Oct 22

Today’s News 22nd October 2017

  • Xi's Roadmap To The Chinese Dream

    Authored by Pepe Escobar via The Asia Times,

    China's Belt and Road Initiative – the New Silk Road – will spark the country's development and turn the dream into reality…

    It all starts with Hong Kong as a major BRI financing hub.

    Now that President Xi Jinping has been duly elevated to the Chinese Communist Party pantheon in the rarified company of Mao Zedong Thought and Deng Xiaoping Theory, the world will have plenty of time to digest the meaning of “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

    Xi himself, in his 3½-hour speech at the start of the 19th Party Congress, pointed to a rather simplified “socialist democracy” – extolling its virtues as the only counter-model to Western liberal democracy. Economically, the debate remains open on whether this walks and talks more like “neoliberalism with Chinese characteristics”.

    All the milestones for China in the immediate future have been set.

    • “Moderately prosperous society” by 2020.
    • Basically modernized nation by 2035.
    • Rich and powerful socialist nation by 2050.

    Xi himself, since 2013, has encapsulated the process in one mantra; the “Chinese dream”. The dream must become reality in a little over three decades. The inexorable modernization drive unleashed by Deng’s reforms has lasted a little less than four decades. Recent history tell us there’s no reason to believe phase 2 of this seismic Sino-Renaissance won’t be fulfilled.

    Xi emphasized, “the dreams of the Chinese people and those of other peoples around the world are closely linked. The realization of the Chinese dream will not be possible without a peaceful international environment and a stable international order.”

    He mentioned only briefly the New Silk Roads, a.k.a. Belt and Road Initiative (BRI) as having “created a favorable environment for the country’s overall development”. He didn’t dwell on BRI’s ambition and extraordinary scope, as he does in every major international summit as well as in Davos earlier this year.

    But still it was implicit that to arrive at what Xi defines as a “community of common destiny for mankind”, BRI is China’s ultimate tool. BRI, a geopolitical/geoeconomic game-changer, is in fact Xi’s – and China’s – organizing foreign policy concept and driver up to 2050.

    Xi has clearly understood that global leadership implies being a top provider, mostly to the global South, of connectivity, infrastructure financing, comprehensive technical assistance, construction hardware and myriad other trappings of “modernization”.

    It does not hurt that this trade/commerce/investment onslaught helps to internationalize the yuan.

    It’s easy to forget that BRI, an unparalleled multinational connectivity drive set to economically link all points Asia to Europe and Africa, was announced only three years ago, in Astana (Central Asia) and Jakarta (Southeast Asia).

    What was originally known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road were endorsed by the Third Plenum of the 18th CCP Central Committee in November 2013. Only after the release of an official document, “Visions and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Roads”, in March 2015, the whole project was finally named BRI.

    According to the official Chinese timeline, we’re only at the start of phase 2. Phase 1, from 2013 to 2016, was “mobilization”. “Planning”, from 2016 to 2021, is barely on (and that explains why few major projects are online). “Implementation” is supposed to start in 2021, one year before Xi’s new term expires, and go all the way to 2049.

    The horizon thus is 2050, coinciding with Xi’s “rich and powerful socialist nation” dream. There’s simply no other comprehensive, inclusive, far-reaching, financially solid development program on the global market. Certainly not India’s Asia-Africa Growth Corridor (AAGC).

    Have BRI, will travel

    It starts with Hong Kong. When Xi said, “We will continue to support Hong Kong and Macau in integrating their own development into the overall development of the country”, he meant Hong Kong configured as a major BRI financing hub – its new role after a recent past of business facilitator between China and the West.

    Hong Kong’s got what it takes; convertible currency; total capital mobility; rule of law; no tax on interest, dividends and capital gains; total access to China’s capital market/savings; and last but not least, Beijing’s support.

    Enter the dream of myriad financing packages (public-private; equity-debt; short-long term bonds). Hong Kong’s BRI role will be of the Total Package international financial center (venture capital; private equity; flotation of stocks and bonds; investment banking; mergers and acquisitions; reinsurance) interlinked with the Greater Bay Area – the 11 cities (including Guangzhou and Shenzhen) of the Pearl River Delta (light/heavy manufacturing; hi-tech venture capitalists, start-ups, investors; top research universities).

    That ties up with Xi’s emphasis on innovation; “We will strengthen basic research in applied sciences, launch major national science and technology projects, and prioritize innovation in key generic technologies, cutting-edge frontier technologies, modern engineering technologies, and disruptive technologies.”

    The integration of the Greater Bay Area is bound to inspire, fuel, and in some cases even mould some of BRI’s key projects. The Eurasian Land Bridge from Xinjiang to Western Russia (China and Kazakhstan are actively turbo-charging their joint free trade zone at Khorgos). The China-Mongolia-Russia economic corridor. The connection of the Central Asian “stans” to West Asia – Iran and Turkey. The China-Pakistan Economic Corridor (CPEC) from Xinjiang all the way to Gwadar in the Arabian Sea – capable of sparking an “economic revolution” according to Islamabad. The China-Indochina corridor from Kunming to Singapore. The Bangladesh-China-India-Myanmar (BCIM) corridor (assuming India does not boycott it). The Maritime Silk Road from coastal southeast China all the way to the Mediterranean, from Piraeus to Venice.

    Yiwu-London freight trains, Shanghai-Tehran freight trains, the Turkmenistan to Xinjiang gas pipeline – these are all facts on the ground. Along the way, the technologies and tools of infrastructure connectivity – applied to high-speed rail networks, power plants, solar farms, motorways, bridges, ports, pipelines – will be closely linked with financing by the Asia Infrastructure Investment Bank (AIIB) and the security-economic cooperation imperatives of the Shanghai Cooperation Organization (SCO) to build the new Eurasia from Shanghai to Rotterdam. Or, to evoke Vladimir Putin’s original vision, even before BRI was launched, “from Lisbon to Vladivostok”.

    Xi did not spell it out, but Beijing will do everything to stay as independent as possible from the Western Central Bank system, with the Bank of International Settlements (BIS) to be avoided in as many trade deals as possible to the benefit of yuan-based transactions or outright barter. The petrodollar will be increasingly bypassed (it’s already happening between China and Iran, and Beijing sooner rather than later will demand it from Saudi Arabia.)

    The end result, by 2050, will be, barring inevitable, complex glitches, an integrated market of 4.5 billion people mostly using local currencies for bilateral and multilateral trade, or a basket of currencies (yuan-ruble-rial-yen-rupee).

    Xi has laid China’s cards – as well as the road map – on the table. As far as the Chinese Dream is concerned, it’s now clear; Have BRI, Will Travel.

  • Forget ISIS, "Government Corruption" Tops Americans' Biggest Fears

    As Americans gear up to celebrate Halloween at the end of October, a recent survey has revealed the fears that really keep people up at night.

    The Chapman University Survey of American Fears polled 1,207 U.S. adults on their levels of fear across 80 different categories.

    As Statista's Niall McCarthy notes, like last year, corruption of government officials came top in 2017, with 74.5 percent of U.S. adults saying it makes them "afraid" or "very afraid".

    Infographic: Americans' Top Fears Of 2017  | Statista

    You will find more statistics at Statista

    The unrest and uncertainty of Donald Trump's presidency has had a significant influence on this year's ranking.

    With the U.S. health system still engulfed by chaos, 55.3 percent of respondents are fearful of the American Healthcare Act/Trumpcare. The president's decision to withdraw from the Paris Climate Accords has also had an impact with 48 percent afraid of global warming and climate change and 44.9 percent fearful of air pollution.

    The threat of war between the U.S. and North Korea is also starting to touch a nerve. 48.4 percent of Americans fear U.S. involvement in another world war while 47.5 percent are afraid the regime in Pyongyang will use nuclear weapons.

  • "It's A Coup": Catalan President Slams "Worst Attack" By Spain "Since Franco Dictatorship"

    Update: The defiant Catalan leader, Carles Puigdemont, addressed Catalans, Spaniards, and the rest of Europe on TV saying that the Spanish states' imposition of Article 155 means "liquidation of our self-government and cancellation of the democratic will of Catalans".  In other words, he made it quite clear that the region's leaders would not accept direct rule imposed on the region by the Spanish government, as a political crisis that has rattled the economy and raised fears of prolonged unrest showed no signs of easing.

    Puigdemont said Rajoy had set out to "humiliate" Catalonia in an "attack on democracy" and said removing powers from Catalonia was the "worst attack against the institutions and the people of Catalonia since the military dictatorship of Francisco Franco".

    After taking party in peaceful demonstration, Puigdemont expressed his rejection of Madrid’s move, but stopped short of saying he would make good his threat to push ahead with the independence bid before direct rule takes effect.

    “I ask the (Catalan) parliament to meet in a plenary session during which we, the representatives of the citizens’ sovereignty, will be able to decide over this attempt to liquidate our government and our democracy, and act in consequence,” Puigdemont said in a televised address.

    Puigdemont also said Spain "closed the doors ot a request for talks, and should set a date to discuss the attack" and "Catalan institutions cannot accept attack by Spain."

    In a striking accusation, the Catalan president said that "Catalan institutions dealt a coup by Spanish state." Puigdemont then switched to English to appeal to Europeans, says democracy also at risk in Europe: "Catalonia is an ancient European nation". He also announced a session in Catalan parliament to debate "the attempt to liquidate our self-government".

    Puigdemont concluded by saying "Long live Catalonia" to which a silently listening crowd suddenly burst back into cheers and chanting.

    However, as noted, Puigdemont did not specifically declare independence, but said Catalonia will not accept Madrid's plan to curb region's powers, leaving one tiny, final loophole.

    The Senate vote that would give Madrid full control of Catalonia’s finances, police and public media and curb the powers of the regional parliament for up to six months is scheduled for next Friday. That could give the independence movement room to maneuver.

    The regional parliament’s speaker, Carme Forcadell, said she would not accept Madrid’s move and accused Rajoy of a “coup.” “Prime Minister Rajoy wants the parliament of Catalonia to stop being a democratic parliament, and we will not allow this to happen,” Forcadell said in a televised speech.

    In the latest can kicking yet, the Catalan assembly is expected to decide on Monday whether to hold a session to formally proclaim the republic of the region. Catalan media have said Puigdemont could dissolve the regional parliament and call elections by next Friday. Under Catalan law, those elections would take place within two months.

    That would enable Puigdemont to go the polls earlier than envisaged by Rajoy, who spoke of a six-month timetable, and to exploit the anti-Madrid sentiment running high in the region.

    According to Reuters, pro-independence groups have previously mustered more than 1 million people onto the streets in protest at Madrid’s refusal to negotiate a solution.
     

    *  *  *

    As we detailed earlier, with Spain officially pulling the trigger on Article 155, and activating the Spanish Constitutional "nuclear option" this morning, when PM Rajoy said he would seize control of the Catalan government, fire everyone and force new elections in six months, attention has shifted to the Catalan response. And as we waited for the official statement by Catalan separatist president Carles Puigdemont, expected at 9pm local time, we found him taking to the streets, where he led hundreds of thousands of independence supporters in protest around Barcelona on Saturday, shouting "freedom" and "independence" following the stunning news from Madrid earlier on Saturday.

    The protest in the center of the Catalan capital had initially been called to push for the release of the leaders of two hugely influential grassroots independence organisations, accused of sedition and jailed pending further investigation. But it took on an even angrier tone after Prime Minister Mariano Rajoy announced his government would move to dismiss the region's separatist government, take control of its ministries and call fresh elections in Catalonia.

    According to municipal police, over 450,000 people rallied on Barcelona's expansive Paseo de Gracia boulevard, spilling over on to nearby streets, many holding Catalonia's yellow, red and blue Estelada separatist flag.

    Catalan regional vice-president Oriol Junqueras and Catalan regional president
    Carles Puigdemont attend a demonstration on October 21, 2017 in Barcelona

    Protesters greeted Puigdemont's arrival at the rally with shouts of "President, President." The rest of his executive was also there.

    For at least some locals, the time to split from Spain has come: "It's time to declare independence," said Jordi Balta, a 28-year-old stationery shop employee quoted by AFP, adding there was no longer any room for dialogue.

    Others disgree: "The Catalans are completely disconnected from Spanish institutions, and particularly anything to do with the Spanish state," said Ramon Millol, a 45-year-old mechanic.

    Meritxell Agut, a 22-year-old bank worker, said she was "completely outraged and really sad." "They can destroy the government, they can destroy everything they want but we'll keep on fighting."

    Catalonia is roughly split down the middle on independence, but residents cherish the autonomy of the wealthy, northeastern region, which saw its powers taken away under the dictatorship of General Francisco Franco. Which is why, as many have warned, Madrid's move could anger even those against independence.

    Barcelona's Mayor Ada Colau, who opposes the independence drive, tweeted: "Rajoy has suspended the self-government of Catalonia for which so many people fought. A serious attack on the rights and freedoms of everyone."

    Meanwhile, the anger keeps rising: as a police helicopter hovered above, protesters booed and gave it the finger. "I wish they would just go," said Balta, looking up at the sky.

    The Spanish government's proposed measures still have to be approved by the Senate. But the upper house is majority-controlled by Rajoy's ruling Popular Party and he has secured the support of other major parties, meaning they will almost certainly go through.

    Puigdemont is expected to make a statement at 9 p.m. For Catalonia, and Spain, it will – literally – mean the difference between independence and remaining part of Spain. It could also mean the difference between peace and a violent crackdown by Madrid on what it has seen since day one as an illegal independence process. For the Catalan leader, the stakes are huge:  El Pais reported Puigdemont faces a charge of sedition, punishable by up to 30 years in prison, if he formally declares independence or tries to change the Spanish constitution.

  • Mauldin: "Investors Ignore What May Be The Biggest Policy Error In History"

    Submitted by John Mauldin

    My good friend Peter Boockvar recently shared a chart with me. The University of Michigan’s Surveys of Consumers have been tracking consumers and their expectations about the direction of the stock market over the next year. We are now at an all-time high in the expectation that the stock market will go up.

    The Market Ignores Monetary Uncertainty

    It is simply mind-boggling to couple that chart with the chart of the VIX shorts (I wrote about the VIX craze in this this issue of Thoughts from the Frontline).

    Peter writes:

    Bullish stock market sentiment has gotten extreme again, according to Investors Intelligence. Bulls rose 2.9 pts to 60.4 after being below 50 one month ago. Bears sunk to just 15.1 from 17 last week. That’s the least amount since May 2015. The spread between the two is the most since March, and II said, “The bull count reenters the ‘danger zone’ at 60% and higher. That calls for defensive measures.” What we’ve seen this year the last few times bulls got to 60+ was a period of stall and consolidation. When the bull/bear spread last peaked in March, stocks chopped around for 2 months. Stocks then resumed its rally when bulls got back around 50. Expect another repeat.

    Only a few weeks ago the CNN Fear & Greed Index topped out at 98. It has since retreated from such extreme greed levels to merely high measures of greed. Understand, the CNN index is not a sentiment index; it uses seven market indicators that show how investors are actually investing. I actually find it quite useful to look at every now and then.

    The chart below, which Doug Kass found on Zero Hedge, pretty much says it all. Economic policy uncertainty is at an all-time high, yet uncertainty about the future of the markets is at an all-time low.

    Why This Is Happening Now

    At the end of his email blitz, which had loaded me up on data, Dougie sent me this summary:

    • At the root of my concern is that the Bull Market in Complacency has been stimulated by:
    • the excess liquidity provided by the world’s central bankers,
    • serving up a virtuous cycle of fund inflows into ever more popular ETFs (passive investors) that buy not when stocks are cheap but when inflows are readily flowing,
    • the dominance of risk parity and volatility trending, who worship at the altar of price momentum brought on by those ETFs (and are also agnostic to “value,” balance sheets,” income statements),
    • the reduced role of active investors like hedge funds – the slack is picked up by ETFs and Quant strategies,
    • creating an almost systemic "buy the dip" mentality and conditioning.
    • when coupled with precarious positioning by speculators and market participants:
    • who have profited from shorting volatility and have gotten so one-sided (by shorting VIX and VXX futures) that any quick market sell off will likely be exacerbated, much like portfolio insurance’s role in a previous large drawdown,
    • which in turn will force leveraged risk parity portfolios to de-risk (and reducing the chance of fast turn back up in the markets),
    • and could lead to an end of the virtuous cycle – if ETFs start to sell, who is left to buy?

    On the Brink of the Largest Policy Error

    The chart above, which shows the growing uncertainty over the future direction of monetary policy, is both terrifying and enlightening. The Federal Reserve, and indeed the ECB and the Bank of Japan, went to great lengths to assure us that the massive amounts of QE that they pushed into the market would help turn the markets and the economy around.

    Now they are telling us that as they take that money back off the table, they will have no effect on the markets. And all the data that I just presented above tells us that investors are simply shrugging their shoulders at what is roughly called “quantitative tightening,” or QT.

    I simply don't buy the notion that QE could have had such an effect on the markets and housing prices while QT will have no impact at all.

    In the 1930s, the Federal Reserve grew its balance sheet significantly. Then they simply left it alone, the economy grew, and the balance sheet became a nonfactor in the following decades. I don’t know why today’s Fed couldn’t do the same thing.

    There really is no inflation to speak of, except asset price inflation, and nobody really worries about that. We all want our stocks and home prices to go up, so there’s no real reason for the central bank to lean against inflationary fears; and raising rates and doing QT at the same time seems to me to be taking a little more risk than necessary.

    And they’re doing it in the midst of the greatest bull market in complacency to emerge in my lifetime.

    Do they think that taking literally trillions of dollars off their balance sheet over the next few years is not going to have a reverse effect on asset prices? Or at least some effect? Is it really worth the risk? Remember the TV show Hill Street Blues? Sergeant Phil Esterhaus would end his daily briefing, as he sent the policemen out on their patrols, with the words, “Let’s be careful out there.”

    * * *

    Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.

  • Crypto-Currency Calm Before The Storm

    Authored by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces) via SHTFplan.com,

    The United States (and the world) has been using the worthless fiat federal reserve note that is not backed by any true tangible asset.  The only backing is not even the “full faith and credit of the United States government,” because the government is too far in debt to have any credit.  Faith disappeared a long time ago: our faith in elected officials as public servants.  Instead, they serve themselves upon the labors of the public, and the public services them, in every sense of the word.

    Cryptocurrency is an illusion.  The new “shell game” is to replace one illusion…the fiat currency…with another illusion, the “bitcoin.” 

    Russia announced last week several measures to “deal” with the Cryptocurrency…first, by issuing a Crypto-ruble.  If you read the fine print, the Russian government is moving in to tax and regulate it, at a rate of 13% on trades for profit, as well as “Crypto-Rubles” that suddenly appear out of nowhere.

    It won’t affect the Black Market as much, because 13% is going to be paid to turn a blind eye to the billions of rubles being stolen by the Russian Mafia and oligarchy alike.  The gimmick here is for the government to take a chunk out of it: for now.  The reason “now” is being used, is that eventually they’ll shift gears, pass legislation, and eventually outlaw private trading in it that is not government-sanctioned or government-approved.

    A government is only concerned with perpetuating itself and maintaining power.  The most basic way it does this is by controlling the currency of the nation, regulating it, and taxing the citizens.  In the United States, it has been reported by several sources that JP Morgan Chase is going to embrace Cryptocurrency.  Europe is well on its way to establishing a “Euro-BitCoin,” and China has recently relaxed some measures regarding it.

    This is the calm before the storm: the governments are studying it, and studying the masses to find the means to take control of it.

    The gullible masses are playing right into their hands.  The problem with Cryptocurrency is not just in the fact that it is backed by nothing (a fool’s errand before it has been started), but there is no privacy.  None.  If the governments control and monitor all electronic and computer media, then there is no such thing as privacy regarding electronic currency.  This will be the death of cash, and thus the death of any privacy for citizens.

    There will be no hiding from the taxing authorities.  All the accounts will be monitored: taxed on any growth, and every single penny accounted for.  The government will know what work you do, for how much, and how much “Crypto-currency” you have in your accounts.  All electronic, nebulous, unbacked garbage.  How about a nice “glitch” where suddenly, your entire account falls to a zero balance?  That “glitch” can happen anytime.

    No, the politicians and the oligarchs will have gold, silver, real estate, mining rights and contracts, and ownership of every utility and municipal function upon which the public is dependent.  Eventually the Crypto-Dollars will be handed out sparingly to “exchange for food, clothing, and to pay their bills,” and the whole thing is designed for one thing:

    To keep the population at a starveling, subsistence level while those in power own everything, and them as well: Ruled by the politicians and oligarchs, fooled by the press and the religious pulpits, and killed by the enforcement arms of police and military.

    In 1910, the meeting on Jekyll Island, Georgia took place leading up to 1913.  It was then that the framework for the transfer of the power of the U.S. government over the nation’s currency to the federal reserve was established.

    “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson.”

     

    President Franklin D. Roosevelt’s letter to Colonel Edward Mandell House,

    Fmr. Advisor to President Woodrow Wilson    November 21, 1933

    The aim is global governance.  The Cryptocurrencies arose out of a desire to use something other than the dollar and other failing fiat notes not backed by anything.  The irony is that the Cryptocurrencies are the vehicle for the globalists.

    Once each nation has its Cryptocurrencies in place, they can “align” them, and virtually abolish all economic buffers and barriers…which will come crashing down just as the illegal aliens in Europe and the United States are destroying the borders, language, culture, and societies.  The whole thing is trumpeted as a recourse, but it is nothing more than an extension of an Alinsky principle “organizing the organized.”  At the right moment, the governments will swoop in, regulate, and tax these Cryptocurrencies.

    Once cash is eliminated, hard assets such as gold, silver, and other resources will be simple to control.  Where did you obtain that gold?  How did you obtain it, and is it in our records?

    The power lies in the receipt, the payment receipt showing where you obtained that product and how you obtained it…all based on POS (point of sale), the electronic monitoring of every expenditure at the register.  The “successful” employment of Cryptocurrency will mean that the people have been completely duped and have handed all privacy into the control of the government.  Once they control everyone economically, they will use that control to seize other aspects of daily life that are not regulated.  They’ll know how much you make, where you work, and how much you have available.

    Or what you think you have available, because in the blink of an eye, they’ll make your Crypto dollars disappear, and you’ll have no recourse, just as they have no accountability.  If politicians steal money now, while cash still exists, think of how much they’ll be able to steal when everything is done electronically…when all the bankers and oligarchs are under their control/in a symbiotic-parasitic relationship and they can pass any law they wish.  Cryptocurrency is a scam that will eventually lead to the final enslavement of the U.S.

  • Unprecedented Housing Bailout Revealed, As China Property Sales Drop For First Time In 30 Months

    Back in March, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth will keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing: three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US with the remainder invested financial assets.

    Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. 

    The other reason why China is so eager to keep its housing sector inflated – and risk bursting bubbles – is that as shown in the chart below, in 2016 the rise of property prices boosted household wealth in 37 tier 1 and tier 2 cities by RMB24 trillion, almost twice the total local disposable income of RMB12.9 trillion. For any Fed readers out there, that’s how you create a wealth effect, fake as it may be. 

    Unfortunately for China, whose record credit creation in 2017, and certainly in the months leading up to the 19th Chinese Communist Party Congress which started last week, has been the primary catalyst for the “global coordinated growth”, the good times are now again over, and according to the latest real estate data released last week, property sales in China dropped for the first time since March 2015, or more than two-and-half years, in September and housing starts slowed sharply reinforcing concerns that robust growth in the world’s second-largest economy is starting to cool.

    Property sales by floor area fell 1.5% in September from a year earlier, compared with a 4.3% increase in August and a 34% jump in September 2016, according to Reuters calculations based on official data released on Thursday. That marked the first annual decline since the start of 2015. Separately, new construction starts by floor area, a volatile but telling indicator of developers’ confidence, rose just 1.4% in September on-year, slowing from a 5.3% increase in August, according to Reuters calculations.

    “The negative September sale number shows that, unequivocally, the property boom has peaked,” Rosealea Yao, a property analyst at Gavekal Dragonomics told Reuters. “We have seen some big rebounds at the end of the first and second quarter, but given how fast the sale numbers are declining, we expect no big rebound this time.”

    Echoing our concerns above, Reuters writes that “real estate, which directly affects 40 other business sectors in China, is a crucial driver for the economy but also poses a major risk as Beijing looks to tame soaring home prices without triggering a crash or a sharp drop in construction activity.

    The easing in property activity appeared to drag on broader growth in the third quarter, and as many economists predicted China’s GDP rose 6.8% in the third quarter from a year earlier, down from 6.9% in the second quarter. And while property investment did rise 9.2% in September, picking up pace from an expansion of 7.8 percent in August, analysts warned such investment usually lags sales trends by up to six months.

    Still, as discussed here previously, while home prices have sharply softened in China’s biggest, Tier-1, cities in recent months in response to a flurry of government cooling measures, property bubbles are still a threat in other parts of the country.

    A flurry of small cities have had to unveil fresh property curbs in recent weeks after speculators turned their attention to less-restricted cities that have massive overhangs of unsold houses.

    Moreover, in addition to many buyers purchasing second houses on credit as Deutsche Bank pointed out last month, high prices are forcing many home buyers to take on more debt, weighing on future household consumption and leaving banks more exposed to any property downturn even as Beijing looks to rein in financial system risks. Household loans, mostly mortgages, rose to 734.9 billion yuan ($110.80 billion) in September from 663.5 billion yuan in August, despite rising mortgage rates, according to Reuters calculations. Short-term loans also soared in the third quarter, suggesting speculators may be trying to circumvent property cooling measures, economists said.

    What is most concerning, however, is that the recent sharp decline takes place even as policymakers have made stabilizing the overheated property market a top priority ahead of a critical Communist Party Congress this week, reiterating the need to avoid dramatic price swings which they fear could threaten the financial system and harm social stability.

    Adn while a downward inflection point in China’s housing market – which accounts for a third of China’s economic growth – is bad, what follows is far worse.

    According to a fascinating new WSJ report, China’s housing downturn is likely far worse than meets the eye, as under Beijing’s direction more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. China’s Housing Ministry, which is behind the purchases, said it plans to continue the program through 2020. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market,

    As the WSJ notes, this latest backdoor bailout “It is a sharp illustration of China’s economy under President Xi Jinping and the economic challenges he will face as he renews his 5-year term at a twice-a-decade Communist Party Congress that opens on Wednesday.”

    Rosealea Yao from Gavekal Dragonomics, who was also quoted above, wrote that “the government’s creativity in coming up with new ways of supporting the housing market is impressive—but it’s also an indication that it still depends on housing for growth.

    While traditionally, China’s government used to build homes for families who lost theirs to development or decay, last year, local governments, from the northeast rust belt to the city of Bengbu with 3.7 million amid the croplands of central Anhui province, spent more than $100 billion to buy housing from developers or subsidize purchases, according to Gavekal Dragonomics.

    In other words, the reason why China no longer has ghost cities is because the government is buying them in just as concerning, “ghostly” transcations.

    The underlying structure is yet another typically-Chinese ponzi scheme:

    Underpinning the strategy is a cycle of debt. Cities borrow from state banks for purchases and subsidies, then sell more land to developers to repay the loans. As developers build more housing, they, too, accrue more debt, setting up the state to bail them out again. The burden on the state rises, as does the risk of collapse.

    What is astounring, is that while the government has tried other ways of filling apartments, such as offering cash subsidies to encourage rural migrants to buy in urban areas, the program is the first large-scale case of the government becoming a home buyer itself. In May, Lu Kehua, China’s deputy housing minister, said the program has “played a positive role in steady economic growth,” and called for a push to clear housing inventory as early as possible, according to an article by the official Xinhua News Agency.

    Well, of course, it’s played a “positive role” – when the government itself is buying half the units it bought (see chart above), what can possibly go wrong? Well, pretty much everything if the housing market is once again headed lower and with the explicit backing and funding of the Chinese government.

    Some more fascinating details on how China fooled the world into believing back in 2014 that its recently burst housing bubble had “smoothly landed” and was again recovering:

    Three years ago, Bengbu’s housing prices were falling. Housing inventory in 2014 would have taken almost five years to fill at the pace of sales at the time, said Shanghai-based research firm E-House China R&D Institute. Around the same time, the Bengbu government began to gobble up homes, and it has continued to do so. The city said it bought nearly 6,000 apartments from developers last year.

     

    Housing stock in Bengbu was down to four months in September, a city official overseeing the government program said in September. Home prices had increased by 15% in August from a year earlier. That exceeded the 8.2% growth across a benchmark of 70 cities compiled by the national statistics agency.

     

    Beijing and Shanghai residents are used to such price surges, but it is unusual in a smaller Chinese city lacking any particular tourism or job-market appeal.

    Naturally, China would rather not have details of its latest bailout program spread too far:

    Bengbu officials are wary about publicizing its hand in the market for fear of driving up prices and speculative buying. “We don’t mention it as much now as in the past two years,” the city official in charge of the program said. “Prices have been fluctuating a lot, and it’s a little bit out of control.”

    Since the launch of the program, which is an explicit subsidy to Chinese real-estate developers who are directly selling to the government, things have predictably normalized. In fact, the outcome has been a little too frothy:

    In 2015, groups of families on government-organized apartment tours started showing up, said Ding Qian, a planner at the developer, Bengbu Mingyuan Real Estate Development. By October 2016, the developer had sold 20 blocks of finished apartments, about 10% of them paid for with government funds, Ms. Ding said.

     

    “We have run out of apartments to sell,” she said. The developer has sped up construction of 42 new blocks, about 4,000 apartments, and has raised prices by 40%.

    All thanks to the government, which is lending to local governments to avoid the impression it is directly involved in bailing out China’s “wealth effect”:

    The Bengbu official in charge of the program declined to disclose details about the city’s apartment purchases, but said the city had borrowed 10 billion yuan ($1.5 billion) of the 19 billion yuan of available credit extended by China Development Bank for housing purchases and subsidies.

     

    Local governments in 2016 borrowed 972.5 billion yuan from the bank, the government’s main housing lender, nine times the level three years earlier, according to E-House China R&D Institute, which compiled data from official bank and government websites. More than half of last year’s loans went to purchases or subsidized buying, according to the official Xinhua News Agency. The rest of the loans funded housing projects built by the government.

    What is most firghtening, is that despite the decline in property sales, the government’s role in the housing market continues to grow according to the WSJ, and here is a stunning statistic: Of all the residential floor space sold in China last year, 18% was purchased by government entities or with state subsidies, E-House China determined from official government data. The share could reach 24% this year, the firm said.

    To paraphrase: Beijing is now the (covert) marginal buyer of a quarter of all Chinese real estate. That, in itself, is a mindblowing statistic. What is scarier, is that despite this implicit backstop, property sales are once again declining after 30 months of increases. One can only imagine the epic crash that would ensure at this moment, if – for some reason – the government bid were to be pulled, and just how spectacular the ensuing global depression would be as the rug is pulled from below the middle class of the world’s fastest growing economy.

  • The First Amendment Is Under Serious Assault In Order To Stifle Anti-Israel Boycotts

    Authored by Mike Krieger via Liberty Blitzkrieg blog,

    Assaults on freedom speech can be found in many aspects of American life these days, but one specific area that isn’t getting the attention it deserves relates to boycotts against Israel.

    Increasingly, we’re seeing various regional governments requiring citizens to agree to what essentially amounts to a loyalty pledge to a foreign government in order to participate in or receive government services.

    I’m going to highlight two troubling examples of this, both covered by Israeli paper Haaretz. The first relates to Kansas.

    From the article, In America, the Right to Boycott Israel Is Under Threat:

    The First Amendment squarely protects the right to boycott. Lately, though, a legislative assault on that right has been spreading through the United States –  designed to stamp out constitutionally protected boycotts of Israel…

     

    Over the past several years, state and federal legislatures have considered dozens of bills, and in some cases passed laws, in direct violation of this important ruling. These bills and laws vary in numerous respects, but they share a common goal of scaring people away people from participating in boycotts meant to protest Israeli government policies, including what are known as Boycott, Divestment, and Sanctions (BDS) campaigns.

     

    Today, the ACLU filed a lawsuit challenging one of those laws — a Kansas statute requiring state contractors to sign a statement certifying that they do not boycott Israel, including boycotts of companies profiting off settlements in the occupied Palestinian territories.

     

    We are representing a veteran math teacher and trainer from Kansas who was told she would need to sign the certification statement in order to participate in a state program training other math teachers. Our client is a member of the Mennonite Church USA. In response to calls for boycott by the church and members of her congregation, she has decided not to buy consumer goods and services offered by Israeli companies and international companies operating in Israeli settlements in the occupied Palestinian territories. Our client is boycotting to protest the Israeli government’s treatment of Palestinians and to pressure the government to change its policies.

     

    Earlier this year, our client was selected to participate as a contractor in a statewide training program run by the Kansas Department of Education. She was excited to use her skills to help train math teachers throughout the state, but when she was presented with a form requiring her to certify that she “is not currently engaged in a boycott of Israel,” she told the state that she could not sign the form in good conscience. As a result, the state refuses to let her participate in the program.

     

    Kansas’s law, and others like it, violates the Constitution. The First Amendment prohibits the government from suppressing one side of a public debate. That means it cannot impose ideological litmus tests or loyalty oaths as a condition on hiring or contracting.

    If this was the only example of such behavior, I suppose we could dismiss it as a one-off, misguided directive. Unfortunately, this sort of thing is far more common than any of us would like to admit.

    Here’s another recent example, from the article, Houston Suburb Won’t Give Hurricane Relief to Anyone Who Boycotts Israel:

    A Houston suburb will not approve grants to repair homes or businesses damaged in Hurricane Harvey if the applicant supports boycotting Israel.

     

    The city of Dickinson’s application form for storm damage repair funding includes a clause stating that “By executing this Agreement below, the Applicant verifies that the Applicant: (1) does not boycott Israel; and (2) will not boycott Israel during the term of this Agreement.”

    No other clauses about political affiliations or beliefs are included in the form.

     

    The state of Texas passed a law in May banning state entities from contracting with businesses that boycott Israel. The law, one of 21 passed in states around the country in the past few years, has been criticized by the American Civil Liberties Union as unconstitutional.

    This is totally insane. I don’t care what you think about Israel, the above is completely unacceptable in a free society and we should all be making a stink about it. Please share with friends and family.

    *  *  *

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  • LedgerX Trades Over $1 Million In Bitcoin Options And Swaps In First Week

    Bitcoin derivatives clearinghouse LedgerX has announced that the first bitcoin derivatives trades have taken place on its platform – an important milestone for the nascent digital currency market that could open the door to more institutional involvement and, some say, the creation of the first bitcoin-focused ETF.

    LedgerX confirmed rumors that it had already started clearing bitcoin derivatives trades in a statement provided to CoinDesk and a handful of other media outlets. According to figures provided by the company, LedgerX facilitated trading in 176 swaps and options contracts in its first week, an amount with a notional values of more than $1 million, according to CEO Paul Chou.

    "This week, a new standard is set for transparency, oversight and counter-party assurance. Institutional investors and traders can now rely on a guaranteed clearing and settlement process when transacting bitcoin contracts," Chou said.

    As CoinDesk points out, while the initial LedgerX trades appear to be exclusively bitcoin focused, the details of the license granted to the company by the CFTC in July allow for the creation of derivatives for other digital currencies as well. The company is reportedly working with options trading shops, asset managers, hedge funds, bitcoin miners, family offices, investment banks and virtually anybody else interested in helping it create a market for the new contracts.

    "Our regulated, institutional-grade platform enables participants who were sitting on the sidelines, to enter the digital currency market."

    LedgerX is licensed as both a swap execution facility (SEF) and a derivatives clearing organization (DCO).

    The CFTC gave its blessing to LedgerX back in July when it approved the creation of the first designed bitcoin SEF, or swap execution facility. Previously, bitcoin derivatives were traded exclusively OTC on exchanges like BitMEX. But now, trading in bitcoin options will be centrally cleared in the same manner as option contracts on equities.

    Congress mandated the creation of SEFs as part of its Dodd-Frank Wall Street reform bill in a bid to bring greater transparency to derivatives trading after synthetic CDOs and other shady “hedging instruments” tied to the mortgage securities helped wreck the economy in 2008,

    Dodd Frank, helped by a raft of CFTC rules, helped create a complex trade-reporting ecosystem in US markets, which RiskFocus has illustrated in the infographic below:

    Bitcoin options trading has come a long way since late 2015, when the CFTC officially went after bitcoin company Coinflip for operating a platform for trading bitcoin options without the proper authorization – confirming in the process that bitcoin would be treated as a commodity for regulatory purposes.

    We imagine LedgerX won’t have too difficult of a time moving inventory, considering bitcoin’s astounding run of new record highs persists unabated. In a market starved for volatility, giving the "big boys" the ability to trade with massive leverage on what is already the most volatile asset class in existence is just what some funds need to make their year as they swing for the fences with 20x (or more in) margin.
     

  • "Carnival Barker" Krugman & The Inevitable Weimar Endgame

    Authored by Jeffrey Snider via Alhambra Investment Partners,

    Who President Trump ultimately picks as the next Federal Reserve Chairman doesn’t really matter. Unless he goes really far afield to someone totally unexpected, whoever that person will be will be largely more of the same. It won’t be a categorical change, a different philosophical direction that is badly needed.

    Still, politically, it does matter to some significant degree. It’s just that the political division isn’t the usual R vs. D, left vs. right. That’s how many are making it out to be, and in doing so exposing what’s really going on.

    As usual, the perfect example for these divisions is provided by Paul Krugman. The Nobel Prize Winner ceased being an economist a long time ago, and has become largely a partisan carnival barker. He opines about economic issues, but framed always from that perspective.

    To the very idea of a next Fed Chair beyond Yellen, he wrote a few weeks ago, “we’re living in the age of Trump, which means that we should actually expect the worst.” Dr. Krugman wants more of the same, and Candidate Trump campaigned directly against that. As such, there is the non-trivial chance that President Trump lives up to that promise.

    Again, it sounds like a left vs. right issue, but it isn’t. The political winds are changing, and the parties themselves are being realigned in different directions (which is not something new; there have been several re-alignments throughout American history even though the two major parties have been entrenched since the 1850’s when Republicans first appeared). Who the next Fed Chair is could tell us something about how far along we are in this evolution.

    What Krugman wants, meaning, it is safe to assume, what all those like him want, is simple: success. He believes that the central bank has given us exactly that, therefore it is stupid to upset what works.

    In particular, both Bernanke and Yellen responded effectively to a once-in-three-generations economic crisis despite constant heckling from back-seat drivers in Congress and on the political right in general. And their intellectual and moral courage has been completely vindicated by events.

    This is right here is the very central point of political difference that is pulling the world slowly apart. Krugman offers no evidence for his assertion, that the Fed has performed admirably and successfully, he just states it as if it was so (a common tactic in the mainstream, the fallacy of authority). Whenever challenged on this contention, the argument will always go back to “jobs saved.”

    A worse counterfactual downside is not a rational standard for evaluation in any discipline or context. The only benchmark that should matter is recovery, as any economy facing recession, even an unusually severe one, has to make it back to the prior condition. On that score the Fed has utterly and unambiguously failed.

    One reason for it is the one thing Economists like Krugman never bring up; the 2008 panic. How can anyone claim the Fed under Yellen or Bernanke performed even minimally well? The very fact that the panic happened at all is a direct indictment on monetary policy and the people who were there during it (you had one job to do!).

    That’s not really what is at issue here, only it has become one battle in what is a larger war. That struggle is betrayed in Krugman’s own words by which he means to raise up both Bernanke and Yellen as examples of what needs to continue.

    For more than a decade the Fed chair has been a distinguished academic economist — first Ben Bernanke, then Janet Yellen. You might wonder how such people, who have never been in the business world, who have never met a payroll, would deal with real-world economic problems; the answer, in both cases: superbly…

    Given this track record, you might expect to see either Yellen reappointed or an equally qualified technocrat take her place.

    This is all really about Economics. It has failed and most publicly so in the form of its principle public adherents in the Federal Reserve piloted by Bernanke and Yellen. The technocratic stars of the faith have been dramatically dimmed by events. Economists are not scientists, clearly, and so they are desperately seeking to circle the wagons by rewriting history; the last ten years weren’t all that bad, and they really could have been worse if it wasn’t for Economics.

    The irrational, emotional defense for the ideology is what is driving political upheaval, including Donald Trump’s occupying the White House.

    To most people, Krugman’s ideas and assertions are nonsense. They don’t have to know anything about QE’s effect on the TBA market and dollar rolls, how exactly McDonald’s was borrowing from FRBNY, or what it was that AIG did that ultimately made the Federal Reserve profits. People know the Fed did a bunch of stuff that didn’t work because they can tell there is something very wrong with the economy.

    And after ten years of being told not to worry about it, or that it was being expertly handled, the people are Fed up with the defense of ideology first at the expense of actual answers. That’s really where we are; Economics has no more solutions (more QE!), therefore Economists have been forced to re-evaluate everything but only along those lines. If Economics can’t solve the problem, then they believe this has to be as good as it gets. And everyone should just stop complaining and appreciate the heroic and inspired effort that “saved” so many “jobs.”

    Trump’s candidacy, as Bernie Sanders’, as an ideal was a grave threat to the status quo because it started with the premise that, no, this isn’t as good as it can be and that we need to look for real solutions. Whether he forwards that ideal as President is and has been another matter, and who he picks as Fed Chair might be some small indication of where he currently stands consistent with that idea, or perhaps having second thoughts about it.

    The technocracy doesn’t work because it isn’t technically competent (thus 2008).

    That’s the real political debate in 2017 and going forward; technical incompetence where the defense of the technocracy refuses to even allow the suggestion that this might be true. I go back to Weimar Germany not because I expect a global hyperinflationary breakdown, but in how that one particular form of systemic breakdown exposed timeless flaws inherent in all economic and financial systems. They all run to some extent on trust and (good) faith:

    In other words, German monetary officials, particularly Reichsbank head Rudolf von Havenstein and Minister of Finance Karl Helfferich, denied that Germany had an inflation problem at all – right up until the end. Minister Helfferich declared that Germany had better gold coverage after the war than before it, despite that more than quadrupling of currency volume. One economics professor, Julius Wolf, wrote in 1922 that, “in proportion to the need, less money circulates in Germany now than before the war.”

     

    As much as the easy-to-see Versailles excuse played a part, there can be no doubt that beyond 1921 the German people themselves began to recognize that authorities had no idea what they were doing; worse, they came to see that even though policymakers were inept and incompetent, officials themselves would never admit as much and thus nothing would prevent Germany from its fate. That awakening meant an increase in danger that French occupation could never have unleashed on its own.

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Oct 21

Today’s News 21st October 2017

  • Brandon Smith: How To Stop All Future Mass Shootings

    Authored by Brandon Smith via Alt-Market.com,

    In my last article 'A Tactical Analysis Of The Las Vegas Mass Shooting Incident,' I outlined the precarious nature of the mainstream narrative and why the Vegas event in particular requires serious independent investigation into the possibility that Stephen Paddock did not plan or execute the event alone, or, he did not plan or execute the event at all, and someone else with far more tactical knowledge and shooting experience committed the murders outside the Mandalay Bay Hotel. Given that the FBI and Vegas sheriff's timeline seems to change every few days and that Mandalay surveillance footage is locked up tight, I think it is safe to say that someone more professional, and not muzzled by bureaucracy, needs be involved.

    Setting aside the inconsistencies in the official narrative, questioning the motives behind this particular attack does not really bring us any closer to a practical solution. Of course, if you are one of those people that obsessively embraces the "crisis actor" theory, then you likely think that nothing much needs to be solved because "no one actually died." I am not very interested in this impractical theory reminiscent of 'The Truman Show', nor the people that promote it. It reminds me of the 9/11 hologram plane theory — remember, the theory designed to discredit the more legitimate 9/11 truth movement which included hundreds of scientists, architects and engineers with real arguments and evidence? Yeah, those establishment disinformation tactics did not go away; they are still being used today to undermine honest and rational investigations of other potential false flag events.

    Ask "fake event" theorists for ANY concrete evidence that a single death was theatrical and that thousands of concertgoers and their families are part of the conspiracy, and these guys will demand that YOU show them the dead bodies and prove that the event "wasn't faked."  In other words, you must prove a negative, which is of course impossible.

    Tell them you happen to know people with friends and family who were harmed in the event and they'll call you a liar or a government "agent." Show them numerous photos of dead bodies and they'll claim the bodies are actors. Show them first hand accounts of people on the ground — hey, all those people must be actors, too. Ask them for proof again and they'll try to pawn the burden of proof off on you; proof that they will then again deny when it is presented. It is a pointless circle of idiocy that makes alternative research look ridiculous.

    If the establishment is seeking to stage a false flag, why go through the trouble of an elaborate, costly and harder-to-contain Kabuki play with numerous actors that might not keep quiet when they could simply shoot some real people with real bullets and be done with it?

    Moving on…

    This article will be focusing on the very real shooting (and attacks like it) which did in fact occur. Perhaps not the way that the mainstream media and the FBI claim, but still taking place all the same. How do we prevent such attacks in the future? What about Gladio-type false flag events (the Vegas event has numerous Gladio markers)? Can those be stopped, or is this an impossible task?

    As far as false flag attacks are concerned, the long-term solution would be to nullify the people who fund and plan these scenarios. Until the day this is accomplished, though, we need some short-term protections.

    I believe it is indeed possible to stop future mass shooting events, and to be sure, the solution does NOT involve further gun control measures or confiscation. Why? Because gun control does nothing to prevent mass shootings.

    Just take a look at the Paris attacks perpetrated by ISIS. France has strict gun laws in line with what gun control advocates in the U.S. would like to see implemented. Even off-duty police officers in France were not allowed to carry their sidearms until after the Paris attacks in 2015.

    French gun laws did nothing to stop ISIS terrorists from killing over 130 people in a single night using weapons already highly restricted in the country. All they accomplished was disarming innocent citizens and making them easy targets.

    The nation of India also has some of the strictest gun laws in the world, yet this did nothing to prevent the Mumbai attacks in 2008 in which 164 people were killed.

    Norway had extremely tough gun laws in 2011, but these were easily circumvented by Anders Breivik who murdered 69 members of a Workers Youth Camp on the island of Utoya.

    As I noted in my previous article, the Vegas attack was initiated using more complex sniper-like tactics as evidenced in the choice of the shooter's perch as well as in the calculations for bullet drop from an elevated position. I believe this was done quite deliberately; most mass shooters tend to be poorly trained and attack a crowd haphazardly at point blank range in order to achieve maximum casualties in the shortest amount of time.  However, in Vegas, and Nevada in general, the likelihood of running into a person with a conceal carry weapon is rather high. Paddock (or whoever) might not have lasted more than a minute before being confronted with multiple defenders armed with their own sidearms.

    The Vegas shooter was smart to avoid a point blank, ground level confrontation. But how do we make future shooters think twice about longer range attacks at crowded events?

    The federal government and DHS will probably call for stricter security measures in locations in which many people congregate. I would not be surprised to see demands for TSA-style security in streets in major tourist areas and at concerts, sporting events, etc. Body scanners and luggage scanners in major hotels? Count on it, eventually. Hardcore anti-gun ordinances within major cities, much like the gun measures in places like Washington D.C.? Do not be shocked.

    As mentioned above, none of this will really stop a determined mass shooter or terrorist (and certainly not a false flag), but without an alternative solution, frightened people have a tendency to go along with the deluded notion that more government means more security.

    Vegas is not a stranger to crisis, but it seems to have forgotten how to prevent it. Many Americans are unaware that back in 1992 during the Rodney King riots, Las Vegas had to deal with its own major civil unrest with millions of dollars in damage and multiple deaths. This was barely reported because of Vegas's habit of burying stories that might stain the tourist destination's fun-loving image. But, it did take place.

    West Las Vegas erupted in violence in the wake of the Rodney King trial, including snipers shooting at police officers and bystanders, but the Vegas Strip went largely untouched. This was perhaps because hotel and casino private security at that time had a reputation for being rather well armed and vicious. Many hotels had their own rooftop shooters ready and waiting. Given, Vegas was still highly "mobbed up" in the 1990s, but one must admit that their security was not to be trifled with.

    No major federal measures were needed and intrusive security was minimal. Can this effect be achieved again (without the mob)?  Yes.

    If mass shooters, terrorists and "others" seek to attack highly populous events using advanced tactics, then the organizers of these events should be employing private security groups with applicable tactical training and experience. There are thousands of well-trained veterans and civilians out there with the skills necessary to stop an active shooter, and they are not being employed where they are most capable. A team of two people trained in counter-sniping positioned near the concert at the Mandalay Bay could have cut down the shooter within a couple minutes rather than 10 minutes (or more), saving dozens of lives.

    To be clear, I am not talking about poorly organized volunteer security made up of people not vetted, led by other men of questionable competence. I am not talking about guys who claim they have training but are never asked to prove it before they show up for the "gig." And I am not talking about security groups composed of individuals who barely know each other and have never worked together, as we have seen in scenarios like the Berkeley riots.

    What I am talking about is the employment of quiet, vetted and tested professionals hired out for specific events in which large crowds will be present.

    The Feds are not needed and, in most cases, not wanted. Private security firms WITHOUT federal affiliations could handle the protection of major venues without constitutional violations by simply placing people at events with the proper training. The mere presence of these people may even act as a deterrent for future attacks.

    Security should also be organized and managed independently from the venues which they are tasked to protect.  As we have seen recently with the very odd behavior of MGM security employee, Jesus Campos; including his disappearance right before he was expected to give his accounting of events at the Mandalay and his sudden reappearance on the Ellen Show to give a farce of an interview devoid of hard facts or timeline confirmations, rent-a-cops owned by the venue are more vulnerable to manipulations and possible "coaching" after a crisis event occurs.

    Excitement seekers and the public at large should avoid events that refuse to pay for truly independent and tactically skilled security, and instead choose typical rent-a-cops, retired cops and moonlighting cops that need extra cash. It is clear in light of the Vegas attack that these people do not have the ability to obstruct any attacker using more advanced combat strategies.  Nor are they likely to be honest about what really happened after the fact.

    On top of this, more training and more responsibly armed Americans continue to be the best methods towards defusing and deterring active shooters. The point is, if the American public does not pursue alternative solutions and take tactical realities into account, then the only other option will be government interference on a scale that will promote totalitarianism in the name of safety. It is time for the American people to grow up, stop waiting for Big Brother to protect them and start taking their security into their own hands.

  • Mapping What Every State In America Is Best At

    Company towns used to be a defining feature of the American economy. Nowadays, as Raul at HowMuch.net notes, thanks to globalization and offshoring, it is much harder to find employers that exert such influence over a small town (with a few notable exceptions).

    That being said, specific industries still tend to grow in clusters and can dominate the economy of a particular region. To understand this new reality, we mapped the most important industries by state according to the U.S. Bureau of Economic Analysis, which takes into account an industry’s collective output as a percentage of the overall GDP. For simplicity, we excluded government jobs and real estate.

    The result is one of the easiest snapshots of the U.S. economy you will ever find.

    Source: HowMuch.net

    The government groups companies into particular industries using the North American Industry Classification System (NAICS). Basically, someone looks at a company and decides where it belongs on a list of industries. This is more complex than it sounds, especially if a parent company holds many different unrelated subsidiaries (like Amazon), or when a business model strides the line between different industries (anyone care to debate if Airbnb is a technology company or in the hospitality industry?). We simply generated a color-coded map of the results of this debate.

    You can immediately see some interesting groupings in the map.

     Computer & electronics companies dominate the West Coast, oil & gas remains ascendant in the Southwest, and insurance companies take the greatest market share in the Upper Midwest.

    Take a look at the deep South, where you see a lot of red signifying the ambulatory healthcare services industry. This single industry dominates in 13 different states. Think about the Fortune 500 companies headquartered in these places, and it’s pretty easy to understand why these industries are so important. For example, Apple, Facebook, and Google are all headquartered in Silicon Valley in California.

    Things tend to be much more diverse across the Northeast, where you see many different industries all grouped together. This is also easy to explain: it’s one of the most population-dense places in the country and it has the smallest states in terms of geography. This environment lets a lot of different industries grow together.

    Factory towns may be a thing of the past, but it remains true today that similar businesses tend to grow and expand in areas with the same economic conditions.

    This is true for less populous states like North Dakota and places with big cities too, like Colorado. If you’re looking for a job in one of these states, then our list gives you a good idea of where the biggest opportunities might be.

     

  • Did John McCain Provide The Infamous 'Trump Dossier' To BuzzFeed?

    After nearly a year of cogitating, no one in the media, usually a fairly leaky institution, has been able to figure out who exactly who provided the infamous “Trump Dossier” to BuzzFeed which was published on January 10, 2017 and promptly debunked within approximately 35 seconds. 

    As the Daily Caller points out today, less than a handful of people had access to the dossier before it made its way to BuzzFeed: John McCain, David Kramer (a former State Department official and an associate of McCain), then FBI Director James Comey and Fusion GPS (the creator of the document).  Fusion GPS has since admitted under oath that they did not share the document with BuzzFeed which basically just leaves John McCain (and/or his associate) or James Comey.

    Asked about the dossier recently, an irritable, and perhaps defensive, McCain lashed out at a Daily Caller reporter (seemingly a new trend for McCain of late) saying only “I don’t know why you’re digging this up now.”

    In addition to McCain and Steele, opposition research firm Fusion GPS had the dossier, as did David J. Kramer, a former State Department official and an associate of McCdoain’s.

     

    One person who was provided a copy of the salacious document, written by former British spy Christopher Steele, is Arizona Sen. John McCain. But McCain, who has already acknowledged providing an early version of the dossier to former FBI Director James Comey, denied this week that he also gave a version to BuzzFeed, which published it on Jan. 10.

     

    “I gave it to no one except for the director of the FBI. I don’t know why you’re digging this up now,” McCain said during a testy exchange with The Daily Caller on Wednesday.

     

    McCain was asked whether he was BuzzFeed’s source after the Republican’s office declined to answer direct questions on the matter.

    As a reminder, here is a recap of the timeline leading up the dossier’s BuzzFeed debut.

    McCain and Kramer, a former official at the McCain Institute, were first told about the dossier in November, during a conversation with Sir Andrew Wood, a former British spy and associate of Steele’s. McCain then dispatched Kramer to meet with Steele in London on Nov. 28.

     

    Steele, who operates Orbis Business Intelligence in London, has revealed in the London lawsuit that he allowed Kramer to view the dossier but did not provide him a copy. He said that an “arrangement” was later made for Fusion to provide a copy of the dossier to McCain through Kramer.

     

    McCain then provided a copy of the document to Comey during a Dec. 9 meeting.

     

    Four days after McCain met with Comey, Steele would produce the final memo of the dossier, the one that was provided to BuzzFeed and which included the allegations against Gubarev.

     

    Steele sent the final memo to Fusion with instructions to pass a hard-copy to Kramer and McCain. It is unclear how the dossier was disseminated after that. Fusion has not said whether it disseminated the final version of the dossier to anyone outside the company.

     

    The denials by Steele, Fusion and McCain that they were BuzzFeed’s sources leaves just a few posibilities, including Kramer.

     

    Kramer has not responded to multiple requests for comment about his handling of the dossier or whether he gave it to any news outlets. He has not talked on the record to any reporters since being identified in the controversy.

    McCain

    Of course, the identity of BuzzFeed’s source is significant for two reasons.  First, because a Russian tech executive, Aleksej Gubarev, was accused in the document of hacking into DNC computers to dig up dirt on Hillary during the 2016 campaign.  And second, but certainly not least, because it could shed light on whether someone in Trump’s own party or, and perhaps even more disturbing, within the FBI ordered a “political hit” on the newly elected – if wildly unpopular (at least on the DC circuit) – president.

    It is a central question in a lawsuit filed against the media outlet by Aleksej Gubarev, a Russian tech executive named in the dossier. Gubarev is identified by name in Steele’s Dec. 13 memo. In it, Steele alleges that Gubarev was recruited under duress by the FSB, Russia’s intelligence agency, and that he used his companies to infiltrate the computer systems of the Democratic National Committee.

     

    Gubarev’s attorneys have said they want to find out if BuzzFeed’s source provided any warnings or qualifications about the allegations made in the dossier. If so, the lawyers are likely to argue that BuzzFeed was negligent and careless in publishing the document.

     

    BuzzFeed, which has apologized to Gubarev, has defended its decision to publish the dossier, noting that its article unveiling the Steele memos explicitly stated that the memos had not been corroborated. The website also said that the dossier was newsworthy because Comey had briefed President Trump on its allegations during a meeting on Jan. 6.

     

    On top of its importance to the lawsuit, the identity of BuzzFeed’s source is of widespread interest because of the possibility that a government official disseminated the uncorroborated document to the media, possibly as a hit job on Trump.

    And then, of course, there is the issue of who ordered the dossier in the first place…

    //platform.twitter.com/widgets.js

  • "Tired Mountain Syndrome" – North Korea's Nuclear Test Site Is Headed For A Deadly Collapse

    UN Security Council sanctions aside, one of the reasons China has closed much of its border with North Korea and imposed emergency measures to monitor radiation flowing across the mountainous terrain is because the country’s scientists worry that the mountain under which North Korea has held five of its six nuclear tests is in danger of collapsing and unleashing a devastating cloud of radiation on the surrounding terrain.

    And just in case anybody doubted the veracity of China’s warnings, a slew of independent analysts have confirmed what Beijing has long feared: North Korea’s Mount Mantap, a 7,200-foot-peak under which North Korea has carried out most of its recent nuclear tests, is suffering from “tired mountain syndrome,” according to the Washington Post.

    Satellite images captured during the North’s Sept. 3 test of a purported hydrogen bomb, Mt Mantap could be seen visibly shifting during the enormous detonation which triggered a 6.3 magnitude earthquake in North Korea’s northeast.

    And since that test, the region – which is not known for seismic activity – has experienced several landslides and no fewer than three more earthquakes.'

    The North, which carried out its first nuclear test more than ten years ago in 2006, has built a complex system of tunnels underneath the mountain that’s known as the Punggye-ri Nuclear Test Facility. According to WaPo, intelligence analysts use satellites to monitor the three known entrances to Punggye-ri to try and anticipate when another test might be coming.

    Arms Control Wonk describes the site in more precise detail.

    North Korea’s nuclear test site comprises a number of tunnel complexes in mountains surrounding a main support area. Following an initial nuclear explosion in 2006, subsequent nuclear tests have been conducted in a tunnel complex to the North of the support area, under Mt. Mantap. The site contains additional tunnel complexes that may be suitable for nuclear explosions to the south and west of the support area. The Punggye-ri site is capable of hosting nuclear explosions in tunnels with yields of up to a few hundred kilotons.

    The tremors unleashed by the North’s last test shook homes in northeastern China. And eight minutes after the initial quake subsided, there was a 4.1-magnitude earthquake that appeared to be a tunnel collapsing at the site.

     

     

    Images captured by Airbus showed the mountain trembling during the test. An 85-acre area on the peak of Mount Mantap visibly subsided during the explosion, an indication of both the size of the blast and the weakness of the mountain.

    Anybody who was around in the 1950s and 1960s will remember that “tired mountain syndrome” was a diagnosis last applied to the Soviet Union’s atomic test sites. To be sure, earthquakes also occurred at the US nuclear test site in Nevada after detonations there.

    “The underground detonation of nuclear explosions considerably alters the properties of the rock mass,” Vitaly V. Adushkin and William Leith wrote in a report on the Soviet tests for the United States Geological Survey in 2001. This leads to fracturing and rocks breaking, and changes along tectonic faults.

    Analysts Frank V. Pabian and Jack Liu worry that the blasts have caused substantial damage to the North’s tunnel network.

    “Based on the severity of the initial blast, the post-test tremors, and the extent of observable surface disturbances, we have to assume that there must have been substantial damage to the existing tunnel network under Mount Mantap,” they wrote in a report for the specialist North Korea website 38 North.

    Of course, just because the mountain is literally crumbling doesn’t mean the North will stop using it as a test site. As WaPo notes, the US didn’t abandon the Nevada test site after earthquakes there, they said. Instead, the US kept using the site until a nuclear test moratorium took effect in 1992. For that reason, analysts will continue to keep a close eye on the Punggye-ri test site to see if North Korea starts excavating there again — a sign of possible preparations for another test.

    But as Chinese scientists have warned, one more test might be one too many.

    Chinese scientists have warned that another test under the mountain could lead to an environmental disaster. If the whole mountain caved in on itself, radiation could escape and drift across the region, said Wang Naiyan, the former chairman of the China Nuclear Society and senior researcher on China’s nuclear weapons program.

     

    “We call it ‘taking the roof off.’ If the mountain collapses and the hole is exposed, it will let out many bad things,” Wang told the South China Morning Post last month.

    But perhaps equally as concerning as the collapse of Mantap is the possibility that another test could trigger an eruption at Mt. Paektu, an active supervolcano located on the North Korea-China border, about 80 miles from Pyungge-ri.

    The mountain has not experienced a major eruption for centuries, and its last small rumble was in 1903. But an eruption could have devastating consequences – possibly causing more death and destruction than a nuclear blast.

    And with a North Korean diplomat reiterating today that the North intends to continue with its nuclear program, while the country has also decried the military exercises happening in the waters east of the peninsula, where the USS Ronald Reagan is conducting training drills with the South Korean navy.

    However, the North’s Oct. 10 holiday and the Oct. 18 beginning of China’s National Party Congress having come and gone without a new test. And signs of movement at some of the country’s missile test sites spotted in recent weeks have apparently been false alarms.

    But given the amount of time that has elapsed since the North’s most recent missile test, it’s likely that the next provocative test – be it a test of a new long-range missile or a seventh nuclear test – isn’t too far off.
     

  • UC Santa Cruz 'Liberals' Declare Mainstream Republicans Nazis: A Threat To Their Safety For Simply Existing

    Authored by Alex Thomas via SHTFplan.com,

    A meeting of the College Republicans at the University of California, Santa Cruz was taken over and subsequently shut down by hard-left students who literally screamed that the groups very existence was a threat to their safety.

    The leftist group initially organized the effort to derail the free speech of Republicans on campus in a Facebook post that openly called for shutting down the groups “right of assembly” while also labeling mainline conservatives as white supremacists and fascists.

    “White Supremacist, fascist-sympathizing College Republicans are having a meeting at McHenry library, room 0332. Everybody be aware of this violent racist activity happening everyday on this campus!” wrote a student.

     

    “We need a movement of people on this campus that rejects the ‘right of assembly,’ or ‘right of free speech’ for white supremacists and fascists.”

    The group then went through with their social media threats, banging on the meetings door and eventually barging into the room to full on disrupt the peaceful meeting while screaming about fascists, racists, and white supremacists. Remember, this was a meeting of mainline conservatives.

    Details published by Campus Reform include the fact that the leftist group refused to have any sort of dialogue with the College Republicans.

    According to the UCSC College Republicans, their offers to discuss the concerns of the protesters were met with exclamations that “dialogue is violence,” after which the protesters called the club’s presence a “threat to the library” and demanded that the CR members vacate the space immediately.

     

    The protesters even reportedly berated library staff members when they refused to shut down the pre-approved meeting. One staff member eventually asked the CR members to leave in order to end the disturbance, but meeting attendees chose to respond by sitting quietly and refusing to leave the area.

    One student protester laughably ran out of the meeting hysterically screaming about nonexistent “Nazis downstairs”.

    The commotion culminated in one of the student activists running out into the main library area screaming that there were “Nazis downstairs,” but while the gimmick drew several spectators, many of them expressed indignation at the actions of the protestors. 

     

    “As a Democrat, I am embarrassed that some people on the left act this way,” remarked Phil Leonard Vogel, creator of the moderate campus news publication City on a Phil. “They give all of us a terrible name.”

     

    After nearly two hours, school officials eventually called the police, who reportedly arrested three of the protesters.

    Unbelievably, one of the protesters even claimed that the groups very existence was a disturbance.

    You truly can’t make this stuff up.

    “Your existence is a disturbance, your existence is a disturbance to every marginalized person in this country.”

    This is apparently what it means to be a liberal (at least for some) in the year 2017.

  • Bank Of America: "This Could Send The Nasdaq To 10,000"

    Last weekend, One River’s CIO Eric Peters explained what he thought would be the nightmare scenario for the next Fed chair, who as we now know will either be Jerome Powell or John Taylor, or both (with an outside chance of Yellen remaining in her post). According to the hedge fund CIO, the “worst case scenario” is one in which despite an improving economy, yields simply refuse to go up, leading to the final asset bubble and Fed intervention that “pops” it:

    if we don’t see a sustained cyclical jump in wages, then yields won’t go up. And if yields don’t go up, then the asset price ascent will accelerate,” continued the strategist. “Which will lead us into a 2018 that looks like what we had expected out of 2017; a war against inequality, a battle for Main Street at the expense of Wall Street, an Occupy Silicon Valley movement.” He paused, flipping through his calendar.  “Then you’ll have this nightmare for the next Federal Reserve chief, because they’ll have to pop a bubble.”

    While Peters never names names in his pieces, the “strategist” in the weekend letter was BofA’s Michael Hartnett, who several days after Peters penned the above, followed up with some thoughts of his own on precisely this topic, and in a note released this week, described what he believes is the “biggest market risk” for the market. Not surprisingly, it is precisely what Peters was referring to in the above excerpt.

    Responding to the question of “What is the biggest market risk”, Hartnett writes that “in our gut, it’s that the two most important investment trends of the past decade, central bank liquidity & technological disruption, ends in a bubble for tech stocks (Chart 7), & High Yield & EM bonds, the epicenters of the “scarce growth” & “scarce yield” themes.

    As with Peters, for Hartnett it all comes down to one thing: inflation and higher yields, specifically among long-dated yields: 

    Multi-year lows in unemployment, multi-year highs in consumer confidence, soaring global PMIs, soaring profits, a doubling of the oil price, fiscal stimulus…little wonder the world is short bonds in 2017.

     

    And yet inflation & bond yields refuse to rise.

    The reason is simple: in attempting to stimulate wage growth, and thus benign inflation, the Fed continues to target the symptom of a condition which it no longer has any control over. Remember: Deflation = Debt + Demographics + Disruption? Well, they’re back. Quote Hartnett:

    Aging Demographics and excess Debt remain structural impediments to higher inflation. But the biggest impediment is technology, and the potential for the labor market to be permanently disrupted, as AI and robotics crush wage expectations, particularly in the service sector.

    For now the bond market still gives the Fed the benefit of the doubt, with 10Y yields occasionally pushing higher when the nearly extinct bond vigilantes make a surprise appearance, pushing rates up at least until the next deflationary scare emerges. But what happens if the bond vigilantes finally throw in the towel? Well, that’s what unleashes the final bubble… and sends 30Y yields toward 2% and the Nasdaq  to 10,000.

    Capitulation of bond bears would send 30-year Treasury yields toward 2%, the Nasdaq toward 10,000, and high yield & Emerging Market bond spreads 100bps tighter (all-time lows…241bps in the US, 179bps in Europe, 139bps in EM). The outperformance of “deflation” versus “inflation” could turn exponential (Chart 8).

    And while the market may or may not have a major correction in the coming months (Hartnett also predicted last week that the next major market drop will take place between Thanksgiving and Valentine’s Day), the longer-term implications as this tension is finally resolved either way, most likely with the intervention of the Fed – whose next chair will have no choice but to burst the bubble – will define the market for the next generation, or as the BofA strategist puts it:

    “Icarus Unleashed” in coming quarters would then set-up 2018/2019 as a period of volatility, aggressive Fed tightening to pop bubbles, and more hostile War on Inequality & Occupy Silicon Valley politics, setting the stage for the end of the bull market as Icarus crashes back to earth.’


  • Pat Buchanan Asks: "Is Liberalism A Dying Faith?"

    Authored by Patrick Buchanan via Buchanan.org,

    Asked to name the defining attributes of the America we wish to become, many liberals would answer that we must realize our manifest destiny since 1776, by becoming more equal, more diverse and more democratic – and the model for mankind’s future.

    Equality, diversity, democracy – this is the holy trinity of the post-Christian secular state at whose altars Liberal Man worships.

    But the congregation worshiping these gods is shrinking.

    And even Europe seems to be rejecting what America has on offer.

    In a retreat from diversity, Catalonia just voted to separate from Spain. The Basque and Galician peoples of Spain are following the Catalan secession crisis with great interest.

    The right-wing People’s Party and far-right Freedom Party just swept 60 percent of Austria’s vote, delivering the nation to 31-year-old Sebastian Kurz, whose anti-immigrant platform was plagiarized from the Freedom Party. Summarized it is: Austria for the Austrians!

    Lombardy, whose capital is Milan, and Veneto will vote Sunday for greater autonomy from Rome.

    South Tyrol (Alto Adige), severed from Austria and ceded to Italy at Versailles, written off by Hitler to appease Mussolini after his Anschluss, is astir anew with secessionism. Even the Sicilians are talking of separation.

    By Sunday, the Czech Republic may have a new leader, billionaire Andrej Babis. Writes The Washington Post, Babis “makes a sport of attacking the European Union and says NATO’s mission is outdated.”

    Platform Promise: Keep the Muslim masses out of the motherland.

    To ethnonationalists, their countrymen are not equal to all others, but superior in rights. Many may nod at Thomas Jefferson’s line that “All men are created equal,” but they no more practice that in their own nations than did Jefferson in his.

    On Oct. 7, scores of thousands of Poles lined up along the country’s entire 2,000-mile border — to pray the rosary.

    It was the centennial of the Virgin Mary’s last apparition at Fatima in Portugal in 1917, and the day in 1571 the Holy League sank the Muslim fleet at Lepanto to save Europe. G. K. Chesterton’s poem, “Lepanto,” was once required reading in Catholic schools.

    Each of these traditionalist-nationalist movements is unique, but all have a common cause. In the hearts of Europe’s indigenous peoples is embedded an ancient fear: loss of the homeland to Islamic invaders.

    Europe is rejecting, resisting, recoiling from “diversity,” the multiracial, multicultural, multiethnic and multilingual future that, say U.S. elites, is America’s preordained mission to bring about for all mankind.

    Indeed, increasingly, the indigenous peoples of Europe seem to view as the death of their nations and continent, what U.S. liberal elites see as the Brave New World to come.

    To traditionalist Europeans, our heaven looks like their hell.

    Thus Poles fall on their knees to pray to the Virgin Mary to spare them from threats of an Islamic future, as their ancestors prayed at the time of Lepanto, and of Vienna in 1683, when the Polish King John Sobieski marched to halt the last Muslim drive into the heart of Europe.

    European peoples and parties are today using democratic means to achieve “illiberal” ends. And it is hard to see what halts the drift away from liberal democracy toward the restrictive right. For in virtually every nation, there is a major party in opposition, or a party in power, that holds deeply nationalist views.

    European elites may denounce these new parties as “illiberal” or fascist, but it is becoming apparent that it may be liberalism itself that belongs to yesterday. For more and more Europeans see the invasion of the continent along the routes whence the invaders came centuries ago, not as a manageable problem but an existential crisis.

    To many Europeans, it portends an irreversible alteration in the character of the countries their grandchildren will inherit, and possibly an end to their civilization. And they are not going to be deterred from voting their fears by being called names that long ago lost their toxicity from overuse.

    And as Europeans decline to celebrate the racial, ethnic, creedal and cultural diversity extolled by American elites, they also seem to reject the idea that foreigners should be treated equally in nations created for their own kind.

    Europeans seem to admire more, and model their nations more, along the lines of the less diverse America of the Eisenhower era, than on the polyglot America of 2017.

    And Europe seems to be moving toward immigration polices more like the McCarran-Walter Act of 1950 than the open borders bill that Sen. Edward Kennedy shepherded through the Senate in 1965.

    Kennedy promised that the racial and ethnic composition of the America of the 1960s would not be overturned, and he questioned the morality and motives of any who implied that it would.

    So, why is liberalism dying?

    Because it is proving to be what James Burnham called it in his 1964 “Suicide of the West” — the ideology of Western suicide.

    What we see in Europe today is people who, belatedly recognizing this, have begun to “rage, rage, against dying of the light.”

  • Kyle Bass: "Today's Market Resembles The 1987 Debacle On Steroids"

    The US stock market celebrated the 30th anniversary of Black Monday with the 2017 version of a rocky trading day: Stocks sold off early, with S&P 500 futures recording their steepest post-midnight drop of the year. But the dip was reflexively and aggressively bought, and stocks even poked back into the green seconds before the close as algos mistook a repetitive Politico headline about Jay Powell’s chances of becoming the next Fed chair for news – leaving us with yet another record close.

    Of course, the historical juxtaposition of the 1987 crash with today’s unnaturally placid markets practically forced even the most bullish of traders to question how much longer the present market paradigm – where markets listlessly drift through a seemingly interminable series of record highs while trading volume and volatility remain suppressed – can possibly last.

    With that question in mind, Real Vision released a video early today containing interviews with some of the biggest names in the hedge fund universe. Though the interview was shot a few weeks ago, remarks from Hayman Capital’s Kyle Bass resonated with market's mood.

    Bass discussed what he sees as the many short- and long-term risks to the US equity market, including the rise of algorithmic trading and passive investment, which have enabled investors to take risks without understanding what they’re doing, leaving the market vulnerable to an “air pocket."

    And with  so many traders short vol, Bass said investors will know the correction has begun when a 4% or 5% drop in equities snowballs into a 10% to 15% decline at the drop of a hat.

    “The shift from active to passive means that risk is in the hands of people who don’t know how to take risk. Therefore we’re likely to have a 1987 air pocket. This is like portfolio insurance on steroids, the way algorithmic trading is now running the market place.

     

    Investors are moving from active to passive, meaning they’re taking the wheel themselves all at a time when CTAs are running their own algo strategies where they’re one and a half times long and half short and they all believe they can come out at the same time."

     

    “If you see the equity market crack 4 or 5 points, buckle up, because I think we’re going to see a pretty interesting air-pocket, and I don’t think investors are ready for that,” Bass said.

    When it comes to identifying potential catalysts, Bass said the US’s deteriorating relationships with both China and North Korea present significant long-term risks…

    “Our trade relationship with China is worsening our relationship with north korea whatever it is continually worsens. We’ve got three people at the head of these countries that are trying ot maike their countries great again, I think that’s a real risk geopolitically."

    …While the unwind of G-4 central bank stimulus could hammer equities and bonds in the short term.

    "But when you think about it financially, which is actually easier to calculate, the financial reason is the G-4 central banks going from a period of accommodation to a period of tightening, and that’s net of bond issuance."

    In summary, investors better snap up those out-of-the-money S&P 500 puts before it’s too late, because central banks – try as they might – can’t forestall the return of volatility forever.

  • How Times Have Changed

    From the Slope of Hope: One of my favorite little books is called Hey Skinny! Great Advertisements from the Golden Age of Comic Books, which pretty much describes the contents exactly. It is a hodgepodge of cheesy ads from the mid 1940s to late 1950s for all manner of junk, and it’s eye-opening to see via these come-ons just how much has changed in merchandising. I thought I’d provide a sampling for your amusement, not edification.

    First up is the “Lucky Grab Bag”, in which children would send in their precious cash in exchange for a bag of……….stuff. God only knows what stuff would come back, but I suspect it was whatever overstock items happened to be laying around the office……..ballpoint pens, sanitary napkins, swizzle sticks. I suspect an entire generation of kids learned the meaning of disappointment from the receipt of these parcels o’ crap.

    1020-grabgab

    Next up is the most amazing sun watch in the world. The fact it was the only sun watch in the world probably helped. Evidently it was a watch with a triangle sticking out of it (helpful for accidentally cutting yourself) which, if you aimed it precisely right on a sunny day, could give you the time within two hours of accuracy. This allowed you to tell time “the truly scientific way”. It wasn’t just a watch, though – – this product claimed to have nine functions, including “weather forecaster”, which I suppose meant if you couldn’t tell what time it was, it was either cloudy or already raining on your dumb ass.

    1020-sunwatch

    Now we step into the yesterday of political incorrectness with rubber masks. There’s Satan, an “Idiot”, and……umm……..a Minstrel. This advertisement, only partly shown, suggests that wearing one of these masks was a great way to bag the ladies, since they found it terribly amusing. In the parlance of the day, you could “panic a party” (whereas today you could “earn a lawsuit.”)

    1020-masks

    This next one is, for me, the most appalling of all. It seems there was a company back in the 50s whose sole purpose in life was to create photo enlargements. In exchange for giving their sales information to twenty of your friends, they would send you………brace yourself……..a monkey. How they shipped it to you or managed to keep it alive during the shipment (or, indeed, kept it from committing monkey suicide out of terror en route) is beyond me. It’s hard for me to believe that the good people of the U.S. had much success with miniature monkeys shrieking and throwing poo around the house across the suburbs of our once-great republic.

    1020-monkey

    For nascent crimestoppers, there is the “new toy gun” which, it seems, fires off pieces of potatoes. No big deal. What I find intriguing is the story they lay out in in the ad, in which a couple of young chaps stop a bank robbery cold (and are immediately paid for doing so by Mr. Bank Manager). It takes some serious suspension of disbelief to think hardened bank robbers would be stopped in their tracks by some ten year old holding what appears to be the letter “L” from Sesame Street in his hand, but that’s how the story is told. One can only hope the kids of the 50s didn’t seek out to emulate this behavior by hanging out in rougher parts of town with their weapon, waiting for their payday.

    1020-toygun

    The ads weren’t all just for kids, though. There were ads aimed at adults as well, and judging from the ad, there must have been plenty of desperate, disillusioned dads in America. Allow me to lay out what was being advertised here, as the story is told: (1) a guy pulls up in his driveway in a new car under the gaze of his envious neighbor, who puzzles over how he could afford such a luxury (2) the car owner states he is pulling down the big money by selling shoes door-to-door (3) Instead of laughing hysterically, the neighbor implausibly inquires as to how he can muscle in on this kind of action (4) the neighbor evidently signs up to be a new salesman for Mason Shoes, and he is provided a catalog and, yes, a sample air cushion which is the distinctive edge of Mason that makes them better than other shoes (5) the poor bastard pesters his neighbors, co-workers, and anyone else with feet to buy these shoes, and he does well enough that Mason sends him some sample shoes, sparing him the continue embarrassment of having nothing more than a soft insole as his only selling aid.

    1020-sellshoes

    We finish our journey with an ad specifically targeted to adult women (why they would be reading Archie comic books is beyond me, but there we are). The ad portrays a town whose women are having their engagement and wedding rings stolen from their homes. Mary has been robbed too, but she’s chill. How could this be? After all, the diamonds were worth at least a thousand dollars! That’s easy – – because Mary has her actual jewelry locked up in a safe where no one can see or enjoy it. What she’s been wearing on her fingers day after day are a set of rings that cost $2.98, and apparently no one could tell the difference. Nice going, Mary. I bet they look fabulous.

    1020-rings

    Well, that’s it for our trip down memory lane. Perhaps you were expecting an article on trading. But ask yourself – – how much value have you received from all the articles you’ve been reading about trading for the past eight years? Yeah, that’s what I thought.

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Oct 20

Today’s News 20th October 2017

  • Legendary Singer Tom Jones Admits Being Abused, Says Sexual Harassment Common In Music Industry Too

    Speaking to the BBC, legendary Welsh singer Tom Jones, perhap smore fmaous for his Vegas shows now, confirmed that the scandal in the movie industry, following the revelations regarding Harvey Weinstein, is also common in music.

    Speaking at the launch of the “The Voice UK” television programme in Manchester, Jones stated that “Things have always happened in the music industry as well. There's been people complaining about publicists and different things they've been expected to do to get a record contract, just like a film contract."

    Unexpectedly, Jones acknowledged that he’d faced this problem when he started out

    “Yes. At the beginning, yes…

     

    There were a few things like that. But you avoid it. You just walk out…

     

    But what's tried on women is tried on men as well. But then again, it's not much though. It was just once, really."

    Jones said that it left him feeling terrible…

    “you think I’ve got to get away from this person and it can’t be like this… There’s always been that element there, that people with power sometimes abuse it.”

    The question is whether other members of the music industry follow Jones lead but name names.

    Jones added:

    "Things happen in showbusiness, and sometimes things are covered up and then they come to light and other people come forward, it's like taking the cork off of a bottle.

     

    Things come out that maybe should've come out years ago, who knows. But that's the way it is with showbusiness, you are in the public eye, and that's it. You have to take the good with the bad. But justice will out. If you've done something wrong you've got to pay for it, or prove that you haven't done anything wrong."

    The fact that it’s also been going on in the music industry for many years – Jones began his career in 1963 – is probably not going to surprise anybody.

  • Europe's Secession Problems Aren't Going Away

    Authored by Ryan McMaken via The Mises Institute,

    Earlier this week, The New York Times noted that movements for greater local autonomy appear to be spreading throughout Europe. In some ways, the conflict in Catalonia is just the tip of the iceberg. The Times reports

    Coming on the heels of the Catalan vote, the Lombardy and Veneto referendums are yet another signal of the homegrown conflicts that persist in many of the European Union’s member states. Separatist movements are also simmering in Britain — where voters in Scotland rejected independence in a 2014 referendum but continue to debate the issue — as well as France, Germany, Belgium and Romania.

    Like Catalonia – and unlike Scotland – the Lombardy and Veneto regions of Italy are among the wealthiest regions, and send enormous amounts of tax revenue to Rome. Italy's southern regions, which are significantly poorer than northern Italy, have benefited from Northern wealth ever since Italians were all forced into a single nation-state in the late nineteenth century. 

    This has never been forgotten by Italians from Veneto, many of whom participated in a referendum in 2014 to declare Independence. Naturally, the Italian government in Rome declared the vote invalid. At the time, however, I interviewed one of the organizers Paolo Bernardini about the referendum. (See "Inside Venice's Secession Movement.") At the time, secessionists liek Bernardini appeared to be pursuing immediate and total independence from Rome, while remaining inside the EU: 

    A tiny majority of Veneto people are in favor both of the EU and of the Euro as a currency. So I envisage a little, rich state, playing a major economic and political role in the EU, a stabilizing role. It will interact naturally with other rich and similar states, Bavaria (still part of Germany), Austria, and the Netherlands. It will be a Finland in the Adriatic. 

    According to the Times piece, though, supporters of Northern independence have gone back to taking small steps, and realize – probably correctly – that there are numerous steps that must be taken between the status quo and total independence. 

    The new effort appears to be focused on conducting local plebescites demanding more local autonomy. This doesn't conflict with the goal of eventual independence, of course, although it probably is an essential first step. 

    Flemish Independence? 

    A region taking a gradualist approach is the Flemish-speaking region of northern Belgium, also known as Flanders. The Flanders situation has been noted in a multitude of media outlets looking to find "the next Catalonia." CNBC reports

    Political groups such as the New Flemish Alliance, a nationalist, conservative group which is dominant in the Belgian parliament, advocate a gradual secession of Flanders from Belgium. Euronews reported that the party even hung a Catalan flag outside its headquarters recently in support of the Spanish separatist region. With elections in 2019, the issue of Flemish independence is not likely to disappear soon.

    The Catalonia and Scotland situations have brought secession issues to the fore in the English-language media, but there's nothing new about Belgium's problem. The unlikely unions of French-speaking and Flemish-speaking regions date back to 1830 when northern regions of Belgium won independence from the Netherlands. The resulting union known as Belgium has never been a totally comfortable one, as noted in a 2007 Chicago Tribune article, which compared Beligum to an unhappy and tired married couple

    They stay together mainly out of habit, and also because it would be such a headache to break up the household and divide the communal property.

     

    If you know a couple like this, then you will understand the Belgians.

     

    Dutch-speaking Flanders and French-speaking Wallonia are trapped in a loveless marriage called Belgium.

     

    In today's Europe, divorce no longer carries the opprobrium it once did. The Czechoslovakians had a very amicable split in 1993. The Yugoslavs less so. Even Scotland and England are talking about a separation.

     

    But in Brussels, which these days feels more the capital of the far-flung European Union than the capital of a medium-size European nation, polite Belgian politicians don't like the D-word. They wish the whole issue would just go away.

     

    It won't. That much became clear in December when RTBF, the French-language state broadcaster, interrupted its regular programming with an urgent bulletin announcing that Flanders had declared independence.

     

    Grainy footage showed King Albert II and Queen Paola heading for the airport to flee the country. There also was video of trams stopped at the new Flemish border, and live interviews with familiar politicians discussing the crisis.

     

    Not until half an hour into the broadcast did the message "This is fiction" appear on the screen. Too late. Embassies in Brussels already had scrambled to seek clarification while thousands of worried callers jammed RTBF's switchboard…

     

    Belgian politicians were not amused.

    Mind you, this was back in 2007 before it had become well established that the Scots could vote on their own Independence, and before the British voted for Brexit. 

    These more recent developments make regionalist movements such as those in Spain, Italy, and Belgium of increasing notability. 

    The question remains, however, if nation-states lacking the Anglo-Saxon deference to electoral politics will be as tolerant of election outcomes as the British appear to be. 

    The Democracy Problem 

    At the core of all these issues remains an unanswered question: If a majority of voters in a region vote for independence or greater autonomy, will the vote be respected by the central government?

    After all, European nation-states have for decades been lecturing the rest of the world about the wonderfulness of democracy and how "the will of the people" must prevail. At the national level, it is simply assumed that "the will of the majority" is what grants a state a "right" to rule over the citizenry. 

    But if a majority in a specific region votes for a divorce from the central government, is all this talk about democracy and the will of the majority to suddenly be ignored? 

    Ludwig von Mises, of course, in his book Liberalism, advocated for the idea that any region, right down to the village level, be allowed to gain independence based on the outcome of a freely held plebiscite. 

    In recent years, opponents of independence movements in Italy and Spain have bickered over the way these votes are being conducted, and over the extent to which a majority actually wants indepenence. 

    These arguments are good at buying time, but they conveniently ignore the central problem at hand: if Catalonia held a fair-and-square election, and, say, 75 percent of eligible voters opted for independence, would the Spanish government allow independence? What about a similar situation in northern Italy? It's a yes-or-no question, but it doesn't seem to be one either the Spanish or Italian government is willing to answer. 

    Thus, Europe's democracy problem persists. Is democracy only allowed when it is no threat to the established status quo for nation-states? Should the central government send in the troops to beat citizens and seize ballots when people vote "the wrong way"? 

    This isn't just a problem for Europe, of course. Most of the "democratic" world, including Europe and the Americas, has a similar problem. 

    Old Borders Have Outlived their Usefulness 

    As time goes on, though, it's going to be harder and harder for nation-states to defend the current configuration of their national borders. 

    The current model of nation-states is based on the idea that a single metropolis, or a group of them, can control surrounding rural frontier areas for reasons of military strategy and to ensure a food supply for the metropolis. In return, the wealthy metropolis will protect frontier areas from foreign invasions, and provide some semblance of order to far-flung regions lacking the wealth and power of the metropolis. 

    This system of nation-states began to take firm shape in the seventeenth century, and was finally solidified in the nineteenth. The world wars of the 20th century showed us the heights to which nation-states can reach, and the extent to which they can seize and control resources.

    This old model, however, was initially based on the idea that populations would be largely agricultural and rural, and that personal, cultural, and economic networks would be focused around the nation-states themselves, and the people within them.

    As time has gone on, though, urbanization, international trade, and international communications have grown far beyond what the national governments of old could have ever imagined. Capital cities in nation states no longer command the attention and economic focus of other powerful cities within their nation states, and trade with foreign populations has in many cases become more important that trade within one's own nation-state. Agriculture is no longer a key source of wealth, which makes city-states with only small rural hinterlands increasingly viable. 

    At the same time, these newly forced international connections reduce the importance of the old nation-states as "protectors" from the neighboring regions. After all, if trade with the foreigners next door is just as important as trade with one's own countrymen, it becomes increasingly difficult to see what one's national government is offering protection from

    Does northern Italy really need protection from Austrian or Swiss invaders? Does Flanders need protection from the Netherlands? In an age of thorough economic integration, a war between two European states would mostly be a matter of mutually-assured economic destruction. 

    Nevertheless, the force of habit is an important factor in political ideology. Many people continue to see their national borders as quasi-sacred, reacting with horror at the idea that their nation-state should be "dismembered." National governments are careful to downplay the fact that the borders of most modern nation-states barely reach back as far as the nineteenth century. Even a look at a map of Europe from 1945 should disabuse us of any notion that national boundaries are anything but temporary. 

    In fact, border changes can often be measured in lengths of time similar to those of a single human lifetime. But this doesn't stop commentators from declaring that such-and-such region or such-and-such state (i.e., California) will never secede or dramatically change its national status.

    In politics, claims of "never" should always be treated as laughably naive. 100 years is quite long enough to completely change the map of the world. 

  • Coverup Questions Emerge Over Vegas Security Guard's 'Ellen' Appearance

    Following his sudden re-appearance on The Ellen Show after vanishing for 6 days, numerous questions remain unanswered about Mandalay Bay shooting hero Jesus Campos' timeline and perhaps more concerning stil is that The Daily Mail reports that he was pressured into giving his only interview to Ellen DeGeneres because the giant company that owns the Las Vegas casino feared he would spill the beans about the shooting timeline if he was grilled by real journalists.

    As we detailed previously, Campos had originally agreed to do five interviews, all on Thursday last week, but suddenly went missing, his union boss, who was helping set up the deal, told DailyMail.com in an exclusive interview. David Hickey, president of the Michigan-based International Union, Security Police and Fire Professionals of America, would not confirm that MGM was behind the decision, but said the company certainly influenced Campos.

    ‘I was in a meeting with MGM’s upper management and they were definitely concerned about how tough someone like Hannity would be on him and they voiced their opinions,’ Hickey said.

     

    He said all sides had agreed parameters for the interviews. ‘Everyone knew he wasn’t to talk about security protocols, staffing or training or give out names of employees.’

     

    But he said the company — that, like most of Vegas’s casino industry, obsessively controls what employees are allowed to say to the media — was pressuring Campos not to give too much away.

     

    ‘I thought they were being negative, telling him that someone was going to be tough and how they were worried about his health — it wasn’t the thing he needed to hear four hours before the interviews were going to begin.’

    Hickey said he met with the MGM executives at a location in Las Vegas where Campos was staying. They met in the living room but he wanted a word with some of the management team in private so they went into the bedroom.

    When they returned, Campos had gone, and Hickey said he hasn’t seen or heard from him since. The next thing he knew the security official had bailed on the five interviews.

    Then he learned on Monday that instead of appearing on a news show he would go on Ellen.

    ‘It certainly wasn’t my choice that he should appear on that circus,’ Hickey told DailyMail.com.

     

    Ellen did not press him on the official timeline of the shooting, which has changed three times since the massacre.

    And that appears to have been MGM's plan.

    When he went through his recollection of the night, she did not press him to clarify some of the lingering questions about the official timeline – such as whether he or hotel officials delayed calling police for six minutes after he was shot.

    If that version is proven to be true, it could open MGM to massive costs from lawsuits.

    DeGeneres told him:

    'I know you've had so many people asking for you to tell the story and talk about it and I understand your reluctance. You're talking about it now and you're not going to talk about it again.

     

    ‘I don't blame you. Why relive it over and over?'

    Sources told DailyMail.com, MGM is worried that families of the 58 people murdered as well as many of the 546 injured  in the Mandalay Bay massacre will launch lawsuits potentially worth billions of dollars against the company, and they thought Campos might not keep his story straight under the pressure of the TV lights and tough questioning.

    That is why Campos, 25, appeared on a daytime chat show hosted by a fast-talking, dancing comedienne, rather than take questions from TV hardhitters such as Fox News’ Sean Hannity, NBC News or ABC News.

     

    ‘MGM was behind the decision to call off all the interviews and did a deal with Ellen, knowing she would not play hardball on the timeline as long as she had the exclusive,’ a TV insider told DailyMail.com.

    The stench of coverup continues…

  • How Many Hours Americans Need To Work To Pay Their Mortgage

    When it comes to the cost of living in cities, a general rule of thumb is that housing prices are much higher in the country’s economic and population hubs, especially in the cities along the coasts.

    As Visual Capitalist's Jeff Desjardins notes, particularly in recent years, prices have been pushed sky-high in places like New York City or San Francisco through a combination of limited supply of new homes, increasing demand, shifting demographics, and government regulations.

    PUTTING IT INTO PERSPECTIVE

    Today’s visualization from HowMuch.net applies a common denominator to compare 97 of the biggest cities in the United States. Using a measure of median household income against the average mortgage payment in each city, we get a gauge of how many hours must be worked each month just to pay down the house.

    The visualization uses data from the U.S. Census for household income and Zillow for median home listing price, while calculating mortgage payments based on a standard 30-year term.

    Courtesy of: Visual Capitalist

    THE RESULTS

    Using the above method to compare the amount of hours it takes to pay down a monthly mortgage, we see some interesting contrasts in the country.

    Here are the five most expensive cities in the United States for housing:

    With about 170 hours in a normal work month, the average people in these cities are spending 50% or more of their income just to pay down their mortgages. It’s worst in New York City and Los Angeles, where at least 65% of income is going towards housing.

    These cities stand in stark contrast to the five cheapest cities based on hours of work needed:

    In a city like Memphis, TN it takes only 18.4 hours of work a month to pay down the average mortgage. That’s equal to only about 10% of monthly household income.

    COASTAL DISPARITY

    Interestingly, even though coastal hubs have high prices relative to the cities in the middle of the country, they differ quite widely against each other. This discrepancy does not necessarily show in terms of ranking, but more in terms of the actual hours of work needed.

    Washington, D.C., for example, requires less than half the hours of work to pay down a mortgage than Los Angeles or New York City. Meanwhile, a popular west coast hub like Seattle only needs 72.8 hours in comparison to New York’s 113.5 hours.

  • Blaming Russia For The Internet 'Sewer'

    Authored by Robert Parry via ConsortiumNews.com,

    As the Russia-gate hysteria spirals down from the implausible to the absurd, almost every bad thing is blamed on the Russians, even how they turned the previously pristine Internet into a 'sewer'…

    With the U.S. government offering tens of millions of dollars to combat Russian “propaganda and disinformation,” it’s perhaps not surprising that we see “researchers” such as Jonathan Albright of the Tow Center for Digital Journalism at Columbia University making the absurd accusation that the Russians have “basically turned [the Internet] into a sewer.”

    Tomb of the Unknown Soldier outside the Kremlin wall in Moscow, Dec. 6, 2016. (Photo by Robert Parry)

    I’ve been operating on the Internet since 1995 and I can assure you that the Internet has always been “a sewer” – in that it has been home to crazy conspiracy theories, ugly personal insults, click-bait tabloid “news,” and pretty much every vile prejudice you can think of. Whatever some Russians may or may not have done in buying $100,000 in ads on Facebook (compared to its $27 billion in annual revenue) or opening 201 Twitter accounts (out of Twitter’s 328 million monthly users), the Russians are not responsible for the sewage coursing through the Internet.

    Americans, Europeans, Asians, Africans and pretty much every other segment of the world’s population didn’t need Russian help to turn the Internet into an informational “sewer.” But, of course, fairness and proportionality have no place in today’s Russia-gate frenzy.

    After all, your “non-governmental organization” or your scholarly “think tank” is not likely to get a piece of the $160 million that the U.S. government authorized last December to counter primarily Russian “propaganda and disinformation” if you explain that the Russians are at most responsible for a tiny trickle of “sewage” compared to the vast rivers of “sewage” coming from many other sources.

    If you put the Russia-gate controversy in context, you also are not likely to have your “research” cited by The Washington Post as Albright did on Thursday because he supposedly found some links at the home-décor/fashion site Pinterest to a few articles that derived from a few of the 470 Facebook accounts and pages that Facebook suspects of having a link to Russia and shut them down. (To put that 470 number into perspective, Facebook has about two billion monthly users.)

    Albright’s full quote about the Russians allegedly exploiting various social media platforms on the Internet was: “They’ve gone to every possible medium and basically turned it into a sewer.”

    But let’s look at the facts. According to Facebook, the suspected “Russian-linked” accounts purchased $100,000 in ads from 2015 to 2017 (compared to Facebook’s annual revenue of about $27 billion), with only 44 percent of those ads appearing before the 2016 election and many having little or nothing to do with politics, which is curious if the Kremlin’s goal was to help elect Donald Trump and defeat Hillary Clinton.

    Even former Clinton political strategist Mark Penn has acknowledged the absurdity of thinking that such piddling amounts could have any impact on a $2.4 billion presidential campaign, plus all the billions of dollars worth of free-media attention to the conventions, debates, etc. Based on what’s known about the Facebook ads, Penn calculated that “the actual electioneering [in battleground states] amounts to about $6,500.”

    In a Wall Street Journal op-ed on Monday, Penn added, “I have 40 years of experience in politics, and this Russian ad buy mostly after the election anyway, simply does not add up to a carefully targeted campaign to move voters. It takes tens of millions of dollars to deliver meaningful messages to the contested portion of the electorate.”

    Puppies and Pokemon

    And, then there is the curious content. According to The New York Times, one of these “Russian-linked” Facebook groups was dedicated to photos of “adorable puppies.” Of course, the Times tried hard to detect some sinister motive behind the “puppies” page.

    The New York Times building in Manhattan. (Photo credit: Robert Parry)

    Similarly, CNN went wild over its own “discovery” that one of the “Russian-linked” pages offered Amazon gift cards to people who found “Pokémon Go” sites near scenes where police shot unarmed black men – if you would name the Pokémon after the victims.

    “It’s unclear what the people behind the contest hoped to accomplish, though it may have been to remind people living near places where these incidents had taken place of what had happened and to upset or anger them,” CNN mused, adding:

     

    “CNN has not found any evidence that any Pokémon Go users attempted to enter the contest, or whether any of the Amazon Gift Cards that were promised were ever awarded — or, indeed, whether the people who designed the contest ever had any intention of awarding the prizes.”

    So, these dastardly Russians are exploiting “adorable puppies” and want to “remind people” about unarmed victims of police violence, clearly a masterful strategy to undermine American democracy or – according to the original Russia-gate narrative – to elect Donald Trump.

    A New York Times article on Wednesday acknowledged another inconvenient truth that unintentionally added more perspective to the Russia-gate hysteria.

    It turns out that some of the mainstream media’s favorite “fact-checking” organizations are home to Google ads that look like news items and lead readers to phony sites dressed up to resemble People, Vogue or other legitimate content providers.

    “None of the stories were true,” the Times reported. “Yet as recently as late last week, they were being promoted with prominent ads served by Google on PolitiFact and Snopes, fact-checking sites created precisely to dispel such falsehoods.”

    There is obvious irony in PolitiFact and Snopes profiting off “fake news” by taking money for these Google ads. But this reality also underscores the larger reality that fabricated news articles – whether peddling lies about Melania Trump or a hot new celebrity or outlandish Russian plots – are driven principally by the profit motive.

    The Truth About Fake News

    Occasionally, the U.S. mainstream media even acknowledges that fact. For instance, last November, The New York Times, which was then flogging the Russia-linked “fake news” theme, ran a relatively responsible article about a leading “fake news” Web site that the Times tracked down. It turned out to be an entrepreneurial effort by an unemployed Georgian student using a Web site in Tbilisi to make some money by promoting pro-Trump stories, whether true or not.

    Hillary Clinton at the Code 2017 conference on May 31, 2017

    The owner of the Web site, 22-year-old Beqa Latsabidse, said he had initially tried to push stories favorable to Hillary Clinton but that proved unprofitable so he switched to publishing anti-Clinton and pro-Trump articles, including made-up stories. In other words, the Times found no Russian connection.

    The Times article on Wednesday revealed the additional problem of  Google ads placed on mainstream Internet sites leading readers to bogus news sites to get clicks and thus advertising dollars. And, it turns out that PolitiFact and Snopes were at least unwittingly profiting off these entrepreneurial ventures by running their ads. Again, there was no claim here of Russian “links.” It was all about good ole American greed.

    But the even larger Internet problem is that many “reputable” news sites, such as AOL, lure readers into clicking on some sensationalistic or misleading headline, which takes readers to a story that is often tabloid trash or an extreme exaggeration of what the headline promised.

    This reality about the Internet should be the larger context in which the Russia-gate story plays out, the miniscule nature of this Russian “meddling” even if these “suspected … links to Russia” – as the Times initially described the 470 Facebook pages – turn out to be true.

    But there are no lucrative grants going to “researchers” who would put the trickle of alleged Russian “sewage” into the context of the vast flow of Internet “sewage” that is even flowing through the esteemed “fact-checking” sites of PolitiFact and Snopes.

    There are also higher newspaper sales and better TV ratings if the mainstream media keeps turning up new angles on Russia-gate, even as some of the old ones fall away as inconsequential or meaningless (such as the Senate Intelligence Committee dismissing earlier controversies over Sen. Jeff Sessions’s brief meeting with the Russian ambassador at the Mayflower Hotel and minor changes in the Republican platform).

    Saying ‘False’ Is ‘True’

    And, there is the issue of who decides what’s true. PolitiFact continues to defend its false claim that Hillary Clinton was speaking the truth when – in referencing leaked Democratic emails last October – she claimed that the 17 U.S. intelligence agencies “have all concluded that these espionage attacks, these cyberattacks, come from the highest levels of the Kremlin, and they are designed to influence our election.”

    Director of National Intelligence James Clapper (right) talks with President Barack Obama in the Oval Office, with John Brennan and other national security aides present. (Photo credit: Office of Director of National Intelligence)

    That claim was always untrue because a reference to a consensus of the 17 intelligence agencies suggests a National Intelligence Estimate or similar product that seeks the judgments of the entire intelligence community. No NIE or community-wide study was ever done on this topic.

    Only later – in January 2017 – did a small subset of the intelligence community, what Director of National Intelligence James Clapper described as “hand-picked” analystsfrom three agencies – the Central Intelligence Agency, National Security Agency and Federal Bureau of Investigation – issue an “assessment” blaming the Russians while acknowledging a lack of actual evidence.

    In other words, the Jan. 6 “assessment” was comparable to the “stovepiped” intelligence that influenced many of the mistaken judgments of President George W. Bush’s administration. In “stovepiped” intelligence, a selected group of analysts is closeted away and develops judgments without the benefit of other experts who might offer contradictory evidence or question the groupthink.

    So, in many ways, Clinton’s statement was the opposite of true both when she said it in 2016 and later in 2017 when she repeated it in direct reference to the Jan. 6 assessment. If PolitiFact really cared about facts, it would have corrected its earlier claim that Clinton was telling the truth, but the fact-checking organization wouldn’t budge — even after The New York Times and The Associated Press ran corrections.

    In this context, PolitiFact showed its contempt even for conclusive evidence – testimony from former DNI Clapper (corroborated by former CIA Director John Brennan) that the 17-agency claim was false. Instead, PolitiFact was determined to protect Clinton’s false statement from being described for what it was: false.

    Of course, maybe PolitiFact is suffering from the arrogance of its elite status as an arbiter of truth with its position on Google’s First Draft coalition, a collection of mainstream news outlets and fact-checkers which gets to decide what information is true and what is not true — for algorithms that then will exclude or downplay what’s deemed “false.”

    So, if PolitiFact says something is true – even if it’s false – it becomes “true.” Thus, it’s perhaps not entirely ironic that PolitiFact would collect money from Google ads placed on its site by advertisers of fake news.

  • ScotiaMocatta Put For Sale After Multibillion Money-Laundering Scandal

    The world’s oldest gold trader is for sale after a massive money laundering scandal may have terminally crippled one of the most iconic names in the business.

    Canada’s Bank of Nova Scotia is exploring options for its gold business ScotiaMocatta, the Financial Times reported, which include a possible sale of Canada’s most popular precious metals trader. Scotiabank made a decision to sell ScotiaMocatta following a massive money laundering scandal centered on a U.S. refinery that involved smuggled gold from South America. The ScotiaMocatta business, a mainstay in PM trading, is one of London’s main gold trading banks and is being sold by JPMorgan.

    According to the FT sources, ScotiaMocatta’s future had been underway for several months, with ScotiaBank allegedly seeking a buyer for up to a year and was likely to shrink the business if a sale is not completed, although according to the article Chinese buyers – the world’s dumbest money these days – are rumoured to be the key targets of the sale.

    While gold trading has been in a cyclical decline in recent years, the “straw that broke the camel’s back” in prompting the sale was Scotiabank’s lending to Elemetal, a precious metals refinery in Dallas. Scotiabank was one of its biggest lenders, they said. The problem emerged in March, when US prosecutors accused workers at a subsidiary of Elemetal, NTR Metals in Florida, of a money laundering scheme using “billions of dollars of criminally derived gold” mostly from Peru.

    Here the story take a turn into a slightly surreal detour:

    NTR imported more than $3.6bn of gold from Latin America between 2012 and 2015, the court documents allege. Two of the accused, Samer Barrage and Juan Granda, pleaded guilty last month to a charge of money laundering in plea deals.

     

    After the story came to light in March, Elemetal was kicked off the London Bullion Market Association’s “Good Delivery List” of gold refiners;

    This was an almost instant death sentence for the company as buyers will usually only buy gold from a refiner on the list. Indeed, in the same month, New York’s Comex futures exchange said it was no longer taking gold from Elemetal for delivery against futures contracts in the world’s biggest gold futures market.

    And this is where the scourge of gold rehypothecation emerged, as in the scandal surrounding Elemetal, it became impossible for holders of Elemetal gold to sell the gold bars on, leaving them sitting in bank vaults, according to traders quoted by the FT. Buyers are reluctant to take the gold, given the investigations.

    This means that hundreds of millions in loans made to Elemetal by ScotiaMocatta are suddenly stuck in limbo. It also means that one of five bullion banks that settle gold trades in the London market, the world’s largest, has effectively been blackballed. It was built on the 1997 purchase by Scotiabank of Mocatta Bullion, which traces its roots back to 1671. And with Mocatta crippled, Scotiabank, which has the biggest foreign presence of any Canadian bank, is focusing its international strategy on the Pacific Alliance, a Latin American trade bloc comprising Mexico, Peru, Chile and Colombia. It will also hope to find a willing Chinese buyer for the gold trading operation.

    Mocatta’s exit will be good news for HSBC and JPMorgan, which dominate the London market; their large balance sheets enable them to provide credit to clients and refiners around the world. Additionally, and unlike Scotiabank, they also have vaults in London. Gold trading in London is estimated to be worth more than $5tn a year, although as the FT notes, there are no precise figures on how much gold is traded there every day.

  • Senate Passes 2018 Budget Paving Way For $1.5 Trillion In Tax Cuts, Sending Yields, Dollar Sharply Higher

    Senate republicans took a major, if relatively easy, step toward passing Trump's tax plan on Thursday night with the critical passage of a budget blueprint that would protect a $1.5 trillion tax cut from a Democratic filibuster. Senators narrowly voted 51-49 to pass the fiscal year 2018 budget after a several hour-long marathon on the Senate floor. The budget resolution could also pave the way for opening up the Arctic National Wildlife Refuge in Alaska to oil exploration by ensuring that drilling legislation can pass with only Republican votes according to the NYT.

    With a 52-seat majority, Mitch McConnell had a narrow path to getting the 50 votes needed to clear the budget through the upper chamber. But GOP leadership caught a break this week when Sen. John McCain, a holdout over defense spending, announced he would vote yes, and Sen. Thad Cochran, recovering from health issues, returned early to Washington.

    The budget’s passage could keep Republicans on track to pass a tax package late this year or early in 2018. That said, there are still plenty of possible complications, not least of all bickering within the GOP over the final shape of the tax package – where the fate of state and local tax exemptions has still to be decided – as the following Goldman flowchart shows: the steps that were successfully passed tonight are shown in green.

    The House could pick up the Senate-passed budget as early as next week and give final approval to parliamentary language protecting the Republicans’ coveted tax effort. If House Republicans instead insist on negotiating a compromise that melds the Senate and House budget plans, tax legislation could be delayed.

    “Passing this budget is critical to getting tax reform done, so we can strengthen our economy after years of stagnation under the previous administration,” said Senate Majority Leader Mitch McConnell (R-Ky.).

    The Senate gave its approval to the budget blueprint on Thursday night after considering a flurry of amendments, a tedious process that gives the minority party an opportunity to force the majority to endure politically difficult votes. One Democratic amendment that was rejected sought to stop tax cuts from going to the top 1 percent; another would have restored cuts to Medicare.

    The Senate approved the budget after the previously discussed so-called vote-a-rama, a legislative whirlwind in which amendments are considered one after another

    Giving tonight events an aura of fatalistic determinism, Senator Lindsey Graham, and a member of the Budget Committee, said "this is the last, best chance we will have to cut taxes,” and warned that the consequences would be ruinous if the party failed. “That will be the end of us as a party,” he said, “because if you’re a Republican and you don’t want to simplify the tax code and cut taxes, what good are you to anybody?”

    Where things get laughable is when one considers the context of what just happened: In Congress, the annual budget resolution provides an outline of federal spending and revenues. The Senate’s blueprint, for the 2018 fiscal year that began Oct. 1, claims to achieve a balanced budget within a decade, assuming greater economic growth and using an accounting method that excludes Social Security. In order to erase projected deficits, it calls for trillions of dollars in spending cuts over the coming decade.But the cuts exist only on paper, without legislation to achieve them.

    And as the GOP predicts that by 2028 US government spending will equal revenues, here is what will really happen:

     

    Meanwhile, as Republicans played with excel's "goalseek" function, Democrats sounded the alarm, warning that the aspirational cuts in the budget plan called for slicing more than $1 trillion from Medicaid and about $470 billion from Medicare over a decade. Unfortunately for Democrats, they have exactly zero say in the matter: Though Democrats have pleaded to have more say in the tax overhaul, parliamentary language in the budget resolution would allow Republicans to pass a tax bill without any cooperation from the minority party.

    “Passing this budget is not a requirement for passing tax reform,” said Senator Gary Peters, Democrat of Michigan. “Passing this budget is only a requirement to pass a tax bill with as few votes as possible, without input or buy-in from members of the minority.”

    For Republicans, the budget debate provided a moment to showcase their main goal in the coming months, which according to the NYT is approving an overhaul of the tax code for the first time in decades, which they hope will lead to greater economic growth. But before they can move ahead with a tax bill, the House and Senate need to agree on the same budget resolution. The House approved its budget resolution, which had long been stalled, on Oct. 5. The House budget also lays the groundwork for a tax bill, but, unlike the Senate’s approach, it calls for the legislation to not add to the deficit.

    The House budget resolution also seeks more concrete action when it comes to cutting spending, instructing committees to come up with legislation that would produce at least about $200 billion in savings.

    However, according to The Hill, a House GOP source says the amendment seems sufficient to avoid a conference committee between the two chambers, and allow the House to simply pass the Senate resolution.

    Ultimately, however, the only reason why the vote passed so easily is because as the Hill explained, it doesn't matter, and was merely viewed as a mere vehicle for passing tax reform

    "This is the biggest hoax cast upon the American people ever that this budget process even exists. The only thing about this that matters is in preparation for tax reform," said Sen. Bob Corker (R-Tenn.), who voted for the budget.  Corker noted bluntly that he believes the budget doesn't have a real-world impact and if he was chairman of the Budget Committee he would disband it. When a staffer told him he was about to miss an amendment vote, he shot back: "yeah, on a vote that doesn't matter."

    McCain, explaining why he would support the budget, added: “At the end of the day, we all know that the Senate budget resolution will not impact final appropriations.”

    Then again, all of these nuances were lost on the shotgun headline scanning algos, which read that Trump's tax plan is one step closer to passage and sent both the USDJPY…

    … and 10Y yields surging…

     

    With gold lower…

     

    With Dow Futs up over 100 points…

    … and the Fed cursing their fate, because as Dudley explained yesterday, the last thing the feed needs right now as it is desperate to avoid tightening fast, is a burst of wage inflation, something which Trump's tax proposal, if it passes, will promptly lead to, crushing the Fed's carefully laid plan to take years and years in unwinding it balance sheet and rising rates.

  • Be Afraid America – DHS Warns ISIS, Al Qaeda Are Planning '9/11-Style' Attack

    Nothing distracts like fear. And today, former DHS chief Elaine Duke invoked one of the most traumatic episodes in US history to remind complacent Americans that Al Qaeda and ISIS are still out there, plotting deadly terror attacks meant to kill as many American civilians as possible.

    With the Islamic State in retreat following the surrender of its de facto capital to US-backed Arab and Kurdish fighters, Duke told reporters that remnants of the group have partnered with a resurgent Al Qaeda to plot a devastating terror attack on the scale of a 9/11 – thus generating a headline seemingly tailor made to make pulses quicken.

    “The terrorist organizations, be it ISIS or Al-Qaeda or others, want to have the big explosion like they did on 9/11. They want to take down aircraft, the intelligence is clear on that,” the acting US secretary of homeland security said during a visit to the UK, as cited by British media.

     

    “The threat is still severe,” she stated on Wednesday in London following her meeting with UK Home Secretary Amber Rudd, according to Russia Today.

    Duke warned that groups have carried out several relatively small-scale terror attacks (think the attacks that have rocked the UK, France and Belgium over the past year), which suggests the groups could be moving on to more ambitious targets. In the UK alone, the attacks have killed nearly 40 people.

    One strategy Duke fears is a 9/11 style plane hijacking, something terrorists have not given up on despite the advances in airport security since 9/11.

    “Creating terror is their goal. A bladed weapon attack causes terror and continues to disrupt the world, but that does not mean they have given up on a major aviation plot,” she said.

    During her meeting with Judd, Duke parroted the UK conservatives’ push to remove terrorist content from the internet – content that has been effective at recruiting home-grown jihadists in the UK’s Muslim population.

    The attacks famously prompted British Prime Minister Theresa May to ask “allied democratic governments” to “regulate cyberspace to prevent the spread of extremism and terrorism planning.”

    Duke said that while tech firms have been cooperative, there’s still much progress to be done.

    “We will continue to push as far as we can go. I think that we have the cooperation of those companies and we just need to work on that,” she said. Social media firms joining a meeting of G7 interior ministers to discuss the issue this week “is a positive sign,” she said.

     

    “There has been a shift and for us somewhat with the Charlottesville incident,” said Duke, adding that tech companies are under “social pressures” and have “to balance between keeping their user agreements and giving law enforcement what they need.”

    Terror attacks have become a regular occurrence in the UK since the rise of ISIS. A bombing in the Manchester Arena last May killed 23 people and injured more than 100 others, making it the deadliest attack of its kind in the UK since 2005. The latest terrorist attack occurred on Sept. 15 at Parsons Green tube station, where a partially-exploded bomb injured 30 commuters.

    Just one day before the US security chief’s warnings, Andrew Parker, director general MI5, Britain’s domestic intelligence agency, said that Britain was under unprecedented threat from Islamist terrorists.

    *  *  *

    Scared enough yet? Don't worry, we'll just take away a little more 'freedom' to ensure your 'security'… and remember – it's for your own good!

  • Chinese Capital Outflows Return As Soon As PBOC Halts FX Intervention

    Since the addition of the Chinese renminbi (RMB), i.e. Yuan, to the IMF’s SDR basket of reserve currencies last October, more than 60 countries and regions have added and adopted the renminbi as a new reserve currency, according to the latest report on renminbi internationalization by the People’s Bank of China.

    As a reminder, one year ago the International Monetary Fund included China’s currency in its Special Drawing Rights basket as an international reserve currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound. As the PBOC gloated, this inclusion further promoted the international use of RMB, which is ironic considering in the past year the Chinese central bank unleashed some of the most draconian capital controls and measures to avoid capital flight, going as far as effectively banning offshore M&A (not to mention bitcoin trading) which Beijing saw as just another way to avoid China’s capital account firewall. Meanwhile, to “lead by example” the ECB invested €500MM of its reserves in renminbi-denominated assets during the first half of this year.

    The PBOC also said “it will push forward with internalization of the renminbi and keep its position stable in the global monetary system.”

    “Looking ahead, the scope of international usage of renminbi will be further expanded in 2017 and usage channels will be further widened” the report said. 

     

    “Renminbi internationalization will play a more active role in serving the real economy and facilitating trade and investment.”

    Supposedly that means that the next time the Yuan crashes once people remember that of China’s $30 trillion in loans, roughly 20% are NPL, the PBOC will not intervene when tens of billion in capital resume fleeing every day.

    Somehow we doubt it, especially since as the report itself admitted, the value of trade deals settled in the renminbi fell by 35.5% in 2016 from the previous year. Renminbi settlement accounted for 16.9% of China’s total goods trade last year, while the proportion was 22.6% in 2015, 20% in 2014, and close to zero in 2009. The currency fell by 6.5% against the dollar in 2016 – the biggest annual drop since 1994, but gained about 5% this year due to dollar weakness and tighter controls on capital outflows.

    And speaking of capital flight, even though the PBOC reported that in September official central bank reserves rose by $17 billion to $3.109 tn (largely due to valuation effects), according to the latest SAFE data released overnight, after the first, and only month of inflows in three years, outflows have again returned for a total of $7bn in September (vs. net inflows of +US$9bn in Aug), in light of the recently relaxed FX forward rule (recall “Yuan Tumbles After Beijing Gives Speculators Green Light To Short The Currencyfrom September 8)

    Below are the details from Goldman:

    Our usual preferred gauge of underlying flows suggests a total net FX outflow of US$7bn in Sep (US$2.4bn from net FX demand onshore plus US$4.9bn in FX outflow routed through the CNH market).

    • According to the SAFE dataset on “onshore FX settlement”, net CNY demand by non-banks onshore in Sep was -US$2.4bn (vs. +US$3.1bn in Aug). This is composed of +$5.1bn net inflows via net outright spot transactions and net outflow of US$7.5bn via net freshly-entered forward transactions. In particular, demand for short-CNY forwards rose significantly (from US$10bn in Aug to US$28bn in Sep), following the cut of reserve requirement for sales of FX derivatives to zero in early Sep, which made it less costly for onshore entities to hedge against CNY.
    • Another SAFE dataset on “cross-border RMB flows” shows that net flow of RMB from offshore to onshore was -US$4.9bn in Sep (vs. +US$5.8bn in Aug).

    Exhibit 1 the usual gauge of FX flows suggests a small net outflow of US$7bn in Sep

    Related, another data set called PBOC’s FX position (also released today) suggests no net FX purchases by the PBOC in Sep (in contrast with the earlier released FX reserve data that implies about $17bn in FX purchases).

    Two notes in terms of flow pattern for Sep:

    Foreigners’ investment in domestic fixed income products remained solid, rising by US$15bn in Sep according to bond custodian data (Exhibit 2), following a $12bn increase in Aug. But similar to the previous month, a large portion of this inflow was into domestic NCDs, which could reflect short-term arbitrage activity driven by the rate spread implied by CNH cross-currency swap and domestic NCD yields.

    Exhibit 2: Bond inflows were large in Aug and Sep, although a majority of these were into short-term NCDs

    Trading firms repatriated a larger portion of their trade surplus back onshore, up to 84% in Sep, from 59% in Aug and the average of 40% in the last two years. The absolute amount though was roughly flat vs. Aug (at c. $24bn).

    Separately, in a conference held on the sidelines of the Party Congress, Governor Zhou downplayed the pace of FX and outflow liberalization going forward. He said that the transition to CNY free convertibility is a long-term process; and that CNY band widening would signal more FX reform in future, but this is currently not a policy focus. In the near term, the authorities may continue to use a combination of daily guidance (via the fixing’s countercyclical factor) and occasional reinforcing FX intervention to manage the CNY, in our view.

    In other words, capital controls are here to stay, and the moment outflows go back to double digit territory, the PBOC will unleash all hell against the Yuan short all over again.

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Oct 19

Today’s News 19th October 2017

  • Ayatollah Blasts Trump's "Rants And Whoppers", Says Iran Will "Shred" Deal If US Pulls Out

    Iranian Supreme Leader Ayatollah Ali Khamenei – who famously waited three months before offering a tepid endorsement of the JCPOA – largely echoed the threats of other Iranian government officials when he said Wednesday that Iran would adhere to the terms of the deal if other world powers respected it, but would “shred it” if the US were to pull out.

    Speaking publicly about the future of the deal for the first time since President Donald Trump refused to decertify it five days ago, Khamenei confirmed that Iran would likely terminate the deal – and restart its nuclear program – if the US Congress decides to unilaterally rule that Iran is not in compliance, opening the door to reimposing sanctions.

    The ayatollah’s proclamation puts Iran at odds with the deals other signatories, who’ve maintained that the US doesn’t have the power to terminate a multilateral accord certified by the United Nations. Khamenei welcomed the support of the other signers – Britain, France, Germany, Russia, China and the European Union – but said it would not be enough to convince Iran to stay, Reuters reported.

    “Europe must stand against practical measures (taken) by America,” he said. If Trump ditched the deal, “Iran will shred it”.

    US lawmakers and President Donald Trump are presently pushing for a bill that would recertify the deal with one important caveat: Iran would be subject to “triggers” – like continued ballistic missile tests or evidence that it could build a nuclear weapon within a year’s time. Violating these conditions would lead to sanctions automatically being reimposed.

    However, Khamenei also vowed to continue Iran’s ballistic missile program, which the country claims is strictly for defensive purposes, suggesting that Iran wouldn’t brook the additional restrictions being considered by the US Congress.

    "Or to ask why Iran has missiles – well, why do you have missiles? Why do you have nuclear weapons? We will not accept the Europeans going along with America's bullying."

    The ayatollah also dismissed Trump's attacks on Iran as "rants and whoppers", adding that Iran will continue to abide by its commitments under the nuclear deal.

    "I don't want to waste my time on answering the rants and whoppers of the brute US president," Khamenei said in a speech to students in Tehran, published on his Telegram channel.

    The ayatollah insisted that ultimately Iran would prevail in its struggle against the US, adding that it would be unwise to underestimate the threat posed by the US because of Trump’s buffoonish persona.  

    "Everyone be assured that this time, too, America will be slapped and defeated by the nation of Iran."

    Khamenei said the world should not be fooled by Trump's public persona.

    "The US president displays stupidity, but this should not cause us to ignore America's mischief," he said.

    The Trump administration has pushed for a more aggressive approach to Iran’s missile program, repeatedly insisting that, while Iran is technically complying with the terms of the pact, it is more broadly violating the “spirit” of the agreement by continuing to test missiles and (allegedly) fund terrorist groups, AFP reported.

    While the US has worked itself into a lather over the Iranian missile program, the regime amusingly “punked” their American adversaries last month when they tested what was purported to be a new type of medium range ballistic missile. Intelligence sources initially trusted the Iranian media reports, but later government sources determined that Iran had never actually fired a missile, and that the footage was from a failed launch seven months ago.

    On Monday, Iranian Parliament Speaker Ali Larijani said Monday that the US would face stiff consequences if it withdraws from the JCPA – informally known as the Iran deal. He added that Iran "had a developed plan and a certain law,” should the United States withdraw from the agreement on Tehran's nuclear program, adding that Washington would "regret it."

  • A Failing Empire, Part 3: China & Russia Are Transforming Enemies Into Friends

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    In the previous articles, the military and economic means by which the United States initially aimed for global hegemony were addressed, detailing how the US became the (declining) superpower it is today. In both analyses I highlighted how the threat of US military power is no longer credible, and how sanctions and the strong-arming behavior of corporate giants and international bodies (IMF, World Bank, BIS, etc) have ceased their effectiveness. This has made the United States increasingly irrelevant, leaving in the process a vacuum to be filled by emerging powers like China and Russia, which effectively ushers in a new world order based on multipolarity. In this third and final part of the series, I will dive into the specific events that show how the military, economic and diplomatic combination of Iran, Russia and China have forged, by known as well as less-known means, an alternative world order to the unipolar American one.

    Russia, China and Iran have in recent years drawn enormous benefit from the declining military and economic power of the United States, further propelled by a general mistrust of Washington's diplomatic and political abilities, both with Obama and now with Trump. The two previous articles showed that Moscow, Beijing and Tehran, even as they addressed different situations, shared similar interests and came to coordinate their military, economic and diplomatic strategy.

    The success of the Euro-Asian triptych is based on the essential principle of transforming enemies into neutral players, neutral players into allies, and further improving relations with allied nations. In order for this project to be realized, economic, military and diplomatic efforts are variously employed, depending on the country and the general regional context. The flexibility shown by Moscow and Beijing in negotiations has delivered historic deals, not only in the energy sector but also in the military sphere and also in education and poverty reduction, as seen in Africa.

    Saudi Arabia, Turkey and Syria are three countries that, when analysed individually, reveal this precise strategy of Russia, China and Iran. Particular attention is focused on the Middle East for several reasons. It is the region where America’s declining military power, unable to achieve its geopolitical objectives in Syria, meets with the progressive loss of Washington's economic influence, highlighted by the increasingly precarious position of the petrodollar that is about to be challenged by petroyuan deals between Saudi Arabia and China.

    From Enemies to Neutrals

    The military defeat of Syria's enemies was mainly due to the Syrian Arab Army (SAA) together with Iran (plus Hezbollah) and Russia's military cooperation, together with Beijing’s diplomatic and economic support. Thanks to the strategy adopted by Putin in Syria, Russia was able to stop the advanced project of the United States, Saudi Arabia, Turkey, Qatar, France, the United Kingdom, Jordan and Israel to dismantle Syria. The Russian Federation gradually entered into the Syrian conflict, and the military results immediately favored the axis of resistance, the US military unable to intervene directly to change the course of events.

    The consequences of this choice have led historic allies in the region to doubt Washington’s real commitment to the region and America’s military ability to intervene in a conflict in the Middle East and North Africa (MENA) and change its course in favour of Riyadh, Doha, Ankara or Tel Aviv. The new Trump administration has showed itself not to live up to the expectations of Saudi regional hegemonic plans, even though the Kingdom agreed to buy up to $110 billion worth of US weapons and commit to further investments in the US.

    Riyadh is in an even tighter position than one would ordinarily think. It has to individually support the weight of the petrodollar, which is increasingly shaky thanks to the Chinese desire to eliminate forms of payment in US dollars by switching to the petroyuan. Moreover, Riyadh sees little tangible benefits to the US militarily backing its aggressive anti-Iran policies, even though Trump has shown to different ideas than Obama on the Iran deal. Saudi Arabia shares a common interest with Israel in the region with regard to their shared anger concerning Washington’s diminishing effectiveness in the region.

    From the Saudi point of view, everything went downhill within a relatively short period. The defeat in Syria that coincided with the agreement on the nuclear deal (Joint Comprehensive Plan of Action – JCPOA) between Iran and the 5+1 countries. In both these scenarios, Riyadh feels the profound betrayal of its old North American ally. The Chinese economic pressure on Riyadh to accept yuan payments for oil, coupled with the growing ability of Moscow to effectively intervene in the region, and the renewed diplomatic and political role of Iran thanks to the JCPOA agreement, has left Riyadh on a certain path to destruction. The only solution is a strategic change that could affect the region in a significant manner.

    The visit of Saudi King Salman to Moscow to sign trade agreements (an investment fund of over 1 billion dollars has been created) was of symbolic importance. The King’s actions, conducted in person, reflected recognition of Russia’s new dominant role in the Middle East as a result of American intentions to withdraw influence in the region. The need for the Saudi king to appear in person in Moscow also directly concerns the succession to the throne, with Mohammed bin Salman to inherit the keys to the kingdom, in spite of the disasters in Yemen and the Gulf Cooperation Council (GCC) crisis caused by the clash with Qatar. In a situation of extreme weakness, especially with oil prices so low, the Saudi monarchy is left with few cards to play and has to initiate a dialogue with Moscow and possibly start some kind of cooperation in various fields related to energy and investment. Initially, the main excuse for the Moscow meeting between Putin and the Saudi king was to coordinate the production and sale of petroleum and gas, a necessity for both countries given falling oil prices over the last 24 months.

    The first goal achieved by Putin and the Saudi king appears to be a spike in oil prices to acceptable levels, following Washington and Riyadh’s failed strategy to bankrupt Moscow by plunging oil prices.

    Secondly, the meeting focused on the acceptance of Riyadh’s defeat in Syria, recognizing Assad as the only legitimate leader of the Syrian Arab Republic.

    A lot is developing behind the scenes, and this is evident with Riyadh now recognizing a political solution as the only way to end the conflict, something never mentioned by Saudi state representatives. It will be very difficult for Riyadh to give up the regime-change project, even if the political, diplomatic, military and economic pressure from China and Russia increases. A common faith accompanies Riyadh and Tel Aviv, as shown with both repeatedly trying to persuade Putin to abandon his friendship with Iran and Assad, but without success. The loyalty demonstrated by Moscow to Tehran and Damascus has also had a positive effect on the Saudis, who must recognize that while Putin may have different views on certain issues, he is a man of his word; unlike the United States, where new administrations may sometimes throw friends under the bus, Putin maintains his promises, even under extreme pressure. In this sense, Trump's decision to decertify the Iran deal is a demonstration of good will to Israel and Saudi Arabia by the new administration.

    Saudi Arabia finds itself with very low monetary reserves as a result of the lowered price of oil and involvement in several wars. To add to this is a military defeat in Syria and an even bigger debacle in Yemen. To cap it all off, the United States, its most valuable ally, is increasingly disinterested in the fate of the Saudi monarchy and the kingdom, thanks to increasing energy independence as a result of fracking. Adding to this, the Gulf Cooperation Council (GCC) has split as a result of the economic warfare against Qatar, representing another example of Washington not supporting Riyadh to the full extent the monarchy in Saudi Arabia would have been expecting. The reasoning for Riyadh is as simple as it gets. If Washington is not able to support Saudi Arabia militarily, but Riyadh has to bear the burden economically, then the Kingdom is in enormous trouble and needs alternatives like Russia and China. It is unthinkable for Saudi Arabia to continue supporting petrodollar hegemony while Iran becomes a regional leader in the Middle East.

    The best way is by negotiating with the main players, and Russia looks like the perfect mediator, as recently announced. China is just waiting for all these disputes to settle down to bring to bear its  economic power to definitively relegate to the past the last forty years of chaos in the region stemming from Saudi-Iranian rivalry.

    For Riyadh, even if the attempt to separate Russia and Iran were to fail, it would nevertheless bring about relations that send a clear signal to the West. The purchase of S-400s is a clear demonstration of expanding Russian influence in the Middle East, and Riyadh perhaps has an understandable fear of American retaliation in the event that it starts to change course regarding the sale of oil in currencies other than the dollar.

    Moscow has achieved a diplomatic miracle with Saudi Arabia, thanks to the military efforts in Syria, Chinese economic pressure through the issuing of petroyuan, and Iranian diplomatic success, stemming especially from the nuclear energy agreement, which has served to rehabilitate Tehran on the international political scene.

    The purchase of advanced Russian weapons systems sends a clear signal and indicates that the Saudi kingdom is ready to assume a more neutral position and has started to knock on the door of the multipolar world, an acknowledgement of Chinese economic power and the military-technological predominance of the Russian Federation.

    From Neutral to Friends

    In transforming itself into a more neutral country, Riyadh may be attempting to balance American economic and military influence with Russian and Chinese support. The importance for Russia and China in having a neutral country with great spending capacity in the region should also be noted. In the case of Turkey, Russian intervention in Syria, coupled with Turkish aspirations to become a Euro-Asian energy centre, progressively pushed Moscow and Ankara together. As a result of effective diplomatic work following Turkey’s downing of a Russian jet, relations have gradually improved, occurring in parallel to the operational success achieved by the Syrian army and Russian Air Force against Turkish-backed terrorists. The military defeat of Turkey was already clear twelve months ago. In the last three to four months, Erdogan seems to have changed priorities, focusing on the Kurdish issue and on growing relations with Qatar (the political movement of the Muslim Brotherhood is key in both countries and essential to their relationship). In the meantime, Turkey is distancing herself from her NATO allies, gravitating more and more towards the orbit of the “axis of resistance” that consists of Iran, Iraq and Syria.

    The Syria peace talks held in Astana laid the foundation for diplomatic efforts by Tehran and Moscow to persuade Ankara to abandon the military option (even though this was already clear once Russia decided to intervene). Instead, Ankara would be encouraged to open up important energy deals between Ankara and Moscow. It seems that Ankara has now decided to become an energy hub, carrying Turkish Stream gas from Russia to Europe as well as gas from Qatar and Iran. It even seems that China has every intention of connecting with the Turkish facilities for the supply of gas and oil, thus increasing Ankara’s role as a central energy-transit hub for the region.

    The other aspect that has firmly convinced Erdogan to yield on Syria concerns the Kurdish issue. The Syrian Democratic Forces (SDF), consisting mainly of Kurdish fighters, operate in Syria under the command and on behalf of the US-led international coalition. Ankara has nominated the Kurds of the SDF as an armed extension of the Kurdistan Workers’ Party (PKK), considered a terrorist group in Turkey. This divergence between Washington and Ankara has continued to grow, even during the Trump administration, contrary to forecasts during the US election period.

    With the progressive use of the SDF in Syria by the international coalition headed by the US, Trump and Erdogan’s strategies have ended up clashing. Trump needs to give his domestic audience the impression that the US is devoted to fighting ISIS, even if this means relying on Kurdish soldiers that entails severing relations with Turkey. Erdogan sees this as a matter of national security. The situation has escalated to a point where a few days ago, a diplomatic dispute led to the suspension of the issuing of visas from the respective embassies in Ankara and Washington. Erdogan considers American aid to the Kurds as a betrayal of the worst kind from a NATO ally. A natural reaction to these actions by the US, therefore, was the the agreement between Iraq, Iran, Syria and Turkey to preserve territorial integrity vis-a-vis the Kurdish issue.

    The blessing of the Chinese and Russians is evident in this situation. In order to pacify the region, rebuild it and incorporate it into the One Belt One Road project, the Maritime Silk Road, and the North-South Transport Corridor, wars have to stop and diplomacy must prevail. For Ankara, it is a unique opportunity to exit the war in Syria without appearing as one of the defeated factions (hence the Turkish participation in the Astana talks with Russia and Iran). At the same time, Turkey emphasizes the importance of its geographical position as a centre for energy distribution on the Eurasian supercontinent. This is all at the expense of the US, with Turkey breaking free from Washington’s pressure.

    Moscow has already removed all sanctions against Turkey, and vice versa, greatly increasing trade with considerable prospects for growth in the coming years. As for weapons sales to Saudi Arabia, Russian influence is expanding, thanks to the S-400 systems in the process of being sold to Ankara over the vehement protests of many NATO countries. The S-400 system is a further effort to deter US aggression, but is also the first indication of Ankara’s will to diversify, this time militarily, constituting a pillar of the new multipolar world order.

    Ankara, after numerous diplomatic and military failures, has rebuilt its role in the region alongside Iran and Qatar, in a context where its partnership with Moscow and Beijing will guarantee Erdogan a margin of maneuver to progressively disengage from the NATO system that has brought so many problems to the country. A future entry into the Shanghai Cooperation Organization (SCO) could seal Ankara’s passage into the multipolar world, becoming in the process a fully fledged ally of Moscow and Beijing. In the meantime, it is already possible to say that Moscow and its allies have succeeded in the unlikely task of turning a nation that was on the brink of a direct involvement in Syria in the effort to remove Assad into one of the most important guarantors of Syria’s territorial integrity. Erdogan has agreed to Assad staying in power into the near future, and has even agreed to help fight terrorists in Syria, as evidenced with the recent Turkish military operations in Idlib.

    How deep these new friendships between Moscow, Riyadh and Ankara are yet to be tested. Erdogan and the Saudi monarchs have been known not to keep their word. At it stands, this appears to be an economic, political and military masterpiece of the Iranian, Russian and Chinese triad. The war in Syria has almost been won; the terrorist groups supported by the Saudis and Turks have been neutralized; and the conditions for a full Eurasian economic and military integration of Riyadh and Ankara have been set.

    Supporting Friends in need.

    Ultimately, it is worth pointing out the contribution of Russia, China and Iran to the Syrian government and people. Over the six years of aggression against the Syrian Arab Republic, Iran has never failed to contribute in terms of manpower, equipment and logistical support in the battle against terrorism. Moscow, in the early stages of the conflict, even before intervening directly, took steps to settle the Syrian foreign debt to Russia, and in fact lent money by providing armaments, energy and logistics as a way of actively contributing to the defeat of terrorists in Syria.

    The People's Republic of China has already paved the way for the future of Syria in economic terms, declaring the country an important transit route and a final destination of a part of the Belt and Road Initiative (BRI). Chinese economic power will allow Damascus to rebuild a nation devastated by six years of terrorism and foreign aggression. With Russian military capabilities, Damascus will have all the necessary means to end the conflict and stabilize the country, laying the foundation to prevent any future Western aggression. From a political and diplomatic point of view, the joint actions of Tehran, Beijing and Moscow, together with Damascus, are an integral part of the axis that stretches from Iran to Iraq and Syria and arrives at the Mediterranean, or could even go to Turkey. With the combination of economic, military and political elements, Syria has survived almost unprecedented aggression, emerging as the winner, thus ensuring its ability to determine its future autonomously without external impositions.

    *  *  *

    Series Conclusions

    The path traced by Moscow, Beijing and Tehran is expected to stabilize the Middle East, thanks to the resolution of the Syrian conflict. Some key elements of this global change we are witnessing are: Chinese economic pressure on the Saudis to accept payment for oil in yuan; the eradication of terrorism in Iraq and neighbouring countries, thereby circumventing sanctions imposed on Iran by the US and its allies; and transforming Turkey into a regional energy-distribution centre.

    The RPC intervenes economically in a number of regions, particularly in the Middle East, to support Russian military power through money, diplomacy, economic investment (OBOR) and by providing liquidity to allies, as seen with Moscow when it was hit with Western sanctions. For Beijing, the decline in terrorism is a key factor in fostering China's development of the Silk Road 2.0 infrastructure, allowing Beijing to enter into areas destroyed in the Middle East to offer easy reconstruction plans. At the moment, Syria, Egypt, Libya and Pakistan seem to hold great importance for China's future strategies.

    Russia and China lead organizations such as the BRICS, the UEE, the SCO, and the AIIB. The grand strategy is to support the creation of an alternative to the US dollar-based neoliberal world order and to contain the effects of declining US empire. Nations will increasingly have to choose between two systems: whether the multipolar world order, based on friendship and win-win cooperation, or the unipolar one, based on the America’s declining military and economic power.

    Strong Chinese economic support, together with Russian military might as well as Iran’s importance in the Middle Eastern region, are successfully shielding countries like Syria from American military interventions, driving a wedge between old US allies and paving the way for Washington’s planned economic and military isolation in the region. Thus, countries similarly facing US pressure, such as South Korea, Mexico and Venezuela, will increasingly gravitate toward the multipolar world led by Russia and China, accelerating the decline and influence of the United States beyond the Middle East.

    The multipolar world order is here to stay. The US is no longer the lone superpower but rather one among two other nuclear-armed powers. The sooner the US realizes this, the better it will be for humanity and for peace around the world.

  • Chinese Army Documents Leak Set To Embarrass Beijing

    Authored by Jan van der Made via RFI,

    In the vaults of Amazon.com’s self publishing market place, a growing series of books exposing China’s dark secrets is seeing the light. Six books with colorful covers, which constitute the “China Secrets” series, introduce a reader to the fascinating world of China’s internal – or neibu – documents. But many questions remain.

    Since 2015, unnoticed by the large majority of the China watchers, the books, with titles like The China 1989 Army Documents, Spying against the United States, Spying against India and others can now be bought on Amazon.

    Author Ben Keiler [probably a pseudonym] claims the documents are being put before the public “for the first time ever”.

    They shed a new and unique light on events as diverse as the 1989 Tian’anmen Square massacre and the martial law imposed in Tibet three months before, the China-India border conflict culminating in hostilities in Bhutan earlier this year

    It also offers detailed descriptions of the state of Chinese army intelligence gathering in respect of the US, South Korea, Japan and other countries, since the founding of the People’s Republic of China in 1949.

    Real or not?

    In total some 500 pages, filled with copies of documents, military maps and tables have been published.

    The big question is: are the documents real?

    For centuries, sinologists have struggled with the question of authentification of documents.

    Andrew Nathan and Perry Link published the Tiananmen Papers in 2001, a book with translated secret documents leaked or provided by “Zhang Liang,” a pseudonym, that minutely describe the policy process that lead to the Tian’anmen crackdown on June 4, 1989 in Beijing.

    They said in the preface that the documents went through a meticulous five-stage process of selection before publication was decided, and they still cannot confirm their veracity completely.

    Keiler criticizes the lack of access to the original documents in the Tiananmen Papers, saying that they “contain not a single copy of an original [ ] and this fact makes it easy to challenge the content.”

    Indeed, Keiler’s 1989 Army documents do show copies of maps and documents that list in minute detail the of the People’s Liberation Army [PLA]’s troops before and during the attack on Tian’anmen Square on June 4, 1989.

    The square had been occupied for weeks by students demanding an end to corruption, more transparency and a chance to participate in the politcal process. China's leaders had imposed martial law, and moved the army against Beijing's demonstrating civilians.

    Internal map showing the advances of the PLA into Tian'anmen Square on June 4, 1989

    There is a minute-to-minute army account of how PLA troops fight themselves through the crowds reaching the square and removing the remaining students by 04:00 am, as planned.

    In a preceding chapter of the book, Keiler illustrates – again showing highly classified neibu material –  how the PLA crackdown in Tibet, in March 1989, served as an example for the Tian’anmen attack.

    The author reproduces PLA policy documents and lists of material, including guns and vehicles used, down to the amount of bullets handed out to the martial law troops who were to control the Tibetan protesters.

    Who is Ben Keiler?

    None of the Chinawatchers contacted by RFI was familiar with Ben Keiler or his work, but some expressed doubts:

    “If the documents were authentic, major publishers would have been interested, and the Chinese Government would have reacted strongly against Amazon. So far I have not seen a prima facie case to do this,” says Steve Tsang, director of the China Institute at the School for Oriental and African Studies [SOAS] in London.

    Perry Link, one of the two editors of the Tian’anmen Papers says that “one needs to be skeptical of these things, and yet it would be a mistake to reject them out-of-hand,” while Nathan insists that the documents can’t be authenticated “just by looking at them. It requires a lot of research,” he says.

    Others were more forthcoming. Michael Dillon, founder of the Center for Contemporary Chinese Studies at the University of Durham and author of Deng Xiaoping, the Man who Made Modern China, said, after “a preliminary look,” that he found the “level of detail [of the 1989 Army Documents] is convincing,” but admitted that it was not possible to be certain if they were originals.

    He also pointed out that the lack of the significant red stamps and handwritten autographs of relevant leaders on some of the documents presented could mean they are just a draft or print out.

    "[They]cast doubt on when and how they were issued and used. Even if they are genuine we cannot be sure that they were final drafts,” he says.

    But Song Yongyi, librarian with California State University, who himself did extensive work exposing cannibalism during the Cultural Revolution in the Guangxi Autonomous Region, going through massive amounts of secret documents, said that one set of documents about the Korean War looked very familiar to him.

    “When I was collecting documents about PRC history, I did see some of them. They are government publications [on] internal and classified level,” he writes in an email to RFI.

    Other volumes of the “China Secrets” series dig deep into Chinese intelligence sources, showing the detailed level of knowledge Beijing had of military positions of the Indian army during the 1962 border war, South Korean positions during the 1950-53 Korea war; always with many illustrations of colorful maps and [parts of] documents and extensive commentary.

     What does Keiler want?

    The identity of the author, as well the way he obtained the documents is shrouded in mystery.

    “Questions regarding who’s behind the China Secrets Series are secret and will not be answered,” he says in the preface.

    “Years of efforts and movements of persons went into the effort to make it as difficult as possible to hide the methods and all the persons involved” in obtaining the documents.

    The reason: under China’s stringent security laws and regulations, leakers of “state secrets” may face the death penalty.

    But Keiler explains why the risk may be taken: in the preface of the China 1989 Army Documents, he says that by exposing details about army units involved in the crackdown, “people responsible can be named and if possible persecuted … once places, units and names are known and officers can no more hide behind a screen of [a] 'state secret' it will become more difficult to find persons ready to use machine guns against civilians the next time such an incident happens in China.”

    Internal document showing PLA troops that got rewarded after the 1989 Tian'anmen crackdown

    Publication of Chinese intelligence on the US, India, South Korea and other countries would give researchers and, ultimately, politicians, a better insight in how the Chinese military acts under extreme circumstances.

    Meanwhile, production goes on. In 2017 some six volumes were produced, and 11 more are on the way.

    Among the new books will be the first publication of top secret documents on decoding, China’s 1979 war with Vietnam, a history on Chinese army mapping and a book on the Tibetan uprising in 1959 and the Chinese crackdown.

    Until now, the Chinese government has offered no reaction regarding the leaks.

  • Staggering Chart Shows Your Personal Share Of Your State's Underfunded Pension

    Back in March we shared the staggering results of a Bankrate survey which found that the average American household couldn’t afford to write a measly $500 check in the event of an unexpected emergency (see: “The Reality Is, Half Of Americans Can’t Afford To Write A $500 Check”).  Of course, as we note frequently, while the talking heads of daytime financial TV shows love to reference surging economic indicators like unemployment figures, the fact is that the number of Americans not participating in the work force remains near all-time highs and wage growth, despite “full employment” levels, has been practically non-existent since the great recession. 

    Given the above, we can only presume that the average person in New Jersey, Connecticut, Illinois, Kentucky, etc. is going to have a somewhat difficult time producing their $10,000 – $27,000 share of their state’s massive pension and debt obligations. 

    As CNBC points out today via S&P Global Ratings, decades of budget mismanagement and hollow pension promises to public employees has resulted in a mountain of debt that many states are unlikely to ever repay.

    New Jersey has set aside just 31 percent of what it needs to pay pensions costs. Kentucky, (31 percent) Illinois (36 percent) Connecticut (41 percent) and Hawaii (541 percent) are the worst off.

     

    States with the best funding levels include Wisconsin (98 percent), South Dakota (97 percent), New York (93 percent), Tennessee (88 percent) and North Carolina (87 percent).

     

    In New Jersey, the funding gap represents nearly 42 percent of the Garden State’s Gross State Product – or more than $27,000 for every resident, according to S&P Global Ratings.

     

    Other underfunded states include Connecticut ($22,700 per person), Hawaii ($15,700), Illinois ($15,900) and Alaska ($18,200).

     

    That compares with Nebraska, where the underfunding represents just $242 for every resident. Taxpayers in South Dakota ($598 per person), Idaho ($472), Iowa ($752), and Tennessee ($806) also face relatively low risk of having to make up for unfunded state liabilities.

    Pension

    Of course, we can’t help but notice that 8 of the 10 worst funded states in America just happen to be “deep blue” bastions of liberalism.  Could it be that perpetually higher taxes and overly burdensome regulations end up being negative for state budgets in the long term?

  • All Hail Chinese Emperor Xi Jinping: Will He 'Make China Great Again'?

    Authored by Mike Shedlock via Maven.net/MishTalk,

    At the nineteenth Communist Party meeting, Chinese president Xi Jinping consolidated his hold on power.

    But can he make China great again? What would it take?

    New Yorker columnist Jiayang Fan notes At the Communist Party Congress, Xi Jinping Plays the Emperor.

    Perhaps no event embodies the unyielding abstruseness and the unforgiving hierarchy of China’s ruling Communist Party as much as its Party Congress, the government’s most important leadership conference. Attended by some twenty-three hundred delegates from across the country, it is held every five years in Beijing’s Great Hall of the People—and when the weeklong meeting finally begins, one can be certain that the crucial politicking has already concluded. What proceeds is a choreographed spectacle bearing fastidiously scripted speeches, pro-forma elections of what has heretofore been determined (a leadership reshuffle in the seven-member Politburo, the highest echelon of power), and, in the case of the 19th Communist Party Congress, which opened today, high-spirited, propagandistic posters reminding the masses that “Life in China Is Good! Everyday Is Like a Holiday!”

     

    This is a message that Xi Jinping, who was appointed President at the previous Party Congress, in 2012, is eager to instill in a country that continues to grapple with a vertiginous pace of change and the outsize influence of politics in everyday life. Xi is almost certainly guaranteed another five-year term, if not longer. Since taking office, he has sought to launch the greatest ideological campaign since the days of Mao.

     

    Xi has made clear from the outset, he is intent on both defining a new world order and restoring to Chinese culture its former esteem.

     

    Yet Xi’s mission should be regarded in the context of a collective and profound post-traumatic stress disorder, the result of almost two centuries of cataclysmic events in China. For every Tang Taizong, who ushered in the golden years of the Tang Dynasty, there were many others like Empress Dowager Cixi, who usurped the throne, crippled the path of progress, and contributed to the downfall of the Qing Dynasty.

     

    As Xi made clear today, during his three-hour address to the Party Congress, he sees this moment as “a new historic juncture in China’s development”—and himself as the man to seize it. He seems to believe that the more power he amasses, the easier it will be for him to enact the kind of monumental changes necessary to transform China into the world’s leading superpower. In this sense, he is positioning himself as a savior with a cause noble enough to justify his autocratic turn. The logic is akin to that which animated the ambition of many of the Middle Kingdom’s five-hundred-odd emperors. Sure, Xi has rerouted all tributaries of power to run upstream to him, but isn’t it in the service of rejuvenation?

     

    Xi has also used his growing power to curb that of his citizens. Under his rule, China has become increasingly repressive. The media is censored and civil society has been muted. Activists have been silenced and human-rights lawyers arrested. More than a million officials have been disciplined. Despite paying lip service to the constitution—the Party devoted an entire plenary session during the 18th Congress to a discussion of “judicial independence”—Xi is steering the country away from the rule of law and toward the rule of the Party.

     

    Xi’s vision for China’s future suggests a great leap backward, in which old lessons remain unlearned.

    Bravo!

    A paradigm change is indeed underway, but it will be led by cars (autonomous driving and electrification), demographics (aging boomers), the demise of pension plans, a revolt by millennials, and a squashing of the current political class.

    A currency crisis is inevitable but it's too soon to say that gold will be back in the picture. Some suggest SDRs, but I dismiss that idea.

    King dollar is certainly not dead yet, and contrary to popular belief, having the reserve currency is more of a curse than a blessing.

    Why Dollar is King

    • The dollar is king because the US has open capital markets, property rights, and the world's biggest bond markets.

    • The US also has a Bill of Rights granting freedom of speech and protection from unwarranted searches. China imprisons people for speaking their mind.

    • China is a long way from competing with the US on those important issues. In addition, China repeatedly resorts to capital controls to stop monetary flight.

    China will not supplant the US for at least two decades and may not ever.

    I expounded on the topic in Marc Faber Banned from CNBC. Here are a few snips.

    What Made the US Great?

    The Constitution's Bill of Rights is what makes the US great. There is nothing else like it in the world. It's a unique constitution put together by a unique set of educated lawyers and other scholars.

    The First Amendment grants freedom of speech and freedom of the press.

    That's what enables Faber to say what he did. And that's a good thing, whether you agree with him or not! China imprisons or kills people for saying something the state disagrees with. Numerous countries in Europe would fine Faber for such remarks.

    The First Amendment prohibits state-sponsored religion. Many Republicans who allegedly want a strict constitution, ought to take a closer look. School prayer does not fit in.

    Democrats might wish to consider the Second Amendment.

    Everyone should appreciate the right to be secure in their home. That's the Fourth Amendment.

    The Sixth Amendment grants a speedy trial.

    Reader Comments

    The subject came up a third time today. In response to the above articles, reader Brindu had this to say:

    Hello Mish

     

    In your section "What Makes the US Great", you used the points made earlier in " King Dollar". This will be very educational for readers who normally don't dwell on constitutional issues.

     

    I have another point worth adding: "A credible, independent and impartial court system accessible to all.".

     

    To illustrate how the Constitution and the Bill of Rights worked real time, I reflected back to Nixon and the Watergate era (1972-74). Many of your readers were too young to remember or not even born. Here is a summary of relevant events showing how the points you listed under "What makes the US Great?" worked in actual practice.

     

    1. Daniel Ellsberg leaked the Pentagon Papers to the NYT. Nixon went to court to stop publication, but the judge ruled against Nixon, saying there was no threat to national security. The NYT published the Pentagon papers in its entirety, This is a classic example of the first amendment at work. Many foreign leaders asked why Nixon did not shut down the press. (The UK has something called the Official Secrets Act and can shut down newspapers).

    2. Nixon's aides broke into Ellsberg's psychiatrist's office looking for dirt. They went to jail. This is a classic example of the 4th amendment at work.

    3. Judge John Sirica systematically sent a dozen or more Nixon's aides (Haldeman, Erlichman, Dean etc.) to jail as Nixon watched helplessly. Again, foreigners, unfamiliar with the US separation of powers asked why Nixon just did not throw Judge Sirica in jail. Imagine a judge acting independently in China or in Erdogan's Turkey? This is a classic example of an independent judiciary at work.

     

    The parliamentary systems in Europe and Canada are inferior in protecting individual rights like our Bill of Rights. Under parliamentary law, the UK can shut down newspapers. They can wiretap, open mail without a warrant. There is no double jeopardy- in some places, they can try you again and again on the same charge even if you are acquitted.

     

    At one time, Australia did not allow its citizens to own foreign accounts. The UK, in the 1960's has capital outflow due to 90%+ marginal taxes. Folks were mailing British pounds abroad and the Government scanned outgoing mail to intercept this.

     

    Like you said, "The Constitution's Bill of Rights is what makes the US great. There is nothing else like it in the world."

    US Dollar Not Dead Yet

    Chinese history speaks for itself. Absolute power in the hands of a man whose actions are rubber-stamped by a mock-up Congress will not make China great.

    Wake me up when China has a Bill of Rights granting freedom of speech and protection from unwarranted searches.

    Add an independent judiciary, a free-floating currency, and the world's largest bond market to the list of China needs.

    
    

  • Drone Footage Reveals A First Look Of Trump's Border Wall Prototypes

    Over the past four weeks, workers have been toiling (mostly in intense 90+ degree heat) to put final touches on eight possible versions of President Donald Trump’s long-promised border wall, ahead of an October 26 deadline to finish the prototype border-wall designs located just a few dozen years from the border that divides San Diego from Tijuana. U.S. Customs and Border Protection awarded eight contracts to six companies to build the prototypes. Four are made of reinforced concrete, and another four incorporate additional construction materials. Construction began on Sept. 26, giving companies 30 days to finish, according to the Arizona Republic.

    By Wednesday, five of the wall designs had already been completed and were fenced off with caution tape, but – as the following video shows – crews were still at work on others, installing vertical concrete panels on one design, using cranes and bulldozers to place them upright. Another two prototypes were in various stages of construction on the demonstration site, located about 2 miles east of San Diego’s Otay Mesa border crossing, in the foothills of the Otay Mountains. At roughly 30 feet, the designs dwarf the petite, primary fence that currently designates the international boundary — it’s made of rusted Vietnam War-era landing mats. They are also nearly twice the height of the secondary metal-mesh fence, which ends near where the prototypes are being built.

    Their height, officials quoted by the AZ Republic said, is intended to make a statement to criminals and would-be unauthorized crossers: Stay away.

    “The 30 feet is very impressive,” said Mario Villareal, the division chief for the San Diego Sector Border Patrol. “What we’re trying to accomplish is by putting tactical infrastructure on the border, by having all-weather roads, by putting Border Patrol agents on the immediate border is the deterrence.”

    Of course, whether the border-wall prototypes “keep people away”, is what matters, and will be closely scrutinized in the coming weeks. After they are done, CBP will move to the “test and evaluation” of each of the eight structures.

    What do the prototypes look like?

    One built by a Maryland company uses concrete at the base with the top two-thirds featuring blue metal panels. Another, built by an Alabama company, has a wide concrete base that gives way to a thinner frame halfway up the structure.  Also, only one of the completed designs incorporates see-through features that would allow Border Patrol agents to monitor activity on the other side of the border.

    Initially, Trump called for a solid reinforced concrete design, and several of the finished prototypes seemed to fit that description. Under advisement from CBP, the administration later included “see-through features” in its call for submissions. A second design by the Alabama company features metal bars for the first half of the prototype, narrowly spaced and resembling the bollard-style fencing commonly used at the border in Arizona’s urban areas. But the top half has what appears to be solid concrete panels.

    Quoted by the AZ Republic, Border Patrol Agent Theron Francisco said the ability to see across the border can be beneficial. It’s an option they don’t have now with landing-mat fencing in the area. “It’s good to be able to see through the south side. We can see them, they can see us,” he said. “But in a way, it can be negative because we’re always being watched. They always can see us. It goes both ways.” Meanwhile, the concrete design is made up of three long, concrete frames that gently slope upward from the U.S. side, but are completely vertical on the south side. The concrete is a light tan, nearly the same color as the dusty soil it stands on. 

    The cost of eight contracts ranges from $320,000 to $480,000. CBP has already appropriated the funds to pay for them. However, funding for additional construction is still up in the air and remains the object of major political disagreement in Congress.

    And until we find out if Trump’s wall will ever amount to anything more than a pipe dream, here is drone footage taken earlier today of the Border Wall prototypes.

  • Yield Curve Inverts, Yuan Slides As China GDP Growth Slows

    Despite all the talk of deleveraging, China did anything but according to its most recent data but the lagged impact of the tumbling credit impulse is starting to show up in the broader macro data. Despite the National Congress being under way (and recent credit spikes and positive PBOC hints) GDP growth limped lower to the expected +6.8% YoY, and fixed asset investment growth was the weakest in over 17 years…

    Ahead of tonight's data dump, China macro data had been disappointing notably, having tumbled for over a month to its weakest since August 2016…

    "A further acceleration in growth would surprise many investors who have taken their lead from measures to slow the property market, credit tightening moves and the government’s 6.5-percent or so growth objective for this year," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney.

    But amid The National Congress, and demands for calm in all markets, expectations for tonight's data were for the usual spot on 'meet' or even a 'beat' of well-managed expectations (following People’s Bank of China Governor Zhou Xiaochuan's hints last weekend that expansion may accelerate in the second half to 7 percent).

    China GDP YoY: MEET +6.8% vs +6.8% Exp (+6.9% prior) – missed the whisper number of +6.9% YoY

    China Retail Sales YoY: BEAT +10.3% vs +10.2% Exp (+10.1% prior)

    China Fixed Assets Investment YoY: MISS +7.5% vs +7.7% Exp (+7.8% prior) – lowest since Feb 2000

    China Industrial Production YoY: BEAT +6.6% vs +6.5% Exp (+6.0% prior)

    "Caution is needed in the Byzantine world of Chinese statistics," said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. The data "traditionally deliver exactly what its leaders want to hear –- and what its leaders want the public and the market to hear – ahead of any sensitive political event."

    As a reminder, The IMF is convinced that China will overtake the eurozone GDP in 2019…

    Offshore Yuan had sold off heading into the data and extended losses after (remember Q3 was notable strength reverse into notable weakness after PBOC verbally intervened)

    Still, China's inverted yield curve suggests not everyone is so excited about the future…

  • "It's A Mad Max Situation" – Puerto Rico Doctors Practice Medicine In 'Post-Apocalyptic' Conditions

    Authored by Mac Slavo via SHTFplan.com,

    Nearly four weeks after Hurricane Maria devastated the island of Puerto Rico, doctors are experiencing “post-apocalyptic” conditions. The reality doctors in Puerto Rico are facing is similar to that from a dystopian novel.

    Doctors are conducting surgical procedures in sweltering 95-degree heat, experience malfunctioning X-ray machines, and have seen medications literally melting. “We’re practicing disaster medicine in real life,” said Dr. William Kotler, a senior resident in emergency medicine at Florida Hospital in Orlando, who spent two weeks volunteering on the island earlier this month. “We improvise if we have to, with very little resources.”

    Arriving one week after Hurricane Maria made landfall, Dr. Kotler and four other emergency physicians from Florida Hospital in Orlando, finished up a volunteer mission on the devastated island. They were the first medical relief team the hospital sent to the island.

    “We went in blind,” said Dr. Julian Trivino, who was among the first team of volunteers.

    A second team arrived on October 8th and will stay for two weeks to assist those who need medical attention. When the physicians arrived in the town of Aguadilla on the northwestern tip of the island, the local hospital was in bad shape. The hurricane had almost completely taken down the entire electrical grid and knocked out communications.

    “I got there and immediately had a patient with serious head injuries from a car accident,” said Trivino, who is the chief resident in emergency medicine.

    Access to electricity was so poor that Trivino couldn’t conduct a CT scan, but he was able to do an X-ray. To review the films, he had to go outside and hold the films up to the sunlight to see anything. Afterward, he used one of the team’s two satellite phones to arrange for the patient to go to a trauma center.

    Dr. Trivino must use sunlight to examine x-rays since electricity is sporadic in Puerto Rico.

    The physicians are also becoming increasingly concerned that Puerto Rico could be headed toward a full-blown health crisis.

    “Trauma centers are overwhelmed. Basic surgeries are being postponed. I’ve seen people lose digits because they couldn’t be treated in time,” said Kotler.

    And the heat is making conditions even more extreme. At a hospital in Carolina on the northeastern coast, Kotler and Trivino had to perform an emergency surgery; attaching a temporary pacemaker to a patient whose heart rate was abnormally slow.

    “It was 95 degrees in this ER room. She was sweating profusely and vomiting,” said Kotler.

     

    “I held her hand and stroked her head. It’s what I could do to comfort her.”

    But there were also several patients who suffered the ultimate fate. In Aguadilla, it was a 42-year-old man in cardiac arrest.

    “He had a fever of 107 degrees. It was burning hot in the hospital. We scrambled to find ice packs to cool him down,” said Kotler. Nonetheless, he died the next day.

     

    “If you have a major heart attack in Puerto Rico, right now, the odds are stacked against you,” said Trivino.

    It isn’t just the sweltering heat that’s causing a post-apocalyptic medical crisis either. A lack of clean drinking water is compounding the problems. In one town, the medical team encountered an orphanage where children were on the verge of dehydration. The physicians flew in pallets of fresh drinking water to save the kids’ lives. Because of the lack of water,  Dr. Raul Hernandez, an internist based in San Juan, is bracing for an outbreak and possibly several deaths from waterborne diseases. He said Leptospirosis, a bacterial disease spread through the urine of infected animals such as rodents, is becoming a growing concern. Due to a lack of safe drinking water, people are drinking from whatever water sources they can find just to survive, he said. If that water contains urine from an infected rat, the disease will spread, he said. So far, at least two deaths have been attributed to Leptospirosis in Puerto Rico.

    Dr. Miguel Acevedo led the second team of emergency physicians from Florida Hospital. “They say it could take six to nine months for power to be restored fully in Puerto Rico. No hospital can plan to survive on generators for that long,” he said.

    What doctors are dealing with in Puerto Rico is a “Mad Max kind of situation, said Acevedo.

     

    The reality here is post-apocalyptic,” he said. “You can’t understand the seriousness of it unless you see it.”

  • A Look Inside The Secret Swiss Bunker Where The Ultra Rich Hide Their Bitcoins

    Somewhere in the mountains near Switzerland’s Lake Lucerne lies a hidden underground vault containing a vast fortune.

    It’s no ordinary vault, according to Quartz. Built inside a decommissioned Swiss military bunker dug into a granite mountain, it’s precise location is a closely guarded secret, and access is limited by myriad security precautions.

    But instead of gold bars, the bunker contains hard drives on which customers’ bitcoins are being kept in what’s call “cold storage” – i.e. the owners’ private keys are protected by an air-gapped hard drive. The vault is one of many operated by Xapo, an early bitcoin company known for its cold storage wallet products and a debit card that pays for transactions in digital currencies.

    The company won’t disclose how much bitcoin is stored in the vault, but one employee who spoke with Quartz said he sometimes takes customers with millions of dollars in bitcoin on tours of the vaults where their fortune is stored. Xapo was founded by Argentinian entrepreneur and current CEO Wences Casares, whom Quartz describes as “patient zero” of bitcoin among Silicon Valley’s elite. Cesares reportedly gave Bill Gates and Reed Hoffman their first bitcoins.

    As Quartz explains, the bitcoin vault doesn’t store actual bitcoin units. Instead, what’s being stored are the owners’ private cryptographic keys that allow the owner to access and transfer his or her bitcoins by matching the key with a public key that’s used to identify the coin on the blockchain. Gaining unauthorized access to someone’s private keys is akin to making off with a gold bar.

    The inexorable rise in bitcoin’s valuation has been marred by notable hacking incidents like the collapse of Mt. Gox, which ushered in the longest bear market in bitcoin’s history. Security fears appear to have subsided as bitcoin’s price has soared to all-time highs, but incidents like the collapse of the DAO have inspired investors with substantial bitcoin wealth to look into protecting it.

    To store the coins, Xapos contracts Deltalis, the company that technically operates the 10,000-square-foot data-center that now inhabits the decommissioned bunker.

    Server racks for banks, and any client who needs secure data processing, fill a cavity dug over 320 meters deep in the granite mountain. The Swiss military built the facility in 1947, and it served as the army’s secret headquarters during the Cold War, Agence-France Presse has reported. Inside, walls covered with detailed maps and ancient radio electronics serve as vestiges of its military past.

    To enter Xapo’s private vault in the Deltalis data center, visitors must endure an exhausting series of security procedures.

    Streiff leads us to a concrete facade jutting out of the mountainside, the bunker’s entrance. We step through about a foot of concrete and enter the lobby. I sign in as I would at any office building, except I also have to present my fingerprints and be photographed. After that I step through a “man-trap”—a phone booth-sized cylinder made of bullet-proof glass that shuts me in until an operator opens the door on the opposite side.

     

    Once through the man-trap, we touch our ID cards and pass through a set of steel revolving doors, then walk down a 100-meter long passageway through the granite. At the end of the passageway are two red steel doors that I’m told can survive a nuclear blast. Streiff invites me to try to close one—my 90 kg (198 pound) frame can’t budge it. “They’re closed every night,” he tells me, showing me how to hang off the handle and use his body’s momentum to gradually swing it shut.

     

    Streiff and Kon are taking me to see Xapo’s “private suite,” an ultra-secure, customized, portion of the data center. We pass through a second man-trap and then end up in front of a nondescript white door. “This is further than anyone outside Xapo has been,” Streiff tells me, as he unlocks it. Inside is a space about the size of a walk-in closet containing a cooling unit, and yet another door. But that’s as far as they’ll let me go, and I’m not allowed to take photographs.

    Security is similarly tight inside the vault. Nobody is allowed the enter the “cold room” where the bitcoins are stored on air-gapped hard drives. To protect against an electromagnetic pulse attack, the cold room is equipped with a Faraday cage, a type of barrier meant to block electromagnetic fields.

    Beyond that door, I rely on what Carlos Rienzi, Xapo’s head of security, tells me later, when I’m back in London. Rienzi chose the vault for Xapo, and he designed the private suite and its security protocols. His “threat model,” as computer security jargon goes, is to protect against attacks from “well-funded terrorist groups or hackers.”

     

    There are two more portals inside the suite: the first leads to an operators’ room, and the second to a “cold room.” The cold room is encircled with steel slabs to form a Faraday cage: a barrier that protects against a possible electromagnetic pulse (EMP) attack that could wipe out the data—and thus the keys to the bitcoin—stored in the room. For digital assets like bitcoin, thick walls and a secret location are not enough. A shield against invisible modes of attack like an EMP bomb must be provided for.

     

    No one, not even the operator, enters the cold room. Its door is sealed with tape—like a crime scene—to ensure it’s not tampered with. The cold room contains hardware, which is never connected to the internet, used to sign bitcoin transactions. Signing a transaction can be performed offline. The operator accesses that hardware using “special cabling,” sending encrypted data to the hardware for signing. Finally, before a transaction can be approved, two more sign-offs, in two other vaults located on separate continents, must be performed.

     

    I ask Rienzi if he feels pretty confident about the security measures he has in place in Switzerland. “We are under attack 24/7,” he tells me, referring to the terrorists and hackers he designed the vault to guard against. “This is not a race. It is a chess game. You have to think about the opponent’s next movement. You can never relax.”

    Of course, all the security measures in the world can’t protect investors from a sudden plunge in the bitcoin price. However, the digital currency’s indomitable – for now – performance has silenced at least one of its most prominent critics. Then said, unlike precious metal specie, one carefully targeted EMP would be all it takes to sever the ownership chain for a long, long time.

    Still, with the digital currency recently reaching yet another record high, despite relentless jawboning and rhetoric by everyone from Jamie Dimon to central bankers to China, we can only imagine the business of protecting bitcoin fortunes is set to boom.

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Oct 18

Today’s News 18th October 2017

  • Carney Reveals Europe's Potential Achilles Heel in Brexit Talks

    This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony.

    Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system?

    When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

    Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.”

    Maybe it’s Europe, not the UK, that needs the transition period most.

    In Carneys view “It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…If one thinks about the implementation of Basel III, we are alone in the current members of the EU in having extensive experience of managing the transition for individual firms of various derivative and risk activities from one jurisdiction back into the UK. That tends to take 2-4 years. Depending on the agreement, we are talking about a substantial amount of activity.”

    Returning to the theme of financial stability, he stated “As a general thing, in an uncooperative outcome, at least initially, the UK will be long financial services. We will have more capacity, capital, individuals, collateral in the UK. The EU will be short of financial services because not all of that capacity will be able to go across. The entire economic impacts are greater for the UK but, from a financial stability perspective, they are greater for the EU.”

    On further questioning, Carney outlined the other two major issues, along with derivatives and wholesale banking, which would be affected, i.e. cross-border provision of insurance (UK domiciled entities would be unable to pay out) and data protection and transfer (there is more data in the UK which is relevant to the EU than vice versa).

    Summing up, Carney stated “These issues are bigger for Europe than they are for us, but they’re material for us.” That comment prompted the following question “In which case we have much more leverage in order to get a deal?” The diplomatic reply was “I wouldn’t want to use financial stability issues as leverage. I wouldn’t want them to be addressed in a bloodless technocratic way in the interests of all the citizens.” Didn’t he just describe Juncker’s modus operandi.

  • Could the Next Fed Appointment Crush the Housing Market?

    As the end of Federal Reserve Chairwoman Janet Yellen’s first term approaches, financial markets are beginning to digest the increased likelihood that US President Donald Trump will opt to appoint a more hawkish individual to the position.  Even though the Federal Reserve is largely expected to continue tightening monetary policy over the coming months as it pares down the balance sheet and contemplates a dovish hike, Trump’s appointment could send shockwaves through the housing market. 

    One of the nastier side effects of operating at or near the zero-bound for interest rates has been the rapid expansion of asset valuations.  Lower interest rates encourage individuals and companies to finance their purchases and then reinvest for more aggressive returns. However, this rapid valuation expansion has not been limited strictly to financialized assets, but also physical assets like real estate.  When seen in the context of the more hawkish leanings of Trump’s recent Fed Chair interviewees, the Administration’s next Fed appointment could pose the risk of a serious correction across asset classes.

    Fed Frontrunners Exhibit More Hawkish Bent

    Financial news outlets have been rife with reports covering the potential picks for Fed Chairman, with two of the leading candidates including Economist John Taylor and former Federal Reserve Governor Kevin Warsh.  Taylor, who currently serves as an economics professor at Stanford University, received high marks from Trump according to a Bloomberg report on the matter.  Trump was purportedly very impressed with his credentials, though unlike other candidates, Taylor is among the fiercest advocates of having policy measures closely reflect economic conditions.  

    The “Taylor Rule”, titled after the economist, stipulates rates should rise when inflation is running at an elevated pace or unemployment is below the “full employment” threshold and should fall in the opposite scenario.  Applying this set of rules to current economic conditions indicates that the key Fed Funds rate should be 3.74% to reflect high levels of employment and rising prices.  At nearly 3 times the present rate, a selection of John Taylor to chair the Fed could rapidly dampen overextended valuations in equities and the housing market.  Already his interview with Donald Trump caused a palpable dip in gold prices considering his overtly hawkish stance.

    By comparison, Kevin Warsh has also advocated for a tighter monetary policy regime, greater deregulation, and a general makeover of the Central Bank.  His attitude towards reform has won him positive mentions as well.  However, his overall degree of hawkishness and stated desire to overhaul the inflation target could put him at the epicenter of a dramatic policy shift that departs from the more cautious approach of current Chair Janet Yellen.

    Factors Outside the Fed’s Control

    While easy to label the rebuilding efforts in Texas and Florida as positive for the overall housing market, this deals more with the supply angle than demand.  On the buy side, a Fed determined to raise interest rates will assuredly presage rising mortgage costs which could in turn subject buyer interest to some downside as financing costs climb.  Though it is tempting to cite the foreclosure rate at an 11-year low as a sign of strength, it does not necessarily imply that the housing market is on stable footing, especially as prices reach past the realm of affordability.

    Considering income growth has kept nowhere near the same pace as price growth for homes according to the monthly Case-Shiller home price index, the lack of affordable solutions may be another factor that hurts demand and concurrently weighs on pricing.  For the year through July, average hourly earnings climbed by 2.50% while housing prices of 20 major US metropolitan areas increased by 5.80% over the same period. With price growth outpacing wages by such a significant margin, the surge in values should be a worrying sign for prospective buyers thinking about diving in while mortgage rates remain not far from record lows.

    However, a more concerning indication apart from unaffordability is the degree to which flipping has reemerged.  The move is eerily reminiscent of the years leading up to the last financial crisis as lending standards are relaxed.  House flipping reached the highest point since 2007 during the second quarter of 2017 and nearly 35% of the transactions were accompanied by mortgages.  Even Goldman Sachs is getting into the flipping game with its recent acquisition of Genesis Capital LLC, a move designed to help the institution build a bigger presence in the lending sphere.  Should mortgage rates rise in tandem with interest rates, it could spell doom for this substantial portion of residential real estate activity.

    The Fed as the Deciding Factor

    With the shortlist for the next Federal Reserve Chair realistically narrowed down to 5 candidates, those under consideration for the job have significantly more hawkish leanings than current Chair Janet Yellen and her predecessor Ben Bernanke.  While ultimately housing prices are a function of the interaction of supply and demand, demand largely behaves inverse to interest rates.  As rates climb, mortgage costs will echo the gains, potentially reducing interest.  Should demand fall, housing prices are likely to experience a correction as well after a near 8-year unabated rise in values.  Considering the unaffordability aspect and the degree of house flipping, the approaching Fed appointment has a higher propensity to cause a downturn compared to another leg of the ongoing housing market rally.

     

     

  • Washington: The Bleeder Of The 'Free World'?

    Authored by Finian Cunningham via The Strategic Culture Foundation,

    Among the many self-flattering epithets it gives itself, the US has always claimed to be the “leader of the free world”. It’s a rather patronizing notion that America views itself as a selfless protector and benefactor of its European allies and others. This fairytale depiction of the world is coming to a rude awakening as American power buffets against the reality of a multi-polar world.

    Less a world leader and more like a blood-sucking leech on international relations.

    We got a clear view of the contradiction in America’s narcissistic mythology with US President Donald Trump’s announcement that he was disavowing the multinational nuclear accord with Iran last Friday.

    Trump didn’t axe American participation in the deal just yet, but he has put it on notice that he or the US Congress may terminate the accord over the next two months. How’s that for high-handed arrogance?

    However, there was near-unanimous push back around the world to Trump’s disparagement of the Joint Comprehensive Plan of Action (JCPOA), which was originally signed in July 2015 by the US, Russia, China, European Union and Iran. All the signatories uniformly rebuked Trump’s attempt to undermine the deal, which is supposed to lift international economic sanctions off Iran in return for curbs on Iran’s nuclear program.

    While Trump accused Iran of “multiple violations” of the accord, all the other stakeholders asserted satisfaction that Iran has in fact fully implemented its obligations to restrict uranium enrichment and weaponization of its nuclear program. The UN watchdog, the International Atomic Energy Agency, also responded to Trump’s claims by reaffirming that eight consecutive monitoring reports have found Iran to be fully compliant with the JCPOA.

    Britain, France and Germany, as well as Russia and China, have firmly said that the nuclear deal – which took two years to negotiate during Barack Obama’s tenure in the White House – is not for renegotiation. A point which was reiterated too by Iranian President Hassan Rouhani.

    The deal is also written into international law, having been ratified unanimously by the UN Security Council back in 2015. In a stinging admonishment to Washington, the EU’s foreign policy chief Federica Morgherini said: “This deal is not a bilateral agreement … The international community, and the European Union with it, has clearly indicated that the deal is, and will, continue to be in place.”

    Russia also denounced Trump’s over-the-top aggressive rhetoric towards Iran. The American president was almost foaming at the mouth when he labelled Iran “the world’s top terror sponsor” and accused Tehran of fueling conflict across the Middle East. Moscow said such rhetoric was unacceptable and inappropriate. Iran dismissed Trump’s accusations as baseless lies.

    Evidently, Russia, China and the Europeans do not share America’s debased caricature of Iran. And who in their right mind would? The hackneyed American allegations against Iran are – as usual – not backed up with any evidence. They rely on bombastic assertion repeated ad nauseam. It is especially ironic and odious for Washington to accuse others of sponsoring terrorism, given the litany of illegal wars it has launched across the Middle East and the steadily emerging evidence of US links to terror groups in Syria’s six-year war.

    Thus, the commitment by all the signatories – except Washington – to the Iranian nuclear deal is a stunning rejection of Trump’s aggressive stance towards Iran.

    Ahead of Trump’s anticipated disavowal of the JCPOA on Friday, Germany’s foreign minister Sigmar Gabriel warned that such a move would “drive a wedge between Europe and the US”. Significantly, Gabriel said that Trump’s spurning of the accord was “driving the EU towards Russia and China”.

    France’s finance minister Bruno Le Maire also warned the US not to interfere in Europe’s growing commercial ties with Iran. He was quoted as saying: “The US must not appoint itself as the world’s police man”.

    Trump’s hostility towards the Iran nuclear treaty has created dissent within his own cabinet. His secretary of state Rex Tillerson and the defense secretary James Mattis are among those who were urging Trump to uphold the JCPOA. In the Congress, there are also many opponents to Trump’s desire to axe the deal, even among his Republican party. It remains to be seen if the Congress will call for new sanctions on Iran over the next 60 days, as Trump has requested. If Congress does, it will mean the US crashing out of the accord.

    In theory, of course, the EU, Russia and China can continue to uphold the nuclear accord with Iran and conduct international trade and investment without the Americans. Russia and China have signed major oil and gas pacts with Iran over the past two years.

    The European states have also lined up huge commercial projects and investments with Tehran in sectors of energy, engineering and infrastructure.  Germany and France in particular have seen their exports to Iran soar since the signing of the JCPOA. With Iran’s 80 million population and vast oil and gas reserves, the Persian nation represents lucrative opportunities for Europe, given too the geographical proximity.

    But the US is still able to exert tremendous power over international banking to the extent that it is having a chilling effect on other countries doing business with Iran. The European states are particularly vulnerable to American pressure.

    In a Bloomberg report, it headlined: ‘Trump's Iran Decision Throws Uncertainty Into Business Plans’.

    The report goes on: “Since a landmark nuclear agreement freed Iran’s economy from crippling economic sanctions, investors eager to tap the country’s energy reserves and its 80 million consumers have waited for signs it was safe to enter the market in full force… Donald Trump is about to signal that they should keep waiting.”

    The US view of Iran is so warped – much of it from relentless propaganda demonizing the Islamic Republic – that it is evidently incapable of normalizing relations as it is obligated to do under the multilateral nuclear deal. Trump ironically accused Iran of “not living up to the spirit of the accord” when it is the US that has worked assiduously to undermine it.

    Since Trump took office, he has reportedly cancelled all export licenses to Iran. His administration and the Congress have slapped more “secondary sanctions” on Iran over allegations that it is destabilizing the Middle East and for its support to Syria’s President Bashar al-Assad.

    These bilateral US sanctions inevitably have a deterrent effect on other nations doing business with Iran out of fear that they may be penalized in the future. Long-term investments over several years are prone to prohibitive risks due to the uncertainty about what Washington’s capricious policy towards Iran will be.

    America’s unilateral, hegemonic conduct – accentuated under Trump – is rapidly alienating other nations. This president seems to operate a “withdrawal doctrine”, as Richard Haass, president of the DC-based Council on Foreign Relations, commented. Trump’s contempt for multilateral obligations peaked with his announcement back in June on backing out of the Paris Climate Accord. It has peaked again with his repudiation of the UN-backed Iran nuclear deal.

    What is becoming increasingly apparent is that US unilateralism is all about pandering to its own selfish interests. Trump’s administration has hit Russia with more sanctions and has warned that European energy companies involved in developing the Nord Stream 2 gas project with Russia’s Gazprom will also be sanctioned. The flagrant agenda here is for the US to replace Russia as Europe’s gas supplier, selling its own more expensive fuel to Europe.

    Likewise US hostility and sanctions on Iran are not just limited to its own perverse policies.

    Washington also wants to block others from also doing legitimate business and trade with Iran. For the Europeans struggling to boost their flagging economies, the impediments being thrown in their way by the US over Iran are another source of resentment towards American unilateralism.

    This is not the idealized conduct of the self-proclaimed “leader of the free world”. America is increasingly seen as the “bleeder” – a declining power which wants to suck the economic lifeblood from others in order to sustain itself. This untenable American unipolar craving is inevitably hastening the reality of a multipolar world, as Europeans in particular realize that they can no longer afford to prop up America’s economic obesity.

  • Ethereum (ETHUSD) Daily MACD Trying to Negatively Cross

    Ethereum (ETHUSD) Weekly/Daily

    Ethereum (ETHUSD) sold off sharply yesterday and continues sliding in today’s Asia morning, arguably breaking below ascending wedge support (on the weekly/daily chart).  ETHUSD is now just a day’s volatility away from the psychologically key 300 whole figure level.  A ETHUSD break below 300 in the next day or so would likely confirm the first red weekly candle in 5 weeks.  Bears will be patiently awaiting any deeper slide in the next few weeks to below the September low, which would signal the start of a downtrend of lower lows.  The October high so far is lower than the August high, which was also lower than the June high.  Weekly RSI, Stochastics and MACD are showing signs of fatigue, and are increasingly weighed down by the already weak daily equivalents.

     

    ETHUSD (Ethereum) Weekly Technical Analysis

     

    ETHUSD (Ethereum) Daily Technical Analysis

     

    Bitcoin (BTCUSD) Weekly/Daily

    Bitcoin (BTCUSD) has defied bears so far, and remains in a strong uptrend.  Nevertheless, BTCUSD appears to have made a short-term top just below 6000 as leading Alt Coin Ethereum (ETHUSD) increasingly weakens.  The tiring daily RSI and Stochastics, and soon to negatively cross daily MACD do not bode well for BTCUSD bulls today.  Nevertheless, upchannel support (on the daily and weekly chart) coincides with the psychologically key 5000 whole figure level and should contain the pullback these next few days assuming the weekly MACD blue line has not flattened and turned lower by then.

    BTCUSD (Bitcoin) Weekly Technical Analysis

     

    BTCUSD (Bitcoin) Daily Technical Analysis

    Click here for today’s technical analysis on Cocoa

    Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and cryptocurrency markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

  • Trump Plans Massive Increase In Federal Immigration Jails, Report

    Following a 43% year over year surge in illegal immigrant arrests between January 22, 2017 and September 9, 2017, the USA Today is reporting that the Trump administration is quietly reaching out to private prison operators with requests to house some 4,000 detainees of the Immigration and Customs Enforcement Agency (ICE).

    The Trump administration is planning an increase in federal immigration jails across the country for the thousands of additional undocumented immigrants its agents are arresting.

     

    In recent weeks, the Immigration and Customs Enforcement (ICE) agency has put out requests to identify privately-run jail sites in Chicago, Detroit, St. Paul, Salt Lake City and southern Texas, according to notices published on a federal contracting website. It did not publicly announce its plans to house 4,000 more detainees at the facilities.

     

    The detention expansion would represent the latest step in President Trump’s efforts to crack down on illegal immigration.

    And here is an example of one Request for Information posted to FedBizOpps.gov for an “existing, renovation or new construction” facility in South Texas.

    Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE) is issuing a Request for Information (RFI) to identify one or more facilities (existing, renovation, or new construction) to be turnkey ready and able to provide housing, medical care, guard services, meals, and the day to day needs for approximately 1000 ICE adult male and adult female detainees within 50 ground-commute miles of Interstate 35. If utilizing multiple facilities, there may be no less than 200 beds per facility. The preference is for facilities to be dedicated for ICE detainees exclusively, but shared facilities may be considered. ICE anticipates issuing a single award, indefinite delivery – indefinite quantity (IDIQ) contract for this requirement.

     

    This RFI is issued to identify potential sources that can provide the physical structure, equipment, personnel, and vehicles in a properly staffed and secure environment under the authority of the Immigration and Nationality Act, as amended. The intent of this RFI is to obtain market information in accordance with FAR 15.201(e) for planning purposes and to determine appropriate strategies to meet the Agency’s requirements. If the results of market research and other factors indicate that it is in the Government’s best interest, ICE may release Requests for Proposals (RFP) for these potential requirements in the near future. However, this RFI is issued solely for information and planning purposes and does not constitute a Request for Proposal (RFP) or a commitment to an RFP in the future. Responses to this notice are not considered offers and cannot be accepted by the Government to form a binding contract. Responders are advised that the Government will not pay for any information or administrative cost incurred in response to this announcement and information submitted in response to this RFI will not be returned.

    Immigration

    Currently, ICE houses anywhere between 31,000 and 41,000 detainees each day in federal prisons, privately-operated facilities and local jails.

    Of course, the director of policy studies at the Center for Immigration Studies said it’s by no means a coincidence that 4 out of the 5 cities identified by the Trump administration for new detention facilities are in so-called “santuary cities” where local police forces have been instructed to not cooperate with federal ICE agents.

    Trump supporters say the new jails are necessary to tackle an estimated 11 million undocumented immigrants.

     

    Jessica Vaughan, director of policy studies at the Center for Immigration Studies, which backs Trump’s immigration enforcement, noted that four of the cities identified for new jails — Chicago, Detroit, St. Paul and Salt Lake City — are all “sanctuary cities.”

     

    One of the core disputes is that some cities refuse to detain undocumented immigrants in their local jails for federal immigration agents.

     

    “ICE cannot rely on local law enforcement agencies to cooperate with them in holding deportable criminal aliens, so they have to acquire their own space that they control,” Vaughan said. “This is very encouraging.”

     

    ICE still has a long way to go before it can open any facilities. The notices invite private companies to provide information on possible locations, and whether it would be necessary to build new facilities or renovate existing ones.

    Meanwhile, reports of the new facilities was welcome news to shareholders of GEO Group, one of the largest private pension operators in the country, which has rallied over 60% since Trump’s election and is one of the most likely recipients of any new awards.

  • If North Korea Can Kill 90% Of Americans In A Year, Why Did DoD Just Defund The Congressional EMP Commission?

    Authored by Daisy Luther via The Organic Prepper blog,

    At a House hearing yesterday, experts warned members of Congress that a North Korean EMP attack could kill 90% of Americans within one year, calling it an “existential threat.”

    But despite this looming crisis, the Department of Defense has decided now was the time to defund the Congressional committee that has been studying the threat since 2001.

    The Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack has been around for nearly two decades, but their efforts have mostly been restricted to making sure that the U.S. national command authority and U.S. strategic forces could continue to function. Meanwhile “no major efforts were then thought necessary to protect critical national infrastructures.” Apparently, the plan was that our defense would be so effective, no further steps were needed.

    This has all changed with recent strides in nuclear weaponry by North Korea. The results of an EMP strike could be apocalyptic.

    With the development of small nuclear arsenals and long-range missiles by new, radical U.S. adversaries, beginning with North Korea, the threat of a nuclear EMP attack against the U.S. becomes one of the few ways that such a country could inflict devastating damage to the United States. It is critical, therefore, that the U.S. national leadership address the EMP threat as a critical and existential issue, and give a high priority to assuring the leadership is engaged and the necessary steps are taken to protect the country from EMP. (source)

    What a lot of people didn’t know was that just a couple of weeks ago, Sept. 30, 2017, the Department of Defense terminated the funding for the EMP Commission. At the same time, “North Korea detonated an H-Bomb that it plausibly describes as capable of “super-powerful EMP” attack and released a technical report “The EMP Might of Nuclear Weapons” accurately describing what Russia and China call a “Super-EMP” weapon.”  The EMP Commission has been urging EMP preparedness on a national level for 17 years, but no one has been listening, despite alarming strides toward that goal in just the past six months.

    Recent events have proven the EMP Commission’s critics wrong about other highly important aspects of the nuclear missile threat from North Korea:

    • Just six months ago, most experts thought North Korea’s nuclear arsenal was primitive, some academics claiming it had as few as 6 A-Bombs. Now the intelligence community reportedly estimates North Korea has 60 nuclear weapons.
    • Just six months ago, most experts thought North Korea’s ICBMs were fake, or if real could not strike the U.S. mainland. Now the intelligence community reportedly estimates North Korea’s ICBMs can strike Denver and Chicago, and perhaps the entire United States.
    • Just six months ago, most experts thought North Korea was many years away from an HBomb. Now it appears North Korea has H-Bombs comparable to sophisticated U.S. two-stage thermonuclear weapons.
    • Just six months ago, most experts claimed North Korean ICBMs could not miniaturize an ABomb or design a reentry vehicle for missile delivery. Now the intelligence community reportedly assesses North Korea has miniaturized nuclear weapons, and has developed reentry vehicles for missile delivery, including by ICBMs that can strike the U.S.1

    After massive intelligence failures grossly underestimating North Korea’s long-range missile capabilities, number of nuclear weapons, warhead miniaturization, and proximity to an H-Bomb, the biggest North Korean threat to the U.S. remains unacknowledged—nuclear EMP attack.  (source)

    So, for 17 years, this group has been ringing the warning bell and no one has been listening. Now that the threat is at our doorstep, their funding has been pulled. Something doesn’t add up.

    The technology exists for a North Korean EMP attack

    A successful attack doesn’t even require a Super-EMP weapon. The Commission concluded that even a primitive weapon could successfully render our infrastructure obsolete.

    “Therefore, terrorists or state actors that possess relatively unsophisticated missiles armed with nuclear weapons may well calculate that, instead of destroying a city or military base, they may obtain the greatest political-military utility from one or a few such weapons by using them—or threatening their use—in an EMP attack.” (source)

    But that isn’t the worst of in. In 2004, two Russian generals told the EMP Commission that their design for a Super-EMP weapon was “accidentally transferred to North Korea.”

    Let that sink in. Somehow, North Korea has had their hands on the design for an incredibly powerful EMP weapon for more than a decade. The report says:

    In 2004, two Russian generals, both EMP experts, warned the EMP Commission that the design for Russia’s Super-EMP warhead, capable of generating high-intensity EMP fields over 100,000 volts per meter, was “accidentally” transferred to North Korea. They also said that due to “brain drain,” Russian scientists were in North Korea, as were Chinese and Pakistani scientists according to the Russians, helping with the North’s missile and nuclear weapon programs.

     

    In 2009, South Korean military intelligence told their press that Russian scientists are in North Korea helping develop an EMP nuclear weapon. In 2013, a Chinese military commentator stated North Korea has Super-EMP nuclear weapons.

     

    Super-EMP weapons are low-yield and designed to produce not a big kinetic explosion, but rather a high level of gamma rays, which generates the high-frequency E1 EMP that is most damaging to the broadest range of electronics. North Korean nuclear tests, including the first in 2006, whose occurrence was predicted to the EMP Commission two years in advance by the two Russian EMP experts, mostly have yields consistent with the size of a Super-EMP weapon. The Russian generals’ accurate prediction about when North Korea would perform its first nuclear test, and of a yield consistent with a Super-EMP weapon, indicates their warning about a North Korean Super-EMP weapon should be taken very seriously. (source)

    The report says that while everyone is focused on the future, when Pyongyang may develop “highly reliable intercontinental missiles, guidance systems, and reentry vehicles”, a North Korean EMP attack wouldn’t require that level of accuracy.

    EMP attack does not require an accurate guidance system because the area of effect, having a radius of hundreds or thousands of kilometers, is so large. No reentry vehicle is needed because the warhead is detonated at high altitude, above the atmosphere. Missile reliability matters little because only one missile has to work to make an EMP attack against an entire nation. (source)

    It would be a strategic initial strike to take down the American power grid to disable the maority of the country before undertaking any other form of attack.

    How would a North Korean EMP attack be likely to occur?

    Potential vehicles of attack are submarines or freighters, which could launch an EMP weapon to the relatively low altitude of 30 kilometers over the United States.  Unsettlingly, “even a balloon-lofted warhead detonated at 30 kilometers altitude could blackout the Eastern Electric Power Grid that supports most of the population and generates 75 percent of U.S. electricity.”

    A more likely choice would be a satellite.

    A Super-EMP weapon could be relatively small and lightweight, and could fit inside North Korea’s Kwangmyongsong-3 (KMS-3) and Kwangmyongsong-4 (KMS-4) satellites. These two satellites presently orbit over the United States, and over every other nation on Earth– demonstrating, or posing, a potential EMP threat against the entire world.

     

    North Korea’s KMS-3 and KMS-4 satellites were launched to the south on polar trajectories and passed over the United States on their first orbit. Pyongyang launched KMS-4 on February 7, 2017, shortly after its fourth illegal nuclear test on January 6, that began the present protracted nuclear crisis with North Korea.

     

    The south polar trajectory of KMS-3 and KMS-4 evades U.S. Ballistic Missile Early Warning Radars and National Missile Defenses, resembling a Russian secret weapon developed during the Cold War, called the Fractional Orbital Bombardment System (FOBS) that would have used a nuclear-armed satellite to make a surprise EMP attack on the United States. (source)

    The report goes on to explain that our defense systems are completely unready for any of these scenarios.

    There’s a lot of misinformation about the threat of EMPs.

    The report counters a great deal of misinformation about the threat of EMPs. While no one really wants to consider the devastating effects, many “uninformed persons posturing as experts” completely deny the possibility. However, the Commission says that the empirical basis for an EMP attack is better established than that of a cyber attack.

    They offered numerous examples of hard data regarding the effects of EMPs.

    • The U.S. STARFISH PRIME high-altitude nuclear test in 1962 over Johnston Island that generated an EMP field over the Hawaiian Islands, over 1,300 kilometers away, causing widespread damage to electronic systems.
    • Six Russian EMP tests 1961-1962 over Kazakhstan that with a single weapon destroyed electric grids over an area larger than Western Europe, proving this capability six times.
    • 30 years (1962-1992) of U.S. underground nuclear testing that included collecting data on EMP effects.
    • Over 50 years of testing by EMP simulators, still ongoing, including by the Congressional EMP Commission (2001-2008) that proved modern electronics are over 1 million times more vulnerable to EMP than the electronics of 1962.
    • “Radio Frequency Weapons were used in separate incidents against the U.S. Embassy in Moscow to falsely set off alarms and to induce a fire in a sensitive area.”
    • “In Kzlyar, Dagestan, Russia, Chechen rebel commander Salman Raduyev disabled police radio communications using RF transmitters during a raid.”
    • “In June 1999 in Bellingham, Washington, RF energy from a radar induced a SCADA malfunction that caused a gas pipeline to rupture and explode.”
    • “In 1999, a Robinson R-44 news helicopter nearly crashed when it flew by a high-frequency broadcast antenna.”
    • North Korea used a Radio Frequency Weapon, purchased from Russia, to attack airliners and impose an “electromagnetic blockade” on air traffic to Seoul, South Korea’s capital. The repeated attacks by RFW also disrupted communications and the operation of automobiles in several South Korean cities in December 2010; March 9, 2011; and April-May 2012.(source)

    The threat is real. So, again, why would the Department of Defense withdraw funding from the Commission that wants to take steps to harden our infrastructure against this possibility?

    What would the aftermath of an EMP attack look like?

    The Commission cited several examples of real-world electrical grid failures and their catastrophic consequences.

    • The Great Northeast Blackout of 2003–that put 50 million people in the dark for a day, contributed to at least 11 deaths, and cost an estimated $6 billion—originated from a single failure point when a powerline contacted a tree branch, damaging less than 0.0000001 (0.00001%) of the system.
    • The New York City Blackout of 1977, that resulted in the arrest of 4,500 looters and injury of 550 police officers, was caused by a lightning strike on a substation that tripped two circuit breakers.
    • The Great Northeast Blackout of 1965, that effected  (sic) 30 million people, happened because a protective relay on a transmission line was improperly set.
    • India’s nationwide blackout of July 30-31, 2012—the largest blackout in history, effecting (sic) 670 million people, 9% of the world population—was caused by overload of a single high-voltage powerline.
    • India’s blackout of January 2, 2001—effecting 226 million people—was caused by equipment failure at the Uttar Pradesh substation.
    • Indonesia’s blackout of August 18, 2005—effecting 100 million people—was caused by overload of a high-voltage powerline.
    • Brazil’s blackout of March 11, 1999—effecting 97 million people—was caused by a lightning strike on an EHV transformer substation.
    • Italy’s blackout of September 28, 2003—effecting 55 million people—was caused by overload of two high-voltage powerlines.
    • Germany, France, Italy, and Spain experienced partial blackouts on November 4, 2006 effecting (sic)10-15 million people—from accidental shutdown of a high-voltage powerline.
    • The San Francisco blackout in April 2017 was caused by the failure of a single high voltage breaker (source)

    My mind immediately goes to the down-grid disaster occurring right now in Puerto Rico.

    The death toll from such a disaster would be unprecedented:

    The result could be to shut down the U.S. electric power grid for an indefinite period, leading to the death within a year of up to 90 percent of all Americans—as the EMP Commission testified over eight years ago.

    We’re talking about the deaths of more than 270 million people.

    President Trump signed an Executive Order in May called “Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure” which will hopefully harden our country against both cyber attacks and EMPs. The Commission provided a list of actionable suggestions on pages 11-14 of this report, but will the steps be undertaken before it’s too late? Especially now that they’re defunct.

    How do you prep for something so massive?

    It doesn’t seem as though the government is very interested in taking steps to protect our power grid. We can look at what is happening in Puerto Rico as a glimpse of the apocalyptic future that would follow such an attack. Restoring power after an EMP could take multiple years, and things in America would never be the same after a sustained change in our way of life.

    The result of an EMP attack would be a protracted blackout that would put at risk the lives of millions of people. Climate control, a lack of off-grid survival skills, looting, lawlessness, lack of medication, starvation, waterborne disease – all of these threats to our survival cannot be overlooked. If you haven’t read the book One Second After, I recommend you do so for a fictionalized yet nonetheless realistic look at life after the grid. If that doesn’t inspire you to prepare for such an event, nothing will.

    The best resource for preparing for an attack like this is Disaster Preparedness for EMP and Solar Storms, by Dr. Arthur T. Bradley. A NASA scientist, Dr. Bradley has spent years studying the aftereffects of such a catastrophe. His book dispels many myths an provides realistic, lifesaving information. My personal plan is a low-tech one – I am not spending a fortune on generators and fancy gadgets I wouldn’t be able to use once the fuel runs out.

    Preparing for something this massive is beyond the scope of this article. I strongly encourage you to begin researching and create your own low-tech plan. Don’t put it off until you get your perfect homestead in the boondocks or you talk your family members into it. Disasters like this don’t wait for a convenient time – in fact, strategically speaking, the less convenient it is, the more the attacker benefits.

    If World War 3 starts off with an EMP, it renders many of our plans moot. We have been warned in the strongest terms possible, but will it be enough?

  • Chicago Politician Pushes Ban On Businesses Banning Cash

    In July, Visa officially entered the global 'war on cash', adding to a long list of academics, elites, and bankers urging the removal of one of the last freedoms 'for the good of the rest of us'. However, if Alderman Edward Burke has his way, that 'war on cash' will end in Chicago after he submitted an ordinance at last week's City Council meeting to ban businesses from banning cash.

    According to the ordinance, "credit card giant Visa announced it is 'launching a major effort to encourage businesses to go cashless," through a campaign called the Visa Cashless Challenge offering $500,000 for 50 businesses to go cash-free.

    As DNAInfo.com reports, the ordinance cites Argo Tea, SweetGreen, Epic Burger and Goddess and the Baker as Chicago businesses that have already gone cashless, but the stores themselves don't seem to have had any issues…

    Xuan Tea, a shop at 1816 N. Milwaukee Ave. in Bucktown, opened in September and is credit card-only.

    "It's been working out fine. Some are taken aback initially, but we haven't had any problems with it," manager Will Quanstrom said.

     

    "Mostly everyone has a credit card in their pocket, even if they're just out for a jog. It's easier and it's simpler for us. We don't have to go to the bank, or count drawers out." The tea shop has a sign at the front counter that says it only takes credit cards.

    Nevertheless, as DNAInfo.com notes, the ordinance, however, points out that credit card companies typically tack on a 1 percent to 3 percent fee on transactions, "a business cost typically passed on to consumers via increased pricing."

     Burke called his ordinance a "fair and equal access" issue and calls out Visa's repression of the poor and young…

    "A 'no cash' sign is a 'not welcome' sign for many without ready access to credit, including those who are low- or fixed-income, homeless, undocumented, young or victims of identity theft," he said.

     

    It adds that those under 18 can't apply for credit cards, making a cash ban "de facto age discrimination," while many low-income families can't even afford to open a bank account.

    The ordinance would make it illegal to decline cash as payment at any business in retail sales or food and drink, under the penalty of fines starting at $1,000 and up to $2,500 a day.

    *  *  *

    As we noted previously, this ongoing push for a cashless society in EuropeAsia, and the Americas is about much more than just phasing out paper money – it’s about central planners solidifying control over the public’s wealth. This ongoing merger of corporate and government interests is the definition of crony capitalism. Regardless of the blatant collusion, the choices individuals make will still ultimately decide the direction for the future. Buying material goods on credit has become a lifestyle for millions, but the long-term costs of those decisions must be understood if there’s any chance for progress.

    Americans have made a huge mistake by running up a staggering $1 trillion dollars in credit card debt with an average interest rate of over 16%. Thanks to the Federal Reserve system, companies like Mastercard, Discover, and American Express can issue bonds paying extremely low-interest rates to the investors while simultaneously lending that money out to credit card holders at sky high rates. Companies will always take advantage of opportunities to increase profits, but the people’s willingness to keep borrowing from them is at the core of the problem.

    Access to cheap capital has been extended to the largest corporations for over a decade, but when it comes to small businesses or individuals there is a completely different set of standards. The pressure to consistently increase revenues and stock prices has led to an unnatural parasitic relationship between these companies and their customers. Cash is one of the last options that allows people a way to avoid dealing with this kind of shakedown.

    More than 30% of all payments in the U.S. are still conducted in cash, but financial intermediaries that charge processing fees are joining with the State and central banks to ensure the public has no room to innovate.

  • FBI Uncovered Russian Bribery Plot Before Obama Approved Uranium One Deal, Netting Clintons Millions

    As the mainstream media continues to obsess over $100,000 worth Facebook ads allegedly purchased by Russian spies in 2016 seeking to throw the presidential election, we’re almost certain they’ll ignore the much larger Russian bombshell dropped today in the form of newly released FBI documents that reveal for the very first time that the Obama administration was well aware of illegal bribery, extortion and money laundering schemes being conducted by the Russians to get a foothold in the atomic energy business in the U.S. before approving a deal that handed them 20% of America’s uranium reserves…and resulted in a windfall of donations to the Clinton Foundation.

    As we pointed out last summer when Peter Schweizer first released his feature documentary Clinton Cash, the Uranium One deal, as approved by the Obama Administration, netted the Clintons and their Clinton Foundation millions of dollars in donations and ‘speaking fees’ from Uranium One shareholders and other Russian entities.

    Russian Purchase of US Uranium Assets in Return for $145mm in Contributions to the Clinton Foundation – Bill and Hillary Clinton assisted a Canadian financier, Frank Giustra, and his company, Uranium One, in the acquisition of uranium mining concessions in Kazakhstan and the United States.  Subsequently, the Russian government sought to purchase Uranium One but required approval from the Obama administration given the strategic importance of the uranium assets.  In the run-up to the approval of the deal by the State Department, nine shareholders of Uranium One just happened to make $145mm in donations to the Clinton Foundation.  Moreover, the New Yorker confirmed that Bill Clinton received $500,000 in speaking fees from a Russian investment bank, with ties to the Kremlin, around the same time.  Needless to say, the State Department approved the deal giving Russia ownership of 20% of U.S. uranium assets 

    Now, thanks to newly released affidavits from a case that landed one of the Russian co-conspirators, Vadim Mikerin, in jail, we learn that not only was the Obama administration aware the Russians’ illegal acts in the U.S. but it may have also been fully aware that “Russian nuclear officials had routed millions of dollars to the U.S. designed to benefit former President Bill Clinton’s charitable foundation during the time Secretary of State Hillary Clinton served on a government body that provided a favorable decision to Moscow.”  Per The Hill:

    Before the Obama administration approved a controversial deal in 2010 giving Moscow control of a large swath of American uranium, the FBI had gathered substantial evidence that Russian nuclear industry officials were engaged in bribery, kickbacks, extortion and money laundering designed to grow Vladimir Putin’s atomic energy business inside the United States, according to government documents and interviews.

     

    Federal agents used a confidential U.S. witness working inside the Russian nuclear industry to gather extensive financial records, make secret recordings and intercept emails as early as 2009 that showed Moscow had compromised an American uranium trucking firm with bribes and kickbacks in violation of the Foreign Corrupt Practices Act, FBI and court documents show.

     

    They also obtained an eyewitness account — backed by documents — indicating Russian nuclear officials had routed millions of dollars to the U.S. designed to benefit former President Bill Clinton’s charitable foundation during the time Secretary of State Hillary Clinton served on a government body that provided a favorable decision to Moscow, sources told The Hill.

    Clinton Cash

    Of course, when Schweizer’s book first made Uranium One a political hot topic in 2015, both the Obama administration and the Clintons defended their actions and insisted there was no evidence that any Russians or donors engaged in wrongdoing and there was no national security reason for anyone to oppose the deal.  That said, we now know that the FBI was aware of wrongdoing going back to at least April 2009 even though the deal wasn’t approved until October 2010.

    But FBI, Energy Department and court documents reviewed by The Hill show the FBI in fact had gathered substantial evidence well before the committee’s decision that Vadim Mikerin — the main Russian overseeing Putin’s nuclear expansion inside the United States — was engaged in wrongdoing starting in 2009.

     

    The first decision occurred in October 2010, when the State Department and government agencies on the Committee on Foreign Investment in the United States unanimously approved the partial sale of Canadian mining company Uranium One to the Russian nuclear giant Rosatom, giving Moscow control of more than 20 percent of America’s uranium supply.

     

    In 2011, the administration gave approval for Rosatom’s Tenex subsidiary to sell commercial uranium to U.S. nuclear power plants in a partnership with the United States Enrichment Corp. Before then, Tenex had been limited to selling U.S. nuclear power plants reprocessed uranium recovered from dismantled Soviet nuclear weapons under the 1990s Megatons to Megawatts peace program.

    And guess who ran the FBI’s investigation into this particular Russian plot?  As The Hill notes, the Mikerin probe began in 2009 under Robert Mueller, now the special counsel in charge of the Trump case, and ended in late 2015 under the controversial, former FBI Director James Comey who was relieved of his duties by President Trump.

    Ironically, when the DOJ finally arrested Mikerin in 2014, following 5 years of investigations in a massive international bribery and money-laundering scheme, rather than publicly celebrate, they seemingly swept it under the rug.  In fact, there was no public release concerning the case at all until a full year later when the DOJ announced a plea deal with Mikerin right before labor day.

    Bringing down a major Russian nuclear corruption scheme that had both compromised a sensitive uranium transportation asset inside the U.S. and facilitated international money laundering would seem a major feather in any law enforcement agency’s cap.

     

    But the Justice Department and FBI took little credit in 2014 when Mikerin, the Russian financier and the trucking firm executives were arrested and charged.

     

    The only public statement occurred an entire year later when the Justice Department put out a little-noticed press release in August 2015, just days before Labor Day. The release noted that the various defendants had reached plea deals.

     

    By that time, the criminal cases against Mikerin had been narrowed to a single charge of money laundering for a scheme that officials admitted stretched from 2004 to 2014. And though agents had evidence of criminal wrongdoing they collected since at least 2009, federal prosecutors only cited in the plea agreement a handful of transactions that occurred in 2011 and 2012, well after the Committee on Foreign Investment in the United States’s approval.

     

    The final court case also made no mention of any connection to the influence peddling conversations the FBI undercover informant witnessed about the Russian nuclear officials trying to ingratiate themselves with the Clintons even though agents had gathered documents showing the transmission of millions of dollars from Russia’s nuclear industry to an American entity that had provided assistance to Bill Clinton’s foundation, sources confirmed to The Hill.

    Perhaps this is what the “most transparent” President in history meant when he told Medvedev that he would have “more flexibility” after his 2012 election.

     

    Below are the affidavits released today:

     

     

  • US Army Is Preparing For Decades Of Hybrid Wars

    Released on Monday, the US Army’s Training and Doctrine Command, or TRADOC, drafted a new strategy for how US ground forces will operate, fight, and campaign successfully across multiple domains—space, cyberspace, air, land, maritime—against all enemies in the 2025-2040 timeframe.

    The new strategy calls for “super-empowered individuals and small groups”, who are mobile and can simultaneously fight in every domain of warfare, which will replace the conventional large units like today.

    Since the end of the Cold War, US and Joint Forces have enjoyed considerable amounts of freedom across all domains. The purpose of this new concept is to prepare the US for an increasing number of actors who challenge US global hegemony.

    The reported titled “Multi-Domain Battle: Evolution of Combined Arms for the 21st Century, 2025-2040?, repeats one key point over and over again according to Defense One.

    Adversaries will make life as difficult as possible for U.S. troops by not declaring themselves to be the enemy, or, as the concept puts it, by “combining regular and irregular forces with criminal and terrorist enterprises to attack the Joint Force’s vulnerabilities while avoiding its strength.”

    The world got a whiff of this new concept in Libya, Syria, and Ukraine through the use of local paramilitaries and proxy forces. “Adversaries have blurred the distinction between actions ‘below armed conflict’ and ‘conflict,’ enabling the achievement of strategic military objectives short of what the U.S. traditionally considers ‘war,” the report says.

    Defense One then summarizes four more reasons why the US Army has to evolve onto a multi-domain battlefield or face the risk of losing America’s global empire:

    1. The exponential speed of information technology. U.S. forces can’t assume that they will have the best phones, drones, or computer hardware on the battlefield. As computers get smaller, cheaper, and more widely available, U.S. tech advantages will disintegrate.
    2. Warfare will be much more urban. Some 60 percent (conservatively) of the Earth’s population will live in cities in 2030, many in megacities with populations of more than 10 million. This is where adversaries will try to engage U.S. forces, not in open fields or deserts where today’s Army and it senormous battle vehicles have the advantage.
    3. The internet will be a key aspect of the battlefield, not just in terms of trading cyber attacks with enemy hackers but in the need to constantly and expertly shape global opinion about the conflict. Troll armies spreading fake news and disinformation, coupled with enough social-media traffic to overwhelm open-source analysts, could “complicate the [Army’s] ability to gain and maintain an accurate, up-to-date, intelligence-driven understanding of the situation, as well as control of the information environment,” the document says.
    4. Every bad guy becomes The Joker. The Army sees a rise of “Super-empowered individuals and small groups” who can “use access to cyberspace, space, and nuclear, biological, radiological, and chemical weapons of mass effects to change the battlespace calculus and redefine the conditions of conflict resolution.” Read that to mean: lone wolves and minescule teams with the power to rival many of today’s nation-states.

    Glancing at the American Empire, there are nearly 800 military bases in more than 70 countries and territories abroad. To maintain this global force,  the US Senate approved a $700 billion military bill this year. The amount eclipses $549 billion military spending cap established by 2011 Budget Control Act.

    Summing up, America’s Army is going through a drastic overhaul after the failed conventional wars in the Middle East. The idea of small and decentralized nodes loosely connected operating across multiple domains–space, cyberspace, air, land, maritime seems to be today’s answer for tomorrow’s warfare. The concept has already been implemented in Libya, Syria, and Ukraine with not the best results. Meanwhile, as the American Empire unravels, the military–industrial complex is set to profit from years of war, as outlined in the report.

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Oct 17

Today’s News 17th October 2017

  • Road To World War 3 Unveiled: Is China Planning To Deploy Its Army Against North Korea?

    Authored by Mac Slavo via SHTFplan.com,

    New photos of a recent highway construction in China could be part of a contingency plan to invade North Korea or amass a huge army on their shared border.

    Experts fear this newly uncovered plot could stoke the fires of World War 3, inevitably involving the United States.

    According to The Express UK, communist China has traditionally been North Korea’s closest ally, but Kim Jong-un’s continued nuclear and ballistic missile tests have tested Beijing’s patience on the rising tensions worldwide. These new revelations also come as North Korea was spotted transporting 30 Scud missiles from Hwangju, south of the capital Pyongyang, to Nampo, on the Korea Bay coast opposite China.

    New photos have emerged and they reveal that the Communist superpower is building a six-lane highway in its desolately populated northeast on route to North Korea.

    With most Chinese peasants not able to afford the luxury of a car, the construction of the G1112 Ji’an–Shuangliao Expressway, has led experts to believe it will be used for quick deployment of tanks and troops to its North Korean border.

    The photos obtained by Daily Star Online show Chinese construction workers digging tunnels through the mountains and massive cranes constructing bridges over rivers.

    Chinese workers construct a six lane highway to North Korea’s border.

    Scott Snyder, senior fellow for Korea studies and director of the program on US-Korea policy at the Council on Foreign Relations, told Daily Star Online:

    “China’s Jilin province has even budgeted and paid for improvements in road infrastructure inside some parts of North Korea in recent years in order to improve logistical access to the Rason port inside North Korea.”

    Dean Cheng, an Asia security expert at the Heritage Foundation, a think tank in Washington, said Beijing would have a ”vast array” of contingency plans involving military options to seize Kim Jong-un’s nuclear weapons. And just last week, a highly respected security think tank warned that the . In the bombshell report, the Rand Corporation said any conflict between North Korea and South Korea and the US would quickly spiral into World War 3.

    If it’s decided upon by a nation to “take out” the North Korean dictator, Kim Jong-Un, American and Chinese troops would then rush across the border in a race to take control of the tyrant’s nuclear weapons and missile facilities colliding in a clash between China and the US, effectively spawning WW3. A whopping 85% of North Korea’s nuclear facilities are believed to be located within 62 miles of the Chinese border.

     last month. The communist nation said that Donald Trump had made a “serious miscalculation” over North Korea. Photos uncovered by a North Korean monitoring site suggested . But there were other confusing and conflicting signs that  next week.

    It looks like the world is steamrolling its way to a third world war.

     

  • Iranian Parliament Speaker Says US "Will Regret" Withdrawing From Nuclear Deal

    Iranian Parliament Speaker Ali Larijani said Monday that the US would face stiff consequences if it withdraws from the JCPA – informally known as the Iran deal.

    Speaker of Iran's parliament Ali Larijani said that Iran "had a developed plan and a certain law,” should the United States withdraw from the agreement on Tehran's nuclear program, adding that Washington would "regret it,” Sputnik reported.

    Larijani made the statement in St. Petersburg where he was taking part in a parliamentary forum.

    President Donald Trump elicited cries of protest from the US’s co-signers of the pact, after saying last week that his administration had decided not to certify Iran's compliance with the deal and would instead leave the final decision up to Congress. The Trump administration has repeatedly insisted that, while Iran is technically complying with the terms of the pact, it is more broadly violating the “spirit” of the agreement by allegedly continuing to fund terrorist groups and developing and testing ballistic missiles.

    Trump’s speech, in which he also accused Iran of being a threat to global security, elicited howls of disapproval from the US’s partners in negotiating the deal.

    "We encourage the US Administration and Congress to consider the implications to the security of the US and its allies before taking any steps that might undermine the JCPOA, such as re-imposing sanctions on Iran lifted under the agreement," French President Emmanuel Macron, German Chancellor Angela Merkel and British Prime Minister Theresa May said in a joint statement.

    In Brussels, Federica Mogherini, the EU foreign policy chief, said the Iran deal is an international agreement and "it is not up to any single country to terminate it."

    In a statement after Trump's speech, Russia's foreign ministry said there was no place in international diplomacy for "threatening" and "aggressive" rhetoric, adding that such methods were doomed to fail.

    "It is a hangover from the past, which does not correspond to modern norms of civilised dealings between countries," the statement said.

    "We viewed with regret the decision of the US President not to confirm to Congress that Iran is fulfilling in good faith" the nuclear deal, it added.

    During an appearance on CNN’s “State of the Union” on Sunday, Secretary of State Rex Tillerson claimed the US is trying to stay in the Iran nuclear deal while hoping to achieve more from it, days after President Donald Trump threatened to pull the US out of the agreement.

    The 2015 deal, reached between Iran and the United States, Britain, France, Germany, Russia and the European Union, saw Tehran curtailing its nuclear program in exchange for the easing of crippling economic sanctions.

    In an amusing development, Trump has urged lawmakers to adopt a bill co-sponsored by Senator “Little” Bob Corker (who has recently traded barbs with the president after saying he wouldn’t seek another term in the senate) that would impose so-called “triggers” like Iran continuing its provocative missile launches, or advancing its nuclear-enrichment capabilities to the point to where it could build a nuclear bomb in a year’s time. Any of these actions would result in sanctions immediately being reimposed.

    The US's allies – not to mention President Donald Trump's political enemies – have insisted that Trump's decision to throw a wrench in the works of the deal could lead to its collapse, which in turn would result in Iran resuming its nuclear program, reviving the possibility of a future military showdown with a nuclear-armed Iran.

  • Car-Bomb Kills "One-Woman WikiLeaks" Who Led The Panama Papers Revelations

    Meet Daphne Caruana Galizia, the journalist who led the Panama Papers investigation into corruption in Malta.

    A blogger whose posts often attracted more readers than the combined circulation of the country’s newspapers, Caruana Galizia was recently described by Politico as a “one-woman WikiLeaks”.

    To John Dalli, a former European commissioner whom she helped bring down in a tobacco lobbying scandal, Galizia is “a terrorist.”

     

    To opposition MPs, she’s a political force of nature, one who fortunately has her guns aimed at the other side of the aisle.

     

    “She single-handedly brought the government to the verge of collapse,” says one MP. “The lady has balls,” says another.

     

    Galizia’s mantra was simple: blog relentlessly about the “cronyism that is accepted as something normal here. I can’t bear to see people like that rewarded.”

    Her blogs were a thorn in the side of both the establishment and underworld figures that hold sway in Europe’s smallest member state.

    Well, sadly, all that is over now, as Galizia was killed today when her car, a Peugeot 108, was destroyed by a powerful explosive device which blew the car into several pieces and threw the debris into a nearby field.

    As The Guardian reports, her most recent revelations pointed the finger at Malta’s prime minister, Joseph Muscat, and two of his closest aides, connecting offshore companies linked to the three men with the sale of Maltese passports and payments from the government of Azerbaijan.

    No group or individual has come forward to claim responsibility for the attack.

    Malta’s president, Marie-Louise Coleiro Preca, called for calm.

    “In these moments, when the country is shocked by such a vicious attack, I call on everyone to measure their words, to not pass judgment and to show solidarity,” she said.

     

    “Everyone knows Ms Caruana Galizia was a harsh critic of mine,” Muscat at a hastily convened press conference, “both politically and personally, but nobody can justify this barbaric act in any way”.

    The Nationalist party leader, Adrian Delia – himself the subject of negative stories by Caruana Galizia – claimed the killing was linked to her reporting.

    “A political murder took place today,” Delia said in a statement.

     

    “What happened today is not an ordinary killing. It is a consequence of the total collapse of the rule of law which has been going on for the past four years.”

    Responding to news of the attack, the German MEP Sven Giegold, a leading figure in the parliament’s Panama Papers inquiry, said he was “shocked and saddened”.

    “It is too early to know the cause of the explosion but we expect to see a thorough investigation,” said Giegold.

     

    “Such incidents bring to mind Putin’s Russia, not the European Union. There can be absolutely no tolerance for violence against the press and violations of the freedom of expression in the European Union.

    It doews make one wonder just what is happening in Europe, as Greece's former finance minister tweeted…

    //platform.twitter.com/widgets.js

    Interesintgly, Muscat announced in parliament that FBI officers were on their way to Malta to assist with the investigation, following his request for outside help from the US government.

     

    Caruana Galizia was 53 and leaves a husband and three sons.

  • WORLD’S LARGEST OIL COMPANIES: Deep Trouble As Profits Vaporize While Debts Skyrocket

    SRSrocco

    By the SRSrocco Report,

    The world’s largest oil companies are in serious trouble as their balance sheets deteriorate from higher costs, falling profits and skyrocketing debt.  The glory days of the highly profitable global oil companies have come to an end.  All that remains now is a mere shadow of the once mighty oil industry that will be forced to continue cannibalizing itself to produce the last bit of valuable oil.

    I realize my extremely unfavorable opinion of the world’s oil industry runs counter to many mainstream energy analysts, however, their belief that business, as usual, will continue for decades, is entirely unfounded.  Why?  Because, they do not understand the ramifications of the Falling EROI – Energy Returned On Invested, and its impact on the global economy.

    For example, Chevron was able to make considerable profits in 1997 when the oil price was $19 a barrel.  However, the company suffered a loss in 2016 when the price was more than double at $44 last year.  And, it’s even worse than that if we compare the company’s profit to total revenues.  Chevron enjoyed a $3.2 billion net income profit on revenues of $42 billion in 1997 versus a $497 million loss on total sales of $114 billion in 2016.  Even though Chevron’s revenues nearly tripled in twenty years, its profit was decimated by the falling EROI.

    Unfortunately, energy analysts, who are clueless to the amount of destruction taking place in the U.S. and global oil industry by the falling EROI, continue to mislead a public that is totally unprepared for what is coming.  To provide a more realistic view of the disintegrating energy industry, I will provide data from seven of the largest oil companies in the world.

    The World’s Major Oil Companies Debt Explode Since The 2008 Financial Crisis

    To save the world from falling into total collapse during the 2008 financial crisis, the Fed and Central Banks embarked on the most massive money printing scheme in history.  One side-effect of the massive money printing (and the purchasing of assets) by the central banks, was that it pushed the price of oil to a record $100+ a barrel for more than three years.  While the large oil companies reported handsome profits due to the high oil price, many of them spent a great deal of capital to produce this oil.

    For instance, the seven top global oil companies that I focused on made a combined $213 billion in cash from operations in 2013. However, they also forked out $230 billion in capital expenditures.  Thus, the net free cash flow from these major oil companies was a negative $17 billion… and that doesn’t include the $44 billion they paid in dividends to their shareholders in 2013.  Even though the price of oil was $109 in 2013; these seven oil companies added $45 billion to their long-term debt:

    As we can see, the total amount of long-term debt in the group (Petrobras, Shell, BP, Total, Chevron, Exxon & Statoil) increased from $227 billion in 2012 to $272 billion in 2013.  Isn’t that ironic that the debt ($45 billion) rose nearly the same amount as the group’s dividend payouts ($44 billion)?  Of course, we can’t forget about the negative $17 billion in free cash flow in 2013, but here we see evidence that the top seven global oil companies were borrowing money even in 2013, at $109 a barrel oil, to pay their dividends.

    Since the 2008 global economic and financial crisis, the top seven oil companies have seen their total combined debt explode four times, from $96 billion to $379 billion currently.  You would think with these energy companies enjoying a $100+ oil price for more than three years; they would be lowering their debt, not increasing it.  Regrettably, the cost for companies to replace reserves, produce oil and share profits with shareholders was more than the $110 oil price.

    There lies the rub….

    One of the disadvantages of skyrocketing debt is the rising amount of interest the company has to pay to service that debt.  If we look at the chart above, Brazil’s Petrobras is the clear winner in the group by adding the most debt.  Petrobras’s debt surged from $21 billion in 2008 to $109 billion last year.  As Petrobras added debt, it also had to pay out more to service that debt.  In just eight years, the annual interest amount Petrobras paid to service its debt increased from $793 million in 2008 to $6 billion last year.  Sadly, Petrobras’s rising interest payment has caused another nasty side-effect which cut dividend payouts to its shareholders to ZERO for the past two years.

    Petrobras Annual Dividend Payments:

    2008 = $4.7 billion

    2009 = $7.7 billion

    2010 = $5.4 billion

    2011 = $6.4 billion

    2012 = $3.3 billion

    2013 = $2.6 billion

    2014 = $3.9 billion

    2015 = ZERO

    2016 = ZERO

    You see, this is a perfect example of how the Falling EROI guts an oil company from the inside out.  The sad irony of the situation at Petrobras is this:

    If you are a shareholder, you’re screwed, and if you invested funds (in company bonds, etc.) to receive a higher interest payment, you’re also screwed because you will never get back your initial investment.  So, investors are screwed either way.  This is what happens during the final stage of collapsing oil industry.

    Another negative consequence of the Falling EROI on these major oil companies’ financial statements is the decline in profits as the cost to produce oil rises more than the economic price the market can afford.

    Major Oil Companies’ Profits Vaporize… Even At Higher Oil Prices

    To be able to understand just how bad the financial situation has become at the world’s largest oil companies, we need to go back in time and compare the industry’s profitability versus the oil price.  To find a year when the oil price was about the same as it was in 2016, we have to return to 2004, when the average oil price was $38.26 versus $43.67 last year.  Yes, the oil price was lower in 2004 than in 2016, but I can assure you, these oil companies weren’t complaining.

    In 2004, the combined net income of these seven oil companies was almost $100 billion….. $99.2 billion to be exact.  Every oil company in the group made a nice profit in 2004 on a $38 oil price.  However, last year, the net profits in the group plunged to only $10.5 billion, even at a higher $43 oil price:

    Even with a $5 increase in the price of oil last year compared to 2004, these oil companies combined net income profit fell nearly 90%.  How about them apples.  Of the seven companies listed in the chart above, only four made profits last year, while three lost money.  Exxon and Total enjoyed the highest profits in the group, while Petrobras and Statoil suffered the largest losses:

    Furthermore, the financial situation is in much worse shape because “net income” accounting does not factor in the companies’ capital expenditures or dividend payouts.  Regardless, the world’s top oil companies’ profitability has vaporized even at a higher oil price.

    Now, another metric that provides us with more disturbing evidence of the Falling EROI in the oil industry is the collapse of  the “Return On Capital Employed.”  Basically, the Return On Capital Employed is just dividing the company’s earnings (before taxes and interest) by its total assets minus current liabilities.  In 2004, the seven companies listed above posted between 20-40% Return On Capital Employed.  However, this fell precipitously over the next decade and are now registering in the low single digits:

    In 2004, we can see that BP had the lowest Return On Capital Employed of 19.68% in the group, while Statoil had the highest at 46.20%.  If we throw out the highest and lowest figures, the average for the group was 29%.  Now, compare that to the average of 2.4% for the group in 2016, and that does not including BP and Chevron’s negative returns (shown in Dark Blue & Orange).

    NOTE:  I failed to include the Statoil graph line (Magenta)  when I made the chart, but I added the figures afterward.  For Statoil to experience a Return On Capital Employed decline from 46.2% in 2004 to less than 1% in 2016, suggests something is seriously wrong.

    We must remember, the high Return On Capital Employed by the group in 2004, was based on a $38 price of oil, while the low single-digit returns by the oil companies in 2016 were derived from a higher price of $43.  Unfortunately, the world’s largest oil companies are no longer able to enjoy high returns on a low oil price.  This is bad news because the market can’t afford a high oil price unless the Fed and Central Banks come back in with an even larger amount of QE (Quantitative Easing) money printing.

    I have one more chart that shows just how bad the Falling EROI is destroying the world’s top oil companies.  In 2004, these seven oil companies enjoyed a combined net Free Cash Flow minus dividends of a positive $34 billion versus a negative $39.1 billion in 2016:

    Let me explain these figures.  After these oil companies paid their capital expenditures and dividends to shareholders in 2004, they had a net $34 billion left over.  However, last year these companies were in the HOLE for $39.1 billion after paying capital expenditures and dividends.  Thus, many of them had to borrow money just to pay dividends.

    To understand how big of a change has taken place at the oil companies since 2004, here are the figures below:

    Top 7 Major Oil Companies Free Cash Flow Figures

    2004 Cash From Operations = …………$139.6 billion

    2004 Capital Expenditures = ……………..$67.7 billion

    2004 Free Cash Flow = ………………………$71.9 billion

    2004 Shareholder Dividends = …………..$37.9 billion

    2004 Free Cash Flow – Dividends = $34 billion

    2016 Cash From Operations = ……………..$118.5 billion

    2016 Capital Expenditures = ………………..$117.5 billion

    2016 Free Cash Flow = …………………………..$1.0 billion

    2016 Shareholder Dividends = ……………….$40.1 billion

    2016 Free Cash Flow – Dividends = -$39.1 billion

    Here we can see that the top seven global oil companies made more in cash from operations in 2004 ($139.6 billion) compared to 2016 ($118.5 billion).   That extra $21 billion in operating cash in 2004 versus 2016 was realized even at a lower oil price.  However, what has really hurt the group’s Free Cash Flow, is the much higher capital expenditures of $117.5 billion in 2016 compared to the $67.7 billion in 2004.  You will notice that the net combined dividends didn’t increase that much in the two periods… only by $3 billion.

    So, the lower cash from operations and the higher capital expenditures have taken a BIG HIT on the balance sheets of these oil companies.  This is precisely why the long-term debt is skyrocketing, especially over the past three years as the oil price fell below $100 in 2014.  To continue making their shareholders happy, many of these companies are borrowing money to pay dividends.  Unfortunately, going further into debt to pay shareholders is not a prudent long-term business model.

    The world’s major oil companies will continue to struggle with the oil price in the $50 range.  While some analysts forecast that higher oil prices are on the horizon, I disagree.  Yes, it’s true that oil prices may spike higher for a while, but the trend will be lower as the U.S. and global economies start to contract.  As oil prices fall to $40 and below, oil companies will begin to cut capital expenditures even further.  Thus, the cycle of lower prices and the continued gutting of the global oil industry will move into high gear.

    There is one option that might provide these oil companies with a buffer… and that is a new even larger Fed and Central Bank money printing scheme which would result in severe inflation and possibly hyperinflation.  But, that won’t be a long-term solution, instead just another lousy band-aid in a series of band-aids that have only postponed the inevitable.

    The coming bankruptcy of the once mighty global oil industry will be the death-knell of the world economy.  Without oil, the global economy grinds to a halt.  Of course, this will not occur overnight.  It will take time.  However, the evidence shows that a considerable wound has already taken place in an industry that has provided the world with much-needed oil for more than a century.

    Lastly, without trying to be a broken record, the peak and decline of global oil production will destroy the value of most STOCKS, BONDS and REAL ESTATE.  If you have placed most of your bests in one of these assets, you have my sympathies.

    Check back for new articles and updates at the SRSrocco Report.

  • Ex-DEA Agent Blasts Congress And Drug Industry For Creating The Opioid Crisis

    Authored by Mac Slavo via SHTFplan.com,

    Whistleblower Joe Rannazzisi is telling all when it comes to placing blame for the nation’s opioid crisis. He says drug distributors pumped opioids into communities in the United States knowing that people were dying and that the US government is helping.

    Joe Rannazzisi is a tough and blunt former DEA (Drug Enforcement Administration) deputy assistant administrator with a law degree, a pharmacy degree, and a growing rage at the unrelenting death toll from opioids. Congress has often been complicit in atrocities, especially when a politician profits off of the removal of the rights of others. So it should not come as a surprise that Rannazzisi is blaming Congress and the drug industry for the opioid epidemic gripping the nation.

    Rannazzisi ran the DEA’s Office of Diversion Control, the division that regulates and investigates the pharmaceutical industry. Now in a joint investigation by 60 Minutes and The Washington Post, Rannazzisi tells the inside story of how, he says, the opioid crisis was allowed to spread. Its quick spread was also aided by Congress, lobbyists, and a drug distribution industry that shipped, almost unchecked, hundreds of millions of pills to rogue pharmacies and pain clinics providing the rocket fuel for a crisis that, over the last two decades, has claimed 200,000 lives.

    The DEA responded to the explosive report that the government is helping keep Americans addicted to opioids so that pharmaceutical companies can continue to boast big profits. The DEA says it has taken actions against far fewer opioid distributors under a new law. A Justice Department memo shows 65 doctors, pharmacies, and drug companies received suspension orders in 2011. Only six of them have gotten them this year.

    “During the past seven years, we have removed approximately 900 registrations annually, preventing reckless doctors and rogue businesses from making an already troubling problem worse,” the DEA said in a written statement.

     

    “Increasingly, our investigators initiated more than 10,000 cases and averaged more than 2,000 arrests per year.”

    But Rannazzisi says this is an industry that is out of control and the DEA isn’t making a dent in this crisis.

    “What they [big pharma] wanna do, is do what they wanna do, and not worry about what the law is. And if they don’t follow the law in drug supply, people die. That’s just it. People die.”

    The harsh reality is that the burgeoning issue of the opioid epidemic is lining the pockets of the pharmaceutical industry and the politicians who help fuel it, so there’s no real rush to stem the bleeding of this crisis.

    “This is an industry that allowed millions and millions of drugs to go into bad pharmacies and doctors’ offices, that distributed them out to people who had no legitimate need for those drugs,” Rannazzisi said.

    Most of his anger is reserved for the distributors of opioid drugs. Some of them are actually multibillion-dollar, Fortune 500 companies. They are the middlemen that ship the pain pills from manufacturers, like Purdue Pharma and Johnson & Johnson to drug stores all over the country. Rannazzisi accuses the distributors of fueling the opioid epidemic by turning a blind eye to pain pills being diverted to illicit use.

    “This is an industry that allowed millions and millions of drugs to go into bad pharmacies and doctors’ offices, that distributed them out to people who had no legitimate need for those drugs,” Rannazzisi said.

     

    “The three largest distributors are Cardinal Health, McKesson, and AmerisourceBergen. They control probably 85 or 90 percent of the drugs going downstream,” he added when prompted.

    Rannazzisi said it’s a “fact” that the big pharmaceutical companies knew they were pumping drugs into people unnecessarily for profits and that people were dying.

    In the late 1990s, opioids like oxycodone and hydrocodone became a routine medical treatment for chronic pain. Drug companies assured doctors and congressional investigators that the pain medications were effective and safe. With many doctors convinced the drugs posed few risks, prescriptions skyrocketed and so did addiction.

    Big pharma had a plan. It was solely a business plan. Their plan was to sell a lotta pills and make a lot of money. And they did both of those very well.

  • Move To Digital Currencies Accelerates As PBoC Successfully Tests Algos For Digital Money

    In a story that seems to have gone largely unnoticed by the western press, the China Daily reported that the PBoC has successfully designed a prototype that can regulate its future supply of digital fiat currency.

    In a report, “PBoC inches closer to digital currency”, the newspaper stated that China’s central bank “has completed trial runs on the algorithms needed for digital currency supply, taking it a step closer to addressing the technological challenges associated with digital currencies, according to a top official associated with the project.”

    China’s has been preparing for digital currency since 2016. In June this year, the PBoC “finished several digital money trials involving fake transactions between it and some of the country’s commercial banks.” Given over-invoicing of imports and the shenanigans in the shadow banking/WMP sector, we suspect that the commercial banks took to these trials like proverbial flies to feces.

    The China Daily article goes on to suggest that, while there is no timetable, “China is likely to become the first country that would deploy a digital fiat currency.”

    Far be it for us to question the accuracy of the China Daily – which Wikipedia notes is often used as a guide to Chinese government policy – but we were expecting Sweden (already the world’s most cashless society) to be first.  It has been widely reported that the introduction of an “e-krona” is being investigated by the Riksbank. Forbes noted last month that “The inquiry is expected to be finalized in late 2019.” It would not replace cash, which accounts for 1% of transactions in Sweden according to a recent BBC report, but operate alongside physical cash initially.

    So…while China expects to be first, it will be “some time before the currency goes public”. According to Di Gang, a senior engineer of the Institute of Digital Money at the PBOC, a number of concerns need to be solved like “managing risks and improving efficiency.” He added that “the government also needs to factor whether the public would use the currency.”

    We know the answer to that.

    Yes, although it would be much quicker if Chinese citizens could somehow use it to get their savings out of the country.

    Back to the serious work of the PBoC’s Institute of Digital Money. Yao Qian, the director-general no less, said that the successful simulation of money supply had paved the way for the central bank to become the future sole regulator and policymaker governing the value of digital currency. That sounded like a veiled explanation for the recent heavy-handed clampdown on Bitcoin trading in the Middle Kingdom. Indeed, the story notes that “Unlike Bitcoin or other digital money issued by the private sector, the digital fiat currency has the same legal status as the Chinese yuan”

    As this will be a government-backed digital currency, we wonder whether Jamie Dimon will be an investor or early adopter? Alternatively, he might be able to buy a Russian version in due course.

    Yesterday, Cointelegraph reported that local news sources in Russia had been informed by the Minister of Communications, Nikolay Nikiforov, that President Putin has approved a plan for the issue of a “CrypoRuble.” There was no detail, however, on timeline and no any subsequent confirmation that we’ve seen. Coincidentally, or not, Nikiforov is quoted as saying “I confidently declare that we run (sic) CryptoRuble for one simple reason: if we do not, then after 2 months our neighbors in the EurAsEC will.”

    So, the world might be moving towards digital, sovereign-backed currencies faster than many people realized. For the time being, however, Bitcoin and its private sector rivals continue to have the playing field to themselves.

    Portfolio managers who want exposure to the cryptos either remain on the sidelines or, as Cathie Wood, CEO, CIO and Founder, of Ark Investment Management, said on Bloomberg TV earlier, are forced to pay a premium via the GBTC (Bitcoin Investment Trust).

     

    Wood commented that “We are a registered investment company, Ark Invest, we can only own financial securities…our funds own GBTC which sells at a premium to the underlying bitcoin investment trusts…the premium is because of the scarcity value. In my IRA, for example, I can’t get any to crypto, except through a GBTC. No one can and the same with our funds…We’ve tried to buy the underlying, but the New York Stock Exchange preferred a traded security and that’s how we ended up with a GBTC.”

    As the Bloomberg guests went on to discuss, the situation may not change unless and until Bitcoin futures are approved by the CFTC, perhaps in early/mid-2018. That could pave the way for the currently stalled approvals for ETFs with the SEC and bring additional institutional capital into crypto.

  • 7 Years & Counting – Trump's Looming EV Time-Bomb

    Authored by Eric Peters via EricPetersAutos.com,

    In just seven years’ time – unless Trump does something before his four years are up – the average fuel efficiency of the average car will have to almost double. From 35.5 MPG (now) to 54.5 MPG by 2025. So reads the fuel economy fatwa issued by Trump’s predecessor.

    No matter how much it costs, no matter what it takes.

    To put this in perspective, as of 2018, there is only one car available that is capable of meeting the 2025 “goal” – as these forced-on-us things are styled: It is the Toyota Prius Prime plug-in hybrid. Nothing else comes close.

    Well, except electric cars.

    These average infinity – as far as gas consumption goes. Which is very helpful insofar as the averages. The federal fuel economy fatwa is formally the Corporate Average Fuel Economy (CAFE) standard, which is an arbitrary number pulled out of a hat by federal regulatory ayatollahs, who have somehow become the arbiters of how much fuel the cars we buy ought to use.

    Those cars which use more gas than the arbitrarily decreed figure are subject to punitive “gas guzzler” fines meant specifically to discourage their manufacture as well as their purchase, by making them artificially more expensive to manufacture and more expensive to buy.

    In case you wondered, this is why larger vehicles and vehicles with larger engines are becoming both scarce and exotically priced. If you’re young – 30 or less – you probably will not remember but there was a time when most Americans, including working-class Americans, routinely drove large cars with large engines. Bought them brand-new. Smaller cars with smaller engines were also available, but people bought them because that’s what they wanted – not because they were forced to by government fatwas that put larger and larger-engined cars out of their reach, as today.

    It is also why suburbanites routinely drive SUVs today. “SUVs” are a made-up class of vehicle that did not exist prior to the CAFE fatwa. The class was made-up by the car industry as a way to get around the fatwa – which (at the time) granted a partial exemption to what were then just trucks, which were considered work vehicles. But if you enclosed the truck’s bed and added seats – you could carry people. Voila!

    The SUV.

    It took Uncle a few years to catch on – and for the CAFE regs to catch up. In the interim, vast fleets of SUVs hit the streets, because people still wanted large vehicles with large engines and the truck-derived SUV’s ground clearance and available 4×4 only made the combo even more appealing. Certainly more so than the “downsized” (and down-engined) cars the car companies were being forced to build, even though the demand was elsewhere.

    Uncle did catch up, of course. The fatwa was changed to envelope SUVs and other “light trucks.” They are now on the endangered species list, too.

    As are mid-sized cars with mid-sized engines. It is no random thing that six cylinder engines, which were as recently as two years ago abundantly available in the mid-sized/family car class of vehicle – are becoming extremely uncommon, if not unavailable. Most of the cars which used to offer them – examples include the Mazda6 and Honda Accord – no longer do.

    Deep within the EPA . . .

    Just as – a generation ago – V8s were all-but-eliminated from the mid-priced/family car class.

    The current fatwa – 35.5 MPG on average – is already a bar too high. None shall pass. Not without radical redesigns, already becoming obvious in the person of nine and ten speed transmissions and aluminum bodies and other such artifices of desperation. Inevitably,  diminution in power and capability and also size will have to be resorted to – to get from 35.5 to 54.5 MPG.

    That, or build far fewer larger (and even medium-sized) cars. And even fewer trucks and SUVs.

    Or, build lots of electric cars.

    Averages, remember.

    This is the practical reason behind the weirdly sudden bum’s rush by every major car manufacturer to build electric cars. As many as possible – even if they don’t sell. Even if they have to be given away at a considerable loss per car (the loss made up by tax write-offs, “carbon credits” and other subsidies).

    Because each electric car – which uses no gas at all – is extremely helpful mathematically, as a regulatory dodge – even if a disaster economically and practically. The presence of one EV on the left side of the scale balances the SUV (or even the car) on the right side of the scale. The more they build of the one, the more they can sell of the other.

    It is the only way.

    Because there is no other way that any car – except a very small hybrid car – is ever going to average 54.5 MPG. Not without extreme lightening up, at least – which will never happen because then the car would be “unsafe” – not able to comply with all the federal bumper-impact, roof crush and other such fatwas.

    Or with a diesel – which the regulatory ayatollahs have also effectively outlawed.

    So without vast fleets of electric cars to balance out the scales, other-than-small (and small-engined) cars will become much harder to justify building at all, because their cost to buy will become exorbitant, such that very few people will be able to afford them.

    Yet people still want the larger (and larger-engined) cars.  Notice the demand for “gas guzzlers’ has not slackened, which must frustrate the fuel efficiency fatwa-issuers. Who are determined to force fuel economy down people’s throats no matter how much they didn’t ask for it.

    Here’s where Trump comes in – or could.

    He is, after all, the elected representative of the people – to invoke the monk-chant of “democracy” – while the regulatory ayatollahs represent no one except themselves and perhaps a few Claybrookian Clover types who are simpatico with the idea of forcing other people to do as they think best even when it’s none of their business and they ought to just mind their own.

    Trump could – and should – simply countermand the CAFE fatwa. Tear the thing up, throw the pieces up over his head, confetti style. It was not, after all, passed by Congress – the representatives of the people. It was imposed by regulatory bureaucrats.

    If we truly do live in a democracy – as we are constantly told – then the will of the people ought to prevail.

    This would, of course, trigger wild ululations among the ayatollahs but wouldn’t that be almost as gratifying as a really top-drawer steak dinner with all the trimmings?

    Trump would probably also assure his re-election, despite everything – because the people give a damn. Not about fuel efficiency. But about being left free to buy the type of car – or SUV  – that meets their needs.

    The ayatollahs be damned.

    *  *  *

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  • Is This The Bizarre Reason Why Tesla Is Struggling To Ramp Model 3 Production?

    A little over a week ago, we noted the damning – if unsurprising – report from the Wall Street Journal revealing that Tesla’s massive production miss on the Model 3, after only producing a tiny fraction of the 1,500 Model 3 sedans that it promised customers, might have been attributable to the fact that key parts of the cars were still being assembled by hand.

    But according to a new report from the WSJ and Automotive News this morning, the real problem with Tesla’s Model 3 production might be even more basic and embarrassing…the company can’t figure out how to weld steel.

    What’s behind Tesla’s manufacturing woes? It could be something as simple as steel.

     

    Based on details in a Wall Street Journal report and in a video of the production line posted on Twitter by Tesla CEO Elon Musk, experts say the electric vehicle maker appears to be struggling with welding together a mostly steel vehicle, as opposed to the primarily aluminum bodies of the Model S and Model X.

     

    The Model 3’s aluminum and steel body requires more welding rather than the adhesive and rivets in aluminum bodies, experts say.

     

    Harbour described the difference between the body of the Model 3 and those of the Model S and Model X as “partly cloudy vs. partly sunny.” The change in materials would require processes new to Tesla.

     

    “There’s a big difference there. They haven’t been doing a lot of spot welding on the first two vehicles because they’re all aluminum,” Harbour said. “The learning curve is pretty steep.”

    As automotive manufacturing consultant Michael Tracy of Agile Group pointed out, the clues of Tesla’s steel problems came from a video posted by Musk himself of the Model 3 assembly line.  Referencing Musk’s video, Tracy said a well functioning auto assembly line would not produce the sparks seen in the video below which are symptomatic of welds spots overheating or poor alignment of components.

    After the Journal report, Musk tweeted a of the Model 3 production line, which was operating at one-tenth of its potential speed. In the video, sparks fly as two robotic arms assemble parts of the vehicle frame. He followed with another on Wednesday, Oct. 11, showing body panel stamping at full speed.

     

    “Resistance welding should make a little smoke, but when you see stuff popping out like that, that’s called expulsion,” automotive manufacturing consultant Michael Tracy of Agile Group in Howell, Mich., said of the first video. “It’s symptomatic of weld spots getting too hot because they’re poorly planned, or in this case, the metal not being pulled all the way together.”

     

    Poor welds can increase the damage to a vehicle in an accident, and can lead to rattling and squeaking as the car ages, Tracy said.

    A post shared by Elon Musk (@elonmusk) on Oct 8, 2017 at 3:20pm PDT

    //platform.instagram.com/en_US/embeds.js

     

    Meanwhile, Tracy says that mistakes like these are things that most auto OEMs would catch and fix 6 months before production launch…which raises the question “is the expertise there?”

    Tracy said slowed assembly lines do little to prove production is running smoothly because lines perform differently when running at full speed.

     

    “At this point, you would only be running it slow if you were having troubles and you were afraid the welds you were going to make weren’t going to be good,” Tracy said. “It has to be able to run at rate for acceptance testing.”

     

    The types of problems Tesla is dealing with are normally worked out long before the assembly line is expected to be working at capacity, Harbour said.

     

    “This is something a plant typically goes through four to six months in advance of a production launch,” Harbour said. “This raises the question: ‘Is the expertise there?'”

    Of course, as we’ve pointed out multiple times of late (see: Porsche And Mercedes Plot Musk Offensive With “Anything Tesla Can Do, We Can Do Better” Strategy), Tesla has historically been somewhat shielded from the negative financial consequences of their manufacturing inefficiencies because they’ve been the only EV game in town…but that’s all about to change in a big way.

    With an influx of competitive EVs on the horizon, Tesla must iron out its manufacturing problems in the next few months or risk losing its competitive edge before the Model 3 reaches a larger audience.

     

    “Before, there was only Tesla. Now, there’s going to be dozens of alternatives,” said Ron Harbour, a manufacturing consultant at Oliver Wyman. “They’re going to have to get really efficient at manufacturing. They have to be cost competitive and price competitive to stay in the business.”

     

    Since July, automakers have been one-upping each other on plans to electrify their lineups. Volvo said it would introduce only electrified vehicles starting in 2019. Jaguar Land Rover said it would offer electrified versions of all of its vehicles by 2020. BMW expects to be able to mass-produce EVs by 2020, offering 12 models by 2025. Mercedes said it will electrify its lineup by 2022.

     

    Detroit also has been turning its attention to electrification. Ford Motor Co. plans to introduce 13 electrified vehicles in the next five years, including a crossover with 300 miles of range. General Motors introduced the Chevrolet Bolt last year, with at least 20 all-electric or hydrogen fuel cell vehicles coming by 2023 — two such vehicles will be introduced in the next 18 months.

    Perhaps this is why Daimler’s CEO didn’t seem to be all that worried about having a manufacturing competition with Tesla?

  • "We Don't Know How To Replace The Vast Gold Deposits Of The Past"

    Authored by Christoff Gisiger via Finanz und Wirthschaft,

    Pierre Lassonde, chairman of Franco-Nevada, expects production in the gold mining sector to decline significantly and foresees a price push for the yellow metal.

    Few people have achieved more success in the mining business than Pierre Lassonde. The savvy Canadian is the co-founder and chairman of Toronto based Franco-Nevada (FNV 99.91 -0.94%) and pioneered the royalty business model in the gold mining sector based on the model used in the oil-and-gas industry. For investors this strategy has paid off golden returns. Today however, Mr. Lassonde points out that the gold industry hasn’t made any large discoveries for years which will put heavy upward pressure on prices in the years to come. He also thinks that US President Donald Trump is good for the yellow metal and that investors will fare better with gold than with stocks.

    Mr. Lassonde, after a few difficult years gold seems to get its shine back. What’s next for the gold price?
    Right now, there is more demand for paper gold than for physical gold. For instance, when you look at the refineries in Switzerland they will tell you that they’ve got the bouillon but they’re not busy. It’s not like a year and half ago when they had no stock and the gold bars basically were flying off their shelf the minute they were produced. So the pressure is in the paper gold market, the futures market.

    What’s the reason for that?
    Part of the recent strength of gold is what I call a risk premium on the world. There is a lot of speculation that has to do with the tensions around North Korea and President Trump. I don’t have a personal relationship with Mr. Trump but I know the man a little bit. When he was elected, my prediction was that he was going to tie up the US administration in a knot because he’s totally unpredictable. Nobody knows where he’s going and you cannot run a country that way.

    And what does this have to do with gold?
    Anyone else in the Oval Office would not make such outlandish statements as Mr. Trump makes. Gold is benefiting from that. After the US election, my prediction was that the dollar was going to suffer from Mr. Trump being in office. The price of gold is intimately related to the dollar. Gold is essentially the »anti-dollar»: If the dollar is strong, gold is weak and if the dollar is weak, gold is strong. So what we are seeing now is exactly what I have expected: a lower dollar and therefore a stronger gold price.

    So where do you think the gold will go from here?
    My view has been between $1250 to $1350 per ounce for this year and then slightly ramping up next year to around $1300 to $1400. But for gold to get into the next real bull market we need signs of inflation. So far we haven’t seen them. The Federal Reserve and other central banks have piled up huge reserves. But there is no inflation because the money is sitting within the banks and they are not lending it. Therefore, you don’t get a multiplier effect. But what happened recently in the US – the one-two punch with respect to the hurricanes »Irma» and »Harvey» – is going to require an enormous amount of reconstruction. This could finally move the needle on inflation. Also, Europe is doing much better. So at some point I suspect we are going to see inflation start to pick up a little bit.

    What does this mean for the mining industry?
    First of all, at a gold price of $1300 the industry by and large is doing well. I tell my peers: »If you are not making money at $1300 you should not be in this business.» So it’s a good price and you should be making good money. But the industry has had to shrink a lot. When the gold price dropped to $1000 at the end of 2015 everybody in the business was too fat. So the industry laid people off, consolidated, shrunk and many junior companies have been wiped out.

    What are the consequences of that?
    Production is declining and this is going to put an enormous amount of pressure on prices down the road. If you look back to the 70s, 80s and 90s, in every of those decades the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know. We do not have those ore bodies in sight.

    Why aren’t there any large discoveries anymore?
    What the industry has not done anywhere near enough is to put money back into exploration. They have not put anywhere near enough money into research and development, particularly for new technologies with respect to exploration and processing. The way our industry works is it takes around seven years for a new mine to ramp up and then come to production. So it doesn’t really matter what the gold price will do in the next few years: Production is coming off and that means the upward pressure on the gold price could be very intense.

    Why didn’t the industry put more money into exploration?
    The industry has had to shrink a lot. Also, the boom in Exchange Traded Funds has changed the capital markets in a huge way: Companies that are part of an ETF get treated like chosen sons. But when you’re not in an ETF you’re getting marginalized. You become an orphan and the junior companies in particular have been completely orphaned.

    How does that impact the funding of mining?
    The thing with this industry is that you have to have an incredible amount of patience and you have to have money. And right now, it’s hard to get money. The risk appetite of investors has been gone for many, many years. If you are not one of the chosen few you can’t get money. You sit on the sideline and wait. In the past, more than half of the new discoveries have been made by junior companies. But they haven’t had any money now for like 10 years. So how are you going to find anything if you don’t fund the junior companies?

    What’s your advice for investors who are interested in gold?
    It’s very interesting. When you look over a hundred years back there are periods of 10 to 30 years where you would rather be in the stock market. But then, there are other periods from 10 to 15 years where you would rather be in gold.

    In which period are we today?
    Let’s take the Dow Jones  Industrial. To my mind, the Dow is essentially an expression of financial assets. Gold on the other hand is what represents hard assets: real estate, paintings and other hard assets. So when you look at the gold cycle from 1966 to 1980, you can see that the ratio between the Dow and the gold price at the beginning topped out at almost 28:1: It took 28 units of gold to buy one unit of the Dow. Then the long term trend reversed and the ratio went all the way down to 1:1. A similar cycle took place in the 30s. The Dow crashed from around 360 in 1929 to 36 in the next years. So it lost like 90% of its value. On the other hand, the gold price went from 20 to 34 and the ratio essentially bottomed out at almost 1:1, like at the end of 1966 to 1980 cycle.

    And what does that mean for investors today?

    Today, the Dow is over 22,000 and the price of gold is around $1300. This equals a ratio of almost 18:1 and you can clearly see that the trend is starting to roll over. So what does it mean if we go down to a ratio of 1:1 once again? The gold price would hit a big number and nobody is prepared for that. I don’t know any more than anybody else because it’s about the future. But it happened already twice in the past 100 years. So I think the odds that it’s going to happen a third time are pretty good. History does repeat itself, never exactly in the same fashion, but in the same form. Therefore, I would rather own a little bit more gold than not. So I think for an average investor, it should be the absolute rule to hold around 5 to 10% gold in your portfolio, like rule number one.

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Oct 16

Today’s News 16th October 2017

  • The Legacy Of Reagan's Civilian 'PsyOps'

    Authored by Robert Parry via ConsortiumNews.com,

    When the Reagan administration launched peacetime “psyops” in the mid-1980s, it pulled in civilian agencies to help spread these still-ongoing techniques of deception and manipulation…

    Declassified records from the Reagan presidential library show how the U.S. government enlisted civilian agencies in psychological operations designed to exploit information as a way to manipulate the behavior of targeted foreign audiences and, at least indirectly, American citizens.

    Walter Raymond Jr., a CIA propaganda and disinformation specialist who oversaw President Reagan’s “psyops” and “perception management” projects at the National Security Council. Raymond is partially obscured by President Reagan. Raymond is seated next to National Security Adviser John Poindexter. (Photo credit: Reagan presidential library)

    A just-declassified sign-in sheet for a meeting of an inter-agency “psyops” committee on Oct. 24, 1986, shows representatives from the Agency for International Development (USAID), the State Department, and the U.S. Information Agency (USIA) joining officials from the Central Intelligence Agency and the Defense Department.

    Some of the names of officials from the CIA and Pentagon remain classified more than three decades later. But the significance of the document is that it reveals how agencies that were traditionally assigned to global development (USAID) or international information (USIA) were incorporated into the U.S. government’s strategies for peacetime psyops, a military technique for breaking the will of a wartime enemy by spreading lies, confusion and terror.

    Essentially, psyops play on the cultural weaknesses of a target population so they could be more easily controlled or defeated, but the Reagan administration was taking the concept outside the traditional bounds of warfare and applying psyops to any time when the U.S. government could claim some threat to America.

    This disclosure – bolstered by other documents released earlier this year by archivists at the Reagan library in Simi Valley, California – is relevant to today’s frenzy over alleged “fake news” and accusations of “Russian disinformation” by reminding everyone that the U.S. government was active in those same areas.

    The U.S. government’s use of disinformation and propaganda is, of course, nothing new. For instance, during the 1950s and 1960s, the USIA regularly published articles in friendly newspapers and magazines that appeared under fake names such as Guy Sims Fitch.

    However, in the 1970s, the bloody Vietnam War and the Pentagon Papers’ revelations about U.S. government deceptions to justify that war created a crisis for American propagandists, their loss of credibility with the American people. Some of the traditional sources of U.S. disinformation, such as the CIA, also fell into profound disrepute.

    This so-called “Vietnam Syndrome” – a skeptical citizenry dubious toward U.S. government claims about foreign conflicts – undermined President Reagan’s efforts to sell his plans for intervention in the civil wars then underway in Central America, Africa and elsewhere.

    Reagan depicted Central America as a “Soviet beachhead,” but many Americans saw haughty Central American oligarchs and their brutal security forces slaughtering priests, nuns, labor activists, students, peasants and indigenous populations.

    Reagan and his advisers realized that they had to turn those perceptions around if they hoped to get sustained funding for the militaries of El Salvador, Guatemala and Honduras as well as for the Nicaraguan Contra rebels, the CIA-organized paramilitary force marauding around leftist-ruled Nicaragua.

    Perception Management

    So, it became a high priority to reshape public perceptions inside those targeted countries but even more importantly among the American people. That challenge led the Reagan administration to revitalize and reorganize methods for distributing propaganda and funding friendly foreign operatives, such as creation of the National Endowment for Democracy under neoconservative president Carl Gershman in 1983.

    President Ronald Reagan meeting with Guatemalan dictator Efrain Rios Montt, who later faced accusations of genocide against Indian populations in the central highlands.

    Another entity in this process was the Psychological Operations Committee formed in 1986 under Reagan’s National Security Council. In the years since, the U.S. administrations, both Republican and Democratic, have applied many of these same psyops principles, cherry-picking or manufacturing evidence to undermine adversaries and to solidify U.S. public support for Washington’s policies.

    This reality – about the U.S. government creating its own faux reality to manipulate the American people and international audiences – should compel journalists in the West to treat all claims from Washington with a large grain of salt.

    However, instead, we have seen a pattern of leading news outlets simply amplifying whatever U.S. agencies assert about foreign adversaries while denouncing skeptics as purveyors of “fake news” or enemy “propaganda.” In effect, the success of the U.S. psyops strategy can be measured by how Western mainstream media has stepped forward as the enforcement mechanism to ensure conformity to the U.S. government’s various information themes and narratives.

    For instance, any questioning of the U.S. government’s narratives on, say, the current Syrian conflict, or the Ukraine coup of 2014, or Russian “hacking” of the 2016 U.S. election, or Iran’s status as “the leading sponsor of terrorism” is treated by the major Western news outlets as evidence that you are a “useful fool” at best, if not a willful enemy “propagandist” with loyalty to a foreign power, i.e., a traitor.

    Leading mainstream media outlets and establishment-approved Web sites are now teaming up with Google, Facebook and other technology companies to develop algorithms to bury or remove content from the Internet that doesn’t march in lockstep with what is deemed to be true, which often simply follows what U.S. government agencies say is true.

    Yet, the documentary evidence is now clear that the U.S. government undertook a well-defined strategy of waging psyops around the world with regular blowback of this propaganda and disinformation onto the American people via Western news agencies covering events in the affected countries.

    During more recent administrations, euphemisms have been used to cloak the more pejorative phrase, “psychological operations” – such as “public diplomacy,” “strategic communications,” “perception management,” and “smart power.” But the serious push to expand this propaganda capability of the U.S. government can be traced back to the Reagan presidency.

    The Puppet Master

    Over the years, I’ve obtained scores of documents related to the psyops and related programs via “mandatory declassification reviews” of files belonging to Walter Raymond Jr., a senior CIA covert operations specialist who was transferred to Reagan’s National Security Council staff in 1982 to rebuild capacities for psyops, propaganda and disinformation.

    Then-Vice President George H.W. Bush with CIA Director William Casey at the White House on Feb. 11, 1981. (Photo credit: Reagan Library)

    Raymond, who has been compared to a character from a John LeCarré novel slipping easily into the woodwork, spent his years inside Reagan’s White House as a shadowy puppet master who tried his best to avoid public attention or – it seems – even having his picture taken.

    From the tens of thousands of photographs from meetings at Reagan’s White House, I found only a couple showing Raymond – and he is seated in groups, partially concealed by other officials.

    But Raymond appears to have grasped his true importance. In his NSC files, I found a doodle of an organizational chart that had Raymond at the top holding what looks like the crossed handles used by puppeteers to control the puppets below them. The drawing fits the reality of Raymond as the behind-the-curtains operative who was controlling the various inter-agency task forces that were responsible for implementing psyops and other propaganda strategies.

    In Raymond’s files, I found an influential November 1983 paper, written by Col. Alfred R. Paddock Jr. and entitled “Military Psychological Operations and US Strategy,” which stated: “the planned use of communications to influence attitudes or behavior should, if properly used, precede, accompany, and follow all applications of force. Put another way, psychological operations is the one weapons system which has an important role to play in peacetime, throughout the spectrum of conflict, and during the aftermath of conflict.”

    Paddock continued, “Military psychological operations are an important part of the ‘PSYOP Totality,’ both in peace and war. … We need a program of psychological operations as an integral part of our national security policies and programs. … The continuity of a standing interagency board or committee to provide the necessary coordinating mechanism for development of a coherent, worldwide psychological operations strategy is badly needed.”

    One declassified “top secret” document in Raymond’s file – dated Feb. 4, 1985, from Secretary of Defense Caspar Weinberger – urged the fuller implementation of President Reagan’s National Security Decision Directive 130, which was signed on March 6, 1984, and which authorized peacetime psyops by expanding psyops beyond its traditional boundaries of active military operations into peacetime situations in which the U.S. government could claim some threat to national interests.

    “This approval can provide the impetus to the rebuilding of a necessary strategic capability, focus attention on psychological operations as a national – not solely military – instrument, and ensure that psychological operations are fully coordinated with public diplomacy and other international information activities,” Weinberger’s document said.

    An Inter-Agency Committee

    This broader commitment to psyops led to the creation of a Psychological Operations Committee (POC) that was to be chaired by a representative of Reagan’s National Security Council with a vice chairman from the Pentagon and with representatives from CIA, the State Department and USIA.

    CIA seal in lobby of the spy agency’s headquarters. (U.S. government photo)

    “This group will be responsible for planning, coordinating and implementing psychological operations activities in support of United States policies and interests relative to national security,” according to a “secret” addendum to a memo, dated March 25, 1986, from Col. Paddock, the psyops advocate who had become the U.S. Army’s Director for Psychological Operations.

     

    “The committee will provide the focal point for interagency coordination of detailed contingency planning for the management of national information assets during war, and for the transition from peace to war,” the addendum added.

     

    “The POC shall seek to ensure that in wartime or during crises (which may be defined as periods of acute tension involving a threat to the lives of American citizens or the imminence of war between the U.S. and other nations), U.S. international information elements are ready to initiate special procedures to ensure policy consistency, timely response and rapid feedback from the intended audience.”

    In other words, the U.S. government could engage in psyops virtually anytime because there are always “periods of acute tension involving a threat to the lives of American citizens.”

    The Psychological Operations Committee took formal shape with a “secret” memo from Reagan’s National Security Advisor John Poindexter on July 31, 1986. Its first meeting was called on Sept. 2, 1986, with an agenda that focused on Central America and “How can other POC agencies support and complement DOD programs in El Salvador, Guatemala, Honduras, Costa Rica and Panama.” The POC was also tasked with “Developing National PSYOPS Guidelines” for “formulating and implementing a national PSYOPS program.” (Underlining in original)

    Raymond was named a co-chair of the POC along with CIA officer Vincent Cannistraro, who was then Deputy Director for Intelligence Programs on the NSC staff, according to a “secret” memo from Deputy Under Secretary of Defense Craig Alderman Jr.

    The memo also noted that future POC meetings would be briefed on psyops projects for the Philippines and Nicaragua, with the latter project codenamed “Niagara Falls.” The memo also references a “Project Touchstone,” but it is unclear where that psyops program was targeted.

    Another “secret” memo dated Oct. 1, 1986, co-authored by Raymond, reported on the POC’s first meeting on Sept. 10, 1986, and noted that “The POC will, at each meeting, focus on an area of operations (e.g., Central America, Afghanistan, Philippines).”

    The POC’s second meeting on Oct. 24, 1986 – for which the sign-in sheet was just released – concentrated on the Philippines, according to a Nov. 4, 1986 memo also co-authored by Raymond.

    But the Reagan administration’s primary attention continued to go back to Central America, including “Project Niagara Falls,” the psyops program aimed at Nicaragua. A “secret” Pentagon memo from Deputy Under Secretary Alderman on Nov. 20, 1986, outlined the work of the 4th Psychological Operations Group on this psyops plan “to help bring about democratization of Nicaragua,” by which the Reagan administration meant a “regime change.” The precise details of “Project Niagara Falls” were not disclosed in the declassified documents but the choice of codename suggested a cascade of psyops.

    Key Operatives

    Other documents from Raymond’s NSC file shed light on who other key operatives in the psyops and propaganda programs were. For instance, in undated notes on efforts to influence the Socialist International, including securing support for U.S. foreign policies from Socialist and Social Democratic parties in Europe, Raymond cited the efforts of “Ledeen, Gershman,” a reference to neoconservative operative Michael Ledeen and Carl Gershman, another neocon who has served as president of the U.S.-government-funded National Endowment for Democracy (NED), from 1983 to the present. (Underlining in original.)

    Carl Gershman, president of the National Endowment for Democracy.

    Although NED is technically independent of the U.S. government, it receives the bulk of its funding (now about $100 million a year) from Congress. Documents from the Reagan archives also make clear that NED was organized as a way to replace some of the CIA’s political and propaganda covert operations, which had fallen into disrepute in the 1970s. Earlier released documents from Raymond’s file show CIA Director William Casey pushing for NED’s creation and Raymond, Casey’s handpicked man on the NSC, giving frequent advice and direction to Gershman. [See Consortiumnews.com’s “CIA’s Hidden Hand in ‘Democracy’ Groups.”]

    While the initials USAID conjure up images of well-meaning Americans helping to drill wells, teach school and set up health clinics in impoverished nations, USAID also has kept its hand in financing friendly journalists around the globe.

    In 2015, USAID issued a fact sheet summarizing its work financing “journalism education, media business development, capacity building for supportive institutions, and strengthening legal-regulatory environments for free media.” USAID estimated its budget for “media strengthening programs in over 30 countries” at $40 million annually, including aiding “independent media organizations and bloggers in over a dozen countries,”

    In Ukraine before the 2014 coup, USAID offered training in “mobile phone and website security,” which sounds a bit like an operation to thwart the local government’s intelligence gathering, an ironic position for the U.S. with its surveillance obsession, including prosecuting whistleblowers based on evidence that they talked to journalists.

    USAID, working with billionaire George Soros’s Open Society, also funded the Organized Crime and Corruption Reporting Project (OCCRP), which engages in “investigative journalism” that usually goes after governments that have fallen into disfavor with the United States and then are singled out for accusations of corruption.

    The USAID-funded OCCRP also collaborates with Bellingcat, an online investigative website founded by blogger Eliot Higgins, who is now a senior non-resident fellow of the Atlantic Council, a pro-NATO think tank that receives funding from the U.S. and allied governments.

    Higgins has spread misinformation on the Internet, including discredited claims implicating the Syrian government in the sarin attack in 2013 and directing an Australian TV news crew to what looked to be the wrong location for a video of a BUK anti-aircraft battery as it supposedly made its getaway to Russia after the shoot-down of Malaysia Airlines Flight 17 in July 2014.

    Despite his dubious record of accuracy, Higgins has gained mainstream acclaim, in part, because his “findings” always match up with the propaganda theme that the U.S. government and its Western allies are peddling. Though most genuinely independent bloggers are ignored by the mainstream media, Higgins has found his work touted by both The New York Times and The Washington Post, and Google has included Bellingcat on its First Draft coalition, which will determine which news will be deemed real and which fake.

    In other words, the U.S. government has a robust strategy for deploying direct and indirect agents of influence who are now influencing how the titans of the Internet will structure their algorithms to play up favored information and disappear disfavored information.

    A Heritage of Lies

    During the first Cold War, the CIA and the U.S. Information Agency refined the art of “information warfare,” including pioneering some of its current features like having ostensibly “independent” entities and cut-outs present U.S. propaganda to a cynical public that would reject much of what it hears from government but may trust “citizen journalists” and “bloggers.”

    A screen shot of U.S. Assistant Secretary of State for European Affairs Victoria Nuland speaking to U.S. and Ukrainian business leaders on Dec. 13, 2013, at an event sponsored by Chevron, with its logo to Nuland’s left.

    USIA, which was founded in 1953 and gained new life in the 1980s under its Reagan-appointed director Charles Wick, was abolished in 1999, but its propaganda functions were largely folded into the new office of Under Secretary of State for Public Diplomacy and Public Affairs, which became a new fount of disinformation.

    For instance, in 2014, President Obama’s Under Secretary for Public Diplomacy Richard Stengel engaged in a series of falsehoods and misrepresentations regarding Russia’s RT network. In one instance, he claimed that the RT had made the “ludicrous assertion” that the U.S. had invested $5 billion in the regime change project in Ukraine. But that was an obvious reference to a public speech by U.S. Assistant Secretary of State for European Affairs Victoria Nuland on Dec. 13, 2013, in which she said “we have invested more than $5 billion” to help Ukraine to achieve its “European aspirations.”

    Nuland also was a leading proponent of the Ukraine coup, personally cheering on the anti-government rioters. In an intercepted phone call with U.S. Ambassador to Ukraine Geoffrey Pyatt, Nuland discussed how “to glue” or “midwife this thing” and who the new leaders would be. She picked Arseniy Yatsenyuk – “Yats is the guy” – who ended up as Prime Minister after elected President Viktor Yanukovych was overthrown.

    Despite all the evidence of a U.S.-backed coup, The New York Times simply ignored the evidence, including the Nuland-Pyatt phone call, to announce that there never was a coup. The Times’ obeisance to the State Department’s false narrative is a good example of how the legacy of Walter Raymond, who died in 2003, extends to the present.

    Over several decades, even as the White House changed hands from Republicans to Democrats, the momentum created by Raymond continued to push the peacetime psyops strategy forward.

    In more recent years, the wording of the program may have changed to more pleasing euphemisms. But the idea is the same: how you can use psyops, propaganda and disinformation to sell U.S. government policies abroad and at home.

  • Chris Hedges: Elites "Have No Credibility Left"

    Chris Hedges and David North via TruthDig.com,

    On Monday, WSWS International Editorial Board Chairman David North interviewed Chris Hedges, the Pulitzer Prize-winning journalist, author, lecturer and former New York Times correspondent. Among Hedges’ best-known books are War is a Force That Gives Us Meaning, The Death of the Liberal Class, Empire of Illusion: the End of Literacy and the Triumph of Spectacle, Days of Destruction, Days of Revolt, which he co-wrote with the cartoonist Joe Sacco, and Wages of Rebellion: the Moral Imperative of Revolt.

    In an article published in Truthdig September 17, titled “The Silencing of Dissent,” Hedges referenced the WSWS coverage of Google’s censorship of left-wing sites and warned about the growth of “blacklisting, censorship and slandering dissidents as foreign agents for Russia and purveyors of ‘fake news.’”

    Hedges wrote that “the Department of Justice called on RT America and its ‘associates’ – which may mean people like me – to register under the Foreign Agent Registration Act. No doubt, the corporate state knows that most of us will not register as foreign agents, meaning we will be banished from the airwaves. This, I expect, is the intent.”

    North’s interview with Hedges began with a discussion of the significance of the anti-Russia campaign in the media.

    David North: How do you interpret the fixation on Russia and the entire interpretation of the election within the framework of Putin’s manipulation?

    Chris Hedges: It’s as ridiculous as Saddam Hussein’s weapons of mass destruction. It is an absolutely unproven allegation that is used to perpetuate a very frightening accusation—critics of corporate capitalism and imperialism are foreign agents for Russia.

    I have no doubt that the Russians invested time, energy and money into attempting to influence events in the United States in ways that would serve their interests, in the same way that we have done and do in Russia and all sorts of other countries throughout the world. So I’m not saying there was no influence, or an attempt to influence events.

    But the whole idea that the Russians swung the election to Trump is absurd. It’s really premised on the unproven claim that Russia gave the Podesta emails to WikiLeaks, and the release of these emails turned tens, or hundreds of thousands, of Clinton supporters towards Trump. This doesn’t make any sense. Either that, or, according to the director of national intelligence, RT America, where I have a show, got everyone to vote for the Green Party.

    This obsession with Russia is a tactic used by the ruling elite, and in particular the Democratic Party, to avoid facing a very unpleasant reality: that their unpopularity is the outcome of their policies of deindustrialization and the assault against working men and women and poor people of color. It is the result of disastrous trade agreements like NAFTA that abolished good-paying union jobs and shipped them to places like Mexico, where workers without benefits are paid $3.00 an hour. It is the result of the explosion of a system of mass incarceration, begun by Bill Clinton with the 1994 omnibus crime bill, and the tripling and quadrupling of prison sentences. It is the result of the slashing of basic government services, including, of course, welfare, that Clinton gutted; deregulation, a decaying infrastructure, including public schools, and the de facto tax boycott by corporations. It is the result of the transformation of the country into an oligarchy. The nativist revolt on the right, and the aborted insurgency within the Democratic Party, makes sense when you see what they have done to the country.

    Police forces have been turned into quasi-military entities that terrorize marginal communities, where people have been stripped of all of their rights and can be shot with impunity; in fact over three are killed a day. The state shoots and locks up poor people of color as a form of social control. They are quite willing to employ the same form of social control on any other segment of the population that becomes restive.

    The Democratic Party, in particular, is driving this whole Russia witch-hunt. It cannot face its complicity in the destruction of our civil liberties—and remember, Barack Obama’s assault on civil liberties was worse than those carried out by George W. Bush—and the destruction of our economy and our democratic institutions.

    Politicians like the Clintons, Pelosi and Schumer are creations of Wall Street. That is why they are so virulent about pushing back against the Sanders wing of the Democratic Party. Without Wall Street money, they would not hold political power. The Democratic Party doesn’t actually function as a political party. It’s about perpetual mass mobilization and a hyperventilating public relations arm, all paid for by corporate donors. The base of the party has no real say in the leadership or the policies of the party, as Bernie Sanders and his followers found out. They are props in the sterile political theater.

    These party elites, consumed by greed, myopia and a deep cynicism, have a death grip on the political process. They’re not going to let it go, even if it all implodes.

    DN: Chris, you worked for the New York Times. When was that, exactly?

    CH: From 1990 to 2005.

    DN: Since you have some experience with that institution, what changes do you see? We’ve stressed that it has cultivated a constituency among the affluent upper-middle class.

    CH: The New York Times consciously targets 30 million upper-middle class and affluent Americans. It is a national newspaper; only about 11 percent of its readership is in New York. It is very easy to see who the Times seeks to reach by looking at its special sections on Home, Style, Business or Travel. Here, articles explain the difficulty of maintaining, for example, a second house in the Hamptons. It can do good investigative work, although not often. It covers foreign affairs. But it reflects the thinking of the elites. I read the Times every day, maybe to balance it out with your web site.

    DN: Well, I hope more than balance it.

    CH: Yes, more than balance it. The Times was always an elitist publication, but it wholly embraced the ideology of neo-conservatism and neoliberalism at a time of financial distress, when Abe Rosenthal was editor. He was the one who instituted the special sections that catered to the elite. And he imposed a de facto censorship to shut out critics of unfettered capitalism and imperialism, such as Noam Chomsky or Howard Zinn. He hounded out reporters like Sydney Schanberg, who challenged the real estate developers in New York, or Raymond Bonner, who reported the El Mozote massacre in El Salvador.

    He had lunch every week, along with his publisher, with William F. Buckley. This pivot into the arms of the most retrograde forces of corporate capitalism and proponents of American imperialism, for a time, made the paper very profitable. Eventually, of course, the rise of the internet, the loss of classified ads, which accounted for about 40 percent of all newspaper revenue, crippled the Times as it has crippled all newspapers. Newsprint has lost the monopoly that once connected sellers with buyers. Newspapers are trapped in an old system of information they call “objectivity” and “balance,” formulae designed to cater to the powerful and the wealthy and obscure the truth. But like all Byzantine courts, the Times will go down clinging to its holy grail.

    The intellectual gravitas of the paper—in particular the Book Review and the Week in Review—was obliterated by Bill Keller, himself a neocon, who, as a columnist, had been a cheerleader for the war in Iraq. He brought in figures like Sam Tanenhaus. At that point the paper embraced, without any dissent, the utopian ideology of neoliberalism and the primacy of corporate power as an inevitable form of human progress. The Times, along with business schools, economics departments at universities, and the pundits promoted by the corporate state, propagated the absurd idea that we would all be better off if we prostrated every sector of society before the dictates of the marketplace. It takes a unique kind of stupidity to believe this. You had students at Harvard Business School doing case studies of Enron and its brilliant business model, that is, until Enron collapsed and was exposed as a gigantic scam. This was never, really, in the end, about ideas. It was about unadulterated greed. It was pushed by the supposedly best educated among us, like Larry Summers, which exposes the lie that somehow our decline is due to deficient levels of education. It was due to a bankrupt and amoral elite, and the criminal financial institutions that make them rich.

    Critical thinking on the op-ed page, the Week in Review or the Book Review, never very strong to begin with, evaporated under Keller. Globalization was beyond questioning. Since the Times, like all elite institutions, is a hermetically sealed echo chamber, they do not realize how irrelevant they are becoming, or how ridiculous they look. Thomas Friedman and David Brooks might as well write for the Onion.

    I worked overseas. I wasn’t in the newsroom very much, but the paper is a very anxiety-ridden place. The rules aren’t written on the walls, but everyone knows, even if they do not articulate it, the paper’s unofficial motto: Do not significantly alienate those upon whom we depend for money and access! You can push against them some of the time. But if you are a serious reporter, like Charlie Leduff, or Sydney Schanberg, who wants to give a voice to people who don’t have a voice, to address issues of race, class, capitalist exploitation or the crimes of empire, you very swiftly become a management problem and get pushed out. Those who rise in the organization and hold power are consummate careerists. Their loyalty is to their advancement and the stature and profitability of the institution, which is why the hierarchy of the paper is filled with such mediocrities. Careerism is the paper’s biggest Achilles heel. It does not lack for talent. But it does lack for intellectual independence and moral courage. It reminds me of Harvard.

    DN: Let’s come back to this question of the Russian hacking news story. You raised the ability to generate a story, which has absolutely no factual foundation, nothing but assertions by various intelligence agencies, presented as an assessment that is beyond question. What is your evaluation of this?

    CH: The commercial broadcast networks, and that includes CNN and MSNBC, are not in the business of journalism. They hardly do any. Their celebrity correspondents are courtiers to the elite. They speculate about and amplify court gossip, which is all the accusations about Russia, and they repeat what they are told to repeat. They sacrifice journalism and truth for ratings and profit. These cable news shows are one of many revenue streams in a corporate structure. They compete against other revenue streams. The head of CNN, Jeff Zucker, who helped create the fictional persona of Donald Trump on “Celebrity Apprentice,” has turned politics on CNN into a 24-hour reality show. All nuance, ambiguity, meaning and depth, along with verifiable fact, are sacrificed for salacious entertainment. Lying, racism, bigotry and conspiracy theories are given platforms and considered newsworthy, often espoused by people whose sole quality is that they are unhinged. It is news as burlesque.

    I was on the investigative team at the New York Times during the lead-up to the Iraq War. I was based in Paris and covered Al Qaeda in Europe and the Middle East. Lewis Scooter Libby, Dick Cheney, Richard Perle and maybe somebody in an intelligence agency, would confirm whatever story the administration was attempting to pitch. Journalistic rules at the Times say you can’t go with a one-source story. But if you have three or four supposedly independent sources confirming the same narrative, then you can go with it, which is how they did it. The paper did not break any rules taught at Columbia journalism school, but everything they wrote was a lie.

    The whole exercise was farcical. The White House would leak some bogus story to Judy Miller or Michael Gordon, and then go on the talk shows to say, ‘as the Times reported….’ It gave these lies the veneer of independence and reputable journalism. This was a massive institutional failing, and one the paper has never faced.

    DN: The CIA pitches the story, and then the Times gets the verification from those who pitch it to them.

    CH: It’s not always pitched. And not much of this came from the CIA. The CIA wasn’t buying the “weapons of mass destruction” hysteria.

    DN: It goes the other way too?

    CH: Sure. Because if you’re trying to have access to a senior official, you’ll constantly be putting in requests, and those officials will decide when they want to see you. And when they want to see you, it’s usually because they have something to sell you.

    DN: The media’s anti-Russia narrative has been embraced by large portions of what presents itself as the “left.”

    CH: Well, don’t get me started on the American left. First of all, there is no American left—not a left that has any kind of seriousness, that understands political or revolutionary theories, that’s steeped in economic study, that understands how systems of power work, especially corporate and imperial power. The left is caught up in the same kind of cults of personality that plague the rest of society. It focuses on Trump, as if Trump is the central problem. Trump is a product, a symptom of a failed system and dysfunctional democracy, not the disease.

    If you attempt to debate most of those on the supposedly left, they reduce discussion to this cartoonish vision of politics.

    The serious left in this country was decimated. It started with the suppression of radical movements under Woodrow Wilson, then the “Red Scares” in the 1920s, when they virtually destroyed our labor movement and our radical press, and then all of the purges in the 1950s. For good measure, they purged the liberal class—look at what they did to Henry Wallace—so that Cold War “liberals” equated capitalism with democracy, and imperialism with freedom and liberty. I lived in Switzerland and France. There are still residues of a militant left in Europe, which gives Europeans something to build upon. But here we almost have to begin from scratch.

    I’ve battled continuously with Antifa and the Black Bloc. I think they’re kind of poster children for what I would consider phenomenal political immaturity. Resistance is not a form of personal catharsis. We are not fighting the rise of fascism in the 1930s. The corporate elites we have to overthrow already hold power. And unless we build a broad, popular resistance movement, which takes a lot of patient organizing among working men and women, we are going to be steadily ground down.

    So Trump’s not the problem. But just that sentence alone is going to kill most discussions with people who consider themselves part of the left.

    The corporate state has made it very hard to make a living if you hold fast to this radical critique. You will never get tenure. You probably won’t get academic appointments. You won’t win prizes. You won’t get grants. The New York Times, if they review your book, will turn it over to a dutiful mandarin like George Packer to trash it—as he did with my last book. The elite schools, and I have taught as a visiting professor at a few of them, such as Princeton and Columbia, replicate the structure and goals of corporations. If you want to even get through a doctoral committee, much less a tenure committee, you must play it really, really safe. You must not challenge the corporate-friendly stance that permeates the institution and is imposed through corporate donations and the dictates of wealthy alumni. Half of the members of most of these trustee boards should be in prison!

    Speculation in the 17th century in Britain was a crime. Speculators were hanged. And today they run the economy and the country. They have used the capturing of wealth to destroy the intellectual, cultural and artistic life in the country and snuff out our democracy. There is a word for these people: traitors.

    DN: What about the impact that you’ve seen of identity politics in America?

    CH: Well, identity politics defines the immaturity of the left. The corporate state embraced identity politics. We saw where identity politics got us with Barack Obama, which is worse than nowhere. He was, as Cornel West said, a black mascot for Wall Street, and now he is going around to collect his fees for selling us out.

    My favorite kind of anecdotal story about identity politics: Cornel West and I, along with others, led a march of homeless people on the Democratic National Convention session in Philadelphia. There was an event that night. It was packed with hundreds of people, mostly angry Bernie Sanders supporters. I had been asked to come speak. And in the back room, there was a group of younger activists, one who said, “We’re not letting the white guy go first.” Then he got up and gave a speech about how everybody now had to vote for Hillary Clinton. That’s kind of where identity politics gets you. There is a big difference between shills for corporate capitalism and imperialism, like Corey Booker and Van Jones, and true radicals like Glen Ford and Ajamu Baraka. The corporate state carefully selects and promotes women, or people of color, to be masks for its cruelty and exploitation.

    It is extremely important, obviously, that those voices are heard, but not those voices that have sold out to the power elite. The feminist movement is a perfect example of this. The old feminism, which I admire, the Andrea Dworkin kind of feminism, was about empowering oppressed women. This form of feminism did not try to justify prostitution as sex work. It knew that it is just as wrong to abuse a woman in a sweatshop as it is in the sex trade. The new form of feminism is an example of the poison of neoliberalism. It is about having a woman CEO or woman president, who will, like Hillary Clinton, serve the systems of oppression. It posits that prostitution is about choice. What woman, given a stable income and security, would choose to be raped for a living? Identity politics is anti-politics.

    DN: I believe you spoke at a Socialist Convergence conference where you criticized Obama and Sanders, and you were shouted down.

    CH: Yes, I don’t even remember. I’ve been shouted down criticizing Obama in many places, including Berkeley. I have had to endure this for a long time as a supporter and speech writer for Ralph Nader. People don’t want the illusion of their manufactured personalities, their political saviors, shattered; personalities created by public relations industries. They don’t want to do the hard work of truly understanding how power works and organizing to bring it down.

    DN: You mentioned that you have been reading the World Socialist Web Sitefor some time. You know we are quite outside of that framework.

    CH: I’m not a Marxist. I’m not a Trotskyist. But I like the site. You report on important issues seriously and in a way a lot of other sites don’t. You care about things that are important to me—mass incarceration, the rights and struggles of the working class and the crimes of empire. I have read the site for a long time.

    DN: Much of what claims to be left—that is, the pseudo-left—reflects the interests of the affluent middle class.

    CH: Precisely. When everybody was, you know, pushing for multiculturalism in lead institutions, it really meant filtering a few people of color or women into university departments or newsrooms, while carrying out this savage economic assault against the working poor and, in particular, poor people of color in deindustrialized pockets of the United States. Very few of these multiculturalists even noticed. I am all for diversity, but not when it is devoid of economic justice. Cornel West has been one of the great champions, not only of the black prophetic tradition, the most important intellectual tradition in our history, but the clarion call for justice in all its forms. There is no racial justice without economic justice. And while these elite institutions sprinkled a few token faces into their hierarchy, they savaged the working class and the poor, especially poor people of color.

    Much of the left was fooled by the identity politics trick. It was a boutique activism. It kept the corporate system, the one we must destroy, intact. It gave it a friendly face.

    DN: The World Socialist Web Site has made the issue of inequality a central focus of its coverage.

    CH: That’s why I read it and like it.

    DN: Returning to the Russia issue, where do you see this going? How seriously do you see this assault on democratic rights? We call this the new McCarthyism. Is that, in your view, a legitimate analogy?

    CH: Yes, of course it’s the new McCarthyism. But let’s acknowledge how almost irrelevant our voices are.

    DN: I don’t agree with you on that.

    CH: Well, irrelevant in the sense that we’re not heard within the mainstream. When I go to Canada I am on the CBC on prime time. The same is true in France. That never happens here. PBS and NPR are never going to do that. Nor are they going to do that for any other serious critic of capitalism or imperialism.

    If there is a debate about attacking Syria, for example, it comes down to bombing Syria or bombing Syria and sending in troops, as if these are the only two options. Same with health care. Do we have Obamacare, a creation of the Heritage Foundation and the pharmaceutical and insurance industries, or no care? Universal health care for all is not discussed. So we are on the margins. But that does not mean we are not dangerous. Neoliberalism and globalization are zombie ideologies. They have no credibility left. The scam has been found out. The global oligarchs are hated and reviled. The elite has no counterargument to our critique. So they can’t afford to have us around. As the power elite becomes more frightened, they’re going to use harsher forms of control, including the blunt instrument of censorship and violence.

    DN: I think it can be a big mistake to be focused on the sense of isolation or marginalization. I’ll make a prediction. You will have, probably sooner than you think, more requests for interviews and television time. We are in a period of colossal political breakdown. We are going to see, more and more, the emergence of the working class as a powerful political force.

    CH: That’s why we are a target. With the bankruptcy of the ruling ideology, and the bankruptcy of the American liberal class and the American left, those who hold fast to intellectual depth and an examination of systems of power, including economics, culture and politics, have to be silenced.

     

  • Meet The 31-Year-Old Austrian Anti-Immigrant Who Just Became The World's Youngest Leader

    As discussed earlier, Austria’s young conservative star, Sebastian Kurz, is now assured of becoming the country’s next leader, projections of Sunday’s parliamentary election result showed, but his party is far short of a majority and is likely to seek a coalition with the resurgent far right.

    Sebastian Kurz arrives to cast his ballot on Oct. 15.

    To his supporters, Kurz is Austria’s Macron: a one-man political phenomenon who is the only thing standing between the country’s resurgent nationalists and power. But to his detractors he is the Austrian Trump, who has hijacked one of the country’s two main parties and refashioned it in his own image. His critics say he is only holding the populists back by adopting their anti-immigrant rhetoric and policies.

    By taking a hard line on immigration that commingled his campaign with that of the Freedom Party (FPO), 31-year old Foreign Minister Kurz managed to propel his People’s Party to first place and draw some support away from an FPO buoyed by Europe’s migration crisis. Both parties increased their share of the vote from the last parliamentary election in 2013, marking a sharp shift to the right. Chancellor Christian Kern’s Social Democrats were in a close race with the FPO for second place.

    Kurz now has a mandate to form a coalition, replace Social Democrat Christian Kern as chancellor and become the world’s youngest government leader.

    With the Freedom Party poised to return to government for the first time since 2005, congratulations poured in from European nationalists including France’s Marine Le Pen and Geert Wilders in the Netherlands, while the World Jewish Congress expressed concern. For German Chancellor Angela Merkel, the result may chip away at a key ally’s pro-European stance in the years ahead.

    Frauke Petry, a former head of the anti-immigration Alternative for Germany party, which drew inspiration from its Austrian counterpart, posted congratulations on Twitter. Ronald Lauder, who heads the World Jewish Congress, said the Freedom Party is “full of xenophobes and racists. It is sad and distressing that such a platform should receive more than a quarter of the vote and become the country’s second party,” he said in an emailed statement. “My only hope is that they won’t end up in government.”

    While Sunday’s projected result doesn’t guarantee a coalition with the Freedom Party, Kurz has a mandate to form a government after an early election he triggered by breaking up a coalition with the Social Democrats this year. The final tally may still be influenced by postal ballots, which will only be counted on Monday.

    “This is a strong mandate for us to bring about change in this country,” Kurz told cheering supporters in Vienna as the results came in. “It’s about establishing a new political style, a new culture. It is our task to work with all others for our country,” Kurz told his supporters, without revealing which way he was leaning on coalition talks.

    Austria, one of Europe’s wealthiest nations of 8.7 million people, whose capital Vienna is ranked every year among the top 3 cities in which to live, was a gateway into Germany for more than 1 million people during the migration crisis that began in 2015. Many of them were fleeing war and poverty in the Middle East and elsewhere. Austria also took in roughly 1 percent of its population in asylum seekers in 2015, one of the highest proportions on the continent. Many voters say the country was overrun.

    Kurz’s strategy of focusing on that issue paid off.

    Meanwhile, the FPO was short of its record score of 26.9 percent, achieved in 1999, but still has a good chance of entering government for the first time in more than a decade. The OVP and the Social Democrats are at loggerheads, meaning the FPO is likely to be kingmaker. FPO leader Heinz-Christian Strache, who has accused Kurz of stealing his party’s ideas, declined to be drawn on his preferred partner.

    “Anything is possible,” he told ORF. “We are pleased with this great success and one thing is clear: nearly 60 percent of the Austrian population voted for the FPO program.”

    “There won’t be a debate to leave the EU, but the Freedom Party is strong enough to demand significant concessions” and may lead Austria to align more often with eastern European countries that have challenged Merkel on issues including migration, said Thomas Hofer, a political consultant in Vienna. “Austria has mostly been an ally of Germany for decades, but that picture could change more often now,” Hofer said.

    Austria’s two big parties, the People’s Party and the Social Democrats, have governed together for 44 of the 72 years since World War II. While Kurz and Freedom leader Heinz-Christian Strache might shake up Austria’s cozy political order, they broadly agree in pledging business-friendly policies, notably to scrap corporate taxes on retained profits. They’ll also stay in the German-led camp favoring fiscal austerity in the euro area.

    * * *

    So who is Kurz?

    Kurz, dubbed both the “Conservative Macron” and “Austrian Trump” due to his age and his party reform, said: ‘I would of course like to form a stable government. If that cannot be done then there are other options,’ adding that he planned to talk to all parties in parliament but would first wait for a count of postal ballots that begins on Monday.

    The young leader has pledged to cut benefits for all foreigners in Austria and has vowed to stop the European Union meddling in the country’s politics.  

    In his victory speech, he said: “I can only say, I am really overwhelmed. We campaigned for several months.”

    “We built a massive movement. We had a goal to be the first ones over the (finish) line on October 15. We have made the impossible possible. Thank you for all your work and for this historic success. Today is not about triumphing over others. But today is the day for real change in our country. Today has given us a strong mandate to change this country, and I thank you for that. We were handed a great responsibility from the voters, and we should all be aware of it. We should also be aware that a lot of people have put their hopes into our movement. I can promise you that I will fight with all my strength and all my commitment for change in this country, and I want to invite you all to come along this path together with me.”

    Kurz also wants to slash Austria’s red tape and keep the EU out of national affairs.

    At 31, Kurz is young even by the standards of Europe’s recent youth movement, which saw Macron enter the Elysee Palace at the age of 39 and Christian Lindner, 38, lead Germany’s liberal Free Democrats (FDP) back into the Bundestag.

    Kurz and Lindner showed that young new faces can inject dynamism into old establishment parties that have lost their way with voters.  Kurz rebranded the OVP as the New People’s Party and changed its colours from black to turquoise.  Lindner used trendy black-and-white campaign posters that showed him staring at his smartphone to revitalise the FDP’s image.

    Macron, who formed his own political movement, was able to paint himself as a rebel outsider despite having served for four years under failed French Socialist Francois Hollande.

    By taking a hard line on immigration that left little daylight between him and the far-right Freedom Party (FPO), 31-year-old Foreign Minister Kurz managed to propel his People’s Party to first place and draw some support away from an FPO buoyed by Europe’s migration crisis. Both parties increased their share of the vote from the last parliamentary election in 2013, marking a sharp shift to the right. Chancellor Christian Kern’s Social Democrats were in a close race with the FPO for second place.

    Today Kurz was pictured voting in the Austrian capital Vienna alongside his girlfriend Susanne Thier – a finance ministry worker who he met at the age of 18.


    Sebastian Kurz, 31, is set to take power and form an alliance with the far-right.
    He is pictured today with his girlfriend Susanne Thier, a finance ministry worker

    Without revealing which way he was leaning on coalition talks, the 31-year-old told his supporters: “It is our task to work with all others for our country.”

    * * *

    Earlier

    The front runner in Austria’s Sunday election ended his campaign with a familiar message : Sebastian Kurz pledged to make Austria great again. He is set to become the world’s youngest leader, ahead of France’s Emmanuel Macron, who is 39… oh and North Korea’s 34-year-old Kim Jong-un, of course.

    “I want to put Austria back on top,” he told an adoring crowd in Wiener Neustadt according to the Telegraph. “I want to provide security and order, because the Austrian people deserve it.”

    Sebastian Kurz

    Austrians are voting Sunday in the country’s National Council elections, where according to recent polls the country’s 6.4 million voters are likely to ditch the current coalition in favor of a new government backed by anti-immigration nationalists and headed by a 31-year-old Millennial.

    Ahead of today’s election results, the conservative candidate of the Austrian People’s Party (OVP), 31-year-old Sebastian Kurz, is leading the polls with Social Democratic Party (SPO) and the right-wing anti-immigrant Freedom Party (FPO) battling to secure second place. Polls suggest Kurz will lead his conservative People’s Party to victory in Sunday’s election: a victory by the millennial could lead to the unwind of a decade of Social Democratic-led administrations “that revived the economy but struggled with issues over immigration and welfare” and result in the anti-immigrant Freedom Party becoming a part of the coalition government for the first time in history.

    To his supporters, Kurz is Austria’s Macron: a one-man political phenomenon who is the only thing standing between the country’s resurgent nationalists and power. But to his detractors he is the Austrian Trump, who has hijacked one of the country’s two main parties and refashioned it in his own image. His critics say he is only holding the populists back by adopting their anti-immigrant rhetoric and policies.

    After a surge of support for populist candidates in elections this year in the Netherlands, France and Germany, Austria looks like it will go one further and elect an anti-immigration alliance. The biggest winner will be the aspiring 31-year-old Kurz, who has been Austria’s Minister for Foreign Affairs and Integration since 2013, and who is leading his political campaign along the center-right principles which seem to exploit the refugee issue.

    Sebastian Kurz, 31, Austria’s foreign minister and leader of the People’s Party,
    greets supporters during his final campaign event in Vienna on Oct. 13

    A recent survey by Meinungsraum conducted for GMX.at shows that FPO might secure around 28.5% of the vote, followed by OVP with 26.5%. SPO is expected to attract roughly 20% of the vote. Another poll by Research Affairs/Österreich predicts OVP to secure around 33% of the vote. FPO is predicted to come in second with around 27% , followed by SPO with 23% of the vote.

    “People are worried about the future and that is the currency that matters in this election,” said Christoph Hofinger, head of the SORA polling institute in Vienna. “The debate is revolving around the issue of fairness, and a lot is also linked to migration.”

    Back in May, Kurz called for a snap election amid tensions with coalition partner, the Social Democrats. The young politician previously backed plans to block refugee routes into Europe and supported a ban on full-face veils. He also supports cracking down on radical Islam, echoing FPO sentiments and luring in nationalist voters.

    For the past two years, the issue of how to deal with the influx of migrants has been among the most sensitive in Austrian society. The swell of anxiety over immigration to Austria began building 2015, when almost 70,000 mostly-Muslim refugees sought asylum from war-torn countries such as Syria, Afghanistan and Iraq. Schools and hospitals in the nation of 8.7 million struggled to accommodate the newcomers, and disagreements over whether it was fair to give immigrants generous welfare support dominate the media.

    As a result, voters have gravitated toward promises by both the People’s Party and Freedom to limit the number of immigrants Austria receives and force newcomers to adapt local customs more quickly.

    Leading FPO candidate Heinz-Christian Strache gained massive support ahead of the election by focusing on the country’s immigration policies and on issues such as unemployment, minimum wage and pensions. The party, founded by a former Nazi SS member after the end of the World War II, stuck the nerve of the electorate by proposing to stop immigration and by speaking out against Islam. The FPO support grew to unprecedented levels following EU-wide ‘Open Door’ migrant policy championed by Germany in wake of 2015 refugee crisis.

    While the biggest number of migrants was welcomed by Berlin, Austria received nearly 150,000 asylum requests since 2015. Comprising just over 1 percent of the population, their presence in the country became the number one debated issue in the election.

    Meanwhile, the incumbent chancellor of Austria and chairman of the Social Democratic Party, Christian Kern, is virtually assured to lose his place as the head of the government. Unlike his rivals, Kern advocates a much softer stand on migration, instead placing emphasis on employment and the economy. Kern, 51, a former business executive plucked from the national railroad by the Social Democrats in May 2016, has been dogged by sloppy campaign management. Despite overseeing faster growth in the export-oriented economy, Kern has struggled to connect with voters. His No. 1 goal is achieving full employment, since “modernizing the country with investment in education, security, health care and pensions” depends on it, Kern said late Thursday in the campaign’s final debate.

    “Austria deserves someone who is ready to take on real responsibility for the population,” Strache said in a parliamentary speech this week, in which he chided Kern for letting thousands of refugees enter Austria, transported on the national railroad he ran before becoming chancellor.

    Regardless of performance in Sunday’s election, the three main parties must work together to form a new coalition government. Neither the OVP nor the SPO has ruled out a coalition with the FPO, which may play the role of the kingmaker at the end of the day since as the revival of OVP/ SPO coalition seems unlikely. Other parties such as the liberal NEOS (The New Austria and Liberal Forum) and the Greens are expected to secure single digits.

    Compared with 10 years ago, more Austrians say they feel like they’re not being heard and are in search of law-and-order leadership, a SORA institute study showed. More than two-fifths of voters declared their desire for a “strongman” leader, according to the research, periodically commissioned by the federal government to gauge public attitudes and consciousness about the country’s Nazi history.

     

    Step forward Kurz, the foreign minister who’s distanced himself from the People’s Party’s leadership and forged similar views with Freedom’s Strache on immigration. Both men want to restrict immigrant access to Austria’s social-security system and impose tighter policing on the country’s borders. The Freedom Party came within 30,000 votes of winning the presidency, a mostly ceremonial post, in a run-off vote last year.

    In Austria, anyone over the age of 16 is eligible to vote in roughly 13,000 voting locations throughout the Alpine nation. There are about 6.4 million voters, and those who cast their ballots will decide 183 contested seats at the National Council.

  • The U.S. Owes UNESCO Half A Billion Dollars

    This week, the U.S. and Israel announced that they would be withdrawing from UNESCO, citing 'continuing anti-Israel bias'.

    As Statista's Niall McCarthy notes, the move comes as a major blow to the organization which is known for designating cultural sites around the world such as the Grand Canyon or ancient Palmyra in Syria.

    The U.S. has been expected to pay the bulk of UNESCO's budget for years and it cancelled its financial contributions back in 2011 in protest of Palestine's admission as a full member.

    In the years since, it has amassed significant arrears of over $500 million…

    Infographic: The U.S. Owes UNESCO Half A Billion Dollars  | Statista

    You will find more statistics at Statista

    This year, the UK, Japan and Brazil have all failed to pay their contributions so far, accrueing nearly $70 million of arrears between them.

    This isn't the first time the U.S. has turned its back on UNESCO.

    The country also left the organization under Ronald Reagan in the 1980s before rejoining under George W. Bush in 2003.

    The latest withdrawal will come into effect at the very end of 2018.

  • Overheating China PPI Sends 10Y Yields To 30 Month Highs As Banks Inject Another Quarter Trillion Dollars In Loans

    Despite a disappointing US CPI report on Friday, which saw core inflation miss once again despite an expected spike due to the “hurricane effect”, moments ago China reported that in September, its CPI printed at 1.6% Y/Y, in line with expectations, and down from, 1.8% in August largely due to high year-over-year base effects, but it was PPI to come in smoking hot, jumping from 6.3% last month to 6.9% Y/Y, slamming expectations of a 6.4% print and just shy of the highest forecast, driven by the recent surge in commodity costs and strong PMI surveys.

    While there has been no reaction in the Yuan, either on shore or off, the stronger than expected PPI has pushed China’s 10Y yield to the highest in 30 months, or since April of 2015.

    Adding fuel to the flame was PBOC head Zhou Xiaochuan who said earlier that China’s GDP would pick up from the 6.9%  figure recorded in the first six months of the year “thanks to a boost from household spending”, according to a synopsis of his comments at the G30 International Banking Seminar posted to the People’s Bank of China website on Monday.” The reason why his comments have impacted the long-end is that the reported, and completely fabricated number, is higher than the previous consensus forecast of a goalseeked Q3 Chinese GDP of 6.8%.

    And while spiking Chinese yields wouldn’t be concerned if China was indeed deleveraging as the Communist Party and the PBOC claim it is doing, the reality is, of course, that China continues to add more and more debt as the latest weekend credit numbers out of the PBOC revealed. As Bloomberg reported earlier, China’s broadest credit aggregated, Total Social Financing, jumped to 1.82 trillion yuan, or over a quarter trillion dollars in September ($276BN to be precise), vs a Wall Street estimate of 1.57 trillion yuan and 1.48 trillion yuan the prior month. New yuan loans also beat expectations, at 1.27 trillion yuan, versus a projected 1.2 trillion yuan, while for the first time in months, the broader M2 money supply did not hit fresh fresh record lows, and instead beat expectations, rising to 9.2% from an all time low of 8.9%.

    Just as notable, after China’s shadow banking credit appeared to have finally been tamed after several months of contraction, shadow banking finance saw a pick-up in Sept (trust loans, entrusted loans and undiscounted bills), which accounted for 22% of Sept TSF vs. 18% in August. This was due mostly to milder deleveraging pace post the completion of self-checking of CBRC regs.

    Commenting on the latest burst of credit creation by China, Kenneth Courtis, chairman of Starfort Investment Holdings and a former Asia vice chairman for Goldman Sachs Group, said that “Momentum continues to be very strong. Loan demand of the private sector has finally turned up in recent months.”

    It also means that just two weeks after the PBOC cuts its RRR for most banks in an unexpected monetary easing on Sept 30, “there is little hope of further policy easing in the fourth quarter as the monetary policy is very accommodative,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “There could be even a tightening bias.”

    Of course, confirming what we have been saying for years, Christopher Balding who is an associated professor in Peking Univeristy in Shenzhen said that “deleveraging is not happening if we look at any measure of credit growth” and that “lending in 2017 has actually accelerated significantly from 2016.” This is shown in the chart below, which confirms that to keep its GDP at 6.9% or some other goalseeked number, China has to inject more than double that amount in credit every single month, in this case 15%. The biggest question is what happens to China’s credit impulse after the 19th Party Congress which begins on Wednesday.

    When looking at the boost in household spending noted above by Zhou Xiaochuan, all of this is the result of a surge in household lending: “Household short-term loans have increased too rapidly, with some funds being invested in stock and property markets,” said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. “Regulators have started to pay attention to the sector and required banks to strengthen credit review. I think the momentum will show signs of slowing in the fourth quarter.”

    Commenting on the recent burst in Chinese household leverage, where short-term household loans soared to 1.53 trillion yuan, versus 524.7 billion yuan this time one year ago, Deutsche Bank’s Hans Fan writes that “noticeably China households are levering up quickly. We welcome the personal loans driven by genuine consumption growth, but there may be a notable portion of short-term consumer loans that were used to finance property purchases, which in our view contains higher risks.” 


    Some more details:

    A breakdown by borrower suggests household and corporate sectors continued to lever up, making up 31%/41% of new system credit in Sept (35%/38% in Aug). For households, while mortgage growth had slowed, s/t retail loan growth accelerated to 17.6% yoy in Sept (vs. 15.8% in Aug or 7.3% in 1Q17) to make up c.10% of credit creation. We attribute this to both decent consumption growth with rising credit penetration and property-related lending. We estimate 1/3 of new consumption loans may be used to finance purchases of second homes. However, PBOC and local CBRC offices have started to crack down on property-related consumer loans in September and we expect consumer loan growth momentum to moderate in the coming months.

    However, as so often happens in China, this surging leverage “sugar high” will not last, as “regulatory crackdown on property-related consumer loans together with monetary policy staying neutral lead us to expect slower credit growth in 4Q17.” The implications for China’s economy and the global credit impulse will be adverse, and will lead to a global economic slowdown just as all central banks enter tightening moment together.

    Finally, for those wondering what the biggest timebomb in the global financial system was, is and will be until such time as it finally blows up, here is a lovely up close schematic courtesy of Deutsche Bank.

  • Is War Between Israel And Hezbollah Imminent?

    Submitted by Elijah Magnier, Middle East based chief international war correspondent for Al Rai Media

    The US has raised the level of tension with Iran without taking any concrete steps to pull out of the Iranian nuclear deal. The reason why Trump is expected to limit himself to verbal abuse and continue threatening hostile measures against Tehran without executing them is fundamentally to avoid a breach between the US and the EU. The Nuclear deal is not bilateral, so the withdrawal of the US theoretically cannot scupper it. Nevertheless Iran is likely to consider the deal totally void if the US pulls out, with all that that implies. So the US continues its aggressive verbal campaigns against Iran, confusing the Europeans, who rightly fail to predict what decisions this US President is capable of adopting in the medium to long term.

    However, the target is not only Iran but also its main ally and military arm in the Middle East: the Lebanese Hezbollah. The US posted bounties on two Hezbollah members of the military council (the highest military authority within the organisation), Haj Fuad Shukr and Haj Talal Hamiyeh, allocating “$12 million to whomsoever is able to offer information” that brings these two to justice. The US bounty purposely showed old photos of the two men to avoid revealing the intelligence sources which have provided the most recent ones. The main question remains: which country is going to take advantage of such an offer, and how?


    Hezbollah troops at a rally and speech. Image source: Anadolu

    Iran is not longer interested in what Donald Trump will do in relation to the nuclear deal. The Iranian leadership has created hundreds of commercial companies during the embargo, mainly in Oman, Dubai, and Abu Dhabi, to counter over 30 years of US sanctions and embargo. Moreover, Iran used gold and oil in exchange of goods and technology and managed to hold on for many years, accepting to buy at a higher price in the open market.

    Today the nuclear deal has opened the thirsty Iranian market and connected it to the European markets. The EU is unwilling to lose that now – especially with the financial crisis the old continent has been going through since 2008 – all because Trump, the US President (alone among all the signatories) considers unilaterally that the “spirit of the nuclear deal has been violated”. The US would like to see the Iranian missile program halted and the supply of weapons to Hezbollah cease: this would also please Saudi Arabia and Israel. However these issues are considered by all the countries who signed (including Iran but excepting the US) as unrelated to, and excluded from, the nuclear deal.

    Saudi Arabian officials visited recently Washington, offering unlimited financial assistance as long as the US helps to destroy Hezbollah and limit Iran’s influence in the Middle East. In fact, Hezbollah is considered responsible for spoiling the game of the international and regional countries who were supporting a regime change in Syria. Therefore, many would like to see Hezbollah, the strong arm of Iran, cut off completely because this would transform Iran into a giant without arms.

    Moreover, during the Saudi Arabian King Salman’s visit to Moscow, the monarchy told the Russian President Vladimir Putin that all groups operating in Syria, such as the “Islamic State” (ISIS), al-Qaeda and Hezbollah are considered terrorist and should be eliminated. Putin, despite the King’s generous financial offer of contributions to invest in Russian products was very clear: any country or group fighting in Syria following the request of the legitimate government is not a terrorist group. The “head of Hezbollah” was not on the table in the Russian capital.

    As for as the US rewards are concerned, the Hezbollah leaders of the first, second and third ranks of the organization are moving freely between Beirut, Damascus, Tehran and Baghdad according to the requirements of the “war on terror” the organization is involved in against ISIS and al-Qaeda in Syria and Iraq.

    No authority – neither the Lebanese authorities nor the US authorities – would dare to arrest any of Hezbollah’s leaders without suffering direct consequences that would backfire against their solders or interests in the Middle East. Abduction (or capture) is expected to be treated similarly and rejected without hesitation.

    The most recent “incident” occurred in Iraq when Washington expressed its desire – when Baghdad asked all US forces to pull out from Iraq under President Barack Obama – to take the Lebanese Hezbollah commander, Ali Moussa Daqduq, to ??America. Hezbollah then sent a clear message to the US administration – through Iraqi leaders – that taking Daqdouq away from Iraq meant that every US soldier and officer in the Middle East, mainly in Iraq, would be held hostage.

    This prompted Washington to turn a blind eye and leave the Iraqis to decide the fate of the Hezbollah officer who had participated in the killing of five American soldiers and officers in an impressively planned operation in Karbala. In January 2007 Daqdouq – along with Moqtada al-Sadr’s resistance group AsaebAhl al-Haq – used bulletproof black cars belonging to an Iraqi minister that the same US had given him as a donation. The fact that Daqdouq was on board facilitated the entry of the convoy into the government building without raising the suspicions of the American forces stationed inside the building.

    Hezbollah is aware there are many American soldiers and officers who travel freely within Lebanon, mainly operating with the Lebanese Army. Therefore, the organization is reassured that the United States is conscious of Hezbollah’s capability for responding by reciprocity and will not leave their men prisoners without an action or reaction. Hezbollah thereby considers its own leaders safe from kidnapping, though not from assassination attempts.

    Thus, the US ”bounties” on the two Hezbollah commanders aim to please the US’s Middle Eastern allies (mainly Israel and Saudi Arabia) saying “we are all in one boat against Hezbollah’s presence and operational capabilities”. Indeed, it shows how Washington is serious about taking political – rather than operational – measures to limit Hezbollah and Iran in the Middle East. Both are considered enemies of the US and its close Israeli and Saudi Arabia associates.

    Tel Aviv – like Washington – is limiting itself to adopting a threatening rhetoric, talking about “a nearby war” against Hezbollah but without taking the narrative further or adopting any belligerent steps besides the rumbling of its drums.

    In the unlikely event of war between Israel and Hezbollah, there is no doubt that Israel has the destructive military capability to bring back Lebanon to the “Stone Age,” as it claims. However, this is a situation that the Lebanese have already experience of since the civil war in1975 and the two (1982 and 2006) Israeli wars. In these wars, Israel launched attacks and destroyed the Lebanese infrastructure, killing thousands of civilians and hundreds of Hezbollah militants.

    However, there is also no doubt that Hezbollah would give Israel a taste of a similar “Stone Age” scenario, with its tens of thousands of rockets and missiles, among them some of the very highest accuracy. The Israeli population however is not accustomed to such a harsh possible scenario: Hezbollah missiles will hit the infrastructure (bridges, concentration locations, markets, water, electricity, chemical plants and more), harbours, airports, military barracks and institutions, and civilian homes.

    It is true that Israeli political and military leaders are not naïve and will never exchange their own security against economic and financial support (which was offered by Saudi Arabia to destroy Hezbollah), no matter how substantial the offer. Israel won’t exchange a public diplomatic relationship with Saudi Arabia and most of the Gulf countries to give up its own safety and the well-being of its people. Israeli commanders are fully aware of the unique military experience which Hezbollah developed in Syria and Iraq, and how Hezbollah is using new underground caches for its long-range accurate missiles on the Lebanese-Israeli borders.

    Nevertheless, Israel and the US are capable of carrying out security and intelligence attacks to strike Hezbollah leaders, as both countries have done in the past with the late Hezbollah Secretary General Sayed Abbas al-Moussawi, with Sayed Hasan Nasrallah’s vice Imad Mughnniyeh and against other minor positions within the leadership such as Hussein al-Lakis, Samir Qantar, Jihad Mughnniyeh, and others.

    The “account” is still open between Hezbollah and Israel. The Lebanese organization has certainly tried similar intelligence strikes against Israel. However, several attempts have failed due to poor planning and a US-Israeli intelligence breach of Hezbollah security by an officer involved in the external operations unit.

    But the balance of terror between Hezbollah and Israel remains: Hezbollah feels more at ease in Syria today and is able to dedicate more resources to the fight against Israel and its allies in the region.

    Thus, American pressure remains within the limits of the inability of anyone to take it further: there is no country or entity that wants to confront a rival like Hezbollah, trained in the art of war and politics and an essential player in the Middle Eastern and international arenas.

  • There Are 2.7 Trillion Reasons Why Tesla Won't Rule The World

    News of mass “performance-based departures” at Tesla, reported yesterday by the San Jose Mercury News has underscored the fact that Elon Musk and company have burned through a ridiculous amount of cash in the past two quarters alone, raising questions about why the company would choose to cut nearly 10% of its workforce when the assembly line for the company’s new Model 3 sedan has reportedly not yet been completed, and production remains woefully behind schedule as employees at the company’s Freemont factory have been forced to piece together the cars by hand.

    And with Elon Musk reeling from a series of embarrassing revelations, Bloomberg is here to remind us of one of the many reasons why Tesla will never become a global automotive behemoth.

    So far, the US government’s generous tax incentives for buyers of electric vehicles have helped bolster Tesla’s sales – a strategy that has been employed across Europe – and have sustained the market’s misguided conviction that Tesla will one day become a profitable enterprise.

    But unfortunately, those incentives aren’t nearly enough to create the infrastructure to support Morgan Stanley’s forecast of 526 million electric vehicles operating globally by 2040. Building the charging stations and other infrastructure necessary would cost an astonishing $2.7 trillion, much of which would probably need to be allocated by governments.

    Morgan Stanley says the problem requires a mix of private and public funding across regions and sectors. The investment bank’s strategists added that any auto company or government with aggressive targets would be unfeasible unless the infrastructure is in place.

    As we’ve noted time and time again, the electric-vehicle industry is essentially being support by generous – and borderline anti-competitive – government subsidies. In China, which has aggressively pushed EVs as a potential remedy for its pollution problem, communist party officials have hit on an effective strategy for forcing consumers to favor electric vehicles. In Shanghai, where tens of thousands of people enter monthly lotteries for just a handful of license plates, consumers who buy electric cars are given license plates with little resistance.

    Morgan Stanley expects China to become the largest EV market in the world by 2040, accounting for about a third of global infrastructure spending, Bloomberg reports.

    But with Trump in office, it’s unlikely the US will prove so amendable to subsidizing Elon Musk’s ambitions for much longer.

  • China's Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis

    Authored by He Huifeng via The South China Morning Post,

    In an inglorious echo of 2007 America, many young homeowners in booming cities owe more than they earn, and some even falsify salary details to get bigger mortgages…

    Young Chinese like Eli Mai, a sales manager in Guangzhou, and Wendy Wang, an executive in Shenzhen, are borrowing as much money as possible to buy boomtown flats even though they cannot afford the repayments.

    Behind the dream of property ownership they share with many like-minded friends lies an uninterrupted housing price rally in major Chinese cities that dates back to former premier Zhu Rongji’s privatisation of urban housing in the late 1990s.

    Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years.

    City residents in their 20s and 30s view property as a one-way bet because they’ve never known prices to drop. At the same time, property inflation has seen the real purchasing power of their money rapidly diminish.

    “Almost all my friends born since the 1980s and 1990s are racing to buy homes, while those who already have one are planning to buy a second,” Mai, 33, said.

     

    “Very few can be at ease when seeing rents and home prices rise so strongly, and they will continue to rise in a scary way.”

    The rush of millions young middle-class Chinese like Mai into the property market has created a hysteria that eerily resembles the housing crisis that struck the United States a decade ago. Thanks to the easy credit that has spurred the housing boom, many young Chinese have abandoned the frugal traditions of earlier generations and now lead a lifestyle beyond their financial means.

    The build-up of household and other debt in China has also sparked widespread concern about the health of the world’s second largest economy.

     

    The Chinese leadership headed by President Xi Jinping has taken a note of the problem and launched an unprecedented campaign in the second half of last year to curb home price rises in major cities by raising down payment requirements, disqualifying some buyers and squeezing the bank credit available for home buyers. The campaign is still deepening, with five more cities introducing rules last weekend that will freeze some property deals.

    Meanwhile, China’s financial regulators have launched an investigation of “consumer loans” in big cities because a torrent of consumer credit flowed into the property market after the government imposed restrictions on mortgage loans.

    Government policies are also protecting the interests of homeowners. City governments have squeezed land supply to keep land prices high and made secondary market trading less attractive, with new home buyers left to compete for a few new developments. Meanwhile, there is no property tax, which encourages homeowners to hold on to appreciating property assets.

    The result has been skyrocketing housing prices in Shenzhen, Beijing and Shanghai, where property prices can match those in Hong Kong or London.

    The lesson was that “if you don’t buy a flat today, you will never be able to afford it”, Wang, 29, said.

    Property ownership was now increasingly what separated the rich and the poor, the haves and have-nots, and the privileged and the underdogs, she said.

    And that means young people like Mai and Wang are scrambling for credit to buy property.

    In May last year, after the value of his first flat, a 70 square metre unit in Guangzhou’s Panyu subdistrict, soared from 900,000 yuan (US$136,500) to 1.2 million yuan in just a few months, Mai, who has a monthly salary of 15,000 yuan, decided to raise the down payment for a new property to cash in on the booming housing market.

    In June, he emptied his and his parents’ 300,000 yuan in savings and incurred debts to friends to muster the 50 per cent down payment for a 2.4 million yuan flat.

    To meet the mortgage repayments of about 12,000 yuan a month on the two flats, and other debts to friends, he used the first flat as collateral for a loan about 800,000 yuan and got 200,000 yuan in cash from a short-term consumer loans supposedly for a car.

    Mai got the money easily from local banks and financial institutions. Now, he needs to pay about 25,000 yuan a month for loans totalling around 3 million yuan, including around 4,000 yuan in mortgage payments for his first flat, about 7,300 yuan in mortgage payments for his second flat, nearly 9,000 yuan on the secondary mortgage for his first flat, 3,800 yuan for car loans, and the rest to service debts to family members and friends.

    In Wang’s case, she borrowed 500,000 yuan from her parents, relatives and friends and sourced another 300,000 yuan from credit cards and consumer loans to pull together 800,000 yuan late last year for the minimum down payment on a small flat.

    She also borrowed 1.8 million yuan from a bank, with monthly mortgage payments of about 9,600 yuan – 80 per cent of her monthly income – for 30 years. To help cover the mortgage, her mother, a retiree who lives 4,000km away in a city in northeastern China, remits the bulk of her pension to Wang.

    “The debts are huge to me,” Wang said. “But a person without a flat has no future in Shenzhen.”

    In China’s world of debt, household debt is supposed to be much safer than corporate or local government debt. Outstanding household loans were the equivalent of 44.4 per cent of China’s gross domestic output last year, more than double the ratio in 2008 but much lower than in most advanced economies. The ratio is 87 per cent in Britain, 79 per cent in the United States and 62 per cent in Japan.

     

    But the figure could be misleading because it failed to reflect regional differences and it under-reported many hidden family debts in China, a recent report by the Institute for Advanced Research at Shanghai University of Finance and Economics said.

    Because Chinese household incomes were growing more slowly than property prices, families were facing serious liquidity problems, with increasing amounts of income and savings sucked into the property market, Chen Yuanyuan, a co-author of the report, told the South China Morning Post.

    Real household debt would have been the equivalent of at least 60 per cent of China’s GDP at the end of last year, Chen said, warning that the rapid rise in household debt was undermining China’s economic growth prospects.

    “If it goes on, as early as in 2020, the ratio of mortgage debt and disposable income in China will reach the same peak level [127 per cent] as the US [in 2007] on the eve of the subprime crisis,” Chen said.

    The boom in China’s housing market since 2015 was the result of soaring household debt leverage, Jiang Chao, an analyst at Haitong Securities in Shanghai, said in a research note last month.

    China’s household debt to household disposable income ratio had soared to 90 per cent from less than 35 per cent in 2007, he said. Meanwhile, its household savings to household disposable income ratio had dropped from more than 30 per cent in the early 2000s to about 15 per cent last year.

    The latest data from the People’s Bank of China, the country’s central bank, shows that at the end of May, domestic household savings deposits totalled around 63 trillion yuan while the amount of outstanding personal loans had soared to 36.4 trillion yuan, up from 8.8 trillion yuan in 2010.

    The Chinese tradition of saving money for a rainy day has been uprooted, and it’s not just that the younger generation, like Wang and Mai, are trying to spend before they earn. Their property buying frenzy has also been endorsed by their parents.

    “My mum is happy about my decision,” Wang said.

    Shenzhen is one of the most indebted cities in China. Data from Lianjia, the country’s biggest property agent, shows that Shenzhen property buyers took on a record amount of debt last year, with mortgage loans a feature of more than 93 per cent of purchases.

    Property buyers in the city spent an average of about 3.7 million yuan on their flat in the first half of last year, with mortgage loans averaging 2.38 million yuan, Lianjia said, resulting in an average loan-to-value ratio of just over 64 per cent. In Hong Kong, banks’ average loan-to-value ratio for new mortgages was 51 per cent in December, according to Standard & Poor’s, while in the US last year it was 55.5 per cent, according to Statista, a leading Web-based data and statistics provider.

    China’s first home buyers are, on average, younger than those elsewhere in the world, with most of those in Shenzhen in their 20s and 30s. On average, they need to pay about 10,600 yuan a month for 30 years for their first flat – or 13,000 yuan for 20 years – based on the current mortgage interest rate of 4.9 per cent. Meanwhile, the average white-collar salary in Shenzhen was 8,315 yuan last year and 8,892 yuan in the first quarter of this year, according to Zhaopin.com, a leading Chinese jobs website.

    “Chinese banks typically allow homebuyers to use up to half of their monthly incomes to repay mortgages,” said Julia Fan, a former state bank manager.

     

    “But the market in cities like Shenzhen and Shanghai is full of buyers whose out-of-pocket property spending is much more than their actual monthly salaries.”

    Bill Duan, a manager at a Chinese investment bank, said it was not unknown for Chinese buyers to exaggerate their salaries or use fake payslips when taking out mortgages and loans, “and this may be when the problem starts”.

    “It’s known among industry insiders that local branches of the banks in many cities do not always double-check salary details with employers, even though the applicants offered salary certificates for several times the city’s average wages,” he said.

    Mai and Wang have been playing it fast and loose to deal with their debts.

    Mai has lent 600,000 of the 800,000 yuan he got from a bank after using his first flat as collateral to a money shark promising an annualised return of 20 per cent. Wang gave the bank fake documents showing her monthly income was 18,000 yuan – about 1.6 times her actual salary. It did not ask any questions.

    Neither see any problem, because the value of their underlying assets, the flats, have risen.

    The value of Mai’s two flats rose from 3.8 million yuan last year to 6.4 million yuan last month, while the value of Wang’s unit is now 2.93 million yuan, up from 2.6 million yuan.

    “I think I made a smart and successful decision to leverage debt,” Mai said.

  • Fiancee Of 'Suspended' Amazon Studios Head Calls Off Wedding

    Former Amazon Studios head Roy Price’s terrible, awful no-good week just got even worse…

    Earlier in the week, Price was unceremoniously suspended by Amazon this past week for reportedly sexually harassing female colleagues.

    Price allegedly lewdly propositioned Isa Hackett, a producer on 'The Man in the High Castle,' back in 2015, promising during a late-night cab ride that she’d “love his dick.” On the evening of July 10, 2015, after a long day of promoting Man in the High Castle at Comic-Con in San Diego, Hackett attended a dinner with the show's cast and Amazon staff at the US Grant Hotel. At the dinner, Price asked Hackett to attend an Amazon staff party later that night at the former W Hotel. She ended up in a taxi with Price and Michael Paull, then another top Amazon executive and now CEO of the digital media company BAMTech.

    During the ride, Price repeatedly propositioned her, Hackett said. Though she immediately reported the incident to Amazon, little was done until this week when Price, the executive in charge of Amazon studios, was suspended “indefinitely”.

    Hackett is the daughter of the late Philip K. Dick, who wrote the acclaimed novel on which “The Man in the High Castle” is based.

    Amazon said in a statement this past week,

    “Roy Price is on leave of absence effective immediately. We are reviewing our options for the projects we have with The Weinstein Company.”

    And now, Price’s fiancée, writer Lila Feinberg, has called off their wedding, which was set to take place in four weeks.

    A source close to the couple confirmed the news of the cancellation to Page Six:

    “Lila is currently in New York and she has called off the wedding.”

    Feinberg was due to wear a Marchesa dress at the nuptials that had been custom-designed by Harvey Weinstein’s wife, Georgina Chapman, who this week announced she was leaving the movie mogul after more than 30 women came forward to accuse Weinstein of harassment, groping and – in more than a handful of instances – rape.

    Price was said to be close friends with Weinstein.

    Feinberg was awarded Araca Group’s National Graduate Playwriting Award for her play “Vertebrae,” and is also the creator and executive producer of “12 Parties,” an original series that was acquired by The Weinstein Company.

    She has also sold projects to Legendary Television and MTV.

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Oct 15

Today’s News 15th October 2017

  • Forget Catalonia, Flanders Is The Real Test Case Of EU Separatism!

    Authored by Andrew Korybko via Oriental Review,

    Catalonia’s separatist campaign has dominated European headlines for the past couple of weeks, but it’s really the northern Belgian region of Flanders which will serve as a barometer over whether large chunks of the EU will fall apart into a collection of identity-centric statelets prior to the bloc’s reconstitution into a “federation of regions”.

    What’s going on in Catalonia is of paramount importance to the geopolitical future of Europe, since it could very well serve as the catalyst for fracturing the EU if copycat movements elsewhere are emboldened by the Spanish region’s possible separatist success. This was explained in detail in the author’s recent analysis about “The Catalan Chain Reaction”, which readers should familiarize themselves with if they’re not already acquainted with the thesis put forth in that work. To concisely summarize, there’s a very distinct possibility that the EU’s liberal-globalist elite have been planning to divide and rule the continent along identity-based lines in order to further their ultimate goal of creating a “federation of regions”.

    Catalonia is the spark that could set off this entire process, but it could also just be a flash in the pan that might end up being contained no matter what its final result may be. Flanders, however, is much different because of the heightened symbolism that Belgium holds in terms of EU identity, and the dissolution of this somewhat artificially created state would be the clearest sign yet that the EU’s ruling elite intend to take the bloc down the direction of manufactured fragmentation. Bearing this in mind, the spread of the “Catalan Chain Reaction” to Belgium and the inspiration that this could give to Flanders to break off from the rest of the country should be seen as the true barometer over whether or not the EU’s “nation-states” will disintegrate into a constellation of “Balkanized” ones.

    “The First Bosnia”

    In order to properly understand the state of affairs at play, it’s necessary to briefly review the history of what could in some sense be described as “The First Bosnia”, or in other words, Europe’s “first artificially created state”. Most of the territory of what is nowadays referred to as Belgium was unified with the modern-day Netherlands from 1482-1581 when the political entity was referred to as the Habsburg Netherlands. The southern part (Belgium) came under Spanish control from 1581-1714 when it was called the Spanish Netherlands. Afterwards, it passed under Austrian administration from 1714-1797 when it became the Austrian Netherlands prior to its brief incorporation into the First French Republic and later Empire from 1797-1815. It was during the Spanish and Austrian eras that Belgium began to consider Catholicism as an inseparable part of its national identity in opposition to the Netherland’s Protestantism. Finally, Belgium was part of the United Kingdom of the Netherlands from 1815-1839 until the Belgian Revolution made it an independent state for the first time in its history.

    In essence, what ended up happening is that a majority-Catholic but ethno-linguistically divided population got caught up in the 19th century’s wave of nationalism and created a hybrid Franco-Dutch state that would eventually federalize in the late-20th century, in a structural sense serving as a precursor to the dysfunctional Balkan creation of Bosnia almost a century and a half later.

    It’s important to mention that the territory of what would eventually become Belgium had regularly been a battleground between the competing European powers of the Netherlands, the pre-unification German states, France, the UK, and even Spain and Austria during their control of this region, and this new country’s creation was widely considered by some to be nothing more than a buffer state. The 1830 London Conference between the UK, France, Prussia, Austria, and Russia saw the Great Power of the time recognize the fledgling entity as an independent actor, with Paris even militarily intervening to protecting it during Amsterdam’s failed “Ten Day’s Campaign” to reclaim its lost southern province in summer 1831. For as artificial of a political construction as Belgium was, it fared comparatively well during the 19th century as it leveraged its copious coal supplies and geostrategic position to rapidly industrialize and eventually become a genocidal African colonizer in the Congo. Although it was devastated in both World Wars, Belgium was able to bounce back in a relatively short period of time, partly because it could rely on its Congolese prison state.

    In The Belly Of The Beast

    Flash forward to the present, and the only thing that modern-day Belgium has in common with its past self is its internal divisions. The post-colonial aftermath of “losing the Congo” and shortly beforehand agreeing to host the capital of the European Union opened up previously nationalistic Belgium to liberal-globalist influence, which contributed to what would eventually become its utter domestic dysfunction in recent years. It wasn’t by chance that Brussels was chosen as the EU’s headquarters either, since its inherent weakness was thought to make it an ideal “compromise country” for establishing the bloc’s headquarters, as it would never become as powerful as France, for example, in potentially monopolizing the international organization’s agenda. Again, Belgium’s history as a buffer state/region came into relevant play in positioning it “in the belly of the beast” that’s nowadays reviled by all sorts of individuals across the continent.

    The administrative disconnect between its northern region of Flanders and the southern one of Wallonia, as well as what would eventually become its multi-tiered federal, regional, and community structure, was exploited by the EU’s ideologically extreme elite to make the country the centerpiece of their “multicultural experiment”. After decades of facilitating mass migration from civilizationally dissimilar societies of the “Global South”, 5.9% of the country is Muslim while at least an astonishing 20% of Brussels follows Islam. Almost all of the capital’s Muslims are immigrants, mostly from Morocco and Turkey, which isn’t surprising considering that 70% of Brussels’ inhabitants are foreign-born. Unfortunately for the native locals, the “multicultural experiment” has failed miserably, and Belgium is now Europe’s jihadist leader in terms of the per capita number of fighters who have travelled abroad to join Daesh.  All things considered, the “utopia” that the Belgians were promised by joining the EU and hosting its headquarters has turned into a dystopia, and the country now finds itself in the belly of the liberal-globalist beast.

    It’s little wonder than that some of Belgium’s population wants to escape from the organization which is responsible for their socio-cultural and security challenges, ergo the Flemish independence movement which aims to see the country’s northern region become an independent state because of the lopsided demographic-economic advantage that it has over Wallonia. Flanders contributes four times as much to Belgium’s national economy as Catalonia does to Spain’s, being responsible for a whopping 80% of the country’s GDP as estimated by the European Commission, and it also accounts for roughly two-thirds of Belgium’s total population unlike Catalonia’s one-sixth or so. This means that Flemish independence would be absolutely disastrous for the people living in the remaining 55% of the “Belgian” rump state, which would for all intents and purposes constitute a de-facto, though unwillingly, independent Wallonia. Therefore, it’s important to forecast what could happen if Belgium ultimately implodes with Flanders’ possible secession.

    Breaking The Buffer State

    This section should appropriately be prefaced by emphasizing that there’s no guarantee that Flanders will actually secede from Belgium, or that it would be successful in holding an unconstitutional referendum such as the one that Catalonia did in attempting to “legitimize” its anti-state ambitions. Furthermore, the Belgian state or its EU superstate overseer might resort to force just as Madrid did in trying to prevent this region’s secession, so the reader shouldn’t take it for granted that Flanders will inevitably become an independent state. Having gotten the “disclaimer” out of the way, however, there’s a very real chance that the “Catalan Chain Reaction” will spread to the “belly of the beast” in catalyzing a similar separatist process in Flanders, hence why the author argued in the introduction that the outcome of such a reenergized post-Catalan movement in this region will be the best barometer in gauging whether the EU’s liberal-globalist elite do indeed plan to “Balkanize” the bloc into an array of regionally “federalized” identity-centric statelets.

    Given the domestic and historical particularities of the Belgian case study, it appears likely that Flanders’ successful secession (however it ends up coming about) would lead to a narrow range of geopolitical outcomes for the Western European country.

    The first one is that Wallonia would be unable to function as a stand-alone “rump”/”independent” state given its measly 20% of unified Belgium’s GDP, its one-third of the previous population, and presumed dependency on Flanders’ port of Antwerp for most economic contact with the “outside world’ aside from France and Germany. For these reasons, it’s conceivable that the French-speaking region could be taken over by France just like how the famous French diplomat Charles Maurice de Talleyrand-Périgord originally envisioned in his unfulfilled eponymous “Talleyrand partition plan” that was first unveiled during the 1830 London Conference. As for Flanders itself, it could either attempt to remain an “independent” state or possibly confederate with the Netherlands, if there was any desire from both parties for this latter option.

    Where things get tricky, however, is when it comes to the German-speaking community in eastern Wallonia, which might not want to become part of France. Also, for reasons of sensitive political-historical optics, they probably wouldn’t be able to join Germany because it would carry uncomfortably strong shadows of Hitler’s annexation of the Sudetenland during the pre-World World II dissolution of Czechoslovakia. Therefore, it’s likely that this sub-region would remain within Wallonia, which itself would probably become part of France, albeit with possible autonomy guaranteed to the German speakers that Paris would be “inheriting”. That said, this isn’t the trickiest part of any Belgian breakup, as the status of Brussels would definitely occupy center stage in this scenario. The EU would be inclined to see to it that its capital becomes an “independent” city-state on par with similarly sized Liechtenstein, though with a much higher and more dangerous Salafist demographic to contend with, one which could make it the “rightful” capital of “Eurabia” if civilizational-geopolitical trends continue in that direction.

    Concluding Thoughts

    The future of Flanders will be more of a harbinger of the EU’s administrative-political future than Catalonia’s will be, though the latter is indeed the trigger for sparking what might become the former’s emboldened separatist push. If the host country of the EU’s headquarters falls victim to the secessionist trend that might be poised to sweep across the bloc due to the “Catalan Chain Reaction”, then it would confidently indicate that the EU’s ruling liberal-globalist elite are determined to initiate the “controlled Balkanization” of the continent into a constellation of identity-centric statelets so as to ultimately satisfy their long-held goal of implementing a “federation of regions.

    There is no place in Europe more symbolically significant than Belgium, and especially its jihadist dystopian capital of Brussels, so if the European power structures “allow” Flanders to separate from “the First Bosnia”, then it’s all but certain that the rest of the bloc will feel the geopolitical reverberations within their own borders sooner than later.

  • Hillary Goes To College: Clinton In Talks To Accept Columbia Professorship

    Like the old joke goes: Those who can’t, teach.

    And after losing an election to the most controversial and unpopular candidate in American history, Hillary Clinton is going back to school.

    The New York Post is reporting, citing sources close to the Clinton camp, that the former Secretary of State is in talks to accept a professorship at Columbia University in Morningside Heights.

    “She’s been in discussions about a professorship, but nothing has been locked down,” a friend of the ex-secretary of state said Thursday.

    As the Post reports, the Ivy League university in upper Manhattan has been a friendly landing pad for other Democrats who have lost elections. Al Gore became a professor at Columbia’s Graduate School of Journalism a year after losing the 2000 presidential election to George W. Bush. And the school hired former mayor David Dinkins after he lost his re-election bid to Rudy Giuliani in 1993.

    The former mayor told the Post that he’d be happy to see Clinton in Morningside Heights.

    Columbia is familiar territory for the Clintons. The Clinton Foundation once had an office in Harlem. Her professorship would reportedly involve leading seminars about issues she is passionate about. No word yet on whether these will include a thorough deconstruction of the forces that cost her the 2016 election.

  • Amid Management Exodus, Tesla Fires Hundreds Of Workers

    One month after Tesla lost its head of business development who wished to “spend more time with his family”, and just weeks after the EV company’s veteran battery technology director also unexpectedly quit amid a growing senior management exodus (full list at the bottom of this article), Tesla decided to even out the ranks on the bottom as well, and fired “hundreds of workers” this week, including engineers, managers and factory workers even as the company struggles to expand its manufacturing and product line, according to the Mercury News which first reported of the mass layoffs.

    Workers estimated between 400 and 700 employees have been fired, although Tesla refused to say how many employees were let go, and added that it expects employee turnover to be similar to last year’s attrition. Tesla employs about 10,000 workers at its Fremont factory; it lost $336 million in the second quarter, and burned through a record $1.16 billion in cash in Q2, or $13 million per day.

    In September, Tesla announced it was cutting 63 positions at SolarCity Corp.’s Roseville, California office; the staff was dismissed after Tesla bought the company, which manufacturers and installs rooftop solar panels, for about $2 billion in 2016.  SolarCity had over 12,200 employees as of the end of 2016.

    The dismissals come at a critical point for the company, which is scrambling to increase vehicle production five-fold and reach a broader market with its new Model 3 sedan. The electric vehicle maker missed targets for producing the lower-cost sedan, manufacturing only 260 last quarter despite a wait list of more than 450,000 customers. It was later revealed by the WSJ that Tesla’s “dirty secret” for the unexpected production problem is that it was banging out parts of the Model 3 by hand.

    According to the Mercury News, this week’s dismissals have not been reported to the state Employment Development Department, a spokeswoman said. The state generally requires companies to report layoffs of more than 50 employees in a 30-day period. Tesla countered that the performance-based departures were not considered layoffs and not subject to state notifications.

    In an absurd demonstration of Musk’s bizarre management style, the company said the mass terminations have “generally boosted worker morale”, as high-performing employees have been rewarded. it was unclear what the 700 layoffs, pardon, exit events did to worker morale.

    While the company said this week’s dismissals were the result of a company-wide annual review, claiming some workers received promotions and bonuses, and expects to hire for the “vast majority” of new vacancies, insisting the mass terminations were not layoffs, some critics have noted that these are layoffs “plain and simple” as a company does not fire 700 people at the same time in the middle of the year due to “performance” issues.

    “As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures,” a spokesman said. “Tesla is continuing to grow and hire new employees around the world.”

    Still, validating the argument that these were indeed layoffs, in interviews former and current employees told the Mercury News little or no warning preceded the dismissals. The workers interviewed include trained engineers working on vehicle design and production, a supervisor and factory employees.

    “Workers spoke on the condition of anonymity because they feared reprisals from the company. Employees said the firings have lowered morale through many departments. Several said Model X, Model S and former SolarCity operations seemed to be targeted.”

    Among those fired was Juan Maldonado, a production worker, who felt the tap on his shoulder on Thursday. He worked at Tesla for nearly four years, and said he heard about 60 other workers in his section of the factory were dismissed. Maldonado, 48, said he ran late for work twice in recent months, but thought he had straightened things out with his supervisor. Now, he said, “I’m going to try to find a job.”

    The dismissals come after Tesla said it built just 260 Model 3 sedans during the third quarter, less than a fifth of its 1,500-unit forecast. The company has offered scant detail about the problems it’s having producing the car, although the previously noted WSJ report suggests that Tesla is having severe manufacturing bottlenecks forcing workers to build parts of the Model 3 by hand. The vehicle’s entry price starts at $35,000, roughly half the cost of Tesla’s least-expensive Model S sedan. When unveiling the Model 3, Musk joked to employees they would be going through “production hell” to meet demand for the new car.  Little did many the employees know that hell would come in the form of a pink slip.

    As Bloomberg notes, a delayed ramp-up risks the ire of some of the almost half million reservation holders who started paying $1,000 deposits early last year. On Oct. 12, Tesla Chief Executive Officer Elon Musk posted a video on Instagram of what he said was a stamping press producing body panels for the Model 3.

    Musk has told investors the company is focused on Model 3 production and expects to eventually build 10,000 cars a week. The manufacturing will become highly automated, but Musk told investors during the early ramp up he expected high overtime costs.

    * * *

    Meanwhile, Tesla has faced ongoing discontent from some factory workers, who have complained about work conditions and wages below the auto industry average. Tesla has a hearing before the National Labor Relations Board in November for charges that company supervisors and security guards harassed workers distributing union literature. Tesla denied the accusations.

    Openly pro-union workers were among those fired this week. Some believe they were targeted, even as the company denied union activities played a role in the dismissals.

    Quoted by the Mercury News, Michael Harley, managing editor at Kelley Blue Book and Autotrader, thought the dismissals could be an effort to improve vehicle production. “It’s no secret that Tesla’s Model 3 development and ramp-up for production has been derailed,” Harley said. “A major change in staff – whether dismissal or layoff – is an indication that there is an upper level movement to put the train back on the tracks.”

    Whatever the reason behind the “non-layoffs”, one thing is clear: Tesla has a management exodus problem as demonstrated by this extensive list of recent senior level departures from the company, including two of the most important, non CEO positions in just the past three months.

     

  • US Reaper Drone Shot Down Over Afghanistan

    In a rare, successful attack on one of the most advanced US offensive weapons, a US drone has reportedly been shot down over Afghanistan. The Islamic Emirate of Afghanistan (Voice of Jihad) reports that Mujahideen of the Islamic Emirate shot down an unmanned aerial vehicle (UAV) said to be operated by the United States. The rea

    The UAV above is believed to be a MQ-9 Reaper with a price tag of $10.5 million. The aircraft can stay airborne up to 36 hours with 1.7 tons of missiles and bombs. The wreckage of the plane is said to have been seized by the Mujahideen. So far, there has been no comment from from the US military.

    The location of the downed drone is in Kunduz, a city in northern Afghanistan.

    The attack may have been in retaliation for a US drone strike which yesterday killed 14 ISIS militants in the Kunar province, a northern boarder region in Afghanistan. According to The Guardian, “Abdul Ghani Musamim, a spokesman for the provincial governor, told the Associated Press that the drone had targeted a meeting of Isis commanders who were planning a terrorist attack.”

    Apropos, on Thursday, we reported U.S. bombs dropped in Afghanistan surged to a 7-year high in the month of September, as it became clear that Trump’s Afghanistan war policy was simply to add to the local death toll by dropping more bombs.

    As discussed before, we suspect that President Trump, gradually settling in into his role as the next “Warmonger-in-Chief” has reignited a trend that the military industrial complex is simply delighted about.

  • The Death Of Petrodollars & The Coming Renaissance Of Macro Investing

    Authored by John Curran via Barrons,

    The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift

    In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U.S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U.S. Treasuries, basically financing America’s future federal expenditures.

    Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U.S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U.S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U.S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U.S. economic growth over the subsequent decades.

    An important consequence was that oil-importing nations would be required to hold large amounts of U.S. dollars in reserve in order to purchase oil, underpinning dollar demand. This essentially guaranteed a strong dollar and low U.S. interest rates for a generation.

    [ZH: Still, the underlying concept of how Petrodollar recycling, or as some call it, petrocurrency mercantilism works, leaves some confusion. So in order to alleviate that, here courtesy of Cult State, is a quick and simple primer that should hopefully answer all questions. From CultState:

     

    So what is petrocurrency mercantilism?

     

    It’s when a national bank and an energy producer collude to generate artificial demand for a currency at the expense of the purchasing power of other currencies.

     

    The flowchart below shows how it all works.

     

    Given this backdrop, one can better understand many subsequent U.S. foreign-policy moves involving the Middle East and other oil-producing regions.

    Recent developments in technology and geopolitics, however, have already ignited a process to bring an end to the financial system predicated on petrodollars, which will have a profound impact on global financial markets. The 40-year equilibrium of this system is being dismantled by the exponential growth of technology, which will have a bearish impact on both supply and demand of petroleum. Moreover, the system no longer is in the best interest of key participants in the global oil trade. These developments have begun to exert influence on financial markets and will only grow over time. The upheaval of the petrodollar recycling system will trigger a resurgence of volatility and new price trends, which will lead to a renaissance in macro investing.

    Let’s examine these developments in more detail.

    First, TECHNOLOGY is affecting the energy markets dramatically, and this impact is growing exponentially. The pattern-seeking human mind is built for an observable linear universe, but has cognitive difficulty recognizing and understanding the impact of exponential growth.

    Paralleling Moore’s Law, the current growth rate of new technologies roughly doubles every two years. In the transportation sector, the global penetration rate of electric vehicles, or EVs, was 1% at the end of 2016 and is now probably about 1.5%. However, a doubling every two years of this level of usage should lead to an automobile market that primarily consists of EVs in approximately 12 years, reducing gasoline demand and international oil revenue to a degree that today would seem unfathomable to the linear-thinking mind. Yes, the world is changing—rapidly.

    Alternative energy sources (solar power, wind, and such) also are well into their exponential growth curves, and are even ahead of EVs in this regard. Based on growth curves of other recent technologies, and due to similar growth rates in battery technology and pricing, it is likely that solar power will supplant petroleum in a vast portion of nontransportation sectors in about a decade. Albert Einstein is rumored to have described compound interest (another form of exponential growth) as the most powerful force in the universe. This is real change.

    The growth of U.S. oil production due to new technologies such as hydraulic fracturing and horizontal drilling has both reduced the U.S. need for foreign sources of oil and led to lower global oil prices. With the U.S. economy more self-reliant for its oil consumption, reduced purchases of foreign oil have led to a drop in the revenues of oil-producing nations and by extension, lower international demand for Treasuries and U.S. dollars.

    ANOTHER MAJOR SECULAR CHANGE that is under way in the oil market comes from the geopolitical arena. China, now the world’s largest importer of oil, is no longer comfortable purchasing oil in a currency over which it has no control, and has taken the following steps that allow it to circumvent the use of the U.S. dollar:

    • China has agreed with Russia to purchase Russian oil and natural gas in yuan.
    • As an example of China’s newfound power to influence oil exporters, China has persuaded Angola (the world’s second-largest oil exporter to China) to accept the yuan as legal tender, evidence of efforts made by Beijing to speed up internationalization of the yuan. The incredible growth rates of the Chinese economy and its thirst for oil have endowed it with tremendous negotiating strength that has led, and will lead, other countries to cater to China’s needs at the expense of their historical client, the U.S.
    • China is set to launch an oil exchange by the end of the year that is to be settled in yuan. Note that in conjunction with the existing Shanghai Gold Exchange, also denominated in yuan, any country will now be able to trade and hedge oil, circumventing U.S. dollar transactions, with the flexibility to take payment in yuan or gold, or exchange gold into any global currency.
    • As China further forges relationships through its One Belt, One Road initiative, it will surely pull other exporters into its orbit to secure a reliable flow of supplies from multiple sources, while pressuring the terms of the trade to exclude the U.S. dollar.

    The world’s second-largest oil exporter, Russia, is currently under sanctions imposed by the U.S. and European Union, and has made clear moves toward circumventing the dollar in oil and international trade. In addition to agreeing to sell oil and natural gas to China in exchange for yuan, Russia recently announced that all financial transactions conducted in Russian seaports will now be made in rubles, replacing dollars, according to Russian state news outlet RT. Clearly, there is a concerted effort from the East to reset the economic world order.

    ALL OF THESE DEVELOPMENTS leave global financial markets vulnerable to a paradigm shift that has recently begun. In meetings with fund managers, asset allocators, and analysts, I have found a virtually universal view that macro investing—investing based on global macroeconomic and political, not security-specific trends—is dead, fueled by investor money exiting the space due to poor returns and historically high fees in relation to performance. This is what traders refer to as capitulation. It occurs when most market participants can’t take advantage of a promising opportunity due to losses, lack of dry powder, or a psychological inability to proceed because of recency bias.

    A current generational low in volatility across a wide spectrum of asset classes is another indicator that the market doesn’t see a paradigm shift coming. This suggests that current volatility is expressing a full discounting of stale fundamental inputs and not adequately pricing in the potential of likely disruptive events.

    THE FEDERAL RESERVE is now in the beginning stages of a shift toward “normalization,” which will lead to diminished support for the U.S. Treasury market. The Fed’s total assets stand at approximately $4.5 trillion, or five times what they were prior to the financial crisis of 2008-09. The goal of the Fed is to “unwind” this enormous balance sheet with minimal market disruption. This is a high-wire act a thousand feet in the air without a safety net or prior practice. Additionally, at some not-so-distant future date, the U.S. will need to finance enormous and growing entitlement programs, and our historical international sources for that financing will no longer be willing to support us in that endeavor.

    The market participants with whom I met theoretically could have the ability to accept cognitively the points made in this article. But the accumulation of many small losses in a low-volatility and generally trendless market has robbed them of confidence and the psychological balance to embrace any new paradigm proactively. They are frozen with fear that the lower- return profile of recent years is permanent—ironic in an industry that is paid to capture price changes in a cyclical world.

    One market legend with whom I spoke suggested he wouldn’t have had the success he enjoyed in his career had he begun in the past decade. Whether or not this might be true, it doesn’t mean that recent lower returns are to be extrapolated into the future, especially when these subpar returns occurred during the quantitative-easing era, a period that is an anomaly.

    I have been fortunate to ride substantial bets on big trends, earning high risk-adjusted returns using time-tested techniques for exploiting these trends. Additionally, I have had the luxury of not participating actively full-time in macro investing during this difficult period. Both factors might give me perspective. I regard this as an extraordinarily opportune moment for those able to shed timeworn, archaic assumptions of market behavior and boldly return to the roots of macro investing.

    The opportunity is reminiscent of the story told by Stanley Druckenmiller, who was promoted early in his investment career to head equity research at a time when his co-workers had vastly more experience than he did. His director of investments informed him that his promotion owed to the same reason they send 18-year-olds to war; they are too dumb to know not to charge. The “winners” under the paradigm now unfolding will be market participants able to disregard stale, anomalous concepts, and charge.

    RELATEDLY, THERE IS a running debate as to whether trend-following is a dying strategy. There is plenty of anecdotal evidence that short-term and mean-reversion trading is more in vogue in today’s markets (think quant funds and “prop” shops). Additionally, the popularity of passive investing signals an unwillingness to invest in “idea generation,” or alpha. These developments represent a full capitulation of trend following and macro trading.

    Ironically, many market players who wrongly anticipated a turn in recent years to a more positive environment for macro and trend-following are throwing in the towel. The key difference is that now there is a clear catalyst to trigger the start of the pendulum swinging back to a fertile macro/trend-following trading environment.

    As my mentor, Bruce Kovner [the founder of Caxton Associates] used to say, “Nobody rings a bell at key turning points.” The ability to properly anticipate change is predicated upon detached analysis of fundamental information, applying that information to imagine a plausible world different from today’s, understanding how new data points fit (or don’t fit) into that world, and adjusting accordingly. Ideally, this process leads to an “aha!” moment, and the idea crystallizes into a clear vision. The thesis proposed here is one such vision.

  • Fukushima Court Rules TEPCO, Government Liable Over 2011 Disaster

    Six years after a tsunami crashed into the Fukushima-Daiichi nuclear power plant, causing three of the plant’s seven reactors to melt down in the worst nuclear accident since Chernobyl, a Japanese district court in Fukushima prefecture ruled this week that Tokyo Electric Power and the Japanese government were liable for damages totaling about 500 million yen ($4.44 million) in the largest class action lawsuit brought over the 2011 nuclear disaster, Reuters reported citing local media sources. It was the third civil court ruling to find Tepco financially liable, and the second to produce an admission of wrongdoing from the inept utility.  

    However, considering the billions of dollars in damage caused by the Fukushima Daiichi meltdown – not to mention the tens of thousands of lives that were disrupted – the judgment is hardly a victory. Especially considering Tepco has been roundly condemned for negligently failing to take the necessary precautions to prevent just such a disaster.

    A group of about 3,800 people, mostly in Fukushima prefecture, filed the class action suit, marking the biggest number of plaintiffs out of about 30 similar class action lawsuits filed across Japan. This is the second ruling to hold the government responsible, following a Maebashi district court decision in March, Reuters reported.

    The fact that Tepco has managed to largely avoid consequences for its botched handling of the disaster at Fukushima, from failing to anticipate the possibility that a natural disaster might severely damage the plants to allowing radioactive material to spill into the soil and the Pacific Ocean. And while the cleanup effort has become a top government priority ahead of the 2020 Tokyo Olympics, the company’s engineers have had trouble locating the lost reactor cores inside the ruined reactors.  

    Tepco notoriously waited months to disclose the true extent of the damage at Fukushima. Furthermore, the company admitted in 2013 that it had allowed more than 300 tons of contaminated wastewater to leak into the Pacific.

    This year, as the Japanese government has cut off subsidies to Fukushima disaster victims, forcing the first of tens of thousands of displaced residents to return to their abandoned homes, Tepco has courted controversy by proposing to dump more radioactive wastewater into the Pacific, provoking outrage among local fishermen.  

    The plaintiffs in Fukushima case have called on defendants for reinstating the levels of radioactivity at their homes before the disaster, but the court rejected the request, Kyodo said.

    In an amusing twist, Tepco on Friday disclosed that Kobe Steel’s Shinko Metal Products unit supplied Tepco with piping for the Fukushima Dai-Ni nuclear power plant that didn’t meet specifications. Luckily, the piping was never used, and is currently sitting in a warehouse, Tepco said.
     

  • The Endgame Of Financialization: Stealth Nationalization

    Authored by Charles Hugh Smith via OfTwoMinds blog,

    This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel.

    As you no doubt know, central banks don't actually print money and toss it out of helicopters; they create a digital liability and use this new currency to buy assets such as bonds and stocks. Central banks have found that they can take control of the stock and bond markets by buying up as much as these markets as is necessary to force price and yield to do the central banks' bidding.

    Central Banks Have Purchased $2 Trillion In Assets In 2017. This increases their combined asset purchases above $15 trillion. A trillion here, a trillion there, and pretty soon you're talking real money–especially if you add in assets purchased by sovereign wealth funds, dark pools acting on behalf of monetary authorities, etc.

    Gordon Long and I discuss this stealth nationalization in our latest video program, The Results of Financialization: "Nationalization" (35 min):

    In the old model of nationalization, governments expropriated/seized privately owned assets lock, stock and barrel. When a central state nationalized an enterprise, it took total ownership of the asset.

    In today's globalized financial world, such crude expropriation is avoided for two reasons:

    1. The entire point of the dominant neoliberal / neofeudal /neocolonial model is to maintain private ownership as a means of transferring the wealth to the New Aristocracy, i.e. the financier class. Government ownership certainly conveys benefits to the some are more equal than others functionaries atop the state's wealth-power pyramid, but it doesn't transfer the assets' income streams to private hands.

     

    2. It sends the wrong message: central banks want private investors to do their bidding, i.e. to go along with the transfer of wealth and income from the many to the few (the New Aristocracy). Maintaining the system of private ownership enables the central banks to control the markets for these assets at the modest cost of a few handfuls of the loot being distributed to the small-fry owners of IRAs, 401K retirement accounts, etc.

    In other words, what central banks want is not outright ownership, which is costly and troublesome; what central banks want is to control the markets on the cheap, with leveraged buying. In effect, central banks have been able to manage assets worth $150 trillion with a mere $15 trillion in well-timed (and loudly announced) asset purchases.

    This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel. Being the buyer of last resort–the Plunge Protection Team that buys every dip in whatever size is needed to stabilize valuations and then reverse the downturn into yet another rally to new highs–has worked for nine long years.

    This success has bred a complacent faith in the central bank cargo-cult that there is no limit to central bank control of yields, valuations and market sentiment.

    But as I've described here many times, financialization is a box canyon. Once you start down the path to the Dark Side of phantom wealth created by commoditized debt and leverage (i.e. financialization), there's no turning back to the real world.

    The central bank aircraft is flying into a canyon with walls 2,000 feet high at an altitude of 300 feet. Everything seems to be going splendidly until the central bank aircraft rounds a bend in the canyon and discovers the canyon ends in a rock face 2,000 high.

    In a desperate attempt to escape the box canyon, central banks will ramp up their assets purchases of bonds to keep yields near zero, and of stocks to keep the bubble valuations high enough to support all the debt and leverage that's been piled on the underlying collateral of the stock market: non-phantom net earnings.

    Needless to say, attempting to control global markets via the issuance of trillions in new currency and using that currency to buy huge chunks of the stock and bond markets is an unprecedented experiment.

    To continue the box canyon analogy: central bankers and their cargo-cult faithful are confident central banks are flying an F-18 with afterburners on max; climbing 1,700 feet in a near-vertical ascent should be no problem.

    Those of us outside the cargo cult see the central bankers flying a Wright Flyer: innovative in its time, but inadequate to the task of controlling private-sector markets via stealth nationalization.

    *  *  *

    If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

  • Syria Demands "Immediate, Unconditional Withdrawal" Of "Terror Supporting" Turkey From Its Territory

    The Syrian government has issued a strong condemnation of Turkey's recent military incursion into northern Syria, demanding "immediate and unconditional withdrawal" according to Syrian state media citing the foreign ministry. Though Turkey claims to be acting in accordance with the Astana agreement reached by Russia, Turkey, and Iran, Damascus is now calling the move a departure from the deal and an intentional violation of Syrian sovereignty, while further accusing Turkey of collaborating with al-Qaeda terrorists on the ground in pursuance of an expansionist policy. 

    On Thursday a large Turkish army convoy consisting of more than 100 Turkish soldiers, including special forces and commandos, along with at least 30 armored trucks entered Syria’s Idlib region for a joint mission ostensibly to monitor a local de-escalation zone and "to pacify al-Qaeda linked militants" there, according to official Turkish statements.

    Many analysts, however, predict that Turkey will not directly confront al-Qaeda, but instead will either allow the terror group to secure an exit or will recognize it under a new form or identify while pretending it to be a local organization.

    The Syrian foreign ministry said on Saturday, “The Syrian Arab Republic condemns in the strongest terms the incursion of Turkish military units in the Idlib Province, which constitutes to blatant aggression against the sovereignty and territorial integrity of Syria and flagrant violation of international law.” According to SANA Syrian state news, the foreign ministry further noted that Turkey's military entered Idlib province "accompanied by Jabhat a-Nusra terrorists which shows clearly the close relationship between Turkish regime and terrorist groups, a matter that the international community should pay more attention to and take firm stance in order to oblige Turkey to end its support to terrorism which managed to shed the blood of Syrian people and destabilize the region and the entire world."

    Meanwhile, Russia has not formally responded to Damascus' condemnation, and it is unclear how the Syrian government's declaration will be interpreted. Turkish government officials have consistently claimed complete cooperation and coordination between Turkey and Russia – though President Erdogan this week stressed that Turkey would implement its "own game plan, step by step" in Syria and that "we are not bounded by just resistance or defense."

    Map source: Middle East Eye

    Erdogan has also vowed to prevent the YPG (Syrian Kurdish "People's Protection Units") from establishing what he called a "terror corridor" to the Mediterranean. Turkey has long sought a green light from Russia to attack YPG-held Afrin – a city close to the Turkish border which is part of the Kurdish declared Rojava autonomous zone – as part of a broader Turkish attempt to prevent such a Kurdish zone from gaining any permanence. And it appears we are now witnessing the beginning this strategy which Turkey clearly holds as its top priority far and above pacifying Idlib (after all, Turkey assisted al-Qaeda's takeover of Idlib in the first place).

    Both the Syrian Kurds and the Damascus government see Turkey's real motives in Idlib as merely a land grab using both local proxies (including al-Qaeda) and direct troop occupation. Turkey hopes the deal reached in Astana, Kazakhstan to implement "safe zones" in the area will give Russian backing to its war on the Kurds, and Turkey's first step which it began implementing this week is to ensure the YPG is contained. As a spokesman for the Turkish sponsored Free Syrian Army (FSA) told the Reuters this week, the Turkish deployment would "ensure the area is protected from Russian and regime bombing and to foil any attempt by the separatist YPG militias to illegally seize any territory."

    In doing a deal with Turkey, it now appears Russia will walk a fine line between keeping a leash on Erdogan's machinations and conducting legitimate anti-terror operations with its Syrian ally.

  • China Is Threatening America's Unicorn Dominance

    The United States is the undisputed capital of the unicorn – private companies worth more than $1 billion. This title though, is becoming more and more under threat, primarily from China.

    Infographic: China is Threatening America's Unicorn Dominance | Statista

    You will find more statistics at Statista

    As Statista's Martin Armstrong notes, according to CB Insights, there are currently 215 unicorns in the world, of which 108 are from the U.S.

    When it comes to the 'birth' of new unicorns however, America's strength is clearly being diluted.

    In 2013, 75 percent of new unicorns were born in the United States, fast forward to 2017 though, and this share has fallen to just 41 percent.

    The number of new unicorns from around the world has remained reasonably stable over this time, but it is the rapid increase in activity in China – from 0 percent in 2013 to 36 percent this year – that is putting the most pressure on U.S. dominance.

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Oct 14

Today’s News 14th October 2017

  • Retired Green Beret Fears North Korea Is On "Death Ground" – No Recourse But To Fight Or Die

    Authored by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces) via SHTFplan.com,

    Fox News reported this on October 11, 2017, in the article North Korea says Trump ‘Lit the Wick of War,’ vows a hail of fire:

    On Wednesday, the U.S. and South Korea flew two strategic bombers over the Korean peninsula in a joint military exercise — another show of force against Pyongyang amid the mounting tensions. The bombers also conducted firing exercises over the East Sea and Yellow Sea, according to the BBC. Japan’s air force also joined the drill.  This is the second time since Trump’s fiery U.N. General Assembly speech that North Korea vocally accused the U.S. of declaring war on its country. Trump lambasted “little rocket man” Kim Jong Un for going on a “suicide mission for himself and his regime” in the speech last month. He vowed to “totally destroy” the country if it did not halt its nuclear program.”

    Additionally, this information was released in the article North Korea Hackers Reportedly Stole US, South Korea War Plans, by Fox News on October 10, 2017:

    “A plan to assassinate Kim Jong Un and preparations for a potential nuclear showdown with North Korea were among the trove of South Korean military documents reportedly stolen by Hermit Kingdom hackers.  South Korea’s Defense Ministry did not comment on the alleged hack, which reportedly occurred in September 2016 but was only revealed Tuesday. Rhee Cheol-hee, a lawmaker in South Korea, confirmed the data breach to the BBC. The hack consisted of 235 gigabytes of military documents and about 80 percent of what was stolen hasn’t been identified.

     

    Pentagon spokesman Army Col. Rob Manning told reporters on Tuesday: “I can assure you that we are confident in the security of our operations plans and our ability to deal with any threat from North Korea.”  Manning would not confirm the hack.  Pyongyang is suspected of having expert hackers attack South Korean government websites and facilities for years. North Korea has accused its neighbor of “fabricating” the claims, the BBC reported.”

    There was also an incident pursuant to the UN sanctions (initiated by the US) on North Korea, as reported by Reuters on October 11:

    “The United Nations Security Council has banned four ships from ports globally for carrying coal from North Korea, including one vessel that also had ammunition, but the United States postponed a bid to blacklist four others pending further investigation.  The vessels are the first to be designated under stepped-up sanctions imposed on North Korea by the 15-member council in August and September over Pyongyang’s sixth and largest nuclear test and two long-range ballistic missile launches.  The Security Council North Korea sanctions committee, which operates by consensus, agreed at the request of the United States, to blacklist the ships on Oct. 3 for “transporting prohibited items from the DPRK” (North Korea), according to documents seen by Reuters on Tuesday.”

    As mentioned in the articles, the U.S. just flew (and has been flying) bomber missions…ostensibly for “combat readiness,” but realistically to torment North Korea.  Along with the hacked into battle plans, it has been reported that an assassination plan against Kim Jong Un was also among the plans.  Now the UN (at the request of the U.S.) is interfering with North Korea’s ability to ship materials abroad.

    The U.S. is rapidly approaching the point of placing North Korea on the “Death Ground,” characterized in Sun Tzu’s “Art of War.”  This “Death Ground” is an untenable position where an enemy has no recourse but to fight or die, as honorable withdrawal is not permitted.

    We have a president who is not acting in the manner of a statesman with the name-calling and insults…actions that are unbecoming for a man who is the Commander-in-Chief and leader of the United States of America.  Diplomatic channels are not being properly pursued.  China and Russia have each stated that North Korea will not back down, and that diplomacy needs to be placed in clearer focus and sought after.

    The United States is deliberately trying to goad North Korea into taking an action (not necessarily an attack) that will justify a response in force.  Un knows what happened to Iraq’s Saddam Hussein and Libya’s Muhammar Khaddaffi…two nations that did not have nuclear weapons.  The North Koreans know that to disarm is to capitulate.  They also know that the U.S. will not strike first without irradiating South Korea, China, or Russia, and such will elicit repercussions from China and Russia.

    North Korea does have the capability to strike the United States, and the United States is backing it into a corner with provocative actions militarily and unstatesmanlike banter that does not befit or dignify representatives of the country.  North Korea has been backing up into a corner for some time.  There will come a point when it can back up no longer, and will be forced to come out swinging.  It is undoubtedly all part of a larger plan.  The cost, however, will not be borne by the politicians, but by the civilian populations.  The price remains to be seen.

    The next world war will be initiated by an EMP device detonated over the continental United States, followed by a nuclear exchange and fighting with conventional forces.

  • Wave Of Eruptions Along Pacific 'Ring Of Fire' Leave 10,000s Displaced

    The Pacific “Ring of Fire” is living up to its name.

    The 450 or so volcanoes that make up the ring outline have been unusually active this year, sparking evacuations on the Indonesian island of Bali and on the tiny island nation of Vanuatu. Parts of southwestern Japan, meanwhile, have been shaken by a series of earthquakes, unsettling the local population, in an area where the massive Pacific Plate grinds against other plates that form the Earth’s crust, creating a 25,000-mile zone where earthquakes and volcanic eruptions are unusually common.

    Three volcanos have either erupted, or are showing signs of an imminent eruption, across the region, according to a roundup published by the Associated Press.

    Japan:

    The Shinmoedake volcano in southwestern Japan started erupting Wednesday for the first time in about six years. An ash plume rose 1,700 meters (5,580 feet) from the crater Thursday and ash fell on cities and towns in Miyazaki prefecture. Japanese broadcaster TBS showed students wearing helmets and masks on their way to school at the foot of Shinmoedake. The Japan Meteorological Agency is warning that hot ash and gas clouds known as pyroclastic flows could reach 2 kilometers (1 mile) from the crater, and ash and volcanic rocks are a risk over a wider area depending on wind and elevation. It raised the volcanic alert level from 2 to 3 on a scale of 5. Level 3 warns people to not approach the volcano.

    Bali:

    More than 140,000 people fled Mount Agung on the Indonesian resort island of Bali after its alert status was raised to the highest level on Sept. 22. Hundreds of tremors daily from the mountain indicate magma is rising inside it, prompting authorities to warn a powerful eruption is possible. The volcano spewed lava and deadly fast-moving clouds of boiling hot ash, gas and rocks when it last erupted in 1963, killing more than 1,100 people. A new eruption is likely to kill fewer people because officials have imposed a large no-go zone around the crater but it could paralyze tourism, which many Balinese rely on for their livelihoods. Indonesia has more than one tenth of the world’s active volcanoes and another two are currently erupting. Sinabung in northern Sumatra is shooting plumes of ash high into the atmosphere nearly daily, and Dukono in the Maluku island chain is also periodically erupting.

    Vanuatu:

    The entire population of a Pacific island was evacuated in the space of a few days in late September and early October to escape the belching Manaro volcano. The 11,000 residents of Ambae island were moved by every boat available to other islands in Vanuatu, a Pacific archipelago nation, where they’re living in schools, churches and tents. Officials have since downgraded the volcano’s danger level but say the population must wait at least two more weeks to return. The island’s water supply and crops have been affected by volcanic ash and acid rain but most villages were spared major damage. Previous eruptions of the volcano have lasted a month to six weeks.

    As if the Ring of Fire wasn’t doing enough to inspire febrile visions of an apocalyptic calamity, scientists are warning that supervolcanos in Italy and the US could be headed for eruptions that would register as by far the most destructive in modern human history.

    Earlier this week, scientists from Arizona State University presented research showing that when the Yellowstone caldera super volcano last erupted more than 600,000 years ago, it took barely a decade for magma flowing into the volcano’s chamber to reach a critical mass.

    Volcanos, hurricanes, wildfires, earthquakes – natural disasters are seemingly happening everywhere at once.  

    Perhaps the ultimate irony is that while the Trump administration is focusing its energy on foreign enemies like Iran and North Korea, the greatest threat to the American population lies within a cherished domestic landmark and symbol of national pride.

  • The Less We Believe Them About Las Vegas, The More They Want Our Guns

    Authored by James George Jatras via The Strategic Culture Foundation,

    Once again, there has been a mass shooting in the United States and the usual script is in play.

    America’s ‘gun culture’ is to blame!

      Before the blood was dry gun control advocates had trotted out their standard list of remedial measures, none of which would have prevented what had just taken place.

    Since the Las Vegas massacre we have been regaled about evil guns by factually ignorant buffoons like Bill Maher, Colin Jost, Michael CheJimmy KimmelStephen ColbertTrevor Noah, and John Oliver – the last two not even Americans. Anyone who disagrees is just wrong and callous about the loss of innocent life. We now import foreigners to insult us and our institutions and pay them outrageous salaries to do it.

    Las Vegas was a bit different from previous mass shooting in at least two glaring respects.

    First, the inability of law enforcement to discover a motive remains the biggest mystery. Admittedly, these same authorities in the US – and even worse in Europe – typically find themselves scratching their collective head in puzzlement after a murderer shouting “Allahu Akbar” kills a bunch of people. (What did he mean by that? Maybe that’s Arabic for “Merry Christmas”! We’re still trying to figure out why he did it, but we’re sure it had nothing to do with Islam. And anyone who says it did is a racist.) At this point, the actions of the person identified as the Las Vegas killer (whose name will not be mentioned here to deny whatever immortality he may have sought) are attributed to mental instability. That’s not good enough. Subjectively, even maniacs think they are doing something. Even a total lunatic who believes he is, say, fighting Martians or chopping potatoes, intends that outcome. But here, supposedly, someone stockpiles weapons for months, meticulously plans a murderous onslaught – and maybe had contingencies for attacks elsewhere – and there’s not a hint of what he thought he was up to. That’s simply not plausible. (Repeated claims by Daesh that the Las Vegas killer was one of their “soldiers” have not yet been substantiated but authorities were lightning-quick to dismiss the possibility. Meanwhile, despite a total lack of evidence, multiple “RussiaGate” investigations of the Trump Administration roll on and on. Let’s not be hasty, some connection to the Kremlin might eventually turn up . . . )

     

    Second, there’s the money. The individual in question, as confirmed by his girlfriend as well as by his brother and other family members, was quite rich. Supposedly his initial wealth was made via savvy real estate deals (possible) but later was sustained by being really, really good at video poker at Las Vegas casinos, where he was a welcome regular “comped” by the House with food, drinks, hotel rooms, and other goodies. That’s not just implausible, it’s virtually impossible. As Ann Coulter points out, the fact that he was “was treated like royalty by the casinos . . . means he was losing… Anyone who plays video poker over an extended period of time will absolutely, 100 percent, by basic logic, end up a net loser.” If anyone would know this, it’s police in Los Vegas, where casino operators are pillars of the community and gambling is the major industry. It’s clear to anyone with half a brain that the killer was laundering money – from somewhere yet to be disclosed. In our age of digital financial surveillance, casinos are among the last places someone can anonymously churn large amounts of unsourced cash, no questions asked. Maybe the police and FBI haven’t figured out where the money was coming from, or maybe they have and are protecting someone.

    In any case, the inability to get a straight answer to the questions, or even to ascertain simple facts like whether a hotel security guard was shot before or after the mass killing began, or when the first call was made to police, feeds public distrust and speculation as to what the hell is really is going on. That is turn prompts establishment gatekeepers like Snopes to denounce as “conspiracy theorists” (mainly of the “far right” variety, because the existence of a far left is itself a conspiracy theory) folks trying to make sense of the nonsense we’re being force-fed.

    At least Las Vegas has shined a light on one deception that has long been standard in the American media: the notion – no doubt believed by many outside the US – that Americans routinely run around with machine guns shooting each other. This impression is fed by false claims of gun-control advocates that “assault rifles” – semiautomatic guns (where one trigger-pull equals one round fired) – are “weapons of war.” What makes them not like contemporary weapons of war is that they are not fully automatic (hold the trigger down for multiple, rapid rounds), which is why gun control advocates abuse the trick designation “military style” – they look scarier than semiautomatic hunting rifles because of cosmetic features like pistol grips and folding stocks. Fully automatic weapons (i.e., machine guns) have been virtually impossible acquire legally in the US for decades. The evident use in Las Vegas of a so-called “bump stock” to allow a semiautomatic to fire in a manner similar to a machine gun has forced even our fake news outlets to note the distinction. It’s a rare breakout of actual facts.

    Ironically, when the Second Amendment to the US Constitution, which protects Americans’ fundamental right to keep and bear arms, was adopted, ordinary civilian guns really were equal to weapons of war. In fact, they were sometimes better. Think of how the standard British “Brown Bess” smoothbore was outclassed by the far more accurate Pennsylvania Rifle – perfect for picking off Redcoat officers at long range.

    Advocates in gun control in America are always saying they just want “common-sense gun control” laws, like “closing the gun show loophole,” having stricter background checks, limiting the size of magazines, restricting the number of weapons or amount of ammunition someone can buy, and other seemingly innocuous measures. Each is a fraud.

    For example, closing the so-called gun show loophole would be basically a ban on private transfers from one citizen to another – such as a man selling, or giving, a pistol or rifle to his cousin – without all the reporting and red tape federally licensed arms dealers must deal with. This is despite the fact that none the notable killings that supposedly justify more controls was carried out with a weapon from such a sale or would have been prevented if the demanded reform had been in place.

    Meanwhile, the real American slaughter continues in cities where gun laws are as strict as those in any country in Europe, and it is virtually impossible for an honest citizen to acquire and carry a legal weapon.

    For example, last month Chicago reached its 500th homicide so far this year, and by New Year’s Day 2018 is on track to rack up a total exceeding ten times that of the Las Vegas massacre.

    What’s the solution? Evidently to infringe on the constitutional rights of honest, peaceful, law-abiding citizens who are armed and increasingly distrustful of what they are being told by their supposed betters.

     

  • Pay-TV Companies Tank As Subscriber Losses Surge To Record Highs In 2017

    As the broader markets casually melt-up to new record highs with each passing day, one small corner of the equity market is in full on meltdown mode: cable and satellite pay-tv providers.  Down anywhere from 3-10% on the week, investors in this space seem to be finally admitting that record subscriber losses, quarter after quarter, just may end up being a bad thing.

    As Bloomberg points out this morning, pay-tv subscriber losses are expected to set a new record in 2017, surpassing the 1.7mm homes that “cut the cord” in 2016, as industry analyst Craig Moffet warns “it is becoming increasingly clear that the wheels are falling off…”

    Barring a major fourth-quarter comeback, 2017 is on course to be the worst year for conventional pay-TV subscriber losses in history, surpassing last year’s 1.7 million, according to Bloomberg Intelligence. That figure doesn’t include online services like DirecTV Now. Even including those digital plans, the five biggest TV providers are projected to have lost 469,000 customers in the third quarter.

     

    AT&T sank 6.1 percent, the biggest one-day loss since November 2008. Dish, which also provides satellite service, declined 5.1 percent. Viacom dropped 2.5 percent while AMC Networks Inc. fell 6.8 percent after Guggenheim Securities LLC downgraded the two stocks to neutral from buy.

     

    Dallas-based AT&T is pushing headlong into TV programming by acquiring HBO and CNN owner Time Warner Inc. in an $85.4 billion deal. Chief Executive Officer Randall Stephenson has argued that the acquisition will let AT&T create compelling video packages for mobile subscribers and provide valuable targeting information for advertisers.

     

    “It is becoming increasingly clear that the wheels are falling off of satellite TV,” said Craig Moffett, an analyst at MoffettNathanson LLC, in a research note.

    AT&T set off the selling panic earlier this week when they announced they would lose 390,000 pay-tv customers in 3Q 2017 alone.  As a reminder, AT&T purchased DirectTV for $48.5 billion just 3 years ago…something tells us shareholders might like a ‘do-over’ on that colossal misallocation of capital.

    AT&T, whose ownership of the DirecTV satellite service makes it the biggest U.S. pay-television provider, said late Wednesday it will report a third-quarter loss of 390,000 satellite and cable customers, echoing a similar warning weeks earlier from Comcast Corp. The same night, Viacom cautioned that its distribution deal with Charter Communications Inc., the second-biggest cable U.S. company, may lead to a blackout, potentially testing whether millions of viewers are willing to go without MTV and Nickelodeon.

     

    Shares of both companies retreated Thursday, contributing to a broader selloff in the sector. The S&P 500 Media Index, which includes Comcast and ESPN owner Walt Disney Co., slid 2.3 percent to the lowest level since December.

    Meanwhile, the bigger question that remains to be answered is whether cable providers will finally use this customer backlash to push back on content providers who have managed to force ridiculous annual price increases down the throats of American consumers for decades…Citi analyst Jason Bazinet seems to think so…

    After decades of steadily increasing bills and ever-bigger packages of channels, the pay-TV ecosystem is in full-blown crisis mode. AT&T, Dish Network Inc. and others are offering cheaper, online-only versions of cable to lure customers back, but that means having to accept thinner profit margins.

     

    “Those salad days of fat bundles, automatic carriage renewals and customary affiliate steps ups are long gone,” Citigroup Inc. analyst Jason Bazinet wrote in a note this week. “Today, every media and cable firm is jockeying for self-preservation. And we suspect the next chapter in this new era means Charter will drop — or significantly curtail — distribution of Viacom’s content.”

    Of course, some of these content owners are making the decision to drop the cable bundle much easier all on their own…

    ESPN

  • Tech Vs. Trump: The Great Battle Of Our Time Has Begun

    Authored by Niall Ferguson via The Spectator,

    Social media helped Donald Trump take the White House. Silicon Valley won’t let it happen again

    In the 1962 Japanese sci-fi classic King Kong vs Godzilla, the two giant monsters fight to a stalemate atop Mount Fuji. I have been wondering for some time when the two giants of American social media would square up for what promises to be a comparably brutal battle. Finally, it began last month – and where else but on Twitter?

    ‘Facebook was always anti-Trump,’ tweeted the President of the United States on 27 September.

    Mark Zuckerberg shot back hours later (on Facebook, of course): ‘Trump says Facebook is against him. Liberals say we helped Trump. Both sides are upset about ideas and content they don’t like. That’s what running a platform for all ideas looks like.’

    A platform for all ideas? Well, maybe. Others see Facebook differently. As Zuckerberg’s response to Trump acknowledged, the President is not alone in criticising him. The various inquiries into Russian meddling in the 2016 presidential election are turning up much that is awkward, notably that Russia bought around 3,000 Facebook ads designed to spread politically divisive posts to Americans before and after the election, as well as to promote inflammatory political protests on issues such as Muslim immigration.

    It may be too big a stretch to claim that Russian Facebook ads swung the election in Trump’s favour. But it seems plausible that his campaign’s use of social media, particularly Facebook, gave it a vital edge that compensated for its financial disadvantage relative to Hillary Clinton’s campaign. On that, if on nothing else, I suspect Steve Bannon and Clinton would agree. ‘Facebook is now the largest news platform in the world,’ Clinton writes in her election postmortem. ‘With that awesome power comes great responsibility.’

    Awesome power, yes. At the end of June, the number of active Facebook users (people who visit the site at least once a month) passed the two billion mark. WhatsApp, Messenger and Instagram — all owned by Facebook — have three billion users altogether, though no doubt there is much overlap. Two- thirds of American adults are on Facebook and 45 per cent get their news from it. More than half the UK population access Facebook at least once a month. The average user is on the site for 1/16 of every day.

    But great responsibility? In the wake of the Las Vegas massacre, Facebook briefly featured a bogus story that the shooter had ‘Trump-hating’ views. A fake page claimed responsibility for the attack on behalf of the far-left Antifa movement, saying the goal had been to kill ‘Trump-supporting fascist dogs’.

    Last month, the non-profit investigative news site ProPublica revealed that Facebook’s online ad tools had helped advertisers to target self-described ‘Jew haters’ or people who had used phrases such as ‘how to burn Jews’. In the words of Facebook’s chief operating officer Sheryl Sandberg: ‘The fact that hateful terms were even offered as options was totally inappropriate and a fail on our part.’ Facebook ‘never intended or anticipated this functionality being used this way’.

    What Facebook intended and how Facebook is used turn out to be very different. The company’s motto used to be: ‘Make the world more open and connected.’ It’s no longer quite so simple.

    ‘For most of the existence of the company, this idea of connecting the world has not been a controversial thing,’ Zuckerberg recently said. ‘Something changed.’

    What has changed is that the world has belatedly woken up to realities about social networks that were already obvious to anyone familiar with history and network science.

    For most of history, it is true, hierarchies have tended to dominate distributed networks. However, there are historical precedents for technological change leading to enhanced connectedness that empowers social networks and weakens hierarchies.

    The first began exactly 500 years ago, when Martin Luther launched his campaign for reform of the Roman Catholic church. Had it not been for the printing press, Luther would have been just another obscure heretic and might well have ended his life in the flames of the stake. But Gutenberg’s innovation enabled Luther’s message to ‘go viral’ — as we would now say — and it spread with remarkable speed throughout Germany and then across north-western Europe.

    Luther was as much of a utopian as the pioneers of Silicon Valley in our own time. In his mind, the Reformation would create a powerful new network of pious Christians, all enabled to read the Bible in the vernacular and to establish more direct relationships with God than the indirect ones mediated by a corrupt ecclesiastical hierarchy. The vision of St Peter of a ‘priesthood of all believers’ would finally be realised.

    But the true upshot of the Reformation was not harmony but polarisation and conflict. Not everyone was inspired by Luther’s message. Some sought to go further than him. Others reacted violently against the proposed reforms. The Counter-Reformation adopted the Protestants’ novel techniques of propagation and deployed them against the heretics.

    Yet it proved impossible to destroy Protestant networks, even with mass executions and hideously cruel torture. If anything, persecution promoted radicalisation. Meanwhile, the constantly growing network of printed words proved itself as ready to spread madness as holiness. The witch craze of the 17th century was a classic example of a monster meme, claiming innocent lives from Scotland to Salem, Massachusetts.

    There are three big differences between now and then.

    First, today’s social networks are vastly bigger, faster and more widespread than those of the early modern era.

     

    Secondly, whereas the printing press was a truly decentralised technology — Johannes Gutenberg was no Bill Gates — the ownership of today’s IT infrastructure is concentrated in remarkably few hands.

     

    Finally, our networked age began by disrupting markets and later politics; only one religion, Islam, has been significantly affected.

    But the similarities are nevertheless striking. Now, as then, newly empowered networks have led to polarisation, not harmony. Now, as then, the networks have acted as a transmission mechanism for all kinds of manias and panics as well as truth and beauty. And now, as then, the networks have eroded territorial sovereignty, weakening the established structures of political authority.

    The US government sought to harness the power of social networks when the National Security Agency co-opted the big technology companies into its PRISM programme of mass domestic and foreign surveillance. But the new networks did not easily integrate into old power structures. Globally disseminated leaks, courtesy of Edward Snowden and Julian Assange, exposed PRISM, while a new kind of populist politics flourished on social media.

    A defining feature of social networks (as in the Reformation) is their tendency to divide rather than unite. Recent research on American blogs and Twitter reveals a similar pattern: the emergence of two self-segregated ideological communities, one liberal, the other conservative. Just as birds of a feather flock together (network geeks call it ‘homophily’) so Twitter users retweet within their political clusters. One study found that with tweets on hot-button political topics (such as gun control, same-sex marriage and climate change), the use of emotional words increases their diffusion by a factor of 20 per cent for each additional word. Ever wondered why tweets are full of expletives? Now you know.

    The presidential election of 2016 was a tale of many networks. By going viral through a largely self-organised network, Trump beat Clinton’s old-school, hierarchically structured campaign, which poured money into antiquated channels like local television. Isis contributed to the febrile atmosphere with its worst attack in North America (in Orlando in June last year), prompting Trump’s populist (and popular) promise of a ‘Muslim ban’. But the Trump network had itself been penetrated by the Russian intelligence network. Trump’s campaign and, to a much smaller extent, the Russians both used Facebook and Twitter as tools to discredit his opponent and discourage potential Democratic voters.

    Make no mistake: 2016 will never happen again. Silicon Valley hates Trump for too many reasons to count. The most important are his stance on immigration (on which the Valley depends for its supply of skilled software engineers) and Big Tech’s need to ‘virtue-signal’ to its most valued user demographic: the young and affluent. They lean left. So does the otherwise capitalist Valley.

    The political consequences were not immediately obvious, unless you were paying close attention, but after the Charlottesville clashes between white supremacists, neo-Nazis and their various left-wing opponents, they were there for all to see. Matthew Prince, CEO of the internet service provider Cloudflare, described what happened: ‘Literally, I woke up in a bad mood and decided someone shouldn’t be allowed on the internet.’ On the basis that ‘the people behind the Daily Stormer are assholes’, he denied their fascistic website access to the worldwide web. As Prince himself rightly observed: ‘No one should have that power. We need to have a discussion around this with clear rules and clear frameworks. My whims and those of Jeff [Bezos] and Larry [Page] and Satya [Nadella] and Mark [Zuckerberg] shouldn’t be what determines what should be online.’ Yet that discussion has barely begun. And until it happens, it will indeed be they who decide who is allowed on the internet.

    This goes to the heart of the matter. According to Zuckerberg, Facebook is ‘a tech company, not a media company… We build the tools; we do not produce any content’. Yet in practice, according to a recent Reuters investigation, ‘an elite group of at least five senior executives regularly directs content policy and makes editorial judgment calls.’ In the words of Espen Egil Hansen, the editor-in-chief of the Norwegian newspaper Aftenposten, Zuckerberg is now ‘the world’s most powerful editor’.

    It is not only neo-Nazi sites that find themselves on the online equivalent of the newsroom spike. Twitter has recently rejected paid-for tweets from the Center for Immigration Studies (CIS) on the grounds of ‘Hate’. These tweets were hardly excerpts from Mein Kampf: for example: ‘The fiscal cost created by illegal immigrants of $746.3bn compares to a total cost of deportation of $124.1bn.’ In the words of CIS director Mark Krikorian, ‘The internet is now a utility more important than phones or cable TV. If people can be denied access to it based on the content of their ideas and speech (rather than specific illegal acts), why not make phone service contingent on your political views? Or mail delivery?’

    Google recently revealed that it is using machine learning to document ‘hate crimes and events’ in America. Among their partners in this effort is the notorious Southern Poverty Law Center (SPLC), which maintains a list of ‘anti-Muslim extremists’ — including my wife, Ayaan Hirsi Ali, and the British liberal Muslim Maajid Nawaz — but no list whatsoever of Muslim extremists.

    ‘YouTube doesn’t allow hate speech or content that promotes or incites violence,’ declared a recent message to YouTube content creators. But who decides what is ‘hate speech’? The phrase has become the 21st-century equivalent of ‘heresy’. It’s what you call something before you proscribe it.

    Silicon Valley insists it is home to neutral network platforms. This is no longer credible. Facebook alone has, without quite meaning to, evolved into the most powerful publisher in the history of the world. Zuckerberg is William Randolph Hearst to the power of ten.

    So what to do? Left-leaning Democrats have an answer: revive the progressive interpretation of anti-trust policy and break up the internet monopolies. Superficially, they have a case. Amazon controls 65 per cent of all online new book sales. Google’s market share of online search is 87 per cent in the US. In mobile social networking, Facebook and its subsidiaries control 75 per cent of the American market.

    Yet who seriously cares what the hipster anti-trust types say? Silicon Valley is a huge donor to the Democrats. Why would they make life difficult for Big Tech when it so openly leans left? The real question is when Republicans (and not just the President) are going to wake up to the threat they now face.

    Two big battles are looming: one on the question of net neutrality (the principle that all bits of data should be treated alike, regardless of their content or value), the other on the 1996 Communications and Decency Act, which allows tech firms exemption from liability for content that appears on their platforms. A group of senators led by Rob Portman has started the ball rolling by seeking to impose liability on companies that knowingly facilitate sex trafficking on their platforms. The initial response of the Internet Association, a trade group that is essentially a mouthpiece for the Valley, was revealing: ‘The entire internet industry wants to end human trafficking,’ it said. ‘But there are ways to do this without amending a law foundational to legitimate internet services.’ Last month, however, the IA conceded the need for ‘targeted amendments’.

    This battle is only just beginning, but its outcome could be decisive in both the 2018 midterm elections to Congress and the 2020 presidential race. The regulatory status quo is not only highly favourable to Silicon Valley. It could also prove highly unfavourable to Republican candidates — though (so far as I could tell on a recent visit to Washington) the penny has not yet dropped with lawmakers who are accustomed to talking only about deregulation, not regulation.

    In many ways, what we are about to witness will be a classic struggle between new networks and established hierarchies. Like King Kong’s epic slugfest with Godzilla, however, it’s far from easy to predict which side will prevail – or how much collateral damage they will both inflict on American democracy. In the old Godzilla movies, after all, the one predictable thing is that Tokyo always gets destroyed.

  • "Enough To Kill 5 Million People": Authorities Make One Of Biggest Fentanyl Busts In History

    The Acting United States Attorney for the District of Nebraska announced earlier this morning that a joint force involving both the Drug Enforcement Administration and Nebraska State Patrol made one of the largest fentanyl busts in the history of the country.  According to authorities, 27 year old Edgar Navarro-Aguirre of California was arrested at an Amtrak station in Omaha carrying 15 kilos (33 pounds) of the deadly opioid.  Here is more from a local NBC affiliate:

    Navarro-Aguirre was traveling on the Amtrak train and waiting at the station when a Drug Enforcement Administration agent was doing a routine surveillance there and noticed a suspicious person with a bag.

     

    “We have officers that are trained to pick out people that are different than the normal traveling public,” Nebraska State Patrol Lt. Jason Scott said.

     

    According to an affidavit, Navarro-Aguirre said it was his friend’s bag, and he denied that anything illegal was inside.

     

    Inside Navarro-Aguirre’s luggage was 15 vacuum-sealed bundles of what forensic chemists determined was pure or nearly pure fentanyl.

     

    “This fentanyl seizure is the largest ever in Nebraska and one of the largest in the nation,” a news released from the U.S. Attorney’s Office said.

    Fent

    For those who may not be familiar with this deadly epidemic, fentanyl is a synthetic opioid that is 40-50 times more potent than herion and has resulted in a wave of overdoses across the country, and particularly in the midwest.  Experts say it only takes a small amount, about 3 milligrams, for the drug to be fatal.

    “This is playing Russian Roulette knowing every cylinder has a bullet in it,” DEA Associate Special Agent in Charge Matt Barden said.

     

    With that in mind, the amount seized by authorities in its pure form would be enough to kill approximately 4.9 million people, or nearly the entire populations of Iowa and Nebraska.

     

    “I think it was literally one mishap away from something extremely tragic for Nebraska,” Lt. Scott said, “dropping a suitcase or it being cut open, this is in a public venue, this was not in a private room.”

    As the New York Times pointed out last month, fentanyl is estimated to have killed over 20,000 people in the U.S. in 2016, a 5x increase over just a couple of years.

    Drug overdoses killed roughly 64,000 people in the United States last year, according to the first governmental account of nationwide drug deaths to cover all of 2016. It’s a staggering rise of more than 22 percent over the 52,404 drug deaths recorded the previous year — and even higher than The New York Times’s estimate in June, which was based on earlier preliminary data.

     

    Drug overdoses are expected to remain the leading cause of death for Americans under 50, as synthetic opioids — primarily fentanyl and its analogues — continue to push the death count higher. Drug deaths involving fentanyl more than doubled from 2015 to 2016, accompanied by an upturn in deaths involving cocaine and methamphetamine. Together they add up to an epidemic of drug overdoses that is killing people at a faster rate than the H.I.V. epidemic at its peak.

     

    The explosion in fentanyl deaths and the persistence of widespread opioid addiction have swamped local and state resources. Communities say their budgets are being strained by the additional needs — for increased police and medical care, for widespread naloxone distribution and for a stronger foster care system that can handle the swelling number of neglected or orphaned children.

    Fent

    Navarro-Aguirre is facing a charge of possession with intent to distribute 400 grams or more of a mixture or substance containing fentanyl. The penalty carries a minimum of 10 years with a maximum of life in prison.  The 27-year-old will appear in federal court Friday afternoon.

  • Rickards Warns "Prepare For A Chinese Maxi-Devaluation"

    Authored by James Rickards via The Daily Reckoning,

    China is a relatively open economy; therefore it is subject to the impossible trinity.

    China has also been attempting to do the impossible in recent years with predictable results.

    Beginning in 2008 China pegged its exchange rate to the U.S. dollar. China also had an open capital account to allow the free exchange of yuan for dollars, and China preferred an independent monetary policy.

    The problem is that the Impossible Trinity says you can’t have all three. This model has been validated several times since 2008 as China has stumbled through a series of currency and monetary reversals.

    For example, China’s attempted the impossible beginning in 2008 with a peg to the dollar around 6.80. This ended abruptly in June 2010 when China broke the currency peg and allowed it to rise from 6.82 to 6.05 by January 2014 — a 10% appreciation.

    This exchange rate revaluation was partly in response to bitter complaints by U.S. Treasury Secretary Geithner about China’s “currency manipulation” through an artificially low peg to the dollar in the 2008 – 2010 period.

    After 2013, China reversed course and pursued a steady devaluation of the yuan from 6.05 in January 2014 to 6.95 by December 2016. At the end of 2016, the Chinese yuan was back where it was when the U.S. was screaming “currency manipulation.”

    Only now there was a new figure to point the finger at China. The new American critic was no longer the quiet Tim Geithner, but the bombastic Donald Trump.

    Trump had threatened to label China a currency manipulator throughout his campaign from June 2015 to Election Day on November 8, 2016. Once Trump was elected, China engaged in a policy of currency war appeasement.

    China actually propped up its currency with a soft peg. The trading range was especially tight in the first half of 2017, right around 6.85.

    In contrast to the 2008 – 2010 peg, China avoided the impossible trinity this time by partially closing the capital account and by raising rates alongside the Fed, thereby abandoning its independent monetary policy.

    This was also in contrast to China’s behavior when it first faced the failure of its efforts to beat impossible trinity. In 2015, China dodged the impossible trinity not by closing the capital account, but by breaking the currency peg.

    In August 2015, China engineered a sudden shock devaluation of the yuan. The dollar gained 3% against the yuan in two days as China devalued.

    The results were disastrous.

    U.S. stocks fell 11% in a few weeks. There was a real threat of global financial contagion and a full-blown liquidity crisis. A crisis was averted by Fed jawboning, and a decision to put off the “liftoff” in U.S. interest rates from September 2015 to the following December.

    China conducted another devaluation from November to December 2015. This time China did not execute a sneak attack, but did the devaluation in baby steps. This was stealth devaluation.

    The results were just as disastrous as the prior August. U.S. stocks fell 11% from January 1, 2016 to February 10. 2016. Again, a greater crisis was averted only by a Fed decision to delay planned U.S. interest rate hikes in March and June 2016.

    The impact these two prior devaluations had on the exchange rate is shown in the chart below.

    Major moves in the dollar/yuan cross exchange rate (USD/CNY) have had powerful impacts on global markets. The August 2015 surprise yuan devaluation sent U.S. stocks reeling. Another slower devaluation did the same in early 2016. A stronger yuan in 2017 coincided with the Trump stock rally. A new devaluation is now underway and U.S. stocks may suffer again.

    By mid-2017, the Trump administration was once again complaining about Chinese currency manipulation.

    This was partly in response to China’s failure to assist the United States in dealing with North Korea’s nuclear weapons development and missile testing programs.

    For its part, China did not want a trade or currency war with the U.S. in advance of the National Congress of the Communist Party of China, which begins on October 18.

    President Xi Jinping was playing a delicate internal political game and did not want to rock the boat in international relations. China appeased the U.S. again by allowing the exchange rate to climb from 6.90 to 6.45 in the summer of 2017.

    China escaped the impossible trinity in 2015 by devaluing their currency.

    China escaped the impossible trinity again in 2017 using a hat trick of partially closing the capital account, raising interest rates, and allowing the yuan to appreciate against the dollar thereby breaking the exchange rate peg.

    The problem for China is that these solutions are all non-sustainable.

    China cannot keep the capital account closed without damaging badly needed capital inflows. Who will invest in China if you can’t get your money out?

     

    China also cannot maintain high interest rates because the interest costs will bankrupt insolvent state owned enterprises and lead to an increase in unemployment, which is socially destabilizing.

     

    China cannot maintain a strong yuan because that damages exports, hurts export-related jobs, and causes deflation to be imported through lower import prices. An artificially inflated currency also drains the foreign exchange reserves needed to maintain the peg.

    Since the impossible trinity really is impossible in the long-run, and since China’s current solutions are non-sustainable, what can China do to solve its policy trilemma?

    The most obvious course, and the one likely to be implemented, is a maxi-devaluation of the yuan to around the 7.95 level or lower.

    This would stop capital outflows because those outflows are driven by devaluation fears. Once the devaluation happens, there is no longer any urgency about getting money out of China. In fact, new money should start to flow in to take advantage of much lower local currency prices.

    There are early signs that this policy of devaluation is already being put into place. The yuan has dropped sharply in the past month from 6.45 to 6.62. This resembles the stealth devaluation of late 2015, but is somewhat more aggressive.

    The geopolitical situation is also ripe for a Chinese devaluation policy. Once the National Party Congress is over in late October, President Xi will have secured his political ambitions and will no longer find it necessary to avoid rocking the boat.

    China’s President Xi Jinping awaits appointment to a second term at the 19th National Congress of the Communist Party of China, starting October 18. His reappointment is a foregone conclusion.

    China has clearly failed to have much impact on North Korea’s nuclear weapons ambitions. As war between North Korea and the U.S. draws closer, neither China nor the U.S. will have as much incentive to cooperate with each other on bilateral trade and currency issues.

    Both Trump and Xi are readying a “gloves off” approach to a trade war and renewed currency war. A maxi-devaluation of the yuan is Xi’s most potent weapon.

    Finally, China’s internal contradictions are catching up with it. China has to confront an insolvent banking system, a real estate bubble, and a $1 trillion wealth management product Ponzi scheme that is starting to fall apart.

    A much weaker yuan would give China some policy space in terms of using its reserves to paper over some of these problems.

    Less dramatic devaluations of the yuan led to U.S. stock market crashes. What does a new maxi-devaluation portend for U.S. stocks?

    We might have an answer soon enough.

  • California's Path To Independence Smoother Than Catalonia's, Secessionists Say

    California’s burgeoning secessionist movement has been watching Catalonia’s struggle for independence with an eye toward the future. Proponents of transforming California into an independent republic have pointed out that there are many similarities between Catalonia and America’s largest state. For example, both are relatively wealthy.  

    However, the circumstances of the two states diverge in one notable respect: The US constitution and California’s state constitution would make it easier for California to secede than Catalonia.

    At least, that’s what one leader of California’s largest pro-secessionist group said during an interview with McClatchy.

    Catalonia has approached secession in the best way it could, Marin said. If secession is what Californians want, he says their path to independence will be easier thanks to the 10th Amendment to the U.S. Constitution, which says any powers not explicitly given to the federal government are retained by the states. The states cannot unilaterally declare independence, but Marin argues that the Constitution provides the federal government and the states a sanctioned path toward that negotiation.

     

    “There are definitely similarities in the fiscal situation – we both give more than we get back,” said Dave Marin, director of research and policy for the California Freedom Coalition. “But there’s more flexibility in the U.S. Constitution for secession than there is in the Spanish one. California has more tools available to it.”

    In a shocking display of police brutality, the government of Spanish Prime Minister Mariano Rajoy forcefully tried to shut down a Catalan independence referendum that took place on Oct. 1 despite being declared illegal by a court in Madrid. Most recently, Catalan Leader Carles Puidgdemont symbolically declared independence before suspending it pending talks with the central government. Meanwhile, Rajoy said Wednesday that Catalonia has eight days to comply with the state’s order to drop its independence bid or Madrid will revoke the state’s autonomy and reassert centralized rule, likely accompanied by a violent crackdown as the rest of Europe backs away.

    However, Dave Marin says California can probably find a way to disentangle itself from the US peaceably by employing unconventional tactics.

    The first step for Marin’s group is getting an initiative on the 2018 ballot that would repeal a section of the state’s constitution that says California is an “inseparable” part of the US.

    “Our state government is very experienced at doing things that undermine the federal government without being unconstitutional,” Marin said, citing California’s sanctuary cities as an example.

     

    The California Freedom Coalition is collecting signatures to get its ballot initiative in front of voters in 2018. It does not definitively say California will declare independence from the United States; it would repeal a provision in the state constitution that says California is “an inseparable part of the United States.” It also directs the governor to negotiate for greater autonomy from the federal government and establishes an advisory commission on California autonomy and independence.

    Calls for California’s independence pre-date Donald Trump’s presidency, but his election magnified the movement considerably. Still, most Californians see secession as ridiculous, with only 20% seeing it favorably. Meanwhile, 32% saw it favorably.

    “We’re not strictly saying secession right now,” Marin said. “But if that number gets into the high 40s or 50s, it makes sense to consider. And then we have a few more tools to pursue it than Catalonia.”

    Given the intense polarization in America’s values and priorities – not to mention California’s open defiance of the federal government, most recently manifested in the “sanctuary state” declaration as well as the state’s legalization of marijuana, which remains illegally at the federal level, the notion that we one day might see an independent California is looking less preposterous.

    At the very least, as first the UK – and now Catalonia – have demonstrated, it’d be foolish to write off the possibility.
     

  • FBI 'Hand-In-Hand' With Vegas PD, Begin Damage Control: "There Is No Conspiracy… Nobody Is Attempt to Hide Anything"

    Sheriff Joseph Lombardo of the Las Vegas Metropolitan Police Department appeared to be visibly shaken when told reporters Friday that he wasn’t attempting to be “subversive” in previous statements he made surrounding details of the October 1 massacre at the Route 91 Music Festival where 58 people lost their lives.

    As Intellihub details, in the ‘no questions’ conference, which members of the independent media were not allowed to attend, the sheriff said that he’s “well aware” of the timeline dispute released by MGM Management on Thursday which claims that Stephen Paddock fired his weapon into the crowd just seconds after Mandalay Bay security guard Jesus Campos was struck by a bullet in the 32nd-floor hallway outside the shooter’s end suite.

    The sheriff stuck to his guns on Friday when he told reporters that he still ‘stands by’ his latest timeline which lists Campos’s encounter with Paddock at 9:59 p.m., 6 minutes prior Paddock’s first known volley of fully-automatic gunfire.

    The visibly nervous sheriff also made clear that “there is no conspiracy between the FBI, LVMPD, or the MGM” and that “nobody is attempting to hide anything” in reference to the investigation and noted his solidarity with the FBI.

     

    “We are standing hand-in-hand with the FBI in the continuance of this investigation,” the sheriff explained.

     

    “I feel confident that there are no other individuals that are intending to cause harm to our community associated with the 1 October event.”

    Sheriff Lombardo also provided an explanation for changes he recently made to the publicly released timeline surrounding Paddock’s arrival to Vegas and his check-in date at the Mandalay Bay.

    “We have come to learn that the suspect did occupy the room on the 25th and the situation on how the room was compensated or paid for had changed on the 28th to include Marilou Danley,” he explained.

    Additionally, the sheriff told reporters that so far there has only been a “visual inspection” done of Paddock’s brain and said that Paddock’s brain was shipped to a facility that will conduct a “microscopic analysis of the brain” to see if there were any signs of mental illness.

    As of yet, authorities admit that they still have no motive for Paddock’s crimes and maintain that he has no affiliation with any groups.

    At one point a reporter tried to sneak a question in but was quickly swatted down by Lombardo over the podium mic.

    This fiasco comes after earlier chaos surrounding the sudden disappearance of Mandalay Bay security guard Jesus Campos, who was shot in the leg by Stephen Paddock…

    Authored by Mac Slavo via SHTFplan.com,

    Over the last few days Las Vegas law enforcement officials have significantly altered the timeline of the mass shooting that left 59 dead and hundreds injured. Adding further intrigue is the fact that the Mandalay Bay Hotel & Casino now says that they have their own timeline of events, which diverge from the official story.

    //platform.twitter.com/widgets.js

    On top of that, mystery still surrounds Mandalay Bay security guard Jesus Campos, who was shot in the leg when Stephen Paddock opened fire and unleashed some 200 rounds through the door of his hotel room.

    As Fox News reports, the Mandalay Bay security guard shot by Stephen Paddock in the moments leading up to the worst mass shooting in modern U.S. history was set to break his silence Thursday night with five television interviews, including one on Fox News, Campos' union president said.

    Except when the cameras were about to roll, and media gathered in the building to talk to him, Campos reportedly bolted, and, as of early Friday morning, it wasn't immediately clear where he was.

     

    “We were in a room and we came out and he was gone,” Campos' union president told reporters, according to ABC News’ Stephanie Wash.

    ampos, who is reportedly not registered to work in the State of Nevada, was also scheduled to do an interview with Sean Hannity Thursday night. But just minutes before the interview was to take place, Campos was said to have abruptly cancelled his appearance:

    //platform.twitter.com/widgets.js

    //platform.twitter.com/widgets.js

    In response to the cancellation, alternative media reporter Laura Loomer attempted to reach out to Campos, who has thus far remained shielded behind his union representatives and refused to provide his account of the shooting to the public. According to Loomer, it appears that Campos and his family have been forced to remain silent because of a gag order surrounding the incident.

    She “doorstopped” the Campos family in person when she visited their home in Las Vegas Thursday night.

    //platform.twitter.com/widgets.js

    According to a video Loomer posted on Periscope, Campos has armed security and it appears that an unmarked law enforcement vehicle is parked outside his home.

    //platform.twitter.com/widgets.js

    Additional videos show Loomer asking members of the Campos family for more information about why he chose to cancel his interviews:

    //platform.twitter.com/widgets.js

    According to Loomer, Jesus Campos and his family members have been told not to discuss the incident. Further, when Loomer was confronted by an armed security guard outside of Campos’ home she noted that the firm the security guard supposedly works for is not registered to operate in Nevada, to which she asks the guard:

    You said that you worked for OnScene, a security company. We did a background check…. and the business license expired in January 2017 and has a virtual address… so the company that you work for…. is it a real company? Or is it just some type of a shill company that the FBI or DHS is using?

    //platform.twitter.com/widgets.js

    Little is known about Campos, with few pictures to emerge of the security guard and no apparent online footprint surfacing to provide details about one of the central figures in the mass shooting.

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Oct 13

Today’s News 13th October 2017

  • China Launches Yuan-Ruble Payment System

    The monetary regimes of China and Russia, two of the world’s most resource-rich nations, are drawing closer with every passing day.

    In the latest push for convergence, China has established a payment versus payment (PVP) system for Chinese yuan and Russian ruble transactions in a move to reduce risks and improve the efficiency of its foreign exchange transactions. The PVP system for yuan and ruble transactions, designed to streamline commerce and curency transactions between the two nations, was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.

    It marks the first time a PVP system has been established for trading the yuan and foreign currencies, said the statement, which was posted on Wednesday on the website of the China Foreign Exchange Trade System (CFETS). PVP systems allow simultaneous settlement of transactions in two different currencies.

    According to CFETS, the system would reduce settlement risk as well as the risk of transactions taking place in different time zones, and improve foreign exchange market efficiency. Of course, if the two countries had a blockchain-based settlement system, they would already have all this and much more.

    CFETS said it plans to introduce PVP systems for yuan transactions with other currencies based on China’s Belt and Road initiative, and complying with the process of renminbi internationalization. Russia, however, is a top priority: the world’s biggest oil producer recently became the largest source of oil for China, the world’s top energy consumer.

    To be sure, the monetary convergence between Beijing and Moscow is hardly new. The most notable recent development took place in April, when the Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade. As the South China Morning Post reported at the time, the new office was part of agreements made between the two neighbours “to seek stronger economic ties” since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

    At the time, Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon, to which we said that If Russia – the world’s fourth largest gold producer after China, Japan and the US – is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

    Furthermore, also around the same time, as the Russian central bank was getting closer to China, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese yuan. The Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi clearing bank in Russia on Wednesday this past Wednesday

    “The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation,” Dmitry Skobelkin, the abovementioned deputy head of the Russian Central Bank, said. “The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries,” he added according to.

    Irina Rogova, a Russian financial analyst told the Russian magazine Expert that the clearing center could become a large financial hub for countries in the Eurasian Economic Union.

    * * *

    The creation of the clearing center, and the launch of PVP systems enables the two countries to further increase bilateral trade and investment while decreasing their dependence on the US dollar. It will create a pool of yuan liquidity in Russia that enables transactions for trade and financial operations to run smoothly. In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of yuan and ruble exchange rates. The clearing center is one of a range of measures the People’s Bank of China and the Russian Central Bank have been looking at to deepen their co-operation, Sputnik reported.

    But one of the most significant measures under consideration is the previously reported push for joint organization of trade in gold.

    In recent years, China and Russia have been the world’s most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

    We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets,” First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia’s TASS news agency.

    In other words, China and Russia are continuing to shift away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

    Meanwhile, the price of gold continues to reflect none of these potentially tectonic strategic shifts, just as China – which has been the biggest accumulator of gold in recent years – likes it.

  • "It Is Time To Return To Sanity" Gorbachev Urges Trump And Putin To Save Crucial Cold-War Arms Pact

    Former Soviet Leader Mikhail Gorbachev the last Soviet leader, is urging Russian President Vladimir Putin and US President Donald Trump to meet face to face to resolve their differences as each side accuses the other of violating a Cold War-era arms-control treaty that Gorbachev believes is essential to maintaining peace between the two world powers.

    The Intermediate-Range Nuclear Forces Treaty, a landmark arms control treaty signed in 1987 by Gorbachev and former US President Ronald Reagan, helped end the Cold War by requiring both countries to eliminate all nuclear ground-launched ballistic and cruise missiles with a range of 500 to 5,500 kilometers.

    But recently, both sides have called for the treaty to be scrapped as perceived encroachment by NATO “missile-defense” systems in South Korea and Europe has unnerved Putin, while Russia’s efforts to influence the US presidential election with a “sophisticated” propaganda campaign

    In an essay that was published in a local newspaper, and re-published by the Washington Post, Gorbachev explains why preserving the treaty – which he sees as the most vulnerable link in the system of limiting and reducing weapons of mass destruction – is imperative to maintaining the Russia-US relationship.

    In the essay, Gorbachev argues that the US-Russia relationship is “in a severe crisis” and only a dialogue based on “mutual respect” can help repair it – if only the two leaders could scrounge up the political will to make it happen.

    So what is happening, what is the problem, and what needs to be done?

     

    Both sides have raised issues of compliance, accusing the other of violating or circumventing the treaty’s key provisions. From the sidelines, lacking fuller information, it is difficult to evaluate those accusations. But one thing is clear:

     

    The problem has a political as well as a technical aspect. It is up to the political leaders to take action.

     

    Therefore I am making an appeal to the presidents of Russia and the United States.

     

    Relations between the two nations are in a severe crisis. A way out must be sought, and there is one well-tested means available for accomplishing this: a dialogue based on mutual respect.

     

    It will not be easy to cut through the logjam of issues on both sides. But neither was our dialogue easy three decades ago. It had its critics and detractors, who tried to derail it.

     

    In the final analysis, it was the political will of the two nations’ leaders that proved decisive. And that is what’s needed now. This is what our two countries’ citizens and people everywhere expect from the presidents of Russia and the United States.

    If Trump and Putin could agree to preserve the agreement, it would encourage the generals and diplomats responsible for implementing and monitoring the terms to fall in line, Gorbachev said.

    I am confident that preparing a joint presidential statement on the two nations’ commitment to the INF Treaty is a realistic goal. Simultaneously, the technical issues could be resolved; for this purpose, the joint control commission under the INF Treaty could resume its work. I am convinced that, with an impetus from the two presidents, the generals and diplomats would be able to reach agreement.

     

    We are living in a troubled world. It is particularly disturbing that relations between the major nuclear powers, Russia and the United States, have become a serious source of tensions and a hostage to domestic politics. It is time to return to sanity. I am sure that even inveterate opponents of normalizing U.S.-Russian relations will not dare object to the two presidents. These critics have no arguments on their side, for the very fact that the INF Treaty has been in effect for 30 years proves that it serves the security interests of our two countries and of the world.

    Unfortunately, the INF isn’t the only important treaty in danger of collapse. As we reported last month, US officials are preparing restrictions for Russian military flights over American territory permitted by the 2002 Treaty on Open Skies after accusing the country of concealing movements of personnel and military equipment near its western enclave of Kaliningrad as Russia prepared to stage its “Zapad-2017” drills, its biggest display of military power since the end of the Cold War.

    In another sign of mounting tensions, the US suspended joint military exercises with its Gulf allies after a historic Russia-Saudi Arabia summit.

    Gorbachev led the Soviet Union from 1985 until its dissolution in 1991.

  • 'Shocker' Of The Day: 'Tech' Company That Buys Movie Tickets For $10 And Sells Them For $0.33 May Not Survive

    Over the past 4 weeks, the stock of a tiny New York based “IT service management” company, Helios & Matheson Analytics, Inc., has surged just over 1,300% after announcing plans to purchase a majority stake of an “innovative and disruptive technology company” called MoviePass at a $210 million valuation.

    So how exactly does MoviePass, the “innovative” and “disruptive” tech powerhouse that it is, plan to change the entertainment world forever, you ask?  Well, apparently by paying movie theaters $10 a pop for movie tickets and then re-selling them to their own monthly subscribers for a small 97% discount, or roughly $0.33 each (in the worst case scenario). Per Bloomberg:

    The company sells a monthly subscription that gives moviegoers a daily pass to movie theaters for $10 a month – though MoviePass is paying theaters full price for tickets, which can cost $10 apiece or more.

    Genius plan, right? 

    MoviePass

    And while the company planned to supplement its top line with advertising revenue and deals with theater chains to share in concession sales, at least according to Bloomberg, a problem developed when its subscriber base ballooned from nearly nothing to 400,000 in a matter of weeks.  Unfortunately, at least when you’re business model is dependent upon selling your primary product at a 97% loss, the more ‘successful’ you are the more money you lose.

    And while the ending of this particular movie seemed obvious from the start, it apparently eluded Helios investors until today when the company announced that the business they just purchased 4 weeks ago may not survive…all of which sent their stock plunging by 40%. 

    Helios & Matheson Analytics Inc., the backer of the controversial $10 MoviePass subscription, fell as much as 21 percent after warning the money-losing cinema service may not make it.

     

    Helios boosted its support for MoviePass to $11.5 million from $5 million as part of an August deal to acquire a majority stake, according to a regulatory filing. At the same time, Helios said MoviePass’s auditors are expected to warn of substantial doubt about its ability to continue as a going concern.

    Who knew that massive cash losses could be considered detrimental for a tech company?

    MoviePass

    Just to put this problem in perspective, lets apply some math to this case study on how not to run a business.  Lets assume that each of MoviePass’s 400,000 subscribers decide to see 2 movies each week (they’re entitled to one movie pass a day…but lets just assume they only use 2 per week) at a cost of $10…that’s a total cost of $32 million each month.  Now, each of those subscribers are paying $10 per month for their service which means MoviePass is collecting $4 million in revenue and burning $28 million every single month or $336mm per year…and that doesn’t even count their staff and other overhead expenses which we’re sure are considerable.  Does that sound like a business plan that might be of interest to you?

    Meanwhile, even AMC, undoubtedly one of the biggest beneficiaries of the bizarre MoviePass business model, said that the company was “unsustainable.”

    MoviePass sparked an outcry in the movie business after cutting the price of its movie subscription plan to just under $10 from $30. That led to a flood of sign-ups that the company struggled to keep up with. The biggest movie-theater chain in the world, AMC Entertainment Holdings Inc., has said the plan is unsustainable — because MoviePass is paying exhibitors full price for tickets — and was looking to block the deal.

    Sorry guys, only Bezos and Musk are able to sell products at a massive loss, in perpetuity, without investor backlash…

  • Andy Xie Warns "The Bubble Economy Is Set To Burst" As Political Tension Soars

    Authored by Andy Xie via The South China Morning Post,

    Central banks continue to focus on consumption inflation, not asset inflation, in their decisions. Their attitude has supported one bubble after another. These bubbles have led to rising ­inequality and made mass consumer inflation less likely.

    Since the 2008 financial crisis, asset inflation has fully recovered, and then some. The US household net worth is 34 per cent above the peak in 2007, versus 30 per cent for nominal GDP. China’s property ­value may have surpassed the total in the rest of the world combined. The world is stuck in a vicious cycle of asset bubbles, low consumer ­inflation, stagnant productivity and low wage growth.

    The US Federal Reserve has indicated that it will begin to ­unwind its QE (quantitative easing) assets this month and raise the ­interest rate by another 25 basis points to 1.5 per cent. China has been clipping the debt wings of grey rhinos and pouring cold water on property speculation. They are ­worried about asset bubbles.

    But, if recent history is any guide, when asset markets begin to tumble, they will reverse their actions and ­encourage debt binges again.

    Recently, some central bankers have been puzzled by the breakdown of the Philipps Curve: that falling unemployment rates would lead to wage inflation first and consumer price inflation next. This shows how some of the most powerful people in the world operate on flimsy ­assumptions.

    Despite low unemployment and widespread labour shortages, wage increases and inflation in Japan have been around zero for a quarter of a century. Western central bankers assumed that the same wouldn’t happen to them without understanding the underlying reasons.

    The loss of competitiveness changes how macro policy works. Japan has been losing competitiveness against its Asian neighbours. As its population is small, relative to the regional total, lower wages in the region have exerted gravity on its ­labour market. This is the fundamental reason for the decoupling between the unemployment rate and wage trend.

    The mistaken stimulus has the unintended consequences of dissipating real wealth and increasing inequality. American household net worth is at an all-time high of five times GDP, significantly higher than the bubble peaks of 4.1 times in 2000 and 4.7 in 2007, and far higher than the historical norm of three times GDP. On the ­other hand, US capital formation has stagnated for decades. The outlandish paper wealth is just the same asset at ever higher prices.

    The inflation of paper wealth has a serious impact on inequality. The top 1 per cent in the US owns one-third of the wealth and the top 10 per cent owns three-quarters . Half of the people don’t even own stocks. Asset inflation will increase inequality by definition. Moreover, 90 per cent of the income growth since 2008 has gone to the top 1 per cent, partly due to their ability to cash out in the ­inflated asset market. An economy that depends on asset inflation always disproportionately benefits the asset-rich top 1 per cent.

    There have been so many theories on why inequality has risen. The misguided monetary policy may be the culprit. Germany and Japan do not have significant asset bubbles. Their inequality is far less than in the Anglo-Saxon economies that have succumbed to the allure of financial speculation.

    While Western central bankers can stop making things worse, only China can restore stability in the global economy. Consider that 800 million Chinese workers have ­become as productive as their Western counterparts, but are not even close in terms of consumption. This is the fundamental reason for the global imbalance.

    China’s model is to subsidise ­investment. The resulting overcapacity inevitably devalues whatever its workers produce. That slows down wage rises and prolongs the ­deflationary pull. This is the reason that the Chinese currency has had a tendency to depreciate during its four decades of rapid growth, while other East Asian economies experienced currency appreciation during a similar period.

    Overinvestment means destroying capital. The model can only be sustained through taxing the household sector to fill the gap. In addition to taking nearly half of the business labour outlay, China has invented the unique model of taxing the household sector through asset bubbles. The stock market was started with the explicit intention to subsidise state-owned enterprises. The most important asset bubble is the property market. It redistributes about 10 per cent of GDP to the government sector from the household sector.

    The levies for subsidising investment keep consumption down and make the economy more dependent on investment and export. The government finds an ever-increasing need to raise levies and, hence, make the property bubble bigger. In tier-one cities, property costs are likely to be between 50 and 100 years of household income. At the peak of Japan’s property bubble, it was about 20 in Tokyo. China’s residential property value may have surpassed the total in the rest of the world combined.

    How is this all going to end? Rising interest rates are usually the trigger. But we know the current bubble economy tends to keep inflation low through suppressing mass consumption and increasing overcapacity. It gives central bankers the excuse to keep the printing press on.

    In 1929, Joseph Kennedy thought that, when a shoeshine boy was giving stock tips, the market had run out of fools. Today, that shoeshine boy would be a genius. In today’s bubble, central bankers and governments are fools. They can mobilise more resources to become bigger fools.

    In 2000, the dotcom bubble burst because some firms were caught making up numbers. Today, you don’t need to make up numbers. What one needs is stories.

    Hot stocks or property are sold like Hollywood stars. Rumour and ­innuendo will do the job. Nothing real is necessary.

    In 2007, structured mortgage products exposed cash-short borrowers. The defaults snowballed. But, in China, leverage is always rolled over. Default is usually considered a political act. And it never snowballs: the government makes sure of it. In the US, the leverage is mostly in the government. It won’t default, because it can print money.

    The most likely cause for the bubble to burst would be the rising political tension in the West. The bubble economy keeps squeezing the middle class, with more debt and less wages. The festering political tension could boil over. Radical politicians aiming for class struggle may rise to the top. The US midterm elections in 2018 and presidential election in 2020 are the events that could upend the applecart.

  • Bitcoin Tops $5800 – Up Over 20% Today Amid China Rumors

    Update: Bitcoin has now topped $5800 amid unconfirmed rumors that China will restore cryptocurrency trading (perhaps in a more regulated environment) following the forthcoming National Congress.

    As it seems the rest of the crypto space is being sold to fun BTC buying…

     

    *  *  *

    Having smashed through the old record high this morning, Bitcoin has blasted above $5600 as the Asian session begins. The cryptocurrency is now up 30% since the Chinese returned from their Golden Week holiday…

     

    Bitcoin is now 16% above its previous record high…

     

    As a reminder, Mike Novogratz recently suggested Bitcoin could reach $10,000 within the next year.

    In an interview with CNBC's Fast Money, Novogratz called the emerging landscape a "revolution," stating:

    "I never thought I'd come out of retirement but the space is so exciting right now I decided to build a business, hire a whole bunch of smart guys, and we're gonna to raise a fund … and hopefully take advantage of what I see as a revolution, actually. A decentralised revolution."

    As a store of value, Novogratz likened bitcoin to digital gold, and said the technology is beginning to make "more and more sense" as we move increasingly into the digital.

    Novogratz continued to say that, while bitcoin is a bubble, the mania is justified, because it is a technological advancement that promises to fundamentally alter our lives.

    "I can hear the herd coming" Novogratz said.

    And bubble or not, Novogratz concluded eloquently on the extreme nature of cryptocurrencies' potential…

    “Remember, bubbles happen around things that fundamentally change the way we live,” he said.

     

    “The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.”

    Bitcoin is set to become "the biggest bubble of our time," he added, and could reach $10,000 very soon due to fast-building interest.

     

     

  • Trump To Scrap Crucial Obamacare Insurer Subsidy

    Just hours after signing an executive order that implicitly begins unwinding ObamaCare, Politco reports, citing two people familiar with the matter, that President Trump plans to cut off critical subsidy payments to insurers selling Obamacare coverage.

    Earlier today, Trump signed an executive order expanding access to more loosely regulated insurance options with low premiums, a move that could undermine the ACA insurance markets.

    “We’ve been hearing about the disaster of Obamacare for so long,” Trump said in signing the order at a White House ceremony. “For a long time, I’ve been hearing repeal, replace, repeal, replace.”

     

    He then said that the order is "starting that process" to repeal ObamaCare.

     

    It will be the "first steps to providing millions of Americans with ObamaCare relief."

    And now, as Politico reports, the process appears to accelerating as Trump's decision to end the payments, estimated at $7 billion this year, marks the president's most aggressive move yet to dismantle Obamacare after months of failed GOP repeal efforts on Capitol Hill.

    As Reuters notes, Trump has repeatedly threatened to stop the payments, which are made directly to insurance companies to help cover out-of-pocket medical expenses for low-income Americans enrolled in individual healthcare plans under Obamacare.

    The move is likely to draw lawsuits and may put pressure on Congress to appropriate funding for the subsidies.

    This latest move is likely to throw healthcare markets into chaos, and will infuriate Democrats – effectively closing the 'Chuck and Nancy' channel of communications – leaving a deal to avert government shutdown on or after Dec 8th (when the currenct extension deal runs out) increasingly doubtful.

  • Robert Gore's "Hard Core Doom Porn"

    Authored by Robert Gore via Straight Line Logic blog,

    It will be a crash like we’ve never seen before.

    SLL has been accused of trafficking in “doom porn.” Guilty as charged. If you don’t like doom porn, don’t read this article, it’s hard core. If you prefer feel good and heartwarming, there are plenty of Wall Street research reports and mainstream media stories about the economy available. Enjoy!

    In 1971, President Nixon closed the “gold window,” which allowed foreign governments to exchange their dollars for gold. This severed the last link between any government and central bank-created debt and the real economy. Debt could be conjured at whim, and governments and central banks have done so for the last 46 years.

    Not surprisingly, credit creation without restraint has papered the globe with the greatest pile of debt mankind has ever amassed, measured in nominal terms or relative to the underlying economy. A measure of how extraordinary this situation is: most people regard it as normal, if they think of it all. Debt is a first mover, a financial constant. Any exigency small or large can be met from an unlimited credit pool that will always be with us. How to rebuild Houston, Florida, and Puerto Rico? No problem, borrow.

    Although fiat credit creation by governments and central banks is unconnected to the real economy, its effects are not. Their debt becomes an asset within the financial system. Through fractional reserve banking, securitization, and derivatives it become the basis for a multiplication of the original debt. That multiplication is many times the multiplier (the reciprocal of the reserve requirement) taught in introductory macroeconomics classes whereby the debt is contained within the banking system.

    Nominal global debt is reckoned at between $225 and $250 trillion, or about three times global GDP. Financial, debt-supported derivatives (financial instruments whose prices are derived from the prices of other financial instruments) are estimated at anywhere from $500 trillion to $1 quadrillion notational, or six to twelve times global GDP.

    Overpriced houses did not cause the last financial crisis and almost bring down the world’s financial system, securitized packages of mortgages and their associated derivatives did. The Panglossian view of derivatives is that most of them can be netted out against offsetting derivatives, thus actual exposures are far less that notational amounts. The real world view is they can only be netted out as long as all counterparties remain solvent. As we learned in 2009, that is not always a correct assumption.

    Globally, unfunded old age pension and medical liabilities, not counted as debt but still promises made that often have the force of law, sum to another $400 trillion. In the US, they are about $210 trillion, or about 11 times US GDP. Demographics amplify the liability: across the developed world, declining birth rates and extensions in life expectancies mean a shrinking pool of workers supports an expanding pool of beneficiaries. In the last month, SLL has posted four excellent articles by John Mauldin for those who want all the gruesome details. (Just enter John Mauldin in SLL’s search box and they’ll pop right up.)

    This doom porn, the skeptics will say, is almost as old as Deep Throat (released in 1972). Markets crash from time to time, but they always bounce back. Central banks and governments come to the rescue with fiscal stimulus (increased government debt) and unlimited fiat debt.

    Why should we worry now?

    There are a number of reasons.

    When the world was less indebted, a fiat currency unit’s worth of debt produced more than a fiat currency unit’s worth of expanded output of goods and services. Sometime within the last year or two, the marginal economic effectiveness of all that government and central bank debt reached zero, and is negative after debt service.

    With the world saturated in debt, another fiat currency unit of debt produces no increase in output. Kick in the costs of servicing and repaying that debt, and increasing debt is actually retarding economic growth. It accounts for the long-term slowing growth trend, flat incomes, and “secular stagnation” that puzzle so many economists.

    It also accounts for the lack of inflation that puzzles so many central bankers, at least in the price indexes they look at. They are looking at the wrong indexes. The relevant indices are stock, high-grade bond, real estate, and cryptocurrency prices, still at or close to record highs, and corporate and securitized-debt credit spreads to treasury benchmarks at record lows (indicating massive complacency about corporate credit risk). Here inflation—the speculative kind that blows bubbles—is alive and thriving.

    With the Federal Reserve now taking steps to shrink its balance sheet and other central banks making noises about doing the same, global fiat debt creation may go into reverse for the first time in many years. Brandon Smith at Alt-Market.com argues that this is part of plan leading to a crash and global, centralized monetary control.

    He may or may not be on to something, however, valuation extremes and sentiment indicators point to the same conclusion concerning a crash. SLL maintains financial markets are exercises in crowd psychology, impervious to government and central bank efforts to control them, designed to separate the maximum number of speculators from a maximum amount of their money.

    Robert Prechter, of Elliott Wave International, has written the chapter and the verse on markets and psychology. (SLL reviewed his groundbreaking tome, The Socionomic Theory of Finance.) Consider the following from Elliot Wave International’s October “Financial Forecast.”

    Every month another sentiment indicator seems to pop to a frothy new extreme. Last month it was the percentage of cash that members of the American Association of Individual Investors harbored in their investment portfolios. At 14.5%, it was the smallest allocation to this safe alternative since January 2000, the same month that the Dow Industrials began a 38% decline that lasted through October 2002. Last month, we also showed a new bullish extreme for the five-day average of Market Vane’s Bullish Consensus survey of advisors. On September 15, the average pushed to 71%, a new ten-year extreme.

     

     

    The most recent Commitment of Traders Report shows that Large Speculators in futures on the CBOE Volatility Index (VIX) have amassed a record net- short position of 172,395 contracts.

     

     

    This record bet on subdued volatility sets the stage perfectly for the period of “high volatility” that EWFF called for in August.

     

    …Large Speculators in the E-mini DJIA futures have pushed their net-long position to 95,976 contracts, more than four times the number of contracts they held in January 2008, shortly after the Dow started its largest percentage decline since 1929. So, investors are betting to a record degree that the stock market will continue to rise and volatility will continue to remain subdued. Paradoxically, these measures indicate that exact opposite.

     

    …Various media accounts confirm that a rare complacency now dominates the stock market.

    One doesn’t have to buy in to socionomics to realize that virtually everyone is now on the same side of the boat, a condition generally followed by the boat capsizing. Using conventional valuation measures, the only time stocks have been more highly valued is just before the tech wreck in 2000.

    If one does buy into socionomics, the last few upward squiggles in the stock market will put the finishing touches on intermediate, primary, cycle, supercycle, and grand supercycle Elliot Waves dating back to 2016, 2009, 1974, 1932, and the 1780s, respectively. In other words, this is going to be a crash for the ages.

    Given the unprecedented level of global debt, that appears to be the most likely scenario. Every financial asset in the world is either a debt claim or an even less secure equity claim—a claim on what’s left after debt is paid. Much of the world’s real, tangible assets are mortgaged.

    When the debt bubble implodes, a global margin call will prompt forced selling, driving down all asset prices precipitously. Most of what is currently regarded as wealth will vanish. Opening up the world’s fiat debt spigots full force won’t stop this one. The notions that governments and central banks have speculators’ backs, that problems caused by excessive debt can be solved with more debt, will be revealed as monumental follies. And markets will not come back, at least in our lifetimes.

    Long-time readers will point out that SLL has been issuing warnings for years. Again, guilty as charged. However, we’ll join Mr. Prechter and company in their prediction that US equity markets top out before the end of this year. (They called last year’s top in the government bond market, adding to an impressive list of correct calls.) If we’re wrong, it won’t be the first or last time. If we’re right, given the magnitude of what’s coming, being a few years early won’t matter at all.

    Our concluding clichés: fear is stronger than greed and markets go down much quicker than they go up.

  • DHS Releases Images Of Border Wall Prototypes

    The White House wasn’t going to let minor details like the fact that Congress hasn’t appropriated any money to fund construction of President Trump’s promised border wall stop it from building eight prototypes in Otay Mesa, near San Diego.

    And with few expecting the Democrats to accept the White House’s demands relating to a tentative deal that Trump struck with “Chuck and Nancy” last month to avert a shutdown and secure some border wall funding in exchange for enshrining DACA, it’s possible that the Trump administration will never secure the funds, given rumors that a handful of Republican lawmakers privately oppose it.  

    Nevertheless, construction on the prototypes, which were selected by the Department of Homeland Security back in August, began two weeks ago. And now, DHS has released the first images of the partly finished designs.

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    Plans for the prototypes that were selected by DHS after a bidding process that began in the spring were published in late August.

    The prototypes are meant to be a “menu of designs” that might be used for the wall, should it be built. Four of the prototypes are made of concrete, while the other four are made of other materials, the Blaze reports. They range from 18 to 30 feet high and are “designed to deter illegal crossings,” says the Border Protection office. They are expected to cost $3.6 million.

    The money for building the prototypes came from $20 million that Congress has allowed the Department of Homeland Security to pull from other areas of its budget. That followed an executive order President Donald Trump signed in January directing the federal government to begin construction on the border wall as soon as possible.

    While the final cost of a border wall would depend on which design is chosen, estimates range from the upper end of $70 billion from a report by Senate Democrats, to $21.6 billion estimated by the US Department of Homeland Security.

  • Did Bannon Just Take Down Harvey Weinstein?

    Authored by Tom Luongo via TomLuongo.me,

    The biggest open-secret in Hollywood was that Harvey Weinstein was a Grade-A pervert.  And his ‘coming out party’ this week is incredibly intriguing.  Hollywood is a dirty place.

    It’s Chinatown, squared.

    And, at this point it’s what we don’t know that is more interesting than what we’ve heard so far.  But, staying focused on Harvey Gropeman, Producer at Large, his position has been to act as one of the main enforcers of the status quo in all of the power centers of the United States.

    From the casting couches of Hollywood to the banks on Wall St. to the grubby think tanks in D.C., this story won’t have all the twists and turns of L.A. Confidential, but it will have the same implications.

    Weinstein, in effect, was perfectly suited for his role.  He is a man of infinite appetites with poor impulse control.  A pathetic loser with power over hot, young women desperate for fame.

    And these women made the trade willingly.  “Small price to pay, right?”  Wrong.

    Look at the women most opposed to Trump, the Ashley Judds, the Gwynneth Paltrows.  They were all used by Weinstein or someone like him.  More will come out every day.

    Ben Affleck is next because he couldn’t handle fame and power any better than the rest of them did. He’s also Batman and Disney will not pass up the opportunity to bloody Warner Bros. nose.

    The story is perverted by the desperate need of the powerful to maintain their power at all costs.  Weinstein’s film companies acted like money laundering operations for the DNC.  How many millions did he raise for people like Obama, Hillary, Pelosi, Feinstein?

    How many millions were added to the budgets of performer’s salaries to be funneled from Wall St. financiers to those same people?

    The whole thing is an internecine nightmare of quid pro quo and the shadiest of finances.

    And Steve Bannon just attacked all of it.  In real time.

    The Bannonator

    Yes, you heard me. Steve Bannon is the Dr. Evil in this movie.  He’s the mastermind behind this.  Except that Bannon isn’t the villain (well, to Harvey Weinstein he is) but the protagonist.  Think about it for two seconds.

    Who else has motive, means, opportunity and, most importantly, the will to take on the biggest, most powerful (and pathetic) people in the world.

    And he doesn’t want money.  Bannon’s already rich.  Remember, as Bannon left the White House he said that there he had influence, but at Breitbart he has power.

    We’re seeing the first effects of his deploying that power.

    Go through it like Jake Gittes or Sam Spade

    Motive?  Bannon, for whatever faults he has, is a patriot.  He’s a disciple of Andrew Breitbart who routinely castigated Hollywood to ‘stop raping the children.’  Bannon joined Trump’s campaign and turned the messaging into a pale reflection of his film, “Generation Zero.”

    Bannon understands the cultural and generational imperatives of this moment in time.  If you haven’t watched that film then you don’t know who Steve Bannon is.

    Means?  The man runs Breitbart.

    Opportunity?  Bannon made millions as a producer on Seinfeld.  He worked in Hollywood for years.  Bannon also saw all sorts of stuff while working for Trump.

    Remember, I told you on the outside he would be Trump’s Secret Agent, using his newly-found knowledge (cue the Hero Cycle!) from the Underworld of Washington to deploy sump pumps in the swamp.

    Will?  That’s my guess.  Spending time in Washington changes everyone.  It corrupts the venal and galvanizes the principled.  Bannon didn’t want to cut deals to govern.  He wasn’t interested in governing the U.S. with Trump, he was interested in blowing up the vile status quo.  He runs Breitbart.

    How do I know Bannon was behind this?  The headlines today are all about how Bannon did some business with Weinstein over a decade ago.  A minor company that Bannon ran into the ground.  It went bankrupt.  Simple guilt by ironic association.

    Here’s a better question?  Who hasn’t worked with Weinstein in Hollywood?  This story is simply chum to feed to the loony left’s Facebook feeds.  It will alienate even more people from that pillar of thought control.

    The left crowed when they thought they’d chased Bannon from the White House.  They thought they had Trump cornered and without friends.  But, Bannon’s leaving the White House wasn’t the end of the movie, it was, simply the end of a smaller arc.

    The Weinstein Turn

    In writing, there is something called the “Mid-Point Turn.”  It is the moment when someone does something so singular, usually bad, that it ensures things can never go back to the way they were at the beginning.

    The fall of Harvey Weinstein is the ‘Mid-Point Turn’ for this part of the story.  The lid has been blown off the abuse cycle in Hollywood. Someone finally is going down for their crimes.  The guy behind the outing is still in power and the dominoes will continue to fall.

    Trump was right to lean on the NFL like he did.  It galvanized his base.  It exposed the hypocrisy of a hyper-violent sport played by criminals and financed by taxpayers.  They think they can just stop taking a knee for a few weeks and all will be forgiven.

    No.  It won’t.  The same thing with the image handlers in Hollywood.  They think that isolating Weinstein, putting out rumors of rehab, etc. will make this thing go away.  Harvey Weinstein is going to jail.  He’s a sex offender.

    But, the real story is how much this disrupts the money laundering cycle of the entertainment industry to maintain control over the narrative.  Trump’s base already didn’t like Hollywood.  Now they hate it.

    George Clooney recently ranted about Steve Bannon saying,

     “Steve Bannon is a failed f**king screenwriter, and if you’ve ever read [his] screenplay, it’s unbelievable. Now, if he’d somehow managed miraculously to get that thing produced, he’d still be in Hollywood, still making movies and licking my a$$ to get me to do one of his stupid-a$$ screenplays.”

    Well, George, Bannon is right now producing one of the best screenplays I’ve read in a long time.  He has power and your boy Harvey has lawyers.  How’s that for an act reversal?

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