Tuesday, November 1, 2016

Free Trade’s Bleak Outlook

By Editorial Board
The Bloomberg View
November 1, 2016

After years of talks and a week or two of comic opera, Canada and the European Union stifled resistance from Wallonia -- the French-speaking part of Belgium -- and signed their Comprehensive Economic and Trade Agreement. It was a good result, though with disturbing implications.

CETA is a new kind of free-trade agreement. Going far beyond the elimination of most tariffs on goods, it also breaks down non-tariff barriers, and aims to foster trade in services and increase flows of foreign investment. Think of it as a scaled-down version of the Transatlantic Trade and Investment Partnership the U.S. hopes to reach with the EU. Even though the Walloons’ objections to CETA were dealt with, after a fashion, the episode inspires little confidence in TTIP’s prospects.

CETA will now go ahead in two stages. Tariff reductions and other conventional trade measures will happen “provisionally” starting next year, but some of the reforms will have to await ratification, which could yet take years. It’s not impossible the deal could still unravel.

A regional parliament in one EU country was able to nearly kill CETA because Europe had deemed the pact to be a so-called mixed agreement, as opposed to an ordinary trade deal. EU trade deals don’t require parliamentary ratification; mixed agreements do. If the EU wants to reach more CETA-like deals, this precedent was an error. Securing agreement in all the EU’s national (and some of its regional) parliaments will never be easy.

That CETA almost failed is especially telling, because Canada’s attitude toward regulating business and investment is not that different from Europe’s. If TTIP is ever put to EU parliaments, opposition will be stronger, fueled by antipathy to American-style capitalism. Enhanced free-trade agreements with other countries -- perhaps including Britain, post-Brexit -- could also be harder to conclude.

Would it be such a bad thing if these deals didn’t go forward? Indeed it would, because promoting international competition in services and investment boosts growth and helps consumers everywhere, lowering costs and raising living standards in the aggregate. Complementary policies (such as income support and assistance with retraining) are also needed, to help workers who may suffer because of stronger competition. But the worst outcome will be if governments fail in that task and then retreat on trade, which is the emerging trend. That would be as dumb as responding to the labor-market downside of technological progress by throttling innovation.

In some areas, admittedly, tactical flexibility might make sense. There’s a case for relenting on nonessential provisions that attract particular opposition. Arrangements for resolving disputes between foreign investors and host-country governments are proving especially contentious. Even though the complaints are mostly misguided, international arbitration measures might be more trouble than they’re worth, especially for agreements between countries that have well-functioning legal systems.

The main challenge for the governments involved, though, is to make the case for trade and competition. They should press forward with CETA, TTIP and the Trans-Pacific Partnership -- but they can’t expect to succeed unless they meet anti-globalist opinion head on. So far, that’s something they’ve conspicuously failed to do.

Article Link To The Bloomberg View:

Dems Should Blame Hillary, Not Comey, For The ‘October Surprise’

By Rich Lowry
The New York Post
November 1, 2016

Before Democrats burn James Comey in effigy, they should think about how the FBI director came to have an outsized influence in the election in the first place.

It’s not something Comey sought or welcomed. A law-enforcement official who prizes his reputation, he didn’t relish becoming a hate figure for half the country or more. No, the only reason that Comey figures in the election at all is that Democrats knowingly nominated someone under FBI investigation.

Once upon a time — namely any presidential election prior to this one — this enormous political and legal vulnerability would have disqualified a candidate. Not this year, and not in the case of Hillary Clinton.

The country has clearly lowered its standards in this election, and Donald Trump’s madcap candidacy provides evidence of that almost every day. But Hillary’s nomination was itself an offense against American political norms and an incredibly reckless act.

And the Democrats were supposed to be the party acting rationally.

Clinton effectively locked up the nomination in June and wasn’t cleared of criminal wrongdoing by the FBI until July. What if she had been indicted? Would Democrats have run her anyway? Would they have substituted in a 74-year old socialist who had lost the nomination battle, or someone else who hadn’t even run? Any of these circumstances would have been unprecedented, but Democrats risked it.

They did it, in part, because they could never bring themselves to fully acknowledge the seriousness of the e-mail scandal and, relatedly, the ethical miasma around the Clinton Foundation. They considered it all another desperate trick of the Vast Right Wing Conspiracy.

Clinton henchman David Brock demanded that The New York Times retract its initial report of Clinton’s exclusive use of a private e-mail account in March 2015. A parade of Democratic operatives pooh-poohed the whole thing, from Clinton spokesman Karen Finney (“a politically motivated series of attacks”), to James Carville (“not going to amount to a hill of beans”), to Howard Dean (“hooey”).

When they first got on a debate stage together last October, Bernie Sanders, the only man who had a chance to stop Clinton, pleased the crowd with a ringing denunciation of interest in her e-mails.

Democrats bought the just-so stories offered up by the Clinton campaign. The FBI investigation was just a “security review.” The FBI wasn’t investigating Hillary, but only her server. Anything to deflect from the seriousness of the matter.

While Democrats willfully looked the other way, they put Comey in an impossible position. An indictment would change the course of American history. That was all on him. He ultimately blinked. But he also put on the record the recklessness of Clinton’s practices as secretary of state in an attempt to create public accountability.

Comey’s conduct is open to criticism, but there’s no way to please everyone when handling a case with such high political stakes.

His notification to Congress last weekend is another case in point. All that can be said is that if Democrats didn’t want the FBI to have any part in the election, they could’ve considered that before nominating Clinton.

Trump may be a deeply flawed candidate, but he caught a wave of popular fervor; Hillary, with her astonishing vulnerabilities, is a production of the Democratic elites who did everything to get her over the finish line.

Just how vulnerable is she? If it weren’t for the new trove of Huma Abedin e-mails, the blockbuster news this week would come via a Wall Street Journal report that the FBI is investigating the Clinton Foundation — although Fox News reported the same thing at the beginning of the year, and Hillary, of course, dismissed it as an “unsourced and irresponsible claim that has no basis.”

The e-mail scandal and Clinton Foundation will dog Hillary until Election Day and, should she win, into her presidency. For this, she has no one to blame but herself — and her irresponsible enablers.

Article Link To The New York Post:

Resign, Mr. Comey

The FBI director lends credence to Trump’s accusation that the system is rigged.

By Bret Stephens
The Wall Street Journal
November 1, 2016

There was once an honorable tradition of resignations from government service. Cy Vance stepped down as Jimmy Carter’s Secretary of State after each man lost confidence in the other’s judgment. George Tenet resigned as George W. Bush’s CIA director in the wake of the Iraq WMD intelligence debacle.

Now it behooves James Comey to do the same. The FBI director lost the confidence of millions of Americans last summer by using semantic sophistry and bureaucratic legerdemain to exonerate Hillary Clinton from charges of mishandling classified information. He lost the confidence of millions more last Friday with his blundering letter to Congress announcing that the Clinton email investigation might not be closed after all—details to come, maybe.

In the most divisive political season in memory, Mr. Comey has become the rare object of political consensus, his motives distrusted by Trump and Clinton voters alike, his judgment doubted by congressional Republicans, Democratic Justice Department officials and probably a great many agents in his own bureau. He needs to go.

This isn’t because Mr. Comey is a secret partisan—an “arm of the [Clinton] campaign,” as journalist Mark Halperin suggested in September. In July Mr. Comey, an Obama appointee who also served as deputy attorney general in the George W. Bush administration, testified that he had been a registered Republican “for most of my adult life,” but that he was “not registered any longer.”

Whatever that means. Mr. Comey’s gnomic, ex cathedra distinction between Mrs. Clinton’s “extremely careless” handling of classified information and the “grossly negligent” standard that would have put her in legal jeopardy probably saved her candidacy. Friday’s letter to Congress, raising “there’s-gotta-be-something-there” suspicions, may yet save Mr. Trump’s.

These aren’t partisan acts. They are self-regarding ones. Mr. Comey is a familiar Washington type—the putative saint—whose career is a study in reputation management. He went after investment banker Frank Quattrone. He threatened to resign from the Bush administration over its warrant-less wiretap program. He vouchsafed the case against Steven J. Hatfill, the virologist accused of the 2001 anthrax mail attacks, in internal White House deliberations. He appointed his close friend Patrick Fitzgerald to investigate the leak of CIA analyst Valerie Plame’s name.

One common thread in these cases is that Mr. Comey was always on the right side of Beltway conventional wisdom. The second is that he was consistently on the wrong side of justice.

Mr. Quattrone was exonerated. Warrant-less wiretaps were ruled constitutional by the FISA court. Mr. Hatfill was an innocent man who eventually won a $5.8 million settlement from the Justice Department. Mr. Fitzgerald oversaw a three-year witch hunt that conveniently overlooked Deputy Secretary of State Richard Armitage’s role in leaking Ms. Plame’s identity. Instead, New York Times reporter Judith Miller went to jail for protecting her sources and Scooter Libby had his career wrecked.

The Journal brought this record to light in a blistering 2013 editorial. “Any potential FBI director deserves scrutiny, since the position has so much power and is susceptible to ruinous misjudgments and abuse,” the editorial warned. “That goes double for Mr. Comey, a nominee who seems to think the job of the federal bureaucracy is to oversee elected officials, not the other way around.”

The Senate ignored our advice. Mr. Comey was confirmed 93-1.

It’s amusing to read liberal pundits suddenly denounce Mr. Comey as a self-serving operator, not the man of honor he was supposed to be when his behavior was more congenial to Democrats.

It’s also amusing to conjecture that Mr. Comey’s hand in sending Friday’s letter to Congress was forced by fear that disgruntled FBI agents would leak the news of the emails. Mr. Comey used just that kind of tactic when he threatened to resign from the Bush administration.

What’s not amusing is that Mr. Comey has lent credence to Donald Trump’s toxic accusation that the system is rigged. In July, the FBI director arrogated to himself the right to decide whether a “reasonable prosecutor” would bring Mrs. Clinton’s case to trial, a decision that belonged to the Justice Department. Now he has flouted Justice Department protocols against using “official authority or influence to interfere with or affect the result of an election.” All to protect his position and reputation.

FBI directors are supposed to be above politics, not in them. President Obama has the authority to fire Mr. Comey but will be hard-pressed to do so politically. That goes double if Mrs. Clinton is elected. Who knows what a President Trump would do.

All the more reason for Mr. Comey to do the right thing. He has lost the trust of his political masters, his congressional overseers and the American people. Wanting to spend more time with family is the usual excuse.

Article Link To The Wall Street Journal:

Lebanon's New Hezbollah-Led Political Order

How to move past Michel Aoun’s deal with the devil.

By Firas Maksad
The National Interest
November 1, 2016

Following two and a half years of political deadlock that left Lebanon with no president, parliamentarians elected a Hezbollah-aligned leader as head of state this Monday. It is a stunning political development, even for a country long infamous for its complex web of sectarian politics, Faustian bargains and foreign meddling in its domestic affairs. More importantly, it allows Iran the opportunity to consolidate its grip on this Mediterranean nation, bolstering its regional influence at the expense of the United States and its allies.

The story of how Michel Aoun became president is emblematic of dynamics throughout the Middle East. Western-leaning politicians in Beirut, led by former prime minister Saad Hariri, enjoyed a parliamentary majority and have long opposed Aoun’s election. They insisted that legislators fulfill their constitutional duties by attending parliament and electing a president. Instead, Hezbollah and its allies boycotted and paralyzed state institutions, until Hariri finally acquiesced.

In this war of political attrition, the Western-leaning majority could have prevailed over the illegal obstructionism of Iran and its allies—but they were abandoned and systematically deprived of meaningful political and financial support. While Hezbollah leader Hassan Nasrallah repeatedly boasted about the bountiful financial and military assistance his party is receiving from Tehran, Hariri was left unable to pay even the salaries of his own staff.

Local factors, including political incompetence and financial mismanagement, surely played a role, but it was the undeniable withdrawal of foreign backing that resulted in such a remarkable reversal of fortunes. With the Obama administration widely perceived as accommodating Iranian encroachment throughout the region, and a Saudi leadership preoccupied with internal reforms and the war in Yemen, Hariri and his allies were practically forced to cut a deal. To survive they had to accept becoming Hezbollah’s junior partners in running the affairs of the Lebanese state.

As part of the deal, Hariri will likely be named prime minister and his coalition will be allotted important ministries, but that will probably not materialize before a protracted process by which Hezbollah and its allies extract further concessions. Their chief objective, through controlling the key levers of power, will be to assure that Lebanon’s state institutions are unable to check Iran’s growing domination.

From here on, the challenge for American and Arab policymakers will be in determining how to deal with a captive state that has come under the control of a group they deem to be a terrorist organization. It is a significant setback, but all is not lost, and they can still help balance the playing field.

Aoun is a pragmatic, if sometime impulsive, figure with a long history of shifting allegiances. As president, his interest will be in governing successfully while demonstrating that he is the uncontested leader of Lebanese Christians. He is undoubtedly aware that Iran and Hezbollah can undercut his presidency, but nonetheless he should be given the opportunity to recalibrate his positions, all while being reminded of the consequences should he decide otherwise.

Aoun commanded the Lebanese Armed Forces before his reincarnation as a politician. He has cultivated an image of being a staunch defender of the military, which the United States supported to the tune of over a billion dollars over the past decade. It would be a significant setback for his presidency should the incoming U.S. administration, presumably under pressure from Congress, decide to scale back or suspend its military assistance.

Similarly, Congress recently passed legislation mandating that the U.S. Treasury Department cut every Lebanese bank found to be servicing Hezbollah or any of its numerous related organizations off from the international financial system. Beirut banks were eager to comply—until a car bomb targeted the headquarters of a major bank in June. Since then, a mechanism has been devised to accommodate some of Hezbollah’s concerns. A more stringent enforcement of the law by the Treasury Department could inflict major damage on a highly dollarized Lebanese economy that is dependent on an outsized financial sector.

Some will argue that threatening the withdrawal of U.S. support runs counter to U.S. strategic interests. They will stress that Lebanon is already under immense pressure due to the rising tide of Sunni extremism and almost two million Syrian refugees on its soil. Instead of withholding support and enforcing sanctions, they will assert, Washington would do well to help prevent Lebanon from collapsing into another failed state in a dangerously turbulent region.

The problem with such argumentation is that, while Washington has no interest in Lebanon’s demise, it ignores that it is up to Lebanon’s leaders to chose the path towards their country’s salvation. Meanwhile, the incoming U.S. administration, coordinating closely with Congress, must present a President Aoun and a Prime Minister Hariri with tough policy choices. The fate of Lebanon will ultimately depend on their decisions, not Washington’s.

Lastly, Lebanon is part of a larger ecosystem in which Iran is gaining ground. Unless politicians in Beirut see a determined American effort to check Iranian power, they are unlikely to change course. This must entail a comprehensive strategy to extract a price from Tehran for its illegitimate use of paramilitary forces throughout the region, whether in Lebanon, Iraq, Syria or Yemen. Failing to do so will further undercut Sunni moderates like Hariri, and it will fuel support for hardened Sunni extremists, the likes of Al Qaeda and the so-called Islamic State, as they take up the fight against Shia Iran. With no credible Sunni partners to speak off, America’s counter-extremism efforts will almost certainly be doomed to failure.

Article Link To The National Interest:

The Insane D.I.Y. Weapons Of The ISIS War

As the battle for the terror group’s Iraqi capital heats up, both sides are assembling exotic, often jury-rigged arsenals to unleash hell on the other.

By David Axe
The Daily Beast
November 1, 2016

The coalition assault on Mosul has steadily chipped away at ISIS’s last and biggest major stronghold in Iraq. A reported 100,000 Iraqi, Kurdish, and coalition troops—including American commandos, air-controllers, and artillerymen—have attacked from south and east, respectively, aiming to dislodge an estimated 10,000 ISIS fighters in the northern city of 1.5 million people.

The stakes couldn’t be higher—and both sides know it. ISIS and the U.S.-led coalition have both deployed their latest, best and—in a few cases—most desperate weaponry. From city-block-smashing rocket-tanks to DIY killer robots, these are the defining weapons of the battle for Mosul.

Soviet-Era Rocket-Tanks

In 1988, the Soviet army introduced a fearsome new weapon—the TOS-1 rocket-tank. Built on the chassis of a T-72 main battle tank, the TOS-1 boasts a 24-pack of roughly 9-inch-diameter rockets in place of the tank’s turret. Each of those rockets lugs 220 pounds of explosives and can hit targets from up to 3 miles away. Ripple-firing all 24 rockets could blanket an area the size of two city blocks in munitions.

And not just any munitions. The TOS-1’s rockets are thermobaric weapons. Where traditional warheads count on instantaneous explosive force for their destructive power, thermobaric weapons are slower and more insidious in nature—and potentially much more destructive, pound for pound. The TOS-1’s rockets spread a cloud of flammable gas then ignite the cloud, burning up all the oxygen for hundreds of feet in all directions and producing a devastating blast effect.

The Soviets developed the TOS-1 as a way of flattening dense urban defenses in order to clear paths for attacking tanks. Needless to say, the TOS-1’s rockets pose at least as much danger to civilians as they do to dug-in combatants.

Moscow provided at least four TOS-1s to Baghdad’s army back in the summer of 2014. This month, The Jerusalem Post’s Seth Frantzman spotted one of the fearsome vehicles in Bartella, a town just 10 miles from Mosul that Iraqi forces had just liberated from ISIS.

The TOS-1’s arrival at the front line is a string indication that Baghdad’s plan for the final assault on Mosul involves a brutal, fiery bombardment.

Mad Max Suicide Trucks

ISIS is outnumbered and outgunned in Mosul but that doesn’t mean the group’s fighters are unprepared. The militants have held the city for two years—long enough to dig in and plan their defense.

That plan clearly leans heavily on counterattacks by suicide-bombers—in particular, suicide-bombers driving tricked-out, armored, explosives-laden trucks that look like something out of Mad Max. The trucks began rolling out to blast Iraqi and Kurdish forces just days after the Mosul offensive began.

The U.S. military calls these bomb-and-truck combos “vehicle-borne improvised explosive devices,” or VBIEDs. They were among the deadliest weapons Iraqi insurgents used against occupying U.S. troops before ISIS’s formation.

Painfully aware of the truck-bombers’ destructive potential, U.S. planners began systematically striking ISIS’s VBIED factories in and around Mosul from the air as early as 2015. And when the first truck-bombs trundled out of Mosul this month, coalition warplanes were waiting for them. One video from Kurdish news outlet Kurdistan24 claims to depict an American plane bombing an ISIS VBIED northeast of Mosul on Oct. 24.

DIY Killer Drones

ISIS might not have access to big, high-tech, missile-armed drones like the United States and its allies routinely deploy (and yes, that includes Iraq). But that doesn’t mean the militant group hasn’t joined in the drone craze in a big, bloody way.

The terrorists have bought inexpensive, quad-copter-style drones and sent them aloft to spy on coalition forces and record video of attacks and other atrocities for propaganda purposes. Perhaps taking their lead from Hezbollah—which in August released a video depicting one of its own copter-drones dropping grenade-size munitions on rebel fighters in Syria—the militants have also begun strapping small explosives to some of their drones and flying them kamikaze-style into coalition positions.

This new tactic became painfully apparent in early October when Kurdish forces in northern Iraq shot down what they believed was an unarmed ISIS spy drone. The Kurds hauled the wreckage back to their base. As they were inspecting the crippled robot, it exploded, killing two people.

Drone Zappers

The Pentagon reacted swiftly to the suicide-drone threat. While the defense industry works on long-term solutions—the Marines, for one, have asked for a truck armed with a drone-zapping laser—this summer military officials desperately sought a quick fix, perhaps mindful of the impending Mosul operation.

The U.S. brass tapped the Joint Improvised Explosive Device Defeat Organization—a controversial agency with its roots in the American occupation of Iraq—to lead the effort. Meanwhile, the Air Force stood up its own counter-drone program. The Defense Department asked Congress for an emergency, $20-million appropriation to help pay for the initiatives.

The crash anti-drone programs scored their first success in early October when, according to Air Force Magazine, two U.S. spy planes deployed unspecified “electronic warfare capabilities” to knock an ISIS drone out of the sky over Mosul. The electronic capabilities in question are almost certainly airborne radio-jammers that can interfere with the signals that ground-based operators use to control their drones.

More than a decade ago, the Joint Improvised Explosive Device Defeat Organization helped to develop truck- and backpack-mounted radio jammers for ground forces. The Air Force, Navy, and Marine Corps have long operated much more powerful jammers aboard aircraft, typically deploying them to prevent insurgents from remotely detonating bombs. It’s a small shift to aim those aerial jammers at drones, instead.

But there’s a catch. Electronic jamming is fairly indiscriminate. So if you’re blocking a drone’s command signal, you’re probably also blocking radio and cellular communications—including those of your own forces—across a wide area. Making calls during the battle of Mosul might not be that easy.

Article Link To The Daily Beast:

Obama’s Israel Surprise?

Fears grow of a final days presidential ambush at the U.N.

By Review & Outlook
The Wall Street Journal
November 1, 2016

The Middle East has few bright spots these days, but one is the budding rapprochement between Israel and its Sunni Arab neighbors, including Saudi Arabia and the United Arab Emirates, thanks to shared threats from Iran and Islamic State. Now the Obama Administration may have plans to wreck even that.

Israeli diplomats gird for the possibility that President Obama may try to force a diplomatic resolution for Israel and the Palestinians at the United Nations. The White House has been unusually tight-lipped about what, if anything, it might have in mind. But our sources say the White House has asked the State Department to develop an options menu for the President’s final weeks.

One possibility would be to sponsor, or at least allow, a U.N. Security Council resolution condemning Israeli settlement construction, perhaps alongside new IRS regulations revoking the tax-exempt status of people or entities involved in settlement building. The Administration vetoed such a resolution in 2011 on grounds that it “risks hardening the position of both sides,” which remains true.

But condemning the settlements has always been a popular way of scoring points against the Jewish state, not least at the State Department, and an anti-settlement resolution might burnish Mr. Obama’s progressive brand for his post-presidency.

Mr. Obama may also seek formal recognition of a Palestinian state at the Security Council. This would run afoul of Congress’s longstanding view that “Palestine” does not have the internationally recognized attributes of statehood, including a defined territory and effective government, though Mr. Obama could overcome the objection through his usual expedient of an executive action, thereby daring the next President to reverse him.

Both actions would be a boon to the bullies in the Boycott, Divestment and Sanctions movement, while also subjecting Israeli citizens and supporters abroad to new and more aggressive forms of legal harassment. It could even criminalize the Israeli army—and every reservist who serves in it—on the theory that it is illegally occupying a foreign state. Does Mr. Obama want to be remembered as the President who criminalized Israeli citizenship?

The worst option would be an effort to introduce a resolution at the U.N. Security Council setting “parameters” for a final settlement between Israel and the Palestinians. The French have been eager to do this for some time, and one option for the Administration would be to let the resolution pass simply by refusing to veto it. Or the U.S. could introduce the resolution itself, all the better to take credit for it.

As the old line has it, this would be worse than a crime—it would be a blunder. U.S. policy has long and wisely been that only Israelis and Palestinians can work out a peace agreement between themselves, and that efforts to impose one would be counterproductive. Whatever parameters the U.N. established would be unacceptable to any Israeli government, left or right, thereby destroying whatever is left of a peace camp in Israel.

The Palestinians would seize on those parameters as their birthright, making it impossible for any future Palestinian leader to bargain part of them away in a serious negotiation. Arab states would find their diplomatic hands tied, making it impossible to serve as useful intermediaries between Jerusalem and Ramallah. It could refreeze relations with Israel even as they finally seem to have thawed.

President Obama may be the last man on earth to get the memo, but after decades of fruitless efforts to end the Israeli-Palestinian conflict it might be wiser for the U.S. to step back until the Palestinians recognize that peace cannot be imposed from the outside. If Mr. Obama is still seeking a Middle East legacy at this late stage in his presidency, his best move is do nothing to make it worse.

Article Link To The Wall Street Journal:

Call Hillary Clinton’s Bluff

The FBI director and the Democratic nominee are getting what they deserve.

By William McGurn
The Wall Street Journal
November 1, 2016

Here are four words this columnist never thought he would type: Hillary Clinton is right.

Mrs. Clinton is right, at least, to this extent: When an FBI director links a presidential candidate to a criminal investigation 11 days out from the election, he owes the American people more than a vague promise to get back to us down the road.

Mrs. Clinton has responded by calling on Mr. Comey to release the emails the bureau has discovered on a home computer used by her aide, Huma Abedin. She demands this only because she is confident it will never happen.

Certainly there exist many practical obstacles to releasing the emails uncovered, including the inadvertent disclosure of classified information. Nevertheless, as unlikely as release may be, the case for more public information has become crucial now that the Justice Department has indicated this Clinton investigation, like the one before it, will go nowhere.

How do we know this? Mr. Comey may speak of going forward. But the objections of Justice suggest that it will again ensure that any investigation will be hindered by a lack of search warrants and subpoenas—and that whatever the FBI may turn up will never be put before a grand jury.

Justice inadvertently gave us a sign of just how important these tools are in a press release earlier this month touting the guilty felony plea by retired Marine Gen. James Cartwright for lying to the FBI in connection with the unauthorized disclosure of classified information. In it, Justice boasts about using all the tools at its disposal to get the general, including “subpoenas, search warrants and document requests”—tools the FBI mostly lacked while investigating Mrs. Clinton.

A truly independent press corps might help here if it were not bent on validating Donald Trump’s complaints about a rigged system. In the dominant media narrative, not only is Mr. Comey now derided as “political,” his decision to investigate this newly discovered batch of emails is said to have been forced by “conservative” FBI agents.

Mr. Comey may indeed be in the thick of a huge battle within the bureau. But the main objections from FBI agents and former FBI agents have little to do with electoral politics and everything to do with investigative procedure.

FBI agents are professional investigators. In a case involving a former secretary of state who is now a candidate for president, they would expect their director to be telling his agents to make sure every “i” was dotted and every “t” crossed. And doing the same himself.

Instead, it’s all been irregular. Start with the zoo-like atmosphere of Mrs. Clinton’s July 2 FBI interview. Instead of the typical two FBI agents, the interviewee and an attorney or two, this one saw five of Mrs. Clinton’s lawyers and four more from the Justice Department in the room with them.

Three days later, this was followed by what Mr. Comey himself admitted was an “unusual” press conference, in which the FBI director played attorney general by pronouncing that “no reasonable prosecutor” would bring criminal charges. Not to mention the more recent Wall Street Journal scoop that Andrew McCabe, one of Mr. Comey’s deputies, was permitted to help oversee the Clinton email investigation even after his own wife had taken nearly $700,000 in political donations from organizations under the control of a longtime Clinton intimate, Virginia Gov. Terry McAuliffe.

Ironically, one consequence of Mr. Comey’s earlier showboating is that the American public does not appreciate that most of the handcuffs put on FBI investigators—the lack of a grand jury, the crazy immunity deals, the appearance of material witnesses (e.g.,Heather Samuelson and Cheryl Mills) as counsel for Mrs. Clinton, the agreements to destroy laptops belonging to two Clinton aides—are areas where Justice, not the FBI, has authority.

Which today leaves both Mr. Comey and Mrs. Clinton with legitimate beefs. Mr. Comey must rightfully resent a Justice Department he bailed out with his July press conference now painting him as a Republican hack. For her part, Mrs. Clinton must be miffed by an FBI director who comes in at the last minute—at a moment when she is leading in a presidential election—to imply she may be guilty of something very bad while providing almost no detail.

Then again, both are in this fix entirely because of themselves. Mrs. Clinton was the one who decided she would take her entire communications as secretary of state off-grid—and she’s also the one who has been lying and doing everything to keep them from becoming public ever since she was caught. As for Mr. Comey, if his reputation as a square shooter is now in tatters, he did it by going where he had no business going and agreeing to Justice constraints he never should have agreed to.

It’s called rough justice. Which in any case involving Mrs. Clinton and Mr. Comey is probably the closest to real justice we will ever get.

Article Link To The Wall Street Journal:

The Universal Right To Capital Income

By Yanis Varoufakis
Project Syndicate
November 1, 2016

The right to laziness has traditionally been only for the propertied rich, whereas the poor have had to struggle for decent wages and working conditions, unemployment and disability insurance, universal health care, and other accouterments of a dignified life. The idea that the poor should be granted an unconditional income sufficient to live on has been anathema not only to the high and mighty, but also to the labor movement, which embraced an ethic revolving around reciprocity, solidarity, and contributing to society.

When unconditional basic-income schemes were proposed decades ago, they inevitably met outraged reactions from employers’ associations, trade unions, economists, and politicians. Recently, however, the idea has resurfaced, gathering impressive support from the radical left, the Green movement, and even from the libertarian right. The cause is the rise of machines that, for the first time since the start of industrialization, threaten to destroy more jobs than technological innovation creates – and to pull the rug out from under the feet of white-collar professionals.

But as the idea of a universal basic income has returned, so has resistance from both the right and the left. Rightists point to the impossibility of raising enough revenue to fund such schemes without crushing the private sector, and to a drop in labor supply and productivity, owing to the loss of work incentives. Leftists worry that a universal income would weaken the struggle to improve people’s working lives, legitimize the idle rich, erode hard-won collective-bargaining rights (by empowering companies like Uber and Deliveroo), undermine the foundation of the welfare state, encourage passive citizenship, and promote consumerism.

Cheerleaders for such schemes – on both the left and the right – argue that universal basic income would support those who already contribute priceless value to society, mainly women in the caring sector – or, indeed, artists producing great public works for next to no money. The poor would be liberated from vicious welfare-state means testing, and a safety net that can entangle people in permanent poverty would be replaced by a platform on which they could stand before reaching out for something better. Young people would gain the freedom to experiment with different careers and to study topics that are not considered lucrative. Moreover, in today’s increasingly pervasive gig economy, with unions shrinking along with their capacity to protect workers, the economic stability that most people are losing would be restored.

The key to moving forward is a fresh perspective on the connection between the source of a universal basic income’s funding, the impact of robots, and our understanding of what it means to be free. That implies combining three propositions: taxes cannot be a legitimate source of financing for such schemes; the rise of machines must be embraced; and a universal basic income is liberty’s main prerequisite.

The idea that you work hard and pay your income taxes, while I live off your enforced kindness, doing nothing by choice, is untenable. If a universal basic income is to be legitimate, it cannot be financed by taxing Jill to pay Jack. That is why it should be funded not from taxation, but from returns on capital.

A common myth, promoted by the rich, is that wealth is produced individually before it is collectivized by the state, through taxation. In fact, wealth was always produced collectively and privatized by those with the power to do it: the propertied class. Farmland and seeds, pre-modern forms of capital, were collectively developed through generations of peasant endeavor that landlords appropriated by stealth. Today, every smartphone comprises components developed by some government grant, or through the commons of pooled ideas, for which no dividends have ever been paid to society.

So how should society be compensated? Taxation is the wrong answer. Corporations pay taxes in exchange for services the state provides them, not for capital injections that must yield dividends. There is thus a strong case that the commons have a right to a share of the capital stock, and associated dividends, reflecting society’s investment in corporations’ capital. And, because it is impossible to calculate the size of state and social capital crystalized in any firm, we can decide how much of its capital stock the public should own only by means of a political mechanism.

A simple policy would be to enact legislation requiring that a percentage of capital stock (shares) from every initial public offering (IPO) be channeled into a Commons Capital Depository, with the associated dividends funding a universal basic dividend (UBD). This UBD should, and can be, entirely independent of welfare payments, unemployment insurance, and so forth, thus ameliorating the concern that it would replace the welfare state, which embodies the concept of reciprocity between waged workers and the unemployed.

Fear of machines that can liberate us from drudgery is a symptom of a timid and divided society. The Luddites are among the most misunderstood historical actors. Their vandalism of machinery was a protest not against automation, but against social arrangements that deprived them of life prospects in the face of technological innovation. Our societies must embrace the rise of the machines, but ensure that they contribute to shared prosperity by granting every citizen property rights over them, yielding a UBD.

A universal basic income allows for new understandings of liberty and equality that bridge hitherto irreconcilable political blocs, while stabilizing society and reinvigorating the notion of shared prosperity in the face of otherwise destabilizing technological innovation. Disagreements of course will continue; but they will be about issues such as the proportion of company shares that should go to the Depository, how much welfare support and unemployment insurance should be layered on top of the UBD, and the content of labor contracts.

Anyone still not reconciled to the idea of “something for nothing” should ask a few simple questions: Would I not want my children to have a small trust fund that shields them from the fear of destitution and allows them to invest fearlessly in their real talents? Would their peace of mind render them lazy layabouts? If not, what is the moral basis for denying all children the same advantage?

Article Link To Project Syndicate:

U.S. Stocks Not Moved By October's Marquee Deals

By Lauren Hirsch and Noel Randewich
November 1, 2016

The record dealmaking volume for October did not create a ripple effect lifting U.S. stocks as it has in the past – partly because the mergers, albeit large, were few and far between, bankers and analysts said.

Though acquisitive corporate bosses generated $329 billion worth of takeovers in October, the biggest month for U.S. M&A on record, according to Thomson Reuters data, the 615 deals that were announced marked the lowest number of monthly deals since March, 2013. The top four deals alone represented over one half the month's total.

The sparsity of deals indicates that while confidence may be running high in board rooms at a handful of large companies, it is not necessarily widespread across corporate America. As such, the stock market's 1.9 percent drop in October, as measured by the S&P 500 index, was more of a thud than a rallying roar.

"It should be bullish, because it's a sign that companies see value in other companies, but it hasn't helped," said Donald Selkin, chief market strategist at National Securities in New York. "People feel that there's not as much value in these stocks as there might have been."

The deals also lack a common or new motivation that would inspire investors to gobble up stocks in anticipation of more mergers, bankers said.

While there is some ambition to get transactions done before the U.S. Federal Reserve makes financing more expensive by raising interest rates, people involved with M&A say that was not a primary factor in October. The presidential election, just over a week away, also did not appear to be a driver.

But the autumn merger boom does reflect a less alluring reality: the summer was uncertain as CEOs put off deals they might have done sooner.

Third-quarter M&A in the U.S. accounted for just 24 percent of total year-to-date M&A, the lowest percentage since 2007.

Britain's Brexit vote in June to leave the European Union kicked off a spate of market volatility. Although Brexit fueled some deals in October because the British pound had lost so much value, it stymied activity until recently.

"In the summer, the dealmakers in the U.S. took a collective breather," said John Reiss, global head of M&A at law firm White & Case.

Deals Across The Board

October's megadeals were spread out among many sectors.

The biggest for the month, as well as 2016 to date, was telecom giant AT&T Inc's (T.N) proposed $85.4 billion acquisition of content creator Time Warner Inc (TWX.N). Qualcomm's (QCOM.O) $38 billion purchase of NXP Semiconductors NV (NXPI.O) also set a record for the semiconductor sector.

There were also large deals announced between cigarette makers, asset managers, and oil-and-gas producers. Healthcare stood out as a sector without big deals.

All told, there were 10 deals larger than $5 billion in October, and the average deal size was $535 million – the highest since July 2015, when it was $329 million.

Bankers, lawyers and executives involved with the October flurry described a range of rationales.

For instance, British American Tobacco's (BATS.L) $47 billion offer to buy U.S. tobacco firm Reynolds American Inc (RAI.N) was driven by the drop in sterling. General Electric Co's (GE.N) decision to merge its oil and gas business with Baker Hughes Inc (BHI.N) reflects its ongoing divestiture of peripheral businesses.

And while the AT&T-Time Warner tie-up happened in October, it was driven by a years-long disruption in technology, media and telecom businesses that has led those types of companies to combine.

"At the end of the summer, there were a lot of things going on in the world: there was discussion around interest rates, concern over Brexit, uncertainty over where the economy was headed," said Steve Arcano, who concentrates on M&A as a partner at law firm Skadden, Arps, Slate, Meagher & Flom.

"My sense is that over the course of September people felt they had a better read on all of that, reengaged and started pushing forward again."

Article Link To Reuters:

China Debuts J-20 Stealth Jet In Show Of Strength At Country's Biggest Air Expo

By Tim Hepher and Brenda Goh 
November 1, 2016

China showed its Chengdu J-20 stealth fighter in public for the first time on Tuesday, opening the country's biggest meeting of aircraft makers and buyers with a show of its military clout.

Airshow China, in the southern city of Zhuhai, offers Beijing an opportunity to demonstrate its ambitions in civil aerospace and to underline its defense ambitions. China is set to overtake the U.S. as the world's top aviation market in the next decade.

Two J-20 jets, Zhuhai's headline act, swept over dignitaries and hundreds of spectators and industry executives gathered at the show's opening ceremony in a 60-second flypast, generating a deafening roar that was met with gasps and applause and set off car alarms in a parking lot at the site.

"It is clearly a big step forward in Chinese combat capability," said Bradley Perrett of Aviation Week, a veteran China watcher.

Analysts say it is too early to say to what extent the new Chinese fighter can match the radar-evading properties of the Lockheed Martin F-22 Raptor air-to-air combat jet, developed for the U.S. Air Force and the J-20's closest lookalike, or the latest strike jet in the U.S. arsenal, Lockheed's F-35.

Unofficial shots of a J-20 prototype fueled discussion over the region's power balance when first glimpsed by planespotters in 2010. Experts say China has been refining designs in hopes of narrowing a military gap with Washington.

Cao Qingfeng, an aircraft engineer watching the flypast, said the "stunning" display was a show of China's strengthening aircraft industry and manufacturing - and Western officials agreed.

"This shows they now have confidence to put it out in public," said a Western industry official who has monitored the biennial show from its inception 20 years ago.

"This is the airplane for China in the way that the J-31 is not; this is the one they develop for themselves," he added.

The export-oriented J-31, was unveiled at Zhuhai in 2014.

Airbus, Boeing Rival

President Xi Jinping has pushed to toughen the armed forces as China takes a more assertive stance in the region, particularly in the South China and East China seas.

It remained unclear whether or how the J-20 would be displayed after the flypast, or to what extent foreign executives and media would be allowed a close look as they try to figure out its role and effectiveness. Some foreign observers have questioned its stealth capabilities.

Aircraft that are already scheduled to be on display alongside the latest Chinese weapon systems, radar and drones include the Xian Y-20 strategic airlifter, and what organizers say is the largest amphibious plane now in production, the AG600.

The flying boat is officially promoted as a fire-fighting or search and rescue plane. But analysts note the AG600 - first unveiled 10 days after a Hague tribunal ruled against China's claim to parts of the South China Sea in July - is well suited to resupplying military outposts in the disputed area.

Notably absent from the airshow schedule is the Comac C919 passenger jet, designed to compete with Europe's Airbus Group and Boeing Co of the United States, the rivals who dominate the global supply of airliners.

The 150-seater C919 is scheduled to stage an often-delayed maiden flight this year, but industry sources say this will now slip to 2017 - three years behind original plans.

Airbus and Boeing continue to expand in China with recent plant announcements. Boeing is expected to announce a new supplier partnership at the show, which runs until Nov 6.

Article Link To Reuters:

Tuesday, November 1, Morning Global Market Roundup: Upbeat China Factory Surveys Buoy Asia Stocks, But Can't Trump U.S. Election Jitters

By Saikat Chatterjee
November 1, 2016

Stronger-than-expected factory growth in China helped Asian stocks erase early losses on Tuesday, but investors remained cautious as the acrimonious U.S. presidential election campaign entered its final week.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent, after earlier hitting its lowest level since Sept. 19. October marked the first monthly loss for the index since May.

Activity in China's manufacturing sector expanded at a faster pace than expected in October, an official survey showed on Tuesday, adding to views the world's second-largest economy is stabilizing thanks to a construction boom.

"While the headline numbers were eye catching, especially the rebound in the small and medium enterprises, markets remain unconvinced about the sustainability of the rebound especially given the credit system fueling this growth looks worrisome," said Cliff Tan, East Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ.

Hong Kong stocks .HSI rose 0.7 percent while Shanghai stocks .SSEC also crept in the black. Property names led the charge though further gains may be checked by concerns of more curbs on home purchases to cool soaring prices.

But worries over the U.S. election largely overshadowed the upbeat China data and other events this week.

Later in the day, the Bank of Japan and Reserve Bank of Australia will issue policy decisions, followed by the U.S. Federal Reserve on Wednesday. All three are expected to keep policy steady.

Investor trepidation ahead of the Nov. 8 election was captured in the so-called "fear index", a broad gauge measuring volatility .VIX, which was at its highest levels in a month.

Opinion polls now show Democrat Hillary Clinton's lead over Republican Donald Trump has narrowed slightly since early last week, though it is not yet known if a fresh email controversy will hurt her support.

Clinton continues to hold a large advantage in the Electoral College, the process that selects a president by awarding votes through individual state elections.

Markets view Clinton as a candidate who will largely maintain the status quo, while there is greater uncertainty over what a Trump victory might mean for U.S. foreign policy, international trade deals and the domestic economy.

Shane Oliver, head of investment strategy at AMP Capital, reckons a Trump victory would be negative for Australian and Asian shares due to concerns over his policies on trade, while safe-haven assets like bonds and the dollar may benefit.

In the very short term, stocks in Asia were broadly trading water ahead of two major central bank meetings later in the day.

Australian shares fell 0.6 percent ahead of a central bank decision due at 0330 GMT where analysts widely expect rates to stay at a record low of 1.5 percent.

The Bank of Japan is also expected to maintain monetary settings and its projection of a moderate economic recovery on Tuesday, even as weak consumption and exports force it to concede that inflation will remain far from its target for years to come.

Broad-based weakness in equities bolstered bond prices with U.S. Treasury bond yields <0> falling across the board with two to 30-year yields slipping between two to four basis points. In early Asian trade, Japanese <0> and Australian bond yields also pushed lower.

Foreign exchange markets were a more quieter place with major currencies hemmed in narrow trading ranges.

The dollar index .DXY, which tracks the greenback against a basket of six global peers, was flat at around 98.41 after a solid run since September.

U.S. crude CLc1 stabilized around $46.9 per barrel after falling nearly 4 percent while global benchmark Brent LCOc1 was flat around $48.85 a barrel after falling nearly 1.5 percent in overnight trades.

The Organization of the Petroleum Exporting Countries (OPEC) approved a document on Monday outlining its long-term strategy, a sign its members are achieving consensus on managing production.

But OPEC representatives have achieved little otherwise, failing to reach any specific terms, and sources said Iran has been reluctant to even freeze output.

Article Link To Reuters:

TPP Is Exciting. Let's Make the Case for It.

By Tyler Cowen
The Bloomberg View
November 1, 2016

Although the Trans-Pacific Partnership has been widely given up for dead, the agreement has a chance to be approved in the lame-duck Congressional session following the presidential election. But the trade deal’s many opponents are not the only obstacle; proponents have not articulated an exciting vision of what the agreement could mean.

Some of the best arguments for the TPP are underwhelming as public rhetoric. “If we don’t pass this trade agreement, China will write the rules for the region,” is perhaps the most significant point. Yet it is framed as a negative, namely that something worse than TPP may happen. This focuses the public on the defects and weakness of American leadership, making the positive options on the table seem less than transformational.

It’s as if U.S. elites are saying: “We screwed this one up by letting Chinese influence get so far in the first place. Trust us now to set it straight.” However true that may be, few private companies would succeed with that kind of motivation in their advertising.

Without TPP, Asian friends of the U.S. would feel let down, but a lot of American voters don’t trust their politicians to manage geopolitical influence anymore and would just as soon walk away from the attempt. Similarly, the fact that the TPP has important features that were not in the 1994 North American Free Trade Agreement with Canada and Mexico also is not a political winner.

Another good argument for TPP is that it will bring 18,000 tax cuts to job-creating exporters. But that’s not how Ronald Reagan would have sold a tax cut. It’s easier to talk about one big tax cut – especially if everyone has a chance of seeing it appear on their tax form -- than about removing 18,000 obstacles to business.

A Peterson Institute estimate suggests global yearly gains from TPP of $295 billion, with $78 billion of that going to the U.S. That is an abstract number to most voters; it doesn’t feel like money in their pockets and it’s hard to be sure it’s accurate anyway.

Alternatively, TPP could be viewed at the margin. The U.S. already has trade agreements with many of the 12 Pacific Rim nations in the proposed pact, so the major additional impact for the U.S. is a new free trade agreement with Japan, the world’s third-largest economy and a significant ally. That seems constructive, but it won’t get people excited about the larger vision.

Other parts of TPP are simply hard to understand. There’s a mechanism to resolve disputes that has been criticized for giving companies the upper hand in conflicts with governments; it’s a common part of trade deals that shouldn’t be a major problem, but has become one. Hardly anyone even mentions that TPP will make it harder for Asian economies to compete unfairly against U.S. companies through state-owned enterprises. The Obama administration touts the labor and environmental standards in the deal to progressives, but those provisions, appropriately or not, leave many of the traditional supporters of free trade under-enthused.

So what then is the exciting, big-picture case for TPP? I say it’s to keep North America, and especially the U.S., the world's leading economic cluster for the foreseeable future.

Think of the global economy as one where some regions do very well -- for example, Silicon Valley or Shanghai -- and other regions languish. The talent, the capital and the most ambitious immigrants want to go to the flourishing places to do business, innovate and create jobs. Overall, the U.S. is the largest and most successful agglomeration of commerce.

If the United States is to extend its economic influence, it must draw upon Asian connections, talent and markets as much as possible. After all, the Asian economies in TPP -- Japan, Malaysia, Vietnam, Singapore and Brunei, along with Australia and New Zealand -- are significant in both population and gross domestic product. South Korea, Indonesia, Thailand and the Philippines have signaled a possible intent to join, and perhaps eventually India and Bangladesh as well.

There are thus two visions of America’s economic future. In one, the U.S. is able to mobilize Asian resources to help maintain its role as world economic leader, to the mutual benefit of most other Pacific nations. In the other, the talents and resources of the TPP nations get pulled in other directions, including toward China, and U.S. economic and geopolitical leadership declines.

Passing TPP is by no means the only factor pushing the U.S. along the better path, but it is probably the most important discrete yes-or-no decision in this regard. In other words, TPP advocates need to articulate more clearly why they stand for building a better American dream.

Catchy cable news soundbites are not going to come easily. But benefits that are difficult to articulate are no less important, and in fact the countries that can implement the hard-to-sell decisions are the ones that will make the biggest strides forward.

Article Link To The Bloomberg View:

Investment For Sustainable Growth

By Jeffrey Sachs
Project Syndicate
November 1, 2016

The big disappointment in the world economy today is the low rate of investment. In the years leading up to the 2008 financial crisis, growth in high-income countries was propelled by spending on housing and private consumption. When the crisis hit, both kinds of spending plummeted, and the investments that should have picked up the slack never materialized. This must change.

After the crisis, the world’s major central banks attempted to revive spending and employment by slashing interest rates. The strategy worked, to some extent. By flooding capital markets with liquidity and holding down market interest rates, policymakers encouraged investors to bid up stock and bond prices. This created financial wealth through capital gains, while spurring consumption and – through initial public offerings – some investment.

Yet this policy has reached its limits – and imposed undeniable costs. With interest rates at or even below zero, investors borrow for highly speculative purposes. As a result, the overall quality of investments has dropped, while leverage has risen. When central banks finally tighten credit, there is a real risk of significant asset-price declines.

As monetary policy was being pushed to its limits, what went missing was an increase in long-term investments in high-speed rail, roads, ports, low-carbon energy, safe water and sanitation, and health and education. With budget austerity restraining public investment, and major uncertainties concerning public policy and international taxation hampering private investment, such spending has generally declined in the high-income countries.

Despite US President Barack Obama’s promises of investment in high-speed rail and other modern infrastructure, not one mile of fast rail was built during his eight years in office. It is time to translate words into action, in the United States and elsewhere, and usher in a new era of high investment in sustainable development.

There are three challenges facing such a strategy: identifying the right projects; developing complex plans that involve both the public and private sectors (and often more than one country); and structuring the financing. To succeed, governments must be capable of effective long-term planning, budgeting, and project implementation. China has demonstrated these capabilities in the last 20 years (though with major environmental failures), whereas the US and Europe have been stymied. The poorest countries, meanwhile, have often been told by the International Monetary Fund and others not even to try.

Today, governments will have some help in overcoming at least one of the key challenges. The Sustainable Development Goals (SDGs) and the Paris Climate Agreement will help to guide them toward the right projects.

The world needs massive investments in low-carbon energy systems, and an end to the construction of new coal-fired power plants. And it needs massive investments in electric vehicles (and advanced batteries), together with a sharp reduction in internal combustion engine vehicles. The developing world, in particular, also needs major investments in water and sanitation projects in fast-growing urban areas. And low-income countries, in particular, need to scale up health and education systems.

China’s “one belt, one road” initiative – which aims to link Asia to Europe with modern infrastructure networks – will help to advance some of these goals, assuming the projects are designed with a low-carbon-energy future in mind. That initiative will boost employment, spending, and growth, especially in the landlocked economies across Eurasia. It should even deliver new dynamism to economic and diplomatic relations among the European Union, Russia, and China.

A similar program is needed urgently in Africa. Although African countries have already identified priority investments for electrification and transport, progress will remain slow without a new wave of investment spending.

African countries’ combined spending on education alone should increase by tens of billions of dollars per year; combined infrastructure spending should surge by at least $100 billion per year. These needs should be covered mostly by long-term, low-interest-rate loans from China, Europe, and the US, as well as by mobilizing African countries’ long-term savings (through, for example, the introduction of new pension systems).

The US and Europe also need major new infrastructure programs. The US – where the last big infrastructure project, the national highway system, was concluded in the 1970s – should emphasize investment in low-carbon energy, high-speed rail, and the mass uptake of electric vehicles.

As for Europe, the European Commission’s Investment Plan for Europe – dubbed the “Juncker Plan,” for Commission President Jean-Claude Juncker – should become the EU’s SDG program. It should focus, for example, on creating a Europe-wide transmission grid for low-carbon energy, and on a massive increase in renewable-power generation.

To help finance such programs, the multilateral development banks – such as the World Bank, the Asian Development Bank, and the African Development Bank – should raise vastly more long-term debt from the capital markets at the prevailing low interest rates. They should then lend those funds to governments and public-private investment entities.

Governments should levy gradually rising carbon taxes, using the revenues to finance low-carbon energy systems. And the egregious loopholes in the global corporate-tax system should be closed, thereby boosting global corporate taxation by some $200 billion annually, if not more. (American companies are currently sitting on nearly $2 trillion in offshore funds that should finally be taxed.) The added revenues should be allocated to new public investment spending.

For the poorest countries, much of the needed investment should come through increased official development assistance. There are several ways to generate that extra aid money via a reduction of military spending, including by ending the wars in the Middle East; deciding firmly against a next generation of nuclear weapons; cutting back on US military bases overseas; and avoiding a US-China arms race through enhanced diplomacy and cooperation. The resulting peace dividend should be channeled toward health care, education, and infrastructure in today’s impoverished and war-torn regions.

Sustainable development is not just a wish and a slogan; it offers the only realistic path to global growth and high employment. It is time to give it the attention – and investment – it deserves.

Article Link To Project Syndicate:

Women Executives Left Yahoo Amid Layoffs, Deal Talk

By Deborah M. Todd
November 1, 2016

Women executives left Yahoo Inc at an unusually high rate after the U.S. technology company announced plans to sell itself earlier this year, but it was not immediately clear why, according to the company's 2016 diversity report, released on Monday.

The sharp drop comes as Silicon Valley faces pressure to diversify a workforce heavily dominated by white and Asian men.

The last year has been turbulent for the web pioneer, which in February announced it would explore alternatives and put in motion a plan to cut about 15 percent of its workforce. In July, it struck a $4.8 billion deal to sell its core internet businesses to Verizon Communications Inc.

The number of women in Yahoo leadership roles slipped to 21 percent as at June 30, down from 24 percent the year before, the report showed. Women in non-technical jobs dropped to 52 percent from 54 percent. The total number of women at Yahoo remained steady at 31 percent.

Yahoo had 8,800 employees at the end of the second quarter, down from 9,400 as at March 31.

It was not clear why there was such a marked decline in the proportion of women leaders at Yahoo, which is led by Silicon Valley's most powerful female CEO, Marissa Mayer.

"Women leaders organically left because other opportunities were more appropriate for them," said Margenett Moore-Roberts, Yahoo's global head of diversity and inclusion. She said most of the women executives who left did so voluntarily after the plan to sell the core company was announced.

She said Yahoo will use a combination of internal searches and promotions, outside recruitment and partnerships with women-focused tech organizations to balance the losses.

The dip in women executives does not seem to be mirrored at other major tech companies. Women held 28 percent of leadership positions at Apple Inc, according to its latest figures, unchanged from the year before.

Article Link To Reuters:

Oil Prices Rise From One-Month Lows After OPEC Approves Strategy

By Aaron Sheldrick
November 1, 2016

Oil prices edged higher from one-month lows in early trading in Asia on Tuesday after OPEC agreed on a long-term strategy that was seen as an indication the cartel was reaching a consensus on managing production.

But the gains were limited as the market was weighed down by further indications of record output from the group, a sign the glut that has kept a lid on prices is not draining away as fast as the oil bulls would like.

U.S. West Texas Intermediate (WTI) futures CLc1 were up 9 cents at $46.95 a barrel. They plunged nearly 4 percent to $46.86 a barrel in the previous session.

Brent LCOc1 for January delivery, the new front-month contract, was up 31 cents at $48.92. The previous front-month contract fell nearly 3 percent before expiry on Monday.

The Organization of the Petroleum Exporting Countries (OPEC) approved a document on Monday outlining its long-term strategy, a sign its members are achieving consensus on managing production.

But the oil grouping had setbacks earlier, raising questions over their ability to control prices that have knocked their economies hard.

Representatives met on Friday in Vienna, and then again on Saturday with their counterparts from non-member producers. They did not reach any specific terms, and sources said Iran has been reluctant to even freeze output.

Oil prices had risen as much as 13 percent since OPEC announced on Sept. 27 a production cut to support prices after the slump that began in mid-2014. The cartel said members' cuts will be finalized at a meeting later this month.

"The lack of progress on implementing production quotas and the growing discord between OPEC producers suggests a declining probability of reaching a deal on November 30," Goldman Sachs said in a research note.

OPEC's oil output likely hit a record high in October, rising to 33.82 million barrels per day as Nigeria and Libya partially resumed output after disruptions and Iraq raised overseas sales, according to a Reuters survey.

Article Link To Reuters:

Dollar Edges Up As Fed, U.S. Jobs Data Awaited

November 1, 2016

The dollar edged higher on Tuesday as the final days of the contentious U.S. presidential campaign overshadowed other major market events, as investors weighed the latest concerns about an FBI investigation into Hillary Clinton's use of a private email server.

Both the Bank of Japan and the Reserve Bank of Australia held policy steady as expected. While the former had little impact on the yen, the later sent the Australian dollar to its highest since last Thursday.

The Aussie was buying $0.7647 AUD=D4, up 0.5 percent, after rising as high as $0.7652 after the central bank kept its cash rate steady at 1.5 percent as the money market priced in only a minor possibility of a move at the next meeting in December.

The RBA said the economy was expected to grow near potential over the next year as it assesses the impact of past cuts in August and May.

The yen's moves after the BOJ were subdued by comparison, with the dollar erasing its tiny losses and edging higher.

The Bank of Japan held off on expanding stimulus despite cutting its inflation forecasts and warning of risks to its price outlook. Investors awaited BOJ Governor Haruhiko Kuroda's post-meeting news conference later this afternoon.

"We're in limbo, unfortunately, ahead of the U.S. election," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets. "There's a realization that the BOJ has done its job, and has been creative, and we're still where we are, in terms of low inflation."

The dollar bought 104.85 yen JPY=, up slightly on the day but still shy of Friday's three-month high of 105.54. It managed to gain more than 3 percent for the month of October, even after dropping on the news of the Clinton email developments.

Next week's U.S. presidential election remained the biggest event hurdle investors faced, as some fear an unexpected outcome could prompt the U.S. Federal Reserve to delay a rate hike beyond the expected year-end date.

Clinton held a five percentage point lead over Republican rival Donald Trump, according to a Reuters/Ipsos opinion poll released on Monday, down only slightly since the FBI said last week it was reviewing new emails in its investigation of the former secretary of state ahead of the Nov. 8 election.

As Clinton is viewed as the status quo candidate for markets, the news weighed on the dollar and nudged it away from highs hit on growing expectations the Fed will raise interest rates in December. However, major currency pairs have largely stuck to their ranges since news of the email probe broke last week.

"The market is not really responding sensitively to U.S. political events since Friday," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

"We have to keep an eye on political and economic events in the U.S.," he said. "People are still pricing in the victory of Secretary Clinton, and a U.S. rate hike in December."

Markets see only a small chance that the Fed will raise rates before the election at the conclusion of its two-day meeting on Wednesday, but traders will be scouring its statement for clues as to the timing of its next interest rate increase.

Markets were pricing in around a 78 percent chance the Fed will raise rates in December, but just a 6 percent chance of a hike this week, according to the CME Group's FedWatch Tool.

On Friday, the October U.S. employment report will also be scanned for the latest reading on whether labor conditions are improving enough for the Fed to act. Employers are expected to have added 175,000 jobs in the month according to the median estimate of 100 economists polled by Reuters. [ECONUS]

The euro was down 0.2 percent at 1.0960 EUR=, while the dollar index was slightly higher at 98.467 .DXY.

Sterling slipped 0.1 percent to $1.2230 GBP=D4 but was underpinned by news that Bank of England Governor Mark Carney said he would stay in his job for an extra year, until the end of June 2019.

The Bank of England will meet on Thursday.

Article Link To Reuters:

Panasonic Shares Plunge After Heavy Spending Causes Weaker Outlook

By Junko Fujita and Makiko Yamazaki
November 1, 2016

Panasonic Corp shares plunged on Tuesday as investors reacted to a sharp downward revision of the electronics maker's profit forecast, brought about by heavy spending to build its automotive battery business.

Panasonic is reinventing itself as a provider of auto parts, batteries and energy-saving home systems to escape the price competition of smartphones and lower-margin consumer products.

But its profit revision shows the company is far from harvesting from what it considers its next profit drivers, analysts said. Upfront investment in a battery plant is likely to cause Panasonic's battery division to log an operating loss in the current business year, the company said on Monday.

"Disappointment for Panasonic specifically is that their growth rate is not strong enough to offset headwinds from the strong yen," said Macquarie analyst Damian Thong.

"Panasonic needs to show that it can secure growth outside Japan across a wider range of its products, including offerings like solar panels, housing systems and high-end appliances."

Panasonic shares were untraded briefly during the trading session due to a glut of sell orders before slumping as much as 8 percent. In contrast, the broader TOPIX stock price index was almost flat.

The Japanese firm on Monday lowered its operating profit forecast for the full year ending March 31 to 245 billion yen ($2.34 billion). That compared with its previous projection of 310 billion yen and an average estimate of 297.30 billion yen drawn from 16 analysts.

The company cited a strengthening yen as well as upfront investment in a battery factory for U.S. electric vehicle maker Tesla Motors Inc.

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Gauging The Risks Of A China Crisis

By Rachel Morarjee
November 1, 2016

Can China avoid a financial crisis? That’s the question facing regulators and investors after a rapid rise in leverage in the world’s second-largest economy. The links between the official banking system and shadowy institutions have also grown deeper and harder for regulators to fathom. Breakingviews explains how the People’s Republic might avert a meltdown, but might find a credit crunch harder to dodge.

How Big Is The Risk Of A Financial Crisis In China?

The amount of debt in the Chinese system has exploded. Total non-financial credit has surged to around two and half times annual output by the first quarter of 2016, according to the Bank for International Settlements. Debt in the still-developing country is now roughly the same relative to the size of the economy as in the richer United States.

Financial history shows that when debt outstrips GDP growth, accidents become more likely. But in China’s case, it’s not just the absolute increase in leverage that’s worrying. The speed at which debt has expanded also means there is an increasingly complex web of transactions and financial products which links China’s biggest banks with smaller peers and with shady financial institutions that operate outside the official safety net provided by the authorities.

So Where Are The Trouble Spots?

Chinese banks have added $7.1 trillion in new assets – equivalent to around two-thirds of GDP – since the end of 2014. Over the same period, deposits have only risen by around $3 trillion, according to official figures. Most of the increased lending is concentrated outside China’s four largest state-owned banks. That means smaller and medium-sized banks are competing hard for alternative sources of funding.

A few smaller lenders stand out. Industrial Bank, Zheshang Bank and Bank of Jinzhou now get almost half their funding from other financial institutions rather than depositors. That makes them more vulnerable to sudden shocks in confidence, which could prompt other banks to pull in lines of credit that are often rolled over on a daily basis.

Mid-sized and local city commercial banks are often the main sources of finance for local governments and property companies. Rather than relying on deposits, these banks frequently bundle up loans into wealth management products which are sold to retail investors or other financial institutions.

Those funds are then repackaged – often many times over – and traded between banks and other financial outfits such as asset management firms. This game of pass-the-parcel enables small banks to support lending in excess of their official balance sheets, while skirting rules that force them to set aside chunky provisions for loans that go bad.

What Can Go Wrong?

The interbank market connects strong banks with weaker counterparts and shadowy lenders. Analysts estimate that over 80 percent of interbank lending is done on an overnight basis. The People’s Bank of China is trying to force banks to borrow for periods of seven or 14 days while making overnight funding more expensive. But it’s hard to tell whether the central bank has succeeded as banks don’t release data on the tenor of their interbank lending and borrowing.

Assume that China suffers a sharp correction in its dizzy property sector, or that a poorly run asset management firm collapses. Such a shock could hit the value of wealth management products issued by a smaller bank, prompting customers to withdraw funds or demand compensation.

This in turn could lead larger banks to scale back their interbank exposure to smaller lenders they perceive to be most at risk. Overnight borrowing costs would spike, forcing small banks to call in loans or launch a fire-sale of assets to meet maturing funds.

But Won’t The PBOC Come To The Rescue?

China’s central bank can flood the market with liquidity and order state banks to keep lending to each other. But banks and non-bank financial institutions have become so entwined that regulators might not immediately know where the problems were.

Banks’ claims on non-bank financial institutions in China have surged from 11.2 trillion yuan ($1.65 trillion) at the end of 2014 to 25.2 trillion yuan at the end of August this year, according to thePBOC. The central bank could pour liquidity into the market as a whole, but wouldn’t be able to inject funds into the specific problem areas.

To see what might go wrong, take Shengjing Bank in the rustbelt province of Liaoning, which has seen the value of wealth management products it sells rise by 754 percent since the end of 2014, according to an analysis by Rhodium Group. Those products aren’t issued by the bank itself but by asset management companies or securities firms. Moreover, the principal isn’t guaranteed.

Nevertheless, the underlying assets are tied to the local economy, which is in recession. Though the wealth management products can be cashed in at short notice, the loans have a much longer life. Any disturbance could leave a funding squeeze.

So Can China Avoid A Financial Crisis?

It depends what you mean by a crisis. The PBOC can prevent the Lehman-style collapse of a major financial institution. It would also step in swiftly to halt a run on any bank – sending trucks full of cash to reassure depositors their money is safe. The government has the power to force banks, brokerages and insurance firms to help prop up troubled firms – much as it organised the stock market bailout in the summer of 2015. And as China has comparatively little overseas debt, the risk of foreign creditors suddenly yanking their loans is also quite small.

But if credit continues to explode, a correction looks increasingly likely. A decline or even a slowdown in lending could trigger a cascade of defaults starting in the non-banking financial sector, and then spilling over into smaller banks and the real economy. Whether you call it a crisis or not, that will certainly be painful.

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China October Factory Activity Expands At Fastest Pace In Over Two Years

November 1, 2016

Activity in China's manufacturing sector expanded at the fastest pace in more than two years in October, adding to views that the world's second-largest economy is stabilizing thanks to a construction boom.

The official Purchasing Managers' Index (PMI) stood at 51.2 in October, compared with the previous month's 50.4 and above the 50-point mark that separates growth from contraction on a monthly basis.

The reading was stronger than economists had expected and the highest since July 2014. Analysts polled by Reuters had predicted a reading of 50.4, pointing to more modest growth.

China's economy expanded at a steady 6.7 percent clip in the third quarter and looks set to hit Beijing's full-year target of 6.5 to 7 percent, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.

Factory output accelerated in October, with the sub-index rising to 53.3 in October from 52.8 in September.

Total new orders also showed solid improvement, rising to 52.8 from September's 50.9.

But new export orders contracted to 49.2, the National Bureau of Statistics said, pointing to persistent sluggishness in global demand that has weighed on Asia's export-reliant economies for nearly two years.

Despite the apparent surge in domestic demand, manufacturers continued to cut jobs, with the employment sub-index standing at 48.8, compared to 48.6 in September. Cost cutting and higher prices for building materials from cement to steel are brightening some firms' profit outlook.

Job losses could be rising as the government has pledged broad capacity cuts across a range of industries.

A sub-index for smaller firms improved, while performance at larger companies fell, a sign that the government's dependence on big state firms for growth this year might be slowly changing.

A similar business survey showed activity in China's services sector expanded at the fastest pace since December 2015, with the official reading picking up to 54.0 in October from 53.7 in September.

A measure of the construction industry stood at 61.8, easing marginally from 61.9 in September, but still pointing to solid expansion as the government goes on an infrastructure spending spree to spur the economy and meet its growth targets.

Financial services and the property sector fell, as the real estate market has begun to cool following curbs on property purchases introduced in early October to cool surging home prices.

The services employment sub-index stood at the no-change mark in October, indicating companies have stopped cutting staff.

Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

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BOJ Keeps Policy Steady, Cuts Price Forecast

November 1, 2016

The Bank of Japan held off on expanding stimulus on Tuesday despite pushing back the time frame for hitting its 2 percent inflation target, signaling that it will stand pat unless a severe market shock threatens to derail a fragile recovery.

In a widely expected move, the BOJ maintained the 0.1 percent interest it charges for a portion of excess reserves that financial institutions park with the central bank.

At the two-day policy meeting that ended on Tuesday, it also left unchanged its 10-year government bond yield target around zero percent.

While the BOJ no longer targets the pace of money printing, it maintained a pledge to keep buying government bonds so the balance of its holdings increases at an annual pace of 80 trillion yen.

At a quarterly review of its forecasts, the BOJ cut its core consumer inflation forecast for the next fiscal year ending in March 2018 to 1.5 percent from 1.7 percent projected in July.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision and the quarterly review.

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