Category: zerohedge

After describing it as “Orwellian nonsense” last month, the Trump administration is again pushing back against China’s request that US airlines change how they refer to Taiwan to make clear that it is a part of China.

“This is Orwellian nonsense and part of a growing trend by the Chinese Communist Party to impose its political views on American citizens and private companies,” the White House press secretary, Sarah Huckabee Sanders, said in a statement.

According to the Financial Times, US officials have asked United, American Airlines and Delta not to comply with China’s demands, which stipulate that airlines should refer to Taiwan as “Taiwan, China” on their websites and maps. China sent letters earlier this year to 36 foreign airlines demanding they remove any language which implied that Taiwan was an independent state, saying they have until later this month to comply.

The White House has urged airlines to push back and tell China that this issue should be handled by the US and Chinese governments.

American Airlines CEO Doug Parker told the FT last month that the Taiwan issue is “between countries.”

“The United States has replied to the Chinese government and as a result we are following the direction of the US government,” said Mr Parker, who would not say if he viewed the order as Orwellian nonsense. “I’m not certain if we are obliged to [heed the US government guidance] but right now it is between our government and their government and we are following the guidance of our government.”

While the White House is trying to reassure carriers that it will handle the issue with China, air lines are nervous because they could lose access to valuable routes in China at a time when the Chinese market is becoming increasingly important for aviation.

“If airlines are denied landing rights, they will simply have to deal with the commercial realities presented by the Chinese government and US top cover won’t help,” said Evan Medeiros, a former White House Asia official. “The only message the Chinese will understand is if the airlines, for their own reasons, are not willing to accept Chinese demands. The Chinese know the pressure points, and it is airline operations and not government-to-government interactions.”

A group of US senators recently wrote to the airlines urging them to rebuff China’s request.

A bipartisan group of US senators, including Cory Gardner from Colorado and Marco Rubio from Florida, ​recently wrote to United and American to urge them to resist the “long arm” of the Chinese government. Mr Gardner told the Financial Times that the airlines should think twice about complying with the Chinese order, and said the US should consider retaliatory measures again Chinese airlines if necessary.

Australia’s Qantas Airline and several other foreign airlines have decided to comply with China’s request, according to Business Insider.

Qantas said it’s in the process of changing over all references to Taiwan in its systems and on its website, but that finalizing such a move will take time.

“Our intention is to meet the requirements. It is just taking time to get there,” CEO Alan Joyce told reporters at the annul meeting of the International Air Transport Association.

[…]

“The IT and technology that underpins our websites and the connectivity takes time for us to get to grips with changes that need to be put into the programming stages of that,” the statement read.

[…]

“An inter-governmental agreement on the naming and grouping of states and territories would be a helpful reference. In the meantime, airlines wishing to serve the China market are doing their best to comply with China’s very stringent requirements.”

Meanwhile, a spokesman for the International Air Transport Association said its members had no “no wish to make political statements” in their descriptions of markets. 

Air Canada, Air France, Malaysia Airlines, and a handful of other carriers have changed their references to Taiwan since receiving letters from Beijing. Lufthansa and British Airways made similar changes earlier this year after Delta Air Lines was censured by China for listing Taiwan as a country on its website. China has also been pressuring hotel chains and retailers. White House officials were reportedly angered earlier this year when Delta apologized to China for labeling Taiwan and Tibet as countries on their website.

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Authored by Adam Taggart via PeakProsperity.com,

Regulations? We don’t need no stinking regulations!

When the dust settled after the Great Financial Crisis, we learned that the big banks had behaved in overtly criminal ways. Yet none of their executives would be held criminally accountable. 

And while legislation was passed in the aftermath to place restrictions on the ‘Too Big To Jail/Fail’ banks, it was heavily watered down and has been under attack by financial system lobbyists ever since.

To talk with us today about the perpetual legislative warfare pitting citizens on one side and lobbyists (and many lawmakers) on the other, is Bartlett Naylor. Naylor is a veteran of the Wall Street wars. He spent a number of years as an aid to Senator William Proxmire at a time when Proxmire was head of the Senate Banking Committee. Naylor himself served as that committee’s Chief of Investigations.

Sadly, Naylor sees the banks winning out here. More and more of the prudent restraints placed on the banking system are being dismantled, as further evidenced by the recent bill President Trump just signed:

The President signed S2155 last week. This bill has 40 or so provisions in it. The most troubling one reduces what’s known as enhanced supervision for a class of banks that are between $50 billion and $250 billion in assets.

Enhanced supervision means tighter capital controls. Capital is assets minus liabilities — the amount of net worth, if you will, of the particular bank. You think of banks of being very solid; but in fact, they’re in hock. They are highly leveraged. 95% of their assets are financed by debt. They really don’t own that much. They mostly owe things.

Stress tests will be reduced. A stress test is to say, “All right bank. Let’s look at your portfolio and decide that of things are going to go bad in the economy—defaults will rise, unemployment will rise — what’s going to happen to your portfolio? And based on that, we will decide how much capital you should have.” In other words, that gap between assets and liabilities, and how much dividends you can pay out, or in fact, executive bonuses, etc. Let’s say you fail. What will happen to all of your assets? Is there a way that this particular part of your bank can be sold to somebody?

So for example, with the failure of Lehman Brothers, they couldn’t sell it. They couldn’t resolve it quickly enough when it was failing. They tried to find buyers for all or parts of the bank. They came close with Mitsubishi, with Barclays, but in the end, there wasn’t a game plan to see how we could break up this bank and avoid a bankruptcy.

Living wills are supposed to help that. A living will exercise is reduced for this class of banks. That’s problematic, because this class of banks would have included Countrywide. Countrywide is now a division of Bank of America. It actually is even a larger class of banks than IndyMac, which was the biggest hit on the Deposit and Insurance Fund. That was only about a $30 billion bank.

Collectively, these are two dozen banks. So you’ve got 25 or the 38 largest banks took about $50 billion in TARP money. They’re not the Boy Scout banks either. We’re talking about all the misconduct at JP Morgan. About half of them have misconduct charges against them just in the last half decade. That’s the most troubling provision.

It also turns back the Volcker Rule. That’s the restriction on gambling within the bank, a general restriction. The regulators are expected to reduce those rules in a proposal due out tomorrow, on May 30th, I think. This new bill says that if you’ve only got $10 billion in assets, you’re free to gamble. We won’t restrict that other than it has to be about 5% of assets.

Again, I worked in the Senate Banking Committee during the savings and loan crisis where what seemed to be small tweaks in savings and loan law, essentially allowing developers to run banks, run savings and loans and loan to themselves, regardless of the promise of the particular project, leading to the inflation of real estate prices and so forth. So in other words, while the smaller banks (less than $10 billion) may not be gambling now, this could usher in a new class of banks. They’ll just say, “Hey, let’s use that deposit insurance money and gamble and start ourselves a $500 million hedge fund.” And since capital is only 5% of a bank’s net worth, a good year can be profitable and a bad year can lead to the failure of the bank.

There are also a dozen or more consumer protection rollbacks. Redlining, which is where banks drew a line around a neighborhood, such as a neighborhood of color and basically said, “Make no loans there”. The Home Mortgage Disclosure Act provided information to see if banks are making loans generally in their market area, including within those red lines.

We learned from the financial crash in 2008 that banks had a different kind of redlining. They were going into some neighborhoods and making predatory loans, high-cost loans even to people who could afford a prime loan. The new HMDA, Home Mortgage Disclosure Data, is supposed to ferret that out. This bill eliminates that new data for pretty much 85% of banks. And there are other anti-consumer provisions in this.

The question is: Will this make America greater again? It’s not clear. We think it’s certainly a step in the wrong direction. I also think that the promise of the bill’s authors, that it’s going to facilitate economic growth, is going to be hard to defend. The banks already have robust loan portfolios and are making record or near record profits. And that’s at all sectors, not just the big banks, but the little banks, too. So this bill was an answer in search of a problem, and again, we think raises the question of whether it will make America greater again.

Click the play button below to listen to Chris’ interview with Bartlett Naylor (55m:53s).

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Former Deputy FBI Director Andrew McCabe is said to be in negotiations with Senate Judiciary Committee Chairman Chuck Grassley for immunity ahead of his testimony on the upcoming DOJ Inspector General report on the FBI’s conduct during the Clinton email probe. 

“Grassley, an Iowa Republican, has quietly requested that several former officials appear in front of the Judiciary Committee to discuss the long-awaited internal Justice Department report, which sources say will detail a series of missteps surrounding the Justice Department and FBI’s investigation into Clinton’s handling of classified information while secretary of state,” reports CNN.

McCabe’s attorney, Michael Bromwich, insisted that “Under the terms of such a grant of use immunity, no testimony or other information provided by Mr. McCabe could be used against him in a criminal case,” adding “Mr. McCabe is willing to testify, but because of the criminal referral, he must be afforded suitable legal protection.”

“This is a textbook case for granting use immunity… If this Committee is unwilling or unable to obtain such an order, then Mr. McCabe will have no choice but to invoke his Fifth Amendment privilege against self-incrimination.” -Michael Bromwich

As we reported Friday, federal investigators from the D.C. U.S. Attorney’s office recently interviewed former FBI director James Comey as part of an ongoing probe into whether McCabe broke the law when he lied to federal agents, reports the Washington Post.

Investigators from the D.C. U.S. Attorney’s Office recently interviewed former FBI director James B. Comey as part of a probe into whether his deputy, Andrew McCabe, broke the law by lying to federal agents — an indication the office is seriously considering whether McCabe should be charged with a crime, a person familiar with the matter said. –Washington Post

Of particular interest is that Comey and McCabe have given conflicting reports over the events leading up to McCabe’s firing, with Comey calling his former deputy a liar in an April appearance on The View. 

Justice Department Inspector General Michael Horowitz issued a criminal referral for McCabe following a months-long probe which found that the former acting FBI Director leaked a self-serving story to the press and then lied about it under oath. McCabe was fired on March 16 after Horowitz found that he “had made an unauthorized disclosure to the news media and lacked candor – including under oath – on multiple occasions.” 

Specifically, McCabe was fired for lying about authorizing an F.B.I. spokesman and attorney to tell Devlin Barrett of the Wall St. Journal – just days before the 2016 election, that the FBI had not put the brakes on a separate investigation into the Clinton Foundation, at a time in which McCabe was coming under fire for his wife taking a $467,500 campaign contribution from Clinton proxy pal, Terry McAuliffe. 

During an April appearance on ABC’s The View to peddle his new book, A Higher Royalty Loyalty, where he called McCabe a liar, and said he actually “ordered the [IG] report” which found McCabe guilty of leaking to the press and then lying under oath about it, several times. 

Comey was asked by host Megan McCain how he thought the public was supposed to have “confidence” in the FBI amid revelations that McCabe lied about the leak. 

“It’s not okay. The McCabe case illustrates what an organization committed to the truth looks like,” Comey said.

“I ordered that investigation.” 

Comey then appeared to try and frame McCabe as a “good person” despite all the lying. 

“Good people lie. I think I’m a good person, where I have lied,” Comey said.

“I still believe Andrew McCabe is a good person but the inspector general found he lied,” noting that there are “severe consequences” within the DOJ for doing so.

Full letter from McCabe’s lawyers to Senator Grassley…

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In an odd coincidence, earlier today we asked rhetorically “what could go wrong” if millions of Americans trust a DNA collecting company – in this case ancestry.com – with their genetic code. At almost the exact same time, Bloomberg reported that the Israeli-based consumer genealogy website, MyHeritage had been hacked, and that the email addresses and password information linked to more than 92 million user accounts have been “compromised.”

According to MyHeritage, its security officer had received a message from a researcher who unearthed a file named “myheritage” containing email addresses and hashed passwords of 92,283,889 of its users on a private server outside the company.

“There has been no evidence that the data in the file was ever used by the perpetrators,” the company said in a statement late Monday, supposedly in an attempt to make its nearly 100 million users and customers feel comfortable.

It was not explicitly clear if any client “genetic material” had also been compromised as part of the security breach.

Like Ancestry.com and 23andMe, MyHeritage lets users submit their DNA, build family trees, search historical records and hunt for potential relatives. Founded in Israel in 2003, the site launched a service called MyHeritage DNA in 2016 that lets users send in a saliva sample for genetic analysis. The website currently has 96 million users of whom 1.4 million users have taken the DNA test.

In a blog post, MyHeritage said the breach took place on Oct. 26, 2017, and impacts users who signed up for an account through that date. Armed with that information, a hacker could access personal information such as the identity of family members. While the company said it is unlikely that they could easily access a user’s raw genetic information, that’s precisely what one would expect them to say as the alternative is going out of business as its entire user base flees.

Still, while it wasn’t certain whether or not the genetic data had been compromised, the company emphasized that DNA data is stored “on segregated systems and are separate from those that store the email addresses, and they include added layers of security.”

As Bloomberg adds, MyHeritage has set up a 24/7 support team to assist customers affected by the breach. It plans to hire an independent cybersecurity firm to investigate the incident and potentially beef up security. In the meantime, users were prudently advised to change their passwords.

Meanwhile, as consumer DNA testing has grown into a $99 million industry, questions about the security of users’ intimate data have increased as well. After investigators tracked down a suspect in the Golden State Killer case using a genealogy website that, like MyHeritage, allows users to upload raw genetic information, privacy concerns about shared DNA data have also surged. One thing is certain: more stories like the hack of Ancestry.com and MyHeritage are the surest way to ensure that the industry which allows naive customers to hand over their DNA to a 3rd party and pay for the privilege, shrinks from $99 million to 0 in a very short time frame.

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Russian president Vladimir Putin gave a tense interview to Austria’s ORF television channel which at times got so heated, he spoke in German to ask host Armin Wolf to let him finish his answers. 

The interview was held ahead of Putin’s Tuesday meeting with Austrian Chancellor Sebastian Kurz and Vice-Chancellor Heinz-Christian Strache during a trip to Vienna, the first since Putin’s March inauguration to his second consecutive term (and fourth term in total). 

After several interruptions by Wolf, Putin asked the host to “be patient,” before switching to Wolf’s mother tongue of German to ask him to put a cork in it. “Seien Sie so nett, lassen Sie mich etwas sagen (Please be so kind as to let me say something),” said Putin. 

When the topic of troll farms came up, Putin said that Moscow “has nothing to do” with them, adding that claims by Western media that a single Russian businessman, Yevgeny Prigozhin, was able to influence the US election. 

Prigozhin and Putin are associates, however Putin said he has no knowledge of his online activities. The Russian president then brought up George Soros as an example of the double standards being applied to those accused of meddling in foreign affairs.

“There are rumors circulating now that Mr. Soros is planning to make the Euro highly volatile,” Putin said quoted by RT.  “Experts are already discussing this. Ask the [US] State Department why he is doing this. The State Department will say that it has nothing to do with them – rather it is Mr. Soros’ private affair. With us, it is Mr. Prigozhin’s private affair. This is my answer. Are you satisfied with it?”

* * *

MH17

Putin said that Russia has been blocked from participating in the ongoing international investigation into the 2014 downing of flight MH17, which Russia has been recently blamed for. Russian experts “have been denied access to the investigation,” said Putin, while Russia’s arguments are “not taken into consideration” because nobody “is interested in hearing us out.”

Ukraine, meanwhile, has been given access to the probe.  

* * *

North Korea

On North Korea, Putin says that the prospect of a full-scale military conflict with Pyonyang would be “dreadful,” considering that the two nations are neighbors – and some North Korean nuclear test sites are located near the Russian border. 

Although Russia “pins great hopes on the personal meeting between [US] President Trump and North Korean leader Kim Jong-un,” the path to the denuclearization of the Korean peninsula is a “two-way road,” Putin explained. “If the North Korean leader is backing up his intentions with practical actions, for example, giving up new tests of ballistic missiles, new nuclear tests, the other side should reciprocate in a tangible manner,” he said, calling regular US military drills in the area “counterproductive.” –RT

* * *

Crimea

During perhaps the most heated moment in the interview, Putin was asked under what conditions Russia would hand Crimea back to Ukraine, to which the Russian president firmy stated: “There are no such conditions and there can never be.”

Crimeans overwhelmingly voted to rejoin Russia in a hotly contested 2014 vote that the West considers illegitimate and rigged. Putin stressed that the annexation happened after an “unconstitutional armed coup” in Kiev, and it was the Crimeans who decided their own fate. 

“Crimea gained independence through the free will of the Crimeans, expressed in an open referendum, not as a result of an invasion by Russian forces.” -Vladimir Putin

Following the annexation, Putin said “the first thing we did was increase our contingent to guard our Armed Forces, our military facilities, because we immediately saw that they were being threatened,” adding that the mostly Russian population in Crimea “sensed danger, when trains started bringing aggressive nationalists there, when buses and personal vehicles were blocked, people naturally wanted to protect themselves.” 

“The first thing that occurred was to restore the rights that Ukraine itself had issued by granting Crimea autonomy.”

* * *

Topless Putin

Once the conversation settled down, Putin was asked about his famous bare-chested photos from various vacations and outdoor activities – to which the Russian president replied: “You said ‘half-naked’ not ‘naked,’ thank God,” Putin joked. “When I am on vacation I see no need to hide behind the bushes, and there is nothing wrong with that.”

Of course, where would we be without photoshop?

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Blasphemy!!

Authored by Steven Hayward, op-ed via The Wall Street Journal,

Its descent into social-justice identity politics is the last gasp of a cause that has lost its vitality…

Climate change is over. No, I’m not saying the climate will not change in the future, or that human influence on the climate is negligible. I mean simply that climate change is no longer a pre-eminent policy issue. All that remains is boilerplate rhetoric from the political class, frivolous nuisance lawsuits, and bureaucratic mandates on behalf of special-interest renewable-energy rent seekers.

Judged by deeds rather than words, most national governments are backing away from forced-marched decarbonization. You can date the arc of climate change as a policy priority from 1988, when highly publicized congressional hearings first elevated the issue, to 2018. President Trump’s ostentatious withdrawal from the Paris Agreement merely ratified a trend long becoming evident.

A good indicator of why climate change as an issue is over can be found early in the text of the Paris Agreement. The “nonbinding” pact declares that climate action must include concern for “gender equality, empowerment of women, and intergenerational equity” as well as “the importance for some of the concept of ‘climate justice.’ ” Another is Sarah Myhre’s address at the most recent meeting of the American Geophysical Union, in which she proclaimed that climate change cannot fully be addressed without also grappling with the misogyny and social injustice that have perpetuated the problem for decades.

The descent of climate change into the abyss of social-justice identity politics represents the last gasp of a cause that has lost its vitality. Climate alarm is like a car alarm – a blaring noise people are tuning out.

This outcome was predictable. Political scientist Anthony Downs described the downward trajectory of many political movements in an article for the Public Interest, “Up and Down With Ecology: The ‘Issue-Attention Cycle,’ ” published in 1972, long before the climate-change campaign began. Observing the movements that had arisen to address issues like crime, poverty and even the U.S.-Soviet space race, Mr. Downs discerned a five-stage cycle through which political issues pass regularly.

The first stage involves groups of experts and activists calling attention to a public problem, which leads quickly to the second stage, wherein the alarmed media and political class discover the issue.

The second stage typically includes a large amount of euphoric enthusiasm – you might call it the “dopamine” stage—as activists conceive the issue in terms of global peril and salvation. This tendency explains the fanaticism with which divinity-school dropouts Al Gore and Jerry Brown have warned of climate change.

Then comes the third stage: the hinge. As Mr. Downs explains, there soon comes “a gradually spreading realization that the cost of ‘solving’ the problem is very high indeed.” That’s where we’ve been since the United Nations’ traveling climate circus committed itself to the fanatical mission of massive near-term reductions in fossil fuel consumption, codified in unrealistic proposals like the Kyoto Protocol.

This third stage, Mr. Downs continues, “becomes almost imperceptibly transformed into the fourth stage: a gradual decline in the intensity of public interest in the problem.”

While opinion surveys find that roughly half of Americans regard climate change as a problem, the issue has never achieved high salience among the public, despite the drumbeat of alarm from the climate campaign. Americans have consistently ranked climate change the 19th or 20th of 20 leading issues on the annual Pew Research Center poll, while Gallup’s yearly survey of environmental issues typically ranks climate change far behind air and water pollution.

“In the final stage,” Mr. Downs concludes, “an issue that has been replaced at the center of public concern moves into a prolonged limbo—a twilight realm of lesser attention or spasmodic recurrences of interest.” Mr. Downs predicted correctly that environmental issues would suffer this decline, because solving such issues involves painful trade-offs that committed climate activists would rather not make.

A case in point is climate campaigners’ push for clean energy, whereas they write off nuclear power because it doesn’t fit their green utopian vision. A new study of climate-related philanthropy by Matthew Nisbet found that of the $556.7 million green-leaning foundations spent from 2011-15, “not a single grant supported work on promoting or reducing the cost of nuclear energy.” The major emphasis of green giving was “devoted to mobilizing public opinion and to opposing the fossil fuel industry.”

Scientists who are genuinely worried about the potential for catastrophic climate change ought to be the most outraged at how the left politicized the issue and how the international policy community narrowed the range of acceptable responses.

Treating climate change as a planet-scale problem that could be solved only by an international regulatory scheme transformed the issue into a political creed for committed believers. Causes that live by politics, die by politics.

*  *  *

Mr. Hayward is a senior resident scholar at the Institute of Governmental Studies at the University of California, Berkeley.

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The only time the tech sector has been more valuable than this, relative to the financials, was at the very peak of the Dot-Com bubble in March 2000.

From there it was a precipitous drop back to reality…

And while we ‘know’ it’s different this time, andespite the stronger fundamentals of the technology sector today relative to  the period 20 years earlier, the high weight of the technology sector, particularly in some markets, raises the question of sustainability.

Goldman Sachs asks (and answers) – What can history tell us about the longevity of sector dominance? How big can a sector or stock get? (Spoiler Alert – a lot bigger and a lot longer)…

Sector dominance in the market

Looking at the history of the sector composition of the S&P 500 as a benchmark we can see that sector dominance is not new. 

We can split the long sweep of history in the US equity market into 4 main periods of leadership.

1) 1800 – 1850s Financials

Over this period banks were the biggest sector. Starting with almost 100% of the equity market, the stock market developed and broadened out. By the 1850s, the sectors weight had more than halved.

2) 1850s – 1910s Transport

As banks started to finance the exploding railroad system in the US (and elsewhere for that matter), transport stock took over as the largest in the index. In their boom years they reached close to 70% of the index in the US before fading to around one third of the market capitalisation by WW1 .

3) 1920s – 1970s Energy

With the huge growth of industry, powered by oil rather than steam and coal, energy stocks took over as the biggest sector. This continued as the main sector group until the 1990s, although interspersed with brief periods of leadership from the emerging technology sector (in the first wave it was lead by main frames and subsequently by software).

In the case of Europe, the sector dominance has been slightly different (see Exhibit 23).

We do not have the same history to compare with the US but, if we use the same broad 10 classifications we see industrials domination between the early 1970s and 1983 (with a brief period of commodities leading in 1980). Financials then took over as the dominant sector and have remained that way (with the exception of technology in 1999) ever since.

*  *  *

Over time different waves of technology resulted in different phases of sector dominance; as stock markets have become more diversified the biggest sector has tended to account for a smaller share of the aggregate market over time… but the lesson is: this dominance can go on longer than you can remain solvent.

However, the silver-lining for Tech bears are both the extreme valuations relative to banks (above) and the fact that these dominant cycles have tended to run for 50-or-so years and Tech has been dominant in the US since the early ’70s.

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Authored by Jason Ditz via AntiWar.com,

Massive death tolls from months of Israeli crackdowns in the Gaza Strip have been sparsely covered by the media, particularly in the US. But even where US media outlets have found fault with the killings, US Ambassador David Friedman is expressing anger, saying it’s “not reporting” to cover the killings critically.

US Ambassador David Friedman

Friedman says media coverage that wasn’t supportive of the deaths was “completely superficial,” and that Israeli military officials had assured him that they had to kill all of those Gazans to defend the nation of Israel.

A US Ambassador to Israel criticizing US media outlets is probably not going to amount to much, but Friedman also slammed Israeli newspaper Haaretz for its own coverage of the deaths, saying Haaretz never explored if there were “other alternatives” besides killing the Gazans.

That might be a bigger deal, as Haaretz is a major Israeli newspaper, and having a foreign ambassador to Israel publicly condemning an Israeli paper for criticizing an incident that happened inside Israel is likely a diplomatic faux pas, and further presents the US role within Israel as politically aligned with one faction’s narrative.

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Back in January, we introduced you to Michael Tubbs – the new mayor of Stockton, California (and the youngest mayor in American history of a city with a population of at least 100,000, according to his staff).

As a reminder, in 2013, Stockton became the most populous US municipality to ever declare bankruptcy. Since then, while the city has struggled through a painful Chapter 9 restructuring, its primarily agriculture-based economy remains mired in poverty.

Tubbs was campaigning during his final year ahead of graduation from Stanford University and upon his victory, he “felt almost a moral responsibility” to take risks and pursue unorthodox policies to help Stockton’s residents, and so, as we noted in January, the pervasive poverty in his city is what led Tubbs to announce the city would soon begin an interesting social experiment.

At the time, reports stated that a random sample of 300,000 Stockton residents will receive $500 every month with no strings attached. The program was set to become the US’s largest experiment with a policy that has become a favorite topic of Mark Zuckerberg and his Silicon Valley peers: Universal Basic Income.

Proponents argue that:

• The lack of expensive means-testing leads to a higher proportion of the budget going to recipients. This would be more efficient

• The transparency of universal payments would drastically reduce the need to detect benefits fraud

• One scheme could replace the current complex arrangement of government benefits, rebates and tax rebates

• Work will always benefit recipients of this welfare, rather than the ‘benefits trap’ that leaves part-time workers

Critics argue that:

• Universal income may be inflationary and, in attempting to move all individuals out of poverty, it may simply raise the level of the poverty line

• It may reduce the incentive to work and studies have found some evidence to support this.

• A reduction in taxable income would reduce the government’s ability to cover other expenses, such as healthcare

The universal basic income, in theory, combats poverty by doling out a fixed amount of cash per month to low-income or unemployed residents to create a guaranteed safety net, but after running a two-year trial, giving 2,000 unemployed residents about $685 a month, Finland recently abandoned its Universal Basic Income experiment (with the Finnish government imposing stricter benefits plans, introducing legislation making some benefits for unemployed people contingent on taking training or working at least 18 hours in three months).

However, despite Finland’s recent cessation, Tubbs is moving ahead with his plan… but on a considerably smaller scale than planned for in January.

As The Daily Caller reports, Stockton will be choosing 100 of its own residents to receive $500 a month in private funds to approximate the effects of a universal basic income.

The Economic Security Project (ESP) is funding the 18-month project, spending $1 million to conduct the test and monitor how the hand-picked residents spend the extra cash each month. ESP is partnering with Stockton Mayor Michael Tubbs, who says there will be “no strings” for accepting the payments.

“And then, maybe, in two or three years, we can have a much more informed discussion about the social safety net, the income floor people deserve and the best way to do it because we’ll have more data and research,” Tubbs told Reuters.

Facebook co-founder Chris Hughes, who also worked on former- President Barack Obama’s campaign, co-chairs ESP.

In the past, Hughes has proposed instituting a basic income of $500 for every American making under $50,000 a year. He proposed raising the income and capital gains taxes to 50 percent to pay for the program, according to Reuters.

Libertarian economist Charles Murray has championed the universal basic income as a viable and better alternative to welfare in the U.S., describing it in 2016 as “the least damaging way for the government to transfer wealth from some citizens to others.”

The Heritage Foundation’s Robert Rector, an expert on welfare policy, disagreed with Murray’s analysis in a 2018 report, saying welfare reform is a better vehicle for a social safety net.

“The premise of universal basic income has a known track record of failure that hurts recipients and increases dependence on government,” Rector writes.

“Policymakers seeking to reform the welfare state should focus instead on policies proven to work.”

Growing up in Stockton, where one in four residents live in poverty, Tubbs’ family relied on government assistance to meet their basic needs.

“My mom was on welfare for the first five, six years of my life,” he said. “You’d get food stamps, but that’s not cash, and maybe food’s not the biggest need … So this gives people more agency to kind of make the best decision.”

And remains convinced the UBI experiment will show that Stockton’s best bet is to invest in its own people.

But, as we noted previously, not everybody agrees.

In what he describes as a “radical critique of Universal Basic Income”, Charles Hugh Smith explained in a post we published back in June how UBI – far from staving off widening income inequality – would instead lead to de facto “serfdom”.

But a radical critique must go much, much further, and ask: is UBI the best that we can do? If we provide the basics of material security – the bottom level of Maslow’s hierarchy of human needs – what about all the higher needs for positive social roles, meaningful work, and the opportunity to build capital?

This critique reveals the unintended consequences of UBI: rather than deliver a Utopia, UBI institutionalizes serfdom and a two-class neofeudalism in which the bottom 95% scrape by on UBI while the top 5% hoard what every human wants and needs: positive social roles in our community, meaningful work that makes us feel needed, and the opportunity to build capital in all its manifestations.

UBI is the last gasp of a broken, dying system, a “solution” that institutionalizes all the injustices of serfdom under the guise of aiding those left behind by automation. We can do better–we must do better–and I lay out how to do so in this book.

A radical critique must also examine the widely accepted assumption that automation will destroy most jobs. Is this assumption valid? It turns out this assumption rests on a completely false understanding of the nature of work, the economics of automation and the presumed stability of an unsustainable global economy.

Community organizer Trina Turner, a pastor who deals with economically disadvantaged people, hopes the experiment will change the way people see Stockton, which declared bankruptcy in 2012 and has high rates of crime and homelessness.

“I think it will begin to shift the narrative about Stockton,” she said. “Instead of being the miserable city, we’ll be the city that people are waiting to come to for all of the right reasons.”

Of course, the experiment could just encourage more freeloaders and discourage actual taxpayers in the city… but then that’s probably racist, or sexist, or poorist, so we would never say that.

 

via RSS https://ift.tt/2HnEi2w Tyler Durden

Via Middle East Eye,

Former aide Ben Rhodes says gifts worth hundreds of thousands of dollars were lavished by the Saudis ahead of Cairo speech…

Saudi Arabia gave White House aides jewellery worth hundreds of thousands of dollars in large suitcases, according to Ben Rhodes, former speechwriter and deputy national security adviser in the Obama administration.

In his memoir The World As It Is, published on Tuesday, Rhodes recounts a trip to Saudi Arabia in June 2009 soon after Barack Obama became president.

He says on arrival he and other US officials were taken to housing units in a compound owned by the monarchy in the desert.

“When I opened the door to my unit, I found a large suitcase,” Rhodes recounts.

“Inside were jewels.”

The trip to Saudi Arabia was the beginning of Obama’s first tour of the Middle East as president, and preceded his famous Cairo speech which he intended as a message to the Muslim world.

Rhodes says at first he thought the bagged treasure was a bribe, to influence him as he wrote Obama’s speech.

However, he soon learned he was not the only member of the delegation to be lavished with such expense.

“We all got suitcases full of jewels,” the former aide told the Guardian newspaper.

“We all gave them to the state protocol office who handles gifts. You have the option to buy the gifts, but given the price – I don’t remember what it was but it was tens of thousands, I believe – no one kept them that I recall.”

Valued guests

The State Department’s register notes the Saudis gave Rhodes “one pair of silver cufflinks, one male watch, one female watch, one silver pen, and one diamond jewellery set including earrings, a ring, and a bracelet, presented in a green leather case”.

It justifies the acceptance of such gifts by saying “non-acceptance would cause embarrassment to [the] donor and US government”.

While the value of the hoard given to Rhodes is estimated by the State Department to be $5,405, the contents of the green leather cases given to other officials were far more precious.

The gifts given to aide Marvin Nicholson were valued at $18,580, meanwhile Peter Rundlet, deputy assistant to the president and deputy staff secretary to Obama, was given $12,560 worth of jewellery.

Eleven other White House officials were given gift sets by the Saudi government.

The president and his wife, Michelle, were not spared expensive gifts either.

The then Saudi king, Abdullah, gave the Obamas and their daughters almost $190,000 worth of gifts.

A diamond and ruby jewellery set given to Michelle Obama was valued at $132,000 alone.

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