Today’s News November 29, 2015

• How A Secretive Elite Created The EU To Build A World Government

  Authored by Professor Alan Sked – original founder of UKIP, via The Telegraph,

  Voters in Britain's referendum need to understand that the European Union was about building a federal superstate from day one

  As the debate over the forthcoming EU referendum gears up, it would be wise perhaps to remember how Britain was led into membership in the first place. It seems to me that most people have little idea why one of the victors of the Second World War should have become almost desperate to join this "club". That's a shame, because answering that question is key to understanding why the EU has gone so wrong.

  Most students seem to think that Britain was in dire economic straits, and that the European Economic Community – as it was then called – provided an economic engine which could revitalise our economy. Others seem to believe that after the Second World War Britain needed to recast her geopolitical position away from empire, and towards a more realistic one at the heart of Europe. Neither of these arguments, however, makes any sense at all.

  The EEC in the 1960s and 1970s was in no position to regenerate anyone’s economy. It spent most of its meagre resources on agriculture and fisheries and had no means or policies to generate economic growth.

  When growth did happen, it did not come from the EU. From Ludwig Erhard's supply-side reforms in West Germany in 1948 to Thatcher's privatisation of nationalised industry in the Eighties, European growth came from reforms introduced by individual countries which were were copied elsewhere. EU policy has always been either irrelevant or positively detrimental (as was the case with the euro).

  Nor did British growth ever really lag behind Europe's. Sometimes it surged ahead. In the 1950s Western Europe had a growth rate of 3.5 per cent; in the 1960s, it was 4.5 per cent. But in 1959, when Harold Macmillan took office, the real annual growth rate of British GDP, according to the Office of National Statistics, was almost 6 per cent. It was again almost 6 per cent when de Gaulle vetoed our first application to join the EEC in 1963.

  In 1973, when we entered the EEC, our annual national growth rate in real terms was a record 7.4 per cent. The present Chancellor would die for such figures. So the economic basket-case argument doesn’t work.

  What about geopolitics? What argument in the cold light of hindsight could have been so compelling as to make us kick our Second-World-War Commonwealth allies in the teeth to join a combination of Belgium, the Netherlands, Luxembourg, France, Germany and Italy?

  Four of these countries held no international weight whatsoever. Germany was occupied and divided. France, meanwhile, had lost one colonial war in Vietnam and another in Algeria. De Gaulle had come to power to save the country from civil war. Most realists must surely have regarded these states as a bunch of losers. De Gaulle, himself a supreme realist, pointed out that Britain had democratic political institutions, world trade links, cheap food from the Commonwealth, and was a global power. Why would it want to enter the EEC?

  

  The answer is that Harold Macmillan and his closest advisers were part of an intellectual tradition that saw the salvation of the world in some form of world government based on regional federations. He was also a close acquaintance of Jean Monnet, who believed the same. It was therefore Macmillan who became the representative of the European federalist movement in the British cabinet.

  In a speech in the House of Commons he even advocated a European Coal and Steel Community (ECSC) before the real thing had been announced. He later arranged for a Treaty of Association to be signed between the UK and the ECSC, and it was he who ensured that a British representative was sent to the Brussels negotiations following the Messina Conference, which gave birth to the EEC.

  In the late 1950s he pushed negotiations concerning a European Free Trade Association towards membership of the EEC. Then, when General de Gaulle began to turn the EEC into a less federalist body, he took the risk of submitting a full British membership application in the hope of frustrating Gaullist ambitions.

  His aim, in alliance with US and European proponents of a federalist world order, was to frustrate the emerging Franco-German alliance which was seen as one of French and German nationalism.

  

  The French statesman Jean Monnet, (1888 – 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe

  Monnet met secretly with Heath and Macmillan on innumerable occasions to facilitate British entry. Indeed, he was informed before the British Parliament of the terms in which the British approach to Europe would be framed.

  Despite advice from the Lord Chancellor, Lord Kilmuir, that membership would mean the end of British parliamentary sovereignty, Macmillan deliberately misled the House of Commons — and practically everyone else, from Commonwealth statesmen to cabinet colleagues and the public — that merely minor commercial negotiations were involved. He even tried to deceive de Gaulle that he was an anti-federalist and a close friend who would arrange for France, like Britain, to receive Polaris missiles from the Americans. De Gaulle saw completely through him and vetoed the British bid to enter.

  Macmillan left Edward Heath to take matters forward, and Heath, along with Douglas Hurd, arranged — according to the Monnet papers — for the Tory Party to become a (secret) corporate member of Monnet’s Action Committee for a United States of Europe.

  According to Monnet’s chief aide and biographer, Francois Duchene, both the Labour and Liberal Parties later did the same. Meanwhile the Earl of Gosford, one of Macmillan’s foreign policy ministers in the House of Lords, actually informed the House that the aim of the government’s foreign policy was world government.

  Monnet’s Action Committee was also given financial backing by the CIA and the US State Department. The Anglo-American establishment was now committed to the creation of a federal United States of Europe.

  Today, this is still the case. Powerful international lobbies are already at work attempting to prove that any return to democratic self-government on the part of Britain will spell doom. American officials have already been primed to state that such a Britain would be excluded from any free trade deal with the USA and that the world needs the TTIP trade treaty which is predicated on the survival of the EU.

  Fortunately, Republican candidates in the USA are becoming Eurosceptics and magazines there like The National Interest are publishing the case for Brexit. The international coalition behind Macmillan and Heath will find things a lot more difficult this time round — especially given the obvious difficulties of the Eurozone, the failure of EU migration policy and the lack of any coherent EU security policy.

  Most importantly, having been fooled once, the British public will be much more difficult to fool again.

  

  

  

  

  

• The Bitcoin Universe Explained

  As evidenced by the Greek, Chinese, and now Argentine 'jumps', the world remains increasingly aware of the inevitable worth of fiat currencies and fears the desperate acts of governments as the react to that reality (and is looking for alternatives).

  

   

  This infographic explains the wide ranges of the Bitcoin universe, accompanied with quotes from some of its best-known business leaders.

   

  

  Courtesy of: Visual Capitalist

   

  So from miners to merchants, the Bitcoin universe continues to expand dramatically as we noted previously, "There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency."

  

  

  

  

  

• Guest Post: A Hybrid War To Break The Balkans?

  Submitted by Andrew Korybko via OrientalReview.org,

  In the spirit of the New Cold War and following on its success in snuffing out South Stream, the US has prioritized its efforts in obstructing Russia’s Balkan Stream pipeline, and for the most part, they’ve regretfully succeeded for the time being. The first challenge came from the May 2015 Color Revolution attempt in Macedonia, which thankfully was repulsed by the country’s patriotic citizenry. Next up on the destabilization agenda was the political turmoil that threatened to take hold of Greece in the run-up and aftermath of the austerity referendum, the idea being that if Tsipras were deposed, then Balkan Stream would be replaced with the US-friendly Eastring project. Once more, the Balkans proved resilient and the American plot was defeated, but it was the third and most directly antagonist maneuver that snipped the project in the bud and placed it on indefinite standby.

  ‘Lucky’ Number Three:

  The climactic action happened on 24 November when Turkey shot down a Russian anti-terrorist bomber operating over the Syrian skies, and the nascent project became a victim of the predictable chain reaction of political deterioration between both sides. Given how obvious it was that energy cooperation would be one of the casualties of simmering Russian-Turkish tensions, it stands to reason that the US purposely egged Turkey on in order to provoke this domino reaction and scuttle Balkan Stream. Be that as it may (and it surely looks convincing enough to be the case), it doesn’t mean that the project is truly canceled, as it’s more strategically accurate to describe it as temporarily shelved. Russia understandably doesn’t want to enhance the position of a state that’s proven itself to be so blatantly aggressive against it, but this feeling extends only towards the present government and in the current context. It’s certainly conceivable that a fundamental shift in Turkey’s position (however unlikely that may appear in the short-term) could lead to a détente of sorts that resurrects the Balkan Stream, but a more probable scenario would be if the disaffected masses and/or distraught military representatives overthrew the government.

  Turkish Reversal?:

  Both of these possibilities aren’t that improbable when one takes note of the growing resentment to Erdogan’s rule and the precarious position he’s placed the armed forces in. It’s well-known how dissatisfied a significantly growing mass of Turks have become (especially amidst an ever-growing Kurdish Insurgency), but what’s less discussed is the strategically disadvantageous situation facing the military right now. As the author wrote about in October, the Turkish forces are spread thin between their anti-Kurdish operations in the broad southeast, securing the heartland from ISIL and extreme left-wing terrorist attacks, occasional interventions in Northern Iraq, and remaining on alert along the Syrian border. This state of affairs is already almost too much for any military to handle, and one of the last things that its responsible leaders need right now is to balance against an imaginary and completely unnecessary Russian ‘threat’ cooked up by Erdogan. This pressure might prove to be too much for them, and in the interests of national security and properly fulfilling their constitutional role in safeguarding the territorial integrity of the state, they might band together in overthrowing him in spite of the systemic changes he’s enacted in the past decade to defend against such an event.

  The Path Forward:

  There’s a very real chance that Balkan Stream will be unfrozen and the project allowed to move forward one day, as it’s too strategically important for Russia, and even Turkey, to be kept on the backburner indefinitely. It’s entirely possible that an internal political change will take place in Turkey, be it in the mindset of the current leadership or more likely with the installment of a new revolutionary/coup government, meaning that it’s much too premature for Russia or the US to give up on their respective policies towards Balkan Stream. Therefore, both Great Powers are proceeding forward with a sort of geopolitical insurance strategy, and in each case, it’s centered on China’s Balkan Silk Road. From the American perspective, the US needs to continue unabated with the destabilization of the Balkans, since even if the Russian project is successfully stopped, then it still needs to do the same thing to China’s. So long as the Balkan Silk Road continues to be built, then Russia will retain a multipolar magnet through its premier strategic partner on which it can concentrate the influence that it’s cultivated thus far. In the event that Balkan Stream is unfrozen, then Russia can immediately jump back into the mix as if it never left and rejoin strategic forces with its Chinese ally like it originally planned, and this nightmare scenario is why the US is resorting to Hybrid War in its desperate bid to destroy the Balkan Silk Road.

  

   

  As has already been similarly mentioned, the Russian approach is to focus more on the economic, military, and political diversifications that were supposed to accompany the energy-based physical infrastructure it was planning to build. Instead of the gas pipeline forming the spine of a New Balkans, it looks as though the Balkan Silk Road high-speed rail will take this role instead, but either way, there’s a multipolar megaproject that acts as a magnet for Russian influence. In the present configuration, Russia has relatively less influence in directly deciding the course of the infrastructure’s construction, but at the same time, it becomes indispensable to China. Beijing has close to no preexisting ties with the Balkans outside of purely economic relations (and even those are relatively new), so Russia’s privileged involvement in supporting the project and investing along the Balkan Silk Road route (which was supposed to run parallel with the Balkan Stream and bring in the said investment anyhow) helps to reinforce regional and local support for it by presenting a friendly and familiar face that decision makers are already accustomed to working with. It’s not to suggest that China can’t build the project on its own or that there isn’t legitimate support in the Balkans for such an initiative, but that Russia’s front-row participation in it reassures the local elite that a civilizationally similar and ultra-influential partner is there alongside them and is also placing visibly high stakes in the process out of a show of confidence in its hopeful success.

  Beijing Is The Balkans’ Last Hope

  It’s thus far been established that the Russian-Chinese Strategic Partnership intended to revolutionize the European continent with an infusion of multipolar influence along the Balkan Corridor, which was supposed to support Balkan Stream and the Balkan Silk Road. Regretfully, however, the US has temporarily succeeded in putting the brakes on Balkan Stream, thus meaning that the Balkan Silk Road is the only presently viable multipolar megaproject envisioned to run through the region. On that account, it’s China, not Russia, which is carrying the torch of multipolarity through the Balkans, although Beijing is of course partially depending on Russia’s established influence there to help secure their shared geostrategic objective and assist in making it a reality. At any rate, the Balkan Silk Road is arguably more important than the Balkan Stream for the time being, and as such, it’s worthy to pay extra attention to its strategic details in order to better grasp why it represents the Balkans’ last multipolar hope.

  Institutional Foundation:

  The concept for the Balkan Silk Road was a couple of years in the making, and it owes its genesis to China’s One Belt One Road (“New Silk Road”) policy of constructing worldwide connective infrastructure. This endeavor was thought up in order to solve the dual problems of creating opportunities for Chinese outbound investment and complementarily assisting geostrategic regions in their liberating quest to achieve multipolarity. Relating to the area under study, the Balkan Silk Road is the regional manifestation of this ideal, and it’s actually part of China’s broader engagement with the Central and Eastern European countries.

  The format for their multilateral interaction was formalized in 2012 under the first-ever China and Central and Eastern European Countries (China-CEEC) Summit in Warsaw, and the event two years later in Belgrade produced the idea for a Budapest-Belgrade-Skopje-Athens high-speed rail project (the author’s colloquial description of which is the Balkan Silk Road) aimed at deepening both sides’ economic interconnection. The 2015 Summit in Suzhou produced a medium-term agenda for 2015-2020, which among other things, proposes the creation of a joint financing firm to supply credit and investment funds for this and other projects. It also officially described the Balkan Silk Road as being the “China-Eurasia Land-Sea Express Line” and suggested that it be integrated into the New Eurasian Land Bridge Economic Corridor sometime in the future, implying that Beijing would like to see the countries cooperative more pragmatically with Russia (first and foremost in this case, Poland). Importantly, Xinhua reported that the participants agreed to complete the Budapest-Belgrade stage of the project by 2017.

  Strategic Context:

  What all of this means is that China has accelerated its diplomatic, economic, and institutional relations with Central and Eastern Europe in the space of only a couple of years, astoundingly becoming a premier player in a region located almost half the world away from it and partially a formal component of the unipolar bloc. This can be explained solely by China’s attractive economic appeal to the CEEC that transcends all sorts of political boundaries, as well as to the complementary ambition that the East Asian supergiant has in deepening its presence worldwide. Together, these two factors combine into a formidable component of China’s grand strategy, which strives to use inescapable economic lures in leading its partners (especially those representing the unipolar world) along the path of tangible geopolitical change over a generational period. To refer back to the Balkan Silk Road, this represents Beijing’s primary vehicle in achieving its long-term strategy, and the geo-economic rationale for how this is anticipated to function will be explained in the below section. Before proceeding however, it’s relevant to recall what was referenced earlier about the US’ hegemonic imperatives, since this explains why the US is so fearful of China’s economic engagement with Europe that it plans to go as far as concocting destructive Hybrid Wars to stop it.

  Geo-Economic Underpinnings:

  The geo-economic justification for the Balkan Silk Road is evident, and it can be easily explained by examining the larger Central and Eastern European area that it’s envisioned to connect. The Southeastern European peninsula directly segues into each of these two regions, and the Hungarian hub of Budapest is geographically located in the center of this broad space. As it presently stands, there’s no reliable north-south corridor linking Hungary and the markets around it (namely Germany and Poland) to the Greek Mediterranean ports, thus meaning that Chinese maritime trade with these leading economies must physically circumnavigate the breadth of the entire European peninsula. The Balkan Silk Road changes all of that and cuts out days of unnecessary shipping time by bringing Central and Eastern European goods to the Greek port of Piraeus and within convenient reach of Suez-crossing Chinese vessels. This saves on time and money, thus making the route more profitable and efficient for all parties involved.

  In the future, the Central and Eastern European economies could ship their goods through Russia en route to China via the Eurasian Land Bridge, but while that might be beneficial from the perspective of producer-to-consumer relations, it’s hardly advantageous for resellers who plan on re-exporting the said goods elsewhere in the world. To take advantage of the dynamic economic developments currently underway in East Africa and South Asia (be it in selling to those markets or in physically building up a presence there), it’s best for either party’s entrepreneurial actors to connect with one another at a maritime node that enables them to efficiently and quickly load or offload their predetermined transshipped goods. Geo-economically speaking, there’s no better place for this than Piraeus, as it’s the closest European mainland port to the Suez Canal which needs to be traversed in order to access the aforementioned destinations, with or without any transshipping involved (i.e. if EU entrepreneurs decide to directly export their goods there and not use a Chinese middleman).

  In order to connect to Piraeus, the high-speed rail corridor known as the Balkan Silk Road is an infrastructural prerequisite, and its successful completion would lead to a significant sum of European trade being profitably redirected towards China and other booming non-Western locations like India and Ethiopia. The US fears losing its position as the EU’s top trading partner, knowing that the slippery strategic slope that could soon follow might lead to the rapid unraveling of its hegemonic control. Viewed from the reverse perspective, the Balkan Silk Road is the EU’s last hope for ever having a multipolar future independent of total American control, which is why it’s so geopolitically necessary for Russia and China to see the project completed. The inevitable New Cold War clash that this represents and the extraordinarily high stakes that are involved mean that the Balkans will remain one of the main flashpoints in this dangerous proxy struggle, despite the hierarchical switch of its multipolar protagonists.

  

  

  

  

  

• Threats

  With the global climate talks in Paris set to begin this week, perhaps the ‘real threat’ will re-emerge…

   

  

   

  Source: Investors.com

  

  

  

  

  

• Fourth Turning – Social & Cultural Distress Dividing The Nation

  Submitted by Jim Quinn via The Burning Platform blog,

  I wrote the first three parts of this article back in September and planned to finish it in early October, but life intervened and truthfully I don’t think I was ready to confront how bad things will likely get as this Fourth Turning moves into the violent, chaotic war stage just over the horizon.

  The developments in the Middle East, Europe, U.S., China and across the globe in the last months have confirmed my belief war drums are beating louder, global war beckons, and much bloodshed will be the result. Fourth Turnings proceed at their own pace within the 20 to 25 year crisis framework, but there is one guarantee – they never de-intensify as they progress. Just as Winter gets colder, stormier and more bitter as you proceed from December through February, Fourth Turnings get nastier, grimmer, more perilous, with our way of life hanging in the balance.

  In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I focused on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis. In Part 4 I will assess the social and cultural channels of distress dividing the nation, Part 5 the technological, ecological, political, military channels of distress likely to burst forth with the molten ingredients of this Fourth Turning, and finally in Part 6 our rendezvous with destiny, with potential climaxes to this Winter of our discontent.

  

  The road ahead will be distressful for everyone living in the U.S., as we experience the horrors of war, economic collapse, civil chaos, political upheaval, and the tearing of society’s social fabric. The pain and suffering being experienced across the globe today will not bypass the people of the United States. Winter has arrived and lethal storms are gathering in the distance. Don’t think you can escape. You can prepare, but this Crisis will reshape our society for better or worse, and you cannot sidestep the consequences or cruel environment we must survive.

  “Reflect on what happens when a terrible winter blizzard strikes. You hear the weather warning but probably fail to act on it. The sky darkens. Then the storm hits with full fury, and the air is a howling whiteness. One by one, your links to the machine age break down. Electricity flickers out, cutting off the TV. Batteries fade, cutting off the radio. Phones go dead. Roads become impossible, and cars get stuck. Food supplies dwindle. Day to day vestiges of modern civilization – bank machines, mutual funds, mass retailers, computers, satellites, airplanes, governments – all recede into irrelevance. Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – Strauss & Howe – The Fourth Turning

  Social Distress

  The vast and growing Grand Canyon sized gap between the haves and have nots, and the societal implications of an elitist uber-wealthy minority capturing the levers of our economic, financial, and political systems, using that control to further enrich themselves at the expense of the isolated working class, can be clearly understood by following the dialogue between three billionaires chatting on stage at a conference thrown by a convicted Wall Street criminal.

  Sheryl Sandberg: “Yeah, so let’s follow up on a bunch of the things we were talking about. Let’s start with income inequality.”

  Hank Paulson: “Ok, well.. income inequality. I think this is something we’ve all thought about. You know I was working on that topic when I was still at Goldman Sachs..”

  Robert Rubin: “In which direction? You were working on increasing it.”

  Hank Paulson then bursts out laughing: “Yeah! We were making it wider!”

  

  Paulson and Rubin spent vast portions of their lives working for the vampire squid on the face of America – Goldman Sachs. This firm represents everything wrong with our social order, as they use all means (legal or illegal) to enrich themselves, whether it be back stabbing clients, double crossing partners, eviscerating vulnerable competitors, robbing the poor, rigging markets, buying influence, placing executives in the highest levels of government, or screwing the taxpayer when their risky gambles blow up the world. Paulson and Rubin are the perfect representatives of the .1% ruling class who protect their interests and the interests of their crony capitalist colleagues at all costs. They truly believe they are shrewder, more astute, cleverer, deserving of the billions they have absconded through rigging the markets, should be running the country behind the scenes, and merit the worship of the lowly peasantry.

  The gap between the richest 1% and the bottom 90% has never been wider in history. The previous largest gap occurred in 1929, at the start of the last Fourth Turning. When the real median household income hasn’t advanced in the last 26 years and men’s real wages are where they were in 1971, while CEOs of S&P 500 companies make 331 times their workers and Wall Street hedge fund managers make billions while paying no taxes, you have building anger, disillusionment and calls for retribution.

  Some people are waking up to the fact the Ben Bernanke led Federal Reserve and the Hank Paulson/Tim Geithner led Treasury saved their buddies on Wall Street while throwing the people on Main Street under the bus. When Wall Street’s leveraged risk bets pay off, they reap all the riches – as is happening today. When their colossal wagers go bad, the propaganda about systematic failure is rolled out and the American people are stuck with the losses. The goal has always been to revive the stock market and make sure the Wall Street banks continue to generate billions in profits, while leaving the taxpayer on the hook for their failed bets.

  

  The OWS and Tea Party were both grass roots initiated movements as a societal response to the distress created by Wall Street and their government crony cohorts. The Wall Street banks colluded with DHS and captured politicians of both parties to crush OWS and subvert the Tea Party. The Deep State’s success in squashing dissent from what they considered the lowly peasants has only been temporarily papered over by the $10 trillion of debt issued to keep the masses sedated, deluded and ignorant about the true nature of the ongoing crisis. The storyline about the 1% is misleading, as many people in the 1% are small business owners, doctors, and professional workers. The true story is the exponential wealth increase of the .1% over the last 35 years as the financialization of the economy has enriched psychopathic, highly educated men who produce nothing but misery, debt, and ultimately social unrest.

  

  Decomposing the 1% reveals the top .1% increasing their share of the national wealth from less than 9% in 1980 to over 21% today. These are the corporate CEO’s buying back their company stock at all-time highs in order to boost their stock based compensation, Wall Street executives who committed the largest control fraud in world history while unabashedly flaunting laws & regulations, hedge fund managers who manipulate and rig the markets while paying no taxes on their billion dollar profits, and billionaire cronies who profit from the military industrial complex and sick care complex by paying off politicians to write laws in their favor and funnel government contracts to them. The sacking and pillaging of the nation’s wealth by psychopaths who are never satisfied with their current vast level of riches, power and control, exposes itself in the tremendous recovery on Wall Street and the ongoing depression on Main Street.

  A simmering rage is bubbling below the surface as 20% of American households rely on food stamps to survive, the percentage of Americans in the labor force stands at a four decade low, real household income remains stagnant at 1988 levels, corporate profits have reached record levels while corporations continue to fire Americans – shipping their jobs overseas, and the six mega-corporations representing the mainstream media cover up the truth, mislead the public with propaganda, while celebrating the .1% as saviors of our economy. There is nothing more volatile to societal stability than millions of unemployed men, growing angry and resentful towards the ruling class for their lot in life.

  

  The vast gulf between the haves and have nots will fuel further violence between the classes, as our fraying society is already seething with anger between races, religions, political parties, and genders. The increasingly brutal police state, militarization of local police forces, shaking down of citizens through fines, and unlawful surveillance of our electronic communications, will lead to a backlash against police.

  The Black Lives Matter movement, begun after a number of police brutality incidents against black men, has been hijacked by politically motived race baiters and is exacerbating tensions between blacks and whites. The false storyline perpetuated by the media disregards the fact blacks, who represent 13% of the population, commit 22% of all violent crimes and 93% of black shooting victims are shot by other blacks. The white population, abiding by laws, is getting sick of being blamed for the gun violence and lawlessness in liberal ghetto bastions like Chicago, Detroit, Baltimore, St. Louis and Philadelphia.

  Cultural Distress

  

  Even though the vast majority of gun related crimes happen in urban ghettos and the much publicized mass shootings are committed by mentally deranged young men on psychotropic drugs, liberal control freak politicians use scare tactics and misinformation in their effort to grab the guns of law abiding Americans living in rural regions. It is the elitist hypocrite politicians living on the coasts, protected by armed guards, who want to eviscerate the 2^nd Amendment, and think it is fine for the 4^th Amendment to be disregarded by police thugs across the land. Disarming the citizenry is essential to implementing a dictatorial regime. The race wars have intensified, as the Black Lives Matter meme has spread to college campuses in Missouri and in the hallowed Ivy League at Yale and Princeton.

  The bullying tactics of the pampered participation trophy generation of entitled millennials, being misled by social justice warrior ideologues, is fueling a backlash by older generations who studied, worked hard, obtained useful college degrees, repaid their student loans, and didn’t use race, gender, or micro-aggressions as excuses when they failed. College campuses, which once championed free speech and free thought, have now become bastions of censorship, left wing ideology, suppression of opinion, shouting down of dissent, thought control, and subduing the rights of the majority for the benefit of an outraged minority who resort to violent rhetoric to achieve their outcomes.

  Institutions of higher education have become nothing more than glorified daycare centers for kids who never grew up, learned personal responsibility, or developed critical thinking skills. The feckless college faculty and administrators have allowed financial considerations to override learning, as the curriculum has been dumbed down to meet the degraded capabilities of their high self-esteem/low intelligence students. The reality of an increasingly brutal economic environment and high likelihood of war is about to crash headlong into the coddled, pampered, parent protected, iGadget, facebook worlds of millions of millennials.

  They will be nothing but cannon fodder for the Deep State unless they develop a backbone, start thinking critically about what is happening in this world, start dealing with reality, stop trusting the government to save them, and make a stand against the corporate fascist tyranny consuming our nation. The Peter Pan Syndrome, where people with the body of an adult but the mind of a child, increasingly dominate the landscape, as a larger number of supposed adults exhibit emotionally immature behaviors. The self-neutering of young men is the result of twelve years of feminist social engineering in government controlled public schools. The wussificiation is complete.

  The combination of social justice warriors, pushing agendas completely out of step with mainstream Americans, and a dying legacy media providing infotainment disguised as news, fuels further cultural distress from coast to coast. With liberalism rampant and dominant on the coasts and conservatism governing the heartland, the cultural divide in the country is a gaping chasm. Average Americans trying to live their lives, pay their bills, and raise families have no strong opinions about gay marriage, men dressing like women, or other deviant behavior performed by consenting adults in the privacy of their own households. But when the liberal media, social justice warriors, and Hollywood elites shove the “right” to gay marriage, the crucifying of people for their religious beliefs, the “courage” of a man pretending to be a woman, and the glorification of abhorrent behavior, down the throats of Americans trying to mind their own business, an unforeseen backlash is inevitable.

  The war on the traditional family unit, white males, societal norms, common decency, and community standards has gone too far and the pushback from common decent middle class folks has begun. It is a proven fact that households with married parents are on average wealthier, raise kids who do better in school, can withstand economic setbacks better, and have been the backbone of this country since its inception. The feminist belief that women can raise children without men has proven to be a disaster.

  With the percentage of married households plunging from over 70% in 1970 to under 50% today, an ominous tipping point has been reached. Rather than address this truly disastrous problem, the radical feminists and race baiters carry on their culture wars. The social justice warriors, prodded by the liberal media and agenda driven ideologues, are offended by free speech, white people, men, married couples, religious freedom, having to repay loans, gun owners, capitalism, carbon dioxide, meat, yoga and anyone who dares to disagree with their antagonistic, bombastic, vacuous nonsense.

  Shockingly, they aren’t offended by the tattooed, pierced freaks roaming the streets, angry because no one will hire them. They aren’t offended by the millions of willfully ignorant, low class army of lazy Obama voters who feel entitled to free housing, free medical care, free food, free phones, and free education at the expense of the working middle class. They aren’t offended by the 70% of black babies born out of wedlock and black men shirking their responsibilities as fathers. They aren’t offended by the rampant criminality and murder rates in the Democrat controlled urban ghettos, created by the welfare policies implemented over the last 50 years.

  They aren’t offended by 93% of black murders being committed by blacks. They aren’t offended by a president droning wedding parties and bombing hospitals, while fighting undeclared wars in foreign lands. They aren’t offended by the widespread Medicare, SSDI, and food stamp fraud, costing taxpayers billions per year. Normal people living normal lives are sick and tired of the hypocritical, hollow horseshit rubbed in their faces by a dying legacy media and agenda driven social networks on a daily basis. The foolishness and lunacy of these feckless feeble minded warriors against normalcy will be exposed when confronted by the harsh reality of a Fourth Turning.

  The rise of Donald Trump and Ben Carson in the early polls for Republican presidential candidate is being fueled by a rising anger and discontent with the corporate media promoting offensive social agendas, the flaunting of the Constitution by a president ruling by executive order, a GOP establishment corrupted by power and unanswerable to their constituents, the disinterest of politicians in both parties in securing our porous southern borders from foreign invasion by illegal hordes. Now the repercussions of Obama ignoring the threats of Islamic extremism and allowing tens of thousands of undocumented Syrian refugees to flood into the country immediately overwhelming our insolvent welfare system and refusing to assimilate into our culture as they worship at mosques where they are taught to hate everything about American culture, is further fueling a political backlash.

  As Aldous Huxley realized six decades ago, the truth is unimportant to those controlling the “free” press and shallow distractions will keep the masses occupied while the controllers achieve their goals.

  “In regard to propaganda the early advocates of universal literacy and a free press envisaged only two possibilities: the propaganda might be true, or it might be false. They did not foresee what in fact has happened, above all in our Western capitalist democracies — the development of a vast mass communications industry, concerned in the main neither with the true nor the false, but with the unreal, the more or less totally irrelevant. In a word, they failed to take into account man’s almost infinite appetite for distractions.” – Aldous Huxley, 1958, in the article The Capitalist Free Press

  The media will use their standard propaganda techniques of showing crying women and children to tug at the heartstrings of a naïve, unaware populace to allow refugees from a conflict created by the U.S. in Syria to come into our country. You know the tired rhetoric – give us your tired, your poor, your huddled masses yearning to breathe free. But this is a Fourth Turning where the harsh reality crashes headlong into rhetoric, memes, and storylines.

  Whether the U.S. government is responsible or not for creating the wave of Islamic radicals practicing their warped religious beliefs across the globe by committing murder against innocent people, the fact remains that only Muslims are waging this war against non-believers. There are no Catholics, Baptists, Lutherans, Jews, Buddhists, or atheists spreading their religious beliefs by committing acts of terror or waging war. A religious war is brewing and the consequences will be far reaching and bloody for those practicing Islam. There may be only a small minority of radical jihadists, but the silence of the majority speaks volumes to non-Muslims around the world.

  As this Fourth Turning continues to intensify, the bowing down to political correctness and agendas of social justice warrior bigots by traditional minded Americans is going to stop. The pushback may be violent, as the aggressive tactics of these free speech hating fascists is met with armed confrontation they aren’t anticipating. These “warriors” aren’t exactly the Hero generation who did the heavy lifting during the last Fourth Turning. Privileged, entitled, ignorant millennials bullying weak kneed college professors and milquetoast administrators on the campuses of liberal arts colleges isn’t exactly storming the beaches of Normandy or battling through the jungles on Guadalcanal.

  When confronted with Americans who have seen their standard of living falling for the last twenty five years and are sick and tired of hearing drivel about white privilege, black lives matter, safe spaces, gay and transgender “rights”, micro-aggressions, rape culture, misogyny, $15 minimum wage, and a myriad of other offenses against feminism, these easily offended “warriors” will piss their pants. These trivialities will seem so quaint when they are confronted with an angry guy with a gun on the streets or when they are told to report for duty as we wage war with Russia and China. The foolishness of the culture wars will become strikingly apparent when economic collapse and life or death choices confront our special snowflake generation.

  

  

  

  

  

  

• If Black Friday Was A Movie

  Put aside 4 minutes of your day to poke some fun at America’s leading religion: Consumerism.

   

   

  h/t Liberty Blitzkrieg

  

  

  

  

  

• Can The Oil Industry Really Handle This Much Debt?

  Submitted by Ekaterina Pokrovskaya via Oilprice.com,

  As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects.

  High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt.

  

   

  Throughout the oil price upturn that lasted until the middle of 2014, companies sold shares and assets and borrowed cash to increase production and add to their reserves. According to the data compiled by FactSet, shared with the Financial Times, the aggregate net debt of U.S. oil and gas production companies more than doubled from $81 billion at the end of 2010 to $169 billion by this June

  In the first half of 2015, U.S. shale producers reported a cash shortfall of more than $30 billion. The U.S. independent oil and gas producers’ capital expenditures exceeded their cash from operations by a deficit of over $37 billion for 2014.

  In July – September 2015, after a couple months of a rebound, a further slump in crude futures prices fluctuated between $39-47/bbl, thus putting more strain on the oil-and-gas producers, and making them feel an even tighter squeeze.

  As The Wall Street Journal reported in August, Exxon Mobil Corp. and Chevron Corp. stated they were cutting stock-buyback programs, while Linn Energy LLC announced it would stop paying dividends to its shareholders. Meanwhile, several small U.S. oil and gas producers have filed for chapter 11 bankruptcy protection this year. Companies with persistently negative free cash flow fall into the trap of borrowing, as they have to incur more debt to repay what they have already borrowed before. This makes such companies vulnerable to default and bankruptcy.

  As shared by Edward Morse, Citigroup Global Head of Commodities Research with Oilprice.com, smaller independent U.S. E&P companies are in the worst position now: they are already highly leveraged and are trying to use increased leverage while having to bear high debt pressure.

  “They also are in the worst cash flow positions of all of the E&P firms per barrel of liquids production relative to the larger and even the mid-cap firms. However, they also tend to account for a much smaller share of overall production. For example, the large North American E&P companies produce around 5.0-million b/d of oil; mid-sized firms produce just short of 1-m b/d. But the small and smallest U.S. E&Ps combined produce only 500-k b/d, 100k b/d of which comes from the smallest U.S. firms,” stated Morse .

  The chart from the U.S. Energy Information Administration below, based on second-quarter results from 44 U.S. oil-and-gas companies, demonstrates the rising share of the companies’ operating cash flow used to service debt.

  For the previous four quarters from July 1, 2014 to June 30, 2015, 83 percent of these companies' operating cash had been spent on debt repayments, the highest since at least 2012.

  

  Source: U.S. Energy Information Administration, based on Evaluate Energy
  Note: Each quarter represents a rolling four-quarter sum.

  Debt Worries for Small Companies

  According to Forbes, among U.S. E&P companies ranking high on the verge of bankruptcy are Goodrich Petroleum (GDP), Swift Energy (SFY), Energy XXI (EXXI), Halcon Resources (HK) among others. “These companies have all lost more than 90 percent of their market value since 2014, are larded up with too much debt, and would be lucky to survive the bust,” Forbes wrote.

  According to FINRA data cited by Forbes, the yield of Goodrich’s issue of 2012 bonds for U.S. $275 million jumped up to 58.66 percent from 8.88 percent during trade sessions this August. The Goodrich’s stock that previously sold at $29 in June 2014 traded at 88 cents. The company has a high leverage ratio (debt to EBITDA): in the first half of 2015, the company’s revenues amounted to U.S. $50 million while its interest expense on servicing of a long-term loan of U.S. $622 million was $27 million.

  Energy XXI (EXXI) is snowed under in $4.6 billion in debt. As Forbes reported, the company was negotiating terms for extending maturities on their bonds with creditors; it also managed to find an investor who bought another U.S. $650 million worth of debt from EXXI.

  Another company staggering under a heavy debt load is Swift Energy (SFY). According to Forbes, Swift’s equity market capitalization is $27 million against long-term debt of $1.1 billion. As The Wall Street Journal reported in July, the company was trying to find an investor to come up with funds to repay loans by issuing a $640 million bond.

  Halcon Resources (HK) is also on the brink of insolvency. 40 percent of Halcon Resource’s revenues this year have been expended on making interest payments on its U.S. $3.7 billion debt. The company did two equity-for-debt swaps earlier this year, and sold more debt for U.S. $700 million, Forbes reported.

  As Virendra Chauhan, Oil Analyst at Energy Aspects discussed with Oilprice.com, the smaller independent U.S. producers are the ones taking the most risk, particularly the ones that have been outspending cash flows quarter-on-quarter for the better part of the last three years. “The debt maturities vary, but the key factor is an over 50 percent fall in oil prices. Whilst costs have come down, they are no way near 50 percent; and so the reliance on external funding, be it through, debt, equity, asset sales or by other means, has increased, which is certainly impacting investor sentiment,” he said.

  Hedges Expiring

  Although quite a few U.S. shale oil producers have reported substantial increases in their productivity per well drilled, the amount of rigs drilling for oil in the U.S. has dropped by 59 percent since its peak in October 2014, according to the EIA data shared by the Financial Times.

  In the Eagle Ford shale of South Texas, the volume of oil produced from new wells for every operational rig, has risen by 42 per cent over the past year, from 556 barrels per rig per day to 792, EIA reported.

  “Profitability and returns in the U.S. tight oil space is a moving target – many producers claim to be profitable and generate healthy returns, yet their cash flow situation has shown no signs of improving,” pointed out Chauhan. According to the analyst, producers in the Permian are likely to be better positioned than in other areas, as this basin is the least developed of the three major basins, and Pioneer Resources (PXD), which has the largest acreage in the basin is 75 percent hedged for this year with a floor of $67 and a ceiling price of $77 per barrel.

  According to the IHS Energy North American E&P Peer Group Analysis Report, the weighted-average hedged prices for 2016 are $69.04 per barrel of oil and $3.83 per thousand cubic feet (MCF) of gas. The midsize E&Ps have hedged 26 percent of estimated 2016 total production. Financially distressed companies with low hedge protection and high risk in 2016 include SandRidge Energy and Ultra Petroleum.

  “The small North American E&Ps have hedged 25 percent of estimated 2016 total production and continue to have the weakest balance sheets. With high debt and little hedging, EXCO Resources and Comstock Resources are at risk of serious liquidity issues if low prices prevail,” stated Paul O’Donnell, principal equity analyst at IHS Energy and author of the report.

  Liquidity Problems

  Many investment banks and financial services companies are already facing losses on substantial investments in E&P companies, as they have committed hundreds of millions of dollars to lend to energy companies on top of the loans provided to them at the time when oil prices were surging.

  Among such investment funds taking a hit on their positions in the financially distressed E&P companies listed above (Goodrich Petroleum Co. Energy XXI Ltd, Swift Energy, etc.) are Franklin Resources Inc., Oaktree Capital Group LLC, Lazard Ltd and others.

  Financial experts and analysts point out that some E&P companies have managed to refinance their debt, however, it becomes increasingly more difficult for them to do so as their stock and bonds lose value and the high yield return they have to offer to lenders to get financing is higher than in any other business sector.

  According to Marketwatch, the energy industry Liquidity Stress subindex has pointed to a high-risk debt weighing on U.S. E&P companies, as it surged up to 16.9 percent in September from 12.7 percent in August, the highest level since it reached 19.2 percent six years ago in July 2009.

  As Chauhan of Energy Aspects pointed out, it is fair to say that most oil and gas companies are not generating free cash flow at current oil prices, as these prices are below full-cycle costs for most regions in the world, with the exception of the Middle East, which is the lowest cost producer globally.

  Larger Companies Faring Better

  “The IOC’s are likely to be better positioned during a downturn because they have higher credit ratings and therefore are more accessible to debt markets. They also have a hedge built into their business because they will benefit from downstream profitability from improved margins,” the analyst added.

  As Paul O’Donnell shared in the IHS report, only six percent of the large North American E&P production volume for 2016 production has been hedged, as these companies have stronger balance sheets to withstand the low prices. “No oil-weighted large E&Ps have any significant hedging in place for 2016”, O’Donnell said.

  According to Morse, the large North American E&P companies should be able to survive and thrive, given their high production base and their free cash flows as a cover for liquids production.

  “They have roughly three times the cash flow coverage as the smaller companies in terms of cash flow per barrel of oil, and they are still increasing production as a group,” commented the Head of Commodity Research.

  According to Ernst & Young U.S. Oil and Gas Reserves Study 2015, the total capital expenditures of 50 largest U.S. oil-and-gas companies reached $200.2 billion in 2014.

  As the study reveals, some of the large E&Ps’ capital expenditures in 2014 were:

  

   

  O’Donnell of IHS expects capital spending for the North American E&P group to drop 25 percent in the second-half 2015, as compared with the first-half of 2015, from approximately $60 billion to $45 billion.

  As cited by Natural Gas Intelligence in September, “according to EIA, U.S. oil and gas E&Ps had reduced their capex budgets by $38 billion in 2Q2015 (to about $95 billion) compared to the preceding second quarter (about $130 billion), "the difference between cash from operations and capex was almost zero in 2Q2015."

  *  *  *

  As Energy Intelligence concluded:

  "The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get?

   

  "I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession."

   

  

  

  

  

  

• Obama Says "Enough Is Enough," Urges Gun Restrictions After Deadly Planned Parenthood Standoff

  Another 'mass' shooting, and another outraged statement from President Obama proclaiming "enough is enough." With 9 injured, and 2 police officers and 1 civilian dead after the dreadful standoff at a Planned Parenthood office in Colorado Springs, the President took the opportunity to explain "we have to do something about the easy accessibility of weapons of war on our streets to people who have no business wielding them. Period." Of course, any discussion of the shooter's mental health, the violent polarization towards and politicization of abortion among an increasingly micro-aggressive America were conveniently ignored.

  As Reuters reports, expressing what has become regularly repeated frustration on the issue, President Barack Obama said on Saturday the United States needs to "do something" to make it harder for criminals to get guns after a shooting in Colorado killed three people and injured nine.

  In Friday's shooting, an assailant opened fire at a Planned Parenthood clinic, a center that provides health services including abortions, in Colorado Springs.

   

  It was the latest in a long series of U.S. mass shootings during Obama's seven years in office. He has called the December 2012 shooting at Sandy Hook elementary school in Newtown, Connecticut, his toughest day as president.

   

  Obama said it was too soon to know the Colorado Springs shooter's "so-called motive" but said the tragedy was more evidence pointing to the need to reform firearms laws.

   

  "This is not normal," said Obama, who has become increasingly forthright in urging gun control measures when he makes statements after such events. "We can’t let it become normal."

   

  Obama tried to tighten up gun laws after the Newtown shootings, but met resistance in the U.S. Congress, including from some of his fellow Democrats, and failed to push a measure through.

   

  After another deadly shooting at an Oregon community college last month, Obama said White House lawyers would pore through existing laws to look for new ways he could use his executive powers to enforce regulations.

   

  One of those options would require more gun dealers to get a license to sell guns, which would lead to more background checks on buyers.

   

  The White House had drafted a proposal on that issue in 2013, but was concerned it could be challenged in court. Administration officials are now hopeful they can find a way to advance the plan.

   

  Obama has also pledged to elevate the issue of gun laws during his remaining time in office, and has denounced lawmakers for bowing to pressure from the powerful National Rifle Association lobby group.

  Finally we thought this 'meme' provided some context…

  

  

  

  

  

  

• Europe's Black Weekend

  Submitted Raul Ilargi Maiejer via The Automatic Earth blog,

  How black would you like your Thanksgiving Friday slash weekend? Many Americans don’t even appreciate the term, or the events, at all anymore (or so they say), but the idea of getting what you don’t need, or want, on the cheap, will still prove irresistible. But then, when all of your desires have been fulfilled, food wise and gadget wise, and you’re still feeling empty, maybe we can help and offer a sweeping redefinition of the term Black Friday.

  Since we live in times that see many other things on the verge of being sweepingly redefined, too, and imminently so, perhaps that’s only fitting. How about this, for starters? Black enough for you?

  Six Migrant Children Drown On Way To Greece

  Turkish state media say six children have drowned when boats carrying migrants to Greece sank in two incidents off the Turkish coast. A wooden boat smuggling some 20 people to the island of Kos capsized in bad weather off the Aegean resort of Bodrum early on Friday. The state-run Anadolu Agency says most of the migrants made it to shore with the help of rescuers, but two sisters aged 4 and 1 drowned. Their nationalities were not immediately known. The agency says a second boat carrying as many as 55 migrants from Syria and Afghanistan sank hours later off the town of Ayvacik, further north. Four Afghan children drowned in that incident, Anadolu reported. Ayvacik is a main crossing point for migrants trying to reach the island of Lesvos.

  Or have we already all gotten too blasé about those dead babies by now? They’ve been washing up on those beaches for half a year or so, after all. How about those who survive the seas, and then get stuck behind a razor wire fence halfway to their preferred destinations?

  Remember the men who had sewn their lips shut? Not even that is enough for more than a few hours of media attention anymore. Not nearly as much as being suspected of terrorism; that sells much better than desperation. So, presumably, will being in the way of goods of ‘important’ companies like Sony and HP’s goods reaching their destination, even if you can’t reach yours. Life is all about priorities.

  Migrants At FYROM Border Crossing Block Trains

  A protest by migrants on Greece’s border with the Former Yugoslav Republic of Macedonia (FYROM) is putting railway operator Trainose at risk of losing major international clients. Migrants have over the last few days been protesting FYROM’s decision not to let them cross from Greece. Many migrants have camped on the railway lines connecting the two countries, which means that no trains have come in or out of Greece for the last week. This means that the freight Trainose is responsible for carrying has not been able to reach its destinations. The railway company serves major international clients such as Hewlett Packard and Sony.

  Is there a better way to sum it up than this sign at the Greece/FYROM (Macedonia) border? We doubt it.

  

  Or perhaps there is a better way after all. The absolute cluelessness of Europe’s ‘leaders’. Here’s a brilliant example of the gap between them and the real world:

  Refugee Influx Threatens Fall Of EU, Warns Dutch PM

  The EU risks suffering the same fate as the Roman empire if it does not regain control of its borders and stop the “massive influx” of refugees from the Middle East and central Asia, the Dutch prime minister has warned. Mark Rutte, whose government assumes the EU’s rotating presidency in January, said southern EU countries had yet to implement policies agreed to stem the flow [..] Mr Rutte said Greece, where more than 700,000 have landed this year, might have to increase its “reception capacity” to at least 100,000. Athens has so far committed to about half that, insisting that it does not want to become a giant refugee camp.

   

  “As we all know from the Roman empire, big empires go down if the borders are not well-protected”, said Mr Rutte in an interview with a group of international newspapers. “So we really have an imperative that it is handled.” [..] Mr Rutte said the EU needed to act quickly to stem the migrant flow, adding that he was optimistic that Sunday’s summit in Brussels between President Recep Tayyip Erdogan of Turkey and EU leaders would help ease conditions by providing €3 billion to improve refugee camps in Turkey and disrupting the “business model” of human smugglers channelling migrants in boats to Greece.

  It’s all still about ‘stemming the flow’. Actually, it’s more about that by the day, and that’s precisely because ‘stemming the flow’ doesn’t work. The idea is that the Greeks do more .. yeah, what exactly? Tell dinghies loaded with desperate refugee families, half of whom suffer from hypothermia, that they should turn around? What, to get back to Turkey? So Turkey can send them back to Syria?

  That’s just nonsense, of course, the product of malfunctioning neurons. Then again, there’s too much of those going around Europe to mention. The above quote is more remarkable for a few other things. First, to claim that the Roman empire went down because it didn’t protect its borders is so contentious no serious historian would want to claim it as his/her own.

  And that’s without asking how the Romans should have implemented that protection. Second, say we take Mr. Rutte’s assertion at face value, then the only peoples those borders should have been protected from, the ones who actually sacked Rome, were the Barbarians. Rutte, ergo, compares the Syrian refugees to Barbarians. And that doesn’t look all that smart.

  And now that the article mentions Erdogan, and the €3 billion he’s been promised by Europe, as well as the fast track route into EU membership, let’s see what he has to contribute to Black Weekend.

  First off, he had two prominent journalists arrested on espionage and related charges for publishing an article way back in May about his own secret service people smuggling arms across Turkey’s border with Syria. And Brussels is going to reward this interpretation of ‘freedom of the press’ with €3 billion?

  Then of course he had a Russian jet shot down this week, maybe just as a patsy to the US -or others-, maybe to avenge Russian bombs falling on transports such as that conducted by those same secret services, or oil deliveries from ISIS managed by his son. That’s Erdogan’s Thanksgiving Turkey: Arms out, oil in.

  What should be clear is that shooting down a Russian plane, and under questionable pretext to boot, is not done. Whether you do it to please someone else or just yourself. Turkey will lose a lot more than those €3 billion in tourism and trade with Russia once Putin gets on Erdogan’s case for real (and Russia will not forgive this no matter what other policies need attention), so Brussels can figure out where the money will go. Russian tourism in Turkey alone brings in $2.7 billion a year. And it’s been halted.

  Turkey claims it gave 10 warnings to a plane that might have been in its airspace for 17 seconds (a highly contested claim), only to shoot it in Syrian airspace?! It claims it hadn’t recognized the plane as being Russian? Since they apparently fire at anything that moves, what do we think would have happened if this had been an American plane? Or a French one? There doesn’t seem to be anything Turkey has said about the incident that rings true.

  But then, that’s the case for so many things so many people say. In the meantime, our morality -let alone the high ground- is washing up on Greek beaches with those babies whose lives our societies don’t deem worth saving, the lives we judge to be not worthy of living.

  Our honesty, our sense of fairness, our decency, basically all things that various prophets have proclaimed are the most important qualities in life, are washing up lifeless on cold deserted patches of sand. And ‘we’ are seeking to further vilify Russia and tempt it into acts we ‘must’ respond to. We are aligning ourselves to that end with Erdogan and Saudi Arabia, the main supporters of those we claim in public to be at war with.

  Here’s how this works: If the end justifies the means, and we make sure there never is an end to this, then arms will continue to be traded, profits will continue to be made, and lies will be told till no-one can tell up from down, since all means are justified until the end of time.

  That this leaves us morally utterly rudderless then becomes just another one of those justified means. Anything goes.

  

  

  

  

  

• ISIS Oil Trade Full Frontal: "Raqqa's Rockefellers", Bilal Erdogan, KRG Crude, And The Israel Connection

  “Effectively, we have been financially discriminated against for a long time. By early 2014, when we did not receive the budget, we decided we need to start thinking about independent oil sales” —  Ashti Hawrami, Kurdistan’s minister for natural resources

  In June of 2014, the SCF Altai (an oil tanker) arrived at Ashkelon port. Hours later, the first shipment of Kurdish pipeline oil was being unloaded in Israel. “Securing the first sale of oil from its independent pipeline is crucial for the Kurdish Regional Government (KRG) as it seeks greater financial independence from war-torn Iraq,” Reuters noted at the time, adding that “the new export route to the Turkish port of Ceyhan, designed to bypass Baghdad’s federal pipeline system, has created a bitter dispute over oil sale rights between the central government and the Kurds.”

  A week earlier, the SCF Altai received the Kurdish oil in a ship-to-ship transfer from the The United Emblem off the coast of Malta. The United Emblem loaded the crude at Ceyhan where a pipeline connects the Turkish port to Kurdistan. 

  The Kurds’ move to sell crude independent of Baghdad stems from a long-running budget dispute. Without delving too far into the details, Erbil is entitled to 17% of Iraqi oil revenue and in return, the KRG is supposed to transfer some 550,000 bpd to SOMO (Iraq’s state-run oil company). Almost immediately after the deal was struck late last year, Baghdad claimed the Kurds weren’t keeping up their end of the bargain and so, only a fraction of the allocated budget was sent to Erbil during the first five months of the year. 

  This was simply a continuation of a protracted disagreement between Erbil and Baghdad over how much of the state’s crude revenue should flow to the KRG. For its part, Iraq has threatened to sue anyone that buys independently produced Kurdish oil. For instance, when The United Kalavrvta – which left Ceyhan last June – prepared to dock in Galveston, Texas a month later, a SOMO official told Reuters that Iraq’s foreign legal team was “watching closely the movement of the vessel and [was] ready to target any potential buyer regardless of their nationality.”

  You get the idea. Erbil wants a bigger piece of the pie, Baghdad doesn’t want to give it to them, and so some time ago, the KRG decided to simply cut the Iraqi government out and export crude on its own. The dispute is ongoing. 

  

  (at an Erbil oil refinery, the Kurds stand guard)

  Ok, so why are we telling you this? Recall that over the past several weeks, we’ve spent quite a bit of time documenting Islamic State’s lucrative black market oil trade. Earlier this month, Vladimir Putin detailed the scope of the operation in meetings with his G20 colleagues. “I’ve shown photos taken from space and from aircraft which clearly demonstrate the scale of the illegal trade in oil and petroleum products,” he told journalists on the sidelines of the G20 summit in Antalya. The very same day, the US destroyed some 116 ISIS oil trucks, an effort that was widely publicized in the Western media. In the two weeks since, Moscow and Washington have vaporized a combined 1,300 ISIS oil transport vehicles. 

  No one knows why it took the US 14 months to strike the convoys. The official line is that The Pentagon was concerned about “collateral damage”, but  we doubt that’s the reason (for a detailed discussion of this, see here). Well now that the mainstream media have been forced to take a closer look at Islamic State’s main source of revenue (the group makes nearly a half billion a year in the illicit oil trade), we decided to take a closer look at exactly who is facilitating the transport of the stolen crude and where it ultimately ends up because you can be sure that the story you get from the major wires will be colored by a slavish tendency to avoid any and all “inconvenient” revelations. This is the fourth in a series of articles on the subject and we encourage you to review the first three: 

  • The Most Important Question About ISIS That Nobody Is Asking
  • Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President
  • How Turkey Exports ISIS Oil To The World: The Scientific Evidence

  On Friday we highlighted an academic study by George Kiourktsoglou and Dr Alec D Coutroubis who took a look at tanker rates at Ceyhan around siginifant oil-related events involving ISIS. Here’s what the researchers found: 

  

  In their words, “it seems that whenever the Islamic State is fighting in the vicinity of an area hosting oil assets, the 13 exports from Ceyhan promptly spike. This may be attributed to an extra boost given to crude oil smuggling with the aim of immediately generating additional funds, badly needed for the supply of ammunition and military equipment.”

  Now you can begin to see the connection. Ceyhan is the port from which Kurdish oil (technically “illegal” to let Baghdad tell it) is transported, and as Kiourktsoglou and Coutroubis note, “the quantities of crude oil that are being exported to the terminal in Ceyhan exceed the mark of one million barrels per day and given that ISIS has never been able to trade daily more than 45,000 barrels of oil, it becomes evident that the detection of similar quantities of smuggled crude cannot take place through stock-accounting methods.” In other words, if ISIS oil was being shipped from Ceyhan, it would essentially be invisible.

  Here’s where things get interesting. A few weeks ago, Reuters released an exclusive report detailing how Erbil hides its crude shipments from Baghdad. Here are some of the details: 

  Most customers were scared of touching it with Baghdad threatening to sue any buyer. Large oil companies – including Exxon Mobil and BP – have billions of dollars worth of joint projects with Baghdad.

   

  Some buyers took tankers to Ashkelon, Israel, where it was loaded into storage facilities to be resold later to buyers in Europe. Kurdish oil was also sold offshore Malta via ship-to-ship transfers helping disguise the final buyers and thus protect them from threats from Iraqi state firm SOMO.

   

  It was a high stakes game. A ship would dock off Malta waiting for another to arrive to take a cargo to a final destination. Sometimes two ships would be sent – one sailing off empty and another full – to complicate cargo tracking.

   

  “Everyone suddenly became a ship tracking expert. So we had to raise our game too … But one thing was proven correct – when oil is out, it flows,” said Hawrami.

  Ok, so a scheme involving ship-to-ship transfers off the coast of Malta was used to get Kurdish crude to places like Israel. “Israeli refineries and oil companies imported more than 19m barrels of Kurdish oil between the beginning of May and August 11, according to shipping data, trading sources and satellite tanker tracking,” FT reported last week. “That is the equivalent of about 77 per cent of average Israeli demand, which runs at roughly 240,000 barrels per day. More than a third of all of the northern Iraqi exports, which are shipped from Turkey’s Mediterranean port of Ceyhan, went to Israel over the period.”

  At this juncture, we begin to get an idea of what’s going on here. Kurdish oil is already technically illegal and Turkey is happy to facilitate its trip to foreign buyers via Ceyhan. What better way for ISIS to get its own oil to market than by moving it through a port that already deals in suspect crude? Al-Araby al-Jadeed (a London-based media outlet owned by the Qatari Fadaat Media) claims to have obtained a wealth of information about the route to Ceyhan from an unnamed colonel in the Iraqi Intelligence Services. Here’s their account: 

  The information was verified by Kurdish security officials, employees at the Ibrahim Khalil border crossing between Turkey and Iraqi Kurdistan, and an official at one of three oil companies that deal in IS-smuggled oil.

   

  The Iraqi colonel, who along with US investigators is working on a way to stop terrorist finance streams, told al-Araby about the stages that the smuggled oil goes through from the points of extraction in Iraqi oil fields to its destination – notably including the port of Ashdod, Israel.

   

  “After the oil is extracted and loaded, the oil tankers leave Nineveh province and head north to the city of Zakho, 88km north of Mosul,” the colonel said. Zakho is a Kurdish city in Iraqi Kurdistan, right on the border with Turkey.

   

  “After IS oil lorries arrive in Zakho – normally 70 to 100 of them at a time – they are met by oil smuggling mafias, a mix of Syrian and Iraqi Kurds, in addition to some Turks and Iranians,” the colonel continued.

   

  “The person in charge of the oil shipment sells the oil to the highest bidder,” the colonel added. Competition between organised gangs has reached fever pitch, and the assassination of mafia leaders has become commonplace.

   

  The highest bidder pays between 10 and 25 percent of the oil’s value in cash – US dollars – and the remainder is paid later, according to the colonel.

   

  The drivers hand over their vehicles to other drivers who carry permits and papers to cross the border into Turkey with the shipment, the Iraqi intelligence officer said. The original drivers are given empty lorries to drive back to IS-controlled areas. 

   

  Once in Turkey, the lorries continue to the town of Silopi, where the oil is delivered to a person who goes by the aliases of Dr Farid, Hajji Farid and Uncle Farid.

   

  Uncle Farid is an Israeli-Greek dual national in his fifties. He is usually accompanied by two strong-built men in a black Jeep Cherokee.

   

  Once inside Turkey, IS oil is indistinguishable from oil sold by the Kurdistan Regional Government, as both are sold as “illegal”, “source unknown” or “unlicensed” oil.

   

  The companies that buy the KRG oil also buy IS-smuggled oil, according to the colonel. 

  Now obviously that’s a remarkable degree of detail, but regardless of whether you believe in “Uncle Farid” and his black Jeep Cherokee, the main point is that there are smuggling routes into Turkey and once the oil is across the border, it might as well be Kurdish crude because after all, it’s all “illegal”, “unlicensed” product anyway, just as we said above. 

  Next, Al-Araby al-Jadeed says a handful of oil companies (which they decline to identify) ship the oil from the Turkish ports of Mersin, Dortyol and Ceyhan to Israel. 

  

  Here’s the alleged route:

  

  While the graphic shows the crude going directly from Ceyhan to Ashdod, it’s worth asking whether ISIS crude is also “laundered” (as it were) through the same Malta connection utilized by those smuggling “illegal” Kurdish crude (which also ends up in Israel). We ask that because as it turns out, Bilal Erdogan owns a Maltese shipping company. “The BMZ Group, a company owned by President Recep Tayyip Erdogan’s son Bilal alongside other family members, has purchased two tankers in the last two months at a total cost of $36 million,” Today’s Zaman reported in September. “The tankers, which will be registered to the Oil Transportation & Shipping company in October — an affiliate of the BMZ Group set up in Malta — were previously rented to the Palmali Denizcilik company for 10 years.”

  Here’s a look at recent port data from Ceyhan and Ashdod via Fleetmon.com (Malta-flagged oil vessels are highlighted).

  Ceyhan

  

  

  Ashdod

  

  

  To be sure, all of this is circumstantial and there’s all kinds of ambiguity here, but it seems entirely possible that Erdogan is knowingly trafficking in ISIS crude given what we know about Ankara’s dealings with illegal Kurdish oil. Consider this from al-Monitor: 

  Details of the energy deals struck between Turkey and the KRG remain sketchy amid claims that Erdogan and his close circle are financially benefiting from them. According to Tolga Tanis, the Washington correspondent for the mass circulation daily Hurriyet who investigated the claims, Powertrans, the company that was granted an exclusive license to carry and trade Kurdish oil by Erdogan’s Cabinet in 2011, is run by his son-in-law Berat Albayrak. It didn’t take long for the notoriously litigious Erdogan to file defamation charges against Tanis.

   

  Several Iraqi Kurdish officials who refused to be identified by name confirmed that Ahmet Calik, a businessman with close ties to Erdogan, had been granted the tender to carry Kurdish oil via overland by trucks to Turkey.

  In other words, Erdogan is already moving illicit crude from the KRG (with whom Ankara is friendly by the way, despite the fact that they are Kurds) via a son-in-law and in large quantities. What’s to say he isn’t moving ISIS crude via the same networks through his son Bilal? Or perhaps through his other son Burak who Today’s Zaman reminds us “also owns a fleet of ships [and] was featured in a report by the Sözcü daily in 2014 [when his] vessel Safran 1 was anchored in Israel’s port of Ashdod.” Here’s a picture circulated on social media that purports to show Bilal Erdogan with ISIS commanders (because we do try at all times to be unbiased, we should also note that the men shown below could just be three regular guys with beards with no connection to any black flag-waving desert bandits):

  Recep Tayip Erdogan’s son “BILAL ERDOGAN” with his ISIS brothers #StopTurkeySuppportOfISIS pic.twitter.com/5IBfXeFo9w

  — Dilxaz Sofiyan (@Dilxazsofi) September 20, 2014

  Russian media claims the men are “ISIS leaders who it is [thought] participated in massacres in Syria’s Homs and Rojava, the Kurdish name for Syrian Kurdistan or Western Kurdistan.”

  

  

  One person who definitely thinks the Erdogans are trafficking in ISIS oil is Syrian Information Minister Omran al-Zoubi who said the following on Friday: 

  “All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well.”

  And then there’s Iraq’s former National Security Adviser Mowaffak al-Rubaie who posted the following to his Facebook page on Saturday: 

  “First and foremost, the Turks help the militants sell stolen Iraqi and Syrian oil for $20 a barrel, which is half the market price.” 

  Meanwhile, the US is preparing for an all-out ISIS oil propaganda war. As WSJ reported on Wednesday, “the Treasury [has] accused a Syrian-born businessman, George Haswani, who his a dual Syrian-Russian citizen, of using his firm, HESCO Engineering and Construction Co., for facilitating oil trades between the Assad regime and Islamic State.” Why Assad would buy oil from a group that uses the cash at its disposal to wage war against Damascus is an open question especially when one considers that Assad’s closest allies (Russia and Iran) are major oil producers. Of course between all the shady middlemen and double dealing, there’s really no telling.

  Ultimately we’ll probably never know the whole story, but what we do know (and again, most of the evidence is either circumstantial, anecdotal, of largely qualitative) seems to suggest that in addition to providing guns and money to the FSA and al-Nusra, Turkey may well be responsible for facilitating Islamic State’s $400+ million per year oil enterprise. And as for end customers, consider the following bit from Al-Araby al-Jadeed:

  According to a European official at an international oil company who met with al-Araby in a Gulf capital, Israel refines the oil only “once or twice” because it does not have advanced refineries. It exports the oil to Mediterranean countries – where the oil “gains a semi-legitimate status” – for $30 to $35 a barrel.

   

  “The oil is sold within a day or two to a number of private companies, while the majority goes to an Italian refinery owned by one of the largest shareholders in an Italian football club [name removed] where the oil is refined and used locally,” added the European oil official.

   

  “Israel has in one way or another become the main marketer of IS oil. Without them, most IS-produced oil would have remained going between Iraq, Syria and Turkey. Even the three companies would not receive the oil if they did not have a buyer in Israel,” said the industry official.

  Finally, you’ll note that this is all an effort to answer what we called “the most important question about ISIS that no one is asking” – namely, “who are the middlemen?” As we noted more than a week ago, “we do know who they may be: the same names that were quite prominent in the market in September when Glencore had its first, and certainly not last, near death experience: the Glencores, the Vitols, the Trafiguras, the Nobels, the Mercurias of the world.” Consider that, and consider what Reuters says about the trade in illicit KRG oil: “Market sources have said several trading houses including Trafigura and Vitol have dealt with Kurdish oil. Both Trafigura and Vitol declined to comment on their role in oil sales.”

  Similarly, FT notes that “both Vitol and Trafigura had paid the KRG in advance for the oil, under so-called ‘pre-pay’ deals, helping Erbil to bridge its budget gaps.”

  Indeed, when Kurdistan went looking for an advisor to assist in the effort to circumvent Baghdad, the KRG chose “Murtaza Lakhani, who worked for Glencore in Iraq in the 2000s, to assist finding ships.”

  “He knew exactly who would and who wouldn’t deal with us. He opened the doors to us and identified willing shipping companies to work with us,” Ashti Hawrami (quoted above) said.

  Indeed. And given everything said above about the commingling of illegal KRG crude and illicit ISIS oil shipments, it’s probably a foregone conclusion that these same firms are assisting in transport arrangements for Islamic State.

  

  

  

  

• Submerging Markets

  Via Dana Lyons' Tumblr,

  After failed breakouts earlier in the year, the charts of the Asian Tiger Cub markets suggest more trouble may lie ahead.

  We’ve mentioned several times how price action often times can “predict” the news. That is, the chart of a particular security, index or market may suggest a likely path for prices – bullish or bearish – long before any news comes out and is assigned as the ex post facto cause of the move. Therefore, scanning the charts of various markets can, at times, give us a head’s up on a potential source of positive or negative “news” before the market hits the mainstream radar. Such may be the case currently in the Asian Tiger Cub markets – in a negative way.

  In August, we revealed the extensive damage being done in the stock markets of the Asian “Tiger Cubs”, i.e., Indonesia, Malaysia, the Philippines and Thailand. That wasn’t the case earlier in the year as we indicated in that post:

  We posted several pieces early in the year on the various emerging markets…as they began the year in promising fashion. While Malaysia was the laggard of the group, Indonesia and the Philippines experienced nice looking breakouts while Thailand appeared poised to do the same. We even suggested that they looked to be in the running early on for “stock market of the year”.

  In that August post, introduced the Asian Tiger Cub Composite, an equal-weight composite of the 4 markets. We wrote:

  Similar to its components, the Composite started the year out strongly. In late January, the Composite broke above its previous high closing levels from 2013 and 2014 and into all-time high territory. While the breakout looked promising, it did not stick. After reaching its peak in early April, the Composite failed to hold above the previous highs. Recently, it has accelerated its move to the downside. As of today, the Composite is down about 15% from its April highs and sitting at an 18-month low.

  We did note that the individual country markets were approaching longer-term potential support areas that could produce a bounce. Indeed the markets bounced soon afterward.

  As it is often said (including, by us), a lot can be determined by judging the “quality” of a bounce. That is, if prices recover robustly and quickly, odds are good that the decline was perhaps a counter-trend move and has run its course. However, if the recovery is a shallow one that fails to approach the prior highs, odds are good that it is the bounce that is counter-trend and that further declines are likely to come. In our view, the latter would be an appropriate description of the bounce in the Asian Tiger Cubs since August.

  Here is the updated chart of the Asian Tiger Cub Composite.

   

  

   

  As the chart shows, after the failed breakout to all-time highs earlier in the year, the Composite broke its post-2009 UP trendline in August, preceding a precipitous decline. Unlike some other markets around the globe, the Composite’s bounce since has been feeble, at best, barely recovering a quarter of the decline. This suggests that the breakdown was a significant event and further declines are likely ahead, eventually.

  A look at the individual countries reveals, not surprisingly, a similar picture. After breaking out to all-time highs earlier in the year, the Indonesian JSX Index was unable to hold above its prior peaks. Subsequently, the index broke its post-2009 UP trendline in August, also preceding a precipitous decline. Its bounce too has been lackluster.

   

  

   

  Likewise, the Philippines PSE Composite suffered a failed breakout to all-time highs earlier in the year, followed by a break of its post-2009 UP trendline in August. Its bounce since has been especially weak.

   

  

   

  Next we see the Thailand SET Index., The SET failed to break out to all-time highs earlier in the year, instead rejected by highs from 2013 and the mid-1990′s. It also has since broken its post-2009 UP trendline. Its weak bounce since is on par with that of the Philippines.

   

  

   

  Lastly, the Malaysia KLCI Composite may be a bit more positive or negative depending on the perspective. The KLCI was able to break out to new highs back in 2012. However, after a nice run, it dropped back down in 2014, breaking below its post-2009 UP trendline. Even worse, during the August decline, the composite broke its post-1998 UP trendline, on a log scale. The only positive here is that it was able, for now, to hold its 2012 breakout levels. We say “for now” because it too has mounted only a weak bounce thus far.

   

  

   

  As you can see, the stock markets of those countries known as the Asian Tiger Cubs suffered extensive damage in the August global equity decline. Each has broken at least its post-2009 uptrend. Potentially making matters worse, the breakdowns come after several of the markets broke out to all-time highs earlier in the year. Just as troubling is the fact that their respective recoveries have been relatively anemic. While there may be room to move a bit higher in the near-term, these recent developments suggest that greater eventual declines are likely ahead for these markets.

  If that comes to pass, expect to hear news waves coming from that region of the world. Whether such news will be related to slow economic growth, China-related concerns, currency issues, etc., we don’t know. But that is the point. The region is well under the radar at the moment in terms of potential trouble spots. However, the charts may suggest otherwise.

  *  *  *

  More from Dana Lyons, JLFMI and My401kPro.

  

  

  

  

  

• How Green Energy Really Works

  After this week's vaporization of $29 billion of liabilities ($230 million of which was owed to the US Taxpayer) amid Abengoa's bankruptcy (Spain's 'Solyndra'), we thought it worth reminding the world's greater fools just how "green" energy works…

   

  

   

  As Pater Tenebrarum noted, oh so eloquently,

  Businesses that cannot possibly survive without subsidies are ipso facto not economically viable. In spite of all the high-minded pronouncements about the “need to save the planet” and how this valiant effort can allegedly be “combined with economic growth”, their existence serves primarily one function: to distribute money looted from taxpayers and consumers to assorted cronies of the political class, who in turn provide the latter with kickbacks. That is all there is to it.

   

  Surely no-one is so naïve as to believe that modern-day politicians, whose horizon and time preferences never stretch beyond the next election date, are really concerned about what might happen to the planet a century hence (not to mention that the entire “climate change” religion seems to be little more than an elaborate hoax). With Abengoa’s bankruptcy we are once again presented with a bill that serves as a stark reminder how much scarce capital has been wasted on such schemes.

   

  Ultimately it is little more than a modern form of highway robbery, clad in highly effective propaganda. Many people feel guilty about “consumerism”, believing that it must be true that prosperity and progress are somehow sinful. In reality, environmentalism has long become the home of a great many authoritarian leftists after they lost their former sugar daddy in Moscow in 1990.

   

  They are trying – very successfully it saddens us to admit – to undermine free market capitalism by appealing to people’s sense of guilt and their innate need to receive absolution for their sins. And they have of course found out that their new sugar daddy is much better than their old one, as there is far more wealth ready to be looted and everybody involved is quite happy to get a cut. Occasionally reality has a habit of interfering, but that won’t stop them, at least not yet.

  It is high time that the victims wake up to these scams and begin opposing them.

  

  

  

  

  

• The Unintended Consequences Of 'Lift-Off' In A World Of Excess Reserves

  Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

  Barring a disastrous NFP print this coming Friday the US Federal Reserve will change the target range for the Federal Reserve (Fed) Bank’s Funds rate from the current level of zero – 25bp to 25 – 50bp on December 16^th.  The Fed will effectively raise the overnight interbank rate of interest to around 30bp from an average of only 12bp in 2015. Ironically, that will be seven years, to the day, when the Fed first lowered rates to the current band.

  During the period of ZIRP madness, the Fed’s balance sheet ballooned 6.2 times its pre-Lehman size to allow the central bank to add monetary “stimuli” even at the zero lower bound. Consequently the financial system got stuffed with more cash than they knew what to do with; commercial banks thus ended up funding the very same assets they sold to the central bank through excess reserves held as deposits with the Federal Reserve bank itself

  

  Source:  Board of Governors of the Federal Reserve System – H.4, Federal Reserve Bank of St. Louis, Bawerk.net

  Historically the Fed would meet their targeted interest rate in the interbank market by conducting open market operations, id est buying and selling securities on the margin from designated primary dealer banks to affect available reserves and hence the rate of interest. As a side note, in this "market' demand will indeed create its own supply. "Market signals" emanating from banks eager to expand their balance sheet will put pressure on interest rates, and hence prompt the Fed to buy securities in order to add reserves in order for them to maintain rates at their "appropriate" level. This Keynesian creation is thus the only "market" that actually operates according to Keynesian principles; whereby demand dictates the level of supply.

  We digress. In a new world where reserve supply is already excessive as witnessed by the 2.5 trillion dollar in the chart above, conventional tools to manage interest rates are no longer applicable.

  The Fed has thus come up with new ways to lift rates in a world of reserve oversupply. According to “Policy Normalization Principles and Plans” dated September 2014 the main conduit that will be used by the Fed to transmit their target range of interest rates to financial markets will be the interest paid on excessive reserves (IOER). In this respect it is worth noting that through the Financial Services Regulatory Relief Act of 2006 (Section 201) the Fed was granted the right to pay interest on bank reserves; long before QE policies had created unprecedented amounts of excessive reserves. While the Fed’s newfound authority did not take effect until October 2011 (section 203), the Emergency Economic Stabilization Act of 2008 section 128 effectively brought that forward to October 1^st 2008. Never let a good crisis go to waste.

  The idea behind the IOER is simple; if the Fed pay banks a rate equal to their target rate for the Fed Funds on their excessive reserves there is no incentive to take risk in short dated money markets so long as the Fed can match the going market rate. Reserves will thus stay put and the Fed can lift rates without unleashing a tsunami of liquidity into already frothy markets; or so the theory goes.

  In practice, it is much more complicated. The scope of Fed’s policy interventions over the last eight years has been so extensive and spread far beyond the Primary Dealer nexus. Money funds in particular sits on piles of liquidity and these cannot access the IOER as only FDIC-insured depository institutions have direct recourse to the Fed and hence IOER only applies to a small group of financial institutions.

  It is therefore highly unlikely that market rates will respond as the Fed moves its target rate upwards; in this case, the FOMC will have lost all control.

  The solution is obvious as the Fed could simply reduce its balance sheet back to pre-crisis levels and remove all excess reserves thereby reestablishing the old practice of managing short term rates through open market operations. With the US Government running a deficit, Fed drawdowns would constitute net supply in the treasury market as the US Treasury would have to issue bonds to repay the Fed. All new issuance would have to be carried by the private market. In addition, most reserve managers are currently selling treasuries, not buying. A dramatic re-pricing of US bonds would occur, flows would move rapidly out of equities and high yield corporates to take advantage of the relative favorable pricing of US treasuries. In addition, by ceasing to reinvest the excess reserve problem would compound several time over; see Why the Fed will change its exit strategy…again for more details.

  This is clearly not a viable strategy for a bankrupt government so the only option for the Fed is to find ways to lift rates with excess reserves still in the system. The proposed solution is to broaden the Fed’s reach by also including non-bank entities. A move that essentially turns the Fed into an all-encompassing market maker.  Technical speaking they will offer a fixed rate, full allotment overnight reverse repurchase (RRP) agreements with a range of financial institutions, such as money market funds (MMF), government sponsored enterprises (GSEs) and banks.

  The Fed started testing the RRP scheme in September 2013 to make sure they are able to control rates within a relatively narrow band. Results so far indicate that the Fed is able to move the band as they want to. During the period of testing we see market rates react to changes in the O/N RRP rate; suggesting rates can be moved up despite excess reserves.

  

  Source: Federal Reserve Bank of New York, Bloomberg, Bawerk.net

  However, this does not mean the strategy is risk-free. On the contrary, we could see dramatic financial flows when the current cap of $300bn turns into full allotment. Unsurprisingly large money market funds are the main beneficiaries of the RRP and as can be seen from the next chart, they are by far the largest user of the Fed’s new tool. Also note that at quarter end, when banks window dress their balance sheets for regulatory purposes, money market funds need to park more money in the RRP, periodically exceeding the statutory limit set by the Fed.

  

  Source: Federal Reserve Bank of New York, Bawerk.net                                                                                         * note that counterparty breakdown is published with a lag

  Since the system is flooded with excess cash, money market funds probably hold large deposits with major banks, which in turn funds the Fed’s large holdings of bonds. In other words, banks are arbitraging the fact that MMFs can only get the going market rate for their investments, while banks receive the higher 25BP IOER rate. Banks thus hold a massive deposit base far exceeding the loan and leases provided to the mainstream economy as shown in the chart below. The imbalance between deposits and loans is essentially the excess reserves problem.

  

  Source:  Board of Governors of the Federal Reserve System – H.8, Bawerk.net

  Before we move on it is important to note that banks, which cannot use their excess reserves outside the banking system itself, probably collateralizes it to fund their own positions vis-a-vis non-bank entities. To what extent excess reserve collateral are then re-hypothecated is unknown to us, but we would not be surprised if they were significant.

  What we do know is that sudden changes in these flows could have unknown, and probably large, implications for the way the financial system is currently funded.

  When money market funds get the chance to move all their deposits with banks into the RRP they will obviously take it, or at a minimum bargain banks for higher rates on deposits, which in turn depresses banks’ IOER / RRP arbitrage.

  Assuming banks outstanding $1.6 trillion liability of large time deposits are susceptible to relatively sudden move into the RRP by MMFs, we get the following before/after picture of how the Fed funds its bond portfolio

  

  Source:  Board of Governors of the Federal Reserve System – H.4 & H.8, Federal Reserve Bank of New York, Bawerk.net

  Today the Fed funds its bond portfolio with excess reserves held by banks. The banks fund these by deposits, of which money market funds probably hold the largest single part.

  If the RRP goes into full allotment money market funds will be eager to move money into it. In other words, the money market funds could relatively quickly withdraw their deposits and move them into RRPs. This will neither change the amount of reserves nor the overall size of the Fed’s balance sheet, but it will change the composition. From being funded by banks excess reserves prior to full allotment, it will be funded by RRPs, predominantly through the money market funds after full allotment.

  Banks would then need to reduce their market exposure to the extent they post excess reserves as collateral with unknown, but potential significant effect on collateral chains and by extension financial markets. With RRP pledged bonds barred from re-hypothecation, collateral chains will not be equally lengthened on the money market side of the equation. We are therefore looking at a net reduction in collateral availability for repo markets.

  In the short run this will probably lead to  dramatic and unexpected change in financial flows. Over the longer run, a much-overlooked problem emerges. Assuming Fed balance sheet drawdown will be around half the pace of natural redemptions through maturity the excess reserve problem will persist for many years to come. Further assuming they will raise rates, very slowly to around 400 basis points, then more than $200bn of "capital" will have entered the financial system. This can be leveraged around 10 times in a fully loaned banking system, which equates to a massive $2 trillion dollars. In other words, the excess reserve problem will be impossible to correct without causing a major financial upheaval at some level.

  Note that it does not matter who the ultimate holder of reserves are. If they move over to the money market funds, the interest will be paid through the RRP which will have to move in tandem (albeit with a small discount) to the IOER.

  

  Source: Board of Governors of the Federal Reserve System – H.8, Bawerk.net

  

  

  

  

  

• Russia Retaliates: Putin Reveals Sanctions Against Turkey

  While many in The West had hoped for a "see, we told you so" strongman military response from Vladimir Putin, it appears the Russian leader has, for now, taken a more practical approach. The wide-ranging sanctions unleashed on Turkey (by its 2nd largest trade partner) include a ban on Turkish workers (with estimates that 90,000 will be fired by Jan 1 2016), restrictions on imported goods and services provided by Turkey, and scraps visa-free travel and bans charter flights (implicitly hurting a major part of Turkey's domestic industry). Finally, Putin calls for "strengthening of port control and monitoring to ensure transport safety," hinting at the fears many have voiced over whether Turkey shutting the Bosphorous in an escalation would be seen as an act of war.

  As Interfax reports,

  Russian President Vladimir Putin has signed a decree "On measures to ensure Russian national security and to protect Russian citizens from criminal and other unlawful actions and the application of special economic measures with respect to the Turkish Republic," the Kremlin press office said on Saturday.

   

  The decree introduces temporary ban or restrictions on import by Russia of certain types of goods, whose country of origin is Turkey, which are stipulated in the list determined by the Russian government (except the good imported for personal use in an amount permitted by the law of the Eurasian Economic Union).

   

  The decree also bans or restricts organizations, which fall under the Turkish jurisdiction, from providing certain types of services in Russia, which are stipulated in the list determined by the Russian government.

   

  In addition, employers and contractors of services which are not stipulated in the list determined by the Russian government, are banned, starting from January 1, 2016, from employing Turkish citizens who were not employed or contracted by such employers and contractors as at December 31, 2015.

  *  *  *

  Here's why this will hurt Turkey (and its now non-independent central bank)…

  

  

   

  Full Kremlin statement of actions…

  The decree on measures to ensure Russia's national security and protection of Russian citizens from criminal and other illegal activities and the application of special economic measures against Turkey

  Vladimir Putin signed a decree "On measures to ensure the national security of the Russian Federation and the protection of Russian citizens from criminal and other illegal activities and the use of special economic measures against the Republic of Turkey."

  November 28th, 2015 20:15
  The text of the document:

  In order to protect national security and national interests of the Russian Federation to protect Russian citizens from criminal and other illegal acts, and in accordance with the federal law of 30 December 2006 ? 281-FZ "On special economic measures" and on 28 December 2010 ? 390-FZ "On security" decree:

  1. The authorities of the Russian Federation, federal government agencies, local authorities, legal entities, formed under the laws of the Russian Federation, organizations and individuals under the jurisdiction of the Russian Federation, in its work to proceed from the fact that in the Russian Federation input time:

  a) prohibition or restriction of foreign economic operations involving import into the Russian Federation of certain goods whose country of origin is the Republic of Turkey, on a list established by the Government of the Russian Federation (except for goods imported for personal use to the extent permitted by law of the Eurasian Economic Union);

   

  b) the prohibition or restriction for organizations under the jurisdiction of the Republic of Turkey on the implementation of (provision) of certain types of work (services) in the territory of the Russian Federation on a list established by the Government of the Russian Federation;

   

  c) prohibition for employers, customers of works (services) are not included in the list determined by the Government of the Russian Federation, to attract to January 1, 2016 in order to work, works (services) of workers citizens of the Republic of Turkey who are not labor and (or) civil-legal relations with these employers, customers of works (services) as of December 31, 2015

  2. Pause from 1 January 2016 in accordance with the Federal Law of July 15, 1995 ? 101-FZ "On international treaties of the Russian Federation", and paragraph 1 of Article 10 of the Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on the terms of mutual trips of citizens the Russian Federation and citizens of the Republic of Turkey on May 12, 2010 action of the Agreement in respect of the journeys undertaken by citizens of the Turkish Republic, which are the owners of foreign passport, except citizens of the Republic of Turkey, who have a temporary residence permit or a residence permit on the territory of the Russian Federation and citizens of the Republic of Turkey sent to work in diplomatic missions and consular offices of the Republic of Turkey on the territory of the Russian Federation in possession of valid official and special passports, and their families.

  3. The Ministry of Foreign Affairs of the Russian Federation in the established order the Republic of Turkey to send a notice of partial suspension of the Agreement, named in paragraph 2 of this Decree.

  4. To establish that the tour operators and travel agents should refrain from implementing the citizens of the Russian Federation of the tourist product, include a visit to the Turkish Republic.

  5. The Government of the Russian Federation:

  a) define lists of goods, works (services) provided by subparagraphs "a" and "b" of paragraph 1 of this Decree;

   

  b) to determine the list of employers, customers of works (services) provided by subparagraph "c" of paragraph 1 of this Decree;

   

  c) to define the list of contracts concluded with organizations under the jurisdiction of the Republic of Turkey for the supply of goods (works, services) in respect of which special economic measures provided for in this Decree shall not apply;

   

  d) adopt measures for the following:

  • a ban on charter air transportation between the Russian Federation and the Republic of Turkey;
  • strengthening of control over the activities of the Turkish road transport on the territory of the Russian Federation in order to ensure safety;
  • strengthening of port control and monitoring to ensure transport safety Russian waters of sea ports in the Black Sea region, including the prevention of illegal residence and movement, and other marine vessels in the waters of Russian sea ports;

  e) if necessary, make proposals to amend the period of validity or the nature of the special economic and other measures provided for by this Decree.

  6. This Decree shall enter into force on the date of its publication and is valid until they cancel the special economic and other measures.

  

  

  

  

  

• Which Assets Have Priced In A Chinese Economic Collapse? Barclays Explains

  On August 11, the day Beijing shocked the world by devaluing the yuan, a whole host of commentators suggested that the move was designed to bolster China’s bid for SDR inclusion. 

  To be sure, the timing would have been right. On at least two separate occasions in August the wires lit up with reports that the IMF was leaning towards making the RMB the fifth currency in the basket and with the official decision due in November, some believed China was simply trying to seal the deal by making it seem as though the market would play a greater role in determining the exchange rate going forward. 

  Of course that’s all nonsense. First, the market doesn’t play a greater role in the new FX regime. In fact, the market’s role is reduced. Previously, the PBoC manipulated the fix to control the spot, but now, the central bank manipulates the spot to control the fix and manipulating the spot means heavy-handed intervention. 

  Second, China’s deval has far more to do with a desperate attempt to boost the flagging export-driven economy. 

  Sure, the official headline GDP print can be whatever a bunch of Politburo central planners want it to be, but the reality (as measured by the Li Keqiang Index and by private economists outside of the bulge bracket) is that growth is nowhere near 7% and indeed, it might very well be that in times of rapidly declining commodity prices, China’s inability to accurately measure the deflator means real output would be materially overstated even if the NBS were putting out accurate figures otherwise. 

  The point here is that China’s hard landing has just begun and the 3% August deval was just the opening salvo in what will likely be a far larger effort to drive the yuan lower (remember, when Beijing burns through its reserves to support the yuan and close the onshore/offshore gap it doesn’t mean that China has changed its mind on devaluation – it simply means the deval will be conducted on the PBoC’s terms, not the market’s) and thereby boost the export-led economy. The country’s acute overcapacity problem combined with lackluster global demand and depressed trade (in relation to which China is both the proximate cause and a victim) mean that things are likely to get far worse before they get better and we’re starting to see the ripple effects in the country’s onshore bond market where defaults are becoming increasingly common as the country approaches its dreaded Minsky Moment. 

  So if we assume that China’s hard landing can and will get hard-er-er, it’s worth asking which assets and currencies have priced in a further deceleration in the world’s engine of global growth and trade. Here’s Barclays with more on what’s expensive and what’s cheap vis-a-vis  persistent deterioration in the Chinese growth story. 

  *  *  *

  From Barclays

  The underperformance of China-sensitive assets raises the question of whether they are already pricing in weaker activity. We compare asset performance over the last year to that implied by slower China growth and the controls; these residuals help us assess whether China-linked assets are reflecting the weaker growth backdrop. We complement this analysis with various valuation frameworks that help us gauge what may be priced into assets, given the risks to Chinese growth. Our analysis shows that EM equities and some commodity price residuals are currently very positive, suggesting the slowing in Chinese activity over the past year is not fully priced (Figure 4). Within equities, EM countries are most expensive relative to the Chinese cycle. The residuals for some of the usual beneficiaries of China’s growth, such as LatAm, Korea and Chinese equities, are very positive, suggesting the bounce in these assets following the August sell-off was overdone. In FX, the most interesting finding is that most Chinasensitive currencies appear cheap, especially commodity currencies and high beta EM. Notably cheap currencies are those of oil producers (the RUB, MYR and COP). The BRL and TRY are examples of currencies that are weak due to domestic issues. The high-beta IDR bounced back strongly at the beginning of Q4 and now looks expensive. The INR also has a positive residual because of idiosyncratic factors. In commodities, Brent looks cheap to the China cycle, while gold and copper are expensive. 

  In fixed income markets (Figure 5), US yields are higher and Europe and Japan yields are lower than what Chinese activity, US 2y yields and the VIX would predict. The negative deviation in Europe suggests that ECB easing expectations are the main reason for the gap. Similarly, Japanese yields are also lower than predicted, but to a lesser extent. US 5y yields are higher than predicted, as the Fed is set to hike as other central banks are still easing. While US nominal rates are higher than predicted, inflation expectations are lower, suggesting US real yields are relatively attractive. In credit markets, corporate spreads are in line with predicted, though elevated HY spreads reflect oil exposure. EM corporate and sovereign spreads are in line with our model results. Residuals for US IG spreads are also close to zero. On the other hand, US HY spreads are much higher relative to the model predictions, likely reflecting oil and commodity exposure. Finally, US MBS spreads are slightly tighter than predicted.

  

  We analyze the sensitivities for over 100 assets and present a summary of our findings in Figure 6. Many China-sensitive assets are vulnerable to renewed losses, as they have performed better than our model predictions. These include copper, gold, EM equities (local terms), IDR and EM corporate credit. Such assets are not necessarily cheap, either, and in some cases are still expensive based on various valuation measures. Real copper and gold prices are still well above pre-super cycle averages, and many China-sensitive currencies are still over- or fairly valued (CNY, AUD, NZD, SGD, RUB, etc). 

  EM equity valuations are relatively cheap, but the headwind from slower China growth is notable and EM FX is still an overhang. EM corporate credit versus US IG relative spreads are back to average levels, suggesting China risks are not fully priced. However, a number of high yielding EM currencies have already been hard hit and valuations are already cheap for idiosyncratic reasons (BRL, MYR, COP, ZAR). DM equities and credit are less sensitive to China, but we find that energy and materials credit spreads have risen by much more than earnings yields.

  

  

  

  

  

  

• Meet Captagon: The Drug Of Choice For Today's Anxious Jihadist

  Submitted by Michaela Whitton via TheAntiMedia.org,

  Dubbed the “jihadist’s drug,” Captagon is rapidly flooding the Middle East and is said to be fueling the bloody conflict in Syria. French media recently reported that the Paris attackers may have taken the drug.

  Last weekend, Turkish anti-narcotics police seized 11 million Captagon pills in a haul that weighed almost two tonnes. It was set to ship to Gulf countries. Widely banned since the mid-eighties, the pills provide a cheap and long-lasting high and are highly addictive. They also have the potential to cause psychosis and brain damage.

  The production of the drug, which keeps fighters awake over long periods of time, is said to be providing income for all factions involved in the Syrian war.

  During the last year, shipments of Captagon have been seized on the way to the West Bank, Jordan, Sudan, Syria and the Gulf. In October, Anti-Media reported on a Saudi prince who was arrested for trying to smuggle two tons of the drug onto a plane.

  As Syria has been engulfed in war, smugglers of the little-known, highly addictive pills have been forced to find alternate routes through Lebanon.

  Lebanese journalist Radwan Mortada has spent 10 years investigating crime, corruption, and the war in Syria. In his documentary for Journeyman Pictures, The Drug Fueling Conflict in Syria, Mortada follows the Captagon trail, from users on the battlefields to traffickers on Lebanese smuggling routes to the kingpins at the top of the supply chain.

   

  “There was no fear anymore”

  Since the Syrian war began, police in the region have continued to seize record-breaking numbers of the pills. Lebanon’s biggest haul to date was a whopping 50 million tablets with a street value of $300 million, weighing over 4 tonnes, en route to Dubai.

  In Mortada’s documentary, men in Beirut are shown crushing the pills and chopping them into lines. They describe the effects as “better than cocaine” and “really strong and like morphine — for really strong pains.” Their experience points to why Captagon has become the drug of choice for some Syrian fighters.

  “There was no fear anymore after I took Captagon,” one ex-fighter said.

  “It stops you feeling anything, you know? It makes you numb, numb,” said another, who described the first time he took the drug as making him feel physically fit.

  “If there were 10 people in front of you, you could catch them and kill them. You’re awake all the time,” he said.

  Since 2013, Captagon smuggling in Lebanon has skyrocketed. The Syrian war has not only pushed smuggling through the country, but has allowed gangs to set up makeshift Captagon factories in the country itself.

  Mortada’s documentary is the first time an illegal factory has ever been filmed. It shows the pills being packaged and disguised in packets of tissues. Factory workers reveal that they use vegetables, bread, and hair gel for smuggling in Lebanon’s home-grown Captagon trade.

  Shia militant group Hezbollah—currently fighting in Syria for the Assad regime—has also been accused of being involved in the trade after two factories were discovered on its premises.

  “Standing on their feet”

  On the surface, Abu Zeus looks just like a wealthy businessman, but he has been funding Captagon factories for years. He fled Syria when the war began and now resides in Europe. It took Mortada months to persuade him to be interviewed.

  Described as being at the top of the supply chain, Abu Zeus boasts on camera of a $6 million profit last year from trading the small pills. The Syrian brigades that have publicly named him as a benefactor number in the thousands, according to Mortada.

  Opposed to both the regime and jihadist groups, Abu Zeus brags of keeping the secular groups in Syria “standing on their feet.’’ He boasts of ‘supporting’ around 12,000 armed men.

  He claims the Saudis love the drug because of the country’s alcohol ban and admits that selling to them has made him a great deal of money. He’s adamant that his drug profits counter the money from Saudi Arabia that he believes is funding jihadist groups and destroying Syria:

  “The truth is that the country that exports terrorism to the Middle East and the protector of terrorism is Saudi Arabia,” he said.

  He continued: “The fight is not a revolution anymore, it is a fight between seculars and Salafists — a fight between countries.”

  Going some way towards explaining why Captagon is tailor-made for the battlefield—and why some have come to rely on the drug after five years of fighting—another fighter described the drug’s effects. He was frank:

  “You don’t have any problems. You don’t even thinking about sleeping or leaving the checkpoint. It gives you great courage and power,” he said.

  

  

  

  

  

• Violence Erupts In Turkey After Prominent Lawyer Is Assassinated On Live TV

  A day after Turkey arrested two journalists for their report exposing Erdogan’s weapons deliveries to “extremist groups” in Syria, confirming that no dissent to the president’s foreign policy would be allowed, today a new riot has erupted in Istanbul following the dramatic murder in broad daylight of Tahir Elci, the president of the Turkish bar association in southeastern Diyarbakir province, who was shot dead by unidentified gunmen while giving a public speech.

  A campaigner for Kurdish rights, Elci had been criticized in Turkey for saying the banned Kurdistan
  Workers Party (PKK) was not a terrorist organization, as the government
  describes it. He had, however, denounced PKK violence. He was facing trial over his comments, which had infuriated state prosecutors. A Turkish prosecutor last month demanded up to seven and a half years of prison tme for Elci on the grounds of “making propaganda of a terror organization” after remarks he made supporting the PKK.

  Just before being gunned down, Elci called for peace and the silencing of all guns.

  Öldürülen Tahir Elçi, bas?n aç?klamas?nda: “Sava?lar çat??malar silahlar operasyonlar bu alandan uzak olsun diyoruz” pic.twitter.com/vAiSF0xgi7

  — 140journos (@140journos) November 28, 2015

  Moments later TV footage showed a shoot out breaking out and plain clothes police repeatedly shooting at a figure running past them towards Elci.  He was then seen lying on the ground with blood apparently streaming from his head. He was later pronounced dead from gunshot to the head. A policeman was also killed in the gunfight.

   

   

  The killing which was captured on tape, took place while Tahir Elci was making a statement to the media.

  “The moment the statement ended, the crowd was sprayed with bullets,” Reuters cited Omer Tastan, a local official from the pro-Kurdish HDP party, as saying. “A single bullet struck Elci in the head,” he said, adding that 11 people had also been injured in the incident.

  In other words, a hit meant to take out the pro-Kurdish lawyer, staged as an attack by the very people he was defending.

  According to the state Anadolu news agency, it was Kurdish insurgents that opened fire, killing Elci, as well as a police officer, and injuring three other people, among them correspondents of the leading Turkish media organizations – the Anatolia and Dogan news agencies

  That, however,  appears to be just more state propaganda, because as journalists were quick to point out, Elci not only was a pro-Kurd activist but defended the “Terrorist” PKK, which is Erdogan’s political nemesis.

  #Turkish President #Erdogan just claimed Tahir #Elci‘s killing was work of #PKK, despite fact that Elci was pro-#Kurd activst & defended PKK

  — William Whiteman (@willmwhiteman) November 28, 2015

  Then Erdogan himself chimed in, saying “I have just learnt that Bar Association President Mr. Tahir Elçi died and a policeman was martyred,” President Recep Tayyip Erdogan said at a meeting in the northwestern province of Bal?kesir. “This incident shows how Turkey is right in its determined stance in fighting terrorism.” The irony is that according to the official narrative, Elci was somehow assassinated by the same people whom he was defending, which, needless to say, makes very little sense.

  According to Today Szaman, in a video clip of the incident taken by the Dogan News Agency, men hiding behind the minaret of a nearby mosque started firing at Elci and people standing with him. “A person ran towards Tahir Elci, fired with one hand and then started to run away. Then fighting started,” Dogan news agency reporter Felat Bozarslan said.

  The US Embassy expressed shock over Elci’s death, calling him a “courageous defender of human rights. Our condolences go to his family, that of the policeman killed and to all of Turkey. A terrible loss,” the embassy said on Twitter.

  Two policemen and a reporter of the state-run Anadolu news agency were injured in the gunfire, along with an unknown number of civilians, Dogan news agency said. One of the policeman was in critical condition, it said.

  Turkey’s People’s Democratic Party (HDP) condemned Elci’s killing which it described as an “planned assassination” and called a protest in Istanbul in a written statement.

  “In the place left by Tahir Elci, thousands more Tahir Elcis will carry on the work in the struggle for law and justice,” it said. Noting that Elçi had been targeted by the ruling Justice and Development Party (AK Party) and its media, the statement called on political parties, civil society and professional groups to “raise their voices” in protest. Metin Feyzioglu, head of the Turkish Bar Association (TBB), said he and members of the executive board of the TBB will be heading to Diyarbakir, inviting all executives of local bar associations across Turkey to join.

  16:41 #?stanbul #?stiklalCaddesi, #Diyarbak?r‘da öldürülen #TahirElçi için yürüyü? düzenleniyor. ????: Ali Asker Çakmak pic.twitter.com/dX36JxDqNy

  — 140journos (@140journos) November 28, 2015

  “This bullet has been fired at not only our brother but at Turkey as a whole. We need to show that our unity will not be undermined and this heinous attack will not succeed,” said Feyzioglu.

  And so the tension across Turkey rises even more, only this time it has nothing to do with the country’s ruinous foreign politics and everything to do with Erdogan’s relentless attempt to crackdown on all domestic political adversaries.

  Meanwhile, as summoned, at least 2000 people gathered in central Istanbul in Turkey late on Ssaturday, to protest the killing of Elci According to RT, one of the few media organizations covering today’s political violence in Turkey, police used water cannon and tear gas, ordering protesters to disperse, RT’s William Whiteman reported from the scene. He himself and an RT cameraman were also teargased during the clashes, the reporter added.

  #Diyarbak?r #Da?kap?‘daki #TahirElçi eylemine polis müdahalesi gerçekle?ti. @mahmutoral_ pic.twitter.com/QqccPQxiiM

  — 140journos (@140journos) November 28, 2015

  Protesters grew more and more angry with the police who were “being incredibly heavy-handed,” Whiteman reported, adding that people were chanting slogans accusing President Erdogan of being a “thief” and a “killer.”

  Helicopters have been heard flying low over the area, and the “violent” protests are continuing into the night.

  #Istanbul: Police repression w/ water cannon & tear gas during protests of the murder of #TahirElci. v/ @dokuz8haber pic.twitter.com/ep57evgVFW

  — ?ynd?cal??? (@syndicalisms) November 28, 2015

  #Turkey: Police repression in Istanbul during protests of the murder of #TahirElci, pro-Kurdish lawyer. @140journos pic.twitter.com/ET05c8N3DP

  — ?ynd?cal??? (@syndicalisms) November 28, 2015

  16:54 #?stanbul #Beyo?lu #Galatasaray, Polis ekipleri, TOMA ile #TahirElçi eylemine müdahale ediyor. @karataszeyno pic.twitter.com/e4FMaaFWjt

  — 140journos (@140journos) November 28, 2015

  #TahirElçi‘nin öldürülmesi sonras? saat 17’de #Galatasaray Meydan?’na eylem ça?r?s? yap?lm??t?. pic.twitter.com/KZ1cHwAWvD

  — 140journos (@140journos) November 28, 2015

  17:02 #TahirElçi protestosuna müdahalenin ard?ndan, polis #?stiklalCaddesi‘nde barikat olu?turdu. @karataszeyno pic.twitter.com/sHpThQrqsj

  — 140journos (@140journos) November 28, 2015

  17:11 #?stanbul, #TahirElçi eylemi için Galatasaray Meydan?’na ç?kmak isteyen gruplara müdahale sürüyor. @tahresrak pic.twitter.com/wmNRwOPapU

  — 140journos (@140journos) November 28, 2015

  19:01 ?stanbul #Kad?köy, Sayg? duru?uyla #TahirElçi, #Ankara ve #Suruç‘ta hayat?n? kaybedenler an?l?yor. @yarinhaber pic.twitter.com/3ro1K4XltT

  — 140journos (@140journos) November 28, 2015

  

  

  

  

  

• Shanghai Futures Exchange Appeals To Sellers: "Please Be Rational"

  While it is nowhere close to Japan’s legendary advice to bond investors what they should do in case of a financial collapse (“please do not worry“), overnight the Shanghai Futures exchange, which has seen unprecedented declines in the prices of commodities transacted on it…

  

   

  … so much so that the entire Chinese economy is now threatened by an unprecedented default wave if prices do not rebound, had some sage words of advice of its own.

  From the SFE:

  

   

  Translated:

  Members,

   

  Complex and volatile economic and financial situations in China and abroad are adding uncertainty to market. Members should remind investors to be prudent in judging market information and to be rational with investment decisions to maintain a smoothly running market.

  Translating the translation:

  “dear investors, please stop selling and be rational, or else you too will be branded “malicious sellers” and disappear forever.”

  And just in case you missed it, “after arresting hundreds of stock traders, China cracks down on “malicious” metals sellers next.”

  Coming to every banana republic near you, where only prices matter to central planners.

  

  

  

  

  

• How Turkey Exports ISIS Oil To The World: The Scientific Evidence

  Over the course of the last four or so weeks, the media has paid quite a bit of attention to Islamic State’s lucrative trade in “stolen” crude. 

  On November 16, in a highly publicized effort, US warplanes destroyed 116 ISIS oil trucks in Syria. 45 minutes prior, leaflets were dropped advising drivers (who Washington is absolutely sure are not ISIS members themselves) to “get out of [their] trucks and run away.” 

  

  The peculiar thing about the US strikes is that it took The Pentagon nearly 14 months to figure out that the most effective way to cripple Islamic State’s oil trade is to bomb… the oil.

  Prior to November, the US “strategy” revolved around bombing the group’s oil infrastructure. As it turns out, that strategy was minimally effective at best and it’s not entirely clear that an effort was made to inform The White House, Congress, and/or the public about just how little damage the airstrikes were actually inflicting. There are two possible explanations as to why Centcom may have sought to make it sound as though the campaign was going better than it actually was, i) national intelligence director James Clapper pulled a Dick Cheney and pressured Maj. Gen. Steven Grove into delivering upbeat assessments, or ii) The Pentagon and the CIA were content with ineffectual bombing runs because intelligence officials were keen on keeping Islamic State’s oil revenue flowing so the group could continue to operate as a major destabilizing element vis-a-vis the Assad regime. 

  Ultimately, Russia cried foul at the perceived ease with which ISIS transported its illegal oil and once it became clear that Moscow was set to hit the group’s oil convoys, the US was left with virtually no choice but to go along for the ride. Washington’s warplanes destroyed another 280 trucks earlier this week. Russia claims to have vaporized more than 1,000 transport vehicles in November. 

  Of course the most intriguing questions when it comes to Islamic State’s $400 million+ per year oil business, are: where does this oil end up and who is facilitating delivery? In an effort to begin answering those questions we wrote: 

  • The Most Important Question About ISIS That Nobody Is Asking
  • Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President

  Turkey’s role in facilitating the sale of Islamic State oil has been the subject of some debate for quite a while. From “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke, and an insult to the victims of the Paris attacks“, by Nafeez Ahmed:

  “Turkey has played a key role in facilitating the life-blood of ISIS’ expansion: black market oil sales. Senior political and intelligence sources in Turkey and Iraq confirm that Turkish authorities have actively facilitated ISIS oil sales through the country. Last summer, Mehmet Ali Ediboglu, an MP from the main opposition, the Republican People’s Party, estimated the quantity of ISIS oil sales in Turkey at about $800 million—that was over a year ago. By now, this implies that Turkey has facilitated over $1 billion worth of black market ISIS oil sales to date.”

  Here’s what former CHP lawmaker Ali Ediboglu said last year: 

  “$800 million worth of oil that ISIS obtained from regions it occupied this year [the Rumeilan oil fields in northern Syria — and most recently Mosul] is being sold in Turkey. They have laid pipes from villages near the Turkish border at Hatay. Similar pipes exist also at [the Turkish border regions of] Kilis, Urfa and Gaziantep. They transfer the oil to Turkey and parlay it into cash. They take the oil from the refineries at zero cost. Using primitive means, they refine the oil in areas close to the Turkish border and then sell it via Turkey. This is worth $800 million.”

  Earlier this month, Ediboglu told Russian media that “ISIL holds the key to these deposits and together with a certain group of persons, consisting of those close to Barzani and some Turkish businessmen, they are engaged in selling this oil” (“Barzani” is a reference to Masoud Barzani, President of the Iraqi Kurdistan Region). 

  But even as Turkey’s ties to the ISIS oil trade have been hiding in plain sight for the better part of two years, the Western media largely ignores the issue (or at least the scope of it and the possible complicity of the Erdogan government) because after all, Turkey is a NATO member. 

  Unfortunately for Ankara, Erdogan’s move to shoot down a Russian Su-24 near the Syrian border on Tuesday prompted an angry Vladimir Putin to throw Turkey under the ISIS oil bus for the entire world to see. Here’s what Putin said yesterday after a meeting in Moscow with French President Francois Hollande: 

  “Vehicles, carrying oil, lined up in a chain going beyond the horizon. The views resemble a living oil pipe stretched from ISIS and rebel controlled areas of Syria into Turkey. Day and night they are going to Turkey. Trucks always go there loaded, and back from there – empty. We are talking about a commercial-scale supply of oil from the occupied Syrian territories seized by terrorists. It is from these areas [that oil comes from], and not with any others. And we can see it from the air, where these vehicles are going.”

  “We assume that the top political leadership of Turkey might not know anything about this [illegal oil trade although that’s] hard to believe,” Putin continued, adding that “if the top political leadership doesn’t know anything about this, let them find out.”

  

  Obviously, Putin is being sarcastic. He very clearly believes that the Erdogan government is heavily involved in the transport and sale of ISIS crude. In the immediate aftermath of the Su-24 incident, Putin said the following about Ankara:

  • PUTIN: OIL FROM ISLAMIC STATE IS BEING SHIPPED TO TURKEY
  • PUTIN SAYS ISLAMIC STATE GETS CASH BY SELLING OIL TO TURKEY

  As part of our continuing effort to track and document the ISIS oil trade, we present the following excerpts from a study by George Kiourktsoglou, Visiting Lecturer, University of Greenwich, London and Dr Alec D Coutroubis, Principal Lecturer, University of Greenwich, London. The paper, entitled “ISIS Gateway To Global Crude Oil Markets,” looks at tanker charter rates from the port of Ceyhan in an effort to determine if Islamic State crude is being shipped from Southeast Turkey. 

  *  *  *

  From “ISIS Gateway To Global Crude Oil Markets“

  The tradesmen/smugglers responsible for the transportation and sale of the black gold send convoys of up to thirty trucks to the extraction sites of the commodity. They settle their trades with ISIS on site, encouraged by customer friendly discounts and deferred payment schemes.  In this way, crude leaves Islamic State-run wells promptly and travels through insurgent-held parts of Syria, Iraq and Turkey. 

  Since allied U.S. air-raids do not target the truck lorries out of fear of provoking a backlash from locals, the transport operations are being run efficiently, taking place most of times in broad daylight. Traders lured by high profits are active in Syria (even in government-held territories), Iraq and south-east Turkey.

  The supply chain comprises the following localities: Sanliura, Urfa, Hakkari, Siirt, Batman, Osmaniya, Gaziantep, Sirnak, Adana, Kahramarmaras, Adiyaman and Mardin. The string of trading hubs ends up in Adana, home to the major tanker shipping port of Ceyhan. 

  
  

  Ceyhan is a city in south-eastern Turkey, with a population of 110,000 inhabitants, of whom 105,000 live in the major metropolitan area. It is the second most developed and most populous city of Adana Province, after the capital Adana with a population of 1,700,000. It is situated on the Ceyhan River which runs through the city and it is located 43 km east of Adana. Ceyhan is the transportation hub for Middle Eastern, Central Asian and Russian oil and natural gas (Municipality of Ceyhan 2015).

  

  The port of Ceyhan plays host to a marine oil terminal that is situated in the Turkish Mediterranean and has been operating since 2006. It receives hydrocarbons for further loading in tankers, which carry the commodity to world markets.

  Additionally, the port features a cargo pier and an oil-terminal, both of 23.2m depth that can load tankers of more than 500 feet in length (Ports.com 2015). The annual export capacity of the terminal runs as high as 50 million tonnes of oil. The terminal is operated by Botas International Limited (BIL), a Turkish state company that also operates the Baku-Tbilisi-Ceyhan pipeline on the territory of Turkey. 

  The quantities of crude oil that are being exported to the terminal in Ceyhan, exceed the mark of one million barrels per day. Putting this number into context and given that ISIS has never been able to trade daily more than 45,000 barrels of oil (see Section 2, ‘The Upstream Oil Business of ISIS’, page 2), it becomes evident that the detection of similar quantities of smuggled crude cannot take place through stock-accounting methods. However, the authors of the present paper believe that there is another proxy-indicator, far more sensitive to quantities of ultracheap smuggled crude. This is the charter rates for tankers loading at Ceyhan.

  The Baltic Exchange (2015 a) tracks the charter rates on major seaborne trading routes of crude oil. To render its service more efficient and easily understood, it uses the system of Baltic Dirty Tanker Indices (Baltic Exchange 2015 b). One of these indices used to be the BDTI TD 11, 80,000 Cross Mediterranean from Baniyas, Syria to Laveras, France (see Map VI). Route 11 was discontinued in September 2011, due to Syria’s civil war and soon thereafter, it was replaced by BDTI TD 19 (TD19-TCE_Calculation 2015), of exactly the same technical specifications as BDTI TD 11, with the exception of the loading port of Ceyhan instead of Baniyas.

  From July 2014 until February 2015, the curve of TD 19 features three unusual spikes that do not match the trends featured by the rest of the Middle East trade-routes (see Graph IV): 

  1. The first spike develops from the 10th of July 2014 until the 21st, lasting approximately ten days. It coincides with the fall of Syria’s largest oil field, the AlOmar, in the hands of ISIS (Reuters 2014); 
  2. The second spike takes place from the end of October until the end of November 2014, lasting one month. It happens at the same time with fierce fighting between fundamentalists and the Syrian army over the control of the Jhar and Mahr gas fields, as well as the Hayyan gas company in the east of Homs province (International Business Times 2014; Albawada News 214); 
  3. The third spike lasts from the end of January 2015 until the 10th of February, stretching roughly ten days. It happens simultaneously with a sustained US-led campaign of airstrikes pounding ISIS strongholds in and around the town of Hawija east of the oil-rich Kirkuk (Rudaw 2015);

  

   

  The authors of this paper would like to make it clear from the very beginning that this has not been the case of a ‘smoking gun’. The evidence has been inconclusive. But even if volumes of ISIS crude found their way, beyond any reasonable doubt, to the international crude oil markets via the Ceyhan terminal, this fact would not conclusively point to collusion between the Turkish authorities and the shadow network of smugglers, let alone ISIS operatives.

  However, having clarified such a politically sensitive issue, the authors believe that there are strong hints to an illicit supply chain that ships ISIS crude from Ceyhan. Primary research points to a considerably active shadow network of crude oil smugglers and traders (see section 2.1, page 3), who channel ISIS crude to southeast Turkey from northeast Syria and northwest Iraq. Given the existence of Route E 90, the corresponding transportation of oil poses no unsurmountable geographic and topological challenges.

  An additional manifestation of the invisible nexus between Ceyhan and ISIS became evident through the concurrent study of the tanker charter rates from the port and the timeline of the terrorists’ military engagements (see section 3.4 on this page). It seems that whenever the Islamic State is fighting in the vicinity of an area hosting oil assets, the 13 exports from Ceyhan promptly spike. This may be attributed to an extra boost given to crude oil smuggling with the aim of immediately generating additional funds, badly needed for the supply of ammunition and military equipment. Unfortunately, in this case too, the authors cannot be categorical.

  *  *  *

  No, it can’t be categorical and frankly, if the authors claimed to have discovered indisputable proof, we would be immediately skeptical. What they have done however, is identify a statistical anomaly and develop a plausible theory to explain it.

  The key thing to note, is that this is a state-run terminal and it certainly seems as though charter rates spike around significant oil-related events involving Islamic State. Indeed, the fact that the authors mention collusion between Turkish authorities and ISIS operatives (even if they do so on the way to hedging their conclusions) indicates that the researchers think such a partnership is possible. 

  

  Finally, note that Ceyhan is less than two hours by car from Incirlik air base from which the US is flying anti-ISIS sorties. In other words, ISIS oil is being shipped to the world right down the road from Washington’s preferred Mid-East forward operating base.

  Now that we can add what looks like quantitative evidence that ISIS oil is shipped from Turkey to the voluminous qualitative evidence supplied by ex-Turkish lawmakers, investigative reporters, and the Russian government (to name just a few sources), we can now proceed to consider one final question: where does the crude that helps to fund Bakr al-Baghdadi’s caliphate ultimately end up? More on that over the weekend.

  

  

  

  

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