- Retired Green Beret Warns: "We're At The Threshold Of War…The Choice Is Not Up To Us Anymore"
As reported Monday, April 25 on almost all mainstream and alternate news sites, Britain’s Defense Minister Michael Fallon has openly declared that his country will carry out a preemptive nuclear strike even if not attacked, as such:
“In the most extreme circumstances we have made it very clear that you can’t rule out the use of nuclear weapons as a first strike.”
Michael Fallon, BBC Today, 4-25-17
This is very serious and no longer simply rhetorical, as the Russians responded to the effect that the UK could be wiped off the face of the globe if they were to provoke the wrong party. The U.S. now has a submarine in position in South Korea that is carrying Tomahawks armed with nuclear warheads and the American Naval armada continues to sail toward the region. The North Koreans have been conducting artillery drills, as South Korea and Japan are preparing their citizens for war to break out. The United States just test-launched an ICBM from California that splashed into the South Pacific.
In the U.S., President Trump has convened a meeting in the White House for all 100 U.S. senators as reported yesterday throughout the alternative media. The mainstream media (MSM) is being notoriously silent about the whole matter, although it is plain to see the focal point of the meeting is North Korea, as announced by the White House.
Deflection has been rendered partially by the MSM by the endless barrage regarding the 9th Circuit Court trying to sabotage the Executive Order signed by the President to withhold federal funding from “sanctuary” cities trying to circumvent federal law and procedure with the illegal aliens. The “First 100 Days” of the Trump Administration is the new catch-phrase the MSM is focusing upon, much as they did with the “47 million on food stamps” phrase that virtually stayed the same for more than 3 years. Underreporting and obfuscation (if not outright lies) are the MSM’s way of keeping the public in the dark nationally and globally.
In the meantime, the Russians are beginning to redeploy ground troops to Syria. It appears that the U.S. is going to be pushed into a war in one theater or another by the progressives masquerading as conservatives. This brings to mind the ratiocination for the initiation of hostilities in either theater. For North Korea, it is simple: The North Koreans are one of the three nations not involved in the global banking cartel. In addition, a war will increase U.S. hegemony in the area regardless of what happens to South Korea or Japan in the aftermath.
Regarding Syria, the Obama administration started a proxy/indirect war with Russia over Syria, with Russia backing Bashar al-Assad and the United States its own “created boogeyman” of ISIS/ISIL. Obama did not take Russia on directly, and Russia out-maneuvered him by suggesting he fight against his own creation…which he did…and then the Russians bombed the daylights out of them. Russia then declared the bombing campaign to be over and did a “drawdown,” while still leaving enough of a force to deter Obama, who fizzled out in pusillanimous splendor.
Syria is still on the table, though, because we don’t have that pipeline running out of Qatar through Northwestern Syria to cut off Gazprom and the Russians from supplying Europe with natural gas. In addition, the House of Saud wants Assad out of Syria, and in addition to this, the U.S. needs to take Syria if it wants (and it does want) to invade Iran. The Russians bombing ISIS/ISIL prevented any more oil from being stolen from Northwest Syria and trucked across the border, where it was sold to Erdogan and his brother.
The Military Industrial Complex (MIC) and their paid-for congressmen and senators (such as McCain, Graham, Ryan, ad infinitum) are the ones who stand to benefit, either in stocks held or in kickbacks to either advance or snafu legislation or policy (depending on which benefits the firms). They did it with Ukraine, as well, but the threat of directly confronting Russia was as good as an orchiotomy for Obama, and we have a stalemate between the U.S.-created Kiev government of Poroshenko and the separatists of the Eastern Ukrainian provinces.
The powers that be are intent on having a war, regardless of the consequences and effects on noncombatants. A war would also be a way to prop up the administration’s flagging ratings. Domestically we have not emerged from the “soft” police state and liberal “legislative” powers of the Courts to remake Constitutional law and circumvent Congress and the President through selective interpretation of anything and everything: These things are the true “legacy” of Obama.
Now, where from there? We are at the threshold of another major war that could erupt in any of these areas. The choice is not up to us anymore, and it is surely being decided upon at this very moment.
- Trump Calls Schumer's Bluff: "If There's A Shutdown, There's A Shutdown… Democrats Would Be To Blame"
With Democrats seemingly unsatisfied with Republicans dropping border wall funding and adjusting on Obamacare-related items, it appears President Trump is calling Schumer's and Pelosi's bluff, proclaiming "If there's a shutdown, there's a shutdown," adding that Democrats would be to blame if the federal government was left unfunded.
Schumer today:
- *SCHUMER: TRUMP CONCESSIONS BRING SPENDING DEAL CLOSER TO FINISH
- *SCHUMER SAYS 'SOME STICKING POINTS' LEFT ON SPENDING BILL TALKS
- *SCHUMER SAYS REVISED GOP HEALTH CARE BILL 'WORSE' THAN INITIAL
- *SCHUMER SAYS ISSUE OF POISON PILL RIDERS STILL OUTSTANDING
Pelosi added:
- *HOUSE DEMOCRATIC LEADER PELOSI SAYS WALL FUNDING ONE ISSUE
- *PELOSI: UNCERTAINTY RE OBAMACARE COST-SHARING PAYMT ALSO ISSUE
- *PELOSI: TYING STOPGAP SPENDING TO HEALTH BILL WOULD BE STUPID
And so, as Reuters reports, President Donald Trump downplayed the severity of a potential government shutdown, making it clear who will be to blame…
"We'll see what happens. If there's a shutdown, there's a shutdown," Trump told Reuters in an interview, adding that Democrats would be to blame if the federal government was left unfunded.
Trump added that a shutdown would be a "very negative thing" but that his administration was prepared if it was necessary.
As part of the budget negotiations, Democrats have called for financial support to prop up Puerto Rico's Medicaid program covering health insurance for the poor, but many Republicans are opposed to the idea. Trump also said it would be unfair to offer a debt bailout to Puerto Rico, a U.S. territory, because it was unfair to people in U.S. states.
"I don't think that's fair to the people of Iowa, and I don't think it's fair to the people of Wisconsin and Ohio and North Carolina and Pennsylvania that we should be bailing out Puerto Rico for billions and billions of dollars," Trump said. " No I don't think that's fair."
Notably, while equity markets are whistling complecentlypast the graveyard, USA sovereign risk has surged back to its highest (relative to Germany) since Trump's election as the threat of a government shutdown gets priced into a non-manipulated market…
- Asylum Seekers Fleeing The U.S. For Canada May Find A Frigid Reception In Canadian Courts
Just over a month ago we highlighted the comments of one recently deported Mexican nationalist who told Reuters that illegally immigrating to the U.S. was over, courtesy of the Trump administration, and that it was “Canada’s turn” to welcome the world’s immigrants with open arms.
“For those without documents, I think (the United States) is over. Now it’s Canada’s turn.”
And, with each passing month, new immigration stats from Canada seem to indicate that Reuters’ young border-hopper was a very prescient fellow indeed. According to stats highlighted by the Financial Times recently, “land border asylum claims” in Canada continue to skyrocket with Quebec crossings up nearly 3x YoY and crossings into Ontario surging as well.
And while ‘open borders’ sound super nice in a political speech, the practical reality is that the majority of Canadians, just like Americans, don’t approve of unfettered illegal border crossings that place a massive financial burden on taxpayers and are often accompanied by a surge in crime (see “Half Of Canadians Want Illegal Immigrants Deported“).
Meanwhile, as Reuters points out today, Migrants who applied for asylum in the United States but then fled north, may have miscalculated in viewing Canadian courts as a more lenient jurisdiction. That is because their time in the United States could count against them when they apply for asylum in Canada, according to a review of Canadian federal court rulings on asylum seekers and interviews with refugee lawyers.
But Canadian refugee tribunals are wary of “asylum-shopping” and look askance at people coming from one of the world’s richest countries to file claims, the refugee lawyers said.
“Abandoning a claim in the United States or coming to Canada after a negative decision in the United States, or failing to claim and remaining in the States for a long period of time – those are all big negatives. Big, big negatives,” said Toronto-based legal aid lawyer Anthony Navaneelan, who is representing applicants who came to Canada from the United States in recent months.
The asylum seekers will make their cases before Canada’s refugee tribunals, which rejected 5,000 cases last year. The tribunals’ decisions are not made public, so the reasons are not known. An Immigration and Refugee Board spokeswoman confirmed, however, that an applicant’s time in the United States can be a factor in a tribunal’s decision.
Those with failed U.S. asylum claims must prove to Canadian tribunals that the U.S. courts were wrong in their assessment, that their circumstances have changed for the worse, or that they qualify in Canada, several lawyers said. Crucially, all applicants must also show that the often years-old fears that led them to leave their home countries for the United States still exist.
“The longer they’ve been away (from their country of origin), the more difficult it is to establish that they’re a refugee,” said Winnipeg refugee lawyer Ken Zaifman.
Frankly, we’re shocked. First it was just Trump supporters, but now it’s looking increasingly likely that Canada is also filled with a bunch of racist people intent upon protecting their ‘arbitrary’ borders.
- The Next Trade War: Trump Threatens To Terminate "Horrible" Trade Deal With South Korea
Two days after launching a trade war with Canada by imposing tariffs on lumber imports, one day after nearly terminating NAFTA (but stopping just shy after an alleged phone call from the leaders of Mexico and Canada), Trump has finally turned his attention to the one nation whose GDP consists of roughly 60% net trade, and which we said several months ago, is far more likely to be punished for trade malpractice than China: South Korea.
Speaking to Reuters and WaPo, Trump – who earlier also told Reuters that a “major, major” conflict with North Korea is possible – Trump sharply criticized the U.S.-Korea Free Trade Agreement, known as Korus, the latest version of which was ratified in 2011 and said that he will “renegotiate or terminate” the “horrible” free trade deal. Next week marks an anniversary for Korus and triggers a review period to potentially renegotiate or ratify a new version of the agreement.
“It’s a horrible deal. It was a Hillary Clinton disaster, a deal that should’ve never been made,” Trump said. “It’s a one-way street.”
“We’ve told them that we’ll either terminate or negotiate,” Trump said. “We may terminate.”
Trump added: “I will do that unless we make a fair deal. We’re getting destroyed in Korea.”
On his trip to Asia last week, Vice President Pence said to an audience of business leaders in Seoul that the United States was looking to “reform” the Korus agreement because U.S. businesses “face too many barriers to entry, which tilts the playing field against American workers and American growth.”
The president explained that the process of termination of Korus is simpler than with the North American Free Trade Agreement. “With NAFTA, we terminate tomorrow; if we did, it ends in six months. With the Korean deal, we terminate and it’s over.”
* * *
Trump also said he wants South Korea to pay for the recent $1 billion deployment of the U.S. Terminal High Altitude Area Defense, or THAAD battery, a missile defense system deployed to South Korea to protect against accidental North Korean launches, and to antagonize China.
Hyundai Motor shares fell as much as 2.4% after Trump’s comments, while the South Korea’s won also dropped on the comments. South Korea’s automakers association said it was concerned about the possible revision of the country’s trade deal with the United States, an official of the industry group said on Friday.
“We are worried about the uncertainty of the deal,” Kim Tae-nyen, vice president at the Korea Automobile Manufacturers Association (KAMA), told Reuters by telephone.
As Reuters followed up, a senior South Korean finance ministry official said the country has not yet received official requests on renegotiation of its free trade pact with the United States.
“Talk and actual policy are different,” the official told Reuters. “They have not requested anything from us so we’ll have to wait and see.”
Trump’s aggressive trade stance was unveiled as tensions are rising on the Korean Peninsula and as South Korea’s increasingly more irrational neighbor is proving to be a major source of instability, and thus leverage for any future Trump negotiations.
- Who Really Controls The Gold Price? (The Answer Is Quite Surprising)
There’s this notion put forth by the majority in the precious metals community that the Fed and Central Banks control the market price of gold. I have even heard that some analysts believe the Fed could push the gold price any where they saw fit…. even to zero. While I agree that the Central Banks do play a role in gold market intervention, they most certainly CANNOT push the price of gold anywhere they want. This is an absolute falsity…. and I have the data to prove it.
To understand how the market determines the price of gold, we must first dismiss the economic principle of SUPPLY & DEMAND. While supply and demand forces are factors in the short-term price movement of gold, they do not really factor all that much over the longer term.
Here is a chart showing the relationship of the gold and oil price since the 1940’s:
The gold price is in DARK ORANGE while the oil price is in BLACK. We can plainly see the price of gold and oil have moved in tandem, especially after Nixon dropped the Dollar-Gold peg in 1971. While the oil-gold price movements are not exact, they parallel each other quite nicely. Thus, when the oil price skyrocketed during the 1970’s, so did the gold price. The same thing took place in the 2000’s.
Interestingly, the same thing took place with the silver price below:
In both of these charts, the volatility in the oil, gold and silver price increased significantly after 1971. There was an underlying reason for this… and it just wasn’t the dropping of the U.S. Dollar convertibility into gold in 1971. It was also due to the fact that the United States peaked in domestic cheap oil production in 1970. This was actually the peak of the U.S. Empire, even though we have continued to dominate the world by exchanging PAPER (U.S. Treasuries) for physical OIL-GOODS.
So, if we look at these two charts above, we can plainly see the oil price was more the LEADING DRIVER in the gold and silver price than were supply and demand forces. Again, supply and demand forces add volatility to the gold and silver price over the short-term, but the energy cost (mainly oil) has been the leading driver over the longer term.
Who Really Controls The Gold Price??
If the gold price has paralleled the oil price, then who really controls the gold market price?? While I agree that the Fed & Central Banks are intervening in the gold market, they can really only control the UPWARD movement in the price of gold. Why? Well, if we look at the chart below, we find our answer:
This chart shows the difference between the total production cost of the top two gold miners, Barrick and Newmont, versus the annual average gold market price. The chart clearly shows that the production cost is always less than the gold market price.
In the early 2000’s, the top two gold miners production cost was closer to the market price. However, after the U.S. Housing and Banking Market collapsed in 2008, the gold market price moved up considerably higher than the cost of production. My analysis suggests that the gold price was starting to head towards its high-quality STORE OF VALUE properties, rather than its COMMODITY PRICING mechanism.
NOTE: I determined Barrick & Newmont’s production cost by using my Net Income & Adjusted Income approach. This is much different than going by either Cash Costs or All-In-Sustaining Costs. My estimated total production cost includes more items such as taxes-interest expense and etc, that are not considered in cash costs or all-in-sustaining costs.
Also, cash costs are a totally bogus metric as they deduct the miners by-product revenue to arrive at a very low cash cost. They list them as by-product credits — other metals extracted and produced along with gold in the process. However, they are not really credits. These miners need these by-product metal sales to fortify their balance sheets. Without them, many mining companies would be suffering losses, not profits.
Thus, a credit is something that one does not need… it’s a plus. In reality, most of these mining companies need their by-product metal sales to remain profitable.
That being said, here are some examples of the Barrick and Newmont’s cost of production versus the gold market price:
2000 Production Cost = $276
2000 Market Gold Price = $279
2012 Production Cost = $1,272
2012 Market Gold Price = $1,669
2016 Production Cost = $1,113
2016 Market Gold Price = $1,251
Now, the reason the production cost at Barrick and Newmont has fallen from $1,272 in 2012 to $1,113 in 2016, is mainly due to the 50%+ decline in the price of oil. It takes a lot of energy to produce an ounce of gold. Oil was trading over $100 in 2012, but fell to $45 in 2016. Even though the energy cost has fallen significantly, labor costs have not declined all that much in the gold industry.
For instance, Barrick’s labor payroll per ounce of gold only declined from $328 in 2012 to $304 in 2015. This is only a 7% decline in labor cost even though oil price dropped considerably in 2015:
On the other hand, the lower gold price has put more stress on Barrick’s financial bottom line as their payroll accounted for 26% of each gold ounce produced in 2015 compared to only 18% in 2009. Investors need to realize it takes a massive amount of energy, labor, materials and capital to produce an ounce of gold.
If we look at the Barrick-Newmont Production Cost vs. Gold Price chart above, we see that the market price was never lower than the production cost. Which means, the market or Central Banks did not push the gold price below the cost of production. This is an important factor to understand when you listen to analysts suggesting that the Central Banks can rig the gold price down to whatever level they desire.
That is total BOLLOCKS…..
As, I have mentioned, the Fed and Central Banks can intervene in the market to control HOW HIGH the gold price will go. That is the big difference. So, those who continue to believe Harry Dent’s forecast that gold will go down to $700 an ounce, aren’t considering the COST OF PRODUCTION. Harry Dent spends a lot of money advertising to get people to buy his books or newsletters. Touting a $700 gold price gets people motivated in buying what he sells.
Unfortunately, Dent, like most analysts, tend to leave out the energy in their forecasts. This is truly hilarious as energy is the leading driver of our economies… not supply-demand or finance
The Production Cost Of Gold Is Higher When We Consider Capital Expenditures
My Net Income & Adjusted Income approach for determining the production cost of gold (and silver) provides a much more realistic metric than the industry’s “cash costs” or “all-in-sustaining costs.” However, when a mining company releases its income statements, they do not include their capital expenditures (CAPEX). Their net income (or adjusted income) does not include capital expenditures. To find out what they paid in CAPEX, we must look at the Cash Flow Statements.
If we consider what Barrick and Newmont spent on CAPEX and then deducted it from their cash from operations we would arrive at their FREE CASH FLOW:
From 2000 to 2016, these top two gold miners free cash flow was a net $10 billion. If we compare their free cash flow of $10 billion to the total $220 billion in revenues, it only accounted for 4.5% of their revenues. Thus, Barrick and Newmont’s free cash flow shows that it cost more to produce gold than was shown in their Annual Income statements. Which means, these gold miners still enjoyed positive free cash flow during this time.
NOTE: In order to consider some unwise capital expenditures during the years when the gold price really surged, I subtracted from each company, their lowest negative free cash flow that year. Actually, this was about $5 billion when we add them both up. So, in all reality, the free cash flow of $5 billion (half of the $10 billion shown in the chart above) means that Barrick & Newmont only enjoyed a 2%+ free cash flow margin compared to their total revenues.
Regardless, the gold market price was still higher than Barrick and Newmont’s small free cash flow margin to total revenue. Of course, if we include stock dilution as well as dividend payouts, these two gold miners would have an even higher production cost. But, that would still not change the overall production cost all that much.
As I have stated in many interviews and articles, the Fed and Central Banks CANNOT push the gold price wherever they see fit. The algorithms are electronically calculating the gold market price based on its cost of production. The only way the Fed and Central Banks can control the gold price is on its way UP. This is by using a massive amount of paper contracts to cap the gold price from moving up too high.
The majority of Fed and Central Bank intervention is controlling where investors put their money. By funneling the massive amount of money printing into STOCKS, BONDS and REAL ESTATE, 99% of investors (in the market) remain happy, as well as the governments. We must remember, local, state and the Federal Govt receive tax revenues are based on high stock, bond and real estate values. Once their values implode, so do government tax revenues. This would be a complete disaster.
Lastly, the present COMMODITY PRICING mechanism of gold will transition to its high quality STORE OF VALUE when the U.S. and Global Oil industry really starts to disintegrate. This gold value transition will be the first in history. Why? Because gold was still valued the same after the Roman Empire collapsed… due to the fact that it was based on human and animal labor.
Unfortunately, today the gold price is being based on the energy in oil. However, when the oil industry collapses, there is nothing to replace it. Thus, the value of most paper assets will plummet. Gold and silver will become stores of economic energy because the world was brainwashed into believing PAPER ASSETS will always retain their value…. not so.
- Home Prices Continue To Surge Sparking Fears Of Bubble 2.0
With each passing day, and each new financial bubble, it becomes more and more difficult to figure out what exactly is “normal.” That said, we can say with near certainty that home prices are not supposed to behave like this:
Home prices in markets that bubbled over back in 2006/2007, like Las Vegas and San Francisco, got cut in half in 2009 but have since doubled again of their lows. Meanwhile, markets like Denver and Dallas that didn’t participate as much in the 2007 mania are now surging to all-time highs, with Dallas prices up 55% over the past 5 years.
Even the 20-City Composite Cash-Shiller Index shows that average prices have surged 44% off their lows and are nearly back to their 2007 peak.
As the Wall Street Journal points out today, some of the home buying behaviors of consumers, like paying prices well above appraisal values and waiving home inspections, are starting to be eerily reminiscent of 2006.
In some markets, bidding wars are breaking out. Agents said some buyers are kicking in extra cash when properties don’t appraise for the asking price, and some are waiving their right to home inspections.
“It can’t be sustained,” said David Berson, chief economist at Nationwide Insurance and a former chief economist at mortgage giant Fannie Mae, referring to the frenzied buying. “It can’t go on forever.”
Per the chart below, homes in a dozen major markets have increased over 50% off their 2012 lows while many have already exceeded their previous bubble peeks.
Meanwhile, there are other signs of overexuberance as well including surging levels of licensed Realtors all chasing a quick buck.
The number of licensed Realtors has jumped by nearly 25% since 2012, hitting a nine-year high in 2016 and sitting just 9% below the peak in 2006, according to real-estate consultant John Burns.
In Denver, homes are selling briskly. The median number of days that homes spent on the market declined to eight in the first three months of the year from 61 in 2012, according to Redfin. Home prices rose 8.5% in Denver over the year ended in February, according to Case-Shiller.
Nicki Thompson, an agent in Denver, said she recently had a listing that was on the market for two weekends at $1.2 million and she received multiple all-cash offers above the listing price.
“It’s just crazy,” she said.
Martin Mata, a Redfin agent in Denver, said his buyers often will commit to kicking in extra cash if the bank’s appraisal comes in lower than the purchase price. “We’ve got to be coming close to a plateau for prices,” he said.
But perhaps the scariest warning of all comes from the number of economists who were all too eager to reassure the WSJ that all is well.
With little risk of a supply glut in the near future, economists generally expect prices to continue rising quickly in most markets for a couple more years, if the economy keeps expanding.
They said it is more likely that overheated markets are headed for a long period of flat or slightly declining home prices, especially if mortgage rates rise or job growth slows, but not an outright crash.
The market “is not going to burst, it’s going to contract” with falling sales volume, said Nela Richardson, chief economist at Redfin, a real-estate firm. “You might still see what looks to be a robust market because prices are really strong, but that doesn’t mean it’s a broad market.”
Alas, we’re sure the economists are right this time around.
- Germany Braces For Wave Of Migrant-Fueled Terrorism Lawsuits – 200 So Far This Year
Thanks to the influx of migrants, Germany’s Department of Terrorism Crime is expecting 500 – 600 lawsuits related to Islamic Terrorism in 2017. Last year there were 250 such terrorism-linked cases, up from 68 in 2013, according to general prosecutor Peter Frank.
The influx of migrants and refugees in recent years is a major cause of this development , said Frank. “There you can see what has come to us, both in the past few years, as well as escaped or has come from all countries to Islamic terrorists.”
According to this, the proportion of procedures with an Islamic background is explosive: it currently accounts for 85 to 90 per cent, four or five years ago it still lay at 50 to 60 per cent. The rest is attributable to legal or left-wing extremists and nationalists. –T-Online.de (translated)
Moreover, Germany’s President of the Federal Office for the Protection of the Constitution, Hans-Georg Maaßen said that there are at least 10,000 Salafist extremists roaming around Germany, with at least 1,600 considered at extremely high risk for terrorism. Every day, two to four threats are received by the OPC.
Violence among extremists has increased. Maaßen complained that the development culminated last year in five terrorist attacks in Germany. Of the perpetrators, however, only the assassin from the Berlin Christmas market had been noticed before, the other assassins did not. Just a lot of young people often radicalized themselves in secret. (Translated)
Coincidence? Germany’s admission of migrants seeking asylum leads the pack: And some are saying Angela Merkel has single handedly destroyed German culture by allowing the greatest number of Islamic migrants of any country in the EU:
And surprise, surprise – crime is spiking:
The Telegraph reports that the crime rate in Germany among ‘refugees, asylum-seekers, and illegal immigrants’ rose by more than 50% last year, and had “increased disproportionately” even when the “huge influx” of refugees entering the country under Merkel’s opern-door refugee policy was taken into account.
“The proportion of foreign suspects, and migrants in particular, is higher than the average for the general population.”
Also interesting to note:
While the general crime rate in Germany fell slightly last year, Islamist-inspired crime rose by 13.7 per cent, according to the figures. -Telegraph
This echoes what Breitbart reported last May – migrants in Germany are committing a vastly disproportionate number of crimes, and account for almost the entirety of the increased crime-rate since 2014.
The data reveals that without migrants considered, crime rates in Germany would have remained roughly static since 2014. –Breitbart
It is unclear whether victims in the increasing number of terrorism-related lawsuits are able to sue the German government or just the perpetrators, however the prospect of Germany being held financially accountable for Merkel’s refugee program would add a completely new dimension to the costs of this ill-fated experiment in forced migration.
And as the United States considers the prospect of resettling Syrian immigrants – which “has to be part of the discussion” per the increasingly influential and effervescent Ivanka Trump’s statements this week, let’s consider the best use of resources per Stefan Molyneux (who hosts insightful and often lengthy “Freedomain Radio” podcasts):
For the cost of resettling 10,000 refugees in the United States – 121,797 can be resettled in the Middle East. #MuslimBan pic.twitter.com/W6WLMaots9
— Stefan Molyneux (@StefanMolyneux) January 29, 2017
//platform.twitter.com/widgets.js
And if you think the spike in German lawsuits over terrorism are bad, just imagine what an influx of migrants would do to the US legal system… Better Call Saul.
- Trade War, Round 2: Boeing Accuses Bombardier Of Dumping Jets; Canada Retaliates
Just days after the US Commerce Department imposed duties averaging 20% on Canadian softwood lumber, accusing Chinese timber companies of getting an unfair government subsidy, on Thursday round two of the trade war between the US and Canada broke out when Boeing asked the U.S. Commerce Department to investigate dumping, subsidies and unfair pricing for Canadian planemaker Bombardier’s new CSeries airplane, a competitor to the Boeing 737, confirming that the trade tensions between the two neighboring countries are set to get far worse.
Specifically, the Chicago-based aerospace giant has asking the International Trade Commission to rule that it has suffered injury to its business at the hands of Bombardier and to recommend that the Commerce Department impose duties on the Canadian jet builder (amusingly, Boeing also complained about the very existence of Bombardier itself, a company which has been aggressively bailed out by the Canadian government as recently as October 2015, when in exchange for $2.5 billion in taxpayer funds, the company fired 7,000 Canadian workers).
In its petition, Boeing said that Bombardier, determined to win a key order from Delta Air Lines after losing a competition at United Airlines, had offered its planes to the airline at an “absurdly low” $19.6 million each, well below what it described as the aircraft’s production cost of $33.2 million. “Propelled by massive, supply creating and illegal government subsidies, Bombardier Inc has embarked on an aggressive campaign to dump its CSeries aircraft in the United States,” Boeing said in its ITC complaint.
A comparable 737-700 model by Boeing has a list price of $83.4 million, with the new 737-MAX 7 priced at $92.2 million. While sales discounts from list prices are typically 40 percent to 50 percent in the industry, another question is just how much of that price is courtesy of the implicit taxpayer subsidy of the Ex-Im bank, but that is a topic for another post.
The spat between the two companies came to a climax in April 2016, whe Bombardier won the Delta order, its biggest yet, for 75 CS100 jets, worth an estimated $5.6 billion based on the list price of about $71.8 million. And now that Trump has given the green light to challenge Canadian trade competitors, Boeing is certainly not wasting time.
In its complaint against Bombardier, Boeing argued that the CSeries program would not exist without hundreds of millions of dollars in launch aid from the governments of Canada, Quebec and Britain, nor the abovementioned $2.5 billion equity infusion from Quebec in 2015.
Boeing wasn’t finished: the company also took a shot at European rival Airbus, which it accuses of benefiting from similar “unfair” government subsidies in a long-running dispute before the World Trade Organization.
“Evidently taking a page out of the Airbus strategy book, Bombardier has blatantly and intentionally demonstrated its goal of muscling its way into the U.S. aviation market by offering its heavily subsidized planes at cut-rate pricing,” Boeing said.
A Commerce Department spokesman told Reuters that the petition would be given “a thorough review” and further comment was premature.
In recent week, Commerce Secretary Wilbur Ross has taken swift action to protect the U.S. steel and aluminum industries from foreign competition, launching national security investigations that could lead to import restrictions. An investigation could lead to duties on the aircraft to offset any below-cost pricing or any subsidies deemed unfair.
Shortly after the complaint was filed, the Canadian government issued a statement objecting to Boeing’s allegations and noted that the CSeries has many U.S. suppliers, including for engines, and supports thousands of U.S. jobs. “The Government of Canada will mount a vigorous defense against these allegations and stand up for aerospace jobs on both sides of the border,” it said. Full statement below:
The Government of Canada today made the following statement regarding the filing of a petition by Boeing Aerospace Corporation with the United States Department of Commerce, alleging the dumping of Bombardier aircraft in the United States market:
“The Government of Canada objects to the allegations made by Boeing. We are confident that our programs are consistent with Canada’s international obligations.
“The aerospace industries of Canada and the United States are highly integrated and companies on both sides of the border benefit from this close partnership. For example, many C Series suppliers are based in the United States and it is projected that more than 50 percent of the components for the C Series, including the engine, will be supplied by American firms directly contributing to high quality jobs in that country. The C Series is a great example of how the North American industrial base can develop and produce a globally competitive product with industry-leading clean technologies.
Bombardier also has a significant presence in the U.S. across its aerospace and transportation divisions, directly employing more than 7,000 workers. In addition, the company works with more than 2,000 suppliers headquartered in states across the country thereby generating thousands of well-paid, high-tech American jobs.
“The Government of Canada will mount a vigorous defence against these allegations and stand up for aerospace jobs on both sides of the border.”
Curiously, Bombardier’s chief executive conceded the company had been “aggressive” on pricing in order to win, and sources familiar with the deal pegged the discount closer to two-thirds off the nominal list price. It added that it was reviewing the petition and structures its dealings to ensure compliance with all relevant laws.
* * *
In a separate development, Premier Christy Clark of British Columbia, wrote a letter to Canadian Prime Minister Justin Trudeau Wednesday asking him to ban coal shipments from the U.S., sending shares of US coal giant Cloud Peak Energy (among others) tumbling. According to Bloomberg, Clark’s demand was in response to Trump’s lumber tariffs. Trudeau said he would consider the request “carefully and seriously.” Some context: a little over 6 million metric tons of U.S. thermal coal were shipped through the port of Vancouver in 2016.
Needless to say, it would be especially absurd if as a result of Trump’s Canadian tariffs, it is the US coal mining industry – the one which the president vowed to reincarnate – that suffers the most.
And now, we sit back and wait for round three in the increasingly hostile trade wars between the US and its peaceful northern neighbor.
- Are Oil Prices To Blame For The Venezuelan Crisis? (Spoiler Alert: Of Course Not!)
Authored by Daniel via The Mises Institute,
Many analysts are venturing to link the crisis that plagues the Venezuelan economy with the fall in the price of crude oil. With oil being one of the most important commodity in Venezuelan production and the country’s main export product, it seems that the fall in the price would bring any country with an economic structure similar to Venezuela’s into a crisis. Similarly, many assume that the problems in Ecuador have the same root as those in Venezuela, although less pronounced.
Certainly, one of the markets that has seen the most movement lately is oil. The price of an oil barrel today is 50% less than what it was in mid-2014. The price increased 47% in 2016.
Venezuela’s Export Importance Put into Context
We intend to analyze how the fall of oil prices affected its major exporters, among them Venezuela.
From the viewpoint of exporting importance, it seems that there are many countries with net oil exports higher than Venezuela’s. In fact, Venezuela is the world’s 9th largest exporter. Russian exports almost triple those of Venezuela and Saudi exports are five times larger.
Source: The World Factbook CIA.
However, the important factor to analyze the economic impact of the fall of crude oil prices in exporting countries is not absolute exports; but rather it is the measure in terms relative to the size of the economy. If we consider the relative importance of oil exports as a percentage of GDP, Venezuela does not appear among the first places either.
Source: World Bank; The World Factbook CIA.
In this case, Venezuela ranks 8th in relative export importance, far from the most important countries. Angola, Kuwait, and Iraq’s exporting importance more than triple that of Venezuela when it comes to oil.
The economic impact of falling oil prices
Both 2015 and 2016 have been difficult years for the economies of oil-exporting countries. After the price of oil barrels fell in the last quarter of 2014, economies dependent on black gold have suffered significant declines in economic performance, as was expected.
Source: IMF; St. Louis Federal Reserve.
The reported economic growth is an unweighted arithmetic mean of the 15 countries analyzed previously.
Although economic growth fell on average among all major oil-exporting countries, the impact of the fall of crude oil prices has been different in each economy. In theory, those economies more dependent on oil, such as Angola or Kuwait, would suffer the harshest declines in economic performance. However, the data does not support this thesis. Venezuela and, to a lesser extent, Russia have been the most affected.
Source: IMF.
The graph of economic growth by country shows two trends:
1)The countries with less exposure to oil prices have less volatile economic growth.
This trend is expected. Therefore, we see how the left part of the graph—where the countries with less oil exposure are located — show less volatility in economic growth than those countries on the right side of the graph — countries with the highest exposure.Those countries with less than 5% exposure to the oil market have been affected only slightly by the price of oil. The United Kingdom, Mexico, and Canada suffer to a lesser extent the falls in crude oil prices.
2) Countries with the worst economic performance are not those that have the most exposure to the oil market.
This trend is not what was expected. In this sense, two countries stand out: Venezuela and Russia. They are the only two countries that were in recession throughout 2015 and 2016; Russia being the 11th country with relative export importance and Venezuela the 8th.
The economic crisis is especially serious in Venezuela. It is the only country from the whole group that was in recession in 2014, 2015, and 2016. Moreover, Venezuela has the most serious recession with a 10% drop in GDP in 2015 (Nigeria fell by 1.7% and Russia only 0.8%).
If we compare Venezuela’s economic growth with that of other oil-exporting countries we can see the serious divergences that this article points out.
Source: IMF
The True Cause of Venezuela’s Economic Collapse
Venezuela is undergoing the typical collapse of a country that has been subject to years of all kinds of political interventions. The fall in oil prices is the external shock that brings to light the embarrassing result of years of price controls, currency controls, nationalizations, uncontrolled monetary creation, and economic dirigisme.
The economic imbalances that had accumulated over the years were hidden under the influx of dollars that incidentally came from oil revenues that grew in value, and not in volume. Lack of investment and low productivity per worker are the usual trend for Petroleum of Venezuela (PDVSA). The ability to increase production in order to counter the fall in oil prices is zero.
Source: IEA.
The Venezuelan government, which always lacked funds and didn’t receive any “help” from high oil prices at the time, did not hesitate to monetize all of the public debt necessary to cover its growing public expenditures without increasing taxes. This created hyperinflation in Venezuela. The population has even been forced to resort to bartering. The destruction of money means the destruction of the division of labor. In this environment, an annual fall of 10% GDP is perfectly understandable.
Source: Central Bank of Venezuela; International Monetary Fund
Price controls have completely depleted the commodities that are subject to such control, just as economic theory predicts. Having to trade food in the black market has radically increased the price of food. In 2015, the increase in food prices was over 130% in real terms (adjusted for inflation). This data only confirms the food emergency that Venezuela suffers.
Source: FAO.
Nationalized industries have become a disaster, to the extent that when oil prices fall the ability to rebuild Venezuelan industries and increase production in other areas is completely null. An ideal example is found in Venezuela’s steel production: after it was nationalized in 2008, steel production fell by more than 70%.
Source: World Steel Association.
Venezuela and the Embarrassments of the Socialist Paradise
In short, the Venezuelan crisis is anything but a crisis caused by the fall in oil prices. Not all oil-exporting countries are undergoing crises, and those countries that do suffer from a crisis do so much less severely than Venezuela.
The Venezuelan crisis has its roots in 21st century socialism and in the economic dirigisme that the political doctrine preaches. The fall in oil prices is nothing more than the event that uncovered the corpse of what used to be Venezuela’s economy.
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