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Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,

Sometimes when you fire up an earthquake machine, you get a real earthquake.

There are three questions I’d like to answer in this Epsilon Theory note: what did the Narrative Machine tell us about the market immediately before and immediately after the November 8 election, what am I preparing for now as an investor, and what am I preparing for now as a citizen? I’m giddy about the first, quietly confident about the second, and pretty darn depressed about the third. Could be worse, I suppose.

On the first question, the Narrative Machine gave clear, actionable, and non-consensus signals prior to the U.S. election last week. For readers who aren’t familiar with what I mean by the Narrative Machine, I’ll refer you to this note by the same title. In a nutshell, I’m using a technology called Quid to take Big Data snapshots of large numbers of financial media articles. These snapshots show the connectivity and influence of each article to every other article, constructing a neural network or “star map” of the narratives and meaning clusters that link the articles. By looking at measures of sentiment and connectivity associated with the network, I think that I can get a good sense of market complacency around events like a Trump victory, as well as the likely direction and magnitude of market moves if an event like that comes to pass. Bottom line: I think that the Narrative Machine gives us a good sense of what’s priced into markets.

Here’s the Quid map of Bloomberg articles talking about Trump in weeks T-5 through T-2.

The skinny: there was never any complacency in markets about a Trump win. There was negative sentiment, but no complacency. Maybe the Huffington Post thought there was only a 5% chance of a Trump win, but markets were taking it much more seriously than that.

Now here’s the Quid map of Bloomberg articles talking about Trump in the week immediately preceding the election.

Still just as focused (the 7.6 score here is only slightly less attentive and concentrated than the 8.5 score of markets after the Brexit vote), but look at the sentiment score. We’ve moved from highly negative to only slightly negative. More to the point, it’s the change in score that’s really important, so this Narrative map is telling us that not only is a Trump victory priced into current market price levels, but if he were to win, the market wouldn’t go down much, if at all. That’s in sharp contrast to the consensus view (you know who you are), that not only was the market highly complacent about the prospects of a Trump win, but also that a Hillary defeat would be a disaster for markets, with projections for as much as 12% down.

My commitment to the Narrative Machine research project is to make it as public as possible. Mass email is a poor distribution method, so I tweeted about these findings on Monday, November 7 (@EpsilonTheory) and spoke about them on a Salient-hosted conference call on Tuesday, November 8. But I’m also managing portfolios for Salient now as part of the internal reorganization we announced in October, so I have a responsibility there, too. Long story short … follow me on Twitter to stay the most engaged with this project.

So what’s next for markets?

First, the positive market Narrative regarding tax repatriation, regulatory reform, and fiscal stimulus in the form of infrastructure spending is for real. And by “real”, I don’t mean that I have any confidence AT ALL that these policies will have any permanent effect or multiplier effect or anything like that on the real economy. Sorry. Maybe regulatory reform has a long-lasting impact. Maybe. No, by “real”, I mean that this policy “reform” is a highly effective signal in the Common Knowledge Game and that it will make stocks go up regardless of its impact (or not) on the real economy. Ain’t that enough? It’s enough for me. The Trump reform and infrastructure Growth Narrative is a tailwind for stocks and a headwind for bonds for the next four years because we want to Believe. True that.

Second, nothing about the Trump reform and infrastructure Growth Narrative is sufficient, in my view, to undo the overwhelmingly negative constraints that massive global debt places on global growth. The Silver Age of the Central Banker is still in full force,with a shrinking global trade pie and domestic political imperatives that accelerate that decline rather than reverse it. Competitive monetary policy is the Borg. First it swallows up currencies, because that’s what currencies are — a reflection of your country’s monetary policy versus other countries’ monetary policies. Then it swallows up commodities — things that don’t have their own cash flow dynamics. Then it swallows up entire economies and swaths of the markets that are levered to commodities — emerging markets in general and developed market segments like industrials, energy and transports in particular. Ultimately it all comes down to monetary policy, and its primary reflection in currencies. It’s the Borg. Resistance is futile.

Here’s an updated chart showing the massive negative correlation between the dollar and oil. This is the trade-weighted broad dollar index in white, as measured by the vertical axis on the left, and this is the inverted spot price of crude oil in green, as measured by the vertical axis on the right. The chart starts in June 2014, because that’s when competitive monetary policy and the Silver Age of the Central Banker begins, when Mario Draghi doubled down on ECB asset purchases and negative interest rates at the same time that Janet Yellen declared her intentions to raise interest rates and forswore more asset purchases.

Yes, you get short-lived divergences in the lockstep negative correlation, first at the end of 2014 when OPEC announces that they’re out of the price-fixing game, and then again a month ago when OPEC announces that they’re back in the price-fixing game. The joke’s on OPEC. And global macro investors who still think that OPEC matters, I suppose, but mostly on OPEC. The half-life of whatever OPEC does or doesn’t do is measured in days … weeks at most. What is persistent, what is irresistible, what is the Borg in this equation is whether the dollar is going up or down.

The Trump reform and infrastructure Growth Narrative makes the dollar go up. If the Fed raises rates in December the dollar will go up still more. If you get a bad vote in Italy in a few weeks the dollar will go up still more. If you get any sort of geopolitical shock or U.S. domestic political craziness the dollar will go up still more. Dollar up is bad. Dollar down is good. I don’t know how to say it more plainly than that, and all the Belief in the world about tax reform and repealing Dodd-Frank and all that doesn’t change this reality. Maybe you see that and maybe you don’t. I can promise you, though, that China sees it.

So that’s where I am as an investor. I’m positive on U.S. equities because we’ve got a four year tailwind from the Trump reform and infrastructure Growth Narrative. That’s not going away no matter what China or Europe does. On the other hand, I’m negative on global risk assets, particularly anything connected to global trade finance, because we’re players in several giant games of Chicken and I think at least one of these is going to break bad. But at least I’m looking at the right things (I think), like what’s happening to the dollar and to European financial credit spreads, and that’s what gives me the hope that I can navigate these risks and these rewards. That and the ability to go short.

So I’m giddy about the potential of the Narrative Machine and I’m hopeful that I can maneuver through the investment storms out there. Why am I so down about American politics?

Well, you gotta admit that this September Epsilon Theory note, “Virtue Signaling, or Why Clinton is in Trouble”, has aged pretty well. Turns out that Hillary Clinton was, in fact, the Jay Cutler of this election cycle, a highly talented but highly flawed performer whose team refused to sell out for her. I stand by everything I wrote in this piece — each candidate will be remembered in Common Knowledge as the Yoko Ono of their respective party, breaking up an all-time great band to make an album or two of dubious, to be generous, quality.

And that means I also stand by what I wrote about Donald Trump. I think he breaks us. Why? Because everything is a deal to Trump. Everything is a transaction, from a vote to a policy to a personal relationship. We all know people like this, men who — as the old Wall Street saying goes — would sell their mother for an eighth. Donald Trump transforms positive-sum Cooperative Games into zero-sum Competitive Games. It’s his nature … his great gift as a New York real estate developer, but his fatal flaw as a politician. Is he “a fighter”? Can he “get deals done”? Sure, and there’s value in that. But OUR great gift as Americans is that we are blessed with positive-sum Cooperative Games in the form of limited government and the political culture to maintain those limitations. Our political culture has been changed by Trump. The teacup has been broken. Can we glue it back? I suppose. But like a broken marriage or a broken partnership it’s never the same. It’s always a broken teacup.

I’m not saying that this broken political culture is Trump’s fault. Like I said, it’s his nature to transform everything he touches into a competitive strategic interaction. I can’t blame him any more than I can blame my Sheltie for barking at the wind. If you don’t want barking, don’t get a Sheltie. But the FACT is that we’ve got a Game Changer for our political culture as president, and there’s no walking that back.

Example: look at the prevalent Democratic meme today, that Trump voters were either motivated by racism directly, or that they willfully tolerated a racist candidate … which is just a paler shade of racism. Okay. I get the argument, although I would ask why Clinton didn’t get the support of working class white voters in Wisconsin, Michigan, and Pennsylvania who voted for Obama twice. Were they racist all along and just hiding it really well? But leave aside the merits of the argument, because there’s no changing anyone’s mind these days on the merits of anything (which is kinda my point). My question is a different one. If you really believe this … if you believe in your heart of hearts that Trump voters are racists … where do you go with this? Or rather, what does politics mean to you now? Politics is no longer a “marketplace of ideas” if you think the other side is comprised of bad guys. You’re not trying to win them over. You’re trying to beat them. Not because you think you’re right (although you do), but because you think you MUST beat them or else your own survival is at stake. It’s not only a zero-sum Competitive Game; it’s a zero-sum Competitive Game of self-defense, which means that anything — anything! — goes.

I’m not trying to pick on the Democratic memes (although they’re such easy targets). You see exactly the same sort of popular Narratives on the Republican side about Democratic voters. To summarize this vast oeuvre, if you’re willing to vote for the evil Hillary and her coven of soul-devouring, child-stealing, gun-confiscating, tax-raising, war-starting warlocks and witches … well, you must either be a sheep or a thieving Team Elite wannabe. Either way, you’re contemptible. Contemptibles and Deplorables, not Democrats and Republicans. My point is that if you believe that the people on the other side of a political argument are not just wrong, but are basically bad people, then the meaning you ascribe to politics — your political culture — is entirely different than if you think the other side is comprised of basically good people. You don’t cooperate with bad people, and the political institutions you favor if you’re surrounded by bad people are very different — and very un-American, in the de Tocqueville-ian sense of that word — than what the Founders came up with.

Look, Trump is no Hitler — that’s Erdogan’s shtick — and Trump’s preening egomania is actually a good thing because it crowds out ideological fervor. I mean, he’s not building a political machine to instantiate His Hugeness in institutional form. But there will be people around him who will try, and unfortunately, if I were a betting man — and I am — I’d bet on them to succeed. The rewards are too great and the technological tools at their disposal are too powerful and the political culture is too conducive to the effort and if it’s not them it will be the Thermidorean political reaction of the Left, and that depresses the bejeezus out of me. True that, too.

But that’s the World As It Is, a world of incredible technological promise that thrills the puzzle-solver in me, a world of reasonably interesting market patterns that gives hope to the investor in me, and a world of ascendant soft authoritarians that chastens the small-l liberal in me. I don’t think I’m alone. Put it all together, and my attitude is perfectly summed up by the most perfect ending in all of American literature.

So we beat on, boats against the current, borne back ceaselessly into the past.

Onwards. Together. Please.

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Simple clarification flowchart for snowflakes, swamp-rates, and sanctuary-dwellers…

 

Source: The Burning Platform

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Submitted by Charles Hugh-Smith via OfTwoMinds blog,

So where will mobile capital flow in an environment of rising socio-political risk, a multi-year USD uptrend and a dearth of safe, liquid markets?

On October 3rd I asked Is the U.S. Dollar Set to Soar? It seems the answer was yes. Here's the weekly chart of the USD I posted on October 3rd:

And here's the current weekly chart of the USD:

Note the apparent breakout above 100 and the constructive similarities to the 2014 breakout that was followed by a 20% increase in the purchasing power of the USD relative to other currencies.

This begs the question: could the US dollar be starting another extended leg higher that would eventually take it to 120, a 20% gain from its current level?

This raises a further question–why shouldn't the USD rise another 20%? Longtime readers are all too familiar with my many essays on the US dollar over the past four years, and so they shouldn't be surprised that the USD is moving higher.

While I have great respect for the analytic skills of the many dollar bears who have expected the USD to decline or collapse, we all have to respect the market's movement. In the case of currencies (which trade in the trillions of dollars daily), it's difficult to make a persuasive case that currency trends are driven by central bank interventions.

Policies such as interest rates and bond-buying, yes–intervention, not likely. The currency markets trade the entire Federal Reserve balance sheet–roughly $4 trillion–every two days.

So we have to look beyond manipulation for explanations of the USD's uptrend. The conventional view–which I have shared–is that the trend toward higher yields in the U.S. acts as a magnet for capital in a zero or negative-yield global economy.

The other dynamic that have been widely covered is the demand for USD to pay loans denominated in dollars.

While these explanations make sense, they don't tell the whole story.

Let's start with the foundation of currency supply and demand: capital flows.

The key characteristic of financial capital is its mobility. Mines and farmland are immobile, factories are costly and time-consuming to move, and labor is only mobile on the margins: the majority of the workforce is anchored by family, language and familiarity to their country or region of origin.

Moving to a new locale and new type of work is costly in terms of time, money and effort, and fraught with risks.

Now compare the ease of moving electronic money around the world. A few clicks and a few seconds are all that's needed.

The story of the financialization and globalization of the planet's economy is ultimately a story of easing the flow of capital. The neoliberal philosophy places a premium on easing capital flows in and out of any market, and turning every corner of the world into a market that is accessible to mobile capital.

As Marx foresaw, this removal of obstructions to the movement of finance capital has elevated finance capital to the dominant form of capital: industrial capital is no match in mobility and thus in profitability.

China is a good example of this. Chinese manufacturers typically operate on razor-thin margins, and many state-owned enterprises lose money and are only kept afloat by subsidies or state-bank-issued loans that are forms of state subsidies.

The big money being made in China is financial, not industrial. This story is repeated everywhere that capital has mobility. In emerging markets, hot money flooded in when the USD was in a downtrend, inflating bubbles in local real estate, stock markets and commodities as finance capital reaped the profits from rising emerging market currencies.

When the USD trend reversed, mobile capital cashed out and left the emerging markets in a digital flood tide. The mobile-capital driven bubbles in currencies, stocks, real estate and commodities all deflated, devastating markets and the social structures that depend on markets' expansion.

The global rise of populism is raising doubts about the stability of a status quo that has greatly enriched the few at the expense of the many. This rising wealth/income inequality is the result of mobile capital's ascendance to supremacy in profitability and political influence.

So where will mobile capital flow in an environment of rising socio-political risk, a multi-year USD uptrend and a dearth of safe, liquid markets? To answer, put yourself in the shoes of a manager responsible for $10 billion. You want to gamble billions in this environment on bat guano futures or hotel developments denominated in illiquid currencies?

Or would you rather buy USD-denominated assets that will gain in value regardless of their yield as the USD marches higher, and be able to sleep at night?

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Jill Stein’s credibility seems to be sinking fast as both the Obama administration and the Clinton campaign have released statements this morning indicating they’ve failed to uncover a single shred of election hacking evidence.  The Obama administration confirmed their confidence in the election results via comments made to the New York Times saying that the election was “free and fair from a cybersecurity perspective” and that votes “accurately reflect the will of the American people.”

The Obama administration said on Friday that despite Russian attempts to undermine the presidential election, it has concluded that the results “accurately reflect the will of the American people.”

 

The statement came as liberal opponents of Donald J. Trump, some citing fears of vote hacking, are seeking recounts in three states — Wisconsin, Michigan and Pennsylvania — where his margin of victory was extremely thin.

 

In its statement, the administration said, “The Kremlin probably expected that publicity surrounding the disclosures that followed the Russian government-directed compromises of emails from U.S. persons and institutions, including from U.S. political organizations, would raise questions about the integrity of the election process that could have undermined the legitimacy of the president-elect.”

 

That was a reference to the breach of the Democratic National Committee’s email system, and the leak of emails from figures like John D. Podesta, Hillary Clinton’s campaign chairman.

 

“Nevertheless, we stand behind our election results, which accurately reflect the will of the American people,” it added.

 

The recount efforts have generated pushback by experts who said it would be enormously difficult to hack voting machines on a large scale. The administration, in its statement, confirmed reports from the Department of Homeland Security and intelligence officials that they did not see “any increased level of malicious cyberactivity aimed at disrupting our electoral process on Election Day.”

 

The administration said it remained “confident in the overall integrity of electoral infrastructure, a confidence that was borne out.” It added: “As a result, we believe our elections were free and fair from a cybersecurity perspective.”

 

The statement from the White House was followed by a statement from Hillary’s general counsel, Marc Elias, who confirmed that they too “had not uncovered any actionable evidence of hacking or outside attempts to alter the voting technology.”

Because we had not uncovered any actionable evidence of hacking or outside attempts to alter the voting technology, we had not planned to exercise this option ourselves, but now that a recount has been initiated in Wisconsin, we intend to participate in order to ensure the process proceeds in a manner that is fair to all sides. If Jill Stein follows through as she has promised and pursues recounts in Pennsylvania and Michigan, we will take the same approach in those states as well. We do so fully aware that the number of votes separating Donald Trump and Hillary Clinton in the closest of these states—Michigan—well exceeds the largest margin ever overcome in a recount.

Of course, while Stein reiterated numerous allegations of foreign
hacking that were well circulated, yet never officially linked to a specific source, before the election, her petition didn’t offer a single shred of actual, tangible evidence that the election results in Wisconsin were in anyway tampered with. 

In August 2016, it was widely reported that foreign operators breached voter registration databases in at least two states and stole hundreds of thousands of voter records.

 

Around that time, hacker infiltrated the e-mail systems of the Democratic National Committee and a campaign official for Democratic presidential candidate Hillary Clinton.  These e-mails were then published online. 

 

On October 7, 2016, the Department of Homeland Security (DHS) and the Office of the Director of National Intelligence on Election Security issued a joint statement regarding these breaches.  The statement reads, in pertinent part, as follows:  “The U.S. Intelligence Community (USCI) is confident” that there have been “recent compromises of e-mails from US persons and institutions, including from US political organizations.”  It also states that “[t]here thefts and disclosures are intended to interfere with the US election process” and that “similar tactics and techniques [have been used] across Europe and Eurasia…to influence public opinion there.”  In the statement, DHS urges state election officials “to be vigilant and seek cybersecurity assistance” from that agency in preparation for the presidential election.

 

In Wisconsin, there is evidence of voting irregularities in the 2016 presidential election that indicate potential tampering with electronic voting systems.  Specifically, there was a significant increase in the number of absentee voters as compared to the last general election.  This significant increase could be attributed to a breach of the state’s electronic voter database.

 

The well-documented and conclusive evidence of foreign interference in the presidential race before the election, along with the irregularities observed in Wisconsin, call into question the results and indicate the possibility that a widespread breach occurred.

 

Even her so-called “computer science expert” offered up nothing more than baseless theories on “plausible” explanations of how the Wisconsin results may have been hacked.  Sure, because it’s just so impossible to believe that a flawed candidate with multiple ongoing FBI criminal investigations may have simply lost the election.   

 

So, the question becomes how will Jill Stein respond now that the establishment seems to be turning on her and what exactly will happen to the $5.8mm she raised if recount efforts are suspended?  Somehow we suspect the disaffected Hillary donors won’t simply get their money back.

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After weeks without a public appearance, which prompted many to speculate that Julian Assange has disappeared, or may even be dead, the curious public demanded evidence that the Wikileaks founder is all right.

As Inquisitr reported, those pushing the theory that Julian Assange, an alleged candidate for Time’s person of the year award, is missing or even dead have cited a number of seemingly strange coincidences in the past few weeks. Those include an incident in November when WikiLeaks tweeted insurance files and SHA-256 hashes that did not match previous tweets. To put it simply, this indicated to conspiracy theorists that WikiLeaks and Julian Assange were no longer in control of the Twitter account.

Another piece of evidence came from an interview with John Pilger, who claimed that it took place on October 30. But those who watched the interview noted that it had several strange points, like the fact that Assange’s audio had been edited together and there were no references to current events. Regated compiled a list of all the major points cited in the conspiracy theory, including the incident of the hashes not matching and the Pilger interview.

It got to the point where on Thursday WikiLeaks urged people to stop asking for Assange ‘proof of life’. “Please stop asking us for ‘proof of life’. We do not control Assange’s physical environment or internet connection. @MashiRafael does,” the whistleblowing website tweeted on Thursday.

Please stop asking us for “proof of life”. We do not control Assange’s physical environment or internet connection. @MashiRafael does.

— WikiLeaks (@wikileaks) November 24, 2016

However, on Saturday, the concerned public may have finally gotten their answer when Julian Assange emerged, and gave an audio interview as part of the Free Connected Minds conference.

The first indirect proof of life came earlier today, when Craig Murray, the former British Ambassador to Uzbekistan, human rights activist and writer, reported that he had “just got back after a long chat with Julian Assange. We were joined for a light supper by the ever interesting and ebullient Yanis Varoufakis. Another of those brilliant evenings that will live in the mind.  Julian is very aware of the persistent rumours about his position or health. He is fine apart from a cold, and buoyed by recent events.”

Setting the World to Rights – Just got back after a long chat with Julian Assange. We were joined for a light https://t.co/TS7rIFcK15

— Craig Murray (@CraigMurrayOrg) November 26, 2016

Subsequently, the FCM conference relased the full 1 hour recording of the conversation with the supposedly sick Assange, which can be heard below.

Many topics were discussed and touched upon by the (at times unintelligible) Assange, among them the manipulated role of the media – a sensitive topic these days, what the role of the West has been in creaing ISIS, the issue of public ignorance in society today.

More importantly Assange clearly states, 50 minutes into the interview, that his team remains in control of Wikileaks, explicitly telling moderator Youmna Naufal that “CIA taking over wikileaks is false.”

I asked #Assange about the rumors of #WikiLeaks not being in their control anymore. He said it still was #FCM16 #Beirut https://t.co/l2GvlZp8Mx

— Youmna Naufal (@YoumnaNaufal) November 26, 2016

While there was much more in the full interview, which is below, the take home message is that Assange “sounds” to be safe and sound, for the time being.

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Submitted by Sanjay Reddy via INETEconomics.com,

How orthodox economics paved the way for the political shocks of 2016

Grappling with the shock of Donald Trump’s election victory, most analysts focus on his appeal to those in the United States who feel left behind, wish to retrieve a lost social order, and sought to rebuke establishment politicians who do not serve their interests. In this respect, the recent American revolt echoes the shock of the Brexit vote in the United Kingdom, but it is of far greater significance because it promises to reshape the entire global order, and the complaisant forms of thought that accompanied it.

Ideas played an important role in creating the conditions that produced Brexit and Trump. The ‘social sciences’ — especially economics — legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics  in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy.

It is never clear whether ideas or interests are the prime mover in shaping historical events, but only ideas and interests together can sustain a ruling consensus for a lengthy interval, such as the historic period of financialization and globalization running over the last 35 years. The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas.

First, there is globalization as we knew it. Mainstream economics championed corporate-friendly trade and investment agreements to increase prosperity, and provided the intellectual framework for multilateral trade agreements. Economics made the case for such agreements, generally rejecting concerns over labor and environmental standards and giving short shrift to the effects of globalization in weakening the bargaining power of workers or altogether displacing them; to the need for compensatory measures to aid those displaced; and more generally to measures to ensure that the benefits of growth were shared.  For the most part, economists casually waved aside such concerns, both in their theories and in their policy recommendations, treating these matters as either insignificant or as being in the jurisdiction of politicians.  Still less attention was paid to crafting an alternate form of globalization, or to identifying bases for national economic policies taking a less passive view of comparative advantage and instead aiming to create it.

 

Second, there is financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class.

 

Financialization also led to the near-abandonment of the ‘national’ industrial economy in favor of global sourcing and sales, and a handsome financial rentier economy built on top of it. Meanwhile, automation trends led to shedding of jobs everywhere, and threaten far more.

 

All of this was hardly noticed by the discipline charged with studying the economy. Indeed, it actively provided rationales for financialization, in the form of the efficient-markets hypothesis and related ideas; for concentration of capital through mergers and acquisitions in the form of contestable-markets theory; for the gentrification of the city through attacks on rent control and other urban policies; for remaking of labor markets through the idea that unemployment was primarily a reflection of voluntary leisure preferences, etc.  The mainstream political parties, including those historically representing the working and middle classes, in thrall to the ‘scientific’ sheen of market fetishism, gambled that they could redistribute a share of the promised gains and thus embraced policies the effect  of which was ultimately to abandon and to antagonize a large section of their electorate.

 

Third, there is the push for austerity, a recurrent trope of the ‘neoliberal’ era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance (though they can paradoxically simultaneously disdain taxation, as with Trumpism).  The often faulty intellectual case made by many mainstream economists for central bank independence, inflation targeting, debt sustainability thresholds, the distortive character of taxation and the superiority of private provision of services including for health, education and welfare, have helped to support antagonism to governmental activity. Within this perspective, there is limited room for fiscal or even monetary stimulus, or for any direct governmental role in service provision, even in the form of productivity-enhancing investments. It is only the failure fully to overcome the shipwreck of 2008 that has caused some cracks in the edifice.

The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.]

Finally, interpretations of politics were too restrictive, conceptualizing citizens’ political choices as based on instrumental and usually economic calculations, while indulging in a wishful account of their actual conditions — for instance, focusing on low measured unemployment, but ignoring measures of distress and insecurity, or the indignity of living in hollowed-out communities.

Mainstream accounts of politics recognized the role of identities in the form of wooden theories of group mobilization or of demands for representation. However, the psychological and charismatic elements, which can give rise to moments of ‘phase transition’ in politics, were altogether neglected, and the role of social media and other new methods in politics hardly registered. As new political movements (such as the Tea Party and Trumpism in the U.S.) emerged across the world, these were deemed ‘populist’—both an admission of the analysts’ lack of explanation, and a token of disdain. The essential feature of such movements — the obscurantism that allows them to offer many things to many people, inconsistently and unaccountably, while serving some interests more than others — was little explored. The failures can be piled one upon the other. No amount of quantitative data provided by polling, ‘big data’, or other techniques comprehended what might be captured through open-eyed experiential narratives. It is evident that there is a need for forms of understanding that can comprehend the currents within the human person, and go beyond shallow empiricism. Mainstream social science has offered few if any resources to understand, let alone challenge, illiberal majoritarianism, now a world-remaking phenomenon.

Trumpism is a crisis for the most prestigious methods of understanding economic and social life, ennobled and enthroned by the metropolitan academy of the last third of a century. It has caused mainstream ‘social science’ to fall like a house of cards. It can only save itself through comprehensive reinvention, from the ground up

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Amid increasing social unrest, a collapsing currency (against the dollar), and an economy at a standstill, there has been another growing fear in India that has spooked many around the world.

The rumors and speculation of an Indian gold import ban (or even an outright ban on gold ownership) have sparked panic-buying of the precious metal sending retail premia soaring at local jewelers. In an effort to quell the 'uproar', a top Indian finance minister has confirmed the government is not considering an plans to restrict holdings of gold by individuals.

As a reminder, Acting-Man.com's Pater Tenebrarum notes that in the recent past, India’s government has also launched several initiatives aimed at reducing gold purchases by Indian citizens. For one thing, it is asserted that the gold hoards held by citizens are “unproductive” and a sign of India’s backwardness that needs to be eradicated in the name of modernization. Another  official reason is that government wants to lower the country’s trade deficit. Since India isn’t producing much gold, it is importing quite a lot; in recent years gold imports oscillated around 700 tons per year.

 

India’s trade deficit over the past decade – cick to enlarge.

 

The world’s governments are almost without exception comprised of  economically ignorant mercantilists who believe that a trade deficit is a symptom of declining wealth. Naturally, India’s government is no different in this respect. This mercantilist view of trade is one of the most “sticky” and widespread economic errors in history (evidently, not only prices and wages are “sticky”…). It is a direct result of viewing the economy through a collectivist lens instead of through the lens of methodological individualism. The government’s efforts included raising a tariff on gold imports (ever since, India’s gold import statistics are no longer reliable, as a lot of gold is smuggled in), as well as urging the creation of assorted “paper gold” products by commercial banks.

The latter were supposed to entice citizens to deposit their gold with banks in exchange for paper receipts. You have one guess why the government would be eager to see that happen.

India’s citizens have a traditional affinity for gold. Gold is not only a “love trade”  for Indians though, as our friend Ronnie Stoeferle puts it. They also buy gold because they don’t trust their government and its economic policies.

 

Looking good, ma’am.

 

As has just been demonstrated again, this is quite a healthy attitude – even if the  government of the day is widely considered to be “good for the economy” (Mr. Modi’s government has indeed adopted a number of positive economic reforms as well in the past). Not only can it be very costly to trust the government, there is obviously also a big difference between looking at and fondling actual metal, as opposed to a bank receipt for a gold deposit. If you try it, you will see it is just not the same. Indian women love gold adornments and gold jewelry plays a major role as a wedding present that concurrently serves as a store of wealth. Hence the government’s efforts to “wean the citizenry off gold” have completely failed to gain traction.

It remains to be seen if the government will get away unscathed with the recent demonetization of large denomination banknotes. As Jayant has pointed out, Mr. Modi has actually enjoyed widespread popular support for the measure – at least initially. Certain segments of society continue to be supportive, depending on the degree to which they are actually affected by the ban.

 

The degree of Modi’s support is presumably inversely proportional to the length of time spent in such queues.

 

After two weeks of increasing chaos and ample demonstrations of government ineptitude, the political opposition has finally decided to join the fray and is now beginning to forcefully denounce the measure.

Parliament was adjourned after an “uproar” over the currency ban,  the opposition is organizing an “all India protest” for November 28, as it is now united in opposing the ban.  Moreover, allegations that the plan was leaked to certain people in advance have surfaced (that wouldn’t surprise us one bit).

As Jayant has rightly pointed out in the third part of his articles on the currency ban, the evolving situation is forcing the government to continually issue new ad hoc decrees in order to stop people from successfully fighting the edict.

Similar to the attempts of the post-revolutionary assembly of France to defend the assignat in the late 18^th century, it is resorting to increasingly repressive steps (the most recent one is that it has apparently suddenly shortened the grace period for banknote exchanges, concurrently with announcing that it will impose a  tax penalty on “too large” deposits).

This has led to speculation that gold may be in the government’s cross hairs next.  As the thinking goes, if it can ban certain banknotes, surely it can also enact a ban on gold imports? As an aside, an outright ban on gold ownership seems highly unlikely, as that would probably cause more than just an “uproar”.

 

Banning gold ownership is out of the question.

Also, some of the largest gold hoards are held by temples – in other words, the country’s religious establishment would undoubtedly be less than amused.

*  *  *

And so, clearly seeking to calm these fears, a top finance ministry source said on Friday that the government is not considering any proposal to restrict holdings of gold by individuals. As The India Times reports, following the demonetisation of 500 and 1,000 rupee notes in a bid to crack down on black money, there were apprehensions among people that the government might impose some kind of restrictions on gold holding by individuals.

"There is no such proposal before the government on restricting domestic gold holding," the source said.

 

There were reports that many people have converted their black money into gold following the announcement of demonetisation of high denomination currency notes by Prime Minister Narendra Modi on November 8.

Of course, we note that there was no official denial of any proposals to impose a gold import ban.

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Submitted by Charles Hugh-Smith via PeakProsperity.com,

A remarkably diverse array of “explanations” of Donald Trump’s presidential election victory have been aired, representing both the conventional political spectrum and well beyond.

Let’s start with the conventional mainstream media “explanations”:

#1: Trump was elected by intolerant Americans, i.e. “deplorables” who are intolerant of immigrants, Muslims, women’s rights, gays, etc. while being overly attached to firearms and the Christian religion.

This sort of broad-brush slander is emotionally appealing to those who lost the election, as it enables the losing party to claim the high moral ground. (It’s also classic propaganda, a topic Chris addressed in a recent series.) But it overlooks the many Progressives who voted for Trump but did not dare announce their choice to their hysterically intolerant Democratic loyalist friends. For example, consider this female voter’s account: Liberals Should Stop Ranting And Seek Out Silent Trump Voters Like Me.

Another "explanation", though satisfying in terms of self-righteousness, has no credible explanatory value.

#2: Trump didn’t win the election, Hillary Clinton lost it.

This “explanation” constructs a narrative from polling data: African-American voters did not turn out for Hillary in the same high percentages as they did for President Obama, a surprising number of higher income households voted for Trump, etc.  If Hillary had drawn the expected percentages of voters, she would have won.

This “explanation” explains nothing, as it ignores the larger issues that drove voters to vote or not vote.

#3: The unprotected Americans (to use Peggy Noonan’s term) who have seen their incomes and security decline in the age of neoliberal globalization voted for Trump to reject globalism, unfettered immigration and free trade.

This narrative is ably dissected in this 5-part series from Spiegel.de: Inequality, Market Chaos and Angry Voters: A Turning Point for Globalization

In the U.S. media, this narrative is typically characterized as a sports event: the “losers” of neoliberal globalization struck back at the “winners.”

This explanation draws upon well-established economic trends: sharply rising inequality, the hollowing out of the Rust Belt and rural economies in “flyover” America, etc.

#4: Trump’s victory is another manifestation of the global revolt against elites.  

Defenders of the status quo—broadly speaking, neoliberalism’s financial “winners” and the ruling elites—are quick to equate outbreaks of populism with the dreaded scourge of fascism. In the defenders’ accounts, the rightist, nationalistic populism of the 1930s led directly to fascism.

The article titles in the December 2016 issue of Foreign Affairs summarize the conventional characterization of populism as reactionary and dangerous–never mind that populism can also be leftist (look at the anti-globalist movement) or largely apolitical:

• Populism on the March: Why the West Is In Trouble
• Trump and American Populism: Old Whine, New Bottles
• Populism Is Not Fascism, But It Could Be a Harbinger

There are few if any positive words for populist movements in these essays, and precious little recognition of populism’s potential to upend a grossly corrupt, inefficient and self-serving global elite—an elite that richly deserves to be cashiered.

While the mainstream media grudgingly admits that the ruling elites paid little attention to soaring income and wealth inequality, or to globalism’s “losers,” the answer to defenders of the status quo is the usual grab-bag of policy tweaks that leave the ruling elites and their media apologists firmly in charge.

#5: Trump has been set up as the fall-guy for an economy that is teetering on the edge of recession or even depression. The coming recession/depression will discredit Trump and the populist/nationalist movement, setting the stage for the neoliberal globalists to return triumphantly to power in four years.

While many of us wouldn’t put such nefarious scheming past the globalist elites, this doesn’t quite align with the reality that virtually everyone, mainstream or alternative, left or right, dismissed Trump’s presidential campaign as a media-circus sideshow staged by a narcissist.

Since virtually no one expected him to win when he entered the race, why would globalists support him when their candidate, Hillary Clinton, was a shoo-in? Rather than pick him as a fall-guy for an economic depression, the claim that he was picked by globalists as an easy target for defeat (another alternative media narrative) makes more sense.

But the reality is nobody could predict Trump’s victory, and theories based on the idea that he was set up as a fall-guy presume the globalists rigged the election for their candidate (Hillary) to lose.  Why install a “dangerous” populist when you could install your candidate?

#6: The Clinton campaign was a “quiet coup” of corrupt elites intent on solidifying the merger of private-sector/philanthro-capitalist pay-for-play and government functions.  A “counter-coup” staged by elements of the Deep State (i.e. the unelected permanent government that remains in power regardless of which party is in office) foiled Clinton’s quiet coup.

As farfetched as this might sound, Clinton insider Sidney Blumenthal accused the FBI of staging a “coup” by reopening the investigation into Clinton’s emails.

While I didn’t use the inflammatory word “coup,” I have outlined the possibility that more forward-looking elements of the Deep State concluded neoliberalism, neoconservative intervention (i.e. endless wars of choice) and institutionalized pay-to-play corruption threatened the security of the nation and had to be thwarted at the ballot box: Why the Deep State Is Dumping Hillary.

While there is little public evidence of this power struggle – the Deep State doesn’t operate in the public gaze – there are plenty of circumstantial clues that the Deep State is not a monolith of neocon neoliberalism.

Conclusion (to Part 1)

Can we summarize these narratives (some competing, some overlapping) in any instructive fashion? I think we can roughly divide them into three categories:

1. Moral claims: the neoliberal “progressives” are morally superior to the “deplorables” and so the neoliberals (the remarkably intolerant “tolerants”) deserved to win on moral grounds; alternatively, the pay-to-play Clinton camp is ethically bankrupt and its claims to the moral high ground are hypocritical.
2. Elite machinations: insiders either set up Trump as the easy-to-beat opponent or as the fall-guy for the coming depression; alternatively, the Deep State was split into two camps, the neocons who backed Hillary and the insurgents who saw Hillary as a threat to national security.
3. Structural economic/social issues: rising wealth/income inequality and the decline of the bottom 95% finally had political consequences.

In Part 2: Why The Ruling Elite Are Becoming Frightened, we examine a hybrid argument that synthesizes each of these categories in a single narrative that explains well what is likely truly going on: The masses have (finally!) reached the point where the pain of maintaining the status quo now exceeds that of breaking it. A People's Coup has been set in motion, of which the election of Trump is just an early example of the unexpected and jarring surprises that lie ahead.

What will this coup look like? Will it succeed?

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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This morning Hillary Clinton’s campaign general counsel, Marc Elias, confirmed what we all knew already, namely that Jill Stein is likely acting at the direction of the Clintons in her recount efforts in WI, MI and PA.  The discovery came after Elias posted a note to Hillary voters this morning on Medium confirming that they would participate in Stein’s recount efforts even though the Clinton campaign itself had decided against a recount because they had “not uncovered any actionable evidence of hacking or outside attempts to alter the voting technology.”  This approach seems to align perfectly with the strategy we laid out two days ago:

We joke, of course, as Jill Stein’s effort to raise money for recounts in WI, PA and MI is obviously being done on behalf of the Hillary Clinton campaign.  It’s a very clever approach (we would expect nothing less) as it allows Hillary to maintain the high road as the gracious loser while allowing someone else to play the bad guy…typical Clinton politics really.

That said, since Jill Stein decided to act “completely independently” to waste the money of a bunch of donors the Hillary general counsel figures they might as well participate despite the fact that “the number of votes separating Donald Trump and Hillary Clinton in the closest of these states—Michigan—well exceeds the largest margin ever overcome in a recount.”

Because we had not uncovered any actionable evidence of hacking or outside attempts to alter the voting technology, we had not planned to exercise this option ourselves, but now that a recount has been initiated in Wisconsin, we intend to participate in order to ensure the process proceeds in a manner that is fair to all sides. If Jill Stein follows through as she has promised and pursues recounts in Pennsylvania and Michigan, we will take the same approach in those states as well. We do so fully aware that the number of votes separating Donald Trump and Hillary Clinton in the closest of these states—Michigan—well exceeds the largest margin ever overcome in a recount. But regardless of the potential to change the outcome in any of the states, we feel it is important, on principle, to ensure our campaign is legally represented in any court proceedings and represented on the ground in order to monitor the recount process itself.

Of course, Clinton’s failure to find any evidence of vote tampering was not for a lack of trying.  Elias also highlighted the five steps they took, including having “lawyers and data scientists and analysts combing over the results to spot anomalies that would suggest a hacked result,” to come up with some reason to launch their own election challenge.  Why is it so hard to believe that Hillary simply lost the election?

First, since the day after the election we have had lawyers and data scientists and analysts combing over the results to spot anomalies that would suggest a hacked result. These have included analysts both from within the campaign and outside, with backgrounds in politics, technology and academia.

 

Second, we have had numerous meetings and calls with various outside experts to hear their concerns and to discuss and review their data and findings. As a part of this, we have also shared out data and findings with them. Most of those discussions have remained private, while at least one has unfortunately been the subject of leaks.

 

Third, we have attempted to systematically catalogue and investigate every theory that has been presented to us within our ability to do so.

 

Fourth, we have examined the laws and practices as they pertain to recounts, contests and audits.

 

Fifth, and most importantly, we have monitored and staffed the post-election canvasses—where voting machine tapes are compared to poll-books, provisional ballots are resolved, and all of the math is double checked from election night. During that process, we have seen Secretary Clinton’s vote total grow, so that, today, her national popular vote lead now exceeds more than 2 million votes.

But we thought Hillary was outraged by Trump’s comment that he wouldn’t blindly accept the outcome of the election.  Well this is awkward.

 

* * *

For those who missed it, here is what we posted yesterday about the recount effort in Wisconsin.

It’s official, the Wisconsin Election Commission just confirmed that a recount petition has been filed by Jill Stein just ahead of the 5pm deadline. 

The Wisconsin Elections Commission has received recount
petitions from both the Stein and De La Fuente campaigns https://t.co/ksJ7dP35zm

— Wisconsin Elections (@WI_Elections) November 25, 2016

 

Per a press release posted to the Commission’s website, the recount will start late next week after the appropriate personnel have been assembled and after Stein pays the recount fee.  While no expectations were given for a completion date, the Commission noted that the federal deadline for all recounts is December 13th.

“The Commission is preparing to move forward with a statewide recount of votes for President of the United States, as requested by these candidates,” Haas said.

 

“We have assembled an internal team to direct the recount, we have been in close consultation with our county clerk partners, and have arranged for legal representation by the Wisconsin Department of Justice,” Haas said. “We plan to hold a teleconference meeting for county clerks next week and anticipate the recount will begin late in the week after the Stein campaign has paid the recount fee, which we are still calculating.”

 

The last statewide recount was of the Supreme Court election in 2011.  At that time, the Associated Press surveyed county clerks and reported that costs to the counties exceeded $520,000, though several counties did not respond to the AP’s survey.  That election had 1.5 million votes, and Haas said the Commission expects the costs to be higher for an election with 2.975 million votes.  “The Commission is in the process of obtaining cost estimates from county clerks so that we can calculate the fee which the campaigns will need to pay before the recount can start,” Haas said.  The Commission will need to determine how the recount costs will be assessed to the campaigns.

 

The state is working under a federal deadline of December 13 to complete the recount. As a result, county boards of canvassers may need to work evenings and weekends to meet the deadlines. “The recount process is very detail-oriented, and this deadline will certainly challenge some counties to finish on time,” Haas said.  

As a reminder, the official count shows a narrow 22,177 vote lead for Trump, or just 0.7% of the total 2,975,313 votes cast in the state.

 

While we haven’t yet heard Trump’s thoughts on the recount, Jill seems to be very enthusiastic.

BREAKING: We’ve filed in Wisconsin! #Recount2016 will begin next week. Volunteer to help: https://t.co/Bvrs0iP3lv https://t.co/B7tS87ggpI

— Dr. Jill Stein (@DrJillStein) November 25, 2016

 

Finally, below is Stein’s official petition filed with the Wisconsin Election Commission which includes all of her “evidence” of Russian election tampering from extremely credible and impartial sources like The New York Times, Chicago Tribune and NBC News.

Among other things, Stein’s petition cites the hacking of Arizona and Colorado voter registration databases, hacking of the DNC and John Podesta’s emails and high levels of absentee voters as the justifications for her recount request. 

In August 2016, it was widely reported that foreign operators breached voter registration databases in at least two states and stole hundreds of thousands of voter records.

 

Around that time, hacker infiltrated the e-mail systems of the Democratic National Committee and a campaign official for Democratic presidential candidate Hillary Clinton.  These e-mails were then published online. 

 

On October 7, 2016, the Department of Homeland Security (DHS) and the Office of the Director of National Intelligence on Election Security issued a joint statement regarding these breaches.  The statement reads, in pertinent part, as follows:  “The U.S. Intelligence Community (USCI) is confident” that there have been “recent compromises of e-mails from US persons and institutions, including from US political organizations.”  It also states that “[t]here thefts and disclosures are intended to interfere with the US election process” and that “similar tactics and techniques [have been used] across Europe and Eurasia…to influence public opinion there.”  In the statement, DHS urges state election officials “to be vigilant and seek cybersecurity assistance” from that agency in preparation for the presidential election.

 

In Wisconsin, there is evidence of voting irregularities in the 2016 presidential election that indicate potential tampering with electronic voting systems.  Specifically, there was a significant increase in the number of absentee voters as compared to the last general election.  This significant increase could be attributed to a breach of the state’s electronic voter database.

 

The well-documented and conclusive evidence of foreign interference in the presidential race before the election, along with the irregularities observed in Wisconsin, call into question the results and indicate the possibility that a widespread breach occurred.

Of course, while Stein reiterates numerous allegations of foreign hacking that were well circulated, yet never officially linked to a specific source, before the election, her petition doesn’t offer a single shred of actual, tangible evidence that the election results in Wisconsin were in anyway tampered with. 

Even her so-called “computer science expert” offers up nothing more than baseless theories on “plausible” explanations of how the Wisconsin results may have been hacked.  Sure, because it’s just so impossible to believe that a flawed candidate with multiple ongoing FBI criminal investigations may have simply lost the election.   

Perhaps Hillary could give us her opinion on whether or not questioning election results by throwing around wild accusations of vote tampering by rogue foreign states qualifies as a “direct threat to our democracy.”  Certainly, she had very strong feelings about Trump refusing to blindly accept the election results during the last debate.

 

Full recount petition as filed by Jill Stein:

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