Tuesday, August 16, 2016

Donald Trump Rattles Republicans With Plan To Rack Up Debt

By Stephen Dinan 
The Washington Times 
August 17, 2016

He has spent the past year mocking President Obama’s debt buildup, but Donald Trump let the country in on a secret last week: He would rack up even more red ink before all is said and done.

Mr. Trump, in part of an interview with CNBC that is getting less attention than his other food-fight-style comments, said that with interest rates so low, “this is the time to borrow” in order to pay for more than $500 billion in infrastructure he wants to build.

Analysts and Republican activists said Mr. Trump is making a mistake, both economically and politically, threatening one of the few areas of agreement within the party, including among moderates and tea partiers, that new spending should be offset, not tacked onto the debt for future generations to cover.

“I’ve been a Trump guy from the beginning, but I’ve got to tell you, the debt comments bother me,” said Ken Crow, a tea party leader and Trump supporter in Iowa. “I’m furious, to be honest with you.”

While short on details, Mr. Trump has said he would like to spend at least $500 billion on infrastructure, twice as much as Democratic opponent Hillary Clinton. He also proposes to raise spending for the Defense and Veterans Affairs departments even as he cuts tax rates, sapping revenue in the near term.

Asked how he would fund his plan, the billionaire businessman told CNBC that he would go into debt.

“The interest rates are so low, I mean the numbers are so low, that yes, this is a time to borrow, and to borrow long term, so we can have the money and rebuild our infrastructure,” he told the network in a long interview last week. “We can have the money. We have things; we have no choice.”

He announced his support for debt after months of attacks on the deficits that have accumulated during Mr. Obama’s tenure. The president took office with total government debt at $10.6 trillion, and the figure as of Monday was $19.4 trillion. Debt held by the public — a more precise measure of the government’s obligations to creditors — has more than doubled, from $6.3 trillion to $14 trillion.

Mr. Trump’s campaign didn’t respond to a request for comment on his new affinity for government debt, but analysts said his read of economics is strained.

Marc Goldwein, senior vice president at the watchdog Committee for a Responsible Federal Budget, said Mr. Trump’s low-interest theory matches a call from the political left, which says if government borrows and pumps the money into productive investments, the economic boost will more than cover the eventual higher interest payments on the debt.

“That’s all fine and good in theory. The problem is when you turn a theory into practice,” Mr. Goldwein said.

In this case, the U.S. already has a massive load and little prospect of paying it down. That means the new debt would be rolled over at some point, at interest rates higher than today’s low rates, skewing the economics. Besides, Mr. Goldwein said, there is scant evidence that infrastructure spending can pay for itself if done as Mr. Trump wants.

The Congressional Budget Office recently published an analysis of several investment scenarios, including spending some $500 on short- and long-term projects, and said it could boost the economy — but only if it is offset with cuts elsewhere in the budget. If the money is tacked onto the deficit, it will sap the economy and leave an even bigger hole in the budget, the CBO said.

Mr. Trump’s new stance on debt contrasts with that of his running mate, Indiana Gov. Mike Pence, who has made cutting spending and reducing deficits a hallmark of his public career. While in Congress, Mr. Pence opposed President George W. Bush’s $400 billion prescription drug expansion of Medicare and led a failed effort to try to force the administration to pay for Hurricane Katrina spending with offsets elsewhere in the budget.

Mr. Trump has praised Mr. Pence’s debt-fighting on the campaign trail but explained to CNBC that low interest rates are too much of an enticement to pass up.

“Normally, you would say you want to reduce your debt, and I like to reduce debt too, as much as anybody. The problem is you have a military problem, you have an infrastructure problem,” he said. “And also, the asset is, your rates are so low. What’s going to happen when the rates eventually are going to go up and you can’t borrow, you absolutely can’t borrow because it’s too expensive? It would destroy our balance sheet.”

Douglas Holtz-Eakin, a former director of the CBO who is now president of the American Action Forum, said spending might boost the economy if it’s in recession, but the U.S. is close to full employment, so there is not a lot to reduce. And the federal government will eventually have to pay off the debts.

“Borrowing is the same as having taxes higher in the future,” he said.

He also dismissed Mr. Trump’s claim that he would be able to renegotiate U.S. debt, forcing America’s creditors to take pennies on the dollar. Mr. Holtz-Eakin said that even if Mr. Trump is able to do so as president, it would set a bad standard and hurt the U.S. in other economic dealings.

Economics aside, Mr. Trump’s call for more debt appears to be bad politics. As he still struggles to unify Republicans, his plan has deepened the rift.

Trump’s comment is simply stunning,” said Judson Phillips, who founded Tea Party Nation. “One of the reasons I refuse to support Trump is comments like he has on the debt. He clearly has no clue how to manage the economy and will lead America into yet another great depression.”

Mr. Crow, the Iowa tea party leader who is still backing the Republican nominee, said he was on a call with Mr. Trump before his state’s caucuses and asked the candidate about debt. At the time, Mr. Trump said the country couldn’t afford more red ink.

Mr. Crow said Mr. Trump’s about-face suggests he is pandering like other politicians, surrendering the qualities that made him a standout during the Republican primary race.

Trump wants to build roads and bridges, and the Democrats want to give it to unions. What’s the difference? Our money’s being wasted,” Mr. Crow said. “I think he’s just capitulating to garner votes. I think he jumped into the ‘I’m a politician now’ mode, and that’s not what made him popular.”

Debbie Dooley, one of those involved in organizing the first tea party protests in 2009, said she wants to see the debt cut, but she is backing Mr. Trump because of his stances on immigration and trade.

“I look at the fact that Ronald Reagan increased the debt. I would prefer the debt be cut, but that hasn’t happened,” she said.

Despite Mr. Trump’s plans to borrow, Ms. Dooley predicted that he would fix economic problems.

Mr. Trump is looking out for the best interests of Main Street, and I have no doubt he will cut the deficit and he will bring government spending under control,” she said.

Article Link To The Washington Times:

Tuesday, August 16, Night Wall Street Roundup: Wall St. Slips From Highs After Fed Officials' Rate Comments

By Caroline Valetkevitch
August 16, 2016

U.S. stocks eased from record highs on Tuesday after comments from Federal Reserve officials fueled speculation of an interest rate hike this year.

The S&P telecommunications index and utilities, among sectors most sensitive to changes in interest rates, led the day's declines. Telecom dropped 2.1 percent and utilities were down 1.2 percent.

New York Federal Reserve Bank President William Dudley said a rate hike in September was possible, while Atlanta Fed President Dennis Lockhart said the U.S. economy is likely strong enough for at least one rate increase before the end of 2016, with two a possibility.

Dudley cited evidence of wage gains and a tighter labor market that could boost inflation. Their comments came ahead of an annual meeting of central bankers from around the world in Jackson Hole, Wyoming, next week.

"I don't think most people are expecting the Fed to actually hike in September ... (but) we've had a strong market and a couple of good jobs numbers," said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

The Fed officials' comments raised traders' expectations of a U.S. rate hike this year, according to the CME Group's FedWatch tool.

Continued expectations of low interest rates have helped stocks rise to record highs, with the S&P 500 index notching 10 all-time closing highs so far this year.

The Dow Jones industrial average was down 84.03 points, or 0.45 percent, to 18,552.02, the S&P 500 lost 12 points, or 0.55 percent, to 2,178.15 and the Nasdaq Composite dropped 34.90 points, or 0.66 percent, to 5,227.11.

Investors will pore over the minutes of the Fed's July policy meeting, scheduled for release on Wednesday, for clues on the U.S. central bank's rate plans after recent blowout jobs data.

Shares of TJX were down 5.8 percent at $77.97 and among the biggest drags on the S&P 500 after the company forecast fiscal-year earnings below analysts' estimates.

Among the day's gainers, shares of industrial gas supplier Praxair rose 2.7 percent to $121.27 after the company announced it was in early-stage talks on a merger with German peer Linde.

Declining issues outnumbered advancing ones on the NYSE by a 2.21-to-1 ratio; on Nasdaq, a 2.27-to-1 ratio favored decliners.

The S&P 500 posted seven new 52-week highs and no new lows; the Nasdaq Composite recorded 74 new highs and 25 new lows.

About 5.9 billion shares changed hands on U.S. exchanges, compared with the 6.4 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Article Link To Reuters:

WSJ: About Those Loser ‘Trumpkins’

What is it that the much-vilified Trump voters are trying to tell us?

By William McGurn
The Wall Street Journal
August 16, 2016

In the land of #NeverTrump, it turns out one American is more reviled than Donald Trump. This would be the Donald Trump voter.

Lincoln famously described government as of, by, and for the people. Even so, the people are now getting a hard lesson about what happens when they reject the advice of their betters and go with a nominee of their own choosing. What happens is an outpouring of condescension and contempt.

This contempt is most naked on the left. No surprise here, for two reasons. First, since at least Woodrow Wilson progressives have always preferred rule by a technocratic elite over democracy. Second, today’s Democratic Party routinely portrays its Republican Party rivals as an assortment of nasty ists (racists, sexists, nativists, etc.) making war on minorities, women, foreigners and innocent goatherds who somehow end up in Guantanamo.

Thus Mr. Trump confirms to many on the left what they have always told themselves about the GOP. A New York Times writer put it this way: “Donald Trump’s supporters know exactly what he stands for: hatred of immigrants, racial superiority, a sneering disregard of the basic civility that binds a society.”

Still, the contempt for the great Republican unwashed does not emanate exclusively from liberals or Democrats. Thanks to Mr. Trump’s run for office, it is now ascendant in conservative and Republican quarters as well.

Start with the fondness for the word “Trumpkin,” meant at once to describe and demean his supporters. Or consider an article from National Review, which describes a “vicious, selfish culture whose main products are misery and used heroin needles” and whose members find that “Donald Trump’s speeches make them feel good. So does OxyContin.” Scarcely a day goes by without a fresh tweet or article taking the same tone, an echo of the old Washington Post slur against evangelicals as “largely poor, uneducated and easy to command.”

We get it: Trump voters are stupid whites who are embittered because they are losing out in the global economy.

But a new Gallup paper suggests this may be a caricature that misses the fuller picture. The analysis is by Gallup senior economist Jonathan Rothwell, who looked not only at Trump voters but where they lived:

“The results show mixed evidence that economic distress has motivated Trump support,” writes Mr. Rothwell. “His supporters are less educated and more likely to work in blue collar occupations, but they earn relative high household incomes, and living in areas more exposed to trade or immigration does not increase Trump support.”

In fact, in areas where people were more affected by immigration and competition from Chinese imports, support for Mr. Trump declined. By contrast, his support was stronger in areas low in intergenerational mobility. Could it be that what motivates Trump voters is not a purely selfish concern for how they themselves are faring but how well their children and their communities will do?

There are those, this columnist included, who would argue that the under 2% average growth rate of the past decade has done more to constrict income and opportunity for ordinary Americans than bugaboos such as the North American Free Trade Agreement or currency manipulation by China. In the same vein, there’s a strong case to be made that Paul Ryan’s “A Better Way” is the path to the Trump voter’s goal of “Making America Great Again.”

The people are not always right—even schoolboys know about the tyranny of the majority—but a self-governing society ought to welcome the engagement of its citizens. In this light, a more fruitful approach might start by taking note of the surprise popularity in these year’s primaries of an outsider businessman in the GOP and a socialist over in the Democratic Party.

The result? A conversation that opened not with a taunt but a question: “What are the American people trying to tell us?” Unfortunately, it’s hard to get there when ordinary people with concerns about the future for themselves and their families are hectored and lectured about how loathsome they are.

It all calls to mind a witticism from Bertolt Brecht from 1953, after East German workers who revolted over measures requiring more work for less pay were met with Soviet tanks. In a poem that was not published until years later, Brecht, a playwright who had publicly supported the crackdown, wryly defined the problem as a regime losing confidence in its people rather than the other way around.

“Would it not be easier in that case,” he quipped, “for the government to dissolve the people and elect another?”

On TV, through Twitter and in person Mr. Trump has long made clear that his epithet of choice for those who disagree with him is “loser.” How ironic that the same people most loudly complaining about what a vulgarian Donald Trump is are now using the same insult to dismiss the ordinary Republican voters who happen to disagree with them.

Article Link To The Wall Street Journal:

Aetna's Retreat From Obamacare Is More Than It Seems

By Megan McArdle
The Bloomberg View
August 16, 2016

Aetna is pulling out of 11 of the 15 states it serves on the Obamacare exchanges. Longtime readers of this column will be unsurprised at the reason: It’s losing substantial amounts of money on its exchange policies.

That’s not necessarily the only reason, of course. Companies in heavily regulated industries -- and health care is now probably our most heavily regulated sector outside of nuclear power plants -- spend a lot of time engaging in n-dimensional chess games with the various government entities that have jurisdiction over their operations. Public statements and market moves may be exactly what they look like. Or they may be part of a complicated strategy involving some third, fourth or eighth factor that does not, at first glance, appear to be much related.

In this case, it has been delicately suggested that the company may have in mind its proposed merger with Humana (and that related announcements by Anthem are designed to aid Anthem’s Cigna merger). The government is currently suing to block both mergers; the companies would, obviously, like them to go through. The deals would consolidate an industry that currently has five major insurers down to three, giving them considerably more pricing power with both customers and providers. Because the individual market is a relatively small piece of their business, those mergers are probably worth a lot more to them than whatever goodwill the companies earn by losing money on the exchanges.

The losses are not to be ignored. Insurance regulators and the Securities and Exchange Commission do not give the firms much room to claim that they’re losing money if they’re actually making it hand over fist. Even if that weren’t the case, the failure of so many co-ops, which don’t have other lines of business, suggests that these markets are not, on the whole, a good place for insurers to make money. But it’s at least plausible that if the government weren’t blocking their mergers, these companies might be willing to go along with those losses for a few years in order to generate some regulatory goodwill for their broader business.

If that’s the case, the question is: What matters to regulators more? Blocking the mergers, or keeping the exchanges healthy? That’s not an easy question. As of this writing, it looks as if Aetna’s withdrawal will leave at least one county -- Pinal, in Arizona -- with no insurers at all selling exchange policies. And it seems unlikely that Pinal County will be the last to lose all its insurers unless something pretty drastic changes in these markets.

The state regulator has made hopeful noises about persuading someone to pick up the business. (Remember the regulatory goodwill we mentioned above?) But regulators in relatively small states don’t necessarily have that much clout with big insurers who can afford to keep taking these losses for years. California can plausibly say “Play ball with us or get ready to lose our nearly 40 million citizens as potential customers,” but a big corporation probably does not tremble in fear of the mighty market-shaking powers of the Vermont Department of Financial Regulation. And more locally concentrated firms cannot simply keep eating large losses for an indefinite period. It is obviously a problem -- for politicians, as well as customers -- if a growing number of people have a theoretical right to buy health insurance but cannot actually buy any.

But allowing the mergers to go through could well mean price increases in other markets. Bigger insurers gain more pricing power against rapidly consolidating provider networks. They also gain more pricing power with customers. Industries dominated by a few major players are not, in general, known for their high quality and low costs. Allowing the mergers to go through could stave off the immediate problem with the Obamacare exchanges at the cost of raising insurance costs for everyone else -- and giving Democrats big headaches in 2018 and 2020.

The calculation is further complicated by the fact that the exchanges and the mergers are regulated by different agencies. Health and Human Services ultimately oversees exchange operations, while the attorney general is the one trying to block the mergers. They both work for the same president, of course. But it would not be the first time that internecine battles between different parts of the same government further complicated an already complicated game.

Whatever the truth of the matter, and whatever the outcome, we can expect to see a lot of such quandaries going forward. The exchanges do not seem to be stabilizing; instead, they seem to be growing more unstable over time, particularly outside large urban areas where there are enough providers and slack capacity in the health-care system to provide some check on the problems that have plagued insurers elsewhere.

Insurers cannot simply go on eating those losses forever. They certainly won’t do so for free. Unless the exchanges get a rapid infusion of healthier customers who pay substantial premiums without using much care, insurers are going to keep pulling out of the areas where they are losing money. Or at the very least, they will demand benefits from the government to make it worth their while to stay.

Article Link To The Bloomberg View:

Oil Remains Near Five-Week High On Expectation Of Producer Action

By Mark Tay
August 16, 2016

Oil prices remained near five-week highs on Tuesday, fueled by talk of producers taking action to prop up the market, although some investors cashed in during Asian hours on the 16 percent rally since early August.

Brent crude futures were trading at $48.35 per barrel at 0737 GMT (3:37 a.m. ET), flat from their last close, but over 15 percent higher than the $41.51 low for the month on Aug. 2.

U.S. West Texas Intermediate crude was trading at $45.76 a barrel, up 2 cents from its previous close, and still over 16 percent above its $39.19 monthly low from Aug. 3.

Traders said earlier price declines were the result of cashing in following the two-week long rally.

The gains were driven by expectations from investors that oil producers may take action, possibly freezing output, to rein in ballooning oversupply.

"Crude oil rose to a four-week high as speculation continued to mount that OPEC would discuss a potential cap on production at an upcoming meeting between the members of the group. Russia joined in, saying it was open to such talks as well," ANZ bank said.

Led by top exporter Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC), has re-launched a debate about oil producers potentially capping soaring output in an effort to reduce a global overhang in production and inventories of crude oil and refined fuel products.

Many traders, however, voiced their doubts over OPEC's ability to agree amongst its divided members, and expect talks will fail just as they did in April.

Analysts also said that concerns over oil production in Venezuela were backing higher markets.

"News of an imminent collapse in oil output from Venezuela also supported prices," ANZ said.

Venezuela, which holds the world's largest crude oil reserves, is on track to suffer its steepest annual oil output drop in 14 years as it struggles with an economic and political crisis and years of underinvestment and mismanagement.

In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), and trade data seen by Reuters show that state-controlled oil firm PDVSA's crude exports, which account for 94 percent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures.

Article Link To Reuters:

How Hillary Clinton Can Fix Her Family Foundation 'Scandal'

She—and Bill—need to say preemptively, ‘Here are the rules under which the foundation will operate’ if she’s elected.

By Michael Tomasky
The Daily Beast
August 16, 2016

I kept reading those Clinton Foundation email stories last week trying to figure out why I was even reading them. Take the name “Clinton” out of the equation and consider the known facts:

An official of a nonprofit foundation emailed a staffer he knew in the State Department. He had a donor who said he had useful information and wanted a meeting. The State Department employee wrote back and said sure, I’ll set him up. And then, by all accounts, did… nothing. No meeting ever happened. The department aide (Huma Abedin, in this case) told the foundation official (Doug Band) that she’d set up a meeting between the part-Lebanese donor and Jeffrey Feltman, the former ambassador to Lebanon. But Feltman told The Washington Post last week that not only did he never meet the man, but “no one ever told me he was seeking me out.”

If you don’t think this kind of email exchange happens dozens of times a day in Washington, you are either, perhaps paradoxically, deeply conspiratorial or deeply naive. Rich people ask connected friends to introduce them to people in government. Sometimes those introductions are made; sometimes they aren’t. Even if the introduction is made, it’s hardly an a priori scandal.

But of course you can’t take the name “Clinton” out of the equation, and so any reading matter that puts the words “Clinton Foundation” and “emails” in proximity to each other, and for that matter the names of Band and Abedin, is bound to generate the expected Pavlovian response. This is not going to change. And so I say again, as I have more than once over the past year, that the Clintons really should take forceful steps to address the legitimate and fair questions out there about the foundation.

Trump keeps having these atrocious weeks because he keeps doing atrocious things because he is an atrocious human being. Just yesterday, Politico said that the pollsters are saying that Trump is “approaching zero hour” now because the candidate who led in the polls coming out of the conventions has won the last 16 elections, all the way back to 1952. And it seems highly unlikely to me that Trump will get—it makes me laugh every time I hear this one—“on message.” He is on message! Racist demagoguery is his message.

But: The election is 84 days away. That’s a long time, and a lot can and will happen. And Clinton has had about as good a last month as a presidential candidate can possibly have—garbage Republican convention, nicely orchestrated Democratic convention, Republicans defecting, her opponent serially demonstrating his brain-melting unsuitability for the job. But it’s not in the nature of presidential campaigns for things to go on like that forever. Someday, the worm will turn.

It is in this context that I keep asking myself: What are the circumstances, as things stand now, with Hillary near 90 percent in Nate Silver’s daily calculation, under which Trump could win? Let’s examine the possibilities:

• A terrorist attack. This is the old standby, right? An attack always helps the Republican but would help Trump especially because he will do and say anything to incite paranoia. But I don’t think this is so. I think Trump has revealed himself to be so erratic and unstable that a majority of voters would rather put a besieged nation in Clinton’s hands (provided she were to handle the situation well).

• An economic collapse. Another piece of long-held conventional wisdom—that a “negative economic event” close to election time hurts the incumbent party. Probably true. But again, Trump having demonstrated that he knows very little about the economy and doesn’t care to learn, I’m not sure it would hold. It would have to be an epic collapse, which could happen but which most economists I consult don’t see occurring.

• A domestic racial conflagration. A Milwaukee-to-the-power-of-five within two weeks of the election. That might more likely help Trump because while the views of white and black Americans on questions of terrorism and the economy aren’t so different from each other, they diverge widely on matters of race. This reality could nudge more centrist white voters in Trump’s direction, although he’d almost surely overplay his hand.

• Finally, a Clinton scandal or “scandal.” This strikes me as the most plausible of all potential scenarios to give Trump some lift-off. In fact let’s put it more bluntly: The emergence of a Clinton scandal/“scandal” is probably the only thing at this point that can keep her out of the White House.

If that’s the case, then it must be asked: Why will the candidate not inoculate herself against such a development? She can’t answer every question about what the foundation has done in the past, and those stories, about Abedin being paid by the foundation while working at State or about Band and Teneo, will continue to percolate up.

But what she—and Bill—can do is say preemptively, “here are the rules under which the foundation will operate” if she’s elected. The rules should be about everything from fund-raising to operations to transparency to Bill’s speaking fees (not a foundation matter per se but a topic of legitimate public concern). They should be clear and simple and pass your average person’s common-sense test.

I wrote more than a year ago in The New York Review of Books: “Imagine speculation that a White House decision with regard to Russia or Pakistan was influenced by a donation to the foundation from someone pursuing a business deal in one of those countries. Even if wholly unfounded, in today’s media environment, the mere speculation could alter outcomes.”

Note my concern is not that such a situation could be bad for Clinton politically. It is that it could alter outcomes. That’s potentially very serious. Even Clinton supporters—I’d say especially Clinton supporters; the people putting their faith in her—deserve to know how she plans to handle this. The sooner the better.

Article Link To The Daily Beast:

Great Cities Must Watch Their Watersheds

By Mark Buchanan
The Bloomberg View
August 16, 2016

The world's great cities could hold the key to the prosperity of the human race. Yet a comprehensive new study points to a worrying trend: The water they need to grow is getting more expensive, because they're failing to protect the nature that purifies it.mark buchanan

Cities are amazing engines of productivity. As the hubs of our modern societies, they mix together people with a diversity of skills and create fertile ground for learning and invention. In many respects, bigger tends to be better. Larger cities have more patents and inventions per person, and achieve better energy and resource efficiency thanks to economies of scale. For example, they require less conducting cable per person to carry electrical power where needed.

Concentrating people in cities also leaves more space for nature. It's one reason that Paul Romer, recently appointed as chief economist of the World Bank, has been championing the idea of charter cities – brand new cities that we could build and use to experiment with large-scale innovations in technology or government. Dozens of such cities could help us explore more sustainable ways of living, and also help meet the need to house many of the additional 3.4 billion people expected to be living by 2050.

It turns out, though, that protecting the surrounding nature is also crucial for cities to work. Any city draws its clean water from a natural watershed area -- some close by, others farther away. The rainfall that drains into the area is filtered and purified by natural land cover – forests, marshes and grasslands – before entering as the “raw water” of treatment facilities. The water for New York City, for example, comes from large reservoirs located an average of 100 miles away in upstate New York.

As cities have grown, the land in their watersheds has been cleared to make way for housing, factories and agriculture. As a result, water quality has declined. Agricultural runoff, for example, boosts concentrations of nitrogen, phosphorous and sediment. Treatment centers must then remove these impurities, requiring the use of increasingly complex and costly technologies.

A new study, led by ecologist Robert McDonald of the Washington-based Nature Conservancy, suggests that the cost of water treatment is becoming a very large burden on a global scale. Looking at changes from 1900 to 2005 in the watersheds of 309 large cities, all with populations larger than 750,000, it finds that more than 90 percent have suffered degradation, and that nearly one third experienced a significant rise in treatment costs – many by more than 50 percent.

The study confirms what environmental economists previously only suspected: The loss of natural water purification capacity is systematically increasing the cost of treatment around the globe. The best estimate puts the added expense at more than $5 billion per year. And it's set to get worse: Watershed degradation is expected to become more severe in the next decade or so, as cropland continues to expand. By 2030, global fertilizer use is projected to rise by nearly 60 percent.

The lesson is that our cities will require concerted investment in watershed preservation. The good news is that it need not be terribly expensive: Targeted projects can make a big difference. Since 1997, for example, the New York City Department of Environmental Protection has moved to protect more than 130,000 acres of valuable watershed, and the city now has very low water treatment costs relative to other U.S. cities.

New York's forward thinking can and should be replicated globally. McDonald and others estimate that roughly one in four cities -- home to about 800 million people -- could reap a positive return on investment aimed at conserving watersheds. In other words, it’s worth doing, and it would be an important step toward securing the kind of environment we need to survive.

Article Link To The Bloomberg View:

Airbus, Boeing Brace For Crucial Phase In Subsidies Dispute

By Tom Miles and Tim Hepher
August 16, 2016

The world's two largest jet makers are bracing for the next round in a transatlantic spat over billions of dollars of aircraft subsidies, amid accusations of widening U.S. support for Boeing (BA.N) and persistent European aid to Airbus. (AIR.PA)

After a year-long lull, the world's biggest trade dispute will enter a crucial phase in coming months, potentially casting a shadow over faltering efforts by the European Union and United States to negotiate a wider free-trade deal.

At stake are mutual claims of unfair subsidies to the two planemakers that raise the prospect of $22 billion a year in threatened trade sanctions, though many say a resolution remains years away and could ultimately involve a negotiated settlement.

The dispute, said to be the biggest in terms of value and time, dates back to 2004 when the U.S. urged the World Trade Organization (WTO) to act against European government loans to help Airbus develop jets such as the A380, followed by a counter-claim from the EU over federal and local aid for Boeing.

In separate rulings, the WTO found that both planemakers had benefited from billions of dollars of unfair subsidies.

The case is now bogged down in arguments over whether each side complied with orders to withdraw illegal subsidies and undo the effects of the majority of aid which, although not banned, can be challenged if it can be proved to be damaging.

After a three-year delay due to the strain placed on its resources by the marathon dispute, the WTO is expected to rule within weeks on whether the EU obeyed its rulings, followed by a similar report on U.S. compliance early next year.

Both sides claim the other ignored the thousands of pages of judgments and appeal findings in each case and have sought WTO permission to draw up sanctions, with the U.S. calling for up to $10 billion in counter-measures and the EU $12 billion.

U.S. sources have said they are confident the WTO will find the EU flouted its decisions, while the European side has called U.S. accusations "empty".

Tax-Break Challenge

Together, the cases affecting tens of thousands of aerospace jobs are seen as the biggest test of a multilateral system for resolving trade disputes since the WTO was founded in 1995.

Any sanctions could further complicate relations as the U.S. and EU remain bogged down in differences over a proposed Transatlantic Trade and Investment Partnership (TTIP), amid growing anti-trade sentiment on both sides of the Atlantic.

As the two existing Airbus-Boeing cases that have dominated the WTO's disputes forum for more than a decade creep towards a conclusion, a third WTO dispute affecting the world's two largest planemakers is simultaneously gathering pace.

Last year, the EU complained that Boeing was set to receive unfair support for its latest plane, the 777X, from Washington state thanks to an $8.7 billion package of expanded tax breaks.

In a confidential draft report, a WTO panel found Boeing would get some fresh subsidy from the tax decision, although it rejected several EU arguments, three people familiar with the case said.

One European source called it an important win for the EU.

A U.S. source denied this, saying claims that the EU is poised to win the case are "false", and a distraction from its inaction over earlier WTO rulings, but declined further comment.

The WTO and all the parties declined comment.

No publication date has been set for the interim findings, but they are typically released a few months after parties see a copy.

Previous WTO rulings on aircraft subsidies have been bitterly disputed, with both sides finding support for their arguments in the trade body's decisions and there are no signs that this report will be any different when it is published.

In parallel previous rulings, the WTO found both sides had doled out subsidies worth billions of dollars to their leading planemakers, sparking feuds between Airbus and Boeing over which side had won a greater percentage of the arguments in each case.

The latest dispute over Washington tax measures adds a third pillar to the sprawling trade dispute and, just like earlier cases, is expected to take years of legal arguments and appeals.

The EU argues that the 2013 package of preferential business tax rates, tax credits and tax exemptions represented subsidies to Boeing in return for securing the coveted 777X jetliner work.

It also claims the support falls into the WTO's most severe category, that of "prohibited" subsidies, because it depends on the use of domestic over imported goods.

U.S. industry sources argue the measures are available to any aerospace company in the state, including even a few suppliers to Airbus, and don't fall into the WTO's subsidy net.

Washington state's 2013 tax package for aerospace companies is largely the same as an earlier 2003 package, which the WTO found caused "serious prejudice."

The 2013 law extended all of the 2003 benefits from 2024 to 2040, and added exemptions for sales and use taxes on new plants used to manufacture airplanes, wings or fuselages.

In 2011, the WTO ruled earlier versions of the incentives from Washington state were subsidies that caused "serious prejudice" to Airbus, but rejected Europe's claim that they crossed the line of support that is prohibited automatically.

Article Link To Reuters:

Tuesday, August 16, Morning Global Market Roundup: Asia Stocks At One-Year High On Global Easy Money Policy, Oil Jumps

By Hideyuki Sano
August 16, 2016

Asian shares rose to one-year highs, expanding their gains this year to 10 percent, supported by a jump in oil prices and investor expectations of an extended phase of easy monetary policy around the globe.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3 percent, bringing its gains so far this year to 10 percent. Japan's Nikkei .N225 shed 1.6 percent as the yen strengthened to one-month high.

European shares may retreat slightly from Monday's seven-week high, with spreadbetters calling Britain's FTSE 100 .FTSE down 0.2 percent, Germany's DAX.GDAXI down 0.1 percent, and France's CAC .FCHI down 0.3 percent.

On Wall Street on Monday, S&P 500, Dow and Nasdaq stock indexes all closed at life-time highs, gaining 0.3 to 0.6 percent. Brazilian shares .BVSP also hit two-year highs, helped by higher oil prices.

Oil prices hit one-month highs on Monday, gaining 10 percent or more in a three-day rally as speculation intensified over potential producer action to support prices amid a glut of crude.

Russian Energy Minister Alexander Novak said on Monday his country is consulting with Saudi Arabia and other producers to achieve oil market stability, bolstering hopes that oil producing nations could take action to stabilize prices.

The market started to rally on Thursday after Saudi energy minister said non-members and members of the Organization of the Petroleum Exporting Countries (OPEC) are to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria from Sept. 26-28.

Brent crude LCOc1 traded at $48.04 a barrel, down 0.6 percent from Monday but still not far from Monday's high of $48.46, its highest since July 12.

Brent has gained more than 9 percent cumulatively since then. Since the start of August, it has risen more than 13 percent.

In currencies, the dollar slipped slightly but was broadly stuck in its recent trading ranges as market players look to the minutes from the Fed's July policy meeting, due on Wednesday.

"At that meeting, the Fed revised up its view on the labor market and said risks to the economy diminished. So markets will be keen to see what discussion they had on future rate hikes," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Although Fed officials have said a rate hike is possible by the end of year, investors are not convinced the Fed can raise rates this year at all given the fragile global economic outlook. Its December rate hike was the first in almost a decade.

Most other countries are easing their monetary policies, with Britain, Australia and New Zealand cutting rates in recent weeks and Japan stepping up its purchasing of exchange-traded funds.

These measures pose a risk that any Fed tightening could strengthen the dollar to an uncomfortable level for U.S. companies and policymakers.

Fed funds futures are pricing in only about 50 percent chance of one rate hike by December.

The dollar's index against a basket of six major currencies .DXY =USD stood at 95.51, down 0.1 percent on the day after having slipped 0.1 percent on Monday.

The euro EUR= fetched $1.1186, off last week's high of $1.1222.

The yen JPY= rose 0.6 percent to one-month high of 100.60 to the dollar.

The British pound slipped to near its three-decade low marked last month as traders brace for the first round of hard UK economic data on consumer and corporate reaction to June's vote for Britain to leave the European Union.

UK datafest begins at 0830 GMT (4.30 a.m. EDT) on Tuesday when consumer and wholesale prices are announced. Economists expect consumer prices to have fallen 0.1 percent on month in July.

"The market is so bearish on sterling that if we see higher figures than expected, we could see a big short-cover rally in the pound," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.

The pound traded at $1.2887 GBP=D4, having shed 2.5 percent so far this month and coming within a cent from its July 6 low of $1.2798.

Article Link To Reuters:

Obama Warns Democrats Against Overconfidence About Clinton Victory

By Jeff Mason
August 16, 2016

Declaring he was tired of talking about Donald Trump, President Barack Obama urged Democrats on Monday not to grow too confident about their prospects in the 2016 election despite Hillary Clinton's strong position in the race for the White House.

Obama, who is on a two-week vacation in Martha's Vineyard, an island off the coast of Massachusetts, took a short break from his relaxation time to raise money for Clinton, the Democratic presidential nominee he hopes will succeed him when he leaves office in January.

Clinton leads Trump in opinion polls, and the Republican nominee's campaign has suffered following remarks he made denigrating the parents of a fallen Muslim American soldier and charging that Obama was the founder of the Islamic State militant group.

The president warned his party, however, to maintain a sense of urgency until the Nov. 8 election.

"If we are not running scared until the day after the election, we are going to be making a grave mistake," Obama told some 60 donors who contributed $10,000 each to attend the fundraiser at a private home on the island.

"If we do our job, then Hillary will be elected president of the United States. But if we do not do our jobs, then it’s still possible for her to lose."

The remarks could foreshadow the president's role this fall in encouraging get-out-the-vote efforts for Clinton, his former secretary of state.

Obama has made clear his disdain for Trump, calling him unqualified for the White House. He told the donors he was tired of talking about Clinton's rival.

"I don't have to make the case against her opponent, because every time he talks he makes the case against his own candidacy," Obama said.

The president is expected to campaign heavily for Clinton in October.

Article Link To Reuters:

China Launches 'Hack-Proof' Communications Satellite

By Ben Blanchard
August 16, 2016

China on Tuesday launched the world's first quantum satellite, which will help it establish "hack-proof" communications between space and the ground, state media said, the latest advance in an ambitious space program.

The program is a priority as President Xi Jinping has urged China to establish itself as a space power, and apart from its civilian ambitions, it has tested anti-satellite missiles.

The Quantum Experiments at Space Scale, or QUESS, satellite, was launched from the Jiuquan Satellite Launch Centre in the remote northwestern province of Gansu in the early hours of Tuesday, the official Xinhua news agency said.

"In its two-year mission, QUESS is designed to establish 'hack-proof' quantum communications by transmitting uncrackable keys from space to the ground," it said.

"Quantum communication boasts ultra-high security as a quantum photon can neither be separated nor duplicated," it added. "It is hence impossible to wiretap, intercept or crack the information transmitted through it."

The satellite will enable secure communications between Beijing and Urumqi, Xinhua said, referring to the capital of China's violence-prone far western region of Xinjiang, where the government says it is battling an Islamist insurgency.

"The newly-launched satellite marks a transition in China's role - from a follower in classic information technology development to one of the leaders guiding future achievements," Pan Jianwei, the project's chief scientist, told the agency.

Quantum communications holds "enormous prospects" in the field of defense, it added.

China insists its space program is for peaceful purposes, but the U.S. Defense Department has highlighted its increasing space capabilities, saying it was pursuing activities aimed to prevent adversaries from using space-based assets in a crisis.

Article Link To Reuters:

Billionaire Investors Turn Bearish As U.S. Stocks Hit Record Highs

By David Randall
August 16, 2016

Several big-name hedge fund investors soured on U.S. stocks in the second quarter and moved to gold and other bearish bets, failing to anticipate the stock market rally in the current quarter.

Noting the recent run-up in the benchmark Standard & Poor's 500 index to fresh record highs while economic growth remains weak and corporate earnings are stagnant - George Soros, Jeffrey Gundlach, Carl Icahn and David Tepper were among billionaire hedge fund investors and money managers who slashed their long equity positions in the second quarter, according to regulatory filings.

All three major U.S. stock indexes ended at all-time highs on Monday, extending their record-setting climb of the past few weeks. The trailing price to earnings ratio of the S&P 500 is now at 20, a level at the high end of its historical range.

Gundlach, who oversees more than $100 billion at DoubleLine Capital, told Reuters last month, "The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That's exactly how I feel – sell everything. Nothing here looks good."

Gundlach has been selectively shorting stocks and has kept his overweight exposure in gold and gold miners.

Spot gold prices XAU= rose around 7 percent in the second quarter of 2016 to $1,358.20 an ounce, a two-year high and extension from the 16 percent rise in the first quarter - the strongest quarter in nearly three decades - as expectations for a U.S. interest rate hike faded.

Soros, who rose to fame and fortune by betting against the sterling in 1992, has become even more bearish among the "Billionaire Bears" club, slashing his share stake in Mondelez International Inc (MDLZ.O), PayPal Holdings Inc (PYPL.O), Lions Gate Entertainment Corp (LGF.N) as well as his entire stake in Apple Inc (AAPL.O).

Soros nearly doubled down on his bearish bet against the equities market, with his Soros Fund Management holding "put" options on 4 million shares in an exchange-traded fund that tracks the S&P 500 at the end of the second quarter, according to Soros Fund Management's latest 13-F filing. That’s up from “puts” on 2.1 million shares as of March 31.

Put options, generally considered bearish bets, give the holder the right to sell shares at a specific price by a certain date.

Portfolio disclosures of long positions by hedge fund managers, which come 45 days after a quarter ends, are closely watched for their insight into the bets of managers in the roughly $3 trillion hedge fund industry and as a source of investment ideas.

But those bearish positions could hurt hedge fund managers at a time when many in the industry are struggling to keep their investors happy and justify their fees.

Hedge fund managers, on average, were up 2.9 percent for the year through July, according to research firm HFR, a performance nearly 4 percentage points less than the 6.3 percent gain in the S&P 500 over the time same time.

Tepper, who did not exercise call options held in the prior quarter that would have allowed him to buy shares in the S&P 500 and PowerShares QQQ Trust, is cautious about the stock market, according to people familiar with his positioning on Monday.

Billionaire hedge fund activist investor Carl Icahn, meanwhile, had a net short position of 149 percent in the second quarter that was little changed from the first quarter, according to comments from company management on a conference call earlier this month.

The move to defensive stocks comes as utilities, telecoms and consumer staples stocks continue to outperform sectors considered more risky, said Todd Rosenbluth, director of fund research at S&P Capital IQ.

Daniel Loeb's Third Point LLC and Barry Rosenstein's Jana Partners both added new stakes in consumer staples company Coca-Cola European Partners PLC CCE.N, while John Lykouretzos's Hoplite Capital Management doubled its stake in health insurer UnitedHealth Group Inc (UNH.N).

Article Link To Reuters:

Inequality And Executive Pay: Taxes Are A Much Bigger Factor

Politics is all about identifying villains — the wrong ones.

By Kevin D. Williamson 
The National Review
August 16, 2016

The politics of blame are a funny thing. We will blame anybody and everybody for any and all imaginable problems — except the people who actually have blame coming.

Nobody really cares very much about evidence, reason, argument, etc. What they care about is telling a story with good guys and bad guys, and that the right people are cast in each role.

For the left, that shapes everything from economic thinking to foreign policy.

For example, we hear a great deal about economic “inequality,” a term that, in an open and dynamic society, means almost nothing. What the Left wants it to mean is that the poor are poor because the rich are rich, and that the middle class is struggling because corporate profits are high and billionaire playboys forget how many yachts they have. But that simply is not the case, as anybody who has even a passing familiarity with the actual economics literature on the subject can tell you. A $10-an-hour job pays $10 an hour because $10 an hour gets you somebody who can do that job. If both Bob and Sam can do the job and Bob wants $12 an hour while Sam will do it for $10 an hour, it’s a $10-an-hour job, and Sam has it.

It’s not the case that it would have been a $12-an-hour job if only the CEO made $500,000 a year instead of $700,000. (The average salary for a U.S. CEO is in fact a little less than $200,000 a year; those wild numbers you see in the news are for the CEOs of a relatively small number of very large global firms; in the same way, the compensation figures for the category “basketball coaches” can go very different ways depending on whether you’re talking only about the NBA or including high-school coaches.) It is true that costs get shifted around within and between companies, and it’s probably true that they get shifted more onto lower-wage workers than higher-wage workers, because those workers are, generally speaking, less in demand. (That’s why they are lower-wage workers.) But CEO pay usually isn’t a real big chunk of a corporation’s financial picture. In 2011, Apple’s chief executive, Tim Cook, was the highest-paid CEO on God’s green Earth, and his paycheck, large though it was ($376 million), amounted to about three-tenths of 1 percent of Apple’s revenue that year. The groundskeepers and secretaries in Cupertino don’t get paid what they get paid because of fluctuations within an approximately 0.3-percent-of-revenue outlay.

You might see some compensation-rejiggering effects from a proportionally much larger outlay, such as the 24.2 percent of its profit Apple paid in taxes that year.

Because we have a free market in labor, it isn’t always clear or straightforward how changes in companies’ expenses affect workers’ compensation. It’s not like Apple or Walmart or GE can simply declare a wage and expect programmers, warehousemen, and engineers to just show up. Workers have choices, too, though some have more choices than others. But if you think that paying the CEO a lot drives down workers’ wages, wouldn’t you also think that other expenses would put downward pressure on wages, too? And which would produce the heavier pressure: $376 million for the CEO or $8.3 billion for the IRS?

Never mind the numbers: Corporate executives have to be the bad guys. Anything else is unthinkable. And if the math and the economics say you’re nuts, then you can always start giving speeches about “economic patriotism.”

This produces some interesting — here meaning stupid, but stupid in an interesting way — thinking. Hillary Rodham Clinton, embracing the Left’s current fervor for Hugo Ch├ívez–style economic populism and nationalism (weirdly, “the Left” includes the Republican presidential nominee, for purposes of this discussion — bang-up job, Republicans!), complains about inequality, and offers as a partial solution higher corporate taxes. Businesses respond to changes in their expenses in different ways. But who do you think is likely to take it in the shorts if you jack up Apple’s tax bill? The designers and programmers who are being offered new six-figure jobs eight times a week at companies all over the country and all over the world, or the parking-garage attendant? If you’re a company that relies on Walmart for 80 percent of your sales, what do you imagine a negotiation looks like when Darth Arkansas decides to alter the deal?

Sometimes businesses go so far as to relocate their headquarters in response to taxes and other burdens; one way of doing that is the dreaded “corporate inversion,” in which a U.S. company uses a merger to relocate its legal domicile to some sweaty, exploitive, relatively low-tax Third World crap-hole . . . like Canada, the United Kingdom, or Ireland. Mrs. Clinton proposes to put a stop to that by enacting an “exit tax,” which is a really nice way of saying “ransom.” That might cause some trouble for existing businesses considering relocation, but what effect might it have ten or 20 years down the road? Do we really think the people who are smart, creative, and energetic enough to build the powerhouse corporations of tomorrow are going to be too stupid to figure out how to incorporate in Switzerland instead of Delaware? Why do you think that 75 percent of the U.S. corporations making initial public stock offerings are based in Delaware to begin with, instead of New York or California?

If you lead with blame instead of leading with reason, the world’s a simpler place. Government creates perverse economic incentives, and if the people who run businesses respond to those incentives, it isn’t because of any complicated economic or financial consideration; it’s because they’re bad, bad, men, most naughty indeed.

Once you’ve settled on a villain, everything else is just plot elaboration. Everybody knows one old hippie who believes that every bad thing that ever has happened in Latin America can be explained by the interests of the United Fruit Company in Guatemala. I know a young lady who sincerely believes that every unhappy event in the world is the work of “Zionists,” though I’m not entirely sure she knows what a Zionist is — if the price of a loaf of bread goes up a nickel, it’s a Zionist plot. Or it’s corporations, or bankers, or illegal immigrants, or blacks, or Christian fundamentalists — take your pick, and you can treat current affairs as a Choose Your Own Adventure book.

But here’s the thing: Hillary Rodham Clinton and Donald Trump are both economically illiterate megalomaniacs who will tell you any story you like if they think you will give them power in return. They know that you like stories in which the bad guys who have messed up your life are Chinese or Mexicans or shadowy billionaires instead of ...well, not to put too fine a point on it, you.

Whom do we blame? Anybody but the guilty party.

Article Link To The National Review:

Ben Bernanke Doesn’t Own Up In His Latest Fed Analysis

By John Crudele
The New York Post
August 16, 2016

Former Federal Reserve Chairman Ben Bernanke must be having memory problems.

In his most recent analysis of the Federal Reserve for his new employer, the Brookings Institution, Big Ben detailed the Fed’s problems as if he had no part in causing them.

Janet Yellen may be running the Fed blind these days because the economy isn’t behaving as it ought to be, but Bernanke and his predecessor, Alan Greenspan, supplied the blinders.

I’m going to do something unpredictable — exonerate Greenspan, Bernanke and Yellen to a point. Each has relied on economic data from various federal agencies that have proven to be faulty.

Yellen has gotten the worst information from these agencies because all data have been thrown for a loop by the intensity of the Great Recession.

I have documented over many years the difficulty with a lot of the data, especially from the Labor Department and Census Bureau. Recent data highlight the problem.

In the first quarter of 2016, the Bureau of Labor Statistics initially said wages in the US rose by a very healthy 4.2 percent annual pace. Then on Aug. 9, it revised that estimate to a loss of 0.4 percent.

So, just like we see in the US gross domestic product (GDP) figures, these numbers confirm that the economy hasn’t been doing well thus far in 2016. No surprise there to those of us living in the real, not-seasonally-adjusted world.

Big Ben, in his Brookings blog, picks on the data and the Fed like a guy who has forgotten where he came from.

“The changing views of the Federal [Reserve’s] Open Market Committee participants [and most outside economists] follow pretty directly from persistent errors in forecasting economic developments in recent years,” Big Ben says.

Persistent errors! He goes on to explain in excruciatingly small detail how bad the errors were and why he thinks they occurred.

Productivity — which is, essentially, the nation’s economic output per worker — has been falling, and Big Ben says that’s one of the problems the Fed didn’t foresee.

Well, the Fed should have been reading my column. If the employment numbers are fictitiously high — as I’ve been explaining for years — then productivity is going to look dismal when it’s measured by an economy whose GDP is weak.

It’s just math. Low economic growth divided by job figures that are being boosted by seasonal adjustments, assumptions and outright fraud.

“In short,” says Big Ben, “over the past few years, and especially during the past 12 months, FOMC participants have significantly revised down their estimates of potential long-run US economic growth.”

And these miscalculations, Big Ben says, are why the Fed has only been able to raise interest rates once in 10 years. And, he said, all these dynamics are likely to make the Fed “dovish” — not raise rates — in the near future.

It took Big Ben all these years to realize that the Fed was misreading the economic data, or — to my point — that misleading economic data were throwing off the Fed.

The Fed, of course, is still hoping that it is only misreading the data and that, somehow, the economy will miraculously right itself. The problem is, the Fed’s long-running near-zero interest rate policy has drained many households of bank account interest income, which cuts spending.

And Big Ben’s quantitative easing programs are at fault, here.

One other thing happened while the Fed was screwing up — voters got angry, allowing self-described billionaire Donald Trump to become the Republican presidential candidate. They also made Bernie Sanders a cult hero

I hope Big Ben is happy with that.

Article Link To The New York Post:

'A Lot of People Are Saying' Trump Is A Democratic Party Plant

By Eli Lake
The Bloomberg View
August 16, 2016

How would Donald Trump assess Donald Trump's candidacy? As he might put it: A lot of people are saying his campaign is an operation on behalf of the Democratic Party to destroy the Republicans.

"A lot of people are saying"? That's not a very high evidentiary standard. What else?

Well, to start there is the photo. You know the one, where Trump and his new bride Melania are rubbing elbows with the Clintons. Bill Clinton spoke with Trump right before Trump announced his candidacy. Trump has of course contributed to Clinton campaigns in past years as well. This doesn't even get into the fact that Ivanka Trump and Chelsea Clinton are friends.

All of that adds up to a lot of conjecture and coincidence. It's more likely there is a less sinister explanation for Trump's obvious political errors in the general election: An isolated egomaniac rejects the advice of political professionals.

And yet the "Trump is a plant" theory has more compelling evidence than Trump could amass for claims like "Obama founded ISIS" or his allies could muster for "Democrats murdered a DNC official because he leaked e-mails" (which by the way most security experts say were pilfered by Russian intelligence).

The Republican candidate's wild lunges and errors in recent weeks, particularly on national security, certainly do more harm to his own adopted party than to those he purports to target.

This is not just because Trump's comments about the Islamic State, the Iraq War, and the Khan family (to name just three) are comically false. They also let President Barack Obama and Hillary Clinton off the hook. It's easy to dismiss a crazed accusation about Obama being the founder of a jihadi organization; it's much harder for the administration to respond to serious and pointed criticism of its foreign policy.

Let's start with the Iran deal. The Wall Street Journal reported this month that $400 million in cash arrived in Iran just as the Iranians were releasing Americans they had detained. Republicans in Congress are now following up. On Aug. 12, Senators Mike Lee and Ted Cruz wrote a scathing letter to Obama asking him whether the payment to Iran violated U.S. prohibitions against financial interactions with Iran. This is the kind of fodder that a typical Republican presidential campaign would seize upon. Trump's campaign doesn't even seem to be trying.

Then there is a report released last week from House Republicans on the Intelligence, Armed Services and Appropriations Committee. It didn't get much airtime because the political conversation was dominated by Trump giving Clinton and Obama the ISIS MVP award and musing about the "Second Amendment people."

The report found that in 2014 and 2015, U.S. Central Command intelligence analysts' accurate and pessimistic assessments of Obama's new war against the Islamic State were often edited out of the finished product.

"I believe the reporting out of U.S. Central Command, which showed a rosier picture about U.S. efforts against ISIS, led the United States to inadequately provide resources to take on the threat that has now grown and metastasized against the U.S.," Representative Mike Pompeo, an author of the report and a Republican member of the House Permanent Select Committee on Intelligence, told me.

This falls into a pattern. Obama, like most modern presidents, engages in selective disclosure of state secrets. Filmmakers are provided extraordinary access to research a movie about the raid that killed Osama bin Laden. At the same time, the White House slow rolled House oversight committees in their investigation of the 2012 attack at Benghazi. So far, the few documents released from the 2011 bin Laden raid to the public paint a picture of an antagonistic relationship between bin Laden and Iran. Former officials who have studied them, like former Defense Intelligence Agency director, Michael Flynn, say there are still classified documents from the raid that show Iran and al Qaeda enjoyed a much cozier relationship.

This critique of Obama is not as bold as calling him the founder of the Islamic State. But it has the benefit of being true. Trump's current approach has the benefit of helping his political opponents. So again, it's worth asking who in the end really gains from Trump's paranoid, fact-free campaign style. After all, a lot of people are saying it's Hillary Clinton.

Article Link To The Bloomberg View:

The Anti-Cop Movement Hits A New Low In Milwaukee

By Rich Lowry
The New York Post
August 16, 2016

Tim Pool is a fearless social-media reporter who specializes in getting close to the action. It almost doesn’t qualify as a protest or riot if Pool isn’t live-streaming from the streets. But he’s pulling out of Milwaukee because it’s too dangerous for white people.

In a carefully stated YouTube video, Pool described the verbal taunts and threats, as well as actual violence, directed at whites. After an 18-year-old male was shot in the neck and extracted by Milwaukee police in an armored vehicle — Pool identifies the victim as white, although other press reports don’t mention his race — he concluded he had to leave. (For the record, Pool is half-Korean — not that rioters care).

The Milwaukee unrest has taken on a more explicitly racist cast than other riots after officer-involved shootings, in yet another new low for the anti-police movement that has roiled our cities in recent years.

After Ferguson, the movement famously adopted the slogan, “Hands up, don’t shoot.” If it were to take its next catch-phrase from Milwaukee, it might be (per Pool’s reporting), “f–k white people.”

In other officer-involved shootings or deaths that have occasioned unrest, there has at least been a colorable case that the police acted wrongfully.

In Milwaukee, a black officer shot an armed man, 23-year-old Sylville Smith, who by all accounts ran from his car after a traffic stop and defied an order to drop his (stolen) gun.

The officer wore a body camera and the police chief says the video shows Smith raising his gun before the cop shot him dead.

Presumably we’ll see the entire video and know more soon enough, but it’s not hard to believe Smith was capable of recklessly threatening the officer. His long rap sheet is the story, in microcosm, of why inner-cities communities are so miserably unlivable, and need to be policed so intensely.

According to the Milwaukee Journal-Sentinel, Smith had been “arrested or ticketed nine times” since 2011, including for a shooting, a robbery, carrying a concealed weapon, theft and possession of heroin and cocaine.

He beat a shooting rap at a jury trial in 2015 when a witness recanted, allegedly after Smith intimidated him.

It’s this criminality that is a constant, oppressive threat to black lives. Smith’s mother says her son got his gun because he had been shot twice and robbed four times. Three people were murdered last weekend within blocks of where the officer shot Smith on Saturday afternoon, and five people were killed in total over a nine-hour period Friday night and Saturday morning. The routine carnage is, of course, never the occasion for rioting.

Law enforcement should treat everyone professionally and respectfully and be held responsible when it doesn’t. There are useful reforms to make the police more accountable, such as the body cameras that now loom so large in controversial cases.

But the Milwaukee disorder is another stark illustration of how often the agitation over police-involved shootings fades into a noxious nihilism, heedless of the facts or reason.

Burning down neighborhood business establishments, throwing bricks at cops, trashing police cars and chasing white people — all features of the Milwaukee riots — may feel good, but they’re simply more symptoms of the social breakdown that police are asked to respond to every day.

Even if the cops conduct themselves perfectly in such communities, there will inevitably be tensions and tragedies that don’t occur in more orderly places where young men aren’t so often the perpetrators — and victims — of crime.

The deeper question in the debate over policing is how we can keep the lives of so many young men like Sylville Smith from sliding off the rails. But trying to answer it doesn’t hold the satisfactions of smashing windows or provide ready fodder for cable TV debates.

And so the beat, drearily, goes on.

Article Link To The New York Post:

Turkey-EU Clash Is Now Just A Matter Of Time

President Recep Tayyip Erdogan has issued a series of warnings that Turkey will stop taking refugees back from the EU if it fails to waive visa restrictions for Turks, signaling the two sides are on a collision course.

August 16, 2016

President Recep Tayyip Erdogan’s warnings that Turkey’s refugee deal with the European Union will collapse if it fails to waive visa restrictions for Turks have become more frequent, almost routine in recent days, signaling a looming and serious crisis in Turkish-EU ties.

The emergency rule Erdogan declared after surviving the failed July 15 coup has meant the suspension of a series of basic rights and freedoms in Turkey, making the planned visa waiver even more difficult and hastening the course toward collision. The row was aggravated by a psychological factor as Erdogan feels anger and mistrust toward EU leaders who, according to him, failed to extend him adequate support after the putsch.

Since the beginning of August, Erdogan has grown markedly tougher on the issue, warning every five days on average that Turkey will stop readmitting refugees if the EU fails to introduce visa-free travel for Turks, with the Turkish press calling his warnings a “showdown.”

In his most recent challenge Aug. 12, Erdogan told Germany’s RTL television, “The visa liberalization and readmission are very important. The process is currently ongoing. Unfortunately, Europe has failed to keep its promise on the issue. We want to take steps simultaneously. If [the visa waiver] happens, fine. If not, I’m sorry but we’ll stop the readmissions.” He had made similar remarks on Aug. 2 and Aug. 8 as well.

Erdogan’s warnings are based on the March 18 deal between Turkey and the EU, under which Ankara pledged to take back all refugees who cross illegally from Turkey to Greece after March 20. Visa-free travel for Turkish nationals was part of the agreement — hence the reciprocity link Erdogan draws between the two. The introduction of the visa waiver was slated for June, but that target was missed, and all signs now indicate it is not forthcoming anytime this year.

Originally, the EU had planned to lift visa requirements for Turks in October 2016 if everything went smoothly under a visa liberalization agreement the two sides signed Dec. 16, 2013, more than two years before the refugee deal. The plan was brought forward to June and incorporated into the refugee deal as a result of personal efforts by Turkey’s then-Prime Minister Ahmet Davutoglu. The EU agreed because the new timing changed nothing about the 72 criteria Turkey was supposed to fulfill for the visa waiver, something that Ankara was perfectly aware of.

So far, Turkey has met 67 of the said criteria. Erdogan is reluctant to fulfill the remaining five, but wants the visa waiver to go ahead all the same — a demand that lies at the core of the dispute. The most important part of the homework Ankara refuses to do requires amendments in Turkey’s anti-terror law in line with EU norms. The EU’s objective here is pretty clear: to strip Turkish security and judicial authorities of a legal framework that allows for violations of basic rights and freedoms and thus make sure that visa-free travel does not encourage victimized Turks to seek political asylum in EU countries. So, the EU’s rationale is to protect itself against a possible new wave of migration, facilitated by visa-free travel while oppressive and restrictive laws remain in place.

Of note, two of the four other criteria at which Erdogan balks require legal amendments to align with EU norms on fighting corruption and the protection of personal data.

It’s worth recalling, however, that Erdogan’s threats to abolish the refugee deal did not begin after the July 15 putsch. The 2013 agreement, with all its 72 conditions, had been signed in Erdogan’s presence in Ankara, yet in May he was able to say, “They have put forward 72 points, saying we should do this and that. This story is something new. These [conditions] didn’t exist before. Where did they come from?”

In the days before the putsch, Erdogan’s pretext for rejecting the five outstanding criteria was the all-out war Ankara had launched on the Kurdistan Workers Party (PKK) in July 2015. He argued that amending anti-terror laws while the fight against the PKK was in full swing would play into the hands of the militants. Now, he has an even stronger reason to dig in his heels: to sustain unhindered the massive, merciless purges and clampdowns targeting the Gulen community — officially branded by Turkey the Fethullah Gulen Terror Organization — whose military network has emerged as the planner and perpetrator of the putsch.

Under the state of emergency, Turkey has become a country run through legislative decrees exempt from constitutional checks, with freedoms further suppressed and the European Convention on Human Rights put on hold. Thus, it has drifted further away from the EU and can in no way be expected to fulfill the pending conditions for a visa waiver.

Meanwhile, tens of thousands of people have landed in police custody or in jail, lost their jobs and seen their properties confiscated as the draconian onslaught on Gulenists rages both at state institutions and public life in general, threatening an exodus of political refugees to Europe.

In sum, the post-putsch conditions have reinforced the EU’s reasons to maintain the visa restrictions, while Erdogan has become tougher in demanding their removal. As long as these conditions prevail, the eruption of a severe crisis between Turkey and the EU is only a matter of time.

Article Link To Al-Monitor:

Turkey-EU Clash Is Now Just A Matter Of Time

The Islamic State’s Asian Offensive

As the extremist group is squeezed at home, it is expanding abroad.

Politico EU
August 16, 2016

Southeast Asia could become ISIL’s next base, as the terrorist organization seeks to expand its operations outside of the Middle East and North Africa.

Organizations inspired by ISIL (Islamic State of Iraq and the Levant) are already gaining ground in the region, which is rich in latent jihadist potential: Small jihadist movements are operating in Indonesia and the Philippines; an ongoing Muslim insurgency is burning in southern Thailand; there is strong support for Sharia law in parts of Malaysia; and a large number of Southeast Asians who have fought in Syria and Iraq have since returned to the region.

ISIL hopes that a base — or wilayat — can catalyze these forces into a powerful regional jihadist movement. ISIL’s influence in the region has been growing steadily since mid-2014. The organization poses a significant threat in part “because of how fast it’s gained popularity among regional groups,” said Joseph Liow, a senior fellow at the Brookings Center for East Asia Policy Studies in Washington.

“Economically, Southeast Asia is very unique, and given the high density of countries in the neighborhood, including large Muslim populations in Indonesia, Malaysia and southern Philippines, it is only natural for ISIL to look to the region,” said Vikram Rajakumar, a senior analyst at the International Centre for Political Violence and Terrorism Research in Singapore.

* * *

Southeast Asia is fertile ground
for ISIL in part because it has strong pre-existing terrorist networks in place. Until recently, extremist groups waged mostly local battles. Now, they have begun to link up across national borders, inspired by ISIL’s global approach.

The well-established Katibah Nusantara (KN) is led by three Indonesian militants based in Syria. The group claims to represent Southeast Asians fighting on behalf of ISIL, and has some 200 fighters based in Raqqa, according to Zachary Abuza, a professor at the National War College in Washington.

The group’s members are active in spreading ISIL propaganda, recruiting members, coordinating attacks, and fostering terrorist networks back in their home countries,” said Thanawan Klumklomchit, the regional terrorism prevention officer at the U.N. Office on Drug and Crime. “KN could be an important enabling factor for ISIL,” she added.

Homegrown terrorist groups in the region, some which have pledged loyalty to ISIL, have appropriated many of its more successful strategies. They cultivate a strong social media presence on Facebook and Twitter, and use encrypted forms of communication like WhatsApp and Telegram to plan and carry out attacks, raise funds, and attract new members. “Evidence is pointing towards Southeast Asia groups seeking inspiration from one another,” said Rajakumar.

“ISIL has sent hundreds of thousands of dollars to Southeast Asia to plan, prepare and execute attacks” — Rohan Gunaratna, head of the International Centre for Political Violence and Terrorism Research

ISIL has partly also been popular among extremist groups in the region because it does not seek to control their operations as Al Qaeda had done. “It just wants these groups to ‘hurt its enemies,’” said Bilveer Singh, a regional security specialist at the Rajaratnam School of International Studies in Singapore. Pledging allegiance to ISIL is also a useful mechanism for local fighters to get military training, funding and combat experience.

ISIL-linked attacks in the region have been small-scale so far, but analysts warn that more ambitious operations are likely, as local leaders loyal to ISIL compete for supremacy. Some ISIL propaganda videos now boast Indonesian subtitles. One, posted in March, showed Indonesian children training with AK-47s.

Meanwhile, Islamic militants returning from Syria and Iraq come home with “unprecedented access” to funding, terrorist networks, combat skills and information skills,” said Klumklomchit.

“ISIL has sent hundreds of thousands of dollars to Southeast Asia to plan, prepare and execute attacks,” said Rohan Gunaratna, head of the International Centre for Political Violence and Terrorism Research.

Indonesia — home to the world’s largest Muslim population — has suffered multiple attacks, the most vicious of which were carried out by Jemaah Islamiyah, an Al Qaeda offshoot that has waged a separatist war for decades. Abu Bakar Bashir, the jailed radical cleric and leader of the militant Islamic group, has pledged loyalty to ISIL and encouraged his followers to do the same.

In January, a series of coordinated bomb and gun attacks in central Jakarta were claimed by ISIL, who said its “crusader alliance” had carried out the Paris-style attacks.

“We now know the Jakarta attacks took place after an order from an Indonesian in Syria affiliated with [ISIL],” said Sidney Jones, the director of the Institute for Policy Analysis of Conflict. “We now have some 500 Indonesian citizens in Syria, probably 250 to 300 fighters.” Several dozen others known to have successfully crossed into Syria have since returned. Tensions between the nation’s moderate Muslims and extremists are growing, and the government has been slow to impose preventive measures.

“January’s Jakarta attacks were directly funded by ISIL,” said Gunaratna. “But this is not the only isolated case. We have seen other examples of movement of funds to Malaysia and to Indonesia.”

* * *

Long-standing ethnic
and religious conflicts in the Philippines, Indonesia, Thailand, and to a lesser extent Malaysia, are adding fuel to the fire. Escalating domestic tensions make extremist recruiters’ jobs that much easier.

A predominately Catholic country, the Philippines has a small, marginalized Muslim population, some of whom have become radicalized. They have their own reasons for supporting an independent Islamic state. “All kinds of groups from within the region have congregated here to support their activities, all expressing their loyalties to ISIL,” said Singh. “It’s no longer just one Philippine group fighting the government, but joint operations of groups.”

The Abu Sayyaf Group (ASG) is the Philippines’ most dangerous militant organization. Operating out of Basilan, in the Sulu archipelago, with a strength of fewer than 500 fighters, ASG has abducted, assassinated, bombed and fought soldiers, police, local and foreigners for more than two decades — with the expressed goal of creating an Islamic state.

“ASG has pledged allegiance to ISIL, and ISIL is aware that they are the only militant jihadist group that has the capabilities of a full militia to mount operational attacks,” said Andrin Raj, Southeast Asia regional director at the International Association for Counterterrorism and Security Professionals.

In Thailand, rebels are fighting for greater autonomy for the 1.8 million Muslims in a country 90 percent Buddhist.

The group is believed to have splintered into hardcore ideologues and mainly kidnap-for-profit bandits, making it harder to eradicate and track. They are also protected by the region’s borders with Malaysia and Indonesia, which are notoriously porous.

Another Philippines-based organization, the Bangsamoro Islamic Freedom Fighters (BIFF), have fought a decades-long war for an autonomous region in the impoverished southern island of Mindanao. Founded in 2010, the 400-strong group recently began displaying ISIL flags and making videos using the group’s rhetoric.

But Malaysia, although it has a far smaller Muslim population than its neighbors, may be the most vulnerable to attack. “An attack [in Malaysia] would be far more consequential in terms of terrorist aims, provoking societal tensions and a heavy-handed government response,” said Abuza. “Malaysia lacks the social resilience that Indonesia has in spades. Recruitment and radicalization is almost all done online, and it cuts across the entire socio-economic spectrum.”

An attack on a nightclub near Kuala Lumpur in June was the first ISIL-related attack in the country, allegedly plotted by a Malaysian extremist who fought with ISIL in Syria. The government has identified 150 ISIL cells since the beginning of 2015, and estimated some 50,000 ISIL sympathizers in the country.

In Thailand, rebels are fighting for greater autonomy for the 1.8 million Muslims in a country 90 percent Buddhist. The protracted conflict, now 12 years old, has killed more than 6,500 people.

So far, rebels have rejected outside attempts by jihadists like Jemaah Islamiyah to turn it into a religious conflict. But this could change. Relations between the Thai government and the rebels have soured, after several rounds of peace talks have failed. The stand-off could make younger rebels impatient and encourage them to break away from the old guard.

The danger is that they “take a page from the ISIL playbook and say that the only way to succeed is by ramping up the sectarian violence,” said Abuza.

On August 11 and 12, Thailand was hit by multiple explosions targeting tourist-popular towns of Hua Hin, Phuket and other locations, killing at least four and injuring 20. The attacks come days after a national referendum approved a constitution giving more power to the ruling military junta. No group has claimed responsibility, but attention could focus on southern militants. If so, this would be a new expansion of their insurgency and targets.

* * *

ISIL has not officially designated a specific country as a potential wilayat, but experts say the group has its eye on the southern Philippines. ASG’s leader, Isnilon Hapilon, pledged allegiance to ISIL earlier this year. The group has claimed responsibility for kidnapping at least 18 Indonesians and Malaysians in the Sulu and Celebes seas this year.

In an ISIL video released in June, Malaysian terrorist Rafi bin Udin described Hapilon as an amir, or leader, in the Philippines and encouraged terrorist attacks against Malaysia, Indonesia, Thailand and the Philippines.

“ISIL hopes creating a wilayat in the Philippines will give the impression that its global footprint is continuing to expand, despite its recent setbacks in the Middle East,” said James Brandon, head of political and security risk at Stirling Assynt, a U.K.-based consultancy. “It also hopes [a base] will act as a logistical and ideological hub for ISIL-influenced jihadists throughout Southeast Asia.”

An ISIL foothold in the Philippines would present “far-reaching security implications for the stability and prosperity of a rising Asia,” Gunaratna said.

The more ISIL’s territory shrinks, experts warn, the more fighters will be let loose for global acts of terrorism.

Bangladesh may also come to play an important role in ISIL’s strategy. “There are existing jihadist movements there that can be reinvigorated, a secular government whose oppression of mainstream Islamists is making some more susceptible to jihadist viewpoints, and an inequitable socio-economic environment that can help fuel radicalization,” said Brandon. From a strategic perspective, a strong presence in Bangladesh would facilitate attacks on India, China and Myanmar — all of which are key enemies of ISIL. “Attacks there would boost the group’s profile,” he said.

ISIL is well placed to take on the role of taking revenge for perceived atrocities against Rohingya, Kashmiris, Uighurs and other minority Muslim groups. “This will allow jihadists to pose as being the ‘shield’ of Islam and to thereby make a play for the hearts and minds of ordinary Muslims,” Brandon said.

Any Southeast Asian wilayat is unlikely to be a stepping-stone or base for carrying out expanded attacks in Europe or the Caucasus. The terrorist threat, even among those who have aligned themselves loosely with ISIL, remains regionally focused.

But what happens in the Middle East and North Africa could influence the group’s success in Southeast Asia. The more ISIL’s territory shrinks, experts warn, the more fighters will be let loose for global acts of terrorism.

“At some point there is going to be a terrorist diaspora,” FBI Director James B. Comey, said at a recent conference. “Not all of the Islamic State killers are going to die on the battlefield.”

Article Link To Politico EU: