“Ebola Cruise” Returns To Texas After Suspected Healthcare Worker Cleared

In a tumultuous week for Ebola updates (which are only set to get worse with flu season about to unfold, and where every sneeze and fever will be interpreted by the potential host as an early symptom of the deadly disease, likely choking hospitals and ERs around the nation) Friday brought us one of the more disturbing updates when it was revealed that an Ebola-handling healthcare worker had decided to break the “self-watch” protocol and had gone on a Carnival cruise in the Caribbean.

The mood of the travelers promptly descended from merely depressed and dour to what the Independent described as “utter panic” after both Belize and Mexico refused to let the ship dock.

Hardly helping, yesterday a helicopter landed aboard a cruise ship to pick up a blood sample from a passenger who may have handled fluids from an Ebola patient, ahead of the Carnival Magic’s planned docking at Galveston, Texas, Sunday. Carnival said Texas health officials requested that a sample be taken from the passenger and tested, but that the ship is still scheduled to arrive Sunday morning. The company said of the passenger, who is in quarantine, that “she’s feeling absolutely fine.”

Fast forward to this morning, when after what one assumes was a negative blood test, the Carnival Magic ship carrying the suspect, was cleared to return to port in Galveston, TX this morning. As AP reports, “The unidentified woman who is being monitored disembarked the Carnival Magic with her husband shortly after the ship returned to Galveston, Texas, about 6 a.m. EDT, said Vicky Rey, vice president of guest care for Carnival Cruise Lines. Rey said the couple drove themselves home, but offered no further details.

Actually, it may well be that there was no definitive blood test result because according to AP, “company and federal officials have said the woman being monitored for Ebola poses no risk because she has shown no symptoms and has voluntarily self-quarantined.”

So, is it the CDC new “protocol” that self-quarantine and lack of symptoms for a several days is sufficient to pronounce one clear of any disease risk? Inquiring minds want to know. 

Petty Officer Andy Kendrick told The Associated Press that a Coast Guard crew flew in a helicopter Saturday to meet the Carnival Magic and retrieved a blood sample from the woman. He said the blood sample was taken to a state lab in Austin for processing.

 

Kendrick had no further details about how the sample was taken. He said the decision to take the sample was made in coordination with the federal, state and local health authorities.

 

Obama administration officials said the passenger handled a lab specimen from a Liberian man who died from Ebola at Texas Health Presbyterian Hospital earlier this month. Officials said the woman poses no risk because she has shown no signs of illness for 19 days and has voluntarily self-quarantined on the cruise ship.”

In other news, as CNN reports, also this morning the hospital that has been ground zero for the US Ebola cases, Texas Health Presbyterian Hospital, took out a full-page newspaper ad, once again offering an apology.

“We slipped up; we’re deeply sorry; we’ll do better.” That could serve as a summary of the open letter from Texas Health Resources CEO Barclay Berdan in the Sunday editions of the Dallas Morning News and Fort Worth Star-Telegram.

“As an institution, we made mistakes in handling this very difficult challenge,” Berdan wrote. The hospital is analyzing the errors and will make changes, he said.

 

Hopefully others will also learn from those mistakes and the first cases of Ebola contagion in the country, and its first death, will also be its last, Berdan wrote.

There is some good news: of the four patients currently being treated, at least two appear to be making a recovery.

But perhaps more importantly, Duncan was admitted to Texas Health Presbyterian on September 28, when he went there the second time. That was the last day the monitored people could have had contact with him. The maximum incubation period for Ebola is 21 days. That period runs out on Monday.

In other words, the deadline for any new Ebola cases that may emerge out of Duncan as the Index patient, ends tomorrow. The question then becomes whether any other potential diseases carriers have managed to make their way onto the US before being isolated.




via Zero Hedge http://ift.tt/11Qsamv Tyler Durden

The Safe Haven Bid is Bogus

It’s not about the current Dollar & Treasury market safe haven bid, it’s about tomorrow’s confidence in our monetary system.  

2014-10-15_1439

Are you confident?

Have you asked yourself why Gold remains by far the best performing asset class of the entire new millennium.  It’s an undisputable categorical fact, and there clearly is a well established and completely understood reason for this. Monumentally excessive irreversible debt loads can no longer be discharged without necessitating the devaluation of the currency. Due to this certitude, throughout this millennium we have experienced an extended period of extraordinary monetary accommodation which is unprecedented in the modern central banking era.

These remarkably irregular measures have allowed governments to issue debt at artificially low, synthetically engineered rates of interest.  The crucial and essential time value of money has been aborted, utterly eviscerated.  A deliberately lowered nominal interest rate reduces debt servicing costs, while negative real interest rates actually erode the principal value of the government debt. This is the very essence of financial repression, it liquidates debts when accompanied by inflation and can be considered a form of taxation, or alternatively a form of debasement.

This explicit trend is systemic in nature and will invariably continue, as all other remedies to satisfy the insurmountable debt obligations are no longer within reach nor achievable.  We quite simply can not grow our way out from under this mushrooming pile of toxic debt.  Currency devaluation is the only applicable and singularly available path forward to liquidate the imposing outstanding debt owed.

Make no mistake,  the most esteemed of economic thinkers are well aware of this ominous predicament. On the other side of the coin, the mainstream financial industry protagonists and pundits have a paramount vested interest in denying this self-evident truth.

Notably, current policy makers lack historically substantiated evidence to validate the stated and intended objectives of the extreme policy measures they have initiated, nor can they accurately ascertain the unintended consequences of the distorting market interventions they have performed. These are the known unknowns. Physical Gold, a long standing historically proven store of value which provides wealth protection with unencumbered counterparty risk, is clearly a judicious and prudent hedge for all investors facing these macro economic realities and policy measure uncertainties.

Precious Metals are inherently the most viable asset class which outperforms all other assets against currency debasement and the ensuing inflation that invariably follows periods of excessive monetary accommodation. Moreover, a 70% consumption based economy which routinely and heedlessly runs massive trade deficits will pay dearly for the inevitable devaluation of its means of exchange.   You can only print and party for so long before others catch on.

Furthermore, you can be assured that the deliberate debasement will most certainly bring with it higher interest rates, as all creditors will surely soon demand higher returns to compensate for the programmed systematic debasement of their holdings.

I know, I know, you will all point to today’s 10 year treasury yield below 2% and recent dollar strength to precariously make your case that we are on sound footing.  However, In my view, the knee jerk reaction, seemingly at the speed of light, of massive capital flows desperately seeking a suspect flight to safety in the most indebted country of all time, actually highlights the acute distortion and inherent instability of global finance today.   Liquidity simply for the sake of liquidity has no intrinsic value in it of itself.

Sound money will always flow to real veritable value.  It’s simply a matter of time now, and the trigger that sets off monetary cataclysms is always a function of the perceived confidence in the financial authorities and their monetary system.  Deep down inside, are you confident in what they have done?

Definitive evidence throughout 5,000 years of mankind’s monetary history overwhelmingly confirms that once the cost of excessive debt burdens outpaces the gains from productive growth, currency debasement inevitably ensues.  Same as it ever was.  Got Gold?

.




via Zero Hedge http://ift.tt/1FlHlTW Bruno de Landevoisin

What Happens When 30,000 People Run The Beijing “Airpocalypse” Marathon In “Hazardous” Smog

Some 30,000 participants were wondering if the organizers of today’s 34th Beijing International Marathon would cancel the event after “a toxic fog enveloped the Chinese capital and smog levels soared to “hazardous” levels.” Adding to the confusion, and concerns, even the People’s Daily, the Communist Party’s mouthpiece newspaper, cautioned athletes against taking part in the 26.2-mile race, reporting that Beijing’s air was “not suitable for outdoor activities”.  As the Telegraph reports, “Beijing authorities admitted their city’s air was “severely polluted” on Sunday while the US embassy, which also monitors smog levels, described the situation as “hazardous”. The Marathon organizers’ answer, however, was that the Marathon would proceed as scheduled.

As a reminder, this is what the Beijing Air pollution tracker said 8 hours ago when the marathon was due to begin:

And to think China was so demonstratively eager to reform not only its massive debt overhang, but its air as well: “Li Keqiang, China’s prime minister, vowed to “declare war” on pollution in March but Beijing’s “airpocalypse” marathon capped a calamitous month for the city’s environmental authorities.”

Once the green light was given, most competitors chose to ignore the health warnings, instead donning facemasks they hoped would prevent toxic air invading their lungs as they gathered in Tiananmen Square ahead of the race’s 8am start.

 “It was really exhausting,” said Ma Dong, a 22-year-old male runner who was among those to use a mask. “Lots of athletes pulled out halfway because of the haze. It was really uncomfortable wearing a mask during the marathon as you can’t breathe freely.”

 

Organisers told the Beijing News they handed out 140,000 water-soaked sponges to athletes, advising them to “clean” their skin after it was “exposed to the air”.

 

Luo Changping, a Chinese journalist, posted a photograph of one runner sporting a military-style gas mask. “I’m not running the marathon. I’m going back to the World War,” the journalist wrote.

 

Not all made it to the finish line across town near Beijing’s Bird’s Nest stadium. “Some of the runners have given up in the 2014 Beijing Marathon due to serious air pollution,” the People’s Daily reported.

 

Ying Wei, a 23-year-old runner, admitted his “lung hurt quite badly during and after the race”.

Just give it a few more weeks: we are confident the pain will simply go away.

In any event, the end result was a surreal photo album of the “airpocalypse” marathon, perhaps the best harbinger of the globalized future, as of thousands of people jogged across downtown Beijing in gasmasks.

At least there was no Ebola scare to force the runners to wear full Hazmat suits…




via Zero Hedge http://ift.tt/1y6r1Sd Tyler Durden

Sheldon Richman Remembers Leonard P. Liggio

Leonard P. Liggio, 81, died Tuesday after a
period of declining health. Sheldon Richman writes that he lost one
of his favorite teachers this week, as did so many other
libertarians, not to mention the freedom movement as a whole.
Leonard was a major influence on Richman’s worldview during the
nearly 40 years he new him, and while he hadn’t seen Leonard much
in recent years, he has a hard time picturing the world — and the
noble struggle for liberty — without him.

from Hit & Run http://ift.tt/1Flx2PN
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Wealth Inequality Is Not A Problem, It’s A Symptom

From Raúl Ilargi Meijer of The Automatic Earth

Wealth Inequality Is Not A Problem, It’s A Symptom

A comment on an article that comments on a book. I don’t think either provides, for the topic they deal with, the depth it needs and deserves. Not so much a criticism, more a ‘look further, keep digging, and ye shall find more’. And since the topic in question is perhaps the most defining one of our day and age, it seems worth it to me to try and explain.

The article in question is Charles Hugh Smith’s Why Nations (and organizations) Fail: Self-Serving Elites, and the book he references is Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson.

Charles starts off by saying:

The book neatly summarizes why nations fail in a few lines:

 

(A nation) is poor precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it.

The Amazon blurb for the book states that the writers “conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it)”, and continues with examples used such as ancient Rome, North Korea, Zimbabwe, the Congo, to make the point that some countries get rich and others don’t, because of differences in leadership structures. That in itself certainly seems true, but that doesn’t necessarily make it the whole story.

In the case of the Congo, for instance, the perhaps richest place on earth when it comes to resources, there’s not only the devastating history it’s had to endure with incredibly cruel Belgian colonial powers, there’s to this day a lot of western involvement aimed at keeping the region off balance, and feed different tribes and peoples with weaponry up the wazoo, in order to allow the west to keep plundering it. It’s not just about national goings-on, it’s – also – a supra-national thing.

That’s one of two shortcomings in the material, the breadth and width of why nations and organizations fail their people but serve their masters. In the present day, national boundaries, whether they are physical or merely legal/political, are not the best yardsticks anymore by which to measure and gauge events.

The second shortcoming, in my view, is that inequality, a theme so popular that even Janet Yellen addressed it this week in what can only be seen as her worst possible impression of Marie Antoinette, and expressed her ‘worry’ about wealth inequality in America. The very person publicly responsible for that inequality thinks it’s ‘just awful’. Go bake a cake, gramps.

Wealth inequality is but a symptom of what goes on. Charles Hugh Smith has a few graphs depicting just how bad wealth inequality has become in the US. We all know those by now. It’s bad indeed. But where does that come from? Charles touches on it, but still hits a foul ball:

I submit that this dynamic of failure – the concentrated power and wealth of self-serving elites – is scale-invariant, meaning that it is equally true of communities, towns, cities, states, nations and empires alike: all fail when they’re run for the benefit of a narrow elite. There is a bitter irony in the ease with which American pundits discern this dynamic in developing-world kleptocracies while ignoring the same dynamic in America.

 

One would imagine it would be easier to see the elites-inevitably-cause-failure in one’s home country, but the pundits by and large are members of the Clerisy Upper Caste, well-paid functionaries, apparatchiks, lackeys, factotums, toadies, sycophants and apologists for the very elites that are leading America down the path of systemic failure as the ontological consequence of their self-serving consolidation of wealth and power.

Here’s the thing: especially after WWII, though before that already as well, the western world woke up to the need for international co-operation. Dozens of organizations were established to structure that co-operation. But then, in yet another fountain of unintended consequences, something man is better at than just about anything else, we let those organizations loose upon the world without ever asking what happened to what they were intended for, or whether the original grounds for founding them still existed, and whether they should perhaps be abolished or put on a tight leash.

These are questions that should be asked about any large-scale organization. Be they multinational corporations, global banks, Google or indeed the United States of America. We can’t just assume these powers, which gather more power as time goes by, share and serve the purposes of the people. What if they gradually come to serve only their own purpose, and it contradicts that of the people? Should we not get that leash out?

Turns out, we never do. If someone would suggest today to break up the USA, because its present status contradicts that which the Founding Fathers had in mind (and there are plenty of arguments to be made that such contradictions exist in plain view), (s)he would not even be sent to a nuthouse, because no-one would take him/her serious enough to do so.

But wealth inequality still rises rapidly within America, and it doesn’t serve the people. So why does it happen, and why do we let it? Because the inequality that matters most is not wealth, but power. And we’ve been made to believe that we still have that power, but we don’t. Voting in elections has the same function today as singing around a Christmas tree: everyone feels a strong emotional connection, but it’s all just become one giant TV commercial.

Even if families are genuinely happy to meet up and exchange gifts and stories, it’s all modeled after the building blocks handed to us by chain stores. It isn’t really our story anymore, and Jesus certainly wasn’t born in a manger: he was born in a MacMansion and the first thing the child saw was his mom’s fake boobs, a wall-sized TV and an iPhone.

In that same vein, we lost the stories bitterly fought and suffered for by our grandparents through two world wars and the brutal invasions of Vietnam and Iraq, the stories of how we can best keep ourselves safe and out of – international – trouble. Not just military trouble, but economic and political trouble. These things are no longer our decision. We founded supra-national, indeed global, institutions for that. And then let them slip out of our sight.

The US is a bit of an outlier here, simply because it’s older. But the IMF, the World Bank, UN, NATO and the EU absolutely all fit the picture of organizations that have – happily – grown beyond our range of view, and that exhibit the exact same inverted pyramid characteristics we see on wealth inequality, only for these organizations it’s not wealth that floats and concentrates increasingly from the bottom to the top, it’s power.

Wealth comes after that. And one shouldn’t confuse that order. Because power buys wealth infinitely faster than wealth buys power.

All these supra-national institutions were established with good intentions – at least from some of the founders. But then we forgot, ignored, to check on them, and they accumulated ever more power when we weren’t watching (we were watching TV, remember?)

And what we see now is that any effort, any at all, to break up the IMF, World Bank, UN, NATO and EU would be met with the same derision that an effort to break up the USA would be met with. We have built, in true sorcerer’s apprentice or Frankenstein fashion, entities that we cannot control. And they have taken over our lives. They serve the interests of elites, not of the people. So why do we let them continue to exist?

What powers do we have left when it comes to bailing out banks, invading countries, making sure our young people have jobs when they leave school? We have none. We lost the decision making power along the way, and we’re not getting it back unless we quit watching the tube (or the plasma) and fight for it. Until we do, power will keep floating to the top like so much excrement; it’s a law of – human – nature.

That the people we voluntarily endow with such control over our lives would also use that control to enrich themselves, is so obvious it barely requires mentioning. But that doesn’t mean this is about wealth inequality, that’s not the main issue, in fact it’s not much more than an afterthought. It’s about the power we have over our lives. Or rather, the power we don’t have.




via Zero Hedge http://ift.tt/1unbrOe Tyler Durden

Reading The Road Map To A Police State

Submitted by Aaron Tao via Ludwig von Mises Institute,

Rise of the Warrior Cop: The Militarization of America's Police Forces, by Radley Balko, PublicAffairs, 2013

"There is no crueler tyranny than that which is perpetuated under the shield of law and in the name of justice." —Charles de Montesquieu

If there was any silver lining to the horrifying events that took place in Ferguson, Missouri which riled the month of August, it has finally brought the issue of police militarization to the forefront. As outrageous as the police shooting death of unarmed 18-year-old Michael Brown was, the brutal law enforcement response in the form of running roughshod over the First Amendment and resorting to quasi-martial law to mostly peaceful protests by local residents and activists was worse. To many observers, what took place in a Midwest suburb was indistinguishable from scenes out of occupied Iraq.

How did this happen? For an answer, the writings of investigative journalist Radley Balko are an invaluable resource. Perhaps more than any other person, Balko has reported substantially on police militarization and injustice across the country for years.

The full details can be found in his book Rise of the Warrior Cop: The Militarization of America's Police Forces . This important book, which was recently released in its paperback edition, could not have arrived at a better time. Despite going into an intellectually rigorous analysis of law, politics, and history, Balko has a gift for storytelling, which highlights many heartbreaking stories and makes Rise of the Warrior Cop an accessible and gripping read.

In the introduction, Balko begins with the provocative question:

How did we evolve from a country whose founding statesmen were adamant about the dangers of armed, standing government forces — a country that enshrined the Fourth Amendment in the Bill of Rights and revered and protected the age-old notion that the home is a place of privacy and sanctuary — to a country where it has become acceptable for armed government agents dressed in battle garb to storm private homes in the middle of the night — not to apprehend violent fugitives or thwart terrorist attacks, but to enforce laws against nonviolent, consensual activities?

In the first chapter, Balko traces classical history and its lessons on America’s Founders as well their own experiences under British rule. As students of the Enlightenment, they were familiar with how the Roman Republic was overthrown by ambitious military leaders and how the Praetorian Guard in the Empire era, which not only acted as bodyguards for the emperor but also took on many policing roles as well, was responsible for much political intrigue and instability. In the lead-up to the American Revolution, British authorities used the hated writs of assistance to enforce tax laws and to crackdown on contraband in the colonies. This type of general warrant allowed for authorities to “search broad groups of people, for evidence of any number of crimes, sometimes over long stretches of time.” As bad as they were, Balko noted that in contrast to what police can do today, the writs of assistance could not be exercised at night and they required a knock-and-announcement before entry into a private home. Finally, it was the deployment of British soldiers to enforce the law that brought long-simmering tensions to a boil. After the Revolutionary War, with these abuses still fresh on their minds, the Founders framed and ratified a Constitution with a Bill of Rights.

The Fourth Amendment, in particular, was written explicitly to prohibit general warrants and to reinforce the Castle Doctrine, an even older principle carried over from the British common law that can be traced back to antiquity. The Castle Doctrine simply reinforces the timeless idea that "a man’s home is his castle." As explained by Balko:

Implicit in the sentiment is not only the right to repel criminal intruders but also the idea that the state is permitted to violate the home's sanctity only under limited circumstances, only as a last resort, and only under conditions that protect the threshold from unnecessary violence. Thus, before entering without permission, government agents must knock, announce and identify themselves, state their purpose, and give the occupants the opportunity to let them in peacefully. … The announcement requirement under English law was not a formality, as it has become in police raids today. It was elemental. Its purpose was to give the homeowner the opportunity to avoid violence, distress, and the destruction of his property.

Balko also goes into interesting detail regarding the Third Amendment, the "runt piglet of the Bill of Rights," which contains the seemingly antiquated provision that prohibits the quartering of soldiers in private homes. The case law pertaining to the amendment is scant but Balko asks us to consider why the Founders placed such an importance on it. Read in light of the Castle Doctrine, it makes sense that those who revere the principle that "a man’s home is his castle" would not tolerate their homes being occupied by soldiers. But most importantly, "the amendment was a placeholder for the broader aversion to a standing army. … It represented a long-standing, deeply ingrained resistance to armies patrolling American streets and policing American communities."

Until the Civil War and Reconstruction, active duty troops were rarely if ever used for domestic law enforcement. In the early American republic, law enforcement was left mostly in private hands. Close-knit communities with shared values relied mostly on social stigma and shaming to maintain order. Professional full-time prosecutors didn’t exist, and it fell upon crime victims themselves to initiate the charges before a grand jury, a panel of private citizens who had the power to indict. The citizen militia was called out for only the worst cases that required force. But as urbanization advanced and an increasingly diverse population grew, it brought the need for changes.

One particularly interesting historical fact noted by Balko is that after the fall of Rome, centralized metropolitan police forces were not to be formed for almost another two millennia. In places that developed strong civil liberties traditions such as England and the American republic, people remained suspicious of standing armies, martial law, and powerful executives. In the United States, the New York Police Department (NYPD) was not formed until 1845. Modeled after London’s famous "bobbies," political leaders had to wage major public relations campaigns to win over the trust of citizens. Major efforts were taken to distinguish the police from soldiers, and to ensure they were responsive to elected officials and the public. But in many jurisdictions, the police became a little too responsive to politicians, acted as corrupt henchmen for anyone who won office, and oppressed minorities and outsiders. The issue of police corruption was serious enough that it became a plank in the progressive movement by the early twentieth century. Reformers introduced the concept of professionalism which "transformed the job of police officer from a perk of patronage to a formal profession with its own standards, specialized knowledge, and higher personnel standards and entry requirements." Although it helped address the problem of corruption, this new policy began to subtly separate the police from the communities they supposedly served and protected.

The meat of Balko’s story focusing on police militarization began in the 1960s. During this time, the civil rights, antiwar, and counterculture movements became very active while the overall crime rates soared. As the liberal Warren Court expanded the rights of the accused in a number of notable rulings, the law-and-order types became greatly alarmed that society was falling apart. As his critics on the right continued their attacks that he was "soft" on crime, President Lyndon B. Johnson oversaw the creation of two government institutions to fight crime that would have huge future ramifications:

  1. the Bureau of Narcotics and Dangerous Drugs (BNDD), which eventually would become the modern Drug Enforcement Agency (DEA), the leading government agency fighting the War on Drugs.
  2. the Law Enforcement Assistance Administration (LEAA), to "stream the federal funding, equipment, and technology to state and local law enforcement agencies."

This would go on to set a large precedent for future programs like Byrne grants and the Pentagon’s 1033 program as "Johnson’s successors would quickly discover that introducing a funding spigot like LEAA, then threatening to pull it away, was an effective way to persuade local police agencies to adopt their preferred polices."

The modern War on Drugs would officially begin under President Richard Nixon after winning on a law-and-order campaign and appealing to the “Silent Majority.” The focus of the Nixon’s administration’s anticrime effort would be on drugs, which they thought was the common denominator among racial minorities, the counterculture, and the antiwar movement that alienated “ignored America.” The Nixonites pushed for massive funding for the BNDD and LEAA, demanded no-knock warrants for federal drug agents, and even temporarily shutdown the U.S-Mexican border in Operation Intercept. In 1969, the first SWAT raid was carried out in Los Angeles against the Black Panthers. Despite the raid being a disaster "practically, logistically, and tactically," it was a major success in public relations and SWAT teams would spread to nearly every city in America in the following decades. Despite being originally designed for emergency situations where violence was needed to end violence such as bank robberies and hostage scenarios, mission creep was unavoidable and SWAT teams would go on to be used for everything from breaking up neighborhood poker games, enforcing underage drinking laws, and performing regulatory inspections, as meticulously documented by Balko. Fast forward to modern day, it is now estimated that SWAT raids occur up to 40,000 times per year across the United States.

This can be traced back to the Reagan administration when SWAT tactics began to be increasingly used in fighting the drug war. Hardliners in his administration saw a "biblical struggle between good and evil, and in the process turn[ed] the country’s drug cops into holy soldiers." Noting the inconsistent reverence supposed limited government conservatives have for Reagan, Balko had this to say:

Conservatives had always held the somewhat contradictory position that government can’t be trusted in any area of society except when it comes to the power to arrest, detain, imprison, and execute people. But Reagan didn't dance around the contradiction, he embraced it. He blamed crime on big government — and in the same breath demanded that the government be given significantly more power to fight it.

Under Reagan, the FBI was brought into enforcing drug laws, health professionals who favored treatment for drug abusers were purged from the bureaucracy, and sweeping new policies such as civil asset forfeiture (the legal theory that property itself can be guilty of a crime and be seized without the owner even being charged) were embraced. Perhaps the most radical action was that Reagan sought to amend the Posse Comitatus Act and bring the military into the Drug War.

Balko notes that:

By the end of the 1980s, joint task forces brought together police officers and soldiers for drug interdiction. National Guard helicopters and U-2 spy planes flew the California skies in search of marijuana plants. When suspects were identified, battle-clad troops from the National Guard, the DEA and other federal and local law enforcement agencies would swoop in to eradicate the plants and capture the people growing them.

After Reagan was succeeded by Vice President George H.W. Bush, the same course continued. Bush Sr. appointed hardliner Bill Bennnet (who once called for beheading drug dealers on Larry King live and even "urged children to turn in their friends who used drugs to the police") as drug czar and ramped up rhetoric that the drug war was a moral crusade between good and evil. Drug treatment programs were stripped of funding, while additional cash flowed into law enforcement and new prison construction. Perhaps the most significant were the Byrne grants that were created in a 1988 crime bill which would send billions in federal cash to police departments over the next twenty-five years and allow "the White House another way to impose its crime policy on local law enforcement." But in Balko’s view, the program's most harmful legacy was the "creation of hundreds of regional and multijurisdictional narcotics task forces" that were often unaccountable and financially rewarded for making many busts in the following decades.

Reformers and activists hoped the election of Bill Clinton would bring changes to the War on Drugs but sadly, that would not be the case. Instead, Clinton "encouraged paramilitary raids against low-level offenders — even users" and cracked down hard on medical marijuana facilities in order to send a political message despite legalization in a number of states. In addition, the Bryne grants picked up steam as they incentivized "police departments across the country to prioritize drug crimes over other investigations." Perversely, the funds were awarded based on the "number of overall arrests, the number of warrants served, or the number of drug seizures." As a result, actually reducing crime was not favored and instead, grants were given to police departments that were making lots of seizures regardless of size and easy arrests (e.g., low level drug offenders).

During this time, the Supreme Court continued to whittle away the Fourth Amendment and further militarization was promoted through the creation of infamous 1033 program as relationships between the federal government and local police departments deepened. High-profile tragedies in the 1990s involving heavily militarized law enforcement such as Ruby Ridge and the Waco Siege served mostly as partisan fodder as the right temporarily became critics only to fall silent when George W. Bush became President.

Bush Jr. followed the moral crusade script and continued the paramilitary raids against medical marijuana facilities and patients despite some initial lip service to federalism. After the September 11th terrorist attacks, drug warriors did not fail to waste a good crisis and used the opportunity to attempt to link the new fear of terrorism to drug use. In addition, the new War on Terror created another "ratchet effect" that ballooned an already-growing National Security State and furthered militarized the police. Thanks to generous anti-terrorism grants from the Department of Homeland Security which dwarfed even the 1033 program, police departments across the country upgraded their arsenals with automatic weapons, drones, armored vehicles, and other military equipment. But since terrorist attacks are incredibly rare, police used their new gear for drug raids instead. Meanwhile, the Supreme Court continued its siege on the Castle Doctrine and the Fourth Amendment with its decisions in United States v. Banks and Hudson v. Michigan.

Many people desiring "hope and change" put their faith in Barack Obama for a drug war détente and an overall repudiation of the Bush policies, but as with what happened with Clinton, they were in for a very bitter disappointment. Obama expanded the trend of police militarization by pouring a record $2 billion into the Byrne grants. This was part of his 2009 economic stimulus package, overseeing "more federal raids on marijuana dispensaries in four years than George W. Bush had presided in over eight," promoting greater forfeiture takings by the Justice Department, and continuing to give away hundreds of millions in federal surplus military equipment to local and state police departments.

Near the end of the book, Balko offers a number of proposed reforms to rollback police militarization and restore the workings of a free society. These ideas include the practical as well as politically unattainable, but at very least, provide a working road map:

  1. Scaling back and ending the War on Drugs.
  2. Halting SWAT mission creep such as prohibiting their use by regulatory agencies.
  3. Increasing transparency such as detailed warrant tracking and requiring the use of body cameras on raids where the videos could then be made public upon request.
  4. Embracing authentic community policing by “taking cops out of patrol cars to walk beats and become a part of the communities they serve” to rebuild trust among the people they serve.
  5. Changing police culture by moving away from “us versus them” combat mindset and toward emphasizing counseling and dispute resolutions for resolving conflict in routine problems.
  6. Increasing accountability and ensuring police are not above the law by imposing stronger liability on officers who make egregious errors (this proposal would most likely be fought tooth-and-nail by police unions).

Even as more people awaken to the realities of a growing police state, the challenges to restoring a free society are vast and likely to be resisted every inch of the way by entrenched interests. As Abigail Hall and Christopher Coyne pointed out in their political-economic analysis of police militarization in the Spring 2013 issue of The Independent Review:

Government agencies’ inherent tendency is to expand beyond their designers’ initial aims and goals. Special-interest groups exacerbate this problem by seeking to expand their power and influence. The onset of crises — whether real or manufactured — begins a long, far-reaching process that erodes the already imperfect constraints on the government’s power … citizens must become skeptical of the possibility of establishing permanent constraints on government power. This skepticism ultimately requires recognition and appreciation of the realities of government power and a rejection of government action as a solution to the perceived crises.

After reading through Rise of the Warrior Cop, if there be a single lesson we should grasp, it is that police militarization and the War on Drugs are intimately tied. The former cannot be reversed unless the latter is ended. Thanks to the War on Drugs, the Castle Doctrine crumbled, the United States ended up with the largest incarcerated population in world history, and the Officer Friendlies of yesteryear have been replaced by a de-facto standing army clothed like Darth Vader.

There is a wide range of opinions among commentators today on what extent the United States is becoming/is a police state. In Balko’s conclusion, "it would be foolish to wait until it becomes one to get concerned." If you were at all disturbed by the events in Ferguson or wondering why your local police department has an armored vehicle with a belt-fed, turreted .50 caliber machine gun, you owe it to yourself to read this book.




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Why Abenomics Failed: There Was A “Blind Spot From The Outset”, Goldman Apologizes

Ever since Abenomics was announced in late 2012, we have explained very clearly (for example here, here, here, here, here, here and here) that the whole “shock and awe” approach to stimulating the economy by sending inflation into borderline “hyper” mode in a country whose main problem has to do with an aging population demographic cliff and a global market that no longer thinks Walkmen and Sony Trinitrons are cool and instead can find all of Japan’s replacement products for cheaper and at a higher quality out of South Korea, was doomed to failure.

Very serious sellsiders, economists and pundits disagreed and commended Abe on his second attempt at fixing the country by doing more of what has not only failed to work for 30 years, but made the problem worse and worse.

Well, nearly two years later, or roughly the usual delay before the rest of the world catches up to this website’s “conspiratorial ramblings”, the leader of the very serious economist crew, none other than Goldman Sachs, formally admits that Abenomics was a failure, and two weeks after Goldman also admitted that now Japan is informally (and soon officially) in a triple-drip recession, begins the scapegoating process when in a note by its Naohiko Baba, it says that Abenomics failed because all along it was based on two faulty “misconceptions and miscalculations.” Ironically, the same “misconceptions and miscalculations” that frame the Keynesian “recovery” debate in every insolvent developed world country which is devaluing its currency to boost its exports and economy, when in reality all it is doing is propping up its stock market, allowing the 1% of the population to cash out and leaving the 99% with the economic collapse that inevitably follows.

So what happened with Abenomics, and why did Goldman, initially a fervent supporter and huge fan – and beneficiary because those trillions in fungible BOJ liquidity injections made their way first and foremost into Goldman year end bonuses  – change its tune so dramatically? Here is the answer from Goldman Sachs.

Blind spot from the outset in “weak yen = export recovery” scenario

 

A weak yen boosts export price competitiveness, fueling a recovery in export volume that supports a sustained economic recovery via improved corporate earnings, capex recovery, and wage growth. At least, this was the scenario painted when bold monetary easing was launched as the first arrow of Abenomics to induce yen depreciation. Government officials and market participants alike believed for a long time that the yen’s rapid depreciation thereafter would at some point drive an export recovery. However, a tangible recovery in export volume is yet to materialize.

 

Actually, this is not the first time a weaker yen has failed to revive exports. Since the 1990s, Japan has experienced four phases of yen appreciation followed by  depreciation, but in none of those phases was there any clear correlation between exchange rate and export volumes. Equating yen depreciation with export recovery would appear to invite multiple misconceptions and miscalculations (see Exhibit 1).

 

 

Firstly, a weaker yen does not necessarily result in lower export prices (on a local currency basis). Since a weak yen also increases exporters’ input prices, it is  unlikely that export prices will fall at the same rate that the yen declines in value. Export prices also have a more limited impact on export volume than global demand, making the latter a more important determinant for exports.

Odd: nobody could think of any of this before Abenomics was launched resulting in the largest domestic misery in Japan in over three decades?

The combination of these two misconceptions has led to a miscalculation about the latest phase of yen depreciation. Export prices have not decreased as much as in past yen depreciation phases and global demand has lacked vigor. Fiscal austerity, chiefly in the US and Europe and implemented around the same time as Abenomics, has weighed on activity, resulting in a muted global economic recovery. This alone is a key factor behind the miscalculation of the export recovery scenario, in addition to which Japan’s export volume has been less responsive to global demand than before.

Let the scapegoating begin: here are the two misconceptions why, according to Goldman, Abenomics failed:

Misconception 1: Export prices do not fluctuate as much as forex

 

It appears to be commonly accepted that a strong yen increases export prices and lowers export volume, negatively impacting the Japanese economy, whereas a weak yen lowers export prices, raising the price competitiveness of Japanese products and in turn spurring an export recovery, with positive implications for the economy. We see two misconceptions here. First is that export prices do not fluctuate as much as forex. When the yen is strengthening, prices of Japanese products rise on a local currency basis and price competitiveness falls, while the opposite is true when the yen is weakening. However, in past yen depreciation phases, export prices on a contract currency basis have only fallen by around 30% of the rate of yen depreciation. Looking at the 12-month average, excluding extreme forex movements, the fluctuation in export prices is minor (see Exhibit 2).

 

 

Given that imported input costs fall and that hiking export prices undermines competitiveness when the yen is strong, the gap between the rate of yen appreciation and the degree of increase in export prices is large. In phases of yen depreciation, yen-based input prices rise, so covering higher costs does not require export prices to fall as much as the yen declines in value.

 

Miscalculation 1: Export prices have not fallen as much as in past phases of yen depreciation

 

One miscalculation regarding the current phase of yen depreciation is that the decline in export prices relative to how far the yen has weakened has been milder than in past phases of yen depreciation. This is because rising crude oil prices and other fuel-related costs have inflated manufacturers’ input prices by 6.1% on aggregate since September 2012 and manufacturers have not been able to lower export prices and at the same cover the higher input costs. When the yen weakened in 1995-1998 and between late 1999 and early 2002, manufacturers’ input prices fell only marginally despite higher import prices driven by the weak yen. This made it easy for manufacturers to lower export prices to factor in the weaker yen. Conversely, when the yen depreciated between 2004 and 2007,  manufacturers’ input prices rose 20% on aggregate on sharply higher crude oil prices, and they were able to hike export prices (see Exhibit 3).

 

 

We see other factors behind the narrower decline in export prices this time. One is external considerations regarding government-led efforts to rapidly weaken the yen since the launch of Abenomics. The US has supported the BOJ’s quantitative and qualitative easing as a means of helping Japan escape deflation. However, concerns about the yen’s sharp depreciation are evident within the US. In January this year, US Treasury Secretary Jacob Lew made comments seeking to curb excessive yen weakness, saying that Japan would not see long-term growth if it overly relies on the forex rate. More recently, on September 22, William C. Dudley, president of the Federal Reserve Bank of New York, said that if the US dollar were to gain substantially in value then trade figures would worsen, impacting economic growth. Partly because US midterm elections are looming, there is consideration on the Japanese export industry side not to cause trade friction by using the weak yen to lower export prices and provoke a backlash from the US auto industry and other exportrelated sectors. We believe this stance is also intended to give Japan an advantage in remaining negotiations with the auto sector in the final stages of Trans-Pacific Partnership (TPP) talks. Therefore, we think one reason the 25% fall in the value of the yen has not led to lower export prices is foreign diplomacy and trade friction considerations.

 

It is also possible companies have not ventured to lower export prices. The Development Bank of Japan (DBJ) has conducted a survey asking manufacturers why they have chosen to keep manufacturing functions in Japan. Interestingly, 54% of respondents cited mother factories (for production of core components) and 27% high-value-added production as key factors after management and R&D. Mass production of commodity products was a low 7.6%. An even higher percentage, more than 60%, cited product and service quality and performance as sources of their competitiveness, while a mere 1% said the currency afforded them a competitive advantage. Products still manufactured in Japan for export tend to offer high-value-added with strengths in terms of quality and performance, or are essential core components with high price and volume elasticity (i.e., products whose sales volumes increase if local sales prices fall), as opposed to mass-produced items. We think Japanese companies may also feel they can preserve the brand image of Japanese products as offering high-value-added and high  performance by maintaining a certain local sales price. For the above reasons, we think Japanese companies in the latest phase of yen depreciation have likely adopted a strategy of securing yen profits arising from the currency’s lower value without cutting export prices (See Exhibit 4).

 

 

Misconception 2: The key determinant of export volumes is global demand, not prices

 

The second misconception is the commonly held belief that export volumes will recover if prices of Japanese products fall in export markets. Even in past yen depreciation phases the correlation between export prices (contract currency basis) and export volumes has changed from time to time, meaning lower export prices do not always translate into higher export volumes. From the end of 1999 in particular, although export prices dropped sharply as the yen weakened due to the BOJ’s zero interest rate policy and quantitative easing, export volumes also slid in the face of cooling overseas demand resulting from the bursting of the IT bubble.

 

 

In short, overseas demand is the key determinant of Japan’s real exports. Indeed, exports and our Global Leading Indicator (GLI), a gauge of global economic trends, are closely correlated (see Exhibit 6).

 

 

Miscalculation 2: Elasticity of export volume versus global demand falls, global demand softens

 

A major miscalculation in the latest phase of yen depreciation is that global economic recovery has been muted owing to fiscal austerity undertaken mainly in the US and Europe during 2013. That the export volume reaction to global demand has been weaker than in the past has acted as a further headwind against the Japanese export recovery scenario. Comparing our export volume model calculations, in which export prices and GLI are explanatory variables, with actual export volume, we note that the latter has been constantly below the former since around the March 2011 earthquake (see Exhibit 7).

 

 

We see several reasons why Japan’s export volume has not kept pace with the global economy: (1) Japanese companies have offshored production; (2) Japanese products are now less competitive than overseas products from other Asian economies and elsewhere; and (3) Japanese companies have adopted a strategy of emphasizing quality and brand and decided not to lower prices to gain global share (see Exhibits 8 and 9).

 

 

We think exports have failed to recover during the latest yen depreciation phase due to several misconceptions and miscalculations: (1) Yen weakness does not necessarily result in a decline in export prices and this has been the case more so this time; (2) the impact of lower export prices on export volume is far more limited than global demand (GLI) in the first place; (3) despite the correlation between GLI and export volume, the offshoring of production and lower competitiveness of Japanese products have resulted in export volume being consistently below GLI since the March 2011 earthquake; and (4) the lackluster US and European economic recoveries have raised the risk of a further slowdown.

There is more, but the point is clear: we hear your apology loud and clear, Goldman, and we accept it – after all you couldn’t possibly tell the truth two years ago when this Keynesian insanity, which incidentally is being tried everywhere around the globe and will have the same results, was about to begin.

And now, where is Abe’s Imodium? He is going to need it.




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Mind “The Asian Dollar Short” – Another Ticking Time Bomb Gifted By The Central Banks

Submitted by Jeffrey Snider of Alhambra Partners via Contra Corner blog,

The PBOC continues along with its path of “targeting” liquidity rather than “flooding” as has been done in the past. Expectations for Chinese action, however, seem to be resistant to getting that message. This is not something that is just now being applied, as if a sudden and unanticipated change in thinking. The entire default drama at the beginning of this year was intended to signal that the “flood” was ending, though I think the PBOC failed to follow that up for fear of further upset.

The entire point of the now-prominent SLF is exactly this targeted approach. The Wall Street Journal reports that this continues to be the only conduit the PBOC is willing to utilize.

China’s central bank is planning to inject up to 200 billion yuan ($32.8 billion) into some 20 large national and regional banks, according to banking executives briefed on the matter, in another step aimed at spurring the world’s second-largest economy.

 

The move—which is expected to channel money to areas the government deems important, such as public housing and small business—marks the latest of a series of targeted easing measures meant to arrest a slowdown in China’s economic growth. Last month, the People’s Bank of China pumped 500 billion yuan into the country’s five major state-owned banks.

Until this year, slowing growth had almost universally been met with broad-based monetarism, including rate cuts in the repo market. Add that history to the growing sense that the Chinese economy may be worse than feared, and the “market” expectation for a new “flood” is somewhat understandable (particularly given the almost haphazard approach in practice), however misplaced. Central banks are into an age of secular stagnation in their thinking which is a total re-assessment of past behavior. In other words, they finally (FINALLY) recognize that the costs of “flooding” the world with economically useless and inefficient monetarism are high, and that the benefits are far too scarce (though almost everyone loves those asset prices, at least on the way up).

Not only is this a full part of the PBOC action now, it is the foundation, I believe, behind what the ECB and even Fed are doing. As I wrote exactly a month ago:

That means not only is China eschewing broad liquidity expansion contrary to what is so often proclaimed, but rather the PBOC is actually recognizing, as are most other central banks, just how ineffective monetarism has been and can be. Furthermore, they are also under less illusion about the high cost of past monetarism, now looking to try to “thread the needle” of some monetary expansion that will not disturb the housing sector (bubble) in either direction. Call it managed decline or targeted growth without bubbles; whatever it is, it is a preposterous-sounding position to take.

But not everything is as it seems. While the PBOC may be taking a stand on monetarism and its character, it has been very curious that the yuan has not fully participated in the dollar turmoil marking so many other “dollar” dependent nations. While the yuan’s appreciation trend may have been altered, that has not led again to the kind of disorder that marked the currency earlier in the year.

ABOOK Oct 2014 China Yuan

Maybe that is due, at least in part, to these expectations that the PBOC will eventually relent on its new approach, but I also think that the PBOC is at least looking the other way on some of the “old tricks” that supported the Chinese version of the dollar short.

Analysts at banks including Everbright Securities Co., Australia & New Zealand Banking Group Ltd. and Bank of Communications Co. said over-invoicing and over-reporting may explain the 34 percent surge in exports to Hong Kong from a year earlier.

 

A discrepancy between Hong Kong data for imports from China and Chinese figures for exports to the city in the past highlighted the practice of over-invoicing that’s used to disguise capital inflows to bet on China’s rising currency. China’s exports increased 15.3 percent from a year earlier, the biggest increase since February 2013 and beating the 12 percent median estimate in a Bloomberg survey of analysts, according to government data released yesterday, prompting deja vu for some.

Aside from the second paragraph where I believe the author attributes the wrong factor (not to “bet on China’s rising currency” but rather to keep the flow of dollars to the Chinese corporate sector that is very short), the description and the timing of this potential “error” sets it within the context of the rapid and dramatic “rise” in the “dollar.” The pressure was at its greatest in September, as the real and ruble can ably attest.

I think that is a second unappreciated change that is taking place, and in some respects has already taken place. The dollar short was very European-centric in the 2000’s, owing to their ready participation in the housing bubble in the US (and I would even argue that the bubble itself was largely based on that European short). Since August 2007, Europe has withdrawn somewhat, if only in terms of marginal participation. That, however, does not mean that the dollar short goes away with Europe’s retrenching.

Jason Fraser of Ceredex Value Advisors alerted me to a recent IMF study, publicized here in the Financial Times, that “found” Asian corporations are more short dollars than previously estimated:

Residents of emerging markets owe hundreds of billions more dollars (and euros) than previously thought, because they have sold bonds offshore that don’t get counted in national statistics…

 

This borrowing creates a currency mismatch. As long as the dollar (or euro) doesn’t appreciate too quickly against the borrowers’ local currencies, the debts can be easily serviced. The danger is that these large short positions could cause a squeeze and create a desperate search for scarce dollars — exactly what happened in 2008.

I’m not sure I agree with the author’s tense on the squeeze – “could cause” maybe should be rethought to “has caused” given what transpired in August and September. Perhaps that was limited to Europe, Brazil and the usual suspects while the Asian shorts, as Chinese were over-represented, were steadied by the Hong Kong mess (which would have been collateralized by some real good or commodity).

And that brings us back to the basic analysis of the dollar short – nobody really knows much about it. It exists independent of any statistical measure and in far too many cases, including and especially policymakers, independent of knowledge and experience (closed system? The dollar short is the empirical refutation of all closed system approaches in economics). As it is in 2014 we are still finding out it is probably bigger (IMF) and more widespread than even thought now after seven years of close involvement with it.

That makes the indirect indications provided by TIC and dollar “flows” all that more concerning, especially as they represent a sort of proxy for liquidity health and systemic capacity. At some point it may become necessary for “someone” to provide all these “dollars” and if everyone is all short then there will be no one left to take up that side (rerun of 2008).

Maybe it is enough to hope that the Fed will act, but history is conclusive that they will do so only after it is obvious; which is, by then, far too late. In that respect, the dollar “tightening” in both 2013 and now in 2014 has reinforced that history. But there is another element to consider, the PBOC being representative – that the “flood” approach is now pretty much discredited as a monetary measure. That would seem to suggest if the dollar short grows far more problematic, then central banks may not just be behind the curve in their planning but also and actually reluctant to step into that void with what would have to be a “flood” since doing so would refute their “evolution” in the other direction. That would certainly suggest a reason for allowing the Hong Kong “fraud” to return. Central banks are loathe to do many things, but at the top is admit mistakes.




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Market Uncertainty Has Never Been Higher

The CBOE’s VVIX Index, “an indicator of the expected volatility of the 30-day forward price of the VIX” reached extreme levels this week. While all eyes are firmly focused on the to-ing and fro-ing of VIX (the so-called ‘fear’ indicator), it is the uncertainty of that fear (or greed) that is exploding as VVIX measures. Simply put, the chance of VIX doubling, or tripling, in the next 30 days (which include the final POMO and Fed ‘end of QE’ meeting), has never been higher.

 

 

Chart: Bloomberg




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