Author: admin

Authored by Michael Every of Rabobank

Yesterday saw the US comprehensively beat China. Not in any sporting sense, and certainly not in any dimension of the current Cold War: and for those who still like to think the latter isn’t happening, just listen to what US Attorney General Barr said yesterday. He attacked China for “economic blitzkrieg – an aggressive, orchestrated, whole-of-government (indeed, whole-of-society) campaign to seize the commanding heights of the global economy and to surpass the United States as the world’s pre-eminent superpower.” He also called out Hollywood and US firms for kowtowing to Beijing, alleging corporate officials “display hammer-and-sickle insignia at their desks and attend party lectures during business hours,” before concluding “If Disney and other American corporations continue to bow to Beijing, they risk undermining both their own future competitiveness and prosperity, as well as the classical liberal order that has allowed them to thrive.”

So just where did the US win? In the field that matters most to markets, in fact the only thing that matters to markets – spending. While Chinese retail sales for June fell 1.8% y/y, US retail sales leaped 7.5% m/m vs. 5.0% expected. Yes, it’s apples and oranges, and the US are still down marginally y/y, but considering the States are at least a quarter behind China in the recovery process, it’s a genuinely dynamic retail rebound. USA! USA! USA!

So what is driving this latest round of the US consumer miracle? The $600 a week in special virus-related unemployment benefits. In many instances this is worth more than people’s pre-crisis salary.

The problem here is that these benefits run out at the end of July, and there is as yet no sign whatsoever that they will be extended. Indeed, key Republicans are making noises that doing so would be dangerous. Certainly, it would be in a laissez-faire sense. Then again, in the face of a war against a virus, so is laissez-faire – which is why nobody ever adopts it during wartime. Indeed, the larger message here is desperately simple, and perhaps just desperate.

We seem to think we live in an ‘economic puzzle’: Central banks have failed to hit their inflation targets, and keep introducing more and more distorting measures that also don’t work; governments are spending vastly more only because of the virus, but clearly through gritted teeth, and with the threat of new austerity as soon as possible; and market experts either bewail that nothing works, or call for more to be done, and preferably before Western society falls apart. Yet the US retail data show that if you want a strong, domestic-led upturn all you need to do is put more money in the pockets of poorer people – and they will spend most of it ASAP.

Imagine if the low-income workers to whom a $600 a week income was a major pay rise had actually got that pay rise endogenously, or if government benefits in kind, like health or childcare, provided the same real income lift. Imagine how strong the US –or any—economic recovery would be. (Once we can all shop safely, of course.)

Naturally, this isn’t going to happen. Not in the US, and not anywhere else. Why? Because, as has been pointed out here for many years, once you begin there –with what works— and work backwards, you have to unravel too many ‘untouchable’ threads:

• You can’t raise pay because of cheaper import competition? So impose tariffs.
• You can’t raise pay because of weak labor power? Make the government tip the balance away from capital and back towards labor.
• You can’t raise pay because then inflation will go up and we have too much debt to service? So use financial repression and impose negative real income on investors for once, not on workers.

So looking at that, isn’t it easier to pretend our economic system works and just blow an endless stream of asset bubbles that repeat like the worst kind of Hollywood movie series (The Fast and the Furious Markets)? If so, one would expect to see rates lower forever as a result: and guess what – the US 30-year mortgage is below 3% for the first time ever. If only more people had the money to buy them. Not that this is solely a US issue. China can more than match it in a head-to-head over property obsession – but is again slipping when it comes to a smooth equity bull run: it’s always too much too soon and then a very nasty hangover in that asset space, it seems.

Back to the Cold War, however, because we can’t avoid it even if we wanted to. Mr Barr needs to understand that all markets, even for movies, are about spending. That is why Hollywood aims at a Chinese, not just US, audience, with all the consequent self-censorship and/or altering of posters. If the US Attorney General wants to see different US movies made then the framework in which movie money can be made must change – otherwise things won’t. (An argument being in a parallel manner by various social justice movements, of course.) If US audiences had the cash to see movies more often (or at all, given the virus), that might help swing things.

Or, looking outside Hollywood, if one can’t add money on one side of the balance sheet, perhaps one needs to subtract it on the other: that is happening in trade and tech already via tariffs and bans, first on Huawei and ZTE, and now possibly the Chinese app TikTok. Yet are we really going to see a law banning US cultural exports to certain markets? (“No Star Wars for you”?) That seems a stretch!

Meanwhile, the Cold War is still mainly a US, or ‘Five Eyes’, phenomenon. By contrast, Germany’s highest level officials continue to talk about “Wandel durch Handel” (“Change through trade”) when it comes to China. Which is convenient when you are a massive mercantilist net exporter who also does not want to pay poorer people more but wants to sell the excess production you consequently end up with. The US, for its part, is asking Germany, like Hollywood, which way that change through trade flows – and does not like what it sees in either. And “No Star Wars for you” has much more of a real-life connotation for Europe under a US defence umbrella.

But that’s a tale for the sequel, not this episode.

Is this Canada’s first “mask murder”?

Those who keep up with coronavirus-related news in the US probably remember an incident that transpired a few months ago where a security guard at a Family Dollar store in Michigan was shot and killed after asking a customer to put on a mask. But a similar incident that occurred more than a month later, where police shot and killed a man after he refused to wear his mask, got much less attention outside of the local press.

Well, this week, Canada one of its first samples of mask-related violence when police shot and killed a man in Ontario after he refused to put on a mask.

According to the CBC, Ontario’s police watchdog unit is investigating an incident where two officers shot and killed a 73-year-old man in Haliburton County on Wednesday morning. Right before the killing, the man had refused to wear a mask and allegedly assaulted a grocery store employee before driving off, according to a statement from the Ontario police that leaves out most of the details about how the shooting transpired.

Initially, police were called to a Valu-Mart in Minden, Ontario, just after 8am local time, according to OPP Sgt. Jason Folz, who spoke with the CBC.

When the suspect left the scene after officers arrived, police refrained from trying to stop him after he drove off “in the interest of public safety”. Instead, they took down his license plate, and showed up at his house later.

Two officers later visited the man at his home in Minden on Indian Point Road, the SIU said.

Outside the home, an unspecified “interaction” ensued, and two police officers fired their guns at the man. The Ontario Police SIU (the unit that handles press) said that after the shooting, the officers called in “additional resources”, which were brought to the area near Eagle Lake, by the village of Haliburton.

The shooting victim was taken to a nearby hospital, where he was pronounced dead a couple of hours later. Officers recovered a pistol and a semi-automatic rifle from the scene, but it’s not clear whether the man had brandished them at the police, or whether he was unarmed during the encounter.

As of Friday, investigators have thoroughly searched the scene, and an autopsy report is expected (though the findings aren’t really in doubt).

But if the man attacked the officers first, why didn’t they just say that?

Police are currently investigating a serious criminal matter near the Village of #Haliburton. Currently there is no concerns for public safety. Please remain away from Indian Point Road near Eagle Lake until police complete this investigation. ^jf pic.twitter.com/ecncyluG1W

— OPP Central Region (@OPP_CR) July 15, 2020

While the authorities were – for whatever reason – reluctant to share a complete account of the incident with the press (presumably, their story will be routed through legal before being dished out to trusted reporters), a woman who works at the Valu-Mart spoke with the CBC, and apparently filled them in.

Tianna Frances, a worker at the Valu-Mart in Minden, said she arrived for her shift at the grocery store shortly after the incident. When she arrived, all her coworkers, and even the customers, were talking about what had just occurred.

“When I got here everyone was talking about it,” Frances said. “My coworkers were a little bit shaken up, yes.”

Frances was told that the man didn’t want to wear a mask and she and other employees had to explain politely to other customers that an incident had happened earlier when they asked why the police were there.

“I guess he just got angry and didn’t want to. We couldn’t really deal with that ourselves because it’s really against the rules. So we had to call the police and everything,” Frances said.

Frances added that workers at her store shouldn’t have to enforce the mandatory mask policy issued by the local health district. It adds too much responsibility to jobs where workers are already stretched pretty thin. The policy only just took effect this week.

“It’s causing chaos,” she said. “If we didn’t have to force him and … tell him that he couldn’t come into the store, nothing would have happened, really. He would have got his groceries and went along with his day.”

Authored by Jonathan Turley,

The Seattle City Council is facing something of a dilemma in its popular pledge of the Seattle City Council to cut the police budget by 50 percent. To do so would require firing a significant number of police officers, which is also popular. The problem is that the firing would be done by seniority and many of the less senior officers are black. 

The solution according to City Council member Lisa Herbold is simple: fire officers based on their race.  

While that would be the definition of racial discrimination, Herbold clearly believes that it is discrimination for a good cause. The federal courts are likely to disagree.  Most notably, Herbold’s call for racial discrimination against white officers would seek to undue the work of Justice Thurgood Marshall who insisted that racial discrimination unlawful and evil regardless of the race you want to disenfranchise or discriminate against.

Seattle Police Chief Carmen Best released a video calling the plan of Herbold and others “completely reckless.” She also sent a letter to Mayor Jenny Durkan warning that dramatic cuts would require the layoff of hundreds of officers. The Police Department also warned that the firings would include many minority officers.

The Department has made a conscious effort to hire employees, both sworn and civilian, who represent the diversity and values within our community. 3/4

— Seattle Police Dept. (@SeattlePD) July 10, 2020

It was only the last risk that concerned Herbold who promptly suggested discriminating on the basis of race:

In the case layoffs are necessary, one threat is firing BIPOC officers first. Chief can request the Public Safety Civil Service Commission ED for permission to lay off “out of order” when doing so is in “the interest of efficient operations of his or her department.”

— Lisa Herbold (@Lisa_Herbold) July 13, 2020

Herbold insists that this would be perfectly legal despite the prohibitions under Title VII of the Civil Rights Act of 1964.

The EEOC amplifies this point on its website: “It is unlawful to discriminate against any employee or applicant for employment because of race or color in regard to hiring, termination, promotion, compensation, job training, or any other term, condition, or privilege of employment.”

In taking this position, Herbold is opposing one of the best known opinions by Thurgood Marshall. In McDonald v. Santa Fe Trail Transportation Co. (1976), Justice Thurgood Marshall wrote opinions that called for the broad interpretation of Title VII to protect everyone. In McDonald, two white employees were fired after a theft in the business.  The two white employees were held jointly and severally liable with a black employee. However, only the white employees were fired.  After they sued under Title VII, Marshall wrote for the majority in denouncing such discrimination against white employees, insisted that “racial discrimination in private employment against whites [must be] on the same terms as racial discrimination against nonwhites.”  He denounced “the illogic in retaining guilty employees of one color while discharging those of another color.”

This of course would be even more egregious since Herbold wants to fire white officers due to their race alone.  They would not be accused of any wrongdoing or failure.  The problem is their race.

It is notable that is not an action that is part of or in furtherance of a valid affirmative action plans ordered by a court or approved by a federal agency. See United Steelworkers of America v. Weber (1979) and Johnson v. Transportation Agency (1987). In Ricci v. DeStefano (2009), the Supreme Court ruled against the city of New Haven after a group of white firefighters and a hispanic firefighter challenged the refusal to certify the results of promotion exams in order to promote black firefighters who performed less well.  The Court held that the City’s refusal to certify the test was unlawful discrimination under Title VII. If found that “race-based action like the City’s in this case is impermissible under Title VII unless the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under the disparate-impact statute.”

Herbold would not only refuse to promote on the basis of race but would fire officers on that basis.  No test. Just a pure racially discriminatory program of terminations.  Parents Involved in Community Schools v. Seattle School District No. 1 (2007), Chief Justice John Roberts once declared “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”  That is clearly not the plan of Herbold and any of her colleagues who want to fire officers based on their race.

After May’s big rebound in both starts and permits, June was expected to show further ‘recovery’ in the US housing market (with starts surging far more than permits) as mortgage rates plunged to record lows.

And while both Housing Starts (+17.3% MoM) and Building Permits (+2.1% MoM), rose notably, they both missed expectations by a mile (+22.2% and +6.3% respectively), though revisions impacted that spread notably.

Source: Bloomberg

The “V”-shaped recovery is already stalling out…

Source: Bloomberg

One of the big drivers of this disappointment was the clear evidence of an exodus from city-living or rentals – Single-Family Home permits were up 11.8%, Multi-family permits down 14.0%…

On the Housing starts side (less forward-looking than permits), single-family units rose 17.2% and multi-family rose 18.6%…

…as the northeast exploded 111.8% from 49K SAAR to 105K (with Single-family starts in the northeast jumping the most since 1990!)…

And Starts remain lower year-over-year…

And all this as homebuilder sentiment surges back towards record highs.