Was This The Worst Economist Forecast Of All Time

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When it comes to predicting the future, there has traditionally been a stealthy contest between economists and weathermen as to who is the worst predictor of coming events. Lately, there was some confusion when economists – this includes central bankers andmarket “strategists” –  tired of being humiliated in public for their terrible predictions, decided to become Monday Morning weathermen (ironically, none more so than those who competed with Groundhog Phil and lost) and blame their lack of foresight on the weather.

This led to even more humiliation for said economisseds (sic) and entertainment for everyone else.

But there is little confusion about what may have been the worst economic forecast of all time. For the answer go to Japan, and back 30 years in time, just after Japan’s mega asset bubble burst when in their desperation to preserve the myth that “all is well”, economists were “predicting” how little Japan’s growth would be impacted as a result of the burst bubble.

They were all wrong.

As HSBC’s Stephen King points out, nowadays, Japan’s “lost decades” are seen to be a blindingly-obvious consequence of the bursting of Japan’s late-1980s stock market and land price bubbles (ahem China). At the time, however, few managed to predict what was apparently so obvious in hindsight.

Which brings us to what probably is the worst economic forecast of all time: in the mid-1990s, the forecasting consensus had every confidence that nominal Japanese GDP would rise 25% over the next five years. Consensus was wrong: by 2000, nominal GDP was more than 24% lower than had been projected five years earlier.

Did the forecast humiliation end there? Oh no.

The gap between forecast and reality got bigger and bigger thereafter. In fact, over 30 years later, Japan’s nominal GDP and GDP per capital now is where it was 30 years ago even as Japan has piled up a total debt load that is now over 400% of GDP.

Finally, as a consequence, bond yields fell further and further, continuously undershooting forecasts.

 

Does this look familiar? If not, recall this chart?

And this:

Comical economists aside, “Japanification” is precisely what is happening to the rest of the “developed world” as global growth continues to deteriorate, global debt grows and the only short-term resolution is to keep rates as low as possible… and now, negative across 28% of the entire world.

This weekend we will lay out HSBC’s thoughts on what “turning Japanese” means for the rest of the world. Spoiler alert: only bad things.

In the meantime we ask, when will “economists” be finally laughed off the global stage for the charlatan comedians they all are?

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“Satanic Cocktail” Of Nails And Acetone Used In Devilish Brussels Bomb Design

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Nearly four days have passed since four men detonated explosives-laden belts and luggage in the Brussels airport and metro killing nearly two dozen people and injuring hundreds and there’s still quite a bit of ambiguity regarding who exactly is dead, who’s still at large, and who was at the scene in the first place.

Part of the confusion stems from the fact that the attackers who died in the blasts were strewn all over the crime scene in pieces, but authorities did manage to determine that among those who blew themselves up were brothers Khalid and Ibrahim El-Bakraoui, one of which was the subject of an Interpol red notice and the other was flagged by Turkey as a “foreign fighter” and deported. Also thought to have been killed in the airport bombings: bombmaker Najim Laachraoui, who is said to have played an instrumental role in building the explosives used in the Paris attacks.

Following the bombings, the taxi driver who delivered Ibrahim Bakraoui, Laachraoui, and a third assailant to the airport called the police. The driver became suspicious when the men were reluctant to let him assist with their luggage which he described as exceptionally heavy. The driver then led police back to the apartment in Schaerbeek (the site of Friday’s sweeping police operation) where he had picked the three men up. On the fifth floor, authorities found 33 lbs of explosives, 180 liters of chemicals, guns, a suitcase full of nails, and an Islamic State flag. Nothing suspicious about that.

Apparently, the apartment was a bomb making factory and in it, the Bakraouis (possibly with the help of Laachraoui or another bombmaker), built the TATP-based explosives used in Tuesday’s attacks. TATP, or triacetone triperoxide, has become an ISIS favorite and for those unlucky enough to find themselves in close proximity when it’s detonated, it’s bad news. Dubbed “the mother of Satan” by Palestinian militants, the white powder is cheap to make and the ingredients are impossible to trace, making it ideal for the clandestine activities of the Islamic State cells operating under the radar of European anti-terror police.

“Used in the 2005 London bombings and the Nov. 13 Paris attacks, and found in a series of foiled bomb attempts in Europe since 2007, TATP appears to be Islamic State’s explosive of choice,” Reuters writes. Here’s more:

Making a TATP bomb, although a more lengthy process than the fertilizer-based explosives used by other European militants, is cheap and simple and recipes and videos by chemistry buffs abound on the Internet. It was discovered by a 19th century German chemist and is very powerful, even in small quantities.

All the ingredients – acetone found in cleaning products, hydrogen peroxide found in wood bleach and sulphuric acid used to unblock kitchen pipes – were available at one Brussels hardware store this week for less than 40 euros ($45).

Nails and bolts can be added to increase the bomb’s impact and afterwards stuffed into bags and taped into suicide belts.

It goes undetected by airport scanners, leaving authorities to rely on sniffer dogs. Though the bombs can have a strong smell — the bombers’ taxi driver said he smelled chemicals on the ride to the airport — there were few such dogs in the Brussels’ airport check-in area on Tuesday when the men detonated the explosives hidden in holdalls on baggage trolleys, according to several witnesses, including an airport worker.

Ehud Keinan, an Israeli scientist who has spent 35 years studying TATP, said that as little as 4 kg could produce the kind of devastation seen in Brussels.

“It is very easy to make, not like a conventional bomb,” said Keinan, the dean of chemistry at Technion-Israel Institute of Technology in Haifa.

“You don’t need to be part of a large organization or need training to do this.”

Still, one of the three Brussels suspects, Najim Laachraoui, a 25-year-old Belgian who blew himself up in the airport attack and is suspected of making suicide vests for Paris, had studied engineering at university and excelled in lab work.

Within two weeks of the July 2005 London attacks, the British chemical industry and British hardware stores stepped up their reporting of suspicious or large purchases of chemicals.

However, in France, the explosive precursor hydrogen peroxide is sold legally as a way to clean private swimming pool water and no one is considering banning nail varnish remover.

“If you go into any pharmacy in Brussels, you can buy 50 ml of acetone. If you go into a hundred pharmacies, you can get that much more,” said Peter Newport, the chief executive of Britain’s Chemical Business Association, which sits on the European Commission’s expert group on regulating precursors.

“There are actually very few bombmakers in the grand scheme of things,” Brian Castner, a former Air Force explosive ordnance disposal technician and author of the book “All the Ways We Kill and Die,” tells The Washington Post. “Once one finds a successful way to construct these things, they [can] mass produce.”

“While there are bomb-building manuals available on the Internet, Castner added that a competent terrorist cell would not rely on them; instead, recruits apprentice with master bombmakers in places such as Syria and Iraq before returning to their home countries,” WaPo continues. “And in Afghanistan and Iraq, the United States has targeted bombmakers.”

http://graphics8.nytimes.com/video/players/offsite/index.html?videoId=100000004281038

For the scientifically inclined, here’s a detailed description of “mother of Satan” from Tech Insider:

One reason TATP is difficult to detect is because it does not contain nitrogen, a key component of homemade “fertilizer” bombs that security scanners are now very good at finding.

 

Each molecule contains only hydrogen, oxygen, and carbon — some of the most common elements on Earth — shaped in a ring.

 

The explosive power of TATP has puzzled scientists since its discovery in 1895. Unlike nitrogen-based bomb materials, which store up energy as they’re cooked into explosive form, TATP can be made at room temperature — no flames required.

 

So where does it get its explosive energy, if not by heating?

 


 

It wasn’t until 2005 that Keinan figured out detonating TATP is more like a massive air blast than a fire bomb. When a crystal of the explosive is rattled hard enough, each solid molecule instantly breaks into four gas molecules.

 

“Although the gas is at room temperature, it has the same density as the solid, and four times as many molecules, so it has 200 times the pressure of the surrounding air,” according to the release about Keinan and his colleagues’ 2005 study of TATP.

 

“This enormous pressure — one-[and-a-half] tons per square inch — then pushes outward, creating an explosive force” on par with TNT, states the release.

 

“In a TATP explosion, the gas molecules give up their energy of motion to the surroundings, in the process creating the shock wave that does the damage.”

So an extremely powerful (if unstable) explosive powder that’s easily synthesized from cheap, readily available, not to mention completely legal ingredients. “There are so many valid uses by the public of these substances,” the aforementioned Peter Newport admits. Right, but there aren’t a lot of uses for 40 gallons of acetone and eight gallons of hydrogen peroxide (the quantities found in the Schaerbeek hideout) and as The New York Times notes, US officials are curious as to “how the terrorists were able to elude detection” while obtaining those quantities of precursors – “especially during a manhunt for Salah Abdeslam.”

The answer, of course, is that Belgian authorities have proven themselves to be completely incompetent and, as we wrote earlier today, have now simply resorted to arresting people first and asking questions later in an increasingly desperate attempt to get out ahead of the next attack which we imagine was probably planned weeks ago in a Molenbeek apartment amongst empty bottles of nail polish remover, loaded Kalashnikovs, and half-empty pizza boxes.

As for the public, we implore you to do your part by following the advice that’s prominently displayed on signs plastered all over New York’s Grand Central Station: “If you see something, say something.” In this context we suppose that means that if you see the guy shown below buying a bottle of nail polish remover (or worse, a can of Nutella), call the police immediately…

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The Slow, Inevitable Collapse Of The Two-Party System

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Submitted by Russell Whitehouse via OrientalReview.org,

In this election year, it’s clear that a seismic political shift is rumbling through America.  Widespread discontent for the status quo is surfacing from both the left and right.  A year ago, it would have been impossible to envision a card-carrying socialist and a pre-WWII style populist mounting legitimate presidential campaigns (much less without Super PACs).  Now, far-left and far-right sentiments are emerging from the underground as perfectly palatable options to Middle America. Establishment darlings like Hillary Clinton, Jeb Bush & Marco Rubio have faced extreme pressure from the New Normal in their respective political tents.

It has become clear that the traditional 2-party system in America is starting to erode.  Sanders’ supporters view Clinton as too untrustworthy & beholden to Big Business.   Meanwhile Trump’s blue-collar base has rejected rank-and-file Republicans as being too unsympathetic to their economic concerns, while his surprising chunk of the evangelical contingent is refuting the Bush-flavored puritanism of Ted Cruz.  Conversely, Clinton’s supporters reject Sander’s bold platform as delusional and Cruz’s base is increasingly being filled by #NeverTrump neocon purists and Romey-ite country club Republicans.

One can see political parallels across the pond, in the UK’s 2015 Parliamentary elections.  The two main parties in Westminster Palace, Conservative and Labour (roughly equivalent to the GOP and Democrats), were shaken up by two popular insurgencies.  UKIP, the UK Independence Party, rose up from the rising flames of the relatively conservative British heartland’s fears of free trade in the EU and immigration, winning an eighth of the popular vote in England. To the north, SNP, the Scottish National Party, won 95% of Scotland’s seats by inspiring among other things, record youth turnout and social media support (sound familiar?), with a message of social democracy and defiance against the British status quo.

us uk politics

Intra-party schisms are also forming in the two Anglophone democracies.  The Tories are tearing themselves apart over the Brexit, austerity and jockeying to succeed Cameron as Party Leader, while the American neocons are assessing the fallout of Trump’s ascendance while in free fall.  Labour officials are debating whether to follow their insurgent leader Jeremy Corbyn to the far Left after 20 years of Tony Blair’s New Labour movement, which moved the party to the center to win back the support of big business and blue-collar voters.  The New Labour centrist putsch coincided with Bill Clinton (and later Obama’s) similar efforts as the face of the Democrats.   Now, Democratic voters are beginning to second-guess this political realignment, spearheaded by the presumptive Democratic nominee’s husband.  Her opponent Bernie Sanders is siphoning away the youth vote and blue-collar moderates from the Democratic establishment, two of the Party’s traditional constituencies, by railing against neoliberal policies like free trade and social welfare cuts.

Given the rise of social-democratic populism and nativist-protectionist populism to either flank of American politics, it would make sense to look at the formation of entirely new parties.  Bernie Sanders can form a Stars-and-Pinstripes version of SNP; he too has the momentum of a more secular, progressive generation reaching political maturity as the more religious, conservative Baby Boomers begin to die out.  Assuming Trump completes his takeover of the Grand Old Party at July’s convention, the neocon brain trust can form a new conservative movement; this is already being planned by members of the #NeverTrump triad. Evangelical and free market diehards can unite to mount a serious challenge to Trump’s right by fielding a Texas crusader like Ted Cruz or Rick Perry, or Mormon elder statesman Mitt Romney.

Regardless of how Trump and Sanders fare in their respective conventions, they could still operate a serious race for the White House.  Both New York loudmouths boast a gigantic wave of rabid new voters, as well as a wellspring of working-class Americans desperate to reverse Wall Street’s increasingly oligarchical dominance, mass layoffs/underemployment, stagnant wages, crumbling infrastructure & the other byproducts of the neoliberal-neoconservative economic policy alliance.  Sanders could march into November as the nominee of the new Democratic Socialist Party, with a trail of young, idealistic future leaders tweeting and live-streaming behind him. 

Depending on July’s RNC, we could see a Make America Great Again Party (MAGAP, for short) trumpeting Trump’s message of putting power back in the hands of the American working class or a Romney-Cruz True Conservatives Party ticket touting Christian piety and Wall St fiscal policy.

Get used to Sanders, Clinton, Trump & Cruz.  You may see all 4 of them, come November…

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