April 2016 – Page 204

Virtual Reality Will Upend the Way We Think About Borders and Immigration Policy

The Oculus Rift, the first of a new generation of consumer virtual reality systems, launched earlier this week to mixed reviews, some of which suggest that it’s promising but has a long way to go, others of which say things like “the first time you put it on is the closest thing to real magic you’re likely to experience anytime soon.”

Either way, though, there seems to be a general, though not universal, sense that the Oculus Rift, and the other VR sets coming in the next few months and years, might—maybe!—herald a kind of technological revolution, albeit one that hasn’t arrived quite yet.

Right now, the emphasis in VR development, especially for the rift, seems to be on video games, and I wouldn’t be surprised if, over the next decade or so, we’ll see video games transition from flat-screen PC and TV experiences to virtual experiences. Video games have increasingly prioritized immersion and visual spectacle over the years (which, of course, sparked a counter-trend of clever smaller-scale games), and it’s hard to imagine a better format for the delivery of those sorts of experiences than virtual reality systems that literally block out the sights and sounds of the world around you.

Games are how a lot of us will interact with VR at first, but I think in the longer run, if it’s successful, it’s going to do a lot more than just make future editions of Fallout more engaging. It’s going to change work and human interaction and social organization in all sorts of ways. For example, it has the potential to make a lot of business travel unnecessary: Virtual conferencing rooms could conceivably simulate in-person meetings well enough to eliminate a lot meetings, at least those that don’t require hands-on work.

The ability to easily work with people anywhere in the world as if they are in the same room as you will, in turn, challenge a lot of the current thinking about immigration and foreign workers. Over at Slate, Reihan Salam works through some of the potential implications of this, focusing on Microsoft’s idea for “holoportation” technology—which allows a virtual image of a person in another location to be projected on top of your current physical environment—using the company’s forthcoming augmented-reality device, the Hololens. Here’s a snippet from Salam’s piece:

VR technology isn’t just going to shape the lives of the global jetset. In the years to come, it may well transform our immigration debate. Advocates of large-scale immigration argue that U.S. workers and consumers benefit from it in a number of ways, and they’re right. Less-skilled migrant workers often fill jobs that native-born workers would only take on for relatively high wages, thus making a wide array of services more available to working- and middle-class consumers. Skilled immigrant workers, meanwhile, can collaborate with skilled native workers in ways that bring substantial benefits to both.

You can see this changing the immigration policy debate in any number of ways: On the one hand, it could make physical borders seem less relevant than ever. On the other hand, it might provide fuel to restrictionists who argue that physical borders and border controls should be strengthened even as virtual borders disappear. At the same time, it’s likely to complicate workplace rules and regulations in all sorts of ways, as previously unknown jurisdictional issues arise.

I don’t want to focus too much on this particular branded technology. Microsoft’s “holoportation” idea might not work out, or might prove cumbersome and not very useful. All of this technology is still in early stages, of course, and it’s always difficult to figure out what widespread adoption will actually look like until it happens. Maybe a hundred years from now, knowledge work will still consist primarily of sitting in front of flat screens, tapping on keyboards and guiding pointers with mice, while scrolling through text on handheld touchscreens.

But I doubt it. and if VR does take off, then it’s going to raise these sorts of possibilities and questions about work and borders and immigration and what it means to be a nation, defined in physical, geographic terms, when digital technology has all but erased the concept of distance.

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Ronald Bailey Reviews Half Life: Our Planet’s Fight for Life by Edward O. Wilson: New at Reason

Biodiversity In his new book, Half Earth, the world’s greatest living naturalist, Edward O. Wilson, argues that humanity needs to set aside half of the our planet’s lands and oceans as biosphere reserves in order to prevent a massive extinction of other species in this century. The good news is that he believes that economic, technological, and demographic trends point to a brighter future both for humanity and for the rest of nature. He sometimes comes off as practically a visionary transhumanist, predicting vast improvements by means of nanotechnology, biotechnology, and robotics. Wilson even thinks that scientists will succeed at whole brain emulation—that is, the installation of human minds on digital devices—by the end of this century. This progress will be achieved by means of free markets and will enable humanity to increasingy withdraw from the natural world.

View this article.

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Auto Sales Disappoint Despite Surging Incentives, “Worrisome Trends Are Taking Hold”

Just as we predicted, it seems – despite the "everything is awesome" jobs data – that auto sales exuberance has hit the wall of credit saturation. Despite a surge in incentives in Q1, GM US auto sales rose just 0.6% (drastically lower than 6.0% rise expectations) and Ford rose 7.8% (missing expectations of a 9.4% surge). As J.D.Power notes "there are worrisome trends below the surface" of auto sales and with inventories at levels only seen once in the last 24 years (and tumbling used car prices), the automakers have a major problem if this is anything but 'transitory'.

It wasn't just GM and Ford though:

*FIAT CHRYSLER MARCH U.S. AUTO SALES RISE 8.1%, EST. UP 14%
*FIAT CHRYSLER HALTED IN MILAN, LIMIT DOWN AFTER FALLING 4.9%
*HONDA MARCH U.S. AUTO SALES UP 9.4%, EST. UP 16%
*VOLKSWAGEN OF AMERICA MARCH AUTO SALES DOWN 10.4%
*TOYOTA MARCH U.S. AUTO SALES DOWN 2.7%, EST. UP 5.6%

U.S. light-vehicle deliveries, aided by low gasoline prices, rising discounts and favorable financing terms, have climbed 3.4 percent this year through February after rising 5.7 percent to a record 17.47 million in 2015. But on a selling-day-adjusted basis, new-vehicle retail sales in March are expected to fall 2 percent from a year ago, according to a joint sales forecast by J.D. Power and LMC Automotive. It would be the first time there has been a year-over-year decline in sales on an adjusted basis since August 2010, Power and LMC say.

What is most troubling however is, as JD Power notes, the worrisome trends below the surface…

Following an exceptional performance in 2015 with strong sales and record average price per vehicle sold, the U.S. automobile market must adopt a more disciplined approach to maintain long term health for the industry, according to a briefing given by J.D. Power here today at the 2016 J.D. Power Automotive Summit.

J.D. Power warns that incentive spending on new vehicles has risen rapidly in the past year and is trending toward recession-era levels for the industry as a whole and has already exceeded recession-era levels on cars.

The analysis, presented as part of the J.D. Power Automotive Summit, which kicks off the National Automobile Dealers Association Convention & Expo, finds that while overall industry retail sales are expected to grow by 300,000 to 14.5 million units in 2016, the growth is being delivered through actions that pose meaningful risks to the long-term health of the industry. Those actions include elevated incentive spending, increased use of extended loan terms, rising loan-to-value ratios and record levels of leasing.

"Overall, auto sales figures continue to post strong results, but when you peel back just one layer beneath the surface, some worrisome trends are taking hold," said Thomas King, vice president of Power Information Network at J.D. Power. "Chief among the trends is the fact that first quarter sales incentives averaged 9.6% of MSRP, a 70 basis-point increase from last year and are trending toward levels observed at the height of the recession.

"The increased spending, which is due primarily to manufacturers trying to offset a shift in demand from cars to trucks and SUVs, has the potential to reduce future resale value. Significant declines in the value of used cars would disrupt consumers' ability to buy new vehicles (due to lower trade-in values), while vehicle manufacturers and lenders would have to deal with exposure on their lease portfolios (if off-lease vehicles fail to achieve their expected resale value)."

And this sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…

And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)…

Falling used car prices means pressure on new car prices as well, which would be a shock to America's booming auto market.

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US Rig Count Tumbles To Fresh Record 41-Year Lows

With US crude production starting to drop, the lagged plunge in oil rig counts appears to be having some effect. Baker Hughes reports that the number of US oil rigs dropped 10 to 362 (14th weekly drop of last 15), the lowest since Nov 2009. The total rig count tumbled 14 to 450, fresh record 41-year lows. Crude was leaking lower into the data and rose modestly after.

BHI: Baker Hughes reports U.S. rig count down 14 to 450 rigs
*U.S. OIL RIG COUNT FALLS 10 TO 362, BAKER HUGHES SAYS

And the total rig count collapsed to fresh record lows…

Is US production about to cliff dive?

The crude reaction was very muted after heading lower all morning.

Charts: Bloomberg

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In Finance, What Happens When You Trust the Untrustworthy? You’re About to Find Put With Private Blockchains

Following up on my detailed analysis of the faux pas of private blockchains using te settlement time endured by Lehman’s counterparties from yesterday, I want to expound upon the extreme likelihood of a bank consortium blockchain being compromised through outright theft!

There are several economic arguments against private blockchains. For instance, and as described in the videos herein, the demand-side network effect allows for much faster and much more secure growth in public networks. More importantly, utility grows exponentially in comparison to close private networks – as does utility. This concept of utility should not be lost, for the most utilitarian aspect of public blockchains is the zero trust attribute. You simply do not have to trust anyone to do completely trusted business with them. The exact opposite is the case with the private blockchain, where you are force to trust the “trusted” parties. Of course, the primary caveat to that model is…. no one is trustworthy. Choose to trust an untrustworthy partner if you so desire, but….

This all boils down to the fact that there is truly no such thing as a “trustworthy” party. Therefore, any system or construct whose operations rely on a “trusted” party is destined to fail. If you need trust for it to work, then it will fail – absolutely guaranteed! Before we go further, let’s define a “trust” for the sake of this discussion. As per Wikipedia:

In a social context, trust has several connotations Definitions of trust typically refer to a situation characterized by the following aspects: One party (trustor) is willing to rely on the actions of another party (trustee); the situation is directed to the future. In addition, the trustor (voluntarily or forcedly) abandons control over the actions performed by the trustee. As a consequence, the trustor is uncertain about the outcome of the other’s actions; they can only develop and evaluate expectations. The uncertainty involves the risk of failure or harm to the trustor if the trustee will not behave as desired. Vladimir Ilych Lenine expresses this idea with the sentence “Trust is good, control is better”.

That risk of failure or harm is not only omnipresent, it is nigh guaranteed to rear its ugly head. Thus, with the guaranteed in mind, if one can transact on trustless basis, then one can transact on a superior basis. This is the primary and most basic flaw of the concept of private blockchains vs public blockchains. – the false presumption of “Trust”!

As per Kaspersky Labs:

Carbanak 2.0: new targets beyond banks

After our exposure of the Carbanak group exactly a year ago, the group disappeared for about five months, leading us to believe that the operation was disbanded. However, in September last year, our friends at CSIS published a blog detailing a new Carbanak variant affecting one of its customers.

In December 2015, we confirmed that the group was still active. Kaspersky Lab discovered signs of Carbanak in two institutions – a telecommunications company and a financial institution.

carbanak2.0executable

Executable files founded in SHIM during Carbanak incident response

One interesting characteristic of Carbanak 2.0 is a different victim profile. The group has moved beyond banks and is now targeting the budgeting and accounting departments in any organization of interest to them, using the same APT-style tools and techniques.

carbanak2.0

In one remarkable case, the Carbanak 2.0 gang used its access to a financial institution that stores information about shareholders to change the ownership details of a large company. The information was modified to name a money mule as a shareholder of the company, displaying their IDs. It’s unclear how they wanted to make use of this information in future.

I want all to think very carefully about this. A bank or systemic financial institution can be (and has on many occasions) been compromised by malware. Once comrpomised, these institutions are no longer trustworthy – but more importantly they are still trusted! What does this mean in this context?

This could not occur if the blockchain was heterogenous, diverse and large. Think centralized vs. decentralized vs. distributed…

In closing, I wish to recap the extreme probability for settlement risk in a consortium blockchain in the event that an entity goes bust – as exemplified in the Lehman bankruptcy example yestereday. While this risk is extant in the legacy system, the nigh irresponsible bandying about of the term “trusted party” lends credence to the premise that one would be led to believe said parties are trustworthy. None can be farther from the truth. A trusted party is one that IS relied upon. A trustworthy party is one that can be unconditionally relied upon. The second party literally does not exist. This concept is further amplified by my 2nd point – there are many, many vectors of compromise in trusted entitiy setup. The primary value drive of the invention of blockchain tech was the elimination of needed trust. By using a trusted network model, you are purposely reintroducing the risks that trustless networks reomved and eliminating the benefits that these networks offer. The vast majority of benefits touted by private blockchain proponents can be offered through Veritaseum over public blockchains with some engineering – while retaining zero trust attributes.

Feel free to contact me at reggie at veritaseum.com to discuss. I can make my team of software and financial engineers, lawyers, macro and fundamental strategists avaialble for consulting engagements if necessary.

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Avoid putting your money in these banks

A friend of mine who’s an equities analyst at a large brokerage firm recently sent out pretty ironic note to all of his private clients.

He focuses on the financial sector, so his job is basically to analyze bank stocks and figure out which ones his investors should buy.

To determine this, he does a deep dive on banks’ financial statements, assessing everything from their capital levels to their non-performing loan ratios.

That’s a fancy way of saying that financial analysts who concentrate on bank stocks conduct a LOT of research to make sure the banks are SAFE and will be in good shape in the long-term.

What struck me as so ironic about his most recent report was how FEW banks are actually safe these days.

Bank balance sheets, particularly in western nations, have eroded substantially over the last few years.

Capital reserves are in the toilet… meaning the banks themselves have very little tucked away for a rainy day fund. If asset prices start to fall, western banks could easily slip into insolvency.

Liquidity ratios are also appalling. Banks keep an incredibly LOW ratio of high quality liquid assets (including cash) on reserve as a percentage of customer deposits.

So if any meaningful portion of the banks’ customers wanted to withdraw their funds out of the system, the banks simply wouldn’t have the money.

My friend’s conclusion about bank stocks was that very few of them are worth owning.

Some are at risk of going under. And the others will be too busy trying to raise their capital ratios, unable to generate much profit or pay dividends to their shareholders.

But this raises a very interesting point: investors spend a lot of time analyzing bank stocks to see whether or not they should invest.

Yet very few people analyze the banks themselves to see whether or not to deposit money there.

This is totally backwards.

Banks are, for better or worse, our financial partners. They’re holding the money.

And while this model is changing rapidly, banks remain an absolutely critical part of our lives.

But there’s almost ZERO analysis that goes into selecting a bank. These decisions are usually made because the bank is conveniently located across the street, not due to its fundamentals.

Crazy. Banking as an industry has been about as deceitful as the political establishment. They never miss an opportunity to cheat their own customers.

They conspire to fix interest rates in their favor. They manipulate asset prices. They inflate fees and commissions for foreign exchange.

They treat us like criminal terrorists when we have the audacity to ask for our own money back.

They take our hard-earned savings and make the most mindless and destructive loans. And then when the whole house of card collapses they claim that they’re too important and demand to be bailed out at taxpayer expense… only to shower themselves with fat bonus checks.

And they consistently make the same mistakes over and over again, while using clever accounting tricks to hide their true financial condition.

Handing over our life’s savings to an institution with such an abysmal track record demands a modicum of analysis.

And if you pop the hood and look at the inner workings of your bank, more than likely you’re not going to be happy with what you see.

Again, most banks, particularly in the West, have extremely low levels of liquidity. So perhaps it’s no surprise how many western nations are establishing “bail-in” rules.

This means that the next time your bank runs into trouble, they’re pre-authorized to steal their depositors’ savings instead of going to the government for a bailout.

You’d think that with this kind of history and level of risk we would give a bit more thought before handing over all of our money.

To make the best decision on where to put your savings, why not think like a savvy investor and take look at your banks’ finances?

You can get started right now, as large banks usually publish annual financial reports online.

(If your bank is private and refuses to provide its balance sheet to you on request, that’s all you need to know about that bank. Take your money and run.)

In a bank’s financial report you want to look for two main things: the bank’s liquidity and its solvency.

A liquid bank is one that holds plentiful liquid assets and cash equivalents on hand to be able to honor all withdrawal requests.

An easy way to determine this is by dividing the bank’s cash and cash equivalents by its total customer deposits.

Liquid banks are safer, and this ratio is key in a financial crisis. Illiquid banks will be the ones ‘bailed in’ by their depositors.

Simultaneously, a solvent bank is one whose assets are far greater than its liabilities. It’s like having a large net worth.

Depending on what a bank is invested in, the value of its assets can drop significantly when there’s a market shock. And if the drop is great enough it can quickly become insolvent.

Healthy banks hold strong capital reserves on their balance sheets and maintain a high ‘net worth’. You can calculate this by looking at a bank’s total capital divided by its assets.

The higher the percentage, the safer the bank.

These are just two very basic numbers to look at when determining the safety of your bank. And it’s imperative to start asking questions. After all, there’s a lot at stake.

If you don’t feel comfortable with the results, think about changing banks. And leave out geography in your decision.

It’s 2016, not 1916. Your money can ‘live’ on the other side of the planet from you. And you might find that a foreign bank is MUCH safer than where your money is currently.

Meet Alexandra Elbakyan – The 27 Year Old Student Who Put 50 Million Stolen Research Articles Online

Screen Shot 2016-04-01 at 10.45.19 AM

The issue of academic journals and whether or not they should be available to everyone for free online was a topic that catapulted into the national consciousness a little over three years ago with the untimely and tragic death of child prodigy Aaron Swartz.

For those of you not up to speed on that story, here’s a brief summary from the post, Remembering Internet Prodigy and Activist Aaron Swartz (1986-2013): Your Life is an Inspiration:

Aaron ran afoul of the law due to his actions in the fall of 2010 when he downloaded millions of academic journal articles from the nonprofit online database JSTOR. While JSTOR could have pursued charges against Aaron for his activities, they decided against it. However, our Federal Government was not so kind. They decided to make an example of Aaron and charged him with multiple felonies. Charges that carried up to 35 years in prison and $1 million in fines. Aaron was found dead in his Brooklyn apartment this past Friday, in an apparent suicide.

Many contend, and I agree with them, that the U.S. government is responsible for driving Aaron to his death by going after him as if he was a mass murderer for an act of civil dissidence.

Interestingly enough, attempts to scare others from following in his footsteps have backfired spectacularly, as the actions of 27-year old Alexandra Elbakyan of Kazakhstan demonstrate.

As reported by the Washington Post:

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Reason Weekly Contest: Readers Respond to the Emory Chalking

Chalking Welcome back to the Reason Weekly Contest! This week’s question is:

Donald Trump’s campaign manager was once arrested for walking into a Congressman’s office with a loaded gun. He claimed he’d gotten his bags mixed up. Come up with a headline announcing the next surprising bit of gossip from the Trump campaign.

How to enter: Submissions should be e-mailed to contest@reason.com. Please include your name, city, and state. This week, kindly type “TRUMP” in the subject line. Entries are due by 11 p.m. Eastern Time, Tuesday, April 5. Winners will appear on April 8. In the case of identical or similar entries, the first one received gets credit. First prize is a one-year digital subscription to Reason magazine, plus bragging rights. While we appreciate kibbitzing in the comments below, you must email your answer to enter the contest. Feel free to enter more than once, and good luck!

And now for the results of last week’s contest: After Emory students demanded Pres. James Wagner respond to their pain and trauma upon seeing the words “Trump 2016” chalked around campus, we asked you to compose the first line of what the president’s letter should have said.

THE WINNER:

Today’s student protest was sponsored by the letter “T.” — Michael Lane, Jefferson City, MO

SECOND PLACE:

Think about my pain and trauma upon seeing the sort of students we accepted! —David Edmondson, Washington, D.C.

THIRD PLACE: Students, your feelings say more than the First Amendment ever could. — David Browne, Exeter, UK

HONORABLE MENTIONS:

We’ll build a wall around campus to keep you safe. – Bruce, Los Angeles, CA

Dear Students, There will be no more Hop Scotch drawn with chalk on sidewalks—it is a trigger for children of alcoholics. — Joyce Farrell, Wautoma, WI

Yesterday, March 21, 2016—a date which will live in infamy—the students and teachers of Emory University were suddenly and deliberately attacked by the chalk forces of the Empire of Trump. — Jay Cornell, San Francisco, CA

I did it, bitches! — Richard Bradley, Fredericksburg, VA

Dear Students, I know that the phrase “Trump 2016” can be triggering to many of you, making the recent incident during which not only was the phrase “Trump 2016” was scrawled on sidewalks, but also that same phrase was scrawled on many exterior walls, causing any literate person walking by to be exposed to “Trump 2016,” without any warning. For these reasons I am writing to invite you all to the opening of the new Trump 2016 Incident Resource Center. —Simon Spero, Durham, NC

Hush little babies don’t say a word, your hero Bernie is also absurd. And if you’d like to overreact, think about Hillary’s vote on Iraq. — Tim, Mahwah, NJ

Effective immediately, all conservative or Republican sidewalk messages must be written in RED chalk, and all liberal or Democratic messages in BLUE chalk. All students will be issued glasses, RED for those offended by conservative messages, BLUE for those offended by liberal messages. The two known libertarians on campus will get clear glasses, and students hopelessly oppressed by everything will get opaque glasses and seeing eye dogs. — Aaron Brown, New York, NY

Get your candy asses back in class. — Marty Long, Greenwood Village, CO

Would every offended student please take a turn standing up and listing my faults as the head of the university and as a human being so I can try to improve upon both? – J.

There are millions of people in this country who do not agree with you. Get used to it. — Dan Langdon, Manteca, CA

Your complaint has been noted and will be given all the attention that it warrants. — Mandy, Ithaca, NY

Concerned students of Emory, I believe you should be aware that I’m a yuge Trump fan and just donated $2,000 to his campaign. – Mark

The entire Admissions Office has been fired for cause. — Steve Eschenbacher, Polson, MT

I surrender. — John Barlow, Houston, TX

Trump 2016! — Colin Blake, Boston, MA

AND FROM THE COMMENTS:

“I wish I could give each and every one of you the biggest hug in the whole wide world.”

“Here’s a pacifier and some warm milk., then have your RA read you ‘Goodnight Moon’ and try to get some sleep.”

“These are the times that try persxns’ non-denominational spirits…”

“You may not be college material.”

“This is why we need common sense chalk laws and chalk-free zones.”

“Pale, vegan, and trembling is no way to go through life, son.”

“You’re all expelled.”

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California Passes $15 Minimum Wage; New York to Follow

Picketing That the state of California would announce a massive, game-changing new labor mandate and pass it in less than a week tells you exactly how much legislators and proponents absolutely do not want a discussion of the consequences. That’s precisely what has happened. Both houses of California’s legislature approved Thursday a deal to increase the state’s minimum wage to $15 an hour over the next six years everywhere in the state. The only concession for small employers is that there will be an extra year for them to comply.

The entire deal was announced and passed in less than a week while economists were still analyzing the potential consequences. Legislative analysts released the report detailing the consequences of the minimum wage increase on the state’s budget just a day before the legislature voted on it.

When the deal was announced I warned about the significant potential impacts in areas outside major urban centers, poorer non-urban communities where there aren’t wealthier people to absorb the rising costs increases in the minimum wage. FiveThirtyEight economics writer Ben Casselman offered some similar concerns tied to actual statistical analysis of how many jobs it may impact. He helpfully provides a chart that shows what percentage of occupations, based on the community, will be affected by such a drastic minimum wage increase. All those poorer counties that don’t house major cities are the places where the greater percentage of occupations will be affected by the minimum wage increase.

It’s easy to imagine the people who argue that this is all the more reason for the wage increase—to help those people in poorer parts of the state also get a raise. But such an argument misses the much larger point that the greater the percentage of people who will receive the pay increase means that there is a much smaller percentage of people who are able to absorb the increased costs of doing business and purchasing goods and services that will naturally follow.

(As an aside, in answer to a question asked after my blog post on Monday, California law prohibits the use of collective bargaining to arrange for employees to make less than the state’s minimum wage. This is not a situation like what happened in Los Angeles, where unions pushed for a minimum wage increase and then tried to exempt themselves in order to get an advantage over competition.)

And here’s a few other issues that really aren’t getting much attention (probably deliberately so) as the legislature and governor rush this mandate into law:

About those government costs. Once the minimum wage reaches $15 an hour, legislative analysts say it will cost the state government an additional $3.6 billion a year in changes to just state employee wages. The state budget for 2016-17 proposes $168 billion in spending, to give some context. But that’s just state spending. It would likely also impact municipal government costs. Do keep in mind that even if local governments don’t employ lots of workers at minimum wages, many collective bargaining agreements tie base pay to whatever the minimum wage actually is. So there could full well be a number of employees both in the public and private sector who make more than $15 an hour now who will nevertheless be able to demand raises anyway because of the increase.

Even more pension obligations. Don’t forget that the increase in wages doesn’t just obligate taxpayers to fund government employees only when they’re actually working. Wage levels determine post-retirement pension payments, so those are going to skyrocket as well. The state of California has billions and billions of unfunded pension liabilities (representing the amount of money taxpayers have to pay when pension funds don’t perform as well as promised). And again, that’s just for state employees. Municipalities have their own pension crises, and they’ve contributed to the bankruptcies of cities like Stockton and San Bernardino. The City of San Bernardino recently dismantled its own fire department and contracted with the county in order to try to reduce its obligations.

Impact on salaried employees. In California, it’s not just the low-skilled hourly wage slaves that will be affected. California is persnickety about the circumstances through which employers may designate employees as salaried and therefore exempt from many hourly pay and overtime guidelines. One of the rules (and not the only rule by far) is that these employees must make at least twice the minimum wage. Right now that’s about $41,000 given California’s $10 minimum wage. By the time this increase is in full effect employers will have to pay managers and others on salaries a minimum of $62,400 annually or shift them back to hourly wages.

In Casselman’s FiveThirtyEight analysis of California’s wage jump, he notes that America is seeing job growth at both the top and bottom of the wage scale (and he has graphs to prove it), but it’s the middle getting hollowed out. Because of this salary rule, we can see exactly how that happens in California. This salary rule won’t likely affect people in upper management or well-established salaried employees. But it will likely result in an elimination or reduction of these types of positions in the middle of the employment spectrum. Critics of the minimum wage like to talk about how it pulls the rungs out of the bottom of a metaphorical wage “ladder,” making it harder for poor and unskilled workers to find opportunities into the workforce. In California (and probably other states as well) these increases will also result in pulling some rungs out of the middle of the ladder as well, reducing opportunities for wage laborers to try to transition into management roles.

On the other side of the country, New York has decided to follow in California’s footsteps, though a little more carefully. A “deal” with legislative leaders (and not anybody who actually has to pay for the costs) will raise the minimum wage to $15 an hour in a timeline that shifts depending on location and will be subject to an impact review once it hits $12.50 an hour. The plan also includes 12 paid weeks of paid family leave, an entitlement that Peter Suderman explains here actually has negative impacts on women in the workplace.

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China Bans April Fool’s Day: It Is “Inconsistent With Core Socialist Values”

In a story that itself seemed like it may be an April fool’s joke, the WSJ writes that China’s official Xinhua News Agency has issued a warning on its viewpoint commentary microblog that antics over April Fool’s Day – a tradition it was first exposed to only in the late 1970s when it gradually opened up to foreign cultural influence – are “inconsistent with core socialist values” and at odds with Chinese cultural tradition.

As the WSJ poignantly puts it, “top-down Communist regimes are not known for their rollicking sense of humor. Building a perfect society is hardly a laughing matter, especially when hostile foreign forces are trying to undermine your efforts with lightness and frivolity.” As a result the Xinhua post, seemingly concerned that objective criticism could pass under the guise of humor warned “please don’t believe, spread or create rumors.”

Somewhat predictably, this sparked a hail of interest and commentary by China’s vibrant online community, much of which does appear to have a sense of humor. According to the WSJ, Xinhua’s message was reposted more than 11,000 times as of early Friday evening. As reaction mounted, Xinhua disabled the story’s comments function. But other state media outlets published screenshots of the original posting on their websites, where they continued to accept feedback.

Some examples:

“News released every day makes a fool of ordinary people, so what’s wrong with celebrating April Fool’s Day?” wrote one online commenter named “WuGang” on the website Huanqiu, an online news portal run by the official People’s Daily and its affiliate the Global Times. WuGang apparently is not familiar with US economic data.

“This must be Xinhua’s April Fool’s Day joke,” added another user identified as “Xie Xingsheng_Big Dipper Academy of Finance Research.”

Some, however, took the government’s side, such as a netizen identified as “Wilderness” who wrote: “I strongly agree with Xinhua. Chinese people should have our own cultural confidence”, of which it appears humor is not a part.

One reason why China’s bureacracy is so afraid of humor is due to its unnatural inability to distinguish fact from humorous fiction. Despite efforts to discourage humorous pranks, China’s straight-laced official media has repeatedly found itself caught out on the humor front. In June 2002, the Beijing Evening News picked up a story from The Onion claiming that the U.S. Congress was considering moving out of the Capitol building to newer digs with a retractable roof, better refreshments and more luxury sky boxes.

A decade later, The Onion struck again when the People’s Daily fell victim to another of its spoof stories declaring that North Korean dictator Kim Jong Un had been voted the “sexiest man alive for 2012.” The Chinese Communist Party mouthpiece even included a 55-photo slideshow and an Onion quote that “this Pyongyang-bred heartthrob is every woman’s dream come true.”

TV stations have not been immune either: according to the WSJ, in 2013, state broadcaster China Central Television took an April Fool’s Day story from the British tabloid the Daily Mirror at face value, according to the South China Morning Post. The Daily Mirror story claimed that Virgin Atlantic Airways Ltd. had unveiled a new aircraft featuring a glass floor so passengers could watch the scenery pass by underfoot.

What makes China’s crackdown on humor particularly ironic, is that the media is already so controlled by the government apartus, it is difficult to distinguish where truth begins (or ends), and is replaced with absudrity. WSJ explains:

While China’s people are as quick to enjoy a good laugh as any, the country’s leadership culture tends to favor the stiff and formal, making it rather unusual for state media to walk on the lighter side.

This is particularly the case lately as President Xi Jinping has championed core Communist Party orthodoxy, said Barry Naughton, a professor at the University of California, San Diego. In a recent widely publicized tour of state-run media outlets, Mr. Xi urged reporters to pledge strict loyalty to the party under his leadership. “Everyone’s supposed to fall in line,” Mr. Naughton said.

Xinhua’s admonition against rumormongering — whether amusing or not — echoes a tradition going back centuries, political historians say. Emperors often feared gossip, particularly in times of disaster, which could signal that the leadership no longer enjoyed a “mandate from heaven” to rule, they say.

“In the past, many rumors were about plagues, natural disasters or government affairs,” said Renmin University professor Zhang Ming. “In fact, many rumors in China are not rumors, but words the government doesn’t want to hear or information the government doesn’t want released.”

Late last year, China amended its criminal law in an effort to quash rumors, especially those leading to “serious disruption of social order.” This followed a crackdown on people accused of spreading unauthorized information regarding a deadly chemical fire in the northeastern city of Tianjin and state intervention in a slumping stock market.

But what is most profound is the following statement by Naughton “Rumors weaken the official message. You suddenly notice that the official narrative isn’t the whole story.”

“Rumors” like “the US economy isn’t doing nearly as well as the official propaganda wants you to believe”, which in turn are met with such derision from none other than the president as “peddling fiction.”

Or even better: “the Fed is a naked emperor” – because nothing would crush the credibility of the Federal Reserve more or send the stock market sliding faster, than one of the privileged reporters at one of Janet Yellen’s pressers bursting into laughter.

And speaking of that, after China made the selling of stocks illegal, it appears that laughter may be the next thing that sends you in jail.

When will the U.S. follow?