Oct 07

Today’s News 7th October 2017

  • Is Saudi Arabia's Grand Strategy Shifting?

    Authored by Andrew Korybko via Oriental Review,

    Even in this era of global paradigmatic changes, Saudi Arabia’s shifting grand strategy is perhaps one of the most surprising developments to occur thus far, but the fast-moving Russian-Saudi rapprochement is likely to provoke an Iranian “zero-sum” reaction which could complicate Moscow’s multipolar efforts in managing the “New Middle East”.

    Vladimir Putin with King Salman bin Abdulaziz Al Saud at the official greeting ceremony, Moscow, October 5, 2017 (Photo: kremlin.ru)

    Most observers were taken aback by what to many seemed to be the inexplicable visit of Saudi King Salman to Moscow this week, wondering how and why the two long-standing Great Power rivals were able to get so close to one another in such a short period of time – and apparently without much public fanfare, too – in making this historic event possible. The usual Alt-Media demagogues decried this as a sellout of Russia’s fundamental national interests, with the most extreme pundit-provocateurs even ranting that it amounts to President Putin siding with “terrorists” such as Daesh and Al Qaeda, especially in light of Moscow’s decision to sell the much-vaunted S-400 anti-air missile systems to Riyadh and even set up a Kalashnikov production plant in the Kingdom.

    Had the Saudi Arabia of 2017 been the same country as it was half a decade ago, or even last year for that matter as some could argue, then there might be some rhetorical substance to this outlandish claim no matter how false it would still be, but what most people don’t realize is that Saudi Arabia is in the process of comprehensive changes to its foreign and domestic policies, and that there’s a very high likelihood that it will moderate its traditional behavior in becoming a more responsible actor in international (and especially regional) affairs. A lot of this has happened away from the public eye, at least in the sense that the developments weren’t “sexy” enough to draw widespread attention from most media outlets and commentators, but these piecemeal changes have altogether contributed to the formation of what looks to be a totally new grand strategy.

    Russia’s Rationale

    Before getting into the details of the drastic policy changes that Saudi Arabia has been up to lately, it’s important to comment a bit on why Russia is embracing its erstwhile nemesis. For starters, Russia’s foreign policy is driven nowadays by the “progressive” faction of the Ministry of Foreign Affairs, which believes that their country’s 21st-century grand strategic ambition should be to become the supreme balancing force in the Eurasian supercontinent. To this end, they’re diligently employing “military diplomacy” and “nuclear diplomacy”; the first in selling arms to rival states in order to preserve the status quo between them and prevent a hot war from transpiring (which is the opposite of the US selling weapons in order to tip the balance in favor of its preferred partner and spark the said conflict that Russia wants to avoid), and the second in utilizing its global leadership in nuclear energy technology to make important strategic inroads with non-traditional partners.

    Multipolarity In Action

    Concerning Saudi Arabia, this has seen Russia sign deals with it for the S-400 anti-air missile system and Kalashnikov production plant (“military diplomacy”), and Rosatom’s proposal to build Riyadh’s first-ever nuclear power plant (“nuclear diplomacy”). Of course, there’s also traditional and energy diplomacy at play here as well, the former as it relates to cooperation in uniting the Syrian “opposition” as a prerequisite to resolving the War on Syria, and the latter when it comes to both sides’ participation in the historic OPEC+ output deal from last year and subsequent renewal earlier in 2017. Moreover, none of this is occurring in a multipolar vacuum either, as Russia’s premier Chinese partner has been making great strides with Saudi Arabia in the same timeframe, including by inking two sets of deals totaling than $130 billion in the past six months alone.

    King Salman bin Abdulaziz in Moscow (photo: kremlin.ru)

    Riyadh’s Reforms

    Most of the Chinese-Saudi agreements were signed in the framework of Crown Prince Mohammed Bin Salman’s ambitious Vision 2030 project for diversifying away from his Kingdom’s present oil-exporting dependency and towards a more “real-sector” economy. This can’t happen unless crucial socio-cultural reforms are made in Saudi Arabia, and the young prince – who’s far from a fundamentalist Wahhabi in real life and therefore something like a “rock star” among his country’s majority “moderate-prone” youth population (over half of which is under 25 years old)  – recently undertook the pivotal decision to allow women to drive in the future, understanding that this a necessary step to increasing their future participation in the economy. It can be expected that more such reforms might follow in the future, such as the possible reopening of movie theaters and maybe even one day lessening the patriarchal legal restrictions placed on women’s freedom of movement.

    Unipolar Pushback

    Mohammed Bin Salman’s reforms aren’t without controversy, however, as they’ve produced a lot of resistance among the country’s ultra-fundamental clerical class, as was explained in the author’s recent analysis about “Why Allowing Saudi Women To Drive Is Very Dangerous”. The fact of the matter is that Saudi Arabia isn’t a pure “monarchical dictatorship” in the structural-political sense, but a “dual dictatorship” between the monarchy and the clergy, but the Crown Prince’s socio-culturally modernizing reforms are being perceived of as an unprecedented “power grab” which de-facto constitutes a “soft coup” by the monarchy against the clergy. In turn, the most extreme clerics could become a pressing national security risk if they rally their followers against the monarchy in fomenting unrest, whether manifested through street protests, a royal coup, or terrorism. It’s the fear of this happening which explains the Kingdom’s recent crackdown and the author’s subsequent investigation into “Who’s Really Trying To Overthrow Mohammed Bin Salman?

     As the aforementioned article concludes, the only serious player with the clandestine competencies to pull this off is the US, which is considering the “Balkanization” of the Kingdom into a collection of emirates aided by the duplicitous connivance of its regional UAE ally. This was elaborated on more in depth by the author in his work a couple of months ago explaining “The Machiavellian Plot to Provoke Saudi Arabia and Qatar into a ‘Blood Border’ War”, but the overriding idea is that the US has had an interest in betraying its decades-long ally ever since the 2015 Iranian nuclear deal was agreed to, which the author predicted in his summer 2015 piece about a “Polar Reorientation In The Mideast” that also described the strategic contours that would eventually lead to the present-day Russian-Saudi rapprochement. It’s this Great Power convergence between Moscow and Riyadh, as well as the latter and Beijing, which is driving the US to wage an incipient but increasingly multifaceted Hybrid War on Saudi Arabia.

    Rosatom SEO Alexey Likhachev with his Saudi counterpart after signing program documents in nuclear sphere (photo: kremlin.ru)

    Stopping The Saudi “Deep State” Conspiracy

    Mohammed Bin Salman must masterfully manage to tame both the radical clerics and domestic terrorists if he’s to have a chance at avoiding a US-backed royalist coup against him. He already has the support of the majority-youthful masses who could come out to the streets to support him in the event of a sudden coup, just like they did for Turkish President Erdogan during last year’s failed pro-US coup attempt, so this infers that he needs to win the backing of the military-security services in order to preemptively suppress clerical-terrorist destabilizations before countering the royalist conspiracy that’s  taking form. However, Saudi forces are embroiled in the bloody War on Yemen, which was one of the first decisions that he made as Defense Minister and is therefore attributed entirely to him, but would have probably happened regardless of whoever was in power at the time due to the geopolitical dynamics involved.

    In fact, the author forecast that a forceful Saudi response could be expected to developments in Yemen as early as September 2014 in his article about “Syria’s Yemeni Opportunity and the Rise of the Shia Circle”, which deliberately analyzed events from Riyadh’s sectarian perspective in an attempt to better understand the Kingdom’s future response. Likewise, the follow-up piece in January 2015 about “Yemen: The Saudi Coup That Totally Backfired” presciently concluded that “the Saudis are expected to hit back as hard as they can against the phantom ‘Iranian menace’ that they’re attributing their Yemeni failings to”, and that “no matter which form it takes, it’s not going to be pretty.” In any case, the only way for Mohammed Bin Salman to be confident in the support of his military-security services is to downscale the disastrous War on Yemen and eventually follow the Syrian peace format in resolving the conflict there in as much of a “face-saving” way as possible.

    That, however, won’t necessarily endear him to any of the conspiratorial royals who are plotting his ouster, many of whom are reportedly irreconcilably opposed to him for his high-profile foreign policy failings in the aforementioned War on Yemen and Qatar Crisis, which is why the young prince so urgently needed to make up for them with a dramatic success elsewhere, ergo the reason why he decided to commence his country’s now-successful rapprochement with Russia. Conversely, it’s precisely because of his pivotal role in carrying out this game-changing foreign policy rebalancing that the US wants him out, and Washington sent a very clear message to Riyadh of its displeasure just the other day when it announced that it will be halting some of its military exercises with “Gulf countries” until the Qatar Crisis is resolved. Reading between the lines, this is the Pentagon voicing its strong opposition to King Salman’s visit to Moscow and Saudi Arabia’s S-400 deal with Russia, thereby signaling to its in-country proxies that it’s time to commence their planned regime change operation.

    Russia-Saudi Arabian talks in extended format in Moscow, Oct 2017 (photo: kremlin.ru)

    Moderating The Monarchy

    All in all, Mohammed Bin Salman is trying to compensate for his earlier errors of judgement in “moderating” his country’s foreign policy to the most realistic extent possible under the present circumstances, which in an historical comparison amounts to an unprecedented pivot of sorts towards the Multipolar World Order.  This doesn’t just have geopolitical implications, however, as there’s the very real possibility that Saudi Arabia might de-dollarize new Vision 2030 and energy contracts with its new non-Western partners, which would in effect equate to the death of the “petrodollar”. The author predicted this in a late-September forecast after it became abundantly clear that the country was no longer as solidly in the American camp as most observers had considered it, especially following its fast-moving rapprochement with Russia and the $130 billion’s worth of deals that the Kingdom signed with China.

    The combined effect of these two multipolar realignments, as well as the likely downscaling of the War on Yemen and the “Damocles’ Sword” potential that Saudi Arabia has for dealing a deathblow to the dollar, are increasingly turning Mohammed Bin Salman into the “Saudi Saddam”, in that he’s now being targeted for elimination by the US because this one-time American subordinate was brave enough to chart his country’s own sovereign path in the world. If he can successfully withstand the US-encouraged “deep state” coup against him being waged through the Hybrid War mechanisms of a rebelling clergy, a possible domestic terrorist insurgency (as partial blowback from Saudi Arabia’s support for such groups abroad), and a royalist plot, among whatever other means might soon make themselves available, then it’s expected that the end result will be a considerable moderation of the Kingdom’s destabilizing activities in the region.

    Irate Iranians

    Background Concepts:

    While the welcoming of Saudi Arabia into the multipolar fold as a responsible member of the international community would be celebrated by many because of the far-reaching consequences that it could have in altering the entire course of the New Cold War, there’s one multipolar party which would actually be incredibly irate at this happening, and that’s Iran. The Islamic Republic is caught in an intense security dilemma with the Kingdom, inspired partly by the centuries-old but previously long-dormant Sunni-Shiite split, and also the US’ efforts since the 1979 Revolution and especially after 9/11 to exacerbate this into taking on geopolitical dimensions all across the international Muslim community (“Ummah”). Iran and Saudi Arabia both conceive of international affairs as being a “zero-sum” game between them, and it’s very likely that Riyadh and its media surrogates will intentionally misportray King Salman’s visit to Russia as being against Tehran instead of epitomizing Moscow’s skillful geopolitical balancing act.

    It’s understandable if Iran feels uncomfortable with these optics, though it should recognize that Russia’s overall intent is truly apolitical and driven by neutral Great Power considerations, not anything directed against it personally no matter what the forthcoming Saudi psy-ops might infer.

    That being said, it’s very tempting to perceive of events through the aforementioned “zero-sum” prism in seeing any betterment of Russian-Saudi relations as being to the overall detriment of Russian-Iranian ones, which in turn might prompt an asymmetrical response or set thereof from Tehran in countering what some of its leadership might truly believe is Russia’s “unfriendly” and “humiliating” gesture by hosting the Saudi King, selling him S-400 anti-air missiles and state-of-the-art Kalashnikovs, and bidding to produce the Kingdom’s first-ever nuclear power plant. This isn’t speculation either, as Iran already isn’t happy with the de-facto alliance that Russia has struck with “Israel” in Syria, which is explained in detail in the author’s earlier work rhetorically questioning whether “Anyone Still Seriously Thinks That Russia And Israel Aren’t Allies?

    Phase 1: Syria

    Moreover, Iran doesn’t like how Saudi Arabia is the main reason why it hasn’t been invited to join BRICS, and while the other four members are in a technical sense equally responsible for this too, it’s only Russia which is courting Saudi Arabia in a way which could make Iran uneasy given how impactful the latest rapprochement will be for Syria. Therefore, even though Iran’s official media has been largely silent on the implications of the Russian-Saudi rapprochement, it can’t be ruled out that the millennia-experienced Iranian diplomats are preparing one of their stereotypically asymmetrical responses to what’s happening, and that it could most immediately have consequences for Syria. For example, Iran could make the Astana talks more difficult by siding more closely with Damascus in attempting to rebuff the joint Russian-Turkish efforts to get the Syrian government to enter into certain political-administrative concessions (e.g. a “phased leadership transition” and “federalization”) as part of a comprehensive peace plan that would meet the interests of most external parties to the conflict and therefore maximize Moscow’s geopolitical “balancing” capabilities.

    Phase 2: Caucasus

    Apart from that and stepping its response up a notch, there’s also the possibility that Iran could work with India to redirect the North-South Transport Corridor (NSTC) from Azerbaijan and Russia to Armenia and Georgia instead, the latter route of which was predicted in the Mideast chapter of the author’s book-length analytical series about “The Chinese-Indian New Cold War” and would allow both on-the-fence Great Powers to pioneer a trade route to the EU. This would be a geopolitically troubling development for Russia and contribute to its perception that Armenia has become an “obstructionist” actor vis-à-vis Moscow-led Eurasian integration processes and has probably been totally taken over by the powerful American-based diaspora lobby, though China’s latest inroads in building its second-largest embassy in the post-Soviet space in Yerevan might help to “balance” everything out in preventing this potential move from being completely disastrous for multipolarity. Nevertheless, if Iran takes this step in rerouting some or all of the NSTC to Armenia, Georgia, and the EU, then it would probably mean that it’s also seriously considering expanding its asymmetrical response to the third phase of operations in the Balkans.

    Phase 3: Balkans

    The third and final escalatory phase of Iran’s most realistic responses to any perceived “security dilemma” with Russia after Moscow’s rapprochement with Riyadh would be if Tehran seeks to broaden its asymmetrical measures to include energy and geopolitical dimensions in the Balkans. The author wrote about the future role that post-sanctions Iranian energy exports to Europe could have in challenging Russia’s present market dominance in certain regions, and while this might not happen if the EU reimposes sanctions against the Islamic Republic in compliance with American pressure, it still can’t be entirely discounted that Iranian LNG exports to Croatia, Ukraine, Lithuania, and even Poland could be in the cards, as well as its exit from the OPEC+ output agreement. However, the most destabilizing consequence of Iran’s irritability with Russia could be if it decides to return to its post-Yugoslav role in breaking up Bosnia, using the Serbs as stand-ins for the Russians in a new proxy war. That’s the most extreme step that Iran could take and there’s nothing right now which indicates that it will happen, but it should nevertheless be included as the worst-case “dark scenario” forecast.

    Concluding Thoughts

    Royal Pivot:

    Saudi Arabia’s grand strategy is shifting away from its former Western-/unipolar-centric focus to a more diversified one of “multi-alignment’ with multipolar leaders such as Russia and China, motivated in part by the US’ hostile energy and geopolitical actions against it. On the domestic front, Crown Prince Mohammed Bin Salman is modernizing his country’s socio-cultural situation by enacting belated reforms that will complement his ambitious Vision 2030 project of multisectoral economic diversification away from its present dependency on oil exports. Taken together, the international and domestic dimensions of Saudi Arabia’s grand strategic shifts are expected to have game-changing implications in altering the global dynamics of the New Cold War, to say nothing of what would happen if the Kingdom de-dollarizes its future Vision 2030 and energy deals with its new non-Western partners, hence why the initiator of all of this, Mohammed Bin Salman, is now the “Saudi Saddam” in the sense of being targeted for elimination.

    Iranian Reaction:

    That’s not all that there is to it, however, since even in the event that the young prince is successful in thwarting his myriad Hybrid War adversaries and the wide variety of weaponized threats that they’re poised to utilize against him, it’s unlikely that this will result in multipolar stability in the Mideast, owing mostly to the fact that Iran is expected to be incredibly irate at its hated rival being feted as a privileged partner by Russia and China. The difference between the two Eurasian Great Powers, however, is that Moscow’s outreaches to Riyadh are having direct consequences for Syria, particularly as it relates to possibly “counterbalancing” or even “rolling back” Iran’s intended post-Daesh influence in the Arab Republic, or so it may seem, which is why Tehran looks much more suspiciously at Moscow than it does at Beijing. The problem, though, is that Russia isn’t doing any of this “against Iran”, but in the “larger multipolar interests” of becoming the supreme “balancing” force in the Eurasian supercontinent, which in and of itself necessitate having excellent relations with Saudi Arabia.

    Scenario Forecasts:

    If the Iranian leadership is misled into viewing Russia’s ties with Saudi Arabia as part of a “zero-sum” game and not the “win-win” strategy that it’s actually intended (key word) to be, then it’s very likely that the Islamic Republic will resort to one of its stereotypically asymmetrical responses honed by millennia of diplomatic experience in making its silent disagreements well known. This would be an unfortunate development because it would mean that Russia’s sincere efforts to balance and then mediate the Saudi-Iranian/Sunni-Shiite rivalry would be for naught, and that the US’ unstated goal of redirecting Iranian attention away from Saudi Arabia and towards Russia would have been partially successful. Nevertheless, should this happen, then it’s expected that the three-phase tier of escalatory responses could see Iran create “complications” in the Astana peace process; redirect the North-South Transport Corridor away from Azerbaijan and Russia and towards Armenia, Georgia, and the EU; and begin actively competing with Russia for part of the European energy market. At the worst, it might even try to restore its destabilizing influence in Bosnia and spark a proxy war against Russia’s Serbian partners there.

    American Backup Plan:

    None of Iran’s forecasted responses are certain, or even that it will negatively appraise the fast-moving Russian-Saudi rapprochement in the first place, but in the possible event that it does, then it would inadvertently be playing into the US’ intended strategy of indirectly using Iran as a backup plan for replacing Saudi Arabia in countering Russian interests in the Mideast, Caucasus, and the Balkans. In addition, Riyadh’s reversal from the unipolar camp to the multipolar one would leave the US without a regular source of jihadi recruits, thereby necessitating that it scout elsewhere in such countries as Sudan, India, Bangladesh, and Indonesia. The most likely scenario to happen in the near future is that Iran’s suspicions of the Russian-Saudi rapprochement manifest themselves subtly in Syria, at least at first, while the US begins looking to non-Mideast “Global South” countries for mercenaries while concurrently commencing its regime change operation in Saudi Arabia.

    The best outcome would be if Russia’s multidimensional diplomatic efforts could bring Saudi Arabia and Iran together in a “New Détente” like how Iraq’s Muqtada al-Sadr unsuccessfully tried to do, all the while assisting both of them in warding off the US’ Hybrid War threats, but the most likely result is that this wishful thinking eventuality is still a far way’s off, if it ever happens at all, since the US is well known for flexibly adapting its unipolar grand strategy to accommodate for any multipolar contingency such as this one.

  • Mapping The Most (And Least) Valuable States In America

    Everyone knows location is the most important part of real estate. You can’t change where your house is (all things being equal). You have to consider school districts, crime rates, commute times—the list goes on and on. It can be much simpler when you’re considering buying a home to compare apples to apples so you can see how the real estate market differs according to location.

    So HowMuch.net created a new visualization showing land and housing prices at a glance.

    Source: HowMuch.net

    The blue dots represent the value of an acre of land, and the red circles indicate the median value of a home. The bigger the blue dot and the larger the red circle, the more expensive it is to become a property owner. Small circles and dots likewise indicate a very low cost of purchasing property. The home values are from the U.S. Census Bureau’s 2015 American Consumer Survey, and the numbers behind the land values come from the Bureau of Economic Analysis.

    As HowMuch.net notes, several things stand out in our illustration.

    An acre of land is much more valuable in the Northeast compared to any other part of the country. This is partly because the Eastern seaboard is a very densely populated area with several large cities, most notably New York. It is also a historical artifact that Europeans settled New England first and then moved west, meaning that New York and Massachusetts have some of the oldest modern structures anywhere in the U.S. In other words, Eastern cities are a lot older than Midwestern cities, so there isn’t a lot of farmland for suburban expansion anymore. We should also mention that in terms of geographic size, these are some of the smallest states in the country. Matter of fact, the three states where the cost of an acre of land is greater than the median price of a house are all located on the East Coast, and they happen to be some of the smallest states in the Union (Rhode Island, Connecticut, and New Jersey).

    Median home values (the red circles) are a different and more complicated story. California has the most expensive houses by far ($449,100). Oregon and Washington boast similarly high housing valuations as well ($264,100 and $284,000, respectively). It is also expensive to buy a home on the East Coast with six out of the top ten states with the most expensive median home values.

    But there’s a noticeable dip in both housing and land prices in southern and midwestern states. Prices slowly rise the further you move from east to west. This highlights unique economic developments over the last several years, including the boom in oil exploration in North Dakota and the growth of Western cities thanks to young people,like Denver. Snowbirds also tend to move to Florida and Arizona after they retire, which also pushes up housing prices in those places.

    Top 5 Most Expensive States to Buy a Home 

    1. California – Value per acre: $39,092; Median Home Value: $449,100
    2. Massachusetts – Value per acre: $102,214;  Median Home Value: $352,100
    3. New Jersey – Value per acre: $196,410; Median Home Value: $322,600
    4. Maryland – Value per acre: $75,429; Median Home Value: $299,800
    5. New York – Value per acre: 41,314; Median Home Value: $293,500

    Top 5 Cheapest States to Buy a Home

    1. West Virginia – Value per acre: $10,537; Median Home Value: $112,100
    2. Mississippi – Value per acre: $5,565; Median Home Value: 112,700
    3. Arkansas – Value per acre: $6,739; Median Home Value: $120,700
    4. Oklahoma – Value per acre: $7,364; Median Home Value: $126,800
    5. Kentucky – Value per acre: $7,209; Median Home Value: $130,000

    All this shows that the laws of supply and demand are alive and well in the real estate market. You can easily find cheap acres of land where they are plentiful and un-useful (sorry, Nevada), but owning property is a lot more expensive in smaller places crowded with lots of people. As always, location, location, location.

  • Is Population Decline Catastrophic?

    Authored by Peter St.Onge via The Mises Institute,

    In the 1970’s we heard the earth was going to get so crowded we’d be falling off. Now the panickers have flipped to population decline. They were wrong in the 70’s, so are they wrong again? Is a declining population catastrophic?

    Countries from Germany to Japan are investing in mass immigration or pro-birth policies on the assumption that they must import enough warm bodies to stave off economic collapseI think this is mistaken.

    Falling population on a country level is certainly no catastrophe and, indeed, may be positive. I’ll outline some reasons here…

    Historically, the first question is why population declined. If it’s the Mongols invading again then, yes, the economy will suffer. Not because of the death alone, but because wholesale slaughter tends to destroy productive capital as well.

    On the other hand, if the population is declining from non-war, we have a well-studied natural experiment in the Black Plague. Which is generally credited with the “take-off” of the West. Because if the population declines by a third while capital including arable land stays the same, you get a surplus. Same resources divided by fewer people.

    Think of zombie movies where dude’s running around with unlimited resources at his disposal — free cars, riverfront penthouses. That, in diluted form, is what a declining population gives us — more land, more highways or buildings, more resources per person.

    Now, if the population’s declining not because of a terrible disaster like the Plague, rather because people simply want fewer children, then you don’t even get the massive hit from losing productive people. A worker dying at 40 takes a lot of productivity with him, while a child unborn isn’t actually destroying anything but hopes and dreams.

    So if the Plague was a per capita economic bonanza to Europe, having fewer children should be an even larger per capita bonanza.

    Take Germany; before recent rises in immigration, Germans averaged 1.25 children per woman. This translates into a 1/3 decline in population per cycle (i.e every 75 years if people are living 75 years). So without immigration, Germany might expect a 1/3 decline by 2100. Is this good or bad?

    The question breaks into 2 parts: absolute number of people, and changes in age composition. On numbers alone, it’s great for Germans; same physical capital, same amount of land and air and water. True there are fewer taxpayers to amortize shared costs like defense, but these costs are small and, empirically, often scale to the population anyway. For example Holland’s military budget and population are both about 1/5 of Germany’s.

    So on numbers it’s great — more stuff for fewer people.

    Now the second question is age profile. The key here is that a declining population means fewer working-adults to pay out pensions, but it also means even fewer kids. Who are very expensive. The number that captures both is “dependency ratio,” which is the ratio of workers to children-plus-elderly.

    To take a real-world example, the UN expects Germany in 2100 to have 68 million people, compared to today’s 82 million — about a 20% decline. The age profile shifts so they expect a third more over-65’s — from 17 to 23 million. Meanwhile, children 14 and under fall from 11m to 9m. So total dependents goes from 28 million today to 32 million in 2100. Meanwhile, population age 15 to 64 goes from 54 million today to 36 million in 2100. Upshot is today a single working-age person supports half a dependent — 54 million carrying 28 million. But in 2100 that worker will support a single dependent — 36 million carrying 32 million. So far so bad, right?

    Well, there are 2 big caveats here, both based on long-lasting trends.

    First, for over a century now people are not only living longer, but living healthy longer. This is called “health expectancy” and, sticking with Germany, is rising by about 1.4 years per decade.

     

    This implies that 65 year-olds in 2100 will be as healthy as 53 year-olds today. While today’s 65-year-olds are as healthy as 2100’s 78-year-olds. This alone would bring the elderly numbers back down to today’s, but the lower number of children means worker burdens actually decline.

     

    Of course, this would require raising retirement ages in line with health expectancy – 1.4 years per decade – which politicians are obviously deeply reluctant to do.

     

    Second caveat is another long-term trend, economic growth. The irony here is that, from a population growth viewpoint, economic growth is actually the worst-case scenario. Because if the economy crashes instead, then historically the population actually soars — kids become your safety net if the welfare state goes bankrupt. So if we fail to grow, the demographic problem actually solves itself anyway. Either we grow, or population decline was a false alarm anyway.

     

    Quantifying this growth, over the past 50 years Germany has grown 1.65% per year, real per capita. That trends puts a 2100 German worker making 4 times what they do today. Keep in mind this is likely underestimating the benefit, because any outperformance makes Germans richer yet, while any catastrophe probably makes them have more kids.

    So, summing up, rising health expectancy implies there will actually be fewer dependents in 2100 Germany, while economic growth implies German workers will be 4 times richer, just on growth alone. The demographic burden plunges by 80% or more.

    By the way, if you’re freaked out at the prospect of working an extra 1.4 years per decade, that economic growth alone suggests a 50% decline in worker burdens – twice the dependents on four times the income. So even if politicians are spineless, the welfare burden declines even with more dependents.

    Bottom line, whether we look at total numbers or demographically, population decline coming from simply choosing to have fewer kids is nothing remotely catastrophic.

    Now, a final point: in a worldwide context, more people does tend to increase investment, therefore innovation and economic growth. This is obvious in the aggregate – there wouldn’t be any factories if there weren’t any humans – but people forget. So, on a world-wide level, we should have a bias towards more humans, while recognizing that, on a country level, a shrinking population is certainly no catastrophe.

     

  • What Would A North Korean Nuclear Attack Look Like?

    Reports that North Korea is planning to test an ICBM capable of reaching the US west coast opened a trapdoor under stocks this morning, suggesting that investors are taking president’s ominous warnings about “the calm before the storm” seriously.

    But in the unlikely event that you’re not sufficiently terrified already, researchers at Johns Hopkins have sought to quantify the horrifying consequences of a North Korean nuclear strike in a new research report published by the university’s 38th Parallel project.

    The US carrying out any military option raises a significant risk of military escalation by the North, including the use of nuclear weapons against South Korea and Japan. According to the calculations presented below, if the “unthinkable” happened, nuclear detonations over Seoul and Tokyo with North Korea’s current estimated weapon yields could result in as many as 2.1 million fatalities and 7.7 million injuries.

    In the report, author Michael Zagurek calculates that an all-out nuclear strike launched by North Korea against Tokyo or Seoul could kill as many as 2.1 million people and injure another 8 million. Combined, the number of dead and injured would equal 10% of the South Korean population – affirming that a nuclear strike by the North would be – by a considerable margin – the single deadliest attack in human history. By comparison, the US killed a combined 120,000 Japanese civilians when dropped nuclear bombs over Hiroshima and Nagasaki.

    To hear Zagurek tell it, investors and ordinary citizens alike are underestimating the likelihood of a nuclear conflict. As Zagurek explains, tipping the world into a potentially civilization conflict could result from an accidental miscalculation by either side. In the most likely scenario, an accidental miscalculation during a missile or nuclear test in the Pacific impacts US military assets in Guam, triggering an overwhelming military response by the US.

    With the North Korean regime fearing the imminent destruction of its nuclear arsenal, as the logic goes, the Kim regime would fire off all 25 of its nukes – at least, that was the number upon which Zagurek based his calculations – at either Japan or Seoul.

    But ruling out the possibility of an accident like that described above, how much longer can North Korea and the US trade threats before a military conflict becomes inevitable?

    If the status quo is unacceptable and diplomacy has been ineffective, then at what point do military responses become probable?  The tension between North Korea, its neighbors and the United States are now extremely high, antagonized further by bombastic exchanges between the US and DPRK during the United Nations General Assembly meetings and continued tweets from Trump. History is replete with “rational actors” grossly miscalculating, especially in crisis situations. It is possible that another North Korean nuclear test—especially if detonated in air or under water—an ICBM test, or a missile test that has the payload impact area too close to US bases in Guam for example, might see Washington react with force. This could include such options as attempting to shoot down the test missiles or possibly attacking North Korea’s missile testing, nuclear related sites, missile deployment areas or the Kim Regime itself. The North Korean leadership might perceive such an attack as an effort to remove the Kim family from power and, as a result, could retaliate with nuclear weapons as a last gasp reaction before annihilation. Therefore, it is worth reviewing the consequences if the “unthinkable” happened.

    The following graphs show the results of Zagurek's calculations for different-sized nuclear payloads:

     

     

    Here’s a map of Seoul showing four possible blast areas from a 250 kt airbust detonation – 12+ psi, 5-12 psi, 2-5 psi, 1-2 psi…

    And the four possible blast areas for Tokyo…

    With Sarah Huckabee Sanders telling reporters that President Donald Trump’s ominous hints about a coming “storm” should be taken seriously, it’s possible that a breaking point could be approaching…

    …then again, Trump is fond of bluffing. Meanwhile, Steve Bannon’s surprising admission that there is “no attractive military solutions” for dealing with North Korea that wouldn't result in the deaths of hundreds of thousands of people in Seoul within 30 minutes due to conventional weapons fire continue to haunt the administration…

  • The U.S. Justice System Must Focus On Elite Criminality

    Authored by Mike Krieger via Liberty Blitzkrieg blog,

    Two very important articles published in recent days serve to once again highlight America’s metastasizing elite criminality problem. A problem which our justice system simply refuses to address.

    This corrupt two-tier justice system is something I’ve been focused on from the very beginning of my writings, and I continue to see it as a civilization-level threat for this country if not aggressively addressed and confronted in the very near future.

    The two articles in question focus on different aspects of untouchable elite culture in America.

    The first relates to the continued fraud pervasive in America’s largest financial institution, while the second covers a thirty year history of predatory sexual behavior by one of Hollywood’s biggest moguls, Harvey Weinstein. In both cases, countless people have known and reported on repeated abuses perpetrated by both the institution and the man, yet the U.S. justice system and the vast majority of “elite” culture happily help shield them from justice. Predators are predators, and elite predators are far more dangerous to society that your average street crook, so why does our justice situation deal with it in the exact opposite way?

    Let’s start with the blockbuster article published in The Nation by the always informative David Dayen. The article is titled, How America’s Biggest Bank Paid Its Fine for the 2008 Mortgage Crisis—With Phony Mortgages!

    Here’s just brief excerpt:

    JPMorgan’s share of the settlement was $5.3 billion, but only $1.1 billion had to be paid in cash; the other $4.2 billion was to come in the form of financial relief for homeowners in danger of losing their homes to foreclosure. The settlement called for JPMorgan to reduce the amounts owed, modify the loan terms, and take other steps to help distressed Americans keep their homes. A separate 2013 settlement against the bank for deceiving mortgage investors included another $4 billion in consumer relief.

     

    A Nation investigation can now reveal how JPMorgan met part of its $8.2 billion settlement burden: by using other people’s money.

     

    Here’s how the alleged scam worked. JPMorgan moved to forgive the mortgages of tens of thousands of homeowners; the feds, in turn, credited these canceled loans against the penalties due under the 2012 and 2013 settlements. But here’s the rub: In many instances, JPMorgan was forgiving loans on properties it no longer owned.

     

    The alleged fraud is described in internal JPMorgan documents, public records, testimony from homeowners and investors burned in the scam, and other evidence presented in a blockbuster lawsuit against JPMorgan, now being heard in US District Court in New York City.

    Sounds hard to believe, but it’s true. Not only that, but as we’ve come to expect from the “rule of law” in America, it somehow never applies to that group of people with the greatest ability to financially destroy people and their lives. Bankers. For example, here’s some more from the same piece:

    Federal appointees have been complicit in this as well. E-mails show that the Office of Mortgage Settlement Oversight, charged by the government with ensuring the banks’ compliance with the two federal settlements, gave JPMorgan the green light to mass-forgive its loans. This served two purposes for the bank: It could take settlement credit for forgiving the loans, and it could also hide these loans—which JPMorgan had allegedly been handling improperly—from the settlements’ testing regimes.

     

    “No one in Washington seems to understand why Americans think that different rules apply to Wall Street, and why they’re so mad about that,” said former congressman Miller. “This is why.”

     

    Most of the loans that JPMorgan released—and received settlement credit for—were all but worthless. Homeowners had abandoned the homes years earlier, expecting JPMorgan to foreclose, only to have the bank forgive the loan after the fact. That forgiveness transferred responsibility for paying back taxes and making repairs back to the homeowner. It was like a recurring horror story in which “zombie foreclosures” were resurrected from the dead to wreak havoc on people’s financial lives.

     

    Federal officials knew about the problems and did nothing. In July 2014, the City of Milwaukee wrote to Joseph Smith, the federal oversight monitor, alerting him that “thousands of homeowners” were engulfed in legal nightmares because of the confusion that banks had sown about who really owned their mortgages. In a deposition for the lawsuit against JPMorgan Chase, Smith admitted that he did not recall responding to the City of Milwaukee’s letter.

     

    Few would expect Jeff Sessions’s Justice Department to pursue such a case, but what this sorry episode most highlights is the pathetic disciplining of Wall Street during the Obama administration.

     

    JPMorgan’s litany of acknowledged criminal abuses over the past decade reads like a rap sheet, extending well beyond mortgage fraud to encompass practically every part of the bank’s business. But instead of holding JPMorgan’s executives responsible for what looks like a criminal racket, Obama’s Justice Department negotiated weak settlement after weak settlement. Adding insult to injury, JPMorgan then wriggled out of paying its full penalties by using other people’s money.

     

    The larger lessons here command special attention in the Trump era. Negotiating weak settlements that don’t force mega-banks to even pay their fines, much less put executives in prison, turns the concept of accountability into a mirthless farce. Telegraphing to executives that they will emerge unscathed after committing crimes not only invites further crimes; it makes another financial crisis more likely. The widespread belief that the United States has a two-tiered system of justice—that the game is rigged for the rich and the powerful—also enabled the rise of Trump. We cannot expect Americans to trust a system that lets Wall Street fraudsters roam free while millions of hard-working taxpayers get the shaft.

    Of course, this is just the latest when it comes to JP Morgan. I highlighted the firm’s rap sheet in last month’s post, Which is Fraudulent – Bitcoin or JP Morgan?

    How many JP Morgan executives have gone to jail?

    Now onto Harvey Weinstein, a guy whose cretinous behavior has been the biggest non-secret in Hollywood for decades. Just like with banker crooks, he mere settles cases and continues to walk around, freely hunting the next defenseless victim.

    The New York Times article published yesterday exposing some of this grotesque man’s history was extraordinary and I suggest everyone read it. Here’s just a little from the piece, Harvey Weinstein Paid Off Sexual Harassment Cases for Years:

    Two decades ago, the Hollywood producer Harvey Weinstein invited Ashley Judd to the Peninsula Beverly Hills hotel for what the young actress expected to be a business breakfast meeting. Instead, he had her sent up to his room, where he appeared in a bathrobe and asked if he could give her a massage or she could watch him shower, she recalled in an interview.

     

    “How do I get out of the room as fast as possible without alienating Harvey Weinstein?” Ms. Judd said she remembers thinking.

     

    In 2014, Mr. Weinstein invited Emily Nestor, who had worked just one day as a temporary employee, to the same hotel and made another offer: If she accepted his sexual advances, he would boost her career, according to accounts she provided to colleagues who sent them to Weinstein Company executives. The following year, once again at the Peninsula, a female assistant said Mr. Weinstein badgered her into giving him a massage while he was naked, leaving her “crying and very distraught,” wrote a colleague, Lauren O’Connor, in a searing memo asserting sexual harassment and other misconduct by their boss.

     

    There is a toxic environment for women at this company,” Ms. O’Connor said in the letter, addressed to several executives at the company run by Mr. Weinstein.

     

    Dozens of Mr. Weinstein’s former and current employees, from assistants to top executives, said they knew of inappropriate conduct while they worked for him. Only a handful said they ever confronted him.

     

    Mr. Weinstein enforced a code of silence; employees of the Weinstein Company have contracts saying they will not criticize it or its leaders in a way that could harm its “business reputation” or “any employee’s personal reputation,” a recent document shows. And most of the women accepting payouts agreed to confidentiality clauses prohibiting them from speaking about the deals or the events that led to them.

     

    In interviews, some of the former employees who said they had troubling experiences with Mr. Weinstein asked a common question: How could allegations repeating the same pattern — young women, a powerful male producer, even some of the same hotels — have accumulated for almost three decades?

     

    “It wasn’t a secret to the inner circle,” said Kathy DeClesis, Bob Weinstein’s assistant in the early 1990s. She supervised a young woman who left the company abruptly after an encounter with Harvey Weinstein and who later received a settlement, according to several former employees.

     

    In March 2015, Mr. Weinstein had invited Ambra Battilana, an Italian model and aspiring actress, to his TriBeCa office on a Friday evening to discuss her career. Within hours, she called the police. Ms. Battilana told them that Mr. Weinstein had grabbed her breasts after asking if they were real and put his hands up her skirt, the police report says.

     

    The claims were taken up by the New York Police Department’s Special Victims Squad and splashed across the pages of tabloids, along with reports that the woman had worked with investigators to secretly record a confession from Mr. Weinstein. The Manhattan district attorney’s office later declined to bring charges.

    As disturbing as all that is, it might be the tip of the iceberg. Here’s some additional info from an article published today by The Daily Beast, Hollywood’s Loud Silence on Harvey Weinstein:

    The Times piece later identified the 1997 actress as Rose McGowan, who starred in the 1996 film Scream, which was distributed by Weinstein-owned Dimension Films. In October 2016, McGowan tweeted, “Because my ex sold our movie to my rapist for distribution #WhyWomenDontReport.” It’s not known whom McGowan was referring to, though she dated filmmaker Robert Rodriguez from 2006 to 2009, and their film Planet Terror was distributed by Weinstein in 2007.

     

    In the wake of the blockbuster Times exposé, The Daily Beast reached out to dozens of prominent actors, actresses, and filmmakers—who both have andhave not worked with Weinstein—only to receive many replies of “no comment” and plenty of radio silence.

    Elite criminals are the most dangerous criminals on earth, but our justice system treats them like well-meaning philosopher kings who deserve endless breaks in the face of rampant unethical and often evil behavior. It should be completely obvious to everyone that the only reason elite crooks get treated with kid gloves is because they’re rich and powerful. The end result of this dereliction of justice is those entrusted with protecting the public have willingly created an entrenched, untouchable, distributed, criminal class which spans across and leads all major industries in America.

    As I tweeted earlier today:

    //platform.twitter.com/widgets.js

    If we don’t get a grip on this now and begin to marshal our resources against the most dangerous criminals in America — those from the highest echelons of U.S. society — the country will continue to unravel and in an increasingly dangerous and chaotic fashion.

     

    If you liked this article and enjoy my work, consider becoming a monthly Patron, or visit our Support Page to show your appreciation for independent content creators.

  • San Franciscans Pissed To Learn Their Liberal Policies Caused A Wave Of Restaurant Failures

    In a note that we’ll file away under the definition of ‘irony’, Bloomberg wrote today that the fun-loving, free-spirited socialists of San Francisco are suddenly really pissed off that their liberal economic policies have resulted in a wave of restaurant failures, making it nearly impossible to find good food at an ‘affordable’ price. 

    We would be pissed too...who could have guessed that artificially raising wages well above market supported rates would result in business failures?

    On Thursday, the Michelin Guide announced its 2018 Bib Gourmand winners for San Francisco with only 67 restaurants on the list this year, a decrease from the 74 restaurants in 2017. Twelve restaurants in total dropped off, once you factor in some new additions. In 2016, there were 73 restaurants, and in 2015, 76 were on the list.

     

    Restaurants that rate a spot on the Bib Gourmand list are defined as places that offer notable food at a reasonable price. Michelin specifically defines that as two courses plus dessert or wine for $40, not including tax or tip. A group of anonymous inspectors choose the restaurants. Bib Gourmand restaurants are not eligible to receive Michelin stars.

     

    Some of the attrition on the 2018 list is due to places that simply fell off (or maybe even got promoted to the star list, proper), like Bistro Jeanty in Yountville, Bistro 29 in Santa Rosa, and Le Garage in Sausalito. But the alarming rate of restaurant closures in the Bay Area also accounts for the dip on the list, with spots like Bar Tartine and Mason Pacific in San Francisco and Scopa in Healdsburg wine country shutting their doors.

    San Fran

    So what was the catalyst that sparked the ongoing massive wave of San Francisco restaurant failures?  Well, Bloomberg figures it’s the result of soaring minimum wages and health care costs…you know, all the things that San Fran liberals argue and protest for.

    Factors like skyrocketing rents, minimum wage and health care have certainly taken a toll on Bib Gourmand-style restaurants around the Bay Area. More than 60 restaurants closed between Sept. 2016 and Jan. 2017, according to the East Bay Times. “We’re at this precipice where the model of the full-service restaurant is being pushed to the brink,” said Gwyneth Borden, executive director of the Golden Gate Restaurant Association.

     

    Although ecstatic by the news of her Bib Gourmand, Brown Sugar Kitchen’s chef/owner Tanya Holland echoed the sentiment during a phone interview: “It’s so challenging to operate this kind of restaurant in the Bay Area right now” especially when it comes to staffing, she said.

    Of course, as we pointed out back in January, a Thrillist article written by Kevin Alexander highlighted the demise of one independently owned restaurant in San Francisco, AQ, that shut down earlier this year for all the same reasons listed above.  When it came to minimum wage hikes, Alexander found that just a $1 per hour minimum wage increase reduced an independent restaurant’s already thin profit margins by $20,000, or 10%.  So we imagine the $5 minimum wage hike that California just passed is probably slightly less than optimal for restaurant owners.

    I should say before I go any further that all of the restaurant owners and chefs I’ve talked to are compassionate humans who support better coverage and livable wages, and seem on the whole progressive by nature, but restaurant margins are already slim as hell. There are no political agendas here — they’re just genuinely worried about how to afford to pay extra without radically changing the way they do business.

     

    Let’s start with the minimum wage. According to the Bureau of Labor Statistics, of the 2.6 million people earning around the minimum wage in 2015, the highest percentage came from service jobs in the food industry. Though the Obama administration’s attempt to increase the federal minimum wage above $7.25 failed, 21 states and 22 cities have raised the minimum wage starting this year, including Washington, DC ($12.50 an hour), Massachusetts ($11), New York ($9.70), and Arkansas ($8.50).

     

    Considering that hour-wage workers are usually the lowest earners and the increase is essential to ensure they earn an actual living, this is the least controversial of the newer expenses and something almost everyone in the industry supports, in theory, but it doesn’t change the fact that it’s an additional cost that must be factored in. If you have 10 hourly employees working eight-hour shifts, five days a week and you raise the wages a dollar an hour, that comes out to a nearly $20K increase on the year. In AQ’s best year — a phenomenal year by restaurant standards — that would have been nearly 10% of profits.

    Meanwhile, when it comes to Obamacare, Alexander noted that AQ was hit with an incremental $72,000 of annual expenses in 2015 that didn’t exist in 2012, which eroded another ~30% of the company’s peak net income.

    Then there’s health care. For the better part of its history, the restaurant business was a health care-free zone, which is ironic, given this Bureau of Labor Statistics’ description of the back-of-house work environment: “Kitchens are usually crowded and filled with potential dangers.” With the introduction of Obamacare, most restaurant workers finally got the coverage they’ve needed for years through the employer mandate, but critics often talk about the strain it puts on small-business owners due to a puzzling and controversial element that defines “full time” as 30 hours per week, and not the 40-hour workweek used almost everywhere else (the Save American Workers Act proposes to move this back to 40 hours).

     

    Though this mainly affects bigger restaurants with staffs of 50 or more full-time workers, independent sit-down restaurants still need to provide suitable coverage (meaning it has to be affordable, less than 9.5% of the employee’s income) or face fees of $2K per employee. Consider AQ. Semmelhack told me that in 2012 they paid $14,400 for health care costs. In 2015, they paid $86,400. That’s an increase of $72K MORE per year than 2012, or 29% of their best year’s profit.

    Then there are those pesky rental rates which have been driven ever higher by nearly a decade of 0% interest rates that have resulted in artificially high demand for “yieldy” commercial real estate.

    In the restaurant world, rent always sucks. Unless you manage to play it perfectly, as a restaurant owner you’re either moving into a sketchy or “emerging” neighborhood where the rent is cheap but few want to go there, or you’re overpaying for an established ‘hood and need to be a runaway success from day one. And even if you do manage to make it in the former type of neighborhood, your success often ends up pricing you out of the ‘hood you helped revitalize.

     

    In Miami, Michelle Bernstein’s Cena by Michy helped rebirth the MiMo historic district but was forced to close this year, after the landlord attempted to triple the rent. And even Danny Meyer had to close and move Union Square Cafe in New York, which, since 1985, had served as one of America’s culinary landmarks, when he couldn’t rationalize paying the huge rent hike the landlord proposed.

    What’s next?  Is San Francisco going to tell us how mad they are that Obamacare is driving up healthcare premiums?

  • One Chart Explains What Bernie Madoff And Kentucky Public Pensions Have In Common

    If Bernie Madoff taught us anything it’s that every successful ponzi scheme requires precisely one critical component to keep it afloat: a steady stream of fresh capital to fund redemptions.  Absent that key component, even the most carefully crafted ponzi, with the best, most creative accounting fabrications in the world, will inevitably fail from a lack of real, cold, hard cash to keep the illusion going.

    Unfortunately, it seems that Kentucky’s public pensions are now running into the very same problem that ultimately brought down Madoff’s multi-billion dollar ’empire’.  As the Lexington Herald Leader points out today, it’s no coincidence that the Kentucky public pension system is suddenly collapsing just as the number of retirees (redemptions) has surged beyond the number of active employees (fresh capital) required to keep the ponzi going.

    It’s impossible to know exactly who, where or when, but one day in 2016, a Kentucky state employee packed up her desk, said goodbye to her colleagues and retired.

     

    Once she hit the exit, the number of retirees drawing a pension from the Kentucky Employees Retirement System (Non-Hazardous), the struggling $2.6 billion fund that serves most of state government, officially topped the number of active workers paying into it.

     

    The 60-year-old fund has been mathematically upside down from that day forward.

     

    Social Security, by comparison, has a roughly 3-to-1 ratio of workers supporting retirees, but KERS’ ratio is less than 1 to 1. Its numbers are expected to worsen as state government continues to cut its work force and aging baby boomers keep heading into retirement. The average age of a worker in KERS is 45, up from 43 just a few years ago. And they retire at age 57 on average to draw a lifetime pension.

     

    “You just can’t depend on this model anymore,” said state Sen. Joe Bowen, R-Owensboro.

    As Senator Joe Bowen notes, “it creates a cash flow problem”…

    Bowen is working with Gov. Matt Bevin and other GOP lawmakers on proposed changes to Kentucky’s public pension systems, which face tens of billions of dollars in unfunded liabilities due to inadequate contributions and unrealistic financial assumptions by state government over much of the past two decades.

     

    Bowen said Wednesday that an outline of their pension proposals could be unveiled within the next week, with a special legislative session to enact those changes possible later this year.

     

    “The model of a defined-benefits plan doesn’t work for us anymore because we can’t raise enough money from this work force to pay for everyone who is going into retirement,” Bowen said. “This is why moving to 401(k) accounts, moving to defined-contribution plans, and then committing to paying down the existing liabilities … that’s really the only option we have.”

     

    “It creates a cash-flow problem,” said David Eager, interim executive director of Kentucky Retirement Systems, which manages KERS (non-hazardous) and other state and local government pension funds. “The benefit payments are going to continue to go up. The contributions are going to continue to go down. That’s just the math of it.”

    Of course, the demographics of the Kentucky pension system are hardly unique.  A surge in Baby Boomer retirements over the next couple of decades, combined with technological advancements that ensure that only a fraction of those retirees will have to be replaced with actual human workers, will inevitably result in a wave public pension ponzi failures as they meet with the same “cash flow problem” as Bernie Madoff.

     

    That said, unlike the Madoff ponzi, no one will go to jail when the public pension ponzi schemes of the U.S. are exposed because, for some reason, defrauding taxpayers, as opposed to investors, is perfectly legal.

  • Why Are Washington's Clients Getting Cozy With Moscow?

    Submitted by Nauman Sadiq,

    Turkey, which has the second largest army in NATO, has been cooperating with Russia in Syria against Washington’s interests since last year and has recently placed an order for the Russian-made S-400 missile system.

     

    Similarly, the Saudi King Salman, who is on a landmark state visit to Moscow, has signed several cooperation agreements with Kremlin and has also expressed his willingness to buy S-400 missile system.

     

    Another traditional ally of Washington in the region, Pakistan, has agreed to build a 600 mega-watt power project with Moscow’s assistance, has bought Russian helicopters and defense equipment and has held joint military exercises with Kremlin.

    All three countries have been steadfast US allies since the times of the Cold War, or rather, to put it bluntly, the political establishments of these countries have acted as virtual proxies of Washington in the region and had played an important role in the collapse of the former Soviet Union in 1991.

    In order to understand the significance of relationship between Washington and Ankara, which is a NATO member, bear in mind that the United States has been conducting air strikes against targets in Syria from the Incirlik airbase and around fifty American B-61 hydrogen bombs have also been deployed there, whose safety became a matter of real concern during the failed July 2016 coup plot against the Erdogan administration; when the commander of the Incirlik airbase, General Bekir Ercan Van, along with nine other officers were arrested for supporting the coup; movement in and out of the base was denied, power supply was cut off and the security threat level was raised to the highest state of alert, according to a report by Eric Schlosser for the New Yorker.

    Similarly, in order to grasp the nature of principal-agent relationship between the United States on the one hand and Saudi Arabia and Pakistan on the other, keep in mind that Washington used Gulf’s petro-dollars and Islamabad’s intelligence agencies to nurture jihadists against the former Soviet Union during the Cold War.

    It is an irrefutable fact that the United States sponsors militants, but only for a limited period of time in order to achieve certain policy objectives. For instance: the United States nurtured the Afghan jihadists during the Cold War against the former Soviet Union from 1979 to 1988, but after the signing of the Geneva Accords and consequent withdrawal of Soviet troops from Afghanistan, the United States withdrew its support to the Afghan jihadists.

    Similarly, the United States lent its support to the militants during the Libyan and Syrian civil wars, but after achieving the policy objectives of toppling the Arab nationalist Gaddafi regime in Libya and weakening the anti-Israel Assad regime in Syria, the United States relinquished its blanket support to the militants and eventually declared a war against a faction of Sunni militants battling the Syrian government, the Islamic State, when the latter transgressed its mandate in Syria and dared to occupy Mosul and Anbar in Iraq in early 2014.

    The United States regional allies in the Middle East, however, are not as subtle and experienced in Machiavellian geopolitics. Under the misconception that alliances and enmities in international politics are permanent, the Middle Eastern autocrats keep on pursuing the same belligerent policy indefinitely as laid down by the hawks in Washington for a brief period of time in order to achieve certain strategic objectives.

    For example: the security establishment of Pakistan kept pursuing the policy of training and arming the Afghan and Kashmiri jihadists throughout the eighties and nineties and right up to September 2001, even after the United States withdrew its support to the jihadists’ cause in Afghanistan during the nineties after the collapse of its erstwhile archrival, the Soviet Union.

    Similarly, the Muslim Brotherhood-led government of Turkey has made the same mistake of lending indiscriminate support to the Syrian militants even after the United States partial reversal of policy in Syria and the declaration of war against the Islamic State in August 2014 in order to placate the international public opinion when the graphic images and videos of Islamic State’s brutality surfaced on the social media.

    Keeping up appearances in order to maintain the façade of justice and morality is indispensable in international politics and the Western powers strictly abide by this code of conduct. Their medieval client states in the Middle East, however, are not as experienced and they often keep on pursuing the same militarist policies of training and arming the militants against their regional rivals, which are untenable in the long run in a world where pacifism has generally been accepted as one of the fundamental axioms of the modern worldview.

    Regarding the recent cooperation between Moscow and Ankara in the Syrian civil war, although the proximate cause of this détente seems to be the attempted coup plot against the Erdogan administration in July last year by the supporters of the US-based preacher, Fethullah Gulen, but this surprising development also sheds light on the deeper divisions between the United States and Turkey over their respective Syria policy.

    After the United States reversal of “regime change” policy in Syria in August 2014 when the Islamic State overran Mosul and Anbar in Iraq in early 2014 and threatened the capital of another steadfast American ally, Masoud Barzani’s Erbil in the oil-rich Iraqi Kurdistan, Washington has made the Kurds the centerpiece of its policy in Syria and Iraq.

    Bear in mind that the conflict in Syria and Iraq is actually a three-way conflict between the Sunni Arabs, the Shi’a Arabs and the Sunni Kurds. Although after the declaration of war against a faction of Sunni Arab militants, the Islamic State, Washington has also lent its support to the Shi’a-led government in Iraq, but the Shi’a Arabs of Iraq are not the trustworthy allies of the United States because they are under the influence of Iran.

    Therefore, Washington was left with no other choice than to make the Kurds the centerpiece of its policy in Syria and Iraq after a group of Sunni Arab jihadists transgressed its mandate in Syria and overran Mosul and Anbar in Iraq in early 2014 from where the United States had withdrawn its troops only a couple of years ago in December 2011.

    The US-backed Syrian Democratic Forces, which are on the verge of liberating the Islamic State’s de facto capital, Raqqa, and are currently battling the jihadist group in a small pocket of the city between the stadium and a hospital, are nothing more than the Kurdish militias with a symbolic presence of mercenary Arab tribesmen in order to make them appear more representative and inclusive in outlook.

    As far as the regional parties to the Syrian civil war are concerned, Saudi Arabia, Jordan and the rest of the Gulf Arab States may not have serious reservations against this close cooperation between the United States and the Kurds in Syria and Iraq, because the Gulf Arab States tend to look at the regional conflicts from the lens of the Iranian Shi’a threat.

    Turkey, on the other hand, has been more wary of the separatist Kurdish tendencies in its southeast than the Iranian Shi’a threat, and particularly now after the Kurds have held a referendum for independence in Iraq despite the international pressure against such an ill-advised move.

    Finally, any radical departure from the longstanding policy of providing unequivocal support to Washington’s policy in the region by the political establishment of Turkey since the times of Mustafa Kemal Ataturk is highly unlikely. But after this perfidy by Washington of lending its support to the Kurds against the Turkish proxies in Syria, it is quite plausible that the Muslim Brotherhood-led government in Turkey might try to strike a balance in its relations with the Cold War-era rivals.

    *  *  *

    Nauman Sadiq is an Islamabad-based attorney, columnist and geopolitical analyst focused on the politics of Af-Pak and Middle East regions, neocolonialism and petro-imperialism.

  • BLS Caught Fabricating Wage Data

    While it’s not the first time we have observed the BLS manipulate data (the last time was in “This Is What Happens When The Bureau Of Labor Statistics Is Caught In A Lie“), never before had we actually caught the Bureau Of Labor Statistics openly fabricating data. Until now.

    As reported earlier today, in one of the most closely watched statistics in today’s payrolls report, the BLS reported that the annual increase in Average Weekly Earnings was a whopping 2.9%, above the 2.5% expected, and above the 2.5% reported last month. On the surface this was a great number, as the 2.9% annual increase – whether distorted by hurricanes or not – was the highest since the financial crisis.

    However, a problem emerges when one looks just one month prior, at the revised August data.

    What one sees here, as Andrew Zatlin of South Bay Research first noted, is that while the Total Private Average Weekly Earnings line posted another solid increase of 0.2% month over month, an upward revision from the previous month’s 0.1%, when one looks at the components, it become clear that the BLS fabricated the numbers, and may simply hard-coded its spreadsheet with the intention of goalseeking a specific number.

    Presenting Exhibit 1: Table B-3 in today’s jobs report. What it shows is that whereas there was a sequential decline in the Average Weekly Earnings for Goods Producing and Private Service-producing industries which are the only two sub-components of the Total Private Line (and are circled in red on the table below) of -0.8% and -0.1% respectively, the BLS also reported that somehow, the total of these two declines was a 0.2% increase!

    Another way of showing the July to August data:

    • Goods-Producing Weekly Earnings declined -0.8% from $1,118.68 to $1,109.92
    • Private Service-Providing Weekly Earnings declined -0.1% from $868.80 to $868.18
    • And yet, Total Private Hourly Earnings rose 0.2% from $907.82 to %909.19

    What the above shows is, in a word, impossible: one can not have the two subcomponents of a sum-total decline, while the total increases. The math does not work.

    This, as Zatlin notes, undermines not only the labor inflation narrative, but it puts into question the rest of the overall labor data, and whether there are other politically-motivated, goalseeked  “spreadsheet” errors.

    We have sent an email to the BLS seeking an explanation for the above data fabrication, meanwhile here is what likely happened: a big, juicy fat-finger error, whether on purpose or otherwise because if one looks at the finalized July weekly earnings of $907.82, it’s precisely the same as what the August preliminary wage number was as released last month, also $907.82.  For the excel fans out there, it means that the August totals were simply hard coded when the BLS shifted cells in the spreadsheet, becoming July.

    Of course, if the BLS confirms that this was a transposition fat finger error, it would also imply that the August number is in fact, the September data, a rather massive mistake which today has had a impact on trillions dollars worth of assets.

    Source: BLS

Digest powered by RSS Digest

%d bloggers like this: