Worldwide Threat Assessment Re-Categorizes US-China Relations As “Global Ideological Struggle”

Submitted by Michael Every of Rabobank

The State of the Union is the ostensible focus today. The State of the Disunion should be of equal importance. Let’s start with the US, where President Trump is going to wheel out that hoary old cliché “bipartisanship” when he speaks tonight. Achieving that in the current US political climate is a challenge, perhaps an even greater challenge than Nancy Pelosi will have in keeping a neutral face while she sits right behind him. Let’s listen for clues on a possible emergency being declared to “build the wall”, as well as what is going on re: meeting Xi and Kim in Da Nang, Vietnam, and on infrastructure: it still seems amazing that two years into a real-estate developer’s presidency the only thing being talked about being built is that wall.

Want another snap-shot of disunion? The good ship Brexit continues to trundle towards the 29 March iceberg with PM May’s “plan” being: (1) repeat the word “Brexit” every few hours; and (2) hope that at the last minute the EU blinks on the Irish border issue. That’s after experts stress that this won’t happen because bad as a Hard Brexit is–and it’s very bad–the idea of allowing a crack in the single market is infinitely worse for the EU. Meanwhile, having warned my mother to stock up on food just in case, she tells me her comfortably middle-class friends are stoically prepared to grow parsnips in their garden if needed. So Keep Calm and Carry On. Next week might see some movement in Parliament with the 14 February next ‘meaningful vote’, but lots of the population are moving towards the garden sheds to get a long-unused shovel. Need I add that the United Kingdom itself will look a lot less so in that scenario?

Of course, the European Union still isn’t looking too united itself. Perhaps it is in facing the UK. However, in terms of the liberal consensus there are clear emerging differences East vs. West. Moreover, even in the West there are deep divisions. President Macron of France has just held one of his new round of “town-hall ”meetings to try to get back in touch with citizens, and has admitted that there has been a “clear breakdown in equality” between the banlieues and wealthy suburbs, and the state must now “guarantee social justice”. That sounds expensive – but he followed that up by talking about cuts to public spending (Le face-palm). Macron also added that he had the “convictions” but not “all the solutions” – which is probably why his opinion poll ratings remain stuck around 25-35%, i.e., far lower than Donald Trump’s, while the far-right National Rally is now neck-and-neck with his La République En Marche in opinion polls for the EU elections in May.

Meanwhile, the annual Worldwide Threat Assessment published by the US Director of National Intelligence has re-categorised US–China relations as a global ideological struggle, stating China is seeking to propagate “authoritarian capitalism” to counter Western liberal democracy. Of course, the US National Defence Strategy already states that Great Power competition has returned, and that China is a “strategic rival”. Yet we now have the US admitting that there will be a “coming ideological battle” to boot. That is far more than a set of differences over tariffs or subsidies that can be settle transactionally. If the US authorities now see China is pushing for an authoritarian model globally that is inimical to US interests, how does it help the US to do a trade deal that allows said ideological system to survive and thrive? There’s no logic in it. In short, the business community and financial media can talk all they like about the opportunities for US business and investors in China, but US spies and its military are singing a very different song: there’s not much union in that approach. Would you care to take a bet on who wins? Because that’s what markets are going to have to do – and soon.

Indeed, I don’t think I am joining dots here as much as showing you the dots joining themselves when the Wall Street Journal carries a front-page expose “How China Pressured MSCI to Add Its Market to Major Benchmark”. That story underlines something I have been saying for some time: the MSCI decision to include China in its benchmark equity indices, despite the appalling behaviour during the 2015 crash (ban selling, freeze the market, censor news, arrest people saying negative things, etc.) and the absence of major reforms since, struck almost everyone who knows China has “dodgy” – and I can think of far worse adjectives to use. The WSJ now reports China effectively threatened MSCI with “business blackmail” to get what it wanted. Indeed, there remains no real argument that the inclusion decision was unjustified by fundamentals, which sounds eerily like allegations made against China vis-à-vis the WTO on trade policy (i.e., Made in China mercantilism) and the IMF in terms of the conditions for being a FX reserve currency (i.e., capital controls, which are never going away either, despite endless promises).

The key point: pressure is building on China in multiple dimensions. While the MSCI weighting so far has been very low, consider that this year it is expected to increase to as much as 15%, giving a green-light for a vast flow of FX into China’s USD7 trillion equity market….which is flat on its back, still as opaque as ever, seeing profit-warnings across the board, and facing an economic slump. Oh, and China itself is so desperate for foreign capital that it is already de facto printing money via perpetual bonds to recapitalise its banks. In short, China NEEDS that MSCI “insert money here” sign very, very badly. So badly it is alleged to have blackmailed them to get it.

Hypothetically, do you think that US intelligence and defence agencies saying China is a physical and ideological opponent, alongside the exposure of the questionable basis on which this MSCI approval for bailing out China was granted, might just mean there is a backlash from fund managers or an MSCI rethink ahead? Or that MSCI might have to come up with a global and a global ex-China benchmark, allowing people to decide how they want to allocate their capital more tactically/politically? (Which Bloomberg already seems to be doing with its new global aggregate bond indices that will be phased in from April.) Put together all this disunity and fleshing out sensible market trade patterns is not immediately evident given the complexity involved. But higher volatility is one theme; and lower CNY and so Asian FX, and higher USD, is another.

This morning also saw the release of the Australia Royal Banking Commission. Cynics argue its conclusions are: terrible things happened; nobody should be punished; and nothing needs to change. Others stress that the government can smell the way the political winds are blowing, and re-regulation is coming anyway. Most crucially, will it mean Aussie banks can start lending 10 times income multiples again for mortgages? Or pretend borrowers only spend only a tiny percentage of their income on anything other than mortgages? The fate of the Aussie housing market, and economy, depends on it. On which note, this morning’s trade and retail sales data saw the former a blockbuster at AUD3,681m vs. AUD2,225m expected, and the latter a shocker at -0.4% vs. flat expected, and for Q4 ex. inflation the print was 0.1% vs. 0.5% consensus, after 0.2% in Q3. In short, trade is doing well, for now, and the domestic economy is really not

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Relax Dems, Howard Schultz Will Likely Steal Trump Voters

When former Starbucks CEO Howard Schultz announced that he was thinking about running for president as a “centrist independent,” he was immediately and vituperatively denounced as a billionaire jagoff riddled with narcissistic delusions of grandeur who nobody would vote for anyway so why is he even running in the first place and if he insists on running who does he think he is not to run as a Democrat in the Democratic primaries or work himself up to the job by running for Congress or something lower than president but of course as a Democrat because he must obviously be a Democrat because he believes in climate change and abortion and immigration but wait he’s against Medicare for All and raising taxes to 70 percent and demonizing rich bastards like him who grew up in housing projects which proves that he’s not a self-made success AT ALL because public housing is paid for by tax dollars so really if he’s anything he’s proof that the state really should be in charge of everything but I guess he should just STFU already about the national debt, which doesn’t really matter because it’s just money we owe ourselves and Starbucks is shit coffee anyways and always has been, right?

For Republicans and Democrats, the discourse around any independent candidate (even one who hasn’t decided to run) immediately degenerates into the verbal equivalent of an evil pitching machine that becomes sentient and starts chucking everything it has at the batter, faster and faster and faster until the poor schmo is just a pile of bruises. That’s because we currently have more types of hepatitis than we do viable major parties in the United States and the duopoly is committed to keeping it that way, thank you very much.

Schultz took a ton of fire from Democrats, liberals, and progressives because they assume he would steal votes from whomever their candidate ends up being and thus potentially help to re-elect Donald Trump. One independent poll of 1,338 likely voters conducted from January 31-February 1 found that “Schultz’s presence in the race makes Trump’s margins between 2 and 4 points better than they would be without him in the race.”

They might want to rethink those fears, especially if Schultz actually sticks around and builds his profile around the idea of being socially liberal and fiscally conservative. Over at FiveThirtyEight, Nate Silver ran the numbers for the 2016 campaign and found that socially liberal, fiscally conservative (SLFC) voters, who make up about 16 percent of the electorate, actually went for Donald Trump over Hillary Clinton. Using data from the Cooperative Congressional Election Study, Silver created a way to compare SLFC voters’ reactions to various issues. What he found:

When choosing between the major-party candidates, these voters were more likely to go for Trump than Clinton. Among the 25 combinations of socially liberal and fiscally conservative views, Trump won the most votes 19 times, Clinton did so five times, and there was one draw. And on average between the 25 combinations, Trump won 52 percent of the vote to Clinton’s 40 percent. That’s not a huge margin: a 12-point edge among 16 percent of the electorate. But it adds up to enough voters that, if all of them had gone for a third party instead, Clinton would have won Michigan, Pennsylvania, Wisconsin and Florida, and therefore the Electoral College.

Read the whole thing here. Silver stresses this isn’t anything like a “comprehensive analysis of whether a Schultz-like candidate is more likely to help or hurt President Trump’s re-election chances,” which will also depend on what sort of candidate the Dems end up fielding.

But the counterintuitiveness of his take squares with deeper reads on how recent major independent candidates have impacted presidential elections. The conventional wisdom is almost always wrong. For instance, it’s typically a given that John Anderson, a liberal Republican, cost Jimmy Carter re-election in 1980 by splitting the anti-Reagan vote. It’s also routinely asserted that Ross Perot drained votes from George H.W. Bush in 1992, allowing Bill Clinton to win with just 43 percent of the vote. As Steve Kornacki wrote for Salon in 2011, that’s just wrong. Among other things, both Anderson and Perot voters were split on who their second choice would be, suggesting that they drew votes away from all of their rivals.

Assuming Schultz or someone like him actually runs, it’s likely that he will draw votes from both the Republican (presumptively Donald Trump) and the Democrat, if only because people really are sick of the major parties. Currently just 25 percent of Americans identify as Republican and 34 percent as Democratic. The largest bloc, at 39 percent, call themselves independent. In 2016, neither major-party candidate managed to get anywhere near 50 percent of the vote, and that was without a strong independent candidate (the Libertarian Party ticket pulled a record-high 3.28 percent of the vote, another sign of dissatisfaction). There’s every reason to think the Dems and GOP will end up with repugnant candidates once again. Republicans and conservatives were mostly soft on or approving of Schultz when he emerged a week or so ago. If he is still around in a year’s time, expect them to start bitching like crazy about him, as his threat to their position becomes clearer.

Related: Paul Krugman, Nobel laureate, misreads recent polling data about Schultz and concludes that SLFC voters make up a tiny fraction of the electorate:

One is the absence of socially liberal, economically conservative voters. These were the people Schultz thought he could appeal to; but basically they don’t exist, accounting for only around, yes, 4 percent of the electorate.

This is simply wrong. As Silver notes, this group makes up about 15 percent of the vote. At times, Krugman conflates SLFC voters with libertarians, which is not unreasonable (if still imperfect), and declares us non-existent. That’s wrong too, and simply a variation on the anxiety that duopolists exude whenever even the possibility of a different sort of politician is conjured. From Emily Ekins of the Cato Institute:

The overwhelming body of literature, however, using a variety of different methods and different definitions, suggests that libertarians comprise about 10-20% of the population, but may range from 7-22%.

More here.

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Stocks Continue To Soar But Bonds, Bullion, & The Greenback Ain’t Buying It

Everything is awesome, right? (just don’t pay attention to bonds, gold, or the dollar)…

Well it had to be higher on SOTU day…

 

Chinese equity markets remain closed for the lunar new year holiday but yuan surged overnight – erasing the plunge from the day before…

 

European equity markets soared, playing catch up to US markets’ ramp and continued into the close (wth FTSE 100 outperforming)…

 

US equities rampaged higher at the cash open once again, but dipped notably shortly after EU closed.

 

On the cash side, Nasdaq outperformed thanks to a rebound in GOOGL…

 

Today was a double-rainbow day – two short-squeezes for the price of one…

 

The S&P was unable to break its 200DMA…

 

US Equity market breadth is extreme to say the least and stocks are “overbought”…

 

Nasdaq is the most overbought since its highs in August…

 

But it seems the Buy-The-Afternoon-Dip trade just won’t stop…

 

FANG Stocks soared again but some are wondering if a head-and-shoulders is forming…

 

VIX collapse continues (back to a 15 handle), likewise, credit spread compression charges on…

 

Despite the equity market gains, bonds were also bid today…

 

Notably 10Y was bid off the pre-Powell highs…

 

The dollar index lifted modestly, but remains stuck around the pre-FOMC highs range…

 

Cryptos went nowhere fast…

 

Copper continues to rise but crude tumbled for the 2nd day in a row…PMs flatlined.

 

Copper is now at its highest since late November…

 

Gold bounced after erasing its post-Powell gains…

 

After trading tick for tick, WTI and Stocks decoupled today…

 

And before we leave commodities, we note the collapse in the Baltic Dry Index (global trade?) is now the worst start to a year since 2012…

 

Finally, this is the best start to a year for the S&P 500 since 1987 and worst start for Earnings expectations in three years…

And don’t forget – The stock market is up 100% of the time on the day after Trump and Powell share a steak

via ZeroHedge News http://bit.ly/2RDkwp2 Tyler Durden

Crypto Exchange CEO Who Took Keys To $150M Fortune To His Grave Filed Will Just Before Dying

Another interesting wrinkle has surfaced in the mysterious saga surrounding the death of Gerald Cotten, the founder of Canadian crypto exchange QuadrigaCX who died suddenly at age 30 last month, inadvertently sealing away a C$190 million ($145 million) fortune in cryptocurrencies belonging to his customers (or at least that’s what the exchange and his widow have claimed).

According to Bloomberg, Cotten, who reportedly died suddenly while traveling in India due to complications arising from his Crohn’s disease (according to Quadriga, he was planning to help build an orphanage), filed a last will and testament just 12 days before his “unexpected” demise – which seems to undercut the exchange’s argument that he died suddenly and, as a result, neglected to share the keys to the exchange’s cold storage wallets with his business partners, or his wife, who will inherit his estate.

Quadriga

Cotten signed his will on Nov. 27, 2018, leaving all of his assets to his wife, Jennifer Robertson, while making her the executor of his estate. The news comes shortly after a Vancouver court on Tuesday granted Quadriga a 30-day stay to stop lawsuits by proceeding. Cotten died on Dec. 9 in Jaipur, India, according to an affidavit filed by Robertson and a statement of death from J.A. Snow Funeral Home in Halifax.

Unfortunately for Quadriga, Cotten was notoriously security conscious and encrypted his phone, laptop and the messaging system he used to run five-year-old Quadriga. He also reportedly was the sole individual responsible for handling the firm’s coins and banking and accounting.

Cotten was always conscious about security – the laptop, email addresses and messaging system he used to run the 5-year-old business were encrypted. He took sole responsibility for the handling of funds and coins and the banking and accounting side of the business and, to avoid being hacked, moved the “majority” of digital coins into what’s known as cold storage, or unconnected to the internet, the filing said.

Robertson and Cotten’s former business partners have failed to find his passwords or any of his business records. And attempts by experts to hack into his computer and phone have been met with only “limited success”.

The problem is, Robertson said she can’t find his passwords or any business records for the company. Experts brought in to try to hack into Cotten’s other computers and mobile phone met with only “limited success” and attempts to circumvent an encrypted USB key have been foiled, his widow, who lives in a suburb of Halifax, said in the court filing.

Quadriga’s customers, some of whom are facing the prospect of millions of dollars in losses, are banding together to sue the firm, which petitioned for bankruptcy protection in Nova Scotia last week. But some have mused in online forums that perhaps Quadriga was a scam all along, and that this “lockout” was by design.

 

via ZeroHedge News http://bit.ly/2MS4JSg Tyler Durden

San Francisco Facial Recognition Ban Proposed

FacialRecognitionAndreyPopovDreamstimeAaron Peskin, a member of San Francisco’s Board of Supervisors, has proposed a new ordinance that could severely limit city agencies’ use of enhanced surveillance of the city, including a ban on facial recognition technology. “I have yet to be persuaded that there is any beneficial use of this technology that outweighs the potential for government actors to use it for coercive and oppressive ends,” Peskin said.

Peskin is not alone in worrying about how government agents can abuse the technology. Woodrow Hartzog, a professor of law and computer science at Northeastern University, and his colleague, Rochester Institute of Technology philosopher Evan Selinger, make a strongly persuasive case that “facial recognition is the perfect tool for oppression.” As a consequence of the technology being “such a grave threat to privacy and civil liberties,” they argue that “measured regulation should be abandoned in favor of an outright ban.”

Their list of the harms to privacy and civil liberties entailed by the widespread use of this technology by government agencies is chilling. They point out that people who think that they are being watched behave differently. In addition, they cite a host of other abuses and corrosive activities entailed by the technology:

Disproportionate impact on people of color and other minority and vulnerable populations.

Due process harms, which might include shifting the ideal from “presumed innocent” to “people who have not been found guilty of a crime, yet.”

Facilitation of harassment and violence.

Denial of fundamental rights and opportunities, such as protection against “arbitrary government tracking of one’s movements, habits, relationships, interests, and thoughts.”

The suffocating restraint of the relentless, perfect enforcement of law. The normalized elimination of practical obscurity.

The amplification of surveillance capitalism.

Why ban rather than regulate this surveillance technology and not others such as geolocation data and social media searches? Hartzog and Selinger argue that systems using face prints differ in important ways that justify banning them. Given the spread of CCTVs and police body cameras, faces are hard to hide and can be inexpensively and secretly captured and stored. All-seeing cameras and never forgetful digital databases will put an end to obscurity zones that secure the possibility of privacy for us all.

In addition, existing databases, such as those for driver’s licenses, make facial recognition tech easy to plug in and play. In fact, it’s already been done by the FBI. In their 2016 report, The Perpetual Line-Up, Georgetown University researchers found that 16 states had let the FBI use facial recognition technology to compare the faces of suspected criminals to the states’ driver’s license and ID photos, creating a virtual line-up of each state’s residents. “If you build it, they will surveil,” assert Hartzog and Selinger.

China’s social credit system is already taking advantage of facial recognition technology. According to Fortune, the Chinese government is deploying facial recognition tied to millions of public cameras to not only “identify any of its 1.4 billion citizens within a matter of seconds but also having the ability to record an individual’s behavior to predict who might become a threat—a real-world version of the ‘precrime’ in Philip K. Dick’s Minority Report.”

“The future of human flourishing depends upon facial recognition technology being banned before the systems become too entrenched in our lives,” conclude Hartzog and Selinger. “Otherwise, people won’t know what it’s like to be in public without being automatically identified, profiled, and potentially exploited. In such a world, critics of facial recognition technology will be disempowered, silenced, or cease to exist.”

Perhaps that’s too ominous. Widespread use of facial recognition technology can certainly make our lives easier to navigate. But it doesn’t take a cynic to worry that governments will demand the right to plunder private face print databases. It’s not too soon to consider if the tradeoffs between convenience and not-implausible government abuses of the technology are worth it.

The proposed ordinance in San Francisco requires agencies to gain the Board of Supervisors’ approval before buying new surveillance technology and puts the burden on city agencies to publicly explain why they want the tools as well as to evaluate their potential harms. That’s at least a step in the right direction.

For more on how we are already constructing a pervasive surveillance state, see my January feature article, “Can Algorithms Run Things Better Than Humans?” The answer depends on what you mean by “better.”

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Watch Congressional Members Get Confronted On US-Led Regime Change Efforts In Venezuela

Is Congress attempting to keep a check on the executive’s foreign policy adventurism especially as we inch closer toward yet another unnecessary military intervention, this time in Venezuela? Or perhaps the better question is, when has it ever? 

Journalist Max Blumenthal recently went to Capitol Hill to find out with camera in tow. And like with Libya, Syria, or Ukraine before, it appears the greater the hawkishness, the greater the ignorance. Blumenthal confronted Congressional members who admitted to US “meddling” in the Latin American country, but who can’t figure out if it’s “good meddling or not” — as one befuddled and confused lawmaker responded. 

Amidst Russiagate fever, the Grayzone’s Max Blumenthal heads to Capitol Hill to ask members of Congress if they think the US is meddling in Venezuela’s political system. The Trump administration had recently recognized the president of the country’s National Assembly as interim president of the nation and intensified sanctions on the country. Grayzone Project

The irony of course is that these very Congressional members, perhaps reflecting much of the broader American public, have been obsessed with alleged ‘Russian meddling’ in the US over the past two years yet don’t give a thought when it goes the other way — that is, America’s penchant for meddling in other nations, even to the point of military-led regime change and covert coup attempts.

To meddle or not to meddle? Predictably it was a basic assumption among most political leaders interviewed by Blumenthal that Washington alone has a right to intervene, hence the laughable term bandied about the interviews “good meddling”.

One Republican from Missouri, Vicky Hartzler, actually gave the classic simplistic and ultra-naive answer of “it’s all about freedom” when pressed on the subject: “I think we’re just supporting the people and supporting what they are deciding needs to happen, and so I think it’s good of us since we are the bastion of freedom,” she stated.

And a Democratic, Rosa DeLauro of Connecticut, thought ‘Trump-Russia collusion’ is among the most pressing issues of our time, yet when asked about meddling in Venezuela, she meekly responded: “I don’t know. There’s been a lot against Maduro, who’s awful.”

In summary, as Blumenthal concluded:

The responses from members of Congress painted a shocking picture of ignorance, hypocrisy, and bipartisan consent for the Trump administration’s assault on Venezuela.

The scenes of politicians who are responsible for voting on matters of war in peace (insofar as anyone actually respects the War Powers Act at all these days) being caught off guard by fairly simple and straightforward questions on Venezuela reminds us of similarly appalling levels of ignorance surrounding the Ukraine debate in 2014 to 2015. As one Washington Post headline observed at the time based on hard dataThe less Americans know about Ukraine’s location, the more they want to intervene. And now insert most any third world country targeted by Washington over the past few decades.

No doubt the same could be said about Venezuela now as US regime change efforts ramp up, which could quickly devolve into yet another proxy war (following dangerously on the heels Syria and Ukraine) between Washington and Moscow, or even Beijing

* * *

Whether the below is footage of US forces mobilizing or perhaps of Colombian US-supplied helicopters, it could be a sign of a dangerous build-up and armed conflict to come…

Unconfirmed viral footage from days ago.

via ZeroHedge News http://bit.ly/2HW7OSD Tyler Durden

New Bipartisan Senate Bill Expands Syria Sanctions, Condemns Trump’s Middle East Troop Withdrawals

Today, the Senate is expected to pass a major piece of foreign policy legislation that awards billions in military assistance to our allies in the Middle East, imposes new sanctions on rivals, and condemns President Donald Trump’s plans to start pulling troops out of the region.

Last night, the Senate voted 72-24 to end debate on the Strengthening America’s Security in the Middle East Act of 2019 or simply S.1, and move it to the Senate floor for a final vote.

The bill, originally introduced by Sen. Marco Rubio (R–Fla.), is a grab bag of Middle East-related policies, including stepped-up sanctions on the Syrian government, authorization for $38 billion in military assistance to Israel, and federal authorization for states and localities to refuse to contract with businesses that boycott Israel.

There is wide bipartisan support for S.1, as demonstrated by yesterday’s lopsided vote to advance the bill. Critics include liberal Democrats, and the libertarian-leaning Sen. Rand Paul (R–Ky.), who took particular issue with the language condemning Trump’s plans for a withdrawal of U.S. troops from Afghanistan and Syria.

“I’m tired of America always doing everybody else’s fighting. I’m tired of America always paying for everybody else’s war,” said Paul in an impassioned floor speech yesterday. “What is the one thing that brings Republicans and Democrats together? War! They love it. The more the better,” said the visibly exasperated Paul.

The Kentucky senator suggested that the Senate strip out S. 1’s condemnation of the troop withdrawals and replace it with a resolution lauding the president’s decision to bring military personnel home.

In addition to the anti-withdrawal language, the bill also makes good on a 2016 Obama administration promise to provide Israel with $38 billion in military assistance and missile defense funding over the next 10 years.

This money is “the largest single pledge of military assistance ever and a reiteration of the seven-decade, unshakeable, bipartisan commitment of the United States to Israel’s security,” reads the text of the bill.

Versions of this military assistance were passed by both the House and Senate during the last Congress, but had been blocked in the Senate by Paul, who demanded that any increase in foreign aid to Israel be offset by ending financial support to other foreign governments, including Saudi Arabia and Pakistan. Paul introduced an amendment to that effect yesterday, which was rejected.

Also included in S.B. 1 were enhanced sanctions against the Syrian government and those doing business with it. The bill gives the president the authority to sanction any foreign person who “provides significant financial, material, or technological support,” to the Syrian government, senior Syrian government officials, or the country’s oil and gas sector.

Selling military aircraft parts to the country is expressly forbidden as well, as is providing construction or engineering services to the Syrian government.

Also incorporated into S.1 is legislation that gives a federal green light for states and localities to refuse to contract with businesses that boycott Israel.

Laws and executive orders forbidding local and state governments from contracting with companies that participate in the movement to boycott, divest, and sanction (BDS) Israel have passed everywhere from New York to Texas, much to the chagrin of free speech advocates. The ACLU, for example, is currently suing Texas over its anti-BDS law.

Aside from its domestically controversial anti-BDS provisions, S. 1 is largely a continuation of long-running U.S. policy towards the Middle East, says Emma Ashford, a foreign policy scholar at the Cato Institute.

“The bill itself is largely status quo. It maintains an active U.S. military presence in the region, and bolsters funding for allies,” Ashford tells Reason, saying that it “does nothing to change or alter America’s Middle East strategy.”

Significant sanctions have been in place against the government of Bashar al-Assad in Syria for years now, she notes. There’s obviously nothing new about military assistance to Israel.

Still, says Ashford, there is some specific causes for concern in the bill.

The new Syrian sanctions could end up penalizing organizations trying to aid in reconstruction efforts in the country. The Senate’s condemnation of the president’s decision to pull troops out of a conflict that was never authorized by Congress to begin with, while non-binding, is nevertheless “another step towards abdicating their responsibilities on questions of war and peace,” says Ashford.

In short, while the bill that the Senate will likely pass today does not do much to escalate America’s role in the Middle East, it also does absolutely nothing to scale it back. That alone makes it a major disappointment for critics of our seemingly endless involvement in the region.

The Senate is expected to vote on S.1 sometime this afternoon, after which it will go to the House for a vote.

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‘Human Trafficking’ Used as Excuse to Try to Destroy Nail Salon Jobs in Connecticut

Nail salonWould you believe that Connecticut is the only state in America that doesn’t force nail tech and skincare workers to get hours and hours of training and pay for occupational licensing to do their jobs?

Unfortunately, that might be about to change, and you can thank overheated human trafficking panics and the typical fears of some sort of “public health” menace if nail salon workers in Connecticut end up unemployed.

Democratic state Rep. Jillian Gilchrest (West Hartford) has introduced legislation, co-sponsored by Republican Rep. Fred Camillo (Greenwich), to force workers at nail salons, estheticians (skin care therapists), and eyelash technicians to get a minimum level of education and licenses in order to work. (Unrelated, but an indicator of Gilchrest’s mentality, she’s getting a lot of attention now for another bill that would increase the taxes on ammunition by 50 percent with a rather absurd “How much ammunition does someone really need?” argument)

The way the Connecticut Post has been reporting the bill is both a fascinating and somewhat infuriating window into how unwilling people are to acknowledge how much occupational licensing harms poorer workers. The Post notes that many salon owners are calling for the regulation but seems rather incurious about deeper motives:

Those in favor—some lawmakers, lobbyists on behalf of industry associations, health inspectors and many salon owners—argue that a lack of licensure makes nail salons and spas unsafe for workers and their clients, both of which are mostly women.

They point to examples like New Haven resident Maggie Todd who alleges she received second degree burns on her left hand while receiving a gel manicure at Nail Studio in Hamden in 2016. She is suing Nail Studio in New Haven Superior Court.

Similarly, in a short video explaining why she introduced the bill, Gilchrest says salon owners have told her that they need to “professionalize” the industry and are “struggling” to find properly trained workers and that this is a burden on their business. Here’s her video:

This explanation doesn’t make a whole lot of sense. Training and government licensing are just completely separate issues. A nail salon can decide to hire only trained workers and could even arrange for workers to get training, if that’s what the salon’s owner wanted.

But, of course, that’s all probably a smokescreen. The likely issue is that there are competitors out there who won’t go through that effort and will therefore offer their services more cheaply than those who bankroll training for staff or hire staff who can demand better wages due to their skills.

“It’s not unusual for folks asking for licensing to do so to eliminate competition or to raise the status of their own occupations,” explains Lisa Knepper, director of strategic research for the Institute for Justice. She and the Institute for Justice put together a state-by-state report in 2012 documenting the extensive burdens that result from occupational licensing. They’ve also researched the overall costs to the economy.

For skin care specialists, that burden is fairly high, ranking among the Institute for Justice report’s top 10 occupations for the amount of work involved in order to legally get permission to wax somebody’s bikini line. The average fees amount to $120, but the average education demand is 149 days of training. That’s more than what’s demanded of a truck driver or an emergency medical technician. The average manicurist must get 87 hours of training before getting a license.

We don’t know how burdensome these proposed regulations will be as yet. The bill (HB 5754) that’s been introduced doesn’t actually say what education requirements will be mandated. The text is just a paragraph calling for education and licensing.

These licensing requirements keep people from getting work, but do they actually protect consumers from health risks? A federal report put together in 2015 by the Barack Obama administration, the Department of Labor, and the Department of the Treasury questioned this wisdom. The report examined 12 studies, and only two of them indicated that licensing actually reduced public safety and health risks.

Connecticut nail salons are not some Wild West where government regulators fear to tread. Knepper notes that state law requires nail salons to be regularly inspected. The lack of a licensing regime for individual workers does not mean that the state has no way to crack down on unsanitary conditions. The state’s Department of Public Health doesn’t even want the new licensing regulations because it says it lacks the manpower to monitor compliance. Gilchrist says she thinks the licensing will bring in revenue, but the Department of Public Health doesn’t actually get to keep the money it collects.

The lack of inspection manpower might explain any health problems with Connecticut nail salons rather than a lack of a licensing program. Connecticut actually previously had a licensing program for manicurists that required a whopping 500 hours of education. That regulation sunsetted in 1980 and efforts since then to reinstate the regime have failed.

So you would think then that there would be some ability to document the harms that have come from abandoning licensing, but what we get are anecdotes of women getting burns or infections from poor care. What we don’t get is any data indicating whether consumers are more or less likely to be injured getting their nails done in Connecticut than in other states.

What has changed since those bygone days of licensing is that we now have a moral panic over human trafficking being used to justify all sorts of regulations and surveillance, and Gilchrist invokes it in her justification for this new licensing scheme. She even hashtags “humantrafficking” in her tweet. She explains:

As the former chair of our state’s Trafficking in Persons Council, I saw firsthand how Connecticut’s unregulated nail salon industry makes us a hotbed for human trafficking. By licensing nail salons and estheticians we enact much needed work protections for employees, protect the public health of consumers, and professionalize a booming industry.

There’s little data to back up her claim that the nail salon industry (which is not “unregulated”) is a hotbed for human trafficking in Connecticut. Federal data on human trafficking from 2015 shows very few cases (less than 15) being referred to the feds for prosecution from Connecticut. That’s in total, not just in these businesses. Data from the National Human Trafficking Hotline shows less than three calls per year originating from Connecticut claiming human trafficking is taking place in “health and beauty service” businesses.

Knepper observes that there are better, less intrusive ways of trying to combat human trafficking in the industry than forcing all workers to get hundreds of hours of education.

“It’s hard to see how this addresses the problem [of human trafficking], especially when it comes to substantive education requirements,” Knepper says. A better, less intrusive approach would simply be a program of inspecting these salons, something Connecticut law already provides for.

“Is this a solution in search of a problem?” Knepper asks. “It may already be that Connecticut has already found the right regulatory system.”

For more occupational licensing craziness, Eric Boehm recently took a look at some of the even more absurd bills being proposed across the country for 2019.

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Oregon Defies Logic With Statewide Rent Control

Authored by Andrew Moran via The Mises Institute,

It is often said by cynical economists and political commentators, usually of the right or libertarian persuasion, that the road to hell is paved with good intentions. There is no more odious and damagingeconomic policy that comes from the heart than rent control. For years, limiting the cost of living spaces was done at the local level, but one West Coast state aims to be the first to implement statewide rent controls.

Oregon’s Proposed Rent Controls

Oregon is set to pass SB 608, legislation that prohibits landlords from raising rents in the first year of a resident’s tenancy. The bill would also cap future rent hikes at 7% annually, plus inflation. This will target all rental properties 15 years or older but exempt units that are a part of a government housing project.

It should be noted that SB 608 does not have vacancy controls, which means buildings can jack up the rent by any amount once the tenant gives his or her notice. Because of this, the legislation bans no-cause evictions, so any landlord must offer a government-approved excuse for evicting a tenant.

With Democratic supermajorities in both chambers of the legislature, SB 608 is likely to pass, making Oregon the first state with statewide rent control.

Gov. Kate Brown (D-OR) is proud of the move, saying in her inaugural address:

“We also need to help Oregonians who have homes but are struggling with the high cost of rent. We can help landlords and tenants navigate this tight housing market. Speaker [Tina] Kotek and Sen. [Ginny] Burdick have innovative proposals that will give renters some peace of mind.”

Lawmakers are jubilant over the bill, but economic experts call the Beaver State’s policy proposal risky, including Mike Wilkerson of ECONorthwest, an economics consulting firm, telling Reason: “You’d be hard-pressed to find any economist who comes out in favor of rent control as a means to help improve whatever failure you are experiencing.”

Rent Control Hurts the Poor

First, it is important to examine the justification for rent controls. Advocates contend that it is immoral for someone who has lived in a neighborhood his entire life to be suddenly priced out of it. It is also wrong, they assert, that landlords are just sitting on their rear ends, enjoying higher rents, because there is a greater demand to reside in New York, San Francisco, or Boston than in Jerome, AZ, or Bonanza, CO.

Proponents will ignore the unintended consequences of rent control. New properties are not erected, vacancy rates plunge, existing landlords exit the market, and the small supply of housing diminishes. Landlords will try to evade regulations by transforming their units into condominiums, luxury apartments, furnished suites, or offices.

Advocates also overlook two other important facts: Real estate can be utilized for a diverse array of purposes (commercial, housing, or industrial), and these laws distort pricing signals.

Ultimately, the state plays a game of cat-and-mouse, coming up with intrusive ways to rein in the evaders. Regulation begets regulation.

New York City

When World War II ended and peacetime reigned supreme in America again, things were not what they used to be, at least for the thousands of troops returning home. After being engaged in battles overseas, soldiers had a new front to fight at home: life – and everything it had to offer.

Despite the inflation rate either contracting or rising in single digits between 1947 and 1952, the cost of living ballooned for the returning heroes of the Armed Forces. One area of the country that increasingly priced these men out of the market was New York City, where real estate values were skyrocketing – and still are!

Officials had an idea to help everyone affected by rising housing costs: rent controls. While the goal was to make units more affordable, the city made the situation worse by introducing temporary relief.

Like economist Milton Friedman once quipped, “There is nothing more permanent than a temporary government program.” This relic of 1947 is still around today, exacerbating the housing affordability crisis. It is estimated that approximately 50,000 apartments and one million rent-stabilized units are controlled by a 70-year-old law.

To understand how egregious this policy is, look no further than former Rep. Charles Rangel (D-NY). The Wall Street Journal reported in September 2008 that he occupied “four rent-stabilized apartments in a posh New York City building,” living in three and using another as an office. By holding four properties, he took advantage of valuable resources at below-market prices at the expense of others.

Controls

Is there a difference between bombs and rent control? Economists often pose this question when debating the efficacy of government controls. The Mises Institute’s Joseph Salerno delivered a lecture a few years ago, showing pictures of urban areas and asking his audience if these dilapidated units were the victims of a bombing campaign or rent controls.

When you even pose the question, you know it’s necessary to second-guess the prescription.

Any time officials use “controls,” you know the policy is going to be a failure. Whether it is preceded by “price” or “rent,” this economically defiant measure produces destitution, deterioration, and destruction. It’s too bad politicians and bureaucrats never learn their lesson.

via ZeroHedge News http://bit.ly/2RIp4KG Tyler Durden

Here’s the Cocktail You Should Drink During Trump’s State of the Union Tonight

It's important to double strain! For many years, I wrote Reason‘s State of the Union drinking game, which typically included a list of likely phrases and topics, and instructions to drink if and when they came up during the speech. The idea, generally speaking, was to predict as much of the speech as possible, offer a few links to relevant Reason stories, and—within limits—to drink accordingly.

But as I have grown older (if perhaps not wiser), I have come to appreciate the pleasures of drinking well rather than drinking more. So this year I’m going to try something a little different. Instead of suggesting when to drink, I’m going to suggest what—in this case, a thematically appropriate pre-Prohibition cocktail called The Last Word. Because tonight, that’s what everyone—from Donald Trump to Stacey Abrams to Bernie Sanders—will be trying to get.

In its classic form, The Last Word is a deceptively simple cocktail made up of equal parts gin, green Chartreuse, maraschino liqueur, and freshly squeezed lime juice—typically three-fourths of an ounce of each—shaken vigorously over ice and then strained into a coupe or martini glass. You might think of it as a bookish, retro riff on a gin sour (typically two parts gin to about one part citrus and one part simple syrup), but with the Chartreuse splitting the gin portion and the maraschino replacing the sugar portion.

The drink, which dates to 1915, was unearthed by Seattle bartender Murray Stenson in 2004. Since then, it has become part of the modern cocktail canon, the sort of drink you can order off menu at most competent cocktail bars. Like most of today’s most successful drinks, it has become a template, spawning an array of variations and imitators, typically (though not always) involving a spirit, a citrus, a sweetener, and a bitter or herbal modifier in equal parts. Among my favorites are the bourbon-based Paper Plane, the clever all-booze riff Oh, My Word!, and, for those who want to pay tribute to Reason‘s current editor-in-chief, the rye-and-lemon-juice variant, The Final Ward. (Fittingly, Last Word riffs are among Katherine Mangu-Ward’s favorite cocktails.) You can also substitute mezcal for the gin, making for an easy, smoky variation that is, if anything, more complex than the original.

I’ve been making and drinking Last Words for years, but even though I’m quite familiar with the flavor profile, it’s a drink that still has the capacity to surprise and delight me. Made properly, it’s herbal, botanical, citrusy, and delicately sweet, a complex yet perfectly balanced chord of flavors that rewards slow sipping and a little bit of contemplation (but not too much).

The Last Word is the sort of all-purpose tipple that works just as well on a warm spring afternoon as on a chilly winter night—or, in this case, on a surprisingly warm winter evening. It’s a drink that will always make you feel good, even if politics makes you feel bad.

The Last Word

¾ oz London dry gin (preferably Tanqueray)

¾ oz green Chartreuse

¾ oz maraschino liqueur (preferably Luxardo)

¾ oz fresh squeezed lime juice (roughly the juice from one small lime)

Combine all ingredients in a cocktail shaker over ice, then shake vigorously until chilled—10 to 20 seconds (ideally you should use a single large cube for shaking; if you’re using small ice cubes from a refrigerator ice-maker, err on the side of a shorter shake). Double strain through a cocktail strainer and a conical mesh strainer (to avoid ice chips) into a chilled coupe, martini, or Nick & Nora glass. Sip, enjoy, roll your eyes at whichever politician happens to be talking, and know that The Last Word in your hand will be far more enjoyable than any of the words that come out of their mouths.

(A few tips for preparation: Make sure to use fresh squeezed juice and to measure your ingredients—guesswork pouring will leave you with an unbalanced drink. Also, this is a drink that you have to shake, not stir. The goal is to both chill and aerate the drink. You should shake until the exterior of your shaker is cold, and a layer of bubbly foam should be visible at the top of the drink.)

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