Tag: news

Trump Doesn’t Understand the GOP Health Care Bill. That’s a Barrier to Good Policy.

Over the last two days, President Donald Trump provided more evidence that he doesn’t entirely understand the health care bill his administration is urging Republicans to pass. In a one-on-one interview, John Dickerson of CBS News took the sadly unusual tack of asking Trump to explain what was in the American Health Care Act (AHCA). Trump couldn’t do it. That’s a real problem for those who want to see better policy put in place.

“We’ve made many changes to the bill,” Trump told Dickerson, “We now have preexisting conditions in the bill.” Trump made the same claim again when speaking to Bloomberg News on Monday. “I want it to be good for sick people,” he told Bloomberg. “It is not in its final form right now. It will be every bit as good on pre-existing conditions as Obamacare.”

But the recent changes to the bill would have allowed states to obtain a federal waiver to opt-out of community rating, the key regulation governing what are commonly described as Obamacare’s preexisting conditions rules. In order to obtain that waiver, states would have to set up a high-risk pool—a government funded insurance plan for individuals with expensive medical conditions—but the Manhattan Institute’s Chris Pope notes, those risk pools have historically been underfunded and expensive for enrollees. In addition, as the Cato Institute’s Michael Cannon notes, the waivers are structured in a way that would likely accelerate the meltdown of the individual insurance market in states that applied for them. The bill has been changed, yes, but not in ways that add or reinforce Obamacare-style preexisting conditions protections, as Trump claimed.

Trump also told Dickerson that, “We’re taking across all of the borders or the lines so that insurance companies can compete,” presumably a garbled reference to allowing health insurance to be sold across state lines. On the campaign trail, Trump often repeated the mantra that he wanted to get rid of “lines around the states,” though it wasn’t clear he fully understood what this meant.

But there’s no provision allowing for the sale of insurance across state lines. When Dickerson pointed this out, Trump said that it would be in the “second phase”—which has, in the most charitable interpretation, been described as a series of regulatory changes made by the administration after the primary bill is signed into law.

It is a problem that Trump doesn’t understand the bill his administration wants so desperately to pass. It means that Trump can’t describe the bill with clarity or accuracy, and that as a result it’s impossible to believe what he does say. It also means that Trump doesn’t really know what makes the bill good or bad, and how to negotiate towards something better. And it makes the already-difficult politics of health care reform even tougher, since Trump can’t effectively haggle over the individual sticking points in a bill he can’t describe.

Trump’s ignorance was a factor in the failure of the bill back in March, when Trump reportedly urged Republicans wary of voting for the bill to “forget about the little shit,” and to “focus on the big picture.” Those Republicans found it difficult to deal with someone who could not focus on the details that concerned them. In health policy, the big picture is a bunch of little shit.

Trump’s continued ignorance about the policy details should worry House Republicans, who are being pressured by the president and his team to support deeply unpopular legislation that the president doesn’t himself understand. (That problem will be compounded and repeated if the bill eventually manages to clear the House, because the Senate is all but certain to significantly alter the legislation, and because those alterations are likely to shatter whatever fragile consensus may exist in the House.)

In a way, Trump’s inability to understand the bill means that he cannot really be said to support it, or at least that his support is far from stable. Privately, Trump has questioned whether or not the bill is worthwhile. During the initial push to pass the bill, Trump sometimes expressed his anxiety about the bill’s merits, according to The Washington Post. He did not possess sufficient understanding of its particular to judge its quality for himself, so he repeatedly asked his aides, “Is this really a good bill?” If you have to ask, the answer is probably no.

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Austria Has Found A Way To Tax Google Searches And Social Media Posts

Via TheAntiMedia.org,

Highlighting the difficulty both public and private establishments can have when it comes to adapting methods in the digital age, it was reported Monday that one government is now trying to tax search giant Google and social media companies.

From a report by Bloomberg:

“Austria is seeking ways to make digital services like Alphabet Inc.’s Google or Facebook Inc. pay taxes for transactions with the nation’s internet users, trying to plug gaps in a tax system still designed for brick-and-mortar business.”

Continuing, Bloomberg explains something most people don’t stop to consider: how social media actually functions, and at no monetary cost to users:

“The most ambitious part of the plan targets the business models of Twitter Inc., Google or Facebook: The tacit pact under which searching, liking, posting and tweeting remains free as long as users let the companies feed usage data into algorithms that help tailor advertising that can be aimed at the most likely buyers.”

Since this arrangement is a form of bartering, the Austrian government argues, a value-added tax can be applied, just as in other sectors of the economy.

“The business transaction that’s going on here is that users are paying with their personal data,” the parliamentary head of the governing coalition, Andreas Schieder, told journalists in Vienna. “The business model of those internet companies is based on massive revenues that are generated with the help of those data.”

As Martin Armstrong rages, Andreas Schieder is a highly dangerous man. He only looks at what government can extract from people, never how government can reduce its size and cost to save money. It’s always just raise more and more taxes without end.

The government’s plan would include extending the general advertising tax to cover digital services, and it would also place a tax on purely digital services Austrians purchase from businesses with no physical location.

“We need a new approach to make sure that taxes are paid where revenue and profit is made,” Schieder said, adding that the government’s plan is comprised of “practical suggestions (on) how to define digital establishments for tax purposes.”

The proposals, according to Bloomberg, now need the approval of a single man, Finance Minister Hans Joerg Schelling.

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Twitter Surges To 3-Month Highs After Mark Cuban Says “Recently Bought Shares”

Having gapped open in the last few days, TWTR is surging once again today helped by positive comments from billionaire Mark Cuban that the social media site is “getting smarter” and “hiring the right people.”

Cuban’s comments that he “bought shares recently” sent the stock to 3-month highs…

As a reminder, this is what drove Twitter higher…

The panic buying volume is very noteworthy.

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RBC: “VXX Short Utilization Spiked To An Insane 95% Yesterday”

In his latest daily note, which does a fantastic job of exploring what the macro “big picture” looks like at this moment (more on that below), RBC’s head of cross-asset strat Charlie McElligott focuses on one of his favorite topics: random outlier moves in asset volatility and, specifically, the crowding of traders behind them. And with the VIX sliding below 10 yesterday for the first time since February 2007…

… and likely set to repeat that achievement today ahead of AAPL’s earnings, the RBC analyst does report some notable developments across the vol space, namely that once again everyone is piling into short inverse VIX ETFs, everyone perhaps also including pension funds.

Of particular note, McElligott writes (see below fore details) that:

“short vol’ isn’t just an institutional trade anymore, it’s massive with retail as evidenced by the shares outstanding in the various VIX ETNs.  FT highlighted over the weekend that ‘short interest’ in VXX has actually outpaced creation of new shares in VXX this years, which is indicative of this growing retail demand for the ‘strategy.’  Currently per my stock loan team, VXX short utilization spiked to an insane 95% yesterday (% of the ‘free shares’ being used to short).”

 

From the latest Big Picture by RBC’s Charlie McElligott

SPX VOL CRUSH CONTINUES: Yesterday we hit a ‘9’ handle in spot VIX, the lowest level in implied vol since ‘08.  The reasons are many.

 

1) The slow-and-grinding’ drag higher’ via options-market mechanics is a contributing factor.  2400 as a ‘gravitational pull’ in S&P index is a real phenomenon (both from ‘short gamma’ and ‘deltas’ perspective), especially with $42.5B of notional calls in weeklies across SPX, SPY and futures out through May expiration per our Andrew Ramsey.  

 

2) Clearly ‘earnings growth’ an ENORMOUS input right now.  The general equities-narrative has turned from one purely driven by the ‘direction of rates’ or ‘inflation-expectations’ experienced over the past 2 years into one where investors are focusing on analysts raising full-year EPS forecasts over the course of Q1, which is, by recent standards, unheard of.

 

The SPX long-term model in Quant-Insight now shows ‘1y forward earnings’ effectively as the largest ‘positive’ macro factor sensitivity to SPX price:

 

3) Sadly, I also think the VIX move continues to evidence the enormous crowding of ‘short vol’ strategies and trades in the market.  ‘short vol’ isn’t just an institutional trade anymore, it’s massive with retail as evidenced by the shares outstanding in the various VIX ETNs.  FT highlighted over the weekend that ‘short interest’ in VXX has actually outpaced creation of new shares in VXX this years, which is indicative of this growing retail demand for the ‘strategy.’  Currently per my stock loan team, VXX short utilization spiked to an insane 95% yesterday (% of the ‘free shares’ being used to short).  

 

An expression of this same ‘short vol’ trade is evidenced by the growth in ‘vol writing’ funds’ AUM.  DB did some work here in a recent report and discovered upwards of $45B of AUM amongst this growing universe, up from $10B pre-crisis.  And you might recall me highlighting the AWESOMENESS of various pension funds crowding into ‘put-write’ overlays last Summer (see link below) on top of the consistent popularity of ‘call-write’ funds too, so this fits the story.  Consultants have an easy job selling the ‘earn premium plus mute your volatility’ pitch, even if that’s not how it actually ‘works out’ in real life.  This article last Fall from Pensions & Investments (“Funds Go Exotic with Put-Write Options to Stem Volatility”) is probably a good place to start driving yourself crazy http://bit.ly/2pPRAAz:

 

“Mr. Tirado said put-write options are becoming popular with pension funds at a time when their overall equity portfolio can be too risky and their bond portfolio isn’t providing enough income in a continuing low-rate environment.

 

“Pension funds are between a rock and a hard place,” Mr. Tirado said. “Low funding, risky assets, both have exposure to downside risk. In this, they’ve constructed a strategy to transfer risk.”

 

Russell”s Mr. Hellekson said the strategy gives investors “a way to get defensive equity, to reach for carry when the markets are going sideways. That’s attractive for some folks.” The carry comes from

the cash premium from the put option when sold. “If markets go sideways, they still get income; they can’t lose,” he said.”

 

And of course a discussion on ‘short vol’ can’t be had without discussing the scale of ‘negative convexity’ strategies in the market place—thus my consistent focus on ‘risk parity’ funds as an example of this universe. 

 

As per the post GFC-period where the intent of quantitative easing has been to artificially suppress financial asset volatility through ZIRP, NIRP and LSAP’s, the negative correlation of stocks and bonds has allowed for outsized returns in strategies which tactically allocate ‘risk’ based upon backward-looking volatility measures across assets, but all tied largely back into the ‘pinning’ of rates (yes, the construct changes as rates are again being allowed to move increasingly via market forces….but that’s an email for a different day!).  In the meantime, we are looking at a universe where between risk-parity, risk-control and vol-target funds, we’re likely talking upwards of $1.0 to $1.5 TRILLION of AUM…and that’S without including the opaque structured-product universe.

 

Everybody is profiting from the trade so its popularity continues to grow, until it inevitably ‘blows up’ on something.  The ‘sad’ thing is that it likely won’t even require a ‘left tail’ event with such asymmetry in the trade right now. 

Aside from vol, McElligott algo looks at the Macro Story, in “one big picture”, which as we have shown over the past year, is all about China:

THE MACRO STORY IN ONE ‘BIG PICTURE’: This scenario highlighted below is also part of my current ‘macro range trade’ thesis which believes you should sell ‘reflation at this 2.35 / 2.40 level in 10Y yields (and buy it again down at 2.05), as the fading Chinese liquidity- / credit- cram-down is contributing to a rollover in global inflation off its multi-year highs (which came via the ‘energy base-effect’ bounce through last year’s Chinese credit impulse, the ‘Yellen Pivot’ and OPEC deal).  This was a large part of the recent ‘reflation’ unwind and squeeze in ‘rates shorts,’ which have now capitulated to the largest net spec long in UST 10Y futures in 9 years, as US data ‘beats’ are now fading in conjunction.

  • The Chinese ‘liquidity- / credit- impulse’ contracts (key on the ‘rate-of-change’ in reduction of liquidity ‘pumping’ via ‘all-system financing’). 
  • As such, Chinese ‘financial conditions’ tighten significantly for the first time in 3 years. 
  • In turn, Chinese inflation—and global inflation via the supply-chain—begin turning pivoting lower. 
  • From there we see proxies like ‘industrial metals’ in commodities and ‘cyclicals vs defensives’ equities-pairs fade from recent ‘reflation’ highs.
  • This ‘big picture’ backdrop is part of what drove the ‘rates shorts’ into their capitulatory squeeze over the past two months—UST 10Y net spec positioning is now the most ‘net-long’ it’s been in 9 years, as US economic data trajectory fades harshly in unison.

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Trump and the Dollar: Could a new economic standard be in the offing?

President Richard Nixon’s “Nixon Shock” heralded the end of the Bretton Woods system. Will President Trump usher in another global currency exchange standard? 

Post WWII, a handful of countries, notably the United States, Japan, Canada, Australia and Western Europe, established the world’s first negotiated monetary standard. Known as the Bretton Woods system, the standard essentially enforced a regimen of fixed exchange rates, in relation to the U.S. dollar, amongst trading partners. That rate was in turn pegged to the price of an ounce of gold.

Under the pressure of mounting inflation, on August 15th, 1971, President Nixon changed the fixed rate system by ending the convertibility of the dollar to gold for trade purposes. 

REPEAT PERFORMANCE?

With the incoming U.S Administration’s actions targeted on the role of NATO, it’s obsession with cheating trading partners, and a focus on immigration and border controls; it would seem as though they are least obsessed with the role of the dollar. Yet, the world’s attention continues to be riveted in that (the U.S. dollar’s) direction.

Today, global currency reserves stand at roughly $10 trillion, as opposed to the paltry $1 trillion they stood at during Bretton Woods. Because it is the reserve currency, much of those reserves are held in U.S dollars by foreign governments, making the role of the U.S dollar even more significant today.  

But could America be getting tired of its role as the owner of the world’s reserve currency? Could we see a Nixon-era repeat under President Trump, which could yet again define how foreign trade is negotiated, accounted for and settled?

A PAINFUL ‘PRIVILEGE’ 

America’s role as the ‘owner’ of the world’s reserve currency gives it enormous power over other nation’s economies. By fine-tuning its own monetary policy, the U.S can send shock waves throughout the world economic order, leaving other nations without the ability to intervene. And many nations are now starting to resent that loss of control.   

They see the U.S dollar as a ‘privileged’ child among sibling currencies. For instance, China has made a number of moves to (legitimately) undermine the prominence of the Greenback viz. its own currency. In fact, during the early days of the Bretton Woods era, many world leaders (including future French President Valéry Giscard d’Estaing (then Finance minister) bemoaned the unfair privilege that the reserve currency had over its competitors.

As the reserve currency of the world, the U.S dollar enables Americans to earn higher returns on their foreign assets, compared to what other nations earn on their U.S denominated reserves. This ‘privilege’ means that America is often able to run exorbitant current-account deficits with minor consequences.

However, where there’s gain there’s also pain. The painful results of this continued ‘privilege’ have started appearing in the form of lower exports, larger imports and dwindling export-related jobs that are impacted by the increased imports of foreign goods and services.  America seems to be in an economic crisis, partly as a result of its currency ‘privilege’!

DANGEROUS CHOICES

Talk of border taxes and import traffic by the Trump Administration and its lawyers will only strengthen the dollar, making it even less attractive as a reserve standard. So what other options are left?

Well, some might think that it’s time for the Chinese Yaun to step in. But given the nation’s authoritarian views, and the lack of transparency in its dealings (both economic and political, domestically and internationally); the world might be unwilling to accept the Yaun as their new world currency standard.

Others may look to the Euro. But the lack of Euro-denominated debt instruments, and the fragmented legal and political systems amongst member states, poses huge risks in crowning the Euro as the next world reserve currency.

Mr. Trump’s ‘Make America Great Again’ policies could lead to even bigger deficits, and may spur inflation faster than we saw in the 1970’s, when President Nixon delivered the world his ‘Nixon shock’ which unraveled Bretton Woods. The question is: Just as Nixon presided over the collapse of the gold standard, will a ‘Trump Shock’ preside over the collapse of the U.S dollar standard?

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Federal Court to Government Regulators: The First Amendment Protects Tattoo Shops

The tattoo trade has won another notable legal victory in its long-running battle against unreasonable government regulation.

In late March a three-judge panel of the U.S. Court of Appeals for the 9th Circuit ruled unanimously in favor of California tattoo artist James Real, who is currently mounting a constitutional challenge to the city of Long Beach’s anti-tattoo shop zoning law and other prohibitory regulations. “We have held that tattooing is ‘purely expressive activity fully protected by the First Amendment,'” the 9th Circuit bluntly reminded the federal district court, which had previously dismissed Real’s complaint. “This includes ‘[t]he tattoo itself, the process of tattooing, and even the business of tattooing.'” Translation: Get your act together, district court.

This is a key win for Real, who had suffered a massive early defeat when the federal district court held that he lacked standing to challenge the city’s zoning law as unconstitutional on its face and that he lacked standing to challenge the law as applied to him. The district court also held that the city’s actions cannot be viewed as violations of Real’s First Amendment rights.

The 9th Circuit reversed the district court on all counts. Its decision in Real v. City of Long Beach orders the district court to rehear Real’s case and “to try Real’s facial and as-applied First Amendment claims, on the grounds that the City’s zoning ordinances operate as unlawful prior restraints on speech and are unreasonable time, place, or manner restrictions on speech.” I suspect Real is going to fare a little better in district court the second time around.

As I previously reported in Reason‘s June 2016 issue, tattoo artists are increasingly taking the government to court and winning on the merits:

Over the past half-century, tattoo artists have been subjected to all manner of overreaching, ill-fitting, and just plain nonsensical government controls. They’ve been hassled by clueless health departments, shut down by moralizing zoning boards, and outlawed entirely by busybody city councils and state legislatures. But tattoo artists can be a prickly bunch, and increasingly they’re opting to fight back. In recent years tattooists around the country have launched a series of civil liberties lawsuits designed to put the government’s regulatory malfeasance on trial. And while the ink-masters aren’t winning every case, their legal attacks are finally starting to turn the tide.

James Real’s preliminary victory at the 9th Circuit is further evidence that the tide is turning.

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German Migrant Crime Spiked In 2016

Authored by Soren Kern via The Gatestone Institute,

  • Although non-Germans make up approximately 10% of the overall German population, they accounted for 30.5% of all crime suspects in the country in 2016.
  • Nearly 250,000 migrants entered the country illegally in 2016, up 61.4% from 154,188 in 2015. More than 225,000 migrants were found living in the country illegally (Unerlaubter Aufenthalt) in 2016.
  • The Berlin Senate launched an inquiry into why migrants disproportionally appear as criminals in the city-state compared to Germans.

An official annual report about crime in Germany has revealed a rapidly deteriorating security situation in the country marked by a dramatic increase in violent crime, including murder, rape and sexual assault.

The report also shows a direct link between the growing lawlessness in Germany and Chancellor Angela Merkel's decision to allow in more than one million mostly male migrants from Africa, Asia and the Middle East.

The report — Police Crime Statistics 2016 (Polizeiliche Kriminalstatistik, PKS) — was compiled by the Federal Criminal Police Office (Bundeskriminalamt, BKA) and presented by Interior Minister Thomas de Maizière in Berlin on April 24.

The number of non-German crime suspects (nichtdeutsche Tatverdächtige) legally residing in Germany jumped to 616,230 in 2016, up from 555,820 in 2015 — an increase of 11% — according to the report. Although non-Germans make up approximately 10% of the overall German population, they accounted for 30.5% of all crime suspects in the country in 2016, up from 27.6% in 2015.

In this year's report, the BKA created a separate subcategory called "migrants" (Zuwanderer) which encompasses a combination of refugees, pending asylum seekers, failed asylum seekers and illegal immigrants.

According to the BKA, the number of migrant crime suspects (tatverdächtiger Zuwanderer) in Germany in 2016 jumped to 174,438 from 114,238 in 2015 — up 52.7%. Although "migrants" made up less than 2% of the German population in 2016, they accounted for 8.6% of all crime suspects in the country — up from 5.7% in 2015.

In terms of non-German crime suspects residing legally in Germany, Turks were the primary offenders in 2016, with 69,918 suspects, followed by Romanians, Poles, Syrians, Serbs, Italians, Afghans, Bulgarians, Iraqis, Albanians, Kosovars, Moroccans, Iranians and Algerians.

In terms of migrant crime suspects, Syrians were the primary offenders, followed by Afghans, Iraqis, Albanians, Algerians, Moroccans, Serbs, Iranians, Kosovars and Somalis.

Police in Bremen, Germany frisk a North African youth who is suspected of theft. (Image source: ZDF video screenshot)

The report's other findings include:

  • Violent crime surged in Germany in 2016. These include a 14.3% increase in murder and manslaughter, a 12.7% increase in rape and sexual assault and a 9.9% increase in aggravated assault. The BKA also recorded a 14.8% increase in weapons offenses and a 7.1% increase in drug offenses.

  • Non-German crime suspects committed 2,512 rapes and sexual assaults in Germany in 2016 — an average of seven a day. Syrians were the primary offenders, followed by Afghans, Iraqis, Pakistanis, Iranians, Algerians, Moroccans, Eritreans, Nigerians and Albanians. German authorities have repeatedly been accused of underreporting the true scale of the migrant rape problem for political reasons. For example, up to 90% of the sex crimes committed in Germany in 2014 do not appear in the official statistics, according to André Schulz, the head of the Association of Criminal Police (Bund Deutscher Kriminalbeamter, BDK).

  • Non-German crime suspects committed 11,525 robberies in Germany in 2016 — an average of 32 a day. Moroccans were the primary offenders, followed by Algerians, Syrians, Georgians, Tunisians, Albanians, Afghans, Serbs, Iraqis and Iranians.

  • Non-German crime suspects committed 56,252 aggravated assaults in 2016 — an average of 154 a day. Syrians were the primary offenders, followed by Afghans, Iraqis, Iranians, Moroccans, Algerians, Somalis, Albanians, Eritreans and Pakistanis.

  • Bavaria was the German state most affected by non-German criminality, followed by North Rhine-Westphalia, Baden-Württemberg, Hesse, Berlin, Lower Saxony, Rhineland-Palatinate, Saxony, Hamburg, Schleswig-Holstein, Saxony-Anhalt, Brandenburg, Mecklenburg-Vorpommern, Saarland, Bremen and Thüringen.

  • Berlin was the German city most affected by non-German criminality, followed by Munich, Hamburg, Frankfurt, Cologne, Düsseldorf, Hanover, Stuttgart, Dortmund, Bremen, Leipzig, Nürnberg, Essen, Duisburg, Mannheim, Karlsruhe, Dresden, Freiburg im Breisgau, Chemnitz, Aachen, Bielefeld, Wuppertal, Augsburg, Bonn, Bochum, Gelsenkirchen, Wiesbaden, Münster, Kiel, Halle, Krefeld, Braunschweig, Mainz, Lübeck, Mönchengladbach, Erfurt, Oberhausen, Magdeburg and Rostock.

  • The BKA also recorded 487,711 violations of German immigration laws (ausländerrechtliche Verstöße), up 21.1% from 402,741 violations in 2015. Nearly 250,000 migrants entered the country illegally in 2016, up 61.4% from 154,188 in 2015. More than 225,000 migrants were found living in the country illegally (Unerlaubter Aufenthalt) in 2016.

The new data contradicts claims made by the BKA in December 2016 — just four months before the current report — that migrant criminality was actually decreasing.

During a press conference in Berlin on April 24, Interior Minister Thomas de Maizière admitted:

"The proportion of foreign suspects, and migrants in particular, is higher than the average for the general population. This cannot be sugarcoated. There is an overall rise in disrespect, violence and hate. Those who commit serious offenses here forfeit their right to stay here."

Separately, officials in Bavaria revealed that the number of crimes committed by asylum seekers and refugees there increased by 58% in 2016. They accounted for 9.6% of all crimes committed in the state, up from 3.2% in 2015 and 1.8% in 2012. Syrians were the primary offenders, followed by Afghans, Iraqis and Nigerians.

"The increase in crime in Bavaria in 2016 is mainly due to foreign suspects, especially immigrants," said Bavarian Interior Minister Joachim Herrmann.

At the same time, officials in Baden-Württemberg noted a 95.5% increase in the number of physical assaults involving at least one migrant in 2016.

Meanwhile, the Berlin Senate launched an inquiry into why migrants disproportionally appear as criminals in the city-state compared to Germans. In 2016, 40% of all crime suspects in the German capital were non-Germans.

None of this seems to be having an impact on the German elections set for September 24, 2017. Polls show that if the election for German chancellor were held today, Angela Merkel, who is largely responsible for the migration crisis, would be re-elected with 37% of the vote. Martin Schulz, the Social Democrat candidate who has pledged to increase migration to Germany even further, would win 29% of the vote and the anti-immigration Alternative for Germany would win 8%. For now, German voters appear to believe that the alternatives to Merkel are all worse.

Finally, we note Vijeta Uniyal's comments that illustrate perfectly the level of cognitive dissonance among European officials at this crisis…

At the height of the European migrant crisis in early 2016, when masses of migrants were pouring into Europe, the German Green Party Chairwoman Katrin Göring-Eckardt could not control her joy.

 

"We have just received an unexpected gift in the form of people," she told her fellow Germans, reminding them to be grateful.

 

This gift, she said, was going to make the country "more religious, more colourful, more diverse and younger."

 

It was agift, it turns out, that keeps on giving.

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I never knew how screwed up global banking was until I started my own bank

By late 2014 I’d finally had enough.

After so many run-ins with the bitter incompetence and bureaucratic indignity of the banking system, I decided once and for all that I would start my own bank.

I probably should have had my head examined, but instead I called one of my attorneys to talk through the options.

Had I known then what I know now, I think I still would have made the same decision… but in total honesty I was completely unprepared for the torrential shit storm I was about to enter.

The deeper I went, the more overwhelming my discoveries of how shockingly inept, obsolete, and out of touch the industry is.

It’s one thing to read about it in the headlines. It’s quite another to experience it first hand as an insider.

Here’s a great example: you know how it seems commonplace these days to hear about banks getting hacked? Well, there’s a very good reason for that.

Every bank runs on something called “core banking software”, which is sort of a central financial database that keeps track of all accounts and transactions.

Anytime you deposit or withdraw funds, the core banking software updates its records.

And whenever you log in to your bank’s website to check your account balance, the server relies on the core banking software for that information.

Core banking software is the most critical component of any bank’s technological infrastructure.

Yet ironically, the software that many of the most established banks use was originally written in either Fortran or COBOL, both 60-year old programming languages that date back to the late 1950s.

Back then banks were very early adopters of technology and jumped on the chance to automate their core functions.

As technology improved, banks continually patched and updated their systems.

But they eventually ran into limitations in terms of how much they could modernize the software.

In the software industry, developers recognize this limitation.

That’s why from time to time they stop supporting obsolete versions of their applications and reengineer new versions with the latest technology.

But that didn’t happen across most of the banking sector. Instead, banks kept patching and upgrading outdated software.

Simply put, the most important functions in the banking system are powered by decades-old technology.

Perhaps nowhere is this more obvious than with domestic money transfers.

Within the domestic US banking system, most banks rely on the ACH payment network to send and receive financial transactions.

If your paycheck is direct deposited into your bank account, or mortgage payment automatically deducted, these typically use ACH.

What’s completely bewildering is that ACH payments typically take 48 hours to clear.

That’s completely insane given that any domestic bank transfer is simply an internal transfer from the sending bank’s account at the Federal Reserve to the receiving bank’s account at the Federal Reserve.

It’s utterly astonishing that in 2017 such a simple transaction actually takes two days, as if they have to send a satchel full of cash cross-country via the Pony Express.

But this is a reflection of the pitiful technology that underpins the banking system.

It doesn’t get any better internationally either.

If you’ve ever dealt with international financial transactions you may have heard of the SWIFT network.

SWIFT is a worldwide banking network that links allows financial institutions to send and receive messages about wire transfers and payments.

Anytime you send an international wire, it’s customary to enter the receiving bank’s “SWIFT code” as part of the wire details.

SWIFT is absolutely critical to global banking and handles billions of transactions and messages each year.

So you can imagine my surprise when I found out that SWIFT runs on Windows Vista an obsolete operating system that Microsoft no longer supports.

When my bank received its SWIFT code, we were told that we had to have a computer running Vista in the office in order to connect to SWIFT.

It was such an absurd exercise to find an obsolete computer running an obsolete operating system to connect to the supposedly most advanced and important international payment network in the world.

Unsurprisingly, SWIFT has been hacked numerous times, both by the NSA as well as private hackers who have stolen a great deal of money from their victims.

Last year a bunch of hackers famously penetrated the SWIFT network and stole over $100 million from the Bangladesh central bank.

And that was nowhere near an isolated incident.

This is the big hidden secret of banking: despite the shiny veneer of online banking, the institutions that literally control your money are run on outdated, inefficient, obsolete technology.

But this technology issue only scratches the surface of how pointless and anachronistic modern banking is. More on that tomorrow.

Source

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China Demands “Immediate Halt” Of US Missile Shield Deployment In South Korea

As we pointed out earlier today, Reuters cited US military officials who said that the U.S. military’s THAAD anti-missile defense system has “reached initial intercept capability” in South Korea, although they added that it would not be fully operational for some months. Just hours after the announcement, Beijing lashed out at DC and demanded an “immediate halt” to the controversial US missile shield. China’s Foreign Ministry spokesperson Geng Shuang voiced the government’s position against the move during a briefing on Tuesday.

“We oppose the deployment of the US missile system to South Korea and call on all parties to immediately stop this process. We are ready to take necessary measures to protect our interests,” he said according to AFP, adding that “China’s position on the THAAD issue has not changed.”

THAAD missile captured during launch

As Reuters noted earlier, the spokesperson didn’t specify what “necessary measures” China had in mind. However, responding to the THAAD installation, last week China announced on Thursday that it will stage live-fire exercises and test new weapons to protect its security.

Curiously, while on one hand Beijing lashed out at the shield’s deployment, on the other, the foreign ministry expressed support for US President Donald Trump’s surprise comments that he would be “honored” to meet North Korean leader Kim Jong-Un under the right conditions.

Asked about Trump’s remarks, Geng said that China “has always believed that dialogue and consultation… is the only realistic and viable way to achieve denuclearisation.”

“We also said many times that the US and DPRK… should make political decisions at an early date, take action and show good faith so that we can create a better atmosphere for resuming the peace talks and settling the issue,” he added.

Beijing has previously expressed loud concerns over the THAAD system and joint US-South Korean drills near the Korean Peninsula, consistently urging all the parties involved to find a peaceful solution to the volatile situation in the region. Backed by Russia, it also proposed a halt to military drills in exchange for an end to Pyongyang’s missile and nuclear tests during a United Nations Security Council (UNSC) session held in New York on Friday.

Moscow likewise considers the stationing of the THAAD system to be an “additional destabilizing factor for the region” amid alarmingly increasing tensions. It has called on Washington and Seoul to reconsider the decision.

Beijing has imposed a host of measures seen as economic retaliation against the South for the THAAD deployment, including a ban on tour groups. Retail conglomerate Lotte, which previously owned the golf course, has also been targeted, with 85 of its 99 stores in China shut down, while South Korea’s biggest automaker Hyundai Motor has said its Chinese sales have fallen sharply. The THAAD deployment comes as tension soars on the Korean peninsula following a series of missile launches by the North and warnings from the administration of US President Donald Trump that military action is an “option on the table.”

Further complicating matters, Trump stunned Seoul last week when he suggested South Korea should pay for the $1 billion THAAD system. “I informed South Korea it would be appropriate if they paid. It’s a billion-dollar system,” Trump was quoted as saying in a published report. “It’s phenomenal, shoots missiles right out of the sky.”

Seoul retorted that under the Status of Forces Agreement that governs the US military presence in the country, the South would provide the THAAD site and infrastructure while the US would pay to deploy and operate it.

Meanwhile, Thomas Karako, the director of the Missile Defense Project at the Center for Strategic and International Studies, noted that South Korea’s sole THAAD battery does not quite have the range to cover the entire country. But he called it an important first step. “This is not about a having a perfect shield, this is about buying time and thereby contributing to the overall credibility of deterrence,” Karako told AFP.

“South Korea with THAAD helps communicate to the North that today is not a good day to attack. It doesn’t mean that they could not do a lot of damage — they would — but it strengthens the overall posture.”

That, however, is irrelevant to China which sees the THAAD deployment as drastically shifting the regional balance of power; as such look forward to aggressive moves by Beijing which will now seek to enforce its own national interest, even if it means dstabilizing South Korea, while boosting Kim’s regime.

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Plan to Roll Back Internet Regulations a Boon for Business and Innovation: New at Reason

Libertarians, rejoice, writes Andrea O’Sullivan—a U.S. regulator took the bold step of deciding that his office simply doesn’t have the jurisdiction to control major parts of the internet. Last Wednesday, the free market-friendly Federal Communications Commission (FCC) Chairman Ajit Pai unveiled his plan to roll back the FCC’s controversial 2015 Open Internet Order (OIO), which granted the telecommunication regulator expansive discretionary authority over how Internet Service Providers (ISPs) can operate and compete.

Pai’s plan is a real win for those who believe businesses should not need government permission before innovating, O’Sullivan suggests.

But don’t expect “net neutrality” hardliners to accept this proposal without a major fight, she warns. Their reactions last week were predictably apoplectic. Yet hysterical critics have a hard time answering exactly how the internet was able to become the engine of innovation that it is today without the expansive FCC controls only granted through the OIO in 2015.

View this article.

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