Goldman Warns Of Downside Risk To $50 Oil Forecast Due To Ceasefire With Niger Delta Avengers

In the aftermath of the successful Brexit referendum, many expected France, Italy, maybe Catalonia, and the Netherlands to demand a referendum next. Instead, the loudest call for a referendum over the weekend came from an odd source: the Niger Delta Avengers, who as we profiled recently, “hold the price of oil in their hands” by mothballing Nigerian production and exports for the past two months.

As All Africa adds,the group  which has been attacking Nigeria’s oil infrastructure since early this year  urged President Muhammadu Buhari to call the vote, in a post on Twitter at the weekend. “It’s probably not going to happen,” says Ryan Cummings, a political analyst at Signal Risk. “The Niger Delta Avengers is not the first group to agitate for a seperate state in Nigeria. It’s a common place used by other groups in the country, most notably Boko Haram itself.”

The attacks have so far cut oil production by some 600,000 barrels a day. This, and the global oil prices remaining low, has sent Nigeria’s economy into a tailspin. “[The government] should be concerned that they have a group that seems quite capable to strike targets in defiance of Nigeria’s naval capabilities,” says Chris Ngwodo, a security specialist of the region. “In my view, they should not be answering to the requests of this group, because doing so would be a signal that violence is a tool of political engagement and that would be disterous for the nation”.

 

Abuja has offered to talk with the Avengers but the militant group has denied reports it has met government representatives. The group also this weekend called for Buhari to visit the Niger delta region.

That may not be the case. According to a new note just out of Goldman, a recent tentative ceasefire between the Nigerian government and the NDA has created upside risk to local production and ownside risk to Goldman’s $50/bbl H2 price target. Here is Damien Courvalin with the details:

In a region with a history of violent interruptions, the oil infrastructure in the Niger Delta is suffering through another string of attacks by local militias. Mostly carried out by a group called the Niger Delta Avengers (NDA), these attacks likely reduced crude production by mid-June by 400 kb/d in addition to 200 kb/d of non-militia related disruptions. On June 20, the government announced a 30-day ceasefire with a number of militias including the NDA. And while the NDA commented that it “does not remember having [such] an agreement”, there have been no attacks since June 16 and on Monday June 27, the government announced that production had recovered by 200 kb/d to 300 kb/d. If sustainable, this ceasefire would pave the way for higher output, with the government optimistically aiming for a return to normal production by end-July. A normalization in production, even over several more months, would create downside risk to our $50/bbl 2H16 price forecast as it would bring the global oil market close to balance over that time period.

 

Admittedly, the path of future Nigerian production remains uncertain in the absence of a sustainable agreement and for now we cautiously continue to assume that production will be reduced by 350 kb/d in 2H16. Despite this uncertainty, it is noteworthy that the current geopolitical setup and the fiscal hit to the Nigerian government are quite similar to 2009 when the Nigerian authorities first put in place the amnesty and payments which stabilized the Delta and allowed for a sharp rise in production. With oil representing 60% of government revenues, this suggests that, while not necessarily imminent, a sustainable resolution to the current uprising is quite possible in coming months. Of course, the path to such a resolution may see further disruptions and should attacks resume and continue to target inland or shallow water fields connected to onshore terminals, we see the potential that at their peak, disruptions could reach 1.1 mb/d (vs. 0.6 mb/d in mid-June). Such a hit to production would create upside risk to our 2H16 price forecast, although the upside would continue to be limited by high global inventories and would likely accelerate a resolution of the current conflict.

 

Nigeria’s disruptions have played an important role in helping end the global oil market oversupply in 2Q16

Oil production disruptions (thousand barrels per day)

Some background on the emergence of the Niger Delta Avengers:

Production stood at 1.8 mb/d in 2015, the year President Muhammadu Buhari succeeded President Jonathan by popular vote. Unlike President Jonathan, who was from the Niger Delta, President Buhari was born in the northern part of the country, and demonstrating his limited popularity in the Niger Delta, President Buhari received just 18% of the region’s vote. Making matters more difficult, President Buhari inherited a federal budget 65% funded by oil sales just as crude prices were declining. Blaming in part this decline in income, in May the government cut spending on the stipends and training programs offered to ex-militants by two-thirds, in line with the budget proposed last December. Also, in an effort to fight corruption, President Buhari ended the practice of hiring former Delta militants to guard oil infrastructure in the Delta.

 

These decisions led to the arrival of new militant groups in the region. The Niger Delta Avengers (NDA) emerged as the most destructive to oil production, disrupting supply out of Nigeria with dozens of attacks since February leading to a loss of 400 kb/d of production by our estimates with an additional 200 kb/d of disruptions driven by local theft and pipeline leaks (Exhibit 2). The group’s demands are broad and include the departure of foreign IOCs from the Niger Delta, increased government spending on local infrastructure, and the local redistribution of oil rights. According to Stratfor, an intelligence company, the NDA’s attacks have been well-planned and were performed on strategic targets, which have resulted in a much more rapid decline in production than that in the late 2000’s.

 

President Buhari responded to these attacks by saying the militias would be defeated, and military raids in the Niger Delta recently began. This response reflects similar episodes in the past where militarization of the region has been the first line of defense against militia activity. But the Boko Haram insurgency in the north-east continues to stretch military resources, and the decline in oil prices has taken its toll on the Nigerian economy, with the economy falling into a recession. This, combined with the interruptions to oil production, will only serve to further constrain fiscal spending. In addition to increasing military pressure, the government, publicly led by the national petroleum minister Emmanuel Kachikwu, who is from the Niger Delta, pushed for negotiations (another similarity with the 2009 negotiations led by Jonathan, at the time Vice-President). The NDA initially refused to negotiate although on June 21 the government announced it had agreed to a 30-day ceasefire with a number of regional militias including the NDA. And while the NDA responded to the news with the comment that it “does not remember having [such] an agreement”, there have been no attacks since June 16 vs. a rate of one attack every couple days since early May. On June 27, in an interview Kachikwu stated that total oil production had recovered 200-300 kb/d from its lows. If the cease-fire holds, he expects production to return to pre-NDA levels by mid-July upon the repair of the Forcados pipeline although this may prove optimistic given that several oil majors have evacuated non-essential personnel from onshore Nigerian projects. 

 

The path of future Nigerian production remains uncertain in the absence of a sustainable agreement and for now we cautiously continue to assume that production will be reduced by 350 kb/d in 2H16. If sustainable, the current ceasefire clearly leaves risk to higher output and such a resumption in production would create downside risk to our $50/bbl 2H16 price forecast as it would bring the global oil market close to balance over that time period since we currently project a 2H16 average supply-demand deficit of 380 kb/d.

 

We continue to assume that Nigerian production will be curtailed by 350 kb/d in 2H16 although the recent ceasefire creates clear upside to production levels
Nigerian crude production disruptions (thousand barrels per day)

We find it ironic that the fate of the price of oil, and certainly Goldman’s crude price target remains in the hands of a “terrorist” organization, which created its own website using GoDaddy on February 3, 2016, and which on June 5 moved to a .org domain using Cloudflare as registrar, a website that even has its own “Contact Us” section. Those readers curious just who is funding this group of millitants can simply ask them.

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Paul Singer: “Donald Trump Will Cause A Widespread Global Depression”

In addition to the recently quite vocal George Soros and Stanley Druckenmiller, one republican hedge fund billionaire who has been warning for years about not only the looming trouble for the market but also a calamitous collapse of the establishment, is Elliott’s Paul Singer, who has been advocating gold as insurance against just this inevitable systemic collapse. Singer has also been an outspoken opponent of Trump,  having supported Florida Sen. Marco Rubio in what was once a 17-person race for the GOP nomination. Singer most recently gave $1 million in April to the Our Principles PAC, which was part of the campaign to stop Trump.

However it was not unti today, one day after Trump revealed the full extent of his trade program, that Singer lashed out and revealed the full extent of his loathing for Trump.

During a discussion at the Aspen Ideas Festival in Colorado, Singer told CNBC that “the most impactful of the economic policies that I recall him coming out for are these anti-trade policies,” Singer said “And I think if he actually stuck to those policies and gets elected president, it’s close to a guarantee of a global depression, widespread global depression.

Does that make him a Hillary supporter? No. When asked who he would pick between Hillary and Donald, Paul’s response: “none of the above.”

Stepping away from politics, Singer also shared his view on Brexit, which differed from most of his peers, and said the UK’s decision was good for Britain because the “EU is a failed experiment.”

Perhaps the question these days, with both neo-Keynesian economics and monetarism failing abjectly, is what isn’t?

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One American’s True Story: “How I Went From Middle Class To Homeless”

Meet Joe. He used to make a steady income in manufacturing, but the work has disappeared. Now, he is selling everything and moving into his van. 

Joe is one of the 71% of Americans who think the U.S. economic system is “rigged in favor of certain groups,” according to a new poll by Marketplace and Edison Research.  The poll asked a simple question: Which of the following comes closer to your opinion on the economic system in the U.S. People could select between three options:

  1. The economic system is rigged in favor of certain groups
  2. The economy system is fair to all Americans
  3. Don’t know

Most selected rigged economy.

As CNN adds, it didn’t matter if the person was white, black or Hispanic or whether they identified as Republican, Democrat or Independent. The majority feel the American Dream comes with huge asterisk that reads “only for the favored few.”

Americans have good reason to think this way. The typical middle class family is earning about the same amount of money adjusted for inflation, just under $54,000, as they did in 1996.

That means that as the rich get richer, the middle class hasn’t seen an improvement in its way of life in 20 years. On top of that, the Great Recession knocked out many people’s safety net savings as they lost jobs or homes or both. Even people who have jobs say they feel one step away from financial ruin. They fear a life of “dead-end crap jobs with crap wages.”

People like Joe, 60, who lives in a mobile home ith his mother outside of Philadelphia and is desperate. He last held a job in early 2013: “The first seven weeks I was there we were busier than I’ve ever seen a small company be, and then like someone flipped a switch. The work just stopped.”

“I would like to work” he says. “I still have skills and abilities and I still know how to use them. I have two associate degrees, one’s in electrical engineering, one’s in mechanical engineering.”

He then discusses the impossible dream for the lower middle class of which he would like to be part of: “I consider $15/hour to be lower middle class. If i had been able to go permanently with a company, probably I would have reached middle class in a few years. I’d settle for lower middle class right now but even that’s almost the impossible dream.”

So what does Joe’s future hold? “If I don’t hear back from any of these applications, if I’m not working I’ll be out of here. With out last couple of thousand dollar we got the minivan. I’ll have enough room for a sleeping back and some clothes. My mom said if you ever have to sell the house, I want you to take the lamp. I can’t take the lamp either.”

And his morbid conclusion: “Poor people have significantly shorter lifespans than more affluent people. In fact I keep having this argument with my doctor. He keeps telling me ‘you have another 30 years.’ I tell him no, I don’t expect to make it past seventy.” In other words, Joe thinks he has another 10 years of working class purgatory before he can finally rest.

In the video below, he is wearing sunglasses to disguise his identity.

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Turkey Sucks, Polls Exclude, Gun-Control Rallies Blow, California Gets High

It's never not the shoes. ||| Chelsea Whittemore Tonight’s Kennedy (Fox Business Network at 8 p.m. ET, with a repeat at midnight) has a Party Panel including smart Sirius/Fox reporter Carley Shimkus, bearded laffmeister Joe DeVito, and your humble narrator. We talk about whether maybe one problem is that Turkey kinda sucks, how even the very latest presidential polls are routinely misleading, plus the conflicting optics of a Democratic gun-control rally in Chicago, California’s weed-legalization initiative, and more. Tune in!

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Not ‘The Onion’ – Why Elections Are Bad For Democracy

Following James Traub's mind-numbingly-elitist rebuttal of the democratic rights of "we, the people" in favor of allowing "they, the elite" to ensure the average joe doesn't run with scissors, "It's time for the elites to rise up against the ignorant masses."

The Brexit has laid bare the political schism of our time. It’s not about the left vs. the right; it’s about the sane vs. the mindlessly angry

The Guardian's David Van Reybrouck, originally posted at The Guardian appears willing to take the fight for elite survival even further…proclaiming "our voting system worked well for decades, but now it is broken. There is a better way to give voice to the people…. you do not ask everyone to vote on an issue few people really understand, but you draft a random sample of the population and make sure they come to the grips with the subject matter in order to take a sensible decision. A cross-section of society that is informed can act more coherently than an entire society that is uninformed."

Brexit is a turning point in the history of western democracy. Never before has such a drastic decision been taken through so primitive a procedure – a one-round referendum based on a simple majority. Never before has the fate of a country – of an entire continent, in fact – been changed by the single swing of such a blunt axe, wielded by disenchanted and poorly informed citizens.

But this is just the latest in a series of worrying blows to the health of democracy. On the surface, everything still seems fine. A few years ago, the World Values Survey, a large-scale international research project, asked more than 73,000 people in 57 countries if they believed democracy was a good way to govern a country – and nearly 92% said yes. But that same survey found that in the past 10 years, around the world, there has been a considerable increase in calls for a strong leader “who does not have to bother with parliament and elections” – and that trust in governments and political parties has reached a historical low. It would appear that people like the idea of democracy but loathe the reality.

Trust in the institutions of democracy is also visibly declining. In the past five years, the European Union’s official research bureau found that less than 30% of Europeans had faith in their national parliaments and governments – some of the lowest figures in years, and an indication that almost three-quarters of people distrust their countries’ most important political institutions. Everywhere in the west, political parties – the key players in our democracies – are among the least trusted institutions in society. Although a certain scepticism is an essential component of citizenship in a free society, we are justified in asking how widespread this distrust might be and at what point healthy scepticism tips over into outright aversion.

There is something explosive about an era in which interest in politics grows while faith in politics declines. What does it mean for the stability of a country if more and more people warily keep track of the activities of an authority that they increasingly distrust? How much derision can a system endure, especially now that everyone can share their deeply felt opinions online?

Fifty years ago, we lived in a world of greater political apathy and yet greater trust in politics. Now there is both passion and distrust. These are turbulent times, as the events of the past week demonstrate all too clearly. And yet, for all this turbulence, there has been little reflection on the tools that our democracies use. It is still a heresy to ask whether elections, in their current form, are a badly outmoded technology for converting the collective will of the people into governments and policies.

We discuss and debate the outcome of a referendum without discussing its principles. This should be surprising. In a referendum, we ask people directly what they think when they have not been obliged to think – although they have certainly been bombarded by every conceivable form of manipulation in the months leading up to the vote. But the problem is not confined to referendums: in an election, you may cast your vote, but you are also casting it away for the next few years. This system of delegation to an elected representative may have been necessary in the past – when communication was slow and information was limited – but it is completely out of touch with the way citizens interact with each other today. Even in the 18th century, Jean-Jacques Rousseau had already observed that elections alone were no guarantee of liberty: “The people of England deceive themselves when they fancy they are free; they are so, in fact, only during the election of members of parliament: for, as soon as a new one is elected, they are again in chains, and are nothing.”

Referendums and elections are both arcane instruments of public deliberation. If we refuse to update our democratic technology, we may find the system is beyond repair; 2016 already risks becoming the worst year for democracy since 1933. We may find, even after the folly of Brexit, that Donald Trump wins the American presidency later this year. But this may have less to do with Trump himself, or the oddities of the American political system, than with a dangerous road that all western democracies have taken: reducing democracy to voting.

Isn’t it bizarre that voting, our highest civic duty, boils down to an individual action performed in the silence of the voting booth? Is this really the place where we turn individual gut feelings into shared priorities? Is it really where the common good and the long term are best served?

By refusing to change procedures, we have made political turmoil and instability defining features of western democracy. Last weekend Spain had to hold its second general election in six months, after the first run did not deliver a government. A few weeks ago, Austria almost elected its first extreme rightwing president, while a Dutch referendum in April voted down a trade agreement between Ukraine and the EU. My country, Belgium, became the laughing stock of Europe a few years earlier, when it failed to form a government for 541 days. But nobody is laughing now that it seems that many western democracies are in the process of turning “Belgian”.

Countless western societies are currently afflicted by what we might call “democratic fatigue syndrome”. Symptoms may include referendum fever, declining party membership, and low voter turnout. Or government impotence and political paralysis – under relentless media scrutiny, widespread public distrust, and populist upheavals.

But democratic fatigue syndrome is not so much caused by the people, the politicians or the parties – it is caused by the procedure. Democracy is not the problem. Voting is the problem. Where is the reasoned voice of the people in all this? Where do citizens get the chance to obtain the best possible information, engage with each other and decide collectively upon their future? Where do citizens get a chance to shape the fate of their communities? Not in the voting booth, for sure.

The words “election” and “democracy” have become synonymous. We have convinced ourselves that the only way to choose a representative is through the ballot box. After all, the Universal Declaration of Human Rights of 1948 states as much: “The will of the people shall be the basis of the authority of government; this will shall be expressed in periodic and genuine elections which shall be by universal and equal suffrage and shall be held by secret vote or by equivalent free voting procedures.”

The words “this will shall be expressed” are typical of our way of thinking about democracy: when we say “democracy”, we only mean “elections”. But isn’t it remarkable that the Universal Declaration of Human Rights contains such a precise definition of how the will of the people must be expressed? Why should such a concise text about basic rights, which is fewer than 2,000 words long, pay particular attention to the practical execution of one of these rights? It is as if the people who compiled the declaration back in 1948 had come to see the specific method as a basic right, as if the procedure was in itself sacred.

It would appear that the fundamental cause of democratic fatigue syndrome lies in the fact that we have all become electoral fundamentalists, venerating elections but despising the people who are elected.

Electoral fundamentalism is an unshakeable belief in the idea that democracy is inconceivable without elections and elections are a necessary and fundamental precondition when speaking of democracy. Electoral fundamentalists refuse to regard elections as a means of taking part in democracy, seeing them instead as an end in themselves, as a doctrine with an intrinsic, inalienable value.

This blind faith in the ballot box as the ultimate base on which popular sovereignty rests can be seen most vividly of all in international diplomacy. When western donor countries hope that countries ravaged by conflict – such as Congo, Iraq or Afghanistan – will become democracies, what they really mean is this: they must hold elections, preferably on the western model, with voting booths, ballot papers and ballot boxes; with parties, campaigns and coalitions; with lists of candidates, polling stations and sealing wax, just like we do. And then they will receive money from us.

Local democratic and proto-democratic institutions (village meetings, traditional conflict mediation or ancient jurisprudence) stand no chance. These things may have their value in encouraging a peaceful and collective discussion, but the money will be shut off unless our own tried-and-tested recipe is adhered to.

If you look at the recommendations of western donors, it is as if democracy is a kind of export product, off the peg, in handy packaging, ready for dispatch. “Free and fair elections” become an Ikea kit for democracy – to be assembled by the recipient, with or without the help of the instructions enclosed. And if the resulting piece of furniture is lopsided, uncomfortable to sit on or falls apart? Then it’s the fault of the customer.

That elections can have all kinds of outcomes in states that are fragile, including violence, ethnic tensions, criminality and corruption, seems of secondary importance. That elections do not automatically foster democracy, but may instead prevent or destroy it, is conveniently forgotten. We insist that in every country in the world people must traipse off to the polling stations. Our electoral fundamentalism really does take the form of a new, global evangelism. Elections are the sacraments of that new faith, a ritual regarded as a vital necessity in which the form is more important than the content.

This single-minded focus on elections is actually rather odd. During the past 3,000 years, people have been experimenting with democracy and only in the last 200 have they practised it exclusively by holding elections. Yet we regard elections as the only valid method. Why? Force of habit is at play here, of course, but there is a more simple cause, based on the fact that elections have worked pretty well over the past two centuries. Despite a number of notoriously bad outcomes, they have very often made democracy possible.

However, elections originated in a completely different context from the one that they function in today. When the supporters of the American and French revolutions proposed elections as a way of learning “the will of the people”, there were no political parties, no laws regarding universal franchise, no commercial mass media, and no internet. The forerunners of our representative democracy had no idea that any of these things would come into existence.

Elections are the fossil fuel of politics. Whereas once they gave democracy a huge boost, much as oil did for our economies, it now turns out they cause colossal problems of their own. If we don’t urgently reconsider the nature of our democratic fuel, a systemic crisis awaits. If we obstinately hold on to a notion of democracy that reduces its meaning to voting in elections and referendums, at a time of economic malaise, we will undermine the democratic process.

In the years after the second world war, western democracies were dominated by large mass parties, and they held the structures of the state in their hands. Through a network of intermediary organisations, such as unions, corporations and party media, they succeeded in being close to the lives of individual citizens. This resulted in an extremely stable system, with great party loyalty and predictable voting behaviour.

This changed in the 1980s and 1990s, when discourse was increasingly shaped by the free market. Party newspapers disappeared or were bought up by media concerns, commercial broadcasters entered the field and even public broadcasters increasingly adopted market thinking. Viewing, reading and listening figures became hugely important – they were the daily share price index of public opinion. Commercial mass media emerged as the most important builders of social consensus, and organised civil society lost ground. The consequences were predictable, as citizens became consumers and elections hazardous.

Parties began to see themselves less as intermediaries between people and power, and instead settled into the fringes of the state apparatus. To retain their places there, they had to turn to the voter every few years to top up their legitimacy. Elections became a battle fought out in the media for the favour of voters. The passions aroused among the populace diverted attention from a far more fundamental emotion, an increasing irritation with anything and everything pertaining to politics.

In 2004, the British sociologist Colin Crouch came up with the term “post-democracy” to describe this new order:

Under this model, while elections certainly exist and can change governments, public electoral debate is a tightly controlled spectacle, managed by rival teams of professionals expert in the techniques of persuasion, and considering a small range of issues selected by those teams. The mass of citizens plays a passive, quiescent part, responding only to the signals given them.

The Italy of Silvio Berlusconi came closest to fitting this definition of the post-democratic state but elsewhere too we have seen processes that tend in that direction. Since the end of the 20th century, citizens have started looking like their 19th-century predecessors. Because civil society has become weaker, a gulf has opened up again between the state and the individual.

After the rise of the political parties, the introduction of universal suffrage, the rise and fall of organised civil society and the dominance of commercial media, another factor has now been added: social media.

At the beginning of the 21st century, citizens could follow the political theatre, minute by minute, on radio, television or the internet, but today they can respond to it from second to second and mobilise others. The culture of immediate reporting now has instant feedback, resulting in even more of a cacophony. The work of the public figure, and especially the elected politician, is not made easier by any of this. He or she can immediately see whether new proposals appeal to the citizen, and indeed just how many people the citizen can whip up. New technology gives people a voice, but the nature of this new political involvement makes the electoral system creak at the joints all the more.

Commercial and social media also reinforce one another – picking up each other’s news and bouncing it back to create an atmosphere of perpetual mudslinging. Tough competition, loss of advertising revenue and falling sales prompt the media to produce increasingly vehement reports about increasingly exaggerated conflicts. For radio and television, national politics has become a daily soap opera, and while editors determine to some extent the framing, the script and the typecasting, politicians, with varying degrees of success, try to slant things this way or that. The most popular politicians are those who succeed in altering the script and reframing the debate – in other words, those who can bend the media to their will.

This collective hysteria has made election fever permanent and has serious consequences for the workings of democracy. Efficiency suffers under the electoral calculus, legitimacy under the continual need to distinguish oneself, while time and again, the electoral system ensures that the long term and the common interest lose out to the short term and party interests. Elections were once invented to make democracy possible, but in these circumstances they seem to be a hindrance.

Since we have reduced democracy to selecting representatives, and reduced representative democracy to mean simply voting, a valuable system is now mired in deep difficulties. Winning the next election has become more important than fulfilling the promises made in the last. Making the best of the system we have is becoming increasingly difficult.

What kind of democracy is appropriate to an era of fast, decentralised communication? How should the government deal with all those articulate citizens who stand shouting from the sidelines?

Imagine having to develop a system today that would express the will of the people. Would it really be a good idea to have them all queue up at polling stations every four or five years with a bit of card in their hands and go into a dark booth to put a mark next to names on a list, names of people about whom restless reporting had been going on for months in a commercial environment that profits from restlessness?

People care deeply about their communities and want to be heard. But a much better way to let the people speak than through a referendum is to return to the central principle of Athenian democracy: drafting by lot, or sortition as it is presently called. In ancient Athens, the large majority of public functions were assigned by lot. Renaissance states such as Venice and Florence worked on the same basis and experienced centuries of political stability. With sortition, you do not ask everyone to vote on an issue few people really understand, but you draft a random sample of the population and make sure they come to the grips with the subject matter in order to take a sensible decision. A cross-section of society that is informed can act more coherently than an entire society that is uninformed.

Experiments with sortition have been successfully applied in the US, Australia, and the Netherlands. The most innovative country so far is certainly Ireland. In December 2012, a constitutional convention began work in order to revise several articles of the constitution of Ireland. Its members were not just a committee of MPs working behind closed doors, but a mixture of elected politicians and ordinary people: 33 elected politicians and 66 citizens, drafted by lot, from both Ireland and Northern Ireland. This group met one weekend per month for more than a year.

An independent research bureau put together the random group of 66 citizens, taking account of age, sex and place of birth. The diversity this produced was helpful when it came to discussing such subjects as same-sex marriage, the rights of women or the ban on blasphemy in the current constitution. However, they did not do all this alone: participants listened to experts and received input from other citizens (more than a thousand contributions came in on the subject of gay marriage). The decisions made by the convention did not have the force of law; the recommendations first had to be passed by the two chambers of the Irish parliament, then by the government and then in a referendum.

By talking to a diverse cross-section of Irish society, politicians could get further than they could have by just talking to each other. By exchanging views with elected officials, citizens could give much more relevant input than they could have in an election or a referendum.

What if this procedure had been applied in the UK last week? What if a random sample of citizens had a chance to learn from experts, listen to proposals, talk to each other and engage with politicians? What if a mixed group of elected and drafted citizens had thought the matter through? What if the rest of society could have had a chance to follow and contribute to their deliberations? What if the proposal this group would have come up with had been subjected to public scrutiny? Do we think a similarly reckless decision would have been taken?

Sortition could provide a remedy to the democratic fatigue syndrome that we see everywhere today. The drawing of lots is not a miracle cure any more than elections ever were, but it can help correct a number of the faults in the current system. The risk of corruption is reduced, election fever abates and attention to the common good increases. Voting on the basis of gut feeling is replaced by sensible deliberation, as those who have been drafted are exposed to expert opinion, objective information and public debate. Citizens chosen by lot may not have the expertise of professional politicians, but they add something vital to the process: freedom. After all, they don’t need to be elected or re-elected.

Juries for criminal trials that are chosen by lot prove that people generally take their task extremely seriously. The fear of a chamber that behaves recklessly or irresponsibly is unfounded. If we agree that 12 people can decide in good faith about the freedom or imprisonment of a fellow citizen, then we can be confident that a number of them can and will serve the interests of the community in a responsible manner.

If many countries rely on the principle of sortition in the criminal justice system, why not rely on it in the legislative system? We already use a lottery like this every day, but we use it in the worst possible form: public opinion polling. As the American political scientist James Fishkin famously remarked: “In a poll, we ask people what they think when they don’t think. It would be more interesting to ask what they think after they had a chance to think.”

Democracy is not, by definition, government by the best, elected or not. It flourishes precisely by allowing a diversity of voices to be heard. It is all about having an equal say, an equal right to determine what political action is taken.

In order to keep democracy alive, we will have to learn that democracy cannot be reduced to voting alone. Elections and referendums become dangerously outmoded tools if they are not enriched with more sensible forms of citizens’ participation. Structured deliberation with a random sample of citizens promises to generate a more vital, dynamic and inclusive form of democracy. In Utrecht, the fourth city of the Netherlands, the city council now drafts by lot 150 citizens to co-create its sustainable energy plan. These processes may become a permanent feature of any modern democracy.

The most common argument against sortition is the supposed incompetence of the those who have not been elected. A body of elected representatives undoubtedly has more technical competencies than a body chosen by lot. But what is the use of a parliament full of highly educated lawyers if few of them know the price of bread?

Besides, the elected do not know everything. They need staff and researchers to fill the gaps in their expertise. In much the same way, a representative body chosen by lot would not stand alone. It could invite experts, rely on professionals to moderate debates and put questions to citizens. Legislation could arise from the interaction between it and an elected chamber.

The arguments put forward against sortition are often identical to the reasons once put forward for not allowing peasants, workers or women to vote. Then, too, opponents claimed it would mark the end of democracy. Do we think Brexit might still have been possible if citizens had been truly invited to express their grievances and search for solutions together with those they had voted for?

If David Cameron had opted for the genuine participation of citizens, he would have obtained a much clearer view of what people really wanted, a powerful list of shared priorities, an agenda for further negotiations, and created much less distrust between the masses and the ruling class. On top of that, he would have gained global admiration for daring to tackle a complex challenge by an innovative process that values people’s voices instead of counting their votes. He could have set a new standard for democracy, rather than serving as its gravedigger.

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Brexit, Benghazi, and Virginia Postrel: The Fifth Column Is Back!

Reason readers have a very special, well, reason (drink!) to tune into the latest episode of The Fifth Column, the podcast starring Kmele FosterMichael C. Moynihan, and me. And that reason is…Virginia Postrel! The beloved former editor of this here mag joins the three fifths to discuss Brexit, populism, the fate of global liberalism, and (of course!) high-speed rail. Listen to the whole episode, which also gets into Benghazi and the BET Awards, right here:

Head over to the podcast website for info on how to subscribe; you can also listen using iTunes, Stitcher, and Google Play.

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107 Nobel Laureates Demand Greenpeace Stop Opposing GMOs… Because “We’re Scientists”

Forget Brexit, one of the most contriversial debates has surfaced once again, and this time with a vengeance. More than 100 Nobel laureates have signed a letter urging Greenpeace to end its opposition to genetically modified organisms (GMOs).

The letter asks Greenpeace to cease its efforts to block introduction of a genetically engineered strain of rice that supporters say could reduce Vitamin-A deficiencies causing blindness and death in children in the developing world.

"We urge Greenpeace and its supporters to re-examine the experience of farmers and consumers worldwide with crops and foods improved through biotechnology, recognize the findings of authoritative scientific bodies and regulatory agencies, and abandon their campaign against 'GMOs' in general and Golden Rice in particular," the letter states according to The Washington Post.

The reasoning is simple according to those who signed the letter: "We're scientists" – so there!

From WaPo

The letter campaign was organized by Richard Roberts, chief scientific officer of New England Biolabs and, with Phillip Sharp, the winner of the 1993 Nobel Prize in physiology or medicine for the discovery of genetic sequences known as introns. The campaign has a website, supportprecisionagriculture.org, that includes a running list of the signatories, and the group plans to hold a news conference Thursday morning at the National Press Club in Washington.

 

We’re scientists. We understand the logic of science. It's easy to see what Greenpeace is doing is damaging and is anti-science," Roberts told The Washington Post. “Greenpeace initially, and then some of their allies, deliberately went out of their way to scare people. It was a way for them to raise money for their cause."

 

Roberts said he endorses many other activities of Greenpeace, and said he hopes the group, after reading the letter, would "admit that this is an issue that they got wrong and focus on the stuff that they do well."

 

Greenpeace has not yet responded to requests for comment on the letter. It is hardly the only group that opposes GMOs, but it has a robust global presence, and the laureates in their letter contend that Greenpeace has led the effort to block Golden Rice.

 

The list of signatories had risen to 107 names by Wednesday morning. Roberts said that, by his count, there are 296 living laureates.

"I find it surprising that groups that are very supportive of science when it comes to global climate change, or even, for the most part, in the appreciation of the value of vaccination in preventing human disease, yet can be so dismissive of the general views of scientists when it comes to something as important as the world’s agricultural future." Nobel laureate Randy Schekman, a cell biologist at the University of California at Berkeley told WaPo.

That reminds us of a pertinent rebuttal to that comment written last year by Mark Spitznagel and Nassim Nicholas Taleb (the full piece can be found here):

First, there has been a tendency to label anyone who dislikes G.M.O.s as anti-science — and put them in the anti-antibiotics, antivaccine, even Luddite category. There is, of course, nothing scientific about the comparison. Nor is the scholastic invocation of a “consensus” a valid scientific argument.

 

Interestingly, there are similarities between arguments that are pro-G.M.O. and snake oil, the latter having relied on a cosmetic definition of science. The charge of “therapeutic nihilism” was leveled at people who contested snake oil medicine at the turn of the 20th century. (At that time, anything with the appearance of sophistication was considered “progress.”)

The article states:

Scientific and regulatory agencies around the world have repeatedly and consistently found crops and foods improved through biotechnology to be as safe as, if not safer than those derived from any other method of production. There has never been a single confirmed case of a negative health outcome for humans or animals from their consumption. Their environmental impacts have been shown repeatedly to be less damaging to the environment, and a boon to global biodiversity.

 

Greenpeace has spearheaded opposition to Golden Rice, which has the potential to reduce or eliminate much of the death and disease caused by a vitamin A deficiency (VAD), which has the greatest impact on the poorest people in Africa and Southeast Asia.

 

The World Health Organization estimates that 250 million people, suffer from VAD, including 40 percent of the children under five in the developing world.  Based on UNICEF statistics, a total of one to two million preventable deaths occur annually as a result of VAD, because it compromises the immune system, putting babies and children at great risk.  VAD itself is the leading cause of childhood blindness globally affecting 250,000 – 500,000 children each year. Half die within 12 months of losing their eyesight.

* * *

In summary, everyone should listen to the elites, no matter what one's personal conviction is. This letter is not a surprise, as there was recently a call for elites to rise up against the ignorant masses – this group wasted no time in that effort.

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Killing Trump’s “Elephant In The Room”

Excerpted from Dilbert Creator Scott Adams' blog,

For months I have been saying mostly good things in this blog about Trump’s powers of persuasion, and mostly bad things about how the Clinton campaign does persuasion. And yet Clinton has a solid lead in the polls, assuming the polls are accurate. How can that be?

The quick answer is that Clinton’s side is totally winning the persuasion battle.

Confused?

Clinton’s side includes more than her campaign team. It also includes pundits, supporters on social media, and the liberal-leaning parts of the mainstream media. While the Clinton campaign itself has been notably weak with its persuasion game, the folks on her side have been viciously effective at branding Trump a crazy racist.

Nothing else in this election matters.

The persuasion kill shot against Trump is the accusation that Trump is a crazy racist. When you combine crazy and racist, you have a lethal persuasion cocktail. And that’s what the Clinton side has done.

The folks on social media tested lots of accusations against Trump until they found traction with the “crazy racist” theme in all its forms. And Clinton’s campaign team wisely amplified it.

Remember when social media was saying Trump wasn’t serious about running, or that he was a clown, or he was doing it for the money? Those accusations didn’t get traction, and Trump swept them away with his continued success.

But the accusations kept coming, one after another, until the combo of crazy and racist bubbled to the top, as measured by social media virality. The Clinton campaign recognized the crazy racist theme as the best approach and started hammering on it through a variety of “fear Trump” message. Fear works when facts do not. And “crazy racist” is totally scary. And totally working. You can test it for yourself by asking any anti-Trumper to list the top three reasons for disliking Trump. Some form of “crazy racist” will normally come out on top. Persuasion-wise, every other reason is just noise.

The facts don’t matter. Facts never matter. What matters is that the “crazy racist” label picked up enough confirmation bias to stick like tar. The Clinton team won the month of June. And unless something changes, Clinton will saunter to an easy victory in November.

But remember also that Trump always makes aggressive first offers before negotiating to the middle. I predicted a softening of Trump’s immigration proposals and you see that happening now, right on schedule. Those changes in his proposals won’t be enough to change the election results because facts and policies are meaningless for persuasion. Trump would have to do far more to shake off the crazy racist label.

I now update my prediction of a Trump landslide to say that if he doesn’t give a speech on the topic of racism – to neutralize the crazy racist label – he loses. There is nothing he can do with policy tweaks, debate performances, advertising, interviews, or anything else that would remove the tarring he received from the Clinton side. But a persuasive speech could do it.

How?

Trump needs to convince Americans of all types that he loves them and plans to protect them from outside forces. Here’s a simple and persuasive formulation for that:

Example: “If you are an American citizen – of any color, ethnicity, gender, or religion – I love you, and I’ll fight for you. I support the melting pot of America, and I will fight to protect each of you from crime, terrorism, and economic risks.”

That’s the basic idea. Talking about policies won’t be enough. To become president, Trump has to embrace the melting pot. And he has to embrace the value of American diversity, loudly.

If Trump doesn’t directly address the elephant in the room – the accusation that he is a crazy racist – he loses. If he makes a case for the value of American diversity – and does it persuasively – he wins in a landslide.

I expect him to do the latter.

Read more here…

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Health Care Costs Are Rising Sharply, And It Will Get Much Worse

Submitted by Mish Shedlock of MishTalk

 

Inquiring minds are diving into Kaiser Family Foundation reports on health care. The charts and stats are not pretty, and they are sure to get worse.

Health Care Expenditures 1960-2014

The above chart from the Kasiser Family Foundation report Health Spending Explorer.

Deductible Spending Soars

Between 2004 and 2014, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell. As can be seen in the chart below, over this time period, patient cost-sharing rose substantially faster than payments for care by health plans as insurance coverage became a little less generous.

The above chart from the Kasiser Family Foundation report Cost Sharing Payments Increasing Rapidly Over Time.

The above via Kaiser Family Tweet.

Huge Cost Increases Coming

Those charts hugely understate the problem. All date to 2014.

In January, CNSNews reported CBO: Obamacare Costs to Increase in 2016 As Millions More Get Subsidized Insurance.

Taxpayers will have to shell out an estimated $18 billion more to subsidize Obamacare in 2016 despite lower than expected enrollment in the health care exchanges, according to a forecast by the non-partisan Congressional Budget Office (CBO).

 

In its latest 10-year economic forecast, CBO predicted that 13 million Americans would purchase health insurance through the Obamacare exchanges in 2016, with 11 million of them receiving government subsidies to help pay for their premiums.

 

But that figure is 40 percent lower than the 21 million enrollees CBO predicted last year would sign up.

 

Despite fewer than expected enrollees, the cost of running the exchanges will increase $18 billion, according to the CBO’s Budget and Economic Outlook: 2016 to 2026.

November Surprise

Many consumers will see large rate increases for the first time Nov. 1 — a week before they go to the polls.

Politico comments on Obamacare’s November Surprise.

The last thing Democrats want to contend with just a week before the 2016 presidential election is an outcry over double-digit insurance hikes as millions of Americans begin signing up for Obamacare.

 

But that looks increasingly likely as health plans socked by Obamacare losses look to regain their financial footing by raising rates.

 

Just a week after the nation’s largest insurer, UnitedHealth Group, pulled out of most Obamacare exchanges because it anticipates $650 million in losses this year, Aetna’s CEO said Thursday that his company expects to break even, but legislative fixes are needed to make the marketplace sustainable.

 

“I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. “A number of carriers need double-digit increases.”

 

Republicans are already pouncing on UnitedHealth’s decision as proof the law is unworkable. “You’re seeing the beginning of the so-called insurance death spiral,” Sen. John Barrasso (R-Wyo.) said last week.

Related Articles

Also consider Obamacare Redistribution and the Disincentive to Work.

Thanks to Obamacare, it is frequently better for a middle class family to get no raise than even a decent sized raise.

The wage point varies, but many will say “Dear employer, please don’t pay me more. It will cost me a lot of money”.

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