Dec 03

Today’s News 3rd December 2017

  • Trump Congratulates ABC For Firing Brian Ross Over "Horrendously Inaccurate" Report

    Update: Just hours after he told a group of reporters that he's "not worried" about Mike Flynn's decision to cooperate with special counsel Robert Mueller because – as Trump put it – "there's been absolutely no collusion and we're prefectly happy with that," the president has weighed in on ABC's decision to suspend World News Tonight's Brian Ross.

    "Congratulations to @ABC News for suspending Brian Ross for his horrendously inaccurate and dishonest report on the Russia, Russia, Russia Witch Hunt. More Networks and “papers” should do the same with their Fake News!"

    Yesterday, Ross fraudulently reported that Flynn was set to testify that Trump ordered him to contact the Russians "during the campaign" when – in fact – Flynn had testified that the order happened during the transition, and was handed down by Trump's son-in-law, Jared Kushner.

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    Notably, Trump has revived the "Russia, Russia, Russia" expression he used in a tweet attacking the Democrats last week following reporters that Flynn might've flipped because his lawyers had decided to cut off contact with Trump's legal team.

    * * *

    Having suffered a massive backlash from their attempt to downplay a fraudulent story with a "clarification," ABC News has upgraded their contrition to a "serious error" and suspended the veteran reporter Brian Ross who wrote the story.

    As a reminder, citing a single anonymous source, Ross told viewers during an ABC special report on Friday morning that Flynn was prepared to testify that Donald Trump, as a candidate for president, told him to contact Russians.

    The left erupted in excitement…

    But then, during Friday's edition of "World News Tonight," Ross corrected his report, telling viewers that the source who had provided the initial information for his story later told him that it was as president-elect, not as a candidate, that Trump asked Flynn to contact Russians.

    The rest of the world then erupted over such an egregious error that confirmed every emotions-over-intelligence 'fake media' shot that Trump has ever sent.

    The initial "clarification" has been upgraded to a "serious error" as ABC attempts to put this fire out.

    ABC News statement:

    We deeply regret and apologize for the serious error we made yesterday.

     

    The reporting conveyed by Brian Ross during the special report had not been fully vetted through our editorial standards process.

     

    As a result of our continued reporting over the next several hours ultimately we determined the information was wrong and we corrected the mistake on air and online.

     

    It is vital we get the story right and retain the trust we have built with our audience –- these are our core principles.

     

    We fell far short of that yesterday.

     

    Effective immediately, Brian Ross will be suspended for four weeks without pay.

    While it might be nice for Ross to have a month off over the Christmas holidays, many are asking for refunds in their brokerage accounts from the market's reaction to his "serious error."

  • Signs Of A Market Top? This Pole Dancing Instructor Is Now A Bitcoin Guru

    Pole dancing instructor Dee Heath built a successful fitness business in western Sydney teaching “stripper fitness” classes that seem to be in vogue among millennial women.

    But recently, Heath has discovered a new passion: Investing in digital currencies.

    Heath has spent $5,800 on Bitcoin since July and has more than tripled her investment.

    "Look, I love pole dancing but lately my passion has definitely been Bitcoin," she told SBS News.

       Heath is spending less time on the pole and more time advising would-be bitcoin investors about navigating the world of digital currencies, even starting a website to explain the digital currency to novices.  

    "It comes with any investing, it's volatile at times, especially cryptocurrencies," she said.

     

    "The good thing is when it goes down, you can buy some more, and you know it's going to go up at some point."

    Dee Heath

    "As long as you're calm and you don't let emotions run you when you're dealing with any sort of cryptocurrency, particularly Bitcoin, then you're safe."

    Still, there are plenty of skeptics in her native Australia, where digital currencies are still largely associated with the black-market economy thriving on the dark web.

    "Australia in particular has been involved in buying and selling drugs on the dark web using cryptocurrencies," said Professor David Glance from the Centre for Software Practice at The University of Western Australia.

     

    "Many are comparing the buzz around Bitcoin to tulip mania that hit the Netherlands in the 17th century."

    Professor Glance said with such a volatile currency, investors should only buy what they can afford to lose.

    But with the digital currency recently peaking above $11,000 – a valuation that represents a 950% return since the beginning of the year in US dollar terms – mom and pop investors who had previously never heard of bitcoin are trying to get a piece of the action. Recently, the CME Group and other exchanges around the world have launched – or announced they’re planning to launch – new bitcoin derivatives that will make it easier for institutional investors like hedge funds to play in that market. Though many new funds have been established already this year to get in on the action.

    Earlier this week, pioneering cryptocurrency investor Mike Novogratz, whose digital-currency focused fund has recorded astronomical returns this year thanks to the performance of bitcoin, Ethereum and many other digital currency copycats. After accurately predicting that bitcoin would reach $10,000 this year, Novogratz now says he sees it going to $40,000 by the end of next year.

    Other financial luminaries like Warren Buffett and – most famously – JP Morgan CEO Jamie Dimon have said they believe bitcoin is a bubble. Dimon famously opined that the digital currency could get somebody killed.

    And while bitcoin has given investors no reason in recent months to believe the rally is slowing down, the idea that strippers are starting to pour their cash earnings into bitcoin is eerily reminiscent of a scene from the movie “The Big Short” where two of the film’s protagonists interview a stripper who took out subprime mortgages to buy nearly half a dozen properties.

    Should investors pay attention to this “stripper indicator”?

  • Mysterious Gold Dealer's Testimony Puts Erdogan On Shaky Ground

    Authored by M K Bhadrakumar via The Asia Times,

    As on the soccer field in his youth, so in a tumultuous political career spanning four decades: Turkey’s president Recep Tayyip Erdogan has consistently shown his mettle as a fighter who won’t be satisfied with anything short of total victory. 

    But in the battle that is now unfolding around him, and which is besieging him, there isn’t going to be a winner.

    What is at stake is survival – the chance to live another day, even if in some ignominy. That much is clear from the opening testimony in a federal courtroom in New York on Wednesday from the Turkish-Iranian gold trader Reza Zarrab, who allegedly helped Tehran sidestep US sanctions to export oil with the connivance of corrupt Turkish high officials and then to launder the income.

    When the principal accused becomes the star witness in a US court, he has possibly struck a deal with the authorities. The remaining ambiguity is with regard to when it was that Zarrab struck the deal – was it when he landed in Miami 18 months ago, ostensibly to show his young son around Disneyland, or before he was spirited out of Turkey to America on the express understanding that he’d get clemency for providing hard evidence to nail Erdogan.

    Zarrab explained before the court the elaborate scheme he orchestrated to free “a few billion euros” of Iran’s sanctioned oil using funds deposited in the Turkish state-owned Halkbank which were used to buy gold that was subsequently smuggled to Dubai and sold for cash. (The FBI also nabbed a senior functionary of Halkbank, Hakan Atilla, who is on trial.)

    Turkish gold trader Reza Zarrab is shown in a court room sketch as he appears in Manhattan federal court in New York. Photo: Reuters / Jane Rosenberg

    Zarrab named a confidant of Erdogan, the former Turkish Economy Minister Zafer Caglayan, as having taken bribes amounting to over US$60 million and also implicated Turkey’s Aktif Bank, which is part of a holding company headed at the time by Erdogan’s son-in-law, Berat Albayrak (the current energy minister). Zarrab is due to testify again. We have only seen the tip of the iceberg.

    Meanwhile, Turkey’s main opposition leader, Kemal K?l?çdaro?lu, revealed on Tuesday that Erdo?an’s close circle – including his brother, his son and his executive assistant – made transactions worth around US$15 million to an off-shore company called Bellway Limited in the Isle of Man (a tax haven) in late 2011 and early 2012. Kilicdaroglu produced documentary evidence and promised to revert with more such disclosures.

    Top Turkish officials and senior leaders of the ruling party have made the counter-allegation that all of this is a political conspiracy orchestrated by Islamist preacher Fetullah Gulen, who lives in the US. They say Gulen and his American mentors are making a second attempt to remove Erdogan from power after the failed military coup two years ago. The Turks believe that CIA officials sponsored Gulen’s exile in Philadelphia.

    Evidently, the US establishment has been preparing the case file for quite some time – and the effort predates the Trump presidency.

    The Turkish side have kept President Trump personally out of the firing line.

    There is, in fact, an eerie similarity here to what the Russians have been saying – namely, that Trump himself desires a good working relationship with Russia and President Vladimir Putin, but, alas, the Washington establishment is pursuing a contrarian agenda.

    Erdogan’s strategic defiance of Washington seriously hurts US interests. Without Turkey’s cooperation, America’s military presence in northern Syria is unsustainable. Turkey’s entente with Russia and Iran undermines US regional strategies.

    Add to that Turkey’s S-400 missile deal with Russia, Erdogan’s hostility toward Israel and support of Qatar in its rift with Saudi Arabia, the downhill slide in Turkey’s relations with major European countries and its lackadaisical attitude toward NATO, and it’s not hard to see how the West might view Erdogan as a hurdle that must somehow be overcome.

    Zarrab can help irreparably damage Erdogan’s reputation, and even implicate his family members and close aides as criminals.

    Worse still, heavy penalties of billions of dollars could be levied on the Turkish banks involved, crippling the country’s economy. And sanctions could be imposed.

    Suffice to say, Erdogan has a choice between capitulation or the desecration of the house he has built in a long and hugely successful political career. Time is running out. Erdogan is circling the wagons. He may feel tempted to ride the wings of Turkish nationalism. There is still no credible political figure who can seriously challenge him in Turkish politics. He is daring and charismatic. The next elections are due only in 2019.

    But that is to cast an eye at the horizon.

    Significantly, US Secretary of State Rex Tillerson quietly digressed during a speech on trans-Atlantic relations in Washington on Tuesday to pose a riddle to no one in particular – whether Turkey would be better off partnering with Russia and Iran or aligning with the West.

    On the eve of Zorrab’s testimony, Tillerson seemed to hint at a passage that Erdogan has not taken, toward a door that he has never opened – one that leads into the rose-garden.

  • Mueller's Top FBI Agent Probing Clinton Emails, Russian-Collusion "Removed" After Anti-Trump Texts Found

    Special Counsel Robert Mueller's top FBI investigator into 'Russian meddling' and Clinton emails has been removed from the probe reportedly due to the discovery of anti-Trump text messages exchanged with a colleague (whom he happened to be having an extra-marital affair with).

    FBI veteran, Peter Strzok, considered "one of the most experienced and trusted FBI counterintel investigators" according to the NYT, and who was tapped by Mueller to help lead the probe of Russian meddling in last year's presidential election, after helping lead the investigation into whether Hillary Clinton mishandled classified information on her private email account, has left Mueller's team.

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    As ABC reported in August, when Strzok's departure was first noticed, this was the first known hitch in a secretive probe that, by all public accounts, is charging full steam ahead. ABC reported that it was unclear why Strzok stepped away from Mueller's team of nearly two dozen lawyers, investigators and administrative staffers. Strzok, who had spent much of his law enforcement career working counterintelligence cases and has been unanimously praised by government officials who spoke with ABC News, was moved the FBI's human resources division. The move prompted many questions about why one of the FBI's top investigators was being reassigned.

    We now know the answer: anonymous sources close to the matter told The Washington Post that Strzok was removed from the investigation after the Justice Department’s inspector general began examining whether the agent had sent text messages that expressed anti-Trump political views, three people briefed on the matter told the WaPo.

    In a rare, on the record statement to the media, the Special Counsel's office effectively admitted that the head investigator into both Clinton and Trump was tainted: "Immediately upon learning of the allegations, the Special Counsel’s Office removed Peter Strzok from the investigation."

    More from the WaPo:

    During the Clinton investigation, Strzok was involved in a romantic relationship with FBI lawyer Lisa Page, who worked for Deputy Director Andrew McCabe, according to the people familiar with the matter, who spoke on condition of anonymity because of the sensitivity of the issue.

     

    The extramarital affair was problematic, these people said, but of greater concern among senior law enforcement officials were text messagesthe two exchanged during the Clinton investigation and campaign season, in which they expressed anti-Trump sentiments and other comments that appeared to favor Clinton.

     

    The people discussing the matter did not further describe the political messages between Strzok and Page, except to say the two would sometime react to campaign news of the moment.

     

    Officials are now reviewing the communications to see if they show evidence of political bias in their work on the cases, a review which could result in a public report, according to people familiar with the matter.

    At the time they left Mueller’s group, no one publicly linked the two departures. For months, officials have refused to explain why Strzok was reassigned, but people familiar with the matter said it was ultimately Mueller’s decision.

    As WaPo concludes, the president’s most vociferous defenders in Congress have called for a special counsel to investigate how the FBI handled the Clinton probe, and other Clinton-connected matters. Word of the texts could give new fuel to those demands.

    For those confused, what this means is that the "professional, impartial, objective" FBI agent tasked with not only uncovering fraud and/or problems with Hillary's abuse of a personal email server and was then charged with finding dirt on Donald Trump in his "Russian collusion", was himself a member of the "resistance."

    No wonder Comey's "recommendation" was to leave Hillary alone, while personally leaking his own, confidential data to the NYT in hopes of starting the Russia proble and ultimately getting Trump impeached.  One does wonder, however, just when will all this anti-Trump bias running across the FBI and CIA be noted, and when truly objective investigations finally take place.

    Furthermore, we suspect Page and Strzok were not alone in their anti-Trumpedness, but we do note that the implicitly pro-Trump 'leak' of these Mueller-probe-embarrassing details is a radical sea-change from the usual torrent of 'gotcha' leaks emanating from the NSA/CIA/FBI designed to further the Deep State's grip on the administration.

  • Frustrated Investors File Lawsuits Against World's Largest ICO

    Here's the latest sign that the massively fraudulent ICO market is headed for a collapse.

    Tezos’s investors are still waiting to learn when they can expect to receive the digital tokens that they paid a premium for during the company’s record-setting crowdsale. But as reports of abuse, internal strife and outright embezzlement have surfaced in the press, three groups of angry investors have filed class action lawsuits accusing the company of fraud and securities violations.

    In response, Arthur and Kathleen Breitman, the young couple that founded the Tezos project, are asking the Switzerland-based Tezos Foundation to foot the bill for their legal defense – a controversial move, seeing as that money is supposed to seed the Tezos coin ecosystem, according to Reuters.

    Tezos set a new sales record in the white-hot IPO market this summer when it raised more than $230 million in a hotly anticipated ICO that saw several behemoth firms in the northern California venture capital scene invest millions while thousands of individual investors followed suit, enticed by the astronomical returns of digital currencies like bitcoin and ethereum?

    However, anybody who stopped to scrutinize the Tezos whitepaper – where the company’s founder laid out his “vision” for a product that he has yet to build – would recognize that the company’s business plan sounds like gibberish.

    Despite this, the company raised more than $200 million during the first week of its July crowdsale.

    To help shore up investors’ faith in the company, the leaders of Tezos promised to entrust the money they raised during the token sale to a nonprofit organization set up in Switzerland. The Tezos Foundation, is supposed to keep the company on budget until the product is finished. The company initially promised investors that it would deliver their tokens – informally known as Tezzies – by the end of the year.

    The Tezos project and its founders, Arthur and Kathleen Breitman, are facing three class-action lawsuits in the United States. Plaintiffs allege federal securities law violations and that the fundraiser defrauded participants, who were told they were making non-refundable donations to the Swiss foundation. The lawsuits are seeking refunds and damages.

     

    The project has yet to launch, which is required for contributors to receive new Tezos digital coins, called Tezzies. Meanwhile, their contributions – made in bitcoins and ether – have soared in value.Both lawsuits name as defendants the project’s young founders, their Delaware-based company, Dynamic Ledger Solutions Inc (DLS), which owns the Tezos source code, as well as the Zug-based Tezos Foundation.

     

    A Reuters investigation in October found that the couple was in a bitter dispute with Johann Gevers, the foundation’s president, over control of the project.

     

    Arthur Breitman told Reuters in Zurich on Thursday that he would not answer any questions. Gevers said he could not comment on the Breitmans’ request that the foundation indemnify them against legal actions.

    According to legal experts who are familiar with the arcane rules governing Swiss nonprofits say the legal argument for the Tezos Foundation covering its founders’ litigation expenses is flimsy, at best.

    Georg von Schnurbein, co-author of a book on Swiss foundation governance, said he saw no reason for the Tezos Foundation to cover the Breitmans’ legal costs.

     

    “In my opinion, there is no reason for that because their activities were connected to their Delaware company, not to the foundation,” he said.

     

    The foundation’s three board members could be held liable by Swiss regulators if they were to agree “because the lawsuits have nothing to do with the foundation purpose, only with the collection of money prior to that,” von Schnurbein added.

    Unfortunately for investors, Tezos neglected to disclose many of the details about the relationship between the foundation and Dynamic Ledger Solutions Inc, Tezos’s corporate entity.

    Further complicating matters is the contractual agreement between DLS and the foundation that was signed in June. The agreement, which is not public, governs the sale of DLS and its intellectual property to the foundation.

     

    The agreement, a copy of which was reviewed by Reuters, states that the Swiss federal supervisory authority for foundations must approve the agreement. It also indicates the approval was required before the fundraiser took place.

    However, a spokesman for the department that oversees the Swiss authority told Reuters that approving these types of agreements lies outside the authority’s scope of influence: “It is not the Foundation Authority’s task nor its responsibility to approve private law agreements."

    The contract also says that some Tezos software code would be put in the public domain prior to the fundraiser. But the foundation later said that it has a license to release the code and will do so “at an appropriate time before the launch of the main network.” Conveniently,  documents provided to investors didn’t mention the required approval by the Swiss authority or the timing of the source code’s release.

    Stephen Palley, an attorney at Anderson Kill in Washington who focuses on software development, told Reuters after reviewing the investor agreement that it may help plaintiffs’ lawyers show that contributors to the Tezos fundraiser were purchasing securities, not making donations. According to the agreement, the contributions were needed to launch the Tezos network, he said. Over the summer, the SEC issued a ruling in an inquiry into the implosion of the DAO that effectively deemed all ICOs securities offerings. This means companies that launch ICOs must register their tokens as securities and abide by all pertinent securities laws.

    “This weakens the argument that tokens were a discretionary gift, akin to a tote bag given to people who donate to a public radio fundraising drive,” he said.

     

    Kathleen Breitman told Reuters in June that participating in the Tezos fundraiser was like making a donation to a public broadcaster and receiving a tote bag.

     

    The agreement was signed on June 27 by Gevers and DLS’s shareholders, who are the Breitmans and an investment firm founded by Silicon Valley venture capitalist Tim Draper. The shareholders eventually stand to receive 8.5 percent of the funds raised in the initial coin offering in cash, and additional Tezos coins distributed over four years.

     

    Reuters also reviewed a separate agreement between DLS and the foundation. It lists 11 early backers of Tezos, including the living trust of Frederick Ernest Ehrsam III, a co-founder of Coinbase, which operates a U.S. cryptocurrency exchange; Meta Stable Capital and CoinFund LLC.

     

    Jake Brukhman, CoinFund’s managing partner, said the fund initially backed the Tezos project but received a refund in May before the fundraiser. “Our teams came to a mutual decision to part ways,” he said.

     

    Ehrsam declined to comment through a spokesperson for Coinbase. Other early backers did not respond to requests for comment.

    The internal strife at Tezos spilled into public view back in October when the Breitmans accused Johann Gevers, the head of a Swiss foundation which oversees their funds, of attempting to overpay himself using the massive pot of investor capital – despite the fact that the company will likely blow through its promised deadline of allocating tokens to buyers by December (the tokens have yet to be created). The news sent Tezos futures contracts trading on BitMEX spiraling lower.

    Of course, Tezos isn’t the only major ICO that’s in trouble: Last month, we reported that Bancor, the world’s fifth-largest ICO by funds raised, has plunged by more than 50% since the company’s June ICO as investors have become disillusioned with its obscure product.

    The question remains: Would Tezos’s failure help pacify the investing fervor surrounding ICOs? Or will investors in these products continue to be victimized by fraudsters until the offerings are banned outright?

    Luckily for Tezos, if the owners can't remedy the company's many intractable problems, PwC is now accepting payment in bitcoin for its consulting services…

  • Trump May Recognize Jerusalem As Israel's Capital Next Week

    Submitted by South Front

    On Friday a senior US official told Reuters that US President Donald Trump may deliver a speech next Wednesday recognizing Jerusalem as Israel’s capital.

    Some Middle East experts speculate that such a move will be a major blow to the US relations with Arab countries and the Israeli-Palestinian peace process. No US president or any western leader have ever recognized Israel’s control over all of Jerusalem.

    However, a spokesperson with the White House National Security Council denied these claims and told Reuters that the White House has “nothing to announce”.


    Israel flag with a view of old city Jerusalem and the Western wall. Image via South Front.

    President Trump had promised during his presidential campaign in 2016 that he will recognize Jerusalem as the capital of Israel. Many experts doubted Trump’s promises back then and didn’t believe that a US president could take such a dangerous step. However many recent reports have claimed that the US president is close to announcing this historical decision.

    Trump said on October 8 that he wanted to give a shot at achieving peace between Israel and the Palestinians before moving the US embassy from Tel Aviv to Jerusalem. Since then, no real effort has been made by the US to push the Israeli-Palestinian peace process forward.

    “I want to give that a shot before I even think about moving the embassy to Jerusalem … If we can make peace between the Palestinians and Israel, I think it’ll lead to ultimately peace in the Middle East, which has to happen” Trump said during an interview on October 8 according to Reuters.

    Saeb Erekat, a member of the Palestinian Parliament described the possible US recognition of Jerusalem as Israel’s capital as “playing with fire”, according to Al-Jazeera. "Any American recognition of Jerusalem as the capital of Israel will bring about the end of the Jerusalem issue. This issue is weighty and dealing with it is playing with fire." Erekat's full statement said.

    Hamas also stated that the move would lead to an “escalation” of the “Jerusalem intifada.” Indeed, the Palestinian side will likely halt all negotiations if Trump fulfills his promise to Israel, and a new uprising in the Western Bank and a military escalation in Gaza Strip is also a possible outcome.

  • "Deadliest Year Ever" – Baltimore Eclipses 2016 Homicide Total

    As of 11:20am ET. Thursday morning, the wave of violent crime continued in Baltimore with the death of a 21-year old man by gunfire.

    The significance of this latest death in Baltimore’s urban war zone, is that total homicides in 2017 have now topped 2016 levels at 319, and there is still one month to go. 

    Homicides in Baltimore have averaged 29 per month, which could indicate Baltimore is now on track for the deadliest year ever to be recorded. The all-time per-capita record was set back in 2015, with 344 homicides, said Fox News.

    Throughout the year, we have pointed out Baltimore’s rapid deterioration into chaos (see: America’s Urban War Zone: Baltimore Doubles Chicago’s Homicide Rate In 2017).

     Baltimore is on track to exceed 400 homicides in 2017 for the first time in the city’s history and has more than doubled Chicago’s homicide rate on a per capita basis. 

    Baltimore Mayor Catherine E. Pugh has called the city’s gun violence “out of control.” Earlier this year she begged the Federal Government for help as 2017 murders soar to a 20-year high.

    “I’m calling on all the assistance we can possibly get because I can’t imagine going into our summer months with our crime rate where it is today, what that’s going to look like by the end of the summer,” says Mayor Catherine Pugh.

     

    “Murder is out of control,” says Pugh.

     

    “We are looking for all the help that we can get,” she says.

    The most recent flare up to draw national attention was the November execution of Sean Suiter, an 18-year veteran of the force, who was fatally shot while on active duty. Shortly after, we reported on the 4-5 day lockdown of one West Baltimore neighborhood by police was described as ‘Martial Law’.

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    Death and despair in Baltimore comes at no surprise since the city has been run by democratic controlled leadership for over 50-years. As the death toll Skyrockets, Republican Gov. Larry Hogan has had enough and said this week that he will be issuing his own crime-fighting strategy, per CBS:WJZ.

    Gov. Hogan said no need for the National Guard but ‘will reveal his own plan to stop the violence in Baltimore as soon as next week’. Back in 2015, Hogan declared a state of emergency during the Baltimore riots, where he called in the National guard to restore order in the city.

    Developments in the next 30-days for Baltimore will be critical in determining government’s next step in tackling the urban war zone for the 2018 timeframe. As expected, the city is projected to further deteriorate this month and record the most homicides ever. Now it’s Hogan’s turn to offer a crime-fighting plan and what we’ve seen before… He isn’t afraid to use the National Guard.

    Baltimore is an urban war zone – it should be treated like one.

  • The Government Is Coming For Your Bitcoin

    Authored by Simon Black via SovereignMan.com,

    The same day Bitcoin cracked its all-time high above $11,000, the government dealt its first blow to the crypto world…

    On Wednesday, a federal judge in San Francisco ordered the popular Bitcoin exchange, Coinbase, to provide the IRS with information on over 14,000 account holders.

    The taxman noticed that only 800-900 people reported gains related to Bitcoin in each of the years between 2013-2015. It seemed unusual given Bitcoin’s meteoric rise.

    So the IRS went for its pound of flesh.

    Initially, the government wanted complete data on every Coinbase user that transacted between 2013 and 2015. The exchange’s website says it has 13 million users (more than the number of Schwab brokerage accounts).

    But Coinbase pushed back… and the government agreed to only take limited data (including name, date of birth, address, tax ID number, transaction statements and account logs) for accounts that have bought, sold, sent or received at least $20,000 worth of Bitcoin in a given year.

    Don’t say I didn’t warn you about Coinbase. I told Sovereign Man: Confidential readers last month:

    If you’re tempted to purchase Bitcoin from the popular Coinbase exchange, don’t bother.

     

    They’ve sold out to regulators.

    The IRS is calling this a “partial win.”

    But you can be sure, there will be a public beheading. This is something governments almost always do.

    They’ll find a prominent Bitcoin person, someone that’s polarizing to the public – like “pharma bro” Martin Shkreli.

    It will be a very public trial… and they’ll throw his ass in the slammer.

    Government’s always do this because they want to scare people.

    Kim Dotcom is the perfect example. Kim founded the popular file-sharing site Megaupload.

    The government wanted to stop illegal downloads, so they raided his guy’s house in New Zealand for violating US law.

    The government also does this for taxes… everything, really.

    Look at Wesley Snipes. The IRS accused him of felony tax evasion. He spent three years in jail.

    They had to take a celebrity and throw him in jail to scare everyone else.

    Back to Bitcoin…

    Now that it’s at all-time highs, the government wants its piece.

    I read the 400+ pages of the proposed tax code. How many lines in there do you think deal with cryptocurrency? ZERO.

    How many lines deal with e-commerce? ZERO.

    The government had every opportunity to set the rules for the 21st century. And they failed miserably.

    So the rules remain as clear as mud.

    Instead of trying to make it clear, their tactic is intimidation, force and coercion.

    This is just the beginning. There will be more.

    And my advice is don’t be one of those guys.

    Every transaction that you make in Bitcoin is potentially a taxable event.

    Let’s say you bought Bitcoin for $1,000 and after it went to $10,000 you buy a business class trip to Australia for $10k. When you pay the airline with one Bitcoin, you’ve just triggered a taxable event.

    The IRS would say that you essentially sold your Bitcoin, have a $9k gain and used those proceeds to buy the ticket.

    Which means you owe the IRS capital gains tax on $9k, which is 20% plus the Obamacare surcharge.

    So, don’t be that guy. If you’ve been doing this, trust me, you don’t want the IRS find out.

    You’d rather come forward yourself and disclose it and pay taxes… Rather than be the next Martin Shkreli.

    And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide. Because… If you live, work, bank, invest, own a business, and hold your assets all in just one country, you are putting all of your eggs in one basket. You’re making a high-stakes bet that everything is going to be ok in that one country — forever. All it would take is for the economy to tank, a natural disaster to hit, or the political system to go into turmoil and you could lose everything—your money, your assets, and possibly even your freedom. Luckily, there are a number of simple, logical steps you can take to protect yourself from these obvious risks.

  • Iceland's New Government Has Cunning Plan Of Tapping Banks To Boost Growth, Improve Infrastructure

    We like Iceland, we’ve never been there, but that doesn’t matter. Besides the outstanding natural beauty, Iceland, unlike the US, UK and practically everywhere else, holds bankers accountable. Last time we checked, 29 had been jailed. As we discussed, it also holds its leaders accountable (partially – see below) when they are complicit in exonerating convicted child rapists. Such an event brought down Iceland’s government in September.

    Last week, it emerged that Prime Minister Bjarni Benediktsson knew of attempts by his father, Benedikt Sveinsson, to have the Ministry of Justice grant “restored honor” to a convicted child rapist. Benediktsson kept this secret as the rapist, a friend of his father’s was essentially exonerated.

    Restored honor is the controversial process by which convicted criminals can have their crimes expunged and return to society with all rights and privileges restored. It requires that the convicted person serve between two to five years of their sentence on their best behavior and that they have multiple letters of recommendation. Sveinsson provided one such letter.

    Iceland held new elections on 28 October 2017 and a new coalition government came in to power this week. Iceland’s economy has been booming, in part due to the influx of tourists visiting its thriving capital city, Reykjavik, along with the Geysir geyser and the Gullfoss waterfalls. On any given day, tourists are likely to account for about 10% of the island’s population. However, as the FT explains, Iceland is paying a price for its success.

    These challenges include everything from the poor quality roads and overburdened infrastructure to a lack of accommodation and simmering popular discontent over how tourism is being handled. At Geysir and Gullfoss in central Iceland, dozens of buses and cars park at both attractions for free before disgorging tourists who pay no entrance fee. The roads across Iceland are under intense strain from hire cars and a tourist died just after Christmas in a head-on collision on a single-track bridge.

    “What are we sacrificing when we don’t put a levy on tourists? The roads here are dangerous,” says Asta Helgadottir, an MP for the anti-establishment Pirate party…Accommodation is also a problem. Cranes everywhere in Reykjavik attest to the surge in hotel construction but the increase in rooms still lags behind the growth in tourism.

    However, all is not lost. The new government has a plan…which involves Iceland’s banks and tapping their excess capital. According to Bloomberg.

    Iceland’s new left-right coalition government is gearing up for a spending drive to fix the nation’s dilapidated infrastructure after years of austerity and it could tap its banks for the some of needed cash.

    Iceland got a new government on Thursday, in a coalition between the Left Greens, the Progressive Party and the conservative Independence Party. The parties have pledged to spend more on roads and other infrastructure to catch up on an estimated 400 billion kronur ($3.9 billion) in missing investments.

    Even in Iceland, it seems, discredited politicians can bounce back into public life almost immediately, which is precisely what’s happened in the case of Bjarni Benediktsson, usually known as “Bjarni Ben”.

    Bloomberg spoke to the man himself, “According to Finance Minister Bjarni Benediktsson the government has an ace in the hole that can help finance the spending: the excess equity in its three largest banks, Arion Bank hf, Landsbankinn hf and Islandsbanki hf. The banks have leverage ratios in the 16 percent to 18 percent range at the end of June, far above the 3 percent minimum, according to Iceland’s central bank.

    “We have hundreds of billions of kronur, way more than any other European nation, tied up in financial institutions,” said Benediktsson, a former prime minister who will now take over at the Finance Ministry, in an interview on Thursday “And we in the three parties are ready to shake loose this capital to use it toward an infrastructure build up.”

    With a plan like that, the government must have considerable leverage over Iceland’s major banks…and it does.

    The government owns most of Landsbankinn and all of Islandsbanki and has a stake in Arion. The banking assets were acquired after the 2008 collapse when the government stepped in to save the financial industry. The crisis is now largely in the rear-view mirror and the new government is being handed a booming economy.

    The government will now put together a white paper on the financial system and have a broad discussion in parliament.

    We hadn’t fully appreciated how rapidly Iceland’s economy has been growing – last year it grew faster than China (6.7%) and even faster than India (7.1%). However, the growth rate is declining rapidly, so the coalition government’s plan might be timely, if it can be executed.

    There are signs that the economy may be cooling after growing at a whopping 7.4 percent last year. Economist surveyed by Bloomberg are forecasting gross domestic product growth at 4.2 percent this year, while the central bank recently lowered its forecast for 2018 to 3.4 percent from 5.5 percent.

    Despite the differing left-right ideologies in the new coalition government, Bjarni Ben and the new prime minister are cautiously confident, especially the former.

    Internally, the government may find it hard to reconcile the policies of its two biggest party’s, the Left Greens and the Independence Party. But both party leaders on Thursday insisted they would make it work.

    “The outer circumstances are working in our favor in forming this government,” Benediktsson. “We are the European nation that is growing at one of the fastest rates — we have no unemployment in Iceland to speak of, we have a budget surplus since 2014 and forecasts predict continuing growth, a great increase in tourism next year.”

    Taking over as prime minister will be Left Green leader Katrin Jakobsdottir, the first time the party holds the top spot after emerging as the second biggest group in October’s election. While she faced some internal party turmoil for joining with the Conservatives, she is now “optimistic but realistic” that she can make it work.

    Having cratered the economy during the crisis, it would be poetic justice if the major Icelandic banks were its saviour as we head towards the next one.

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Dec 02

Today’s News 2nd December 2017

  • Paul Craig Roberts: "Can't You See War On The Horizon?"

    Authored by Paul Craig Roberts,

    According to news reports in the British press, Russian President Vladimir Putin has instructed Russia’s industries to prepare themselves to be able to make a quick switch to war production.

    Clearly, the Russian government would not make such an announcement unless it was convinced that the prospect of war with the West was real.

    For some time I have emphasized in my columns that the consequence of years of hostile actions taken by Washington and its European vassals against Russia was leading to war.

    It is easy to understand that the massive US military/security complex needs a convincing enemy in order to justify its enormous budget, that the crazed neoconservatives put their fantasy ideology of US world hegemony above the life of the planet, and that Hillary and the Democratic National Committee will do anything to overturn Trump’s presidential victory.

    However, it is difficult to understand why the European political leaders are willing to put their countries at risk for Washington’s benefit.

    Yet, they do.

    For example, on November 13 UK PM Theresa May said that Russia was a threat to international security and was interfering in European elections and hacking European governments. There is no more evidence for these claims than there is for “Russiagate.” Yet the allegations continue and multiply. Now the European Union is organizing former provinces of the Soviet Union—Belarus, Moldova, Ukraine, Georgia, Armenia, and Azerbaijan—into an “Eastern Partnership” with the European Union.

    In other words, the West is openly organizing former provinces of Moscow against Russia, declared by Prime Minister May to be a “hostile state.” Russia knows that there is no basis for the allegations against Russia and regards them as identical to the false allegations against Saddam Hussein, Gaddafi, and Assad in order to justify military attacks on Iraq, Libya, and Syria. Having convinced Russia that she is being set up for attack, Russia is preparing for war.

    Think about this for a moment. The world is being driven to Armageddon simply because a greedy and corrupt US military/security complex needs an enemy to justify its huge budget, because Hillary and the DNC cannot accept a political defeat, and because the neoconservatives have an ideology of American Supremacy. What’s the difference between the detested White Supremacy and the American Supremacy that President Obama himself endorsed? Why is white supremacy terrible and American supremacy God’s gift to the “exceptional” and “indispensable” country?

    The Russian government has openly shared its concern that Russia is being set up for military attack. As I, if not CNN, the New York Times, and the Washington Post, have reported, the deputy commander of the Russian military’s Operation Command stated publicly the concern that Washington is preparing a surprise nuclear attack against Russia. President Putin recently called attention to Washington’s collection of Russian DNA for a US Air Force weapons lab, which implies development of a Russian-specific bio-weapon. On many occasions Russia has called attention to US and NATO bases on its borders despite previous assurances from US administrations that no such thing would ever happen.

    We have to ask ourselves why it is not the top item of public and political discussion that Washington has convinced Russia, a premier nuclear and military power, that Russia is going to be attacked. Instead, we hear of football players who kneel for the national anthem, fake news about Russiagate, a Las Vegas shooting, and so on.

    We also must ask ourselves how much longer Washington is going to permit any of us via the Internet to report the real news instead of the fake news that Washington uses to control explanations.

    The effort by the Federal Communications Commission chairman to destroy net neutrality and other efforts underway to discredit factual news as Russian propaganda indicate that Washington has concluded that in order to war on Russia Washington must also war on truth.

    Washington will not survive its war, and neither will the American and European people.

  • Chinese Researchers Experiment With Anti-Gay Spray

    Around mid-November, Human Rights Watch (HRW) issued a shocking report detailing China’s gay conversion problem.

    Powerful first-hand accounts expose how state-owned hospitals are using electric shock machines and medication to convert gays back to some form of 'normalcy'. The practice is an open secret in China, where a majority of gays are forced by their families into hospitals, because the culture labels it as a curable-disease.

     Even the World Psychiatric Association has come out denouncing the practice as “unethical, unscientific and harmful”.

    It’s been rumored that prisoners at Guantanamo Bay have received better treatment than those in China, who have been put through the conversion process.

    With that being said, the Chinese knew the rest of the world was going to figure out about the inhuman treatments to literally shock the gay out of you; and so, back in 2015, the Government approved a research team at Zhejiang University in Hangzhou to study the effects of spraying oxytocin up the noses of homosexual men to see how it affects their sexual orientation.

    Oxytocin has been best known for its roles in the female reproduction system. Recently, scientist have been investigating oxytocin’s role in various behaviors including, orgasm, social recognition, bonding, and maternal behaviors. The article says it’s also known as the ‘love hormone’ or the ‘cuddle hormone’ because levels of oxytocin are increased during hugs and orgasms. Oxytocin’s connection in love and sexuality is not well understood, which spurred the scientist’s two years clinical, to spray the natural hormone up gay men’s noses.

    Darius Longarino, a senior fellow at Yale Law School’s Paul Tsai China Center, indicated on Twitter, the 2-year study is in the final stages and results should be out by the end of December.

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    On the Chinese Clinical Trial Registry website, the study states the objective of the trial: “the feature of brain activity and social gender cognition in male homosexuals, and how oxytocin affects them.” In pursuit of these objectives, 20 volunteers were chosen at random. Among other things, the volunteers had to be right-handed, aged 18-40, and have “complete male homosexuality.”

    Researches then conducted a blind study with 20 test subjects who were divided into two groups. One group had oxytocin sprayed up their nose, while the others used a placebo saline solution.

    According to the article, the study began in October 2015 and is now in the latter stage of completion.

    The study began in October 2015 after being approved by an ethics committee and is set to end at the end of this year. Subjects are being measured on the Kinsey Scale, the Klein scale, through gender cognitive tests and functional magnetic resonance imaging of the brain, and by testing their blood pressure. Hu Shaohua, the deputy director of the Department of Psychiatry at the Zhejiang University School of Medicine, is in charge of the study.  

    Further, the article notes,

    Sup China’s Jiayun Feng notes that the study generated quite a bit of controversy upon its initial posting on the Chinese Clinical Trial Registry earlier this year after it was discovered that on the space in the form for “target disease,” someone had written “male homosexual.”

     

    The experiment has since been redefined as a “basic study,” not one intended to cure a disease, eliminating the need to fill in that blank.

    And we’re curious to see what they find out. Back in 2015, researchers at Universidad Veracruzana in Mexico found that they were able to induce a conditioned homosexual preference in male rats by giving them oxytocin and the psychoactive drug quinpirole.

    At the very least, it seems likely that one group of men had a much better time these last few years than the other group. A 2013 study found that taking oxytocin before lovemaking makes for a much more intense orgasm and feeling of satisfaction, particulary for men.

     

    And perhaps, the chart above identifies why China’s government is racing to find the most humane method in gay conversions, as the gender gap is about to take the next leg up similar to the 1980’s through the mid-2000’s widening. Anti-gay spray seems to be the communist regimes solution to combat homosexuality.

  • Expect Desperate, Insane Behavior From Government In 2018 – Part 1

    Authored by Mike Krieger via Liberty Blitzkrieg blog,

    I heartily accept the motto, “That government is best which governs least”; and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe — “That government is best which governs not at all”; and when men are prepared for it, that will be the kind of government which they will have.

    – Henry David Thoreau, Civil Disobedience

    As we head into 2018, I believe governments around the world will become increasingly insecure about their positions of power and control, which will result in increased paranoia about whether or not they have the consent of the governed.

    Being a global empire in decline, the U.S. power structure has the most to lose, making it particularly vulnerable to such panic. I suspect forces within the U.S. government are likely to engage in various attempts to reestablish authority via desperate and authoritarian moves as 2018 unfolds. I don’t say this to spread fear; rather, I think such moves will result in considerable pushback from the population at large, particularly from younger generations who are intimately aware of how spectacularity the status quo has failed them. Panic and desperation from those in control shouldn’t be feared, it should be expected and contemplated ahead of time. That’s why I’m writing this series. I want as many people as possible to start thinking about this now so we aren’t caught off guard.

    The areas I’ll be diving into with these pieces consist of cannabis, Bitcoin, and war against Iran. I’m sure there are plenty of other areas government will target in its last ditch effort to exert control over a populace sick and tired of these busybody, corrupt authoritarians, but these are issues I follow closely and have a certain degree of familiarity with. As such, they’ll be the focus of this series.

    Today’s topic is cannabis. This seems the least likely area for government action, specifically because it would be such a monumentally stupid move. That said, just because something’s idiotic doesn’t mean we should simply discount it, particularly with human fossil Jeff Sessions continuing to chirp on the issue every chance he gets.

    Although Sessions has been threatening to stomp on states’ rights and freedom of choice when it comes to cannabis ever since he became Attorney General, he hasn’t done anything yet. Nevertheless, he continues to issue threats.

    As Axios reported yesterday:

    Attorney General Jeff Sessions suggested in a press conference on Wedenesday that the Department of Justice is looking at changing Obama-era policies that allowed states to decide what to do about marijuana despite the drug remaining illegal under federal law, according to McClatchy DC.

     

    Why it matters: This could have a huge impact on the 6 states and D.C. which will have legalized marijuana by January, 2018. Places that have already legalized marijuana and have seen the marijuana industry boom in their states could face particularly tricky legal situations.

     

    Key quote: “In fact, we’re looking at that very hard right now, we had a meeting yesterday and talked about it at some length. It’s my view that the use of marijuana is detrimental, and we should not give encouragement in any way to it, and it represents a federal violation, which is in the law and is subject to being enforced.”

     

    Meanwhile, bipartisan groups of Senators and House members have been pushing for criminal justice reform bills, which would lower minimum mandatory sentences for non-violent drug crimes. A crackdown on drug crimes is not what they’re looking for from Sessions. 

    If Sessions decides to do something, I predict he’ll have his ass handed to him in spectacular fashion. First of all, I can’t think of a single issue that unites Americans at this time more than the belief cannabis should be legalized. A recent Gallup poll proved this in spades. We learned:

    WASHINGTON, D.C. — Americans continue to warm to legalizing marijuana, with 64% now saying its use should be made legal. This is the highest level of public support Gallup has found for the proposal in nearly a half-century of measurement.

     

    Gallup first asked national adults about their views on the topic in 1969, when 12% supported legalization. Support had more than doubled by the end of the next decade but changed little throughout the 1980s and 1990s. By 2001, however, about a third of Americans favored legalizing marijuana, and support has steadily increased since. A majority of Americans have consistently supported legalizing marijuana since 2013.

     

    That looks like the chart of Bitcoin.

    More significantly, we live in an era in which basically no issue issue successfully crosses partisan political lines. Except cannabis. Also from Gallup:

    Democrats and independents have historically been much more likely than Republicans to say marijuana should be legalized. In 2009, Democrats were the first partisan group to see majority support for legalization, followed by independents in 2010.

     

    This year for the first time, a majority of Republicans express support for legalizing marijuana; the current 51% is up nine percentage points from last year.

    Moreover, many of those against legal cannabis in their particular state still accept the right of people in other states to decide for themselves. The idea of the federal government going into states and denying the will of the citizens who voted to legalize it would be extraordinarily unpopular across the board. It’ll be completely obvious to everyone that if the feds think they can tell people their votes don’t matter on that issue, there’s zero freedom of choice for anything in this country. It’s the ultimate canary in the coal mine.

    In fact, I’ll take this one step further and say if Sessions dares to make this move, it’ll accelerate secessionist movements across the country and delegitimize government credibility more than any other single act in the forty years since I’ve been alive.

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    If the Trump administration actually moves on this issue, we’ll know for sure how completely inept and desperate it is. Part of me almost wants to see them try, because the resulting monumental fail will demonstrate the power of the people and give a gigantic black eye to authoritarians in government.

    Stuff like this is all part of the process we’ll be going through over the next few years, and we need to be mentally prepared for it. We the people will increasingly move to take sovereignty back in a variety of ways, and government will respond with panic. The good news is they’ll be reacting from a position of weakness, not strength.

    Which brings us to the topic of Bitcoin. As the price crossed $10,000 recently, I noticed increased squeamishness and fear on behalf of various banksters, economists and other assorted statists.

    Monday’s post will dig into what all of that means.

    *  *  *

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  • ABC Makes "Epic Mistake", Retracts Bombshell Flynn Story

    Having caused chaos in financial markets briefly, set the liberal media on fire with 'I told you so's, and sparked a renewed round of #ImpeachTrump demands, ABC News issued a 'clarification' to their bombshell Flynn report that not only negates the entire story but provides President Trump with another round of ammunition to fire against the 'fake news' media.

    Critically, ABC News reports, correcting their earlier report, that Michael Flynn is prepared to testify that Donald Trump directed him to contact the Russians as president-elect, not as a candidate.

    Here is the full 'clarification'

    During a live Special Report, ABC News reported that a confidant of Lt. Gen. Michael Flynn said Flynn was prepared to testify that then-candidate Donald Trump instructed him to contact Russian officials during the campaign.

     

    That source later clarified that during the campaign, Trump assigned Flynn and a small circle of other senior advisers to find ways to repair relations with Russia and other hot spots.

     

    It was shortly after the election, that President-elect Trump directed Flynn to contact Russian officials on topics that included working jointly against ISIS.

    So to clarify – just as President Trump had stated, there was no contact with Russians during his time as a candidate but in fact it was in transition as he attempted to mend broken bridges with another world super-power in his role as president-elect – this in no way a criminal act at all. In fact, reaching out to foreign governments during transitions is standard procedure.

    CNN is embarrassed…

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    Axios apologizes for its use of the story…

    (We regret highlighting a story that had one source making an astonishing allegation.)

    And maybe Brian Ross, so-called journalist and ABC News Chief Investigative Correspondent, who wrote the ABC article, will explain himself and his 'sources' for this nothingburger of a story.

    One wonder what the consequences are, or should be, for such an obvious error.

    The original tweet published by ABC News containing Ross' initial report had been retweeted more than 25,000 times and embedded in various news stories online before it was deleted.

    But the clarification – issued at 7:53pmET – has just 2600 RTs…

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    Is it any wonder trust in the mainstream media is at rock bottom?

    How long before Dianne Feinstein retracts her angry statement aimed at President Trump "negotiating with Russia against US interests"?

    We look forward to President Trump's tirade over this.

  • South Korea Unveils Plan To Strike North Korean Missile Launchers

    North Korea launched its Hwasong-15 ICBM into the waters west of Japan at 3:17 am local time on Wednesday. Barely six minutes later, South Korean artillery, air force, and Navy sprang into action and began firing missiles into the waters off eastern Korea – yet another military show of force meant to intimidate the North into ceasing its missile strikes.

    The retaliatory display was calibrated to target a spot in the waters off the Korean peninsula that was exactly as far away as Pyongsong, a town about 20 miles north of Pyongyang where the Hwasong 15 was reportedly launched. The distance was meant to signify that the South Korean military could destroy the North’s missile launchers if it chose to do so, the Wall Street Journal.

    But while the precision strike probably impressed any bystanders who were watching, in reality, the South’s technology for detecting and responding to North Korean missile launches is still unreliable.

    But detecting missile tests is an imperfect science, involving misses as well as hits. In a conflict situation, North Korea is likely to take more steps to conceal its movements, for instance by deploying decoy launchers, said Yang Uk, senior defense researcher at the Korea Defense and Security Forum, a Seoul think tank.

     

    In such a scenario, the likelihood falls that South Korean, U.S. or Japanese forces would pinpoint the exact launch site, Mr. Yang said. Still, he viewed the South’s response to the missile test as a success, especially considering the short time the military needed to return fire.

     

    A spokesman for the U.S.-led U.N. Command in Korea said no U.S. or other forces participated in the response.

     

    “What we saw Wednesday was an active response to a North Korean missile launch that South Korea calls its ‘kill chain’ system’,” Mr. Yang said. The kill chain is part of a larger defense system designed to pre-emptively strike the North’s missile systems in the case of a nuclear attack.

     

    South Korea this year installed a U.S.-operated Terminal High-Altitude Area Defense antimissile battery that can shoot down short- and medium-range missiles, complementing its Patriot PAC-2 antiballistic missile system.

     

    The new battery has a longer-range, but it can’t cover the whole country.

    A retired senior South Korean military official said that the South lacks a military satellite that can watch the North, although US and Japanese satellites share images with South Korean officials in real time.

    Meanwhile, analysts said North Korean officials install devices onto missiles that generate signals and send them to ground-based control towers. The South has a way to tap into these signals and track the missiles, they said.

    But in a real missile launch targeting a South Korean, Japanese or U.S. city, the North Koreans may choose not to install them, said Jo Dong-joon, deputy director of the Institute for Peace and Unification Studies at Seoul National University. This means that the South might have no way to track a hostile missile, Mr. Jo said.

    The retired military official also noted that the South has a network of human intelligence in the North that may have tipped off Seoul officials about this week’s launch. He declined to give further details, citing security concerns.

    Details on the South’s spy network in the North remain murky, but local media have reported in recent months that the South has lost most of its human network in North Korea in recent years.
     

  • What Gives Cryptocurrencies Their Value

    Authored by Peter St.Onge via The Mises Institute,

    The value of cryptocurrencies like bitcoin, just like any other kind of money, comes fundamentally from what you can do with it. As a follow up to What Backs Bitcoin, I want to dig into that value.

    The idea, which comes from Austrian economist Carl Menger, is that just as a shovel’s value comes from its ability to dig, a currency’s value comes from its ability to help you do two things: transactions and savings.

    Think of transactions as the money you carry in your wallet or checking account, and savings as the rest of what you have in the bank or buried in the yard. It’s worth mentioning here that that vast majority of money demand is indeed savings, making up 90% or more of all money demand.

    The reason this matters is because if we know what transactions cryptocurrencies are good at, we can estimate how much money demand they’ll start pulling from fiat or gold, and therefore how much those cryptos will increase in price.

    For transactions, some features that matter are cost and speed of transaction, anonymity, reversibility, counter-party risk, regulatory treatment. For savings demand, those factors are overwhelmed by the specific question of how well the currency keeps its price.

    Supply and Demand Determine Price — Always

    Price, as always in economics, is simply a matter of demand and supply. When demand is rising faster than supply, the currency will go up in price. And if demand is rising slower than supply, price will go down.

    Since bitcoin was born in 2009, it has generally enjoyed demand rising much faster than supply, hence price has soared. While the US dollar, say, has gone down — has “price inflated” — because demand failed to keep up with dollar creation.

    Those are the features, now what are the applications: what are people using money for?

    When we’re looking at a currency’s price, because we’re looking at total demand we don’t care about the number of transactions rather the total amount transacted.

    And here, the vast majority of money moving around in the economy is not goods and services — buying a cup of coffee, or a plane ticket — rather financial movements. Paying salaries, buying and selling stocks or bonds, investments and dividends. These occur mostly by bank transfer, which account for 80% of all money moved in the US. Another 15% goes by check, leaving just 3% for credit or debit cards, and 4% for paper cash.

    Bitcoin Still under 0.01% of Global Transactions

    A final part of the puzzle, what’s the competition to cryptocurrencies? Most money payments worldwide are, of course, denominated in fiat currency like dollars or yen — about 99% by amount. With the remaining 1% made in gold.

    Note that fiat has both physical and electronic forms, such as credit cards and bank transfers. Even gold payments can be made with paper rather than physically moving the gold, including gold-based securities that trade in financial markets (so-called “paper gold”).

    Now we’re ready to go through those features for each currency. On cost of transaction, bitcoin’s fees nowadays average about $1, and don’t vary by amount you transfer.

    You can send one bitcoin, worth $5,000, or 1,000 bitcoins, worth $5 million, and the fees are still a dollar. In contrast, banks typically charge a percentage of the transaction, which adds up on million-dollar transfers.

    Meanwhile, on speed bitcoin is much faster than banks; between 10 minutes and an hour to confirm a transaction, while banks take days.

    So bitcoin beats on the most important application of money: financial transfers. The one caveat here is exchange costs. Just as you pay fees and spreads when you exchange your dollars for yen, every time you convert dollars into bitcoin you’ve got to pay fees and spreads.

    This means that bitcoin’s low fees only really dominate if both the sender and receiver are keeping the money in bitcoin.

    Bitcoin’s Exchange Rate Woes

    On the other hand, if you have a bunch of dollars and want to buy a house from somebody who likes to keep dollars in the bank, then you’ll have to convert your dollars into bitcoin, send the bitcoin for a buck, then the other guy converts the bitcoins into dollars again. You saved on the transfer itself, but you had to exchange the money twice.

    So, bitcoin as a technology is superior for the main type of transaction by value, but in reality that advantage is eroded if people are keeping their wealth in fiat. This isn’t really a flaw of cryptocurrencies per se, it’s just a standard penalty suffered by any minority currency — having to pay for conversion into the dominant currency.

    To finish up on cost and speed, obviously physical cash or physical gold are fantastic on both cost and speed, but only if buyer and seller are touching each other. Given paper cash has only a 4% share today, touchable buyers and sellers is a very small part of demand.

    For remote orders, then, bitcoin carries lower fees than credit and debit cards, but again with that double-exchange problem unless both buyer and seller are staying in bitcoin.

    Bitcoin’s Potential to Outperform

    Next up are some secondary benefits: anonymity, reversibility, counter-party risk, regulatory treatment.

    Briefly, bitcoin is nearly anonymous unless the US government cares enough about you to put some serious people on you. In this sense it’s essentially like using cash, but with the advantage you can use it over long distances with those low fees.

    In practice, the closest alternative is probably a pre-paid debit card that you buy at 7/11, which can cost several dollars in addition to the merchant fees, and isn’t going to work for large amounts nor overseas.

    As for reversibility, the question is whether the buyer can cancel his payment. A problem for online vendors who get scammed by people who buy the product, get it in the mail, cancel the order and keep the goodies.

    Credit card companies or Paypal famously always side with the customer, which can suck for the honest vendor getting ripped off online. Bitcoin, again like cash, is irreversible once it’s confirmed — so about 10 minutes to an hour. That’s slower than cash, but faster than Paypal or credit cards where buyers can reverse months later.

    Fourth characteristic is counter-party risk; the idea that your bank could go under, taking your money with it. Remember bitcoin was invented in the wake of the 2008 financial crisis, where bank failures were common.

    Because bitcoin is distributed across many computers and isn’t managed by a central organization, it has no single point of failure. On the other hand, cryptocurrencies do still have potential technical glitches that probably more than make up for that risk.

    Regulation: Not If but When

    Finally, regulatory treatment. This is where we’ll probably see a lot of change over the next couple years, as governments digest cryptocurrencies like bitcoin.

    So far cryptos have enjoyed mostly benign neglect from regulators; tolerated, neither discouraged nor encouraged. On the bright side this has meant little regulatory burdens or fees, although this is changing in places like New York.

    On the down-side, this regulatory grey-zone has meant a lot of companies and institutional investors are afraid to use, or even to buy, bitcoin. So increasing regulations could actually boost bitcoin demand, as those regulated users become unafraid to play.

    As for what happens in the future, countries are gradually drifting into two camps: broadly enthusiastic (Japan, Dubai, Taiwan, Switzerland), broadly skeptical (China, Korea), with the USA and European Union still lurching between the camps.

    Cryptos: For now, Only for Adrenaline Junkies

    Now, given how much savings dominate money use, the elephant in the room is would you feel comfortable keeping your life savings in bitcoin.

    As we mentioned, the key point here is how its price will hold up, meaning will demand grow faster than supply. While bitcoin has knocked the socks off dollars or even gold, rising 800% in the past year alone, even this soaring growth has come with the major downside that bitcoin also fluctuates a lot — easily up or down 50% in a month.

    However, as with any product, service, or medium of exchange, the value of cryptocurrencies will depend on the future choices of countless users and consumers — based on their subjective valuations of the currencies themselves. Those who can successfully guess what will become more valuable in the future will become wealthy. But risks always remain.

  • Chicago Cop Caught On Video Telling Teen He's Being Detained "Because You're White"

    A police detective in Illinois has faced disciplinary action this week, after he was recorded on video telling a teenager he was being detained because he’s white.

    Footage of the controversial encounter surfaced on Facebook on Monday, and has since gone viral with more than 85,000 views.

    Dezi Baczek,18, who recorded the video, was among a group of teens who went to the local pawnshop in Lake Villa, a suburb of Chicago, to sell an ‘item’ so the group could buy her brother a book that he wanted to read…How thoughtful…

    When the group of millennials exited the shop, they found Detective Gomez waiting out in the parking lot for them. Immediately, the group of teens were ordered to sit down or face being arrested. 

    Baczek told NBC 5, “I was yelled at to sit down”.

    When asked ‘what for?.. That is when she started filming.

    Police said the detective was conducting a theft investigation at the time and was questioning the group of teens. One unseen teen in the video questions why he’s being detained— he asked Gomez, “Is it because I’m a teenager? Because I have baggy pants on?”

    Detective Gomez was seen storming off, then spun around and yelled back, ”because you’re white."

    In response to the incident,  Lake Villa Police Chief Craig Somerville said such behavior will not be tolerated, said the Daily Herald.

    “We are a professional department with high standards and we value our relationship with the public, particularly our youth,” Somerville said in a statement.

     

    “Our relationships are built upon mutual understanding and trust and this type of behavior contradicts that.”

    Somerville said Gomez became suspicious of the group when they were accompanied by the suspect of a theft investigation at the pawn shop and another member gave officers a fake name. That person was charged with obstructing police.

    The chief did not directly acknowledge what was said in the video, but he did note it as inappropriate and unprofessional.

    Somerville said in a statement, “Gomez admitted his words were poorly chosen and insensitive and he immediately regretted what he had said. The Lake Villa Police Department does not condone this type of behavior of its officers.Gomez has been disciplined for behavior unbecoming an officer. He will be assisting me with speaking to the parents and teens involved in this incident.”

  • Democratic Campaign Tells Voters Not To Vote For A Man (Because He Has A Penis)

    Authord by Alex Thomas via SHTFplan.com,

    Despite losing the 2016 election largely because the Democrat Party refused to move away from divisive identity based politics they have apparently not learned their lesson, with at least one powerful female Democrat deciding to piggyback off the wave of sexual assault allegations sweeping the country by openly telling Michigan voters to vote for her because she is a women.

    Democratic candidate for Michigan’s Attorney General, Dana Nessel, has released an ad for her campaign that directly implies that voters should choose her simply because she does not have a penis and therefore cannot sexually assault someone she works with like many male politicians (on both sides of the aisle) have been accused of over the past month.

    “Who can you trust most not to show you their penis in a professional setting? That would be the candidate who doesn’t have one,” Nessel says with a straight face as headlines of male sexual harassment play across the screen.

    Nessel attempted to explain the fact that she is now attempting to guilt voters into voting for her as a way to show that they are against sexual harassment in an interview with a local news outlet.

    “If you get more women in office, if you get more women in positions of authority, you’re less likely to have issues where someone is pulling out their penis at an inappropriate time in the the workplace,” she told WWJ’s Charlie Langton.

     

    “I’m not saying that all men harass and I’m certainly not saying that women are incapable of sexually harassing, but I know from many years serving as an assistant prosecutor prosecuting sex crimes, honestly, the vast, vast majority of those cases do involve men. So I thought that point needed to be made.”

    So there you have it.

    The Democrats apparently plan to run on a platform that uses guilt to force Americans to vote for them or risk making it look as if they do not care about the issue of sexual harassment.

    Absolutely disgusting.

  • PwC Becomes First "Big Four" Firm To Accept Payment In Bitcoin

    Regulators may be skeptical of the burgeoning ICO market, where outright fraud isn’t uncommon, but that isn’t stopping some of the world’s largest audit and consulting firms from trying to win their business.

    PWC revealed that it will begin accepting payment for its consulting services in bitcoin because it is increasingly working with startups in the city involved in cryptocurrencies and blockchain, the open-ledger technology that processes bitcoin transactions by logging them on a public record. The firm also noted its advisory work for initial coin offerings – which typically collect payment in bitcoin and Ethereum – along with crypto exchanges and crypto funds, according to the Wall Street Journal.

    “This decision helps illustrate how we are embracing new technology and incorporating innovative business models across our full range of services,” Raymund Chao, chairman of PwC Asia-Pacific, said. “It is also an indication that bitcoin and other established cryptocurrencies have now developed into more broadly accepted forms of settlement."

    ICOs have two important characteristics that would pique PwC’s partners’ interest: Plenty of cash on hand, and many intractable problems.

    Of course, PwC isn’t the first major company to accept bitcoin: Overstock.com has been accepting payment in bitcoin for years. Dish Network and Microsoft also accept payment for some services in bitcoin.

    The US has taken steps to crack down on ICOs, with the SEC having recently opened several civil actions against them. Meanwhile, China has banned them entirely. As the large pots of money accumulated have spurred internal conflict and in some cases outright embezzlement, some of the largest offerings are already crumbling.

    But they’re on track to raise as much as $4 billion this year alone. And despite the bad press and regulatory scrutiny, the market hasn’t cooled.

    Overstock.com claims it’s building a trading platform that will help legitimize the market, and at least one other company is building what’s essentially an exchange for ICO tokens.

    The move also makes sense from a trend-following standpoint. Bitcoin has climbed more than 950% this year alone. And with several new derivatives products hitting the market, PwC will have more options for hedging its exposure.

    However, on Thursday, the price of a single coin had fallen 16% to $9,400 a coin, well below its recent peak above $11,000.


     

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Dec 01

Today’s News 1st December 2017

  • Paul Craig Roberts: "Is Washington The Most Corrupt Government In History?"

    Authored by Paul Craig Roberts,

    Robert Mueller, a former director of the FBI who is working as a special prosecutor “investigating” a contrived hoax designed by the military/security complex and the DNC to destroy the Trump presidency, has yet to produce a scrap of evidence that Russiagate is anything but orchestrated fake news.

    As William Binney and other top experts have said, if there is evidence of Russiagate, the NSA would have it. No investigation would be necessary. So where is the evidence?

    It is a revelation of how corrupt Washington is that a fake scandal is being investigated while a real scandal is not.

    The fake scandal is Trump’s Russiagate.

    The real scandal is Hillary Clinton’s uranium sale to Russia. No evidence for the former exists. Voluminous evidence for Hillary’s scandal lies in plain view.

    Why are the clearly false charges against Trump being investigated and the clearly true charges against Hillary not being investigated? The answer is that Hillary with her hostility toward Russia and her denunciation of Russian President Putin as the “New Hitler” is not a threat to the budget and power of the US military/security complex, while Trump’s aim of normalizing relations with Russia would deprive the military/security complex of the “enemy” it requires to justify its massive budget and power.

    Why hasn’t President Trump ordered the Justice Department to investigate Hillary? Is the answer that Trump is afraid the military/security complex will assassinate him? Why hasn’t the Justice Department undertaken the investigation on its own? Is the answer that Trump’s government is allied with his enemies?

    How corrupt does Mueller have to be to agree to lead a fake investigation designed to overthrow the democratic election of the President of the United States? Why doesn’t Trump have Mueller and Comey arrested for sedition and conspiring to overthrow the president of the United States?

    Why instead is Mueller expanding his investigation beyond his mandate and bringing charges against Manafort and others for decade-old under-reporting of income? Why instead is Congress harassing journalist Randy Credico for interviewing Julian Assange? How does an interview become part of the House Intelligence (sic) Committee’s investigation into “Russian active measures directed at the 2016 U.S. election?” There were no such active measures, but the uranium sale was real.

    Why haven’t the media conglomerates that have produced presstitutes instead of journalists been broken up? Why can presstitutes lie 24/7, but a man can’t make a pass at a woman?

    Once you begin asking questions, there is no end of them.

    The failure of the US and European media is extreme.

    The presstitutes never investigate real events.

    The presstitutes never question inconsistencies in official stories. They never tie together loose ends. They simply read over and over the script handed to them until the official story that controls the explanation is driven into the public’s head.

    Consider, for example, the Obama regime’s claim to have murdered Osama bin Laden in his “compound” in Abbottabad, Pakistan, next to a Pakistani military base. The official story had to be changed several times. The Obama regime claim that Obama and top government officials had watched the raid via cameras on the SEALs’ helmets had to be abandoned. There was no reason to withhold the filmed evidence, and of course there was no such evidence, so the initial claim to have watched the killing became a “miscommunication.” The staged photo of the top government officials watching the alleged live filming was never explained.

    The entire story never made any sense: Osama, unarmed and defended only by his unarmed wife, was murdered in cold blood by a SEAL. What in the world for? Why murder rather than capture the “terrorist mastermind” from whom endless information could have been gained? Why forgo the political fanfare of parading Osama bin Laden before the world as a captive of the American superpower?

    Why were no photographs taken? Why was Osama’s body dumped in the ocean. In other words, why was all the evidence destroyed and nothing saved to back up the story?

    Why the fake story of Osama being given a sea burial from an aircraft carrier? Why was no media interested that the ship’s crew wrote home that no such burial took place?

    Why was there no presstitute interest in the fact that the SEAL unit, from which the SEALs on the alleged raid on bin Laden’s compound were drawn, was loaded against regulations in one 50-year old Vietnam era helicopter and shot down in Afghanistan, with all lives lost? Why was there no presstitute interest in the parents of the SEALs complaints about inappropriate procedures that cost their sons’ lives and about fears expressed to them by sons that something was wrong and they felt endangered?

    Did the SEAL unit have to be wiped out because the members were asking one another, “who was on that raid?” “Were you on the bin Laden raid?” When in fact no one was on the raid.

    Why wasn’t Congress interested?

    Why was the live Pakistani TV interview with an eye witness of the alleged raid on bin Laden’s compound not reported in the US media? The witness contradicted every aspect of the official story. And this was immediately after the event. There was no time for anyone to concoct an elaborate counter-story or motive to do so. Here is the interview, and here is a verified translation that confirms the accuracy of the English subscripts.

    Osama bin Laden had been dead for a decade prior to the false claim that Navy SEALs murdered him in Pakistan in May 2011. Here are the obituaries from December 2001, and this one from Fox News.

    Here is bin Laden’s last confirmed interview. He says he had nothing to do with 9/11. Why would a terrorist leader who succeed in humiliating “the world’s only superpower” fail to boost his movement by claiming credit?

    Think about this. The bin Laden story, including 9/11, is fake from start to finish, but it is inscribed into encyclopedias, history books, and the public’s consciousness.

    And this is just one example of the institutionalized mass lies concocted by Washington and the presstitutes and turned into truth. Washington’s self-serving control over explanations has removed Americans from reality and made them slaves to fake news.

    So, how does democracy function when voters have no reliable information and, instead, are led into the agendas of the rulers by orchestrated events and fake news?

    Where is there any evidence that the United States is a functioning democracy?

  • Surveillance State: Stanford Researchers Use AI To Determine Neighborhood's Bias By Its Cars

    A team of researchers at Stanford University have trained artificial intelligence algorithms to observe and study millions of images on Google Street View to determine how people vote by the make of their car. The algorithms were trained to recognize the make, model, and year of every car produced since 1990, in more than 50 million Google Street View images across 200 American cities.

    The data on car types and location were then compared against the most comprehensive demographic database in use today, the American Community Survey, and against presidential election voting data to estimate demographic factors such as race, education, income and voter preferences, the Stanford News reported.

    Fei-Fei Li, an associate professor of computer science at Stanford and director of the Stanford Artificial Intelligence Lab, led the team of researchers who published the study on Tuesday in the official journal of the U.S. National Academy of Sciences, and found a “simple linear relationship” between cars, demographics and political persuasion.

    Li is an expert in computer vision and deep learning, a form of artificial intelligence in which she teaches algorithms to “recognize three-dimensional objects in two-dimensional images”. The algorithms were trained, but more importantly, they became self-aware combing through millions of images on Google Street View in identifying the political preference of a citizen through the car they owned.

    “Using easily obtainable visual data, we can learn so much about our communities, on par with some information that takes billions of dollars to obtain via census surveys. More importantly, this research opens up more possibilities of virtually continuous study of our society using sometimes cheaply available visual data,” Li said.

    According to the study: “If the number of sedans in a neighborhood is greater than the number of pickups, there is an 88 percent chance that the precinct will vote Democratic. Transpose those numbers to have more pickups than sedans and there is an 82 percent chance a precinct will vote Republican.  

    The algorithms worked day and night for two weeks and were able to probe through 50 million images creating 2,657 categories by make, model, and year. Standford News said that “a human working at a relatively high rate of six images a minute would need 15 years to complete the same task”.

    Researchers believe their algorithm could be an inexpensive real time solution to the more costly demographic surveys. For example, the American Community Survey costs the U.S. more than $250 million per year a lag time between data collection and publication that could span 2-years. Li’s algorithm is a hopeful to replace the current surveys.

    Not so fast, however said Timnit Gebru, first author of the paper and formerly a member of Li’s lab, who does not “see something like this replacing the American Community Survey, but as a supplement to keep the data up to date.” Gebru has high hopes for the technology of extracting critical information in the world around us on inexpensive platforms such as Google Street View.

    “If you walk around a neighborhood looking at cars, the density of traffic sometimes tells you things as valuable as the types of cars you see on the streets. We can use all this information in our algorithms,” Gebru said. Li agreed, counterting that “It can help us understand how our society works, the things people need and how we can improve lives,” Li said. “There is great potential to use computer vision technology in a constructive and benevolent way.”

    And while AI algos at an elite academic institution are mapping out the political preferences of each American by location, with what one hopes are ultimately benign intentions, one wonders what would happen if the data fell into the wrong hands, or if – gasp – the “election manipulating” Russians were to do a similar analysis using entirely publicly available data? Would America’s next president be an organgutan?

  • Michael Hudson: America's Monetary Imperialism

    Authored by Michael Hudson via Counterpunch.org,

    In theory, the global financial system is supposed to help every country gain. Mainstream teaching of international finance, trade and “foreign aid” (defined simply as any government credit) depicts an almost utopian system uplifting all countries, not stripping their assets and imposing austerity.

    The reality since World War I is that the United States has taken the lead in shaping the international financial system to promote gains for its own bankers, farm exporters, its oil and gas sector, and buyers of foreign resources – and most of all, to collect on debts owed to it.

    Each time this global system has broken down over the past century, the major destabilizing force has been American over-reach and the drive by its bankers and bondholders for short-term gains. The dollar-centered financial system is leaving more industrial as well as Third World countries debt-strapped. Its three institutional pillars – the International Monetary Fund (IMF), World Bank and World Trade Organization – have imposed monetary, fiscal and financial dependency, most recently by the post-Soviet Baltics, Greece and the rest of southern Europe. The resulting strains are now reaching the point where they are breaking apart the arrangements put in place after World War II.

    The most destructive fiction of international finance is that all debts can be paid, and indeed should be paid, even when this tears economies apart by forcing them into austerity – to save bondholders, not labor and industry. Yet European countries, and especially Germany, have shied from pressing for a more balanced global economy that would foster growth for all countries and avoid the current economic slowdown and debt deflation.

    Imposing Austerity on Germany After World War I

    After World War I the U.S. Government deviated from what had been traditional European policy – forgiving military support costs among the victors. U.S. officials demanded payment for the arms shipped to its Allies in the years before America entered the Great War in 1917. The Allies turned to Germany for reparations to pay these debts. Headed by John Maynard Keynes, British diplomats sought to clean their hands of responsibility for the consequences by promising that all the money they received from Germany would simply be forwarded to the U.S. Treasury.

    The sums were so unpayably high that Germany was driven into austerity and collapse. The nation suffered hyperinflation as the Reichsbank printed marks to throw onto the foreign exchange market. The currency declined, import prices soared, raising domestic prices as well. The debt deflation was much like that of Third World debtors a generation ago, and today’s southern European PIIGS (Portugal, Ireland, Italy, Greece and Spain).

    In a pretense that the reparations and Inter-Ally debt tangle could be made solvent, a triangular flow of payments was facilitated by a convoluted U.S. easy-money policy. American investors sought high returns by buying German local bonds; German municipalities turned over the dollars they received to the Reichsbank for domestic currency; and the Reichsbank used this foreign exchange to pay reparations to Britain and other Allies, enabling these countries to pay the United States what it demanded.

    But solutions based on attempts to keep debts of such magnitude in place by lending debtors the money to pay can only be temporary. The U.S. Federal Reserve sustained this triangular flow by holding down U.S. interest rates. This made it attractive for American investors to buy German municipal bonds and other high-yielding debts. It also deterred Wall Street from drawing funds away from Britain, which would have driven its economy deeper into austerity after the General Strike of 1926. But domestically, low U.S. interest rates and easy credit spurred a real estate bubble, followed by a stock market bubble that burst in 1929. The triangular flow of payments broke down in 1931, leaving a legacy of debt deflation burdening the U.S. and European economies. The Great Depression lasted until outbreak of World War II in 1939.

    Planning for the postwar period took shape as the war neared its end. U.S. diplomats had learned an important lesson. This time there would be no arms debts or reparations. The global financial system would be stabilized – on the basis of gold, and on creditor-oriented rules. By the end of the 1940s the Untied States held some 75 percent of the world’s monetary gold stock. That established the U.S. dollar as the world’s reserve currency, freely convertible into gold at the 1933 parity of $35 an ounce.

    It also implied that once again, as in the 1920s, European balance-of-payments deficits would have to be financed mainly by the United States. Recycling of official government credit was to be filtered via the IMF and World Bank, in which U.S. diplomats alone had veto power to reject policies they found not to be in their national interest. International financial “stability” thus became a global control mechanism – to maintain creditor-oriented rules centered in the United States.

    To obtain gold or dollars as backing for their own domestic monetary systems, other countries had to follow the trade and investment rules laid down by the United States.

    These rules called for relinquishing control over capital movements or restrictions on foreign takeovers of natural resources and the public domain as well as local industry and banking systems.

    By 1950 the dollar-based global economic system had become increasingly untenable. Gold continued flowing to the United States, strengthening the dollar – until the Korean War reversed matters. From 1951 through 1971 the United States ran a deepening balance-of-payments deficit, which stemmed entirely from overseas military spending. (Private-sector trade and investment was steadily in balance.)

    U.S. Treasury Debt Replaces the Gold Exchange Standard

    The foreign military spending that helped return American gold to Europe became a flood as the Vietnam War spread across Asia after 1962. The Treasury kept the dollar’s exchange rate stable by selling gold via the London Gold Pool at $35 an ounce. Finally, in August 1971, President Nixon stopped the drain by closing the Gold Pool and halting gold convertibility of the dollar.

    There was no plan for what would happen next. Most observers viewed cutting the dollar’s link to gold as a defeat for the United States. It certainly ended the postwar financial order as designed in 1944. But what happened next was just the reverse of a defeat. No longer able to buy gold after 1971 (without inciting strong U.S. disapproval), central banks found only one asset in which to hold their balance-of-payments surpluses: U.S. Treasury debt. These securities no longer were “as good as gold.” The United States issued them at will to finance soaring domestic budget deficits.

    By shifting from gold to the dollars thrown off by the U.S. balance-of-payments deficit, the foundation of global monetary reserves came to be dominated by the U.S. military spending that continued to flood foreign central banks with surplus dollars. America’s balance-of-payments deficit thus supplied the dollars that financed its domestic budget deficits and bank credit creation – via foreign central banks recycling U.S. foreign spending back to the U.S. Treasury.

    In effect, foreign countries have been taxed without representation over how their loans to the U.S. Government are employed. European central banks were not yet prepared to create their own sovereign wealth funds to invest their dollar inflows in foreign stocks or direct ownership of businesses. They simply used their trade and payments surpluses to finance the U.S. budget deficit. This enabled the Treasury to cut domestic tax rates, above all on the highest income brackets.

    U.S. monetary imperialism confronted European and Asian central banks with a dilemma that remains today: If they do not turn around and buy dollar assets, their currencies will rise against the dollar. Buying U.S. Treasury securities is the only practical way to stabilize their exchange rates – and in so doing, to prevent their exports from rising in dollar terms and being priced out of dollar-area markets.

    The system may have developed without foresight, but quickly became deliberate. My book Super Imperialism sold best in the Washington DC area, and I was given a large contract through the Hudson Institute to explain to the Defense Department exactly how this extractive financial system worked. I was brought to the White House to explain it, and U.S. geostrategists used my book as a how-to-do-it manual (not my original intention).

    Attention soon focused on the oil-exporting countries. After the U.S. quadrupled its grain export prices shortly after the 1971 gold suspension, the oil-exporting countries quadrupled their oil prices. I was informed at a White House meeting that U.S. diplomats had let Saudi Arabia and other Arab countries know that they could charge as much as they wanted for their oil, but that the United States would treat it as an act of war not to keep their oil proceeds in U.S. dollar assets.

    This was the point at which the international financial system became explicitly extractive. But it took until 2009, for the first attempt to withdraw from this system to occur. A conference was convened at Yekaterinburg, Russia, by the Shanghai Cooperation Organization (SCO). The alliance comprised Russia, China, Kazakhstan, Tajikistan, Kirghizstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. U.S. officials asked to attend as observers, but their request was rejected.

    The U.S. response has been to extend the new Cold War into the financial sector, rewriting the rules of international finance to benefit the United States and its satellites – and to deter countries from seeking to break free from America’s financial free ride.

    The IMF Changes Its Rules to Isolate Russia and China

    Aiming to isolate Russia and China, the Obama Administration’s confrontational diplomacy has drawn the Bretton Woods institutions more tightly under US/NATO control. In so doing, it is disrupting the linkages put in place after World War II.

    The U.S. plan was to hurt Russia’s economy so much that it would be ripe for regime change (“color revolution”). But the effect was to drive it eastward, away from Western Europe to consolidate its long-term relations with China and Central Asia. Pressing Europe to shift its oil and gas purchases to U.S. allies, U.S. sanctions have disrupted German and other European trade and investment with Russia and China. It also has meant lost opportunities for European farmers, other exporters and investors – and a flood of refugees from failed post-Soviet states drawn into the NATO orbit, most recently Ukraine.

    To U.S. strategists, what made changing IMF rules urgent was Ukraine’s $3 billion debt falling due to Russia’s National Wealth Fund in December 2015. The IMF had long withheld credit to countries refusing to pay other governments. This policy aimed primarily at protecting the financial claims of the U.S. Government, which usually played a lead role in consortia with other governments and U.S. banks. But under American pressure the IMF changed its rules in January 2015. Henceforth, it announced, it would indeed be willing to provide credit to countries in arrears other governments – implicitly headed by China (which U.S. geostrategists consider to be their main long-term adversary), Russia and others that U.S. financial warriors might want to isolate in order to force neoliberal privatization policies.

    Article I of the IMF’s 1944-45 founding charter prohibits it from lending to a member engaged in civil war or at war with another member state, or for military purposes generally. An obvious reason for this rule is that such a country is unlikely to earn the foreign exchange to pay its debt. Bombing Ukraine’s own Donbass region in the East after its February 2014 coup d’état destroyed its export industry, mainly to Russia.

    Withholding IMF credit could have been a lever to force adherence to the Minsk peace agreements, but U.S. diplomacy rejected that opportunity. When IMF head Christine Lagarde made a new loan to Ukraine in spring 2015, she merely expressed a verbal hope for peace. Ukrainian President Porochenko announced the next day that he would step up his civil war against the Russian-speaking population in eastern Ukraine. One and a half-billion dollars of the IMF loan were given to banker Ihor Kolomoiski and disappeared offshore, while the oligarch used his domestic money to finance an anti-Donbass army. A million refugees were driven east into Russia; others fled west via Poland as the economy and Ukraine’s currency plunged.

    The IMF broke four of its rules by lending to Ukraine: (1) Not to lend to a country that has no visible means to pay back the loan (the “No More Argentinas” rule, adopted after the IMF’s disastrous 2001 loan to that country). (2) Not to lend to a country that repudiates its debt to official creditors (the rule originally intended to enforce payment to U.S.-based institutions). (3) Not to lend to a country at war – and indeed, destroying its export capacity and hence its balance-of-payments ability to pay back the loan. Finally (4), not to lend to a country unlikely to impose the IMF’s austerity “conditionalities.” Ukraine did agree to override democratic opposition and cut back pensions, but its junta proved too unstable to impose the austerity terms on which the IMF insisted.

    U.S. Neoliberalism Promotes Privatization Carve-Ups of Debtor Countries

    Since World War II the United States has used the Dollar Standard and its dominant role in the IMF and World Bank to steer trade and investment along lines benefiting its own economy. But now that the growth of China’s mixed economy has outstripped all others while Russia finally is beginning to recover, countries have the option of borrowing from the Asian Infrastructure Investment Bank (AIIB) and other non-U.S. consortia.

    At stake is much more than just which nations will get the contracting and banking business. At issue is whether the philosophy of development will follow the classical path based on public infrastructure investment, or whether public sectors will be privatized and planning turned over to rent-seeking corporations.

    What made the United States and Germany the leading industrial nations of the 20th century – and more recently, China – has been public investment in economic infrastructure. The aim was to lower the price of living and doing business by providing basic services on a subsidized basis or freely. By contrast, U.S. privatizers have brought debt leverage to bear on Third World countries, post-Soviet economies and most recently on southern Europe to force selloffs. Current plans to cap neoliberal policy with the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Transatlantic Free Trade Agreement (TAFTA) go so far as to disable government planning power to the financial and corporate sector.

    American strategists evidently hoped that the threat of isolating Russia, China and other countries would bring them to heel if they tried to denominate trade and investment in their own national currencies. Their choice would be either to suffer sanctions like those imposed on Cuba and Iran, or to avoid exclusion by acquiescing in the dollarized financial and trade system and its drives to financialize their economies under U.S. control.

    The problem with surrendering is that this Washington Consensus is extractive and lives in the short run, laying the seeds of financial dependency, debt-leveraged bubbles and subsequent debt deflation and austerity. The financial business plan is to carve out opportunities for price gouging and corporate profits. Today’s U.S.-sponsored trade and investment treaties would make governments pay fines equal to the amount that environmental and price regulations, laws protecting consumers and other social policies might reduce corporate profits. “Companies would be able to demand compensation from countries whose health, financial, environmental and other public interest policies they thought to be undermining their interests, and take governments before extrajudicial tribunals. These tribunals, organised under World Bank and UN rules, would have the power to order taxpayers to pay extensive compensation over legislation seen as undermining a company’s ‘expected future profits.’”

    This policy threat is splitting the world into pro-U.S. satellites and economies maintaining public infrastructure investment and what used to be viewed as progressive capitalism. U.S.-sponsored neoliberalism supporting its own financial and corporate interests has driven Russia, China and other members of the Shanghai Cooperation Organization into an alliance to protect their economic self-sufficiency rather than becoming dependent on dollarized credit enmeshing them in foreign-currency debt.

    At the center of today’s global split are the last few centuries of Western social and democratic reform. Seeking to follow the classical Western development path by retaining a mixed public/private economy, China, Russia and other nations find it easier to create new institutions such as the AIIB than to reform the dollar standard IMF and World Bank. Their choice is between short-term gains by dependency leading to austerity, or long-term development with independence and ultimate prosperity.

    The price of resistance involves risking military or covert overthrow. Long before the Ukraine crisis, the United States has dropped the pretense of backing democracies. The die was cast in 1953 with the coup against Iran’s secular government, and the 1954 coup in Guatemala to oppose land reform. Support for client oligarchies and dictatorships in Latin America in the 1960 and ‘70s was highlighted by the overthrow of Allende in Chile and Operation Condor’s assassination program throughout the continent. Under President Barack Obama and Secretary of State Hillary Clinton, the United States has claimed that America’s status as the world’s “indispensible nation” entitled it back the recent coups in Honduras and Ukraine, and to sponsor the NATO attack on Libya and Syria, leaving Europe to absorb the refugees.

    Germany’s Choice

    This is not how the Enlightenment was supposed to evolve. The industrial takeoff of Germany and other European nations involved a long fight to free markets from the land rents and financial charges siphoned off by their landed aristocracies and bankers. That was the essence of classical 19th-century political economy and 20th-century social democracy. Most economists a century ago expected industrial capitalism to produce an economy of abundance, and democratic reforms to endorse public infrastructure investment and regulation to hold down the cost of living and doing business. But U.S. economic diplomacy now threatens to radically reverse this economic ideology by aiming to dismantle public regulatory power and impose a radical privatization agenda under the TTIP and TAFTA.

    Textbook trade theory depicts trade and investment as helping poorer countries catch up, compelling them to survive by becoming more democratic to overcome their vested interests and oligarchies along the lines pioneered by European and North American industrial economies. Instead, the world is polarizing, not converging. The trans-Atlantic financial bubble has left a legacy of austerity since 2008. Debt-ridden economies are being told to cope with their downturns by privatizing their public domain.

    The immediate question facing Germany and the rest of Western Europe is how long they will sacrifice their trade and investment opportunities with Russia, Iran and other economies by adhering to U.S.-sponsored sanctions. American intransigence threatens to force an either/or choice in what looms as a seismic geopolitical shift over the proper role of governments: Should their public sectors provide basic services and protect populations from predatory monopolies, rent extraction and financial polarization?

    Today’s global financial crisis can be traced back to World War I and its aftermath. The principle that needed to be voiced was the right of sovereign nations not to be forced to sacrifice their economic survival on the altar of inter-government and private debt demands. The concept of nationhood embodied in the 1648 Treaty of Westphalia based international law on the principle of parity of sovereign states and non-interference. Without a global alternative to letting debt dynamics polarize societies and tear economies apart, monetary imperialism by creditor nations is inevitable.

    The past century’s global fracture between creditor and debtor economies has interrupted what seemed to be Europe’s democratic destiny to empower governments to override financial and other rentier interests. Instead, the West is following U.S. diplomatic leadership back into the age when these interests ruled governments. This conflict between creditors and democracy, between oligarchy and economic growth (and indeed, survival) will remain the defining issue of our epoch over the next generation, and probably for the remainder of the 21st century.

  • Mapping The United States Of Welfare

    Via HowMuch.net,

    When was the last time you stopped to think about how much the government spends on welfare?

    Most people probably don’t think about it too much, but we bet even for those who do, they don’t know how much their government spends, much less what the money actually pays for.

    That’s why we created a new map showing you how much each state spends on the public dole.

    Source: HowMuch.net

    Our viz takes U.S. Census Bureau data from GoBankingRates to create a map for the entire country. Each bubble represents a state, and the size of the bubble corresponds to the size of the public expenditure on public welfare. We then color-coded each circle according to the size of the expense. Shades of blue mean that the state spends relatively little money, but pink and red indicate a higher-than-average amount. There’s a lot that you can quickly learn by breaking mapping public welfare expenses in this war.

    First off, what is public welfare? This can be a controversial topic with a lot of stereotypes, so let’s get our definitions straight. If you rely on public welfare, then you turn to the government for help with paying your basic necessities, like food, housing and healthcare. The federal government runs programs that provide these types of things, and to varying degrees, so do some states. As you can clearly see, some places are more generous than others.

    California is the obvious standout on the West Coast, dropping north of $100 billion on public assistance. Texas is the only other Western state with over $30 billion of expenditures, followed by Washington at under $12 billion.

    There’s a significant cluster of high-spending states across the Northeast, including New York ($61.4B) and Pennsylvania ($26.8B). Florida stands out in the South at over $27B, thanks in large part to its retirement communities. There’s also a cluster of states in the Upper Midwest in light pink, where there a lot of old manufacturing cities.

    We should also point out the states with much smaller expenditures, stretching across the Midwest and into the deep South. The simplest explanation for the lack of huge welfare budgets in these states has to do with geography: there just aren’t a lot of big cities in places like Iowa and Alabama compared to other states. This helps explain why California and New York spend so much on welfare. They rank first and fourth as the most populous states.

    Here’s a straightforward list of the top ten states with the highest expenditures on public welfare. Note the enormous difference between California and New York and the rest of the country.

    1. California – $103 Billion

    2. New York – $61.4 Billion 

    3. Texas – $35.4 Billion 

    4. Florida – $27.2 Billion 

    5. Pennsylvania – $26.7 Billion 

    6. Illinois – $21 Billion 

    7. Ohio – $20 Billion 

    8. Massachusetts – $18.6 Billion 

    9. New Jersey – $17.3 Billion 

    10. Michigan – $16.3 Billion 

    Here’s an interesting fact for you. The top ten states listed above spend more on public welfare ($346.9B) than all of the bottom forty states (plus the District of Columbia) combined ($262.7B). 

    Regardless of how populated any particular state is, you want to pay attention to these numbers because they foreshadow future budget problems.

    When you consider the fact that many states run operating deficits and have enormous debt problems, you begin to wonder if some of these numbers are sustainable for the long term.

  • Is The Left Self-Destructing, Or Is Something Else Going On?

    Authored by Brandon Smith via Alt-Market.com,

    The temptation to revel in the implosion of the extreme political Left is high, and it's understandable.

    I could go through a long list of insane offenses by the cultural Marxist cult of the church of "social justice," but I think this latest example summarizes the problem nicely.

    In this video, teaching assistant Lindsay Shepard at Wilfred Laurier University in Canada is reprimanded and brow beaten by two professors for daring to commit the heresy of showing her students BOTH sides of the debate over transgenderism and pronoun politics.

    The zealotry on display here by these professors is indicative of a deep-rooted cancer within the Left. Shepard was not attempting to troll her class with misinformation or subtly manipulate them with propaganda, in fact she wasn't seeking to pressure them to support either viewpoint. She was not violating anyone's private property rights to assail them with her arguments, either.  Her only goal was to show people in a public space that there are in fact at least two opposing viewpoints on the issue in question. But in a cult it is unacceptable to acknowledge that there are different ways of thinking from the prevailing doctrine. Other beliefs and evidence must be filtered out completely, otherwise, the devout members of the cult might be faced with uncertainty.

    If an ideological system is so fragile that it cannot tolerate the slightest hint of legitimate counter-evidence, then something is very wrong with that system. If that system is incapable of arguing its merits using facts and instead relies on the argument of "How dare you!," the only things that could possibly keep it alive are threats of force and terror.

    Decades ago, it was the "Christian Right" that was often attacked as being too puritanical and theocratic in its attempts to not only control politics and legislation, but to also control the public mindset. They were not satisfied by merely dictating the laws; they wanted individual people to believe the way they believed, or at least act like it for the sake of conformity. This caused a considerable backlash from the general populace, and over time the image of the rest of Christianity suffered because of the overreach of an aggressive and often self-contradicting and hypocritical contingent.

    The social justice cult is running into the same conundrum today.  The backlash is reaching epic proportions and the term "SJW" is becoming a household joke, when only a year ago most people had no clue what an SJW was — all they knew was that "political correctness" was furiously taking over Hollywood, the internet, politics, etc.

    Most people do not like zealots, no matter what side of the political spectrum they claim to come from. And, whenever zealotry poisons a social movement and causes it to violate the non-aggression principle, there is always a reaction in the other direction from the citizenry. You cannot force people to believe what you believe, to think the way you think or to speak the way you want them to speak.

    The laws of social physics at least partially explain the current collapse of the Left. However, I believe there is another underlying agenda taking place here, and it is working to the detriment of all people, regardless of their political affiliations.

    In my article "Order Out Of Chaos: The Defeat Of The Left Comes With A cost," published just after Donald Trump's election win, I warned of the potential danger that the Left is being exploited by the establishment as a sacrificial appendage, a tool used to push conservatives to their own extremes and their own zealotry.  Meaning, conservatives could be manipulated into embracing government power and totalitarianism in order to crush the zealotry of the cultural marxists. Essentially, we would become monsters in order to defeat monsters.

    The next stage in this theater of fourth-generation warfare would be for the Left to hit rock bottom and then rise again from the ashes as something new, and entirely more dangerous.

    So, has the Left hit rock bottom yet?

    I would note that the tidal wave of mainstream media reports on sexual deviance and misconduct on the part of celebrities and politicians has been composed primarily of people on the left.  Celebrity icons that are long time representatives of Democratic party money and support. I find it interesting also that many of these celebrities are people who attacked Donald Trump for his rather minor recorded discussion of sexual activity, the same recording the mainstream media used to admonish him as akin to a rapist.

    Whether or not the accused people are guilty, or even require a self-flagellating apology, remains to be seen. I am not one to take the court of public opinion very seriously. That said, I wonder why there have not been more accusations against Republican icons recently? I mean, Republican figures have certainly not been strangers to sexual misconduct in the past, so why are the vast majority of pariahs being exposed today, including Harvey Weinstein, major Democratic players?

    My theory is that the establishment and the controlled media are being very selective in their targets and are going after mainly leftists who represent low hanging fruit. But why? As mentioned above, the extreme Left must hit rock bottom, and then mutate into something else. They must be molded into something even more extreme. The social justice cult must be pressured into doubling down.

    The people who supported attacks on Trump over his sexual commentary now look like idiots because some of their favorite Hollywood idols are being exposed as allegedly much worse in their behavior. What will their response be, I wonder? Admit they were wrong? Or become even more zealous in their political correctness and indignation?

    The obviously fraudulent and completely fabricated Russia-gate issue is also disintegrating. But, contrary to what many conservatives and liberty movement analysts assumed, this piece of propaganda was NOT meant to take down Donald Trump; not in the slightest. In fact, it was meant to help radicalize the Left, to make them more aggressive and violent and to give them false hope that there was a way to get rid of Trump without waiting for another election. That hope is being taken away from them as Russia-gate fumbles.

    The people who blindly supported the Russia-gate narrative now look like idiots. What will their response be, I wonder? Will it be to admit they were wrong? Or, will they become even more angry and violent?

    The U.S. government is clearly ready to help this narrative along. The FBI and DHS officially classified ANTIFA activities as "domestic terrorist violence" back in September. And, according to Edward Klein who is publishing FBI documentation on leftist groups in his new book, the government is also asserting that leftists have been traveling to Europe to meet with Al-Qaeda and ISIS representatives, apparently to form ties with said organizations and to learn terrorist skill sets.

    Do I believe this to be true? No, not really. This kind of agency propaganda reminds me quite a bit of the propaganda used against "patriot groups" over the last decade, including the not so subtle insinuations that "right-wing extremists" would work with Al-Qaeda and form an alliance. Which is, of course, absurd, because right-wingers are pretty adamant about opposing the tyranny inherent in Islam.

    The claim may be more believable in the case of cultural Marxists, but still unlikely. What is MORE likely, and what I have been warning about since before Trump's election, is that there will be terror attacks in the name of leftist ideologies, but that these attacks will for the most part be initiated by the establishment. Just as the establishment funded and trained Al-Qaeda and ISIS and then set them loose to create havoc, and just as the establishment has engineered false flag attacks that were automatically blamed on a designated bogeyman, it now appears to be the extreme Left's turn.

    If we see catalyzing events like war and continued economic downturn, the chances of Leftists being swept into an engineered fervor are even higher.

    The Left is plummeting into the depths of embarrassment and despair. As Trump's first term goes forward, these feelings are probably only going to fester. Civil unrest and rioting are inevitable, but the greater threat is the issue of Gladio-style terror that is obviously being prepared. The narrative is being carefully set. And, at this point, conservatives are all too happy to believe that the Left is capable of almost anything. With the madness they have displayed so far, why wouldn't we think the worst of them?

    Again, the danger is that when this begins to happen in great frequency, conservatives may respond by acting against their own ideals of limited government and individual liberty. When terror attacks are blamed on the Left, how will we react? Will we question the validity of the narrative? Will we apply suspicion to the Trump administration, which has only increased the number of swamp creatures in "the swamp" since its inception? Will we seek out solutions to the problem by staying true to the Constitution and without turning to state power? Or, will we embrace the narrative, embrace the Trump administration without question, throw our full weight behind government power and say "Let's stomp lefty faces into the dirt!"

    I hope this will not be the outcome, because if it is, then the last vestiges of liberty in America are doomed. Hating the Left could be seen as reasonable and rational in our era, but abandoning our principles is not.

  • Australian Banks – First The Housing Bubble Bursts, Now A Public Inquiry

    We keep returning to the subject of Australia and the growing signs that its bubble economy is bursting. Earlier this month, we discussed how the world’s longest-running bull market – 55 years – in Australian house prices appears to have come to an end. We followed this up with “Why Australia’s Economy Is A House Of Cards” in which Matt Barrie and Craig Tindale described how Australia’s three decades long economic expansion had mostly been the result of “dumb luck”.

    As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

    Last week, in "The Party's Over For Australia's $5.6 Trillion Housing Market Frenzy", we highlighted some scary metrics for Australia’s housing bubble – notably how the value of Australian housing is more than four times gross domestic product – higher than other nations with housing bubbles, e.g. New Zealand, the UK and Canada. Two days ago, we noted the number of Australians optimistic about the year ahead had plunged to a record low.

    Moving on to the nation’s banks, while Australian households are the second most indebted in the world, its banks are the most exposed to housing debt…

    …which doesn’t augur well if, as we expect, the housing bubble deflates. We pointed out that an additional risk for Australia’s banking sector, which certainly wouldn’t help the property market either, was the growing demand for a public inquiry. This follows a series of scandals relating to misleading financial advice, attempted rate-rigging, fee gouging and alleged breaches of anti-money laundering laws. According to Australia’s ABC News.

    But the overwhelming reason for an inquiry rests on just one principle — accountability. What has been forgotten in the endless round of scandals in recent years is that the Australian banking sector is a taxpayer subsidised industry. It's an industry that pays ridiculously bloated salaries to its leaders; that showers itself with massive bonus payments when profits are soaring but instantly demands taxpayer protection and support when the tide turns.

    Australia’s biggest lender, Commonwealth Bank of Australia, is currently facing a lawsuit from the country’s financial crime agency alleging it repeatedly breached anti-money laundering laws. A class action suit has been launched resulting in to further probes into alleged misconduct. In May, the government announced an additional A$6 billion tax on the four biggest banks along with Macquarie.

    Having resolutely opposed a formal inquiry into the banking industry, which happens to be a major political donor, Malcolm Turnbull’s Liberal-National coalition government has finally caved in to political pressure. According to Bloomberg.

    Australia’s banks will be subject to a wide-ranging public inquiry after Prime Minister Malcolm Turnbull bowed to pressure to address scandals besetting the industry. The year-long royal commission will examine the conduct of the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct, Turnbull said Thursday. He pledged the inquiry would not put “capitalism on trial.”

    The next part of the story is truly laughable, as the banks suddenly did a 180 degree turn and welcomed an inquiry in a letter which, minutes later, provided the political cover for Turnbull to reverse his opposition. Bloomberg continues.

    The announcement came just minutes after Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac Banking Corp. and National Australia Bank Ltd. dropped their opposition to an inquiry, saying in an open letter to the government that months of political squabbling over the issue risked undermining offshore investor confidence.

    “Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system,” Turnbull said. The inquiry will “further ensure our financial system is working efficiently and effectively.”

    In the letter to Treasurer Scott Morrison, the banks’ chief executive officers and chairmen said that political uncertainty was “hurting confidence in our financial services system, including in offshore markets, and has diminished trust and respect for our sector and people.”

    “It also risks undermining the critical perception that our banks are unquestionably strong,” the letter said, and urged the government to “act to ensure a properly constituted inquiry into the financial services sector is established to put an end to the uncertainty and restore trust, respect and confidence.”

    No evidence of collusion between Turnbull and his banking friends there then. It was merely damage limitation.

    “This is not a win for Turnbull — at best it’s a face-saving exercise,” said Haydon Manning, a political analyst at Flinders University in Adelaide. “He obviously realized that a public back-flip today would be less embarrassing than the potential sight next week of members of his own government voting against his policy position in parliament.”

    The announcement follows months of campaigning by the main opposition Labor party and some National party MPs (the junior coalition partner), which demanded a royal commission to investigate the banks’ conduct. A Guardian Essential poll published on 27 November 2017 showed that 64% of Australians were in favour. As for its impact on the banks themselves, Bloomberg reports Moody’s sees it negatively impacting investor confidence.

    A royal commission has the power to compel documents and summon witnesses to answer questions under oath. “In the short term, this could be embarrassing and has the potential to negatively impact the banks,” Frank Mirenzi, a banking analyst at Moody’s Investors Service, said by phone. “There may be some waning of investor confidence simply due to the headline risk. However in the longer-term, investors will look through this and focus on the underlying financial strength and well-regulated nature of the banks.”

    The inquiry is unlikely to “meaningfully alter” the structure of the industry, Mirenzi said, adding the ratings company’s assumption that the government would support the big lenders in the event of a crisis — which underpins their high credit ratings — was unaltered.

    The announcement wiped A$8 billion ($6 billion) off the combined market caps of the “big four” banks in early Sydney trading, with Commonwealth Bank declining as much as 2.7%. By the close, Commonwealth Bank was down 1.9%, ANZ down 1.1%, Westpac down marginally and National Australia unchanged.

    Betting against Australia’s housing bubble by selling the big four banks has been a “widow-making” trade for years. Maybe, just maybe, that’s beginning to change.
     

  • "Here Are The 3 Questions We Hear Most About Bitcoin Right Now"

    As DataTrek’s Nick Colas, formerly chief market strategist at Convergex Group, writes overnight, “we’re doing our best to make sure we don’t flood you with bitcoin/crypto information because there are plenty of other issues with broad appeal.” However, he finds that hard to do when the topic dominates both financial news headlines and popular imagination… and when it goes from $11,000 to $8,900 in two hours.

    To address some of the pent-up confusion, here are the three questions (and answers) Colas it getting most about bitcoin at the moment:

    #1 Where is all the new interest coming from (i.e. is it just the US?)

    Looking at Google Trends, the top five countries for bitcoin searches over the last 24 hours are: The Netherlands, Australia, South Africa, Singapore, and Switzerland. The US is in 8th place. Searches for “Coinbase” (a popular wallet app) come from Malta, Singapore, the US, Norway and Switzerland (in that order).  Within the United States, bitcoin is strictly a bicoastal phenomenon. Google searches come most from New York, California, Hawaii, New Jersey, and Washington. Searches for Coinbase look the same.

    The upshot is that bitcoin is a tech-enabled (and therefore global) phenomenon, which is a critical feature of its price advance. We can’t think of another financial asset in history where the majority of the world’s citizens can invest as easily as they view an Instagram picture or chat on Twitter.  And on that point, one fun (and perhaps telling) statistic: in the US, Google searches for bitcoin are 6-7x greater than those for “Kim Kardashian”. Enough said…

    #2 When will the rally stop/slow down, and what is bitcoin’s “Fundamental” Value?

    Our best look at bitcoin’s intrinsic worth is to compare it to the total value of American and European high-denomination bank notes in circulation. Both bitcoin and its fiat currency counterparts are portable stores of wealth, which appeals to buyers/holders of each. Yes, fiats are government backed, but you can’t counterfeit a bitcoin. So we’ll call it a draw in terms of relative attractiveness.  There are currently $1.1 trillion in $100 bills in global circulation, and $650 billion in high denomination euro notes. Total value: $1.7 trillion, not counting counterfeit notes that likely add 20-30% (in the case of $100 bills at least).

    By comparison, bitcoin’s current total value is $167 billion, and total crypto currency outstanding is $307 billion.

    The question is: what is the appropriate share for crypto currencies like bitcoin in a market defined as “fiat+crypto currencies”? At current levels, bitcoin’s share is 8%, and all cryptos combined have a 15% share.

    Where could this ratio go? Here is a table to consider, assuming bitcoin remains 50% of the total crypto currency market (a fairly sticky ratio lately):

    • Bitcoin at $20,000: 14% market share of crypto+fiat paper currency market
    • Bitcoin at $50,000: 25% market share
    • Bitcoin at $100,000: 33% market share

    The calculus here comes down to adoption rates, just as it does with any new technology. One advantage for bitcoin in terms of price: incremental supply comes on very slowly, unlike other tech-enabled products like smart phones where manufacturers produce as many units as possible.

    Our take: bitcoin remains a highly speculative asset – the spiciest thing we’ve seen in +30 years on Wall Street. We can see pathways where it continues to climb, but even a glance at a historical price chart shows this is a highly volatile situation. More on that in point #3…

    #3 VERY IMPORTANT: What will the entrance of futures exchanges and bitcoin contracts do to the price?

    Both the CME and CBOE are set to launch bitcoin futures soon, and today the NASDAQ threw its hat in the ring as well. Moving bitcoin into a regulated structure will allow more sorts of investors and traders to speculate on price moves in the currency. That, the thinking goes, should be good for bitcoin prices.

    One intriguing point: shorting bitcoin is currently a clunky process, but futures markets will make it much easier. The difficulty of shorting bitcoin has been an underappreciated feature of its meteoric rise, limiting true price discovery. Whether anyone is brave enough to put on a sizable short position remains to be seen. But someone who wants to back up their “Bitcoin is a fraud” talk with dollars will soon have a place to express their viewpoint.

    * * *

    And a final, and deeply cautionary, point: yesterday’s plunge in bitcoin’s price may have been caused by a DDOS (Direct Denial of Service) attack on several exchanges. That’s the color from some market observers, anyway. The speed and severity of the decline certainly points to a technological glitch.

    Put together the ability to short bitcoin easily with what happened today, and you see the problem. The financial incentives to disrupt the bitcoin exchange/wallet ecosystem increase exponentially once futures start to trade. Whether the world’s bitcoin exchanges and wallets are up to that challenge is an important – and unanswered – question.

  • North Korea's Newest Missile Is Capable Of Carrying Multiple Warheads

    Contrary to the South Korean government’s initial analysis, the missile launched by North Korea into the waters west of Japan yesterday could represent an important advancement in the country’s missile technology that would allow it to carry multiple warheads.

    According to a report in Japanese business newspaper Nikkei, photos of the Hwasong-15 published by local North Korean media showcase a newly developed launch system and casing.

    Rodong Sinmun, a mouthpiece for the North's ruling Workers' Party of Korea, published photos of the Hwasong-15, the country's latest intercontinental ballistic missile, at liftoff and mounted on what appears to be a newly developed mobile launch system. The missile seems to involve a completely new rocket, judging by its size and shape, South Korea's Ministry of National Defense said Thursday. The ministry's initial analysis Wednesday claimed the Hwasong-15 was merely a retooled version of the Hwasong-14 ICBMs launched in July.

    The shape of the rocket’s nose cone suggests that it was designed with an eye toward carrying multiple warheads, which could make it easier for the North to outfit the rocket with a nuclear payload. Also, by possessing the capability to strike multiple sites with one missile, it would make it more difficult for anti-missile defense systems to intercept it.

    The latest missile's nose cone is more rounded than that of its predecessor. This could indicate it was designed with an eye toward a multiple-warhead system, Chang Young-keun of the Korea Aerospace University said in response to questions from South Korea's Yonhap News Agency. It was generally agreed that inserting multiple warheads into the Hwasong-14's pointed nose cone would be difficult.

     

    A missile capable of striking multiple sites at once would be more difficult for ship- and land-based defense systems to fully neutralize than a single-warhead missile. North Korea, long thought to be seeking this technology, would pose a much greater threat as a result.

    To be sure, the rounded nose cone may have been designed solely to protect the missile as it reenters Earth’s atmosphere. Atmospheric re-entry has long been a major obstacle for the North’s missile program.

    The missile's shape may also be related to technology intended to protect its payload from the stress of re-entering the Earth's atmosphere, said Kim Jung-bong, a professor at Hanzhong University. Heavy use of high-performance material such as carbon fiber could account for the rounded form, Kim said.

     

    Re-entry technology is considered a major hurdle blocking North Korea from deploying a functional ICBM. A warhead must survive the intense heat and pressure of re-entry to be useful as a weapon. The North is thought to have obtained high-performance materials, using them in its quest to clear that barrier.

    Finally, the rounded nose might be necessary to allow North Korea to load its rudimentary nuclear warheads on the rocket. US and Japanese officials now believe the North is less than two years away from being able to successfully strike the continental US with nuclear weapon.

    A rounder nose cone also allows for a larger payload, perhaps intended to let Pyongyang mount a nuclear warhead on the rocket, a source at Japan's Ministry of Defense said. The North's technology is "certainly advancing," Adm. Katsutoshi Kawano, chief of the Japanese Self-Defense Forces' Joint Staff, told reporters Thursday. Japan will operate under the assumption that "the threat has grown," he said.

    Furthermore, the missile’s added girth suggests that it has been outfitted with two engines for the first two stages of flight instead of one.

    The Hwasong-15 is 30 centimeters wider than its predecessor at around 2 meters, one expert said. This suggests the missile contains two engines in the first of its two stages, up from one in the Hwasong-14, said Kim Dong-yup, a professor at the University of North Korean Studies in Seoul. The increased thrust could put the entire U.S. mainland within the missile's range without any reduction in the weight of the payload, the professor said.

     

    A Rodong Sinmun editorial posted online Thursday called the launch of the Hwasong-15 a watershed moment for the North. Many think locking down multiple-warhead technology will take some time. But Pyongyang's progress toward a functional ICBM is undeniable.

    While there’s still no guarantee the North could pull off a nuclear strike with a high degree of accuracy, a nuclear weapon detonated several hundred miles above the center of the country could destroy the US by causing a giant electromagnetic pulse. Such an attack could kill hundreds of thousands, if not millions, of people by wiping out access to electricity across the entire continent.

  • "What Can We Do…?"

    Authored by Eric Peters via EricPetersAutos.com,

    Until enough people’s minds are changed about coercion and collectivism, resistance is futile.

    The debate will continue to be about how much should be stolen from whom and for what purpose – rather than about whether anything should be stolen by anyone for any purpose.

    As things are, many people believe it is ok to steal from others – provided the stealing is done on their behalf by other people (these are called “tax collectors”) and the stolen goods are called by pleasant but intellectually dishonest, morally evasive names (examples include Social Security, welfare, foreign aid, grants and so on).

    Using this technique of doublethink, people are able to do things to other people – or urge they be done to other people, on their behalf – without feeling ashamed or guilty, as they would if they were to do these things themselves, personally.

    This “surgical excision” of the psychologically normal human revulsion for other-than-defensive violence and for the use of violence to take things from others is the keystone of the coercive collectivist system. Dislodge it and the whole edifice collapses.

    It is that simple – and that hard.

    Simple, because the moral principle is already established.

    Excluding psychological defectives – the relatively small population in every society that does not feel ashamed or guilty about the use of violence (these people are called “criminals”) most people do feel ashamed and guilty when they steal or resort to violence.

    And hence, most people do not steal or resort to violence.

    It is a broadly accepted moral principle that theft and violence are wrong things; that those who steal and threaten to harm others in order to get what they want are not good people. This is half the battle, already won.

    The problem is the disconnect which occurs once you transcend from the individual to the group.  

    For some reason, most people – who are good people, basically – are able to not feel shame or guilt when the very things they understand instinctively as well as intellectually to be wrong when they do them on their own are done by people acting in some “official” capacity.

    Theft becomes not-theft by the same method that Orwell’s character O’Brien in the novel 1984 used to persuade Winston Smith that the four fingers he was holding up were really five – with the difference being cognitive dissonance on a mass rather than an individual scale, inculcated from youth by a kind of warping of the critical faculty rather than by crude torture, as in the book.

    The same person who would never threaten or assault his neighbor in order to take his property or dictate to him how he will be allowed to us his property (even if he had the physical power to do so) refrains from doing so because of the internal “check” of the guilt/shame mechanism about doing violence to others and stealing; yet this same person will feel good about going to the ballot box on election day and pulling a lever that will empower a proxy to do precisely the same things.

    He will proudly wear an “I voted” sticker – and gladly accept the stolen goods he receives via proxy theft. He will advocate and defend this, even to the extent of considering his receipt of stolen goods an entitlement (as for instance “my” Social Security). The ends are immaterial; the means are always the same.

    So long as it is called anything but what it actually is. So long as the violence necessary to obtain it is obscured from sight – and thought –  much in the same manner that one encounters a steak, neatly wrapped, without thinking about the cow that was killed to provide it.

    The horror is camouflaged by verbiage.

    Social Security. Obamacare. Aid to whomever. All the numerous form of government “help.” All of it comes – obviously enough, if one thinks about it honestly – not from the government but from our neighbors, taken from them against their will in exactly the same way that an ordinary thief takes their property. Only it is called something else and so considered – somehow – to be a normal, acceptable thing. The “price we pay for civilization.”

    Organized, codified, legalized thievery without even the self-ware honesty of the street mugger.

    Could anything be less “civilized”?

    It is exceptionally odd.

    These same people also accept the idea that a man wearing a certain kind of costume (i.e., a “law enforcer”) may assault them, effectively at will. And worse, they approve such assaults upon others whose personal activities do not affect them in any way – yet somehow offend their sensibilities.

    And then object when the same sort of thing is done to them by others, whose sensibilities are also offended, but for different reasons.

    Liberals vs. conservatives. Democrats vs. Republicans. It is a battle over means – but the ends are always the same.

    Deconditioning these essentially good but horribly misled people is the first – admittedly gigantic – step away from coercive collectivism. It will be the hardest part, in part because these people are to some degree unconscious. A conscious mind knows that theft is theft in the same way and for the same reason that a chicken is a chicken and not a Labrador Retriever or a pile of wood.

    This is self-evident to the conscious mind. It is what Aristotle had in mind when he talked about “A is A” – a thing is what it is and cannot simultaneously be something else. Government schools very deliberately tamp down the critical faculty in favor of repetition exercises – each thing treated as a separate and unrelated thing. Linguistic falsehood being one of the fathers of moral relativism and the grandfather of the much worse things which always proceed from that.

    But get people awake . . . get them to see  . . . and the unconscious acceptance of generations can be dissipated in a moment.

    It is that easy to change the world – by changing the words. By demanding that words be used precisely; that language not be used to obfuscate but to clarify.

    Thomas Paine understood this power – and used it to greater effect than the armies of the British Empire at its very peak. He changed people’s minds about a doctrine which had been accepted as not only normal but reasonable by most people – by good people – for  generations: The “divine right” of kings.

    Paine’s clear, concise language rendered this not merely ridiculous but obnoxious. The idea that a man in an ermine robe with a tiara on his head was somehow special, set apart from other men and entitled to rule over them. Kings suddenly became what they always were in fact: Men who trampled upon the rights of other men.

    Only now – courtesy of Paine – people saw it.

    It will be the same, some day, with coercive collectivism – whether practiced by Republicans or Democrats, liberals or conservatives. One day, it will also be seen for what it is – and regarded as both ridiculous and obnoxious.

    The world can change in an instant.

    It begins with a thought.

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Nov 30

Today’s News 30th November 2017

  • US Coast Guard Operates Secret Floating Prisons In Pacific Ocean

    Last week, Seth Wessler wrote a story for the New York Times, in which he described “terror on the high seas”: an expansion of the maritime war on drugs, the U.S. Coast Guard is operating a fleet of secret floating prisions in the Pacific Ocean. Coined “floating Guantanamos”, Coast Guard cutters have been deployed as far as 3,000 miles miles away from the nearest U.S. port, to international waters from Central America to South America in a bid to bust drug smugglers.

    Wessler writes about a number of men who were detained by the U.S. Coast Guard and imprisoned on the cutters for weeks or months at a time. The practice of capturing smugglers and turning them back to their governments changed in 2012, when the Defense’s Southern Command, tasked with leading the war on drugs in the Americas, launched a multinational military campaign called Operation Martillo, or “hammer.” Post 2012, Coast Guard cutters cruise around the Pacific picking up smugglers who will then be admitted to U.S. courts.

    According to Wessler, the U.S. Coast Guard never intended to operate floating prisions, but thanks to U.S. marintime law, drug smuggling in international waters is considered a crime against the U.S (even if there is no proof), making the possibility of floating prisions legal. Once detained, conditions for the smugglers are quite rough, often kept on US vessels for weeks or months on end– chained to anything, usually on the ships’ decks exposed to the bare elements.

    The Coast Guard has a humanitarian public image, celebrated in local newspapers for rescuing pleasure boaters off Montauk or hurricane survivors in Florida. But as the lone branch of the military that serves as a law-enforcement agency, the 227-year-old service has also long been in the business of interdicting contraband, from Chinese opium smugglers to Prohibition rumrunners. For centuries, Coast Guard operations waited to arrest smugglers once they crossed into U.S. territorial waters. Then, in the 1970s, as marijuana trafficking ballooned on the route from Colombia into the Caribbean before arriving in the United States, Justice Department officials argued to Congress that current U.S. law constrained law enforcement’s ability to punish drug smugglers caught on the high seas. While the Coast Guard, then a branch of the Department of Transportation, could chase smugglers into the Caribbean, Justice Department lawyers could rarely hold smugglers caught in the legal gray zone of international waters criminally liable in U.S. courts.

     

    Congress responded by passing a set of laws, including the 1986 Maritime Drug Law Enforcement Act, that defined drug smuggling in international waters as a crime against the United States, even when there was no proof that the drugs, often carried on foreign boats, were bound for the United States. The Coast Guard was conscripted as the agency empowered to seek out suspected smugglers and bring them to American courts.

     

    In the 1990s and through the 2000s, maritime detentions averaged around 200 a year. Then in 2012, the Department of Defense’s Southern Command, tasked with leading the war on drugs in the Americas, launched a multinational military campaign called Operation Martillo, or “hammer.” The goal was to shut down smuggling routes in the waters between South and Central America, stopping large shipments of cocaine carried on speedboats thousands of miles from the United States, long before they could be broken down and carried over land into Mexico and then into the United States. In 2016, under the Southern Command’s strategy, the Coast Guard, with intermittent help from the U.S. Navy and international partners, detained 585 suspected drug smugglers, mostly in international waters. That year, 80 percent of these men were taken to the United States to face criminal charges, up from a third of detainees in 2012. In the 12 months that ended in September 2017, the Coast Guard captured more than 700 suspects and chained them aboard American ships.

    Wessler details the extent of his investigation below, which provides an eye-opening view of the extent of America’s secret extraterritorial war on drugs,

    Over the last year, I’ve interviewed seven former Coast Guard detainees, some of whom are still in American federal prison, and received detailed letters, some with pencil renderings of the detention ships, from a dozen others. Most of these men remain confounded by their capture by the Americans, dubious that U.S. officials had the authority to arrest them and to lock them in prison. But it is the memory of their surreal imprisonment at sea that these men say most torments them. Together with thousands of pages of court records and interviews with current and former Coast Guard officers, these detainees paint a grim picture of the conditions of their extended capture on ships deployed in the extraterritorial war on drugs.”  

    PBS NewsHour interviews Seth Wessler, where he speaks about the 700 suspected drug smugglers imprisoned on Coast Guard cutters between September 2016 through 2017.

  • The US Aristocracy's Smear-Russia Campaign: Big Brother At Work

    Authored by Eric Zuesse via The Strategic Culture Foundation,

    Billionaires, both liberal and conservative ones, own, and their corporations advertise in and their ‘charities’ donate to, America’s mainstream (and also many ‘alternative news’) media.

    They do this not so as to profit directly from the national ‘news’media (a money-losing business, in itself), but so as to control the ’news’ that the voting public (right and left) are exposed to and thus will accept as being “mainstream” and will reject all else as being “fringe” or even ‘fake news’, even if what’s actually fake is, in fact, the billionaires' own mainstream ’news’, such as their ’news'media had most famously ‘reported’ about ’Saddam’s WMD’ (but the’news’media never changed after that scandal — even after having pumped uncritically that blatant lie to the public). 

    Have America’s numerous foreign coups and outright military invasions (including Iraq 2003) been the result of fake-news that was published by the mainstream ’news'media, or only by some of the ‘alternative news’ sites that mirror what the mainstream ones have been ‘reporting’ (passing along the Government’s lies just like the mainstream ones do)? Obviously, the catastrophic fake news — the fake news that ‘justified’ America’s invading and destroying Iraq, Libya, and many other countries — was all published in the mainstream ’news’media. That’s where to go for the really dangerous lies: it’s the mainstream ’news’media. If those media, and their Government (whose lies they stenographically report to the public) will now censor the Internet, such as is increasingly happening not only in the US but in its allies including the European Union, then the only ‘information’ that the public will have access to, at all, will be the billionaires’ lies. Have we already almost reached 1984, finally, in 2017?

    Two typical examples of this coordinated mass-deception-operation happened to be showing at the top of the magazine-pile at an office recently and struck my attention there, because of the ordinariness of the propaganda that was being pumped.

    One of them was the cover of TIME magazine, dated “July 24, 2017” and with the cover headlined “RED HANDED: The Russia Scandal Hits Home”, overprinting onto the face of Donald Trump Jr., as their menacing-looking cover-image. That cover-story, as published inside, was titled “How Donald Trump Jr.'s Emails Have Cranked Up the Heat on His Family”, and it used such phrases as “potentially treasonous” and “Russia is the one country that could physically destroy America” (as if it weren’t also the case that US is the one country that could physically destroy Russia, and very much the case also that possession of the weaponry isn’t any indication of being evil, such as this particular propagandist was implicitly assuming). Hillary Clinton’s V.P. running-mate was reported to be “saying that these fresh revelations move the Russia investigation into the realms of 'perjury, false statements and even, potentially, treason.'” 

    These mere speculations, with slimy inferences of evil, with no real facts that back them up, were the front-cover ‘news’, in TIME. The facts were thin, but the speculations were thick, and the only thing really clear from it was that almost all of America’s billionaires and centi-millionaires want Trump ousted, and want Vice President Mike Pence to become America’s President as soon as possible — before Trump’s term is up. Democratic ones certainly do, and many of the Republican ones apparently do as well. Perhaps Trump isn’t hostile enough toward Russia to suit their fancy. At least Pence would be predictable — predictably horrible, in precisely the way that the controllers of the ‘news’media overwhelmingly desire.

    The other example was the cover of The New Republic magazine, dated “December 2017” and it simply headlined in its center, “HOW TO ATTACK A DEMOCRACY”, and the opening page of the article inside was bannered “WEAKEN FROM WITHIN” and below that in the printed edition (the December physical issue of the magazine) was:

    “Russian manipulation of American social media in the 2016 presidential election took the United States by surprise. But Moscow has been honing an information-age art of war — through fake news, disinformation, leaks, and trolling — for more than a decade. How can these societies protect themselves?”

    The online version of that article (which was dated 2 November 2017) opened almost the same: “Moscow has been honing an information age art of war — through fake news, disinformation, leaks, and trolling — for more than a decade. How can free societies protect themselves?”

    The unspoken assumption in this article is that the US CIA hasn’t been doing the same thing — and doing it even worse than the old (and thankfully expired) KGB ever did. (And the CIA, even after the end of communism as its supposed enemy until 1991, still does far worse to other countries than Russia’s FSB does or ever did.)

    Underlying both the TIME article and the TNR article are unstated speculations about the American situation, which are based upon thin facts such as that "at least $100,000 in ads purchased through 470 phony Facebook pages and accounts” were "using Facebook to incite anti-black hatred and anti-Muslim prejudice and fear while provoking extremism”, and that supposedly somehow (they never say how) such puny expenses threw the multi-billion-dollar 2017 US Presidential election to Trump. How is a case such as that, to be viewed by an intelligent reader as constituting anything but propaganda for the weapons-making firms such as Lockheed Martin, who benefit from such international anti-Russia hate-spewing to NATO countries, which are those firms’ major markets (other than Saudi Arabia, and the other fundamentalist-Sunni kingdoms that together constitute the Gulf Cooperation Council or “GCC” nations, which hate Shiite Iran as much as the US regime hates Russia)?

    Also among the underlying and unstated speculations in the background here is the older mass-media allegation about Russia’s allegedly having spied and swayed the US election by ‘hacking’ it, which is likewise being pumped by Democrats and other opponents of Mr. Trump, alleging that ‘Russia hacked the election’.

    And, so, for an example of the flimsiness of those allegations, one of the two main ‘authorities’ who are the source of that, the Bush and Obama Administration’s James Clapper, was headlined at Politico on 7 July 2017, "Clapper: No evidence others besides Russia hacked US election”. Mr. Clapper happens to be a military-industrial-complex revolving-door ‘intelligence’ ‘professional’ whom, on 10 February 2011, even Politico was reporting to be “backing away from comments he made Thursday calling Egypt's branch of the Muslim Brotherhood movement 'largely secular’,” and who had also covered-up George W. Bush’s lies about ‘WMD in Iraq’ so as to protect the liars. On 29 October 2003, the New York Times stenographically passed along his deception about the non-existent WMD by headlining, "WEAPONS SEARCH; Iraqis Removed Arms Material, US Aide Says” and reported, "The official, James R. Clapper Jr., a retired lieutenant general, said satellite imagery showing a heavy flow of traffic from Iraq into Syria, just before the American invasion in March, led him to believe that illicit weapons material 'unquestionably' had been moved out of Iraq.” No evidence ever existed that Saddam Hussein still had any WMD after the U.N. monitors (UNSCOM) destroyed the last of them in 1998; but Clapper ‘unquestionably’ ‘knew’ to the contrary — though no evidence was ever made available to the contrary of UNSCOM’s reports, and lots of evidence existed that Bush simply lied about the entire matter.

     

    The other main source for the allegation that ‘Russia hacked the election’ is the Obama Administration’s John Brennan, whom Glenn Greenwald exposed as a fraud back on 7 January 2013, headlining “John Brennan's extremism and dishonesty rewarded with CIA Director nomination”. 

    Both of the official ‘experts’ who are promoting the Russiagate charges, are longtime, and repeatedly, exposed liars – but that’s the best they can do, always assuming that the public don’t know that these people are propagandists for the military-industrial complex, not real ‘public servants’ at all.

    This isn’t to say that Trump isn’t also a liar — just that the ‘news’ in America is full of conflicting lies — and that they constantly are coming from the fake ‘news’media that are the mainstream ones who are now trying to censor out, and ultimately to obliterate, the few small news-operations (some of which, unlike any of the mainstream ones, actually are good, and authentic journalistic operations, no mere PR hackery) that are constantly exposing the fraudulence of the mainstream ones, which want to impose their dictatorship — the mainstream lies — even more rigorously than they already do. After all, the mainstream Western media still haven’t yet reported US President Obama’s bloody racist-fascist coup that in February 2014 replaced the democratically elected President of Ukraine (and his supporters in the legislature) by a racist-fascist or ideologically nazi regime that’s rabidly hostile toward its neighboring nation of Russia. Even now — nearly four years after the event. It’s already solidly documented history, but the mainstream US-and-allied press still hasn’t reported it.

    The fake-news masters are certainly the mainstream ‘news’media themselves – and they, and the billionaires and centi-millionaires who own and control them, are the real megaphones by which the US dictatorship constantly fools the American people (and the publics in its allied nations), to keep in line, for the aristocracy.

  • Mapping The Fiscal Burden Of Illegal Immigration On Each State

    Via HowMuch.net

    There’s a lot of confusion and misunderstanding out there around the economic impact of illegal immigration in the United States. We decided to bring some clarity around the issue by mapping new numbers on the estimated costs of illegal immigration on a state-by-state basis.

    Our viz takes data from the Federation for American Immigration Reform (FAIR) about how much illegal immigration costs in each state. FAIR takes into account a variety of different expenditures, like healthcare, education and refundable tax credits. We mapped these numbers across the United States according to a color-coded scale. Purple and dark red states have comparatively high expenditures, but the pink and blue states spend relatively less money because of illegal immigrants.

    There are two interesting trends you can see from looking at the data in this way.

    • First, states that spend the most on illegal immigration tend to be located close to Mexico. Looking at out map, the two states with the highest expenditures are California ($23B) and Texas ($11B), both sharing long borders with Mexico. In fact, there’s a cluster of dark red states stretching along the Southwest. States closest to the phenomenon pay the most as a result.
    • Second, states with higher population levels tend to spend more than their less populated counterparts. You can see a group of high-expenditure states clustered around the Northeast, not to mention Illinois and Florida. According to the U.S. Census Bureau, California and Texas are also the two most populous states in the country. High population levels and proximity to Mexico act like a double-whammy for illegal immigration expenses.

    Now take a look at the places with relatively low levels of expenditures for illegal immigration, the light blue states. They are all located far away from the U.S.-Mexico border with relatively small population levels. West Virginia is perhaps an exceptional state, seeing that it is surrounded by red and dark red. We can speculate that this is likely due to the fact that West Virginia has a struggling economy which actually contracted last year.

    We should add that the source for the numbers in our viz come from a partisan outfit. The Federation for American Immigration Reform (FAIR) advocates for legislation designed to decrease immigration, and you can poke holes in their methodology. For example, suppose immigrants really are paying less in income taxes because of their illegal status. Forbes estimates that granting them amnesty would actually boost their state tax contributions by $2.1 billion. That’s the exact opposite conclusion than what FAIR would like you to believe.

    That being said, here’s a list breaking down the States with the highest expenditures for illegal immigration according to FAIR.

    1. California – $23,038,125,353

    2. Texas – $10,994,614,550

    3. New York – $7,489,141,357

    4. Florida – $6,290,429,108

    5. New Jersey – $4,466,838,574

    6. Illinois – $3,220,767,517

    7. Georgia – $2,487,719,503

    8. North Carolina – $2,437,965,113

    9. Maryland – $2,378,996,947

    10.   Arizona – $2,314,131,964

    Remember, these numbers only look at the net expenditures that states spend on illegal immigration, and they say nothing about other contributions to the economy. Any way you cut it though, whenever states are spending billions of dollars on something, it’s worth taking a hard look at where the money is going and why.

  • Bitcoin, Nuclear War, And The "Real World Use" Argument

    Authored by Tom Luongo,

    I received a comment this morning challenging my contention that Bitcoin should be thought of as a foundational asset for the crypto-based monetary system.

    With Bitcoin topping $11,000, arguments like this continue to be made by gold-bugs (of which I’m one) and hard-asset enthusiasts because they make fundamental errors in their analysis of Bitcoin.

    And it’s important, in my mind, to counter those arguments to help the community refine its response to them rather than simply dismiss them.

    The Bitcoin/Gold Conundrum

    Like gold, Bitcoin should sit at the bottom of the crypto-version of John Exter’s inverted pyramid which describes the monetary system.

    The comment can be found here in full.  The commenter means well, but misses a fundamental point that most hard asset enthusiasts miss about Bitcoin and cryptocurrencies in general.

    I’m going to break it down step by step because I believe it’s a perfect illustration of how one wrong assumption can lead to a wrong conclusion.

    Comment: Why do you think gold belongs to the bottom of exter’s pyramid and diamonds/gemstones are found near the top…?

    First, gold belongs at the bottom of Exter’s Pyramid because it is the only asset in that mix that has zero counter-party risk.  Everything else is secondary.

    So, to begin the argument in earnest, do Bitcoins have counter-party risk?  No.

    No one can issue Bitcoins that someone else, by Bitcoin’s very nature, has a claim to.

    You may pledge your Bitcoins as collateral for some other transaction, but that transaction, say a loan denominated in Bitcoins, is what has counter-party risk, not the Bitcoin itself.  Just like gold.

    So, it could qualify as a reserve asset like gold.  Okay, step #1 completed.

     [Comment continues:] …that is because gold has certain physical properties that are intrinsic to its values while diamonds/gemstones don’t have… from ancient times until modern times… the properties of gold like good conductivity of heat and electricity… resistance to corrosion and oxidation… high malleable.. it makes physical gold to be ACTUALLY useful… diamonds and gemstones don’t have all these properties.. although diamonds is still useful for making into extremely strong diamond cutters…

    However, many things have zero counter-party risk, for example diamonds. But diamonds are terrible mediums of exchange, as he points out.  The rest of this portion of the comment does a credible job of explaining gold’s rise as money and satisfying Mises’ Regression Theorem.

    But the diamond-cutter argument applies to gold.  Gold is more fungible than diamonds. But gold is not fungible compared to the dollar or Bitcoin.

    Money is liquid.  You can receive it now and immediately exchange it for something else.

    Property that isn’t money has time-risk. Finding a buyer of your non-money property is the risk of losing value in the transaction.

    This is the fundamental problem with barter.  It’s why gold no longer satisfies, except in specific situations, as a good medium of exchange.

    Bitcoin has tremendous liquidity when you realize that 10 minutes to fully clear a transaction is stupendously fast compared to the three days behind the scenes that the average credit card transaction takes.

    The Digital Road Not Taken

    Now onto the next portion of his argument:

    as for bitcoins… it doesn’t have ACTUAL use… so it is more useless compared to diamonds/gemstones…

    This is where so many hard asset enthusiasts go wrong.  Bitcoin does have actual use.  We wanted something like Bitcoin to use as money before it existed.

    There was latent demand for a digital asset with its properties.  We wanted something better than the dollar, so someone, Satoshi Nakamoto, created it.

    That latent demand for a money like Bitcoin imbued it with value from the moment the software started building the blockchain.

    Bitcoins are encrypted packets of information.

    Do encrypted packets of information traversing the Internet not have use?  Yes.

    If they don’t, then why do we send them?  We wouldn’t.

    If we do, then they must have value.

    So, it follows, that certain types of encrypted packets will potentially have more value than others.  In this case the signed, hashed, confirmed and stored packets represented by the nine-year old Bitcoin blockchain has a lot more value than literally most of the information on the internet.

    So, we have the perception of value, we have zero counter-party risk all we lack is use.

    Does anyone use Bitcoin?  Yes. This is self-evident.

    That is its ACTUAL USE.

    Bitcoin came into existence to solve the very modern problem of centrally-issued debt-based monetary units and the corruption of our society those monetary units engender.

    And it had to do so better than gold.

    The World Bitcoin Could Make

    All of those things make it a foundation for a new monetary system. This is not to say gold will not be part of this system or that there can be only one system.

    In fact, as we move forward I expect to see the nascent crypto-system and the current debt-based one merge.  Gold alongside Bitcoin and other Bitcoin-like coins with strong blockchains and hashing networks will form that foundation.

    Commenter Concludes: in the worst case scenario if we have global nuclear fallout and whatever remaining humans degenerate back into stone age days where we resort to barter trade for survival… then nobody will want bitcoins while gold/silver will STILL survive…

     

    of cos.. the worst case scenario may never happen… or at least not in a few centuries… then bitcoin may well survive all the other kinds of crisis…

     

    so… I don’t agree that bitcoins can substitute gold/silver…

    As for post-Nuclear War, if conditions change that radically then the value of everything changes radically.

    In this case, there is no ‘financial system,’ Exter’s Pyramid or the like. 

    There is survival and not even gold is useful until civilization and the division of labor are sophisticated enough to support such concepts.

    Bitcoin is the money we are choosing to take human society to the next level. If we don’t get there all of this is moot.  QED.

    At which point the cycle starts all over again.

    *  *  *

    I want to thank “wacky” for his thoughtful comment, even if I disagreed with it.  That is the point of forums like this, discussion in order to clarify truths.

  • Killer Millennials: The Era Of Destruction Has Started

    According to Neil Howe, the Fourth Turning is a crisis and it’s happening right now.

    The United States is in an era of great destruction, as the old institutional way of life created by past generations is being systematically destroyed by the incoming generation i.e. the millennials. This transitional period is cyclical and has happened before – most recently during the Great Crash of 1929. Creative destruction is essential for the nation’s survival, as the millennials are rewriting America’s next journey – much different than before.

    Already, the preferences of millennials’ are killing dozens of industries such as department stores, diamonds, food chains, and real estate. Life decisions such as marriage and a starter home are being delayed or totally abandoned. Millennials are swamped with student- and other forms of toxic-debt in a period of wage stagnation that makes their financial mobility limited.

    They will be the first generation not to achieve the American Dream, along with a lower standard of living than their parents.

    Given the backdrop of America’s transition induced by millennials in a fiat system that is considered late-stage. Cracked provides a 3-minute breakdown of why millennials are killing industries.

    The video focuses on the diamond industry and provides various motives of why millennials aren’t buying the precious stone.

    In particular, the video makes the point millennials are heavily in-debt and cannot afford marriage, thus breaking the long lasting cycle of tying the knot, which usually involves buying a diamond ring. Not anymore, millennials are broke.. And there goes the diamond scarcity that was produced by prior generations who could afford to get married.

    Soon the American Dream will have to be redefined in accordance with the millennials.

    Spoiler alert: there will be no family, goldendoodle, and or white picket fence in the new normal Millennial American Dream. It will be the attempt to go debt-free.

  • How A North Korean EMP Attack Could Kill Millions And Turn America Into A Post-Apocalyptic Wasteland

    Authored by Michael Snyder via The Economic Collapse blog,

    This is why North Korea’s test of an intercontinental ballistic missile is so important.  North Korea had test fired a total of 22 missiles so far this year, but this latest one showed that nobody on the globe is out of their reach.  In fact, General Mattis is now admitting that “North Korea can basically threaten everywhere in the world”, and that includes the entire continental United States.  In addition to hitting individual cities with nukes, there is also the possibility that someday North Korea could try to take down the entire country with an EMP attack. 

    If the North Koreans detonated a single nuclear warhead several hundred miles above the center of the country, it would destroy the power grid and fry electronics from coast to coast.

    I would like you to think about what that would mean for a few moments.  Suddenly there would be no power at home, at work or at school.  Since nearly all of our vehicles rely on computerized systems, you wouldn’t be able to go anywhere and nobody would be able to get to you.  And you wouldn’t be able to contact anyone because all phones would be dead.  Basically, pretty much everything electronic would be dead.  I am talking about computers, televisions, GPS devices, ATMs, heating and cooling systems, refrigerators, credit card readers, gas pumps, cash registers, hospital equipment, traffic lights, etc.

    For the first couple of days life would continue somewhat normally, but then people would soon start to realize that the power isn’t coming back on and panic would begin to erupt.

    The intercontinental ballistic missile that North Korea just launched traveled almost 1,000 kilometers and reached a maximum altitude of 4,500 kilometers.  We have been told for decades that this would never be allowed to happen, but now it has happened…

    This is concerning for one big reason: according to General Mattis, the North Korean ICBM “went higher, frankly, than any previous” and “North Korea can basically threaten everywhere in the world.”

     

    This was confirmed by North Korea missile analyst, Shea Cotton, who cited Allthingsnuclear author David Wright, and who told the BBC that the initial estimates of the ICBM test mean that North Korea can now reach New York and Washington DC.

    If we had been working hard to develop our anti-missile technology all these years, this wouldn’t be a problem.

    But at this point we are way behind the Russians in this regard, and there is a very real possibility that a missile launched by the North Koreans could make it through the very limited anti-missile defenses that we do have.

    Once upon a time, discussions about a North Korean EMP threat were mostly hypothetical, but now that has completely changed.  North Korea has clearly demonstrated that they are able to deliver such an attack, and last September Kim Jong Un publicly admitted that North Korea intended to develop this capability…

    But most reporters missed a key threat that appeared at the bottom of Kim’s public statement, when he bragged that North Korea had harnessed “a multi-functional thermonuclear nuke with great destructive power which can be detonated at high altitudes for super-powerful EMP (electromagnetic pulse) attack according to strategic goals.”

     

    So now we know. Launching an electromagnetic pulse attacks against its enemies is one of North Korea’s strategic goals. And for North Korea, the United States is the top enemy.

    And like I said earlier, all it would take would be a single well placed nuclear detonation to fry electronics from coast to coast.  The following comes from the Daily Mail…

    Theoretically, a sufficiently powerful bomb detonated at an altitude of 249 miles would wipe out all electronics in the US, save the southernmost top of Florida and the easternmost states – as well as affecting Canada and Mexico.

    Without power, nothing would get distributed.  That means that very rapidly there would be no food, no water and no medicine available in your community.  An article posted by Fox News this week used the term “post-apocalyptic” to describe what we would be facing…

    It all starts to sound very post-apocalyptic when you realize this means no lights or other electric-powered devices in homes and businesses, no water filtration, no regional food hubs, no transportation grid – none of the things we take for granted in modern civilization.

    Like I stated earlier, things would be relatively fine for a few days, but then once everyone realizes that the power isn’t coming back on there would be chaos on a scale unlike anything we have ever seen before.  The following comes from an article by Mac Slavo…

    The first 24 – 48 hours after such an occurrence will lead to confusion among the general population as traditional news acquisition sources like television, radio and cell phone networks will be non-functional.

     

    Within a matter of days, once people realize the power might not be coming back on and grocery store shelves start emptying, the entire system will begin to delve into chaos.

     

    Within 30 days a mass die off will have begun as food supplies dwindle, looters and gangs turn to violent extremes, medicine can’t be restocked and water pump stations fail.

    So what kind of a “mass die off” would we be talking about?

    Well, some of the top experts in the field believe that “up to 90 percent of all Americans” could end up dead if the power outage lasted long enough…

    William Graham, chairman of the former EMP commission and its former chief of staff, Peter Vincent Pry, warned the hearing that such an attack could “shut down the US electric power grid for an indefinite period, leading to the death within a year of up to 90 percent of all Americans.“

    Others believe that the figure would be lower, but pretty much everyone agrees that the death toll would be in the millions.

    This is one of our greatest strategic vulnerabilities, and our power grid could be hardened against an EMP attack for just a few billion dollars.  This is something that I am pushing very hard for, but right now it is just not a priority for our leaders in Washington.

    In fact, they have actually pulled funding from the commission that was looking into the EMP threat…

    On Sept. 30, the Congressional Commission to Assess the Threat of Electromagnetic Pulse to the United States of America shut its doors after a failure to secure funding from Congress.

    Sometimes I find it difficult to come up with the words to describe how incredibly foolish Congress is being.

    An EMP attack is a greater threat than ever before, and yet Congress didn’t even want to come up with a little bit of funding for the commission that was working on a plan to protect us.

    This is yet another example that shows that we need new leadership on Capitol Hill, because right now the people that we have “representing” us in Washington seem to be completely and utterly clueless about almost everything.

    *  *  *

    Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

  • Nervous About Traffic Stops? I Am. You Should Be, Too

    Authored by John Whitehead via The Rutherford Institute,

    We’ve all been there before.

    You’re driving along and you see a pair of flashing blue lights in your rearview mirror. Whether or not you’ve done anything wrong, you get a sinking feeling in your stomach.

    You’ve read enough news stories, seen enough headlines, and lived in the American police state long enough to be anxious about any encounter with a cop that takes place on the side of the road.

    For better or worse, from the moment you’re pulled over, you’re at the mercy of law enforcement officers who have almost absolute discretion to decide who is a threat, what constitutes resistance, and how harshly they can deal with the citizens they were appointed to “serve and protect.”

    This is what I call “blank check policing,” in which the police get to call all of the shots.

    So if you’re nervous about traffic stops, you have every reason to be.

    Trying to predict the outcome of any encounter with the police is a bit like playing Russian roulette: most of the time you will emerge relatively unscathed, although decidedly poorer and less secure about your rights, but there’s always the chance that an encounter will turn deadly.

    For instance, it was just a year ago, in the early morning hours of Dec. 1, 2016, when Gregory Tucker, a young African-American man, was pulled over by Louisiana police for a broken taillight.

    What should have been a routine traffic stop became yet another example of police brutality in America.

    According to the lawsuit that was filed in federal court by The Rutherford Institute, Tucker was thrown to the ground by police, beaten, arrested and hospitalized for severe injuries to his face and arm, allegedly in retaliation for “resisting arrest” by driving to a safe, well-lit area before submitting to a traffic stop for a broken tail light.

    Mind you, this young man complied with police. He just didn’t do it fast enough to suit their purposes.

    If this young man is “guilty” of anything, he’s guilty of ticking off the cops by being cautious, concerned for his safety, and all too aware of the dangers faced by young black men during encounters with the police.

    Frankly, you don’t even have to be young or black or a man to fear for your life during an encounter with the police.

    Just consider the growing numbers of unarmed people are who being shot and killed just for standing a certain way, or moving a certain way, or holding something—anything—that police could misinterpret to be a gun, or igniting some trigger-centric fear in a police officer’s mind that has nothing to do with an actual threat to their safety.

    At a time when police can do no wrong – at least in the eyes of the courts, police unions and politicians dependent on their votes—and a “fear” for officer safety is used to justify all manner of police misconduct, “we the people” are at a severe disadvantage.

    Add a traffic stop to the mix, and that disadvantage increases dramatically.

    According to the Justice Department, the most common reason for a citizen to come into contact with the police is being a driver in a traffic stop.

    On average, one in 10 Americans gets pulled over by police.

    Indeed, police officers have been given free range to pull anyone over for a variety of reasons.

    This free-handed approach to traffic stops has resulted in drivers being stopped for windows that are too heavily tinted, for driving too fast, driving too slow, failing to maintain speed, following too closely, improper lane changes, distracted driving, screeching a car’s tires, and leaving a parked car door open for too long.

    Motorists can also be stopped by police for driving near a bar or on a road that has large amounts of drunk driving, driving a certain make of car (Mercedes, Grand Prix and Hummers are among the most ticketed vehicles), having anything dangling from the rearview mirror (air fresheners, handicap parking permits, troll transponders or rosaries), displaying pro-police bumper stickers, having acne, appearing nervous or driving with a stiff posture.

    In other words, drivers beware.

    Traffic stops aren’t just dangerous. They can be downright deadly.

    From the moment those lights start flashing and that siren goes off, we’re all in the same boat.

    Survival is the key.

    Technically, you have the right to remain silent (beyond the basic requirement to identify yourself and show your registration). You have the right to refuse to have your vehicle searched. You have the right to film your interaction with police. You have the right to ask to leave. You also have the right to resist an unlawful order such as a police officer directing you to extinguish your cigarette, put away your phone or stop recording them.

    However, there is a price for asserting one’s rights. That price grows more costly with every passing day.

    If you ask cops and their enablers what Americans should do to stay alive during encounters with police, they will tell you to comply, cooperate, obey, not resist, not argue, not make threatening gestures or statements, avoid sudden movements, and submit to a search of their person and belongings. 

    The problem, of course, is what to do when compliance is not enough.

    As I make clear in my book Battlefield America: The War on the American People, every day we hear about situations in which unarmed Americans complied and still died during an encounter with police simply because they appeared to be standing in a “shooting stance” or held a cell phone or a garden hose or carried around a baseball bat or answered the front door or held a spoon in a threatening manner or ran in an aggressive manner holding a tree branch or wandered around naked or hunched over in a defensive posture or made the mistake of wearing the same clothes as a carjacking suspect (dark pants and a basketball jersey) or dared to leave an area at the same time that a police officer showed up or had a car break down by the side of the road or were deaf or homeless or old.

    Frankly, the only truly compliant, submissive and obedient citizen in a police state is a dead one.

    If you’re starting to feel somewhat overwhelmed, intimidated and fearful for your life and the lives of your loved ones, you should be.

    You should be very afraid.

    I am.

     

  • Millennials Saved Thanksgiving Weekend

    While online spending surged, the overall picture for Thanksgiving weekend spending was more mixed as the traditional “bricks and mortar” retailers continued to struggle. Nevertheless, overall spending was about 4% higher. The National Retail Foundation (NRF) estimated that 174 million Americans shopped online or in stores over the period (Thursday to Monday), versus 164 million the previous year, although the latter excluded Cyber Monday. According to Bloomberg.

    “The big takeaway here is: Gone are the days you could measure the success of this weekend by looking at a single metric,” NRF Chief Executive Officer Matthew Shay said on a conference call.

    It’s also difficult to tell from the NRF data how e-commerce sales compared with brick-and-mortar shopping. But other surveys have indicated that physical chains saw smaller crowds this year. The research firm ShopperTrak found that shopper visits declined 1.6 percent combined on Thanksgiving and Black Friday.

    Overall spending in the holiday season is expected to rise as much as 4 percent from last year, helped by low unemployment and rising home values. The purchases will amount to about $680 billion in November and December, the Washington-based NRF has estimated.

    However, there is no doubt about the strength of the online sector and mobile in particular.

    The Thanksgiving shopping season was record-breaking measured by the total level of online spending and the big shift towards mobile to both browse and buy. Adobe, which measures 80% of online transactions from 100 major US retailers, estimated that $5.03 billion was spent on Black Friday, $2.82 billion on “Small Business Saturday” and $6.59 billion on Cyber Monday – the largest ever online sales day in history and 16.8% higher than a year ago. According to Adobe, mobile devices accounted for between 46% and 54% of all site visits, and between 30% and 37% of all sales, on those days, the biggest proportion yet.

    In part, as Bloomberg notes, the strength in online and mobile shopping reflects the growing spending power of “older millennials” in the 25-34 age range.

    The kickoff to the holiday shopping season brought mixed results to retailers, with traffic falling at many stores. But don’t blame older millennials. Shoppers in that age group, which ranges from 25 to 34, were the biggest spenders during the long Thanksgiving weekend, according to the National Retail Federation. Older millennials shelled out $419.52 during the five-day stretch, 25 percent more than the overall average.

    The survey findings reflect the growing clout of millennials in their 20s and 30s, especially as more of them form families and enter prime spending years. Still, their higher profile is a mixed blessing for retailers. Such shoppers are more likely to buy online — often using their phones — meaning brick-and-mortar storefronts won’t see as much of a traffic bump.

    The trade group’s survey, conducted by Prosper Insights & Analytics, found that 64.6 million Americans shopped both online and in stores. That compares with 58.4 million who shopped online and 51.6 million on who only went to stores.

    In terms of product categories, clothing was the biggest over the holiday weekend followed by toys, books and electronics. Despite the hollowing out of America’s traditional retail sector, the NRF has a positive spin on the industry’s evolution.

    “We were very encouraged that what we saw was strong engagement across the board, both in stores an online,” Shay said. “That validates the investment retailers are making to reach customers in multiple ways.”

    Since peak spending normally occurs between the years of 45-48 years old, we hope that "older millennials" are not exhausting their buying power prematurely due to their online and mobile addictions.

  • Fed's Kashkari Responds To Zero Hedge: "The Fed's Job Is Not To Protect Investors"

    Former Goldmanite and current Minneapolis Fed president, Neel Kashkari, conducted another #AskNeel session on Twitter where the dovish FOMC voter (he was the only one to dissent to the Fed’s rate hike decision earlier this year) received numerous questions. Among them was the following one from Zero Hedge:

    https://platform.twitter.com/widgets.js

    His response:

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    The answer echoed a similar response from back in March, when he claimed that he doesn’t “care about stock market fall itself. Care abt potential financial instability. Stock market drop unlikely to trigger crisis.”

    Needless to say, Kashkari’s answer was token, superficial and condescending: while he is right that the tech bubble bursting didn’t cause a crisis, the Fed’s dramatic easing in response to the bursting of the tech bubble bursting lay the foundations for the housing and credit bubble; in other words, the Fed responded to one bubble by creating an even bigger bubble, and the bursting of that bubble in 2007/2008 did cause a crisis: the biggest financial crisis since the Great Depression to be precise. And, in turn, the bursting of the current global financial bubble – in which the Fed has been joined by all other central banks to inject $20 trillion in global liquidity, or a third of global GDP – and is the biggest in history, will have a far more disastrous outcome than the last one.

    Kashkari also said that “we don’t see leverage building across the economy the way it did in housing run-up”, which of course is a surprisingly naive way of looking at leverage, especially following last night’s explanation from Fasakanara that when one takes into account ehe world’s vol-sellers, it’s all just one giant, $22 trillion position shorting volatility with record gama and all-time high leverage, both explicit and synthetic.  Which also makes his next statement that the Fed needs “to worry about what would trigger a real crisis” especially bizarre: we now live in a world in which the market itself, thanks to QE and NIRP, has become systemic risk (see “”It’s All One Single, Giant $22 Trillion Position”: How Market Risk Became Systemic Risk“).

    The fact that, as Kashkari confirms, the Fed is completely oblivious to its footprint and impact in the market should be terrifying to anyone. Well, anyone but not traders because despite what Kashkari also claimed, namely that “If stocks correct – fine“, one thing we can be certain of is that the moment stocks have a 5-10% swoon, the Fed will be right back assuring traders that it will ease back on its tightening, if not launch QE4 (right, James Bullard?)

    https://platform.twitter.com/widgets.js

    But wait, it gets better, because in the very next question, immediately after stating that the Fed’s job is not to protect investors, in response to a question whether the Fed creates moral hazard by keeping rates extra low, Kashkari answers that “If we raised interest rates to drive down the stock market, how does that help workers/wages/employment?” Or investors, for that matter. But the point is that the Fed quite clearly is intent on keeping stocks high.

    The punchline: his very next statement: “If Greenspan had acted on his irrational exuberance call the economic costs may have been high.”

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    Here’s a thought: if Greenspan had acted on his “irrational exuberance” call, there would have been pain, yes, but there would never be a tech bubble, and there would never be a global financial crisis, Lehman, AIG or trillions and trillions in central bank liquidity keeping the global financial system propped up now. In fact, Kashkari’s statement once again demonstrates just how utterly clueless the “macroprudential regulators” at the Fed truly are.

    * * *

    There were some other tangential, but notable insights from the Minneapolis Fed president. One was his accurate observation that the Fed’s constantly wrong dot plots have destroyed the Fed’s credibility:

    I’m not a fan of the dot plot. Forward guidance is a wonderful tool. Forward misguidance may do harm and undermine our credibility.  I would rather only give guidance when we are pretty sure about the path forward

    In response to whether the Fed’s ZIRP was responsible for “zombie companies” in the shale patch and the record glut of oil inventory, the former Goldmanite was non-commital:

    I think low interest rates brought down costs for people and businesses to invest – across sectors. That is what they were designed to do. But commodity markets always have cycles of under and overinvestment.

    When asked how US investors are supposed to compete with foreign buyers of US stocks, including such buyers as the Swiss National Bank which is price-indescriminate as it creates money out of thin air, Kashkari’s response:

    It is a global market for investors.  I don’t think US economic growth would be stronger if we forbade foreign investment.  If we can get job and wage growth up, that will help regular Americans make ends meet and save for their futures.

    That Kashkari explicitly ignored the stated implication, namely that foreign central banks buying US stocks has led to a giant asset bubble, was one more warning either how clueless or how devious and premeditated this entire asset reflation experiment truly is.

    Kashkari was also asked if the Fed would “ever consider forgiving the Treasury debt on its books?” to which the answer– sadly for the Magic Money Treers who have no grasp of elementary finance –  was “No. That would violate our independence and likely cause high inflation as people lost confidence in the Fed’s independence.“

    Among the other interesting exchanges was a question if the Fed plans on using blockchain in the future, where the response was that “researches around the Fed System are looking at it (and other fintech developments).  Too soon to know how and if it will be used by the Fed.”

    Kashkari also touched on inflation price targeting: when asked “What level of inflation would be a reason to ‘tap the brakes’?” He responded that, as price targeting would suggest, “2% core PCE on a 12-month basis would be a good place to start. We’ve been 1.3% for 5+ years so we should be comfortable at 2.7% for 5+ years. That’s what we are saying when we call it a target and not a ceiling.” In other words, Kashkari supports doubling the rate of core inflation for the next 5 years.

    Finally when asked “at what point does the flattening of the Treasury curve become a concern for the Fed?” Kashkari responded that “it’s a concern now. We r raising rates, driving the front end up, meanwhile inflation expectations r low keeping the long end anchored. The more we commit to driving rates higher (regardless of data), the more we risk pressuring inflation expectations to the downside.” He has good reason to be concerned: the flatter – and eventually inverted – the curve gets, the more the market is telling the Fed what should be obvious to everyone, if not Kashkari: that the Fed has lost control, as Citi warned last week.

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Nov 29

Today’s News 29th November 2017

  • World's First Vending-Machine For The Homeless To Be Unveiled In UK In December; LA, NYC Next Year

    This is a first, a new charity in the UK called Action Hunger plans to install a vending machine for the homeless in December. The organization describes itself as a charity with a “new approach to combating homelessness.” The initial plan will be installing a machine in the town of Nottingham in the December time-period, then a second machine in Manchester sometime early 2018. If all goes well, Action Hunger plans to do a full release across the UK in attempt to alleviate poverty and hardships– something the government is having trouble in doing.

    Action Hunger is working with Tesco and other partners to stock the machines with water, fresh fruit, energy bars, crisps, chocolate, and sandwiches, as well as socks, sanitary towels, antibacterial lotion, toothbrush and toothpaste combination packs, and books. A majority of the food will be provided by a localized network of regional food vendors who will donate excessive food waste.

    The charity has partnered with The Friary, an outreached centre in the city, to oversee the people’s access to the vending machines. The machines will operate 24-hours a day accessed by a special card given out by the Friary and can service up to 100 homeless people per day. Key cards are programmed to permit up to three items per day, which offers a low-cost automated solution in dealing with the poor.

    Action Hunger explains how the process works: 

    According to the Independent, homelessness has increased 34% per cent since the Conservatives came to power in 2010, partly due to benefit cuts and welfare changes. A new study reveals that 300,000 people in Britain are now homeless, with the crisis growing as much as 13 per cent last year alone.

    Number of rough sleepers across England on a given night

    Number of homelessness applications made to local authorities

    Action Hunger is targeting Nottingham and Manchester, two areas where homelessness is out of control.

    Across England, housing market affordability is once again above 2006 to 2008 levels— signaling that house prices are once more outpacing income.

    Besides the exploding homelessness situation in the UK, there is an even larger market in the United States, where Action Hunger will be installing the vending machines next year in Seattle, New York, and LA.

    In August, we reported 1 in 7 New York City Public-School students is homeless. On top of that, NYC shelter officials have admitted a record number of homeless to shelters each night.

    In a preview of things to come, automation in the form of vending machines seems to be the short term solution in dealing with the homeless in the UK. The next step for Action Hunger appears to be a multi-city rollout in the United States targeting a much larger homeless population as the middle class deteriorates.

    For our American audience, an automated vending machine for the homeless is coming to a town near you. The dying middle class will no longer be able to shop at the Dollar Tree nor Walmart, as they will resort to automated vending machines. The future is bleak.

  • Blockchain-Based Platform Spurs Confidence In 'Sketchy' ICO Investment Opportunities

    If it were a competition, BnkToTheFuture would be a shoo-in for “most meta business plan” of 2017. To wit, the company is building a blockchain-based trading system for selling and trading stakes in blockchain companies in a play to capture a subset of investors who are growing increasingly wary of the sketchy ICO market.

    A firm called BnkToTheFuture plans to open a market in the second quarter that will let investors trade equity stakes in companies involved with the blockchain, the transaction-tracking technology that underpins digital currencies like bitcoin. BnkToTheFuture will use a blockchain ledger to keep record of those investments for clients.

    While the blockchain tech sector is certainly still in its infancy, there’s little doubt that investors are interested in finding more reputable ways to facilitate investing in blockchain. Presently, the booming market for ICOs, which has seen more than $3.5 billion raised this year, has proven to be rife with incompetence and even outright fraud.

    Some of the largest and most widely anticipated ICOs are already floundering with their tokens rapidly losing value, and even drawing lawsuits, in some cases.

    Given the lack of honest brokers – and explosion of self-dealing – in the existing market for investing in blockchain solutions, there’s reason to believe BnkToTheFuture’s projection that it will soon facilitated more than 50% of private investments in the space.

    “By year-end, we could have 50 percent of the major companies in the sector on our platform,” Chief Executive Officer Simon Dixon said in a phone interview.

    As Bloomberg explains, the blockchain is a digital ledger for recording transactions in a secure and transparent manner. The technology is expected to revolutionize industries ranging from finance, to supply chain management to even boring old title insurance, as we recently pointed out.

    BnkToTheFuture has already helped some 45,000 accredited investors from around the world invest more than $200 million, Bloomberg reports. It has allowed investors to buy equity in more than 100 companies and projects, including ethereum and storj. The company is planning to implement a blockchain-based ledger to record and facilitate these transactions – something it says it will implement by the second quarter.

    It’s worth noting that BnkToTheFuture – despite its implicit challenge to the existing ICO market – is itself an ICO.  The company plans to issue a token next year with which customers can pay BnkToTheFuture for deal analysis, due diligence and investor relations. BnkToTheFuture hopes to raise as much as $33 million in an initial coin offering planned for next February. The largest ICO’s have raised more than $200 million. Indeed, some self-styled ICO “experts” have advised their audience that raising $100 million in an ICO can be more trouble than its worth.

    As more regulators crack down on the ICO market – China has banned it entirely, and the SEC has opened civil actions against several accused ICO fraudsters – investors could migrate to BnkToTheFuture’s platform. To be sure, the product has not yet launched, and if ICOs like Tezos are any guide, investors in ICOs shouldn’t count their chickens before they hatch, so to speak.

    BnkToTheFuture is registered in the Cayman Islands, and holds a stake in a broker-dealer. The company holds equity in several established digital-currency exchanges, including Bitstamp and Kraken.

    According to Kyle Samani, managing partner at Multicoin Capital Management, a crypto hedge fund, BnkToTheFuture is already a hit in Asia.

    “Their investment opportunities are vetted quite extensively and it seems only very few get accepted judging from the amount of investments that pass through their platform,” Majid Shah, the co-founder of CoinSchedule and a longtime user of BnkToTheFuture, said in an email. “I would say they provide a lower-return but lower-risk way of investing into the blockchain space, whereas ICOs are more high return, high risk.”

    However, BnkToTheFuture isn't the only company trying to legitimize ICOs: Overstock.com saw its shares pop back in September after revealing that it is building a platform for launching and trading ICOs.
     

  • The End Of The Syrian War Is The Beginning Of A New Middle Eastern Order

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    In the Middle East and beyond, we are witnessing a series of high-level political meetings between dozens of nations involved directly or indirectly in the Syrian situation. It is crucial to understand all this in order to understand the direction in which the region is going and what the new regional order is.

    With the liberation of Abu Kamal on the Iraqi border, the last Syrian town controlled by ISIS, the Syrian Arab Army (SAA) and its allies have completed the task of eliminating the Caliphate and its control over Syrian cities.

    ISIS returns to its original dimensions of being a terrorist organization without control of any territory or a city-state proclaimed as its capital.

    These are important days, with political conferences about the future of the region and Syria itself occurring from Sochi to Cairo and passing through Riyadh. In Sochi, Assad met with Putin to confirm the alliance as well as Moscow’s loyalty to the Syrian State, and to also focus on a political solution. The Russian and Syrian presidents agreed on the need to involve the largest possible number of opposition groups in the reform process. In this regard, the meeting between Rouhani, Erdogan and Putin was also aimed at creating the conditions for an inclusive solution for all those who have agreed to put down arms and engage in talks with the legitimate government in Damascus. Turkey is the country that holds together the ranks of the so-called legitimate opposition, and Erdogan’s moves have confirmed that his strategy in the region is based around pivoting towards Russia through a full-fledged cooperation with Moscow. It is an almost unprecedented diplomatic victory for Russia that in two years it has managed to turn a potential opponent into one of the main guarantors of the peace process in Syria.

    Riyadh is in the meantime bringing together the not-so-moderate opposition groups that are very close to Islamic extremism, a sort of spin-off of Al Nusra (Al Qaeda) and Daesh, and attempting to apply on them a makeover in an effort to rebrand them. It is important to note that recent meetings between King Salman and Putin seem to have opened some sort of dialogue with a representative of Moscow present at the Riyadh conference.

    Firstly Erdogan, and then King Salman and his son Mohammad bin Salman (MBS), seem to have understood that a military defeat in Syria is now inevitable, and the latest developments have been related to the consequences resulting from the defeat of the terrorists. Turkey has much to gain from a convenient alliance with Moscow, both in terms of energy and transit along the East-West route of the Chinese Belt and Road Initiative (BRI), and along the North-South corridor contained within the agreement between Russia, Iran, Azerbaijan and Turkey. In light of this, Russian planes have been flying over Turkey to reach Syria. A NATO country is letting Russian military aircraft fly over its airspace to reach Syria, something that would have been impossible to imagine not too long ago.

    For Saudi Arabia the situation is different. While the meeting between King Salman and Putin represents an absolute novelty, the recent confirmation by MBS of his intentions to oppose the rise of Iran run counter to the possibility of pacifying the region.

    The result of the war in Syria has carved out a new Middle East, where the likes of Riyadh, Tel Aviv and Washington, previously regional masters of all they surveyed, appear to have more or less been deliberately cut off from the decision-making process. While it can be argued that Washington has played out its role in the region with the defeat of Daesh, thanks to Trump's "America first" policies that resists direct involvement in conflicts, Riyadh and Tel Aviv do not seem to have any intention of accepting Tehran’s new role in the region, even as it is supported by Turkish and Russian diplomacy and even military might.

    The aggression against the Syrian state initially saw a compact front comprising the United States, Saudi Arabia, Turkey, Qatar, Jordan, Israel, France and the United Kingdom. All were at the forefront of arming, training, financing, assisting and treating the injured of the tens of thousands of terrorists sent to Syria. It was a destabilization operation with few precedents in history. Already in 2014, at the pinnacle Daesh’s power, Assad's position seemed firm and immovable. According to the intentions of Western terror planners, Assad was to be expelled within the first twelve months of the conflict. The drawback was the impossibility, for a number of reasons, of NATO and its allies directly intervening a la Libya, foremost among which was Syria’s possession of a good level of air defense, as well as America’s inability to deal with the human and financial costs of yet another conflict in the region, with the inevitable escalation that would follow given Iran's involvement.

    After the failure to remove Assad, the next step for Western policymakers was to deploy Daesh to create chaos and destroy the country, this diabolical force having been born as a result of America’s illegal occupation of Iraq.

    Russia’s 2015 intervention in Syria, at the invitation of the legitimate government in Damascus, disrupted Western plans, bringing about the inevitable defeat of Daesh and consolidating Assad's power.

    There are two events between the Russian intervention and the efforts to Balkanize Syria through use of the Syrian Democratic Forces (SDF) that served to confirm that the Iran-Syria-Russia axis was destined to prevail in the conflict.

    The first is Donald Trump becoming president of the United States. Leaving aside all the negatives related to his presidency, his victory has ensured that there is no direct intervention in Syria against Assad and against Russia. This is in contrast to what would have happened had Clinton won the election, the former Secretary of State prepared to trigger a regional conflict between the great powers by giving the order to shoot down Russian planes in Syria, thereby potentially kicking off World War Three.

     

    The other event that has upset the balance of power in the region concerns the events that have occurred in Turkey over the last two years. Both the failed coup and the downing of the Russian fighter plane played an important role. The turning point was reached with the reconquering of Aleppo, which indicated a clear military failure by the opposition to overthrow Assad. Erdogan faced an unavoidable choice: support the terrorists and have to deal with a Kurdish enclave on the Syrian border; or reach a peaceful solution with the Russian Federation in order to contain the Kurdish threat and guarantee the integrity of Syria.

    Erdogan has been rewarded by his choice to side with Russia and Iran, leaving Turkey in a better position than that of a couple of years ago, with him now able to influence the fate of many events in the Middle East, as well as allowing him to focus on his own national interests, in particular on the Kurds. The failure of the plan to balkanize Syria, involving the extreme attempt to declare Kurdish independence in Iraq, has only led to the end of Barzani’s reign. Hardliners committed to regime change in Damascus, such as the international coalition led by the US military and the military-industrial complex, have tried in every way possible to sabotage the SAA's fight against Daesh along the Euphrates. Saudi Arabia had even ventured to support Kurdish movements directly within Iraq; and Israel was the only country to openly support the referendum on Kurdish independence.

    This strategy foundered on the opposition of Syria, Iraq, Turkey and Iran, which with Russian military support consolidated the front against the Saudi-Israeli-Neocons-Neoliberals. During this series of changes and upheavals, the anti-Assad front managed to alienate even a country like Qatar, which has explicit ties to the Muslim Brotherhood and the neoliberal part of the American establishment. Although anti-Assad propaganda continues on state media such as Al Jazeera, the concrete effects are zero. Moreover, Qatar, following the Saudi crisis, sought to broaden its geopolitical stance, engaging directly with Moscow (there have been many contacts between the Al Thani family and the Kremlin) and Iran, a historic enemy of Riyadh.

    The European component of the anti-Assad alliance is in complete disarray, with Macron in France conducting difficult mediation between MBS and Hariri in an attempt to avert further Saudi-Israeli political disasters that risk pushing Lebanon completely into the Iranian sphere of influence. In Germany, Merkel is experiencing a long wave of pervasive challenges between globalist versus national-sovereignty movements, with new elections looming. In England, the consequences and effects of Brexit are still tangible, with an unstable government and a series of difficult negotiations with the European Union. There no longer seems to be any time or resources available to invest in Syria. The falsification of reality continues through the mainstream media that belongs to the neoliberal world-wide elite, such as CNN, Al Jazeera, and the Washington Post. In addition to the usual lies fed through television and newspapers, Europeans and Americans today have no other tool at their disposal.

    Trump seems to be contented to have been able to return home from his tour of Asia having secured hundreds of billions of dollars worth of extortion from allies, while not getting embroiled in the type of endless wars that even Saudi Arabia is unable to sustain, as seen with the genocide in Yemen and actions against Qatar. The Trump administration has many flaws as well as a deep aversion towards Iran, but it has no ability or intention to support Israel and Saudi Arabia in their attempt to limit Iranian influence by force. Not even the combined military forces of Israel and Saudi Arabia could pose a threat to Hezbollah let alone the Islamic Republic of Iran.

    What we see is a Middle East that is trying to restore a regional order that is practical and functional. Meetings in Sochi between Turkey, Russia and Iran aim precisely to achieve this. In this scenario, Washington's absence is notable, despite attempts from Staffan de Mistura to revive the now-dead Geneva conference. Russia and its allies, after taking the military initiative, are ready to guide the diplomatic negotiations between the Assad government and opposition forces, to be held under the auspices of the trio gathered in Sochi, with the involvement of the United Nations in a role as guarantor rather than decider. The shots are called by Assad, Putin, Erdogan and Rouhani, even though this new reality will never be accepted by MBS, Netanyahu, the European governments and the US deep state (neocon/ neoliberal).

    MBS's domestic actions, together with Netanyahu's threats to Iran and Hezbollah, reveal a refusal to acknowledge defeat as well as, in the case of MBS, an extreme attempt to avoid losing control of the country. For Israel, the problem is more complicated. Already in 2006 it was unable to defeat Hezbollah, and now Hezbollah is more developed, better trained, and better able to inflict damage on the Jewish State. Saudi and Israeli military leaders are more than aware that they do not have the ability to defeat Iran or Hezbollah and that only Washington's direct involvement would be able to change the course of events. This hypothesis, however, must also take into account the reality on the ground, with Moscow now allied to Tehran and Trump more than opposed to any new wars involving the US. In this situation that is chaotic for anti-Assad forces, MBS continues his work of arresting anyone opposed to him and recovering money sunk into wars in the context of the collapse of the oil price.

    The new Middle Eastern order coincides with the near-end of the conflict in Syria and the intention to find a political solution to the conflict by pacifying all parties. It is a solution that is increasingly successful, especially in light of Turkey's abandonment of the anti-Assad front. Moscow is slowly replacing the US as the fulcrum in the region and beyond, solving conflicts and accompanying the progressive withdrawal of US military and economic influence in the region.

    Once again, the strategic triangle between Iran, Russia and China finds itself victorious, inheriting and solving one of the most complicated conflicts since the end of World War II. Kudos to Putin, Rouhani and Xi Jinping, the new giants of the 21st century.

  • Caught On Video: ISIS-Driven "Jihadimobile" Explodes In Massive Fireball

    Editor's note: The confrontation depicted in the video below is 100% authentic.

    In a showdown that demonstrated the destructive power of ISIS-aligned suicide bombers, a tank manned by Iraqi Shia fighters appeared to trigger a massive explosion when it pointed its muzzle at a rickety pickup truck packed to the brim with explosives. First, militia soldiers try to stop the truck with small-arms fire. Then the truck, presumably driven by ISIS fighters, advances toward the tank.

    Then suddenly, there's a massive explosion.

    Debris flies everywhere, hitting the tank and a combat infantry vehicle, and narrowly missing a group of fighters on the ground.

    Combat experience in Iraq and Syria prove that light vehicles including trucks can be converted into dangerous weapons capable of inflicting hundreds of casualties if detonated in a densely packed area.

    Shia forces in Iraq even have a nickname for these vehicles: They’ve dubbed them "jihadimobiles.”

    They are built with the purpose of killing as many people as possible and causing maximum damage in an attack.

    A "jihadimobile" can be built on the chassis of both a civilian or military vehicle, according to Sputnik. Though they’re typically built out of old combat infantry vehicles and trucks, as well as passenger cars that are covered with armor plates. It can also have bulletproof tires, a bulldozer bucket and a machine-gun turret.
     

  • China Hits A Brick Wall: For First Time Ever, Record Chinese Credit Creation Fails To Stimulate Economy

    Submitted by Gordon Johnson of Axiom Capital

    We believe that exhibit 1 says a lot: it shows that despite a record level of new credit issued by China’s PBoC YTD through Oct. 2017 (which stands in stark contrast to government authorities continued statements that China is de-levering), China’s economic backdrop is currently experiencing:

    • (a) monthly construction new start (commercial + residential + office) growth slowing Y/Y (Ex. 2),
    • (b) monthly fixed asset investment growth slowing Y/Y (Ex. 9),
    • (c) monthly cement output slowing Y/Y (Ex. 5),
    • (d) monthly electricity production slowing Y/Y (Ex. 6),
    • (e) monthly M2 money supply growth slowing Y/Y (Ex. 7),
    • (f) monthly household loan growth slowing Y/Y (Ex. 8),
    • (g) monthly private fixed asset investment growth slowing Y/Y (Ex. 10), and
    • (h) monthly home price growth slowing Y/Y (Ex. 12) – in fact, select data points have turned negative Y/Y.

    Stated differently, while the lion’s share of our client base continues to tell us, with respect to our bearish views on China… “President Xi Jinping will simply stimulate more if/when things get bad”, we would highlight, again as detailed in Ex. 1 below, China stimulated at a record pace in 2017, yet it did not resonate in improved economic activity (in fact, the exact opposite appears to be unfolding – i.e., economic growth is slowing across a number of data points).

    Furthermore, underpinning our view that China’s debt stimulus was targeted specifically at the months preceding the 19th Party Congress in Oct. 2017 (i.e., when President Xi Jinping consolidated power to become the strongest Chinese leader since Mao Zedong), implying we may see a phase of debt fatigue, we note that in the first 10 months of 2016, incremental credit issued in China on a month-over-month (“M/M”) basis was negative three times (i.e., May, July, and Oct.), and averaged $189 billion on a monthly basis; yet, in the first 10 months of 2017, incremental credit issued on a M/M basis was positive in each month outside of Oct., and averaged $429 billion on a monthly basis (in Oct. 2017, the month the 19th Party Congress concluded, new credit issued fell by $11.9 billion M/M).

    WHAT DOES IT ALL MEAN? The broader point is… when you issue an unprecedented amount of credit targeted at a growing number of negative ROI projects multiple decades, at some point the law of diminishing marginal returns sets in (since 1/1/09, China’s credit has grown by CNY153.9 trillion while GDP has grown by a much more modest CNY 48.5 trillion, or a multiple of 3.17x, meaning a lot of bad investments have stacked up over the years) – keep in mind that China’s $3.6 trillion in credit issued in 2017 YTD through Oct. is more than the entire developed world combined. Put in the simplest of terms, at some point the incremental dollar in new credit created actually does more harm than good.

    Ex. 1: China New Credit Created YTD Through Oct.


    Note: Credit created = TSF + Local Gov't Debt.
    Source: PBoC; NBS; ChinaBond.

    SO WHERE FROM HERE? When considering China hit the afterburners on new credit issuance in 2017, yet the impact seems to be quickly fading, it would appear we may have reached the point of “no return” (while Consensus, at this point, seems completely oblivious to this possibility, the recent sell-off across the Chinese stock markets suggest investors on-the-ground in China may be catching on).

    CONCLUSION: In the face of China’s TTM 3Q17 credit as a percentage of GDP coming in at 250%, to “keep the party going”, Xi Jinping would have to force new credit issuance far in excess of $4.0 trillion in 2018 (which could trigger a number of ratings downgrades, as well as a reassessment by the IMF of China’s “market economy” status).

    Moreover, given what we’ve seen this year – i.e., 101.7% Y/Y new credit issuance growth YTD through Oct. 2017 – it seems the level of credit necessary to stimulate growth in China could prove elusive at this point (we don’t recall any economist’s forecasts exiting 2016 pointing to China’s new credit issuance more than doubling Y/Y in 2017, yet that’s exactly what’s happened – had this been our base case, we would have expected all economic indicators in China to be moving substantially higher at this point in the cycle). Thus, to the thesis that rests on a view that: “Xi will just stimulate more”, we would argue that the extent of the stimulus necessary may be so high at this point that President Xi Jinping may have lost sight of how much debt he needs to “get things going again”. Should this prove to be the case, China’s economy will continue slowing, putting pressure on bulk commodity prices, and, ultimately, industrial/steel stocks (CAT, URI, FMG, RIO, X, CLF, GATX, and TRN, all of which we have SELL ratings on).

    HOW’S THE DATA LOOK IN THE FACE OF CHINA’S RECORD 2017 CREDIT “BINGE”? So how do the data points look? Well, here’s a few (we feel the charts say it all)…

    Ex. 2: Monthly Construction Starts (Residential + Commercial + Office)

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 3: GDP Growth Internals – China (FAI, Industrial Production, & Retail Sales)

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 4: China Monthly Steel Production by Year

    Source: World Steel Association (WSA), National Bureau of Statistics (NBS), Axiom Capital Research.

    Ex. 5: China Cement Output

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 6: Y/Y Growth in Electricity Production by Month

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 7: China M2 Money Growth, Y/Y% – Multi Decade Low (bearish)

    Source: Peoples' Bank of China (PBOC), Axiom Capital Research.

    Ex. 8: 3MMA Household Loan Growth, Y/Y%

    Source: Axiom Capital Research, Bloomberg, National Bureau of Statistics.

    Ex. 9: Monthly Total Fixed Asset Investment and Y/Y Growth

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 10: Monthly Private Fixed Asset Investment and Y/Y Growth

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 11: Private Investment in Industrial Sector and Y/Y Growth

    Source: National Bureau of Statistics, Axiom Capital Research.

    Ex. 12: Average Price Change of New Residential Buildings, by Tiered-Cities, %Y/Y

    Source: National Bureau of Statistics (NBS), Axiom Capital Research.

    In short, we feel China could be the “black swan” that ruins the stock market rally party for many in the industrials space. Caveat emptor.

  • Valuing Bitcoin Using Metcalfe's Law

    Just over a month a go we discussed Frank Homes, CEO of US Global Investors, who had returned from the LBMA/LPPM Precious Metals conference in Barcelona after giving the key note address on Day 2, “Quant Investing: From Gold to Cryptocurrencies.” Homes’s presentation was voted the best – no doubt helped by the topical subject matter – and he was the recipient of an ounce of gold.

    Seeing a role for both gold and cryptocurrencies in portfolios, he aimed a couple of blows at recent Bitcoin detractors, including you know who from JPM. As we noted at the time, however, it was Homes’s observations on Metcalfe’s law, i.e. the economics of network effects, which we particularly enjoyed.

    This was his take on the surge in the price of Bitcoin…

    “Metcalfe’s law states that the bigger the network of users, the greater that network’s value becomes. Robert Metcalfe, distinguished electrical engineer, was speaking specifically about Ethernet, but it also applies to cryptos. Bitcoin might look like a bubble on a simple price chart, but when we place it on a logarithmic scale, we see that a peak has not been reached yet.

    In an article, Bitcoin and Metcalfe’s Law, Stephen Powaga of ETF Momentum Investing acknowledges the challenges of valuing Bitcoin and has also turned to Metcalfe’s Law.

    With the recent run up in the Bitcoin price, cryptocurrencies have been garnering much greater attention from the public at large.

     

    A rapid price rise like this presents a difficult situation for potential new investors into the space. On one hand, this price action appears to be a classic asset price bubble, but on the other hand investors can wait years for a meaningful drawdown, all while missing out on the intermediate price appreciation.

     

    How then can one determine a benchmark value for Bitcoin? On the most basic level Bitcoin is a distributed payment network, and like all networks should be subject to Metcalfe’s Law.

    Powaga continues by leading us through some of the basics of Metcalfe’s Law.

    Metcalfe’s Law states that a network’s value is proportional to the square of the number of users. For instance, it’s obvious that if you’re the only person with a telephone then that network would have no value, when one additional person gets a phone the network has achieved a tiny bit of value, and if virtually everyone has a phone, then the network becomes extremely valuable. This relationship has been observed in many industries where increased adoption boosts the network’s overall usefulness, such as European internet usage, Facebook’s value, and more recently Tencent’s value.

    A recent white paper by Ken Alabi finds that blockchain networks also appear to follow Metcalfe’s Law, in his paper he states, “it was demonstrated that the growth in the value of the network was related to the number of unique addresses”. This intuitively comports with our understanding of how Bitcoin’s value should operate, if you’re the only holder of Bitcoin it’s not very valuable because there is no one to exchange it with for goods and services, however if many people hold Bitcoin then it should be much more valuable since there are now many people to potentially exchange it with.

    As Powega explains, he can show us how Bitcoin’s valuation has traded over time based on Metcalfe’s Law principles.

    Given this information, what can Bitcoin’s network size tell us about its value and the size of the current bubble? Utilizing Alabi’s method we can arrive at Bitcoin’s Metcalfe Value through time and compare historic Price-to-Metcalfe Value ratios for Bitcoin.

     

    This is somewhat analogous to price-to-book ratio in public equity analysis in that a higher ratio implies investors expect a given network to create more value from a given number of users.

    As you can see above, the Price-to-Metcalfe Value ratio seen in the previous Bitcoin bubble of 2013/14 was far larger than where it currently stands.

     

    Obviously, the future is unknowable, but given the enormous growth that Bitcoin has seen in its user base, the recent price appreciation may not be as “bubbly” as it appears.

    What Powaga can’t tell us, however, is what is the intrinsic value of Bitcoin now, or what it might be in the future. Who knows? As we discussed, high-profile cryptocurrency investor, Mike Novogratz, sees Bitcoin at $40,000 at the end of 2018. In contrast, Peter Tchir, is taking some Bitcoin chips “off the table”.

  • David Stockman Slams The GOP Tax Bill: "Fuggedaboutit!!"

    Authored by David Stockman via Contra Corner blog,

    The GOP has become so politically desperate that they might as well enact a two-word statute and be done with it. It would simply read: Tax Bill!

    Actually, that's not far from where they are in the great scheme of things. The Senate Finance Committee's bill is a dog's breakfast of K-Street/Wall Street pleasing tax cuts, narrowly focused revenue raisers that will be subject to withering attack on the Senate floor, nonsensical vote-driven compromises and outrageous fiscal gimmicks—-the most blatant of which is the sun-setting of every single individual tax provision after 2025.

    This latter trick is designed to shoe-horn the revenue loss into the $1.5 trillion 10-year allowance in the budget reconciliation instruction and also comply with the Senate's "Byrd Rule" which allows a point of order to strike down a reconciliation bill that increases the deficit after year 10. Save for these gimmicks, the actual 10-year cost of the Senate bill would be $2.2 trillion including interest on the added deficits.

    Nevertheless, this and other sunset gimmicks also underscore how threadbare the whole undertaking has become. To wit, the bill provides interim, deficit-financed tax relief of $1.38 trillion during 2018-2025 before these budget gimmicks kick-in, which is not a big number in the scheme of things: it amounts to just 4.2% of current law revenue collections during the eight year period, and only 0.8% of GDP.

    Since the bill doesn't even really cut marginal rates during this interim period (the top bracket drops from 39.6% to 38.5%), its hard to see how a mere 0.8% "stimulus" to GDP is going to incite a tsunami of growth and jobs.

    As we have frequently pointed out, the Reagan tax cut of 1981—which had no measureable effect on the trend rate of economic growth— slashed marginal rates from 70% to 50% and as a total package paled the current Senate Plan into insignificance: It reduced the Federal revenue base by 26%, not 4.2%; and it amounted to 6.2% of GDP, not 0.8%, when fully effective in the later 1980s.

    Moreover, the "fully effective" part is especially salient because the Senate bill's impact does not widen with time, as do most permanent tax cuts which require phase-in periods, but, instead, shrinks into virtual insignificance.

    Thus, the bill's net tax cut amounts to $225 billion or 1.1% of GDP in 2019, but by 2022 the net cut shrinks to $199 billion and 0.9% of GDP—and then to just $145 billion or 0.6% of GDP in 2025 when the sunset gimmick kicks in.

    Thereafter the bill becomes a small net revenue raiser ($31 billion) by 2027, but, more importantly, the single "cut" item left in the statute tells you who is really driving the show. That is, the Business Roundtable, the K-Street industry lobbies and Wall Street get to keep what they mobilized for—-the 20% corporate rate cut, which stays in place permanently at a cost of $171 billion in 2027 revenue loss.

    However, the lopsided math laid out in the Tax Policy Center's price-out of the Finance Committee reported bill underscores why this dog's breakfast will never make it close to the Donald's desk. That's because by year #10 not one of the 150 million individual filers get a tax cut; the reduction for small business "pass-thru" payers is zeroed-out; and the balance of the bill consists of  an incredible $202 billion of tax increases in 2027 compared to current law.

    That's right. The great Republican "tax cut" slithers off the stage in 2027 raising taxes by a net of $75 billion on individual filers, $123 billion on business filers (aside from the corporate rate cut) and $4 billion on international companies.

    So what you have is a sharply downward sloping taper of tax cuts and revenue losses, which makes the bill a classic Keynesian deficit stimulus through the tax code, not a supply side incentive driver; and one so tangled up in the nation's fiscal strait-jacket that it ends up in political la la land.

    For instance, the only individual tax provision that is not subject to the 2025 sunset is the tax indexing modification which relies on a shorter ruler to adjust the brackets and standard deduction for inflation. Accordingly, by 2027 approximately 150 million filers will be paying $32 billion per year in higher taxes!

    Another fiscal anomaly contained in the bill in order to shoe-horn it into the allotted $1.5 trillion deficit add-on is the repeal of the individual mandate under ObamaCare.

    To be sure, as a matter of policy and liberty we would be the first to say, right on!

    But here is how the bill reduces the deficit by $53 billion in 2027 and $318 billion over the 10 year period. To wit, it assumes that about 13 million citizens are being forced to join Medicaid or buy subsidized health insurance policies on the ObamaCare exchanges who do not want them, and don't even need the coverage, apparently.

    That's completely crazy, of course, but is also par for the course in today's American Welfare State and the fiscal impact and analysis thereof.

    Indeed, the intuitive notion would be that repeal of the ObamaCare fines would cause an increase in the deficit, and, in fact, the CBO analysis assumes a $43 billion revenue loss over the 10-year period from uninsured individuals no longer being forced to pay fines to Uncle Sam for exercising their right to self-insure, pay cash for care or go without.

    Still, the repeal provision is projected to net $318 billion of "payfors" because a different set of needy people are presumed to reject mandatory welfare.

    That's right. The CBO projects that Medicaid costs will be $29 billion lower than current law in 2027 and $179 billion lower over the 10-year period because millions of low income citizens—and this is hard to type with a straight face—-would otherwise sign up for Medicaid, which they would be qualified for but don't want, in order to avoid paying a fine!

    Stated differently, CBO essentially assumes that millions of low income citizens are being fined into enrolling in Medicaid when they don't want Uncle Sam's free stuff; and that millions more would give up their ObamaCare tax subsidies of up to $15,000 because they no longer would have to pay a fine of about $2,000.

    You can't make this stuff up—but there is a reason for the apparent lunacy. What is going on here, in fact, is that 30 years of fiscal kick-the-can is coming home to roost.

    The overhang of $10 trillion of additional built-in deficits over the next decade, and a prospective public debt of $31 trillion is tying the GOP tax-writers in knots, and well it should.

    That's because a meaningful tax cut not paid for with spending cuts (preferably) or a more benign revenue raiser like VAT or a consumption levy is simply unaffordable and counter-productive.

    A deficit-financed tax cut will result in "crowding out" and higher interest rates in the years ahead—-meaning headwinds to growth, not enhancements. That's because for the first time since the 1980s the Fed and other central banks will be selling government debt, not buying it; they will be in a demonetization and QT (quantitative tightening) mode rather than one of massive monetization and QE.

    Yet it was only the latter which permitted the fiscal profligacy that quadrupled the public debt since the turn of the century (from $5 trillion to $21 trillion) to roll forward year after year unchecked by visible, adverse financial and macroeconomic effects. Now comes the payback.

    Indeed, given the nation's rapidly aging and welfare-consuming demographics, its $66 trillion albatross of public and private debt on a sputtering $19 trillion economy and Washington's 5% of GDP structural deficit during the next decade even under CBO's nirvana of perpetual full-employment, the very idea of an unfinanced tax cut amounts to what Senate Leader Howard Baker called a "riverboat gamble" back in 1981.

    And that get's us the most absurd twist yet in the GOP's futile attempt to fit it's big fat political foot into the purported golden slipper of tax reduction and reform. It happens that Senator Baker's legatee representing Tennessee in the US Senate, the now retiring Bob Corker, has exactly the same concern as his illustrious predecessor.

    Namely, the objectively warranted fear that tax cuts do not pay for themselves—-and most especially in the case of the dog's breakfast now heading toward the Senate floor. Indeed, Corker has explicitly stated that he will vote "no" on any bill that increases the Federal deficit—-after any favorable impact on economic growth and the revenue feedback therefrom.

    Apparently, the good Senator is not at all convinced that the sole permanent beneficiary of the Senate bill—corporate America—-will use most of its $1.35 trillion in increased after-tax cash flow over the next decade in order to invest in domestic plant, equipment and technology. And in sufficient incremental quantities to generate meaningful  revenue reflow.

    The skunk in the woodpile here, in fact, is that Corker has been a long-time member of the budget committee and reasonably consistent deficit hawk (except on defense where he is a raging war hawk and spender). Accordingly, he is actually numerate and understands the forbidding math of the corporate tax cut.

    To wit, at the permanent 20% rate, the tax cuts would have to generate nearly $7 trillion of incremental pre-tax profits to pay for itself; and given the pre-tax profit share at 12% of national income, the total gain in GDP would need to be in the order of $60 trillion!

    At the same time, the corporate C-suites already face the lowest debt and equity costs in history thanks to decades of radical financial repression by the Fed, on the one hand, and are now addicted to financial engineering, on the other. So it is not unreasonable to assume that at least 65% of the corporate rate reduction will be allocated to higher dividends and stock buybacks.

    In short, to pay for itself, the 20% corporate tax rate would need to generate $60 trillion of incremental GDP over the next decade from perhaps $500 billion of incremental investment. That is to say, a 120X yield on investment in an economy that has actually not been acutely deprived of investment dollars over the last decade.

    In the alternative, of course, added investment might also generate some incremental employment and income and payroll tax revenue. But that would likely be a strictly second order effect: Hardly a single CEO at a recent meeting with Gary Cohn raised his hand when asked with the 20% rate would lead to more jobs or higher wages.

    Undoubtedly, Senator Corker (and his fellow deficit hawks including Flake, Lankford and others) will lean hard toward the most favorable assumptions possible about the share of the corporate cut that will be reinvested rather than distributed to shareholders, and the yield of GDP and pre-tax corporate income which will result therefrom.

    But they will not get close to a 100% "payfor" conclusion—so they have invented in new morsel to throw into the Senate dog's breakfast. Namely, a "tax cut" written in disappearing ink or what they are pleased to called a "trigger-tax" increase in the event that the dynamic reflow assumptions do not pan out.

    "Corker, the retiring Tennessee Republican has staked a hard line against letting tax legislation add to federal deficits – saying that a single penny of new deficits would lose his vote. It turns out the Senate bill would add $1.4 trillion to the deficit over 10 years – at least before accounting for any economic growth – according to a Congressional Budget Office report released Sunday.

     

    The bill’s supporters say it’ll boost economic growth enough to cover that shortfall, but Corker says he’s not satisfied. He wants a backstop mechanism – essentially a tax-increase trigger that would raise revenue in case the promised growth doesn’t result. Arizona’s Flake and Oklahoma’s Lankford also support that kind of trigger.

    Needless to say, the crafting of a trigger-tax is beyond the capacity of the US Senate to devise while in full partisan floor battle or at any other time.

    The problem is, what is the baseline for measuring any revenue shortfall, and what happens if the short-fall is due to a recession or some other un-programmed economic development? Or even a multi-quarter growth hiatus that may or may not be the on-set of an officially designated "recession" by the authorities at the NBER.

    You editor speaks with some authority on this point—having helped devise such a "trigger tax" back in 1983 when Ronald Reagan was looking for a way to raise taxes to stem the exploding deficit caused by the 1981 cut without admitting he was back-tracking. The long and short of it was Reagan's "trigger tax" never got off the ground because even the threat of a trigger release causes it own set of adverse but impossible to quantify economic feedbacks.

    Even then, the Senate bill has not yet begun to fix all the other "problems" that would be required to find the 51-votes.

    For instance, Senators Johnson and Daines—both former small businessmen and "pass-thru" tax payers—-are holding out for a better deal for the millions of small business owners who won't benefit from the K-Street/Wall Street driven cut in the corporate rate.

    As presently written, pass thru payers would face a 30% rate on qualifying business income rather than 20%, and that's only until 2025. After that they get zip—even as the corporate rate remains permanent.

    The problem with the "fix" needed for these two Senate votes, of course, is that even the 30% pass-thru rate costs $25 billion per year and there is no room in the fiscal envelope.

    Likewise, the latest distributional analysis shows that in 2025—before the sunset—the bottom 30 million tax filers would get an average "tax cut" which amounts to the grand sum of $1.15 per week—-and, no, we did not omit any zeros.

    Similarly, the next 30 million filers would only get $7 per week; and the middle quintile—-the 30 million tax filers between $55,00 and $95,000 per year and the heart of the middle class—– would get just $17 per week of tax relief in 2025.

    That is, before it all disappears into the sunset!

    As we said, the GOP might better pass a two-word tax bill and be done with it.

    Better still, it might consider the possibility that the great barrier to growth in America today is not the tax code, but the Fed and its massive inducements for speculation on Wall Street, rather than investment and growth on main street.

    Indeed, given the warm welcome that most GOP Senators are giving to the new Fed Chairman—-that is, Janet Yellen in a tie and trousers—that avenue of inquiry is more than warranted.

    As we will argue tomorrow, US taxes are always too high and should be cut along with parallel reductions in spending and the deficit. But short of that, it is hard to say that American producers struggle under some kind of severe competitive disadvantage in the global economy.

    In fact, only Ireland, Chile and Mexico have lower tax burdens among all OECD countries, and the US rate at 26% of GDP is actually one-fourth lower than the OECD average.

  • Maryland Schools Forced To Cancel Baltimore Field Trips Due To "Escalating Violence"

    In light of the ongoing wave of violent crime in Baltimore, school officials in nearby Carroll County have been forced to halt school-related trips to the city – including a marching band’s scheduled performance in the Mayor’s Christmas Parade this weekend – citing “escalating violence.”  The field trip ban was imposed by the Carroll County Sheriff’s Office “in response to parent concerns regarding the safety of students.”  Here’s more from The Baltimore Sun:

    Schools spokeswoman Carey Gaddis said the order is based on a recommendation from the county Sheriff’s Office, and will stay in place until the beginning of the next semester in late January, when it will be revisited. She said the order was sent to school principals last week.

     

    Sheriff James T. DeWees recommended the measure during a meeting with school system officials “in response to parent concerns regarding the safety of students during field trips to venues in Baltimore City,” according to a statement from the sheriff’s office. The move is intended to “limit the risk to students and staff.”

     

    “In light of recent violence in the traditional tourist areas of the city, the sheriff agrees that the best course of action is to temporarily suspend travel to Baltimore City venues,” spokesman Cpl. Jonathan Light wrote in the statement.

    Of course, as we pointed out recently (see: America’s Urban War Zone: Baltimore Doubles Chicago’s Homicide Rate In 2017), Baltimore is on track to exceed 400 homicides in 2017 for the first time in the city’s history and has more than doubled Chicago’s homicide rate on a per capita basis.

    As the Sun notes, two field trips to Baltimore have been cancelled so far after parent’s received a rather disturbing email from Carroll County schools spokeswoman Cary Gaddis citing “escalating violence.”

    Field trips are still being considered on a “case-by-case basis,” Gaddis said, but the policy has caused at least two forthcoming trips to be canceled: a planned field trip Friday to the Maryland Science Center by third-grade students from Westminster Elementary School, and Francis Scott Key High School’s band appearance in the Christmas parade in Hampden.

     

    Both schools cited the county’s new policy as the reason for the cancellations.

     

    “Due to escalating violence reported in Baltimore City, and consultation with law enforcement and Maryland Center for School Safety, we will not be sending any students on field trips to Baltimore City at this time,” said an email sent to Westminster parents and guardians Nov. 22.

     

    “When they’re not contained but they’re walking around an area, walking around the city … we don’t have as much control,” she said. The Sheriff’s Office does not send a deputy along with students on field trips, she said.

    Of course, support of the field trip ban is mixed with at least one Democratic legislator in Baltimore blasting the decision of the Carroll County Sheriff’s Office as “misguided and disappointing” while declaring the city is “still a safe place to visit and walk around and explore our cultural sites”…

    Delegate Brook Lierman, a Baltimore Democrat who lives downtown, called the notion that the city is unsafe for visitors “misguided and disappointing.”

     

    “While we are experiencing an uptick in crime, there’s no denying that, it is still a safe place to visit and walk around and explore our cultural sites,” she said. “I love living in Downtown Baltimore and want and hope students from around the state can come visit the great neighborhoods and institutions we have in the city.”

     

    Andy Smith, the Hampstead parent who sent the email to the sheriff and school officials, said he is satisfied with the school system’s decision.

     

    “This is one of those things where being overly cautious is probably the best policy, rather than waiting for something to happen that you can’t undo,” Smith said.

     

    “We’re trying to keep in mind the safety of our students,” she said. “That’s something we have to pay attention to.”

    …it seems that Washington D.C. isn’t the only place where politicians find it convenient to ignore statistics.

  • North Korea Says "Completed State Nuclear Program"; Warns "The Whole US Is In Range"

    North Korea claims its "new ICBM can put whole U.S. mainland within range," says it has "realized great historic cause of completing state nuclear force"

    *  *  *

    Following the successful test-firing of its longest range ICBM yet today, Yonhap News reports, citing North Korean media, that North Korea will make an important announcement at noon Seoul time (10:30pm ET).

    Presumably, Kim's comments will be a braggadocio reaction to President Trump and General Mattis' comments (begins around 6:30):

    Mattis warned "[North Korea] R&D is accelerating and they now appear to have the capability to launch an ICBM attack on anywhere in the world" to which Trump replied "we will take care of it… it is a situation we will handle."

    Trump then tweeted later this evening: "After North Korea missile launch, it's more important than ever to fund our gov't & military! "

    North Korea announces that it “successfully” fired a new Hwasong-15 missile with improved technology, according to an announcement read on state-run television on Wednesday.

    Kim gave the order to test fire the missile, state-run Korean Central News Agency said.

    “After watching the successful launch of the new type ICBM Hwasong-15, Kim Jong Un declared with pride that now we have finally realized the great historic cause of completing the state nuclear force, the cause of building a rocket power,” KCNA said.

    The new missile "brings the whole US mainland within North Korea's range."

    None of which is news as we already reported these details.

    But perhaps the most notable claims is that North Korea says it has "realized great historic cause of completing state nuclear force"

Digest powered by RSS Digest

Nov 28

Today’s News 28th November 2017

  • The Saker: How I Became A Kremlin Troll

    Authored by The Saker,

    Today, with the kind permission of Phil Butler, I am posting the full text of my contribution to his book “Putin’s Praetorians: Confessions of the Top Kremlin Trolls“.  There are a couple of reasons for that.  The main one is that I strongly believe that this book deserves a much bigger visibility than it has received (this is also why, exceptionally, I am placing this post in the top “analyses” category and not elsewhere).  Please read my review here to see why I feel so strongly about this book.  Frankly, I am rather shocked by the very little amount of reviews this book as generated.  I don’t even know if somebody besides Russia Insider has bothered writing a review of it or not, but even if somebody has, it is still a crying shame that this most interesting volume has been so far ignored by the alternative media including the one friendly to Russia.  So by posting my own contribution here I want to bring back this book to the “front page”, so to speak, of our community.  Second, I want to ask for your help.  Right now the Kindle version of the book has 15 reviews on Amazon and only 1 review for the printed paper version.  This is not enough.  I am therefore asking you to 1) buy the book (Amazon wants reviews by purchasers) and 2) write a review on Amazon.  Guys – that is something most of you can do to help, so please do so!  We need to show the world that there is what I call “another West” which, far from being russophobic is, in fact, capable of producing real friends and even defenders of Russia.  So, please, do your part, help Phil in his heroic struggle, get the paper version of the book and review it on Amazon!

     

    Thanks a lot for your help, hugs and cheers,

     

    The Saker

    *  *  *

    How I became a Kremlin troll by The Saker

    By birth, experience, and training, I truly had everything needed to hate Putin.  I was born in a family of “White Russians” whose anti-Communism was total and visceral.

    My childhood was filled with (mostly true) stories about atrocities and massacres committed by the Bolsheviks during the revolution and subsequent civil war.  Since my father had left me, I had an exiled Russian Orthodox Archbishop as a spiritual father, and through him, I learned of all the genocidal persecutions the Bolsheviks unleashed against the Orthodox Church.

    At the age of 16, I had already read the three volumes of the “Gulag Archipelago” and carefully studied the history of WWII.  By 18 I was involved in numerous anti-Soviet activities such as distributing anti-Soviet propaganda in the mailboxes of Soviet diplomats or organizing the illegal importation of banned books into the Soviet Union through the Soviet merchant marine and fishing fleet (mostly at their station in the Canary Islands).  I was also working with an undercover group of Orthodox Christians sending help, mainly in the form of money, to the families of jailed dissidents. And since I was fluent in Russian, my military career took me from a basic training in electronic warfare, to a special unit of linguists for the General Staff of the Swiss military, to becoming a military analyst for the strategic intelligence service of Switzerland.

    The Soviet authorities had long listed me, and my entire family, as dangerous anti-Soviet activists and I, therefore, could not travel to Russia until the fall of Communism in 1991 when I immediately caught the first available flight and got to Moscow while the barricades built against the GKChP coup were still standing.   Truly, by this fateful month of August 1991, I was a perfect anti-Soviet activist and an anti-Communist hardliner.  I even took a photo of myself standing next to the collapsed statue of Felix Derzhinsky (the founder of the ChK – the first Soviet Secret police) with my boot pressed on his iron throat.  That day I felt that my victory was total.  It was also short-lived.

    Instead of bringing the long-suffering Russian people freedom, peace, and prosperity, the end of Communism in Russia only brought chaos, poverty, violence, and abject exploitation by the worst class of scum the defunct Soviet system had produced.  I was horrified.  Unlike so many other anti-Soviet activists who were also Russophobes, I never conflated my people and the regime which oppressed them.  So, while I rejoiced at the end of one horror, I was also appalled to see that another one had taken its place.  Even worse, it was undeniable that the West played an active role in every and all forms of anti-Russian activities, from the total protection of Russian mobsters, on to the support of the Wahabi insurgents in Chechnya, and ending with the financing of a propaganda machine which tried to turn the Russian people into mindless consumers to the presence of western “advisors” (yeah, right!) in all the key ministries.  The oligarchs were plundering Russia and causing immeasurable suffering, and the entire West, the so-called “free world” not only did nothing to help but helped all the enemies of Russia with every resource it had.  Soon the NATO forces attacked Serbia, a historical ally of Russia, in total violation of the most sacred principles of international law.  East Germany was not only reunified but instantly incorporated into West Germany and NATO pushed as far East as possible.  I could not pretend that all this could be explained by some fear of the Soviet military or by a reaction to the Communist theory of world revolution.  In truth, it became clear to me that the western elites did not hate the Soviet system or ideology, but that they hated Russian people themselves and the culture and civilization which they had created.

    By the time the war against the Serbian nation in Croatia, Bosnia and Kosovo broke out, I was in a unique situation: all day long I could read classified UNPROFOR and military reports about what was taking place in that region and, after work, I could read the counter-factual anti-Serbian propaganda the western corporate Ziomedia was spewing out every day.  I was horrified to see that literally everything the media was saying was a total lie.  Then came the false flags, first in Sarajevo, but later also in Kosovo.   My illusions about “Free World” and the “West” were crumbling.  Fast.

    Fate brought me to Russia in 1993 when I saw the carnage of meted out by the “democratic” Eltsin regime against thousands of Russians in Moscow (many more than what the official press reported).  I also saw the Red Flags and Stalin portraits around the parliament building.  My disgust by then was total.  And when the Eltsin regime decided to bring Dudaev’s Chechnia to heel triggering yet another needless bloodbath, that disgust turned into despair.  Then came the stolen elections of 1996 and the murder of General Lebed. At that point, I remember thinking “Russia is dead.”

    So, when the entourage of Eltsin suddenly appointed an unknown nobody to acting President of Russia, I was rather dubious, to put it mildly.  The new guy was not a drunk or an arrogant oligarch, but he looked rather unimpressive.  He was also ex-KGB which was interesting: on one hand, the KGB had been my lifelong enemy but on the other hand, I knew that the part of the KGB which dealt with foreign intelligence was staffed by the brightest of the brightest and that they had nothing to do with political repression, Gulags and all the rest of the ugly stuff another Directorate of the KGB (the 5th) was tasked with (that department had been abolished in 1989).  Putin came from the First Main Directorate of the KGB, the “PGU KGB.”  Still, my sympathies were more with the (far less political) military intelligence service (GRU) than the very political PGU which, I was quite sure by then, had a thick dossier on my family and me.

    Then, two crucial things happened in parallel: both the “Free world” and Putin showed their true faces: the “Free world” as an AngloZionist Empire hell-bent on aggression and oppression, and Vladimir Putin as a real patriot of Russia. In fact, Putin slowly began looking like a hero to me: very gradually, in small incremental steps first, Putin began to turn Russia around, especially in two crucial matters: he was trying to “re-sovereignize” the country (making it truly sovereign and independent again), and he dared the unthinkable: he openly told the Empire that it was not only wrong, it was illegitimate (just read the transcript of Putin’s amazing 2007 “Munich Speech”).

    Putin inspired me to make a dramatic choice: will I stick to my lifelong prejudices or will I let reality prove my lifelong prejudices wrong. The first option was far more comfortable to me, and all my friends would approve. The second one was far trickier, and it would cost me the friendship of many people. But what was the better option for Russia? Could it be that it was the right thing for a “White Russian” to join forces with the ex-KGB officer?

    I found the answer here in a photo of Alexander Solzhenitsyn and Vladimir Putin:

    If that old-generation anti-Communist hardliner who, unlike me, had spent time in the Gulag, could take Putin’s hand, then so could I!

    In fact, the answer was obvious all along: while the “White” and the “Red” principles and ideologies were incompatible and mutually exclusive, there is also no doubt that nowadays true patriots of Russia can be found both in the former “Red” and “White” camps. To put it differently, I don’t think that “Whites” and “Reds” will ever agree on the past, but we can, and must, agree on the future. Besides, the Empire does not care whether we are “Red” or “White” – the Empire wants us all either enslaved or dead.

    Putin, in the meantime, is still the only world leader with enough guts to openly tell the Empire how ugly, stupid and irresponsible it is (read his 2015 UN Speech).

    And when I listen to him I see that he is neither “White” nor “Red.”  He is simply Russian.

    So, this is how I became a Kremlin troll and a Putin fanboy.

  • As Australia's Housing Bubble Bursts, Optimism For The Year Ahead Crashes To Record Low

    Zero Hedge readers might have noted our increasingly bearish tone on all things Australian – economic that is, since the cricket team just whipped the English in the first test match in Brisbane. The focal point of our concern is the housing market and, earlier this month, we discussed how the world’s longest-running bull market – 55 years – in Australian house prices appears to have come to an end. We followed this up with “Why Australia’s Economy Is A House Of Cards” in which Matt Barrie and Craig Tindale described how Australia’s three decades long economic expansion had mostly been the result of “dumb luck”.

    As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

    Last week, in "The Party's Over For Australia's $5.6 Trillion Housing Market Frenzy", we highlighted some scary metrics for Australia’s housing bubble cited by Bloomberg. In particular, we showed how the value of Australian housing is more than four times gross domestic product. This is higher than other western nations, like New Zealand, Canada and the UK, which are experiencing their own housing bubbles. The ratio of house values to GDP in the US seems positively tame in comparison.

    It seems that it’s nor just us and other market commentators who are becoming progressively more pessimistic on Australia’s outlook. Australians are coming round to the same opinion, as Australia's Domain.com explains (note: Roy Morgan is an Australian market research company).

    The number of Australians optimistic about the year ahead has dropped to a never-before-seen low as mortgage holders eye a combination of record-high household debt and the possibility of interest rate hikes in 2018.

     

    According to a Roy Morgan survey taken in mid-November, 31 per cent of people think 2018 will be “better” than 2017 – the lowest figure recorded since the survey began in 1980.

    Along with a slide in positivity, the survey showed a spike in active negativity, with 30 per cent expecting next year to be “worse” than 2017 and 39 per cent saying it will be “the same”. Younger Australians are more positive than older generations, with almost half (46%) of 18-24-year-olds expecting next year to be better, while just 20 per cent of over 65s feel that way. In fact, a noticeable drop in optimism can be seen as Australians age.

    AMP notes that the greater level of optimism among younger Australian’s is probably due to them being saddled with less debt.  Their older countrymen are becoming fearful that a rise in interest rates could lead to a housing crash.

    “(Older Australians) have the debt,” AMP Capital chief economist and head of investment strategy Shane Oliver told Domain. “There’s a growing problem in Australia where a lot of people might own their home by the time they’re 65 but they still have a lot more debt than previous generations.

    “If you were going to worry about a property price collapse, you wouldn’t be as worried about it if you were a younger Australian – they might actually see an opportunity. If you’re an older Australian with a lot of debt it might be more of a worry for you.” Households are sitting on record high debt, above 190 per cent of income, which is why talk of interest rate hikes have been hitting confidence.

    While the Australian central bank sees a rate hike as unlikely in the “near-term”, Domain.com notes that the next move is likely to be up.

    Reserve Bank governor Philip Lowe reiterated last week he sees the next move from the central bank as being upwards, and while most economists expect those hikes in late 2018 or even 2019, ANZ is hanging onto its call that two rate hikes await next year.

    While Australian citizens are the second most-indebted in the world, the country’s banks are the most exposed to housing debt.

    They are also potentially in the firing line for a government enquiry as AMP’s Shane Oliver tells Domain.com.

    Meanwhile, confidence in the institutions to which Australians are so deeply indebted has scarcely been lower, with scandals and the threat of a royal commission a part of the landscape.

     

    “The bank questions seem to keep coming – it seems to have a life of its own,” Dr Oliver said. “This idea of the royal commission or commission of inquiry… putting aside the should we or shouldn’t we… that constant talk that there’s some sort of problem with the banks is probably affecting people as well.”

    This was Australia’s ABC News earlier today.

    The calls for a full inquiry have been relentless for years, emanating from a broad section of the community — from farmers, small business and households, jaded and disillusioned with the industry's rampant profiteering, fee gouging and blatant disregard for the law. How many times can a Commonwealth Bank chairman sincerely apologise for a yet another breach of trust? What, pray tell, will be the cause of next year's?

    But the overwhelming reason for an inquiry rests on just one principle — accountability. What has been forgotten in the endless round of scandals in recent years is that the Australian banking sector is a taxpayer subsidised industry. It's an industry that pays ridiculously bloated salaries to its leaders; that showers itself with massive bonus payments when profits are soaring but instantly demands taxpayer protection and support when the tide turns.

    Having resolutely opposed a formal enquiry, the Australian government may have its hand forced as Liberal National Party Senator, Barry Sullivan, is threatening a to put a motion to the senate, possibly as early as this week. This might undermine confidence in Prime minister, Malcolm Turnbull. Furthermore, as ABC News notes, the banks have also taken the usual, and likely misguided step, of appealing to their biggest critics.

    Senior Coalition members are terrified, having been forced for so long to walk the tightrope between hauling bankers into line and staunchly opposing an inquiry. If the motion gets up, it would be a major loss of face for Mr Turnbull and the Government, with serious ramifications for his grip on leadership.

    In a show of desperation, the banks have opted to go straight to the public, the area where they possibly have the least support, with a multi-million dollar propaganda campaign on free to air television and newspapers. And the fight is likely to get ugly.

    With pessimism on the part of Australian public already at record low levels, we suspect that a messy political confrontation between politicians and the banking sector could only be an additional negative for the popping of Australia’s housing bubble. AMP’s Shane Oliver is not optimistic, as Bloomberg notes.

    And the general sense of “malaise” could be here to stay, according to Shane Oliver.

    “It seems the old days of ‘she’ll be right, mate died off with the Holden Ute,” he said.

    For those unfamiliar with the Australian vernacular, a Holden Ute is an iconic pick-up truck. Sales hit record lows last year and the Adelaide manufacturing plant is being shut at the end of this year.
     

  • Did NBC Push An Unfounded Conspiracy Theory On Behalf Of CIA?

    Authored by Wayne Madsen via The Strategic Culture Foundation,

    Retired National Security Agency (NSA) chief technology officer William Binney is being branded as a "conspiracy theorist" by corporate media outlets, most notably, the Comcast-owned National Broadcasting Corporation, for co-authoring a controversial memo issued this past summer by a group of former intelligence officers – Veteran Intelligence Professionals for Sanity.

    The memo opined that the leak of Democratic National Committee e-mails during the 2016 presidential campaign were not the result of Russian state-sponsored hacking but the result of an inside job by a DNC staffer who loaded the purloined e-mails onto a thumb drive. That view is contrary to an assessment made in a 2017 intelligence assessment by 17 US intelligence agencies. That assessment claimed that Russian government-sponsored hackers broke into the email servers of the DNC and then provided the emails to WikiLeaks. However, the assessment was not the unanimous view of 17 US intelligence agencies, but merely four – the Central Intelligence Agency, the National Security Agency, the Federal Bureau of Investigation. It was provided a chapeau of legitimacy by the Director of National Intelligence. Contrary to news reports, the Defense Intelligence Agency, the State Department Bureau of Intelligence and Research, and intelligence elements of the military services did not provide input to the assessment.

    Binney was also accused by NBC "national security reporter" Ken Dilanian of pushing the "conspiracy theory" that the "NSA is collecting and storing nearly every US communication."

    Far from being a conspiracy theory, NSA's unconstitutional eavesdropping program, code-named STELLAR WIND and officially known as the “President’s Surveillance Program,” was proven in classified documents revealed by NSA whistleblower Ed Snowden and, earlier, by Justice Department prosecutor Thomas Tamm. A metadata-capturing program called PRISM ensnared the personal data of millions of Americans from AT&T, Verizon, Sprint, Facebook, Apple, Google, Microsoft, Yahoo, and AOL.

    What raised the hackles of Dilanian and other media shills for the intelligence community is that Binney was invited to a meeting with Central Intelligence Agency director Mike Pompeo on the "hallowed" 7th floor executive level at CIA headquarters in Langley, Virginia. Pompeo, a former Republican congressman from Kansas, had two CIA technology experts sit in on the meeting.

    Pompeo was reportedly urged to meet Binney by President Trump after the president saw one of Binney's interviews on Fox News and suggested that Pompeo meet with the retired NSA official.

    Dilanian wrote that although Binney "has been feted in Europe and elsewhere as a truth-telling whistleblower . . . American officials of all political persuasions say his allegations about the NSA are false." Dilanian offered up pure uninformed conjecture. Many current and former NSA, CIA, Justice Department, FBI employees, of all political persuasions, have confirmed that Binney's statements about illegal NSA eavesdropping are correct. And, they have been proven correct by deliberations of the super-secret Foreign Intelligence Surveillance Court (FISC).

    Dilanian is nothing more than a CIA embedded reporter at NBC News. While Dilanian was the Tribune Washington bureau national security reporter, he was accused of submitting his stories to the CIA in advance of publication. Tribune owns the Chicago Tribune and Los Angeles Times. In one email, Dilanian wrote to the CIA press officer: "I’m working on a story about congressional oversight of drone strikes that can present a good opportunity for you guys." In other cases, the CIA made significant re-edits of Dilanian's stories. Dilanian left Tribune in May 2014 for the Associated Press. While the Tribune Washington bureau chief later called Dilanian's e-mail exchanges with the CIA a violation of the newspaper chain's news policy, the AP had no problem with Dilanian's e-mail pen pals at the CIA. Dilanian later moved to NBC News.

    NBC News, which has had a long relationship with the CIA since the agency's implementation of the news media infiltration project called MOCKINGBIRD in the early 1950s, apparently has had no problem with Dilanian's shilling for the CIA. The NBC attack on Binney appears to have been coordinated by Dilanian and his copy editors at the CIA who were not happy about Pompeo's meeting with the NSA whistleblower. Pompeo has been all over the map on accepting the US Intelligence Community's assessment on Russian hacking of the DNC computers, first accepting the assessment, then agreeing that it had no impact on the presidential election, and wavering back and forth to please Trump.

    There is some credence to Binney's contention that weak DNC security led to either an internal compromise of sensitive e-mails or an external hack. Then-DNC chairwoman Donna Brazile did not create a Cybersecurity Advisory Board until after the e-mail hacking became public in August 2016. Instead of asking non-partisan technical experts to serve on the advisory board, Brazile packed it with Democratic Party hacks, ironic, since the title of her new book is "Hacks: The Inside Story of the Break-ins and Breakdowns That Put Donald Trump in the White House." Among the members of Brazile's advisory board were former members of the Obama administration, including Rand Beers, formerly with the Department of Homeland Security; Nicole Wong and Aneesh Copra of Albright Stonebridge Group; and Perkins Coie partner Michael Sussmann, a former federal prosecutor who was a lawyer for Hillary Clinton and the DNC. Albright Stonebridge is the lobbying firm of former Secretary of State Madeleine Albright.

    According to a retired technical officer with the US Senate Sergeant-at-Arms Technology Development Services (TDS), the computer systems maintained by TDS have had their security weakened by senators who want ease of access to the systems maintained by the DNC, the Republican National Committee, and the four campaign committees of the Senate and House – the Democratic Senate Campaign Committee (DSCC), the National Republican Senate Committee (NRSC), the Democratic Congressional Campaign Committee (DCCC), and the National Republican Congressional Committee (NRCC). The DCCC was reportedly penetrated by hackers while the DNC was also being hit. However, based on the revelations by the retired TDS official, Binney is correct in stating that the "inside hack" was done either by DNC and/or DCCC authorized users or by those who penetrated the systems from the US Senate or House of Representatives computers.

    US Senate and House computer systems and network have been vulnerable to outside penetration ever since 2002, when Foxcom Wireless, a Jerusalem-based Israeli wireless start-up firm, received a contract to install a wireless system in the US Capitol and Senate and House office buildings. Foxcom was heading into bankruptcy before landing the lucrative contract for the US Capitol complex. Foxcom Wireless moved its headquarters to Vienna, Virginia and renamed itself MobileAccess Networks. In 2011, Mobile Access, Ltd. was bought by Corning, Inc. and merged into its Corning Cable Systems subsidiary.

    It was discovered after the contract with the US House that Foxcom paid $280,000 to Republican lobbyist Jack Abramoff, who was later convicted for bribery, mail fraud, and tax evasion, who helped secure the contract by lobbying members and staff of the powerful House Administration Committee, which was seen, at the time, as a corrupt congressional version of New York's infamous Tammany Hall. The powerful committee has been dubbed the "City Hall" of Capitol Hill.

    There was not a single member, except for House Minority Leader Nancy Pelosi, who voiced objections to the Foxcom contract.The deal had the personal support of House Speaker Dennis Hastert, later convicted of lying to federal investigators about details of his paying hush-money in a pedophile scandal.

    The congressman who originally introduced Foxcom to the House Administration Committee was House Democratic Whip Steny Hoyer. Hoyer's sister, Bernice Manocherian, once served as the executive president of the American Israel Public Affairs Committee (AIPAC), the largest Jewish influence-peddling operation in the United States. House Administration Committee members who approved the deal with the Israelis were committee chairman Bob Ney and Representatives Candice Miller, Zoe Lofgren, and Juanita Millender-McDonald. Ney was later convicted of conspiracy and making false statements in the Abramoff influence-peddling scandal.

    Foxcom ensured that its "contract" to "re-wire" Congress saw no oversight from TDS technicians or employees of either the Senate Sergeant-at-Arms or House Information Resources Office. The House Information Resources Office reports to the Chief Administrative Office of the House. Today, it is convenient for the media to ignore what Abramoff's actions have since allowed the Israeli mafia – the true culprits in the 2016 DNC/DCCC hacks – to have accomplished. Many of the Trump Organization's global partners are members of this particular mafia and its various branches.

    NBC hacks like Dilanian and the perpetual happy-faced bobblehead Katie Tur, as well as their dubious colleagues at CNN, Wolf Blitzer – the former public affairs officer for AIPAC – and Jake Tapper, are not able to see prior to 2016 to discover that the security holes within the telecommunications networks of Congress – with access to the DNC and RNC – were placed by Israeli intelligence agents in the early and mid-2000s. Brazile's expert cyber-security committee could never turn their attention toward the Israelis, given the large amounts of money Haim Saban and Harvey Weinstein lavished on the Democratic Party.

    Russia may be getting the blame for HackGate, but Israeli mobsters, hailing originally from places as diverse as Lithuania, Kazakhstan, and Ukraine to Kyrgyzstan, Azerbaijan, and Moldova, deserve all the credit.

  • "Hong Kong House Prices Could Soar Another 10% Next Year" – Have They Just Rung The Bell?

    Hong Kong property was in Algebris Investments’ top tier of six most inflated bubbles from its longer list of the world’s fourteen biggest bubbles. The territory is ranked as the most expensive housing market in the world for the seventh successive year in 2017, with the medium home price selling for 18.1 times the median household income, according to Forbes. Last week, we discussed how the record price per square foot for a Hong Kong residence was smashed twice on the same day by the same buyer. The buyer paid HK$600 million, or HK$131,000 per square foot for an apartment in the exclusive “The Peak” district. Later that day, the same buyer paid HK$560m for another apartment measuring 4,242 square feet, equivalent to HK$132,000 per square foot. These two purchases beat the previous record of HK$105,000 per square foot paid on 17 September 2017.

    In his analysis, Algebris portfolio manager, Alberto Gallo, used a variety of measures to identify irrational behaviour, two of which are “The trend is your friend” and “Sky is the limit”, both which apply to the latest prognostications for Hong Kong property prices from three of its leading real estate agents. According to Bloomberg.

    Hong Kong’s red-hot housing market shows no signs of cooling anytime soon. Prices in the city have climbed 11 percent this year, defying skeptics waiting for the bubble to burst and government attempts to rein in the world’s most expensive housing market through a raft of taxes and mortgage curbs.

    If anything, the frenzy has intensified in recent months as investors have poured money into property. Buyers have set new records for everything from luxury homes in the exclusive Peak neighborhood to undeveloped residential land. There have also been blockbuster deals for commercial property in the heart of Hong Kong’s central district. “Now it is very hot, because of the hot money rushing in,” said Raymond Ho, deputy senior director of residential development and investment at Savills Plc. “There is more record-breaking coming.”

    Runaway growth has put the city in bubble risk territory, according to the UBS Global Real Estate Bubble Index. Even so, mass-market home prices will rise 8 percent to 10 percent next year, according to property consultancy Colliers International Group Inc. Real estate consultant Knight Frank LLP expects prices of such homes to climb 5 percent next year, while luxury housing advances 8 percent.

    Helpfully, Bloomberg has conducted a survey of Hong Kong property bulls to discover their reasoning as to why the “Sky is the limit” for prices.

    Here are five reasons why property bulls say the city’s housing market will continue to defy expectations of a slowdown:

    1. Demand Outstrips Supply
    An average 20,000 new private residential units come to market each year, barely enough to cover the 20,000 mainland Chinese who become permanent residents each year — allowing them to avoid the punitive stamp duties slapped on foreign buyers — let alone anyone else. The number of unsold apartments in the third quarter fell to the lowest levels since 2015, according to Bloomberg Intelligence.

    2. Money’s Easy
    Cash-rich developers are pulling out all stops to entice buyers. At its Cullinan West project, Sun Hung Kai Properties Ltd. is offering buyers finance of as much as 120 percent of the purchase price: 90 percent toward buying the new property, and 30 percent to pay down their existing mortgage. More than 95 percent of the 321 units offered over the weekend sold, Sun Hung Kai said. They were priced about 11 percent higher than a March sale at the same development, according to BOCOM International Holdings Co. Other developers offer rebates to buy furniture or interest-only loans for the first three years.

    3. … and Cheap
    In a sign that mortgage wars between banks are raging even amid the prospect of rising interest rates, HSBC Holdings Plc is offering to match low rates from rival lenders. Hong Kong’s largest mortgage lender is offering some clients a rate of Hibor plus 1.28 percent if they get similar terms from other banks. That works out to less than 2 percent.

    “These rates are highly affordable and will continue to be, even if the U.S. pushes up rates 25 or 50 basis points,” said Marcos Chan, senior director of head of research for Hong Kong, Southern China and Taiwan at CBRE Inc.

     

    4. The Bank of Mom and Dad
    The biggest obstacle for new home buyers is coming up with the minimum 40 percent down-payment required by Hong Kong Monetary Authority loan-to-value ratios. Step in the Bank of Mom and Dad. Hong Kong’s de-facto central bank has warned young buyers are increasingly turning to their parents, with home purchases being financed partially by proceeds from refinancing mortgages. That also makes it harder for others whose families aren’t asset-rich to get on the property ladder.

    The average number of monthly refinancings rose to 3,100 in the first three quarters of this year from 2,200 in 2016, according to HKMA data.

    Through August, the value of refinancing was equal to almost 50 percent of primary sales, according to Cusson Leung, head of research for Hong Kong property and conglomerates at JPMorgan Chase & Co. “We have the sense that most of the financing is going into buying property.”

    5. Soaring Land Prices
    Aggressive bids by mainland developers keen to build up land banks have pushed Hong Kong prices to records. Non-local developers account for 68 percent of all government land purchases this year, according to Colliers.

    In February, two mainland companies paid a record HK$22,118 per square foot for a waterfront site. Those costs will ultimately result in higher apartment prices once developments are completed, causing neighboring property owners to raise their own expectations.

    “People translate a land sale into the final built price, and when it is way above the market everyone will raise their own prices,” said Denis Ma, head of Hong Kong research at consultancy Jones Lang LaSalle Inc.

    We don’t know when the HK property bubble will burst, but the cascading selling we’ve seen in Chinese financial markets – from government bonds to corporate bonds to equities following October’s Party Congress – is hardly reassuring. Furthermore, as was noted above, Hong Kong mortgages tend to be priced off Hong Kong interbank rates and 1-month HKD Hibor has recently spiked to its highest rate since December 2008, in the midst of the last crisis, which hardly augurs well.


     

  • The Future Is What We Make Of It – Part 1

    Authored by Mike Krieger via Liberty Blitzkrieg blog,

    Not everything that is faced can be changed. But nothing can be changed until it is faced. … Most of us are about as eager to change as we were to be born, and go through our changes in a similar state of shock.

    – James Baldwin

    2017 has been a really strange year for me.

    As tens of millions of my fellow Americans have experienced mental breakdowns following the election of Donald Trump, an unexpected sense of calm has come over me and I can’t remember the last time I was this optimistic about the future.

    Importantly, the optimism I feel isn’t the demented, tribal and transient sort that many people experience when their politician of choice wins an election. I strongly disliked both Donald Trump and Hillary Clinton and I refused to support or vote for either. As such, I already knew going into November 2016, that we’d emerge on the other side with a dangerous authoritarian in power, and I mentally prepared myself to push back against whoever won. Although I think Trump is a terrible President and a fake populist, I think his winning the election might serve as the necessary kick in the ass our society needs in order to evolve.

    If Hillary Clinton had been elected, she would’ve been given an incredible amount of slack from our depraved corporate media. In fact, the entire first year of her Presidency would’ve been dominated by non-stop slobbering about how amazing it was that the U.S. chose a female leader. This would’ve overshadowed anything she actually did and we’d continue to hear endless platitudes about how exceptional America is from our corrupt, self-proclaimed “elites” via the propaganda press machine. In short, Hillary Clinton would’ve gotten a gigantic pass by the media class which claims to keep the public informed.

    All of this reminds me of the James Baldwin quote I put at the top of this post:

    “Not everything that is faced can be changed. But nothing can be changed until it is faced. … Most of us are about as eager to change as we were to be born, and go through our changes in a similar state of shock.”

    With Trump’s election, the mask is finally off. Even Trump supporters admit that his election was a reaction to how corrupt and fraudulent our economy and society had become during the 21st century – first under Bush and then Obama. Independents such as myself, despite finding Trump revolting and dangerous, tend to agree with this assessment.

    The only significant group of people who simply refuse to admit this fact are those who proudly proclaim themselves to be part of “the resistance.” Many of them thought everything was going just fine for the country while Obama was President simply because things were going well for them, which is just human nature. If things are going fine for you on a individual level, there isn’t much incentive to peek behind the curtain and question what’s really going on. You’re simply too busy feeling good about yourself and focusing on getting ahead. I know because I’ve been there.

    During my Wall Street career from 2000-2010, I was primarily focused on my career and having fun with friends. Part of this was age related, but it was even more so due to the fact that I was on the fast track and my personal future — from a materialistic and superficial perspective at least — looked bright. It wasn’t until around the time of the financial crisis that I started to see the world from a radically different perspective. I started digging into our shady monetary and financial system, and from there, started looking into other industries, as well as the nefarious and unconstitutional practices of my government’s military-industrial-surveillance complex. The learning curve was exceptionally steep, but it’s been well worth the effort and I finally started the process of confronting reality, as opposed to living comfortably in my own bubble of privilege. Many others “woke up” during this same wave.

    While all that’s well and good, there’s a catch. Although “waking up” is an exhilarating process, it’s simultaneously a terrifying and vulnerable time, especially in the early stages. I certainly spent a couple of years with visions of imminent apocalyptic doom, which made me more susceptible to going down all sorts of unproductive rabbit holes that merely sucked away my energy versus inspiring me with productive drive. It wasn’t until I heard about Bitcoin and recognized its revolutionary potential that I began to turn the corner and see a better path forward. Accepting reality for what it is, is productive, but wallowing in fear and despair is not.

    At the exact same time I was fretting about the future and expecting collapse, others were working passionately on building the Bitcoin ecosystem. My fear and kvetching didn’t add much value to the world, while those who had focused their energy on creating a better world were helping to push humanity’s evolution forward in a tangible way. This realization forced me to once again question my entire worldview and mindset, which is why you’ve probably noticed a significant change in the tone and content of my writings this year.

    While none of us knows what the future holds, it’s guaranteed things won’t get significantly better if we just cower in a corner in the fetal position shivering about what “the powers that be” are about to do to us. A revolutionarily better future will only emerge if we create it.

    Which brings me to both the problem and opportunity presented by “the resistance.”

    It’s tempting to just write these people off as useful idiots being easily corralled into the vicious arms of neocons and deep state psychopaths following the emotional trauma inflicted upon their psyche by the election of Donald Trump. It’s tempting to do that, because in many ways that’s a fairly accurate description of what’s going on, but I want to try to be less judgmental right now. When thinking back to the early days of my awakening, I remember how malleable my mind was to all sorts of influences, both positive and negative. This is what happens to people when your entire worldview is suddenly shattered or disrupted. Human nature is to look for an alternative narrative that can help you once again make sense of the world. Unfortunately for most card-carrying members of “the resistance,” nefarious characters within corporate media and U.S. intelligence agencies were ready with a comforting narrative which gave them permission to avoid confronting reality: Russia did it.

    As idiotic as the whole obsession with Russia has been in 2017, it serves a very useful purpose for the entrenched and discredited U.S. power structure. It effectively gives permission to that segment of the population who thought everything was hunky dory during the Obama administration to continue with that worldview. If everything can be blamed on meddling Russians, then we don’t actually have to confront the rapacious oligarchs running this country into the ground. This is the real tragedy of “the resistance.” By creating and pushing the Russia narrative, these master manipulators are intentionally preventing tens of millions of Americans from confronting how bad things really are. As such, a considerable percentage` of the population simply refuses to admit that our big problems were not created by Vladimir Putin, but are very much a home grown affair.

    This presents the danger and the opportunity. If the millions of people in “the resistance” continue to blindly blame our deep problems on Russia while fantasizing about how awesome everything would’ve been if Hillary had been elected, we’re in for some serious trouble as a society. On the other hand, if some meaningful percentage of this group can move beyond their initial election trauma and face reality for what it is, the future is very bright. Let’s never forget that the 2016 election was as much about staying home as it was about voting for Donald Trump. Enough of the country was pissed off about the corruption and degeneracy of the status quo to elect this guy as a middle finger to the “experts” and “elites.” People don’t love Trump, they just despise the status quo.

    While I think most rank and file “resistance” members continue to be happily manipulated at this stage since it allows them to avoid confronting how truly screwed up this country has become, I suspect a certain percentage of them can eventually come out of their stupor and evolve into productive agents of change. Tomorrow’s post will dive more deeply into why I think that’s the case.

    *  *  *

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  • Keith Olbermann: "I'm Retiring From Political Commentary"

    Keith Olbermann, anti-Trump video blogger, self-proclaimed leader of the ‘Resistance’, and former ESPN, MSNBC, Current TV and Fox Sports host announced on Monday that he is retiring from political commentary. The progressive provocateur made the announcement during the final episode of “The Resistance,” a political show sponsored by GQ that airs on YouTube.

    “I am retiring from political commentary in all media venues” Olbermann said. “Thank you for all the kind words and all the support. Have fun storming the castle. My work here is done. Matter of fact, so is Trump’s.”

    He framed his departure by stating that “I am confident now even more so than I have been throughout the last year that this nightmare presidency of Donald John Trump will end prematurely and end soon, and I am thus also confident that this is the correct moment to end this series of commentaries.” He added that Trump will either be removed from office or forced to resign by his own party sometime in the next 13 months. 

    Clarifying his departure, the 58-year-old insisted that he wasn’t being fired and was in good health: “No illness. No scandal. No firing. Just I’ve said what I’ve had to say. It was as obvious as I made it seem. I give my work everything I can, so it’s not like I can dial it back.”

    In a twitted preview of his retirement, Olbermann said that “After “Pocahontas,” Trump’s an ex-president waiting to happen – imminently. So this will be the last episode of #TheResistanceGQ. If you’re a political account and I unfollow you it ain’t personal.” Doubling down on the Pocahontas incident, Olbermann then added that “The good news: I’m finishing it because, especially after the “Pocahontas” debacle, I think Trump is unavoidably, inevitably, and in every possible path open to him, FINISHED “

    In the wind-up to his announcement, Olbermann reiterated his running line for the past year, claiming that it is all but inevitable that Trump will either be removed from office or resign from the White House. He asserted that the Republican will be impeached over the Russia investigation or forced by Republicans to leave office.

    “I’ve made my point…I’d like to go back and enjoy some of my life again,” said Olbermann, who seemed to take credit for what he predicts will be Trump’s downfall. Olbermann went on to complain about his time on the show, saying that he has “not enjoyed one minute of it.”

    “As, I’m certain, it has also been for you, for me it has been unadulterated pain and revulsion and horror. The process has become nearly 24/7,” said Olbermann, who says he produced the show without pay. Olbermann also took one last dig at mainstream television news networks and the “dim-witted world of American political TV reporting, which is still trying to get dim-witted Trump supporters to watch their network.”

    Nearly seven years earlier, Olbermann surprised his fans with a similar abrupt exit from media: in Jan. 2011, he announced his departure from MSNBC during the final episode of his show, “The Countdown with Keith Olbermann.” A few months later he joined Current TV, the network founded by Al Gore. That gig lasted just over a year. Olbermann was accused by colleagues of failing to show up to work according to The Daily Caller, which added that in a statement announcing Olbermann’s departure, Gore said that “the values of respect, openness, collegiality, and loyalty to our viewers…are no longer reflected in our relationship with Keith Olbermann and we have ended it.

  • Hawaii Reinstates Cold-War Era Warning To Prepare For North Korean Attack

    Authored by Mac Slavo via SHTFplan.com,

    The previously retired air raid warning sirens from the Cold War era in Hawaii will be wailing again come December. Only this time, it’s due to the rising tensions between the United States and North Korea.

    Hawaii has long been a military defense outpost, sparking fears that North Korea could target the island.

     “I suppose that’s necessary as a precaution,” said Ted Tsukiyama, a Hawaiian resident, and WWII veteran.

     

    “But I don’t think North Korea is gonna attack,” Tsukiyama said. “They’d be foolish to threaten South Korea or Japan or the United States.”

    But the concerns are growing as North Korean leader Kim Jong-un has repeatedly threatened to drop a bomb over the Pacific Ocean, and President Donald Trump has threatened North Korea with “fire and fury” and designated North Korea as a state sponsor of terrorism.  In turn, North Korea has continually failed to abide by the United Nations sanctions placed on them, as they advance their weapons of mass destruction.

    Sirens were installed around Hawaii after the second world war started, according to Tsukiyama, and there would be periodic tests.

    “I remember hearing the sirens going off. The radio would give us a warning: ‘This is only a test, don’t get alarmed,’” said Tsukiyama, who was born and raised in Hawaii.

    According to Vern Miyagi, administrator of the Hawaii Emergency Management Agency (HI-EMA), which is part of the state’s Department of Defense, the chances North Korea will act are unlikely, but making sure Hawaii is prepared is still vital. 

    “If North Korea launches against us or our allies, the retaliation would be complete and they would defeat North Korea’s ambition to continue its regime. The regime would probably end,” explained Miyagi.

    He notes Hawaii is protected under the U.S. Pacific Command’s defensive umbrella, the anti-ballistic missile system, and it is home to the Pacific Command, the military’s headquarters for the Asia-Pacific region.

    Miyagi has pointed out that “Hawaii is a likely target because we’re closer to North Korea than most of the continental United States… As we track the news and see tests, both missile launches, and nuclear tests, it’s the elephant in the room. We can’t ignore it. People of Hawaii need to know what Hawaii is doing in preparation for this.” 

    Hawaii has been ramping up their preparations in advance for a potential nuclear attack by North Korea.

    The Aloha State is currently attempting to educate its 1.4 million residents, as well as its visitors, on how to prepare for a nuclear attack.  Hawaii has become one of the first states in the nation to initiate a nuclear preparedness campaign and starting December 1, it will reinstate the “attack warning” siren, which it hasn’t tested since the Cold War. The siren will follow the monthly “attention alert” signal, which warns people of an incoming tsunami or hurricane.

    The state has also been holding community meetings and broadcasting public service announcements on TV and the radio to prepare people for a possible attack.  Gone are the days of “duck and cover” during the Cold War; today, the mantra is “shelter in place,” preferably in a concrete structure. Officials also recommend having enough food and water to survive for 48 hours and being prepared with supplies to last up to 14 days.

    If North Korea launches a missile, officials estimate it would only take 20 minutes to reach its destination.  It would take about five minutes for the United States government to determine where the missile is going, which would leave about 12 to 15 minutes to warn the public.

  • Here We Go Again: Wells Fargo Is Under Investigation For Gouging Clients

    After reporting last month that Wells Fargo’s foreign-exchange unit was being investigated by regulators and that the bank had fired four employees – and demoted another – after discovering certain unspecified improprieties in its FX shop, more details about the exact nature of the bank’s latest scandal – which follows revelations that the bank’s retail division created millions of fake customer accounts, and its auto lending unit overcharged borrows – have finally been unearthed by the Wall Street Journal.

    WSJ reports that the bank's FX sales desk routinely gouged customers by charging them up to eight times as much as the industrywide standard. Furthermore, when confronted by clients about the high fees, traders and salespeople were encouraged to lie about the reasoning for them.

    And once again, it appears Wells Fargo’s idiosyncratic incentives encouraged traders and salespeople on the bank’s foreign-exchange desk to take advantage of their clients’ ignorance and gouge them with exorbitant fees. Those who remember the cross-selling scandal that precipitated the resignation of CEO John Stumpf last year will recall that the 5,000 or so branch employees who were fired by the bank reportedly blamed management’s unrealistic quotas for their behavior.

    Foreign-exchange employees got bonuses based solely on how much revenue they brought in, say more than a dozen current or former Wells Fargo employees. No other big bank in the U.S. calculated bonuses of currency traders in such a defined and individual way. Wells Fargo said Monday that it began making changes to those compensation plans earlier this year.

     

    The bank also charged some of the highest trading fees around, according to current and former employees. For more than a decade, customers were sometimes charged anywhere from 1% to 4% on basic transactions such as converting euros to dollars and complicated trades like hedging.

     

    Those percentages can be at least two to eight times higher than the industrywide average of 0.15% to 0.5%, depending on the trade, customer and volume, according to foreign-exchange bankers throughout the industry.

    For what it’s worth, Wells Fargo contests WSJ’s description…

    Wells Fargo disputes the descriptions of its foreign-exchange fees by current and former employees. The bank said Monday its fees in 2016 had a weighted average of 0.09 percentage point across all transaction sizes. Clients served by its middle-market banking team were charged a weighted average of 0.18 percentage point, according to Wells Fargo.

     

    Some foreign-exchange bankers at Wells Fargo relied on the fact that customers often didn’t bother to double-check how much they were charged, fee levels weren’t straightforward, and complaints could be batted away, the current and former employees say.

    As WSJ had previously reported, a “large trade” involving Restaurant Brands International – the food-service conglomerate that owns Tim Hortons, Burger King and Popeyes – initially aroused regulators’ suspicions.

    Amazingly, the price-gouging on the trade was apparently so egregious it resulted in a loss to the company. The Ontario-based company complained about the size of its trading fee and…well…the rest is history.

    While WSJ didn’t offer many details about the transaction, the restaurant chain has been on something of an M&A spree in recent years: First the company bought Tim Hortons in 2014, then famously purchased Popeyes Louisiana Chicken last year.

    Apparently, none of the traders’ traditional tactics for dealing with customer complaints worked on RBI. One manager told WSJ the sales desk would tell customers – in a stunning feat of mendacity worthy of their rivals at Goldman Sachs – that the higher fee was due to a “time fluctuation” when the trade was executed, or some other such nonsense. The dispute was resolved when the bank refunded RBI nearly $1 million. Inside the bank, the incident even has its own nickname: “the Burger King trade”.

    One former Wells Fargo manager says employees would tell customers who expressed surprise at the size of a trading fee that market prices were different at the moment when the transaction was executed and blame “time fluctuation” for any difference.

     

    The bank’s foreign-exchange customers have included telecommunications firm CenturyLinkInc., vehicle-parts supplier Federal-Mogul Holdings Corp. and nonprofit groups such as the National Bone Marrow Donor Program.

     

    Regulators have been investigating the foreign-exchange business at Wells Fargo, including a big trade involving Restaurant Brands International Inc., the owner of Burger King, Tim Hortons and Popeyes Louisiana Kitchen, according to people familiar with the matter.

     

    The trade resulted in a loss to Restaurant Brands, people familiar with the matter have said, which led to a dispute between the Oakville, Ontario, company and the bank. The dispute centered on how bank employees handled the trade, rather than its pricing. Wells Fargo refunded about $900,000 to Restaurant Brands, people familiar with the refund say.

    In addition to blaming market fluctuations, Wells Fargo traders devised another brilliant excuse: Blame the machines.

    Wells Fargo’s foreign-exchange business also charged unusually high fees for trades with different currency conversions, known as “Bswift” transactions, current and former employees say.

     

    “And if anybody did complain, it was an easy tap dance,” one former employee says. He says employees would say the pricing had been done automatically by the bank’s computer system so “there’s no accountability for the spread."

     

    Wells Fargo sent an internal email Nov. 2 detailing new guidelines for Bswift transactions, according to a copy of the email reviewed by the Journal. The guidelines include specific handling and pricing procedures for those trades.

    According to WSJ’s account, it isn’t clear exactly how regulators became involved – presumably RBI tipped them off, but it’s possible senior executives at the bank, hoping to get out in front of the scandal, decided to come clean. Early this year, a restructuring at the bank moved its foreign-exchange desk from its international division into its capital markets division. Once the new management took over and began reviewing internal controls at the desk, they discovered malfeasance that apparently goes beyond the infamous RBI trade.

    The business was moved in early 2017 from Wells Fargo’s international division into its investment-banking and capital-markets operation. Since then, executives have changed internal systems, added more stringent rules around pricing and required more frequent compliance checks, current and former employees say.

     

    Issues with the Burger King trade were found following those checks and customer complaints, people familiar with the matter say. The continuing internal review of Wells Fargo’s foreign-exchange operation is separate from the review sparked by the sales scandal, some of the people said.

     

    A compliance training session in early November detailed what Wells Fargo called “approved margins” for different volumes of foreign-exchange transactions, according to an internal document reviewed by The Wall Street Journal.

     

    Employees say fee levels remain higher than industry norms, and some compensation practices aren’t due to change until next year.

    Both the Fed and the Comptroller of the Currency are involved in investigating the Burger King trade. The US Attorney from the Northern District of California is also looking into it.

    As WSJ explains, bonuses in Wells’ FX shop were based on a system that essentially allows salespeople to eat what they kill.

    Current and former bank employees say its pricing practices were rooted in a culture and compensation system that looked to maximize revenue. Bonuses were defined as 10% of revenues exceeding revenue targets.

     

    If a banker’s revenue target was $5 million and the person brought in $6 million, he or she would earn a $100,000 bonus, or 10% of the additional $1 million in revenue. Bankers typically received such bonuses twice a year in cash, rather than stock, as part of a signed contract, they added.

     

    It’s rare among foreign-exchange groups in other banks to have so-called defined-bonus plans focused on individual earnings, according to people in the industry.

     

    After Wells Fargo moved the foreign-exchange business into its investment bank earlier this year, managers began telling employees that bonuses would become “discretionary” by the end of 2017. Under this more typical arrangement, management would decide employee bonuses, and bankers wouldn’t know exactly how much they would receive. It would be based on a variety of factors, not just revenue.

     

    Wells Fargo has 18 foreign-exchange sales and trading offices, including in New York, San Francisco, Charlotte, N.C., London and Hong Kong. A few hundred people work in the group world-wide.

    Current and former employees say Wells Fargo’s foreign-exchange customers are largely midsize businesses that don’t trade often or in large volumes and therefore lack “market insight."

    However, RBI isn’t the only Wells client that has complained about gouging. In November 2016, Ecolab Inc., a water, hygiene and energy company based in St. Paul, Minn., complained after the bank took a hefty 1% fee on a $100 million swap deal. Like RBI, Ecolab also received a refund.

    In another example, data-management firm Veritas Technologies LLC had a fee agreement already worked out with Wells. But after making one trade on behalf of Veritas, Wells Fargo bankers told Veritas that the bank’s fee was 0.05 percentage point higher than the agreed rate. Veritas was, understandably, not pleased.

    One of the most damning details in the story – and something sure to draw the ire of regulators – is that one former employee who spoke out about the fee gouging was demoted and eventually pushed out of the bank.

    During a meeting of foreign-exchange managers in the mid-2000s, Cathy Witt said it wasn’t right to celebrate high fees by ringing a bell, people familiar with the situation say. Ms. Witt, an employee in the bank’s Chicago foreign-exchange group, warned that Wells Fargo could become known as a “bucket shop,” a derisive term for a disreputable finance firm, some of the people say.

     

    A few weeks later, Ms. Witt was summoned to a meeting in St. Louis, told that her comments had been offensive and demoted on the spot, according to people familiar with the matter. She also was told to apologize to other managers for her unprofessional behavior, the people say. She later left the bank.

    For such a small shop, the Wells Fargo traders reportedly did quite a bit of celebrating. Management would publicly praise traders for locking in large fees in emails to the entire desk. Traders in San Francisco were reportedly encouraged to ring a brass bell every time they sealed a trade.

    In what was perhaps the most hilarious detail in the story, the FX traders even charged exorbitant fees to other Wells Fargo businesses like Wells Fargo rail – all to help pad their bonuses.

    The operation also charged high fees to other parts of Wells Fargo. Wells Fargo Rail, which leases locomotives and railcars, and the bank’s corporate-trust division are often charged 1% to 1.5% on currency transactions, according to current and former employees.

    Of course, the timing of this revelation couldn’t be worse for Wells: It comes just as new CEO Tim Sloane – who recently appeared before a Congressional hearing, where he was told by Massachusetts Senator Elizabeth Warren that he should resign, just like she told his predecessor – has been making themedia rounds to try and rehabilitate the bank’s image after the cross-selling scandal. And the fact that its breaking only months after the bank was forced to refund customers whom it deceived into buying unnecessary auto insurance isn’t helping.

    However, Wells has one thing going for it: Most of the working public don’t understand what the foreign exchange market – or even that there is a foreign exchange market – much less how it works and how one might go about cheating clients. The unceasing wave of FX scandals hardly did anything to dent the reputation of BNY Mellon, or Barclays, or DB in the eyes of the public.

    But given Wells’ recent track record, retail customers might make an exception.

  • "Because We Can!!"

    Authored by Robert Gore via The Burning Platform blog,

    Sexual predation is the tip of the abuse-of-power iceberg…

    Truths are emerging from the sexual predation scandals. Put a person in a position of power and there’s an appreciable chance he or she (most of the allegations so far have been against men) will sexually impose on someone—male or female, above or below the age of consent—with less power. The scandals shine a light on the prevalence of such predation. There’s no reason to think that future revelations won’t work their way through virtually every corner of American life. Non-consensual sex and, beyond a certain point, unwanted advances are unacceptable and must lead to civil and criminal liability, especially in those situations in which the perpetrator has power over the victim.

    This is as it should be, and even much of the politically driven anguish and celebration is understandable and excusable. The discomfiture of Bill Clinton’s many zero-integrity apologists as they try to reclaim at least a veneer of decency—a few even admitting that perhaps they got it wrong back in the 1990s—would be gratifying if it wasn’t so disgusting. If there were a gram of decency in any of them, they’d issue personal apologies to the women they labeled as sluts, whores, bimbos, and trailer park trash back then. Of course that won’t happen, which invalidates their opportunistic “reappraisals” of the vile ex-President.

    There are two potential problems with the current scandals. You don’t have to be a full-blown conspiracy theorist to question the timing.

    The establishment concocted a story of Russian influence on Trump, his campaign, and members of his administration that has backfired spectacularly.

     

    It’s obvious that there’s nothing to the establishment’s story, and it has boomeranged into two very real stories about Russia, Hillary Clinton, and the Obama administration: Uranium One and Fusion GPS (see “The Rout Is On,” SLL).

     

    If you’re implicated in the crumbling concoction or either of the two new scandals, you’d like to change the subject.

    In America, there’s no better way to get people’s attention than with sex. Appeal to this prurient preoccupation and you’ve got a surefire diversion. Harvey Weinstein answered Establishment prayers: a Hollywood movie mogul, powerful, and among his alleged victims are a slew of comely actresses. He looks like a piggish thug, or a thuggish pig. Talk about a figure Americans love to hate.

    Next up was Kevin Spacey, whose alleged transgressions—perhaps in a bow to sexual diversity—are homosexual in nature. There might be some resentment of Spacey in Washington. His House of Cards portrayal of President Francis Underwood as a bad apple tarnishes the .000002 percent in government who aren’t. There are people who still haven’t forgiven Frank Capra for Mr. Smith Goes to Washington or Francis Ford Coppola for The Godfather, two movies that portrayed politicians in an unsympathetic light.

    If someone was trying to divert attention those are two blockbusters. However, there a much greater danger than that sexual predation will divert the masses’ attention from Russiagate, Uranium One, and Fusion GPS. Eventually Americans will lose interest in the latest accusations, the accusers, the accused, and their alleged depredations. That point may already have been reached. Investigations, lawsuits, and judicial proceedings will grind on for years, far longer than the American attention span.

    Many commentators have correctly pointed out that these scandals are not about sex, they’re about power. The leitmotif of these tawdry tales is: I’m doing what I’m doing to you because I can. Horrifying as it had to been for the victims, they’re the tip of the abuse-of-power iceberg. This must be the beginning of the beginning, we’re nowhere close to the end. The powers that be have had their way with the world for decades, and for many of their victims the price has been far higher than traumatization.

    Consider the Yemeni mother holding her child, who’s dying of starvation. She has no ties to those making war in her country. She knows that rich Saudi Arabia has shut her poor country off from food and medicine, and many are dying from starvation and disease. She knows that the rich United States, a country she had thought of as a good place, with good people, is helping Saudi Arabia destroy Yemen. She knows she would bear any indignity or horror, including death itself, if it would save her child.

    Dead Yemenis join the millions who have died over the past few decades in America’s senseless wars. America’s deaths are always in the thousands and are well and endlessly mourned. Its victims’ deaths are often in the millions, mostly ignored, but when noticed hypocritically justified as sacrifices to some American greater good. Eventually the survivors figure out it for themselves: the dead are “less than,” and they’ve been killed because America can.

    As the cynicism deepens, they realize something else. Wars aren’t just about blood and power, they’re about treasure. America manufactures endless war, weapons, mayhem, and death the same way it manufactures autos and computers, and for the same reason—profit. The rhetoric is a smokescreen: the people who profit don’t want them to end. Is there any evil more monstrous than murdering millions for money?

    It’s no consolation to the people of those lands, but most Americans are victims of the same depraved cabal. They are looked upon in the same way and for the same purpose as a starlet invited to Harvey Weinstein’s hotel room: to be used and abused. The “less than” are robbed, coerced, defrauded, swindled, herded, conscripted, patronized, propagandized, lied to, and opiated. Those who question this state of affairs are mocked, scorned, deplored, harassed, marginalized, ostracized, silenced, and eliminated.

    A river flows into the heart of darkness from this wellspring of evil: the belief that other people are the involuntary means to one’s own ends. It’s the predators’ view of the world, whether that view encompasses victims of their sexual violence, honest and productive people and businesses plundered, countries conquered and subjugated, or any other “less than” they’ve exploited. They will do it because they can…until they can’t, which won’t happen if exposure and retribution are confined to sexual predation.

    Anyone who claims your life, your body, your mind, your work, or your property without your consent is a predator. The predators among us must be brought to justice. “Because we can” must become an inviolate: “No, you cannot.” No one is a “less than.” Only when that becomes the consistent reality will humanity staunch the evil from which all others flow.

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Nov 27

Today’s News 27th November 2017

  • Satoshi Secrets & Why Nearly 4 Million Bitcoins Are "Lost" Forever

    Authored by Jeff John Roberts and Nicolas Rapp via Fortune.com,

    Just as gold bars are lost at sea or $100 bills can burn, bitcoins can disappear from the Internet forever.

    When all 21 million bitcoins are mined by the year 2040, the actual amount available to trade or spend will be significantly lower.

    According to new research from Chainalysis, a digital forensics firm that studies the bitcoin blockchain, 3.79 million bitcoins are already gone for good based on a high estimate – and 2.78 million based on a low one. Those numbers imply 17% to 23% of existing bitcoins, which are today worth around $9,000 each, are lost.

    While others have speculated about the number of lost bitcoins, the Chainalysis findings are significant because they rely on a detailed empirical analysis of the blockchain, where all bitcoin transactions are recorded.

    As the graphic above shows, Chainalysis’s conclusions rely on segmenting the existing bitcoin supply based on age and transaction activity. For some segments, the company used statistical sampling to determine the amount lost.

    The segment “Mined Coins” reflects bitcoins mined in 2017 (which are presumed not to be lost), while “transactional” refers to those that have moved or spent in the last year—very few of which are lost. Likewise, the category of “Strategic Investors,” who have held their bitcoins for 1-2 years represent a very small share of the losses.

    Here’s the data in another format, which shows how “Out of circulation” bitcoins – those mined 2-7 years ago and belonging to long-time investors known as “hodlers” – and those from the early days of bitcoin in 2009 and 2010 account for the vast majority of the lost coins:

    These figures reflect bitcoins that are truly lost, and not hacked or otherwise stolen – in these cases, of course, the bitcoin is not lost since the thief has control of them.

    Note the numbers above are based on the high estimate, and that the low estimate, which is based on only a 30% loss in “hodler” coins, puts the number of lost bitcoins at 2,767,468. Also, both estimates make a critical assumption that coins belonging to bitcoin’s inventor, Satoshi, are gone for good (more on that below).

    In the future, more bitcoins will be lost. But the rate at which they disappear will be much lower than in the past since, now that they’re so valuable, people will be more vigilant about keeping track of them (unlike this poor fellow out who threw away a hard drive with the key to 7,500 bitcoins). Meanwhile, there is a question of whether the Chainalysis findings mean bitcoin is more scarce than people assume—or if the market has already priced the missing coins into the currency’s current value.

    “That is a very complex question. On the one hand, direct calculations about market cap do not take lost coins into consideration. Considering how highly speculative this field is, those market cap calculations may make it into economic models of the market that impact spending activity,” said Kim Grauer, Senior Economist at Chainalysis. “Yet the market has adapted to the actual demand and supply available – just look at exchange behavior. Furthermore, it is well known monetary policy procedure to lower or increase fiat reserves to impact exchange rates. So the answer is yes and no.”

    Lost Bitcoins and the Secret of Satoshi

    Chainalysis, whose clients include the IRS and Europol, has made a name for itself in the bitcoin world because of its abundant data and sophisticated study of blockchain wallets. Law enforcement agencies rely on the company to provide detailed insights into who owns the currency and how it moves around.

    Chainalysis’s overall methodology is confidential, but a spokesperson shared certain details about how the company assesses which bitcoins are lost. An important clue comes when there is a “fork” in the blockchain, such as the one this summer which led to the creation of a bitcoin clone known as Bitcoin Cash. Such events can lead to the owners of wallets that have been inactive for years to conduct a transaction, providing an opportunity for statistical analysis.

    These sort of clues help inform the Chainalysis figure for the “hodler” category – wallets belonging to people who got into bitcoin before it hit the big time, and which represent the biggest source of uncertainty as to whether bitcoins are lost or just being hoarded.

    As for the 2% of “‘transactional” bitcoins that Chainalysis determined to be gone, the company says this is based on scraping the Internet for reports of lost coins. It added that the estimate of such losses, which can arise from a misdirected transaction or the loss of a private key through death or carelessness, is not based on statistical extrapolation and will be refined further in coming years.

    Finally, there’s the question of what became of the bitcoins belonging to Satoshi, the pseudonymous creator of the crypto-currency, who has not been not been heard from since 2011. Chainalysis says wallets associated with Satoshi represent about 1 million bitcoins (the company will provide a more specific figure later this year), and that its model assumes that those coins—which date from a time when it was easy to mine 50 bitcoin with a laptop—are gone forever. This assumption is a big one and, if it proves to be incorrect, the number of circulating bitcoins could suddenly increase significantly and deliver a shock to the market.

    Fortune asked Chainalysis about what was most surprising about the lost bitcoin findings.

    “Firstly, we floated our findings to a few people and they all had different reactions about how surprising the figure was. But what I found most surprising/interesting was how when you unpack what it means to be “lost” things get even more confusing.” Grauer said.

  • Thanksgiving 2017 – David Stockman Explains Why There Is No Peace On Earth

    Authored by David Stockman via Contra Corner blog,

    After the Berlin Wall fell in November 1989 and the death of the Soviet Union was confirmed two years later when Boris Yeltsin courageously stood down the red army tanks in front of Moscow's White House, a dark era in human history came to an end.

    The world had descended into what had been a 77-year global war, incepting with the mobilization of the armies of old Europe in August 1914. If you want to count bodies, 150 million were killed by all the depredations which germinated in the Great War, its foolish aftermath at Versailles, and the march of history into the world war and cold war which followed inexorably thereupon.

    To wit, upwards of 8% of the human race was wiped-out during that span. The toll encompassed the madness of trench warfare during 1914-1918; the murderous regimes of Soviet and Nazi totalitarianism that rose from the ashes of the Great War and Versailles; and then the carnage of WWII and all the lesser (unnecessary) wars and invasions of the Cold War including Korea and Vietnam.

    We have elaborated more fully on this proposition in "The Epochal Consequences Of Woodrow Wilson's War", but the seminal point cannot be gainsaid. The end of the cold war meant world peace was finally at hand, yet 26 years later there is still no peace because Imperial Washington confounds it.

    In fact, the War Party entrenched in the nation's capital is dedicated to economic interests and ideological perversions that guarantee perpetual war; they ensure endless waste on armaments and the inestimable death and human suffering that stems from 21st century high tech warfare and the terrorist blowback it inherently generates among those upon which the War Party inflicts its violent hegemony.

    In short, there was a virulent threat to peace still lurking on the Potomac after the 77-year war ended. The great general and president, Dwight Eisenhower, had called it the “military-industrial complex” in his farewell address, but that memorable phrase had been abbreviated by his speechwriters, who deleted the word “congressional” in a gesture of comity to the legislative branch.

    So restore Ike’s deleted reference to the pork barrels and Sunday afternoon warriors of Capitol Hill and toss in the legions of beltway busybodies that constituted the civilian branches of the cold war armada (CIA, State, AID etc.) and the circle would have been complete. It constituted the most awesome machine of warfare and imperial hegemony since the Roman legions bestrode most of the civilized world.

    In a word, the real threat to peace circa 1991 was that Pax Americana would not go away quietly in the night.

    In fact, during the past 26 years Imperial Washington has lost all memory that peace was ever possible at the end of the cold war. Today it is as feckless, misguided and bloodthirsty as were Berlin, Paris, St. Petersburg, Vienna and London in August 1914.

    Back then a few months after the slaughter had been unleashed, soldiers along the western front broke into spontaneous truces of Christmas celebration, singing and even exchange of gifts. For a brief moment they wondered why they were juxtaposed in lethal combat along the jaws of hell.

    The truthful answer is that there was no good reason. The world had stumbled into war based on false narratives and the institutional imperatives of military mobilization plans, alliances and treaties arrayed into a doomsday machine and petty short-term diplomatic maneuvers and political calculus. Yet it took more than three-quarters of a century for all the consequential impacts and evils to be purged from the life of the planet.

    The peace that was lost last time has not been regained this time for the same reasons. Historians can readily name the culprits from 100 years ago, such as the German general staff's plan for a lightening mobilization and strike on the western front called the Schlieffen Plan or Britain's secret commitments to France to guard the North Sea while the latter covered the Mediterranean.

    Since these casus belli of 1914 were criminally trivial in light of all that metastisized thereafter, it might do well to name the institutions and false narratives that block the return of peace today. The fact is, these impediments are even more contemptible than the forces that crushed the Christmas truces one century ago.

    Imperial Washington – Global Menace

    There is no peace on earth today for reasons mainly rooted in Imperial Washington – not Moscow, Beijing, Tehran, Damascus, Mosul or Raqqah. The former has become a global menace owing to what didn't happen in 1991.

    What should have happened is that Bush the elder should have declared "mission accomplished" and slashed the Pentagon budget from $600 billion to $200 billion; demobilized the military-industrial complex by putting a moratorium on all new weapons development, procurement and export sales; dissolved NATO and dismantled the far-flung network of US military bases; slashed the US standing armed forces from 1.5 million to a few hundred thousand; and organized and led a world disarmement and peace campaign, as did his Republican predecessors during the 1920s.

    Unfortunately, George H.W. Bush was not a man of peace, vision or even mediocre intelligence. He was the malleable tool of the War Party, and it was he who single-handedly blew the peace when he plunged America into a petty arguement between the impetuous dictator of Iraq and the gluttonous Emir of Kuwait that was none of our business.

    By contrast, even though liberal historians have reviled Warren G. Harding as some kind of dumbkopf politician, he well understood that the Great War had been for naught, and that to insure it never happened again the nations of the world needed to rid themselves of their huge navies and standing armies.

    To that end, he achieved the largest global disarmament agreement ever during the Washington Naval conference of 1921, which halted the construction of new battleships for more than a decade.

    And while he was at it, President Harding also pardoned Eugene Debs. So doing, he gave witness to the truth that the intrepid socialist candidate for president and vehement anti-war protestor, who Wilson had thrown in prison for exercising his first amendment right to speak against US entry into a pointless European war, had been right all along.

    In short, Warren G. Harding knew the war was over, and the folly of Wilson's 1917 plunge into Europe's bloodbath should not be repeated at all hazards.

    Not George H.W. Bush. The man should never be forgiven for enabling the likes of Dick Cheney, Paul Wolfowitz, Robert Gates and their neocon pack of jackals to come to power—-even if he has denounced them in his bumbling old age.

    Even more to the point, by opting not for peace but for war and oil in the Persian Gulf in 1991 he opened the gates to an unnecessary confrontation with Islam and nurtured the rise of jihadist terrorism that would not haunt the world today save for forces unleashed by George Bush's petulant quarrel with Saddam Hussein.

    We will momentarily get to the 45-year old error that holds the Persian Gulf is an American Lake and that the answer to high old prices and energy security is the Fifth Fleet. Actually, the answer to high oil prices everywhere and always is high oil prices—–a truth driven home in spades again two years ago when the Brent oil price plunged below $35 per barrel.

    But first it is well to remember that there was no plausible threat anywhere on the planet to the safety and security of the citizens of Springfield MA, Lincoln NE or Spokane WA when the cold war ended.

    The Warsaw Pact had dissolved into more than a dozen woebegone sovereign statelets; the Soviet Union was now unscrambled into 15 independent and far-flung Republics from Belarus to Tajikistan; and the Russian motherland would soon plunge into an economic depression that would leave it with a GDP about the size of the Philadelphia SMSA.

    Likewise, China's GDP was even smaller and more primitive than Russia's. Even as Mr. Deng was discovering the PBOC printing press that would enable it to become a great mercantilist exporter, an incipient threat to national security was never in the cards. After all, it was 4,000 Wal-Marts in America upon which the prosperity of the new red capitalism inextricably depended and upon which the rule of the communist oligarchs in Beijing was ultimately anchored.

    No Islamic Or Jihadi Terrorist Threat Circa 1990

    In 1991 there was no global Islamic threat or jihadi terrorist menace at all. What existed under those headings were sundry fragments and deposits of middle eastern religious, ethnic and tribal history that were of moment in their immediate region, but no threat to America whatsoever.

    The Shiite/Sunni divide had co-existed since 671AD, but its episodic eruptions into battles and wars over the centuries had rarely extended beyond the region, and certainly had no reason to fester into open conflict in 1991.

    Inside the artificial state of Iraq, which had been drawn on a map by  historically ignorant European diplomats in 1916, for instance, the Shiite and Sunni got along tolerably well. That's because the nation was ruled by Saddam Hussein's Baathist brand of secular Arab nationalism.

    The latter championed law and order, state driven economic development and politically apportioned distribution from the spoils of the extensive government controlled oil sector. To be sure, Baathist socialism didn't bring much prosperity to the well-endowed lands of Mesopotamia, but Hussein did have a Christian foreign minister and no sympathy for religious extremism or violent pursuit of sectarian causes.

    As it happened, the bloody Shiite/Sunni strife that plagues Iraq today and functions as a hatchery for angry young jihadi terrorists in their thousands was unleashed only after Hussein had been driven from Kuwait and the CIA had instigated an armed uprising in the Shiite heartland around Basra. That revolt was brutally suppressed by Hussein's republican guards, but it left an undertow of resentment and revenge boiling below the surface.

    Needless to say, the younger Bush and his cabal of neocon warmongers could not leave well enough alone. When they foolishly destroyed Saddam Hussein and his entire regime in the pursuit of nonexistent WMDs and ties with al-Qaeda, they literally opened the gates of hell, leaving Iraq as a lawless failed state where both recent and ancient religious and tribal animosities are given unlimited violent vent.

    Likewise, the Shiite theocracy ensconced in Tehran was an unfortunate albatross on the Persian people, but it was no threat to America's safety and security. The very idea that Tehran is an expansionist power bent on exporting terrorism to the rest of the world is a giant fiction and tissue of lies invented by the Washington War Party and its Bibi Netanyahu branch in order to win political support for their confrontationist policies.

    Indeed, the three decade long demonization of Iran has served one over-arching purpose. Namely, it enabled both branches of the War Party to conjure up a fearsome enemy, thereby justifying aggressive policies that call for a constant state of war and military mobilization.

    When the cold-war officially ended in 1991, the Cheney/neocon cabal feared the kind of drastic demobilization of the US military-industrial complex that was warranted by the suddenly more pacific strategic environment. In response, they developed an anti-Iranian doctrine that was explicitly described as a way of keeping defense spending at high cold war levels.

    And the narrative they developed to this end is one of the more egregious Big Lies ever to come out of the beltway. It puts you in mind of the young boy who killed his parents, and then threw himself on the mercy of the courts on the grounds that he was an orphan!

    To wit, during the 1980s the neocons in the Reagan Administration issued their own fatwa again the Islamic Republic based on its rhetorical hostility to America. Yet that enmity was grounded in Washington’s 25-year support for the tyrannical and illegitimate regime of the Shah, and constituted a founding narrative of the Islamic Republic that was not much different than America's revolutionary castigation of King George.

    That the Iranians had a case is beyond doubt. The open US archives now prove that the CIA overthrew Iran’s democratically elected government in 1953 and put the utterly unsuited and megalomaniacal Mohammad Reza Shah on the peacock throne to rule as a puppet in behalf of US security and oil interests.

    During the subsequent decades the Shah not only massively and baldly plundered the wealth of the Persian nation; with the help of the CIA and US military, he also created a brutal secret police force known as the Savak. The latter made the East German Stasi look civilized by comparison.

    All elements of Iranian society including universities, labor unions, businesses, civic organizations, peasant farmers and many more were subjected to intense surveillance by the Savak agents and paid informants. As one critic described it:

    Over the years, Savak became a law unto itself, having legal authority to arrest, detain, brutally interrogate and torture suspected people indefinitely. Savak operated its own prisons in Tehran, such as Qezel-Qalaeh and Evin facilities and many suspected places throughout the country as well. Many of those activities were carried out without any institutional checks.

    Ironically, among his many grandiose follies, the Shah embarked on a massive civilian nuclear power campaign in the 1970s, which envisioned literally paving the Iranian landscape with dozens of nuclear power plants.

    He would use Iran’s surging oil revenues after 1973 to buy all the equipment required from Western companies – and also fuel cycle support services such as uranium enrichment – in order to provide his kingdom with cheap power for centuries.

    At the time of the Revolution, the first of these plants at Bushehr was nearly complete, but the whole grandiose project was put on hold amidst the turmoil of the new regime and the onset of Saddam Hussein’s war against Iran in September 1980. As a consequence, a $2 billion deposit languished at the French nuclear agency that had originally obtained it from the Shah to fund a ramp-up of its enrichment capacity to supply his planned battery of reactors.

    Indeed, in this very context the new Iranian regime proved quite dramatically that it was not hell bent on obtaining nuclear bombs or any other weapons of mass destruction. In the midst of Iraq's unprovoked invasion of Iran in the early 1980s the Ayatollah Khomeini issued a fatwa against biological and chemical weapons.

    Yet at that very time, Saddam was dropping these horrific weapons on Iranian battle forces – some of them barely armed teenage boys – with the spotting help of CIA tracking satellites and the concurrence of Washington. So from the very beginning, the Iranian posture was wholly contrary to the War Party’s endless blizzard of false charges about its quest for nukes.

    However benighted and medieval its religious views, the theocracy which rules Iran does not consist of demented war mongers. In the heat of battle they were willing to sacrifice their own forces rather than violate their religious scruples to counter Saddam’s WMDs.

    Then in 1983 the new Iranian regime decided to complete the Bushehr power plant and some additional elements of the Shah’s grand plan. But when they attempted to reactivate the French enrichment services contract and buy necessary power plant equipment from the original German suppliers they were stopped cold by Washington. And when the tried to get their $2 billion deposit back, they were curtly denied that, too.

    To make a long story short, the entire subsequent history of off again/on again efforts by the Iranians to purchase dual use equipment and components on the international market, often from black market sources like Pakistan, was in response to Washington’s relentless efforts to block its legitimate rights as a signatory to the Nuclear Nonproliferation Treaty (NPT) to complete some parts of the Shah’s civilian nuclear project.

    Needless to say, it did not take much effort by the neocon “regime change” fanatics which inhabited the national security machinery, especially after the 2000 election, to spin every attempt by Iran to purchase even a lowly pump or pipe fitting as evidence of a secret campaign to get the bomb.

    The exaggerations, lies, distortions and fear-mongering which came out of this neocon campaign are truly disgusting. Yet they incepted way back in the early 1990s when George H.W. Bush actually did reach out to the newly elected government of Hashemi Rafsanjani to bury the hatchet after it had cooperated in obtaining the release of American prisoners being held in Lebanon in 1989.

    The latter was self-evidently a pragmatist who did not want conflict with the United States and the West; and after the devastation of the eight year war with Iraq was wholly focused on economic reconstruction and even free market reforms of Iran's faltering economy.

    It is one of the great tragedies of history that the neocons managed to squelch even George Bush's better instincts with respect to rapprochement with Tehran.

    So the prisoner release opening was short-lived—especially after the top post at the CIA was assumed in 1991 by Robert Gates. He was one of the very worst of the unreconstructed cold war apparatchiks who looked peace in the eye, and elected, instead, to pervert John Quincy Adams' wise maxim by searching the globe for monsters to fabricate.

    In this case the motivation was especially loathsome. Gates had been Bill Casey's right hand man during the latter's rogue tenure at the CIA in the Reagan administration. Among the many untoward projects that Gates shepherded was the Iran-Contra affair that nearly destroyed his career when it blew-up, and for which he blamed the Iranian's for its public disclosure.

    From his post as deputy national security director in 1989 and then as CIA head Gates pulled out all the stops to get even. Almost single-handedly he killed-off the White House goodwill from the prisoner release, and launched the blatant myth that Iran was both sponsoring terrorism and seeking to obtain nuclear weapons.

    Indeed, it was Gates who was the architect of the demonization of Iran that became a staple of War Party propaganda after the 1991. In time that morphed into the utterly false claim that Iran is an aggressive would be hegemon that is a fount of terrorism and is dedicated to the destruction of the state of Israel, among other treacherous purposes.

    That giant lie was almost single-handedly fashioned by the neocons and Bibi Netanyahu's coterie of power-hungry henchman after the mid-1990s. Indeed, the false claim that Iran posses an “existential threat” to Israel is a product of the pure red meat domestic Israeli politics that have kept Bibi in power for much of the last two decades.

    But the truth is Iran has only a tiny fraction of Israel's conventional military capability. And compared to the latter's 200 odd nukes, Iran has never had a nuclear weaponization program after a small scale research program was ended in 2003.

    That is not merely our opinion. It's been the sober assessment of the nation's top 17 intelligence agencies in the official National Intelligence Estimates ever since 2007. And now in conjunction with a further study in conjunction with the nuclear accord that will straight-jacket even Iran's civilian program and eliminate most of its enriched uranium stock piles and spinning capacity, the IAEA has also concluded the Iran had no secret program after 2003.

    On the political and foreign policy front, Iran is no better or worse than any of the other major powers in the Middle East. In many ways it is far less of a threat to regional peace and stability than the military butchers who now run Egypt on $1.5 billion per year of US aid.

    And it is surely no worse than the corpulent tyrants who squander the massive oil resources of Saudi Arabia in pursuit of unspeakable opulence and decadence to the detriment of the 30 million citizens which are not part of the regime, and who one day may well reach the point of revolt.

    When it comes to the support of terrorism, the Saudis have funded more jihadists and terrorists throughout the region than Iran ever even imagined.

    Myth Of The Shiite Crescent

    In this context, the War Party’s bloviation about Iran’s leadership of the so-called Shiite Crescent is another component of Imperial Washington's 26-year long roadblock to peace. Iran wasn't a threat to American security in 1991, and it has never since then organized a hostile coalition of terrorists that require Washington's intervention.

    Start with Iran's long-standing support of Bashir Assad's government in Syria. That alliance that goes back to his father’s era and is rooted in the historic confessional politics of the Islamic world.

    The Assad regime is Alawite, a branch of the Shiite, and despite the regime’s brutality, it has been a bulwark of protection for all of Syria’s minority sects, including Christians, against a majority-Sunni ethnic cleansing. The latter would surely have occurred if the Saudi (and Washington) supported rebels, led by the Nusra Front and ISIS, had succeeded in taking power.

    Likewise, the fact that the Bagdhad government of the broken state of Iraq——that is, the artificial 1916 concoction of two stripped pants European diplomats (Messrs. Sykes and Picot of the British and French foreign offices, respectively)——–is now aligned with Iran is also a result of confessional politics and geo-economic propinquity.

    For all practical purposes, the Kurds of the northeast have declared their independence; and the now "liberated" western Sunni lands of the upper Euphrates have been physically and economically destroyed—- after first being conquered by ISIS with American weapons dropped in place by the hapless $25 billion Iraqi army minted by Washington’s departing proconsuls.

    Accordingly, what is left of Iraq is a population that is overwhelmingly Shiite, and which nurses bitter resentments after two decades of violent conflict with the Sunni forces. Why in the world, therefore, wouldn’t they ally with their Shiite neighbor?

    Likewise, the claim that Iran is now trying to annex Yemen is pure claptrap. The ancient territory of Yemen has been racked by civil war off and on since the early 1970s.  And a major driving force of that conflict has been confessional differences between the Sunni south and the Shiite north.

    In more recent times, Washington’s blatant drone war inside Yemen against alleged terrorists and its domination and financing of Yemen’s governments eventually produced the same old outcome. That is, another failed state and an illegitimate government which fled at the 11th hour, leaving another vast cache of American arms and equipment behind.

    Accordingly, the Houthis forces now in control of substantial parts of the country are not some kind of advanced guard sent in by Tehran. They are indigenous partisans who share a confessional tie with Iran, but which have actually been armed by the US.

    And the real invaders in this destructive civil war are the Saudis, whose vicious bombing campaign against civilian populations controlled by the Houthis are outright war crimes if the word has any meaning at all.

    Finally, there is the fourth element of the purported Iranian axis—–the Hezbollah controlled Shiite communities of southern Lebanon and the Bekaa Valley.  Like everything else in the Middle East, Hezbollah is a product of historical European imperialism, Islamic confessional politics and the frequently misguided and counterproductive security policies of Israel.

    In the first place, Lebanon was not any more a real country than Iraq was when Sykes and Picot laid their straight-edged rulers on a map. The result was a stew of religious and ethnic divisions—-Maronite Catholics, Greek Orthodox, Copts, Druse, Sunnis, Shiites, Alawites, Kurds, Armenians, Jews and countless more—– that made the fashioning of a viable state virtually impossible.

    At length, an alliance of Christians and Sunnis gained control of the country, leaving the 40% Shiite population disenfranchised and economically disadvantaged, as well. But it was the inflow of Palestinian refugees in the 1960s and 1970s that eventually upset the balance of sectarian forces and triggered a civil war that essentially lasted from 1975 until the turn of the century.

    It also triggered a catastrophically wrong-headed Israeli invasion of southern Lebanon in 1982, and a subsequent repressive occupation of mostly Shiite territories for the next eighteen years. The alleged purpose of this invasion was to chase the PLO and Yassir Arafat out of the enclave in southern Lebanon that they had established after being driven out of Jordan in 1970.

    Eventually Israel succeeded in sending Arafat packing to north Africa, but in the process created a militant, Shiite-based resistance movement that did not even exist in 1982, and which in due course became the strongest single force in Lebanon’s fractured domestic political arrangements.

    After Israel withdrew in 2000, the then Christian President of the county made abundantly clear that Hezbollah had become a legitimate and respected force within the Lebanese polity, not merely some subversive agent of Tehran:

    “For us Lebanese, and I can tell you the majority of Lebanese, Hezbollah is a national resistance movement. If it wasn’t for them, we couldn’t have liberated our land. And because of that, we have big esteem for the Hezbollah movement.”[

    So, yes, Hezbollah is an integral component of the so-called Shiite Crescent and its confessional and political alignment with Tehran is entirely plausible. But that arrangement—-however uncomfortable for Israel—–does not represent unprovoked Iranian aggression on Israel’s northern border.

    Instead, it’s actually the blowback from the stubborn refusal of Israeli governments—–especially the rightwing Likud governments of modern times—–to deal constructively with the Palestinian question.

    In lieu of a two-state solution in the territory of Palestine, therefore, Israeli policy has produced a chronic state of war with nearly half the Lebanese population represented by Hezbollah.

    The latter is surely no agency of peaceful governance and has committed its share of atrocities. But the point at hand is that given the last 35 years of history and Israeli policy, Hezbollah would exist as a menacing force on its northern border even if the theocracy didn't exist and the Shah or his heir was still on the Peacock Throne.

    In short, there is no alliance of terrorism in the Shiite Crescent that threatens American security. That proposition is simply one of the Big Lies that was promulgated by the War Party after 1991; and which has been happily embraced by Imperial Washington since then in order to keep the military/industrial/security complex alive, and justify its self-appointed role as policeman of the world.

    Washington's Erroneous View That The Persian Gulf Should Be An American Lake – The Root Of Sunni Jihaddism

    Likewise, the terrorist threat that has arisen from the Sunni side of the Islamic divide is largely of Washington's own making; and it is being nurtured by  endless US meddling in the region's politics and by the bombing and droning campaigns against Washington's self-created enemies.

    At the root of Sunni based terrorism is the long-standing Washington error that America’s security and economic well-being depends upon keeping an armada in the Persian Gulf in order to protect the surrounding oilfields and the flow of tankers through the straits of Hormuz.

    That doctrine has been wrong from the day it was officially enunciated by one of America’s great economic ignoramuses, Henry Kissinger, at the time of the original oil crisis in 1973. The 42 years since then have proven in spades that its doesn’t matter who controls the oilfields, and that the only effective cure for high oil prices is the free market.

    Every tin pot dictatorship from Libya’s Muammar Gaddafi to Hugo Chavez in Venezuela to Saddam Hussein, to the bloody-minded chieftains of Nigeria, to the purportedly medieval Mullahs and fanatical Revolutionary Guards of Iran has produced oil—-and all they could because they desperately needed the revenue.

    For crying out loud, even the barbaric thugs of ISIS milk every possible drop of petroleum from the tiny, wheezing oilfields scattered around their backwater domain. So there is no economic case whatsoever for Imperial Washington’s massive military presence in the middle east, and most especially for its long-time alliance with the despicable regime of Saudi Arabia.

    The truth is, there is no such thing as an OPEC cartel——virtually every member produces all they can and cheats whenever possible. The only thing that resembles production control in the global oil market is the fact that the Saudi princes treat their oil reserves not much differently than Exxon.

    That is, they attempt to maximize the present value of their 270 billion barrels of reserves, but ultimately are no more clairvoyant at calibrating the best oil price to accomplish that than are the economists at Exxon or the IEA.

    The Saudis over-estimated the staying power of China’s temporarily surging call on global supply; and under-estimated how rapidly and extensively the $100 per barrel marker reached in early 2008 would trigger a flow of investment, technology and cheap debt into the US shale patch, the Canadian tar sands, the tired petroleum provinces of Russia, the deep offshore of Brazil etc. And that’s to say nothing of solar, wind and all the other government subsidized alternative source of BTUs.

    Way back when Jimmy Carter was telling us to turn down the thermostats and put on our cardigan sweaters, those of us on the free market side of the so-called energy shortage debate said the best cure for high oil prices is high prices. Now we know.

    So the Fifth Fleet and its overt and covert auxiliaries should never have been there—–going all the way back to the CIA’s coup against Iranian democracy in 1953.

    But having turned Iran into an enemy, Imperial Washington was just getting started when 1990 rolled around. Once again in the name of “oil security” it plunged the American war machine into the politics and religious fissures of the Persian Gulf; and did so on account of a local small potatoes conflict that had no bearing whatsoever on the safety and security of American citizens.

    As US ambassador Glaspie rightly told Saddam Hussein on the eve of his Kuwait invasion, America had no dog in that hunt.

    Kuwait wasn’t even a country; it was a bank account sitting on a swath of oilfields surrounding an ancient trading city that had been abandoned by Ibn Saud in the early 20th century.

    That’s because he didn’t know what oil was or that it was there; and, in any event, it had been made a separate protectorate by the British in 1913 for reasons that are lost in the fog of diplomatic history.

    Likewise, Iraq’s contentious dispute with Kuwait had been over its claim that the Emir of Kuwait was “slant drilling” across his border into Iraq’s Rumaila field. Yet it was a wholly elastic boundary of no significance whatsoever.

    In fact, the dispute over the Rumaila field started in 1960 when an Arab League declaration arbitrarily marked the Iraq–Kuwait border two miles north of the southernmost tip of the Rumaila field.

    And that newly defined boundary, in turn, had come only 44 years after a pair of English and French diplomats had carved up their winnings from the Ottoman Empire’s demise by laying a straight edged ruler on the map. So doing, they thereby confected the artificial country of Iraq from the historically independent and hostile Mesopotamian provinces of the Shiite in the south, the Sunni in the west and the Kurds in the north.

    In short, it did not matter who controlled the southern tip of the Rumaila field—–the brutal dictator of Baghdad or the opulent Emir of Kuwait. Not the price of oil, nor the peace of America nor the security of Europe nor the future of Asia depended upon it.

    The First Gulf War – A Catastrophic Error

    But once again Bush the Elder got persuaded to take the path of war. This time it was by Henry Kissinger’s  economically illiterate protégés at the national security council and his Texas oilman Secretary of State. They falsely claimed that the will-o-wisp of “oil security” was at stake, and that 500,000 American troops needed to be planted in the sands of Arabia.

    That was a catastrophic error, and not only because the presence of crusader boots on the purportedly sacred soil of Arabia offended the CIA-trained Mujahedeen of Afghanistan, who had become unemployed when the Soviet Union collapsed.

    The 1991 CNN glorified war games in the Gulf also further empowered another group of unemployed crusaders. Namely, the neocon national security fanatics who had mislead Ronald Reagan into a massive military build-up to thwart what they claimed to be an ascendant Soviet Union bent on nuclear war winning capabilities and global conquest.

    All things being equal, the sight of Boris Yeltsin, Vodka flask in hand, facing down the Red Army a few months later should have sent them into the permanent repudiation and obscurity they so richly deserved. But Dick Cheney and Paul Wolfowitz managed to extract from Washington’s pyric victory in Kuwait a whole new lease on life for Imperial Washington.

    Right then and there came the second erroneous predicate. To wit, that “regime change” among the assorted tyrannies of the middle east was in America’s national interest.

    More fatally, the neocons now insisted that the Gulf War proved it could be achieved through a sweeping interventionist menu of coalition diplomacy, security assistance, arms shipments, covert action and open military attack and occupation.

    What the neocon doctrine of regime change actually did, of course, was to foster the Frankenstein that utlimately became ISIS. In fact, the only real terrorists in the world which threaten normal civilian life in the West are the rogue offspring of Imperial Washington’s post-1990 machinations in the middle east.

    The CIA trained and armed Mujahedeen mutated into al-Qaeda not because Bin Laden suddenly had a religious epiphany that his Washington benefactors were actually the Great Satan owing to America’s freedom and liberty.

    His murderous crusade was inspired by the Wahhabi fundamentalism loose in Saudi Arabia. This benighted religious fanaticism became agitated to a fever pitch by Imperial Washington’s violent plunge into Persian Gulf political and religious quarrels, the stationing of troops in Saudi Arabia, and the decade long barrage of sanctions, embargoes, no fly zones, covert actions and open hostility against the Sunni regime in Bagdad after 1991.

    Yes, Bin Laden would have amputated Saddam’s secularist head if Washington hadn’t done it first, but that’s just the point. The attempt at regime change in March 2003 was one of the most foolish acts of state in American history.

    The younger Bush’s neocon advisers had no clue about the sectarian animosities and historical grievances that Hussein had bottled-up by parsing the oil loot and wielding the sword under the banner of Baathist nationalism. But Shock and Awe blew the lid and the de-baathification campaign unleashed the furies.

    Indeed, no sooner had George Bush pranced around on the deck of the Abraham Lincoln declaring “mission accomplished” than Abu Musab al-Zarqawi, a CIA recruit to the Afghan war a decade earlier and small-time specialist in hostage-taking and poisons, fled his no count redoubt in Kurdistan to emerge as a flamboyant agitator in the now disposed Sunni heartland.

    The founder of ISIS succeeded in Fallujah and Anbar province just like the long list of other terrorist leaders Washington claims to have exterminated. That is, Zarqawi gained his following and notoriety among the region’s population of deprived, brutalized and humiliated young men by dint of being more brutal than their occupiers.

    Indeed, even as Washington was crowing about the demise of Zarqawi, the remnants of the Baathist regime and the hundreds of thousands of demobilized Republican Guards were coalescing into al-Qaeda in Iraq, and their future leaders were being incubated in a monstrous nearby detention center called Camp Bucca that contained more than 26,000 prisoners.

    How a US prison camp helped create ISIS

    As one former US Army officer, Mitchell Gray, later described it,

    You never see hatred like you saw on the faces of these detainees,” Gray remembers of his 2008 tour. “When I say they hated us, I mean they looked like they would have killed us in a heartbeat if given the chance. I turned to the warrant officer I was with and I said, ‘If they could, they would rip our heads off and drink our blood.’ ”

     

    What Gray didn’t know — but might have expected — was that he was not merely looking at the United States’ former enemies, but its future ones as well. According to intelligence experts and Department of Defense records, the vast majority of the leadership of what is today known as ISIS, including its leader, Abu Bakr al-Baghdadi, did time at Camp Bucca.

     

    And not only did the US feed, clothe and house these jihadists, it also played a vital, if unwitting, role in facilitating their transformation into the most formidable terrorist force in modern history.

     

    Early in Bucca’s existence, the most extreme inmates were congregated in Compound 6. There were not enough Americans guards to safely enter the compound — and, in any event, the guards didn’t speak Arabic. So the detainees were left alone to preach to one another and share deadly vocational advice.

     

    …….Bucca also housed Haji Bakr, a former colonel in Saddam Hussein’s air-defense force. Bakr was no religious zealot. He was just a guy who lost his job when the Coalition Provisional Authority disbanded the Iraqi military and instituted de-Baathification, a policy of banning Saddam’s past supporters from government work.

     

    According to documents recently obtained by German newspaper Der Spiegel, Bakr was the real mastermind behind ISIS’s organizational structure and also mapped out the strategies that fueled its early successes. Bakr, who died in fighting in 2014, was incarcerated at Bucca from 2006-’08, along with a dozen or more of ISIS’s top lieutenants.

    The point is, regime change and nation building can never be accomplished by the lethal violence of 21st century armed forces; and they were an especially preposterous assignment in the context of a land rent with 13 century-old religious fissures and animosities.

    In fact, the wobbly, synthetic state of Iraq was doomed the minute Cheney and his bloody gang decided to liberate it from the brutal, but serviceable and secular tyranny of Saddam’s Baathist regime. That’s because the process of elections and majority rule necessarily imposed by Washington was guaranteed to elect a government beholden to the Shiite majority.

    After decades of mistreatment and Saddam’s brutal suppression of their 1991 uprising, did the latter have revenge on their minds and in their communal DNA?  Did the Kurds have dreams of an independent Kurdistan that had been denied their 30 million strong tribe way back at Versailles and ever since?

    Yes, they did. So the $25 billion spent on training and equipping the putative armed forces of post-liberation Iraq was bound to end up in the hands of sectarian militias, not a national army.

    In fact, when the Shiite commanders fled Sunni-dominated Mosul in June 2014 they transformed the ISIS uprising against the government in Baghdad into a vicious fledgling state in one fell swoop. It wasn’t by beheadings and fiery jihadist sermons that it quickly enslaved dozens of towns and several million people in western Iraq and the Euphrates Valley of Syria.

    ISIS Is Washington's Frankenstein

    Its instruments of terror and occupation were the best weapons that the American taxpayers could buy. That included 2,300 Humvees and tens of thousands of automatic weapons, as well as vast stores of ammunition, trucks, rockets, artillery pieces and even tanks and helicopters.

    And that wasn’t the half of it. The newly proclaimed Islamic State also filled the power vacuum in Syria created by its so-called civil war. But in truth that was another exercise in Washington inspired and financed regime change undertaken in connivance with Qatar and Saudi Arabia.

    The latter were surely not interested in expelling the tyranny next door; they are the living embodiment of it. Instead, the rebellion was about removing Iran’s Alawite/Shiite ally from power in Damascus and laying gas pipelines to Europe across the upper Euphrates Valley.

    In any event, ISIS soon had troves of additional American weapons. Some of them were supplied to Sunni radicals by way of Qatar and Saudi Arabia. More came up the so-called “ratline” from Gaddafi’s former arsenals in Benghazi through Turkey. And still more came through Jordan from the “moderate” opposition trained there by the CIA, which more often than not sold them or defected to the other side.

    So that the Islamic State was Washington’s Frankenstein monster became evident from the moment it rushed upon the scene 18 months ago. But even then the Washington war party could not resist adding fuel to the fire, whooping up another round of Islamophobia among the American public and forcing the Obama White House into a futile bombing campaign for the third time in a quarter century.

    But if bombing really worked, the Islamic State would be sand and gravel by now. Indeed, as shown by the map below, it is really not much more than that anyway.

    The dusty, broken, impoverished towns and villages along the margins of the Euphrates River and in the bombed out precincts of Anbar province do not attract thousands of wannabe jihadists from the failed states of the middle east and the alienated Muslim townships of Europe because the caliphate offers prosperity, salvation or any future at all.

    What recruits them is outrage at the bombs and drones being dropped on Sunni communities by the US air force; and by the cruise missiles launched from the bowels of the Mediterranean which rip apart homes, shops, offices and mosques containing as many innocent civilians as ISIS terrorists.

    The truth is, the Islamic State was destined for a short half-life anyway. It was contained by the Kurds in the north and east and by Turkey with NATO’s second largest army and air force in the northwest. And it was surrounded by the Shiite crescent in the populated, economically viable regions of lower Syria and Iraq.

    So absent Washington’s misbegotten campaign to unseat Assad in Damascus and demonize his confession-based Iranian ally, there would have been nowhere for the murderous fanatics who pitched a makeshift capital in Raqqa to go. They would have run out of money, recruits, momentum and public acquiesce in their horrific rule in due course.

    But with the US Air Force functioning as their recruiting arm and France’s anti-Assad foreign policy helping to foment a final spasm of anarchy in Syria, the gates of hell have been opened wide. What has been puked out is not an organized war on Western civilization as Hollande so hysterically proclaimed in response to the mayhem in Paris.

    It was just blowback carried out by that infinitesimally small salient of mentally deformed young men who can be persuaded to strap on a suicide belt.

    Needless to say, bombing wont stop them; it will just make more of them.

    Ironically, what can stop them is the Assad government and the ground forces of its Hezbollah and the Iranian Revolutionary Guard allies. Its time to let them settle an ancient quarrel that has never been any of America’s business anyway.

    But Imperial Washington is so caught up in its myths, lies and hegemonic stupidity that it can not see the obvious.

    And that is why a quarter century after the cold war ended peace still hasn’t been given a chance and the reason that horrific events like November's barbarism in Paris still keep happening.

    Even the so-called "inspired" terrorists like the pair who attacked San Bernardino emerge episodically because the terror that the American military visits upon Muslim lands is actually what inspires them. After all, whatever the Koran has to say about purging the infidel, it inspired no attacks on American soil until Imperial Washington went into the regime change and military intervention business in the middle east.

    Another False Demon – Putin's Russia

    At the end of the day there now exists a huge irony. The only force that can effectively contain and eventually eliminate the Islamic State is the so-called Shiite Crescent – the alliance of Iran, Baghdad, Assad and Hezbollah.

    But since they are allied with Putin's Russia, still another unnecessary barrier to peace on earth comes into play.

    The fact is, there is no basis whatsoever for Imperial Washington's relentless campaign against Putin, and Washington-NATO's blatant intervention in Ukraine.

    Contrary to the bombast, jingoism, and shrill moralizing flowing from Washington and the mainstream media, America has no interest in the current spat between Putin and the coup that unconstitutionally took over Kiev in February 2014.

    For several centuries the Crimea has been Russian; for even longer, the Ukraine has been a cauldron of ethnic and tribal conflict, rarely an organized, independent state, and always a meandering set of borders looking for a redrawn map.

    Like everything reviewed above, the source of the current calamity-howling about Russia is the Warfare State–that is, the existence of vast machinery of military, diplomatic and economic maneuver that is ever on the prowl for missions and mandates and that can mobilize a massive propaganda campaign on the slightest excitement.

    The post-1991 absurdity of bolstering NATO and extending it into eastern Europe, rather than liquidating it after attaining “mission accomplished”, is just another manifestation of its baleful impact. In truth, the expansion of NATO is one of the underlying causes of America’s needless tension with Russia and Putin’s paranoia about his borders and neighbors. Indeed, what juvenile minds actually determined that America needs a military alliance with Slovenia, Slovakia, Bulgaria and Romania, and now Montenegro!

    So the resounding clatter for action against Russia emanating from Washington and its house-trained media is not even a semi-rational response to the facts at hand; its just another destructive spasm of the nation’s Warfare State and its beltway machinery of diplomatic meddling, economic warfare and military intervention.

    Memo To Obama: It’s Their Red Line

    Not only does Washington’s relentless meddling in the current Russian- Ukrainian food fight have nothing to do with the safety and security of the American people, it also betrays woeful disregard for the elementary facts of that region’s turbulent and often bloody history.

    In fact, the allegedly “occupied” territory of Crimea was actually annexed by Catherine the Great in 1783, thereby satisfying the longstanding quest of the Russian Czars for a warm-water port. Over the ages Sevastopol then emerged as a great naval base at the strategic tip of the Crimean peninsula, where it became home to the mighty Black Sea Fleet of the Czars and then the commissars.

    For the next 171 years Crimea was an integral part of Russia—a span that exceeds the 166 years that have elapsed since California was annexed by a similar thrust of “Manifest Destiny” on this continent, thereby providing, incidentally, the United States Navy with its own warm-water port in San Diego.

    While no foreign forces subsequently invaded the California coasts, it was most definitely not Ukrainian and Polish rifles, artillery and blood which famously annihilated The Charge Of The Light Brigade at the Crimean city of Balaclava in 1854; they were Russians defending the homeland from Turks, Europeans and Brits.

    And the portrait of the Russian “hero” hanging in Putin’s office is that of Czar Nicholas I—whose brutal 30-year reign brought the Russian Empire to its historical zenith, and who was revered in Russian hagiography as the defender of Crimea, even as he lost the 1850s war to the Ottomans and Europeans.

    At the end of the day, it’s their Red Line. When the enfeebled Franklin Roosevelt made port in the Crimean city of Yalta in February 1945 he did at least know that he was in Soviet Russia.

    Maneuvering to cement his control of the Kremlin in the intrigue-ridden struggle for succession after Stalin’s death a few years later, Nikita Khrushchev allegedly spent 15 minutes reviewing his “gift” of Crimea to his subalterns in Kiev in honor of the decision by their ancestors 300 years earlier to accept the inevitable and become a vassal of Russia.

    Self-evidently, during the long decades of the Cold War, the West did nothing to liberate the “captive nation” of the Ukraine—with or without the Crimean appendage bestowed upon it in 1954. Nor did it draw any red lines in the mid-1990’s when a financially desperate Ukraine rented back Sevastopol and the strategic redoubts of the Crimea to an equally pauperized Russia.

    In short, in the era before we got our Pacific port in 1848 and in the 166-year interval since then, our national security has depended not one wit on the status of the Russian-speaking Crimea.

    That the local population has now chosen fealty to the Grand Thief in Moscow over the ruffians and rabble who have seized Kiev is their business, not ours.

    The real threat to peace is not Putin, but the screeching sanctimony and mindless meddling of Susan Rice and Samantha Power. Obama should have sent them back to geography class long  ago——-and before they could draw anymore new Red Lines.

    The one in the Ukraine has been morphing for centuries among the quarreling tribes, peoples, potentates, Patriarchs and pretenders of a small region that is none of our damn business.

    The current Ukrainian policy farce emanating from Washington is not only a reminder that the military-industrial-beltway complex is still alive and well, but also demonstrates why the forces of crony capitalism and money politics which sustain it are so lamentable. The fact is, the modern Warfare State has been the incubator of American imperialism since the Cold War, and is now proving itself utterly invulnerable to fiscal containment, even in the face of a $19 trillion national debt.

    So 101 years after the Christmas truces along the Western Front there is still no peace on earth. And the long suffering American taxpayers, who foot the massive bills generated by the War Party's demented and destructive policies, have no clue that Imperial Washington is the principal reason.

  • Chinese Liquidity Dries Up: Stocks Hit 3-Month Lows, Tumble Most Since June 2016

    It appears The National Team is taking a well-earned break as Chinese stocks extend their losses from late last week in the biggest 3-day drop since June 2016.

     

    Breaking below a key technical support level…

    Chinese shares were already on a shaky footing after last week when investor confidence was sapped by fresh government steps to reduce financial risks, and a rout in the bond market; but three straight days down with no aggressive 'management' buying is unusual…

     

    With the Shanghai Composite back to its lowest since August (when China's National Team – aka state-backed investor China Securities Finance Corp – announced it had boosted its stake in the entire brokerage sector)…

     

    At the same time, short-term liquidity markets are showing serious signs of strain as 1-month HKD HIBOR spikes to its highest since Dec 2008…

     

    And South Korean stocks plunged most in 3 months…as tech shares slumped following an analyst’s report suggesting the memory chip “super cycle” would soon fade, led lower by Samsung Electronics.

     

    Something has changed!

  • Aussie Government Unleashes Counter-Terror Unit To Halt Youth Crime Storm

    The Northern Territory (abbreviated as NT) is a federal Australian territory covering 520,902 square miles with a total population size of 245,000 (8th largest in Australia).

    A brand new report from the NT Police Commissioner indicates an elite unit of the Australian Federal Police called Territory Response Group (TRG) will be using military grade weapons to patrol Alice Springs and Darwin at night.

    Commissioner Reece Kershaw confirms TRG’s deployment to the area and said, it’s in response to concerned communities as the youth crime wave spirals out of control.

    Timing of the deployment is for the holiday season, as many local officials believe crime will surge.

    Police estimate more than 50 percent of property break-ins in NT are from youths as young as 10 to 12-years old. TRG will be using military grade equipment and weapons to monitor people  kids “acting suspiciously”.

    “We’ve had information around Alice Springs of kids jumping onto roofs of hotels and stealing people’s wallets and all sorts of things. TRG will be there to act as surveillance, and what we call the night-time assessment team”, Mr Kershaw said.

    According to ABC Australia,

    The announcement came a week to the day since a royal commission delivered its report on youth detention and child protection systems in the Northern Territory. The report published damning findings about police over-arresting and over-charging children and youth.

     

    A recommendation to raise the age of criminal responsibility from 10 to 12 years of age has so far been accepted by the NT Government “in principle”. Legal groups have called for an immediate moratorium on child arrests, but so far the Government has not provided a timeframe on when the recommendation would come into effect.

    Earlier this year, A Current Affair, an Australian TV media outlet, launched an investigative report called ‘Aboriginal Youth Crime Storm In NT’.

    The mind blowing report highlights the out of control crime by youths breaking into commercial and residential properties.

    TRG will be providing protection and surveillance to community members in Darwin, the capital of NT, and Alice Springs, a community in the most southern point of the territory through the holiday season.

    The Australian Bureau of Statistics says the “youth offender rate, as measured per 100,000 persons aged 10–17 years, was highest in the Northern Territory”.. As noted on the chart below, theft is the most popular by youth offenders.

    Mr Kershaw did not provide concrete evidence of what started the youth crime wave, but offered to give his opinion on broken families and domestic violence.

    We’d rather prevent crime before it occurs, and some of these kids are out on the streets because of things like domestic violence.

     

    We know that because of studies of repeat young offenders and some of their history. We’re going to be working with Territory Families and other agencies and NGOs to answer how do we provide that safe place for these kids to go to, and keep them on the right path.

     

    At the moment, we’re bringing these children and youth before the courts, and nothing has come to me to say we’re breaking the law — we’re here to uphold and maintain social order.

    And lastly according to ABC Australia, TRG officers would be approaching children as young as 10 while camouflaged and carrying assault weapons, Mr Kershaw said it was up the response group to determine how they conducted their operation.

  • Russiagate Explained

    Authored by Caitlin Johnstone via Medium.com,

    Michael Flynn is in the news again.

    Russiagaters are gushing with excitement at the revelation that Flynn’s lawyers are no longer sharing information with the president’s legal team now that Robert Mueller’s investigation is looking more closely at the former National Security Advisor’s involvement in the production of a film about an exiled cleric from Turkey. The story goes that this separation means that Flynn has struck a deal with Mueller, which Mueller wouldn’t permit him to do if he didn’t have damning information on Trump.

    Of course this excitement is dependent on the false belief that Mueller’s job is to get the president impeached, and that he would only cut deals toward that ultimate end. It is also dependent on the false belief that there is any evidence to be found that Trump illegally colluded with the Russian government to steal the 2016 election. And, like the rest of the Russiagate enthusiasm around Flynn, it is also somewhat dependent on compartmentalizing away from the fact the Turkey and Russia are two completely different countries.

    This is all par for course in the interminable dance of soaring excitement followed by thinly veiled disappointment that Russiagaters have been engaged in for over a year. I’ve been receiving some complaints that I don’t recap enough on the specific details of why I reject the establishment Russia narrative so aggressively, so if you’re just tuning in, what follows is a quick synopsis of how this weird thing has been going so far.

    At the beginning of 2015 Hillary Clinton was already scaring people with her intensely hawkish positions on Russia, long before she went all-in on her horrifying support for a no-fly zone in a region where Russian military planes were conducting operations. Coincidentally this same nation Clinton wanted to fight happens to be the nation everyone in her political party is supporting new cold war escalations with today.

    When WikiLeaks began releasing Democratic party emails, those ever-trustworthy truth angels collectively known as the US intelligence community began asserting that the leaks were provided by Russian hackers, a claim WikiLeaks denies. Clinton, still widely expected to win the presidency, used that opportunity to call for “military responses” to cyber intrusions, saying as president she would “make it clear that the United States will treat cyber attacks just like any other attack.”

    In a debate with Trump in October of 2016, Clinton asserted that “17 intelligence agencies” had all concluded that Russia was behind the WikiLeaks releases, which this year we learned was actually four agencies, which was actually three agencies plus Director of National Intelligence James Clapper, which was actually two dozen agents from the CIA, FBI and NSA that Clapper hand-picked himself.

    James Clapper is a known Russophobic racist who has said that Russians “are almost genetically driven to co-opt, penetrate, gain favor, whatever,” and that “It is in their genes to be opposed, diametrically opposed to the United States and to Western democracies.”

    Clinton has continued to repeat the “17 intelligence agencies” lie long after it was conclusively debunked, and Democratic party loyalists continue to repeat it to this day. They do this to manufacture the illusion that this is something agreed upon by the entire US intelligence community and not two dozen analysts picked by a man with a seething eugenicist hatred of Russians.

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    Russia, incidentally, functions with regard to the United States as the right arm of China, the chief rival of the US power establishment Clinton has spent her career immersed in.

    In January Clapper’s ODNI released its much anticipated intelligence report on the Russian hacking allegations to the public, which spent much of its space bizarrely talking about the fact that RT America covers third party presidential candidates and Occupy Wall Street. It ties Guccifer 2.0 to the WikiLeaks releases on very shaky grounds, despite an abundance of evidence that “Guccifer 2.0” is in fact an US establishment psyop and not a hacker at all.

    To this day we’ve seen no hard evidence of Russian hacking the Democratic party emails despite assurances from NSA veterans that if such evidence exists it can surely be found on NSA records and safely shared with the public without exposing any sources or compromising any methods that aren’t public knowledge already. And yet the anti-Russia sentiment that assertion sparked has been used to manufacture support for sanctions, troops along Russia’s border, NATO expansionism and proxy conflicts. This is simply unacceptable in a post-Iraq invasion world. When it comes to assertions which lead to war, including cold war, the US intelligence community must be considered guilty until proven innocent. They have lost the trust of every sensible person forever.

    The many, many gaping plot holes in the Russian hacking narrative are likely why as 2017 has worn on, establishment loyalists have been opting to focus more on allegations that Russia used a pervasive propaganda campaign to get Trump elected.

    This includes RT America, which has the temerity to air the anti-establishment opinions of Americans whom mainstream media outlets refuse to platform, Pikachu-gate, and a narrative about $100,000 in Facebook ads somehow influencing a $6.8 billion election despite the fact that the ads in question rarely mentioned the election and most of them not being seen until after it was over.

    Most disturbingly, the “Russian propaganda” angle has led to a large percentage of the US population supporting and promulgating the narrative that Americans need to be protected from ideas or information, which has led to enormous increases in corporate censorship across all major social media platforms. Which of course works out nicely for the unelected power establishment which has a vested interest in manipulating the ideas and information that Americans consume.

    So that’s the narrative about Russia’s half of Russiagate. The story about Trump’s half is even more absurd.

    The notion that Democrats may be able to get Trump impeached for colluding with Russia really took hold in January with the release of the now-infamous Christopher Steele dossier, which alleges that Russians have been blackmailing Trump into compliance with their agendas using a video they took years prior of Trump paying a bunch of prostitutes to urinate on a bed the Obamas once slept in. Apart from the obvious fact that nothing about this is even remotely believable, the dossier itself is riddled with significant errors and mostly unverified, and Steele himself has been distancing himself from parts of it. Some of the more high-octane Russiagaters have claimed that since some small parts of the Dossier have been confirmed to contain accurate basic information it must therefore all be true, which is the same as claiming that since Alex Jones was right about Iraq WMDs he’s definitely right about everything else he says as well.

    Oh, and the position on Ukraine that the dossier alleges Trump was blackmailed into espousing? It’s virtually identical to Obama’s, and arguably more anti-Russia.

    You’ll also hear a lot of talk about how Trump has “financial ties to Russia”, meaning he is necessarily therefore financially beholden to the Kremlin.

    This story of course requires that you ignore the many, many other foreign countries with which Trump has financial ties in order to view this as significant. Why would Trump exclude Russia from his map of business deals when the arm-waving hysteria about that country didn’t start until last year? In order to make Russian business ties look significant amid a sea of other foreign business ties you need to make the case that Russia is uniquely nefarious among nations, and few Americans saw it that way until the anti-Russia propaganda campaign began last year.

    There’s talk about how some campaign officials met with Russians, which is only suspicious if you ignore all the other foreign nationals they met with and doublethink your way into believing that Russia has always been viewed as uniquely malicious among nations. Manafort and Gates were indicted for stuff that had nothing to do with Trump or Russia, and back in August the Washington Post ran a story explicitly stating that Papadopoulos was a very low-level aide whose attempts to arrange meetings between campaign officials and Russians were consistently rejected by the Trump campaign.

    Taken individually, parts of Russiagate look like they could maybe possibly somehow lead somewhere plausible. Taken together, it’s obvious that the American people are being manipulated toward an anti-detente agenda by the Democrats who just want Trump impeached and the US power establishment which wants to secure geopolitical power by aggressively undermining its potential rivals.

    The term Gish gallop refers to a fallacious debate tactic in which one barrages one’s opposition with a deluge of individually weak arguments which take far too long to debunk individually in a way that sustains the audience’s interest. This is all Russiagate amounts to. When Russiagaters tell you that there’s “too much smoke for there not to be fire”, they are unwittingly telling you “I’ve been won over by a Gish gallop fallacy.”

    Every single aspect of their argument can be easily debunked without exception, but since there’s so much of it and since pundits are assuring them of its reality so confidently, they believe.

    https://platform.twitter.com/widgets.js

    Every few weeks there’s some major new “bombshell” revelation which Russiagaters get all excited about, only to have people read the actual information in the “bombshell” and find out it’s not actually anything incriminating or particularly remarkable. Take all those “bombshells” together, though, and you create the illusion of something real. That’s all this nonsense is.

     

    *  *  *

    Hey you, thanks for reading! My work is entirely reader-funded so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following me on Twitter, and maybe throwing some money into my hat on Patreon.

  • Saudi Coalition Crumbles In Yemen: Sudanese Mercenaries On Front Lines, Foreign Officers, Proxies In Revolt

    Most Americans might be forgiven for having no clue what the war in Yemen actually looks like, especially as Western media has spent at least the first two years of the conflict completely ignoring the mass atrocities taking place while white-washing the Saudi coalition's crimes. Unlike wars in Iraq, Libya, and Syria, which received near daily coverage as they were at their most intense, and in which many Americans could at least visualize the battlefield and the actors involved through endless photographs and video from on the ground, Yemen's war has largely been a faceless and nameless conflict as far as major media is concerned.

    Aside from mainstream media endlessly demonstrating its collective ignorance of Middle East dynamics, it is also no secret that the oil and gas monarchies allied to the West are rarely subject to media scrutiny or criticism, something lately demonstrated on an obscene and frighteningly absurd level with Thomas Friedman's fawning and hagiographic interview with Saudi crown prince MBS published in the New York Times.


    Saudi Arabia's hired help in Yemen: Sudanese fighters headed to the front lines. Image souce: al-Arabiya

    But any level of meticulous review of how the Saudi coalition (which heavily involves US assistance) is executing the war in Yemen would reveal a military and strategic disaster in the making. As Middle East Eye editor-in-chief David Hearst puts it, "All in all, the first military venture to be launched by the 32-year-old Saudi prince as defense minister is a tactical and strategic shambles."  

    And if current battlefield trends continue, the likely outcome will be a protracted and humiliating Saudi coalition withdrawal with the spoils divided among Houthi and Saudi allied warlords, as well as others vying for power in Yemen's tenuous political future. But what unsurprisingly unites most Yemenis at this point is shared hatred for the Saudi coalition bombs which rain down on civilian centers below. For this reason, Hearst concludes further of MBS' war: "The prince, praised in Western circles as a young reformer who will spearhead the push back against Iran, has succeeded in uniting Yemenis against him, a rare feat in a polarized world. He has indeed shot himself, repeatedly, in the foot."

    So how has this come about, and how is the war going from a military and strategic perspective?

    First, to quickly review, Saudi airstrikes on already impoverished Yemen, which have killed and maimed tens of thousands of civilians (thousands among those are children according to the UN) and displaced hundreds of thousands, have been enabled by both US intelligence and military hardware. Cholera has recently exploded amidst the appalling war-time conditions, and civilian infrastructure such as hospitals and schools have been bombed by the Saudis. After Shia Houthi rebels overran Yemen’s north in 2014, embattled President Abd-Rabbu Mansour Hadi vowed to “extract Yemen from the claws of Iran” something which he's repeatedly affirmed, having been given international backing from allies in the West, and a major bombing campaign began on March 2015 under the name "Operation Decisive Storm" (in a cheap mirroring of prior US wars in Iraq, the first of which was "Desert Storm").

    Saudi Arabia and its backers fear what they perceive as growing Iranian influence in the region, something grossly exaggerated, and seek to defend at all costs Yemeni forces loyal to President Hadi. The coalition includes Bahrain, Kuwait, UAE, Egypt, Sudan, and the US and UK, and the Saudi initiated war has also lately received behind the scenes political support from Israel, something recently confirmed by Israeli officials. Concerning the supposed Iran threat in Yemen, an emergency session of the Arab League recently doubled down on its shared commitment to wage war against Iranian interests after it blamed Tehran for a November 4 ballistic missile attack from Shia Houthi rebels against the Saudi capital, which Iran denies playing a role in.

    But the Saudi coalition is now in shambles according to a new Middle East Eye investigation. The report highlights some surprising facts long ignored in mainstream media and which give insight into how the Saudi military campaign is likely to end in total failure as "more than two years into a disastrous war, the coalition of ground forces assembled by the Saudis is showing signs of crumbling."


    The multi-national Saudi coalition is "showing signs of crumbling" while increasingly relying on mercenaries fighting on the ground in Yemen.

    * * * * *

    Below are 5 key takeaways from the full report.

    1) Saudi coalition ground forces have a huge contingent of foreign fighters, namely Sudanese troops with UAE officers, suffering the brunt of the battle on the front lines.

    Sudanese forces, which constitute the bulk of the 10,000 foreign fighters in the Saudi-led coalition, are suffering high casualty rates. A senior source close to the presidency in Khartoum told Middle East Eye that over 500 of their troops had now been killed in Yemen.

     

    Only two months ago, the commander of the Sudanese Army's rapid support force, Lieutenant General Mohammed Hamdan Hamidati, quoted a figure of 412 troops killed, including 14 officers to  the Sudanese newspaper Al Akhbar. "There is huge pressure to withdraw from this on-going fight," the Sudanese source told MEE. A force of up to 8,000 Sudanese troops are partly led by Emirati officers. They are deployed in southern Yemen as well as to the south and west of Taiz in al Makha.

    2) Sudan's President Omar al-Bashir has been dubbed "president of the mercenaries" for accepting over $2.2 billion from Saudi Arabia and Qatar in order to provide canon fodder for the Saudi ground war in Yemen in the form of thousands of young Sudanese troops, but he's threatening revolt. To escape his untenable position, he is reportedly seeking help from Putin.

    At home, Sudan's President Omar al-Bashir is also having second thoughts. He remembers the lifeline he got when Riyadh deposited $1bn in Sudan's Central Bank two years ago, followed by Qatar's $1.22bn. But he hardly enjoys being known as "president of the mercenaries," and he has other relationships to consider.

     

    On Thursday, Bashir became the latest of a procession of Arab leaders to beat a path to Vladimir Putin's door. He told the Russian president he needed protection from the US, was against confrontation with Iran, and supported the policy of keeping Syrian President Bashar al-Assad in power. This follows an incident at home, which was variously described as espionage and a coup attempt. Taha Osman Ahmed al-Hussein was dismissed as the director of the Office of the Sudanese President after he was discovered carrying a Saudi passport and a residency permit for the UAE. He was caught maintaining secret contact with both.

    3) Saudi-backed Yemeni fighters are increasingly mutinying and fear local mass push back from Yemen's civilian population due to the unpopular bombing campaign.

    Mutiny is also stirring in the ranks of Yemenis who two and a half years ago cheered the Saudi pushback against the Houthis who were trying to take over the entire country.

     

    The Saudi relationship with Islah, the largest group of Yemeni fighters in the ground force employed by the coalition, has at best been ambivalent. The Crown Prince Mohammed bin Salman's closest partner in Yemen, Mohammed bin Zayed, Crown Prince of Abu Dhabi, is openly hostile to the Muslim Brotherhood-affiliated Yemeni party… They [Islahi leadership] are feeling the political price they are paying for supporting a campaign that turned in Yemeni eyes from liberation to occupation… Enough is enough. The regional Islahi leadership are now talking of starting direct negotiations with the Houthis, a senior Islah source told MEE.

    4) Saudi proxy fighters are at war with each other: an Emirati-backed militia fighting under the Saudi coalition is assassinating other members of the Saudi coalition in what's increasingly an internal coalition civil war. 

    They are also paying a physical price. A number of Islahi sheikhs and scholars as well as Salafis who rejected Emirati leadership have been killed or targeted by assassination attempts. The list is growing: there have been assassinations of Khaled Ali al-Armani, a leader in the Islah Party, on 7 December 2016; Sheikh Abdullah Bin Amir Bin Ali Bin Abdaat al-Kathri, on 23 November 2017 in Hadhramaut; Abdelmajeed Batees (related to Saleh Batees) a leader in the Islah Party on 5 January 2017 in Hadhramaut; Mohammed Bin Lashgam, Deputy Director of Civil Status, on 17 January 2017; Khaled Ali al-Armani, a leader in the Islah Party, on 7 December 2016…

     

    "The Emiratis do not conceal their hostility to Islah. Islahi sheikhs and scholars are being assassinated, and this is being co-ordinated by the pro-Emirati militia. In addition, the UAE is clearly enforcing the blockade of Taiz, and withholding support for our fighters in the city," the source said.

    5) Oman is entering the fray, which will further fragment the Saudi coalition as rivalries for territorial control develop.

    As if the balance of competing outside forces  in Yemen is not complicated enough, enter Oman. Oman, too, regards southern Yemen as its backyard. It is particularly worried about the takeover of a series of strategic ports and islands off Yemen by the Emiratis. A Qatari diplomatic source described this as the Emiratis' "seaborn empire," but the Omanis are upset by this too.

     

    The Omanis are understood to be quietly contacting local Yemeni tribal leaders in south Yemen, some of them separatist forces, to organize a more "orchestrated response" to the militias paid for and controlled by Abu Dhabi.

    Like the proxy war in Syria, it appears that Gulf/US plans have backfired, and we are perhaps in for a long Saudi coalition death spiral fueled by delusion and denial. Sadly, it is primarily Yemeni civilians and common people in the region that will continue to bear the brunt of suffering wrought by such evil and delusional stupidity.

  • The Blob? Inside The Murky Mirepresentations Of Alibaba

    Via Deep Throat IPO blog,

    As many of you know, I've been off the grid in rural India for the last few weeks.  As I've also mentioned, I love my trips to India….I get a chance to regroup, reset, meet wonderful people and think about things I rarely take the time to think about.  It's all about perspective.

    Anyway, while I was traveling, I had a chance to peruse the Alibaba September Quarter figures, Press Release, 6K, Investor Presentation and of course, took some time to listen to the always entertaining Investor Call.  Shortly thereafter, Alibaba had reported their amazing "Singles Day" sales figure of  $25.3 Billion of fake GMV.

    To put this figure in perspective,  this year, "Singles Day" GMV came in at just a few billion more than the annual revenue of Sears/K-Mart (140,000 employees and 1,500 locations world-wide)….. again, I'll repeat that….. Alibaba sold, shipped and delivered the annual, global, sales volume of Sears/K-Mart in just one day!  ….800 Million orders to deliver!  Incredible!  Bravo!…..all those guys on the tuk-tuks, scooters and bicycles must be exhausted…

    The Alibaba business model has triumphed once again.  It's now obvious that UPS, FedEx, DHL, et al, have it all wrong.  Why in the world would anyone invest in all of that expensive GPS, scanning, package tracking automation and logistics hardware when you can just dump your packages on the sidewalk and let homeless people figure out how to get them where they are supposed to go?  Again, the wizardry of Alibaba's ecosystem  has rewritten the global-logistics playbook.  Absolute genius…

    The Investor Call

    The Investor Call, with all of its suspense, of course, reminded me of one of the greatest motion picture epics of all time.  Many Cinephiles consider this flick to be the late, great, Steve McQueen's quintessential work. That's right, I am of course referring to that trans-generational, 1958 classic, "The Blob"

    From the trailer:…"It's kinda like a mass that keeps getting bigger and bigger…."

    Like the Blob, Alibaba's financial misrepresentations, as absurd as they are, have grown to the point where its oozing tentacles of slime have crept into every corner the world's financial system.

    I won't bother to dissect the numbers any more than I have in the past, but suffice it to say that the same accounting shenanigans I've discussed herein, every quarter since the IPO in September of 2014 are still alive and well.  (See my last 20F analysis for a little more detail: "Finding Inner Peace in Dharamsala….and thoughts on the Alibaba 20F….")

    Everything is steady as she goes…..Gigantic, unbelievable "asset-lite" growth, huge fake efficiencies and synergies abound.  Asset write-ups and inflated carrying values of "Questionable Assets" scattered across the books of more than six hundred (600) un-auditable, consolidated entities are omnipresent.  Alibaba Pictures and Alibaba Health are carried on the books at roughly $3 Billion more than their current, publicly traded market caps would support.  A Billion dollars of loans to insiders (See: Wasu Holdings, Simon Xie & Shi Yuzhu) are outstanding with a good chance that they will be looking for even more Alibaba shareholder money soon.

    In the call, management reinforced their philosophy that they never manage a business to a profit/margin or apparently any sort of target/metric so they, of course, never feel compelled to offer any detailed explanation or meaningful guidance on the numbers, product mix or how they make their money……. except that everything will most likely be really good forever.  It's all about delivering nebulously defined "value".  The call was, of course, capped off with the usual, odd, irrelevant, softball questions posed by the religiously devoted cadre of analysts.  Note that the analysts all refer to the business as "our segments" or "our strategy" or "how are we going to expand…."….as though they are part of the Alibaba management team.  Call transcript posted below courtesy of Seeking Alpha.  Using our patented Dick Fuld Banker-Speak Translator (BST), I'll just take a minute to analyze the first analyst's question.  I'm not necessarily picking on Eddie Leung here, he seems like a really nice guy, but he happened to ask the first question. 

    No need to go deeper into the Q&A unless you are a glutton for punishment, It just gets worse from here:

    Eddie Leung – Bank of America Merrill Lynch

     

    Good evening. Thank you for taking my questions. I have two questions. One is on Cainiao. Could you share your thought on the long-term positioning of Cainiao? Again, as the professional logistic service providers in China and globally, how to differentiate and perhaps cooperate in logistics?

     

    And then secondly, on New Retail, have we seen any change in the way that we cooperate with some of our brands and merchants across our multiple channels after we developed our offline channel recently? Thank you.

    Translation: "First, how the hell are you going to deliver $25 Billion of merchandise using push carts, bicycles and homeless people?  When you dump the packages on the sidewalk, what percentage of the merchandise is stolen?  Second, this is the first full quarter you've consolidated InTime as your "new retail"… the InTime acquisition?…. you know, where you just paid $3 Billion for a bunch of broken down department stores and vacant shopping malls?…. so you can dump fake knock-off merchandise and overstock junk in these stores?….that way photographers from the New York Times won't snap pictures of homeless people picking through the stuff scattered all over the sidewalks?"

    DT Note:  The correct response to this question should have been:  "Regarding Cainiao, I'll refer you to the detailed schedule XX of the 6K (which unfortunately doesn't exist) describing, by region/zone the packages/deliveries, product mix and associated costs by product category.  As for Intime, I'll refer you to the segment P&L's & Balance Sheets in Appendicix XX of the 6K (also doesn't exist) which describe, in detail the breakdown between On-Line and Off-Line GMV, Revenue and cost of operations, showing precisely what we're selling, where we're selling it and how profitable it is compared to our detailed projections. (which also don't exist)" 

    This is what we got:

    Response: CEO Daniel Yong Zhang – Alibaba Group Holding Ltd.

     

    "Eddie, this is Daniel. I'd like to answer your questions. For the first one, Cainiao. Actually, Cainiao is positioned as a smart logistic platform. Why smart is because this should be a data-driven logistics platform. We truly believe that the data is the most important asset which can generate value for the partners in the Cainiao ecosystem. And so what we do is that we work closely with our partners in not only warehousing, but also delivery network to enable them to optimize their operation. So we will continue this strategy and which is the partnership strategy and continue to work closely with our partners in China and in the world.

     

    And the key thing is that the data-driven logistic network, actually we are – Cainiao is not going to be a logistic company and we are not interested into building another logistics company. Instead, we will work with a lot of logistic companies, delivery companies to build a network across the world.

     

    And for your second question, New Retail, I would say actually, our New Retail strategy is very clear and we will continue to execute our New Retail strategy and to partner with the offline retailers in key categories such as in fashion categories, we work with Intime. In consumer electronics, we work with Sony. In food and FMCG categories, we work with Bailian and Sanjiang. And recently, we invest another regional retailer, which is (29:13) and we will work closely with them to empower them with our prospective (29:19) technology.

     

    Second is about – is a valid New Retail form or format to enable them to operate efficiently. So I think this is our New Retail strategy, but we're still in early stage. And our goal is to help the whole New Retail (29:40) world to be upgraded into a digital operation. So actually we are on our way. Thank you."

    Translation: "I have no F-ing idea what I'm talking about and I can't give you any detailed information because it doesn't exist, all of these numbers are made up, so I'll just use words like 'partner', 'digital', 'data' and hope that you think I'm brilliant.  We don't need to build a logistics company since our homeless people on bicycles are doing just fine. Our retail strategy is very clear, you should already know what it is, I think, maybe not, but anyway, it's all about data…..data, data, data.  We have lots of smart, logistics data, and on-line, off-line data logistics partners and we are global across the world because of  our data.  We are going to ship things to all sorts of dumpy convenience stores, kiosks and partners for people to pick up.  It's a better model than dumping the stuff on sidewalks. When it rains, packages get soggy and customers bitch.  We're going to ship $25 billion of fake GMV in one day next week, Nicole Kidman will be at the party, we paid her big bucks to show up, ooopsss Jack told me to not to say that, but we are at the beginning stages of helping the world.  Our on-line, off-line data-driven-big-data will allow us to sell more data-driven fake junk to everyone on the planet on mobile apps, which will track everyone so the CCP knows exactly where they are and what they are doing.  Did I mention that we are experts at big data?  Oh….and Amazon sucks.  Thank you."  

    So really, what is this gigantic "blob" of "China Commerce" GMV  and the related revenue comprised of?  Who knows?

    Alibaba management incessantly references their huge investment in infrastructure that enables them to sell supposedly gigantic volumes of Consumer Electronics, Fast Moving Consumer Goods, Clothing, Grocery, etc. yet they have never disclosed how much of same is sold through their platform(s).  How can they publish a gigantic $25.3 Billion, one day GMV total and not know what its components are?  I thought that Joe, Daniel and Maggie were the ring masters of this big-data circus?  They should know these numbers off the top of their head and disclose them.

    For example…

    You can buy a million dollar yacht.…..just put it on your MasterCard/Visa or Alipay…..it would be nice to know how many yachts they sell on-line.

    Or perhaps you'd like a luxurious Prada hand bag…..apparently sold by authorized and licensed Prada distributors like "wishload flagship store" and "buyfine overseas flagship store".

    Or maybe you need a few hundred tons of steel pipe…

    …or sheet steel...

    Perhaps a new building?…put a skyscraper on Visa/Mastercard!

    Or land for sale in Estonia or Iran?….note the "smart data" algorithm on the right of the page…..people who liked "land in Estonia" also apparently liked "kitchen cleaners and car wash soap"….and I actually could have "chatted" with the creepy looking guy shown in this listing, but my IT Department advised against it…..

    None of the above ridiculous transactions have anything to do with consumer goods and never "close" on the platform, yet they are there for a reason.  They are included in GMV.  They are "reported" by the seller (presumably for a fee?)…..Think Craig's List….not Amazon.

    The SEC correspondence from 2014 was illuminating…

     

    …everything about this business is a misdirection or a half truth…

     

    ...See pg 5, where Alibaba management opines that the GMV metric is a critical part of their fake operating/reporting framework and that it's perfectly legitimate for them to report transactions that were never shipped or closed.

    We might ask, if GMV is so important, why have they never provided any detail as to its composition/mix, or oddly enough, are only reporting GMV twice a year now. (on "Singles Day" and an annual "Blob" in the 20F)   Is it somehow no longer important?

    In fact, back in 2016 under Mary Jo White, the SEC started looking into, among other things, the possibility that there are issues with Alibaba's GMV reporting.  You'll also notice that, on page 60 of the above answers to the SEC correspondence, one of the signor/architects of the aforementioned, dubious Alibaba responses, was a Sullivan & Cromwell Attorney by the name of Jay Clayton, who also now happens to be the newly appointed Chairman of the SEC.  As they say….a fortuitous coincidence indeed.

    I'd invite all of my readers to check this out for yourselves…..take a few minutes to browse the Alibaba sites, Tmall, Taobao, Alibaba.com, AliExpress, 1688, and type in luxury brands (Gucci, Prada, Coach, etc.) industrial goods, etc., sort by price (high to low) and see what you get.  It's a hoot….you can buy single malt Scotch and Kentucky bourbon made in China!…..who knew?  Let your eyes be the judge as to whether Mr. Clayton's position, while representing Alibaba, had any merit at all.

    My guess is that "real" consumer goods GMV actually delivered is probably less than a third of what they report……yet investors believe these inflated numbers.….. I suppose, because it's "China"….and in hindsight, perhaps because Jay Clayton got a (presumably) sizable paycheck to sign off on it.

    Show Me The Money!

    Finally, with all of this Revenue and activity, all of this purported income and cash flow….a little bird told me that Alibaba will be looking to the US Bond Market for more funding in the very near future, riding the wave of the latest fake numbers. 

    They'll be looking for something in the range of $5 Billion to $8 Billion.  The big question is, if the business is actually generating dump trucks full of money as they claim, why have they maxed out their bank lines of credit and why do they once again need to go running to the US credit markets for cash ???….in addition, why in the world don't Chinese Banks want a piece of this gold mine?  They should be clamoring to lend money to this national treasure.  There isn't one Chinese Bank materially involved in financing this mess, at least that I can see.  This, to me, is incredible.  Ninety percent (90%) of Alibaba's business is in China, they need RMB….not dollars….what gives?

    Perhaps their "Authorized Representative" Don Puglisi would know the answers.  Every foreign company listed on a US Exchange must have an Authorized Representative in the United States and Don is Alibaba's man, per the original F-1.  

    Per Bloomberg, Don also seems to be a serial "Authorized Representative", collecting checks to represent dozens of foreign businesses in the United States, all run out of his three (3) person office in Newark, Delaware.    Lots of irons in the fire.  I can't imagine how, at his age, he can keep it all straight.  He's a busy man.  If I were him I would have retired long ago, but apparently "80 is the new 50"!  On the other hand, I, for one, think it's absolutely marvelous that a gigantic global enterprise like Alibaba was able to give a "little guy" like Don the chance to become a big time international player.  It must be a dream come true for him.

    Looking at the big picture, perhaps Don's job as an Authorized Representative was just the first of the "Million US Jobs" that Jack told the White House he was going to create!  Only 999,999 to go! Of course, Don's great new Alibaba administrative job pales in comparison to the half dozen or so high paying executive jobs that Jack had already created at his new (2014) Alibaba headquarters in the Caymans.  As our political leaders often say, "it's all about the jobs".  I couldn't agree more.

    Anyway, I'm sure that Don is a great old guy and if asked, he could bring some clarity to what Alibaba is up to. Perhaps Mr. Clayton (after waiving attorney/client privilege) could lend some insight as well. 

    After all, if you are representing someone, I'd think you should have at least some idea as to what's going on with their business.

  • Fake Market Narratives Are Masking The Roots Of The Next Crisis

    During the second half of an interview with MacroVoices host Erik Townsend, Fasanara Capital fund manager Francesco Filia explained how the trillions of dollars in post-crisis asset purchases by central banks have bred a dangerous trend-following mentality that ultimately undermines the stability of markets and leaves stocks and bonds vulnerable to a vicious reversal.

    Passive, trend following funds – which account for the bulk of daily flows across financial markets – have only helped exacerbate the situation. But what’s worse is market strategists’ refusal to acknowledge how these flows, which create destabilizing feedback loops, tend to drive trading. Instead, sell-side “experts” employ flimsy fake narratives ex post to explain trading activity. These narratives are often accepted without question or criticism by financial reporters at CNBC, the Wall Street Journal, Bloomberg…the list goes on.  

    While it’s much easier for strategists and traders to latch on to the narrative of the day during interviews and conversations with clients, Filia posits that both professional and retail investors are ignoring these fundamental trends at their own peril.

    There was a moment in the market a couple of years ago where, whenever we saw bad data, the market was rallying, because they were expecting more monetary printing and more interventionism from the side of central banks.

     

    A little bit later, when rates were falling because of deflation, the narrative was chasing yields. So the narrative was not that there is deflation, therefore there will be a recession, therefore there will be a deflationary bust. The narrative was that there will be a deflationary boom. So the narrative was chase yields. So go into bonds even if the yields are low (whenever there is some yields left), go into equity to get some yield, and so make equities more expensive.

     

     

    Then later on, pretty much about when Mr. Trump won the elections, you had a new narrative coming in, which was chasing growth and chasing reflation. And the whole market was repositioning for that, going long banks and short utilities, and so forth.

     

    …

     

    At some point the reflation story was challenged, because it was all too clear that it was not really happening. You could see that the big pickup in soft data was closing the gap down to the downside on hard data. And you could see that the hard data were always very weak, and soft data went up and then came back down. So the reflation story was not there anymore.

     

    But then there was another story that could convince investors that what was happening was making sense, which was to chase earnings. Earnings around the middle of this year, after the second quarter, they were the one bit of positive information out there. So the market was focusing a laser focus on that only, and that was becoming the driving narrative. But it was a fake narrative. Because, in reality, it was really about flows, in our opinion.”

    Which brings us to the narrative strategists have ascribed to this year’s rally: The myth of synchronized global GDP growth.

    But investors who believe this to be true are overlooking the fact that most of this “growth” has been fueled by debt and money printing. As Erik Townsend points out, “it shouldn’t come as a surprise that there’s global synchronized growth when there’s global synchronized money printing.”

    The current narrative nowadays is synchronized global GDP growth. How many times have you heard that? And then, we see it all the time, and that is justifying the fact that the indices are reaching new heights. Except nobody is discussing about how this growth is achieved for much debt. And the debt on GDP that is on the shoulders of governments that is unheard in modern financial history.

     

     

    So our point in this slide is that the fake market cycle is trying to prove that it is not really about narratives. The narratives are exposed and they’re just handy excuses. But the point of this – market is about flows: the passive flows from the public central banks, from the private investment community, from the EFTs, to all the new investment strategies. And our point here is to challenge our assumptions about the market and be prudent because, you know, the future is really wide open. Anything could happen now that flows are coming back and for the first time we see tapering and quantitative tightening.

    The discussion soon turned to a concept that Filia famously helped pioneer: The notion that markets in recent years have succumbed to a positive feedback loop that has undermined their credibility and stability, as investors – spurred by overly generous and meddlesome central banks – have embraced high-beta, long-only positioning.

    As markets become increasingly fragile thanks to this lopsided positioning, small changes in circumstances can have an outsize impact on markets.

    Whenever there are positive feedback loops – and that is true in engineering, in cybernetics, in chemistry, in biology – whenever you have that you have the possibility of a self-fulfilling prophecy and a reinforcing process. You have reflexivity. You have a number of things that provoke a further diversion from fundamentals, or call it from general equilibrium, and system instability.

     

     

    And this is the case right now, in my opinion. The system instability is further defined as a state in the markets in which a small disturbance is able to produce a very large adjustment.

    So whenever – you said before what is the catalyst? And I said there could also not be a catalyst, that things could happen all of a sudden because of this very fragile state of affairs and because of the fact that it’s very unstable, this equilibrium.

     

    And, to use an analogy, when you talk about an unstable equilibrium, you should think of a pendulum which is held in the vertical position. And the pendulum that is held in the vertical position stands still, it looks really stable. But a small disturbance is able to crash it down left or right.

     

    When the equilibrium is stable instead of unstable, you should think of it as a painting which is attached to the nail – and it can move a little bit left and then goes back to the original position, a little bit right and then goes back to the original position. The market is like a pendulum held in vertical position, in our opinion.

     

    So what happens? There are these massive public passive flows, these are central banks. In the last ten years, roughly, they printed $15 trillion. And they’ve spent that money to buy financial assets. Primarily government bonds, but also some risky assets like mortgages. And in some countries, as I said, Switzerland and Japan, also directly equities. Japan owns the majority of the ETF industry in Japan for $200 billion (equivalent). And the Swiss central bank owns $100 billion worth of stocks, primarily US stocks.

    Private investors, of course, aren’t blind to activities of central banks.

    They see the writing on the wall and adjust to account for the massive central-bank put that has buoyed markets since the crisis. However, this has created an environment where the entire market is effectively long – either by shorting volatility or by betting on the trend to continue. Meanwhile, fashionable trend-following investment strategies like risk parity have only helped exacerbate this weakness.

    Now, we live through the peak QE. What are the two major factors that were originated by this $15 trillion printing and these huge monumental money flows? There are two. There is a factor trend and there is a factor volatility. The two consequences of those flows were trending markets – upward, obviously, because of all those flows. And financial repression of volatility, which means, really, volatility being killed to the ground and going into new all-time lows.

     

    Those are two consequences of those monumental money flows. Those two factors have an impact. A reflective impact on the private community. Because the whole private community adjusts to those two factors.

     

    So here we have a cursory look at all the players involved – some of the players involved – going from ETF and positive index files to all the fashionable investment strategies nowadays of risk parity, risk premia, algorithmic short volatility, machine learning, etc. And you can see that 90% of the investment community is affected by either one of those factors – volatility or trend – or both of them. 90% of the most fashionable investment community, and the most successful at present, is either going long trend – so long only – or it is shorting volatility or benefiting from low levels of volatility.

    The popularity of passive ETFs has contributed immensely to this…

    So, if I can spend a minute on this, a minute more, I will say that ETFs are the most – what you would expect – rates are going down, so it is very difficult for managers to make a performance and to justify fears. Therefore, there is from the investment community an obsession for fears. Therefore these ETFs are able, obviously, to be produced for very little cost, for total expense ratios of less than half a point and for management fees of 9 basis points or even smaller than that. Even we have seen some ETFs for 3 basis points of management fees. So they are a byproduct of the current environment of lower and lower interest rates which is produced by central banks.

     

    What do they do, the ETFs? They obviously go long only. By definition. They don’t price any risk inside portfolios. ETFs, when you buy a certain subset of the market through an ETF, that ETF will not decide to be underweight for any reason. Not because there is a big election coming up, not because there is a potential nuclear strike in North Korea, not because there is a valuation problem – that investment will be mindless and will be long only and will be fully invested.

     

    And this is number one: Now the ETFs alone represent close to 90% of the equity flows daily on the S&P these days. And this is an estimation coming from Vanguard, which is the number one shopper for ETFs. A different estimation from Bank of America sees 70% of the flows due to ETFs. But, you know, you are talking about a very big percentage.

    …Short-vol ETFS in particular – as the Macro Tourist Kevin Muir pointed out in a post-game interview with Townsend – pose a major threat to market stability. Short-volatility positioning is so overwhelming, that a modest reversal in stocks and bonds (remember, it’s been more than a year since we’ve seen a 3% intraday drop in the S&P 500) could cause the VIX to spike. If the VIX were to double from its current levels – say it goes from nine to 18 during a particularly volatile trading day – these funds run the risk of being totally wiped out.

    So, if I can spend a minute on this, a minute more, I will say that ETFs are the most – what you would expect – rates are going down, so it is very difficult for managers to make a performance and to justify fears. Therefore, there is from the investment community an obsession for fears.

     

    Therefore these ETFs are able, obviously, to be produced for very little cost, for total expense ratios of less than half a point and for management fees of 9 basis points or even smaller than  that. Even we have seen some ETFs for 3 basis points of management fees. So they are a byproduct of the current environment of lower and lower interest rates which is produced by central banks.

     

     

    What do they do, the ETFs? They obviously go long only. By definition. They don’t price any risk inside portfolios. ETFs, when you buy a certain subset of the market through an ETF, that ETF will not decide to be underweight for any reason. Not because there is a big election coming up, not because there is a potential nuclear strike in North Korea, not because there is a valuation problem – that investment will be mindless and will be long only and will be fully invested.

     

    And this is number one: Now the ETFs alone represent close to 90% of the equity flows daily on the S&P these days. And this is an estimation coming from Vanguard, which is the number one shopper for ETFs. A different estimation from Bank of America sees 70% of the flows due to ETFs. But, you know, you are talking about a very big percentage.

    One of the most harmful byproducts of central banks’ nearly decade-long post-crisis monetary experiment has been to exacerbate income inequality by failing to produce inflation, except in financial assets. Instead of creating a wealth effect that would help boost consumer spending and, by extension, boost economic growth, the central banks have instead created an inequality effect that has numerous unintended consequences – the rise of populism in Europe and the US is perhaps the most striking example.

    Self-congratulatory central bankers like Janet Yellen have never hesitated to defend how the Fed and its peers in Japan, Europe and the UK responded to the crisis. But the great policy experiment that began ten years ago is nearing its end. As Filia points out, as the Fed raises interest rates and starts paring its $4.5 trillion balance sheet and the ECB continues to taper, markets will experience a liquidity drawdown of nearly $1 trillion next year alone.

    This drawdown will represent the first real challenge to financial markets in ten years.

    How passive investors react to this paradigm shift will ultimately steer the broader market’s response.

  • Airports Close, Thousands Flee As Bali's Mt Agung Volcano Erupts: Live Feed

    Bali’s Mount Agung has been trembling and spewing ash into the sky for months, warnings that prompted the government to steadily evacuate more than 75,000 people living around the base of the active volcano. Now the long-anticipated eruption is finally happening.

    As the eruption began, Indonesia’s disaster management agency mandated an evacuation zone of 10 kilometers around the volcano and raised its alert status to 10, the highest level. More than 24,000 residents were evacuated over the past two days as the airport in Bali canceled flights as a thick cloud of ash shot 6,000 meters into the sky and drifted east and southeast of the archipelago. Lombok International Airport on Pulau Lombok, the island due east of Bali, has also closed.

    According to CNN, residents were evacuated from 224 points around the island, said Ari Ahsan, spokesman for Ngurah Rai International Airport in Bali.

    The closures came as Indonesia upgraded its Volcano Observatory Notice for Aviation (VONA) to red, its highest warning, and said the ash-cloud top could reach 19,654 feet or higher.

    The cancellations at Ngurah Rai, Bali's main airport, stranded roughly 7,000 domestic and international passengers, according to the airport's latest report.

    Indonesia's Center for Volcanology and Geological Hazard Mitigation raised its aviation notice from an orange alert to a red one Sunday.

    According to Reuters, ash covered roads, cars and buildings near the volcano, which is situated in the northeast of the island, while the red glow of what appeared to be magma could be seen in photographs taken by the state news agency.

    “The activity of Mount Agung has entered the magmatic eruption phase. It is still spewing ash at the moment but we need to monitor and be cautious over the possibility of a strong, explosive eruption,” said Gede Suantika, an official at the volcanology and geological disaster mitigation agency.

    At a height of just over 3,000 meters, Agung looms over eastern Bali. The most recent eruption, which happened in 1963, killed 1,000 people. The eruption surprised the local community, and some residents had only minutes to flee.

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Nov 26

Today’s News 26th November 2017

  • Bitcoin Soars Above $9,000, Hits New All Time High On Burst Of Asian Buying

    Less than 24 hours ago, we noted that Bitcoin had broken above the recent resistance level around $8,300 and hit a fresh all time high of $8,650, observing that the world’s biggest cryptocurrency by market cap is now rising at a pace pace that has put the $10,000 price target by both Mike Novogratz (and Jose Canseco) firmly in its sights. It didn’t take long however for bitcoin to find a new round of eager buyers, and in early Asian trading, a burst of buying out of Korea’s Bithumb exchange, has sent bitcoin surging another several hundred dollars higher, and around midnight ET bitcoin had surpassed $9,000, sending its maret cap to $150 billion, making it more valuable than corporations like Siemens, Mastercard or McDonald’s. The sharp gains come as the combined market capitalization for all cryptocurrencies also peaks at new highs – currently standing at just shy of $300 billion.

    At this rate of appreciation, the crypto may hit the key psychological level of $10,000 in under a week. Needless to say, the long term chart is about as exponential as it gets, so as usual, buyer beware.

    Bitcoin started the year just above $1,000, and the YTD gain is now above 900, which however pales in comparison to Ether’s nearly 5,000% YTD return and Litecoin’s 20x. One month ago, Mike Novogratz was the first to predict a $10,000 price in 6 to 10 months. It may come in that many weeks instead.  As a store of value, Novogratz likened bitcoin to digital gold, and said the technology is beginning to make “more and more sense” as we move increasingly into the digital. Novogratz continued to say that, while bitcoin is a bubble, the mania is justified, because it is a technological advancement that promises to fundamentally alter our lives.

    “I can hear the herd coming” Novogratz said.

    And bubble or not, Novogratz concluded eloquently on the extreme nature of cryptocurrencies’ potential…

    “Remember, bubbles happen around things that fundamentally change the way we live,” he said. “The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.”

    Bitcoin is set to become “the biggest bubble of our time,” he added, and could reach $10,000 very soon due to fast-building interest. In retrospect, he may be right much faster than even he anticipated.

  • How The Deep State Squeezed America's Wealth

    Authored by Bill Bonner via InternationalMan.com,

    Salvator Mundi, said to be by Leonardo da Vinci, is the world’s most expensive painting.

    Last Wednesday, at auction, each square inch was valued at nearly $1 million – including the bummed-up, restored, and damaged parts.

    The painting may not be da Vinci’s work. Or perhaps, since it has been so heavily doctored up, little remains of his work. And whoever’s work it was must have been having a bad day.

    And yet, it sold for over $450 million (including auction-house charges) – a lot of money for such a depressing work of art.


    Donald Trump as da Vinci’s Salvator Mundi

    The question on the table: Why?

    But since we don’t know the answer to that question, we’ll answer another one: How come so many people have so much money?

    Made in the Middle

    The latest GOP “tax reform” proposals raise questions, too.

    Though billed as a “middle-class tax cut,” the middle class gets almost nothing from the proposed plan.

    Instead, almost all the benefits go to: (1) business owners, and (2) the rich.

    And since the feds are unwilling to cut spending, the middle class ends up with about $2.2 trillion of extra debt, which it will have to reckon with eventually.

    We bring up the tax cut because we think it helps explain the painting. Not for nothing are Republicans and the modern Salvator Himself, Donald J. Trump, setting up the middle class for a huge bamboozle.

    A train ride we took on Monday – the Acela Express from Baltimore to New York – was subsidized by taxpayers from all over the country.

    The train runs from one end of today’s modern economy to the other. It goes from Washington, D.C. – the center of politics – to New York – the center of money.

    In between is nothing but poverty and dereliction. There are factories that last made a product in the ’50s. There are workers’ houses almost unchanged in half a century. There are abandoned warehouses… wrecked cars… junk steel… and burly men in orange vests working with machines.

    The middle is where real work was done and real things were made, shipped, and distributed; it shows few signs of growth or prosperity.

    It is as though a sausage had been squeezed in the middle, driving the rich meat to the ends. In between is lean… and greasy.

    How come?

    Deep State’s Fingerprints

    Every crime scene has many fingerprints on it.

    Most are of the innocent.

    An aging population, for example, is not exactly something you can do anything about. Technological innovations, too, are largely beyond public policy control.

    But there’s one set of fingerprints on the tax cut flimflam… the relative poverty along the Northeast Corridor… and the $450 million painting: the Deep State’s.

    The insiders use fake money – the post-1971 dollar – to transfer wealth and power from the people who earn it to themselves.

    It is as though they loaded up the train in Newark and Trenton… and shipped everything to Washington.

    You earn real money by making real things and providing real services. But fake money is different. You don’t earn it by adding to the world’s wealth.

    You get it by subtracting from it… that is, by borrowing from future output.

    Real money is not controlled by anyone.

    It is earned – freely – in win-win exchanges. Back in the 1950s and 1960s, it ended up in places like East Baltimore and Trenton because they used to make things people wanted.

    But fake money takes a different route. It is created by the insiders… and controlled by them. It goes where they want it to go.

    No Stimulus

    Money always bows to politics; often, it is completely beholden to it.

    In Russia, the oligarchs took government-owned property and used it to build their fortunes. In China, state-owned enterprises and favored entrepreneurs get government-backed credit to build their apartments, factories, and shopping malls.

    And in America, the fake money is directed to favored sectors by 73,000 pages of the Internal Revenue Code… and 81,000 pages of the Federal Register.

    So, it is hardly a surprise that the latest tax proposals favor the Deep State at the expense of the middle class.

    Readers may argue that the money “stimulates” the economy… and that it “trickles down” to the common people. If so, there is little evidence of it.

    As a percentage of the working-age population, fewer people have jobs today than at any time since the 1970s. Back then, the typical man had to work 900 hours to earn enough to buy a new pickup truck. Today, he has to work 1,500 hours.

    Central banks have increased the world’s monetary base (and their own balance sheets) by $20 trillion so far this century.

    This money didn’t go to the fellow in the orange vest. Instead, it went to Russian tycoons… Chinese billionaires… art collectors… hedge fund managers… and rich people on both ends of the track.

    *  *  *

    The Trump team reached out to Bill’s network for advice on the economy. Recently, Bill’s team sent them a field memo on a coming crisis… They’re now releasing it to the general public… (It’s not what you expect.) Click here to read more.

  • Muir: "People Are Going To Be Wiped Out" By Short-VIX ETFs

    Back in August, we highlighted a story in the New York Times about a former manager at Target who decided to try day trading with $500,000 he had saved up. Over the following years, he turned that into $13 million by following one simple strategy: Shorting volatility every time it spiked.

    As MacroVoices host Erik Townsend points out, that strategy has worked for many retail investors over the past eight years. And in a brief “postgame” interview with the Macro Tourist Kevin Muir following a longer interview with Francesco Filia, a fund manager at Fasanara Capital, the former explains how many investors don’t understand the risks associated with shorting volatility, as well as the possible repercussions if exchanges and brokerages don’t take the appropriate steps to limit this.

    Townsend begins the discussion by asking Muir about a chart he created of the VXX – the long-VIX ETF – which, because of the low-volatility environement, has repeatedly split leading to unbelievable wealth destruction.

    Going back to 2009, the price of the ETF has gone from $120,000 a share to just $35. And while a sudden spike in volatility could see it surge, with so many investors on the other side of the trade, it's worth considering what might happen if they couldn't pay.

    It’s frightening. And I don’t think enough people are – well, there are some – but I don’t think that enough people are really considering all these things. And I think that guys like the Interactive Broker chairman, that are taking proactive steps to make sure that there’s enough margin, we need to see more of that. We need to see more people saying, hey, wait, this is actually a very, very scary instrument that has a lot of risk in it.

     

    I watched a Real Vision interview with John Hempton from Bronte Capital, and he talked about phoning up the infamous Target salesman guy, the fellow that quit his job as a Target manager to trade XIV and all the VXX products, and he turned his 1/2 a million bucks into 13 million bucks. The part that really scared me about it was that John phoned him up and he was expecting to talk to this very sophisticated guy, and his basic takeaway was that, although he had a lot of buzzwords, and he understood kind of what the products represented, he didn’t really understand his true risk.

     

    And I think that there’s just a myriad of people out there that are trading these things that don’t understand that. The more people that wake up and realize this, and stop playing this game, the better off we’ll be, actually.

    Brokerages have caught on to this, Muir says. Interactive Brokers, one of the largest online brokerages, is now asking retail investors to post between 300%-400% margin when they short certain VIX contracts – because brokerages recognize that one sharp drawdown in the S&P 500 could blow millions of short traders out of their positions, potentially leaving thousands of customers with massive negative balances that could threaten the brokerages’ existence.

    Erik, you’re absolutely correct. And Interactive Brokers, one of the largest electronic brokers out there, realizes the risk. If you look at the way that they’re margining these products, they’re margining them completely different than what the exchanges and everyone else say is the proper amount.

     

    So if you look at the VIX futures, the front month is $6,200 – the exchange minimum is $6,200 – which works out to roughly 50% of a contract. The next month is $4,000, which works out to 30% of a contract. And the far months are $2,500, which works out to 17% of a contract.

     

    But if you go to Interactive Brokers and you want to sell this VIX contract short, you have to put up 300%–400% of the contract. Because they’ve looked at it and they’ve realized that if the S&P has a 10% down move, which isn’t out of the realm of possibility, that the VIX could spike up to 37 really easily. And people are going to be wiped out if that happens.

    Should the VIX suddenly spike, the repercussions of such a move would be further complicated by the billions of dollars sitting in various VIX-linked ETFs. Because individuals sellers would probably disappear from the market in such a situation, the ETF market makers would find it nearly impossible to hedge their positions, potentially triggering the dissolution of the funds, or even the collapse of some of these firms.

    There’s $1.2 billion of the XIV, which is the short ETF. There’s $1.3 billion of the SVXY, which is another short one. These are staggering numbers.

     

    In my days, when I was on the institutional desk, we had this big – I did index arbitrage, and we used to go out and buy the baskets and sell the futures. One day the risk manager came to me and said, if you had to take this position off (because we had accumulated this big position) how long would it take you? And who would do it?

     

    And I said, the reality is that there’s nobody. You know, we were the biggest player in the market and there was nobody that was going to take this off of us. The only way was to go all the way to expiry.

     

    Well, the reality is that these numbers are way bigger than any market player can absorb. And, if we get a situation where – as Francesco says, all it’s going to take is a return of the VIX from its current level of 10 to its average level of 18 or 19 to wipe out these products.

     

    I guess that’s the point that I want to make: If you’re actually owning these things, you should be aware that all it will take is a move of 80% and then they’re going to wind down these products. So the XIV, when it moves up, if all of a sudden VIX goes from 10 to 18 in a day, they’re going to wind down that product.

     

    And what’s going to be really scary is the amount of VIX futures that is going to have to be bought, because they’re short all those VIX futures and they’re going to have to buy them back.

     

    And I just don’t know who’s going to sell it to them. For the first time – for a long time, I didn’t view this VIX as that big a deal, and there were some smart guys like Jesse Felder that were going on about it – I just think that it has been taken to a level that is becoming increasingly worrisome. And it actually could create a market dislocation in itself.

     

    And what is it Warren Buffett says? What the wise man does in the beginning the fool does in the end. Well, VIX, at this point, we’re hitting a point where if you’re actually continuing to bet on it you’re going to be in the fool category.

     

    Because it’s not going to take much to have a big spike that wipes a lot of people out. And it’s actually very, very worrisome.

    Of course, it would take a large intraday move to trigger a truly catastrophic spike in the VIX. But at least one analyst, Bank of America’s Michael Hartnett – whose work we have cited here – believes there could be a 1987-style crash in the early months of 2018. Hartnett’s reasoning? The bearish positioning seen at the beginning of 2017 has completely flipped. Investors’ long positions are larger than they’ve been in years.

    And as we’ve repeatedly pointed out, with volatility and volume so subdued, hedge funds have remained overwhelmingly short vol, fearful of missing out on even one tick of the torrid rally for fear of pissing off their clients.

    One things for certain: Given the market’s already dramatically overextended rally, the day of reckoning is coming. The only question is will it be a steady decline, or will it happen suddenly?

    Given the incredibly stretched nature of positioning, the latter scenario, Muir and Co. believe, seems far more likely.

    * * *

    Muir's discussion begins just after the hour mark:

     

  • Meet Laikago: China's $25,000 Robo-Labrador

    The Japanese have their non-nagging synthetic wives, the Saudis have their Shariah-compliant humanoid citizens, Americans are content with a backflipping supra-human, and now the Chinese get their very own 50lb, poop-less, robo-dog…

    Meet Laikago – named after Laika, a Soviet dog who was the first living creature to orbit the Earth.

    The Chinese-made robot dog weighs 22kg, a bit less than a common Labrador, and is around 60cm tall.

    “It is a kind of medium automatic robot, a robot-dog in short,” creator Wang Xingxing told RT’s Ruptly video news agency.

     

    “We have popularized Laikago among science and technology companies, and science fans. So Laikago is a scientific toy.”

    The four-legged mechanical pet is able to run on grass and can assimilate canine-like movements, just like a flesh-and-blood pooch.

    The initial price for Laikago will be around US$25,000, but may drop in the future.

    No doggy-doo, vet visits or bones… now everyone can buy a robot canine online and enjoy spending time with their new four-legged friend (admittedly perhaps not the cuddliest or most-loving version of "man's best friend,") feeding it only with electricity.

    The makers did not comment on whether RoboDog is so lifelike as to hump your leg or drink from the toilet.

  • The MbS-Blackwater Marriage Of Convenience

    Authored by Ghassan Kadi via The Saker blog,

    Mohamed Bin Salman’s (MBS) royal Saudi coup is still in the making and its stories of mystery and intrigue are unfolding.

    Some recent articles written about this unprecedented Saudi development have focused on whether or not MBS was actually desirous of instigating reform within the kingdom of sand and capable of putting together the infrastructure that made such reform possible and how. Other more cynical articles have cast little doubt on his ability to create any change and classified him as yet another puppet of the legacy that his grandfather King Abdul Aziz, the founder of the Saudi dynasty, has forged with the West. In between the two extremes, many perhaps waited in anticipation to see what was to happen next in the now quick-changing kingdom that did not change at all in essence for nearly a hundred years.

    To put recent developments into perspective, we must objectively look at MBS’s achievements and failures since his rise to prominence; with a special emphasis on the developments of the last few weeks.

    MBS has failed to turn previous Saudi Government failed policy on Syria to his advantage by distancing his own legacy from it. If anything, the outcome of the Syrian opposition conference that was held in Riyadh was a farcical outcome of Saudi diplomacy. Not only did this conference coincide with the 20th of November 2017 Putin-Assad Sochi victory summit, but it is still “demanding” the removal of Syrian President Assad from power.

    The arrogant and seemingly naive Saudis seem to be still under the illusion that they are able to dictate terms of settlement of the “War on Syria” despite the fact that they have put all of their efforts into winning it but have lost decisively.

    However, the more painful fact for them is that they lost without a single bargaining chip remaining for them to capitalize on.

    Whilst MBS can be “excused” for not being able to find a face-saving way out of Syria, he has failed abysmally in the war that he orchestrated in Yemen, and as this war drags on, the international community is beginning to wake up to the atrocities and genocide that the Saudi-led coalition is inflicting upon Yemen, and no one can be held more accountable for this military failure and crime against humanity than MBS himself.

    MBS also failed to contain the loss he “inherited” from the failures of previous Saudi policies in Lebanon and Iraq. If anything, his determination to remain steadfast with these has turned regional Saudi policies into a total joke.

    So where did MBS score any success, if any at all?

    In my previous related articles and herein, I have mentioned and reiterate that MBS is increasingly gaining popularity within the ranks of young and educated Saudi men and women of all ages and in general amongst the grass-roots of the population. Hence, in this venture, he is scoring two birds with a single stone. In rounding up more popular support, he is confiscating and freezing badly-needed cash under the pretext of corruption.

    The estimates of the number of incarcerated Saudi princes and businessmen are not any less subject to a game of guess work than the funds involved in this kerfuffle. Ignoring how many men have been put under detention, the tally of funds confiscated and frozen is estimated at a minimum of USD 150 bn to a maximum of USD 800 bn.

    Given that the total official Saudi savings reserve is in the tune of “only” USD 700 bn after decades of high financial times, even the low estimate of USD 150 bn is a huge sum by proportion and by any proportion of course. It is little surprise that MBS is trying to replenish into the coffers of the state such sums, and if he manages to do it, it would be to his credit.

    Whilst on the subject of official Saudi savings, after many decades of huge petroleum exports and at elevated prices, the Saudi savings reserve figure should be in the vicinity of a few trillion dollars. But a huge proportion of Saudi petro-dollars has been squandered on royal funds, holidays yachts, prostitutes, drugs, bribes, theft, corruption at all levels, and on this account and this account only, MBS can be acknowledged for bringing corrupt individuals to account.

    But whether or not MBS is able to stamp out corruption and/or whether or not he is guilty of the same charge, as his cousins and some others argue, how much command does he have over the affairs of the kingdom, and over the royal family he staged a coup against?

    Inside, unconfirmed reports allege that whether or not MBS has any command on traditional local troops that he can rely on, he is not taking any second chances.

    To elaborate, the reader ought to be reminded that the Al-Saud legacy built its reign of power (and terror) on Wahhabism and money.

    Wahhabism was used as the doctrine, and money was the catalyst for buying loyalty and support.

    With MBS’s purge on the royals, no traditional royal supporter with known wealth is left feeling safe. How can they feel safe if they hear reports of news of princes like Al-Walid bin Talal not only being in custody, but also getting tortured and his assets frozen and sieged by the state?

    In my previous article, The Second Saudi Dynasty: MBS’s Reset Button, I wondered how can MBS count on any local supporters. Apparently, he is not.

    Recent inside information that was later on published in various media, reports that MBS has been using Blackwater to do his dirty work.

    If those reports are true, MBS has hired Blackwater to arrest, with orders to kill whoever resists arrest, Saudi princes and high-ranking businessmen, and to answer to no one but him.

    In retrospect, the fatal shooting of Prince Abdul Aziz, son of former King Fahed, was highly unlikely to have been done by a Saudi as this would attract a death sentence in the event of the coup failing.

    It has even been reported that Blackwater personnel are driving around in tinted Saudi Police and security agency personnel vehicles in a manner that is totally unbeknown and hidden from the Saudi public.

    This cannot be corroborated any more than they can realistically be dismissed.

    If true, such reports indicate that MBS’s coup is not over. They indicate that he is not taking any chances, but most practically, they indicate that he trusts no one; no one expect Blackwater.

    Most importantly and significantly however, such news, if confirmed, indicates that MBS does not have a true hold on power.

    If such is the case, and seeing the ambition he has, there is more reason to believe that MBS is going to have no choice but to go with his cousins all the way to the wire and until he has destroyed them all and confiscated all of their assets.

    After all, he needs their money to achieve his dreams and get his kingdom out of its financial mess. He needs to blame his failure on them. He needs to eliminate any possible claim they can make for the throne.

    Almost overnight, MBS has changed Saudi Arabia from a kingdom of sand upon which Al Saud reigned with a solid foothold and strong base, to a kingdom of quick-sand upon which princes and power brokers no longer have a leg to stand on. They either have to pledge total and unconditional loyalty to MBS or fear persecution. On the other hand, if they do pledge that loyalty, and MBS’s coup fails as a result of a counter-coup, then they will risk being seen as enemies of the winners of the counter-coup. It is a damned if you do and a damned if you don’t situation.

    Not any less perplexing than the dilemma of the princes is the dilemma of the lower tiers of power in Saudi Arabia; especially senior military officers and their subordinates. With its tribal mentality, Saudi Arabia has had several tiers of armed forces, some of whom are loyal to particular princes rather than to the state itself. Prince Mutaib for example, the son of former King Abdullah, was until the 4th of November, the Minister of the National Guard. The hierarchy within the National Guard are loyal to him personally, and now the big boss is in jail. MBS therefore has a few options; either to coerce those military officers to become loyal to him under the risk of them stabbing him in the back, or, to throw everyone in jail and bring his own people in. But, where would he bring his own people in from and who are they to begin with? After all, and despite all the great power he gave himself, he is Mr Johnny-come–lately and he hasn’t had the advantage of time to slowly build his own army. His practical alternative was based on pragmatism and securing his own safety, and to that effect, he cannot find a more faithful and better trained army than Blackwater. And even though Blackwater does not come cheap, but clearly to MBS the objectives he seeks justify the costs.

    Some may argue that Blackwater can also be bought by counter coup leaders and even foreign governments. Whilst this is possible, MBS remains to have no better alternative. However, one would imagine that for a company like Blackwater, to guarantee its business success and continuity, it would have a strict code of conduct that stipulates that it will refrain from entering contractual agreements that can generate conflict of interest between its clients. After all, and irrespective of its criminal and underhanded mercenary modus operandi, who would hire it knowing beforehand that it is in the habit of breaking contracts and replacing them with ones with the adversaries? Whilst it is arguable as to whether or not any client of Blackwater can actually take legal action against it and win is another story because, without any doubt, Blackwater, inhumane and criminal as it is, cannot afford to see its reputation ruined.

    To sum it up therefore, whilst MBS’s coup is still in the making and its final outcome remaining unclear, what is evident is that MBS does not have enough local Saudi power base that he can rely on in the upper echelons of power. Whilst his grass root popularity among the general population is on the rise, traditional power brokers can neither be supportive of him, seen to be supportive or seen to be against him. Either way, and even though some of them could potentially become strong and faithful proponents of MBS, at the moment any pledges of allegiance are highly risky for all involved.

    In his reliance on Blackwater however, MBS is achieving a more guaranteed short term objective. However, this policy can backfire very violently; because it is allowing certain key Saudi power brokers to sit on the fence for a little longer until they see who is the final winner in all of this for them to eventually back.

  • LA, NYC Detectives Collaborate On Weinstein Probes As Arrests Loom

    Detectives in New York and Los Angeles have been hinting for weeks that they’re close to arresting disgraced studio head Harvey Weinstein for one of any number of credible sexual assault claims that both fall within the statute of limitations and involve accusers who can provide the evidence prosecutors need to make pursuing a case worthwhile.

    As the various investigations into Weinstein wend toward completion, the Guardian is reporting that police departments in several disparate jurisdictions are collaborating to help strengthen their cases and ensure that the maximum number of prosecutable cases are brought against the one-time mogul.

    Detectives in several cities investigating Harvey Weinstein for sex crimes are likely to be collaborating as they build evidence and assess whether the film producer can be arrested and charged, experts believe.

     

    Investigators in New York, London and Los Angeles have opened criminal cases against Weinstein in the last six weeks, as the disgraced producer faces lawsuits on both sides of the Atlantic following a flood of accusations of sexual misconduct.

     

    Los Angeles police department (LAPD) detectives have interviewed witnesses in preparation for presenting a case to the district attorney’s office. The DA will then decide whether to press criminal charges over accusations that Weinstein raped an unnamed actress in a hotel in Beverly Hills in 2013, according to David Ring, a lawyer for the alleged victim.

    Many believe the NYPD will be the first to act, if only because Manhattan District Attorney Cyrus Vance Jr. quashed an earlier investigation into Weinstein before accepting a campaign donation from Weinstein lawyer David Boies. The LAPD and Beverly Hills police are also expected to pursue criminal charges. But police in London are also reportedly preparing to file charges based on the testimony from three women who’ve accused Weinstein of rape.

    Of course, as we’ve pointed out in the past, the pending criminal cases against Weinstein are only the beginning of his legal problems. Many of the more than 80 women who have come forward to accuse Weinstein of sexual assault or harassment plan on filing civil suits, which are much easier to prove than criminal cases, and often result in out-of-court settlements.

    The first civil suits targeting Weinstein, and his former company Weinstein & Co. for abetting his monstrous behavior, are already being filed.

    The sheer volume of complaints against Weinstein, Christensen said, will be much more easily introduced in civil cases, where rules about evidence involving a defendant’s character and the standard of proof are less stringent than in criminal court.

     

    The UK lawyer Jill Greenfield is expected to file civil lawsuits on behalf of a number of women in the high court in London in due course, having written to Weinstein demanding settlements but without hearing back so far.

     

    People are contacting me,” she said. “I’m expecting to coordinate a claim for a number of victims."

     

    Following the decision not to charge Weinstein in connection with her case, Ambra Battilana Gutierrez signed an agreement in which the film producer paid her $1m.

     

    “I thought I needed to support my mom and brother, and how my life was being destroyed, and I did it,” she told the New Yorker earlier this week.

     

    The actor Dominique Huett filed the first civil suit since complaints against Weinstein came pouring out in early October, in the New York Times. She is claiming $5m in Los Angeles superior court, alleging that the Weinstein Company “aided and abetted” Weinstein in “repeated acts of sexual misconduct".

    Of course, Weinstein has been hiding from the world – reportedly wearing disguises when he ventures out in public – communicating with the world only through his defense attorneys, Ben Brafman and Blair Berk. With penury and incarceration looking almost inevitable at this point, he’ll need all the legal guidance he can afford.

  • Why Superintelligent AI Could Be The Last Human Invention

    Via ValueWalk.com,

    When we create something more intelligent than we could ever be, what happens after that? We have to teach it.

    MAX TEGMARK: Hollywood movies make people worry about the wrong things in terms of super intelligence. What we should really worry about is not malice but competence, where we have machines that are smarter than us whose goals just aren’t aligned with ours. For example, I don’t hate ants, I don’t go out of my way to stomp an ant if I see one on the sidewalk, but if I’m in charge of this hydroelectric dam construction and just as I’m going to flood this valley with water I see an ant hill there, tough luck for the ants. Their goals weren’t aligned with mine and because I’m smarter it’s going to be my goals, not the ant’s goals, that get fulfilled. We never want to put humanity in the role of those ants.

    On the other hand it doesn’t have to be bad if you solve the goal alignment problem. Little babies tend to be in a household surrounded by human level intelligence as they’re smarter than the babies, namely their parents. And that works out fine because the goals of the parents are wonderfully aligned with the goals of the child’s so it’s all good. And this is one vision that a lot of AI researchers have, the friendly AI vision that we will succeed in not just making machines that are smarter than us, but also machines that then learn, adopt and retain our goals as they get ever smarter.

    It might sound easy to get machines to learn, adopt and retain our goals, but these are all very tough problems. First of all, if you take a self-driving taxi and tell it in the future to take you to the airport as fast as possible and then you get there covered in vomit and chased by helicopters and you say, “No, no, no! That’s not what I wanted!” and it replies, “That is exactly what you asked for,” then you’ve appreciated how hard it is to get a machine to understand your goals, your actual goals.

    A human cabdriver would have realized that you also had other goals that were unstated because she was also a human and has all this shared reference frame, but a machine doesn’t have that unless we explicitly teach it that. And then once the machine understands our goals there’s a separate problem of getting them to adopt the goals. Anyone who has had kids knows how big the difference is between making the kids understand what you want and actually adopt your goals to do what you want.

    And finally, even if you can get your kids to adopt your goals that doesn’t mean they’re going to retain them for life. My kids are a lot less excited about Lego now than they were when they were little, and we don’t want machines as they get ever-smarter to gradually change their goals away from being excited about protecting us and thinking of this thing about taking care of humanity as this little childhood thing (like Legos) that they get bored with eventually.

    If we can solve all three of these challenges, getting machines to understand our goals, adopt them and retain them then we can create an awesome future. Because everything I love about civilization is a product of intelligence. Then if we can use machines to amplify our intelligence then we have this potential to solve all the problems that are stumping us today and create a better future than we even dare to dream of.

    If machines ever surpass us and can outsmart us at all tasks that’s going to be a really big deal because intelligence is power.

    The reason that we humans have more power on this planet than tigers is not because we have larger muscles or sharper claws, it’s because we’re smarter than the tigers. And in the exact same way if machines are smarter than us it becomes perfectly plausible for them to control us and become the rulers of this planet and beyond.

    When I. J. Good made this famous analysis of how you could get an intelligence explosion, or intelligence just kept creating greater and greater intelligence leaving us far behind, he also mentioned that this super intelligence would be the last invention that man need ever make. And what he meant by that, of course, was that so far the most intelligent being on this planet that’s been doing all the inventing – it’s been us.

    But once we make machines that are better than us at inventing, all future technology that we ever need can be created by those machines if we can make sure that they do things for us that we want and help us create an awesome future where humanity can flourish like never before.

  • Citi's Shocking Admission: "There Is A Growing Fear Among Central Bankers They've Lost Control"

    Earlier we showed a variation on a VIX chart from Citi’s Hans Lorenzen which, if it doesn’t impress, or scare you, then nothing probably will.

    However, leaving readers unimpressed – and unscared – will not satisfy Lorenzen, which is why the credit strategist who works together with the godfather of rational doom, Matt King, and has been warning for weeks that now is the time to sell credit, unloads in one of the more effusive missives of dripping negativity to hit during this holiday week when one after another equity sellside analyst has been desperate to outgun each other with their ridiculous 2018 year end S&P forecasts.

    And while Lorenzen touches on many things, at its core, his warning is straight out of Shumpeter: the longer nothing changes, the greater the crash will ultimately be, a topic which DB’s Aleksandar Kocic dissected over the summer, even defining an entirely new term in the process: metastability.

     

    So without further ado, here is Lorenzen explaining why “embellishing the status quo will be the market’s undoing.

    Ultimately, extreme valuations, the lack of risk premia, and a lack of responsiveness to tail risks are merely symptoms. The real question is what the skewed incentive structure resulting from that backstop has done to the fabric of markets after so many years. To our minds the answer is that trades and strategies which explicitly or implicitly rely on the low-vol environment continuing, are becoming more and more ubiquitous.

     

    Realised historic vol is de facto an exogenous input to much of the risk management framework that underpins modern finance. With lookbacks extending a few years, an extended period of market stability reduces VaR measures and improves Sharpe ratios. Both allow / encourage investors to take more risk – driving valuations higher and vol lower still, creating a self-reinforcing dynamic. Intuitively, returns should follow flows – money is deployed and the asset price goes up. But in the real world the causation works the other way.

    What this means in real-world terms:

    Long periods of one-way markets breed survivor biases. The fund manager with lots of beta outperforms, the cautious fund manager underperforms. Either the latter gets on the bandwagon or soon enough outflows from the fund will ensue. Over time, fewer and fewer “critics of the regime” are left standing.

     

    In an asset class where the upside is constrained, like in credit, that dynamic is further reinforced by the fact that a fund manager has to take more and more beta relative to benchmark in order to sustain the level of excess carry that will merely cover costs. The lack of volatility and the super high correlations between credits and the index (Figure 24), leave precious little scope for alpha (Figure 25).

    Here we can add another piece to the short vol conundrum, because the closer spreads get to the lower bound, the more explicitly being long credit in itself becomes a short-vol position. With less and less upside remaining, owning credit risk become a question of generating a small amount of carry (or premium) for taking future downside risk – essentially, akin to selling a put option.

    Meanwhile, as spreads collapse, as dol implied and realized vol, we are all “happily” ignoring that more risk is being issued into the market than ever before (Figure 26) and that the credit quality of the market keeps slipping – for the first time ever the market cap of the BBBs is about to overtake the rest of the € IG index (Figure 27).

    What happens next should be familiar from the last financial crisis: the infamous step up in risk:

    When the conventional asset class of choice no longer offers a “decent” return potential, money looks to the next one on the quality spectrum for a pickup. IG funds holding BBs and AT1. DM funds buying EM debt. European and Asian funds holding more and more $ fixed income. Corporates moving their liquidity from money markets to short-dated IG credit funds. Mandate creep in the investment criteria. Even synthetic structured credit is making something of a comeback. The list of tourist trades goes on and on. Most of these too are predicated on the status quo – if volatility and risk premia were to rise, retrenchment back towards the original / natural asset allocation would be swift and uncompromising.

    And then, one day, the market will finally discount that the central banks are no longer set to injection trillions in liquidity: that’s the moment the public finally begins to admit the emperor is not wearing any clothes.

    You could rightly argue that many of these factors are generic to every bull market. The fact that volatility clusters is exactly because of these (and other) selfreinforcing dynamics. But the implicit ceiling on vol / cap on downside from the central bank backstops has, in our view, allowed them to run for much, much longer than would have been possible in a market operating on its own devices.

     

    You could argue that there is nothing to worry about as long as fundamentals remain strong. But those looking at the economic data, corporate earnings or leverage trends to indicate the next turn in markets are looking in the wrong place, if you ask us. Over the last 50 years, only 2 out of 19 corrections in US credit were led by a recession. 12 had no overlap with a  recession at all. In half the corrections, there wasn’t even a discernible turn in the leading economic indicator beforehand. Plainly, there is a long history of market corrections being triggered by other factors than fundamentals – Black Monday in 1987 and the correlation crisis in 2005 are two obvious examples.

    Still, judging by the current state of the market, Citi writes that traders “evidently don’t expect a sharp market correction to happen tomorrow.”

    While the probability of a next-day loss still feels quite low there is an obvious temptation to stay invested a little bit longer for professional investors, tasked not with delivering a return of money, but a return on money and with high frequency. The process of judging that near-term probability manifests itself in the frenzied search for “triggers”. Surely, if one could just get a slightly better call on the next trigger, then it’d be possible to get out just in time before everyone else jams the exit? We don’t dismiss the importance of triggers. Indeed,  when you look back at the last fifty years, nearly every major correction in credit can be associated with a triggering event (Figure 28). With hindsight everything is easy.

    Here Citi has some advice: don’t look for triggers; instead focus on the big picture.

    We are sceptical that hunting for the next trigger is worth the effort. If a trigger seems obvious, then it’s probably obvious to everyone and chances are it will be too late. Triggers are often latent – the long-term problem is obvious, but it is ignored until suddenly it explodes without much warning (think the Greek sovereign debt crisis). Multiple factors often have to  combine to create a triggering event – the GFC wasn’t just about sub-prime, it was about excessive leverage, inadequate regulation, unchecked financial innovation, misaligned rating methodologies, inadequate backstops and a host of other things. The last couple of years have seen several widely peddled “triggering events” crystallise with remarkably little shake out.

    So what about the big picture? Here one can argue that in recent years the market simply wasn’t vulnerable with so much central bank money behind it. However, Lorenzen believes that “2018 is different.” As we see it, it is now increasingly vulnerable to a mid-cycle, “technical” correction, based on what we have discussed above:

    • Central bank asset purchases are set to be the smallest in a decade (Figure 29). A $1tn of incremental demand versus 2017 is needed from private sources.
    • At least in the US, the opportunity cost of not being invested in credit (i.e. the yield differential to 3m LIBOR) is likely to be the smallest since 2007.
    • The perception of a backstop has facilitated a multitude of trades and strategies that are contingent on a low level of volatility in an increasingly crowded space. Now that backstop is moving “out the money”.
    • Vol is near historic lows and has been so for longer than ever before. More risk than ever before is being issued into a credit market where spreads, on a like-forlike basis, are close to the 2007 tights and where breakevens are wafer thin.

    Lorenzen then branches into some chaos theory for good measure:

    In the context of a self-reinforcing, herding market, the pivot point where the marginal investor is indifferent between putting more money back into risk assets and holding cash instead is fluid. But when the herd suddenly changes direction, the result is a sharp non-linear shift in asset prices. That is a problem not only for us  trying to call the market, but also for central bankers trying to remove policy accommodation at the right pace without setting off a chain reaction – especially because the longer current market dynamics run, the more energy will eventually be released.

    And while not intended to be a conclusion, or even a punchline, the next line from the Citi strategist should scare the living daylights out of anyone: it is a direct admission that central bankers have now lost control.

    That seems to be a growing fear among a number of central bankers that we have spoken to recently. In our experience, they too are somewhat baffled by the lack of volatility and concerned about the lack of response to negative headlines.… Our guess is that sooner or later in the process of retrenchment they
    will end up going too far – though that will only be obvious with
    hindsight.

    Frankly, that’s about the scariest admission from one of the world’s biggest banks that we have read in a long time.

    * * *

    As for how this period of cataclysmic metastability ends, here is Lorenzen’s dire conclusion:

    In a fairy tale, turning points come suddenly and unexpectedly. Everything that has long been taken for granted is suddenly in pieces. In that sense markets are not all that different. People have gotten used to the paradigm that has been built up since the Great Financial Crisis. It has been tested on several occasions – 2011, 2012 and 2015 – and on each occasion central banks have overcome the challenge, thus ultimately reinforcing the regime.

     

    The emperor in Andersen’s story was only able to parade around naked because the social norms, customs, conventions and vested interests that had built up over time were so strong that even the blatantly obvious was better left unspoken.

     

    Similarly, the low risk premia, the low level of volatility, the lack of responsiveness to tail risk and spillover of systemic events, the reluctance to sell etc. to us are all indications that the market now has an almost Pavlovian response to central bank liquidity. The mere thought of it is enough to still leave us salivating, even when it is patently in the process of being turned off. Yes, excess liquidity will remain in the system even after central bank net asset purchases fall to zero, but as we have argued, if that money has chosen to stay out of the securities  market now, then why should it seamlessly come flowing in at these valuations when the backstop is moving out the money?

     

    While our conviction in the exact timing and magnitude of the paradigm shift is admittedly low – hence the deliberately very wide range in the scenario forecasts – it is unwavering  when it comes to the broader point that central bank asset purchases will remain the key driver of markets. Exactly because trades and strategies have been built up around an assumption of the status quo, we fear that the inflection point, if / when it comes will be anything but smooth and linear. Indeed, the longer we remain in the current paradigm, the greater the chance that it  ends up being both sharp and painful.

     

    One of our favourite quotes pertains as much to markets as it does to economics:

     

    “In economics, things take longer to happen than you think they will, and then they  happen faster than you thought they could.”

        ? Rudiger Dornbusch

     

    Surely, that is a sentiment which the emperor who had his vanity and pride shattered so abruptly from the least likely angle would recognise all too well?

    We end with one of our favorite pictures: the one we call Yellen’s moment of epiphany haw it all ends.

    No wonder the Fed chair can’t wait to get the hell out…

  • Demographic Dysphoria: Swiss Village Offers Families Over $70,000 To Live There

    Across the world, demographic dysphoria is taking shape, creating numerous headaches for governments. To avoid the next economic downturn, governments are searching for creative measures to increase population growth and deliver a sustainable economy. In Europe, a near decade of excessive monetary policy coupled with a massive influx of refugees have not been able to reverse negative population growth– first spotted in 2012.

    As for Switzerland, a small mountainside village near Leukerbad in Canton of Valais called Albinen, is now experiencing a population crisis. The village of 240 inhabitants is one many areas in the country experiencing a mass exodus in recent years.

    The report blames depopulation on Switzerland’s younger generation moving to big cities in attempt for a better life. With declining population, the village’s economy has come to a halt with local businesses closing up shop. Even the local school system had to shut down because activity in the area is non-existent.

    Among the remaining residents, widespread panic has reached the village’s council, with locals demanding officials do something to reverse the declining trend and improve the economic outlook for the area.

     In a last ditch effort to avoid a total collapse of the local economy, officials are now offering 70,000 Francs ( 71,467 US Dollars) to families (of 4) under the age of 45 to move in and settle down for 10-years.

    Here are the strict rules,

    The communal council has accepted the initiative and has drawn up a regulation which provides financial assistance for anyone who would deposit his papers in Albinen. The planned amounts are 25,000 francs per adult and 10,000 francs per child. A family of four would thus receive 70,000 francs. The financing of the operation would go through the creation of a fund in which the municipality would pay 100,000 francs annually.

     

    The offer is, however, subject to certain conditions. The interested parties must be under 45 years old. They must make a commitment to reside at least ten years in the commune, specifies the president. The minimum amount of their investment is set at 200,000 francs. It can not be a second home. Real estate complexes of investor groups are excluded from the offer.

    Tour Albinen from above:

    The village’s local newsletter explains why officials want to pay outsiders to live in their community,

    It is an investment in the village’s future, adding that the community will profit from the new families through taxes, construction contracts and purchases in the village shop, while young people will bring life back to the village. In a best-case scenario, even the village school will reopen.  

    Thomas Egger, director of the Swiss Association for Mountain Regions (SAB) said, “the rural exodus is an insidious phenomenon that spans several decades. The only closure of a post office is not yet a warning signal, but when the last store, the last restaurant closes, the doctor has no visit, the situation becomes dramatic”.

    Over the years, many mountain municipalities have implemented creative measures to attract new residents. Several municipalities have, in the past, offered rebates for the purchase of land or housing. Some municipalities offer public transportation or even discounts for goods and services to new residents.

    In a poll, one Swiss Newspaper asked: “would you be ready to settle in Albinen against 70,000 francs?” The overwhelmingly response of 3,257 participants was – No.

    Perhaps in a preview of things to come, mountain regions in Switzerland offering cash for outsiders to live in their communities is an act of desperation and demonstrates demographic dysphoria is full steam ahead in the western hemisphere. It’s only a matter of time before larger municipalities take note and offer similar packages. We think this could be useful in the United States for cities like Baltimore and Detroit where population totals have hit record low levels.

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Nov 25

Today’s News 25th November 2017

  • RT & Michael Flynn: Is That The Case Mueller Is Going To Make?

    Authored by Alexander Mercouris via TheDuran.com,

    With every other attempt to put together a convincing Russiagate case having failed – the indictments against Manafort, Gates and Papadopoulos make no allusion to the collusion allegations at the heart of it, and the FBI has now admitted to Congressional investigators that it cannot verify the Trump Dossier, the document which appears to have triggered the whole inquiry – it seems that the pressure is now increasingly on Michael Flynn.

    Shortly after the indictments against Manafort, Gates and Papadopoulos I speculated that an indictment against Flynn might be pending.  News that his lawyers have broken contact with the President’s lawyers hardens that suspicion.  There are also rumours that Special Counsel Mueller may also be considering an indictment against his son.

    The trouble is that nothing that is known about General Flynn’s activities during the 2016 election campaign give any reason to think that he was involved in any sort of illegal collusion with the Russians.

    The only case that can convincingly be made against him is that he failed to register under FARA in connection with paid lobbying work he did for a foreign government.  However the government in question is Turkey not Russia.

    I wonder whether this may explain the otherwise highly oppressive and legally dubious decision to force RT to register under FARA as a foreign agent?

    Flynn did appear on RT on a number of occasions, and did attend an RT dinner where he was famously photographed sitting at the same table as President Putin. 

    He also received payments from RT, though there were quibbles between him and RT over the amount.

    Could it be that the intention is to claim that since RT is a foreign agent – an agent of the Russian government no less – Flynn is also in breach of FARA and/or his disclosure obligations to the Pentagon because he did not register or properly disclose his dealings with RT?

    Whilst that would on the face of it be an attempt to use the FARA legislation retrospectively – a legally highly dubious practice, to put it mildly – it might make some sense of the otherwise legally highly questionable decision to force RT to register as a foreign agent.

    There is a further possibility.  Back in January when the 6th January 2017 ODNI report was published I speculated that the long seven page appendix about RT that was mysteriously attached to it might suggest that the US intelligence community has convinced itself that RT was in some way the intermediary the Russians used to provide the DNC and Podesta emails to Wikileaks.

    After all Julian Assange has had a programme on RT and RT – along with many other stations – covered the story of the DNC and Podesta leaks heavily.  It is not difficult to see how in the present hysterical atmosphere someone might have put all these facts together and come to some completely erroneous conclusions which are not supported by evidence.

    I say the last because as I have pointed out previously, former FBI Director James Comey has in effect admitted that the FBI and therefore presumably Special Counsel Mueller’s investigators actually have no idea how the emails reached Wikileaks.

    If this is indeed what is going on then it is legally and ethically highly dubious.  However this has been the consistent pattern of the whole Russiagate investigation from the start.

    It is now clear that it was used to place members of the Trump campaign under surveillance, and has since morphed into what looks like an increasingly desperate attempt to justify this conduct.

    Given the high stakes, it is not difficult to see how concerns about the retrospective use of legislation might be brushed aside.

  • Afghan War Intensifies: US Stealth Fighters Target Narcotics Production Facilities

    16-years after the Bush administration began military operations in Afghanistan, President Trump has just launched a military campaign of his own using high-tech stealth fighters to bomb drug labs in the country.

    The Pentagon’s playbook of nation building in the Middle East has stretched, now, to three Presidents making it the longest war in U.S. history. Ever since the U.S. started occupying the country in the early 2000s, opium production soared. Afghan President Ashraf Ghani said without drugs, the war in Afghanistan “would have been long over.”

    In 2017, Afghanistan’s opium crop and production both hit a record high, despite the increased efforts by government to stop the drug trade. For the Taliban and other criminal elements in the region, opium is an important revenue source to fund operations.

    On Monday, the Defense Department said it unleashed F-22 Raptor stealth fighters to bomb narcotic production facilities in southern Afghanistan targeting the revenue streams of the Taliban. The air operation started on Sunday and continued through Monday. The F-22s were accompanied by B-52 bombers and Afghan A-29 Super Tucanos for additional support to expand the strike mission.

    According to the Washington Post,

    This represents the first significant use of new legal authorities granted by the Trump administration in August that enable the Pentagon to target Taliban revenue streams, said Army Gen. John W. Nicholson Jr., the top U.S. commander in Afghanistan.

     

    Previously, the U.S. military conducted strikes only when facing imminent threat or working directly with the Afghans. 

    Nicholson said, the F-22 “was used because of its ability to deliver precision munitions — in this case, a 250-pound bomb, small-diameter, that causes the minimal amount of collateral damage.” The objective for more precise munitions comes at a time where civilian deaths in U.S. airstrikes have been heavily scrutinized. Earlier this month, U.S. airstrikes in the region killed ‘at least 13 civilians’ in a bombing raid.

    “This target was also a Taliban narcotics production facility in Musa Qala. So I want to draw your attention — as you look at this strike, you’re going to see that inside this compound are multiple structures, and we destroy only two of them, while leaving the third standing, which we do to avoid collateral damage,” Nicholson said.

    The Drug Enforcement Administration estimates there are 400 to 500 narcotic production facilities across Afghanistan. In the latest strike about 10 of them were taken out. The concentration of strikes resided in the Helmand province, an area where Taliban hold strong control.

    Opium cultivation change in Afghanistan 2015/2016 shown on the chart below indicates a rapid increase in the northern tier of the country.

    More details of the operation per The Washington Post,

    The strikes Sunday hit seven Taliban drug laboratories and a headquarters in three districts across northern Helmand. Three occurred in Kajaki district, four in Musa Qala and one in Sangin — all areas controlled by the U.S. military at the height of Obama’s troop surge there. The largest, carried out by a B-52, struck a opium-processing facility where 50 barrels of drugs were cooking at the time, Nicholson said. Video released by the Pentagon shows the building being consumed by a massive fireball.

     

    The U.S. government has pursued various anti-drug strategies during its 16-year war in Afghanistan, but it has done little to hamper the steady resurgence of opium poppy cultivation and drug trafficking since the Taliban’s fall in 2001. While in power before the U.S. invasion, the Taliban banned poppy growing as un-Islamic and staged bonfires of confiscated opium and heroin.

     

    Until now, though, those U.S. efforts have not directly involved the military. During the early post-Taliban years, the Pentagon focused exclusively on pursuing al-Qaeda and Taliban insurgents and expressly avoided diverting efforts toward curbing the drug trade. In some cases, this was because of U.S. alliances with warlords or regional strongmen who were involved in drugs.

     

    Later, as both poppy production and drug trading rebounded, the U.S. launched several ambitious programs to counter them. One was a crop substitution campaign that encouraged and paid farmers to grow almonds, apricots, green vegetables and saffron instead of poppy. Another paid farmers cash to destroy their poppy fields and funded interdiction campaigns in which Afghan security forces burned fields under cultivation.

     

    These efforts were fatally hampered by a mix of factors, including the enormous appeal of drug profits, the long-accepted tradition of poppy growing by small farmers, the involvement of powerful Afghans in the trade, local hostility to interdiction, and the hardiness that enabled poppy plants to thrive in harsh and dry conditions.

     

    Meanwhile, the Taliban insurgents, apparently abandoning their previous religious scruples, became increasingly involved in both poppy cultivation and drug trafficking as a means of supporting the war, especially in Helmand province. At first they primarily demanded taxes from growers, but gradually the overlap between Taliban recruits and local agricultural labor became so pronounced that the insurgents essentially suspended military operations during poppy harvest seasons.

    In the latest figures from the United Nations, “Afghanistan opium production jumps 87 per cent to record level”… Most of the increase has occurred under the United States occupation of the region.

    It seems as Afghan President Ashraf Ghani is bullish on President Trump’s new campaign to bomb the nation’s narcotic facilities…

    Perhaps in a preview of things to come, Sunday through Monday’s U.S airstrikes in Afghanistan signal the war is about to intensify.

    Stealth fighters and other support aircraft only managed to knockout 10 narcotic facilities and as the report states there are about another 400-500 to go.

     

  • Doug Casey On Why Race Will Break America Apart, Part II

    Via CaseyResearch.com,

    Today, Doug and I continue our conversation on why the U.S. could dissolve over time. Doug says the problems are all bubbling to the surface…and when the U.S. eventually breaks apart “it will not be peaceful.” (If you missed Part I, you can catch up right here.)

    Justin: What about political tensions? Because, as I’m sure you’ve seen, the far-left and far-right are becoming more and more antagonistic. In some cases, they’ve even become violent towards each other.

    Could radical political ideologies cause the country to break apart?

    Doug: Yes, I think so.

    In the late ‘60s and the early ‘70s, hundreds of bombings took place at universities, banks, and all kinds of places. The National Guard was in cities like Detroit during the riots, and they were raking buildings with .50 caliber machine guns. It was wild.

    I don’t think most remember this. At least, I don’t see it being brought up anywhere.

    I lived in Washington DC then. It seemed like there was tear gas in the air half the time I went out on a date on a Friday or Saturday night.

    But as wild and wooly as things were back then, what we have now is much more serious.

    The racial element is still there, but the ideological element is even more pronounced.

    In those days, people at least talked to each other. You could have a disagreement, and it was a simple difference of opinion.

    It’s much worse now. Today, there’s a visceral hatred between the left and the right, between the people that live in the so-called red counties and blue counties.

    You add that to the racial situation. Then throw in the fact that the rich are getting richer at an exponential rate while the middle class is disappearing.

    And let’s not forget the large-scale subsidized migration of people from totally alien Third World hellholes. This is not what the U.S. was founded on. Before changes in the immigration law that were made in the ‘60s, immigrants were culturally compatible opportunity seekers that were coming to America to improve themselves.

    Now, people from all kinds of alien places are being imported by the hundreds of thousands by NGOs; they then go on welfare in enclaves in different places around the country. This is unlikely to end well. The U.S. is no longer a country.

    That said, I’m actually for open borders. But it’s only possible if, A, there is zero welfare to attract the wrong types. And, B, all property was privately owned, to help ensure everyone is self-supporting.

    Justin: But Doug, aren’t you against large nation states? Would the Divided States of America be better?

    Doug: Absolutely. In my ideal world, there would be approximately seven billion little nation states on the planet, all of them independent.

    It would be excellent if the U.S. split into smaller entities, where the people that lived in these entities shared more in common with each other.

    And let me go further. I think it was a mistake for the U.S. to have come together with the Constitution of 1789. The Articles of Confederation should have stayed in existence, with a few modifications. The Constitutional Convention of 1789 was actually a coup. A successful, non-violent coup. Most people didn’t really care because the government was such a trivial factor in their lives in those days.

    I’m just afraid that when the U.S. breaks up, which inevitably it will, it may not be peaceful. The existence of the USA—which is now just one of 200 other nation states, no longer anything special—is not part of the cosmic firmament. The original founding ideas of America expressed in the Declaration of Independence have been lost, washed away. The absence of those principles is why I say it’s going to come to a bad end.

    Justin: Do you think the United States will dissolve over time? Or will something set this in motion, possibly a financial or economic crisis?

    Doug: An economic crisis always brings things to the fore.

    When the standard of living is dropping, the government inevitably finds somebody or something to blame…anything other than itself.

    Usually, they point the finger at foreigners. But if you get the wrong people in the government, they can point fingers at domestic enemies, the way the Germans did with the Jews in the ‘30s, or the way the Soviets did with the kulaks at the same time. Or the way the Chinese did with its enemies of the State under Mao. There are many, many other examples. Political power attracts the worst kind of people—and then brings out the worst in them.

    Economic turmoil causes social turmoil and political turmoil. And one of the things that scares me most is that if things get spooky within the U.S., people in the government will try to find a foreign enemy in order to “unite” the country.

    Incidentally, I don’t feel that uniting the country is necessarily a good idea. It all depends on which direction they’re united towards, and united against what. And do the people of the United States have enough in common anymore to even be united? I think not, in an age of multiculturalism.

    There are a lot of problems, and they’re bubbling to the surface. When the economy gets bad, which it will, I think the pot will boil over.

    *  *  *

    As Doug says, America’s problems are coming to a head. Unfortunately, most investors aren’t prepared for what’s coming. That’s why Doug and his team just released this urgent video that explains everything you need to know about the crisis that’s about to make landfall…and why you need to take action today. Click here to watch it now.

  • The Party's Over For Australia's $5.6 Trillion Housing Frenzy

    Early this month, we discussed whether the world’s longest running bull market – 55 years – in Australian house prices had come to an end. This was UBS’s view following the October 2017 monthly report on Australian house prices from CoreLogic suggested that measures to tighten credit standards and dissuade overseas buyers (especially Chinese in Sydney and Melbourne) have finally begun to bite. As CoreLogic’s summary table shows, Sydney prices fell in October, for the second month running, and poised to lead national prices lower.

    We followed up that discussion with “Why Australia’s Economy Is A House Of Cards” in which Matt Barrie and Craig Tindale described how Australia’s three decades long economic expansion had mostly been the result of “dumb luck”.

    As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

    Now Bloomberg has followed UBS in calling the end of the bull market, while showing some of the frankly scary metrics for Australian housing versus the country’s GDP.

    The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come. After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.

    Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.

    One thing which should slow Australian property prices on the way down is that the Governor of the Reserve Bank of Australia (RBA), Philip Lowe, is still in no rush to raise rates. However, his hands are tied…and he knows it…as Australia’s New Daily reported.

    “In striking the appropriate balance in our policy setting we have paid close attention to trends in household borrowing given the already high levels of debt.”

     

    Over the past four years, household borrowing has increased at an average rate of 6.5 per cent while household income has increased at an average rate of just 3.5 per cent, he said. An area of particular concern for Dr Lowe is the slow growth in household incomes. Over the past four years, nominal average hourly earnings have grown at the slowest rate in “many decades”.

     

    “This means that borrowers haven’t been able to rely on rising incomes to reduce the real value of the debt repayments in the way they used to,” he said.

    Here’s Bloomberg on the same theme.

    Aussie households have racked up record private debts and aren’t getting the pay rises to help service them. That’s a core concern for the RBA and frequently cited as a deterrent for hiking interest rates. Macquarie Bank has said such debt levels mean any hikes will have triple the impact on consumers than tightening cycles in the mid-1990s. With retail sales looking grim and wage growth near record lows, debt will likely vex policy makers for years.

    Of course, as Bloomberg notes, the RBA is pointing out the resilience of the Australian financial system should it be hit by any shocks…somewhat reminiscent of Ben Bernanke prior to the sub-prime crisis.

    So far, the Reserve Bank of Australia has relied on banking regulators to apply the brakes with lending curbs. It reckons the financial system is well-placed to withstand any shocks, but isn’t so confident on consumers.

    The banks didn’t fare so well in the 2008 crisis, nor will they in an Australian housing crisis. Bloomberg continues.

    On one hand, the dizzy valuations reflect a desirable location and strong population growth. But they also reflect the massive liabilities that are now tied to these assets. “The risk is that it leaves the Australian economy extremely exposed, and a minor shock could become far more significant,” said Daniel Blake, an economist at Morgan Stanley in Sydney.

    The increasing treatment of housing as a financial commodity has seen borrowers rush into a byzantine maze of mortgage-related products. That’s made banks very profitable, but very exposed. While the RBA is satisfied that lenders have adequate buffers to cope with any downturn, banks may find it harder to value their collateral in a falling market as investors look to consolidate their portfolios of multiple homes, said Blake.

    Meantime, aside from tighter lending standards and fewer overseas buyers, the major Australian cities are poised to see a wave of new supply, especially apartments – as this chart shows.

    As you’d expect, even that is not something that will change the rhetoric from the central bank, as Bloomberg notes.

    While cranes dot the Sydney skyline for miles, the central bank remains confident that population growth will eventually fill all those new apartments. Its worries about a Melbourne glut have eased off recently, with the main concern in the Brisbane market, where peak completion is expected this year, capping a three-year period in which the number of apartments has increased by more than a third. Overseas buyers comprise up to 15 percent of new dwelling purchases nationwide, according to the RBA.

    Having called the end of Australia’s housing boom, UBS notes.

    “The cooling may be happening a bit more quickly than even we expected.”

  • The End Of The Age Of Benevolence

    Authored by Francis Marion of CanadianGunBlog.com, via Jim Quinn's Burning Platform blog,

    The history of democracy, Marxism and feminism is the history of the snake, which, being hungry for more, stalks its own tail and consumes itself.

    Some evenings I sit on the sofa in the family room with my teenage daughter and watch a TV program with her. I leave the choice of the show to her, it matters little to me, and when she finds something she likes she sits next to me, puts her head on my shoulder, and snuggles up for the hour it takes to watch whatever it is she’s chosen.

    It’s our time.

    Occasionally we’ll sneak in another twenty or thirty minutes to the objection of her mother but I like my time with her so I put up with the raised eyebrows and the, “She’s got school tomorrow,” scoldings. It’s important to me that she knows I love her, that I want to spend time with her and that she feels safe when she is with me. Someday, when she is a grown woman I want her to find a man that will take care of her and protect her like I do. I expect no less from a suitor and neither should she.

    There will be women who read this who will object to my stance. They will say, “She doesn’t need a man to feel safe or validated or content,” but I would disagree. When she gets older she’ll need a good man, not just any man, and that’s as true today as much as it was ten years, twenty years, fifty years, one hundred years and even one thousand years ago. And it will become even more so as time goes on.

    Indeed, we have reached peak denial in our civilization and whether we like it or not reality is about to make a come back.

    The freedom that we have enjoyed in the west and the modern democracies that have sprung forth from our evolving and enlightened philosophies over the past few hundred years are not a given. Granted, they are preferable outcomes given our natural state but politically speaking they are an anomaly in the history of mankind and not the norm.

    As such, democracy and the systems, social structures and institutions that have grown up around them are grossly misunderstood by the vast majority of the western world. Most of the people living in the west today have been raised to believe that democracy is a moral system of governance and that it is our gift to the rest of mankind. But democracy is not an inherently moral system nor is it a guarantor of linear, progressive political growth.

    At its root democracy is quite simple. It is the exercise of political power by the majority over the minority. It is the power to choose in matters of politics. This, of course, begs the question: to choose what?

    Since choices in general (and political ones are no exception) can be either good or bad, in this case, both for the individual and the body politic, then it follows that democracy is neither. It is nothing more than a tool for decision making where the majority holds the power to make decisions that affect everyone, either for better or for worse. Democracy is, therefore, a reflection of the character of the people who exercise it.

    Additionally, democracy is also the use of soft force. That is, the minority bends to the will of the majority on political matters and the apparatus of the state is responsible for carrying out its demands. The minority consents, willingly or unwillingly not because violence is present but because, by the state’s presence, it is implied.

    More importantly, though, democracy is a luxury that is preceded by benevolence but does not necessarily guarantee its continuance or creation if forgotten.

    Societies in a state of internal turmoil, or where competing factions vie for political power, often through the use of overt physical violence, will forgo democracy because the primary component for its exercise, order, is absent.

    Democracy in the western world has always followed ‘order’. ‘Order’ is a byproduct of force and, like democracy varies in severity on the scale of good and bad, its moral leanings by and large being dependent on the type of people who impose it from the top down. It can be fatherly and benevolent or it can be violent and oppressive. It is never universally both.

    Thus democracy usually occurs where ‘order’ has been established and the apparatus of the state is at least somewhat benevolent.

    In a political world ruled by strength, order and benevolence are precursors to suffrage. Without either suffrage would not exist, choices would be limited and brute strength would still be the order of the day.

    Whether feminists are willing to admit it or not, brute, physical strength is at the root of all political power, thus feminism came into being because those who held that strength chose to exercise benevolence and reason over strength and subjugation. Their suffrage was dependent first and foremost on the benevolence of those who held political power. And like it or not, those who held political power at the time it was introduced were men.

    As time progressed, at least in the West, democracy, and universal suffrage gave way to both physical and intellectual freedom for women. In the West during the twentieth century, its political structure (and the intellectual values it embodied) and the industrial revolution it spawned ushered in a new era for women, giving them choices they had not previously had, by and large, since the beginning of recorded history.

    Women were finally free to choose between family, career or both. Rather than playing the role of the weaker, subservient sex women found their place beside men in society as intellectual equals. Physical strength was no longer a factor in the social structure of our civilization. An intellectual meritocracy came to be valued over a system based simply on brute force. This structure was the product of order created from benevolent strength.

    But the rise of Marxism and feminism, particularly the rise of third-wave feminism has put ‘order’ at risk.

    Without order, an intellectual meritocracy will once again become subservient to strength. It’s a hard pill for women and progressive liberals in general to swallow but it’s a fact.

    Marxism and modern feminism work continuously towards a perfect world but ignore reality in the process. They forget an important lesson, born true repeatedly throughout history:

    There is no utopia.

    The best we can hope for in any civilization is for a society to be built and based on fundamental individual rights and freedoms. If we refuse this then we return to what we were before. This means rule by brute force which means the end of political and legal equality for women and the death of democracy itself.

    The irony in the dilemma which the West now faces is that our demise, the continual erosion of a democratic, intellectual meritocracy, is by and large spurred on by the very people that our system was created to protect.

    Feminists, both female and male, cry daily for more of the same poison which infects us.

    More illegal and unscreened immigration. More tolerance of philosophies which are intolerant themselves. More invitations for an enemy created by a corrupt and immoral government to ignore our borders and live among us.

    More cries for moral nihilism, the repression of speech (one of the cornerstones of their own suffrage) and the denial of fundamental biological reality.

    More cries for the denial of basic math and the continuance of government-sponsored bread and circuses. More of everything which our civilization cannot sustain. More of everything which rots us from the core.

    Subsequently, modern feminists decry the men of their own civilization as misogynists, racists, and intolerant while forgetting it was their own men who recognized that a society built on equal political rights for all was preferable to a society built on spoils taken by the strong.

    They forget that it was the men they live among who valued justice over greed and force so much that they shed the old ways and took their place beside their women instead of in front of them. They do all of this while cheering on the invasion of their own countries by foreign men who view them as nothing more than chattel property. In doing so they have unwittingly invited the destruction of their own freedom.

    While I sit next to my daughter I wonder what the future will hold for her. I have no desire to see her disenfranchised but the reality is that many of her own kind have chosen a future where reason has been rejected and instead, traded for thirty pieces of silver and whatever makes them feel good. Unfortunately, a world without reason is a world without order which is a world without choice. A world without choice is a world of brute force. And that’s a man’s world.

    Ironic.

    Benevolence and democracy should have ushered in an era of truth and reason but instead, they ushered in an era of denial and wishful thinking. Thus, democracy’s beginning will also be its end. What came from force will return to it.

    For those of you paying attention and who can see the contradictions and the resultant decay, pray. Pray that what comes afterward will once again be benevolent.

  • "This Is A Paralyzed Market": Hedge Fund Turnover Drops To All Time Low

    Back in July, Canaccord analyst Brian Reynolds put out a contrarian piece which broke with numerous conventional wisdom norms about the state of the market, key among which was that traders are not complacent, but rather – in light of collapsing trading volumes, something which has plagued bank income statements in the past 2 quarters – simply paralyzed, as they no longer have a grasp of financial “logic” when it is all superceded by central bank liquidity injections, and as such most trades feel fake, forced and just part of the FOMO charade to avoid losing one’s job.

    As Reynolds explained, “Investors are not complacent. Their stances range from extremely aggressive to bearish” and added that these “opposing forces have led to a compression of volatility. When stocks have rallied strongly, they have then been met with investor selling. When stocks sell off, the buybacks have picked up after the selling runs its course. That has been the case for more than eight years. Those forces have led to an equity bull market that moves higher in fits and starts, with some brief pullbacks from time to time. Given the positioning of equity investors and continued flows into credit, we do not see that pattern changing for some time.” Meanwhile, sandwiched inbetween these two trends, investors – both retail and institutional – find themselves in trade limbo, and the outcome is a gradual decline in trading volumes “which is more reflective of paralysis than complacency among equity investors.”

    And while one can posit theories explaining this bizarre market until one is blue in the face, the most vivid confirmation of Reyonld’s “paralysis” thesis emerged in the latest batch of hedge fund 13Fs, which was analyzed by Goldman earlier this week, and noted here in “These Are The Top 50 Hedge Fund Long And Short Positions.”

    In the report, Goldman highlighted various notable outliers, such as the latest record high in hedge fund leverage…

    … coupled with the recent plunge in short interest (which as a share of S&P 500 market cap sits just below 2.0%, matching January of this year as the lowest level since 2012)…

    … even as hedge fund “crowding” in a handful of top names hits an all time high:

    But the most interesting to us, and the hedge fund community, we believe is the following chart, which shows that hedge fund portfolio turnover continued its downward trend and reached a new record low in the third quarter Across all portfolio positions, turnover registered 26% in 3Q. Turnover of the largest quartile of positions, which make up the vast majority of fund portfolios, fell to just 13%.

    This means that once hedge funds have established positions, they no longer trade in and out, but simply lean back and let it ride. And why not: with the most popular hedge fund positions this year being also the best performing ones, namely Facebook, Amazon, Alibaba, Alphabet and Microsoft, why ever both selling.  Indeed, as the next chart shows, the bulk of the collapsing turnover is largely due to tech stocks:

    Of course, this strategy of loading up on winner and letting them ride is a two-edged sword. while it is the best strategy on the way up, it also becomes a quasi private equity strategy, in which the price formation is created on the margin with increasingly less volume. And, since such tech holdings are becoming ever more illiquid, the threat is what happens once the narrative shifts and instead of buying, hedge funds start to sell these most concentrated of growth names. One could say that a tech selloff is emerging as one of the more concerning black – or at least gray – swans in the market. In fact, we are did say just that…

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  • As America Gave Thanks, Homelessness Set New Records In Major Cities All Over The Nation

    Authored by Michael Snyder via The Economic Collapse blog,

    If the economy is doing just fine, then why is homelessness at levels not seen “since the Great Depression” in major cities all over the country? 

    If the U.S. economy was actually in good shape, we would expect that the number of people that are homeless would be going down or at least stabilizing.  Instead, we have a growing national crisis on our hands.  In fact, within the past two years “at least 10 cities or municipal regions in California, Oregon and Washington” have declared a state of emergency because the number of homeless is growing so rapidly.

    Things are particularly bad in southern California, and this year the Midnight Mission will literally be feeding a small army of people that have nowhere to sleep at night…

    Thanksgiving meals will be served to thousands of homeless and near-homeless individuals today on Skid Row and in Pasadena and Canoga Park amid calls for donations and volunteers for the rest of the year.

     

    The Midnight Mission will serve Thanksgiving brunch to nearly 2,500 homeless and near-homeless men, women and children, according to Georgia Berkovich, its director of public affairs.

    Overall, the Midnight Mission serves more than a million meals a year, and Berkovich says that homelessness hasn’t been this bad in southern California “since the Great Depression”…

    Berkovich said the group has been serving nearly 1 million meals a year each year since 2013.

     

    “We haven’t seen numbers like this since the Great Depression,” she said.

    And of course the official numbers confirm what Berkovich is claiming.  According to an article published earlier this year, the number of homeless people living in Los Angeles County has never been higher…

    The number of homeless people in Los Angeles has jumped to a new record, as city officials grapple with a humanitarian crisis of proportions remarkable for a modern American metropolis.

     

    Municipal leaders said that a recent count over several nights found 55,188 homeless people living in a survey region comprising most of Los Angeles County, up more than 25% from last year.

    If the California economy is truly doing well, then why is this happening?

    We see the same thing happening when we look at the east coast.  Just check out these numbers from New York City…

    In recent years the number of homeless people has grown. Whereas rents increased by 18% between 2005 and 2015, incomes rose by 5%. When Rudy Giuliani entered City Hall in 1994, 24,000 people lived in shelters. About 31,000 lived in them when Mike Bloomberg became mayor in 2002. When Bill de Blasio entered City Hall in 2014, 51,500 did. The number of homeless people now in shelters is around 63,000.

    For New York, this is the highest that the homeless population has been since the Great Depression, and city leaders are trying to come up with a solution.

    Meanwhile, things are so bad in Seattle that “400 unauthorized tent camps” have popped up…

    Housing prices are soaring here thanks to the tech industry, but the boom comes with a consequence: A surge in homelessness marked by 400 unauthorized tent camps in parks, under bridges, on freeway medians and along busy sidewalks. The liberal city is trying to figure out what to do.

    Are you noticing a theme?

    Homelessness is at epidemic levels all over the U.S., and this crisis is getting worse with each passing day.  Some communities are trying to care for their growing homeless populations, but others are simply trying to force them to go somewhere else.  They are doing this by essentially making it illegal to be homeless.  In some cities it is now a crime to engage in “public camping”, to “block a walkway” or to create any sort of “temporary structure for human habitation”.  These laws specifically target the homeless, and they are very cruel.

    Many of us tend to picture the homeless as mostly lazy older men that don’t want to work and that instead want to drink or do drugs all day.

    But the truth is that women and children make up a significant percentage of the homeless.

    In fact, the number of homeless children in our country has increased by about 60 percent since the end of the last recession.

    And there are thousands upon thousands of military veterans that are homeless.  For example, a 34-year-old man named Johnny that served in the Marine Corps recently used his last 20 dollars to buy fuel for a woman that had run out of gas and was stranded along I-95 in Miami…

    Pulled over on the side of I-95, McClure, 27, was approached by a homeless man named Johnny. She was apprehensive at first, but Johnny told her to get back into her car and to lock the doors while he walked to get her help. He went to a nearby gas station, used his last $20 fill a can and brought it back to fill up her car.

     

    Grateful, but without a dollar to repay him, McClure promised she would come back with something.

     

    In the weeks since, she’s returned to the spot along I-95 where Johnny stays with cash, snacks and Wawa gift cards. Each time she’s stopped by with her boyfriend, Mark D’Amico, they’ve learned a bit more about Johnny’s story, and become humbled by his gratitude.

    Deciding that they wanted to do even more for Johnny, they started a GoFundMe page for him and have since raised approximately $250,000.

    So it looks like there is going to be a happy ending to Johnny’s story, but the truth is that more people are falling into homelessness with each passing day.

    If things are this bad now, how much worse will they become as the economy really starts slowing down?  Already, we have shattered the all-time yearly record for retail store closings, and we still have more than a month to go.  The following is from a CNN article entitled “Is This The Last Black Friday?”…

    A record number of store closures – 6,735 – have already been announced this year. That’s more than triple the tally for 2016, according to Fung Global Retail and Technology, a retail think tank.

     

    And there have been 620 bankruptcies in the sector so far this year, according to BankruptcyData.com, up 31% from the same period last year. Prominent names such as Toys R Us, Gymboree, Payless Shoes and RadioShack have all filed this year, and Sears Holdings (SHLD), which owns both the iconic Sears and Kmart chains, has warned there is “substantial doubt” it can remain in business.

    Sadly, analysts are projecting that the number of store closings could be as high as 9,000 next year.

    Yes, there are some areas of the country that are doing well right now, but there are many others that are not.

    Let us always remember to have compassion on those that are struggling, because someday we may be the ones that end up needing some help.

    *  *  *

    Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

  • Automation Nation: America's Largest Employer 'Secretly' Tests Self-Driving Floor-Scrubbers

    Dark and difficult times lie ahead. Soon, America’s middle class must come to the realization that the country’s largest employer–Walmart is quietly testing an army of robots that soon will replace their jobs. The latest installment is an autonomous floor scrubber being tested at five store locations near the company’s headquarters in Bentonville, Arkansas.

    The autonomous cleaning robot dubbed Emma, an A.I. navigated system capable of operating floor care equipment on nightshifts, is able to clean the entire store front without human interaction. San Diego-based startup Brain Corp., works with the Defense Advanced Research Projects Agency (DARPA) to develop novel machine learning algorithms that focus on taking jobs from middle class Americans. BrainOS is the company’s flagship product that enables robots to “perceive their environments, control motion, and navigate using visual cues and landmarks, while seeing and avoiding people and obstacles”.

    A Walmart spokesperson, Kory Lundberg, confirmed to Chip Cutter, Managing editor at LinkedIn, that Walmart was indeed testing the robotic scrubbers, but said it is still in a “proof of concept” phase.

    “We’re always testing new ideas and new technology,” Lundberg said. “We still have a lot more to learn about how this technology will work best for our different retail locations.”

    According to LinkedIn, here are more details documenting the ‘secret tests’ of robotic scrubbers at various Supercenters..

    Multiple employees who work at the retailer’s 24-hour Supercenter in Pineville, Mo., about 20 minutes north of Walmart’s home office, confirmed the use of the device to me this week, saying it had been tested in their store for about a month this fall.

     

    In a private Facebook group earlier this month, someone who claims to be a worker at the Pineville store shared a photo of the greyish vehicle making a turn near a display for $78 deer feeders. No one is seated in the driver’s seat, and two “caution, cleaning in progress” banners are shown on both sides of the device. An ICE logo is also affixed; Holland, Mich.-based International Cleaning Equipment, a Brain Corp. partner, manufactures the scrubbing equipment itself.  

    In October, Walmart said it’s rolling out self-scanning robots in more than 50 U.S. stores to replenish inventory on shelves. The company is determined to automate the daily tasks of its workers, but said the bots would not lead to a drop in headcount.

    With the retail apocalypse in full-swing, “retailers are looking for opportunities to automate processes and stop paying people,” said Richard A. Feinberg, a professor of consumer sciences and retailing at Purdue University, who forecasts automation could save retailers such as Walmart.

    He also noted, “it changes the nature of the jobs; it may not mean fewer jobs, it may mean they can retrain the people to do things that are more useful for them, business wise,” he said. “It wouldn’t surprise me if it reduces headcount, but I don’t know.”

    More importantly, a Walmart spokesperson said “the maintenance team is actually quite ‘excited’ to work with new technology.” What they don’t know is that their jobs will be obsolete in a few years after the 50 state rollout commences. All fun in games today until someone gets a pink slip.

    As Fox News reports, Walmart is not the only company testing this technology..

    According to Phil Duffy, VP of Innovation & Marketing for Brain Corporation, the company is currently working with approximately 50 malls and big box retailers across the U.S.

     

    “We are also in airports, educational campuses, corporate campuses and industrial sites. In addition, we will be launching in Japan, through our partner, SoftBank Robotics, by summer 2018,” Duffy said.  

    In a preview of what’s to come, Brain Corp., funded by DARPA is leading the charge through Walmart, America’s largest employer to automate low skill jobs. The middle class or what is left of them have many dark and difficult days ahead, as we expect this trend to gain momentum in the coming years.

  • More Evidence BoJ Desperate To Steepen Yield Curve

    Two days ago, we highlighted how Bank of Japan officials have been briefing Reuters about reducing its monetary stimulus earlier than markets had been expecting – around 1Q 2018 rather than later in the year. In particular, the yield curve control (YCC) is likely to be eased from the current target of zero percent for 10-year JGB yields. It seems the BoJ became frustrated that markets had failed to respond to his hints about the “reversal rate”, i.e. that central banks can lower rates too far and damage financial institutions and the provision of credit in the economy. The one (former) BoJ official who was prepared to go on the record explained.

    “Reversal rate is a pretty shocking word to come out of the mouth of a BOJ governor. It’s unthinkable the BOJ would insert it in Kuroda’s speech without any policy intention,” said Takahide Kiuchi, who was a BOJ board member until July.

     

    The BOJ may allow long-term rates to rise more by shifting its long-term rate target to five-year yields from 10-year yields around the first quarter of next year, Kiuchi said. “The BOJ could put a positive spin on the move by saying it can more effectively reflate growth by keeping short-term borrowing costs low while allowing longer yields to rise.”

    We might assume that the BoJ is becoming obsessed with steepening the yield curve and we got confirmation of this overnight. A story which flashed up on Bloomberg about the BoJ tapering bond purchases at the super long end.

    BOJ Bond Cut Shows Desire to Steepen Yield Curve: Merrill Lynch

     

    Bank of Japan’s slight cut in buying of bonds maturing in more than 25 years suggests its desire to steepen the yield curve, says Shuichi Obsaki, chief rates strategist for Japan at Bank of America Merrill Lynch.

     

    Yield curve has been flattening of late and the BOJ is probably sending a message that it wants the super-long yield curve to steepen.

    In terms of the mechanics, the BoJ today cut its purchases of bonds maturing in more than 25 years to 90 billion Yen from 100 billion yen at the previous offer on 17 November 2017. This was the first cut since March. JGB yields rose on the news in Friday trading, as Bloomberg reports.

    JGB yields rose across the curve after the BOJ trimmed outright debt purchase in the super long sector.

     

    BOJ reduced purchases of bonds with maturity of more than 25 years by 10b yen to 90b yen; it was the bank’s first cut in the sector since March.

     

    Purchase volume for the 10-to-25-year zone was unchanged at 200b

     

    JGB futures closed regular day down 0.13 at 151.02; key futures suffered the biggest intraday loss since Oct. 2, losing as much as 0.21

     

    10-year cash bond yield rises 0.5bp to 0.025%; 20-year yield gains 1bp to 0.57%; 30-year climbs 2.5bps to 0.830%

     

    Falls in JGB futures were exaggerated by sharp rise on Wednesday

    It appears that the BoJ had become panicked by the yield curve flattening after reports that the government might reduce the issuance of super-long bonds in the next fiscal year, i.e. to March 2019. On Wednesday, there was a meeting between officials from Japan’s Ministry of Finance and primary dealers to discuss the plans for issuance in the next fiscal year.

    While inflation is remains far below its 2% target, the BoJ is being forced into a policy reversal due to the damage its NIRP/ZIRP policy is doing to the financial sector. However, it’s portraying its defeat as  a victory via the supposed reflationary signalling of steepening yield curve. It’s utter nonsense and a shameful reflection on the depths which central bankers will stoop to.

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Nov 24

Today’s News 24th November 2017

  • 2nd Largest Gunmaker Nears Default As Americans Buy Fewer Firearms Post-Obama

    2017 has seen the biggest drop in American firearms sales in history.

    After 8 years of almost incessant rises in NICS Firearms Checks (a proxy for 'legal' arms sales) under President Obama…

    source: NICS

    2017 has seen a considerable drop (year-to-date) – the biggest on NICS records…

    source: NICS

    This sudden drop in demand after President Trump's election has meant Remington Outdoor, the second-largest U.S. gunmaker, has suffered a “rapid” and “sharp” deterioration in sales and a similar drop in profits since January, and faces “continued softness in consumer demand for firearms,” according to credit analysts at Standard & Poor’s Global Ratings.

    As Philly.com's Joseph DiStefano reports, S&P cut the company’s corporate credit rating – already at a junk-bond-level CCC+ – two full notches, to CCC- as:

    …a backlog of unsold, unwanted firearms will force Remington to operate at a loss and “pressure the company’s sales and profitability at least through early 2018, resulting in insufficient cash flow for debt service and fixed charges,” unless Remington gives up cash to pay for ongoing operations.

     

    S&P expects “a heightened risk of a restructuring” of Remington’s $575 million senior secured loan and asset-based lending facility, which it is supposed to pay back in 2019.

     

    If Remington defaults on its payments, based on the company’s current value, S&P expects first-lien creditors may receive around 35 cents back from every dollar they have lent or invested. Lower-rated creditors would get back less, or nothing.

    While the report said that default is not yet "a virtual certainty," judging by the collapse in Remington's bond prices this week… the market is pretty sure.

    And while Remington is not public, it is not alone in pain as shown below…

  • The Public Are All Alone: Understanding How The Enemy Of Your Enemy Is Not Your Friend

    Authored by Eric Zuesse via The Strategic Culture Foundation,

    In political matters, the public are taught to believe that some political Party is ‘good’, and that the others are “bad”; but the reality in recent times, at least in the United States, has instead been that both Parties are rotten to the core (as will be clear from the linked documentation provided here).

    Belief in this myth (that the opposition between Parties is between ‘good’ ‘friend’ versus ‘bad’ ‘enemy’) is based upon the common adage that “The enemy of my enemy is my friend.”

    One side is believed, and ones that contradict it are disbelieved – considered to be lying, distorting: bad. But, maybe, both (or all) Parties are deceiving; maybe all of them are enemies of the public, but just in different ways; maybe each of them is trying to control the country in the interests of (and so to obtain the most financial support from) the aristocracy, while all of them are actually against the public.

    Can it really be false that “The enemy of my enemy is my friend?”

    Not only can be, but often is. And no one is able to vote intelligently without recognizing this fundamental political fact.

    It’s true between entire nations, too – not only within nations.

    For example: Hitler and Stalin were enemies of each other, but neither of them was a friend of America (except that Stalin did more than anyone else to defeat Hitler, and thereby saved the world, though the U.S. — far less a factor than the U.S.S.R. was in defeating Hitler — still refuses to acknowledge the fact that Stalin did more than anyone else did to prevent the entire world’s becoming dictatorships; so, whatever democracy exists today, is a result of that dictator, Stalin, even more than it’s a result of either FDR or Churchill). 

    What about internally, then?

    Hillary Clinton and Donald Trump became enemies of each other, but neither of them had ever really been a friend of the American public: both of them were instead liars who would, and did, do everything they could to grab control (on the aristocracy’s behalf, who financed their respective campaigns) over what is supposed to be our Government, in a democracy. That’s just a sad fact about reality, which both of America’s political Parties deny (because they both need those voters, not merely those mega-donations; they need the public to believe that the Party cares about them).

    Most of the American public have been successfully deceived by the ‘news’media, and by the ‘history’-books (likewise published by agents for the aristocracy), to believe that the U.S. Government serves the public-interest, and not the interest of the centi-millionaires and especially billionaires, who finance political campaigns. But it’s no truer than it’s true that the enemy of your enemy is necessarily your friend: both enemies of each other can be your enemies, too. The difference here is that the enmity between the aristocracy and the public is basically intrinsic, whereas the enmities between (Republican versus Democratic, or any other divisions between) aristocrats, are basically personal — these are matters of business, instead of matters of state. They are, in a sense, different business-plans — competing business-plans. But they are all assisting the aristocracy, to control the public, so as to advance the interests of the aristocracy. They’re all competing for the aristocracy’s support, and deceiving for the public’s support. Two blatant recent examples displaying this were America’s invasion in 2003 that destroyed Iraq, and America’s invasion in 2011 that destroyed Libya. Did either of those invasions advance the interests of the American public? But the owners of Lockheed Martin and other ‘defense’ contractors blossomed after 9/11. In fact: U.S. arms-exports are at record highs. 

    The now-proven reality in America is that the U.S. Government really does represent those billionaires and centi-millionaires, and not the public. It’s a now-proven reality, that the U.S. isn’t a democracy but a dictatorship – albeit, a two-Party one, with a real competition between billionaire and centi-millionaire Republicans on the one hand, versus billionaire and centi-millionaire Democrats on the other. But all billionaires and centi-millionaires are takers (that’s how they came to be super-rich, even the ones who didn’t inherit it from their parents), who (notwithstanding any ‘charity’ they may establish to avoid taxes while extending their control) receive from the public far more than they give to the public; and, so, there is actually an intrinsic class-war — not at all like Karl Marx famously said, between the bourgeoisie (including small-business owners) versus the proletariat (including some centi-millionaires and billionaires who became super-wealthy from being movie-stars or athletic stars and who don’t necessarily actually control any business at all, and so they’re “proletariats”), but instead between the aristocracy versus the public: the ancient and permanent class-conflict. It’s the entire aristocracy-of-wealth (which is maybe half of the nation’s wealth) that’s arrayed against the public (the poorer 99+% of the people). (In fact, Marx — the promoter of the view that the bourgeoisie are the public’s enemies — had aristocratic sponsors, and he would have remained obscure and died poor, if he had instead blamed the aristocracy, not “the bourgeoisie” — which is mainly the middle class — as being the exploiting-class. Marx, too, was an agent of aristocracy. He succeeded and became famous because he had aristocratic sponsors. Otherwise, his name would have simply been forgotten.)

    Anyway, the American public are now alone. No Government represents our interests. It’s now been proven that America’s Government doesn’t represent us; and it’s not even the business of any other Government in the world to represent us; so, no foreign government does, either. No Government represents us.

    In order to understand any aristocracy, one must understand what gives rise to almost all wars, because almost all wars throughout history have been between contending aristocracies – between the aristocracies of different nations. Each aristocracy needs to be able to fool its national public, to believe that they’re fighting against the foreign public, when, in fact, they’re fighting against the foreign aristocracy, and they’re fighting for the home-nation’s aristocracy – they are, almost always, fighting for one aristocracy, against another aristocracy. Any public who would know that this is the reality, would just as soon commit a democratic revolution, against the local aristocracy, as go to war for the local one, against the foreign ones. This is the reason why, in every dictatorship, the local centi-millionaires and billionaires buy up all of the ‘news’media that inform, or (on essential matters) misinform, their audiences about international relations, and about who did what to whom and why. They hire only ‘reporters’ who comply with whatever deceptions the owners feel to be necessary, in order to be able to attract sponsorships from other aristocrats’ corporations and ‘charities’. But, the aristocrats themselves are actually all in this together, because their mutually shared enemy is the public. Without deceiving the public about essential matters, no national news-medium would be able to attract the sponsorships it needs in order to grow, or even to survive.

    The public thinks it’s fighting an international war, when, in fact, they’re fighting for the local aristocracy (and its allied aristocracies), against foreign aristocracies (and their allied aristocracies). This has been true since the dawn of human civilization. Only the weapons are bigger now, and the alliances (in the World Wars) are now global. (But, of course, if there is another World War, then all of human civilization will immediately end, and not long thereafter, all human and most other forms of life will also end.)

    An excellent example of the real class-war, and of its international nature, is James Bamford’s 3 April 2012 masterful and pioneering article in Wired, “Shady Companies With Ties to Israel Wiretap the U.S. for the NSA”. He documented that even very high-up people in America’s NSA were kept out of the loop when joint U.S.-and-Israeli intelligence-agencies and private corporations were creating the present 1984-ish, “Big Brother” reality, in (at least) those countries (but, actually, the Sauds, and probably a few others, were also on the inside — the aristocracies not merely of those two countries, U.S. and Israel, are in the alliance).

    The “Deep State” isn’t merely one nation’s aristocracy and its agents; it is basically a form of actually international gang-warfare. That’s what got us into invading and destroying Iraq 2003, Libya 2011, Syria 2012-, Ukraine (by coup 2014), and so many other nations. It wasn’t done in order to serve the America public’s interests. That’s just the standard lie — and it keeps going on, and on. Maybe until we invade Russia.

  • Mapping The Highest And Lowest Incomes Of America's City Slickers

    All throughout history, people have gone to cities to take advantage of the wealth and business. We wanted to know which metropolitan areas offered the best opportunities for Americans, so we looked at data for all 382 metros.

    Want to know where to make the most money? The following map from HowMuch.net shows just where…

    Source: HowMuch.net

    This map shows the median household income of metropolitan populations. Measuring the median makes it a good standard for “normal people.”

    High Incomes in the Usual Places

    The green spots on this map indicate areas with the highest median household income, and they often appear in predictable places. San Francisco. Washington DC. The Northeast.

    As we’ve established with other visualizations (like this one), certain regional economies just have more money in them. That means higher incomes.

    Of course, other areas have high median incomes too. The Pacific Northwest has pockets of wealth, as do Hawaii and Alaska. Denver, Salt Lake City, and the Twin Cities also support respectable incomes.

    Top 5 Highest Median Household Incomes in America

    • San Jose-Sunnyvale-Santa Clara (CA) | $110,040
    • San Francisco-Oakland-Hayward (CA) | $96,677
    • Washington-Arlington-Alexandria (VA) | $95,843
    • Bridgeport-Stamford-Norwalk (CT) | $90,123
    • Boston-Cambridge-Newton (MA) | $82,380

    The Low-Income South

    The Industrial Revolution created a major economic division between the northern and southern states. While the South stayed agrarian, the North adopted a booming manufacturing economy.

    That division remains.

    A quick glance at the map reveals consistently low incomes across the entire South. Households in Arkansas, Louisiana, Alabama, and Mississippi are in particularly bad shape. These states don’t have a single metro area with median household income over $59,000 per year. They haven’t recovered from the Great Recession either, which probably doesn’t help matters.

    If you’re looking to leave rural America for a prosperous life in the city, avoid southern Texas. Down there, you’ll find a cluster of metro areas with teeny, tiny median household incomes.

    Bottom 5 Highest Median Household Incomes in America

    • Laredo (TX) | $35,659
    • McAllen-Edinburg-Mission (TX)| $36,176
    • Grants Pass (OR) | $36,472
    • Sebring (FL) | $36,490
    • Brownsville-Harlingen (TX) | $37,061

    Three of them are found on Texas’ southern tip.

    Fortune seekers with their heart set on Texas should stick to the big cities. They would have much better chances of securing higher incomes in the Austin-Round Rock ($71,000), Midland ($65,224), or Dallas-Fort Worth ($63,812) metro areas.

    A Silver Lining

    Although we all want a higher income, it’s important to remember this: income and cost of living go hand in hand. As your income rises, so do expenses. That means a high income can have low spending power while a low income doesn’t always prevent you from buying a home or saving money.

    How much spending power does your income have? Try the True Cost of Living Tool to find out.

    Source: HowMuch.net

  • NewsWeek Embarrasses Itself: "What Russia Did To Control The American Mind"

    Authored by Mike Shedlock via themaven.net/mishtalk,

    In yet another mindless fake news story about fake news, NewsWeek explains how "Russia Controls the American Mind"  

    The all caps shouting is theirs.

    Fake news tweets and social media posts that flooded the internet leading up to the 2016 presidential election came from a Russian troll factory that works around the clock like any IT facility – except lies were pumping out to control the American mind and put Donald Trump in the White House.

     

    Early this month, Twitter testified before Congress and provided the Senate Intelligence Committee with more than 2,700 accounts tied to the agency, while Facebook identified more than 80,000 pieces of content linked to the agency.

     

    Meanwhile, Google found about $4,700 worth of search-and-display ads with dubious Russian ties.

    Mercy!

    Imagine that.

    $4,700 worth of search-and-display ads took down the Clinton campaign, despite the fact Clinton outspent Trump $969.1 million to $531.0 million according to a Bloomberg article on Campaign Fundraising.?

    Writer Jessica Kwong also moaned about trolls being paid between $1,300 and $2,000 per month.

    Kwong also makes this amusing claim:

    "Twitter users in swing states in the U.S. received more fake news than real stories in the days leading up to the 2016 presidential election."

    Yes folks, this is how Trump won the election:

    By spending a mere $4,700 for paid Tweets and $1,000 or so a month for some trolls, Russia now controls our minds.

    If you click on that inane article, you may be treated (as I was) to three autoplay videos, two of them were ads, running simultaneously.

    You will also find a barrage of Newsweek Fake News articles like these.?

    Instead of reading NewsWeek garbage about how Russia controls our minds with a few thousand dollars, I suggest reading: US spy operation that manipulates social media.

    The latter is a believable article about US military software that secretly manipulates social media sites by using fake online personas to influence internet conversations and spread pro-American propaganda.

    NewsWeek provides a great example of the pathetic quality of mainstream media reporting.

     

  • The Five Biggest Tests For China's Next Central Bank Governor

    Zhou Xiaochuan’s long reign as PBoC Governor is drawing to a close. He signaled his impending retirement last month and will be seventy years old In January 2018. Zhou has headed up China’s central bank from the early days of China’s “growth miracle” in 2002 and successfully – thanks to massive credit creation – steered China’s economy through the 2008 crisis.

    Since then, he’s kept China’s horrendous credit bubble on the rails, while warning of the risk of a “Minsky moment” at the recent Party Congress.

    As Bloomberg notes, however, Zhou’s successor will immediately be faced with a series of major problems.

    When Zhou Xiaochuan finally hands over the baton at the People’s Bank of China after a decade and a half in charge, his successor will inherit a series of headaches crowned by a debt pile racing toward 300 percent of output. The next governor will be tasked with not just reining in that leverage without tripping up economic growth, but keeping an eye on accelerating inflation too, all as the institution’s role in a complex regulatory structure evolves. As if that wasn’t enough, they’ll also be tasked with maintaining a stable currency as it opens up to market forces and boosting communication to keep global investors in the loop.

     

    "The PBOC is in more of bind than ever with its monetary policy," said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong. "While it was fine to just look at inflation and economic growth targets in the past, the central bank now has to strike a balance among more targets, some of them conflicting."

    Bloomberg sets out “five of the most pressing tasks” which it sees Zhou’s successor having to address from day one. 

    1. Financial Sector
    If the $40 trillion financial sector is a ticking time-bomb, then the PBOC governor will be among those sweating over which wire to cut. Reducing risky inter-bank lending, weeding out dangerous behavior by asset managers, and corralling internet credit will all be key tasks, all while trying to prevent funding to the real economy from cratering.

    While it’s done a decent job so far with that balancing act, the central bank now also must find its place in a new regulatory structure for the bodies in charge of oversight. Whether the PBOC is the leading light of this effort or one among many may depend on the profile of the new governor. And the clock’s ticking — the financial sector faces further shakeups now that authorities have lifted some curbs on foreign ownership.

    2. Policy Framework
    How the PBOC interacts with markets in pursuit of its nominal policy goals — maintaining stability in the value of the currency and thereby promoting economic growth — is undergoing a shift. From the credit quotas of the planned-economy era that focused on the quantity of money in the system, the central bank is ultimately headed toward letting short-term interest rates set the price of money, as its global peers have long done.

    Under Zhou, the PBOC has developed a bewildering array of instruments to guide market rates — but now it’s trying to focus attention on just two at a time when it’s actually increasing the range of maturities it uses.

    Streamlining the policy framework will be a key task for the new governor, especially as the central bank has already announced that it’s moving to a "two-pillar" system that pairs rates policy with tools geared to regulate prices of financial assets.

    3. Communication
    Of the world’s major central banks, the PBOC talks the least. Whereas Federal Reserve and European Central Bank officials give hundreds of policy speeches each year, Zhou does just a handful.

    There are signs, though, that the central bank wants to better explain itself to markets, and has slowly increased commentary this year. In an ever-more complex market environment, Zhou’s successor may have to engage in open-mouth operations a little more.

    4. Currency Management
    Managing China’s massive capital inflows and outflows, and their effect on the yuan, complicates PBOC efforts to regulate the amount and price of liquidity in the market. It’s a task they may ultimately be glad to be rid of, but for now heading toward a freer-floating yuan is something that the next governor is likely to continue.

    Moving in that direction may aid another big goal for Beijing: boosting global use of the yuan. Despite the International Monetary Fund conferring a reserve-currency status last year, the currency’s share of global payments is down from a 2.79 percent peak in August 2015.

     

    5. Inflation

    With hefty financial-sector and currency tasks already on its plate, it would be easy for the PBOC to forget a little about its inflation mandate. With a damaging episode of runaway inflation in the 1990s in mind though, Zhou’s successor should keep a close eye on developments.

    Consumer prices adjusted for food and fuel held at their fastest since 2011 in October, evidence that surging factory prices are beginning to feed through. The government’s drive to reduce pollution could also spur inflation, making a tightening of policy not unthinkable.

     

    While PBOC has to take instruction from the State Council for major policies, the governor can always leverage his knowledge and experience to guide the direction of the policy debate, said Ding Shuang, chief economist for Greater China & North Asia at Standard Charted Bank Ltd in Hong Kong.

    "It’s an important ability to make good arguments for its policies to top leaders, which helps the PBOC find a louder voice among policy makers, even though it may not enjoy full independence," he said.

    We don’t disagree with the broad strokes painted by Bloomberg above, however, we think Zhou’s successor will have to get his hands dirty at the “coal face” on several issues very quickly.

    What is going on at the highly-indebted (and formerly highly acquisitive) conglomerate HNA if it has to pay 9% on a new bond issue.

    Why have the authorities taken to issuing warnings about the price of a stock – Kweichow Moutai – rising too quickly? As we explained.

    One can wonder why China is suddenly so concerned about even the hint of potential vol spike in the stock market – suggesting that even a modest selloff could have dramatic consequences for the Chinese financial sector

    Then there’s the sell-off in China’s government bond market, where 10-year yields have breached the 4% level. We questioned if one reason is Wealth Management Products (WMPs), faced with redemptions, had to sell something quickly. Liquid government bonds were the easiest option, ahead of the higher yielding corporate bonds.

    Now that the sell-off has spread to the corporate bond sector, are we seeing the early signs of cascading sell-offs in the Chinese financial system?

    Zhou is a shrewd man and his warning about a "Minsky moment" will not have been made idly. He is also a principal architect of China's credit bubble, whether (always) willing or not, and must shoulder some of the blame. If he is lucky, his successor will be the one picking up the pieces. Below is Bloomberg's top five picks of likely replacements for Zhou.

    Guo Shuqing
    The China Banking Regulatory Commission chairman combines political heft with top-level financial industry experience. His resume includes stints as governor of Shandong province, chairman of China Construction Bank Corp. and head of the nation’s securities regulator. He served at the central bank before, too, as deputy governor between 2001 and 2005, simultaneously running the State Administration of Foreign Exchange.

     

    Many consider Guo a reformer in Zhou’s mold. Still, under Guo, the CBRC advanced the broader crackdown on overseas investments by China’s top dealmakers in June, when it asked banks to detail loans to such companies as Anbang Insurance Group Co. and Fosun International Ltd.

    Jiang Chaoliang
    The party chief of Hubei province in central China and a former chairman of two state-owned banks, Jiang isn’t new to the PBOC. He led the Shenzhen and Guangzhou branches during the Asian financial crisis years, and he worked there during the collapse of Guangdong International Trust and Investment Corp., China’s biggest-ever corporate bankruptcy at the time.

     

    Jiang was promoted to assistant governor in 2000. He served as chairman of two state-owned lenders — Bank of Communications Co., where he led an initial public offering of Hong Kong-listed shares and forged a partnership with HSBC Holdings Plc; and Agricultural Bank of China Ltd., where he started his career.

    Liu He
    A longtime member of Xi Jinping’s inner circle, Liu’s influence primarily occurs behind the scenes as director of the Communist Party’s Office of the Central Leading Group for Financial and Economic Affairs. He’s also vice chairman of the National Development & Reform Commission, the government’s top economic planning body.

     

    Though Liu avoids the public spotlight, the Harvard-educated economist has played a pivotal role in the relationship between China and the U.S. As global markets cratered in 2009, then-U.S. Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers separately made time to meet with Liu, who was seen as a link to China’s top leaders, Bloomberg News reported.

    Liu Shiyu
    Liu, born in 1961, took charge of China’s securities regulator early last year, tasked with restoring investor confidence after the stock-market meltdown of 2015. Using language atypical of China’s political elite, he vowed to take on the “crocodiles” and “barbarians” of the markets, and during his tenure the government imposed heavy fines on market manipulators.

     

    He joined the PBOC in 1996 and became deputy governor in 2006, according to an official biography. Before that he worked at China Construction Bank Corp. and the nation’s economic reform commission. He earned a master’s degree from the economic management school of Tsinghua University in Beijing.

    Yi Gang
    Like Zhou, Yi is a fluent English speaker with longstanding links to global economic leaders and a similar reputation as a reformist. Yi joined the central bank in 1997 and served in a succession of roles before being promoted to deputy governor in 2007.

     

    Yi was administrator of the State Administration of Foreign Exchange from 2009 until 2016. As head of the currency regulator, he presided over expansion of the world’s largest foreign reserve stockpile, which peaked in 2014 at nearly $4 trillion; further loosening of currency trading restrictions; and greater emphasis on increasing the yuan’s international use.

  • Nasrallah Accuses US Of "Daesh Conspiracy" As Feared 'Tehran-To-Beirut Land Bridge' Is Established

    Washington's past decade of Syria policy has been driven by fears of the so-called "Shia crescent" or Iranian land bridge which would conceivably connect Tehran with the Mediterranean in a continuous arch of influence. With events rapidly unfolding in Iraq and Syria, foremost among them the defeat of ISIS and the connection of Syrian and Iraqi national forces at the shared border, that land bridge has now been established for the first time in recent history. 

    Plans to undermine the Syrian government were manifest as early as the mid-2000's, when Damascus was put on notice by the US that "you are next" after the 2003 invasion of Iraq. Indeed, this was so well-known and openly talked about in diplomatic circles that CNN's Christian Amanpour directly informed Assad on camera that he was being targeted for regime change in a 2005 interview. She told him, "Mr. President, you know the rhetoric of regime change is headed towards you, from the United States. They are actively looking for a new Syrian leader. They are granting visas and visit to Syrian opposition politicians. They're talking about isolating you, diplomatically, then perhaps a coup d'etat or your regime crumbling."

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    The geopolitics driving the current Middle East war were framed and set in motion under the Bush administration, as Seymour Hersh reported in 2007:

    To undermine Iran, which is predominantly Shiite, the Bush Administration has decided, in effect, to reconfigure its priorities in the Middle East. In Lebanon, the Administration has cooperated with Saudi Arabia’s government, which is Sunni, in clandestine operations that are intended to weaken Hezbollah, the Shiite organization that is backed by Iran. The U.S. has also taken part in clandestine operations aimed at Iran and its ally Syria. A by-product of these activities has been the bolstering of Sunni extremist groups that espouse a militant vision of Islam and are hostile to America and sympathetic to Al Qaeda.

    But now as 2017 comes to a close, the Syria-Hezbollah-Iran alliance appears victorious, and it's the House of Saud and US-backed alliance that is fragmented and in shambles. And consistent with what Hersh predicted all the way back in 2007, the US has for years supported a jihadist corridor in Syria in order to "isolate the Syrian regime, which is considered the strategic depth of the Shia expansion (Iraq and Iran)."

    This week Hezbollah's Secretary-General Hassan Nasrallah has once again accused the United States and its allies in Syria of aiding ISIS. In televised remarks on Monday related to the recent fight for Albu Kamal, Nasrallah said, “The US helped Daesh as much as it could in Albu Kamal short of directly engaging forces that fought to liberate the town from Daesh.” He further accused the US of giving air cover to ISIS terrorists in Syria's east, as well as facilitating their escape from advancing Syrian army forces. 

    But what is the truth behind what Nasrallah calls "the Daesh conspiracy"? The current geopolitics of the Syrian battlefield, and US policy and interests east of the Euphrates, in reality gives the US military every incentive to pressure the Syrian Army while at the same time allowing a Daesh escape – as even a recent bombshell BBC investigation confirmed. But to understand the intricacies of how US policy and strategy is playing out, it is important to chart the significance of the establishment of the historic "Iranian land bridge" which occurred this month. 

    Below is a dispatch authored and submitted by Elijah Magnier, Middle East based chief international war correspondent for Al Rai Media, who is currently on the ground in the region and has interviewed multiple officials involved in the conflict.


    A US buffer zone in northeastern Syria and a land-bridge from Tehran to Beirut. Map source: Stratfor

    Following the victory of the Syrian army and its allies over the “Islamic State” group in the town of Albu Kamal in the northeast of the country, the road has been opened for the first time since the declaration of the Islamic Republic of Iran in 1979 between Tehran, Baghdad, Damascus and Beirut and become safe and non-hostile to the four capitals and their rulers.

    The United States tried to block the road between Tehran and Beirut at the level of Albu Kamal by forcing the Kurdish forces into a frantic race, but Washington failed to achieve its goals.

    The Syrian Army along with allied forces (the Lebanese Hezbollah, the Iranian Revolutionary Guards and the Iraqi Harakat al-Nujaba’) liberated the city, opening the border with Iraq at al-Qa’im crossing. ISIS militants fled to the Iraqi al-Anbar desert and east of the Euphrates River where US and Kurdish forces are operating.

    The United States established a new rule of engagement in the east of the Euphrates, informing the Russian forces that it will not accept any ground forces (the Syrian army and its allies) east of the Euphrates River and that it will bomb any target approaching the east of the river even if the objective of the ground forces is to pursue ISIS.

    Thus, the US is establishing a new undeclared no-fly-zone without bothering to deny that this can serve ISIS forces east of the Euphrates and offer the terrorists a kind of protection. Moreover, the US-led international coalition air bombing against ISIS has reduced noticeably.

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    With this US warning, it is clear that Washington is declaring the presence of an occupying force in Syria, particularly as the presence of the coalition was linked to fighting ISIS as previously announced. Today ISIS has lost all cities under its occupation since July 2014 in Iraq and before this date in Syria. Therefore there is no legal reason for the presence of the US forces in the Levant.

    By becoming an occupation force, the US troops expose themselves, along with the proxy Kurds operating under its command, to attacks similar to the one in Iraq and the one in Lebanon in 1982 during the Israeli invasion.

    The United States will no longer be able to block the Iraqi-Syrian road (Al-Qaim-Albu Kamal) because it is related to the sovereignty of the two countries. But this does not mean Tehran will use this route to send weapons across Baghdad and Damascus to Hezbollah in Lebanon, for two reasons: First, Iraq has sovereignty and the Prime Minister Haider Abadi will not allow any Iraqi armed party to keep its weapons because the Iraqi armed forces are responsible for holding security, especially after the defeat of ISIS in all cities. Abadi’s next step will be to disarm all Iraqi movements and organizations by the year 2018 and most likely after the forthcoming elections in May. According to well-informed sources Iran and the Marjaiya in Najaf (and the majority of the Iraqi parties) want Abadi to be re-elected for another term.

    This means that Iraq will not allow its territory to be used to finance non-state actors, even if these have taken part in the elimination of ISIS. Neither will Abadi allow weapons to cross his country to an ally that fought alongside the Iraqi forces – such as Hezbollah – because he is not positioning himself against the United States and the countries of the region. This is not Iraq’s battle.

    Secondly, Hezbollah does not need the land route from Tehran to Beirut because the sea and air links with Tehran are open through Syria and from it to Lebanon. Moreover, Hezbollah is no longer in need of additional weapons in Lebanon, especially since the Lebanese-Syrian front is unified against any possible future Israeli war.

    As for Syria, the preparations for starting the challenging and complex rounds of negotiation to open the way for political talks which have begun in Sochi, Russia. Naturally, these talks are difficult because the United States has demands, as does Turkey, which has shown its intention to stay for a very long in the north of Syria.

    In this context, Syrian President Bashar al-Assad is ready to prepare for a new constitution, on which work began several months ago. Syrian and international human rights experts and law specialists have been discussing with various groups how to establish new constitutional foundations for Syria, aiming to invite the numerous anti-Damascus parties to lay down their arms and join in the negotiations for the future of Syria.

    The only problem remains with al-Qaeda in Bilad al-Sham, and the thousands of foreign fighters in Idlib, waiting for the results of the Turkish-Syrian negotiation. The war was long and complex, mainly because of shifting alliances. But the peace will be no less complex to construct if future wars based on revenge and a greedy desire for territory are to be avoided.

  • Gold Fund: Bitcoin Will Make Gold "Global Money" Again

    The manager of Old Mutual Gold & Silver Fund, a precious metals fund with over $220 mln under control has said Bitcoin is “paving the way” for a global gold comeback.

    Speaking to Bloomberg in an interview published today, Ned Naylor-Leyland said that the marriage of Bitcoin and gold was essentially a logical one given the characteristics and remit of both.

    “Bitcoin was explicitly designed to be digital gold,” he said.

     

    “So if you’re going to have a small proportion of a fund in Bitcoin, it should be in a gold fund because that’s exactly the point.”

    As CoinTelegraph's William Suberg notes, the fund, which began in April this year, is aiming to allocate up to five percent to cryptocurrency, creaming off profits from price upticks to reinvest back into gold and silver.

    image courtesy of CoinTelegraph

    Naylor-Leyland is highly bullish on the concept going forward, echoing CME Group’s Chairman Emeritus Leo Melamed in his desire to bring discipline to the scene for investors.

    “It’s about bringing the ownership of disciplined money into the modern world,” he continued.

     

    “Bitcoin is paving the way for the reintroduction of gold as global money.”

    As we previously discussed, the real importance of bitcoin is not making cheap, easy payments. It’s not a way of making fast payments. It’s not going to allow for microtransactions or all these other use cases that we’ve heard are important for bitcoin.

    The most important thing that bitcoin offers is a new form of sound money outside the control of any authority or government in the world. And that is something very, very important for the world economy. Bitcoin is hard money as opposed to easy money.

    Easy money refers to money whose quantity is easy to increase, in case there is an increase in demand for it. So if people move toward using copper as money, it is very easy for copper miners to increase the supply and bring the price back down, which will hurt the people who used copper as the store of value for their savings. So copper is bad as a store of value, because it’s easy to produce in response to an increase in demand.

    Gold, on the other hand, is hard money because even if the price of gold goes up a lot, it is very hard for gold miners to increase the supply of gold in the world. It is hard to bring the value down. Therefore, gold serves as a good store of value in the long run. It’s a much better store of value than other forms of money over time.

    Bitcoin is far closer to gold. It is a digital equivalent of gold.

    Bitcoin’s supply is strictly limited. There will only ever be 21 million bitcoins. And the code that controls the issuing of the bitcoins is decentralized among thousands, tens of thousands of nodes that operate the bitcoin software. And if it were to change, it would need the majority agreement of everybody involved.

    Since everybody involved has an interest in maintaining the monetary policy in a way that maintains the value of the money, it is highly unlikely that we’re going to witness any change in the monetary policy. Even technical changes, like changing the block size or various parameters, have been almost impossible to make in bitcoin.

    It’s possible to make a copy of bitcoin, but it’s not possible to change bitcoin. There will always be some people that want to stick to the inflation schedule as it is. So the monetary policy of bitcoin is immutable, it isn’t going to change, and since the supply is strictly limited and the network is distributed and nobody can control it, we might just have the digital equivalent of gold.

    This, I think, is an enormously important innovation, because it has many good properties that gold doesn’t have. It’s very easy to send across the world very quickly, and it’s much harder to confiscate than gold. Therefore, the possibilities are exciting for people who believe in the importance of sound money for society.

    Look at the era of the classical gold standard, from 1871, the end of the Franco–Prussian War, until the beginning of World War I. There’s a reason why this is known as the Golden Era, the Gilded Age, and La Belle Epoque. It was a time of unrivaled human flourishing all over the world. Economic growth was everywhere. Technology was being spread all over the world. Peace and prosperity were increasing everywhere around the world. Technological innovations were advancing.

    I think this is no coincidence. What the gold standard allowed people to do is to have a store of value that would maintain its value in the future. And that gave people a low time preference, that gave people the incentive to think of the long term, and that made people want to invest in things that would pay off over the long term.

    With bitcoin, once you’ve started holding some bitcoin and you see it appreciate, you start understanding that there is a very high opportunity cost to spending, and you start thinking twice about spending frivolously.

    Also, bitcoin matters for moving very large quantities and high amounts of value, particularly in transactions in which you’re trying to avoid censorship or economic inflation from the central bank. So as a store of value, this is what bitcoin’s importance is.

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    Not everyone in the wider gold industry is as happy with the status quo, however.

    Discussing a drop in profits, BullionVault Research Director Adrian Ash said earlier this month that Bitcoin “noise” was “distracting” some investors and leading to gold being sidelined.

    As John Rubino previously noted, sound money advocates who love the concept of cryptocurrencies but don’t want to abandon precious metals have been trying to clarify their thoughts of late.

    Risk Hedge just helped, with a comprehensive statement of the pro-gold position.

    The following is an excerpt. Read the full article here.

    All the Reasons Cryptocurrencies Will Never Replace Gold as Your Financial Hedge

    Despite what the crypto-evangelists will tell you, digital tokens will never and can never replace gold as your financial hedge.

     

    Here are six reasons why.

     

    #1: Cryptocurrencies Are More Similar to a Fiat Money System Than You Think.
    The definition of “fiat money” is a currency that is legal tender but not backed by a physical commodity.

     

    It’s clear that cryptocurrencies partially fit the definition of fiat money. They may not be legal tender yet, but they’re also not backed by any sort of physical commodity. And while total supply is artificially constrained, that constraint is just… well, artificial.

     

    You can’t compare that to the physical constraint on gold’s supply.

     

    Some countries are also exploring the idea of introducing government-backed cryptocurrencies, which would take them one step closer toward fiat-currency status.

     

    As Russia, India, and Estonia are considering their own digital money, Dubai has already taken it one step further. In September, the kingdom announced that it has signed a deal to launch its own blockchain-based currency known as emCash.

     

    So ask yourself, how can you effectively hedge against a fiat money system with another type of fiat money?

     

    #2: Gold Has Always Had and Will Always Have an Accessible Liquid Market.
    An asset is only valuable if other people are willing to trade it in return for goods, services, or other assets.

     

    Gold is one of the most liquid assets in existence. You can convert it into cash on the spot, and its value is not bound by national borders. Gold is gold—anywhere you travel in the world, you can exchange gold for whatever the local currency is.

     

    The same cannot be said about cryptocurrencies. While they’re being accepted in more and more places, broad, mainstream acceptance is still a long way off.

     

    What makes gold so liquid is the immense size of its market. The larger the market for an asset, the more liquid it is. According to the World Gold Council, the total value of all gold ever mined is about $7.8 trillion.

     

    By comparison, the total size of the cryptocurrency market stands at about $161 billion as of this writing—and that market cap is split among 1,170 different cryptocurrencies.

     

    That’s a long shot from becoming as liquid and widely accepted as gold.

     

    #3: The Majority of Cryptocurrencies Will Be Wiped Out.
    Many Wall Street veterans compare the current rise of cryptocurrencies to the Internet in the early 1990s.

     

    Most stocks that had risen in the first wave of the Internet craze were wiped out after the burst of the dot-com bubble in 2000. The crash, in turn, gave rise to more sustainable Internet companies like Google and Amazon, which thrive to this day.

     

    The same will probably happen with cryptocurrencies. Most of them will get wiped out in the first serious correction. Only a few will become the standard, and nobody knows which ones at this point.

     

    And if major countries like the US jump in and create their own digital currency, they will likely make competing “private” currencies illegal. This is no different from how privately issued banknotes are illegal (although they were legal during the Free Banking Era of 1837–1863).

     

    So while it’s likely that cryptocurrencies will still be around years from now, the question is, which ones? There is no need for such guesswork when it comes to gold.

     

    #4: Lack of Security Undermines Cryptocurrencies’ Effectiveness.
    Security is a major drawback facing the cryptocurrency community. It seems that every other month, there is some news of a major hack involving a Bitcoin exchange.

     

    In the past few months, the relatively new cryptocurrency Ether has been a target for hackers. The combined total amount stolen has almost reached $82 million.

     

    Bitcoin, of course, has been the largest target. Based on current prices, just one robbery that took place in 2011 resulted in the hackers taking hold of over $3.7 billion worth of bitcoin—a staggering figure. With security issues surrounding cryptocurrencies still not fully rectified, their capability as an effective hedge is compromised.

     

    When was the last time you heard of a gold depository being robbed? Not to mention the fact that most depositories have full insurance coverage.

    The gold vs bitcoin debate has a long way to run. But if the outcome is a world in which money is what the market – rather than the government – says it is, then hopefully there will be room for both.

  • China Deleveraging Hits Corporate Bonds As Cascade Effect Begins

    Following the market lockdown during October’s Party Congress, many commentators were disturbed by the continued rise in Chinese government bond yields as we returned to “business as usual”, with the 10-year rising to 4%. At the beginning of this month, we discussed the sell-off (see “China: Shadow Bank Inflows Are Critical To Sustain The Ponzi…But They’re Falling”) and noted a useful insight from the Wall Street Journal.

    An important anomaly to note about the bond rout: as government bonds sold off, yields on less-liquid, unsecured Chinese corporate bonds barely moved.

     

    That is atypical in an environment of rising rates – usually, bond investors shed their less-liquid holdings and hold on to assets that are more easily tradable, like government debt.

    The question was…why had corporate bond yields barely moved? The answer, according to the WSJ, was that China’s deleveraging policy led to redemptions in the shadow banking sector, e.g. in the notorious $4 trillion Wealth Management Products (WMP) sector. Faced with redemptions, shadow banks had to sell something…quickly…and highly liquid government bonds were the “easiest option”. Furthermore…and this is potentially significant…the WSJ noted.

    Meanwhile, the nonbanks have held on to their higher-yielding corporate bonds, which at least have the benefit of helping them to maintain high returns.

    Not any more (see below).

    We agreed with the WSJ’s explanation at the time, but noted that the government bond sell-off was actually a sign of the unravelling of the WMP Ponzi scheme. The Chinese authorities are wise to the Ponzi which is why they announced the overhaul of shadow banking and WMPs last Friday (see “A ‘New Era’ In Chinese Regulation Means Turmoil For $15 Trillion In China's ‘Shadows"). However, the new regulations don’t kick in until mid-2019, a sign to us that when they looked “under the bonnet”, they didn’t like what they saw.  

    We doubt that China can achieve an orderly restructuring of its shadow banking sector, never mind its much larger credit bubble. A sign that we have taken another step towards China’s “Minsky moment” is that the bond sell-off has spread to the corporate bond market. The chart shows how spreads versus sovereign bonds have blown out during the last few weeks.

    Bloomberg noted how the 10-year yield on China Development Bank notes, a quasi-sovereign issue, closed above 5% for the first time since 2014 today while, in another report, it put the corporate bond sell-off in a wider context.

    China’s deleveraging campaign is finally starting to bite in the nation’s corporate-bond market, a shift that will make 2018 a clearer test of policy makers’ appetites to let struggling companies fail. Yields on five-year top-rated local corporate notes have jumped about 33 basis points since the month began, to a three-year high of 5.3 percent, according to data compiled by clearing house ChinaBond. Government bonds, which have far greater liquidity, had already moved last month as the central bank warned further deleveraging was needed.

    With more than $1 trillion of local bonds maturing in 2018-19, it will become increasingly expensive for Chinese companies to roll over financing — and all the tougher for those in industries like coal that the nation’s leadership wants to shrink. Two companies based in Inner Mongolia, a northern province that’s suffered from a debt-and-construction binge, missed bond payments on Tuesday, in a demonstration of the kind of pain that may come.

    Bloomberg tries to put a positive spin on the corporate bond sell-off, defaults are healthy in terms of differentiating good and credits.

    In the long haul, that all may be good for China. Allowing more defaults could see its bond market become more like its overseas counterparts, with a greater differentiation in price. And that could mean it channels funds more productively. “The deleveraging campaign and the new rules on the asset management industry will further differentiate good and bad quality credits, and make the onshore credit market more efficient,” said Raymond Gui, senior portfolio manager at Income Partners Asset Management (HK) Ltd. “Weaker companies will find it harder to roll over their debts because funding costs will stay high.” Gui predicts yields will keep climbing. The average for top-rated corporate bonds is already 2.2 percentage points above what investors demanded to hold them in October last year.

    The rise comes as authorities show greater determination to shift the economy onto a more sustainable footing, with less debt. The latest move was a plan to discipline the asset-management industry, including banning guaranteed rates of return. People’s Bank of China Governor Zhou Xiaochuan graphically depicted the risk of excess leverage, by evoking a "Minsky moment," or sudden collapse of asset values. Key to that endeavor will be scaling back some of the implicit credit guarantees that have backed a broad swathe of Chinese borrowers. The country only started allowing corporate defaults in 2014. Last year there was a record, coming in at at least 29. It’s unclear yet whether that total will be met in 2017.

    Bloomberg spoke to an analyst who also believes the recent sell-off in Chinese bonds is more to do with separating the “wheat from the chaff”, rather than anything more profound.

    "We expect the divergence of performance between different bond categories (Chinese government bonds, policy bank bonds and credits) to become more prominent into 2018," Albert Leung and Prashant Pande, rates strategists at Nomura Holdings Inc., wrote in a note Wednesday.

    We disagree. From our perspective, it looks like early signs of cascading sell-offs within Chinese financial markets, which have long been abused by excessive leverage and Ponzi characteristics. Talking of which, the Shanghai Composite Index suffered its biggest one-day drop since June 2016.

    What caused the sell-off? According to some commentators it was fear that the local bond rout was getting out of control…hence "cascade". We noted last week that traders had been stunned by the official warning from Beijing that some stocks – in this case Kweichow Moutai – had risen "too far, too fast". Zhengyang Shen, a Shanghai-based analyst at Northeast Securites commented.

    "The decline in Moutai has triggered selloffs in some of this year's best performing stocks."

    Which sounds an awful lot like another example of cascading selling…

  • How FDR Politicized Thanksgiving

    Authored by Tho Bishop via Mises Canada,

    Call me old-fashioned, but one thing I am always thankful for every Thanksgiving is the blessing of not having Franklin Delano Roosevelt in the White House.

    After all, of all the heroes of the American progressive movement, few have quite the record of sins as FDR. The man routinely celebrated in the halls of academia was guilty of Japanese internment camps, stealing Americans’ gold, prolonging the Great Depression, and establishing a number of Federal agencies that continue to haunt the American economy today.

    But perhaps one of the most absurd examples of Roosevelt’s Presidential arrogance was his attempt in 1939 to move Thanksgiving a week earlier than its traditional date as the last Thursday Thanksgiving in November.

    The President’s motivation would have earned the approval of his friend John Maynard Keynes. The country was still suffering from the Great Depression and some prominent retailers were concerned that since the holiday fell on the unusually late date of November 30th, post-Thanksgiving day sales would suffer. The lobbying proved effective as FDR became convinced that moving the date to November 23rd would help boost consumption and the economy along with it. On October 31st, President Roosevelt signed Executive Proclamation 2373 making the change official.

    The change faced immediate resistance, only amplified by the move’s late announcement. Republicans compared the President’s decision to “the omnipotence of a Hitler,” while American football clubs – who regularly scheduled rivalry games for Thanksgiving – were particularly outraged by the sudden change. Polls found that overall 62% of Americans opposed the President’s actions. Democrats favored the move 52% to 48% while Republicans opposed it 79% to 21%. This partisan divide was lampooned by Looney Toons creator Tex Avery in his 1940 animated short Holiday Highlights which listed different Thanksgiving Day dates for Democrats and Republicans.

    State governments also got involved. In a holiday-themed form of nullification, twenty five states with Republicans governors refused to recognize what became derided as “Franksgiving,” instead sticking with the original November 30th date, while Texas opted to recognize both.

    In spite of the backlash, FDR would continue with his earlier Thanksgiving Day date until his Commerce Department discovered in 1941 that, like most of his attempts to stimulate the economy, Franksgiving was a flop. 

    As the New York Times reported, “a record crowd of reporters” were on hand to hear the President admit that “that the Commerce Department had found that expected expansion of retail sales had not occurred.”

    But this did not mean that government was done meddling with the holiday.

    In November of 1941, Congress worked together with the president to hammer out a bipartisan deal officially recognizing Thanksgiving as the fourth Thursday in November.

    So on this Thanksgiving, no matter how hard it may be to avoid getting into a heated political with friends and family, be thankful that at least the holiday itself is no longer marred by partisanship. After all, holidays should always be about time enjoyed with loved ones, far beyond the machinations of government tyrants.

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