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Soros Network Ready to Boost Radical Groups

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Amidst internal dissent, George Soros’s shadowy political funding powerhouse is planning to execute a $200 million fundraising campaign this election cycle in order to benefit key groups pushing for a permanent radical left-wing Democrat majority.

The billionaire members of the elite fundraising empire known as the Democracy Alliance have reportedly funneled $500 million or more into leftist and pro-Democrat organizations. The goal of the Alliance is to foster a permanent political infrastructure of left-wing nonprofits, think tanks, media outlets, leadership schools, and activist groups.

Among the groups benefiting from the Alliance’s largesse are the John Podesta-founded Center for American Progress, Media Matters for America, America Votes, and Organizing for Action (an outfit that grew out of the Obama campaign and used to be known as Organizing for America).

Much of the money being spent by groups that enjoy support from the Democracy Alliance is being devoted to class warfare and the vilification of right-leaning billionaires Charles and David Koch in order to distract from President Obama’s failed policies. Members of the Alliance are “obsessed with” the Kochs’ funding network, according to Politico‘s Ken Vogel.

“Conservatives, particularly the Koch Brothers, are playing for keeps with an even more pronounced financial advantages [sic] than in recent election cycles,” according to a 62-page briefing book Democracy Alliance donors received before the annual spring of the group at Chicago’s luxurious Ritz-Carlton hotel.

“The briefing book reveals a sort of DA-funded extra-party political machine,” Vogel writes, “that includes sophisticated voter databases and plans to mobilize pivotal Democratic voting blocs, air ads boosting Democratic candidates, while also — perhaps ironically — working to reduce the influence of money in politics.”

As Vogel reports, the Democracy Alliance is embracing a series of projects its leadership believes help to advance the leftist cause.

According to internal documents, at the Chicago meeting the Alliance recommended increasing annual funding of the alleged “conservative misinformation” watchdog Media Matters for America from last year’s level of $2.4 million to $3 million in order to back the group’s “Metis” software for “tracking conservative smears.”

The Alliance also supports training for “acts of civil disobedience” by groups such as the New Organizing Institute, and funding for the Progressive Leaders Network, which has been described as the left-wing counterpart to the American Legislative Exchange Council. ALEC, which writes model legislation that it promotes in state legislatures, suffered mightily in past years as a result of false accusations of racism that the Van Jones-founded group Color of Change level at it based on ALEC’s previous support for voter ID laws.

The Alliance boasts that its support of Harold Ickes’s progressive voter contract outfit, Catalist, helped bring Sen. Kelly Ayotte (R-N.H.) in as a supporter of the (failed) Manchin-Toomey gun control bill, by applying voter pressure to the freshman senator.

The Alliance aspires to play a “lead national role in the fight against voter suppression in the lead up to the 2014 election” by supporting the Brennan Center at New York University. The Center generates an unending stream of propaganda promoting the lie that voter fraud is a figment of conservatives’ imagination.

But not all the limousine leftists of the Democracy Alliance are happy campers, according to internal documents obtained by Lachlan Markay of the Washington Free Beacon.

The group’s president, George Soros protege Gara LaMarche, believes the Alliance hasn’t been aggressive enough in steering the ship of state to port. He reportedly told the meeting attendees in Chicago that Alliance members need to spend “the hundreds of millions of dollars that will be necessary to make a serious effort” to elect Democratic candidates and push more leftist policies.

LaMarche acknowledged separately that some former members “had the perception we were not sufficiently independent of the Democratic Party or the White House, or failed to take a long enough view of infrastructure and power-building beyond the next election cycle.”

Facebook magnate and New Republic editor Chris Hughes joined the Democracy Alliance last year but his husband Sean Eldridge, a Democratic congressional candidate in New York, did not.

Internal documents say the two have “indicated that they are unlikely to renew their membership in 2014” but “have indicated that they would like to return to the DA at a later date.”

Two other Alliance members quit outright. Art dealer Ronald Feldman and manufacturing executive Donald Budinger left the group earlier this year.

“Three other partners—former investment banker and U.S. ambassador to Germany Phil Murphy, tech entrepreneur Tim Gill, and Steve Cohen, whose professional associations are not clear—are at risk of ceasing their involvement with the DA,” Markay writes. To offset the losses, the group aspires to bring 16 new members into the fold by the end of 2014.

According to LaMarche, some Alliance members feel there “is a sense … that we have become a bit stalled. … We haven’t grown enough as a partnership to keep pace with the challenges before us.”

The invitation-only member-based Alliance, co-founded by radical billionaire Soros, describes itself on its website as a “first-of-its-kind partnership of change-makers who are committed to a stronger democracy and a more progressive America.” The Democracy Alliance keeps its membership confidential but the names of members leak out from time to time.

The Democracy Alliance is registered as a taxable nonprofit corporation (in the District of Columbia) in order to prevent public scrutiny of its finances and internal affairs.

It is a collection of more than 100 socialist venture capitalists, spoiled brat rich kids, heirs and heiresses, Hollywood moguls, and unethical bankers that funds left-wing groups that aspire to smash the American system. It was created following the 2004 elections, which brought stinging defeats to the Left in battles for the White House, Senate, and House of Representatives — long before most in the media had even heard of the Koch brothers. Leftist blogger Markos Moulitsas has called the Alliance “a vast, Vast Left Wing Conspiracy to rival” the conservative movement.

The Democracy Alliance recently announced that its new chairman of the board is John C. Stocks, executive director of the National Education Association. His NEA bio states that the signature of his career has been “an unmatched drive for social justice and positive change in education.” He also served as a Democratic member of the Idaho state senate and was honored in 2007 by the Saul Alinsky-inspired Midwest Academy, which trains community organizers. Stocks succeeds Taco Bell heir Rob McKay as Alliance chairman.

By giving to far-left philanthropies that wish to abolish the border such as Soros’s Open Society Foundations (formerly Open Society Institute), Democracy Alliance members fund the open borders free-for-all immigration policies that laid the foundation for the ongoing invasion of southern states by illegal aliens from Latin America.

Soros himself has also given more than $100 million to groups that support “immigrant rights,” immigration amnesty, and open borders since 1997. The idea is to flood America with reliably Democratic future voters who will support Soros’s extreme policy agenda.

Soros makes little effort to conceal his contempt for this nation. He openly favors the collapse of the greenback and the decline of America in general. “The main obstacle to a stable and just world order is the United States,” he has said.

Soros praises Red China effusively, saying the totalitarian nation that cuts babies from unauthorized pregnancies from the wombs of their mothers, tortures and kills religious dissenters such as Falun Gong members, and runs over eminent domain resisters with steam-rollers, has “a better-functioning government than the United States.”

It is only logical that Hillary Clinton, who presided over the shameful Benghazi saga and coverup as secretary of state, would be Soros’s choice for the White House in 2016. Clinton is a hardcore Alinsky devotee just like President Obama.

Soros came out as an early supporter of the Benghazi bungler’s prospective presidential candidacy.

And because Soros’s wealthy leftist friends in the Democracy Alliance often follow his lead, a tsunami of early money may be poised to boost the former U.S. secretary of state’s campaign.

Whether the American people are ready for Barack Obama’s third term is a separate question.

Federal Gov’t Sues Wisconsin Company, Says English-Language Requirement is ‘Discrimination’ – WHAT?

by Brittany Hughes
The Equal Employment Opportunity Commission (EEOC), a federal agency tasked with enforcing workplace discrimination laws, is suing a private American business for firing a group of Hispanic and Asian employees over their inability to speak English at work, claiming that the English-language requirement in a U.S. business constitutes “discrimination.”

Judicial Watch reported Tuesday that the government is accusing Wisconsin Plastics, Inc. of violating Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on “national origin.” The government argues this includes the “linguistic characteristics of a national origin group.”

Irene Garcia, the blog editor and Spanish media liaison for Judicial Watch, called the EEOC’s accusation “ludicrous.”

“That’s ludicrous and an overreaching of government,” Garcia told CNSNews.com. “If you are a private company in the United States, you should be able to require your employees to speak English.”

According to a news release from the EEOC, Chicago Regional Attorney John C. Hendrickson said the Green Bay-based company’s English requirement is based on “superficial” reasoning.

Plastic factory

“Our experience at the EEOC has been that so-called ‘English only’ rules and requirements of English fluency are often employed to make what is really discrimination appear acceptable. But superficial appearances are not fooling anyone,” Hendrickson said in the release. “When speaking English fluently is not, in fact, required for the safe and effective performance of a job, nor for the successful operation of the employer’s business, requiring employees to be fluent in English usually constitutes employment discrimination on the basis of national origin — and thus violates federal law.”

But Garcia said the ability to speak English is necessary for employees of Wisconsin Plastics, Inc., but that the employees in question “were not able to speak English at any kind of level that would be considered proficient.”

“In this case some English is necessary to communicate with supervisors and stuff like that, and the EEOC just went after this private company because some employees were being marked down for not having English skills. So that doesn’t really make sense,” she said.

Garcia added that the lawsuit, filed on June 9, is just the latest in a slew of attempts by the EEOC and the Obama administration to go after American businesses for so-called “discrimination.” She cited numerous cases in which the EEOC has accused businesses of discriminating by requiring workers to speak English, running background and criminal checks, and enforcing company-wide restrictions on head coverings, including those worn by some Muslim women.

“We’ve seen some decisions that are kind of radical that we haven’t seen in the past, under Republican or Democrat administrations,” she said, claiming the EEOC under the Obama administration is “on a roll.”

Many lawsuits brought by the EEOC subjectively twist the Civil Rights Act of 1964 to include things it was never meant to cover, Garcia added.

“We’re seeing a lot of these kinds of law suits using his civil rights law to sue on behalf of all these different causes that I believe violate the spirit of the law,” Garcia explained.

“In terms of religious and language rights under the Civil Rights Act, that’s what the administration is using to offer and extend protects when really and truly there’s no place for them [in the law],” she said.

Jobless in America

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White House reaches out to Sen. Paul for economy meeting

Rand paulSen. Rand Paul, R-Ky., a frequent thorn in President Obama’s side, is among a bipartisan group of senators expected to attend the president’s announcement Thursday on the designation of “Promise Zones” to help communities tackle poverty.

Paul is also expected to join Senate Minority Leader Mitch McConnell and other lawmakers at a private meeting with the president at the White House to discuss the initiative prior to the announcement, an aide for Paul told Fox News.

Though Paul’s inclusion may seem out of place, the conservative senator recently introduced separate legislation to create “economic freedom zones” in troubled cities like Detroit where taxes and red tape would be cut in order to encourage growth.

“They say the sincerest form of flattery is imitation,” Paul told Fox News, confirming he will be at the White House on Thursday. He questioned, though, why the president’s plan does not include Detroit, as his does.

Obama’s announcement is part of a focus on income inequality in the lead-up to his State of the Union address. Promise Zones are areas where the federal government provides tax incentives and grants. Obama first announced the initiative during last year’s State of the Union speech.

An eight-county region of southeastern Kentucky will be among five locations that Obama will announce this week as “Promise Zones.” The president’s proposed zones also include San Antonio, Texas; Philadelphia; Los Angeles; and the Choctaw Nation of Oklahoma.

The Paul invitation could have the makings of another Obama “charm offensive” to reach out to Republicans, as he did early in 2013 to try — unsuccessfully — achieve a “grand bargain” budget deal.

Paul may be a particularly elusive legislative partner. Besides launching a recent class-action lawsuit against the administration over the National Security Agency’s spying practices last week, Paul has also pressed Obama on a range of issues, including a filibuster over his drone policy.

McConnell, R-Ky., said in a statement Wednesday he was pleased the Obama administration decided to include Eastern Kentucky in its promise zone designation.

“I wrote a letter last year supporting this designation because this region has suffered enormous economic hardship over the last several years,” McConnell said. “Thousands of jobs have been lost and economic opportunity is extremely limited, particularly because of this administration’s hostile policies toward the coal industry.”

Fox News’ Ed Henry and The Associated Press contributed to this report.

How to Profit During High Inflation

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If you are unable to view this email, please read it online.
Miller’s Money Weekly
DECEMBER 12, 2013 www.millersmoney.com

How to Profit During High Inflation

Anyone with a technical degree will admit that college programmed them to consider “sell” a dirty word—to think salespeople use trickery to lure consumers into buying things they don’t need. It makes no difference whether it’s an investment product or a Pet Rock; anyone involved with selling or its evil twin marketing is guilty until proven innocent.

I spent the majority of my first career in sales and marketing, where I focused on negotiations and pricing. My clients included 40 of the top 500 US corporations. Now I work alongside some of the best economists and analysts in the world, and well, let’s just say I bring a different perspective and experience base to our meetings.

That difference became apparent during a recent discussion on how our subscribers can protect themselves and even profit from inflation. We were all in agreement on several key points:

The government cannot continue to print money as it is without high inflation resulting.
Traditional investments like precious metals will soar when the world finally discovers the US dollar is worthless. Own them, be patient, and when it hits, what a ride it will be.
Billions of dollars will flow out of the stock market as interest rates begin to rise.
Certain companies and industries fare better than others in an inflationary environment. Success means investing in those companies whose stock prices and dividend appreciation will grow ahead of the rate of inflation, giving investors true gains.

Investors should look for:

Companies with a worldwide presence to hedge against the US dollar;
Companies with a history of regular dividend increases ahead of the inflation rate; and
Companies that can quickly pass through their cost increases to the market.
Take oil companies and airlines, for example. When oil companies notice some saber-rattling in the Middle East, the price at the pump can go up a nickel or more the next day. Contrast that with the airline industry, which does a very poor job in this regard.

Why do air travel and gasoline—both considered commodities—perform so differently when their costs are rising? The major oil companies understand market dynamics as well as any industry I’ve served. If an event is going to cause their costs to rise for whatever reason, it only takes one company to raise its prices, and the competition immediately follows. Market share is generally unaffected, but the entire industry makes money.

Price fixing is illegal, and that’s not what oil companies are doing. Go to the Weather Channel, surf around, and you can find the best gas prices in any given ZIP code. If you’re a dealer, you adjust your prices accordingly. After all, how far is a customer going to drive to save a couple cents per gallon when gas is priced over $3/gallon? It sounds crazy, but gas customers don’t have as much mobility as one might think. They risk spending more in gas driving around than they might save at the pump.

The airlines used to do the same thing when they were a regulated industry. One company would announce a fare increase, and all the competition would follow. Now unregulated, some airlines have significant cost advantages over their competition. A few years ago, Southwest Airlines made a huge bet on the direction of fuel prices and guessed right. It had a terrific advantage over the competition, and it was reflected in its pricing.

Unlike a driver needing gas, an air traveler has time to hop on the Internet and compare airfares quite easily, and price is a major factor when buying a plane ticket. While costs increase in the industry, those who maintain a cost advantage over their competition use that as an opportunity to increase their load factor. Instead of raising prices quickly, they lag behind. Fill just two or three more empty seats on a flight, and that income is straight profit. It is a very difficult industry in which to pass through cost increases quickly. Instead, for years the industry has scrambled to cut costs to remain profitable.

At this point, I shared what I consider to be the best place to look for companies that will beat inflation with the team. I started with two fundamental truths about cost and pricing:

In business, the cost of producing your product or service should tell you only one thing about how you should set your price: specifically, the price you don’t want to sell it for.
The selling price should be the value of your goods or services in the mind of the customer, as tempered by competition.
Too many businesses set their selling price as a formula called “cost plus,” which is the wrong way to go about it. Your cost information tells you when you’re losing money on every sale. There are companies that price their goods below cost with the intention of building up enough volume to bring their unit cost down in order to become profitable. Sometimes it works. But the sooner it does so the better, because these companies cannot continue losing money forever.

Take Amazon.com, for example. It used price as its main competitive advantage for years, delivering few if any profits for the better part of a decade as it grew. There can really be only one strong price leader, and that leader will condemn itself to being a low-margin, low-profit business so long as it competes on price alone.

From a marketing perspective, there are two different types of markets: concept and brand markets. In a concept market, a new idea, technology, philosophy, or methodology is sold. A brand market is an established market where competitors are fighting for market share.

The iPad is an easy example. The iPad was a new concept called a tablet computer. The competition was a different technology—an expensive notebook computer, your home computer, or a smartphone. In a concept market, many times you’re creating a market (tablets) at the expense of another market (portable computers). Personal computers, for their part, completely destroyed the typewriter market.

Apple is a great marketing company, its technology is excellent, and it understood it could price the new gadget below its true competition (computers) and still make terrific margins.

As a new market is created, competition sees the opportunity and jumps in. In the early stages, it validates the concept, and the total market growth accelerates even faster. Competition normally prices its product under the pricing umbrella of the market leader. At the same time, they may drop off a feature or two to keep their costs down. That further reinforces the market leader as the technology leader.

Eventually the market is created, and competition begins fighting for market share. Look at what’s happened to the printer business. Printers have now turned into a commodity—almost a disposable product, really. The market is now a brand market. Capitalism creates competition, which benefits the consumer. Each competitor is trying to convince consumers that their brand is better than the competition’s, and price is an important factor in that contest.

The next thing I look at is who dominates the market. You may be surprised to find the company with the highest quality and highest price is also a low-cost producer because they have the lion’s share of the market. Rather than cut price, Apple continues to upgrade the quality of its products to keep the competition in continual catch-up mode as opposed to leapfrogging their technology.

Because the dominant market leader provides the pricing umbrella for the industry, this creates an interesting Catch-22 in an inflationary environment. As production costs rise, the longer the dominant player hangs on, the more difficult it is for the competition, because they cannot pass on their cost increases to the consumer. If they raise prices, they will lose market share. Once the big boy announces a price increase, the rest of the market generally follows.

The dominant market leader also recognizes there are certain segments where price is a major consideration. There is now a market niche for basic, low-cost tablets. If the leader tries to cut its price to capture that segment, it has to determine how much additional share it would gain to offset the margin loss on the share it currently has. In addition, there are laws concerning predatory pricing, meaning pricing your products with the intention of driving your competition out of business. Concept sellers are generally content to open up a new market, and expect some loss of market share as it matures.

Let’s look at some real numbers:

Apple’s share price rose with the iPad very well, and it’s holding good margins. Now the iPhone5 is out, and the company is hoping for similar results.

There are many examples of concept sales in the technology sector (with which BIG TECH and Casey Extraordinary Technology subscribers should be familiar); however, concept sales take place in many markets. One of our holdings in the Money Forever portfolio has developed a new type of noninvasive medical test that gives better results with much less trauma to the patient. Its main competition is not a similar test, but rather the older, less-effective technology. As this new test becomes the standard, various brands will begin fighting over market share. In the meantime, the company is rapidly growing and maintaining excellent profit margins along the way. In turn, its shareholder value is really accelerating.

There are countless TV commercials for products and services like online dating services, reverse mortgages, or hair color for men, all of which are still in the concept stage. The companies are all still selling their idea as opposed to why they are better than the competition. Much of their success will depend on the size of the market they create with their ideas. Direct competitors offering a lower price to garner market share is of little concern.

Companies that create new concepts by finding large markets with needs begging for solutions will prosper. That’s one reason the technology sector is ripe with these success stories. How many products do we use today that were not even invented 20 years ago?

Our research team is constantly on the lookout for concept sellers in all markets throughout the world. Those who recognize the opportunity ahead of the crowd (before we learn about them on television) will see some extraordinary gains. They will thrive in any market, even during high inflation.

Concept sellers range from smaller companies with new ideas or technologies to huge companies like Apple or Sony that develop new products to fill needs they see in the market. When one finds a need and develops a product that’s in high consumer demand, its stock will generally rise, even in a tough market, and its gross margins will be protected because it can more easily pass cost increases to the customers.

If you’re not already a subscriber to BIG TECH or Casey Extraordinary Technology, I urge you to subscribe and take advantage of the 90-day money back guarantee. Both newsletters have spotted new tech trends well ahead of the crowd, and their subscribers have made spectacular profits because of it.

On the Lighter Side

Thank you to everyone who sent along positive feedback about the Oxford Club Wealth Survival Summit. If you missed it, you still have time to watch it here.

If you’re looking for a good Christmas gift, Doug Casey’s new book Right on the Money will be released on December 16. Right on the Money is the second book in the Conversations with Casey series. This time, the conversations focus on speculating, economics, investing, politics, and how to profit in times of political and economic chaos. The book is a set of keys to a potential fortune, available only to contrarians who are brave enough to use them during a time of chaos and volatility gripping our world. Click here for more information.

It looks like winter has hit a good portion of the country. Donna, our media relations manager, said the skiing in Stowe was great over the weekend.

No skiing in Florida, but I did enjoy watching football games played in blizzards. I can’t imagine 60,000 semi-sober fans leaving the stadium, finding their cars covered by a foot of fresh snow, and then trying to exit the parking lot.

The Monday night game in Chicago had a wind chill of 9 degrees below zero. Right after I married Jo, I decided to take my bride and stepdaughter Holly from Fort Myers, Florida to Chicago for a Bears game. The wind chill was well below zero, and we were bundled up as well as Floridians could be.

After the game, we went with the Bears Fan Club to Butch McGuire’s, where the team’s president gave our club president a game ball. I have a photo of Holly sitting on one of the player’s laps, grinning from ear to ear. Despite the cold, they loved it. The girls were really good troupers. But if we want to watch the Bears now, we wait until they come to Florida! I’m giving in to Father Time when it comes to cold weather.

And finally…

Speaking of time, I read some material about being politically correct. Apparently words like “old,” “fat,” “bald,” and “hard of hearing” are now offensive.

If that’s the case, your follicle-impaired, calorically gifted, chronologically blessed, and audio-challenged scribe wants to tell everyone Happy Holidays!

Until next week…

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Dennis Miller
Editor

Minimum Wages: Evaluating New Evidence on Employment Effects

David Neumark – UC-Irvine, J.M. Ian Salas – UC-Irvine Min Wages

The fierce political debate over raising the minimum wage, which is repeated yearly in legislatures across the country, has at times been matched by a strong academic debate on the subject. Specifically, economists have argued over whether a higher minimum wage reduces the employment of less-skilled jobseekers.

The published research on the subject points overwhelmingly in one direction: A summary of the last two decades of literature on the minimum wage, co-authored by the lead economist on this study, concluded that most of the evidence points to job loss following wage hikes. Economists have detected this job loss using state variation in minimum wages, with states that do not raise their minimum wage acting as a “control group” for states that do.

But today, a small group of economists has mounted an aggressive challenge to the existing academic consensus on minimum wages. In a series of studies first published through the organized labor-aligned Institute for Research on Labor and Employment (and later in the journals Review of Economics and Statistics and Industrial Relations), they’ve argued that prior studies on the minimum wage were incorrect in blaming the policy for a drop in employment opportunities among less-skilled employees (like teens) or in service-intense industries. Rather, they claim, these employment declines are due to unrelated changes in states’ economies—in particular, unexplained downturns in employment of unskilled workers that just happen to coincide with dozens of state minimum wage increases.

To get around this purported problem, they toss out most of the labor market data available to detect the effects of wage increases, and restrict their analysis to either neighboring state border counties or states in the same Census division. Using this highly-restrictive model, they claim, provides better control groups and shows that a higher minimum wage has no negative effect on employment.

With the encouragement of the economists themselves, who have a history of working in support of progressive causes, these studies (henceforth IRLE papers) have gained prominence among activist groups who leverage them to claim that mandated wage hikes will have no adverse impact on employment. (One of the economists even said explicitly at a 2010 conference in Atlanta that this research should “help to pave the way” for higher mandated wages.)

Or so they hope. But in this new study, University of California-Irvine labor economist David Neumark worked with UC-Irvine Ph.D. student J.M. Ian Salas to determine whether the IRLE papers have merit. Specifically, do the studies make good on the claim their authors’ have put forth, of overturning the decades of research preceding them? Neumark and Salas report that the evidence presented in the IRLE papers only runs contrary to earlier studies because the authors’ empirical models rely on inappropriate control groups, and toss out the economic data necessary to detect the impact of a minimum wage increase. They are unequivocal in their conclusion: “[N]either the conclusions of these studies nor the methods they use are supported by the data.”

The authors of the IRLE papers provide no direct evidence to justify their highly-restrictive study design, instead speculating that nearby states or counties constitute ideal control groups against which to measure the effects of the minimum wage. But Neumark and Salas demonstrate that the premise of the IRLE papers is wholly incorrect: If you examine the characteristics of the control counties and states used in the IRLE papers (which the authors of those papers failed to do), you find that they’re generally very poor control groups.

For instance, the authors’ preferred control for Leon County, FL—home of the Florida state capital in Tallahassee, with a population of roughly 275,000 people—is Grady County, GA, which has barely 25,000 people and no major cities.

Similarly, one control state for Connecticut—a vibrant northeastern state with 3.5 million people and $237 billion in annual economic output—is Vermont, a state with roughly 1/6th of Connecticut’s population and one-tenth its economic output.

Instead of speculating about which states represent ideal controls, Neumark and Salas closely examine the economic characteristics of all states in each Census Division, and find that it’s mostly states outside the Census Division that serve as better control groups. (A similar pattern holds for nearby counties, which they also examine individually.)

Yet all of this identifying data is discarded by the authors of the IRLE papers. In other words, the robust set of control groups the authors use actually aren’t robust at all—indeed, they’re less suited to the task at hand than studies that have come before. And in the small number of cases where nearby states or counties are appropriate controls, the data in these cases show that employment did fall after a minimum wage increase.

Given their numerous methodological problems, it’s not surprising that the evidence in favor of the empirical approach advocated in the IRLE papers is “weak or non-existent.” When the analysis is not restricted to these inappropriate control groups, the data clearly show that wage hikes do cause job loss. Indeed, in some cases Neumark and Salas find that the IRLE authors omitted evidence that exposed the weaknesses in their approach.

Neumark and Salas end with a strong admonishment to the authors of the IRLE papers: “[P]rior to concluding that one has overturned a literature based on a vast number of studies, one has to make a much stronger case that the data and methods that yield this answer are more convincing than the established research literature that finds disemployment effects, and understand why the studies in that literature would have generated misleading evidence.”

It’s a warning that the economists themselves should heed, as should legislators eager for studies (no matter their accuracy) that validate their ideological preferences.

Marine Le Pen: EU will collapse like the Soviet Union

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By Martin Banks, Henry Samuel and Alex Spillius

The leader of France’s far-Right party has vowed that the European Union would “collapse like the Soviet Union” as she conspired to form what would be the most radical faction yet seen in the European parliament.
Marine Le Pen, buoyed by a weekend by-election triumph in southern France, criticised the EU as a “global anomaly” and pledged to return the bloc to a “cooperation of sovereign states”.
She said Europe’s population had “no control” over their economy or currency, nor over the movement of people in their territory.
“I believe that the EU is like the Soviet Union now: it is not improvable,” she said. “The EU will collapse like the Soviet Union collapsed.”
Ms Le Pen, 45, will next month travel to Holland to chart a joint campaign with Geert Wilders, whose anti-Islamic Freedom Party (PVV) currently tops national opinion polls for May’s European elections.
Together they aim to establish a pan-European, far-Right parliamentary grouping that would run on an anti-immigrant, anti-integration platform. Once in office its overriding aim would be to be as disruptive as possible.
Even ardent European federalists now concede that as much as 30 per cent of the new parliament will comprise Euro-sceptics capitalising on economic misery and record levels of unemployment across Europe.
“If Eurosceptic parties are successful in 2014, this would create the most extreme European parliament ever,” Sarah Ludford, a Liberal Democrat MEP, said.
“I’m alarmed at not only their racist and discriminatory attitudes but also their protectionism and hostility to the European single market to which three million British jobs are linked.”
Guy Verhofstadt, a former Belgian PM, urged mainstream parties across Europe to stand firm against the forces of extremism that fuelled the Second World War.
“If we allow these forces to gain a foothold once again on our continent we will have wasted a century of building closer ties and condemned history to repeat itself,” he said.
President François Hollande of France warned this week that the prospect of a significant anti-EU grouping could lead to “regression and paralysis” in Europe, adding that it could threaten the continent’s ability to recover from the after-effects of the crisis in the Eurozone.
Ms Le Pen has already cultivated links with Austria’s far right Freedom Party, which gained 21 per cent of the vote in last month’s general election.
Mr Wilders, whose party was until last year a member of his country’s ruling coalition, has forged links with Vlaams Belang in Belgium, the Democratic Party in Sweden and the Northern League in Italy.
“We want to do whatever we can to turn the forthcoming European elections into a Europe-wide electoral landslide against Brussels,” said Mr Wilders.
The new anti-EU bloc would be to the Right of the existing Eurosceptic group in Brussels, Europe of Freedom and Democracy, which is dominated by the UK Independence Party.
Nigel Farage, Ukip’s leader, has ruled out any alliance with FN or PVV, saying their views on race and religion were too extreme.
It is predicted Ms Le Pen’s party could win 20 seats or more in May. Forming an official group in the European parliament requires 25 members from at least seven of the union’s 28 states.
Creating such an official faction brings major advantages such as guaranteed speaking time in debates and considerable subsidies.
Ludovic de Danne, Ms Le Pen’s international affairs adviser, said: “She is not wandering alone in the desert. If I were a federalist, I would be very, very frightened.”
In the past Mr Wilders refused to associate with FN because he disapproved of the anti-Semitic remarks of Ms Le Pen’s father, Jean-Marie Le Pen.
Since she replaced her father in January 2011, Ms Le Pen has tried to improve the party’s image and move it into Left-wing territory on social policy and economic protectionism.
Previous attempts at cooperation by the far Right in Brussels have been defeated by national rivalry and policy disagreements.
In 2007, 23 far-right and nationalist MEPs formed a group called Identity, Tradition and Sovereignty. Within months, they had broken up after Alessandra Mussolini, an Italian MEP, insulted the Romanians.

Dave Ramsey Destroys Obamacare

by Onan Cocoa

Dave Ramsey has been speaking financial sense to millions of people for years. He has taught Americans that credit is not the beautiful thing that banks and credit card companies have tried to make it out to be. He has taught Americans that spending more than you make is never a good idea. He has taught Americans that now is always the right time to fix your spending habits and get your financial house in order. A few days ago, Mr. Ramsey decided to share his wisdom with people of all political affiliations on how the Obamacare legislation would affect every American, no matter their political beliefs.

“You’re not exempt from math if you’re a Republican, and you’re not exempt from math if you’re a Democrat. You’re not exempt from math if you’re a liberal, and you’re not exempt from math if you’re a conservative. You still have to do math.”

“Pull your head far enough out of your politics to have an original thought.”

“January 1st, 2014 every insurance company is require to take on anyone, no matter how sick they are, and they canot charge them more than someone who is not ill…Your 500 lbs. you have diabetes, you’ve got cancer, you’ve had three heart attacks you’re going to pay the exact same premium as a perfectly healthy person.”

“I understand the motivation, and the nobility and the moral imperative behind that. I get that. But that doesn’t change the math, the math is that those people get sick more often and run up more medical bills than someone who is healthy. Duh.”

“If they now have to be covered by the same company that you’re covered by and they’re required to take them… then the math kicks in. Because the amount of money that that company was paying out to the medical community is going to go way up. They’re going to pay out to the medical community per person than they ever have before… what they pay out per person is how your premium is determined – plus profit.”

“Everyone is going to be charged the same. Translation you are going to pay higher premiums to keep the insurance company open, so they don’t go broke. Because they are now going to have to cover people that they didn’t have to cover before… sick people.”

“It’s a nice moral imperative, but it doesn’t change the math.”

“Translation. Your health insurance premiums are going to go WAY up. They HAVE to. It’s not that I’m mad about it, it’s not a political statement. It’s that I know how to do math.”

“Your premium went way up, your employer paying them might affect your raise. It might even affect the stability of your job because they might not be able to pay everybody, because they have higher costs of operating now… you paid for it, it’s called a pass-through, you’re going to pay for it.”

“46% of Americans pay NO income tax.”

“This is not an angry thing, it’s a math thing… we are not exempt from math. Just because you think social security is a good idea does not mean you are right, you still have to do the math.”

“If I put 10% of the money that I pay into Social Security I can beat what social security administration does with the other 90%, that’s how bad it sucks, mathematically. In other words that money is not invested it is sent to Washington and promptly stolen by them.”

“You don’t even get back what you pay in. Mathematically this is known as, sucks….”

“We got a mess up there…”

We are fortunate to have men like Dave Ramsey who can keep a calm, cool presence while explaining the horror that is Obamacare. Show this video to your liberal friends who are still defending Obamacare.

Read more at http://eaglerising.com/2254/dave-ramsey-destroys-obamacare/#Y9SW0K8qSQeeAbXu.99

The Big Squeeze on Your Wallet

Dennis Miller October 3, 2013Wallet
As the politicos in Washington continue to move the deck chairs around on the Titanic, ignoring the monster iceberg in plain sight, I’m keeping my eyes wide open. Here are a few tidbits I noticed in a recently published fact sheet from the Social Security Administration:

An estimated 161 million workers—94% of all workers—are covered under Social Security.
In 1940, the life expectancy of a 65-year-old was almost 14 years; today it is more than 20 years.
By 2033, the number of older Americans will increase from 45.1 million today to 77.4 million.
There are currently 2.8 workers for each Social Security beneficiary. By 2033, there will be 2.1 workers for each beneficiary.
We can forget about the trust fund when the cupboard is bare. Right now, today, the government collects Social Security taxes from the work force. From those receipts, it pays out Social Security benefits. In 2010 the Congressional Budget Office announced, “[T]he system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016.” Baby boomers will retire at a rate of 10,000 per day for the next 19 years, and the gap between Social Security tax revenue and expenditures will grow with each passing day.

Social Security is just the tip of the iceberg. In 2011 USA Today pegged the US government’s unfunded liabilities at $61.6 trillion. That’s $528,000 per household. I doubt most Americans, regardless of their age, have a spare half million to bail out the government. All the wealth of the Warren Buffetts and Oprah Winfreys of our country wouldn’t even make a dent.

The rest of the world knows what’s going on. Historically, other countries have lent us the money to help pay our bills. Keeping our economy in spending mode helped them sell exports to the US and create jobs. That lending is slowing down radically as the world grows concerned about the US government’s ability to pay its bills.

Foreign Awards
In January, CNS news gave us a pretty shabby report card:

“[T]he Federal Reserve revealed that its holdings of U.S. government debt had increased to an all-time record of $1,696,691,000,000 as of the close of business on Wednesday. The Fed’s holdings of U.S. government debt have increased by 257 percent since … Jan. 20, 2009, and the Fed is currently the single largest holder of U.S. government debt.”

If other countries won’t lend us money and our tax revenue is not enough to cover expenses, the Federal Reserve will just keep creating money without much more than a simple accounting entry.

What comes next? We have all heard pundits predict a crash or talk about unsustainable debt. What does that really mean? First, folks depending on the government for income or benefits will take a huge hit. Many Generation Xers (wisely) assume Social Security won’t even be around when they reach retirement age. Any help they get from the government will be icing on the cake. They know the system is unsustainable.

And while the Federal Reserve continues to create money out of thin air, Social Security gets clobbered, and expenses will continue to rise—rapidly. I asked Terry Coxon, a senior economist at Casey Research, what will happen when people catch on. He explained:

“When price inflation starts to become obvious, more and more people will behave as though they are playing a game of Old Maid. They’ll try to get rid of depreciating dollars. And that effort—to get rid of dollars before they lose even more value—will make inflation even worse. The players who diversified out of dollars early will win the game.”

Seniors and savers are particularly vulnerable during periods of high inflation. They worked hard, saved their money, and need it to last. But if their nest eggs are denominated in a rapidly inflating currency, their buying power could vanish virtually overnight. And as their nest eggs shrink, Social Security, food stamps, and government benefits will buy fewer goods and services to boot.

This is no accident, folks. Governments hopelessly in debt create inflation so they can pay their obligations with depreciated currency units.

The big squeeze is coming. It will trap us between rising costs and withering incomes. Carter-era inflation is the closest most Americans have come to what lies ahead. Let me refresh your memory.

1977—6.5% inflation
1978—7.6% inflation
1979—11.3% inflation
1980—13.5% inflation
1981—10.3% inflation
It wasn’t pretty. Imagine you bought a $100,000, five-year certificate of deposit on January 1, 1977. The interest rate for the CD was 6%, paid annually, and you were in the 25% income tax bracket. At the end of five years, assuming you reinvested your after-tax interest income, you would have received $24,600 plus your initial $100,000 investment. Would you have been any better off? No.In January, CNS news gave us a pretty shabby report card:

“[T]he Federal Reserve revealed that its holdings of U.S. government debt had increased to an all-time record of $1,696,691,000,000 as of the close of business on Wednesday. The Fed’s holdings of U.S. government debt have increased by 257 percent since … Jan. 20, 2009, and the Fed is currently the single largest holder of U.S. government debt.”

If other countries won’t lend us money and our tax revenue is not enough to cover expenses, the Federal Reserve will just keep creating money without much more than a simple accounting entry.

What comes next? We have all heard pundits predict a crash or talk about unsustainable debt. What does that really mean? First, folks depending on the government for income or benefits will take a huge hit. Many Generation Xers (wisely) assume Social Security won’t even be around when they reach retirement age. Any help they get from the government will be icing on the cake. They know the system is unsustainable.

And while the Federal Reserve continues to create money out of thin air, Social Security gets clobbered, and expenses will continue to rise—rapidly. I asked Terry Coxon, a senior economist at Casey Research, what will happen when people catch on. He explained:

“When price inflation starts to become obvious, more and more people will behave as though they are playing a game of Old Maid. They’ll try to get rid of depreciating dollars. And that effort—to get rid of dollars before they lose even more value—will make inflation even worse. The players who diversified out of dollars early will win the game.”

Seniors and savers are particularly vulnerable during periods of high inflation. They worked hard, saved their money, and need it to last. But if their nest eggs are denominated in a rapidly inflating currency, their buying power could vanish virtually overnight. And as their nest eggs shrink, Social Security, food stamps, and government benefits will buy fewer goods and services to boot.

This is no accident, folks. Governments hopelessly in debt create inflation so they can pay their obligations with depreciated currency units.

The big squeeze is coming. It will trap us between rising costs and withering incomes. Carter-era inflation is the closest most Americans have come to what lies ahead. Let me refresh your memory.

1977—6.5% inflation
1978—7.6% inflation
1979—11.3% inflation
1980—13.5% inflation
1981—10.3% inflation
It wasn’t pretty. Imagine you bought a $100,000, five-year certificate of deposit on January 1, 1977. The interest rate for the CD was 6%, paid annually, and you were in the 25% income tax bracket. At the end of five years, assuming you reinvested your after-tax interest income, you would have received $24,600 plus your initial $100,000 investment. Would you have been any better off? No.

Inflation
Your net return adjusted for inflation would have been $74,100. That’s a 25.9% decline in purchasing power. Inflation would have reduced your net worth by the cost of a well-equipped, mid-size automobile.

Inflation can devastate our standard of living. We know prices are going up. Money doesn’t seem to go as far, but it’s tough to calculate the decline. Still, we know we need to do something.

How can we protect ourselves? Holding assets that historically retain their value is a good start. Gold and precious metals are a prime example. Those who specialize in precious metals like to point out that gold is not getting more expensive; our currency is just losing its value.

Farmland and foreign currencies in countries that are not papering over their debt are also viable sources of protection.

Money Forever subscribers know that we subject our portfolio investments to a Five-Point Balancing Test. Number 4 is: “Does it protect against inflation?” In part, that means investing in companies with a large international base. There are many foreign companies that trade in the US market, and we keep our eyes peeled for the best among them.

When a currency experiences high inflation, no one wants it. In our lifetimes the currencies of Argentina, Brazil, Mexico, and Zimbabwe have become totally worthless. Those who followed Terry’s advice and got out of those currencies early kept a much larger portion of their wealth.

When ultra-high inflation arrives, desperate governments will do anything to protect themselves. Instituting currency controls that make it difficult, if not impossible, for their citizens to dump a quickly depreciating currency is one of their favorite moves. By then it may be too late to protect ourselves.

The time to discard your Old Maid card and pick up inflation protection opportunities is now. When it comes to protecting your life savings, it is far better to take precautionary steps a year early than one day too late. If you’d like access to inflation-protecting investments specifically curated for seniors and savers, click here to become a Money Forever subscriber today.

On the Lighter Side

Baseball post-season playoffs are here. Congratulations to the Cleveland Indians, who won their last 10 games in a row to make the playoffs. Texas won their last seven in a row to tie Tampa for the wild-card spot.

The National League had five teams reach the playoffs, including three from the Central Division with over 90 wins each. Of course, my beloved Cubs ended up in last place in the Division. To add insult to injury, in the last week of the season, three teams clinched the playoffs by beating the Cubs, and the losers got to watch them celebrate.

The day after the regular season ended, the Cubs fired their manager. A friend asked me what I thought about it. I responded, “They haven’t won the World Series in the last 105 years, so changing the manager hasn’t worked so far!” We have to keep things in perspective.

As long as I’m mentioning perspective, I should touch on the government shutdown. This charade will play itself out and some sort of stupid compromise will be reached. How many more years can they kick the can down the road before Terry’s prediction about inflation becomes our reality?

And finally…

My friend Bob L. sent over lines from famous hits of our youth, redone for seniors.

Splish, splash, I was havin’ a flash
Mrs. Brown, you’ve got a lovely walker
I get by with a little help from Depends
On the commode again
Come on, folks. I know you sang along while you read those.

Recognizing the End of the Chinese Economic Miracle

By George Friedmanchinese-red-dragon

Major shifts underway in the Chinese economy that Stratfor has forecast and discussed for years have now drawn the attention of the mainstream media. Many have asked when China would find itself in an economic crisis, to which we have answered that China has been there for awhile — something not widely recognized outside China, and particularly not in the United States. A crisis can exist before it is recognized. The admission that a crisis exists is a critical moment, because this is when most others start to change their behavior in reaction to the crisis. The question we had been asking was when the Chinese economic crisis would finally become an accepted fact, thus changing the global dynamic.

Last week, the crisis was announced with a flourish. First, The New York Times columnist and Nobel Prize-recipient Paul Krugman penned a piece titled “Hitting China’s Wall.” He wrote, “The signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.”

Later in the week, Ben Levisohn authored a column in Barron’s called “Smoke Signals from China.” He wrote, “In the classic disaster flick ‘The Towering Inferno’ partygoers ignored a fire in a storage room because they assumed it has been contained. Are investors making the same mistake with China?” He goes on to answer his question, saying, “Unlike three months ago, when investors were placing big bets that China’s policymakers would pump cash into the economy to spur growth, the markets seem to have accepted the fact that sluggish growth for the world’s second largest economy is its new normal.”

Meanwhile, Goldman Sachs — where in November 2001 Jim O’Neil coined the term BRICs and forecast that China might surpass the United States economically by 2028 — cut its forecast of Chinese growth to 7.4 percent.

The New York Times, Barron’s and Goldman Sachs are all both a seismograph of the conventional wisdom and the creators of the conventional wisdom. Therefore, when all three announce within a few weeks that China’s economic condition ranges from disappointing to verging on a crash, it transforms the way people think of China. Now the conversation is moving from forecasts of how quickly China will overtake the United States to considerations of what the consequences of a Chinese crash would be.

Doubting China

Suddenly finding Stratfor amid the conventional wisdom regarding China does feel odd, I must admit. Having first noted the underlying contradictions in China’s economic growth years ago, when most viewed China as the miracle Japan wasn’t, and having been scorned for not understanding the shift in global power underway, it is gratifying to now have a lot of company. Over the past couple of years, the ranks of the China doubters had grown. But the past few months have seen a sea change. We have gone from China the omnipotent, the belief that there was nothing the Chinese couldn’t work out, to the realization that China no longer works.

It has not been working for some time. One of the things masking China’s weakening has been Chinese statistics, which Krugman referred to as “even more fictional than most.” China is a vast country in territory and population. Gathering information on how it is doing would be a daunting task, even were China inclined to do so. Instead, China understands that in the West, there is an assumption that government statistics bear at least a limited relationship to truth. Beijing accordingly uses its numbers to shape perceptions inside and outside China of how it is doing. The Chinese release their annual gross domestic product numbers in the third week of January (and only revise them the following year). They can’t possibly know how they did that fast, and they don’t. But they do know what they want the world to believe about their growth, and the world has believed them — hence, the fantastic tales of economic growth.

China in fact has had an extraordinary period of growth. The last 30 years have been remarkable, marred only by the fact that the Chinese started at such a low point due to the policies of the Maoist period. Growth at first was relatively easy; it was hard for China to do worse. But make no mistake: China surged. Still, basing economic performance on consumption, Krugman notes that China is barely larger economically than Japan. Given the compounding effects of China’s guesses at GDP, we would guess it remains behind Japan, but how can you tell? We can say without a doubt that China’s economy has grown dramatically in the past 30 years but that it is no longer growing nearly as quickly as it once did.

China’s growth surge was built on a very unglamorous fact: Chinese wages were far below Western wages, and therefore the Chinese were able to produce a certain class of products at lower cost than possible in the West. The Chinese built businesses around this, and Western companies built factories in China to take advantage of the differential. Since Chinese workers were unable to purchase many of the products they produced given their wages, China built its growth on exports.

For this to continue, China had to maintain its wage differential indefinitely. But China had another essential policy: Beijing was terrified of unemployment and the social consequences that flow from it. This was a rational fear, but one that contradicted China’s main strength, its wage advantage. Because the Chinese feared unemployment, Chinese policy, manifested in bank lending policies, stressed preventing unemployment by keeping businesses going even when they were inefficient. China also used bank lending to build massive infrastructure and commercial and residential property. Over time, this policy created huge inefficiencies in the Chinese economy. Without recessions, inefficiencies develop. Growing the economy is possible, but not growing profitability. Eventually, the economy will be dragged down by its inefficiency.

Inflation vs. Unemployment

As businesses become inefficient, production costs rise. And that leads to inflation. As money is lent to keep inefficient businesses going, inflation increases even more markedly. The increase in inefficiency is compounded by the growth of the money supply prompted by aggressive lending to keep the economy going. As this persisted over many years, the inefficiencies built into the Chinese economy have become staggering.

The second thing to bear in mind is the overwhelming poverty of China, where 900 million people have an annual per capita income around the same level as Guatemala, Georgia, Indonesia or Mongolia ($3,000-$3,500 a year), while around 500 million of those have an annual per capita income around the same level as India, Nicaragua, Ghana, Uzbekistan or Nigeria ($1,500-$1,700). China’s overall per capita GDP is around the same level as the Dominican Republic, Serbia, Thailand or Jamaica. Stimulating an economy where more than a billion people live in deep poverty is impossible. Economic stimulus makes sense when products can be sold to the public. But the vast majority of Chinese cannot afford the products produced in China, and therefore, stimulus will not increase consumption of those products. As important, stimulating demand so that inefficient factories can sell products is not only inflationary, it is suicidal. The task is to increase consumption, not to subsidize inefficiency.

The Chinese are thus in a trap. If they continue aggressive lending to failing businesses, they get inflation. That increases costs and makes the Chinese less competitive in exports, which are also falling due to the recession in Europe and weakness in the United States. Allowing businesses to fail brings unemployment, a massive social and political problem. The Chinese have zigzagged from cracking down on lending by regulating informal lending and raising interbank rates to loosening restrictions on lending by removing the floor on the benchmark lending rate and by increasing lending to small- and medium-sized businesses. Both policies are problematic.

The Chinese have maintained a strategy of depending on exports without taking into account the operation of the business cycle in the West, which means that periodic and substantial contractions of demand will occur. China’s industrial plant is geared to Western demand. When Western demand contracted, the result was the mess you see now.

The Chinese economy could perhaps be growing at 7.4 percent, but I doubt the number is anywhere near that. Some estimates place growth at closer to 5 percent. Regardless of growth, the ability to maintain profit margins is rarely considered. Producing and selling at or even below cost will boost GDP numbers but undermines the financial system. This happened to Japan in the early 1990s. And it is happening in China now.

The Chinese can prevent the kind of crash that struck East Asia in 1997. Their currency isn’t convertible, so there can’t be a run on it. They continue to have a command economy; they are still communist, after all. But they cannot avoid the consequences of their economic reality, and the longer they put off the day of reckoning, the harder it will become to recover from it. They have already postponed the reckoning far longer than they should have. They would postpone it further if they could by continuing to support failing businesses with loans. They can do that for a very long time — provided they are prepared to emulate the Soviet model’s demise. The Chinese don’t want that, but what they do want is a miraculous resolution to their problem. There are no solutions that don’t involve agony, so they put off the day of reckoning and slowly decline.

China’s Transformation

The Chinese are not going to completely collapse economically any more than the Japanese or South Koreans did. What will happen is that China will behave differently than before. With no choices that don’t frighten them, the Chinese will focus on containing the social and political fallout, both by trying to target benefits to politically sensitive groups and by using their excellent security apparatus to suppress and deter unrest. The Chinese economic performance will degrade, but crisis will be avoided and political interests protected. Since much of China never benefited from the boom, there is a massive force that has felt marginalized and victimized by coastal elites. That is not a bad foundation for the Communist Party to rely on.

The key is understanding that if China cannot solve its problems without unacceptable political consequences, it will try to stretch out the decline. Japan had a lost decade only in the minds of Western investors, who implicitly value aggregate GDP growth over other measures of success such as per capita GDP growth or full employment. China could very well face an extended period of intense inwardness and low economic performance. The past 30 years is a tough act to follow.

The obvious economic impact on the rest of the world will fall on the producers of industrial commodities such as iron ore. The extravagant expectations for Chinese growth will not be met, and therefore expectations for commodity prices won’t be met. Since the Chinese economic failure has been underway for quite awhile, the degradation in prices has already happened. Australia in particular has been badly hit by the Chinese situation, just as it was by the Japanese situation a generation ago.

The Chinese are, of course, keeping a great deal of money in U.S. government instruments and other markets. Contrary to fears, that money will not be withdrawn. The Chinese problem isn’t a lack of capital, and repatriating that money would simply increase inflation. Had the Chinese been able to put that money to good use, it would have never been invested in the United States in the first place. The outflow of money from China was a symptom of the disease: Lacking the structure to invest in China, the government and private funds went overseas. In so doing, Beijing sought to limit destabilization in China, while private Chinese funds looked for a haven against the storm that was already blowing.

Rather than the feared repatriation of funds, the United States will continue to be the target of major Chinese cash inflows. In a world where Europe is still reeling, only the United States is both secure and large enough to contain Chinese appetites for safety. Just as Japanese investment in the 1990s represented capital flight rather than a healthy investment appetite, so the behavior we have seen from Chinese investors in recent years is capital flight: money searching for secure havens regardless of return. This money has underpinned American markets; it is not going away, and in fact more is on the way.

The major shift in the international order will be the decline of China’s role in the region. China’s ability to project military power in Asia has been substantially overestimated. Its geography limits its ability to project power in Eurasia, an endeavor that would require logistics far beyond China’s capacity. Its naval capacity is still limited compared with the United States. The idea that it will compensate for internal economic problems by genuine (as opposed to rhetorical) military action is therefore unlikely. China has a genuine internal security problem that will suck the military, which remains a domestic security force, into actions of little value. In our view, the most important shift will be the re-emergence of Japan as the dominant economic and political power in East Asia in a slow process neither will really want.

China will continue to be a major power, and it will continue to matter a great deal economically. Being troubled is not the same as ceasing to exist. China will always exist. It will, however, no longer be the low-wage, high-growth center of the world. Like Japan before it, it will play a different role.

In the global system, there are always low-wage, high-growth countries because the advanced industrial powers’ consumers want to absorb goods at low wages. Becoming a supplier of those goods is a major opportunity for, and disruptor to, those countries. No one country can replace China, but China will be replaced. The next step in this process is identifying China’s successors.

Read more: Recognizing the End of the Chinese Economic Miracle | Stratfor
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