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Natural and Neutral Rates of Interest in Theory and Policy Formulation

[This article originally appeared in the Quarterly Journal of Austrian Economics.]

Interest has a title role in many pre-Keynesian writings as it does in Keynes’s own General Theory of Employment, Interest, and Money (1936). Eugen Boeöhm-Bawerk’s Capital and Interest (1889), Knut Wicksell’s Interest and Prices (1898), and Gustav Cassel’s The Nature and Necessity of Interest (1903) readily come to mind. The essays in F.A. Hayek’s Profits, Interest, and Investment (1939), which both predate and postdate Keynes’s book, focus on the critical role that interest rates play in coordinating production plans with consumption preferences. The General Theory represents a significant departure from classical (and Austrian) thinking but not because of the title-role status of interest. Rather, the departure stems from the fact that, in Keynesian theory, the role played by a market-determined interest rate is a disruptive one.

In contemporary policy discussions, the interest rate occupies center stage if only because the much-watched federal funds rate is the Federal Reserve’s sole surviving policy target. (A quarter-century ago, the Fed lost the ability to target the money supply — or even to identify a distinctly relevant monetary magnitude.) By its very nature an extra-market institution, the Federal Reserve is expected to exert a countervailing force. It is to move against market forces that, presumably, would otherwise be disruptive. In accordance with the Keynesian vision, market interest rates fail to coordinate saving and investment decisions, leaving saving decisions dependent only on incomes and leaving investment decisions dominated by Keynes’s “animal spirits.” Worse, high rates of interest can stem from fetishistic attitudes toward liquidity and a corresponding deficiency of spending.

The federal funds rate, which is the overnight rate on interbank loans, can be lowered or raised in an effort to control interest rates generally. The Federal Reserve lowers the federal funds rate to stimulate spending and keep the economy from sinking into recession; it raises the federal funds rate to retard spending and keep prices and wages from spiraling upward. Given the Keynesian vision and the implied role for central bank policy, the so-called “art of central banking” is to pick the “right” federal funds rate — the rate that wards off both unemployment and inflation.

As theory and policy have developed, the terms “natural rate” and “neutral rate,” though seeming synonyms, provide a contrast between pre-Keynesian and post-Keynesian thinking. Although “natural” and “neutral” are sometimes used almost interchangeably, there is an important conceptual distinction in play: the natural rate of interest is a rate that emerges in the market as a result of borrowing and lending activity and governs the allocation of the economy’s resources over time. The neutral rate of interest is a rate that is imposed on the market by wisely chosen monetary policy and is intended to govern the overall level of economic activity at each point in time. Exploring this distinction and its implications can go a long way toward understanding the current state of Federal Reserve policymaking and the difficulties that a central bank creates for the market economy.

The Natural Rate of Interest

So named by Swedish economist Knut Wicksell, the natural rate of interest is the rate that reflects the underlying real factors. In macroeconomic terms as applied to a wholly private economy, it is the rate that governs the allocation of resources between current consumption and investment for the future. By keeping saving and investment in balance, the natural rate guides the economy along a sustainable growth path. That is, governed by the natural rate, unconsumed current output (real saving) is used for augmenting the economy’s productive capacity in ways that are consistent with people’s willingness to postpone consumption.

In the hands of the Austrian economists, the natural rate became the rate that reflects the time preferences of market participants and allocates resources among the temporally defined stages of production. The output of one stage serves as input to the next in this logical and broadly descriptive representation of the economy’s production process. The temporal dimension of the economy’s capital structure is a key macroeconomic variable in Austrian theory.

Time preference is simply a summary term that refers to people’s preferred pattern of consumption over time. A reduction in time preferences means an increased future-orientation. People willingly save more in the present to increase the level of future consumption. Their increased saving lowers the natural rate of interest and releases resources from the final and late stages of production. Simultaneously, the lower natural rate, which translates directly into reduced borrowing costs, makes early stage production activities more profitable. With the reallocation of resources from late to early stages of production, the preferred temporal pattern of consumption gets translated into an accommodating adjustment of the economy’s structure of production.

Movements in the natural rate are also critical to the economy’s performance when changes occur in the availability of resources or in technology. Suppose that a technological breakthrough makes a time-consuming production process much more productive than before. Future consumption — even increased future consumption — can now be secured with less of a sacrifice of current consumption. People’s choices in the marketplace will determine how much of the technological gain will be realized in terms of current consumption (less saving) and how much in terms of future consumption (in which the availability of a new technology more-than-offsets the effect of reduced saving).

A rise in the natural rate during the transition period is portrayed by the Austrian economists as an “interest-rate brake,” a term we owe to Hayek (1933, pp. 94 and 179). The interest-rate brake moderates the rate at which the new technology is implemented and thereby allows for increased current consumption even during the period of implementation. Inventories are drawn down in late stages of production and some resources are reallocated toward less time-consuming projects.

In summary terms, the natural rate is seen as an equilibrating rate. It is the rate that tells the truth about the availability of resources for meeting present and future consumer demands, allowing production plans to be kept in line with the preferred pattern of consumption. By implication, an unnatural, or artificial, rate of interest is a rate that reflects some extra-market influence and that creates a disconnection between intertemporal consumption preferences and intertemporal production plans.

An artificially low rate of interest, which might prevail for some time if the Federal Reserve is targeting a low federal funds rate, translates into the business world as longer planning horizons than are justified by people’s actual willingness to save. The policy-induced mismatch between production and consumption activities creates the illusion of prosperity but sets the stage for an eventual market correction, which takes the form of an economy-wide downturn.

This is the essence of the Austrian theory of the business cycle. The mismatch and resultant boom-bust sequence can occur as a result of two different but related policy goals, which can be described as “stimulating growth” and “accommodating growth.”

Stimulating Growth

The Federal Reserve might lower interest rates (by targeting a low federal funds rate) in circumstances where there has been no change in the underlying market conditions. With unchanged technology, resource availability and consumption preference, business firms are led nonetheless to take advantage of cheap credit. Production activities, particularly in interest-sensitive sectors of the economy, appear more profitable. The economy is steered by low interest rates onto an unsustainable growth path. The cheap-credit policy, though ultimately harmful to the economy, is politically attractive. A seemingly strong economy always makes an attractive backdrop for office holders seeking re-election. If the timing is right, the votes can be harvested before the seeming strength is revealed by the market itself to be an actual weakness.

The phenomenon of stimulating growth for political reasons has given rise to a whole literature on “political business cycles.” Whether the emphasis is on the intertemporal misallocation of resources (as the Austrian economists would have it) or on the alternating bouts of inflation and unemployment (as mainstream macroeconomists would have it), political business cycle theory takes the underlying undistorted rate of interest to be consistent with macroeconomic health and the policy-infected interest rates (and money-growth rates) to be responsible for a macroeconomic malady in the form of boom and bust. Business cycles that are roughly aligned with the election cycle have been an integral part of the political landscape for the past half-century. In his Constitution of Liberty (1960), F.A. Hayek offered a blend of Austrian macroeconomics and what is now called Public Choice theory to account for these eco-political dynamics of boom and bust.

Accommodating Growth

In periods of technological advance, the Federal Reserve accommodates economic growth by lending freely at whatever rate of interest prevailed before the enhancements in technology occurred. Thus, interest rates are not actually lowered, as in the case of stimulating growth. Rather, interest rates are simply not allowed to rise — as they would have in the absence of Federal Reserve accommodation.

In effect, the policy of accommodation overrides Hayek’s interest-rate brake. With given intertemporal preference, people would choose to take only a portion of the gains associated with the technological advance in the form of increased future consumption. They would choose to take at least some of those gains in the form of increased current consumption. And given the enhanced technology, gains all around are possible.

People can save less now and still enjoy more future consumption. During the period that the new technology is being implemented, the natural rate would rise as entrepreneurs compete for investable funds. In this way, the temporarily high natural rate allows the economy to adjust to the new technology at a rate that is consistent with people’s intertemporal preferences.

The policy of accommodation distorts this market process. It overrides the interest-rate brake and allocates resources in a way that, if not countered by market forces, would cause all the gains from the technological advance to be realized exclusively in the form of future consumption. But the implied intertemporal pattern of consumable output is at odds with people’s intertemporal consumption preferences. This means that the spending of incomes on consumer goods during the transition period will disrupt the efforts of the Federal Reserve, revealing its policy of accommodation to entail over-accommodation.

Though there may be some political motivation for accommodating technology-induced growth, this policy is more directly linked to the long-discredited real-bills doctrine. The founding documents of the Federal Reserve identify sound lending with self-liquidating loans — loans that finance production, distribution, or retail activities which, in turn, generate the revenues for repaying those loans. Self-liquidating loans contrast with consumer loans or, more importantly, with loans made for speculative purposes.

The real-bills doctrine, widely accepted in the early twentieth century, does not include any guidance about the rate of interest at which these loans are made. Tellingly, the accommodating, self-liquidating loans are typically made at the interest rate that prevailed before the perceived need for accommodation arose, i.e., before the technological advance. But as already demonstrated, that rate is too low. It would be just right only in the extreme circumstance in which people preferred to take the entire gain from the technological advance in the form of future consumption. This circumstance, labeled in conventional price theory as a “corner solution,” is distinctly improbable.

Of course, at a higher rate of interest, one that reflected some increase in current consumption, the demand for self-liquidating loans (and for other loans, for that matter) would be accommodated by the market itself. The Federal Reserve need only allow the interest rate to rise to its new market-clearing level.

The most historically significant applications of the Austrian theory of the business cycle are instances of “accommodating growth” rather than of “stimulating growth.” The second decade of the twentieth century was a period of technological advance — involving mass production of automobiles and, with electrification, the widespread marketing of household appliances and processed food. The last decade of the twentieth century was similarly dominated by technological advance — this time involving the internet and other aspects of the digital revolution.

The policy-infected interest rates during each of these two periods were not necessarily low by historical standards but were low relative to the rate that would have emerged in the absence of growth accommodation. The Austrian theory suggests that in each period, a policy-induced boom rode piggyback on a genuine, technology-driven boom. But because the interest rate was not allowed to rise, i.e., because the interest-rate brake was overridden by the adherence to the real-bills doctrine, the economy was set off on a growth path that could not be sustained. These booms, then, were unavoidably followed by busts.

There is a close and obvious kinship between stimulating growth and accommodating growth. In both scenarios, there is a divergence between the rate of interest defended by Federal Reserve and the natural rate of interest. In one case, the policy-infected rate is driven below the natural rate; in the other case the natural rate rises above the policy-infected rate.

The two scenarios can also be distinguished with the aid of the familiar production possibilities frontier — the frontier representing different combinations of consumption and investment, given the economy’s resources and the state of technology. Market forces will keep the economy at the point on the frontier that is consistent with people’s intertemporal preferences. This judgment reflects the pre-Keynesian — and especially the Austrian — vision of the economy. The market-determined interest rate strikes a balance between current consumption and future consumption.

The policy of stimulating growth is an ill-fated attempt to move the economy away from the preferred trade-off and toward a point that entails less current consumption and more investment. The policy of accommodating growth is similarly ill-fated but applies when technological advance has shifted the frontier outward. Normal market forces, which would entail a temporary increase in the natural rate of interest, would move the economy to a point on the shifted frontier — a point that represents more consumption and more investment. The policy of accommodating growth at an unchanged rate of interest is an ill-fated attempt to move the economy parallel to the investment axis to a point on the shifted frontier — a point that disallows increased consumption during economy’s adjustment to the advance in technology.

In short the natural rate of interest is the rate that avoids booms and busts. With given resources and technology, it is the rate that keeps the economy on a sustainable growth path. With increased resources or enhanced technology, it is the rate that governs the adjustment to the new growth path.

The Neutral Rate of Interest

From the perspective of Austrian theory, what is remarkable about modern discussions of interest-rate policy is the total absence of any mention of intertemporal preferences and the corresponding trade-off between consumption and investment. Yet, the lack of concern about intertemporal resource allocation is consistent with the development over the past several decades of mainstream macroeconomics.

Keynes made a first-order distinction between consumption and investment spending, claiming that the former magnitude is a stable function of income while the latter magnitude, being largely governed by psychological forces (his “animal spirits”), is fundamentally unstable. This consumption-investment distinction and its rationale was central to the Keynesian revolution. The monetarist counterrevolution strongly down- played the psychological factors that might color investment decisions and, in effect, turned a blind eye to the consumption-investment tradeoff itself.

These two magnitudes were combined into an all-inclusive magnitude summarily called output and symbolized by Q in the equation of exchange. This age-old equation, MV = PQ, allows no scope for a temporally heterogeneous Q. It focuses attention instead on changes in total spending (PQ) and the division of those changes between price-level changes (ΔP) and changes in the level of real output (ΔQ). In this respect (and in many others), the more recent new classical models in which a representative agent operates in a one-good economy bear a strong family resemblance to monetarism.

The focus on real output puts into eclipse the division of that output between consumption goods and investment goods. Even more deeply into eclipse is the Austrian construction of a temporally defined structure of production. The very basis on which the natural rate of interest is conceived is simply absent in modern, highly aggregated macroeconomic theorizing.

It is only a short step from theorizing in terms of P and Q to theorizing (and formulating policy) in terms of inflation and unemployment. Taking the relevant benchmark to be “no inflation” and “full employment” suggests a critical distinction between upward and downward demand pressures in the economy. When aggregate demand is too strong, the pushing upward against the benchmark PQ causes prices and wages to rise, the level of output being bound by the full-employment, supply-side constraint. When aggregate demand is too weak, the pulling downward from the benchmark PQ causes the levels of output and employment to fall, prices and wages being “sticky” in the downward direction. (It is this pattern of movements in P and Q that underlies the so-called L-shaped aggregate supply curve that is characteristic of Keynesian constructions.)

If the aggregate pushing and pulling were a strict “either-or” proposition, the policy implications of this mode of theorizing would be clear-cut: If Q is on the wane, as evidenced by an abnormally high unemployment rate, then total spending (MV) should be strengthened (by reducing the federal funds rate). If P is rising, then total spending should be weakened (by raising the federal funds rate).

In practice, of course, the two problems of unemployment and inflation are competing with one another for the attention of Federal Reserve’s policymaking committee. The Federal Open Market Committee (FOMC) has to strike a balance between lowering interest rates and raising interest rates. It would actually lower or raise the federal funds target rate if one problem is judged to be more serious or more pressing than the other. Over time, the FOMC’s efforts to fight inflation and fight unemployment gives rise to a sequence of changes in the federal funds rate.

The actual pattern of federal funds rate during the early Greenspan years (1987–1993) is described by a simple equation introduced by John B. Taylor (1993) of Stanford University:

r = p + 0.5 q + 0.5 ( p – 2 ) + 2

where r is the targeted federal funds rate, p is the inflation rate over the previous year, and q is the percentage deviation of actual output from full-employment output. Taylor himself writes the equation using income (y) instead of output (q), but he defines y in terms of real GDP. In effect, y is a measure of q. The simple equation could be written in a still simpler form:

r = 1.5 p + 0.5 q + 1,

but the original rendering has more intuitive appeal. It suggests that the implicit goal of the Federal Reserve is “full employment” and “2 percent inflation.” Note that if q = 0 (i.e., no deviation from full employment) and p = 2 percent, then r would be 4 percent. That is, the targeted federal funds rate would be 2 percentage points above the (2 percent) inflation rate. The two coefficients of 0.5 give equal weighting to the problems of unemployment and inflation generally. In particular instances, of course, one of those problems may be more severe than the other — as would be indicated by the actual values of p and q. Thus, the targeted federal funds rate r is low with a high and negative q; it is high with a high p.

The discretion needed for the Federal Reserve to fight the good fight (against unemployment and inflation) stands in contrast to the adoption of a Monetary Rule as advocated by Milton Friedman. According to this rule, the Federal Reserve should increase the money supply year-in and year-out at a slow and steady rate that approximates the economy’s long-run growth rate of 2 or 3 percent.

In Friedman’s judgment, deviations from this Monetary Rule are more likely to do harm than to do good. But modern discussion of Federal Reserve policy suggests that the appropriate federal funds rate is the one that strikes the right balance at each FOMC meeting between fighting unemployment and fighting inflation. If, after a successful fight, the goals of the Federal Reserve are actually achieved, then the neutral rate (of 4 percent in the sample calculation) is the rate that threatens the economy with neither inflation nor unemployment.

Like the natural rate identified by Wicksell and adopted by the Austrian economists, the neutral rate can be described with the aid of a production possibilities frontier depicting combinations of consumption and investment. The dominating concern, in the case of the neutral rate, is not with movements along the frontier or with adjustments from one frontier to another. Rather, the concern is with actually staying on a given frontier. The concern is with Q and not with its division between consumable output and investment.

The economy may lapse into recession or depression, coming to rest in the frontier’s interior area. Or it may send itself into an inflationary spiral, with (nominal) movements in spending beyond the frontier. An economy prone to such inward and outward spiraling exhibits movements roughly orthogonal to the frontier. The objective of Federal Reserve policy is to undo any perverse movements away from the frontier and then, by maintaining a neutral federal funds rate, to hold in check any further such movements.

The equation relating the federal funds rate to inflation and unemployment quickly came to be known as the Taylor Rule. But is it really a rule in the same sense as Friedman’s Monetary Rule? More broadly, is the Taylor Rule supposed to be descriptive, predictive, or prescriptive?

The short answer to that question — and the answer that implicitly underlies many policy discussions is: it’s all three. The original 1993 Taylor article provides the basis for this view. According to Taylor (1993 p. 197; emphasis added), his “hypothetical but representative policy rule …describes recent Fed policy surprisingly accurately” (emphasis added).

Taylor tracks the actual federal funds rate for a half dozen years (ending in 1993) and compares the time profile graphically to the Taylor Rule rate. The difference in the two profiles is surprisingly small. The close fit suggests that considerations beyond those concerning inflation and unemployment are of minor significance. Taylor mentions as the only significant deviation of actual FOMC policy from Taylor-made policy the 1987 episode in which the stock market crashed and the Federal Reserve lowered the federal funds rate to accommodate the high demands for liquidity.

So, barring crashes and consequent high demands for liquidity, the Taylor Rule seems to be a serviceable basis for predicting Federal Reserve policy. But can the rule also be rendered prescriptive, as was the intent of Friedman’s Monetary Rule?

Here, we need to bridge the Humean is-ought gap, a feat that has stumped philosophers for centuries. But Taylor does not shrink from the task. The relevant passage deserves to be quoted in full. After acknowledging that there will be a learning curve that leads to improvements in the rule, he suggests how description can morph into prescription:

If the policy rule comes so close to describing actual Federal Reserve behavior in recent years and if FOMC members believe that such performance was good and should be replicated in the future even under a different set of circumstances, then a policy rule could provide some guide to future discussions. This may be particularly relevant when the membership of the FOMC changes. Such a policy rule could become a guide for future FOMCs. (Taylor 1993, pp. 208–09)

With this logic, the original Taylor Rule becomes a starting point for a learning-by-doing approach to Federal Reserve policy. And tellingly, the occasional crashes, such as the one in 1987, are taken to be anomalous deviations rather than as evidence that the rule itself may have serious shortcomings.

Friedman and Taylor In Perspective

Even during the heyday of monetarism, the federal funds rate was very much in play. But in those years, roughly 1979–1982, the rate was varied with an eye toward the volume of bank reserves and, looking one step beyond reserves and currency, toward the most basic monetary magnitude M1. The actual target was the money growth rate, typically an annual percentage change in M1 in the mid-to-high single digits. On the heels of the late 1970s double-digit inflation, the federal funds rate was varied between 10 percent and nearly 20 percent in an effort to keep M1 on its target growth path. That effort, though, was less than heroic. The Federal Reserve never actually adopted and abided by Friedman’s Monetary Rule. Instead, it periodically announced a new money-growth target as a range of rates and then persistently missed the range on the high side.

With the failure of the Federal Reserve to hit its money-growth target and with significant changes in the regulatory environment that blurred the distinction between money and earning assets, the monetarist experiment ended. Without a well-defined money supply, money-growth targeting was abandoned in favor of interest-rate targeting. But there was no bona fide Interest-Rate Rule to serve as a counterpart to the Monetary Rule. Discussions at policy meetings were informed by up-to-date unemployment statistics and the various price indexes, but policy changes had to be made on the basis of market conditions expected to prevail in the future. In practice, the FOMC was dealing with worries and fears rather than data and rules.

It is well known that if the FOMC picks a federal funds target that is too low, there will be worries about inflation; and that if it picks a target that is too high, there will be worries about unemployment. The goal, then became one of balancing the worries. The Federal Reserve had to find the equi-worry federal funds rate. This is what the neutral rate came to mean.

But just whose worries count? Is it the worries emanating from financial markets? Traders in financial markets might worry about interest rates being too low or too high — but mainly because of the implications about future actions by the Federal Reserve. Is the Fed going to raise rates? Is it going to lower them? The neutral federal funds rate, then, is the rate that causes the financial markets to have no net worry about the federal funds rate changing in one direction or the other.

But if this is the balancing act that underlies Federal Reserve policy, then both the Fed and financial markets are living in a house of mirrors, the actions on each side of the loan market being driven by expectations about actions on the other side. Federal Reserve policymaking and the financial community’s Fed-watching interact to produce some interest-rate dynamics akin to the dynamics of Keynes’s beauty contest — in which the objective is to pick the winning contestant on the basis of what others are likely to see as true beauty. The modern-day neutral rate is truly neutral only in this sense: it emerges as reflections on reflections and is not otherwise anchored in economic reality.

The Taylor Rule may well describe the temporal pattern of the federal funds rate as the Federal Reserve strives toward neutrality. But to take this description of the past as prescription for the future does not transform the art of central banking into a science. Believing that a seemingly neutral rate will be enduringly so is based on faith rather than on theory and experience.

An Austrian Perspective

Is there any known market mechanism that causes the neutral rate to be brought into line with the natural rate? That is, is there any reason to believe that equi-worry about inflation and unemployment somehow translates into interest rates that are consistent with sustainable growth? Or is it quite possible that the neutral rate (the equi-worry rate), lies below the natural rate (the rate that is consistent with sustainable growth)?

While the Federal Reserve, especially during the Greenspan era, often expressed concerns about sustainable growth, there was no interest-rate rule that would assure that outcome or even nudge markets in that direction. The Taylor Rule is tailored to the inflation-unemployment tradeoff. It deals only with P and Q and not with the division of Q (output) between C (consumption) and I (investment).

The evidence is that the neutral rate not likely to be the natural rate, and hence the equi-worry rate itself is something to worry about. Even when financial markets are expecting neither a rate hike nor a rate cut, the economy may be growing at an unsustainable rate. There is no timely way to distinguish between robust growth and financial bubbles. Bob Woodward (2000, p. 217) makes the point in connection with the 1990s boom. “There was no rational way to determine that you were in a bubble when you were in it. The bubble was perceived only after it burst.” It is this lack of correspondence between neutral and natural that gives the adherence to the Taylor rule its faith-based whistling-in-the-dark character.

Finally, the distinction made earlier between stimulating growth and accommodating growth casts further doubts on the relevance of the Taylor Rule. Two of the most noteworthy expansions since the creation of the Federal Reserve were episodes of accommodating growth and hence periods of little or no inflation. In both the 1920s and the 1990s, technological developments and the implied increase in productivity largely offset the overall price inflation that would otherwise have occurred as a result of the Federal Reserve’s interest-rate — and hence money-supply — policies.

Taylor’s p was held in check and his q gave no indication of problems ahead. Interest-rate neutrality in the form of an equi-worry rate was easily maintained — and with little or no worry on either the upside or the downside. Yet, the Austrian theory with its disaggregated Q shows that it is precisely in these circumstances (of growth accommodation as dictated by the fallacious real-bills doctrine) that interest rates are at odds with the natural rate. The excessive future-orientation of the production process is inconsistent with sustainable growth.

The Austrian theory does not offer some Hayek Rule for a natural rate to be recommended over a Taylor Rule for a neutral rate. Rather, it suggests that centralizing the business of banking deprives the market of its ability to find the natural rate.

Pompeo: Trump Recognizes ‘Hard-Fought Real Estate’ on Golan Heights Should be Israel’s

(CNSNews.com) – Confirming President Trump’s tweet about recognizing Israeli sovereignty over the Golan Heights, Secretary of State Mike Pompeo on Thursday night recalled a key tank battle on the strategic plateau in 1973, and said the president had “made the decision to recognize that that hard-fought real estate” should fall under Israeli sovereignty.

Speaking alongside Israeli Prime Minister Binyamin Netanyahu in Jerusalem, Pompeo – a former U.S. Army captain – remembered as a cadet studying an Israel-Syria clash during the Yom Kippur War known as the “Battle of the Valley of Tears.”

“It was Israeli heroism at its most amazing, saving this great nation at a time of enormous challenge, a threat that came from east of the Golan, from Syria – a tank battle of epic and historic proportion, of amazing Israeli bravery.”

“Tonight, President Trump made the decision to recognize that that hard-fought real estate, that important place, is proper to be a sovereign part of the State of Israel,” Pompeo said.

https://www.mrctv.org/embed/538153

“It will truly be historic,” he added of the decision, “and the people of Israel should know that the battles they fought, the lives that they lost on that very ground, were worthy and meaningful and important for all time.”

Netanyahu, who spoke earlier by phone with Trump, said the president’s decision was “of equal historic importance” to other recent decisions he had taken, such as moving the U.S. Embassy to Jerusalem and exiting the Iran nuclear deal.

“He recognized Israel’s sovereignty over the Golan Heights, and he did so at a time when Iran is trying to use Syria as a platform to attack and destroy Israel,” Netanyahu said. “And the message that President Trump has given the world is that America stands by Israel.”

The international community does not recognize Israeli sovereignty over the Golan, and early reactions to the significant policy shift reflected that.

Arab League Secretary-General Ahmed Aboul Gheit was quick to call the decision “irrelevant and illegal.”

Turkish foreign minister Mevlut Cavusoglu said that “attempts by the U.S. to legitimize Israel’s actions against international law will only lead to more violence and pain in the region,” adding that Turkey “supports Syria’s territorial integrity.”

There was no immediate response from the Assad regime, although its diplomat in Geneva complained at the U.N. Human Rights Council earlier this week that Israeli has “escalated its attempts to consecrate its occupation of the Golan and have its illegal decision to annex it be acknowledged.”

The Arab League, Organization of Islamic Cooperation, European Union, and U.N. General Assembly are all expected to weight in in the coming days.

U.N. bodies regularly adopt resolutions on the “occupied Syrian Golan,” and have continued doing so even since the outbreak of the Syrian civil war, passing by large margins resolutions that imply the inhabitants of the Golan would fare better under the Assad regime than under Israeli administration.

Late last year the U.S. for the first time in more than two decades shifted from abstaining to opposing such resolutions.

‘Reliable buffer’

Israel captured the plateau during the 1967 Six Day War, before which it had been used by the Syrians as a launching-pad for attacks on Israeli communities in the Hula and Galilee valleys below.

Six years later, Syria joined Egypt in launching a surprise attack on Israel on Yom Kippur, the holiest day on the Jewish calendar. It was during that costly war that the battle cited by Pompeo took place.

A scene from an Oct. 1973 battle in an area of the Golan later named the Valley of Tears. (Photo: Israel Defense Forces/Flickr)

Unlike the West Bank and Gaza, also captured in 1967, Israel would go on to annex the Golan, in 1981. Opinion polls have long found strong support for retaining it, from Israelis across the political spectrum.

The ridge has now been under Israeli control for more than twice as long as it was under Syria – 52 years, compared to the 21 years it fell within the borders of Syria prior to 1967.

(Before Syria’s formal independence in 1946, the Golan was part of a French mandate, having been ceded to France by Britain in 1923. Prior to World War I the area fell under the Ottoman Empire.)

Testifying before the House Oversight subcommittee on national security last summer, Hudson Institute senior fellow Michael Doran called for a recognition of “reality” regarding the Golan.

While under Syrian control, he said, “literally thousands of clashes” occurred between Syria and Israel.

But from the time Israel captured the Golan in 1967 until the outbreak of the Syrian civil war in 2011, it had served as a natural barrier between the two sides, he said.

If the Heights are to continue being a “reliable buffer” Doran argued, “we must leave them in the hands of the Israelis.”

A bill introduced by Sen. Ted Cruz (R-Texas) last month, “[c]larifying that it is United States policy to recognize Israel’s sovereignty over the Golan Heights,” has seven Republican co-sponsors, including Sens. Tom Cotton (Ark.), Marco Rubio (Fla.) and Lindsey Graham (S.C.).

The End Of Trust

Authored by Sven Henrich via NorthmanTrader.com,

I worry about America. When I was young, despite all its problems, America was greater than life, always beaming with optimism with a vision of a better future always ahead. Now that I’m getting older I’m very much unsure. Maybe I now know so much more than when I was younger, that is highly likely, but I’m not blind to seeing the changes over the past few decades.

When does a civilization recognize that it is in decline? When does it realize that its best days are behind it? It’s probably a much easier question to answer for historians with the benefit of a historical record and viewed through the lens of time, but much harder, if not impossible, for witnesses in the midst of history unfolding.

I ask these questions because it is hard not to worry about the state of the US or Western democracies in general these days. From my perch we are witnessing the end of trust, trust in government, trust in fairness, trust in each other. It’s not something that’s suddenly evolved, it’s been coming for a long time, but perhaps we’re just approaching peak realization. 50% of eligible voters already don’t vote in US presidential elections, they have no sense of stake or trust in the outcome. Nepotism and corruption appear rife in aspects of government and general success in life. I could list a myriad of examples, you can as well. The recent corruption scandal in college admissions being the latest example of many confirming an already prevailing sense that the world is rigged. Politics are getting ever more polarized and a common reality seems increasingly out of reach. Decades of expanding wealth inequality have left people behind, frustrated and angry and many they are lashing out, seeking to blame others for both real, imagined and often times manufactured problems. The politics of misinformation and propaganda are not new, but they are increasingly getting intense, bold and vicious.

Governments are as hopelessly divided as their peoples, incapable of reaching consensus on complex issues. In the meantime ever more debt is required to keep the system afloat.

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Hence I have to ask: Have we reached peak civilization? Are we witnessing a civilization in decline? What are the consequences if true?

It’s perhaps easy to dismiss such questions in light of the vast technological advances our societies continue to see at the present time.

But the term civilization is subject to a much broader definition:

Civilization: An advanced state of human society, in which a high level of culture, science, industry, and government has been reached.

For the purposes of this article I want to hone in on culture and government for I can’t help but find historic parallels in the eventual fall of the Roman Empire. The timescales and context were different, but the parallels to what we are witnessing now may be more than coincidental, they may be prescient.

Rome was perhaps the first great civilization that could be classified as the first true melting pot of different cultures and backgrounds, this as a result of the empire needing to ever expand to sustain economic growth by conquering its neighbors and forcing its culture and laws upon them.

But then growth peaked, the empire became extended, it could no longer afford its military might, its culture peaked, internal strive became pervasive while foreign adversaries kept challenging its predominance and the people lost trust in its government as corruption and nepotism became the primary means to power and influence.

Some may say Rome as a society peaked during the time of Octavian who became Caesar Augustus, himself reaching power aided by status and wealth following a bloody civil war, but there was peace and prosperity during his long reign. But then came the Caligulas, the Neros, the despots and tyrants, the year of the four emperors. Sure there were periods of renaissance, but chip by chip what was an advanced culture became degraded. The cohesive respect for the dream that Rome represented slowly got torn apart from the inside. Social, cultural, religious and ideological differences made the empire ever more difficult to govern. During the time of great religious upheaval Emperor Constantine made a bold attempt to unify the diverging empire, making Christianity the state mandated religion banning all other religions or even diverging views of Christianity. To no avail. 120 years later, Rome the great empire that had lasted for centuries was no more, too great were the divisions and structural forces that had torn at the fabric of the empire. Rome, the shining city of a million+ people, became deserted, the Colosseum, long the host to bloody spectacles attended by tens of thousands became a grazing ground for sheep.

I dare say neither Augustus, Julius Caesar, Cicero, or any of the well known figures of Rome’s glorious past could have imagined such a decline.

I’m obviously not predicting such a collapse for America, but all of us today have come to take civilization for granted, but what is civilization without a basic amount of shared reality, values and respect?

Which brings me to the here and now: Let’s acknowledge that on the science front we do not appear to be at a peak, many more advances are in the pipeline to come. But the same could have have been said about Rome, after all its industry and innovation continued to flourish way past Octavian’s time. But just because we have an iPhone in our hands doesn’t make us better people.

So let’s look at culture. If information technology and the internet offered the promises of vast access to knowledge and information and thereby help create a better educated and more enlightened population these first 20 odd years of the internet appear to be a complete failure. Has culture and civil discourse improved over the past 20 years or has it degraded? Based on what I see in our political and social discourse, and especially on how people are conversing with each other on social media and media in general, I see a complete breakdown in social discourse.

I’ve been hanging out on this planet for a few decades now and I can honestly say I’ve never seen so much hate, vitriol, ignorance, anger and disrespect in my life. And dare I add sheer stupidness and ignorance? It is dismaying seeing people often times utterly misinformed viscously at each other’s throats. No filter, no class, utter gutter. I don’t need to cite any examples. Every reader can think of plenty examples before I finish typing this sentence.

Lady Gaga recently described social media as the toilet of the internet. And boy, that toilet is clogged up and the stench appears to be getting worse as time goes on. Respect for institutions or government leaders or even each other? Forget it. Today’s internet would crucify Jesus before he could even perform a miracle. I can see the twitter attacks now: “Your carpentry sucks you socialist hack!”.

Everybody is fair game and in the process everyone gets diminished. The haters diminish themselves, any prospective leaders of conscience shy away in disgust and fear or look bloodied and soiled as constant attacks take their toll in the eye of public opinion.

What’s driving it all? Too complex to analyze in depth in this article, but suffice to say we are witnessing a massive divergence in culture and perception of reality and the reemergence of fanaticism.

There is an uncomfortable truth about the human condition: Once people become radicalized in mind and spirit it’s impossible to reason with them. Be it religion or politics. Ideology trumps facts. Allegiance to tribe becomes more important than sense of community or society and even educated and advanced societies can fall victim to radicalization.

And don’t think this is just a temporary fluke. History is full of examples of societies diverging and becoming radicalized and invariably these cultural shifts bring about unhappy endings. I don’t want to see an unhappy ending, but unfortunately only larger calamities end up bringing people back to a state of reason and acknowledgement that only a civilized discourse can bring about positive change. Yelling at each other on twitter just won’t do.

The last prominent example of the country coming together in recent American history was 9/11. The entire country pulled together. Now, not even 2 decades later, the country is the most divided in modern times with no hope in sight that it will get better anytime soon. Rather a dreaded sense lingers that the worst is still to come.

Which brings me to the government aspect of all this. Western democracies have become paralyzed by these internal divisions. Consensus building becomes virtually impossible, too far apart are the political bases, too fragmented the support to be able to address any complex structural issues. Debt and easy money have become the go to solutions to keep the consequences at bay. Politicians don’t need to fix anything knowing central bankers will always step in.

America is extended, riddled with debt and too reliant on ever more debt, past its growth peak, incapable and unwilling to address structural issues. Both political parties have given up on dealing with debt, illusory monetary policies such as MMT are invented to render structural issues as irrelevant. Meanwhile wealth inequality keeps expanding from administration to administration no matter who is in charge with voters distracted by the ideological divisions of the day, not trusting their leaders or each other.

And all this with 3.8% unemployment. What will this all look like during the next downturn? Nobody knows. Rome showed us to not take civilization for granted. It also showed us to not ignore structural problems before they become too large to tackle.

I want to be hopeful and I am hopeful because of all the great people I meet in real life and on social media, but America divided, show me you can come together and work together for a better future. I know you can do it, but until you do I worry about you.

Brazil To Go Full NATO? Trump Floats Possibility After Bolsonaro Visit

Latin America’s largest country to enter NATO? President Trump actually broached the unlikely scenario during a press conference after meeting with populist far right Brazilian President Jair Bolsonaro — dubbed by the Media as the ‘Brazilian Donald Trump’ — at the White House on Monday. 

During the remarks President Trump said he intends to designate Brazil as a non-NATO ally while also musing in an off-the-cuff manner “even possibly” making it “maybe a NATO ally”. 

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Brazil had previously indicated it is seeking and would welcome “major non-NATO ally” status granted by the White House, which would significantly boost its ability to purchase military equipment from the US.

The designation of “major non-NATO ally” (MNNA) would give Brazil “preferential access” to American military equipment procurement, and further invite more US-led military training and joint operations. 

Trump previously indicated he is “inclined” to push for Brazil receiving non-NATO ally privileges. “We’re looking at it very strongly. We’re very inclined to do that. The relationship we have now with Brazil has never been better,” he said Monday. But the comments about full NATO entry came as a surprise to many, perhaps even Bolsonaro himself. 

Brazil has been a key regional ally in ramping up pressure against Maduro’s Venezuela as well, and a longtime on-and-off again ally, going all the way back to the US being the first to recognize Brazilian independence from Portugal in the early 19th century. 

Last week Brazilian officials told Reuters the two countries were in the midst of strengthening direct military cooperation and ties, with eye toward increased NATO level cooperation. 

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President Donald Trump with Brazilian President Jair Bolsonaro at the White House, March 19, 2019. Image source: AP

Reuters summarized: 

Currently 17 countries have MNNA status. Brazil would become just the second Latin American country to join their ranks after Argentina, which received the designation in 1998. Colombia last year became a NATO partner, allowing Colombian armed forces to take part in NATO exercises other NATO activities.

The Brazilian officials said they have been negotiating the designation since the beginning of this year. They requested anonymity because they were not cleared to discuss it publicly.

No doubt Caracas will interpret Brazil’s potential future MNNA status and closer relations with NATO as yet another move toward US-sponsored regime change. 

Trump specifically addressed the Venezuela issue after meeting with Bolsonaro: “We call on members of the Venezuelan military to end their support for Maduro — who is really nothing more than a Cuban puppet — and finally set their people free,” he said during the press statements on the White House lawn. 

Turkish Occupation Continues to Erase Cyprus’ Heritage

Since the military invasion of Cyprus by the Turkish army during the summer of 1974, countless reports have been published about the atrocities the Turkish invaders committed on the beautiful Mediterranean island.

But less known is the continuous effort by …

The post Turkish Occupation Continues to Erase Cyprus’ Heritage appeared first on Global Research.

Thousands rally in Algiers as protest leaders tell army to stay away

March 19, 2019

By Lamine Chikhi and Hamid Ould Ahmed

ALGIERS (Reuters) – Thousands of students, university professors and health workers rallied in Algiers on Tuesday calling for President Abdelaziz Bouteflika to quit, and a new group headed by activists and opposition figures told the army not to interfere.

In the first direct message to the generals from leaders emerging from nearly a month of mass protests against Bouteflika, the National Coordination for Change said the military should “play its constitutional role without interfering in the people’s choice”.

Bouteflika, who has ruled for 20 years, bowed to the protesters last week by announcing he would not stand for another term. But he stopped short of stepping down immediately and said he would stay in office until a new constitution is adopted, effectively extending his present term.

His moves have done nothing to halt demonstrations, which peaked on Friday with hundreds of thousands of protesters on the streets of Algiers and have continued into this week.

“We will not stop our pressure until he (Bouteflika) goes,” said student Ali Adjimi, 23. “The people want you to leave”, read a banner. Others shouted “the people and the army are one.”

The 82-year-old president has rarely been seen in public since suffering a stroke in 2013.

The protesters say he is in no fit health to rule. Djilali Bahi, one of the doctors and other health workers at Tuesday’s demonstration, said: “We are fed up with this system. It must disappear forever.”

ARMY “RESPONSIBILITY”

So far, soldiers have stayed in their barracks during the protests. But on Monday, Chief of Staff Lieutenant-General Ahmed Gaed Salah hinted at a more active role, saying the army should take responsibility for finding a quick solution to the crisis.

Generals have traditionally wielded power behind the scenes in Algeria and have publicly intervened during pivotal moments, including cancelling an election in the early 1990s that Islamists were poised to win, triggering a decade of civil war.

The protest leaders issued their statement titled “Platform of Change” late on Monday, demanding that Bouteflika step down before the end of his term on April 28 and the government resign immediately.

Bouteflika’s newly appointed deputy prime minister, Ramtane Lamamra, has launched a tour of allied countries seeking support. On Tuesday he visited Moscow, long a close military ally of Algeria.

Foreign Minister Sergei Lavrov said Russia was concerned by the protests: “We see attempts to destabilize the situation, and speak out against any interference in this process,” he said.

Lamamra defended the government’s reform proposals. Bouteflika has agreed to hand over power to an elected president, and the opposition will be allowed to take part in the cabinet that will oversee elections, he said at a joint press conference with Lavrov.

Protesters have been calling for a generation of new leaders to replace a ruling elite dominated by the military, big businessmen with ties to the establishment and veterans of the 1954-1962 war of independence against France.

Algerian authorities have long been adept at manipulating a weak and disorganized opposition. But the mass demonstrations have emboldened well-known figures to lead the reform drive.

Prominent members of the new group include lawyer and activist Mustapha Bouchachi, opposition leader Karim Tabou and former treasury minister Ali Benouari, as well as Mourad Dhina and Kamel Guemazi, who belong to an outlawed Islamist party.

Zoubida Assoul, leader of a small political party, is the only woman in the group so far.

“Bouteflika just trampled on the constitution after he decided to extend his fourth term,” said the National Coordination for Change.

With dark memories of the 1990s civil war which cost an estimated 200,000 lives, many Algerians have long placed a priority on stability.

Bouteflika survived protests during the 2011 “Arab Spring” uprisings that toppled other regional leaders, using oil and gas wealth to buy support and the security services to tamp down dissent. But with the economy disappointing in recent years and a younger generation less fearful of change, he has yet to formulate a strategy that can placate Algerians.

“A free and democratic Algeria,” doctors chanted at the demonstrations.

(Additional reporting by Maria Tsvetkova in Moscow; Writing by Michael Georgy; Editing by Peter Graff)

Man Tests Tesla Autopilot By Trying To Run Over His Wife

Who knew that the story of Tesla’s rise and inevitable fall, would spawn so many potential Hollywood scripts (don’t answer that, it’s rhetorical).

In the latest story to emerge from Tesla’s “too crazy to be true” annals, a man decided to test the autopilot anti-collision feature on his car by trying to run over his wife. According to The Mirror, YouTuber KriszXstream filmed the risky experiment, during which his wife stepped out in front of his speeding car.

In the video, he said: “We’re going to test autopilot to see what happens when someone runs in front of the car.”

During the first test, the man drives towards his wife, who crosses the road in front of the car.

This is where things almost took a turn for the homicidal, as the autopiloted car gets very close to the woman, forcing her to run out of the way. While an alarm can be heard inside the car, it doesn’t appear as if the car would have stopped.

KriszXstream said: “For a second I thought it’s not gonna brake. But now it brakes” (it wasn’t clear if he was disappointed with that particular test outcome).

In a follow up test, the woman put her bag in the middle of the road, and while the Tesla does brake for the bag, it also knocks it over. The wife said: “It hit my bag. It’s still alive, I would say.”

Predictably, viewers of the idiotic experiment were unimpressed with the dangerous “test”.

One user said: “I don’t know who is dumber…you or your wife?”

Another added: “Plain and simple: are you nuts? People should never test safety system like that.”

While this clip is surely a contender for Darwin Award of the year, it brings up an interesting point: what if the driver had run over his wife (who just happened to have a multi-million life insurance policy)? Would it be his fault, or Tesla’s? We are confident an answer to this hypothetical scenario will be forthcoming soon.

Trudeau’s Top Bureaucrat Unexpecteldy Quits Amid Growing Corruption Scandal

Since it was exposed by a report in Canada’s Globe and Mail newspaper earlier this month, the scandal that’s become known as the SNC-Lavalin affair has already led to the firing of several of Trudeau’s close advisors and raised serious questions about whether the prime minister was complicit in pressuring the attorney general to offer a deferred prosecution agreement with a large, Quebec-based engineering firm.

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And according to the first round of polls released since the affair exploded into public view…

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…it could cost Trudeau his position as prime minister and return control to the conservatives, according to the CBC.

Campaign Research showed the Conservatives ahead with 37% to 32% for the Liberals, while both Ipsos and Léger put the margin at 36% to 34% in the Conservatives’ favour. Since December, when both polling firms were last in the field, the Liberals have lost one point in Campaign Research’s polling and four percentage points in the Ipsos poll, while the party is down five points since November in the Léger poll.

Meanwhile, as the noose tightens around Trudeau, on Monday another of the key Canadian government officials at the center of the SNC-Lavalin scandal has quit his post.

Michael Wernick, clerk of the privy council, the highest-ranking position in Canada’s civil service and a key aide to Justin Trudeau, announced his retirement Monday. Trudeau named Ian Shugart, currently deputy minister of foreign affairs, to replace him.

In a scathing letter to Trudeau, Wernick said that “recent events” led him to conclude he couldn’t hold his post during the election campaign this fall.

“It is now apparent that there is no path for me to have a relationship of mutual trust and respect with the leaders of the opposition parties,” he said, citing the need for impartiality on the issue of potential foreign interference. According to Bloomberg, the exact date of his departure is unclear.

As we reported in February, Canada’s former justice minister and attorney general, Jody Wilson-Raybould, quit following allegations that several key Trudeau government figures pressured her to intervene to end a criminal prosecution against Montreal-based construction giant SNC. Wernick was among those she named in saying the prime minister’s office wanted her to pursue a negotiated settlement.

Wernick has since twice spoken to a committee of lawmakers investigating the case, and during that testimony both defended his actions on the SNC file and warned about the risk of foreign election interference, as “blame Putin” has become traditional Plan B plan for most politicians seeing their careers go up in flames.

“I’m deeply concerned about my country right now, its politics and where it’s headed. I worry about foreign interference in the upcoming election,” he said in his first appearance before the House of Commons justice committee, before repeating the warning a second time this month. “If that was seen as alarmist, so be it. I was pulling the alarm. We need a public debate about foreign interference.”

Because somehow foreign interference has something to do with Wenick’s alleged corruption.

Incidentally, as we wonder what the real reason is behind Wernick’s swift departure, we are confident we will know soon enough.

Anyway, back to the now former clerk, who is meant to be non-partisan in service of the government of the day, also criticized comments by a Conservative senator and praised one of Trudeau’s cabinet ministers.

Wernick’s testimony was criticized as overly cozy with the ruling Liberals. Murray Rankin, a New Democratic Party lawmaker, asked the clerk how lawmakers could “do anything but conclude that you have in fact crossed the line into partisan activity?” Green Party Leader Elizabeth May said he seemed “willing to interfere in partisan fashion for whoever is in power.”

Whatever Wernick’s true motives, he is the latest but not last in what will be a long line of cabinet departures as the SNC scandal exposes even more corruption in Trudeau’s cabinet (some have ironically pointed out that Canada’s “beloved” prime minister could be gone for actual corruption long before Trump). Trudeau had already lost a top political aide, Gerald Butts, to the scandal. A second minister, Jane Philpott, followed Wilson-Raybould in quitting cabinet.

Separately, on Monday, Trudeau appointed a former deputy prime minister in a Liberal government, Anne McLellan, as a special adviser to investigate some of the legal questions raised by the controversy. They include how governments should interact with the attorney general and whether that role should continue to be held by the justice minister.

As Bloomberg notes, the increasingly shaky Liberal government hasn’t ruled out helping SNC by ordering a deferred prosecution agreement in the corruption and bribery case, which centers around the company’s work in Moammar Qaddafi’s Libya. Doing so would allow the company to pay a fine and avoid any ban on receiving government contracts. That decision is up to the current attorney general, David Lametti; of course, such an action would only raise tensions amid speculation that the government is pushing for a specific political, and favorable for Trudeau, outcome. 

Paying the Price for Peace: The Story of S. Brian Willson and Voices from the Peace Movement

Vietnam veteran S. Brian Willson paid the price for peace as he was run over and nearly killed by a military train during a non-violent protest at The Concord Naval Weapons Station in California on September 1st, 1987. The train …

The post Paying the Price for Peace: The Story of S. Brian Willson and Voices from the Peace Movement appeared first on Global Research.

In Thai election, new ‘war room’ polices social media

March 18, 2019

By Patpicha Tanakasempipat

BANGKOK (Reuters) – In Thailand’s election “war room”, authorities scroll through thousands of social media posts, looking for violations of laws restricting political parties’ campaigning on social media that activists say are among the most prohibitive in the world.

The monitors are on the look-out for posts that “spread lies, slander candidates, or use rude language”, all violations of the new electoral law, said Sawang Boonmee, deputy secretary-general of the Election Commission, who gave a Reuters team an exclusive tour of the facility.

When they find an offending post, on, for example, Facebook, they print it out, date-stamp it, and file it in a clear plastic folder, to be handed over to the Election Commission and submitted to Facebook for removal.

“When we order content to be removed, we’ll reach out to the platforms, and they are happy to cooperate with us and make these orders efficient,” Sawang said.

Sawang said the tough electoral laws governing social media for the March 24 election, the first since a 2014 military coup, are a necessary innovation aimed at preventing manipulation that has plagued other countries’ elections in recent years.

“Other countries don’t do this. Thailand is ahead of the curve with regulating social media to ensure orderly campaigning and to protect candidates,” Sawang said.

A Facebook representative said it reviewed requests from governments on a case-by-case basis.

“We have a government request process, which is no different in Thailand than the rest of the world,” the representative said.

Twitter did not respond to a request for comment.

Democracy advocates, worry the social media restrictions laid out by the military government may be impeding parties from freely campaigning.

The rules require that candidates and parties register social media handles and submit a post to the commission, stating what platform it will appear on and for how long.

Parties and candidates are only allowed to discuss policies, and posts that are judged to be misleading voters or that portray others negatively could see the party disqualified, or a candidate jailed for up to 10 years and banned from politics for 20.

Pongsak Chan-on, coordinator of the Bangkok-based Asia Network for Free and Fair Election (ANFREL), said the rules go far beyond combating “fake news” and raise questions about how free and fair the election will be.

“The rules are stricter than in any recent elections anywhere. They’re so detailed and strict that parties are obstructed,” he told Reuters.

‘DOESN’T BODE WELL FOR DEMOCRACY’

The monitoring center, with a signboard reading “E-War Room”, has three rows of computers and stacks of printouts, with half a dozen workers spending eight hours a day searching for violations of the law.

Sawang said another intelligence center scanned for violations 24 hours a day but it was “off-limits” to media.

The election is broadly seen as a race between the military-backed prime minister, Prayuth Chan-ocha, and parties that want the military out of politics.

But the stringent rules have left anti-junta parties fretting about how to campaign online, nervous that they could inadvertently break a rule that triggers disqualification.

Up to now, the new rules have not been used to disqualify any candidates though the very threat has had a dampening effect and encouraged self-censorship.

“They create complications for parties,” said Pannika Wanich, spokeswoman for the new Future Forward Party, which has attracted support among young urban folk who have come of age on social media.

She said her party had to consult a legal team before making posts.

Some candidates have deactivated their Facebook pages while others have removed posts that might cause trouble.

Last month, Future Forward leader Thanathorn Juangroonruangkit faced disqualification over an allegation that he misled voters in his biography on the party’s website. The commission dismissed the case last week.

In another petition, the commission was asked to ban the party’s secretary-general for slandering the junta in a Facebook post.

“It’s very restrictive and doesn’t bode well for democracy,” said Tom Villarin, a Philippine congressman and member of ASEAN Parliamentarians for Human Rights (APHR).

“Putting more restrictions on social media during a campaign season defeats the purpose of holding elections in the first place.”

FIGHTING FAKE NEWS

About 74 percent of Thailand’s population of 69 million are active social media users, putting Thais among the world’s top 10 users, according to a 2018 survey by Hootsuite and We Are Social.

Thailand is Facebook’s eighth biggest market with 51 million users, the survey showed.

Facebook said it has teams with Thai-language speakers to monitor posts and restricts electoral advertisements from outside the country.

“Combating false news is crucial to the integrity and safety of the Thailand elections,” said Katie Harbath, Facebook’s Global Politics and Government director, during a Bangkok visit in January.

Sawang said the election commission has also gained cooperation from Twitter and Japanese messaging app Line, used by 45 million Thais.

Line Thailand told Reuters it did not monitor chats for the election commission but helped limit fake news by showing only articles from “trusted publishers” on its news feature.

(Reporting by Patpicha Tanakasempipat; Editing by Kay Johnson, Robert Birsel)

Lyft Expects To Raise Up To $2.1 Billion As IPO Roadshow Begins

Lyft is looking to raise up to $2.1 billion in its upcoming initial public offering, pegging its valuation between $21 and $23 billion according to the Wall Street Journal, as the ride-hailing service launches its IPO roadshow. 

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The range, equating to between $62 and $68 a share, is preliminary and could change by the time the shares start trading around the end of next week. The company issued a filing outlining the range Monday, confirming a report by The Wall Street Journal on Sunday. –WSJ

Lyft, founded in 2012 and operating in over 300 cities in the US and Canada, had revenues of $2.16 billion in the last year and a net loss of $911.3m according to the Financial Times – the largest-ever for a company entering the public markets for the first time, while as Axios notes, there is no visible path to profitability. 

Expect Lyft to emphasize focus when speaking with prospective investors. It’s a ride-hail company, growing at a faster clip than is Uber, and not too distracted by large side projects like food delivery and autonomous vehicle development.

  • It’s a smart message, although not entirely accurate. Lyft not only invests in other micro-mobility efforts like bike sharing and scooters, it also has major AV initiatives.
  • Plus, it’s unclear that ride-hail is actually a viable business. Uber once said its ride-hail efforts were profitable in large, developed markets like North America, but it’s not reaffirmed that claim lately, and Lyft has never made it. One possible reason: the massive, albeit largely anecdotal, increase in rider discount offers. Maybe ride-hail is best as a monopoly, like taxis once were. –Axios

A final IPO price will be set by the San Francisco-based company and its underwriters based on feedback from the investors during the roadshow. 

Lyft’s roadshow kicks off what is expected to be one of the most busy years for technology issues, as Uber, Pinterest, Slack Technologies, Airbnb and others are waiting in the wings. 

Even at the low end of the range, Lyft would be valued at far more than it was during its last private valuation of $15.1 billion in 2018, making it one of the largest US-listed new tech IPOs since Alibaba Group Holding Ltd. went public in September 2014. 

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Lyft’s CEO Logan Green and Vice President John Zimmer will together hold 48.8% of voting power after the offering, while the company expects to operate on the Nasdaq under the symbol “LYFT.” Green received a base salary in 2018 of $401,500 plus almost $42 million in stock awards. His “personal security services” have apparently run the company $935,000 per Axios. 

“We thoughtfully balance investments in growth and profitability considerations, while deliberately leaning more towards growth (especially in these early days),” wrote the co-founders. 

J.P. Morgan, Credit Suisse and Jefferies are among the lead bookrunners. Fidelity, meanwhile, holds a $7.71% pre-IPO stake in the company. 

CLAIM: Google is aiding the Communist Chinese military in asserting global domination and the defeat of America

by Ethan Huff, Natural News: The top-dog general in the United States Military has issued a stark warning about tech giant Google, revealing that the company’s ongoing work in China is helping to bolster the communist country’s military strength. Speaking during a recent testimony before the Senate Armed Services Committee, General Joseph Dunford, who serves as chairman […]

The post CLAIM: Google is aiding the Communist Chinese military in asserting global domination and the defeat of America appeared first on SGT Report.

Marriott to open 1,700 hotels, return $11 billion to shareholders by 2021

March 18, 2019

(Reuters) – Hotel chain Marriott International Inc on Monday mapped out a three-year plan to open more than 1,700 hotels around the world, return up to $11 billion to shareholders and make a full-year profit of as much as $8.50 per share by 2021.

Marriott, which owns the Ritz-Carlton and St. Regis luxury hotel brands, said it would add between 275,000 and 295,000 rooms over three years, potentially adding $400 million in fee revenue in 2021 and $700 million annually when stabilized.

The company also forecast a profit of $7.65 to $8.50 per share by 2021, the mid point of which was above $7.72 estimated by analysts, according to Refinitiv data.

During the three-year period, the company plans to pay $1.9 billion to $2 billion in dividends and buy back $7.6 billion to $9 billion in shares, Marriott said.

The company, which plans to hold an investor conference on Monday, expects comparable hotel revenue per available room (RevPAR) growth – a key measure of hotel health – between 1 and 3 percent on an annual basis for the three-year period.

Last month, Marriott missed Wall Street estimates for fourth-quarter revenue and forecast a lower-than-expected full-year profit, blaming weak demand in North America, its largest market.

The company was hit by a massive data breach involving up to 383 million guests in its Starwood hotels reservation system and Chief Executive Officer Arne Sorenson earlier this month apologized before a U.S. Senate panel and vowed to protect against future attacks.

(Reporting by Sanjana Shivdas in Bengaluru; Editing by Shounak Dasgupta and Anil D’Silva)

Couple Beaten, Congregation Member Missing in Persecution of Church in China

Couple Beaten, Congregation Member Missing in Persecution of Church in China

(Morning Star News) – Following the arrest of 44 worshipers from house church meetings in southwestern China in February, police in Chengdu this month arrested a married couple from the church and beat them during interrogation, the church reported.

The couple, identified as Liu and his wife Xing, of Early Rain Covenant Church, were visiting Christian friends when police from Chengdu Shuyuan Police Station on March 2 detained them and took them to Taisheng Road Police Station for interrogation, according to the church, whose pastor along with more than 100 others was arrested in a Dec. 9 raid.

“At 2 p.m., while being interrogated, they were personally humiliated, abused, and violently beaten by seven to eight police officers from the Chengdu Taisheng Road Police Station,” the church’s March 2 statement on Facebook reads. “They were detained for nearly eight hours. After being beaten by police officers from the Taisheng Road Police Station, sister Xing and her husband were escorted by an unidentified person back to their home.”

The unexplained violence was one of the latest instances of persecution of the church in Chengdu, capital of Sichuan Province. After church pastor Wang Yi and his wife, Jiang Rong, were incarcerated in the Dec. 9 raid, authorities on Feb. 24 detained 44 Early Rain members meeting for worship in several homes.

Some were released the next day, and seven others were released on Monday (March 11), the church reported. Pastor Wang and his wife were charged with “inciting to subvert state power” and are in secret detention. Ten others are also facing criminal charges, including four church elders, according to the statement.

Police have pressured landlords to evict some church members and compelled employers to fire others, and one church member has been missing since March 5. In a statement on March 8, the church reported that Pan Fei, who had lost his job because of his church activities, disappeared after his first day at a new job on March 4.

“He stopped going to work beginning on the following Tuesday morning,” the statement reads. “We have visited his apartment multiple times to look for him but to no effect. We have not been able to contact him.”

Police had arrested Pan Fei several times since May 2018 and had illegally searched his home, according to the church. After police compelled his landlord to evict him, community officers visited him at his new apartment and harassed him regularly, the statement reads.

“In the past, when brother Pan Fei would encounter harassment and persecution, he would ask his brothers and sisters to pray for him,” it reads. “But he has not sent any messages since disappearing four days ago. We are concerned that brother Pan Fei is being targeted for his faith.”

Yesterday (March 14) Early Rain member Zhang Ying and her daughters received a visit at their apartment in Chengdu from her landlord, accompanied by officers from the local police station, according to a church statement online.

“Six males and one female barged into her home,” the statement reads. “They insulted sister Zhang and her three children, threatened them, and derided them. Two of them were extremely aggressive and threatened to rape and beat sister Zhang. Community officers stood by the side and recorded their insults and verbal abuse with a video camera.”

Zhang has signed a two-year contract with her landlord for the apartment, but he falsely claimed that she had violated it without saying what she had done wrong, the statement reads.

“He was harassing her because community officers and police had pressured him to,” according to the church. “When the landlord and community officers left, they required sister Zhang to move out of her home by the end of March.”

One church member whose husband was arrested in the Feb. 24 raids said that a community police officer stopped her and her child during a visit to another Christian’s home, according to a March 1 posting. When she objected, she said, the officer called a police station director identified only as Ding.

Telling her that she was still in custody and needed permission to go anywhere, the police station director told the Christian woman, whose name was withheld, that she couldn’t take home the treat her friend had given her.

“He even grabbed my neck and told me to stomp on it,” she reported. “I firmly refused to stomp on it. He then said that if I didn’t stomp on it, he would throw it into the face of my child right in front of me. He also said that if I didn’t listen to them, he would put me in detention and send my child to a welfare institution. He said, ‘Your husband is still in detention. Do you think I won’t keep him there? I will send him to live with people with AIDS.’”

The official concluded by saying that if she didn’t “behave” that weekend, he would cause trouble for her. “I won’t be as nice to you as I was today,” he told her, according to the church posting. “If this happens again, you will be taken directly to the police station.”

Such threats have become commonplace for church members, according to the church.

“For the most part, there is no member of this church who has not suffered in some way,” the church reported in a Feb. 24 statement.

In the Feb. 24 arrests, plainclothes officers at the police station struck church member Tang Chunliang and his wife in the face, according to a church statement on Feb. 25. Surrounding several homes during worship and making arrests afterward, including all present in two homes, officers did not spare the elderly, 11 children and a pregnant woman, according to the church.

“Some were not released until 2 a.m.,” the statement reads. “Tired children slept on ice-cold tables and floors. Others were not released until 6 a.m.”

‘Subversion’ 

Chinese Christians are often charged with “inciting subversion of state power,” punishable by up to five years in prison or 15 in extreme cases, as the Communist regime views religion as a threat to its ideological control, according to advocacy group China Aid. It notes that Christian groups have no intention of threatening government power.

Pastor Wang was a human rights activist and a constitutional scholar before becoming a pastor, according to the South China Morning Post (SCMP). In 2006, he met with then-U.S. President George W. Bush in the White House.

The raids on the Early Rain church are part of a broader crack-down on unofficial or “underground” churches that Beijing escalated since last year following amendments to the Religious Affairs Regulation that give lower-level officials more power to act against churches and impose tougher penalties for “unauthorized religious gatherings,” according to the SCMP.

Unofficial churches decline to become part of the government-sanctioned Three-Self Church, which would subject them to intrusive government controls. The Early Rain church on Tuesday (March 12) posted a video of Xu Xiaohong, head of the government-sanctioned Three-Self Church, telling the National People’s Congress the previous day that officials planned to “Sinicize” Christianity. This plan would rid Christianity of all “Western” influences and ensure that all Christian doctrine and worship conforms to the government ideology, the church stated, noting that Xu denounced churches gathering in “private meeting places” and “black sheep” who are “subverting state security.”

The U.S. State Department announced on Dec. 10 that it had included China among 10 countries designated as Countries of Particular Concern for severe religious rights violations.

China ranked 27th on Christian support organization Open Doors’ 2019 World Watch List of the 50 countries where it is most difficult to be a Christian.

If you would like to help persecuted Christians, visit http://morningstarnews.org/resources/aid-agencies/ for a list of organizations that can orient you on how to get involved.

Pelosi Hits ROCK BOTTOM, Supports Lower Voting Age to ‘Capture Kids’ When They’re Young

Source:

Speaker of the House Nancy Pelosi (D-CA) wants to lower the voting age to 16.

She says it’s imperative to “capture kids” while they are young.

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Think about that for a second. What’s next?

If the voting age is eventually lowered to 16 when children are still highly politically ignorant, will 14 or 12 or 10 be that far off?

VOTER POLL: Should Abortion Be Banned FOREVER?

From Free Beacon:

House Speaker Nancy Pelosi (D., Calif.) on Thursday said she has “always been for lowering the voting age to 16.”

[…]

Pelosi suggested it was important to get high schoolers involved in civics when they’re a captive audience.

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Pelosi: “I myself, personally, not speaking for my caucus, I myself have always been for lowering the voting age to 16. I think it’s really important to capture kids when they’re in high school, when they’re interested in all of this, when they’re learning about government.”

WATCH:

English is not Speaker Nancy Pelosi’s first language. Wait, I wrote that wrong.

URGENT POLL: Does Trump have your vote in 2020?

English is Speaker Pelosi’s first language.

What’s odd is how often she seems to misspeak publicly.

For example…

The House Speaker spoke to reporters today for only about 21 minutes, but there were plenty of strange moments as she botched words, suffered face spasms and brain freezes as she attacked President Trump’s proposed border wall and his leadership during the recent partial government shutdown.

Lamenting the recent partial government shutdown, Pelosi said, “Veterans, many of whom— a third of the Republican— federal employees…”

Pelosi: “Maybe we can do something to help our contractors, uh, because they did— are— not getting paid.”

The House Speaker attempted to read recent votes to reporters, and had trouble finding the right numbers in her notes.

Pelosi: “163— what is it, 163, uh, Democrats, uh, Republicans voted no to a resolution that says shutdowns are wrong.”

Pelosi: “163 voted, only 20, um, uh, 1 voted yes on that.”

READER POLL: Better First Lady – Melania Or Michelle?

WATCH:

MSNBC recently held a town hall with Pelosi. One person asked the pro-abortion “Catholic” if she supports the black lives matter movement.

Within Nancy’s long-winded response, she mentioned three words Democrats will absolutely hate.

“Well, I support the recognition that Black Lives Matter for sure and I have incorporated that in many of my statements. I think that all lives matter, yes, but it has—we really have to redress past grievances in terms of how we have addressed the African-American community.”

WATCH:

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What’s that, Nancy? ALL LIVES MATTER?

Reactions:

‘Thuggish’: Trump Imposes Visa Bans on ICC Staff Probing US War Crimes in Afghanistan

The United States will impose visa restrictions on people responsible for any International Criminal Court (ICC) probe, a move aimed at preventing the court from pursuing the United States and its allies regarding their actions during and after the invasion …

The post ‘Thuggish’: Trump Imposes Visa Bans on ICC Staff Probing US War Crimes in Afghanistan appeared first on Global Research.

Chaos Breaks Out As Yellow Vests Clash With French Police

from ZeroHedge: Update: Saturday’s Yellow Vest protests have escalated in intensity as clashes with the police grew increasingly violent. Take a look: After weeks of more moderate protests, France’s Yellow Vests are back in full swing following the end of President Macron’s unsuccessful ‘great debate’ – during which thousands of town halls were conducted over […]

The post Chaos Breaks Out As Yellow Vests Clash With French Police appeared first on SGT Report.

Harvard University uncovers DNA switch that controls genes for whole-body regeneration

Source: Posted By Wyatt – Nworeport

Humans may one day have the ability to regrow limbs after scientists at Harvard University uncovered the DNA switch that controls genes for whole-body regeneration.

Some animals can achieve extraordinary feats of repair, such as salamanders which grow back legs, or geckos which can shed their tails to escape predators and then form new ones in just two months.

Planarian worms, jellyfish, and sea anemones go even further, actually regenerating their entire bodies after being cut in half.

Now scientists have discovered that that in worms, a section of non-coding or ‘junk’ DNA controls the activation of a ‘master control gene’ called early growth response (EGR) which acts like a power switch, turning regeneration on or off.

“We were able to decrease the activity of this gene and we found that if you don’t have EGR, nothing happens,” said Dr Mansi Srivastava, Assistant Professor of Organismic and Evolutionary Biology at Harvard University.

“The animals just can’t regenerate. All those downstream genes won’t turn on, so the other switches don’t work, and the whole house goes dark, basically.”

The studies were done in three-banded panther worms. Scientists found that during regeneration the tightly-packed DNA in their cells, starts to unfold, allowing new areas to activate.

But crucially humans also carry EGR, and produce it when cells are stressed and in need of repair, yet it does not seem to trigger large scale regeneration.

Scientists now think that it master gene is wired differently in humans to animals and are now trying to find a way to tweak its circuitry to reap its regenerative benefits.

Post doctoral student Andrew Gehrke of Harvard believes the answer lies in the area of non-coding DNA controlling the gene. Non-coding or junk DNA was once believed to do nothing, but in recent years scientists have realised is having a major impact.

“Only about two percent of the genome makes things like proteins,” added Mr Gehrke said. “We wanted to know: What is the other 98 percent of the genome doing during whole-body regeneration?

“I think we’ve only just scratched the surface. We’ve looked at some of these switches, but there’s a whole other aspect of how the genome is interacting on a larger scale, and all of that is important for turning genes on and off.”

Marine animals, such as the moon jellyfish, are masters of regeneration and some have been found to clone themselves after death.

In 2016, a Japanese scientist reported that three months after the death of his pet jellyfish, a sea anemone-like polyp rose out of the degraded body, and then astonishingly aged backwards, reverting to a younger state.

In the 1990s, scientists in Italy discovered that the Turritopsis dohrnii jellyfish switches back and forth from being a baby to an adult, resulting in its nickname, the immortal jellyfish.

Dr Srivastava added: “The question is: If humans can turn on EGR, and not only turn it on, but do it when our cells are injured, why can’t we regenerate?” added Dr Srivastava.

“It’s a very natural question to look at the natural world and think, if a gecko can do this why can’t I?

“The answer may be that if EGR is the power switch, we think the wiring is different. What EGR is talking to in human cells may be different than what it is talking to in the three-banded panther worm.”

The research was published in the journal Science.

TRUMP EXPOSES PAUL RYAN FOR THE TRAITOR HE IS, RYAN SAVED DEMOCRATS FROM BEING INVESTIGATED

by Terrence Donovan, The Daily Sheeple: It has been discovered that former House Speaker Paul Ryan blocked subpoenas of people and entities the House GOP should have been investigating during the first two years of the Trump administration. Needless to say, the President is not so happy about it! “Paul Ryan wouldn’t give the right […]

The post TRUMP EXPOSES PAUL RYAN FOR THE TRAITOR HE IS, RYAN SAVED DEMOCRATS FROM BEING INVESTIGATED appeared first on SGT Report.

TRUMP EXPOSES PAUL RYAN FOR THE TRAITOR HE IS, RYAN SAVED DEMOCRATS FROM BEING INVESTIGATED

by Terrence Donovan, The Daily Sheeple: It has been discovered that former House Speaker Paul Ryan blocked subpoenas of people and entities the House GOP should have been investigating during the first two years of the Trump administration. Needless to say, the President is not so happy about it! “Paul Ryan wouldn’t give the right […]

The post TRUMP EXPOSES PAUL RYAN FOR THE TRAITOR HE IS, RYAN SAVED DEMOCRATS FROM BEING INVESTIGATED appeared first on SGT Report.

Keynes Is Dead – This Is The ‘Long-Run’

Authored by Charles Gave via Evergreen Gavekal blog,

“In the long run, we are all dead.”
–JOHN MAYNARD KEYNES

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INTRODUCTION

John Maynard Keynes, an English economist and author, has been held in high esteem for several decades thanks to his groundbreaking work in economics in the early 20th century. The theory he popularized in an attempt to better understand the Great Depression, aptly named Keynesian theory, revolutionized demand-side economic policy at the time.

For those who haven’t studied the riveting subject of macroeconomics since college – sarcasm, of course, for everyone out there that doesn’t live and breathe the subject like we do – Keynes advocated for increased government spending and lower taxes to stimulate economy activity, especially during times of economic hardship. Subsequently, long after his death, Keynes’ disciples proposed that optimal economic performance could be achieved through frequent “fine-tuning” by government monetary and fiscal policies (i.e. interest rates, relative to the former, and taxes/spending in the case of the latter).

Consequently, like so many well-intentioned policy initiatives meant to cope with emergency conditions, Keynes’ prescription has morphed into constant application even during mild cyclical downturns. Moreover, the other part of his master plan—to run surpluses during good times–has been almost totally ignored by election-driven politicians (are there any other kind?).

In the case of the global monetary mandarins following the financial crisis of 2007-2008, the slightest market turbulence or economic hiccup has caused them to resort to Keynesian remedies that were once reserved for true crises. As noted in prior EVAs, the net effect is a global addiction to stimulus, especially to ultra-low interest rate policies (ULIPs). But more on that in the next installment of Bubble 3.0…

As this week’s missive from Charles Gave puts forth, the question facing investors is whether Keynesian economics is dead after years being used and abused. The sorry growth record of countries which for years, if not decades, have resorted to levels of stimulus that would have made Keynes blush, indicates that its effectiveness has diminished—if not vanished. Moreover, it increasingly appears that these desperate measures have done more harm than good. In other words, it seems that a chronic overreliance on short-term, feel-good medications has led to a serious long-lasting disease. The question is particularly relevant in the European Union (EU), where interest rates have plummeted over the last 10 years to near zero, or even below. This has made it nearly impossible to stimulate a significant return on capital in the midst of a slowing economy with shrinking savings and rising debt levels. Sound at all familiar to you?

KEYNES IS DEAD; THIS IS THE LONG RUN

Yogi Berra once said that “in theory, there is no difference between theory and practice. In practice, there is”. Take cutting interest rates as an example. According to (Keynesian) theory, reducing interest rates is a way to borrow from future demand in order to prevent a recession today. That’s the theory, and the theory is sound. But then comes the practice, and in Europe today, we are in practice up to our necks.

When interest rates reach zero, or even worse linger in negative territory, it is safe to assume there is no more future demand left that can be brought forward to today. So, after a while, if you want to keep consuming beyond your production, the only solution is to use past savings.

For example, in Germany long rates have fallen from 4.5% in 2007 to 0.3% today. Now imagine a German pension fund (or insurance company) portfolio, fully invested (for the sake of argument) in German bunds. Further, imagine that 10% of the portfolio matures every year. Finally, imagine that this pension fund needs to pay out 3% of its value every year in pension benefits.

Between 2007 and 2011, the yield on bunds hovered around 3%, so our pension fund didn’t face a problem. The bund yield was roughly equal to the distribution rate, ensuring that the pension fund could pay its pensioners from its coupons. However, since Mario Draghi’s 2012 “whatever it takes”’ speech, yields on bunds have collapsed and now hover around 0.3%. For our hypothetical German pension fund, its income from bond coupons (0.3%) is now no longer sufficient to cover the annual pay-out to its pensioners (3%).

This means it has to sell bonds. Logically, the first bonds to get the chop will be the higher-coupon bonds bought a long time ago, because those are the bonds on which the fund has made the greatest capital gains. But selling these means the fund will receive lower average coupons in the future. And of course, the proceeds of maturing bonds and any new inflows will be invested in newly-issued bonds with a much lower yield.

Eventually, the pension fund will run out of older bonds to sell, and the only solution will be to either a) start paying pensions out of its capital, or b) to reduce its pension payouts massively.

At the risk of flogging a dead horse: when interest rates reach zero, after a while capital gains disappear, and the only way to maintain consumption is to start consuming the system’s existing stock of savings. At this point, pensioners stop living off the return on their capital, and start living on the return of their capital.

Take France as an example: one of the triggers behind the Gilet Jaune protests was the French government’s decision to stop the indexation of pensions to the French inflation rate. Could this highly unpopular decision have been made necessary by the fact that pension funds had reached the point at which the distribution of capital, rather than the distribution of returns, had started?

The low interest rate environment means that the stock of French savings is currently insufficient to provide adequate returns to retirees. So, to maintain French pensioners’ purchasing power, the only other option for the French government would have been to raise taxes on working people. But at this point in France, higher taxes are both politically and economically impossible (France is not only world champion in soccer, but also in direct and indirect taxation).

To put it simply, once the “euthanasia of the rentier” has been achieved, Keynesian policies stop working. As a result, the question confronting investors is whether Keynes is dead, and whether they are now stuck in the long run; a long run where bringing forward tomorrow’s consumption to today is no longer an option. If so, then it seems obvious that the final victims of the euro experiment will be the pensioners of Northern Europe.

Perhaps we are getting close to this point, given the current buzz in policy circles around a new way to monetize this shortfall in savings. Of course, a cynic might observe that there is nothing new about having central banks print money to make up savings shortfalls. However, in this case our cynic would be wrong. There is something new this time: a new name! Specifically, printing money for governments to spend, even when savings don’t allow for such spending, is now called Modern Monetary Theory, or MMT.

Of course, the name is something of an oxymoron; there is really nothing modern about this monetary theory. Confusing money creation with wealth creation was at the core of the debate between John Law and Richard Cantillon 300 years ago. For Law (a Scot who fled British justice, took refuge in France, and within a few years managed to drive what was then the leading economic power of the day into near bankruptcy), increases in the supply of money would lead to the employment of unused land and labor, which in turn would lead to higher productivity. Meanwhile, Cantillon explained in his Essay On Commerce that mistaking money for wealth always leads to disaster. Plus ça change...

Stock Market Update: Which Way From Here?

The following report and analysis has been contributed by Adam Taggart of PeakProsperity.com

Hair-Trigger Markets
Bull market liftoff? Or bear rally rollover?

Stocks are at an inflection point.

After a bruising end to 2018, the major indices caught fire at the turn of the New Year as the world’s central banking cartel leapt into action. Here’s how the US Federal Reserve reacted:

The central banks have more than demonstrated that they are now subservient to the markets. Losses will not be tolerated

Which is why the chart below by Sven Henrich goes far in explaining why they’ve been in full panic mode this year: a major long-term technical breakdown threatened. As prices fell in later 2018, the S&P 500 broke through a trendline that had remained unviolated since the markets began recovering from the Great Financial Crisis in 2009:

As Sven has been doing an excellent job of monitoring, this violated trendline may now have flipped from “support” to “ceiling” for the S&P.

Which may be why we were treated to not just one, but three Federal Reserve chairs during last weekend’s episode of 60 Minutes. Their triple-strength “all is well” show of force was good enough to juice the S&P back up to the long-term trendline this week — but not convincingly through it.

The market looks very much paused at the brink of a breakout here.

The bulls are expecting a sharp rebound in GDP from Q1, which they claim was artificially low due the government shutdown. They point to 2018’s solid 3% economic growth, claiming the US is humming along fine and about to get a shot of adrenaline once America and China announce an end to their trade war. In their eyes, the S&P is poised to rocket higher once it punches vigorously above 2820.

The bears see a topping out of a classic bear market rally, one that has been propelled by no convincing fundamentals — only central bank jawboning/easing and continued massive buyback programs (plus this week’s rare Quad Witching options expiration). They see an extremely overbought market, with stocks ready to break down to new lows for the year.

Which Way From Here?

If we look over at the bond markets, we see no confirmation at all of the recent exuberance in equities, especially the melt-up seen this week:

When the bond and stock markets disagree, it’s usually the (much larger) bond market that has it right.

Moreover, many analysts, including Goldman Sachs’ volatility trader Moran Freeman, are predicting a near-term resurgence in the VIX, which would correlate with lower stock prices.

Returning to Sven Henrich’s charts, here he shows how we’ve been seeing a successive pairing of descending wedges for volatility (predictive of upside breakouts) and ascending wedges for the S&P (predictive of downward breakdowns). The tighter the wedges, the more compression they have to force prices to move quickly when they break:

(Source)

This week, the VIX hit its lowest level ($12.50) of 2019. This suggests a reversal is much more likely going forward — possibly as high as $50 — than continued suppression.

And beyond the technical arguments, the fundamental underlying the markets are on their way from bad to worse.

DoubleLine’s Jeff Gundlach basically vomited on the bull case in his latest macro market outlook, optimistically-titled Highway To Hell (well worth the viewing). In it, he noted how global economic indicators are falling off a cliff at this point:

And in terms of stocks specifically, he emphasizes that despite the early ramp-up this year, the S&P “was and is in a bear market”, and that he predicts stocks will take out the December low during the course of 2019 and markets will roll over earlier than they did last year.

GMO’s Jeremy Grantham sounds a similar warning, albeit a longer-looking one. Grantham, who has been expecting a meltdown in stocks since last year, not only sees the US stocks as overpriced — he predicts they will deliver sub-par returns for the next two decades that will “break of lot of hearts” among today’s investors.

Tech Looking Especially Vulnerable

I wrote several reports last year warning of dangerous overvaluation of the FAANG stocks, which had yet to show any weakness at that time. I went as far as to issue a rare notice that I was building a short position against these stocks, one rewarded with a 50% return when successfully exited three months later.

If anything, the big Tech stocks look even more vulnerable now than they did back then.

The NASDAQ (of which the FAANG stocks comprise the majority of the index’s market cap) has rocketed up over 20% since its December lows, sitting now just 5% below it’s all-time high.

This surge in value is starkly contradicted by the negative developments arising for these companies in 2019. Here are just a few recent ones:

  • Senator and presidential candidate Elizabeth Warren is proposing much tougher regulation, specifically calling for the breakup of Amazon, Google and Facebook. She’s also making the case that Apple should be prevented from selling apps on the App Store it operates. Politicians and regulators in the EU are making similar arguments.
  • Two of Facebook‘s key executives (it’s Chief Product Officer and the head of WhatsApp) just resigned,right as the company faces a criminal probe into past security and privacy scandals.
  • Apple’s iPhone sales dropped worldwide last year, falling 12% in the critical holiday FYQ4 quarter. Since then, smartphone demand in China has been falling off a cliff — at its lowest in years.
  • Netflix is still burning cash at a horrifying pace while large competitors are readying to provide consumers with compelling alternatives. Disney recently announced its streaming service will include its entire movie catalog (soon to include Fox’s, as well), for a cheaper price than Netflix. Apple is expected to launch its service in May, and be free.
  • Google and Facebook are under threat of multi-billion dollar fines in the UK if they fail to rid their platforms of “toxic content”. Google is also fending off similar fines in China, India and France.

I could easily go on. But do the above headwinds (along with a Q1 2019 US economy growing at a pitiful 0.4%) justify Tech stock prices kissing their all-time highs?

No. Not even close.

Which is why I’m moving a percentage of my “dry powder” cash savings into a new short position at this time, one larger than I placed last year. It’s not a move I take lightly (and as usual, this is NOT personal financial advice). I’m only doing it because, in my estimation, the preponderance of evidence for a near-term reversal is overwhelming my strong default risk-averse preference to sit on the sidelines.

In Part 2: Assume The Crash Position we detail out the wide range of options that investors skeptical of current market valuations can consider — for both protecting against a downturn and, for the more courageous, profiting from one. We also reveal the latest outlook from our endorsed financial advisor as well as the latest trades I’m making in my own portfolio.

We should know soon which way this market breaks. If it indeed breaks downward, make sure you’ve prepared in advance for it.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

CALIFORNIA MAYOR ADMITS LOCAL GOVERNMENT HAS “LOST CONTROL” OF 5G ROLLOUT

by Derrick Broze, Waking Times: On March 6, the Danville Town Council voted four to one to block a permit for an upcoming small cell wireless installation by Verizon. During the meeting, Danville Mayor Robert Storer stated that the vote was an effort to stand up to the federal government and telecommunications companies, like Verizon. The […]

The post CALIFORNIA MAYOR ADMITS LOCAL GOVERNMENT HAS “LOST CONTROL” OF 5G ROLLOUT appeared first on SGT Report.

Here’s How Much Your Healthcare Costs Rise As You Age

Submitted by Priceonomics

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Imagine working your entire life with the plan to retire at the age of 65, only to declare bankruptcy due to medical costs and losing all your assets.

This isn’t some unlikely nightmare scenario; the rate of senior citizens declaring bankruptcy has more than doubled since 1999, and the leading cause is high healthcare costs. Despite the existence of Medicare insurance for seniors, it doesn’t cover all costs and healthcare can be extremely expensive, especially as you age.

In this analysis, we decided to look at the most recent data on how healthcare spending increases as you age along with Priceonomics customer RegisteredNursing.org. The goal of this is for people to understand just how much higher healthcare costs are the older you get and how sensitive they are to medical inflation rates.

By the time you reach 65 years old, average healthcare costs are $11.3K per person, per year in the United States. This is nearly triple the annual average cost of when you’re in your 20s and 30s. During your adult lifetime, average spending for women is nearly twice as high as for men. Healthcare spending for minority groups like Black and Hispanic Americans is approximately 30% less than on White Americans.

During one’s lifetime, over $400K will be spent on the average American’s healthcare in today’s dollars. And that is if medical costs rise as the same rate as inflation. If medical costs rise at 3% more than inflation, your healthcare will cost over $2MM, the vast majority of which will take place after the age of 45.

Even if your insurance company or Medicare covers most of that bill, the typical American can still be on the hook for a very large sum of money to cover their healthcare costs as they age.

***

The Department of Health and Human Services commissions a detailed survey of medical costs dating back to 1999 all the way up to 2016 most recently. The data set, The Medical Expenditure Panel Survey (MEPS), provides detailed healthcare spending data segmented by age and demographics, among other things. The spending figures noted as total average spending per individual, regardless of who is paying it (the insurance company, the individual directly, or some combination between).

When budgeting for your retirement, it’s tempting to think your costs may be much lower in old age. Afterall, your kids may (hopefully) be financially self-sufficient adults and the mortgage on your home may be paid off.

But the big unknown is healthcare expenses. It turns out as you age, your annual healthcare costs go up a lot and despite having insurance you may be on the hook for copays, deductibles, and all sorts of things that aren’t actually covered.

The MEPS data set shows the average spending per person in the United States based on their age group.

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It turns out being born is somewhat expensive and childhood costs peak when you’re under five years old. Healthcare costs are lowest from age 5 to 17 at just at $2,000 per year on average. From then on it’s a steady increase, however, with costs rising to over $11,000 per year when you’re over 65 years old.

The costs of your care may be mostly covered by private insurance or Medicare, but not all costs are always covered and an unexpected bill can have devastating effects on your finances. As one senior citizen relates on their traumatic experience with health insurance:

“My bankruptcy started with back surgery. I had several medical tests that my insurance did not cover. This caused me to fall behind in my medical payments. The next thing I knew, the bills began piling up. I got to the point I owed more than I was making on Social Security.”

Healthcare costs are not evenly distributed. You could be among the tragically unlucky with much higher costs. But not only that, but healthcare spending varies substantially by gender and demographic.

At each stage of life, health care spending for women is substantially higher than for men. The need for more gerontology nurse practitioners and wnhp in the coming years will be vitally important to the success of healthcare programs.

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During time period of age 18 to 44, health spending for females is 84% higher than men for years. Yes, much of this is due to the expense of childbirth, but from age 44 to 64 spending for women is 24% higher than for men and even at age 65+ spending for women is 8% higher.

According to this data, women will need to budget more than men for health care expenses each year. Not only that but women tend to live two more years than men in the United States which requires additional savings. The MEPS data also reveals tremendous inequality in healthcare spending by race and demographic. The following chart shows average spending by demographic group for adults in America:

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There is an average of $3.6K annual healthcare spending on white adult Americans, approximately 70% higher than for Asian, Black, and Hispanic Americans. The root cause and implications of this unequal spending should be studied much further to see if their remedy can improve healthcare outcomes for all.

So if we add up all these annual spending figures how much will your healthcare cost over the course of your lifetime? In today’s dollars, if you’re “average”, you can expect it to cost $414K.

The following chart shows this total spending during various ages in your life. Nearly two-thirds of one’s healthcare spending takes place after your 45th birthday:

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However, there is a lot of reason to believe this estimate of $414K spent on your healthcare is being conservative. First of all, it’s for the “average” person. If you have a health catastrophe, your healthcare spending may be tremendously higher. Second, the above figures assume that healthcare costs in the future increase as the same rate as inflation to arrive at the $414K spending in today’s dollars.

There is a lot of data to suggest that healthcare costs in the United States have been increasing much faster than inflation. One estimate is that over the last two decades, healthcare costs have increased twice as fast as inflation.

Since projecting future healthcare costs is an impossible task to pinpoint with any accuracy, let’s show how much the cost of your healthcare will be under various assumptions about healthcare cost growth rates. The following chart shows how much your lifetime healthcare spending will be if healthcare spending grows at the same rate as inflation versus if it grows slightly faster.

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If healthcare costs increase just one percentage point faster than inflation, the total bill for your healthcare will be $710K, and even that could be a conservative estimate. If healthcare costs rise at three percentage points more than inflation your lifetime healthcare costs will exceed two million dollars!

If this chart isn’t a good reason for why healthcare in America needs to be reformed, perhaps nothing is. Even small increases in healthcare spending rates result in runaway costs for your lifetime healthcare bill. You and your insurance company might be able to plan for a scenario where your lifetime healthcare bill is half a million dollars, but how about if it’s more than seven million dollars?

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As this analysis shows, your healthcare spending is tremendously expensive. Perhaps you might have great health insurance, but if money is spent on your healthcare, someone is paying for it. In large part you pay for it via healthcare premiums, but if that doesn’t cover it then other people’s premiums or taxes will. Either way, high healthcare costs mean high spending for someone. Not only that, but even with the best health insurance, senior citizens are often hit with expensive co-pays or need drugs that their plans won’t cover. These unexpected and large expenses can often wreck one’s finances and result in bankruptcy. As you save up for retirement, it’s important to understand the value of having savings for your future medical expenses, which would be much higher than they are today.

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