Commentary on Political Economy

Friday 26 April 2024

This is why Palestinians must be disbanded and neutralized - No mercy!


Gazans turn on Hamas for failing to predict Israel retaliation (not because of its atrocities, but because Palestinian beasts deluded themselves that they could get away with their crimes!)

Islamist group criticised after enclave reduced to rubble and thousands killed

MAI KHALED AND HEBA SALEH — CAIRO · 27 Apr 2024


Palestinians in Gaza are increasingly willing to voice their anger against Hamas, accusing the militant group of failing to anticipate Israel’s ferocious retaliation for its October 7 attack that sparked the devastating six-month war.

Hamas rules Gaza with a tight grip, but as Israel’s offensive has reduced the enclave to rubble, killed tens of thousands and brought the population close to famine, residents such as Nassim — a retired civil servant — have begun speaking out against the Islamist group.

“They should have predicted Israel’s response and thought of what would happen to the 2.3mn Gazans who have nowhere safe to go,” Nassim said from the southern city of Rafah, which teems with internally displaced families from across the shattered territory. “They [Hamas] should have restricted themselves to military targets.”

Mohammed, another Gazan, went further by directly blaming Yahya Sinwar — the leader of Hamas in Gaza and the mastermind of October 7 — for the devastation Israel’s offensive has wrought in the strip. “I pray every day for God to punish the one who brought us to this situation,” Mohammed said. “I pray every day for the death of Sinwar.”

Hamas ruled a divided society in Gaza even before the war, with a sizeable constituency still supporting rival Fatah, which it ousted from the strip in 2007.

The militant Islamist movement has in the years since exerted strong control over Gaza and its population, arresting opponents and allowing little space for dissent. The blockade imposed by Israel and Egypt after Hamas seized sole control in 2007 strangled the enclave’s economy, leaving most Gazans dependent on aid.

Following the October 7 attack, some in the Palestinian territories and the wider Arab world expressed support for Hamas’s cross-border raid on Israel as a blow against the occupying power. About 1,200 people were killed in the assault, according to Israeli authorities.

Polls in November by the Palestinian Center for Policy and Survey Research showed Hamas’s popularity in Gaza and the occupied West Bank had increased from three months earlier. In Gaza, support increased from 38 per cent to 43 per cent, and in the West Bank from 12 per cent to 44 per cent.

But by March, that support had dipped again because of the ferocity of Israel’s retaliation and the scale of destruction and loss of life in Gaza, according to the same research group.

Khalil Shikaki, director of the centre, said support for Hamas fell by almost a quarter to 34 per cent, according to a poll taken during the first week of March. The movement also lost popularity in the West Bank, where support fell from 44 per cent to 35 per cent.

“There is no doubt support for Hamas is declining in Gaza because more and more people feel it has some responsibility for the pain they are enduring,” Shikaki said.

Israel’s Gaza offensive has killed more than 34,000 Palestinians, according to local health authorities. The vast majority of the population have been displaced, sometimes many times over. Entire families have been killed and swaths of the strip have been reduced to uninhabitable wastelands.

Starvation and disease stalk the territory as Israeli restrictions severely limit the entry of humanitarian supplies, according to UN agencies. The World Food Programme warned this week that Gaza could officially enter famine within six weeks.

Analysts say the absence of Hamas’s powerful internal security force — which has been lying low to avoid Israeli attacks — has opened an unprecedented space for those willing to vent their frustration at the militant group and its leadership.

Azmi Keshawi, Gaza analyst at the International Crisis Group, said: “Critics have been emboldened because there’s no one now to fear. Hamas fighters are busy with Israel and have no time to deal with ordinary people. Their police force is also being struck by the Israelis.”

Others argue Gazans have endured so much devastation that they feel they have nothing more to lose by speaking out. “People are no longer afraid,” said Mkhaimar Abusada, professor of political science at the now destroyed al Azhar University, who left Gaza late last year. “They’ve suffered like never before and their situation is so catastrophic that it makes no difference to them. They’re already facing death.”

Hamas appears to be aware that Gazans are increasingly blaming it for their predicament. Abusada said he knew of individuals with large social media followings who received phone calls — which he presumed to be from the militant group or people connected to it — when they had criticised Hamas, asking them to stop. “They told them, ‘You should be helping lift morale and encouraging people’,” he said.

Such is the scale of the devastation in Gaza that for survivors there is no realistic prospect of returning to their homes or resuming normal life in the short term, even if the bombs stop falling.

Damage to Gaza’s critical infrastructure amounts to $18.5bn, said a World Bank report this month that warned the estimated 26mn tonnes of debris and rubble from bombed buildings across the strip would take years to clear.

“The role of the resistance is to protect us civilians, not to sacrifice us,” said Samia, another of those displaced to Rafah. “I don’t want to die and I didn’t want my children to witness what they’ve seen and to live in a tent suffering from hunger, cold and poverty.”

There is also anger at the disappearance not only of the police but also of other elements of Hamas’s state apparatus. That has allowed civil order to break down and left Gaza’s population, half of whom are children, to fend for themselves amid the chaos.

Israel appears to be gearing up for a ground offensive on Rafah, which would bring further violence to the town that humanitarian groups warn is Gazans’ last refuge from the destruction.

“We even have to pay an enormous price for the aid that reaches Gaza,” said Mohammed, a resident of Khan Younis. “If we assume it’s not Hamas that’s selling it, what are they doing about the profiteers? Where’s the government and the police to ensure the right of citizens to get hold of basic food?”

Even with anger rising against Hamas, analysts say it can count on the core support of about 20-25 per cent of the population. “There’s a bloc which backs Hamas and the resistance, whatever they do, and they are ready to pay the price,” said Keshawi. “There are others who voted for Hamas in the past, but because they hold it responsible for their current suffering, they are now frustrated with it.”

Abusada said: “Hamas may be losing popularity in Gaza, but in the West Bank and among Palestinians in Jordan, Syria and Lebanon, it remains very popular.”

 DÉBATS

« L’action délétère de TikTok sur nos sociétés est peu contestable »

TRIBUNE
Paul Charon
Sinologue
Le politiste Paul Charon détaille, dans une tribune au « Monde », les caractéristiques qui font du réseau contrôlé par Pékin un instrument de sa politique.
Article réservé aux abonnés

Partout, l’expansion vertigineuse de TikTok, l’opacité de son algorithme et ses pratiques intrusives suscitent des polémiques qui débouchent sur des restrictions d’utilisation, voire des interdictions. Les reproches adressés à l’application mobile de partage de courtes vidéos peuvent varier d’un Etat à l’autre, mais la controverse se cristallise essentiellement autour des menaces qu’elle fait peser sur la sécurité nationale. Celles-ci peuvent être résumées en quatre points.

Premièrement, TikTok est accusé de recueillir les données privées – numéro de téléphone, localisation, informations financières ou encore adresse IP de ses utilisateurs. La direction de l’entreprise affirme que ces données ont pour seul but de faciliter le ciblage publicitaire et qu’elles ne sont en aucun cas envoyées à la maison mère chinoise ByteDance. Mais la fuite des enregistrements de plus de quatre-vingts réunions internes a montré que des employés de ByteDance basés en Chine avaient eu accès à ces données. Ces révélations infirment les déclarations faites sous serment par les dirigeants de TikTok.

Pour apaiser les craintes du gouvernement américain, la société chinoise a entrepris de faire en sorte que les données des utilisateurs basés aux Etats-Unis soient stockées uniquement dans le pays, c’est le projet « Texas ». Ces efforts sont toutefois peu convaincants dans la mesure où le stockage des données aux Etats-Unis ne peut garantir totalement que des employés de ByteDance en Chine n’y auront pas accès.

Mais cette menace doit être relativisée car la Chine a des moyens bien plus efficaces d’accéder à des informations à très haute valeur ajoutée. C’est ce qu’illustre le vol, en 2014, de 21,5 millions de fichiers de l’Office of Personnel Management des Etats-Unis contenant notamment les dossiers de cadres de la sécurité nationale…

Deuxièmement, ByteDance serait sous le contrôle du pouvoir chinois, ce que le PDG de TikTok a démenti lors de son audition devant la Chambre des représentants des Etats-Unis. Mais le système chinois n’assure pas de séparation nette entre l’Etat-parti et la société. Autrement dit, aucune entreprise n’est véritablement indépendante du pouvoir. Ce constat est confirmé par l’établissement, depuis 2014, d’un cadre législatif imposant aux acteurs de la société chinoise de coopérer avec les services de renseignement.

Il est donc tout simplement impensable qu’une entreprise comme ByteDance puisse refuser de transmettre les informations en sa possession. Le fondateur de cette entreprise, Zhang Yiming, en a du reste déjà fait l’amère expérience en 2018 : il avait alors été contraint de fermer deux de ses applications, jugées contraires aux valeurs du régime, et de faire son autocritique en rédigeant des excuses publiques.

Façonner l’opinion

Troisièmement, les contenus de l’application serviraient la propagande de Pékin. La fuite de documents détaillant les directives transmises aux modérateurs a montré que TikTok divise les contenus prohibés en deux catégories : ceux qui méritent d’être supprimés ; et ceux qui sont simplement occultés.

Les règles de modération sont formulées de telle manière qu’elles semblent découler de l’application de principes généraux. Ainsi, il est prohibé de « diaboliser » l’histoire locale d’un pays – on ne peut donc point évoquer le massacre de la place Tiananmen (1989) –, comme de critiquer les régimes politiques et, par conséquent, le Parti communiste chinois (PCC). Cette censure qui ne dit pas son nom a fait la preuve de son efficacité puisque la plupart des sujets sensibles pour le PCC sont totalement absents.

Quatrièmement, le véritable intérêt de TikTok pour le pouvoir chinois se trouverait dans sa capacité à façonner les opinions. TikTok permet en effet au PCC de promouvoir des contenus qui favorisent une certaine interprétation de l’actualité internationale. On l’a vu à la suite des attaques du 7 octobre 2023 en Israël, où la plate-forme a contribué à orienter une partie de l’opinion internationale contre l’Etat hébreu, et de manière plus évidente encore à Taïwan, où le média dissémine auprès de la jeunesse de l’île une vision positive et bienveillante de la Chine qui, selon certains spécialistes locaux, pourrait affaiblir le sentiment identitaire et la volonté de maintenir le statu quo politique.

TikTok est d’ailleurs un redoutable vecteur de mobilisation de la population. Il suffit pour s’en convaincre d’observer comment les dirigeants de la société ont eux-mêmes appelé les utilisateurs de la plate-forme à manifester contre le projet de loi du gouvernement américain. Paradoxalement, cette mobilisation réussie des utilisateurs de TikTok aura sans doute achevé de convaincre les élus américains du danger qu’une plate-forme aussi puissante peut représenter entre les mains d’un Etat autoritaire.

A la lumière de ces quelques éléments, l’action délétère de TikTok sur nos sociétés est peu contestable. Ce constat plaide sans aucun doute pour une régulation plus ferme de ses activités. Cet encadrement peut prendre des formes diverses – dont la séparation totale d’avec la maison mère ByteDance. En revanche, l’interdiction intégrale de TikTok ne me semble pas souhaitable dans la mesure où cette décision viendrait nourrir le récit sur l’hypocrisie de l’Occident que Pékin dissémine avec succès dans le Sud global.

Paul Charon est sinologue et politiste, directeur du domaine renseignement, anticipation et stratégies d’influence à l’Institut de recherche stratégique de l’Ecole militaire (Irsem).

TikTok sur le front sino-américain

La loi contraignant le réseau social à couper les ponts avec Pékin est-elle une entrave à la liberté d’entreprise et d’expression ou une riposte légitime dans la guerre de l’information ?

THE SHAMBLES OF AMERICAN UNIVERSITIES 

Columbia Bars Student Protester Who Said ‘Zionists Don’t Deserve to Live’

After video surfaced on social media, the student, Khymani James, said on Friday that his comments were wrong.

Khymani James, a Columbia student, is seen on a video posted to social media. He is wearing glasses and a brown bandanna on his head.
Khymani James’s comments came during and after a disciplinary hearing with Columbia administrators that he recorded and then posted on Instagram. Credit... via X
Katherine Rosman

Columbia University announced on Friday that it had barred from its campus a leader in the pro-Palestinian student protest encampment who declared on video in January that “Zionists don’t deserve to live.”

Video of the incendiary comments resurfaced online Thursday evening, forcing the school to again confront an issue at the core of the conflict rippling across campuses nationwide: the tension between pro-Palestinian activism and antisemitism.

The student, Khymani James, made the comments during and after a disciplinary hearing with Columbia administrators that he recorded and then posted on Instagram.

The hearing, conducted by an administrator of the university’s Center for Student Success and Intervention, was focused on an earlier comment he shared on social media, in which he discussed fighting a Zionist. “I don’t fight to injure or for there to be a winner or a loser, I fight to kill,” he wrote.

A Columbia administrator asked, “Do you see why that is problematic in any way?”

Mr. James replied, “No.”

He also compared Zionists to white supremacists and Nazis. “These are all the same people,” he said. “The existence of them and the projects they have built, i.e. Israel, it’s all antithetical to peace. It’s all antithetical to peace. And so, yes, I feel very comfortable, very comfortable, calling for those people to die.”

And, Mr. James said, “Be grateful that I’m not just going out and murdering Zionists.”

In announcing their decision to bar Mr. James from campus, the university did not make clear if he had been suspended or permanently expelled.

Other protest groups condemned the comments and pointed out that one student’s statements do not reflect the tenor of the movement as a whole. But the remarks were widely shared on social media and go to the heart of a question that has animated criticism of the protests: How much of the movement in support of the Palestinian people in Gaza is tainted by antisemitism?

College administrators have pledged to Congress that they will take swift action against hateful attacks on Jewish students and antisemitic threats. “I promise you, from the messages I’m hearing from students, they are getting the message that violations of our policies will have consequences,” Columbia’s president, Nemat Shafik, told congressional leaders last week.

On Friday, a school spokesman said, “Calls of violence and statements targeted at individuals based on their religious, ethnic or national identity are unacceptable and violate university policy.”

Brian Cohen, the executive director of Columbia/Barnard Hillel, the center for Jewish campus life, described Mr. James’s statements as dangerous. “I think students who make comments like that don’t belong on campus,” he said.

Noa Fay, 23, a first-year student at the School of International and Public Affairs, said she was shocked by the “unabashedness” of the video. “It’s one of the more blatant examples of antisemitism and, just, rhetoric that is inconsistent with the values that we have at Columbia,” she said. “I was mostly very surprised to see that it was just so out in the open.”

Early Friday morning, Mr. James posted a statement on social media addressing his comments. “What I said was wrong,” he wrote. “Every member of our community deserves to feel safe without qualification.” He noted that he made these comments in January before he become involved with the protest movement and added that the leaders of the student protests did not condone the comments. “I agree with their assessment,” he wrote.

Mr. James did not respond to a request for comment, and student protesters declined to address the matter at a news conference on the Columbia campus Friday afternoon.

But in an interview earlier in the week, Mr. James drew a distinction between the ideas of anti-Zionism, which describes opposition to the Jewish state of Israel, and antisemitism. “There is a difference,” he said. “We’ve always had Jewish people as part of our community where they have expressed themselves, they feel safe, and they feel loved. And we want all people to feel safe in this encampment. We are a multiracial, multigenerational group of people.”

Sophie Ellman-Golan, the communications director of Jews for Racial & Economic Justice and a Barnard College graduate, said she found Mr. James’s comments awful and upsetting but she added that it was clear his views did not represent those of the other campus protesters.

Ms. Ellman-Golan said that in her 10 years as an organizer, there were always people who tried to inject hateful messages into public action, and that such messages tended to be amplified by those looking to smear entire movements.

“For people who want to believe that characterization, that our movements are inevitably and permanently hostile to us as Jews, this is catnip, right?” she said. “It’s irresistible.”

A spokeswoman for Jewish Voice for Peace, a pro-Palestinian advocacy group, said in a statement that the organization was glad Mr. James had realized he was wrong and had acknowledged that his words were harmful.

“We believe that all people have the capacity to transform — many of our own members once supported Israel’s violence against Palestinians,” the statement said, adding that “within the movement we are committed to holding one another accountable to respecting the dignity of all human beings.”

One student protester who is Jewish and who has spoken to Mr. James about the video said she believed he was committed to nonviolence and acceptance of all people. She said that he had reacted emotionally after being trolled online and that it was unfair that his decision to vent his frustration on social media was being used against him.

It remains unclear how many students are directing the Columbia protests, but Mr. James, 20, emerged as a public face of the demonstrations this week when he led a news conference to assert the demands the movement is making of the Columbia administration.

“This encampment — a peaceful, student-led demonstration — is part of the larger movement of Palestinian liberation,” Mr. James said at the conference.

In his biography on X, he calls himself an “anticapitalist” and “anti-imperialist.”

Mr. James was raised in Boston, and graduated from Boston Latin Academy, according to a 2021 interview with The Bay State Banner.

He told The Banner that at Columbia, he planned to study economics and political science. “The ultimate destination is Congress,” he said.

Eryn Davis, Stephanie Saul, Olivia Bensimon and Claire Fahy contributed reporting.

Katherine Rosman covers newsmakers, power players and individuals making an imprint on New York City. More about Katherine Rosman

A version of this article appears in print on April 27, 2024, Section A, Page 14 of the New York edition with the headline: Columbia Bars Protester Who Said Zionists Should DieOrder Reprints | Today’s Paper | Subscribe
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Thursday 25 April 2024

 

Joseph Stiglitz and the Meaning of Freedom

The famous liberal economist wants to take back the language of liberty from the right.
Portrait of economist Joseph E. Stiglitz. There is a green tinted overlay on the image.
Source photograph by Joel Saget / AFP / Getty

In the early days of the COVID-19 pandemic, when there was no vaccine in sight and more than a thousand people who had contracted the virus were dying each day in the United States, Joseph Stiglitz, the economics professor and Nobel laureate, was isolating with his wife at home, on the Upper West Side. Stiglitz, who is now eighty-one, was a high-risk individual, and he followed the government’s guidelines on masking and social distancing scrupulously. Not everyone did, of course, and on the political right there were complaints that the mask mandate, in particular, was an unjustified infringement on individual freedom. Stiglitz strongly disagreed. “I thought it was very clear that this was an example where one person’s freedom is another’s unfreedom,” he told me recently. “Wearing a mask was a very little infringement on one person’s freedom, and not wearing a mask was potentially a large infringement on others.”

It also struck Stiglitz, who had served as chair of the White House Council of Economic Advisers during the Clinton Administration, that the experience of the pandemic could provide an opportunity for a wide-ranging examination of the question of freedom and unfreedom, which he had been thinking about from an economic perspective for many years. The result is a new book, “The Road to Freedom: Economics and the Good Society,” in which he seeks to reclaim the concept of freedom for liberals and progressives. “Freedom is an important value that we do and ought to cherish, but it is more complex and more nuanced than the Right’s invocation,” he writes. “The current conservative reading of what freedom means is superficial, misguided, and ideologically motivated. The Right claims to be the defender of freedom, but I’ll show that the way they define the word and pursue it has led to the opposite result, vastly reducing the freedoms of most citizens.”

Stiglitz’s title is a play on “The Road to Serfdom,” Friedrich Hayek’s famous jeremiad against socialism, published in 1944. In making his argument, Stiglitz takes the reader on a broad tour of economic thinking and recent economic history, which encompasses everyone from John Stuart Mill to Hayek and Milton Friedman—the author of the 1962 book “Capitalism and Freedom,” which has long been a free-market bible—to Ronald Reagan and Donald Trump. The going can get a bit heavy when Stiglitz is explaining some tricky economic concepts, but his essential argument comes across very clearly. It is encapsulated in a quote from Isaiah Berlin, the late Oxford philosopher, which he cites on his first page and returns to repeatedly: “Freedom for the wolves has often meant death to the sheep.”

Stiglitz begins not with pandemic-era mask mandates but with the American plague of gun violence. He notes that there is a simple reason why the United States has far more gun deaths than other countries do. It has far more guns, and, thanks to a tendentious reading of the Second Amendment by the courts, including the Supreme Court, many Americans now regard owning a gun, or even a closet full of semi-automatic rifles, as a constitutionally protected right. “The rights of one group, gun owners, are placed above what most others would view as a more fundamental right, the right to live,” Stiglitz writes. “To rephrase Isaiah Berlin’s quote . . . ‘Freedom for the gun owners has often meant death to schoolchildren and adults killed in mass shootings.’ ”

Gun violence and the spread of diseases by people who refuse to abide by health guidelines are examples of what economists call externalities, an awkward word that is derived from the fact that certain actions (such as refusing to wear a mask) or market transactions (such as the sale of a gun) can have negative (or positive) consequences to the outside world. “Externalities are everywhere,” Stiglitz writes. The biggest and most famous negative externalities are air pollution and climate change, which derive from the freedom of businesses and individuals to take actions that create harmful emissions. The argument for restricting this freedom, Stiglitz points out, is that doing so will “expand the freedom of people in later generations to exist on a livable planet without having to spend a huge amount of money to adapt to massive changes in climate and sea levels.”

In all these cases, Stiglitz argues, restrictions on behavior are justified by the over-all increase in human welfare and freedom that they produce. In the language of cost-benefit analysis, the costs in terms of infringing on individual freedom of action are much smaller than the societal benefits, so the net benefits are positive. Of course, many gun owners and anti-maskers would argue that this isn’t true. Pointing to the gun-violence figures and to scientific studies showing that masking and social distancing did make a difference to COVID-transmission rates, Stiglitz gives such arguments short shrift, and he insists that the real source of the dispute is a difference in values. “Are there responsible people who really believe that the right to not be inconvenienced by wearing a mask is more important than the right to live?” he asks.

In 2002, five years after he left the White House, Stiglitz published “Globalization and Its Discontents,” which was highly critical of the International Monetary Fund, a multilateral lending agency based in Washington. The book’s success—and the Nobel—turned him into a public figure, and, over the years, he followed it up with further titles on the global financial crisis, inequality, the cost of the war in Iraq, and other subjects. As a vocal member of the progressive wing of the Democratic Party, Stiglitz has expressed support for tighter financial regulations, international debt relief, the Green New Deal, and hefty taxes on very high incomes and large agglomerations of wealth.

During our sit-down interview, Stiglitz told me that, for a long time, he had cavilled at the negative conception of freedom used by conservative economists and politicians, which referred primarily to the ability to escape taxation, regulation, and other forms of government compulsion. As an economist accustomed to thinking in theoretical terms, Stiglitz conceived of freedom as expanding “opportunity sets”—the range of options that people can choose from—which are usually bounded, in the final analysis, by individuals’ incomes. Once you reframe freedom in this more positive sense, anything that reduces a person’s range of choices, such as poverty, joblessness, or illness, is a grave restriction on liberty. Conversely, policies that expand people’s opportunities to make choices, such as income-support payments and subsidies for worker training or higher education, enhance freedom.

Adopting this framework in “The Road to Freedom,” Stiglitz reserves his harshest criticisms for the free-market economists, conservative politicians, and business lobbying groups, who, over the past couple of generations, have used arguments about expanding freedom to promote policies that have benefitted rich and powerful interests at the expense of society at large. These policies have included giving tax cuts to wealthy individuals and big corporations, cutting social programs, starving public projects of investment, and liberating industrial and financial corporations from regulatory oversight. Among the ills that have resulted from this conservative agenda, Stiglitz identifies soaring inequality, environmental degradation, the entrenchment of corporate monopolies, the 2008 financial crisis, and the rise of dangerous right-wing populists like Donald Trump. These baleful outcomes weren’t ordained by any laws of nature or laws of economics, he says. Rather, they were “a matter of choice, a result of the rules and regulations that had governed our economy. They had been shaped by decades of neoliberalism, and it was neoliberalism that was at fault.”

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Stiglitz’s approach to freedom isn’t exactly new, of course. Rousseau famously remarked that “Man is born free and everywhere he is in chains.” In “Development as Freedom,” published in 1999, the Harvard economist and philosopher Amartya Sen argued, in the context of debates about poverty and economic growth in developing economies, that the goal of development should be to expand people’s “capabilities,” which he defined as their opportunities to do things like nourish themselves, get educated, and exercise political freedoms. “The Road to Freedom” falls in this tradition, which includes another noted philosopher, Franklin Delano Roosevelt. Stiglitz cites Roosevelt’s Four Freedoms speech, delivered in January, 1941, in which the President added freedom from want and freedom from fear to freedom of speech and freedom of worship as fundamental liberties that all people should enjoy.

“A person facing extremes of want and fear is not free,” Stiglitz writes. He describes how, at a high-school reunion, he spoke with former classmates from the city he grew up in—Gary, Indiana, which had once been a thriving center of steel production. “When they graduated from high school, they said, they had planned to get a job at the mill just like their fathers. But with another economic downturn hitting they had no choice—no freedom—but to join the military . . . . Deindustrialization was taking away manufacturing jobs, leaving mainly opportunities that made use of their military training, such as the police force.”

Among the hats Stiglitz wears is one as chief economist at the Roosevelt Institute, a progressive think tank. He doesn’t claim to have a surefire recipe for reviving rusting American steel towns. But in the second half of “The Road to Freedom” he calls for the creation of a “progressive capitalism” that would look nothing like the neoliberal variant he has spent the past two decades excoriating. In this “good society,” the government would employ a full range of tax, spending, and regulatory policies to reduce inequality, rein in corporate power, and develop the sorts of capital that don’t appear in G.D.P. figures or corporate profit-and-loss statements: human capital (education), social capital (norms and institutions that foster trust and coöperation), and natural capital (environmental resources, such as a stable climate and clean air). Not-for-profits and workers’ coöperatives would play a larger role than they do now, particularly in sectors where the profit motive can easily lead to abuses, such as caregiving for the sick and elderly.

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In political terms, Stiglitz started out as a self-described centrist. Over the years, he has shifted to the left and become ever more gimlet-eyed about how policies and laws are made and upheld, and whom they benefit. In “The Road to Freedom,” he inveighs against the Supreme Court for adopting the perspective of the “white male slave-owning drafters of the Constitution,” and reminds us that conservative billionaires and major corporations underwrote the neoliberal policy revolution, which bestowed upon big corporations what Stiglitz refers to as “The Freedom to Exploit.” He writes, “We cannot divorce the current distribution of income and wealth from the current and historical distribution of power.”

Given this conjuncture, and the rise of authoritarian populists like Trump, Orbán, and Bolsonaro, it is easy to get fatalistic about the prospects for creating the “good society” that Stiglitz describes, in which “freedoms of citizens to flourish, to live up to their potential . . . are most expansive.” He’s under no illusion that winning the battle of ideas would be sufficient to bring about such a transformation. But he’s surely right when he writes that, if “we successfully dismantle the myths about freedom that have been propagated by the Right,” and reshape the popular conception of human liberty in a more mutual and positive direction, it would be an important first step.

And how likely is that? In his book, Stiglitz lists a number of reasons to be pessimistic, including the fact that “neoliberal ideology runs deep in society,” and that people stubbornly “discount information that runs counter to their preconceptions and presumptions.” On the positive side, he points to a widespread rejection, particularly among younger people, of the neoliberal approach to issues like inequality and climate change. During our conversation, he cited the Biden Administration’s industrial policy, which provides generous incentives to green-energy producers and purchasers of electric vehicles, as an example of a “sea change” in views about economic policymaking. “Neoliberalism is on the defensive,” he said. However, he also noted the enduring power of simplistic slogans about freedom and averred that he didn’t want to sound like a Pollyanna. “I am optimistic, over-all,” he said. “But it is going to be a battle.” ♦

 

The Dream of Fed Rate Cuts Is Slipping Away

Fed Chair Jerome Powell has dialed back expectations on interest-rate cuts. Photo: Samuel Corum/Bloomberg News

Thursday’s report on economic activity delivered the latest in a series of rude awakenings to investors and Federal Reserve policymakers who have held their breath in anticipation that lower inflation would allow interest-rate cuts to begin in earnest this summer.

Instead, Commerce Department data showed that, for the third straight month, inflation was proving stickier than expected after an immaculate cooling in the second half of last year.

Individual readings on growth and prices so far this year haven’t been enough on their own to dramatically change the outlook for the Fed. But the cumulative effect of those serial disappointments has been notable. 

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In particular, inflation data has consistently been firmer than expected, with recent months getting revised somewhat higher in subsequent reports. This trend has led investors and Fed officials to rethink whether rate cuts will be appropriate this year.

“I always say, one month is no months, but three months—that’s at least one real month,” said Chicago Fed President Austan Goolsbee in an interview last week. “Now that we’re seeing—after six, seven months of very strong improvement and close-to-2% inflation—something that’s well above that, we have to recalibrate, and we have to wait and see.”

Policymakers and financial-market participants began the year broadly expecting slower growth and cool inflation would allow the Fed to begin rolling back interest-rate hikes.

But the opposite has occurred. Growth has proven more resilient than expected, and inflation has been surprisingly firm. On Thursday, the Commerce Department reported that gross domestic product expanded at a 1.6% seasonally- and inflation-adjusted annual rate, but a broader measure of underlying demand ran closer to 3%, suggesting solid momentum.

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Meanwhile, inflation was stronger-than-expected during the first quarter. Core prices, which exclude volatile food and energy items, rose at a 3.7% annualized rate during the quarter and were up 2.9% from a year ago, according to the personal-consumption expenditures price index.

Price data for March will be released by the Commerce Department on Friday. Thursday’s report suggested that figures for January and February are likely to have been revised higher from already firm levels and that inflation didn’t ease and may have picked up in March, keeping the 12-month inflation rate around 2.8%.

Omair Sharif, founder of research firm Inflation Insights, said he believed revisions to seasonal adjustments could explain some of the likely revisions to inflation in Friday’s report.

Others have said a stock-market rally fueled by rate-cut hopes late last year may have boosted prices for financial-management services that feed into the inflation gauge.

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The Fed targets 2% inflation over time. Officials have signaled since late last year they could begin lowering interest rates on the assumption that price growth would slow to around 2.5% later this year and reach 2% after that. The core PCE index rose at a 2% annualized rate in both the third and fourth quarters of last year, buoying optimism that the Fed might have finished its inflation battle without the hand-to-hand combat for which senior officials had braced themselves.

Analysts at forecasting firm LH Meyer said Thursday they now anticipated just one cut this year, at the Fed’s December meeting, after having recently revised their projection of three rate cuts beginning in June to just two beginning in September.

“We still think inflation is headed toward 2%, we still think the [Fed] is heading toward rate cuts, and we still expect them to start cutting this year. And we continue to see little chance that the next move will be a rate hike,” analysts wrote in a client note Thursday. “But the risks have again shifted toward fewer cuts this year and a later onset.”

Markets largely agree. Investors in interest-rate futures markets began the year anticipating six cuts, but now many anticipate just one—or none at all. Bond investors sold U.S. Treasurys on Thursday morning, pushing yields on the benchmark 10-year note above 4.7% for the first time since November, when Fed officials hadn’t yet signaled they were done raising interest rates.

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The Fed has been especially focused on monthly inflation readings in part because central bank economists and the economics profession more broadly have struggled to forecast inflation since the pandemic. Many failed to anticipate just how much it would rise in 2021 and 2022, and then they likewise were surprised by how quickly it appeared to fall last year despite solid hiring and spending. 

Officials including Fed Chair Jerome Powell initially played down higher inflation readings in January and February as “bumps” on the path to lower inflation. At a news conference last month, he said those readings “haven’t really changed the overall story.” 

But Powell acknowledged a limit to that line of thinking. “I always try to be careful about dismissing data that we don’t like. So you need to check yourself on that, and I’ll do that,” he said. Last week, Powell said that firmer inflation in March had likely pushed the timetable for starting rate cuts back by several months.

Core inflation hit a high of 5.6% in February 2022 and began falling steadily a year ago. The latest reports have revived fears that the so-called “last mile” in bringing inflation all the way back to 2% will prove more challenging. Some Fed officials have said they are anxious about leaving rates too high for too long and causing unnecessary harm to the labor market.

The Fed’s inflation fight “has been straightforward” as supply chains healed and labor markets benefited from an influx of workers, said Goolsbee. “It definitely becomes harder this year.”  

Write to Nick Timiraos at Nick.Timiraos@wsj.com

Inflation and the Economy

Analysis from The Wall Street Journal, selected by the editors

 

The Counter-Revolt Finally Begins

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(6 min)

Wonder Land: Columbia, Yale and NYU camp out while the rest of the U.S. flees from wokeness. Images: AFP/Getty Images Composite: Mark Kelly

Before this column ends, we’ll get to the unmissable fact that anti-Israel, often antisemitic, protests are proliferating at what we amusingly choose to call our most “selective” universities—Columbia, Yale, New York University, Stanford, Berkeley. For the moment, add these North Face tent protests on $75,000-a-year campus quads to the sense among the American public that their country is running off the rails.

A list of the phenomena laying us low includes: wokeness, DEI (diversity, equity and inclusion), defund the police (a depressing subset of wokeness), conspiracy theories, head-in-the-sand isolationism and a self-centered political polarization typified—from left to right—by Reps. Alexandria Ocasio-Cortez, Ilhan Omar, Cori Bush, Marjorie Taylor Greene, Matt Gaetz and Lauren Boebert.

Ironically this time of year is associated with hope, amid spring and college graduations—except at the University of Southern California, which, fearing trouble, canceled its commencement speakers and told honorary-degree recipients not to show up.

Setting silenced USC aside, a hopeful note one hears at college commencements is that the American system is self-correcting, that despite recurrent stress, it always rights itself. Opinion polls suggest few believe this anymore but—happy spring—it looks as if we may be on the brink of a real counter-revolt against the craziness.

Last week in the hopelessly gridlocked House, Republican Speaker Mike Johnson, facing threats to his job from the chaos caucus, cast his lot with the enough-is-enough caucus. The House passed bills to sustain allies in Ukraine, Israel and Taiwan. Congress isn’t dead—yet.

Blue states and cities that looked willing to collapse rather than defend their citizens have begun to push back against progressives’ pro-criminal and antipolice movements.

At the urging of Gov. Kathy Hochul, New York’s just-passed state budget includes measures to crack down on shoplifting. Assaulting a retail worker will be a felony. Larceny charges can be based on the total goods stolen from different stores. Progressives in the state’s Legislature opposed the measures. Philadelphia Mayor Cherelle Parker, elected in January on restoring law and order (yes, it can be a Democratic issue), last week announced a plan to support policing in the most crime- and drug-plagued neighborhoods.

March seemed to be a tipping point. The hyperprogressive Council of the District of Columbia, in a city that had become an embarrassing carjacking hellhole, passed an array of anticrime measures. Oregon’s Legislature voted to reverse the state’s catastrophic three-year experiment with drug decriminalization. San Francisco voters approved two measures proposed by, of all people, Mayor London Breed, to ease restrictions on policing and require drug screening for welfare recipients. The results in Los Angeles County’s primary for district attorney strongly suggest progressive George Gascón will be voted out in November.

In all these places, the reversals by elected officials are driven by the prospect of voters’ turning them out of office. That is the U.S. political system trying to right itself.

In California, a safety coalition has collected about 900,000 signatures to reverse parts of Proposition 47, the state’s now-notorious 2014 decision to reduce some theft felonies to misdemeanors. This week, the U.S. Supreme Court’s conservative majority appeared sympathetic to overturning a Ninth Circuit decision that bars cities and towns from enforcing vagrancy laws. Though the case emerged from Grants Pass, Ore., which is trying to ban homeless encampments, about three dozen elected officials and organizations in California filed briefs arguing that the Ninth Circuit’s ruling made cleaning up the streets almost impossible.

News stories since the start of the year have noted that many private companies are rethinking policies on DEI, partly under legal pressure, such as the Supreme Court’s decision last year to strike down the use of race in college admissions.

Some in the corporate DEI movement thought they were immune to restraints. No longer. Companies are rediscovering that the constituency most needing inclusion is their customers. The loudest shot across the bow came last week, when Google fired 28 employees after some staged sit-in protests at its New York and California offices over a contract with Israel’s government. Google’s firing statement describes “completely unacceptable behavior.” No one saw that coming.

All this adds up to a nascent counter-revolt against America’s lurch toward self-destruction. The exception is elite U.S. universities. Their leadership has seen itself as answerable to no one and politically immune.

Robert Kraft, a Columbia grad and owner of the New England Patriots, said this week he will no longer give the school money “until corrective action is taken.”

If big donors ever regain control of these so-called selective schools, a suggestion: Firing the president won’t close the barn door. Instead, fire the admissions office. What a tragedy to think how many serious high-school students were rejected by Columbia, Yale and NYU, edged out by nonuseful idiots whose chosen major is the political structure of re-education camps.

Someone has to be a lagging indicator, and these schools are it.

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Write henninger@wsj.com.

Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the April 25, 2024, print edition as 'The Counter-Revolt Begins'.

Wednesday 24 April 2024

 

The Folly of China’s Real-Estate Boom Was Easy to See, but No One Wanted to Stop It 

When New York hedge-fund manager Parker Quillen visited a glitzy new development in northern China called Tianjin Goldin Metropolitan, he wondered how on earth the developer would fill all that space.

It had apartments starting at $1 million and plans for an office tower bigger than the Empire State Building, an opera hall, shopping malls and hotels. Its total square footage was to exceed the land area of Monaco.

Was there a plan for attracting buyers? Quillen asked. Polo, said the marketing agent showing him around. 

“Polo? You mean the horse thing?” he asked. 

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“Exactly,” he recalled her saying. 

The agent, dressed in riding gear, led him through a stable with more than 100 polo ponies. Quillen asked if Goldin’s founder, a billionaire polo enthusiast who got rich selling computer monitors, had done a viability study for the project. She said she had no idea.

“Then I realized that the vision was that international executives would come to Tianjin and set up their corporate headquarters here because they like polo,” Quillen said. “I was like, oh my God.”

When Quillen returned to New York, he poured more money into his wagers against Chinese property stocks. 

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Polo was supposed to draw buyers to the Tianjin project, which has foundered. Photo: Kevin Frayer/Getty Images

That was 2016, during the heady days when the Chinese property boom was just getting going. Even then, the truth was obvious to anyone who knew what to look for: The boom had turned into a bubble—and was likely to end very badly.

The bubble proceeded to get even worse, though, because no one wanted the music to stop. Chinese developers, home buyers, real-estate agents and even the Wall Street banks that helped underwrite the boom all ignored warning signs. 

Developers found ways to obscure the amount of debt they were holding, with the help of bankers and lawyers. Buyers who suspected the property markets were overbuilt bought more anyway. Chinese and foreign investors seeking juicy returns flooded developers with funding. 

The cheerleaders were operating on a seemingly bulletproof assumption that China’s government would never allow the market to crash. Chinese people had invested the majority of their wealth in housing. Letting the market tumble could wipe out much of the population’s savings—and erode confidence in the Communist Party. 

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Now China is paying the price for failing to act earlier to rein it all in. 

More than 50 Chinese developers have defaulted on their international debt. Around 500,000 people have lost their jobs, according to Keyan, a private think tank focused on Chinese property. Some 20 million housing units across China have been left unfinished, and an estimated $440 billion is needed to complete them. 

Prices for secondhand homes in major cities fell 5.9% in March. Local governments, deprived of income from selling land to developers, are struggling to service their debts. The overall economy is fragile, as real estate and related industries, which once accounted for around 25% of gross domestic product, become a bigger drag on growth.  

‘Worth nothing’

In 2016, the same year Parker Quillen toured the polo grounds in Tianjin, a pair of Hong Kong-based accountants traveled to mainland China and hit the road in a rented Buick.  

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Gillem Tulloch and Nigel Stevenson and their firm, GMT Research, specialize in digging out what they call “financial anomalies” and “shenanigans,” and they suspected a lot of that in China’s housing market. 

Decades earlier, in the Mao Zedong era, the market was controlled by the state, and most people lived in homes provided by their Communist Party work units. In the 1990s, authorities started liberalizing the market, and private developers sprang up everywhere, erecting row after row of housing towers in one of the biggest investment booms in history. 

By the time Tulloch and Stevenson began their trip, many government officials and economists were warning of a bubble. But whenever the market showed signs of faltering, the government would step in. Beijing rolled out new policies to stimulate buying, lowered interest rates and lifted home purchase limits. Confidence was restored, and sales took off again. 

Tulloch and Stevenson were suspicious. As they drove across the country, they were amazed by the number of empty buildings and busted projects. 

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They zeroed in on the projects of China Evergrande Group, the country’s largest developer by sales. Its founder and chairman, Hui Ka Yan, was on his way to becoming China’s richest man, with personal wealth of more than $40 billion in 2017, according to Forbes.

China Evergrande founder and chairman Hui Ka Yan was once one of the nation’s richest men. Photo: Bobby Yip/REUTERS

Tulloch and Stevenson visited 40 Evergrande projects in 16 cities, concluding that many of them were “dead assets,” earning little or no income. Those included sparsely occupied hotels, shops that hadn’t ever been occupied and entire developments far from major population centers. 

At one project, in a port city a few hours from the North Korean border, six residential towers were abandoned, with no workmen, residents or marketing staff. Yet according to Tulloch and Stevenson, Evergrande still treated the project on its books as a performing asset, without writing down its value. 

Tulloch and Stevenson paid special attention to Evergrande’s parking garages. Many were nearly empty. By their reckoning, Evergrande had built some 400,000 parking spaces it was struggling to rent or sell, yet in audited statements it continued to value the spaces at $7.5 billion, or nearly $20,000 per space. 

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The developer booked the parking spaces as investment properties rather than inventory assets—an accounting treatment, unusual among its peers, that allowed Evergrande to overstate their value and book gains early, the two accountants said.

“The company is insolvent by our reckoning, and its equity worth nothing,” they wrote to clients later that year, in a report titled “Auditors Asleep.” The report concluded Evergrande could stay afloat only by borrowing more. 

Evergrande has defended its accounting and business practices, saying its financial results were audited.

Tulloch and Stevenson said that many of their clients agreed with their analysis, but they don’t think many of them acted on it. 

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Hong Kong-based accountant Gillem Tulloch and a colleague traveled around China in a rented Buick to see for themselves what was happening with the nation’s housing market. Photo: Anthony Kwan/Bloomberg News

They were right not to. China’s property market was on the eve of a rebound, thanks to the government’s property-market rescue plan rolled out a year earlier. The next year, 2017, home sales rose 11%, and Evergrande’s Hong Kong-listed shares surged 458%. 

To many Chinese people, real estate seems like a smarter and safer investment than stocks. Many bought multiple units and left them empty, satisfied just to see their values increase.

Chen Yanzhi, now 35, says she began buying homes while still in college, after making a bit of money trading stocks. She started visiting new projects around the country, snapping up units whenever she saw one she liked. 

Over a decade, she bought and sold more than 20 homes in places such as Nanjing, Shanghai and Hainan province. The first cost around $70,000. Years later, she paid $3.8 million for a property in Shanghai. “I love houses, and I love everything about houses,” Chen said in an interview. 

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Young people made fortunes working for developers.

Remen Xia, 40, was a sales manager at Evergrande in China’s northern Jilin province before he jumped to other property companies. By 2018 and 2019, he said, he was earning $280,000 a year, when the average salary for Jilin was less than $4,500, according to data provider Wind. 

Developers needed a lot of capital, which meant fees for financiers willing to raise it. From 2017 to 2021, Chinese real-estate developers raised $258 billion by selling dollar-denominated bonds, according to data provider Dealogic. Banks, including Wall Street heavyweights such as Goldman Sachs and Morgan Stanley, collected $1.72 billion for underwriting these deals. 

Bankers met to discuss deals in the lobby of the Hong Kong Four Seasons hotel. One hedge-fund manager recalled attending parties at least once a month on yachts owned by Chinese developers, with Champagne and female escorts.

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An unfinished China Evergrande residential compound on the outskirts of Shijiazhuang, in Hebei province. Photo: tingshu wang/Reuters

‘Hole-digging’

Chinese banks and international institutions such as Fidelity, Invesco, BlackRock and Pimco invested in Chinese property bonds. Demand for the bonds, which yielded double-digit returns, far exceeded supply, so investors appeared willing to tolerate dubious deal structures.

One popular tactic, which bankers and investors nicknamed “hole-digging,” involved using shell subsidiaries to borrow money, guaranteed by the parent development companies. The guarantee was valid all year long—except, according to documents reviewed by The Wall Street Journal, for June 30 and Dec. 31, the cutoff days most Chinese property companies use to base their financial results on. 

The structure enabled the parent companies to avoid disclosing on their own balance sheets the liabilities incurred by guaranteeing the subsidiary’ debt. It wasn’t illegal, lawyers and accountants said, because a balance sheet is supposed to provide only a snapshot of a company’s financial health at a specific point in time.

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Developers sometimes pledged the same collateral multiple times when borrowing money, according to developers and bankers familiar with the activity. 

An executive at one hedge fund recalled seeing the same list of collateral—shares of developers’ subsidiaries, receivables or company officials’ private jets and mansions—on term sheets for a half-dozen private debt offerings. He bought the debt anyway, given the need for high returns.

“If a portfolio manager chooses not to overlook the collateral issue and refuses to buy those bonds, his performance will rank last, and he will get fired,” he said. 

Chinese banks were so eager to underwrite such offerings that they sometimes agreed to invest tens of millions of dollars of their own money in the bonds, no matter the pricing, according to bankers and an executive at one development company. Such bank participation would suggest to other investors that the deal was hot, thereby holding down the interest rate and making it less expensive for developers to raise money. 

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“At that time, we chose investors, not the other way around,” the executive said.

Evergrande, having become China’s biggest developer, set its sights on becoming one of the world’s top 100 companies by 2020.  

One executive at a Chinese rating agency said Evergrande asked him to award the company a sovereign credit rating, which would signal Evergrande was as safe as the Chinese government. 

Some 20 million housing units across China have been left unfinished, including many in this stalled China Evergrande project outside Shijiazhuang. Photo: tingshu wang/Reuters

Three large Chinese domestic companies awarded it triple-A ratings, the highest possible. S&P Global gave Evergrande only a B-plus rating, junk-bond territory. 

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Chinese state media highlighted the discrepancy, with People’s Daily writing that it was partly due to “a lack of understanding of [Chinese] companies.” People’s Daily blamed Western firms for “exaggerating the potential risks of the Chinese economy and companies,” and said international firms could be helping short sellers.

After a brief pause during coronavirus lockdowns in early 2020, the market resumed its relentless climb. 

The total value of Chinese homes and developers’ inventory hit $52 trillion, according to Goldman Sachs, twice the size of the U.S. residential market and bigger than the entire U.S. bond market. Chinese people had nearly 78% of their wealth tied up in residential property, compared with 35% in the U.S., according to a report by China Guangfa Bank and Southwestern University of Finance and Economics.

Skeptics like Quillen, the New York hedge-fund manager, and Tulloch and Stevenson, the Hong Kong accountants, were flummoxed. 

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Quillen had lost millions of dollars on the short positions he accumulated after his visit to the Tianjin development. Shorting China property stocks, he said, was like having a conversation with the devil in which the devil promised that a $10 stock would go to zero within two years. “But what the devil didn’t tell you,” he said, “is that within those two years, the stock goes to 100 first, then goes to zero.” 

By late 2020, it was becoming harder to ignore the warning signs. 

Prices in Tianjin were comparable with the most expensive parts of London. Millions of units across China sat empty. 

Quillen figured the writing was truly on the wall now. President Xi Jinping kept declaring that “homes are for living in, not for speculation,” and reports surfaced that regulators were planning to tighten credit. Quillen made new short bets.

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