Malaysia PM: Protectionism Will Fail, Free Trade Will Triumph
The 35th Association of Southeast Asian Nations (ASEAN) Business Advisory Council (ASEAN BAC) was held over the weekend at the IMPACT Exhibition Center in Muang Thong Thani, Nonthaburi Province, a northern suburb of Bangkok, Thailand.
The theme of the business investment summit was empowering ASEAN countries (Indonesia, Thailand, Singapore, Philippines, Malaysia, Vietnam, Brunei, Cambodia, Myanmar (Burma), and Laos in the 21st century.
There was also another theme at the summit, and that was the trade war and how protectionism will be short-lived.
Malaysian Prime Minister Mahathir Mohamad told attendees at the summit, that the rapid surge of protectionism seen by the US-China trade war will not last long, and free trade will triumph at the end, who was quoted by The Straits Times.
“Popularism is mounting in Europe and America where there are talks about limiting trade, about trade wars and applying higher taxes for imports. But I think this will not last very long because they will understand that if they cut themselves off from the new producers, they tend to lose a lot. They cannot really stop trade from expanding and becoming multilateral,” Mohamad said.
“There is a fear now that competition this time would benefit the countries in the East, rather than the developed countries from the West. That is why now there is a lot of resistance expressed openly by the people. And the politicians have responded, listening to the people, their worry about their jobs, about their growth, etc, and they like to now restrict trade, rather than have free trade, because now they understand that they are at the wrong end,” he added.
President Trump skipped out on the summit this weekend, was seen at UFC 244 at Madison Square Garden in New York City on Saturday night.
Mohamad called President Trump “not a very nice man” and criticized US protectionist policies that were leading the world towards a trade recession.
“People will come to their senses one day. At the very worst, this is going to go on for another five years, if he wins. When you limit the presidency to two terms, then the damage done will be much less,” Mohamad said.
With President Trump absent, China was seen leading the ASEAN summit and vowed to strengthen economic ties with neighboring countries.
”If you go alone, you will be bullied. We don’t want to go into trade war but sometimes when they do things that are not nice to us, we have to be unnice to them,“ says Malaysian Prime Minister Mahathir Mohamad of US protectionism. https://t.co/CAh3RhwjFE
ASEAN countries were striving towards new trade deals with six other nations: China, Japan, India, Australia, New Zealand, and South Korea. None of the trade deals included in the US.
Mohamad better hope President Trump doesn’t win a second term in 2020, otherwise, if he does, protectionism will continue to soar.
The US is rapidly decoupling from the Eastern Hemisphere. The global economy is being fractured between the West and the East. This will produce a decade of financial market volatility and elevated geopolitical risks if not corrected in the near term.
The Nasdaq and the S&P 500 closed on record highs Friday after a stronger than expected jobs report. But in his podcast, Peter Schiff said that the stock markets aren’t surging because of a great economy. They’re surging because of bad monetary policy.
The economy added 128,000 jobs in October, according to the Labor Department. That beat the expectation of 98,000. Trump economic advisor Larry Kudlow called it a great jobs report and a sign of a strong economy. In fact, Trump tweeted last week that we have the strongest economy in American history.
But Peter said the jobs report wasn’t really all that great, despite the fact that it beat expectations. And there was other economic data that came out weaker than expected last week. Peter called it a mixed bag. And the Atlanta Fed actually revised its Q4 GDP estimate down from 1.5 to 1.1.
So hardly the strongest economy in history. And yet the markets and President Trump are certainly celebrating like the economy was strong.”
Peter said the underlying economy is weak despite the job numbers. The real reason the markets are rising is because of the Fed. As Peter discussed in his previous podcast, the Fed cut rates for the third time this year last week. More significantly, Fed chair Jerome Powell indicated that it would take a “really significant” and “persistent” move up in inflation before considering rate hikes. Basically, Powell conceded that the Fed wasn’t going to be vigilant about inflation.
Rate hikes are the furthest thing from their mind. They’re not even considering raising rates right now. So, the only thing that they’ll do is cut rates or leave them alone … This is a very dovish stand for the Fed to take. Probably the most dovish stance I’ve ever seen the Fed take with respect to its supposed tolerance for inflation. Because, in the past, the Fed always pretended it would be vigilant and it would be more proactive when it came to inflation — that it wouldn’t wait to see the whites of inflation’s eyes. I mean, it would fire if it believed there was an inflation threat, but it didn’t actually believe one existed.”
But now the Fed is basically saying it’s going to wait until inflation is clearly a problem.
This is a green light to the stock market. ‘Hey, don’t worry. The Fed has got your back. We’ve got the Powell Put in place. Buy stocks.’”
And of course, it’s not just the rate cuts. It’s QE4.
The Fed can deny that they’re doing quantitative easing. But they can’t hide the numbers. They can’t hide their balance sheet.”
[ZH: And in case you wondered what the real role of central banks was/is…]
Source: Bloomberg
In fact, the balance sheet rose by 51.1 billion last week alone. The balance sheet is now above $4 trillion. It has grown by $250 billion over the last seven weeks.
That is a lot of quantitative easing. The Fed is expanding its balance sheet right now at about twice the pace that it was expanding its balance sheet when it was doing QE3. So QE4, whether they admit it or not, is much, much bigger than QE3, and it’s going to continue, and it is going to accelerate. And that is what is driving the stock market. Despite the fact that the economic data is deteriorating. Despite the fact that corporate earnings are falling, it is the Fed that is pushing this market to new highs by cutting interest rates, by indicating to the markets that they don’t have to worry about rate hikes no matter what happens with inflation. The Fed’s not going to raise interest rates. Oh, and by the way, they’re doing quantitative easing, and they’re going to print as much money as they have to keep the markets going up and to keep the economy propped up.”
Peter goes on to ponder an interesting question: what would things look like if the Fed hadn’t expanded its balance sheet by $250 billion? Obviously, it bought something with all that money.
They are buying new highs in the stock market.”
The Fed isn’t solving the problems. It’s just papering over the problems.
Conservative Californians Leaving In Droves For “America First, Law And Order” Red States
California conservatives are leaving the state in droves over what the LA Times describes as their “disenchantment with deep-blue California’s liberal political culture,” not to mention “high taxes, lukewarm support for local law enforcement, and policies they believe have thrown open the doors to illegal immigration.“
Just over half of California’s registered voters have considered leaving the state, according to a UC Berkeley Institute of Governmental Studies poll conducted for the Los Angeles Times. Republicans and conservative voters were nearly three times as likely as their Democratic or liberal counterparts to seriously have considered moving — 40% compared with 14%, the poll found. Conservatives mentioned taxes and California’s political culture as a reason for leaving more frequently than they cited the state’s soaring housing costs. –LA Times
Former Californians Richard and Judy Stark had no regrets as they left their Modesto home, towing a U-Haul trailer with their Volkswagen SUV 1,300 miles to Amarillo, Texas. After finding the website Conservative Move, the Starks put their home up for sale aroundsix months ago and bought a newly constructed three-bedroom home in the suburb of McKinney for around $300,000. According to Stark, a similar home in California would cost around twice as much.
“We’re moving to redder pastures,” said the 71-year-old. “We’re getting with people who believe in the same political agenda that we do: America first, Americans first, law and order.“
According to new Census Bureau migration data for 2018, 691,145 Californians left for other states last year, according to the San Jose Mercury News.
Where they’re going (via the Mercury News)
• Top destinations: In raw terms of people moving, the top spot for Californians is Texas, which got 86,164 Californians in 2018. Next came Arizona (68,516), Washington (55,467), Nevada (50,707), and Oregon (43,058). All told, California had the most exits among the state and that wave grew by 4% in a year.
• Largest net gain: Texas also had the largest “net gain” from California — more ins than outs — with 48,354. Next was Arizona (34,846), Nevada (28,274), Oregon (19,008), and Washington (17,460).
• Greatest ratio of ins to outs: Or look at the comings and goings as a ratio of ins to outs. Idaho wins this race with 497 arrivals from the Golden State for every 100 former Potato State residents who moved to California. Next was South Carolina (247 ins per 100 out); Texas (228); Nevada (226); and Arizona (203).
***
That said, the LA Times also notes that California is gaining people with higher incomes – most of whom have migrated to the Bay Area.
Over the last decade, the Legislative Analyst’s Office report said, the state added about 100,000 residents with household incomes of $120,000 or higher. About 85% of these higher-income earners moved to the Bay Area counties of Alameda, Contra Costa, San Francisco, San Mateo and Santa Clara. –LA Times
The three-member Bailey family moved from California to Prosper, Texas in 2017 to get away from Southern California’s steep housing prices. Bailey and her husband Scott owned a home in Orange County, while renting in El Segundo to be closer to Scott’s work in Santa Monica.
“To buy a house there [El Segundo] is insane,” said Marie. “It’s like $1 million. Why are we working our butts off for a fixer-upper in El Segundo? We’re just working, working, working — and for what?”
Bailey launched a Facebook group for people struggling with the same problems – “Move to Texas From California!“, which boasts over 14,000 members. She says that most members are conservatives like her, though not all. As such, one of her rules is “no insulting or going overboard with political conversations.”
“I wouldn’t be one to put up a Trump sign, even here,” said the 40-year-old Bailey. “But in your town Facebook, people would be like, ‘We know who the Trump supporters are.’ I had friends who voted for Trump and went to work the next day and pretended they didn’t.”
Bailey says she helped around 40 families migrate to Texas over the last year.
“There are hundreds more who made the move who didn’t use my real estate services but are in the group,” she said. “Tons and tons of families are moving all the time. People are posting photos of their families waving goodbye.”
Nicole Rivers and her husband put their Clovis home on the market in April, and hope to close escrow soon. They plan on flying to Texas to look for a place to rent in the eastern part of the state, near Tyler, coming back to California and then driving to their new home.
Rivers, who recently quit her job as a medical assistant and phlebotomist, said the cost of living is so much lower in the Tyler area that she can afford to stop working and dedicate herself to being a stay-at-home mom.
Her husband works in the oil fields, she said, and was already splitting his time between his job in Pennsylvania and family in California. When he had the chance to transfer to Texas full time, they jumped on it.
The 37-year-old said she wants to live in a town where the family can save money and her husband can retire sooner.
“It’s just too expensive here in California,” said Rivers, a California native. The state’s politics have “really gotten out of hand,” she added. She doesn’t support the state’s restrictive gun laws, she said, or the controversial sex education framework California approved despite protests earlier this year. –LA Times
Between earthquakes, seasonal fires, high taxes, poo-covered streets, the worst homeless crisis in the nation, and transgender summer camp for children as young as four, what’s not to love?
“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum — even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.”
~ Noam Chomsky
The plutocrat-owned narrative managers of the political/media class work constantly to shrink the Overton window, the spectrum of debate that is considered socially acceptable.
They do this by framing more and more debates in terms of how the oligarchic empire should be sustained and supported, steering them away from debates about whether that empire should be permitted to exist at all.
They get people debating whether there should be some moderate changes made or no meaningful changes at all, rather than the massive, sweeping changes we all know need to be made to the entire system.
They get people debating whether they should elect a crook in a red hat or a crook in a blue hat, rather than whether or not they should be forced to elect crooks.
They get people debating violations of government secrecy laws, not whether the government has any business keeping those secrets from its citizenry in the first place.
They get people debating how internet censorship should take place and whom should be censored, rather than whether any internet censorship should occur.
They get people debating how and to what extent government surveillance should occur, not whether the government has any business spying on its citizens.
They get people debating how subservient and compliant someone needs to be in order to not get shot by a police officer, rather than whether a police officer should be shooting people for those reasons at all.
They get people debating whether or not a group of protesters are sufficiently polite, rather than debating the thing those protesters are demonstrating against.
They get people debating about whether this thing or that thing is a “conspiracy theory”, rather than discussing the known fact that powerful people conspire.
They get people debating whether Tulsi Gabbard is a dangerous lunatic, a Russian asset, a Republican asset gearing up for a third party run, or just a harmless Democratic Party crackpot, rather than discussing the fact that her foreign policy would have been considered perfectly normal prior to 9/11.
They get people debating whether Bernie Sanders is electable or too radical, rather than discussing what it says about the status quo that his extremely modest proposals which every other major country already implements are treated as something outlandish in the United States.
They get people debating whether Jeremy Corbyn has done enough to address the Labour antisemitism crisis, rather than whether that “crisis” ever existed at all outside of the imaginations of establishment smear merchants.
They get people debating whether Joe Biden or Elizabeth Warren would win against Trump, rather than whether either of those establishment lackeys is a worthy nominee.
They get people debating whether politicians should have corporate sponsors, rather than whether corporations should be allowed to interfere in the electoral process at all.
They get people debating if the US should be pursuing regime change in Iran or Syria, rather than whether the US has any business overthrowing the governments of sovereign nations to begin with.
They get people debating how many US troops should be in Syria, rather than whether that illegal invasion and occupation was ever legitimate in the first place.
They get people debating whether to kill people slowly by sanctions or kill them quickly with bombs, rather than whether they should be killed at all.
They get people debating whether or not some other country’s leader is an evil dictator, rather than whether it’s any of your business.
They get people debating the extent to which Russia and Trump were involved in the Democratic Party’s 2016 email leaks, rather than the contents of those leaks.
They get people debating what the response should be to Russian interference in the election, rather than whether that interference took place at all, and whether it would really matter if it did.
They get people debating how much government support the poor should be allowed to have, rather than whether the rich should be allowed to keep what they’ve stolen from the poor.
They get people debating what kind of taxes billionaires should have to pay, rather than whether it makes sense for billionaires to exist at all.
They get people impotently debating the bad things other countries do, rather than the bad things their own country does which they can actually do something about.
They get people debating what should be done to prevent the rise of China, rather than whether a multipolar world might be beneficial.
They get people debating whether western cold war escalations against the Russian Federation are sufficient, rather than whether they want the horrors of the cold war to be resurrected in the first place.
They get people debating what extent cannabis should be decriminalized, rather than whether the government should be allowed to lock anyone up for deciding to put any substance whatsoever in their own body.
They get people debating whether or not US troops should be withdrawn from Afghanistan, rather than whether or not there should be any US troops outside of the US.
They get people debating whether or not Julian Assange is “a real journalist”, rather than whether or not they should set legal precedents that necessarily criminalize acts of journalism.
They get people debating the subtle details of bail protocol, political asylum, embassy cat hygiene and leaking rather than whether it should ever be legal to imprison a publisher for exposing government war crimes.
They get people debating what the punishment should be for whistleblowers, not what the punishment should be for those they blow the whistle on.
They get people debating whether Fox or MSNBC is the real “fake news”, rather than whether the entirety of mainstream media is oligarchic propaganda.
They get people debating about how the things everyone is freaking out over Trump doing were previously done by Obama, rather than discussing why all US presidents do the same evil things regardless of their parties or campaign platforms.
They get people debating what should be done with money, not whether the concept of money itself is in need of a complete overhaul.
They get people debating what should be done with government, not whether the concept of government itself is in need of a complete overhaul.
They get people debating whether the status quo should be reinforced or revised, rather than whether it should be flushed down the toilet where it belongs.
They get people angrily debating things they can’t change, rather than constructively working on the things that they can.
They get people shoving against each other in opposite directions, while they swiftly build a cage around us all.
Stocks, Yuan Surge On Reports Trump Considering Lifting Some China Tariffs
Surprise!
Another hour, another anonymously-sourced, strawman of an idea suggesting the end of the US-China trade war is nearer.
This time it is The FT that reports, according to five people briefed on the discussions, the White House is considering whether to roll back levies on $112bn of Chinese imports – including clothing, appliances, and flatscreen monitors – that were introduced at a 15 per cent rate on September 1.
Such a move by the US would meet a core demand from Beijing as negotiators from the world’s two largest economies work out the terms of a ceasefire to be signed in the coming weeks by President Trump and Xi Jinping, his Chinese counterpart.
Washington would likely expect something in return, including beefed up provisions on the protection of intellectual property for US companies (which the Chinese already rejected earlier today), greater certainty on the scale of Chinese purchases of US farm products, and a signing ceremony for the agreement on American soil.
Futures exploded higher…
And Offshore yuan is bid…
Source: Bloomberg
How long before Trump tweets a denial? Or Navarro jawbones it away?
US Hotel Industry Contracts The Most Since The Financial Crisis
With virtually every other sector of the US economy slowing rapidly, or now outright contracting, we can now add the hotel industry – which in 2019 saw RevPAR decline for the first time since the crisis as the lower-tier class segments and markets outside the top 25 struggled – into the mix.
As HotelNewsNow reports, In September, US hotels recorded the second monthly revenue-per-available-room decline of 2019, declining by 0.3%, as average daily rates increased by 0.6%, but that was not enough to overcome the 0.9% occupancy decline.
Whether due to the impact of AirBnB, or some other reason, average hotel rates growth has now been below 1% for five of the nine months this year, while occupancy has now declined four of nine months.
As HNN’s Jan Freitag writes, while the RevPAR cycle had enjoyed some 112 of the past 115th months – ever since the financial crisis – in positive territory, it may be time to retire the term “upcycle” if RevPAR is declining, as it did in September. The long-run monthly RevPAR growth chart now looks as if it is about to break with a period of record growth as its starts shrinking.
The slight RevPAR decline on the national level implies that there were likely some pockets of positive results, and indeed the upper end of the market did somewhat better than the remainder of the classes. This is the result of the group numbers coming in quite positive as discussed below.
As Freitag notes, a couple of data points stand out:
Luxury hotels continue to do well, upper-upscale hotels continue to see some pricing power (when group demand is good).
Upscale and upper-midscale hotels are seeing the impact of almost 4% supply increases in the occupancy results. It’s interesting then that the upscale ADR has not moved, although that could be seen as a positive outlier and not the norm going forward, as occupancy declines will be followed by ADR declines.
Economy occupancy took a real hit, and that is noteworthy since supply for that class is still down 0.2%. Demand declined 1.3%, the steepest decline of all classes.
So when people look for canaries in the coalmine, is the ongoing deterioration of economy key performances indicators that sign? Is the leisure customer tightening the purse strings as the U.S. economy slows?
That, as the author notes, is the key space to watch.
* * *
Finally, some comments about the state of Q3, 2019: third-quarter U.S. RevPAR grew 0.7%, as occupancy declined 0.1% and ADR barely moved up 0.8%. Here a few things stood out: luxury continued to do better than average, pointing at continued healthy demand growth. Upper-upscale hotels had tiny bit of pricing power. Upper midscale hotels overcame supply increases of 3.6% to still report growth in occupancy. The most worrisome number, however, is “economy”, since the supply continues to decline (-0.2%), but in this quarter demand decreased (-0.5%) as well, the only class with Q3 demand decline.
One last observation: real quarterly ADR, as in ADR less CPI, continued to paint a grim picture for profit growth. Real ADR in Q3 was down 1% – the biggest drop since the financial crisis.
“Major movers” such as China, Russia and the European Union have a strong “motivation to de-dollarize,” said Korin, co-director at the energy and security think tank, on Wednesday.
“We don’t know what’s going to come next, but what we do know is that the current situation is unsustainable.”
– Anne Korin, Institute for the Analysis of Global Security.
Irrespective of where you reside in the world, chances are you feel some sense of unease, a nagging concern for the future and a deep instinctual understanding that an era you knew and navigated your entire life is slipping away and won’t be coming back.
We’ve been witnessing widespread protest and unrest across countries with distinct political and economic systems, such as Hong Kong, France, Chile, Spain, Ecuador, Lebanon and Venezuela just to name a few. Those with vested interests and an ideological solution to sell insist it’s all because of socialism, capitalism or some other ism, but the truth is this goes far deeper than that. What’s actually happening is the geopolitical and economic paradigm that’s dominated the planet for decades is failing, and rather than address the failure in any real sense, elites globally are have decided to loot everything they possibly can until the house of cards comes crashing down.
This chart is almost as disturbing as the charts of negative yielding debt.
The entire financial system is a farce and a fraud. It’s all smoke and mirrors, a coverup machine for elitist looting.
Despite people with vested interests reassuring you this is normal, it is not. https://t.co/UWbQjB32Ss
You can’t properly discuss the entrenched global paradigm without addressing the American empire, and you can’t have a conversation about empire without discussing the monetary and financial system that keeps it all in place. The last time I discussed this in any detail was last year in the post, The Road to 2025 (Part 3) – USD Dominated Financial System Will Fall Apart. Today’s post should be seen as an update to that piece, taking stock of where we stand a year and a half later.
Several assumptions were made in last year’s article that must be recognized in order to understand how I see the situation. The first is a view that we’re already transitioning into a multi-polar world, in other words, the U.S. no longer holds a position of total planetary geopolitical dominance similar to what it enjoyed in the mid-to-late 1990s. Despite proclamations to the contrary, history did not in fact end.
U.S. leadership became accustomed to getting virtually whatever it wanted around the world via overt violence, covert intelligence operations or economic coercion, but this is no longer the case in 2019. Although this doesn’t sit well with much of the foreign policy establishment, it’s nevertheless reality. The most recent evidence came just last week with Denmark’s decision to approve the Nord Stream 2 gas pipeline, something the U.S. was adamantly opposed to.
For the past three years the U.S. has fought the construction of the Nordstream 2 pipeline from Russia to Germany every inch of the way.
The battle came down to the last few miles, literally, as Denmark has been withholding the final environmental permit on Nordstream 2 for months.
The U.S., especially under Trump, have committed themselves to a ‘whole of government approach‘ to stop the 55 bcm natural gas pipeline from making landfall in Germany…
In a sense, this pipeline is Germany’s declaration of independence from seventy-plus years of U.S. policy setting.
The fact the U.S. foreign policy establishment sees it as our business to determine which country the EU should buy natural gas from and how offers a glimpse into the imperial mindset. It’s the same mindset that maintains Iran shouldn’t be able to sell oil to anyone without U.S. permission. It represents an attachment to total global control, a view that the world consists of little more than the U.S. hegemon and its client states.
Which gets us to the key point surrounding the unsustainable nature of the world’s monetary and financial system.
Specifically, we already live in a world where several powers (namely China and Russia) have very publicly and clearly elucidated they will not function as U.S. client states going forward. They appear to be on the winning side of history because it’s much harder to maintain global empire than to frustrate it at this point, but the U.S. maintains an enormous advantage when making moves on the geopolitical chessboard. It’s not the ubiquitous military bases or advanced technology, but a more esoteric and stealth weapon — the U.S. dollar.
The USD continues to dominate global financial transactions, which means the world can never truly be multi-polar unless this lopsided structural reality is dealt with. None of this is new of course, though there’s now a heightened sense of urgency for those countries unwilling to serve as U.S. client states given the Trump administration’s increasingly aggressive and blunt usage of the financial system as a geopolitical weapon.
The significance of the USD as a weapon was put into plain view a couple of weeks ago during Congressional hearings on Facebook’s Libra project. See the clip below.
Please allow this to be a wakeup call for those who don’t understand.
Congressman admits the U.S. dollar is the most significant tool of imperialism available to the state (it is).
Zuckerberg then admits he gets it and Libra will also be wielded as a weapon of empire. https://t.co/4uqhSUOYw5
As such, nations committed to functioning as sovereign states have a clear choice. Figure out a way to transact smoothly on the world stage without touching the USD, or submit to being a client state. Since the latter is seen as unacceptable for an increasing number of nations, I believe the former will be figured out, and that it’ll happen by 2025 at the latest.
Whenever I say stuff like this people insist there’s nothing ready to replace the USD as a global reserve currency. On this front I agree, but my argument isn’t that another nation-state fiat is going to totally usurp the USD on the world stage in the years ahead (nor should anyone want that). Rather, my view is competing powers will figure out a way to avoid the dollar in an increasing percentage of global transactions simply because they have no other option in a world where the dollar’s been fully weaponized to achieve U.S. geopolitical goals.
I don’t need to know the specifics of how this transitions unfolds, just that it will. This is why it makes sense to own bitcoin and gold, two politically neutral alternative global monetary instruments that’ll likely trade multiples higher from here in the years ahead as people come to recognize the importance of such assets in the historical transition period we’re in.
Ultimately, I hope humanity learns from the experience of recent decades and never again permits one country to control monetary policy for the entire planet. A reserve currency controlled by a single nation is effectively the most potent geopolitical weapon ever invented. No country or institution should ever have such power, now or in the future.
A global reserve currency must be politically neutral otherwise it’s just a weapon.
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Gavin Newsom’s Handling Of PG&E Crisis Stokes Comparisons To Disgraced Ex-Governor Davis Enron Debacle
The California wildfires aren’t just starting to look ugly for PG&E, they’re also starting to look ugly for Governor Gavin Newsom.
Newsom, overseeing the 5th largest economy in the world, has said publicly that he “owns” the crisis, according to Bloomberg – a public statement that could come back to bite him if he can’t get the problem under control quickly. Most recently, Newsom threatened a state takeover of PG&E unless the company could quickly exit bankruptcy and improve its operations.
The focus on Newsom is similar to the focus that was put on Governor Gray Davis in 2003, after Enron manipulated the state’s deregulated energy market causing blackouts without warning and resulting in Davis being recalled from office.
Joel Fox, a Republican consultant who worked for Arnold Schwarzenegger during the Davis recall said:
“If the situation is not handled, it’s very possible it will blow back on Newsom. There’s jeopardy for him, depending on how it plays out.’’
President Trump said that Newsom “has done a terrible job of forest management” and said California would no longer get Federal aid. “Get your act together Governor,” Trump tweeted.
What Trump may have failed to realize is that federal agencies own and manage 57% of the state’s forests, while industrial timber companies own another 14%.
The pre-planned “safety blackouts” that PG&E has been engineering across the state have resulted in school closures, evacuations and millions of dollars of lost revenue for the state’s businesses.
At the same time, the Kincade Fire, which originated in Sonoma County, continues to burn. Newsom said on Friday: “This cannot — and will not — be the new normal. California demands better.”
Newsom has been in office since January, winning election with an insanely unreasonable “ambitious” agenda to tackle homelessness and affordable housing. Not long after taking office, he was fully immersed in the crisis surrounding PG&E. He has also gone head to head with President Trump, who continues to use California as an example of “all that he sees as wrong with Democratic politics.”
In response to Trump, Newsom said: “You don’t believe in climate change. You are excused from this conversation.”
Trump has even revoked the state’s authority to set its own auto-emission tailpipe standards, and attacked it for failing to meet federal standards for smog reduction. The state has taken Trump to court to try and fight back.
Meanwhile, Republicans have been sharply critical of the job Newsom has done. John Cox, the Republican San Diego businessman who ran against Newsom in 2018 said:
“Mr. Newsom knows this is as dangerous for him politically as it is, life safety-wise, for the people who are facing fires. It’s not lost on him that the outages we’re experiencing are hurting people. The people of this state have a way of reacting negatively when they turn on the light switch and there’s nothing there.’’
Republican Assemblyman James Gallagher commented: “They’ve been saying they understand the terrible impacts, but the next step is to say, ‘Here’s what we’re going to do to change it.’ And I don’t think there’s been enough of that yet. There needs to be more urgency on the issue, either through a special session or other means of changing policy in a timely fashion.’’
Gallagher has suggested that Newsom and Democratic leaders consider additional programs to reduce wildfire fuel through forest management and funding for utility equipment upgrades.
Former Governor Davis concluded with some heavy hitting words of wisdom: “Nobody knows better than me that blackouts are bad and electricity is good. But we all have to understand that until these measures the governor has taken take hold, we’re going to have to live with an imperfect solution.’’
With razor sharp thinking like that, it’s tough to see how David lost his job in 2003, isn’t it?
We open this episode with David Kris’s thoughts on the two-years-late CFIUS investigation of TikTok, of its Chinese owner, ByteDance, and of ByteDance’s US acquisition of the lip-syncing company Musical.ly. Our best guess is that this unprecedented reach-back investigation will end in a more or less precedented mitigation agreement.
WhatsApp is suing NSO Group over the use of spyware on WhatsApp’s network. I predict that this is going to be a highwire act for WhatsApp, given the precedents on when breaching terms of service violates the Computer Fraud and Abuse Act. I also muse on the possibility that NSO will find ways to make this a much less comfortable lawsuit for WhatsApp to pursue.
The ACLU takes this week’s prize for making a PR and fundraising mountain out of a molehill of a lawsuit. Matthew Heiman and I try to decide which took less effort – cutting and pasting the ACLU’s generic FOIA complaint or cutting and pasting the ACLU’s generic “Oh my God, it’s a surveillance dystopia” press release.
I comment on a heart-warming story about a geek in Normal, Illinois, who runs the most successful ransomware-rescue site in the world – and is going broke doing it. Advice to DHS’s CISA: Isn’t it time to sponsor prizes for people who post ransomware decryptors with real impact?
Mark MacCarthy discusses the guidance provided by the Defense Innovation Board on building ethical AI. I complain that political correctness seems to have outweighed considerations like, you know, winning wars.
Matthew tells us that Israel is creating its own CFIUS-like panel, and we note the longstanding tension between the US and Israel over Chinese access to Israeli technology.
David spots more decoupling: The Interior Department has grounded its entire drone fleet, citing the risk from Chinese manufacturers.
Mark and I find common ground in thinking that Facebook got the political ad censorship question more right than wrong. Twitter, not so much. We offer Strange New Respect for Herbert Hoover and the legislators who struggled with the last industry to seize control of what Americans could know—broadcasting.
Matthew fills us in on a story suggesting that North Korea breached an Indian nuclear plant’s network. He and I also briefly note that Georgia was the victim of a massive case of cyber vandalism.
In updates of past stories, I cover Coalfire’s persuasive critique of the sheriff who arrested the company’s pentesters in an Iowa courthouse. In another even longer-running story, the latest and perhaps the last word on the LabMD-Tiversa-FTC imbroglio can be found in an excellent New Yorker story that leaves LabMD looking good, the FTC looking bad, and Tiversa looking like a candidate for criminal prosecution. Finally, David updates the story of the 2016 Uber hack that cost the company’s chief security officer his job. Now it’s also going to cost the hackers their freedom, as they plead guilty to CFAA violations.
As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to CyberlawPodcast@steptoe.com. Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!
The views expressed in this podcast are those of the speakers and do not reflect the opinions of the firm.
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Hunter Biden and his Ukrainian gas firm colleagues had multiple contacts with the Obama State Department during the 2016 election cycle, including one just a month before Vice President Joe Biden forced Ukraine to fire the prosecutor investigating his son’s company for corruption, newly released memos show.
During that February 2016 contact, a U.S. representative for Burisma Holdings sought a meeting with Undersecretary of State Catherine A. Novelli to discuss ending the corruption allegations against the Ukrainian firm where Hunter Biden worked as a board member, according to memos obtained under a Freedom of Information Act lawsuit. (I filed that suit this summer with the help of the public interest law firm the Southeastern Legal Foundation.)
Just three weeks before Burisma’s overture to State, Ukrainian authorities raided the home of the oligarch who owned the gas firm and employed Hunter Biden, a signal the long-running corruption probe was escalating in the middle of the U.S. presidential election.
Hunter Biden’s name, in fact, was specifically invoked by the Burisma representative as a reason the State Department should help, according to a series of email exchanges among U.S. officials trying to arrange the meeting. The subject line for the email exchanges read simply “Burisma.”
“Per our conversation, Karen Tramontano of Blue Star Strategies requested a meeting to discuss with U/S Novelli USG remarks alleging Burisma (Ukrainian energy company) of corruption,” a Feb. 24, 2016, email between State officials read. “She noted that two high profile U.S. citizens are affiliated with the company (including Hunter Biden as a board member).
“Tramontano would like to talk with U/S Novelli about getting a better understanding of how the U.S. came to the determination that the company is corrupt,” the email added. “According to Tramontano there is no evidence of corruption, has been no hearing or process, and evidence to the contrary has not been considered.”
At the time, Novelli was the most senior official overseeing international energy issues for State. The undersecretary position, of which there are several, is the third-highest-ranking job at State, behind the secretary and deputy secretary. And Tramontano was a lawyer working for Blue Star Strategies, a Washington firm that was hired by Burisma to help end a long-running corruption investigation against the gas firm in Ukraine.
Tramontano and another Blue Star official, Sally Painter, both alumni of Bill Clinton’s administration, worked with New York-based criminal defense attorney John Buretta to settle the Ukraine cases in late 2016 and 2017. I wrote about their efforts previously here.
Burisma Holdings records obtained by Ukrainian prosecutors state the gas firm made a $60,000 payment to Blue Star in November 2015.
The emails showTramontano was scheduled to meet Novelli on March 1, 2016, and that State Department officials were scrambling to get answers ahead of time from the U.S. embassy in Kiev.
The records don’t show whether the meeting actually took place. The FOIA lawsuit is ongoing and State officials are slated to produce additional records in the months ahead.
But the records do indicate that Hunter Biden’s fellow American board member at Burisma, Devon Archer, secured a meeting on March 2, 2016 with Secretary of State John Kerry. In addition to serving on the Burisma board, Archer and Hunter Biden were partners at an American firm known as Rosemont Seneca.
“Devon Archer coming to see S today at 3pm – need someone to meet/greet him at C Street,” an email from Kerry’s office manager reads. “S” is a shorthand frequently used in State emails to describe the Secretary of State. The memos don’t state the reason for the meeting.
Tramontano, a lawyer for Hunter Biden, Archer and Joe Biden’s campaign did not return messages seeking comment on Monday.
In an interview with ABC News last month, Hunter Biden said he believed he had done “nothing wrong at all” while working with Burisma but “was it poor judgment to be in the middle of something that is…a swamp in — in — in many ways? Yeah.”
Whatever the subject of the Archer-Kerry meeting, its existence is certain to spark interest. That’s because Secretary Kerry’s stepson, Christopher Heinz, had been a business partner with both Archer and Hunter Biden at the Rosemont Seneca investment firm in the United States.
Heinz, however, chose not to participate in the Burisma dealings. In fact, he wrote an email to his stepfather’s top aides in May 2014, pointedly distancing himself from the decision by Hunter Biden and Devon Archer to join Burisma’s board.
Heinz’s spokesman recently told The Washington Post that Heinz ended his relationship with Archer and Hunter Biden partly over the Burisma matter. “The lack of judgment in this matter was a major catalyst for Mr. Heinz ending his business relationships with Mr. Archer and Mr. Biden,” Heinz spokesman Chris Bastardi told the newspaper
A person who assisted Blue Star and Buretta in settling the Burisma matters in Ukraine told me in an interview that the late February 2016 overture to State was prompted by a dramatic series of events in Ukraine that included when that country’s top prosecutor escalated a two-year probe into Burisma and its founder, the oligarch Mykola Zlochevsky.
Zlochevsky’s gas firm hired Hunter Biden and Archer as board members for Burisma Holdings in spring 2014, around the time that British officials opened corruption investigations into Zlochevsky’s gas firm for actions dating to 2010 before Hunter Biden and Archer joined the firm. Ukraine officials opened their own corruption probe in August 2014.
A firm called Rosemont Seneca Bohai began receiving monthly payments totaling more than $166,000 from Burisma Holdings in May 2014, bank records show. The records show Devon Archer was listed as a custodian for the Rosemont Seneca Bohai firm and that Hunter Biden received payments from it. You can read those bank records here.
In September 2015, then-U.S. Ambassador to Ukraine Geoffrey Pyatt gave a speech imploring Ukrainian prosecutors to do more to bring Zlochevsky to justice, according to published reports at the time.
By early 2016 the Ukrainian investigation had advanced enough that then-Prosecutor General Viktor Shokin authorized a court-ordered seizure of Zlochevsky’s home and other valuables, including a luxury car. That seizure occurred on Feb. 2, 2016, according to published reports in Ukraine.
The same day that the Zlochevsky seizure was announced in Ukraine, Hunter Biden used his Twitter account to start following Deputy Secretary of State Tony Blinken, a longtime national security adviser to Vice President Joe Biden who was promoted to the No. 2 job at State under Secretary John Kerry.
The Feb. 4, 2016 Twitter notification from Hunter Biden to Blinken was captured by State email servers and turned over to me as part of the FOIA release.
Within a few weeks of Tramontano’s overture to Novelli and of Archer’s overture to Kerry, Vice President Joe Biden took a stunning action, one that has enveloped his 2020 campaign for president in controversy.
By his own admission in a 2018 speech, Joe Biden used the threat of withholding $1 billion in U.S. aid to strong-arm Ukraine into firing Shokin, a prosecutor that he and his office knew was investigating Burisma.
Biden has said he forced Shokin’s firing because he and Western allies believed the prosecutor wasn’t aggressive enough in fighting corruption.
Shokin disputes that account, telling both me and ABC News that he was fired specifically because he would not stand down from investigating Burisma. In fact, Shokin alleges, he was making plans to interview Hunter Biden about his Burisma work and payments when he got the axe.
Ukraine prosecutors have said they do not believe the Bidens did anything wrong under Ukraine law. But some of the country’s prosecutors made an effort in 2018 to get information about Burisma to the U.S. Justice Department because they believed American prosecutors might be interested in some activities under U.S. law. You can read about that effort here.
Some experts and officials have been quoted in reports saying Joe Biden’s actions created the appearance of a conflict of interest, something all U.S. government officials are supposed to avoid. The questions about conflicts were previously raised in a 2015 article by the New York Times and the 2018 book Secret Empires by author Peter Schweizer.
The new evidence of contacts between Burisma, Hunter Biden and Archer at State are certain to add a new layer of intrigue to the debate. Those contacts span back to at least spring 2015, the new memos show.
On May 22, 2015, Hunter Biden emailed his father’s longtime trusted aide, Blinken, with the following message: “Have a few minutes next week to grab a cup of coffee? I know you are impossibly busy, but would like to get your advice on a couple of things, Best, Hunter.”
Blinken responded the same day with an “absolutely” and added, “Look forward to seeing you.”
The records indicate the two men were scheduled to meet the afternoon of May 27, 2015.
The State Department records also indicate Hunter Biden met Blinken in person for lunch on July 22, 2015, when State officials gave the name of a person to meet to help him enter the building. “He has the VIP pin and can escort you upstairs for your lunch with Tony,” the email said.
The emails don’t indicate whether the meeting had to do with Burisma or one of Hunter Biden’s other interests.
But they clearly show that Hunter Biden, his business partner and Burisma’s legal team were able to secure contacts inside the State Department, including to one of his father’s most trusted aides, to Secretary Kerry and to the agency’s top energy official.
The question now is: Did any of those contacts prompt further action or have anything to do with Joe Biden’s conduct in Ukraine in March 2016 when he forced Shokin’s firing?
