No Mass Shootings, No Mass Arrests

People including myself are relieved that the political conventions are over. Two weeks of calculated and scripted hyperbole will leave any sensible person fatigued, even if one ultimately agreed with most of the sentiments being expressed. But there is more to it this time when you look back at what our worries were going into the respective conventions. Dozens of delegates said they were going to Cleveland carrying arms and ammunition. Meanwhile, the event was surrounded by a city where effectively everyone was a victim of the same repressive policies that would be advocated inside the walls. It was a recipe for disaster — but there were no mass shootings. Similarly, in a party that had become synonymous with throwing people out on the street, might a VIP or party official be injured while being ejected? In fact, more than a few journalists were removed from the hall at points, but without injury or spectacle. The worrisome news of a disease outbreak at the convention added an unexpected angle of disaster, with the potential for a dangerous contagion to go national, yet with quick action on a quarantine, the disease was nearly contained within the California delegation. The next week Philadelphia hosted the largest number of demonstrators ever at a formal political event in U.S. history, yet with astute planning, there were no mass arrests. This is a good moment to remember the incredible sums of money put forward by national billionaire donors to buy the last Philadelphia mayoral election. This week might have turned out quite differently had that effort succeeded.

The sigh of relief is in part about the absence of the several disasters that so easily could have occurred. There is some dismay in saying this. Are our expectations of the American political process so lowered that merely not seeing a mass shooting by one of the gun nut delegates is cause for celebration? And yet in reality we did avoid each of these potential disasters. These was not just good luck. A combined and cumulative effort involving thousands of people also had a part in the two relatively peaceful weeks. There is reason to hope that with a continued effort this relative peace could hold right on through November. Yes, the current state of U.S. politics is unexplainable and inexcusable by the standards of just 15 years in the future. In fact, a significant fraction of voters have already made that leap and are trying to explain to us how broken the system is. From their point of view, looking at the events of the past two weeks is agonizing. And they’re right to see it that way. But let’s not lose sight of what just happened.

This Week in Bank Failures

EU stress tests were released tonight. The tests estimated how well a bank’s capital would stand up to a one-dimensional economic shock in 2018. The modeled stress is more substantial than a run-of-the-mill recession, but not by much. There were few surprises in the results. However:

• Monte dei Paschi, the third largest bank in Italy and the only bank in Europe likely to be wiped out by the moderate economic shock modeled in the tests, announced a rescue package in which it will sell €9 billion in bad business loans while adding new capital. The small size of the rescue plan suggests that the bank may need a new rescue next year.
• Italy, Spain, and Ireland were the only countries that fared poorly in the tests. The top two banks in Ireland did well enough that they can continue to repay past bailout funds.
• Banco Popular, the sixth largest bank in Spain, fired its top executive before the test results were released to the public.
• RBS, with the most problematic result in Britain, said its test results showed progress on its rebuilding plan.

Sentenced: Three former executives in Ireland, two at Anglo Irish Bank and the other at Irish Life and Permanent, were sentenced for a scheme to create €7.2 billion in phantom deposits on the bank’s balance sheet. Each was sentenced to between 2 and 3.5 years. The purpose of the scheme was to make the bank appear financially sound when in fact it was on the edge of insolvency.

Crackdown in Turkey Is an Economic Blow

The predictions of a prolonged recession in the U.K. after word of its exit from the EU were, at least, greatly exaggerated. On the far corner of Europe, though, Turkey really is heading into a recession. The military coup attempt did more damage than the world knew at the time, and the political crackdown now underway has already come perilously close to shutting down the economy. Roughly 100,000 workers have been fired or arrested or have had their licenses to work revoked. So many education workers were removed that schools and universities are effectively not operating. The state of emergency and general turmoil will keep most foreign tourists out of the country for months or years. A weakened military will probably no longer be able to protect the most volatile border zones. Banks and large businesses may not be able to issue bonds for several years. These are not trivial adjustments in an economic sense. Fortunately, the political crackdown has spared agriculture and public utilities. With food and water, there is an opening for the country to survive the tough times ahead and eventually start on the way back to normal. 

This Week in Bank Failures

The Republican platform calls for legislation to separate banking, investments, and insurance. That would return the banking business to the more stable and efficient way it operated before 1999.

Turkey’s central bank is providing emergency liquidity to banks. The country’s economy is reeling from political instability and a subsequent crackdown on dissenters and academics, and for now it is impossible for banks to raise funds by issuing bonds.

Arrested: a senior manager at HSBC, charged in the U.S. with manipulating currency markets in 2011.

Seized: A U.S. investigation has located close to $1 billion of the $4 billion missing from 1MDB. The lost money was found in the accounts of the prime minister of Malaysia, who previously served as a director of the fund but was removed when the magnitude of the missing money was understood. Half of that money was used to buy art at auctions. U.S. authorities moved to seize the related assets located in the U.S. The prime minister has previously said he legitimately earned the commissions he received from the fund.

Immune System Linked to Details of Brain Function

There may be a mechanism to explain the cases of autism that improve with organic food. It is speculative, but all the major pieces are there. It has long been known that conditions in the intestine affect the immune system. This makes sense since the intestine is essentially the headquarters of the immune system. New research shows that the immune system modulates brain functions that determine perceptions and behavior, at least in mice. It is a fair guess, then, that certain agricultural chemicals in food could have an impact on the immune system that would lead to decreased levels of certain brain functions. If so, removing the chemical load by eating organic food would tend to restore those same brain functions. Obviously, a lot of details are missing here, but the discoveries lend credence to the anecdotes about autism improving with organic food, elevating it from the level of anything-is-possible to might-be-worth-a-try.

Another intriguing result of the recent research is the thought that autism and schizophrenia could have some mechanisms in common. One theory briefly considered historically was that the agricultural chemical DDT was the cause of schizophrenia. No convincing mechanism was ever found, but the incidence of schizophrenia dropped at the same time that DDT was phased out. Of course, there were other chemicals that were used and abandoned in the same historical period, so the culprit could just as easily be another chemical rather than DDT. It may be time to take a new look at all diseases of brain function now that the immune system is a confirmed part of the brain function puzzle.