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Authored by Chalres Hugh Smith via OfTwoMinds blog,

China is creating Kafka’s nightmare world as the perfection of centralized control of its citizenry.

China is rapidly building out a Total Surveillance State on a scale that far surpasses any government surveillance program in the West. The scope of this surveillance is so broad and pervasive that it borders on science fiction:

Life Inside China’s Total Surveillance State (8 min video)

China Aims For Near-Total Surveillance, Including in People’s Homes (“Sharp Eyes” nationwide surveillance network)

“You’re Being Controlled All The Time” – An Inside Look At China’s “Social Credit Score”

China Assigns Every Citizen A ‘Social Credit Score To Identify Who Is And Isn’t Trustworthy

It’s well known that the intelligence agencies in America seek what’s known as Total Information Awareness, the goal being to identify and disrupt terrorists before they can strike.

This level of surveillance has run partly aground on civil liberties concerns, which still have a fragile hold on the American psyche and culture.

The implicit goal of China’s Total Surveillance State is to control the citizenry and root out any dissent before it threatens The Communist Party’s hold on power, but the explicit goal is a behavioral psychologist’s dream: to reward “positive social behaviors” and punish “negative social behaviors” via a “Social Credit Score.”

There is something breathtakingly appealing to anyone in a position of power about this goal: imagine being able to catch miscreants who smoke in no-smoking zones, who jaywalk, who cheat people online, and of course, who say something negative about those in power.

But let’s ask a simple question of China’s vast surveillance system: what happens when it’s wrong? What if one of those thousands of cameras mis-identifies a citizen breaking some minor social code, and over time, does so enough times to trigger negative consequences for the innocent citizen?

What recourse does the citizen have? It appears the answer is none, as the process is not strictly speaking judicial; the system appears to be largely automated.

Here’s a second question: is the scoring system truly transparent, or can insiders place their thumbs on the scale, so to speak, to exact revenge on personal enemies?

Question #3: Who have the power to change the weightings within the automated software? Will criticizing the government online generate 1 negative point this month but 10 points next month? How can citizens with a handful of negative points, some perhaps incorrect mis-identifications, avoid crossing the dreaded threshold if they don’t know how the system is truly ranking various violations?

This aligns perfectly with the world envisioned by Kafka in his novels The Trial andThe Castle.

Kafka’s fictional accounts of power manifesting through an impenetrable bureaucracy describe a world with two primary features:

1. The rules guiding the system are opaque to those enmeshed in the system

2. There is no recourse for those unjustly persecuted or convicted by the system

What is it like to inhabit such a world? I’ve assembled some insightful comments on Kafka’s works from online resources.

Critic Michiko Kakutani: “(his novels share)…the same paranoid awareness of shifting balances of power; the same atmosphere of emotional suffocation.”

The Trial is “the story of a man arrested and prosecuted by a remote, inaccessible authority, with the nature of his crime revealed neither to him nor to the reader.”

“The law in Kafka’s works, rather than being representative of any particular legal or political entity, is usually interpreted to represent a collection of anonymous, incomprehensible forces. These are hidden from the individual but control the lives of the people, who are innocent victims of systems beyond their control.”

“For Kafka, law ‘has no meaning outside its fact of being a pure force of domination and determination.'”

Kafka’s novel The Castle explores “the motif of an oppressive and intangible system” and “the seemingly endless frustrations of man’s attempts to stand against the system.”

China is creating Kafka’s nightmare world as the perfection of centralized control of its citizenry. The question is: will the Chinese people tolerate this as long as the current artificial financialized “prosperity” reigns? What will happen to their perception and tolerance when the debt-fueled “prosperity” blows away like the sands of the Taklimakan Desert?

Gordon Long and I discuss the conceptual framework and implementation of Social Control in a two-part video series:

Part 1:

Part 2:

*  *  *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.Read the first section for free in PDF format.  If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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The last few days have seen oil prices bid up 5% or so after flat-lining for a week or two, despite surprising builds in inventory data and ever-increasing production. As prices have risen, so speculators (most notably trend-following momo players such as CTAs have come to dominate the price action).

The lack of downward price action has been pinned on, among other things, a growing belief that President Trump will decide not to renew the Iran nuclear deal and pull US out of JCPOA; thus tightening the oil market by implicitly removing Iranian output (due to a likely reinstatement of sanctions)…

However, as today’s “sell the news” event – following President Trump’s tweet that he will announce his decision on the Iran Deal tomorrow – and now Barclays analysts suggest… the fear of a tightening oil market due to Iran are not warranted.

In a Special Report titled “Trump and the Art of (Breaking the Iran) Deal”, Barclays writes

Given President Trump’s continued criticism of the nuclear deal, the personnel changes in his foreign policy team, and a revitalized US alliance with Israel and Saudi Arabia, US policy has become more confrontational.

Whatever Trump announces this week on May 8 and May 12, the announcement will likely mark the beginning of protracted talks with the other signatories of the Joint Comprehensive Plan of Action (JCPOA). We analyze key aspects of the deal, discuss several scenarios, and assess their effect on the oil and FX markets.

Regardless of his decision, the current Iran deal will not survive under President Trump, in our view. He has two main options:

1.  in the more disruptive one, he does not renew this week’s deadline of oil-related sanctions waivers and enforces significant reductions of Iranian imports within six months; or

2.  he could restate his opposition to the JCPOA, but renew the waiver. This option would buy time as nuclear negotiations with North Korea unfold over the summer. Regardless, his foreign policy continues to ignite tensions in the main oil-exporting center and is, thus, price supportive.

We expect little Iran production effect in 2018 if the waiver is not renewed. Many European buyers would likely suspend purchases in the short term. Under either scenario above, a new US sanctions regime would threaten Iran’s ability to attract foreign investment, especially for Yadavaran and Azadegan, keeping Iran’s output flat or lower through 2025. Whether other members of the P5+1 group counter the effect of US secondary sanctions is another variable that could influence short- and
medium-term effects.

Prices would likely fall in the benign scenario, but either would fuel already elevated tensions in the Middle East, especially between Iran and Saudi Arabia, with spill-overs to Iraq, Syria, and Yemen.

The geopolitical consequences of a possible dismantling of the JCPOA would likely to play a larger and long-lasting role.

Here’s what Barclays sees next…

Of course, should Barclays be proved correct, and given the dominance of trend-following players in the market, the extremely net-long WTI positioning suggests downside could appear a lot faster than many are assuming… especially as the global synchronous recovery narrative (driving the demand side of the equation) is rapidly falling apart.

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Sometimes in bed, she recalls, he would be “shaking me and grabbing my face” while demanding that she repeat such things as “I’m a little whore.” She says that he also told her, “If you ever left me, I’d kill you.” -The New Yorker

New York’s Democratic Attorney General, Eric Schneiderman has been a prominent voice in the #MeToo movement – suing Harvey Weinstein in the wake of his sexual misconduct scandal and advocating for women’s rights. Now, Schneiderman himself stands accused by four women of choking, hitting, and threatening them during brutal, alcohol-fueled sexual assaults. 

Revealing the accusations are the New Yorker’s Jane Mayer and Ronan Farrow – the latter of whom broke bombshell allegations last October by thirteen women involved in the Harvey Weinstein scandal.

Two of Schneiderman’s accusers did not reveal their identities, while the other two, Michelle Manning Barish and Tanya Selvaratnam, have come forward in full. All four accuse the New York Attorney General of heinous and abusive sexual assaults – along with threats, mental abuse, and stealing prescription medication.

All have been reluctant to speak out, fearing reprisal. But two of the women, Michelle Manning Barish and Tanya Selvaratnam, have talked to The New Yorker on the record, because they feel that doing so could protect other women. They allege that he repeatedly hit them, often after drinking, frequently in bed and never with their consent. Manning Barish and Selvaratnam categorize the abuse he inflicted on them as “assault.” They did not report their allegations to the police at the time, but both say that they eventually sought medical attention after having been slapped hard across the ear and face, and also choked. Selvaratnam says that Schneiderman warned her he could have her followed and her phones tapped, and both say that he threatened to kill them if they broke up with him. (Schneiderman’s spokesperson said that he “never made any of these threats.”) –The New Yorker

One of the anonymous accusers says Schneiderman told Manning Barish and Selvaratnam that he “also repeatedly subjected her to nonconsensual physical violence,” but was too afraid to come forward. 

The fourth woman – a prominent New York attorney, says that Schneiderman slapped her across the face and left a mark after she rebuffed his advances. 

She recalls screaming in surprise and pain, and beginning to cry, and says that she felt frightened. She has asked to remain unidentified, but shared a photograph of the injury with The New Yorker.

Schneiderman, in a statement said “In the privacy of intimate relationships, I have engaged in role-playing and other consensual sexual activity. I have not assaulted anyone. I have never engaged in nonconsensual sex, which is a line I would not cross.”

Michelle Manning Barish says her romantic involvement with Schneiderman spanned the summer of 2013 until New Year’s Day, 2015, while Selvaratnam was with the AG from the summer of 2016 until the fall of 2017. Both women, as the New Yorker writes, are “articulate, progressive Democratic feminists in their forties who live in Manhattan.” 

They work and socialize in different circles, and although they have become aware of each other’s stories, they have only a few overlapping acquaintances; to this day, they have never spoken to each other. Over the past year, both watched with admiration as other women spoke out about sexual misconduct. But, as Schneiderman used the authority of his office to assume a major role in the #MeToo movement, their anguish and anger grew. –The New Yorker

Four months after the Harvey Weinstein story broke, Schneiderman’s office proudly announced that his office was filing a civil-rights suit against the former movie mogul. In a February press conference, Schneiderman denounced Weinstein, saying “We have never seen anything as despicable as what we’ve seen right here.” 

Schneiderman then launched an investigation on May 2nd into the prior handling of criminal justice complaints of Weinstein at the request of Governor Andrew Cuomo, who said in a speech that “sexual-assault complaints must be pursued aggressively, and to the fullest extent of the law.” As the New Yorker notes, “The expanding investigation of the Weinstein case puts Schneiderman at the center of one of the most significant sexual-misconduct cases in recent history.”

Schneiderman’s activism on behalf of feminist causes has increasingly won him praise from women’s groups. On May 1st, the New York-based National Institute for Reproductive Health honored him as one of three “Champions of Choice” at its annual fund-raising luncheon. Accepting the award, Schneiderman said, “If a woman cannot control her body, she is not truly equal.” But, as Manning Barish sees it, “you cannot be a champion of women when you are hitting them and choking them in bed, and saying to them, ‘You’re a fucking whore.’ ” –New Yorker

Manning Barish said of Schneiderman’s involvement in the Weinstein investigation “How can you put a perpetrator in charge of the country’s most important sexual-assault case?” 

Selvaratnam describes Schneiderman as “a Dr. Jekyll and Mr. Hyde” figure, and says that seeing him lauded as a supporter of women has made her “feel sick,” adding, “This is a man who has staked his entire career, his personal narrative, on being a champion for women publicly. But he abuses them privately. He needs to be called out.” –New Yorker

 “His hypocrisy is epic,” says Manning Barish. “He’s fooled so many people.” 

Schneiderman, she says, would pressure her to drink to excess with him, often getting plastered “two bottles of wine in a night.” 

“I would come over for dinner. An already half-empty bottle of red wine would be on the counter. He had had a head start. ‘Very stressful day,’ he would say.” Sometimes, if she didn’t drink quickly enough, she says, he would “come to me like a baby who wouldn’t eat its food, and hold the glass to my lips while holding my face, and sweetly but forcefully, like a parent, say, ‘Come on, Mimi, drink, drink, drink,’ and essentially force me – at times actually spilling it down my chin and onto my chest.” Schneiderman, she recalls, “would almost always drink two bottles of wine in a night, then bring a bottle of Scotch into the bedroom. He would get absolutely plastered five nights out of seven.” On one occasion, she recalls, “he literally fell on his face in my kitchen, straight down, like a tree falling.” Another evening, he smashed his leg against an open drawer, cutting it so badly that “there was blood all over the place.” She bandaged it, but the next day she went to his office to change the dressing, because the bleeding hadn’t stopped.

Schneiderman also allegedly took prescription tranquillizers, says Manning Barish, often asking her to refill her own Xanax prescription so that he could steal half of them for himself. (Schneiderman’s spokesperson said that he has “never commandeered anyone’s medications.”)

Sometimes in bed, she recalls, he would be “shaking me and grabbing my face” while demanding that she repeat such things as “I’m a little whore.” She says that he also told her, “If you ever left me, I’d kill you.”

Ironically, after his election to the New York State Senate in 1998 where he served for twelve years, Schneiderman wrote several laws, including one which created specific penalties for strangulation in 2010. He also chaired a committee that investigated domestic-violence charges against former state senator Hiram Monserrrate (D), who was kicked out of office after a conviction for assaulting his girlfriend. 

During the hearings, the legislators learned that New York State imposed no specific criminal penalty for choking, even though it is a common prelude to domestic-violence homicides. Not only did Schneiderman’s bill make life-threatening strangulation a grave crime; it also criminalized less serious cases involving “an intent to impede breathing” as misdemeanors punishable by up to a year in prison. “I’m just sorry it took us so long in New York State to do this,” Schneiderman declared at the time. “I think this will save a lot of lives.”

The other Schneiderman accuser who revealed her name, Tanya Selvaratnam – a feminist author, actor and film producer, says that she met Schneiderman at the 2016 Democratic National Convention. After they began dating, “it was a fairy tale that became a nightmare,” as Selvaratnam says Schneiderman began physically abusing her in bed, and that it got worse over time. 

“The slaps started after we’d gotten to know each other,” she recalls. “It was at first as if he were testing me. Then it got stronger and harder.” Selvaratnam says, “It wasn’t consensual. This wasn’t sexual playacting. This was abusive, demeaning, threatening behavior.”

When Schneiderman was violent, he often made sexual demands. “He was obsessed with having a threesome, and said it was my job to find a woman,” she says. “He said he’d have nothing to look forward to if I didn’t, and would hit me until I agreed.” (She had no intention of having a threesome.) She recalls, “Sometimes, he’d tell me to call him Master, and he’d slap me until I did.” Selvaratnam, who was born in Sri Lanka, has dark skin, and she recalls that “he started calling me his ‘brown slave’ and demanding that I repeat that I was ‘his property.’ ”

Then, the abuse got worse… 

Schneiderman “not only slapped her across the face, often four or five times, back and forth, with his open hand; he also spat at her and choked her. “He was cutting off my ability to breathe,” she says. Eventually, she says, “we could rarely have sex without him beating me.”

In her view, Schneiderman “is a misogynist and a sexual sadist.” She says that she often asked him to stop hurting her, and tried to push him away. At other times, she gave in, rationalizing that she could tolerate the violence if it happened only once a week or so during sex. But “the emotional and verbal abuse started increasing,” she says, and “the belittling and demeaning of me carried over into our nonsexual encounters.” He told her to get plastic surgery to remove scars on her torso that had resulted from an operation to remove cancerous tumors. He criticized her hair and said that she should get breast implants and buy different clothes. He mocked some of her friends as “ditzes,” and, when these women attended a birthday celebration for her, he demanded that she leave just as the cake was arriving. “I began to feel like I was in Hell,” she says.

Selvaratnam also said Schneiderman routinely “drank heavily,” took sedatives, and pushed her to drink with him. 

“Drink your bourbon, Turnip” – his nickname for her. In the middle of the night, he staggered through the apartment, as if in a trance. “I’ve never seen anyone that messed up,” she recalls. “It was like sleeping next to a monster.” 

And then came the threats…

“He had said he would have to kill me if we broke up, on multiple occasions. He also told me he could have me followed and could tap my phone,” said Selvaratnam.

Read the rest of the accusations against Schneiderman here.

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In what sounds eerily like a re-run of the Cuban Missile Crisis (though admittedly not nearly as dire), the US has threatened Beijing with unspecified “consequences” if China doesn’t remove missiles from islands in the South China Sea that are also claimed by Vietnam and the Philippines.

According to the South China Morning Post, the US is seeking to verify a CNBC report from last week that China had installed anti-ship and air-to-air defenses on some of these disputed islands over the last 30 days. The missiles are reportedly stationed on Fiery Cross Reef, Subi Reef and Mischief Reef.

China, for its part, has neither confirmed nor denied the existence of the missiles.

At a regular briefing on Thursday, Chinese foreign ministry spokeswoman Hua Chunying neither confirmed nor denied the deployment.

“China’s peaceful construction in the Spratly archipelago, including the deployment of necessary national defence facilities, is aimed at protecting China’s sovereignty and security,” she said. “Those who don’t intend to violate [this sovereignty] have no reason to worry.”

Following land reclamation efforts that have transformed reefs into full-fledged islands, China’s military has built air bases, radar and communication systems, as well as naval facilities, on some of these islands.

As the SCMP points out, tensions over the South China Sea have been brewing for years, which could be one reason why markets ignored the reports about the missiles last week, and have generally viewed the worsening tensions between the US and China as a non-issue.

Back in 2015, the International Criminal Court ruled in favor of the Philippines, declaring that the country could officially exert sovereignty over some of the disputed islands. But China ignored the ruling, and threatened military confrontation should the Philippines try to enforce the ruling.

Admiral Philip Davidson, President Trump’s pick to lead the US Pacific Command, has repeatedly warned that China is trying to muscle the US out of the Pacific so it can assert unilateral domination over the territory.

In written testimony to the US Senate Armed Services Committee released last Tuesday, Adm. Davidson said China is seeking “a long-term strategy to reduce the U.S. access and influence in the region,” which he claims the U.S. must maintain its critical military assets in the area. He views China as “no longer a rising power,” but rather a “great power and peer competitor to the United States in the region.” Adm. Davidson agreed with President Trump’s recent assessment on China, calling the country a “rival.”

Despite President Trump’s public “friendship” with Chinese President Xi Jinping, the relationship between the two countries has never quite recovered from Trump’s first diplomatic faux pas – accepting a call from Taiwanese President Tsai Ing-wen. China recently terrorized Taiwan by holding the largest-ever live fire drills. Tsai has advocated for a more confrontational relationship with China, though she has specifically said she dosn’t oppose the “One China” policy. 

Washington takes no position on sovereignty claims, but it has accused Beijing of “militarizing” the South China Sea. Likewise, China has warned the US against continuing its “freedom of navigation” operations – deliberately provocative missions where US destroyers sail within the defensive perimeter of China’s South China Sea holdings.

The US, meanwhile, insists that China itself benefits from US “freeops”, which a Pentagon spokeswoman says have helped make the region more secure.

“China has to realise that they’ve benefited from the free navigation of the sea, and the US Navy has been the guarantor of that,” Pentagon spokeswoman Dana White said.  

“We will continue to do our operations.”

China’s defense ministry responded by saying the islands are “part of Chinese territory” and that China alone will decide what happens there.

In other words: The US needs to mind its own business.

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Authored by Peter Tasker, op-ed via Bloomberg.com,

The Prime Minister’s likely successor won’t be as knowledgeable about economic issues or have the personal authority necessary to rein in the bureaucrats…

When it comes to politics, the Japanese like to say that a few steps ahead, all is darkness. Just six months ago, Shinzo Abe scored yet another landslide electoral victory and seemed certain to stay in office until 2021, thus becoming Japan’s longest serving prime minister. Suddenly, all bets are off.

A seemingly endless series of petty scandals has led to a sharp decline in Abe’s approval rate, and no less a person than former Prime Minister Junichiro Koizumi, Abe’s erstwhile mentor, is predicting that a “loss of trust” will lead to Abe resigning sooner rather than later. Certainly, the autumn’s internal party election for leader of the Liberal Democratic Party — and thus prime minister — will no longer be a walkover.

The question for investors is how much this matters. Has Abe changed the game permanently as Margaret Thatcher did in Britain during the 1980s, or could Japan slide back into a deflationary funk and another lost decade?

In reality, some of the improvements to corporate governance and company profitability were accreting well before Abe took over in 2012. After the disastrous slump of the 1990s in which the book value of companies in the Topix Index failed to increase, corporate Japan experienced a mini-boom in the 2003-2007 period. That progress was reversed by the global financial crisis and the damage was compounded by the tsunami and Fukushima nuclear meltdown of 2011.

Other changes seem embedded. There is widespread consensus behind such moves as welcoming Asian tourism, promoting the role of women in the workforce and the associated encouragement of changes to the work-life balance. Some major companies now offer one year’s paid paternity leave.

Likewise, powerful megatrends such as Japan’s structural labor shortage will be drivers of economic and social change, almost regardless of the political weather. There will be more labor-saving capital investment, intra-sectoral consolidation and smarter use of human resources. The tilt to the Asian economies as markets and production hubs will continue apace.

There is no question that Abe has been personally instrumental in switching the macroeconomic policy settings from fiscal austerity and hard money to reflation. Hence the scale and durability of the current bull run that has seen Japanese stocks comfortably outperform European and emerging-market benchmarks since he took over.

The job is not finished by any means. Japan needs to run the economy hot for several more years for a virtuous circle of wage and consumption growth to develop. Abe’s likely successor – current front-runners are the bland Fumio Kishida and the hawkish Shigeru Ishiba, neither knowledgeable about economic issues – will have nothing like the personal authority necessary to rein in the bureaucrats.

That is no accident. Japanese scandals are never what they appear to be about. To quote another political proverb, “The hidden side has a hidden side of its own.” The respected investigative magazine Facta describes what is going on as “a counter coup d’état.” The original coup was Abe’s transfer of power from the bureaucracy to the prime minister’s office. Now, top officials — aghast at Abe’s electoral successes and particularly incensed by his move to control appointments and other high-level personnel matters within the ministries – are hitting back.

Ousting Abe would be a victory for the bureaucracy and herald a return to business as usual. Haruhiko Kuroda would still be governor of the Bank of Japan, with new Deputy Governor Masazumi Wakatabe strongly committed to the reflationary cause. So a shock Abe resignation would probably be met with a stepping-up of the quantitative easing program.

However, the BOJ’s 2 percent inflation target derives from a political compact with the government, not any legal requirement. A new prime minister influenced by the deflationists in the BOJ and elsewhere could simply scrap or amend it. Similarly, finance ministry bureaucrats and their acolytes would meet little resistance in enforcing tax hikes and fiscal austerity.

It’s too early to write Abe off. His approval rating may have slumped this year, but the opposition parties have gained almost nothing. The strength of a prime minister’s position is sometimes measured by the “Aoki Ratio” — named after LDP veteran Mikio Aoki — which adds together the party’s support rate and the cabinet’s approval rate. Abe’s five short-lived predecessors saw their Aoki ratios plummet into the sub-50-percent danger zone and lost office soon after. Abe’s current score of 74 percent is relatively high. More serious revelations will have to be produced before his colleagues feel compelled to dump him.

Japanese political scandals appear from nowhere, develop their own momentum, then often fade away once the behind-the-scenes arguments have been settled. In this case Abe doesn’t appear to have done anything wrong, though he and his wife may have shown poor judgment in their choice of associates.

Investors should hope he rides out the storm and keeps the reflationary dynamic going. Abenomics would hardly be the same without Abe.

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A Russian Ka-52 fighter helicopter crashed during what authorities described as a “routine flight” in eastern Syria, killing both of its pilots, RT reported on Monday.

The crash is the second Russian aircraft involved in a fatal crash during operations in Syria over the past week. Authorities said the cause of the crash could’ve been a “technical malfunction,” according to Sputnik.

“When carrying out a planned flight over the eastern regions of the Syrian Arab Republic, the Russian Ka-52 helicopter crashed. Both pilots were killed,” the ministry revealed in a statement.

“The cause of the incident could be a technical malfunction,” the ministry added.

On Thursday, A Russian Su-30SM fighter jet crashed over the Mediterranean – an incident that Russia’s Ministry of Defense blamed on a bird that was sucked into the plane’s engine. Both pilots were killed in that crash as well.

“A Russian Su-30SM fighter plane crashed over the Mediterranean Sea at around 9:45 a.m. Moscow time [06:45 GMT] when gaining height after taking off from the Hmeymim airfield. Both pilots, which were fighting to save the plane until the last moment, died,” the statement read.

Authorities haven’t released any details about the circumstances surrounding the crash, but did say that they had recovered the remains of both pilots.

Ka-52 attack helicopters – which are widely known by their nickname “Alligators” – have been deployed in Syria since 2016. Since then, they’ve provided air support military operations against ISIS and other enemies of Syrian leader Bashar al-Assad. 

Russia also deployed a version of the helicopter modified for maritime conditions, which it called the Ka-52K. These helicopters were based on the aircraft-carrying cruiser Admiral Kuznetsov.

The crash comes as Israel and Saudi Arabia have been stepping up their military pressure on Iranian and Hezbollah forces operating in Syria. Over the weekend, Israel threatened Assad, warning that “it will be your end” if he continued allowing Iranian forces to operate in Syria.

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Authored by Nikita Vladimirov via Campus Reform,

A University of California, Berkeley task force is blaming conservative students for destructive protests on campus, saying that hosting conservative speakers was “likely to incite a violent reaction.”

The report was filed on April 10 by a Commission on Free Speech that Chancellor Carol Christ created last October to “analyze events featuring external speakers” on campus in the wake of a series of disruptive protests against planned appearances by speakers such as Ben Shapiro, Milo Yiannopoulos, and Ann Coulter.

“Although those speakers had every right to speak and were entitled to protection, they did not need to be on campus to exercise the right of free speech,” the commission declares, speculating that they were only invited “in order to advance a facile narrative that universities are not tolerant of conservative speech.”

“The Commission was charged with ‘developing a set of recommendations that preserve the campus’s firm commitment to free expression while reducing the likelihood of such expression disrupting the mission of education, research, and public service,’” the report explains, referencing the objectives set by Christ .

According to the document, the commission was formed in October 2017 following a wave of protest against conservative speakers who were invited to lecture at the university. The commission specifically highlights the difference between the polite reception Shapiro received when he visited campus on April 11, 2016 compared to his latest speech on campus in September of last year, which cost the university approximately $600,000 in security.

“Although of course many things changed during the 17 months between Shapiro’s campus engagements, our conclusion is that the rise of ultra-conservative rhetoric, including white supremacist views and protest marches, legitimized by the 2016 presidential election and its aftermath, encouraged far-right and alt-right activists to ‘spike the football’ at Berkeley,” the commission writes.

“This provoked an at-times violent (and condemnable) response from the extreme left, tearing at the campus’s social fabric,” the document adds.

The report goes on to contend that all of the events that sparked protests last year “were sponsored by very small groups of students working closely with outside organizations,” asserting that “at least some of the 2017 events at Berkeley can now be seen to be part of a coordinated campaign to organize appearances on American campuses likely to incite a violent reaction, in order to advance a facile narrative that universities are not tolerant of conservative speech.”

The task force further elaborates that while there is “plausibility” to the claim that Shapiro’s visit was intended to “broaden the political discourse” on campus, many of its members believe that Yiannopoulos and Coulter only came to the university “in pursuit of wealth and fame.”

“We should, of course, be wary of painting with an overly broad brush,” the report explained. “In Shapiro’s case, the claim that his invitation to campus was intended to broaden the political discourse has some plausibility, as his commitment to the issue long predates the polarizing 2016 election.” 

“Milo Yiannopoulos and Ann Coulter, however, expressed little interest in reasoned discussion of contentious issues or in defending or revising their views through argument,” the commission continued. “Many Commission members are skeptical of these speakers’ commitment to anything other than the pursuit of wealth and fame through the instigation of anger, fear, and vengefulness in their hard-right constituency.”

The university officials insist that “speech of this kind is hard to defend” due to “the acute distress it caused (and was intended to cause) to staff and students, many of whom felt threatened and targeted by the speakers and by the outside groups financing their appearances.”

The report concedes that “more than eighty years of First Amendment law would need to be overturned for the campus to legally prohibit potentially disruptive events that offer little value as contributions to campus discourse,” saying its members have “no appetite for instigating a legal battle over this issue.”

In an attempt to “reduce the likelihood of disruptions” at future campus events, however, the report includes a catalogue of policy recommendations that, according to the commission, would partially tackle the issue. 

“The first [recommendation] is that the campus open a third free speech zone, West Crescent, and encourage non-departmental hosts to hold their events there,” the report states, adding that the school may consider moving one of its speech zones to a new location as an alternative.

Likewise, the authors of the report observe that for some UC Berkeley students and staff, the police presence during controversial campus events “was intimidating and alienating.”

“The Commission recognizes that the UCPD has an obligation to preserve the physical safety of everyone on campus, which may sometimes require a show of force,” the report admits. “Nonetheless, the Commission recommends that the campus take steps to make the police a less intimidating presence at controversial events.”

Other recommendations include “counterprogramming during disruptive events,” “improving communication about disruptive events,” establishing a “campuswide events database,” and more.

One of the final recommendations entails encouraging the administration to “continue the steps that have already been undertaken to nurture a culture of reasoned engagement with a wide range of political and ideological viewpoints.”

A spokesperson for UC Berkeley, however, told Campus Reform that the report does not necessarily reflect school’s official commission, and that its recommendations must still be evaluated by the administration.

“It has been only a few days since the report was completed and delivered to the Chancellor and her leadership team. Given the importance and complexity of the issues covered by the report, they intend to take the time necessary to carefully review and discuss the commission’s findings and recommendations,” the spokesperson explained. “As part of her commitment to transparency and engagement, Chancellor Christ will keep the campus community informed about her plans to ensure our University maintains its unwavering support for Free Speech.

“And, just to clarify,” the official added, “the views expressed in the report are those of the commission and don’t necessarily represent the perspectives of the Chancellor or her administration.”

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Simple…

“When ur loading a $70,000 missile onto a $28 million drone, so it can fly at the cost of $3,624 an hour to kill some people in Yemen who live on less than $1 per day…”

h/t Jim Quinn’s Burning Platform blog

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Authored by Kevin Muir via The Macro Tourist blog,

One of the greatest traders of all time, yet probably one of the least well known, once said, “win or lose, everybody gets what they want out of the market.” Easy for Ed Seykota to say as he sits on his deck overlooking Lake Tahoe sipping a nice California cab. Yet as I struggle to make sense of this great game we all love to play, I wonder if maybe Ed is correct. I know his comment might seem a little preachy, but the older I get, the more I realize that a trader’s biggest obstacles lie in the dark recesses of their thoughts, not in the day-to-day zigs and zags of the markets.

So I wonder. Not only do we all get what we want, but do we only see what we want to see?

The other day, one of the biggest bond bulls out there posted the following chart:

I was confused by Raoul’s comments because as I examined the chart of M2 Money Velocity versus US Labour Force Participation, it only made me more bearish on bonds. But to Raoul and all the other deflationists, this chart demonstrates the futility of battling the overpowering forces of demographic deflation.

Before we go any further, I am about to commit the cardinal sin of trading – mixing timeframes. Bonds are hugely oversold on shorter-term charts and everyone is leaning short. It wouldn’t take much of an economic pause to cause a massive short covering rally. Therefore I am by no means advocating leaning hard on bonds down here for a trade.

Yet as an investment, bonds are a terrible risk-reward. And ironically, Raoul’s chart provides the reason.

Let’s assume that monetary velocity is affected by labour participation. Not a hard leap to make. The more people that are working, the more likely they are to borrow and spend.

But what has happened to labour over the past couple of decades? With the fall of the Iron Curtain, combined with China’s WTO admission, and topped off with a demographic bulge of baby-boomers, the global economy has been subject to a massive labour supply glut. This has driven down the cost of labour as a percentage of GDP to multi-generational lows:

This relentless deflationary force has made monetary policy increasingly less effective. It’s obviously not this simple as the increasing debt load is also a large factor muting monetary stimulus. And there can be no denying that the neutering of discretionary governmental fiscal spending during the last economic downturn only worsened the situation.

Yet both factors are no longer headwinds. Trump’s deregulation push and pro-business policies have encouraged banks and other lenders to once again extend credit. And the tax cut bill is providing fiscal stimulus as opposed to tightening.

But most importantly, the labour supply glut is finally getting worked through. China is no longer the cheap cost provider competing in a race-to-the-bottom on wages. Globalization is now headed in reverse with tariffs and other trade impediments being applied.

So I ask – what are the chances that labour participation continues declining? Even if it just stabilizes, this might allow the velocity of money to stop its relentless plummet.

And if the money velocity stops declining, and god forbid, even increases, what will happen to the mountain of monetary stimulus that has been administered over the past decade?

I don’t know if I am just seeing what I want to, but when I look at Raoul’s chart of M2 velocity versus the Labour Participation Rate, all I can do is worry about what happens if velocity follows the participation rate higher. Instead of just assuming this trend will continue forever lower unabated, I am preparing for the day it bottoms and turns everything we know on its head.

Ed would probably tell me that all of this analysis is most likely moot. It’s way more productive to listen to what the market is saying,

“If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right.”

I have been worried about the oversold nature of bonds, but maybe the market knows better. Maybe this is one of those bigger waves you shouldn’t push against.

[ZH: And perhaps rates and vol will recouple with the normalizing Fed balance sheet once again…]

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After the SEC asked a New York judge last week for a court order to compel Jay-Z to testify in an investigation into Iconix Brands, a New York City-based company that purchased the rapper’s Rocawear clothing label back in 2007, Jay-Z’s legal team has fired back with a 15-page memo blasting the SEC’s request as “unreasonable” and pointing out that the rapper has already offered one day of testimony.

Lawyers for Jay-Z also raised concerns about the direction of the investigation, saying a probe into Iconix, which has financial ties to Jay-Z, could morph into a “celebrity hunt” (like they did to Martha Stewart), according to USA Today.

Arguing that the rapper, whose birth name is Shawn Carter, has little information about the direction of the investigation, attorney Alex Spiro said asking Jay-Z to testify for an unlimited period of time would impose too much of a burden on the rapper and his crew, who are preparing for a 45-date world tour in support of his album 4:44.

“The SEC continues to insist on meeting Mr. Carter in person for an unlimited period of time,” Spiro wrote in a 15-page legal memorandum. “The upshot imposes unreasonable burdens on Mr. Carter and raises serious questions about whether this exercise has transcended any investigative purpose and crossed over into a celebrity hunt.”

In a separate declaration, Jay-Z stated that providing the asked-for testimony at the SEC’s Washington headquarters on May 11 would “impair the work of many individuals and entities who are preparing for the tour and will hinder my own work in preparation for the tour.”

As far as we know, the investigation centers on potential securities law violations by Iconix, which paid Jay-Z more than $200 million to acquire “intangible assets” associated with Rocawear. The company has since written down most of the value of those assets, announcing a $169 million writedown in March 2016, and a further $34 million writedown in March of this year.

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