From Judge Tanya Walton Pratt’s decision Friday in Kimberlin v. U.S. (S.D. Ind.); note that there’s an interesting First Amendment twist as to the impersonation conviction:
In February 1979, Kimberlin was charged in a 34-count indictment with crimes related to a series of bombings in Speedway, Indiana. Over the course of three trials in 1980 and 1981, Kimberlin was convicted of numerous felonies arising out of his impersonation of a Department of Defense police officer and eight explosions that occurred in Speedway, Indiana in September 1978. Kimberlin has challenged his convictions on numerous occasions. He served his sentences and was released from imprisonment in 2001.
In addition to the convictions challenged in this case, Kimberlin has incurred a 1974 felony perjury conviction …; and the Government asserts and Kimberlin has not disputed a 1979 felony conviction for conspiracy to distribute marijuana in Texas. {Based on [references to the conspiracy conviction] in this record, the Court concludes that the felony conviction still exists.}
Kimberlin is challenging the validity of some of his past convictions, but that’s hard to do for convictions that are decades old, such as these ones. The time for direct appeal has run out. Any appeal via a petition for habeas corpus is no longer available because his sentences have long expired. His only remedy is therefore under the writ of coram nobis, “an extraordinary remedy, allowed only where collateral relief is necessary to address an ongoing civil disability resulting from a conviction” (emphasis added)—and the reversal of the convictions would have to eliminate the civil disability.
“[C]oram nobis relief is available when: (1) the error alleged is of the most fundamental character as to render the criminal conviction invalid; (2) there are sound reasons for the defendant’s failure to seek earlier relief; and (3) the defendant continues to suffer from his conviction even though he is out of custody.” …
[Kimberlin] seeks relief from [his past] convictions asserting that they have interfered with his ability to obtain government grants, sit on a jury in his home state of Maryland, and renew his pilot’s license, among other impediments.
The Court assumes, without deciding, that these alleged impediments cause Kimberlin more than merely incidental harm. But because he has been convicted of multiple felonies in separate trials, including a 1974 perjury conviction in this Court, and the 1979 conspiracy to distribute marijuana conviction in Texas, neither of which are at issue here, a successful challenge to any one conviction will not relieve him of these impediments. See United States v. Keane (7th Cir. 1988) (“a single felony conviction supports any civil disabilities and reputational injury [a convicted felon] may have to endure”).
As discussed in detail below, Kimberlin’s challenge to his convictions for impersonating a Department of Defense official fail. Even if he were to successfully overturn his other bombing-related convictions, he would remain a convicted felon on at least the impersonation convictions, and likely his felony perjury and felony drug conspiracy convictions which he does not challenge here. Those felony convictions interfere with his ability to sit on a jury in Maryland state court, renew his pilot’s license, and obtain government grants whether his convictions related to the explosions in Speedway are overturned.
“Courts must conserve their scarce time to resolve the claims of those who have yet to receive their first decision.” United States v. Sloan (7th Cir. 2007). Kimberlin’s liberty is not at stake and overturning his bombing-related convictions would not relieve him of the civil impediments discussed above. Therefore, the Court will analyze Kimberlin’s challenge to his false impersonation convictions, but not his other claims.
Kimberlin challenges his convictions under 18 U.S.C. § 912, for falsely impersonating a Department of Defense … official. He argues that these convictions violate the First Amendment under United States v. Alvarez (2012) …. Specifically, Kimberlin argues that his convictions under § 912 violate the First Amendment because his wearing of the uniform and DOD patch while conducting commercial transactions constitutes expressive speech protected by the First Amendment. He seeks to extend the reasoning of Alvarez and United States v. Swisher (9th Cir. 2016), cases which dealt with the Stolen Valor Act of 2005 to his convictions under § 912. {In addition, Mr. Kimberlin challenges his convictions under 18 U.S.C. § 701 for unlawfully possessing an official DOD insignia, and 18 U.S.C. § 713 for illegal use of the presidential seal violate the First Amendment under Alvarez, but the Court need not reach these arguments.}
In Alvarez, the United States Supreme Court addressed the constitutionality of the Stolen Valor Act, 18 U.S.C. § 704(b) (which prohibits lying about being awarded military medals) and held it to be invalid under the First Amendment. In Swisher, the Ninth Circuit extended the holding in Alvarez to § 704(a) (which criminalizes the unauthorized wearing of such medals). However, [n]either Alvarez nor Swisher held convictions under § 912 or § 701, the statutes Kimberlin was convicted under, to be unconstitutional.
Last year, the Seventh Circuit addressed an argument similar to Kimberlin’s in United States v. Bonin (7th Cir. 2019). In Bonin, the Seventh Circuit rejected the defendant’s attempt to extend the reasoning of Alvarez to overturn his conviction under 18 U.S.C. § 912 for impersonating a United States Marshal. The Seventh Circuit squarely held that the acts-as-such clause of § 912 is narrowly drawn to serve the government’s compelling interests of protecting the integrity of government processes.
Undeterred, Kimberlin argues that Bonin left the door open for challenges to § 912 in less egregious cases such as his, but this Court disagrees. The Seventh Circuit rejected Bonin’s argument that, if allowed to stand, 18 U.S.C § 912 could be used to prosecute people for simply wearing Halloween costumes. But that was in the context of Bonin’s void for vagueness challenge, not his facial challenge under Alvarez, and the Seventh Circuit ultimately avoided evaluating his void for vagueness challenge because his conduct—claiming to be a U.S. Marshal and displaying a weapon in a theater as a way to intimidate other moviegoers who asked him to stop talking on his cell phone—clearly violated § 912.
The same can be said of Kimberlin’s conduct. He was not on his way to a Halloween party when he stopped to have a calendar or party invitations printed. The evidence at his trial demonstrated that he wore a DOD patch on his shirt and attempted to have copies made of the presidential seal.
It makes no difference that the copies were never made for Kimberlin. It was reasonable for the jury to conclude that he wore the DOD patch to deceive the copy store employee so that he or she would copy the presidential seal for him and the impersonation was to falsely imply that he was government official. Bonin held that public safety and protection of the reputation of law enforcement were compelling interests and § 912 is narrowly drawn to protect that interest. Thus, Kimberlin’s First Amendment challenge is foreclosed by Bonin….
Kimberlin has not shown that a fundamental error renders his convictions under § 912 invalid. Because these felony convictions, and his other unrelated felony convictions are valid, the Court need not address Kimberlin’s arguments regarding the alleged errors in his second and third trials which resulted in his conviction on charges related to the explosions in Speedway in the fall of 1978….
The court also rejected Kimberlin’s challenge to his felon-in-possession-of-explosive convictions:
In Rehaif v. United States (2019), the United States Supreme Court held that to convict an individual of illegal firearm possession under 18 U.S.C. §§ 922(g) and 924(a)(2), the Government must prove (1) the individual knew he or she possessed a firearm, and (2) the individual knew that he or she belonged to the relevant category of persons banned from possessing a firearm. Kimberlin asserts that his felon in possession of explosive convictions (violations of 18 U.S.C. § 842(i)(1)), as charged in Counts 23 and 24 of the 34-count indictment, must be vacated because the government never proved at trial that “he had any criminal intent or that he knew he had been convicted of a crime punishable by more than one year.” The evidence presented at Kimberlin’s trial does not support this assertion.
For more on Kimberlin’s lawsuits against the bloggers (which I mention chiefly because I think some of our readers may have followed them in the past), see here, here, here, and here.
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Bill Weld, the former Massachusetts governor and 2016 Libertarian Party vice presidential nominee, is facing some brutal odds this Super Tuesday in his Quixotic quest to wrest the GOP presidential nomination from incumbent Donald Trump.
Weld, who lost to Trump by nearly 96 percentage points in Iowa and nearly 77 in New Hampshire, then watched helplessly as Nevada and South Carolina ceded all delegates to the president rather than hold elections, has not as an official candidate polled higher than 14 percent in any of the 13 states (worth a combined 785 delegates) voting Tuesday. Trump’s margin in national polls has not dipped below 80 percentage points since October, and his approval rating among Republicans rests at 93 percent. The president’s combined campaign-finance juggernaut is outraising Weld by a ratio of 300 to 1.
And yet the perpetually chipper redhead still sees some upside to his long shot bid. More than half of Super Tuesday states, including Trump-averse Utah, have not been polled. In his home state of Massachusetts, Weld was endorsed by the Boston Globe, in an effort “to salvage time-honored conservative principles and to change the shabby tone of the Trump era.”
And though he no longer dreams of being 1992 Pat Buchanan or 1968 Eugene McCarthy, Robert Mueller’s old boss does hold out hope that his minor electoral contribution might yet be enough to derail the 2020 Trump train.
“Steve Bannon said that if the president loses four percent of the traditional Republican vote, he cannot be re-elected,” Weld told me in a phone interview Monday afternoon. “If that’s true, that’s a marker I can meet. And it would not pain me to think that I had some responsibility for bringing it about that Donald J. Trump was not re-elected president.”
Weld, who has campaigned consistently on reducing debt/deficits, updating 1990s-flavored moderate-conservative reform for the 21st century, and railing against Trump’s unfitness, also told me that he still thinks the Republican Party might go the way of the Whigs, and that a “strong third party” including “centrist Democrats” and “centrist libertarians” might rise from the ashes in 2021 or 2022. He also said he would back Joe Biden or Michael Bloomberg if they became the Democratic presidential nominee, though not Sen. Bernie Sanders (I–Vt.) at this time.
The following is a lightly edited transcript of our conversation:
—
Reason: What results do you need to see tomorrow to stick in until Wednesday?
Weld: Well, I’ll be sticking in anyway. I mean, we’ve got Michigan coming up on the 10th. We’ve got Florida coming up on the 17th. So I don’t want to miss those.
In terms of tonight, I would say my top three states are probably Vermont, Massachusetts, and Utah. I’ve been endorsed by Evan McMullin, who got 20 percent-plus in Utah last time. Had some very nice visits out there with the [Latter Day Saints] folks, who I get along with very well. So that’s why that’s in the top three. […]
Colorado is an open primary, and I think unpredictable—I’m not predicting victory there, but that could be an interesting state. California, likewise, not predicting victory, because it’s a closed primary, but Trump has really declared open war on California, so that could be of interest. Otherwise, I’d like to see what happens in Texas and North Carolina, Tennessee. It should be an enjoyable evening.
Reason: What have you learned in this process since you jumped in?
Weld: I’ve learned that the duopoly in Washington, D.C., is every bit as bad as Gary Johnson and I thought it was four years ago. It’s really paralyzing the country and preventing forward motion. When you have a president of the United States who shares that poisonous view and is vengeful into the bargain, that makes it even worse. So that’s what I’ve learned!
It’s all about Washington, D.C., the bad stuff—it’s not about the state capitals and states, it’s not about the Trump voters. I think it’s about Donald Trump, the increased negativity.
Reason: What have you observed on a state-by-state level, including even in Massachusetts to the extent that it’s relevant, about the way that Trump and the national GOP has muscled in on state GOPs, or that just state GOPs know that in order to be popular you need to stay in good with the president?
Weld: Well, no, it’s not that they’re inferring anything, it’s that they’re told things. Because once the Republican National Committee merged its operations with the Trump campaign, then from that point forward the Republican state committee in every single state was, is, and remains the Trump organization. So it doesn’t pay me to try to bark up that tree.
My strategy needs to be, and has been, to try to increase the number of people voting in the Republican primary—more women, more younger voters, more minorities, et cetera, et cetera. Just voters who are perhaps marginally more likely to rally to my flag than a classical Republican voter who’s voted in the last five Republican primaries.
Reason: You mentioned that the duopoly is every bit as strong, if not stronger. And yet we’re on the verge of having Trump, who was an outsider, take over the Republican Party and mold it in his image, largely. And Bernie Sanders is on the verge of being a democratic socialist independent who might do the same with the Democratic Party. What do you make of that paradox? So, the duopoly is super strong and yet vulnerable to takeover by kind of anti-establishment figures?
Weld: Well, I’m not sure Sanders is going to get there, frankly. Most people seem to think that he will.
I think Donald Trump essentially cemented his takeover of what I’ll call the Trump faction of the Republican Party…when 52 Republican senators not only said, “We don’t want to hear any evidence,” they also said, “We really don’t want to consider whether you should be removed from office, although the Constitution requires us to do so.” That was not a good showing.
And I know that a number of them have said to the press on background since their vote, “I did it because of fear. I did it because I was fearful the president would run somebody against me to my right in the primary, and I would lose my seat.” I’ll tell you, if that was the case with me, I would never have admitted that to anybody on or off the record! That’s a shameful admission.
Reason: You and I talked a lot in 2017 and 2018 when you were still doing a lot of activities within the Libertarian Party; you had an analysis of the Republican Party facing a future in which maybe they go the way of the Whigs, maybe they kind of split apart and get reborn anew into something else, or explode. I want you to re-evaluate that analysis. And then also, might that be happening on the Democratic side as well?
Weld: Well, victory is a wonderful salve. And if the Democrats win the election, I don’t think that’ll happen, Democratic side.
On our side, yeah, no, I think the same thing I did last time. And this time, because of their votes to acquit without hearing any evidence, I think the Republican senators are vulnerable this year.
I saw this happen with the Nixon impeachment when people who had gone through the draining exercise of defending President [Richard] Nixon all summer long and saying, “There’s insufficient evidence that he knew about the Watergate conspiracy to tank the Jaworski investigation”—they lost their seats. Including people like Rep. Wiley Mayne from Iowa, who had won handsomely [before] but was voted out. I mean, they looked kind of ridiculous.
I’m not sure that a number of the Republican senators this time around don’t look ridiculous. So I think there’s a decent chance that the Republicans will lose the Senate.
Then you could see some finger-pointing and forces at play that could cause a split-up of the party, similar to the split-up of the Whigs in the 1850s with the Know-Nothing faction, which was founded on anti-immigrant prejudice. It was all the Catholics from Germany and Italy and Ireland that they hated, and they had violent rallies and they had conspiracy theories. It’s a carbon copy of the Trump faction now. But they did pinwheel out into outer space and were never heard from again. Except for Speaker Nathaniel Banks of the Massachusetts House, who also became speaker of the U.S. House, I think. But he was an outlier. So I think that could happen again, and I’m not sure it’d be a bad thing.
You might see a third party—a strong third party, not a single-issue third party—emerge out of the remnants of traditional Republicans. Some centrist Democrats, some centrist libertarians. That could be an interesting party. I’ll just call it the Unity Party for the time being. That’s something that could happen. But it’s not going to happen in 2020. It would be 2021, 2022.
Reason: It’s not hard to look at your situation and see some pretty bad math…So what are some glass-half-full analyses of the numbers going into tomorrow, even if there are some lopsided defeats?
Weld: Well, although you’d always like to win any contest you get into, and I’m no stranger to long odds—my first governor’s race, I won, even though I started at sub-asterisk levels and everyone laughed and said, “You got to get out of this race”—however, I do think that of the reasons that I’m running, number one is I think I could start Monday on the job, and I have half a dozen things that I think desperately need doing. But number two is—and the reason I ran as a Republican this time as opposed to a Libertarian—one of the reasons is that every vote for me, even a write-in vote for me, is not a vote for Trump.
Steve Bannon said that if the president loses 4 percent of the traditional Republican vote, he cannot be re-elected. I don’t know whether Bannon was being serious or not, but he’s usually serious. And if that’s true, that’s a marker I can meet. And it would not pain me to think that I had some responsibility for bringing it about that Donald J. Trump was not re-elected president.
Reason: I know you don’t spend a lot of time commenting on the Democratic race, for obvious reasons, but is it safe to assume that if it’s candidate Biden or Bloomberg, you would vote or encourage people to vote Democrat? And if it’s candidate Sanders, you’re going to wait and see who the Libertarians nominate?
Weld: That’s exactly correct.
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Washington Ramps Up Testing, Beijing Adopts New Travel Bans As Global Case Total Passes 90,000: Live Updates
Following the longest publicly-disclosed illness of Pope Francis’s papacy, the Vatican has confirmed that the leader of 1 billion Catholics has tested negative for the coronavirus. After days of insisting that the pope didn’t have the virus…somebody at the Vatican was clearly worried that the Pope might have been exposed.
Pretty soon, millions of Americans and Europeans will know that feeling, if they don’t already.
Yesterday, the death toll in the US climbed to 6, while the death toll across Europe has moved closer to 100. Late last night, officials in Washington State confirmed what many probably already suspected: 4 of the six deceased were either patients or staff at a nursing home in Kirkland, suburban Seattle.
Yesterday, the Dow posted its biggest one-day rebound in points as an endless parade of strategists and talking heads on CNBC jawboned hopes of ‘coordinated central-bank intervention’ into reality, though in the hours since Monday’s close, though hopes have dimmed somewhat, thanks in part to this Reuters report. As G7 finance minister and central bankers prepare for Tuesday morning’s conference call, it seems traders around the world have suddenly remembered that there’s not much central banks can do, even after the OECD called for a mix of monetary and fiscal stimulus to rescue global growth.
In the span of days, the number of confirmed coronavirus cases in the US has climbed to more than 100 across 15 states if we include the evacuees, along with six deaths so far. the White House, and other governments, are shifting their focus, according to the New York Times, to distributing tests and focusing on early identification and containment instead of trying to keep the virus out.
This comes as the number of cases worldwide surpassed 90,000 on Tuesday.
In China, Communist Party officials are luxuriating in their success, or at least a convincing image of success, in suppressing the outbreak: Now that the novel coronavirus appears to be on the decline, vindicating Beijing’s heavy handed tactics (for weeks, 760 million were subjected to some form of restriction on their movements, while 100 million faced punishment for leaving their homes without permission).
On Tuesday, Shanghai and Beijing instituted ‘travel bans’ directed at travelers from hot zones including Italy, South Korea and – of course – the US, turning President Trump’s ‘racist’ travel restrictions on their head. Here’s more from the NYT:
Major cities across China have announced new travel restrictions on people who have recently visited countries where coronavirus infections are on the rise.
On Tuesday, the authorities in Shanghai said that all travelers entering the city who had visited countries with significant outbreaks within the last two weeks must undergo a 14-day quarantine at home or at an approved isolation center. Officials in Guangdong Province announced similar measures, the state news media reported on Tuesday.
And a city official in Beijing announced on Tuesday that all arrivals into the capital from countries struggling with outbreaks — including Iran, Italy, Japan and South Korea — would be subject to a 14-day quarantine.
At least 13 people in China were found to be infected with the coronavirus after returning from countries such as Iran and Italy, two places that have seen some of the most severe outbreaks outside of Asia in recent days, according to the authorities.
A 31-year-old Chinese woman had worked in a restaurant in the Italian city of Bergamo before returning home to Qingtian County, in the southeastern province of Zhejiang, where she tested positive for the virus. Seven more people who worked at the same restaurant in Bergamo were later found to be infected after they returned to Zhejiang, the local authorities said.
In recent days, county officials in Qingtian have urged overseas residents to reconsider any plans to return home, citing the challenges they could pose to China’s efforts to control the epidemic.
Minutes ago, South Korean health officials released their second coronavirus update for Tuesday: Another 974 confirmed cases raised the country’s total to 5,186. Meanwhile, South Korea’s death toll climbed to 34.
Public fury in SK so far has been directed at a strange, cult-like church called Shincheonji. Its leader issued an apology yesterday following reports that public prosecutors were being pressed to charge him and 11 other church leaders with murder. Now, investigators are looking into two church members who traveled to South Korea in January from Wuhan. One of them have tested positive, while the other tested negative, according to CNN.
In Japan, another case was reported in Tokyo Tuesday, along with two additional cases in Osaka, and six cases between Nagoya and Kyoto.
Over in Europe, UK Prime Minister Boris Johnson said “we are ready for potential economic downside” as the UK faces a “national challenge” in defeating the virus.
Johnson added: “I am very confident that Britain will get through it in good shape.”
Asked about school closures, Johnson said “we don’t think schools should be closing in principle – they should stay open,” he said. But the public must follow the advice of Public Health England. However, given that children are actually considered “low risk” for COVID-19, Johnson said school closures might not fit into the government’s strategy. On Tuesday, cases in the UK climbed to 40.
In France, the increasingly unpopular “President for the Rich” Emmanuel Macron has become the latest victim of coronavirus rumors, after the president reportedly caught a cold and tried to pull out of an event. He has now reportedly been cajoled into visiting a hospital ward in Paris to try and dispel rumors that he’s dying of pneumonia.
In Iran, where the virus has killed at least 77 people (and more than 200 according to some reports), public health officials (at least those who haven’t already succumbed to the virus) confirmed that 2,336 cases have been counted. As case totals in Qatar, Bahrain, Saudi Arabia, Jordan, Qatar, Oman, the UAE and Egypt climb, Iran’s regional neighbors have shut their borders and severed travel and trade links with the Islamic Republic. The head of Iran’s emergency medical services has become at least the fifth senior government official to be diagnosed with the virus after a senior advisor to the Ayatollah died yesterday. Additionally, 23 Iranian MPs were among the new cases on Tuesday.
As more companies restrict employee travel, Google on Tuesday told the bulk of staff at its European headquarters in Dublin have been asked to work from home after a staffer reportedly caught the flu.
As more countries cancelled cultural and sporting events across Europe, the head of European football’s government body said Tuesday that the Euro 2020 soccer tournament would move ahead as planned.
“You don’t know how many concerns we have when we organize a big competition […] We have security concerns, we have political instability concerns and one of those concerns is the virus. We are dealing with it and we are confident that we can deal with it,” said UEFA President Aleksander Čeferin at a presser in Amsterdam.
As the total number of cases in Spain climbs to 129, a person in Gibraltar has tested positive, the first case identified in the British territory on the southern coast of Spain.
Thailand has imposed compulsory self-quarantine on travelers arriving from hot zones in Asia, the Middle East and Europe following a spate of deaths in the country.
But now that the G7 communique has dashed the market’s hopes, get ready for another wild day.
G7 Disappoints: Futures Slide After Group Of Seven Fails To Announce New Action, Vows To Use “All Appropriate Policy Tools”
Buy the rumor of a global coordinated bailout; sell the lack of facts.
Less than 40 minutes after the G7 call of finance ministers and central bankers stated, the G7 issued a statement, which as Reuters warned, was a disappointment because while it vowed to use “all appropriate policy tools including fiscal measures where appropriate”, but stopped short of promising interest rate cuts or other immediate rescue measures.
The joint statement of solidarity showed that the leaders of the so-called G7 nations, which also includes Britain, Canada, France, Germany, Italy and Japan, are capable of cooperation. But the statement did not announce any of the more aggressive action that investors have been hoping for and that many economists say is needed to prevent the virus outbreak from undermining global growth.
In a statement, the group said that the G7 finance ministers and central bankers “are closely monitoring the spread of the coronavirus disease” and added, “given the potential impacts of Covid-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.”
The full statement is below (link), with the following preamble: “U.S. Treasury Secretary Steven T. Mnuchin and Federal Reserve Chair Jerome H. Powell led a call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus disease 2019. At the conclusion of their meeting, they issued the following joint statement:”
Washington – “We, G7 Finance Ministers and Central Bank Governors, are closely monitoring the spread of the coronavirus disease 2019 (COVID-19) and its impact on markets and economic conditions.
Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks. Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase. G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.
We welcome that the International Monetary Fund, the World Bank, and other international financial institutions stand ready to help member countries address the human tragedy and economic challenge posed by COVID-19 through the use of their available instruments to the fullest extent possible.
G7 Finance Ministers and Central Bank Governors stand ready to cooperate further on timely and effective measures.”
In response to the disappointing statement – and as a reminder ES rallied 200 points yesterday on expectation of coordinated action today which has failed to materialize – futures immediately slumped approaching session lows as the key catalyst behind yesterday’s move higher has now come and gone without any actual news just more promises and jawboning…
… While 10Y yields dropped to session lows.
And so it will once again be up to the market to force the Fed’s hand by doing the one thing it knows will spook the central bank into action: plunge.
Frentic Rally Reverses On Speculation G-7 Stimulus Will Disappoint
Monday’s ferocious rally halted and reversed on several occasions overnight, following a report that the G7 meeting that started moments ago, at 7am ET this morning, and which sparked a record point gain in the Dow Jones Index, may disappoint. Specifically Reuters reported that while G7 finance officials and central bankers will discuss ways to bolster their economies against the impact of the spreading coronavirus outbreak, the meeting will not be another Shanghai Accord (contrary to widespread speculation) as they are not expected to specifically call for new spending or coordinated interest rate cuts, but merely will pledge to work together to mitigate damage on economies from coronavirus spread.
As reported yesterday, finance ministers and central bank governors from the G-7, led by Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin will hold a conference call at 700AM ET/1200 GMT to discuss the outbreak. But according to the official, who declined to be identified, a statement they are crafting and which is expected to be released on Tuesday or Wednesday, does not detail any fiscal or monetary steps, which is hardly what the market – which is now pricing in as much as 25 to 50bps in emergency rate cuts by the Fed was expecting. As a result, while global stocks and oil prices made a torrid recovery afters policymakers indicated on Monday a willingness to help ease the economic fallout from the coronavirus, worries about the outcome of the Group of Seven heads’ discussion kept a lid on gains.
“The market is very much wanting a coordinated policy response, but the question here is whether a conventional interest-rate response is sufficient, or whether it requires also a fiscal response,” said Sameer Goel at Deutsche Bank. “The problem is, the severity of the problem is not very clear.”
Yet even as traders got cold feet in the last moment that the G7’s response will be far less forceful than expected, with Reuters once again warning not to expect too much:
EU FINANCE MINISTERS UNLIKELY TO TAKE ANY DECISIONS AT WED CALL ON CORONAVIRUS RESPONSE – OFFICIALS
G7 STATEMENT AS OF NOW DOES NOT INCLUDE SPECIFIC LANGUAGE CALLING FOR FRESH FISCAL SPENDING OR COORDINATED INTEREST RATE CUTS BY CENTRAL BANKS – G7 SOURCE
… the momentum alone from yesterday’s record US move higher was enough to send Europe’s Stoxx 600 Index at one point more than 3% up as every sector in that region rallied, even as the euro slipped after data showed inflation slowing to a three-month low in February, in part due to slumping energy prices.
Yet despite the early loss in futures, the overall improved sentiment – which apparently improved on an event which may not even happen but traders were too busy buying stocks to ask any questions – helped U.S. S&P 500 futures climb as much as 1% overnight before fading again, while MSCI’s world stocks index was up 0.6% having scored its best day since 2011 on Monday after a roaring Wall Street pushed it up just over 3%.
“Markets will have to decide if the promise of concerted and possibly co-ordinated action from fiscal and monetary authorities will be enough,” said James Athey, senior investment manager at Aberdeen Standard Investments. “For most shocks you would probably say yes, but the scale, magnitude and sheer unknowable nature of this one makes that an open question.”
Earlier in the session, Asia-Pacific shares outside Japan ended 0.8% higher, off earlier peaks but still marking the second straight session of rises. Most markets in the region were up, with Thailand’s SET gaining 3% and Jakarta Composite rising 2.9%, while Japan’s Topix Index dropped 1.4%. Trading volume for MSCI Asia Pacific Index members was 16% above the monthly average for this time of the day. The Researve Bank of Australia on Tuesday cut interest rate by 25 basis point to a record low, although the cut was seen by many as not enough. Still, Australian shares ended up 0.7% after the central bank cut interest rates to a record low of 0.5%, the fourth reduction in less than a year. The Topix declined 1.4%, with Land Co and HIS falling the most. The Shanghai Composite Index rose 0.7%, with Jinzhou Port and Baoding Tianwei Baobian Electric posting the biggest advances.
The decision to hold a G7 call came after the head of the European Central Bank, Christine Lagarde, on Monday joined the chorus of heavyweight central bank chiefs signalling a readiness to deal with the threat from the outbreak. Earlier messages from the U.S. Federal Reserve that it was prepared to act continued to weigh on the dollar, having fueled expectations of a sizable rate cut at its meeting in two weeks.
The rout in global stocks last week had already prompted Fed Chair Jerome Powell and Bank of Japan Governor Haruhiko Kuroda to flag a readiness to move. “It is reasonable to expect a response that reflects a combination of fiscal measures and central bank initiatives,” Bank of England Governor Mark Carney said on Tuesday.
As a result, money markets are fully pricing in a cut of at least 0.25 percentage points to the current 1.50%-1.75% target rate at the Fed’s March 17-18 meeting as well as a 0.10 percentage point cut to the ECB’s minus 0.5% key rate at March 12 meeting. The frantic moves by policymakers reflected growing fears about the disruption to supply chains, factory output and global travel caused by the new epidemic just as the world economy was trying to recover from the effects of the U.S.-China trade war.
Coronavirus, which has already claimed more than 3,000 lives, now appears to be spreading much more rapidly outside China than within the country. That leads the world into uncharted territory, although the World Health Organization has so far stopped short of calling it a pandemic.
“Barring any further deterioration of the coronavirus outbreak, we believe that the global cyclical recovery is likely to gain further momentum,” Schroders’ Asian multi-asset team said in a report. “This is likely to benefit stocks with higher leverage to global growth, as stronger earnings could support dividend growth.”
In rates, treasuries remain higher, with yields off session lows reached during Asia session and close to yesterday’s closing print, as participants awaited details of the G-7 conference call. The rally gathered pace after Reuters reported that the G-7 draft statement doesn’t specifically call for new government spending or rate cuts by central banks, however it has since fizzled on Monday’s risk on momentum. Yields were lower by ~2bp across the curve, 10-year by 1.6bp at ~1.145%, vs Monday’s record low 1.028%. In Europe, Bunds (+5bp) and gilts (+3.5bp) continue to lag behind Treasuries, the main beneficiary of safe-haven demand; Italian bonds outperform core European rates, along with Greek debt. Also of note, 3-month dollar Libor +6.05bp at 1.25375%, snapping an eight-day streak of lower settings, including the biggest drop since 2008 on Monday.
In FX, against the yen, the dollar lost 0.4% to 107.95 yen, slipping towards a five-month low of 107 set on Monday. The Australian dollar, seen as a proxy bet on China, sat above a recent 11-year low largely on short covering after its central bank cut interest rates by 25bps, or less than many traders expected, earlier in the day.
In commodities, Brent oil prices gained another 2% after a jump of more than 4% on Monday. U.S. WTI crude futures went to $47.8 a barrel while Brent crude stood at $52.9.
Aside from watching the market, U.S. citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election. AutoZone, Target, and Veeva are among companies reporting earnings
Market Snapshot
S&P 500 futures up 1% to 3,096.00
STOXX Europe 600 up 2.8% to 386.55
MXAP up 0.04% to 156.90
MXAPJ up 0.8% to 517.29
Nikkei down 1.2% to 21,082.73
Topix down 1.4% to 1,505.12
Hang Seng Index down 0.03% to 26,284.82
Shanghai Composite up 0.7% to 2,992.90
Sensex up 1.1% to 38,568.09
Australia S&P/ASX 200 up 0.7% to 6,435.68
Kospi up 0.6% to 2,014.15
German 10Y yield rose 3.3 bps to -0.591%
Euro down 0.2% to $1.1108
Italian 10Y yield rose 3.5 bps to 0.969%
Spanish 10Y yield fell 3.5 bps to 0.251%
Brent futures up 2.7% to $53.28/bbl
Gold spot up 0.5% to $1,597.81
U.S. Dollar Index up 0.1% to 97.49
Top Overnight News
Group of Seven finance chiefs will hold a rare conference call Tuesday under pressure from investors to match their pledges to shield the world economy from the coronavirus with action. Bank of England Governor Mark Carney said policy makers are crafting a “powerful and timely” defense of the world economy
After financial markets effectively browbeat global central banks into at least verbal action in recent days, the reaction to Australia’s interest-rate cut Tuesday showcased the danger of under-delivering
Former Vice President Joe Biden did something in 24 hours he couldn’t do for more than a year — coalesce the Democratic Party’s establishment around him as he tries to thwart Bernie Sanders on Super Tuesday
Swiss economic growth slowed slightly at the end of 2019, highlighting some fragility as it faces the impact from the coronavirus outbreak.
Plans by two distressed Chinese companies to ease their imminent debt crisis are betraying a subtle shift in Beijing’s delicate balancing act between combating financial risk and preserving stability as the coronavirus outbreak continues
Andrew Bailey, the man who becomes Bank of England governor in less than two weeks, is set to make the first public appearance connected to his new role on Wednesday. The appearance is all the more important since his views on policy remained virtually unknown, giving investors little insight into the direction the BOE may take when he takes over
The Bank of Japan conducted an unscheduled debt buying operation for a second day amid growing expectations of a coordinated effort by global central bankers and finance ministers to mitigate the economic impact of the coronavirus. Group of Seven finance ministers and monetary officials will speak by teleconference on Tuesday, people familiar with the matter said
Japanese Prime Minister Shinzo Abe told parliament his government is paying close attention to the effects of the coronavirus on the economy, as it implements a series of measures aimed at stemming the disease. Won’t hesitate to introduce more economic measures if necessary, Abe says. Japanese Finance Minister Taro Asocalls for coordination with other nations on virus
The Trump administration is discussing a series of steps to contain the economic and market fallout from the rapidly spreading coronavirus, including a push for the Federal Reserve to enact an emergency rate cut and a possible tax cut.
Joe Biden is consolidating support for his Democratic presidential campaign as centrists line up behind him to effectively try to block Bernie Sanders from winning the party’s nomination. Pete Buttigieg, who dropped out of the campaign Sunday night, appeared with Biden at a Dallas restaurant and gave his endorsement. Amy Klobuchar ended her presidential bid earlier Monday and planned to endorse Biden at a rally
Oil extended its rebound from last week’s slump as global policy makers pledged to safeguard markets from the coronavirus, while OPEC and its allies are expected to deepen production cuts.
Asia traded mostly higher as the region took impetus from the rally on Wall St amid hopes of a coordinated effort to address the fallout from the coronavirus, with G7 Finance Ministers and Central Bankers planning a call to weigh the coronavirus response which will be led by US Treasury Secretary Mnuchin and Fed Chair Powell, while FFR futures were now pointing to a 75bps cut by the Fed this month. This inspired a surge across the major US indices led by the DJIA which rose over 5% which was the most in over a decade and posted its biggest point gain on record of nearly 1300 points. ASX 200 (+0.7%) and Nikkei 225 (-1.2%) were lifted at the open with Tech and Healthcare frontrunning the broad sector gains in Australia and as markets also awaited the widely anticipated rate cut by the RBA, while the Japanese benchmark was less decisive and retraced all its gains amid detrimental flows into the currency. Elsewhere, Hang Seng (U/C) and Shanghai Comp. (+0.7%) were positive in which the latter breached the psychological 3000 level with sentiment supported by the global stimulus hopes and a continued decline in the pace of coronavirus cases in mainland China. Finally, 10yr JGBs slumped to below 153.50 on spill-over selling from USTs amid the rally in stocks, although JGBs later found reprieve despite mixed 10yr JGB auction results, as the sentiment in Japan deteriorated and following the BoJ announcement for another JPY 500bln unscheduled repo operation.
Top Asian News
BOJ Displays Resolve on Calming Markets With Another Repo Move
Legally Embattled Netanyahu Claims Victory After Turbulent Year
IPhone Maker Expects Return to Normal in China by End- March
Local Funds Snap Up Philippine Stocks While Foreigners Sell
European equities (Eurostoxx 50 +2.1%) trade with firms gains as market participants continue to place bets on a coordinated policy response with G7 Finance Ministers and monetary policy officials scheduled to hold a call at 1200GMT/0700EST today. Ahead of this call, a draft version of the statement appears to make no specific calls for fresh fiscal spending or coordinated rate cuts, however, world leaders will pledge to work together to mitigate the economic fallout from COVID-19. Furthermore, reports ahead of the call at midday were based on a draft version of the text, which could ultimately be revised to provide more of a robust response, should it be deemed to be necessary. In terms of sector specific performance in Europe, gains have been relatively broad-based with all ten key sectors trading markedly higher. Travel names including Deutsche Lufthansa (+9.5%), Air France (+6.5%), and Tui (+5.5%) have been granted some reprieve from recent losses, albeit, it’s difficult to gauge exactly how much the sector would benefit from a response by monetary authorities given that travel restrictions would likely remain in place regardless. Elsewhere, Qiagen (+18.7%) sit at the top of the Stoxx 600 after Thermo Fisher announced a USD 10bln deal to buy the Co, Direct Line (+4.3%) trade higher post-earnings, whilst support has been seen for the Spanish banking sector after a court ruling over mortgage terms could prevent lenders from having to make large compensation payments to customers. To the downside, Hiscox (-4.7%) lag peers over concerns about coronavirus-related claims, a disappointing earnings update for Ashtead (-0.5%) has weighed on Co. shares, whilst Novartis (flat) are marginally softer after the Co.’s subsidiary are to pay USD 195 over antitrust violations.
Top European News
ECB Joins Central Banks Pledging Coronavirus Action If Needed
Bailey Faces First BOE Test as Coronavirus Rewrites Outlook
Spanish Banks Soar After Mortgage Cases Sent to Local Courts
Six Kids, $17 Billion and Plans to Keep Russia Wealth Stable
In FX, the Dollar is on a firmer footing after extending declines on Monday and the DXY briefly breaching Fib support (97.193) just ahead of 97.000, but crucially from a tech perspective managing to ‘close’ back above. Meanwhile, the Greenback has also gleaned some traction from a rebound in US Treasury yields amidst a strong recovery in equities and risk assets in general on the premise that more global monetary authorities are providing ammunition to combat COVID-19, with additional supportive policies in the pipeline. On that note, G7 Finance Ministers and Central Bankers are holding a conference call around 12GMT to discuss whether the situation warrants coordinated action, which has helped the index return to the 97.500 axis.
GBP/AUD – Somewhat perversely perhaps, the Pound and Aussie are among the major outperformers even though BoE Governor Carney and MPC members Tenreyro are hinting at some form of policy stimulus at the post-Budget meeting pending what new UK Chancellor Sunak has in store on March 11. Cable is back above 1.2800, albeit with the aid of an encouraging construction PMI as the headline reclaimed 50+ status, while Eur/Gbp has retreated through 0.8700 after running into resistance fractions shy of the 200 DMA and with contacts noted decent model/program offers on the way back down. Back down under, Aud/Usd has been volatile following the RBA’s 25 bp ease overnight and forward guidance suggesting the official cash rate may be held at the new 0.5% record low until the extent of the nCoV (and bushfire) damage is known rather than reduced again to the lower bound that in theory would only leave QE in reserve for any further economic downturn.
JPY/SEK/NOK – The other strong G10 units as the Yen holds above 108.00 vs the Buck following a second test of support circa 108.50 that is now forming a double chart formation, while the Scandi Crowns are rebounding firmly from yesterday’s lows against the Euro on the back of renewed risk appetite that has filtered through to oil and other commodities. Eur/Sek has reversed sharply within 10.6475-5535 parameters and likewise Eur/Nok between 10.3870-3165.
NZD/CHF/EUR/CAD – The Kiwi continues to lag its Antipodean counterpart, with Nzd/Usd straddling 0.6250 ahead of the latest GDT auction and awaiting the RBNZ’s response to the coronavirus, while the Franc has handed back some gains vs the Dollar on the 0.9500 handle in contrast to Eur/Chf pivoting 1.0650 in wake of firmer than forecast Swiss GDP. Moreover, the Euro has lost momentum more broadly as Eur/Usd fades around 1.1155 and some distance from Monday’s best levels nearer 1.1185 irrespective of more reports about targeted ECB liquidity and push-backs against near term of knee-jerk rate cuts and QE, via Holzmann this time. Similarly, the Loonie has waned on the approach to 1.3300 and Wednesday’s BoC policy convene that could see a less confident assessment and statement if not action to counter the effects of China’s epidemic.
EM – It’s back to broad depreciation against the Usd, but with the Zar also hit extremely hard by the SA plunging into a deep recession via a 1.2% q/q Q4 GDP contraction, while the Try continues to lament heightened military conflict in Syria’s Idlb.
In commodities, WTI and Brent front month futures are bolstered this morning in-line with the generally firmer risk-sentiment, as markets anticipate some form of stimulus package from central banks and with the G7 meeting today at mid-day London time to discuss the situation. In terms of where we currently stand, WTI and Brent are posting gains of around USD 1.50/bbl at present and remain in proximity to their session highs in the mid USD 48/bbl and USD 53/bbl realm. Crude specific, has seen remarks from the Kremlin that we should wait for the OPEC+ meeting for details on whether Russian is ready for additional output cuts. Additionally, Lukoil’s VP expects OPEC to cut production in excess of 1mln BPD; believes that a cut of 600k-1mln would be sufficient to bring prices above the USD 60/bbl mark. Recall the JTC recommended a cut of 600k and Russian Energy Minister Novak has remarked that they have received no communication from Saudi on a 1mln BPD move; are reviewing the 600k recommendation ahead of this week’s Thursday/Friday meeting. Turning to metals, spot gold has remained within a comparatively tight range of around USD 15/oz for much of the session, the yellow metals upside has, thus far, been effectively capped by the USD 1600/oz handle. Focus for the safe haven does remain affixed to the coronavirus, and the potential for a policy response to tackle this, as well as other geopolitical concerns such as the ongoing Syrian conflict; in which the Turkish Military confirm that a Syrian Government warplane was shot down as well as reports of ballistic missiles being fired in the region.
US Event Calendar
Wards Total Vehicle Sales, est. 16.8m, prior 16.8m
2:50pm: Fed’s Mester to Address UK Society of Professional Economists
4:30pm: New York Fed’s Logan Discusses Ample Reserves Regime
6:30pm: Fed’s Evans Takes Part in Moderated Q&A
DB’s Jim Reid concludes the overnight wrap
Due to being brainwashed (probably correctly) I’ve washed my hands so much over the last few days that I think I need to buy some hand moisturiser as they are rapidly drying out. I’ve also got the taste of hand sanitising gel in my mouth. I’ve no idea why but it may speak to my bad habits and exactly why the advice is given to wash your hands a lot. Given that it contains alcohol I hope that doesn’t count in my weekly units. Anyway last night we published the results of our flash 9 hour covid-19 survey with the results in graph form published here. We had over 600 responses and on a scale of 0 (not at all) and 10 (extremely) on how concerned you were that you or your family would catch the virus the average response was 4.76 with 42% at 6 or higher on this scale. 37% have made no changes to lifestyle with 63% making some changes (most slight). 26% have had a social event cancelled and 40% a work event. A net 7% thought markets overreacted last week but the tails were quite big with 17% strongly agreeing and 14% strongly disagreeing with this. In terms of when the Western World will be mostly back to normal, June (26%) pipped May (23%) as the most popular response. 23% felt later than August and 11% beyond October. In terms of policy approval various travel bans were much less popular than other containment measures. Cancellation of public events such as sporting ones saw 68% approval which, with Liverpool close to winning the league for the first time in 30 years, worries me. Anyway see the link for full graphs.
Onto markets now and last week we discussed how we needed the authorities to be more aggressive to get some more two-way pricing in markets. It seems we have that now but it remains to be seen how powerful and co-ordinated they want or will be able to be. Markets had another roller coaster day but the big boost came with Bloomberg reporting that the G7 finance ministers would be holding a teleconference today to discuss their response to the coronavirus, and that the G7 central bankers would also be joining the call. So cue maximum excitement (S&P 500 +4.61%) but the 2008 template suggests that the biggest response is unlikely to come at the first meeting. They will probably need a fair bit more time to be truly co-ordinated. We will see later today. The call is planned for 1200 GMT/0700 EST. After the NY close, ECB’s Lagarde said ‘We stand ready’ to take appropriate and targeted measures. The word targeted might suggest a response more towards lending (eg LTROs) than straight to rates cuts.
Overnight in Asia, Reuters has reported that G7 countries won’t at this stage include any specific language on fresh fiscal stimulus or coordinated cuts by central banks in a statement they are drafting. The report added that it is likely to include a pledge that the countries will work together to mitigate the damage to economies from the virus. If true there is likely to be some disappointment that nothing concrete has been decided yet.
Asian markets are largely up this morning though but more off the back of the strong US session with the Hang Seng (+0.43%), Shanghai Comp (+1.33%) and Kospi (+1.31%) all advancing. However, the Nikkei (-0.67%) is trading lower after erasing earlier gains as the Japanese yen moved up +0.46% on the prospect of upcoming Fed cuts. The Australian dollar is also up +0.25% despite a 25bps rate cut by the RBA. Elsewhere, futures on the S&P 500 are down -0.11% and yields on 10yr USTs are back down -4.7bps to 1.118%. The Reuters story mentioned above is creating a bit of softness. In commodities, brent crude oil prices are up +2% to $52.97 and are on track to cover almost half of last week’s declines ahead of the OPEC+ meeting in Vienna on Thursday and Friday.
This is all after the S&P 500 finishing at the day’s highs of +4.61% yesterday (largest gain since Boxing Day 2018), taking a further leg higher in the last half hour possibly on news that pharmaceutical companies Gilead and Pfizer had antiviral treatments/compounds that could be effective against the coronavirus. Throughout the session, the best performing sectors were the defensive, bond-proxies like utilities, staples, and real estate companies – supporting the idea that investors are still wary about the economic impact on cyclicals. The NASDAQ also closed +4.49% higher, but semiconductors lagged the larger technology sector and were “only” up +3.51% as concerns over supply-chain exposed stocks remain. The VIX index fell -8.4 points to 31.7. This all followed the STOXX 600 finishing just slightly higher at +0.09%. The FTSE MIB underperformed though to close down -1.50%, as the number of cases in Italy continues to grow and concerns mounts over the economic impacts.
Amid the numerous fixed income record lows of late, inflation expectations in both the US and the Euro Area fell to all-time lows yesterday. In the US, five-year forward five-year inflation swaps fell by -10bps to around 1.78% at midday before climbing in the afternoon to finish down -1.3bps at 1.873, while those for the Euro Area fell to 1.108%. It was another crazy day in fixed income as well, with 10yr Treasury yields initially falling by -11.8bps to another record low of 1.028% before closing up at 1.16%, breaking a 7 session run. 2yr Treasury yields fell by -16bps at one stage before ending -1.0bps lower – still their lowest level since November 2016. The last turn higher in risk markets in the US session also saw yields rise on the US 30yr by +8.6bps at the end of the day (+4.6bps overall), to break a 7 session run of increasingly lower yields. President Trump was also calling for action again yesterday after tweeting that, “As usual, Jay Powell and the Federal Reserve are slow to act. Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate.” Just like with the Italian stocks underperforming Europe, BTPs are also continuing to diverge with bunds – with spread widening 5.2bps yesterday (10yr Bunds -1.7bps) as the spread is now at levels last seen in August.
Moving on, 10 days ago we would have thought today would be all about Super Tuesday but events have overshadowed it. However it still has huge importance for the medium to longer term direction of markets. Karthik on my team has published a 2020 US Election Primer (link here) with all you might want to know about the primaries, Presidential and House/Senate races.
As for today, 14 states will be holding Democratic primaries along with American Samoa. They amount to 34% of delegates for the overall race. The latest from last night is that Klobuchar has dropped out and has lent her support to Biden. This combined with Mayor Pete dropping out over the weekend indicates that the moderate wing of the party is trying to coalesce around Biden. In terms of the different contests to keep an eye out for, California is the biggest prize as it has the largest delegate haul of any state, and Sanders has a commanding lead there with the potential to rack up a sizeable delegate advantage. Texas, which is the third-largest state in terms of delegates, will also be vital to watch – Sanders polls well in the state with young, minority voters, while Biden does better with more moderates. If Biden loses California and cannot win or at least stay very close in Texas it will be hard for him to catch Sanders even over the course of the spring. Early voting started in California on the 3rd of Feb and on the 18th of Feb in Texas – that could potentially effect Biden’s numbers if those are Pete/Klobuchar/Bloomberg voters who might have voted differently following South Carolina. Biden will be hoping for a number of wins of his own, particularly in those southern states with larger African-American populations, where he has stronger support. So watch out for him in states such as North Carolina, Alabama and Tennessee. Another of interest will be Massachusetts, which is Elizabeth Warren’s home state, but where Sanders currently has a narrow poll lead over her. Warren hasn’t come 1st or 2nd in any of the first four states to vote, so a failure to win her home state would not be a great sign for her campaign. Michael Bloomberg will be on ballots for the first time today and is the wildcard. His support has fallen off following his lackluster debate performances over the past two weeks though with his PredictIt betting odds having fallen from 33c on 12-Feb to 7c last night. He still may affect races if he pulls support from Biden, and allows Sanders to pull ahead in otherwise more moderate states. The non-California results should come out at around 0400GMT/2300 EST, while California could take a while to be official – in 2018 60% of the voters submitted absentee ballots as opposed to going to the polls on Election Day, thereby elongating the process.
Now to DB’s updated forecasts. Our economists’ new base case forecasts see the EA and Japan recording two quarters of moderately negative growth with the US hovering near zero with a contraction in Q2. China will experience one negative quarter in Q1 with Australia in recession for the first time since 1991. As discussed at the top the Fed will now cut 100bp (50bp this month) with the ECB cutting the deposit rate 10bps and doing a targeted LTRO to SMEs in areas affected. However the ECB policy may come with a lag as council disagreements delay it. See their full report here.
Elsewhere yesterday, George Saravelos, our global head of FX research, released a note called “Time to sell the dollar” (link here). He sees a number of drivers pushing EUR/USD higher, seeing it head towards 1.20 by the end of the year, and thinks USD/JPY will drop to 100. Among others, the Fed are going to cut rates, and they have more room than other G10 central banks, which will lower the world-US interest rate differential. Meanwhile, the US election could further damage the dollar and there’s the rising probability of a European fiscal response given the ECB are heavily constrained. Funnily enough yesterday, EURUSD was actually up by +0.98%, after a similar +1.1% move higher last week, two of the biggest up days since January 2018. The Euro strengthened by more than 1% against the Japanese Yen and the British pound as well yesterday.
The main data highlight yesterday came from the manufacturing PMIs, though the extent of the coronavirus’ impact was limited as the survey data was only collected up to 21st February, so before global equity markets experienced their worst week since the financial crisis. In terms of the numbers, the Eurozone manufacturing PMI was revised up to 49.2 (vs. flash 49.1), while Germany’s was revised up to 48.0 (vs. flash 47.8), which is a 13-month high even if it remains in contractionary territory. In spite of the data being collected before the last week, there was some initial evidence of the coronavirus’ impact, with the comments in the Eurozone PMI saying that “Supply-side constraints were in notable evidence during February as average lead times for the delivery of inputs lengthened appreciably and for the first time in a year. Manufacturers primarily linked the deterioration in vendor performance to the coronavirus-related factory shutdowns in China.” Meanwhile in the US, the ISM manufacturing for February fell to 50.1 (vs. 50.5 expected), only just above the 50 line that separates expansion and contraction. The anecdotes from respondents were also full of comments on the virus and China, and new orders fell to 49.8 (vs. 51.8 expected).
To the day ahead now, and as mentioned Super Tuesday will be the main event to watch out for today. Otherwise, the data highlights will be the Euro Area CPI estimate for February, along with January’s unemployment rate. In addition, we’ll also get the preliminary Italian unemployment rate for January and the UK’s construction PMI for February. From central banks, we’ll hear from the ECB’s Holzmann, along with the Fed’s Mester and Evans. Finally, Target will be releasing earnings.
Last year, voters in Toledo, Ohio passed a ballot initiative purporting to enact a “bill of rights” for Lake Erie as a part of the city’s charter. The so-called “Lake Erie Bill of Rights” or LEBOR declared that “Lake Erie, and the Lake Erie watershed, possess the right to exist, flourish and naturally evolve.” Accordingly, LEBOR sought to prohibit environmental contamination and prohibit activities that harmed the ecological integrity of the lake and purported to authorize citizen suits to effectuate its prohibitions.
The idea behind LEBOR was always a bit fanciful, particularly insofar as the initiative’s sponsors thought that voters in a single municipality could assert rights on behalf of broader ecosystems and waive away the trade-offs inherent in declaring that particular resources must be used in particular ways. Now LEBOR is no more.
Last week, a federal district court judge in Ohio declared the LEBOR to be “unconstitutionally vague” and beyond “the power of municipal government in Ohio.” In Drewes Farms Partnership v. Toledo, Judge Jack Zouhary explained:
Federal courts have invalidated municipal legislation on vagueness grounds. For example, a Cincinnati ordinance criminalized gathering on sidewalks “in a manner annoying to persons passing by.” Coates v. City of Cincinnati, 402 U.S. 611, 611 (1971). The Supreme Court struck it down because “[c]onduct that annoys some people does not annoy others.” Id. at 614. A Detroit-area township regulated the use of machines that keep water near boats and docks free from winter ice. Belle Maer Harbor v. Charter Twp. of Harrison, 170 F.3d 553, 555 (6th Cir. 1999). These ice-free areas could not exceed a “reasonable radius.” Id. The Sixth Circuit found the ordinance void for vagueness, in part due to the “failure to include a definition of ‘reasonable.'” Id. at 558–59. A Columbus gun-safety ordinance met the same fate. The ordinance banned forty-six specific guns, as well as “other models by the same manufacturer . . . that have slight modifications or enhancements.” Springfield Armory, Inc. v. City of Columbus, 29 F.3d 250, 251 (6th Cir. 1994) (emphasis added) (brackets omitted). The Sixth Circuit saw “no reasoned basis” for determining what changes qualify as “slight,” so it invalidated the ordinance. Id. at 253–54.
LEBOR’s environmental rights are even less clear than the provisions struck down in those cases. What conduct infringes the right of Lake Erie and its watershed to “exist, flourish, and naturally evolve”? TOLEDO MUN. CODE ch. XVII, § 254(a). How would a prosecutor, judge, or jury decide? LEBOR offers no guidance. Similar uncertainty shrouds the right of Toledoans to a “clean and healthy environment.” Id. § 254(b). The line between clean and unclean, and between healthy and unhealthy, depends on who you ask. Because of this vagueness, Drewes Farms reasonably fears that spreading even small amounts of fertilizer violates LEBOR. Countless other activities might run afoul of LEBOR’s amorphous environmental rights: catching fish, dredging a riverbed, removing invasive species, driving a gas-fueled vehicle, pulling up weeds, planting corn, irrigating a field—and the list goes on. LEBOR’s authors failed to make hard choices regarding the appropriate balance between environmental protection and economic activity. Instead, they employed language that sounds powerful but has no practical meaning. Under even the most forgiving standard, the environmental rights identified in LEBOR are void for vagueness.
The right of Toledoans to “self-government in their local community” is impermissibly vague as well. Id. § 254(c). At first blush, this provision seems to reiterate Article XVIII, Section 3 of the Ohio Constitution, which grants municipalities “authority to exercise all powers of local self government.” Unlike the Ohio Constitution, however, LEBOR imposes a fine on any business or government that violates the right. The amount of the fine is “the maximum . . . allowable under State law for that violation.” Id. § 256(a). But Ohio law does not identify any fine for violating a right to self-government. Additionally, this right includes “the right to a system of government that protects and secures . . . human, civil, and collective rights,” but the nature of those human, civil, and collective rights is anybody’s guess. Id. § 254(c). Like LEBOR’s environmental rights, this self government right is an aspirational statement, not a rule of law. . . .
Frustrated by the status quo, LEBOR supporters knocked on doors, engaged their fellow citizens, and used the democratic process to pursue a well-intentioned goal: the protection of Lake Erie. As written, however, LEBOR fails to achieve that goal. This is not a close call. LEBOR is unconstitutionally vague and exceeds the power of municipal government in Ohio. It is therefore
invalid in its entirety.
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Last year, voters in Toledo, Ohio passed a ballot initiative purporting to enact a “bill of rights” for Lake Erie as a part of the city’s charter. The so-called “Lake Erie Bill of Rights” or LEBOR declared that “Lake Erie, and the Lake Erie watershed, possess the right to exist, flourish and naturally evolve.” Accordingly, LEBOR sought to prohibit environmental contamination and prohibit activities that harmed the ecological integrity of the lake and purported to authorize citizen suits to effectuate its prohibitions.
The idea behind LEBOR was always a bit fanciful, particularly insofar as the initiative’s sponsors thought that voters in a single municipality could assert rights on behalf of broader ecosystems and waive away the trade-offs inherent in declaring that particular resources must be used in particular ways. Now LEBOR is no more.
Last week, a federal district court judge in Ohio declared the LEBOR to be “unconstitutionally vague” and beyond “the power of municipal government in Ohio.” In Drewes Farms Partnership v. Toledo, Judge Jack Zouhary explained:
Federal courts have invalidated municipal legislation on vagueness grounds. For example, a Cincinnati ordinance criminalized gathering on sidewalks “in a manner annoying to persons passing by.” Coates v. City of Cincinnati, 402 U.S. 611, 611 (1971). The Supreme Court struck it down because “[c]onduct that annoys some people does not annoy others.” Id. at 614. A Detroit-area township regulated the use of machines that keep water near boats and docks free from winter ice. Belle Maer Harbor v. Charter Twp. of Harrison, 170 F.3d 553, 555 (6th Cir. 1999). These ice-free areas could not exceed a “reasonable radius.” Id. The Sixth Circuit found the ordinance void for vagueness, in part due to the “failure to include a definition of ‘reasonable.'” Id. at 558–59. A Columbus gun-safety ordinance met the same fate. The ordinance banned forty-six specific guns, as well as “other models by the same manufacturer . . . that have slight modifications or enhancements.” Springfield Armory, Inc. v. City of Columbus, 29 F.3d 250, 251 (6th Cir. 1994) (emphasis added) (brackets omitted). The Sixth Circuit saw “no reasoned basis” for determining what changes qualify as “slight,” so it invalidated the ordinance. Id. at 253–54.
LEBOR’s environmental rights are even less clear than the provisions struck down in those cases. What conduct infringes the right of Lake Erie and its watershed to “exist, flourish, and naturally evolve”? TOLEDO MUN. CODE ch. XVII, § 254(a). How would a prosecutor, judge, or jury decide? LEBOR offers no guidance. Similar uncertainty shrouds the right of Toledoans to a “clean and healthy environment.” Id. § 254(b). The line between clean and unclean, and between healthy and unhealthy, depends on who you ask. Because of this vagueness, Drewes Farms reasonably fears that spreading even small amounts of fertilizer violates LEBOR. Countless other activities might run afoul of LEBOR’s amorphous environmental rights: catching fish, dredging a riverbed, removing invasive species, driving a gas-fueled vehicle, pulling up weeds, planting corn, irrigating a field—and the list goes on. LEBOR’s authors failed to make hard choices regarding the appropriate balance between environmental protection and economic activity. Instead, they employed language that sounds powerful but has no practical meaning. Under even the most forgiving standard, the environmental rights identified in LEBOR are void for vagueness.
The right of Toledoans to “self-government in their local community” is impermissibly vague as well. Id. § 254(c). At first blush, this provision seems to reiterate Article XVIII, Section 3 of the Ohio Constitution, which grants municipalities “authority to exercise all powers of local self government.” Unlike the Ohio Constitution, however, LEBOR imposes a fine on any business or government that violates the right. The amount of the fine is “the maximum . . . allowable under State law for that violation.” Id. § 256(a). But Ohio law does not identify any fine for violating a right to self-government. Additionally, this right includes “the right to a system of government that protects and secures . . . human, civil, and collective rights,” but the nature of those human, civil, and collective rights is anybody’s guess. Id. § 254(c). Like LEBOR’s environmental rights, this self government right is an aspirational statement, not a rule of law. . . .
Frustrated by the status quo, LEBOR supporters knocked on doors, engaged their fellow citizens, and used the democratic process to pursue a well-intentioned goal: the protection of Lake Erie. As written, however, LEBOR fails to achieve that goal. This is not a close call. LEBOR is unconstitutionally vague and exceeds the power of municipal government in Ohio. It is therefore
invalid in its entirety.
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Arizona State University’s School of Civic and Economic Thought and Leadership held a two-day conference on nationalism last weekend. I was invited to speak on a panel titled “American Citizenship in a Global Context: Rootedness and Globalism,” along with Baylor College’s Ann Ward and the Claremont Institute’s Christopher Caldwell.
What follows is an expanded and revised version of my remarks:
Does America need a project of nationalism to make Americans feel more American? More specifically, can nationalism offer a way to foster social cohesion in an increasingly polarized country and globalized world?
Not to give away the punch line, but the short answer is “no.” In this, I am sharply diverging from the emerging consensus on the center-right represented here yesterday by Rich Lowry and on this panel by Chris Caldwell. But with all due respect to them, a top-down program of nationalist engineering to unite the country will, I fear, backfire badly, pouring gasoline on the fires of polarization. It’ll also force Americans, paradoxically, to turn their back on the one true source of their rootedness: their founding principles of equality, individual rights, and human dignity—universal principles that unify them not just with each other but with the rest of humanity. Their country is an instantiation of universal principles, which makes it possible for Americans to be both citizens of their country and citizens of the world without any inner conflict.
But before I get into why a program of nationalism is undesirable and unworkable, let me push back on the premise of this panel and perhaps conference and say why it is also unnecessary. It is unnecessary because if you look past screechy liberal activists, Americans are preternaturally inclined to not just love but more importantly like their country.
I came to the United States from India some 30 years ago, and I was immediately struck by the same thing that struck a much more illustrious foreigner, Alexis de Tocqueville, about 200 years before me: America is a naturally patriotic country. I remember being intrigued by the open and unselfconscious affection of Americans for their country. To effete European eyes, this might seem corny. But to the eyes of this immigrant from a “shithole country” used to government-sponsored and jingoistic public shows of patriotism, it was really charming to see the display of the American flag outside private homes, the heartfelt rendition and warm reception of the American anthem before every sporting event, and hobby clubs where adults reenact the Revolutionary War and the Civil War dressed in period costumes. On the Fourth of July, every neighborhood association, every city, every municipality arranges its own festivities. No national law is required. No federal funding is demanded. Laredo, Texas, a border town with a 90 percent Hispanic population, has a century-old tradition of holding month-long festivities to celebrate George Washington’s birthday that culminate in a debutante ball where young men and women dress up as figures from the revolutionary period. Last fall, I went to Sharpsburg, Maryland, the site of the Battle of Antietam, the bloodiest battle in this country’s history, in which Union forces eked out a victory that allowed Abraham Lincoln to issue the Emancipation Proclamation. My tour guide, hands down the best I’ve ever had anywhere in my travels, was a retired dentist from Illinois who spends several months every year in the town to conduct these tours, barely making minimum wage no doubt. He does it because he loves that chapter in American history in which his country stood up for its principles.
What is strikingly absent in America, at least until the “Salute to America” that President Donald Trump held in the National Mall last year, is state pomp and circumstance—military parades with soldiers in crisp uniforms smartly saluting political authorities. As Tocqueville observed, American patriotism is very different from the old-fashioned Old World kind that regarded the nation as a father that created its citizens. Americans, by contrast, love their country because as free and productive citizens, they see themselves as its creators. The nation is their offspring, not their father. (Or the result of their actions, not their designs, as F.A. Hayek might have put it.)
Not so in India, where Republic Day celebrations involve a massive parade by various military divisions, complete with fighter planes performing war games in the air, followed by schoolchildren conscripted from all over the country to march in lockstep. Four years ago, after a military skirmish with Pakistan, the Indian Supreme Court issued a ruling mandating that every movie theater begin with a rendition of the national anthem and required every viewer to stand up. “The time has come, the citizens of the country realize that they live in a nation and are duty bound to show respect to the national anthem…[the Constitution] does not allow any different notion, or the perception of individual rights.” This ruling has since been reversed, but such a sentence is unimaginable from the pen even of the most ardently patriotic American jurist. Indeed, far from not allowing any “different notion” or posture toward the national anthem, this country has insisted on letting its beloved symbols be used as vehicles for protests.
Precisely because the understanding in America is that the country exists for the sake of individuals and not individuals for the sake of the country, the First Amendment protects activities like bending the knee during an anthem to protest police brutality, or burning a flag to oppose unnecessary wars. (Also, you won’t see any American reenacting the Vietnam War, a sign that this was a mistake, not a “just war.”) This allows civic activism by oppressed groups and dissidents to alert the country when it is falling short of its professed ideals. Of course, the dissenters and protesters can and do go overboard, but then their cause fails to sway. In short, American nationalism has built-in mechanisms for course correction, which makes the country more worthy of affection.
The other striking thing about American patriotism—and I am using the term interchangeably with nationalism, although there is a valid distinction to be made, as Reason‘s Stephanie Slade recently pointed out—is that it does not define itself against something else. If Pakistan and Islam were to disappear from the face of the Earth tomorrow, there would be nothing left to sustain Indian nationalism. It would be devoid of content, hollowed out. But America’s ideals anchor it. The demise of Communism didn’t diminish America’s ideals-based nationalism. It vindicated it. Indeed, it resulted in a wave of democratization around the world, at least for a while. The Israeli author Yoram Hazony, whose book The Virtue of Nationalism arguably launched the post-Reagan nationalist right in America, makes the remarkable claim that America’s classical liberalism is fundamentally imperialistic because its political principles are deduced from Lockean notions about a universal human nature. That, he says, leads to a crusading moral universalism that denies the validity of alternative principles of national self-determination. But America doesn’t have to try to universalize its ideals—the universe vindicates them on its own. In fact, the one thing that most powerfully undermines American patriotism is misguided warfare aimed at spreading democracy at gunpoint, as in Iraq. I’ll speak more on Hazony later, but suffice it to say for now that America does not have to be like the dragon-riding Daenerys from Game of Thrones, incinerating countries to free them.
None of this is to suggest that pre-Trump America had completely risen above the us-versus-them impulse. But Trump’s campaign to depict Mexicans as “rapists and criminals” and Mexico as a fundamental threat to American sovereignty is perhaps the first attempt in living memory to mount a major presidential campaign around it.
It is terribly unfortunate that instead of rejecting this idea of nationalism, conservatives are straining to put a respectable intellectual foundation beneath it. It is as if they are buying the notion of the conservative German jurist and philosopher Carl Schmitt that the very core of political life requires opposition to “the Other” because polities, even liberal ones, can’t maintain their cohesion on the strength of their own principles. They allegedly need a cultural enemy against which to define themselves.
And what is this new enemy? Mass immigration, especially from non-Western countries. This has become de rigueur in conservative nationalist circles. Germany’s Angela Merkel is out because of her friendliness to Middle Eastern refugees; Hungary’s strongman, Viktor Obran, is in because he is taking draconian steps to wall off his country from even transient refugees in the name of national security and cultural purity. Though I am pro-immigration, I get why others feel that immigration flows have to be carefully managed. But this is something else. This is making opposition to immigration the central pillar of a program of cultural renewal—treating immigrants as the enemies against whom we assert our national sovereignty.
Once you look past the lofty references to Hamilton and Lincoln in Rich Lowry’s book, this antipathy to immigration even makes him flirt with a mild version of blood-and-soil nativism. He argues that “an exclusively idealistic account of America is a mistake” and “the criterion for citizenship in the United States is not attachment to a set of ideas but birth within our borders.” He calls George W. Bush’s statement that “our identity as a nation, unlike other nations, is not determined by geography or ethnicity or soil or blood” a sign of “willful ignorance,” because it denies “the contribution of geography or land to our identity.” Geography, he says, “is our national destiny,” and celebrating the “beauty and bounty of our land in the most exalted terms” ought to inform our understanding of who can be a true American and who can’t. What also matters, he says, is whether our ancestors shed blood for the country and are buried here.
What is Lowry’s project here? He’s trying to articulate a non-racial, non-religious criteria to anchor a thick sense of nationalism that bloodless appeals to abstract individual rights allegedly cannot do. (Tocqueville would be rolling in his grave right now.) He wants to be broadly inclusive of those already in America, but not so inclusive that America has an obligation to anoint as a full American anyone who manages to find his or her way here and agrees to live by American principles. He wants a form of cultural nationalism that makes it more difficult for immigrants to become accepted as Americans. So if America’s principles are not enough to anchor a robust nationalism—and race and religion are off limits because they would run afoul of the constitution—then geography and ancestry are the only candidates for Lowry’s project.
Lowry devotes an entire chapter to immigration in which he offers the standard conservative prescriptions for reform, namely, cut overall immigration levels and let only high-skilled immigrants come in. But that won’t advance his version of ancestral and geographic—or blood-and-soil—nationalism. Another thing that might be required is something else that’s popular in conservative circles, namely, getting rid of birthright citizenship, which automatically makes any child of immigrants born on American soil an U.S. citizen. Lowry’s America may also need to let fewer immigrants obtain naturalization and make them wait much longer to do so than the current five years after obtaining their green cards. It may have to make them pass some cultural test.
For those of us who see America’s “idealized conception” of citizenship as its greatest strength, there is nothing to be gained by doing something like this. Recent arrivals often have a deeper and more visceral appreciation of America’s founding principles, because they know what its like to live in an unfree, tyrannical country. When some Muslim refugees are asked if they are angry about the rising anti-Muslim bigotry in America that Trump may be fomenting, they say something like, “Hell, no. We love a country where the president can be sued.”
Lowry’s deification of land and ancestry will not just make it harder for such immigrants to be embraced as true Americans; it will also make Americans whose ancestors don’t go back generations feel less American. Once a criterion to judge “outsiders” is established, it will also inevitably become a way of judging “insiders.” Who will these Americans be? Religious minorities who don’t have a long history in this country. A blood-and-soil criterion will become a de facto religious criterion, regardless of whether Lowry intends that.
Will we also start viewing Americans who haven’t undertaken a national pilgrimage from the Grand Canyon to the Shenandoah as less American? How about the Amish, who eschew travel but love America precisely because it leaves them alone to pursue their own quaint ways? Will they be granted space in Lowry’s cultural nationalism? And the Hassids? Would all these groups be turned into second-class citizens or, worse, foreigners in their own land, because they don’t subscribe to Lowry’s version of blood-and-soil nationalism?
What a project like Lowry’s will do is deny individuals and communities their own ways of defining their own relationships with America, of finding their own reasons to love America.
What’s more, if this project is serious it will require state action, even aggression, to make it stick. This means that any attempt to attach it to liberal democratic principles, as Lowry seems to want to do, will destroy these principles.
This is precisely what’s happening in my native land, where Prime Minister Narendra Modi is demonstrating what it takes to convert a liberal democracy into a robust nationalistic one. Hindu extremists were touting a religiously infused blood-and-soil nationalism, or Hindutva, before such a thing became cool in the West. Hindutva believes that the only true citizens of India are those whose holy sites sit on the hallowed Indian soil that gave birth to their religion. This includes Hinduism and its off-shoots—Buddhism, Jainism, Sikhism—but not India’s 140 million Muslim inhabitants, equal to half of the population of the United States. Or its 30 million Christians, equal to the entire population of Canada.
Hindutva makes no bones that its ultimate goal is to purge India of these “foreign” religions and return to the halcyon days when only true Hindus roamed the motherland spanning the Himalayas in the North and the Indian Ocean in the South. To that end, Modi’s home minister announced plans to separate legal from illegal residents by creating a nationwide registry of citizens. Only those among India’s 1.3 billion residents who produce papers showing that they have ancestors dating back to some cutoff year will be included on this list.
The government knows that this will be an impossible task for hundreds of millions of Indians, especially poor ones, many of whom don’t even know their birth dates, let alone keep their grandparents’ birth certificates. So Modi passed a law that non-Muslims who can’t produce documents will be granted amnesty and expedited citizenship. But Muslims who can’t do so will be out of luck, even if they do have ancestors going back generations.
Modi’s nationalistic project provides a clear example of how empowering a government to impose nationalism does not nurture “mutual loyalty” among citizens, as Hazony suggests. Why? Because this state-prescribed nationalism ends up judging citizens not by their loyalty to each other but their loyalty to the state’s aims and methods. In Modi’s India, it is not just Muslims and Christians who are considered less Indian. Hindus who don’t dutifully line up behind Hindutva’s idea of national identity are considered un-Indian. As Modi pushes his Hindu nationalistic agenda, Indians are becoming more divided—the exact opposite of what nationalism is supposed to achieve.
Nor can anyone who embraces Hazony’s nationalistic project consistently condemn what’s happening in India. Why? Because as far as Hazony is concerned, judging nations that are striving to build thick national communities by liberal principles of pluralism is an illicit breach of their right to self-determination. The liberal conception of individual rights and market economics is only one among many legitimate political principles, he believes. Nation-states should be left alone, not just by international organizations threatening sanctions to imperial powers peddling a new world order at gunpoint but even by any diplomacy that smacks of moral judgments. In the name of localism, Hazony is advocating not non-interventionism but a radical moral relativism where the only standard of right and wrong is what a nation says it is. The obscene spectacle of Trump visiting India and praising Modi as a great defender of religious liberty even as Hindu militants at that very moment were butchering Muslims merely miles away might be in keeping with that spirit.
I came to America in the heyday of the multicultural movement, when the right was up in arms over the postmodern left’s relativism that regarded any effort to judge even Muslim societies that practiced genital mutilation as Western chauvinism. It is breathtaking to now watch the same right talk itself into its own version of moral relativism, which would give the worst atrocities a pass in the name of national self-determination.
To add insult to injury for a classical liberal like me, Hazony enlists in his project the great classical liberal hero John Stuart Mill. Hazony refers to Mill’s thoughts on nationalism in Considerations on RepresentativeGovernment, where Mill suggests that too much diversity makes representative government difficult because then one faction can make alliances with the government to increase its power over others. So even liberty and limited government require nationalism, says Hazony. Lord Acton vehemently disagreed. He believed that the more diverse a nation, the better, because that prevents the tyranny of the majority. But setting that aside, Hazony is mischaracterizing Mill. Mill certainly believed that “common sympathies” among a people makes the task of governing easier. But he also said that there can be various reasons behind this “fellow feeling”—religion, language, geography, common history, or “identity of political antecedent,” as is the case in America. Indeed, Mill, citing the example of Switzerland, says that it “has a strong sentiment of nationality” even though its cantons are of “different races, different languages, and different religions.” Furthermore, he states if a free nation lacks a natural sense of nationality, one cannot expect it to create one by entrusting the authorities. One of the great advantages of a unified populace is that it is able to limit the power of government, Mill says. But it is putting the cart before the horse to expect that the government, once entrusted with great powers to create national unity, will actually follow through and risk having its own powers limited. More likely it will divide and conquer.
Indeed, any overt program of nationalism will backfire badly, because it will inevitably try to replace Americans’ organic love for “political antecedents” with an entirely new and inorganic principle of American nationalism. Whether it wants to or not, it will empower the government to slice and dice people into in-group and out-group based on some artificial principle, becoming simultaneously more oppressive and more divisive.
Nation-building at home in the name of fostering a strong local identity won’t work any better, and may in fact work worse, than nation-building abroad in the name of a new world order.
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This episode features a lively (and – fair warning – long) interview with Daphne Keller, Director of the Program on Platform Regulation at Stanford University’s Cyber Policy Center. We explore themes from her recent paper on regulation of online speech. It turns out that more or less everyone has an ability to restrict users’ speech online, and pretty much no one has both authority and an interest in fostering free-speech values. The ironies abound: Conservatives may be discriminated against, but so are Black Lives Matter activists. In fact, it looks to me as though any group that doesn’t think it’s the victim of biased content moderation would be well advised to scream as loudly as possible about censorship anyway for fear of losing the victimization sweepstakes.
Feeling a little like a carny at the sideshow, I serve up one solution for biased moderation after another, and Daphne methodically shoots them down. Transparency? None of the companies is willing to allow real transparency, and the government may have a first amendment problem forcing companies to disclose how they make their moderation decisions. Competition law as a way to encourage multiple curators? It might require a “magic” API, and besides, most users like a moderated Internet experience. Regulation? Only if we want to take First Amendment law back to the heyday of broadcast regulation (which is frankly starting to sound pretty good to me).
As a particularly egregious example of foreign governments and platforms ganging up to censor Americans, we touch on the CJEU’s insufferable decision encouraging the export of European defamation law to the US – with an extra margin of algorithmic censorship to keep the platform from any risk of liability. Turns out, that speech suppression regime is not just an end run around the first amendment; it’s protected by the first amendment. I offer to risk my Facebook account to see if that’s already happening.
In the news, FISA follies take center stage, as the March 15 deadline for reauthorizing important counterterrorism authorities draws near. No one has a good solution. Matthew Heiman explains that another kick-the-can scenario remains a live option. And Nick Weaver summarizes the problems that the PCLOB found with the FISA call detail record program. My take: The program failed because it was imposed on NSA by libertarian ideologues who had no idea how it would work in practice and who now want to blame NSA for their own shortsightedness.
Another week, another couple of artificial intelligence ethics codes: The two most recent ones come from DOD and … the Pope? Mark MacCarthy sees a lot to like. I offer my quick and dirty CTRL-F test for whether the codes are serious or flaky, and both fail.
In China news, Matthew covers China’s ever-spreading censorship regime – which now reaches Twitter users whose accounts are blocked by the Great Firewall. We also ask whether and how much the US “name and shame” campaign has actually reduced Chinese cyberespionage. And whether China is stealing tech from universities for the same reason Willie Sutton robbed banks – that’s where the IP is.
Nick recounts with undisguised glee the latest tribulations suffered by Clearview AI’s facial recognition system: Its app has been banned from Android and Apple, and both its customers and its data collection methods have been doxed.
Mark notes the success of threats to boycott Pakistan on the part of Facebook, Google, and Twitter. I wonder if that will simply incentivize Pakistan to drive its social media ecosystem toward the Chinese giants.
Nick gives drug dealers a lesson in how not to store the codes for €53.6 million in Bitcoin; or is it a lesson in what to say to the police if you want that €53.6 million waiting for you when you get out of the clink?
Finally, in a few quick hits, we cover new developments in past stories: It turns out, to the surprise of no one, that removing a police tracking device from your car isn’t theft. West Virginia has apparently recovered from a fit of insanity and now does not plan to allow voting by insecure app. And the FCC is doing a slow striptease in its investigation of mobile carriers for selling customer location data; now we know who’ll be charged (pretty much everyone) and how much it will cost them ($200 million), but we still don’t know the theory or whether the inquiry is going to kill off legitimate uses of location data.
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 their institutions, clients, families or pets.
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