Wednesday, July 27, 2016

Did Trump Outfox Hillary?

July 27, 2016

Donald Trump pushed the envelope of propriety once again on Wednesday when he challenged Russia to find Hillary Clinton’s missing deleted emails. For a presidential candidate or any officeholder of any kind to seemingly encourage Russian espionage or spying by any foreign power on the United States, let alone his political opponent, isn’t merely unprecedented; it’s outrageous, even by the debased standards of behavior by which we have come to judge Trump.

But if anyone is expecting it to hurt him, they haven’t been paying attention to anything that’s happened in the last year. It merely shows once again that he’s the consummate political entertainer-in-chief who says things that a lot of Americans are thinking—and in doing so, is distracting the public and the media from the Democrats’ national convention.

In policy terms, Trump once again sent all the wrong signals to the Russians by downplaying the possibility that they’re guilty of the hack of the Democratic National Committee emails and placing the blame for bad relations between Washington and Moscow on President Obama. If Trump were thinking more about what is in America’s best long-term interests—i.e. like a president rather than an entertainer—he’d have sent a warning to the Russians that once in office, he’d be even tougher on them than Obama and that they shouldn’t even think of trying any funny business with Ukraine or the Baltic republics on his watch.

Instead, Trump made light about the Russians doing more hacking. But while this is earning him severe and well-earned rebukes from observers with foreign policy and security experience and more evidence that he is unfit for high office, it might be an act of political genius.

This was a pointed reminder of the public’s lack of trust in Hillary Clinton. He’s not the only one who would like to see what was in the emails Clinton’s staff deleted from her personal server. In addition to anger about her not facing any punishment for her reckless handling of classified material, there are still unanswered questions about Clinton’s conduct relating to the conflicts of interest between her State Department responsibilities and the donors to her family foundation that supports their royal lifestyle. That’s why it’s likely that the instinctual reaction of a lot of Americans, including many who don’t like Trump, to the line about the Russians finding out what the Clintons are up to, was a rueful smile rather than anger at the GOP nominee.

Trump accomplished today what he’s been doing for the past year. He won the news cycle by causing the media to rivet their attention on him and his outrageous statement. He alienated no one who would be likely to vote for him and convinced many others that, once again, he’s the only person with the chutzpah to say what they think about Hillary. His conduct is infuriating, but it’s no surprise that for the first time in this campaign, he is leading Clinton in the Real Clear Politics average of national polls. If Democrats want to beat him, they need to stop clucking about his bad conduct and start understanding why so many voters like his candor.

Article Link to Commentary:

How A Billionaire Tamed The Bernie Bros

Michael Bloomberg had a mixed record with Democrats as mayor of New York, but his speech captivated the crowd in Philly—and nary a chant of “Bernie” was heard.

By Gideon Resnick
The Daily Beast
July 27, 2016

PHILADELPHIA—One mayor was too extreme. One was too lame. And one was intended to be just right.

The last option was Michael Bloomberg, who billed himself as an “outsider” (he’s a billionaire) when he trotted onstage after Joe Biden took the convention crowd in Philly to church.

He is a registered Independent who, as former head of the Big Apple, had a mixed legacy among Democrats (*coughs loudly* stop-and-frisk, Muslim spying). But as he plodded through his DNC speech at a quick clip, sometimes falling into a “What’s the Deal with That?” ‘Seinfeld’ cadence, the crowd was particularly receptive to his pitch.

“There are times when I disagree with Hillary,” Bloomberg said. “But whatever our disagreements may be, I’ve come here to say: We must put them aside for the good of our country. And we must unite around the candidate who can defeat a dangerous demagogue.”

Even at that stage, there were no audible chants of “Bernie” as an alternative to the foregone conclusion.

Bloomberg had regional quips: “I’m a New Yorker and New Yorkers know a con when we see one!”

He had Mark Cuban-esque billionaire quips: “Truth be told, the richest thing about Donald Trump is his hypocrisy.”

And he summed up a convincing argument about the ramifications of a Trump presidency: “Trump is a risky, reckless and radical choice. And we can’t afford to make that choice!”

Earlier this year, Bloomberg poll-tested the possibility of an independent run and immediately ruled it out—he hit 17 percent in a prospective matchup against Trump and Sanders. There simply was not enough room for two New York billionaires in the strangest presidential election of all time.

But Bloomberg was surprisingly effective in a speech that, on paper, sounded something like a Medium post and he managed to overshadow the current mayor of New York, who spoke hours before him.

Bill de Blasio, gangly and goofy, plowed through a quick speech during the grandparents’ dinner hour. The Clintons’ ally, whose role in their orbit has diminished since he has been enveloped a corruption scandal, was bumped from prime time for Bloomberg, a former Republican who supported spying on American Muslims in New York during his administration.

“Hillary Clinton—she’s smart, she’s steady, she’s right, and she’s ready,” de Blasio said as some in the audience looked at their phones.

If two former New York mayors in Philadelphia wasn’t enough for a race with two New Yorkers duking it out for the presidency, Rudy Giuliani also showed up.

As part of the counterprogramming provided by the Republican National Committee, Giuliani appeared at a boxing club where “The Wrestler” was filmed, to assail the Democratic nominee.

“I would be surprised,” Giuliani said, “if the Russians haven’t hacked all of Hillary’s emails way back when they were sitting in [a] garage. That server of hers was less secure than the DNC server that was hacked—considerably less secure.”

If the intersecting paths weren’t completely clear, he even referenced Bloomberg, saying the mayor had taken credit for a Muslim surveillance program he helped create.

All three mayors have had interactions with Clinton that have ranged from 9/11 relief to fundraising to golf—Trump, Bloomberg and Bill Clinton used to go on outings.

But their ability to generate excitement for or against the candidate ranged from pure vitriol to analytical reasoning.

“To me, this election is not a choice between a Democrat and a Republican,” Bloomberg concluded. “It’s a choice about who is better to lead our country right now.”

Depends on which New Yorker you’re listening to.

Article Link to the Daily Beast:

Biden Paints Trump As Deadly Choice For Nation’s Future

By Sarah Ferris
The Hill
July 27, 2016

PHILADELPHIA — Vice President Biden delivered a forceful takedown of Donald Trump on Wednesday as he sought to paint the GOP presidential nominee as a deadly choice for the nation’s future.

“No major-party nominee in the history of this nation has ever known less or has been less prepared to deal with our national security,” Biden said in an effective speech that brought thousands of people to their feet in the packed Wells Fargo Center for the Democratic National Convention.

“Donald Trump and all his rhetoric would literally make us less safe."

Biden delivered the White House's strongest rebuke yet of Trump from the convention stage, perhaps paving the way for President Obama, who is to speak later on Wednesday night. Biden's speech came just hours after Trump made headlines for encouraging Russia to hack into Clinton’s email server to obtain unreleased emails.

In one of the most stand-out speeches of the convention so far, Biden also seized on Trump’s signature line from his TV show, "The Apprentice."

"His lack of empathy and compassion can be summed up in a phrase I suspect he's most proud of having made famous: 'You're fired,' " Biden said. "How can there be pleasure in saying 'You're fired'? He's trying to tell us he cares about the middle class? Give me a break.

"That's a bunch of malarkey!” Biden said, repeating his own oft-used line as delegates stood up and flashed bright orange signs that read “Joe” around the arena.

Describing himself as “middle-class Joe,” the Scranton, Pa., native hammered Trump as a disastrous pick for American workers. Despite his long career in Washington, Biden has become a favorite of unions due to his reputation as a champion of the working class.

Biden is seen as a crucial bridge to that group of voters — which he said earlier Wednesday had been largely overlooked by “limousine liberals” in the Democratic Party. It’s a demographic that’s also being targeted by Trump.

“This guy doesn’t have a clue about the middle class. Not a clue,” Biden said.

“Actually, he has no clue, period,” he said as the crowd roared with applause and then erupted in chants of “not a clue.”

Biden offered an important show of unity for Democratic presidential nominee Hillary Clinton, who has been his occasional rival throughout the years. Detailing their 30-year relationship, Biden recalled working closely with Clinton before she became first lady up through their shared time in the Senate and their weekly breakfast meetings in his home when they served in Obama’s Cabinet.

Still, he did not call her a friend or offer warm anecdotes about working together, unlike previous speakers this week.

“Everybody knows she's smart. Everybody knows she's tough. But I know what she's passionate about. I know Hillary. Hillary understands. Hillary gets it,” Biden said.

“There is only one person in this race who will be there, who has always been there for you, and that's Hillary Clinton's life story. It's not just who she is; it's her life story. She's always there. She's always been there."

The vice president worked to ease years of friction with Clinton, including intense speculation last year over whether he would jump into the presidential race. Polls showed that Biden would have beaten Clinton in head-to-head match-ups, and Biden has in the past said himself, “I think I would have been the best president.”

And while Biden’s popularity has hovered around 50 percent over the last year, Clinton’s has dipped to about 37 percent, according to Gallup.

Biden has not yet shared a stage with Clinton in 2016. The duo will campaign for the first time together next month in his hometown after their last event was canceled in the wake of the deadly shooting of police officers in Dallas.

Ascending the stage on Wednesday was an emotional moment for Biden. Four years ago, when he addressed the Democratic convention, he was introduced on stage by his son Beau, who died of brain cancer last year. Biden has since cited Beau’s death — the latest of multiple tragedies in his life — as the reason he chose not to mount his own presidential bid this year.

In the opening minutes of his speech, Biden teared up as he offered a deeply personal tribute to his son.

“The world breaks everyone, and afterwards, many are strong at the broken places. I’ve been made strong at the broken places,” Biden said, keeping himself from choking up.

He sought to downplay his own personal tragedies by highlighting the “thousands of other people who suffered so much more than we did, with so much less support, with so much less reason to go on.”

"But they get up every morning, every day. They put one foot in front of the other. They keep going. That’s the unbreakable spirit of the people of America. That’s who we are. Don’t forget it,” Biden said, raising his voice as the entire arena stood up and cheered.

Just ahead of his speech, the crowd was revved up by a six-minute video highlighting Biden’s most popular advocacy roles. It touched on his work on issues of sexual assault, gun control, LGBT rights and, most recently, cancer, drawing robust applause.

The emotional tribute included Biden’s poignant open letter to a Stanford University rape survivor — a case that captivated attention, particularly among young people, nationwide.

Article Link to The Hill:

Bloomberg Offers Scathing Indictment Of Trump

By Peter Schroeder
The Hill
July 27, 2016

PHILADELPHIA — Former New York City Mayor Michael Bloomberg blasted Donald Trump as a “dangerous demagogue” and “reckless” choice for president in a forceful endorsement speech Wednesday for Hillary Clinton.

The billionaire political independent cast Trump, his fellow New Yorker, as a failed businessman and a risk to the country.

“The bottom line is: Trump is a risky, reckless and radical choice. And we can’t afford to make that choice,” the three-term mayor said. “I know Hillary Clinton is not flawless; no candidate is. But she is the right choice, and the responsible choice, in this election,” he said of the Democratic presidential nominee.

Bloomberg, who has made gun control the centerpiece of his post-mayoral political career, seriously considered mounting his own independent bid for the White House. He decided against the bid when he determined he would not win a race against Clinton and Trump.

“There are times when I disagree with Hillary. But whatever our disagreements may be, I’ve come here to say we must put them aside for the good of our country,” he said. “We must unite around the candidate who can defeat a dangerous demagogue."

Bloomberg made his pitch directly to voters exhausted by both parties and dissatisfied with their choice in candidates.

“I don’t believe either party has a monopoly on good ideas or strong leadership,” he said. “When I enter the voting booth each time, I look at the candidate, not the party label. Probably not many people in this room can say that, but I know there are many watching at home who can.”

Bloomberg, who became a billionaire with a financial data and media company bearing his name before seeking office, argued that Trump, the GOP presidential nominee, is a far cry from the business titan he claims.

“Through his career, Donald Trump has left behind a well-documented record of bankruptcies, thousands of lawsuits, angry shareholders and contractors who feel cheated, and disillusioned customers who feel ripped off,” he said. “Trump says he wants to run the nation like he’s run his business. God help us.”

He took Trump to task for blasting trade deals on the campaign trail while using overseas manufacturers to produce products bearing his name. He accused him of gaming the U.S. visa system and hiring illegal immigrants while vowing to deport them if elected president.

“Truth be told, the richest thing about Donald Trump is his hypocrisy,” he said.

Article Link to The Hill:

Trump's Nationalist Appeal Fades When He Starts Winking At Putin

By Megan McArdle
The Bloomberg View
July 27, 2016

The word of the year 2016 has to be “nationalism.” All over the developed world, electorates seem discontented with elites who were too quick to embrace immigration and trade, too unwilling to value native culture, native workers, native interests over those of foreign lands. Donald Trump’s campaign has some unique American twists, but when you pull back the camera, he looks like part of a pattern of resurgent nationalism, nativism, a desire to hear a politician stand foursquare for “Us” against “Them.”

Trump has played on that desire very well, of course. At least, until now. Then today he gave a press conference where, among other things, he invited Russia to find and release missing e-mails from Hillary Clinton’s private server.

The possibility that Russia has been trying to influence this election has already been raised by reporters and Democrats. Trump seems to have a lot of Russian money in his projects, and his advisers haveclose ties to Vladimir Putin’s regime. He’s also considerably friendlier toward Putin than Republican candidates are wont to be. And the feeling seems to be mutual; Russian media backs Trump, and there are credible allegations that the recent leaks of Democratic National Committee e-mails, which started the Democratic convention on a chaotic note, were the product of a hack by Russian intelligence services.

This argument, however, is the sort that generally stays mostly within the wonk community. It’s a complicated “follow the money” story. Those always sound great in movies, but most readers (voters) are not going to sit still through your 15,000-word tour of banking statements and legal filings.

Trump’s pronouncement today, on the other hand, was the sort of gaffe that every voter can understand -- and resent. It’s the sort of statement that seems precision-calibrated to alienate exactly the nationalists whose votes he’s seeking.

“Nationalism” is a bit of a dirty word these days, because people have done some very bad things in the name of nationalism. On the other hand, they also did some good things, like … building modern nations. The sense of the nation as an important source of identity is rather modern, and while it has been the cause of wars, that identity was also absolutely necessary to get all those folks to do anything together -- like have police and welfare states and foreign aid and all the stuff that we like nations doing. Tribalism, for all its flaws, is one of the main vehicles that human beings have for collective cooperation. (Market exchange is the other one.)

Inviting a foreign power to start attacking Clinton seems like a first-class way to engage voters’ nationalist instincts. No matter how much one faction of the American tribe may hate Clinton, she’s still an American, and this is still an American election. If we have to choose between having our president selected by other Americans we dislike and having our presidential election swayed by the government of another country, I suspect that most of us would prefer to stick with our fellow Americans.

I was skeptical that the rumors that Putin was trying to help Trump get elected would actually matter in this election. On the other hand, when Trump starts soliciting that help, that certainly raises some alarms.

In Trump’s thumping rhetoric, voters found the nationalist strain they’ve been looking for. But his statement today makes it sound as if Trump doesn’t really feel any of that sentiment. He’s perfectly happy for his country to be manipulated by foreigners, as long as this happens to advance the interests of one Donald J. Trump.

Article Link to The Bloomberg View:

Trump Leading Hillary By Largest Margin Yet In Latest Poll

By Bob Fredericks
The New York Post
July 27, 2016

A new poll out Wednesday showed Donald Trump leading Hillary Clinton 47 to 40.4 percent — his largest margin yet in the presidential race.

The results of the USC/Los Angeles Times poll likely reflect the so-called “bounce” candidates get immediately after their party’s convention.

The results also follow FBI Director James Comey’s disclosure in July that Clinton was “extremely reckless” using private e-mail to conduct government business while serving as secretary of state.

Clinton is expected to get a boost of her own after this week’s Democratic National Convention in Philadelphia.

Other recent polls reflect a tighter race, with the RealClearPolitics average showing Trump barley leading the former first lady, 45.7 to 44.6 percent.

The USC/LA Times survey tracks the opinions of about 3,000 people who have agreed to participate.

Article Link to the New York Post:

The DNC Is One Big Corporate Bribe

Drink up—it's on us! Then go protest the TPP to your heart’s content.

By David Dayen
The New Republic
July 27, 2016

To get to the Democratic National Convention, you take the subway to the AT&T Station and walk to the Wells Fargo Center. Along the way, you’ll stroll by the Comcast Xfinity Live complex, where delegates and honored guests can booze it up. You’ll also see the “Cars Move America” exhibit, an actual showroom sponsored by Ford, GM, Toyota, and others. Finally, you’ll reach your seat and watch Democrats explain why we have to reduce the power of big corporations in America.

Party conventions have always been collection points for big money. But many major corporations sat out last week’s Republican gathering for fear of Trump contamination. There’s no such reticence here in Philadelphia; in fact, it feels like they’re making up for that lack of investment.

It’s hard to ferret out all the special interests at the DNC, because there’s no full public schedule. Invitations are doled out individually, and people whisper about this or that event. But enter any official hotel where a delegation is staying, or any Philadelphia landmark, and you’re likely to have a complimentary drink thrust into your hand.

As Politico’s Ben White reported on Monday, private equity firm Blackstone has a meet-and-greet on Thursday. Independence Blue Cross, the southeastern Pennsylvania arm of the large insurer, held a host-committee reception Tuesday; their chief executive is the finance chair of that host committee. The same day, Le Meridien hotel had a private event for Bloomberg LP, and the Logan Hotel hosted “Inspiring Women, a Luncheon Discussion.” The sponsors included Johnson & Johnson, Walgreens, AFLAC, the Financial Services Roundtable (the industry trade lobby), and New York Life. (How many people were they serving, given the number of corporations involved?)

Facebook commandeered a bar inside the Wells Fargo Center for delegates and guests. Twitter rented out an entire restaurant, bestowing attendees with free breakfast, lunch and an open bar. (Full disclosure: I had a slider and some salad. The way I see it, I’ve boosted their market value through the free labor of tweeting and deserve something back.) And when the speeches end, convention-goers fan out to a sea of mostly industry-sponsored parties. A particular favorite of convention delegates is the Distilled Spirits Council kickoff, which in Philadelphia featured music from Jason Isbell and former Eagle Joe Walsh.

Those are just the liquor and cocktail-weenie bribes. An entire other category of corporate cash goes toward “policy discussions,” must-see educational roundtables with a host of luminaries. On Tuesday, Obama campaign guru David Plouffe (now with Uber) and Gore consultant Chris Lehane (now with Airbnb) unveiled new polling data on the sharing economy; a second Airbnb event celebrated the 1964 Mississippi Freedom Party, featuring actor Bryan Cranston. On Wednesday, the Information Technology and Innovation Foundation convenes its own technology conference, featuring four members of Congress, a Federal Trade Commission member, the president of the biotech lobby, representatives from Microsoft and Facebook, and former White House Press Secretary Jay Carney, now at Amazon.

"The donors who are actually paying for the convention are anonymous. So God (and Debbie Wasserman Schultz) only knows where it all comes from."

A softer version—in perfect concert with the “Hillary works for families and children” theme of the week—is the corporate PR booth, highlighting charitable work, usually with children. JPMorgan Chase has its summer youth employment program. Johnson & Johnson (they get around) has the Save the Children Action Network, committed to eradicating rural poverty. I saw House Assistant Democratic Leader James Clyburn holding court at their booth when I passed by yesterday.

None of this is considered money toward the convention, which is being entirely privately funded for the first time. The donors who are actually paying for the festivities in Philly are anonymous. So God (and Debbie Wasserman Schultz) only knows where it all comes from. And clearly the DNC wants to keep it that way.

The DNC’s host committee refuses to disclose the names despite a court order, allowing corporate benefactors to hide behind anonymity. The 2014 “CRomnibus” budget law massively increased contribution limits for political convention committees, which can raise up to $800,000 from a single donor per year. And overlooked by emails showing possible anti-Bernie Sanders bias by DNC officials in the Democratic primaries, the WikiLeaks trove released last Friday actually detailedhow the DNC woos big donors with gifts and perks.

The whole spectacle is not technically considered lobbying, but it may have a more insidious effect. Not only are elected officials compromised by their proximity to big money—a version of this happens daily in Washington, after all—but the delegates, usually the grassroots activists most likely to pressure their members of Congress to stand up for Democratic values, get caught up in the muck as well.

Big money didn’t necessarily overshadow Day 2 of the convention, with the historic selection of the first female president and a succession of speakers hailing Hillary Clinton’s lifetime of work. But it pervaded the whole scene. Right before the roll-call vote, Virginia Governor Terry McAuliffe, himself one of the most prodigious corporate fundraisers in Democratic history, addressed the convention. In an interview directly afterward, he suggested that Clinton would eventually come around and support the Trans-Pacific Partnership corporate trade deal, “with some tweaks.” Clinton campaign aide John Podesta had to refute McAuliffe; for his part, Podesta has jumped in and out of government and corporate lobbying for three decades.

Wasserman Schultz, supposedly banished to Florida after resigning as DNC chair, was still hanging around Philadelphia, and slipped into the Wells Fargo Center to watch the roll call. She got to see the vice presidential nomination of her predecessor as lead party fundraiser, Tim Kaine, who ran the DNC from 2009 to 2011. During the roll call, lobbyists with the Society for Human Resource Management, which helped stall the signature equal pay bill in Congress, cheered from the floor.

Former Attorney General and corporate lawyer Eric Holder took time off from his work with Uber and Airbnb to address the convention. Former Press Secretary Robert Gibbs, now Global Chief Communications Officer for McDonald’s, showed up in a video. Howard Dean praised Hillary Clinton on health care, but strangely left out her support for the public option. Perhaps that’s because he’s a lobbyist for the pharmaceutical industry, which doesn’t want government insurance plans driving down prices. Even former Secretary of State Madeleine Albright, who added her praise of Clinton to others’ on Tuesday night, has her own lobbying firm. And Tuesday closer Bill Clinton also has a certain, er, comfort with the corporate world.

The best speech I saw on Tuesday happened five miles from the Wells Fargo Center. In an afternoon address she should have unleashed the previous night—and not sponsored by anyone but her own Senate office—Elizabeth Warren gave a couple hundred delegates a Power Point presentation showing how the economy shifted from broadly shared prosperity to a funnel of practically everything to the very top.

The average American holds 15 times more debt than a generation ago, Warren noted, and one in three with a credit file is dealing with a debt collector. “I went to college for $50 a semester,” Warren said, but now fixed costs on education and health care have skyrocketed, making it impossible for the middle class to keep up. The reason: disinvestment in the public good, deregulation of banks and industry, and policies that pushed practically all economic gains upward.

Warren pointed the finger directly at lobbying, which grew seven-fold in the past 30 years. After the speech, I asked her about the corporate underwriting of practically everything in Philadelphia this week. “Too many CEOs have learned that they can invest millions in Washington and get billions in return with special deals with the government,” she said. “This is the central issue of 2016.”

You wouldn’t know that from the official, industry-sponsored proceedings. Maybe the ideological split within the Democratic Party has something to do with Bernie Sanders’s supporters distaste for the ostentatious display of corporate money, and how it has affected the party. The rare moment when overturning Citizens United gets a mention in a convention speech, loud whoops and cheers go up. But corporate influence on the party goes way beyond Super PACs and campaign contributions; in Philadelphia, it is everywhere.

Article Link to The New Republic:

Wednesday, July 27, Night Wall Street Roundup: Wall St. Ends Lower After Fed Keeps Rates Unchanged

By Noel Randewich
July 27, 2016

Wall Street ended lower on Wednesday after the Federal Reserve left interest rates unchanged but opened the door to a possible rate increase later this year.

The Fed had not been expected to move interest rates at its two-day meeting, ended on Wednesday, but investors have been anxious for hints about when an increase might come in light of concerns about fallout from Britain's vote in June to leave the European Union.

The U.S. central bank indicated less worry about possible shocks that could push the U.S. economy off course and noted that inflation expectations were little changed in recent months.

"The statement is more constructive about the economy," said Mike Materasso, senior vice president at Franklin Templeton in New York. "A rate increase is warranted this year, most likely at the end of the year, but a lot has to do with a benign world arena."

After investors shrugged off Britain's unexpected vote in late June to leave the European Union, the S&P 500 rallied and is up 6 percent year to date.

"The bias over the near term is for the market to continue to move higher," said Eric Wiegand, senior portfolio manager at U.S. Bank's Private Client Reserve. "That being said, we expect a volatile environment. Valuations are certainly full."

The S&P 500 recently traded at about 17.2 times expected earnings, up from about 16.5 at the start of the year, according to Thomson Reuters Datastream.

In a volatile session, the Dow Jones industrial average .DJI finished down a marginal 0.01 percent at 18,472.17 points and the S&P 500 .SPX ended down 0.12 percent at 2,166.58.

The Nasdaq Composite .IXIC added 0.58 percent to 5,139.81.

Six of the 10 major S&P sectors fell, led by a 1.44-percent drop in the consumer staples index .SPLRCS followed by a 1.17 percent decline in utilities .SPLRCU.

About 7.3 billion shares changed hands on U.S. exchanges, above the nearly 6.4 billion daily average over the past 20 sessions.

After the bell, Facebook (FB.O) posted quarterly results that sent its stock 6 percent higher.

Earlier, Shares of Boeing (BA.N) rose 0.8 percent after the company reported a much small-than-expected loss in its core quarterly results.

Helped by the airplane maker's results, S&P 500 companies' aggregate earnings are now expected to decline 3.0 percent for the second quarter, compared with the 3.5 percent decline expected a day ago, according to Thomson Reuters I/B/E/S.

Coke's (KO.N) revenue miss and forecast cut sent its stock down 3.3 percent, pulling down the S&P 500 index.

In contrast, Apple Inc (AAPL.O) shares rose 6.6 percent after the company sold more iPhones than expected in the third quarter and gave an upbeat current-quarter forecast.

Declining issues outnumbered advancing ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.38-to-1 ratio favored advancers.

Article Link to Reuters:

Oil Falls To Stay Near Three-Month Lows As Headwinds Persist

By Henning Gloystein
July 27, 2016

Oil prices fell on Wednesday, staying close to their near three-month lows reached earlier this week, as plentiful supplies and slowing economic growth weighed on markets.

However, analysts said the current downtrend would be modest and that they saw a recovery later this year.

Brent crude oil futures LCOc1 were trading at $44.67 at 0656 GMT, down 20 cents from their previous close.

U.S. West Texas Intermediate (WTI) crude CLc1 was trading down 23 cents from the previous session, at $42.69.

Brent hit $44.14 the previous day, the lowest since May, and the contract has shed over 15 percent in value since peaking in June as a refined product glut as well as slowing economic growth dent the demand outlook for crude oil.

Analysts said they expected more price declines in the short-term as oversupply continued while demand growth stutters.

"My view is that oil prices will find a low between $39 and $42 per barrel over the coming weeks due to headwinds," said Ric Spooner, chief market analyst at CMC Markets in Sydney, Australia.

"After that, however, we are coming closer to seeing a balanced market again," he added, saying that $50-60 per barrel would represent such a supply and demand balance.

Oil markets have been dogged by oversupply in the last two years, which pulled down prices by as much as 70 percent between 2014 and early 2016, when Brent hit a more than a decade low of around $27 per barrel.

Article Link to Reuters:

Wednesday, July 27, Morning Global Market Roundup: Asia Stocks Settle Near One-Year Highs On Japan Stimulus

By Saikat Chatterjee
July 27, 2016

Asian stocks settled near one-year highs on Wednesday while the safe-haven yen slumped after Japan's government announced a larger-than-expected economic stimulus package, which led most of the region's bourses higher.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.1 percent, reversing earlier gains, having previously climbed to its highest level since Aug. 11, 2015. It has risen 10 percent so far this month.

Japan's Nikkei .N225 rose nearly 2 percent, leading the region higher. However, mainland China stock indexes .SSEC .SZSC bucked the regional rally, falling 2 to 4 percent in midday trade on worries about regulatory restrictions.

There is a near-consensus view among traders that the Bank of Japan will ease on Friday, most likely by ramping up its already massive purchases of government bonds and riskier assets.

Cutting interest rates into negative territory has proved unpopular with the public and the government, so deepening those cuts is a less likely option, sources familiar with central bank thinking say.

But some market watchers say the BOJ decision is too close to call with many central bank policymakers preferring to hold off on action as they expect a fiscal stimulus package and a delay in next year's sales tax hike to boost growth.

Japanese Prime Minister Shinzo Abe said on Wednesday his government would compile a stimulus package of more than $265 billion to reflate the flagging economy, media reported, though it is unclear how much will be spent to directly boost growth. This would be more than expected earlier, but critics will be watching to see how much is actually new spending.

Pressured by the weakness in Chinese shares, Hong Kong stocks .HSI also declined 0.4 percent though mainland Chinese investors continued to snap up shares through a stock market connection scheme.

"Pockets of the world where yield and growth are present will continue to be rewarded by investors," said Daniel Morris, a senior investment strategist at BNP Paribas Investment Partners, citing India, Indonesia and China consumer-focused plays among his top picks.

"Still, we are cautious on the second half and we don't think central banks will rush into tightening policy with the global growth outlook bleak and uncertain," he said.

Since the global financial crisis, major central banks have inflated their balance sheets and injected trillions of dollars to reflate their economies. On a monthly basis, they are adding about $180 billion into the world's financial system led by the ECB and the BOJ, according to Deutsche Bank.

On Tuesday, U.S. equity markets closed mixed while stocks in Europe traded slightly higher with all eyes were on the Fed, which concludes its two-day policy meeting later on Wednesday.

The U.S. central bank is widely expected to stand pat on monetary policy and the markets will sift through its statements - a post-meeting news conference will not be held - for any hints of the timing on future interest rate hikes. Expectations of a September increase are clouded ahead of the U.S. presidential election in November, but markets see a roughly 50-50 chance of a rise in December.

Price action was messy in currency markets, triggered by Australian price data where core inflation stayed at a record trough, though major pairs clung to well worn trading ranges.

The Australian dollar was a shade weaker at 0.7488 AUD=D4 after rising to as high as 0.7568 after the data. Investors slightly reduced the odds of a cut next week to 50 percent <0>, from 60 percent before the data.

The dollar was up slightly against a basket of currencies on a trade weighted basis =USD nearing five-month high it hit last week.

Against the yen, it was up 1 percent at 105.65 after tanking more than 1 percent overnight.

"It's good for equities. It's good for risk," said Stephen Innes, senior trader for FX broker OANDA in Singapore. "There's still room for disappointment from the Bank of Japan."

The euro stood steady at $1.0995 EUR= after edging up 0.3 percent overnight thanks to the greenback's broad retreat versus the yen.

The pound edged up 0.1 percent to $1.3114 GBP=D4 after touching a two-week low of $1.3057 GBP=D4 overnight following dovish statements from Bank of England policymaker Martin Weale.

In commodity markets, crude oil extended losses after suffering big hits overnight on renewed concerns about oversupply. U.S. crude was down 0.05 percent at $42.88 a barrel CLc1. The contracts had touched $42.36 on Tuesday, their lowest in three months.

Trade group American Petroleum Institute (API) said Tuesday that U.S. crude stockpiles fell by 827,000 barrels last week, much less than analysts' expectations for a drawdown of 2.3 million barrels. [O/R]

Article Link to Reuters:

Apple CEO Touts Future Technology Amid iPhone Worries

By Julia Love
July 27, 2016

As iPhone sales declined for the second straight quarter, Apple CEO Tim Cook peeled back the curtain ever so slightly on its work in artificial intelligence and augmented reality, aiming to reassure investors that the company is ready to ride the next wave of technology.

Raving about hit smartphone game Pokemon GO, Cook stressed that Apple is “high on [augmented reality] for the long-run” and investing heavily. Augmented reality, in which computer-generated content is overlaid on the real world, is one of the latest fixations in the technology business, with Pokemon GO among the first applications to catch on.

Cook also highlighted Apple’s investment in artificial intelligence, which the company now uses to recommend content to users and even spot usage patterns to improve a device's battery life.

It was a small glimpse of the future from the notoriously secretive tech giant, which fiercely guards its product pipeline. But analysts said Cook must do more to show his cards as sales of the iPhone slow.

Augmented reality and artificial intelligence are often regarded as an uneasy fit for Apple, a hardware maker that tends not to embrace new technology until it matures. And Apple’s habit of keeping quiet until it has a finished product to show – in contrast with rivals such as Google and Facebook (FB.O), which iterate products in the open – doesn’t help, said analyst Bob O’Donnell of TECHnalysis Research.

“They’re in this weird position where they want the world to know that they are working on it, but they have nothing to show for it,” he said.

As rivals such as Google and Facebook double down on augmented reality, Apple has made no public display of its aptitude in the field. But Cook stressed that the company is hard at work behind the scenes.

“We have been and continue to invest a lot in this,” Cook said. “We think there’s great things for customers and a great commercial opportunity.”

Apple has more to show for its efforts in artificial intelligence, where it was an early pioneer with its Siri digital assistant. But the company has been dogged by doubts that it has fallen behind rivals such as Amazon (AMZN.O) and Google and will be hard-pressed to catch up due to its strict privacy stance.

“They are running behind, and they are trying to catch up both in perception but also in fact,” said Oren Etzioni, who is CEO of the Allen Institute for Artificial Intelligence and a professor at the University of Washington.

Cook maintained that Apple had found a way to strike the balance between progressing in artificial intelligence and maintaining users’ privacy, detailing features in Apple’s latest operating system.

“The deployment of artificial intelligence technology is something that we will excel at because of our focus on user experience,” he said.

Ultimately, Cook argued, phenomena such as artificial intelligence and augmented reality will only reinforce the importance of the iPhone. He said the company was working to make sure its products worked well with third-party products like Pokemon Go.

“That’s why you see so many iPhones in the wild right now chasing Pokemons,” he said.

Article Link to Reuters:

Now Democrats Need To Tear Trump's Face Off

The first two days of the convention were about unity and making Hillary palatable, but it’s time to fire on the Republicans. Fortunately, the cavalry is coming: Biden, Kane, and Obama.

By Michael Tomasky 
The Daily Beast
July 27, 2016

Michelle Obama had me jumping out of my chair on Monday night, but I didn’t do any jumping Tuesday night.

Don’t overreact. It was no disaster. The general theme, or one general theme, the optimism about America, was strong. It contrasted sharply with Donald Trump’s America presented at the Republican convention last week and apparently designed by Tim Burton. It was controversial for the Democrats to hand their convention stage to the mothers of black people who died at the hands of police, especially after the cop worshipfest last week in Cleveland.

But the mothers were great, especially Geneva Reed-Veal, the mother of Sandra Bland. There wasn’t a word of bitterness in the speeches by the three black mothers who spoke. (It’s worth noting that Michael Brown’s mother, Lezley McSpadden, didn’t get the mic; her presence was the most controversial, given that the Justice Department found that he attacked Darren Wilson before the officer killed him). Reed-Veal opened by praising and thanking God for making the night possible, thus immediately taking the occasion out of the realm of the profane and onto a higher plane.

They made a striking contrast to Milwaukee County Sheriff David Clarke, who vein-popped his way through an appalling speech last week in Cleveland. Clarke, who is black, actively sought to divide America from his very first sentence; there can be utterly no debate about that assertion. These mothers sought to heal. From now to November, anyone who tries to cast aspersions on these poor mothers deserves national contempt.

From kind of the other end, 9/11 survivor Lauren Manning was terrifically moving. She testified to Clinton’s—dare I use this word?—character. Manning was burned over 82 percent of her body.

“For years, she visited, she called, and continued to check in, because Hillary cares,” Manning said. “When I needed her, she cared....Not for the cameras. Not because anyone was watching. But because that’s who she is. Kind. Caring. Loyal. This is the Hillary Clinton I want you to know.” While it was obviously scripted, sure, it wasn’t invented.

That was the second theme of the night: Hillary’s accomplishments, the Hillary you don’t know.

And that’s where Bill came in.

On Twitter, and in emails with friends, opinion was divided on his speech. Some thought it was brilliant, a powerful case for a woman who’s trying to break the ultimate glass ceiling. The “made up Hillary vs. the real Hillary” was good. The mere mention of the moment when “Hillary’s water broke” the night Chelsea was born was a certain first in presidential politics and may have humanized her to the broader audience more than anything else said Monday night.

In that sense Bill’s was a typical spouse’s speech, little different in spirit from the kind of speech Ann Romney delivered in behalf of Mitt or Theresa Heinz delivered for John Kerry. It was interesting to see a man give that kind of speech for once.

But he’s not Ann Romney or Theresa Heinz. He’s a former president. He’s not just a spouse. If I’d been running the convention, I’d have asked him to do something different. I’d have asked him to explain to all those middle-management people out there why they should vote Democratic. He alone among all living Democrats has the cred to make that argument to those people. They’re not especially inclined to vote for Hillary, but if they do on Nov. 8, it will be a wipeout.

Bill has—had—unique power to move them away from Trump. The short movie that ran before he spoke did a lot more than the speech, in my view, to persuade those voters. Maybe the polls will show that what he did worked, but I can say there weren’t any lines that made me jump out of my seat. I did that 10 times for Michelle—and I did it 20 times in 2012 when Bill spoke for President Obama in Charlotte. I insist is the greatest convention speech of the television era: far better than Mario Cuomo in 1984 or Teddy Kennedy in 1980. That was Bill Clinton at his insane, tape-measure best. That wasn’t him tonight.

This convention has been good so far. The obsession with the divided Berniac storyline has faded. (And good for Bernie to move to make Hillary the nominee by acclimation—class.) But there is more work that needs to be done.

The Democrats have not hit Trump hard enough: on his embarrassing man-childness, on his crypto-fascism, on his national security disastrousness. Trump needs to be hammered, mauled on these things. This convention hasn’t done it yet. Joe Biden will probably do it Wednesday night and the Biden’s heir apparent, Tim Kaine. That’s the veep’s job during an election.

I guess Obama will do that, too. I’d have thought, as I wrote Monday, that a sitting president shouldn’t go all nuclear on the other party’s nominee, but maybe he has to this time. Obama will have to over the course of the fall, because it’s not clear that Bill can do it anymore. I think the best way for Bill to help his wife is not to tell stories from their Yale days, but to get Trump in his sights and fire.

Article Link to The Daily Beast:

How To Start a Clash of Civilizations

If the Islamic State wants to renew the Crusades by attacking churches and killing priests, Catholic France won’t run from the fight.

Foreign Policy
July 27, 2016

With Tuesday’s mid-Mass beheading of an elderly French priest in Rouen, a short distance from Paris, the Islamic State’s malignant devotees have dealt a vicious blow against the West’s all but emotionally neutral campaign to contain the quasi-caliphate. Though the internecine conflicts wracking the Arab world ensure the war against the Islamic State is hardly a war on Islam, the jihadis are bent on a clash of civilizations. And by martyring French Catholics who are Old Christendom’s flesh and blood, they’re one step closer to getting one.

Whatever the extent of Western reluctance or prudence, the truth is there’s no better way to shake Europe out of what many now see as its guilt-ridden paralysis than to assault French Catholicism — the oldest, most ingrained force that transcends nationalism in Europe’s most powerful proud nation.

History has long prepared this seemingly revolutionary moment. If in one sense, postwar French Catholics like Robert Schuman — one of the European Union’s founding fathers and the architect of the European integration plan — were innovators; in another, they simply recapitulated a vision of Continental unity as old as Charlemagne. However vital the force and thrust of political rationalism, mere secularism could never make European civilization as whole as Christian Rome had once made it. Even Napoleon Bonaparte, despite his tyrannical embrace of ancient cruelty and modern statism, recognized the centrality of the Church to France’s unique claim on European leadership by having the pope coronate him as France’s emperor in 1804. Having subsequently snuffed the Holy Roman Empire (long lampooned as neither holy, Roman, nor an empire) in 1806, he cemented Europe’s new Catholic imperium by marrying his defeated adversary’s daughter, Marie Louise. His wife’s parents, Emperor Francis and his wife Maria Theresa, continued to rule the Austrian Empire after the Holy Roman Empire’s dissolution.

Today, no historically Catholic country maintains the strength and significance of France, even at its relatively low ebb, and none can look forward to mustering anything comparable. In Europe, both politicians and the pope all but deliberately mischaracterize Islamist violence as senselessly absurd. As Pope Francis has focused attention on the weakest and most vulnerable to arrive on Europe’s shores — or perish in their attempt — his plea that refugees “are not dangerous but in danger” has run up against the hard truth that among the hundreds of thousands of newcomers are enough killers to keep horrific bloodshed in the news and in public nightmares. While the willful pontiff labors to prove that charity and solidarity are two sides of the same coin, France’s increasingly devout Catholic insurgents see, and paint, a darker picture.

Consider the reaction of France’s youngest and most alluring reactionary, the sensational young National Front figure Marion Maréchal-Le Pen. At first, in horror and frustration, came the obvious: “They’re killing our children, assassinating our police officers, and slitting our priests’ throats,” she tweeted. “Wake up!” You’d expect nothing less from a scion of the Le Pen dynasty, one primed by the grisly, unprecedented truck attack in Nice, which is just a two-hour drive from her political headquarters.

But Marion Le Pen wasn’t finished. Hours after her first appeal, she urged Christians worldwide to unite against Islamism. And then the coup de grâce: “Faced with the threat weighing on France, I’ve decided to join the military reserve. I invite all young patriots to do the same.” The logic may be unnerving, but it is crystal clear. For Le Pen and Europeans starved for leadership consistent with patterns adhered to for centuries on end, it is Islam’s would-be holy warriors who have invited a defensive Crusade, and the time has come to give it to them.

Such a message would fare poorly in the presence of stronger medicine drawing on secular values. But Westerners hoping for a muscular alternative to the Catholic spirit connecting Charlemagne, Bonaparte, Schuman, and Le Pen — to say nothing of Joan of Arc — have already had their try. Culturally and theologically disarmed, interventionist secular internationalism has proven itself a shattering disappointment, from Iraq to Libya to Syria and beyond. Despite Nicolas Sarkozy’s dramatic bid to mount a comeback for militant moderates, his regurgitations of failed secular dreams, both neoconservative and neoliberal is all but certain to dash the hopes of the French public, and those of the wider Western world.

The decisive question now is whether reactionary French Catholicism can scale up quickly enough to present more than a parochially nationalistic image of the new Crusader esprit. They face a fairly daunting dilemma: The more Le Pen’s constituency casts its mission as a defense of pan-European Christendom, the more readily its mainstream opponents can claim it’s embarked on a war of aggression. At the same time, however, the far-right faces a different publicity crisis in courting the nationalists seen by its traditionalist base as part of the Continent’s decadence problem, like Matthieu Chartraire, the National Front supporter recently voted France’s top gay model, or the party’s own chief, Marine Le Pen, Marion’s fiercely secular aunt.

With French worries of civil conflict growing — in the grip of a state of emergency repeatedly extended since November’s Paris attacks — the country’s crusading Catholics are likely to find their best weapon against Islamism in a spirit of unity for France no less than for Christendom. But it’s here that their jihadi foes, too, could find their greatest advantage. As the West is still learning the hard way, there’s nothing like terrorism to sow division and disorder among those desperate to make it stop.

Article Link to Foreign Policy:

China Talks About Harmony, But Feeds Global Disorder

The peaceful rhetoric stops at the water’s edge.

By Gregory J. Moore
The National Interest
July 27, 2016

Anyone familiar with the foreign policy rhetoric emanating from Beijing for the past three decades or more has heard talk of China’s “good neighbor policy,” its “peaceful rise” and its aspirations to contribute to a “harmonious world,” by way of “a new type of great power relations.” China pledged under Deng Xiaoping to pursue a “good neighbor policy,” and China arguably followed through on that for the next three decades. China’s modus operandi during this era was what Deng called a policy of “taoguang yanghui,” literally “avoiding the [spot]light, nurturing obscurity,” or more colloquially, “biding one’s time and lying low.” Under Hu Jintao, the foreign policy mantra was “peaceful rise”—later changed to “peaceful development,” perhaps so as to avoid associations realists might make with rising powers and the complications this might bring).

Xi Jinping has ushered in a new initiative, suggesting “a new type of great power relations,” which could be read to say: Don’t worry—we won’t rise like 1930s Germany! Or, put another way, today’s China does not seek to repeat the past in terms of the “normal” historical pattern of great-power rise as leading to great-power conflict. In 2007, perhaps the high tide of “the peaceful rise” strategy, China was quite successful, for as David Kang and others pointed out, China’s neighbors did not appear to be balancing against a rising China, but seemed quite optimistic about China’s role in the region. China had then perhaps the best security environment it has ever enjoyed.

Yet in recent years, things have changed. China now has one of the worst security environments it has seen in recent decades, its relations with many of its neighbors now fraught with tension. For example, China’s recently very warm relations with South Korea have cooled, because of what Seoul perceives as Beijing’s continued backing of Pyongyang, despite North Korea’s nuclear tests, Beijing’s support for North Korea following the North Korean sinking of the South Korean naval ship Cheonan and North Korea’s shelling of South Korea’s Yeonpyeong Island in 2010, all of which arguably contributed to Seoul’s decision to accede to and host the U.S. THAAD missile defense system, over Beijing’s heated protests. Moreover, China’s relations with Japan worsened in 2010, with an incident between a Chinese fishing trawler and a Japanese Coast Guard ship (YouTube videos clearly show the trawler ramming the Japanese ship) near the Senkaku/Diaoyu Islands group, which both China and Japan claim and Tokyo administers, and again in 2012, after violent anti-Japanese protests in China associated with a Japanese move to nationalize three of the islands in the Senkaku/Diaoyu Islands group. China’s relations with India have been tense in recent years as well, with Indians perceiving the maritime dimensions of Beijing’s “One Belt, One Road” policy as encroaching upon Indian interests in the Indian Ocean, and claiming that Chinese troops in the Himalayan region where Indian and Chinese border claims overlap have been more aggressive in pressing China’s claims there in recent years.

China’s relations with most of the Southeast Asian nations have soured recently, too, because of Beijing’s more assertive maritime policies and its assertion of its nine-dash line, which stakes claim to the bulk of the South China Sea. In fact, China’s 2012 takeover of the Philippines-claimed Scarborough Shoal (which Beijing calls Huangyan Island), just 123 miles from the Philippines and 540 miles from China, brought Manila to take China to court via the International Tribunal of the Law of the Sea, an appeal which Beijing recently lost. In addition, China’s placement of an oil rig in waters claimed by Vietnam set off violence and protests directed at Chinese concerns in Vietnam in 2014, bringing Sino-Vietnamese relations to new lows. In the past year or two, China has also begun aggressive reclamation work on several maritime features in the South China Sea, some of them far from China’s shores and well within the EEZs of other claimant nations, turning the features into man-made islands with docking facilities and airstrips capable of hosting military aircraft. Clashes between Chinese fishermen (who clearly have state support) and Indonesian patrol boats as far away as the Natuna Islands (within Indonesia’s two-hundred-mile Exclusive Economic Zone and outside China’s nine dash line) have raised tensions between Beijing and Jakarta in the last few years as well.

All of this has led to South Korea, Japan, the Philippines, Australia and Singapore deepening defense ties with the United States, and even Vietnam seeking closer ties with the United States. “Taoguang yanghui” appears to have been abandoned.

With all of this in mind, there appears to be a curious disjuncture between China’s harmonious, peaceful, exceptionalist (i.e., the argument that China is not aggressive like other great powers) rhetoric and its increasingly robust, even aggressive, foreign policy-choices. Given the turn toward the assertive that Chinese foreign policy took between 2008 and 2010, and the increased friction with almost all of China’s neighbors during that period, what should we make of the Chinese government’s repeated pronouncements that China will rise peacefully, that China will never threaten other nations, that harmony is China’s overriding political and foreign-policy principle or value, that Confucian cultural inclinations make China different than other, “more imperialistic” nations, and so on?

Should we then believe that China will rise peacefully, and will not fall into the “Thucydides Trap,” as Graham Allison has so colorfully labeled the temptation to power that faces rising powers like the People’s Republic of China—namely, the tendency for rising powers to get into wars with other powers as they seek to establish their place in the international order? Based on a comprehensive study at Harvard University, Allison concludes, “Indeed, judging by the historical record, war [between the United States and China] is more likely than not.” Realists like John Mearsheimer are even more pessimistic that China can rise peacefully, that it can avoid the “Thucydides Trap” Allison speaks of, not simply because of China’s own natural insecurities and interests as a rising power, but because of the fear China’s rise will put in the hearts of China’s neighbors and the United States, just as Thucydides said of relations between rising Athens and Sparta.

As for me, I believe the weight of evidence is on the realist side as it concerns outcomes in this case. I do not believe that realism’s material-driven narrative wholly explains it, however. Realism’s narrative is quite simply that the availability of material power opens doors of opportunity for foreign policy, and that given the uncertainties and insecurities facing great powers, expansion of the state’s power along with robust, aggressive, security-enhancing foreign-policy action is the best, most rational option available to foreign policy makers. What this means is that in a power transition such as the one we are witnessing, this dynamic will more likely than not lead to great-power conflict. As Mearsheimer says in the final pages of his noteworthy 2001 book, “A wealthy China would not be a status quo power, but an aggressive state determined to achieve regional hegemony,” including the domination of Japan and Korea and the exclusion of the United States from Asia.

While the outcome I see may (unfortunately) be similar to what Mearsheimer sees, my explanation thereof would be different in a number of important ways. While I do not believe that the growing abundance of Chinese power in and of itself determines that China will become more aggressive or problematic, I do think there are a number of reasons China is likely to become a more aggressive, difficult power for the United States and China’s neighbors to deal with in the coming decade.

First is the nature and role of domestic politics in China, drawing in particular here from Zheng Wang. Wang has argued that China’s foreign policy is best explained by domestic politics, by the policy choices of a regime whose legitimacy is based not on democratic processes or even primarily on economic success any more (though this still matters to be sure), but rather on its self-defined legacy of being defender of the realm, “most thorough-going patriot,” urging that all Chinese must “never forget national humiliation,” its mantra according to Wang. In other words, the Party portrays itself as being all that stands between stability, independence, success and national pride on the one hand, and instability, subjugation to foreign powers, failure and national shame on the other hand, drawing from China’s very real and very painful history of humiliation at the hands of foreign powers, from 1839 to 1949 in particular.

Wang concludes that because China’s undemocratic regime now draws its legitimacy from the “never forget national humiliation” mantra it has constructed, inculcating it into the minds and hearts of its people via state-run education and media from cradle to grave, China’s foreign policy is quite prickly, and China’s leaders are unwilling to compromise on what might otherwise be minor territorial issues. This is because, Wang argues, compromise on such issues would undermine the Party’s master narrative, its raison d’être. As long as the Chinese Communist Party rules China, and does so in the general way that it does now, it is difficult to see much change in this regard.

Related directly to this is the second factor I’d like to highlight: the role of hierarchy in Chinese social and cultural reality. Chinese views of the social milieu have been hierarchical for centuries, in both domestic and international political terms, and while not bowing to historical determinism, there is a strong historical trajectory that suggests there is no reason to expect that China in the twenty-first century will be remarkably different, with no reason to believe Chinese leaders will this time disavow the ambition to be number one, or laoda in Chinese vernacular.

Domestically, the Chinese political system has always been authoritarian, with clear norms for relations between ruler and ruled, husbands and wives, parents and children, etc. Hierarchy was, and is, valued more than equality. In international relations, in like manner, China’s world has always (until the 1839 Opium Wars) been hierarchical, one in which China was always laoda in the world it knew. While China did not necessarily impose its will on every subordinate nation whenever it could (its hegemony was much more subtle than this, as Yuan-kang Wang, Alastair Iain Johnston and others make clear), in the tributary system it wisely and successfully constructed, it was clearly always first among unequals and got what it wanted on the issues most important to it. Its hegemony was, for the most part, benign during the tributary system period as long as it was not challenged. If challenged, it acted like a realist would expect it to. It rarely was challenged, however.

In a very general sense, in Chinese societal contexts, even today being number one is key—the highest social value—where attainable. Zheng Wang has an interesting discussion about gold medals at the Olympics. In the medals count, the Chinese do not count total medals (gold, silver and bronze), but only gold medals, because from a Chinese perspective silver and bronze medalists still lost. Only the gold medalist is a winner in the true sense, and Chinese athletes face an overwhelming pressure to win gold and bring glory to China, or fail and face shame.

In like manner, as long as the United States is number one economically, militarily, technologically, or in terms of cultural soft power or the number of Nobel Prizes attained, there is a compelling argument that Chinese leaders are not going to rest, harmonious rhetoric aside. The argument here is that they aspire, once again, to be laoda, number one. This is visible in almost everything the Chinese state does internationally, from creating “national champions” in global but state-run corporations like Huawei, Lenovo and Haier, to building a formidable industrial policy as a part of a state-driven/state-serving economy, to establishing its nine-dash line in the South China Sea, to its relentless quest for national resources and military technology and hardware, to its policy to increase the number of research publications or Nobel Prizes won by Chinese academics, to its quest for success in space.

In addition to this, there is a third factor: the fact that China’s newfound wealth, coupled with its size and historical legacy of being “laoda” (again, number one, the preeminent one), makes its easy for Chinese leaders to have a sense of entitlement in their foreign-policy orientation, a sense that China should be deferred to, that China should once again get its way after so many years of humiliation, poverty and struggle. This is one way to read China’s increasingly assertive positions and policies in the South China Sea. As then foreign minister Yang Jiechi told his Southeast Asian colleagues in the context of an ASEAN ministers’ meeting in response to Hillary Clinton’s statements about the importance of freedom of navigation in the South China Sea, “China is a big country and other countries are small countries, and that’s just a fact.” This statement speaks volumes. China is a big country, it is now number two economically and quite powerful militarily, and it should therefore get what it wants, à la Thucydides (again, “the strong do what they can, while the weak accept what they must”). What is true in Chinese domestic politics, where the attainment of power brings with it a seemingly limitless ability to bend rules to one’s advantage and expectation of deference from the weak, so too Chinese policymakers seem to have developed in their foreign policy a similar sense of entitlement, an expectation that China’s newfound power purchases it a right of deference from smaller, weaker nations. Needless to say this has not flown well with China’s neighbors or today’s “global laoda,” the United States.

For the domestic political, ideational and sociological reasons explicated here, and not due simply to the raw material reality of China’s rise (which cannot be stopped in any event, though Mearsheimer would like the United States to try to do so), China seems on course to clash with the United States and its neighbors. Though the materiality of China’s rise is part of the story, for it facilitates the aspirations of this great nation in repositioning itself at (or near) the top of international society, I would argue that this is largely a nonmaterial story, a story driven by domestic politics and social, cultural and ideational factors, not just on crude material indicators of power. Though I wish it were not so, alluding to the potentially tragic outcome of the trajectories described herein, I think it is an accurate story.

It seems that there are two possible explanations for the disjuncture between China’s harmonious rhetoric and its more assertive, even aggressive, foreign-policy turn in recent years. One possibility is that when Chinese leaders look in the mirror, so to speak, they honestly see a peaceful, harmonious self, a self quite different from those of other actors in the world outside of China, and they honestly believe that no one should fear China, that China will always, and only, do what is right and fair, and that any rhetoric otherwise comes from either ignorance or ill will toward China, or both. This is consistent with what Peter Gries and others have called fundamental attribution error, or the tendency to assume good intentions of and give the benefit of the doubt to oneself and one’s friends, but to assume the worst about enemies and unfamiliar others. The other possibility is that the harmonious rhetoric is simply a farce, a tactical move to placate China’s neighbors and the rest of the world until China is ready to begin flexing its muscles. The reality may be a little bit of both, but it is difficult to know for sure, given the lack of transparency in the Chinese political system.

In the end, only time will tell if China’s rise will be peaceful or if it will end in an international-relations train wreck, in yet more examples of war among nations party to a great power transition, and yet further proof of the difficulty of avoiding the “Thucydides Trap.” In any event, alluding to the language of realist Reinhold Niebuhr, it seems prudent that while hoping and working for the best, China’s neighbors and the United States would be prudent to quietly prepare for the worst.

Article Link to the National Interest:

The De-Gulenification Of Turkey

Western observers first must understand the severity of Turkey’s coup plot and the complexity of the religious group that seems to be behind it.

July 27, 2016

If one needs to define what is going on in Turkey in the aftermath of the failed July 15 coup attempt, besides the arrest of the actual putschists, here is an accurate term: The de-Gulenification of Turkey. Just like the de-Baathification process in post-occupation Iraq, the aim is to cleanse the whole public sector from a cadre that is considered to be the enemy of the state.

First, let’s see how Turkey came here. The infiltration of state institutions — especially strategic ones such as the police, the judiciary and the military — by the Gulen community is a fact harped on by secular journalists for decades. When President Recep Tayyip Erdogan’s Justice and Development Party (AKP) came to power in 2002, the infiltration went even further, for Erdogan considered Fethullah Gulen a key ally.

With the defeat of the common secular enemy, these two Islamic powers began to dispute and ultimately resent each other. The AKP had the legitimacy of popular support, while the Gulenists had the cultish self-confidence that they know everything better.

When political war between these two groups broke out in late 2013 with a Gulenist-orchestrated corruption investigation, I took a nonaligned position: The corruption was real, so the AKP had to be honest about it. Meanwhile, it was clear that the Gulenists had indeed created a “parallel state” within the state that had to be cleansed, but their “civic wing,” (schools, charities, media and economic assets) had to be respected. Among the political leaders of the time, only Abdullah Gul seemed to support that position. After the bloody coup attempt of July 15, however, it is impossible to pursue such nuances in Turkey. Even the “civic institutions” of the Gulen community are being seized by the state, for they are seen — not so wrongly so — as breeding grounds for, or the facades of, the dark side within the state.

The reason for this massive purge must be understood first, before being criticized. The coup plot of July 15 was, arguably, the greatest assault the nation has ever seen since its founding in 1923. In no previous coup or coup attempt was the nation’s parliament bombed or its civilians crushed by tanks. Moreover, not just the government, but also the chief of staff, the National Intelligence Organization, all major opposition parties, mainstream secular media, many anti-Erdogan journalists and most nongovernmental organizations seem to all agree that this coup was mainly a Gulenist operation, as a last-ditch effort to topple Erdogan, who had become the Gulenists’ No. 1 enemy.

One may wonder why this national consensus in Turkey is not reflected at all in Western media. My answer is that while Erdogan’s authoritarianism, of which I have been quite critical, is all blatant and clear, Gulenist operations are always stealthy, covered nicely by successful public relations and insistent denial of involvement. That is why many Western journalists keep on believing that the only problem in Turkey must be Erdogan and everybody who opposes him must be “good guys.” This even makes them open to anti-Erdogan conspiracy theories, such as that he orchestrated the coup just to get political credit, which is totally ridiculous given the fact that the coup was very well-organized and nearly succeeded.

Of course, the truth can come out only at the end of a fair trial, as I argued in The New York Times. But even at this point, the Turkish state has the right to defend itself by outing the people in its ranks who are suspected to be members of the Gulenist network. Being a member of the movement in itself, however, cannot be considered a crime. Hence, I agree with Ali Bayramoglu, the prominent secular liberal who first exposed the “parallel state” in 2010 and who has lately been critical of Erdogan as well, who wrote:

“It is inevitable that government employees about whom there are serious suspicious of being a Gulenist will be demoted to passive positions or will be fired. Legislation for this end will be only natural. But this logic cannot be used in prosecutions. It cannot be a crime to work in Gulenist institutions or to have relations with Gulenists. Being a member of the Gulen community is not a crime either. It is only a crime to be within the illegal organization and the illegal actions of the group. Even then, principles such as the presumption of innocence and individual criminal responsibility have to be upheld.”

But will these principles be really upheld by the government, which is not only alarmed by but also furious about the Gulenists?

There are some worrying signs. First of all, the recent report by Amnesty International suggesting that some of the suspects may have been subject to torture, even rape, is horrifying. The government must prevent all such crimes against the detainees, no matter how guilty the suspects may be, and “give independent monitors access to detainees,” as Amnesty International demanded.

Second, those who are to be detained now include journalists who have merely written in pro-Gulen media outlets, either as Gulenists themselves or merely as Erdogan opponents who have no religious connection with the group. This is unacceptable, unless there are serious signs that the journalists in question knew about the coup plot and tried to help it. It is only good news that one such journalist, the renowned human rights defender Orhan Kemal Cengiz, who has no religious ties with Gulenists, has been released after being detained for three days.

Third, there is clearly a furious mood among Erdogan’s supporters, which may turn the prosecution of the coup plot into a crackdown on all “traitors,” which for them may easily include mere Erdogan critics. The government must not give in to this zeal, or take advantage of it. Quite the contrary, it should use this opportunity to build a broad democratic consensus in Turkey, as most mainstream commentators are rightly calling for.

Western media, nongovernmental organizations and governments can help Turkey in this critical period by calling for restraint and lawfulness and by criticizing human rights violations. But in order to be taken into account, they first must understand the severity of the coup plot and the complexity of the religious group that seems to be behind it.

Article Link to Al-Monitor:

The De-Gulenification Of Turkey

The Death Of OPEC

By Anas Alhajji
July 27, 2016

The Organization of the Petroleum Exporting Countries is dead. Saudi Arabia killed it. Now, OPEC is just a toothless zombie, attracting attention, but without having any impact on the living.

Few have noticed OPEC’s demise for a simple reason: it never really had the impact that it was widely perceived to have. It was never actually a cartel, possessing monopolistic market power. Anyone who thought otherwise was mistakenly attributing to it Saudi Arabia’s market power.

And Saudi Arabia’s power is expansive. It remains the dominant producer in world oil markets, and its political and economic decisions shape global energy economics. This impact will be intensified if the Kingdom resurrects Arab Light as the global benchmark crude.

Of course, new players in the energy-production game could conceivably deal a blow to Saudi Arabia. But, so far, the Kingdom has managed to avoid serious injury.

The shale-energy revolution in the United States, for example, has had a far-reaching international impact – far greater than expected. The Atlantic Basin ran an oil surplus – producing more than it consumed – for the first time in a half-century, while the Pacific Basin became the only dumping ground for crude. The surge in domestically produced shale oil caused OPEC members Algeria, Angola, and Nigeria to lose significant market share in the US.

Yet that revolution has had little impact on Saudi Arabia, Iraq, or Kuwait, owing to crude quality. Algeria, Angola, and Nigeria were exporting to the US a kind of light sweet crude that is comparable to shale oil. Yet many US refineries are still geared toward the heavier and more sour types of crude that the country imports from the Middle East. As a result, Saudi Arabia’s market share in the US seems relatively secure.

This is not to suggest that Saudi Arabia is invincible. On the contrary, it has lost market share among the largest oil importers in Asia, which have increased their purchases of West African crude (diverted from the US). Perhaps most painful, the Kingdom has lost substantial market share in China to Russia.

Russian penetration of the Chinese market was spurred by the imposition of Western sanctions after Russia invaded Ukraine and annexed Crimea in 2014. China took full advantage of the Kremlin’s desperation, securing rock-bottom rates for Russian energy resources. Once the door to Asia was open, however, Russian companies seized the opportunity to enter the downstream markets of India and Indonesia – two countries that are critical to the Saudis’ own strategy.

Over the last two years or so, Saudi Arabia has made starkly clear that it will not easily give up its market share – to anyone. It has pursued a campaign to recover its former position not just in crude, but also in petroleum products, natural gas liquids, and petrochemicals. To this end, it has sustained a price war, supported by a boost in production, aimed at pushing out weaker competitors.

At first, Saudi Arabia took aim at the shale industry. But its strategy for asserting its dominance over global energy markets evolved over time, adapting to new economic information and political circumstances. Ultimately, Saudi Arabia dragged all of OPEC into the price war. Countries increased their production for as long as they could, causing prices naturally to drop. When production peaked, the bottom fell out of the market, because OPEC members were forced to enter into direct price competition with one another.

The permanent internal rifts that all of this has produced were painfully apparent at this April’s OPEC meeting in Doha, where a deal to freeze output fell apart. Saudi Arabia refused to cut production unless Iran would do likewise. But Iran – which, like Russia, had lost considerable market share as a result of Western sanctions – refused to cut production outright. Producers that lost market share in the US will not cut production, either.

By now, Saudi Arabia recognizes that low oil prices will not fully restore its market share in Asia and Europe. But it also sees that it has no more use for OPEC, an organization that it foisted on the world with the first Arab oil embargo in 1973 and has since used as a shield for its oil policies. With the US shale revolution having rendered OPEC useless, Saudi Arabia has decided that its creature is not worth keeping alive.

But this does not mean that there is no hope for energy cooperation. Saudi Arabia is now pursuing a major shift in its foreign, economic, and energy policies, exemplified by the impending privatization of a portion of Aramco, its national petroleum company, which is set to expand its refining capacity.

All of this suggests that competition in energy markets may shift from crude oil to refined products. That would create new opportunities for cooperation: producers with large refining and storage capacity could purchase surplus oil from producers lacking such capacities.

A shift from competition in crude to competition in petroleum products would have a profound effect on global oil markets and related industries, like shipping. Ultimately, it would most likely boost the overall efficiency of the oil market and strengthen producers’ capacity to weather market volatility. The producers and refiners with the most sophisticated technologies would dominate – beginning with Saudi Arabia.

Article Link to Project-Syndicate:

Democrats’ War On The Sharing Economy

By Betsy McCaughey
The New York Post
July 27, 2016

The battle over Airbnb is taking center stage at the Democratic National Convention.

The fight is emblematic of the dispute between Republicans and Democrats over who should steer the economy: government regulators or consumers and innovators.

Democrats are attacking Airbnb and similar Internet sites that enable people to earn cash by renting their homes out. Sen. Elizabeth Warren and several like-minded lawmakers are calling on the Federal Trade Commission to crack down.

They’re determined to regulate anything and everything.

They claim to be for the little guy, but they’re protecting a rigged economy that favors hotel unions and the real-estate industry. To heck with the budget traveler who needs a temporary place to stay for less than a pricey hotel — and, for that matter, the home-sharer who needs to make extra cash.

Airbnb is fighting back, running ads defending its service during Hillary Clinton’s nominating convention in Philly. Meanwhile, here in New York state, Gov. Cuomo is still deciding whether to sign a bill that would make it illegal for most New Yorkers to advertise their apartments on the sites.

The attack on Airbnb is an example of pro-regulation politicians depriving consumers of choices and impeding start-up industries. For decades, politicians from both parties have piled on regulations. A notable exception came when Donald Trump declared war on excessive regulation during his GOP presidential acceptance speech last week, calling regulation “one of the greatest job killers of them all.”

Airbnb is now used by people in 34,000 towns and cities in 191 countries. Here in New York, it’s favored by women over 60 who rent out their homes to make ends meet, allowing them to stay put after retirement or the death of a spouse.

But Dems like Warren say Airbnb drives up rents. They note the flimsy argument that renters can manage to pay higher rents if they’re allowed to earn cash from their homes a few days a month. Warren and other senators wrote to the FTC last week urging an investigation of Airbnb’s impact on “the cost of housing in our communities.”

The federal government has no business interfering with local housing prices. Read the Constitution, Sen. Warren. Nothing in there on that.

New York Attorney General Eric Schneiderman parrots Warren’s unsubstantiated argument about Airbnb pushing up rents. Schneiderman has the authority under state law to intervene, but common sense is another matter. Does he really want to tell an elderly lady she can’t rent out her apartment because addressing New York’s affordable housing shortage matters more than her need to make enough money to stay in her home?

Schneiderman even suggests that Airbnb brings an “influx of out-of-town visitors upsetting the quiet of longstanding residential neighborhoods.” In New York — “the city that never sleeps”?

It’s a typical case of politicians targeting a beautifully disruptive industry in order to defend the status quo. Over-regulation is destroying growth in the United States by discouraging innovators from even starting companies.

The White House conceded last week that growth for 2016 will drag on at an anemic 1.9 percent. That’s less than half the rate during Ronald Reagan’s presidency or Bill Clinton’s best years, and well below the rate needed to get America working again. This horrible news provoked not a murmur of concern from Democrats.

In fact, Obama doubled down on his defense of regulations last weekend with vague platitudes about protecting the public.

The gravest harm done by regulation isn’t the time and money squandered on compliance, but rather the forfeited opportunities — companies never launched, technologies never invented, jobs never created and products consumers will never see.

Uber, the popular taxi alternative, narrowly escaped destruction at the hands of the taxi industry and its elected henchmen. Fortunately, Cuomo — unlike many Democrats — appreciates Uber as “one of these great inventions” in “this new economy.” Cuomo said “it’s offering a great service for people, and it’s giving people jobs.”

Let’s hope Cuomo takes the same enlightened approach to Airbnb. And that other Democrats see the light.

Article Link to the New York Post: