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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