June 16, 2017

Posted by orrinj at 4:52 PM


Posted by orrinj at 4:38 PM


Weak inflation erodes conviction at Fed on rate hikes (Ann Saphir and Lindsay Dunsmuir, 6/16/17, Reuters)

When the Federal Reserve raised rates earlier this week, Fed Chair Janet Yellen expressed confidence that recent weak inflation readings were transitory. Fed officials on Friday signaled that doubts are simmering.

In an interview with Reuters on Friday, Minneapolis Federal Reserve President Neel Kashkari said he was not alone at the U.S. central bank in his view the Fed should have waited to raise interest rates until it was sure the recent drop in price pressures really is temporary. [...]

"The run of weaker core inflation readings has clearly rattled some Fed officials," Capital Economics wrote in a note to clients earlier on Friday.

The U.S. unemployment rate fell to a 16-year low of 4.3 percent in May, but the Fed's preferred measure of underlying inflation has been running below target for more than five years and in April slowed a second month to 1.5 percent.

That has led to some beginning to question the validity of the traditional narrative of a tight labor market eventually sparking higher inflation.

"Recent global developments add doubt to whether the traditional dynamics still work," Barclays economist Christian Keller said on Friday. He cited the examples of Japan and Germany, whose unemployment levels have declined to levels not seen since the early 1990s but where wage pressures also remain sluggish.

The four most recent downturns have all been caused by the Fed hiking rates into the teeth of deflation, though only the one where hikes revealed institutional fraud produced a recession.

Posted by orrinj at 3:38 PM


A Reported Investigation of Trump Would Have Widespread Legal Implications (ARI MELBER and PHIL HELSEL, 6/16/17, NBC News)

[T]he expanded scope of the probe is a turning point, and raises several legal implications:

-- An FBI inquiry of the Comey firing makes it more likely Rosenstein could be a witness, and thus potentially meet the parameters for recusing himself from overseeing Mueller's investigation.

Rosenstein told The Associated Press in an article published on June 3 that he would recuse himself if he were to become a subject of Mueller's investigation.

"I've talked with Director Mueller about this," Rosenstein told the AP. "He's going to make the appropriate decisions, and if anything that I did winds up being relevant to his investigation then, as Director Mueller and I discussed, if there's a need from me to recuse I will."

Attorney General Jeff Sessions has already recused himself in the investigation because of his role in the Trump campaign.

-- An obstruction inquiry reviewing Comey's firing makes it more likely that other government officials involved in that act, or related activity, could face legal exposure.

Federal employees interacting with the Trump administration regarding FBI staffing or this investigation, for example, may want to consider retaining counsel.

If the FBI is pursuing a theory that the Comey firing may be part of a larger obstruction effort, for example, then staff who knowingly assist with the original or related acts could face exposure. As a general matter, the Department of Justice can theoretically make an obstruction case against multiple people.

-- This report asserts the obstruction inquiry began before Mueller took over.

Comey was fired on May 9, and Mueller was appointed on May 17. The suggestion is that the career FBI agents already determined obstruction warranted investigation, independently and before Mueller took over. [...]

[I]n the event an investigation were to find potential high crimes, the process is to refer such information or material to Congress, which the Constitution provides as the adjudicative body for alleged high crimes and misdemeanors by a president.

Posted by orrinj at 3:31 PM


In Search of Fear : Notes from a high-wire artist. (Philippe Petit, Lapham's Quarterly)

How to disrupt the body language of fear

Before my high-wire walk across the Seine to the second story of the Eiffel Tower, the seven-hundred-yard-long inclined cable looked so steep, the shadow of fear so real, I worried. Had there been an error in rigging calculations? No. I had just forgotten how high were my expectations, how mad I was to have conceived such a project. On the spot I vanquished my anxiety by imagining the best outcome: my victorious last step above a cheering crowd of 250,000.

If imagination does not work, turn to the physical side of things. Give yourself a time-limit ultimatum: start counting! Yes, choose a number--not too high--and when you hear footsteps on your porch at three am, unfreeze your trepidation by whispering to yourself, "At ten, I open the door! One, two, three, four..."

A clever tool in the arsenal to destroy fear: if a nightmare taps you on the shoulder, do not turn around immediately expecting to be scared. Pause and expect more, exaggerate. Be ready to be very afraid, to scream in terror. The more delirious your expectation, the safer you will be when you see that reality is much less horrifying than what you had envisioned. Now turn around. See? It was not that bad--and you're already smiling.

Posted by orrinj at 3:27 PM


Historical Returns of the Market Portfolio (Ronald Q. Doeswijk, Trevin Lam and Laurens Swinkels, June 1, 2017, SSRN)

Using a newly constructed unique dataset, this study is the first to document returns of the market portfolio for a long period and with a high level of detail. Our market portfolio basically contains all assets in which financial investors have invested. We analyze nominal, real, and excess return and risk characteristics of this global multi-asset market portfolio and the asset categories over the period 1960 to 2015. The global market portfolio realizes a compounded real return of 4.38% with a standard deviation of 11.6% from 1960 until 2015. In the inflationary period from 1960 to 1979, the compounded real return of the GMP is 2.27%, while this is 5.57% in the disinflationary period from 1980 to 2015. The reward for the average investor is a compounded return of 3.24%-points above the saver's. 

The deflationary epoch is the Golden Age.

Posted by orrinj at 3:23 PM


THE SOVEREIGN MYTH (JACOB T. LEVY, 6/16/17, Niskanen Center)

One of the defining organizational facts about the state as we know it -- the modern Weberian state that crystallized in Europe over the course of early modernity -- is that it is symbiotic with transnational finance. In part, but it's an important part, the modern state is a creation of the bond market, and so is the modern democratic state. Medieval mercantile cities had long been able to borrow money at better interest rates than other political units. In early modernity, states that were relatively representative and relatively commercial learned that they could do the same. First Holland, then England, gained crucial advantages in international competition from their ability to borrow cheaply; the credit market trusted representative governments that incorporated important parts of the commercial classes much more than they trusted absolute monarchs. And Britain's ability to out-borrow France eventually contributed to the bankruptcy of the latter state and the onset of the Revolution.


This is uncontroversial but, from many ideological perspectives, uncomfortable. It means that the growth, stability, and expansion of powerful states governed by representative democracy was in part a creation of the credit market, bondholders, and international finance. That's not a world in which democratic decision makers ever had unconstrained sovereign decision-making authority over public finance, even in the powerful core states of the international system. It also means that the representative state emerged out of a kind of market competition for creditworthy providers of government. The representation of those who would have to be taxed in the future to repay the debt was taken as much more credible than a king's prediction that his son would probably find the money somewhere. Moreover, the innovative financial instruments that characterize modern financial markets were often created by, or around, public or quasi-public entities like the Bank of England and the Dutch East India Company. And once these processes got underway, the validity of transnational debt in the nineteenth and twentieth centuries was often enforced at gunboat-point by powerful states.

Thus, imagined histories of democratic sovereignty over the economy cannot survive contact with the actual history of the emergence of democratic states. Neither can imagined histories of an immaculately conceived market innocent of the world of coercive states. Modern liberal markets and modern democratic states evolved together, and each contributed to the development of the other in their familiar forms. I think that this history is somewhat more compatible with the kind of theory Andy Sabl recently developed in this space, one that takes seriously the connections and affinities among the fundamental institutions of liberal society: the free commercial market, the constitutional democratic state, civil society governed by associational freedom, and the rule of impersonal law. It's the attempt to split these apart, whether to celebrate the democratic state alone or the market alone, that runs into trouble.

My point is not only the familiar one (no less crucial and true for being familiar!) that broad economic forces are always outside of any one state's control. Every local economy is always affected by global economic forces, once markets have been integrated; and this is true regardless of how the local economy is organized. The Soviet Union spared no effort to subject its economy to deliberate planning and control, but it was still at the mercy of global swings in the price of oil. No state can legislate away the existence of changes in relative prices. Neither can a state just decide to have technological innovations or productivity increases, to say nothing of whether there are such innovations elsewhere that have positive spillover effects, or that hurt a local sector by competition. I think all of this is generally recognized -- although one might sometimes wonder, given the popularity of claims about nation-states and democratic electorates controlling their economic destinies.


But I mean to also emphasize that even the things that states do govern about their economies, they have never sovereignly controlled. The public budget, the tax system, public debt, monetary and exchange policy: these have always been constrained by international actors. Indeed, the finance provided by the international actors has often been a precondition for the states' ability to decide these matters at all.

And modern sovereignty just holds that it is the electorate and its representatives who get to decide at all, not that they will be able to control everthing.

Posted by orrinj at 3:18 PM


'Practice really makes perfect' in ax throwing : On International Ax Throwing Day, physicist Metin Tolan tells DW how best to launch the tool - and explains why the traditional way of hurling them is relatively weak. (Deutsche-welle, 6/15/17)

In clubs where beginners practice ax throwing and in competitions, the throwers aren't allowed to spin for safety reasons, even though that seems to be the best way to cover great distances. Competitive ax throwers raise the ax with both hands and launch it forward. What do you think of this technique?

I totally understand that spinning is too risky. It's tough to know when to let go and having a stray ax fly around would simply be too dangerous.

Posted by orrinj at 3:15 PM


How the President's "Clarifying" Memorandum Destroys the Case for the Entry Ban (Leah Litman and Steve Vladeck, June 15, 2017, Justsecurity)

The government's argument for suspending all entry into the United States of non-citizens from seven (now six) Muslim-majority countries has, from its inception, been predicated on two separate--but related--claims: First, that such a ban is a necessary "temporary pause" to allow the government to review its internal procedures for granting entry in the future to nationals from these countries.  Second, that the Secretary of Homeland Security and the Attorney General have "determined" that such review (and, therefore, such a "temporary pause") was necessary for national security. In other words, the most outward-facing (and controversial) aspect of the Executive Orders--the entry ban--was simply a means to their more important, inward-facing end, the internal review procedures.

Two developments on Wednesday have called this understanding--and, with it, much of the underlying justification for the entry ban--into serious question. First, President Trump signed a memorandum "clarifying" that the provisions of the second Executive Order (and their 90-day clock) become effective only once the current injunctions are "lifted or stayed," a move designed apparently to preempt the argument (based on the plain language of the Executive Order) that it expired last night at midnight. Second, the Justice Department filed a little-noticed motion in the Ninth Circuit to issue the mandate in Hawaii v. Trump immediately--so that those aspects of the Executive Order that Monday's Ninth Circuit ruling un-enjoined (to wit, the internal review procedures) could go into immediate effect (although the clarifying memorandum provides that they won't go into effect until 72 hours after the injunction is formally lifted).

As we explain in the post that follows, in the process, these developments de-couple the entry ban from the internal review procedures--and, in doing so, undermine (perhaps fatally) the government's strongest arguments for the ban itself. 

No one takes the pretexts seriously.

Posted by orrinj at 2:40 PM


The death of cash (Melissa Thompson, 6/15/17, Next Web)

Bad news for anyone who loves unhygienic, bacteria-circulating dollar bills: cash is on its way out. But for the rest of us, there is reason to rejoice. Cash costs us a lot of money. A recent study by Tufts showed that consumers lose about $200 billion annually by using cash.

This includes ATM fees, and other losses associated with cash use, like the time and transportation it takes to drive to the bank (which is, since you're wondering, 28 precious minutes per month, per person).

But, the study maintains, "cash derives its value from the information it contains and is a classic information good, which can be replaced by a digital substitute."

Posted by orrinj at 11:38 AM


With shift on Cuba, Trump could undercut his company's hotel-industry rivals  (Drew Harwell and Jonathan O'Connell June 15, 2017, Washington Post)

[A]s the owner of a real estate company with a big stake in hotels and resorts, Trump brings an added element to an issue that is unique to his presidency -- the ability, through his official actions, to undermine a growth area for his industry rivals who have raced in recent years to establish a foothold in a lucrative new market.

Starwood Hotels and Resorts, which merged with Marriott International to form the world's largest hotel chain, last year debuted the first Cuban hotel managed by a U.S. company in nearly 60 years, taking advantage of President Barack Obama's 2014 move to normalize relations with Cuba and lighten regulations enforcing the U.S. embargo on the island.  [...]

As part of an ethics pledge, Trump's company has vowed to pursue no new foreign deals during his presidency, making a potential foray into Cuba off limits for now. Yet, according to one industry expert, a presidential directive restricting efforts there by Starwood or other hotel chains would, in effect, neutralize a chief rival's ability to gain an early advantage.

"What's the president going to say? That the largest hotel company in the world, a competitor, is not allowed to renew its license" to operate in the country? asked Julia Sweig, a longtime Cuba scholar and former adviser to Starwood who has called for normalizing relations with the island. "That could be interpreted as the president is going to hold things up for the competition until the Trump Organization is ready to go down there."

Posted by orrinj at 6:01 AM


Catalans woo immigrants in quest to split from Spain (Sonya Dowsett, 6/16/17, Reuters)

Catalonia has one of the highest percentages of immigrants in Spain, just under 14 percent of residents are foreign-born, and their votes may gain crucial votes for the independence movement in what is likely to be a close-run race.

Including them in the movement for nationhood is key says Catalonia's deputy governor, Oriol Junqueras. "We want to be a very open and integrated society," he told Reuters in Barcelona.

Campaigners are even encouraging migrants without the right to vote to ask work mates and friends to vote for independence and are advocating Catalan nationality for all migrants living in the region if it leaves Spain.

"All those who are officially registered as living in Catalonia will have the right to Catalan nationality from day one of independence," said Uruguayan Ana Surra, Spanish member of parliament for Catalan pro-independence party ERC.

Posted by orrinj at 5:32 AM


'A reckoning for our species': the philosopher prophet of the Anthropocene : Timothy Morton wants humanity to give up some of its core beliefs, from the fantasy that we can control the planet to the notion that we are 'above' other beings. His ideas might sound weird, but they're catching on. (Alex Blasdel, 6/15/17, The Guardian)

The Anthropocene idea is generally attributed to the Nobel prize-winning atmospheric chemist Paul Crutzen and the biologist Eugene Stoermer, who started popularising the term in 2000. From the outset, many took Crutzen and Stoermer's concept seriously, even if they disagreed with it. Since the late 20th century, scientists have viewed geological time as a drama punctuated by great cataclysms, not merely a gradual accretion of incremental changes, and it made sense to see humanity itself as the latest cataclysm.

Imagine geologists from a future civilisation examining the layers of rock that are in the slow process of forming today, the way we examine the rock strata that formed as the dinosaurs died off. That civilisation will see evidence of our sudden (in geological terms) impact on the planet - including fossilised plastics and layers both of carbon, from burning carbon fuels, and of radioactive particles, from nuclear testing and explosions - just as clearly as we see evidence of the dinosaurs' rapid demise. We can already observe these layers forming today.

For a couple of years, a lively debate over the usefulness of the concept unfolded. Detractors argued that humanity's "geological signal" was not yet loud enough to justify the coronation of a new epoch, or that the term had no scientific use. Supporters wondered when they should date the Anthropocene's start. To the advent of agriculture, many millennia ago? To the invention of the steam engine in the 18th century and the beginning of the Industrial Revolution? To 5.29am on 16 July 1945, the moment when the first-ever nuclear test exploded over the New Mexico desert? (Morton, in his all-embracing way, treats each of these moments as pivotal.) Then, in 2002, Crutzen set out his arguments in the scientific journal Nature. The idea of a moment in planetary history in which human influence was predominant seemed to tie together so many disparate developments - from retreating glaciers to fresh thinking about the limits of capitalism - that the term quickly spread to other earth sciences, and then beyond.

From the geocentric universe to the homocentric...

Posted by orrinj at 5:23 AM


The Trump Idea Liberals Should Like : Privatizing air traffic control has worked well for countries like Canada. (Adam Minter, Bloomberg)

The FAA's troubles don't differ significantly from those Canada faced before 1996, except perhaps in terms of scale. Nav Canada, the user-financed, non-profit corporation that purchased Canada's air traffic control system for $1.1 billion, has solved most of those problems by introducing private-sector efficiency and incentives where none had existed before.

Freed of burdensome government contracting rules, Nav Canada is able to hire quickly and pay competitively, and set strict deadlines for tasks to be accomplished. The company has also been able to take advantage of new navigation technologies more quickly than the U.S. government has.

For example, Canadian controllers now use satellite-based GPS to track aircraft that are outside radar coverage, whereas their American counterparts still often rely on paper-and-pencil. Canadian controllers can space in-flight planes more closely and thus develop more efficient routes. This allows airlines to schedule flights more flexibly and improve on-time performance -- not to mention reduce fuel use, improve margins and shrink carbon emissions.

Posted by orrinj at 5:20 AM


The Case for Obstruction Charges (DANIEL HEMEL and ERIC POSNERJUNE 15, 2017, NY Times)

[T]he case against Mr. Trump involves three key events. First, James Comey said that when he was the F.B.I. director, the president told him in a Valentine's Day chat, "I hope you can see your way clear to letting this go, to letting Flynn go." Two Federal Courts of Appeals have held that similar "I hope" statements can -- depending on the context -- support charges of obstruction.

Second, President Trump reportedly asked the director of national intelligence, Daniel Coats, in a private meeting in late March if Coats could get the F.B.I. to back off its Flynn probe. President Nixon's attempt to use the C.I.A. to shut down the Watergate investigation was one of the reasons the House Judiciary Committee voted for articles of impeachment on obstruction charges.

Last, President Trump fired Mr. Comey on May 9 and then said on television that the firing was related to the Russia inquiry -- a signal to Comey's replacement, Acting Director Andrew McCabe, that he should roll back the investigation if he wanted to stay on as F.B.I. chief.

Even if none of those specific incidents would qualify as obstruction on its own, federal courts have said that an entire course of conduct can constitute obstruction. And whether Mr. Trump succeeded in his efforts is legally irrelevant, because federal law criminalizes attempted obstruction as well as successful obstruction. Nor does it matter whether there was an actual underlying crime.

Posted by orrinj at 5:15 AM


Russia Says It May Have Killed IS Leader Al-Baghdadi In Air Strike (Radio Liberty, June 16, 2017)

The Russian Defense Ministry says the leader of the extremist group Islamic State (IS), Abu Bakr al-Baghdadi, may have been killed in a Russian air strike in Syria late last month.