OECD Sees Global Growth At Decade-Low As WTO Warns Of “Doomsday Scenario”
Global growth is quickly plunging to levels not seen since the financial crisis as the risk of long-term stagnation has developed, according to the OECD’s latest Economic Outlook.
The world economy is expected to grow at a decade-low of 2.9% this year and remain in a subdued range of 2.9% to 3% through 2021. Global GDP has quickly decelerated from peaking at 3.5% in 2018.
The Paris-based policy forum warned that several years of escalating trade disputes between the US and China have resulted in a synchronized global downturn that has pushed down global growth to alarming levels, not seen since the last financial crisis.
The fragility of the world has led to a cycle of vulnerability where a global trade recession could be imminent or has already arrived.
“The alarm bells are ringing loud and clear. Unless governments take decisive action to help boost investment, adapt their economies to the challenges of our time and build an open, fair and rules-based trading system, we are heading for a long-term future of low growth and declining living standards, “OECD Secretary-General Angel Gurría recently said.
OECD warns that China, the driver of global growth the bailed everyone out during the last financial crisis, might not be able to stimulate the global economy this time around as trade tensions soar and a rebalancing of the Chinese economy continues.
China will accept sub 6% GDP in 2020, as it’s likely Beijing will not turn on its massive credit spigots anytime soon.
China’s credit growth slowed more than expected in October to the weakest pace since at least 2017 as a continued collapse in shadow banking, weak corporate demand for credit, and seasonal effects all suggest that a rebound in the domestic and global economy aren’t likely in the near term.
To make things even more complicated for the global economy, the Trump administration has created a perfect storm that will likely paralyze the World Trade Organisation’s (WTO) appeals body in December that could lead to further escalations in the trade war and damage the global economy into a depression.
Without WTO’s working appeals system, international trade disputes will go unresolved and could escalate into tit-for-tat tariff wars that spiral out of control.
“At that stage, the whole thing gets out of hand,” said Stuart Harbinson, Hong Kong’s former representative at the WTO, now a trade consultant at Hume Broph. “I think that will be the doomsday scenario.”
And with global growth at decade lows, China not able to jump-start the global economy, and the risk that trade tensions could continue escalating — it seems that global equities have priced in a recovery that was only fantasy — what happens next could be a repricing event for risk assets.
The volatility in weather that our computer has been forecasting on a long-term basis should result in this winter being colder than the last. In Britain, the snow has hit an already flood-ravaged country as temperatures plunged to -7C. This is part of the problem we face. The ground freezes down and this prevents winter crops.
During the late 1700s, the ground froze to a depth of 2 feet according to John Adams. When John Adams set out to travel to Philadelphia, it was bitterly cold and there was a foot or more of snow that covered the landscape that had blanketed Massachusetts from one end of the province to the other. Beneath the snow, after weeks of severe cold, the ground was frozen solid to a depth of two feet. Packed ice in the road made the journey very hazardous.
In a letter to his wife, John Adams wrote:
“Indeed I feel not a little out of Humour, from Indisposition of Body. You know, I cannot pass a Spring, or fall, without an ill Turn — and I have had one these four or five Weeks — a Cold, as usual. Warm Weather, and a little Exercise, with a little Medicine, I suppose will cure me as usual. … Posterity! You will never know, how much it cost the present Generation, to preserve your Freedom! I hope you will make a good Use of it. If you do not, I shall repent in Heaven, that I ever took half the Pains to preserve it.”
On September 8, 1816, Jefferson described the weather in a letter to Albert Gallatin:
“We have had the most extraordinary year of drought and cold ever known in the history of America. In June, instead of 3¾ inches, our average of rain for that month, we had only 1/3 of an inch; in August, instead of 9 1/6 inches our average, we had only 8/10 of an inch; and it still continues. The summer too has been as cold as a moderate winter. In every state North of this there has been frost in every month of the year; in this state we had none in June and July but those of August killed much corn over the mountains. The crop of corn through the Atlantic states will probably be less than 1/3 of an ordinary one, that of tobacco still less, and of mean quality.”
It is global cooling, not global warming, that we should fear the most. Climate change people may get their wish to reduce the population. That is usually the result of global cooling, which creates famine as we are witnessing already in North Korea. The past winter 2018/2019 experienced record breaking cold temperatures. We should beat that this winter 2019/2020… and here’s why…
Professor Valentina Zharkova gave a presentation of her Climate and the Solar Magnetic Field hypothesis at the Global Warming Policy Foundation in October, 2018. The information she unveiled should shake/wake you up.
Zharkova was one of only two scientists to correctly predict solar cycle 24 would be weaker than cycle 23 — in fact, only 2 out of 150 models predicted this.
Zharkova’s models have run at a 97% accuracy and now suggest a Super Grand Solar Minimum is on the cards beginning 2020.
Grand Solar Minimums are prolonged periods of reduced solar activity, and in the past have gone hand-in-hand with times of global cooling.
The last time we had a GSM (the Maunder Minimum) only two magnetic fields of the sun went out of phase.
This time, all four magnetic fields are going out of phase.
SoftBank To Cut Offer For WeWork, Slash Neumann’s Payout After Unprecedented Humiliation By Its Key Banks
Two days ago, the Nikkei reported that the millennium’s most iconic juggernaut of epic malinvestment, Japan’s SoftBank – which may well be this bubble era’s “short of the century” – was in talks to receive about 300 billion yen ($2.76 billion) in financing from Japan’s leading banks, as the company scrambled to fund a turnaround at its co-working startup, the scandal plagued and terribly misnamed WeWork… which earlier today fired 20% of its workforce.
Why did Softbank need the money? Because as part of its bailout of arguably the most disastrous investment of this century, SoftBank had to fund a $3 billion tender offer to raise its stake in WeWork, and provide an additional $3.3 billion through loans and other methods.
At this point SoftBank ran into a problem: while the bank/telecom/venture capital arm of Japan’s richest man, Masayoshi Son, had more than 2 trillion yen on hand, or about $19 billion, it was hoping to borrow additional funds so it can maintain a certain level of cash reserves. For banks – such as SoftBank’s main lender, Mizuho Financial – this presented a rare moneymaking opportunity amid Japan’s ultralow interest rates.
Here, Softbank ran into another, bigger problem: many of Japan’s top banks had already lent large amounts of money to SoftBank and were cautious about taking on further risk. Adding insult to injury, these banks were also investors in the SoftBank Vision Fund which suffered a massive loss over WeWork’s aborted initial public offering, not to mention the dismal investment in Uber, and were said to be nixing an investment in a second fund proposed by SoftBank.
And then there was the biggest problem: Mitsubishi UFJ, Japan’s biggest bank, was said to withhold additional loans to finance SoftBank’s $9.5 billion rescue package for WeWork, the FT reported overnight. While WeWork had gotten a tacit approval from the bank consortium consisting of Mizuho and Sumitomo Mitsui, the third member of SoftBank’s lending group, MUFG said it would turn down the request, if the loans are to be used to save WeWork.
And just like that the radioactivity of Adam Neumann’s former company turned gamma.
According to the FT, Sumitomo also did not want to lend to the WeWork bailout, but acknowledged that it had no real control over how SoftBank used any corporate loans once they had been extended (which is odd because clearly MUFJ had no such qualms).
According to analysts, the unprecedented cautious stance – in which SoftBank’s closest circle of lenders effectively issued a vote of no confidence in Son’s investment capabilities – could signal a turning point in the close relationship between Japanese banks and SoftBank’s deal-driven founder Masayoshi Son. It would also mean that what we predicted before, is now virtually assured – the next time SoftBank needs money, it will go to the BOJ directly.
To be sure, such a snub of a core client is unheard of, especially in always polite Japan. However, after SoftBank’s recent massive $6.4 billion quarterly loss, and since the “valuation issues” at WeWork which brought down the value of the office subletting company from $47 billion to essentially zero, there has been “a definite change in mood” among the Japanese banks and doubts have emerged over some parts of SoftBank’s investment strategy, said a banker close to SoftBank.
So what is SoftBank to do?
Well, as Bloomberg reported late on Thursday, SoftBank execs – finding themselves in a liquidity crunch – have been forced to admit they overpaid for WeWork again, this time when they bailed it out of bankruptcy, and are now looking for a way to reduce the size of a $3 billion offer for WeWork stock as part of its rescue package.
The discussions at SoftBank center around shrinking a $3 billion tender offer for WeWork shares owned by founders, employees and investors, according to people with knowledge of the talks. Such a move would be designed, first and foremost, to limit the amount paid to the company’s megalomaniacal co-founder Adam Neumann, said Bloomberg’s sources.
Yet while there would be a collective cheer if Neuman were to see his platinum parachute reduced to flaming plastic bag, it’s unclear how SoftBank could renege on its agreement with WeWork investors and most of all, with Neumann. Any effort to re-draw terms could result in an unprecedented, and even more humiliating, legal battle as SoftBank takes on the company that until recently was at the forefront of its historic investment spree and, no joke, “AI Revolution” as SoftBank calls its crazy rollup of dozens of startups.
As part of the deal, Neumann would sell almost a billion dollars, or $970 million worth of largely worthless WeWork stock to SoftBank. Some more details from Bloomberg:
In recent internal discussions at SoftBank, some executives have said the payout to Neumann is too generous, the people with knowledge of the talks said. It may be a case of buyer’s remorse after WeWork employees expressed outrage over the favorable deal given to Neumann while the business was in turmoil. Representatives for Neumann, SoftBank and WeWork declined to comment.
Neumann, who just days before the now infamously imploded WeWork IPO was treated as a god by the bank’s underwriters including JPMorgan and Goldman, departed the company’s board as part of the rescue package and was replaced by SoftBank executive and newly appointed Chairman Marcelo Claure. Meanwhile, the size of Neumann’s payout, which also included millions in consulting fees, has incensed some WeWork employees, which dropped by 17% today after the latest mass layoff by the company.
To be sure, as Bloomberg notes, no decision has been made yet and SoftBank may choose to fulfill the $3 billion tender offer in its entirety without haircuts, however that may prevent the bank from getting the money it hopes to receive from its banks; indeed, as noted above, it now appears that Mitsubishi UFJ will only grant Masa Son the money if Adam Neumann ends up with nothing (at least metaphorically speaking).
Big the biggest joke of all here is that at a recent briefing in Tokyo, SoftBank’s billionaire founder Masayoshi Son acknowledged that this month’s financial results were “a mess” and that overvaluing WeWork was a judgment error. Well, isn’t it ironic that after he massively overvalued WeWork when it was solvent, he also overvalued the office rental company (which.is.not.a.tech.company) when it was about to file for bankruptcy.
Son said that he had consulted with lawyers to see if he could back out of a $1.5 billion warrant SoftBank had pledged to WeWork, but they said he couldn’t. Instead, Son decided to buy even more shares at a discounted price, lowering the average cost of SoftBank’s equity in the business.
Because somehow throwing good money after an idiotic investment is supposed to be… good? smart?
We don’t know the answer, but we do know that as we said earlier this week, “Japan is without doubt the dumbest money this bubble cycle.”
Fake Growth? China “Adjusts” 2018 GDP 2.1% Higher Due To Census
In 2016, China admitted its economic data was fake, pointing out that “some local statistics are falsified, and fraud and deception happen from time to time.”
In 2017, China (again) admitted its economic data was fake, saying that a nationwide audit found some local governments inflated revenue levels and raised debt illegally, with some local GDP data as much as 20% “over-cooked.”
In 2018, we exposed China’s “cooked” numbers in China’s industrial profits growth data.
And early in 2019, a team of researchers from the Brookings Institute published a carefully researched paper detailing the exact mechanism by which authorities in Beijing inflate the country’s GDP figures, while estimating that China’s economy is roughly 12% smaller than the official figures would suggest.
Based on China’s gross domestic product (GDP) accounting system and the results of the fourth national economic census, the National Bureau of Statistics revised the preliminary accounting figures for 2018. The main results are as follows:
In 2018, the gross domestic product was 91.93 trillion yuan, an increase of 1.8972 trillion yuan over the initial accounting, an increase of 2.1%.
The revisions were almost entirely focused in the tertiary sector of the economy, whose growth was “adjusted” 4.29% higher while the primary sector barely moved and the output of the secondary sector was actually adjusted 0.32% lower.
We look forward to 2019’s goal-seeked adjustments… to ensure China’s growth remains above the ‘mandated’ 6%.
Article II, section 5(c) of the California Constitution provides (emphasis added),
The Legislature shall provide for partisan elections for presidential candidates, and political party and party central committees, including an open presidential primary whereby the candidates on the ballot are those found by the Secretary of State to be recognized candidates throughout the nation or throughout California for the office of President of the United States, and those whose names are placed on the ballot by petition, but excluding any candidate who has withdrawn by filing an affidavit of noncandidacy.
Elections Code sections 6883 and 6884 purport to make the appearance of a “recognized” candidate for president on a primary ballot contingent on whether the candidate has made the disclosures specified by the Act. This additional requirement, however, is in conflict with the Constitution’s specification of an inclusive open presidential primary ballot.
The Legislature may well be correct that a presidential candidate’s income tax returns could provide California voters with important information. But article II, section 5(c) embeds in the state Constitution the principle that, ultimately, it is the voters who must decide whether the refusal of a “recognized candidate[] throughout the nation or throughout California for the office of President of the United States” to make such information available to the public will have consequences at the ballot box.
The court acknowledged that the “recognized candidates” requirement might require some definition of who is “recognized,” and that perhaps perhaps “the Legislature might properly claim some role in defining when someone is” so recognized. But the requirement here, the court explained, had nothing do with providing any such definition:
[U]nder any reasonable interpretation of the “recognized” language within article II, section 5(c), a candidate’s failure to disclose tax returns to the Secretary of State would not establish that the candidate is not “recognized … throughout the nation or throughout California” as a candidate “for the office of President of the United States.”
The word “recognized” is susceptible to somewhat different meanings. (Compare, e.g., Black’s Law Dict. (4th ed. 1968) p. 1436, col. 2 [defining “recognized” as “[a]ctual and publicly known”] with Random House Dict. of the English Language (1973) p. 1199, col. 3 [defining “recognize” as, among other things, “to acknowledge or treat as valid”].) The repeated use of the word “throughout” within article II, section 5(c) suggests that the “recognized” language is concerned (although perhaps not exclusively) with a candidacy’s prominence or pervasiveness. (See Webster’s 3d New Internat. Dict. (1971) p. 2385, col. 1 [defining “throughout” as “in … every part of”].) If this meaning applies, it seems plain that whether a candidate has disclosed tax returns to the Secretary of State cannot, by itself, be determinative of whether the candidate is “recognized.” Such disclosure has, at most, a highly attenuated relationship to public awareness of a candidacy throughout the nation or California—or, for that matter, to whether someone is an “[a]ctual” candidate for the presidency. (Black’s Law Dict., at p. 1436, col. 2.)
The disjunctive “throughout the nation or throughout California” language in article II, section 5(c) also suggests that nondisclosure of tax returns under the Act could not supply a basis for keeping a presidential candidate off the primary ballot even if the “recognized” phrasing were to be construed as being to some extent concerned with a candidacy’s validity. For even in that case, a failure to comply with the Act’s tax return disclosure requirement would establish only that someone is not “recognized,” i.e., not regarded as valid, as a presidential candidate in or by California. It would not mean that the candidate is not “recognized … throughout the nation,” because a failure to satisfy this requirement would not make a candidacy invalid throughout the nation.
The court had no occasion to determine whether the provision also violated the U.S. Constitution (see the federal district court decision in Griffin v. Padilla).
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One Bank Was Just Accused Of Violating Money Laundering Laws…23 Million Times
Australia’s once squeaky clean banking industry has lost its good reputation, and now the country’s second largest bank, Westpac, has broken anti-terror and AML laws requiring the bank to closely screen transactions with an international component. All told, the bank said it has documented no fewer than 23 million transactions that didn’t receive an adequate level of scrutiny. This includes failing to report $7.5 billion in international transfers.
But here’s the kicker: According to Australian banking laws, each individual breach could warrant a fine of up to A$21 million ($14 million). That means AUSTRAC, the country’s financial watchdog, could legally choose to pursue hundreds of trillions of dollars in fines, though that likely far outpaces the bank’s ability to pay, WSJ reports.
Though it’s not clear exactly what the bank’s oversight failures mean, in the case it brought against the bank on Wednesday, AUSTRAC accused Westpac of enabling payments from “high risk” countries, and counterparties with specific histories of sex trafficking.
According to Reuters, the lawsuit dwarfs a case AUSTRAC brought against the larger Commonwealth Bank of Australia, which agreed last year to pay a record A$700 million ($476 million) penalty after admitting that it didn’t properly screen 53,750 payments that violated similar protocols.
Court filings from AUSTRAC said the transactions that Westpac failed to monitor took place between 2013 and 2018.
The filing said Westpac maintained relationships with offshore banks without assessing their risks, products, customers or payments, even when those banks disclosed relationships with counterparties in “high risk or sanctioned countries including Iraq, Lebanon, Ukraine, Zimbabwe, and Democratic Republic of Congo.”
“The risk posed to Westpac was that these high risk or sanctioned countries may have been able to access the Australian payment system,” AUSTRAC said.
The Sydney-based bank has known about some of these risks since 2013, when it became aware of “heightened child exploitation risks associated with frequent low value payments to the Philippines and South East Asia” but it didn’t set up an automated detection system until 2019.
One customer who had served a prison sentence for child exploitation set up several of the Westpac accounts in question. Westpac detected suspicious activity in one account, but failed to review the other accounts and “this customer continued to send frequent low value payments to the Philippines through channels that were not being monitored appropriately”, AUSTRAC said.
The breaches were “the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board,” Austrac said in court documents. “They have occurred because Westpac adopted an ad-hoc approach to money laundering and terrorism financing risk management and compliance.”
We just witnessed one of the most monumental events of the entire decade, and yet most Americans still don’t understand what has happened.
In recent months, the global economy and stock markets around the world have been buoyed by the hope that the U.S. and China would soon sign a new trade agreement. Unfortunately, there is no way that is going to happen now. On Tuesday, the Senate unanimously passed the “Hong Kong Human Rights and Democracy Act of 2019”, and the House of Representatives passed the same bill by a 417 to 1 vote on Wednesday.
Needless to say, the Chinese are beyond angry that Congress has done this. In part one of this article, I showed that China is warning the U.S. to “rein in the horse at the edge of the precipice” and that there will be “revenge” if this bill is allowed to become law. And it looks like this bill will actually become law, because Bloomberg is reporting that President Trump is fully expected to sign it…
President Donald Trump is expected to sign legislation passed by Congress supporting Hong Kong protesters, setting up a confrontation with China that could imperil a long-awaited trade deal between the world’s two largest economies.
Before I go any further, there is something that I want to address. Earlier today, one of my readers emailed me and accused me of siding with China because I am warning about what will happen if trade negotiations fail. Of course that is not true at all. I have been writing about the horrific human rights abuses in China for many years, and they are one of the most tyrannical regimes on the entire planet today. But our two economies have become deeply intertwined over the past two decades, and there are going to be very serious consequences now that we are rapidly becoming bitter enemies. Anyone that doesn’t see this is simply not being rational.
As I have detailed repeatedly in recent months, the global economy has already entered a very serious slowdown. One of the only things that could reverse our economic momentum in the short-term would be a comprehensive trade agreement between the United States and China. But now that our relationship with China has been destroyed, there isn’t going to be a deal.
Some mainstream news sources are reporting that all of this rancor about Hong Kong could delay a trade deal, but that is just more wishful thinking.
Over in China, they are being much more realistic. In fact, the editor of the Global Times, Hu Xijin, just said that the Chinese are “prepared for the worst-case scenario“…
Few Chinese believe that China and the US can reach a deal soon. Given current poor China policy of the US, people tend to believe the significance of a trade deal, if reached, will be limited. China wants a deal but is prepared for the worst-case scenario, a prolonged trade war.
So a friendly reminder to American farmers: Don’t rush to buy more land or get bigger tractors. Wait until a China-US trade deal is truly signed and still valid six months after. It’s safer by then.
As the two largest economies on the entire planet decouple from one another, it is going to cause global economic activity as a whole to dramatically slow down. Corporate revenues will fall, credit markets will start to tighten, and fear will increasingly creep into global financial markets.
I have repeatedly warned that conditions are ideal for our first major crisis since 2008, and this conflict with China could be more than enough to push us over the edge.
And already we are getting more bad economic news day after day. For example, we just learned that U.S. rail traffic this month is way down compared to last year…
Nowhere is the slowdown in the U.S. economy more obvious than in places like Class 8 Heavy Duty Truck orders and rail traffic. We already wrote about how Class 8 orders continued to fall in October and new data the American Association of Railroads (AAR) now shows that last week’s rail traffic and intermodal container usage both plunged.
The AAR reported total carloads for the week ended Nov. 9 came in at 248,905, down 5.1% compared with the same week in 2018. U.S. weekly intermodal volume was 266,364 containers and trailers, down 6.7% compared to 2018, according to Railway Age.
Unless a miracle happens with China, the economic numbers are going to continue to get worse.
Sadly, a miracle seems exceedingly unlikely now. As I pointed out in part one, the only way that our relationship with China can be fixed is if Congress repeals the bill that it just passed, and there is no way that is going to happen.
And we better hope that our trade war with China doesn’t escalate into a real war at some point.
According to a report that was released earlier this year, we are very ill-prepared to fight any sort of a conventional war with China in the Western Pacific…
The University of Sydney’s United States Studies Centre’s new report Averting Crisis, said: ‘China’s growing arsenal of accurate long-range missiles poses a major threat to almost all American, allied and partner bases, airstrips, ports and military installations in the Western Pacific.
‘As these facilities could be rendered useless by precision strikes in the opening hours of a conflict, the PLA missile threat challenges America’s ability to freely operate its forces from forward locations throughout the region.’
China has tested a new submarine-launched missile capable of obliterating San Francisco, an insider has revealed, in a massive boost to the country’s ‘deterrent’.
The Chinese navy tested its state-of-the-art JL-3 missile in Bohai Bay in the Yellow Sea last month, sources said.
The nuclear-capable missile has a 5,600 mile range, significantly longer than its predecessor the JL-2, which could strike targets 4,350 miles away.
We certainly aren’t at that point yet, but without a doubt the Chinese now consider us to be their primary global enemy.
For the moment, it is just a “cold war” that we are facing, and the Chinese are quite adept at playing global chess. They have lots of ways that they can hurt us, and most Americans don’t realize this.
But in the end nobody is going to “win” this conflict, and the entire planet is going to suffer.
Collectively, the economies of the United States and China account for approximately 40 percent of the GDP of the entire world.
As we cause chaos for one another, everyone else is going to experience tremendous pain as well.
The stage is set for a global nightmare, and at this point it doesn’t appear that there is a way that we will be able to escape it.
Article II, section 5(c) of the California Constitution provides (emphasis added),
The Legislature shall provide for partisan elections for presidential candidates, and political party and party central committees, including an open presidential primary whereby the candidates on the ballot are those found by the Secretary of State to be recognized candidates throughout the nation or throughout California for the office of President of the United States, and those whose names are placed on the ballot by petition, but excluding any candidate who has withdrawn by filing an affidavit of noncandidacy.
Elections Code sections 6883 and 6884 purport to make the appearance of a “recognized” candidate for president on a primary ballot contingent on whether the candidate has made the disclosures specified by the Act. This additional requirement, however, is in conflict with the Constitution’s specification of an inclusive open presidential primary ballot.
The Legislature may well be correct that a presidential candidate’s income tax returns could provide California voters with important information. But article II, section 5(c) embeds in the state Constitution the principle that, ultimately, it is the voters who must decide whether the refusal of a “recognized candidate[] throughout the nation or throughout California for the office of President of the United States” to make such information available to the public will have consequences at the ballot box.
The court acknowledged that the “recognized candidates” requirement might require some definition of who is “recognized,” and that perhaps perhaps “the Legislature might properly claim some role in defining when someone is” so recognized. But the requirement here, the court explained, had nothing do with providing any such definition:
[U]nder any reasonable interpretation of the “recognized” language within article II, section 5(c), a candidate’s failure to disclose tax returns to the Secretary of State would not establish that the candidate is not “recognized … throughout the nation or throughout California” as a candidate “for the office of President of the United States.”
The word “recognized” is susceptible to somewhat different meanings. (Compare, e.g., Black’s Law Dict. (4th ed. 1968) p. 1436, col. 2 [defining “recognized” as “[a]ctual and publicly known”] with Random House Dict. of the English Language (1973) p. 1199, col. 3 [defining “recognize” as, among other things, “to acknowledge or treat as valid”].) The repeated use of the word “throughout” within article II, section 5(c) suggests that the “recognized” language is concerned (although perhaps not exclusively) with a candidacy’s prominence or pervasiveness. (See Webster’s 3d New Internat. Dict. (1971) p. 2385, col. 1 [defining “throughout” as “in … every part of”].) If this meaning applies, it seems plain that whether a candidate has disclosed tax returns to the Secretary of State cannot, by itself, be determinative of whether the candidate is “recognized.” Such disclosure has, at most, a highly attenuated relationship to public awareness of a candidacy throughout the nation or California—or, for that matter, to whether someone is an “[a]ctual” candidate for the presidency. (Black’s Law Dict., at p. 1436, col. 2.)
The disjunctive “throughout the nation or throughout California” language in article II, section 5(c) also suggests that nondisclosure of tax returns under the Act could not supply a basis for keeping a presidential candidate off the primary ballot even if the “recognized” phrasing were to be construed as being to some extent concerned with a candidacy’s validity. For even in that case, a failure to comply with the Act’s tax return disclosure requirement would establish only that someone is not “recognized,” i.e., not regarded as valid, as a presidential candidate in or by California. It would not mean that the candidate is not “recognized … throughout the nation,” because a failure to satisfy this requirement would not make a candidacy invalid throughout the nation.
The court had no occasion to determine whether the provision also violated the U.S. Constitution (see the federal district court decision in Griffin v. Padilla).
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Former Baltimore Mayor Pleads Guilty To Fraud, Tax Evasion, Faces Decades In Prison
Former Baltimore Mayor Catherine Pugh pleaded guilty Thursday afternoon to federal charges in the “Healthy Holly” book scandal, reported WJZ Baltimore.
Pugh pleaded guilty to four of the 11 charges, including wire fraud, conspiracy to defraud the US, and two counts of tax evasion. The disgraced mayor faces up to 35 years in federal prison, sentencing is expected in late February 2020.
Maryland US Attorney Robert K. Hur told reporters on the steps of the US District Court in Baltimore that “the city of Baltimore faces many pressing issues. We need dedication and professionalism from our leaders, not fraud and corruption, if we have any hope of fixing these problems.”
Pugh’s attorney Steven D. Silverman said her client “sincerely apologizes to all of those that she let down, most especially the citizens of Baltimore whom she had the honor to serve in multiple capacities for decades.”
Former Mayor Catherine Pugh left federal court in Baltimore without comment. She has pleaded guilty to 4 cts in fraud/tax evasion case against her.
It is unusual for a defendant to get dropped off and picked up at the curb of the courthouse in a private vehicle pic.twitter.com/MDsz5ZhExo
The indictment alleges Pugh used her position of power to defraud the customers of “Healthy Holly” children’s book series for personal use and also to fund her mayoral campaign.
“The indictment alleges that from November 2011 until March 2019, Ms. Pugh conspired with Gary Brown to defraud purchasers of ‘Healthy Holly’ books to enrich themselves, promote Ms. Pugh’s political career and fund her campaign for mayor,” Hur said. “Mr. Brown helped Ms. Pugh solicit nonprofit organizations and foundations to buy the ‘Healthy Holly’ books.”
The indictment said for years Pugh evaded paying taxes on the sales of the book.
“For the tax year 2016, Ms. Pugh claimed her taxable income was a little over $31,000 and the tax due was a little over $4,000, when in fact her taxable income was over $322,000 with an income tax due of approximately over $100,000. In other words, her taxable income was more than 10 times what she reported to the IRS for that year and she owed more than 20 times more in taxes than she actually paid for that year,” Hur said.
Pugh resigned in May after the FBI and IRS raided her home amid speculation, she was involved in large book sales to disguise hundreds of thousands of dollars in kickbacks from the University of Maryland Medical System and managed-care consortium KaiserPermanente.
There are a lot of unpleasant things in George Orwell’s dystopian novel 1984. Spying screens. Torture and propaganda. Victory Gin and Victory Coffee always sounded particularly dreadful. And there is Winston Smith’s varicose ulcer, apparently a symbol of his humanity (or something), which always seems to be “throbbing.” Gross.
None of this sounds very enjoyable, but it’s not the worst thing in 1984. To me, the most terrifying part was that you couldn’t keep Big Brother out of your head.
Unlike other 20th-century totalitarians, the authoritarians in 1984 aren’t that interested in controlling behavior or speech. They do, of course, but it’s only as a means to an end. Their real goal is to control the gray matter between the ears.
“When finally you surrender to us, it must be of your own free will,” O’Brien (the bad guy) tells the protagonist Winston Smith near the end of the book.
We do not destroy the heretic because he resists us: so long as he resists us we never destroy him. We convert him, we capture his inner mind, we reshape him.
Big Brother’s tool for doing this is the Thought Police, aka the ThinkPol, who are assigned to root out and punish unapproved thoughts. We see how this works when Winston’s neighbor Parsons, an obnoxious Party sycophant, is reported to the Thought Police by his own child, who heard him commit a thought crime while talking in his sleep.
“It was my little daughter,” Parsons tells Winston when asked who it was who denounced him.
“She listened at the keyhole. Heard what I was saying, and nipped off to the patrols the very next day. Pretty smart for a nipper of seven, eh?”
Who Are These Thought Police?
We don’t know a lot about the Thought Police, and some of what we think we know may actually not be true since some of what Winston learns comes from the Inner Party, and they lie.
What we know is this: The Thought Police are secret police of Oceania—the fictional land of 1984 that probably consists of the UK, the Americas, and parts of Africa—who use surveillance and informants to monitor the thoughts of citizens. The Thought Police also use psychological warfare and false-flag operations to entrap free thinkers or nonconformists.
Those who stray from Party orthodoxy are punished but not killed. The Thought Police don’t want to kill nonconformists so much as break them. This happens in Room 101 of the Ministry of Love, where prisoners are re-educated through degradation and torture. (Funny sidebar: the name Room 101 apparently was inspired by a conference room at the BBC in which Orwell was forced to endure tediously long meetings.)
The Origins of the Thought Police
Orwell didn’t create the Thought Police out of thin air. They were inspired to at least some degree by his experiences in the Spanish Civil War (1936-1939), a complicated and confusing affair. What you really need to know is that there were no good guys, and it ended with left-leaning anarchists and Republicans in Spain crushed by their Communist overlords, which helped the fascists win.
Orwell, an idealistic 33-year-old socialist when the conflict started, supported the anarchists and loyalists fighting for the left-leaning Second Spanish Republic, which received most of its support from the Soviet Union and Josef Stalin. (That might sound bad, but keep in mind that the Nazis were on the other side.) Orwell described the atmosphere in Barcelona in December 1936 when everything seemed to be going well for his side.
The anarchists were still in virtual control of Catalonia and the revolution was still in full swing … It was the first time that I had ever been in a town where the working class was in the saddle,
he wrote in Homage to Catalonia.
[E]very wall was scrawled with the hammer and sickle … every shop and café had an inscription saying that it had been collectivized.
That all changed pretty fast. Stalin, a rather paranoid fellow, was bent on making Republican Spain loyal to him. Factions and leaders perceived as loyal to his exiled Communist rival, Leon Trotsky, were liquidated. Loyal Communists found themselves denounced as fascists. Nonconformists and “uncontrollables” were disappeared.
Orwell never forgot the purges or the steady stream of lies and propaganda churned out from Communist papers during the conflict. (To be fair, their Nationalist opponents also used propaganda and lies.) Stalin’s NKVD was not exactly like the Thought Police—the NKVD showed less patience with its victims—but they certainly helped inspire Orwell’s secret police.
The Thought Police were not all propaganda and torture, though. They also stem from Orwell’s ideas on truth. During his time in Spain, he saw how power could corrupt truth, and he shared these reflections in his work George Orwell: My Country Right or Left, 1940-1943.
…I saw newspaper reports which did not bear any relation to the facts, not even the relationship which is implied in an ordinary lie. I saw great battles reported where there had been no fighting, and complete silence where hundreds of men had been killed. I saw troops who had fought bravely denounced as cowards and traitors, and others who had never seen a shot fired hailed as the heroes of imaginary victories; and I saw newspapers in London retailing these lies and eager intellectuals building emotional superstructures over events that had never happened.
In short, Orwell’s brush with totalitarianism left him worried that “the very concept of objective truth is fading out of the world.”
This scared him. A lot. He actually wrote, “This kind of thing is frightening to me.”
Finally, the Thought Police were also inspired by the human struggle for self-honesty and the pressure to conform. “The individual has always had to struggle to keep from being overwhelmed by the tribe,” Rudyard Kipling once observed.
The struggle to remain true to one’s self was also felt by Orwell, who wrote about “the smelly little orthodoxies” that contend for the human soul. Orwell prided himself with a “power of facing unpleasant facts”—something of a rarity in humans—even though it often hurt him in British society.
In a sense, 1984 is largely a book about the human capacity to maintain a grip on the truth in the face of propaganda and power.
More Prophetic Than He Knew?
It might be tempting to dismiss Orwell’s book as a figment of dystopian literature. Unfortunately, that’s not as easy as it sounds. Modern history shows he was onto something.
When the Berlin Wall came down in November 1989, it was revealed that the Stasi, East Germany’s secret police, had a full-time staff of 91,000.
When the Berlin Wall came down in November 1989, it was revealed that the Stasi, East Germany’s secret police, had a full-time staff of 91,000. That sounds like a lot, and it is, but what’s frightening is that the organization had almost double that in informants, including children. And it wasn’t just children reporting on parents; sometimes it was the other way around.
Nor did the use of state spies to prosecute thoughtcrimes end with the fall of the Soviet Union. Believe it or not, it’s still happening today. The New York Times recently ran a report featuring one Peng Wei, a 21-year-old Chinese chemistry major. He is one of the thousands of “student information officers” China uses to root out professors who show signs of disloyalty to President Xi Jinping or the Communist Party.
The New Thought Police?
The First Amendment of the US Constitution, fortunately, largely protects Americans from the creepy authoritarian systems found in 1984, East Germany, and China; but the rise of “cancel culture” shows the pressure to conform to all sorts of orthodoxies (smelly or not) remains strong.
The new Thought Police may be less sinister than the ThinkPol in 1984, but the next generation will have to decide if seeking conformity of thought or language through public shaming is healthy or suffocating. FEE’s Dan Sanchez recently observed that many people today feel like they’re “walking on eggshells” and live in fear of making a verbal mistake that could draw condemnation.
That’s a lot of pressure, especially for people still learning the acceptable boundaries of a new moral code that is constantly evolving. Most people, if the pressure is sufficient, will eventually say “2+2=5” just to escape punishment. That’s exactly what Winston Smith does at the end of 1984, after all. Yet Orwell also leaves readers with a glimmer of hope.
“Being in a minority, even a minority of one, did not make you mad,” Orwell wrote.
“There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad.”
In other words, the world may be mad, but that doesn’t mean you have to be.
