- How The Military Defeated Trump's Insurgency
Trump was seen as a presidential candidate who would possibly move towards a less interventionist foreign policy.
That hope is gone. The insurgency that brought Trump to the top was defeated by a counter-insurgency campaign waged by the U.S. military. (Historically its first successful one).
The military has taken control of the White House process and it is now taking control of its policies.
It is schooling Trump on globalism and its "indispensable" role in it. Trump was insufficiently supportive of their desires and thus had to undergo reeducation:
When briefed on the diplomatic, military and intelligence posts, the new president would often cast doubt on the need for all the resources.
Defense Secretary Jim Mattis and Secretary of State Rex Tillerson organized the July 20 session to lay out the case for maintaining far-flung outposts — and to present it, using charts and maps, in a way the businessman-turned-politician would appreciate.
Trump was hauled into a Pentagon basement 'tank' and indoctrinated by the glittering four-star generals he admired since he was a kid:
The session was, in effect, American Power 101 and the student was the man working the levers. It was part of the ongoing education of a president who arrived at the White House with no experience in the military or government and brought with him advisers deeply skeptical of what they labeled the “globalist” worldview.
In coordinated efforts and quiet conversations, some of Trump’s aides have worked for months to counter that view, hoping the president can be persuaded to maintain — if not expand — the American footprint and influence abroad.
Trump was sold the establishment policies he originally despised. No alternative view was presented to him.
It is indisputable that the generals are now ruling in Washington DC. They came to power over decades by shaping culture through their sponsorship of Hollywood, by manipulating the media through "embedded" reporting and by forming and maintaining the countries infrastructure through the Army Corps of Engineers. The military, through the NSA as well as through its purchasing power, controls the information flow on the internet. Until recently the military establishment only ruled from behind the scene. The other parts of the power triangle, the corporation executives and the political establishment, were more visible and significant. But during the 2016 election the military bet on Trump and is now, after he unexpectedly won, collecting its price.
Trump's success as the "Not-Hillary" candidate was based on an anti-establishment insurgency. Representatives of that insurgency, Flynn, Bannon and the MAGA voters, drove him through his first months in office. An intense media campaign was launched to counter them and the military took control of the White House. The anti-establishment insurgents were fired. Trump is now reduced to public figure head of a stratocracy – a military junta which nominally follows the rule of law.
Stephen Kinzer describes this as America’s slow-motion military coup:
Ultimate power to shape American foreign and security policy has fallen into the hands of three military men […]
Being ruled by generals seems preferable to the alternative. It isn’t.
[It] leads toward a distorted set of national priorities, with military “needs” always rated more important than domestic ones.
It is no great surprise that Trump has been drawn into the foreign policy mainstream; the same happened to President Obama early in his presidency. More ominous is that Trump has turned much of his power over to generals. Worst of all, many Americans find this reassuring. They are so disgusted by the corruption and shortsightedness of our political class that they turn to soldiers as an alternative. It is a dangerous temptation.
The country has fallen to that temptation even on social-economic issues:
In the wake of the deadly racial violence in Charlottesville this month, five of the Joint Chiefs of Staff were hailed as moral authorities for condemning hate in less equivocal terms than the commander in chief did.
On social policy, military leaders have been voices for moderation.
The junta is bigger than its three well known leaders:
Kelly, Mattis and McMaster are not the only military figures serving at high levels in the Trump administration. CIA Director Mike Pompeo, Attorney General Jeff Sessions, Energy Secretary Rick Perry and Interior Secretary Ryan Zinke each served in various branches of the military, and Trump recently tapped former Army general Mark S. Inch to lead the Federal Bureau of Prisons.
the National Security Council [..] counts two other generals on the senior staff.
[Chief of staff John] Kelly initiated a new policymaking process in which just he and one other aide […] will review all documents that cross the Resolute desk.
The new system [..] is designed to ensure that the president won’t see any external policy documents, internal policy memos, agency reports and even news articles that haven’t been vetted.
To control Trump the junta filters his information input and eliminates any potentially alternative view:
Staff who oppose [policy xyz] no longer have unfettered access to Trump, and nor do allies on the outside [.. .] Kelly now has real control over the most important input: the flow of human and paper advice into the Oval Office. For a man as obsessed about his self image as Trump, a new flow of inputs can make the world of difference.
The Trump insurgency against the establishment was marked by a mostly informal information and decision process. That has been destroyed and replaced:
Worried that Trump would end existing US spending/policies (largely, still geared to cold war priorities), the senior military staff running the Trump administration launched a counter-insurgency against the insurgency.
General Kelly, Trump's Chief of Staff, has put Trump on a establishment-only media diet.
In short, by controlling Trump's information flow with social media/networks, the generals smashed the insurgency's OODA loop (observe, orient, decide, act). Deprived of this connection, Trump is now weathervaning to cater to the needs of the establishment …
The Junta members dictate their policies to Trump by only proposing to him certain alternatives. The one that is most preferable to them will be presented as the only desirable one. "There are no alternatives," Trump will be told again and again.
Other countries noticed how the game has changed. The real decisions are made by the generals, Trump is ignored as a mere figurehead:
Asked whether he was predicting war [with North Korea], [former defence minister of Japan, Satoshi] Morimoto said: "I think Washington has not decided … The final decision-maker is [US Defence Secretary] Mr Mattis … Not the president."
Climate change, its local catastrophes and the infrastructure problems it creates within the U.S. will further extend the military role in shaping domestic U.S. policy.
Nationalistic indoctrination, already at abnormal heights in the U.S. society, will further increase. Military control will creep into ever extending fields of once staunchly civilian areas of policy. (Witness the increasing militarization of the police.)
It is only way to sustain the empire.
It is doubtful that Trump will be able to resist the policies imposed on him. Any flicker of resistance will be smashed. The outside insurgency which enabled his election is left without a figurehead, It will likely disperse. The system won.
- The Future Of Artificial Intelligence (According To Pop Culture)
The unpredictable nature of super-intelligent, self-improving machines lends itself quite nicely to the dramatic storylines of movies and books.
It’s a science fiction writer’s dream – as Visual Capitalist's Jeff Desjardins warns: if AI becomes smart enough to create more advanced versions of itself, pretty much every outcome is on the table. Machines could empower humanity to become enlightened and virtuous. On the less optimistic side? Machines could instead ruthlessly enslave all of humankind to tickle their own warped sense of satisfaction.
POP CULTURE PERSPECTIVES
From the plot of movies like The Terminator to The Matrix, pop culture offers up innumerable examples of what could happen from the rise of the machines – and most of them, as you can imagine, steer towards the less optimistic side of the spectrum.
Today’s infographic from BBC Future provides an entertaining take on these scenarios, organized by potential likelihood.Courtesy of: Visual Capitalist
Some experts see AI having a $15.7 trillion impact on our economy, but pop culture offers up a slightly different perspective of what the future may hold.
FUTURE AI SCENARIOS
Here are just some of the scenarios offered up in mainstream movies, books, and television shows. Some are apocalyptic and dystopian, and some seem just plain bizarre:
Seductive Siris: In 2013’s Her, Joaquin Phoenix falls in love with an intelligent operating system named Samantha.
Self-Replicating AI: In 1995’s Screamers, scientists create a self-replicating weapon with one purpose: to destroy all life.
The Singularity: AI vies to take over the world in 1982’s classic Tron.
Rampaging Robots: In 1973’s Westworld, recently re-envisioned as a different TV series by HBO, murderous androids go on a killing spree in a futuristic Disney-style theme park.
Feeling Machines: In the 1999 movie Bicentennial Man, a household robot experiences emotions, creative thoughts, and eventually develops sentience.
Androids Among Us: Artificial beings infiltrate society undetected in TV series Battlestar Galactica.
Human Enslavement: In the 1999 movie The Matrix, all life on Earth is an elaborate facade. The robots are really the ones in command, but you wouldn’t know it until you take the “red pill”.
Mind Upload: Digitized humans gain immortality and then wreak havoc, such as in 2014’s Transcendence.
While some of these ideas seem far-fetched, it’s worth noting that not all future scenarios are as distant as they may seem.
With computing power increasing exponentially, the tail end of the hockey stick could happen sooner than we may think.
- Paul Craig Roberts Exhorts "Whatever Happened To America?"
Dear Friends and Supporters, this is my quarterly call for your financial support. There is no one who will write for you more frankly and truthfully than I do. This article is long. Read it. Twice, three times. You will learn an important part of your history that has been cast into the Memory Hole. You will learn the nature of the danger that we as a people face. And you will learn a lot about yourselves. PCR
Whatever Happened to America?
Over the course of my lifetime, America has become an infantile country.
When I was born America was a nation. Today it is a diversity country in which various segments divided by race, gender, and sexual preference, preach hate toward other segments. Currently white heterosexual males are losing in the hate game, but once hate is unleashed it can turn on any and every one. Working class white males understand that they are the new underclass in a diversity country in which everyone has privileges except them. Many of the university educated group of heterosexual white males are too brainwashed to understand what is happening to them. Indeed, some of them are so successfully brainwashed that they think it is their just punishment as a white male to be downtrodden.
Donald Trump’s presidency has been wrecked by hate groups, i.e., the liberal/progressive/left who hate the “racist, misogynist, homophobic, gun nut working class” that elected Trump (see Eric Draitser, “Why He Won,” in CounterPunch, vol. 23, No. 1, 2017). For the liberal/progressive/left Trump is an illegitimate president because he was elected by illegitimate voters.
Today the American left hates the working class with such intensity that the left is comfortable with the left’s alliance with the One Percent and the military/security complex against Trump.
America, the melting pot that produced a nation was destroyed by Identity Politics. Identity Politics divides a population into hate groups. This group hates that one and so on. In the US the most hated group is a southern white heterosexual male.
To rule America, Identity Politics is competing with a more powerful group – the military/security complex supported by the neoconservative ideology of American world hegemony.
Currently, Identity Politics and the military/security complex are working hand-in-hand to destroy President Trump. Trump is hated by the powerful military/security complex because Trump wanted to “normalize relations with Russia,” that is, remove the “Russian threat” that is essential to the power and budget of the military/security complex. Trump is hated by Identity Politics because the imbeciles think no one voted for him but racist, misogynists, homophobic gun-nuts.
The fact that Trump intended to unwind the dangerous tensions that the Obama regime has created with Russia became his hangman’s noose. Designated as “Putin’s agent,” President Trump is possibly in the process of being framed by a Special Prosecutor, none other than member of the Shadow Government and former FBI director Robert Mueller. Mueller knows that whatever lie he tells will be accepted by the media presstitutes as the Holy Truth. However, as Trump, seeking self-preservation, moves into the war camp, it might not be necessary for the shadow government to eliminate him.
So the Great American Democracy, The Morally Pure Country, is actually a cover for the profits and power of the military/security complex.
What is exceptional about America is the size of the corruption and evil in the government and in the private interest groups that control the government.
It wasn’t always this way.
In 1958 at the height of the Cold War a young Texan, Van Cliburn, 23 years of age, ventured to show up at the International Tchaikovsky Piano Competition in Moscow. Given the rivalry between the military powers, what chance did an American have of walking away with the prize? The cold warriors of the time would, if asked, had said none.
But Van Cliburn electrified the audience, the Moscow Symphony, and the famous conductor. His reception by the Soviet audience was extraordinary. The judges went to Khrushchev and asked, “Can we give the prize to the American?” Khrushchev asked, “Was he the best.” The answer, “Yes.” “Well, then give him the prize.”
The Cold War should have ended right there, but the military/security complex would not allow it.
You can watch the performance here:
In other words, the Soviet Union, unlike America today, did not need to prevail over the truth. The Soviets gave what has perhaps become the most famous of all prizes of musical competition to an American. The Soviets were able to see and recognize truth, something few Americans any longer can do.
The supporters of this website are supporters because, unlike their brainwashed fellows who are tightly locked within The Matrix, they can tell the difference between truth and propaganda. The supporters of this website comprise the few who, if it is possible, will save America and the world from the evil that prevails in Washington.
Van Cliburn came home to America a hero. He went on to a grand concert career. If Van Cliburn had been judged in his day, as Donald Trump is today for wanting to defuse the dangerously high level of tensions with Russia, Van Cliburn would have been greeted on his return with a Soviet prize as a traitor. The New York Times, the Washington Post, CNN, NPR and the rest of the presstitutes would have denounced him up one street and down another. How dare Van Cliburn legitimize the Soviet Union by participating in a music competition and accepting a Soviet prize!
Did you know that Van Cliburn, after his talented mother had provided all the music instruction she could, studied under a RUSSIAN woman? What more proof do you need that Van Cliburn was a traitor to America? Imagine, he studied under a RUSSIAN! I mean, really! Isn’t this a RUSSIAN connection?!
How can we avoid the fact that all those music critics at the New York Times and Washington Post were also RUSSIAN agents. I mean, gosh, they actually praised Van Cliburn for playing RUSSIAN music in MOSCOW so well.
Makes a person wonder if Ronald Reagan wasn’t also a RUSSIAN agent. Reagan, actually convinced Van Cliburn to come out of retirement and to play in the White House for Soviet leader Gorbachev, with whom Reagan was trying to end the Cold War.
I am making fun of what passes for reasoning today. Reason has been displaced by denunciation. If someone, anyone, says something, that can be misconstrued and denounced, it will be, the meaning of what was said not withstanding.
Consider the recent statement by the Deputy Prime Minister of Japan, Taro Aso, in an address to members of his ruling political party. He said: “I don’t question your motives to be a politician. But the results are important. Hitler, who killed millions of people, was no good, even if his motives were right.”
To anyone capable of reason, it is perfectly clear that Aso is saying that the ends don’t justify the means. “Even if” is conditional. Aso is saying that even if Hitler acted in behalf of a just cause, his means were impermissible.
Aso, a man of principle, is instructing his party’s politicians to be moral beings and not to sacrifice morality to a cause, much less an American cause of Japanese rearmament so as to amplify Washington’s aggression toward China.
The response to a simple and straight forward statement that not even in politics do the ends justify the means was instant denunciation of the Deputy Prime Minister for “shameful” and “dangerous” remarks suggesting that Hitler “had the right motives.”
Arrgh! screamed the Simon Wiesenthal Center which saw a new holocaust in the making. Reuters reported that Aso had put his foot in his mouth by making remarks that “could be interpreted as a defense of Adolf Hitler’s motive for genocide during World War Two.” Even RT, to which we normally look for real as opposed to fake news, joined in the misreporting. The chairman of the Japanese opposition party joined in, terming Aso’s statement that the ends don’t justify the means “a serious gaffe.”
Of course the South Koreans and the Chinese, who have WWII resentments against Japan, could not let the opportunity pass that the Western media created, and also unloaded on Japan, condemning the Deputy Prime Minister as a modern advocate of Hitlerism. The Chinese and South Koreans were too busy settling old scores to realize that by jumping on Aso they were undermining the Japanese opposition to the re-militarization of Japan, which will be at their expense.
Aso is astonished by the misrepresentation of his words. He said, “I used Hitler as an example of a bad politician. It is regrettable that my comment was misinterpreted and caused misunderstanding.”
It seems that hardly anyone was capable of comprehending what Aso said. He clearly denounced Hitler, declaring Hitler “no good,” but no one cared. He used the word, “Hitler,” which was sufficient to set off the explosion of denunciation. Aso responded by withdrawing Hitler as his example of a “bad politician.” And this is a victory?
The media, even RT alas, was quick to point out that Aso was already suspect. In 2013 Aso opposed the overturning of Japan’s pacifist constitution that Washington was pushing in order to recruit Japan in a new war front against China. Aso, in the indirect way that the Japanese approach dissent, said “Germany’s Weimar Constitution was changed [by the Nazis] before anyone knew. It was changed before anyone else noticed. Why don’t we learn from the technique?” Aso’s remarks were instantly misrepresented as his endorsement of surreptitiously changing Japan’s constitution, which was Washington’s aim, whereas Aso was defending its pacifist constraint, pointing out that Japan’s pacificist Contitution was being changed without voters’ consent.
An explanation of Aso’s words, something that never would have needed doing prior to our illiterate times, has its own risks. Many Americans confuse an explanation with a defense. Thus, an explanation can bring denunciation for “defending a Japanese nazi.” Considering the number of intellectually-challenged Americans, I expect to read many such denunciations.
This is the problem with being a truthful writer in these times. More people want someone to denounce than want truth. Truth-tellers are persona non grata to the ruling establishment and to proponents of Identity Politics. It is unclear how much longer truth will be permitted to be expressed. Already it is much safer and more remunerative to tell the official lies than to tell the truth.
More people want their inculcated biases and beliefs affirmed by what they read than want to reconsider what they think, expecially if changing their view puts them at odds with their peers. Most people believe what is convenient for them and what they want to believe. Facts are not important to them. Indeed, Americans deny the facts before their eyes each and every day. How can America be a superpower when the population for the most part is completely ignorant and brainwashed?
When truth-tellers are no more, it is unlikely they will be missed. No one will even know that they are gone. Already, gobs of people are unable to follow a reasoned argument based on undisputed facts.
Take something simple and clear, such as the conflict over several decades between North and South leading to the breakup of the union. The conflict was economic. It was over tariffs. The North wanted them in order to protect northern industry from lower priced British manufactures. Without tariffs, northern industry was hemmed in by British goods and could not develop.
The South did not want the tariffs because it meant higher prices for the South and likely retaliation against the South’s export of cotton. The South saw the conflict in terms of lower income forced on southerners so that northern manufacturers could have higher incomes. The argument over the division of new states carved from former Indian territories was about keeping the voting balance equal in Congress so that a stiff tariff could not be passed. It is what the debates show. So many historians have written about these documented facts.
Slavery was not the issue, because as Lincoln said in his inaugural address, he had no inclination and no power to abolish slavery. Slavery was a states rights issue reserved to the states by the US Constitution.
The issue, Lincoln said in his inaugural address, was the collection of the tariff. There was no need, he said, for invasion or bloodshed. The South just needed to permit the federal government to collect the duties on imports. The northern states actually passed an amendment to the Constitution that prohibited slavery from ever being abolished by the federal government, and Lincoln gave his support.
For the South the problem was not slavery. The legality of slavery was clear and accepted by Lincoln in his inaugural address as a states right. However, a tariff was one of the powers given by the Constitution to the federal government. Under the Constitution the South was required to accept a tariff if it passed Congress and was signed by the President. A tariff had passed two days prior to Lincoln’s inaugeration.
The South couldn’t point at the real reason it was leaving the union—the tariff—if the South wanted to blame the north for its secession. In order to blame the North for the breakup of the union (the British are leaving the European Union without a war), the South turned to the nullification by some northern states of the federal law and US Constitutional provision (Article 4, Section 2) that required the return of runaway slaves. South Carolina’s secession document said that some Northern states by not returning slaves had broken the contract on which the union was formed. South Carolina’s argument became the basis for the secession documents of other states.
In other words, slavery became an issue in the secession because some Northern states—but not the federal government—refused to comply with the constitutional obligation to return property as required by the US Constitution.
South Carolina was correct, but the northern states were acting as individual states, not as the federal government. It wasn’t Lincoln who nullified the Fugative Slave Act, and states were not allowed to nulify constitutional provisions or federal law within the powers assigned to the federal government by the Constitution. Lincoln upheld the Fugative Slave Act. In effect, what the South did was to nullify the power that the Constitution gives to the federal government to levy a tariff. Apologists for the South ignore this fact. The South had no more power under the Constitution to nullify a tariff than northern states had to nullify the Fugative Slave Act.
Slavery was not, under the Constitution, a federal issue, but the tariff was. It was the South’s refusal of the tariff that caused Lincoln to invade the Confederacy.
You need to undersand that in those days people thought of themselves as citizens of the individual states, not as citizens of the United States, just as today people in Europe think of themselves as citizens of France, Germany, Italy, etc., and not as citizens of the European Union. In was in the states that most government power resided. Robert E. Lee refused the offer of the command of the Union Army on the grounds that it would be treasonous for him to attack his own country of Virginia.
Having explained history as it was understood prior to its rewrite by Identity Politics, which has thrown history down the Orwellian Memory Hole, I was accused of “lying about the motivations of the South” by a reason-impaired reader.
In this reader we see not only the uninformed modern American but also the rudness of the uninformed modern American. I could understand a reader writing that perhaps I had misunderstood the secession documents, but “lying about the motivations of the South”? It is extraordinary to be called a liar by a reader incapable of understanding the issues. President Lincoln and the northern states gave the South complete and unequivable assurances about slavery, but not about tariffs.
The reader sees a defense of slavery in the secession documents but is unable to grasp the wider picture that the South is making a states rights argument that some northern states, in the words of the South Carolina secession document, “have denied the rights of property . . . recognized by the Constitution.” The reader saw that the documents mentioned slavery but not tariffs, and concluded that slavery was the reason that the South seceded.
It did not occur to the reason-impaired reader to wonder why the South would secede over slavery when the federal government was not threatening slavery. In his inaugural address Lincoln said that he had neither the power nor the inclination to forbid slavery. The North gave the South more assurances about slavery by passing the Corwin Amendment that added to the existing constitutional protection of slavery by putting in a special constitutional amendment upholding slavery. As slavery was under no threat, why would the South secede over slavery?
The tariff was a threat, and it was a tariff, not a bill outlawing slavery, that had just passed. Unlike slavery, which the Constitution left to the discretion of individual states, tariffs were a federal issue. Under the Constitution states had no rights to nullify tariffs. Therefore, the South wanted out.
It also does not occur to the reason-impaired reader that if the war was over slavery why have historians, even court historians, been unable to find evidence of that in the letters and diaries of the soldiers on both sides?
In other words, we have a very full context here, and none of it supports that the war was fought over slavery. But the reader sees some words about slavery in the secession documents and his reasoning ability cannot get beyond those words.
This is the same absence of reasoning ability that led to the false conclusion that the Deputy Prime Minister of Japan was an admirer of Hitler.
Now for an example of an emotionally-impaired reader, one so emotional that he is unable to comprehend the meaning of his own words. This reader read Thomas DiLorenzo’s article (http://www.paulcraigroberts.org/2017/08/21/lincoln-myth-ideological-cornerstone-america-empire/) and my article (http://www.paulcraigroberts.org/2017/08/28/weaponization-history-journalism/) as an “absolution of the South” and as “whitewashing of the South.” Of what he doesn’t say. Slavery? Secession? All that I and DiLorenzo offer are explanations. DiLorenzo is a Pennsylvanian. I grew up in the South but lived my life outside it. Neither of us are trying to resurrect the Confederacy. As I understand DiLorenzo, his main point is that the so- called “civil war” destroyed the original US Constitution and centralized power in Washington in the interest of Empire. I am pointing out that ignorance has spawned a false history that is causing a lot of orchestrated hate. Neither of us thinks that the country needs the hate and the division hate causes. We need to be united against the centralized power in Washington that is turning on the people.
Carried away by emotion, the reader dashed off an article to refute us. My interest is not to ridicule the reader but to use him as an example of the emotionally-impaired American. Therefore, I am protecting him from personal ridicule by not naming him or linking to his nonsensical article. My only interest is to illustrate how for too many Americans emotion precludes reason.
First, the reader in his article calls DiLorenzo and I names and then projects his sin upon us, accusing us of “name-calling,” which he says is “a poor substitute for proving points.”
Here is his second mistake. DiLorenzo and I are not “proving points.” We are stating long established known facts and asking how a new history has been created that is removed from the known facts.
So how does the emotionally-disturbed reader refute us in his article? He doesn’t. He proves our point.
First he acknowledges “what American history textbooks for decades have acknowledged: The North did not go to War to stop slavery. Lincoln went to war to save the Union.”
How does he get rid of the Corwin Amendment. He doesn’t. He says everyone, even “the most ardent Lincoln-worshipping court historian,” knows that the North and Lincoln gave the South assurances that the federal government would not involve itself in the slavery issue.
In other words, the reader says that there is nothing original in my article or DiLorenzo’s and that it is just the standard history, so why is he taking exception to it?
The answer seems to be that after agreeing with us that Lincoln did not go to war over slavery and gave the South no reason to go to war over slavery, the reader says that the South did go to war over slavery. He says that the war was fought over the issue of expanding slavery into new states created from Indian territories.
This is an extremely problematic claim for two indisputable reasons.
First, the South went to war because Lincoln invaded the South.
Second, the South had seceded and no longer had any interest in the status of new territories.
As I reported in my article, it is established historical record that the conflict over the expansion of slavery as new states were added to the Union was a fight over the tariff vote in Congress. The South was trying to keep enough representation to block the passage of a tariff, and the North was trying to gain enough representation to enact protectionism over the free trade South.
It is so emotionally important to the reader that the war was over slavery that he alleges that the reason the South was not seduced by the Corwin Amendment is that it did not guarantee the expansion of slavery into new states, but only protected slavery in those states in which it existed. In other words, the reader asserts that the South fought for an hegemonic ideology of slavery in the Union. But the South had left the Union, so clearly it wasn’t fighting to expand slavery outside its borders. Moreover, the North gave the South no assurances over the South’s real concern—its economic exploitation by the North. The same day the North passed the Corwin Amendment the North passed the tariff. Clearly, it was not assurances over slavery that mattered to the South. Slavery was protected by states rights. It was the tariff that was important to the South.
Whereas the tariff was the issue that brought the conflict to a head, correspondence between Lord Acton and Robert E. Lee shows that the deeper issue was liberty and its protection from centralized power. On November 4, 1866, Lord Acton wrote to Robert E. Lee: “I saw in State Rights the only availing check upon the absolutism of the sovereign will, and secession filled me with hope, not as the destruction but as the redemption of Democracy.” Acton saw in the US Constitution defects that could lead to the rise of despotism. Acton regarded the Confederate Constitution as “expressly and wisely calculated to remedy” the defects in the US Constitution. The Confederate Constitution, Acton said, was a “great Reform [that] would have blessed all the races of mankind by establishing true freedom purged of the native dangers and disorders of Republics.”
Lee replied: “I yet believe that the maintenance of the rights and authority reserved to the states and to the people, not only essential to the adjustment and balance of the general system, but the safeguard to the continuance of a free government. I consider it as the chief source of stability to our political system, whereas the consolidation of the states into one vast republic, sure to be aggressive abroad and despotic at home, will be the certain precursor of that ruin which has overwhelmed all those that have preceded it.”
A present day American unfamiliar with the 18th and 19th century efforts to create a government that could not degenerate into despotism will see hypocrisy in this correspondence and misread it. How, the present day American will ask, could Acton and Lee be talking about establishing true freedom when slavery existed? The answer is that Acton and Lee, like George Washington and Thomas Jefferson, understood that there were more ways of being enslaved than being bought and sold. If the battle is lost over the character of government and power becomes centralized, then all are enslaved.
Lee’s prediction of a government “aggressive abroad and despotic at home” has come true. What is despotism if not indefinite detention on suspicion alone without evidence or conviction, if not execution on suspicion alone without due process of law, if not universal spying and searches without warrants?
What I find extraordinary about today’s concern with slavery in the 1800s is the lack of concern with our enslavement today. It is amazing that Americans do not realize that they were enslaved by the passage of the income tax in 1913. Consider the definition of a slave. It is a person who does not own his own labor or the products of his own labor. Of course, if the slave is to live to work another day some of his labor must go to his subsistance. How much depended on the technology and labor productivity. On 19th century southern plantations, the slave tax seems to have been limited short of the 50% rate.
When I entered the US Treasury as Assistant Secretary, the top tax rate on personal income was 50%. During the medieval era, serfs did not own all of their own labor. At the time I studied the era, the top tax rate on serfs was believed to have been limited to one-third of the serf’s working time. Given labor productivity in those days, any higher tax would have prevented the reproduction of the labor force.
So what explains the concern about wage slavery in 1860 but not in 2017?
The answer seems to be Diversity Politics. In 1860 blacks had the burden of wage slavery. In 2017 all have the burden except for the rich whose income is in the form of capital gains and those among the poor who don’t work. Identity Politics cannot present today’s wage slavery as the unique burder of a “preferred minority.” Today those most subjected to wage slavery are the white professionals in the upper middle class. That is where the tax burden is highest. Americans living at public expense are exempted from wage slavery by lack of taxable income. Consequently, the liberal/progressive/left only objects to 19th century wage slavery. 20th Century wage slavery is perfectly acceptable to the liberal/progressive/left. Indeed, they want more of it.
People can no longer think or reason. There seems to be no rational component in their brain, just emotion set into action by fuse-lighting words.
Here is an example hot off the press. This month in Cobb County, Georgia, a car was pulled over for driving under the influence of alcohol. The white police lieutenant requested the ID of a white woman. She replied that she is afraid to reach into her purse for her license, because she has read many stories of people being shot because police officers conclude that they are reaching for a gun. Instead of tasering the woman for non-compliance, yanking her out of the car, and body slamming her, the lieutenant diffused the situation by making light of her concern. “We only shoot black people, you know.” This is what a person would conclude from the news, because seldom is a big stink made when the police shoot a white person.
The upshot of the story is that the lieutenant’s words were recorded on his recorder and when they were entered as part of the incident report, the chief of police announced that the lieutenant was guilty of “racial insensitivity” and would be fired for the offense.
Now think about this. A little reasoning is necessary. How are the words racially insensitive when no black persons were present? How are the words racially insensitive when the lieutenant said exactly what blacks themselves say? And now the clincher: Which is the real insensitivity, saying “we only shoot black people” or actually shooting black people? How is it possible that the officer who uses “racially insensitive” words to diffuse a situation is more worthy of punishment that an officer who actually shoots a black person? Seldom is an officer who has shot a black, white, hispanic, Asian, child, grandmother, cripple, or the family dog ever fired.
The usual “investigation” clears the officer on the grounds that he had grounds to fear his life was in danger—precisely the reason the woman didn’t want to reach into her purse.
For a person who tries to tell the truth, writing is a frustrating and discouraging experience. What is the point of writing for people who cannot read, who cannot follow a logical argument because their limited mental capabilities are entirely based in emotion, who have no idea of the consequence of a population imbued with hate that destroys a nation in divisiveness?
I ask myself this question everytime I write a column.
Indeed, given the policies of Google and PayPal it seems more or less certain that before much longer anyone who speaks outside The Matrix will be shut down.
Free speech is only allowed for propagandists. Megyn Kelly has free speech as long as her free speech lies for the ruling establishment. Her lies are proteced by an entire media network backed by the Shadow Goverment and the Deep State.
My truth is backed only by your support.
- "It's All Fun & War-Games" In Russia, Until…
Amid Russia's largest wargames yet, with over 100,000 taking part in "Zapad 2017" according to NATO, independent news site Fontanka.ru has released footage of a rather shocking event.
Reuters reports that a military helicopter on a rural training exercise in western Russia mistakenly fired rockets at a group of parked vehicles, knocking at least one person to the ground, footage posted by Russian news sites and on social media showed.
The clip below shows a helicopter firing a salvo of rockets at a military truck covered in camouflage netting in open countryside, with three vehicles with no military markings visible, parked a few meters away. A man in civilian clothes who had been standing close to the truck was engulfed in a cloud of dust. The person filming the clip, who was slightly further away, could be seen sprawled on the ground.
The Russian Defence Ministry’s western military district, in a statement cited by Interfax news agency, said that during a training exercise a helicopter’s targeting system had mistakenly acquired a target, but denied anyone had been injured.
The representative cited by Interfax did not say when the incident happened, or where, or if the exercise was part of the “Zapad-2017” war games.
“As a result of a strike by an unguided rocket, a cargo vehicle with no people on board was damaged,” Interfax quoted a representative of the military district as saying.
- Russian Collusion? New Emails Reveal Hillary Clinton Invited Putin To "Pay For Play" Event
In newly released emails which the mainstream media is willfully ignoring, Hillary Clinton invited Russian president Vladimir Putin to a Clinton Foundation event. The Russian collusion between Hillary Clinton is becoming very apparent.
Hillary Clinton likes to talk a tough game about Russian President Vladimir Putin. And she likes to put him on the list of those at fault for her loss in the election last November to Donald Trump. But that didn’t stop her from inviting him and other top Russian officials to a Clinton Foundation gala right after she became Secretary of State.
Clinton Foundation director of foreign policy Amitabh Desai sent dozens of invitations to world leaders including then-Russian Prime Minister Vladimir Putin, Russian President Dmitry Medvedev, and Former President of the Soviet Union Mikhail Gorbachev, emails recently obtained by Judicial Watch revealed.
While Democrats blast any Republican who has the nerve to even look Russia’s direction, Hillary and her minions in the Clinton Foundation were begging the Russians to come to an event put on by the “pay for play” organization.
Hillary offered political favors in exchange for money filtered through the Clinton Foundation.
On March 13, 2009, Desai emailed the list of invitations to Assistant Secretary of State Andrew Shapiro, who then forwarded the email to top Clinton aide, Jake Sullivan. This happened at approximately the same time that the newly appointed Clinton tried to “reset” U.S. relations with Russia. Yet, Donald Trump has been blasted for trying to do the same thing. The propaganda in the media is becoming clear as they continue to brush this story under the rug too.
Hillary Clinton repeatedly attacked Putin during her 2016 presidential campaign and often tried to link president Donald Trump to the Russian leader. Clinton and her staff, with help from Barack Obama and the media also allegedly concocted the “Russian hacking” narrative within 24-hours of her election defeat, as documented in the Clinton campaign tell-all book, Shattered: Inside Hillary Clinton’s Doomed Campaign:
That strategy had been set within twenty-four hours of her concession speech. Mook and Podesta assembled her communications team at the Brooklyn headquarters to engineer the case that the election wasn’t entirely on the up-and-up.
For a couple of hours, with Shake Shack containers littering the room, they went over the script they would pitch to the press and the public. Already, Russian hacking was the centerpiece of the argument.
Clinton’s public display of contempt for Putin does not match her track record of how she interacted with the Russian leader in the past as controversy swirled following a uranium deal she approved while at the State Department. The deal was quickly followed by a massive donation to her foundation, proving the “pay for play” policy she herself used to become wealthy.
“Shortly thereafter, donors connected to the company that was sold to Russia contributed $145 million in donations to the Clinton Foundation.”
These newly released emails simply prove what most already knew – Hillary Clinton’s collusion with Russia is far deeper than Donald Trump’s.
- The Obamacare "Death Spiral": Health Plans Now Cost Employers More Than A New Car
With the Graham-Cassidy Obamacare replacement now officially dead, it appears Senate Republicans will be unable to pass a repeal-and-replace bill before the Sept. 30 deadline announced by the Senate Parliamentarian arrives – though it’s impossible to rule out another long-shot plan gaining momentum in the coming days.
After the deadline, Senate Republicans would need 60 votes for their repeal-and-replace bill, effectively killing the repeal-and-replace effort, at least for now.
As Republicans struggle to fulfill their campaign promises to the American people, the Wall Street Journal has published a report showing that rising premiums are forcing some small business owners to stop offering benefits, the latest sign that Democrats ignored Republican rhetoric about the bill’s job-killing potential at their own political peril.
As we’ve reported time and time again, the bill has increased cost pressures on businesses, forcing them lay off employees or pare back benefits to stay in business.
According to WSJ, the average cost of health coverage offered by employers pushed toward $19,000 for a family plan this year, while the share of firms providing insurance to workers continued to edge lower, according to a major survey by the Kaiser Family Foundation.
Annual premiums rose 3% to $18,764 for an employer plan in 2017, from $18,142 last year, the same rate of increase as in 2016, according to an annual poll of employers conducted by Kaiser and the Health Research & Educational Trust, a nonprofit affiliated with the American Hospital Association.
Premiums for employers have been climbing for several years, though, as WSJ notes, their rise has been slowed somewhat by a shift toward larger out-of-pocket costs for employees in the form of higher deductibles. That move slowed this year, as deductibles were roughly flat, compared with 2016.
Kaiser foundation officials said it wasn’t clear why the growth in deductibles appeared to pause this year. The average general deductible for single coverage among all workers, including those with no deductible, this year was $1,221 – the same as last year, but up sharply from $802 in 2012. This year, 28% of covered workers were enrolled in high-deductible plans that can be paired with savings accounts that aren’t taxed, compared with 29% last year and 19% five years ago.
Drew Altman, chief executive of the Kaiser foundation, said it was too soon to tell if the growth in deductibles would quickly resume next year, or if employers are reluctant to keep pushing the tactic.
“We’ll have to watch it,” Mr. Altman said. “It’s possible it’s playing itself out or reaching some kind of natural limit.”
Still, the rise of premiums over time has resulted in family health plans that can annually cost more than a new car, though often most of the cost is borne by employers. Employees paid on average $5,714, or 31%, of the premiums, for a family plan in 2017, according to Kaiser.
In what should be interpreted as clear-cut evidence of the bill’s job-killing potential, Gary Claxton, a vice president at the foundation, said that the overall cost of insurance appears to be driving small firms, particularly those with low-wage workers, to stop offering health benefits. Indeed, among small employers that didn’t offer health insurance, 44% said the biggest reason for not providing the benefit was its cost. “It’s harder for them to maintain coverage when it’s so expensive,” Mr. Claxton said.
However, among small employers that didn’t provide health coverage, 16% did give workers some money they could use toward purchasing a plan themselves.
None of this should surprise readers, as we've been writing for years that the entire Obamacare system is on the "verge of collapse" as premiums soar, risk pools deteriorate and insurers were pull out of exchanges all around the country leaving many Americans with just a single 'option' for health insurance.
Meanwhile, for an individual worker, the average annual cost of employer coverage was $6,690 in the 2017 survey, up 4% from last year, with employees paying 18% of that.
In another troubling trend highlighted by WSJ, the number of employers offering health insurance as a benefit to employees has been declining even as the labor market has purportedly been tightening. This appears to jive with stagnant hourly earnings, which have shown little movement as most of the new jobs being created in the US are low-level, low-skill and low-pay.
The Kaiser survey was conducted between January and June of this year and included 2,137 randomly selected employers that responded to the full telephone survey.
- Did Obama Know About Comey's Surveillance?
The media is less interested in Obama Administration wiretapping than in how Trump described it…
This week CNN is reporting more details on the Obama Administration’s 2016 surveillance of people connected to the presidential campaign of the party out of power. It seems that once President Obama’s appointee to run the FBI, James Comey, had secured authorization for wiretapping, the bureau continued its surveillance into 2017. CNN reports:
US investigators wiretapped former Trump campaign chairman Paul Manafort under secret court orders before and after the election, sources tell CNN, an extraordinary step involving a high-ranking campaign official now at the center of the Russia meddling probe.
The government snooping continued into early this year, including a period when Manafort was known to talk to President Donald Trump.
Some of the intelligence collected includes communications that sparked concerns among investigators that Manafort had encouraged the Russians to help with the campaign, according to three sources familiar with the investigation. Two of these sources, however, cautioned that the evidence is not conclusive.
This means the wiretapping was authorized more than ten months ago and perhaps more than a year ago.
It was presumably a tough decision for a judge to issue a secret warrant under the Foreign Intelligence Surveillance Act, enabling the administration to spy on someone connected with the presidential campaign of its political adversaries.
One would presumably only approve such an order if the request presented by the executive branch was highly compelling and likely to produce evidence that the subject of the wiretap was in fact working with Russia to disrupt U.S. elections.
Roughly a year later, as the public still waits for such evidence, this column wonders how this judge is feeling now, especially now that CNN has reported that at least two of its three sources believe the resulting evidence is inconclusive.
One would also presume—or at least hope—that seeking to wiretap associates of the leader of the political opposition is not an everyday occurrence in any administration. At the very least, it seems highly unlikely that such a decision would be made by a mid-level official. CNN notes,
“Such warrants require the approval of top Justice Department and FBI officials, and the FBI must provide the court with information showing suspicion that the subject of the warrant may be acting as an agent of a foreign power.”
It seems reasonable for the public to know exactly which officials made this decision and who else they consulted or informed of their surveillance plans. Was the President briefed on the details of this investigation?
And as for the information showing suspicion, where did the FBI come up with that? A September 7 column from the Journal’s Kim Strassel raises disturbing questions, based on recent events and a Washington Post story from last winter. Ms. Strassel writes:
The House Intelligence Committee’s investigation took a sharp and notable turn on Tuesday, as news broke that it had subpoenaed the FBI and the Justice Department for information relating to the infamous Trump “dossier.”
That dossier, whose allegations appear to have been fabricated, was commissioned by the opposition-research firm Fusion GPS and then developed by a former British spook named Christopher Steele. ..
The Washington Post in February reported that Mr. Steele “was familiar” to the FBI, since he’d worked for the bureau before. The newspaper said Mr. Steele had reached out to a “friend” at the FBI about his Trump work as far back as July 2016. The Post even reported that Mr. Steele “reached an agreement with the FBI a few weeks before the election for the bureau to pay him to continue his work.”
Oddly, even though CNN is the source of this week’s news, the media outlet seems less interested in President Obama’s knowledge of the surveillance activities that occurred on his watch and against his political adversaries than in how President Trump has described them.
CNN’s scoop doesn’t even mention Mr. Obama except in the context of Mr. Trump’s accusations of wiretapping against the former president that appeared on Twitter in March. CNN has followed up with another story saying that Mr. Trump’s accusations have still not been proven.
That’s true, although Mr. Trump’s argument may be getting stronger. And whatever Donald Trump’s tweets say, Americans deserve to know how our government came to spy on people associated with the presidential campaign of the party out of power.
- Fed’s Massive QE is Ending – Here Comes the Boom! By Michael Carino
The Federal Reserve has manipulated bond prices for the last
10 years. Yields in the US and abroad
are lower now than during the Great Depression – a period in time that could
justify such low yields. For those with
short memories, bond markets are more expensive than before and right after the
financial crisis of 2008. Longer dated
yields are at least 300 basis points richer than typical when inflation is
running around 2% as it is today. Yes,
the bond market in the US and globally are the most overpriced ever. We are now on the precipice of the catalyst
for the greatest bond market trade unwind ever – the end of the Fed’s quantitative
I have heard all the arguments for why yields are so
low. Inflation is low, growth is slow,
the Fed is raising rates or lowering rates, buying bonds or selling bonds and a
plethora of the sky is falling fodder is credited for reasons to buy or hold
onto current positions in the bond market.
You can backfill this story any way you like. The truth is that the bond market has been
manipulated by the Federal Reserve lowering the Fed Funds rates to zero, buying
5 trillion of bonds and giving forward guidance that it is safe to come along
on the Fed induced bond buying binge.
The Fed’s commitment that they would not take the punch bowl away from
the party had definitely contributed to the bond buying bonanza.
Party Over! The Fed
has been warning the markets that the party has come to an end, Fed Funds will
keep going higher and their portfolio will be rolling off and reduced. Even though it’s last call, many participants
are lining up to load up on drinks, hoping the lights to the bar stay on a
little longer. Long term bond yields
have been manipulated by some of the largest bond trading firms during low
volume periods pushing yields back down to lows seen only during depressions or
catastrophes. These market distorting
strategies are masked by the Fed’s market distorting strategies. Even though short term rates are pinned near
the Fed Funds rate, long term rates have been manipulated to where the yield
curve is rather flat. You pick up very
little yield to compensate for the embedded duration risk, or price risk from
rising interest rates as you look out the interest rate curve.
As the Fed continues to raise rates and now unwinds their
massive bond purchases, the historically low bond yields leave the market is in
a tenuous position. Any day, and for any
reason, the bond market can experience parabolic moves higher in yield. As volatility increases, more bond managers
will evacuate the market place that has limited yield to compensate for the
volatility risk. Cash is now a viable
alternative and there is only a minimal yield give up with none of the risks in
longer dated bonds.
To be honestly blunt, investors are taking massive amounts
of risk in the bond market – consciously or unconsciously. Yes, some of the biggest risks with little
compensation. We have learned nothing
since the 2008 bond market meltdown. And
now we are at lower yields and higher prices since then. Worse, the bond market has almost doubled in
the last 10 years. I have to repeat
myself again. Doubled in the last 10
years!!! Lower yields in a market that
is twice as large and we still think this is going to end well?
The Fed has fostered and encouraged the current bond market
situation. They know their departure
from the market will be disruptive and have been trying to set the market up
for this for some time. Instead of
positioning accordingly, large participants have been high volume trading the
markets at the detriment to those that have tried to prepare for this next
chapter. This leaves the market poorly
positioned for the Fed’s withdrawal of market support.
The bond market has changed greatly from that of a decade
ago and there are a few large balance sheets that hold significantly large
positions. This distribution in the bond
market makes it impossible for the largest holders to ever sell their
positions. Any attempt to sell (to who?)
and yields would shoot higher. The best
they can do is to keep providing liquidity, supporting markets at these most
expensive levels and hope some event comes along to bluff the market into
holding these levels until they retire or sell their firms.
So what should the markets expect? I was vocally warning anyone who would listen
in 2006 and 2007 that the risks built in the system would be catastrophic when
they unwound. I continue to ring the
alarms now. After 10 years of driving
and pinning yields to ultimate lows and the fundamentals significantly divergent
from the market, market participants are unprepared for the end of the Fed’s QE
With the end of QE and the largest buyer of Treasuries non-existent,
volatility will increase. Yields cannot
be justified when volatility increases and selling in the bond market will
begin. Money will move to cash and
redemptions submitted to bond funds and other fixed income hedge funds. But yields will move higher before the bond
fund redemptions are paid leaving larger losses and more panicked investors. Higher bond yields will not be met with the
buy the dips attitude. Rather, selling
will beget selling, liquidity will disappear and yields will start to gap
higher. Funds that knew nothing except
inflows will, unfortunately, need to limit redemptions and gate their
investors. As volatility increases and
liquidity decreases, the markets will crescendo into a financial debacle that
will only end when a large or a couple of large and popular funds that have
outperformed over the past 10 years have to close down. This will alleviate selling, but more
importantly, reprice the bond markets to a yield level that compensates for
risks and starts to attract sound investors.
This may seem like a dire prediction but it’s not. This is part of any normal market process
where prices go up and down. The
unfortunate result of 10 years of Fed market manipulation is that many bond
market managers are clueless as to how normal markets operate. Some traders were 10 years old during the last
bond market debacle! What worked for the
last 10 years will not work for the next 10.
As the Fed turns off the lights and locks up the bar, don’t find yourself
stuck inside looking for a way out.
by Michael Carino, Greenwich Endeavors, 9/19/17
Michael Carino is the CEO of Greenwich Endeavors and has
been a fund manager and owner for more than 20 years. He has positions that benefit from a
normalized bond market and higher yields.
- Full Preview Of Tomorrow's "Historic" FOMC Meeting
It is virtually guaranteed that tomorrow the FOMC will make history by officially announcing the Fed’s plan to begin shrinking its balance sheet through the gradual phasing out of bond reinvestments, which however in a world in which other central banks continue to pump $125 billion per month, will hardly by noticed by markets at least in the beginning.
So aside from the start of balance sheet renormalization what else should traders expect tomorrow? Earlier today, we showed a cheat sheet from ING that broke down the various USD bullish and bearish permutations of how Yellen could still surprise the market, including the Fed’s signalling on policy rates, economic projections, a shift in the “dots”, comments on asset prices and, last but not least, whether Yellen will stay or leave when her term expires in Feb 2018.
* * *
For those seeking a more in-depth preview, here courtesy of RanSquawk, is the full “historic” September 20 FOMC Preview.
- FOMC likely to maintain rates between 1.00-1.25%; there will be focus on whether it flattens the rate hike trajectory
- The formal announcement of balance sheet reduction is expected; it’s unclear what size the Fed wants to return it to
- Growth and unemployment projections unlikely to see major changes; inflation may be trimmed again
- Money markets price a very slim chance that the FOMC will hike rates this week, with an overwhelming 98.6% implied probability that the Federal Funds Rate target will remain between 1.00% to 1.25%. Looking ahead, markets now assign a 58% chance that rates will be lifted again in 2017.
- Federal Funds futures currently price in just two more hikes over the Fed’s current forecast horizon; the FOMC’s June forecasts pencilled in seven rate rises over that timeframe. Note, this week’s forecast will extend the horizon out to 2020.
- Given the cautious tone of comments from FOMC participants in recent weeks, it will be interesting to see whether the central bank lowers its trajectory for the rate path down, in line with the market’s view. However, analysts at Barclays do not expect a major revision to the median view of the rate profile, but sees the average falling: “We expect the median policy path to remain unchanged, but the average policy path should decline. We believe the average funds rate will decline by 15-25bp across the forecast horizon, and we believe as many as seven participants may signal that they prefer no further rate hikes this year (against nine participants who view one or more as appropriate).”
- It is an almost a forgone conclusion that the FOMC will formally announce the start of its balance sheet programme; indeed, ‘several’ were ready to make the announcement in July. The Fed has also been given some leeway not that the debt ceiling has been extended until December.
- In June, the FOMC suggested a plan where it will allow $6bln of maturing Treasuries and $4bln of maturing MBS to roll-off per month for a three-month period; that amount would then be raised to $12bln for Treasuries and $8bln for MBS for another three months, and after a year, redemptions would be capped at $30bln for Treasuries and $20bln for MBS per month.
- The plan ensures the Fed wouldn’t have to outright sell any of its holdings immediately, which would cause a market reaction. In fact, Fed commentary suggests that the central bank wants to avoid any “shock and awe”; Loretta Mester (non-voter) said the intention is to set the policy, then “forget it”, suggesting that balance sheet would not be an active policy tool.
- Some questions remain unanswered; for instance, what size the FOMC is ultimately seeking to cut the balance sheet to. It is currently around $4.5trln; pre-crisis, it was around $800mln, but it is unlikely that the Fed intends to bring it down to that size. It seems as though the FOMC is still undecided: William Dudley (NY Fed, permanent voter) sees the balance sheet falling to between $2.4trln and $3.5trln – a wide range, but there doesn’t seem to be any firm consensus as yet.
STAFF ECONOMIC PROJECTIONS
- The Fed meets amid an improving tone in US economic data: The labour market has been ticking along nicely for some time, with the rate of joblessness beneath the Fed’s estimate of NAIRU. The second estimate of growth in Q2 was revised higher to 3.0%, well above the Fed’s longer-term view between 1.8% and 2.0%. Inflation has been the Achilles heel, but there are some signs of improvement here too. Recent CPI data showed upside surprises to headline and core rates; but the Fed’s preferred measure – core personal consumption expenditures – lingers at the lowest since Q4 2015 at (1.4% vs Fed’s June forecast of 1.7% in 2017); additionally, wage growth continues to disappoint, which may give the Fed ammunition to remain dovish.
- Analysts at Oxford Economics say “a key focus will be on the FOMC’s view of recent inflation readings and its degree of conviction about whether inflation will hit the 2% target over the medium-term,” adding “this in turn will underpin the committee’s decision about raising rates further this year and the pace of rate increases next year.” FOMC Chair Janet Yellen has previously attributed the weak inflation to temporary factors and called for patience. Many will look out for commentary on whether the Committee has reached a consensus on the extent to which low inflation is transitory, and how much patience should be extended. The likes of Neel Kashkari (voter, dovish) expressed outright concerns on inflation, whereas centrists like William Dudley see a return to target in the medium-term; others, like Robert Kaplan (voter) want to see more evidence before committing to a tighter monetary policy path.
- It is worth noting that the Fed’s forecast horizon will be extended out to 2020, and the FOMC’s June forecasts and the current market view are generally in line, with the exception of inflation, suggesting growth and unemployment forecasts will be little changed, though its short-term inflation views may be cut.
PRESS CONFERENCE WITH CHAIR YELLEN
- Chair Janet Yellen will likely adopt her usual balanced approach in her press conference, according to SGH Macro Advisors, to ensure that the FOMC still has the option of a rate hike in 2017. “She will certainly give voice to dovish concerns over the persistence in low inflation and the possibility of a new inflation dynamic emerging,” SGH says, “but on balance, we still expect her to modestly tilt her remarks to a base rate path that would warrant a possible third-rate hike in December.”
- In addition to inflation, the Fed’s forecasts, and the immediacy of near-term rates hikes, Yellen may also be quizzed on FOMC personnel following the early resignation of Stanley Fischer. Tradition dictates that outgoing Governors do not usually attend the last meeting of their term; however, the Fed has confirmed that Fischer will be in attendance, though it is unclear whether he will be submitting economic forecasts.
- The upshot of Fischer’s resignation means that there would be four vacancies on the Fed’s Board of Governors; but additionally, there remains doubt around Chair Yellen’s own position when her term expires next year, and on top of that, the position of President of the Richmond Fed (which will have a vote in 2018) remains unfilled.
* * *
Finally, here are select sellside research takes on what to expect tomorrow:
- Barclays: We believe the Fed will begin balance sheet normalization as described in the June 2017 Addendum to the Committee’s Policy Normalization Principles and Plans. Beyond this, the committee will likely engage in extensive discussions about how much the underlying trend rate of inflation has slowed. We do not believe the committee will reach consensus on the extent to which slower inflation is transitory and, in turn, how much “patience” is needed before proceeding with further policy rate normalization or whether it is worth the risk to financial stability to run the domestic economy hotter. Yet, we believe some members will reflect their view that some of the slowing in inflation will be persistent and mark down modestly their inflation forecast for 2018. Although we do not expect the median policy rate path to change, we do expect the average federal funds rate projection to decline.
- Credit Suisse: We expect the Fed to keep the fed funds rate unchanged and to begin reducing the size of their balance sheet. We expect an announcement in line with their June policy normalization plan which stated that reinvestments are ended up to a gradually-increasing cap. The caps are likely to begin at a modest $10bn per month, but are scheduled to rise every quarter before levelling off at $50bn. Aside from the balance sheet reduction, we expect a dovish tone from the September meeting.
- Goldman Sachs: We expect the FOMC to officially announce next week that balance sheet runoff will begin in October. As the Fed has already communicated extensively about its plan for a gradual and predictable runoff, we expect markets to focus instead on the outlook for the federal funds rate. The key question is whether the committee’s expectations for the federal funds rate have declined in light of the surprising deceleration in the inflation data since the start of the year. Several Fed officials have expressed reduced confidence in the view that the recent decline is a blip and that inflation will reaccelerate. Despite this week’s stronger-than-expected CPI report, Fed officials will still be looking at year-over-year core PCE and CPI inflation rates that are three tenths and five tenths lower, respectively, than in March. We therefore look for lower core inflation in the Summary of Economic Projections (SEP) and expect the “dot plot” to show a decline in the average projected funds rate path. While risks are tilted to the downside, we still expect the median projection to continue to show a third rate hike this year, 3 hikes in 2018 and a longer-run funds rate at 3%. Ultimately, there are three reasons why we expect only minor dovish changes. First, several influential FOMC members have highlighted that there is not yet enough data in hand to abandon the view that the economy is close to full employment and that diminishing spare capacity will gradually push inflation back up to the target. Second, growth momentum has remained very firm and while hurricanes will make the activity data noisier in the near term, they are unlikely to derail firm underlying trend growth. Third, financial conditions have continued to ease even as the FOMC moved to a path of quarterly tightening last December.
- ING: We think this may be one of the more difficult meetings and press conferences for Chair Yellen to navigate, not least because of the growing dichotomy within the FOMC over the appropriate near-term policy approach. Our base case is for the doves to prevail, with a lower conviction over the pace and extent of future policy tightening visible in the Fed’s dot plot. While the median 2017 dot is still set to tentatively pencil in a Dec rate hike, we expect to see more members calling for a pause for the remainder of the year; anything more than five would suggest that hopes of a Dec hike stand on a fragile footing. More telling of a dovish shift would be if the 2018 dot also moves lower; here we require five or more members to downgrade their views over future policy hikes, a scenario that cannot be ruled out given the softer US inflation dynamics. What is highly likely is that we’ll see the 2019 and longer-run dots moving lower – with Fed officials acknowledging that a 2% handle for the terminal Fed funds rate is more realistic in the prevailing US economic environment.
- Morgan Stanley: Our US economists expect the Fed to announce balance sheet normalization at its September meeting. They also expect the median dots to remain as they were in June, with the Fed adding a final rate hike in 2020 (see FOMC Preview: Auto Pilot). In our view, the risks to this outcome are that the 2018 median dot falls to 1.875% from 2.125% and the longer-run median dot falls to 2.75% from 3.00%. To assess the risks, we constructed the September 2017 dot-plot scenario in Exhibit 4. First, we attempted to match up dots in 2017 with dots in 2018. This allows us to create the following scenarios we felt were reasonable. We assume: 2 more FOMC participants pencil in no further hikes in 2017 and decrease the # of subsequent hikes in 2018 to 2from 3; 2 participants keep the third hike in 2017, but decrease the # of subsequent hikes in 2018 to 2 from 3;and 2 participants decrease the # of hikes in 2017 to 3 from 4, but keep 4 hikes in 2018. Given we assumed only 2 more participants join the “no more hikes in 2017” camp, the 2017 median dot remains at 1.375%. However, given our other assumptions, half of the Committee ends up with a 2018 dot below 2.00% and half ends up with a dot above 2.00% – leaving the median between 1.875 and 2.125% versus its 2.125% position in June. It is possible that Randal Quarles is confirmed by the Senate and sworn in before the meeting, thereby allowing a 17th dot to be added. But, at this point, the Senate has not scheduled his confirmation hearing. As a result of our scenario analysis, we think there is a reasonable risk that the 2018 median dot falls by 25bp,even though it’s not our base case.
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