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.
Senator John McCain and White House Chief of Staff John Kelly offered starkly different visions of service—and of America.
It was a week of powerful speeches. The least memorable, oddly, was delivered by the most naturally gifted speaker, former President Barack Obama at a campaign rally in Virginia. “Our democracy is at stake,” he said, before harking back to the trope of his 2008 campaign: “Yes, we can.” Compelling in the setting, but not special.
Far more powerful was former President George W. Bush’s indictment of Donald Trump that didn’t mention the 45th president by name. It was a cry for freedom as a theme in American policy, a denunciation of “casual cruelty” in American discourse, of “nationalism distorted into nativism,” of isolationism, of attempts to turn American identity away from American ideals and into something darker, driven by “geography or ethnicity, by soil or blood.” In itself it would have been noteworthy.
Emma Perrier was deceived by an older man on the internet—a hoax that turned into an unbelievable love story.
Emma Perrier spent the summer of 2015 mending a broken heart, after a recent breakup. By September, the restaurant manager had grown tired of watching The Notebook alone in her apartment in Twickenham, a leafy suburb southwest of London, and decided it was time to get back out there. Despite the horror stories she’d heard about online dating, Emma, 33, downloaded a matchmaking app called Zoosk. The second “o” in the Zoosk logo looks like a diamond engagement ring, which suggested that its 38 million members were seeking more than the one-night stands offered by apps like Tinder.
She snapped the three selfies the app required to “verify her identity.” Emma, who is from a volcanic city near the French Alps, not far from the source of Perrier mineral water, is petite, and brunette. She found it difficult to meet men, especially as she avoided pubs and nightclubs, and worked such long hours at a coffee shop in the city’s financial district that she met only stockbrokers, who were mostly looking for cappuccinos, not love.
More comfortable online than out partying, post-Millennials are safer, physically, than adolescents have ever been. But they’re on the brink of a mental-health crisis.
One day last summer, around noon, I called Athena, a 13-year-old who lives in Houston, Texas. She answered her phone—she’s had an iPhone since she was 11—sounding as if she’d just woken up. We chatted about her favorite songs and TV shows, and I asked her what she likes to do with her friends. “We go to the mall,” she said. “Do your parents drop you off?,” I asked, recalling my own middle-school days, in the 1980s, when I’d enjoy a few parent-free hours shopping with my friends. “No—I go with my family,” she replied. “We’ll go with my mom and brothers and walk a little behind them. I just have to tell my mom where we’re going. I have to check in every hour or every 30 minutes.”
Those mall trips are infrequent—about once a month. More often, Athena and her friends spend time together on their phones, unchaperoned. Unlike the teens of my generation, who might have spent an evening tying up the family landline with gossip, they talk on Snapchat, the smartphone app that allows users to send pictures and videos that quickly disappear. They make sure to keep up their Snapstreaks, which show how many days in a row they have Snapchatted with each other. Sometimes they save screenshots of particularly ridiculous pictures of friends. “It’s good blackmail,” Athena said. (Because she’s a minor, I’m not using her real name.) She told me she’d spent most of the summer hanging out alone in her room with her phone. That’s just the way her generation is, she said. “We didn’t have a choice to know any life without iPads or iPhones. I think we like our phones more than we like actual people.”
Four families of fallen servicemembers received next-day UPS letters from President Trump after a turbulent week in which Trump falsely claimed he had called “virtually all” of the families.
Updated on October 22, 2017.
The Trump administration is scrambling to defend the president’s characterization of his communications with grieving military families, including rush-delivering letters from the president to the families of servicemembers killed months ago. Donald Trump falsely claimed this week that he had called “virtually” all fallen servicemembers’ families since his time in office.
Timothy Eckels Sr. hadn’t heard anything from President Trump since his son Timothy Eckels Jr. was killed after a collision involving the USS John S. McCain on August 21. But then, on October 20, two days into the controversy over the president’s handling of a condolence call with an American soldier’s widow, Eckels Sr. received a United Parcel Service package dated October 18 with a letter from the White House.
A stunning new speculative-fiction book by Naomi Alderman couldn’t be more timely.
One of the most succinct definitions of sexual harassment I’ve read over the past few weeks goes like this: For men, it’s anything they might say to a woman that would make them uncomfortable if it were said to them, but in prison. It’s glib, sure. But it gets at the fundamental imbalance of power that characterizes relationships between men and women. To understand what it’s like for a woman to be catcalled, or harassed, or propositioned, it isn’t enough for men to simply put themselves in that woman’s place. They also have to imagine what it’s like to sense the imminent danger in those interactions—to be weaker than their aggressor in every way, and to have that weakness woven into the fabric of society itself. As the adage often attributed to Margaret Atwood goes, “Men are afraid that women will laugh at them. Women are afraid that men will kill them.”
A neuroscientist on how we came to be aware of ourselves.
Ever since Charles Darwin published On the Origin of Species in 1859, evolution has been the grand unifying theory of biology. Yet one of our most important biological traits, consciousness, is rarely studied in the context of evolution. Theories of consciousness come from religion, from philosophy, from cognitive science, but not so much from evolutionary biology. Maybe that’s why so few theories have been able to tackle basic questions such as: What is the adaptive value of consciousness? When did it evolve and what animals have it?
The Attention Schema Theory (AST), developed over the past five years, may be able to answer those questions. The theory suggests that consciousness arises as a solution to one of the most fundamental problems facing any nervous system: Too much information constantly flows in to be fully processed. The brain evolved increasingly sophisticated mechanisms for deeply processing a few select signals at the expense of others, and in the AST, consciousness is the ultimate result of that evolutionary sequence. If the theory is right—and that has yet to be determined—then consciousness evolved gradually over the past half billion years and is present in a range of vertebrate species.
Monday afternoon, President Trump delivered a press conference from an alternative reality, or perhaps a slightly-less-dark timeline. His relationship with Mitch McConnell is great! They have the votes for Obamacare repeal! The hurricane relief effort in Puerto Rico is a smashing success! Democrats are to blame for GOP divisions on Capitol Hill! These claims range from the highly dubious to the patently false.
The foundation of Donald Trump’s presidency is the negation of Barack Obama’s legacy.
It is insufficient to statethe obvious of Donald Trump: that he is a white man who would not be president were it not for this fact. With one immediate exception, Trump’s predecessors made their way to high office through the passive power of whiteness—that bloody heirloom which cannot ensure mastery of all events but can conjure a tailwind for most of them. Land theft and human plunder cleared the grounds for Trump’s forefathers and barred others from it. Once upon the field, these men became soldiers, statesmen, and scholars; held court in Paris; presided at Princeton; advanced into the Wilderness and then into the White House. Their individual triumphs made this exclusive party seem above America’s founding sins, and it was forgotten that the former was in fact bound to the latter, that all their victories had transpired on cleared grounds. No such elegant detachment can be attributed to Donald Trump—a president who, more than any other, has made the awful inheritance explicit.
A new bookfollows Joseph Lister as he ushers surgery into the modern age.
Joseph Lister came of age as surgery was being transformed. With the invention of anesthesia, operations could move beyond two-minute leg amputations that occasionally lopped off a testicle in haste. (True story.) But as surgeons poked and prodded deeper into the body, surgery only became more deadly.
It was the infections that killed people.
And it was Lister who first realized that germ theory has profound implications for medicine. In a new biography of Lister, Lindsey Fitzharris argues that the invention of antisepsis marks the true beginning of modern surgery. The Butchering Art: Joseph Lister’s Quest to Transform the Grisly World of Victorian Medicine takes its title from Lister’s own notes, where he writes of his love for “this bloody and butcherly department of the healing art.”
Honoring the sacrifice of servicemembers requires understanding why they were put at risk, and demanding that those who did so hold themselves to account.
On Thursday morning, I planned to write a pointed screed decrying President Trump’s propensity to view the military community as a problem he can buy off with a check. Then, on Thursday afternoon, White House Chief of Staff John Kelly, himself a Gold Star father, decried the noxious politicization of the deaths of servicemembers and how we treat their families in the aftermath. His remarks gave me pause, as they were meant to.
“Let’s not let this maybe last thing that’s held sacred in our society, a young man, young woman, going out and giving his or her life for our country, let’s … keep that sacred” he implored, lamenting the ugly and voyeuristic events of the past week.
Who better to set the protocol and define the limits of this sacred space than a father who lost his son in Afghanistan? Unless you’ve walked in his shoes, don’t ask questions.