Key Yield Curve Signal Shows US Recession Due As Soon As June

Key Yield Curve Signal Shows US Recession Due As Soon As June

Authored by Simon White, Bloomberg macro strategist,

At least one key segment of the Treasuries yield curve suggests the US economy will enter a recession as early as June.

The spread between 3-month and 30-year yields — typically the first part of the curve to steepen before a recession — continues to widen.

This is a warning sign because inverted yield curves precede recessions, but it’s the re-steepening that signals the downturn is going to hit sooner rather than later.

Historically it is the 3m30y yield curve that has started steepening first before a recession, beginning to rise about five months before its onset. It began in mid-January, which would put a downturn starting as early as June. The spread between 3-month and 30-year yields is about minus 84 basis points, versus the January low of minus 115 basis points.

This time around, the rise in long-term yields is particularly troublesome because it suggests the bond market is beginning to price in structurally high inflation.

The closely watched 2s10s curve is still inverting, recently hitting a new low. But as the chart shows, 2s10s along with most other yield-curve segments, only begin to steepen just before the recession begins.

Tyler Durden
Fri, 03/03/2023 – 08:25

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Just Say ‘No’ to New Forms of Prohibition


orange background with cartoon of old-fashioned picketers carrying signs saying 'we want beer'

These are weird times (aren’t they all?), but I’ve lived long enough to see a resurgence of atrocious ideas that I thought had been debunked years ago. Apparently, humanity can only learn lessons for a short time before a new generation needs to re-learn them. “Freedom is never more than one generation away from extinction,” Ronald Reagan said. Perhaps he wasn’t exaggerating.

For instance, the Cold War was a backdrop to my formative years with the collapse of communism marking a great advance in the freedom and prosperity of vast swaths of humanity. Despite the gulags, oppression and deprivation, many left-wing thinkers now spend their days—with full belies and from the comfort of their suburban homes—raging against the evils of American capitalism. Just check your Twitter feed.

Likewise, right-wing provocateurs have crept out from under their rocks. I can’t fathom how anyone can fall prey to fascistic and bigoted philosophies these days. I also can’t understand how some self-styled “conservatives” can champion Hungary’s authoritarian leader as a model. There’s nothing new under the sun, I suppose, but I naively thought such illiberalism had largely gone away.

The revanchist idea that has really left me flummoxed, however, involves Prohibition. Some serious thinkers have surveyed the American landscape and decided that America’s key problem is we don’t have enough laws regulating personal behavior. They see vice everywhere—and perhaps they’re right on that point. Instead of engaging the culture, they turn to the tried-and-failed method of empowering the government.

In a recent Atlantic column criticizing the legalization of online gambling and marijuana, physician Matthew Loftus argues that these moves embrace the idealistic idea that “responsible, independent adults (should) be able to make decisions for themselves about how they spend their money or use their body.” He believes we overlook the degree to which “our habits … are just as often inexplicably self-destructive as they are reasonable.”

His solution is to pass laws requiring that “gambling should take place in casinos, not on smartphones, and marijuana should be used only under a healthcare provider’s supervision.” He even offers a nuanced defense of the Eighteenth Amendment’s alcohol Prohibition, which he credits with reducing alcohol-related illnesses and domestic violence. We should structure our laws to provide “guardrails to help people from driving off cliffs of vice,” he adds.

Debates about virtue and vice have been around since the dawn of humanity. I’m no personal fan of online gambling or any form of gambling, for that matter, nor do I have any particular interest in cannabis. But, as Jacob Sullum noted in a Reason column debunking Loftus’ arguments, only 1 percent of the nation’s gamblers have severe gambling problems and only 1.7 percent of marijuana users have a substance-related disorder related to weed.

It doesn’t make sense—at least not in a relatively free society—to create laws that restrict activities enjoyed (rightly or wrongly) by the general populace to protect a tiny minority that will undoubtedly partake in those activities anyway, albeit in a less-regulated way. When I was a teenager, it was no doubt a bit harder to access marijuana, but it was widely used nonetheless. We’ve all heard the term “bookies,” who facilitate illegal bet-making. We also know about black markets.

The first problem with the New Prohibitionists is they have an almost childish faith in government regulation. Trying to stop vice is like trying to stop water from flowing down a hill. It finds its way somehow. The world’s oldest profession remains illegal yet, I’m betting, takes place pretty much everywhere. Those open-air drug markets that one might find near any homeless encampment involve the sale of drugs that are not—nor likely to be—legal.

The second problem is they focus almost entirely on the ill effects of problem gambling and drug use, but ignore the ill effects of using law enforcement approaches to control people’s deep-seated and “inexplicably self-destructive” desires. There were some (mostly temporary) health benefits to Prohibition, but the Cato Institute notes that, “alcohol became more dangerous to consume; crime increased and became ‘organized’…and corruption of public officials was rampant.”

More recently, the Drug War led to appalling erosions of our civil liberties, as the government gained wide-ranging powers (e.g., civil asset forfeiture) to fight drug cartels—something they promptly used against ordinary citizens. One might argue that personal “vices” are problematic, but no-knock raids and government property thefts seem far more evil.

“Puritans argue against the goodness of creation, finding the source of evil in material things of pleasure (as tobacco, alcohol, art, and so on) rather than in the disordered human will to misuse the good things nature affords us,” wrote the great Christian author G.K. Chesterton. Indeed. If they want to make us more virtuous, today’s Puritans need to spend less time changing laws and more time changing hearts.

This column was first published in The Orange County Register.

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Libel Lawsuit Over Daily Dot’s Allegations That Someone Was “Jan. 6 Capitol Riot Organizer” Can Go Forward

From Bostic v. Daily Dot, LLC, decided Wednesday by Judge Robert Pitman (W.D. Tex.):

This case revolves around an article … published on February 23, 2021, by the Daily Dot—a wholly owned subsidiary of Clarion Media—which stated that Plaintiff Daniel Bostic … was a “Jan. 6 Capitol riot organizer.” Bostic claims that he “was not connected in any way with the January 6 riots, much less that he was an organizer or coordinator of riots and insurrection.” According to his complaint, Defendants knew or disregarded that Bostic was not connected with the January 6 riot and falsely attempted to portray him as an organizer by using a photo of him at an event from a different rally in November 2020.

Bostic has a background in politics but maintains that he has never been substantially involved in any attempts to overturn the 2020 election. He first interned for and later worked as a staff assistant for Congressman Tim Scott, and in 2018, volunteered with the organization “Stop the Steal,” which protested ongoing recounts in Broward County, Florida. After 2018, he maintained contact with the organizers of Stop the Steal but began to focus on promoting his filmmaking. He attended political rallies in 2020, including some following the November election results, but alleges that he did not play any part in organizing the Stop the Steal rallies planned for January 5 or 6, 2021. While Bostic does not firmly deny that Stop the Steal helped to organize parts of the January 6 protest, he says that the organization did not plan the march on the Capitol or rally at then-President Trump’s speech.

While Bostic acknowledges that he was at a protest in Washington D.C. on January 6, he maintains that he only attended a peaceful portion of the protest. Bostic walked from the White House Ellipse to the media area of the Capitol Lawn and live-streamed a portion of the walk on Twitter via Periscope with “Stop the Steal” chants in the background. He captioned one of the videos “Storming the Capitol#StopTheSteal” but argues that he was so far away from the Capitol building that it should have been obvious that he was not actually storming anything. When he reached the Capitol, Bostic saw the violent scene unfolding, deleted his Periscope stream, and left the protest. According to Bostic, that was the extent of his participation in the events of January 6.

On January 19, 2021, Salon published an article stating that Bostic could be seen on video climbing the steps of the Capitol building. On February 23, 2021, the Daily Dot—an online news organization based out of Austin, Texas—published a short article stating that Bostic would be attending an upcoming Conservative Political Action Conference (“CPAC”). The Article was written by [Zachary] Petrizzo, who Bostic describes as an investigative reporter who has published for the Daily Dot[], Mediaite, Salon, and the Daily Beast….

Bostic sued for libel, and the court allowed the case to go forward as to one of Bostic’s claim. First, the court held that Bostic was a limited-purpose public figure, because he had voluntarily injected himself into debate about the legitimacy of the 2018 and 2020 elections. But the court concluded that Bostic had adequately “pled that the descriptions of him as a Jan. 6 Capitol riot organizer and coordinator of the insurrection were defamatory with the requisite level of falsity”:

The Daily Dot Defendants argue that Bostic did in fact help to organize the events of January 6. They point out that Stop the Steal’s website directed visitors to a funding page for January 6 protestors and promoted a January 6 “Petition Congress” event. In their request for judicial notice, they point to more sites and Tweets that associate Bostic with Stop the Steal. Even assuming these sites were judicially noticeable, they would not warrant a dismissal. Indeed, the Daily Dot Defendants point out that Stop the Steal’s website “[identified] Bostic as a Georgia organizer” but did not suggest a direct affiliation with organizing national or D.C. protests. Nor do Bostic’s tweets, which encourage his followers to come to D.C. on January 6, show that he “organized” the protest. Tweets encouraging attendance at an event are not necessarily the same as “organizing” an event, and it would be premature to draw such an inference against Bostic.

There are reasons to doubt Bostic’s characterization of the events. If Stop the Steal did help organize the portion of the January 6 protest that turned into the storming of the Capitol, that might show that the Article was not defamatory. But neither Bostic’s complaint nor the Daily Dot Defendants’ motion explicitly describes Stop the Steal’s role in the January 6 protests in detail. Bostic alleges that “Stop the Steal [did not] organize[ ] President Trump’s rally or the subsequent march to the Capitol lawn” but he stops short of disclaiming any organizational involvement. Elsewhere, he alleges that he “did not help Stop the Steal organize any events scheduled for January 5, 2021 or January 6, 2021 in Washington, D.C.” But Bostic never describes what events Stop the Steal did plan for January 6. If Stop the Steal did organize events that led to the January 6 insurrection, and Bostic was listed as the media contact for Stop the Steal, such evidence will likely be relevant for summary judgment. However, as such information is not before the Court on the pleadings, dismissal is premature.

Further, the Daily Dot Defendants argue that their description of Bostic as an organizer and coordinator of the January 6 cannot be actionable in defamation because they are not provably false assertions of fact…. The Daily Dot Defendants focus on the labels of the January 6 events as a “riot” or “insurrection.”

Whether this argument is correct or not, it appears to miss the thrust of Bostic’s defamation claim. Bostic alleges that he attended a peaceful portion of the January 6 protest but left once it turned violent. As Bostic states, “Even if ‘riot’ and ‘insurrection’ could be interpreted to include the peaceful events of that day—and they cannot—Defendant’s claims would still be false.” Whether Bostic organized or coordinated the January 6 insurrection does not depend on how that insurrection is classified. Accepting, for the purposes of a [motion to dismiss], that Bostic’s factual claims are true, then the allegation that he was involved with organizing the January 6 riot or insurrection is plausibly defamatory, regardless of the potential meanings of the words.

Moreover, “riot” and “insurrection” do appear capable of containing a provably false assertion of fact…. These words are not the sort of opinion or rhetorical hyperbole that courts have held lie outside the scope of defamation. Instead, it is plausible that “riot” and “insurrection” refer to provable and specific facts and events. Namely, in this context, “riot” does not just characterize the protests, but refers to the violent events on near the Capitol steps and the storming of the Capitol building. The notion that the dictionary definitions of these terms could be used to describe broader behavior does not render them unverifiable in the context of the Article.

And the court concluded that Bostic had sufficiently alleged that Petrizzo knew the statements were false or likely false (the so-called “actual malice” standard), though of course at later stages of the case Bostic would actually have to provide more concrete evidence of that:

“The actual malice inquiry focuses on the defendants’ states of mind … which may be proved by indirect or circumstantial evidence.” Bostic alleges that the evidence relied on by the Daily Dot Defendants in their Article should have alerted them to the falsity of their assertion that he organized the January 6 riot. Petrizzo’s actions after publication of the Article also suggest—at this stage—that he acted with reckless or intentional disregard. Bostic alleges that Petrizzo “contacted organizers of CPAC” and “attempted to get [Bostic] banned from the event.” He further alleges that Petrizzo “filmed [Bostic] entering a restroom.”

While this evidence may not speak to the Daily Dot Defendants’ state of mind leading up to publication, it suggests that malice is at least plausible. It is rare that a plaintiff will be able to definitively assert what a defendant knew prior to publication—and that is not the standard at a motion to dismiss. At this stage, Bostic has shown more than “scant assertions” that the Daily Dot Defendants acted with malice. Drawing inferences in favor of Bostic, both Petrizzo’s conduct and the nature of the Article’s evidence plausibly suggest that the Daily Dot Defendants knew or recklessly disregarded the fact that Bostic did not organize the January 6 riot….

Congratulations to Jason Greaves (Binnall Law Group), who represents plaintiff.

The post Libel Lawsuit Over Daily Dot's Allegations That Someone Was "Jan. 6 Capitol Riot Organizer" Can Go Forward appeared first on Reason.com.

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How To Save American Mass Transit


A subway train car leaving the station in New York

As U.S. transit agencies approach a fiscal cliff due to dwindling ridership, some public transportation advocates have called for eliminating customer fares in an effort to increase ridership. At the same time, large mass transit systems are experiencing a persistent fare evasion problem that has fed broader public concern about transit crime and safety. But forgoing this source of revenue would worsen transit’s already gloomy outlook as decades of research have found that ridership is more sensitive to service quality than fare price. Instead, advocates should be more realistic about transit’s role in delivering 21st-century transportation in the U.S. and demand efficiency improvements so that transit can function well in the niche markets where it can provide the most value.

The COVID-19 pandemic caused nationwide mass transit ridership to crater by 95 percent at its worst. Congress responded by sending nearly five years’ worth of pre-pandemic federal transit funding—$69.5 billion—between March 2020 and March 2021. Unlike conventional federal transit aid, these funds were largely unrestricted and could be used by transit agencies as they saw fit. 

In contrast to transit’s fiscal bailouts, ridership recovery has been slow. December 2022 ridership remained 34 percent below December 2019 levels, according to the Federal Transit Administration’s National Transit Database, which also indicates that nationwide farebox recovery of operating costs from transit riders fell from 30 percent in 2019 to 13 percent in 2022, with taxpayer subsidies accounting for nearly all of the remaining balance. This figure does not include the capital costs to build and refurbish transit systems, where taxpayers have been responsible for virtually the entire tab since the middle of the 20th century.

Transit experts are increasingly expecting a prolonged ridership winter, with ridership forecasted to remain below 2019 levels at least through the remainder of the decade. As this reality has started to set in, some transit advocates have called for desperate measures to regain lost ridership, most notably transitioning to fare-free transit

Supporters of fare-free transit do have a point that ending fare collections can increase transit ridership. But it’s important to understand that not all ridership gains are created equal. Transit is often sold to the public as a solution to social costs related to the use of private automobiles, such as traffic congestion and pollution. Fare-free transit may entice those who were already dependent on transit, as well as people who would have otherwise walked or biked. But it likely won’t draw many new riders who can drive their own cars. This means that while fare-free transit can provide private benefits for riders, it is unlikely to meaningfully increase the social benefits often touted by transit advocates to justify additional government subsidies.

This proposed move to fare-free transit has also been justified on progressive social justice grounds, with some advocates arguing that transit service should be treated as a commons and that fare enforcement unfairly targets individuals living on the margins of society. Critics counter that fares are already low and heavily subsidized and that fare enforcement can be used to stop people from entering transit systems who then commit crimes.

In the real world of scarcity and tradeoffs, eliminating fares may also starve agencies of revenue that could otherwise be used to improve service, including transit security that is generally paid for out of agency operating budgets that fares support. A January 2023 report published by the UCLA Institute of Transportation Studies notes that decades of research have shown that “service improvements are likely to be a more effective use of resources than fare reductions, even for low-income riders.”

This tradeoff between eliminating fares and improving service is even more stark in a tightening fiscal setting. Over the next few years, large transit agencies in Chicago, New York, San Francisco, Washington, and a handful of other major metropolitan areas that account for the vast majority of nationwide transit trips will have completely spent down their pandemic funding windfalls. Absent large ridership increases, addressing future shortfalls will require some combination of fare increases, service cuts, state and local tax increases, and additional federal subsidies.

With ridership and farebox revenue unlikely to recover in the near future, advocates are expected to appeal to Congress for perpetual transit operating subsidies. However, assuming a divided Congress will even consider it, lawmakers will likely insist on a local match given that transit is fundamentally a local service. Federal transit subsidies have traditionally focused on capital cost assistance for infrastructure construction and vehicle procurement, not day-to-day operations. These grant programs have often required recipients to contribute matching funds equal to 50 percent of project costs. The upshot is that eliminating fare collection will simply dig a deeper hole for transit agencies seeking to raise matching funds needed to access potential federal operating subsidies.

Undoubtedly, some advocates will claim transit is underfunded, especially when compared to highway funding. But this appeal is undermined by national transportation expenditure data. According to the Bureau of Transportation Statistics, combined federal, state, and local government spending on highways was over $2.6 trillion between 2007 and 2019. Transit spending was over $775 billion during this period, accounting for 22.6 percent of total highway and transit spending by all levels of government. 

Compare this spending share to data from the most recent National Household Travel Survey from 2017, in which travel by transit accounted for just 2.5 percent of nationwide person-trips while travel by private automobiles accounted for 82.1 percent of trips. Transit appears to be extremely well-funded compared to its primary competitor. 

Transit’s outsized share of government funding relative to its travel share isn’t commonly acknowledged in the political sphere, at least not with any precision. But economists have long noticed and analyzed this disparity. As a team of University of Pennsylvania and Brown University economists remarked in a 2020 working paper for the National Bureau of Economic Research, “The allocation of expenditure across modes of transportation requires scrutiny. That we spend about the same amount on public transit buses, which provide about 2 billion rides per year, as on the interstate highway system, which provides about 700 billion miles of vehicle travel per year, primarily for local travel, is a central and surprising feature of US transportation policy.”

The biggest single problem facing transit is it tends to be poorly designed to serve modern transportation needs, and this was true even before the pandemic. Transit was always disproportionately used by commuters during the workweek, where transit accounted for 5 percent of journey-to-work trips, according to 2019 Census Bureau estimates. But even in its most favorable setting, transit declines have been steep, with transit’s commuting share dropping from 12 percent in 1960 to just 2.5 percent in 2021, or half of its pre-pandemic share.

The reason for this decline is simple. In the second half of the 20th century, first households and then jobs dispersed from central cities into the surrounding suburbs. As a result, connecting people with employment by transit has become more and more challenging. By 2019, the University of Minnesota’s Access Across America series showed those residing in the 50 largest U.S. metropolitan areas could on average access 47 percent of metro area jobs by car in 30 minutes of travel, or one hour of bidirectional daily commuting. In contrast, just 8 percent of jobs were accessible by transit in 60 minutes, or two hours of commuting. Working from home first surpassed transit’s commuting market share in 2017, and the COVID-era increase in telecommuting among higher-income urban professionals is expected to remain several multiples above the pre-pandemic telecommuting share.

For transit to continue to serve a valuable role in the few places where it can compete, policy makers will need to rethink how service is provided. They must reconsider commuter-centric transit network designs and service schedules to account for remote and hybrid work, where allocating expenditures to serve high-volume rush-hour travel into central business districts five days a week is no longer defensible. They must somehow get transit capital costs under control, costs that dwarf those incurred by peer countries. They should consider smaller alternatives to better serve routes with fewer customers and avoid running vehicles mostly empty most of the time. Finally, they should pursue new technologies that could significantly reduce operating costs, especially automation, even if that means taking on powerful public employee unions.

Transit’s future in the U.S. is uncertain, although broader societal trends are working against it. Eliminating customer fares may help transit regain some of its lost ridership, but this would likely undermine the flexibility of transit agencies to respond to a changing landscape and accelerate transit’s long-run decline in the transportation marketplace. While transit will remain a niche mode regardless of what policy makers do, responsible leadership demands reevaluating status quo governance and adapting to best serve the customers most dependent on transit.

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Review: Operation Fortune: Ruse de Guerre


Aubrey Plaza in "Operation Fortune: Ruse de Guerre"

It’s been a while since anyone went to the trouble of making a James Bond knockoff, but here comes Guy Ritchie to take a fresh whack at it. Back in the mid-1960s, after Goldfinger supercharged the nascent 007 franchise, the movie landscape swarmed with Bond rips. They ranged from kind-of-entertaining (James Coburn’s Our Man Flint) to fairly bearable (Dean Martin’s Matt Helm series) to altogether dire Euro spy junk (worst in show: Il vostro super agente Flit, an Italian knockoff of the Coburn knockoff). As lame as a lot of this stuff was, it all fed into the Austin Powers movies of the 1990s, which were fun, and then, a couple years ago, into the flamboyantly violent Kingsman pictures, about a secret spy agency headquartered inside a bespoke menswear shop on London’s Savile Row. The Kingsman movies demonstrated that the old pop-espionage world of the Bond films, however remote in time, was still resonant.

So the new Ritchie picture sounds promising at first. Whatever you think of his movies—the cockney gangster films he started out with, the Sherlock Holmes pictures with Robert Downey Jr., the Will Smith version of Aladdin (a billion-dollar hit at the world box office)—Ritchie’s work, however overamped, is seldom less than lively. But in Operation Fortune: Ruse de Guerre he seems to take a wrong turn at every turn, starting with the constipated title. A ruse de guerre, for those who weren’t expecting a French quiz at the movies, would be a sneaky military strategy intended to deceive an enemy. As for the Operation Fortune part, that refers to the story’s protagonist, whose name is Fortune—Orson Fortune, I’m afraid.

Orson is played by Ritchie’s longtime collaborator, the stubbly butt-whomper Jason Statham. Statham is an unlikely fit for a character who is a pain in the neck for the intelligence agencies that employ him because he’ll only fly private, only drink “the finest clarets,” and only undergo any necessary post-mission rehab in the expensively sunny Maldives. I don’t know about anyone else, but I don’t think of Jason Statham as a “finest clarets” kind of guy.

Orson’s mission this time out is difficult to grasp. Something tech-y has been stolen…by somebody…and we’re not told what or who for a good long while. Obviously, an unidentified something or other is going to be hard to find (although it’s quickly given an inscrutable name: “The Handle”). But Orson’s controller, Nathan Jasmine (Cary Elwes), has every confidence in his man’s bloodhounding talents. So Orson is soon assembling a team, which includes a computer whisperer named Sarah Fidel (Aubrey Plaza, her trademark disdain dialed down by about a third); a muscular factotum named JJ (English rapper Bugzy Malone, distributing exposition); and, before long, a Hollywood movie star named Danny Francesco (Josh Hartnett, projecting actual star quality). Danny is brought aboard Orson’s murky mission when it acquires a suspect, a billionaire weapons dealer named Greg Simmonds (Hugh Grant—could anyone look less like a Greg Simmonds than Hugh Grant?). Since Simmonds is some sort of weird fame groupie, Danny has been roped in as bait. “You can’t catch this fish with conventional lures,” Orson says sagely.

The movie is low on energy (Statham’s sudden punch-ups feel perfunctory), under-edited, and persistently unpersuasive. The filmmakers’ need to globe-hop on a budget results in traditional cost-cutting deficiencies like the shot in which a chyron tells us we’re in Madrid, but all we actually see is Orson getting off a plane. There’s a cocktail scene set on the deck of a luxury yacht in the harbor at Cannes that isn’t quite convincing as anything other than a soundstage setup (Ritchie doesn’t even rock the camera a little). Other problems are location-related. The movie was filmed mostly in Turkey and partly in Qatar (also the source of some of the production budget), which is why we find the billionaire Simmonds based in a villa in the provincial Turkish capital of Antalya (where he drives around in a vintage Mustang with California plates). Ritchie lards the picture with beauty shots of this Mediterranean city, as if he were showing us around the iconic sights of the Île-de-France or the Tuscan countryside; since he’s not, the Bondian travel-porn effect is blunted.

The actors, at least, are fine, although the script, cowritten by Ritchie and his veteran associates Ivan Atkinson and Marn Davies, gives them little in the way of breezy lines to work with. If you’re going to go to the trouble of signing up Aubrey Plaza for your picture, you should give her some snappy patter. Not things like, “I don’t care where we’re going, as long as I’m drunk.” She manages to deal with that one, but she doesn’t look happy about it.

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My Son Did His Taxes for the First Time. Rage Ensued.


An exasperated young man covers his face in his hands as numerous financial documents litter the floor in front of him.

Nothing focuses the mind quite so intently on the sheer stupidity of government as doing your taxes. What is taken from us is excessive, the intrusiveness is maddening, and the rules are byzantine, which is the distilled essence of most of our interactions with the state. So, it was with a certain degree of anticipation that I told my son that, after working hard at the supermarket in addition to his homeschooling and martial arts, he would have to file his first tax return. Much fun ensued.

Given the complexity of our returns, involving a trust, commercial real estate, and business entities, my wife and I pay an accountant to wrangle our taxes. But before Anthony heads down that path, we thought he should understand what it means to fill out his own return and hope for the best.

“The whole system is based on the premise that the government already knows how much you owe, but won’t tell you. You have to guess,” I told my son.

“What happens if you guess wrong?” he asked.

“Well, there’s no actual right answer in terms of how much you’re supposed to pay. If you can even reach them, IRS employees contradict each other all the time because nobody really understands the rules. But if you come up with something they don’t like, they just might destroy your life.”

“Oh, shit,” he said.

At the IRS website, we clicked on the “File Your Taxes for Free” link which touted “a public-private partnership between the IRS and many tax preparation and filing software industry companies who provide their online tax preparation and filing for free.” The first option was for “guided tax preparation” involving “simple questions” and letting “software do the work.” That sounded like a great way to undergo an expensive and potentially perilous process without understanding what the hell is happening. We opted for “free fillable forms” instead, which walked Anthony through a 1040.

“What the fuck does that even mean?” my son asked multiple times as he worked his way through the usual questions about wages, capital gains, deductions, withholding and the like.

“Pull up the instructions,” I told him, as if they offered much in the way of help.

He doggedly plowed through the dense verbiage. Because I’m not a complete monster, I helped him through the spots where he was stuck. When the 1040 itself was finished, he had to reenter all of the information from his W-2 because scanning has not yet come to the world of free fillable forms. Then, he submitted his return.

Two days later he received an email rejecting his tax return. For reasons unknown, rejections consist of gibberish such as “XML data has failed schema validation. cvc-complex-type.2.4.b.” You copy the email into the IRS’s Error Search Tool to get a (sort of) clear explanation that could have been included in the rejection to begin with. In Anthony’s case, we narrowed it to a missing zip code for his employer on the W-2 form. I could have sworn he filled that in, but who knows? He entered the zip and resubmitted.

Two days later, he received another rejection. This time the Error Search Tool told him that he had checked “Yes” to “the Third-Party Designee area at the bottom of Form 1040” without including a required PIN. That was very helpful, except that he’d printed the forms before submitting and the box in question was definitely checked “No,” so no PIN was required.

Fortunately, the public library had a rack of paper 1040 forms and booklets. Anthony copied the information to the old-school form, stuck it and his W-2 in an envelope with a stamp, and mailed it off.

“Let the IRS do it the hard way,” I told him. “It’s more work for them, which is all the more reason to send them paper forms.”

Then it was on to state taxes. To give Arizona credit, it was actually possible to file a return through the means provided. All Anthony had to do was navigate past the Arizona Department of Revenue (AZDOR)’s prominent warning of “intermittent issues with AZTaxes.gov. Technical staff are actively working to resolve the matter as quickly as possible. We apologize for the inconvenience.” Then he clicked on the box promising that he could “E-File My Taxes for Free” only to find the AZDOR, like the IRS, was trying to slough him off on a “fast, safe and free way to do your tax return online” through partnered services.

“Oh, hell no,” we both said after the experience with federal taxes.

It took an internet search to find that the AZDOR had PDFs of its 140 (individual income tax) form in both it-does-the-math and simple printable formats on its website, along with instructions. We chose the calculating form. It was our own fault that we overlooked the instruction to use it only with stand-alone Acrobat software, since it locks up in web browsers. With just a little drama, Anthony got his return filled out and mailed to the Department of Revenue.

As expected, my son was less than enthusiastic about the experience, amidst much cursing and references to official incompetence. He could have bypassed a lot of the hassle by going with a tax preparer, or one of the answer-easy-questions services. That’s certainly what the tax collectors prefer.

“Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year to avoid refund delays,” the IRS urged in January. “If you need a tax refund quickly, do not file on paper – use software, a trusted tax professional or Free File on IRS.gov.”

But that would also bypass the full experience of preparing a tax return and wondering over its arcane terminology and the judgment calls necessary for navigating the form’s many entries. It reduces the pain of filing (though not of watching money disappear from your pay) while also diminishing comprehension of the process. There’s a lot of value in having to stop and ask yourself, “What the fuck does that even mean?” as my son did many times while wandering through a minefield of rules.

With part-time income and refunds due, the stakes are low for Anthony. This is a good stage in life for him to experience filling out a 1040 form and a state return and to wonder if he got it right. When his income rises and there’s more at risk, he’ll be able to go to a professional tax preparer with a better understanding of just what he’s sparing himself.

And when his accountants mumble curses under their breath, as mine frequently does, and complain of the arcane red tape and incompetence of tax collectors, my son will know exactly what they mean.

The post My Son Did His Taxes for the First Time. Rage Ensued. appeared first on Reason.com.

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Foxconn Plans $700 Million iPhone Factory In India As China Exodus Accelerates

Foxconn Plans $700 Million iPhone Factory In India As China Exodus Accelerates

Foxconn Technology Group, Apple’s biggest contractor, plans to invest $700 million in a new plant in India to diversify its supply chain out of China, according to Bloomberg

The Taiwanese manufacturing giant’s new plant will be situated on a 300-acre site near Bengaluru, the capital of the southern Indian state of Karnataka. Sources said Foxconn would assemble iPhones and might even produce parts for its electric vehicle business, entirely separate from Apple. 

“The investment is one of Foxconn’s biggest single outlays to date in India and underscores how China’s at risk of losing its status as the world’s largest producer of consumer electronics,” Bloomberg said. 

Behind the scenes, Apple might be pressuring its suppliers to reevaluate its manufacturing supply chain of iPhones, AirPods, HomePods, and MacBooks in China. Apple’s supplier of Airpods, GoerTek, said earlier this week it’s investing $280 million in a new production facility in Vietnam and considering an India expansion.

“Starting from last month, so many people from the client side are visiting us almost every day,” GoerTek Deputy Chairman Kazuyoshi Yoshinaga told Bloomberg. He said the topic that dominates client discussions is “When can you move out” of China?

Shifting supply chains out of China has been dubbed as “friendshoring.” While that’s a play on “offshoring,” this isn’t about companies moving operations back to the US or Europe but instead seeking foreign alternatives that retain the benefit of cheap labor costs but with less international controversy. 

A recent poll by the American Chamber of Commerce in Shanghai, an organization that promotes US businesses in China, said about a fifth of the 307 companies surveyed revealed a reduction in investments in the world’s second-largest economy. 

The uncertainty around China started in 2018 after President Trump launched a trade war. Then supply chain snarls at manufacturing facilities during Covid spooked many multinationals with high exposure in the country. And now, rising Sino-US tensions have fueled the fire to push companies to diversify abroad. 

Readers have been well aware of this trend over the last year:

Michael Every, the global strategist at Rabobank, expects India to be one of the largest beneficiaries of friendshoring. 

We doubt CEO Tim Cook will ever mention plans to divest from China because that could heavily impact Apple’s entire ecosystem centered in China… Don’t upset Beijing. 

 

Tyler Durden
Fri, 03/03/2023 – 07:45

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Von Greyerz: Prepare For 10 Years Of Destruction

Von Greyerz: Prepare For 10 Years Of Destruction

Authored by Egon von Greyerz via GoldSwitzerland.com,

The final stages of major economic cycles are always accompanied by the maximum amount of bad news as well as heinous events. This time is no different as the West is in the process of committing Harakiri (Seppuku). 

As Elon Musk said: 

“My mentality is that of a Samurai. I would rather commit Seppuku than fail.”

Sadly, the problem for the West is that it is both committing Harakiri and failing.

For at least half a century, the world has been in a process of self-destruction. 

As the decline accelerates, the next phase of 5-10 years will include major political, social, economic as well as wealth – destruction.

What can be more heinous than a total economic and financial collapse accompanied by a potential World War III that at worst could destroy the world totally. 

A recent article of mine discussed global fragility due to War, Debt and Energy Depletion.

In this article I outline the major risks today, financial and geopolitical and also discuss the best way to protect against these risks. Physical Gold is of course the ultimate wealth preservation investment. The next major move up in gold is not far away. See further on.

Biden’s recent visit to Ukraine and whistle stop tour of Europe confirmed that there is no desire to make peace but only war. More support of weapons and money from the US is forthcoming. And whatever the US dictates, Europe follows without considering the consequences. 

At the end of his Warsaw address Biden stated about Putin: 

For Gods sake, this man cannot remain in power”. 

Hmmm…. Hardly the talk of a peace maker

China on the other hand is trying to act as peacemaker but their proposal last Friday was cold shouldered by the West. 

More importantly, the Chinese Ministry of Foreign Affairs issued an important policy document this week which is a very strong attack on the US hegemony called:

US Hegemony and Its Perils”.

The attack starts in the introduction:

“Since becoming the worlds most powerful country after the two world wars and the Cold War, the United States has acted more boldly to interfere in the internal affairs of other countries, pursue, maintain and abuse hegemony, advance subversion and infiltration, and wilfully wage wars, bringing harm to the international community.

It then goes on in detail to attack all the areas of US Hegemony like: Political – Throwing its Weight Around, Military – Wanton Use of Force, Economic – Looting and Exploitation, Technological – Monopoly and Suppression, Cultural – Spreading False Narratives. 

The document exemplifies in detail the hegemonic policies and attacks of the US. Although US politicians will totally reject its contents, it is difficult to argue with the facts put forward by China. 

As I mention regularly, I very much like America and its people but have difficulties accepting the policies of the Neocons who dominate US politics.

Here is an extract from the Conclusion in this Chinese document:

“The United States has been overriding truth with its power and trampling justice to serve self-interest. These unilateral, egoistic and regressive hegemonic practices have drawn growing, intense criticism and opposition from the international community. 

Countries need to respect each other and treat each other as equals. Big countries should behave in a manner befitting their status and take the lead in pursuing a new model of state-to-state relations featuring dialogue and partnership, not confrontation or alliance. China opposes all forms of hegemonism and power politics, and rejects interference in other countries’ internal affairs.” 

(Here is a link to the full document.)

It is difficult to argue with this conclusion. But we need to wear the moccasins of the US and rest of the world and look at China from that perspective. This is to follow my adage to walk three moon laps in somebody’s moccasins before you judge him

China is not attacking various countries in the world by force, but primarily using investments and trade routes to dominate the world like the Modern Silk Road called the Belt and Road Initiative. It sets out to connect 65% of the world’s population to China by creating a network of sea routes and land links. China is estimated to have spent $1 trillion so far but total estimates are as high as $8 trillion. It will most likely take decades to achieve and might become too costly as the world economy declines. 

However, what is clear is that China is investing heavily in infrastructure around the world both in Europe, Africa and South America. For example China is buying up ports in a substantial number of countries. They are also investing heavily in the resource sector globally. 

Another problem that the West has with China is their human rights record. 

Regardless, the trend is clear. The West is in a long term structural decline and the shift to China and the rest of the East and the South is inevitable as I discussed in the article“AS WEST, DEBT & STOCKS IMPLODE, EAST, GOLD & OIL WILL EXPLODE”

THE STRUCTURAL DECLINE OF THE WEST

All empires are ephemeral and this is what the US and Europe are currently experiencing.

The final stages of empires, like the Han, Roman, Mongol, Ottoman, Spanish and British always include the same ingredients some of which are: 

  1. Excessive Debts and Deficits

  2. Currency Collapse

  3. Collapse of asset prices including property, bonds and stocks

  4. Hyperinflation in the final stages, especially in food, commodities & services 

  5. Migration

  6. High Crime Rates & Breakdown of Law & Order

  7. Moral Decadence

  8. Social Unrest, Civil War  

  9. Wars 

As the West is now falling (& failing), we can tick all the above events also in the current collapse. 

Global debt has exploded since 1971 to $2-3 quadrillion as I have explained in many articles like here.

If it wasn’t for the Petrodollar, the US would have collapsed years ago. But as more countries are considering trading oil in other currencies like Yuan, the dollar will first Gradually lose its value and then Suddenly to paraphrase Hemingway.

But remember that since Nixon closed the Gold Window in 1971, all currencies have lost at least 97-99% of their value in real terms which is against gold.

Empires seldom die overnight so this process which started in 1971 could take another 5-10 years. But since we are now in the final stages, it could also happen Suddenly.

So let’s paint a potential scenario for the next 5-10 years.

In simple terms it will be more of the same if we look at the 9 points above. 

Debts and deficits will increase exponentially. I have for many years shown the growth in US debt which on average has doubled every 8 years since Reagan became president in 1981. 

On December 6, 2016, the chart below was included in a Family Office presentation I gave in London:

I projected then in 2016 that when Trump would reach the end of his first term in January 2021, US debt would be $28 trillion on the way to $40 trillion four years later in 2025. 

Interestingly, the debt was $28T in Jan. 2021. It doesn’t require a genius to project this figure as it is a straight extrapolation of the trend dating back 40 years. Still, I didn’t see anyone forecasting anywhere near the $28T debt in 2016. 

A couple of years ago, I raised my $40T debt in 2025 to $50T as the chart below shows:

So how is the US going to go from $32T to $50T in 3 years. Well, in the same way as bankrupt countries collapse with tax revenue falling precipitously and expenditure exploding. 

THE ROAD TO PERDITION FOR THE US & THE WEST

As the value of the dollar collapses, think:

  • Much higher war costs, social security, and pensions. As pension fund assets implode, there probably won’t be any pensions. 

  • Debt collapse both private and public with $2-3 quadrillion of derivatives turning into debt. 

  • All bubble assets of stocks, bonds and property, only held up by fake money, collapsing  by 75-95% in real terms.

  • Banks and financial institutions failing after initially having received $100s of trillions in printed, thus worthless, government support.

  • With high inflation or hyperinflation, interest rates going to at least 20% or probably much higher. Financing a debt in the quadrillions at 20%+ will of course lead to even more money printing. The Fed and other central banks will clearly lose control of interest rates which will be determined by a market in panic.. 

WILL THERE BE A GLOBAL NUCLEAR WAR?

The US has at this point stressed that there will be no uniformed US military in Ukraine. Both Russia and Ukraine has lost around 150,000 soldiers each. The problem for Ukraine is that this is around 50% of their regular soldiers whilst for Russia it is 13%. Also, a major part of the weapons and ammunition from the West is not forthcoming or substantially delayed. There just isn’t the spare capacity available to fulfil those promises. 

At this point, it looks like this war at best will be a very long drawn local conflict although Ukraine will find it difficult to sustain the war. In January 2022 the Ukraine population was 41 million and now 14 million are estimated to have left the country. 

In a war of this nature between two super powers, it is impossible to forecast the outcome. An “accident” or false flag can easily trigger the start of a nuclear war. 

Remember that this is a war between the US and Russia. So if there was a nuclear war, most missiles would be directed towards those two countries and potentially Ukraine

But if the world will see a nuclear war, all bets are off since some parts of the world would then be destroyed for decades. Therefore, it is not worth speculation about. 

WEALTH PRESERVATION & CBDCs

So assuming that this war remains a local conflict in Eastern Europe, how should people outside the war zone prepare financially?

Many countries are planing to introduce Central Bank Digital Money or CBDC. 

As the current monetary system in the West collapses, CBDC will only be another form of fiat money. The worst part about it is the ability to spy on and control people that it gives governments. As Western governments’ finances implode, CBDC is the perfect system for the likely socialist or Marxist economies that many Western countries are likely to have. 

For individuals who have the freedom to move, it would be preferable to leave the heavily indebted USA and Europe (especially the EU countries). 

One country in Europe still stands out as probably the best in the world both politically, economically and socially. This is of course Switzerland.

Yes, I have skin in the game here! I am Swiss from birth and pleased that I am. I was born and educated in Sweden and also like Sweden. 

But whilst Switzerland has remained a very sound country, Sweden has deteriorated dramatically. It now has one of the highest crime rates in Europe. As in the last 10-15 years Europe opened its borders for refugees from many poor and war struck countries, this has totally changed Swedish society.

There is nothing wrong with immigration. The world has always had migration. But until recent years, migrants had to look after themselves with no government subsidies. But in many countries in Europe and especially in Sweden, migrants arrive and get free housing and money to live. For many, there is no incentive to work and or to learn Swedish. Sadly an important percentage of men turn to crime and especially drug dealing. Fatal shootings between the immigrants are now happening daily in Sweden whilst 20 years ago, private weapons didn’t exist. 

The best proof of a sound country and economy is the currency.

When I, as a younger man, came to Switzerland in the late 1960s, 1 Swiss Franc cost 1.10 Swedish Kroner. Today it costs 11.20 Swedish Kroner to buy one Franc. So the Krona has lost 90% in the last 50+ years. 

The Swiss Franc has of course been strong against all currencies. The dollar for example has lost 80% against the Franc over 50 years. 

THE SUPERIOR SWISS ECONOMY AND POLITICAL SYSTEM

But Switzerland has so much more than a strong currency and economy like:

  • Low debt, normally no deficits

  • Lowest crime rate in Europe and in the world (excluding some Middle East countries. It is one of the few countries where you can walk safely in any town at night. 

  • Rule of Law 

  • Direct Democracy allowing the population to have a referendum on virtually any topic. If the referendum is approved by a majority, it becomes part of the constitution and cannot be changed by government or parliament but only by another referendum. This is totally unique in the world

  • For example there will be a referendum on stopping Switzerland from becoming cashless

  • Whilst all  EU countries have decided to confiscate Russian assets, Switzerland has declared: “The expropriation of private assets of lawful origin without compensation is not permissible under Swiss law,” the government said on Thursday. “The confiscation of frozen private assets is inconsistent with the constitution,” it added, and “violates Switzerland’s international commitments”.

  • The standard and quality of everything is very high, services, construction, communications etc

  • Switzerland also has beautiful nature, and excellent food. 

RISK OF WAR IN EUROPE

Some countries are worrying about a war in Europe. Except for a nuclear war which would be global, the risk of a war on the ground in Europe is in my view minimal. 

Russia has been invaded many times with the most famous examples being Karl XII of Sweden in the early 1700s, Napoleon in the early 1800s and Hitler in the 1940s. But Russia has never made any serious invasion into Europe.  Their interest lies primarily within their former empire. There was a brief entry into Finland at the beginning of WWII which lasted 3 months. Also at the end of WWII the Russians drove the invading Germans back to Berlin. 

So in my view, there is absolutely no reason to fear a Russian invasion of Europe

WEALTH PRESERVATION & GOLD

To protect your wealth against all the risks that I have outlined above is absolutely vital. Anyone invested in conventional assets like stocks, bonds and property, which have been artificially inflated by printing fake fiat money will in the coming 5+ years experience a major collapse of their wealth. 

As I already said, for anyone who has the ability to move to a country outside the US and the EU, that would be the safest option. It is likely that these areas will have the biggest problems both in the economy and the financial system as well as socially. In that region, Switzerland will be an important exception. 

Parts of South America like Uruguay should also avoid many of the problems in the West but sadly crime is high in many of these countries. Many Americans live in Central America but with the coming economic downturn, many countries will become less safe and also poor. In Asia, countries like Singapore and Thailand are very good but if there is a conflict between the US and China after a possible Chinese invasion of Taiwan, these areas could become more precarious. 

The problem with Australia and New Zealand is that they are highly indebted with big asset bubbles, especially in property. The socialist policies are not a plus either.  But the biggest risk is that a conflict in Taiwan could make these countries very risky with Chinese aspirations. 

Many people are moving to Dubai today for tax reasons. Russians are moving there since Dubai doesn’t sanction them. The problem with the UAE is that conflicts in the Middle East occur with regular intervals. 

For the ones who can’t move for job or family reasons, a second passport is advisable. 

But the most important asset protection is having wealth preservation assets outside your country of residence. 

There is no totally safe country today in an unsafe world. 

For investors who want to preserve their wealth, the best asset is physical gold followed by the more volatile silver. Gold and silver shares have had a terrible 35 years but the good companies should perform spectacularly.  Since most stocks are held by custodians within the financial system, they are not the same degree of wealth preservation as physical metals that you have direct control of. 

So my own preference would be to own physical gold and silver that I have direct control of and can withdraw or sell with very short notice. 

It is also important to deal with a company that can move your metals at very short notice if the security or geopolitical situation would necessitate it. 

Our gold vault in the Swiss Alps is the biggest private gold vault in the world and is also nuclear bomb proof which is totally unique. This is for bigger investors. We also store gold in Zurich. Our second preference is Singapore with the reservations I have mentioned. We also have vaults in many parts of the world and as I have stated, this can be important if the situation in the world changes and the gold/silver needs to be moved.

The world is now moving towards troubled times. 

Remember that family and friends are your most important asset and treasure them profoundly. 

Also, except for family and friends, many of the best things in life are free like books, nature, music, and sports.

Tyler Durden
Fri, 03/03/2023 – 07:20

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The Winter Wave Of Tech Layoffs Continues

The Winter Wave Of Tech Layoffs Continues

Many tech stocks have been in a tailspin for the better parts of the last 12 months, which was one factor in the reduction of the workforces of numerous companies and startups in the tech sector after the pandemic years of growth.

Even tech bulwarks like Amazon, Meta and Twitter carried out mass layoffs, with Jeff Bezos’ company topping the global ranking for corporations with the most laid-off employees with 18,000 layoffs. On January 19, Microsoft announced it would reduce its workforce by about ten thousand. A day later, Google parent Alphabet announced it would cut 12,000 jobs.

As Statista’s Florian Zandt shows in the chart below, the winter months have been especially layoff-heavy at tech companies and startups.

Infographic: The Winter Wave of Tech Layoffs Continues | Statista

You will find more infographics at Statista

In November 2022 alone, more than 50,000 tech workers were laid off globally. Meta laid off 11,000 employees, Amazon laid off 10,000, and Salesforce laid off another 1,000 after previous waves of layoffs. Crypto companies were among the hardest hit in the fintech sector. Even though only 63 companies reduced their workforce, industry heavyweights Crypto.com, Coinbase and Kraken alone reduced their workforces by a combined total of more than 5,000 employees, likely due in part to market volatility and the drastic drop in the price of popular tokens such as Bitcoin, dubbed the “crypto winter.”

Since the beginning of the year, more than 120,000 employees have been laid off at tech-related companies, which is around 75 percent of the tech and startup workforce let go in all of 2022. Most recently, companies such as Dell, PayPal, IBM, Yahoo and Zoom parted ways with 1,300 to 6,500 employees each. In total, about 283,000 people were laid off between January 1, 2022, and March 2, 2023, about 68 percent of them in the United States.

Also partly responsible for the unprecedented wave of layoffs are Russia’s war of aggression against Ukraine and increased plant closures in China due to the People’s Republic’s zero-covid strategy, which has significantly exacerbated the global economic situation.

In addition to external factors, these layoffs can also be attributed to miscalculations from previous years. Meta, for example, increased its workforce by 60 percent between 2019 and 2021, from nearly 45,000 to 72,000 employees.

The only GAMAM member skirting major layoff rounds is Apple, allegedly in part due to CEO Tim Cook taking a pay cut of $50 million, 40 percent of his total income generated from the company.

Tyler Durden
Fri, 03/03/2023 – 06:55

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