Power & Market

Bovard: Cliven Bundy-FBI debacle: Another example of why the feds need to be leashed

01/05/2018James Bovard

Writes James Bovard in USA Today:

The Justice Department was caught in another high-profile travesty last month that continues to reverberate through the western states. On Dec. 20, federal judge Gloria Navarro declared a mistrial in the case against Nevada rancher Cliven Bundy and others after prosecutors were caught withholding massive amounts of evidence undermining federal charges. This is the latest in a long series of federal law enforcement debacles that have spurred vast distrust of Washington.

Bundy, a 71-year old Nevadan rancher, and his sons and supporters were involved in an armed standoff with the Bureau of Land Management (BLM) beginning in 2014 stemming from decades of unpaid cattle grazing fees and restrictions. The Bundys have long claimed the feds were on a vendetta against them, and 3,300 pages of documents the Justice Department wrongfully concealed from their lawyers provides smoking guns that buttress their case.

A whistleblowing memo by BLM chief investigator Larry Wooten charges that BLM chose "the most intrusive, oppressive, large scale and militaristic trespass cattle (seizure) possible'' against Bundy. He also cited a "widespread pattern of bad judgment, lack of discipline, incredible bias, unprofessionalism and misconduct, as well as likely policy, ethical and legal violations" by BLM officials in the case. BLM agents even "bragged about roughing up Dave Bundy, grinding his face into the ground and Dave Bundy having little bits of gravel stuck in his face'' while he was videotaping federal agents. Wooten also stated that anti-Mormon prejudice pervaded BLM's crackdown.

The feds charged the Bundys with conspiracy in large part because the ranchers summoned militia to defend them after they claimed that FBI snipers had surrounded their ranch. Justice Department lawyers scoffed at this claim in prior trials involving the standoff but newly-released documents confirm that snipers were in place prior to the Bundy’s call for help.

The feds also belatedly turned over multiple threat assessments which revealed that the Bundys were not violent or dangerous, including an FBI analysis that concluded that BLM  was "trying to provoke a conflict" with the Bundys. As an analysis in the left-leaning Intercept observed, federal missteps in this case “fueled longstanding perceptions among the right-wing groups and militias that the federal government is an underhanded institution that will stop at nothing to crush the little guy and cover up its own misdeeds.”

Read the rest of the article at USA Today.

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Bovard: How quickly NY Times forgets Obama's lies and frauds

12/19/2017James Bovard

Writing for The Hill: 

Donald Trump has been flogging the truth and twisting facts since the day he arrived in the Oval Office. But anyone who expected more candor from him as president than on the campaign trail was criminally naive. The real mystery nowadays is why the media seeks to expunge the falsehoods of prior presidents.

“Trump’s Lies versus Obama’s” was the headline in a Sunday Review New York Times piece aiming to drive a final coffin nail into Trump’s credibility. The Times claimed Trump has already “told nearly six times as many falsehoods as Obama did during his entire (8-year) presidency.”  The columnists seem so distraught that it is surprising the article is not in all caps.

But the Times’ list of falsehoods is itself a charade with gaping Montana-sized holes.

Read the full article here.

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Bovard: Yes, the FBI is America's Secret Police

12/11/2017James Bovard

Politifact delivered a “pants on fire” slam to Fox News on Friday because one of its commentators asserted that the Federal Bureau of Investigation “has become America's secret police.” The FBI has legions of new champions nowadays among liberals and Democrats who hope that its probes will end Donald Trump’s presidency. This is a stunning reversal that may have J. Edgar Hoover spinning in his grave.

In order to boost the credibility of the FBI’s investigations of the Trump team, much of the media is whitewashing the bureau’s entire history. But the FBI has been out of control almost since its birth.

Read more at The Hill

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Bitcoin Loses Steam as Steam Loses Bitcoin

The skyrocketing price of Bitcoin has dominated the financial news for the past few weeks, and the usual suspects are queuing up to offer predictions about its continued rise or inevitable fall. Yet it’s not all good news for fans of the cryptocurrency: in a notable decision, the digital distribution platform Steam has announced that it will no longer be accepting payment in Bitcoin.

In the grand scheme of things, Steam’s new policy will likely have little impact on the use or price of Bitcoin as such. Rather, the decision is significant because it highlights an underlying economic question about the future of the cryptocurrency. Specifically, Steam’s example shows that despite an enormous gain in market value, Bitcoin still has a long way to go before it becomes money.

Money is conventionally defined as a generally accepted medium of exchange, the key part of this definition being “generally accepted.” In order to be adopted on such a large scale, a medium of exchange must fulfil certain basic criteria, the most important of which is that it must be capable of serving as a tool for economic calculation. Entrepreneurs must be able to use a means of payment to compare the costs and benefits of different production plans, and this in turn requires a degree of stability in the value of money. Of course, money’s value is never constant: but it must be dependable. The inability of entrepreneurs to calculate is one reason why extreme price inflation creates widespread social havoc—planning production becomes difficult if not impossible.

One of Mises’s original contributions to monetary theory was the emphasis he placed on money’s role as a medium of exchange. Many others had identified this basic function before Mises, of course, but his approach is distinct in the way it argues that the role of medium of exchange is central, and that money’s other functions—as a unit of account, for example—are derived from it. Money is primarily a means of facilitating peaceful social cooperation, and in this sense is an indispensable part of any advanced division of labor as well as of economic calculation.

This brings us back to Bitcoin. At the moment, Bitcoin is still a minority means of payment, and Steam’s decision helps to illustrate why: Bitcoin does not at the moment satisfy the calculation criterion. As the Steam Team notes:

Historically, the value of Bitcoin has been volatile, but the degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days. This creates a problem for customers trying to purchase games with Bitcoin. When checking out on Steam, a customer will transfer x amount of Bitcoin for the cost of the game, plus y amount of Bitcoin to cover the transaction fee charged by the Bitcoin network. The value of Bitcoin is only guaranteed for a certain period of time so if the transaction doesn’t complete within that window of time, then the amount of Bitcoin needed to cover the transaction can change. The amount it can change has been increasing recently to a point where it can be significantly different.

The unpredictable changes in the value of Bitcoin mean that it is now extremely difficult for consumers or producers to gauge the true cost of their transactions, or to make an educated judgment about the best time to buy or sell. Increasing transaction fees for paying in Bitcoin further complicate the issue, especially in regard to relatively small purchases (a major concern for Steam).

At the moment, commentators seem intent on convincing each other of their predictive powers regarding Bitcoin’s price, and everyone wants to be on “right side of financial history.” The vital question though is not around what price Bitcoin will ultimately settle, but if and when it will settle at all, especially compared to its competitors. For the time being, however, the extreme changes in Bitcoin’s price mean that although it might be a good investment, it will not soon become money.

Steam’s decision thus nicely underlines a point that Mises was fond of repeating: entrepreneurs and others who are involved in practical economic affairs often know more about prices and what they mean for the economy than the pundits watching from the wings.

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Bovard: Trump Making Thanksgiving Travel Worse

11/20/2017James Bovard

On the campaign trail last year, Donald Trump derided the Transportation Security Administration as a "total disaster". But his administration is making TSA more intrusive and abusive while its 42,000 screeners remain as incompetent as ever.

New TSA screening guidelines will likely make Thanksgiving travel a disaster for legions of Americans — and the worst is yet to come.

Read the full article at USA Today.

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Bylund: The Chinese Economic Miracle Is a Sham

11/16/2017Ryan McMaken

From The Observer: 

During a three-and-a-half-hour speech to mark China’s five-year congress in Beijing, President Xi Jinping laid out his vision for the nation’s future. Xi spoke at length about economic concerns troubling Chinese leaders, including problems with medical care, education, employment, and a growing income gap.

President Xi’s speech was by no means negative, though the hints of pessimism were unusual during a weeklong event designed to build confidence in the Chinese Communist Party. His opening remarks came mere weeks after rating agency Standard & Poor’s downgraded China’s credit rating because of rising debts. Chinese officials have slammed the downgrade as a “wrong decision,” but there is evidence to suggest the nation’s economy is not the powerhouse it seems.

I recently spent two weeks visiting China to attend several economic conferences. Aside from its magnificent scenery, what really struck me was the amount of development underway. Massive tower cranes dominate city skylines, and it’s not unusual to hear the clamor of construction at all hours. The country has an endless slate of infrastructure projects, including high-speed railways, bridges, and grand architecture.

It might look like a prosperous economy growing at warp speed, but these projects are not representative of genuine growth. This construction is commonly the result of cronyism in which investors, builders, and other players are “insiders” who profit from politically directed and supported clout.

Despite a flurry of construction, many of these structures are notably desolate. When you stroll through China’s large cities at night, dark skyscrapers tower over the metropolis, with nary a twinkling light from employees working late into the evening. Entire residential areas sit lifeless and lightless, casting an eerie vibe over a seemingly booming city.

Read the full article. 

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Bank of England Raises Target Rate for First Time in Decade

11/03/2017Ryan McMaken

The Bank of England raised its target key rate yesterday, increasing the rate from 0.25 percent to 0.5 percent. The last time the Bank raised rates was in July of 2007 when the key rate increased from 5.5 percent to 5.75 percent. 

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Since then, rates have fallen repeatedly, with the most recent rate cut being in August 2016, in the wake of the Brexit vote, when the bank claimed the vote created a need for more additional stimulus. 

  • The Fed: 1.25%
  • Canada: 1%
  • ECB: -0.4%
  • BofE: 0.5%

The stated justification this time, according to Ben Broadbent, Deputy Governor for Monetary Policy at the BofE, is to "get inflation back on track." Specifically:

Following the referendum, sterling's exchange rate fell very sharply, that's pushed up import prices and with it the rate of inflation.

As in Canada, however, there are continued worries that any increase in interest rates could impact indebted Brits: 

Around a third of households have owner-occupied mortgages. Interest payments on debt - in aggregate - for households, are lower than they’ve ever been, relative to income, and this is a moderate rise.

In other words, in the UK, as is the case throughout Europe and North America, the household debt burden is no small factor in considering the realities of rate hikes. At the same time, we're seeing increased urgency in raising rates — with both Canada and the Uk raising rates in the past month — in an attempt to escape the trap which central banks now find themselves in. If a recession appears on the horizon, and central banks are still neear zero percent on their target rates, where will they go to "stimulate" the economy? Thus, raising rates are of increasing importance, but household debt levels may only be managable so long as rates remain remarkably low. 

Central banks may be afraid to wait any longer to raise rates at this point, even though they are clearly still concerned that any hike may upset the booms we're now experiencing. Indeed, it may be that investors are already wise to the game:

Despite the rate rise, the pound fell against the dollar and the euro on Thursday. Financial markets interpreted the Bank’s message about the future of the British economy as being cautious, implying that the pace of future rate rises would be slower than had been expected.

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Bank of Canada Holds Key Rate at 1 Percent

10/25/2017Ryan McMaken

The Bank of Canada today is holding its key rate at 1 percent, after two increases early this year. According to the BofC's press release, it must proceed with caution:

Based on this outlook and the risks and uncertainties identified in today’s MPR, Governing Council judges that the current stance of monetary policy is appropriate. While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate. In particular, the Bank will be guided by incoming data to assess the sensitivity of the economy to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.

Although the talk of "two consecutive rate hikes" in the print media might give the impression that the Bank of Canada is suddenly hawkish, the reality is that the Bank, like the Fed, is nowhere near normalization, since the target rate was over four percent a decade ago, and has been at or below one percent for more than eight years. 

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The Federal Reserve and the European Central Bank have been holding their target rates at 1.25 percent, and 0.4 percent, respectively. 

Canadian central bankers are concerned about NAFTA, about Trump's protectionism — including a new tariff slapped on lumber — and lackluster growth in general. 

The Bank doesn't come right out and say this, of course. The rhetoric employed here is similar to what is found with the Fed, and is always cuatiously upbeat, even though its reluctance to normalize rates illustrates fear of upsetting the fragile economy. According to the official line, the Canadian economy was "stronger than expected" earlier in the year, but we must not get carried away, since the economy is now "expected to moderate to a more sustainable pace." 

One of the biggest concerns for the bank, apparently, are the high debt levels adopted by Canadians. The Bank notes "Because of high debt levels, household spending is likely more sensitive to interest rates than in the past."

This has apparently been a topic of discussion in the Canadian media with numerous articles on how Canadian households aren't prepared for rate hikes, given their debt levels. A new survey released this month about Canadian households concludes: 

  • - Over fifty per cent say they are $200 or less per month away from not being able to meet all of their bills or debt obligations each month.
  • - Six in ten say that they are less than very confident in their understanding of the impact of interest rates on debt payments and about their ability to set and follow a budget.
  • - Nearly half say they are concerned about their current level of debt.
  • - Nearly four in ten regret the debt they've taken on in the past year alone and half say they regret how much debt they've taken on in their life.
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