Month: November 2019

LA County Intoduces E-Voting System: Not Hand-Marked, Not Paper, Not Hand-Counted In Public

LA County Intoduces E-Voting System: Not Hand-Marked, Not Paper, Not Hand-Counted In Public

Authored by Lambert Strether of Corrente, via NakedCapitalism.com,

No doubt Los Angeles County’s VSAP (“Voting Solutions for All People”) rollout will not be covered as a debacle. The real question is: If there were a debacle — like, say, a case of election fraud — would we even know? Doubtful.

Just what we want in a voting system! In this post, I’ll give a brief overview of issues with electronic voting. Then I’ll look at VSAP as an institution. Next, I’ll show why the VSAP system is not only insecure, but likely to make money-in-politics even worse than it already is.

We’ve covered electronic voting before — see here, here, and here — and if you want to understand why hand-marked paper ballots, hand-counted in public (HMPBCP) is the world standard, you can read them, especially the first. In this overview, I’ll make a few high-level observations about electronic voting in general.

Digital systems can never be shown not to have bugs. As Computer Science Elder God Edgers Dijkstra wrote: “Program testing can be used to show the presence of bugs, but never to show their absence!” Many bugs in many important programs persist for years before they are discovered. A list would include Flash in IE6 (persisted 12 years), OpenSSL (15 years), LZO data compression (18 years), and bash (25 years). None of these examples are outlier programs or trivial; they are all used by millions, essential to enterprises, networks, etc. Each of these bug is an insecurity waiting to happen. And that’s before we get to Trojan Horses, which are bugs introduced deliberately by a developer for purposes of their own. In fact, I would go so far as to argue that any voting system decision maker who advocates electronic voting is doing so for reasons other than security, given that HMPBCP is available, which amounts to saying that such a decision maker regards a certain amount of exploited bugs — election fraud — as acceptable.

Now, of course we all use programs all the time: We have programs to turn on our lightbulbs, call cabs, download pr0n, etc. I’m using a program now to write this post! However, if we put voting machine software on the same plane as commercial software, we’re arguing that a central-to-mission function of democracy — the vote — is on the same plane as the very convenient ability to check the contents of our refrigerator from our cellphone. Lest I be thought curmudgeonly in this, recall the example of Bolivia, where one reason the vote was challenged was the use of an unauthorized server for data transmission of the count. Contrast that with the recent vote in Hong Kong, where there were many images of people marking paper ballots, and of people counting them, in public (in fact, of people demanding to be let in to observe). Imagine if electronic systems had been used: First, the Mainland would have had every incentive to have compromised the software, and might well have done so successfully; second, electronic systems, because they are always buggy, are always open to challenge. The fallout could have been extremely ugly at the geopolitical level. Nor would the people’s will have been respected.

With that, lets turn to Los Angeles County and VSAP. As with any software project, we need to understand the requirements. Here is what I can find on the extremely spiffy and well-budgeted VSAP site: “The Design Concepts“:

The final concept created for VSAP incorporates features driven by the project principles as well as focus group feedback, input and in-person testing.

The concept system features touch-screen technology with a simple user interface, both audio and visual output and a built-in scanner, printer and ballot box. The new voting system will provide voters with options to scan in QR coded ballots from their phone, enter their ballot choices in-person at the polling location or vote-by-mail with printed ballots.

(Note that the concept very explicitly does not say that hand-marked paper ballots will be available at polling locations; only vote by mail.) I note with alarm that the concept document includes no mention of security, or even that the voters vote be accurately recorded and tabulated. Let’s look elsewhere for that. From the aforementioned “Principles“:

TRUST The voting system must instill public trust and have the ability to produce a physical and tangible record of a voter’s ballot to verify the ballot was marked as intended before it is cast and to ensure auditability of the system. It must demonstrate to voters, candidates, and the general public that all votes are counted as cast.

(A little too much focus on PR for my taste: “instill,” “demonstrate.”) Note the fundamental equivocation, which I have underlined: The paper is not the ballot; the paper is only a record of the ballot, which is digital. More:

INTEGRITY The system must have integrity, be accountable to voters, and follow existing regulations. System features must protect against fraud and tampering. It should also be easy to audit and produce useful, accessible data to verify vote counts and monitor system performance.

“System features must protect against fraud and tampering.” See comments on bugs above. There is nothing insecure about counting ballots by hand in public. That’s why you count them in public. Finally:

TRANSPARENCY The processes and transactions associated with how the system is set up, run, and stored should be easy for the public to understand and verify. This should include making hardware components available for inspection, and source code to the extent that the manner of doing so would not jeopardize system security or availability

VSAP is being marketed as open source, but that underlined section is an awfully big qualifier. We’ll have to see how it works out in practice.

So, these design concepts and principles are the closest I can come to a requirements document (and I did look using several search tools, as well as doing an image search for diagrams). So, although VSAP uses “ballot marking devices,” we don’t know what requirements they are supposed to meet, and so have no way to judge the success of the VSAP system. If you, readers, can do better, please put your results in comments.

So, the VSA site reads like public relations to me. For completeness, here’s an image of the county-wide rollout:

Dear Lord. A “voting experience”? So the tiny little alarm head began to ring a little louder, and with this press release it began to clamor: “Votem Corp Selected For LA VSAP Project In Partnership With Smartmatic“:

An innovative voter-centered election system will modernize the way Los Angeles County citizens will cast their ballots. In partnership with Smartmatic, who was awarded a contract to assist LA County in the design, construction, and deployment of the new voting solution, Votem will facilitate the development of the new system’s interactive ballot display.

“We are extremely pleased to be taking this important step forward in delivering on our commitment to modernize the voting experience in Los Angeles County and to lead in the development and implementation of a non-proprietary, publicly-owned voting system that is responsive to the needs and behavior of our electorate,” said Dean Logan, Registrar of Voters, following the awarding of the contract at the Board of Supervisors meeting on Tuesday.

Votem and its team will be responsible for the interactive ballot display and implementation, as designed by and for Los Angeles County, in partnership with IDEO, during prior phases of the VSAP initiative that focus on security, accessibility and usability. The interactive sample ballot display will allow for voters to mark their choices on their mobile device – anywhere, anytime – and then scan in their QR code in person for fast and easy voting at a vote center.

(Hold that thought on QR codes. As it will turn out, the QR code is the actual ballot.) Votem, eh? NC readers will be familiar with Votem, since Votem was involved in CalPERS corrupt election process (see here, here, and here). Of the Votem’s many problems, this one seems to be, well, the juiciest. Yves analyes a Votem “CalPERS Tabulation Incident Report” and concludes:

[T]he Incident reports starts with five Big Lies, which is quite impressive in such a short space:

The 2018 CalPERS Public Agency Member Election was conducted by the Everyone Counts/IVS Joint Venture. Everyone Counts has since been acquired by Votem, Corp. The election team and tabulation platform remained the same.

First, the election vendors admitted in 2017 (just the way CalPERS finally confessed that “CalPERS Direct” was not direct investing) that its election “joint venture” was no such thing. It was an operating agreement between K&H Printers-Lithographers, Incorporated, dba Integrity Voting Systems, and Everyone Counts, Inc.6 In keeping, the two parties signed the agreement as separate entities.

Second, the parties nevertheless attempted to depict the contract repeatedly as a joint venture, even stating in the operating agreement that the services were to be provided in the name of the “”IVS/Everyone Counts Joint Venture”. So Votem also misrepresented the name by putting “Everyone Counts” first, implying it is the more important player. We have the agreement embedded at the end of our second post. It makes very clear that K&H Printing, operating as IVS, was the dominant party.

Third, Votem falsely stated that the elections were conducted by the soi disant joint venture. That is false because Everyone Counts defaulted on the agreement by selling its assets to Votem before the election was over.

Fourth, Votem says it acquired “Everyone Counts”. It did not do so. It acquired only Everyone Counts’ assets, deliberately leaving the liabilities and the legal entity behind.

Finally, Votem claims that it acquired “Everyone Counts” after the election. This is false, since the sale of assets closed before the election was over and days before the tabulation took place.

So, underneath all the glossy PR, and the rollout, and the stakeholders, and the lavish website, we have a prime contractor that’s an extremely shady business entity. One, morever, in charge of the ballot!

With all that set-up, let’s quickly move to the critique from the HMPBCP world. First, from the essential Bradblog, “L.A. Registrar Won’t Answer Qs About County’s New Unverifiable Touchscreen Vote Systems.” Here is where the QR code becomes important:

The new VSAP system is a touchscreen Ballot Marking Device or BMD, which prints out a computer-marked paper ballot summary of votes selected via the touchscreen, before using another computer, an optical-scanner, to read the non-human readable QR Code that is also printed on the ballot summary. The QR Codes are used to tally votes. While the QR Code (a type of barcode) cannot be verified for accuracy by voters, it is also impossible with such systems to know if any voter has even verified the human-readable portion of the ballot summary at all, much less correctly, after an election. Studies reveal that most do not verify computer-marked ballots at all, and that of the minority who do, most don’t recall the details or selections on the ballot they voted just moments earlier. That’s just one of the many reasons why most cybersecurity and voting systems experts warn against the use of such systems which are now proliferating — and sometimes replacing verifiable hand-marked paper ballot systems — in many states and counties across the country before 2020. (The list of states where counties or the entire state are moving to BMD systems include a number of key battleground states. Such systems are planned for use next year, or are already being used, in OH, WI, PA, TX, WV, KY, NY, NJ, KS, TN, IN, SC, NC and, yes, CA, unless the public prevents these plans.)

(There’s much, much more; read the whole thing, especially Los Angeles residents.) For readers who think they have never seen a QR code, it’s like a bar-code in two dimensions, and it looks like this:

I wanted to find the requirements document and if possible some process flow diagrams, but I’ll take BradBlog at his word. The flow for a Ballot Marking Device would be something like: Voter makes selections on touch-screen (software, hence buggy and insecure), selections are stored (ditto) and printed out (ditto) on a page with a human-readable receipt reflecting the touchscreen selections, and the ballot itself, which is the QR code, which is not human-readable. The page is then scanned (ditto) and QR code is then tabulated (ditto). The sleight of hand is, of course, the ballot itself. A human may think that their reciept, which they can read to check that it matches what they selected on the touch screen, also matches the QR code, which they cannot. But there’s no reason on earth to think that! And the unreadable QR code, since that is what is tabulated, is the ballot! Take the matter out of the delusional digital realm. Suppose voting worked like this: You voted by hand-marking a yellow paper ballot. You then handed the yellow paper ballot to an official who, behind a screen so you could not see, then marked a blue ballot that you could not read, seaked it so you could not read it, and then handed the blue ballot back to you and told you to put it in the ballot box, that’s your vote. Does that make any sense? That is how a “Ballot Marking Device” works.

Worse, the QR code ballots reinforce the power of money in politics. Recall that “The new voting system will provide voters with options to scan in QR coded ballots from their phone.” Well, security aside, game that out. From Knock LA, “The Campaign Finance Problem is About to Get Worse“:

Voters who like to fill out their sample ballot in advance and bring it to the polls will be particularly interested in the new Interactive Sample Ballot (ISB) feature. This will allow them to store their choices to a “Poll Pass” containing a QR code and then reload it into the Ballot Marking Device. This is an option that will “help expedite the voting process” by negating the need to individually mark each line on the ballot while in the polling center. This will be particularly useful on a ballot that will be extraordinarily long now that local elections will be folded into the presidential ballot. Unfortunately, this convenience will come at a steep price for our democracy.

Instead of building in assurances that the Poll Pass could only be used by the person who created it, the designers left the system open so QRs can be created by third parties and then be distributed for use at the polls. This would significantly increase the effectiveness of the slate mailers that inundate mailboxes prior to an election[1].

While the casual voter may believe that the strategically named organizations that publish slate mailers have carefully screened candidates for inclusion, the truth is that most are nothing more than a pay to play form of political marketing. Inclusion on these ads has more to do with the ability to pay than the views of the included candidate. The ability to pre-fill a voter’s ballot will make inclusion on these mailers even more valuable and put candidates not funded by special interest groups at even more of a disadvantage.

Groups like the California Charter School Association (CCSA), which have already shown the willingness to throw ethics aside in order to win elections, will find the new system even more valuable. Their printed materials could highlight popular candidates without even mentioning their favored candidate while still embedding their choice within the QR code. The unsuspecting voter who does not check all the way down the ballot at the polling place would be casting a vote for a candidate they took no action in choosing and may, in fact, oppose. By creating different slates to cover multiple candidates in races that attract the most attention, groups like CCSA could magnify their effect on the election. They could even print one slate on their mailer and include a QR code that placed a completely different set of names on the ballot.

Given the role that liberal Democrats think the donor class should play in politics, this may not be an issue for VSAP.

Conclusion

G-a-a-a-a-a-h! All that design! All those principles! And at the end of the day we have a system where the voter doesn’t know the vote they cast, and that reinforces the power of big money. Some clever lawyer needs to bring suit on this and fight it all the way to the Supreme Court (who, I suppose, can choose to put the final nail in the democracy’s coffin, or not). Oh, and VSAP hopes a lot of other jurisdictions adopt its system. Swell.


Tyler Durden

Sat, 11/30/2019 – 13:30

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Bill Barr is Wrong to Claim Courts Cannot Examine Government Motives

Attorney General William Barr.

In a deservedly much-criticized recent speech before the Federalist Society, Attorney General William Barr outlined an extraordinarily expansive view of executive power. One aspect that, until recently, did not get much attention is his claim that it is almost always improper for courts to examine the motives underlying the actions of government officials:

The Supreme Court has traditionally refused, across a wide variety of contexts, to inquire into the subjective motivation behind governmental action.  To take the classic example, if a police officer has probable cause to initiate a traffic stop, his subjective motivations are irrelevant.  And just last term, the Supreme Court appropriately shut the door to claims that otherwise-lawful redistricting can violate the Constitution if the legislators who drew the lines were actually motivated by political partisanship.

What is true of police officers and gerrymanderers is equally true of the President and senior Executive officials.  With very few exceptions, neither the Constitution, nor the Administrative Procedure Act or any other relevant statute, calls for judicial review of executive motive.  They apply only to executive action.  Attempts by courts to act like amateur psychiatrists attempting to discern an Executive official’s “real motive” — often after ordering invasive discovery into the Executive Branch’s privileged decision-making process — have no more foundation in the law than a subpoena to a court to try to determine a judge’s real motive for issuing its decision.  And courts’ indulgence of such claims, even if they are ultimately rejected, represents a serious intrusion on the President’s constitutional prerogatives.

This kind of argument became popular in some conservative circles during the legal battle over President Trump’s travel ban, in which the administration used a thin veneer of national-security rationalizations to cloak religious discrimination.

The argument is nonetheless both weak, and fraught with dangerous implications if it were to be accepted by the courts. If judges cannot examine government motives, officials could severely undermine a wide range of important constitutional rights.

As Milad Emam of the libertarian public interest firm Institute for Justice points out, courts in fact routinely consider government motives in assessing a variety of constitutional claims:

[Barr] implied that “otherwise-lawful” actions are constitutional irrespective of governmental motive.

But the U.S. Supreme Court has, in fact, repeatedly held that the government’s motives often are relevant in determining whether its actions are constitutional. For example, in First Amendment cases, it is relevant whether the government has regulated speech “because of disagreement” with its message or whether regulation was “justified without reference to the [speech’s] content.” Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989). Speech restrictions that fall into the former category are presumptively unconstitutional. And, to figure out whether restrictions are in that category, the Supreme Court “look[s] to governmental motive.” Reed v. Town of Gilbert, 135 S. Ct. 2218, 2228-29 (2015). (In Reed, the Supreme Court clarified that even where the government’s motive is innocent, speech restrictions that discriminate based on content are presumptively unconstitutional; but I digress.)

The Supreme Court scrutinizes governments’ motives for good reason. If it didn’t, federal and state governments could circumvent constitutional restraints by offering pretexts for their actions.

As Emam suggests, absent scrutiny of government motives, officials could repress opposition speech by using seemingly neutral restrictions to target political opponents. This is in fact a standard tactic of authoritarian governments, such as Vladimir Putin’s regime in Russia, which routinely targets opposition speech by selectively applying various supposedly neutral regulations that would never be used against regime supporters.

Freedom of speech is far from the only right that would be imperiled under Barr’s approach. The same goes for constitutional rights against government discrimination on the basis of race, ethnicity, and religion, a point I discussed here:

Defenders of President Trump’s travel ban executive order often make much of the fact that the plaintiffs’ attorney supposedly admitted it would be constitutional if another president did the same thing….

The case against the travel ban is a pretextual discrimination claim: that the official rationale for the order is actually a smoke-screen for an effort to discriminate against Muslims. The whole point of any pretextual discrimination claim is that an otherwise potentially constitutional action may be unconstitutional because of the illicit motive behind it. In any such case, there is always the possibility that the same policy would be legal if adopted for a different motive.

Consider a government agency that requires all job applicants to have a college degree in order to reduce the number of African-Americans eligible to apply. Given that motive, the employment policy would be unconstitutional. And that is true regardless of the fact that a college diploma requirement might be perfectly legal if adopted for a different purpose…..

There is good reason for courts to strike down seemingly neutral policies that are proven to have a discriminatory motive. Otherwise, the government would have a blank check to target unpopular racial, ethnic, and religious minorities, so long as the the law or executive order in question did not explicitly mention race, ethnicity, or religion. And there are many ways to target such groups without directly mentioning them. The government can easily find characteristics that strongly correlate with membership in the group and then disadvantage people who have that trait. That is exactly what the segregationist Jim Crow states tried to do in many situations where courts began to strike down explicit racial classifications.

Some may consider it pointless to strike down a policy that could potentially be reenacted for different reasons. But this overlooks the reality that many such policies are unlikely to be adopted in the first place if not for discriminatory purposes. Trump’s travel ban is an example of this very phenomenon.

To guard against such shenanigans, the Supreme Court has long held that facially neutral laws and regulations may be invalidated if the true purpose behind them is to discriminate on the basis of race, ethnicity, religion, or some other suspect classification. If facially neutral policies are exempt from scrutiny for discriminatory motive, then a wide range of prejudicial policies would have to be upheld. For example, many Jim Crow-era policies targeting African-Americans were facially neutral, including poll taxes and literacy tests intended to keep blacks from voting.

In determining whether discrimination was the motivation behind the challenged action, the Supreme Court requires judges to make “a sensitive inquiry into such circumstantial and direct evidence of intent as may be available,” including “[t]he historical background of the decision” and “[t]he specific sequence of events leading up to the challenged decision.”

Most conservatives are (justifiably) happy to support many such rulings outside the context of the Trump Administration. For example, conservative commentators cheered the Supreme Court’s ruling in the  2018 Masterpiece Cakeshop case, a 7-2 decision in which all five conservative justices voted to overturn a seemingly neutral state civil rights commission ruling holding that conservative Christian baker had violated state antidiscrimination laws, on the basis that two of the seven commissioners who made the decision had been motivated by bias against the baker’s religion. The evidence of unconstitutional motivation in that case, while substantial, was far less extensive than in the travel ban case.

As Masterpiece Cakeshop demonstrates, judicial review of government motives is needed to protect the rights of unpopular conservative minorities, as well as Muslims, left-wingers and others. If Bill Barr gets his way, theologically conservative Christians will be among those who have reason to regret it.

Most of the examples Barr cites to support his position actually do no such thing. For example, it is not true, as Barr suggests, that judicial motives are immune from legal scrutiny. If a judge’s ruling is tainted by an illegal motive, such as corruption or impermissible favoritism towards one of the parties, it can be set aside on that basis—even if it was otherwise based on defensible legal reasoning. In Caperton v. Massey (2009), the Supreme Court ruled that such a remedy is required even in cases where a conflict of interest creates a “serious risk of actual bias.”

Criminal convictions can be set aside if there is proof of “discriminatory intent” in jury selection—even if the government offers seemingly neutral justifications for its decisions, and the trial judge accepts them. Although Barr’s speech blames the left for those judicial doctrines he dislikes, this latter principle was most recently reaffirmed in a 7-2 Supreme Court decision authored by that notorious leftist Justice Brett Kavanaugh.

While the Supreme court ultimately upheld Trump’s travel ban, they did not do so on the basis that examination of governmental motives is impermissible. Instead, the majority ruled that the president deserves special deference on immigration policy that would not  be accorded in other contexts. This double standard is wrong and should be abolished. But at least it does not grant  government officials any blanket immunity from judicial scrutiny of their motives.

The recent gerrymandering decision also doesn’t help Barr’s case. In that ruling, the Supreme Court ruled that federal courts should stay out of disputes about political gerrymandering, not because judicial scrutiny of motives is impermissible, but because the whole issue of partisan gerrymandering is a nonjusticiable “political question”—regardless of whether the plaintiff’s case was based on the government’s motives or not. Federal courts do assess motives in cases involving racial gerrymandering.

Barr is right that the Supreme Court has held that a police officer’s decisions to arrest a suspect is immune from scrutiny of motive so long as he had “probable cause.” But that doctrine is badly misguided for reasons recently summarized by another notorious leftist: Justice Neil Gorsuch. This pernicious logic should not be extended to other areas of constitutional law.

Assessment of motives is not relevant in all constitutional claims. In many situations, a government policy is unconstitutional regardless of the motive. And, of course, some reprehensible motives are not illegal. But assessment of motive is essential in a wide range of situations, especially pretextual discrimination cases where seemingly neutral criteria can be used to mask targeting of groups on the basis of unconstitutional criteria such as race, ethnicity, religion, or political opinions.

In some cases, it can be difficult to determine what the government’s true motives were, especially in situations involving multiple decision-makers. Such line-drawing problems are common in a wide range of constitutional cases, and are far from unique to  those involving motives. For reasons I summarized here, I think the Supreme Court’s current precedent dealing with such issues provides more than adequate protection against excessive invalidation of legitimate exercises of government power.

Still, there is room for legitimate disagreement over the question of what standards judges should apply in such cases. It will sometimes be difficult to strike the right balance between the risk of allowing the government to violate constitutional rights and the risk of invalidating legitimate uses of state power. But, whatever we might think of such line-drawing issues, we should reject Barr’s claim that government motives enjoy near-total immunity from judicial review. That theory is a menace to many of our most important constitutional rights.

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Bill Barr is Wrong to Claim Courts Cannot Examine Government Motives

Attorney General William Barr.

In a deservedly much-criticized recent speech before the Federalist Society, Attorney General William Barr outlined an extraordinarily expansive view of executive power. One aspect that, until recently, did not get much attention is his claim that it is almost always improper for courts to examine the motives underlying the actions of government officials:

The Supreme Court has traditionally refused, across a wide variety of contexts, to inquire into the subjective motivation behind governmental action.  To take the classic example, if a police officer has probable cause to initiate a traffic stop, his subjective motivations are irrelevant.  And just last term, the Supreme Court appropriately shut the door to claims that otherwise-lawful redistricting can violate the Constitution if the legislators who drew the lines were actually motivated by political partisanship.

What is true of police officers and gerrymanderers is equally true of the President and senior Executive officials.  With very few exceptions, neither the Constitution, nor the Administrative Procedure Act or any other relevant statute, calls for judicial review of executive motive.  They apply only to executive action.  Attempts by courts to act like amateur psychiatrists attempting to discern an Executive official’s “real motive” — often after ordering invasive discovery into the Executive Branch’s privileged decision-making process — have no more foundation in the law than a subpoena to a court to try to determine a judge’s real motive for issuing its decision.  And courts’ indulgence of such claims, even if they are ultimately rejected, represents a serious intrusion on the President’s constitutional prerogatives.

This kind of argument became popular in some conservative circles during the legal battle over President Trump’s travel ban, in which the administration used a thin veneer of national-security rationalizations to cloak religious discrimination.

The argument is nonetheless both weak, and fraught with dangerous implications if it were to be accepted by the courts. If judges cannot examine government motives, officials could severely undermine a wide range of important constitutional rights.

As Milad Emam of the libertarian public interest firm Institute for Justice points out, courts in fact routinely consider government motives in assessing a variety of constitutional claims:

[Barr] implied that “otherwise-lawful” actions are constitutional irrespective of governmental motive.

But the U.S. Supreme Court has, in fact, repeatedly held that the government’s motives often are relevant in determining whether its actions are constitutional. For example, in First Amendment cases, it is relevant whether the government has regulated speech “because of disagreement” with its message or whether regulation was “justified without reference to the [speech’s] content.” Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989). Speech restrictions that fall into the former category are presumptively unconstitutional. And, to figure out whether restrictions are in that category, the Supreme Court “look[s] to governmental motive.” Reed v. Town of Gilbert, 135 S. Ct. 2218, 2228-29 (2015). (In Reed, the Supreme Court clarified that even where the government’s motive is innocent, speech restrictions that discriminate based on content are presumptively unconstitutional; but I digress.)

The Supreme Court scrutinizes governments’ motives for good reason. If it didn’t, federal and state governments could circumvent constitutional restraints by offering pretexts for their actions.

As Emam suggests, absent scrutiny of government motives, officials could repress opposition speech by using seemingly neutral restrictions to target political opponents. This is in fact a standard tactic of authoritarian governments, such as Vladimir Putin’s regime in Russia, which routinely targets opposition speech by selectively applying various supposedly neutral regulations that would never be used against regime supporters.

Freedom of speech is far from the only right that would be imperiled under Barr’s approach. The same goes for constitutional rights against government discrimination on the basis of race, ethnicity, and religion, a point I discussed here:

Defenders of President Trump’s travel ban executive order often make much of the fact that the plaintiffs’ attorney supposedly admitted it would be constitutional if another president did the same thing….

The case against the travel ban is a pretextual discrimination claim: that the official rationale for the order is actually a smoke-screen for an effort to discriminate against Muslims. The whole point of any pretextual discrimination claim is that an otherwise potentially constitutional action may be unconstitutional because of the illicit motive behind it. In any such case, there is always the possibility that the same policy would be legal if adopted for a different motive.

Consider a government agency that requires all job applicants to have a college degree in order to reduce the number of African-Americans eligible to apply. Given that motive, the employment policy would be unconstitutional. And that is true regardless of the fact that a college diploma requirement might be perfectly legal if adopted for a different purpose…..

There is good reason for courts to strike down seemingly neutral policies that are proven to have a discriminatory motive. Otherwise, the government would have a blank check to target unpopular racial, ethnic, and religious minorities, so long as the the law or executive order in question did not explicitly mention race, ethnicity, or religion. And there are many ways to target such groups without directly mentioning them. The government can easily find characteristics that strongly correlate with membership in the group and then disadvantage people who have that trait. That is exactly what the segregationist Jim Crow states tried to do in many situations where courts began to strike down explicit racial classifications.

Some may consider it pointless to strike down a policy that could potentially be reenacted for different reasons. But this overlooks the reality that many such policies are unlikely to be adopted in the first place if not for discriminatory purposes. Trump’s travel ban is an example of this very phenomenon.

To guard against such shenanigans, the Supreme Court has long held that facially neutral laws and regulations may be invalidated if the true purpose behind them is to discriminate on the basis of race, ethnicity, religion, or some other suspect classification. If facially neutral policies are exempt from scrutiny for discriminatory motive, then a wide range of prejudicial policies would have to be upheld. For example, many Jim Crow-era policies targeting African-Americans were facially neutral, including poll taxes and literacy tests intended to keep blacks from voting.

In determining whether discrimination was the motivation behind the challenged action, the Supreme Court requires judges to make “a sensitive inquiry into such circumstantial and direct evidence of intent as may be available,” including “[t]he historical background of the decision” and “[t]he specific sequence of events leading up to the challenged decision.”

Most conservatives are (justifiably) happy to support many such rulings outside the context of the Trump Administration. For example, conservative commentators cheered the Supreme Court’s ruling in the  2018 Masterpiece Cakeshop case, a 7-2 decision in which all five conservative justices voted to overturn a seemingly neutral state civil rights commission ruling holding that conservative Christian baker had violated state antidiscrimination laws, on the basis that two of the seven commissioners who made the decision had been motivated by bias against the baker’s religion. The evidence of unconstitutional motivation in that case, while substantial, was far less extensive than in the travel ban case.

As Masterpiece Cakeshop demonstrates, judicial review of government motives is needed to protect the rights of unpopular conservative minorities, as well as Muslims, left-wingers and others. If Bill Barr gets his way, theologically conservative Christians will be among those who have reason to regret it.

Most of the examples Barr cites to support his position actually do no such thing. For example, it is not true, as Barr suggests, that judicial motives are immune from legal scrutiny. If a judge’s ruling is tainted by an illegal motive, such as corruption or impermissible favoritism towards one of the parties, it can be set aside on that basis—even if it was otherwise based on defensible legal reasoning. In Caperton v. Massey (2009), the Supreme Court ruled that such a remedy is required even in cases where a conflict of interest creates a “serious risk of actual bias.”

Criminal convictions can be set aside if there is proof of “discriminatory intent” in jury selection—even if the government offers seemingly neutral justifications for its decisions, and the trial judge accepts them. Although Barr’s speech blames the left for those judicial doctrines he dislikes, this latter principle was most recently reaffirmed in a 7-2 Supreme Court decision authored by that notorious leftist Justice Brett Kavanaugh.

While the Supreme court ultimately upheld Trump’s travel ban, they did not do so on the basis that examination of governmental motives is impermissible. Instead, the majority ruled that the president deserves special deference on immigration policy that would not  be accorded in other contexts. This double standard is wrong and should be abolished. But at least it does not grant  government officials any blanket immunity from judicial scrutiny of their motives.

The recent gerrymandering decision also doesn’t help Barr’s case. In that ruling, the Supreme Court ruled that federal courts should stay out of disputes about political gerrymandering, not because judicial scrutiny of motives is impermissible, but because the whole issue of partisan gerrymandering is a nonjusticiable “political question”—regardless of whether the plaintiff’s case was based on the government’s motives or not. Federal courts do assess motives in cases involving racial gerrymandering.

Barr is right that the Supreme Court has held that a police officer’s decisions to arrest a suspect is immune from scrutiny of motive so long as he had “probable cause.” But that doctrine is badly misguided for reasons recently summarized by another notorious leftist: Justice Neil Gorsuch. This pernicious logic should not be extended to other areas of constitutional law.

Assessment of motives is not relevant in all constitutional claims. In many situations, a government policy is unconstitutional regardless of the motive. And, of course, some reprehensible motives are not illegal. But assessment of motive is essential in a wide range of situations, especially pretextual discrimination cases where seemingly neutral criteria can be used to mask targeting of groups on the basis of unconstitutional criteria such as race, ethnicity, religion, or political opinions.

In some cases, it can be difficult to determine what the government’s true motives were, especially in situations involving multiple decision-makers. Such line-drawing problems are common in a wide range of constitutional cases, and are far from unique to  those involving motives. For reasons I summarized here, I think the Supreme Court’s current precedent dealing with such issues provides more than adequate protection against excessive invalidation of legitimate exercises of government power.

Still, there is room for legitimate disagreement over the question of what standards judges should apply in such cases. It will sometimes be difficult to strike the right balance between the risk of allowing the government to violate constitutional rights and the risk of invalidating legitimate uses of state power. But, whatever we might think of such line-drawing issues, we should reject Barr’s claim that government motives enjoy near-total immunity from judicial review. That theory is a menace to many of our most important constitutional rights.

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Starbucks Barista, Who Called Cop “PIG” On Thanksgiving, Fired

Starbucks Barista, Who Called Cop “PIG” On Thanksgiving, Fired

A Starbucks employee who printed the word “PIG” on the labels of a Kiefer, Oklahoma police officer’s coffee has been fired, according to the company.

The Kiefer police officer went to the Glenpool Starbucks on Thursday to pick up five drinks for dispatchers working on Thanksgiving, according to Police Chief Johnny O’Mara in a Facebook post.

“What irks me is the absolute and total disrespect for a police officer who, instead of being home with family and enjoying a meal and a football game, is patrolling his little town,” he added.

“This cup of coffee for a ‘pig’ is just another little flag,” the post continues. “It’s another tiny symptom and a nearly indiscernible shout from a contemptuous, roaring and riotous segment of a misanthropic society that vilifies those who stand for what’s right and glorifies the very people who would usher in the destruction of the social fabric. It’s another tiny pinprick into the heart of men and women who are asking themselves more often: ‘Why am I doing this?'”

Starbucks called the incident “absolutely unacceptable,” adding that they are “deeply sorry to the law enforcement officer who experienced this,” according to CNN.

“The Starbucks partner who wrote this offensive word on a cup used poor judgement and is no longer a partner after this violation of company policy,” reads a company statement. “This language is offensive to all law enforcement and is not representative of the deep appreciation we have for police officers who work tirelessly to keep our communities safe.”

The company issued a joint statement with the Kiefer police department, saying they’re using the incident “as an opportunity to leverage our shared platforms to promote greater civility.”

The Seattle-based coffee chain will meet with Kiefer police to discuss other ways to work together, and will host a Coffee with a Cop event where baristas and and members of the community will be educated as to “the critical role dispatchers and police offers play in keeping our communities safe.”


Tyler Durden

Sat, 11/30/2019 – 13:00

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The Fed’s Answer To The Ghastly Monster Of Its Own Creation

The Fed’s Answer To The Ghastly Monster Of Its Own Creation

Authored by MN Gordon via EconomicPrism.com,

The launch angle of the U.S. stock market over the past decade has been steep and relentless.  The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent.  New highs continue to be reached practically every day.

Over this stretch, many investors have been conditioned to believe the stock market only goes up.  That blindly pumping money into an S&P 500 ETF is the key to investment riches.  In good time, this conditioning will be recalibrated with a rude awakening.  You can count on it.

In the interim, the bull market may continue a bit longer…or it may not.  But, to be clear, after a 370 percent run-up, buying the S&P 500 represents a speculation on price.  A gamble that the launch angle furthers its steep trajectory.  Here’s why…

Over the past decade, the U.S. economy, as measured by nominal gross domestic product (GDP), has increased about 50 percent.  This plots a GDP launch angle that is underwhelming when compared to the S&P 500.  Corporate earnings have fallen far short of share prices.

Hence, the bull market in stocks is not a function of a booming economy.  Rather, it’s a function of Fed madness.  And its existence becomes ever more perilous with each passing day.

Central planners at the Fed – like other major central banks – have taken monetary policy to a state of madness.  Zero interest rate policy, negative interest rate policy, quantitative easing, operation twist, quantitative tightening, reserve management, repo market intervention, not-QE, mass-asset purchases, and more.

These schemes have fostered massive growth in public and private debt with nothing but lackluster economic growth to show.  What’s more, these schemes have produced massive asset bubbles that have skyrocketed wealth inequality and inflamed countless variants of new populism.

Yet the clever fellows at the Fed are blind to the fact that they’re most responsible for fabricating this monster.  And now they want to rectify the ghastly deformities of their creation…

Higher Calling

Earlier this week, for example, Minneapolis Fed President Neel Kashkari remarked that:

“Monetary policy can play the kind of redistributing role once thought to be the preserve of elected officials.” 

How exactly Mickey Mousing with credit markets could attain this objective is unclear.  But, like yield curve control (YCC), Kashkari wants to give it a go.  These sorts of amorphous meddling operations is how he answers his higher calling.

You see, Kashkari’s a man with crazy eyes.  But he’s also a man with even crazier ideas.  He’s an extreme economic interventionist – and a crackpot.  Though he wears his burdens on his sleeve.

If you recall, as federal bailout chief, Kashkari functioned as the highly visible hand of the market.  When the sky was falling in early-2009, he awoke each morning, put on his pants one leg at a time, drank his coffee, and rapidly funneled Treasury Secretary Hank Paulson’s $700 billion of TARP funds to the government’s preferred financial institutions.

Incidentally, the experience had an ill effect on Kaskkari’s mental health.  Soon after, he became a hermit, took to a cabin in the Sierra Nevada Mountains – near Donner Pass – and pursued his other life’s purpose of chopping wood.  We thought we’d seen the last of him.

But sadly, it’s impossible for true believers to amiably exit the trappings of public life for good.  After a failed California gubernatorial campaign in 2014, losing to retread Governor Jerry Moonbeam Brown, Kashkari resurfaced as Minneapolis Fed President in 2016.

We suppose this appointed position was his reward for the abuse heaped upon him from grandstanding Representatives – absolute losers like Barney Frank and Maxine Waters – while handing out vast quantities of taxpayer dollars to Wall Street banks.  Of course, for real public servants like Kashkari, appointed positions are the crème de la crème.

Strangely, lightning strikes twice for this guy.  Next year, roughly a month from today, Kashkari will be a voting member of the Federal Open Market Committee.  For the second time in 11 years, destiny will place him at the precise location where he can exact maximum destruction upon financial markets during a colossal crisis.

The Fed’s Answer to the Ghastly Monster of its Creation

As the economy stalls out in 2020, U.S. deficits are going to jump to over $2 trillion a year – and will stay there.  So, too, the national debt will run up towards $40 trillion over the next decade.  The Fed, through YCC or some other wild scheme, will take on the dirty deed of monetizing this debt.  They’ll create money from nothing and loan it to the Treasury.

Then, if Kashkari has his way, the Treasury will send out checks backed by the Fed’s funny money to William Jennings Bryan’s “struggling masses.”  All the while, the Fed will be oblivious to the fact that these are the same people who’ve been hollowed out by the Fed’s own policies of wealth inequality.  This is their solution to the ghastly monster of their making.

Still, the Fed and Kashkari are only the source of but some of the crazy ideas being burped about.  Moreover, an election year always provides a startling preview of the madness coming to Washington – regardless of who wins.  The styling may be different.  But the results are the same: bigger government, bigger deficits, and greater government control and encroachments upon individual freedom and liberty.

Right now, Presidential candidates are tripping over themselves to see who can make greater and crazier promises to coat the landscape in gravy for voters to sup off of.  You know what we’re talking about…

Economic patriotism.  Universal basic income.  Modern monetary theory.  Trade wars.  Green new deal.  Quantitative easing for the people.  Generous spending packages.  Free school.  Free drugs.  Canceling debt.  Wealth taxes.  Taxes on unrealized capital gains.  Outright currency destruction.  And much, much more.

The planners and schemers are queuing up these ridiculous plans for just the right moment.  That is, when the economy slows, credit market’s freeze, the stock market crashes, the sky falls, and all hell breaks loose.  Like TARP, or the Patriot Act, they’ll roll them out at the precise moment of maximum panic.

Alas, the monster will rampage in wild and unexpected ways.


Tyler Durden

Sat, 11/30/2019 – 12:30

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NK Threatens ‘Imbecile’ Shinzo Abe With “Real Ballistic Missile” Over Japan

NK Threatens ‘Imbecile’ Shinzo Abe With “Real Ballistic Missile” Over Japan

Amid stalled talks with the US we have the dangerous Thanksgiving specter of multiple North Korea ICBM launches in the past month — or were they?

Pyongyang has lashed out at Japanese Prime Minister Shinzo Abe, calling him a “political dwarf” for ‘misidentifying’ missiles used in the latest tests. In the fourth known recent test of a new “multiple launch rocket system,” two short-range projectiles were fired into waters off NK’s east coast on Thursday. It’s sparked an intense debate over the nature of the missiles, and whether they were banned ballistic missiles under United Nations Security Council resolutions, which would constitute a threat to the region and the world.

On Saturday a North Korean Foreign Ministry official called Abe “the most stupid person ever known in history” after the Japanese leader publicly characterized the latest rocket test as a likely ballistic missile launch.

NK state news showcasing this week’s launch, via Sky News.

“It can be said that Abe is the only one idiot in the world and the most stupid man ever known in history as he fails to distinguish a missile from multiple launch rocket system while seeing the photo-accompanied report,” NK’s Foreign Ministry’s Department of Japanese Affairs said on the North’s official Korean Central News Agency channel.

All of this has led an enraged Pyongyang to issue a more direct threat of “a real ballistic missile” which concluded the fiery and bizarre “political dwarf” comments: 

“Abe may see what a real ballistic missile is in the not distant future and under his nose,” the statement said.

And followed with, “Abe is none other than a perfect imbecile and a political dwarf without parallel in the world.”

Via Daily Express 

Of Thursday’s launch, Prime Minister Shinzo Abe told reporters that the missiles didn’t enter Japan’s airspace or “exclusive economic zone” at sea. The incident followed a series of short-range missile tests by North Korea in late October, which landed near Japan.

According to South Korea’s Joint Chiefs of Staff, the projectiles launched days ago flew about 380km (235 miles) at a maximum altitude of 97km (60 miles), leading to debate over their nature and classification in among western analysts as well.

“Some experts said the distance and trajectory of the projectiles showed they were virtually missiles or missile-classed weapons,” Sky News noted.

The South Korean army further assessed they were “presumed to be fired from a super-large caliber multiple rocket launcher,” according to an official statement .

Though the White House has in recent months downplayed the tests, Pyongyang’s new threat to launch “a real ballistic missile” over Japan is sure to provoke a reaction from Washington, also given that if confirmed to be a ballistic missile test, it would mark the 13th since May of this year.


Tyler Durden

Sat, 11/30/2019 – 12:00

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US Arrests Ethereum Developer For Training North Koreans To Evade Sanctions

US Arrests Ethereum Developer For Training North Koreans To Evade Sanctions

Authored by Joeri Cant via CoinTelegraph.com,

Today, United States prosecutors announced the arrest of Virgil Griffith, who allegedly traveled to the Democratic People’s Republic of Korea (DPRK) to deliver a presentation on how to use cryptocurrencies and blockchain technology to circumvent sanctions.

image courtesy of CoinTelegraph

According to the November 29 announcement, the 36-year-old Griffith was arrested at the Los Angeles International Airport, and will be charged with conspiring to violate the International Emergency Economic Powers Act (IEEPA). The charges carry a maximum term of 20 years in prison. U.S. Attorney Geoffrey S. Berman stated:

“As alleged, Virgil Griffith provided highly technical information to North Korea, knowing that this information could be used to help North Korea launder money and evade sanctions. In allegedly doing so, Griffith jeopardized the sanctions that both Congress and the president have enacted to place maximum pressure on North Korea’s dangerous regime.”

The IEEPA prohibits any U.S. citizens from exporting any goods, services, or technology to the DPRK without a license from the Department of the Treasury, Office of Foreign Assets Control.

Griffith, a U.S. citizen living in Singapore, was previously denied permission to travel to the DPRK by the U.S. Department of State. Griffith went against the decision and presented at the DPRK Cryptocurrency Conference, violating the U.S. sanctions against the DPRK. FBI Assistant Director-in-Charge William F. Sweeney Jr. said:

“There are deliberate reasons sanctions have been levied on North Korea. The country and its leader pose a literal threat to our national security and that of our allies. Mr. Griffith allegedly traveled to North Korea without permission from the federal government, and with the knowledge of what he was doing was against the law. We cannot allow anyone to evade sanctions, because the consequences of North Korea obtaining funding, technology, and information to further its desire to build nuclear weapons put the world at risk. It’s even more egregious that a U.S. citizen allegedly chose to aid our adversary.”

North Korea trying to evade sanctions

North Korea is reportedly in the early stages of developing a cryptocurrency to help the DPRK evade international sanctions and find a way around “the U.S.-dominated global financial system.”

Alejandro Cao de Benos, the official in charge of North Korea’s crypto conferences, said at the time that the digital currency will be similar to Bitcoin (BTC) but that they are still in the very early stages in the creation of the token and that there are “no plans to digitize the [North Korean] won for now.”


Tyler Durden

Sat, 11/30/2019 – 11:30

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US Enraged After 6 More EU Nations Join INSTEX To Bypass Iran Sanctions

US Enraged After 6 More EU Nations Join INSTEX To Bypass Iran Sanctions

On Friday six European countries issued a bombshell joint statement declaring their intent to join INSTEX, or the Instrument in Support of Trade Exchanges, a European special-purpose vehicle serving as a ‘SWIFT alternative’ to bypass US sanctions on Iran. 

Finland, Belgium, Denmark, Netherlands, Norway, and Sweden released a joint statement asserting it’s of “the utmost importance to the preservation and full implementation of the Joint Comprehensive Plan of Action (JCPoA) on Iran’s nuclear program by all parties involved.”

“In light of the continuous European support for the agreement and the ongoing efforts to implement the economic part of it and to facilitate legitimate trade between Europe and Iran, we are now in the process of becoming shareholders of the Instrument in Support of Trade Exchanges (Instex) subject to completion of national procedures,” the statement reads.

The Foreign Minister of Finland Pekka Haavisto alongside Foreign Minister of Iran Mohammed Javad Zarif. AP Photo

Instex is an initiative set up by France, Germany and the UK in January 2019 to provide humanitarian and sanctions relief to Iran after in November 2018 the SWIFT network suspended Iranian banks under Washington pressure, months after Trump pulled the US out of the nuclear deal.

Though the new alternative financial device had shaky beginnings amid further aggressive threats from the US administration, it continued through a trial phase even though Tehran officials had complained it appeared ‘too little, too late’.

But now as this latest six country statement announces, it will serve as the European vehicle to “facilitate legitimate trade between Europe and Iran,” while also providing incentive for Tehran to return to its commitments under the JCPOA, specifically to recently breached uranium enrichment limits. Upon the announcement, US Ambassador to Germany Richard Grenell lambasted the move, saying: 

Terrible timing – why fund the Iranian regime while its killing the Iranian people and shutting off the internet? You should be standing for human rights not funding the abusers.

Specifically he called out a tweet by Norway’s ambassador to Iran hailing the news of multiple Scandinavian countries joining the nuclear deal-saving initiative.

As the US official’s tweet reveals, the White House is using the latest weeks-long protests and government-ordered internet blockage inside Iran to keep up the pressure and focus on a ‘human rights’ narrative amid the security forces crackdown. 

Despite the criticism and what will no doubt be a continued flood of US official anger in response to the news, France said it asserts European autonomy amid an over-reaching Washington administration. French Foreign Minister Jean-Yves le Drian called it an “important decision” that will show “Europe’s autonomy of action”.


Tyler Durden

Sat, 11/30/2019 – 11:00

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Beware The ‘Unholy Alliance’ Of Trump & Powell

Beware The ‘Unholy Alliance’ Of Trump & Powell

Authored by Sven Henrich via NorthmanTrader.com,

Some things can’t be proven, but they can be observed. Correlation is not necessarily causation, but when the evidence keeps mounting so does credulity. And the cumulative evidence increasingly points to an unholy alliance between Donald Trump and the US Federal Reserve with the Fed succumbing to political pressure and delivering Donald Trump what he needs most: A soaring stock market to ward off political problems and to help ensure a 2020 re-election.

Fantasy talk? Let’s examine the evidence and take a closer look at the historicity of it all. Nobody has done it and I sense it needs to be done for all to see and judge for themselves. May as well be me doing the legwork here.

It all began in October of 2018. The S&P 500 had made new all time highs in September of 2018. The $DJIA made an all time new high in early October 2018. Things were going well. The US tax cuts rewarded corporations with massive tax benefits which many of them unleashed on US markets in the form of record buybacks and markets were soaring, US GDP growth was moving above 3% all was well.

Indeed Donald Trump, known for having tweeted critically about the Fed dozens of times in 2019, had not mentioned the Fed once in 2018. Not until this happened:

Markets sold off in October and suddenly the first tweet about the Fed, a subtle hint quoting a Wall Street strategist:

Backing off of course referring to the Fed’s efforts to use market and economic strength to finally attempt to normalize its bloated balance sheet from $4.5 trillion to something more in line with pre financial crisis levels.

The larger hint: Use the Fed to re-inflate asset prices.

Whatever you may think of of Donald Trump he knows quite well the power of the Fed and its impact on asset prices. Sinking stock prices are bad for business, bad for the economy and bad for a president.

And what better way to increase stock prices than to have the Fed increase its balance sheet. Here, Donald Trump in 2012:

QE creates artificial numbers for short term gains. His words. He knows.

QE was needed, especially as markets collapsed into late 2018:

Suddenly the pace of Fed tweeting increased, the tone more direct with specific instructions:

Stop the 50 B’s. The 50 B’s of course referring to the Fed’s quantitative tightening program on “autopilot” as Jay Powell had declared it to be.

The collapse in markets now prompted more aggressive signaling as only 4 days following the above tweet Trump threatened to fire Powell.

Pressure was on. Treasury Secretary Mnuchin was hitting the phones hard only a day later with his now infamous liquidity calls with banks. It doesn’t take a conspiracy theorist to presume Jay Powell’s phone was on speed dial as well.

Markets, vastly oversold and technically disconnected, bottomed following these phone calls. And Jay Powell’s autopilot program crumbled in principle and suddenly signaled being “flexible” on the balance sheet roll-off only a few days later.

Stop the 50Bs. Yes sir. A message received and likely very well reinforced during an ‘informal dinner” in early February.

And thus began a long windy road to ensure asset price levitation and stop any corrective activity in its tracks and Jay Powell became the savior at every low in 2019:

But the Fed ran into problems during its initial rate cuts in 2019 as each time markets sold off.

All the while the present kept the pressure on in dozens of tweets. Type in “Fed” in the tweet archive and see for yourself.

Here are a few select goodies again linking market performance to the Fed:

Jay Powell is claimed to be clueless as markets were correcting in August:

Powell has let us down, need a big cut:

No, the pressure was on to deliver big, not only on rate cuts but also on QE:

And Powell delivered. 3 rate cuts, and then came the big repo program and then QE, although the Fed sheepishly claimed it not to be QE. The Fed increased its balance sheet hard, over $290B now and markets listened.

Indeed the only down week markets have had since then was precisely the only week the Fed actually reduced its balance sheet. Correlation is not causation?

Hardly, especially considering the Fed is running a massive daily liquidity program on top of QE, called repo:

As markets volumes have dwindled in the run up of the rally the Fed is relentlessly injecting liquidity into these markets with over $106B added just on the Wednesday in front of the Thanksgiving holiday. My question:

My larger point: “The Federal Reserve Bank of New York added $108.95 billion in temporary liquidity to the financial system on Wednesday.”. If it’s temporary, but happens every single day it’s not temporary, it’s a permanent daily liquidity boost.

It’s distorting markets.

And indeed it is.

Following the introduction of QE not only went markets on a tear to new highs, but left the weekly 5EMA in the dust, not touching it for 6 weeks in a row:

Weekly 5 EMA disconnects happen during big rallies and during big sell offs. Nothing unusual about that. How often do weekly 5 EMA disconnects happen 6 weeks in a row? Well, never:

Not even during the blast off rally into January 2018 did this happen, but since the Fed has been drowning markets in liquidity with its daily liquidity injections and treasury bills buying markets have blasted off into the melt-up/combustion scenario.

And suddenly we get to witness a miraculous conversion. From Jay Powell the beaten puppy, the clueless terrible communicator and derelict if he doesn’t stimulate…

…to getting a very good and cordial meeting:

We’re all friends again, cause that’s where you meet with friends, not in the Oval office, but in the private residence of the White House.

I submit the timelines, the actions, the words, the results speak for themselves.

The US Fed under Jay Powell has manufactured a massive market rally producing vast P/E multiple expansion in the face to declining earnings and growth:

Wall Street gets to celebrate, wealth inequality is made great again, Powell’s no longer clueless, his job is safe and the president gets to take victory laps on twitter:

Will it last for the long term?

Not according to this guy:

It just needs to last until November 2020.

And the Fed claiming political independence? That claim rings as hollow as its September declaration of repo being just temporary. Sure Sherlock:

Look, I can’t prove an unholy alliance between Trump and the Fed. I’m not sitting at the dinner table or in the White House residence or listen to phone calls. There are no transcripts, no minutes, nothing of the transparent sort.

But we have dates, we have tweets, we have price action, we have speeches and we have policy actions and we can see the correlations between all these things and the impact on US stock markets and all of these lead to an inevitable conclusion: The Fed has been doing the administration’s bidding, willingly or not is besides the point. They have for the ultimate reason: No bull market without central bank intervention, for they know the larger truth:

I’ll aim to post a technical update separately in the days ahead, but know that this rally is not based on fundamentals or growth, it’s a manufactured melt-up that is stretching charts far above the historic mean and therefore increase risk of a massive reversion. Melt-ups are awe-inspiring, but they are also dangerous if not supported by fundamentals and the Fed may come to regret the liquidity monsters it has unleashed for the Fed will ultimately take the blame blowing the largest asset bubble since 2000.

*  *  *

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Tyler Durden

Sat, 11/30/2019 – 10:30

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US Primes NATO To Confront Russia, China

US Primes NATO To Confront Russia, China

Authored by M.K.Bhadrakumar via The Indian Punchline blog,

The December 3-4 summit of the North Atlantic Treaty Organisation (NATO) in London resembles a family reunion after the acrimony over the issue of military spending by America’s European allies.

The trend is up for defence spending across European Allies and Canada. Over $100 billion is expected to be added to the member states’ defence budgets by end-2020.

More importantly, the trend at the NATO foreign ministers’ meeting at Brussels on November 19-20, in the run-up to the London summit, showed that despite growing differences within the alliance, member states closed ranks around three priority items in the US global agenda — escalation of the aggressive policy toward Russia, militarisation of space and countering China’s rise.

The NATO will follow Washington’s lead to establish a space command by officially regarding space as “a new operational domain”.

According to NATO secretary-general Jens Stoltenberg, this decision “can allow NATO planners to make a request for allies to provide capabilities and services, such as satellite communications and data imagery.”

Stoltenberg said, “Space is also essential to the alliance’s deterrence and defence, including the ability to navigate, to gather intelligence, and to detect missile launches. Around 2,000 satellites orbit the Earth. And around half of them are owned by NATO countries.”

Equally, Washington has been urging the NATO to officially identify China’s rise as a long-term challenge. According to media reports, the Brussels meeting acceded to the US demand and decided to officially begin military surveillance of China.

The US Secretary of State Mike Pompeo hit out at China after the Brussels meeting:

“Finally, our alliance must address the current and potential long-term threat posed by the Chinese Communist Party.  Seventy years ago, the founding nations of NATO came together for the cause of freedom and democracy.  We cannot ignore the fundamental differences and beliefs in the – between our countries and those of the Chinese Communist Party.”

So far so good.

However, it remains to be seen if Washington’s grand design to draw NATO into its “Indo-Pacific strategy” (read containment of China) will gain traction. Clearly, the US intends to have a say in the European allies’ growing business and economic relations with China to delimit Chinese influence in Europe. The US campaign to block 5G technology from China met with rebuff from several European countries.

On the other hand, the European project has unravelled and the Franco-German axis that was its anchor sheet has become shaky. The rift between Paris and Berlin works to Washington’s advantage but, paradoxically, also hobbles the western alliance system.

The French President Emmanuel Macron annoyed Germany by his recent calls for better relations with Russia “to prevent the world from going up in a conflagration”; his brutally frank remarks about NATO being “brain dead” and the US policy on Russia being “governmental, political and historical hysteria”; and his repeated emphasis on a European military policy independent of the US.

“NATO is an organization of collective defense. Against what, against who is it defending itself? Who is our common enemy? This question deserves clarification,” Macron said after talks in Paris with Jens Stoltenberg, NATO’s secretary-general on Thursday, according to the Times.

He argues that new talks with Russia are vital to European security and has pushed for European involvement in a new deal to replace the defunct Intermediate-range Nuclear Forces treaty between the U.S. and Russia.

“Is our enemy Russia or China as I sometimes hear?” he added at a press conference with Stoltenberg. “Is it the job of the Atlantic alliance to name them as enemies? I don’t think so. Our common enemy, it seems, is the terrorism which is striking all our countries.”

The congruence of interests between Berlin and Washington vis-a-vis Macron manifested itself in the NATO’s endorsement of the US-led escalation against Russia and China, with France rather isolated. However, this congruence will be put to test very soon at the summit meeting of the Normandy format over Ukraine, which France is hosting on December 9, following the NATO’s London summit. France is helping Russia to negotiate a deal with Ukraine.

The recent phone calls between Russian President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelensky underscored the growing interest in Moscow and Kiev at the leadership level to improve relations between the two countries.

Moscow’s breakthrough Avangard missile system with the hypersonic boost-glide vehicle will be deployed on combat duty with the Strategic Missile Force in December 2019

In the final analysis, the Franco-German relations are of pivotal importance to not only Europe’s strategic future but the western alliance system as such. If anyone was in doubt, the French veto in October means sudden death for the proposal on European Union accession of the Balkan state of North Macedonia, which NATO is inducting as its newest member. Berlin and Washington are livid, but a veto is a veto.

With NATO being set up by Washington for a confrontationist posture, Russia and China won’t let their guard down. Addressing a meeting of the Russian Federation Security Council on November 22, Putin said, “There are many uncertainty factors… competition and rivalry are growing stringer and morphing into new forms… The leading countries are actively developing their offensive weapons… the so-called ‘nuclear club’ is receiving new members, as we all know. We are also seriously concerned about the NATO infrastructure approaching our borders, as well as the attempts to militarise outer space.”

Putin stressed, “In these conditions, it is important to make adequate and accurate forecasts, analyse the possible changes in the global situation, and to use the forecasts and conclusions to develop our military potential.”

The US-led military build-up against Russia and China will be on display in two big exercises next year codenamed ‘Defender 2020 in Europe’ and ‘Defender 2020 in the Pacific’.

Significantly, only four days before Putin made the above remarks, Chinese President Xi Jinping told him at a meeting in Brasilia on the sidelines of the BRICS summit that “the ongoing complex and profound changes in the current international situation with rising instability and uncertainty urge China and Russia to establish closer strategic coordination to jointly uphold the basic norms governing international relations, oppose unilateralism, bullying and interference in other countries’ affairs, safeguard the respective sovereignty and security, and create a fair and just international environment.”

Putin responded by saying that “Russia and China have important consensus and common interests in maintaining global strategic security and stability. Under the current situation, the two sides should continue to maintain close strategic communication and firmly support each other in safeguarding sovereignty, security, and development rights.” (Chinese MFA)

The Russian response is also visible on the ground. The share of modern weapons and equipment in the Russian Army and Navy has reached an impressive level of 70 percent. The first pilot batch of next-generation T-14 Armata tanks will arrive for the Russian troops in late 2019 – early 2020.

On November 26, Russian Defence Ministry stated that Moscow’s breakthrough Avangard missile system with the hypersonic boost-glide vehicle will be deployed on combat duty with the Strategic Missile Force in December.

For the first time, the electronic warfare systems at Russia’s military base in Tajikistan will be reinforced with the latest Pole-21 jamming station that can counter cruise missiles, drones and guided air bombs and precision weapon guidance systems. Moscow is guarding against the US and NATO presence in Afghanistan.


Tyler Durden

Sat, 11/30/2019 – 09:20

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Politics
War Conflict

via ZeroHedge News https://ift.tt/37VBB78 Tyler Durden