March 2020 – Page 304

The Afghanistan Deal Is Already Falling Apart

The U.S. just signed a peace deal with the Taliban that would see U.S. forces exit Afghanistan in 14 months. Yet less than 24 hours after the peace deal was signed, it’s already unraveling after Afghan President Ashraf Ghani rejected the timeline agreed to by America and the Taliban to exchange nearly 5,000 Taliban prisoners for around 1,000 Afghan government captives.

To be blunt, the details of this deal are a distraction. For America, a withdrawal of U.S. forces from Afghanistan is more urgent than the success or failure of a deal between the Taliban and Kabul.

Just observe how many hawks in Washington are already calling for President Donald Trump to rethink his plans to withdraw from Afghanistan. “We got a chance to end this Afghanistan War smartly and well but we’re gonna need a residual U.S. force, a counterterrorism presence for years to come because I don’t trust the Taliban to police Al Qaeda and ISIS,” said Sen. Lindsey Graham (R–S.C.), while championing never-ending U.S. presence in Afghanistan. Likewise, Susan Rice and John Bolton have both come out swinging against the deal—these arch-hawks may quibble over the details, but they agree on maintaining a U.S. military presence in Afghanistan.‬

For close to two decades, America’s interests have demanded a military withdrawal from Afghanistan, peace deal or not. If this is a question of what the U.S. is getting in return for the nearly $2 trillion spent on the war, and around 2,500 American lives lost directly due to combat, the answer is completely depressing—after being in Afghanistan for 18 years, there’s no end in sight to the conflict. Over the last 10 years, the situation on the ground has looked more and more like a stalemate that grinds on. Meanwhile the Taliban still controls the exact same amount of territory.

Even from a humanitarian angle, it is in America’s interest to leave. Not all who America is helping in the fight against the Taliban are “good guys.” There’s a host of human rights abuses committed by Afghan warlords and security forces, including the bacha bazi abuse of young boys. Meanwhile, corruption is rife in Kabul.

America would be foolish to tie withdrawal to the success of a deal between Kabul and the Taliban. Neither side has American interests in mind and our allies in Kabul have an incentive to scuttle a deal if that means America continues to provide a security blanket to Afghan forces.

But what of Graham’s contention, repeated elsewhere by establishment types, that America’s chief mission in Afghanistan is keeping Al Qaeda and the Islamic State group out?

First off, notice how the mission evolved from beating the Taliban and engaging in nation-building in Afghanistan to now keeping Al Qaeda and IS out. But we aren’t doing a good job at even that: Al Qaeda still operates on the border between Afghanistan and Pakistan. Sure, the Taliban continues to have a relationship with Al Qaeda, but America’s presence in Afghanistan isn’t changing that. Regrettably, our military presence may even be giving the Taliban and terror groups like Al Qaeda more reasons to work together.

Next, it isn’t true that we need troops in Afghanistan to conduct anti-terrorism operations. Defense Secretary Mark Esper already stated that the U.S. “will not hesitate” to strike terrorist threats in Afghanistan if the Taliban falters in its promise to prevent Sunni terror groups from using Afghanistan as a base. If a legitimate terror threat to the U.S. arises in Afghanistan, there are tools at our disposal—whether by strike or by raid, America’s reach is long and does not rely on a permanent ground presence in Afghanistan.

Peace deals can always fall apart. Instead of focusing on the details of the accord, policymakers should be thinking about America’s interests—and how badly we’ve strayed from them. Whether the deal holds or not, this statement remains true: It’s in America’s best interest to withdraw from Afghanistan as soon as possible.

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The Afghanistan Deal Is Already Falling Apart

To be blunt, the details of this deal are a distraction. For America, a withdrawal of U.S. forces from Afghanistan is more urgent than the success or failure of a deal between the Taliban and Kabul.

But what of Graham’s contention, repeated elsewhere by establishment types, that America’s chief mission in Afghanistan is keeping Al Qaeda and the Islamic State group out?

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Netanyahu Declares Election Victory In “Comeback Unseen In Israeli Politics”

Israel’s Prime Minister Benjamin Netanyahu has declared victory in the nation’s general election held on Monday, but still lacks a clear majority to form a ruling coalition in Israel’s third vote after two prior gridlocked elections.

“We won by believing in our own way and by the people of Israel,” Netanyahu stated immediately after. But he’s still two seats short of a ruling majority, as Reuters reports of the results:

With some 90 percent of the votes counted, Netanyahu, who has the pledged support of right-wing and religious parties for a coalition government, appeared to control 59 seats in parliament, two short of a ruling majority.

The gap made former defense minister Avigdor Lieberman’s far-right Yisrael Beiteinu party a potential kingmaker after remaining on the sidelines in inconclusive ballots in April and September.

*Via AFP: ‘What a joyous night,’ a beaming Netanyahu told a cheering crowd in a speech at Likud’s election headquarters in Tel Aviv.*

Netanyahu’s right-wing Likud Party gained just over 31% of the vote, followed by the opposition Blue and White party of Benny Gantz with over 23%, and with The Joint List, the alliance of Israel’s Arab political parties, with 11.60 percent.

However, Gantz stopped short of immediately conceding defeat, but noted his supporters’ “feeling of disappointment and pain” amid what could be another gridlock situation that has plagued Israeli politics for the past year.

Not only did Netanyahu extend his political career but saved himself from significant legal trouble as well, given he was shortly to go on trial for corruption — with only a win as prime minister that could keep him immune.

Israeli and international media are noting it’s a huge “comeback unseen in Israeli politics” for the embattled prime minister. As The Guardian reports Tuesday:

Adding to his woes, the timing of Monday’s election – held just two weeks before a scheduled court appearance in Jerusalem – could not have been worse.

Yet as the votes were being counted on Tuesday, it seemed Netanyahu, who denies all the charges, had somehow regained his swagger. While it remains unclear if he can form a government, or if the country is doomed to remain in political stasis, his ruling Likud party appears to be on track to win a significant number of seats and more than any other faction.

Writing in the often pro-Netanyahu newspaper, Israel Hayom, commentator Mati Tuchfeld said the result was “a comeback unseen in Israeli politics”.

Netanyahu, setting his sights on the next phase of building a coalition with his defeated rival Benny Gantz, said “It’s time for reconciliation”.

Gantz, for his part, in addressing supporters after the vote remained ambiguous on if he would agree to a coalition with Likud.

Concerning the impact of Netanyahu’s legal woes and corruption charges, The Guardian noted further that “voters either do not believe the corruption allegations, or they do not care. In this respect, there are parallels with some of Trump’s supporters in the US, who either refuse to believe or are happy to downplay criticism of his conduct.”

Tyler Durden

Tue, 03/03/2020 – 11:55

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The Establishment’s Ultimatum: Scuttle Bernie!

Authored by Pat Buchanan via Buchanan.org,

After Joe Biden’s blowout victory in South Carolina Saturday and the swift withdrawal of Tom Steyer, “Mayor Pete” Buttigieg and Sen. Amy Klobuchar, the decisive day of the race for the Democratic nomination, Super Tuesday, is at hand.

Fourteen states — including California and Texas and delegate-rich Colorado, North Carolina and Virginia — hold primaries today, where 40% of the delegates to the Democratic convention will be chosen.

Yet consider where the Democratic Party, the party of diversity, America’s “progressive” party, the all-inclusive party of persons of color, African Americans, Asians and Hispanics, the party of women and LGBT, will close out this day.

Of the 24 candidates who sought the nomination in 2019, all the black candidates such as Sens. Cory Booker and Kamala Harris and Gov. Deval Patrick, have been eliminated. The sole Asian American, Andrew Yang, is gone. The Hispanic candidate, Julian Castro, is long gone. Winning just 2% of the black vote in South Carolina, 38-year-old gay candidate Pete Buttigieg is gone.

After South Carolina, the last two women in the race, Elizabeth Warren and Klobuchar, were put under pressure from the Democratic establishment in its hair-on-fire panic. To do what?

These female senators were to sacrifice their hopes and dreams to advance the establishment’s plot to derail the nomination of the unapologetic progressive who has run the best and boldest campaign of this election year — Bernie Sanders.

Klobuchar packed it in Monday. Warren is barely hanging on. And where does that leave the party of diversity this first week in March?

With three potential nominees. All three are aging white men — Joe Biden, Bernie Sanders and Mike Bloomberg. All three, if nominated and elected, would soon celebrate their 80th birthday in the White House.

The establishment’s ultimatum: Everyone, get with the program of breaking Bernie and “Go with Joe!” or face retribution.

Of what is the establishment terrified?

That if Sanders is nominated, Donald Trump will crush him in November. And not only will the White House be lost, all hopes of winning the Senate and blocking Trump’s second-term Supreme Court nominees would also be lost.

And not only the Senate but Nancy Pelosi’s House could also be lost. And not only the House but hundreds of down-ballot candidates could also lose, leaving the GOP with the whip hand in redistricting congressional seats through the decade.

For Democrats, the fear is of the Harding-Coolidge Roaring ’20s revisited.

And if Trumpists rule the roost in the Republican Party and the populist-left of “Crazy Bernie” dominates the Democratic Party, what happens to the agenda of the establishment?

Today promises to a fateful one in the history of the Democratic Party, and it will answer many questions:

Will Sanders win enough delegates to give him an insurmountable lead for the nomination?

Or will he have a good, but not a great, night, winning most of the states, but not a large enough pile of delegates to reach 50% before the convention in Milwaukee?

As for Mayor Mike Bloomberg, who was being urged to drop out and back Biden before he got the first returns on his $500 million investment in his campaign, what did he buy with that half billion? We shall find out today.

If his performance is disappointing, will he yield to the establishment and do what it demands to advance the killing of Sanders’ candidacy?

As for Biden, the questions are clear and crucial: Will the momentum from Saturday’s victory be sustained and replicated in Alabama and other Southern and border states where the African American share of the Democratic electorate is similar to South Carolina’s?

Will today provide the clarity the establishment and Biden want, and make this a Biden-Sanders race, with those two coming into the convention with large blocs of delegates but neither with a majority?

What the establishment wants is for the first ballot to end without a nominee – if that nominee would be Sanders – and the pledged delegates to be freed of their commitments, and for the superdelegates to vote on the second ballot, and for the party thus to be spared falling into the custody of an angry septuagenarian socialist.

For the Democratic establishment, the stakes could not be higher and thus that establishment, after Biden’s landslide in South Carolina, is not disguising its interests or demands: Sanders must be denied the nomination, and Biden is the only one who can accomplish that.

Biden might have won South Carolina without the endorsement of veteran African American Congressman Jim Clyburn. But it was Clyburn’s blessing that gave Biden his landslide.

And if Biden wins Alabama and other states today, the major factors of his victory will be his South Carolina landslide and his support from African Americans.

Should Biden win the nomination, still a long shot, he will be in deep political debt.

Look for Biden to put an African American woman on his ticket.

Tyler Durden

Tue, 03/03/2020 – 11:35

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What Does Bernie Sanders Really Mean When He Calls Himself a Democratic Socialist? Q&A With Jim Pethokoukis

Sen. Bernie Sanders (I–Vt.) has rocketed to the top of the Democratic presidential primary field by proposing a massive expansion of government: single-payer health care, free public college tuition, student loan forgiveness, universal pre-K, and more.

His plans could cost as much as $60 trillion dollars over the next decade, more than doubling the federal budget.

More than any single policy, however, Sanders has run on an idea: Democratic socialism, with the economies of Denmark, Norway, and Sweden as models.

At times in his life, however, he’s also had kind words for socialist revolutionaries and regimes that are more authoritarian—although he has also condemned their harshest practices.

So what is Sanders’ vision of democratic socialism? And what would it mean for the country? To find out, Reason Features Editor Peter Suderman spoke with Jim Pethokoukis. He is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog.

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Decades-old investment wisdom from Albert Einstein

Albert Einstein is rumored to have said that “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

These days interest rates are near zero. The average savings account currently pays .09% interest per year, according to the FDIC.

So over the course of a decade, saving $100 with compound interest would give you a grand total of $109.37.

But at the same time, the opposite force is working against us. Inflation currently stands around 2.5%. And that compounds too.

What $100 can buy now will cost $102.50 next year. After ten years, assuming inflation stays the same, it will cost $128.

So just by saving $100 for ten years, you’ve lost $18.63 of real value.

That’s why these days, you have to invest to make money. Luckily stocks, real estate and pretty much every asset class is close to all time highs right now.

But last week’s “coronavirus drop” is a good reminder that it’s not going to last forever.

If you have substantial unrealized capital gains, and you’re looking for an exit strategy, there is one available right now. It allows you to compound your current gains for almost six years before paying capital gains tax.

I’m talking about Opportunity Zones. These were created by Trump’s tax reform law to reward investors who fund projects in distressed areas.

One of the major benefits of investing in an Opportunity Zone is the chance to compound your gains BEFORE you pay taxes on them.

For instance, if you bought $100,000 worth of stocks that are now worth $200,000 you have $100,000 worth of capital gains. At current tax rates, you could owe as much as $23,800.

But by investing those $100,000 of gains in an Opportunity Zone, you can defer paying those taxes until 2026. That means the $23,800 that would have gone to taxes instead grows from the new investment.

Let’s say that the new investment increases in value by 10% each year. When the time comes to pay the capital gains taxes on the original investment, you will have earned an EXTRA $18,363 just from deferring taxes.

In addition, after holding the Opportunity Zone investment for several years, you’ll finally pay tax on your original capital gain, but at a discounted rate. (Technically they call this a ‘step-up in basis’, so instead of being taxed on $100,000 you are taxed on a gain of $90,000.)

This can save you even more money.

But there is yet another major tax benefit of Opportunity Zones.

If you keep your funds in the Opportunity Zone for ten years, you’ll NEVER pay tax on the capital gains from your Opportunity Zone investment.

So to continue our example, say that after ten years, your $100,000 Opportunity Zone investment has compounded into $259,374– a total capital gain of $159,374. Your total capital gains tax bill will be ZERO.

Remember, ALL capital gains are eliminated on Opportunity Zone investments held for at least 10 years. So if you invest in the next Facebook and turn $100,000 into $100 million you still owe ZERO capital gains taxes on that $99,900,000 gain.

But like most good things, this won’t last forever.

And some of the benefits have already expired.

For instance, you could have had a 15% step-up in basis on your original capital gains (i.e. only paid tax on $85,000 instead of $100,000).

But you had to hold the Opportunity Zone investment for seven years. And with the deadline to pay the original capital gains set at the end of 2026, it is too late to hold the investment for seven years.

But you can still get the discount of 10% by holding for five years, as long as you get into an Opportunity Zone by the end of 2021.

It’s worth looking into. And a good place to start is our new in-depth article: Opportunity Zones: Ultimate Guide and My Personal Experience.

Source

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What Does Bernie Sanders Really Mean When He Calls Himself a Democratic Socialist?Q&A With Jim Pethokoukis

His plans could cost as much as $60 trillion dollars over the next decade, more than doubling the federal budget.

More than any single policy, however, Sanders has run on an idea: Democratic socialism, with the economies of Denmark, Norway, and Sweden as models.

At times in his life, however, he’s also had kind words for socialist revolutionaries and regimes that are more authoritarian—although he has also condemned their harshest practices.

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Stocks Plunge, Erase Fed-Cut Spike – Here’s What Wall Street Thinks

The market seems disappointed. After The Fed’s 50bps rate-cut sent stocks spiking higher, all those gains have been erased…

But the market (and trump) was asking for more and Wall Street does not seem impressed… as the market’s dependence in Fed largesse is revealed for all to see…

Matt Maley, an equity strategist at Miller Tabak & Co:

“This should be very positive on a near-term basis. If the coronavirus causes the market to roll-back over in the coming weeks (which will confirm that the Fed cannot fight a health-care crisis), it’s going to mean that we’re headed for a bear market. However, this should be quite positive over the near-term.”

John Augustine, chief investment officer at Huntington Private Bank:

“The Fed responded proactively to the markets, which is very unusual and may be prelude to them also reacting at their scheduled meeting in March. Other central banks are going to respond in the interim,” he said.

“The market is not sure how to respond — the markets worry with intra-meeting Fed rate cuts, what does the Fed know that we don’t know? The stock market will remain volatile until coronavirus cases peak. So at this point in time, we’d say patience. We’re in unprecedented territory for the Fed to act like this. This is likely going to lead to further volatility in financial markets.”

Max Gokhman, the head of asset allocation for Pacific Life Fund Advisors:

“That central bank response I was talking about over the weekend is coming in quicker and hotter than anticipated. The Fed going for an emergency 50bp cut is a bit too much. It may send the message that the risk to the economy is even bigger than currently anticipated, it leaves them with less ammunition for the rest of the year (unless we go negative under Powell), and it makes them appear to be doing the Administration’s bidding since it was widely reported that Mnuchin and Kudlow were pushing for a 50bp cut immediately.”

Naufal Sanaullah, chief macro strategist at EIA All Weather Alpha Partners:

“The rates market was looking for 50bps of cuts by April. Equities first found their footing when Powell said he would act as appropriate, and then when G-7 announced an emergency conference call. Now that we’ve gotten an inter-meeting 50bps cut and the market has rebounded strongly off the lows, the upside is now relatively capped. We expect a wide, volatile range to be carved out over the next few weeks, as we consolidate the big sell-off and digest the incoming newsflow, which has the potential to deteriorate as testing proliferates further.”

Neil Dutta, head of U.S. Economics at Renaissance Macro Research:

“Markets are said to stop panicking when policy makers begin to panic. The Fed just delivered an emergency cut, which qualifies as panic. But the Fed’s tools are imperfect and not adequate to deal with a public health crisis. The market wants to know how far the virus will spread and the Fed cannot answer that question. The panic needs to come from the opposite of 17th Street in DC.”

Win Thin, global head of currency strategy at Brown Brothers Harriman:

“I’ll say it again, the optics are bad after Trump just called for a big rate cut. Call me old-fashioned but I guess I’d like a central bank that doesn’t hit the panic button every time the stock market freaks out. I know many were calling for this but I am shocked.”

We give the last word to former Dallas Fed President Richard Fisher, who warned last week…

“Does The Fed really want to have a put every time the market gets nervous? …Coming off all-time highs, does it make sense for The Fed to bail the markets out every single time… creating a trap?”

“The Fed has created this dependency and there’s an entire generation of money-managers who weren’t around in ’74, ’87, the end of the ’90s, anbd even 2007-2009.. and have only seen a one-way street… of course they’re nervous.“

“The question is – do you want to feed that hunger? Keep applying that opioid of cheap and abundant money?“

the market is dependent on Fed largesse… and we made it that way…

…but we have to consider, through a statement rather than an action, that we must wean the market off its dependency on a Fed put.”

Tyler Durden

Tue, 03/03/2020 – 11:19

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Mikhail Mishustin Is an Unexpected Putin Pick for Prime Minister

Vladimir Putin shocked the West when he dismissed longtime prime minister Dmitri Medvedev after announcing plans in January to completely overhaul the Russian constitution.

Yet his pick for the new PM, former tax minister Mikhail Mishustin, shows Putin is aiming for more than his usual placeholder. His technological experience provides Putin with a vehicle to strengthen authoritarianism while giving people the impression that he wants to improve the dwindling economy.

“Mishustin was a suitable choice for Putin, because his obscurity makes it unlikely for people to see him as an official successor,” Alexander Morozov, an expert at the Boris Nemtsov Academic Center for the Study of Russia, told Reason.

Mishustin will also be adept at appropriating funds for the government’s infrastructure projects, Morozov added, as inadequate government spending is a pressing issue for the Kremlin.

He also has a reputation in the Russian business community of getting things done, economist Sergei Guriev said in an interview with Echo of Moscow Radio. Putin might use him to show Russian citizens that the country’s public development projects are continuing, giving them the impression that Putin is concerned for their welfare.

Prior to entering the public sector in 1998, Mishustin worked in information technology. In 1992, after graduating with a systems engineering degree, Mishustin worked at the International Computer Club, a nonprofit organization that collaborated with Western tech firms to help modernize the Russian system. With the help of Boris Fyodorov, Russia’s first finance minister, Mishustin gained substantial exposure to finance and government affairs before being named tax chief of Russia in 2010.

Using Mishustin’s technological prowess, former White House economist Joseph Sullivan points out in Foreign Policy, Putin likely intends to bolster a form of “techno-authoritarianism” similar to that of China:

As taxman, Mishustin developed a set of futuristic technologies that allowed Russia’s government to raise revenues. But these technologies also enhanced surveillance capabilities of Putin’s authoritarian state. For it’s not as if Russia’s tax authorities simply set an algorithm on heaps of data to do the impersonal bidding of state administration. Putin’s political appointees, like Mishustin, also maintain the ability to identify subjects and dredge up transaction-level data at their own discretion.

During his tenure as a government official, Mishustin revamped the tax collection system through rapid modernization and eased regulatory burdens on international traders.

In a 2010 interview with Russian newspaper Vedomosti, Mishustin touted electronic services as invaluable for catching “corrupt officials.” Later, in 2018, he claimed that Russia’s tax revenue had increased by almost 70 percent in the past five years.

Despite the emphasis Putin and Mishustin place on fixing government spending, they have also made plans to expand the country’s social welfare program. Shortly after Mishustin was appointed as PM, Putin’s new executive cabinet introduced a bill in the Duma, the parliament’s lower chamber, that would allocate approximately $31.2 billion in federal funds for services such as free school lunches, financial aid for low-income individuals, and healthcare system improvements.

At the very least, Mishustin has a better reputation than Medvedev, whom the public has regarded as increasingly corrupt as the years progressed. Putin’s selection also provides more clarity about his plans after the 2024 presidential election: Even if he leaves office, Putin’s recent changes to the Russian constitution will ensure that he maintains a substantial influence over the state.

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Trump Urges “More Easing & Cutting” As Fed’s Independence Questioned

After President Trump’s tweet overnight:

Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown. They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so.

Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage.

Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!

Former Alliance Bernstein chief economist Joseph Carson has a few choice words following The Fed’s decision to cut rates by 50bps…

In a surprise move the Federal Reserve announced an intra-meeting reduction of 50 basis point cut in the federal funds rate, lowering the target rate to 1 to 1.25%.

The Fed stated, “the fundamentals of the US economy remain strong”, but the “coronavirus poses evolving risks to economic activity.”

It is hard to see how “easy money” offsets supply disruptions in supply chains and global travel. And although many companies have alerted investors to the prospect of lower earnings in Q1 there is no hard evidence (job layoffs) of any disruption to the US economy.

Policymakers have once again been forced by “politics” and not “economics” to make a move in official rates.

The “BIG” test for policymakers is if and when the fear of “coronavirus” fades will policymakers take back the “emergency” rate cut.

Last year’s rate cuts linked to global trade disputes remained in place even after “phase 1” trade deal was signed.

THE FED HAS LOST ITS INDEPENDENCE.

Carson is echoing former Dallas Fed President Richard Fisher who warned last week…

“Does The Fed really want to have a put every time the market gets nervous? …Coming off all-time highs, does it make sense for The Fed to bail the markets out every single time… creating a trap?”

“The Fed has created this dependency and there’s an entire generation of money-managers who weren’t around in ’74, ’87, the end of the ’90s, anbd even 2007-2009.. and have only seen a one-way street… of course they’re nervous.“

“The question is – do you want to feed that hunger? Keep applying that opioid of cheap and abundant money?“

the market is dependent on Fed largesse… and we made it that way…

…but we have to consider, through a statement rather than an action, that we must wean the market off its dependency on a Fed put.”

Trump is demanding more though…

“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!“

Of course, as Rabobank noted, if we don’t see any major fiscal stimulus then it’s hard to imagine how one can remain too optimistic either. Notably, Mnuchin is keen on a tax cut rather than any higher state spending, and if that is any indication of what the G-7 will agree on, then we are in real trouble.

All that returned cash is going to sit there on hold until the virus has been and gone, however long that is; and then the recovery will be too aggressive the other direction. The change in baseball caps that will be required up and down and up again could be extremely challenging, especially now Chinese supply chains to the US for things like baseball caps are damaged.

Tyler Durden

Tue, 03/03/2020 – 10:44

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