to be revisions to the rules that govern the declaration of winners in presidential elections. Second, there needs to be structural reforms to the nation’s electoral processes to prevent election denialists winning races even when a majority of the electorate would prefer other candidates. Third, there needs to be carefully tailored adjustments, consistent with the First Amendment, that deter election denialists from spreading intentional falsehoods about election results. What follows is an overview of these three points.

Electoral Count Act Reform.  The good news is that a bipartisan group of Senators, led by Susan Collins and Joe Manchin, have developed a revision to the dangerously antiquated Electoral Count Act of 1887, which was exploited for partisan purposes on January 6, 2021 (among other recent presidential elections).  Indeed, the exploitation of this outdated and convoluted statute by election denialist allies of Trump is what set the stage for the insurrectionary riot at the Capitol that delayed the counting of the electoral votes in the 2020 election. The Collins-Manchin bill, while not perfect (what legislative endeavor ever is?), would fix the flaws in the 1887 law and significantly reduce the risk of election denialists negating the lawful winner of a future presidential election. The Collins-Manchin bill does this by requiring Congress to accept whatever the courts determine to be the true outcome of the presidential election in each state according to the applicable law when the ballots are cast. Even if election denialist officials in a state attempt to subvert the true result, Congress must abide by what the courts say and not whatever any election denialists do. The prospects for the Collins-Manchin bill passing Congress are good, given the level of bipartisan support it already has received in the Senate.  But until the bill is enacted in the law, presidential elections remain dangerously vulnerable to subversion at the hands of election denialists. Thus, doing whatever it takes to get the Collins-Manchin bill across the legislative finish line must remain the most urgent electoral priority.

Securing the Will of Electoral Majorities. Just because an election denialist candidate wins a partisan primary and then goes on to win the general election, it does not mean that the election denialist is the candidate most preferred by a majority of the electorate. This point is not well-understood, but it needs to be to avoid election denialists holding office even when a majority of voters would prefer someone else. Right now, election denialists are able to exploit the features of the nation’s prevailing electoral system that enable candidates oppose by a majority of voters to win partisan primaries, often with less than a majority of votes in the primary, and then win the November general election because the plurality-winner rule in November prevents meaningful competition from anyone other than the nominee of the opposing major party.  Altering the structure of electoral competition, so that the will of the majority can prevail, needs to be a top priority in order to counteract the threat of election denialism prevailing even when a majority of voters do not want it to.

A few pending midterm races illustrate this point. In Arizona, election denialist Kari Lake narrowly won the Republican primary with 48%, less than a majority. Her main competitor, Karrin Taylor Robson, was not an election denialist, and perhaps might have won the GOP nomination if a runoff or “instant runoff” using ranked-choice voting had been used to identify the majority preference of the state’s GOP voters. In any event, Taylor Robson likely would be more preferred by a majority of all the state’s voters—those voting in the November general election—than the election denialist Lake. This presumption is based on the common-sense observation that virtually all the state’s Democrats would prefer non-denialist Taylor Robson to denialist Lake. Therefore, although a majority of the state’s November voters might prefer the Democratic nominee Katie Hobbs to either Republican, Taylor Robson or Lake, it is also possible that in this closely divided state a majority of the November voters this year would prefer either Republican to Hobbs. But if Hobbs doesn’t win, Democratic voters would rather have Taylor Robson than Lake, and given that almost half Republican voters also preferred Taylor Robson to Lake, it seems undoubtedly true that a majority of all the state’s voters would want Taylor Robson rather than Lake to become the state’s governor.

Yet, given the nature of the electoral system, the November race will be just Lake versus Hobbs, with Taylor Robson eliminated in the partisan primary. Lake thus might beat Hobbs and become Arizona’s governor, even though a majority of Arizona voters in November would prefer Taylor Robson over Lake. This is how the majority of the state’s voters’ actual preference can be defeated in the existing electoral system, and this is what must change to prevent election denialists from taking office even though a majority of voters would favor a different outcome.

Other midterm races illustrate the same point. Election denialist J.D. Vance won the Republican primary for Ohio’s U.S. Senate seat with less than a third of the votes, 32.2%, beating among other candidates non-denialist Matt Dolan (who came in third with 23.3%). Vance might win the November election against Democratic nominee Tim Ryan, even though a majority of Ohio’s November voters might prefer non-denialist Dolan to Vance. Again, the partisan primary knocked Dolan out of contention even though he would be the candidate that the majority of November voters would most prefer. Something similar could also be true in North Carolina’s U.S. Senate election. There, election denialist Ted Budd won the GOP primary, beating non-denialist (and former governor) Pat McCrory. Budd might beat Democratic nominee Cheri Beasley in November, even though a majority of November’s voters in the state likely would prefer McCrory to Budd.

In this way, election denialists can come to power after the November elections, in governorships and U.S. Senate seats among other major offices, even though November voters in all these states would have preferred a non-denialist alternative, who got boxed out by the partisan primary. It is imperative to change this anti-majority feature of the prevailing electoral system, and it is possible to do so through a version of ranked-choice voting that conforms to majority-maximizing electoral principles. Known as Round-Robin Voting, because it resembles a round-robin sports tournament in which each competitor faces one-on-one against every other competitor, this version of ranked-choice voting would prevent election denialists from winning office whenever they are not the candidate most preferred by a majority of all the voters in the electorate. If we want to safeguard democracy from election denialism, we need to pursue this reform (among others).

Combatting the Spread of Intentional Falsehoods about Election Results. What is most brazen about the so-called “Big Lie”—that the 2020 presidential election was stolen from Trump and that Joe Biden was not the rightful winner pursuant to the rules for conducting the election—was that at least some of the leading perpetrators of this Big Lie knew it to be false but spread the falsehood anyway. Rudy Giuliani, Trump’s lead lawyer for contesting the outcome of the 2020 election, admitted that they had no evidence to support claims they were making. Others, including Trump himself, also surely must have known the Big Lie was false if, as Attorney General Bill Barr observed, they were maintaining a connection to reality; only by being utterly detached from, or in defiance of, reality would it be possible to claim, as Trump and his supporters have, that Trump would have won the election were it not for massive fraud inflating Biden’s vote totals beyond the ballots cast for him by valid voters.

The First Amendment’s freedoms of expression are essential elements to self-government. But the First Amendment historically has never been understood to protect the “knowing lie,” and even the U.S. Supreme Court’s recent case involving the false claim of being a Medal of Honor recipient does not go so far as to protect all intentional falsehoods from well-tailored and well-justified statutes aimed precisely to protect the political process from deliberately destructive disinformation. Although the idea of using criminal prosecutions to counteract intentionally false election denialism must proceed with great caution, it is necessary to restore a political culture that causes professionals like Rudy Giuliani to exercise an appropriate measure of self-restraint in their public discourse about adverse election outcomes. Going forward, no one should think they are entitled to spread intentional untruths like the Big Lie with impunity; as has become abundantly clear since 2020, this kind of deliberate dishonesty about who really won the election does grave damage to the capacity of the country to conduct elections as a core component of republican self-government, and consistent with the First Amendment the Republic is entitled in the interest of self-preservation to take carefully drawn steps to protect itself from this kind of damage.

Additionally, social media companies have no First Amendment right to simultaneously elevate intentional falsehoods on their platforms and remain immune from the liability that intentional falsehoods cause.  No other type of publisher who exercises control over what they publish is entitled to such absolute immunity from their publication choices. Under the famous New York Times v. Sullivan standard, newspapers are liable under defamation law for the intentional falsehoods they print. So too are TV and cable broadcasters, for the intentional falsehoods they disseminate. The same should be true for social media companies—unless those social media companies exercise no control over the content of the expression that flows through their platforms, in which case then the companies should be immunized from liability in the same way that an old-fashioned telephone company would be. But as long as social media companies wish to profit from amplifying some messages over others, then they should be liable under defamation (and, where applicable, other forms of tort law) for the damages that their amplification of intentional falsehoods cause.

The Synergy of These Three Steps. Pursuing these three dimensions of reform cannot guarantee that American democracy will withstand the serious threat it currently faces from election denialism. Unfortunately, there can be no such guarantee if a majority of Americans actually become converted to the election denialism cause. But, thankfully, election denialism has not taken hold among the public to this extent, at least not yet. Thus, as long as election denialism remains a minority rather than majority position among the American electorate as a whole, these three dimensions of reform—especially if undertaken in combination, so that they can reinforce each other’s effectiveness—can go a long way to safeguarding the right of self-government that, since the Declaration of Independence itself, has been the nation’s foundational principle.

The post Three Reforms to Protect Democracy from Election Denialism appeared first on Reason.com.

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Ex-FBI Intel Chief Says DOJ Has “No Case” Against Trump

Ex-FBI Intel Chief Says DOJ Has “No Case” Against Trump

Authored by Jack Phillips via The Epoch Times,

A former assistant director in the FBI said he believes the affidavit used to obtain a search warrant of former President Donald Trump’s Mar-a-Lago reveals the government has “no case” against him.

“We now know why the DOJ wanted the affidavit—which is supposed to articulate the probable cause needed for a legitimate search—to be kept under seal,” wrote Kevin R. Brock, the former assistant director of intelligence for the FBI and principal deputy director of the National Counterterrorism Center (NCTC), in an opinion piece published Sunday.

The affidavit was ordered released by a U.S. magistrate judge last week in response to court filings submitted by media outlets and third parties. The legal document, however, was heavily redacted and revealed very little about what the FBI agents were searching for on Aug. 8 and why.

“First,” Brock wrote, “the affidavit confirmed that the FBI’s investigation was triggered in January 2022 at the request of the National Archives, which wanted certain documents, especially classified documents, that it considered to be presidential records to be turned over to it by Trump.” But there appears to be nothing “in the affidavit asserting a refusal by Trump to cooperate,” he wrote.

“Second, from what I have seen, I don’t believe the affidavit articulates how a federal law was or is being broken. For those who hold out hope that the affidavit’s redacted sections fill that gap, there is almost no chance that they do,” he continued.

The legal document’s probable cause arguments only deal with “half of what is needed to show a possible violation of the federal statutes that are cited in the warrant,” Brock wrote, adding that based on his experience, it’s unlikely the government will release more of the redacted portions of the affidavit.

‘Cannot Be Proven’

In order to obtain a warrant, it’s not sufficient for the affidavit to only argue that there is cause to believe Trump had allegedly classified documents at Mar-a-Lago, the former official said.

At the same time, the unredacted portions do not make the case that Trump wasn’t authorized to have the documents at his Florida residence.

“A criminal violation of those statutes only exists if it can be established that the person being investigated was not authorized to possess, store, transfer or copy those documents,” Brock said.

“This is an easy element to establish against anyone in America. Except one person.”

Trump and former aides have said that while president, he had a standing order to declassify materials that left the White House’s Oval Office and were sent to Mar-a-Lago.

Meanwhile, Trump wrote in October on his now-banned Twitter account that he had declassified some FBI-related materials. He also issued an order on Jan. 19, 2021, to declassify some FBI Crossfire Hurricane documents.

“As president, he had broad, legally intimidating authority, established by law and court determinations, to declassify any and all documents and to determine what is and is not a presidential record,” Brock wrote.

“Trump and his legal team have asserted that this authority was exercised while he was still president. Therefore, a violation of these fairly low-level and seldom-prosecuted document-oriented statutes cannot be proven.”

Tyler Durden
Mon, 08/29/2022 – 11:05

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Dow Dumps Below Critical Technical Support As The “Enter The Stupid” Equity-Rebound Ends

Dow Dumps Below Critical Technical Support As The “Enter The Stupid” Equity-Rebound Ends

Update (1100ET): US equity markets have taken another leg lower this morning after a brief attempt at a bounce. The Nasdaq is now down over 5% from the start of Powell’s speech…

And The Dow has broken back below its key 50DMA…

The rest of the majors are all edging back down towards that key support level…

*  *  *

As we detailed earlier, there’s a lot lower to go as rates reality hits stocks.

As stocks soared for the last few weeks – supposedly on semantic and self-reinforcing dovish sentiment heard in Powell’s post-FOMC presser – a funny thing happened in the actual market that trades rate-trajectory expectations… NOTHING!

That’s right, as we warned multiple times, as talking heads proudly proclaimed the bottom was in for stocks and Powell would pivot, the short-term interest-rate (STIRs) market was decidedly un-dovish and even ahead of Powell’s definitive dove-destroying (brief) message last Friday, Nomura’s Charlie McElligott notes that:

STIRs actually never wavered last week in their consistent “hawkishness,” as opposed the the “Enter the Stupid” of the insane Equities rally overshoot Thursday: in fact, most of those profile ED$ curves we have been monitoring show Fed path expectations have barely moved since Powell spoke Friday…

This is because STIRs had already accurately reflected Fed “tightening” prior to the Powell speech Friday (priced-in ahead of the actual remaining hikes—no changes from Powell with regard to NEW hikes—just iteration of “restrictive for longer”), and also too then accurately removed any prior Fed “easing” in that 1H23 period over the past month + (the “de-inversions” in EDZ2-H3, Z2-M3), after the mid-Summer “recession scare 1.0” priced in premature Fed cuts.

That said, McElligott notes that 33bps of implied Fed CUTS do still remain in 2H23, because the view is that “restrictive for longer” in the medium-term then means much higher probability of “hard-landing” recession longer-term (Note: Powell made ZERO references to “soft landing” in his speech), which will then necessitate a commensurate large “easing” to start the next Fed policy cycle, which is helping to keep the long-end moves relatively more contained.

So what does all this mean for Equities now, as the narrative flips from BTFD to the reality of Earnings, Multiples and Valuations.

The Nomura strategist points out that as the entirety of the Equities down-trade in ’22 has been on tighter FCI and Fed hiking impact on the MULTIPLE, it seems the market is again turning its gaze towards Q3 negative EARNINGS revisions as the driver of the “next leg down” on risk of lower profit margins and lower earnings growth as the slowdown “bites”

Although with front-end Yields impulsively higher here, a snapshot PE multiple is now generously closer to 17.5x’s versus the current recently used est PE of 18x’s

So with that prior “Valuation range” mentioned last week, let’s make it 17.5 x’s $230 = 4025, which just happens to be current “Spot”…although in-light of the belief that earnings are soon to begin moving lower on the “variable and lagged” impact of FCI tightening, 17.5 x’s $225 goes to 3937…with the local low-end being 3850 (17.5 x’s $220)

After the shock-down in US Equities Spot index Friday, Options Dealer positioning is again a big part of the story moving-forward, trading in “Short Gamma vs Spot” location for all major indices / ETFs…

…with big downside levels nearing with SPX @ 4000 and QQQ @ 300 in the crosshairs, as potentially “acceleration points” lower.

Tyler Durden
Mon, 08/29/2022 – 10:58

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Reports Of US Embassy Being Evacuated As Baghdad’s Green Zone Breached

Reports Of US Embassy Being Evacuated As Baghdad’s Green Zone Breached

Days of pro-Muqtada Sadr protests and unrest have reportedly resulted in Baghdad’s high secure Green Zone being breached Monday, placing international diplomatic missions and foreign embassies under threat.

AFP is reporting that an exchange of gunfire has been observed as dozens or possibly hundreds of supporters riot, with police using riot control measures like water cannons to repel an attack on the Green Zone. There are unconfirmed reports that the sprawling and iconic Iraqi Republican Palace has been forcibly breached with protesters inside.

The fresh unrest appears to be in response to Sadr being pressured to exit politics, with the influential Shia cleric tweeting earlier in the day, “Earlier I decided that I would not interfere in political affairs. And now I announce my final retirement (from politics) and the closure of all institutions (belonging to the Sadr movement).”

The past months have witness periodic unrest as Shia factions struggle to form a government, which has also resulted in sporadic violence amid gridlock in parliament. Against this backdrop, for the last two years pro-Iran militia groups have launched occasional rocket attacks on US bases and even at times the heavily fortified American embassy. Sadr’s supporters believe there’s a conspiracy against him.

Though as yet unconfirmed from the US side, there are widespread reports that the United States Embassy which is located inside the Green Zone is currently being evacuated.

Convoys of international vehicles have also been seen speeding from the areas of unrest, exiting the confines of the Green Zone.

Below are some developments according to Iraqi war correspondent Ali Almikdam:

  • closure of the shrine of Imam Al Kadhim
  • Intense security deployment near Baghdad International Airport.
  • Sadr’s supporters storm the government palace & the Republican Palace.
  • Curfew in Baghdad.
  • US embassy is evacuating

Purported footage of protesters breaching the symbolic seat of government for the Iraqi state, which is at the heart of the walled Green Zone:

developing…

Tyler Durden
Mon, 08/29/2022 – 10:44

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Oil Surges As Supply Takes Center Stage

Oil Surges As Supply Takes Center Stage

Oil’s recent rebound has the potential to run further as traders will turn their focus to the upcoming OPEC+ meeting now Jackson Hole is out of the way, Bloomberg’s Sungwoo Park writes.

Crude is sharply extending gains on Monday, suggesting oil is now focused more on supply dynamics following the recent Saudi pivot than on a hawkish Powell. Indeed, the medium-term outlook for crude has improved since the Saudi energy minister’s comments on potential supply curbs last week, with more OPEC+ members aligning themselves with the kingpin.

These add key support to the positive backdrop on the supply side amid a prolonged energy crisis in Europe, along with the prospect of renewed exports from Iran getting undermined lately (just as we have been warning all along for the past year).

That should help overshadow bearish factors, especially fears about demand destruction amid recession risks. Oil’s timespreads remain in backwardation (which is of coursebullish).

With OPEC+ taking the driver’s seat again, crude can get a fresh impetus if the alliance delivers what the oil bulls want to hear – or a surprise beyond expectations – at the Sept. 5 meeting.

Finally, a reminder that perhaps the main reason why oil prices haven’t exploded even higher is the weekly drain of ~5 million in oil from the SPR. However, all that is ending in two months at which point the SPR will shift from a tailwind to a headwind for lower energy prices. It’s also why, in what appears a sheer act of desperation, the IEA’s head Fatih Birol just blurted out confirmation to what Zoltan Pozsar said, namely that a commodity supply panic is imminent, saying that a further SPR releases is “not off the table.”

Not off the table? Does he plan on taking it negative?

Tyler Durden
Mon, 08/29/2022 – 10:39

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“The Only Way We Are Getting Big Rate Cuts Next Year Is Alongside An Economic Collapse The Pushes Us Off A Cliff”

“The Only Way We Are Getting Big Rate Cuts Next Year Is Alongside An Economic Collapse The Pushes Us Off A Cliff”

By Michael Every of Rabobank

‘Head like a Hole’ like J-Hole in the head

This Daily repeatedly warned inflation wasn’t ‘transitory’: it wasn’t. It warned lower rates would be higher: they are. It also warned ‘lower for longer’ would be ‘higher for longer’ as the markets implied ‘Fed pivot!’ Jackson Hole confirmed all three of our views. However, there was a hole in the Hole on why we are here and so what the implications are.

A day flight from Australia to Asia left me a ‘hole’ lot of time to muse ahead of Powell’s speech. On TV, I watched the billionaires in Billions ‘saving the world’…for profit. I couldn’t find the music I wanted, Pink Floyd – but read that Wall Street wants to buy their back catalogue: sing along, kids and Pigs: “Come in here, dear boy, have a cigar…. Everybody else is just green; Have you seen the chart? It’s a helluva start; It could be made into a monster; If we all pull together as a team. And did we tell you the name of the game, boy; We call it ‘riding the gravy train’” I read déjà-vu of “economic war = higher inflation and rates”; an anti-Semitic rant from Pepe Escobar cheering Western poverty and Russian riches; and The American Mind arguing ‘Finance Means Betting on People – Not Numbers’ using Marxist arguments –“Live vs. dead credit” is “productive vs. fictitious capital”– and savaging global markets for failing: “both to stimulate wealth creation and even to control risk when it becomes detached from the ultimate aim of allocating credit to people who will use it to create more wealth… Allocators look for “safe” investments insulated from the messy world of entrepreneurial risk-taking… Best of all… is anything with a government guarantee…even [in Silicon Valley] a large share of capital goes into copycat ideas, zero-sum battles, or financial businesses with a thin tech veneer.” How relevant to J-Hole!

Indeed, we have a hole where productive investment needed to be to prevent our crisis, as food prices soar, European energy hits mind-blowing highs, France’s Macron says it is “the end of abundance”, Germans stockpile toilet paper, and Belgium’s PM warns of the next TEN European winters being difficult. Clearly, we are close to banana republic stagflation – without the bananas. Do we get a Western energy price cap, as France is hinting? When you see the 10x energy price hikes SMEs are facing, it must surely be a death blow to neoliberalism’s “because markets”. Yet that would mean Western demand won’t fall, and out-bid emerging markets freeze and/or starve: and Pepe Escobars are elected all over. Such a move would ironically also make DM look like EM, as a sub-dollar parity EUR is already warning. Yet not capping energy prices would make DM look like EM in terms of crashing real incomes and social and political unrest.

Would J-Hole address the failures of ‘Billions’ as a political-economy model? After all, 90% of Australia’s fuel supplies will dry up if the South China Sea sees fighting, with only two weeks of inventory: neither the state nor the private sector built any oil refineries at normal or low rates because ‘dead credit’ goes into housing. Relatedly, the US Energy Secretary who laughed at the idea of increased fossil fuel production just sent a letter to oil refiners stating: “Given the historic level of US refined product exports, I again urge you to focus in the near term on building inventories in the US… It is our hope that companies will proactively address this need If that is not the case, the Administration will need to consider additional Federal requirements or other emergency measures. So, US export bans ahead? More of an energy crisis abroad, if so.

Would J-Hole note the crisis goes far beyond energy? After Covid PPP failures, we also see the RBA couldn’t retain a local auto sector to spill-over/convert to the military in a crisis, as it holds a hurried strategic defence review. The Fed couldn’t retain the US industrial base needed to carry the load of a major war: it won’t have the Navy it needs for many years. Europe has industry convertible to military needs – but not with these energy prices. What good is monetary policy when it leaves us behind this national-security curve? Central banks were created to fight wars, not inflation and “National security remains the irreducible function of the state.”

Would J-Hole note trends against their neoliberal worldview? An Aussie government minister declaring the ‘gig economy’ a “cancer” on the economy; my Aussie taxi-driver with a degree in engineering and thermal dynamics who can’t get a job due to off-shoring and HR departments run by young apparatchiks who value social media skills over being able to manage sulphuric acid pumps; the Aussie Greens calling for a two-year national rent cap and a 2% cap on rises after that; UK Tories imploding for NOT shaking the status quo up more, and just 6% of 18-24 year olds planning to vote blue; and MAGA now being “semi-fascism”, apparently.

So to J-Hole and its title of ‘Reassessing constraints on the economy and policy.’ How apt! What larger constraints on monetary policy are there than knowing that raising rates ruins the unproductive parts of the economy but doesn’t incentivise the productive parts we desperately need, and lowering rates only incentivises socio-economic necrosis? Not a word of this was mentioned by Powell in his keynote eight and half minute speech.

Powell said rates will go up and won’t come down in a hurry: “Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance… [it] will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” As Philip Marey covers here, we will likely see another 50bps in September, November, and December, taking Fed Funds to 4%.

However, he didn’t mention the crumbling global architecture driving inflation higher, or propose any solutions beyond driving demand down. Central bankers who love to talk outside their policy remit are quiet, as if the inflation and war they didn’t see coming, like the GFC, happened in a vacuum, and will decline in a vacuum.

To be fair, the IMF and World Bank heads both made clear that the supply-side backdrop was going to make monetary policy much harder for at least the next five years, as we face the most challenging backdrop in decades (read: the 70s). However, Singapore’s leaders are telling their public to “get real”; that the country must be able to stand on its own two feet; the atmosphere is like that before WW1; and the population needs to psychologically prepare itself for the risk of regional conflict. Watch this video and ask why we can’t all have this kind of brave leadership from central banks and the IMF and World Bank too.

Friday’s equity drop showed some were in denial: many still hope data will ‘save’ them. Yes, the latest PCE inflation was marginally weaker than expected, but CPI will not come down until geopolitical crises are resolved. Low demand growth does not mean low supply-side inflation. Epitomising this, Bloomberg just raised their terminal prices by 10% when many funds face terrible returns this year! As it stands, surely the only way we are getting big Fed rate cuts next year, at least without larger hikes to follow, is alongside an economic collapse that will push us not just into a hole, but off of a cliff.

[ZH: which, incidentally, is precisely what we have been saying all along is bound to happen]

If J-Hole produced brave and intellectually honest assessments it would have said rates are only part of the solution to this economic war, which the IMF and World Bank implied. Moreover, if we have a 2% CPI target, why can’t we have a median wage target; a productivity target; a target for the % of GDP accounted for by industry; for spare capacity in critical areas; share of imports in key sectors; and trade concentration? (Of course, you won’t hear any of that!)

Logically, we need sustained higher rates to: crush dead/fictitious credit/capital; push down the price of commodities paying for the other side’s war-machine and claiming to back new dollar rivals; and to suck Western capital out of rival economies to pump it into more geopolitically-friendly alternative destinations. This will blow up the dead/fictitious credit/capital without incentivising investment in what we most need: many important things *lose* money, but we all lose without them. ‘Billions’ won’t do that job, and if ESG could we wouldn’t be worrying about boiling, freezing, starving, or the inability to do any fighting.

Assuming nobody will pay higher taxes –because the rich won’t, and the poor can’t– then that logically leaves only two paths.

  • First is MMT, yet even that theory says don’t print when inflation is high. The American Mind article added, “we know what happens when we allow the boundless desires of politicians to become the basis of credit creation.” And President Biden just gave students debt relief of $10-$20,000 owed to rich, rentier private universities specialised in the dead/fictitious because of a “Midterm Covid emergency”: even the Washington Post calls it “a regressive, expensive mistake [which] will provide a windfall for the upper-middle class and wealthy – with American taxpayers footing the bill.” Yet MMT **only** into live/productive credit/capital areas such as agriculture, energy, industry, infrastructure, and defence , and into local/bloc supply chains not imports, might work, even if it means more inflation now. That is de facto industrial policy and Bretton Woods-era credit rationing to reallocate scarce resources and maintain social stability, if central banks read their own history. (And isn’t the ECB starting down this path with its anti-fragmentation policy? All it needs it state supply-side spending now.)
  • Second is to force private capital to do the things society desperately needs by narrowing its horizons. That means: telling banks what to do; high tariffs; capital controls; credit rationing; and moral suasion like under China’s “Common Prosperity”. Any Western takers?

Both paths lead to a bloc/values-based neo-mercantilism: thus the IMF and World Bank silence. Both are inflationary short-term and mean higher base inflation long-term. Today the Financial Times says “A post-dollar world is coming”. I will take the other side of that bet, while agreeing the can-still-soar-higher-than-this US dollar won’t be used in certain balkanized parts of the world ahead – and good luck to them with their choice of replacement.

On this note, the US Justice Department has blocked Maersk selling its box manufacturing unit to the Chinese because it would have combined two of the world’s four suppliers of refrigerated shipping containers, further concentrated the global cold supply chain, and consolidated control of over 90% of insulated container box and refrigerated shipping container production in Chinese SOEs or state-controlled entities. Somebody sees we are ‘in deep ship’ on the supply side. (Then again, the SEC signed a deal over audits of China’s US-listed firms: now to make them comply.)

J-Hole showed little intellectual honesty because it has a hole where an ideological “-ism” to frame what we are ‘allowed’ to do in this economic war should be. As Solzhenitsyn said: “Ideology – that is what gives evildoing its long-sought justification and gives the evildoer the necessary steadfastness and determination.” The Pepe Escobars clearly have theirs nailed down.

While we try to agree on one, it is clear that what the West needs like J-Hole in the head is Nine Inch Nails’ ‘Head Like a Hole: “God money, I’ll do anything for you; God money, just tell me what you want me to; God money, nail me up against the wall; God money, don’t want everything he wants it all; No you can’t take it; No you can’t take it; No you can’t take that away from me; Head like a hole; Black as your soul; I’d rather die; Than give you control; Bow down before the one you serve; You’re going to get what you deserve.”

Tyler Durden
Mon, 08/29/2022 – 10:15

via ZeroHedge News https://ift.tt/efqYmhr Tyler Durden

The National Constitution Center’s “Restoring the Guardrails of Democracy” Initiative


Guardrails NCC

In the wake of the 2020 election, the National Constitution Center launched its Restoring the Guardrails of Democracy initiative. We commissioned three teams—conservative, libertarian, and progressive—to identify potential reforms to address current threats to American democracy and strengthen its institutional guardrails. Team Conservative included Sarah Isgur, Jonah Goldberg, and David Frenchall of The Dispatch. Team Libertarian included Clark Neily and Walter Olson of the Cato Institute and Ilya Somin of the Antonin Scalia Law School at George Mason University. Team Progressive included Edward Foley of The Ohio State University and Franita Tolson of the USC Gould School of Law.

The three teams worked independently, but they converged in important ways. All three teams called for reforming the Electoral Count Act of 1887 (though Team Conservative’s report didn’t say this explicitly because, as Sarah Isgur explained during our launch program, it was so important they “just thought that went without saying”). The conservative and progressive teams both proposed reforms to the primary system. They also both described education as central to preserving democracy, with Team Conservative calling for reinvigorating history education and focusing on teaching students critical thinking skills, and Team Progressive calling for strengthening civic numeracy (whereas Team Libertarian focused on expanding foot voting as an alternative to increasing civic knowledge).

We hope that the Guardrails of Democracy Initiative, like other National Constitution Center projects such as the Madisonian Commission and the ongoing Constitution Drafting Project, contributes to a nonpartisan national conversation about the most important challenges facing American democracy and the best ways to meet them.

 

The post The National Constitution Center's "Restoring the Guardrails of Democracy" Initiative appeared first on Reason.com.

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The National Constitution Center’s “Restoring the Guardrails of Democracy” Initiative


Guardrails NCC

In the wake of the 2020 election, the National Constitution Center launched its Restoring the Guardrails of Democracy initiative. We commissioned three teams—conservative, libertarian, and progressive—to identify potential reforms to address current threats to American democracy and strengthen its institutional guardrails. Team Conservative included Sarah Isgur, Jonah Goldberg, and David Frenchall of The Dispatch. Team Libertarian included Clark Neily and Walter Olson of the Cato Institute and Ilya Somin of the Antonin Scalia Law School at George Mason University. Team Progressive included Edward Foley of The Ohio State University and Franita Tolson of the USC Gould School of Law.

The three teams worked independently, but they converged in important ways. All three teams called for reforming the Electoral Count Act of 1887 (though Team Conservative’s report didn’t say this explicitly because, as Sarah Isgur explained during our launch program, it was so important they “just thought that went without saying”). The conservative and progressive teams both proposed reforms to the primary system. They also both described education as central to preserving democracy, with Team Conservative calling for reinvigorating history education and focusing on teaching students critical thinking skills, and Team Progressive calling for strengthening civic numeracy (whereas Team Libertarian focused on expanding foot voting as an alternative to increasing civic knowledge).

We hope that the Guardrails of Democracy Initiative, like other National Constitution Center projects such as the Madisonian Commission and the ongoing Constitution Drafting Project, contributes to a nonpartisan national conversation about the most important challenges facing American democracy and the best ways to meet them.

 

The post The National Constitution Center's "Restoring the Guardrails of Democracy" Initiative appeared first on Reason.com.

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