Jack Davies and Jan De Deken Interview the Man Behind Uruguay’s Marijuana Legalization

Julio CalzadaTrained as a sociologist, Julio Calzada spent 24
years working with disadvantaged young people in the country’s
slums. “That they come into contact with cocaine paste while
looking for soft drugs is particularly problematic,” said Calzada,
who is now Secretary-General of Uruguay’s National Drug Council,
the agency in charge of implementing the country’s new marijuana
(partial) legalization law, which was passed by the country’s
Senate on December 10. Jack Davies and Jan De Deken sat down with
Calzada to discuss drug policies promises and challenges.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/jack-davies-and-jan-de-deken-interview-t
via IFTTT

Jack Davies and Jan De Deken Interview the Man Behind Uruguay's Marijuana Legalization

Julio CalzadaTrained as a sociologist, Julio Calzada spent 24
years working with disadvantaged young people in the country’s
slums. “That they come into contact with cocaine paste while
looking for soft drugs is particularly problematic,” said Calzada,
who is now Secretary-General of Uruguay’s National Drug Council,
the agency in charge of implementing the country’s new marijuana
(partial) legalization law, which was passed by the country’s
Senate on December 10. Jack Davies and Jan De Deken sat down with
Calzada to discuss drug policies promises and challenges.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/jack-davies-and-jan-de-deken-interview-t
via IFTTT

As Bitcoin Transaction Volume Triples Since October, Europe Prepares To Regulate, Tax The Digital Currency

Representing numbers that would put the adoption curve of Obamacare to shame, the Bitcoin equivalents of Paypal, BitPay, announced last week that it has now processed over $100 million in BTC transactions in 2013, has increased its merchant base to over 15,500 approved merchants in over 200 countries, but most importantly, has seen a surge in the number of merchants using its BTC payment pricing plan, by 50% since October while the volume of transactions has tripled. While the surge in the currency adoption has matched the explosive rise in the USD-value of the currency, the news should comfort any lingering doubts whether Bitcoin is a credible payment system.

From the BitPay press release:

BitPay Inc, the world leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year, and has increased its merchant base to over 15,500 approved merchants in 200 countries. Since the announcement of the new All Inclusive Pricing Plan in October, along with the integration with Shopify in November, the number of new merchants has increased over 50% and the transaction volume has tripled.

 

“This year, the 2013 holiday season was Adafruit’s biggest ever. We are delighted to offer bitcoin payments via BitPay to our community and customers. It was fast and easy, hundreds of orders and happy customers getting educational electronics, using bitcoin!” shared Limor Fried, Founder and Engineer with Adafruit.

 

Bitcoin has “clear potential for growth and could become a major means of payment for online transactions” a Bank of America analyst told CNBC. As the number of Bitcoin users continues to increase, merchants such as Adafruit, BTCTrip, Alliance Virtual Offices, and Clearly Canadian, see the value of working with BitPay to help expand their business.

Which explains why Europe, which over a year was the first entity to cry foul about Bitcoin (recall from November 2012: “The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows“) when the USD-price of one BTC was still in the double digits, is doubling down in its fight against the fiat alternative, this time as the European Union’s top banking regulator is preparing to actively supervise the virtual currency. From Bloomberg:

Trading Bitcoins could bleed you dry, the European Union’s top banking regulator said as it weighs whether to regulate virtual currencies. Thefts from digital wallets have exceeded $1 million in some cases and traders aren’t protected against losses if their virtual exchange collapses, the European Banking Authority said today in a report warning consumers about the risks of cybermoney.

 

Virtual currencies such as Bitcoin have come under increased scrutiny from regulators and prosecutors around the globe. China’s central bank barred financial institutions from handling Bitcoin transactions last week and German police arrested two suspects in a fraud probe into illegally generated Bitcoins worth 700,000 euros ($963,000).

 

“The technology is still relatively immature and lacks the infrastructure, regulation and understanding of the risks that are taken for granted in conventional financial systems,” Matt Rees, assistant director at Ernst & Young LLP, said in an e-mail. “It is not surprising then that thefts, frauds and other deceptions are currently commonplace.”

 

Since Bitcoins exist as software, the virtual currency isn’t controlled by any government or central bank. The digital money emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown.

 

The virtual currency gained credibility last month after law enforcement and securities agencies said in U.S. Senate hearings that it could be a legitimate means of exchange. The price of Bitcoins topped $1,000 as speculators anticipated broader use of digital money.

Because, you see, it is the possibility of theft that has regulators worried, not that alternative currencies could undermine the fiat system (especially in Europe where the artificially common currency is not exactly the world’s most admired construct) the world is so hooked on.

So what does Europe propose? Simple: do more of what it truly excels at: tax stuff.

People holding virtual currencies may be subject to value-added or capital gains taxes, the EBA said.

 

The government of Norway, Scandinavia’s richest nation, said it would treat Bitcoins as an asset and levy capital gains tax on them.

 

“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview.

 

For virtual currencies to be regulated in the EU, the EBA would have to get approval from the European Commission, the 28-nation bloc’s executive arm.

 

We “support the EBA warning to consumers on the risks associated with virtual currencies,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.

In other words, it is only a matter of time before Europe does all it can to make the use of Bitcoin even more prohibitive, which in a Europe that is flooded with bad debt, with a banking sector whose credibility is non-existent resulting in loan “creation” plunging at a record pace, and a banking union “resolution mechanism” that is as improbable now as it has ever been, means more deposit bail-ins in a form that “fall under the usual definition of money” are just a matter of time.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/SVBCukOjheQ/story01.htm Tyler Durden

Cathy Young on Linda Tirado and the Politicization of Poverty

Linda TiradoThe issue of poverty and responsibility starkly
divides leftists and liberals from conservatives and libertarians.
Is poverty caused by conditions beyond individual control, or by
bad personal choices? Can the poor help themselves, or is it a
social responsibility? In recent days, this debate has been
dramatized by the saga of Linda Walther Tirado, the woman who
(depending on which side you take) either perpetrated a brazen hoax
by offering “poverty porn” to the gullible left, or told a brave,
honest tale of American poverty only to be savaged by the heartless
right. As is often the case with conflicting politicized
narratives, writes Cathy Young, neither one quite matches the
facts. Tirado’s story is not a quite hoax; but there is nothing
honest about it. It is a combination of partial truths and dramatic
embellishments spun into a false narrative with a political
agenda.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/cathy-young-on-linda-tirado-and-the-poli
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Remembering Christopher Hitchens, 1949 – 2011

Christopher
Hitchens died on
this date two years ago
. Hitchens was the model of a public
intellectual. He was certainly public in his positions and
arguments, which allows for anyone interested to assess a person’s
arguments. And he was intellectually honest in a way that is
uncommon, with many (most?) thinkers curtailing their views if they
threaten a broader ideological identity. Though definitely a man of
the left, Hitchens was never orthodox and ran into trouble given
his positions on issues such as abortion (he was against it),
foreign interventionism (he was for it), free speech deemed
offensive to certain groups (he was for it), and more. While he
rarely missed opportunities to offend right-wing sensibilities (he
once joked about Ronald Reagan’s Alzheimer’s clearly having started
with the president was still in office), he didn’t hold back
against the left, either. He had few kind words about Martin Luther
King, Jr. and he dismissed Gandhi as a “poverty pimp.”

He admitted to Reason in a
wide-ranging  2001 Reason interview
conducted a few months
before the 9/11 attacks that his connection to the left was fraying
(he would break definitively with The Nation magazine shortly after
the attacks). Part of the reason stemmed from his realization that
the forces of creative destruction unleashed by capitalism were
remaking the world in a way that he – along with Marx and Engels in
the Communist Manifesto – could appreciate:

The thing I’ve often tried to point out to people from the early
days of the Thatcher revolution in Britain was that the political
consensus had been broken, and from the right. The revolutionary,
radical forces in British life were being led by the conservatives.
That was something that almost nobody, with the very slight
exception of myself, had foreseen.

I’d realized in 1979, the year she won, that though I was a
member of the Labour Party, I wasn’t going to vote for it. I
couldn’t bring myself to vote conservative. That’s purely visceral.
It was nothing to do with my mind, really. I just couldn’t
physically do it. I’ll never get over that, but that’s my private
problem.

But I did realize that by subtracting my vote from the Labour
Party, I was effectively voting for Thatcher to win.

Hitchens was a good friend and ally to Reason over the years,
though we disagreed with him on many, many topics (indeed, on
most topics). He graciously penned a foreword to our 2004
anthology Choice: The Best of Reason, remarking

It is useful and encouraging to have a magazine that approaches
matters with an additional dash of hedonism. Freedom might be
more efficient, but it also might possibly be more
enjoyable….I find that Reason keeps my own
arteries from hardening or from flooding with adrenaline out of
sheer irritation, because in the face of arbitrary power and
flock-like conformism it continues to ask, in a polite but firm
tone of voice, not only “why?” but “why not?”

The world of ideas needs more people like Hitchens: People who
speak up for their beliefs, debate them openly and honestly, and
have the courage to change their positions when they come to new
understandings. Hitchens was an admirer of Thomas Jefferson because
Jefferson, for all his limitations as a flesh-and-blood being, was
commited to an Enlightenment ideal that we might struggle in the
general direction of truth and understanding if we vet all of our
arguments in public debate and discourse. That’s the model that
Hitchens embodied in a manner that will always inspire his
audience.


Reason on Hitchens, Reason articles by Hitchens, and more.

In 2007, Hitchens headlined Reason’s “Very Secular Xmas Party,”
leading the crowd in a rendition of Tom Lehrer’s “Christmas Song”
after riffing on the the holiday season, the Bush presidency, and
North Korea. Take a look:

 

from Hit & Run http://reason.com/blog/2013/12/15/remembering-christopher-hitchens-1949-20
via IFTTT

Spend Sunday Morning with Dirty Jobs’ Mike Rowe Talking College Debt, Work Ethic, and Blue Collar Jobs

If it’s Sunday morning, it’s Reason’s deliberate
counter-programming to the boring, Team Red/Team Blue yak shows.
Here’s a 40-minute-long conversation with Mike Rowe, popular host
of Discovery Channel’s Dirty Jobs show. Originally released on
Friday, here’s the writeup:

“If we are lending money that ostensibly we don’t have to kids
who have no hope of making it back in order to train them for jobs
that clearly don’t exist, I might suggest that we’ve gone around
the bend a little bit,” says TV personality Mike Rowe, best known
as the longtime host of Discovery Channel’s Dirty
Jobs
.

“There is a real disconnect in the way that we educate vis-a-vis
the opportunities that are available. You have – right now – about
3 million jobs that can’t be filled,” he says, talking about
openings in traditional trades ranging from construction to welding
to plumbing. “Jobs that typically parents’ don’t sit down with
their kids and say, ‘Look, if all goes well, this is what you are
going to do.'”

Rowe, who once sang for the
Baltimore Opera and worked as an on-air pitchman for
QVC
, worries that traditional K-12 education demonizes
blue-collar fields that pay well and are begging for workers while
insisting that everyone get a college degree. He stesses that he’s
“got nothing against college” but believes it’s a huge mistake to
push everyone in the same direction regardless of interest or
ability. Between Mike Rowe
Foundation
 andProfoundly Disconnected, a
venture between Rowe and the heavy equipment manufacturer
Caterpillar, Rowe is hoping both to help people find new careers
and publicize what he calls “the diploma dilemma.”

Rowe recently sat down with Reason’s Nick Gillespie to discuss
his bad experience with a high school guidance counselor (3:20),
why he provides scholarships based on work ethic (6:57), the
problem with taxpayer-supported college loans (8:40), why America
demonizes dirty jobs (11:32), the happiest day of his
life (13:14), why following your passion is terrible advice
(17:05), why it’s so hard to hire good people (21:04), the hidden
cost of regulatory compliance (23:16), the problem with Obama’s
promise to create shovel ready jobs (33:05), efficiency versus
effectiveness (34:17), and life after Dirty
Jobs
 (38:24).

Aprrox. 41 minutes. Cameras by Meredith Bragg and Joshua Swain.
Edited by Bragg. 

More, including links, downloadable versions, and more,
here
.

Editor’s Note: At one point, Rowe says
that college costs have risen over 500 percent the rate of
inflation. According to the Department of Labor, college tuition
costs have increased over 500 percent in nominal dollars since
1985, not 500 percent the rate of inflation. Read more about the
increase here.

from Hit & Run http://reason.com/blog/2013/12/15/spend-sunday-morning-with-dirty-jobs-mik
via IFTTT

Spend Sunday Morning with Dirty Jobs' Mike Rowe Talking College Debt, Work Ethic, and Blue Collar Jobs

If it’s Sunday morning, it’s Reason’s deliberate
counter-programming to the boring, Team Red/Team Blue yak shows.
Here’s a 40-minute-long conversation with Mike Rowe, popular host
of Discovery Channel’s Dirty Jobs show. Originally released on
Friday, here’s the writeup:

“If we are lending money that ostensibly we don’t have to kids
who have no hope of making it back in order to train them for jobs
that clearly don’t exist, I might suggest that we’ve gone around
the bend a little bit,” says TV personality Mike Rowe, best known
as the longtime host of Discovery Channel’s Dirty
Jobs
.

“There is a real disconnect in the way that we educate vis-a-vis
the opportunities that are available. You have – right now – about
3 million jobs that can’t be filled,” he says, talking about
openings in traditional trades ranging from construction to welding
to plumbing. “Jobs that typically parents’ don’t sit down with
their kids and say, ‘Look, if all goes well, this is what you are
going to do.'”

Rowe, who once sang for the
Baltimore Opera and worked as an on-air pitchman for
QVC
, worries that traditional K-12 education demonizes
blue-collar fields that pay well and are begging for workers while
insisting that everyone get a college degree. He stesses that he’s
“got nothing against college” but believes it’s a huge mistake to
push everyone in the same direction regardless of interest or
ability. Between Mike Rowe
Foundation
 andProfoundly Disconnected, a
venture between Rowe and the heavy equipment manufacturer
Caterpillar, Rowe is hoping both to help people find new careers
and publicize what he calls “the diploma dilemma.”

Rowe recently sat down with Reason’s Nick Gillespie to discuss
his bad experience with a high school guidance counselor (3:20),
why he provides scholarships based on work ethic (6:57), the
problem with taxpayer-supported college loans (8:40), why America
demonizes dirty jobs (11:32), the happiest day of his
life (13:14), why following your passion is terrible advice
(17:05), why it’s so hard to hire good people (21:04), the hidden
cost of regulatory compliance (23:16), the problem with Obama’s
promise to create shovel ready jobs (33:05), efficiency versus
effectiveness (34:17), and life after Dirty
Jobs
 (38:24).

Aprrox. 41 minutes. Cameras by Meredith Bragg and Joshua Swain.
Edited by Bragg. 

More, including links, downloadable versions, and more,
here
.

Editor’s Note: At one point, Rowe says
that college costs have risen over 500 percent the rate of
inflation. According to the Department of Labor, college tuition
costs have increased over 500 percent in nominal dollars since
1985, not 500 percent the rate of inflation. Read more about the
increase here.

from Hit & Run http://reason.com/blog/2013/12/15/spend-sunday-morning-with-dirty-jobs-mik
via IFTTT

China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure”

Overnight rhetoric in Asia became increasingly heated when China's Ministry of Foreign Affairs expressed "strong dissastisfaction" at the slanderous actions of Abe's Japanese government over the Air Defense Identification Zone (ADIZ) and the "theft and embezzlement" of the Diaoyu Islands. "Japan's attempt is doomed to failure," China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 

The 'triangle' of doom in the East China Sea…

 

 

Via Google Translate,

Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China's air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?

 

A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.

 

Diaoyu Islands are China's inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.

 

East China's air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan's attempt is doomed to failure.

 

"Rationalist Explanations For War" In The East China Sea

Submitted by Ankit Panda of The Diplomat,

Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.

I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.

Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.

Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.

Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).

First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.

Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.

The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one. Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese control of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.

If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).

So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.

Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).

Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal. Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.

Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.

As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.

A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Y1ytMiDqgLs/story01.htm Tyler Durden

China Slams Abe's "Malicious Slander"; Warns Japan Is "Doomed To Failure"

Overnight rhetoric in Asia became increasingly heated when China's Ministry of Foreign Affairs expressed "strong dissastisfaction" at the slanderous actions of Abe's Japanese government over the Air Defense Identification Zone (ADIZ) and the "theft and embezzlement" of the Diaoyu Islands. "Japan's attempt is doomed to failure," China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 

The 'triangle' of doom in the East China Sea…

 

 

Via Google Translate,

Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China's air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?

 

A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.

 

Diaoyu Islands are China's inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.

 

East China's air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan's attempt is doomed to failure.

 

"Rationalist Explanations For War" In The East China Sea

Submitted by Ankit Panda of The Diplomat,

Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.

I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.

Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.

Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.

Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).

First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.

Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.

The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one. Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese con
trol of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.

If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).

So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.

Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).

Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal. Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.

Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.

As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.

A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Y1ytMiDqgLs/story01.htm Tyler Durden

Investing in 2014

2013 is ready for the history books as an exceptional year on the financial markets in many regards. For the first time in five years there were no signs of a big financial crisis anywhere in the world. At a certain point it felt like Japan was going to be next in line to be hit by an implosion, but the swift actions from the Bank of Japan squashed the possibility. A party ensued on the Japanese stock market, which took away the prize for ‘best market in 2013’ with a rounded return of 50%!

The stock markets fared well this year. But the global economy stabilized all over too, with a modest growth of 1 to 2 percent for Western economies and 4 to 7 percent for the emerging markets. Of course, we have the extremely accommodative monetary policy from the central bankers to thank for this. They were again quite busy in 2013. The Federal Reserve for example, coupled its stimulus package to economic targets for the first time. More specifically an unemployment rate of less than 6.5 percent and an inflation rate of more than 2 percent. In the aftermath of these decisions, the Fed adjusted their monthly debt buyback program upward, to 85 billion dollars.

It is not about fighting of crises anymore, but about supporting balance sheets of banks, financing government spending and keeping the bond markets in check. Meanwhile, the core of the problem from a few years back – a huge pile of debt – is far from solved. You do not have to be a rocket scientist to understand that sooner or later this will have its effect, which is when the financial markets will be challenged once more. The only sustainable solution for the debt problem is economic growth, but at this stage it is practically impossible for Western societies like the US or Europe to grow its way out of debt. The gap between income and spending has become too large and it is increasing exponentially.

One day we will have another Big Bang. The question of ‘when’ is extremely hard to answer, however. Because until that time, the current trends will remain intact. That is why we are keeping an ‘open mind’ over at Sprout Money. Do not get caught up with one asset class or another. Make sure you have a decent mix of different assets in your portfolio. Be alert, but nimble. Ensure you respect your cash position as you never know what tomorrow might bring. New opportunities might present themselves fairly quickly. And although we do not have a crystal ball, we do want to share a few scenarios with you based on our decades of experience in the markets. As always, we are focusing on our specialties: stocks and commodities.

Stocks

This past year presented new highs for stocks. The Western markets are trading 20 to 30 percent higher, and the most important indices put historical records on the board. That is an important sign if we look at the big picture. Stocks practically broke free from the crisis period as you can see on the Bank of America chart below, which depicts the S&P 500 since 1927.

Generational lows stock market 100y

Not only did we just experience a similar crisis period as we did in the ‘30s and ‘70s of the last century, but the recent breakthrough also fits the mould well. However, we do expect that this breakthrough will be tested. Technical analysis would say that the last resistance level should become the new support level. For the S&P 500 that line lies somewhere around 1,550 to 1,600 points. That is why we do see the markets continuing the race in the first months of 2014, but the rally will meet resistance at some point, probably around symbolic barriers. If we have to make an estimation: the S&P 500 can go to 2,000 points, the Dow Jones could jump to 18,000 and the Nasdaq will have to meet its historical resistance at 5,000 points. Indeed, the technology sector is not in record territory yet!

Investing however, is looking ahead. Stock markets are trading 6 months ahead of the real economy. Those who want to predict the evolution of the markets in 2014, has to predict in one way or another the developments in 2015. As the expectations of corporate profits keeping growing at a decent pace, we foresee some ‘fear of heights’ among investors by that time. That will translate into a more turbulent year for the markets next year, possibly even before the summer. Although we are far from negative, we do predict that the stock market will not repeat its amazing 2013 performance. We expect a modest but higher close at the end of 2014 (around 7 percent) for the traditional markets. Investors will have to search for profit growth (technology stocks) and laggards – the emerging markets – to realize an above average return next year.

Commodities

2013 was as exciting for the stock market, but it was quiet for most commodity markets. Important (economically relevant) commodities barely made the news. While oil is closing off the year modestly higher, the copper price is now a little bit lower. Also in the agricultural sector there were mixed results between the grains and the softs. For real fireworks however, precious metals where the place to be, but in a negative way. We had predicted last year that the stock market could become a party pooper for gold and silver. And that scenario is exactly what happened.

Gold 10y chart 2013

As you can see on the above chart, the gold market blew off a lot of steam in 2013. The market sentiment however, felt like gold is done for. Nothing is further from the truth! Although the gold price almost had a 30 percent correction this year, it is still 3X higher than ten years ago. The secular bull market is more than intact. We are not giving up on the precious metal just like that.

We have seen movements like this before in the ‘70s. Things actually were a lot worse then, as the market had a correction of almost 50 percent, with all the doom and gloom at the time. Afterwards, the gold price made a full 180 and shot up at a ratio of 8X in the four years after. We are not saying that the next four years are going to be the same, but the gold rally is far from over. For 2014, we do expect a stabilization and a first ‘recovery’ for gold. If you look at the fundamentals, you cannot ignore the enormous demand for the precious metal. China bought most of the gold production of 2013, while the supply could possibly decrease because of the lower gold price. If we have to make an estimation for next year, we do see gold coming close to its historical record price. For gold’s ‘little brother’, silver, we expect a similar recovery, although a new record price might be a bridge too far.

We also foresee upward pressure for other commodities. The structurally higher prices of years past will continue their trend. Not only as a consequence of the increasing global demand, but also because of monetary measures taken by central bankers. The inflationary pressure will sooner or later have its effect within the commodity complex.

In summary we are keeping an open mind for 2014, with the current trend leading the charge. Increased turbulence, however, will most likely cause changes along the way. That is why flexibility, in the form of a decent cash position, is a must for every investor in the new year. New opportunities and challenges may present themselves at any given time. Our sights are mostly set on technology stocks, Chinese s
tocks, and gold and silver mining stocks.

Prepare for 2014 & Download our Free ‘Guide to Gold’

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QgXcSK0-6rI/story01.htm Sprout Money