Cryptos Are Surging: Bitcoin At 2-Month Highs After CME Options Start Trading
Cryptos rallied overnight and are accelerating their gains this morning with Bitcoin Cash leading the way…
Source: Bloomberg
Bitcoin Cash has topped its 200DMA, back to its highest in 5 months…
Source: Bloomberg
Bitcoin is at 2-month highs, pushing towarsd its 200DMA..
Source: Bloomberg
No immediate news catalyst for this morning’s surge but we note this is an extension of the post-Soleimani-killing rally.
Also, as CoinTelegraph’s William Suberg notes, Bitcoin futures options from CME Group saw volumes in excess of $2.3 million on the product’s first day of public trading, the company has confirmed.
Data from CME’s official website confirmed the successful rollout on Jan. 13, which began as scheduled and ultimately saw 55 contracts change hands.
Investors lap up BTC options products
Each contract corresponds to 5 BTC, meaning that at current prices, the 55 contracts were worth $2.34 million.
Bitcoin markets rallied on release day, rising by more than 5% to hit highs of $8,550. Those levels had previously remained absent since mid-November.
As Cointelegraph reported, enthusiasm was palpable in advance of the options debut last week, with Bitcoin likewise gaining significantly in the run-up to Monday. CME, along with competitor Bakkt, reported increased interest in futures during that period.
For Monday, Bakkt’s futures delivered total volumes of 2,907 contracts worth $19.94 million, nonetheless down 10% on the previous session. At the same time, open interest was up 7% to $9.58 million.
FTX reported volumes spike
The past seven days have in fact seen two options releases, the other being from FTX, which began trading days before CME.
According to live company data, FTX saw reported volumes of 3,618 BTC ($30.8 million) for its options over the past 24 hours — conspicuously higher than others’ figures.
* * *
Finally, we note that for the second time in a week, the price rose above the oft-referenced descending channel trendline which has served as a long term resistance for the last 7 months.
Source: Bloomberg
Earlier in the day, Cointelegraph contributor filbfilb suggested that:
“Bitcoin price is currently consolidating above resistance and the most significant volume node on the visible profile visible range, or VPVR. If Bitcoin can complete bullish consolidation above $8,000, a measured move to the upside would take the price of Bitcoin to the top of the previous range at $9,500 and possibly as high as the next high volume node of $10,100.”
And as we noted previously, in their latest report, available only to clients, Fundstrat expects over 100% BTC gains with key findings uploaded to Twitter by co-founder Tom Lee on Jan 10.
“For 2020, we see several positive convergences that enhance the use case and also the economic model for crypto and Bitcoin – thus, we believe Bitcoin and crypto total return should exceed that of 2019,” an excerpt states.
Fundstrat continued:
“In other words, we see strong probability that Bitcoin gains >100% in 2020.”
The factors Lee and others identified focus on geopolitical tensions and the upcoming United States presidential elections, in addition to the halving.
Fed Injects $82BN In Liquidity As Term Repo Is Most Oversubscribed In One Month
It was supposed to be a one-time, year-end “liquidity event.” Instead, it has transformed into the latest liquidity addiction within the financial community.
Just days after we reported that yet another disturbance appears to be brewing below the calm surface of the repo market again, we got another indication just how strong the market’s addition to the Fed’s easy repo money has become, when moments ago the Fed announced that its latest 2-week term repo operation was also the most oversubscribed since December 16, as $34.3BN in securities ($27.65BN in TSYs, $15.5BN in MBS) were submitted for today’s $35 billion operation, as dealers continue to scramble to the Fed for liquidity which they are no longer using for “regulatory” year-end purposes (since it is no longer year-end obviously), but are instead using it to pump markets directly.
Today’s operation, which was the most oversubscribed in 2020, also saw the most submissions since Dec 16, and suggests that as repos are now maturing at a rapid burst (as we noted in “Mark Your Calendar: Next Week The Fed’s Liquidity Drain Begins“), dealers remain as desperate as ever to roll this liquidity into newer term operations.
And just in case there was any doubt that the liquidity shortage isn’t getting better, moments later the Fed announced that in its daily Overnight repo operation, it also accepted $47BN in securities ($22.5BN TSYs, $24.5BN in MBS) for a total liquidity injection of $82 billion.
Predictably, as the market’s repo addiction is now clear for everyone, in the wake of today’s term repo operations, traders were eagerly waiting for the release of the new repo schedule to see if there are any changes in the size of the offerings… but don’t hold your breath.
Why? Because The latest repo operations also confirmed what we discussed overnight in “Top Repo Expert Warns Fed Is Now Trapped: “It Will Take Pain To Wean The Repo Market Off Easy Cash“” in which we noted that according to Curvature Securities’ repo expert Scott Skyrm, something appears amiss as recently the total overnight and term Fed RP operations were greater than on year end! On year-end, the Fed had pumped a total of $255.95 billion into the market verses $258.9 billion last week..
The problem, as Skyrm explained, is that the market had gotten addicted to the easy Fed liquidity unleashed in September (via temporary repo ops), and then again in October (via permanent T-Bill purchases): “it’s easy to see how the Repo market can get addicted to easy cash from the Fed when the stop-out rates for the RP operations are 1.55% – behind the offered side of the market.” But, as the repo strategist added, as the Fed keeps injecting cash, the market gets used to it.
Which is great in the short-term as it sends risk assets soaring, but become a major issue over the long-term: “The long-term problem is that the some investor cash (real money cash) that was once going into the Repo market is now going elsewhere”, Skyrm explains.
Indeed, the problem is that repo rates are trading in the lower end of the fed funds target range. When GC rates were higher in the range, Repo general collateral, as an investment, was more competitive than other overnight rates. But now that cash has gone to other markets.
In short, just as the market got addicted to QE and the result was a 20% drop in the S&P in late 2018 when markets freaked out about Quantitative Tightening, the Fed’s shrinking balance sheet, and declining liquidity, Skyrm cautions that “it will take pain to wean the Repo market off of cheap Fed cash” since “it‘s a circle” which can be described as follows:
For the Fed to end daily RP ops, they need outside cash to come back into the Repo market. For the Repo market to attract cash, Repo rates need to move higher. For rates to move higher, the Fed needs to stop RP ops.
The problem is that stopping RP ops could spark another repo market crisis, especially with $259BN in liquidity pumped currently – more than at year end – via Repo. It also means that the Fed is now unilaterally blowing a market bubble with its repo and “NOT QE” injections, and yet the longer it does so the more impossible it becomes for the Fed to extricate itself from the liquidity pathway without causing a crash.
Or stated simply, the longer the Fed avoids pulling the repo liquidity band-aid, the bigger the market fall when (if) it finally does. The question then becomes whether Powell can keep pushing on the repo string until the November election, because a market crash in the months preceding it, especially since it will be of the Fed’s own doing, will result in a very angry president.
Libya’s Haftar Leaves Putin-Sponsored Talks In Moscow Without Signing Ceasefire
Head the UN-backed Government of National Accord (GNA) in Tripoli, Fayez al-Sarraj, and Benghazi-based General Khalifa Haftar who is now warring for control of the capital, were actually in the same building in Moscow for peace talks on Monday — an extremely rare and unlikely event in its own right.
The Putin-sponsored talks follow an agreement between the Russian president and Turkey’s Erdogan last week to issue an urgent ceasefire call in Libya (the urgent call designated last Saturday for a pause in fighting), but which was immediately rejected by Haftar, despite Russia being among his political backers.
Monday’s talks may have also been awkward for Haftar-Russian ties, given Haftar departed Moscow without signing the agreement for an “unconditional open-ended” ceasefire even after the GNA’s Sarraj did.
Khalifa Haftar greets Russian Foreign Minister Sergei Lavrov in Moscow Jan.13, via Reuters/Ministry of Foreign Affairs of the Russian Federation.
Likely, Haftar rebuffed the ceasefire — which also would establish a“military commission to determine a contact line” between fighters on the ground — given his Libyan National Army (LNA) has made recent gains into Tripoli. Notably Haftar refused to engage in face to face talks with Sarraj despite being in the same building.
But he did ask for more time to make a final decision, but it’s increasingly looking like he’ll reject any stoppage in fighting.
Expressing surprise that like with Syria before, the United States has been effectively cut out from overseeing any diplomatic solution, Der Spiegel journalist Mathieu von Rohr noted, “Now, [Russia and Turkey] not only have their seat at the table, they provide the table. And Europe is nowhere to be seen.”
While France and Italy were quarrelling about Libya, Russia and Turkey took the initiative. Now, they not only have their seat at the table, they provide the table. And Europe is nowhere to be seen. https://t.co/VNpG3iPpWD
Amid Haftar delaying signing the deal, the Russian military is still touting that the Libyan rivals agreed to an “ongoing ceasefire” according to the AFP. Russia has vowed to continue pushing peace efforts.
But the reality will only be tested on the ground, where mortars and missiles continue to fly across the suburbs on the outskirts of Tripoli.
President Erdogan meanwhile used the occasion to slam Haftar, saying Turkey will “teach a lesson” to the LNA leader if attacks resume. Turkey has recently sent troops to bolster the besieged GNA in Tripoli, after having for years provided support in the form of military hardware, including drones.
This opens the potential for the entire situation to spill over into a broader regional proxy war, given also Egypt has condemned Turkish intervention in the war, and has warned it could send its own troops if Ankara and other external actors don’t back down.
CNN kicked off some shit yesterday between Sens. Bernie Sanders (I–Vt.) and Elizabeth Warren (D–Mass.), just ahead of the Democratic presidential debate on CNN tonight. By the end of the day, the alleged disagreement between the two 2020 candidates over whether a woman could win against Donald Trump had spawned conflicting comments from the two campaigns and a huge outpouring of animosity from their respective fans.
The CNN story, from political correspondent MJ Lee, described a meeting between Sanders and Warren in December 2018. “The two agreed that if they ultimately faced each other as presidential candidates, they should remain civil and avoid attacking one another, so as not to hurt the progressive movement,” writes Lee. More:
They also discussed how to best take on President Donald Trump, and Warren laid out two main reasons she believed she would be a strong candidate: She could make a robust argument about the economy and earn broad support from female voters. Sanders responded that he did not believe a woman could win.
Cue the outrage about Sanders’ supposed misogyny, despite the fact that there was no indication that Sanders relished this idea. And for Sanders’ part, he denies that any such conversation ever happened.
“It is ludicrous to believe that at the same meeting where Elizabeth Warren told me she was going to run for president, I would tell her that a woman couldn’t win,” said Sanders in a statement to CNN. He chalked up the story to “staff who weren’t in the room…lying about what happened.”
“What I did say that night was that Donald Trump is a sexist, a racist, and a liar who would weaponize whatever he could,” Sanders added. “Do I believe a woman can win in 2020? Of course!”
A few hours later, the Warren campaign effectively called Sanders a liar. In a statement about the meeting with Sanders, Warren said: “I thought a woman could win; he disagreed.”
NEW statement from Elizabeth Warren on her meeting with Bernie Sanders: “Among the topics that came up was what would happen if Democrats nominated a female candidate. I thought a woman could win; he disagreed.” pic.twitter.com/pCZnCJBZ57
The most charitable reading here says that Warren and Sanders came out of the same conversation with different reads on what had been discussed. It’s not hard to imagine one person in an already somewhat awkward situation (hey, so, we’re both running for president…) discussing hypothetical hardships a woman candidate would face against Trump, and the other person construing that as saying a woman couldn’t win.
Sanders is blunt. He said after the midterms that racism probably hurt Abrams and Gillum. Easy to imagine him making this misogyny point, which got telephone-gamed into “a woman can’t win https://t.co/ZBKJdOnfOl
It’s also possible that Sanders is lying to save face, of course, and the same goes for Warren. A popular theory has been that Warren embellished her opponents’ words when telling staffers about the meeting (without meaning for it to go further) and was backed into publicly confirming a tall tale when the story got leaked to media.
Other suggest a more active sabotage attempt by Warren. For instance, here’s Jacobin staff writer Meagan Day:
This last-ditch attempt from Warren's camp to use the cheapest, stalest narratives to smear Bernie as a sexist is fucking pathetic https://t.co/LDxJRPpsxY
Still others suggest the whole melodrama was cooked up (or is being egged on) by Republicans to divide Democrats and get their top candidates to attack one another.
Reminder that @realDonaldTrump is happily tweeting abt the “feud brewing” btwn Sanders & Warren while @GOPleader is telling people that @SpeakerPelosi is withholding articles from the Senate to help Biden (huh?). Idc who the nominee is… stfu & unify & vote when the time comes.
The Washington Postreported that “two people with knowledge of the conversation at the 2018 dinner [said] that Warren brought up the issue by asking Sanders whether he believed a woman could win. One of the people with knowledge of the conversation said Sanders did not say a woman couldn’t win but rather that Trump would use nefarious tactics against the Democratic nominee.”
Rep. Tulsi Gabbard (D–Hawaii) also weighed in with support of Sanders:
I also met with @BernieSanders before announcing my candidacy. We had a nice one-on-one conversation and I informed him that I would be running for President. In that meeting, he showed me the greatest respect and encouragement, just as he always has.
ICYMI, here's my @ArcDigi writeup on the Romance Writers Association implosion, which presents interesting questions about whether professional organizations can (or indeed are obligated to) tolerate the presence of members with unpopular political views https://t.co/JXN5vt41sU
“Politicians across the country have declared a war on human trafficking, but the tactics police departments are deploying aren’t catching the real criminals. Instead, they’re tearing apart families, terrorizing communities and ruining lives,” writes Kaytlin Bailey at the The Orange County Register.
Here and can confirm. Hearing that the couple was walking the dog and that agent, off duty, was frightened of dog *on leash* and shot him. https://t.co/oN3i9VoGsa
House Intelligence Committee Ranking Member Devin Nunes appears with Maria Bartiromo to discuss two very important issues.
The first is the origination of the “whistle-blower” complaint and new issues surrounding Intelligence Community Inspector General Michael Atkinson.
The second important subject is the background of newly installed FISA Court monitor, David Kris, to oversee the FBI reform promises.
CTH has some explosive new information which has been shared with Mr. Nunes on both issues; but we start with the interview and ICIG Michael Atkinson.
Since our original research into Atkinson, there have been some rather interesting additional discoveries.
The key to understanding the corrupt endeavor behind the fraudulent “whistle-blower” complaint, doesn’t actually originate with ICIG Atkinson. The key person is the former head of the DOJ National Security Division, Mary McCord.
Prior to becoming IC Inspector General, Michael Atkinson was the Acting Deputy Assistant Attorney General and Senior Counsel to the Assistant Attorney General of the National Security Division, Mary McCord.
It is very safe to say Mary McCord and Michael Atkinson have a working relationship from their time together in 2016 and 2017 at the DOJ-NSD. Atkinson was Mary McCord’s senior legal counsel; essentially her lawyer.
McCord was the senior intelligence officer who accompanied Sally Yates to the White House in 2017 to confront then White House Counsel Don McGahn about the issues with Michael Flynn and the drummed up controversy over the Russian Ambassador Sergey Kislyak phone call.
Additionally, Mary McCord, Sally Yates and Michael Atkinson worked together to promote the narrative around the incoming Trump administration “Logan Act” violations. This silly claim (undermining Obama policy during the transition) was the heavily promoted, albeit manufactured, reason why Yates and McCord were presumably concerned about Flynn’s contact with Russian Ambassador Sergey Kislyak. It was nonsense.
However, McCord didn’t just disappear in 2017 when she retired from the DOJ-NSD. She resurfaced as part of the Lawfare group assembly after the mid-term election in 2018.
THIS IS THE KEY.
Mary McCord joined the House effort to impeach President Trump; as noted in this article from Politico:
“I think people do see that this is a critical time in our history,” said Mary McCord, a former DOJ official who helped oversee the FBI’s probe into Russian interference in the 2016 presidential election and now is listed as a top outside counsel for the House in key legal fights tied to impeachment. “We see the breakdown of the whole rule of law. We see the breakdown in adherence to the Constitution and also constitutional values.”
“That’s why you’re seeing lawyers come out and being very willing to put in extraordinary amounts of time and effort to litigate these cases,” she added. (link)
Former DOJ-NSD Head Mary McCord is currently working for the House Committee (Adam Schiff) who created the impeachment scheme.
Now it becomes critical to overlay that detail with how the “whistle-blower” complaint was organized. Mary McCord’s former NSD attorney, Michael Atkinson, is the intelligence community inspector general who brings forth the complaint.
The “whistle-blower” had prior contact with the staff of the committee. This is admitted. So essentially the “whistle-blower” almost certainly had contact with Mary McCord; and then ICIG Michael Atkinson modified the whistle-blower rules to facilitate the outcome.
There is the origination. That’s where the fraud starts.
The coordination between Mary McCord, the Whistle-blower and Michael Atkinson is why HPSCI Chairman Adam Schiff will not release the transcript from Atkinson’s testimony.
It now looks like the Lawfare network constructed the ‘whistle-blower’ complaint aka a Schiff Dossier, and handed it to allied CIA operative Eric Ciaramella to file as a formal IC complaint. This process is almost identical to the Fusion-GPS/Lawfare network handing the Steele Dossier to the FBI to use as the evidence for the 2016/2017 Russia conspiracy.
Atkinson’s conflict-of-self-interest, and/or possible blackmail upon him by deep state actors who most certainly know his compromise, likely influenced his approach to this whistleblower complaint. That would explain why the Dept. of Justice Office of Legal Counsel so strongly rebuked Atkinson’s interpretation of his responsibility with the complaint.
In the Justice Department’s OLC opinion, they point out that Atkinson’s internal justification for accepting the whistleblower complaint was poor legal judgement. [See Here] I would say Atkinson’s decision is directly related to his own risk exposure:
Michael Atkinson was moved from DOJ-NSD to become the Intelligence Community Inspector General (ICIG) in 2018. What we end up with is a brutally obvious, convoluted, network of corrupt officials; each carrying an independent reason to cover their institutional asses… each individual interest forms a collective fraudulent scheme inside the machinery of government.
Michael Atkinson and Mary McCord worked together in 2016/2017 on the stop-Trump surveillance operation (FISA application via DOJ-NSD). Then, following the 2018 mid-term election, in 2019 Mary McCord and Michael Atkinson team up again on another stop-Trump operation, each in a different position, and -working with others- coordinate the House impeachment plan via the ‘whistle-blower’ complaint.
While Devin Nunes is focused on the false statements of ICIG Michael Atkinson, the key is the contact between the ‘whistle-blower’ (Eric Ciaramella) and the House Intelligence Committee via Mary McCord.
There’s a very strong likelihood this entire impeachment construct was manufactured out of nothing.
National Security Council resistance member Alexander Vindman starts a rumor about the Trump-Zelenskyy phone call, which he shares with CIA operative Eric Ciaramella (a John Brennan resistance associate). Ciaramella then makes contact with resistance ally Mary McCord in her role within the House. McCord then helps Ciaramella create a fraudulent whistle-blower complaint via her former colleague, now ICIG, Michael Atkinson…
…And that’s how this entire Impeachment operation gets started.
Last night, the President tweeted about his health care policy accomplishments:
I stand stronger than anyone in protecting your Healthcare with Pre-Existing Conditions. I am honored to have terminated the very unfair, costly and unpopular individual mandate for you!
According to this tweet, the President “terminated” the individual mandate, presumably by signing the federal tax reform bill that eliminated the tax penalty that had been used to enforce the Affordable Care Act’s minimum coverage requirement, which is usually referred to as the “individual mandate.” By zeroing out the tax penalty for failing to obtain qualifying health insurance, the tax reform bill turned the purported requirement into nothing more than a precatory statement, as there is no consequence for anyone who fails to comply with the statutory requirement.
Interestingly enough, the Department of Justice does not share the President’s understanding of what happened to the mandate. For while the President is taking credit for eliminating the mandate, DOJ is in federal court arguing that the mandate still exists and is capable of imposing Article III injuries on individuals. According to DOJ, there is still a legal obligation to obtain qualifying health insurance, and that anyone who purchases insurance in order to comply with that requirement has suffered an injury-in-fact that satisfies the requirements of Article III standing.
A perverse corollary of DOJ’s position is that Congress and the President, by zeroing out the tax penalty for failing to obtain qualifying health insurance, actually made the Affordable Care Act more coercive on the American people. This is because, after NFIB, Americans were left with a choice—obtain health insurance or pay a “tax.” This was deemed not coercive by the Supreme Court, which stressed there was no consequence for failing to purchase health insurance other than paying the “tax.” DOJ’s position, however, is that once the tax penalty was zeroed out, the mandate actually imposes a real obligation to purchase insurance. In other words, DOJ’s position is not only that Congress and the President failed to “terminate” the individual mandate, but also that President Trump—by signing the tax reform bill—actually made the mandate more coercive, by eliminating the choice to forego health insurance and pay a “tax.”
In most cases, when President Trump tweets something that contradicts the statements of other government officials, it’s safe to assume that the President got it wrong. In this case, however, the President is actually the one who got it right.
[Post-script: There’s actually an argument that the President is wrong here, but not in a way that helps the DOJ’s position. There is a serious argument, made by my co-blogger Randy Barnett here, that NFIB v. Sebelius actually eliminated the mandate, leaving just a tax penalty. Under this view, there was no mandate to eliminate, just a tax penalty to zero out. Also under this view is the implication that, if the DOJ is right, then the tax reform bill actually managed to resurrect the individual mandate and reimpose it on the American people.]
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The drama at tonight’s Democratic debate is going to be all about Sen. Bernie Sanders (I–Vt.), and not simply because he stands accused of electoral misogyny by rival progressive Sen. Elizabeth Warren (D–Mass.), who says the self-described socialist told her privately in 2018 that a “woman couldn’t win” the presidency.
The bigger reason is that Sanders is emerging as a legitimate—and possibly even the leading—contender for the nomination of a party to which he doesn’t even belong. Each debate so far has featured a breakout candidate who draws the collective fire of the field and barely makes it off the stage (Kamala Harris, we hardly knew ye!). Tonight will be Sanders’ time in the barrel and it’s hard to imagine him emerging unscathed.
According to some recent polls of Democratic voters, Sanders is leading all candidates in early-voting states Iowa and New Hampshire. With the exception of Bill Clinton in 1992, no Democrat since 1976, when the current primary system came online, has won his party’s nomination without placing first in either Iowa or New Hampshire. With Sanders polling so well in both, he has to be taken super-seriously, despite trailing former Vice President Joe Biden by 10 points in national surveys of Democratic voters and also doing worse than Biden in polls versus Donald Trump (Biden beats the incumbent by an average of 4 percentage points, Sanders by 3 points).
Just as in 2016, Sanders’ persistence and unapologetically hard-left policies are filling mainstream Democrats with anxiety about electability. This is a 78-year-old senator who had a heart attack last fall and yet according to all national polls remains solidly in second place among the dwindling field of Democratic hopefuls. Back in 2016, Sanders rained on Hillary Clinton’s coronation as the first female president by refusing to concede until the Democratic National Convention, almost certainly helping to suppress enthusiasm for her in a general election that was ultimately decided by fewer than 80,000 votes. The Democratic National Committee’s hacked emails plainly showed that the party establishment was secretly working to knee-cap Sanders and mainstream party members have never really forgiven Bernie and his supporters for forcing the matter.
Add to that the single-mindedness of Bernie supporters. As Margaret Carlson notes in The Daily Beast, a Quinnipiac Poll from last fall found that half of Sanders’ supporters said they wouldn’t vote for anyone else in the field if the former mayor of Burlington wasn’t the candidate. In an election that is almost certainly going to be won by a candidate who pulls less than 50 percent of the popular vote, Democrats are rightly worried that Sanders fans will either stay home or vote third-party as a protest vote.
Expect Sanders’ opponents to attack him tonight by forcing him to say exactly how he’s going to pay for all the giveaways he promises to everyone. More than any other Democratic contender, Sanders has promised more free stuff if elected president—free college (and canceling of all student debt), free (or heavily subsidized) housing, and especially free health care (he is the popularizer of Medicare for All). Back in 2016, Sanders laid out plans to increase taxes by about one-third, an enormous amount that still wouldn’t pay for an ever-growing list of programs.
But this time around, Sanders is generally hostile to discussing how to cover costs. “You’re asking me to come up with an exact detailed plan of how every American—how much you’re going to pay more in taxes, how much I’m going to pay,” he said last fall as Elizabeth Warren finally laid out a plan to pay for her version of Medicare for All. “I don’t think I have to do that right now.”
Warren’s plummet in the polls coincided exactly with her attempts to explain how she was going to afford all the free stuff she was promising, so don’t expect Sanders to offer any details when it comes to footing the bill. But that’s exactly how Biden, Warren, South Bend Mayor Pete Buttigieg, Sen. Amy Klobuchar (D–Minn.), and billionaire environmentalist Tom Steyer will work Sanders over. And in so doing, they will reveal not simply his lack of seriousness but their own party’s larger inability to imagine a government that is actually affordable. As Reason‘s Peter Suderman noted in December, arguably the most-moderate Democratic candidate, Joe Biden, is already calling for tax increases that are twice as large as what Hillary Clinton proposed just four years ago. Expect him especially to call out Sanders for irresponsible spending in a way that simultaneously reminds people that Democrats want to raise taxes while clawing back some of the freebies proposed by the senator.
All of this is a gift to Donald Trump, who has unashamedly presided over the return of trillion-dollar deficits. In the general election, he will focus on his tax cuts and steer the conversation toward the idea that Democrats are the spendthrift party that will also choke off economic growth. He won’t be correct, exactly, as the GOP has played a signal role in busting the federal budget for the entirety of the 21st century. But such rhetoric almost certainly will be effective, whoever manages to win the Democratic nomination.
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Last night, the President tweeted about his health care policy accomplishments:
I stand stronger than anyone in protecting your Healthcare with Pre-Existing Conditions. I am honored to have terminated the very unfair, costly and unpopular individual mandate for you!
According to this tweet, the President “terminated” the individual mandate, presumably by signing the federal tax reform bill that eliminated the tax penalty that had been used to enforce the Affordable Care Act’s minimum coverage requirement, which is usually referred to as the “individual mandate.” By zeroing out the tax penalty for failing to obtain qualifying health insurance, the tax reform bill turned the purported requirement into nothing more than a precatory statement, as there is no consequence for anyone who fails to comply with the statutory requirement.
Interestingly enough, the Department of Justice does not share the President’s understanding of what happened to the mandate. For while the President is taking credit for eliminating the mandate, DOJ is in federal court arguing that the mandate still exists and is capable of imposing Article III injuries on individuals. According to DOJ, there is still a legal obligation to obtain qualifying health insurance, and that anyone who purchases insurance in order to comply with that requirement has suffered an injury-in-fact that satisfies the requirements of Article III standing.
A perverse corollary of DOJ’s position is that Congress and the President, by zeroing out the tax penalty for failing to obtain qualifying health insurance, actually made the Affordable Care Act more coercive on the American people. This is because, after NFIB, Americans were left with a choice—obtain health insurance or pay a “tax.” This was deemed not coercive by the Supreme Court, which stressed there was no consequence for failing to purchase health insurance other than paying the “tax.” DOJ’s position, however, is that once the tax penalty was zeroed out, the mandate actually imposes a real obligation to purchase insurance. In other words, DOJ’s position is not only that Congress and the President failed to “terminate” the individual mandate, but also that President Trump—by signing the tax reform bill—actually made the mandate more coercive, by eliminating the choice to forego health insurance and pay a “tax.”
In most cases, when President Trump tweets something that contradicts the statements of other government officials, it’s safe to assume that the President got it wrong. In this case, however, the President is actually the one who got it right.
[Post-script: There’s actually an argument that the President is wrong here, but not in a way that helps the DOJ’s position. There is a serious argument, made by my co-blogger Randy Barnett here, that NFIB v. Sebelius actually eliminated the mandate, leaving just a tax penalty. Under this view, there was no mandate to eliminate, just a tax penalty to zero out. Also under this view is the implication that, if the DOJ is right, then the tax reform bill actually managed to resurrect the individual mandate and reimpose it on the American people.]
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The drama at tonight’s Democratic debate is going to be all about Sen. Bernie Sanders (I–Vt.), and not simply because he stands accused of electoral misogyny by rival progressive Sen. Elizabeth Warren (D–Mass.), who says the self-described socialist told her privately in 2018 that a “woman couldn’t win” the presidency.
The bigger reason is that Sanders is emerging as a legitimate—and possibly even the leading—contender for the nomination of a party to which he doesn’t even belong. Each debate so far has featured a breakout candidate who draws the collective fire of the field and barely makes it off the stage (Kamala Harris, we hardly knew ye!). Tonight will be Sanders’ time in the barrel and it’s hard to imagine him emerging unscathed.
According to some recent polls of Democratic voters, Sanders is leading all candidates in early-voting states Iowa and New Hampshire. With the exception of Bill Clinton in 1992, no Democrat since 1976, when the current primary system came online, has won his party’s nomination without placing first in either Iowa or New Hampshire. With Sanders polling so well in both, he has to be taken super-seriously, despite trailing former Vice President Joe Biden by 10 points in national surveys of Democratic voters and also doing worse than Biden in polls versus Donald Trump (Biden beats the incumbent by an average of 4 percentage points, Sanders by 3 points).
Just as in 2016, Sanders’ persistence and unapologetically hard-left policies are filling mainstream Democrats with anxiety about electability. This is a 78-year-old senator who had a heart attack last fall and yet according to all national polls remains solidly in second place among the dwindling field of Democratic hopefuls. Back in 2016, Sanders rained on Hillary Clinton’s coronation as the first female president by refusing to concede until the Democratic National Convention, almost certainly helping to suppress enthusiasm for her in a general election that was ultimately decided by fewer than 80,000 votes. The Democratic National Committee’s hacked emails plainly showed that the party establishment was secretly working to knee-cap Sanders and mainstream party members have never really forgiven Bernie and his supporters for forcing the matter.
Add to that the single-mindedness of Bernie supporters. As Margaret Carlson notes in The Daily Beast, a Quinnipiac Poll from last fall found that half of Sanders’ supporters said they wouldn’t vote for anyone else in the field if the former mayor of Burlington wasn’t the candidate. In an election that is almost certainly going to be won by a candidate who pulls less than 50 percent of the popular vote, Democrats are rightly worried that Sanders fans will either stay home or vote third-party as a protest vote.
Expect Sanders’ opponents to attack him tonight by forcing him to say exactly how he’s going to pay for all the giveaways he promises to everyone. More than any other Democratic contender, Sanders has promised more free stuff if elected president—free college (and canceling of all student debt), free (or heavily subsidized) housing, and especially free health care (he is the popularizer of Medicare for All). Back in 2016, Sanders laid out plans to increase taxes by about one-third, an enormous amount that still wouldn’t pay for an ever-growing list of programs.
But this time around, Sanders is generally hostile to discussing how to cover costs. “You’re asking me to come up with an exact detailed plan of how every American—how much you’re going to pay more in taxes, how much I’m going to pay,” he said last fall as Elizabeth Warren finally laid out a plan to pay for her version of Medicare for All. “I don’t think I have to do that right now.”
Warren’s plummet in the polls coincided exactly with her attempts to explain how she was going to afford all the free stuff she was promising, so don’t expect Sanders to offer any details when it comes to footing the bill. But that’s exactly how Biden, Warren, South Bend Mayor Pete Buttigieg, Sen. Amy Klobuchar (D–Minn.), and billionaire environmentalist Tom Steyer will work Sanders over. And in so doing, they will reveal not simply his lack of seriousness but their own party’s larger inability to imagine a government that is actually affordable. As Reason‘s Peter Suderman noted in December, arguably the most-moderate Democratic candidate, Joe Biden, is already calling for tax increases that are twice as large as what Hillary Clinton proposed just four years ago. Expect him especially to call out Sanders for irresponsible spending in a way that simultaneously reminds people that Democrats want to raise taxes while clawing back some of the freebies proposed by the senator.
All of this is a gift to Donald Trump, who has unashamedly presided over the return of trillion-dollar deficits. In the general election, he will focus on his tax cuts and steer the conversation toward the idea that Democrats are the spendthrift party that will also choke off economic growth. He won’t be correct, exactly, as the GOP has played a signal role in busting the federal budget for the entirety of the 21st century. But such rhetoric almost certainly will be effective, whoever manages to win the Democratic nomination.
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When the dust from a suspected terrorist attack on U.S. soil eventually settles, the inevitable fight over access to encrypted communications can quickly commence. This is again the case with last month’s shooting spree by Saudi Air Force flight school student Mohammed Saeed Alshamrani, who was being trained at the Naval Air Station in Pensacola, Florida.
Investigators are still determining the now-deceased Alshamrani’s motivations, who is believed to have hyped himself up by hosting a party to watch videos of other atrocities and posting anti-US and anti-Israel content before killing three U.S. sailors and wounding eight other people. “Terrorism” seems a pretty good bet: Attorney General William Barr reported Monday that 17 other Saudi Air Force students at NAS Pensacola had pro-jihadi content on their social media accounts.
But to build a watertight case, law enforcement might need access to the shooter’s suspected two iPhones, so the FBI is hoping to enlist Apple’s help. Last week, the FBI sent a letter to Apple’s general council asking for technical assistance after their efforts to simply guess the passcodes proved fruitless. The agency says it has court permission to search the phones, so it’s not a question of warrantless access. And Apple appears eager to help, telling NBC News that the company has given the FBI “all of the data in our possession” when first approached at the time of the attack and “will continue to support them with the data we have available.” Barr countered this characterization in his speech Monday, claiming that “Apple has not given us any substantive assistance” so far.
Perhaps the FBI and its many forensic offices may be able to work with Apple to find a fortuitous way into the iPhones in question. (Entering at least one of the phones may prove especially tricky, as it was apparently shot during the attack.) Or maybe the FBI will again tap one of the many shadowy organizations that specialize in granting access to secure devices, like the Israel-based NSO Group Technologies, which is believed to have cracked the San Bernardino shooter’s phone.
Or perhaps this present détente is just the calm before the revived Crypto War storm. When considering the backdrop that festoons this latest security incident, the curious case of the NAS Pensacola iPhones could have all the makings of a new public battle over law enforcement access to encryption.
Recall that the San Bernardino incident resolved with only a whimper. The government had hoped to secure a legal precedent in the courts that would facilitate future access to encrypted communications. By compelling Apple engineers to build government backdoors into phone software, the law enforcement community would not only receive access to those particular devices, but possibly any device protected by strong encryption, whether with or without a warrant. (No wonder the FBI dragged its feet to crack into the devices on its own.)
Eventually, the FBI was able to get into the iPhone without conscripting Apple engineers as unwilling government hackers. The whole thing became moot. But it’s likely that many in the law enforcement community have simply been biding their time until another opportunity presented itself.
The emotional high-stakes surrounding the attack in California only added more oomph to the government’s case in the court of public opinion. Exploiting horrible events appears to be a key tactic in the government’s ongoing campaign against encryption.
In 2015, emails obtained by the Washington Post from a top lawyer in the intelligence community explained that while “the legislative environment is very hostile” to the idea of outright crippling encryption, things could “turn in the event of a terrorist attack or criminal event where strong encryption can be shown to have hindered law enforcement.” A 2018 inspector general inquiry into the San Bernardino incident reported that the case was seen as a “poster child” for the so-called Going Dark problem thwarting law enforcement access to secure devices. So of course the agency played the San Bernardino shooting up.
Perhaps the specific game plan has changed with the rise of a new administration. But the overall goal of chipping away at strong security protocols remains the same under the tenure of Attorney General William Barr and FBI director Christopher Wray. Barr has blasted tamper-proof encryption protocols as “law-free zones” that are fundamentally opposed to the needs of law enforcement. In his press event Monday, Barr called on Apple to “find a solution so that we can better protect the lives of Americans and prevent future attacks.” Wray echoes these contentions, characterizing security technologies as creating an “entirely unfettered space that’s utterly beyond law enforcement for criminals to hide.”
What they want is what’s called a “backdoor” into encryption standards that will let governments decrypt data at their leisure. Law enforcement argues that such backdoor are a necessary tool to get evidence and carry out justice. But computer scientists point out that a government backdoor would undermine everyone’s security because the bad guys could exploit it as well. Essentially, there may be no way to build a backdoor that wouldn’t effectively ruin the whole point of encryption to begin with, which is to secure our computing.
The FBI has a history of exaggerating the Going Dark problem. Wray had previously claimed that his Bureau was locked out of some 8,000 or so devices in their investigations. But the real number is much smaller, probably around 1,000 or so. Plus, it’s simply not the case that these thousand-some devices are related to terrorism or even plain old violent crime cases. The vast majority are probably drug-related.
Then there’s the question of whether the information on the devices would have even been instrumental to solving the case. Obviously, law enforcement will want access to as much information as possible to build the best case. But maybe the locked device wouldn’t have provided much evidence anyway.
Computer scientists routinely point out that law enforcement may be missing the forensics forest for the trees. We live in a virtual ocean of plaintext data, metadata, and tools that can piece together our online lives if assisted by the right analysis. Many times, law enforcement fails to tap this rich vein of available data simply because they do not know it exists, or they don’t know how to access it, or they don’t know how to analyze it.
Rather than quixotically trying to undermine everyone’s security by installing insecure backdoors into encryption protocols, the FBI should instead seek to harvest this kind of low hanging fruit and better train the nation’s law enforcement on this kind of forensic analysis.
Hopefully Apple and the FBI will be able to get into these phones the old fashioned way and an encryption stand-down can be avoided. As a Pensacola resident and a security writer, I hope that justice is served without undermining strong encryption.
But if we don’t have a stand-down now, we will almost certainly have one later. Today, not only are devices like iPhones protected by strong encryption by default, Facebook is also integrating strong encryption practices into their suite of platforms, which means more tragedies will likely involve some kind of encryption.
The government will not cease in its quest to put a backdoor into encryption technologies, and we must be ready to challenge them whenever it is attempted.
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