Thursday, July 7, 2016

Brexit Casts Doubt On The Wisdom Of Crowds

By Mark Buchanan
The Bloomberg View
July 7, 2016

During the next couple months, the various candidates to replace U.K. Prime Minister David Cameron will debate what to do now that voters have decided to leave the European Union. They should keep in mind that doing exactly what the voters said might not be the wisest -- or even the most democratic -- approach.

Direct democracy, in which voters decide specific issues en masse, is actually rather unusual. Typically, they leave such decisions to elected officials, such as a president or legislature, whom they provide with the time and resources needed to make well-informed choices.

As it happens, there may be a very good reason that government has historically developed this way: Smaller groups can actually make better decisions, particularly on complex issues. As researchers from Berlin's Max Planck Institute for Human Development note in a recent paper, the wisdom of crowds works well only on questions that individuals can answer relatively easily.

Suppose you're asking whether California's population is larger than Britain's (it's not). If you get nine people to vote, they'll probably get the right answer. If you get a million people to vote, they'll almost certainly get it right. The power of the crowd washes away the possibility of error.

But now try a harder question: If you fold a piece of paper on itself 25 times, will the result be taller than the Empire State Building? Most people would say no, even though the actual thickness would be about 10 miles. Asking a larger group to vote would only increase the certainty of getting it wrong.

The Max Planck researchers show that smaller groups perform particularly well when questions come in an unpredictable mix of easy and difficult. Under general conditions, they suggest, the optimal group size for making good decisions is fairly small -- often around 10 to 15, and typically less than 40.

No wonder decision-making bodies around the world work with small numbers. Think of juries, parish councils, central bank boards or parliamentary committees, which tend to have between five and 40 members.

Granted, this research might not apply directly to the U.K. referendum, which arguably didn't have a right answer. Yet it certainly suggests that a referendum was an awfully crude instrument for deciding such an important and difficult issue -- especially given that the British public holds wildly distorted views on, say, the number of immigrants in the country (estimated by the public at more than twice the actual level).

Voters clearly expressed their discontent on a number of issues, including immigration and globalization. U.K. leaders can't ignore this, but they should also question the naïve view that respecting democracy demands invoking Article 50 of the Lisbon Treaty, triggering the formal process of taking the U.K. out of the EU. There's a good reason that voters gave them the power and resources to examine such choices carefully. In deciding how to respect the voters' will, and whether this requires Britain to leave or stay, that is precisely what they should do.

Article Link to The Bloomberg View:

Comparing Bush’s Iraq Surge And Obama’s Afghanistan About-Face

One president had the courage to act in the face of failure.

By Tom Rogan 
The National Review
July 7, 2016

Eight years ago this month, Barack Obama explained his warfighting plans to the American people:

"I want Iraqis to take responsibility for their own future, and to reach the political accommodation necessary for long-term stability. That’s victory. That’s success. That’s what’s best for Iraq, that’s what’s best for America, and that’s why I will end this war as president. . . . That’s why the second goal of my new strategy will be taking the fight to al-Qaeda in Afghanistan and Pakistan."

Those classic Obama campaign tropes should have warned us of what was to come. For they sum up our president’s worse impulse: arrogant assumptions veiled as incontrovertible assessments of reality. Mr. Obama’s Iraq policy offers the best example. The president’s relinquishing of U.S. influence in Iraq — an approach he presented as “That’s victory. That’s success.” — has been a catastrophe. Opportunities for Iraqi political moderates have perished after years of American neglect, while ferocious sectarians from Iran have filled the vacuum.

Yesterday, however, President Obama backed off from his withdraw-at-all-costs foreign policy and reversed plans to reduce U.S. force levels in Afghanistan down to 5,500 troops. Instead, 8,400 service personnel will remain in the country. Yet judging Obama’s late-term reversal in Afghanistan alongside George W. Bush’s late-term surge in Iraq, we gain valuable insight into their national-security decision making.

In January 2007, Iraq was a slaughterhouse. Every day hundreds of Iraqis were being murdered by the suicide bombers of al-Qaeda in Iraq and the Iranian-backed Shiite power-drill-torturer death squads. Each week, hundreds of Americans were being killed and wounded. In December 2006, in the highest monthly rate of that year, 112 Americans were killed. But President Bush would not give up. Explaining his surge decision to the nation on January 10, 2007, the president understood the domestic political consensus was firmly in favor of withdrawal. But he was resolute. “Where mistakes have been made,” Bush asserted, “the responsibility rests with me.” Outlining his new strategy, the president declared that it would “require increasing American force levels. So I have committed more than 20,000 additional American troops to Iraq. The vast majority of them — five brigades — will be deployed to Baghdad.”

It was a bold, almost unbelievable gambit in the context of the public’s anger at the disaster and one made in the face of plummeting polls. Bush didn’t care. He knew the stakes. He prophesied ISIS’s rise if America failed. “Radical Islamic extremists would grow in strength and gain new recruits,” Bush said. “They would be in a better position to topple moderate governments, create chaos in the region, and use oil revenues to fund their ambitions. . . . Our enemies would have a safe haven from which to plan and launch attacks on the American people.”

The surge worked. The U.S. Army’s Joint Security Stations in Baghdad reduced violence dramatically, the Anbari tribes joined with U.S. Marines to smash al-Qaeda, and the Shiite militias were introduced to humility. Still, as the combat histories of the surge attest (David Finkel’s The Good Soldiers and Matt Gallagher’s Kaboom are my favorites), these victories were costly. In 2007, 904 Americans died in Iraq — the highest annual casualty figure of any of our 13 long years at war in that country since 2003. Nevertheless, their sacrifices brought about the improvements in Iraqi security that allowed for the multi-sectarian political cooperation that defined Iraq until 2011. Those sacrifices gave physical representation to America’s commitment to Iraq. In turn, that commitment gave U.S. diplomats, military officers, and spies the grudging respect of Iraqi politicians of all stripes. While those politicians continued railing against America in public, they began listening to our advice and cajoling behind closed doors. Our commitment gave us influence in Iraq’s future — a better future. But then, President Obama threw it all away by showing plain disinterest in a status-of-forces agreement that would have allowed American troops to stay in Iraq until the hard-won gains took more permanent root.

On July 6, 2016, in an echo of Bush’s January 2007 change of course, Obama implicitly accepted that his Afghanistan policy has failed. But consider the differences. Most notably, where President Bush spoke in decisive terms and offered decisive action, President Obama offered proud hesitation. Obama took pains to claim that “we are no longer engaged in a major ground war in Afghanistan.” He again signaled his desperation for compromise with the Taliban: “I will say it again — the only way to end this conflict . . . is through a lasting political settlement between the Afghan government and the Taliban. That’s the only way.”

These statements encapsulate Mr. Obama’s utter divorce from military realities. Most analysts recognize that political compromise is necessary in Afghanistan. But Mr. Obama seems oblivious to the fact that the Taliban’s escalating aggression of recent years has flowed alongside his calls for negotiation. In short, the president has failed to realize that one cannot negotiate with terrorists from a position of overt timidity — that approach has only encouraged our enemies to laugh and build more bomb factories. President Obama’s National Security Council might be vast, but it is singularly incapable of making rapid and bold decisions. (The Bin Laden raid was bold, but Mr. Obama took far too long to authorize that action.)

The differences aren’t just in strategic vision. They reach to the tactical level. During the Iraq surge, Bush gave Generals Petraeus and Odierno, the top-ranking American commanders in theater, wide-ranging authority to conduct their operations as they saw fit. His words thus matched his actions. Contrast that with President Obama, who yesterday asserted that his force retention showed America’s “resolve to carry on the mission for which [U.S. forces] gave their last full measure of devotion,” only to, amazingly, just a few prompter paragraphs later, abandon that principle: “The narrow missions assigned to our forces will not change. They remain focused on supporting Afghan forces and going after terrorists.”

The president refuses to allow U.S. forces any greater latitude in killing Taliban fighters. While the rules of engagement were recently relaxed for anti-Taliban targeting, air-strike-approval authority in Afghanistan remains heavily limited. U.S. commanders can approve strikes only in pursuit of specific self-defense or strategic objectives. Unfortunately, in war, complexity equals hesitation. Afghan commanders will continue to have to navigate bureaucratic minefields in order to beg for air strikes that would help them kill our mutual enemy.

But consider a final problem: Even as he decides to keep some forces in Afghanistan, Obama is also withdrawing 1,400 personnel from the current force level. Why? Because rather than listening to Generals Dunford, Votel, and Donaldson, his hand-picked military advisers, and authorizing force levels to best utilize U.S. intelligence, aviation, and command capabilities, Mr. Obama wants to throw a bone to liberal legacy writers.

Ultimately, the contrast between Bush in Iraq and Obama in Afghanistan is one of a leader who made bad mistakes and moved to correct course, and a leader who has always doubled-down on a calculated pursuit of legacy. The historians of 2050 may slam President Bush for invading Iraq, but they will praise him for ordering the surge. Yet whether in Afghanistan or Iran, in China or in Russia, or in many other places across the world, President Obama’s foreign policy will continue to be praised by totalitarians who would burn down all that American-led order has built.

Article Link to the National Review:

Jindal: From Sister Souljah To Black Lives Matter

America’s culture is its greatest asset — and the one under the greatest threat.

By Bobby Jindal 
The National Review
July 7, 2016

I believe in American exceptionalism. America truly is the greatest country in the history of the world — but not for the reasons many suppose. America is not great merely because of our mighty military, free-market capitalism, or representative democracy. Don’t get me wrong; I am incredibly grateful to the men and women who serve our nation in uniform, and I want our armed services to continue to be stronger than any other. I strongly prefer our systems of economics and government, which empower individuals rather than centralized authority. What has truly set America apart, however, has been something much more foundational — our culture. Our Founding Fathers created a limited government dedicated to protecting, not creating, our God-given rights, and thus enshrined freedom into our foundational documents and ethos. That freedom presupposes a healthy culture and particular values, our civic religion derived from but not limited to our particular Western Judeo-Christian heritage.

Leaders from both political parties, including Presidents Bush and Obama, have made the mistake of believing that imposing elections on other societies, without the necessary prerequisite civic values, would result in pluralistic, peaceful societies like our own. Democracy without respect for minority rights, human dignity, the rule of law, property rights, and freedom of expression is merely mob rule. We have seen this lesson again and again with Gaza and Hamas, Egypt and the Muslim Brotherhood, Iraq and Shiite militias, Russia and the oligarchs, etc. Majorities, sometimes in the guise of terrorist groups, have transformed “one man, one vote” into “one election, one time” as they hold on to power.

In America, civic values like individualism, frugality, delayed gratification, striving, private charity, and temperance have served us well through many generations. Combined with healthy, though not absolute, tendencies towards libertarianism and isolationism, these values have not been identified with a particular political party or religious denomination. Despite their roots in the beliefs of the first Protestant immigrants to the colonial settlements, they have been embraced by Americans from all backgrounds.

I worry because these values are under assault. Indeed, the middle class — the traditional repository of these values and the backbone of America — is under increasing assault, economically and otherwise. As it sees a Democratic party more concerned with making individuals dependent on government and a Republican party more concerned with protecting the wealthy, no wonder many are flocking to Trump to defend them.

I believe America is strong enough to confront any external threat, but I worry more about our weakening from within. Even as we resist enemies determined to take away our freedoms, I worry that we are more vulnerable to simply giving away our incredible heritage.

Liberals have been remarkably successful in transforming America’s culture from within, dominating the media, universities, and the entertainment industry, where so many ideas originate. Elites have adopted new values of government dependency, the universalization of victimhood, instant gratification, political correctness, and group identity well before mainstream America. To be sure, we are not merely passive recipients; but families, busy paying bills and raising kids, are not immune to the relentless proselytization. Just as previous eras’ kids had their parents’ values reinforced from not-so-subtle television shows, movies, and celebrities, today’s children are similarly influenced by today’s popular culture.

Diversity and tolerance (for all except those who disagree with the liberal elites) are becoming the most sacred values in today’s more secular society. Nobody is arguing for their opposite, but values originally designed to protect the minority view have instead become tools with which to bludgeon into conformity all who hold dissenting views. Conservatives are no longer to be tolerated, much less debated with — all in the name of tolerance. The quickest way to silence those who have illiberal views on gay marriage, transgender bathrooms, or quotas is to simply label them bigots. Case closed.

A lifetime ago, during a very different Clinton presidential campaign, the candidate engineered a confrontation with Sister Souljah, and by extension Jesse Jackson, to prove he was not too liberal for mainstream voters. Today Hillary Clinton will have to manufacture a very different kind of moment to prove to the Black Lives Matter crowd that she is sufficiently attuned to their group grievances. The shift within the Clinton family is hardly surprising; they are masters at adapting to the times. What is noteworthy is how much has changed, both within the Democratic party and in the country as a whole. The Clintons are not to blame for this transformation; they merely serve as the weathervane, showing us the direction in which the cultural winds are blowing.

There is much self-satisfaction and heroism in being countercultural against great odds. Being salt and light in a world needing both can be its own reward, and we are certainly called to rewards in a life after this one. But I think it is time for conservatives to fight not just to win elections, but for a greater and more enduring victory — to reclaim our culture. One does not need to be a communitarian to realize the importance of reasserting America’s traditional values before it is too late.

Article Link to The National Review:

Trump Stumps With Newt The NAFTA Champion

Newt Gingrich once bragged that he got more votes for NAFTA than Bill Clinton and Al Gore. What a difference a campaign makes.

By Betsy Woodruff
The Daily Beast
July 7, 2016

At a Cincinnati rally tonight, Donald Trump savaged the NAFTA trade deal. And he stood shoulder-to-shoulder with a man who played a crucial role in getting it passed.

Newt Gingrich, one of Trump’s most devoted supporters and a top contender to be his vice presidential pick, isn’t just a long-time backer of the free trade agenda that Trump loves to vilify; he also was one of NAFTA’s most visible Republican boosters, and -- as House minority whip when it passed -- one of its most effective advocates.

You wouldn’t have guessed it. At the event, Trump made no mention of their policy disagreements as he praised Gingrich.

“In one form or another, Newt Gingrich is going to be involved with our government,” the mogul said.

Later during the rally, Trump heavily hinted that Gingrich remains a favorite to be his running mate.

“I’m not saying it’s Newt, but if it’s Newt, nobody is going to be beating him in those debates, that’s for sure,” the Republican frontrunner said.

When Gingrich gave a short stump speech to introduce Trump at the rally, the former House speaker reciprocated the mogul’s praise.

“Everybody else talks about how they would like to change Washington a little bit,” Gingrich said. Trump “is going to kick over the table.”

The former top GOP lawmaker then urged Ohio Gov. John Kasich, Trump’s former rival in the Republican primary, to support the frontrunner.

"Your governor who is a good friend of mine, although it's about time he gets on the Trump bandwagon!"

Gingrich did not broach the subject of free trade -- but that was Trump’s job.

Trump didn’t disappoint, calling NAFTA “ the worst, in my opinion, the worst trade deal in the history of this country. It’s not even close.”

Trump added that, because Bill Clinton signed NAFTA, “The jobs are moving. They’re moving down to Mexico, one after another.”

If the mogul picks Gingrich as his running mate, he’ll have a man who knows Congress inside-out -- and who has used that knowledge to make NAFTA happen. And Gingrich’s advocacy of the trade deal will make him an easy target for Trump’s conservative critics.

George H. W. Bush negotiated NAFTA (full name: the North American Free Trade Agreement, a historic pact to eliminate trade barriers between Canada, the U.S., and Mexico), but it needed passage in the House and Senate before it could become law. So when Bill Clinton beat Bush in 1992, it was up to him to seal the Congressional deal.

At the time, Republicans were in the minority in the House, and Gingrich was minority whip. The job required him to persuade Congressional Republicans to vote the way Leadership wanted them to, by hook or by crook. Political operatives who worked on the Hill at the time said Gingrich went into overdrive to get the pact passed.

And Gingrich himself boasted that he flipped more votes for the NAFTA law than even Clinton and Al Gore did. Under Gingrich’s leadership, 132 House Republicans voted for NAFTA -- while only 102 of the chamber’s 258 Democrats backed it. The final vote in the House was close -- 234 yeas and 200 nays -- and some say it wouldn’t have passed if not for Gingrich’s savvy whipping operation.

Oregon Democratic Rep. Peter DeFazio was on the opposite side during the fight, on the whip team of then-House Majority Whip David Bonior.

He told The Daily Beast that Gingrich’s vote-getting prowess was impressive. It was also essential, since powerful labor unions adamantly opposed the deal. Most House Democrats opposed the pact, so maximizing Republican support was key.

And Gingrich got it done.

“In those days, we had more moderate Republicans who were a little more concerned about the position of labor,” DeFazio said. “So I would say it was definitely a testament to his skills as whip that he got that large supermajority that eked the thing through.”

Ed Kutler, who was Gingrich’s senior policy advisor on trade issues at the time, said the then-House Speaker regularly grilled him on trade issues.

“I remember joking that there were some trade experts in town who I would be on speed dial with,” Kutler told The Daily Beast. “‘Newt raised questions! Can you talk to me about it? Can I have you come up to talk to the whip?’ He would constantly question conventional wisdom.”

He added that NAFTA was one of the toughest challenges for then-Whip Gingrich. But his penchant for strategy and attention to detail paid off.

“He’s one of the very few members I’ve ever seen who, when they sit down with a member of congress, has a pad of paper and a pen in his hand to take notes on what people are saying to him,” Kutler said. “He’s a good listener, and he figures out, what does Joe need or Jane need to get him or her to a yes.”

Gingrich himself was acutely aware of the high stakes and logistical challenges of getting support for the deal.

“I feel like we’re in the third overtime of a basketball game and we’ve been running a full court press,” he said about a week before it passed.

Fortunately, he had allies in high places. Dan Meyer, who was Gingrich’s chief of staff at the time, said the whip worked well with Clinton on the issue. Meyer attended a meeting in the Oval Office between Gingrich, Clinton, and a few other staffers strategizing a member-by-member approach.

Gingrich would later boast about his success working with Clinton, referring to their partnership as the “Clinton-Gingrich Pro-American Growth Team.” And, never one to err on the side of humility, Gingrich also did a little horn-tooting about his superior ability to woo congressmen.

“I got more votes for NAFTA than Clinton and Gore did,” he told The Daily Beast last year. “There were a lot of places where we were able [to work together].”

Since getting it passed, Gingrich has taken a tone on NAFTA that is, shall we say, equivocal.

“I basically agree with Trump’s speech on trade,” he told Politico, citing the fact that China steals intellectual property and things are different now, or something. A Gingrich representative didn’t respond to a request for comment on this story from The Daily Beast.

That won’t placate his critics. Quin Hillyer, a conservative columnist and former spokesperson for an anti-Trump group, called Gingrich’s effort to realign himself “craven and brazenly hypocritical.” Then again, it may not matter.

After all, it’s 2016. And nothing matters.

Article Link to The Daily Beast:

Turf War Behind EU-NATO Peace Deal

The military alliance has a clear chain of command. The EU, however, does not.

Politico EU
July 7, 2016

A wide-ranging deal with NATO that aims to strengthen Europe’s military capacities is driving a power struggle in Brussels over who gets to run EU foreign policy.

The agreement, set to be signed Friday on the margins of the NATO summit in Warsaw, is a significant step forward in cooperation between the Atlantic alliance and the Union, combining NATO’s military forces with the EU’s money and ambition to fight threats, ranging from terrorism to cybersecurity, on the Continent.

EU leaders can proclaim the “Joint Declaration of EU-NATO Principals” a much-needed triumph for the bloc at a time of unprecedented crises. But even as they celebrate on the NATO stage barely two weeks after the shock of Britain’s vote to leave the EU, they will still be grappling with questions about who is in charge as the main counterpart to the military alliance’s clear chain of command.

The task is, on paper, shared between the European Council and the European Commission — what NATO diplomats like to refer to as “the other institutions in town.” But in the curiously complicated EU geometry of power, those two institutions feature three key players on foreign policy, all of whom can claim some ownership of the deal: Council President Donald Tusk, Commission President Jean-Claude Juncker and EU foreign policy chief Federica Mogherini.

Mogherini, who is a vice president of the Commission but also chairs meetings of EU foreign ministers over at the Council, is expected to join the other EU leaders and NATO Secretary-General Jens Stoltenberg for the ceremony in Warsaw but won’t herself be a signatory to the deal.

That’s spurred some resentment in Mogherini’s ranks, and among EU diplomats in general. Several ambassadors and officials involved in setting EU foreign and military policy have expressed their frustration that even though the European External Action Service (EEAS) she runs has done a lot of the preparatory work for the deal, Mogherini will not get to sign on the dotted line.

Mogherini And 3 ‘Principals’

It is not only a matter of visibility or ambition — though those factors are of no small importance to Mogherini, a former Italian foreign minister with half an eye on a future political career either back in Rome or, indeed, in Brussels. One senior diplomat said there are institutional reasons for her to sign it, citing the fact that the EEAS will be the main institution in charge of implementing the deal.

Despite lobbying by Mogherini’s office to share the limelight, the joint declaration will be signed by Stoltenberg, Tusk and Juncker, known in diplomatic lingo as the three “EU-NATO Principals.” Tusk and Juncker will also represent the EU in a summit Friday morning with U.S. President Barack Obama. Mogherini will join Tusk and Juncker at the NATO summit later on Friday and on Saturday.

An EEAS official downplayed the significance of Mogherini’s supporting role, saying that “with what is going on right now it does not make any sense to create or fuel arguments.”

For some it is an issue. Mogherini’s cabinet was involved in the preparation of the agreement’s text and “there will be a clear tasking to her and the EEAS in the joint statement, making it sufficiently clear who actually ‘does the job,’” said the official, adding that it was seen as a reason for some “in favor of her cosigning.”

The official added, however, that most member countries felt the agreement should only be signed by the presidents, and Mogherini in the end did not press the issue.

“She is very careful in not declaring wars she cannot win,” a high-ranking EEAS official said.

The power struggle reflects the confusion over the leading role in EU foreign policy since Tusk took over as president of the Council in 2014. Tusk has been far more visible on the foreign policy stage than his predecessor, Herman Van Rompuy, who was more of a backroom fixer.

Tusk has visited more than 20 non-EU countries since he took office. In a report he published in May on the first 18 months of his presidency, Tusk highlighted his diplomatic efforts in the Balkans and the Middle East as part of “a record year for diplomacy.” Now approaching his third year in office, the former Polish prime minister has also tried to build up a power center of his own at the Council.

Landmark deal

Regardless of any tensions behind the scenes, the EU-NATO deal is being hailed as an important step for both the Alliance and the Union, especially as Europe confronts increasing tensions with Russia and deals with the security threats raised by the migration crisis and terrorism.

The deal is expected to be “an effective division of labor with the Europeans that will take more responsibility for their defense,” said Stefano Stefanini, a former Italian NATO ambassador, adding that the biggest NATO member and contributor also sees upsides. The “U.S. is ready to see it happening, as long as it happens.”

The agreement, according to an internal Commission briefing document obtained by POLITICO, will include measures to deal with “hybrid threats” — diplomatic jargon that mainly refers to the destabilizing effect of Russian propaganda or cyberattacks on IT infrastructure. It will also include support to non-EU, non-NATO countries in Southern and Eastern Europe to build defense and security capabilities. Importantly for the EU, it will also include cooperation on border control and naval patrols in the fight against illegal migration.

The deal has the backing of EU countries that are not in NATO, such as Sweden and Finland, because it arrives at a crucial moment. “With the conflict in Syria, terrorism and migration everybody came to realize that we need it,” said Sweden’s ambassador to NATO, Håkan Malmqvist. “We need to cooperate more in the EU and NATO context, this is just a start.”

Diplomats hope the agreement will help to overcome past difficulties the pair have had in working with each other. NATO’s military staff, for example, have been reluctant to divide labor and share information with EU institutions that have a lot less experience in military planning.

Juncker, according to the internal Commission memo, will use the summit to push for “full implementation” of an agreement that the EU and NATO reached in March on naval support in the Mediterranean — and ask for even more help. NATO military authorities, according to the memo, were “currently exploring different options in that respect.”

Expect to hear both sides repeat calls for more of a focus on defense issues in Europe — and especially for higher defence spending, a longtime NATO request to its European members.

The EU side hopes to profit from increased defense budgets too: “NATO should call Europeans to intensify efforts towards a stronger European defense,” the Commission memo reads.

Article Link to Politico EU:

The Latest Attempt To Rewrite The History Of The Iraq War

By Benny Avni
The New York Post
July 7, 2016

If hindsight indeed is 20/20, how come no one ever examines foreign-policy actions not taken, while those like George W. Bush’s 2003 decision to overthrow Saddam Hussein are forever second-guessed?

Thanks to a British public commission, we’re once again relitigating Iraq. According to John Chilcot, the principal author of a new British inquiry into the war, it was waged on the basis of unchallenged, yet deeply flawed intelligence. There was no post-war planning, and diplomacy wasn’t exhausted in the lead up to military action that should have only been used as “a last resort.”

As he released the 6,000-page, 12-volume, 2.6 million-word report Wednesday, Chilcot said his inquiry didn’t attempt to assign legal culpability. Nevertheless, he said, legal justifications for the war were “far from satisfactory.”

That will no doubt be used as ammunition by those who’ve long called for trying the British prime minister at the time, Tony Blair, on war-crimes charges. And can Bush be far behind?

Politically, the Chilcot report will embolden those, like Bernie Sanders, who say Iraq was “the worst foreign-policy blunder in the history of the country.” Or Donald Trump, who just added Saddam to the list of his favorite foreign dictators. “Saddam Hussein was a bad guy, right?” Trump told a crowd in North Carolina Tuesday. “But you know what he did well? He killed terrorists. He did that so good.”

OK, leave it to Trump to ignore Saddam’s well-documented support of terrorists in the Mideast. Yet he’s reiterating a received wisdom: Saddam’s Iraq had “nothing to do with 9/11” and by overthrowing him America and our allies have opened Pandora’s box, which bred the current Mideast mess and gave birth to ISIS.

True: Dismantling state organs after the overthrow of Saddam — known as de-Baathification — was a terrible mistake that deepened sectarian hatreds. It was based on a faulty, idealistic notion that once Saddam was gone, freedom would replace his despotic rule.

But remember when the decision to invade Iraq took place: two years after 9/11, the deadliest terrorist attack in American history, which didn’t at the time look like a one-off. Anthrax envelopes, a shooting spree and the fear of a follow-up attack put America on war footing.

Afghanistan was first, but it wasn’t enough. While al Qaeda was headquartered in Taliban-ruled Afghanistan, its principals were Arabs and they were a product of the Arab world’s ills.

As in Saddam’s Iraq — where chemical weapons were used to put down resurrections; where sectarian enmities that bubbled under the surface were only capped by a ruthless, corrupt and megalomaniacal tyrant; where destructive weapons, including nukes, were in development in the past, were widely believed to still exist, and could easily fall into the hands of terrorists.

But Chilcot’s also wrong about a very big part of the report’s conclusion. Diplomacy with Iraq did, in fact, reach a dead end. At the United Nations, Russia and France were about to dismantle the sanctions regime that kept Saddam from resurrecting his chemical, biological and nuclear programs.

And while Bush made terrible mistakes after toppling Saddam, he eventually managed to turn the tide. Between 2007 and 2009, al Qaeda in Iraq was defeated, the Sunnis cooperated with Baghdad and Iraq was mostly peaceful.

President Obama’s decision, in 2010, to back Nouri al-Maliki — even though he’d lost an election — and, more generally, America’s vow to withdraw forces from Iraq threw Iraq back into chaos.

On Wednesday, Blair insisted that “Iraq in 2003 had no chance; Iraq today has a chance.” Well, maybe — though it’s hard to see it now. But clearly his and Bush’s decision to overthrow Saddam wasn’t the only reason for the current bloody state of the Middle East or for Sunni-Shiite enmity or the rise of Islamist terrorism.

History is much trickier than that.

George H.W. Bush’s decision not to overthrow Saddam after the first Iraq war in 1991 was just as momentous. Bill Clinton’s decision to largely ignore the 1996 attack on Americans housed in Saudi Arabia’s Khobar Towers signaled to Islamist terrorists that they could strike Western powers and get away with it. Obama’s avoidance of any serious military intervention in Mideast disputes prolongs war, mayhem and terrorism.

There’s a lot to criticize about how Bush and Blair led their respective governments — and the world — in the last decade. Their actions are endlessly dissected and investigated. But lack of leadership and inaction, while much harder to write lengthy reports about, can be just as bad, if not worse.

Because, errors and all, an America-led world is a better place than one led by Russia, China and ISIS.

Article Link to The New York Post:

Trump: 'The FBI Just Made Beating Hillary That Much Easier'

By Daniel Halper
The New York Post
July 7, 2016

FBI Director James Comey did Donald Trump a favor by clearing Hillary Clinton of criminal wrongdoing in the e-mail scandal, Trump said Wednesday while telling The Post in a wide-ranging interview that she’s so “corrupt” that there’s no one else he’d rather face in the general election.

In a sit-down interview in a gold-trimmed, wood-paneled boardroom on the 26th floor of Trump Tower, the presumptive GOP presidential candidate described Clinton as deeply flawed and extremely vulnerable.

“I would rather face her than Bernie,” Trump said, alluding to the prospect that Democrats would have replaced Clinton had she been indicted. “I would rather face her than almost anybody else.”

Trump said his odds of winning have increased now that he’s sure the Democratic Party won’t be dumping Clinton at their own convention at the end of the month.

Clinton remains the second-least-favored person ever to run for president, according to public polls — just behind Trump himself.

Late Wednesday, Attorney General Loretta Lynch accepted Comey’s recommendation that Clinton not be criminally prosecuted by announcing that no charges would be brought against her.

Trump has called the decision giving Clinton a pass a “total miscarriage of justice.”

His confidence comes a week and a half before he’s set to accept the Republican nomination in Cleveland and from some recent poll numbers he said show him leading the race.

He insisted he’s not continuing his presidential campaign for fun, as some critics have alleged.

“I’m doing it to make America great again,” Trump declared.

Article Link to The New York Post:

There’s A Machiavellian Method To The ISIS Madness

Like communists of yore, the soldiers of the caliphate are seeking to ‘exacerbate the contradictions’ of those ranged against them.

By Christopher Dickey
The Daily Beast
July 7, 2016

PARIS — Saudi King Salman bin Abdelaziz sounded at once angry and plaintive as he marked the end of this blood-drenched month of Ramadan.

The so-called Islamic State, ISIS, had just staged attacks in three Saudi cities, hitting near the U.S. consulate in Jeddah, a Shia mosque in Qatif, and even a mosque in the holy city of Medina.

Two days before, a car bomb in Baghdad and the fire that followed had killed more than 250 people. Before that, attackers in Bangladesh slaughtered Western patrons and locals at a popular Dhaka café. Days earlier came the stunning attack on Istanbul’s Ataturk Airport, and before that the murder of a husband and wife from the French police in front of their three-year-old son in a Paris suburb. Still earlier: the horrific slaughter at the Pulse nightclub in Orlando.

All that happened in one month on the Muslim calendar, all in the name of Allah.

Abu Mohammed al-Adnani, the ISIS spokesman and second in command, had declared Ramadan a time of “conquest and jihad.”

“Get prepared, be ready… to make it a month of calamity everywhere for the non-believers,” he said in a recording released in May. But as usual, most of the slaughter targeted other Muslims.

King Salman, “Custodian of the Two Holy Mosques,” vowed this week to meet these threats with “an iron fist,” as of course he would. But his statement acknowledged the heart of the problem with a more original and more memorable phrase: the “biggest challenge,” he said, is how to keep young people away from the “masterminds of misleading ideas.”

Salman also called for Muslim unity to face the ISIS menace. But given that the Saudis’ proxy wars with Iran from Lebanon to Syria to Iraq, in Bahrain and in Yemen are waged with sectarian vehemence, the king’s call for “Muslim unity” sounds oxymoronic, a true contradiction in terms.

And contradictions, in fact, are the foundation that ISIS is built on.

The so-called Islamic State chooses its targets and tailors its terror to reach specific audiences. To do this, it tries, as communist revolutionaries once did, to “exacerbate the contradictions” among its rivals: build on suspicions, inflame resentments, inspire violence and repression that engenders more violence and rebellion.

In a global war of attrition, which is what we’re looking at, the key to defeating ISIS—aside from killing its operatives—is to resist absolutely and unequivocally its strategy using terror to divide and demoralize.

But that’s no easy feat. There are just so many contradictions in Arab and Western society, and ISIS understands them better, it seems, than many Arab and Western leaders do. Its “masterminds of misleading ideas” employ what the French call la polique du pire, a policy that provokes a society to turn on itself, aiming eventually to make the masses ungovernable, and daily life unbearable.

In the last few weeks, as ISIS has come under pressure on the ground in Iraq and Syria, its response has not been a blind, senseless lashing out. It has been a carefully calculated campaign using a wide array of available human tools, some of them acting under direct orders, some of them loosely affiliated, and some merely inspired to carry out mass murder against a backdrop of psycho-sexual confusion—but always serving the interest of the self-anointed “caliphate” that ISIS claims to be.

Let’s go down the list from this gruesome month of fasting, prayer, and slaughter:

The Saudi Attacks — Conspiracy theories abound, which is part of the ISIS game sowing suspicion and doubts. But the basic messages are straightforward: a bomb near the U.S. consulate draws attention to the longstanding Saudi-U.S. alliance, and pretends to threaten it. A bomb near a Shia mosque in Qatif suggests there may be those in Saudi willing to attack Shiites in the same manner they’ve been attacked in Iraq, Pakistan and elsewhere, thus exacerbating sectarian tensions inside the kingdom. And the attack in Medina is a direct affront to the monarchy, showing the Custodian cannot defend the Two Holy Mosques.

According to a fact sheet from Riyadh, Saudi Arabia has suffered more than 25 terror attacks in the last two years, and ISIS has declared two Saudi provinces, along with Bahrain, part of its caliphate. In response, some 2,800 alleged terror suspects have been arrested since 2015, and some have been beheaded. Yet Medina is hit by a suicide bombing. That is a particular embarrassment to Crown Prince Mohammed bin Nayef, the interior minister and longtime U.S. ally in the counter-terror wars.

Bin Nayef is now in an ill-concealed power struggle with Deputy Crown Prince Mohammed bin Salman, the king’s favored son, who is minister of defense and holds the economic portfolio as well. Heightening the friction between MBN and MBS, as these two princes are called, is an added plus from the ISIS point of view.

The Kerrada Bombing in Baghdad
— For more than a decade, the core strategy of ISIS and the organization from which it sprang, Al Qaeda in Iraq, has been to incite sectarian war between Shiites and Sunnis, with the idea that in the end, and not least for self defense, the Sunnis would side with ISIS.

But the record-setting carnage in Kerrada, where the bomb ignited a crowded shopping center with no fire exits, has had a deeper impact than what might be described, in Iraq, as the usual atrocities. And it comes days after the government’s reconquest of the nearby city of Fallujah, an ISIS stronghold since 2014, which was supposed to have made people in Baghdad more secure.

Among other aftershocks, Interior Minister Mohammed Ghabban, a member of the Badr Organization widely seen as a front for Iran, has been forced to resign. Even if someone else from Badr replaces him, ISIS can score that as a victory.

But as blogger Sajad Jiyad wrote, the effect of this incident, on top of so many others, is deeply, fundamentally corrosive:

“The recriminations are underway, politicians using the tragedy for score settling or to outdo each other in their condemnations and even sectarian innuendo. People are disgusted at the entire ruling system in Iraq, blaming them as much as Daesh [ISIS]. Perhaps that is the biggest change I’ve seen over the years in such attacks, a paradigm shift where the first point of responsibility is the government rather than the terrorists who conducted the attack.”

The Bangladesh Hostage Taking and Murders
— As Daily Beast columnist Maajid Nawaz pointed out, the killers struck at a moment when the political establishment already has been torn asunder by the heavy-handed rule of Sheikha Hasina’s Awami League, which has seen to the execution of several of its Islamist rivals.

From the jihadist point of view, Nawaz wrote, “The killing of the leader of the country’s oldest Islamist group is too good an opportunity to pass up. It provides perfect justification for the jihadist notion that secularists are ‘at war with Islam’ everywhere, which is why Muslims must fight back. Call jihadists anything, but bad at propaganda they are not.”

ISIS immediately claimed the murders in Dhaka’s Holey Artisan Bakery, which left 22 people dead, some of them reportedly after gruesome torture. That the gunmen came from relatively well-to-do families and had not previously been associated with ISIS does not in the least affirm that some other group was involved. Indeed, the use of previously unaffiliated killers has become standard operating procedure for the masterminds of misleading ideas.

The Attack on Istanbul’s Airport
 — In Turkey, ISIS has taken a different tack. The intelligence services of Ankara and Washington have little doubt that the so-called Islamic State, which borders Turkish territory in many places, was behind the attack that killed 44 people and injured 240 people on June 28. Indeed, specific operatives from Chechnya and from former Soviet republics have been named and arrested.

But ISIS has not claimed responsibility, most likely, because it is punishing what had been an important tacit ally, the Turkish government and security services under President Recep Tayyip Erdogan. The ISIS leadership had virtual carte blanche to import fighters through Turkey and export oil across the Turkish border to fill its war chest in 2014 and 2015.

Under pressure from the United States and Europe, the Turks have been cracking down on these routes in recent months. But ISIS may yet think it can renew the old arrangement, and is punishing the Turks in hopes they will see the wisdom of such a deal. A claim of responsibility would make that more difficult.

This is almost standard operating procedure in the Middle East, where plausible—or even implausible—deniability has long been a favorite tool of those who use terror as a means of communication. Atrocities can be carried out, pressure exerted, and then agreements struck, with both sides eventually agreeing that somebody else must have been responsible, as long as no one explicitly claims credit in the first place.

The French Cop Killer — The murderer who stabbed to death a French policeman and his wife, who also worked for the police, in their home in Magnanville outside of Paris on June 14—with their 3-year-old son watching—chose easily available targets. At the time, French cops were not allowed to take their service weapons home, so they were basically defenseless. (That rule has since been changed.)

The murderer fit a by-now familiar profile in France and Belgium, one common to the men who carried out the Charlie Hebdo and kosher supermarket massacres in January 2015, the Paris slaughter in November and the Brussels atrocity in March: He was already known as a radical Islamist and a potential threat, but managed to keep a low enough profile long enough for the authorities to lose interest in him. Then he struck, and in this case live-streamed his diatribe on Facebook.

His message to would-be emulators? Killing like this is “so easy,” people should give it a try. The strategy: to show the French that even with their state of emergency and cops and soldiers all over the place, they are still vulnerable.

As if to underscore this point, a report by a French parliamentary committee investigating the earlier attacks concluded this week that the French intelligence services need to be reorganized because they are “not up to” the jihadist challenge.

The longer strategy served by such attacks is to force the French to pull out of the fight against ISIS, and eventually to provoke such internal repression against Muslims that there will be civil war here. Whether that will work is doubtful, but the jihadists certainly will keep trying.

Orlando — The ISIS strategy in the United States, thus far, has been to encourage lone wolves, or, as veteran counter-terror analyst Brian Jenkins calls them, “stray dogs,” to strike when and where they can. Little direction is given. The notion is to show that ISIS can reach into American life one way or another and sow terror, pure and simple, then to see what “contradictions” emerge.

If people with personality orders, high-powered rifles and pistols want to claim allegiance to the ISIS cause, so much the better. And if Donald Trump or any other American demagogue wants to exploit the fear provoked, that’s truly the cherry on top of the cake.

Omar Mateen’s rampage in Orlando fit neatly into the ISIS worldview, in which LGBT people should be thrown from building, stoned, or exterminated in other ways. But Mateen’s own demons appear to have played a major role in his decision to lay waste the Pulse nightclub, killing 49 people, and the FBI has found no direct orders given to him by ISIS.

From the point of view of ISIS, which did claim Mateen as its own, after the fact, it didn’t matter that there’d been little or no contact with him before. Indeed, that’s the genius of that organization. The masterminds don’t need to give explicit orders, they just spread their “misleading ideas.” And the war goes on.

Article Link to The Daily Beast:

Oil Prices Edge Up On U.S. Crude Stock Draw, But Slowing Economies Weigh

By Henning Gloystein
July 7, 2016

Oil prices edged up on Thursday, supported by a report of another fall in U.S. crude inventories as well as a weaker dollar, although a glut of refined products and economic growth concerns continue to drag on markets.

International Brent crude oil futures were trading at $48.96 per barrel at 0712 GMT on Thursday, down from a morning high of $49.17 per barrel but 17 cents above their last settlement. U.S. West Texas Intermediate (WTI) crude was at $47.67 per barrel, up 24 cents from its last close.

Traders said that a report of a reduction in available U.S. crude oil stockpiles was the main price driver.

The American Petroleum Institute (API) said its data showed U.S. crude stockpiles fell by 6.7 million barrels last week, declining for a seventh week in a row.

Analysts also pointed to a lower U.S. dollar.

"Oil prices also rose, with a weaker U.S.-dollar making commodities priced in the currency more attractive," ANZ bank said.

However, traders warned that an economic slowdown and a refined product glut were weighing on oil markets.

"Demand remains a concern, as both spot and forward demand are indicating... weakness," said commodities brokerage Marex Spectron.

Asian crude demand is slowing and by some measures falling, and many market participants suspect it is not just a seasonal phenomenon, but also due to an economic slowdown and perhaps even more permanent structural changes.

"Growth is slipping again..., and things don't seem quite so rosy. Exports continue to disappoint and may weaken again once the ripples from Brexit reach Asia's shores," HSBC said in a note to clients.

German industrial output plunged unexpectedly in May for its steepest monthly drop since August 2014, data showed on Thursday, suggesting Europe's largest economy lost steam in the second quarter after a surprisingly strong start to the year.

Output was down 1.3 percent on the month, data from the Economy Ministry showed, below the consensus forecast in a Reuters poll for an unchanged reading.

On the supply side, Libyan officials said oil export terminals that have been shut since 2014 could open again soon, potentially restoring 600,000 barrels per day of crude export capacity.

Article Link to Reuters:

Thursday, July 7, Morning Global Market Roundup: Stocks Bounce, Aussie Dollar Hit By Ratings Blow

By Wayne Cole
July 7, 2016

Asian share markets crept ahead on Thursday after upbeat U.S. economic data took some of the sting out of the latest Brexit scare, while the Australian dollar briefly dipped as the country's triple A credit rating came under threat.

The European market were also seen starting firmer, with the FTSE .FTSE and CAC .FCHIseen up around 1 percent and the DAX .GDAXI rising 0.8 percent. U.S. S&P futures ESc1 were little changed.

The Aussie initially fell half a U.S. cent to $0.7470 AUD=D4 after Standard and Poor's cut the country's outlook to negative from stable, citing a need for fiscal repair.

The agency had warned it may act after inconclusive elections over the weekend suggested the next government would have a hard time getting reforms through to law.

However, investors are less sensitive to ratings these days given so many countries were downgraded in the wake of the global financial crisis and the Aussie soon steadied at $0.7511.

Likewise, Australian bond futures barely budged YTCc1 as 10-year yields of 1.88 percent make the debt highly attractive compared to the negative yields of some of its peers.

Elsewhere in Asia, the mood was one of relief that Brexit fears had faded for the moment. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8 percent.

Japanese shares were restrained by a strong yen and the Nikkei .N225 slipped 0.9 percent.

Still, it was notable that while bond markets have been signaling recession, equities had stayed fairly resilient.

"The most optimistic interpretation is that markets believe a limited regional shock is going to result in a significantly easier stance for global monetary policy," David Hensley, an economist at JPMorgan, said in a note.

"At ground zero, the Bank of England has indicated it may soon cut rates. There is widespread speculation the BOJ and ECB will ease, a view we share."

More importantly, JPMorgan believes the Bank of England will revive its quantitative easing process while the UK government reverses course on austerity and loosens fiscal policy, which could be a green light to fiscal expansion globally.

No Fed Hike Until 2019?

Sentiment got a welcome lift from a survey showing activity in the giant U.S. service sector hit a seven-month high in June as new orders surged and companies hired more.

That helped the Dow .DJI rise 0.44 percent, while the S&P 500 .SPX gained 0.54 percent and the Nasdaq .IXIC 0.75 percent.

Minutes from the U.S. Federal Reserve's June policy meeting confirmed what was already suspected - that officials were concerned ahead of the Brexit vote, which subsequently erased $3 trillion from global equities over two days.

The British pound remained vulnerable at $1.2975 GBP=4, having slid almost 3 percent in the previous two sessions to carve out a 31-year trough of $1.2898.

The safe-haven yen was well bid at 100.73 per U.S. dollar JPY=, while the euro held steady at $1.1090 EUR=.

Markets have assumed the uncertainty over Brexit, and the resulting strength in the U.S. dollar, has made it very unlikely the Fed will be able to hike rates again this year.

Fed fund futures for December <0> imply a rate of 38.5 basis points, almost exactly where the effective rate is now. Remarkably, the market is not fully priced for a hike until the start of 2019.

Treasuries have in turn enjoyed an historic rally that has taken yields to record lows right out to 30 years. The benchmark 10-year note US10YT=RR was paying just 1.37 percent, some way below the rate of U.S. inflation.

Indeed, analysts estimate over $10 trillion of government debt around the world offer only negative yields, a nightmare for fund managers and insurance companies who have committed to future pension payments at positive rates.

In commodity markets, oil prices recouped some lost ground on the better U.S. data and expectations for a sharp drop in crude stockpiles.

NYMEX crude futures CLc1 were quoted 25 cents firmer at $47.68 a barrel, while Brent LCOc1 added 23 cents to $49.03.

Article Link to Reuters:

China's Innovation Economy A Real Estate Bubble In Disguise?

By Sue Lin-Wong
July 7, 2016

The Chinese government's call to the nation to build an innovation-driven economy from the top down has sparked a rush by local governments to construct new buildings in the name of supporting creativity.

Innovation centers have been popping up around the country and are set to more than double to nearly 5,000 in the next five years, according to internet research firm iiMedia. The only problem for local governments; entrepreneurs are not moving in.

Many centers are in small Chinese cities or towns, not ideal locations for attracting startups. There is no local market for their product, no local ecosystem of suppliers and fellow entrepreneurs and centers generally provide only basic amenities, such as a desk and a telephone. They lack the financial, technical or marketing expertise that many startups need.

Most incubators have occupancy rates of no more than 40 percent, iiMedia says.

The result: like steel mills, theme parks and housing before them, the country now faces a glut of innovation centers as another top-down policy backfires to leave white-elephant projects and a further buildup of debt.

"The risk of a bubble is extremely large," said Shi Jiqiang, a partner at Leilai Management, which runs day-to-day operations at a startup base in the city of Tianjin, near Beijing.

"This is both a test for government and for the managers of startup spaces ... there aren't enough entrepreneurs."

China's Ministry of Industry and IT declined to comment and the state planning agency, the National Development and Reform Commission, did not respond to a request for comment.

Beijing argues its development model that worked so well for infrastructure and real estate, powering the country through the global financial crisis, can build successful, high-tech startups.

With slogans such as "mass entrepreneurship" and "internet plus", Beijing has called for innovation centers to be built all over the country, hoping to lay the groundwork for the next Jack Ma - who founded e-commerce giant Alibaba - to emerge.

It has encouraged college students and even migrant workers to try their hand at starting their own businesses to transform China into a high-tech economy less reliant on basic manufacturing.

Almost 80 percent of the capital for the innovation centers springing up around the country is coming from the government or universities, which are state-backed in China, or a combination of sources, iiMedia said.

"In any sort of market, you want the experts making the decisions, not some technocrat or bureaucrat," said William Bao Bean, investment partner at venture capital fund SOSV, which invests in startups. "You don't tend to see too many successful companies come out of a government-based decision-making process."

Open For Business

The small town of Shacheng in Huailai county in northern Hebei province answered Beijing's call for innovation by building two 25-storey adjoining towers - one for office space and the other as an innovation center.

However, the innovation center, offering desks and a period of free rent and utilities to potential startups, is empty. The floors are littered with rubbish and dust.

Like other towns in China's industrial heartland, Shacheng is feeling the brunt of Beijing's push to reduce massive industrial overcapacity. Glass and cement factories, and coal mines and steel mills have been shut down.

The town offers few signs of the central government's innovation campaign. Chinese characters hanging on a fence in Shacheng's economic zone spell out "mass entrepreneurship" but otherwise local people said they had not seen any promotion of the innovation center and they felt it was not targeted at them anyhow.

Instead, they assumed it was designed to attract students and entrepreneurs from Beijing, some four-hours away by train.

"I wouldn't consider becoming an entrepreneur. You need money to do that. No, for someone like me, I don't really have many options," said Liu Haiyang, 30, who runs a shop next to the innovation center, selling bathroom fittings.

Shacheng's local authority and the county economic planner declined to comment.

Residents said they hoped their economic fortunes would improve when a high-speed rail link with Beijing, which will cut travel time to the capital down to half an hour, is completed in 2019.

"The incubator is losing money," said a businessman with strong ties to the local government, who spoke on condition of anonymity. "But we're playing the long game, hoping this push will create companies that pay taxes and add jobs to the local economy."

Elsewhere, some local governments have rebranded empty office space as innovation centers. At the new Yujiapu economic zone in Tianjin near Beijing, the government has designated 5.5 square kilometers for 11 incubators with at least four more on the way. The zone's flagship incubator is only 30 percent occupied, an administrative assistant said.

"All these office buildings have already been built," said Yang Dehong, a local government official. "We might as well use them, help startups reduce their costs," she said.

"And ride the wave of this (innovation) policy," added Pei Lei, another government official.

Against The Odds

Venture capitalists say startups gravitate to where successful innovation centers are already up and running, or where they can find the right mix of a local market, talent, expertise and fellow entrepreneurs.

That generally means the big cities, such as Zhuhai, Beijing, Guangzhou, Shanghai and Shenzhen - the five cities that top the rankings for startups in China.

"The idea that you can predict location or the idea that every geography happens to have this nascent group just waiting to be given capital to go create the next Alibaba, is just not true," said Gary Rieschel, founder of Qiming Venture Partners, a China-based venture capital firm.

Other more fundamental factors are holding back an entrepreneurial culture in China, startup experts say.

Even in towns with universities, young Chinese are often pressured by their parents to find a job considered more steady, such as in government or with a private company. Starting your own business is seen as too high risk.

The Chinese education system, which largely focuses on rote learning, also crimps the development of creative thinkers, said Bo Yiqun, chief executive of a privately run co-working space in Beijing with 85 percent occupancy.

"Innovation is related to education," Bo said. "If education levels don't rise, we can't expect innovation to catch up that fast."

Even if all those factors were in place, government efforts would have more chance of success if officials teamed up with former entrepreneurs or venture capitalists with money at stake, Chinaccelerator's Bao said.

"Where it's not worked the world over, as well as in China, is where the governments themselves are making the investment decisions," he said.

Article Link to Reuters:

China's Innovation Economy A Real Estate Bubble In Disguise?

Fog Of Brexit Clouds Outlook For Central Banks Seeking Clarity

By Howard Schneider and Ann Saphir
July 7, 2016

For much of this year, the dollar, oil prices, and economic conditions largely behaved as the U.S. Federal Reserve had expected, allowing policymakers to plot further interest rate increases.

Not anymore. Since Britain's June 23 vote to leave the European Union, every piece of economic, such as Friday's jobs report, data comes with a question mark - how much does it reflect domestic economic developments and how much the short and long-term implications of an economic reordering that may take years to play out.

For Fed policymakers it means balancing the mainly positive flow of U.S. indicators against the risk that major trading partners fall into recession, the dollar surges again, or the terms of Britain's divorce stress the global financial system.

With past overseas events of similar importance, such as the euro zone debt crisis, it has taken the Fed months to get clarity. Brexit may prove just as difficult to decipher, already helping lift the dollar and drive U.S. Treasury yields to historic lows - both trends making it harder for the Fed to move.

"You don't know how long that is going to last and indeed we don't know the magnitude," Federal Reserve Governor Daniel Tarullo said on Wednesday. "I doubt there will be a moment where people say, okay, Brexit is done."

Britain's decision comes at time when the Fed has grown more sensitive to international events, postponing what seemed to be imminent rate increases twice since last summer because of events far from U.S. borders. In minutes of the June meeting, released on Wednesday, policymakers explicitly tied consideration of further rate increases to "additional data on the consequences of the UK vote".

No one expects the United States to slip into a recession because of Brexit. However, recent research by the Fed, the Bank for International Settlements, the International Monetary Fund and some private economists has raised the possibility that the Fed may be fundamentally constrained by outside events, like the UK vote, that have made recovery slow and the Fed's inflation goal elusive.

The dollar appears to have become more sensitive to global economic conditions, and its rapid rise since 2014 has curbed U.S. exports and upended the Fed's inflation outlook. Long-term U.S. bond yields, which remained near record lows on Wednesday, have grown more sensitive to global capital flows and less to Fed policy. Even the Fed's key estimate of a neutral rate of interest may be anchored by such rates in Europe and other, slower-growing, developed economies.

If the past is any indication, uncertainty surrounding Brexit could fog the lens for months to come. In mid-2011, when Italian bond yields spiked amid renewed concerns about the euro zone's future, the Fed added to its statement that "strains in global financial markets" had created "significant downside risks to the economic outlook."

Cloudy Ball

The Fed kept the language for 16 months, until well after the European Central Bank had intervened with a forceful pledge to keep the currency union intact.

"I would suspect they are really struggling how to decipher short versus long term, and also what is happening in the U.S. domestic economy," said Beth Ann Bovino, chief U.S. economist for S&P Global Ratings. "I would say the Fed's crystal ball is very, very cloudy."

If the U.S. economy keeps growing and creating jobs as expected, the Fed's job will become easier, said San Francisco Fed senior vice president Mary Daly. But any misses will raise questions whether the causes are domestic or can be traced back to events such as Brexit, and if so, whether they will act as a temporary drag or could mark a fundamental shift in the global economy.

The IMF, which is expected to cut its global growth forecast in a mid-July update, is already factoring the Brexit vote into its analysis. In a report on Germany released this week, the IMF noted that the strong trade and financial linkages between Europe's largest economy and the UK had the potential to "derail the growth momentum" in a country whose success is central to lifting eurozone growth, and, in turn, helping the world economy grow faster.

The San Francisco Fed's Daly said any surprises would prompt policymakers to go back to the Fed's models and search for domestic or international causes.

"We are watching this carefully," Daly said in an interview. "If the data don’t evolve as we think and we don’t get consistent job growth as we think, then of course we would say, it looks like another step down."

Investors, who earlier this year had taken the Fed's cue that a rate increase could come in June, have now pushed expectations for a policy move deep into next year.

Ken Matheny, senior economist at Macroeconomic Advisers, said he expected Brexit to nick U.S. growth, but that was all investors and policymakers will be able to say for a while.

"I am not sure that in six months we will know. Maybe we will have some understanding of what the settlement will be between the eurozone and the U.K., but even if we know the settlement do we know the economic impact? I am not sure."

Article Link to Reuters:

Fog Of Brexit Clouds Outlook For Central Banks Seeking Clarity

Clinton Makes The FBI’s Least-Wanted List

Explaining why he wasn’t recommending prosecution, Director James Comey instead showed that charges would have been justified.

By Michael B. Mukasey
The Wall Street Journal
July 7, 2016

Federal Bureau of Investigation Director James Comey opened and closed his statement to the press Tuesday with expressions of gratitude and pride to be associated with the bureau. His description of FBI agents’ work on the Hillary Clinton email investigation showed why he feels that way. Whether the rest of his statement—explaining why he wasn’t recommending prosecution of Mrs. Clinton—should make the feeling mutual is an open question.

The agents had to reconstruct thousands of emails from a series of private servers used and abandoned over the years, some of them turned into confetti in the process. The FBI agents also had to tease out from the files of other government employees emails that they might have received from or sent to Mrs. Clinton during her tenure as secretary of state, and weigh their importance.

Unlike Mrs. Clinton’s own lawyers—who decided which emails to produce by reading just the headings—the agents read each of the many thousands of emails and fragments that passed through their hands. The job was made no easier by the decision of those lawyers to obliterate the email record they had examined, making it impenetrable to forensic examination. All in all, these tasks of the agents bear comparison with the labors of Hercules.

Moreover, that the FBI seems to have limited its inquiry to the two federal criminal statutes mentioned in Mr. Comey’s statement appears entirely reasonable. The level of intent and specificity necessary to prove purposeful intent to destroy government records, or intent to obstruct justice—even assuming such activity was afoot—would have required testimony by an actively cooperating participant. Plainly, no such cooperation was forthcoming.

That left the two statutes discussed in Mr. Comey’s statement—one a felony, the other a misdemeanor—and here the announced decision is harder to understand.

It is a felony for anyone entrusted with lawful possession of information relating to national defense to permit it, through “gross negligence,” to be removed from its proper place of custody and disclosed. “Gross negligence” rather than purposeful conduct is enough. Yet Mr. Comey appears to have based his recommendation not to prosecute on the absence of “clear evidence that Secretary Clinton or her colleagues intended to violate laws governing the handling of classified information”—though he did say in the same sentence that there was “evidence that they were extremely careless in their handling of very sensitive, highly classified information.”

As an example of the kind of information at stake, he described seven email chains classified at the Top Secret/Special Access Program level. These were the emails that the government had said earlier are so sensitive that they will never be disclosed publicly. Mr. Comey went further, citing “evidence to support a conclusion that any reasonable person in Secretary Clinton’s position . . . should have known that an unclassified system was no place for that conversation.” To be “extremely careless” in the handling of information that sensitive is synonymous with being grossly negligent.

And what of the finding that the investigation did not disclose “clear evidence that Secretary Clinton or her colleagues intended to violate laws governing the handling of classified information”? Even the felony statute requires no such evidence, and no such intent.

The misdemeanor involves simply the knowing removal of classified documents to an unauthorized location. That is the statute to which David Petraeus, the former U.S. Army general and Central Intelligence Agency director, pleaded guilty in 2015. (He had disclosed classified documents to his biographer/mistress, who also had top-secret clearance, returned the information to him and never disclosed it in his biography or elsewhere.)

Mr. Comey mentioned three considerations prosecutors weigh in considering charges: the strength of the evidence, “especially regarding intent”; “the context of a person’s actions”; and “how similar situations have been handled in the past.”

Criminal intent of the usual sort, as noted, is not a requirement of either statute.

The only reference to context in the statement—other than repeated references to the extreme secrecy of the information—is the disclosure that the “security culture” of the State Department pertaining to email in particular was “generally lacking in the kind of care . . . found elsewhere in the government.” If that is meant to suggest that Mrs. Clinton was the victim of a bad culture, it seems fair to point out that she headed the agency where it existed.

The “similar situations in the past” in which prosecutions were brought were said to be limited to those involving “clearly intentional and willful mishandling of classified information” or “vast quantities” of information disclosed with an inference of intent; or evidence of disloyalty or obstruction of justice.

Gen. Petraeus’s case included messages showing he knew that the information was being mishandled, and initial misrepresentations to the FBI, although neither is required under the misdemeanor statute. And although the FBI may not have been involved, there are indeed reported felony prosecutions of soldiers for putting copies of classified documents in a gym bag and then not returning them out of fear of discovery; placing classified documents in a friend’s desk drawer and forgetting them; tossing documents meant to be destroyed in a dumpster rather than in the appropriate facility.

The FBI director said the investigation of Mrs. Clinton was a case for “unusual transparency,” and the transparency in Tuesday’s exercise was certainly unusual. Mr. Comey’s disclosure of his recommendation outside the context of any discussion with Justice Department lawyers was anomalous. What is supposed to happen in a matter like this is, as the director mentioned, a “prosecutive” decision—i.e., a decision made by prosecutors. It is not an investigative decision. Investigators are supposed principally to gather facts.

Mr. Comey didn’t explain why, with evidence clearly fulfilling the requirements of the two statutes involved, no reasonable prosecutor would bring a case—except for the director’s inaccurate assertion that it had never been done before.

And finally, although there was transparency about process, there was no discussion of underlying facts, only conclusions. It may be that some day there will be the usual transparency: disclosure of facts. That day was not Tuesday, and it is little wonder that many in and out of government were left both puzzled and dismayed.

Article Link to The Wall Street Journal: