Fed flunks econ 101: understanding inflation | MarketWatch

Caroline Baum’s opinion on the Fed’s approach to inflation:

For all the sturm und drang about the Fed debasing the dollar and sowing the seeds of the next great inflation, the public’s demand for money has increased. The increased desire to hold cash and checkable deposits has risen to meet the increased supply. Velocity, or the rate at which money turns over, has plummeted.

The Fed has two choices. It can adopt the Dr. Strangelove approach and learn to stop worrying and live with low inflation and low unemployment. Or it can do something about it, which runs counter to its stated intention to raise the funds rate and reduce the size of its balance sheet.

Option #1 involves learning to live with a low, stable inflation rate about 0.5 percentage point below the Fed’s explicit 2% target.

Not only has the Fed has achieved price stability in objective terms, but it has also fulfilled former Fed Chairman Alan Greenspan’s subjective definition of price stability: a rate of inflation low enough that it is not a factor in business or household decision-making.

Option #2 means taking some additional actions to increase the money supply by lowering interest rates or resuming bond purchases. The Fed is taking the opposite approach. It began its balance sheet normalization this month, allowing $10 billion of securities to mature each month and gradually increasing the amount every quarter. And it has guided markets to expect another 25-basis-point rate increase in December….

The Fed faces a delicate balancing act. Unemployment is low but capacity utilization is also low, indicating an absence of inflationary pressure.

Capacity Utilization

Janet Yellen understandably wants to normalize interest rates ahead of the next recession but she can afford to take her time. The economy is unlikely to tip into recession unless the Fed hikes rates too quickly, causing a monetary contraction.

I believe the Fed chair is relying on the outflow from more than $2 trillion of excess reserves held by banks on deposit with the Fed to offset the contractionary effect of any rate hikes.

Capacity Utilization

If pushed, the Fed could lower the interest rate paid on excess reserves in order to encourage banks to withdraw excess deposits. But so far this hasn’t been necessary. The attraction of higher interest rates in financial markets has been sufficient to encourage a steady outflow from excess reserves, keeping the monetary base (net of reserves) growing at a steady clip of close to 7.5% p.a. despite rate hikes so far.

Capacity Utilization

Inflation is always and everywhere a monetary phenomenon. ~ Milton Friedman

Makes you wonder why Donald Trump would even consider replacing the Fed chair when she is doing such a great job of managing the recovery.

Source: Fed flunks econ 101: understanding inflation – MarketWatch

Dow Hits Another Milestone, But Signs of Caution Loom – WSJ

By Corrie Driebusch and Michael Wursthorn Updated Oct. 18, 2017 9:04 p.m. ET

The Dow Jones Industrial Average powered past 23000 on Wednesday, but the latest milestone masks a potentially worrisome trend: investors keep yanking money out of stock funds.

Investors pulled roughly a net $36 billion out of U.S. stock mutual and exchange-traded funds in the third quarter, according to EPFR Global. Overall in 2017, more money has flowed out of such funds than has flowed in, EPFR data show, even as the Dow has climbed to 51 fresh highs this year….

Source: Dow Hits Another Milestone, But Signs of Caution Loom – WSJ

Gold and Crude Oil

Nymex Light Crude continues to test resistance at $52/barrel. A rising Trend Index signals buying pressure. Breakout above $52 would offer a target of $54. There is a broad band of resistance between $50 and $54 as illustrated on the chart below. Breakout above $54/barrel would signal another long-term advance. But long-term consolidation below $54 is as likely.

Nymex Light Crude

High gold prices historically tend to coincide with high crude prices. The chart below shows crude oil and gold prices over the last 50 years, after adjusting for inflation.

Gold and Crude prices adjusted by CPI

Present low crude prices suggest that gold will weaken.

Spot Gold rallied off support at $1260/ounce on the daily chart but encountered resistance at $1300. Consolidation between $1290 and $1275 now indicates uncertainty, while a declining Trend Index warns of selling pressure.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Dollar strength is another key influence on gold prices. After a lengthy sell-off, the Dollar Index found support at 91. Breakout above resistance at 94 would indicate this is more than just a typical bear market rally. Until then, another test of primary support at 91 remains likely; breach would warn of another major decline.

Dollar Index

China’s bank chief warns of a ‘sharp correction’

Ambrose Evans-Pritchard reports on a statement by Zhou Xiaochuan, the governor of the People’s Bank (PBOC):

Mr Zhou told China Daily that asset speculation and property bubbles could pose a “systemic financial risk”, made worse by the plethora of wealth management products, trusts, and off-books lending.

He warned that corporate debt had reached disturbingly high levels and that local governments were using tricks to evade credit curbs.”If there is too much pro-cyclical stimulus in an economy, fluctuations will be hugely amplified. Too much exuberance when things are going well causes tensions to build up. That could lead to a sharp correction, and eventually lead to a so-called Minsky Moment. That’s what we must really guard against,” he said.

The function of the central bank is to remove the punch bowl just as the party really gets going (William McChesney Martin jr., Fed chair 1951 – 1970). It looks like the PBOC may have left it too late:

Non-financial debt has galloped up to 300 per cent of gross domestic product – uncharted territory for a big developing economy.

The International Monetary Fund says debts in the shadow banking system grew by 27 per cent last year.

Less widely known is that the “augmented” budget deficit – including local government spending and the deficits of quasi-state entities – has jumped to 13 per cent of GDP. This is an astonishing level of fiscal stimulus at this stage of the economic cycle. It was around 6 per cent in 2010….

What this means is that public and quasi-public debt in China is growing at the rate of 13% of GDP. China has achieved its growth targets but at what cost to economic stability? There are no free lunches, especially from the “perpetual leveraging doomsday debt machine”.

Source: China’s bank chief warns of a ‘sharp correction’

ASX 200 meets resistance as miners retreat

The ASX 300 Metals & Mining index breached its new support level at 3300, warning of a bull trap. Penetration of the rising trendline would test primary support at 3100.

ASX 300 Metals and Mining

The divergence between iron ore and miners was bound to end and a correction of the Metals & Mining index is now likely. Iron ore below support at $62 warns of a test of primary support at $53. Declining Twiggs Trend Index signals selling pressure.

Iron ore

The ASX 200 encountered resistance at 5900. Retracement is likely to test the new support level at 5800 (top of the narrow ‘line’ formed over the last four months). Twiggs Money Flow reversal below zero would be a bearish sign.

ASX 200

The ASX 300 Banks index are testing resistance at 8800. Respect of resistance would warn of another test of primary support at 8000.

ASX 300 Banks

If banks and miners both turn bearish, the index is likely to follow.

Australian growth faces headwinds but the index has other ideas

Bill Evans at Westpac sums up their outlook for the Australian economy:

….Constraints on growth next year are likely to centre on a lack lustre consumer who struggles under the weight of weak wages growth; high energy prices and excessive leverage. Conditions in housing markets, particularly in the eastern states, are likely to soften while the residential construction boom will turn down.

We are also less euphoric about growth prospects for our major trading partners than seems to be the current consensus. We expect China’s growth rate to slow from 6.7% to 6.2% as the authorities step up policies to slow its long running credit boom.

Yet the ASX 200 broke out of its line formed over the last 4 months, signaling a primary advance.

ASX 200

Miners are advancing, with the ASX 300 Metals & Mining Index breaking resistance at 3300.

ASX 300 Metals & Mining Index

The ASX 300 Banks Index is headed for a test of 8800. Upward breakout would complete a bullish outlook for the ASX 200.

ASX 300 Banks Index

Last Australian car-maker exits

An emotive moment for many Australians:

On Friday morning, a unique group of workers will slip into their uniforms: denim jeans, dark boots and black collared jumpers. Some will make coffee, or have a bite to eat, before arriving at their factory, a bit later than usual…..

Production has been winding down. By the time they arrive today, the machines will have already stopped for good.

And just before noon, the workers inside – all 1000 of them – will gather around to mark a very special moment: when the last-ever car was built in this country….

The climb in the Australian Dollar from 50 cents in 2001 to $1.10 in 2011 was more than local motor manufacturers could handle. The last straw.


Could this have been avoided?

“Dutch Disease” is a term coined by The Economist to describe the experience of the Netherlands in the 1960s. Discovery of extensive gas reserves caused an influx of investment to establish new gas fields. Large capital inflows drove up the exchange rate, blighting the local manufacturing sector.

Australia experienced a similar influx of investment in response to the commodities boom of the early 2000s. The Australian Dollar more than doubled in value against the greenback in the 10 years to 2011, while manufacturing employment in Australia headed in the opposite direction.

Decline of Australian Manufacturing

Norway faced a similar problem with the discovery of large oil reserves in the 1980s. To cushion local industry from a steep rise in the Norwegian krone, the government channeled a percentage of oil revenues, roughly equal to the trade surplus, into a sovereign wealth fund. The fund invests mainly in stocks and bonds on major global markets. With assets now exceeding $1 trillion the investment outflow has helped to soften the impact on the currency from rising oil revenues.

Chile followed Norway’s example, investing its trade surplus from copper exports in a sovereign wealth fund.

The Australian government, on the other hand, distributed its trade surplus, hoping to win votes at the next election. Resulting in a housing bubble and a decimated manufacturing sector.

Source: Holden assembly workers despair as last Australian car-maker exits manufacturing

Bank rally boosts the ASX

Banks rallied, with the ASX 300 Banks index breaking 8500 to signal another test of resistance at 8800. Breakout above 8800 would signal resumption of the primary up-trend but expect retracement to first test the new support level. I will remain wary of banks until the support level is respected.

ASX 300 Banks

The bank rally helped to lift the ASX 200 above resistance at 5800 — from the narrow ‘line’ formed over the last four months. Breakout signals another primary advance but again wait for retracement to respect the new support level. Respect would confirm a test of the 2015 high at 6000. Twiggs Money Flow peaks below zero still warn of long-term selling pressure. Reversal below 5800 would mean all bets are off.

ASX 200

On a more bearish note, iron ore is heading for a test of primary support at $53. Declining Twiggs Trend Index signals selling pressure. Breach of primary support would spell trouble for the miners.

Iron ore

The ASX 300 Metals & Mining index rally continues but another test of 3100 is likely. Breach of 3100 would most likely drag the ASX 200 (and banks) lower.

ASX 300 Metals and Mining

Dollar rally stalls, Gold bounces

Nymex Light Crude is still testing support at $50/barrel. Follow-through above $52 would signal another advance, with a target of $54/barrel. Reversal below $49 and the rising trendline, however, would warn of trend weakness. A primary up-trend would be bearish for the Dollar and bullish for gold.

Nymex Light Crude

The Dollar Index bear market rally found resistance at 94 and is now retracing to find support. Breach of primary support at 91 would signal another major decline. Respect, on the other hand, would suggest that a base is forming.

Dollar Index

Spot Gold underwent a deep correction but is now rallying as the Dollar stalls. Political tensions remain high, both within the White House and without, and the Dollar remains in a bear market. Breakout above $1300 would reflect strong upward pressure, suggesting another test of $1350. Retreat from $1300 is not necessarily bearish. Respect of support at $1250 would suggest that a base is forming. Breach of $1250, on the other hand, would warn that the primary up-trend that started in early 2017 is weakening.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Beijing Pushes for a Direct Hand in China’s Big Tech Firms – WSJ

By Li Yuan, Updated Oct. 11, 2017 7:27 p.m. ET:

The Chinese government is pushing some of its biggest tech companies–including Tencent, Weibo and a unit of Alibaba–to give the state a stake in them and a direct role in corporate decisions, according to people close to the companies.

While the authoritarian government already exerts heavy sway over businesses through regulation, a management role would give Beijing a direct hand in innovative companies that service hundreds of millions of Chinese. The biggest of these companies have expanded beyond their original niches into finance, health care and transportation, collecting data that give them unparalleled insights into people’s lives. Some companies privately say they are wary of the move, because of the power balance….

A major concern as China moves away from free market reforms and towards more autocratic control. See China’s push for hegemony.

Source: Beijing Pushes for a Direct Hand in China’s Big Tech Firms – WSJ

The truth about our debt

Stephen Koukoulas says Australians have little to worry about high household debt:

….According to the latest data complied by the RBA, household assets are growing very strongly, aided by a building up in savings, unrelenting growth in superannuation holdings, growth in bank deposits and of course, from rising house prices.

While household debt is indeed just under 200 per cent of disposable income, household holdings of financial assets, which includes superannuation, direct share holdings and deposits, is now over 400 per cent of income…..

….The total value of housing in Australia is …. over 500 per cent of disposable income.

…. for every $1 of debt that the house sectors has, they have $5 of assets, which is a loan to value ratio of 20 per cent.

…..while the asset side of the household balance sheet remains healthy, the debt side will remain a non-problem.

That’s the problem with averages, they conceal a multitude of sins. Many Australians own houses without a mortgage. Probably the same group own most of Australia’s financial assets. They are financially secure, no doubt, and help to make the averages look reasonable.

But there are vast numbers of Australians in the mortgage belt with low financial assets and high loan-to-value ratios (LVRs) on their household mortgage. Any rise in interest rates would cause them financial stress and the impact of this would flow through the entire economy.

From Elizabeth Tilley at the Courier Mail:

Almost 50,000 households are at risk of defaulting on their home loans in the next 12 months and nearly a third of homeowners are in mortgage stress, new figures show.

The latest mortgage stress and default modelling from Digital Finance Analytics for the month of September reveals more than 905,000 households are estimated to be in mortgage stress — 45,000 more than there were the month prior.

….Of those households, 18,000 are in severe stress, which means they are unable to meet home loan repayments with their current income.

Not quite as rosy as the averages may seem.

Source: The truth about our debt

Hat tip to Macrobusiness.

Why is Macquarie long the “perpetual leveraging doomsday machine” | Macrobusiness

By David Llewellyn-Smith (“Houses & Holes”)
Reproduced with kind permission from Macrobusiness:

Great stuff today from the always entertaining and cross-disciplinary Viktor Shvets at Macquarie:

Investors seem to be residing in a world without any notable perceived risks. It is an extraordinary and unprecedented situation, particularly given unresolved issues of over leveraging and associated over capacity as well as profound disruption of business and economic models, which are not just depressing inflation but also causing extreme political and electoral outcomes while feeding Maslowian-type disappointments across labour markets.

What can explain such lack of concern regarding potential risks?

In our view, the only answer is one of investors’ perception that, as we discussed in our preview of 2H’17, ‘slaves must remain slaves’ and hence, neither Central Banks nor other public institutions can afford to step aside but need to continue to guarantee asset price inflation. In its turn, this can only be achieved by ensuring that volatilities are contained (as they are the deadliest enemy of an ongoing leveraging) and liquidity is expanding at a sufficient pace to accommodate nominal demand.

The optimists would argue that the productivity slowdown that the world experienced over the last decade was primarily caused by the global financial crisis (GFC) and that we are starting to turn the corner. Hence, optimists argue that velocity of money is likely to improve, and this would allow Central Banks to gradually (and very carefully) withdraw liquidity and rate supports. While this is the ‘dream outcome’ from Central Banks’ perspective, we don’t see any convincing evidence that this is occurring.

We maintain that the best explanation for investors’ perception that risks are low is that a combination of Central Banks’ liquidity (still running at ~US$1.5-2.0 trillion per annum), an assumption that Central Banks would swiftly reverse their policies at the slightest sign of volatility reemerging, and China’s real estate and infrastructure investment, act as ‘risk buffers’. Investors seem to believe that liquidity cannot be withdrawn, volatility must be arrested and cost of capital cannot go up, and hence, financial assets are in many ways underwritten. While Central Banks would like to have a little bit more volatility and a little bit more price discovery, they would be highly averse to shocking what is the highly financialized and leveraged global economy.

While it is hard to back what is essentially a long-term ‘doomsday’ machine, nevertheless, the above describes our view. We remain constructive on financial assets (both equities and bonds), not because we expect a return to self-sustaining private sector led recovery and growth but because we believe that an ongoing financialization is the only politically and socially acceptable answer. In our view, therefore, the greatest risk is one of policy miscalculation.

We remain constructive on financial assets, not because we believe in a sustainable recovery, but because we back the perpetual leveraging ‘doomsday’ machine.

Shvets has been pushing the “long grinding cycle” narrative for a number years now:

Despite all these challenges, Shvets still recommends his clients to invest in certain types of stocks. “The outcomes of the next 10-15 years could be quite dramatic. How do you invest in that climate? There are only two ways of investing. The first is: Assume non-mean reversion. The private sector will never recover. The only thing left would be the public sector cycle.”

This means we can conveniently forget about corporate profits, or valuations like the price-earnings ratio of the S&P 500, as many investors already have done. The only thing that matters is public sector activity in the form of central bank intervention or government stimulus programs.

An extreme example of this cycle is perhaps Venezuela. While the country is going up in flames, people don’t have enough food, and the currency is dissolving itself in a vicious hyperinflation, the stock market actually went up 10 times since the beginning of 2012. Only recently has reality caught up with stocks and the market gave up 15 percent of its gains since the beginning of the year.

‘Buy quality sustainable growth, high returns on equity. Companies capable to generate a high return on equity through margins and without leverage. Don’t worry about the price to earnings ratio, there is no mean reversion,” says Shvets. And don’t own any financials. Good advice. The stock price of the likes of Deutsche Bank and Credit Suisse have been decimated this year.

The share prices of Deutsche Bank AG (DBK) and Credit Suisse AG (CSGN) have both lost almost 50 percent of their value this year (Source: Google Finance).

The other option is to invest along some pretty grim themes which benefit from the new trends identified by Shvets. “People are still going back to 20th-century thematics, it’s so old-fashioned.”

None of the new trends can be described as inspirational or uplifting, but the Macquarie portfolio reflecting the themes has bested the MSCI World Index by almost 30 percent since the beginning of 2015.

“The biggest theme is declining return on humans, the replacement of humans, biotech, augmentation of humans, opium for the people, like computer games and gambling,” Shvets said.

Performance of the Macquarie Group Thematics portfolio (Macquarie Group)

Then there are themes catering to geopolitical risk and potential regional war or civil uprisings, like detention and prison centers, weapons, and drones. Another theme supports the aging demography in the West, so companies holding hospitals, funeral operators, and psychiatric institutions should do well.

On the positives, Shvets notes technological disruptors like Amazon and Google. All those companies should be independent of the government and long-term structural shifts. “They go on no matter what.”

If readers shy away from profiting from these themes, there is always gold.

“If you think of gold, the only way gold loses is if normal business and private sector cycles come back. If that is the case, gold goes back $100 per ounce. The other outcomes: deflation, stagflation, hyperinflation are all good for gold.” As for a return to a gold standard, Shvets has more bad news: “Gold standards come back after the war, not before the war.”

In principle I agree therefore the MB Fund is long:

  • US stocks despite the valuations;
  • we are underweight Australian assets given interest rates will go to zero or the equivalent in a world of endless oversupply;
  • investment becomes a matter of discerning the most potent disruptors or the most embedded rent-seekers at the best prices.

Where I disagree is that the business cycle is entirely dead. To my mind, this is a process not a one-off shift, driven by successive crises that shunt de-globalisation and de-privatisation forward with each convulsion. After all, we have not yet had an earnings-destroying event in the US in this cycle so the lack of risk has been real.

Next year China is going to slow and the Fed tighten, at some point one two many times. Mean reversion will come but then so will our next round of socialisation.

East to West: Seoul and Footsie find support

A Twiggs Money Flow trough high above zero reflects strong buying support on the Seoul Composite Index. Breach of support at 2300 is unlikely but would signal a primary down-trend.

Seoul Composite Index

Japan’s Nikkei 225 Index broke resistance at 20200, signaling another advance.

Nikkei 225 Index

Hong Kong’s Hang Seng Index has been in a strong bull market since breaking resistance at 24000 early this year.

Hang Seng Index

India’s NSE Nifty Index displays strong buying pressure, with Twiggs Money Flow oscillating above the zero line. Breakout above resistance at 10000/10100 is likely and would signal another advance.

Nifty Index

Target 10000 + ( 10000 – 9000 ) = 11000

Moving to Europe, Dow Jones Euro Stoxx 50 is headed for a test of resistance at 3650. A big Twiggs Money Flow trough above zero signals buying pressure. Breakout is likely and would offer a target of 3900*.

DJ Euro Stoxx 50

* Target calculation: 3650 + ( 3650 – 3400 ) = 3900

The UK’s Footsie is rallying strongly after a bear trap at 7300. Often the strongest bull signals start with a bear trap or false break through support. breakout above 7550 would offer a target of 7900*.

FTSE 100

* Target calculation: 7550 + ( 7550 – 7200 ) = 7900

Canada’s TSX 60 continues to consolidate below its former primary support level at 900. Beset by a massive property bubble, with soaring household debt, and weak crude oil prices the index displays a similar pattern to the ASX 200. Declining Twiggs Money Flow warns of selling pressure. Breach of support at 880 would confirm the primary down-trend.

TSX 60

ASX 200 finds support

The ASX 200 found support on Friday after threatening to break support at 5650 earlier in the week. The narrow ‘line’ formed over the last four months continues. Twiggs Money Flow peaks below zero still warn of long-term selling pressure. Breach of support at 5650 remains likely and would signal a primary decline. Breach of support at 5650 would confirm.

ASX 200

Iron ore broke short-term support at $62, signaling a test of primary support at $53. Declining Twiggs Trend Index signals selling pressure.

Iron ore

Strangely, the ASX 300 Metals & Mining index rallied. Breakout above 3300 would confirm a primary up-trend.

ASX 300 Metals and Mining

The ASX 300 Banks index are a major drag on the ASX 200 broad market index. See Australian Banks Under Selling Pressure.

Gold hurts as Dollar rallies

Nymex Light Crude respected its new support level at $50/barrel. Follow-through above $52 would signal another advance, with a target of $54/barrel. A primary up-trend would be bearish for the Dollar and bullish for gold.

Nymex Light Crude

At present the Dollar Index continues its bear market rally, testing resistance at 94. Breakout is fairly likely but expect another correction to test primary support at 91. After all, this is a bear market.

Dollar Index

Spot Gold is undergoing a deep correction in response to the Dollar rally. But political tensions are high and the Dollar is in a bear market. Respect of the rising trendline (around $1250) would signal another primary advance. Follow-through above $1350 would confirm.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

The economic consequences of Jeremy Corbyn socialism

Martin Wolf on socialism:

Socialism is not a new idea, but one that has been tried and tried again. It has come in three main varieties: autocratic, populist and social democratic. Autocratic socialism was that of the Soviet Union and Mao Zedong. It was a catastrophe. The social democracy of the Nordics or the Netherlands has, in contrast, been a triumph. These are among the most successful societies on the planet: wealthy, dynamic and stable.

Finally, the populist socialism so characteristic of Latin America has never worked economically. But it has at least not had the cataclysmic human results of Soviet or Maoist communism (though the outcome of Hugo Chávez’s Venezuelan experiment, much lauded by Mr Corbyn, is clearly ghastly).

Why has European social democracy been such a success? The answer is that it understands the fundamental constraints that have to shape any successful programme, particularly for a party that believes in active government. First, it must avoid the lure of magical thinking on budget constraints, at all levels of government. Resources are always limited. Second, it must recognise the crucial role of incentives in shaping human behaviour. Third, it must fully internalise the importance of a stable institutional framework in guiding these incentives. Last, it must understand that the private sector, foreign as well as domestic, must play a leading role in the economy.

The economy can function with very high levels of tax: ratios of close to, or over, 50 per cent of gross domestic product are common in the advanced social democracies. Governments can also play a big role in supporting the economy. But private initiative is essential. And that does not come because the government commands it. It comes because the government motivates it.

Why, then, has populist socialism failed? It is because it does not respect these constraints. It is undisciplined on public finances, unconcerned about incentives, contemptuous of property rights, hostile to the private sector and antagonistic to the constraining institutions. The last point is crucial. As Princeton’s Jan-Werner Müller has written, the one thing leftwing and rightwing populists share is the belief they alone represent the people against the elites. Anything that limits their ability to act as they see fit is seen as illegitimate….

Sweden’s experiment with socialism is often lauded as an outstanding success but numbers from the Institute of Economic Affairs suggest otherwise:

Between 1950 and 2005, the Swedish population grew from seven to nine million, but net job creation in the private sector was zero. Jobs in the public sector expanded rapidly until the end of the 1970s. As it became difficult to further expand the already large public sector, job creation simply stopped (Bjuggren and Johansson, 2009)….

Will Tanner at the London School of Economics highlights more recent reforms:

In the last two decades, Sweden has reformed its welfare state to deliver efficiency as well as equity. Policymakers have opened up services to competition, using new, for-profit providers to drive down costs and improve quality within Sweden’s universal health and education systems. Around 27 per cent of healthcare is now delivered by profit-making firms, including nine major hospitals and 10 per cent of ambulance services, compared to just 3 per cent in the UK. Hospital waiting times have fallen by nearly a quarter….

Alongside market-orientated reforms, citizens have been given greater power and responsibility over the public services they use…. In the decade to 2010, Swedish hospital admissions grew just 1.6 per cent compared to the UK’s 38 per cent.

Sweden’s reforms have brought the country’s finances under control. Between 2003 and 2009, healthcare spending rose by just 0.6 per cent of GDP, compared to 2 per cent of GDP in the UK, while pension spending is actually expected to fall by 1 per cent of GDP by 2030. In contrast to the UK, meaningful reform has also allowed Sweden to meet its own fiscal targets: in the last 20 years, Sweden has consistently run a budget surplus of 1 to 3 per cent of GDP.

Source: The economic consequences of Jeremy Corbyn

Facebook and Google are struggling to put the fake news genie back in the bottle

From John McDuling:

As news of the horrific gun attack in Las Vegas unfolded earlier this week, millions of internet users flocked to Google and Facebook to find out what happened. But in the immediate aftermath of the event – the worst mass shooting in modern United States history – widespread confusion was apparent online.

Phony reports from a message board wrongly identifying the gunman were prominent on Google’s ‘Top News’ page in US, and also made their way into Facebook’s algorithms, The Washington Post reported.

….Facebook earlier this year outlined a series of steps designed to curtail fake news, including pledges to employ more human fact checkers.

….Yet Nick Enfield, a professor of linguistics at the University of Sydney, who has studied fake news as part of the university’s Post Truth Initiative, doesn’t think fact checking is going to cut it.

The volume of information is just too big to deal with, he reckons. It is “just too weak a solution, because the internet is an open resource,” he says.

Proliferation of fake news is a serious threat to social media. Fact checking appears unlikely to succeed. The alternative may be some form of moderated content, with users given more freedom to post when they have proven their credibility. And better classification of posters, with satire sites like @DarthPutinKGB clearly labeled as such, while news site classification should require an established track record and regular review by an external editorial panel.

Source: Facebook and Google are struggling to put the fake news genie back in the bottle

How to survive in the fake-information age | Computerworld

By Mike Elgan:

“Information wants to be free.”That was the motto of truth-seeking digital activists in the ’80s and ’90s.The motto today is: “Information wants to be fake.”

….Senator James Lankford (R-Okla.) pointed out this week that Russian troll farms are stoking both sides of the debate over NFL players protesting during games, urging Americans to join kneeling players in protest, and also to boycott the NFL over kneeling players.

One recent tweet on a Twitter account called “Boston Antifa” came from a poster who apparently forgot to remove the location stamp. The location wasn’t Boston, but Vladivostok, Russia.

Such is the nature of our age that some said even the time stamp may have been faked to smear Russia.

Nobody knows what’s true.

Buzzfeed reported this week on the rising readership of content farms based overseas in places such as the Philippines, Pakistan and Macedonia. Such “publications” exist solely for profit. They don’t care what’s true. They just care what goes viral…..

The rise of false information online is caused by five factors:

1. The Internet allows anyone anywhere to publish anything everywhere.

2. Digital content is easy to counterfeit or modify.

3. Many people have powerful incentives to spread false information.

4. It’s easier for social network algorithms to favor emotionally reactive content than true content.

5. The public increasingly relies upon digital internet content for “knowledge.”

Facebook, Twitter and Google claim that they’re taking active measures against the rise of fake information. But previous efforts have failed.

The reality is that fake information will continue to be spread online. And that could be a problem for you and your company.

A possible solution lies in applying existing law and extending it to the Internet. If a newspaper publishes information they are required to take reasonable steps to ensure the information is correct, else the publisher may face criminal prosecution, liability for civil damages, and/or censure by media/advertising standards bodies. The same should apply to online media.

Source: How to survive in the fake-information age | Computerworld