In Africa, Ending a Despot Doesn’t End Despotism

In the tradition of dimming debate, the chattering class has reduced systemic corruption in South Africa and the near collapse in Zimbabwe, respectively, to the shenanigans of two men: Jacob Zuma and Robert Mugabe.
Zuma, the President of South Africa, currently faces possible impeachment for corruption, while Robert Mugabe has now been forcibly ‘retired’ after 30 years as President.
Surely by now, though, it should be common knowledge that in Africa, if you replace a despot, but not despotism, you only oust a tyrant, and not tyranny.
How Kleptocracy Works Emblematic of this is a thematically confused article in The Economist, offering a description of the dynamics set in motion by the Zuma dynasty’s capture of the state.
At first, the magazine explains the concept of ‘state capture’ as “private actors [having] subverted the state to steal public money.”
Later, the concept is more candidly refined: ‘The nub of the state capture argument is that Mr. Zuma and his friends are putting state-owned enterprises and other governmental institutions in the hands of people who are allowing them to loot public funds.”
Indeed. Corruption invariably flows from state to society.

This post was published at Ludwig von Mises Institute on Dec 31, 2017.

The Greatest Bubble Ever: Why You Better Believe It, Part 2

During the 40 months after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index rose from 830 to 4585 or by 450%. But the perma-bulls said not to worry: This time is different—-it’s a new age of technology miracles that will change the laws of finance.
It wasn’t. The market cracked in April 2000 and did not stop plunging until the NASDAQ 100 index hit 815 in early October 2002. During those a heart-stopping 30 months of free-fall, all the gains of the tech boom were wiped out in an 84% collapse of the index. Overall, the market value of household equities sank from $10.0 trillion to $4.8 trillion—-a wipeout from which millions of baby boom households have never recovered.
Likewise, the second Greenspan housing and credit boom generated a similar round trip of bubble inflation and collapse. During the 57 months after the October 2002 bottom, the Russell 2000 (RUT) climbed the proverbial wall-of-worry—-rising from 340 to 850 or by 2.5X.
And this time was also held to be different because, purportedly, the art of central banking had been perfected in what Bernanke was pleased to call the “Great Moderation”. Taking the cue, Wall Street dubbed it the Goldilocks Economy—-meaning a macroeconomic environment so stable, productive and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices.
Wrong again!

This post was published at David Stockmans Contra Corner on December 29th, 2017.

Rare Anti-Government Protests Grow In Iran, Reports Of Jammed Satellite TV Networks

Rare protests in multiple cities across Iran, especially in the country’s second largest city of Mashhad, gained momentum on Thursday and Western media and pundits are beginning to take note. Though it appears the main protest locations have been consistently described as being in the hundreds and not yet reaching mass numbers, observers say they are likely to grow in size and in intensity as economic grievances over high prices, corruption, and mismanagement have reached a boiling point.
Notably, dozens of videos were uploaded to social media channels Thursday showing demonstrators primarily in Mashhad in northwest Iran chanting ‘death to [President] Rouhani’ and ‘death to the dictator’. Mashhad is considered one of the holiest and most conservative places in Shia Islam, causing some pundits to conclude that if such aggressive anti-government demonstrations can take place there, they could take place anywhere throughout Iran. Other places named by the semi-official ILNA news agency and social media reports where demonstrations have occurred are in Razavi Khorasan Province, including Neyshabour and Kashmar.
And there are some indications that authorities in Tehran are preparing for a broader crackdown to prevent protests from spreading.

This post was published at Zero Hedge on Fri, 12/29/2017 –.

The Uniqueness of Western Law

‘When accordingly it is inquired, whence is evil, it must first be inquired, what is evil, which is nothing else than corruption, either of the measure, or the form, or the order, that belong to nature.’ ~Augustine of Hippo
The study of Western Civilization has been all but eradicated. This was no accident but, rather, an aggressive policy of leftist academe which has used exclusionary tactics to dominate and pervert the culture and purpose of our universities since the 1960s and 70s.1 But, for us students, driven underground, Western history is the greatest treasure trove of almost every faculty. Not least of these is natural law.
This unique philosophy of law so encapsulated the spirit of the West that the late Surya P. Sinha described law as ‘the most central principle of [the] social organization’ of Western civilization alone. “This fact explains that most…theories about law have issued from the Western culture’.2 Sinha even declared law itself to be a non-universal phenomenon of the West, other civilizations developing little more than ‘principles of moral life which are not law.”3
The story of natural law is a fascinating one; Ricardo Duchesne draws from decades of definitive scholarship on the uniqueness of the West to crystallize the “essential message” from across the social sciences: “the rise of the West is the story of the realization of humans who think of themselves as self-determining and therefore accept as authoritative only those norms and institutions that can be seen to be congenial with their awareness of themselves as free and rational agents.”4 Being at the heart of Western civilization, yet lost to history and shrouded in confusion, I would like to clarify the environment in which natural law developed and the consequences of its loss.

This post was published at Ludwig von Mises Institute on Dec 29, 2017.

The Greatest Bubble Ever: Why You Better Believe It, Part 1

During the 40 months after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index rose from 830 to 4585 or by 450%. But the perma-bulls said not to worry: This time is different—-it’s a new age of technology miracles that will change the laws of finance forever.
It wasn’t. The market cracked in April 2000 and did not stop plunging until the NASDAQ 100 index hit 815 in early October 2002. During those heart-stopping 30 months of free-fall, all the gains of the tech boom were wiped out in an 84% collapse of the index. Overall, the market value of household equities sank from $10.0 trillion to $4.8 trillion—-a wipeout from which millions of baby boom households have never recovered.
Likewise, the second Greenspan housing and credit boom generated a similar round trip of bubble inflation and collapse. During the 57 months after the October 2002 bottom, the Russell 2000 (RUT) climbed the proverbial wall-of-worry—-rising from 340 to 850 or by 2.5X.
And this time was also held to be different because, purportedly, the art of central banking had been perfected in what Bernanke was pleased to call the “Great Moderation”. Taking the cue, Wall Street dubbed it the Goldilocks Economy—-meaning a macroeconomic environment so stable, productive and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices.
Wrong again!

This post was published at David Stockmans Contra Corner on December 28th, 2017.

Up Next——Deflation In The Canyons Of Wall Street

Record high stock and bond prices are flashing danger signs to former Reagan White House Budget Director David Stockman. Stockman contends, ‘I don’t think we are going to have a liquidity crisis. I think it’s going to be a value reset. I think there is going to be a jarring downward price adjustment both in the stock market and in the bond market. This phantom or phony wealth that has been created since the last crisis is going to basically evaporate.’
So, what asset is safe? Stockman says gold and goes onto explain, ‘I think the time to buy (gold and silver) is ideal. Gold is the ultimate and only real money. Gold is the only safe asset when push comes to shove. They tell you to buy the government bond, that’s a safe asset. It’s not a safe asset at its current price. I am not saying the federal government is going to default in the next two or three years. I am saying the yield on a 10-year bond of 2.4% is way below of where it’s going to end up. So, the only safe asset left is gold. This crazy Bitcoin mania has drained off what would otherwise be a demand for gold. . . . When Bitcoin collapses, spectacularly, which it will because it’s sheer mania in the markets right now. When it collapses, I think a lot of that demand will come back into gold, as well as people fleeing the standard stock and bond markets for the first time in 9 or 10 years.’

This post was published at David Stockmans Contra Corner on December 27th, 2017.

New Trump Executive Order Targets Clinton-Linked Individuals, Lobbyists And Perhaps Uranium One

The Trump Administration quietly issued an Executive Order (EO) last Thursday which allows for the freezing of US-housed assets belonging to foreign individuals or entities deemed “serious human rights abusers,” along with government officials and executives of foreign corporations (current or former) found to have engaged in corruption – which includes the misappropriation of state assets, the expropriation of private assets for personal gain, and corruption related to government contracts or the extraction of natural resources.
Furthermore, anyone in the United States who aids or participates in said corruption or human rights abuses by foreign parties is subject to frozen assets – along with any U. S. corporation who employs foreigners deemed to have engaged in corruption on behalf of the company.

This post was published at Zero Hedge on Dec 27, 2017.

Mercantilism as the Economic Side of Absolutism

[This article is excerpted from An Austrian Perspective on the History of Economic Thought, vol. 1, Economic Thought Before Adam Smith.]
By the beginning of the 17th century, royal absolutism had emerged victorious all over Europe. But a king (or, in the case of the Italian city-states, some lesser prince or ruler) cannot rule all by himself. He must rule through a hierarchical bureaucracy. And so the rule of absolutism was created through a series of alliances between the king, his nobles (who were mainly large feudal or postfeudal landlords), and various segments of large-scale merchants or traders. “Mercantilism” is the name given by late 19th-century historians to the politicoeconomic system of the absolute state from approximately the 16th to the 18th centuries.
Mercantilism has been called by various historians or observers a “system of Power or State-building” (Eli Heckscher), a system of systematic state privilege, particularly in restricting imports or subsidizing exports (Adam Smith), or a faulty set of economic theories, including protectionism and the alleged necessity for piling up bullion in a country. In fact, mercantilism was all of these things; it was a comprehensive system of state-building, state privilege, and what might be called “state monopoly capitalism.”
As the economic aspect of state absolutism, mercantilism was of necessity a system of state-building, of big government, of heavy royal expenditure, of high taxes, of (especially after the late 17th century) inflation and deficit finance, of war, imperialism, and the aggrandizing of the nation-state. In short, a politicoeconomic system very like that of the present day, with the unimportant exception that now large-scale industry rather than mercantile commerce is the main focus of the economy. But state absolutism means that the state must purchase and maintain allies among powerful groups in the economy, and it also provides a cockpit for lobbying for special privilege among such groups.
Jacob Viner put the case well:

This post was published at Ludwig von Mises Institute on 12/26/2017.

New Erdogan Decree Grants Immunity For “Suppressing Terror”, Paves Way For Militia Violence

President Recep Tayyip Erdogan’s latest batch of presidential decrees has transformed Turkey into a nation of government-endorsed militias and “anti-terror vigilantes.”
According to Ahval, Erdogan published Turkey’s latest state of emergency government decree – the country has been under a perpetual state of emergency since the summer of 2016 failed coup – in the Official Gazette on Sunday. And not only does it condone the purging of thousands of civil servants from their jobs, but, in an unprecedented escalation, grants immunity to “those who took to the streets during the coup attempt” or “assisted with suppressing terror.” Furthermore: ”Notwithstanding whether individuals hold a formal title or whether they have fulfilled a formal duty, those who have acted in the scope of suppressing the coup attempt and acts of terror on July 15, 2016, and actions that were extensions of these events” will be exempt from being put on trial for their actions.”
Of course, anyone who has been following the situation in Turkey over the past year-and-a-half (and certainly longer) knows that ‘suppressing terror’ is Erdogan’s popular euphemism for punishing or imprisoning suspected Gulenist sympathizers, and also anyone who dares to bring attention to Erdogan’s brazen corruption.
As a result, the Turkish president has been busy lately, signing a flurry of decrees that have further consolidated political power in the office of the president – a stunning reversal from the early days of Erdogan’s political career, when he was a well-regarded moderate advocating much needed government reforms.

This post was published at Zero Hedge on Dec 25, 2017.

Hysteresis In The C-Suite—-Why The GOP Tax Bill Won’t Stimulate “Growth” (Part 3)

Yesterday (Part 2) we documented the vast difference between the Reagan Tax Cut of 1981 and the GOP Tax Bill of 2017—-both as to scale and potential to stimulate supply-side growth of output, investment, jobs and earnings.
In a word, the Reagan tax cut averaged 4.0% of GDP over a decade and was predominately focused on supply-side incentives via a 25% marginal rate cut for individuals and a giant business cut. The latter would amount to $300 billion per year at today’s economic scale, and, crucially, was also tightly linked to CapEx via the 10-5-3 depreciation incentive for new plant, equipment and technology purchases.
By contrast, the current GOP Tax Cut is just one-tenth the size (o.4% of GDP) of the Reagan cut over the next decade and has virtually no supply-side incentives at all. The individual income tax cuts are temporary and reflect a Keynesian purpose to put “money in the pockets” of workers via, for instance, doubling the standard deduction and child credit.
At the same time, the heart of the GOP tax cut is a wholly misguided $1.4 trillion 10-year reduction of the corporate tax rate to 21%. But under the deformed monetary and financial conditions of the present, that will actually just put money in the brokerage accounts of the wealthy and Wall Street speculators.

This post was published at David Stockmans Contra Corner on Friday, December 22nd, 2017.

Saudi General Reportedly Tortured To Death After Refusing To Fork Over His Fortune

Rumors that Saudi Crown Prince Mohammad bin Salman has hired mercenaries to torture recalcitrant royals and officials sleeping in the ballroom of the Ritz Carlton in Riyadh have been circulating since shortly after last month’s ‘corruption crackdown’ naked cash grab.
***
Now, Middle East Eye reports that one of MbS’s guests has reportedly died under torture rather than fork over his money and assets to his domineering relative. He was reportedly beaten and tortured so bad his family members had difficulty recognizing his body.
Major general Ali Alqahtani, who was detained in early November as part of an alleged anti-corruption drive, had been working in the royal guard forces.
He was the manager of the private office of Prince Turki Bin Abdullah, the son of former king Abdullah Bin Abdulaziz, according to the newspaper.
Alqahtani died on 12 December after being tortured with electric shocks, and his family struggled to recognise him after receiving his body, according to sources, the newspaper reported.

This post was published at Zero Hedge on Dec 23, 2017.

House Republicans Secretly Gathering Evidence To Launch Case Against DOJ and FBI: Report

According to Politico, a group of frustrated Republicans on the House Intelligence Committee led by Devin Nunes (R-CA) have been gathering in secret for several weeks to build a case against senior leaders of the Justice Department and the FBI for what they say is “improper” and perhaps criminal mishandling of the salacious and unproven 34-page Trump-Russia dossier, according to four sources familiar with their plans.
***
A subset of the Republican members of the House intelligence committee, led by Chairman Devin Nunes of California, has been quietly working parallel to the committee’s high-profile inquiry into Russian meddling in the 2016 presidential election. […] The people familiar with Nunes’ plans said the goal is to highlight what some committee Republicans see as corruption and conspiracy in the upper ranks of federal law enforcement. The group hopes to release a report early next year detailing their concerns about the DOJ and FBI, and they might seek congressional votes to declassify elements of their evidence. –Politico
When pressed for details, Reps Mike Conway (R-TX) and Peter King (R-NY) were mum, with Conway telling POLITICO, “I don’t want talk about what we do behind closed doors.”

This post was published at Zero Hedge on Dec 22, 2017.

What The GOP Pols Have Wrought—A Fiscal, Economic And Political Monster, Part 2

In Part 1 we revived Senator Howard Baker’s famous description of the giant Reagan Tax Cut of 1981 as a “riverboat gamble”, and that it was. When the “bidding war” with the Dems ended in July 1981, the US Congress had cut the Federal revenue base by 6.2% of GDP in the outyears. At today’s economic scale that would amount to a tax cut of $1.2 trillion per year!
***
By contrast, the peak year cut (FY 2019) in the current tax bill is just $280 billion. Nevertheless, we present this chart to demonstrate why today’s GOP “riverboat gamble” is actually far more dangerous than the one back then, and also why it’s capacity to actually stimulate a growth surge in the US economy is not even a pale imitation of the 1981 act.

This post was published at David Stockmans Contra Corner on Thursday, December 21st, 2017.

Peso Pounded Most Since Election As Corruption Probe Deepens

The Mexican peso has tumbled over 3% in the last 4 days, plunging to its weakest against the USDollar since March as the ongoing corruption investigation soured market sentiment.
As we detailed yesterday, a deepening graft investigation involving Alejandro Gutierrez, a former deputy of sitting President Enrique Pena Nieto could imperil his party’s chances in the coming July elections. An ongoing scandal could also bolster the prospects of leftist rival Andres Manuel Lopez Obrador.
“The news of this arrest scares investors,” said Jesus Lopez, a strategist at Banco Base in Monterrey, Mexico. “These days, the exchange rate is more sensitive because of low liquidity, and we already know that the peso is more vulnerable from the political side.”
And the pso is extending losses…

This post was published at Zero Hedge on Dec 22, 2017.

Peso Plunges To 9-Month Lows As Corruption Probe Spreads

The Mexican peso is plunging (down over 1% today) to its weakest against the dollar since March after a former deputy in the ruling party in Mexico was arrested as part of a graft inquiry.
As Bloomberg reports, political uncertainty continued to weigh on the most-traded currency in emerging markets.

This post was published at Zero Hedge on Dec 21, 2017.

Is This Why Charlie Lee Sold His Litecoin?

Authored by Tom Luongo,
The news broke yesterday morning that Litecoin developer and outspoken founder, Charlie Lee, sold or donated all of his liquid Litecoin holdings. This prompted a big sell-off in the cryptocurrency markets, putting on pause the bounce off of the previous night’s bottom below $16000 for Bitcoin.
This comes in the wake of Coinbase adding Bitcoin Cash (BCH) to its stable of coins available for purchase, which also sent shockwaves through the markets.
In his post on reddit, Lee explained that he felt his ownership stake was actually a burden on Litecoin’s development as a real-world medium of exchange:
And whenever I tweet about Litecoin price or even just good or bads news, I get accused of doing it for personal benefit. Some people even think I short LTC! So in a sense, it is conflict of interest for me to hold LTC and tweet about it because I have so much influence. I have always refrained from buying/selling LTC before or after my major tweets, but this is something only I know. And there will always be a doubt on whether any of my actions were to further my own personal wealth above the success of Litecoin and crypto-currency in general.
The market reacted negatively to the news but only for a short time. Litecoin under Lee’s direction has been setting itself up as the day-to-day cryptocurrency. One that is easy to use, cheap, fast and easy to pay with.

This post was published at Zero Hedge on Dec 21, 2017.

What The GOP Pols Have Wrought—A Fiscal, Economic And Political Monster, Part 1

The GOP tax bill is not “at least something”. It’s not “better than nothing”. And, no, we are not letting the perfect become the enemy of the good.
In truth, this thing is a fiscal, economic and political monster. It is hands down the worst tax bill enacted in the last half-century—-maybe even since FDR’s 1937 soak-the-rich scheme, which re-ignited the Great Depression.
True, rather than soak them, the GOP’s bill will pleasure America’s wealthy with a bountiful harvest of tax relief. Owners of public equities, for example, will garner a trillion dollar shower of extra dividends and stock buybacks from the corporate rate cut.
Likewise, 4 million top bracket ATM (alternative minimum tax) payers will be relieved of about $80 billion per year of Uncle Sam’s extractions; around 5,000 dead people per year with estates above $20 million will get to leave more behind; owners of real estate will be able to deduct another 20% of property income that isn’t already sheltered by depreciation and interest deductions; and tax accountants and lawyers will become stinking rich helping America’s proprietorships (24 million), S-corporations (4 million), partnerships (3.5 million) and farms (1.8 million) convert their “ordinary income” into newly deductible “qualified business income”.

This post was published at David Stockmans Contra Corner on Wednesday, December 20th, 2017.

Ethics Watchdog Finds Trudeau Vacation Violated Conflict Rules

In an unprecedented decision with potentially serious consequences for Canadian Prime Minister Justin Trudeau, Canada’s outgoing ethics watchdog Mary Dawson has ruled that Trudeau violated conflict of interest rules when he took Aga Khan’s private helicopter to the business magnate’s private island in the Bahamas during a Christmas 2016 vacation. Trudeau is the first Canadian prime minister to ever be convicted of such a violation.
According to the law, Trudeau needed to seek permission from the ethics watchdog before making such a trip – something he inexplicably failed to do. The ruling comes just weeks before the end of Dawson’s term, which is set to expire on Jan. 8.

This post was published at Zero Hedge on Dec 20, 2017.