Trump’s Reckless Hostility Unites China And Russia

Authored by Eric Margolis via EricMargolis.com,

Good work Mr. President! You have now managed to lay the groundwork for a grand Chinese-Russian alliance. The objective of intelligent diplomacy is to divide one’s foes, not to unite them.

This epic blunder comes at a time when the US appears to be getting ready for overt military action in Syria against Russian and Syrian forces operating there. The excuse, as before, will be false-flag attacks with chlorine gas, a chemical widely used in the region for water purification. It appears that the fake attacks have already been filmed.

Meanwhile, some 303,000 Russian, Chinese and Mongolian soldiers are engaged in massive maneuvers in eastern Siberia and naval exercises in the Sea of Japan and Sea of Okhotsk. The latter, an isolated region of Arctic water, is the bastion of Russia’s Pacific Fleet of nuclear-armed missile submarines.

Interestingly, President Vladimir Putin, who has attended the war games with his Chinese counterpart, Xi Jinping, just offered to end the state of war between Russia and Japan that has continued since 1945. He also offered some sort of deal to resolve the very complex problem of the Russian-occupied Kuril Islands (Northern Territories to Japan) that has bedeviled Moscow–Tokyo relations since the war. The barren Kurils control the exits and entry to the Sea of Okhotsk where Russia’s nuclear missiles shelter.

In the current war games, Russia has deployed 30,000 military vehicles and 1,000 combat aircraft. China contributed 3,200 troops, 30 warplanes and naval units. Most of the equipment deployed in Vostok-18 was state of the art. Russia’s and China’s infantry, artillery and armor appeared impressive and combat ready – or as we in the US Army used to say, ‘STRAC.’

Why were these huge exercises being held in remotest eastern Siberia? First, so China could contribute forces close to its territory. Second, as a possible warning to the United States not to invade North Korea, which is just to the south and abuts on both China and Russia. Third, as a demonstration of the improved effectiveness of Russia and China’s military and as a warning to the US and its NATO satraps not to pick a fight with Russia over Ukraine, Syria or the Black Sea.

On a grander scale, Beijing and Moscow were signaling their new ‘entente cordiale’ designed to counter-balance the reckless military ambitions of the Trump administration, which has been rumbling about a wider war in Syria and intervention in, of all places, Venezuela. The feeling in Russia and China is that the Trump White House is drunk with power and unable to understand the consequences of its military actions, a fact underlined by recent alarming exposés about it.

Russia and China appear – at least for now – to have overcome their historic mutual suspicion and animosity.

In the over-heated imagination of many Russians, China often appears to be the modern incarnation of the Mongol hordes of the past that held ancient Rus in feudal thrall. Russians still call China ‘Kitai’, or Cathay.

For the Chinese, Russia is the menacing power that stole large parts of eastern Siberia in the 19th century. Today, Russia frets that China’s 1.4 billion people will one day swamp the Russian Far East which has only 6.2 million inhabitants spread over a vast, largely empty region which is one of the world’s least inhabited.

In the 1960’s, after the Soviet Union and China became ideological antagonists, the two sides frequently clashed along their border rivers, Amur and Ussuri. They almost stumbled into a full-scale war on their 4,000 km border– at a time when the US had invaded Vietnam supposedly to ‘halt Chinese-Soviet aggression.’ The CIA was as ill-informed back then as it is today.

Vladimir Putin and Xi Jinping attended the grand display, along with their senior military staffs. This week-long martial event, Russia’s largest war games in almost four decades, overshadowed the smaller military exercise being staged by NATO in Ukraine.

The message from eastern Siberia was clear: Washington’s reckless hostility and bellicosity is causing its foes to band together. A full third of the Russian Army just moved from Europe to the Far East for the war games. The Chinese dragon of which Napoleon warned is awakening.

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These Are The Hottest Neighborhoods For Millennial Transplants

Most American cities have already reached “Peak Millennial” as the number of young people moving to trendy downtown areas has finally started to wane after years of growth (coincidentally, this trend has started to accelerate just as new data showing 30% of student-loan borrowers are delinquent has surfaced, but who are we to imply causation?) Still, even if they don’t have the means to live downtown, living the city life is still an aspiration for millions of millennials who crave the walkable lifestyle and proximity to friends as more of them put off having families and buying homes.

Millennials

To be sure, demographic trends are constantly in flux. And for anybody hoping to predict which neighborhoods might become hotspots for gentrification in the not-too-distant future, RentCafe has ranked zip codes in the 30 largest American cities by the popularity among the millennial cohort. To arrive at its conclusions, RentCafe looked at the increase in the millennial population in each individual zip code over a period of five years.

Here are some of the highlights of what they found:

  • Downtown Los Angeles dominated the rankings, taking the top two zip codes.
  • On the East Coast, Lower Manhattan dominated the rankings, with millennials flocking to Battery Park City, the most expensive zip code in the US.
  • Portland, Ore. has also become a hot spot, with millennials increasingly moving to Kerns-Laurelhurst.
  • Denver has four zip codes in the top 20 fastest-growing in the US
  • In total, Los Angeles had 3 neighborhoods in the top 20, while Manhattan had 2, Philly had 2 and San Francisco had 2.

A full accounting of RentCafe’s top 20 hottest neighborhoods are ranked below:

RentCafe

However, when measuring by total millennial population, the totals look slightly different. By this metric, downtown Chicago dominates, with a whopping 73% of residents in the city’s West Loop neighborhood falling into the millennial cohort. Next on that list is Philadelphia’s Manayunk.

The Financial District in lower Manhattan comes in third, with 71% of the total population. Boston’s financial district takes fourth place, followed by DuPont Circle in Washington, DC. The downtown areas of Denver, Dallas, Oklahoma City, Columbus, Charlotte and Indianapolis also emerge are also hot spots.

RentCafe

While it’s definitely true that millennials receive more than their fair share of criticism from their elders (not all of it deserved), data show that – contrary to being lazy – they are actually the generation most likely to forfeit vacation time. So if they can’t afford a home or a fancy vacation, at least they can try and make up for it by living in a hip neighborhood with a vibrant dating scene and where most of the bars are walking distance.

 

 

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The Major Attack On Syria Followed Putin-Erdogan Agreement For Demilitarized Zone In Idlib

The world once again was taken to the brink of World War 3 Monday night, and the situation is still extremely dangerous. A massive wide-ranging assault on multiple Syrian provinces, including the coastal cities of Latakia and Tartus, occurred Monday evening reportedly by Israel and possibly with the help of France or the US, though the Pentagon is denying any US assistance during the assault. 

With Syrian and Russian air defenses responding during the over hour-long attack which targeted among other things an alleged chemical weapons research center, and in the confusion of missiles cross the sky, a Russian maritime patrol plane was shot down with 14 personnel on board. The Pentagon is claiming it was Syrian defense which “accidentally” downed the plane, while Russia is pointing out its radar observed a French frigate firing in the area just before the plane went down

Regardless, this is an incredibly dangerous situation which puts world powers closer to major war. And crucially, the whole event came immediately after Russia and Turkey announced they’ve agreed to establish a “demilitarized zone” around Idlib

Before talks in Sochi on September 17, via AP.

The Russian Ministry of Defense (MoD) announced just hours before the reported Israeli attack was initiated that Russia and Turkey have agreed to establish a 15-20km demilitarized zone along Syrian government positions.

This means the widely reported Syrian-Russian offensive is off for the time being, according to the Russian MoD.

But this raises the following questions given the timing of Monday’s night’s escalation: with Putin negotiating for a ‘world power deescalation’ over Idlib after the US threatened attack, was Monday’s attack part of an Israeli (and Western allies) strategy for keeping regime change in Damascus on the table? Why escalate now? 

This at the very least appears a conscious effort to keep the fires burning in Syria, to prevent Putin from being in the driver’s seat, and to continue to provoke hostilities with the Tehran-Damascus axis, and to further keep alive the possibility of the eventual military ouster of Assad. 

After Monday’s meeting Putin related to reporters the details of the Russia-Turkey-Syria demilitarization deal: “At the meeting, we discussed in detail this situation (in the Idlib governorate) and decided to establish a 15-20km-wide demilitarized zone along the contact line between government troops and the armed opposition by October 15, 2018 and evacuate radical militants, including Jabhat al-Nusra,” he said.

Putin explained that at the Turkish president’s initiative, there will be a planned “withdrawal from this zone heavy weapons, tanks, multiple missile launcher systems, artillery systems and mortars of all opposition groups” by October 10″. “Control in the demilitarized zone will be exercised by mobile patrol groups of Turkish units and units of Russian military police,” Putin said. 

He added that the sides agreed to “resume transit traffic along the Aleppo-Latakia and Aleppo-Hama highways by the end of 2018, also at the initiative of the Turkish side.”

“Russia and Turkey are working closely to resolve the Syrian crisis, to strengthen the ceasefire and improve the humanitarian situation,” Putin said. Putin further said the deal involves Syria agreeing to “coordinated solutions,” but that the details of the deal are still being worked out with Damascus. 

“In general, the Syrian leadership supports this approach,” he said. “We will hold additional consultations with the Syrian authorities soon.”

“Russia and Turkey reiterated their commitment to continue anti-terrorism efforts in Syria in any of its forms or manifestations,” Putin stressed. “We agreed that practical implementation of the steps we plan will give a fresh impetus to the process of political settlement of the Syrian conflict and will make it possible to invigorate efforts in the Geneva format and will help restore peace in Syria.”

Putin also emphasized that the sides will work together to root out terrorists across Syria. 

But given Monday night’s massive escalation, it doesn’t appear Israel or its Western allies want to see to this deal take effect. 

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WikiLeaks Disputes That Assange Sought Russian Visa, Slams AP “Assange Letter” As Fake

For years international media outlets worked collaboratively with WikiLeaks to publish leaked files on subjects ranging from the Iraq and Afghan wars to Syria to State Department diplomatic cables, but now it’s WikiLeaks itself that media outlets are attempting to expose. 

An exclusive Associated Press story claims that WikiLeaks founder Julian Assange sought to obtain a Russian visa as his legal troubles and pressures from Western politicians grew. This comes after US officials have long sought to smear Assange as a Russian asset and the WikiLeaks organization as a whole as working with Russian intelligence. 

The AP has published a letter it says is from a WikiLeaks laptop and penned by Julian Assange only days after the group made world headlines by publishing hundreds of thousands of US diplomatic cables in 2010, however WikiLeaks immediately disputed the authenticity of the letter

The AP story begins as follows

Julian Assange had just pulled off one of the biggest scoops in journalistic history, splaying the innards of American diplomacy across the web. But technology firms were cutting ties to his WikiLeaks website, cable news pundits were calling for his head and a Swedish sex crime case was threatening to put him behind bars.

Caught in a vise, the silver-haired Australian wrote to the Russian Consulate in London.

“I, Julian Assange, hereby grant full authority to my friend, Israel Shamir, to both drop off and collect my passport, in order to get a visa,” said the letter , which was obtained exclusively by The Associated Press.

The letter, though unsigned, is dated from Nov. 30, 2010 and is said to prove that Assange was giving serious thought to moving to Russia at the time, presumably to ensure he wouldn’t be apprehended by police or intelligence agencies in the West. 

It was a couple of years prior to Assange’s seeking refuge at the Ecuadorian embassy in London; however, his international stature as a controversial figure was rising and Sweden was building a legal case against him for sexual assault allegations. 

The AP published the letter Monday as part of what’s described as “a much larger trove of WikiLeaks emails, chat logs, financial records, secretly recorded footage and other documents leaked to the AP”

More significantly, the AP frames the internal messages of the controversial organization as “an early hint of Assange’s budding relationship with Moscow” — a theme which the organization’s many enemies, including leading Democrats, have emphasized especially after the election of Donald Trump. 

Over the years Assange has consistently and vehemently denied associations with Russian intelligence; and has further hinted the DNC leaks came from within the Democratic Party. 

The letter’s contents show that a WikiLeaks associate named Israel Shamir was authorized to deliver the request to the Russian consulate in London. The AP also published a page which purports to prove that WikiLeaks had the letter notarized at the time using a copy of Assange’s passport for identification. 

Meanwhile WikiLeaks on Monday slammed the letter as fake, saying in a statement published to Twitter: Mr. Assange did not apply for such a visa at any time or author the document. The source is document fabricator & paid FBI informant Sigurdur Thordarson who was sentenced to prison for fabricating docs impersonating Assange, multiple frauds & pedophilllia.

For its part the Russian Embassy in London told the AP that it never discusses as a matter of policy who applies for a visa and who doesn’t.

The AP report describes the tens of thousands of files now in its possession as possibly “the biggest leak yet” on the transparency organization. And further that: “The AP has confirmed the authenticity of many of the documents by running them by five former WikiLeaks associates or by verifying non-public details such as bank accounts, telephone numbers or airline tickets.”

However, concerning the alleged WikiLeaks “Russian connection”  it is unlikely that there’s anything damning on this front, otherwise the AP would have published it first. 

In 2013 NSA leaker and whistleblower Edward Snowden obtained temporary asylum status in Russia after fleeing arrest. Snowden’s enemies too have accused him of being a Russian asset due to his ending up in Moscow after going public with the leaks from a hotel room in Hong Kong. 

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The Cure For Homelessness

Authored by Jacob Hornberger via The Future of Freedom Foundation,

One of most fascinating characteristics of progressives (also known as “liberals”) is the blindness they display to the adverse consequences of their very own government programs.

Instead of acknowledging what their statist programs do to people and then calling for their repeal, they inevitably call for new government programs to address the ills that their government programs are causing.

A good example of this phenomenon was an article entitled “The Homelessness Crisis Continues. Maybe Libertarians Have a  Solution?” which was published last June by a newsweekly in Seattle called The Stranger. The author of the piece was an associate editor at The Stranger named Eli Sanders. Sanders is no dummy. In 2012 he was awarded a Pulitzer Prize in featured writing. His book, “While the City Slept,” was a finalist for the Washington State Book Award and the Dayton Literary Peace Prize.

Yet, Sanders’ article, which mocks and ridicules libertarians, including me, for their supposed solutions to homelessness is a pathetic display of moral, political, and economic obtuseness. That’s because Sanders, like other statists, simply cannot bring himself to acknowledge and address the two root causes of homelessness, especially in Seattle — zoning and minimum-wage laws, both of which are warmly and enthusiastically embraced by both the left and the right and ardently opposed by libertarians.

What does Sanders say in his anti-libertarian screed? Ignoring libertarian calls for repeal of zoning and minimum-wage laws, he instead lists a number of other supposed libertarian solutions to homelessness, such as “giving homeless people guns,” “doing nothing,” “empowering individuals,” and “ending income taxation” (where he mentions me), all the while implicitly mocking and ridiculing libertarians for not coming up with real solutions to homelessness.

Why does Sanders choose to remain silent about libertarian opposition to zoning laws and minimum-wage laws in the context of the homelessness debate?

The answer is simple: Whether we are dealing with the drug war, the war on poverty, the forever wars on Iraq and Afghanistan, the war on immigrants, or any other statist program, statists have a terribly difficult time acknowledging the failure and destructiveness of their own government programs. They will do everything they can to avoid taking personal responsibility for what their statism has wrought.

The fact is that Seattle is one of the most zoned cities in the country. Its zoning laws date back to 1923! It also has a mandatory minimum wage of $11.50 an hour, with it slated to increase to $15 over the next several years. Surely, Sanders realizes these things. The problem is that his mindset prevents him from connecting the dots. Given that the minimum wage and zoning are so deeply embedded within the statist mindset and within Seattle society, he is unable to bring himself to recognize that these two statist programs are the root cause of the problem he laments — homelessness — and that the solution to homelessness, especially in Seattle, lies in simply repealing the city’s zoning laws and abolishing the national, state, and local minimum-wage laws.

What is zoning? It is a government program that consists of mandatory rules, regulations, and laws that prevent or inhibit low-income housing from being built within a community. It obviously doesn’t occur to Sanders that builders cannot build low-cost housing for the poor in Seattle when zoning laws prohibit them from doing so.

The situation is aggravated by the fact that the poor are locked out of the labor market by the government’s mandatory minimum wage. Suppose, for example, that a homeless man is willing to work for $5 an hour and that an employer is willing to hire him at that price. They can’t make the deal because the law makes it illegal for them to enter into that consensual transaction.

The progressive says, “We are just trying to protect the poor from being exploited.” But that’s ridiculous because a person’s whose labor is not valued by employers at the mandatory minimum isn’t going to be hired at all.

He goes unemployed, permanently. The minimum wage law is the reason why there has been a chronic, permanent unemployment rate of 30-40 percent among black teenagers for years. At the risk of belaboring the obvious, an unemployed person is prevented from earning the money he needs for a down payment on those expensive single-family homes that Seattle’s zoning laws mandate. Duh!

I grew up in Laredo, Texas, which the Census Bureau in the 1950s labeled the poorest city in the United States. Laredo did not have zoning. We had a family friend who was a builder. His specialty? Building low-income housing for the poor. He once explained to me that he would travel into Mexico (Laredo is situated on the border) and purchase low-cost building supplies, which enabled him to build low-priced housing that served poor people. His places were always super-clean, super-nice, super-maintained, and super-sold out.

Was my friend doing this out of a sense of altruism and love for the poor? On the contrary. He was doing it to make money. He was the classic example of what people on the left call a no-good, capitalist, profit-seeking, bourgeois swine. And my friend was a wealthy man because poor people loved his housing.

Among the best aspects of my friend’s low-cost housing was that residents weren’t prohibited from making too much money, as people are who live in the federal government’s public housing projects, another favorite program among statists, one that is called into existence to address the homelessness that comes with zoning laws and minimum-wage laws.

Oh, maybe I should mention something that might interest Sanders: There was never a homelessness problem in Laredo. Lots of poverty, yes. But never a homeless problem, like the one that exists in Seattle, with its statist programs of massive zoning and minimum-wage laws.

Let me conclude this article by stating that I plan to send it to Eli Sanders. I’m curious as to whether he would like to write a follow-up piece addressing the actual two main libertarian positions to end homelessness in Seattle: Repeal the city’s zoning laws and all minimum-wage laws. Don’t hold your breath. It’s easier for leftists to attack straw men than to confront the consequences of their favorite statist programs.

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Rents Soar As Chinese Plan To Cool Real Estate Bubble Backfires

Beijing has been trying to calm its bubbly real estate market with policies that divert investor funds into China’s rental market. But the policy shift to increase the supply of rental housing has backfired, leaving most middle-class Chinese with a rapid increase in living expenses. The reason: the government’s latest centrally planned initiative has had an unintended effect: a flood of property investors into the rental market has dramatically pushed up prices.

This summer, rents in eleven major Chinese cities climbed by an average of over 20% Y/Y in July according to an August 22 report by Chinese newspaper 21st Century Business Herald, citing data from CityHouse.cn.

The most significant increase did not occur in the capital of Beijing – the capital ranked sixth place among the eleven cities, with an increase of about 22%. Chengdu, the capital of southwestern China’s Sichuan Province, had the largest uptick, of more than 31%; followed by 30.7% for Guangzhou, a port city in southern China; and 30.5% for Shenzhen which borders on Hong Kong.

The sudden spike in rental prices has placed a heavy burden for many middle- and low-income workers said Reuters. While President Xi Jinping promised to support these people, they are now forced to seek smaller homes and are relocating to less desirable neighborhoods because of housing affordability issues.

Reuters said real estate investment firms are flushed with cash and have jumped into the rental market all at once “thanks” to the government’s instruction. As a result, many of these companies have been aggressively acquiring or developing hundreds of thousands of rental homes in the past year, affording them oligopolistic pricing power.

Here is the results: in 2017, Wang Zhilu, 23, rented a flat in a mid-tier Beijing neighborhood for 3,000 yuan ($438.17) per month. In less than 12 months, he now pays 4,500 yuan for a similar apartment down the street. That represents a near 50% increase in rent which Zhilu said caused him financial harm.

* * *

Soaring rents across major Chinese cities is dangerous for the communist regime. Widespread public frustration is growing as the cost of living outpaces salary growth for many young people, which if history serves for any government, could trigger a severe social uprising, something that Beijing has always tried to avoid.

“Rent now makes up about 30 percent of my salary while my housing condition is worse,” said Tian Enyu, a 35-year-old divorced office manager in Beijing.

Putting the “rent to income” ratio in context, 30% of middle- and or a low-income workers’ salary is the upper extreme of what they should pay for rent on a per annum basis, leaving them the ability to cover other expenses. Once 30% is breached, financial stress starts to affect the monetary decisions of the working class, and usually results in social change.

But the bigger take home is that Beijing’s attempts to control the formerly overheating housing market – and drive speculators into rental properties – is another instance of government intervention in markets failing to generate the desired outcome.

But why did developers flood the rental market? Simple: blame the ‘window guidance’ of central planners who effectively instructed investors to pile into the rental housing sector. The result are clear:

  • Ziroom, which is owned by Zuo Hui, chairman of the Chinese real estate broker Lianjia, raised 4 billion yuan ($582 million) in January from investors including Tencent Holdings, Warburg Pincus and Sequoia Capital.
  • GIC Private Limited, a sovereign wealth fund established by the Government of Singapore, launched a 4.3 billion yuan ($625 million) venture with Nova Property Investment in May to acquire rental apartments in major Chinese cities.
  • Tiger Global Management, an American hedge fund and family office, led a $70 million financing round in June for Danke, a Beijing-based rental flat operator.

Reuters said Ziroom had controlled about half a million rooms in China and commanded a market share of 30% at the end of 2017. Xiangyu, a rental firm owned by 5I5J, was a close second with a 27 percent share.

Approximately 1.66 million rooms were owned or managed by rental companies and developers at the end of last year.

Ziroom and Xiangyu typically buy units from property owners. They then quickly renovate the properties and rent them out at a premium, which some experts tell Reuters its a “forced upgrade” for tenants.

“These companies are very aggressive in securing flats this year,” said Yu Runze, who leased his two-bedroom Beijing apartment to Ziroom for 7,800 yuan a month in May after rejecting an offer from Xiangyu.

The rent that Xiangyu charges is often double the price that it pays to flat owners for their properties, said Zhang Yongjing, a former property agent with 5I5J in northern Shanxi province’s capital, Taiyuan.

Meanwhile, even though rental companies have been widely accused of driving up prices, a lack of regulations means that government overseers have limited mobility to act on pricing or enforce rules. A housing ministry source told Reuters that the government does not have an official rent tracking system, though it is “closely monitoring the situation”.

According to Hu Jinghui, a former vice president at 5I5J, there are about a million homes available for rent in Beijing, but homeowners have left them empty and decided to speculate on market trends.

As one would expect, bubble growth in a sector with limited government oversight has created unexpected financial risks. Dingjia, a Hangzhou-based rental company, went bankrupt in August due to what its chief executive called an aggressive market expansion.

Meanwhile, Beijing appears to remain blind to the risks: a source at one of China’s top banks told Reuters they had not received any guidance to tighten financing to the sector. Sources close to the government, who also requested anonymity, said that they were unaware of any major change in policy despite the rising risks.

“The market is neither balanced nor transparent,” said a source at the Ministry of Land and Resources. But “if Xi doesn’t say something needs to be done, these ministries won’t do anything.”

And that is why Chinese rents will only keep rising until some breaking point is finally reached.

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Ten Years After Lehman: The Solution Was “More Lehmans”

Authored by Daniel Lacalle via The Mises Institute,

The day Lehman went bankrupt I left the office in London for Waterloo Station and realized that something monumental had happened. The faces of the dozens of people waiting patiently for trains from the center to their homes were revealing. Most of them were, like me, City workers. Panic.

I remember when Freddie Mac and Fannie Mae – both government entities – were bailed out, because it happened shortly before the Lehman collapse. They were the largest originators of subprime mortgages.

Why were subprime mortgages originated by Freddie and Fannie given maximum rating and credit quality? Because they had the government stamp.

What had happened with Lehman? The CEO, Richard Fuld, had been saying for some time that its situation was impeccable, that solvency and liquidity ratios were strong and the viability of the bank was out of the question. He also repeated something we hear too often nowadays, that the shares were simply under the “attack of speculators”. Many of my readers will remember similar excuses in Popular, Monte dei Paschi, Abengoa, Tesla and so many others. This “speculator attack” excuse was used a lot years later during the Eurozone crisis.

Lehman Brothers was not a commercial bank, managing deposits of retail savers, it was an investment bank. Their clients were “competent persons” that is, those that regulators deem with sufficient knowledge of the risk and complexity of the financial products they are offered. It is not possible to contract the services of an investment bank without being a competent person. Lehman was not run by incompetent people. It was managed by people that firmly believed in the system and that analysed risk the way that central banks and governments tell them to. Lehman accumulated high-risk mortgages in its assets because it believed, as so many analysts, commentators and experts said, that these assets had very little risk.

Crises never happen due to accumulation in high-risk assets, but due to the massive accumulation of assets that the entire mainstream deems as “low risk”. Houses never fall, the economy is booming, etc.

Lehman was a prime example of mainstream consensus analysis of risk and economic opportunity. When asset prices fall, buy more.

Lehman did not buy low. It bought in the middle of an already building bubble. More importantly, it did not sell high. It kept riding the gravy train.

Lehman acquired five mortgage lenders in 2003 and 2004, including subprime lenders, when house prices were already soaring. Its acquisitions were lauded by many analysts as genius. As the bubble grew, Lehman’s real estate division led the capital markets unit profits to soar more than 50% between 2004 and 2006. it was the fastest growing division in the entire business. Valuations reflected that “success” sending the multiples at which brokers valued the Lehman stock at all-time highs.

Janet Yellen said in 2005:

“In my view, it makes sense to organize one’s thinking around three consecutive questions –three hurdles to jump before pulling the monetary policy trigger.

First, if the bubble were to deflate on its own, would the effect on the economy be exceedingly large?

Second, is it unlikely that the Fed could mitigate the consequences?

Third, is monetary policy the best tool to use to deflate a house-price bubble?

My answers to these questions in the shortest possible form are, “no,” “no,” and “no.””

Her analysis would not be as clear later in her years as Chairman of the Fed, where she saw no signs of bubbles.

Yellen was not as clear on the housing bubble as it looks. She also spoke of “sophisticated financial products that mitigate risk and facilitate access to housing financing” and Bernanke spoke of “a slowdown, but not a fall“. In essence, she said what most were saying. “Housing is a relatively small sector of the economy, and its decline should be self-correcting”. No, it was not.

Bernanke, on the other hand, saw no bubble and no risk for the economy in 2005.  Even in 2007, he saw no risk for the broader economy as subprime mortgages started to collapse.

Lehman beat consensus numerous times and reported record earnings every year from 2005 to 2007. It was unstoppable, an analyst told me at the time. “They buy cheap and always deliver”. “Naysayers are always proven wrong”, he said.  In fact Lehman bought in the middle of a bubble and rode it like The Beach Boys sang. “Catch a wave and you’ll feel on top of the world”.

Until the music stopped.

In 2007, Lehman reported net income of a record $4.2 billion on revenues of $19.3 billion. Unstoppable. However, house prices were already showing signals of weakness and subprime mortgages were already cracking in the market. Enter the experts.

The voice on the street, the words of market experts were almost unanimous. It was a correction, nothing else. We were living a new paradigm.

Even holders of subprime packages refused to lend to shortsellers because they believed the assets were super safe.

We must now remember the heroes, those investors and analysts who warned of those risks and who were accused of being stupid, almost terrorism for showing that the risks were enormous. They should be praised today as well.

Bubbles always look like a new paradigm. Valuations soar and the prudent investors are left speechless, looking like fools because they “missed” the rally. 2007 was exactly that. And the hundreds of experts at Lehman as well as most mainstream repeated over and over again the same mantras. “Just a correction”, “value opportunities” and more importantly, when reminded of the tech bubble years earlier “this time is different”. Houses are hard assets, technology is a promise. This time is different. it wasn’t.

And, like all bubbles, it burst when the patience of even the most prudent analyst was tested.

Here is what we learned from Lehman. Or what we did not learn, considering the bubble of everything we are living:

The share price of a bank is the thin veil of hope between its assets and its liabilities. Risk builds slowly and happens fast. Lehman’s assets were falling in value as liabilities rose with margin calls being triggered everywhere. Those uniquely profitable assets that were so scarce they could always be sold higher to many investors found no bid at all.

We constantly hear that there is enormous liquidity in the market waiting to buy a correction and that investors are cautious and would jump at the opportunity created by a market drop. It does not happen. The marginal buyer disappears.

Lehman’s solvency and liquidity ratios evaporated in months. The bleeding became a massive hemorrhage.

Lehman also showed the futility of stress tests and traditional risk analysis. The impact of exposure to one asset class cannot be analyzed believing everything else remains equal.

The two most dangerous words in economics are “ceteris paribus”. All else remaining equal. Nothing remains equal. It is such nonsense I cannot even believe that we still read thousands of pages of academic research and analysts’ reports based on that premise.

Lehman’s exposure to subprime was deemed “manageable” by bulls. It was not. The bank prided itself on having reduced debt, increased liquidity and sold assets throughout 2007.

By then it was too late. it did not survive the end of the year.

Lehman was not a cause of the financial crisis. it was a symptom of a more significant disease. A crisis created by excess risk and high debt has been “solved” by adding more debt and incentivising risk.

The timeline is always the same.

  • First, deny the risk.

  • Then, deem it manageable.

  • Afterwards, take measures to “please” markets or rating agencies that are too small and too late.

  • Stock collapses.

  • Following that, blame speculators.

  • Finally, close the shop.

The monetary and financial system learned something else from Lehman. To hide any new case under the massive monetary laughing gas cloud. 

We have seen other cases, but asset prices have continued to soar under the excess of monetary policies. Central banks have injected more than $20 trillion in the economies sending financial assets to all-time highs.

However, Japan, China or Europe have showed how that placebo effect stops working. The ECB and BOJ examples are clear. Massive liquidity stops working as an asset price inflation machine when it becomes part of the liquidity. The Bank of Japan started buying ETFs and in 2018 the market stopped rallying while the Topix fell 7%, the ECB prolonged its quantitative easing program and European stocks still fell 4%. Chinese stocks fell more than 10% despite massive liquidity pumping.

More than $9 trillion in negative-yield bonds can cause much more damage to the economy than all investment banks in 2008 combined.

The world is well prepared to avoid repeating the 2008 crisis. The risk is that we are not prepared for the next one. Because global monetary and fiscal policies are aimed at increasing, not decreasing, risk taking and debt.

Monetary laughing gas has covered all asset classes with a fake blanket of security, disguising risk with ultra-low rates. We have solved a crisis of excess risk, debt and imbalances increasing debt, imbalances and taking more risk for lower returns.

We have learned a few things from Lehman, except that it seems that we want to replicate the same bubble with inflationary policies. The Lehman crisis was solved incentivising more Lehmans.

The next one will probably not be 2008-style crisis, it will likely be a Japanese stagnation solution, as the biggest risk today is in sovereign debt.

When the bubble bursts, governments and central banks will blame speculators and lack of regulation. And fuel the next bubble.

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$1,000 Samsung Galaxy Note 9 Explodes In Woman’s Purse According To Lawsuit

Just when Samsung thought their exploding phone problems were behind them, a Long Island woman has claimed in a lawsuit that her supposedly fireproof Galaxy Note 9 spontaneously combusted inside her purse, reports the New York Post

Real estate agent Diane Chung claims that just after midnight on September 3, Chung was in the elevator of a Bayside, Long Island building when her brand new phone “became extremely hot,” according to her complaint. Chung stopped using the phone and put it in a bag, before she says she “heard a whistling and screeching sound, and she noticed thick smoke” pouring out of her purse. 

Chung put the bag on the elevator floor and tried to empty it, burning her fingers as she grabbed the smoking Samsung, the suit says.

Trapped alone in the lift and “extremely panicked,” Chung dropped the phone and started smashing elevator buttons, the thick smoke making it hard to see.

Reaching the lobby, she kicked the sizzling phone out of the elevator.

The mobile didn’t stop burning until a good Samaritan grabbed it with a cloth and plunked it into a bucket of water, Chung claims in the Queens Supreme Court lawsuit.

The fire left her unable to contact clients and ruined everything in her bag, claims Chung, who called the experience “traumatic.” –NY Post

Chung, who is suing for unspecified damages and a restraining order barring new phone sales, claims that Samsung should have known the phone was “defective.” 

In response, a Samsung spokesman said: “We have not received any reports of similar incidents involving a Galaxy Note9 device and we are investigating the matter.” 

Exploding Samsung Galaxy Note 7s became such a large problem that airlines wouldn’t allow them on flights, and the company conducted a massive recall – followed by a remote software update to brick any remaining units

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Former VP Joe Biden: Trump Supporters Are The “Dregs Of Society”

Authored by Mac Slavo via SHTFplan.com,

Former vice president Joe Biden is going on an insult tour, calling supporters of President Donald Trump the “dregs of society.” In a not-so-classy move, Biden used a pro-LGBT Human Rights Campaign annual dinner on Saturday to rip supporters of Trump and the president.

According to the Daily Wire, Biden’s little moment was reminiscent of Hillary Clinton’s when she called Trump supporters a “basket of deplorables.” 

 “To just be grossly generalistic, you can put half of Trump supporters into what I call the basket of deplorables,” Clinton said in September 2016.

“Right? Racist, sexist, homophobic, xenophobic, Islamaphobic, you name it.”

“Despite losing in the courts, and in the court of opinion, these forces of intolerance remain determined to undermine and roll back the progress you all have made,” Biden said.

“This time they – not you – have an ally in the White House. This time they have an ally. They’re a small percentage of the American people – virulent people, some of them the dregs of society.

“And instead of using the full might of the executive branch to secure justice, dignity, safety for all, the president uses the White House as the literal – literal – bully pulpit, callously – callously – exerting his power over those who have little or none,” Biden continued. 

 “Barack and I agreed to remain silent for a while to give this administration the chance to get up and running in the first year,” Biden said.

“God forgive me,” he added, making the sign of the cross as the audience vehemently applauded.

 “Those who try to excuse this kind of prejudice in the name of culture, I say, ‘Prejudice is prejudice and humanity is humanity — it is a crime,’” Biden said, urging those in the room to continue to oppose Trump.

“Our work is not yet done by any stretch of the imagination. The stakes are much too high.”

Biden and his wife Jill both acted as if the apocalypse was coming thanks to Trump’s supporters. 

“This is deadly earnest, we are in a fight for America’s soul,” Biden said.

Jill accused Trump of being a bully.

 “There is nothing that makes either of us more angry than a bully. There’s nothing that’s more unfair or unjust than people using their power to try to make other people feel small, to tell them who they are or what they are capable of, to say their identity doesn’t belong,” she said.

Of course, let’s not forget that this is creepy uncle Joe speaking here, so take anything this eerie guy says with a grain of salt:

Donald Trump Jr. immediately called out Biden, tweeting Sunday evening that the comments went “too far even for him.”

But Don Jr. was not alone as social media erupted at Biden’s comments…

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The Economic ‘Recovery’ Is Leaving More Than 50 Million Americans Behind

For more than half of American communities, the economic “recovery” that has created millions of jobs and pushed GDP growth above 4% during Q2 never happened. Indeed, while urban centers like New York City have created millions of jobs, a study recently highlighted by Axios showed that economic conditions in half of the zip codes in the US have actually worsened since the recovery began.

Among other findings, the Distressed Communities Index highlighted the fact that more than 50 million Americans live in distressed communities, while more than 80 million live in prosperous communities.

The 2017 DCI finds that 52.3 million Americans live in economically distressed communities—the one-fifth of zip codes that score worst on the DCI. That represents one in six Americans, or 17 percent of the U.S. population.

By comparison, 84.8 million Americans live in prosperous communities—the one-fifth of zip codes that score best on the DCI. These top-performing zip codes contain 27 percent of the country’s population, a far greater share than any other tier.

Underlying indicators of well-being vary drastically across the different tiers of U.S. communities.

As a map of the distribution of these communities shows, they’re disbursed across all regions of the US, with the greatest concentration of distressed communities in the southeastern US. Meanwhile, the northeastern US had the lowest concentration. Indeed, more than half of the US’s distressed population residents in the southern US.

Axios

One of the starkest differences between prosperous and distressed communities is the uneven level of economic growth.

According to Labor Department data, 10 million jobs were created in the US between 2011 and 2015, with roughly 85% of these created in prosperous zip codes. Meanwhile, roughly half of American communities have seen zero jobs growth since the crisis. Only two out of every five distressed zip codes recorded growth in employment: the rest saw the number of jobs decline as companies migrated toward more populous areas.

Distressed

Because of this phenomenon, more than half of distressed zip codes (54%) had fewer jobs and business in 2015 than they did in 2000.

The growth gap between prosperous and distressed zip codes may be the starkest feature of the index because of what it implies about their radically different trajectories.

Over the five-year period from 2011 to 2015, the country added 10.7 million jobs and 310,000 business establishments. Yet that growth was concentrated in the top echelon of U.S. places. An impressive 85 percent of prosperous zip codes saw rising numbers of business establishments and 88 percent registered job growth.

[…]

Outside of the upper echelon, however, growth rapidly becomes less pervasive. Only about two out of every five distressed zip codes registered job growth from 2011 to 2015 and only one in five added business establishments.

Unsurprisingly given these patterns, prosperous zip codes dominated the recovery. They contained 29 percent of the nation’s jobs in 2011 but welcomed 52 percent of the new jobs created over the following five years.

Reflecting the disparity in high paying jobs, nearly three out of every five adults in distressed zip codes have no education beyond high school, and only one in seven residents in these struggling communities has completed a four-year degree.

Distressed

Meanwhile, more prosperous communities harbor the lions share of advanced-degree holders. They also are healthier, with distressed counties registering roughly 40% more deaths.

Prosperous communities, on the other hand, are home to a whopping 45 percent of the country’s advanced degree holders and 41 percent of all Americans with a bachelor’s degree. Tellingly, advanced degree holders are more prevalent in prosperous zip codes than college graduates are in distressed ones.

Massive disparities in health outcomes parallel the nation’s economic imbalances. The inhabitants of more prosperous places tend to be healthier than their neighbors in less advantaged communities, where struggles to find work or pay the bills exact heavy physical and psychological tolls.

Americans in prosperous counties live five years longer than their peers in distressed counties on average.

[…]

In a corollary, in 2014 the average distressed county registered over 1,000 deaths for every 100,000 residents—38 percent more than the average prosperous county. Among specific causes, mortality from mental and substance abuse disorders is 64 percent higher in distressed counties than in prosperous ones. Neonatal mortality rates—those for infants before birth—are 86 percent higher in the average distressed county.

Americans in prosperous areas survive, on average, roughly five years longer than their peers in distressed areas. Meanwhile, mortality from mental and substance abuse disorders is 64 percent higher in distressed counties than in prosperous ones. So next time you hear Americans grumbling about the Obama-era economy, remember: For a significant portion of the American public, economic conditions have gotten worse, not better.

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