Testimony

August 6th and 9th of 2015 mark the 70th anniversary of the U.S. dropping two atomic bombs on Hiroshima and Nagasaki. This was the first and only time a state used a nuclear device on cities (or civilians) of another state. Some conservative estimates put the immediate death toll of the two bombs at 200,000 people. This is more than the total number of American soldiers killed in the Pacific front of World War II. Since the bombs were dropped, the U.S. government, U.S. high school history texts, and the American public have asserted that dropping the bombs was necessary. But was it?

Earlier this year, Germany’s attorney-general Harald Range has suspended the investigation into the NSA phone tapping affair. Due to Edward Snowden’s revelations, it had emerged that the NSA had wire-tapped even chancellor Merkel’s mobile phone. The reason for suspending the investigation? “We can’t prove it, and the Americans won’t tell us anything”. Of course documented proof does exist, and US officials have even admitted to tapping Ms. Merkel’s phone. It couldn't be any clearer that Germany is essentially a US vassal state. Since then, a plethora of NSA and BND-related scandals has emerged. But now, the president of Germany’s “Federal Office for the Protection of the Constitution” (another spook agency) brought criminal charges against journalists working for the online publication “Netzpolitik”. Allegedly, the journalists are guilty of treason. Their offense? They reported on the spook bureaucracy’s plans to vastly expand internet surveillance of Germany’s citizens.

A Japanese citizens’ judicial committee has overruled government prosecutors and forced them to bring three former executives of the Tokyo Electric Power Co. (TEPCO) to trial on charges of criminal negligence for their inability to prevent the 2011 nuclear disaster at the Fukushima Daiichi nuclear power plant.

We’re always interested in alternative economic frameworks that can help address the sizable gaps left open by classical approaches. Behavioral economics can fill part of that void, of course, as it describes some basic shortfalls in the assumption that we’re all superhuman welfare maximizing individuals. One step beyond that is evolutionary economics, which borrows from biology rather than psychology to form models about economic behavior.

Given the irrefutable historical testimony of the disasters which ensue once a construction boom takes full root – and also given both the empirical and Austrian-theoretic conclusion that this is one of the most interest rate sensitive sectors in the economy – can we please act now, before it is too late, Janet?

Here is the paradox as succinctly summarized by Deutsche Bank, which notes that the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% over the next couple of months, or just in time for the September or December FOMC meetings both proposed as the "lift off" date. This would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history.

Just as Japan thought they could go back to pre-Plaza Accord growth rates by holding on to the old ways in the 1990s, the Chinese will expect the growth miracle to return in 2016 with the “right” policies. It will not. It is all a mirage though. Just as in Japan, the Chinese will not allow the market process to do its magic to get the economy back on a stable footing. Draconian measures to stop the recent stock market rout are a clear testimony of that. In other words, the Chinese economy will resemble that of Japan, and it will do so very soon, if it is not already there.  China is heading straight into a zero growth environment, and will be mired there for years to come.

Straight-forward discussion of next week's economic data and events, and why it is important for the dollar.  

With the FBI and DoJ now involved in yet another Hillary Clinton scandal - that she sent confidential emails from her personal email server - it seems the 'presidential' former Secretary of State has felt pressured to come somewhat clean. While some might argue "what difference does it make?" The Washington Post reports that Hillary Rodham Clinton will testify on Oct. 22 before the House select committee investigating her role in connection with the deaths of four Americans in Benghazi, Libya. The testimony - before the committee formed last year - will be in a open setting (apparently against the wishes for privacy that committee chairman, Rep. Trey Gowdy initially requested).

In the middle of the biggest criminal scandal involving the Fed, but also an FT-owned expert network (an FT which until today was owned by Pearson), the expert network known as Medley Global Advisors just changed its owners, from the FT/Pearson to Japan's Nikkei, in a transaction advised by Rothschild for the buyer and Goldman, Evercore and JPM for the seller.

Just in case you still harbored any doubt that absolutely zero lessons were learned from the cataclysmic financial collapse of 2008/09...

Justice in America is not all it’s cracked up to be. On paper, you may be innocent until proven guilty, but in actuality, you’ve already been tried, found guilty and convicted by police officers, prosecutors and judges long before you ever appear in a courtroom. Chronic injustice has turned the American dream into a nightmare.

If the Fed is concerned that a rate hike cycle might exacerbate the supposed drag on the economy exerted by the strengthening dollar and that tightening when the rest of the world is immersed in competitive devaluation could create FX headwinds for US exports, then why not nominate a currency strategist to the Fed board to weigh in on the subject? Well, as it turns out, that’s precisely what the Obama administration did on Monday.

Greece’s lesson for Russia, and for China and Iran, is to avoid all financial relationships with the West. The West simply cannot be trusted. The “globalism” that is hyped in the West is inconsistent with Washington’s unilateralism. No country with assets inside the Western system can afford to have policy differences with Washington. It is testimony to the insouciance of our time that the stark inconsistency of globalism with American unilateralism has passed unnoticed.