The House voted 305–102 last week to pass a $4.6 billion border bill. In theory, the money will improve conditions in the government’s detention camps for migrant kids. But Rep. Alexandria Ocasio-Cortez (D–N.Y.) argued that the Trump administration doesn’t need more money; it needs to release the kids it’s holding. She was right, but she failed to stop the legislation.
The progressive and Hispanic caucuses weren’t able to strip $81 million out of the Immigration and Customs Enforcement (ICE) budget. Instead, the bill will direct $788 million to new Border Patrol facilities; $112 million to food, medical care, and other necessities for people in Border Patrol custody; and $866 million to shelters under the jurisdiction of Department of Health and Human Services. This was basically the same bill that previously cleared the Senate, 84–8.
The outcome puts on full display the growing fracture between the progressive and moderate Democratic caucuses. It also represents a considerable loss of face for House Speaker Nancy Pelosi, given that she had initially declared the Senate bill a nonstarter. She was forced to back down after Blue Dog Democrats—who did not want to be seen as weak on border security—threatened a revolt against their more progressive colleagues’ demands to cut enforcement spending. “In order to get resources to the children fastest, we will reluctantly pass the Senate bill,” Pelosi wrote in a letter to Democratic lawmakers. “As we pass the Senate bill, we will do so with a battle cry as to how we go forward to protect children in a way that truly honors their dignity and worth.”
The bill’s opponents did manage to kill President Donald Trump’s request for money to build his wall. Since the federal courts last week stopped Trump from declaring a national emergency to divert military funds for the wall, that’s a significant setback for him.
But that was the only substantial victory for the bill’s opponents.
The progressives fought to prevent the Department of Human Health and Services (HHS) from keeping kids in its detention centers for more than 90 days. The 1997 Floressettlement requires Customs and Border Protection (CBP)—generally the first point of contact for asylum seekers—to release unaccompanied kids from its detention facilities within 20 days to either their parents or other relatives. If these guardians are not immediately available, then the kids are supposed to be handed to HHS. HHS facilities are better than CBP detention camps, which are now so crowded that one doctor declared after the recent visit that they’ve come to resemble “torture facilities.” But HHS, unlike CBP, can detain the kids indefinitely, because Flores does not apply to it.
Progressives wanted to impose a limit on stays in HHS facilities and one version of the bill did just that. But this provision was stripped out of the final legislation. In its stead, Vice President Mike Pence gave Speaker Pelosi a verbal “assurance” over the phone that the administration would voluntarily adhere to that limit. Good luck getting them to stick to that.
The number of migrant kids in CBP and HHS custody is increasing. That’s partially due to Trump’s zero tolerance policy, which forces these agencies to give ICE information about any relatives who come forward to claim the kids. If these relatives happen to be out of status, ICE can initiate deportation proceedings against them, deterring them from coming forward in the first place. The progressive and Hispanic caucuses wanted to include provisions to prevent such information sharing. Their measures didn’t make it in. (Some watered-down substitute language may temper such cooperation somewhat, but immigration advocates aren’t sure yet.)
In short, the administration created the migrant kids’ sorry conditions, then used their plight to win billions of dollars for agencies with a record of abuse and neglect. It remains to be seen whether this will make a whit of difference in the conditions the kids have been living in.
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The House voted 305–102 last week to pass a $4.6 billion border bill. In theory, the money will improve conditions in the government’s detention camps for migrant kids. But Rep. Alexandria Ocasio-Cortez (D–N.Y.) argued that the Trump administration doesn’t need more money; it needs to release the kids it’s holding. She was right, but she failed to stop the legislation.
The progressive and Hispanic caucuses weren’t able to strip $81 million out of the Immigration and Customs Enforcement (ICE) budget. Instead, the bill will direct $788 million to new Border Patrol facilities; $112 million to food, medical care, and other necessities for people in Border Patrol custody; and $866 million to shelters under the jurisdiction of Department of Health and Human Services. This was basically the same bill that previously cleared the Senate, 84–8.
The outcome puts on full display the growing fracture between the progressive and moderate Democratic caucuses. It also represents a considerable loss of face for House Speaker Nancy Pelosi, given that she had initially declared the Senate bill a nonstarter. She was forced to back down after Blue Dog Democrats—who did not want to be seen as weak on border security—threatened a revolt against their more progressive colleagues’ demands to cut enforcement spending. “In order to get resources to the children fastest, we will reluctantly pass the Senate bill,” Pelosi wrote in a letter to Democratic lawmakers. “As we pass the Senate bill, we will do so with a battle cry as to how we go forward to protect children in a way that truly honors their dignity and worth.”
The bill’s opponents did manage to kill President Donald Trump’s request for money to build his wall. Since the federal courts last week stopped Trump from declaring a national emergency to divert military funds for the wall, that’s a significant setback for him.
But that was the only substantial victory for the bill’s opponents.
The progressives fought to prevent the Department of Human Health and Services (HHS) from keeping kids in its detention centers for more than 90 days. The 1997 Floressettlement requires Customs and Border Protection (CBP)—generally the first point of contact for asylum seekers—to release unaccompanied kids from its detention facilities within 20 days to either their parents or other relatives. If these guardians are not immediately available, then the kids are supposed to be handed to HHS. HHS facilities are better than CBP detention camps, which are now so crowded that one doctor declared after the recent visit that they’ve come to resemble “torture facilities.” But HHS, unlike CBP, can detain the kids indefinitely, because Flores does not apply to it.
Progressives wanted to impose a limit on stays in HHS facilities and one version of the bill did just that. But this provision was stripped out of the final legislation. In its stead, Vice President Mike Pence gave Speaker Pelosi a verbal “assurance” over the phone that the administration would voluntarily adhere to that limit. Good luck getting them to stick to that.
The number of migrant kids in CBP and HHS custody is increasing. That’s partially due to Trump’s zero tolerance policy, which forces these agencies to give ICE information about any relatives who come forward to claim the kids. If these relatives happen to be out of status, ICE can initiate deportation proceedings against them, deterring them from coming forward in the first place. The progressive and Hispanic caucuses wanted to include provisions to prevent such information sharing. Their measures didn’t make it in. (Some watered-down substitute language may temper such cooperation somewhat, but immigration advocates aren’t sure yet.)
In short, the administration created the migrant kids’ sorry conditions, then used their plight to win billions of dollars for agencies with a record of abuse and neglect. It remains to be seen whether this will make a whit of difference in the conditions the kids have been living in.
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They urged potential presidential candidates to campaign for and, if elected, implement a new wealth tax that would strengthen America.
I hereby offer my own letter in response.
Dear Billionaires,
Thank you for your patriotic concern about our nation’s democracy and the global climate. The willingness shown to submit yourselves to higher tax rates warms my heart as we approach the season in which we celebrate US Independence from Britain, brought about mostly over a concern about arbitrary taxation without adequate representation.
Your plans, as presented, are somewhat vague other than a call for the federal government to tax your “wealth” (as opposed to income). Wealth, not to mention income, comes in a variety of forms. A more detailed plan would specify the forms of wealth to be taxed (e.g., real estate, cash held in bank accounts). However, I take it on good faith that you are willing to submit yourselves to the public generosity that only Congress and the Internal Revenue Service could compel.
The appeal to presidential candidates indicates that such a plan will rely upon an amenable person winning the 2020 general election as well as a majority of Congressional representatives favorable to this idea. Add to this the time spent drafting, voting upon, and implementing a viable “wealth tax” and we might be looking at another 2-3 years before revenue from this plan starts drifting in. Alas, the problems detailed in your letter – from climate change to economic growth to cultivating a general sense of fairness – seem to suggest that more immediate action is necessary.
Fortunately, there is a quicker and perhaps more simple solution. After just a few minutes on the Internet, I discovered that the US Treasury accepts voluntary gift donations to reduce debt held by the public. The link can be found here, with more explicit instructions on who to make the check out to and where to send it here. You don’t have to wait for all that pesky legislative debate and cumbersome bureaucracy to start making a difference immediately. Even better, this proposal avoids the reems of paperwork needed for the typical tax filing and won’t require you to contact your accountant.
Simply calculate what you consider to be your fair share, write the check, and drop it in the mail. Your honorable wishes realized, instantaneously! Better yet, you can do this every year.
The good news is that several of your fellow citizens have already stepped up to the plate. In fiscal year 2018, the Treasury collected just over three-quarters of a million dollars in donations. The high water mark was in 2012 when nearly $8 million was voluntarily contributed. Given your generous concern for the well-being of our country, I’m hoping you can raise the bar by several hundred million by the end of fiscal year 2020.
Granted, your voluntary contributions to the US Treasury would be directed towards debt reduction and not the specific issues you spelled out in your letter, but the good news is that money in fungible; all the financial resources that would have been used to service the debt in lieu of your donation could now go towards promoting the issues you consider a high priority. I am sure that if you attach a note to your check specifying your interests, the word will get to the appropriate people to fund those concerns appropriately.
Should my immediate solution here appear too simple or banal, there are other possibilities available. Again, calculate what you consider to be a fair tax rate on your wealth, and then take that money and invest it in clean energy or heart disease research. There are numerous private enterprises and public universities that would love to help out on those fronts.
Or repair our crumbling infrastructure by directly paying for new roads or filling in potholes. (Word has it, Domino’s Pizza has found a way to make this work.) Start some new businesses that would employ folks and provide them with good wages. And if concerns over inequality are on the top of your mind, you always can write me a check directly, which will go a long way to bridging the wealth gap between you and I.
Given these alternative ways to invest in the common welfare of the nation, I wonder why you would consider government management of your tax revenue to be better? Many, if not all, of you have founded charitable foundations designed to alleviate a variety of social ills. Why not fund those efforts more fully, or create new institutions? Why would you expect the federal government to be better caretakers of your wealth? I’m truly curious.
Of course, while the speed in which your wealth tax proposal can be implemented is of concern to me, I am also worried about what will become of such a law over time. While you advocate a new wealth tax on the 1/10th of 1%, we know from decades of experience that tax programs initially designed for one target community tend to expand and encompass more individuals than originally intended. Indeed, the Revenue Act of 1913, which gave us our federal income tax structure we enjoy today, started out with the intention of only targeting roughly 3% of all income earners with a 1% marginal rate, but has expanded drastically since then. The trade-off at that time was to lower tariff rates on imported goods, which happened for a short spell but then increased again just a few years later.
A wealth tax designed simply to affect the wealthiest of the wealthiest will soon, I fear, move down to the wealthy, and then to the middle class. After all, what politician can resist the appeal to collect more revenue for their pet projects while promising their constituents that “those rich folks will pay”?! “Those rich folks” are always at envy’s reach and a majority of Americans easily can be tempted to tax “the other guy who has it better.” Indeed, this would seem to be the basis of your wealth tax proposal.
As these tax brackets and rates creep into new territory, the opportunity of individuals to manage their own resources as they best see fit will shrink. This, in turn, will limit the chance for them or their children to climb the socio-economic ladder as you all have done. Some might even suspect that this new wealth tax, when expanded, is designed to preserve the status quo of those at the top.
Again, and in conclusion, all of which you desire can easily be achieved through voluntary action. The opportunity to voluntarily tax yourself at rates you so choose is available to you via the US Treasury. If that option is not desirable, there is always the possibility of investing your funds in private charitable organizations or free market enterprises, things that you have done in the past and from which we all have benefited from.
via ZeroHedge News https://ift.tt/2XkTcU5 Tyler Durden
“We were the first state to legalize marijuana,” former Colorado Gov. John Hickenlooper said toward the end of last Thursday’s Democratic presidential debate, “and we transformed our justice system in the process.” That statement was part of a paragraph in which the relatively moderate Hickenlooper highlighted his progressive accomplishments. As he put it:
You don’t need big government to do big things. I know that because I’m the one person up here who’s actually done the big progressive things everyone else is talking about. If we turn towards socialism, we run the risk of helping to re-elect the worst president in American history.
There is much truth to that, but it was pretty chutzpadik for Hickenlooper to implicitly take credit for marijuana legalization in Colorado, since he opposed it at the time and has only gradually come around to the view that it was not the disaster he anticipated. “It’s bizarre that Hickenlooper is seemingly taking credit for legalization in Colorado, and it’s somewhat laughable that he attempted to use it as a way to distinguish himself from the rest of the field,” Mason Tvert, who spearheaded the legalization campaign in Colorado, toldCannabis Now. All of the Democratic presidential candidates say states should be allowed to legalize marijuana, and most of them think Congress should repeal the federal ban.
Hickenlooper announced his opposition to Amendment 64, Colorado’s legalization initiative, in September 2012, two months before 55 percent of voters approved it. “Colorado is known for many great things—marijuana should not be one of them,” Hickenlooper said. “Amendment 64 has the potential to increase the number of children using drugs and would detract from efforts to make Colorado the healthiest state in the nation. It sends the wrong message to kids that drugs are OK.”
As late as October 2014, when Hickenlooper was running for re-election against a Republican who opposed legalization, he called voters “reckless” for approving Amendment 64. But by then Hickenlooper, to his credit, was beginning to acknowledge that the effects of legalization were not as bad as he thought they would be.
“It seems like the people that were smoking before are mainly the people that are smoking now,” Hickenlooper told Reuters in June 2014, six months after legal recreational sales had begun. “If that’s the case, what that means is that we’re not going to have more drugged driving, or driving while high. We’re not going to have some of those problems. But we are going to have a system where we’re actually regulating and taxing something, and keeping that money in the state of Colorado…and we’re not supporting a corrupt system of gangsters.”
That October, in another interview with Reuters, Hickenlooper walked back his “reckless” remark:
I was asked if I thought it was reckless to legalize marijuana in Colorado—perhaps risky is a better word. While I believe it was risky for Colorado to be the first state to step away from a failed federal policy given all of the unanswered legal questions and implications, the adoption of Amendment 64 by Colorado voters sent a clear message to the federal government that marijuana should be legal and regulated.
We have a robust regulatory enforcement system that would not have been possible without the partnership of the marijuana business owners, activists, law enforcement officials, regulators, parents, policy experts and stakeholders. Together we have worked tirelessly to ensure a safe and fair system that protects the public health, diminishes the underground market, and educates and keeps marijuana out of the hands of our children. We remain committed to carrying out the will of the voters, including providing marijuana businesses access to banking and maintaining a fair regulatory system.
In 2017 Hickenlooper rebutted then-Attorney General Jeff Sessions’ concerns about marijuana legalization in Colorado. “Colorado’s system has become a model for other states and nations,” he and Colorado Attorney General Cynthia Coffman wrote. “We are confident that if we work together, we can maintain a responsible regulatory and enforcement model that protects public safety, public health, and other law enforcement interests.”
Hickenlooper’s shift reflects Colorado’s experience with legalization, which has been neither “reefer madness” nor “pot paradise,” as The New York Timesputs it in a recent story. While cannabis consumption among adults is up, the Times notes, “state surveys do not show an increase in young people smoking pot.” Furthermore, according to a study reported in the Journal of Cannabis Research last month, “permitting or not permitting recreational cannabis dispensaries in a community does not appear to change student cannabis use or perceptions towards cannabis.”
Marijuana-related visits to emergency rooms are up, although some of that increase may be due to a greater willingness to seek help now that cannabis consumption is legal. While the number of drivers involved in fatal crashes who test positive for marijuana has risen, the Times notes, “a positive test does not necessarily mean the driver was high.” (More on that here.)
While “legalization coincided with a 20 percent rise in violent crime rates in Colorado from 2012 to 2017,” the Times says, “it is almost impossible to attribute broad changes in crime rates to just one cause.” According to an analysis by University of Oregon economist Benjamin Hansen, “the homicide rates in Colorado and Washington were actually below what the data predicted they would have been given the trends in homicides from 2000-2012.”
In the Times article, some Colorado residents complain about aspects of legalization that bother them, including odors from grow facilities and uncomfortable conversations with their children. But a 2016 poll found that only 36 percent of voters favored repealing Amendment 64, while most thought legalization’s net effects had been positive or neutral. A 2017 survey found that 65 percent of Colorado voters supported legalization—up 10 percentage points from the 2012 election results.
Marijuana is by no means harmless, but neither is prohibition. Coloradans, now including John Hickenlooper, continue to prefer the costs of legalization to the costs of trying to forcibly prevent cannabis consumption.
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“We were the first state to legalize marijuana,” former Colorado Gov. John Hickenlooper said toward the end of last Thursday’s Democratic presidential debate, “and we transformed our justice system in the process.” That statement was part of a paragraph in which the relatively moderate Hickenlooper highlighted his progressive accomplishments. As he put it:
You don’t need big government to do big things. I know that because I’m the one person up here who’s actually done the big progressive things everyone else is talking about. If we turn towards socialism, we run the risk of helping to re-elect the worst president in American history.
There is much truth to that, but it was pretty chutzpadik for Hickenlooper to implicitly take credit for marijuana legalization in Colorado, since he opposed it at the time and has only gradually come around to the view that it was not the disaster he anticipated. “It’s bizarre that Hickenlooper is seemingly taking credit for legalization in Colorado, and it’s somewhat laughable that he attempted to use it as a way to distinguish himself from the rest of the field,” Mason Tvert, who spearheaded the legalization campaign in Colorado, toldCannabis Now. All of the Democratic presidential candidates say states should be allowed to legalize marijuana, and most of them think Congress should repeal the federal ban.
Hickenlooper announced his opposition to Amendment 64, Colorado’s legalization initiative, in September 2012, two months before 55 percent of voters approved it. “Colorado is known for many great things—marijuana should not be one of them,” Hickenlooper said. “Amendment 64 has the potential to increase the number of children using drugs and would detract from efforts to make Colorado the healthiest state in the nation. It sends the wrong message to kids that drugs are OK.”
As late as October 2014, when Hickenlooper was running for re-election against a Republican who opposed legalization, he called voters “reckless” for approving Amendment 64. But by then Hickenlooper, to his credit, was beginning to acknowledge that the effects of legalization were not as bad as he thought they would be.
“It seems like the people that were smoking before are mainly the people that are smoking now,” Hickenlooper told Reuters in June 2014, six months after legal recreational sales had begun. “If that’s the case, what that means is that we’re not going to have more drugged driving, or driving while high. We’re not going to have some of those problems. But we are going to have a system where we’re actually regulating and taxing something, and keeping that money in the state of Colorado…and we’re not supporting a corrupt system of gangsters.”
That October, in another interview with Reuters, Hickenlooper walked back his “reckless” remark:
I was asked if I thought it was reckless to legalize marijuana in Colorado—perhaps risky is a better word. While I believe it was risky for Colorado to be the first state to step away from a failed federal policy given all of the unanswered legal questions and implications, the adoption of Amendment 64 by Colorado voters sent a clear message to the federal government that marijuana should be legal and regulated.
We have a robust regulatory enforcement system that would not have been possible without the partnership of the marijuana business owners, activists, law enforcement officials, regulators, parents, policy experts and stakeholders. Together we have worked tirelessly to ensure a safe and fair system that protects the public health, diminishes the underground market, and educates and keeps marijuana out of the hands of our children. We remain committed to carrying out the will of the voters, including providing marijuana businesses access to banking and maintaining a fair regulatory system.
In 2017 Hickenlooper rebutted then-Attorney General Jeff Sessions’ concerns about marijuana legalization in Colorado. “Colorado’s system has become a model for other states and nations,” he and Colorado Attorney General Cynthia Coffman wrote. “We are confident that if we work together, we can maintain a responsible regulatory and enforcement model that protects public safety, public health, and other law enforcement interests.”
Hickenlooper’s shift reflects Colorado’s experience with legalization, which has been neither “reefer madness” nor “pot paradise,” as The New York Timesputs it in a recent story. While cannabis consumption among adults is up, the Times notes, “state surveys do not show an increase in young people smoking pot.” Furthermore, according to a study reported in the Journal of Cannabis Research last month, “permitting or not permitting recreational cannabis dispensaries in a community does not appear to change student cannabis use or perceptions towards cannabis.”
Marijuana-related visits to emergency rooms are up, although some of that increase may be due to a greater willingness to seek help now that cannabis consumption is legal. While the number of drivers involved in fatal crashes who test positive for marijuana has risen, the Times notes, “a positive test does not necessarily mean the driver was high.” (More on that here.)
While “legalization coincided with a 20 percent rise in violent crime rates in Colorado from 2012 to 2017,” the Times says, “it is almost impossible to attribute broad changes in crime rates to just one cause.” According to an analysis by University of Oregon economist Benjamin Hansen, “the homicide rates in Colorado and Washington were actually below what the data predicted they would have been given the trends in homicides from 2000-2012.”
In the Times article, some Colorado residents complain about aspects of legalization that bother them, including odors from grow facilities and uncomfortable conversations with their children. But a 2016 poll found that only 36 percent of voters favored repealing Amendment 64, while most thought legalization’s net effects had been positive or neutral. A 2017 survey found that 65 percent of Colorado voters supported legalization—up 10 percentage points from the 2012 election results.
Marijuana is by no means harmless, but neither is prohibition. Coloradans, now including John Hickenlooper, continue to prefer the costs of legalization to the costs of trying to forcibly prevent cannabis consumption.
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In a bizarre flashback to the 1990s, domestic restrictions on the use of encryption are being proposed once again.
Politico has reported that a National Security Council committee discussed last week whether to ban encryption without a mandatory backdoor for government access to plaintext. “Senior officials debated whether to ask Congress to effectively outlaw end-to-end encryption, which scrambles data so that only its sender and recipient can read it,” the article said.
The best way to read this report is that it represents the latest extrusion of the permanent cadre of law enforcement and national security bureaucrats who have never abandoned their efforts, underway for over 20 years, to allow U.S. government agencies to break or bypass encryption embedded in hardware and software products.
The last time this extra-constitutional campaign against encryption kicked off was during the George W. Bush administration, in mid-2008, when FBI officials briefed Senate Intelligence committee members on what they called the “Going Dark” problem. This campaign continued without apparent interruption during the Barack Obama administration, when the FBI asked all field offices in 2009 for anecdotal information about cases in which “investigations have been negatively impacted” by encryption. By 2012, as I disclosed in an article at the time, the FBI had drafted a proposed law to force tech companies to build in backdoors and was asking the companies not to oppose it. That legislation was never publicly introduced.
Details on the latest discussions are nonexistent, as Politico delicately acknowledged (they were “unable to determine what participating agency leaders said during the meeting”). But anti-crypto legislation has been introduced in the past.
In 1997, after lobbying by law enforcement and intelligence agencies, one House of Representatives committee actually voted for mandatory backdoors. The committee’s rewritten version of the bill, H.R. 695, said: “After January 31, 2000, it shall be unlawful for any person to manufacture for distribution, distribute, or import encryption products intended for sale or use in the United States, unless that product includes features or functions that provide an immediate access to plaintext capability” in response to a court order. The plaintext must be able to be acquired, the legislation said, “without the knowledge or cooperation of the person being investigated.”
Industry efforts killed this version, and it was not taken up by the full House of Representatives. But let’s review for emphasis. Elected members of Congress actually wanted to imprison American citizens (and permanently take away related liberties like the right to own firearms, as the U.S. Court of Appeals for the 7th Circuit recently reminded us) for allowing other Americans to communicate privately. A lawyer, working as legislative counsel, actually agreed to undertake the task of drafting language. And a committee of the U.S. Congress actually voted for it.
In a constitutional republic, this is properly seen as risible. Police may be granted the authority, through legal processes, and within reasonable limits, to search our possessions. But they are not guaranteed success. We are not required to speak only in languages that senior FBI officials prefer. We are not required to talk only in locations where police can readily eavesdrop. As John Gilmore, the libertarian co-founder of the Electronic Frontier Foundation, pointed out during the 1990s crypto wars, the patriots fighting the American Revolution were able to enjoy perfect privacy by rowing to the middle of Boston Harbor. (Encryption wasn’t unknown to those revolutionaries either.)
Based on the Politico report, last week’s meeting is the continuation of efforts by federal agencies that now qualify as multi-generational. It can be traced back to when the National Security Agency convinced IBM to use a shorter, easier-to-crack key length for the DES encryption algorithm in the 1970s, and continues through the National Security Agency’s efforts, disclosed by Edward Snowden, to weaken encryption algorithms today. This is what detractors might call the “deep state,” the unseen government within the government that does not change with elections, which outlasts individual politicians and department heads.
In other words, this is no Trump administration-specific plan. But the danger is that it could become one.
If there’s a terrorist attack with mass casualties, and encryption is reported to have been involved, look for a renewed push for domestic restrictions on encryption without backdoors. Technology companies will complain, of course, but in a political environment where the executive branch has turned against Silicon Valley because of its increasing bias against conservatives—a White House summit on that topic is planned for July 11—would anyone expect the president to listen?
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With Draghi finally admitting that the ECB will never hike even once under his mandate which ends on Oct. 31, and instead indicating two weeks ago at Sintra that the ECB will launch further easing measures in the near term unless the outlook improves – which won’t, judging by the latest woeful European PMIs – the question has turned to just what dovish options the ECB has, and/or may reveal as soon as this month.
Commenting on this eventuality, over the weekend Goldman’s Sven Jari Stehn writes that “given sluggish growth, persistent geopolitical risks and subdued inflation expectations, we expect the Governing Council to provide an easing package, most likely at the September meeting” and proceeds to discuss the ECB’s easing options and their possible effectiveness.
The analysis starts with the most mundane of options: another rate cut.
Here, as Goldman explains, the effectiveness of further cuts to the deposit rate will depend on two main issues in the current context. The first is whether further cuts into negative territory would be passed into bank lending rates given weak bank profitability. Since the deposit rate was lowered below zero in mid-2014, bank deposit rates have been “sticky” and responded little to further rate cuts (Exhibit 1). Bank lending rates have still fallen, but less than in normal times. As a result, bank net interest margins have declined which, in turn, has further reduced incentives to lower lending rates.
A key point made by the Goldman strategist is that the pass-through from further deposit rate cuts into bank lending rates remains positive but will diminish further from here. Moreover, there is evidence that further rate cuts might start pushing up bank lending rates as the deposit facility rate approaches -1%, a point which has been dubbed the “reversal rate.” In other words the ECB can cut another roughly 50-60bps before its easing loses effectiveness. As a result, Goldman’s analysis suggests that the ECB can cut rates somewhat further from here, even though the resulting boost to retail interest rates would likely be smaller than usual.
Meanwhile, ECB officials have discussed measures to mitigate the effects of negative interest rates on bank profitability – which even some European central bankers now admits is being hindered due to NIRP – which might help to cushion the weakening of the bank transmission channel. The leading option is a tiered reserve system, where banks can avoid paying a negative interest rate on a portion of their excess reserves at the ECB.
As discussed previously, the benefits of a tiered system are likely to be limited and asymmetrically distributed across the Euro area, as Goldman shows in the next chart.
This is because the costs of negative rates are concentrated in core economies—mainly France and Germany—where the majority of excess reserves are held. Banks are currently paying a total of around € 8bn per year on their excess reserves at the ECB. A tiering system that shields 50% of excess reserves from negative rates would, for example, provide annual relief of €4bn for the Euro area banking system (or around 3% of profit before tax in 2017). The relief from tiering would rise proportionally with further rate cuts and a renewed expansion of the ECB’s balance sheet, which would increase excess liquidity. But even then the benefits of tiering would be limited and skewed heavily towards banks in France and Germany.
The second key transmission channel of lower policy rates is the exchange rate, according to Goldman, which notes that the Euro has appreciated notably since the both Draghi’s (oops) and Powell’s dovish message in June as Goldman now expects the FOMC to cut the funds rate by 25bp in each of July and September. According to bank estimates, the sensitivity of the Euro to ECB policy surprises has risen quite notably since the deposit rate entered negative territory .
This underscores the ECB’s incentive to try to limit Euro appreciation in response to Fed cuts, especially if the FOMC cuts by 50bp in July.
Another option for master of jawboning is for Mario “Whatever it Takes” Draghi, to further strengthen the bank’s forward guidance. As a result, Goldman thinks it is likely that ECB officials will reintroduce the easing bias at the July meeting, indicating that policy rates could go lower from here. Beyond this, the Governing Council could provide a further extension of its date-based guidance, either by pushing out the “mid-2020” calendar date or by tying lift-off to the end of QE.
Here, an alternative, and more aggressive, approach would be to adopt a quantitative criterion to guide expectations for lift-off. For example, the Governing Council could indicate that rates will be on hold until year-over-year core HICP inflation has reached a certain threshold (such as 1.75%). Connecting lift-off to inflation pressures—rather than the calendar—would be appealing and our simulations show that the benefits could be significant. Three stylised paths for how the Governing Council could steer expectations of the policy rate path to provide additional accommodation are shown below. The first shows a 20bp rate cut without additional guidance about the path. The second and third paths show scenarios where the ECB succeeds to push out and flatten the EONIA curve by strengthening the state-based forward guidance.
What about a return to QE?
As a reminder, the ECB ended its QE program, which it had been tapering in 2018, at the start of 2019. In retrospect, this may have been a big mistake.
As Goldman notes, a return to QE at full throttle is complicated by the ECB’s self-imposed limits on purchases of public sector securities. But there is still hope, as significant room to expand corporate sector purchases remains, even under current limits. Goldman’s credit strategists see scope for additional purchases to the tune of around €400bn, which are heavily skewed towards French and German issuers.
Some details on how Goldman got to this number: the bank assumes the ECB will keep the same eligibility criteria relative to CSPP 1.0, including restricting the purchases to non-bank issuers and maintaining the limit per ISIN to 70%. Second, Goldman assumes the current bond constituents of the CSPP portfolio capture the universe that the ECB can effectively target. On this estimates, the combined par value outstanding of the ISINs currently owned by the ECB is €814 billion, which is smaller than the size of the €952 billion worth of bonds that the ECB can theoretically target (again assuming the CSPP 1.0 criteria continue to apply). The extra €138 billion that the “theoretical” universe of eligible bonds comprises likely includes illiquid bonds with high ownership concentration that are hard to acquire in the secondary market. Applying the 70% limit to the €814 billion of eligible bonds outstanding and subtracting the current par value of the ECB portfolio which is estimated to be at €168bn, Goldman’s analysts get a lower bound estimate of the universe of eligible bonds of €403 billion. Exhibit 1 provides the ratings, country, sector, and maturity breakdowns of the universe of eligible bonds.
While the theoretical purchase space is around €100bn larger, the ECB has not been able to tap these bonds during the first corporate QE programme. Which is why sourcing all eligible bonds therefore looks like a stretch.
In addition, the monthly purchase pace of corporate QE is likely to be limited in practice by liquidity conditions. A pace of EUR 3-5bn seems feasible, with purchases targeting primary issuance rather than outstanding bonds.[7] We therefore think that corporate purchases of up to EUR 5bn are likely to be part of any return to QE.
As such, with a limited flow of corporate purchases, sovereign purchases will be necessary to achieve a meaningful monthly purchase volume. Under the current self-imposed limits (especially the 33% issue/issuer limits and country allocation according to capital key) Goldman calculates that the ECB could buy up to €400bn sovereign and agency bonds with limited need for substitute purchases.
Should the ECB relax the issue and issuer limits to 50% would almost quadruple the purchase space to around EUR 1,500bn (light blue and grey bars). Maintaining the 33% issue and issuer limits, while switching to a country allocation following market capitalization, instead, would lift the available purchase space in countries with large sovereign debt markets, such as France and Italy (red diamonds). But it would not relax the limits in Germany beyond the available purchase space under current parameters.
Here Goldman warns that while in theory the ECB has significant runway, in practice, the central bank will not be able to expand the purchase space up to these theoretical limits under any parameter constellation due of liquidity concerns and scarce supply in certain bond market segments. On balance, Goldman’s estimates point to limited headroom under the current programme parameters to extend sovereign QE as suggested by President Draghi in his Sintra speech. For instance, an extension by nine months at a pace of EUR 25bn looks feasible (Exhibit 7, left panel).
However, beyond that Stehn sees significant political, legal and reputational hurdles to a relaxation of the issue and issuer limits, as well as the capital key allocation principle. Should the ECB nonetheless lift the current constraints, a relaxation of the issue and issuer limits looks more likely than a move away from the capital key. With this change a longer extension of the programme—say for twelve months—at a substantially higher monthly purchase pace—such as €75bn—would become feasible, translating in roughly $1 trillion in asset purchases by the ECB in one year.
On the other hand, implementing a small extension of sovereign QE would have a limited impact on long-term Euro area yields through the extraction of duration risk based on Goldman’s prior estimates (Exhibit 7, right panel). At the same time, such an announcement could be interpreted as a powerful signal that more QE is in the pipeline and hence have an outsized yield effect relative to its limited volume. Finally, any modification of the technical parameters could be complemented by a maturity “twist” towards longer-dated securities. This would increase the duration absorption of ECB purchases and elicit larger yield effects.
Putting these proposals together, Goldman considers three hypothetical bundles.
First, a “small” program which includes a 10bp deposit rate cut and corporate purchases (scaled to EUR 5bn per month for six months).
Second, Goldman constructs a “medium” package which includes a 20bp rate cut with tiering, somewhat stronger forward guidance, corporate purchases (EUR 5bn per month for nine months) and limited sovereign purchases (EUR 25bn per month for nine months).
Third, the bank considers a “large” package that contains more aggressive sovereign purchases (scaled to EUR 75bn per month for twelve months) via an increase in the issuer limit, in addition to the other elements in the medium package.
In terms of practical consequences, Goldman finds that the small package would provide a limited boost to financial conditions of around 10bp. The medium package could have notably larger effects, easing our FCIs by 30-40bp, mainly via the rate cut and the enhanced forward guidance. The large package would, obviously, bring the FCI to around 60bp, as sovereign QE provides a significantly bigger effect. In terms of the real-world, the bank’s estimates suggest that the medium package might boost area-wide growth by 0.3-0.4pp over the subsequent year., and modestly more for a full-blown QE package.
While those are the theoretical constructs the ECB is facing, looking at next steps, Goldman expects the Governing Council to adopt the “or lower” easing bias for policy rates in July and indicate that the ECB will analyze QE options for September. At that point look for an easing package that closely resembles the “medium” package discussed above, including a 20bp rate cut with tiering, enhanced forward guidance and a return to QE.
Furthermore, Goldman expects the asset purchases to include corporate bonds and sovereign debt within the existing PSPP headroom, paired with a signal that the Governing Council stands ready to expand the sovereign purchase program with an increase in the issuer limit if economic conditions do not improve.
Finally, while earlier action is possible, the September meeting appears the most likely given new staff projections and the timing of the next FOMC meeting, which is at the end of July 30-31.
via ZeroHedge News https://ift.tt/2RNg2O4 Tyler Durden
In a bizarre flashback to the 1990s, domestic restrictions on the use of encryption are being proposed once again.
Politico has reported that a National Security Council committee discussed last week whether to ban encryption without a mandatory backdoor for government access to plaintext. “Senior officials debated whether to ask Congress to effectively outlaw end-to-end encryption, which scrambles data so that only its sender and recipient can read it,” the article said.
The best way to read this report is that it represents the latest extrusion of the permanent cadre of law enforcement and national security bureaucrats who have never abandoned their efforts, underway for over 20 years, to allow U.S. government agencies to break or bypass encryption embedded in hardware and software products.
The last time this extra-constitutional campaign against encryption kicked off was during the George W. Bush administration, in mid-2008, when FBI officials briefed Senate Intelligence committee members on what they called the “Going Dark” problem. This campaign continued without apparent interruption during the Barack Obama administration, when the FBI asked all field offices in 2009 for anecdotal information about cases in which “investigations have been negatively impacted” by encryption. By 2012, as I disclosed in an article at the time, the FBI had drafted a proposed law to force tech companies to build in backdoors and was asking the companies not to oppose it. That legislation was never publicly introduced.
Details on the latest discussions are nonexistent, as Politico delicately acknowledged (they were “unable to determine what participating agency leaders said during the meeting”). But anti-crypto legislation has been introduced in the past.
In 1997, after lobbying by law enforcement and intelligence agencies, one House of Representatives committee actually voted for mandatory backdoors. The committee’s rewritten version of the bill, H.R. 695, said: “After January 31, 2000, it shall be unlawful for any person to manufacture for distribution, distribute, or import encryption products intended for sale or use in the United States, unless that product includes features or functions that provide an immediate access to plaintext capability” in response to a court order. The plaintext must be able to be acquired, the legislation said, “without the knowledge or cooperation of the person being investigated.”
Industry efforts killed this version, and it was not taken up by the full House of Representatives. But let’s review for emphasis. Elected members of Congress actually wanted to imprison American citizens (and permanently take away related liberties like the right to own firearms, as the U.S. Court of Appeals for the 7th Circuit recently reminded us) for allowing other Americans to communicate privately. A lawyer, working as legislative counsel, actually agreed to undertake the task of drafting language. And a committee of the U.S. Congress actually voted for it.
In a constitutional republic, this is properly seen as risible. Police may be granted the authority, through legal processes, and within reasonable limits, to search our possessions. But they are not guaranteed success. We are not required to speak only in languages that senior FBI officials prefer. We are not required to talk only in locations where police can readily eavesdrop. As John Gilmore, the libertarian co-founder of the Electronic Frontier Foundation, pointed out during the 1990s crypto wars, the patriots fighting the American Revolution were able to enjoy perfect privacy by rowing to the middle of Boston Harbor. (Encryption wasn’t unknown to those revolutionaries either.)
Based on the Politico report, last week’s meeting is the continuation of efforts by federal agencies that now qualify as multi-generational. It can be traced back to when the National Security Agency convinced IBM to use a shorter, easier-to-crack key length for the DES encryption algorithm in the 1970s, and continues through the National Security Agency’s efforts, disclosed by Edward Snowden, to weaken encryption algorithms today. This is what detractors might call the “deep state,” the unseen government within the government that does not change with elections, which outlasts individual politicians and department heads.
In other words, this is no Trump administration-specific plan. But the danger is that it could become one.
If there’s a terrorist attack with mass casualties, and encryption is reported to have been involved, look for a renewed push for domestic restrictions on encryption without backdoors. Technology companies will complain, of course, but in a political environment where the executive branch has turned against Silicon Valley because of its increasing bias against conservatives—a White House summit on that topic is planned for July 11—would anyone expect the president to listen?
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Law enforcement officials have tried every trick to attempt to convince Americans to accept civil asset forfeiture, the controversial process that allows the police to take and keep the money and property of those who are suspected, though not convicted, of criminal activity. In particular, police and prosecutors often insist that they need the seized money and property to help fight the war on drugs.
Polls show that most Americans disapprove of these seizures when they understand what they actually are. Most Americans rightfully think that law enforcement should have to convict somebody of a crime before taking their stuff.
The FBI, faced with such disapproval, and hoping to protect its controversial methods, has now brought out the big guns: adorable puppies. Among other things, the FBI uses civil asset forfeiture to extricate pups when they raid dog-fighting operations. So the agency has put together a video and story purporting to show how important civil asset forfeiture is for the care and safety of such animals.
The FBI claims that historically it has had to euthanize the animals found in dog-fighting operations because the agency couldn’t adopt them out until after the dogs’ owners had been convicted. More recently, the FBI says, it has used civil asset forfeiture to get legal control over the dogs more quickly. The FBI explains:
“Typically, when you’re dealing with cash or jewelry or some other inanimate object, it doesn’t matter if you wait until the end of the criminal case to deal with it,” said Mary Hollingsworth, an attorney with the Wildlife and Marine Resources Section in DOJ’s Environment and Natural Resources Division (ENRD). “Dogs may start to decline physically and psychologically after about six months, even in the best shelter setting. They are not meant to be in cages with limited human interaction and exercise for long periods of time.”
It’s obvious that the intended message here is that civil asset forfeiture is a necessary tool for keeping these dogs alive. But there’s an even better solution. The story notes that that these pups had foster families before they were fully adopted. If the FBI is unable to adequately care for the live creatures it seizes, fostering the dogs would seem to be a perfectly adequate fix while the dogs’ owners are being prosecuted.
The federal code outlawing animal fighting allows for the dogs to be held by any “authorized person,” and the FBI’s own story notes that its agents immediately team with private partners for kenneling and animal care upon seizure of the dogs. So why not just foster all dogs that are seized in such cases? The dogs would be well cared for and properly socialized by loving homes. If it turns out that the dogs’ owners are innocent, the dogs can be returned to them. No animals need to languish and die in cages.
Throwing live animals into the mix doesn’t magically make it more ethically acceptable or constitutional to seize a person’s property without first securing a conviction. There are ways to manage these pups without violating the Fifth Amendment. This video is not the justification for civil asset forfeiture that the agency is looking for.
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Let me warn you right up front – the information in this article might freak you out. If what some experts are telling us is true, a global food crisis appears to be inevitable. Even during good years we have a really difficult time feeding everyone on the planet, and now a major climate shift appears to be happening. Our sun has become exceedingly quiet, and many experts believe that this is a sign that a solar minimum is now upon us. Of course we have seen solar minimums happen quite regularly in the past, and if this is just a normal solar minimum then conditions should begin to return to normal after a couple of years. Unfortunately, evidence continues to mount that we have entered what is known as a “grand solar minimum”. In fact, Professor Valentina Zharkova says that what we are facing is a “super grand solar minimum”, and if that is true we are going to be facing climate chaos like we have never seen before. During previous “grand solar minimums” the globe was gripped by devastating famines and vast numbers of people died. Could a similar scenario potentially be in our future?
Ice Age Farmer has compiled a “Grand Solar Minimum Crop Loss Map” which you can view right here, and I appreciate our friends at ANP for pointing it out to us. Ice Age Farmer’s map shows that there are literally dozens of locations all over the globe right now that are reporting significant crop losses, and this is really unlike anything we have ever seen before. Some parts of our planet are dealing with horrific drought, but in the middle of the United States it just won’t stop raining. In some areas of the world it is too cold, while others are experiencing record heat. Everywhere we look we see extremes, and the behavior of our sun is the primary reason this is happening.
Last November I warned that we could be facing one of the coldest winters in modern times, and that is precisely what happened. Back then top scientists were warning us that a solar minimum had arrived, and since that time the behavior of the sun has continued to confirm that hypothesis…
The surface of the sun is normally a roiling, super-heated hellscape.
But Nasa images have revealed that the face of our star is looking ominously calm right now, prompting claims it’s reached a stage of its cycle called the solar minimum.
During the minimum, there are significantly fewer sunspots and its magnetic field weakens, allowing cosmic rays from outside our solar system to rain down on Earth.
This solar minimum came early, and that is exactly what we would expect if we were entering a “grand solar minimum”. Perhaps the best known “grand solar minimum” in our history was the Maunder Minimum which stretched from 1645 to 1715…
The last time a deep solar minimum was in effect was the Maunder minimum, which saw seven decades of freezing weather, began in 1645 and lasted through to 1715, and happened when sunspots were exceedingly rare.
During this period, temperatures dropped globally by 1.3 degrees celsius leading to shorter seasons and ultimately food shortages.
The food shortages during the Maunder Minimum were quite severe, and the global death toll was enormous.
Could we be facing a similar scenario this time around?
The Maunder Minimum created such a deep cold in Europe and extreme weather events elsewhere that what unfolds is a series of droughts, floods, and harvest failures. Historically, this leads to massive migrations, wars and revolutions. The fatal synergy between human and natural disasters eradicated perhaps one-third of the human population during the last event and this time we are crashing more rapidly than before. Therefore, we may exceed more than a reduction in population of one-third and reach the levels of the 14th century of 50%, which was also combined with the Black Plague.
Without a doubt, our planet is behaving very strangely right now, and reports of crop failures are regularly coming in from all over the planet.
That layer of stress on the agricultural industry is only intensified when you zoom out to the international level, where farmers around the world are facing various dire situations. As one North Dakota farmer and Twitter user Jordan Gackle pointed out in a recent thread: Drought is continuing to disrupt wheat crops in Australia forcing the country to import some of its wheat from Canada. Some farmers in Canada are now reporting long stretches without rain under the hashtag #drought19. Head over to China and you’ll find that a legion of fall armyworms are spreading rapidly and devouring key grain crops.
It is becoming quite clear that food prices are going to rise substantially and that the world is going to produce a lot less food than it normally does this year.
And as I noted earlier, we have a tough time feeding everyone on the planet even during ideal conditions. Sadly, this even includes the United States…
So what will things look like if global food production drops 10 percent, 20 percent or even more?
We have never had to deal with anything like this in modern times, and meanwhile the population of the planet has grown from 1.6 billion in 1900 to 7.5 billion today.
We have entered the time of “the perfect storm”, and we are going to start to witness things happen that many people would consider to be unimaginable.
I truly hope that things will not be as bad as some of the experts are suggesting. But as far as crop failures are concerned, we don’t have to speculate. They are happening right now all over the planet, and that means that global food supplies are going to get tighter and tighter in the months ahead.
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