Newsflash: Teachers Are Already Armed!

Authored by Tom Mullen via The Foundation for Economic Education,

Maybe we should just stop disarming them…

In the wake of yet another mass shooting in a public school, a host of familiar recommendations have resurfaced about how to “prevent this from ever happening again.” Predictably, both conservatives and liberals are looking to the government for a solution.

Americans have somehow arrived at a point where they cannot conceive of human action that is not either prohibited, mandated, or, at the very least, centrally planned.

Just Like Drugs

The first problem is the goal. It is absurdly unrealistic to believe any set of rules is going to prevent anything from “ever happening again.” If you doubt that, I invite you to examine the war on drugs. Many decades ago, politicians decided American citizens taking heroin was never going to happen again. They banned that drug completely. You aren’t allowed to possess or sell it under any circumstances. Not after a background check. Not with a doctor’s prescription. Not at all.

Today, that drug is at the center of what the same government calls an opioid “epidemic.” Epidemic. So much for heroin overdoses “never happening again.”

Yet, despite this evidence, liberals still suggest what they’ve always suggested: further restrictions on gun ownership. A good portion of them believes that only government employees charged with national defense or public safety should be allowed to carry guns. Ban them completely for the civilian population, they say, and mass shooters won’t be able to obtain them.

You know, just like drugs.

Arm and Train?

The conservative answer to liberal prohibition (oxymoron?) is to “arm and train the teachers.” While no one has come out and suggested mandating teachers carry firearms or be trained in using them, every suggestion seems to suggest “we” (i.e., the government) need to do the arming and training.

Here’s a little newsflash for both sides: the teachers are already armed.

No, not every teacher carries firearms and perhaps not as high a percentage of teachers do so as the percentage of the general population that carries. But there are over three million teachers in public schools and some percentage of them have concealed carry permits. It would be unlikely that there aren’t at least some members of every faculty in America that have a concealed carry permit.

It’s not a matter of arming teachers, but rather to cease disarming them when they report to work.

To the extent conservatives acknowledge this option at all, they seem trapped in the same box as liberals in feeling the need to point out there are teachers who are also retired military, in the reserves, or former law enforcement officers. That’s probably true. But there are also tens of millions of Americans, and likely tens of thousands of teachers, who both own firearms and never served in the military or police.

An armed civilian population constitutes that “well-regulated militia” the 2nd Amendment refers to. What makes a militia a militia is the members not being part of the regular army.

Four Little Words

I’ve often said the greatest danger to liberty is not a foreign army, terrorists, or even a homegrown tyrant. It is four little words. And they aren’t, “Up against the wall!” That comes later.

They are, “Something must be done.”

Instead of the government “doing something” about mass shootings, it should stop doing something. It should stop prohibiting teachers from carrying into school the same firearms they are licensed and trusted to carry in most other places. It is the path of least resistance to providing realistic protection for schoolchildren. It requires no one to do anything they aren’t already doing.

No, this will not ensure that mass shootings “never happen again.” Nothing will. And not every teacher with a firearm, confronted with the pressure of an active shooter situation, will calmly dispatch the shooter. But as we saw in Parkland, FL, neither will every trained police officer.

The Failures of Government

Broward County Sheriff’s deputy Scot Peterson was assigned to the school as a resource officer and was on the school grounds during the entire incident. He heard the shooting inside the school, but videos show he remained outside for four minutes during the six-minute mass shooting, which claimed seventeen lives.

Peterson wasn’t alone. Three other armed law enforcement officers were on the scene and failed to enter the school before backup arrived.

This wasn’t the only government failure in this case. Local police had been called to Nikolas Cruz’s home thirty-nine times over the past seven years, according to documents obtained by CNN. Members of the family he lived with after his mother’s death report he routinely introduced himself as “a school shooter.”

It wasn’t just local police who dropped the ball on Cruz. The FBI was warned multiple times about Cruz, including by “an unidentified woman close to Cruz” who called the FBI a month before the incident, warning of her fears he would “get into a school and just shoot the place up.” The FBI was also called in September 2017 by a video blogger who said a user named “nikolas cruz” had posted a comment on one of his videos, saying, “I”m going to be a professional school shooter.”

Hopefully, this will inspire more than mere outrage at government incompetence. Americans should take a long, hard look at how much of what should be personal and private they have allowed government to become involved in and how badly it has failed them. And if government can’t run education or health care, it certainly shouldn’t be trusted with something as important as the defense of one’s own life.

Let’s Try Freedom

Thomas Paine began his pamphlet, Common Sense, widely credited with convincing a critical mass of colonists to support American independence, by making a crucial distinction:

SOME writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins.”

He went on to say, “Society in every state is a blessing, but Government, even in its best state, is but a necessary evil; in its worst state an intolerable one.”

It’s time Americans remembered the miracles possible within that blessing called society and the limitations of an institution based on nothing more than consolidated brute force. Mass shootings are horrible situations under any circumstances, but they may be rendered less horrible if the victims have options other than to call the government and wait.

Repealing the federal Gun-Free School Zones Act will at least let states consider giving the right and the responsibility for self-defense back to teachers and other school employees. Allowing them the option to carry firearms will both act as a deterrent to future shooters and give teachers a reasonable chance to defend their students and themselves the next time the need arises.

The government has had its chance. It has failed. It’s time to try a little freedom.

via Zero Hedge http://ift.tt/2EP3O4u Tyler Durden

Breaking Ground? Trump Border Wall Begins Construction In Calexico

U.S. Customs and Border Protection (CBP) officers started construction Wednesday to replace a decaying stretch of a 2.25-mile Mexico–United States barrier, swapping it out for a new and improved 30-foot high bollard style wall.

This is the first border wall contract awarded in the Trump administration outside the eight prototypes that were built last year near Tijuana, Mexico.

According to CBP Public Affairs, the 2.25-mile project will stretch from the Calexico West Port of Entry extending westward beyond the Gran Plaza Outlets and include all-weather roads paralleling the new wall.

KESQ-TV, an ABC-affiliated television station for the Coachella Valley licensed to Palm Springs, used their Newsdrone to survey the area where the new wall construction is underway.

CBP states that the construction is located in the El Centro Sector, which is one of the “Border Patrol’s highest priority projects.”

The current barrier in Calexico was erected several decades ago from recycled scraps of metal and has been proven to be widely ineffective in preventing illegal cross-border activities.

The unlawful cross-border activities in the El Centro Sector are stunning. CBP provides a breakdown of seizures made by officers for the fiscal year 2017:

The El Centro Sector apprehended 18,633 illegal aliens, seized 5,554 pounds of marijuana, 483 pounds of cocaine, and 1,526 pounds of methamphetamine and 2,521 ounces of heroin. During that fiscal year, there were 21 assaults against El Centro Sector agents.  

CBP spokesman Carlos Diaz told the Washington Examiner on Wednesday, the project was fully funded by fiscal 2017 appropriations, which will also fund projects in Southern California, New Mexico, and in the Rio Grande Valley in Texas.

Back in November, the Trump administration awarded the $18 million contract to replace the barrier in Calexico to SWF Constructors of Omaha, Nebraska.

And lastly, the administration is trying to find $18 billion in funding to extend and complete the Mexico-United States border wall. Recent funding efforts to pay for the entire stretch failed last week in the Senate.

The one question we ask: Will the Trump administration have the border walls erected in time to thwart a Mexican drug cartel war spillover into the United States? Don’t be shocked if the Trump administration labels the drug cartel wars just south of the border as a national security threat. Perhaps, that would be enough to spur emergency funding to pay the entire stretch…

via Zero Hedge http://ift.tt/2EQDxCT Tyler Durden

Venezuela’s Petro: Stable Coin For Crypto-Economy Or Illegal Oil Futures?

Authored by Thomas Meyer via CoinTelegraph.com,

Starting in late 2017 Venezuela’s President Nikolas Maduro began expanding heavily into media space in an attempt to promote a new payment instrument– the government-issued cryptocurrency Petro.

On Feb. 20 the pre-sale of Petro was launched and has already raised $735 mln, according to Maduro’s Twitter. Total amount of PTR issued for sale is 100 mln and is worth $6 bln. The pre-sale will end on March 19.  

The following questions are raised by this controversial project: what is Petro in an economic context and what would be its possible real use in the global economy? Is it a cryptocurrency, a stable coin, oil futures, new government debt instrument or something else? What is its possible economic impact? Which legal issues could follow?

image courtesy of CoinTelegraph

Having carefully studied the Petro white paper and other data available, we present below the results of the analysis.

Venezuela now

According to Maduro, Petro being backed by the Venezuelan crude oil is one of the best ways to use new technologies to restore the financial condition of Venezuela. For many years, the country has been suffering from hyperinflation by thousands of percent per year, while US sanctions cut off Venezuela from international capital markets.

A huge deficit of US dollar monetary supply has led to the absence of basic goods and a tenfold price discrepancy between official and black market currency exchanges for the Venezuelan bolivar and US dollar. That said, this financial catastrophe coincides with Venezuela’s status as possessing the largest volume of readily retrievable proved oil reserves as assessed by OPEC, being well ahead of well-known oil producers such as Saudi Arabia, Kuwait, and others.

But it seems even more alarming news are boiling up. The US administration was urged to impose a full embargo on Venezuelan oil in the near future. According to export statistics, US is the main market for Venezuelan oil and a primary source of ‘hard currency’- US dollars. The excluding of the market from the oil export structure could lead to an even more dramatic economic situation in the country.

The idea of issuing cryptocurrency by the government has been suggested before (Japan, UAE, Russia, and some others), but has so far fallen short of authorization by top officials and practical implementation.

Petro has received official recognition from the Venezuelan government. President Maduro has signed a white paper clearly specifying the conditions and dates of the tokensale. Its activity is aimed at both internal and external markets and carried out at ALBA (Bolivarian Alliance for the Peoples of Our America) and OPEC (Organization of the Petroleum Exporting Countries) levels as well.

El Petro white paper

The original white paper, published on the official website of Venezuela’s government describes the process of issuing Petro. The initial disbursement will be made on the Ethereum platform as a standard ERC20 token. It also states that the Petro price will be correlated with one barrel of Venezuelan crude oil.

The Real Coas Of Petro

The basic items of Petro are mentioned in the white paper as follows: (all the information in this table is the white paper summary and the details are stated as they are in the original document):


Petro: general information

Petro is not solely a token equal to the raw oil barrel price. They are looking at more broad functioning:

  • A transitory asset for exchange to goods and services, and also fiat money
  • A digital platform for emittance and trade of stable crypto assets backed up by raw minerals
  • A store of savings and an investment tool

Unfortunately, the Whitepaper is drafted in common language without any detail on an assumed technological base to launch a full-stack digital platform. Plans to develop such a platform are also absent.


Petro: initial emission and distribution information

100 mln coins will be emitted at launch. Their initial distribution is planned as follows:

  • 38.4% presale
  • 44% public sale
  • 17.6% will be stored in possession of Venezuela’s Superintendence of Cryptocurrencies and Related Activities (SUPCACVEN)

El Petro’s minimum unit is called the ‘mene’ and equals 10-8 Petro. ‘The total emission of El Petro is to be carried out at the initial coin offering,’ further down in the document we find that ‘an additional emission can be made as per the result of El Petro holders vote: 1 coin equals one vote.’


Petro: economic use cases

The project’s architecture is aimed at El Petro’s maximum involvement into settlements between economic agents. The main use cases are as follows:

  • As means of payment for Venezuelan oil via direct exchange of cryptocurrency to real oil dispatch
  • As a legal means of payment on the territory of Venezuela, which allows for tax payments, exactions, duties and official acceptance as the settlement by individuals and businesses. To intensify the use there is a special discount index (Dv)**:

Acceptance price of petro = PriceOil/Bolivar*(1-Dv)

**Dv will be at least 10%

Apparently, this means that paying taxes and any other settlements with state bodies would be at least 10 percent cheaper in El Petro at the current exchange rate than in traditional currency (i.e. in Bolivars).

In the future, the use of Petro is planned to be expanded into other payment markets promoting its use in the world as a stable currency backed up by a real resource.


Petro: legal aspects

As the document states, Petro will fully comply with Venezuela’s legislation. However, the opposition in the National Assembly publicly claimed that issuing Petro was illegal. Some operations with Petro, such as initial sales, subsequent exchange to oil and other assets at ‘authorized exchange sites’ will be carried out in strict compliance with KYC/AML, yet the standards for these are not stated in the document.


Overall the document goes well beyond the scope in which Petro was covered by the media in late December and early January. Earlier it was considered to be simply a cryptocurrency backed up by oil. However, over the course of deeper investigation into the white paper, one could see that it also announces future creation of a platform for e-commodities (digital representation of goods/raw materials), greatly expanding the concept.

At the same time, some parts of the Whitepaper lack fine details, and some statements are not backed by any sufficient explanation. Some items feature information that could seem contradictory. A more thorough white paper with extra technical details would probably spark much more interest and trust in global crypto community.

Economic aspects

Petro could be described as ‘a legal payment instrument’ or ‘a legal tender’ applicable by the government. The concept raises the question of determining the use of a single currency as a legal payment instrument for goods and services to businesses, individuals and the government. This leads to several basic assumptions:

  • Any individual or business must accept this medium of settlement as payment in a private or public transaction

  • All taxes, levies, duties and excise duties as well as other payments to state bodies can be made solely in this currency (currencies)

In the case of Petro, the government, businesses, and individuals can (but are not obliged) to accept it as the currency for all the payments and levies. Despite the fact that the whitepaper declares the maximum intensification of Petro use – up to the discount index, which actually makes it more beneficial for use on the market compared to the Bolivar – we still cannot confirm that Petro fully corresponds to the concept of a legal means of payment. It is a payment instrument that has the attributes of a legal means of payment but is not necessarily such.

In reality, the value of emitted currency is to be ‘secured’ by the liability of Venezuelan government on providing the goods, i.e. the oil, and by its acceptance as the payment to state bodies. In theory, Petro looks more like the currency of the gold-standard period that is technically implemented by virtue of Blockchain technology.

Petro concept

The concept of Petro seems to be both simple and complicated. Up until now, there has been no precedent of issuing cryptocurrencies with such broad functionality to the mass market by the government. Petro is the ‘intersection’ of several familiar concepts from the world of conventional finance.

In Venezuela, Petro stands close to the concept of a legal settlement medium, and in global trade, it is basically a conditionally-stable crypto asset (oil also has specific volatility) that is in fact an oil future without a specific delivery date. Petro could also be assessed as an instrument for tax and levies payment with discounts in a concrete jurisdiction (in the ICO world: a token discount on the unique goods or service of the project). From the investors perspective, at the time of running the crowd sale, the purchase of future oil delivery (the futures) is made with the nominal discount.

New monetary aggregate

That being said, Petro can be conventionally viewed as a new monetary aggregate in the structure of Venezuelan monetary mass. Unlike the Bolivar, it is expected to be easily converted into the US dollar as well as other currencies, which will help Venezuela in export trade.

Therefore, it all comes down to ‘a special monetary aggregate for international payments’. Since it is planned to issue 100 mln coins with each coin equal to one oil barrel (~$60), its total capitalization will amount to $6 bln.

This cost will be actually created during the initial offering with the Venezuelan government receiving several billion of real US dollars from investors. Taking into account the correlation with the oil price and based on the price range starting from 2008 ($30-$150 BBL), we could claim that this monetary aggregate will amount to somewhere between $3 bln and $15 bln. The white paper doesn’t have any grounding on why this specific amount of coins is issued. However, this amount should probably be calculated according to the country’s demand in US dollars and foreign trade transactions.

Payment in Petro

From now on by order of Nicolás Maduro the oil state corporation PDVSA is obliged to carry out transactions in Petro. Moreover, all public and private services like hotels or services of the Venezuelan consulates can now legally accept Petro as means of payment. At the same time, the circulation of digital currency has not even started yet, but Maduro is already preparing a full-fledged legislative and actual infrastructure for future acceptance of Petro.

Questions arise

Many questions arise upon scrutinizing the project, and finding answers to them might clear up the future of Petro. Here we’d like to list some major concerns:

  1. Is it a currency or an oil future? And to what extent is it legal? Taking into account Venezuela’s condition under economic sanctions, it’s highly unlikely that this monetary tool will be easily accepted by the global community. And if it is not, Petro investors and users could get into trouble with the law in jurisdictions outside Venezuela.

  2. Whats are the risks of money laundering through Petro? There’s a clear possibility that it could be purchased with the funds that were received illegally at crypto exchanges or privately, and then exchanged to oil that can be ‘laundered’ and documented to eventually be sold under above-board business practices in various jurisdictions.

  3. Taking into consideration the political and economic situation in Venezuela and the level of corruption, it’s very likely that KYC/AML could become a rather byzantine procedure. Another question is whether major crypto exchanges would agree to list a token that is contradictory in terms of legal compliance.

  4. The project is initially issued at a digital platform. However, there is zero information on the technical parameters of the future blockchain system.

  5. What is the discount index going to be like? The white paper states that ‘no less than 10 percent’ will be available. This could be a point of leverage for Petro’s popularity in the country.

  6. It should be noted that introduction of Petro could put Venezuelan national currency Bolivar into even more miserable condition.

  7. The issue of additional issuance is not fully transparent. If it is done with consideration to holders’ votes, then apparently the government will profit from accumulating >50 percent of the coins and sooner or later start disseminating whichever amounts it chooses. On the one hand, it is useful for Venezuela’s economy: it could actually put into full swing the printing of ‘hard currency,’ on the other hand, a trust issue could arise.

To be continued…

Petro has set a precedent of bringing a cryptocurrency to the market which was created by and government and secured by a physically tangible resource. This instrument features broad functionality that is close to regular money and conventional financial instruments.

However, at the moment the project raises a lot of concerning questions and provides few answers. It still looks more like a beautifully crafted concept than a real and viable financial instrument which could operate worldwide.

It should be noted that initially, the cryptocurrency world is in the state of post-industrial economy, i.e. an economy of communities which independently emit the values determining cost on their own. Therefore, any attempt to secure the cost by virtue of some kind of liabilities is pretty risky.  As history shows, the emitters of money like to renege on financial liabilities. Taken Venezuela’s negative reputation on world financial markets, one might think twice about the promise of Petro.

So the big question is still there: is Petro a stable coin for the world’s crypto economy or merely an illegally emitted oil future? It remains to be seen.

via Zero Hedge http://ift.tt/2HLGJNR Tyler Durden

How Long Before Rising Inflation Leads To A Recession: Deutsche Answers

While inverse vol funds were the immediate catalyst for the February 5 market crash, the market’s recent jittery behavior has coincided, and often been blamed on, the recent uptick in inflation. That said, as Deutsche Bank’s Binky Chadha writes, whether this was cause and effect is debatable. Nonetheless, late in the business cycle with a tight labor market, “strong coordinated growth”, a lower dollar, higher oil prices and a fading of one off factors, all point to inflation moving up.

As a result, two key questions have emerged: What does higher inflation mean for equities? And how long until higher inflation translates into a recession.

Here, Deutsche Bank makes some preliminary observations. First, and conceptually, higher inflation is ambiguous.

From a pricing vs cost perspective, whether higher inflation leads to higher or lower margins depends on the relative strengths of price vs wage and other input cost inflation. It depends on the relative importance of variable vs fixed costs. And on the extent to which corporates can increase productivity in response to cost pressures. It is notable that while markets seem to have been surprised by the recent uptick in wage inflation, corporates have been noting it for at least a year. Finally, inflation does not occur in a vacuum. The drivers of higher inflation matter and when it reflects strong growth, it implies not only higher sales but operating leverage from fixed costs can raise margins and amplify the impact on earnings.

In other words, inflation in itself is not a death sentence to bull markets. What is just as important is overall economic growth (rising inflation is benign if overall economic growth is higher), as well as the impact of inflation on profit margins – i.e. the ability to pass inflation through to the end consumer – and most importantly, how the Fed reacts to inflation, or namely does the Fed think it is behind the curve.

Ultimately, it all boils down to whether future inflation will be higher (or much higher) than currently.

Here one of the reasons why the Fed has been gingerly hiking rates at a glacial pace in recent years is that persistent inflationary pressures have largely been absent during this bull market cycle. However, recent data points indicate that any inflation surprises over the coming months will most likely be to the “upside.” And, judging by its quotes, the Fed is also taking noticing as well, potentially realizing that it is behind the curve, as highlighted by the change of tone in the quotes below:

  • Nov 1, 2017: “…the Committee is monitoring inflation developments closely”
  • Dec 13, 2017: “…the Committee is monitoring inflation developments closely.”
  • Jan 31, 2018: “The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal.

Making matters worse, while the Fed has raised rates 4 times since Sept. 2016, increasing the discount rate by 1.00%, the 2Y Tsy has increased by 1.70% over the same period, suggesting that bond vigilantes see the Fed as behind the curve, literally.

Furthermore, as Investec points out in a recent note, although both headline and core inflation appear tame – a key leading indicator from the New York Fed, the Underlying Inflation Gauge (UIG), is pointing towards increased risks ahead, having hit 3.00% in January, up from 2.94% in December and the highest level since 2007.

Furthermore, as Investec adds, the UIG has proven especially useful in detecting turning points in inflation trends, and has shown high forecast accuracy when compared with core inflation measures. As shown in the chart below, the UIG has been indicating far higher levels of inflationary pressure relative to Core CPI since over the past year.

The divergence between the core CPI and UIG is notable, and reached a differential in excess of 1% in recent months. Based on historical patterns, such a wide divergence has been followed by increasing pressures in official inflation statistics, prompting the Federal Reserve to become more aggressive in their actions.

And while one can argue whether higher inflation is bad, one thing is guaranteed: rising interest rates are the nemesis of an aging bull market. Nothing has killed more bull markets than a deteriorating monetary climate with a relentless uptrend in interest rates; in fact, as we have shown previously, virtually every single Fed tightening cycle has always ended with a recession or some “event.”

Once started down the track of tightening, the conclusion seems all but inevitable. Out of 11 past tightening cycles, nine have resulted in a recession while only two created a soft landing that allowed the Fed to ease and avoid a recession.

Here another observation from the historical record: the Fed has a dismal track record of slowing the economy and at the same time avoiding a full blown recession. As investec ominously points out, “while each cycle has its own unique characteristics, the odds are not favorable that the current Fed tightening cycle is going to end happily for investors.”

* * *

Which brings us back to the key question: how long before rising inflation results in a recession?

For the answer, we go back to Deutsche Bank, which looks at the role inflation has a leading indicator of recession. Specifically, the German bank asks “Is the inflection in inflation a leading indicator of the end of the cycle? How
long is the lead?”
It answer: On average 3 years… but the Fed’s reaction is key. Here are the details:

If the recent uptick marks the typical mid-to late-cycle inflection up in inflation, how long after did the next recession typically occur? On average 3 years, which would put it in late 2020. But the timing is likely determined critically by the Fed’s reaction.

Historically, a Fed rate-hiking cycle preceded most recessions since World War II, with recessions occurring only after the Fed moved rates into contractionary territory. Arguably the Fed did this only after it was convinced the economy was overheating and it continued hiking until the economy slowed sufficiently or went into recession.

At the current juncture, core inflation has remained below the Fed’s target of 2% for the last 10 years and several Fed officials have argued for symmetry in inflation outcomes around the target, i.e., to tolerate inflation above 2%. It is thus likely that the Fed will welcome the rise in inflation for now and simply stick to its current guidance, possibly moving it up modestly. It also means that if indeed the Fed intends on running the economy hot, equity investors may want to consider jogging quietly for the exits, especially before the vol-targeting, inverse vol, Risk parities, CTAs and the rest of the systematic funds decide to make another sprint for it.

via Zero Hedge http://ift.tt/2HFTkSF Tyler Durden

Eight Sacrilegious Reflections On Russiagate

Authored by Paul Street via Counterpunch.org,

The Russians were…flocking to Bernie Sanders Facebook sites, and they were saying to Bernie Sanders supporters… ’if you voted for Sanders, you have to understand Hillary Clinton is crazy, she’s a murderer, she is terrible,’ all kinds of horrible, horrible things, about Hillary Clinton…it was an effort to undermine American democracy and to really say horrible things about Secretary Clinton…we have to say to the Russians. You are doing something to undermine American democracy; you are not going to get away with it. This is a major assault. If you do that there will be severe, severe consequences.

— Bernie Sanders, Face the Nation (NBC), February 18, 2018

Neo-McCarthyite liberals and other dismal Democrats are clucking about how Robert Mueller’s indictment of 13 untouchable Russians for “defrauding” the U.S. by buying some Facebook ads and employing some Internet trolls to “say horrible things” (imagine!) about Hillary Clinton (a horrifically bad politician who was accurately described as a “lying neoliberal warmonger” by a leading U.S. left intellectual trying to get leftists to hold their noses and vote “for” her as the lesser evil) “proves” that Russia engaged in relevant meddling to undermine U.S. “democracy” on Donald Trump’s behalf during the 2016 U.S. presidential election.

Please note eight things you will not hear from the Russia-mad Democrats and their many media allies at places like the Washington Post, the New York Times, CNN, and MSDNC:

1. There is No Real Democracy to Subvert in the United States.

As the distinguished political scientists Benjamin Page (Northwestern) and Marin Gilens (Princeton) show in their important new volume Democracy in America? What Has Gone Wrong and What We Can Do About It (Chicago: University of Chicago Press, November 2017):

“the best evidence indicates that the wishes of ordinary Americans actually have had little or no impact on the making of federal government policy. Wealthy individuals and organized interest groups—especially business corporations—have had much more political clout. When they are taken into account, it becomes apparent that the general public has been virtually powerless . . . The will of majorities is often thwarted by the affluent and the well-organized, who block popular policy proposals and enact special favors for themselves . . . Majorities of Americans favor . . . programs to help provide jobs, increase wages, help the unemployed, provide universal medical insurance, ensure decent retirement pensions, and pay for such programs with progressive taxes. Most Americans also want to cut ‘corporate welfare.’ Yet the wealthy, business groups, and structural gridlock have mostly blocked such new policies [and programs].”

Mammon reigns in the United States, where “government policy . . . reflects the wishes of those with money, not the wishes of the millions of ordinary citizens who turn out every two years to choose among the pre-approved, money-vetted candidates for federal office.”

Thanks to this American “oligarchy” ( Page and Gilens’ term),  the United States ranks at or near the bottom of the list of rich nations when it comes to key measures of social health: economic disparity, inter-generational social mobility, racial inequality, racial segregation, infant mortality, poverty, child poverty, life expectancy, violence, incarceration, depression, literacy/numeracy, and environmental sustainability and resilience.

It’s a vicious circle. “When citizens are relatively equal [economically],” Page and Gilens write, “politics has tended to be fairly democratic. When a few individuals hold enormous amounts of wealth, democracy suffers.” Savage inequality and abject plutocracy are two sides of the same class-rule coin in New Gilded Age America.

Some political scientists have argued that regular elections that generate competitive contests for citizens’ votes are all that is required for a nation to be a democracy. But “elections alone,” Page and Gilens note, “do not guarantee democracy” in a nation where the electoral and policy processes run in grooves made and greased to serve an unelected dictatorship of concentrated wealth.

Russia didn’t “undermine American democracy” in 2016. There was no real system of popular self-rule in place to subvert. This is, and has long been, a corporate and financial oligarchy.

2. Interference Made Obvious Sense for Russia.

Insofar as Russia interfered in the 2016 election (and it did to a minor degree), there was nothing remotely shocking about its intervention. What was all that surprising, strange, or nefarious about the Russians wanting to see Hillary Clinton defeated? Mrs. Clinton was and remains an arch-imperialist Russo-phobic warmonger determined to provoke and humiliate Russia in Eastern Europe and the Middle East.  She has long been a strong advocate of NATO‘s ever more menacing and eastward presence on Russian’s long-invaded western border. She is a strong backer of right-wing, neo-Nazi, and anti-Russian coup regime the Obama administration helped create in Ukraine.

Let’s say the tables were turned.  Would a weaker United States seek to influence national elections in a foreign global superpower that helped engineer a coup that gave rise to a viciously anti-U.S., government in Canada – and that was placing deadly military hardware, personnel, and alliances in alliances in Canada, Mexico, and the Caribbean?  Would Washington try to do whatever it could to favor actors inside the foreign superpower who seemed least disposed to threaten the U.S. “homeland”?   Would the U.S. scheme to weaken that superpower’s legitimacy and influence on the global stage?

The answer to all three questions is “you betchya!” One doesn’t have to be any kind of fan (I’m certainly not) of the corrupt state-capitalist autocrat Vladimir Putin to understand his obvious realpolitik interest in the defeat of the blood-soaked Queen of Chaos (sorry for “saying horrible things” about her, Bernie!) Hillary Clinton.

Insofar as Putin “interfered” in “our democratic elections,” his “meddling” should be understood as predictable and fairly modest electoral “blowback” elicited by U.S. global aggression and empire.

3. The Rest of the World Has a Frankly Legitimate Interest in U.S. Politics.

Why shouldn’t other nations try (however imperfectly) to influence the political process inside the U.S.? For seven-plus decades now, big bad Uncle Sam has stomped and strode across the planet as a criminal, arrogant, gun- and mass-murderous bomb-slinging imperial hegemon, convinced of his own special God- and/or History-ordained mission to run the world as his own possession. Millions upon millions have been murdered and maimed by “exceptional” America’s “benevolent” agents of “peace” and “freedom.” Still by far and away world history’s most extensive Empire, the U.S has at least 800 military bases spread across more than 80 foreign countries and “troops or other military personnel in about 160 foreign countries and territories.”  The U.S. accounts for more than 40 percent of the planet’s military spending and has more than 5,500 strategic nuclear weapons, enough to blow the world up 5 to 50 times over.

Think it’s all in place to ensure peace and democracy the world over, in accord with the standard boilerplate rhetoric of U.S. president, diplomats, and senators? Seriously? Do you know any other good jokes?

The world knows better.  Of course other nations seek to have some kind of say within the belly of the beast of the planet’s only global-reach Superpower.

Please see my latest Truthdig and Common Dreams essay, titled “The World Will Not Mourn the Decline of U.S. Global Hegemony” – a chilling and I hope useful reflection on savage and authoritarian, “democracy-deterring” (Noam Chomsky) U.S. imperial arrogance and criminality since 1945.

4. Russian Interference Was Nothing Compared to that of the Superpower’s Homegrown Oligarchy.

Russian interference in U.S. politics is a tiny drop in the bucket compared to the regular authoritarian intervention of the United States’ own homegrown “deep state” corporate and financial oligarchy. I don’t pretend to know that Russian intervention was completely irrelevant in a race that was ultimately by decided by under 78,000 votes in the swing states of Pennsylvania, Wisconsin and Michigan. We can be quite sure, however, that Russian and Russia-duped trolls and activists were infinitesimal factors balanced against the influence wielded by the leading financial institutions and corporations in “America, the best democracy money can buy.”

Here I am thinking less of the money that Trump got from renegade right-wing moguls like Robert Mercer and Sheldon Adelson than of how Mrs. Clinton’s longstanding allegiance and captivity to Wall Street helped make her a loser in an anti-establishment election colored by deep popular outrage at American hyper-inequality and plutocracy.

Also relevant is the $5 billion worth of free media exposure that the despicable orange beast got from the U.S. corporate media during the 2016 election cycle. Russia didn’t do that.  CNN and the rest of the commercial media’s news and entertainment empire did.

6. Republican Vote Suppression was a Much Bigger Deal.

Russian interference was a minor matter compared also to the impact of the reactionary and racist voter suppression laws and practices passed and conducted by Republican authorities in key swing states.

7. Other Noxious but Officially U.S.-Allied States Invest in U.S. Politics and Policy.

There’s a revealing contrast between the endless outrage the Democrats and liberals express over Russia’s real and alleged engagement in the U.S. political process and their comparative silence about the longstanding political influence exercised by vicious U.S.-allied states like Israel and Saudi Arabia. Where’s the liberal and Democratic outrage over Israel’s big-time interference in our great democracy? In a recent excellent Counterpunch report, professor Mel Gurtov writes that:

Saudi Arabia has played the influence game just as aggressively as the Russians, and for much longer. Saudi money has effectively lobbied in Washington for many years, often relying on former members of Congress. The Saudis also seek to influence US politics by funding NGOs (e.g., the Clinton Foundation), think tanks, law firms, social media, and even political action committees. Saudi investors, including members of the royal family, may have as much as a half-trillion dollars invested in US real estate, the stock market, and US treasury bills. At the time of Trump’s visit in May the Saudi leadership committed to another $40 billion in infrastructure investments, though whether or not that will actually happen is another matter….The payoff for the Saudis is arms acquisitions that have usually put Saudi Arabia first on the US arms export list. The $110 billion arms deal announced while Trump was in Saudi Arabia came on top of billions more weapons sold during the Obama years—and consistent US political support since before World War II of the royal family’s authoritarian rule. The Saudis have also bought continued US support of the Saudi air war in Yemen—a humanitarian disaster that probably amounts to war crimes. For the US, cultivating Saudi Arabia yields not only low oil prices and a reliable arms customers but also an easing of Arab pressure on Israel and leadership in Sunni confrontation of Shiite Iran and Iran’s partner, Hezbollah.

When does Robert Mueller’s Saudigate investigation begin?

7. The Russians Did Not Make the Deplorable, Dollar-Drenched Democratic Party Establishment Rig the Primaries against Bernie Sanders

…thereby undermining the only one of the two top Dem candidates who (as I freely admit despite my left criticisms of Sanders) could have defeated Dolt45 (even I would have had to forego third-party voting if Sanders had been allowed to defeat horrid Hillary). What about the Hillary campaign and the Clintonite DNC’s “meddling” against Bernie? (Sadly but predictably, Sanders has aligned himself [see this essay’s opening quote] with the neo-McCarthy-ite Russia-gate narrative. This validates his early Left critics, who took significant undeserved abuse from fellow progressives for having the elementary decency to note that Bernie the Bomber was a stealth Democratic Party company man and a dedicated Empire Man)

Russian interference wasn’t a complete “nothing burger,” but it was sorely skimpy fare compared to the immeasurably bigger and beefier servings of democracy-killing intervention  delivered by American Big Business, Republican-controlled states, and the Democratic Party establishment.

Where’s the beef stroganoff? Scattered on the margins of a much bigger plate of homegrown prime ribs.

8. “We” (the U.S.) Interfere(s) in Elections Around the World for “Our” Own Authoritarian Purposes.

In a recent remarkable report titled “Russia Isn’t the Only One Meddling in Elections. We Do It, Too,” the nation’s imperial newspaper of record, The New York Times, made and reported what might have seemed like some startling admissions about Uncle Sam’s longstanding and ongoing history of interfering in other nations’ elections.  Lengthy quotation is merited:

Most Americans are understandably shocked by what they view as an unprecedented attack on our political system. But intelligence veterans, and scholars who have studied covert operations, have a different, and quite revealing, view.

“If you ask an intelligence officer, did the Russians break the rules or do something bizarre, the answer is no, not at all,” said Steven L. Hall, who retired in 2015 after 30 years at the C.I.A., where he was the chief of Russian operations. The United States “absolutely” has carried out such election influence operations historically, he said, “and I hope we keep doing it.”

Loch K. Johnson, the dean of American intelligence scholars, who began his career in the 1970s Investigating the C.I.A. as a staff member of the Senate’s Church Committee, says Russia’s 2016 operation was simply the cyber-age version of standard United States practice for decades, whenever American officials were worried about a foreign vote.

“We’ve been doing this kind of thing since the C.I.A. was created in 1947,” said Mr. Johnson, now at the University of Georgia. “We’ve used posters, pamphlets, mailers, banners — you name it. We’ve planted false information in foreign newspapers. We’ve used what the British call ‘King George’s cavalry’: suitcases of cash.”

…the Russian campaign in 2016 was fundamentally old-school espionage, even if it exploited new technologies. And it illuminates the larger currents of history that drove American electoral interventions during the Cold War and motivate Russia’s actions today.

A Carnegie Mellon scholar, Dov H. Levin, has scoured the historical record for both overt and covert election influence operations. He found 81 by the United States and 36 by the Soviet Union or Russia between 1946 and 2000, though the Russian count is undoubtedly incomplete….. “We had bags of money that we delivered to selected politicians, to defray their expenses,” said F. Mark Wyatt, a former C.I.A. officer, in a 1996 interview.

Covert propaganda has also been a mainstay. Richard M. Bissell Jr., who ran the agency’s operations in the late 1950s and early 1960s, wrote casually in his autobiography of “exercising control over a newspaper or broadcasting station, or of securing the desired outcome in an election.” A self-congratulatory declassified report on the C.I.A.’s work in Chile’s 1964 election boasts of the “hard work” the agency did supplying “large sums” to its favored candidate and portraying him as a “wise, sincere and high-minded statesman” while painting his leftist opponent as a “calculating schemer.”

C.I.A. officials told Mr. Johnson in the late 1980s that “insertions” of information into foreign news media, mostly accurate but sometimes false, were running at 70 to 80 a day. In the 1990 election in Nicaragua, the C.I.A. planted stories about corruption in the leftist Sandinista government, Mr. Levin said. The opposition won.

…For the 2000 election in Serbia, the United States funded a successful effort to defeat Slobodan Milosevic, the nationalist leader, providing political consultants and millions of stickers with the opposition’s clenched-fist symbol and “He’s finished” in Serbian, printed on 80 tons of adhesive paper and delivered by a Washington contractor.

Vince Houghton, who served in the military in the Balkans at the time and worked closely with the intelligence agencies, said he saw American efforts everywhere.

Similar efforts were undertaken in elections in wartime Iraq and Afghanistan, not always with success. After Hamid Karzai was re-elected president of Afghanistan in 2009, he complained to Robert Gates, then the secretary of defense, about the United States’ blatant attempt to defeat him, which Mr. Gates calls in his memoir “our clumsy and failed putsch.”

At least once the hand of the United States reached boldly into a Russian election. American fears that Boris Yeltsin would be defeated for re-election as president in 1996 by an old-fashioned Communist led to an overt and covert effort to help him, urged on by President Bill Clinton. It included an American push for a $10 billion International Monetary Fund loan to Russia four months before the voting and a team of American political consultants (though some Russians scoffed when they took credit for the Yeltsin win).

In recent decades, the most visible American presence in foreign politics has been taxpayer-funded groups like the National Endowment for Democracy, the National Democratic Institute and the International Republican Institute, which do not support candidates but teach basic campaign skills, build democratic institutions and train election monitors….The National Endowment for Democracy gave a $23,000 grant in 2006 to an organization that employed Aleksei Navalny, who years later became Mr. Putin’s main political nemesis, a fact the government has used to attack both Mr. Navalny and the endowment. In 2016, the endowment gave 108 grants totaling $6.8 million to organizations in Russia for such purposes as “engaging activists” and “fostering civic engagement.” The endowment no longer names Russian recipients, who, under Russian laws cracking down on foreign funding, can face harassment or arrest.

What the C.I.A. may have done in recent years to steer foreign elections is still secret and may not be known for decades. It may be modest by comparison with the agency’s Cold War manipulation. But some old-timers aren’t so sure.

“I assume they’re doing a lot of the old stuff, because, you know, it never changes,” said William J. Daugherty, who worked for the C.I.A. from 1979 to 1996 and at one time had the job of reviewing covert operations. “The technology may change, but the objectives don’t.”

Wow.  Radical truth-telling at The New York Times?

No, not really.

There’s a catch. It’s very simple.  The caveat is that “we” (U.S. foreign policymakers and their supposedly benevolent institutions – the CIA, the IMF, the NED, the Carnegie Endowment, etc. – are good and only interfere to advance democracy, while they are bad and interfere for authoritarian reasons.  We good.  They bad.  Get it?

It’s kind of like how we killed 3-5 million Southeast Asians out of “good intentions” between 1962 and 1975 but the Soviet Union crushed internal dissent and waged war in Afghanistan out of purely evil designs.

When Washington kills civilians in Syria it’s for good reasons.  When Moscow does the same it’s for bad reasons.

“Equating” U.S. interference in other nations’ elections with the Russians’ (much more minor) interference in the 2016 U.S. election, Steven Hall told Times reporter Scott Shane, “is like saying cops and bad guys are the same because they both have guns — the motivation matters.” (Imagine thinking that cops could be bad guys!).

“It’s not just apples and oranges,” Kenneth Wollack informed Shane, “It’s comparing someone who delivers lifesaving medicine to someone who brings deadly poison.” Wollack is president of the National Democratic Institute, a key non-profit engaged in U.S. “democracy promotion” and election interference abroad.

Shane fails to subject these transparently absurd assertions to the slightest hint of critical scrutiny.  That’s because he and/or his editors have had their brains marinated in the toxic, mind-numbing doctrinal sauce of nationally narcissistic American Exceptionalism.  As a result, they take it as a matter of self-evident truth that “we” are noble and benevolent, far-seeing agents of popular sovereignty. “We” are healers and “good cops.” “They” are nefarious “bad guy” bearers of authoritarian poison.

You must be a gullible victim of American state propaganda to believe something as patently preposterous as this, of course. Today as in previous decades. U.S. foreign policy, including election interference operations, is all about advancing perceived U.S. national interests, strongly conflated with the imperatives of U.S. and global capitalism.  It is about defending and expanding U.S. global primacy by any means deemed necessary. It has nothing whatsoever to do with spreading democracy.  Indeed, it is fundamentally about “deterring democracy” (the title of Noam Chomsky’s masterpiece volume on the basic underlying continuity in U.S. foreign policy as the post-Cold War era dawned) since most of the world’s politically cognizant populace has no interest in subordinating themselves to U.S. dominance and the selfish imperatives of American transnational corporations.

Sadly, untold thousands of U.S. liberals open the Times to drink up American Exceptionalist doctrine along with their daily Starbucks each morning. Too many of them are being fed the related neo-McCarthyite notion that serious dissent and conflict within the U.S. reflects “outside” (Russian) interference, not established steep and domestic modes of inequality, oppression, and authoritarian rule. This is dangerous messaging indeed, great fuel for the expansion of the military police state and its ever-burgeoning cybernetic surveillance apparatus.

The fact that so many Democrats and Democratic Party-affiliated groups and media organs are helping spread this conspiratorial and xenophobic madness is yet another reminder that the radically regressive Republicans and the deplorable dollar Democrats are “two wings of the same bird of [corporate and imperial] prey” (Upton Sinclair, 1904) – both lethal, murderous, plutocratic, and authoritarian in their own different ways.

Think Bernie represents some portside exit from this state-capitalist and imperialist nightmare? Dream on.

Still, it is perhaps worth it to pressure him to speak up against plans for a possible U.S. war on Venezuela, whose great populist hero (Hugo Chavez) Bernie insultingly described as a “dead communist dictator”  in March of 2016.

Hillary, by the way, is a murderer, terrible to say.

*  *  *

Please help Street keep writing here.

via Zero Hedge http://ift.tt/2ETEUwz Tyler Durden

PCR Asks: Does The ACLU No Longer Defend Civil Liberty?

Authored by Paul Craig Roberts,

There are many signs of American collapse. One of the most scary is the fact that the American Civil Liberties Union no longer knows what are the civil liberties it purports to defend. Identity Politics has transformed civil rights into privileges for victim groups.

Yesterday (February 22, 2018) I received a 50-state survey from the ACLU. The envelope in which the questionnaire arrived said the survey was about how “to protect civil liberties during the Trump Presidency.” However, the survey (essentially a fundraiser) did not mention a single civil liberty contained in the Bill of Rights and added as amendments to the US Constitution.

Nothing about the sweeping away by the criminal Bush regime of habeas corpus with indefinite detention. No mention of the criminal Obama regime’s kill list, which swept away due process by executing US citizens on allegation alone without trial, evidence, and conviction. Nothing about the sweeping away by both criminal regimes of the prohibition against spying on citizens without warrants. No mention of the shutdown of free speech and protest or of the destruction of civil liberties by unaccountable police who brutalize, rob, and murder Americans at will.

In place of civil liberties, the ACLU has Identity Politics. The ACLU “civil rights” survey is concerned with the civil rights of illegal aliens, of women to have abortions and publicly financed birth control, the “fundamental rights of LGBT people,” and Muslim bans. The civil liberties listed in the Constitution do not qualify for concern; only invented rights that are not listed in the Bill of Rights.

The letter accompanying the questionnaire does mention the First Amendment and suppression of free speech “emanating from the White House.” I mean, really, the Bush and Obama regimes decimated free speech and imprisoned whistleblowers. Julian Assange has been imprisoned for years in the Ecuadoran embassy in London for publishing leaked material revealing criminal and deceitful behavior of the US government. By the time of Trump’s election, the First Amendment was a dead letter civil right.

In the ACLU’s Identity Politics, white people, especially white heterosexual males, have no rights. They are not protected by quotas, political correctness, or hate speech prohibitions. No one has to worry about offending a white by destroying statures of white males or church plaques commemorating George Washington and Robert E. Lee. Try destroying a stature of Martin Luther King. A white person can be called every name in the book, and is. White DNA is said to be an abomination. Anyone who said black DNA or homosexual DNA was an abomination would face hate crime charges.

Even men-hating white feminists jump on the anti-white bandwagon, denouncing white heterosexual–not homosexual–males as misogynist. The feminists reserve their hate for the men attracted to women.

War is the greatest destroyer of civil liberty. Indefinite detention, execution without due process, spying without warrants, suppression of the First Amendment are all consequences of the use of 9/11 to put the US on a war basis. The replacement of civil liberty with a police state is said to be necessary in order to protect us from Muslim terrorists, expanded to include undefined “domestic extremists.” Currently the US is being put on an even greater war basis with Russia, China, Iran, North Korea, and even Venezuela declared as threats to America.

The ACLU shares responsibility for the explosion of the threat level from al Qaeda to every country that “threatens” America by having its own independent foreign policy and insisting on its sovereignty. It was Trump who said he was going to normalize relations with Russia, and it was the ACLU and the entirety of the liberal/progressive/left who jumped on the anti-Trump bandwagon and went after him with the orchestrated conspiracy of Russiagate. What the liberal/progressive/left did was to drive Trump into the arms of the military/security complex.

Clearly, the liberal/progressive/left and the ACLU are a greater menace to the Bill of Rights than Donald Trump.

via Zero Hedge http://ift.tt/2EQx231 Tyler Durden

Here’s How Regulators Are Inadvertently Laying The Groundwork For The Next Housing Crisis

Only a few weeks ago, we pointed out a remarkable development in the US mortgage market that has significant implications not only for mortgage borrowers, but perhaps the broader economy as a whole: Wells Fargo, formerly America’s foremost mortgage lender, had seen its share of the market eclipsed by Quicken Loans – the Detroit-based, nonbank lending behemoth that pioneered applying for mortgages on the Internet with its now-famous Rocket Mortgage (readers will remember RM’s celebrity-packed SuperBowl spot).

Many factors (aside from Wells’ own criminality, which recently drew a strong, but ultimately meaningless, rebuke from the Fed) have contributed to this shift, as Bloomberg points out.

But as it turns out, the rising dominance of nonbank lenders like Quicken could portend a massive, bad-debt fueled binge reminiscent of the circumstances that led up to the housing crisis. That is to say, a wave of bad debt could create a cascading wave of defaults with repercussions far beyond the housing market.

Considering all the restrictions that Dodd-Frank and other post-crisis regulations slapped on mortgage lenders, one might wonder how this might be possible.

Foreclosure

Of course, as Bloomberg explains, instead of making the market safer, regulators are inadvertently enabling the rise of lenders like Quicken who aren’t bound by many of the rules that restrict banks’ mortgage-lending practices. As a result, Quicken Loans is effectively free from many of the regulations that have forced some of the biggest mortgage lenders into a period of retrenchment…

Make no mistake, regulators have done plenty to rein in the mortgage business since the 2000s. New rules require that lenders carefully assess borrowers’ ability to pay, and that mortgage servicers — which process payments and manage other relations with borrowers — give troubled customers plenty of opportunity to renegotiate their debts before resorting to foreclosure. The Federal Reserve performs regular stress tests to ensure that banks have enough capital to weather defaults.

Problem is, the requirements have weighed most heavily on traditional, deposit-taking banks. The added hand-holding required in mortgage servicing, for example, has roughly quadrupled the cost of handling delinquent loans, turning them into major loss-makers. Together with stringent capital requirements, this has all but guaranteed that banks will lend only to people with the most pristine credit. In some cases, they have given up the business entirely: Late last year, Capital One announced it was exiting mortgage origination because it was “structurally disadvantaged.”

Because they’re not FDIC-backed, the shadow (aka “nonbank”) mortgage lenders have much more latitude to approve mortgages to borrowers with lower credit scores. This is a huge advantage in a market where supply is limited, which has helped squeeze home prices to their highest levels on record – surpassing even the pre-crisis peak from June 2006.

As we’ve pointed out many times  (but most recently last month), with home prices in 80% of US cities growing twice as fast as wages, American working- and middle-class families are finding it increasingly difficult to support their families – let alone afford a home.

CaseShiller

Just the other day, we highlighted the cognitive dissonance between data showing US household debt of about $13.15 trillion, of which nearly $1 trillion is the credit card debt alone. Households, it seems, are truly on a dangerous debt binge. Yet, as the economists keep telling us, the US economy has almost never been in better shape…

…Of course, the reality is that the economy looks just peachy if you’re a wealthy individual who owns lots of financial securities…

RealAssets

…This has accounted for the bulk of assets gained during the recovery, as the hart above illustrates…

Meanwhile, nonbank lenders are happily courting these already debt-burdened borrowers by signing the up for mortgages with higher interest rates, even though many banks – who will now only deal with borrowers with the most pristine records – won’t touch these customers. This has caused the average FICO score for loan originations at these lenders to fall precipitously, as Bloomberg adds.

The non-banks’ growth has been breathtaking. At the end of 2016, such unaffiliated mortgage companies accounted for more than 40 percent of new conventional mortgages (those eligible for sale to government-controlled guarantors Fannie Mae and Freddie Mac), twice the share they accounted for just eight years earlier. They’re also responsible for a decline in credit standards: The average FICO score at origination stood at 730 at the end of 2017, down from 750 five years earlier. For loans guaranteed by the Federal Housing Administration — an area where the non-banks’ share is greatest — the average FICO score has fallen to 680.

And the shift has been even more extreme among companies that provide mortgage-servicing…

The shift has been even more extreme in mortgage servicing. Non-banks now service about 51 percent of all loans packaged into new Freddie Mac securities, according to mortgage analytics firm Recursion Co. That’s more than double the share of just five years ago. For securitized FHA loans, the share stands at a staggering 83 percent. Again, banks are leaving the business: Last year, CitiMortgage announced it would exit by the end of this year, transferring the servicing rights for about 780,000 mortgages.

Quicken Loans and its ilk might argue that their gains are a result of their cutting-edge technology (offering mortgages over the Internet?, the banks say. Why didn’t we think of that!). But this simply isn’t true.

What accounts for the non-banks’ appetite? They might argue that their processes and technologies give them greater confidence in their underwriting. But one can’t ignore the reality that, thanks to relative lax regulation, they also have less at stake. By operating with less capital, they can reap very large returns in good times. In bad times, however, they might not have the capacity to withstand losses or deal with the servicing burden created by widespread delinquencies. As a result, a large swathe of the country’s lending and servicing system could implode when the next crisis hits.

The only sensible solution, Bloomberg posits, would be to level the playing field by adopting additional regulations specifically aimed at these non-bank lenders. But this, too, would come with risks that could potentially harm consumers…

The only solution is to level the regulatory playing field between the banks and the non-banks. This means raising capital requirements for the latter, and subjecting them to stress tests. Difficult as this might sound, the Dodd-Frank financial reform legislation actually created an institution tailor-made to handle such systemic issues: the Financial Stability Oversight Council. The council should put non-bank mortgage lenders at the top of its agenda this year.

Of course, given what looks like a market peak, this might not be such a bad thing…

* * *

Another factor enabling this expansion is the continued dominance of Fannie Mae and Freddie Mac. All together, Fannie and Freddie guarantee some $4 trillion in residential mortgages, accounting for some 40% of the US market. And as we pointed out late last year, the hope that the two mortgage giants – which were nationalized during the crisis following a $187 billion taxpayer bailout – could be wound down under federal oversight has all but vanished.

Today, Senators on both sides of the aisle have concluded that they are too big and too risky to replace. Proposed legislation in 2018 will see them maintain their position as the beating heart of the US mortgage industry, rather than replacing them, like the Senate tried and failed to do four years ago.

Once again, government regulations – that were intended to protect consumers – are instead creating the unintended consequence of making consumers increasingly vulnerable to the same types of predatory lending practices the regulations were initially designed to stamp out.

Make sense?

We didn’t think so…

via Zero Hedge http://ift.tt/2CJTODS Tyler Durden

Facing The Tragicomedy Of Russiagate

Authored by Sheldon Richman via AntiWar.com,

The whole election-meddling distraction is remarkable in both comic and tragic ways. The tragedy can be summed up in three words: New Cold War. At a time when the U.S. and Russian governments ought to be working toward nuclear disarmament, relations are deteriorating dangerously. As the estimable Australian writer Caitlin Johnstone, notes, despite Donald Trump’s campaign promise of détente with Russia,

This administration has already killed Russians in Syria, greatly escalated nuclear tensions with Russia, allowed the sale of arms to Ukraine (a move Obama refused for fear of angering Moscow), established a permanent military presence in Syria with the goal of effecting regime change, forced RT and Sputnik to register as foreign agents, expanded NATO with the addition of Montenegro, assigned Russia hawk Kurt Volker as special representative to Ukraine, shut down a Russian consulate in San Francisco and expelled Russian diplomats as part of continued back-and-forth hostile diplomatic exchanges.

We are already at an extremely dangerous point in the ongoing trend of continuous escalations with a country that is armed with thousands of nuclear warheads. [Johnstone’s links.]

Would Trump have done these things without the pressure of Russiagate? I don’t know, but Russiagate hasn’t helped. And what more would Hillary Clinton have done by this point? Johnstone argues that Russiagate is all about putting Russia in its place and securing the American ruling elite’s geopolitical and economic interests — not about getting Trump:

America’s unelected power establishment doesn’t care about impeaching Trump, it cares about hobbling Russia in order to prevent the rise of a potential rival superpower in its ally China. All this lunacy makes perfect sense when you realize this. The US deep state is using the hysterical cult of anti-Trumpism to manufacture support for increasing escalations with Russia, and the anti-Trumpists are playing right along under the delusion that pushing for moves against Russia will hurt Trump.

Of course, removing Trump from office would be a cherry on top. If the drivers of Russiagate can’t have that, at least they can leave the impression that Hillary Clinton would be president today were it not for the diabolically cunning Vladimir Putin and the inherently depraved Russia in cahoots with their tool, Donald Trump. (Putin’s opponents in Russia are irritated that Americans portray Putin as virtually omnipotent.) Russiagate promoters in the Democratic Party deny they intend to right the wrong of 2016, but I don’t believe them. Surely they are trying to delegitimate the election on the grounds that Trump and Putin stole it from its rightful owner. (For the record, I think all elections are illegitimate but not because of foreign involvement.)

The anti-Russia campaign has certainly gone well beyond overboard. Former Director of National Intelligence James (Yeah, I lied. What you gonna do about?) Clapper, on “Meet the Press,” said the Russians “are “typically, almost genetically driven to co-opt, penetrate, gain favor, whatever, which is a typical Russian technique.” (Beg your pardon, I linked to RT. Here’s an American site for anyone concerned about having RT in their browser history.) Johnstone points out that Clapper has said such things before, including: “But as far as our being intimate allies, trusting buds with the Russians that is just not going to happen. It is in their genes to be opposed, diametrically opposed to the United States and to Western democracies.” As I recall, former CIA Director John Brennan said something similar.

On the comic side, Russiagate is a new theater of the absurd, featuring Americans running around with their hair on fire over alleged official Russian actions that amount to nothing significant: it was an act of war — another Pearl Harbor — no wait, another 9/11!

Let’s assume – purely for the sake of discussion since no evidence has been made public — that the Russians did it. Note, first, that the “it” looks like the product of the gang that couldn’t shoot straight. I’m not going to do what Johnstone, Glenn Greenwald, Aaron Maté, and the late Robert Parry have done so well so many times, namely, catalog all the inane acts the Putin-guided Russian intel agencies are said to have committed in order to bring down America. (Start here.) Suffice it to say that if that’s the best Putin can come up with, we have little to worry about. Of course, the very inanity of this so-called campaign to destroy America — the ridiculous discrepancy between means and alleged end, the sheer clownish ineptitude — furnishes sufficient grounds for skepticism, at least, about the Russiagate narrative. (See David Stockman’s explanation of the ineptitude. SPOILER ALERT: It wasn’t a Russian Intel operation. The man who we are to believe sought to subvert America’s democracy is a freelance pro-Putin Russian food-industry oligarch employing a bunch of minimum-wage keyboard jockeys who didn’t pay attention to the United States until the 2014 U.S.-sponsored coup in Ukraine, i.e., before there was a Trump campaign.)

Another comic aspect is the national arrogance of it all. How dare anyone interfere with our election! What’s so funny is that some people who express such outrage really have no idea how many times the US government has interfered in other countries’ elections (including Russia’s), not to mention far worse things, like perpetrating assassinations, coups, and invasions. (See Stephen Kinzer’s Overthrow: America’s Century of Regime Change from Hawaii to Iraq. This sordid history is summarized here.)

Americans generally do not know the nefarious things “their” government has done over many, many years. This is partly due to what Bryan Caplan in The Myth of the Rational Voter calls “rational irrationalism.” Americans embrace a nationalism that is impervious to facts. Even vivid accounts of the systematic wholesale slaughter of the Indians wouldn’t shake it. People generally don’t like to venture outside their comfort zones to shake up their worldview, and even if they did so, what would change? Each person has only one vote, and the chance that one vote will make a difference is close to zero. So why not indulge one’s nationalist biases? It’s not as though there’s an opportunity cost to doing so.

On the other hand, politicians and pundits do have some idea of America’s long record of intervening in other countries. (Maybe I’m being too charitable.) What’s their excuse for being so offended by even the possibility of meddling in an U.S. election? One explanation is the “exceptional nation” dogma of the American creed, or what I call the American chosen-people complex. Even secular American nationalists believe America has been anointed — by history if not by a deity — to lead the world. (This goes back to the founding generation, by the way. It’s no post-World War II phenomenon. See America’s Counter-Revolution: The Constitution Revisited.)

Thus, we have a moral inequivalence on our hands. It’s okay if we do it to “them” (whoever), but it’s not okay if “they” do it to us. Moreover, we can do it to ourselves, but if anyone else tries it, there’ll be hell to pay.

Any way you look at it, Russiagate is ridiculous. Of course it serves some people’s interests. But it harms the rest of us, most of all by bringing us closer to conflict with Russia, perhaps even to nuclear war.

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Millions Of Working-Age Men Will Never Return To The Labor Market, Fed Says

Given that the trend has only accelerated in recent years, we’ve report time and time again (and again) on the declining participation rate of healthy, working-aged men (typically defined as those aged 25 to 54).

The labor force participation rate for prime-age men (age 25 to 54) has declined dramatically in the US since the 1960s. But in recent years, the declines have intensified. In 1996, 4.6 million prime-age men did not participate in the labor force. By 2016, this number had risen to 7.1 million.

As the paper’s author wrote in the excerpt: “Better understanding these men and the personal situations preventing them from working may be crucial in evaluating whether they are likely to return to the labor force.”

And in a perhaps more shocking finding, it’s likely that many of these men will never return to the workforce due to a phenomenon called “job polarization”…

In addition, I argue that “job polarization,” a phenomenon that describes declining demand for middle-skill workers in response to advancements in technology and globalization, has been a key contributor to the increase in nonparticipation among prime-age men. I show that if job polarization had not changed the composition of jobs in the labor market in the past two decades, 1.9 million more men would likely be employed in 2016, representing a 3.6 percent increase in overall employment of prime-age men. However, the effects of job polarization are unlikely to unwind any time soon—survey evidence suggests nonparticipating prime-age men are unlikely to return to the labor force if current conditions hold.

But by taking a closer look at this trend, the researchers at the Kansas City Fed discovered that the numbers more or less line up with a trend that politicians have been lamenting for decades: The hollowing out of the American middle class. Indeed, the study discovered that, over the past two decades, unemployment gains were highest for men in the middle education group – those with a high school degree or some college.

…While the nonparticipation rates rose for all education groups over the past two decades…

 

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…the largest increase was for those in the middle-education groups, who had only a high school degree, some college, or an associate’s degree…

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Indeed, that trend can also be seen in comparisons between the education levels of participating and nonparticipating men…

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…Meanwhile, within the prime working age group, older men tended to see the highest rates of participation, presumably as disruption has left many men stranded mid- or late-career without any usable skills to help them attain a position comparable to their old job…

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Here’s a more complete breakdown by education group below:

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Read the report in its entirety:

1q18tuzemen by Anonymous JJ6eerL on Scribd

 

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Och-Ziff’s 34-Year-Old Superstar Trader To Get $7.5 Million Guarantee

Three weeks ago, news broke that Dan Och was stepping down as CEO of the once iconic Och-Ziff hedge fund (which as of January 1 managed $32BN in AUM), following internal turmoil in the form of a growing feud between founder Daniel Och and former superstar trader Jimmy Levin. As we noted at the time, it was unclear what future Levin, currently co-CIO at Och Ziff would have at the company as part of the executive fallout.

We now know the answer: according to Bloomberg, Levin, 34, who was passed over for the hedge fund’s top job in December and who netted the firm over $2 billion in 2012, will remain at the fund, and get restricted stock worth $35.6 million as of Friday’s close, as well as a guaranteed annual bonus of $7.5 million under his new job contract.

As disclosed in the company’s 10-K, Levin’s employment agreement entitles him to receive 1.1% to 1.5% of the gross profit of some of the firm’s funds, subject to a $7.5 million minimum guarantee, most of which will be paid in cash. In addition to receiving restricted stock, he’ll give up large chunks of previously awarded equity units, Bloomberg notes.

Och-Ziff Chief Financial Officer Alesia Haas said last week that Levin’s new contract would link his compensation more closely to fund performance to reflect his responsibilities as co-CIO. Returns at the hedge fund firm strengthened last year, with the flagship OZ Master Fund gaining 10.4 percent — the most since 2013 — and the OZ Credit Opportunities Fund jumping 11 percent.

As previously reported, Levin who  “in the late 1990s, was working at a summer camp in Wisconsin, teaching Mr. Och’s son how to water ski” was promoted to co-CIO in February last year, a move many saw as his promotion to heir apparent of Dan Och.

As part of the promotion, he got 39 million shares tied to stock return, outlining an effort by the firm to prop up its share price, which has plunged more than 92% since its 2007 initial public offering. The award would have been worth almost $200 million if all goals were met.

However, as the WSJ detailed last month, outgoing CEO Dan Och told investors in December that Levin wouldn’t succeed him.

Over Christmas weekend, Och-Ziff rushed out a letter to investors revealing that the 57-year-old Mr. Och had changed his mind, overruling others in the process. “After extensive discussion with the board of directors, including the company’s independent directors, who support transitioning to Jimmy in the near future, it was the conclusion of Dan Och …that now is not the right time to transition to Jimmy.”

Mr. Och himself has never publicly addressed why he soured on Mr. Levin and reasserted control at the big firm. Interviews with more than a dozen people close to the situation at Och-Ziff suggest that many inside the firm, including board members and Mr. Levin, were shocked by the shift. People familiar with Mr. Och’s thinking say he felt Mr. Levin pushed too far, too fast, asking for more money and control than he was due.

“A level of distrust” had developed between the two executives, says a person close to the matter.

In January, the firm said Robert Shafir, the former chairman of the Americas at Credit Suisse Group AG, would take the CEO job Feb. 5 and receive a $60 million pay package. Part of the award would be linked to the fund’s stock price performance.

While for many a $7.5 million guarantee is unheard of, for Levin – who was named global head of credit in 2013 – it represents a big step down from his prior arrangement. In 2013, Levin, then 30 years old, was rewarded with a $119 million payday for his big, and successful, bet on RMBS.

Last February, when relations between the two traders were better, Och shocked Wall Street by elevating Levin, the star of the firm’s credit business, to co-chief investment officer and handing him an incentive package of $280 million. 

“It’s the kind of crazy pay you don’t hear about in the industry much these days” Bloomberg reported at the time. As part of the deal, Och agreed to surrender around $100 million of his own stock to Levin, meaning Mr. Levin’s raise essentially came out of Och’s pocket.

Inside the firm, some seethed. Outside, they sneered; the move smelled a bit of desperation. Five months later, that remains the burning question: Is this a Hail-Mary stab by Och to win back his seat of dominance in the hedge-fund universe or a stroke of genius?

One year later, even as the internal “seething” has died down, the question remains – with Och relinquishing control of the hedge fund he built, and almost destroyed, is keeping Levin – a trader who made it to the top largely thanks to a concurrent bond bull market – still a desperation “Hail Mary” by the company?

Today, Och-Ziff, still one of the world’s largest hedge funds, manages just over $30 billion, down from almost $50 billion in 2005 as a result of the fund’s performance and legal woes, and its shares closed at $2.66 on Friday. To be sure, Levin’s challenge is great.

… to reverse the merciless bleeding of assets — and defections of personnel — triggered by Och-Ziff’s misconduct in the Democratic Republic of Congo, Libya and other African countries. If Levin makes it happen, it’ll be because he’s successful in his push to remake Och-Ziff, a firm long dominated by equity trades, into something of a fixed-income shop. The firm now has half of its $32 billion in assets tied to credit, including dedicated funds that have cropped up in just the past few years.

“We certainly weren’t known as a credit shop when I first met with clients,” Levin said recently from an Och-Ziff conference room overlooking Central Park, recalling when he was a twenty-something on the road trying to convince investors to part with their money. “Those early meetings weren’t the easiest in the world.”

Well, if he fails at least he will at least have some guaranteed “pocket change” to fall back on, because for a man who has made hundreds of millions at the fund he joined in 2006, that’s precisely what $7.5 million represents. That, and of course, a forced vacation: Levin has a two-year noncompete clause in his contract precluding him from going to a new firm.

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