Is the Chevron Doctrine Really Such a Problem?

There is widespread – and well-justified – concern about the size, scope and intrusiveness of the administrative state. Many feel that the accumulation of regulatory authority within administrative agencies undermines democratic accountability and self-government.

Many critics of the administrative state focus on the Chevron doctrine, and suggest its requirement that courts sometimes defer to reasonable agency interpretations of ambiguous statutory provisions lies at the heard of administrative overreach. For reasons I explain in the new issue of National Review (and have previously noted here),I think the focus on Chevron is misplaced.

While it is certainly true that, in the hand of some judges, Chevron has allowed some agencies to run rampant, faithfully applied within its proper domain, Chevron itself is not much of a problem. As Justice Kennedy noted in one of his final opinions on the Court, some courts grant agencies “reflexive deference” after only “cursory” examinations of the relevant statutory text. This is a problem, but it’s one of application, not of the underlying doctrine itself.

Further, insofar as some are (rightfully) concerned about the broad degree of interpretive authority and policy discretion agencies exercise under Chevron, the real blame lies with Congress, not the courts. As I note in NR:

The problem . . . is less that courts sometimes defer to federal-agency interpretations of ambiguous statutes through which Congress delegates regulatory authority and more that the legislature is so profligate with its delegations. . . .

The abdication taking place is less on the federal bench than in the halls of Congress, where our legislators have forgotten that it is their job, first and foremost, to enact the laws that govern the nation.

Unless and until courts are willing to enforce meaningful limits on the delegation of authority to federal agencies — a far heavier lift than constraining Chevron — the underlying problem will remain. If we want Chevron and other deference doctrines to be less important, Congress needs to stop providing so many opportunities for these doctrines to apply, both by drafting legislation more carefully and by regularly revisiting older statutes that might otherwise be used as new sources of agency authority.

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Is the Indian System Strong Enough to Survive Modi?

Both my native country, India, and my adopted country, America, are liberal democracies that are right now in the thrall of right-wing populist demagogues—Prime Minister Narendra Modi in India’s case and President Donald Trump in America’s. Few would deny that between the two, Trump is the crazier one—a showboat with impulse control issues. Modi, by contrast, a humble tea stall owner once, is a veritable picture of discipline and restraint.

Yet Modi, who got re-elected by a landslide last month, is potentially more dangerous because Indian democracy lacks strong institutional checks on his illiberal ambitions. In America, however, multiple resistance points—courts, Congress, opposition both from outside and even within the GOP and states—have managed to thwart Trump’s worst instincts.

For all of Trump’s bluster and bravado, the fact is that beyond tax cuts, he hasn’t accomplished much of his signature agenda. Even though his party controlled all three branches of government for the first two years, Obamacare stands—albeit considerably weakened—and his wall doesn’t.

Where Trump has made his real mark is on trade and immigration. By abusing his authority under the National Security Act, he picked unnecessary trade wars. And on immigration, he’s used the vast enforcement discretion that Congress has foolishly relinquished to crack down on immigrants far beyond what a majority of Americans support. And he has used administrative means to cut legal immigration even after Congress pointedly refused to do so.

Still, the courts have either watered down (the Muslim travel ban) or stalled (scrapping the Obama-era Deferred Action for Childhood Arrivals program that hands temporary protected status to those who were brought to the country as kids) or outright stopped (defunding sanctuary cities) a good portion of his immigration agenda.

Although Trump has remade the GOP in his own image with remarkable speed—forcing it to abandon its long-standing commitment to entitlement reform, fiscal responsibility, and free trade to embrace profligacy and protectionism instead—there are still limits to how far he can push his party. Indeed, one reason he backed down from his latest threat to impose stiff tariffs on Mexico was to avoid an all-out revolt by incensed Republicans. Moreover, with the House falling into Democratic hands after the 2018 midterms, Trump’s grandiose ambitions are pretty much on ice for now.

Contrast this with what Modi got away with in his first term.

One Sunday evening about three years ago, without notice or forewarning, he declared on national TV that close to 90 percent of the nation’s currency was null and void, effective immediately, and would be replaced with new bills. The ostensive purpose of this so-called demonetization was to cure the scourge of “black money”—the illicit cash that rich Indians horde to avoid paying taxes. But the scheme badly backfired as India’s wealthy classes managed to use their connections with corrupt bank officials to swap much of their black money while small businessmen and day laborers got wiped out.

In America, Trump could never have pulled off a stunt like this because he simply doesn’t have the authority. And if he’d tried, he likely would have been impeached.

But Modi got the Reserve Bank of India (RBI), whose board members serve at the prime minister’s pleasure, to rubber stamp his harebrained scheme hours before he announced it. How did he accomplish that?

When the parliament is not in session, Indian ministries (the equivalent of executive agencies) can issue ordinances that they have six months to get ratified by the parliament. Given that the Indian parliament is in session only about 60 days out of the year, this gives ministries lots of time to push all kinds of ordinances. Moreover, when a bill concerns matters of money, which the demonetization one did, they only need to get it ratified in the lower house or Lok Sabha (where Modi enjoyed a big majority when he pushed demonetization and an even bigger one now after the recent elections), and not the upper house (where he didn’t).

This meant that once the RBI issued the demonetization order, the only possible pushback in parliament could come from members of Modi’s own party, the Bharatiya Janata Party (BJP). But there was no chance of that—not only because the BJP is too cowed by Modi but also because an anti-defection law that India embraced in 1985 gave party bosses, who are in Modi’s pocket, untold powers to thwart dissent and crush resistance.

The alleged purpose of the anti-defection bill was to boost government stability. In parliamentary systems, the party that wins the most seats in the lower house gets to pick the prime minister who forms the government. However, if the prime minister enjoys only a narrow majority, a few members can hold the threat of voting with the opposition to make unreasonable demands or, worse, switch sides and bring down the government, a genuine problem in India. The anti-defection law gives the party whip the power to strip the seats of members of parliament (MPs) who vote against the party on a bill or motion.

This obviously ruled out even the possibility of a successful no-confidence motion—the equivalent of impeachment—against Modi for foisting such a radical scheme on 1.3 billion people. But there was not even the hint of dissent in the BJP, although it can hardly be the case that not a single BJP MP had any qualms given the massive disruptions Modi’s brain malarkey caused constituents. In fact, the BJP-controlled Lok Sabha meekly introduced and passed the bill ratifying the scheme in a few hours.

Nor are Indian courts in any position to stop someone like Modi, even if they were so inclined, which they are increasingly not. In the demonetization case, their hands were more or less tied because the RBI has sweeping powers to write monetary policy. But even on non-monetary issues, the executive and legislative functions are too conjoined in India for effective judicial oversight. Unlike in England and America where there is a tradition of the parliament writing long and detailed laws precisely to hem in the discretion of the executive, Indian laws tend to be very short and imprecise, laying out some vague policy direction and letting the executive fill in the details as he or she sees fit. This means that there isn’t a clear legislative intent that courts can refer to when a prime minister chooses to interpret a law in a self-serving way.

But even if the laws were clearer, the courts would still be reluctant to call out the prime minister or his agencies, notes State University of New York’s Shruti Rajagopalan, a constitutional economist and a keen observer of the Indian judiciary. In contrast to America, where Supreme Court justices get lifetime appointments, in India they are required to retire by 65, after which they typically seek plum government jobs. Opining against a sitting prime minister isn’t a smart career move.

But if governmental checks-and-balances on Modi are weak, external checks are weaker still.

Modi started trashing the Indian media as “paid news” when Trump was still hosting The Apprentice. He accuses the press of a liberal bias and serving the near-dead Congress Party and its politics of minority appeasement—”fake secularism” as he calls it. This has been a remarkably effective narrative that discredits the media, the opposition, liberalism, and secularism all at once.

Trump merely fantasizes about starting a government channel to counter “biased” CNN coverage. Modi has been there, done that. For the duration of the elections, the BJP launched—and private cable operators dutifully carried—the NaMo channel whose express purpose was to broadcast pro-Modi propaganda 24/7. This was a clear abuse of power for partisan ends, but India’s election commission, fearful of Modi, refused to intervene despite howls of protest from the opposition. Indeed, so insulated is Modi from scrutiny that he maintains his squeaky clean image even though 116 out of the 303 BJP MPs elected this time have pending criminal cases against them, including a Hindu militant accused of involvement in an anti-Muslim terrorist attack that killed six people.

The only remaining check on Modi is the Rajya Sabha or the upper house where the opposition still has a slight edge. Modi has blamed it of obstructing his agenda, although the truth is that he hasn’t even seriously tried to reach out because he lacks both the temperament and the skills to win over detractors and build consensus. However, it is widely expected that he’ll conquer this last frontier, too, next year when many states that have become BJP strongholds in recent years will hold state assembly (legislative) elections.

The great hope of Modi is that he’ll use his awesome powers to finally deliver much-needed but difficult pro-growth reforms that he promised when he was first elected. That is not outside the realm of possibility, but demonetization shows that Modi is also capable of great harm. If he chooses to advance his long-standing Hindu nationalist agenda, he has the power to do it.

It’s already a foregone conclusion that he’ll use his second term to push divisive issues such as weakening constitutional accommodations for the practices of religious minorities. The big question is whether he’ll also push issues like constructing a temple on the site of a historic mosque that Hindu militants razed in 1992. The fact that he has done nothing to control the epidemic of lynchings by Hindu nationalists of Muslims suspected of consuming beef does not bode well. He talked about winning the trust of India’s religious minorities during his inauguration speech. But rather than outlining steps to beef up (so to speak) their security, he redoubled his accusation against the “fake secularism” of the bloodied and maimed opposition. The BJP head, Amit Shah, also an avowed Hindu nationalist who is Modi’s trusted lieutenant, had already included such controversial “reforms” in the BJP’s election manifesto. And, ominously, Modi just made Shah his home minister—the equivalent of Department of Homeland Security secretary—the second most powerful position after his own.

Modi is a loaded gun. It is possible that he won’t go off. But there is no institution left in India to disarm him for the next five years. India’s opposition is decimated, internal party resistance neutralized, the legislative branch neutered, the courts compliant, and the media vanquished.

Trump is manifestly unfit for office. The capacity of America’s institutions to resist and stop him is not inexhaustible—and the longer he stays, the weaker they’ll get given that he is on a constant collision course with them. For now, however, Americans should be grateful that they are not at the mercy of just one man.

This column originally appeared in The Week.

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Iran Will Exceed Nuclear Stockpile Limit in Response to U.S. Sanctions

Iranian officials announced their uranium stockpiles will soon exceed the limits the country agreed to as part of the 2015 nuclear agreement.

President Trump withdrew from the agreement last year and brought sanctions against Iran.

“If Iran feels that the sanctions have been reinstated or not lifted, Iran has the right to partly or on the whole suspend its commitments,” said Behrouz Kamalvandi, Iran’s Atomic Energy spokesperson.

This news follows several days of escalating tensions between the U.S. and Iran. The Trump administration has accused Tehran of damaging two oil tankers in the Gulf of Oman. Secretary of State Mike Pompeo said, “there is no doubt,” that Iran was responsible, and that “the intelligence community has lots of data, lots of evidence,” which is not completely reassuring, for obvious reasons. The oil tanker’s Japanese owner maintains that the ship was struck by a “flying object,” not a mine. Nevertheless, Sen. Tom Cotton (R–Ark.) is agitating for conflict and told PBS that two military strikes would be enough to incapacitate the country. In reality, of course, a full-blown war with Iran—a country three times larger than Iraq—would necessitate the involvement of tens of thousands of ground troops.

Given its unfeasibility, the military option should be virtually off the table. No one should want—let alone be actively working toward—a war. Trump has previously claimed that U.S. involvement in Iraq and Libya was a mistake. He should apply those lessons to his own administration’s Iran policy, and work out a diplomatic solution.

FREE MINDS

Conservatives are rejoicing after a jury awarded $33 million in punitive damages to a bakery that had sued Oberlin College for defamation. Student activists had falsely accused Gibson’s Bakery of racism, and internal emails showed that Oberlin administrators actively coordinated with and supported the students. According to The New York Times:

The dispute began on Nov. 9, 2016, when an Oberlin student tried to pay for a bottle of wine with a fake ID, and the store clerk noticed that the student had hidden two more bottles of wine under his coat, according to court papers.

The Atlantic‘s Conor Friedersdorf takes a more cautionary tone:

I celebrate the happy ending for the Gibsons, but not without some trepidation about the downsides of adjudicating culture-war fights or the proper administration of America’s colleges in court, where extreme cases can mean cathartic outcomes and bad law. It would be a shame if jurors intent on vindicating the wrongly maligned wound up severely chilling protected speech too.

FREE MARKETS

U.S. Commerce Secretary Wilbur Ross said Trump is “perfectly happy” to proceed with tariffs that would affect an additional $300 billion in Chinese goods. According to CNBC:

“We will eventually make a deal, but if we don’t, the president is perfectly happy with continuing the tariff movements that we’ve already announced, as well as imposing the new ones that he has temporarily suspended,” Ross said.

His comments directly echo those of Treasury Secretary Steven Mnuchin last week, indicating that the administration is unified on its plan in the event that talks fall apart.

Trump is also considering tariffs an all auto imports, including those from the European Union.

QUICK HITS

  • President Trump once again tweeted his support for an amendment to the Constitution that would prohibit burning the American flag, calling it a “no brainer.”
  • Conservative pundit Candace Owen went even further, tweeting that if she were president, she would banish flag-burners from the country. She’s quite the free speech defender, you see.
  • Pete Buttigieg, one of the 2020 presidential contenders, says he doubts he will be the first gay president because the U.S. has probably already had one. Buttigieg did not name names, though: “My gaydar even doesn’t work that well in the present, let alone retroactively. But one can only assume that’s the case.”
  • Rep. Alexandria Ocasio-Cortez (D–N.Y.) says she will “absolutely” support Joe Biden if he is the Democratic nominee for president.

from Latest – Reason.com http://bit.ly/31ERmMw
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275-Year-Old Sotheby’s Goes Private In $3.7 Billion Buyout

After seeing its share price collapse over 40% in the past few months, 275-year-old Sotheby’s has been scooped up by French-Israeli businessman Patrick Drahi for $3.7 billion.

Founded in 1744, the auctioneer has long been a signal of imminent economic demise, so the telecom titan’s buyout could well be catching a falling knife into recession, but for now, the avid art collector is excited:

“Sotheby’s is one of the most elegant and aspirational brands in the world,” Drahi said in the statement.

“As a longtime client and lifetime admirer of the company, I am acquiring Sotheby’s together with my family.”

Bloomberg reports the details. Investors will receive $57 in cash per share of Sotheby’s common stock under terms of the agreement, according to a statement Monday from the New York-based company. The offer price represents a 61% premium to Sotheby’s closing price on Friday. The transaction means Sotheby’s is returning to private ownership after 31 years as a public company.

Drahi, 55 – worth $8.6 billion, according to the Bloomberg Billionaires Index – is the president of Altice Europe, a publicly traded telecommunications business with more than 30 million customers.

Full PR Statement:

Sotheby’s today announced that it has signed a definitive merger agreement to be acquired by BidFair USA, an entity wholly owned by media and telecom entrepreneur as well as art collector, Patrick Drahi.  Under the terms of the agreement, which was approved by Sotheby’s Board of Directors, shareholders, including employee shareholders, will receive $57.00 in cash per share of Sotheby’s common stock in a transaction with an enterprise value of $3.7 billion.  The offer price represents a premium of 61% to Sotheby’s closing price on June 14, 2019, and a 56.3% premium to the company’s 30 trading-day volume weighted average share price.  The transaction would result in Sotheby’s returning to private ownership after 31 years as a public company traded on the New York Stock Exchange.

Tad Smith, Sotheby’s CEO, said, “Patrick Drahi is one of the most well-regarded entrepreneurs in the world, and on behalf of everyone at Sotheby’s, I want to welcome him to the family.  Known for his commitment to innovation and ingenuity, Patrick founded and leads some of the most successful telecommunications, media and digital companies in the world.  He has a long-term view and shares our brand vision for great client service and employing innovation to enhance the value of the company for clients and employees.  This acquisition will provide Sotheby’s with the opportunity to accelerate the successful program of growth initiatives of the past several years in a more flexible private environment. It positions us very well for our future and I strongly believe that the company will be in excellent hands for decades to come with Patrick as our owner.”

Domenico De Sole, Chairman of Sotheby’s Board of Directors, said, “Following a comprehensive review, the Board enthusiastically supports Mr. Drahi’s offer, which delivers a significant premium to market for our shareholders.  After more than 30 years as a public company, the time is right for Sotheby’s to return to private ownership to continue on a path of growth and success.”

“I am honored that the Board of Sotheby’s has decided to recommend my offer,” commented Patrick Drahi.  “Sotheby’s is one of the most elegant and aspirational brands in the world.  As a longtime client and lifetime admirer of the company, I am acquiring Sotheby’s together with my family.  We thank Domenico and the rest of the Sotheby’s Board for its support and look forward to getting started with Tad and the wonderful members of his team to define our future.”

The closing of the deal is subject to customary conditions, including regulatory clearance and shareholder approvals, but is not subject to the availability of financing.  The transaction is expected to close in the fourth quarter of 2019 following shareholder approval.

via ZeroHedge News http://bit.ly/2MTzZUX Tyler Durden

Iran Will Exceed Nuclear Stockpile Limit in Response to U.S. Sanctions

Iranian officials announced their uranium stockpiles will soon exceed the limits the country agreed to as part of the 2015 nuclear agreement.

President Trump withdrew from the agreement last year and brought sanctions against Iran.

“If Iran feels that the sanctions have been reinstated or not lifted, Iran has the right to partly or on the whole suspend its commitments,” said Behrouz Kamalvandi, Iran’s Atomic Energy spokesperson.

This news follows several days of escalating tensions between the U.S. and Iran. The Trump administration has accused Tehran of damaging two oil tankers in the Gulf of Oman. Secretary of State Mike Pompeo said, “there is no doubt,” that Iran was responsible, and that “the intelligence community has lots of data, lots of evidence,” which is not completely reassuring, for obvious reasons. The oil tanker’s Japanese owner maintains that the ship was struck by a “flying object,” not a mine. Nevertheless, Sen. Tom Cotton (R–Ark.) is agitating for conflict and told PBS that two military strikes would be enough to incapacitate the country. In reality, of course, a full-blown war with Iran—a country three times larger than Iraq—would necessitate the involvement of tens of thousands of ground troops.

Given its unfeasibility, the military option should be virtually off the table. No one should want—let alone be actively working toward—a war. Trump has previously claimed that U.S. involvement in Iraq and Libya was a mistake. He should apply those lessons to his own administration’s Iran policy, and work out a diplomatic solution.

FREE MINDS

Conservatives are rejoicing after a jury awarded $33 million in punitive damages to a bakery that had sued Oberlin College for defamation. Student activists had falsely accused Gibson’s Bakery of racism, and internal emails showed that Oberlin administrators actively coordinated with and supported the students. According to The New York Times:

The dispute began on Nov. 9, 2016, when an Oberlin student tried to pay for a bottle of wine with a fake ID, and the store clerk noticed that the student had hidden two more bottles of wine under his coat, according to court papers.

The Atlantic‘s Conor Friedersdorf takes a more cautionary tone:

I celebrate the happy ending for the Gibsons, but not without some trepidation about the downsides of adjudicating culture-war fights or the proper administration of America’s colleges in court, where extreme cases can mean cathartic outcomes and bad law. It would be a shame if jurors intent on vindicating the wrongly maligned wound up severely chilling protected speech too.

FREE MARKETS

U.S. Commerce Secretary Wilbur Ross said Trump is “perfectly happy” to proceed with tariffs that would affect an additional $300 billion in Chinese goods. According to CNBC:

“We will eventually make a deal, but if we don’t, the president is perfectly happy with continuing the tariff movements that we’ve already announced, as well as imposing the new ones that he has temporarily suspended,” Ross said.

His comments directly echo those of Treasury Secretary Steven Mnuchin last week, indicating that the administration is unified on its plan in the event that talks fall apart.

Trump is also considering tariffs an all auto imports, including those from the European Union.

QUICK HITS

  • President Trump once again tweeted his support for an amendment to the Constitution that would prohibit burning the American flag, calling it a “no brainer.”
  • Conservative pundit Candace Owen went even further, tweeting that if she were president, she would banish flag-burners from the country. She’s quite the free speech defender, you see.
  • Pete Buttigieg, one of the 2020 presidential contenders, says he doubts he will be the first gay president because the U.S. has probably already had one. Buttigieg did not name names, though: “My gaydar even doesn’t work that well in the present, let alone retroactively. But one can only assume that’s the case.”
  • Rep. Alexandria Ocasio-Cortez (D–N.Y.) says she will “absolutely” support Joe Biden if he is the Democratic nominee for president.

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Will A False-Flag Iran War Cause A Financial Crisis?

Authored by John Rubino via DollarCollapse.com,

Just a couple of weeks ago the financial world’s biggest worry was the plunging price of oil. Supply was up, stockpiles were building and speculation was pointing towards $40 a barrel, a price at which the fracking/shale oil “miracle” would evaporate. A trillion dollars of related junk debt would default, taking a big part of the leveraged speculating community along for the ride.

Then it all changed. Someone attacked some ships and oil infrastructure in the Middle East, the US and Saudi Arabia accused Iran, and now the fear is that a major regional war will interrupt the flow of oil, sending its price way up and causing a financial crisis at least as severe as a shale oil debt collapse.

This is a legitimate concern, for two reasons.

  • First, oil shocks have happened in the past, most notably during the Arab-Israeli war of the 1970s. So we know what they do, and it isn’t pretty. Gas prices jump, workers can’t afford their commute, the economy slows dramatically and pretty much everyone other than domestic energy companies suffers badly.

  • Second and potentially more serious, the pretext for this war is so blatantly false that it risks destroying what little credibility the US government has left. Think about it: With the US doing everything it can to delegitimize and destabilize Iran while positioning assets for an invasion, Iran’s leaders … start attacking oil tankers in its offshore waters.

Does that make sense? Of course not. Much more likely is that this is yet another false flag – that is, an incident faked to give a pretext for war – and a clumsy one at that.

For readers who aren’t clear on the false flag concept and its ubiquity in geopolitics, here are just a few of the dozens of documented examples:

  • Japanese troops blew up a train track in 1931, blamed it on China and used it to justify the invasion of Manchuria.

  • After taking power, the Nazis burned down their own parliament building and blamed the communists. Later on, they faked attacks on German citizens and blamed the Poles, to justify the subsequent invasion of that country.

  • In 1939 the Soviets shelled one of their own villages and blamed Finland, prior to invading.

  • In 1954 Israeli terrorist cells operating in Egypt bombed U.S. diplomatic facilities, leaving behind evidence implicating Arabs.

  • The CIA hired Iranians in the 1950s to pose as Communists and stage bombings in Iran in order to ignite a rebellion against the democratically-elected government. After the rebellion succeeded the US installed a hand-picked dictator.

  • The US staged a naval engagement — the Gulf of Tonkin incident – and blamed the North Vietnamese, providing a pretext for entering the Vietnam War.

  • The FBI used provocateurs in the 1950s through 1970s to carry out violent acts and falsely blame them on political activists.

  • In 1984, Israel faked radio messages that linked Lybia to terrorism. The US bombed Libya immediately thereafter.

  • Russian blew up apartment buildings in 1999 and falsely blamed it on Chechens, in order to justify an invasion of Chechnya

The list goes on seemly forever. But these examples are enough to make the twin points that 1) lots of countries employ false flags attacks, and 2) the US is especially fond of them.

There’s just one problem this time: Everyone is on to it. Even the New York Times, which has never met a Mid East war it didn’t love, sees through the deception:

As Trump Accuses Iran, He Has One Problem: His Own Credibility

To President Trump, the question of culpability in the explosions that crippled two oil tankers in the Gulf of Oman is no question at all. “It’s probably got essentially Iran written all over it,” he declared on Friday.

The question is whether the writing is clear to everyone else. For any president, accusing another country of an act of war presents an enormous challenge to overcome skepticism at home and abroad. But for a president known for falsehoods and crisis-churning bombast, the test of credibility appears far more daunting.

For two and a half years in office, Mr. Trump has spun out so many misleading or untrue statements about himself, his enemies, his policies, his politics, his family, his personal story, his finances and his interactions with staff that even his own former communications director once said “he’s a liar” and many Americans long ago concluded that he cannot be trusted.

Fact-checking Mr. Trump is a full-time occupation in Washington, and in no other circumstance is faith in a president’s word as vital as in matters of war and peace. The public grew cynical about presidents and intelligence after George W. Bush’s invasion of Iraq based on false accusations of weapons of mass destruction, and the doubt spilled over to Barack Obama when he accused Syria of gassing its own people. As Mr. Trump confronts Iran, he carries the burden of their history and his own.

“The problem is twofold for them,” said John E. McLaughlin, a deputy C.I.A. director during the Iraq war. “One is people will always rightly question intelligence because it’s not an exact science. But the most important problem for them is their own credibility and contradictions.”

The task is all the more formidable for Mr. Trump, who himself has assailed the reliability of America’s intelligence agencies and even the intelligence chiefs he appointed, suggesting they could not be believed when their conclusions have not fit his worldview.

All of that can raise questions when international tension flares up, like the explosion of the two oil tankers on Thursday, a provocation that fueled anxiety about the world’s most important oil shipping route and the prospect of escalation into military conflict. When Mr. Trump told Fox News on Friday that “Iran did do it,” he was asking his country to accept his word.

“Trump’s credibility is about as solid as a snake oil salesman,” said Jen Psaki, who was the White House communications director and top State Department spokeswoman under Mr. Obama. “That may work for selling his particular brand to his political base, but during serious times, it leaves him without a wealth of good will and trust from the public that what he is saying is true even on an issue as serious as Iran’s complicity in the tanker explosions.”

Combine these two problems – a Middle East war sending oil much higher, and a near-universal lack of belief in the rationale for that war – and the remaining faith in American competence and honesty might evaporate.

This takes us back to finance, specifically to a monetary system based on fiat currency which depends for its value on our collective trust in the people managing it.

The Fed will respond to an oil crisis by cutting interest rates back to – or below – zero. But will this be met with euphoria as in the past or with skepticism, as happened in Europe recently? If it’s the latter, remember what gold did the last time there was both an oil shock and a loss of faith in government:

via ZeroHedge News http://bit.ly/2x0PAHw Tyler Durden

“Explosion” Triggers ‘Small Earthquake’ Near North Korea-China Border

AFP is reporting a “suspected explosion” near the China-North Korea border that appears to bear some resemblance to an eartquake, possibly one triggered by the country’s nuclear program.

 

via ZeroHedge News http://bit.ly/2XmSXHi Tyler Durden

Here Come The Central Banks: A Look At This Week’s Barrage Of Key Events

Brace for a barrage of flashing red central bank headlines.

Central banks are set to steal the limelight on the coming sessions, and Markets will have to prepare themselves for a packed week of events next week, headlined by the Fed meeting. Additionally, the BoE and BoJ will also meet, ECB leaders gather in Sintra, the UK Conservative Party leadership contest should be narrowed down to two candidates, while the flash June PMIs are also scheduled to be released. And it goes without saying that the risk of further trade headlines is never too far away either.

As DB’s Craig Nicol writes, it’s hard to look past next week’s Fed meeting as being the main event for markets. Indeed with markets now pricing in virtually a full rate cut at the July meeting and a further 2 cuts over the next 12 months, all eyes will be on to what extent Powell endorses market pricing now in light of recent soft inflation and rising downside risks to the US economy from trade tensions. Expectations are much lower for a cut next week, with around a 30% chance.

Incidentally, DB economists recently changed their Fed call and expect 3 cuts of 25bps each at the July, September and December meetings. They also lowered their 2019 growth forecast by 40bps to 1.9%. Meanwhile, Rabobank is now of the view that a July rate cut announcement from the Fed is likely on the back of the lack of progress in the US/China trade talks, the weak US May jobs report and sluggish US inflation data. There has been some speculation in the market that the Fed could act on rates as soon as this week.  However, the prospect of this dimmed on the back of Friday’s stronger than expected US retail sales report.

In addition to the Fed, the BoE will also meet on Thursday. In light of the global easing wave, few banks expect the BOE to hike this year, and DB – for example- now sees rising risks that the Bank Rate has reached its terminal point. 

Finally for central bank meetings, we’ve also got the BoJ meeting next Thursday. DB economists expect the BoJ to maintain its current policy stance and reaffirm the view that the economy is “on a moderate expanding trend” despite the rising global uncertainties. Comments from Kuroda particularly about the inflation outlook will also be a focus.

Over in Europe, there is no central bank announcement but ECB officials will also get an opportunity in the spotlight as they gather in Sintra – the same place where several years ago Draghi first proposed the ECB’s rate normalization, which has since crashed and burned, on Monday for a three-day meeting. Draghi is making opening remarks on Monday evening and introductory remarks on Tuesday morning, while Guindos, Praet, Lane, Lautenschlaeger and Coeure are all due to take part. The BoE’s Carney also takes part in a policy panel with Draghi and former Fed Chair Yellen on Tuesday afternoon. Staying with the ECB we should note that EU heads of state also gather in Luxembourg on Thursday for another round of talks about candidates for the European Commission and ECB.

Political events also loom with the second leadership contest for the Conservative Party taking place on Tuesday, with further  contests to take place on Wednesday and Thursday until the final two candidates remain. Six candidates remain at the time of writing, with Boris Johnson topping the first winning ballot with 114 votes (36%). The new PM is still expected to be appointed by 22 July.

Meanwhile, it’s a relatively light week for data and we’ll have to wait until Friday for the main highlight when we’ll get the flash June PMIs around the world and which will be important to gauge how the fallout from the trade war has impacted the data.

The consensus for the data for the Euro Area is a very slight improvement in the manufacturing and services readings. Data worth flagging in the US next week includes May housing starts and building permits on Tuesday, and NY Fed and Philly Fed surveys on Tuesday and Thursday respectively. On Tuesday we’ll also get the final May CPI revisions for the Euro Area and June ZEW survey in Germany, while the May CPI report is due in the UK on Wednesday.

There is also a long line of central bank speakers next week; on Friday we’re due to hear from Brainard and Mester at the Fed at a Fed Listens Event, while Daly will also be speaking at a separate event. At the ECB most of the focus will be on Sintra, however Guindos and Enria are also due to speak on Thursday. Meanwhile, BoE Governor Carney will give his Mansion House speech on Thursday.

Finally, other things worth flagging next week include Italian Deputy PM Salvini traveling to the US on Sunday to meet VP Pence. On Monday public hearings will begin in Washington on President Trump’s proposed tariffs on $300bn of Chinese goods. On Wednesday we’ll get the EIA crude oil inventory report.

Courtesy of Deutsche Bank, here is a breakdown of key events in the coming week:

  • Monday: Data releases include June house price data in the UK, Q1 labour costs data for the Euro Area and the June empire manufacturing and NAHB housing market index readings in the US. ECB officials will also meet in Sintra for a three-day gathering, with Draghi due to speak. Public hearings will also begin in Washington on Trump’s proposed tariffs on $300bn of Chinese goods.
  • Tuesday: Overnight, China’s new home prices data for May will be released, while in Europe we’ll get May PPI in Germany, April trade balance for the Euro Area, final May CPI revisions for the Euro Area and June ZEW survey in Germany. In the US we’re due to get May housing starts and building permits data. The second ballot for the UK leadership contest will also take place.
  • Wednesday: The highlight will be the Fed meeting in the evening. In terms of data, we’ll get May trade data in Japan, the May CPI report and June CBI survey data in the UK and April construction output for the Euro Area. The EIA crude oil report will also be due.
  • Thursday: Overnight, the BoJ policy meeting is scheduled, while during the day the BoE policy meeting is due. In terms of data, May retail sales data in the UK is scheduled while in the US the latest claims reading, Q1 current account balance, June Philly Fed survey and May leading index are all due. The June consumer confidence reading for the Euro Area is also due in the afternoon. Away from that EU heads of state commence a two-day meeting to appoint new leaders for the commission and ECB. The BoE’s Carney is due to speak in the evening while the ECB’s Guindos speaks during the day.
  • Friday: The data highlight are the flash June PMIs around the world. As well as that we’ll get May CPI in Japan, May public finances data in the UK and May existing home sales in the US. The Fed’s Brainard, Mester and Daly are also due to speak.

Finally, looking at just the US, Goldman notes that the key event this week is the June FOMC meeting with the release of the statement and Summary of Economic Projections at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. In addition, the Philly Fed manufacturing index will be released on Thursday.

Monday, June 17

  • 08:30 AM Empire State manufacturing index, June (consensus +12.0, last +17.8)
  • 10:00 AM NAHB housing market index, June (consensus 67, last 66)

Tuesday, June 18

  • 08:30 AM Housing starts, May (GS +1.0%, consensus flat, last +5.7%);  Building permits, May (consensus flat, last +0.6%)
  • We estimate housing starts rose +1.0% in May. Our forecast incorporates a boost from lower mortgage rates and a drag from slower construction job growth.

Wednesday, June 19

  • 02:00 PM FOMC statement, June 18-19 meeting; As discussed in our FOMC preview, we do not expect any change in the funds rate. In the post-meeting statement, we expect a slight dovish tilt to the statement language, with removal of the word “patient,” but no outright endorsement of easier policy. We also expect modest downgrades in the growth characterization (to “moderate” from “solid”). We expect several officials, but not most, to show a projected cut in 2019 in the Summary of Economic Projections. In his press conference, we expect Chair Powell to project a vigilant but ultimately data-dependent view on the outlook, in order to help limit the magnitude of any risk-asset selloff.

Thursday, June 20

  • 08:30 AM Current account balance, Q1 (consensus -$123.5bn, last -$134.4bn)
  • 08:30 AM Initial jobless claims, week ended June 15 (GS 225k, consensus 220k, last 222k); Continuing jobless claims, week ended June 8 (last 1,695k): We estimate jobless claims increased by 3k to 225k in the week ended June 15, after increasing by 3k in the prior week.
  • 08:30 AM Philadelphia Fed manufacturing index, June (GS +9.6, consensus +12.0, last +16.6); We estimate that the Philadelphia Fed manufacturing index declined by 7.0pt to +9.6 in June after an 8.1pt increase in May.

Friday, June 21

  • 09:45 AM Markit Flash US manufacturing PMI, June preliminary (consensus 50.6, last 50.5)
  • 09:45 AM Markit Flash US services PMI, June preliminary (consensus 51.0, last 50.9)
  • 10:00 AM Existing home sales, May (GS +2.5%, consensus +2.1%, last -0.4%): After falling 0.4% in April, we estimate that existing home sales rose by 2.5% in May, based on a rebound in regional home sales data. Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.
  • 12:00 PM Fed Governor Brainard (FOMC voter) and Cleveland Fed President Mester (FOMC non-voter) speak: Fed Governor Lael Brainard and Cleveland Fed President Loretta Mester will take part in a Fed Listens event in Cincinnati. Audience Q&A is expected.

Source: DB, BofA, Goldman

via ZeroHedge News http://bit.ly/2IOyguC Tyler Durden

Dollar, Bond Yields Tumble As Empire Manufacturing Survey Crashes

Against expectations of a small drop to 11.0, Empire State Manufacturing Survey collapsed – by the most on record – from +17.8 to -8.6 in June. This is the first negative print since Oct 2016.

 

This is the biggest MoM drop in the survey in its history

 

Led by a complete collapse in New Orders

 

The result is a quick drop in yields and the dollar…

Unleash The Fed!!??

 

via ZeroHedge News http://bit.ly/2IMdHPu Tyler Durden

The Treasury Department Is Entrenching Trump’s Nonsense View of Trade Deficits

President Donald Trump’s basic misunderstanding of America’s trade deficits will continue to haunt American taxpayers after he leaves office thanks to changes made this year to a little-noticed Treasury Department report.

The Treasury Department’s annual report to Congress on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” is supposed to alert elected officials to currency manipulation conducted by governments in places where American companies do a lot of business, but as this year’s report notes, “there has been a decline in the scale and persistence” of that sort of behavior.

The Trump administration, however, has found a new way to make the study relevant. “Starting with this report,” the Treasury says it will expand its investigations “to monitor for external imbalances” in trade. Specifically, the report will scrutinize any U.S. trading partner that runs an annual trade imbalance with the United States of more than $40 billion—a list that includes not only China but also key allies like Japan, South Korea, Germany, Italy, and Ireland.

There’s nothing inherently wrong with the Treasury Department rounding up a list of America’s trading partners and noting which ones run a goods surplus of more than $40 billion, of course. But the language suggests data-gathering is not the endgame.

“The Treasury Department is working vigorously to achieve stronger growth and to ensure that trade expands in a way that helps U.S. workers and firms and protects them from unfair foreign trade practices,” Treasury Secretary Steven T. Mnuchin said in a statement accompanying the release of the report late last month. The report itself echoes that economic nationalism. “Treasury will continue to press major U.S. trading partners that have maintained large and persistent external surpluses to support stronger and more balanced global growth…while durably avoiding foreign exchange and trade policies that facilitate unfair competitive advantage,” reads part of the executive summary.

And the real problem here is that it’s all based on Trump’s faulty conviction that trade deficits matter—when they really don’t.

“By this document the Treasury is institutionalizing nuttiness,” writes John Cochrane, an economist and Senior Fellow of the Hoover Institution at Stanford University.

To understand why trade deficits don’t matter, Cochrane outlines a simple exercise. Imagine three nations trading with one another—Australia, China, and the United States. America buys $1 million in shoes from China, Australia buys $1 million in airplanes from America, and China buys $1 million in coal from Australia. All three nations are now running $1 million bilateral trade deficits with one of their partners, but all three are better off. “Bilateral trade ‘deficits’ are meaningless,” Cochrane writes. “In quotes as this is a horrible word too, implying something is deficient every time you go to the Starbucks and suffer a coffee trade ‘deficit.'”

Don Boudreaux, an economist at the Mercatus Center at George Mason University, says the report’s focus on bilateral trade deficits is “completely untethered to economic reality.” In an interview this week with Reason, he compared the Treasury Department’s scrutiny of bilateral trade deficits to astrophysicists giving serious consideration to a geocentric model of the solar system.

But such is the gravitational pull of Trump-style economic nationalism, which posits that trade deficits are proof other countries are taking advantage of the United States.

Peter Navarro, Trump’s top trade advisor, argued in a recent Wall Street Journal op-ed that lowering America’s trade deficit would boost growth. In fact, no such correlation seems to exist for other countries around the world. As I’ve previously written:

In 2017, for example, the United States recorded GDP growth of 2.22 percent and ran a trade deficit of about $502 billion. But look at other countries that had similar growth rates. France grew at 2.16 percent but had a trade deficit of $18 billion. Germany grew at 2.16 percent too, but ran a trade surplus of $274 billion.

The same is true at the higher end of the growth scale. Ireland grew by 7.22 percent and had a $101 billion trade surplus in 2017; India grew by 7.17 percent with a $72 billion trade deficit. It’s also true at the bottom. Italy’s economy grew by a mere 1.57 percent with a $60 billion trade surplus; the United Kingdom grew by 1.82 percent despite a $29 billion trade deficit.

But maybe the best evidence of faultiness of the Trump administration’s view of trade deficits comes from the very Treasury Department report that’s meant to bolster the Trump administration’s worldview.

On the first page, the report highlights how the United States’ trade deficit with China grew to a record high of $419 billion in 2018. “A key driver of this increase was a sharp decline in U.S. exports to China in the fourth quarter of 2018, a time when U.S. imports from China were sustained,” the report says.

The fourth quarter of 2018, of course, is the first full quarter after Trump imposed two rounds of tariffs on Chinese imports—the first in July and the second, larger set in August—with the expressed intent of reducing America’s trade deficit. The opposite occurred.

As developments in the trade war go, this is not an earth-shattering one. But it’s a good example of how the Trump presidency is institutionalizing a worldview that’s at odds with free trade. Like how civil liberties violations under George W. Bush paved the way for worse ones under Barack Obama, this is exactly how new ideas worm their way into the executive branch’s ongoing perception of its role in the economy and the world at large. Presidential administrations don’t end when the guy in charge exits the White House for the last time.

from Latest – Reason.com http://bit.ly/2ZtONuE
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