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.
If Democratic candidate Doug Jones lost to GOP candidate Roy Moore, weakened as he was by a sea of allegations of sexual assault and harassment, then some of the blame seemed likely to be placed on black turnout.
But Jones won, according to the AP, and that script has been flipped on its head. Election day defied the narrative, and challenged traditional thinking about racial turnout in off-year elections and special elections. Precincts in the state’s “black belt,” the swathe of dark, fertile soil where the African American population is concentrated, reported long lines throughout the day, and as the night waned and red counties dominated by rural white voters continued to report disappointing results for Moore, votes surged in from urban areas and the black belt. By all accounts, black turnout exceeded expectations, perhaps even passing previous off-year results. Energy was not a problem.
In a major upset, the Democratic candidate prevailed in the deeply conservative state.
In a major upset, Democrat Doug Jones won the Alabama Senate special election on Tuesday to fill the seat previously held by Attorney General Jeff Sessions. The last time Alabama sent a Democrat to the Senate was in 1992.
The Associated Press called the race for Jones just before 10:30 p.m. eastern.
Alabama is a deeply conservative state. But the race unexpectedly became competitive after Republican Roy Moore became embroiled in allegations of past sexual misconduct involving teenage girls. The result was a stunning victory for the Democratic Party, which found itself locked out of power in Washington after the 2016 presidential election.
“Tonight is a night for rejoicing," Jones said at his victory party Tuesday evening to a cheering crowd. Referencing a famous Martin Luther King quote, Jones said: “The moral arc of the universe is long but it bends toward justice. Tonight, you helped bend that moral arc a little closer to justice."
Democrat Doug Jones defeated Roy Moore in Alabama’s Senate race, narrowing the Republican majority and handing the president a major political setback.
Democrat Doug Jones defeated Republican Roy Moore in Alabama on Tuesday night, snagging a U.S. Senate seat in a upset and providing an appropriately unpredictable end to a bizarre race.
The election saw an uneasy coalition formed between President Trump and the Republican establishment only to be rebuked in the GOP primary; a sitting senator defeated in a primary runoff; a candidate refusing to withdraw despite a series of sexual-misconduct allegations involving teenagers; and, in the end, a Democrat robbing Republicans of a Senate seat in the deep-red Deep South.
With the last few precincts being counted, Jones was headed for a narrow but decisive victory over Moore, an archconservative culture warrior who was twice removed as chief justice of the state supreme court for defying federal judges. The race is at once an outlier—Moore was a uniquely flawed candidate—and the latest example of Democratic enthusiasm, and in particular African American engagement, spiking in backlash to the Trump era. Early analysis suggests Jones’s victory came on the power of black turnout that far exceeded expectations and white turnout that sagged in the face of a scandal ridden, bigoted GOP candidate.
Russia's strongman president has many Americans convinced of his manipulative genius. He's really just a gambler who won big.
I. The Hack
The large, sunny room at Volgograd State University smelled like its contents: 45 college students, all but one of them male, hunched over keyboards, whispering and quietly clacking away among empty cans of Juicy energy drink. “It looks like they’re just picking at their screens, but the battle is intense,” Victor Minin said as we sat watching them.
Clustered in seven teams from universities across Russia, they were almost halfway into an eight-hour hacking competition, trying to solve forensic problems that ranged from identifying a computer virus’s origins to finding secret messages embedded in images. Minin was there to oversee the competition, called Capture the Flag, which had been put on by his organization, the Association of Chief Information Security Officers, or ARSIB in Russian. ARSIB runs Capture the Flag competitions at schools all over Russia, as well as massive, multiday hackathons in which one team defends its server as another team attacks it. In April, hundreds of young hackers participated in one of them.
There’s a fiction at the heart of the debate over entitlements: The carefully cultivated impression that beneficiaries are simply receiving back their “own” money.
One day in 1984, Kurt Vonnegut called.
I was ditching my law school classes to work on the presidential campaign of Walter Mondale, the Democratic candidate against Ronald Reagan, when one of those formerly-ubiquitous pink telephone messages was delivered to me saying that Vonnegut had called, asking to speak to one of Mondale’s speechwriters.
All sorts of people called to talk to the speechwriters with all sorts of whacky suggestions; this certainly had to be the most interesting. I stared at the 212 phone number on the pink slip, picked up a phone, and dialed.
A voice, so gravelly and deep that it seemed to lie at the outer edge of the human auditory range, rasped, “Hello.” I introduced myself. There was a short pause, as if Vonnegut were fixing his gaze on me from the other end of the line, then he spoke.
The president attacked a senator who has emerged as a crusader against all manner of sexual misbehavior by political leaders.
Just after 8:00 on Tuesday morning, President Trump whipped out his phone and fired off this incendiary, insinuating tweet:
Lightweight Senator Kirsten Gillibrand, a total flunky for Chuck Schumer and someone who would come to my office ‘begging’ for campaign donations not so long ago (and would do anything for them), is now in the ring fighting against Trump. Very disloyal to Bill & Crooked-USED!
It’s hardly surprising that Trump is miffed at Gillibrand. On Monday, the gentlewoman from New York publicly called on the president to step down in light of the multiple accusations of harassment and assault swirling around him. Having long pressed for the military to address its sexual-assault problem, Gillibrand has emerged more recently as a crusader against all manner of sexual misbehavior by political leaders: She was the first Senate Democrat to call on her Minnesota colleague Al Franken to step down, and she contends that elected officials absolutely should be held to higher standards than regular folks.
A good marriage is no guarantee against infidelity.
“Most descriptions of troubled marriages don’t seem to fit my situation,” Priya insists. “Colin and I have a wonderful relationship. Great kids, no financial stresses, careers we love, great friends. He is a phenom at work, fucking handsome, attentive lover, fit, and generous to everyone, including my parents. My life is good.” Yet Priya is having an affair. “Not someone I would ever date—ever, ever, ever. He drives a truck and has tattoos. It’s so clichéd, it pains me to say it out loud. It could ruin everything I’ve built.”
Priya is right. Few events in the life of a couple, except illness and death, carry such devastating force. For years, I have worked as a therapist with hundreds of couples who have been shattered by infidelity. And my conversations about affairs have not been confined within the cloistered walls of my therapy practice; they’ve happened on airplanes, at dinner parties, at conferences, at the nail salon, with colleagues, with the cable guy, and of course, on social media. From Pittsburgh to Buenos Aires, Delhi to Paris, I have been conducting an open-ended survey about infidelity.
Russian billionaire Yuri Milner says if the space rock 'Oumuamua is giving off radio signals, his team will be able to detect them—and they may get the results within days.
The email about “a most peculiar object” in the solar system arrived in Yuri Milner’s inbox last week.
Milner, the Russian billionaire behind Breakthrough Listen, a $100 million search for intelligent extraterrestrial life, had already heard about the peculiar object. ‘Oumuamua barreled into view in October, the first interstellar object seen in our solar system.
Astronomers around the world chased after the mysterious space rock with their telescopes, collecting as much data as they could as it sped away. Their observations revealed a truly unusual object with puzzling properties. Scientists have long predicted an interstellar visitor would someday coast into our corner of the universe, but not something like this.
Winning images and honorable mentions from the four categories: Wildlife, Landscapes, Aerials, and Underwater.
National Geographic has announced the winners of its annual photo competition, with the Grand Prize Winner Jayaprakash Joghee Bojan receiving a prize of $7,500 for his image of an orangutan in Borneo. National Geographic was once again kind enough to let us display the winning images and honorable mentions here from the four categories: Wildlife, Landscapes, Aerials, and Underwater.
Top picks from a year of personal stories, protest songs, and escapism
In a year when world events seemed to push pop culture aside—or else become pop culture itself—the albums that hit most deeply for me were about individuals, not issues. Many of the picks below are autobiographies of sorts, and even the more “political” records blend their songs of social crackups with ones of personal breakups. The other albums here offer much-needed escape, whether with guitar solos, rave immersion, or, in one case, a new word game: “raindrop / drop top.”
1. Kendrick Lamar, Damn
The title of Damn refers in part to a divine curse, which in turn ties in with the Black Hebrew Israelite theology the Compton rapper flirts with throughout his latest masterpiece. But Lamar raps about damnation as not only a spiritual state, but also an inheritance of history, of society, and of one’s own past. The dizzying “DNA”establishes the controlling metaphor: Each person is a double helix of information and attributes, containing War and Peace and war and peace. The album then makes clear he’s not interested in drawing cute contradictions, but in drawing out truth—or rather, truths next to truths next to truths.