Krugman’s Solution Is “The Fiscal Equivalent Of War” – Japan Agrees

Submitted by Lakshman Achuthan via BusinessCycle.com,

In the wake of the Bank of Japan (BoJ) decision to stand pat, Japan looks to be in ever more desperate straits, given the growing danger of sliding into its second recession since Abenomics was introduced. Such a recession would be the nail in the coffin of Abenomics, launched with high hopes and much fanfare three years ago. It made sense, therefore, for Prime Minister Shinzo Abe to seek the advice of Paul Krugman, who has been one of the chief cheerleaders for Abenomics, in a private meeting last month meant to lay the groundwork for the G7 Summit at Ise-Shima next month.

Although it was evidently supposed to be confidential, we recently chanced upon a rather revealing transcript of that meeting, which also included BoJ Governor Kuroda and Finance Minister Taro Aso.

Mr. Krugman began by declaring that “we are now in the world of pervasive economic weakness. In many ways, we are all Japan.”

 

Second, he noted “that the linkages among major economies are strong … largely … because of capital flows.”

 

Third, he emphasized “the difficulty in achieving goals through even very bold and unconventional monetary policy.”

 

He concluded “that monetary policy needs help from fiscal and possibly other policies [which] is … very much a global issue at this point.”

Recalling how World War II catapulted the U.S. economy out of the Great Depression, Mr. Aso then emphasized that they were looking for a similar trigger to make entrepreneurs abandon their “deflationary mindset” and “start making capital investments.”

Mr. Krugman responded that they were “looking for ways to achieve something like that without war” – what he subsequently characterized as the “fiscal equivalent of war.”

Then, regarding G7 countries with policy space for fiscal stimulus, he opined that, while Japan and Canada would go along, Germany, the U.S. and the U.K. were unlikely to “implement significant stimulus measures in coming months.”

In Germany’s case, it was “very difficult to make the argument” as “they simply live in a different intellectual universe.”

In the U.S., while President Obama favored major fiscal stimulus, it was not yet politically feasible, but at least, Mr. Krugman said, “we can blunt the push for fiscal consolidation.” Meanwhile, he said, “conventional wisdom [within] the policy community” had been shifting in favor of stimulus, “and it might be possible to move that along.”

Finally, he noted the likelihood that by year-end the U.S. would have a “significantly less obstructionist” legislature.

Around the end of the meeting, Mr. Abe concluded that

the “international community must coordinate in the fiscal space and the countries which are able would spend fiscally. … After all, this is off the record, Germany has the greatest space … I will have to … persuade them how they will come along with the policy for further fiscal mobilization.”

Good luck Mr.Abe

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Blistering 7 Year Auction Stops Through, Driven By Surge In Foreign Central Bank Demand

This week’s preceding 2 and 5 Year auctions, both tailing, were nothing to write home about, or as we characterized them “mediocre.” We also said that a big part of the reason may have been the overhang from yesterday’s Fed decision. But now that the Fed is out of the picture for 2 months, the real shape of the primary TSY market could show itself and sure enough it did with blistering demand for today’s $28 billion in 7 Year paper.

With a high yield of 1.634%, this stopped through the When Issued by a notable 1 bp. The Bid to Cover was also strong, jumping from 2.505 to 2.652, the highest February 2014.

Finally, the internals were certainly impressive, with Indirects taking down 65.55% of the auction, up from last month’s 57.9% and the highest since January’s record 69.38%, which also meant the third highest Indirect take down on record. And since Directs ended up with 14.22% of the paper, this mean that Dealers were left with just 20.23% of the final allotment, the second lowest on record.

It appears that when a potentially hawkish Fed is out of the picture, there continues to be no shortage of demand, especially coming from offshore, for US paper.

 

Surprisingly (or perhaps not) as the yield curve snapped lower on the strong auction results, so did stocks.

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Publishing Charlie Hebdo Cover Lands Turkish Journalists in Prison

Prison in Turkey for Charlie Hebdo covers

Two journalists have been sentenced by a Turkish court to two years in prison after being convicted of blasphemy and “insulting religious values” for publishing several cartoons from France’s satirical Charlie Hebdo magazine, including a caricature of the Muslim Prophet Mohammad.

Ceyda Karan and Hikmet Cetinkaya of Turkey’s Cumhuriyet daily had faced up to four and a half years each for re-printing the cartoons in solidarity with the cartoonists who were massacred in Paris by Islamic radicals in January 2015.

Karan tweeted, “We will appeal (the ruling). We will not leave this country to fascists in Islam sauce,” according to Reuters

The sentencing comes at a time when journalists are increasingly under siege in Turkey, which was ranked 151 out of 180 countries on Reporters Without Borders recently released World Press Freedom Index. Last year, the group called Turkey “the world’s biggest prison for journalists,” and last month’s government takeover of the country’s largest newspaper has many wondering whether the NATO ally seeking to join the EU can be reasonably referred to as a democracy.

Ever more troublesome, just yesterday, Turkey’s Prime Minister Ahmet Davutoglu — who was among the world leaders who marched in Paris in solidarity with the Charlie Hebdo victims in 2015 — tried to downplay comments made by the Parliamentary Speaker Ismail Kahraman, who had said that the nation needed a religious constitution.

Davutoglu later said that the country’s new in-the-works constitution will include “the principle of secularism…as one guaranteeing individuals’ freedom of religion and faith, and the state’s equal distance to all faith groups,” Reuters reports.

The modern nation of Turkey was founded on secularism in the 1920s, but the tenure of President Tayyip Erdogan and his AK Party have led to an increased role Islam in public life, as well as an authoritarian posture that extends beyond Turkey’s borders. 

Earlier this month, Germany said it would allow the prosecution of one of its citizens for the crime of writing a ribald poem insulting Erdogan. In a recently published article at The Atlantic titled, “The Thinnest-Skinned President in the World,” Uri Friedman noted that the prosecution of German comedian Jan Böhmermann is the height of irony, considering Erdogan himself had served time in prison for reciting a poem.

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Did Bernie Sanders Just Go Full Establishment?

Submitted by Michaela Whitton via TheAntiMedia.org,

Comments made by Bernie Sanders this week may just have blindsided and disillusioned swathes of his support base.

Some of those with higher expectations of the ‘peacenik’ candidate breathed a collective sigh of disappointment after he endorsed Obama’s extrajudicial drone assassination program.

At the same time, the Democratic candidate backed the recent deployment of 250 U.S. troops to further death and destruction in Syria. During the town hall meeting at Philadelphia’s National Constitution centre, he told MSNBC’s Chris Hayes that the people of the United States have a right to defend themselves. The warmongering endorsement, which could have easily slid under the radar, was slotted into a much wider discussion that included vote-winners like Planned Parenthood, violence against women, marijuana, and gun control.

Despite acknowledging he would do everything to avoid perpetual war in the Middle East, when asked if he would he keep the government’s secret “kill list” if he were to become President, the “progressive” candidate was unhesitant:

“Look. Terrorism is a very serious issue. There are people out there who want to kill Americans, who want to attack this country, and I think we have a lot of right to defend ourselves,” he said.

Asked if he thinks the current method in which the White House decides which suspected terrorists are added to the ‘kill list’ is constitutional and legal, he added:

“In general I do, yes.”

While some Bernie supporters came to the slow and painful realisation that there are no saviours, others took to Twitter and accused him of being a quasi-socialist warmonger and brutal imperialist.

It appears that soon, the only ones ‘feeling the Bern’ will be the families killed by the drone programme that he fully supports.

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Volume Collapses As China Commodity Exchanges Ordered To “Curb Speculation”

We have been warning about China's speculative commodity trading bubble – spewing false signals around the world about the strength of the real economy – and now, as we suggested previously, Chinese authorities have decided to burst yet another bubble they created.Reuters reports that China's Securities regulator has ordered three major commodity exchanges to "control intraday speculation in commodity markets," ordering them to "curb trading for investors with no commodity industry background." Volume has crashed… and just as it did in the equity markets, price will follow.

As Reuters reports, China's securities regulator ordered the country's major commodity futures exchanges this week to control speculative trading activity, sources told Reuters, after a surge in prices sparked fears of a boom-and-bust cycle.

In response, commodity futures exchanges in Dalian, Shanghai and Zhengzhou ordered major institutional investors that lack a commodities background to rein in their trading, three people with direct knowledge of the situation said. The sources didn't define what was meant by a lack of background in commodities.

 

Analysts said speculators have been betting that government plans for more infrastructure spending and signs of a pick up in the economy would fuel more demand for commodities.

 

Others suggested commodities futures markets were the only place left for speculators to make quick profits given weakness in stocks, bonds and housing.

The result…Party's Over!

 

As Reuters concludes, the measures this week appear to be having an impact. Steel and iron ore futures steadied on Thursday, while other commodities fell further.

"The aim is to restrict the oversized space for profiting from short-term trades, reduce elevated holdings of related products and curb speculation," the Dalian Commodity Exchange said on Wednesday, referring to the moves to increase trading costs.

 

The volatility in prices has already deterred some major industry players from using the futures market, causing some to take losses and others to reduce their positions. It also marks a setback for attempts to give China's domestic markets more influence over global pricing, analysts say.

And that means prices are set to tumble…

 

A run up in steel prices has been blamed for encouraging some idled steel mills to restart production, adding to a production glut in the country and exports of the metal, which is upsetting other countries.

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Tenn.’s Discriminatory Counseling Law Protects LGBT Folks from Getting Bad Advice

TherapyIs there are service or occupation that is less of a “public accommodation” than psychological counseling? Therapy is a deeply personal, deeply intimate, often experimental process. It is dependent in part on the therapist developing a bond of trust with his or her client. Getting therapy is not like buying a pack of gum or a ticket to the movies or a stack of flapjacks at a diner. The relationship between the professional and the client actually matters.

So the anger over a new bill signed into law in Tennessee seems overheated and irrational. Yesterday Gov. Bill Haslam signed into law Senate Bill 1556, which allows counselors and therapists to decline to provide their services to a client for “goals, outcomes, or behaviors that conflict with the sincerely held principles of the counselor or therapist,” as long as the professional recommends somebody else who can help the client. This is widely understood to be a law to permit therapists to turn away gay and (probably more likely) transgender clients if they are not on board with their sexual orientations or gender transitions.

It’s a law that permits discrimination. There’s no getting around it. The law is literally, obviously designed to allow a service provider to refuse customers on the basis of certain attributes. That doesn’t, though, necessarily mean that it’s a bad law. In our current round of culture war conflicts, some folks are absolutely outraged. Here’s some anger from a mayor and the American Civil Liberties Union via The Tennessean:

Nashville Mayor Megan Barry, who is a Democrat and opposed the bill, said in a statement Wednesday that she was disappointed in the governor’s decision to sign it into law.

“It hurts our LGBT citizens, negatively impacts our economy and seeks to undermine the counseling profession. As mayor of Nashville, I’ll continue to do whatever I can to create a warm and welcoming city free from discrimination,” Barry said.

Hedy Weinberg, executive director of the American Civil Liberties Union of Tennessee, had a similar position and said ACLU is “disappointed that the governor has chosen to sign this troubling bill into law. This measure is rooted in the dangerous misconception that religion can be used as a free pass to discriminate. Allowing counselors to treat some potential clients differently from others based on their personal beliefs defies professional standards and could cause significant harm to vulnerable people.”

A couple of thoughts on this that people like Barry and Weinberg should stop for a moment and consider:

First, what sort of potential “significant harm” could come to, for example, a transgender person who consults with a therapist who doesn’t support or agree with transitioning but it is essentially forced to keep that belief quiet and serve this client? What sort of quality of care is that transgender person likely to get? These folks seems to be simply treating therapy like any other professional service, like getting a mole removed or one’s taxes done. That’s simply not how therapy works. Gay and transgender clients face significant harms from unwittingly ending up with therapists who do not support them, but are constricted by the law from saying so or sending them to a therapist who would fit them better.

Second, if we set aside for a moment the issue of whether the right of free association applies to commercial service providers, we can debate whether goods like wedding cakes or floral arrangements count as artistic expressions and are therefore subject to free speech protections. But there’s no debate here: Therapy is literally speech. The consequence of an antidiscrimination law covering therapists wouldn’t just be requiring them to take these clients—it would be requiring them to actually say and endorse therapeutic positions with which they do not agree. It is compelled speech disguised as occupational regulation. In the culture war cake wars, even those who argue that a baker can be forced to make a wedding cake acknowledge that the baker can’t be compelled to put messages onto a cake he or she finds obscene or disagrees with. Thus a bakery can’t be forced to make a cake with a swastika on it or to express overt pro-gay or anti-gay sentiments. That counts as compelled speech, and it’s generally unconstitutional.

How is any of that different from the government requiring a therapist to take on clients and tell them things that therapist does not believe and in fact may believe is wrong or dangerous? Or let’s consider a possible unintended outcome here: a court determines that a therapist can be obligated to accept gay or transgender clients under a state’s antidiscrimination laws, but the state cannot compel the therapist to espouse positions with which he or she does not agree. Who does this even help? Certainly not the gay or transgender client.

The Tennessean notes that the reason why the state felt the need to pass this law in the first place is because Tennessee incorporates the American Counseling Association’s (ACA) ethics rules into its regulations for therapists. The ACA (which opposes this law) updated its ethics rules in 2014 to prohibit referring clients to other therapists for discriminatory reasons.

Perhaps what Tennessee should be doing here is considering whether it’s appropriate in the first place for the state to tie the legal right to practice an occupation with the rules set up by a private association (with its own agendas) within that occupation. The position the ACA holds sets up an easy, voluntary solution. The ACA has every right to set up ethical guidelines and require that its members follow them. Those who don’t want to follow those rules do not get to be a member of the ACA. This is a completely separate matter from whether an individual should be allowed to practice therapy under Tennessee law.

Then the ACA can promote the fact that their members do not discriminate. People looking for counseling on gay or transgender issues will then know that when they select somebody who is a member of the ACA, they’ll find a supportive therapist. The Tennessean even notes that some activists are setting up an initiative for counselors to sign up and indicate that they won’t discriminate. I bet they’re going to find plenty of them.

Finally, I suspect that the outcome people want but are reluctant to actually say out loud is that they don’t want people to hold these anti-gay, anti-transgender attitudes at all, and if they do, they should be forbidden from being therapists, period. That’s a very blinkered, simplistic attitude toward a field of work that provides a wide spread of counseling treatments. That a particular therapist is not a good choice for a gay or transgender teen to seek counseling does not mean that therapist isn’t great at other types of treatment in the field for other people. It’s a needlessly reductive attitude. Let a thousand therapists bloom and leave it to citizens to find the ones that fit them best.

There is no reason for this conflict to even be happening at all. The government should not be playing a role in determining the circumstances by which therapists take on clients and it should most clearly and obviously not be determining what therapists say in their sessions. 

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Ted “Lucifer” Cruz Responds To John Boehner

It didn’t take long for a suddenly dejected by the establishment Ted Cruz to respond to John Boehner’s allegation that the presidential candidate is  “Lucifer in the flesh” and that he has “never worked with a more miserable son of a bitch in my life.”

According to The Hill, Cruz dismissed the harsh criticism, brushing off the remarks from the establishment figure. Cruz shared a pair of tweets labeling the criticism an “endorsement” coming from Boehner.

His rhetorical question was who would stand up to Washington, Trump or Cruz.

Washington may be a toss up, but when it comes to who would not stand up to Goldman Sachs, the answer is clear.

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SpaceX Foots the Bill for 2018 Mission to Mars

SpaceX announced plans to send an unmanned capsule to Mars by 2018 on Twitter yesterday

Right now, Dragon capsules ferry cargo to the International Space Station as part of a $5.5 billion contract with NASA. But SpaceX founder Elon Musk has made it clear that the capsules are built for more than just hauling shipments of astronaut ice cream, tweeting that “Dragon 2 is designed to be able to land anywhere in the solar system. Red Dragon Mars mission is the first test flight….But wouldn’t recommend transporting astronauts beyond Earth-moon region. Wouldn’t be fun for longer journeys. Internal volume ~size of SUV.”

Veronique de Rugy labels Musk a crony capitalist in her column today, noting (quite correctly) that companies he has founded have received many billions in federal taxpayer dollars, state incentives, and more. 

But it’s worth highlighting that for this ambitious 2018 mission, Musk is footing the bill—despite some warm, fuzzy press releases about partnering with NASA.

One might consider some of those private funds his firm is spending on the mission ill-gotten gains, I suppose. But SpaceX has delivered the services it promised for those NASA billions so far; though not without the occasional mishap. And the company has done so under a type of contract that keeps much more of the incentives to behave like a profit-maximizing private actor (rather than an old-school appendage of the bloated space agency, like Boeing or Lockheed) intact. 

The Washington Post reports that NASA will providing only “technical assistance” for this first unmanned mission to Mars, quoting space historian John Logsdon saying that “NASA has more expertise in getting to and landing on Mars than any other organization in the world….So if a U.S. company wants to try it on a no-exchange-of-funds basis, why not?”

For a while now, Musk has been beefing with science celeb Neil deGrasse Tyson about whether a Mars mission is an approriate undertaking for a private entrepreneur. Last fall, Tyson said “The delusion is thinking that SpaceX is going to lead the space frontier. That’s just not going to happen.” Calling a Mars mission too time-consuming and expensive, Tyson declared: “A government has a much longer horizon over which it can make investments.”

But, as space journalist Alan Boyle notes in GeekWire, Musk seems perfectly cheerful about the expense and rather more optimistic than Tyson about the time horizon. He’s been pretty clear about how he hopes to overcome commericial pressure to think short term—the company will remain privately held for now. 

“When we’re doing regular flights to Mars, that might be a good time to go public,” he said. “But before then, because the long-term goals of SpaceX are really long term—it takes a long time to build a city on Mars—that doesn’t match with the short-term time frame of public shareholders and portfolio managers that are looking at the two- to four-year time horizon.”

In other words, Musk thinks that this insanely huge undertaking will be good for his business in the long term. So much so that he’s putting up cash now and delaying the big payday that would come with going public.

And frankly, it’s hard to doubt the sincerity of a man who has said repeatedly over many years that he hopes to die on Mars (though ideally not at the point of impact).

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Influential Ex-Marines Commandant Wants Next President to Make War on Human Trafficking More Like the Drug War

Retired Gen. Charles C. Krulak, a former commandant of the U.S. Marines and president of Birmingham-Southern College, is calling on the next president of the United States to ramp up spending on fighting human trafficking, which Krulak refers to as “modern slavery.”

Denouncing the “glaring disconnect between espoused ideals and demonstrated commitment” from federal lawmakers, Krulak complains in a CNN op-ed that “each year the federal government dedicates less than $150 million to combating human trafficking—compared to $30.5 billion for the War on Drugs.” 

Considering that the War on Drugs is now roundly viewed as one of biggest boondoggles in U.S. history—a fiscal and humanitarian disaster of such scope that even conservative Republicans and many former Drug Warriors can’t deny that it’s not working—I’m not sure why that’s supposed to serve as an endorsement. But consider this one more clue that America’s war on human trafficking—which in practice is seldom more than a war on adults consenting to commercial sex—is indeed the next target of all that displaced Drug War effort. 

And there’s more. Citing the same bad statistics that have routinely been debunked by myriad sources, Krulak announces the launch of Generation Freedom. This coalition of more than 70 organizations has come together to push for greater “financial investment by the U.S. governments.” 

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Gold & Silver Soar – Lead The Way Post-Japan “Policy Error”

It seems – just as we have seen since The Fed’s December rate-hike decision – that The Bank of Japan’s “shock” decision not to pour more punch into the global equity bull’s bowl overnight has sparked another leg higher in the market’s indicator of monetary policy incompetence. Gold and Silver are surging back near cycle highs…

Precious metals are leading the way post-BoJ…

 

With Silver topping $17.50 once again…


And gold is back within $30 of Goldman’s “Short Gold” Recco ‘stop-out’ level.

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