10 Numbers That Prove That America’s Current Financial Condition Is A Horror Show

Authored by Michael Snyder via The Economic Collapse blog,

America’s long-term “balance sheet numbers” just continue to get progressively worse.  Unfortunately, since the stock market has been soaring and the GDP numbers look okay, most Americans assume that the U.S. economy is doing just fine. 

But the stock market was soaring and the GDP numbers looked okay just prior to the great financial crisis of 2008 as well, and we saw how that turned out.  The truth is that GDP is not the best measure for the health of the economy.  Judging the U.S. economy by GDP is basically like measuring the financial health of an individual by how much money he or she spends, and I will attempt to illustrate that in this article.

If I went out right now and got a whole bunch of new credit cards and started spending money like there was no tomorrow, would that mean that my financial condition had improved?

No, in fact it would mean that my long-term financial condition just got a whole lot worse.

GDP is a measurement of how much economic activity is happening in our society, and it is basically an indication of how much money is changing hands.

But just because more money is changing hands does not mean that things are going well.  What really matters is what is happening to assets and liabilities.  In other words, is wealth being built or is more debt just being accumulated?

Sadly, there are only a handful of bright spots in our economy.  A couple of very large tech companies such as Apple are accumulating wealth, but just about everywhere else you look debt is growing at an unprecedented pace.  Household debt has never been higher, corporate debt has doubled since the last financial crisis, state and local government debt is at record highs, and the U.S. national debt is wildly out of control.

If I went out tomorrow and spent $20,000 with a bunch of new credit cards, I could claim that my “personal GDP” was soaring because I was spending a lot more money then before.  But my boasting would be pointless because in reality I would just be putting my family in an extremely precarious financial position.

Economic growth that is produced by continually increasing amounts of debt is not a positive thing.  I wish that more people understood this very basic concept.  The following are 10 numbers that prove that America’s current financial condition is a horror show…

#1 U.S. consumer credit just hit another all-time record high.  In the second quarter of 2008, total consumer credit reached a grand total of 2.63 trillion dollars, and now ten years later that number has soared to 3.87 trillion dollars.  That is an increase of 48 percent in just one decade.

#2 Student loan debt has surpassed 1.5 trillion dollars for the first time ever.  Over the last 8 years, the total amount of student loan debt has shot up 79 percent in the United States.

#3 According to the Federal Reserve, the credit card default rate in the U.S. has risen for 7 quarters in a row.

#4 One recent survey found that 42 percent of American consumers paid their credit card bill late “at least once in the last year”, and 24 percent of Americans consumers paid their credit card bills late “more than once in the last year”.

#5 Real wage growth in the United States just declined by the most that we have seen in 6 years.

#6 According to one recent study, the “rate of people 65 and older filing for bankruptcy is three times what it was in 1991”.

#7 We are in the midst of the greatest “retail apocalypse” in American history.  At this point, 57 major retailers have announced store closings so far in 2018.

#8 The size of the official U.S. budget deficit is up 21 percent under President Trump.

#9 It is being projected that interest on the national debt will surpass half a trillion dollars for the first time ever this year.

#10 Goldman Sachs is projecting that the yearly U.S. budget deficit will surpass 2 trillion dollars by 2028.

And I haven’t even talked about unfunded liabilities.  Those are essentially future commitments that we have made that we don’t have the money for at the moment.

According to Professor Larry Kotlikoff, our unfunded liabilities are well in excess of 200 trillion dollars right now.

If individuals, corporations, state and local governments and the federal government all stopped going into more debt, we would plunge into the greatest economic depression in U.S. history immediately.

The system is deeply, deeply broken, and the only way that we can keep this debt bubble going is go keep accumulating even more debt.

Anyone out there that believes that the U.S. economy has been “fixed” is completely deceived.  NOTHING has been fixed.  Instead, our long-term financial imbalances are getting worse at an escalating pace.

Unfortunately, the attitude of the general public is so similar to what it was just prior to the great financial crisis of 2008.  Most people seem to assume that just because we have not experienced great consequences for our very foolish decisions up to this point that no great consequences are coming.

And many also assume that since control of the White House has switched parties that somehow things must magically be better as well.

Of course the truth is that the only way that our long-term problems are ever going to be fixed is if we start addressing the issues that caused those long-term problems in the first place, and that simply is not happening.

As I have traveled extensively over the course of the past year, I discovered that most Americans do not want to make fundamental changes to the system, because they are under the illusion that the current system is working just fine.  So it will probably take another major crisis before most people are ready to consider fundamental changes, and when it finally arrives we will need to be ready to educate the public.

The system that we have today is not fundamentally sound at all.  We desperately need to return to the values and principles that this nation was founded upon, but until things start getting really, really bad it is highly unlikely that the American people will be ready to embrace those changes.

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Baltimore Cop Quits After Pummeling a Man for Disrespecting His Authority

A Baltimore police officer who was caught on camera repeatedly punching a pedestrian who dared to question his authority resigned yesterday after his department suspended him and launched an investigation. The swift response to the ugly incident, which happened around noon on Saturday, shows once again the importance of ubiquitous cameras in revealing and deterring police brutality, which may be partly a function of race but is fundamentally a problem of unconstrained power. That truth is especially apparent in this case, where both the abusive officer and his victim are black.

The Baltimore Police Department has not named the officer who resigned or the man he assaulted. But Warren Brown, an attorney who represents Dashawn McGrier, the man who was beaten, identified the officer as Arthur Williams, who joined the department last year. Brown said the encounter on Saturday, which was recorded by more than one bystander, was McGrier’s second run-in with Williams, who last June arrested him for assaulting an officer, disorderly conduct, obstructing and hindering, and resisting arrest. All of those are highly malleable charges that look even more questionable in light of what happened on Saturday.

According to Brown, McGrier was sitting on the steps of a building when Williams passed by in his patrol car. Moments later, as McGrier was walking down the street, Williams approached him on foot and ordered him to stop. McGrier wanted to know why he was being stopped, but Williams would not say. “I’m sitting on the steps,” McGrier says in one video. “For what?” Williams pushes him, and McGrier says, “Don’t touch me!” Williams responds by punching McGrier more than a dozen times and tackling him. McGrier does not fight back. As he lies on the sidewalk under Williams, blood flows from his mouth. “I got all that,” says the man who is recording the attack. “Don’t worry.”

Interim Police Commissioner Gary Tuggle said he was “deeply disturbed” by the videos and had launched an investigation of Williams and the officer who was with him, which will include a review of “body camera footage.” The second officer, who like Williams was suspended with pay, did not participate in the assault but did not intervene either. Mayor Catherine Pugh described the incident as “disturbing” and said she had “demanded answers and accountability.” She added that “we are working day and night to bring about a new era of community-based, constitutional policing and will not be deterred by this or any other instance that threatens our efforts to re-establish the trust of all citizens in the Baltimore Police Department.”

Even Lt. Gene Ryan, president of the local police union, said Tuggle took “the appropriate action” in suspending Williams pending an investigation. “I’d like to believe that there is more to it, but obviously, it really makes us look bad,” Ryan told The Baltimore Sun. “That’s something we don’t need right now. We don’t need another black eye.”

But for the bystander video, the official response might have been quite different. McGrier, the victim, might have been treated as a criminal instead. Without video evidence to contradict him, Williams could have claimed McGrier resisted arrest for disturbing the peace, or some other combination of easily invented charges.

In its initial description of the incident, the BPD said two officers “working a special cross borders crime initiative…encountered a man, whom one of the officers is familiar with.” According to the BPD, “After the first encounter, officers released him and then approached him again to provide him a citizens contact sheet. When he was asked for his identification, the situation escalated when he refused. The police officer then struck the man several times.”

Ironically, citizen contact sheets are meant to help prevent police abuse by providing a record of street stops. But McGrier seems to have provoked a beating by making it difficult for Williams to fill out this supposedly protective paperwork. The BPD statement mentions no justification for the initial stop, which was supposed to be based on “reasonable suspicion” that McGrier had committed a crime or was about to do so. A demand for identification under threat of arrest likewise is unconstitutional in the absence of reasonable suspicion. But reasonable suspicion, like criminal charges for people whom police deem insufficiently deferential, is easily manufactured.

“I don’t think there was any room for the activity that I saw,” Commissioner Tuggle said at a press conference today. But in practice police have a license to harass people at will, inventing excuses as necessary, unless there is video or eyewitness testimony to contradict them. While young black men like McGrier are especially likely to be the victims of such abuse, the basic problem is loose rules and weak mechanisms for enforcing them.

Some people might fault McGrier for responding defiantly to Williams instead of meekly complying, which probably would have saved him a beating. But people who are not reasonably suspected of criminal activity are under no obligation to provide identification, and McGrier was rightly indignant that police were hassling him for no valid reason. In a free society, no citizen should have to fear police punishment for asserting his rights.

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One Big Reason You’re Better Off Today than in 1968: Reason Turns 50 in L.A. on Nov. 3!

What do you think?

About a year ago, Pew Research asked people around the globe whether they thought life in their country was better or worse than it was 50 years ago.

Look to your right and down to see how Americans stack up. There we are, in a sad little grouping of countries, with just 37 percent of us feeling better about the current day than a time when major political figures were being gunned down in the streets, massive race riots convulsed cities that were already hitting the shitter, about 500,000 men were serving overseas involuntarily, and racism and sexism were overt and acceptable. FFS, in 1968, George Wallace won five states and 14 percent of the popular vote on a segregationist platform in a year that saw MLK and RFK get shot and riots erupt everywhere (including the Democratic National Convention in Chicago, the streets of Paris’s Left Bank, and the Olympic Games in Mexico City)!

The upside of 1968? That was the year Reason was born, the product of the late, great Lanny Friedlander.

At Reason, we tend to believe that things are always getting better. Not that all things are always getting better all the time, but as a country and a planet, we’re generally moving in the right direction. There’s a heap of trouble in the world, but you look back a half-century and the things that immediately pop out are the end of Soviet Union and the last vestiges of 19th-century colonialism, the shrinking of the number of people living in what the United Nations considers extreme poverty, the relative lack of major shooting wars, the rise of global trade and movement of people, and the rise to near-equality of women.

As it happens, Reason is celebrating its 50th anniversary this year, in Los Angeles on Saturday, November 3. This is a time where we are calling in all the ships at sea to have a blowout, day-long, day-glo celebration of what’s gotten better during the last half-century. After cranking out issue after issue since 1968, developing Reason.com into the largest source of news, politics, culture, and ideas from a libertarian perspective, and building out Reason TV to be the premier libertarian video and podcast platform online, we’re going to a day off to mix with our tribe of gentle, lovely, beautiful, fun freak-flag-flyers. Please join us!

The day’s events include a morning of panels and conversations packed with past, present, and future Reason luminaries, including Robert W. Poole, Virginia Postrel, Adrian Moore, Nick Gillespie, Matt Welch, Katherine Mangu-Ward, and more; lunch with broadcasting legend John Stossel; and a gala dinner hosted by Fox Business star Kennedy and featuring former Indiana Gov. Mitch Daniels and Nobel Prize-winning economist Vernon Smith.

And the program is still being hashed out, with plenty of very great surprises yet to drop.

Go here for ticket prices and sponsorship opportunities (the latter includes an invite to a special Friday night dinner at L.A.’s incredible Bavel). Prices increase after September 15, so it pays to book early if you’re coming from out of town. The day’s events are at the Ritz-Carlton, but there are plenty of other hotels in the area, too.

The only thing that will make this great day better is your presence! Thanks for the support you’ve shown to Reason in our first 50 years. We can only say with cautious confidence that the next 50 years are really going to be awesome.

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Trump Hints That “Wacky” Omarosa May Be In Legal Jeopardy

President Trump has been busy today – alternating between tweets about just-fired FBI agent Peter Strzok, and former White House aide Omarosa Manigault-Newman who was fired in December over “integrity issues,” and has just released two secret recordings of both her firing by White House chief of staff John Kelly, and a subsequent phone call with Trump. 

Omarosa’s new disclosures have been timed with the release of her new book, Unhinged. The former Apprentice contestant appeared on NBC’s Meet the Press with Chuck Todd on Sunday where she dropped the Kelly recording – only to turn around and released a phone call with Trump in which he says he didn’t know she was fired. 

What’s more – Omarosa was  caught in a lie about whether she heard President Trump use the N-word – claiming in her new book that someone told her pollster Frank Luntz heard Trump say it, which Luntz denied, while later telling NPR that she personally heard Trump say it. 

Following the release of the second recording – Manigault-Newman’s second, President Trump hit back, tweeting: “Wacky Omarosa, who got fired 3 times on the Apprentice, now got fired for the last time. She never made it, never will. She begged me for a job, tears in her eyes, I said Ok,” adding “People in the White House hated her. She was vicious, but not smart.”

“Nasty to people & would constantly miss meetings & work. When Gen. Kelly came on board he told me she was a loser & nothing but problems. I told him to try working it out, if possible, because she only said GREAT things about me – until she got fired!”

Wacky Omarosa, who got fired 3 times on the Apprentice, now got fired for the last time. She never made it, never will. She begged me for a job, tears in her eyes, I said Ok. People in the White House hated her. She was vicious, but not smart. I would rarely see her but heard….

— Donald J. Trump (@realDonaldTrump) August 13, 2018

…really bad things. Nasty to people & would constantly miss meetings & work. When Gen. Kelly came on board he told me she was a loser & nothing but problems. I told him to try working it out, if possible, because she only said GREAT things about me – until she got fired!

— Donald J. Trump (@realDonaldTrump) August 13, 2018

And in his latest tweet on the subject, Trump hinted that Omarosa may have some legal issues, writing “Wacky Omarosa already has a fully signed Non-Disclosure Agreement!”

In response, never-Trump Neoconservative Bill Kristol asked “What legal authority permitted you to direct White House Counsel to try to secure such unprecedented agreements with respect to non-classified information from government employees?

We assume Kristol made the comment after discussing with an attorney, but who knows. Journalist Michael Warren at the Kristol-co-founded Weekly Standard wrote in March when NDAs were rumored to have been signed in the West Wing: 

But there are reasons to be skeptical of the NDAs—either of their existence entirely or that many in the Trump White House who signed them believed in their enforceability. Marcus herself considers some of these reasons, including the First Amendment violations of White House aides held to any such contracts. And who was party to the NDAs? Trump himself? The office of the president? The federal government? Any answer would be problematic to enforcing the contracts if and when a dispute ended up in court. 

There’s also the fact that unauthorized leaks have more or less continued at the same pace over the last year. People in the White House talk to reporters frequently and without apparent fear of reprisal. The very idea of an NDA in the White House is, as one lawyer interviewed by Marcus said, “crazy.”Weekly Standard

Speaking with a crowd on Saturday, President Trump called Manigault-Newman a “lowlife” when asked if he felt betrayed by the former aide. White House staff, meanwhile, have slammed Omarosa as a “disgruntled former White House employee” trying to “profit off these false attacks.” 

If the NDA isn’t enforceable, we wonder if Omarosa’s prior statements about Trump will be “exhibit A”?

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Stephen Miller Also Benefitted from ‘NOT ACCEPTABLE’ Chain Migration

|||DAVID SILPA/UPI/NewscomA scathing Monday column in Politico has revealed that yet another member of President Trump’s administration benefitted from chain migration, something the president once called “NOT ACCEPTABLE!”

As Reason previously reported, First Lady Melania Trump’s parents became U.S. citizens last week by using the first lady as a sponsor. The family-based path to citizenship, often referred to as “chain migration,” is the most common form of immigration and relies on a green card holder or a legal U.S. resident to sponsor a foreign family member. Prior to the first lady’s use of the procedure for her parents, the president suggested limiting its use to spouses and minor children. Among his many criticisms of the practice, Trump once asserted that chain migration “cannot be allowed to be part of any legislation on Immigration.”

According to David S. Glosser, uncle of White House policy adviser Stephen Miller, Miller’s family also benefitted from chain migration. On Monday, Glosser wrote in Politico that Miller’s maternal great-grandfather, Sam Glosser, became a U.S. citizen after various ancestors sent enough money to Eastern Europe to pay off debts and sponsor the passage of immediate family members to America. Glosser criticized his nephew, “who is an educated man and well aware of his heritage,” for becoming “the architect of immigration policies that repudiate the very foundation of our family’s life in this country.” He argued that had Miller’s immigration policies been enacted in the 20th century, the family may have become victims of “violent anti-Jewish pogroms and forced childhood conscription in the Czar’s army.”

Similar to Trump, Miller has backed legislation that would end chain migration. When the merit-based Reforming American Immigration for Strong Employment (RAISE) Act was introduced by congressional Republicans in August 2017, Miller explained to the White House pool reporters that the bill sought to eliminate “so-called chain migration.” Like Trump, he said that the bill would limit family-based migration to “spouses and minor children.”

When asked about his ideal number of immigrants to the U.S., Miller told Fox News’ Tucker Carlson in January, “I have my own views on it, but I think the important point is ending chain migration, as the president has called for, is necessary not just for economic security but for national security.” He also confirmed that the administration was not merely looking to limit chain migration, but to eliminate it in favor of merit-based immigration.

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Iran’s Supreme Leader: “No War Nor Negotiations” Ever With This White House

Iran’s supreme leader Ayatollah Ali Khamenei announced in a statement Monday that there would be neither war nor negotiations with the United States.

“Recently, U.S. officials have been talking blatantly about us. Beside sanctions, they are talking about war and negotiations,” the senior cleric wrote via his Twitter account in English.

He added, using all caps to close the statement, “In this regard, let me say a few words to the people: THERE WILL BE NO WAR, NOR WILL WE NEGOTIATE WITH THE U.S.

It appears Khamenei was referencing President Trump’s surprise words given at a July 31st White House press conference wherein he said“I would certainly meet with Iran if they wanted to meet. I don’t know if they’re ready yet.” 

The entirely unexpected though not outside the norm of Trump’s off the cuff style overture caught Iran’s leadership off guard as a direct response to the idea of direct talks with no preconditions met with no immediate response, only mixed reactions later that week from Iranian lawmakers, the majority of which slammed the idea as “a humiliation” to sit down with Trump at a moment the White House was strangling the Iranian economy with multiple impending rounds of sanctions primarily targeting gold and other metals trading in Iran, and the country’s ability to purchase of dollars and its auto industry.

Khamenei, in his most comprehensive series of English statements since Trump’s offer of face to face talks, slammed the door permanently on the idea of ever sitting down with the Trump administration, saying in a separate tweet Monday morning, “Even if we ever—impossible as it is—negotiated with the U.S., it would never ever be with the current U.S. administration.”

In near simultaneous statements addressed to the Iranian public in a speech aired on state TV, the supreme leader who has the final word over all affairs in the Islamic republic, issued the directive: “I ban holding any talks with America… America never remains loyal to its promises in talks.” 

“America’s withdrawal from the nuclear deal is a clear proof that America cannot be trusted,” state TV quoted Khamenei further. 

As part of his series of tweets, some of which mocked Trump’s policy in the Middle East, Khamenei published an infographic presenting his position on ratcheting tensions with the U.S.

He also slammed the idea that this was the first such offer of talks, saying that Iran has proudly resisted unfair and imbalanced U.S. offers of negotiations for decades, and even cited President Ronald Reagan’s sending his national security advisor, Robert McFarlane to Tehran for failed negotiations.

Notably, he appeared to troll Trump personally as well as his cabinet in the following:

A stupid man tells the Iranian nation that ‘your government spends your money on Syria’. This is while his boss– the U.S. president– has admitted he spent 7 trillion dollars in the Middle East without gaining anything in return!

The top Iranian cleric also briefly referenced Iran’s domestic crisis, which has included sporadic protests and clashes with the police throughout the summer in response to a plummeting rial and inability of people to access imported goods, stating “Today’s livelihood problems do not emerge from outside; they are internal.”

He urged the country to resist sanctions and erect “prudent” ways shielding from their effects. 

It will be interesting to see if Trump responds to this directly in a tweet, or if any official reaction will be forthcoming from the White House.

But in the meantime it appears the possibility of any renegotiation after Trump’s official pullout of the JCPOA last May has just had to the door slammed on it.

developing…

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Judge Rules Chicago Can Keep Its Amazon HQ2 Bid Secret, Rejecting FOIA Lawsuit

An Illinois judge ruled last Thursday that the city of Chicago does not have to reveal the details of its bid to become the site of Amazon’s massive new headquarters, shielding the city’s offer of huge tax breaks and other handouts from public view.

Lucy Parsons Lab, a digital rights and transparency advocacy group, filed a public records lawsuit against Chicago in February after the city refused to disclose its bid, citing a competitive advantage exemption. Since the corporate giant announced in 2017 that it was seeking a site to build a second headquarters, nicknamed HQ2, major cities across the U.S. have been vying for Amazon’s favor, often dangling billions in tax breaks and other incentives to the company.

But the exact details of those offers have often been hidden from the public. Chicago is only one of 30 cities that has refused to disclose its HQ2 bid, according to a public records project by MuckRock.

Chicago reportedly offered Amazon $1.32 billion in “Economic Development for a Growing Economy” tax credits. Lucy Parsons Lab was seeking the city’s bid as well as communications between Chicago Mayor Rahm Emanuel. However, a Cook County circuit judge rejected the group’s effort to pry loose those records.

“The City of Chicago could suffer greatly by this very disappointing ruling,” says Freddy Martinez, director of Lucy Parsons Lab. “We raised this lawsuit to bring transparency to a very critical issue in our city and are outraged that we lost. This raises the potential for a very serious loophole where the city can offer private companies massive tax breaks in secret with virtually no oversight. These tax breaks are being offered to Amazon, one of the richest corporations in the world, which pays no federal tax at all.”

Chicago is “notorious for gaming tax payers and putting them on the hook for decades of awful economic policies,” Martinez continued, pointing to the city’s bizarre deal to lease out its parking meters to Abu Dhabi. “We don’t even know the details of this bid but we expect that taxpayers could end picking up the tab for Jeff Bezos for decades.”

As The New York Times reported last week, places like Newark, Austin, and Miami-Dade County have all refused to disclose their Amazon HQ2 bids—sometimes even city councils are kept in the dark—or released documents that are almost completely redacted:

A primary reason for the information blackout is that, in many cases, the bids were handled by local private Chamber of Commerce affiliates or economic development groups that aren’t required to make their negotiations public. Many of the groups are also not covered by Freedom of Information Act or state open-records requests.

But another reason is gamesmanship. Some cities say they want their Amazon proposals to remain confidential to avoid showing their hand to rivals. And Amazon required the finalists to sign nondisclosure agreements that forbid the local groups to release proprietary information about the company […]

The few bids that have become public are breathtaking financial packages that indicate just how much states are willing to pony up to woo Amazon. Maryland put together an $8.5 billion tax incentive and infrastructure bid, and local and state officials in New Jersey got legislative approval to offer Amazon $7 billion in tax credits and incentives to pick Newark.

Whoever gets the final rose in this unseemly municipal edition of The Bachelor will likely see a big influx of jobs, construction, and housing demand (50,000 jobs and a $5 billion investment in construction, if you believe Amazon’s numbers), but the public should have the opportunity to see exactly what their officials are putting them on the hook for in exchange for those potential jobs.

As Reason columnist Veronique de Rugy, a senior research fellow at the Mercatus Center, wrote in July, the sort of subsidies that cities are throwing at Amazon do little to enrich anyone besides the recipients of them. Take Maryland’s absolute unit of a bid:

My Mercatus Center colleagues Michael Farren and Anne Philpot did the math: The bid, when added to $2 billion in infrastructure spending also being promised, amounts to 3 percent of Maryland’s anticipated tax revenue over the next 10 years.

That should fill residents and businesses in the state with dread. While there’s no doubt Amazon’s HQ2 would add something to the economy, a broad body of economic research has shown that targeted state subsidies to private businesses—while often promoted as a “market-friendly” means to boost growth, jobs, and development—have little to no net positive effects. And as George Mason University’s Christopher Coyne and Lotta Moberg wrote in a 2014 working paper, such subsidies are in fact often damaging, because they misallocate scarce public resources while encouraging rent seeking, regulatory capture, and cronyism.

Bonus: Watch ReasonTV’s parody video of two desperate small-town mayors vying for Amazon’s sweet, sweet jobs. “Alright, bullet train. You want a bullet train? Because I’ll eminent domain this whole fucking town.”

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What We Saw at the Unite the Right II Protest: New at Reason

So what happened at Unite the Right II?

The organizer’s permit application stated that about 400 attendees would gather outside the White House to commemorate last year’s rally in Charlottesville, Virginia. The estimate was later downgraded to about 200, but by the time the rain started falling on Lafayette Square, it was clear that fewer than 30 were showing up amid a significant presence of cops and counterprotesters. Most of downtown Washington, D.C., was shutdown.

Bands of black clad Antifa members came with shields, helmets, and gas masks, and police surrounded far right protesters to protect them from violence. Most counterprotesters never laid eyes on anyone from the group they came to stand against.

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Could an 11-Year-Old Really Hack an Election in 10 Minutes?

An 11-year-old boy apparently needed less than 10 minutes to hack into a replica of Florida’s election website last week and change election results.

The boy was attending DEFCON 26, an annual hackers’ conference in Las Vegas. PBS reports:

The boy, who was identified by DEFCON officials as Emmett Brewer, accessed a replica of the Florida secretary of state’s website. He was one of about 50 children between the ages of 8 and 16 who were taking part in the so-called “DEFCON Voting Machine Hacking Village,” a portion of which allowed kids the chance to manipulate party names, candidate names and vote count totals.

He wasn’t the only young person to have such an easy time with the election website replica. An 11-year-old girl named Audrey was able to accomplish a similar feat in about 15 minutes.

Both 11-year-olds pointed out that the websites they hacked weren’t all that well protected. “Basically what you’re doing is you’re taking advantage of it being not secure,” Audrey tells BuzzFeed News. She was able to make it look like Constitution Party candidate Darrell Castle had won Florida in the 2016 presidential election.

“It’s actually kind of scary,” Brewer tells TechCrunch. “People can easily hack in to websites like these and they can probably do way more harmful things to these types of websites.”

Nico Sell, CEO of the secure communications firm Wickr, thinks the U.S. isn’t taking election security seriously enough. “By showing this with 8-year-old kids we can call attention to the problem in such a way that we can fix the system so our democracy isn’t ruined,” Sell tells TechCrunch.

But while state elections websites are definitely hackable, it’s a bit alarmist to suggest that 11-year-olds can change actual results in a matter of minutes.

For one thing, replica websites aren’t the real thing. As the National Association of Secretaries of State (NASS) notes in a statement, “many states utilize unique networks and custom-built databases with new and updated security protocols.” Thus, “it would be extremely difficult to replicate these system.” Sell might claim the sites the young hackers used are “very accurate replicas.” But unless you’ve actually tried to hack the real thing, you can’t know for sure.

Plus, state election websites are not repositories of actual vote counts. Instead, they’re merely unofficial election night tallies. “[E]lection night reporting websites are only used to publish preliminary, unofficial results for the public and the media,” the NASS says. “The sites are not connected to vote counting equipment and could never change actual election results.”

Americans should be worried about election security, particularly when it comes to Russian agents hacking our voting systems. But are we so vulnerable that an 11-year-old can change results so quickly? Probably not.

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One Bank’s “Emerging Market Crisis Indicator” Is About To Be Triggered

While the market is (finally) paying attention to the accelerating Turkish collapse and specifically the risk of contagion to Europe, Asia, and ultimately, US capital markets, the truth is that this crisis has been a long time in the making. In fact, the first break in the “strong Emerging Market” narrative emerged in late April when as a result of rising US interest rates the dollar surge began in earnest (facilitated by China’s first easing announcement on April 17), which in turn sent the both EM currencies, and EM debt reeling…

… to be followed shortly by the plunge in the biggest EM currency of all: the Chinese Yuan.

And as we highlighted in early May, BofA’s Chief Investment Officer Michael Hartnett observed that higher US rates finally caused a higher US dollar (courtesy of the PBOC), at which point “EM started to crack.” But while many had pointed at the collapse in the Turkish Lira, the Argentine Peso, and the Indonesia Rupiah, as cracks in the EM narrative, the truth is that many of these are idiosyncratic stories.

So how could one decide if the Emerging Market turmoil – whether started by Turkey, Argentina, Russia, China, or any other EM country – was set about to sweep across the entire sector, and result in DM contagion? According to Bank of America the answer was simple. This is what Hartnett said in early May:

“EM FX never lies and a plunge in Brazilian real toward 4 versus US dollar is likely to cause deleveraging and contagion across credit portfolios.”

In other words, to Bank of America, the best indicator of imminent emerging market turmoil is shown in the chart below dated circa three months ago: if and when the BRL starts sliding, and approaches 4, it may be a good time to panic as contagion is about to go global.

Fast forward to today, when in light of the latest emerging market turmoil, the Brazilian real – which plunged as low as 3.9287 vs the dollar after the Brazilian FinMin said he saw “no need to intervene in FX markets” – is now on the verge of crossing this key level that has been a virtually guaranteed predictor of contagion.

And just in case, Hartnett also laid out a secondary “fail safe” EM-stress indicator:

Tremors in the periphery: 3% + rally in US$ has caused EM tremors (ARS, INR) at a time of peak EM debt/equity inflows ($371bn)…EMB <107.50 contagious

This means that once EMB, the JPM Emerging Market Bond ETF, drops to 107.50 – the level it hit right after the Trump election – it will be time to get out of Emerging Dodge.

Where is the EMB today? It just dropped to 105.75, the lowest level since February 2016, and validating the negative signal about to be launched by the BRL.

So while everyone is hypnotized by the Turkish lira, keep a closer eye on the Brazilian Real: once it crosses 4, the real fireworks begin.

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