Kurt Loder Reviews Ant-Man and the Wasp: New at Reason

Ant-Man movies offer a welcome respite from the endless gush of Marvel super-product. The action is confined to one planet, the banter is funny but not overbearingly zingy, and the super-suits are only modestly muscular. At first sight, the diminutive hero raises minimal action expectations, so in this second film, as in the first, they’re easily exceeded, writes Kurt Loder.

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Chinese Ports Begin Delaying Clearing Of US Goods

Rumors that US companies have been experiencing unspecified “difficulties and delays” while trying to get their goods through customs in China have been circulating for weeks – ever since reports surfaced alleging that Chinese officials had warned US executives that China would come down hard on US firms in retaliation for Trump’s trade war. And now that the Trump administration has finally imposed the first round of tariffs, Reuters is reporting that several major Chinese ports are delaying the clearing of goods from the US as officials await further instructions from the central government. These delays could seriously disrupt imports – especially of agricultural products like pork and soybeans which were targeted by Beijing for tariffs.

Trade

An official at the port of Shanghai told Reuters that the clearing of some US imports through customs had been halted.

There did not appear to be any direct instructions to hold up cargoes, but some customs departments were waiting until they had received official guidance from the central government on imposing hefty import tariffs on hundreds of products, the sources said.

A wine merchant in Shanghai, one of the country’s busiest trading hubs, said customs brokers were also slowing the clearance process because of confusion about how and when to implement duties.

“They’re holding everything … because there’s uncertainty,” he said.

[…]

“But overall, this weekend they should be able to identify what the taxes are and how they should be implemented, and they should be processed as normal.”

Meanwhile, a commodities trader in Shandong province said he was told by customs officials that the clearance of goods from the US that are on Beijing’s “list” will be delayed. Among the goods being targeted by tariffs, transportation equipment, electronics and agricultural products, among others, were high on the list. American fruit, pork, nuts, wine and – of course – soybeans, with a 25% tariff. The chart below from JP Morgan is a rough breakdown of expected tariffs by industry (however, some of the announced tariffs have yet to be implemented).

Goods

And here’s a list of US goods that China has threatened with tariffs.

Tariff

According to Reuters, the delays started at midnight local time on Thursday. China said that it would wait for the US to impose tariffs on Chinese goods before responding with its own tariffs. China has implied that customs delays and other actions to discourage or punish US firms operating in China would be an integral part of its trade-war response thanks to the US’s gaping trade deficit.

Deficit

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“We Are Wrong In Being Short”: Gartman Stopped Out Of S&P500 Short

Less than 24 hours ago, we excerpted some of the most salient commentary from the latest Gartman letter, according to which “[S]trength is to be sold into; weakness is only to be bought after the market has been sold. If one sells a thousand shares on strength, on weakness one might wish to buy back only half of that, with the intention of selling another thousand on any subsequent strength. This is now a bear market; trade then accordingly.

More importantly, we noted that his latest trade reco, to short the S&P500, saw its blended stop price lowered from 2747 to 2741, one which was noted was just points away from being triggered.

Well, just a few hours later Gartman decided to end the suspense and in his Friday note confirmed that he was now stopped out, to wit:

… we have been short of the US equity market for the past several weeks and for a while that position looked wise, and in fact it was wise enough for us to have added to that initial short position, intending… as had been clearly stated… to add to that position again. Indeed, we came very close to having done precisely that. But all positions must be  considered in light of each new day; risks must be assessed, and positions adjusted as needed. Simply put then, we are wrong in being short… for the moment at least… and as we write our stop order in the S&P futures has been touched off, for in yesterday’s commentary we moved our stop down in the nearby futures from $2747 to $2741, using our “hour or so” methodology to assure that the stop point had been proven valid. It has been and as we write we consider that most shall have been taken out of their trades at or near to $2743. Those that have not exited their positions should do so as soon as practicable. Apparently, trade tariffs; trade protection; and rising interest rates are good for equity prices. Who knew?

But fear not, he will be back:

Eventually we shall be short again of the equity markets, confident that the highs seen in late January in global terms shall prove to have been a bull market high; but for now we are wrong in being short with the market telling us for the past two days that we are and we listen to what the market has to say. As we have said many times in the past, there is nothing wrong with being wrong; however, there is a great deal wrong with being wrong and remaining so. There is even more wrong with adding to wrong positions and that we will not do. We live to fight another day.

And for those who desperately need another trade reco to fade, good news: Gartman is suddenly a fan of soy beans – the commodity slammed the most so far by the US-China trade war – if not buying just yet:

Finally, watch developments in the “bean” market and watch developments in the Mexican Peso and gold. Things are moving and our interests are piqued as noted at length above. Actually were it not for the fact that this is Employment Situation Report day we’d be taking action but we’ll wait until Monday for now.

Trade accordingly.

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Trump Offers Elizabeth Warren $1 Million To Prove Native-American Heritage

Reverting to his campaigning days, President Trump offered some red meat to his base during an appearance at a campaign rally in Montana on Thursday when he joked about offering Massachusetts Senator Elizabeth Warren $1 million to take a genetics test that would prove (or disprove) her native American heritage.

Trump lobbed insults at “Pocahontas”, adding that he wouldn’t apologize for using what some believe to be a racially charged nickname.

Claiming that Warren has “based her life” around “being a minority,” Trump said that if Warren wins the Democratic nomination in 2020, he would offer her $1 million to take a DNA test to conclusively prove that she does have Native American heritage.

“But let’s say I’m debating Pocahontas, I’ll do this,” Trump said during a rally in Great Falls, Mont. “Pocahontas, they always want me to apologize for saying it. You know those little kits you see on television for $2 – learn your heritage – we will very carefully take that kit, since we’re in the #MeToo generation, we’ve got to be very gentle, we will gently take that kit and we will slowly toss it, hoping it doesn’t hit her and injure her arm, even though it only weighs probably 2 oz.,” Trump said.

“And we will say, ‘I will give you a million dollars, paid for by Trump, to your favorite charity if you take the test and it shows you’re an Indian,” Trump said. “And we’ll see what she does. I have a feeling she will say no but we will hold it for the debates.”

Trump often attacks Warren at his rallies, like he did at a rally in Nevada last month. However, he once again refused to apologize for using the nickname, which some have derided as racist.

“Pocahontas, I apologize to you,” Trump said Thursday. “To the fake Pocahontas, I won’t.”

Afterward, Warren fired back at Trump on twitter, accusing him of obsessing over Warren’s “genes” while his administration carries out “DNA tests on little kids because you ripped them from their mamas & you are too incompetent to reunite them in accordance with a court order.”

“Maybe you should focus on fixing the lives you’re destroying,” she added.

Warren has defended her claims of Native American heritage, saying she’s never “used it for anything” or benefited from it in any way.

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Volatile Markets On Edge As Trade War Begins Amid Confusion

Clearly the first salvos have been exchanged and in that sense, the trade war has started. There is no obvious end to this”  – Louis Kuijs, chief Asia economist at Oxford Economics.

Bulletin headline summary from RanSquawk:

  • Limited reaction seen across asset classes as China/US tariffs are imposed ahead of NFP
  • Reports of JP Morgan taking a stake in Deutsche Bank refuted
  •  

The “biggest” trade war in world history launched at midnight, when the US announced $34 billion in tariffs on Chinese exports, and… confusion followed.

Duties on Chinese goods started just after midnight, or at 12:01 a.m. Friday in Washington, and just after midday in China. Another $16 billion of goods could follow in two weeks, Trump earlier told reporters aboard Air Force one, before suggesting the final total could eventually reach $550 billion, a figure that exceeds all of U.S. goods imports from China in 2017.

As we noted earlier, while China vowed to respond with countermeasures to the “unfair” US tariffs, no explicit announcement of just how China would retaliate followed immediately. Adding to the confusion, state-owned news agency Xinhua reported that China’s tariff actions in response took effect at 12:01 pm, however here too there was no detail, and the result was a spike in risk, as traders assumed that China was perhaps willing to concede early on without an explicit retaliation.

It wouldn’t be until a little after 3am EDT, during the press conference by Chinese foreign ministry spokesman Lu Kang, that China specifically laid out how China would respond. In the Beijing press conference, he called the US move “typical trade bullying” and noted that any side’s “hegemonic actions” in trade will not succeed, in response to questions about whether China and U.S. will hold talks. Some other highlights from his presser:

  • When asked about how much U.S. goods will be affected, Lu says it’s a question for relevant departments
  • China has been trying the best to help relevant parties understand the globalization objectively and to deal with trade issues rationally since March, Lu says
  • U.S. tariff actions openly violate WTO rules and trigger global market turbulence: Lu
  • China is confident to uphold multilateral and free trade system with other countries, Lu says

But most importantly, he said that China’s countermeasures took effect immediately after “unfair” U.S. tariff actions came into force, as Xinhua trolled Trump in a tweet, saying that “Battling with the world over trade, Trump seems to be making America ALONE again.”

Xinhua then also clarified that the list of products China will hit with the 25 percent tariff won’t change from what was put out in mid-June: some 545 products including soybeans and a bunch of other farm products, plus cars and crude oil, but mostly agriculture products:

  • Soybeans – which are used to feed pigs in China, the world’s biggest pork producer
  • Corn – same, used as animal feed
  • Wheat – China is the world’s top wheat consumer
  • Beef – U.S. exports to China only started again in 2017 after being banned for years because of mad cow disease
  • Sorghum – also used in animal feed

China also said that while it has promised not to “fire the first shot,” it would now be forced to “counterattack” in order to defend its core interests. It has vowed to inform the World Trade Organization (WTO) and work with other countries to “jointly safeguard free trade and the multilateral system.”

“Our view is that trade war is never a solution,” Chinese Premier Li Keqiang told reporters in the Bulgarian capital Sofia, after meeting his counterpart. “No one will emerge as a winner from trade war, it benefits no one.”

Meanwhile, PBoC adviser Ma Jun said impact of US-China trade war is limited and expects the $50BN in US tariffs to slow
down China’s growth by 0.2 ppts, while there were also comments from China Foreign Minister Wang Yi that China and EU should safeguard free trade and that China is willing to defend Iran accord with Europe.

These clarifications appeared to break the back of the modest bullish tone that had developed in response to the widely telegraphed and priced in trade war announcement, resulting in renewed selling in both China and the US: as shown below, while the Shanghai Composite initially dropped to a fresh 2016 low, sliding as much as 1.57% and below 2,700, it then rebounded sharply, only to fade gains and close 0.49% higher after a rollercoaster session .

A similar confused reaction was observed in the offshore yuan, which initially tumbled, then erased all losses and even turned briefly green for the day, before trading modestly in the red as US traders walked in to their desks.

Meanwhile, US equity futures saw the initial mini-spike fizzle, and were trading modestly in the red at publication time.

European stocks similarly trimmed gains and U.S. equity-index futures fluctuated after China provided the details of its retaliation. The Stoxx Europe 600 Index climbed 0.1% as of 10:14 a.m. London time, the highest in two weeks. Defensive stocks including household goods and utilities were among the gainers in the Stoxx Europe 600 Index, while carmakers and miners fell, confirming that traders were especially concerned about sectors targeted by China: as a reminder, China’s new tariffs will deal a big blow to German automakers, like BMW and Daimler which are fighting a number of battles in addition to trade tensions.

One of the sectors hit hard was Europe’s bank which initially spiked higher, only to lose all gains as the session progressed.


 

In a mini sideshow development, Deutsche Bank rose on a WiWo report that China’s ICBC and JPMorgan are takeover bids; however JPM promptly denied the rumor just before 6am. The denial however did not faze traders who have sent DB stock 5% higher on the session.

Overall, there has been a relatively limited reaction to the official start of the trade conflict, which however had been well-telegraphed in advance. As an aside, if one looks at how stocks have performed since the start of trade war tensions, the US is clearly winning, if only for the time being.

What happens next, nobody really knows: as Bloomberg notes, the riskiest economic gamble of Trump’s presidency could spread as it enters a new and dangerous phase by imposing direct costs on companies and consumers globally. It’s the first time the U.S. has imposed tariffs aimed just at Chinese goods and follows months of accusations that Beijing stole American intellectual property and unfairly swelled America’s trade deficit.

Meanwhile, adding to today’s confused trade, in just under 2 hours, the BLS will release the June jobs numbers, after the ADP released disappointing numbers on Thursday (a full preview is here).

“The usually highly anticipated report comes as trade tensions intensify between the U.S. and Chinese and are about to step up a gear, so the Labor Department’s report may not attract as much attention as normal,”  Jasper Lawler, head of research at London Capital Group Ltd. said in a note. “This does not mean that the report will be less likely to cause volatility in the dollar.”

Treasuries were unchanged, stuck to 2.83% and grinding ever lower. The Bloomberg Dollar Spot Index fell for a fourth day and was set for a weekly decline. The pound gained above $1.32 Friday following a report that ex-Prime Minister David Cameron had intervened to urge Foreign Secretary Boris Johnson to accept May’s proposals.

Commodities are mostly lower with WTI (-0.1%) and Brent (-0.3%) pressured amid yesterday’s surprise build in crude inventories fused with nervous trading as US-Sino trade war looms. Gold (-0.2%) is experiencing cautious trade ahead of the key US NFP due later today. Elsewhere, London copper (-0.1%, -5% this week) is set for the worst week since November 2015, down a fifth consecutive session as US tariffs kick in.

Looking ahead, highlights include US NFP, US trade, Canadian jobs, Baker Hughes

Market Snapshot

  • S&P 500 futures little changed at 2738
  • STOXX Europe 600 up 0.3% to 382.69
  • MXAP up 0.6% to 163.58
  • MXAPJ up 0.4% to 532.10
  • Nikkei up 1.1% to 21,788.14
  • Topix up 0.9% to 1,691.54
  • Hang Seng Index up 0.5% to 28,315.62
  • Shanghai Composite up 0.5% to 2,747.23
  • Sensex up 0.6% to 35,770.54
  • Australia S&P/ASX 200 up 0.9% to 6,272.29
  • Kospi up 0.7% to 2,272.87
  • German 10Y yield rose 0.3 bps to 0.302%
  • Euro up 0.2% to $1.1713
  • Brent Futures down 0.2% to $77.22/bbl
  • Italian 10Y yield rose 7.4 bps to 2.462%
  • Spanish 10Y yield fell 1.1 bps to 1.318%
  • Brent Futures down 0.2% to $77.22/bbl
  • Gold spot down 0.2% to $1,255.94
  • U.S. Dollar Index down 0.1% to 94.27

Top Overnight News

  • China said its retaliatory tariffs are now in effect to counter Trump’s measures, and argued it had been forced to act Impact of U.S. tariffs on $50b of Chinese goods to have “limited” impact on the economy, PBOC adviser Ma Jun says in comments distributed to reporters over WeChat
  • U.S. companies for months bemoaned the tariffs on Chinese imports that will take effect Friday. Now they fear the worst is yet to come in an escalating confrontation with Beijing over trade
  • Federal Reserve officials said a “very strong” economy warranted continued increases in their benchmark policy rate while citing an escalating trade war and emerging-market turmoil as risks to growth
  • Deutsche Bank: recent fall in valuation has drawn interest from JPMorgan and ICBC accoring to people familiar: Wirtschaftswoche
  • Prime Minister Theresa May is facing a decisive battle with her cabinet over the U.K.’s future ties to the European Union, in a showdown that threatens to throw Brexit talks into disarray
  • Saudi Arabia cut pricing for most of its oil grades as the world’s biggest crude exporter is increasing production to assure buyers there is sufficient supply following U.S. President Donald Trump’s demands that OPEC do more to stabilize oil markets
  • German industrial production picked up in May, signaling that the economy is beginning to stabilize after a stumble earlier in the year
  • While trade tensions intensify, Germany’s carmakers are fighting on an unprecedented number of fronts. While a tit-for- tat trade war move will hurt BMW AG and Daimler AG the most, the industry also has to also deal with record spending required for electric cars to keep up with emissions regulation, competitors from China and the tech industry

Asian stocks traded higher after the positive momentum from Wall St’s best performance in over a month followed through to Asia. ASX 200 (+0.9%) and Nikkei 225 (+1.1%) were positive as both indices took impetus from their US counterparts, in which the mining sector led the gains in Australia and the prior day’s currency weakness provided some encouragement to Japanese exporters. Conversely, Hang Seng (+0.5%) initially weakened and Shanghai Comp. (+0.5%) briefly fell below the 2700 level for the first time since March 2016 amid the tit-for-tat tariffs and after PBoC inaction amounted to a considerable CNY 500bln net drain for the week before the indices finished in the green. The KOSPI (+0.7%) was also subdued with index heavyweight Samsung Electronics dampened on disappointing preliminary Q2 results, while Singapore Straits Times Index (-2.0%) slumped from the open with developers hit by a surprise announcement yesterday of higher stamp duty rates and tighter loan-to-value limits as part of measures to cool the property market. Finally, 10yr JGBs have seen mild support overnight amid the overall cautious tone in the Asia-Pac region and BoJ’s presence in the market for JPY 810bln in JGBs, but with upside capped by resistance around the 151.00 level.
PBoC skipped open market operations for a net weekly drain of CNY 500bln vs. last week’s CNY 370bln net drain. PBoC set CNY mid-point at 6.6336 (Prev. 6.6180)

Top Asian News

  • Xiaomi Falls in Gray Market Before H.K. Debut: Bright Smart Sec.
  • Musk: SpaceX, Boring Co. Engineers Heading to Thailand Tomorrow
  • Chinese Stocks Struggle to Hold on to Rally as Tariffs Begin
  • Janus Henderson Seeks Sales Team Head as It Expands in Asia

European equities trade higher (Eurostoxx 50 +0.2%) while investors monitor the ongoing trade disputes amid US moving forward with tariffs targeting USD 34bln of Chinese goods. Shortly after, the Chinese Foreign Ministry said tariffs have been implemented on some US goods. Energy names lag on softer oil prices. In terms of individual stock movers, Deutsche Bank (+5.0%) shares were lifted by reports JP Morgan and ICBC are to take a stake in the company, JP Morgan have denied these reports, however. Thyssenkrupp (+2.8%) also rests at the top of the German benchmark following the resignation of their CEO after he came under heavy criticism from shareholders.

Top European News

  • Irish Banks Face Increased Capital Demand Decade After Crash
  • U.K. House Prices ‘Broadly Flat’ Amid Shortage of Properties
  • Rolls- Royce Offloads Problem Marine Arm to Norway’s Kongsberg
  • Econocom Drops Most on Record as Leasing Delays Prompt Warning

In FX, the Dollar remains on the back foot amidst the first roll out of reciprocal import tariffs by the US and China, but also eyeing the official monthly BLS report with several anecdotal releases in the run up suggesting moderate downside  risk vs consensus for the headline payroll number. The DXY is near recent lows around 94.200 as a result, but likely to be more responsive to average earnings once the initial reaction to jobs, back revisions and the unemployment rate. EUR/GBP – Both maintaining momentum vs the Buck, with the single currency back above 1.1700, but still wary of decent (1.7 bn) option expiry interest at the strike and Cable looking at 1.3250 again as attention away from NFP is trained on Chequers and the latest Brexit ‘make or break’ meeting. CHF/JPY/CAD – All treading tight lines vs the Usd, with the Franc meandering between 0.9915-45, Jpy trapped within a 110.55-80 range and Loonie locked in 1.3120-50 parameters in the run up to Canadian jobs data, and the BoC policy meet next week.

Commodities are mostly lower with WTI (-0.1%) and Brent (-0.3%) pressured amid yesterday’s surprise build in crude inventories fused with nervous trading as US-Sino trade war looms. Gold (-0.2%) is experiencing cautious trade ahead of the key US NFP due later today. Elsewhere, London copper (-0.1%, -5% this week) is set for the worst week since November 2015, down a fifth consecutive session as US tariffs kick in.

Looking at the day ahead, the June employment report in the US is the data highlight including of course the latest payrolls and average hourly earnings data. We will also get May industrial production in Germany along with the May trade balance and current account balance in France and Q1 unit labor costs in the UK. Aside from the data, the ECB’s Nouy and the EU’s Dombrovskis will be speaking at Central Bank of Austria’s annual conference.

US Event Calendar

  • 8:30am: Trade Balance, est. $43.7b deficit, prior $46.2b deficit
  • 8:30am: Change in Nonfarm Payrolls, est. 195,000, prior 223,000
    • Unemployment Rate, est. 3.8%, prior 3.8%
    • Average Hourly Earnings MoM, est. 0.3%, prior 0.3%
    • Average Hourly Earnings YoY, est. 2.8%, prior 2.7%
    • Average Weekly Hours All Employees, est. 34.5, prior 34.5
    • Labor Force Participation Rate, est. 62.7%, prior 62.7%

DB’s Jim Reid concludes the overnight wrap

A word of warning. If you’re going to a wedding that starts around 3pm tomorrow in England or Sweden be prepared to stand in for the Groom or Bride if they’re a football fan as they may see jilting their spouse as preferable to missing the big game. It’s truly a game where “the winner takes it all”. I haven’t read the tabloid papers in the UK today but I’m predicting that someone will use “Come and ABBA go if you think your hard enough” as their front page! Finally spare a thought for Craig on my team who tomorrow has his stag do in Scotland. He may not find many places to watch the game with a sympathetic crowd.

Sticking with the ABBA theme it’s a case this morning of “Gimme, gimme, gimme a tariff after midnight” as we we’re now an hour past the 00.01am ET scheduled US imposition of tariffs on $34bn of Chinese goods. Earlier on, Bloomberg reported that China’s Ministry of Commerce will be forced to retaliate on US tariffs, but have not specified a time frame yet. There is no official word yet from China as we go to print this morning. Before the US tariffs took effect, Reuters reported that President Trump told reporters on board Air Force one that subsequent rounds of tariffs could be applied on $550bn worth of Chinese goods.

This morning in Asia, markets are recovering from earlier session lows, with the Nikkei (+1.04%) and Kospi (+0.18%) both up while the Hang Seng (-0.48%), and Shanghai Comp. (-0.34%) are modestly down. Datawise, Japan’s May labour cash earnings grew at the fastest monthly rate in c20 years, at 2.1% yoy (vs. 0.9% expected). Meanwhile in Germany, Chancellor Merkel’s third coalition partner (the SPD) has now endorsed her migration plans.

Ironically on this morning of escalation, yesterday saw European automakers having their best day in 2 years after the story yesterday that German autoindustry executives met with U.S. Ambassador to Germany Richard Grenell on Wednesday where the latter was said to suggest that Washington was prepared to discuss a zero car duty regime. The Stoxx 600 Automobiles & Parts Index rose 3.41% percent with BMW (+1.70%), Fiat Chrysler (+5.98%), and VW (+3. 24%) all strong.

Staying with autos, after Europe closed Politico reported that the EU may offer to negotiate a plurilateral trade deal that would eliminate most tariffs on autos to persuade President Trump to avoid a trade conflict with the EU. The paper noted the proposal has the backing from Germany and the EC President Juncker could present the proposal to the US later in the month. Notably an unnamed official said the deal would have to cover c90% of global car exports to meet WTO rules, but DB’s George Saravelos noted that it should be relatively easy for other countries to sign up because their tariffs are already near zero. So it is a path for the EU to claim they have agreed to a multilateral deal under WTO rules when in practice it could be more of a negotiated bilateral tariffs with the US. Further, an unnamed WTO official said they have not been briefed on the proposal, but the “concept would be possible”. Meanwhile German Chancellor Merkel seems to back the idea of lower car tariffs too as she noted “talks on…reducing tariffs, for which I’m prepared, can’t only be done with the US….we’ve to do it with all countries with which we have trade in automobiles…”.

The highlight outside of trade today will be US payrolls. The consensus for June is 195k (with a high to low range of 154-242k) which compares to the above market 223k in May. The bigger focus, average hourly earnings, are expected to come in at +0.3% mom (DB agrees) which, if it holds, would push the annual rate up one-tenth to +2.8% yoy and match the post-recession high made in September last year. Our US economists are close to the consensus with a 190k projection for payrolls and their expectation is that this should be enough to keep the unemployment rate at 3.8%.  Yesterday’s ADP didn’t really do anything to sway that view with the 177k reading pretty much as expected by our economists.

As markets yesterday. US equities rebounded c1% on thin volume as trading resumed post holidays (S&P +0.86%; Nasdaq +1.12%). Within the S&P, only the energy sector was slightly down while gains were led by tech stocks as Facebook (+2.97%) and chipmaker Micron Technology (+2.64%) both rebounded and lifted sentiment as the latter clarified that the Chinese court’s sales ban on some of the company’s products would only impact c1% of its annual revenue. Back in Europe, all the bourses were higher as the DAX led the gains (+1.19%) given the boost from car maker stocks while the Stoxx 600 (+0.41%) and FTSE (+0.40%) also advanced.

This followed a confusing day of price action in European bonds with 10yr bunds selling off 4bps in the first couple of hours of trading as the previous night’s ECB story reverberated and strong data from Germany came through. However it reversed all these gains as the day progressed, most likely due to early weakness in Italy and possibly softness in Oil later on in the day. On Italy, 2 and 10yr yields were +16.9bps and +7.4bp higher respectively. Finance Minister Giovanni Tria was quoted earlier on Bloomberg as saying that the new government will have both tax cuts and a universal basic income in its first budget to prove it’s sticking to its agenda. Elsewhere in global bond markets, curves continue to flatten with US 2s10s down to a fresh decade low of 28bps and long dated core European yields are continuing to do well as chatter persists about ECB doing an equivalent of ‘operation twist’ with reinvestments once QE ends.

In FX, Sterling initially traded 0.3% higher following BOE Governor Carney’s slightly hawkish comments that “the incoming data have given me greater confidence that the softness in the UK activity in 1Q was largely due to the weather, not the economic climate”, but gains were erased and the currency closed -0.06% weaker as Bloomberg cited unnamed German government officials who noted the UK PM May’s latest plans (due to be discussed today) for a customs union post Brexit is unworkable. Meanwhile WTI oil fell -1.62%, in part as EIA data showed higher than expected US crude inventories.

Turning to the FOMC minutes which were largely in line with our US economists’ views. Fed officials acknowledged rising trade tensions but flagged the US economy is very strong. On rates, DB’s Brett Ryan noted the Fed remains on path to neutral rates and beyond given their forecasts, as the minutes indicated “participants generally judged that with the economy already very strong….it would be appropriate to continue gradually raising the …federal funds rate to a setting that was at or somewhat above their estimate of its longer run level by 2019 or 2020”. Notably some members did argued that “it might soon be appropriate to modify the language in the post-meeting statement indicating that the stance of monetary policy remains accommodative.’” Elsewhere, the flattening yield curve was a concern, as “a number of participants thought it would be important to continue to monitor the slope of the yield curve” but the minutes also indicated that the curve “…. would be only one among many considerations in forming an assessment of appropriate policy.” On trade tensions, “most (participants) noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects”. Further, “many district contacts expressed concerns” that the ongoing trade tensions was weighing on future investment activity. Finally on inflation, “a number” of participants noted it was “premature to conclude that the committee had achieved” its 2% inflation target on a sustainable basis.

Finally turning back to Brexit. Today sees the all-day cabinet meeting at the PM’s Chequers country residence where Mrs May and her cabinet will look to finalise their blueprint on the future relationship between the UK and EU post Brexit. Bloomberg reported that a group of seven pro-Brexit ministers met last night at Secretary of State for Foreign affairs Johnson’s office to coordinate their opposition to the PM’s policy on linking tariffs and goods regulations closely to those of the EU. Meanwhile, Bloomberg has also confirmed an earlier report by the Telegraph where the Brexit Secretary Davis has written to PM May to say her new proposal on the customs union will fail. So lots bubbling along before more details later today.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the June ISM non-manufacturing composite index was above market and rose 0.5pt to a four month high of 59.1 (vs. 58.3 expected). In the details, the activity index rose 2.6pts to 63.9 – the highest since August 2005, while the new orders index also jumped to a solid print of 63.2. Meanwhile the labour market cooled with the June weekly initial jobless claims (231k vs.  225k expected) and continuing claims (1739k vs. 1,718k expected) both slightly higher than expectations, but remaining at very low levels. The final readings of the June services PMI was confirmed at 56.5 while the composite PMI was revised up 0.2pt 56.2.

In Germany, the May factory orders was solid, up for the first time in five months and also above market at 2.6% mom (vs. 1.1% expected), leading to an annual growth of 4.4% yoy (vs. 1.7% expected). Excluding the impact of major  transport items, manufacturing orders still rose a solid 2.2% mom and 4.3% yoy.

Looking at the day ahead, the June employment report in the US is the data highlight including of course the latest payrolls and average hourly earnings data. We will also get May industrial production in Germany along with the May trade balance and current account balance in France and Q1 unit labor costs in the UK. Aside from the data, the ECB’s Nouy and the EU’s Dombrovskis will be speaking at Central Bank of Austria’s annual conference.

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Germany: ‘Decapitating’ Freedom Of The Press?

Authored by Stefan Frank via The Gatestone Institute,

In an apparent attempt to sweep under the rug a recent double homicide in Hamburg, Germany, authorities there censored the story. They also raided the apartments of a witness who filmed a video describing the murder, and a blogger who posted the video on YouTube.

The murder, which made headlines worldwide, occurred on the morning of April 12. The assailant, Mourtala Madou, a 33-year-old illegal immigrant from Niger, stabbed his German ex-girlfriend, identified as Sandra P., and their one-year-old daughter, Miriam, at a Hamburg subway station. The child died at the scene; her mother died later, at the hospital. The woman’s three-year-old son witnessed the murders.

According to the prosecutor’s office, Madou — who initially fled the scene, but then called the police and was arrested shortly thereafter — acted “out of anger and revenge,” because the day before the incident, the court had denied him joint custody of his daughter.

It later emerged that for months Madou had been threatening to harm Sandra P. and the baby. A senior public prosecutor told reporters that the police investigated the woman’s charges, but had concluded that the “threats were not meant seriously” and did not pursue the case.

Furthermore, half a year earlier, in October 2017, a judge revoked a restraining order that Sandra P. had obtained against Madou two months earlier, on the grounds that he saw “no evidence” that Madou had threatened her. That was when Madou’s threats increased and he explicitly announced: “I’m going to kill our daughter, and then I kill you!”

A detail of the murders that has never officially been revealed, is that Madou apparently attempted to decapitate the baby. This detail was mentioned by a commuter — Ghanaese citizen Daniel J., a gospel singer at an evangelical church in Hamburg — who happened to arrive at the subway station moments after the attack and filmed the scene on his phone.

In the video, police officers can be seen questioning witnesses, and paramedics are surrounding what appears to be the baby girl. Daniel J. says, in English, “Oh my God. It’s unbelievable. Oh Jesus, oh Jesus, oh Jesus. They cut off the head of the baby. Oh my God. Oh Jesus.”

Police question witnesses to the double-murder in Jungfernstieg subway station in Hamburg, Germany. (Image source: Daniel J./Heinrich Kordewiner video screenshot)

 

Heinrich Kordewiner, a blogger from Hamburg who discovered the video on Daniel J.’s Facebook page, uploaded it to YouTube.

A few days later, a team of state prosecutors and officers of the cybercrime unit of the Hamburg police arrived at Kordewiner’s apartment with a search warrant, and confiscated his computer, mobile phone and other electronics, allegedly to find “evidence” of the “crime”. He was — and still is — accused of: uploading the video.

Kordewiner and his flatmate told Gatestone about the raid, which took place at 6.45 a.m. They recounted that when they first refused to open the door, police forced it open — and even searched the flatmate’s room, although it was apparently not covered by the search warrant.

“The police officer said that he could also search for SD (secure digital) cards,” the flatmate told Gatestone. “While he fumbled through the books on my shelf, he suggested that he could turn my whole apartment upside down. He told me to relax.”

According to the search warrant, Kordewiner is accused of having “invaded the private sphere” of the murder victim, in breach of §201a of Germany’s Criminal Code. This so-called “paparazzi paragraph” — the legislation of which was launched by Heiko Maas (currently Germany’s Foreign Minister), who as Minister of Justice was responsible for Germany’s internet censorship law — is a barely known and rarely applied law, passed in 2015. Among other things, it makes it illegal to take pictures that “display someone in a helpless situation.” Supposedly aimed at protecting victims of traffic accidents from being filmed by curious onlookers, the law was already highly controversial when it was debated in 2014, and journalist associations criticized it for jeopardizing freedom of the press.

When the German parliament debated the law, one of the 10 experts invited to give their opinions on the matter was Ulf Bornemann, head of the “Hate and Incitement” department of Hamburg’s public prosecution office. A former MP and member of the East German civil rights movement, Vera Lengsfeld, wrote at the time that Bornemann was the only one to embrace the law without reservations: “Why,” she reported he had said, “should the data of a supposed inciter be protected?”

In a written statement, Bornemann praised the censorship law for sending “a clear political message that the administration is willing to act against hate crime in social networks.” Bornemann was also part of the team that raided Kordewiner’s apartment.

The stated reason for the raid — a breach of privacy rights — is flimsy. Only the victim’s feet can be seen in the video, and even those for only a brief moment. As the daily newspaper Hamburger Abendblatt pointed out, the footage “is blurred, taken from a distance and doesn’t allow the identification of any person.”

Meanwhile, the German publication Welt online posted a video that shows close-up footage of the victim — something that did not spur state prosecutors into action. The main difference between the two videos seems to be the verbal comment on the beheading in Daniel J’s video. The alleged breach of “privacy rights,” then, would appear to be a pretext.

The “Beheading”

“We don’t comment on this rumor,” state prosecutor Nana Frombach said to Gatestone when asked about the beheading. All she was willing to acknowledge was that the child had suffered “severe neck injuries.” When Gatestone said that §201a could not be applied to the video in question because it did not show anybody’s face, she replied that this had “yet to be decided,” and that the raid was based on an “initial suspicion.” Gatestone then mentioned that Kordewiner, instead of uploading the video anonymously (which would have been easy for him to do), had uploaded it to his YouTube channel, along with his full name and address, rendering the raid’s stated goal of “finding evidence” not merely disproportionate but entirely unnecessary. Frombach said that she was not allowed to “comment on details of an ongoing investigation,” but that she could “guarantee” that the search warrant had been “approved by a judge.”

How can any journalist, under such censorship, report the news? Would it be illegal to film the scene of a terrorist attack? Frombach said that she could “not tell” whether this would still be legal in today’s Germany. “I can only judge specific cases, not ones that lie in the future,” she said.

The libertarian website Achse des Guten (Axis of the Good) was the first media outlet to report the raid. Two days later, the daily Hamburger Abendblatt wrote:

“Hamburg’s state prosecutor rabidly prosecutes a blogger who has published pictures of the tragedy at Jungfernstieg… The raid was based on paragraph 201a, a law that the council of the press and journalist associations view as being problematic with regard to free reporting.”

The Abendblatt criticized the “nebulous phrasing” of the law and the “even more nebulous interpretation by the state prosecutor,” stating, “The law stipulates that no pictures of helpless persons may be taken. However, the cell phone footage does not show such persons.”

According to the Abendblatt, sources “from within the security apparatus” had been “surprised” by the raids of the homes of the blogger and Daniel J. The state prosecutor who ordered the raids had been “very hot on this case,” these sources said, and was “shooting out of cannons into sparrows… it is surprising how quickly the search warrant was issued, given the high obstacles we face every day, even when dealing with serious crime.”

In an accompanying commentAbendblatt editor Matthias Iken called the raid “foolish,” because “it supports the conspiracy theories of right-wingers.” Where, he asked, “do the prohibitions start? And where do they stop?”

In the meantime, the incriminated video has been deleted from all German websites and YouTube channels (although it can still be found on websites that are out of reach of the German authorities).

Censorship Backfired

If it was indeed the authorities’ plan to censor the news and keep the information of the beheading under wraps, then it backfired. Due to the reports about the raid, thousands of people have seen the video, and hundreds of thousands have heard about the botched censorship attempt. Even worse for the would-be censors, they unwittingly revealed the very detail that they wanted to keep from the public. This is because the search warrant — a copy of which was handed to Kordewiner — happens to provide a detailed account of the murders. It elaborates that Madou had “wanted to punish the mother of the child” and “enforce his claim to power and ownership.” With an “intent to kill,” Madou “suddenly” took a “knife from the backpack he was carrying, stabbed the child in the belly and then almost completely cut through the neck.”

The office of the state prosecutor is under the authority of Hamburg’s state government, a coalition of Social Democrats and the Green Party. The state’s Minister of Justice, Till Steffen, is a member of the Green Party and has for years been accused of being behind many scandals in his ministry. Among these are that alleged murderers repeatedly have had to be released from pre-trial detentionbecause their trials have taken too long. In 2016, Steffen prevented police from sharing pictures of the Berlin truck terrorist, Anis Amri when he was still at large, out of fear that sharing images of jihadist terror suspects could incite racial hatred.

Censorship in Parliament

Hamburg’s government is still trying to conceal the beheading. This became clear when, in May, MPs of the anti-immigration party Alternative for Germany (AfD) made a parliamentary enquiry about the police raid and details of the murder case. Among other things, they wanted to know whether the child had been beheaded. The administration — in breach of its constitutional duty — refused to answer. It also censored the questions by blacking out whole sentences. The newspaper Die Welt noted: “That the text of an enquiry and the questions are blackened out without consultation” is something “that almost never happens.”

When Gatestone contacted Alexander Wolf, one of the MPs who made the enquiry, to find out what exactly was censored, he sent the original enquiry (the first two pages from the left) as well as the senate’s answer (pages 3, 4 and 5) in which parts of the questions were censored. Every hint of a beheading that might have taken place was blacked out, as was the link to the article that first broke the news about the beheading and the subsequent police raid. Wolf told Gatestone:

“In the session of the interior committee, the Senator of the Interior and the responsible state prosecutor both replied very evasively to the repeated questions of our speaker, Dirk Nockemann, and imputed a lack of respect [for the murder victim]. In my opinion, this was designed to cause indignation against the enquirer on the part of the other MPs. Apparently, the Senator wants to sweep the issue under the rug.”

The speakers of the other opposition parties were also contacted by Gatestone: Dennis Gladiator of the Christian-Democrats (CDU) and Anna von Treuenfels-Frowein of the centrist Free Democrat Party (FDP). Treuenfeld-Frowein replied:

“Of course, the public has a right to information. But for us as a party committed to the rule of law, personal rights do not end with death. We therefore consider the decision to black out parts of the enquiry to be appropriate. Right now, there is no need to make details of the crime public.”

Gladiator did not respond to Gatestone’s repeated requests for comment.

Why the beheading should be kept a secret is anyone’s guess. What has become clear is how easily authorities in Germany can censor the news and punish bloggers who spread undesired information. They have a vast toolbox of laws at their disposal. It does not seem to bother them that the law invoked in this case stipulates explicitly that it shall not be applied to the “reporting of contemporary events.” The state prosecutor, however, argues that this murder case – which was reported, among others, in FranceIndiaPakistanSouth Africa and the United States – does not constitute such a “contemporary event.”

“For Hamburg’s ministry of justice,” the Abendblatt wrote, “the double murder is a crime of passion that must not be of any interest to the public.”

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Brickbat: Suspicious Minds

Sheriff SUVStutsman County, North Dakota, sheriff’s deputy Matt Thom testified that he stopped a vehicle because it was going 2 mph under the speed limit, it was from out of state, he could see no luggage, and the driver was sitting too rigidly and did not look at him when he drove alongside the vehicle. A judge ruled none of that added up to a good reason to stop the vehicle. He ruled that Thom violated the Fourth Amendment rights of the two men in the vehicle and said that 500 pounds of marijuana seized in the stop cannot be used as evidence.

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Moped Crime Is Soaring In London

Many European cities including tourist hotspots such as Barcelona, Rome and Paris have become notorious for petty crime, especially pickpocketing.

However, as Statista’s Niall McCarthy notes, while London never really gained such a bad reputation among tourists, a new criminal phenomenon is quite literally gaining traction.

Infographic: Moped crime is soaring in London | Statista

You will find more infographics at Statista

In the UK’s capital, thieves are more likely to snatch someone’s bag from their moped or motorcycle as it quickly weaves in and out of traffic.

Back in 2013, the Metropolitan Police recorded 1,637 incidents of this type of crime and since then, it has soared. In 2017 (up to September 30), there were 17,604 incidences of moped crime in London.

The solution is simple – Ban Mopeds!!!

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The Long Crisis Looms: UK Govt Economic Advisor Warns “Growth Is Ending”

Authored by Nafeez Ahmed via Insurge Intelligence (@Medium.com),

Study charts the protracted collapse of industrial economic growth and why prosperity must be built on a new economic model. And no, the Singularity won’t save us.

Economic growth isn’t coming back. While some level of growth might continue in coming decades, the boom era of seemingly unlimited material throughput we became accustomed to in the middle of the twentieth century is unlikely to ever return again as we enter a fundamentally new age of diminishing returns

These are the conclusions of a new working paper by leading ecological economist Professor Tim Jackson, Director of the University of Surrey’s Centre for Understanding Sustainable Prosperity (CUSP).

And the UK Ministry of Defence (MoD) is taking notes.

An earlier draft of the paper, notes Jackson, was “prepared as input into the UK Global Strategic Trends Review”, a forecasting research programme run by the MoD’s Defence Concepts and Doctrines Centre (DCDC), which every few years produces an updated Global Strategic Trends report for the MoD and wider UK government. Jackson also acknowledges feedback from MoD officials in revising that draft to create the concurrent version.

Jackson is former Economics Commissioner for the UK government’s Sustainable Development Commission. From 2010 to 2014, he was Director of the Sustainable Lifestyles Research Group, funded by the UK Department for the Environment, Food & Rural Affairs, Scottish Government, and the Economic and Social Research Council. He also advised many other government departments, and held advisory roles for the UN Environment Programme, the UN’s Department of Economic and Social Affairs, the UN Industrial Development Organissation, the European Environment Agency, the European Parliament, and the New Zealand Parliamentary Commissioner for the Environment.

Photo by Andre Benz on Unsplash

The long crisis

Professsor Jackson’s paper examines a range of new data suggesting strongly that chronically low rates of economic growth in recent years since the 2008 crash, far from representing a temporary phase soon to be overcome by a resounding ‘recovery’, are in fact a ‘new normal’ — from which the global economy may never truly recover.

“There remains a disturbing possibility that the huge productivity increases that characterised the early and middle twentieth Century were a one-off, something we can’t just repeat at will, despite the wonders of digital technology,” writes Jackson:

“A fascinating — if worrying — contention is that the peak growth rates of the 1960s were only possible at all on the back of a huge and deeply destructive exploitation of dirty fossil fuels; something that can be ill afforded — even if it were available — in the era of dangerous climate change and declining resource quality. Low (and declining) rates of economic growth may well be the ‘new normal’.”

Jackson draws on a number of prominent economic voices in putting forward his diagnosis, most of whom are widely respected. He cites former World Bank chief economist Larry Summers, for instance, who has recently observed:

“The underlying problem may be there forever.”

Different economists emphasise different causes for the phenomenon. Some point to problems with “sluggish demand”, a deeper reluctance from business and consumers to invest and spend due to new economic uncertanties. Others, like US economist Robert Gordon, point to a supply challenge relating to an escalating decline in the pace of industrial innovation and productivity.

Whatever the underlying drivers of the problem, Jackson shows that the phenomenon is very real — the 2008 financial crash was indeed a major catalysing event. But it was only a particularly bad blip in an unmistakeable long-term downward trend for the rate of global economic growth.

Growth rate in GDP per capita from 1966 to 2016, calculated by Jackson

In 1996, the trend rate of growth in the global GDP was 5.5%. By 2016 it was little more than 2.5%.

Photo by Andre Benz on Unsplash

‘Advanced’ economies trending to zero growth in a decade

When Jackson breaks down the data regionally, the picture is more complicated. After the financial crisis, some of the poorest economies in sub-Saharan Africa and South East Asia had per capita growth rates below 1% per annum. But in emerging markets like China, India and Brazil, economic growth rates had overtaken growth rates in more advanced economies such as the OECD countries.

Extrapolating the current downwards trend forward has some interesting results:

“Whereas for the global GDP per capita, the point at which growth disappeares is more than 60 years into the future, for GDP per capita in the OECD nations, the point is brought forwards dramatically. In less than a decade, on current trends, there would be no growth at all in GDP per capita across the OECD nations.”

As an indicator of how bad things are looking, Jackson focuses on trends on labour productivity growth. First of all, he looks at the OECD, where we see plummeting rate of productivity growth since the 1970s.

Labour Productivity Growth in the OECD from 1971 to 2016, calculated by Jackson from OECD data

If we extrapolate this trend forward, labour productivity growth would reach zero by 2028.

Then Jackson looks at the UK, a particularly useful case study of the future pathways of industrial development due to being one of the world’s earliest industrialisers.

Labour productivity growth in the UK from 1900 to 2016, calculated by Jackson from Bank of England data

The data shows that the peak of Britain’s labour productivity occurred between the 1950s and 70s, after which it declined quite steeply, reaching extraordinary low levels after the 2008 crash which are even lower than pre-1900 levels.

August 11–12, 2017, ‘Unite the Right’ white supremacist rally in Charlottesville

Political instability

We are already seeing the destabilising social and political impacts of this situation. The rise of Trump, his turn to neo-fascist policies toward Black and ethnic minorities, immigrants and Muslims, and his alliance with far-right extremist networks in Europe — all driven by an alarming resurgence of populism across both sides of the Atlantic — are direct symptoms of a new economic reality of slowly dying growth:

Electorates tend to punish administrations badly when social investment falls. If declining growth is met with fiscal austerity it is likely to lead to progressively worse social outcomes and increasing political fragility.”

At the root of the political instability we are seeing in the world, Jackson suggests, is the breakdown in the dynamics of “the existing growth-based paradigm.”

This old dying paradigm is driving environmental damage, exacerbating social inequality and contributing to increased political instability.

Net energy decline

Jackson then goes further, stepping outside of economic orthodoxy to point out the striking evidence of a correlation between the long-term decline in economic growth and underlying resource constraints:

“The suggestion that the rise and fall of productivity growth is associated with the availability of physical resources such as energy and minerals is clearly one that merits further attention. The similarity between the rise and fall in labour productivity shown… and some recent studies of the energy return on energy invested (EROI) in fossil fuels is striking.”

EROI is a measure of the amount of energy used to extract energy from a particular resource. The more energy one can get out compared to what is put in, the better, and the higher the ‘net energy’ available to society. Lower EROI, however, means that less and less energy can be extracted despite increasing investments of energy.

Recent economic research previously reported by INSURGE suggests that the maximum EROI levels for global oil and gas production were reached around the middle of last century.

“Most EROI studies across multiple countries show declining EROI in the last two to three decades,” says Jackson. “So the idea that the rise and fall in labour productivity growth has something to do with the underlying physical resources is certainly not fanciful.”

There are strong grounds then to recognise that the long-term decline in the rate of economic growth is partly related to industrial civilisation’s intensifying exploitation of material resources on the planet, and the diminishing returns from doing so.

The economic crisis is not just about ‘economics’, narrowly conceived: it is about the human species’ accelerating breach of planetary boundaries.

Photo by Ehud Neuhaus on Unsplash

The debt machine

But Jackson points out that declining EROI is unlikely in itself to be the sole driving factor in this broader trend of declining economic growth, which will also be intimately related to a combination of supply and demand issues within the economy.

Among those issues is that to keep growth growing, industrial economies have sought to financialise their economies, even more so as they deal with rising costs of material production. The idea is to increase “liquidity”, spending power, by essentially creating more cheap money — which in simplified terms means flooding the economy with credit. This temporarily lubricates spending power in the economy, but at the cost of expanding levels of debt.

“This has tended to stimulate speculative investment at the expense of productive investment in the real economy,” says Jackson. It also means that the global economy is increasingly unstable, with growth hinging very much on the expansion of debt whose repayability is in question.

And that has meant that this concurrent structure of economic growth has inevitably benefited a tiny rich minority, who sit at the helm of this parasitical financial system — while the vast majority of the world’s poor have seen little or negligible benefits.

What Jackson then shows is that the neoliberal story of growth that has accompanied these processes in recent decades has seen a dramatic increase in structural inequality.

Gutting the poor, working and middle classes

From 1980 to 2014, average income growth in the US was only 1.4%, already quite low overall.

“But the striking part of the story was the reversal in the fortunes of the poorest and richest as beneficiaries of that growth,” observes Jackson.

The bottom 50% of Americans saw their income grow “at a meagre 0.6%, only half the average rate of growth of the economy as a whole. Meanwhile, the incomes of the richest 5% “grew at 1.7% per annum, significantly above the average income growth.” Increasingly, the super-rich benefited from the tepid growth being squeezed out of the planet:

“The average growth rate of the top 0.001% of the population was over 6%, allowing them to increase their post-tax earnings by a factor of seven over the last three decades. The poorest 5% saw their post-tax incomes fall in real terms over the same period.”

This sharp rise in inequality illustrates how the poor, working and middle classes have been gutted — with even reasonably well-off working professionals experiencing an overall unprecedented decline in their purchasing power.

Faced with such diminishing returns, powerful economic producers and shareholders have “systematically protected profit by depressing the rewards to labour.” This has been exacerbated by governments pushing forward fiscal austerity, deregulation, privatisation and liberalisation along with “loose monetary policy”:

“The outcome for many ordinary workers has been punitive. As social conditions deteriorated, the threat to democratic stability has become palpable.”

Rather than rising inequality being an inevitable result of a decline in the growth rate, Jackson argues that rising social-financial instability and inequality result directly from “trying to protect the growth rate in the face of an underlying decline in productivity, by privileging the interests of the owners of capital over the interests of those employed in wage labour in the economy.”

In other words, trying to keep the growth machine growing when the machine itself is running out of steam is precisely the problem — the challenge is to move into a new economic model entirely.

Wither the Singularity?

Having demonstrated an alarming correlation between efforts to accelerate growth at all costs and the systemic deepening of economic inequalities, Jackson goes on to show that an effort by business and government to adapt to the reality of a post-growth economy may hold the best prospects for more equal and prosperous economies of a different kind.

The problem with business-as-usual, he points out, is that it is based on assumptions for which the evidence is rather thin.

The idea is that productivity growth will return, driven chiefly by technological breakthroughs either in low carbon technologies, or in “increased automation, robotisation, artificial intelligence” — or by some combination of both.

In other words, technology, at some point, will save the day. The most explicit variation of this circulating today is the idea of the Singularity — which is when artificial intelligence (AI) reaches a level of super-intelligence that will drive exponential, runaway technological growth, that in turn will solve all our problems.

But in reality, it’s simply not clear that techno-focussed investment strategies alone will actually lead to the hoped for outcomes. The low-carbon revolution is not, as yet, actually taking off. The Paris Agreement still lacks any tangible delivery plans. And it’s not clear that low carbon technologies, even if viable, can simplistically substitute for fossil fuels with the same levels of growth industrial civilisation is accustomed to.

As for AI-driven automation, it is widely recognised that its social consequences might be devastating. It involves essentially replacing workers with technological material assets owned centrally as capital. This means it is not only likely to require increased material inputs and therefore have a higher resource footprint, it is also likely to create “an unequal and increasingly polarised society”:

“There is a real danger that new digital and robot technologies will remove the need for whole sections of the working population, leaving those who don’t actually own the technologies without income and without bargaining power. Meanwhile the owners of these technologies are likely to acquire unprecedented market power, and the conditions for ordinary workers will deteriorate even further.”

Like others, Jackson suggests a Universal Basic Income as a potential mechanism to address this mass disenfranchisement of workers. But there remain serious unanswered questions over how governments committed to austerity in an era of diminishing resource and productivity returns would be able to afford this.

More usefully, Jackson calls on governments, businesses and communities preparing to respond to these issues to begin actively adapting to the underlying drivers of an emerging new economic reality.

Pointing to new research on de-growth and ‘post-growth’ economics, Jackson notes that these approaches increasingly accept that endless “economic growth is neither desirable nor indeed feasible” for the world’s most advanced economies.

If these approaches are not pursued, then we are faced with the probable impacts of business-as-usual: :

“In a growth-obsessed world it is easy to end up overlooking the parts of the economy that matter most to human wellbeing. By understanding and planning for the conditions of the ‘new normal’ associated with low growth rates, it is possible to identify more clearly the features that define a different kind of economy. A simple shift of focus opens out wide new horizons of possibility.”

*  *  *

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US And UK Authorities Now DNA-Testing Migrant Children

Both the UK and US are now using DNA testing on migrant children who have entered the country illegally, according to CNN and the Independent.

The Department of Health and Human Services (HHS) said Thursday that the agency would be using DNA testing as a “faster” and more reliable method of reuniting separated migrant children with their parents, reports CNN

“The safety and security is paramount and that it is not uncommon for children to be trafficked or smuggled by those claiming to be parents. To our knowledge this is a cheek swab and is being done to expedite parental verification and ensuring reunification with verified parents due to child welfare concerns,” a federal official told the network – who would not say how long the DNA sampling has been taking place, whether the testing requires consent, or whether the samples are being stored in a database.

The expedited identification method has been employed in order to comply with a court order instructing the Trump administration to reunite separated children under 4 with their families by July 10, while children aged 5-17 must be reunited by July 26. The DNA testing will also ensure that children are not being handed over to someone falsely claiming to be a parent or relative, such as a human trafficker

HHS secretary Alex Azar told reporters on Thursday that slightly fewer than 3,000 children have been separated from their parents – around 1,000 more than earlier reports by the agency of 2,047. 

“We have to confirm that these are in fact their parents and we have to confirm they’re appropriate people to be having custody of these children,” Azar said in an appearance on Fox News Thursday. “We’re doing DNA testing on everybody who claims to be a parent of one of our children to confirm that.”

Azar also expressed frustration at the court-ordered deadline, arguing that it was extreme and artficial – and that HHS won’t be able to be as thorough as possible in determining family relationships in just days and weeks. 

“That deadline was not informed by the process needed to vet parents, including confirming parentage as well as determining the suitability of placement with that parent,” Azar said. 

“We will comply even if those deadlines prevent us from conducting our standard, or even a truncated, vetting process.”

Two weeks ago, Attorney General Jeff Sessions spoke with members of Congress about using DNA testing, said Tony Perkins, President of the Family Research Council.

“Sessions is talking to congressional members and is hoping for a legislative fix,” Perkins said, adding that the DOJ would like to see “just, fair and enforceable” immigration policies. To that end, “They are looking at how to use DNA tests in the field to verify they are parents and not traffickers,” according to Perkins.

Sessions told Perkins “We know for a fact that a lot of adults taking children along are not related to them. [They] could be smugglers. They could be human traffickers. It’s a very unhealthy dangerous thing and it needs to end. We need to return to a good lawful system,” Sessions told Perkins on his broadcast.

UK authorities, meanwhile, has admitted that officials “wrongly forced immigrants to take DNA tests in order to settle their UK status,” after previously saying that the identification method was “entirely voluntary,” according to the Independent

The accusation against the Home Office comes a month after Caroline Nokes, the immigration minister, said in answer to a parliamentary question that any DNA was submitted on an “entirely voluntary basis”.

In one case, a letter was sent by the Home Office to an applicant’s solicitor stating that it was “imperative” they submit DNA evidence to confirm the paternity of their client’s child. This was despite the fact that the child already had a British passport.

The letter, seen by The Independent, stated: “In order to progress your client’s case it is imperative that your client submits the DNA evidence requested to confirm the paternity of your client’s child”Independent

“In the absence of such evidence the secretary of state for the home department is unable to provide you with a specific timeframe to conclude this claim.”

The asylum seeker’s attorney, Enny Choudhury, from the Joint Coincil for the Welfare of Immigrants (JCWI) excoriated Noakes over her comments. 

“The Home Office already accepted my client’s child was British when it issued him a passport. Asking for DNA tests on top of that is an unlawful frustration of her application, delaying a decision by over two years, and all too typical of Home Office practices,” said Choudhury. 

In another example, a family of Vietnamese origin in Dover said that last year the Home Office demanded their children undergo a DNA test even though the UK consulate in Hanoi accepted that their father was a UK citizen when he registered their births in 2004, according to the Financial Times.

Meanwhile back in the USA…

DNA testing at the border has already sparked concerns from immigration advocacy groups. 

Jennifer K. Falcon, communications director for RAICES, a nonprofit in Texas that offers free and low-cost legal services to immigrants and refugees, called the move deplorable because collecting such sensitive data would allow the government to conduct surveillance on the children “for the rest of their lives.” –CNN.

Join the club…

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