iftttwall – Page 21726

New York Times’ Dire Warning About Polling Accuracy

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

As I demonstrated in yesterday’s article, How Bloomberg Spun its Own Poll Data to Make Hillary Clinton Seem Inevitable, the media is intentionally spinning poll results at best, and completely fabricating them at worst.

While that’s bad enough, there are also some deep, fundamental problems which plague any attempts to conduct accurate polling in 2016. Cliff Zukin, professor of public policy and political science at Rutgers University and a past president of the American Association for Public Opinion Research, wrote about many of these issues in a 2015 New York Times opinion piece titled, What’s the Matter With Polling?

Here are a few excerpts:

Over the past two years, election polling has had some spectacular disasters. Several organizations tracking the 2014 midterm elections did not catch the Republican wave that led to strong majorities in both houses; polls in Israel badly underestimated Prime Minister Benjamin Netanyahu’s strength, and pollsters in Britain predicted a close election only to see the Conservatives win easily. What’s going on here? How much can we trust the polls as we head toward the 2016 elections?

Election polling is in near crisis, and we pollsters know. Two trends are driving the increasing unreliability of election and other polling in the United States: the growth of cellphones and the decline in people willing to answer surveys. Coupled, they have made high-quality research much more expensive to do, so there is less of it. This has opened the door for less scientifically based, less well-tested techniques. To top it off, a perennial election polling problem, how to identify “likely voters,” has become even thornier.

The second unsettling trend is the rapidly declining response rate. When I first started doing telephone surveys in New Jersey in the late 1970s, we considered an 80 percent response rate acceptable, and even then we worried if the 20 percent we missed were different in attitudes and behaviors than the 80 percent we got. Enter answering machines and other technologies. By 1997, Pew’s response rate was 36 percent, and the decline has accelerated. By 2014 the response rate had fallen to 8 percent. As Nate Silver of fivethirtyeight.com recently observed, “The problem is simple but daunting. The foundation of opinion research has historically been the ability to draw a random sample of the population. That’s become much harder to do.”

So what’s the solution for election polling? There isn’t one. Our old paradigm has broken down, and we haven’t figured out how to replace it. Political polling has gotten less accurate as a result, and it’s not going to be fixed in time for 2016. We’ll have to go through a period of experimentation to see what works, and how to better hit a moving target.

Those paying close attention to the 2016 election should exercise caution as they read the polls. Because of the high cost, the difficulty in locating the small number of voters who will actually turn out in primaries and the increasing reliance on non-probability Internet polls, you are likely to see a lot of conflicting numbers. To make matters still worse, the cellphone problem is more acute in states than it is at the national level, because area codes and exchanges often no longer respect state or congressional boundaries. Some polling organizations will move to sampling from voter lists, which will miss recently registered voters and campaigns’ efforts to mobilize them.

We are less sure how to conduct good survey research now than we were four years ago, and much less than eight years ago. And don’t look for too much help in what the polling aggregation sites may be offering. They, too, have been falling further off the track of late. It’s not their fault. They are only as good as the raw material they have to work with.

In short, polls and pollsters are going to be less reliable. We may not even know when we’re off base. What this means for 2016 is anybody’s guess.

Combine all of the above with blatant mainstream media bias and you end up with zero confidence in polling.

It’s going to be an interesting couple of months.

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Nate Parker’s Campus Rape Acquittal: For The Birth of a Nation Star, Innocent Is Still Guilty

Parker In 1999, Nate Parker—then a member of Pennsylvania State University’s wrestling team—was accused of rape by a female student. Two years later, he was acquitted. Fifteen years after that, he is a celebrated up-and-coming filmmaker: he co-wrote, directed, and starred in The Birth of a Nation, a forthcoming movie about Nat Turner’s 1831 slave rebellion.

Eighteen-year-old Parker was no one of consequence, but 36-year-old Parker is quickly becoming famous, and so the media has seen fit to revisit the accusation. The Daily Beast published a long story about the case, and even interviewed friends and family members of the accuser, who is given the pseudonym “Jennifer.” (Her real name is known to reporters, but I will continue to call her Jennifer.)

Jennifer isn’t alive to discuss what happened to her. After struggling with mental illness for years, she committed suicide in 2012. Jennifer’s tragedy contributes to a striking juxtaposition: in the wake of the assault, the victim lost her mind and her life, while her attacker thrived and became famous.

Of course, Parker maintains that their sexual encounter was consensual, and notes that he was cleared of wrongdoing. He recently told Deadline:

“I stand here, a 36-year-old man, 17 years removed from one of the most painful … [he wells up at the memory] moments in my life. And I can imagine it was painful, for everyone. I was cleared of everything, of all charges. I’ve done a lot of living, and raised a lot of children. I’ve got five daughters and a lovely wife. My mom lives here with me; I brought her here. I’ve got four younger sisters.”

“Women have been such an important part of my life. I try, every day, to be a better father to my daughters, and a better husband… The reality is, this is a serious issue, a very serious issue, and the fact that there is a dialogue going on right now around the country is paramount. It is critical. The fact we are making moves and taking action to protect women on campuses and off campuses, and educating men and persecuting them when things come up. … I want women to stand up, to speak out when they feel violated, in every degree, as I prepare to take my own daughter to college.”

The details of the accusation are public knowledge. Parker had been spending time with Jennifer, a freshman, who later admitted that she was interested in him, though she did not want to have sex with him. Parker started kissing her and tried to pull her underwear down: she said no, firmly, and he stopped. She then decided to perform oral sex on him instead.

That encounter isn’t in dispute. The real trouble came next evening, when Parker met Jennifer at a bar around midnight. According to The Daily Beast, Parker was late for the date, and Jennifer had already consumed several drinks. They agreed that she was too intoxicated to go back to her dormitory room, so instead, she went home with Parker.

Two other people were present for what came next: Tamerlane Kangas (a friend of Parker), and Jean Celestin (a friend and roommate, and fellow wrestler). Kangas was never charged with a crime, and thus his testimony was key. According to Kangas, both he and Celestin looked into Parker’s room and saw Parker having sex with Jennifer. She wasn’t moving, he said.

Celestin suggested going into the room. Kangas refused, and Celestin went without him. Celestin then joined in the sexual activity, according to Kangas.

Celestin put the matter differently. He claimed that he was already in the room when Parker and Jennifer started having sex, and that she took Celestin’s arm, encouraging him to participate.

Parker and Jennifer had sex again the following morning. Afterward, she was deeply confused about what had happened the night before. She scarcely remembered any of it, and claimed to have been black-out drunk. She could picture another man having sex with her—Celestin—but wasn’t sure who he was. And Parker wouldn’t tell. Jennifer eventually tricked him into divulging Celestin’s name by faking a pregnancy scare. She went to the police and accused them both of raping her.

The case hinged on whether Jennifer had been too intoxicated to consent to sex. Parker said she remained conscious and gave no indication that she didn’t understand what was happening. “You were all for it,” Parker told Jennifer, during a subsequent telephone conversation.

Parker was acquitted. Celestin was not. He was sentenced to six months in prison. He later sought a retrial, and the case against him was dismissed. The guilty verdict was expunged from his record. It’s unknown how time he actually served, according to The Daily Beast.

Celestin remains friends with Parker, and is listed as a co-writer of The Birth of a Nation.

This creates some difficulties for liberal feminists who, because of intersectionality, really want to support black filmmaker, particularly when they one has created an important movie about the mistreatment of black people throughout American history.

“Is it possible to root for a talented black filmmaker amid contentious details about his past with women?” wondered Jezebel‘s Clover Hope. “Certainly, it’s left us perplexed.”

In a sense, the Parker situation is similar to the recently-resurfaced accusations made by Juanita Broaddrick against Bill Clinton, who she claims raped her 30 years ago. Many left-leaning feminists believe that all sexual assault victims deserve to be believed, no matter what. Hillary Clinton herself has said this. But in the Broaddrick case, this thinking, taken to its logical conclusion, is damaging to Hillary’s presidential aspirations: Broaddrick has accused Mrs. Clinton of covering up her husband’s misdeeds and trying to keep Broaddrick quiet.

“Believing the victim” is similarly uncomfortable in the Parker situation. Can we admire the art while disliking the artist? Does Parker deserve forgiveness for something that happened so long ago? Should his dirty laundry even be re-aired at all, given that he was acquitted by a jury? Should Jennifer’s subsequent suicide undermine Parker’s accolades? Should Celestin’s involvement in the film be a matter of public concern?

These are not easy questions. In fact, they are even harder to answer than they seem. That’s because there’s another dimension to this story: key to Parker’s defense was his lawyer’s contention that racism was motivating the police’s handling of the case. Parker and Celestin are black men—Jennifer was a white woman.

The defense also argued that the police essentially gave Kangas no choice but to throw his friends under the bus. An officer threatened to arrest him unless he was more forthcoming about the night in question.

Some lawyers who follow sexual misconduct disputes in higher education suspect that black men are overrepresented among the accused. This shouldn’t really come as a surprise. Men of color are disproportionately likely to be thrown in jail for various crimes; the criminal justice system struggles to grant justice to black people; because of systemic racism, police officers, prosecutors, judges, and jury members might be more likely to look at a black man and automatically presume he is guilty.

There’s actually something of a tension here among progressives who simultaneously advocate for criminal justice reform in the abstract—particularly when it comes to non-violent drug offenders—while stridently condemning men (often black men) accused of rape to suffer lengthy prison sentences, ruinous financial consequences like expulsion from college, and endless public shaming—even if the accused was ultimately acquitted. Freddie de Boer explodes this tension in a terrific piece:

That leaves us with a question: if an acquittal is insufficient to prove Parker’s innocence, what would such proof look like? Is exoneration even possible? And what do we do with people who are accused of crimes like sexual assault and domestic violence when their cases never go to trial? The current progressive impulse seems to be to simply treat them as guilty regardless, and permanently. Yet this strikes me as unambiguously contrary to the spirit and philosophy that contribute to our drive for criminal justice reform. How can we make such reform possible if we condemn huge groups of people to the status of guilty despite never being found guilty of any crime? And if such crimes carry existential and disqualifying moral judgment for life even for those only accused, how can we bring those imprisoned and released back into normal adult life?

The reality of racism makes this even more complex. As it is in all aspects of the criminal justice system, race is implicated in Parker’s story. As they are for almost all crimes, black men are arrested, tried, convicted, and incarcerated for sex crimes out of proportion with their numbers in our country. We know, for a fact, that our criminal justice system casts black men with a level of suspicion that it inflicts on no other group. The presumption of guilt in cases of sexual assault cannot fail to be influenced by the same powerful racial inequalities that afflict our system as a whole. And we have reason to believe this is especially true in sex crimes.

De Boer’s piece is worth reading in full. He argues persuasively that liberals who are serious about criminal justice reform have to start admitting to themselves that dismantling the prison-industrial complex will by necessity involve forgiving and releasing a lot of people who committed violent crimes of a sexual nature. How will we be able to show compassion for them if we aren’t even capable of forgiving someone like Parker—who might have been innocent, and indeed, was declared so by a jury—decades after his alleged crime took place?

I can understand, of course, why Jennifer’s family is unable to forgive Parker. Her sister Sharon choked back tears as she told The Daily Beast, “He’s probably going to get an Academy Award. It eats me up.”

At the same time, it doesn’t strike me as fair to blame Parker or Celestin for Jennifer’s death. The article notes that Jennifer suffered from bouts of depression even before the alleged rape took place. Before her death, she was confined to a mental institution. She alternately believed she was Satan, or Jesus Christ. She accused her sister of kidnapping her and was clearly suffering from mental illness.

It’s perfectly possible that Jennifer’s ordeal with Parker and Celestin exacerbated her issues. But it’s also possible she would have taken her life 11 years later anyway—that her illness would have progressed regardless.

There isn’t anything wrong with journalists looking into these matters again. Perhaps there’s even more to be learned about what happened that night in 1999. But there’s a very good chance the public will never know more about Jennifer’s alleged rape than they do now. Her story had a very sad ending, but it doesn’t seem quite right to me that Parker’s much happier ending is ill-deserved, or something to lament.

If we must always “believe the victims,” then sure, Parker is a rapist who got away with a terrible crime and is now living the good life, even has his victims lies dead and buried. But then there would be no need for due process at all: we would simply imprison everyone who was accused. This would not be a just and civil society, it would be the court of the Queen of Hearts. We recognize that this kind of thing would be immoral and impractical—that everyone deserves a chance to prove their innocence, that some of these people are indeed innocent, and that those who persuade a jury of their innocence are, well, innocent.

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In Surprising Twist, Global Central Banks Dump A Record $335 Billion In US Debt In Past Year

On Sunday, when looking at the latest update of the Fed’s custody holdings of Treasuries, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of Treasuries held by foreigners at the Fed since 2012.

We added that “while TIC data released this Monday will give us some much needed, if substantially delayed, data on reserve manager activity as of June, the hypothesis is that OPEC countries such as Saudi Arabia are once again quietly selling Treasuries to raise cash in an environment of low oil prices and the consequent budgetary tightness.”

After getting the Treasury International Capital (TIC) data, we can confirm that something strange is taking place in the US Treasury market, in fact something that is the complete opposite of what one would expect by looking at the relentless Indirect bidder demand in government bond auctions. Because, based on TIC data, foreign investors – both official and private – were sellers of $32.9 billion Treasury notes and bonds in June. Narrowing the selling down to just official entities, i.e. mostly central banks, but also SWFs and reserve managers, brings the total to $33.5 billion.

Contrary to our expectation that the biggest sellers would be Saudi Arabia and/or other petrodollar reliant nations, the largest sellers of Treasuries in June, based on transaction data, were China, with sales of $28.0 billion, Japan, with sales of $13.2 billion and Hong Kong, with sales of $10.8 billion. Alternatively, the largest buyer in June by far was the Cayman Islands, with purchases of $28.3 billion; this is another name for hedge funds. The UK was a distant second, with purchases of $5.1 billion. As SMRA points out, the purchases of Treasuries by the Cayman Islands in June were much larger than the increase in holdings by investors there, suggesting that some of the buying was done on behalf of investors located in other countries.

It appears we have a new “Belgium” on our hands, this time one where a sovereign player is using a hedge fund to accumulate positions.

But there was a bigger surprise: using the TIC transaction data, the change in central bank holdings in the first 6 months of 2016 amount to a whopping $192 billion liquidation, more than twice larger than the $82 billion sale in the same period in 2015. This was also the biggest 6 month selling of US debt in series history which stretches back to 1978.

Finally, the biggest surprise is when looking at the selling on an LTM basis, because adding all the central bank transactions over the past 12 months reveals a not so stealthy, make that gargantuan $335 billion in selling in the period July 2015- Jun 2015, something which as the chart below shows, is truly unprecedented.

Incidentally, while the much less followed transaction data showed a historic liquidation by central banks, the TIC’s holdings data revealed an increase in Treasury holdings of $78.5 billion (including Bill holdings).

Where does the $111.4 billion discrepancy come from?

The answer is simple: the TIC holdings data are reported at market value and that often explains large discrepancies between the holdings data and the transactions data, according to SMRA. That would certainly make sense in June, when Treasuries rallied sharply after the Brexit vote. (In the TIC data, holdings are reported using month-end values.)

The impact of changes in market value is greatest on the largest holders, including China and Japan. In June, while the transactions data indicated selling by China of $32.0 billion in Treasuries in June (including bills), the holdings data showed a small reduction of $3.2 billion.

In other words, as China dumped over $30 billion in Treasuries, the market value of its holdings actually increased by $3.2 billion over the same period, giving the impression that it was actually buying. It wasn’t.

Similarly, while the transactions data showed Japan selling $14.3 billion of Treasuries in June, the holdings data showed an increase after adjusting for market values of $14.5 billion.

And the biggest surprise: based on the holdings data – which is marked to market – foreign holdings of long-term Treasuries were up $117.8 billion in the 12 months ended in June, compared to a decline of $241.7 billion for all foreign investors, both official and private, implied by the transactions data.

In other words, far from the conventional wisdom that foreign central banks are accumulating US Treasury holdings at a feverish pace (they may be, but only at On The Run auctions while dumping illiquid Off The Run paper), they have in reality liquidated a third of a trillion in TSYs in the past year.

Who are they selling to? The answer: private demand, in other words just like in the stock market the retail investor is the final bagholder, so when it comes to US Treasuries, “private investors” are soaking up hundreds of billions in central bank holdings. We wonder if they would do that knowing who is selling to them.

Meanwhile, the yield on US 10Y paper is almost at its all time lows.

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There Is A Line!!

Submitted by T.L.Davis via Christian Mercenary blog,

There is a war being waged in America, but only one side is fighting. The progressives, or Marxists, or outright Communists have been waging war against middle America, using every diabolical means available, for decades, perhaps a century, but middle America is too busy just trying to survive to bother with them. Like the day when Barack Obama declared ISIS to be the Junior Varsity team, middle America considers this war being waged on them as insignificant to their lives, too distant and too petty. Yes, some useless and pathetic residual guilt is responsible for some of their acquiescence.

Yet, the Marxists have taken ground steadily, pushing and shoving against the pillars of traditional American culture until they have begun to rattle the foundations. Still, middle America shrugs at these advancements, hopefully ignoring them, waiting for something to cause the Marxists to give up. But, they will never give up. They are not stronger than middle America, but they are more persistent and right now, they are aided by every structure of government, the media, entertainment, sports figures, or so it seems. We will never really know the truth, because we get information from the media and they are liars.

The media covers up for crimes, preferring the lies of omission to the truth of objective reporting. That is all really up to them, but they have become nothing other than Baghdad Bob, who proclaimed to Iraqi television that there was nothing amiss in Baghdad while American tanks rolled in the street behind him. That is our media today and like Baghdad Bob, they are covering for their leaders: Barack Obama and Hillary Clinton. They sound as ridiculous as he did and are as transparent.

In decades hence, the media will be forced to wear the shame they should feel today, but that is another post for another day.

The crowds in the streets of Milwaukee are not their own masters at it might seem to them. They are foot soldiers in a bigger battle. The Marxists came for Russia and China, what reason would they have to bypass America? How? Through convincing the discontented that they could get satisfaction by attacking the enemies of the masters. Time after time, place after place, it was all the same. Barack Obama, perhaps the most notable Marxist of our time, with the background to prove it, is pulling all the strings. It was clear when his Attorney General made it clear that the Obama Administration would stand behind Black Lives Matter no matter what. That was the signal, in front of the whole nation that the administration was with them.

So, this is what the Marxists want: America. They will use Muslim jihadists; they will use discontented minorities from the inner cities; they will use IRS agents; they will use the power of the United States government; they will use the media; they will use sports figures; they will use relatives within the family.

We are about to see the masks come off. That is what this is all about, all of this unrest, all of these riots. It is time for them to show middle America what progress they have made over the past century. Of course, they have to make a serious push to get our guns, first. They have to disarm the populace they intend to enslave. Then they will offer the chance to live our lives as before, watching television, texting, facebooking, etc, all under the new standards and rules of communication, you understand.

There is a line where middle America figures it out and begins to fight back. I don't know where that is, but it is there. We saw it on 9/12, however fleeting it might have been. Perhaps it is when they realize that their children will be beaten and killed to satisfy the bloodlust of a tyrant. All I know is, if they do not see the line by then, it is because they are on the wrong side of it.

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Jill Stein CNN Town Hall, Turkey Frees Prisoners to Make Room for Alleged Coup Plotters, UFO Crosses Moon: P.M. Links

New Hampshire Gov. Maggie Hassan (D) said “yes,” she believed Democratic presidential nominee Hillary Clinton was trustworthy, a day after refusing to answer the question multiple times in a CNN interview. Mikhail Baryshnikov says Republican presidential nominee Donald Trump reminds him of the Soviet Union. Libertarian presidential nominee Gary Johnson points out most Americans support legalizing marijuana. CNN will hold a town hall with Green party presidential nominee Jill Stein tonight.
Officials in California ordered the evacuation of 80,000 people as a wildfire spreads in San Bernardino County, but less than 5,000 residents have left the area.
A judge in Brazil ordered two U.S. swimmers who competed in the Olympics to remain there as authorities accuse them of filing a false police report over a late-night robbery.
Turkey plans to release nearly 40,000 prisoners to make room for alleged coup plotters.
North Korea’s deputy ambassador in the United Kingdom has defected to South Korea.
A black speck crossing the Moon during a livestream is taken for a UFO.

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Cisco Fires 5,500; Market Disappointed It Wasn’t More – Shares Fall

After yesterday’s leak by CRN that Cisco would terminate some 14,000 workers, or about 20% of its 73,000 workforce, investors were looking forward to today’s earnings announcement by the tech giant not so much for whether it would beat expectations (it did not on a GAAP basis, with $0.56 in GAAP EPS, however it did beat on a non-GAAP basis, reporting $0.63, above the $0.60 expected), but whether it would indeed reduce its workforce to a level not seen in a decade.

We got the answer moments ago, when Cisco indeed announced the latest mass layoff, which however was “only” 5,500 people, a mere 7% of its workforce.

Today’s market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we’ve seen in our history. Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud. We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth. The restructuring will eliminate up to 5,500 positions, representing approximately 7 percent of our global workforce, and we will take action under this plan beginning in the first quarter of fiscal 2017.

And, with the market hoping to see nearly three times more workers fired, despite the top and bottom line beat by CSCO, the stock is no lower in the after market, as algos punish management for not being a bunch of inconsiderate monsters.

However, don’t despair CSCO longs: as CRN reported, “Cisco is expected to announce the cuts within the next few weeks, as many early retirement package plans have already been offered to employees, said sources.” This likely means that once the initial shock of the first round of layoffs passes, the company will proceed with rounds 2 and 3, sending the stock right back up.

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New York Congressional Candidate Challenges Billionaire Hedge Fund Manager Paul Singer to a Debate

Screen Shot 2016-08-17 at 2.32.10 PM

This is a pretty genius move by Zephyr Teachout.

First, some background, via the Huffington Post:

In May, billionaire Paul Singer fundamentally changed one of the most interesting political contests of 2016. The vulture fund manager wrote a $500,000 check to a super PAC supporting John Faso, a Republican trying to fill an open congressional seat in New York’s Hudson Valley. Overnight, Faso became a serious contender in a race that had been dominated by progressive Democrat Zephyr Teachout.

Faso had been relying on super PAC funding from another hedge fund billionaire, Robert Mercer, to get through a much tighter primary contest on the Republican side. When Singer signed on in May, Faso had the firepower to challenge Teachout in the general election.

continue reading

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Bonds & Stocks Surge After Fed’s Equity Valuation Warning

As J-Hole looms and Fed minutes fade, this is all we had…

Post-Fed Minutes, Rate Hike Odds plunged…

And traders bought everything from bonds to stocks and gold to crude… (oil ramped into NYMEX close) as USD dumped

Buy Bonds, Buy Gold, Buy Stocks, Sell USDs… and down the drain goes Fed Cred…

Stocks initially dumped after the Minutes before all ripping higher… despite this…. "during the discussion, several participants commented on a few developments, including potential overvaluation in the market for CRE, the elevated level of equity values relative to expected earnings, and the incentives for investors to reach for yield in an environment of continued low interest rates. "

To ensure The Dow was green for the week…but reality bit into the close and The Dow ended red on the week…

The Market broke shortly after the minutes were unleashed – as VIX was crushed – but VIX was not done with yet as desperation struck into the close to get S&P green above 2178 (we highlighted the BROKEN MARKET segment o fthe day for your entertainment)

But some have blamed today's price action Dennis Gartman – who went short bonds and short oil this morning…

Treasury yields tumbled after Fed Minutes, flattening 5s30s to cycle lows…

But the flatness of the curve didn't worry financials…

The USD Index dumped on Fed Minutes before starting to bounce back…erasing yesterday's Dudley-driven bounce…

Notice the kneejerk run higher in USD Index as the minutes hit (which fits with the seemingly hawkish narrative)…

Commodities were mixed with Gold unch today but silver and copper lower – despite the weak USD – crude ripped…

Notably, Gold ETFs have seen their largest withdrawals this year in the last week…

Charts: Bloomberg

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Stupid Is What Stupid Does – Secular Stagnation Redux

Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

Which country, the United States or Japan, have had the fastest GDP growth rate since the financial crisis? Due to Japan’s bad reputation as a stagnant, debt ridden, central bank dependent, demographic basket case the question appears superfluous. The answer seemed so obvious to us that we haven’t really bothered looking into it until one day we started thinking about the demographic situation in the two countries. As we all know, Japan has a rapidly ageing population whereby the workforce is getting smaller for every day. Japan has had a demographic growth tax ever since 1997 when population growth overtook potential labour force growth.

The United States on the other hand only started “paying” their demographic tax in 2010 and it was not until very recently it became severe enough to make a large dent in overall growth accounting.

If we adjust for the demographic difference between the US and Japan, the Japanese economy has actually performed much better than the US. In other words, given the resources available, Japan has managed to eke out more real growth than the US. That is not to say Japan is growing on a healthy pace, only that they are able to grow faster (or fall less rapidly) than their potential workforce. The US economy have barely managed to keep up with is workforce; and the demographic tax facing the US from here on will only exacerbate the precarious situation.

Facing headwinds like that it is safe to say US growth will remain subdued (not to mention the upcoming recession) in the years ahead. This will obviously wreak havoc with public budget projections as tax revenues fall well short of expectations and secular stagnationists crowding the upper echelons of economic policy circles insist on more fiscal spending. The resulting trillion dollar deficit will presumably be funded at negative interest rates with the strong approval of Keynesian hacks and power hungry policymakers. Needless to say, a structurally low growth environment will be blamed on under-consumption and foolish counter cyclical policies will continue to mend a non-existent problem.

We heard the story before and we know how that turned out for Japan; as the Plaza Accord of September 1985 strengthened the Yen, Japan’s boom was coming to an end. Reduced demand for their products on international markets led the Japanese leadership to conclude that they faced prospects of a secular stagnation (they didn’t call it that at the time) which could only be rectified by boosting internal demand. The Bank of Japan slashed the basic loan rate in half by expanding their purchases of treasury bills and doling out cheap loans. The ensuing bubble gave the impression that boom times would last as Japan transformed its economy from one dependent on manufacturing and exports to one self-propelled by its own service sector (sounds familiar?).

Initially the bubble policy appeared to be working as nominal growth rates held up, but the growing economy was built on the shaky foundation of an expanding balance sheet at lower interest rates engineered by the central bank.

What was really happening was essentially a substitution of productive debt with the intent of making a subsequent sale to counter-productive debt which is not self-liquidating, to maintain the illusion of prosperity. As soon as the Bank of Japan started to raise rates again, counter-productive debt came under pressure as it could not fund itself unless subsidised by the Bank of Japan. When the inevitable bust struck, new bouts of stimuli was applied, but this time counter-productive debt was substituted for pure consumptive, or destructive, debt.

As Keynesian focus on measured aggregates in the present, they could see nothing wrong with this policy. Lower domestic saving was a signal of a strong economy where little purchasing power would leak out of the circular spending stream whereby one man’s liability is another man’s asset.

However, in the dis-aggregates something was terribly wrong. Old industries were kept alive by cheap credit, consuming the capital that should bring life to new ones, cementing the pre-Plaza Accord system that were ill fit for the new reality. Believing the post-Plaza Accord policy of bubble blowing was working, the Japanese continued with ZIRP (now NIRP) and QE in order to re-establish Japan’s glory days. Unsurprisingly, it did not work. Income, as measured by nominal GDP stagnated while outlays kept growing alongside the gargantuan public debt burden.

It is within this environment of utter incompetence by the Japanese leadership the economy of Japan, adjusted for its dire demographic situation, manage to beat the US! Think about that for a second and what it means for the prospects of the US economy. The United States is doing the exact same mistakes as Japan did and the lesson will be the same; stagnation.

Instead of changing course, economists justify their ineptitude with made-up concepts such as a permanently reduced r* to prove the secular stagnation thesis. Fiscal spending funded by debt issuance at negative rates is next stop on this journey of madness, secured in central banks with nominal GDP targets.

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No, New York Times, The FDA Should Not ‘Have The Power’ To Mandate National Recalls of Shampoo

After a bad batch of shampoo made some customers hair fall out, the New York Times ran a front page story on Tuesday asking whether Congress should give the Food and Drug Administration more regulatory authority over hair and skin products.

The entire piece is an exercise in “do-somethingism,” since there are already better ways for the market—and yes, even the government—to deal with the problems created by Wen Hair Care, the shampoo product at the center of a $26 million class action lawsuit. It appears that the article was prompted by ongoing congressional efforts to apply more regulations to the cosmetics industry and give the FDA authority to issue recalls of skin and hair products.

More on that in a moment. First, the facts.

The piece starts off wanting you to know that Los Angeles hairstylist Chaz Dean made “millions” by selling a variety of scented hair care products. Those same products ended up prompting more than 21,000 complaints from consumers who experienced unwanted itching, rashes and even widespread hair loss after using Dean’s Wen Hair Care products.

Without even pausing to consider whether those people have another sort of recourse besides an expensive expansion of federal regulatory power (spoiler alert: they do), the Times turns to U.S. Sens. Dianne Feinstein, D-California, and Susan Collins, R-Maine, who are pitching new legislation to require the FDA to do additional testing of cosmetic products and give the FDA authority to issue mandatory recalls for “products found to be unsafe.”

There’s good reason to feel sympathy for the victims here—no one expects to end up temporarily bald because they purchased a bottle of supposedly “revolutionary” shampoo and they are right to be upset about it—but the lack of federal regulations on cosmetics didn’t cause this problem and isn’t the best way to fix it.

Let’s start by looking at what happened to those “millions” that Chaz Dean made by apparently swindling unsuspecting consumers.

A class action lawsuit against Wen Hair Care and its manufacturer, Guthy-Renker LLC, resulted in a $26 million settlement for the plaintiffs. The settlement awards $25 to any person who bought a bottle of Wen and up to $20,000 to anyone who experienced bodily harm or hair loss after using the product.

That’s how the government should be involved in a situation like this: in a judiciary role to work out a settlement between the aggrieved parties and the business responsible for misleading them. The system works!

The Times article suggests this application of government is not enough; that the federal authorities must be more active to prevent this sort of thing from happening at all or at least to respond more quickly when it does. The FDA must be able to force companies to recall potentially problematic products, Feinstein and Collins argue.

When trying to decide whether the government should have the authority to force businesses to recall products, it’s important to know how recalls work. In almost all cases, recalls are voluntary actions taken by manufacturers. That’s true whether we’re talking about cosmetic products regulated by the FDA or whether you’re looking how the National Highway Traffic Safety Administration oversees recalls of defective automotive parts.

Even when comes to issues of food safety—certainly an area where there is a greater potential threat to public health and safety than what is created by bad shampoo—the FDA can only request a recall. The final decision rests with the food supplier, and oftentimes businesses will initiate their own recalls without being asked by the FDA because it’s generally accepted that lying to your customers or making them sick isn’t good for business.

The same is true here. Good cosmetic businesses will issue recalls of faulty products as a way to maintain consumer trust (and to avoid the kinds of class action lawsuits like the one brought against Wen in this instance). Businesses that provide bad products and then don’t come clean about the problems—no matter what industry they are a part of—won’t stay in business for long.

At the risk of sounding facetious: shampoo that causes baldness is already pretty bad for business, even before the $25 million lawsuits start rolling in.

To recap: the people who were negatively affected by Wen Hair Care were compensated for their losses and the FDA has the same authority over recalls for cosmetic products as it does over recalls related to food safety or anything else.

What more could you want the government to do in this situation?

Feinstein and Collins want to pile more regulations onto the cosmetic industry. In addition to letting the FDA issue mandatory recalls, their bill would require the FDA to test all cosmetic products that contain at least one of five common ingredients. That’s going to cost an estimated $20 billion annually, with the funds being extracted from the cosmetic industry in the form of new “fees.”

This legislation is important, we’re told by U.S. Rep. Frank Pallone Jr., D-New Jersey, because “there is effectively no regulation of cosmetics.“

Except there is. The FDA’s website explains that it “monitors the safety of cosmetic products that are being marketed and acts on products that are established to be harmful to consumers when used as intended.” It does that by conducting inspections of manufacturing facilities and by surveying products on the market “especially if aware of a potential problem.” That information is used to alert consumers, support regulatory actions or issue guidance for industry, the FDA says.

The Times touts the fact that the bill has “won the endorsement of heavyweights” in the cosmetic industry, including Clinique, Johnson & Johnson, MAC and Procter and Gamble.

Opposition comes from the Independent Cosmetic Manufacturers and Distributors, a trade group that represents portions of the industry generally not large enough to be household names and not wealthy enough to hire their own lobbyists.

This is the same story that often plays out when government tries to increase regulations. Larger companies—like those “heavyweights” of the industry rattled off by the Times—are better able to absorb the added cost of regulations and will support the expansion of regulations as a way to hurt smaller competitors. This is the same dynamic driving the FDA’s expensive, destrutive and unnecessary regulations of electronic cigarettes, by the way.

In a statement to Reason, the Independent Cosmetic Manufacturers and Distributors said it did not support the Feinstein-Collins bill because “it placed too large a burden on small business, did not provide reasonable national uniformity, and would, if passed, stifle innovation in the cosmetics and personal care industry.”

There’s no way to know whether more testing and regulations would have caught the problems with Wen Hair Care shampoo before it hit store shelves, but the people injured have been compensated and the company paid the price for making a bad product.

One business’ mistake should not be a reason to add to the regulatory burden faced by all others in the same field.

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