Category: zerohedge

Remember When Obama And His Supporters Hated And Mocked John McCain?

Submitted by Rusty of The Political Insider,

While the left has spent the last few days shedding tears over the passing of Arizona Senator John McCain, it’s important to remember that their admiration for him hasn’t always been so prevalent.

In fact, Barack Obama and his supporters in 2008, when McCain dared to challenge the first African-American candidate for the presidency, offered far less adoration than you’ll see today.

For his part, the former President issued a statement raving about his longtime adversary, even lauding his tragic war experiences as a test that showed McCain’s courage.

“Few of us have been tested the way John once was or required to show the kind of courage that he did,” Obama said in a statement. “But all of us can aspire to the courage to put the greater good above our own.”

It is a far cry from those years in which supporters of Obama belittled McCain’s war record, mocked him for the injuries he suffered, scoffed at his age, and even compared him to a Nazi.

If you’re watching media coverage of the Republican ‘maverick’ today, you’d be skeptical. But yes, all of those things happened just a decade ago.

General Wesley Clark, an ardent defender of Obama who was once considered for the role of Vice President, scoffed at McCain’s war record, or the ‘test’ that Barack referenced.

“I don’t think getting in a fighter plane and getting shot down is a qualification to become president,” he said during a ‘Face the Nation’ interview.

Former Obama adviser Rand Beers attacked McCain saying his “isolation” during much of the Vietnam War (being a POW and tortured), meant that his national security experience was “sadly limited.”

Liberal blogger John Aravosis added to the reprehensible attacks saying, “getting shot down, tortured, and then doing propaganda for the enemy is not command experience.”

Aravosis was referring to a false confession drawn out of McCain after being tortured for multiple days and having his ribs broken in a North Vietnamese prison.

In a later blog post, Aravosis claimed Obama’s people asked him to do “all the dirty work” for the campaign.

What is now a test of courage and a sign of McCain’s strength was once a source of mockery for his political opponents. A political ad released by the campaign even mocked the Republican’s old age and inability to use email, a result of injuries sustained during his years in captivity.

“McCain’s severe war injuries prevent him from combing his hair, typing on a keyboard, or tying his shoes,” Mary Leonard wrote in the Boston Globe in 2000.

Rep. John Lewis painted McCain as comparable to George Wallace, a man fostering “an atmosphere of hate” and “hostility” in 2008. Two days ago he called the ‘hostile’ McCain a “warrior for peace.”

Then there was the far-left Hollywood crowd who adored Obama and remarkably compared McCain to Nazis and Adolf Hitler, paving the way for Trump supporters years later to not give a rip about the disparaging comparisons.

The animated comedy ‘Family Guy’ featured a scene in which characters were transported back to Nazi Germany and tried to blend in wearing uniforms, one of which had a McCain/Palin button.

Madonna, who this go around declared her fantasy was to blow up the White House because a Republican resides there, used a video montage during one of her concerts in 2008 that showed images of McCain alongside photos of Hitler and brutal Zimbabwean President Robert Mugabe.

Not very many offered an ardent defense of McCain at the time. Certainly not the media, and certainly not soon-to-be President Obama and former President George W. Bush.

Yet both men have been invited to deliver a eulogy at the Senator’s funeral services at the National Cathedral.

By contrast, “Mr. McCain quietly declared before his death that he did not want Mr. Trump to take part in his funeral,” the New York Times reported.

How quickly they have forgotten that Obama and his supporters said the very same things Trump did during the heat of a political battle.

One side has been forgiven. The other has not.

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Starter Homes Most Expensive Since Just Before Last Housing Crash

There is a simple reason why the US housing market is headed for its “broadest slowdown in years“: prices for housing are just too high, a new report suggests. Which is odd considering the conventionally accepted narrative that “rising prices are better for everybody.”

According to a new report from the National Association of Realtors, prices for starter homes are the highest they have been since 2008, just prior to the collapse of the housing market, and when Ben Bernanke infamously said that there is no housing bubble  and that “we’ve never had a decline in house prices on a nationwide basis” and therefore we’ll never have one. The housing market suffered its worst crash on record shortly after.

In the second quarter, first time buyers needed 23% of their income in order to afford a typical entry-level home; this was up from 21% in the year prior, and the highest in the past decade.

This, of course, should surprise nobody as price gains in the housing market have long outpaced wages; in fact in most markets the average home price increase is double the growth in hourly earnings.

Now, with the housing market starting to show signs of cooling off, those bearing the brunt of the increases are buyers at the low-end of the market and in areas where supplies are the tightest. This has probably not been helped along by the volatile cost of commodities like lumber which have been impacted by Canadian tariffs, among others.

On top of that, rising interest rates are making mortgage prohibitively expensive for a broad section of the population.

“When prices go up at the entry level, that’s where the affordability issue is most acute,” Wells Fargo economist Charles Dougherty told Bloomberg. “People are hesitant to stretch the amount they’re willing to pay.”

The most expensive markets in the United States were San Francisco and New York City, where Bloomberg reported that the median household needed 65% of its income to buy a house in the second quarter of this year. Similar statistics followed in Los Angeles and Miami, where those numbers were 59% and 55%, respectively.

Perhaps a better way of saying this is that no mere mortal can actually afford to buy there, and the only buyers are members of the 0.01% or those who have an extremely generous mortgage lender.

None of this housing information is discussed at length by the FOMC or the government, which find no problem with a near record number of people getting priced out of the market. Nobody will be surprised when, as prices continue to rise, we are “surprised” by the next housing crisis.

This news comes just days after we reported layoffs taking place at Wells Fargo as a result of the slumping housing market and slower mortgage applications, as a result of collapsing mortgage loan demand. Last Friday, Wells Fargo announced it was cutting 638 mortgage employees as the nation’s largest home lender is hit by a crippling slowdown in the business.

“After carefully evaluating market conditions and consumer needs, we are reducing to better align with current volumes,” Wells Fargo spokesman Tom Goyda said in an emailed statement according to Bloomberg.

As we reported back in March that the “Bank Sector Is In Peril As Refi Activity Crashes Amid Rising Rates” and as interest rates have continued to rise, Wells Fargo has been contending with the end of a refinancing boom that helped push profits to a record.

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The Tectonic Plates Of Geopolitics Are Starting To Shift

Authored by Mike Krieger via Liberty Blitzkrieg blog,

The United States is currently waging economic warfare against one tenth of the world’s countries with cumulative population of nearly 2 billion people and combined gross domestic product (GDP) of more than $15 trillion.

These include Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea and others on which Washington has imposed sanctions over the years, but also countries like China, Pakistan and Turkey which are not under full sanctions but rather targets of other punitive economic measures.

In addition, thousands of individuals from scores of countries are included in the Treasury Department’s list of Specially Designated Nationals who are effectively blocked from the U.S.-dominated global financial system. Many of those designated are either part of or closely linked to their countries’ leadership…

But in recent months it seems that America’s unwavering commitment to fight all of the world’s scourges has brought all those governments and the wealthy individuals who support them to a critical mass, joining forces to create a parallel financial system which would be out of reach of America’s long arm. Should they succeed, the impact on America’s global posture would be transformational.

– From the recent article: The Anti-Dollar Awakening Could Be Ruder and Sooner Than Most Economists Predict

The peak of American empire has already come and gone, but this reality is not yet widely understood due to the continued dominance of the global financial system by the U.S. dollar, still the world’s preeminent reserve currency. U.S. leaders have always used the USD as a weapon, but it’s only in recent years that geopolitical rivals and long-standing allies alike have started to come to an increasingly vocal understanding that the unipolar role played by the U.S. in the world’s centralized financial system is well past its expiration date.

I think history will show Trump’s decision to unilaterally scrap the Iran deal (JCPOA) was the catalyst that caused much of rest of the world to get serious about creating alternative financial rails on which to conduct global business. Nation-states the world over are coming to the obvious conclusion that it’s virtually impossible to execute independent foreign policy in the content of a global financial system so completely dominated by the U.S.

European countries that entered the Iran deal wish to remain in it, but this has been complicated by the Trump administration’s decision to use the global financial system as a weapon. Although this angered leaders across the pond back in May when it first went down, it was unclear whether they’d just roll over as usual. Months later, it appears perhaps not.

First, we saw comments last week from Germany’s foreign minister Heiko Maas. Here are a few excerpts from his widely read column published last week at Handelsblatt.

Via Business Insider:

The US monopoly over the global payments infrastructure has been challenged by Germany’s foreign minister, Heiko Maas, who has suggested that the European Union should set up its own payment system that would give Brussels independence from Washington.

Maas wrote in the German daily Handelsblatt on Tuesday that the EU should “strengthen European autonomy by creating payment channels that are independent of the United States – a European Monetary Fund and an independent SWIFT system.”

“Europe should not allow the U.S. to act over our heads and at our expense,” Maas wrote.

Maas called for a “balanced partnership” with the U.S., in which Europe would fill gaps in the world left by the American withdrawal. He said Europe must “form a counterweight when the U.S. crosses red lines.”

“It is high time to re-evaluate our partnership…The Europeans must become a mainstay of the international order, a partner for all who are committed to this order,” Maas wrote.

Those are strong words, words that have not been walked back since. In fact, other historic U.S. allies feel emboldened to echo similar sentiments. As reported by Bloomberg earlier today:

“With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions,” French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF. “I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist.”

“We have to react and strengthen Europe’s autonomy and sovereignty in trade, economic and finance policy,” Maas said in a speech in Berlin. Canadian Foreign Minister Chrystia Freeland also spoke at the event and said that her nation shares the goal of preserving a multilateral world order.

If this sort of talk was merely limited to a couple of European nations expressing frustration with SWIFT, I probably wouldn’t have written this post. Where it gets really interesting is when you compare the sentiments highlighted above with the extraordinary statement made by Pakistan’s recently elected Prime Minster Imran Khan in the clip below.

But that’s not all. Take a look at the following excerpts from an article written by Daniel Sneider, Lecturer in East Asian Studies at Stanford University, in Tokyo Business Daily.

Inside the national security bureaucracy, there is growing alarm over relations with South Korea. On the surface, President Moon and his government continue to support U.S. diplomacy and reinforce its messages to Pyongyang. But things are starting to shift, with Seoul telling administration officials that the nuclear issue is basically between the U.S. and North Korea and that they want to separate their engagement with the North from progress on that issue.

“We have a big problem coming with South Korea,” a senior official involved in the talks told me. “It has reached the point where the South Koreans are determined to press ahead. They no longer feel the need to act in parallel with us.”

Moon is planning a visit next month to Pyongyang. He is eager to proceed with projects such as rail and pipe lines that will run from South, through the North, to Russia and China, as he outlined in a recent address.

Taken together, we can see a big picture starting to emerge. Countries around the world, including many longstanding U.S. allies, are starting to very publicly express frustration with U.S. imperial bullying, as well as deep concern with the limits placed on national sovereignty by a unipolar world centralized in Washington D.C.

We’re beginning to see the emergence of a global consensus related to two crucial geopolitical perspectives:

  1. A growing understanding that a world unilaterally controlled by an imperial U.S. which demands all other nations accept vassal status is no longer tenable.

  2. Recognition that a more multi-polar world cannot truly come into being without displacing, or at the very least creating, a viable alternative(s) to the USD-centric global financial system.

These developments have not been lost on many in the beltway, which is precisely why U.S. tech giants are being rapidly weaponized in a struggle to maintain imperial dominance. While the seemingly coordinated deplatforming of Alex Jones was the canary in the coal mine, the tech giants have also moved against several countries seen as problematic when it comes to achieving full spectrum dominance of the U.S. empire, including Venezuela, Iran and of course Russia.

As I tweeted last week:

It’s really undeniable at this point. U.S. tech giants are merely extensions of the U.S. shadow government — complicit organs of the imperial state masquerading as private companies.

While unquestionably disturbing, I see recent moves by the tech giants as part of a desperate response to the huge cracks developing beneath the post-World War II geopolitical paradigm. A status quo confident in its position or role in the world would never resort to such blatant attempts at censorship. This is all rooted in fear, insecurity and a futile desire to hold onto a world that is vanishing. 

I’ve discussed these themes continually over the years, but it’s nevertheless extraordinary to see it begin to play out. The tectonic plates of geopolitics are finally starting to shift. Slowly at first, rapidly later, and I expect the world to be entirely different in structure by around 2025.

Today’s post should be seen as an update to a four part series I published earlier this year. Links below.

Part 1: The Road to 2025 – Prepare for a Multi-Polar World
Part 2: The Road to 2025 – Russia and China Have Had Enough
Part 3: The Road to 2025 –USD Dominated Financial System Will Fall Apart
Part 4: The Road to 2025 – A Very Bright Future If We Demand It

*  *  *

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Top Student Loan Official Quits, Blames Trump; Warns “The System Is Rigged”

The top federal official overseeing the massive $1.5 trillion student loan market bubble resigned Monday, citing in a letter what he says is the Trump administration’s blatant disregard toward protecting the nations 44 million Americans struggling with student loan debt (which, however, they had no problem taking out).

In a fiery resignation letter, Seth Frotman, who until Monday morning was the Student Loan Ombudsman at the Consumer Financial Protection Bureau (CFPB), warned that current leadership “has turned its back on young people and their financial futures.” i.e., loans are not being forgiven. The letter was addressed to the Honorable Mick Mulvaney, the Acting Director of the CFPB.

In the letter, obtained by NPR, Frotman unloads on Mulvaney and the Trump administration of undermining his ability to defend the millions of millennial loan borrowers struggling to stay afloat. There was no mention of explaining to said millions of millennials why taking out debt in the first place is a bad idea if there are no prospects of ever repaying it.

“I had hoped to continue this critical work in partnership with you and your staff by using our authority under law to stand up for student loan borrowers trapped in a broken system. Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”

Congress created the Student Loan Ombudsman office when it formed the CFB, citing the critical need for a specific office to handle student loan complaints.

Frotman’s office was quite powerful; they worked with the bureau’s enforcement staff to pinpoint bad behavior in the student loan market as well as an advocate for student loan borrowers. Since inception, the Student Loan Ombudsman office returned $750 million to harmed borrowers.

“Frotman’s office was central to processing tens of thousands of complaints from student loan borrowers against their servicers. It also was the office at the center of the lawsuits against for-profit colleges like Corinthian Colleges and is currently heading up a lawsuit between the CFPB and Navient. The Navient lawsuit has been mired in bureaucratic red tape as the Department of Education, headed by Betsy DeVos, has been unwilling to help the CFPB with their lawsuit,” said Bloomberg.

Under Mulvaney, Frotman’s student loan office was severely downgraded, which scaled back its enforcement work. Mulvaney’s office is currently in the process of revising or rescinding all of the rules and regulations it put into place under the Obama administration.

Frotman concludes the resignation letter with a warning that the “system is rigged to favor the most powerful financial interests.” He also mentioned millions of borrowers are “trapped in a broken student loan system”, by which he meant one in which borrowers are expect to repay their lenders:

In my time at the Bureau I have traveled across the country, meeting with consumers in over three dozen states, and with military families from over 100 military units. I have met with dozens of state law enforcement officials and, more importantly, I have heard directly from tens of thousands of individual student loan borrowers.

A common thread ties these experiences together — the American Dream under siege, told through the heart-wrenching stories of individuals caught in a system rigged to favor the most powerful financial interests. For seven years, the Consumer Financial Protection Bureau fought to ensure these families received a fair shake as they as they strived for the American Dream.

Sadly, the damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country.

For these reasons, I resign effective September 1, 2018. Although I will no longer be Student Loan Ombudsman, I remain committed to fighting on behalf of borrowers who are trapped in a broken student loan system.

As for millions of the millennials who are financially wrecked with student loans and shitty jobs in the gig economy, and whose only hope was to get their debt forgiven, perhaps complain to the Fed and demand that during the next bailout their debt be monetized too.

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Damning UN Report Calls For Myanmar Generals To Be Prosecuted For Genocide

Authored by Jessica Corbett via CommonDreams.org,

Following a United Nations Human Rights Council fact-finding mission in Myanmar, a damning U.N. report published Monday concludes that the nation’s military leaders, including its top commander, should be further investigated and prosecuted for genocide, crimes against humanity, and war crimes committed against Rohingya Muslims in the wake of a violent crackdown last August that forced more than half a million refugees to flee to neighboring Bangladesh.

“The gross human rights violations and abuses committed in Kachin, Rakhine, and Shan states,” which “stem from deep fractures in society and structural problems that have been apparent and unaddressed for decades,” the report asserts, “undoubtedly amount to the gravest crimes under international law.”

The report (pdf) comes from a yearlong investigation conducted by a three-member panel, which relied on 875 in-depth interviews with victims and eyewitnesses, satellite images, and verified documents, photographs, and videos. It documents crimes including murder, enforced disappearance, enslavement, imprisonment, torture, rape, and sexual slavery.

While the report determines that six leaders of the Myanmar military, or Tatmadaw—most notably Commander-in-Chief Senior-General Min Aung Hlaing—bear the greatest responsibility for such crimes, it also charges that State Counsellor Daw Aung San Suu Kyi, a Nobel Peace Prize laureate, “has not used her de facto position as head of government, nor her moral authority, to stem or prevent the unfolding events in Rakhine State.”

Among the report’s key recommendations, it declares, “The international community, through the United Nations, should use all diplomatic, humanitarian, and other peaceful means to assist Myanmar in meeting its responsibility to protect its people from genocide, crimes against humanity, and war crimes.”

It also urges the U.N. Security Council to “ensure accountability for crimes under international law committed in Myanmar, preferably by referring the situation to the International Criminal Court or alternatively by creating an ad hoc international criminal tribunal,” as well as to “adopt targeted individual sanctions, including travel bans and asset freezes, against those who appear most responsible for serious crimes under international law” and to “impose an arms embargo on Myanmar.”

Human rights advocates responded to the findings, which bolster previous reportsfrom U.N. officials and international news agencies, with immediate calls for actions.

Brad Adams, Asia director at Human Rights Watch, said that the “powerful report and clear recommendations demonstrate the obvious need for concrete steps to advance criminal justice for atrocious crimes, instead of more hollow condemnations and expressions of concern,” especially considering that “so far, condemnations without action by U.N. member states have only emboldened a culture of violence and oppression in Myanmar.”

Tirana Hassan, director of crisis response at Amnesty International, said the report makes “clear that the Myanmar authorities are incapable of bringing to justice those responsible,” which means that “the international community has the responsibility to act to ensure justice and accountability. Failing to do so sends a dangerous message that Myanmar’s military will not only enjoy impunity but is free to commit such atrocities again.”

The report will “have a big impact internationally, coming from the main U.N.-mandated body investigating the violence against the Rohingya, and also covering armed conflict in Shan, and Kachin states,” Richard Horsey, a former U.N. diplomat in Myanmar and longtime Yangon-based analyst, told the Washington Post. “Its specific finding that there is sufficient grounds for investigation and prosecution of military commanders for genocide is likely to have particularly serious diplomatic, not only legal, consequences.”

After the report’s release, Facebook – according to a company blog post – removed “18 Facebook accounts, one Instagram account, and 52 Facebook Pages, followed by almost 12 million people,” specifically banning  20 individuals and organizations, including the commander-in-chief and the military’s Myawady television network, “to prevent the spread of hate and misinformation.” Reuters noted that the “action means an essential blackout of the military’s main channel of public communication.”

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Manafort 11th Hour Plea Deal In Second Trial Broke Down During Jury Deliberations

A last-minute deal to resolve a second set of charges against former Trump campaign chairman Paul Manafort broke down last week shortly before a Virginia jury convicted him of eight counts of fraud, reports the Wall Street Journal, citing people familiar with the matter. 

The plea talks on the second set of charges stalled over issues raised by Special Counsel Robert Mueller, one of the people said. It isn’t clear what those issues were, and the proposed terms of the plea deal couldn’t immediately be determined. –WSJ

The plea negotiations were aimed at forestalling Manafort’s second trial, scheduled for September 17 in Washington D.C., as prosecutors and defense attorneys argue over how to present that case to the jury – including what evidence will be allowed at trial. The two sides will meet Tuesday morning before US District Judge Amy Berman Jackson. 

Hilariously, President Trump praised Manafort for refusing to “break” under pressure, “unlike Michael Cohen” – when Manafort was about to do just that before Mueller got in the way. 

Manafort’s charges were split into two separate trials on related allegations because he declined to allow prosecutors to combine them into one case. 

The Virginia indictment was related to filing false tax returns between 2010 and 2014 while misleading several US banks in order to obtain millions of dollars in loans in 2016. Following his conviction last week, a juror admitted that while Manafort was convicted on eight counts, the other 10 counts were declared a mistrial due to a lone juror holding out despite “overwhelming” evidence. 

Prosecutors will have until Wednesday to tell the court whether they plan to retry Manafort on the remaining 10 counts, however both sides are preparing for their D.C. trial in three weeks. 

Manafort’s second trial will focus on his failure to register as a lobbyist for the former Ukrainian ruling party between 2008 and 2014, as well as conspiracy to launder millions of dollars of income from that work from US authorities. 

In June, prosecutors tacked on charges that Manafort attempted to influence the testimony by potential witnesses – a move which landed the former Trump aide in jail as he awaited trial. 

In a filing late Friday, prosecutors said they expected to take 10 to 12 days to present their case. Last week they turned over to Mr. Manafort’s team more than 1,500 exhibits they plan to present. –WSJ

Manafort’s attorneys haven’t said whether they will present a defense, however if they did it would take approximately three or four days – adding that they are in the process of identifying expert witnesses who can testify on rules governing money-laundering and foreign-lobbying registration.

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How To Manipulate People With Interest Rates

Authored by Frank Shostak via The Mises Institute,

Most experts agree that through the manipulation of short-term interest rates, the central bank by means of expectations regarding future interest rate policy, can also dictate the direction of long-term interest rates. In this way of thinking expectations regarding future short-term interest rates are instrumental in setting the long-term rates. (Note the long-term rates are an average of short-term rates in this way of thinking.)

Given the supposedly almost absolute control over interest rates, the central bank by correct manipulations of short-term interest rates could navigate the economy along the growth path of economic prosperity, so it is held. (In fact, this is the mandate given to central banks.)

For instance, when the economy is thought to have fallen below the path of stable economic growth it is held that by means of lowering interest rates the central bank could strengthen aggregate demand. This in turn will be supportive in bringing the economy onto a stable economic growth path.

Conversely, when the economy becomes “overheated” and moves onto a growth path above that which is deemed as stable economic growth, then by lifting interest rates the central bank could slow the economy back onto the path of economic stability.

But is it valid to suggest that the central bank is the key factor in the determination of interest?

Individuals Time Preferences and Interest Rates

According to great economic thinkers such as Carl Menger and Ludwig von Mises, interest is the outcome of the fact that every individual assigns a greater importance to goods and services in the present against identical goods in the future.

The higher valuation is not the result of capricious behavior, but because of the fact that life in the future is not possible without sustaining it first in the present. According to Carl Menger,

Human life is a process in which the course of future development is always influenced by previous development. It is a process that cannot be continued once it has been interrupted, and that cannot be completely rehabilitated once it has become seriously disordered. A necessary prerequisite of our provision for the maintenance of our lives and for our development in future periods is a concern for the preceding periods of our lives. Setting aside the irregularities of economic activity, we can conclude that economizing men generally endeavor to ensure the satisfaction of needs of the immediate future first, and that only after this has been done, do they attempt to ensure the satisfaction of needs of more distant periods, in accordance with their remoteness in time.

Hence, various goods and services that are required to sustain man’s life at present must be of a greater importance to him than the same goods and services in the future.

On this Menger wrote,

To the extent that the maintenance of our lives depends on the satisfaction of our needs, guaranteeing the satisfaction of earlier needs must necessarily precede attention to later ones. And even where not our lives but merely our continuing well-being (above all our health) is dependent on command of a quantity of goods, the attainment of well-being in a nearer period is, as a rule, a prerequisite of well-being in a later period. Command of the means for the maintenance of our well-being at some distant time avails us little if poverty and distress have already undermined our health or stunted our development in an earlier period.

Similarly, Mises wrote that,

He who wants to live to see the later day, must first of all care for the preservation of his life in the intermediate period. Survival and appeasement of vital needs are thus requirements for the satisfaction of any wants in the remoter future.

Life sustenance therefore serves as the standard of valuation regarding present goods versus future goods. According to Mises,

If he (the consumer) were not to prefer satisfaction in a nearer period of the future to that in a remoter period, he would never consume and so satisfy wants. He would always accumulate, he would never consume and enjoy. He would not consume today, but he would not consume tomorrow either, as the tomorrow would confront him with the same alternative.

As long as the means at an individual’s disposal are just sufficient to accommodate his immediate needs, he will most likely assign less importance for future goals. With the expansion of the pool of means, the individual can now allocate some of those means toward the accomplishments of various ends in the future.

Life Sustenance and Zero Interest Rate

As a rule, with the expansion of the pool of means people tend to allocate more means toward the accomplishment of remote goals in order to improve their quality of life over time.

With scarce means, an individual can only consider very short-term goals, such as making a primitive tool. The meager size of his means does not permit him to undertake the making of more advanced tools. With the increase in the means at his disposal, he could consider undertaking the construction of better tools.

No individual undertakes a goal, which promises a zero return. The maintenance of the process of life over and above hand to mouth existence requires an expansion in wealth. The wealth expansion implies positive returns. It is through the generation of wealth, after allowing for the maintenance of life and well-being in the present, that savings become possible.

These savings in turn permit further expansions in wealth. The expansion in the pool of real wealth permits a greater allocation of savings toward longer-term goals, implying a greater preference for future goods, i.e., a lowering of interest rates.

While prior to the expansion of real wealth the need to sustain life and well-being in the present made it impossible to embark on various long-term projects, with more wealth this has become possible. The extra wealth that becomes available is invested because the expected future benefits outweigh the benefits of consuming them in the present.

Interest rates Guide Business Decision Makers

Since in the market economy interest is calculated in money terms, it would appear that money is a determining factor of the level of interest. Being the medium of exchange, money only facilitates the flow of real savings from lenders to borrowers, or from suppliers to demanders. Money however, has nothing to do with the fact that interest is the outcome of a higher valuation of present goods versus future goods.

Changes in interest rates instruct businesses about the feasibility of undertaking various capital projects. A fall in the interest rate will mean that a greater proportion of means was made available for these projects. Conversely, a rise in the interest rate will imply that less funding is available to these projects.

In setting an interest rate, both a buyer and a seller of real savings must allow for the fact that central banks relentlessly depreciate the purchasing power of money by means of the printing presses.

Hence, expectations for depreciation in the purchasing power of money will contribute to an increase in interest expressed in money terms. Conversely, expectations that money’s purchasing power will increase will contribute towards the lowering of interest.

Observe that monetary pumping, which erodes the purchasing power of money, also weakens the flow of real savings by setting an exchange of nothing for something. This weakens the formation of real wealth, which in turn increases people’s preference toward present consumption and hence to a rise in the underlying interest rates that corresponds to individuals’ time preferences. To conclude then over time, monetary pumping lifts the level of interest rates.

Does the Lowering of Interest Permit Greater Capital Formation?

Being the outcome of the fact that life sustenance imposes a greater importance to present goods versus future goods, interest as such does not cause more or less investment, as popular theories have it.

It is true that businessmen react to interest rates. In this sense, the interest rate can be regarded as an indicator. What permits an expansion of capital goods production is not interest rates as such but the increase in the pool of real savings. A greater allocation of real saved wealth toward the buildup of capital goods, manifested by the lowering of people’s time preferences — the lowering of interest rates. (Note again what enables the expansion of capital goods investments is the greater allocation of real saved wealth and not the lowering of interest rate as such, which just reflects the greater allocation of real wealth toward the capital investment.)

When interest rates are not tampered with, they serve as an important tool in facilitating the flow of real savings toward the build-up of a wealth-generating infrastructure.

Whenever the central bank tampers with interest rates it falsifies this indicator, thereby breaking the harmony between the production of present consumer goods and the production of capital goods, i.e., tools and machinery. An overinvestment in capital goods and an underinvestment in consumer goods emerges. While an overinvestment in capital goods results in a boom, the liquidation of this overinvestment produces a bust. Hence, the boom-bust economic cycle. On this Rothbard wrote,

…once the consumers reestablish their desired consumption/investment proportions, it is thus revealed that business had invested too much in capital goods (hence the term “monetary overinvestment theory”), and had also underinvested in consumer goods. Business had been seduced by the government tampering and artificial lowering of the rate of interest, and acted as if more savings were available to invest than were really there.

Conclusions

To conclude, as long as life sustenance remains the ultimate goal of human beings they will continue to assign a higher valuation to present goods versus future goods and no central bank interest rate manipulation will be able to change this.

Any attempt by central-bank policy makers to overrule this fact will undermine the process of real wealth formation and thus lower people’s living standards.

The central bank can try to manipulate the interest rate to whatever level it desires. However they cannot exercise control over the underlying interest rates as dictated by people’s time preferences. When the central bank engages in a persistent lowering of interest rates this policy sets in motion an increase in the underlying interest rates as dictated by people’s time preferences. (The exact opposite of the central bank’s intention.)

It is not going to help true economic growth if the central bank artificially lowers interest rates whilst the people did not allocate an adequate amount of real savings to support the expansion of capital goods investments. It is not possible to replace real saved wealth with more money and the artificial lowering of interest rates. It is not possible to generate something out of nothing as suggested by Keynes and his many followers.

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How Mexico Just Stabbed Canada In The Back

In what was the biggest economic news of the day, Donald Trump concluded bilateral trade negotiations with Mexico, a deal which he called the US-Mexico Trade Agreement (profiled previously) and which will replace the trilateral NAFTA which has – for now at least – been scrapped until Canada also comes to the negotiating table and hammers our an agreement with the US from a position of weakness and virtually no negotiating capital.

There were some odd twists in the announced deal, for example the agreement on the “sunset clause”, which as some pointed out is strange as it is a “trilateral matter” – i.e., one which would involve Canada – and it was unclear how it squares with the U.S.Mexico pledge that their talks were purely on bilateral issues.

Confirming that Trump was engaging in some good old “divide and conquer”, was the announcement from a White House official that, if Canada doesn’t agree to a renegotiated NAFTA, it will go ahead with a two-way deal with Mexico, although another official claimed that splitting up the negotiations is “standard practice and not about squeezing Canada.”

That may not have been exactly true, because even though Mexico’s foreign minister Luis Videgaray said it’s necessary for Canada to be part of the deal, he then said that if a trilateral Nafta deal with Canada is impossible, a bilateral agreement between the U.S. and Mexico would also be acceptable.

At this point the alarm bells went off, and as Globe and Mail correspondent Adrian Morrow said, “it looks like the U.S. and Mexico went far beyond bilateral issues and agreed to a pile of trilateral stuff without Canada.” He also noted that while it was unclear whether any of the negotiated terms were okay with Canada, “it puts enormous pressure on Ottawa to agree or hold up the deal.”

Furthermore, Morrow points out that unless Canada already agreed to these trilateral issues — sunset compromise, IP etc. — via its back-channel with Mexico, “the U.S. and Mexico have just massively cranked up the pressure.“

In other words, Mexico just stabbed Canada in the back in order to get a deal with the US on preferential terms to Canada, just as Trump desired, and in vivid demonstration of applied game theory in practice.

Adding pressure on Canada, Morrow quoted Videgaray who said that Mexico’s deal with the U.S. is a “comprehensive” agreement, and warned that if Canada doesn’t reach a deal this week, it will be much harder for Ottawa to negotiate any changes to what’s already been agreed.

Which is a not very subtle ultimatum to Canada to get on board or lose any leverage it may have; and although Videgaray tried to wash his hands and said that Mexico can’t control state of relationship between U.S. and Canada, the message was received loud and clear.

Here Morrow makes two key observations: “because of U.S. trade law, it would be very difficult for the U.S. and Mexico to do a bilateral without Canada at this point,” but confirming the dagger in the back interpretation, “it looks like Mexico is helping Trump turn the pressure up on Canada. They agreed a nearly-complete deal without Canada at the table” something which Videgaray confirmed saying today is a good day for Mexico, U.S. relations. 

Turns out that the art of the deal does work on occasion.

Meanwhile, although it is possible that there’s a secret Canada-Mexico understanding here, if there isn’t, “it’s hard to see this as anything other than Canada getting played”, Morrow wryly observes, and adds that “Mexico is blowing up the Canadian spin that Mexico and the U.S. weren’t agreeing anything Canada needed to be at the table for.”

As a final point, much of what was agreed today was “style over substance”, as the substance of the deal (mostly) doesn’t look that bad for Canada:  Mexico gave up more with its concessions on autos. But as the Canadian journalist cautions, “this is definitely not how Canada would have chosen to negotiate, cut out of talks and now pressured from two sides to agree a deal in a week.”

So what does being stabbed in the back by Mexico mean for Canada? Morrow concludes that Ottawa will “probably spend all of its negotiating capital this week trying to keep Chapter 19, which Mexico has apparently agreed to scrap, nevermind trying to defend on any of the other things it won’t like in the U.S.-Mexico deal.”

Said otherwise, Mexico made some concessions but kept its US market exposure, even as Canada is now cornered and has virtually no leverage or political capital left.

The winner from today’s deal?

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YDSA Urges Socialists To ‘Infiltrate’ Public Education

Authored by Zachary Petrizzo via Campus Reform,

The Young Democratic Socialists of America organization is urging socialists to “take jobs as teachers” in order to exploit the “political, economic, and social potential the industry holds.”

“Why Socialists Should Become Teachers,” an 11-page pamphlet crafted jointly by YDSA and the Democratic Socialist Labor Commission, contends that education is “a strategic industry to organize,” and offers prospective socialist educators “a basic roadmap for how to get a job in education.”

The pamphlet begins by outlining the “success” of the recent West Virginia teachers strike, which it attributes to “creative shop floor organizing” from teachers who believed in “socialist politics.”

“Our immediate win in West Virginia was a 5% raise for all public sector workers, plus halting charter school legislation and attacks on seniority,” the document boasts.

“But crucially, our movement’s demand was that the money come from highly profitable corporations that have long exploited West Virginia’s natural wealth.”

While the funding debate has yet to be resolved, the pamphlet credits socialist agitators with pressing for corporate tax increases, saying most union leaders simply expect lawmakers to “figure out where the money comes from” after securing pay raises.

“Socialists have a long history of involvement in the workplace,” the booklet asserts, noting that while existing labor unions are imperfect from a socialist perspective, the Democratic Socialists of America (DSA) organization believes it is now “in a position to develop a concerted, coordinated presence in unions, to help shape the militancy and political ideology of those unions, and ultimately to play a role in building working class power.”

Acknowledging that there are other industries in which “workers are far more oppressed,” the document contends that education is nonetheless a “strategic” sector because it is so pervasive and heavily unionized that it can impact the “political and economic demands for the working class as a whole.”

In addition, it argues that teachers can leverage their relationships with students and their families to engage in “campaigns around police brutality, immigrant rights, and environmental justice.”

Notably, the section concludes by pointing out that teaching “is still one of the most stable professions in the United States,” asserting that “even in West Virginia, where teachers experienced some of the lowest pay in the nation, they were sometimes the highest-paid workers in their communities.”

After briefly outlining some personal and professional reasons that socialists should consider a career in teaching, the pamphlet turns its attention to the question of “How to Become a Teacher,” stating that while there are certain “barriers” to entering the profession, these can be “overcome.”

Although teachers have traditionally pursued a “standard” certification through a bachelor’s or master’s degree in education, for instance, the document notes that “as teaching has become increasingly deprofessionalized in the past twenty years or so, ‘accelerated’ teacher preparation programs have spread,” enabling those with “a generic bachelor’s degree” to “enter the classroom with little to no teaching experience under a ‘transitional’ certification.”

For those who might be reluctant to engage directly in teaching, the handbook suggests non-teacher positions that are often represented by education unions, such as “school secretaries, guidance counselors, psychologists, speech therapists, parent coordinators, and special education support staff.”

“There is a growing national network of educators in DSA working to transform our schools, our unions, and our society,” the section concludes.

“Being a member of DSA means there is a pre-existing network of fellow socialists you can tap for support as you undertake this work.”

The DSLC and the YDSA are shipping out free copies of the pamphlet to those who “plan to use” them, and has also made a version available online.

“Teaching is proving to be one viable way for socialists to get into the labor movement and wage class struggle in a key industry that is under attack by capital,” the pamphlet declares.

“Teachers across the country and indeed the world have shown us that if we organize in the schools, we can not only win concessions from the millionaire and billionaire class, but can also set a powerful example for the entire working class to follow.”

Campus Reform has reached out to both the YDSA and the DSLC for comment, but neither has responded.

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Trump Reverses, Orders Flags At Half-Staff For McCain After Angry Backlash

President Trump on Monday issued a formal statement following the death of Senator John McCain after drawing bipartisan rebuke from veterans groups, legislators and pundits alike. 

In a Monday proclamation, Trump said: “Despite our differences on policy and politics, I respect Sen. John McCain’s service to our country and, in his honor, have signed a proclamation to fly the flag of the United States at half-staff until the day of his interment.” 

Trump also “authorized military transportaion of Senator McCain’s remains from Arizona to Washington D.C., military pallbearers and band support, and a horse and caisson transport during the service at the United States Naval Academy.” 

Vice President Mike Pence was asked to offer an address at a Friday ceremony at the Capitol, and called for the attendance of Chief of Staff John Kelly, Secretary of Defense James Mattis and Ambassador John Bolton “to represent my administration at his services.” 

McCain and Trump had a markedly acrimonious relationship, which included McCain withdrawing support for Trump during the 2016 US election, the hand-delivery of the infamous “Steele Dossier” to former FBI Director James Comey, and casting the deciding vote which killed the repeal of Obamacare. 

Trump’s reversal also follows a report by the Washington Post that Trump initially rejected recommendations to issue an official statement from White House press secretary Sarah Huckabee Sanders, Chief of Staff John Kelly and other White House aides – instead opting on Saturday to fire off a terse tweet offering “deepest sympathies.” 

Moreover, after spending the weekend following McCain’s death at half-staff, the White House flag was hoisted to full staff on Monday morning – only to be lowered again to half-staff upon Trump’s proclamation. 

In response to Trump’s treatment of McCain, veterans group AMVETS issued a statement over Twitter calling for him to reverse course: 

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