Month: September 2016

John Embry: The Fundamental Attraction of Gold

 

 

 

 

John Embry: The Fundamental Attraction of Gold

Posted with permission and written by Sprott Global Investments


 

For investors who are both just beginning their foray into gold investment, and for those who have been long time proponents of gold, Sprott Senior Advisor John Embry breaks down the recent history of the U.S., highlighting the pressures that have brought fiat currency to the brink, U.S. debt liabilities to staggering heights, and gold back to the institutional investor’s crosshairs. It’s a must-hear, dispassionate and highly instructional speech for anyone seeking to fully understand the state of the global economy and its implications for gold and silver, and why gold remains a cornerstone of a well-constructed portfolio today.


To quote Voltaire: “Paper money eventually returns to its intrinsic value. Zero.”


The U.S. has provided the world’s reserve currency since Breton Woods. Though we did not lose the implicit gold backing until 1971, the pressure of the 1960s set the stage. As President LBJ tried to fund both his Great Society program and the Cold War era arms race and the Vietnam War, cash was flying out of U.S. coffers. In the process, an ever-greater amount of U.S. cash – gold-backed cash – was ending up in foreign hands. At the time, only central banks could redeem U.S. currency for gold, and they came forward with arms outstretched.
By 1970, the U.S. gold reserves were depleting at an alarming rate, causing Nixon to close off the vaults and unpeg the dollar. Few could imagine the financial engineering that was to follow.


After that came the reigns of Fed Chairmen Paul Volcker and later Alan Greenspan, who began to take enormous liberties with monetary policy, effectively addicting the financial markets to stimulus. Inflation remained muted, thanks in part to emerging China flooding the world with cheap goods, and therefore financial returns were spectacular. It has also corresponded with dramatic market dislocations.


The bond market bottomed in 1981. The stock market bottomed in 1982. The stock market crashed in 1987. The dot com bubble popped in 2001, followed by real estate – and essentially the global economy – in 2007 and 2008. And the central bank’s been there every step of the way, accommodating fresh paper money – monetary heroin — to shore up markets at any sign of trouble.
 And what has been the result?


In 1981, when Ronald Reagan was sworn in, federal debt was $960 billion, an amount accumulated over the better part of 200 years.


In 2007 and 2008, federal public debt was $10 trillion, a 10-fold increase in 26 years. This only led to greater stimulus via QE.


Eight years later and we find ourselves saddled with federal funded debt which has doubled again to $19 trillion. And this isn’t the whole picture: Off-balance sheet debt liabilities, including Freddie Mac and Fannie Mae, at an estimated $5 to $6 trillion; unfunded liabilities for Medicare, Medicaid, and social security, estimated between $60 trillion and $150 trillion; plus other liabilities, equals a range of about $85 trillion to $175 trillion.
 Factor in that U.S. GDP is a mere $18 trillion, and we can see that our obligations are between 4x and 8x our productive capacity. And how long
can this charade continue?

 

 


Please email with any questions about this article or precious metals HERE

 

 

 

 

John Embry: The Fundamental Attraction of Gold

Posted with permission and written by Sprott Global Investments


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Turkey Contemplates Buying Deutsche Bank

In what is surely the most stealthy version of Wednesday humor we have ever posted, Bloomberg reports that according to Yigit Bulut, chief adviser to Turkish President Recep Erdogan, Turkey should consider “using a new wealth fund or a group of state-owned banks to buy” the embattled Deutsche Bank. Bulut made the proposal on Tuesday via his Twitter account, saying Germany’s largest lender should be made into a Turkish bank.

“For months on TV programs, I’ve been calling on Turkey’s private and public capital: ‘Some very good companies in the EU are going to fall into trouble and we need to be ready to buy a controlling stake in them,’” Bulut wrote on Twitter. “Wouldn’t you be happy to make Germany’s biggest bank into a Turkish bank!!” the advisor said, cited by Bloomberg.

Aside from the farcically comical overtones of the proposal, the suggestion will likely infurate Germany and may ignite political opposition in Europe’s strongest economy, where Deutsche Bank has long been viewed as a national champion and has played an integral role in Germany’s economy.

Going with the flow, Bloomberg does a “serious” analysis of the proposal and notes that  Turkey’s financial industry, long viewed as a source of strength for the $700 billion economy, “has suffered some loss of market confidence over the past few years.”

The market capitalization of the country’s publicly traded lenders stands just above $49 billion, roughly the size of General Motors Co. and about half what it was in 2013, while that of Deutsche Bank is almost $17 billion. Banking assets in the country amounted to about $836 billion at the end of July, while Deutsche Bank had total assets of 1.63 trillion euros ($1.83 trillion) at the end of last year.

Yeah, the numbers don’t really work but that’s the smallest issue facing the “contemplated” transaction. There is a bigger problem. 

Back in July, Turkish Prime Minister Binali Yildirim announced that the government was planning to form a wealth fund to finance investments in infrastructure mega-projects, stabilize markets and keep growth on track. The fund could be as large as $200 billion, Maritime and Communications Minister Ahmet Arslan said in August, without providing details on where its money would come from.

And here is the issue: Turkey’s wealth fund does not exist, and considering the urgent nature of DB’s troubles, this may prove to be a modest hurdle.

“Turkey’s sovereign wealth fund is still in the works, but the critical problem at this stage is that while it is ‘sovereign,’ the key bit it lacks is the ‘wealth,’” Timothy Ash, a credit strategist at Nomura International Plc in London, said in an e-mail on Wednesday. “I am not sure that Turkey’s state-owned banks would want to be saddled with Deutsche Bank’s balance sheet at this stage — they possibly have enough problems/challenges with their own in the context of the domestic growth slowdown.”

While Turkey’s “consideration” whether or not to buy Deutsche Bank will sadly go nowhere, “sadly” for the purely comedic value that would ensue as Turkey is straddled with some €42 trillion in derivatives, one person who would be delighted from such an outcome is Angela Merkel herself, who is now caught between the political hammering that would ensue from any state bailout on one hand, and on the other risks collapsing the global financial system should Deutsche Bank indeed be “Lehmaned”, as the worse case scenario has been dubbed by seom.

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Battle Over Publicly-Financed Las Vegas Stadium Heats Up

Pay up, suckersA prominent Las Vegas labor union and a conservative tax watchdog group have both come out in vocal opposition to the proposed $750 million public subsidy for a new stadium intended to lure the National Football League (NFL)’s Raiders to Sin City.

As I noted here at Reason earlier this month, to get the stadium built, “the Raiders, who currently call Oakland (Calif.) home, will contribute far less at $500 million, while Sheldon Adelson, the billionaire casino owner and financier of failed political campaigns, will contribute $650 million through his Las Vegas Sands corporation.” If the deal goes through as presently constructed, Adelson’s group will not be required to share any profits with the public.

Via the Twitter feed of KTNV political analyst Jon Ralston, The Nevada Taxpayers Association sent out a letter featuring 16 reasons to oppose raising hotel taxes one percent to help finance the stadium, including:

  • The bond will have to be paid out of the public tax coffers whether or not the tax increase raises sufficient revenue.
  • A recently as this year, a NFL team abandoned a city which publicly financed its stadium—before the debt on the stadium was paid off.
  • The public won’t share in the stadium’s profits.
  • Nevada Gov. Brian Sandoval (R)—who supports the stadium proposal—has called for $300 million in budget cuts “because other taxes are under-performing.”
  • And finally, “There is no evidence to suggest that a publicly funded stadium brings any benefit to taxpayers and there is significant data indicating that subsidized stadiums can be a detriment to a community.”

Earlier this week Nevada’s largest private sector labor union—the Culinary Workers Union—released a Dr. Seuss-esque video mocking the stadium proposal. Watch below:

Not to be outdone, the Adelson-funded group Support the Las Vegas Dome (which has been pushing the unintentionally hilarious hashtag #DOTHEDOMETHING) released an NFL Films style video obviously directed at the jock-sniffers, but which was also loaded with overblown promises made countless times elsewhere about the thousands of new jobs and hundreds of millions of dollars that will be added to the economy.

Tiltled “Five Things to Know About Bringing the Raiders to Las Vegas,” the video includes such sound and reasoned arguments as, “The stadium will be awesome. Not awesome-awesome, Vegas-awesome,” and “The public will own the stadium. That’s right, it’s YOUR stadium,” though the video doesn’t recommend you show up to the stadium without paying for parking and admission:

Gov. Sandoval has called for a special session of the legislature to convene in early October to vote on the stadium proposal, which if passed by two-thirds of both the Senate and the Assembly will become a reality.

Read more Reason coverage on the never-ending boondoggle of publicly-financed stadiums here.

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Can Donald Trump Really Save U.S. Coal?

Submitted by Leonard Hyman & William Tilles via OilPrice.com,.

On September 22, Donald Trump reaffirmed his intent to revive the American coal industry – without many details on how to do it. What influences the price and demand for coal? Can Donald Trump influence the forces behind these market drivers?

We nominate these four factors as the most important drivers of coal prices: production and demand for steel, because the coal industry sells and exports metallurgical coal used in steel production; demand for electricity, insofar as much electricity is still generated from coal; Chinese government interference in the steel and metallurgical coal markets, because China is the world's largest steel producer and most of the companies there are state owned; and, lastly, the price of natural gas because coal competes directly with natural gas in the electric generation market. Of course a fifth factor may emerge: Presidential Candidate Donald Trump’s plan (so far unspecified) to make coal king again.

Let’s examine these factors most of which are not within the control of the U.S. President. From 2007 (before the market crash) to the present, steel production in the U.S. and the Rest of the World (outside China) has declined and Chinese production may be topping out as well. The coal industry can’t improve metallurgical coal sales up without a steel industry revival. (See Figure 1.)

Figure 1. Production of Crude Steel (millions of metric tons)

The electricity market has a similar "topping" look to it (and is far more important because electric generators buy over 90% of all U.S. coal production). We see static sales in the U.S. and declining growth elsewhere. (See Figure 2.) Even if renewables, especially wind, were not crowding out coal from the power generation market, sales to the electricity industry would show minimal growth at best. The real problem? Coal can no longer compete with natural gas on a price basis as an electricity generating fuel.

Figure 2. Electricity Generation (TWH)

But the price of fuel is only part of the problem. The costs to build new coal-fired power plants is higher as well. Overall power costs for a new gas fired station are roughly 20 percent lower than from a coal fired power plant. (See Figure 3.)

Figure 3. Delivered Price of Fuels to Electric Generators and Gas Price Adjusted for Superior Efficiency of Gas fired plants ($/MM BTU)

Note: Adjusted gas price takes into account the relative fuel efficiency of gas vs coal stations. 

President Trump claims he will ease environmental restrictions on coal by appointing sympathetic administrators to the EPA. At the same time he would also lift restrictions on natural gas exploration and production. For coal is a problem. It would lead to even more price competition by lowering natural gas production and development costs thereby making gas even more competitive as a boiler fuel.

It's probably safe to assume that Mr. Trump takes a dim view of carbon limits such as those recently agreed to by world leaders in Paris. But prospective power plant builders also have to consider that whoever occupies the Oval Office post-Trump may entertain more conventional views on global warming and climate change. Thus it is unlikely we will see a rush to construct coal fired power plants with an expected forty or sixty year life.

President Trump, however, could also attempt to slow the advance of renewables. At the federal level, reducing or eliminating relatively attractive tax credits is an obvious first step. While this might slow the decline of coal sales, it would not protect the coal industry from innovative, low cost competitors (both natural gas and renewables).

At the end of the day, natural gas is cheaper than coal. It also emits roughly half as much CO2 as coal per kwh when burned to produce electricity. In a nutshell, that’s a large part of why utility CO2 emissions are declining.

Much attention has been focused on states that produce coal. It may also help to ask, what areas of our country depend most heavily on coal? Answer: rural ones. Coal is the way rural America produces its electricity. The contractual relationship between the rural co-ops and generation-owning G&Ts (almost exclusively coal fired) is likely to come under scrutiny. This is a stealth issue for Supreme Court watchers.

On the economic battlefield, coal is losing and natural gas is winning. Mr. Trump, should he win in November, could certainly help the coal industry. He could work to level the environmental playing field thereby slowing the rate of coal’s decline. But there's not much any U.S. President can do about trends in worldwide steel production or the American public’s desire to consume energy more efficiently, as demonstrated in flat electricity sales. Maybe he really has a plan. We just don’t see it.

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Police in El Cajon Simultaneously Tase and Shoot Man Who Was Acting ‘Erratically’

The sister of a man in El Cajon, California, called police on her brother, who was acting “erratically” and who police say was walking in traffic, endangering himself and others, and eventually he was tased by one officer at the same time as being shot by another after pulling his hands out of his pocket and, according to police, appearing to place them together and point them at a cop as if he had a gun. The man died in hospital.

Police said in a statement released to multiple news outlets including Reason that the man did not comply with orders from an officer to take his hands out of his pockets when they arrived, so the officer drew his firearm and pointed it at the man. A second responding officer arrived, according to the statement, and “immediately prepared to deploy a less lethal electronic control device while the other officer covered.”

Multiple witnesses told NBC 7 that the man, Alfred Olango, had his hands up when he was shot, but police released a frame from a video of the shooting showing the man holding his hands together and pointing them at an officer who had his weapon pointed at him (picture on the right). It appears police were aware they were responding to a call about a mentally disturbed man, but did not arrive with the Psychiatric Emergency Response Team. Witnesses also said Olango was unarmed.

One witness who worked at a nearby restaurant also told NBC 7 that police confiscated phones from her co-workers, but police say they are in possession of just one cellphone, and that the owner of the phone gave it to them voluntarily after telling them it contained footage of the shooting. The witness also claimed police told them not to talk to anyone.

Olango’s sister is seen on another video crying. “Why couldn’t you guys tase him? Why, why, why, why?” she asked officers on the scene. “I called so many times to help him.”

Police say the two officers are administrative leave, which is standard procedure after “critical incidents,” and that “a complete and thorough investigation will be completed.” Police also called in the district attorney’s office to investigate.

The city purchased body cameras in May but police chief says he hopes the cameras will be deployed by next year.

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Actress Melissa Joan Hart Joins Gary Johnson’s Presidential Campaign

Family sitcom star Melissa Joan Hart has announced that she’s not just endorsing Gary Johnson for president, she’ll be joining the Libertarian candidate’s campaign as chair of Connecticut operations. “I want to break away from this two-party system and I think it’s important for people to know that there’s another candidate out there who really toes the line between Democrat and Republican,” Hart, who lives in Connecticut, told People magazine in a video interview. “I mean, he’s Libertarian. But socially he’s liberal, but fiscally conservative.”

Hart went on to tout the executive experience of Johnson, a former governor of New Mexico. “Governors I love, because they already ran their state as like a little president,” Hart explains, adding that Johnson “was on a border state, so if you want to talk about immigration, he’s the guy.”

“It’s really time for us to break away from this two party system that’s controlling us,” she reiterated to People. “They’re like gangs, you know?”

On Tuesday, Johnson tweeted that he was “Proud to have @MelissaJoanHart on the team!”

Beloved by millennials and Gen X’ers for her role in 1990s sitcoms Clarissa Explains It All and Sabrina, the Teenage Witch, Hart starred more recently (with fellow ’90s teen star Joey Lawrence) in the popular ABC Family sitcom Melissa and Joey. In that show, which ended in 2015, Hart played a city councilwoman in Toledo, Ohio, who eventually runs for state Congress.

Hart currently lives in Westport Connecticut with her husband, musician Mark Wilkerson, and their three children.

In 2012, she publicly endorsed Mitt Romney for president, a move that earned her a lot of outrage from liberal fans on social media.

This year, Hart declared her support for Johnson in August, tweeting, “Just donated to #LetGaryDebate! Watch the video and you might too!” with a link to a Johnson campaign ad.

Today, she posted a photo of Gary Johnson to Instagram with the following message: “I always said I wouldn’t vote for a party, I would vote for the person that was the best for the job… and I think I found him. @govgaryjohnson #voteFORsomeone not against one. My hope is that sometime in my lifetime we can be more than a 2- party country.”

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Saudi Devaluation Bets Surge, Stocks Crash As Debt Deal Falters On 9/11 Legislation Anxiety

Despite its peg, Spot Riyal is trading at its weakest in 8 months as turmoil mounts in The Kingdom as a failed 'deal' in Algiers, pay cuts for royalty, and now growing concerns that the US vote/veto on 9/11 Legislation will delay Saudi Arabia's first international bond sale. Forward bets on Saudi currency devaluation are surging and default risk is on the rise again as Bloomberg reports, a Senate vote to override President Barack Obama’s veto could cause some investors to balk at the issue.

The country is planning to sell at least $10 billion of bonds next month, four people said. As Bloomberg adds,

Senate leaders in both parties said Tuesday they expect the vote to succeed, though Congress has yet to override a veto by Obama. Senator Ben Cardin of Maryland, the ranking Democrat on the Foreign Relations Committee, said last week that the Saudi government has warned that enacting the bill would cause a “significant change” in the U.S.-Saudi relationship. Saudi stocks tumbled and the currency weakened the most in four months.

 

Overriding the bill “could dent investor demand in near term,” said Kaan Nazli, who helps oversee $4.8 billion of emerging-market debt at Neuberger Berman Europe Ltd. in The Hague.

 

“It would subject the new bonds to some headline noise but ultimately the U.S.-Saudi relationship is very deep and the thinking would be that this issue would be overcome somehow.”

he Saudi Arabian riyal weakened the most since January…

And one-year forward contracts for the currency (Devaluation bets) headed for the biggest increase since July…

 

Saudi stocks lost the most in the world for a second straight day. The Tadawul All Share Index was the worst performer among more than 90 gauges tracked by Bloomberg, falling 4.5 percent as of 2:11 p.m. in Riyadh to the lowest level in more than eight months (near its lowest sicne 2009)

 

So now we know why Obama was so adamant to veto the bill… The Saudis have a lot to lose… this is not about US blowback.

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Oil Oscillates As Production Drops; RBOB Plunges After Biggest Gasoline Build In 4 Months

Following the surprising across-the-board inventory draws report by API overnight, DOE confirmed crude's overall draw (-1.88mm bartrels vs +3mm exp). However, gasoline saw the biggest build in 4 months (as distillates saw the biggest draw in almost 2 months). Crude production dropped very modestly on the week but remains stuck around 8.5mm barrels. Oil prices popped then dropped and remain lower for now…

API

  • Crude -752k (+3mm exp)
  • Cushing -832k
  • Gasoline -3.7mm
  • Distillates-343k

DOE

  • Crude -1.88mm (+3mm exp)
  • Cushing -631k
  • Gasoline +2.03mm (+500k exp)
  • Distillates -1.915mm

Total U.S. imports of crude 7835k b/d vs 8309k

  • PADD1: 866k vs 883k
  • PADD2: 2437k vs 2664k
  • PADD3: 2980k vs 2875k
  • PADD4: 354k vs 367k
  • PADD5: 1197k vs 1520k

Imports into U.S. by country in b/d:

  • Canada imports 3194k vs 3460k
  • Saudi Arabia imports 1272k vs 1100k
  • Venezuela imports 775k vs 791k
  • Mexico imports 434k vs 561k
  • Colombia imports 353k vs 547k
  • Ecuador imports 259k vs 218k
  • Nigeria imports 302k vs 141k
  • Kuwait imports 340k vs 155k, highest since wk of July 22
  • Iraq imports 352k vs 358k
  • Angola imports 99k vs 64k

For the 4th week running crude inventories fell but Gasoline saw the biggest build in 4 months…

Total stocks fell modestly to 503mmbbl…

 

… which narrowed the surplus over 2015 to 45mmbbl, or 10%, although the surplus to the 10 year average remains a whopping 155mmbbl, or 45%.

 

Domestic production fell very modestly but remains glued to the 8.5mm barrel levels…

 

Crude ripped and dipped on the mixed headlines, but RBOB is tumbling on the big build.

 

“Everything is still headline driven out of Algiers,” says Petromatrix analyst Olivier Jakob. “Directionally it’s difficult to trade when you’ve got so many conflicting headlines coming out of there”

 

Charts: Bloomberg

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FBI Director Comey Takes Stand Again To Answer For “Handing Out Immunity Agreements Like Candy”

As the credibility of the FBI continues to dwindle away over it’s handling of the Hillary email investigation, FBI Director James Comey is back on the Hill today to explain why he was “handing out immunity agreements like candy.”  Comey has come under consistent attack recently from members of the House Oversight Committee who have alleged political bias in an investigation that granted immunity to 5 of Hillary’s top aides and IT professionals while seemingly receiving minimal cooperation in return.  The testimony can be viewed on C-SPAN. 

Allegations of impropriety were exacerbated by the FBI’s decision to, not once but twice, dump information on the media late on a Friday afternoon in an obvious attempt to “bury the story.”  The latest 189-page, Friday afternoon document dump included, among other things, new revelations that Hillary maintained a gmail account while Secretary of State and that Obama, after previously denying knowledge of Hillary’s private server, actually communicated with her on that server using a pseudonym. 

According to the Wall Street Journal, the FBI usually only “proffers” immunity deals in return for genuine information and requirements that the recipients cooperate with other investigating bodies, such as Congress.  That said, in this specific case its unclear what the FBI received in return for their immunity deals other than what they could have otherwise taken with a subpoena.  As Jim Jordan (R-OH) said, “if the FBI wanted any other Americans’ laptops, they would just go get them—they wouldn’t get an immunity deal.”  But, of course, by offering immunity, the FBI exempted the laptops and their emails as potential evidence in a criminal case.

James Comey

But, Comey says that granting immunity deals was a much faster way to gather evidence as the alternative was to get a grand jury to subpoena the laptop, which he said could have ignited a years long legal fight because Mills was also acting as Hillary’s attorney.  Per the Washington Times:

“The FBI judgment was we need to get to that laptop. We need to see what it is,” he said. “This investigation’s been going on for a year. And this was, in the negotiation, a tool that her lawyer asked for, that the Department of Justice granted so we could get the laptop.”

 

Others offered immunity included Bryan Pagliano, the Clinton campaign staffer whom she brought over to the State Department to operate the private server; Heather Samuelson, another of Mrs. Clinton’s attorneys and a former State Department employee; John Bentel, a former information technology official at the State Department; and Paul Combetta, an employee at Platte River Networks, the firm Mrs. Clinton hired to handle her server in its final days before wiping it clean.

 

Mr. Comey said the bureau offered immunity to Mr. Combetta to try to find out whether he was ordered to be part of a cover-up and found no evidence to back that up.

 

“The department granted immunity to the one fellow who erased the stuff so that we could figure out, did anybody tell you to do this, did anybody ask you do this, to see if we could make an obstruction case — we couldn’t,” he said.

Apparently, the following email from an “Undisclosed PRN Staff Member” referring to the “the Hillary coverup operation” was not quite enough to convince the FBI of a “coverup.”  Per the FBI notes:

Hillary Coverup Operation

 

Beth Wilkinson, the attorney representing Cheryl Mills and Heather Samuelson, said the immunity deals were designed to protect her clients against any related “classification” disputes.  Meanwhile, Comey also allowed Mills and Samuelson to serve as lawyers for Hillary at her FBI interview—despite having been interviewed as witnesses and offered immunity.

Sen. Ron Johnson, Wisconsin Republican and chairman of the Senate Homeland Security Committee, ticked off a number of cases he said were similar to Mrs. Clinton’s in which a prosecution was launched.

 

“My concern when all is said and done with what Secretary Clinton did is that by not prosecuting anybody in this case we really do signal that we have a two-tiered justice system here,” he said. “And what is that going do in terms of other people that are charged with responsibility, properly handling classified information?”

What a disaster…but one more Congressional hearing should clear it all up.

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Sex Offenders Say Idaho’s Retroactive Registration Requirements Are Unconstitutional

When Idaho first required sex offenders to register with police in 1993, most of them were not forced to do so for the rest of their lives. But over the years legislators extended lifetime registration to more and more crimes, and today it presumptively applies to all sex offenders, who also must check in with police every 90 days. A federal lawsuit filed last Friday argues that retroactively imposing those requirements on sex offenders, in some cases more than two decades after they were convicted, violates the Constitution’s ban on ex post facto laws.

Whether the courts agree will depend on whether they view registration and the burdens associated with it as a punishment. In the 2003 case Smith v. Doe, the Supreme Court ruled that Alaska’s sex offender registry was essentially regulatory and was not punitive enough to violate the Ex Post Facto Clause. But in August the U.S. Court of Appeals for the 6th Circuit concluded that Michigan’s Sex Offender Registration Act goes far enough beyond Alaska’s law that applying it retroactively is unconstitutional. The 6th Circuit focused on the act’s arbitrary classification scheme, residence restrictions, and burdensome reporting requirements—all features shared by Idaho’s law.

Michigan puts sex offenders in tiers that supposedly indicate how dangerous they are, but an offender’s classification is based entirely on the statute he violated, as opposed to an individualized assessment of the risk he poses. While Idaho has no tiers, putting all sex offenders in the same category and requiring all of them to register for life implies that they are all equally dangerous, which is arguably even more misleading than Michigan’s system. The Idaho lawsuit, which was brought by 104 sex offenders, argues that the state “publicly and falsely identifies [the plaintiffs] as among the most dangerous sex offenders on the registry,” even though they “have clinically been determined to be low risk.”

Michigan makes it illegal for sex offenders to live, work, or loiter within 1,000 feet of a school. Idaho’s zone of exclusion is half as big, and it does not explicitly apply to work, although it effectively bars sex offenders from any job that might require being present on school grounds (to deliver goods or repair equipment, for example). Even sex offenders attending their children’s school functions have to get permission in advance.

Like Michigan, Idaho requires registrants to immediately report in person even minor changes in their information, such as a new online ID or a newly borrowed car. Failing to do so within two days is a felony punishable by up to 10 years in prison. Registrants also have to report in advance any trip lasting longer than seven days, and if they travel to another state they are subject to its restrictions, which may be different and hard to figure out. The lawsuit says Idaho’s “reporting, surveillance, and supervision requirements” for sex offenders “are similar to, but more restrictive and onerous than, the reporting, surveillance, and supervision that the plaintiffs experienced while serving their sentences on probation or parole.”

The plaintiffs note (as the 6th Circuit did) the lack of evidence that these requirements actually make the public safer, which is the rationale for viewing them as regulations rather than penalties. “In fact,” says the lawsuit, “the research shows that public registries are likely to increase, rather than decrease, recidivism, and are therefore counterproductive to their avowed purpose of public protection….These results reflect the fact that sex offender registration and the attendant consequences exacerbate risk factors for recidivism, such as lack of employment and housing, and prevent healthy reintegration into the community.”

The lawsuit also argues that some provisions of Idaho’s law are unconstitutionally vague. It is not clear, for example, whether a registrant commits a felony by signing up for Netflix or changing his Amazon user ID and failing to notify police (in person!) within two days. Other claims involve double jeopardy, cruel and unusual punishment, freedom of travel, and religious freedom (since churches may be within 500 feet of a school).

This month the U.S. Court of Appeals for the 9th Circuit, which includes Idaho, ruled that an Arizona appeals court “was not unreasonable” in holding that Arizona’s sex offender registry was mainly regulatory rather than punitive. That decision does not bode well for the challenge to Idaho’s law, but it does not preclude success either, even on the ex post facto claim. Idaho’s law is more burdensome than Arizona’s in some respects, and the 9th Circuit did not independently assess Arizona’s law in this month’s ruling, which involved a habeas corpus petition filed by a sex offender sentenced to prison for failing to register. The 9th Circuit merely concluded that the state court’s decision was “neither contrary to, nor an unreasonable application of” Smith v. Doe.

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