US To Withhold Nuclear Weapons Data From Russia As Last Treaty Collapses

US To Withhold Nuclear Weapons Data From Russia As Last Treaty Collapses

The White House has confirmed what we can call the effective (and expected) collapse of the New START nuclear treaty between the US and Russia, announcing Tuesday it will no longer provide data on its nuclear arsenal under the treaty’s stipulated terms.

Moscow had already suspended its participation on March 1st, but still said it will remain in compliance with nuclear weapons caps under the agreement. National Security Council spokesman John Kirby said the decision was made due to Russia being in violation, but still held out hope that the US punitive measure could push Moscow to return.

“We obviously would like to see Russia back in New START in full compliance … Russia refused to share data, which we agreed in New START to share biannually … since they have refused to be in compliance with that particular modality of New START, we have decided to, likewise, not share that data,” Kirby said. “We would prefer to be able to do that, but it requires them to be willing as well.”

Image: AFP/Getty

“As a lawful countermeasure intended to encourage Russia to return to compliance with the treaty, the United States will likewise not provide its biannual data update to Russia,” Kirby said. “The United States informed Russia in advance of this step. In the interest of strategic stability, the United States will continue to promote public transparency on our nuclear force levels and posture.”

However, Russian Foreign Minister Sergey Lavrov rejected Kirby’s assertion of ongoing contact between the two sides on New START. But he did emphasize that “our readiness to adhere to the caps on strategic nuclear arms in the treaty is nothing more than a goodwill gesture” – suggesting all is not quite yet completely lost regarding the last nuclear arms reduction agreement between the nuclear-armed superpowers.

On Monday, White House press secretary Karine Jean-Pierre stated that the has not seen “any indications that Russia is preparing to use a nuclear weapon” – despite the big news this week that Putin ordered tactical nukes to be stationed in neighboring Belarus.

Starting in August last year the US accused Russia of violating the treaty in disallowing US on-site inspections under its stipulations. In response, Washington halted Russian inspectors’ ability to do the same on American soil. Russia had at the time complained that it was actually the US side which “deprive the Russian Federation of the right to conduct inspections on American territory.”

And then last month, Putin declared, “No one should be under the illusion that global strategic parity can be violated,” in reference to New START.

In March 2021 the two sides renewed New START for a period of five years, and it will expire in February 2026 if it’s not continued – now looking looking more likely given US-Russia relations have deteriorated so fast over the Ukraine war and are at a complete breaking point.

Tyler Durden
Wed, 03/29/2023 – 12:25

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SEC Chair Gary Gensler To Face Congress Grilling Over Crypto Policy

SEC Chair Gary Gensler To Face Congress Grilling Over Crypto Policy

Authored by Prasant Jha via CoinTelegraph.com,

The chair of the Financial Services Committee said its primary focus would be setting the groundwork for crypto regulations in the United States…

The United States Securities and Exchange Commission (SEC) chief Gary Gensler is set to testify before the House Financial Services Committee for the first time.

In an interview, Representative Patrick McHenry, chairman of the Financial Services Committee, confirmed that the SEC chief would have to face questions on April 18 over his approach toward the crypto ecosystem.

The House Financial Services Committee has jurisdiction over all aspects of the U.S. financial services sector, including banking, securities and digital assets.

During his interview, McHenry noted that it would be the first oversight hearing of the SEC. The hearing will be focused on Gensler’s rulemaking and approach toward crypto assets. He added that the committee will have sizeable general oversight over the SEC and would take a serious approach in terms of “laying down a regulatory sphere for digital assets.”

The SEC chief’s approach toward crypto has turned many heads over the years, with many Democratic party members voicing their concern about his approach. Some in the crypto industry believe the party’s anti-crypto stance could be disastrous for its 2024 election campaign.

Dennis Porter, the co-founder of the Satoshi Action Fund, said that many pro-crypto and pro-Bitcoin Democrats are lining up to voice their opposition to the party’s stance.

U.S. regulators have taken a hard stance on crypto in the first months of 2023, with the SEC issuing Wells notices to several crypto firms, including Coinbase. The Commodity Futures Trading Commission has also filed a new lawsuit against Binance. However, the crypto community has always highlighted that regulations would be decided by Congress, not individual agencies.

Tyler Durden
Wed, 03/29/2023 – 12:07

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New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”

New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”

Authored by Simon Black via SovereignMan.com,

Every year the IRS publishes a detailed report on the taxes it collects. And the statistics are REALLY interesting.

A few weeks ago the agency released its most recent report. So this is the most objective, up-to-date information that exists about taxes in America.

This is important, because, these days, it’s common to hear progressive politicians and woke mobsters calling for higher income earners and wealthier Americans to pay their “fair share” of taxes.

But this report, directly from the US agency whose job it is to tax Americans, shows the truth:

The top 1% of US taxpayers paid 48% of total US income taxes.

And that’s just at the federal level, not even counting how much of the the local and state taxes the wealthy paid.

Further, the top 10% paid nearly 72% of total income taxes.

Meanwhile, the bottom 40% of US income tax filers paid no net income tax at all. And the next group, those making between $30-$50,000 per year, paid an effective rate of just 1.9%.

(Again, this is not some wild conspiracy theory; these numbers are directly from IRS data.)

But the fact that 10% of the taxpayers foot nearly three-fourths of the tax bill still isn’t enough for the progressive mob. They want even more.

The guy who shakes hands with thin air, for example, recently announced that he wants to introduce a new law that would create a minimum tax of 25% on the highest income earners.

But the government’s own statistics show that the highest income earners in America— those earning more than $10 million annually— paid an average tax rate of 25.5%. That’s higher than Mr. Biden’s 25% minimum.

So he is essentially proposing an unnecessary solution in search of a problem.

I bring this up because whenever you hear the leftist Bolsheviks in government and media talking about “fair share”, they always leave out what exactly the “fair share” is.

The top 1% already pay nearly half the taxes. Exactly how much more will be enough?

Should the top 1% pay 60% of all taxes? 80%? At what point will it be enough?

They never say. They’ll never commit to a number. They just keep expanding their thinking scope.

Elizabeth Warren, for example, quite famously stopped talking about the “top 1%” and started whining about the “top 5%”. And then the “top 10%”.

She has already decided that the top 5% of wealthy households should not be eligible for student loan forgiveness or Medicare.

And when she talks about “accountable capitalism” on her website, Warren calls out the top 10% for having too much wealth, compared to the rest of households.

Soon enough it will be the “top 25%” who are the real problem…

Honestly this whole way of thinking reminds me of Anthony “the Science” Fauci’s pandemic logic on lockdowns and mask mandates.

You probably remember how reporters always asked “the Science” when life could go back to normal… and he always replied that it was a function of vaccine uptake, i.e. whenever enough Americans were vaccinated.

But then he kept moving the goal posts. 50%. 60%. 70%. It was never enough. And there was never a concrete answer.

This same logic applies to what the “experts” believe is the “fair share” of taxes which the top whatever percent should pay.

They’ll never actually say what the fair share is. But my guess is that they won’t stop until 100% of taxes are paid by the top 10% … and the other 100% of taxes are paid by the other 90%.

Tyler Durden
Wed, 03/29/2023 – 11:25

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I love how everyone pretends the bank crisis is over…

Practically on cue, politicians began their public hearings yesterday about the recent banking crisis.

This was so predictable; every time there’s a major crisis, Congressmen book a committee meeting to express their shock and outrage. They pass new laws to prevent a future crisis. Then their new laws fail to work properly, so they hold another public hearing to express more outrage.

This is the cycle of political problem solving, and yesterday was no exception.

The Senate Banking Committee summoned key officials from the Federal Reserve, FDIC, and US Treasury Department. And the tone was quite angry.

Senators were flummoxed that their thousands of pages of banking legislation had once again failed to provide adequate protection to the US financial system. And they were looking for someone to blame.

This, too, quite predictably, fell along partisan lines. The people on the left somehow found reason to blame everything on Orange Man, while describing bank regulators as “gutsy” and “courageous”. It was bewildering.

Most absurd was how the officials in the hot seat (who, again, represent the primary bank supervisors in the United States) managed to avoid any culpability whatsoever.

The Fed’s Vice-Chairman for Banking Supervision admitted that his agency’s supervisors had rated SVB as a poorly managed bank. And the Fed was further aware of several material weaknesses in the SVB’s risk compliance.

They acknowledged that they had advanced knowledge of the banks’ problems.

They acknowledged they should have done something about it. They acknowledged they had the tools and authority to do something about it.

Yet they did absolutely nothing… and somehow ended up being praised as gusty and courageous.

It’s natural to blame the bank executives for making such idiotic decisions with their customers’ money. But culpability is not mutually exclusive. It’s not either/or. And the regulators had a major role to play in this crisis.

Not only did they escape culpability at yesterday’s hearing, but the regulators even managed to pat themselves on the back for their swift and decisive response to the crisis.

After SVB’s failure a few week ago, government officials invoked what’s known as the “systemic risk exception”. This exception essentially gives them sweeping power to deal with a crisis by whatever means necessary.

And all the key officials unanimously agreed that SVB, First Republic Bank, etc. posed systemic risk, and that justifies the massive bailout response.

Isn’t it interesting, though, that “systemic risk” only seems to apply to banks?

You never heard these officials say that baby formula shortages pose systemic risk. Or that inflation itself is a systemic risk. Or that dwindling US oil production is a system risk.

Yet whenever the banks and their somnambulant regulators fail, they call it “systemic risk” and pull out all the stops to save them.

Energy companies, on the other hand, which produce the very thing that all economic activity requires, are tossed out in the cold and demonized at every available opportunity by the President of the United States. It’s bizarre logic.

The biggest falsehood of yesterday’s hearing, however, was the continued insistence by all that “our banking system is strong and resilient”. Coincidentally they presented zero evidence to support that assertion.

In fact most evidence would support the opposite conclusion– that there are still a number of major problems in the banking system.

The FDIC itself reported that banks across the US have a total $620 billion in unrealized losses; this is due primarily to the steep decline in bond prices, which are a result of the Federal Reserve’s aggressive interest rate increases.

And bear in mind that the FDIC’s estimate was before the most recent rate hikes. So the updated estimate on unrealized losses right now is most likely higher than $620 billion.

But risks in the banking system go way beyond these unrealized bond losses.

Commercial real estate is an obvious one; Fed data show that banks across the US have loaned out nearly $3 trillion of their customers’ money against commercial property, including office space. Other estimates go up to $5.5 trillion including commercial mortgage-backed securities.

But thanks to new, pandemic-related remote work policies, companies across the US are using less space.

Moody’s Analytics recently reported office utilization rates at roughly 50% of pre-pandemic levels based on security-badge swipe data at office buildings.

Workers simply aren’t showing up to the office like in the past, and office occupancy rates have been steadily deteriorating as a result.

Office vacancy now stands at 12.5% nationwide according to the National Association of Realtors. That’s about a third worse than in 2019.

To make matters worse, the economy is slowing, which will likely trigger additional cuts in office space.

All of this is bad news for banks. They have trillions of dollars of exposure to a rapidly declining commercial real estate market, so even a small increase in loan defaults could spark another panic.

The Wall Street Journal recently reported that estimates of total unrealized bank losses right now, including commercial loans, is a whopping $1.7 TRILLION. That’s the vast majority of all bank capital in the United States… so this is still an enormous problem.

But everyone keeps playing the same chorus again and again: “the banking system is strong, the banking system is strong.”

Even sophisticated Wall Street investors have joined the sing-along, given that bank stocks are once again on the rise.

As of this morning, shares of financially uncertain banks with enormous unrealized losses are now trading at fairly rich, double-digit valuations as measured by Price/Earnings and Price/Free Cash Flow metrics.

(Meanwhile, valuations of high quality, well-managed real asset businesses in the energy, mining, agriculture, and productive technology sectors are tiny by comparison.)

Everyone seems happy to close their eyes and pretend that the crisis is over despite so much evidence to the contrary.

Source

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Fed Gauge Of Financial Stress Is Approaching Levels Of Concern

Fed Gauge Of Financial Stress Is Approaching Levels Of Concern

Authored by Ven Ram, Bloomberg cross-asset strategist,

It’s not just the credit markets that are sending out a signal of distress. A key barometer that the Fed watches, the St. Louis Fed Financial Stress Index, is telegraphing a similar message about the state of the US economy.

While the spread between high-yield and investment grade debt captures one major variable, the Fed’s gauge comprises a host of yield spreads, interest rates and other indicators, making it a veritable one-stop-shop.

The average value of the index is intentionally meant to be zero, capturing a moment in time when the financial markets are in a “normal” state, with values above indicative of heightened stress.

The markets have been relatively calm these past couple of days after immense volatility earlier this month. But the key question confronting the Fed is what the combination of widening credit spreads and a re-steepening of the Treasury curve tells us about damage already inflicted on the economy.

As far as interest-rate traders are concerned, the damage merits rate cuts down the line.

While Fed Chair Jerome Powell already poured cold water on the idea that the Fed would consider rate cuts this year, we heard overnight from James Bullard, who has espoused the separation principle in walking the fine balance between financial and price stability.

For now, though, policymakers’ best hope will be that the current calm will prevail long enough to keep the economy from falling off a cliff.

Tyler Durden
Wed, 03/29/2023 – 10:45

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WTI Extends Gains After Large Surprise Crude Draw, ‘Adjustment’ Factor Remains High

WTI Extends Gains After Large Surprise Crude Draw, ‘Adjustment’ Factor Remains High

Oil prices extended recent gains overnight (but have trodden water for the last couple of hours) after a surprise crude draw reported by API last night and the ongoing dispute over Iragi crude exports via Turkey (disrupting supply).

“Supply concerns continue to support oil prices,” said Warren Patterson, the Singapore-based head of commodities strategy at ING Groep NV.

One of the biggest oil producers in Iraqi Kurdistan, Norway’s DNO ASA, has started to lower production as the dispute drags on.

However, despite the support for oil prices coming from supply concerns, oil prices are likely to remain volatile in the near term, led by the financial market turmoil, according to UBS strategist Giovanni Staunovo.

And if official inventory, supply, and demand data matches API’s that upside vol may continue as positioning is very short.

API

  • Crude -6.076mm (+300k exp) – biggest draw since 11/25/22

  • Cushing -2.388mm – biggest draw since Feb 2022

  • Gasoline -5.891mm (-1.6mm exp)

  • Distillates +548k (-1.1mm exp)

DOE

  • Crude -7.49mm (+300k exp)- biggest draw since 11/25/22

  • Cushing -1.632mm

  • Gasoline -2.904mm (-1.6mm exp)

  • Distillates +281k (-1.1mm exp)

The official DOE data shows an even bigger crude draw than API reported along with a draw in gasoline stocks (6th week in a row). Cushing stocks fell for the 4th straight week while Distillates saw a small build…

Source: Bloomberg

The infamous “adjustment factor” dropped last week but remains extremely high historically speaking…

Source: Bloomberg

US Crude stocks overall remain relatively elevated…

Source: Bloomberg

Overall US gasoline stocks are at their lowest for this time of year since 2014…

Source: Bloomberg

US Crude production was flat week-over-week, as rig counts continue to decline..

Source: Bloomberg

WTI has been chopping around in a narrow range around $74 for the last few hours ahead of the official data and extended gains after the draws…

Finally, as Bloomberg notes, while oil has rallied from recent lows as the banking sector stabilizes, it remains on track for a fifth monthly decline amid concerns over a potential US recession and resilient Russian energy flows. Most market watchers are still betting that China’s recovery will accelerate and boost prices later this year as demand rebounds.

Meanwhile, OPEC+ is showing no signs of adjusting oil production when it meets next week, staying the course amid turbulence in financial markets, delegates said. 

We also note that there is the ‘Biden Call’ sitting under the market as at some point he will have to start refilling the SPR.

Tyler Durden
Wed, 03/29/2023 – 10:38

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“A Herculean Task”: You Don’t Solve One Problem, You Create Two New Ones

“A Herculean Task”: You Don’t Solve One Problem, You Create Two New Ones

By Michael Every of Rabobank

I loved the Greek myths growing up, and the older I get the more they frame the contemporary world better than most contemporary takes. Among the rich pantheon, I turn to the Hydra in particular, a giant serpent with many heads, where each time you cut off one, two grow back in its place. That’s how the real world works: you don’t solve problems, but create two new ones.

Yesterday’s US consumer confidence data were better than expected at 104.2 post-SVB vs. 103.4 in February. So, less fear of the recession some see looming. However, the survey saw 12-month inflation expectations rise from 6.2% to 6.3%, and ‘jobs are plentiful’ minus ‘jobs are hard to get’ at a still-high 38.8, consistent with a tight labor market. Hence, the Fed need to do more on rates, which then places more potential stress on the banking sector and the economy.  

Yesterday saw ECB regulators state that just one small Credit Default Swap (CDS) trade was, in their eyes, behind the recent panic at Deutsche Bank. So, all is well? Hardly, if that kind of market structure exists, says the regulator. After all, CDS allows markets to trade on insurance on somebody else, which we don’t allow for any other insurance for obvious reasons. This morning also sees news of regulators raiding French banks in a tax fraud probe.

On US banks, testimony from the Fed’s Barr underlined the points already released in his text the day before and added little new. The Wall Street Journal summarises it as: ‘How Bank Oversight Failed: The Economy Changed, Regulators Didn’t – Overseers paid insufficient heed to risks of falling bond values and fleeing deposits. Social media and selling by smartphone made that worse’, adding the quote: ““The supervisory process has not evolved for rapid decision making. It is focused on consistency over speed. In a fast-moving situation, the system is not as well-designed to force change quickly.” So, they aren’t even cutting off the right heads(?)

In the Financial Times, Martin Wolf defends central banks, arguing ‘Monetary policy is not solely to blame for this banking crisis.’ Which is true, even though it arguably played the largest single role. He then adds: ‘It’s a fallacy to suppose there is a simple solution to the failings of our financial systems and economies’. Which is also true – thus the Hydra. At least he admits there are systemic failings – how much of that do you see in other financial media and market commentary?

The IMF understand things are changing. They just released ‘RETHINKING MONETARY POLICY IN A CHANGING WORLD’ (all caps, so it must be important!) that argues: “after decades of quiescence, inflation is back; to fight it central banks must change their approach. Monetary theory in economics has consisted of various schools of thought rather than a single unified model. Each of these schools emphasizes different forces that drive inflation and recommends a distinct policy response. Different times have raised different challenges -and each required its own policy approach.” It’s nice that the IMF finally recognises multiple schools of monetary theory. However, the paper lists our current problems before concluding that to address them, “central banks should return to a monetary approach in which stabilizing inflation expectations is a central priority” – without saying *how*. So, ‘Go slay the Hydra, Heracles!’

As Aussie CPI data today showed a downside surprise at 6.8% y-o-y vs. 7.2% expected –so, might the RBA sheath its sword in April?– the new message is that central banks will keep hiking if the data back it, and use acronymic liquidity support to prevent a banking crisis at the same time. In other words, hybrid policy to deal with a Hydra.

Yet that creates all kinds of problems too, as central banks inexorably start getting involved in either deeper moral hazard or capital allocation decisions at a time when they can’t even get rates or financial supervision right. Those political-economy choices are likely to between guns and butter (or cat videos), as China, whose ruling ideology understands both financialisation and ‘fictitious capital’, is leading the way on.

On which, Congress yesterday heard another testimony as consequential as Barr’s. The Joint Armed Services Committee learned US naval logistics have atrophied and are a generation behind on sealift readiness, the entire end-to-end fuel system in question, US ship-building too slow, and buying new ships on the open market not an option. Congress was sympathetic. The potential bill could be astronomic. Without it, the US cannot permanently remain hegemonic.  

Coincidentally, today’s Financial Times also sees Janan Ganesh argue that regardless of the geopolitical crisis we are experiencing, Western voters –or at least European– won’t give up their peace dividend because electorates prefer guns to butter. He concludes, “Governments have to decide between a retirement age here and a naval fleet there. Or rather, voters do. If they go the way I fear, it will be a legitimate and understandable democratic choice. But then so was the inward turn of the interwar years. The second world war happened, in part, because Germany and Japan didn’t believe a US that had lets its hard power run down for a generation could counter them….Weakness is provocative, goes the cliché. But so, at home, is paying for strength.” Of course, we have plenty of talking heads who point out that even Western strength is also provocative.

These issues flow back to markets even if most won’t join the dots. For example, as oil markets swing wildly (on which, see the latest energy outlook ‘Energy Security in a Walled World’ from our Joe DeLaura, which urges “Focus on the future!”) FinTwit is still, wrongly, echoing with cries of ‘the end of US dollar hegemony’, which implies market chaos on a scale few grasp.

Again, let me stake out the view that the US dollar will remain unchallenged as the global reserve currency. Again, however, let me also stress that if we keep seeing large emerging markets and commodity producers switch to de facto barter for trade settlement priced in US dollars, then there might over time be a growing imbalance between the supply of global dollars and the actual physical demand for them. The dollar could, hypothetically, become like Latin in Europe – still there as lingua franca, but never used in day-to-day interactions. The US recourse would logically *not* be lower rates and QE, as pivot-happy punters are saying.

Yet even if one buys this longer-term scenario, it’s still a Hydra. In the near term, barter is highly inefficient. If ‘no dollars’ means Saudi Arabia building up assets in China or Kenya rather than the US, good luck to them with their US-pegged currency. If it all means a weaker dollar and higher Treasury yields, which is questionable, it also means higher global inflation and more financial turbulence, and so a collapse in demand for commodity exporters ‘protecting themselves’. Moreover, as the logical end game, Michael Pettis has long argued the US would be better off without its global reserve currency role, which allows every other economy to dump their excess savings on it, pushing up US debt or unemployment in kind. A US walk-away would mean Japan, China, Germany, etc., would not be able to save and export so much to it, directly or indirectly.

As Pettis also points out, the path to achieving this global rebalancing is through increased financial regulation, not tariffs: stop the capital flows, and the inverse trade flows halt too. Is that the way to slay our global Hydra, as in the Greek myths, where Heracles and his nephew Iolaus cut off each head and cauterised the wound with a burning torch before new ones could grow back?

Of course, applying a burning torch to our financial system does not seem to be on the cards, and would create epic market volatility. We are more likely to see a fusion of fiscal, monetary, regulatory, and industrial policy, i.e., a new mercantilism – but that path also means geopolitical and geoeconomic tensions, rippling back to markets.

In short, there are always two new heads to the international political economy Hydra for every one we cut off. Pretending there is a pre-2020, pre-2008, pre-1971, or pre-1913 way to simply resolve all our global issues is a giant myth.  

Tyler Durden
Wed, 03/29/2023 – 10:15

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Pending Home Sales Rebound Slows In Feb As Mortgage Rates Reverse

Pending Home Sales Rebound Slows In Feb As Mortgage Rates Reverse

Despite a big jump in existing home sales (and continued increases in new home sales), pending home sales were expected to drop 3.1% MoM in February (the latest data) after the huge 8.1% surge in January. However, in line with the others, pending home sales beat expectations, rising 0.8% MoM

Source: Bloomberg

That pushed the pending home sales index to its highest since August…

Source: Bloomberg

Signings rose in February in all regions but the West (where the most expensive homes are), while the increase was led by a 6.5% advance in the Northeast.

Of course, so much of this recent resurgence was due to a brief dip in mortgage rates – what happens next…

Source: Bloomberg

The pending home sales report is often seen as a leading indicator of existing home sales given homes typically go under contract a month or two before they’re sold.

“After nearly a year, the housing sector’s contraction is coming to an end,” Lawrence Yun, NAR’s chief economist, said in a statement.

Sadly, Mr. Yun, we think your celebration is premature.

Tyler Durden
Wed, 03/29/2023 – 10:06

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Moving Beyond Banks

Moving Beyond Banks

Authored by Peter Tchir via Academy Securities,

Testimony on the hill yesterday turned financials (XLF and KRE) from positive to negative, dragging broader risk markets with them. Overnight, financials are performing well, along with broader risk markets (CDS indices in Europe are particularly strong).

The good news is that the overdone fear of depositor losses seems to be behind us (even after D.C. did little to help on that front yesterday).

I have some ongoing concerns about deposits from an overall yield standpoint (I Know What You Did Last Summer), but that is a concern, that even if I’m correct will work in slow motion.

The overall question of “unrealized bond market losses” (we can include loans and private debt in the “bond market” for these purposes) in the financial system hasn’t gone away, but many are wondering if it is already priced in? I expect that the “unrealized bond market losses” will play out in three ways:

  • As more in depth research on specific balance sheets is done (probably by distressed analysts, rather than traditional analysts who just don’t seem as focused on picking apart balance sheets), there is a risk that some entities will be flagged as being overexposed to obvious risks.

  • If questions arise about deposit stability (or cost of funds), then these unrealized bond market losses will weigh on the entire sector again, though I would expect the impact to be more and more correlated with institutions identified as having some potential losses of a material size.

  • Pull to par and time help, as does a strong economy. There can be a “healing” process.

The final issue, one that became quite painfully obvious yesterday, is that the industry has to brace for another round of regulatory scrutiny, brought on to the entire industry by a few particularly egregious situations.

Inventories, Shipments and Delinquencies

With so many potential things to look at, today we will just revisit a few that have influenced our outlook for the past year so.

Inventories remain elevated and after some progress, seem to be ticking higher again, which can partly be explained by supply chain resolution, may be better explained by consumer fatigue. We compare total retail inventories with those less autos, just to make sure the automobile industry, which experienced more than its fair share of supply chain issues, isn’t impacting the data disproportionately and it doesn’t seem to be.

A quick look at credit card debt, credit card delinquencies and auto loan delinquencies shows a deteriorating trend (higher debt, higher delinquency frequency), but in most cases still below pre-covid historical averages. Nothing to be overly concerned about today, but the trend is heading the wrong direction for those who are arguing that we can never bet against the American Consumer.

We used 50 day moving averages here (the weekly data is highly volatile and has some serious seasonality (we ramp up pre-holidays, slow down during holidays, etc.). Some of what we are catching in the data may be a typical seasonal effect (though it looks worse than that). It is possible the tragic derailment in East Palestine is affecting the data (I do not have that level of granularity into this data).

For me, it does fit into the “we overordered”, “we have too much inventory” so “we are taking our foot off the gas” narrative that I am using for goods inflation and potential economic impact.

I could look at Baltic Dry Index (which has bounced, but remains in a downtrend) but chose to start trying to figure out what to do with this mess of data from the ports.

For some reason I couldn’t get the moving average data to work, but in 2017 the lows were in February, for the following years, the lows were in March. So there is some seasonality to them, but:

  • That seasonality did not exist last year when the ports remained busy throughout the year (makes me wonder about the China closed vs China re-opening narrative??).

  • If historical data is correct, we should see worse data in March and the chart is now getting to be lower than historical levels and a big drop-off from the average of the past 2 years.

Given how messy this first cut of data is, maybe it isn’t relevant, but, then again, maybe it is telling us that companies are trying to fix the inventory “glut” (my word) by ordering less?

Bottom Line

Remain in a cautious, “risk-off” stance. Positioning doesn’t need to be doom and gloom and trying to time some moves higher and lower makes sense, but I’m erring to side of caution (small short, or small underweight) as laid out in Sunday’s report.

Also, as per Sunday’s “Last Summer” Report, there seem to be more obvious “event risks” to the downside than upside. Yes, that means the market is hedging and preparing for them, but if any of the events materialize (Debt Ceiling, China selling weapons to Russia, etc.) they will still drag markets lower.

The overdone fears of bank deposit safety should be behind us, but now we can all examine the economy again (not liking what I see) and start prepping for earnings which are just around the corner!

Tyler Durden
Wed, 03/29/2023 – 09:45

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The Statistically Flawed Evidence That Social Media Is Causing the Teen Mental Health Crisis


social-media-kids-2

The social psychologist and New York University professor Jonathan Haidt wants journalists to stop being wishy-washy about the teen girl mental health crisis

“There is now a great deal of evidence that social media is a substantial cause, not just a tiny correlate, of depression and anxiety, and therefore of behaviors related to depression and anxiety, including self-harm and suicide,” Haidt wrote recently in his Substack, After Babel, where he’s publishing essays on the topic that will also come out in the form of a book in 2024 tentatively titled, Kids In Space: Why Teen Mental Health is Collapsing

In recent weeks, Haidt’s work has been the subject of significant online discussion, with articles by David Leonhardt, Michelle Goldberg, Noah Smith, Richard Hanania, Eric Levitz, and Matthew Yglesias that mostly endorse his thesis.

 In a recent post, Haidt took journalists, such as The Atlantic‘s Derek Thompson, to task for continuing to maintain that “the academic literature on social media’s harms is complicated” when, in fact, the evidence is overwhelming. 

I admire Haidt’s skill and integrity as a writer and researcher. He qualifies his view and describes complexities in the areas he studies. He acknowledges that teen depression has multiple causes. He doesn’t make unsupported claims, and you’ll never find bland assertions that “studies prove” in his work, which is regrettably common in mainstream accounts. 

And he’s a model of transparency. Haidt posted a Google Doc in February 2019 listing 301 studies (to date) from which he has derived his conclusions, he began inviting “comments from critics and the broader research community.” 

I don’t know Haidt personally and didn’t receive an invitation to scrutinize his research four years ago. But more recently, I decided to do just that. I found that the evidence not only doesn’t support his claim about teen health and mental health, it undermines it. 

Let me start by laying out where I’m coming from as a statistician and longtime skeptical investigator of published research. I’m much less trusting of academic studies and statistical claims than Haidt appears to be. I broadly agree with John Ioannidis of Stanford University’s landmark 2005 paper, “Why Most Published Research Findings Are False.”  

Gathering a few hundred papers to sift through for insight is valuable but should be approached with the assumption that there is more slag than metal in the ore, that you have likely included some egregious fraud, and that most papers are fatally tainted by less-egregious practices like p-hacking, hypothesis shopping, or tossing out inconvenient observations. Simple, prudent consistency checks are essential before even looking at authors’ claims. 

Taking a step back, there are strong reasons to distrust all observational studies looking for social associations. The literature has had many scandals—fabricated data, conscious or unconscious bias, and misrepresented findings. Even top researchers at elite institutions have been guilty of statistical malpractice. Peer review is worse than useless, better at enforcing conventional wisdom and discouraging skepticism than weeding out substandard or fraudulent work.  Academic institutions nearly always close ranks to block investigation rather than help ferret out misconduct. Random samples of papers find high proportions that fail to replicate.  

It’s much easier to dump a handy observational database into a statistics package than to do serious research, and few academics have the skill and drive to produce high-quality publications at the rate required by university hiring and tenure review committees. Even the best researchers have to resort to pushing out lazy studies and repackaging the same research in multiple publications. Bad papers tend to be the most newsworthy and the most policy-relevant.  

Academics face strong career pressures to publish flawed research. And publishing on topics in the news, such as social media and teen mental health, can generate jobs for researchers and their students, like designing depression-avoidance policies for social media companies, testifying in lawsuits, and selling social media therapy services. This causes worthless areas of research to grow with self-reinforcing peer reviews and meta-analyses, suck up grant funds, create jobs, help careers, and make profits for journals. 

The 301 studies that make up Haidt’s informal meta-analysis are typical in this regard. He doesn’t seem to have read them with a sufficiently critical eye. Some have egregious errors. One study he cites, for example, clearly screwed up its data coding, which I’ll elaborate on below. Another study he relies on drew all of its relevant data from study subjects who checked “zero” for everything relevant in a survey. (Serious researchers know to exclude such data because these subjects almost certainly weren’t honestly reporting on their state of mind.) 

Haidt is promoting his findings as if they’re akin to the relationship between smoking cigarettes and lung cancer or lead exposure and IQ deficits. None of the studies he cites draw anything close to such a direct connection. 

What Haidt has done is analogous to what the financial industry did in the lead-up to the 2008 financial crisis, which was to take a bunch of mortgage assets of such bad quality that they were unrateable and package them up into something that Standard & Poor’s and Moody’s Investors Service were willing to give AAA ratings but that was actually capable of blowing up Wall Street. A bad study is like a bad mortgage loan. Packaging them up on the assumption that somehow their defects will cancel each other out is based on flawed logic, and it’s a recipe for drawing fantastically wrong conclusions. 

Haidt’s compendium of research does point to one important finding: Because these studies have failed to produce a single strong effect, social media likely isn’t a major cause of teen depression. A strong result might explain at least 10 percent or 20 percent of the variation in depression rates by difference in social media use, but the cited studies typically claim to explain 1 percent or 2 percent or less. These levels of correlations can always be found even among totally unrelated variables in observational social science studies. Moreover the studies do not find the same or similar correlations, their conclusions are all over the map.

The findings cited by Haidt come from studies that are clearly engineered to find a correlation, which is typical in social science. Academics need publications, so they’ll generally report anything they find even if the honest takeaway would be that there’s no strong relation whatsoever. 

The only strong pattern to emerge in this body of research is that, more often than you would expect by random chance, people who report zero signs of depression also report that they use zero or very little social media. As I’ll explain below, drawing meaningful conclusions from these results is a statistical fallacy.  

Haidt breaks his evidence down into three categories. The first is associational studies of social media use and depression. By Haidt’s count, 58 of these studies support an association and 12 don’t. To his credit, he doesn’t use a “majority rules” argument; he goes through the studies to show the case for association is stronger than the case against it. 

To give a sense of how useless some of these studies are, let’s just take the first on his list that was a direct test of the association of social media use and depression, “Association between Social Media Use and Depression among U.S. Young Adults.” (The studies listed earlier either used other variables—such as total screen time or anxiety—or studied paths rather than associations.) 

The authors emailed surveys to a random sample of U.S. young adults and asked about time spent on social media and how often they had felt helpless, hopeless, worthless, or depressed in the last seven days. (They asked other questions too, worked on the data, and did other analyses. I’m simplifying for the sake of focusing on the logic and to show the fundamental problem with its methodology.) 

The key data are in a table that cross-tabulates time spent on social media with answers to the depression questions. Those classified with “low” depression were the people who reported “never” feeling helpless, hopeless, worthless, or depressed. A mark of “high” depression required reporting at least one “sometimes.” Those classified with “medium” depression reported they felt at least one of the four “rarely” but didn’t qualify as “high” depression.

Social media time of Q1 refers to 30 minutes or less daily on average; Q2 refers to 30–60 minutes; Q3 is 60–120 minutes; and Q4 is more than 120 minutes.  

My table below, derived from the data reported in the paper, is the percentage of people in each cross-tabulation, minus what would be expected by random chance if social media use were unrelated to depression. 

 

The paper found a significant association between social media time and depression scores using two different statistical tests (chi-square and logistic regression). It also used multiple definitions of social media use and controlled for things like age, income, and education.  

But the driver of all these statistical tests is the 2.7 percent in the upper left of the table—more people than expected by chance reported never feeling any signs of depression and using social media for 30 minutes or less per day on average. All the other cells could easily be due to random variation; they show no association between social media use and depression scores. 

A basic rule of any investigation is to study what you care about. We care about people with depression caused by social media use. Studying people who never feel any signs of depression and don’t use social media is obviously pointless. If the authors had found another  2.7 percent of their sample in the cell on the lower right (high social media time and at least sometimes feeling some sign of depression), then the study might have some relevance. But if you exclude non–social media users and people who have never felt any sign of depression from the sample, there’s no remaining evidence of association, neither in this table nor in any of the other analyses the authors performed. 

The statistical fallacy that drives this paper is sometimes called “assuming a normal distribution,” but it’s more general than that. If you assume you know the shape of some distribution—normal or anything else—then studying one part can give you information about other parts. For example, if you assume adult human male height has some specific distribution, then measuring NBA players can help you estimate how many adult men are under 5 feet. But in the absence of a strong theoretical model, you’re better off studying short men instead.

This is sometimes illustrated by the raven paradox. Say you want to test whether all ravens are black, so you stay indoors and look at all the nonblack things you can see and confirm that they aren’t ravens.  

This is obviously foolish, but it’s exactly what the paper did: It looked at non–social media users and found they reported never feeling signs of depression more often than expected by random chance. What we want to know is whether depressed people use more social media or if heavy social media users are more depressed. If that were the finding, we’d have something to investigate, which is the sort of clear, strong result that is missing in this entire literature. We’d still want statistical tests to measure the reliability of the effect, and we’d like to see it replicated independently in different populations using different methodologies, with controls for plausible confounding variables. But without any examples of depressed heavy social media users, statistical analyses and replications are useless window dressing.

The authors’ methodology can be appropriate in some contexts. For example, suppose we were studying blood lead levels and SAT scores in high school seniors. If we found that students with the lowest lead levels had the highest SAT scores, that would provide some evidence that higher lead levels were associated with lower SAT scores, even if high levels of lead were not associated with low SAT scores.  

The difference is that we think lead is a toxin, so each microgram in your blood hurts you. So a zero-lead 1450 SAT score observation is as useful as a high-lead 500 one. But social media use isn’t a toxin. Each tweet you read doesn’t kill two pleasure-receptor brain cells. (Probably not, anyway.) The effects are more complex. And never feeling any signs of depression—or never admitting any signs of depression—may not be healthier than occasionally feeling down. Non–social media users with zero depression signs are different in many ways from depressed heavy users of social media, and studying the former can’t tell you much about the latter. 

The use of statistics in this kind of study can blind people to simple logic. Among the 1,787 people who responded to the authors’ email, there were likely some people who became depressed after extensive social media use without any other obvious causes like neglect, abuse, trauma, drugs, or alcohol. Rather than gathering a few bits of information about all 1,787 (most of whom are irrelevant to the study, either because they’re not depressed or aren’t heavy social media users), it makes sense to learn the full stories of the handful of relevant cases.  

 Statistical analyses require throwing away most of your data to focus on a few variables you can measure across subjects, which allows you to investigate much larger samples. But that tradeoff only makes sense if you know a lot about which variables are important and your expanded sample takes in relevant observations. In this case, statistics are used without a sense of what variables are relevant. So the researchers draw in mostly irrelevant observations. Statistics will be dominated by the 1,780 or so subjects you don’t care about and won’t reflect the seven or so you do. 

The logic is not the only issue with this study. The quality of the data is extremely poor because it comes from self-reports by self-selected respondents.  

All of the 2.7 percent who drove the conclusions checked “never” to all four depression questions. Perhaps they were cheerful optimists, but some of them were probably blowing off the survey as quickly as possible to get the promised $15, in which case the fact that most of them also checked zero social media time doesn’t tell us anything about the link between social media use and depression. Another group may have followed the prudent practice of never admitting anything that could be perceived as negative, even in a supposedly anonymous email survey. And in any event, we cannot make any broad conclusion based on 2.7 percent of people, despite whatever p-value the researchers compute. 

The measures of social media usage are crude and likely inaccurate. Self-reports of time spent or visits don’t tell us about attention, emotional engagement, or thinking about social media when not using it. Checking that you “sometimes” rather than “rarely” feel helpless is only distantly related to how depressed you are. Different people will interpret the question differently and may well answer more based on momentary mood than careful review of feelings over the last seven days, parsing subtle differences between “helpless” and “hopeless.” Was that harlequin hopelessly helping or helplessly hoping? How long you have to think about that is a measure of how clearly your brain distinguishes the two concepts. 

The responses to the depression questions have been linked to actual depression in some other studies, but the links are tenuous, especially in the abbreviated four-question format used for this study. You can use indirect measures if you have strong links. If the top 5 percent of social media users made up 50 percent of the people who reported sometimes feeling depressed, and if 90 percent of the people who reported sometimes feeling depressed—and no others—had serious depression issues, then we could infer the heavy social media users had more than eight times the risk of depression as everyone else.  

But weaker correlations typical of these studies, and also of the links between depression questionnaires and serious clinical issues, can’t support any inference at all. If the top 5 percent of social media users made up 10 percent of the people who reported sometimes feeling depressed, and if 20 percent of the people who reported sometimes feeling depressed had serious clinical issues, it’s possible that all the heavy social media users are in the other 80 percent, and none of them have serious clinical issues. 

This is just one of the 70 association studies Haidt cited, but almost all of them suffer from the issues tabulated above. Not all of these problems were in all of the studies, but none of the 68 had a clear, strong result demonstrating above-normal depression levels of heavy social media users based on reliable data and robust statistical methods. And the results that were reported were all over the map, which is what you would expect from people looking at random noise.  

The best analogy here isn’t art critics all looking at the Mona Lisa and arguing about what her smile implies; it’s critics looking at Jackson Pollock’s random paint smears and arguing about whether they referenced Native American sandpainting or were a symptom of his alcoholism. 

You can’t build a strong case on 66 studies of mostly poor quality. If you want to claim strong evidence for an association between heavy social media use and serious depression, you need to point to at least one strong study which can be analyzed carefully. If it has been replicated independently, so much the better. 

The second set of studies Haidt relied on were longitudinal. Instead of looking at a sample at a single time period, the same people were surveyed multiple times. This is a major improvement over simple observational studies because you can see if social media use increases before depression symptoms emerge, which makes the causal case stronger. 

Once again, I picked the first study on Haidt’s list that tested social media use and depression, which is titled “Association of Screen Time and Depression in Adolescence.” It used four annual questionnaires given in class to 3,826 Montreal students from grades seven to 10. This reduces the self-selection bias of the first study but also reduces privacy, as students may fear others can see their screens or that the school is recording their answers. Another issue is since the participants know each other, they are likely to discuss responses and modify future answers to conform with peers. On top of that, I’m doubtful of the value of self-reported abstractions by middle-school students.  

A minor issue is the data were collected to evaluate a drug-and-alcohol prevention program, which might have impacted both behavior and depression symptoms. 

If Haidt had read this study with the proper skepticism, he might have noticed a red flag right off the bat. The paper has some simple inconsistencies. For example, the time spent on social media was operationalized into four categories: zero to 30 minutes; 30 minutes to one hour and 30 minutes; one hour and 30 minutes to two hours and 30 minutes; and three hours and 30 minutes or more. You’ll notice that there is no category from 2.5 hours to 3.5 hours, which indicates sloppiness.  

The results are also reported per hour of screen time, but you can’t use this categorization for that. That’s because someone moving from the first category to the second might have increased social media time by one second or by as much as 90 minutes.  

These issues don’t discredit the findings. But in my long experience of trying to replicate studies like this one, I’ve found that people who can’t get the simple stuff right are much more likely to be wrong as the analysis gets more complex. The frequency of these sorts of errors in published research also shows how little review there is in peer review.

Depression was measured by asking students to what extent they felt each of seven different symptoms of depression (e.g., feeling lonely, sad, hopeless) from zero (not at all) to four (very much). The key finding of this study in support of Haidt’s case is that if a person increased time spent on social media by one hour per day between two annual surveys, he or she reported an average increase of  0.41 on one of the seven scales. 

Unfortunately, this is not a longitudinal finding. It doesn’t tell us whether the social media increase came before or after the depression change. The proper way to analyze these data for causal effects is to compare one year’s change in social media usage with the next year’s change in depression symptoms. The authors don’t report this, which suggests to me that the results were not statistically significant. After all, the alleged point of the study was to get longitudinal findings. 

Another problem is the small magnitude of the effect. Taken at face value, the result suggests that it takes a 2.5-hour increase in social media time per day to change the response on one of seven questions by one notch. But that’s the difference between a social media non-user and a heavy user. Making that transition within a year suggests some major life changes. If nothing else, something like 40 percent of the student’s free time has been reallocated to social media. Of course, that could be positive or negative, but given how many people answer zero (“not at all”) to all depression symptom questions, the positive effects may be missed when aggregating data. And the effect is very small for such a large life change, and nowhere near the level to be a plausible major cause of the increase in teenage girl depression. Not many people make 2.5-hour-per-day changes in one year, and a single-notch increase on the scale isn’t close to enough to account for the observed population increase in depression. 

Finally, like the associational study above, the statistical results here are driven by low social media users and low depression scorers, when, of course, we care about the significant social media users and the people who have worrisome levels of depression symptoms. 

I looked at several studies in Haidt’s category of longitudinal studies. Most looked at other variables. The study “Social networking and symptoms of depression and anxiety in early adolescence” did measure social media use and depression and found that higher social media use in one year was associated with higher depression symptoms one and two years in the future, although the magnitude was even smaller than in the previous study. And it wasn’t a longitudinal result because the authors did not measure changes in social media use in the same subjects. The fact that heavier social media use today is associated with more depression symptoms next year doesn’t tell us which came first, since heavier social media use today is also associated with more depression symptoms today. 

Of the remaining 27 studies Haidt lists as longitudinal studies supporting his contention, three avoided the major errors of the two above. But those three relied on self-reports of social media usage and indirect measures of depression. All the results were driven by the lightest users and least depressed subjects, and all the results were too small to plausibly blame social media usage for a significant increase in teen female depression. 

Against this, Haidt lists 17 studies he considers to be longitudinal that either find no effect or an effect in the opposite direction of his claim. Only four are true longitudinal studies relating social media use to depression. One, “The longitudinal association between social media use and depressive symptoms among adolescents and young adults,” contradicts Haidt’s claim. It finds depression occurs before social media use and not the other way around. 

 Three studies (“Social media and depression symptoms: A network perspective,” “Does time spent using social media impact mental health?,” and “Does Objectively Measured Social-Media or Smartphone Use Predict Depression, Anxiety, or Social Isolation Among Young Adults?“) find no statistically significant result either way. 

Of course, absence of evidence is not evidence of absence. Possible explanations for a researcher’s failure to confirm social media use caused depression are that social media use doesn’t cause depression or that the researcher didn’t do a good job of looking for it. Perhaps there was insufficient or low-quality data, or perhaps the statistical techniques failed to find the association.  

To evaluate the weight of these studies, you need to consider the reputations of the researchers. If no result can be found by a top person who has produced consistently reliable work finding nonobvious useful truths, it’s a meaningful blow against the hypothesis. But if a random person of no reputation fails, there’s little reason to change your views either way. 

Looking over this work, it’s clear that there’s no robust causal link between social media use and depression anywhere near large enough to claim that it’s a major cause of the depression increase in teen girls, and I don’t understand how Haidt could have possibly concluded otherwise. There’s some evidence that the lightest social media users are more likely to report zero versus mild depression symptoms but no evidence that heavy social media users are more likely to progress from moderate to severe symptoms. And there are not enough strong studies to make even this claim solid. 

Moving on to Haidt’s third category of experimental studies, the first one he lists is “No More FOMO: Limiting Social Media Decreases Loneliness and Depression.” It found that limiting social media time to 10 minutes per day among college students for three weeks caused clinically significant declines in depression. Before even looking at the study, we know that the claim is absurd.  

You might feel better after three weeks of reduced social media usage, but it can’t have a major effect on the psychological health of functional individuals. The claim suggests strongly that the measure of clinical depression is a snapshot of mood or some other ephemeral quality. Yet the authors are not shy about writing in their abstract, “Our findings strongly suggest that limiting social media use to approximately 30 minutes per day may lead to significant improvement in well-being”—presumably limits from the government or universities. 

This study is based on 143 undergraduates participating for psychology course credits. This type of data is as low quality as the random email surveys used in the first study cited. The subjects are generally familiar with the type of study and may know or guess its purposes—in some cases they may have even discussed ongoing results in class. They likely communicated with each other.  

Data security is usually poor, or believed to be poor, with dozens of faculty members, student assistants, and others having access to the raw data. Often papers are left around and files on insecure servers, and the research is all conducted within a fairly narrow community. As a result, prudent students avoid unusual disclosures. Subjects usually have a wide choice of studies, leading to self-selection. In particular, this study will naturally exclude people who find social media important—that is, the group of greatest concern—as they will be unwilling to limit social media for three weeks. Moreover, undergraduate psychology students at an elite university are hardly a representative sample of the population the authors wish to regulate. 

Another problem with these types of studies is they are usually data-mined for any statistically significant finding. If you run 100 different tests at the 5 percent level of significance, you expect to find five erroneous conclusions. This study described seven tests (but there’s a red flag that many more were performed. Few researchers will go through the trouble of collecting data for a year and fail to get some publications out of it, and it’s never a good idea to report to a granting institution that you have nothing to show for the money. 

This particular study had poor control. Students who limited social media time were compared to students with no limits. But imposed limits that severely restrict any activity are likely to have effects. A better control group would be students limited to ten minutes daily of television, or video games, or playing music while alone. Having an additional control with no restrictions would be valuable to separate the effect of restrictions versus the effect of the specific activity restricted. Another problem is researchers could only measure specific social media sites on the subject’s personal iPhone, not activity at other sites or on tablets, laptops, computers, or borrowed devices. 

The red flag mentioned above is that the subjects with high depression scores were assigned to one of the groups—experimental (restricted social media) or control (no restrictions)—at a rate inconsistent with random chance. The authors don’t say which group got the depressed students.  

In my experience, this is almost always the effect of a coding error. It happens only with laundry list studies. If you were only studying depression, you’d notice if all your depressed subjects were getting assigned to the control group or all to the experimental group. But if you’re studying lots of things, it’s easier to overlook one problematic variable. That’s why it’s a red flag when the researchers are testing lots of unreported hypotheses. 

Further evidence of a coding error is that the reported depression scores of subjects who were assigned to abstain from Facebook promptly reverted in one week. This was the only significant one-week change anywhere in the study. That’s as implausible as thinking the original assignment was random. My guess is that the initial assignment was fine, but a bunch of students in either control or experimental group got their initial depression scores inflated due to some kind of error.   

I’ll even hazard a guess as to what it was. Depression was supposed to be measured on 21 scales ranging from zero to 3, which are then summed up. A very common error on these Likert scales is to code those scales instead as 1 to 4. Thus someone who reported no signs of depression should have been a zero but gets coded as a 21, which is a fairly high score. If this happened to a batch of subjects in either the control or experimental group, it explains all the data better than the double implausibility of a defective random number generator (but only for this one variable) and a dramatic change in psychological health after a week of social media restriction (but only for the misassigned students). Another common error is to select for control or experimental accidentally using the depression score instead of the random variable. Since this was a rolling study, it’s plausible that the error was made for a period and then corrected. 

The final piece of evidence against a legitimate result is that assignment to the control or experimental group had a stronger statistical association with depression score before assignment—which it cannot possibly affect—than with reduction in depression over the test—which is what researchers are trying to estimate.The evidence for the authors’ claimed effect—that restricting social media time reduces depression—is weaker than the evidence from the same data for something we know is false—that depression affects future runs of a random number generator. If your methodology can prove false things it can’t be reliable.

Speculations about errors aside, the apparent nonrandom assignment means you can’t take this study seriously, whatever the cause. The authors do disclose the defect, although only in the body of the paper—not in the abstract, conclusion, or limitations sections—and only in jargon: “There was a significant interaction between condition and baseline depression, F(1, 111) = 5.188, p <.05.”  

They follow immediately with the euphemistic, “To help with interpretation of the interaction effect, we split the sample into high and low baseline depression.” In plain English, that means roughly: “To disguise the fact that our experimental and control groups started with large differences in average depression, we split each group into two and matched levels of depression.”

Taking a One-Week Break from Social Media Improves Well-Being, Depression, and Anxiety: A Randomized Controlled Trial” was an experiment in name only. Half of a sample of 154 adults (aged 18 to 74) were asked to stop using social media for a week, but there was no monitoring of actual usage. Any change in answering questions about depression was an effect of mood rather than psychological health. The effect on adult mood of being asked to stop using social media for a week tells us nothing about whether social media is bad for the mental health of teenage girls. 

None of the remaining experiments measured social media usage and depression. Some of the observational, longitudinal, or experimental studies I ignored because they didn’t directly address social media use and depression might have been suggestive ancillary evidence. If Facebook usage or broadband internet access were associated with depression, or if social media use were associated with life dissatisfaction, that would be some indirect evidence that social media use might have a role in teenage girl depression. I have no reason to think these indirect studies were better than the direct ones, but they could be. 

If there were a real causal link large enough to explain the increase in teenage girl depression, the direct studies would have produced some signs of it. The details might be murky and conflicting, but there would be some strong statistical results and some common findings of multiple studies using different samples and methodologies. Even if there’s lots of solid indirect evidence, the failure to find any good direct evidence is a reason to doubt the claim. 

What would it take to provide convincing evidence that social media is responsible for the rise in teenage girl depression? You have to start with a reasonable hypothesis. An example might be, “Toxic social media engagement (TSME) is a major causal factor in teenage girl depression.” Of course TSME is hard to measure, or even define. Haidt discusses how it might not even result from an individual using social media, the social media could create a social atmosphere that isolates or traumatizes some non-users.

But any reasonable theory would acknowledge that social media could also have positive psychological effects for some people. Thus it’s not enough to estimate the relation between TSME and depression, we want to know the full range of psychological effects of social media–good and bad. Studying only the bad is a prohibitionist mindset. It leads to proposals to restrict everyone from social media, rather than teasing out who benefits from it and who is harmed.

TSME might—or might not—be correlated with the kinds of things measured in these studies, such as time spent on social media, time spent looking at screens, access to high-speed Internet. The correlation might–or might not–be causal. But we know for sure that self-reported social media screen time cannot cause responses to how often an individual feels sad. So any causal link between TSME and depression cannot run through the measures used in these studies. And given the tenuous relations between the measures used in the studies, they tell us nothing about the link we care about, between TSME and depression.

A strong study would have to include clinically depressed teenage girls who were heavy social media users before they manifested depression symptoms and don’t have other obvious depression causes. You can’t address this question by looking at self-selected non–social media users who aren’t depressed. It would need meaningful measures of TSME, not self-reports of screen time.

The study would also have to have 30 relevant subjects. With fewer, you’d do better to consider each one’s story individually, and I don’t trust statistical estimates without at least 30 relevant observations.  

There are two ways to get 30 subjects. One is to start with one of the huge public health databases with hundreds of thousands of records. But the problem there is that none have the social media detail you need. Perhaps that will change in the next few years.  

The other is to identify relevant subjects directly, and then match them to nondepressed subjects of similar age, sex, and other relevant measures. This is expensive and time-consuming, but it’s the type of work that psychologists should be doing. This kind of study can produce all sorts of valuable collateral insights you don’t get by pointing your canned statistical package to some data you downloaded or created in a toy investigation.

This is illustrated by the story told in Statistics 101 about a guy who dropped his keys on a dark corner, but is looking for them down the block under a street light because the light is better there. We care about teenage girls depressed as a result of social media, but it’s a lot easier to study the college kids in your psychology class or random responders to internet surveys.

Most of the studies cited by Haidt express their conclusions in odds ratios—the chance that a heavy social media user is depressed divided by the chance that a nonuser is depressed. I don’t trust any area of research where the odds ratios are below 3. That’s where you can’t identify a statistically meaningful subset of subjects with three times the risk of otherwise similar subjects who differ only in social media use. I don’t care about the statistical significance you find; I want clear evidence of a 3–1 effect. 

That doesn’t mean I only believe in 3–1 or greater effects. If you can show any 3–1 effect, then I’m prepared to consider lower odds ratios. If teenage girls with heavy social media use are three times as likely to be in the experimental group for depression 12 months later than otherwise similar teenage girls that don’t use social media, then I’m prepared to look at evidence that light social media use has a 1.2 odds ratio, or that the odds ratio for suicide attempts is 1.4. But without a 3–1 odds ratio as a foundation, it’s my experience that looking at any random data can produce plenty of lesser odds ratios, which seldom stand up. 

Haidt is a rigorous and honest researcher, but I fear that on this issue he’s been captured by a public health mindset. Rather than thinking of free individuals making choices, he’s looking for toxins that affect fungible people measured in aggregate numbers. That leads to blaming social problems on bad things rather than looking for the reasons people tend to use those things, with their positive and negative consequences. 

It is plausible that social media is a significant factor in the mental health of young people, but almost certainly in complex ways. The fact that both social media and depression among teenage girls began increasing about the same time is a good reason to investigate for causal links. It’s obviously good for social media companies to study usage patterns that predict future troubles and for depression researchers to look for commonalities in case histories. A few of the better studies on Haidt’s list might provide useful suggestions for these efforts. 

But Haidt is making a case based on simplifications and shortcuts of the sort that usually lead to error. They treat individuals as faceless aggregations which obscures the detail necessary to link complex phenomena like social media use and depression. The studies he cites are cheap and easy to produce, done by researchers who need publications. Where the data used are public or disclosed by the researchers, I can usually replicate them in under an hour. The underlying data was generally chosen for convenience—already compiled for other reasons or studying handy people rather than relevant ones—and the statistical analyses were cookbook recipes rather than thoughtful data analyses. 

The observation that most published research findings are false is not a reason to ignore academic literature. Rather, it means you should start by finding at least one really good study with a clear strong result and focus precisely on what you care about. Often, weaker studies that accumulate around that study can provide useful elaboration and confirmation. But weak studies and murky results with more noise than signal can’t be assembled into convincing cases. It’s like trying to build a house out of plaster with no wood or metal framing.

It’s only the clarity of his thought and his openness that makes Haidt vulnerable to this critique. Many experts only reference the support for their claims in general terms, or provide lists of references in alphabetical order by author instead of the logical arrangements Haidt provides. That allows them to dismiss criticisms of individual studies as cherry-picking by the critic. Another popular tactic is to couch unjustified assumptions in impenetrable jargon, and to obscure the underlying logic of claims.

On the other hand, I think I am delivering a positive message. It’s good news that something as popular and cherished as social media is not clearly indicted as a destroyer of mental health. I have no doubt that it’s bad for some people, but to find out more we have to identify those people and talk to them. We need to empower them and let them describe their problems from their own perspectives. We don’t have to restrict social media for everyone based on statistical aggregations.

The post The Statistically Flawed Evidence That Social Media Is Causing the Teen Mental Health Crisis appeared first on Reason.com.

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