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Submitted by Michael Shedlock via MishTalk.com,

The EU fired a major global trade war tit-for-tat retaliation today against US banks and the UK in a single action.

Brussels will raise costs for foreign lenders while simultaneously taking a pot shot at London.

 

Please consider EU to Retaliate Against US Bank Capital Rules.

Brussels is proposing to tighten its grip over overseas banks operating in the EU in a tit-for-tat step against the US that will raise costs for big foreign lenders and potentially hurt the City of London after Brexit.

 

The European Commission will unveil provisions on Wednesday that mirror controversial US “intermediate holding company” rules that ringfence foreign bank capital. When these were announced in 2014, the EU complained to Washington of “protectionism” and threatened to retaliate.

 

If adopted into EU law, the commission’s proposals would force big US investment banks such as Goldman Sachs and JPMorgan to hold additional capital and liquidity in the EU so their subsidiaries can be separately wound up in a crisis by European authorities.

 

The counterblow from Brussels, slipped into late drafts of the proposal, will be welcomed by European banks that have been complaining about an unlevel playing field with their US rivals. But it underlines the accelerating trend towards further fragmentation in financial rules, as jurisdictions assert control even at the risk of duplicating international requirements.

 

Although EU officials insist the proposal was drafted without Brexit in mind, the reforms would potentially affect London as a non-EU financial centre. The proposal could add costs and complexity to UK-based banks by forcing them to establish a separate pool of capital in the EU after the country leaves the bloc.

 

“This is a taste of what is to come,” said one adviser to an investment bank that would be affected by the rules. “At a time when everyone is rethinking bank structures, it adds one more point of uncertainty.”

 

He added: “If you must create an EU holding company that acts as your hub, the question becomes: how many European hubs do you want?”

 

The move is likely to stoke tensions between the US and Europe, which have already been ignited by a $14bn claim on Deutsche Bank from the US Department of Justice to settle claims of mis-selling mortgage securities.

 

European officials have also pushed back against US-led pressure for tough capital requirements to be introduced by the Basel Committee of global regulators in a move that some European banks claim would put them at a disadvantage to their US rivals.

 

US banks say they are already forced to hold significant amounts of capital and liquidity in their large UK operations. But if Europe presses ahead with the latest proposals, it could force them to increase the amount of resources they have tied up in Europe.

 

In 2014 Michel Barnier, then EU’s financial services commissioner, warned that US plans to force foreign banks to hold more capital were “protectionist” and risked bringing a “fragmentation of global banking markets”. Mr Barnier is now the commission’s chief Brexit negotiator.

The US and EU both want to be in control of a very fragmented and essentially insolvent global banking system.

It appears the UK was caught in the middle of a US-EU dispute, but in reality, the EU wanted to punish the UK and would have done this anyway.

Regardless, this adds fat to the fires of retaliations even as far bigger problems loom. Italy may be one vote away from leaving the Eurozone.

via http://ift.tt/2foaHrK Tyler Durden

US Municipal Bond yields have now risen for 10 straight days, spiking from 1.72% to 2.34% today – the highest since July 2015. This crash has now moved munis to the most-oversold-ever as the group suffers the biggest fund outflows since 2013’s taper tantrum.

The last 2 times that Muni yields spiked at such a pace marked dramatic buying opportunities…

 

Notably, Munis are also “cheapest” to Treasuries since Oct 2015…

As Bloomberg notes, BofA analyusts have pointed out that “the market sell off in munis is likely to continue to the end of November and into the first full week of December in a slow and negotiating fashion in order to reach an exhaustion point,” the report said.

Bank of America Merrill Lynch projects that the bull market in bonds that began in 1981 should run for another two years given the current and expected health of the global economy.

“This sloppy market provides buying opportunities, in our view.”

via http://ift.tt/2fo1znd Tyler Durden

Authored by Alastair Crooke, via Raul Ilargi Meijer's Automatic Earth blog,

We are plainly at a pivotal moment. President-Elect Trump wants to make dramatic changes in his nation’s course. His battle cry of wanting to make “America Great Again” evokes – and almost certainly is intended to evoke – the epic American economic expansions of the Nineteenth and Twentieth centuries.

Trump wants to reverse the off-shoring of American jobs; he wants to revive America’s manufacturing base; he wants to recast the terms of international trade; he wants growth; and he wants jobs in the U.S. – and he wants to turn America’s foreign policy around 180 degrees.

It is an agenda that is, as it were, quite laudable. Many Americans want just this, and the transition in which we are presently in – dictated by the global elusiveness and search for growth (whatever is meant now by this term “growth”), clearly requires a different economic approach from that followed in recent decades.

As Raúl Ilargi Meijer has perceptively posited, greater self-reliance “is the future of the world, ‘post-growth’, and post-globalization. Every country, and every society, needs to focus on self-reliance, not as some idealistic luxury choice, but as a necessity. And that is not as bad or terrible as people would have you believe, and it’s not the end of the world … It is not an idealistic transition towards self-sufficiency, it’s simply and inevitably what’s left, once unfettered growth hits the skids. …

“Our entire world views and ‘philosophies’ are based on ever more and ever bigger and then some, and our entire economies are built upon it. That has already made us ignore the decline of our real markets for many years now. We focus on data about stock markets and the like, and ignore the demise of our respective heartlands, and flyover countries …

 

“Donald Trump looks very much like the ideal fit for this transition … What matters [here] is that he promises to bring back jobs to America, and that’s what the country needs … Not so they can then export their products, but to consume them at home, and sell them in the domestic market …There’s nothing wrong or negative with an American buying products made in America instead of in China.

 

“There’s nothing economically – let alone morally – wrong with people producing what they and their families and close neighbours themselves want, and need, without hauling it halfway around the world for a meagre profit. At least not for the man in the street. It’s not a threat to our ‘open societies’, as many claim. That openness does not depend on having things shipped to your stores over 1000s of miles, that you could have made yourselves, at a potentially huge benefit to your local economy. An ‘open society’ is a state of mind, be it collective or personal. It’s not something that’s for sale.”

A Great Wish

That’s Trump’s ostensible great wish, (it seems). It is not an unworthy one, but things have changed: America is no longer what it was in the Nineteenth or Twentieth centuries, neither in terms of untapped natural resources, nor societally. And nor is the rest of the world the same either.

Mr. Trump rather unfortunately may find that his chief task will not be the management of this Great Re-orientation, but more prosaically, fending off the headwinds which he will face as he hauls on the tiller of the economy.

In short, there is a real prospect that his ambitious economic “remake” may well be prematurely punctured by financial crisis.

These headwinds will not be of his making, and for the main part, they lie beyond human agency per se. They are structural, and they are multiple. They represent the accumulation of an earlier monetary doctrine which will fetter the President-elect into a small corner from which any chosen exit will carry adverse implications.

Ditto for anyone else trying to steer any ship of state in this contemporary global economy. Paradoxically – in an era moving toward greater self-sufficiency – what success Trump may have, however, will likely depend not on self-reliance so much as he would like.

For his foreign policy about turn, he will depend on finding common interest with Russian President Vladimir Putin (that should not be too hard) – and for the economic “about turn” – on Trump’s ability not to confront China, but to come to some modus vivendi with President Xi (less easy).

“Things are not what they were.” Complexity “theory” tells us that trying to repeat what worked earlier – in very different conditions – will likely not work if repeated later. In the Clinton era, for example, 85 percent of the U.S. population growth derived from the working-age population. The headwind that Trump will face is that, over the next eight years, 80 percent of the population growth will comprise 65+ year olds. And 65+ year olds are not a good engine of economic growth. This is not an uniquely American problem; it is a global trend too.

 

“The peak growth” (according to Econimica blog), “in the annual combined working age population (15-64 year/olds) among all the 35 wealthy OECD nations, China, Brazil, and Russia has collapsed since its 1981 peak. The annual growth in the working age population among these nations has fallen from +29 million a year to just +1 million in 2016 … but from here on, the working age population will be declining every year … These nations make up almost three quarters of all global demand for oil and exports in general. But their combined working age populations will shrink every year, from here on (surely for decades and perhaps far longer). Global demand for nearly everything is set to suffer.”

And then there is China: It too is passing through a difficult “transition” from the old economy to an “innovative” one. It too, has an aging population and a debt problem (with a debt-to-gross domestic ratio reaching 247 percent). Trump argues that China deliberately holds down the value of its currency to gain unfair trade advantage, and he further suggests that he intends to confront the Chinese government on this key issue.

Again, Trump does have a point (many nations are managing their exchange rates precisely in order to try to “steal” a little bit extra growth from the diminished global pot). But as noted at Zerohedge, citing the analysis of One River Asset Management executive Eric Peters:

“What’s good for the US in this case [the rising dollar and interest rates in anticipation of ‘Trumponomics’], is not good for emerging markets (EMs). Emerging markets benefit from a weaker dollar, and you’re not going to get that. Emerging markets benefit from global capital flows moving in their direction and that’s not happening either. Back in February, emerging markets were in sharp decline, driven by (1) a strong dollar, (2) rising US interest rates, and (3) slowing Chinese growth. Then China spurred a massive credit stimulus, the Fed became wildly dovish, and the dollar declined sharply.

 

“Interest rates collapsed throughout the year. As the growing pool of dollar, euro and yen liquidity searched for a decent return, it headed to emerging markets. Trump has reignited the dollar rally, and his fiscal stimulus will force interest rates higher. This reversed everything. [the dollars are heading home]

 

“And to be sure, the Beijing boys don’t want to see material weakness ahead of next autumn’s Party Congress. But we’re currently near peak impulse from China’s Q1 stimulus.”

In short, Peters is saying that, with the appreciating dollar and rising interest rate environment, growth from emerging markets as a whole will falter, since emerging markets have effectively leveraged their economies to Chinese growth. It used to be the case that they were closely tied to U.S. growth, but it is now China which dominates the EMs’ trade flows [i.e. without China growth, the EMs languish]. The question is, can America reboot its growth whilst China and the EMs languish? It is another structural shift, whereas heretofore, it was vice versa: without U.S. growth, the EMs and China languished. Now it is the converse.

Hollowed-Out Economies

There are other structural changes of course which will make it harder for the industrially hollowed-out economies of the West to recuperate jobs off-shored earlier. Firstly, there has been a systemic shift of innovation and technology eastwards (often to a more skilled and better-educated workforce). This represents not only an economic event, but a redistribution of power too. In any case, technology in this new era is being more job destructive than creative.

In one sense, Trump’s economic plan to “get America working again” through massive debt-financed, infrastructure projects, harks back to the Reagan era, which was also a period in which the dollar was strong. But yet again, “things today are not what they were then.” Inflation then was at 13 percent, Interest rates were around 20 percent, and crucially, the U.S. debt to GDP ratio was a mere 35 percent (compared to today’s estimate of 71.8 percent or 104.5 percent with external debt included).

Then, as Jim Rickards has suggested, the strong dollar was deflationary (deliberately so), and interest rates had nowhere to go, but down. It was the beginning of the three decades’ bond boom, which finally seems to have come to an end, coincident with Trump’s election. Today, inflation has nowhere to go but up – as have interest rates – and the bond market, nowhere to go, but (perilously) down.

Growth and Jobs?

Can Trump then achieve growth and jobs through infrastructure expenditure? Well, “growth” is an ambiguous, shape-shifting term. The first chart shows both sides of the equation … the annual GDP growth and the annual federal debt incurred, spent, and (thus counted as part of the growth) to achieve the purported growth.

The second chart shows the annual GDP minus the annual growth in federal debt to achieve that “GDP growth.” In other words, unlike in the earlier Reagan times, more recently, the debt is producing no growth – but … well … just more debt, mostly.

In fact, what the second chart is reflecting is the dilution – through money “printing” – of purchasing power: away from one entity (the American consumer), through the intermediation of the financial sector, to other entities (mostly financial entities, and to corporations buying back their own shares). This is debt deflation: the American consumer ends having less and less purchasing power (in the sense of residual discretionary income).

The point here is that “growth” is becoming rarer everywhere. Russia and China, like everyone else, are in search for new sources for growth.

As Rickards has said, debt is the “devil” that can undo Trump’s whole schema: a “$1 trillion infrastructure refurbishment plan, along with his proposal to rebuild the military, will — at least in the short-term — significantly increase annual deficits. In fact, deficits are already soaring; the fiscal 2016 budget hole jumped to $587 billion, up from $438 in the prior year, for a huge 34% increase…in addition to this, Trump’s protectionist trade policies would implement either a 35% tariff on certain imports or would require these goods to be produced inside the United States, at much higher prices. For example, the increase in labor costs from goods made in China would be 190% when compared to the federally mandated minimum wage earner in the United States. Hence, inflation is on the way.”

In sum, self-sufficiency implies higher domestic costs and price rises for consumers.

Debt will rise. And there is seemingly already a buyers’ strike against U.S. government debt underway: well over a third of a $1 trillion worth of Treasuries were disposed of, and sold in the year to Aug. 31 by foreign Central Banks. And who is buying it? (Below, the chart shows what this purchasing looks like, as a percentage of total debt issued by the Treasury). Well, foreign central banks have disappeared. (The Chinese have not bought a U.S. Treasury bond since 2011.)

(Above: who purchased the marketable debt as a percentage, by period)
Source.

 

It is the American public who are buying. Will they be willing to take on Trump’s $1 trillion infrastructure spree? Or, will it be “printed” in yet another dilution of the American consumer’s purchasing power? The question of whether the infrastructure splurge does give growth hangs very much in the balance to such answers. (Equity shares in construction firms will do okay, of course).

The bottom line: (Michael Pento, Pento Report): “If interest rates continue to rise it won’t just be bond prices that will collapse. It will be every asset that has been priced off that so called ‘risk free rate of return’ offered by sovereign debt. The painful lesson will then be learned that having a virtual zero interest rate policy for the past 90 months wasn’t at all risk free. All of the asset prices negative interest rates have so massively distorted including; corporate debt, municipal bonds, REITs, CLOs, equities, commodities, luxury cars, art, all fixed income assets and their proxies, and everything in between, will fall concurrently along with the global economy.

“For the record, a normalization of bond yields would be very healthy for the economy in the long-run, as it is necessary to reconcile the massive economic imbalances now in existence. However, President Trump will want no part of the depression that would run concurrently with collapsing real estate, equity and bond prices.”

A Pending Financial Crisis

Trump, to be fair, has said consistently throughout the election campaign that whoever won the Presidential campaign to take office in January would face a financial crisis. Perhaps he will not face the “violent unwind” of the QE and bond bubble as some experts have predicted, but many more – according to Bank of America’s survey of 177 fund managers over the last six days, and controlling just under half a trillion of assets – expect a “stagflationary bond crash.”

This has major political implications. Trump is setting out to do no less than transform the economy and foreign policy of the U.S. He is doing this against a backdrop of many of the followers of the liberal élite, so angered at the election outcome, that they reject completely his electoral legitimacy (and, with the élites themselves staying mum at this rejection of the U.S. democratic process). Movements are being organized to wreck his Presidency (see here for example). If Trump does indeed experience a severe financial “unwind” at a time of such domestic anger and agitation, matters could turn quite ugly.

via http://ift.tt/2geNNnM Tyler Durden

Back in the summer we wrote about an IMF report that flagged Deutsche Bank as the “most important net contributor to systemic risks” (see “‘Deutsche Bank Poses The Greatest Risk To The Global Financial System’: IMF“).  Those who read our site frequently were likely not terribly surprised by the IMF’s conclusion.

Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.

That said, we suspect the latest ranking of global systemically important banks (G-SIBs) by the Financial Stability Board may be a bit more surprising to our readers, among others, as it features two of America’s largest banks right at the very top. 

 

Of course, Citigroup was quick to release a statement saying that its rise in the FSB list “does not drive a binding capital constraint” on the bank, and that it’s already subject to a higher 3% surcharge imposed by the U.S. Federal Reserve.  While that may be true, any relative risk ranking that finds Citibank and JP Morgan more risky that Deutsche Bank has to be concerning to U.S. regulators.

The Financial Stability Board was established after the global financial crisis in 2009 by the Heads of State of the G20 with a mandate to “promote financial stability.”  As such, the board ranks the 30 most systemically important financial institutions each year and assigns them to “capital surcharge” risk buckets based on a variety of risk measures.  In this year’s rankings, Citigroup, BofA and Wells Fargo were the biggest losers and all face higher capital surcharges as a result.  Meanwhile, London-based banks HSBC and Barclays all fared better in 2016’s rankings.  Per Bloomberg:

Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. all face higher capital surcharges after they rose in the Financial Stability Board’s latest ranking of the most systemically important banks in the world. Meanwhile, New York-based Morgan Stanley and London-based lenders HSBC Holdings Plc and Barclays Plc saw their buffer levels fall, the FSB said in a statement on Monday.

 

HSBC’s capital surcharge falls to 2 percent of risk-weighted assets from 2.5 percent, while Citigroup’s buffer rises to 2.5 percent from 2 percent, the FSB said. Barclays surcharge falls to 1.5 percent from 2 percent; Wells Fargo rises to 1.5 percent from 1 percent; and the Industrial and Commercial Bank of China surcharge rises to 1.5 percent from 1 percent.

 

The drop in HSBC’s surcharge is positive for the lender and “further enhances the capital return prospects” in the long term, Citigroup analysts said in a note.

Of course, all of this news was promptly dismissed by wall street as investors haven’t seen a bank stock they didn’t want to buy since election night two weeks ago.

via http://ift.tt/2gA5x0T Tyler Durden

Submitted by Peter Korzun via Strategic-Culture.org,

Turkish President Tayyip Erdogan said on November 20 that Turkey did not need to join the European Union «at all costs». Instead, it could become part of the Shanghai Cooperation Organization (SCO), or Shanghai Pact. The Turkish leader said he had already discussed the idea with Russian President Vladimir Putin and his Kazakh counterpart Nursultan Nazarbayev.

The SCO is a Eurasian political, economic, and military organization founded in 2001 in Shanghai. Its members are Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Kazakhstan, Kyrgyzstan and Uzbekistan speak Turkic languages.

India and Pakistan are to become full-fledged members by the next meeting at Astana in 2017. Mongolia, India, Iran, Pakistan and Afghanistan are SCO observers. In 2013, Turkey got the status of SCO’s «dialogue partner». The other country with the same status is Belarus. Dialogue partners are entitled to take part in ministerial-level and some other meetings of the SCO, but do not have voting rights.

Turkey formally applied to become a member of the European Union in 1987 and accession talks began in 2005. Its ambition to become part of the bloc dates back to the 1960s. Its prospects of joining look dim after 11 years of negotiations. The human rights are a divisive issue.

The EU has stepped up its criticism of Ankara since the failed July 15 coup d’état, saying the country’s anti-terror laws were being applied too broadly. Luxembourg and Austria, as well as some European lawmakers, called on the bloc to halt membership talks with Turkey or punish it with other sanctions.

For its part, Turkey is frustrated with the long stalemate over EU membership. Ankara has accused the EU of treating the country differently regarding its accession attempt and failing to unlock all the cash it had promised to disburse to Turkey on the back of the refugee deal. Turkey plans to revive the death penalty. The move will make EU accession impossible. President Erdogan plans to call a referendum on the future of Turkey’s EU membership bid.

Turkey’s SCO accession would be a milestone bringing together the organization and the Cooperation Council of Turkic-Speaking States (CCTS) – an international organization of Turkic countries, comprising Azerbaijan, Kazakhstan, Kyrgyzstan and Turkey. The General Secretariat is in ?stanbul, Turkey. Turkmenistan and Uzbekistan are possible future members of the council.

The international organization also functions as an umbrella body for all other autonomous collaboration mechanisms like the Parliamentary Assembly of Turkic Speaking Countries (TURKPA), International Organization of Turkic Culture (TURKSOY), and Turkic Academy.

Since its establishment in 2009 the CCTS has made meaningful progress on institutionalizing the interaction. The 6th Summit of the Heads of States of the Turkic Council is expected to take place till the end of the year in Cholpon-Ata (Kyrgyzstan).

President Erdogan’s statement is another sign of Ankara’s moving away from the West to other partners. For instance, Turkey has just announced it is in talks with Russia on purchasing the advanced long-range S-400 air defense systems to protect its skies. It also seeks procurement deals in electronic systems, ammunitions and missile technology. General Hulusi Akar, the head of the Turkish armed forces’ General Staff, visited Russia this month to discuss military cooperation.

During Erdogan’s two-day visit to Pakistan on November 16, the editor of a pro-government newspaper in Turkey said the country needed to develop its own nuclear deterrent. He might have expressed his personal opinion but it confirms the general trend of Turkey’s reorientation away from the NATO’s concept of cooperative security under the US umbrella.

During the August 9 summit in Saint-Petersburg, Russia and Turkey signed a declaration on unprecedented partnership in defense industry. The parties also agreed to form a joint military and intelligence mechanism to coordinate their activities in the Middle East. Russian-Turkish economic cooperation is expected to make further progress with the revival of Turkish Stream gas project.

It should be noted that Russia, not the US or any other NATO member, was the first country to be visited by the Turkish president after the failed coup.

In late October, Turkey and China also held a trade symposium in Istanbul, signing a total of 36 new deals amounting to $300 million in value. Due to its geography, Turkey has a crucial role to play in implementation of China’s One Belt One Road (Silk Road) project. Turkey is again taking the position as a key investment and cooperation partner that will help bridge the East and the West.

It has risen to become the world's 17^th largest economy and an increasingly important destination for Chinese companies that want to trade and invest. Currently, China is Ankara’s third-largest trading partner, with trade amounting to $28 billion. Turkey is popular among Chinese tourists, and cultural relations between the two countries are developing.

Turkish Customs Minister Bulent Tüfenkci announced in January that the country now aims to triple trade with Iran, an SCO observer, to $30 billion «as soon as possible».

Turkey’s gradual shift from the West to Eurasia and other partners is part of a broader process as the West gets weakened and divided. The very notion of “Western unity” is fading away. Unsurprisingly, as its relations with the West sour, Turkey is reaching out to other poles of power. Further progress on the way of Ankara’s to integration with the SCO will facilitate the multi-dimensional foreign policy to strengthen Ankara’s standing in the world.

via http://ift.tt/2fpYPbY Tyler Durden

I slammed Trump in March for calling for more torture and waterboarding.

I pointed out that the overwhelming majority of military and intelligence experts say that torture prevents the ability to obtain helpful information, makes us less safe, decreases national security and only creates more terrorists.

Saturday, Trump met with a very high-level military man: Four-Star General James Mattis , former head of the U.S. Central Command, Unified Combatant Command and  U.S. Joint Forces Command, as well as being Supreme Allied Commander Transformation.

The New York Times reports:

On the issue of torture, Mr. Trump suggested he had changed his mind about the value of waterboarding after talking with James N. Mattis, a retired Marine Corps general, who headed the United States Central Command.

 

“He said, ‘I’ve never found it to be useful,’” Mr. Trump said. He added that Mr. Mattis found more value in building trust and rewarding cooperation with terrorism suspects: “‘Give me a pack of cigarettes and a couple of beers, and I’ll do better.’”

 

“I was very impressed by that answer,” Mr. Trump said.

 

Torture, he said, is “not going to make the kind of a difference that a lot of people are thinking.”

Exactly …

via http://ift.tt/2gj1DH6 George Washington

Via The Daily Bell,

Barack Obama on fake news: ‘We have problems’ if we can’t tell the difference The US president denounced the spate of misinformation across social media platforms, including Facebook, suggesting American politics can be affected. -Guardian

Is fake news the new “conspiracy theory.” We’ve read that it may be, and it seems likely to us.

That’s because “conspiracy theory” has seemingly lost credibility as a way of dismissing anti-mainstream critiques, and it can be argued that “fake news” is being substituted.

We recently wrote about the decline and fall of “conspiracy theory” as an effective denigration of Deep State critiques. You can see the article here.

This make sense to us because the CIA was apparently responsible for disseminating the initial “conspiracy theory” meme, and “fake news” could certainly have been developed to take its place.

Secondly, as reportedly some 50 percent of Americans now believe in so-called “conspiracies,” it’s very obvious a elite replacement was needed.

Some caveats: Regarding this second point, it’s very likely that many more than 50 percent of Americans believe in conspiracy theories. And the substitution of “fake news” is a very unappealing alternative.

More:

President Barack Obama has spoken out about fake news on Facebook and other media platforms, suggesting that it helped undermine the US political process.

 

“If we are not serious about facts and what’s true and what’s not, if we can’t discriminate between serious arguments and propaganda, then we have problems,” he said during a press conference in Germany.

 

Since the surprise election of Donald Trump as president-elect, Facebook has battled accusations that it has failed to stem the flow of misinformation on its network and that its business model leads to users becoming divided into polarized political echo chambers.

Our mission is to cover elite memes – propaganda that scares people into giving more control to the government – and having Obama comment on “fake news” is part of a standard meme reinforcement.

The “fake news” meme is all over search-engine news and prominent people like Obama are speaking out about the meme and basically endorsing it.

But it all strikes us as rather desperate.

Conspiracy Theory is far less prone to analysis than “fake news.” It has persisted so long and been so successful because it is difficult to quantify a “conspiracy” and thus the dismissal cannot be either confirmed or denied.

“Fake news” however, lends itself to fact-checking. One may not wish for a variety of reasons to delve into “conspiracy theory,” but if someone is told he or she is espousing fake news, the resultant irritation may move that person to further research.

When we coined the term Internet Reformation, our idea was that the information available via the ‘Net would generate a gradual process of enlightenment – and an accretion of truth. In fact, this process is occurring, in fits and starts.

If “conspiracy theory” really has lost impact – and apparently it has – as a way of debunking criticism of the Deep State, this is certainly a setback for modern propaganda.

Additionally, “when it comes to “fake news,” the mainstream media is going to have to speak with one voice in order to disparage factual information.

But fewer and fewer people believe the mainstream media. Thus, if the media places its communicative muscle behind tarring certain cogent criticisms as “false,” it will likely only speed up the decline of mainstream credibility.

Conclusion: Of course, those in power could ban the Internet outright, but it’s probably too late for that – and wouldn’t work effectively in any case.

via http://ift.tt/2fDD8CW Tyler Durden

In what is surely a mere coincidence, at the same time as Facebook has been embroiled in a scandal involving the dissemination of “election tipping” stories, which prompted Zuckerberg to release a 7-point plan to eradicate “fake news” and which many conservatives believe is a preamble toward wholesale banning of so-called “fake news” websites (as arbitrarily defined by an ultra-liberal,  Trump-bashing “professor”) by the social networks (when ironically, Wikileaks revealed that Google was actively engaged in developing a “strategic plan” to help the Democrats win the election and track voters), we learn that in an attempt to penetrate the Chinese market, Facebook has “quietly” developed a censorship tool to appease China’s politburo in hopes the social network will finally get the blessing to address the world’s largest market.

According to the NYT, which first reported Facebook’s strategy, the social network “has quietly developed software to suppress posts from appearing in people’s news feeds in specific geographic areas, according to three current and former Facebook employees, who asked for anonymity because the tool is confidential. The feature was created to help Facebook get into China, a market where the social network has been blocked, these people said. Mr. Zuckerberg has supported and defended the effort, the people added.”

Why would Zuckerberg support an effort that goes fundamentally against the premise of free speech? Why ad revenue, and profits, of course, because while it remains to be seen if organic revenue growth in the rest of the world is topping out, suddenly getting access to the Chinese market means making a compromise unlike any done previously in Facebook’s history.

To be sure, Facebook has restricted content in other countries before, such as Pakistan, Russia and Turkey, in keeping with the typical practice of American internet companies that generally comply with government requests to block certain content after it is posted. According to its own data, Facebook blocked roughly 55,000 pieces of content in about 20 countries between July 2015 and December 2015, for example. But the censorship tool in China takes a step further by preventing content from appearing in feeds in China in the first place.

The NYT adds that Facebook does not intend to suppress the posts itself. Instead, it would offer the software to enable a third party — in this case, most likely a partner Chinese company — to monitor popular stories and topics that bubble up as users share them across the social network, the people said. Facebook’s partner would then have full control to decide whether those posts should show up in users’ feeds. In effect, Facebook is willing to admit its sold out its integrity to a third-party Chinese vendor and arbiter, simply to boost revenue, and its stock price (we are confident FB’s stock price will rise on the news that the company may be close to penetrating the Chinese market, no matter the cost).

Of course, there is the possibility that once the story becomes public that Facebook is now officially in the censorship game, that it may shelve plans: after all, the last thing Zuckerberg needs now is to be accused not only of spreading “fake news” but of engaging in premeditated censorship due to ideology or bias. The Facebook employees the NYT spoke with cautioned that the software is one of many ideas the company has discussed with respect to entering China and, like many experiments inside Facebook, it may never see the light of day. The feature, whose code is visible to engineers inside the company, has so far gone unused, and there is no indication that Facebook has offered it to the authorities in China. Although, it is hard to imagine why Facebook would spend millions developing such a project if it had no intention of using it.

Worse, the project illustrates the extent to which Facebook may be willing to compromise one of its core mission statements, “to make the world more open and connected,” to gain access to a market of 1.4 billion Chinese people. Even as Facebook faces pressure to continue growing — Mr. Zuckerberg has often asked where the company’s next billion users will come from — China has been cordoned off to the social network since 2009 because of the government’s strict rules around censorship of user content.

But what may be the most interesting part of this story, is that Facebook’s creeping censorship may have led to an internal “whistleblower” with a conscience: a Facebook “Snowden: if you will:

Several employees who were working on the project have left Facebook after expressing misgivings about it, according to the current and former employees.

An official statement from the company was non-committal: a Facebook spokeswoman said in a statement, “We have long said that we are interested in China, and are spending time understanding and learning more about the country.” She added that the company had made no decisions on its approach into China.”

Censorship notwithstanding, Zuckerberg may have trouble breaching the Chinese market even purely on its “redacted” merits: coming at a time when Trump is actively preparing for trade war with China, the last thing Xi Jinping will want to do is make a political concession that grants Facebook market share in China at the expense of protected domestic companies.

Indeed, as NYT adds, the current climate for internet companies in China may not help Facebook. In August, the ride-hailing giant Uber gave up an expensive battle to crack the Chinese market, selling its Chinese business to an incumbent rival, Didi Chuxing. More broadly, China has streamlined and tightened its controls over the internet under President Xi, targeting influential social media celebrities and adding new reviews to popular online video sites.

However, China may allow Facebook to enter, on one condition: that it is used to root out political dissidents, making the social network into a “snitch”:

Some officials responsible for China’s tech policy have been willing to entertain the idea of Facebook’s operating in the country. It would legitimize China’s strict style of internet governance, and if done according to official standards, would enable easy tracking of political opinions deemed problematic. Even so, resistance remains at the top levels of Chinese leadership.

Ultimately, what Facebook may end up doing is transforming itself into a mutant, minority version of itself where it keeps a portion of the upside, while letting a bigger partner deal with the local political headache: analysts have said Facebook’s best option is to follow a model laid out by other internet companies and cooperate with a local company or investor. Finding a partner — and potentially allowing it to own a majority stake in Facebook’s China operation — would take the burden of censorship and surveillance off the Silicon Valley company. It would also let Facebook rely on a local company’s government connections and experience to deal with the difficult task of communicating with Beijing, the NYT notes.

Facebook currently sells advertising for some Chinese businesses from its Hong Kong office. Among its customers are state-media sites that act as the propaganda arm of the Chinese government, and that operate official accounts where they post articles. Chinese citizens who wish to gain access to Facebook must tunnel in using a technology known as a virtual private network, or VPN.

* * *

Going back to the censorship tool, it is unclear when it originated, but the project is said to have picked up momentum in the last year, as engineers were plucked from other parts of Facebook to work on the effort, the current and former employees said. The project was led by Vaughan Smith, a vice president for mobile, corporate and business development at Facebook, they said. Like Mr. Zuckerberg, Mr. Smith speaks a smattering of Mandarin.

Unveiling a new censorship tool in China could lead to more demands to suppress content from other countries. The fake-news problem, which has hit countries across the globe, has already led some governments – most notably Germany – to use the issue as an excuse to target sites of political rivals, or shut down social media sites altogether.

Curiously, for whatever reason, several Facebook employees who were working on the suppression tool left the company over the summer. Internally, so many employees asked about the project and its ambitions on an internal forum that, in July, it became a topic at one of Facebook’s weekly Friday afternoon question-and-answer sessions.

Mr. Zuckerberg was at the event and answered a question from the audience about the tool. He told the gathering that Facebook’s China plans were nascent. But he also struck a pragmatic tone about the future, according to employees who attended the session.

“It’s better for Facebook to be a part of enabling conversation, even if it’s not yet the full conversation,” Mr. Zuckerberg said, according to employees.

And if Facebook is willing to go the full stretch and compromise its core mission statement in China, how long until the social network will do the same in the US, where a witch-hunt against “fake news” unlike any other, has exploded in recent days and which effectively grants Facebook the ability to censor anyone it disagrees with. After all, we now know that the tool is in place – all Zuckerberg has to do is flip a switch.

via http://ift.tt/2gfANBN Tyler Durden