en "Japan Has No Illusions That Rates Will Ever Rise": Is This What The Endgame Looks Like <p><em>By Victor Shvets of Macquarie Capital</em></p> <p><span style="text-decoration: underline;"><strong>Japan Debt Mountain: does it matter?</strong></span></p> <p>For almost 25 years, Japan’s debt burden has been the poster child of what would happen to others if capital is misallocated, bubbles burst and then clearance and required reforms are either delayed or not implemented. Indeed, <strong>at more than 5x GDP, Japan is shouldering a greater debt burden than other key jurisdictions. </strong>It is also facing severe demographic challenges, while its labour market remains constrained and the state maintains a sway over the private sector. Since WW II, Japan has always been more statist than most other major economies, with Korea and China subsequently following Japan in developing a similar model. The conventional argument has been that Japan’s debt would ultimately crush its economy and severely crimp public sector spending, while the private sector would be unable to adjust, and hence lose competitiveness. Eventually, the private sector might lose confidence and stop repatriating cash and the country would then suffer from massive capital outflows.</p> <p>Not only were these dire projections wrong for decades, <strong>but as the rest of the world joined Japan in secular stagnation and unorthodox monetary policies, it is no longer perceived as an exception but rather as a pointer to the future. </strong>Japan’s success in navigating disruption, deep financialization and permanent overcapacity is now studied and imitated. While there are local nuances, Japan shows the way forward. <strong>QEs associated with the Fed were invented in Japan more than a decade earlier. </strong>The same applies to fiscal stimuli, collapsing velocity of money and strong disinflation. Whatever are the policies, Japan has already tried them. Japan is far more advanced in fully monetizing its debt by utilizing multiple asset classes, from bonds to equities. <strong>It also accepts that normalization is not feasible, and unlike the Fed, it has no illusions that rates could ever rise or that immigration and deep labour market reforms are either possible or </strong><strong>desirable.</strong> When the US is focusing on returning outdated factories, <strong>Japan is building for the future, when labour inputs would no longer be the key. </strong></p> <p>Although Japan’s cultural and labour market constraints reduce its ability to fully commercialize inventions, it has not prevented the country from maintaining its rating as the most complex economy in the world, while keeping leadership in patents and yielding above-average labour and multi-factor productivity. Japan’s stagnant domestic economy is overshadowed by its competitive externally-facing sectors that are becoming complementary rather than directly competing against China. Even financial repression that Japan practised for decades is becoming a global norm, nowhere more so than in Eurozone. <strong>We expect BoJ to quietly abandon its inflation targets while maintaining flexibility in asset acquisitions to keep cost of finance close to zero. </strong>This would be a recipe for continuing twilight for years to come, with debt burden neither derailing the economy nor financial markets, even as BoJ assets rise beyond 100% of GDP (~45%+ of JGBs).</p> <p>Assuming that Abenomics is dead and that there is neither desire nor capacity to lift inflationary outcomes, then it would be positive for ¥. Higher ¥ would erode Topix’s ROEs (corporate governance is unlikely to offset lower returns) but it should also highlight the strength of its globally competitive and thematic plays. In our global portfolios we currently have Yaskawa, Fanuc, Mitsubishi Electric, Nintendo, Nidec, Murata, Keyence, Tokyo Electron and Yamaha. Any further ¥ appreciation should also reduce pressure on Korea and China while extending EM reflationary cycle and its investment ‘goldilocks’.</p> <p><span style="text-decoration: underline;"><strong>Why is Debt Mountain not crushing Japan?</strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>“We know that advanced economies with stable governments that borrow in their own currency are capable of running up very high levels of debt without crisis.”</em></p> </blockquote> <p>&nbsp; &nbsp; &nbsp;&nbsp; — Paul Krugman</p> <p>This quote by Paul Krugman neatly encapsulates the main reasons as to why Japan has not been crushed by ever-rising public sector debt. Japan is state with a high degree of credibility and it borrows almost exclusively in its own currency, with debt owned predominantly by its own citizens. Financial crisis is all about perception rather than reality.</p> <p>However, <strong>one issue that Krugman has not emphasized but which is increasingly important is the ability of central banks (CBs) to support and distort the governments’ cost of funds. </strong>Given that the CBs are not economic agents, their bids and bond acquisitions are not designed to discover appropriate pricing levels, but rather to support governments’ objectives (usually to simulate economies by lowering cost of capital). In the past, such aggressive interventionist policies were unique and infrequent events (accompanying wars or other major dislocations), but over the last two decades, they have become an increasingly acceptable tool in the governments’ armoury. Japan has been leading from the front for more than two decades, followed by the rest of the world after GFC.</p> <p>Thus, there are essentially four reasons as to why most bets against Japan failed on a consistent basis:</p> <ol> <li>Japan is a homogeneous society, with relatively egalitarian income and wealth distribution, and hence, pain has been shared fairly evenly, thus preserving economic and societal coherence.</li> <li>Japan maintained credibility by selectively boosting and adjusting national commitments to elderly and medical care while irregularly pushing up consumption tax. Although some of these measures were counter-productive on a longer-term basis, they have placated global markets.</li> <li>Japan borrows in its own currency and the bulk of JGB holders are Japanese residents (over 88%). This massively reduces the degree of external vulnerability.</li> <li>BoJ has been exceptionally aggressive in driving money supply up and cost of capital down. This aggressiveness coincided with the growing global disinflationary trend, which eroded bond yields and significantly reduced the proportion of the government spending that is spent financing interest commitments.</li> </ol> <p>As can be seen below, despite massive rise in the governments’ gross and net debt burden, the proportion of state spending that is dedicated to servicing interest has declined significantly over the last decade and is now below 5% of total expenditure.</p> <p><a href=""><img src="" width="600" height="215" /></a></p> <p><a href=""><img src="" width="600" height="226" /></a></p> <p><strong>The extent to which BoJ has become the key to Japan’s perceived longer-term sustainability can be seen from the explosion of its balance sheet and how its asset base increased at a pace much faster than state requirements. </strong>BoJ has by now accumulated almost 45% of the entire JGB’s market (vs 10% only five years ago), and its balance sheet is rapidly closing on 100% of the country’s GDP (vs 37% G4 average). Also, BoJ is not just buying state paper but it has become actively involved in the corporate and ETF (equities) markets. BoJ already controls 75% of all of Japanese ETFs (although only 4% of overall equities) and as much as 15% of the Japanese corporate bonds.</p> <p><a href=""><img src="" width="600" height="431" /></a></p> <p><img src="" width="600" height="218" /></p> <p>The public sector over the last two decades did not really have an option but to become far more aggressive in transferring excess debt from private sector and onto government books. While this private sector de-leveraging was largely complete by 2005, the combination of GFC as well as subsequent earthquake (2011), continued to suppress private sector desire for more aggressive spending. Private sector sectoral savings even today remain at ~6% of GDP, whilst velocity of money is at best only stabilizing.</p> <p><strong>If public sector did not step in, the country would have undergone a massive and uncontrolled deflationary bust. </strong>Instead, Japan had simply kept its nominal demand intact, despite the private sector sustaining losses (real estate and equities) of equivalent to 100% of Japan’s GDP in ‘90/91 (or ~US$5 trillion). For perspective, consider that the GFC caused initial contraction of only around 1/3 of the US GDP. In other words, bursting of an asset bubble in the ‘90s Japan was at least three times more powerful than the GFC’s impact.</p> <p><a href=""><img src="" width="600" height="412" /></a></p> <p>The net outcome of aggressive public sector policies offsetting sluggish and deleveraging private sectors was a ‘tranquil autumn’ of a civilized relative decline.</p> <p><strong>The Japanese economy is today a fraction of its importance several decades ago. </strong>Whereas in the late ‘80s, Japan was responsible for ~10% of global merchandise exports, its share is now below 3.8%. In the same period, Germany’s share eased from 10%-11% in ‘80s to around 8%, while the US’s share is down from 12% to ~9% and France’s share is down from 5% in the ‘80s to ~3%. The same occurred to Japan’s share of global GDP (whether on a nominal or PPP basis). The growth rates have compressed massively<strong>, but the country managed to maintain its overall aggregate demand and per capita income intact</strong>.</p> <p><a href=""><img src="" width="600" height="408" /></a></p> <p>Japan emerged from this traumatic experience, as land of no inflation (indeed mild deflation for most of the time) and steady demand <strong>funded by the fiscal stimulus and resilient private sector productivity.</strong></p> <p><strong>It has become a land where the central bank has been effectively cancelling national debt by acquiring more securities than the government needed to fund its deficits. </strong>While this poses many questions (such as ability of life and insurance companies to price their products, in the absence of a viable JGB market), it also implies that <strong>Japan is shifting closer to embracing far more extreme (but necessary) policies, such as minimum income guarantees and abandoning any further consumption taxes.</strong></p> <p>In the world where <strong>labour inputs are becoming increasingly less relevant and where robotics, automation, AI and social capital are likely to play an increasingly important role, even the traditional argument of a negative impact of demographics no longer dooms Japan to oblivion and collapse. </strong>It also implies that the conventional arguments in favour of large-scale increase in immigration is not only irrelevant but is likely to be faulty on both theoretical and practical grounds. It is likely that the current age of ‘declining return on humans and conventional capital’ will become far more pronounced over the next decade. It so happens that Japan is in the forefront of this evolution.</p> <p>It is highly unlikely that Japan would ever accept large-scale immigration (whether it applies to high or low skill labour). It is equally unlikely that the Japanese themselves would ever prefer to work and live in foreign jurisdictions. At the same time, the pace of human replacement (whether it is waiters in the restaurants or nurses in hospitals) is accelerating in Japan at a far more robust pace than elsewhere. The unique nature of Japan is also translating into sustainably high levels of private sector productivity while containing income and wealth inequalities. Although Japan is today more unequal than it was in&nbsp; late 1980s-early 1990s, it still remains one of the most egalitarian societies in the world.</p> <p><strong>While Japan is yet reluctant to accept the most radical of policies, it is far more advanced in fully monetizing its debt burden and unlike most other countries it no longer requires an ever accelerating pace of financialization (or addition of new debt-driven generations). </strong>The objective in Japan is to maintain per capita income rather than generating growth to accommodate a rising population and keeping society intact. The extent to which Japan would be able to achieve this objective would depend critically on Japanese corporates and its overall economy maintaining productivity gains.</p> <p>* * * </p> <p><em>In part 2 tomorrow: "<strong>Global lessons from Japan - the future is Red"</strong></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="513" height="347" alt="" src="" /> </div> </div> </div> Abenomics Abenomics artificial intelligence Bond Business Central Banks China Demographics Economic history of Japan Economics Economy Economy of the United States Eurozone Financial crisis of 2007–2008 Fiscal policy Government debt Insurance Companies Japan Krugman Macroeconomics Money Supply National Debt Paul Krugman Paul Krugman Real estate Reality Recession Stock market crashes US Federal Reserve Sat, 23 Sep 2017 23:13:43 +0000 Tyler Durden 604062 at Drone Footage Shows Puerto Rico Devastation From The Air <p>Hurricane Maria caused widespread damage to Puerto Rico. Drone footage captured the scene in San Juan and Canóvanas on Sept. 21.</p> <p><iframe frameborder="0" height="315" src="" width="560"></iframe></p> <p>As <a href="http://&lt;p&gt;&lt;em&gt;Hurricane Maria caused widespread damage to Puerto Rico. Drone footage captured the scene in San Juan and Canóvanas on Sept. 21.&lt;/em&gt;&lt;/p&gt;">we reported earlier, </a>flash flooding caused by the storm has prompted the NWS to warn that a dam in the northwestern part of the island is in danger of failing, prompting the government to scramble to evacuate the 70,000 residents of the river valley beneath the dam that is in danger of being completely submerged.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="414" height="229" alt="" src="" /> </div> </div> </div> Atlantic hurricane season Canóvanas, Puerto Rico Disaster Environment flash Hurricane Maria Puerto Rico San Juan–Caguas–Guaynabo metropolitan area Weather Sat, 23 Sep 2017 22:45:00 +0000 Tyler Durden 604055 at Spain In Crisis: Catalan Police Reject Madrid Takeover, Vow To "Resist" <p>Spain found itself on the verge of a full-blown sovereign crisis on Saturday, after the "rebel region" of Catalonia rejected giving more control to the central government in defiance of authorities in Madrid who are trying to suppress an independence referendum on Oct. 1.</p> <p>As tensions rise ahead of the planned Catalan referendum on October 1, and as Madrid's crackdown on separatist passions took a turn for the bizarre overnight <a href="">when as we reported </a>Spain’s plan to send boatloads of military police to Catalonia to halt the referendum backfired with dockers in two ports staging a boycott and refused access, on <strong><a href="">Saturday Spain's Public Prosecutor's Office told Catalan Police chief Josep Lluis Trapero that his officers must now obey orders </a>from a senior state-appointed police coordinator, </strong>Spanish news agency EFE reported on Saturday.</p> <p>The Catalan Police, however, disagreed and as <a href="">Bloomberg reports</a>, the SAP union - the largest trade group for the 17,000-member Catalan Police, known as Mossos d'Esquadra - <strong>said it would <a href="">resist hours</a> after prosecutors Saturday ordered that it accept central-government coordination</strong>. The rejection echoed comments by Catalan separatist authorities.</p> <p>“We don’t accept this interference of the state, jumping over all existing coordination mechanisms,” the region’s Interior Department chief Joaquim Forn said in brief televised comments. <strong>“The Mossos won’t renounce exercising their functions in loyalty to the Catalan people.”</strong></p> <p>The Mossos are one of the symbols of Catalonia’s autonomy and for many Catalans the prosecutor’s decision may be reminiscent of the 1936-39 Spanish Civil War and subsequent dictatorship of Francisco Franco, when the Mossos were abolished.</p> <p>In a joint press conference today with the Catalan home affairs minister Joaquim Forn and the Mossos chief Josep Lluís Trapero, <strong>Forn said that the move by Spain was "unacceptable".</strong> </p> <p><strong>“We denounce the Spanish government’s will of seizing the Mossos, as they did with Catalonia's finances"</strong> Forn said adding that that <strong>"the Catalan government does not accept this interference, it bypasses all the institutions that the current legal framework already has in place to guarantee the security of Catalonia." </strong>Additionally, Trapero expressed his intention to not accept the measure, which he described as "interference by the state", and also warned that "it skips over all the bodies of the legal framework to coordinate the security of Catalonia".<strong><br /></strong></p> <p><a href=""><img src="" width="500" height="259" /></a><br /><em>Catalan minister Joaquim Forn (L) with Mossos chief Josep Lluís Trapero</em></p> <p>Earlier on Saturday, El Pais reported that Civil Guard Colonel Diego Perez de los Cobos, chief of staff of the Interior Ministry’s security department, was named by a prosecutor to coordinate the efforts of the Civil Guard, the National Police and the local Mossos.&nbsp; Spanish media reported unnamed Home Office sources as saying the measure did not mean withdrawing any powers from the Mossos formally, but rather requiring them to submit to a joint coordination operation to stop the Catalan referendum taking place on October 1.</p> <p>However, shortly after the reshuffling, <strong>Catalan police chief Josep Lluis Trapero rejected giving up control to the central government during a meeting with the heads of the other police forces on Saturday</strong>, adding that all possible legal challenges would be studied. According to La Vanguardia Trapero "protested at that meeting about the decision to impose central government control" on the regional police force. </p> <p>Also on Saturday morning, as the police meeting in Barcelona took place, the regional interior minister, Forn, published a defiant message on Twitter: "We will encounter many difficulties. The state wants to take control of our self-government, but they will not stop us! #HelloRepublic".</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="und">Ens trobarem amb moltes adversitats. L'Estat vol intervenir la nostra autonomia, però no ens aturaran! <a href="">#HolaRepúbica</a> <a href=""></a></p> <p>— Joaquim Forn (@quimforn) <a href="">September 23, 2017</a></p></blockquote> <script src="//"></script><p>Ironically, as Bloomberg writes, while Mossos chief Trapero reports to the regional government, his force’s funding is mostly provided by Madrid and it’s supposed to take orders from judges and prosecutors from across the country. Article 155 of the Spanish Constitution lets the central government take control of a regional administration if it poses a threat to the national interest. Rajoy has already made moves in that direction. </p> <p>Earlier this week, the budget ministry took over management of Catalan’s finances and will issue paychecks to more than 200,000 public workers in the region, including the police.</p> <p>That said, any <strong>more direct challenge to the Mossos would be fraught with risk because Trapero, its leader, has become something of a local hero since leading the response to the terrorist attacks in August</strong>. Separatists are selling T-shirts with his face printed on them.</p> <p>According to <a href="">Reuters</a>, the Catalan government also believes that the Mossos takeover bypasses the Catalan statute&nbsp; - article 164 - and constitutional law and the Spanish prosecutor that ruled in favour of Madrid taking control had overstepped his legal boundaries, saying that it had no power to rule on who had the authority to issue orders to Mossos.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The prosecutor had ordered that the Catalan police, the Spanish National Police and Spain's Guardia Civil be managed from the Ministry of Home Affairs in Madrid. The decision, according to the prosecution, aims at "reinforcing the operation to prevent crime and to keep public order" a week before the October 1 independence referendum. </p> <p>&nbsp;</p> <p>The decision was announced during a meeting between the prosecutor and the chiefs of the three police forces.</p> </blockquote> <p>The disobedience will fuel further speculation the Mossos will not work with the national Civil Guard in Spain’s largest regional economy. The standoff came a day after Prime Minister Mariano Rajoy’s government acknowledged it’s sending more reinforcements to help control street demonstrations and carry out a separate court order to halt the vote.</p> <p>Additionally, <strong>the latest move by Madrid will also increase the tension between the two sides which increasingly looks like it could descend into a direct confrontation as neither side appears to be willing to back down. </strong></p> <p><em><img src="" width="500" height="344" /><br />Catalan President Carles Puigdemont speaking a pro-independence rally</em></p> <p>Carles Puigdemont, Catalonia’s president, called the independence vote in an attempt to push the secession movement forward after decades of political and legal fights over the region’s traditions and language. Since Rajoy took office in 2011, he’s had persistent clashes with separatists seeking to foment a backlash against Madrid. Catalonia is home to about 7.5 million people, or 16 percent of the population, but accounts for a fifth of the economy, on a par with Portugal and Finland.</p> <p>Several pro-independence groups have called for widespread protests on Sunday in central Barcelona. “Let’s respond to the state with an unstoppable wave of democracy,” a Whatsapp message which was used to organize the demonstration read.</p> <p>The Catalonian government opened a new website on Saturday with details of how and where to vote on Oct. 1, challenging several court rulings that had blocked previous sites and declared the referendum unconstitutional.</p> <p><strong>“You can’t stem the tide,” </strong>Catalonia’s president Carles Puigdemont said on Twitter in giving the link to the new website.</p> <p>But Spanish Prime Minister Mariano Rajoy insisted again that the vote should not go ahead. “It will not happen because this would mean liquidating the law,” he said at the PP event in Palma de Mallorca. Acting on court orders, the Spanish state police has already raided the regional government offices, arrested temporarily several senior Catalan officials accused of organizing the referendum and seized ballot papers, ballot boxes, voting lists and electoral material and literature. The finance ministry in Madrid has also taken control of regional finances to make sure public money is not being spent to pay for the logistics the vote or to campaign.</p> <p>How this escalating clash between Madrid and Catalonia is resolved over the coming week will define the fate of Spain for years to come. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="302" height="167" alt="" src="" /> </div> </div> </div> 17,000-member Catalan Police Autonomous communities of Spain Carles Puigdemont Catalan government Catalan independence referendum Catalan police Catalonia Catalonian government Department of the Interior Europe Finland Generalitat de Catalunya Geography of Europe Government of Catalonia Home Office Independence referendums Interior Ministry Josep Lluís Trapero Álvarez Mossos d'Esquadra national police Politics Portugal Prime Minister Mariano Rajoy’s government regional government regional police regional police force Reuters Spain Spain's Public Prosecutor's Office Spanish government Spanish National Police Spanish state police Statute of Autonomy of Catalonia Twitter Twitter Sat, 23 Sep 2017 22:13:46 +0000 Tyler Durden 604058 at U.S. B-1B Bombers Fly Just Off Coast Of North Korea: 4 Reasons Why This Time It's Different <p>Just before North Korea’s foreign minister was <a href="">due to address the United Nations</a>, the Pentagon announced that U.S. Air Force B-1B Lancer bombers escorted by fighter jets flew in international airspace over waters east of North Korea on Saturday, in a show of force which "demonstrated the range of military options available to President Donald Trump." <strong>The flight was the farthest north of the demilitarized zone separating North and South Korea that any U.S. fighter jet or bomber has flown in the 21st century</strong>, the <a href="">Pentagon added</a>. </p> <p><img src="" width="500" height="256" /><br /><em>B-1B Lancer prepares to take off from Andersen AFB, Guam, Sept. 23, 2017</em></p> <p>According to <a href="">Reuters</a>, the B-1B Lancer bombers came from Guam and the U.S. Air Force F-15C Eagle fighter escorts came from Okinawa, Japan. The Pentagon saod the operation showed the seriousness with which it took North Korea’s “reckless behavior.”</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><a href="">#USAF</a> bombers, fighters fly in international airspace east of <a href="">#NorthKorea</a>, farthest north of the DMZ in 21st century <a href=""></a> <a href=""></a></p> <p>— U.S. Pacific Command (@PacificCommand) <a href="">September 23, 2017</a></p></blockquote> <script src="//"></script><p>“This mission is a demonstration of U.S. resolve and a clear message that the President has many military options to defeat any threat,” said Pentagon spokeswoman Dana White, calling North Korea’s weapons program “a grave threat" adding that “<strong>we are prepared to use the full range of military capabilities to defend the U.S. homeland and our allies.” </strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><a href="">#PACOM</a> stands prepared to use our full range of military capabilities to defend the U.S. homeland and our allies if called upon to do so.</p> <p>— U.S. Pacific Command (@PacificCommand) <a href="">September 23, 2017</a></p></blockquote> <script src="//"></script><p>The DMZ is a strip of land running across the Korean Peninsula near the 38th Parallel, separating North Korea from South Korea. It was created in 1953, following the armistice which ended the Korean War.</p> <p><a href=""><img src="" width="500" height="278" /></a></p> <p>The patrols came after officials and experts said a small earthquake near North Korea’s nuclear test site on Saturday was probably not man-made, easing fears Pyongyang had exploded another nuclear bomb just weeks after its last one. Reversing its original assessment, China’s Earthquake Administration said the quake was not a nuclear explosion and had the characteristics of a natural tremor.</p> <p>While the US has flown similar sorties before, according to <a href="">The Aviationist</a>, the show of force is a bit more interesting than usual, for four reasons:</p> <ol> <li><strong>it is the farthest north of the Demilitarized Zone (DMZ)</strong> any U.S. fighter or bomber aircraft have flown off North Korea’s coast in the 21st century;</li> <li>unlike all the previous ones, <strong>the latest sortie was flown at night</strong>, hence it was not a <a href="">show of force staged to take some cool photographs</a>;</li> <li><strong>no allied aircraft is known to have taken part in the mission </strong>at the time of writing, whereas most of the previous B-1 missions near the Korean Peninsula involved also ROKAF (Republic Of Korea Air Force) and/or JASDF (Japan’s Air Self Defense Force) jets;</li> <li><strong>it was a U.S. Air Force job: no U.S. Marine Corps F-35B stealth jet took part in the show of force this time,</strong> even though the STOVL (Short Take Off Vertical Landing) variant of the Joint Strike Fighter has taken part in all the most recent formations sent over Korea to flex muscles against Pyongyang. The photo here below shows the “package” assembled for Sept. 14’s show of force.</li> </ol> <p><em><a href=""><img src="" width="500" height="209" /></a><br />Munitions from a U.S. Air Force, U.S. Marine Corps and Republic of Korea Air Force (ROKAF) </em><br /><em>bilateral mission explode at the Pilsung Range, South Korea, Sept 17, 2017.</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="655" height="336" alt="" src="" /> </div> </div> </div> Aftermath of the Korean War Aftermath of World War II China’s Earthquake Administration Donald Trump Donald Trump Guam Japan Japan’s Air Self Defense Force Korea Korea Air Force Korean Demilitarized Zone Korean War Military Military history by country Military history of Korea North Korea North Korea North Korea Pentagon Politics Proxy wars Republic of Korea Air Force Reuters South Korea state nuclear force Twitter Twitter U.S. Pacific Command United Nations United Nations General Assembly United States Air Force United States Marine Corps US Air Force Sat, 23 Sep 2017 22:11:21 +0000 Tyler Durden 604052 at Former Democratic Congresswoman Urges All NFL Players To Kneel During National Anthem <p>Having left public office in January, former U.S. Congresswoman from Maryland, Donna Edwards, has decided to get involved in the current meme of the moment battle over respect and freedom of 'speech' between President Trump and The NFL...</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">On Sunday, I hope every <a href="">@NFL</a> player takes a knee in solidarity w <a href="">@Kaepernick7</a> against the white supremacist who squats in our White House.</p> <p>— Donna Edwards (@DonnaFEdwards) <a href="">September 23, 2017</a></p></blockquote> <script src="//"></script><p>We have to admit <strong>we are a little confused</strong>. </p> <p><em><strong>We thought that if you disrespected anything American, you were automatically a 'Russian puppet'</strong></em>, but now it's 'cool' to bash America's flag, its anthem, and The White House?</p> <p><a href=""><img src="" width="600" height="346" /></a></p> <p>For some reason, Edwards decided to tweet this shortly after...<br /> <blockquote class="twitter-tweet" data-lang="en"> <p lang="en" dir="ltr">For the record, I do stand for the flag. I stand because I respect our Constitution and value the freedom of speech of others not to do so. <a href=""></a></p> <p>&mdash; Donna Edwards (@DonnaFEdwards) <a href="">September 23, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script></p><p>So do as I say, not as I do?</p> <p>This seemed to sum up what we suspect will occur should this former congresswoman get her wishes...</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">I support NFL players’ right to take a knee, and NFL fans’ right to take a walk.</p> <p>— David Burge (@iowahawkblog) <a href="">September 23, 2017</a></p></blockquote> <script src="//"></script> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="965" height="556" alt="" src="" /> </div> </div> </div> American football in the United States American people of German descent Business Climate change skepticism and denial Colin Kaepernick Donald Trump National Football League Politics Sports in the United States Sports in the United States by state The Apprentice United States White House White House WWE Hall of Fame Sat, 23 Sep 2017 21:54:20 +0000 Tyler Durden 604059 at Cops Delete Facebook Post Of Massive "Weed" Bust After The Internet Corrects Them <p><a href=""><em>Authored by Carey Wedler via,</em></a></p> <p>Last week, officers from Missouri&rsquo;s Jasper Police Department celebrated a marijuana bust they deemed worth roughly $100,000.</p> <p><strong>In a now-deleted Facebook post, they disclosed their satisfaction with their operation, which took ten cops and sheriff&rsquo;s deputies and a National Guard helicopter to conduct.</strong></p> <p><img height="293" src="" width="600" /></p> <p>As the&nbsp;<em>Riverfront Times</em>&nbsp;<a href="" rel="noopener" target="_blank">noted</a>&nbsp;(grabbing screenshots before the post was taken down):</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;&rsquo;<em>What a great team effort today,&rsquo; the Jasper department&rsquo;s now-deleted post read. &lsquo;It was hot and humid and not easy getting these plants. We ALL got in the thick of things and got it done.&rsquo;</em>&ldquo;</p> </blockquote> <p>The&nbsp;<em>Times</em>&nbsp;summarized the post&rsquo;s sentiment:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;In a curious bit of show-your-work math, the department calculated the nearly 290 plants seized would have produced &mdash; &ldquo;on the low side&rdquo; &mdash; 63 pounds of marijuana with a &ldquo;street value&rdquo; of roughly $100,000</em>.&rdquo;</p> </blockquote> <p>But commenters were quick to point out an apparent flaw in the officers&rsquo; bust: <span style="text-decoration: underline;"><strong>it wasn&rsquo;t cannabis they had seized, but hemp,</strong></span> they said.</p> <p>You can&rsquo;t get high from smoking hemp, and the material can be used to&nbsp;<a href="">create</a>&nbsp;anything from clothing, soap, paper to sails, rope,&nbsp;<a href="">fuel</a>, and&nbsp;<a href="">concrete</a>, called &ldquo;hempcrete.&rdquo; It is&nbsp;<a href="">both</a>&nbsp;durable and sustainable.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;<em>That&rsquo;s hemp</em>,&rdquo; </strong>one comment bluntly said, according to the&nbsp;<em>Times</em>, though the rest of the comments are not available to view because the original post has been removed.</p> <p>&nbsp;</p> <p>One of Missouri&rsquo;s two entities allowed to grow hemp for certain medicinal purposes, Mitch Meyers of BeLeaf, said,<strong> &ldquo;<em>Sure looks like hemp to me</em>.&rdquo;</strong></p> <p>&nbsp;</p> <p><strong>&ldquo;<em>These look to me like wild hemp plants, because they are tall and without buds</em>,&rdquo; </strong>Show-Me Cannabis Executive Director John Payne told the&nbsp;<em>Times</em>, which sent images of the confiscated plants to several experts.<strong>&nbsp;</strong></p> <p>&nbsp;</p> <p><strong>&ldquo;<em>That probably means that no one was actively cultivating them. If that&rsquo;s the case, the street value of those plants is next to nothing</em>.&rdquo;</strong></p> </blockquote> <p>Many comments echoed similar sentiments, &ldquo;<em>as the post racked up hundreds of comments, among them mocking congratulations to cops for confiscating the raw material of natural fiber rope,</em>&rdquo; the&nbsp;<em>Times</em>&nbsp;reported.<em>&ldquo;Jasper Police, who cover an area about twenty miles northeast of Joplin, pulled the post on Wednesday morning</em>.&rdquo;</p> <p><strong>However, there is still some doubt as to whether the plants were hemp or cannabis.</strong> Dr. Jason Strotheide, founder of licensed hemp grower Noah&rsquo;s Arc Foundation, said it is &ldquo;<em>nearly impossible to tell the difference between hemp and marijuana until late in flower.</em>&ldquo;</p> <p>Rusty Rives, police chief of the Lamar Police Department, which participated in raid stuck by the claim that it was weed. &ldquo;I&rsquo;m just looking at the picture,&rdquo; he said. &ldquo;but they look like marijuana plants to me.&rdquo;</p> <p>It doesn&rsquo;t matter either way. Both are illegal in the state of Missouri despite nationwide efforts to legalize both marijuana and the hemp plant.</p> <p>The&nbsp;<em>Times</em>&nbsp;had difficulty obtaining comment other officials involved, but by last Thursday, Jasper police chief Chad Karr responded, defending the Facebook post.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;<em>The goal, Karr says, was never to brag about a bunch of pot plants, but rather to serve notice to a suspected meth dealer operating in the area.</em>&rdquo; </strong>But the post reached many more people, accruing over 1,000 comments, Karr said, some of which were &ldquo;abusive.&rdquo;</p> </blockquote> <p>As far as the &ldquo;$100,000&rdquo; estimation, &ldquo;<em>Karr says he tried to estimate conservatively. He admits he&rsquo;s no expert when it comes to marijuana and doesn&rsquo;t care to be.&rdquo;&nbsp;</em>However, he suggested the plants were not growing on their own, without human cultivation, because there were trails leading out to the field where they were confiscated.</p> <p>Nevertheless, he claims cannabis is not an issue for him.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>&ldquo;I think the misconception is we go to work to bust pot heads,&rdquo;&nbsp;</em></strong>he said<em>. <strong>&ldquo;I personally do not. I know what the problem is &mdash; it&rsquo;s opiates and methamphetamine.&rdquo;</strong></em></p> </blockquote> <p>Hopefully, his sentiment will continue to grow among law enforcement, who are increasingly <a href="" rel="noopener" target="_blank">trolled</a> when they <a href="" rel="noopener" target="_blank">boast</a> of cannabis busts on social media. The&nbsp;<em>Times</em>&nbsp;reports that for now, it doesn&rsquo;t appear any charges have been filed over the plants.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="788" height="385" alt="" src="" /> </div> </div> </div> Cannabis Cannabis in the United States Entheogens Euphoriants Feral cannabis Hemp Herbs Jasper Police Jasper Police Department Lamar Police Department Legality of cannabis Medicinal plants Missouri’s Jasper Police Department National Guard Noah’s Arc Foundation Rosales Rosids Sat, 23 Sep 2017 21:45:00 +0000 Tyler Durden 604050 at Congress Passed A Bill To Deport Suspected 'Gang' Members - There's Just One Problem <p><a href=""><em>Authored by Sarah Cronin via,</em></a></p> <p><strong>Last week the House passed a bill to expand the government&rsquo;s ability to deport immigrants on the basis of alleged gang affiliation.&nbsp;</strong></p> <p>Promoted by Republicans as a way to target members of gangs such as the transnational M13 gang,&nbsp;<a href="" rel="noopener" target="_blank">H.R. 3697</a>, the &ldquo;Criminal Alien Gang Member Removal Act,&rdquo; amends the&nbsp;<a href="" rel="noopener" target="_blank">Immigration and Nationality Act</a>&nbsp;by <strong>adding gang affiliation to the list of criminal offenses that qualify as grounds for detention and deportation.</strong></p> <p><a href=""><img height="285" src="" width="600" /></a></p> <p>The bill passed 233 &ndash; 175 with almost unanimous Republican support and now must gain approval in the Senate, where it is currently pending in the&nbsp;Committee on the Judiciary.&nbsp;While the bill still has yet to come to a vote in Senate, it has already gained the presidential nod of approval. Shortly following the bill&rsquo;s passage, the White House Press Secretary published a&nbsp;<a href="" rel="noopener" target="_blank">statement</a>&nbsp;applauding Congress&rsquo; decision, and the administration already&nbsp;affirmed that &ldquo;<em>If H.R. 3697 were presented to the president in its current form, his advisors would recommend that he sign the bill into law,&rdquo;&nbsp;</em>according to a&nbsp;<em>&nbsp;</em><a href="" rel="noopener" target="_blank">statement of administrative policy</a>&nbsp;published last Tuesday.</p> <p>The bill has received strong criticism from House Democrats and organizations such as the National Immigrant Justice Center (NIJC) and the American Civil Liberties Union (ACLU), who<strong> claim the bill provides the government with sweeping discretion to detain and deport immigrants using a broad and arbitrary label.</strong></p> <p>The bulk of the debate on the bill revolves around how it defines &lsquo;gangs.&rsquo; <u><strong>The bill defines a gang as any group of five or more people that has as one of its primary purposes the commission of one or more specified criminal offenses. </strong></u>The bill goes on to expand on these <strong>&lsquo;criminal offenses&rsquo; to include felony drug offenses, which would include the possession of marijuana</strong>. It also explicitly names the &lsquo;harboring&rsquo; of undocumented immigrants as a crime.</p> <p>This means, theoretically, that any organization that helps, shelters, or hires undocumented immigrants could be considered a gang, and thus any immigrant member of such group could theoretically be detained or deported as a gang member.</p> <p>The National Immigrant Justice Center&rsquo;s recent&nbsp;<a href="" rel="noopener" target="_blank">policy report</a>&nbsp;explains:<strong>&nbsp;</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<em>For example, the government could attempt to designate a church group that elects to offer shelter to an undocumented immigrant as a gang. Similarly, a fraternity whose members use expired identification documents to purchase liquor or engage in initiation rites or a Fortune 500 company that employs workers who may or may not have irregular documents could also fall under this definition.</em>&rdquo;</p> </blockquote> <p><strong>The government already has a history of liberally applying the &lsquo;gang&rsquo; label. Just ask the Juggalos, a fan group of the Insane Clown Posse.</strong> They&nbsp;<a href="" rel="noopener" target="_blank">took to the streets Saturday</a>&nbsp;to protest the FBI&rsquo;s designation of their group as a gang in the bureau&rsquo;s&nbsp;National Gang Threat Assessment&nbsp;<a href="" rel="noopener" target="_blank">report</a>&nbsp;back in 2011.<strong> The fans and the band have been fighting to clear their name ever since. </strong>The issue even ended up in court last year when the Clown Posse&nbsp;<a href="" rel="noopener" target="_blank">sued the FBI</a>&nbsp;for withholding documentation about the gang classification of their fans.</p> <p>In a revealing profile about the group,&nbsp;<a href="" rel="noopener" target="_blank"><em>Vox</em>&nbsp;writer Dylan Matthews</a>&nbsp;explained that<strong> the parallel would be to criminalize&nbsp;someone for being a &ldquo;Belieber&rdquo;(Justin Bieber fan) or a &ldquo;Swiftie&rdquo; (Taylor Swift fan).</strong> While perhaps ridiculous in theory, the classification has had serious consequences for group members, causing some fans to lose their jobs and, in some cases, their parental rights because of their affiliation with the so-called &lsquo;gang.&rsquo;</p> <p>In the case of H.R. 3697, the consequences of alleged gang affiliation would be much more dire &mdash; as in&nbsp;no-bond mandatory detention.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<em>Mandatory detention refers to a provision of the INA that states that non-citizens with certain criminal convictions must be detained by ICE. People who are subject to mandatory detention are not entitled to a bond hearing and must remain in detention while removal proceedings are pending against them,</em>&rdquo; explains a&nbsp;<a href="" rel="noopener" target="_blank">policy handout</a>&nbsp;by the Immigrant Law Research Center.</p> </blockquote> <p>H.R. 3697 would expand the terms of mandatory detention, which the ACLU considers a clear violation of the Fifth Amendment&rsquo;s Due Process Clause. It also transfers the discretion of determining bond eligibility from the Attorney General to the Secretary of Homeland Security.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<em>[The bill] grants the Department of Homeland Security massive discretion to designate a group of people as a &lsquo;criminal gang,&rsquo; based on secret evidence, and without meaningful judicial review</em>,&rdquo; the ACLU writes in their vote recommendation and&nbsp;<a href="" rel="noopener" target="_blank">analysis&nbsp;</a>of the bill.</p> </blockquote> <p><strong>While the practice may appear unconstitutional, it wouldn&rsquo;t be the first time the government has sanctioned detention without trial.</strong> During the War on Terror era, the government adopted the practice of &lsquo;indefinite detention&rsquo; whereby suspected terrorists can be held without charge or trial. Despite facing challenges in&nbsp;<a href="" rel="noopener" target="_blank">Congress</a>&nbsp;and in the&nbsp;<a href="" rel="noopener" target="_blank">courts</a>, indefinite detention was&nbsp;<a href="" rel="noopener" target="_blank">signed into law</a>&nbsp;as a provision of the 2012&nbsp;National Defense Authorization Act, where it remains in legal standing today.</p> <p><strong><em>In the same way the War on Terror became a catch-all justification for constitutionally questionable policies, it seems that the vaguely defined threat of immigration and &lsquo;criminal aliens&rsquo; will be this administration&rsquo;s keyword for getting around civil liberties.</em></strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1588" height="755" alt="" src="" /> </div> </div> </div> American Civil Liberties Union Bond Congress Crime Criminal justice Criminal law Department of Homeland Security FBI Federal Bureau of Investigation Gang Human migration Illegal immigration Immigrant Law Research Center Immigration detention International law Juggalo gangs Law Law Morality National Immigrant Justice Center Politics Punishments Senate Social Issues SWIFT White House White House Sat, 23 Sep 2017 20:45:00 +0000 Tyler Durden 604044 at Pentagon To Probe "Evacuation Hoax" Messages Sent To US Soldiers In South Korea <p>The Pentagon announced Friday that it would be launching an investigation into a series of fake messages sent to US soldiers stationed in South Korea and their family members on Thursday. In what probably sent a temporary chill down the spines of recipients, the messages warned that all &quot;non-essential&quot; (i.e. non-combat) personnel must evacuate the Korean Peninusla - suggesting that the long-dormant Korean War was about to explode once again into violence, <a href=";feedName=domesticNews&amp;utm_medium=Social&amp;utm_source=Twitter">Reuters </a>reports.</p> <p>The hoax, which was spread via fake SMS messages and Facebook posts, was carried out during a particularly tense period in the ongoing standoff between the US and North Korea over the latter&#39;s insistence on developing a nuclear weapon capable of striking the US. Also on Thursday, the North&#39;s foreign minister warned that the regime was considering a test of a nuclear weapon over the Pacific &ndash; something that would represent an unprecedented escalation and possibly force the US to respond with a military strike. A military spokesman said there was no way of knowing how many soldiers or family members received the messages, but said the chain of command quickly acted to shut down the hoax.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;We have no accurate way to know how many people received it,&rdquo; the spokesman said. &ldquo;Incidents were &lsquo;self-reported&rsquo; and many people claimed the message disappeared as soon as they unlocked their phone.&rdquo;</p> </blockquote> <p>The spokesman added that the &ldquo;good news here&rdquo; is that the hoaxer&#39;s attempt to create an outbreak of chaos was foiled.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;The good news here is: informed, savvy family members plus an engaged chain of command means no panic or over-reaction,&rdquo; he added. &ldquo;We had no reports of anyone acting on message other than notifying the appropriate authorities.&rdquo;</p> </blockquote> <p><a href="">Stars and Stripes</a> reports that the hoax was reported by soldiers less than an hour after the alerts were sent. The hoax was spread via fake text messages and Facebook posts, the military said.</p> <p>The USFK posted a statement on its official Facebook page on Thursday making clear that the US military did not issue any evacuation-related alerts. It has also instructed all US Department of Defense personnel and their family to confirm any evacuation-related communications before acting.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 758px;" /></a></p> <p>The notice alerted soldiers and their family members that the USFK did NOT issue the alert: <em>&ldquo;On Thursday, 21 SEP, we received multiple reports of a fake text-to-cell and social media message regarding a&nbsp; &ldquo;real world noncombatant evacuation operation (NEO) order issued&rdquo; which instructed DOD family members and non-emergency essential DOD civilians on the Korean peninsula that an evacuation order had been issued.&rdquo;</em></p> <p>Warnings were also posted on the 8th Army&rsquo;s official Facebook page.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 368px;" /></a></p> <p>&nbsp;</p> <p>As<a href=""> Stars and Stripes </a>explains, the messages referred to what is known as a noncombatant evacuation operation, or NEO, which would affect family members of the 28,500 U.S. servicemembers stationed in South Korea and non-emergency essential Defense Department civilian employees. According to <a href=";feedName=domesticNews&amp;utm_medium=Social&amp;utm_source=Twitter">Reuters</a>, the USFK holds biannual NEOs to prepare soldiers and their families for just such an eventuality.<br />&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="742" height="399" alt="" src="" /> </div> </div> </div> Department of Defense Facebook Human Interest Korean War Military Military history of the United States North Korea North Korea–South Korea relations Pentagon Reuters SMS Software South Korea–United States relations Text messaging U.S. Department of Defense United States Forces Korea US military War Sat, 23 Sep 2017 20:15:00 +0000 Tyler Durden 604047 at Trump Trounces "Hypocrite" McCain, Thinks Rand Paul "May Find A Way" To Save Obamacare Repeal Bill <p>In a surprising demonstration of wit, President Donald Trump told a crowd of rowdy Alabamians Friday night that it would be<strong> amusingly &ldquo;ironic&rdquo; if Kentucky Senator Rand Paul offered to vote for the Republicans&rsquo; floundering Graham-Cassidy health-care bill after<a href=""> John McCain blindsided the administration by withdrawing his support </a></strong>On Friday. The two senators, Trump explained, do not get along. And by swooping in to save the Republicans&rsquo; Obamacare repeal-and-replace effort at the last second, Paul would be coronated a hero.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 299px;" /></a></p> <p>After saying earlier this year that he is determined to win Paul&rsquo;s vote on health-care, the president appears to be making good on his word, launching what appears to be a personal charm offensive to try and win the support of one of the most intransigent Republican senators. That campaign continued Saturday morning, when the president tweeted that he &ldquo;might have&rdquo; a way to finally win the Kentucky senator&rsquo;s vote.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 282px;" /></a></p> <p>&ldquo;<strong><em>I know Rand Paul and I think he may find a way to get there for the good of the Party!</em></strong>&rdquo;</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">I know Rand Paul and I think he may find a way to get there for the good of the Party!</p> <p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="">September 23, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>The tweet was part of a series about the Graham Cassidy bill, which was effectively killed on Friday when McCain withdrew his support. In the series, Trump took shots at McCain, and also Alaska Moderate Lisa Murkowski, who opposes the bill. The third Republican &ldquo;no&rdquo; vote belongs to Sen Susan Collins of Maine.</p> <p><strong>Trump began by bashing McCain </strong>for opposing repeal and replace after campaigning on repealing Obamacare during his most recent Senatorial bid. The president also warned that McCain&rsquo;s decision could elicit substantial political backlash in his state as premiums skyrocket&hellip;although, given his recent brush with brain cancer, we doubt McCain is still motivated by these types of political considerations&hellip;particularly after opposing a bill sponsored by his close friend, South Carolina Sen. Lindsey Graham.</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">John McCain never had any intention of voting for this Bill, which his Governor loves. He campaigned on Repeal &amp; Replace. Let Arizona down!</p> <p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="">September 23, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">Arizona had a 116% increase in ObamaCare premiums last year, with deductibles very high. Chuck Schumer sold John McCain a bill of goods. Sad</p> <p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="">September 23, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>In a plug for Graham Cassidy, Trump said adopting a system of large block grants to states would be &ldquo;a good thing to do.&rdquo;</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">Large Block Grants to States is a good thing to do. Better control &amp; management. Great for Arizona. McCain let his best friend L.G. down!</p> <p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="">September 23, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>In<strong> a shot at Murkowski,</strong> Trump tweeted that Alaskans would be angry after their premiums skyrocket 200%, implying that they would express that anger by voting against their senator. But &ldquo;Lisa M&rdquo; still has a chance to be a hero by changing her mind and voting for the bill.</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">Alaska had a 200% plus increase in premiums under ObamaCare, worst in the country. Deductibles high, people angry! Lisa M comes through.</p> <p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="">September 23, 2017</a></p></blockquote> <p>So, has Trump found a way to save the repeal and replace effort by turning Paul? Maybe, maybe not. As the public is well aware, Trump is fond of bluffing.</p> <p><strong>Of course, the math is simple: Republicans have 52 seats and need 50 senators to support the bill, which would require Vice President Pence to break a tie, under the special budget rules being used to avoid a Democratic filibuster.</strong> The clock on those rules runs out at the end of the month, effectively closing the Republicans&rsquo; window to pass a repeal and replace bill &ndash; for now, at least.</p> <p>Of course, on Friday, Paul reaffirmed his opposition to the bill in a series of tweets on Friday, saying he &quot;wouldn&#39;t be bullied&quot; into supporting it after Trump had admonished him via twitter earlier in the week.</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">I won&#39;t vote for Obamacare Lite that keeps 90% of the taxes &amp; spending just so some people can claim credit for something that didn&#39;t happen</p> <p>&mdash; Senator Rand Paul (@RandPaul) <a href="">September 22, 2017</a></p></blockquote> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en">I won&#39;t vote for Obamacare Lite that keeps 90% of the taxes &amp; spending just so some people can claim credit for something that didn&#39;t happen</p> <p>&mdash; Senator Rand Paul (@RandPaul) <a href="">September 22, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>That sounds like a &quot;hard pass&quot; to us.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="478" height="251" alt="" src="" /> </div> </div> </div> 115th United States Congress American Health Care Act American Presbyterians Donald Trump Donald Trump Efforts to repeal the Patient Protection and Affordable Care Act Internal Revenue Code John McCain John McCain Obamacare Patient Protection and Affordable Care Act Patient Protection and Affordable Care Act replacement proposals Politics Rand Paul United States Wealth in the United States Sat, 23 Sep 2017 20:00:00 +0000 Tyler Durden 604043 at Bond Market Bulls Embrace China Debt Downgrade <p>It appears credit ratings agencies simply get <strong>no respect</strong>...</p> <p><strong>Four months after <a href="">Moody&#39;s downgraded China to A1 from Aa3</a>, </strong>unwittingly launching a startling surge in the Yuan as Beijing set forth to &quot;prove&quot; just how &quot;stable&quot; China truly is through its nationalized capital markets, <strong>S&amp;P followed suit this week when the rating agency also downgraded China from AA- to A+ for the first time since 1999</strong> citing risks from soaring debt growth, <strong>less than a month before the most important congress for Chiina&#39;s communist leadership in the past five years is set to take place</strong>. In addition to cutting the sovereign rating by one notch, S&amp;P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&amp;P revised its outlook to stable from negative.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;China&rsquo;s prolonged period of strong credit growth has increased its economic and financial risks,&rdquo; S&amp;P said.</p> <p>&nbsp;</p> <p>&ldquo;Since 2009, claims by depository institutions on the resident nongovernment sector have increased&nbsp; rapidly. The increases have often been above the rate of income growth.&nbsp; Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to&nbsp; some extent.&quot;</p> </blockquote> <p>According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, <a href="">Bloomberg reported</a>. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The cut will &ldquo;have a relatively big impact on Chinese enterprises since corporate ratings can&rsquo;t be higher than the sovereign rating,&rdquo; said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. &ldquo;It will affect corporate financing.&rdquo;</p> <p>&nbsp;</p> <p><strong>&ldquo;The market has already speculated S&amp;P may cut soon after Moody&rsquo;s downgraded,&rdquo; said Tommy Xie, an economist at OCBC Bank in Singapore. &ldquo;This isn&rsquo;t so surprising.&rdquo;</strong></p> <p>&nbsp;</p> <p>S&amp;P said that its stable outlook &quot;reflects our view that China will maintain robust economic performance over the next three to four years. We expect per capita real GDP growth to stay above 4% annually, even as public investment growth slows&nbsp; further. We also expect the stricter implementation of restrictions on&nbsp; subnational government off-budget borrowing to lead to a declining trend in the fiscal deficits, as measured by changes in general government debt in terms of GDP.&quot;</p> </blockquote> <p><strong>But bond investors are saying meh to the downgrade and bid bonds back to their richest in 2 months... </strong></p> <p><a href=""><img height="266" src="" width="600" /></a></p> <p><strong>The&nbsp;average spread&nbsp;on dollar bonds from the nation&rsquo;s corporations fell 3.3 basis points on the day to 266, the second largest drop since May 31</strong>, according to JPMorgan indexes.&nbsp;</p> <p>While the timing of the rating cut was less than opportune because China is&nbsp;planning to sell&nbsp;a dollar bond soon, <em><strong>&ldquo;this might make the Chinese authorities more determined to price a very tight sovereign new issue,&rdquo; </strong></em>said&nbsp;Jethro Goodchild, head of Asian credit at Aviva Investors.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&nbsp;&quot;It will be an opportunity for the Chinese government to create the image in investors&rsquo; minds that they have a coherent and well-articulated plan for the country&rsquo;s economic growth and fiscal stability.&quot;</p> </blockquote> <p><strong>But, of course, S&amp;P (and Moody&#39;s) are correct in their downgrade.</strong></p> <p>All is not at all well under the hood in China and without the endless flood of liquidity (&quot;well we have to put it somewhere&quot;), the reactions to downgrades could be very different.</p> <p><a href=""><u><strong>As we previously noted, China&#39;s dent minefield is worse than ever</strong></u></a>. Last June, <a href="">Goldman made a &quot;surprising&quot; finding </a>when it calculated that China real debt load was far higher than it had represented.<br /><img src="" style="width: 599px; height: 308px;" /></p> <p>In other words, whether due to using shadow banking strategies to cover the true debt load, or simply because Chinese corporations and the government were not booking all their obligations, <u><strong>China was covering up its true debt load. </strong></u>That strategy worked as long as China was flooding its ponzi debt system with far more debt than we maturing or being otherwise taken out.</p> <p>However, now that Beijing once again appears intent on breaking China&#39;s leverage addition - at least until overnight repo rates soar to 30% or higher as happened in the summer of 2013 when China tried this exercise for the first time - this is changing, but the real catalyst is China&#39;s recent surge in defaults, a development which the local financial system had not had to deal with until as recently as two years ago, as virtually all defaults were settled privately, and usually involved a government bailout of some nature.</p> <p>Now, with corporate bankruptcies soaring, we are finally getting first hand evidence that Goldman - and many other skeptics - were right, <a href="">because as Bloomberg reports</a>, &quot;<strong>defaults in China are unearthing hidden debt at companies across the country.&quot;</strong></p> <p><a href=" bond defaults.jpg"><img src="" style="width: 601px; height: 334px;" /></a></p> <p>Think of it as nested debt: big companies, themselves reliant on debt, arbing interest expense by providing loans to smaller companies at higher rates, without declaring said loans, or as Bloomberg puts it, &quot;small firms that can&rsquo;t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. <strong>The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark</strong>. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains.&quot;</p> <p>*&nbsp; *&nbsp; *</p> <p>And just in case you needed a reminder, this is what happened when S&amp;P dared to downgrade the US Sovereign rating in 2011...</p> <p><a href=""><img height="305" src="" width="600" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1114" height="493" alt="" src="" /> </div> </div> </div> Bond Borrowing Costs Business Capital Markets China Chinese government Communist Party Controversies surrounding the Eurozone crisis Credit Credit rating Credit rating agencies Creditors Debt default Economy Finance Government debt Hong Kong Money Moody's Investors Service Rating Agency ratings Ratings Agencies Shadow Banking Sovereign Debt Standard & Poor's United States federal government credit-rating downgrades Yuan Sat, 23 Sep 2017 19:55:00 +0000 Tyler Durden 604004 at