Monday, September 12, 2016

Why Brexit Hasn’t Destroyed The British Economy (Yet)

Since the referendum, U.K. consumers and businesses have defied the doomsayers. But the day of reckoning has only been delayed.

Politico EU
September 12, 2016

It was supposed to be a summer of discontent.

But after the Brexit vote, many Britons feel they have never had it so good.

In the early hours of Friday, June 24, as Britain’s shocking decision to leave the EU dawned on the world, economists of all stripes took out their red pens, slashing forecasts and predicting short-term woes and long-term pain. Their consensus view, shared by many experts, including POLITICO, was that one of Europe’s strongest economies would sputter in 2016 and grind to a halt next year.

Credit Suisse headlined a post-referendum research report “Mayday! Mayday!” while Morgan Stanley’s economists spoke of a step “into the unknown.” All of a sudden, the warning of a “DIY recession” from then-finance-minister George Osborne in the run-up to the voting appeared close to becoming a reality.

A new moniker was coined: “Brecession.”

Less than three months later, the doomsayers are beating an embarrassing retreat.

Financial analysts and economists are now busy revising their predictions upwards and scrapping calls of a 2017 recession, defined as two consecutive quarters of negative growth. After being wrong-footed by the referendum result, the City of London and assorted pundits have been fooled by its economic aftermath.

Far from being hampered by the uncertainty surrounding the vote, the British economy accelerated in the three months through June, driven by strong consumer spending, a big improvement in industrial production, and business investment. And the picture has remained positive, albeit not as rosy, since then, with preliminary data showing manufacturing and services holding up well, and retail sales stronger than expected.

What Went Right?

Brexit supporters are already taking victory laps. “I see no circumstances where the Brexit vote can cause a recession in the U.K.,” John Redwood, a leading Conservative Euroskeptic, told POLITICO’s Tom McTague.

What went right for the U.K economy after the vote? And can Britain really survive a historic break-up from its biggest trading partner with just a few scrapes? The answers are, respectively: “A lot” and “not really — in the long-term.”

"Political developments, for once, also helped. Instead of descending into months of internecine strife, the ruling Conservative party was able to swiftly appoint Theresa May."

First, the good news. The British economy didn’t fall off a cliff after June 23, thanks to a benign confluence of previous momentum, a swift political entente and radical action by the Bank of England.

In 2015, the U.K. was one of the best-performing economies in the developed world, notching up a 2.3 percent growth rate, a smidgen below that of the U.S. (2.4 percent) but way ahead of the 1.6 percent recorded by the eurozone, according to the Dutch bank ING. Employment soared to levels not seen in more than a decade, while low-interest rates and even lower inflation kept the housing market humming and consumers shopping.

Economists say that when an economy is growing like that, it’s difficult to knock it off its tracks, partly because a lot of investment and spending decisions are locked in for the long term. Companies, for example, prefer to reduce margins, dip into reserves, or hike prices before cutting their workforce or reversing investment decisions. And individuals loathe changing their spending patterns unless there’s a life-changing event — like layoffs.

Political developments, for once, also helped. Instead of descending into months of internecine strife, the ruling Conservative party was able to swiftly dispose of the referendum-losing Prime Minister David Cameron and appoint Theresa May as his replacement in a matter of days. May, a Remainer before the vote, formed a Cabinet that seemed to balance the views of the Out camp — three key Brexiters were given big jobs — with the pragmatism needed to get a deal out of the EU.

"What economists appeared to have gotten wrong is the timing of a Brexit-induced slowdown."

“Many were expecting the Tories to really implode. That didn’t happen,” said Jean-Michel Six, chief economist for Europe, Middle East, and Africa for Standard & Poor’s. “The conservatives demonstrated an amazing ability to move to the next step, forget about Cameron and appoint a new PM that impressed markets and public opinion. That was very reassuring.”

The Bank of England compounded the feel-good factor in August by throwing “the kitchen sink” at the economy, as Robert Wood at Bank of America Merrill Lynch put it. Among other things, the BoE’s move made the sterling weaker, helping British exporters and boosting inward tourism.

The first BoE interest rate cut since 2009, coupled with other stimulus measures, also sent a powerful message to markets, companies, and consumers alike: That the country’s monetary authorities will not be standing idly and let Brexit wreck the economy.

Tougher times lie ahead.

For a start, not all indicators continue to point upwards. On the consumer front, high-street sales have suffered after a strong July, falling 1.5 percent in August compared to a year ago, according to accountants BDO. And on the business side, an industrial trends survey from the Confederation of British Industry in July showed that optimism about the business situation over the previous quarter had fallen at the fastest pace since January 2009. The CBI also found that companies’ desire to invest in buildings and factories had fallen sharply.

What economists appeared to have gotten wrong is the timing of a Brexit-induced slowdown. Instead of fretting about investments and tightening belts immediately after the vote, the Britons had a leisurely summer in the (relatively) good weather, enjoyed the country’s Olympics successes and took advantage of the benign political and monetary situation to carry on spending.

But that has only delayed the day of economic reckoning. A tidal wave of uncertainty is about to hit Britain’s political and economic landscape as the country embarks on treacherous talks over its future relationship with the EU.

“We think the key risk event is the point at which Article 50 is triggered, i.e., the formal notification of the U.K.’s intention to Leave the EU, which we currently expect in the first quarter of 2017,” wrote Morgan Stanley economists Melanie Baker and Jacob Nell in a recent note.

As for consumers, the most important determinant of their spending is whether they have a job or not. As a result, consumer spending tends to lag, rather than lead, any economic contraction. In the view of Kathrin Muehlbronner, lead U.K. analyst at Moody’s Investors Service, British consumers will start to feel the pain of a Brexit downturn only when the job market weakens, something that might not happen until next year.

Less Acute But More Chronic Pain

Indeed, some economists, like ING’s James Knightley still forecast a Brecession in 2017. A delayed timetable doesn’t mean the pain will be any less pronounced. “The drag on growth looks less acute than we had expected but may be more chronic,” Bank of America’s Wood wrote to clients.

Much will depend on how foreigners behave. Not, mind you, the foreign workers that hard-line Brexiters want to keep out, but overseas investors such as the Japanese car companies or Chinese real estate buyers that have been funding Britain’s gaping current account deficit. As doubts grow over Britain’s relationship with the EU, many expect the foreign money to stay away, making it less possible for Britain to “rely on the kindness of strangers,” as Mark Carney, the governor of BoE, has said, citing American playwright Tennessee Williams.

To be clear, U.K. policymakers can, and will, try to counter these negative effects. New Chancellor of the Exchequer Philip Hammond is due to unveil his first fiscal measures on Nov. 23 and is certain to reverse the austerity of Osborne and add tax cuts and spending plans to stimulate the economy. And the BoE could cut rates further and add to its bond purchases, going down the stimulative path blazed by the U.S. Federal Reserve, Bank of Japan and European Central Bank.

But those actions may not be enough to stop a once-booming economy from hitting the wall — or at least braking very hard before it.

Even May has admitted that “there may be some difficult times ahead.” By next year, that could be seen as a stunning example of British understatement.

Article Link To Politico EU:

Will Letting A.I. Make Our Decisions Be The Best Decision We Make?

Singularity HUB
September 12, 2016

I confess: while writing this, I was intermittently procrastinating by browsing the overwhelming number of wireless headphone options on the market.

As you may have heard, Apple just killed the headphone jack on their new generation of iPhones, leaving only a single port. This means a solid pair of wireless earbuds will be a must if you want to charge and listen to music at the same time. And those puppies aren’t cheap. How to pick the best bang for your buck?

We make a crushing number of choices every day — over 200 just for food — and businesses aren’t helping. “Consumers want more options” seems to be the core mantra guiding design operations, with companies offering an embarrassment of riches in every field.

But is more really better?

In 2004, the psychologist Barry Schwartz popularized the idea of “the paradox of choice”: when presented with too many options, we freeze in indecision and experience intense dissatisfaction. A related, perhaps more insidious problem is “decision fatigue” — a type of brain drain that happens when we make too many choices, exhausting our better judgment, becoming rash or avoiding the decision-making process altogether. Brain drain may be why judges deny parole more often in the afternoon,why we buy junk food when shopping hungry or make impulsive purchases before sleep.

When surveying the types of choices we make each day, the majority are trivial — what to eat, wear, read — hardly the best use for our limited brainpower. Instead of dwelling on those micro-decisions, what if we could remove them from our lives altogether, outsourcing them to companies and algorithms?

'Convenience, Not Choice'

According to Aaron Shapiro, the CEO of the creative agency Huge, such a world is beginning to take shape.

Writing in FastCompany’s Co. Design blog, Shapiro delivers his manifesto: “The next big breakthrough in design and technology will be the creation of products, services, and experiences that eliminate the needless choices from our lives and make ones on our behalf, freeing us up for the ones we really care about: Anticipatory design.”

In a nutshell, anticipatory design creates an ecosystem where users don’t have to make decisions — instead, a choice is made automatically on the user’s behalf without input. Here, an AI determines the best option based on the user’s prior behaviors, preferences, and other data, guided by some simple business logic and common sense to smoothly complete the decision cycle.

In a way, anticipatory design is personalization on steroids.

Here’s an example. Say you need to book a flight — you search through airline aggregation sites for the best choice, weighing in on price and agony, doing all the hard work yourself. In anticipatory design, an AI assistant scans for upcoming out-of-town events in your calendar and automatically books a ticket, carefully choosing airlines, seats, flight time and price based on previous bookings.

Of course, with a system like this, feedback is required at the beginning, explains Shapiro. However, like any other machine learning system, the more you use it, the better it gets. In the end, the system simplifies life by removing intermediate steps toward a goal—whether it’s buying a ticket, picking a restaurant, or even choosing a date on Tinder. Instead of asking Siri to call a Lyft, the AI assistant may automatically schedule one to pick you up after your event.

Anticipatory design strives to deliver what technology promised in the first place: to make things simpler.

'Flow, Not Friction'

According to Shapiro, some pioneers are already taking baby steps in that direction, though with mixed results. For example, Amazon, Netflix, and Pandora offer a smattering of recommendations based on a user’s past picks — though one might argue those systems often make things harder because they still require the user to make the ultimate decision.

In contrast, a Nest smart thermostat does all the work without consulting you. The Internet of Things poster child automatically tweaks room temperature based on the time of day and your prior preferences.

Then there’s Spotify. Rather than offering individual songs for users to pick and choose like its competitors, the service’s Discover Weekly playlists serve up songs as a package based on the user’s taste profile — and it’s tremendously popular, perhaps contributing to the dominance of the service over other music streaming apps.

“It’s not hard to see how today’s services can easily evolve for an anticipatory future,” wrote Shapiro.

Perhaps. If you’re skeptical, I’m with you. Are our behaviors really so predictable that an algorithm can guess our spur-of-the-moment decisions? What will we be relinquishing when we outsource choice?

'Efficiency, Not Freedom'

That something as deeply subjective as music preference can be so readily anticipated by computers offers hope that our decision-making processes — however mercurial — can be automated to some extent.

Regardless, for such systems to work smoothly, we need training data. A lot of data.

Luckily, we’re in the era of the “quantified self.” Fitbit and other health-tracking devices are just the tip of the iceberg; future gadgets could collect real-time information about all aspects of our physiology, such as hormones and brain waves, and build models of the user’s emotional state and preferences.

There’s already a small experimental example. Last year, the Japanese clothing brand Uniqlo 
developed an algorithm called UMOOD that helps customers choose the perfect shirt from its massive collection.

The store began by categorizing their T-shirt styles and colors into different “mood territories” based on survey data — for example, green for calm. The customers then donned headsets that measured their brain activity while watching video clips that represented different kinds of moods. UMOOD measured their responses to the videos and offered the best shirt that fits the bill.

Yes, it’s gimmicky. And yes, the customers loved it.

Picking a shirt may seem trivial, but similar technologies could potentially help us with banking, finance and other larger life decisions. To get there, early implementations of anticipatory design systems could suggest solutions rather than carry out the decisions. Once trust is earned, Shapiro envisions a system that aggregates different streams of data from different sources, which works “behind the scenes to do things automatically, all in the service of letting you focus on what’s most important to you in work and life.”

No doubt, Shapiro paints a rosy picture. But he did leave some things out.

Privacy is an obvious concern. As Anne Quito pointed out in Quartz, “Anticipatory design presents new ethical checkpoints for designers and programmers behind the automation, as well as for consumers. Can we trust a system to safeguard our personal data from hackers and marketers — or does privacy become a moot concern?”

That said, the tradeoff between privacy and convenience is hardly limited to anticipatory design and well in effect in our current smart systems. The debate is far from settled, though in the end, it may (somewhat ironically) come down to personal choice.

More philosophically, some argue that prediction introduces constraints in what we understand about human behavior, making stereotypic assumptions and preemptively robs us the freedom of choice. While that may be true, for those who strive for efficacy, not freedom, the allure of having trivial decisions made for them is deeply alluring.

Besides, if such services achieve the goal of freeing up our mental resources, one could argue we will have more power over how we decide. By relinquishing some control and allowing machine-driven designs to sweat the small stuff, we may finally be able to focus on tackling decisions that really matter.

Article Link To Singularity Hub:

Silent Vote Won’t Carry Trump To White House

By Albert R. Hunt
The Bloomberg View
September 12, 2016

There is talk among Republicans, and some trepidation among Democrats, that Donald Trump could benefit from a silent vote. Although these voters aren't captured by polls, the privacy of a voting booth or a mail-in ballot will allow them to vent their anger and resentments.

The theory holds that in some circles it's not respectable to publicly support the inflammatory New York billionaire, but it's easier in private.

This is a variation of the so-called Bradley effect: In several instances over recent decades, white candidates have outperformed polls when running against a black opponent. Something similar was at work in the U.K. referendum on exiting the European Union. To the surprise of financial markets and bettors, the "leave" camp won the June vote, which was interpreted as an expression of discontent with the elites.

Similarly, in the U.S. presidential election, former House Speaker Newt Gingrich, a Trump supporter, claimed that "the average citizen will not tell pollsters the truth."

A silent or secret Trump vote would be a big deal: Hillary Clinton is up by several points in the latest surveys, not a comfortable margin.

There are, however, reasons to question whether Trump will outperform the polls.

This wasn't the case in the primaries. The Republican nominee underperformed the final polls in about as many states as those where he outperformed.

In Iowa, Ann Selzer, the pollster for the Des Moines Register and Bloomberg Politics, lost her unblemished record when she showed Trump with a small lead. He narrowly lost to Ted Cruz. Sure, that all was within a margin of error and Iowa's contest is a caucus, where turnout is low. And a week later, in New Hampshire, the final polls suggested Trump would win by about 15 points; he won by 20.

That trend was erratic. In one of his most important closing victories in Indiana, he finished well ahead of the final surveys. But in South Carolina and Michigan, though he won, he underperformed the last polls. In Wisconsin, the closing polls suggested Cruz would beat Trump by about seven points; the Texan won by 13.

The Bradley effect gets its name from the 1982 California governor's race, when the Democratic nominee, Los Angeles Mayor Tom Bradley, who was black, was running ahead of his white Republican opponent. When Bradley ended up losing, there was speculation that some voters didn't want to admit to poll-takers that they wouldn't support a black candidate.

Trump has aroused racial feelings more than any national candidate since George Wallace 40 years ago, but a lot has changed. In 1982, there had not been a black governor anywhere since Reconstruction, and of course a black man has won the last two presidential elections, carrying California twice by landslides.

The Brexit vote did shock the establishment because the final polls pointed to a victory for the "remain" camp. Yet only a few weeks earlier, most of the surveys showed a win for "leave." In the interim, a pro-EU member of Parliament, Jo Cox, was assassinated. Some analysts speculate that the tragedy created a short-term backlash against the exit movement that dissipated by Election Day.

The U.S. presidential contest should be a "change" election, which ordinarily would work to the advantage of the Republican candidate in the last eight weeks. In 1980, Ronald Reagan surged at the end, demonstrating that he was up to the job. It's doubtful Trump has that capacity, so he needs a silent vote to offset his high negatives.

Even if this hidden strength adds a few points for Trump, the Democrats have a powerful offset. The Clinton campaign can rely on better data and analytics, as well as a better get-out-the-vote operation than President Barack Obama had in 2012. That may be worth at least two points.

Article Link To The Bloomberg View:

North Korea’s Latest Nuke Test Exposes Another Failed Obama Approach

By John Bolton
The New York Post
September 12, 2016

North Korea’s fifth nuclear test signals continuing progress and sophistication in its decades-long effort to possess deliverable nuclear weapons. Moreover, both US and South Korean military experts assess that the increasing range of Pyongyang’s ballistic missiles, and its ability to miniaturize nuclear devices in order to mate them with its missiles, means targets across America will be vulnerable in just a few years.

The North’s weapons program perfectly embodies Winston Churchill’s warning about “perverted science,” where humanity’s highest intellectual achievements fall into the wrong hands.

The test is yet another fire bell in the night. North Korea’s leaders may have been trying to get President Obama’s attention, but their odds of success are small. For nearly eight years, his resolute indifference to Kim Jung-un’s advances demonstrated that nuclear proliferation is just not one of his priorities.

While Obama’s rhetorical response to the North’s evident progress is sometimes vigorous, it never extends to meaningfully tightening sanctions or anything more robust. And Pyongyang doesn’t even slow down.

Why should it, given Obama’s lack of interest? Former Secretary of State Hillary Clinton has also been thoroughly indifferent, although her rhetoric, especially as she runs for president herself, tends to torque somewhat higher than Obama’s. Nonetheless, if humor is permitted in these dire circumstances, Clinton’s just deserts will be having to deal with the consequences of their mutually failed North Korea policy if she wins.

Conversely, Japan and South Korea need little incentive to worry about Pyongyang’s growing threat. Their intense interest in missile-defense technology is less about China’s aggressive investment in nuclear and ballistic-missile programs than the North’s ongoing menace. In stark contrast, Obama and Clinton have consistently opposed vigorous national missile defenses for America — a mistake Donald Trump should emphasize.

Obama’s defenders argue the Iran nuclear deal demonstrates his nonproliferation bona fides. Instead, the Iran accord proves the opposite. New information emerges daily about the agreement’s inadequacies, both in its own right and in side arrangements like the cash-for-hostages ransom debacle. Plus, there’s increasing evidence of clear Iranian violations of the deal itself, which its verification mechanisms are insufficient to detect, especially considering that major Iranian cheating may be underway in hidden facilities in North Korea.

The unfortunately long, bipartisan history of negotiations with Iran and North Korea contains important lessons for the next president.

First, once launched on the path to nuclear weapons, Tehran and Pyongyang both demonstrated they had made irreversible strategic decisions. These were not lightly taken, nor the potential consequences ignored. Accordingly, once they were underway, negotiations to induce them to abandon their nuclear objectives were inevitably doomed to failure.

Gaining nukes had become essential not just for military purposes but for regime political survival. And just as diplomacy could never succeed, no “agreement” reached with the proliferators ever had serious prospects of being adhered to. Cheating was always central to the rogue states’ strategies. Once they had fixed on acquiring nuclear weapons, duplicity was an automatic reflex.

Second, our intelligence on North Korea has been negligible for so long, and obviously so to the rest of the world, that Tehran would’ve been foolish not to explore the possibility of cooperating with Pyongyang on developing nuclear weapons. We’ve known for at least 20 years of their extensive collaboration on ballistic missiles; why wouldn’t they also collaborate on nuclear weapons, the intended payloads of such delivery systems?

We should’ve long ago stopped “stove-piping” the North Korean and Iranian nuclear threats as if they were unrelated. We need dramatically improved intelligence about the North, in considerable measure for what it could reveal about cooperation with Iran and other possible nuclear proliferators. Turkey, Egypt, Saudi Arabia and others might well pay Pyongyang handsome premiums to counter the potentially existential threat of a nuclear Iran.

Quite rightly, the threat of radical Islamic terrorism is a central issue in the 2016 campaign. Nuclear proliferation and other national-security issues should be as well.

Candidates who demonstrate mastery over these matters, and persuasively explain their strategic thinking, would be tapping a rich, politically helpful and widespread concern among American voters.

They are looking for leaders who truly understand that our government’s most important job is keeping their fellow citizens secure from foreign threats.

Article Link To The New York Post:

Clinton Health Another Landmine For Suddenly Vulnerable Markets

By Oliver Renick & Joseph Ciolli
September 12, 2016

Investors nursing wounds after the worst selloff in three months for equity and debt markets got another stress to ponder after concerns over Hillary Clinton’s health flared anew.

The 68-year-old Democratic presidential nominee, whose polling edge over Donald Trump has soothed traders who fear ruptures to U.S. policy and see virtue in political gridlock, is suffering from pneumonia and became overheated and dehydrated during a Sept. 11 commemoration Sunday, forcing her to leave abruptly, her doctor said. Clinton was prescribed antibiotics and advised to modify her schedule so she can rest.

Volatility is already resurfacing in markets that had purred along for two months inured to everything from politics to weakening global growth, with the S&P 500 Index getting jarred Friday out of its tightest trading range ever in a selloff that erased about $500 billion of share value. While investors and analysts were reluctant to speculate on Clinton’s health, they said expectations she will prevail in November have been a factor in the calm and predicted the scrutiny will intensify.

“If we found out that there was something catastrophic about her health it obviously would matter, but you have to be very careful about extrapolating shorter-term news,” Jonathan Golub, managing director and chief US market strategist at RBC Capital Markets LLC in New York, said by phone. “What we do know is we have two candidates around 70 years old and in reality it must be brutal running around the world for two years.”

Speculation central banks are losing their taste for extra stimulus on Friday tore through the blanket of tranquility that has enveloped global markets. The S&P 500, global equities and emerging-market assets tumbled at least 2 percent in the biggest drop since Britain voted to secede from the European Union. The yield on the 10-year Treasury note jumped to the highest since June and the dollar almost erased a weekly slide.

The extent to which investors have been able to ignore politics is illustrated by the CBOE Volatility Index, the options-derived gauge of price turbulence that in August recorded one of its lowest monthly averages since the bull market began in March 2009. A measure of cross-market volatility encompassing equities, rates, currencies and commodities overseen by Bank of America hit its lowest level of the year last week.

To many bears, the calm betokens complacency and that’s what gave rise to Friday’s fireworks, with plunging stock and bond markets the predictable consequence of central bank policies that have allowed investors to ignore slowing economic growth, falling earnings and rising share valuations. U.S. stocks started Friday trading above 20 times annual earnings, one of the highest multiples since the internet bubble.

“We’re fragile right now,” said Kevin Kelly, chief investment officer at Recon Capital Partners LLC in Greenwich, Connecticut, which oversees $350 million. “It’s already priced into the market that Hillary Clinton is going to be president so right now anything that changes that narrative is going to give the market a pause to consider what that would mean.”

Future contracts on the S&P 500 slipped 0.2 percent at 7 p.m. in New York on Sunday.

Clinton’s sudden departure from the ceremony in New York and a bystander’s video showing her appearing to stumble as she was helped into a black van by aides and Secret Service agents is sure to resurface health questions. She blamed recent coughing jags on allergies, but Republicans have sought to raise questions about her fitness for office, particularly following a concussion in 2012 that resulted in a blood clot.

“If Clinton’s health becomes a larger factor with regard to voter decision-making, the market may have to recalculate the risk-reward of a regime change in the White House, as Clinton right now is assumed as a continuity from the current administration,” Yousef Abbasi, global market strategist at JonesTrading Institutional Services LLC, said by phone. “Obviously today is another thing that’s going to draw closer attention.”

Article Link To Bloomberg:

The Black Body Count Rises As Chicago Police Step Back

In 2016 nearly 3,000 people have been shot in the city, an average of one victim every two hours.

By Heather Mac Donald
The Wall Street Journal
September 12, 106

‘The streets are gone,” Dean Angelo, president of the Chicago police union, told me last month. The night before, Aug. 14, a Chicago police officer’s son had been killed in a shooting while sitting on his family’s porch, one of 92 people killed in Chicago during the worst month for homicides in the Windy City since July 1993. The August victims who survived included 10-year-old Tavon Tanner, shot while playing in front of his house (the bullet ripped through Tavon’s pancreas, intestines, kidney and spleen); an 8-year-old girl shot in the arm while crossing the street; and two 6-year-old girls.

On Sept. 6, a 71-year-old man was accosted by a teen on a bike while watering his lawn. The robber demanded the man’s wallet and when he refused shot him in the abdomen, then grabbed his wallet before pedaling away.

By Sept. 8, nearly 3,000 people had been shot in Chicago in 2016, an average of one shooting victim every two hours. Five hundred and sixteen people had been murdered. Gun homicides and non-fatal shootings were up 47% over the same period of 2015, which had seen a significant rise in crime over 2014.

“There is no way out of this shooting spree,” Mr. Angelo said. His despair is understandable, because Chicago is the country’s most-glaring example of what I have called the “Ferguson effect.” Chicago officers have cut back drastically on proactive policing under the onslaught of criticism from the Black Lives Matter movement and its political and media enablers.

In October 2015, Mayor Rahm Emanuel told U.S. Attorney General Loretta Lynch during a crime meeting in Washington, D.C., that the Chicago police had gone “fetal,” and were less likely to interdict criminal behavior. That pull-back worsened in 2016, with pedestrian stops dropping 82% from January through July 20, 2016, compared with the same period in 2015, according to the Chicago police department. The cops are just “driving by people on the corners,” Mr. Angelo says, rather than checking out known drug dealers and others who raise suspicions. Criminals are back in control and black lives are being lost at a rate not seen for two decades.

Chicago’s cops are responding to political signals from the most powerful segments of society. President Obama takes every opportunity to accuse police of racially profiling blacks and Hispanics. The media, activists and academics routinely denounce pedestrian stops and public-order enforcement—such as dispersing crowds of unruly teens—as racial oppression intended to “control African-American and poor communities,” in the words of Columbia law professor Bernard Harcourt. Never mind that it is the law-abiding residents of high-crime areas who beg the police to clear their corners of loiterers and trespassers.

Further discouraging proactive policing in Chicago is a misguided agreement between the Illinois American Civil Liberties Union and the city that allows the ACLU to review every police stop. The police are also experiencing fallout from City Hall’s mishandling of the unjustified fatal police shooting of Laquan McDonald in October 2014.

Chicago cops regularly encounter aggressive hostility when they leave their vehicles. In August a Chicago Tribune reporter filmed a group of teens taunting officers for over an hour while the cops investigated a shooting on the West Side. “F--- the police!” went one chant. “Get the f--- off my block!” came another insult. Someone fired off shots in a nearby alley for the fun of seeing cops run toward another possible victim. “Run, b----, run!” a shirtless male shouted as the officers took off in a sprint.

Three gangs—the Vice Lords, Black Disciples and Four Corner Hustlers—reached a pact in August to assassinate Chicago officers, according to a police departmental alert. The National Gang Intelligence Center has also picked up on plans to shoot officers.

The media blame poverty, racism and a lack of government services for the growing mayhem. Police Superintendent Eddie Johnson blames lenient prison sentences for releasing Chicago’s gun criminals onto the streets too soon. The Illinois Legislature’s Black Caucus, however, blocks any effort to mandate stricter sentences for gun-toting felons—in a sub rosa acknowledgment that the vast majority (80%) of Chicago’s gun criminals are black.

But neither Mr. Johnson’s lax-sentencing explanation nor the media’s systemic-injustice explanation aligns with the timing of Chicago’s surge in violence. Sentencing protocols did not weaken in 2015 when crime started rising. Nor did poverty or alleged racism grow worse. What did change was the intensity of anti-police ideology, driven by the Black Lives Matter movement, relentlessly amplified by the press, and echoed by President Obama.

“Where does this end?” Mr. Angelo asked last month. “We’re in an unknown environment. We don’t know at what point in time the people in this city and the city council will stand up and say: ‘Enough is enough,’ so that cops feel that they have the support to be the police again.”

The ideal solution to Chicago’s violence would be for more at-risk boys to be raised by their mother and their father. Until that happens, the only hope for law-abiding residents of Chicago’s high-crime areas is that police regain control of the streets.

Article Link To The Wall Street Journal:

The Road To Trump’s Rise — Big Banks Behaving Badly

By Nicole Gelinas
The New York Post
September 12, 2016

Eight years ago Wednesday, Lehman Brothers collapsed into bankruptcy. To stem the panic, the feds launched the biggest bailout the world has ever seen. In rewarding failure, America allowed a broken, corrupt financial system to flourish — and, yes, has invited populists like Donald Trump to take the stage.

The latest example of how greed is not good, especially when it’s backstopped by government guarantees: Last week, federal regulators revealed that Wells Fargo, the country’s third-largest bank, had opened 1.5 million bank accounts and 565,000 credit-card accounts without customers’ permission over the past five years.

How could that happen? At least 5,300 workers engaged in what the government calls “abusive” acts: using a customer’s personal information from one legitimate account to open another one, and then taking money from the real account to put it into the fake one. Workers went so far as to create fake e-mail addresses and PIN numbers.

And why would this happen? Wells Fargo wanted to grow — and so it rewarded workers who opened new accounts. Employees were “spurred by sales targets and compensation incentives,” the government notes.

As punishment, Wells Fargo will pay a $185 million fine, plus refund customers the money they paid in late fees and other charges on accounts they never really had.

Officials at the Consumer Financial Protection Bureau are crowing that “Wells Fargo is paying the largest penalty the CFPB has ever imposed” since President Obama created the agency after the 2008 crisis.

The real question, though, is why Wells is even in business, since this debacle shows that it’s not very good at its main job: banking.

If five or 10 or 50 random employees came up with a scheme to defraud their employer by opening false accounts, it would be hard to blame the bank: The bank would be a victim of its workers. But 5,300 workers — and more than two million accounts?

This is systemic, pervasive behavior — including behavior that rises to the level of criminal fraud, real-property theft (by taking money from a legitimate account without permission) and identity theft, though the government oddly glosses over these crimes.

Wells Fargo’s auditing procedures should have caught out this systemic criminal victimization of its own unwitting customers. That is, after all, why you put your money in a bank — to keep it safe.

This, again, is the difference between big banks and small businesses. If my business is supposed to make wedding cakes, and I can’t do it very well, I’ll soon go out of business for lack of customers.

But if a bank’s business entails not committing fraud against its own customers, and it can’t do it well, it stays in business.

Yep, Wells Fargo is too big to fail — which is why the government allows it to pay its fines without admitting wrongdoing.

Regulators have allowed banks to do this over and over since 2008, and it’s a strange practice on both sides: If the government thinks Wells Fargo did all of these horrible things, why doesn’t it try to prove it in a court of law?

And if Wells Fargo doesn’t think it did these bad things, why doesn’t it try to defend its reputation?

Wells Fargo wasn’t quite so big before 2008. In 2007, the bank had $520.8 billion in assets. Today, it has $1.7 trillion.

But in 2008, the government, through TARP, helped Wells Fargo purchase Wachovia, another too-big-to-fail bank, and one that should have failed because of its bad mortgage bets. “The . . . capital investment from the government will enable us to finance the Wachovia acquisition,” Wells said at the time.

The purchase doubled Wells’ size overnight — and, obviously, made the bank too big to manage.

Back in 2008, the smart people said we had to bail out the banks — because if we didn’t, we’d get an economic catastrophe.

Maybe. We know what we did get: generations of voters, liberal and conservative, who are disillusioned with capitalism. They can see that the chief of Wells Fargo gets $19.3 million annually to preside over systemic fraud, while they get blots on their credit reports.

The financial world doesn’t much like Donald Trump. But if they’re still wondering where he came from, they can look to the Wells settlement, just the latest in a long line over the past near-decade.

Article Link To The New York Post:

A Conspiracy Theory No Longer

By Jonathan S. Tobin
September 12, 2016

A president’s illness is no small matter. With so much power residing in one individual, the necessity of having a possible successor ready to take control in the event of the commander in chief becoming incapacitated is vital. It’s equally important that the public not be kept in the dark about the health of a potential president, especially in light of a number instances during the 20th century. Presidents such as Woodrow Wilson, Franklin Roosevelt, and John Kennedy kept grave medical problems secret from the public with the connivance of the press. That’s why the announcement that Hillary Clinton has been diagnosed with pneumonia must not only be treated with the greatest seriousness but also prompt both major-party campaigns to come clean about the medical records of the nominees.

The political implications of Clinton’s medical incident during the ceremony commemorating the 9/11 anniversary in New York are obvious. While most serious people dismissed the rumors about Clinton’s health that were being circulated by Donald Trump’s supporters, what happened Sunday morning will deepen suspicions both about her health and whether her campaign has been telling the truth about it. As I noted last month, when the issue first came to prominence, a dubious pickle-jar test on a late night comedy show isn’t enough to prove that Clinton is not suffering from some unknown problem.

Having said that, a diagnosis of pneumonia isn’t a death sentence. Nor, given treatment, must it be anything more than a temporary setback (unless there are other complications we don’t know about). There are few jobs more physically demanding than running for president in a general election. For almost two years, candidates must sprint from event to event, flying all over the country on a daily basis. It’s a killing pace and it’s a wonder that Clinton and Trump, who are respectively 68 and 70, have held up so well under the strain.

But Clinton’s problem is particularly ill timed. Trump is attempting to portray himself as a big tough guy running against a frail woman. On hot days, people can get dehydrated standing around under the sun. But for Clinton to falter in this manner undermines her campaign’s narrative that considers all questions about her health to be a smear. And if people are prepared to believe the worst about Clinton’s health, it’s due in part to her consistently lying about matters such as her email scandal and the conflicts of interest involving the Clinton Foundation.

Up until now Clinton has actually been far more forthcoming about her health than Trump. But even her more detailed statement has fallen far short of what previous presidential candidates have released. It is no longer possible for her to refuse to give us more until Trump is equally forthcoming. Clinton must now come completely clean with detailed medical reports and allow her doctors to be questioned by reporters with medical expertise. Given his age, Trump should do the same. As is the case with his tax returns, it’s doubtful that the billionaire will release a single document. But he’s not the one whose health is currently in question.

The Clinton campaign must understand that the discussion is no longer about conspiracy theories but about how she’s seemed to wear down amid the stress of the campaign. She may well be fine after some rest and medication, and be ready to serve as president. But unless we are given a complete dossier about her health — including more about her 2012 concussion — voters are now entitled to be cynical about reassurances from her supporters. After weeks of other setbacks related to her credibility, Hillary’s very bad 9/11 was the last thing her camp needed.

Article Link To Commentary:

Press Rips Clinton Campaign's Handling Of Health Incident

Why didn't they just say she had pneumonia?

By Gabriel Debenedetti
September 12, 2016

Hillary Clinton’s campaign is coming under fire for failing to disclose that she was diagnosed with pneumonia on Friday, and for saying she simply got “overheated” at the 9/11 memorial service in New York, when video showed her knees buckling as aides helped her into a waiting van.

It wasn’t until shortly after 11:00 a.m. ET Sunday that the campaign put out a terse statement saying that Clinton had “departed to go to her daughter's apartment, and is feeling much better.” There was no explicit acknowledgment that Clinton had left the ceremony earlier than planned, nor any mention of what looked to be a fainting spell.

Clinton herself sought to project that all was well, stepping outside of her Chelsea’s apartment some 45 minutes later. "I'm feeling great, it's a beautiful day in New York," she said, taking a moment to greet a small girl before piling back into the van to head home to Westchester County.

Not until 5:15 p.m. did the campaign revealed that she had in fact been diagnosed with pneumonia and put on antibiotics a day earlier, after what her doctor called a “follow-up evaluation of her prolonged cough.”

Lisa Bardack, Clinton’s physician, said that she had indeed become “overheated and dehydrated” on Sunday morning, but made no mention of her apparent collapse. “I have just examined her and she is now re-hydrated and recovering nicely,” Bardack said. Saturday’s examination, an aide said, took place at Clinton’s home in Chappaqua, New York.

At 10:16 p.m., the campaign said that "Clinton will not be traveling to California tomorrow or Tuesday." Clinton was scheduled to raise cash in both Los Angeles and San Francisco, and her campaign had previewed that she would also deliver a speech on the economy Tuesday. Clinton's Wednesday trip to Las Vegas is, for now, still on her schedule.

Around midnight, however, fundraisers who were planning to attend Clinton's San Francisco event on Monday received an email saying the event is still on, but that Clinton would now appear via teleconference.

Frustration with the Clinton campaign’s handling of the incident boiled over among political journalists on Twitter.

Jonathan Martin, national correspondent for the New York Times, tweeted, “Hillary camp now reveals that her doctor diagnosed her pneumonia on Friday & put her on antibiotics. Only disclosed after this am's episode.”

“I don't understand why Clinton aides weren't telling reporters at 10:30am: ‘pneumonia,’” CNN media reporter Brian Stelter wrote.

“Of course they should have disclosed this. This isn't a cold,” added Chuck Todd, the host of NBC’s “Meet the Press.”

The campaign ignored requests for explanation, but its allies defended its actions online.

#Hillary's health is fine. The hysteria in the media and the attacks about it from #Trump supporters are not,” Democratic PR consultant Hilary Rosen tweeted before Clinton’s pneumonia was disclosed.

“Is there really a tradition of candidates publicly disclosing illnesses like colds, flu's etc?” tweeted former White House communications director Dan Pfeiffer. “Every candidate I have ever worked for has gotten sick on the trail and worked through it because you can't take days off in a close race.”

“[S]o which illnesses that are treated with antibiotics do you have to disclose? All?” former White House chief speechwriter Jon Favreau asked.

“From a medical point of view this is not a big deal, She needs to cancel some events or do them by Skype for a week,” observed former Vermont governor Howard Dean, a trained doctor.

“I think I coughed up a lung somewhere between Pennsylvania and Kentucky,” recalled former Clinton ‘08 staffer Mo Elleithee, who also lauded her stamina. “She kept a campaign schedule with pneumonia. When I have a normal cold, I curl up in the fetal position & want to stay in bed for a week.”

Former Michigan governor Jennifer Granholm tweeted: "To press lamenting @HillaryClinton's health/transparency: 'powering through' illness is what women do: Stoically, every. single. day."

Clinton’s campaign schedule has been vigorous: On Friday alone, she headlined two fundraising events, met with a group of national security heavy-hitters, held a news conference, and granted an interview to CNN.

But the former secretary of state, who at 68 would be the second-oldest president in U.S. history should she win in November, has disclosed fewer details about her health than past presidential nominees -- though she has divulged more information than her opponent, 70-year-old Donald Trump, who has released only a cryptic, one-page letter that his doctor has said was written in just five minutes.

David Scheiner, an assistant professor at the University of Illinois Medical School who was Obama's personal physician for 22 years, argued in a recent Washington Post op-ed that neither Clinton nor Trump had disclosed enough information given their advanced ages.

"Having been in practice for 50 years serving a predominantly geriatric patient population, and now a septuagenarian myself, I can attest that the American people need much more medical information from these candidates," he wrote. "The medical reports from Clinton’s and Trump’s personal physicians do not suffice."

And neither candidate has agreed to a protective pool, an intensive form of media coverage that allows the press to monitor the candidate’s whereabouts at all times -- as the White House press corps does for the president.

“I'm surprised it's mid-September, just a little more than 8 weeks before Election Day, and neither candidate has a protective pool,” Obama’s first White House secretary, Robert Gibbs, tweeted Sunday. “Protective pool isn't always easy for either candidate or press but there comes a point for each nominee when it must be part of daily life.”

Clinton And Trump: Healthy Enough to Serve?

Candidates over the age of 70 or with a medical history should release their health records for private viewing by a few reporters.

By Marc Siegel
The Wall Street Journal
September 12, 2016

When Hillary Clinton left a 9/11 memorial service on Sunday—reportedly feeling overheated, stumbling, seeming to be about to faint—the question once again came up about the health of our presidential candidates and the public’s right to know.

Medical advances of the 20th and the early 21st century have helped most people to live longer, healthier lives, and U.S. presidents are no exception. But older people often have multiple medical problems, and when they run for public office, the question comes up as to whether these problems could interfere with performance.

In 2016 the U.S. has two older candidates, Donald Trump, 70, and Hillary Clinton, 68. An argument can be made that Mr. Trump should release his full health records on the basis of his age. His sparse but glowing physician’s letter, from Dr. Harold Bornstein of Lenox Hill Hospital in New York City, asserts in classic Trump hyperbole, that if elected, Mr. Trump will be “the healthiest individual ever elected to the presidency.” Mr. Trump reportedly has low blood pressure (110/65), takes a daily aspirin, and is on Lipitor to lower his cholesterol while admitting to a diet containing considerable amounts of fast food.

In contrast, Hillary Clinton’s doctor, Dr. Lisa Bardack of Mount Kisco, N.Y., has released a much more extensive letter to cover, among other things, Mrs. Clinton’s 2012 fall, concussion, and incidentally discovered blood clot on the outside of her brain (transverse venous sinus thrombosis) that (coupled with a history of a previous blood clot in her leg) will require lifetime anticoagulation for which she currently takes the blood thinner Coumadin.

Dr. Bardack’s letter includes a description of Mrs. Clinton’s recovery from concussion, the blood clot, a follow-up MRI, and subsequent neurological testing a year later that is reported as being normal. She writes that Mrs. Clinton is in excellent physical condition and fit to serve as president.

What are missing are the records. Is Sunday’s episode insignificant or part of an underlying problem? Her doctor reported later Sunday that she was found to have pneumonia Friday, is on antibiotics, was dehydrated and overheated but is now better. Anything more specific is bound by HIPAA, unless the candidate authorizes a private release to a small group as John McCain did when he was running for president in 2008.

Without the actual facts, speculation runs rampant, even among physicians. It isn’t acceptable for a doctor to put forth diagnostic impressions on a patient he hasn’t examined or whose records he hasn’t reviewed. I am concerned about the speculative response to Mrs. Clinton’s recurrent cough, especially when you consider that up to 90% of cases of chronic cough are due to either postnasal drip, asthma or acid reflux. All are common problems that are treatable and in no way an obstacle to being president.

In 1980 the media expressed concern that Ronald Reagan was too old at 69 to be president. There was no mention of specific health issues, and Reagan proved to be healthy throughout his eight years, with the exception of a near-fatal gunshot wound that couldn’t have been anticipated. Alzheimer’s disease as far as we know developed after he left office.

Previous presidents from William Henry Harrison (who died of pneumonia after only a month in office), to Woodrow Wilson (who suffered a stroke during his last term that wasn’t revealed), to FDR(the severity of his illness wasn’t publicly known), to JFK (Addison’s disease), to Nixon (who took multiple medications including the anticonvulsant Dilantin) had undisclosed health problems.

More recently, public concerns have been raised about the health of candidates running for president. In 1996, Sen. Bob Dole at 73 became the oldest candidate to run for president, and he felt compelled to release his full health records under pressure from President Bill Clinton’s campaign. Sen. John Kerry allowed the media a brief look at his military medical records in 2004, and George W. Bush released approximately 400 pages of health records in 2000 and again in 2004.

But the first time a real standard was superimposed was in 2008, when I joined a group of more than 20 journalists in Phoenix for a private three-hour session at a local hotel to review more than 1,100 pages of Sen. McCain’s medical records. The focus was on the senator’s age (71) and his history of melanoma, as he’d had four. Our endeavor was a witch hunt of sorts, though we all concluded from the records that the melanoma hadn’t spread or recurred and Mr. McCain was fit to serve. Requests for then-Sen. Obama to release his records for a similar viewing got no traction, only a short letter that revealed him to be a former smoker with low cholesterol and blood pressure who jogged frequently.

In retrospect, his youth and vigor were probably enough, and 2008 set the new standard that unless you were elderly or had a significant medical history, summary letters from a candidate’s primary-care physician were necessary and sufficient.

Flash forward to 2012. Mr. Obama was again pronounced fit, having reportedly not smoked while in the White House and working out several times a week. Challenger Mitt Romney, then 65, released a letter that revealed his active health problems to be only benign prostatic hypertrophy, low heart rate and high cholesterol (on Lipitor). The new standard had been met.

I was never completely comfortable with the way Sen. McCain was treated in 2008, though at least by the time the records were released in May the obsessive media focus wasn’t on questions of PTSD from the Vietnam War, only on his melanoma history. A new standard was set then, and it should be followed now.

I call it the McCain Protocol: If you are 70 or over (Mr. Trump) or have a health history (Mrs. Clinton), records should be made available by the candidate for a private viewing of select journalists or perhaps an independent board of physicians. This transparency may be excessive, but consistency would demand that it be part of the vetting process for our highest public office.

Article Link To The Wall Street Journal:

Build The Wall

By Robert J. Samuelson
The Washington Post
September 12, 2016

Just because Donald Trump isn’t qualified to be president — and just because much of his agenda is hateful and undesirable — doesn’t mean that everything he says is automatically wrong. Some of his ideas deserve consideration and enactment. One of these is building a wall across our southern border with Mexico.

It has been ridiculed as a monstrosity and a colossal waste of money. The theory of the wall is that it keeps out low-wage workers and, thereby, raises the wages of U.S. workers, including earlier Hispanic arrivals. They are most vulnerable to additional Hispanic workers, because their skills generally overlap.

Just what a wall would cost is unknown. Guesses vary. Trump has said $8 billion. A detailed report by AllianceBernstein, a research firm, estimated between $15 billion and $25 billion. These sums seem (and are) large, but within a $4 trillion federal budget, they’re modest.

The crucial question is: If we had a wall, what would we get for it? The answer: A wall probably represents our best chance of reaching broad agreement on immigration policy, a subject that has frustrated Congress and the two most recent presidents.

Let’s be clear on one issue: Trump’s insistence that Mexico pay for the wall is absurd . No self-respecting Mexican president would accept it. If one did, the wall would become a subject of endless bickering between the two countries as to who actually owned and controlled it. The fact that Trump made this so central to his proposal suggests that he’s simply grandstanding.

Still, in the hands of someone serious, a wall could be a catalyst for a comprehensive overhaul of U.S. immigration policy. “It’s hard to understand opposition [to a wall],” as my colleague Charles Krauthammer recently noted. “It’s the most venerable and reliable way to keep people out.” He argued correctly that the outlines of a deal have long been apparent. It would:

● Change legal immigration criteria to favor employability (a.k.a. skills) over family connections. The emphasis would be on stimulating the nation’s economic growth.

● Require most businesses to belong to E-Verify, the government system that allows employers to check on the immigrant status of potential workers.

● Create a path to legality — and ultimately to citizenship — for the estimated 11 million undocumented immigrants in the country.

● Embrace policies — including a wall — that would credibly and dramatically reduce illegal immigration.

Without a wall, it’s doubtful that Republicans would enter meaningful negotiations on immigration policy — and without Republican participation, the stalemate would continue. In a recent Pew Research Center poll, 63 percent of Republicans and Republican-leaning voters supported a wall and only 34 percent opposed it. The distrust is deep. Republicans think Democrats don’t truly care about stopping illegal immigration; they mainly want “amnesty” for existing undocumented immigrants. In the same Pew poll, 84 percent of Democrats and those who lean Democrat opposed a wall.

There are two standard objections to a wall — both true but politically irrelevant. The first is that it might have once been justified but isn’t now because the inflow of undocumented Mexican immigrants is slowing and maybe reversing. Mexico’s birthrate — which affects its labor force — has declined, and its economy has improved. It can more easily absorb new workers. A 2015 Pew study found that the number of undocumented Mexicans in the United States had dropped by 140,000 between 2009 and 2014.

But this is a net figure: people entering minus people leaving. There are still hundreds of thousands of Mexicans and Latinos trying to cross the southern border illegally every year. A wall would make this harder and reinforce the natural trend. Some people wouldn’t try to enter; of those who did, fewer would make it. Tragedies — dying in the desert, being exploited by “coyotes” — would decline.

The second objection is that the southern border isn’t the only way people become illegal immigrants. Many arrive legally and overstay their visas. Indeed, according to a study in the Journal on Migration and Human Security, these immigrants now outnumber those breaching the southern border. But if E-Verify were widely adopted, these immigrants would have a harder time getting work.

If we could buy an immigration bargain for $25 billion, or even a bit more, it would be a fabulous deal. That’s the opportunity facing the next president. But we won’t make it any easier by stigmatizing the one change — a wall — that could be the foundation for compromise.

Article Link To The Washington Post:

The Next President Should Make Infrastructure Spending A Priority

By Lawrence Summers
The Washington Post
September 12, 2016

There is now a consensus that the United States should substantially raise its level of infrastructure investment. Economists and politicians of all persuasions are increasingly concluding that higher infrastructure investment can create quality jobs and provide economic stimulus without posing the risks of easy-money monetary policies in the short run. They are also recognizing that infrastructure investment can expand the economy’s capacity in the medium term and mitigate the enormous maintenance burden we would otherwise pass on to the next generation.

The case for infrastructure investment has been strong for a long time, but it gets stronger with each passing year, as government borrowing costs decline and ongoing neglect raises the return on incremental spending increases. As it becomes clearer that growth is not going to return to pre-financial-crisis levels on its own, the urgency of policy action rises. Just as the infrastructure failure at Chernobyl was a sign of malaise in the Soviet Union’s last years, profound questions about America’s future are raised by collapsing bridges, children losing IQ points because of lead in water, an air-traffic control system that does not use GPS technology and chipping paint in thousands of schools.

The issue now is not whether the United States should invest more in infrastructure but what the policy framework should be. Here are the important questions and my answers.

How much more do we need do invest? For the foreseeable future, there is no danger that the United States will overinvest in infrastructure. An increase in infrastructure investment of 1 percent of gross domestic product over a decade would total $2.2 trillion and permit substantial steps both to catch up on deferred maintenance and embark on new projects. It would also still leave the United States well behind parts of Europe and Asia in terms of infrastructure.

What is the highest priority?
The fastest, highest and safest returns are likely to be found where maintenance has been deferred. For example, inadequate maintenance of American roads imposes costs on American motorists that are the equivalent of a 75-cent-per-gallon gasoline tax. Maintenance outlays do not require extensive planning or regulatory approvals, so they can take place quickly. And they tend naturally to take place in areas where infrastructure is most heavily used.

How should investment be financed? There is a compelling case that infrastructure investments pay for themselves by expanding the economy and increasing the tax base. The McKinsey Global Institute has estimated a 20 percent rate of return on infrastructure projects. If the return is only 6 percent and the government collects about 25 cents on every dollar of GDP, the government will earn 1.5 percent on investments. This far exceeds the real cost of borrowing even over a horizon of 30 years. Debt financing of new infrastructure investment over the next few years would be entirely reasonable.

However, if there is a desire to generate revenue to finance infrastructure investments, the best approaches would involve user fees. Thus, increased landing fees could help finance airports, and tolls or taxes on miles driven could finance road and highway improvements. Consideration should also be given to adopting capital budget conventions for infrastructure improvements, so the costs of projects are spread out over time rather than all accrued during construction.

What about the private sector?
Some infrastructure priorities, such as replacing coal-fired power plants with renewables, expanding broadband Internet networks and building pipelines, are clearly the responsibility of the private sector. Policy frameworks that streamline regulatory decision-making and reduce uncertainty could help spur investment in these sectors.

There is a case for experimenting with approaches that could mobilize private capital for use on infrastructure that has been a public-sector preserve, such as airports and roads. However, the reality that government borrowing costs are much lower than the returns demanded by private-sector infrastructure investors should lead to caution. It would be unfortunate if, in an effort to avoid deficits, large subsidies were given to private financial operators. Only when private-sector performance in building and operating infrastructure is likely to be better than what the public sector can do is there a compelling argument for privatization.

How can we be sure investment is carried out efficiently? There is legitimate skepticism about the quality of infrastructure investments, and there is no silver bullet for this problem. Transparency of the type adopted for the Obama administration’s fiscal stimulus program should become the norm. Additionally, progressive advocates of greatly expanded investment should compromise with conservative skeptics and, in the context of increased spending, accept regulatory streamlining, as well as requirements that projects undergo cost-benefit analysis. Minimizing cost should be the central objective of infrastructure procurement.

Every year that we allow our infrastructure to decay raises the burden that our generation is placing on the next. We will not always be able to borrow for the long term at a near-zero interest rate. However the election turns out, a major infrastructure investment program should be adopted by the president and Congress in the spring of 2017.

Article Link To The Washington Post:

Fed's Kashkari Sees Cure For Slow Growth In Immigration, Tax Reform

By Jonathan Allen and Curtis Skinner
September 12, 2016

With the Federal Reserve powerless to do much more than it already is, the best route to faster U.S. economic growth is through non-monetary policy approaches such as immigration and tax reform, a top Fed official argued on Monday.

In a 5,100-word essay released just after midnight, Minneapolis Federal Reserve Bank President Neel Kashkari noted that the U.S. labor market is "closer to normal" but that inflation is still below the Fed's 2-percent target and economic growth is well below pre-crisis norms.

"Monetary policy is largely doing what it can to support a robust recovery, and what remains are fiscal and regulatory policies," Kashkari wrote in the essay, published on the last day before Fed officials enter a weeklong communications blackout prior to each policy-setting meeting.

Fed policymakers next meet on Sept. 20-21.

Kashkari sketched out a wide range of possible reasons for slow U.S. economic growth, concluding that the most likely causes are an aging population, psychological scarring from the financial crisis that makes households and businesses unwilling to take risks, and "lackluster technological innovation."

To address those problems, he said, the government could boost spending on basic research, rebuild worn-out infrastructure, streamline regulations and the tax code, and otherwise take small steps with little downside risk and plenty of potential.

"Another promising policy is immigration reform, especially for high-skilled workers," Kashkari wrote.

But government, and the Fed, should be wary of policy change that poses too much potential for harm, he argued. Raising the Fed's inflation target is one such approach, he suggested; massive government spending is another.

"I am skeptical that a large-scale expansion of government spending by itself is the best way forward, since larger fiscal deficits will lead to higher expected future taxes, which could further undermine private sector confidence," he wrote.

Fed officials in recent months have stepped up calls for structural fixes to the economic doldrums, saying that monetary policy alone is not enough.

Article Link To Reuters:

Syria Rebels Guardedly Agree On Truce But Battles Persist

By Angus McDowall and Tom Perry
September 12, 2016

Government troops and insurgents fought in several parts of Syria on Sunday, apparently seeking to strengthen their positions on the eve of a ceasefire that Free Syrian Army rebels said they would observe but with major reservations.

The Free Syrian Army groups wrote to the United States on Sunday about the deal it agreed on with Russia, saying that while they would "cooperate positively" with the ceasefire, they were concerned it would benefit the government.

Although the letter did not explicitly say the groups would abide by the ceasefire, two rebels who confirmed its text to Reuters said they would respect the ceasefire when it comes into force on Monday evening.

But according to the letter, the groups are worried by the absence of enforcement mechanisms, a lack of provision for besieged areas and clauses letting army jets fly for up to nine days after the deal comes into effect.

The influential hardline Islamist rebel group Ahrar al-Sham issued a statement late on Sunday attacking the ceasefire deal, but stopping short of explicitly saying it would not abide by its terms.

A war monitor reported clashes around Aleppo and Damascus, but pushes by the government in the mountainous northwest and rebels in the southwest indicated an effort to improve their positions before fighting is due to stop on Monday.

Syria's five-year civil war has killed hundreds of thousands of people and displaced 11 million - half the country's prewar population - causing a refugee crisis in the Middle East and Europe and inspiring jihadist attacks around the world.

Underscoring the war's global impact, President Bashar al-Assad is backed by Russia's air force, Iran's Revolutionary Guards and Shi'ite militias from Iraq and Lebanon, while the rebels are supported by the United States, Turkey and Gulf Arab states.

Previous peace agreements crumbled within weeks, with the United States accusing Assad and his allies of attacking opposition groups and civilians. On Saturday, air strikes on rebel-held areas killed scores of people.

"A big part of the agreement serves the regime and doesn't apply pressure on it and doesn't serve the Syrian people," said Zakaria Malahifji of the Aleppo-based rebel group Fastaqim.

Syria's government has not issued an official comment on the truce, but Syrian state media on Saturday quoted what it called private sources as saying the government had given its approval. Iran welcomed the deal on Sunday.

Islamic State Excluded

The ceasefire will not apply to the jihadist groups Islamic State or Jabhat Fateh al-Sham, known as the Nusra Front until it broke formal allegiance to al Qaeda and changed its name.

The rebel groups writing to the United States said the exclusion of Jabhat Fateh al-Sham, which operates only inside Syria, while including Iran-backed foreign Shi'ite militias that operate across international borders showed a double standard.

They added in their letter that its exclusion from the ceasefire would be used by Russia as a pretext to bomb other rebel groups, citing their experience of a failed cessation of hostilities earlier this year.

The Syrian air force bombed Islamic State targets near Palmyra, state television reported on Sunday, while rebels clashed with the group northeast of Damascus, the Syrian Observatory for Human Rights, a U.K.-based war monitor said.

The United States warned insurgents on Saturday they would face "dire consequences" if they cooperated with Jabhet Fateh al-Sham, which fought alongside a range of mainstream and Islamist rebel groups during intense battles in recent weeks in southern Aleppo.

Ahrar al-Sham, one of the largest Islamist groups among the rebels, which has fought alongside Jabhat Fateh al-Sham, criticized the deal in a videotaped speech celebrating Islam's Eid al-Adha festival, which falls on Monday, without rejecting it outright.

It said the deal failed to meet the minimum goals of the movement and would increase the suffering of the Syrian people. It also attacked what it called the "singling out" of particular groups, apparently a reference to the exclusion of Jabhat Fateh al-Sham.

Illustrating how widely insurgents work with the former al Qaeda affiliate, Ahrar al-Sham was one of several rebel groups to announce the launch of an offensive in the southwest in coordination with Jabhat Fateh al-Sham on Saturday.

Insurgents posted footage said to show battles on that front on Sunday which Reuters could not verify.

In Latakia province, violent clashes continued on Sunday two days after the army and its allies launched an offensive around several villages near the main coast road to Aleppo using heavy artillery fire and dozens of air strikes, the Observatory said.

More air strikes were reported in Aleppo and Idlib province on Sunday after scores of people were killed in aerial bombardment on Saturday. One in the town of Saraqeb hit a civil defense center where civilian rescuers are based, injuring several, according to the Observatory.

Article Link To Reuters:

North Korea Ready For Another Nuclear Test Any Time: South Korea

By Ju-min Park and Jack Kim
September 12, 2016

North Korea is ready to conduct an additional nuclear test at any time, South Korea's Defence Ministry said on Monday, three days after the reclusive North's fifth test drew widespread condemnation.

Pyongyang set off its most powerful nuclear blast to date on Friday, saying it had mastered the ability to mount a warhead on a ballistic missile and ratcheting up a threat that its rivals and the United Nations have been powerless to contain.

"Assessment by South Korean and U.S. intelligence is that the North is always ready for an additional nuclear test in the Punggye-ri area," South Korean Defence Ministry spokesman Moon Sang-gyun told a news briefing.

Punggye-ri, near the northeastern coast, is the site of the North's five nuclear explosions.

"North Korea has a tunnel where it can conduct an additional nuclear test," Moon said.

South Korea's Yonhap News Agency reported earlier that North Korea had completed preparations for another nuclear test, citing South Korean government sources who said the North may use a previously unused tunnel at its mountainous test site.

It did not elaborate on what activities had been detected at the Punggye-ri nuclear test site.

A U.S. special envoy for the isolated state, Sung Kim, will travel to Seoul on Monday after discussing cooperation among neighboring countries in Tokyo in the wake of the North's latest nuclear test.

Kim met with Japanese officials on Sunday and said the United States may launch unilateral sanctions against North Korea, echoing comments by U.S. President Barack Obama on Friday in the wake of the test.

A push for further sanctions was "laughable", North Korea said on Sunday, vowing to continue to strengthen its nuclear power.

The U.S. military delayed a planned B-1B bomber flight to the Korean peninsula, a show of strength and solidarity with ally Seoul, scheduled for Monday, Yonhap reported. The delay of at least 24 hours was due to bad weather conditions in Guam, Yonhap said, citing an unidentified U.S. Forces Korea official.

South Korea's military put the force of Friday's blast at 10 kilotons, but a U.S. expert said the highest estimates of seismic magnitude suggested a yield of 20 to 30 kilotonnes. The test showed North Korea's nuclear capability was expanding fast and North Korean leader Kim Jong Un was unwilling to alter course, South Korea said on Saturday.

The U.N. Security Council denounced the test and said it would begin work immediately on a resolution. The United States, Britain and France pushed for the 15-member body to impose new sanctions.

It was not clear if the Security Council can quickly come to a consensus on fresh sanctions, given the ambivalence by China and Russia on adopting another resolution. Both countries did join sanctions in March following the North's January nuclear test.

Russian Foreign Minister Sergei Lavrov said on Saturday a "creative" response was needed.

The Global Times, run by the Chinese Communist Party, rejected the suggestion by the United States that Beijing was responsible for the North's pursuit of nuclear arms. It said the United States was "the root cause" of the issue.

"China is not capable of persuading North Korea to give up nuclear development, because China's efforts are not supported by the others," it said in an editorial on Monday. "Washington has been refusing to sign a peace treaty with Pyongyang."

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Monday, September 12, Morning Global Market Roundup: Asia Stocks, Bonds Suffer Central Bank Anxiety Attack

By Wayne Cole 
September 12, 2016

Asian shares skidded on Monday with investors rattled by rising bond yields and talk the Federal Reserve might be serious about lifting U.S. interest rates as early as next week.

Reports that the Bank of Japan was considering ways to steepen the Japanese yield curve, along with speculation that central banks more generally were running short on fresh stimulus options, also hit sovereign debt and risk appetite globally.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2.2 percent, pulling away from a 13-month peak. It was the largest daily drop since the frenzy caused by Britain's vote in late June to leave the European Union.

Shanghai followed with a fall of 1.7 percent, while Australian stocks sank 2.2 percent.

The Nikkei 225 .N225 lost 1.5 percent as the yen firmed due to risk aversion and yields on 10-year JGBs briefly hit the highest since March before paring losses.

Traders were unsure how the BOJ would try to steepen the yield curve if it goes down that path at a policy review later this month, but markets are worried that tapering of its buying in long-dated bonds could be among the options.

EMini futures for the S&P 500 ESc1, traded in Chicago during Asian hours, also swung 0.6 percent lower, though Treasuries were finding safe-haven demand.

Some Fed members have been trying to convince markets that the September meeting would be "live" for a hike, even though futures <0> only imply a one-in-four chance of a move.

No less than three Fed officials are expected to speak later in the global day, including board member and noted dove Lael Brainard. Any hint of hawkishness would likely further pressure bonds and equities.

"Market participants are wondering if maybe she's (Brainard) being wheeled out to give the market one last warning of a rate hike at next week's meeting," said Marshall Gittler, head of research at broker FXPRIMUS.

"The thinking is that if someone as dovish as she is starts talking like a hawk, people will notice. Her speech will be closely examined."

Such risks led the Chicago Board Options Exchange Volatility index .VIX to close at its highest level since late June on Friday. The Dow .DJI shed 2.13 percent on Friday, while the S&P 500 .SPX lost 2.45 percent and the Nasdaq .IXIC 2.54 percent.

Super-low yields have made returns on equities seem relatively more attractive in comparison, so any sustained climb in yields would likely weigh on stock valuations.

The yield on benchmark German debt DE10YT=RR, for instance, had turned positive for the first time since July 22 and ended at 0.02 percent, its highest since June 23. Yields on U.S. 10-year and 30-year paper hit 11-week peaks.

Seeking Safety

In the forex market, the sudden bout of risk aversion benefited safe havens such as the yen while hitting carry trades in higher yielding currencies including the Australian dollar.

The Aussie has lost 1.5 percent against the yen in two sessions to stand at 77.21 AUDJPY=, while the Japanese currency was firm on the U.S. dollar at 102.55 JPY=.

The euro was sidelined on the dollar at $1.1239 EUR=after weak German trade data dragged it down from $1.1271 on Friday. The dollar index .DXY, which tracks it against a basket of six currencies, eased fractionally to 95.317.

Adding to the jittery mood on Monday was news that Democratic candidate Hillary Clinton fell ill at a Sept. 11 memorial ceremony and had been diagnosed with pneumonia.

Markets have generally assumed Clinton would win the presidency and have not truly considered the implications, both economic and for national security, should Donald Trump prevail.

Geopolitical concerns had already been inflamed by North Korea's fifth and biggest nuclear test, ratcheting up a threat that its rivals and the United Nations have been powerless to contain.

North Korea has completed preparations for another nuclear test, South Korea's Yonhap News Agency reported on Monday, citing South Korean government sources.

In commodities, oil prices extended Friday's 4 percent fall in Asia after reports showed increasing oil drilling activity in the United States, indicating that producers can operate profitably around current levels. [O/R]

Brent crude LCOc1 was off 70 cents, or about 1.5 percent, at $47.31 a barrel, while U.S. crude CLc1 lost 79 cents to $45.09.

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Oil Prices Fall As U.S. Drillers Add New Rigs, Speculators Cut Long Positions

By Henning Gloystein
September 12, 2016

Crude prices fell over 1.5 percent on Monday after U.S. oil drillers added rigs to look for new production as producers adapt to cheaper crude, with speculators cutting positions betting on further price rises.

Brent crude futures LOCOc1 were trading at $47.29 per barrel at 0200 GMT (10:00 p.m. EDT), down 72 cents, or 1.5 percent, from their last settlement.

U.S. West Texas Intermediate futures CLc1 were down 80 cents, or 1.74 percent, at $45.08 a barrel.

Traders said the price falls on Monday and Friday were a result of increasing oil drilling activity in the United States, which indicated that producers can operate profitably around current levels.

"Each dollar is being used far more efficiently and, as a result, $50 oil appears much more palatable," Barclays bank said in a note to clients.

U.S. drillers added oil rigs for a tenth week in the past 11, according to a Baker Hughes rig count report on Friday. It was the longest streak without rig cuts since 2011.

Speculative oil traders also became less confident of higher oil prices, cutting their net long U.S. crude futures and options positions for a second consecutive week last week, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Oil's near 5-percent price decline since Sept. 8 partly reverses a 10-percent rally early in the month, which was fueled by speculation that oil exporters could cap production.

Algeria's energy minister said there is a consensus among OPEC and non-OPEC members about the need to stabilize the oil market to support prices, state news agency APS reported on Saturday.

OPEC Secretary-General Mohammed Barkindo told APS that OPEC was not seeking a definite price range for oil but rather "sustainable stability" for the market.

Moves toward clinching a global deal on stabilizing crude output come five months after similar talks for a production freeze failed when Saudi Arabia insisted that Iran join the pact.

Tehran says it supports any measures to stabilize the market, but has stopped short of committing to output restraint before its production reaches 4 million barrels per day, the level at which it says it was pumping before the imposition of Western sanctions which were lifted last January.

Even if exporters agree on freezing output around current levels, analysts said that would do little to raise prices as most exporters are pumping out oil at or near record levels, and have adapted to do so at lower prices.

"Producers and service companies ... are well positioned to return to growth mode at much lower prices," Barclays said.

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