- Russian Navy To Deploy 30 Poseidon Strategic Underwater Nuclear Drones
On Saturday, a defense industry source told TASS News that the Russian Navy is preparing to deploy more than 30 Poseidon strategic nuclear-capable underwater drones on combat duty.
“Two Poseidon-carrying submarines are expected to enter service with the Northern Fleet and the other two will join the Pacific Fleet. Each of the submarines will carry a maximum of eight drones and, therefore, the total number of Poseidons on combat duty may reach 32 vehicles,” the source said.
Poseidon, previously known by the Russian codename Status-6, is designed to create a tsunami wave up to 1,600 ft. tall and wipe out enemy vessels and marine bases, which would then contaminate the area with radioactive isotopes.
President Vladimir Putin first unveiled the strategic drone propelled by a miniaturized nuclear reactor at his state-of-the-nation address to both houses of the Russian parliament back in March.
“In his state-of-the-nation address to both houses of Russia’s parliament on March 1, Russian President Putin mentioned for the first time the country’s efforts to develop a nuclear-powered unmanned underwater vehicle that can carry both conventional and nuclear warheads and is capable of destroying enemy infrastructural facilities, aircraft carrier groups and other targets,” TASS said in a Dec. report.
Last month, we documented how the Russian Navy started underwater trials of the drone, which a source told TASS that, “in the sea area protected from a potential enemy’s reconnaissance means, the underwater trials of the nuclear propulsion unit of the Poseidon drone are underway.”
For the trial, the Russian Navy is using one of its nuclear-powered submarines as the drone’s carrier during the test, the source said.
The defense source also said the Poseidon drone is included in the state armament program from 2018 to 2027.
Poseidon is a weapon of last resort. It will also function as a deterrent against Western forces. The drone can travel at speeds of up to 60 to 185 mph, with a range of 6,200 miles and a maximum depth of 3,300 ft. The drone is cloaked by stealth technology to elude acoustic tracking devices. Its size has been estimated at 5 ft. wide and 78 ft. long.
The source drone is capable of carrying a nuclear warhead with a yield of up to 2 megatonnes, enough to destroy a Western naval base and or an entire aircraft carrier battle group.
- The Rise Of Eurasia: Geopolitical Advantages & Historic Pitfalls
Authored by James Dorsey via MidEastSoccer blog,
Asian players are proving to be conceptually and bureaucratically better positioned in the 21st century’s Great Game that involves tectonic geopolitical shifts with the emergence of what former Portuguese Europe minister Bruno Macaes terms the fusion of Europe and Asia into a “supercontinent.”
Yet, in contrast to the United States, Asian players – despite approaching Europe and Asia as one political, albeit polarized and disorganized entity populated by widely differing and competing visions – may find that their historic legacies work against them.
Writing in The National Interest, US Naval College national security scholar Nikolas K. Gvosdev argued that the United States, for example, was blinded to the shifts by the State Department’s classification of Russia as part of Europe, its lumping of Central Asia together with Pakistan and India and the Pentagon’s association of the region with the Arab world and Iran.
“The (State Department’s) continued inclusion of Russia within the diplomatic confines of a larger European bureau has intellectually limited assessments about Russia’s position in the world by framing Russian action primarily through a European lens. Not only does this undercount Russia’s ability to be a major player in the Middle East, South Asia and East Asia, it has also, in my view, tended to overweight the importance of the Baltic littoral to Russian policy,” Mr. Gvosdev said.
He warned that the US government’s geographical classification of Central Asia, Eurasia’s heartland has “relegated it to second-tier status in terms of U.S. attention and priorities.”
US failure to get ahead of the tectonic shifts in global geopolitics contrasts starkly with the understanding of Central Asian nations that they increasingly exist in an integrated, interconnected region that cannot isolate itself from changes enveloping it.
That understanding is reflected in a report by the Astana Club that brings together prominent political figures, diplomats, and experts from the Great Game’s various players under the auspices of Kazakh president Nursultan Nazarbayev.
Entitled, ‘Toward a Greater Eurasia: How to Build a Common Future?,’ the report warns that the Eurasian supercontinent needs to anticipate the Great Game’s risks that include mounting tensions between the United States and China; global trade wars; arms races; escalating conflict in the greater Middle East; deteriorating relations between Russia and the West; a heating up of contained European conflicts such as former Yugoslavia; rising chances of separatism and ethnic/religious conflict; and environmental degradation as well as technological advances.
The report suggested that the risks were enhanced by the fragility of the global system with the weakening of multilateral institutions such as the United Nations, the World Trade Organization and NATO.
Messrs. Nazarbayev, Russian president Vladimir Putin and Turkish president Recep Tayyip Erdogan may be better positioned to understand the shifts given that they govern territories at the heart of the emerging Eurasian supercontinent and see it as an integral development rooted in their countries’ histories.
Then Turkish foreign minister Ahmet Davutoglu made as much clear in 2013. “The last century was only a parenthesis for us. We will close that parenthesis. We will do so without going to war, or calling anyone an enemy, without being disrespectful to any border; we will again tie Sarajevo to Damascus, Benghazi to Erzurum to Batumi. This is the core of our power. These may look like different countries to you, but Yemen and Skopje were part of the same country a hundred and ten years ago as were Erzurum and Benghazi,” Mr. Davutoglu said drawing a picture of a modern day revival of the Ottoman empire. Mr. Erdogan has taken that ambition a step further by increasingly expanding it to the Turkic and Muslim world.
At its core, Erdogan’s vision, according to Eurasia scholar Igor Torbakov, is built on the notion that the world is divided into distinct civilizations. And upon that foundation rise three pillars: 1) a just world order can only be a multipolar one; 2) no civilization has the right to claim a hegemonic position in the international system; and 3) non-Western civilizations (including those in Turkey and Russia) are in the ascendant. In addition, anti-Western sentiment and self-assertiveness are crucial elements of this outlook.
Expressing that sentiment, Turkish bestselling author and Erdogan supporter Alev Alati quipped:
“We are the ones who have adopted Islam as an identity but have become so competent in playing chess with Westerners that we can beat them. We made this country that lacked oil, gold and gas what it is now. It was not easy, and we won’t give it up so quickly.”
The Achilles Heel, however, of Mr. Putin and Mr. Erdogan’s Eurasianism is the fact that its geographies are populated by former empires like the Ottomans and Russia whose post-imperial notions of national identity remain contested and drive its leaders to define national unity as state unity, control the flow of information, and repress alternative views expressions of dissent.
Turkey and Russia still “see themselves as empires, and, as a general rule, an empire’s political philosophy is one of universalism and exceptionalism. In other words, empires don’t have friends – they have either enemies or dependencies,” said Mr. Torbakov, the Eurasia scholar, or exist in what Russian strategists term “imperial or geopolitical solitude.”
Mr. Erdogan’s vision of a modern-day Ottoman empire encompasses the Turkic and Muslim world. Different groups of Russian strategists promote concepts of Russia as a state that has to continuously act as an empire or as a unique “state civilization” devoid of expansionist ambition despite its premise of a Russian World that embraces the primacy of Russian culture as well as tolerance for non-Russian cultures. Both notions highlight the pitfalls of their nations’ history and Eurasianism.
Both Mr. Erdogan and Russia’s vision remain controversial. In Mr. Erdogan’s case it is the Muslim more than the Turkic world that is unwilling to accept Turkish leadership unchallenged with Saudi Arabia leading the charge and Turkish-Iranian relations defined by immediate common interests rather than shared strategic thinking.
Similarly, post-Soviet states take issue with Russia’s notion of the primacy of its culture. Beyond the Russian-Ukrainian conflict over the annexation of Crimea and Moscow’s support for Russian-speaking rebels in the east of the country, Ukraine emphasized its rejection of Russian cultural primacy with this month’s creation of a Ukrainian Orthodox Church independent of its Russian counterpart.
Earlier, Ukraine’s parliament passed a law in September 2017 establishing Ukrainian rather than Russian as the language of instruction in schools and colleges. The law stipulated that educational institutions could teach courses in a second language, provided it was an official language of the European Union. National minorities were guaranteed the right to study in Ukrainian as well as their minority language.
Similarly, Kazakhstan, the Eurasian nation par excellence, shifted from Cyrillic to Latin script.
“Russia’s influence (in Central Asia) has been largely mythologized, and its role in both national and regional security has not been properly and honestly discussed. Different fears and phobias still influence the decision-making process, including those over Russia’s aggression in Ukraine, its annexation of Crimea, the concept of the ‘Russian World’ as a pillar of its national identity, and its soft power,” said Kazakh Central Asia scholar Anna Gussarova.
Ukraine may put a dent in the Russian World’s attractivity, but it does not amount to a body blow.
Ms. Gussarova cautioned that while Central Asian elites may recognize the risks involved in embracing Russian primacy, the region’s public remains far more aligned with Russian culture, at least linguistically.
“Whereas the expert community, which is supposed to shape public opinion, uses the English-language platforms Facebook and Twitter, the general public relies on Russian-language social media. This dichotomy underscores the limitations of any effort by the government and affiliated experts to shape public perceptions. At the same time, this gap shows greater public support for Russia and its activities, which makes nation building and language issues difficult and sensitive,” Ms. Gussarova said.
- "Erratic Movement" In Earth's Magnetic Field Threaten Global Navigation
Earth’s magnetic field, otherwise known as the geomagnetic field, is the magnetic field that extends from the Earth’s inner core out into space, where it deflects harmful radiation from the Sun.
But now something bizarre is taking place. Earth’s north magnetic pole has been rapidly shifting away from Canada and towards the Siberian Federal District, driven mostly by liquid iron churning deep within the planet’s core.
“The magnetic pole is moving so quickly that it has forced the world’s geomagnetism experts into a rare move,” Nature reported.
On January 30 (delayed due to the US Government shutdown), the World Magnetic Model (WMM), a large spatial-scale representation of the Earth’s magnetic field, will be updated.
WMM is the standard geomagnetic model of the US Department of Defense (DoD), the Ministry of Defence (United Kingdom), the North Atlantic Treaty Organization (NATO), and the World Hydrographic Office (WHO) navigation and attitude/heading reference.
The current model was expected to be valid until 2020, but extraordinarily large and erratic movements of the north magnetic pole have been realized and had to be fixed immediately.
“They realized that it was so inaccurate that it was about to exceed the acceptable (safe) limit for navigational errors,” Nature said.
Geophysicists from the US National Oceanic and Atmospheric Administration (NOAA) and the British Geological Survey regularly monitor the current state of Earth’s magnetic field.
Nature said consistent monitoring is necessary because liquid iron churning in the Earth’s core does not move in a uniform manner.
The movement of the north magnetic pole has been studied since 1831. Initially, it was tracked moving into the Arctic Ocean at a rate of about 9.3 miles each year. But, since the mid-1990s, it has accelerated.
It is now moving at a rate of about 34.17 miles per year.
However, geophysicists are not exactly sure why the magnetic field is shifting so quickly.
“Geomagnetic pulses, like the one that happened in 2016, might be traced back to ‘hydromagnetic’ waves arising from deep in the core,” Nature reported. “And the fast motion of the north magnetic pole could be linked to a high-speed jet of liquid iron beneath Canada.”
This fast-flowing molten river appears to be weakening the magnetic influence of the iron core beneath North America.
“The location of the north magnetic pole appears to be governed by two large-scale patches of magnetic field, one beneath Canada and one beneath Siberia,” Phil Livermore of the University of Leeds told an American Geophysical Union meeting. “The Siberian patch is winning the competition.”
In the meantime, geophysicists are trying to figure out why the magnetic field is shifting.
Most obviously, there is a significant gap in the WMM model that is not being released for another two weeks because of the US Government shutdown. With a potential breach in the acceptable limit for navigational errors, navigation systems that are heavily reliant on the Earth’s geomagnetic field could experience disruption.
Geophysicists do note that Earth can undergo a “geomagnetic reversal,” where these magnetic poles switch sides. The last time this happened was 781,000 years ago, but it is believed to have occurred every 20,000 to 30,000 years over the last 20 million years.
Could the erratic motion of the north magnetic pole be a hint that a “geomagnetic reversal” is already underway? If so, what are the consequences for planet Earth?
- A New Cold War Has Begun (With China, Not Russia)
Authored by Robert Kaplan via ForeignPolicy.com,
The United States and China will be locked in a contest for decades. But Washington can win if it stays more patient than Beijing…
In June 2005, I published a cover story in the Atlantic, “How We Would Fight China.” I wrote that, “The American military contest with China … will define the twenty-first century. And China will be a more formidable adversary than Russia ever was.” I went on to explain that the wars of the future would be naval, with all of their abstract battle systems, even though dirty counterinsurgency fights were all the rage 14 years ago.
That future has arrived, and it is nothing less than a new cold war: The constant, interminable Chinese computer hacks of American warships’ maintenance records, Pentagon personnel records, and so forth constitute war by other means. This situation will last decades and will only get worse, whatever this or that trade deal is struck between smiling Chinese and American presidents in a photo-op that sends financial markets momentarily skyward. The new cold war is permanent because of a host of factors that generals and strategists understand but that many, especially those in the business and financial community who populate Davos, still prefer to deny. And because the U.S.-China relationship is the world’s most crucial—with many second- and third-order effects—a cold war between the two is becoming the negative organizing principle of geopolitics that markets will just have to price in.
This is because the differences between the United States and China are stark and fundamental. They can barely be managed by negotiations and can never really be assuaged.
The Chinese are committed to pushing U.S. naval and air forces away from the Western Pacific (the South and East China seas), whereas the U.S. military is determined to stay put. The Chinese commitment makes perfect sense from their point of view. They see the South China Sea the way American strategists saw the Caribbean in the 19th and early 20th centuries: the principal blue water extension of their continental land mass, control of which enables them to thrust their navy and maritime fleet out into the wider Pacific and the Indian Ocean, as well as soften up Taiwan. It is similar to the way dominance over the Caribbean enabled the United States to strategically control the Western Hemisphere and thus affect the balance of forces in the Eastern Hemisphere in two world wars and a cold war. For the United States, world power all began with the Caribbean, and for China, it all begins with the South China Sea.
But the Americans will not budge from the Western Pacific. The U.S. defense establishment, both uniformed and civilian, considers the United States a Pacific power for all time: Witness Commodore Matthew Perry’s opening of Japan to trade in 1853, America’s subjugation and occupation of the Philippines starting in 1899, the bloody Marine landings on a plethora of Pacific islands in World War II, the defeat and rebuilding of Japan following World War II, the Korean and Vietnam wars, and, most important, Washington’s current treaty alliances stretching from Japan south to Australia. This is an emotional as well as a historical commitment: something I have personally experienced as an embed on U.S. military warships in the Western Pacific.
In fact, the U.S. Defense Department is much more energized by the China threat than by the Russia one. It considers China, with its nimble ability as a rising technological power—unencumbered by America’s own glacial bureaucratic oversight—to catch up and perhaps surpass the United States in 5G networks and digital battle systems. (Silicon Valley is simply never going to cooperate with the Pentagon nearly to the degree that China’s burgeoning high-tech sector cooperates with its government.) China is the pacing threat the U.S. military now measures itself against.
This American refusal to yield blue water territory to China is championed by liberal hawks who will likely staff any incoming Democratic administration’s Asia portfolios, to say nothing of the Republicans—both pro- and anti-President Donald Trump. As for the so-called restrainers and neo-isolationists, when you boil it right down, they are really about getting American ground troops out of the Middle East, something that may actually strengthen the U.S. position against China. And as for left-wing Democratic progressives, when it comes to a hard line on trade talks with China, they are not too far away from Trump’s own economic advisors. Remember that the Democratic candidate Hillary Clinton was forced to publicly disown the Trans-Pacific Partnership free trade agreement because of pressure from her own party. The fact is, since President Richard Nixon went to China in 1972, U.S. policy toward the Pacific has been notably consistent whatever party has held the White House, and the turn against China has likewise been a bipartisan affair—and thus unlikely to be dramatically affected by any impeachment or presidential election.
Regarding the trade talks themselves, what really riles both the Trumpsters and the Democrats (moderates and progressives alike) is the very way China does business: stealing intellectual property, acquiring sensitive technology through business buyouts, fusing public and private sectors so that their companies have an unfair advantage (at least by the mores of a global capitalistic trading system), currency manipulation, and so on. Trade talks, however successful, will never be able to change those fundamentals. China can adjust its business model only at the margins.
And because economic tensions with China will never significantly lessen, they will only inflame the military climate. When a Chinese vessel cut across the bow of an American destroyer, or China denied entry of a U.S. amphibious assault ship to Hong Kong—as happened last fall—this cannot be separated from the atmosphere of charged rhetoric over trade. With the waning of the liberal world order, a more normal historical era of geopolitical rivalry has commenced, and trade tensions are merely accompaniments to such rivalry. In order to understand what is going on, we have to stop artificially separating U.S.-China trade tensions and U.S.-China military tensions.
There is also the ideological aspect of this new cold war. For several decades, China’s breakneck development was seen positively in the United States, and the relatively enlightened authoritarianism of Deng Xiaoping and his successors was easily tolerated, especially by the American business community. But under Xi Jinping, China has evolved from a soft to a hard authoritarianism. Rather than a collegial group of uncharismatic technocrats constrained by retirement rules, there is now a president-for-life with a budding personality cult, overseeing thought control by digital means—including facial recognition and following the internet searches of its citizens. It is becoming rather creepy, and American leaders of both parties are increasingly repelled by it. This is also a regime that in recent years has been imprisoning up to a million ethnic Uighur Muslims in hard labor camps. The philosophical divide between the American and Chinese systems is becoming as great as the gap between American democracy and Soviet communism.
Keep in mind that technology encourages this conflict rather than alleviates it. Because the United States and China now inhabit the same digital ecosystem, wars of integration—where the borders are not thousands of miles, but one computer click away—are possible for the first time in history: China can intrude into U.S. business and military networks as the United States can intrude into theirs. The great Pacific Ocean is no longer the barrier that it once was. In a larger sense, it has been the very success of decades of capitalist and pseudo-capitalist economic development throughout the Pacific that has generated the wealth required to engage in such a high-end military-cum-cyber arms race. Truly, the new age of warfare would be impossible without the economic prosperity that has preceded it: The glass is half-empty precisely because it is half-full. This is a theme of Yale Professor Paul Bracken’s prescient 1999 book, Fire in the East: The Rise of Asian Military Power and the Second Nuclear Age.
The good news is that all this may not lead to a bloody war. The bad news is that it well might. I believe the chances of a violent exchange are still nowhere near the 50 percent baseline, where warfare becomes probable rather than merely possible. Nevertheless, the chances have increased significantly. This has to do with more than merely the famous Thucydidean paradigm of fear, honor, and interest. It has to do with just how emotional the Chinese can get over an issue like Taiwan, for example, and how easy it is for air and naval incidents (and accidents) to spiral out of control. The more the countries fight over trade, and the closer Chinese and American warships get to each other in the South China Sea, over time the less control the two sides will actually have over events. As we all know, many wars have begun even though neither side saw it in its interest to start one. And a hot conflict in the South or East China Sea will affect the world financial system much more than the collapse of Iraq, Syria, Libya, or Yemen.
What kept the Cold War from going hot was the fear of hydrogen bombs. That applies much less to this new cold war. The use of nuclear weapons and the era of testing them in the atmosphere keeps receding from memory, making policymakers on both sides less terrified of such weapons than their predecessors were in the 1950s and 1960s, especially since nuclear arsenals have become smaller in terms of both size and yield, as well as increasingly tactical. Moreover, in this new era of precision-guided weaponry and potentially massive cyberattacks, the scope of nonnuclear warfare has widened considerably. Great-power war is now thinkable in a way that it wasn’t during the first Cold War.
What we really have to fear is not a rising China but a declining one. A China whose economy is slowing, on the heels of the creation of a sizable middle class with a whole new category of needs and demands, is a China that may experience more social and political tensions in the following decade. A theme of the late Harvard political scientist Samuel Huntington’s 1968 book, Political Order in Changing Societies, is that as states develop large middle classes, the greater the possibility is for political unrest. This will encourage China’s leadership to stoke nationalism even further as a means of social cohesion. While skeptics, particularly in the world business community, see the South and East China seas as constituting just a bunch of rocks jutting out into the water, the Chinese masses don’t see it that way. To them, almost like Taiwan, the South China Sea is sacred territory. And the only fact that prevents China from becoming even more aggressive in the East China Sea is the fear that Japan could defeat it in an open conflict—something that would so humiliate Beijing’s leadership that it could call into question the stability of the Communist Party itself. So China will wait a number of years until it surpasses Japan in naval and air power. Beijing’s rulers know how closely their strategy dovetails with the feelings of the Chinese masses. Indeed, this new cold war is more susceptible to irrational passions fueled by economic disruptions than the old Cold War.
In the second half of the 20th century, the United States and the Soviet Union each had internal economies-of-scale (however different from each other), that were far better protected from the destabilizing forces of globalization than the American and Chinese economies are now. It is precisely the fusion of military, trade, economic, and ideological tensions, combined with the destabilization wrought by the digital age—with its collapse of physical distance—that has created an unvirtuous cycle for relations between the United States and China.
The geopolitical challenge of the first half of the 21st century is stark: how to prevent the U.S.-China cold war from going hot.
Preventing a hot war means intensified diplomacy not only from the State Department but also from the Pentagon—American generals talking and visiting with Chinese generals in order to create a network of relationships that are the equivalent of the old Cold War hotline. This diplomacy must avoid the temptation of reducing the American-Chinese relationship to one contentious theme, be it trade or the South China Sea. It can mean playing hard on trade but always keeping the public rhetoric cool and reasoned. Passion becomes the real enemy in this competition, because in the megaphone world of global social media, passion stirs the impulse to assert status, which has often been a principal source of wars. And it means most of all stealing a concept from the American diplomat George Kennan’s playbook on containment: Be vigilant, but be always willing to compromise on individual issues and in crises. Wait them out.Because, in a very different way than the old Soviet system, the Chinese system—the more authoritarian it gets—is over time more prone to crack up than America’s.
- Dramatic Video Shows Secret Police Seizing Venezuelan Opposition Leader On Busy Highway
Following news that Venezuelan secret police seized and then quickly released prominent opposition leader Juan Guaidó on Sunday, dramatic video emerged online which shows the violent arrest on a busy highway.
The 35-year-old head of Venezuela’s opposition-run parliament, who some argue is the rightful president of the country after last Thursday’s swearing in ceremony of Nicolás Maduro for a second six-year term in what the US and other countries have deemed “illegitimate”, was reportedly on his way to a political rally on Sunday when his car was stopped by masked and armed security forces.
Juan Guaidó addressed supporters at a political rally after his brief detention Sunday, via AFP After the men — reportedly members of Venezuela’s SEBIN political police (or Bolivarian National Intelligence Service) — struggle to force their way into Guaido’s vehicle with traffic halted, they appear to commandeer it and drive off.
His official twitter account confirmed that he’d been detained, with his political party issuing a statement that he was then released less than two hours later.
His wife, Fabiana Rosales, and daughter were reportedly traveling with him at the time, along with two foreign journalists, one from CNN en Español, who were also briefly detained.
Dramatic video showing the moment secret police rushed and seized Guaidó:
Urgente…..vean como fue el secuestro de @GuaiF Narcodictadura asesina pic.twitter.com/pUO53nVrH4
— Antonio Ledezma (@alcaldeledezma) January 13, 2019
https://platform.twitter.com/widgets.js
As the president of the National Assembly of Venezuela Guaidó stirred controversy following Maduro’s contested re-election by challenging Maduro’s rule in saying he was the only “legitimate power” that the Venezuelan people look to. He said at a political rally on Friday:
As President of the National Assembly, the only elected and legitimate power to represent the Venezuelan people, I have a responsibility to Venezuela: I stand by the Constitution…
Internationally pundits saw this as a significant challenge to Maduro’s contested presidency as a direct, combative declaration that it remains illegal and invalid.
According to The Guardian:
On Friday the politician threw down the gauntlet to Hugo Chávez’s heir, telling a rally Maduro was an illegitimate “usurper” and declaring that he therefore had the constitutional right to assume leadership of the country until fresh elections were held. Several regional powers, including Brazil and Colombia, voiced support for that move.
Several Latin American leaders and groups immediately condemned Guaido’s brief detention, which was clearly orchestrated to send a strong message that opposing the Maduro regime would be met with swift and severe punishment.
The head of the Organization of American States, Luis Almagro, expressed his “absolute condemnation” of what he said was “the kidnapping of Venezuela’s interim president”. “The international community must stop the crimes of Maduro and his goons,” Almagro tweeted.
Meanwhile, Venezuela’s communications minister, Jorge Rodríguez, painted the whole thing as a misunderstanding, calling the detention a “unilateral and irregular” act carried out by “rogue agents”, and claimed further those responsible would be dismissed. But in a separate interview with RT Spanish Rodriguez bizarrely claimed that “there was actually no detention. Several security service employees acted on their own and carried out an unlawful act at the Caracas highway.”
But previous to the violent arrest, Venezuela’s chavista prison minister, María Iris Varela Rangel, had tweeted a direct threat to Guaidó after his challenge to Maduro. She said:
I’ve already prepared your cell and your uniform, I hope you name your cabinet quickly so I know who is going down with you.
Immediately after his release on Sunday, Guaidó pointed out that Maduro’s administration seems panicked and divided. “Look what they are doing. They are desperate in [the presidential palace] Miraflores! They don’t know who is giving the orders!” he said, calling on citizens and military members alike to unite against Maduro’s rule.
- Doug Casey On Alexandria Ocasio-Cortez: "Evil On A Basic Level"
Justin’s note: America can’t stop talking about Alexandria Ocasio-Cortez (AOC).
AOC, if you haven’t heard, is a 29-year-old democratic socialist. Earlier this month, she became the youngest woman ever elected to Congress.
And that concerns me. I say this because her platform is every socialist’s dream. She wants Medicare to be free. She wants college education to be free. She wants to cancel student debt. She wants to hike the minimum wage to $15. And she wants to replace oil and gas with green energy by 2030.
Now, I realize these ideas might sound good to some people. But none of this would come free. It would require massive tax hikes and a lot more national debt.
In short, she’s advocating for policies that often destroy entire economies.
Yet, she’s one of today’s most popular political figures.
I wanted to see what Casey Research founder Doug Casey thinks of AOC and her policies. So I got him on the phone to discuss his thoughts for this week’s Conversations With Casey…
Justin: Doug, AOC has been getting a lot of press lately. What are your thoughts on her? Specifically, what do you think of her platform and her idea for a Green New Deal?
Doug: Most likely she’s the future of the Democratic Party – and of the U.S. Why? She’s cute, vivacious, charming, different, outspoken, and has a plan to Make America Great Again. And she’s shrewd. She realized she could win by ringing doorbells in her district, where voter turnout was very low, and about 70% are non-white. There was zero motivation for residents to turn out for the tired, corrupt, old hack of a white man she ran against.
She’s certainly politically astute – but doesn’t seem very intelligent. In fact, she’s probably quite stupid. But let’s define the word stupid, otherwise, it’s just a meaningless pejorative – name-calling.
But in fact it doesn’t seem like she has a very high IQ. I suspect that if she took a standardized IQ test, she’d be someplace in the low end of the normal range. But that’s just conjecture on my part, entirely apart from the fact a high IQ doesn’t necessarily correlate with success. Besides, there are many kinds of intelligence – athletic, aesthetic, emotional, situational…
A high IQ can actually be a disadvantage in getting elected. Remember it’s a bell-shaped curve; the “average” person isn’t terribly smart, compounded by the fact half the population has an IQ of less than 100. And they’re suspicious of anyone who’s more than, say, 15 points smarter than they are.
However, there are better ways to define stupid than “a low score on an IQ test,” that apply to Alexandria. Stupid is the inability to not just predict the immediate and direct consequences of actions, but especially the indirect and delayed consequences of your actions.
She’s clearly unable to do that. She can predict the immediate and direct consequences of the policies she’s promoting – everybody getting excited about liberating all other people’s wealth that just seems to be sitting around. Power to the People, and Alexandria! But she’s unable to see the indirect and delayed consequences of her policies – which I hope I don’t have to explain to anyone now reading this.
If you promise people unicorns, lollipops, and free everything, they’re going to say, “Gee, I like that, let’s do it.” She’s clever on about a third grade level.
But there’s an even better definition of stupid. Namely, “an unwitting tendency to self-destruction.” All the economic ideas that she’s proposing are going to wind up absolutely destroying the country.
It’s as if she thinks that what’s happened recently in Venezuela, Zimbabwe – not to mention Mao’s China, the Soviet Union, and a hundred other places – was a good thing.
That’s my argument for her being stupid. And ignorant as well. But perhaps I’m missing something. After all, Karl Marx was both highly intelligent, and extremely knowledgeable; he was actually a polymath. The same can be said of many academics, left-wing economists, and socialist theoreticians.
So perhaps a desire for “socialism” isn’t just an intellectual failing. It’s actually a moral failing.
Justin: What do you mean?
Doug: Socialism is basically about the forceful control of other people’s lives and property.
I’m afraid Alexandria is evil on a basic level. I know that sounds silly. How can that be true of a cute young girl who says she wants just sunshine and unicorns for everybody? It’s too bad the word “evil” has been so compromised, so discredited, by the people who use it all the time – bible-thumpers, hysterics, and religious fanatics. Evil shouldn’t be associated with horned demons and eternal perdition. It just means something destructive, or recklessly injurious.
The world would be better off if she went back to waitressing and bartending.
Justin: Why do you think she’s resonating with so many people then? Is it because she represents something different from status quo, or is it because people actually like her ideas?
Doug: It really helps to be young, good looking, and have a nice smile. But there are immense problems in the U.S., at least just under the surface. Wouldn’t it be nice if everybody had a job paying at least $15 an hour, free schooling, housing was a basic human right, free medical, free food, and 100% green energy? I know it doesn’t sound evil – it just sounds stupid. But it’s actually both.
The problem isn’t just that she got elected on this platform in a benighted – but increasingly typical – district. The problem is that most young people in the U.S. have her beliefs and values.
The free market, individualism, personal liberty, personal responsibility, hard work, free speech – the values of western civilization – are being washed away, everywhere. But it’s hard to defend them, because the argument for them is intellectual, economic, and historical. While the mob, the capita censi, the “head count” as the Romans called them, is swayed by emotions. They feel, they don’t think. Arguments are limited to Twitter feeds. Or 30-second TV sound bites.
Justin: Can you elaborate?
Doug: When somebody says, for instance, “Why can’t we have free school for everybody? The university buildings are already built. The professors are already there. So why can’t everybody just go to class, and learn about gender studies?” The same arguments are made for food, shelter, clothing, entertainment, communication – everything in fact.
To counter that, you have to come up with specific reasons for why not. You end up sounding like a Negative Nelly because you’re telling people they can’t have something.
I guess I’ve given too much credit to the goodwill and the common sense of the average American. The proof of that is the success of AOC. The psychological aberrations of the average human are being brought to the fore.
It’s exactly the type of thing the Founders tried to guard against by restricting the vote to property owners over 21, going through the Electoral College. Now, welfare recipients who are only 18 can vote, and the Electoral College is toothless. Some want to totally abolish the College, and have even 16-year-olds and illegal aliens voting.
Justin: What are the chances that the U.S. adopts her Green New Deal plan or something similar? It seems increasingly likely that America will head in that direction in the coming years.
Doug: The U.S. will absolutely adopt something like that once Trump is out of office. They’ll do it for a half dozen cockamamie reasons that aren’t germane to this conversation. For the last couple of generations, everybody who’s gone to college has been indoctrinated with leftist ideas. Almost all of the professors hold these ideas. They place an intellectual patina on top of nonsensical emotion and fantasy-driven ideas.
Nobody, except for a few libertarians and conservatives, are countering the ideas AOC represents. And they have a very limited audience. The spirit of the new century is overwhelming the values of the past.
When the economy collapses – likely in 2019 – everybody will blame capitalism, because Trump is somehow, incorrectly, associated with capitalism. The country – especially the young, the poor, and the non-white – will look to the government to do something. They see the government as a cornucopia, and socialism as a kind and gentle answer. Everyone will be able to drink lattes all day at Starbucks while they play with their iPhones.
The people that will control the government definitely won’t want to be seen as “do nothings.” Especially while the ship of state is sinking in The Greater Depression. They’ll want to be seen as forward thinkers and problem solvers.
So we’re going to see much higher taxes, among other things. There’s no other way to pay for these programs, except sell more debt to the Fed – which they’ll also do, by necessity.
The government is bankrupt. But like all living things from an amoeba to a person to a corporation, its prime directive is to survive. The only way a bankrupt government can survive is by higher tax revenue and money printing. Of course, don’t discount a war; these fools actually believe that would stimulate the economy – the way only turning lots of cities into smoking ruins can.
I don’t see any way out of this.
Justin: Doug, AOC is proposing a 70% marginal tax rate to finance the Green New Deal? Could something like that actually happen?
Doug: Of course, you’ve got to remember that as recently as the Eisenhower administration the top marginal tax rate was 91%. The average person didn’t pay that because it was a steeply progressive tax rate. Nobody did, frankly, because there were loads of tax shelters, which no longer exist, including hiding money offshore.
In Sweden during the 1970s, the marginal tax rate, including their wealth tax, was something like 102%. So, almost anything is possible in today’s world.
Of course they’ll raise taxes. It’s time to eat the rich. But, perversely, many of the rich will deserve it, since many made their money as cronies during the long inflationary boom.
But look at the bright side. Look at this from AOC’s point of view. She doesn’t just get $200,000 a year plus massive benefits. That’s chicken feed. But lucrative speaking fees, director’s fees, consulting fees, emoluments from the inevitable Ocasio-Cortez Foundation, multimillion-dollar book deals, and sweetheart investment deals. Not counting undisclosed bribes. She’ll be worth $100 million in no time, like Clinton and Obama.
That’s not even the best part. She’ll be idealized, lionized, and apotheosized by an adoring public. The media will hang on her every word. That’s pretty rich for a stupid, evil dingbat. Other young socialist idealists will try – and succeed – in replicating her success. Congress will increasingly be filled with her clones.
Frankly, at this point, resistance is futile.
Justin: Thanks for speaking with me today, Doug.
Doug: You’re welcome.
- Houston Airport First To Close Terminal Over Shutdown-Driven TSA Worker Shortage
Due to a staffing shortage caused by the partial government shutdown, George Bush Intercontinental Airport in Houston was forced to shut down Terminal B at 3:30 p.m. for the remainder of the day. The airport made the announcement over Twitter, telling passengers they would be routed to either Terminal C or E.
The @TSA security checkpoint at Terminal B has been closed, and passengers will be routed to either Terminal C or E. if you have a flight, please allow extra time, and check https://t.co/a5cyZuGvqF for wait times. #fly2houston
— Houston Bush Airport (@iah) January 13, 2019
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Houston Bush International Airport closed Terminal B security checkpoint early today because of @TSA staffing issues pic.twitter.com/gfkDqC1u61
— David Shepardson (@davidshepardson) January 13, 2019
Houston Mayor Sylvester Turner suggested that passengers arrive at the airport two hours before their flight, noting that a “shortage of TSA workers, unpaid during the US gov’t shutdown, is causing the change.”
Advice to always get to @iah 2 hours before your flight is especially important today. Shortage of TSA workers, unpaid during the US gov’t shutdown, is causing this change. Terminal B is solely @united flights. pic.twitter.com/ijCKa4k1NP
— Sylvester Turner (@SylvesterTurner) January 13, 2019
There appears to be no end in sight to the shutdown which is now the longest in modern US history at 23-days-long. With Congress out of town for the weekend, President Trump tweeted: “I’m in the White House, waiting. The Democrats are everywhere but Washington as people await their pay. They are having fun and not even talking!”
I’m in the White House, waiting. The Democrats are everywhere but Washington as people await their pay. They are having fun and not even talking!
— Donald J. Trump (@realDonaldTrump) January 13, 2019
At issue is more than $5 billion Trump is demanding to fund construction of his long-promised wall at the US-Mexico border. Democrats led by House Speaker Nancy Pelosi (CA) and Senate Majority Leader Chuck Schumer (NY) have refused to provide the funding – insisting that Trump reopen the government and table the border discussion for later. Trump, meanwhile, has rejected their offers.
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- Why The Manafort Revelation Is Not A Smoking Gun
Authored by Aaron Maté via The Nation,
Proponents of the Trump-Russia collusion theory wildly overstate their case, again…
Partisans of the theory that Donald Trump conspired with the Kremlin to win the 2016 election believe that they have found their smoking gun. On Tuesday, defense attorneys inadvertently revealed that special counsel Robert Mueller has claimed that former Trump-campaign chairman Paul Manafort lied to prosecutors about sharing polling data with a Russian associate. Now we’re being told that the revelation “is the closest thing we have seen to collusion,” (former FBI agent Clint Watts), “makes the no-collusion scenario even more remote,” (New York magazine’s Jonathan Chait), and, “effectively end[s] the debate about whether there was ‘collusion.’” (Talking Points Memo’s Josh Marshall). But like prior developments in the Mueller probe that sparked similar declarations, the latest information about Manafort is hardly proof of collusion.
According to an accidentally unredacted passage, Mueller believes that Manafort “lied about sharing polling data…related to the 2016 presidential campaign,” with Konstantin Kilimnik, a Russian national who worked as Manafort’s fixer and translator in Ukraine. Manafort’s employment of Kilimnik has fueled speculation because Mueller has stated that Kilimnik has “ties to a Russian intelligence service and had such ties in 2016.”
Yet Mueller’s only references that Kilmnik has Kremlin “ties” came in two court filings in 2017 and 2018, and it’s not clear what Mueller meant in either case. In April 2018, Manafort’s attorneys told a Virginia judge that they have made “multiple discovery requests” seeking any contacts between Manafort and “Russian intelligence officials,” but that the special counsel informed them that “there are no materials responsive to [those] requests.”
Kilimnik insists that he has “no relation to the Russian or any other intelligence service.” According to a lengthy profile in The Atlantic, “insinuations” that Kilimnik has worked for Russian intelligence during his years in Ukraine “were never backed by more than a smattering of circumstantial evidence.” All of this has been lost on US media outlets, who routinely portray Kilimnik as a “Russian operative” or an “alleged Russian spy.”
That same creative license that makes Kilimnik part of the Russian-intelligence apparatus is now being applied to the claim that Manafort shared polling data with Kilimnik. The New York Times initially reportedthat Manafort instructed Kilimnik in the spring of 2016 to forward the polling data to Oleg Deripaska, a Russian tycoon to whom Manafort owed a reported $20 million. The Times also reported that “[m]ost of the data was public,” but that didn’t stop pundits from letting their imaginations run wild.
“Deripaska is close to Putin, and he has zero use for campaign data about a US election, other than to use it for the then on-going Russian campaign to elect Donald Trump,” wrote TPM’s Josh Marshall. “There is only on reason I can think of: to help direct the covert social-media propaganda campaign that Russian intelligence was running on Trump’s behalf,” declared The Washington Post’s Max Boot.
The fervent speculation suffered a setback when it was revealed that the polling data was not intended to be passed to Deripaska or any other wealthy Russian. The New York Times corrected its story to inform us that Manafort actually wanted the polling data sent to two Ukrainian tycoons, Serhiy Lyovochkin and Rinat Akhmetov. That correction came long after viral tweets and articles from liberal outlets amplified the Times’ initial false claim about Deripaska. Most egregiously, New York magazine’s Chait doubled down on the initial error by incorrectly claiming that the Timeswas now reporting that Manafort’s intended recipient was “different Russian oligarchs.” For his part, Akhmetov says he “never requested nor received any polling data or any other information about the 2016 US elections” from Manafort or Kilimnik.
That two Ukrainian tycoons were confused with a Russian one reflects a broader error that has transmuted Manafort’s business dealings in Ukraine into grounds for a Trump-Russia conspiracy. Because Manafort worked for Ukraine’s Russia-aligned Party of Regions, it is widely presumed that he was doing the Kremlin’s bidding. But internal documents and court testimony underscore that Manafort tried to push his client, then–Ukrainian President Viktor Yanukovych, to enter the European Union and turn away from Russia. As Manafort’s former partner and current special-counsel witness Rick Gates testified in August, Manafort crafted “the strategy for helping Ukraine enter the European Union,” in the lead-up to the 2013-2014 Euromaidan crisis. The aims, Manafort explained in several memos, were to “[encourage] EU integration with Ukraine” so that the latter does not “fall to Russia,” and “reinforce the key geopolitical messaging of how ‘Europe and the U.S. should not risk losing Ukraine to Russia.’” As his strategy got underway, Manafort stressed to colleagues—including Kilimnik—the importance of promoting the “constant actions taken by the Govt of Ukraine to comply with Western demands” and “the changes made to comply with the EU Association Agreement,” the very agreement that Russia opposed.
Rather than imagining it as part of some grand Trump-Russia conspiracy, there’s a more plausible explanation for why Manafort wanted public polling data to be forwarded to Ukrainian oligarchs. Manafort was heavily in debt when he joined Trump’s team. Being able to show former Ukrainian clients “that he was managing a winning candidate,” the Times noted, “would help [Manafort] collect money he claimed to be owed for his work on behalf of the Ukrainian parties.”
All of this highlights another inconvenient fact about Mueller’s case against Manafort: It is not about Russia, but about tax, bank, and lobbying violations stemming from his time in Ukraine. The Virginia judge who presided over Manafort’s first trial said the charges against him “manifestly don’t have anything to do with the [2016] campaign or with Russian collusion.” The collusion probe, the DC judge in Manafort’s second trial concurred, was “wholly irrelevant” to these charges.
The same could be argued about the entirety of Mueller’s indictments to date. Not a single Trump official has been accused of colluding with the Russian government or even of committing any crimes during the 2016 campaign. As The New York Times recently noted, “no public evidence has emerged showing that [Trump’s] campaign conspired with Russia.” The latest error-ridden hoopla generated by an inadvertent disclosure from Manafort’s attorneys does nothing to change that picture. If anything, it underscores that after two years there is still no strong case for Trump-Russia collusion—and that only shoddy evidentiary standards have misled its proponents into believing otherwise.
- Powell May Not Know It Yet, But The Fed Is Now Trapped
With even Morgan Stanley openly discussing whether the Fed will “make the market happy“, it now appears that the Fed tightening is effectively over with the Fed Funds rate barely above 2%, and the only question is whether the Fed will cut rates in 2019 or 2020 – roughly around the time the next recession is expected to strike – and whether the balance sheet shrinkage will stop at the same time (and be followed by more QE).
To be sure this new consensus was reflected in both equity and credit markets, both of which cheered the Fed’s recent dovish U-Turn, and recouped all their losses since mid-December. And yet, market paradoxes quickly emerged: for one, rates markets yawned. On December 31, rates were pricing no Fed hikes over the next two years. Today, after the Fed’s big ‘change of tone’, expectations are almost exactly the same.
Second, a material disconnect has emerged between front-end pricing (no hikes) and the level of 10-year real rates (near seven-year highs). If, as Morgan Stanley’s Andrew Sheets notes, “one of these is right, the other seems hard to justify.”
Then there is, of course, the lament about the neutral rate being so low – and the potential output of the US economy so weak – that it can’t sustain nominal rates above 2.25% – incidentally we explained back in 2015 the very simple reason why r-star, or the real neutral rate, is stuck at such a low level and is only set to drift even lower: record amounts of debt are depressing economic output, as the following sensitivity analysis showed.
Bank of America touched on this key concern last week when it said mused rhetorically that “if the US rates market is right, this would suggest that potential growth is much, much lower than generally accepted.” Which, to anyone who read our 2015 analysis, should have been obvious: after all there is too much debt in the system to be able to sustain material rate increases.
Bank of America continued:
If Fed Funds target rates of 2.00-2.50% are enough to cause the economy to go into recession, with inflation having normalised at around 2%, then potential growth would seem to be less than 50bp. Alternatively, when looking at where the USD OIS curve regains positive shape and flattens out (in the 7-10 year forwards) the market price for neutral rates again seems to be as low as 2.00-2.50%, leading to the same conclusion. If the above were true, every asset bar rates is massively mispriced.
And the punchline: “If we accept market pricing, then there is no shortage of inconsistencies to take advantage of. If the world is going into a severe slowdown, then the Fed is unlikely to wait until next year to cut rate.”
What this means stated simply, is that while stocks may be rejoicing that the Fed shifted from hawkish to dovish, this may prove dangerously near-sighted, especially if the Fed is indeed concerned about about a major recession breaking out, an outcome which will have devastating consequences once the current short squeeze ends as does the vicious snapback bear market rally, and stocks resume pricing in a global contraction.
All of this brings us to a note from Citi’s Jeremy Hale, who like Morgan Stanley, agrees that while equities may indeed need Fed help, it is indeed the question whether the Fed will help, and frames the response as follows: “Maybe if the equity market portends weakness in the economy. Does it?”
And this is where we find why the Fed is now trapped, at least when it comes to the Fed’s reaction function… and the market’s response to the Fed’s response.
The problem is simple: for the Fed, the sequence of events during past recessions has been: Fed cuts, the SPX crashes, Fed cuts. So, as Citi notes, the SPX crash is a symptom of greater economic weakness rather than the cause.
Of course, it’s a bit more nuanced than this, because as Citi also shows, for all three slowdown periods the sequence of events is: Fed hikes, equity market crashes, Fed cuts.
In other words, traders – who hold the market hostage (as Powell first discovered back in 2013) – force the Fed’s hand, a conclusion supported by the surprisingly short lag time of the Fed reaction function. Indeed, as shown in the chart below, it usually takes 1 month on average – and no longer than three months – between the first 20% drop and an appropriate Fed reaction. Then, once the Fed gives in and cuts, it takes at most 4 months for equities to find a bottom, as the economic backdrop and Fed are supportive. This story seems to fit fairly well with the current environment: i.e. the Fed hiked in December, and then the equity market fell 20%. Meanwhile, current economic conditions remain relatively robust, and in line with previous slowdowns (and stronger than prior recessions), so the logical next step is that the Fed flinches – they have always in the past after all.
The obvious problem is that the Fed is cutting because the economy is indeed entering a recession, even as market have already rebounded by over 10% from the recent “bear market” low, effectively cutting the drop in half expecting the Fed to react precisely to this drop, while ignoring the potential underlying economic reality (the one noted above by the bizarrely low neutral rate, suggesting that the US economy is far weaker than most expect).
Ultimately, what this all boils down to is whether the economy is entering a recession, and – some reflexively – whether the suddenly dovish Fed, trapped by the market, has started a chain of events that inevitably ends with a recession. The historical record is ambivalent: as Bloomberg notes, similar to 1998 and 1987, the S&P fell into a bear market last month (from which it immediately rebounded) following a Fed rate hike. The difference is that in the previous two periods, the Fed cut rates in response to market crises – the collapse of Long-Term Capital Management in 1998 and the Black Monday stock crash in 1987 – without the economy slipping into a recession. In comparison, the meltdown in December occurred without a similar market event.
But the real reason why the Fed is now trapped, whether Powell knows it or not, is also the result of the most troubling observation of all: while many analysts will caution that it is the Fed’s rate hikes that ultimately catalyze the next recession and the every Fed tightening ends with a financial “event”, the truth is that there is one step missing from this analysis, and it may come as a surprise to many that the last three recessions all took place with 3 months of the first rate cut after a hiking cycle!
In other words, one can argue that it was the Fed’s official admission of economic weakness – by cutting rates – that triggered the economic contraction that was gathering pace as a result of higher rates and tighter financial conditions. If that is indeed the case, then the next US recession will begin just a few months after the Fed cuts rates.
There is still a tiny chance that Powell will attempt to escape this trap, and instead of cutting rates will resume hiking, but the odds of that happening are tiny: as Bloomberg calculates, if the Fed does resume rate tightening later this year, it will be the first time in the recent history it did so after a drop in stocks this large.
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