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Guggenheim’s Minerd: “Zombie Companies” Will Be Crushed By Rising Libor

Guggenheim’s Scott Minerd became the latest respected investor to declare that the widening Libor-OIS spread (which we’ve been pointing to for the past month) is the most overlooked trend in markets right now.

In his interview outlining his bearish view on markets, Minerd explained how US corporations that embarked on a debt binge during the ZIRP era are headed for a rude awakening as interest rates rise.

And the canary in the coal mine, so to speak, will be the rising Libor rate. As it continues to climb, companies could soon start experiencing difficulties in borrowing money and servicing debt.

“The thing I’m concerned about is this rise in Libor and the repricing of bank loans. If my view of the world is right, a year from now we’re going to have interest rates up 100 basis points and Libor somewhere around 3.5% or 3.25%. And believe it or not that would begin to soak up a lot of the free cash flow for below investment grade companies,” he said.

“There are a lot of companies that are zombie companies that survived the last cycle,” he said. “We just saw iHeart – any number of comapnies. As these companies have their debt repriced by the market with rates going up, it’s going to be harder and harder (for them) to stay alive.”

Adding to the stress on highly levered firms, Minerd explained, would be the Trump tax reform plan, which limits companies’ ability to deduct their interest costs.

Circling back to the flattening yield curve, Minerd explained that the Fed’s insistence on hiking will send short-term rates on a crash course with long-term rates, which are anchored.

“The 10-year note is already 3% as we’re sitting here so there’s not a lot of room for the long end to move up.

Guggenheim is, Minerd said, is “moving away” from high-yield debt and bank loans – just as the credit risk for some of the world’s largest banks is flashing red. The Libor-OIS spread has risen to its widest level in nine years this week, rising to 54.6 bps or the most since May 2009 after 3M USD Libor rose for the 30th consecutive day from 2.2225% to 2.2481%.

IOS

And as we pointed out earlier, the stress in money markets in the US, UK and Europe is rippling across the globe…

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Facebook, Uber, And The End Of The Great American Tech Delusion

Authored by SPENGLER via The Asia Times,

We’ve been there before, in the crash of the dot-com bubble of 2000, when we believed that downloading pop music and porn would drive the economy of the future.

We’ve done it again: We made another tech bubble on the premise that Americans would write the apps and Asians would make the hardware, and the miracle of connectivity would bring the world together in Mark Zuckerberg’s utopian vision. Internet community and Artificial Intelligence were the two blasts of hot air that inflated the bubble. Social media as a substitute for actual human interaction and computation as a substitute for human thought were going to waft us into the future.

This week’s double crash of these delusions was the sort of irony that makes one intimate the hand of God in human history.

The crown jewel of Artificial Intelligence shattered when Uber’s autonomous SUV ran over Ms. Elaine Herzberg at the corner of Curry and Mill Street in Tempe, Arizona. And the concept of Internet community vaporized when news reports alleged that Cambridge Analytica improperly retained Facebook profiles of 50 million users. Facebook promptly lost 7% of its stock market value in yesterday’s trading, and other big tech names fell by 3% to 4%.

All the hype in the world can’t stand up to the ugly fact of a dead human body on the road. A few skeptics, including the distinguished physicist and venture capitalist Dr. Henry Kressel, have warned that AI in general and self-driving cars, in particular, are mainly hype. As Kressel wrote last year in Asia Times:

In a well-controlled environment (like driving on a track), the computer can be expected to respond to situations consistent with programmed information. The problematic situations are the accidental ones when something happens on the track that requires a quick response different from the programmed actions. This is where the awareness and quick response of a human driver come into play and where the response of a computer making the decisions is quite another matter. And this is the skill that differentiates race-car drivers from the rest of us – and computers from all of us.

A glance at the intersection where Uber’s vehicle killed Ms. Herzberg tells the whole story. It is one of those massive, amorphous, ill-designed and opaque suburban crossings that human drivers traverse in fear of their lives. One makes eye contact with other drivers and pedestrians, taps the breaks, and proceeds with extreme caution. To ask a computer to navigate through this sort of mess is foolish. We do not know the precise circumstances of Ms. Herzberg’s death; we only are surprised that it did not happen before. If that seems complex, try fighting the yellow cabs in Manhattan with a self-driving car.

Self-driving vehicle tests are now suspended, which will collapse valuations across a range of Silicon Valley enterprises. But that is minor compared to the blow to the public’s perception of the future of AI technology.

The Information, a consulting organization that showcases industry specialists, recently held a conference call on self-driving where one expert warned: “You have to remember that self-driving does not work, at least in… a highly functional, driverless robotaxi sense. It does not work. And there are many folks clamoring for architectures to get there. Again, think back to flight. Do you ever watch those YouTube videos where the guy pumping the umbrella and the dude with a big corkscrew and the person with the bird wings? I would think of it more that way. It is left to be seen which one of those architectures gets you to a useful outcome.”

America simply doesn’t have the infrastructure to support autonomous vehicles, the expert added. China is another matter, he added:

If you’ve been to China… over the last couple of years and watched it grow, they are literally building new cities all of the time and then they move populations into them. And these cities frequently have infrastructure that is unheard of in the US. Just as an example, fences that keep people off the roads. Someone who jumped the fence and runs out into the road and gets hit by a car – that’s the pedestrian’s fault. Simple things like that make the self-driving problem several orders of magnitude easier [emphasis added]. So even without looking at their “technology pool,” just their ability to do simple things like that I think really makes China a very, very attractive target for developing autonomy. I think it would be foolish to count them out in any way, shape or form. The China market may end up being something that is very big and profitable for the companies that are there.

The last tech bubble was based on entertainment, as I wrote in my maiden column for this website’s predecessor, Asia Times Online, in January 2000:

What if [the Internet stock boom] isn’t a bubble? What if consumers want to double or quadruple their spending on whatever it is the Internet has to offer every year for the next 20 years? What if they will pay a premium to watch their favorite episode of Pee-Wee Herman or the Lone Ranger rather than the latest sit-com? What if they will spend heavily to explore the cutting edge of anatomical possibility on the porn sites?

Americans woke up one day in early 2000 and realized that salacious entertainment could not support equity market valuations indefinitely. Now Americans have discovered that cars won’t drive themselves like magic and that the Facebook fishbowl is not a substitute for ordinary human interaction, but rather a vast commercial experiment in profiling their behavior.

Only a handful of Facebook users will delete their accounts and cancel their broadband connections, to be sure, but the bloom is off the lily: The Internet giant no longer can sell the concept of community, and it is not clear what it will sell except the sort of connectivity that is provided by any number of competitors.

The idea that Americans would be the designers and Asians would be the manufacturing worker-bees had an obvious and fatal flaw. At some point, the advancement of the technology requires real physical infrastructure, and research and development will come to grief without a working partnership with the factory floor. Without the sort of physical infrastructure that China is building into its new cities, computation can’t solve all the problems that arise in intersections like the corner of Mill Avenue and Curry St. in Tempe, Arizona.

Infrastructure, R&D budgets, and technological innovation by themselves don’t explain major economic transformations, however. More important than all of these put together, Prof. Edmund Phelps argued in his 2013 book Mass Flourishing (which I reviewed for Standpoint magazine). The people of China have leapt from traditional life into the modern world, and their entire life experience is a sequence of innovations. They are far more eager than Americans or Europeans to adopt new technologies because they never made a habit of old ones. For example, E-commerce now accounts for 30% of retail sales in China, but less than 10% of retail sales in the United States.

China’s alternative to Facebook behind the Great Firewall is Wechat, Tencent’s premier product. Unlike Facebook users, who feel violated when they learn that their personal data was appropriated by big data firms, Chinese social media users have no expectation of privacy. The issue simply doesn’t arise: Everything that one does in China is subject to examination by the state.

America’s tech stocks won’t blow up in the fashion of early 2000 when the tech sector traded at 60 times forward earnings vs. about 16 times today. Unlike the era of maximized burn rates, they are monopolies with stable profits. But the tarnished tech sector won’t drive stock market valuations the way it did during the past five years. It isn’t clear what will.

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9 Ridiculous Things About the Omnibus Budget Bill

Less than 24 hours after the 2,300-page bill was made public, the U.S. House of Representatives, by a vote of 256 to 167, approved a $1.3 trillion spending package that funds the federal government through the end of the fiscal year on September 30.

The omnibus bill still has to clear the Senate, where a vote could happen sometime Thursday night or Friday. In what is surely not a comprehensive list, here are nine ridiculous things about the catch-all spending measure.

The Amount of Spending

Not too long ago, Republicans in Congress—led by the current speaker of the House, Paul Ryan (R-Wis.)—were so concerned about limiting the growth of government that they imposed caps on federal spending. Now? Not so much.

According to an analysis by the nonpartisan Committee for a Responsible Federal Budget, the omnibus bill spends $143 billion more than would have been allowed under the sequester-era caps and $52 billion more than the ceiling set by the Budget Control Act of 2011. The spending increases are bipartisan, with Republicans getting additional funding for the military in return for spending more on domestic programs favored by Democrats.

The bill is a fiscal embarrassment in just about every way imaginable. Unemployment is low, the economy is humming along, and we are only a few months removed from the passage of a tax reform bill that will reduce future government revenues. Spending more money—lots more money—makes no sense.

More Toys for the Pentagon

The beginning stages of the first-ever audit of the Defense Department have already uncovered $800 million that simply vanished from the Pentagon’s Defense Logistics Agency, and there is surely more waste to be found inside the world’s biggest military budget. But that’s not going to stop Congress from throwing an additional $144 billion at the Pentagon for the purchase of new equipment.

The new military spending includes the purchase of an additional 143 military aircraft. “That’s great news for major defense primes like Lockheed Martin and Boeing, both of which stand to make billions more from the additional sales,” reports Defense News.

Killer Bridges

The pedestrian bridge on the campus of Florida International University that collapsed two weeks ago, killing six people, was funded in part by an $11.4 million grant from the Department of Transportation’s TIGER (Transportation Investments Generating Economic Recovery) program. The omnibus budget bill will triple funding for that program, because apparently the Pentagon isn’t the only federal department where racking up a body count is rewarded rather than punished.

Even when it’s not helping fund collapsing bridges, TIGER is a mess, awarding grants that subsidize city officials’ bad decisions. Consider Atlanta, where a streetcar project got $47 million in TIGER grants in 2010 (the most of any project that year) but ended up costing three times as much as expected while creating about a quarter of the promised jobs.

The Government Accountability Office found that TIGER projects often violated internal controls meant to prevent projects from being used as political patronage. Funding was often doled out to proposals that were rated as inferior to other contenders or that came in after deadlines. The Department of Transportation’s chief economist referred to most of the cost-benefit analysis conducted by grant applicants as “pretty bad,” as Reason’s Christian Britschgi has detailed. Nothing says accountability for past mistakes like a 200 percent raise.

The Border Wall

President Donald Trump wanted to spend $23 billion on a border wall between the United States and Mexico, but Congress agreed to allocate just $1.6 billion this year, with some of the funding earmarked for enhanced barricades near San Diego and along the Rio Grande River. A good chunk of the rest will be spent on planning, design, and technology. In other words, it’s spending that will be used to justify more spending on Trump’s signature immigration policy.

We’ve been over this before. The Wall Won’t Work. But it seems we’re going to pay for it anyway.

National Science Foundation

If there were ever an easy target for spending cuts, it’s the National Science Foundation. As Sen. Rand Paul (R-Ky.) reminded his followers on Twitter, this is the federal agency that once spent $350,000 in taxpayer money to study whether Japanese quail enjoy doing blow and banging.

And that’s not all! The NSF has funded studies teaching sea monkeys how to swim in formation, teaching land monkeys how to gamble, running shrimp on tiny treadmills, running mountain lions on giant treadmills, watching humans play FarmVille, watching humans use Flickr, and building a robot that can fold laundry.

Okay, maybe that last one sounds pretty cool. But none of these things have anything to do with the core functions of government. If you can’t even eliminate funding for this nonsense, what can you cut?

Planned Parenthood

It doesn’t matter whether you think Planned Parenthood should get federal funding or not. What matters is that it does, and Republicans have spent years and untold fortunes of campaign cash making election-year promises to cut off the organization’s funding. Yet the Republican-written and soon-to-be Republican-passed omnibus spending bill includes $500 million for Planned Parenthood.

In the grand scheme of a $1.3 trillion budget bill, the funding for Planned Parenthood isn’t the biggest concern. But there might not be a single line item that better exemplifies the extent to which Republicans just don’t give a fuck anymore. Either that, or GOP lawmakers realized that they can’t run for re-election on promises to cut funding for Planned Parenthood if they actually cut funding for Planned Parenthood.

Centers for Disease Control and Prevention

The CDC gets a $53 million boost in the omnibus bill, which is a good thing because the CDC does important work like controlling deadly diseases and certainly would never waste taxpayer money on things like hiring a “Hollywood liaison” to help television and movie studios develop accurate story lines about diseases.

The increase in CDC funding includes the creation of a new program to study gun violence, which is apparently a disease now. If you want to get a sense of how the CDC handles this type of very specific assignment, take a look at what happened in 1999 when the agency asked Congress for extra funding with the goal of eliminating syphilis in the United States by 2005. The CDC used some of that money to pay for strippers, and not only did syphilis still exist in 2005, but the number of reported cases had increased by 68 percent, as then-Sen. Tom Coburn (R-Okla.) noted in a 2007 report.

Head Start

So much for Education Secretary Betsy DeVos’ goal of destroying the public school system. The omnibus spending bill boosts federal education spending by $2.6 billion while omitting a $250 million private school choice initiative that President Donald Trump requested and ignoring a proposed $1 billion program to encourage open enrollment, something DeVos wanted, according to Education Week.

Meanwhile, Congress will keep tossing money into Head Start. It’s been more than eight years since the U.S. Department of Health and Human Services concluded that any benefits from the pre-K program “yielded only a few statistically significant differences in outcomes at the end of 1st grade.” A more recent study from two Vanderbilt University researchers suggests that governments are funding pre-K programs without having a good sense of what these programs should be trying to achieve and without knowing how to judge if they’re working. Head Start nevertheless gets a $610 million hike and will cost more than $9.8 billion this year.

Results? Measurements? Accountability? Nah.

The Process Itself

Don’t trust the process. The omnibus budget bill was written in secret and made public just hours before it was approved. There was no time for lawmakers to read and digest the bill, let alone offer amendments or try to change the details. This sort of rushed process isn’t new, but it is “lawmaking at its most depressingly predictable,” says Peter Suderman. Read his explanation of all the ways in which the passage of the omnibus bill undermines the institutional processes of Congress.

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Trump Replaces McMaster With John Bolton As Security Advisor

They keep dropping like flies.

While H.R. McMaster’s departure from the Trump administration had been thoroughly leaked press in recent weeks, and the press had a field day with John Bolton’s appearance at the White House earlier today…

… with many putting two and two together…

… it wasn’t until just after 6pm that the NYT reported that H. R. McMaster, the veteran Army officer who was tapped as President Trump’s national security adviser last year to stabilize a turbulent foreign policy operation, will resign and be replaced by John R. Bolton, the neoconservative hard-line former US ambassador to the United Nations.

 

Which is ironic considering that just one week ago..

Upon his departure, Gen. McMaster will retire from the military.

“H.R. McMaster has served his country with distinction for more than 30 years. He has won many battles and his bravery and toughness are legendary,” Mr. Trump said in a statement. “General McMaster’s leadership of the National Security Council staff has helped my administration accomplish great things to bolster America’s national security.”

The president and the general, who had never met before Mr. Trump interviewed General McMaster for the post, had little chemistry from the start, and often clashed behind the scenes. McMaster had struggled for months to impose order not only on a fractious national security team and also on a president who resisted the sort of discipline customary in the military.

Although General McMaster has been a maverick voice at times during a long military career, the Washington foreign policy establishment had hoped he would keep the president from making rash decisions.

Tensions between the two seeped into public view in February, when General McMaster said at a security conference in Munich that the evidence of Russian interference in the 2016 presidential election was beyond dispute. The statement drew a swift rebuke from the president, who vented his anger on Twitter.

“General McMaster forgot to say that the results of the 2016 election were not impacted or changed by the Russians and that the only Collusion was between Russia and Crooked H, the DNC and the Dems,” Mr. Trump wrote, using his campaign nickname for Hillary Clinton. “Remember the Dirty Dossier, Uranium, Speeches, Emails and the Podesta Company!”

Trump picked McMaster last February after pushing out Michael T. Flynn, his first national security adviser, for not being forthright about a conversation with Russia’s ambassador at the time. (Flynn has since pleaded guilty of making a false statement to the F.B.I. and is cooperating with Robert S. Mueller III, the special counsel investigating Russia’s interference in the 2016 election.)

General McMaster carried out a slow-rolling purge of hard-liners at the National Security Council who had been installed by Mr. Flynn and were allied ideologically with Stephen K. Bannon, Trump’s former chief strategist, earning the ire of conservatives who complained that his moves represented the foreign policy establishment reasserting itself over a president who had promised a different approach.

Now, just over a year into his tenure, McMaster himself is out.

According to the NYT, McMaster had been discussing the process around his departure with President Trump for several weeks, and decided to speed it up “because questions about his status were casting a shadow over his conversations with foreign officials.”

The officials also said that Mr. Trump wanted to fill out his national security team before his meeting with North Korea’s leader, Kim Jong-un. He replaced Secretary of State Rex W. Tillerson with the C.I.A. director, Mike Pompeo, last week.

To avoid the impression of another botched Rex-T-like firing in which the general was sacked while sitting on the toilet, “officials emphasized that General McMaster’s departure was a mutual decision and amicable, with none of the recrimination that marked Mr. Tillerson’s exit.”

The NYT sources also said it was not related to a leak on Tuesday of briefing materials for Mr. Trump’s phone call with President Vladimir V. Putin of Russia. As was reported, Trump had been advised by his senior staff not to congratulate Mr. Putin on his re-election, which the president went ahead and did during the call.

Bolton, who will take office April 9, has met regularly with Trump to discuss foreign policy, and was on a list of candidates for national security adviser. He was in the West Wing with Mr. Trump to discuss the job on Thursday.

Incidentally, while Gen. McMaster had been among the most hard-line administration officials in his approach to North Korea, publicly raising the specter of a “preventive war” against the North, and was among those who expressed concerns about Mr. Trump’s abrupt decision this month to meet Kim Jong-un, according to a senior official – Bolton is far more interventionist, and a far greater neocon than McMaster ever could be.

With Bolton’s arrival, the likelihood of a far more aggressive foreign military policy will surge, which means that not only is the Iran deal virtually finished – with bullish consequences for the price of oil as over 1 million barrels of Iranian oil are taken off the market as a result of a new economic blockade of Tehran – but tensions surrounding North Korea are likely to return front and center, as Trump’s attempt at detente crashes and burns under his new neocon security advisor.

 

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Trump Admin Approves $1BN Arms Deal With Saudi Arabia, Including 6,700 Missiles

After welcoming Crown Prince Mohammed bin Salman to the White House for a series of meetings earlier this week (which provoked a mini-scandal when the New York Times reported that there were no women in the room) the Associated Press and Bloomberg reported that the Trump administration has officially approved a $1 billion arms sale to the Kingdom – complete with 6,700 Raytheon anti-tank missiles worth $670 million.

Saudi

The approval came just hours after former Secretary of State Rex Tillerson delivered his farewell remarks.

Today’s deal should not come as a surprise: during his trip to the Kingdom last year, President Trump touted business deals that he claimed to help facilitate – including the largest US arms-sale agreement ever, worth some $350 billion. Furthermore, over the past year Trump has repeatedly voiced his desire to consummate major arms deals with any willing buyer of US equipment, even Ukraine recently, a move which is sure to provoke escalation in hostilities between Ukraine and Russia.

And since the missiles in today’s arms sale will almost certainly be used by the Saudi government to support the government of Yemen, which is embroiled in a brutal years-long civil war with Houthi rebels aligned with Iran, the surest trade for the foreseeable future will be going short the lifespan of Yemen residents. Again.

Ironically, the latest US arms sale to Riyadh happens a day after the Senate voted to kill a bipartisan bill intended to limit the scope of US support for the Saudi proxy war in Yemen as the situation there has snowballed into a devastating humanitarian crisis. Here’s Al-Monitor with more:

By a vote of 55-44, the Senate voted to kill a bipartisan effort to end US support for an aerial campaign that has killed thousands of civilians over the past three years. While proponents of the measure decried the humanitarian toll and lack of congressional oversight, the specter of Iran loomed over the debate.

“The Trump administration has tried to justify our involvement in the Yemen war as necessary to push back on Iran,” bill sponsor Bernie Sanders, I-Vt., said ahead of the vote. “While Iran’s support for Houthi insurgents is of serious concern for all of us, the truth is that this war has increased, not decreased, the opportunities for Iranian interference.”

Others sharply disagreed.

“As it has done in political vacuums throughout the region, Iran will continue to expand its proxy power,” said Sen. Robert Menendez, D-N.J., the top Democrat on the Senate Foreign Relations Committee. “Through its Revolutionary Guard, Iran will continue shipping weapons to the Houthis.”

It’s worth noting that the US isn’t alone among its “democratic, humanitarian” allies in supporting the Saudi war effort. Yesterday, Canadian Prime Minister Justin Trudeau defended the previous administration’s decision to sell more than 900 armored vehicles to the Saudis, per the Guardian.  Trudeau, one of the world’s most prominent progressive leaders, defended the deal, saying his government had little choice but to honor it – to the consternation of some of his fellow liberal lawmakers.

“So I am asking the prime minister, what does he think about Canada potentially being complicit in international human rights violations?” Laverdière asked. “How can we say Canada’s foreign policy is progressive and feminist when we continue to sell arms to Saudi Arabia?”

Trudeau responded by arguing that his government had little choice but to respect the contract signed by the previous government. “Permits are only approved if the exports are consistent with our foreign and defence policies, including human rights,” said Trudeau. “Our approach fully meets our national obligations and Canadian laws.”

Cesar Jaramillo of Project Ploughshares, a Canadian disarmament group, described Trudeau’s response as “flawed logic”, as it is up to his government to set out the parameters of Canada’s foreign and defence policy.

“We also think it flies in the face of this feminist agenda of the Canadian government, which is now being sold as the centrepiece of Canadian foreign policy. Yet at exactly the same time we are arming one of the most repressive regimes on the planet for women,” said Jaramillo. “So I think there’s a clear gap between the rhetoric and the action of the Canadian government.”

Just minutes after news of the arms sale broke, reporters spotted John Bolton, the infamous Iran hawk and rumored to be a contender to succeed HR McMaster as Trump’s National Security Advisor, entering the White House.

The very lucrative US support for Saudi Arabia over the past three years has come at a staggering human cost, with over 10,000 civilians dead during the Yemeni civil war, while more than 3 million have been replaced. Earlier today, the Houthis fired a missile at an Aramco facility near the border, however it appears to have missed: Aramco told Bloomberg that all oil, natural gas and refining facilities were safe and operating normally following the attack.

According to the AP, the State Department says the administration told Congress on Thursday that it plans to approve the sale. Lawmakers will have 30 days to act if they want to try to stop it.

Finally, for those who claim that this is a partisan issue, don’t: we pulled a random headline from the recent past – Obama To Sell $10 Billion In Weapons To Israel, Saudi Arabia And The UAE – to demonstrate that when it comes to collecting Saudi blood money, Democrats and Republicans will do so with identical enthusiasm.

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Congress Looks To Curb Chinese Inflitration Of America’s Higher Education

Authored by Nikita Vladimirov via Campus Reform,

Several Republican lawmakers are backing a new bill that would further tighten the screws on Chinese “Confucius Institutes” in U.S. colleges and universities.

The bill, S.2583, was introduced by Republican Senators Marco Rubio and Tom Cotton, and is intended to amend two laws in order to make it harder for the Chinese government to infiltrate higher education.

Numerous lawmakers have expressed concerns that Confucius Institutes serve as “proxies for the Chinese Communist Party” on American campuses, pushing “manipulative propaganda campaigns” and using “strings-attached” funding to cow professors into conforming with the Chinese government’s priorities.

According to the Congressional Record published on Tuesday, the new initiative will “amend the Foreign Agents Registration Act of 1938 to limit the exemption from the registration requirements of such Act for persons engaging in activities in furtherance of bona fide religious, scholastic, academic, or scientific pursuits or the fine arts to activities which do not promote the political agenda of a foreign government…”

Likewise, the lawmakers seek to “amend the Higher Education Act of 1965 to clarify the disclosures of foreign gifts by institutions, and for other purposes.”

If passed, the bill would require Confucius Institutes to register as foreign agents and obligate universities to disclose any substantial donations received from abroad. 

Earlier this month, Senate Majority Whip John Cornyn also blasted the suspicious activity of Confucius Institutes, arguing that the Foreign Investment Risk Review Modernization Act, another legislative effort that was introduced last year, will become “an important piece of our overall response” to China’s strategy.

“These institutes are proxies for the Chinese Communist Party,” the lawmaker said at the time.

“They offer schools financial benefits in exchange to set up shop in close proximity to U.S. researchers and students whose views they attempt to influence for what are essentially manipulative propaganda campaigns—ones that conveniently whitewash over the Communist regime’s less flattering attributes and their troubling history of human rights abuses and belligerence in places like the South China Sea.”

The bothersome relationship between the Chinese government and its Confucius Institutes has alarmed many lawmakers and foreign policy experts, who are now calling for colleges and universities to end their association with the China-linked groups.

According to Reuters, Chinese foreign ministry spokeswoman Hua Chunying dismissed U.S. concerns about the Confucius Institutes, arguing that the program is simply designed to foster educational and cultural exchanges between the two countries. 

Hua also blasted critics in Washington, urging them to “abandon these outmoded ideas and get their brains, along with their bodies, into the 21st century, and objectively and rationally view the trends of the time in global development and China’s development progress.”

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Tillerson Gives Bitter Farewell Speech: “This Can Be A Very Mean Spirited Town”

Outgoing Secretary of State Rex Tillerson gave a salty farewell speech at the State Department on Thursday – one week after President Trump announced his firing on Twitter. Tillerson’s top deputy, Steve Goldstein was also let go after Goldstein disputed the official White House account of the firing. 

“This can be a very mean-spirited town,” said Tillerson, who called his boss a moron last July. “But you don’t have to choose to participate in that.”

Tillerson – whose ouster had been rumored for months, didn’t mention Trump in his remarks, and said that he hopes the department will “continue to treat each other with respect. 

The possibility of Tillerson’s ouster was a point of speculation for months, and came after a number of clashes with Mr. Trump. But the suddenness and execution of his ouster was shocking to many. Tillerson’s departure also comes as the U.S. is looking to negotiate a meeting with North Korean leader Kim Jong Un — in other words, a somewhat fragile time for foreign relations. –CBS

Trump nominated CIA Director Mike Pompeo to replace Tillerson. 

When Rex-T was fired, President Trump was asked if he fired Rex Tillerson because the former Secretary of State called him a “moron” last summer. Trump refused to answer, as the following exchange reveals:

Reporter: Did you fire him because he called you a moron?

Trump: What?

Reporter: Did you fire him because he called you a moron?

Trump: Say it again.

At that point Trump pivoted to Mike Pompeo.

Tillerson’s full remarks:

“In these times, your continued diligence and devotion to the State Department’s mission has never been more necessary. As you go about your duties, each of you carrying out your individual responsibilities as well as your collective duty, it is my hope that you will be guided by and test your actions each day by the values that we have spoke about over this past year. First, to value the safety and security of yourselves, your loved ones and your colleagues. Second, to maintain a commitment to accountability by first holding yourselves accountable so that you are able to hold others accountable. And that the positive environment of accountability is underpinned by honesty and integrity, in all that you do. Never lose sight of your most valuable asset, the most valuable asset you possess — your personal integrity. Not one of you was gifted it — you were born with it. It belongs to you, and always has and will belong to you and you alone. Only you can relinquish it or allow it to be compromised. Once you’ve done so, it is very, very hard to regain it. So guard it as the most precious thing you possess. 

And finally I hope you will continue to treat each other with respect, regardless of the job title, the station in life, or your role, everyone is important to the State Department. We’re all just human beings trying to do our part.

In closing I’d like to ask that each of you undertake to ensure one act of kindness each day towards another person. This can be a very mean-spirited town. “But you don’t have to choose to participate in that. Each of us get to choose the person we want to be, and the way we want to be treated, and the way we will treat others. God bless you all, your loved ones, God bless America.”

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Snowden Explains Deep State’s Influence On Presidents Obama, Trump

Authored by Jay Syrmopoulos via TruthInMedia.com,

Famed whistleblower Edward Snowden was recently interviewed by Italian publication La Repubblica. The publication noted the 5-year mark of Snowden’s historic act of blowing the whistle on the NSA’s expansive surveillance programs and that “many thought he would end up very badly, but when he connects via videolink for this interview with la Repubblica, he seems to be doing very well: the frank smile and peaceful face of someone who is easy in his mind.”

In an excerpt from the exclusive interview, Snowden explained how the presidencies of both Obama and Trump are shaped by the Deep State following an illuminating question by journalist Stefania Maurizi.

Stefania Maurizi: 

We saw that President Obama, who was an outsider to the US military-intelligence complex, initially wanted to reign in the abuses of agencies like the CIA and the NSA, but in the end he did very little. Now we see a confrontation between president Trump and so-called Deep State, which includes the CIA and the NSA. Can a US president govern in opposition to such powerful entities?

Edward Snowden: 

Obama is certainly an instructive case. This is a president who campaigned on a platform of ending warrantless wiretapping in the United States, he said “that’s not who we are, that’s not what we do,” and once he became the president, he expanded the program.  He said he was going to close Guantanamo but he kept it open, he said he was going to limit extrajudicial killings and drone strikes that has been so routine in the Bush years. But Obama went on to authorize vastly more drone strikes than Bush. It became an industry.

As for this idea that there is a Deep State, now the Deep State is not just the intelligence agencies, it is really a way of referring to the career bureaucracy of government.

These are officials who sit in powerful positions, who don’t leave when presidents do, who watch presidents come and go, they influence policy, they influence presidents and say: this is what we have always done, this is what we must do, and if you don’t do this, people will die.

It is very easy to persuade a new president who comes in, who has never had these powers, but has always wanted this job and wants very, very badly to do that job well. A bureaucrat sitting there for the last twenty years says: I understand what you said, I respect your principles, but if you do what you promised, people will die. It is very easy for a president to go: well, for now, I am going to set this controversy to the side, I’m going to take your advice, let you guys decide how these things should be done, and then I will revisit it, when I have a little more experience, maybe in a few months, maybe in a few years, but then they never do.

This is what we saw quite clearly happen in the case of Barack Obama: when this story [of Snowden exposing the NSA’s mass surveillance] came forward in 2013, when Obama had been president for five years, one of the defences for this from his aides and political allies was: oh, Obama was just about to fix this problem!  And sure enough, he eventually was forced from the wave of criticism to make some limited reforms, but he did not go far enough to end all of the programs that were in violation of the law or the constitution of the United States. That too was an intentional choice: he could have certainly used the scandal to advocate for all of the changes that he had campaigned on, to deliver on all of his promises, but in those five years he had become president, he discovered something else, which is that there are benefits from having very powerful intelligence agencies, there are benefits from having these career bureaucrats on your side, using their spider web over government for your benefit.

Imagine you are Barack Obama, and you realise – yes, when you were campaigning you were saying: spying on people without a warrant is a problem, but then you realise: you can read Angela Merkel’s text messages. Why bother calling her and asking her opinion, when you can just read her mind by breaking the law? It sounds like a joke, but it is a very seductive thing. Secrecy is perhaps the most corrupting of all government powers, because it takes public officials and divorces them from accountability to the public.

When we look at the case of Trump, who is perhaps the worst of politicians, we see the same dynamic occurring. This is a president who said the CIA is the enemy, it’s like Nazi Germany, they’re listening to his phone calls, and all of these other things, some claims which are true, some claims which are absolutely not.  A few months later, he is authorizing major powers for these same agencies that he has called his enemies.

And this gets to the central crux of your question, which is: can any president oppose this?  The answer is certainly. The president has to have some familiarity going in with the fact that this pitch is going to be made, that they are going to try to scare him or her into compliance. The president has to be willing to stand strongly on line and say: ‘I was elected to represent the interests of the American people, and if you’re not willing to respect the constitution and our rights, I will disband your agency, and create a new one’. I think they can definitely be forced into compliance, because these officials fear prison, just like every one of us.

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NY Taxi Driver Commits Suicide; Blames Uber, Lyft Before Hanging Self

A yellow cab driver of nearly 30 years hanged himself after he said ridesharing apps such as Uber and Lyft left him in dire financial straits, according to Authorities.

Nicanor Ochisor, 65, was discovered in the garage of his Maspeth, Queens home by his adult son on Friday – reports Richard Lipsky of the Taxi Medallion Owners and Drivers Association. Ochisor is the fourth such suicide in four months – however he is the first medallion owner to do so.

“He said, ‘I’m old, I’m tired, and I’m not going to make it,’ ” fellow driver Nino Hervias, 59, recalled from a conversation with Ochisor last week according to the NY Post.

“He talked to me about it [suicide] and said that’s the way he’s going to end,” friend and fellow medallion owner Dan Nitescu, 65, told The Post. “I told him to wait and it will get better.”

New York taxi medallion which used to fetch around $1 million have plummeted in value over the last five years to around $180,000. Ochisor used his medallion to back his home mortgage, and originally planned to use the license to finance his retirement. 

Ochisor had his medallion since 1989 according to the Taxi and Limousine Commission – driving it nightly while his wife took fares during the day, said Nitescu. “They were working like that for about 25 years to raise family and save for college,” the grieving friend said.

“He was only making $200 a day working 10 to 12 hours,” he said, adding that it was barely enough to make ends meet. “He was devastated.”

To make matters worse, the couple used the medallion as collateral on their home mortgage and would have been on the hook if the bank called in its debts and the medallion didn’t cover what they owed.

“It used to be that you knew that even if you weren’t making it on a day-to-day basis, the equity in your medallion was going up,” Hervias said. “Now we have no backup. The psychological effect is terrible.” –NY Post

Three other TLC drivers have committed suicide in the last four months. 

For decades there had been no more than 12,000 to 13,000 taxis in New York but now there were myriad new ways to avoid public transportation, in some cases with ride-hailing services like Via that charged little more than $5 to travel in Manhattan. In 2013, there were 47,000 for-hire vehicles in the city. Now there were more than 100,000, approximately two-thirds of them affiliated with Uber. –NYT

Livery driver Doug Schifter, in his early 60s, killed himself with a shotgun outside the gates of City Hall in Lower Manhattan after having written a lengthy Facebook post several hours earlier detailing his hardships.

“I worked 100-120 consecutive hours almost every week for the past fourteen plus years, wrote Schifter. “When the industry started in 1981, I averaged 40-50 hours. I cannot survive any longer with working 120 hours! I am not a Slave and I refuse to be one.”

I did manage to put something away but my financial cushion never developed. deBlasio stopped a traffic study on the impact of Uber. That would have revealed the true traffic impact of so many cars and shown the need to freeze car levels. There seems to be a strong bias by the Mayor and Governor in favor of Uber. A Company that is a known liar, cheat and thief. Cuomo allowed the removal of controls and allowed unlimited cars on the road. Cuomo also placed State Troopers in NYC to patrol and issue moving violations. This never happened before in my lifetime. He has turned the city into a police state. 

—

I had almost 5 million miles experience, driven through five hurricanes and over 50 deep snow and blizzard conditions. I have driven over 100 world famous celebrities including Michael Bloomberg’s daughters and mother, the family of the man who destroyed me.

—

What is happening to our Country where the Government now destroys the people? We are not a government of the People, by the People and for the People any more. We are turning into a Government of the People, by the Corporation for the Rich. People are becoming enslaved and destroyed by politicians and companies with the aid of the rich and the corporations they control. They are doing it by bypassing the Laws or manipulating them. America is being stolen. Your future and your families future is being stolen right now.

The New York Times notes: In response to Mr. Schifter’s death, Mayor de Blasio showed little sensitivity to the psychic harms of economic deprivation. “Let’s face it, for someone to commit suicide there’s an underlying mental health challenge,” he said. Uber did not respond to a request for comment.

And right before Christmas, driver Danilo Castillo penned a similarly lengthy suicide note lamenting the “disastrous” state of the Taxi industry, before leaping to his death from his Manhattan apartment window on December 20. 

Bronx Councilman Reuben Diaz Sr. has proposed a bill aimed at protecting medallion holders by charging app-based companies the same fees that livery firms and drivers pay, as well as limiting the number of vehicles that can operate. 

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Should Facebook And Google Pay Users When They Sell Data Collected From Users?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Let’s imagine a model in which the marketers of data distribute some of their immense profits to the users who created and thus “own” the data being sold for a premium.

It’s not exactly news that Facebook, Google and other “free” services reap billions of dollars in profits by selling data mined/collected from their millions of users. As we know, If you’re not paying for it, you’re not the customer; you’re the product being sold, also phrased as if the service is free, you are the product.

Correspondent GFB recently asked, why aren’t Facebook et al. sharing a slice of the profits reaped from users’ data with the users who create the data? Given the enormous data processing capabilities of these tech giants, it’s certainly not a technical issue to credit each user a micro-payment when the data they create and thus “own” (since the creator of any digital product is by rights the owner of that product, including data sold to marketers) is sold.

Is the presumption that the collector of users’ data “own” that data via the collection process false, legally and ethically? Teams of attorneys may well be employed to support this claim on legal grounds, but what about the ethics of this data-mining of the many to profit the few with the means to collect and sell the data harvested from users?

Now that the ethical foundation of all these tech giants has been revealed to be nothing but shifting sand, it’s a line of inquiry worth pursuing. In some ways it parallels the situation in biomedicine: if a private-sector corporation harvests a particular genetic variation from an individual, do they “own” the variation because they detected it, or does the individual whose tissue/blood was harvested retain some ownership?

We need to differentiate sites and services that 1) do not collect data from users and 2) sell display advertising seen equally by all users (i.e. the traditional media model) and sites and services that 1) collect data from users as their “business model” / reason to exist and 2) sell marketing/advertising for a premium because it’s targeted to individual users.

The difference between these two models is obvious: one is “broadcast” available equally to users and advertisers alike. The other is “targeted marketing” based on data harvested from individual users.

I think the ethical case for sharing the profits reaped from selling the premiums gained by targeting users based on data harvested from them is strong. Note that the premium is derived not from some unique technology or intellectual property developed by Facebook, Google et al. but specifically and directly from the sale of data harvested from users.

Let’s imagine a model in which the marketers of data distribute some of their immense profits to the users who created and thus “own” the data being sold for a premium. This could be viewed as a royalty paid to the creators of the data or as a dividend paid to the pool of “owners” of the data being collected and sold.

However the payment is labeled, the point is that the profits should be shared with those who are creating the data being sold.

There are plenty of profits to be shared:


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