The latest development out of China was a classic case of good news/bad news. On Thursday their central bank, the People's Bank of China (PBoC), unexpectedly cut interest rates for the first time since 2008. The good news is that the PBoC is reacting aggressively to their slowdown. The bad news is that their slowdown warrants such an aggressive reaction by the PBoC.
Actually, it might warrant far more. Or it might not. China is so opaque, it's almost impossible to say. You might be wondering how a country that announced 8.1 percent GDP growth in the first quarter of 2012 might be in such trouble. The answer: Those numbers are reported year-over-year, not quarter-over-quarter. In other words, even if we can trust them -- which is far from certain -- high growth figures don't necessarily mean that China has high growth right now.
When the financial crisis hit in 2008, China responded with a massive stimulus program. Except it wasn't "stimulus" in the way we usually think about it. The Chinese government didn't cut taxes or spend more. Instead, the Chinese government told their state-owned banks to lend more. A lot more. The chart below shows the percentage growth of China's high-powered (red) and broader (blue) money supply since 2005. Notice the post-Lehman surge in 2009.
This lending boom fueled an investment boom that made up for lost exports. But it also fueled a frothy housing sector. China's officials certainly noticed. Over the past year they have introduced a number of measures to rein in rising prices. Careful what you wish for. China in 2012 is starting to look a bit like the U.S. in 2006.
Something strange is happening now. It looks like a combination of too loose credit and too tight credit at the same time. Credit might be too loose for big state-owned enterprises (SOEs), but too tight for small-and-medium enterprises (SMEs). We can get an inkling of that in the chart above. Bank money (red) is barely growing recently, but broader money (blue) is accelerating. China's state-owned banks have said they might miss their 2012 lending targets, so this broader money growth is likely a story about China's shadow banks -- unregulated lenders who are banks in all but name. Shadow banks are happy to lend SOEs that enjoy explicit government backing, but less so for SMEs.
WHAT'S CHINESE FOR 'PONZI'?
What are big companies doing with shadow bank money?
When prices are falling, developers don't want to develop, and steel companies don't want to sell steel. They'd rather wait until the economy turns up and their scarce resources -- land or metal -- will make them more money. In the meantime, they're happy to play the role of hedge funds. Rather than borrow money to invest in their own businesses, many of them are borrowing money to speculate.
We have a word for this. It starts with a "p" and ends with "onzi".
Steel companies have been particularly bad (so much so that China's banking regulator recently issued a warning). They have taken out multiple loans with the same collateral, and then thrown this borrowed money into land and stocks. Even with housing prices retreating.
Then there's Zoomlion, a construction machinery company that just happens to be the most shorted company in Hong Kong. Zoomlion has managed this thanks to supercharging its sales by lending customers the money to buy their products.
Smaller companies are missing out on this credit boom. They're left asking banks if they can spare a dime. Well, maybe not anymore. Now they're turning to another U.S.-in-2006 standby: collateralized debt obligations (CDOs). In plainish English, a handful of small companies with bad credit ratings get together, issue debt, and then put all of their bond payments into a security. The idea is that pooling the risk reduces risk for investors -- and lets banks get the risk off their balance sheets. It can work out. But the very fact that it's happening should concern you. Also worrying: Local governments are guaranteeing these debts.
But maybe things aren't that bad. It's easy to fall into the trap of availability bias. When you've just been slapped by a housing bubble, every bad piece of evidence starts to look like a housing bubble. Still, it's undeniable that both credit and housing prices increased substantially since 2009 -- and that the latter are now falling. It's also undeniable that the behavior of China's shadow banks and big companies are reminiscent of our own circa 2006. And it's certainly undeniable that China's government is worried about growth if they're slashing interest rates for the first time in four years.
Maybe China's leaders will engineer a so-called "soft landing". They certainly have room to cut interest rates and reserve requirements. Or the government can spend money on infrastructure itself. But with Europe teetering and the U.S. slowing down itself, the last thing the world economy needs is for its biggest engine to break down too. Let's hope this is just a hiccup.
Choosing a president isn’t easy in this election, but here are three ways a principled conservative might vote.
The day of decision is nearing. All the talk fades, and one mark must be made beside one box on the ballot. Many Republicans are agonizing. They reject Donald Trump; they cannot accept Hillary Clinton. What to do?
I won’t conceal, I’m struggling with this question myself. I’ve listened to those Republicans, many my friends, who feel it their duty to stifle their anger and disappointment, and vote for Trump; to cast a protest vote for the Libertarian Gary Johnson or the independent Evan McMullin; or to cross the aisle and vote for Hillary Clinton as the lesser evil. On the way to my own personal answer, I found it helpful to summarize the best case for each of these options.
Emphasize the word “best.” If your case for Trump rests on the assumption that America is hurtling toward national doom, if your case for McMullin rests on the hope of tossing the election into the House of Representatives, if your case for Hillary argues that she is a large soul eager to work cooperatively with those who think differently from her. I’d say you are not thinking very clearly. Despair and fantasy are misleading counselors.
What use is there today for one of the oldest virtues?
As many Americans go about their days, I imagine they have two little angels perched on their shoulders, whispering conflicting messages about happiness and material wealth. One angel is embodied by James Altucher, a minimalist self-help guru recently profiled by The New York Times. Altucher claims to have only 15 possessions, after having unburdened himself a few months ago of 40 garbage bags’ worth of stuff and never looking back. As I read about Altucher, I rolled the numbers 15 and 40 over in my mind, thinking about the belongings in my bedroom and the garbage bags under my kitchen sink.
The other angel is Tyler Brûlé, the editor in chief of the fantastically high-end lifestyle magazine Monocle and a columnist for the Financial Times. He is the sort of writer who tosses off such lines as “I zipped along the autostrada through the Val d’Aosta with the ever-trusty Mario (my Italian driver for the past 20 years) at the wheel” with little regard for how privileged and pretentious he sounds (especially in his superfluous parentheticals). Still, there is something, I’m a little ashamed to say, that I envy about Brûlé’s effortless cosmopolitanism—which, it’s hard to miss, is only made possible by unusual wealth.
“Light” events are some of the heaviest lifting in political life. Comedy is hard to begin with, and for the kinds of people involved in politics, jokes are vastly more difficult to write or deliver than “substantive” remarks. And for presidents or presidential aspirants, we’re talking about a special kind of joke. These eminent figures need to come across as “modest” and self-deprecatory, but only up to a humble-brag point. (That is, just enough so the audience and reviewers will say, “Oh, isn’t it charming that he’s willing to laugh at himself!”) Real comedy often includes a “what the hell!” willingness to say something that will genuinely shock or offend, which national politicians can’t afford to do. The White House Correspondents Dinner, the Gridiron, the Al Smith Dinner—any event like this is hard (as David Litt, a former member of the Obama speechwriting team, explains in a very nice item just now).
Why the WikiLeaks revelation about a “pay-to-play” deal with Morocco is a quintessential Clinton controversy
The chief complaint that critics make about the Clinton Foundation is that the former and perhaps future presidents engaged in a “pay-to-play” scheme, whereby donors—many of them foreign governments—would contribute money to the charity in exchange for access to Bill or Hillary Clinton, or worse, beneficial treatment from the State Department.
On Thursday, hacked emails from WikiLeaks suggest that is precisely what happened when the king of Morocco agreed to host a Clinton Global Initiative summit and give $12 million, but only if Hillary Clinton attended the May 2015 meeting.
“No matter what happens, she will be in Morocco hosting CGI on May 5-7, 2015,” Huma Abedin, a top Hillary Clinton aide, wrote in a November 2014 email to several other advisers, including campaign chairman John Podesta. “Her presence was a condition for the Moroccans to proceed so there is no going back on this.”
It isn’t the only democratic institution that finds itself in danger.
Four years ago, as a speechwriter for President Obama, I commissioned a binder full of women.
A little context. It was the morning of the Al Smith Dinner, the election-year tradition in which both parties’ nominees don white-tie attire and deliver comedy monologues to New York City’s elite. Our opponent, Governor Mitt Romney had recently used the words “binders full of women” while discussing gender parity in government. Eager to mock the clumsy phrase, I asked a staffer on the advance team to put together a prop.
But our binder never saw the light of day. Obama nixed the idea. I remember being disappointed by the president’s decision, and wondering if POTUS was phoning it in. Of the jokes that did make it into the final draft, one in particular stood out for its authenticity.
First there was McCain’s caving to Bush’s signing statement on his own torture bill, then his selection of an extremely unqualified and unvetted running mate, then he backed Trump until nearly the bitter end—even after Trump insulted his POW experience and his fellow vets with PTSD. And now, a shameless betrayal of constitutional principle that would have gotten far more attention this week if Trump hadn’t one-upped McCain with all his incendiary “rigged” rhetoric. Reader Don explains:
I don’t know if your readers have seen this yet, but it seems that McCain has announced that his fellow GOP Senators will not confirm any Supreme Court nomination by Clinton. Trump is an ignorant, narcissistic, nasty piece of work. But McCain used to be a guy who remembered and honored (at least sometimes) the old bipartisan traditions of the Senate. His statement is just outrageous and inexcusable. What he’s basically saying is that only Republican presidents get to appoint Supreme Court Justices.
I understand that their thinking is that they don’t want the bias of the Court to shift from conservative to liberal. But the Court has shifted back and forth over the years, and we have managed to survive those changes. Apparently, today’s Republican Party feels that the country somehow won’t survive a Democratic administration or a liberal Supreme Court.
We have what might be described as an asymmetric politics. One party disagrees with the other party’s policy domestic policy positions, but recognizes the legitimacy of an opposition party and accepts that the other party is patriotic and loyal to the country. The other party rejects the legitimacy and loyalty of the other party. The efforts to de-legitimize former President Clinton, President Obama, and likely future President Hillary Clinton are part of this effort. The refusal of the GOP Congress to allow Obama any legislative accomplishments was another part of it. I expect that a GOP House will adopt the same obstructionist tactics starting in 2017.
People predict that the U.S. population will continue to get younger, better educated, and less white. I hope our political experiment lasts long enough to see that day.
What began as a two-hour morning outage spanned well into the afternoon as Twitter, Reddit, Spotify, Github, and many other popular websites and services became effectively inaccessible for many American web users, especially those on the East Coast.
The websites were not targeted individually. Instead, an unknown attacker deployed a massive botnet to wage a distributed denial-of-service attack on Dyn (pronounced like dine), the domain name service (DNS) provider that they all share.
A distributed denial of service attack, or DDoS, is not an uncommon attack on the web, and web hosts have been fending them off for years. But according to reports, Friday’s attack was distinguished by its distinctive approach. The perpetrator used a botnet composed of so-called “internet-of-things” devices—namely, webcams and DVRs—to spam Dyn with more requests than it could handle.
Science says lasting relationships come down to—you guessed it—kindness and generosity.
Every day in June, the most popular wedding month of the year, about 13,000 American couples will say “I do,” committing to a lifelong relationship that will be full of friendship, joy, and love that will carry them forward to their final days on this earth.
Except, of course, it doesn’t work out that way for most people. The majority of marriages fail, either ending in divorce and separation or devolving into bitterness and dysfunction. Of all the people who get married, only three in ten remain in healthy, happy marriages, as psychologist Ty Tashiro points out in his book The Science of Happily Ever After, which was published earlier this year.
Social scientists first started studying marriages by observing them in action in the 1970s in response to a crisis: Married couples were divorcing at unprecedented rates. Worried about the impact these divorces would have on the children of the broken marriages, psychologists decided to cast their scientific net on couples, bringing them into the lab to observe them and determine what the ingredients of a healthy, lasting relationship were. Was each unhappy family unhappy in its own way, as Tolstoy claimed, or did the miserable marriages all share something toxic in common?
Tristan Harris believes Silicon Valley is addicting us to our phones. He’s determined to make it stop.
On a recent evening in San Francisco, Tristan Harris, a former product philosopher at Google, took a name tag from a man in pajamas called “Honey Bear” and wrote down his pseudonym for the night: “Presence.”
Harris had just arrived at Unplug SF, a “digital detox experiment” held in honor of the National Day of Unplugging, and the organizers had banned real names. Also outlawed: clocks, “w-talk” (work talk), and “WMDs” (the planners’ loaded shorthand for wireless mobile devices). Harris, a slight 32-year-old with copper hair and a tidy beard, surrendered his iPhone, a device he considers so addictive that he’s called it “a slot machine in my pocket.” He keeps the background set to an image of Scrabble tiles spelling out the words face down, a reminder of the device’s optimal position.
The candidates are back on the campaign trail, following the third, and final, debate on Wednesday night.
It’s Saturday, October 22—the election is now less than three weeks away. Donald Trump and Hillary Clinton are back on the campaign trail to deliver their final pitch to voters, ahead of Election Day. We’ll bring you the latest updates from the trail, as events unfold. Also see our continuing coverage: