Monday, October 3, 2016

Hitting North Korea Where It Hurts

If Washington can get solid cooperation from Beijing, even reluctantly, that may help keep Pyongyang’s nuclear wolves away from the door.

The Daily Beast
October 3, 2016

The Obama administration may have found a way to contain North Korea.

Just about everyone says sanctions don’t work. That’s exceedingly misleading. Sanctions have not worked simply because they have not been enforced. Now, Washington looks like it’s getting serious.

At the end of last month, two U.S. agencies hammered China’s so-called “accidental sanctions breaker,” and Beijing took notice.

Specifically, on September 26 the Treasury Department’s Office of Foreign Assets Control added Ma Xiaohong, three co-workers, and her company, Dandong Hongxiang Industrial Development Co. Ltd., to its list of Specially Designated Nationals. By doing so, Treasury imposed sanctions on the listed parties for ties to North Korea.

The action against Hongxiang was the first time the Obama administration imposed secondary sanctions on a Chinese firm for dealings with the North’s nuclear weapons program.

Treasury’s notice contains no explanation for the designations, but North Korea sanctions expert Joshua Stanton told The Daily Beast that the sole reason for the designations was their help to Korea Kwangson Banking Corp., itself under sanctions, which is laundering money.

On the same day, the Justice Department announced the unsealing of indictments of the same four individuals and Hongxiang for various crimes including “conspiring to evade U.S. economic sanctions and violating the Weapons of Mass Destruction Proliferators Sanctions Regulations through front companies.” The indictments allege the laundering of money for Pyongyang through the U.S. financial system.

The Justice Department also initiated a civil forfeiture action to recover money in 25 Chinese bank accounts.

The U.S. actions came after two American prosecutors traveled to Beijing to lay out the case against Hongxiang, starting with Ma and her three associates. Since then, China has cooperated, for instance by beginning its own police investigation of what it termed “serious economic crimes.” Authorities have also detained Ma and prevented suspects from leaving the country.

Yet Beijing has exhibited a noticeable lack of enthusiasm for prosecuting the culprits identified by Washington. Most notably, the Chinese Foreign Ministry immediately criticized the American indictment and sanctions. Said spokesman Geng Shuang at the regular news briefing on the 27th, “If any country tries to exercise ‘long-arm jurisdiction’ by enforcing its domestic laws over China’s enterprises and individuals, we are firmly opposed to that.”

“That’s rich,” Joshua Stanton, the sanctions expert behind the One Free Korea site, said. “China is really claiming a unilateral right to misuse our financial system, to threaten our security, break our laws, and violate UN resolutions.”

As Stanton points out, those selling materials and components for Pyongyang’s weapons program demand dollars. All dollar-denominated transactions clear through the U.S. financial system. That means the U.S. government “has a right and duty to ensure that its financial system isn’t misused.”

And Beijing should not complain too much because, even after this latest move, the Obama administration is giving China a pass on particularly egregious conduct. For instance, the Justice Department’s press release announcing the forfeitures of the Chinese bank accounts stated, “There are no allegations of wrongdoing by the U.S. correspondent banks or foreign banks that maintain these accounts.”

The Wall Street Journal noted in a September 29 editorial that this would seem to signal that Chinese banks “are untouchable.”

banks have long been deeply involved in handling funds in connection with North Korea’s illicit commerce. But recently have they begun to cut ties in anticipation of U.S. enforcement actions.

Bank of China, China Merchants Bank, and Bank of Dandong stopped doing business with North Koreans. Moreover, Industrial and Commercial Bank of China, China’s largest financial institution, reportedly froze accounts of North Korean customers in Dandong, the Chinese trading hub across the Yalu River from the North.

There are many more Chinese firms to go after. Ma’s business is considered a small fry. The South China Morning Post calls her an “accidental sanctions breaker” because she was pulled into helping the Norks “against her will.”

According to a “source” speaking to the Hong Kong newspaper, she was undone by a $30 million receivable. “When Ma kept pressing them for the outstanding money, the North Koreans suggested Ma import chemicals like aluminum oxide for them,” the unidentified party told the paper, which increasingly carries Beijing’s line. Aluminum oxide is used in processing fuel for nuclear devices.

Ma’s company is not the only one that sold the Kim regime materials and components for Pyongyang’s nuclear weapons program. David Albright of the Institute for Science and International Security said this spring cylinders of uranium hexafluoride, vacuum pumps, and valves crossed the Chinese border into North Korea.

And the weapons commerce might include more important items. Bruce Bechtol of Angelo State University has raised the possibility that the missile launched by a North Korean submarine on August 24 is based on China’s JL-1.

“If one looks at pictures of the JL-1 and compares them to the ‘new’ North Korean submarine-launched ballistic missile, the two look very similar,” he told The Daily Beast. “In addition, based on the limited data we have from the North Korean tests, the specifications appear to be very similar.” And as he points out, Pyongyang’s technicians do not have the technology to develop a solid-fueled, two-stage sub-launched missile “completely on their own.”

North Korea could have procured the missile directly from a Chinese manufacturer, from Chinese middlemen, or from a third country that got it from China. Yet the least likely option is that Kim Jong Un’s technicians built a similar looking missile on their own.

As Charles Burton of Brock University told me last week, Beijing, by supporting proliferation—or at least allowing it to continue—“appears to be forcing a crisis on the Korean peninsula by renewing its support for the Democratic People’s Republic of Korea just as it gets closer and closer to perfecting development of nuclear weaponry that forms a credible threat to the U.S. mainland.”

Kim Jong Un is perhaps three years from developing the capability to land a nuke in the lower 48 states. He has two launchers that can get there—the Taepodong-2 and the KN-08/KN-14—and all he needs now is the warhead. His technicians already have a nuclear device for their shorter-range launchers, like the intermediate-range Nodong, so he can’t be far off from incinerating the American city of his choice.

Clearly it’s urgent for Washington to act in a way that gets the Chinese to take action. The September 26 sanctions, indictments, and forfeitures are good first steps, but they are not enough in and of themselves. As RAND’s Andrew Scobell told me, they are “a signal to China that Beijing needs to do much more.”

At this late date, Washington needs to do more than just send coded messages. The U.S. has to overcome what Scobell correctly calls Chinese “policy inertia.”

That exists in American policy circles as well. In Washington, there remains reluctance to confront the complicity at the highest level of the Chinese political system, even in the face of evidence of Beijing-approved sanctions busting.

For example, Sino-Korean trade, which dropped off after the adoption of UN sanctions in early March, has now returned to pre-March levels. Moreover, sanctioned North Korean vessels are now regularly loading and unloading at Chinese ports. Beijing is also allowing luxury goods, which the regime uses to reward loyal followers and which are under sanction, to go across the border unimpeded.

It’s not that Washington does not have the means to push China in a better direction. Bob Corker, chairman of the Senate Foreign Relations Committee, notes the administration “has barely scratched the surface when it comes to using all of the tools at its disposal.”

Last week, a senior State Department official, Daniel Fried, told one of Corker’s subcommittees that the administration is going after other Chinese companies. That’s good, of course, but it is hardly sufficient. The Obama administration needs to be willing to understand Chinese intentions and put American security before Beijing’s sensitivities.

After all, if some U.S. city ends up a smoldering heap of radioactive rubble after being hit by a North Korean nuke, it will not do for an American president to say “I could have stopped this, but I didn’t want to anger the Chinese.”

Article Link To The Daily Beast:

Hitting North Korea Where It Hurts

As Aleppo Falls, Extremists Rise

With a heavy bombing campaign that included hospitals, Russia and the Assad regime are ensuring the destruction of Aleppo and any moderate U.S.-backed rebels in it.

The Daily Beast
October 3, 2016

The U.S. quickly is running out of options to stop the regime and Russia on Syria’s eastern Aleppo, U.S. officials concede, and they fear that abandoned U.S.-backed rebels could increasingly turn to jihadists groups, like al Qaeda, for protection.

In addition, two U.S. officials told the Daily Beast, they fear the defeat of rebels in Syria’s largest city could weaken U.S.-backed groups in other areas around including Idlib, Hama and Latakia.

That is, the collapse of rebel held areas of eastern Aleppo could mean not just a stronger position for Syrian President Bashar al Assad but radical terror groups, the last remaining opposition forces still standing. The fate of Aleppo could be the turning point of the five-year civil war.

“The rebels have been willing to go along with the coalition up until now. But how long can they hold out against a [Russian] assault?” one distraught U.S. official asked

If that happens, it will validate a long standing Russian narrative that U.S. backed rebels are not moderate as the U.S. claims but radical elements seeking to destroy Syria. And forcing such groups toward more radical elements may be the very intent behind their aggressive assault on eastern Aleppo for the last week, which was launched after the collapse of the latest cease fire.

The Russians and the regime are using “brutal tactics to radicalize other side. And that appears to be by design, not a defect,” Daveed Gartenstein-Ross, a senior fellow at the Washington, D.C.-based Foundation for Defense of Democracies.

“This is self-fulfilling Russian propaganda,” the U.S. official said.

U.S. officials believe the assault by the regime and Russia now includes using bunker buster bombs, designed to pierce hardened targets like bunkers, in addition to incendiary weapons and chemical weapons, all part of a campaign targeting hospitals, aide workers, water supplies and food supplies.

According to the Syrian Observatory for Human Rights, roughly 10,000 civilians have been killed by Russian airstrikes since their campaign on behalf of Assad began a year ago on September 30, an intervention that fundamentally shifted the war toward the regime.

According to the World Health Organization, as recently as the week between September 23 and September 30, 338 people were killed in eastern Aleppo, including 106 children.

"The situation really is unfathomable,” Rick Brennan, WHO's head of emergency risk management and humanitarian response, said a U.N. briefing in Geneva Friday.

Moreover, U.S. officials believe thousands of regime forces have moved into the city and started a block by block clearing of destroyed rebel-held areas of eastern Aleppo.

There are conflicting reports about what the regime forces now hold. A Syrian government source told Reuters its troops had captured several government buildings Friday in parts of Aleppo’s Suleiman al-Halabi district, but rebels said those forces have since retreated.

On Sunday, the Syrian Army reportedly urged the opposition to leave, offering safe passage, as they moved their way through the city.

U.S. officials estimate there are “several thousand” rebels in and around Aleppo. But weapons like TOW missiles and AK-47s in rebel hands are no match against the air assault.

On Thursday, U.S. officials began suggesting for the first time that eastern Aleppo could fall into regime hands, in a matter of weeks, citing the assault on food and water supplies and the presumed Russian and/or Syrian strikes on the two largest hospitals in eastern Aleppo Wednesday.

“You can live without a lot of things, but not water,” one defense official explained to The Daily Beast.

Defenders of the rebels note that if rebels have been unwilling to join al Qaeda forces in eastern Aleppo this long, they are not likely to turn to the group now. But Jennifer Cafarella, a Syria planner at the Washington-based Institute for the Study of War, noted there are other groups, short of al Qaeda, that rebels could turn to for support as their territory shrinks. Among them are al Ahrar al Sham, a Salafi jihadist group.

“There is currently a diverse spectrum of groups in Syria,” Cafarella explained to the Daily Beast.

That said, the defeat of weakened moderate opposition forces in Aleppo would result in an "overall change in the character of the opposition" moving forward, Cafarella said.

The Russians charge that there is no real moderate opposition, but rather the United States is depending jihadist elements, like Jahbat Fateh al-Sham, formerly known as al Nusra, an al Qaeda affiliate, to bolster a small number of moderates.

During the ceasefire negotiations two weeks ago, the U.S. “pledged solemnly to take as a priority an obligation to separate the opposition from Nusra," Russian Foreign Minister said Sergey Lavrov told the BBC Friday.

"They still, in spite of many repeated promises and commitments... are not able or not willing to do this and we have more and more reasons to believe that from the very beginning the plan was to spare Nusra and to keep it just in case for Plan B or stage two when it would be time to change the regime,” Lavrov told the BBC.

U.S. officials currently are considering options for eastern Aleppo, in the face of the ongoing bombardment and collapse ceasefire talks between the Russians and the U.S. State Department. But those discussions so far are at a staff level. And with every day of Russian-led aerial bombardments, options dwindle, the U.S. officials conceded.

At least one option remains off the table. Ash Carter, Secretary of Defense, and Marine Gen. Joseph Dunford, the chairman of the Joint Chiefs of Staff, have resisted military options, saying the U.S. military campaign should remain focused at defeating the self-proclaimed Islamic State in Iraq and Syria. The administration has so far agreed with that assessment.

“At the end of the day, there are going to be challenges around the world that happen that don't directly touch on our security, where we need to help - we need to help lead, but just sending in more troops is not going to be the answer,” President Obama told CNN”s Jake Tapper at a presidential town hall Wednesday with members of the U.S. military and their families.

The result is that the various U.S. government agencies invested deeply divided over U.S. options for what to do in eastern Aleppo, particularly for the CIA, which worked hardest at finding, training and arming U.S.-backed opposition groups.

“If eastern Aleppo falls, it would be a major setback to say the least,” a second U.S. official concluded.

Article Link To The Daily Beast:

Putin’s Covert War On Western Decadence

Russia is being presented as a moral fortress against gays and pornography.

By Owen Matthews
The Spectator
October 3, 2016

Last weekend a group of young activists turned out on a Moscow street to protest against western decadence. They were a hard-faced bunch, standing defiantly in military poses and wearing uniforms bearing the logo ‘Officers of Russia: Executive Youth Wing’ as they blocked access to an exhibition by American photographer Jock Sturges that featured images of nude adolescents.

‘We are here to protect people from paedo-philic influences,’ one Officer of Russia told journalists — while another protester sprayed the offending photographs with urine. At the same time, Russia’s state–controlled airwaves filled with senators, priests and government officials denouncing the wickedness of the exhibition (which shut down immediately after the protests) and calling for the organisers to be prosecuted. The outcry came just days after the Russian government banned two popular porno-graphy sites, youporn and xhamster, also on the grounds of protecting public morality.

Putin’s Russia is fast becoming a very puritan place. Ever since returning to the presidency in 2012, Putin has pursued an increasingly religious-conservative ideology both at home and abroad, defining Russia as a moral fortress against sexual licence and decadence, porn and gay rights.

Putin’s puritanism has grown hand-in-hand with the personal influence of two key conservative ideologues: his personal confessor Bishop Tikhon Shevkunov and the mystical geopolitical thinker Alexander Dugin. Bishop Tikhon is one of Russia’s highest-profile critics of the decadence of the modern western world — and his Every-day Saints and the Other Stories was the best–selling Russian book of 2012, rivalled for sales only by Fifty Shades of Grey. Dugin is the chief ideologue of Eurasianism, an ideology which holds that Russia has a special historical destiny to save the world from the corrupt moral values of western capitalism.

The influence of the Russian Orthodox church on public life is growing fast, thanks to Kremlin patronage. The church’s preferred instrument of control is a draconian law criminalising ‘offending the feeling of religious believers’ that was passed in the wake of a protest by the feminist punk group Pussy Riot in Moscow’s Christ the Saviour Cathedral in 2012. Prosecutions under the law have kicked into high gear this year. In March in Stavropol, south Russia, criminal charges were brought against Viktor Krasnov after he wrote ‘God does not exist’ on the VKontakte social network, Russia’s version of Facebook. Krasnov was ordered to spend over a month undergoing examinations in a psychiatric ward before he was finally deemed sane enough to stand trial, and the case continues.

A month ago, 20-year-old blogger Ruslan Sokolovsky was arrested and sentenced to two months in jail after he posted an online video of himself playing Pokémon Go in a church. He could eventually spend five years behind bars if his action is classed as a ‘hate crime motivated by religion’. ‘I decided to catch some Pokémon in church because why not? I believe it’s both safe and not against the law,’ said Sokolovsky in his online video as he walked into Ekaterinburg’s Church of All Saints. ‘Who could be offended if you walk in a church with a smartphone in your hand?’

Apparently, the answer is: most Putin-era Russians.

Polls show that most ordinary Russians hold deeply illiberal views on social issues (for example, 21 per cent want to see homosexuals ‘liquidated’, and another 37 per cent advocate ‘separating them from society’ — while only 11 per cent believe homosexuality to be a ‘sexual orientation from birth, which merits the same rights as heterosexual orientation’). And historical polling data from the recently shuttered Levada research centre shows that Russian attitudes on gays, blacks, Jews, foreigners, capital punishment and the like have remained pretty unenlightened since the fall of the Soviet Union.

But what is new is that those prejudices — especially the hatred of westerners and intolerance of nonconformity — are now being officially reinforced not just by state-controlled media but also by a growing cacophony of religious and ultranationalist media.

Russia’s fastest-growing TV station, for instance, is Tsargrad TV, a religious–patriotic channel founded by a Kremlin–connected investment banker called Konstantin Malofeyev. Tsargrad regularly features Bishop Tikhon and Alexander Dugin commenting on world affairs.

‘In this epoch of cyborgs, hybrids, mutants, chimeras and virtual reality, mankind will be saved only by tradition,’ Dugin said in his latest lecture on Tsargrad. According to him ‘all modernism — the idea of progress, development, the so-called scientific view of the world, democracy and liberalism [is] a Satanic idea that spells a death sentence for humanity… the only defence is asserting God, the church, the empire, the congregation of the faithful, the state, and the people’s traditions.’

Dugin, once a marginal figure, has come closer to the political mainstream as Russia has veered deeper into isolation and nationalism in the wake of the annexation of Crimea in March 2014. The Tsargrad team played an important role in encouraging and fomenting the pro-Russian rebellion in eastern Ukraine. Dugin and Malofeyev have both been named in the US sanctions list for their role in the conflict — a rebellion that was spearheaded by two of Malofeyev’s former employees, Igor Strelkov and Alexander Borodai, who became defence minister and prime minster respectively of the break-away (and Russian-backed) Donetsk People’s Republic.

As economic sanctions, slumping oil prices and double-digit inflation stall Russia’s economy and threaten to bite into the Kremlin’s popularity, the regime is turning more to its fans on the religious-nationalist right for support — and adopting Orthodoxy as a kind of state ideology.

‘This is a state that cynically uses Orthodox Christianity as a surrogate ideology to prop up its authority,’ argues Brian Whitmore, author of Radio Free Europe/Radio Liberty’s influential blog The Power Vertical. ‘It’s a state where fealty to the Orthodox church, or at least publicly proclaiming fealty, becomes a surrogate for patriotism… and it’s a state where challenging the authority of the church is akin to an act of treason.’

The state-sponsored culture of prudery extends to the Kremlin’s latest recruits. Russia’s newly appointed children’s rights commissioner Anna Kuznetsova is the wife of a priest (Orthodox priests have to be married, otherwise they must become monks) and she appears to believe in a theory called telegony, which holds that every sexual partner a woman has ever had can physically and emotionally influence a child she gives birth to.

‘If a woman has several partners, there is a significant chance of a baby being born weakened due to the mixing of information,’ Kuznetsova told the Penza Medical Portal in 2009. ‘This fact has an especially strong influence on the morals of a future child.’ (She now says she has no recollection of making the remarks.) Kuznetsova has also been accused of being a member of a VKontakte group devoted to denouncing Aids as ‘the greatest fraud of the 20th century’.

In some ways it is no surprise that Russia has turned pious and moral after so many years of wickedness. In the mid-1990s — an epoch now much reviled by Russia’s new puritans — Moscow was a town where a strip club was considered a normal place to eat lunch, where bars served unlimited free drinks to young women from seven till nine before opening the doors to a predatory horde of men, where the main street of the city was lined with prostitutes and the television filled with tawdry soft porn. Russia was almost defined by an absolute, bottomless nihilism. After communism’s collapse, suddenly there were no rules, no holds barred, and everything went for those bold and ruthless enough to go out and grab as much as they could.

Now the wheel has turned full circle. In the wake of last weekend’s Sturges protest, liberal Russians posted images of another group of morally indignant officers mounting a boycott — members of the Union of German Officers blocking the door of the Jewish-owned Woolworth’s in Berlin in 1930.

Rise-of-fascism analogies are usually facile and often inappropriate. But it is true that Putin’s regime is making closer common cause with Russia’s religious, ultranationalist right. And it’s also true that the space for debate and dissent in Russia’s media is becoming vanishingly small. In that environment, with state television whipping up ever crazier conspiracy theories and loading ever more blame on external enemies, from America and the EU to the IMF and the World Anti-Doping Agency, the more dangerous the new state-sponsored puritanism becomes. Puritanism is, at base, just another word for hatred of dissent and difference. And it’s only a matter of time before difference becomes synonymous with treason.

Article Link To The Spectator:

The Idiocy Of Calling Donald Trump A ‘Bully’

By Eddie Scarry
The New York Post
October 3, 2016

Either Democrats and the national media know they’re being melodramatic when they call Donald Trump a “bully” or they have no clue what bullying actually looks like.

After last week’s debate, liberal New York Times columnist Nicholas Kristof described the Republican nominee as “the seventh-grade bully.” The New Yorker’s Amy Davidson said Trump has a “bully’s instinct for his opponent’s weakness” but that it had failed against Hillary Clinton in the debate.

Because Trump interjected several times while his Democratic opponent was speaking, Mark Oppenheimer at the Los Angeles Times said his microphone should’ve been cut off when it wasn’t his turn to speak.

Having Trump’s mic on when it wasn’t his turn “empower[ed] a bully, especially a male bully,” wrote Oppenheimer.

Anyone who hadn’t seen the debate but read the media’s coverage of it would be forgiven for assuming Trump had given Clinton a wedgie and broken her glasses on live TV.


Trump sometimes interrupted Clinton, made facial expressions when she talked and ridiculed her as a “typical politician: all talk, no action.”

In other words, he debated her.

But the left’s “bully” meme isn’t new. At the Democratic convention in July, former Maryland Gov. Martin O’Malley said it was “time to put a bully in his place, and a tough woman in hers — the White House!”

Late last year, the Washington Post editorial board drew a parallel between Trump and Communist-hunter Joe McCarthy. “We have seen the likes of him before,” said the Post, “in the United States and elsewhere: narcissistic bullies who rise to prominence by spreading lies, appealing to fears and stoking hatred.”

"Real victims of bullying are physically harmed, emotionally paralyzed and worse. When Clinton is “bullied,” she solicits donations to help get her into the White House."

Also last year, WaPo columnist Dana Milbank advised the other GOP presidential hopefuls to treat Trump as “the schoolyard bully he has been acting like.”

Among Trump’s sins throughout the primary were to call Jeb Bush “low energy,” Ted Cruz “Lyin’” and Marco Rubio “little.”

They were the comic book villain-style taunts that reminded normal people of Batman and the Joker.

But the media and Democrats feigned dark flashbacks to the oversized middle-schooler dunking their heads in the toilet.

The federal government defines bullying as “unwanted, aggressive behavior . . . that involves a real or perceived power imbalance.”

Trump has a penchant for insults and a knack for getting his supporters to laugh at his opponents. But what about the “power imbalance”?

He’s a longtime businessman and TV celebrity with no real power other than his popularity with roughly half the country’s voters. Meanwhile, his targets have all the power of the Washington political establishment, the airwaves and the national newspapers.

Clinton is the wife of a former president, she’s been a senator and a secretary of state. There’s no imbalance of power between her and a man who sold now-defunct brands of bottled water and steaks.

Bush is the brother and son of two presidents, a former governor and associate to big Wall Street banks. There’s no imbalance of power between him and a man who once fired Gary Busey on a TV game show.

There’s a difference between being ridiculed and being bullied.

Real victims of bullying are physically harmed, emotionally paralyzed and worse. When Clinton is “bullied,” she solicits donations to help get her into the White House.

In August, Clinton sent out an e-mail to Democrats “to address the idea that Donald Trump is anything other than the rock-throwing bully he’s proven himself to be since day one of his candidacy.”

At the end, it asked for money.

Clinton loyalist James Carville sent a similar e-mail in June, calling on supporters “to pony up and chip in — we can’t let that unreconstructed bully get near the White House.”

The same month, Sen. Elizabeth Warren sent an e-mail calling Trump “a small, insecure, money grubbing bully.”

That one asked for money, too.

When Democrats and the media call Trump a “bully,” what they’re telling voters is: Stop laughing at us. And send us a check.

Article Link To The New York Post:

Biden Considers A Bright Post-Administration Future

By Albert R. Hunt
The Bloomberg View
October 3, 2016

Vice President Joe Biden is in a comfortable place; he's also on fire.

But he's on fire about the presidential election.

"My name is Joe Biden, and I work for Hillary Clinton," he told a Philadelphia rally last week, referring to a politician he hasn't been especially close to and considered running against.

As with most everything Biden, this is authentic, and outweighs any worry about eroding the Obama administration legacy. He genuinely believes Donald Trump is unqualified to be commander-in-chief and this, coming from the man who delivered the eulogy at the funeral of the conservative Republican Senator Strom Thurmond, is an unusual expression of contempt.

"This guy's lack of any sensibility really offends me," he says of the Republican nominee during a long interview aboard Air Force Two that covered politics, his vice presidency and the future.

While Biden fought repeatedly on substance with Presidents Ronald Reagan and George W. Bush, he says they maintained a civility, a human decency that are lacking in Trump, who boasted of profiting from others' suffering.

"I can't imagine Ronald Reagan not feeling any pain or even rooting for failure when people were being hurt so badly, losing everything," Biden says.

The billionaire businessman also bragged that his ability to avoid federal taxes for several years showed he was "smart."

Biden contrasts such statements with the lives of a typical working-class family making $80,000, an assembly worker and waitress, who pay their bit to support troops, veterans, cops and firemen.

"Trump really thinks he's better than those people," he says. "He has contempt for them."

Looking back over the past eight years, he's pleased with his tenure by President Barack Obama's side in which he embodied the "Mondale model" of a vice president actively engaged in all foreign policy and most domestic issues.

Unlike other vice presidents of the modern era -- Dick Cheney, Al Gore and George H.W. Bush -- his personal relationship with the president is genuinely close as well as professional. They are very different: the cerebral, lone wolf, first black president who grew up without a father and with an absentee mother, and the plain-talking and talking, streetwise, family-oriented Irish lifetime politician.

"I knew this was going to work," Biden says, recalling when, during their first year, "Barack said, 'You know we've become friends.'"

Their mutual affection and respect has endured even during some heated disputes, usually over foreign policy. The president resists advice, Biden says, only on his speeches, because he takes great pride in his way with words. The vice president is one of the few people Obama trusts outside his family; in a way, they've grown old together.

A year and a half ago, the vice president was in a bad way, conflicted over whether to run for president and worried about his post-administration future, professionally and financially, if he didn't. In a speech to the elite Gridiron Dinner this year, Biden joked that his net worth was less than Bernie Sanders's: "When a socialist has more money than you, you know you've been doing something really wrong."

Most of all, he was heartbroken that his 46-year-old son, Beau, a political superstar, was dying of brain cancer.

Friends say it took a while, but Biden has bounced back, motivated in no small part by his job as czar of the "Cancer Moonshot," a role in which he assembles government agencies, medical experts, donors and foundations to work on a crash cancer research project. Hillary Clinton has said she wants him to stay in that post if she's elected; that's uncertain, but it's more likely than his becoming secretary of state, as some have speculated.

Academic centers such as the University of Pennsylvania and the University of Delaware envision a Biden public policy institute that could attract prominent politicians and world leaders. There is no national political figure who commands more good will across the political aisle and around the globe.

Also, the 73-year-old career politician wants to accumulate some money to set up an educational fund for Beau's children and a comfortable life for him and his wife, Jill, and extended family. He'll consider foundations, businesses (selectively) and offers to speak.

Some big financial institutions offer the promise of quick riches, but that would be incongruous for a guy everyone in Washington calls Joe: "I don't want to change my brand."

Article Link To The Bloomberg View:

Progressives For Trump Tax Reform

The media are shocked that business losses reduce tax liability.

By Review & Outlook
The Wall Street Journal
October 3, 2016

Who would have believed it? Donald Trump has driven his political opponents to embrace the cause of tax reform so the wealthy have fewer loopholes to exploit. That seems to be the inescapable logic of the media and Clinton campaign’s reaction to the weekend story that Mr. Trump may have used large income losses to reduce his tax payments.

The New York Times reported Saturday that it had received an anonymous gift in the mail of three pages from three of Mr. Trump’s state tax returns from 1995. The real-estate and casino magnate, who was having well-known business problems at the time, reported a loss of $916 million on those New Jersey, New York and Connecticut returns.

The Times concludes from these losses and after consulting those it called “tax experts” that the resulting tax deduction “could have allowed him to legally avoid paying any federal income taxes for up to 18 years.” Cue the synthetic shock and outrage.

Note that word “legally.” No one, not even the Clinton campaign, is claiming Mr. Trump broke any tax laws 20 years ago. Had he done so you can bet the IRS would have noticed, since the tax agency doesn’t routinely ignore tax losses that large.

The details from three pages are scant and don’t reveal the specific tax deductions that Mr. Trump might have exploited in 1995 or other years. But even average taxpayers who declare self-employment income know that business losses are deductible, often across several years. This reflects that the cycle of business investment and sales isn’t confined to a calendar tax year.

The real-estate business is also notorious for complex accounting and depreciation practices that can reduce tax liability. Developers borrow heavily, and the interest on that debt is deductible. Mr. Trump didn’t write the tax laws he was exploiting, though President Bill Clinton did have a hand in writing them since he pushed a major tax bill through Congress in 1993 with a Democratic Congress. Maybe Hillary Clinton should blame her husband and party for tolerating such rules.

What is illegal in this story is that someone disclosed Mr. Trump’s tax returns without his permission. The Times reports that the postmark on the documents indicates they were sent from New York City, and the “return address claimed the envelope had been sent from Trump Tower.” The Trump Tower bit is probably a joke, and the sender could have traveled to New York from anywhere to send them.

But the tax-return leak was nonetheless all too predictable. The Trump campaign is attacking the newspaper for publishing the documents, but publication is not a crime. Releasing it is. The left is committed to defeating Mr. Trump by whatever means possible, and many believe this end justifies any means, much as progressives have justified the Edward Snowden leaks despite the damage to national security.

Mr. Trump also invited this October surprise by refusing to release his tax returns. Had he done so last year, when we advised him to, the debate over the details would have burned itself out. The smart play in politics is transparency to give your opponents nowhere to go.

The Clintons can count on a protective press corps to ignore or forgive their email and Clinton Foundation deceptions, but Republicans will never get that break. Mitt Romney made the same mistake by waiting to release his 2011 tax return until September 2012, and George W. Bush almost lost in 2000 when someone disclosed his drunk-driving conviction shortly before Election Day. Don’t Republicans understand that their secrets will always be exposed, and at the most damaging moment?

Mr. Trump hasn’t helped his cause by boasting about how “smart” he is for paying little tax. This is the vainglorious Trump who can’t stand to be criticized. He should be saying instead that the tax code is dumb. He could say he’s fortunate to have the means to hire lawyers and accountants who can maneuver through the tax maze to cut his payments. But he knows most Americans aren’t so lucky.

He could also say that Mrs. Clinton’s tax plans all but guarantee that the rich would pay less in taxes. She wants to raise rates, which would invite the rich to lobby Congress for more loopholes, which it would eventually pass, which would be fine for the Clintons and Donald Trump but be terrible for middle-class Americans and the economy.

Mr. Trump has made so many campaign mistakes that it’s a miracle he’s still competitive. He owes this to the fact that a majority of Americans clearly don’t want to vote for Mrs. Clinton. But the hour is late, and if he wants to win he has to stop pursuing defensive, egotistical sideshows and focus on his plans to make America better.

Article Link To The Wall Street Journal:

The Culture Ate Our Corporate Reputation

CEOs must do more than establish corporate values. Look at what your actions tell employees.

By Lou Gerstner 
The Wall Street Journal
October 3, 2016

In describing what caused a recent retail-banking debacle, the CEO said that employees failed to honor the bank’s culture. They did not do the thing we asked, namely to “put the customer first.”

This is not the first time I have seen corporate leaders blame a flaw in the “culture” for major shortfalls in their company’s performance. I believe this represents a serious misunderstanding of how institutional culture is created and the role it plays in defining corporate behavior.

Culture is often described by a statement of values that all employees are expected to follow. Pick 10 companies. Go to their websites or annual reports and look at the value statements listed there. You will most likely find:

• “We work for our customers.”

• “We respect diversity.”

• “We are dedicated to our employees’ success.”

• “We believe in supporting the communities in which we operate.”

• Etc.

These statements are for the most part extraordinarily similar. But look inside these companies and you will learn that a common vocabulary does not lead to common behavior.

What is critical to understand here is that people do not do what you expect but what you inspect. Culture is not a prime mover. Rather it is a derivative. It forms as a result of signals employees get from the corporate processes that structure their work priorities.

Compensation is one of the most important of these processes. If the reward system pays a premium for one kind of behavior, that’s what will determine employee behavior—regardless of the words enshrined in the value statement.

If the financial-reporting system focuses entirely on short-term operating results, that’s what will get priority from employees. If you want employees to care a lot about customers, then customer-satisfaction data should get as prominent a place in the reporting system as sales and profit.

Look at who gets the atta-boy and atta-girl treatment at corporate meetings. Is it the leaders in meeting financial targets—or is it those who raise concerns regarding marketing programs that give priority to corporate goals at the expense of true customer needs?

And those sincere expressions of commitment to diversity by the CEO? Obviously helpful. But what really matters is which programs suggested by the HR department—such as executive coaches, neutral-gender parental leave and others—actually get through the budgeting process. Believe me, the budget process is almost as powerful as the compensation process in shaping corporate culture.

Communication is another important process. All too often, the CEO in his or her state-of-the-union address in January will proclaim a commitment to investing in the future, seizing new growth opportunities and accelerating R&D expenditures. And then six weeks later in the middle of February comes a memo from the chief financial officer stating that first-quarter budgets are running behind and all discretionary expenditures are to be put on hold and all new hiring is to be suspended. Now which of those communications do you believe shapes employees’ view of what really matters and, therefore, what they see as the true cultural priorities of their company?

It is the cumulative effect of all of these processes: compensation, performance measurement, recognition, etc. that shape what we describe as corporate culture.

So for any CEO who wants to understand the real culture in his or her company: Do not look at the value statement in the new employee handbook. Go deep and understand what each process in the company is telling employees is important. Again, people do not do what you expect but what you inspect.

Don’t misconstrue my message: Creating expectations and communicating goals is a worthy and important responsibility of corporate leaders. But if these are not followed up on by a comprehensive and continual assessment of the alignment of all major corporate processes with those goals, the leaders will be listening to the sound of one hand clapping.

Article Link To The Wall Street Journal:

New Jersey Was Not Ready To Handle The Hoboken Train Crash

By Nicole Gelinas
The New York Post
October 3, 2016

We don’t know why a New Jersey Transit train crashed at high speed into the Hoboken train station last Thursday, killing 34-year-old Fabiola Bittar de Kroon and injuring 114, just a month after a New Jersey Transit bus collision killed two people.

But we do know this: States are best prepared to handle a disaster when they’re doing well before it happens — and when they’ve built up some public goodwill, too.

New Jersey doesn’t fit that bill: It doesn’t run its transportation well on a day-to-day basis.

And without big changes, it’s going to get worse.

Without New Jersey Transit, the Garden State withers. Last year, 272.3 million people took its trains or buses — up from 237.4 million a decade ago. 32.7 million people took the Hoboken line, up 41 percent from the 23.2 million who took it back then.

More people are commuting for a few reasons: taking the car is more expensive and harder, as tolls go up and buses take up more of the Hudson crossings. Last month, the Port Authority hinted at the idea of a second bus-only lane on the highway to the Lincoln Tunnel.

Increasingly, too, the jobs are in New York. As New Jersey Transit itself notes, “New Jersey’s economy . . . fared significantly worse than its neighbors” after the 2008 recession. Employment dropped by 6 percent, twice as much as in New York City. New Jersey didn’t recover its lost jobs until last year, four years later than New York.

So you’d think the state would care about its transit system. It sure isn’t acting like it: Between 2001 and 2006, New Jersey Transit spent $4.1 billion, in today’s dollars, on major capital projects like train, station and track upgrades. Between 2011 and 2016, it spent only $3.4 billion.

And until recently, it’s been spending almost nothing. Over the summer, Jersey’s transportation fund ran out of money. (It still takes in $1.2 billion a year, including from the gas tax, but it must spend all of that money on its existing debt.)

"New Jersey continues to squander the infrastructure money it does have on trifles and amusements."

New Jersey Gov. Chris Christie and lawmakers couldn’t agree on how to find more money: some lawmakers wanted to raise the gas tax, but Christie said they had to cut another tax in return. So they spent the summer bickering over whether to cut the sales tax or the estate tax.

As the money ran out in August, Christie signed an emergency order diverting money from the state’s overall budget to pay for critical transportation projects — stuff like filling in potholes, not funding better track and signaling systems.

Of course, when you have no money, raising one tax only to cut another one makes no sense. But the day after the crash, that’s exactly what New Jersey did — raising its gas tax but cutting a slew of other taxes, including both the sales tax and the estate tax, in return. Noting the average family would see an overall tax cut, Christie said “it’s the first statewide tax cut . . . that affects all New Jerseyans since 1994.”

Realistically, though, Jersey is dead broke — it can’t make even half of its necessary payments to pension funds. Christie is using this tragedy, then, to pretend to do something responsible about infrastructure while boasting about tax cuts.

Would investment in better technology have averted Thursday’s crash? It’s impossible to know. New York and Amtrak aren’t flat broke like New Jersey is, but they’ve been slow, too, in rolling out automated-stop technology.

Capital investments would give people a better day-to-day commute — and could avert a future disaster. New Jersey needs to fund about $5 billion out of the $20 billion cost of building a new tunnel across the Hudson River to do major repairs to the existing, century-old tunnel. But it has no idea where it’s going to get that money.

Just how bad are the decisions state officials have been making? New Jersey continues to squander the infrastructure money it does have on trifles and amusements. Last month, as the Bond Buyer reported, the state made plans to issue $1.2 billion in debt to fund a long-delayed “megamall” in East Rutherford.

Using scarce tax dollars to fund a mall made no sense in 2002, when the state launched the bizarre project, and it makes less sense today. Maybe, though, Christie and lawmakers can prod the mall’s owners to add an indoor miniature train to the planned indoor ski slope and water slide.

At least, then, the state could say it’s working on some train project.

Article Link To The New York Post:

Monday, October 3, Morning Global Market Roundup: Asia Stocks Start Fourth Quarter With Gains, Sterling Stumbles

By Wayne Cole
October 3, 2016

Asian shares got the new quarter off to a firm start on Monday and European bourses were expected to follow, while sterling stumbled as Britain set a March deadline to start divorce proceedings from the European Union.

Risk sentiment had benefited on Friday from reports Deutsche Bank was negotiating a much smaller fine with the U.S. Department of Justice, though the Wall Street Journal reported on Sunday that the talks were still in flux.

Just a hint of a deal was enough to push MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS 0.8 percent higher. The index climbed 8.8 percent in the third quarter, its best performance since early 2012.

The Australian market added 0.75 percent, while Japan's Nikkei .N225 put on 0.8 percent. In Europe, spreadbetters predicted British and German stocks would also open higher.

Japanese data showed confidence at big manufacturers was static in September amid a strong yen and sluggish demand at home and overseas.

The mood was supported by a survey showing activity in China's manufacturing sector expanded again in September, which may indicate that recent positive momentum can be sustained.

The official Purchasing Managers' Index (PMI) stood at 50.4 in September, identical with the previous month's level. A reading above 50.0 shows growth on a monthly basis.

Chinese markets are on holiday for the entire week.

Sterling GBP=D4 shed half a U.S. cent after British Prime Minister Theresa May said she would trigger the process for the UK to leave the European Union by the end of March.

The pound was last quoted at $1.2936 GBP=D4 having been down as far as $1.2902 at one point, its lowest since mid-August.

May on Sunday told the ruling Conservative party's annual conference that she was determined to move on with the process and win the "right deal".

Using Article 50 of the EU's Lisbon Treaty will give Britain a two-year period to clinch one of the most complex deals in Europe since World War Two.

Things were quieter elsewhere in the currency market, with the dollar steady at 101.38 yen JPY= having wandered between 101.02 and 101.75 on Friday.

The euro EUR= was flat at $1.1232, after rebounding from a nine-day low of $1.1153 on Friday, while the dollar index .DXY was up 0.06 percent at 95.519.

Waiting On Deutsche Deal

A rally in financial stocks led Wall Street to a firmer close on Friday. The Dow .DJI rose 0.91 percent, while the S&P 500 .SPX added 0.8 percent and the Nasdaq .IXIC 0.81 percent.

A media report late on Friday claimed Deutsche and the U.S. Department of Justice (DOJ) were close to agreeing a settlement of $5.4 billion, rather than the initially touted $14 billion.

That report has still not been confirmed.

Deutsche Bank AG's U.S.-listed shares jumped 14 percent (DB.N) in reaction, but were still down 11.3 percent for the month. Its Frankfurt-listed shares (DBKGn.DE) rose 6 percent.

Deutsche has significant trading relationships with all of the world's largest finance houses and the International Monetary Fund (IMF) has identified it as a bigger potential risk to the wider financial system than any other global bank.

Oil ran into profit-taking on Monday after enjoying its second straight monthly gain in September aided by OPEC's planned output cuts. Brent crude settled up 4 percent for September and U.S. West Texas Intermediate rose 8 percent. [O/R]

On Monday, the December Brent contract LCOc1 was off 24 cents at $49.95 a barrel, while U.S. crude CLc1 lost 33 cents to $47.91.

Copper CMCU3 steadied near eight-week highs after boasting its biggest monthly gain in more than a year-and-a-half as improving Chinese economic data brightened the outlook for demand from the world's top consumer.

Article Link To Reuters:

Oil Prices Fall On High Production Despite Planned OPEC Output Cut

By Henning Gloystein
October 3, 2016

Oil prices fell away from $50 per barrel on Monday despite an agreement last week by exporters to cut output, with traders doubting the step was enough to rein in production that has exceeded consumption for the better part of three years.

Brent crude futures LCOc1 were trading down 25 cents, or 0.5 percent, at $49.94 per barrel at 0205 GMT.

U.S. West Texas Intermediate (WTI) futures CLc1 were down 26 cents, or 0.5 percent, at $47.98 a barrel.

The dips follow fresh production highs from the Organization of the Petroleum Exporting Countries (OPEC) as rival members like Saudi Arabia, Iran and Iraq are reluctant to give away market share.

OPEC's oil output is likely to reach 33.60 million bpd in September from a revised 33.53 million bpd in August, its highest in recent history, a Reuters survey found on Friday.

"Sentiment has been slightly dented by a Reuters survey Friday, showing that despite agreeing to cut production OPEC pumped crude in record amounts through September," said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore.

The price falls came despite last week's agreement by OPEC members to cut output to between 32.5 million barrels per day (bpd) and 33.0 million bpd from about 33.5 million bpd, with details to be finalised at OPEC's policy meeting in November.

Traders said there was more downside risk to oil prices if the planned cut wasn't deep enough to bring production back in line with consumption.

"OPEC has created its own Q4 risk to oil prices ... In raising expectations of a November deal to cut production, it also risks a steep price decline should it fail to achieve its goal of cutting output back to less than 33 million bpd," Barclays said in a note to clients.

Despite that, the British bank said it did not expect a repeat of the price crash seen late last year after a rally earlier in 2015.

"We think oil prices, and commodities more generally, will avoid the Q4 price crash that has become a feature of the market in recent years," it said, pointing to an improving Asian economic growth outlook, falling oil supplies and rising investor interest in oil markets as support factors.

Trading activity will be limited on Monday as public holidays in China and Germany mean Asia's and Europe's biggest markets are shut.

Article Link To Reuters:

Clinton Expected To Hit Wells Fargo In Speech On 'Bad Corporate Actors'

By Amanda Becker 
October 3, 2016

U.S. presidential candidate Hillary Clinton on Monday will unveil a plan to make it easier for consumers to take legal action against “bad corporate actors,” citing Wells Fargo & Co and Mylan Pharmaceuticals, according to a campaign official.

While campaigning in Ohio, the Democratic nominee will explain how she would, if elected on Nov. 8, curb the prevalence of contractual clauses that require consumers, employees and other individuals to resolve legal disputes in private arbitration proceedings instead of in courts, her campaign said. Mandatory arbitration clauses sometimes require that claims be pursued on an individual basis instead of on behalf of a class of similarly situated individuals. Consumer advocates say this makes it prohibitively expensive to take legal action.

Clinton will call on the U.S. Congress to give agencies such as the Federal Trade Commission, the Federal Communications Commission and the Department of Labor the authority to restrict the use of arbitration clauses in consumer, employment and antitrust agreements, according to a preliminary plan reviewed by Reuters.

Clinton will also discuss how she believes that the Consumer Financial Protection Bureau and other agencies already have the authority to curb the use of such clauses under the 2010 Dodd-Frank Act. The planning document said she would urge the Securities and Exchange Commission to exercise its authority to make related rules authorized by the financial reform law. Wells Fargo is expected to be in the crosshairs when Clinton discusses how she would curb mandatory arbitration clauses.

For years, the bank’s employees opened as many as 2 million checking, savings and credit card accounts without the customers' permission in order to meet sales quotas. Wells Fargo reached a $190 million settlement with federal regulators earlier this month.

When Wells Fargo chief John Stumpf testified before Congress recently about the unauthorized accounts, he said he did not expect the bank to waive a clause signed by its customers in order to open their authorized accounts. The clause said they would arbitrate disputes instead of suing Wells Fargo in court.

Democratic lawmakers in Congress, including Senator Elizabeth Warren of Massachusetts, have called on Wells Fargo to toss out the mandatory arbitration clause and allow customers to sue.

Clinton is also expected to criticize Mylan for sharply raising without justification the price of EpiPens, which deliver life-saving drugs to those with allergies. The criticism will be part of a larger push to curb excessive market concentration and encourage competition that benefits consumers, her campaign said.

Article Link To Reuters:

BOC Aviation To Buy Five Planes From Air China Worth $1.5 Billion At List Prices

By Donny Kwok
October 3, 2016

Aircraft lessor BOC Aviation Ltd (2588.HK) said on Monday it would buy five new planes from Air China (601111.SS), worth a combined $1.5 billion at list prices, and would lease them back to the carrier.

The Asia's second-biggest aircraft lessor, with a fleet of more than 260 planes, said it would buy three new Boeing B777-300ERs and two new Airbus A330-300 aircraft.

The company expects to take delivery of the aircraft before the end of 2016.

An expanding air travel market in Asia has helped many regional airlines improve their financial performance which in turn is fuelling growth in the leasing sector, BOC Aviation Chief Executive Officer Robert Martin said in August.

Article Link To Reuters:

What’s Ahead For Colombia After Voters Reject FARC Peace Deal

Government and guerrillas say they’ll continue to seek peace; Opinion polls had forecast that voters would approve deal.

October 3, 2016

Colombia faces uncertainty after voters unexpectedly rejected a peace deal between the government and Marxist guerrillas that was hammered out during four years of talks in Cuba. President Juan Manuel Santos had said there was no “Plan B” in case of defeat.

What Happened?

Colombians narrowly nixed the deal by 50.2 percent to 49.8 percent, with nearly two thirds of voters abstaining. Santos and the leader of The Revolutionary Armed Forces of Colombia, or FARC, had already signed the peace pact last week at a ceremony attended by regional heads of state and United Nations Secretary-General Ban Ki-moon. The referendum result followed at least three polls published last week predicting the deal would pass by 60 percent or more.

Turnout in the Caribbean coast, which overwhelmingly backed the deal, was even lower than the national average as the area was hit by rain caused by Hurricane Matthew, according to electoral authorities.

What Was In The Agreement?

The deal would have guaranteed the FARC ten seats in Congress between 2018 and 2026, agricultural reform and reduced sentences for crimes committed, in return for handing in their weapons to UN monitors. A “yes” vote would have given the green light for the guerrillas to start the demobilization process and convert themselves into a legal political party.

What Happens Next?

There’s no immediate prospect of a return to all-out violence. Santos said the bilateral cease-fire will hold, and he will continue to seek a negotiated settlement. FARC leader Rodrigo Londono told local radio stations the group retains a willingness to use words rather than weapons, and that "peace will triumph." Santos is sending his negotiating team to Cuba on Monday to meet with the FARC. He’ll also call a meeting of all parties, including former President Alvaro Uribe’s Democratic Center Party, to try to work how to proceed.

How Will Markets React?

Goldman Sachs analyst Alberto Ramos said the peso and local peso-denominated bonds will sell off as the rejection of the deal was a surprise. Citigroup Inc. analyst Munir Jalil said the outcome will make it harder for the government to pass a tax reform bill, which it needs to do this year to offset a loss of oil revenue and prevent a downgrade. The Finance Ministry estimates that an end to conflict would boost growth by 1 percentage point per year.

Article Link To Bloomberg:

Brisk Hiring, Rising Wages Keep Economy Trudging Ahead With No Recession In Sight

Stronger labor market gives Americans more confidence to spend

By Jeffry Bartash
October 3, 2016

Think of it as The Loneliness of the Long Distance Runner. That’s how things are shaping up for the U.S. economy, which continues to drudge forward, albeit at a moderate pace, as the rest of the world stumbles.

Looking ahead, there are a smattering of new reports expected this week, including how many new jobs were created in September, which is likely to show the economy sticking to its steady-eddy route. Employment probably grew by nearly 200,000 jobs last month to keep the unemployment rate under 5%, but manufacturers are still struggling to expand and business investment remains soft.

The yin-and-yang performance of key segments of the economy means U.S. growth will probably clock in at around 2% or a bit less in 2016 despite a pickup in the third quarter.

In other words, more of the same. Even though the labor market has been the best it has been in years, the economy is limited to 2% growth—well below the historical 3.3% average. That means it is hard for Americans to get ahead financially even when they’ve got stable jobs and work is easy to find.

Not that most Americans are freaking out. A survey of Americans in September, for instance, showed they are the most confident in the economy and labor market since 2007. Hiring has perked up after a spring lull, job openings are at a record high and layoffs are near the lowest level since the early 1970s.

“At this point, the slowdown in job creation earlier in the year appears to have been an aberration as payrolls have expanded at a solid clip since June,” noted Jim Baird, chief investment officer at Plante Moran Financial Advisors.

When consumers believe their jobs are safe and their financial situation is secure, they are much more likely to spend.

Consumer spending jumped 4.3% in the second quarter to mark the second-highest level of the recovery. Americans probably won’t keep up that pace through the end of the year, but they aren’t scrimping and saving as much as they did after the end of the Great Recession.

What will also help is a labor market that shows few signs of weakening. Consider initial jobless claims — or applications for unemployment benefits. They’ve tallied less than 300,000 for 82 consecutive weeks, the longest such streak since 1970.

Companies are very reluctant to get rid of workers, especially since it is harder to find good help.

“We are increasingly hearing from businesses across a broad set of industries that they are having trouble finding qualified workers, both in high-skilled occupations and in lower-skilled jobs,” said Loretta Mester, president of the Cleveland Federal Reserve, in a speech last week. “And we are now beginning to see firms respond by raising wages.”

If any single indicator can tell where the economy is headed, it might be wages. They’ve risen at a 2.8% annual pace in the first eight months of 2016, well above the average 2.1% clip from 2010 to 2015.

If that keeps up, the annual increase in wages could top 3% and generate momentum for a U.S. economy struggling to break out of a 2% straitjacket. Stagnant wage growth has been one of the hallmarks of the weakest economic recovery since World War II. And similar to Smith, the central character in Alan Sillitoe’s aforementioned short story, the economy has been, almost defiantly, refusing to cross the finish line and offer clearer signs that it is bag on firm footing.

Article Link To MarketWatch:

After Article 50, Brexit Will Be Easy. A Trade Deal Will Be Anything But

Britain will leave the EU by 2019. But for years afterwards, until there’s a new agreement, its most vulnerable will suffer the full force of globalisation.

The Guardian
October 3, 2016

Article 50, providing for Brexit, will be triggered by the end of March next year, Theresa May has promised. Two years after it is triggered, Britain will find itself outside the European Union, unless there is unanimous agreement among the other member states to extend the time limit.

Contrary to popular perceptions, article 50 inaugurates a withdrawal process, not a trade agreement. It will involve negotiating essentially technical issues, though important ones – such as the rights of British citizens in the EU and of EU citizens in the UK – and can be achieved within the two-year limit.

Article 50 does allow for a shadow negotiation on trade matters. But, clearly, the EU cannot conclude a trade agreement with another country until that country ceases to be a member, and it is highly unlikely that a detailed trade agreement can be achieved within two years. When, in 1985, Greenland – whose population is smaller than that of Uxbridge, and whose one staple industry is fishing – withdrew, an agreement took three years to negotiate.

In any case, EU procedures for ratifying most trade agreements are far more stringent than for ratifying a withdrawal agreement, which requires merely a qualified majority in the council and a majority in the European parliament. A trade agreement would probably require unanimity in the council, a majority in the European parliament, and also ratification in national parliaments as well as in some regional parliaments – for example, those of Flanders and Wallonia. That involves 36 legislatures, each of which has a veto.

Matters would be easier, of course, were Britain to emulate Norway and join the European Economic Area. That, however, was established for countries proposing to join Europe, not leave it. The EEA obliges member states to incorporate not only current EU laws but also future legislation into domestic law, and to accept the principle of free movement. It also subjects member states to review by a European court – not the European Court of Justice, but the court of the European Free Trade Association – and requires a contribution to the EU budget. Per head, Norway currently pays around 83% of the British contribution.

"In a more competitive and harsher world, it will be those most likely to have voted for Brexit who will suffer the most."

Since the Brexiteers wanted to end the supremacy of European law, supervision by a European court and contributions to the EU budget, this option will hardly satisfy them. It would indeed be worse than EU membership since it would involve EU regulation without representation, a kind of colonial status in which Britain would be dependent on others to look after its interests.

Some suggest the Swiss relationship as an alternative. Switzerland has negotiated, over a period of 20 years, some 120 bilateral deals with the EU. These have to be regularly revised and renegotiated to take account of new EU laws, a cumbersome procedure. The EU dislikes this arrangement, and wants it to converge towards the Norwegian model. It is highly unlikely to replicate so broken a model for Britain.

Remaining in the EU customs union but outside the EU is open to the obvious objection that when the EU signs a trade agreement with a third country, that third country would have access to British markets but Britain would have no access to those of the third country.

Britain therefore may well find itself in 2019 trading under the rules of the World Trade Organisation – of which it was an original member – while still negotiating trade agreements with the EU and other countries. WTO membership, if Britain moved towards freer trade, would allow it to benefit from cheaper food from outside Europe – EU prices on beef and veal are currently around 30% higher than world prices – as well as cheaper cars, textiles and other goods subject to the EU’s common external tariff.

But the irony is that, contrary to the hopes of many Brexiteers, leaving the EU will expose Britain to more globalisation, not less; and in a more competitive and harsher world it will be the “left behind”, those most likely to have voted for Brexit, who will suffer the most.

Brexit, therefore, will be Margaret Thatcher’s revenge. It will suit the vision of the Tory right, which hopes that outside the EU Britain could become like Hong Kong or Singapore, a global trading hub. These two territories have no natural resources except for their brains, which they use to the full.

We, by contrast, have a deep-seated skills problem, first noticed by Joseph Chamberlain – the hero of Nick Timothy, Theresa May’s special adviser – well over 100 years ago. The priority, if May’s socially responsible capitalism is to become a reality, must be a radical skills policy. That means more resources devoted to further education colleges, currently the Cinderellas of the education service, and to university technical colleges, for those whose skills are technical and vocational rather than academic.

In 1950 Britain was asked to engage with the continent by joining the European Coal and Steel Community, precursor of the EU. The then foreign secretary, Ernest Bevin, declined, warning that once one opened that Pandora’s box, all sorts of Trojan horses would fly out. Today it’s clear that Brexit too will release a multitude of Trojan horses.

Article Link To The Guardian:

India's Central Bank Grows Up

By Mihir Sharma
The Bloomberg View
October 3, 2016

Roiled by fears of a possible conflict with Pakistan, markets in India haven’t been terribly stable in recent days. But at least one source of anxiety has happily been alleviated. Investors are confident that Tuesday’s monetary policy statement from the Reserve Bank of India -- the first since the departure of former governor Raghuram Rajan -- will signal continuity, not change.

In fact, the RBI may be on a much stronger institutional footing now than even under the well-regarded Rajan. This week’s decision is also the first under a new system in which a committee rather than the central bank chief will decide whether to raise, cut or hold steady on rates. The preferences and idiosyncrasies of whoever happens to be RBI governor -- in this case, Rajan’s former deputy Urjit Patel -- matter less than they ever have.

The RBI has used advisory committees in the past, but the final decision was always the governor’s. Now Patel is only one of six members of the new committee; he’ll cast a deciding vote only if there’s a 3-3 deadlock.

Equally importantly, even as India’s central bank has expanded its decision-making processes, it’s narrowed its focus. While earlier the RBI had more than one mandate -- economic growth and development, for example, was considered to be part of its responsibility -- a pact was signed during Rajan’s tenure that reduced the central bank’s targets to just one: consumer price inflation.

There are good reasons to worry about an excessive focus on India’s flawed consumer price index. But narrowing the RBI’s targets while broadening the number of voices shaping policy at least increases the predictability and robustness of monetary policy. And, in mature economies, that’s what produces macroeconomic stability.

India’s government has put to rest other concerns about the end of “governor’s rule,” too. Some critics were dismayed that the government would get to pick half of the new monetary policy committee. Past nominations, especially of regulators, have often proved problematic. Since, unlike in the U.S., India’s Parliament doesn’t approve the executive’s appointments, governments often nominate bureaucrats who can be relied on to toe New Delhi’s line.

India’s profligate finance ministry has never met an interest rate it doesn’t think is too high. And given worries about India’s continuing slump in investment, Prime Minister Narendra Modi had plenty of reason to stack the committee with figures who would reliably have pushed for lower interest rates. If he’d chosen only serving or retired finance ministry officials, it could well have undermined the RBI’s credibility.

Instead, Modi’s three appointees are all academics; there isn’t a bureaucrat among them. Nor did the government rummage around for “safe” economists with links to the ruling party: All three are macroeconomists, from India’s three leading schools of economics. Chetan Ghate is a professor at the Indian Statistical Institute; Pami Dua is director of the Delhi School of Economics; and Ravindra Dholakia is at the Indian Institute of Management in Ahmedabad.

Ghate was already performing a similar job as a member of the RBI’s existing advisory committee; and part of Dua’s remit at the Delhi School of Economics is to examine the sort of real-time economic indicators that the monetary policy committee will need to make their decision on interest rates. Dholakia’s appointment is a bit more of a puzzle, but given that he has served on numerous government committees in the past, he’s hardly an unknown quantity.

So, at least for now, many of the concerns raised by Rajan’s departure have been laid to rest. Patel is a solid successor. The bank has a new and clearer target. And a better and more robust system for deciding rates is now in place. It’s another reminder that strong personalities only really matter in countries with weak institutions -- and that India’s institutions are constantly getting stronger.

Article Link To The Bloomberg View:

Tesla Surprises Analysts With Hottest Sales Quarter In History

By James Covert
The New York Post
October 3, 2016

Tesla founder Elon Musk stepped on the accelerator, delivering the biggest-ever sales quarter for the electric-car maker, despite recent distractions.

Tesla Motors — whose charismatic chief executive week unveiled plans to go to Mars with his Space X company — said Sunday it more than doubled third-quarter sales, to 24,500 units, from last year.

That was better than most analysts expected, including Brad Erickson of Pacific Crest Securities, who last week forecast 22,000 deliveries. Some Tesla’s sales centers were discounting cars in the final days of the quarter to meet targets, he said, as a reason for his bearish outlook.

Musk sent an e-mail to employees last week, banning discounts on all brand-new, undamaged cars, including to “my family, friends and celebrities, no matter how famous or influential.”

Tesla’s strong numbers come as Musk is making a controversial bid to merge with SolarCity, a solar-panel installer co-founded by Musk’s cousins, Lyndon and Peter Rive. Musk, meanwhile, has been grappling with the aftermath of a fatal crash in June in Florida of a Model S driver who was using Autopilot mode.

Tesla said Sunday it shipped 15,800 Model S sedans in the quarter, and 8,700 Model X SUVs. Tesla said the third-quarter delivery count “should be viewed as slightly conservative,” as it has an additional 5,500 vehicles in transit to customers that will be counted towards fourth-quarter numbers.

For the final quarter of 2016, Tesla expects deliveries to be “at or slightly above Q3.” As such, Tesla said it remains on track to crank out 50,000 vehicles during the second half of 2016 — a feat that would meet Tesla’s most recent goal to deliver between 80,000 and 90,000 cars this year.

To get the job done, Tesla lately has introduced a two-year leasing option for both the Model S and Model X. It also launched a new, souped-up version of the Model S, the P100D, which in “Ludicrous Mode” can go from zero-to-60 mph in 2.5 seconds, making it the fastest current mass production car in the world.

Still, Tesla remains well short of producing the 500,000 cars it aims to crank out in 2018, after launching its upcoming Model 3, which is targeted for the end of next year.

Tesla’s Sunday announcement made no mention of profitability. In an August memo to employees, Musk wrote that “the third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.”

Once the fourth quarter begins, capital spending to ramp up the Model 3 — a car that’s priced more affordably, at $35,000 — will force Tesla’s cash flow “into a negative position” until the Model 3 reaches full production in late 2017, Musk said.

Tesla shares, down 15 percent this year, rose 1.7 percent, to $204.03, on Friday.

Article Link To The New York Post:

US Accused Of Waging ‘Economic War’ Over Deutsche Bank

By Guy Chazan
Financial Times
October 3, 2016

German politicians have accused the U.S. of waging economic war against Germany as concern continues to rise among the country’s political and corporate elite over the future of Deutsche Bank, its biggest lender.

Some of Germany’s top industrial chiefs have also rallied to the bank’s side following the market storm that last week threatened to engulf Deutsche, stressing its importance to the German economy and expressing confidence in the leadership of John Cryan, the bank’s chief executive.

Deutsche has been under intense pressure since the U.S. Department of Justice requested it pay $14 billion to settle claims of mis-selling mortgage securities last month, sparking fears about the bank’s capital levels. Shares in the bank fell below €10 to their lowest level since 1983 before bouncing back on Friday after some media reports suggested Deutsche was close to a much smaller $5.4 billion deal with the U.S. authorities.

Peter Ramsauer, chairman of the German parliament’s economics committee, told the German newspaper Welt am Sonntag that the DoJ’s move against Deutsche “has the characteristics of an economic war”.

He said the US had a “long tradition” of using every available opportunity to wage what amounted to trade war “if it benefits their own economy”, and the “extortionate damages claims” being made in the case of Deutsche Bank were an example of that.

His remarks were echoed by Markus Ferber, a member of the European Parliament from the CSU, the Bavarian sister party of Angela Merkel’s Christian Democrats. He told Welt that the timing and size of the DoJ’s initial request of Deutsche suggested it was a “tit for tat response” by the US authorities to the EU’s recent move against Apple. Last month, the EU ordered Ireland to claw back €13bn in taxes from the US technology company, saying it gave the company illegal state aid.

Meanwhile, some of the biggest names in German industry have expressed their support for Deutsche. “Strong German banks are important for a strong German economy,” Dieter Zetsche, boss of carmaker Daimler, told the Frankfurter Allgemeine newspaper. “This is a close connection, and it will remain so.”

Johannes Teyssen, head of utility Eon, told the same paper that Germany as a big exporter would suffer “if we can only secure access to international capital markets through banks in other countries”.

Peter Terium, head of the other big German power company, RWE, said it was “important for us to have a global player like Deutsche Bank at our side” in the international marketplace, while Joe Kaeser, boss of Siemens, said Deutsche’s management “has our complete confidence”.

Deutsche was meanwhile dealt a fresh blow at the weekend when a court in Milan ordered Deutsche, as well as two other banks — Banca Monte dei Paschi di Siena and Nomura — to stand trial for a string of alleged financial crimes.

Deutsche has emphasized that its €215 billion of cash and liquid assets are sufficient to cope with any short-term stress. But analysts say the bank is short of capital, lagging its main rivals and its own target.

Hedge funds have bet heavily against Deutsche by short selling its shares. Some have also started withdrawing collateral held by the bank for derivative trades, prompting fears of a rush for the exits by clients.

Pedro Teixeira, an executive at New York-based hedge fund Nakota Management, warned that if the bank did not manage to agree a settlement with the DoJ before its shares resumed trading after the weekend, it would be “a black Monday for Deutsche”.

Article Link To The Financial Times:

Trump’s BFF: Rosy Scenario

By Robert J. Samuelson
The Washington Post
October 3, 2016

Rosy Scenario is alive and well. There is a long and dubious tradition among politicians of projecting high — usually unrealistic — rates of economic growth as a way of avoiding unpopular political choices. We can do everything, because rapid growth and torrents of tax revenue will pay the bills. That’s Rosy’s message, and Donald Trump has eagerly embraced it.

What Trump proposes is a huge vote-buying machine — a massive tax cut, financed mostly with borrowed money — masquerading as an economic policy. Almost everyone would get something, although the rich would get the most (because they pay most of the taxes). This is Trump’s other tax problem, alongside the weekend revelation that he may have paid no federal income taxes for years.

Here are the basics. The standard deduction for married couples would rise from today’s $12,600 to $30,000; any couple with taxable income below that level wouldn’t pay a cent (generally, the amounts for singles are half those for couples). On the first $75,000 of taxable income — again for couples — the rate is 12 percent. The other two rates are 25 percent (on taxable income up to $225,000) and 33 percent (on income above $225,000). The top rate today is 43.4 percent.

Businesses would also get big breaks. The top rate on corporate income would drop to 15 percent from today’s 35 percent.

The price tag for this extravaganza? The nonpartisan Tax Foundation puts it between $4.4 trillion and $5.9 trillion over a decade (2016 to 2025), depending on how the plan is implemented. It’s a lot.

Not to worry, say Trump advisers. Last week, Peter Navarro, an economist at the University of California at Irvine, and Wilbur Ross, a well-known investor, released a 31-page study full of fancy calculations purporting to show how Trump’s plan would ignite rapid growth while barely adding to the $14 trillion federal debt held by the public.

First, they say, you have to adjust for the “dynamic” effects of lower tax rates on both labor income (wages, salaries) and capital income (profits, interest payments). Low tax rates raise economic returns. People work more; companies invest more. This speeds up economic growth, though how much is debated by economists. The Tax Foundation says these adjustments could reduce the 10-year cost of Trump’s tax plan to between $2.6 trillion and $3.9 trillion. Still a lot.

Next, say Navarro and Ross, you have to count the higher taxes from Trump’s trade, regulatory and energy policies. These are huge. Through tougher trade policies, Trump would quickly eliminate the chronic U.S. trade deficit, $500 billion in 2015. American jobs and profits increase. So does tax revenue, to the tune of $1.7 trillion over a decade.

The same logic applies, say Navarro and Ross, to government regulation and energy policy. Overregulation stifles hiring and investment, they say. They figure that Trump cuts regulatory costs by 10 percent, resulting (again) in higher employment and profits. The tax windfall over a decade is nearly $500 billion. Streamlining energy regulations would, by the same logic, increase taxes by almost $150 billion over a decade.

Do the arithmetic. According to Navarro and Ross, the higher tax revenue from Trump’s policies totals about $2.4 trillion — roughly equal to the lower estimate of lost revenue in the “dynamic” simulation.

Convinced? You shouldn’t be. You will notice that all these changes are simply assumed; they’re made-up and self-serving. They assume that Trump’s tough trade tactics immediately scare other countries into submission, rather than (as many trade experts expect) triggering retaliation that would reduce many countries’ income and taxes. Similarly, the regulatory changes are assumed to occur smoothly, dispensing with political and legal challenges or the sheer complexity of many rules.

Even the tax gains from adopting “dynamic” economic assumptions are uncertain, as the Tax Foundation itself acknowledges. “It is very tricky to isolate the effects of tax policy” on the economy, it says. The effects could be swamped by other factors: the state of the business cycle, other government policies, broad social and economic trends.

What’s also forgotten is that both Trump’s and Hillary Clinton’s programs accept the deficits of existing policies.That’s about $8 trillion over a decade. Clinton’s proposals would also add to these, but much less than Trump’s. The nonpartisan Committee for a Responsible Federal Budget estimates that Clinton’s policies would increase the debt by about $200 billion above existing deficits for the decade.

None of this means that U.S. trade, regulatory and energy policies aren’t essential subjects for debate. Constructive changes might improve the budget and economic outlooks. But the notion that Trump can wave a magic wand over these matters and — presto! — produce vast revenue to finance politically popular tax cuts is either wishful thinking or deliberate deception. It’s make-believe: a ploy to procrastinate on hard political choices. Rosy Scenario would be proud.

Article Link To The Washington Post: