- 9 Of The World's 10 Least-Peaceful Nations Were All Targeted By US Intervention
Authored by Whitney Webb via TheAntiMedia.org,
The annual Global Peace Index, recently released for June 2017, has found that while the world is more peaceful now than last year, violence has increased significantly overall in the past decade.
Although the situation has improved in many countries, the ten lowest-ranking nations – known as the world’s “least peaceful” countries – have shown little change in recent years.
You will find more statistics at Statista
However, nine of those ten countries share one commonality in the violence that they’ve experienced: U.S.-led destabilization efforts and regime change operations…
Syria, Iraq and Afghanistan: Targets for regime change and manufactured sectarianism
Syria, which ranked last in the June 2017 index, has been in the throes of a U.S.-led regime change effort for the better part of six years – a conflict that has ravaged one of the most prosperous nations in the Middle East and turned it into the latest battleground for a proxy war between the U.S. and Russia.
The U.S. has been planning the overthrow of Syrian President Bashar al-Assad at least as far back as 2006. Since the 2011 “uprising,” the U.S. has continuously funded and armed opposition groups in Syria along with several extremist groups, many of which have since joined terrorist organizations like Daesh (ISIS) and the al-Nusra Front.
The nations that rank just above Syria – Iraq and Afghanistan – were both targets of major U.S. invasions in the early 2000s and the U.S.’ continued presence in both of these countries has greatly contributed to the still-deteriorating situations in both nations.
With the U.S. troop presence growing in Iraq and set to surge dramatically in Afghanistan with the deployment of over 50,000 troops, more conflict is inevitable.
South Sudan: “Nation-building” gone awry
South Sudan, which ranked fourth, has also been victimized by U.S. intervention and “nation-building.”
The U.S. pushed South Sudan to secede from Sudan in 201,1 as South Sudan held 75 percent of Sudan’s oil reserves — the largest oil reserves in all of Africa. Analysts argued that the U.S. sought to create an independent South Sudan in order to dislodge Chinese claims to Sudanese oil, as the Chinese had previously signed oil contracts with the (now Northern) Sudanese government. The U.S.’ significant aid contributions to South Sudan, totalling $1.6 billion between 2013 and 2016, suggest that Washington has sought to influence the government there for that very purpose.
Just two years later, however, South Sudan dissolved into a deadly civil war that has killed tens of thousands and displaced more than 1.5 million. Some analysts have suggested that the civil war broke out between South Sudanese President Salva Kiir Mayardit and his former deputy Riek Machar only when Mayardit started to cozy up to China.
The chaos from U.S. meddling in South Sudan has reached beyond its borders and brought trouble to Sudan, with that nation ranking as the eighth least peaceful nation.
Yemen: U.S.-backed Saudi aggressors responsible for famine, war crimes
Yemen, which ranked fifth, has also been involved in a U.S.-linked conflict, though the United States’ role has been less direct. While the U.S. is not leading the fight in Yemen, it has ardently backed the war’s aggressor – Saudi Arabia – from the beginning and has supplied the Saudis with billions of dollars in weapons, as well as occasionally bombed locations in Yemen to aid their Gulf allies.
In addition, the U.S. has turned a blind eye to the Saudis’ numerous war crimes in Yemen, despite the enormity of the tragedy unfolding there, including blocking aid shipments and consequently triggering widespread famine. The U.S. has been eager to see Saudi influence continue in Yemen – as it was prior to the conflict – due to Yemen’s location, which grants it control over the strategic strait of Bab al-Mandab, a chokepoint for the Saudi oil trade.
Yemen is followed by Somalia in the rankings.
Somalia: State of anarchy persists thanks to U.S. involvement
U.S. involvement in Somalia has a long history and reached a climax in the early 1990s, when the U.S.-supported military dictatorship of Siad Barre was overthrown, plunging the nation into civil war.
Thanks to Somalia’s strategic location for global oil markets at the mouth of the Red Sea, the U.S. became involved and, according to a staffer for the chief of the UN Somalia operation, “dragged the UN into Somalia kicking and screaming.” Somalia remained in a state of anarchy for 16 years until a coalition of Islamic courts took over the capital in 2006. However, this government was soon overthrown by Ethiopia with U.S. support.
Current U.S. anti-terrorism policy in Somalia, which includes the use of airstrikes, has been blamed for worsening the nation’s conflict and its burgeoning humanitarian crisis, having driven the nation into famine.
Libya: Plunged into chaos after challenging U.S. petrodollar
Another recent victim of U.S. regime change efforts, Libya now ranks as the seventh least peaceful nation in the world. Once one of the most prosperous nations in Africa, former Libyan leader Muammar Gaddafi made the “mistake” of challenging the U.S. petrodollar system by creating a gold-backed pan-African currency known as the dinar. Following his ouster, Libya was essentially transformed into a failed state where there is still no clear government, terrorism runs rampant and slaves are now openly traded in public.
Ukraine: Targeted by U.S.-led coup over gas industry
Ukraine, which was the target of a U.S.-led coup in 2014 to weaken the influence of Russia’s lucrative gas industry on European gas markets, now ranks tenth among the least peaceful nations in the world. The only nation ranking near the bottom that has not experienced clear U.S. involvement is the Central African Republic, which ranks ninth.
The United States’ not-so-peaceful ranking
The United States itself also plummeted dramatically in this year’s Global Peace Index, now ranking 114 out of the 163 nations surveyed. This decrease was the greatest decline measured in any country this year.
Statisticians have blamed divisiveness that has made itself plain following the 2016 presidential election, as well as a continued rise in homicide rates.
The United States’ involvement in military conflicts abroad is not factored into its ranking, meaning that this placement is conservative at best. As indicated by the ten lowest-ranking nations, if this factor were taken into consideration, the U.S. could likely find itself at the bottom of the list for its role in spurring disastrous and deadly conflicts around the world under the guise of foreign policy.
- Hillary Clinton Explains The Way To Stop Terrorism Is To "Understand" Other Cultures & Their Food
Authored by Paul Joseph Watson via Infowars.com,
If you thought Hillary Clinton would stop talking any time soon then think again.
The defeated presidential candidate told a fundraiser for a youth program that the best way to stop terrorism was to “understand” other cultures and their food.
Yes, really.
Hillary defended London Mayor Sadiq Khan, the man who once represented 9/11 Al-Qaeda member Zacarias Moussaoui, called moderate Muslims “Uncle Toms” and said terrorism was “part and parcel” of living in a major city.
Clinton said that Khan, who has called for Donald Trump to be banned from entering the UK for a state visit (while actual terrorists from Syria are free to return), had shown “steady, determined leadership”.
Hillary said the best way of combating terror was to “reach out to the world” in order to “understand” people living in foreign countries.
“Getting to know one another. Learning about the experiences, the lives, the cultures, the religions, the food,” she added.
One wonders what kind of “cultures” Clinton is referring to? Maybe the ‘culture’ of Bacha b?z?, where elderly Muslim men dress up young boys as girls and then rape them? Or could she be referring to female genital mutilation? Another expression of Islamic ‘culture’ now endorsed by imams living in America.
“This is not a time to lash out, to incite fear or to use tragedy and terror for political gain,” said Clinton.
A comment obviously aimed at Donald Trump and anyone else who has correctly identified political correctness and tolerance of Islamism as creating a fertile ground for terrorist attacks in the west.
Maybe Hillary is right.
Maybe we don’t need to arrest the thousands of jihadists who walk our streets.
Maybe we don’t need to stop terrorists who have fought alongside ISIS in Syria and Iraq from returning to the west.
Maybe we just need to get a better grip on the dietary habits of Muslims.
Who knew it would be this easy to stop suicide bombers, rampaging knifemen and jihadists who plough vehicles into crowds of people?
- Gingrich Questions Special Counsel's Impartiality – "Republicans Are Delusional…Look Who He Is Hiring"
Since his appointment by Deputy Attorney General Rod Rosenstein, Special Counsel Robert Mueller has enjoyed fairly bipartisan praise in Washington D.C. for his apparent impartiality.
That said, Newt Gingrich, a former ‘informal advisor’ to President Trump, thinks that Comey cast a dark shadow over Mueller’s independence last week when he admitted under oath, before the Senate Intelligence Committee, that he leaked FBI documents to the New York Times with the express intent of getting a Special Counsel appointed to investigate Trump and various members of his campaign team. All of which prompted the following tweet from Gingrich early this morning:
“Republicans are delusional if they think the special counsel is going to be fair. Look who he is hiring.check fec reports. Time to rethink.”
Republicans are delusional if they think the special counsel is going to be fair. Look who he is hiring.check fec reports. Time to rethink.
— Newt Gingrich (@newtgingrich) June 12, 2017
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As The Hill notes, several of Mueller’s early, notable hires have all been contributors to Hillary’s and/or Obama’s previous campaigns.
Michael Dreeben, who serves as the Justice Department’s deputy solicitor general, is working on a part-time basis for Mueller, The Washington Post reported Friday.
Dreeben donated $1,000 dollars to Hillary Clinton’s Senate political action committee (PAC), Friends of Hillary, while she ran for public office in New York. Dreeben did so while he served as the deputy solicitor general at the Justice Department.
Jeannie Rhee, another member of Mueller’s team, donated $5,400 to Hillary Clinton’s presidential campaign PAC Hillary for America.
Andrew Weissmann, who serves in a top post within the Justice Department’s fraud practice, is the most senior lawyer on the special counsel team, Bloomberg reported. He served as the FBI’s general counsel and the assistant director to Mueller when the special counsel was FBI director.
Before he worked at the FBI or Justice Department, Weissman worked at the law firm Jenner & Block LLP, during which he donated six times to political action committees for Obama in 2008 for a total of $4,700.
James Quarles, who served as an assistant special prosecutor on the Watergate Special Prosecution Force, has donated to over a dozen Democratic PACs since the late 1980s. He was also identified by the Washington Post as a member of Mueller’s team.
Starting in 1987, Quarles donated to Democratic candidate Michael Dukakis’s presidential PAC, Dukakis for President. Since then, he has also contributed in 1999 to Sen. Al Gore’s run for the presidency, then-Sen. John Kerry’s (D-Mass.) presidential bid in 2005, Obama’s presidential PAC in 2008 and 2012, and Clinton’s presidential pac Hillary for America in 2016.
This latest Twitter warning followed similar comments made by Gingrich over the weekend on Fox News. Among other things, the former Speaker of the House said that Mueller’s investigation is shaping up to be a “witch hunt.”
“First of all, look at what Comey said. Comey said ‘I deliberately leaked, through an intermediary, to create this counsel’…who happens to be one of his closest friends. And look at who Mueller is starting to hire. I mean these are people that frankly look to me like they’re setting up to go after Trump. Including people, by the way, who have been reprimanded for hiding from the defense information in two major cases.”
“I think this is going to be a witch hunt. Comey himself, by his own testimony, tainted this particular process.”
“You know, the Director of the FBI deliberately leaking in order to create a special counsel, who we’re now supposed to believe is going to be this neutral figure, I think that’s just nonsense.”
.@newtgingrich: “Comey himself, by his own testimony, tainted this particular process.” pic.twitter.com/3KF320R0Go
— Fox News (@FoxNews) June 11, 2017
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Meanwhile, appearing on the John Catsimatidis radio show, Gingrich went one step further and called on Congress to “abolish the independent counsel.”
“I think Congress should now intervene and they should abolish the independent counsel, because Comey makes so clear that it’s the poison fruit of a deliberate manipulation by the FBI director leaking to the New York Times, deliberately set up this particular situation. It’s very sick.”
“It’s very clear that Comey hates Trump.”
Of course, as a former surrogate of the Trump campaign, Gingrich’s opinions on the topic of Mueller’s independence will undoubtedly be quickly dismissed by the left and most of the media.
So what say you, does Gingrich raise valid concerns in light of Comey’s testimony or is he just a conflicted surrogate attempting to mount a Trump offensive?
- Gallup Finds Stunning Decline In Americans' Respect For US Government
Authored by Eric Zuesse via The Strategic Culture Foundation,
On June 9th, Gallup’s Editor-In-Chief, Frank Newport, headlined «Americans Want More Than Just Budget Cuts» and reported that, «Gallup's latest update shows that 28% of Americans have a favorable opinion of the federal government, while 55% have an unfavorable opinion. That's the lowest rating for any business or industry sector we tested». Here are the details on that net minus 27% (55% minus 28%) favorability-rating for «The federal government»:
Dr. Newport then points out that, the last time when Gallup had reported about Americans’ opinions of Congress, which was on 28 September 2015, «The More Americans Know Congress, the Worse They Rate It»; and, specifically, that, whereas only 7% of Americans who answered either 4 or 5 out of five questions about Congress correctly were rating Congress either «Excellent» or «Good», a far higher 27% of Americans who had answered none of the five questions correctly were rating Congress either «Excellent» or «Good». 29% of Americans who had answered zero questions correctly were rating Congress as either «Poor» or «Bad», but a far higher 66% of Americans who had answered either 4 or 5 of the questions correctly were rating Congress as «Poor» or «Bad». Consequently, «The Knowledgeable Are the Most Negative About Congress» according to Gallup’s latest available information, published there.
The basic point in Dr. Newport’s June 9th article is that the reason why Americans dislike «The federal government» isn’t that it’s ‘too big’ or ‘spends too much money’ or any of the other excuses that the (widely despised) Republican Party claims, but is instead that, «Americans think that Congress is corrupt and not focused on the interests of the people. They want their representatives to compromise rather than rigidly stick to principles».
By «principles» there, might be meant such things as ‘a balanced budget’ or ‘cutting spending’ (as Republicans would like to be hearing), but it might also mean ‘consideration and decent treatment of the poor’ (as Democrats would like to be hearing); and, so, in a survey such as this, it is really meaningless overall.
What is far more meaningful was Gallup’s survey about Americans’ perceptions about corruption in Congress: 52 % thought that «Most members» of Congress are corrupt, but only 32 % thought that their own particular member of Congress is corrupt. Obviously, if the perceptions on that matter had been correct nationwide, and 52% of Congress is corrupt, then 52% of the survey’s respondents should have been saying that their own Representative in Congress is corrupt. In other words: the U.S. public are widely deceived to believe that their own Representative is not corrupt but that a substantial majority (52% saying that Congress is «Corrupt», versus only 42 % saying it’s «Not corrupt») believe that «Congress» is corrupt.
Gallup’s 28 September 2015 report about perceptions of Congress made note, also, that there was an extraordinary jump in 2006 in the percentage saying that «Most members are corrupt», from 38 % saying that in 2005, up to 47 % saying that in 2006. After 2006, the percentages saying that, rose only slightly. Perhaps 2006 was a post-Iraq-invasion syndrome, in which increasing numbers of Americans came to distrust the U.S. government that had clearly lied and invaded Iraq under false pretenses. The Gallup Poll’s findings about Americans’ perceptions regarding the question »In general, are you satisfied or dissatisfied with the way things are going in the United States at this time?» first peaked at 61% right before the invasion, in the poll taken on «3/3-5/03» or March 3-5 of 2003, then subsided a bit but finally rose even higher, to 62%, in the poll taken during «8/22-25/05» or August 22-15 of 2005, and then it stayed generally above that and briefly soared into the 80s during 2011, but is now in the high 60s, still slightly higher than the post-Iraq-invasion disillusionment period.
In any case, what seems clear is that Americans now strongly dislike ‘our’ federal government and generally consider it to be «corrupt» or not really «our» government, but instead to be somehow «their» government of »us». And, also obviously, if this long-term trend continues, then the American public will be heading into a pre-revolutionary condition, and, beyond that, into a revolutionary one. If the existing long-term trend continues, then the result will be either the overthrow of the U.S. federal government, or else a lock-down of first the Internet and then the public, at a time of already overcrowded prisons. Of course, when there is not space to accommodate additional prisoners, then military compounds become resorted to — and martial law.
No longer is it at all reasonable to characterize the United States as a stable democracy. It’s certainly not stable now; and, also, it’s certainly not a democracy. And the present long-term trend is in the wrong direction.
The United States is certainly a country that is currently heading into some kind of convulsive transition — but, certainly, also, an extremely unpleasant transition, even if, somehow, one that can reach a stability which is better, not worse, than that of the earlier post-WW-II era. And, of course, if it turns out to be a pre-WW-III transition, then the result will be catastrophic for the entire world.
The way that the U.S. federal government has responded to the current transition, up till now, is to continue the lies. But there is no certainty that that will continue to work, even for the people at the very top.
- Opioids Killed More People In One Ohio County Last Year Than Car Accidents, Homicides, & Suicides Combined
As the national opioid crisis rages in the midwest and along the northern and mid-Atlantic states, Cuyahoga County has reported yet another disturbing statistic about the growing death toll from one of America’s most pressing health crises: Last year, deaths from drug overdoses in the county – the bulk of which were caused by powerful synthetic opioids like fentanyl – surpassed deaths from homicides, suicides and car crashes combined.
The county medical examiner’s office in Cuyahoga, which abuts the southern shore of the Ohio River, said the country, which is centered around Cleveland, recorded 666 overdose deaths lasts year. Officials see no end in sight to the crisis and are projecting deaths to climb in 2017, according to the Cleveland.com.
"What we've seen over the beginning of 2017 is it's getting off to a start that's worse than 2016," Cuyahoga County Medical Examiner Dr. Thomas Gilson said last week in a news release.
Here’s a rundown of data from the county medical examiner’s office, as compiled by Cleveland.com.
The powerful synthetic opioid fentanyl was a factor in 399 of the 666 overdose deaths reported last year. Prevalence of these synthetic drugs has risen sharply since 2013 when it was involved in just five deaths. Another reason for the spike in deaths is that fentanyl is sometimes being mixed in with other drugs, usually heroin but also sometimes cocaine. The 399 fentanyl deaths reported last year included 117 deaths caused by fentanyl alone and 141 caused by a mix of fentanyl and heroin. Sixty-eight deaths were caused by a mix of fentanyl and cocaine, and 73 were caused by a mix of fentanyl, heroin and cocaine.
Two other powerful fentanyl analogues, Carfentanil and acetyl fentanyl, were responsible for 54 and 43 deaths, statistics show.
Deaths from opioid overdoses are most prevalent among young white males aged 18-24, according to expert who monitor the epidemic. But in Cuyahoga County, opioids are increasingly killing minorities as well. Fentanyl contributed to the deaths of 58 black people last year in Cuyahoga County, up from 25 in 2015. Just five black people were died from fentanyl use in 2014, according to Cleveland.com.
Still, 85 percent of the people killed by fentanyl last year were white.
Although opioid deaths accounted for the bulk of overdoses, cocaine related deaths also rose sharply in 2016.
There were 260 people who died after overdosing on the drug, or on cocaine mixed with other drugs, statistics show.
Cocaine resulted in 115 deaths in 2015; in fact, cocaine-related deaths have not risen higher than roughly 125 at any point in the past decade.
Fentanyl has been involved in the bulk of drug deaths. But heroin and painkillers were also linked to a greater number of deaths.
Opioids, which include heroin and fentanyl, were linked to 557 of the 666 overdose deaths last year in Cuyahoga County.
Overdose deaths worsened in each four-month trimester of 2016, the medical examiner's office said.
According to the data, the county reported 140 deaths from January through April and 181 from May through August and 196 deaths between September and December.
In 2016, the county reported 475 violent deaths; that included 184 homicides, 172 suicides and 119 fatal crashes. Heroin and fentanyl, by contrast, killed 506.
Drug overdose deaths in the country are projected to increase from 666 in 2016 to 775 in 2017, the medical examiner’s office said. Heroin deaths are projected to drop, but officials are projecting an additional 200 cases involving fentanyl or cocaine.
"We are seeing epidemic levels of drug overdose deaths in this country," medical examiner Gilson told Cleveland.com in a statement. "It's a big issue."
Cuyahoga is hardly unique; deaths from drug overdoses nationwide surpassed homicides for the first time in 2015 as the epidemic of heroin and opioid related deaths in the US continues to grow amid the dismal failure of the 'war on drugs'.
One coroner in Montgomery Country, PA told a local newspaper that the morgue's freezer is running out of room for bodies because of the high death toll from the epidemic.
President Donald Trump has vowed to combat the crisis, saying that his border wall would help curb the flow of drugs over the border from Mexico. But increasingly, drug dealers are ordering their drugs through websites hosted on the dark web, where fentanyl and other super-powerful synthetic opioids are widely available. These sites connect buyers with labs in China who will mail the drugs to US-based customers in unassuming packages that are difficult for customs to intercept.
- Putin Meets With Ethereum Founder To Create National Virtual Currency
Two weeks ago, in our latest comparison of Bitcoin and its up and coming competitor, Ethereum, we said “step aside bitcoin, there is a new blockchain kid in town.” Actually, we said that for the first time back in February when Ethereum was still trading in the low teens (the return on ETH since then is roughly 3000%), but the most recent glance provided some perspective on where the competition between the two largest cryptocurrencies may culminate, because according to at least two venture capitalists, the market cap of Ethereum – currently roughly $35 bilion – and whose share of the market has been soaring, will surpass that of Bitcoin, at ~$43 billion although it changes by the second, sometime before the end of 2018.
Two things: first, at the current rate of gains in Ethereum market share (and loss in Bitcoin’s), the inflection point between the two will come not in months, or weeks, but perhaps days.
Second, said inflection point may come in even faster if Vladimir Putin has anything to say about it, because as Bloomberg reports, “Ethereum has caught the attention of none other than the Russian president as a potential tool to help Russia diversify its economy beyond oil and gas.” Putin met Ethereum’s young founder Vitalik Buterin on the sidelines of the St. Petersburg Economic Forum last week and supported his plans to build contacts with local partners to implement blockchain technology in Russia, according to a statement on Kremlin’s website.
Speaking at the Economic Forum, Putin said that “the digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business model” and discussed means to boost growth long-term after Russia ended its worst recession in two decades. As explained repeatedly over the past 6 months, besides being a method of exchange, Ethereum is also a ledger for everything from currency contracts to property rights, speeding up business by cutting out intermediaries such as public notaries. It also does not suffer from some of the size limitations that have paralyzed bitcoin in recent months.
Furthermore, just like the western Enterprise Ethereum Alliance which consists of JPMorgan, Intel, Microsoft and other leading blue chips, Russia’s central bank has already deployed an Ethereum-based blockchain as a pilot project to process online payments and verify customer data with lenders including Sberbank PJSC, Deputy Governor Olga Skorobogatova said at the St. Petersburg event. She didn’t rule out using Ethereum technologies for the development of a national virtual currency for Russia down the road.
Adoption of Ethereum in Russia has been brisk also in the private sector: last week, Bloomberg reports that Russia’s state development bank VEB agreed to start using Ethereum for some administrative functions. Steelmaker Severstal PJSC tested Ethereum’s blockchain for secure transfer of international credit letters.
Blockchain may have the same effect on businesses that the emergence on the internet once had — it would change business models, and eliminate intermediaries such as escrow agents and clerks,” said Vlad Martynov, an adviser for The Ethereum Foundation, a non-profit organization that backs the cryptocurrency. “If Russia implements it first, it will gain similar advantages to those the Western countries did at the start of the internet age.”
What about price targets? Pavel Matveev, co-founder of Wirex told CNBC today that Ethereum could reach $600 by the end of the year, leaving bitcoin in the dust. Until just a few short weeks ago, such a forecast would seem ludicrous. However, considering the recent surge in ethereum prices – recall it hit an all time high of $412 earlier today before sharply dropping then again erasing virtually all losses – it may reach that particular target in just a few weeks.
- 'Madoff Whistleblower' Harry Markopolos Has Uncovered A New Fraud
Authored by Robert Huebscher via Advisor Perspectives,
Harry Markopolos, the investigator who exposed the Bernie Madoff Ponzi scheme, has uncovered a new fraud. The unfunded status of the pension fund of the Boston Transit Authority (the “MBTA”) is $500 million bigger than previously thought, according to Markopolos. This will have a significant impact on the municipal bond market, especially if it turns out that the MBTA’s problems are endemic among similar pension funds.
The unfunded status of a pension fund is the market value of the assets minus the present value of the liabilities, discounted at an actuarially determined interest rate. For most public pension plans, this number is negative; the liabilities exceed the assets and it is underfunded.
Although the full details are not yet known, Markopolos said the $500 gap is due to bad investments, fraudulent accounting and unrealistic actuarial assumptions.
Markopolos spoke on June 9 at Northfield Information Service’s 22nd annual summer seminar, held in Newport, RI. Northfield is a provider of advanced analytics to institutional investment managers and wealth managers. Its CEO, Dan diBartolomeo, worked with Markopolos in the Madoff investigation and is helping with the MBTA case.
Markopolos called what is left of the MBTA’s pension a “Tender Vittles retirement plan,” meaning (sarcastically) that its participants would be eating cat food.
The underlying cause of the MBTA’s problems was poor management and oversight. “No good outcomes result when you mix politics and money,” Markopolos said.
The problems began with failed investments in two hedge funds and culminated in the more widespread problems that Markopolos uncovered.
Buddy Fletcher
The troubles at the MBTA began in 2012, when it was revealed that it had lost $25 million in an investment in Fletcher Asset Management, a hedge fund run by Alphonse “Buddy” Fletcher. The MBTA had been hiding this loss until it was exposed by an investigative reporter from The Boston Globe.
Fletcher had promised guaranteed returns of 12%, similar to Madoff’s sales pitch. It was nothing more than a Ponzi scheme. In addition to the MBTA, three Louisiana pension funds lost $100 million in the scheme.
What made the Fletcher loss so galling, according to Markopolos, was that its chief investment officer, Karl White, had been the executive director of the MBTA pension fund. One year after leaving the MBTA, he convinced it to fund Fletcher.
“There are a lot of Ponzis,” Markopolos said, “and they are stealing customers from legitimate managers.”
Fletcher used the money it raised to invest in a movie, Violet and Daisy, which his brother was making and in a “penny stock” called ANTS, on which it booked a 1,000% return over a 16-day period. At one point, Fletcher reported 127 months of positive returns without a down month; it later revised this to show 14 down months.
The Fletcher irregularities went unnoticed by the MBTA’s board, which Markopolos said consisted of mostly non-college graduates – union members who worked on or operated the city’s busses and subways. The board had one person with an MBA and a couple of lawyers, who Markopolos said were not experts in investing.
Neither the MBTA’s auditor, KPMG, nor Marco Consulting, its pension consultant, reported any problems with the Fletcher investment.
Weston Capital
In 2013, the MBTA invested approximately $10 million in Weston Capital, a hedge fund run by Jason Galanis, whose father had run a big Ponzi scheme in the 1970s, stealing approximately $400 million from mostly Hollywood investors.
Markopolos said in 2007 that Galanis bought shares in Penthouse magazine, filed a false 10Q with forged signature, and had caused its auditor, Deloitte, to resign. All this happened before the MBTA made its investment in 2009.
“How much due diligence do you have to do to invest with Weston Capital?” Markopolos asked, rhetorically.
By the end of 2013, the MBTA had written off the value of its Weston investment.
Galanis, Markopolos said, would look for struggling RIAs. He would overpay for an ownership interest in firm, with the stipulation that its minority interest not be disclosed on its form ADV (which is illegal). He would then arrange to invest all or a portion of the RIA’s fixed-income portfolio with a promise of 8-9% returns. He would then raid those funds to pay Ponzi-style interest, Markopolos said.
Markopolos warned that fraudulent schemes to buy struggling RIAs are ongoing. RIAs should be aware that the damage goes beyond the firm’s assets, he said. A good criminal defense starts at $1 million, according to Markopolos, and even if you beat the charge anyone will be able to Google the result.
The larger problem
After recounting the Fletcher and Weston debacles, Markopolos described the larger problem facing the MBTA.
Based on audited financials, he said that the MBTA plan’s assets are only 29% of its liabilities, an underfunding of approximately $470 million. But Markopolos claims the actual number is closer to $1 billion.
The gap is due to overstating of asset values and returns, underestimating employee’s life expectancies and using an unrealistic discount rate for its liabilities.
The MBTA is “one bear market away from disaster,” Markopolos said.
Markopolos presented data from the MBTA’s 2012 and 2013 annual reports, when its market value jumped by $200 million. The most alarming aspect in those years was the outperformance of its public equity (large-cap, small-cap and emerging markets) and fixed-income holdings. Equities outperformed their benchmark by 6.28% and 5.63%; bonds beat its benchmark by 7.60% and 2.86%, respectively in the two years. Similar returns were reported for the MBTA’s real estate holdings.
That degree of outperformance is highly unusual, since the MBTA was using multiple asset managers in both its equity and fixed-income allocations. Across all asset classes, it used 71 asset managers. According to diBartolomeo, a single manager might achieve such outstanding results, but the chances of a team of managers performing that well was “essentially zero.”
The investigation is ongoing as to how the MBTA was able to report such spectacular results. Most likely, it was due to accounting manipulations. The MBTA may have switched the accounting standard it used (such as GAAP or GASB) in order to report the most favorable result. It may also have used provisions which allows pension plans to report performance smoothed over a five-year period to inflate its numbers.
By contrast, the MBTA reported dismal results for the 20% of its assets held in alternative funds – private equity, hedge funds and something it called “diversified beta.” Each of those fund categories underperformed their benchmarks in 2012 and 2013 by between 9% and 17%.
Markopolos questioned the due diligence procedures that led to such poor investments and why those managers had not been fired after achieving such poor results.
“Why did it keep investing in alternatives?” he asked, rhetorically.
The MBTA used actuarial tables from 1994 to determine the expected lifetimes of its employees. This resulted in shorter lifetimes than the rest of the pension industry, which was using tables from 2000. By assuming its employees would have shorter lifetimes, it was able to artificially reduce its projected liabilities and underfunded status. This represents approximately $105 million of the half-billion shortfall.
Long-term implications
Of the roughly $500 million shortfall, Markopolos calculated that $106 million is due to using an unreasonable discount rate to calculate the present value of its liabilities. The MBTA used an 8% discount rate and had increased its rate in 2012 by 0.5%, when almost all pension plans were decreasing their rate or leaving it constant.
The use of unreasonable discount rates is well-known and its impact widely estimated. The plans justify the use of an unreasonably high rate by claiming adherence to an actuarial standard; in reality, the economically appropriate discount rate – one which reflects the riskiness of the liabilities – is much lower. Markopolos said it should be about 4.5%.
The more troubling problems uncovered by Markopolos are driven by other factors, such as poor due diligence on its investments, overstating of returns, overstating of asset values and faulty life-expectancy estimates. These problems appear to be driven by a pension board that, at best, was unable or unwilling to scrutinize its investments or, at worst, willingly investing its assets with known criminals and past employees.
Nobody knows how widespread problems like these are.
The MBTA falls into the category of multi-employer public pension plans, which are among the smaller state-run plans. According to diBartolomeo, there are approximately $3 trillion in assets in about 6,000 smaller plans, roughly about 30% of the total assets in public pension plans. Markopolos said there are “plenty of other plans in Massachusetts with similar problems.”
Don’t expect help from supporting vendors. In addition to KPMG and Marco, Markopolos said that neither State Street Bank, the MBTA’s custodian, nor Buck Consultants, the plan’s actuarial consultant, warned of any problems.
KPMG should have found the discrepancies. But Markopolos said its auditors are typically “22-year olds who catch more colds than frauds.”
The investigation into the MBTA plan will continue. But if the plan fails – as Markopolos warned – it will surely have an impact on the municipal market. If the state of Massachusetts needs to bail out the plan, it will need to raise money through the bond market. It would be politically unpopular to let the plan fail, since the blue-collar MBTA workers are unwitting victims of the fraud and incompetence.
If problems like this are endemic among multi-employer state pension plans, it will mean higher rates for municipal bonds.
- How Russians Feel About Corruption
Russian opposition leader Alexei Navalny was arrested at his apartment just before taking part in an anti-corruption protest in Moscow. His wife tweeted the news of his arrest as crowds prepared to descend on Tverskaya Street near the Kremlin. Navalny had moved the rally there from a different location in the capital. Even though his initial request to hold a demonstration was granted by the authorities, he decided to change location, claiming they prevented him from hiring key items such as sound equipment and a stage.
As Statista's Nial McCarthy notes, after shifting the focus of his event to one of Moscow's main thoroughfares, Navalny was always on a collision course with the police, unsurprisingly resulting in his arrest. That's nothing new for the former lawyer who has been arrested countless times over the years, most notably in 2012 when he was accused of embezzlement and fraud, charges he denied.
The numbers attending protests in Moscow and over 200 other cities will be an indicator of how much support Navalny actually has ahead of his plans to contest next year's presidential election.
His cause will undoubtedly be helped by a survey from the Levada Center which shows that Russians are angry about high-level corruption in the government.
You will find more statistics at Statista
The research found that 47 percent of people think corruption has taken a significant hold in the government while 32 percent think it has fully permeated it from top to bottom.
Interestingly, 25 percent of those polled think Vladimir Putin bears full responsibility for the corruption and financial abuse frequently cited by his opponents. 42 percent said the Russian president is responsible in large part and only 9 percent say he could not be responsible for all of it.
Even though Navalny wants to contest next year's elections, authorities say he is barred due to his fraud conviction, a conviction he feels is fabricated. Even though that theory might gain more traction after his latest arrest, Navalny will find it extremely difficult to dislodge Putin who nevertheless enjoys very high approval ratings.
- China Auto Sales Post First Consecutive Monthly Drop Since 2015
The Chinese auto market is having it’s own version of a “cash for clunkers” moment. After artificially pulling sales forward for all of 2016 with a purchase tax that was cut in half from 10% to 5%, the Chinese auto market is now suffering the consequences of removing that stimulus. As Reuters notes, Chinese auto sales have declined sharply so far in 2017 with April and May registering the first consecutive monthly declines since 2015.
Chinese auto sales slipped in May from a year ago, registering two straight months of declines for the first time since 2015, with the automakers’ association saying the weakness may drag on as the rollback of a tax incentive continues to hurt.
The world’s biggest auto market got a shot in the arm in 2016, growing at its fastest pace in three years, after Beijing halved the purchase tax on smaller-engined vehicles. But buyers have shied away since taxes climbed to 7.5 percent, from 5 percent, at the start of this year.
Auto sales in China fell 0.1 percent in May from a year ago to 2.1 million vehicles, China Association of Automobile Manufacturers (CAAM) said on Monday. In April, sales recorded their steepest fall in 20 months.
Of course, for those of old enough to remember 2009, the U.S. auto market had it’s own, albeit short-lived, experience with massive government subsidies for auto purchases. Unfortunately, sales crashed as soon as the stimulus was removed.
Meanwhile, as China Association of Automobile Manufacturers spokesman Xu Haidong notes, the downturn in China is probably far from over given that auto purchases taxes will increase again in 2018 back to their original 10%.
The current downturn in China’s auto market could extend through July or August, said Xu Haidong, a CAAM spokesman.
“Last year was just too strong and now the policy impact is fading away,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight. “The growth (last year) overdrew some of the demand.”
China’s auto market recorded a 13.7 percent rise in sales last year, helped by the tax incentive. The purchase tax on vehicles with engines of 1.6 litres or below will rise to the normal 10 percent next year.
Seems as though China is experiencing an auto plateau of their own…
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