- Erdogan To Trump: Leave Syria Now Before We Strike
Turkey has threatened to strike the Syrian Kurdish YPG militia if the United States delays its troop withdrawal from the country, according to The Guardian.
“If the [pullout] is put off with ridiculous excuses like Turks are massacring Kurds, which do not reflect the reality, we will implement this decision,” said Turkish foreign minister Mevlüt Çavuşoğlu, referring to their threat to launch a military operation in Kurdish controlled Syria.
Speaking with broadcaster NTV, Çavuşoğlu said it was not realistic to assume that the United States will be able to collect weapons it gave to the YPG, which Turkish President Recep Tayyip Erdoğan considers a terrorist group.
Turkish officials had a tense meeting this week with Trump’s national security adviser, John Bolton, in Ankara aimed at coordinating the pullout process.
Erdoğan – who has welcomed the pullout plan – accused Bolton of a “grave mistake” by demanding that Ankara provide assurances on the safety of the Kurdish fighters before Washington withdraws its troops.
The US secretary of state, Mike Pompeo, who is on a regional tour, also said on Wednesday that Turkey had committed to protecting Washington’s Kurdish allies fighting Islamic State in Syria. –The Guardian
The United States has worked closely with the Syrian Kurdish People’s Protection Units (YPG) militia, which Ankara views as a “terrorist offshoot” of the Kurdistan Workers’ Party (PKK), reports The Guardian. The PKK has vowed to battle the Turkish state since 1984.
“We are determined on the field and at the table … We will decide on its timing and we will not receive permission from anyone,” Çavuşoğlu said of the plan to strike, adding that various officials in the Trump administration had tried to discourage Trump from the pullout plan – creating “excuses” such as Turkey massacring Kurds, referring to Pompeo’s comments.
Çavuşoğlu added that Turkey would fight the YPG whether or not the US withdraws from Syria, and that he and Pompeo would discuss over the phone on Thursday.
- The Secret Logistics Of America's Global Deep State
Authored by Eric Zuesse via The Strategic Culture Foundation,
Why is America’s Baghdad Embassy the world’s largest embassy — and the largest by far?
— Iraqi Sheikh Qassim Al Ta’ee, as quoted on 27 December 2011 in Al Iraq News and translated by Ibrahim Zaidan from the original Arabic by Nicholas Dagher
Zaidan’s article went on to say:
The world’s largest embassy is situated in the Green Zone and fortified by three walls, another barrier of concrete slabs, followed by barbed wire fences and a wall of sandbags. It covers an area of 104 acres, six times larger than UN headquarters in New York and ten times larger than the new embassy Washington is building in Beijing – which is just 10 acres.
[Editor’s’ Note: The ten-acre US Embassy in Beijing is the second largest overseas construction project in the history of the Department of State — and the 104-acre US Embassy in Iraq is the largest.]
So, America’s largest diplomatic mission is surrounded by high concrete walls, is painted in black, brown and grey and is completely isolated from its environment… The United States announced several months ago that between diplomats and employees, its embassy would include 16,000 people after the pullout of US forces.
On January 1st, Will Sillitoe headlined at the Helsinki Times, “What does the US embassy in Baghdad export to Finland and dozens of other countries?” and he reported that:
More than a million kilograms of cargo were shipped from Baghdad to different parts of the world, reveals US embassies procurement documents.
Mysterious cargo shipments from the US Embassy in Baghdad to other American embassies and consulates around the world have been revealed on a Wikileaks’ database. Procurement orders of US embassies are public documents, but Wikileaks put them in a searchable database making it easier to analyse.
The database displaying worldwide US embassy orders of goods and services reveals Baghdad as a postal and shipping centre for tonnes of freight.
Though military freight might be expected between the US and Iraq, records show that embassies across Europe, Asia, the Middle East, the Americas and Africa are all receiving deliveries from Baghdad too.
According to Wikileaks’ database, orders to ship more than 540 tonnes of cargo to the US were made in May 2018. The same document shows other main delivery destinations included 120 tonnes of freight to Europe, and 24 tonnes to South Africa, South America and Central Africa respectively…
On December 29th, Sillitoe had headlined “Guarded warehouse near airport and mysterious cargos from Baghdad; what is the US embassy in Helsinki up to?” and he opened:
Why does the US Embassy in Helsinki need a big warehouse near Malmi Airport and what are the contents of thousands of kilograms of cargo sent to Helsinki from Baghdad?
A dilapidated warehouse in Malmi is being used by the US Embassy for unknown operations after a Wikileaks release revealed its location.
The anonymous looking building on Takoraudantie is notable only for the new 427 meter perimeter fence that according to the Wikileaks’ database was ordered by the US Embassy in April 2018.
Situated across the street from the main entrance of Malmi Airport, the warehouse with its 3 meter high security fence appears an unlikely location for official embassy business. Neighbouring companies include a car yard and a tyre warehouse.
Helsinki Times visited the perimeters this weekend. Security personnel, young Finns in uniforms with American flags on their arms, appeared nervous and suspicious when asked to comment on the warehouse. …
Sillitoe closed that article by saying: “The searchable Wikileaks database and info about Finland related activities can be found HERE.”
That link leads to a “US Embassy Shopping List” of 24 separate documents, one of which is “RFP 191Z1018R0002 Mission Iraq Shipping Transportation Services”, dated “5/17/18.”
Item 2 there is “Packing of unaccompanied air baggage (UAB) – Throughout Iraq – US Embassy Baghdad, Baghdad International Zone, US Consulate General in Basrah, US Consulate General in Erbil, US Baghdad Diplomatic Support Center, US Erbil Diplomatic Support Center (Note: under the specified unit of measure the US Government contemplates ‘per kilogram’ of gross weight in kilograms)”
The “Quantity Estimated” is “100,000” and the “Unit of Measure” is “kilogram.”
Item 7 is “Storage Services – Monthly Storage of containers – Throughout Iraq – US Embassy Baghdad, Baghdad International Zone, US Consulate General in Basrah, US Consulate General in Erbil, US Baghdad Diplomatic Support Center, US Erbil Diplomatic Support Center.”
The “Quantity Estimated” is “100” and the “Unit of Measure” is “40’ Container.”
Item “Section B.5 Sub-CLIN:84E” is “From Republic of Iraq to Western European Countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Andorra, Liechtenstein, Malta, Monaco, San Marino, and Vatican City, Nicosia)”
The “Quantity Estimated” is “5,000” and the “Unit of Measure” is “kilogram.”
Item “Section B.5 Sub -CLIN:84 F” is “From Republic of Iraq to Eastern European Countries (Armenia, Azerbaijan, Belarus, Estonia, Georgia, Latvia, Lithuania, Moldova, Russia, Ukraine, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Kosovo)”
The “Quantity Estimated” is “5,000” and the “Unit of Measure” is “kilogram.”
By far the biggest categories for shipments are to the eastern US states: “From Republic of Iraq to the Unites [sp.] States Eastern Time-Zone – the following States: VT, ME, NH, MA, RI, CT, NJ, DE, MD, DC, NY, PA, VA, NC, SC, GA, FL, WV, MI, OH, IN, KY, GA”
There are 11 such categories:
“Section B.5 Sub-CLIN:85A”
“Section B.5 Sub-CLIN:86A”
“Section B.6 Sub-CLIN:84A”
“Section B.6 Sub-CLIN:85A”
“Section B.6 Sub-CLIN:86A”
“Section B.7 Sub-CLIN:84A”
“Section B.7 Sub-CLIN:85A”
“Section B.7 Sub-CLIN:86A”
“Section B.8 Sub-CLIN:84A”
“Section B.8 Sub-CLIN:85A”
“Section B.8 Sub-CLIN:86A”
Each one of those eleven will receive 30,000 kilograms, under the contract.
In each of the eleven, the products will be going “From Republic of Iraq to the Unites [sp.] States Eastern Time-Zone – the following States: VT, ME, NH, MA, RI, CT, NJ, DE, MD, DC, NY, PA, VA, NC, SC, GA, FL, WV, MI, OH, IN, KY, GA”
That’s a total of 330,000 kilograms. That’s 727,525 pounds, or 364 tons, which are going from the world’s largest Embassy, America’s in Baghdad, to America’s eastern states.
In addition, around another 1,091,287 pounds are going from the Baghdad Embassy to other locations throughout the world.
The RFP, or Request For Proposal, informs its recipient that “The Contractor shall provide the services for the base period of the contract,” but “base period” isn’t defined in the RFP. However, the contract does specify that there shall be “a firm fixed unit price for any contract line item number in the Base Year,” and therefore the obligations under any contract will continue for at least one year, but possibly longer (if renewed). Furthermore, the “Type of Solicitation” here is not “Sealed Bid (IFB),” but instead “Negotiated (RFP),” which means that the US Government officials who are “Soliciting” these offers will choose whom to request to present an offer; and, if two or more recipients are being approached and make an offer, then the US official will select the winner that he or she prefers, and won’t be required to accept the lowest-priced one, but can instead take some sort of kickback, as long as there is no evidence of having done that. It can easily be arranged. Furthermore, private arrangements bond the two parties, even if the arrangement is just a one-time deal, because neither party will want the private arrangement to be made public, and if ever it does become public, then both parties will be revealed as guilty; it’ll hurt both parties. Moreover, since any contract may be renewed, the offeror of the contract, which is the Embassy employee, holds the power to affect that — the length of term, and everything that’s associated with it, will be controlled by the Embassy’s side, and not by the contractor’s side. And no matter how brief a contract-term might be, and no matter how many non-Americans might be signing any particular type of contract during any given period of years, none of the private parties will have any motive to make public any kickback. Consequently, there is every motive to keep these arrangements private; and the Embassy employee will always be the more powerful one in any private arrangement that is made with any contractor.
Prior RFPs are also online, for example this one from 16 November 2014. The annual amounts seem to be fairly stable.
On 10 October 2007, while the US Embassy in Iraq was still building, the Congressional Research Service issued to Congress their report, “US Embassy in Iraq”, and it said:
The US Ambassador to Iraq (currently Ambassador Ryan Crocker) has full authority for the American presence in Iraq with two exceptions: 1 — military and security matters which are under the authority of General Patraeus, the US Commander of the Multinational Force-Iraq (MNF-I), and 2 — staff working for international organizations.
In areas where diplomacy, military, and/or security activities overlap, the Ambassador and the US Commander cooperate to provide co-equal authority regarding what is best for America and its interests in Iraq.
By “Patraeus” it meant David Petraeus. He was the person who designed the torture-system that was applied by his assistant James Steele and used in Iraq to extract from prisoners everything they knew about Saddam Hussein’s assistance to the 9/11 event. Petraeus subsequently became a regular participant in the annual meetings of the private and secretive Bilderberg group of representatives of the US and allied nations’ billionaires that constitute The West’s Deep State. Prior to that, Petraeus and Steele had organized and instituted in El Salvador that Government’s death-squads, to eradicate opponents of US control over that country.
The most corrupt parts of the US Government are usually in the military, because the entire Defense Department isn’t audited. It is instead financially an enormous dark hole, even to US Senators and Representatives, and even to the US President. Only members of the US Deep State might have an approximate idea of how much money is getting ‘lost’ in it. After all, the Deep State isn’t, at all, answerable to the public. Since it operates in secret, it can’t be. The consequences of the Deep State, however, can become public, and may contradict what is shown in publicly available documents and public statements, which have been circulated, to the public, by the press. In any nation where a Deep State rules, such contradictions, between public assertions and the actual outcomes, are so commonplace as hardly to be even news at all, if and when they appear, at all.
On 2 July 2017, the great investigative reporter Dilyana Gaytandzhieva headlined “350 Flights Carry Weapons Diplomatic for Terrorists”, and provided documentation of the US CIA’s intricate global network, which secretly “sends $1 billion worth of weapons” through many countries to jihadists in Syria to take down Syria’s Government. Iraq was mentioned 6 times in the original publication of her article, and is mentioned 9 times in the 29 April 2018 updated version. That secret US supply of weapons to jihadist groups to overthrow Bashar al-Assad and his secular, non-sectarian, Baathist Party, is a secret operation, just like the US State Department’s Baghdad Embassy’s operations are, and that Embassy could even be this particular operation’s headquarters.
The 200-page, December 2017, study, “Weapons of the Islamic State: A three-year investigation”, by Conflict Armament Research Ltd., states in its Conclusion:
IS forces, like most non-state armed groups, acquire significant quantities of weapons and ammunition on the battlefield… Evidence presented in this report, however, confirms that many of the group’s weapons — and notably its ammunition — are newly manufactured, having been delivered to the region since the start of the Syrian conflict in 2011. These weapons originate in transfers made by external parties, including Saudi Arabia and the United States, to disparate Syrian opposition forces arrayed against the regime of President Bashar al-Assad.
Here are just a few of the details that this passage in the summary was based upon and summarizing:
On pages 36-9, it says:
CAR has documented and traced numerous weapon systems in service with IS forces. Many derive from shipments made to the US government, or to entities operating under US government contracts. The United States has acknowledged its support to Syrian opposition forces, orchestrated primarily through resupply from the territories of Jordan and Turkey.26 All of the shipments originated in EU Member States; in most cases, US retransfers (exports made after purchase by the United States) contravened clauses in end-user certificates (EUCs) issued by the United States to EU supplier governments. The United States signed these certificates prior to transfer, stated that it was the sole end user of the materiel, and committed not to retransfer the materiel without the supplier government’s prior consent. It did not notify the supplier states concerned before [violating that, and] retransferring the materiel. …
On 21 December 2016, Jaysh al-Nasr, a Syrian armed opposition faction active in the Hama Governorate of Syria, published a set of photographs of its fighters.29 In one of these, Jaysh al-Nasr fighters are operating a 9M111MB-1 ATGW30 bearing an identical lot number and a serial number (365) close in sequence to the one CAR documented (286) in Iraq, suggesting both were part of the same supply chain. …
In May 2015, Syrian YPG forces recovered a PG-7T 40 mm rocket from IS forces near Al Hasakah, Syria, where CAR documented it on 20 May 2015. The Government of Bulgaria confirmed that it exported the item to the US Department of the Army through the US company Kiesler Police Supply. The application for the export licence was accompanied by the original EUC issued by the US Department of the Army (with a non-re-export clause) as well as a delivery verification certificate. The item was exported on 23 June 2014.32 … CAR has yet to receive a reply to a trace request sent to the United States regarding these rockets.
Page 54 says:
Like the United States, Saudi Arabia has provided support to various factions in the Syrian conflict, including through the supply of weapons. Working with the Bulgarian authorities, CAR has traced numerous items deployed by IS forces to initial exports from Bulgaria to Saudi Arabia. These transfers were uniformly subject to non-retransfer clauses concluded between Saudi Arabia and the Government of Bulgaria prior to export. In this respect, onward retransfers by Saudi Arabia of these weapons contravene its commitments to the Government of Bulgaria not to re-export the materiel in question without Bulgaria’s prior consent.
Just like in the case of the Baghdad Embassy’s agreements with contractors, the powerful party in any contract will be the party whose side is paying (the buyer), and not the party whose side is supplying the service or goods (the seller). Money always rules.
The CAR report, which was issued just months after Dilyana Gaytandzhieva’s report, was entirely consistent with, and largely overlapped, hers. The US and Saudi Governments were not only using Al Qaeda as their main proxy in southwestern Syria to lead the jihadist groups to overthrow Syria’s non-sectarian Government, but were also using ISIS in northeastern Syria as their main proxy forces there to overthrow Syria’s Government. After Russia’s entry into the war on 30 September 2015 on the side of Syria’s Government, America’s assistance to Al Qaeda in Syria (Al Nusra) continued in order to help replace that Government by one which would be controlled by the Sauds. And America’s assistance to ISIS was almost totally replaced then by its assistance to ethnocentric Syrian Kurds in the northeast as the Syrian Democratic Forces, which were fighting against both the Government and ISIS. Russia, of course, was against both Al Qaeda-led jihadists and against ISIS jihadists. (Turkey was against ethnocentric Kurds, because those people want to take a chunk out of four nations: Turkey, Syria, Iraq, and Iran. The CIA edited and written Wikipedia’s article on Kurdistan conveniently doesn’t even make note of that key fact.) So: America was using a complex combination in order to take over Syria for the Sauds ultimately to control. But Russia’s entry into Syria’s air-war on 30 September 2015 has overcome that U.S-led and Saudi financed combination against Syria.
Would any secret facility, anywhere in the world, be better situated to manage that operation, on America’s side, than America’s Baghdad Embassy?
So, the question then arises: who benefits from this enormous Embassy, and from the Deep State of which it is a part? The American public certainly do not.
Generally speaking, the people who get paid to promote endless wars, such as sellers of the constantly receding (propagandistic) “light at the end of the tunnel”, support continuing if not intensifying such wars. Typical is the neoconservative (in foreign affairs) and neoliberal (in domestic affairs) David Bradley, who controls and is the Chairman of Atlantic Media, which publishes the neocon-neolib The Atlantic, and many other public-affairs magazines and websites. His “Defense One” site posted, on 22 March 2018, from its Executive Editor, “The War in Iraq Isn’t Done. Commanders Explain Why and What’s Next”, and closed with “‘We need to be very careful about rushing to the exit, and secure this win,’ said the senior US military official. ‘This is a significant win.’” The “senior US military official” wasn’t identified, other than to say that he “spoke only on background.” But, of course, George W. Bush had already told the world all about this “win,” back in 2003. Salespeople just continue their pitches; it’s what they are paid to do, and so they never stop.
The annual military costs alone, for the US to keep being, as its propaganda euphemistically puts the matter, “policeman for the world” (such as, in the Syrian case, by means of those proxy boots-on-the-ground warriors, the jihadists, and the ethnocentrists among Syria’s Kurds) are actually sufficient, even on their own, to cause America’s soaring federal debt – and that’s not a benefit, but an extreme harm, to the public. Future generations of Americans will be paying the tab for this. And the costs for being “policeman for the world” are enormous. Even just militarily, they’re over a trillion dollars each and every year.
Though current US Defense Department budgets are around $700 billion annually, the United States is actually spending closer to $1.2 trillion annually on the military when all of the nation’s military spending (such as for military retirements, which are paid by the Treasury Department not by the Defense Department) are factored in. The only people who benefit from being “policeman for the world” are the billionaires of the US and (though to only a lesser extent) of its allied countries. And, of course, they pay their lobbyists and propagandists. It’s really being policeman for those billionaires, who own and control all of the international corporations that are headquartered in this alliance. The US public isn’t paying the tab by any cash-and-carry basis; instead, future generations of Americans will be paying the tab, for today’s US-and-allied billionaires. Those billionaires today are the chief beneficiaries. It’s all being done for them and their retinues. That’s why America’s Founders didn’t want there to be any “standing army” at all. They didn’t want there to be any permanent-war government. They wanted military only for national defense — not for any billionaires’ protection or ‘insurance policy’, or what might actually be publicly paid and armed thugs in service abroad as if they were the nation’s armed forces — when, in fact, they are the armed forces for only those billionaires and their servants. America’s Founders wanted no military at all that serves the aristocracy. They wanted no aristocracy, at all. They wanted no “standing army” whatsoever. They wanted only a military that protects the public, when a real military danger, from abroad, to the domestic public, exists. Of course, that’s possible only in a democracy, but the US is no democracy now, even if it might have been in the past.
On 11 December 2017, Montana State University headlined “MSU SCHOLARS FIND $21 TRILLION IN UNAUTHORIZED GOVERNMENT SPENDING; DEFENSE DEPARTMENT TO CONDUCT FIRST-EVER AUDIT”, but the Pentagon’s promised audit has failed to materialize. A major accounting firm was hired for the task but soon quit, saying that the Defense Department’s books were too incomplete to proceed further. Three days before that article was published, a colleague of that MSU team headlined at Forbes, ”Has Our Government Spent $21 Trillion Of Our Money Without Telling Us?” and said that the answer was yes. All of this ‘lost’ money was spent merely by the Department of Defense. Just managing the more-than-a-thousand US military bases worldwide requires a lot of money. Any actual war-fighting adds to that US military-base cost — the war-fighting costs are extra. Those military bases etc. are the “standing army.” Protection of our billionaires’ investments abroad, and of their access to raw materials in underdeveloped countries (such as to manufacture cellphones), is an enormously expensive operation. Basically, the American public are hugely subsidizing America’s billionaires. But only future generations of Americans will be paying that debt — plus, of course, the accumulated interest on it.
The Department of Defense isn’t the only federal Department that has ever been unauditable. On 18 June 2013, Luke Johnson and Ryan Grim at Huffington Post bannered “GAO Cannot Audit Federal Government, Cites Department Of Defense Problems” and opened: “The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense. Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.” However, on 17 November 2014, the Washington Post headlined “Homeland Security earns clean audit two years running”, and Jerry Markon reported that, “For the second straight year, the Department of Homeland Security has achieved a much sought-after clean audit of its financial statements by an independent auditor.” Furthermore: “for nearly all of its first decade of existence, DHS was unable to achieve a clean audit because it had been created by combining 22 federal agencies and components into one massive department. That led to inherent challenges.” That wasn’t the situation at the Defense Department, which was far different. On 8 December 2017, NPR headlined “Pentagon Announces First-Ever Audit Of The Department Of Defense”, and opened: “‘The Defense Department is starting the first agency-wide financial audit in its history,’ the Pentagon’s news service says.” However, almost as soon as the auditing team began their work, they quit it, because the Department’s books were garbage. Only the DOD is like that — almost entirely corrupt.
On 2 October 2018, Project Censored headlined “$21 Trillion in Unaccounted-for Government Spending from 1998 to 2015”. However, it falsified. It opened: “Two federal government agencies, the Department of Defense and the Department of Housing and Urban Development (HUD), may have accumulated as much as $21 trillion in undocumented expenses between 1998 and 2015.” None of that was actually HUD, it was 100% DOD. And all of “the alleged irregularities in DoD and HUD spending” were not merely “alleged,” but they were, in fact, carefully checked and repeatedly verified, and were only at DOD, despite what Project Censored published. This inaccuracy is important. If people don’t know that DOD is the only unaudited federal Department, then they can’t possibly understand why that is the case. The reason it is the case, is that almost all of the “waste, fraud, and abuse” in the US federal government is at the Defense Department. It has never been auditable. How much do America’s ‘news’-media report this reality?
DOD is consistently, year after year, and decade after decade, the federal Department or federal or local governmental function, that Gallup’s polling has shown to be more respected by the US public than is any other. (It’s identified there as “The military”. It beats, for examples: “The Supreme Court,” “Congress,” “The public schools,” “The presidency,” “The police,” and “The criminal justice system.”) The most corrupt isn’t the most despised; it is the opposite — it is the most respected.
Secret government tends to be costly for taxpayers, and also tends to add a lot to the governmental debt. An unauditable governmental department, such as the Defense Department is, cannot function, at all, without an enormous amount of corruption. This is the reality about America’s military. However, there’s much propaganda contradicting it. The news-media also serve those same billionaires.
How likely, then, is it, that America’s Baghdad Embassy serves the US public? It certainly does not serve the Iraqi public. But it does serve the people — whomever they are — who control the US Government. And that’s the Deep State. That’s the reality, but what’s promoted is fantasyland. And this fantasyland, which is promoted, is called “American democracy”. Just ask Big Brother, and he’ll tell you all about it. He always does.
- Are You In The Middle Class?
Are you in the middle class?
You probably think you are, according to new research from the Pew Research Center, but that doesn’t necessarily mean you’re right. As HowMuch.net explains, it turns out household size is a major determiner of status in the lower, middle and upper classes.
We plotted family size against the income range required to be in the lower, middle and upper classes, letting you easily see how much money people need to make to be at opposite ends of the income spectrum. And in fact, the size of your family is directly correlated with how much you need to earn to stay afloat.
Things are relatively simple for single working adults with no children. Anyone earning under $34,400 is considered in the lower income range, and anyone making over $103,200 is in the upper class. In reality, much of this depends on where you live and how much debt you’re paying off. Does the college grad who makes six figures but lives in a big city with $100,000 of student loan debt feel like he or she is in the upper class? What about the single adult making $90,000 in West Virginia, where the cost of living is cheap? Doesn’t that qualify as an “upper income”? It all depends on the cost of living for where you live in particular.
Regardless, our visualization demonstrates that adding more people to your household increases the amount you need to earn to enjoy the same standard of living. Having a child or getting married raises the bar to middle class entry to $43,693. For a household of 3 people, it goes higher to $50,697. And for two breadwinners and a pair of kids, the level goes even further up to $60,499. In other words, having a second child means you need to earn about $10,000 more just to stay at the same level, much less climb higher.
The same thing happens at the opposite end of the income spectrum. The gap between middle- and upper-income households grows the more people join a household. A single adult at the low end of the upper-income range making $103,200 would need to make $131,078 as a household of 2 people to stay at the same level. The amount jumps another $21,000 to $152,092 for households of 3, and an eye-popping $181,496 for a family of 4. That means it’s harder for well-off people to provide the same standard of living the more children they have, because, well, it’s so expensive.
All of which goes to show the dangers of “keeping up with the Joneses.” If you’re in the upper-income range and you and your spouse decide to have a second child, you don’t have to go out and earn another $29,000 just to stay in the same income range. It’s perfectly fine to slip into the middle class.
There’s a lot more we could say about how the cost of living depends entirely on where you live. Learn more by exploring our interactive calculator.
Data: Table 1.1
- The Curious Story Of An American Arrested By The Kremlin
Submitted by Scott Stewart of WorldView
-
Russia has arrested an American corporate security director, Paul Whelan, but he doesn’t have the profile befitting a non-official cover intelligence officer, even though there are elements in his background that would bring him to the attention of the Kremlin’s security services.
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Russian authorities arrested Whelan not long after Russian citizen Maria Butina pleaded guilty in a U.S. court to being an unregistered foreign agent, but it doesn’t appear that Moscow is seeking a prisoner swap.
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The Kremlin could try to hold Whelan to exchange him in the future for any “illegal” Russian operative caught operating in the United States.
The holiday season was less than merry for one Paul Whelan. On Dec. 28, 2018, the U.S. citizen (and bearer of additional passports from Canada, Ireland and the United Kingdom) was arrested by officers of the Russian Federal Security Service (FSB) in his room at Moscow’s Metropol Hotel. His family said the former Marine was in Moscow to play tour guide for the family of a fellow service member who was marrying a Russian woman, according to the Detroit Free Press. The Russians, naturally, have a different story. For them, Whelan is an intelligence officer who was using “non-standard methods for intelligence gathering,” as well as social media to target Russians with access to classified information. In fact, the FSB claimed they arrested Whelan shortly after a contact gave him a flash drive that contained a list of employees at a classified Russian government agency.
The Western press was quick to tie his arrest to the high-profile case of Maria Butina, a Russian citizen who pleaded guilty in a U.S. court on Dec. 13 to being an unregistered foreign agent. But the more I learn about Whelan, the more I become convinced that he was not an intelligence officer. Moreover, I am also fairly certain that his arrest is not linked to Butina’s guilty plea. That, however, doesn’t mean that the Russians don’t have their reasons for detaining him.
An Odd Duck
In the wake of Whelan’s arrest, former CIA official John Sipher said the agency would never use non-official cover officers (NOCs) — operatives who have no official ties to the government that employs them and, importantly, no diplomatic immunity — in Russia. Now, it is understandable that Sipher and others would want to downplay the CIA’s use of NOCs in dangerous places, but I remain somewhat skeptical of such claims — although I admittedly have no direct knowledge of CIA operations in Russia. Nevertheless, a simple fact remains: If the CIA or some other U.S. intelligence agency were planning to deploy a NOC in Russia, Whelan would patently not be fit for the job.
First, his current position — corporate security director for an auto parts manufacturer — is a poor choice for a NOC. In many cultures, the terms security and intelligence are interchangeable, meaning many do not view them as separate functions as in the United States. Corporate security personnel generally come from backgrounds in law enforcement, the military or both (like Whelan), which would make them subject to additional scrutiny and suspicion — certainly too much scrutiny for a NOC trying to operate comfortably, especially in the exceptionally hostile environment of Russia. Whelan reportedly made his first tourist trip to Russia while serving on active-duty tour in Iraq with the U.S. Marine Corps, something that likely raised the FSB’s eyebrows. What’s more, given the perilous state of Russia’s auto industry, I am highly skeptical that Whelan was using his position at the car parts manufacturer as a means to engage in any sort of industrial espionage.
Second, Whelan received a court-martial in 2008 for larceny on 10 counts of passing bad checks, along with other charges, while serving on active duty in the Marines. According to news reports, he also had a history of not paying his rent while on active duty. The New York Times also published a court-martial document indicating that military authorities had reduced his rank from staff sergeant (E-6) to corporal (E-4) and discharged him from the military. The record also shows that Whelan was sentenced to a bad conduct discharge, only for a military judge to suspend the ruling.
An FSB officer told the Rosbalt news service that he believed the court-martial may have been cover to allow Whelan to serve as a NOC, but that explanation simply does not add up. A Marine staff sergeant who is experiencing financial problems, passing bad checks and failing to pay his rent is more of a counterintelligence problem — someone who could be recruited by a foreign power — than an ideal candidate for a highly secretive assignment as a NOC.
And according to Whelan’s family, he had engaged in a competition with his sister to see how many passports each could acquire — extremely unusual behavior for an intelligence officer. While such officers do often use passports from third countries to travel, these additional documents are in the name of cover identities, not the officer’s true name, as in Whelan’s case. Moreover, intelligence agencies, rather than officers themselves, are responsible for obtaining these secondary passports. Indeed, possessing multiple passports all in the same name is terrible intelligence tradecraft. It would put any operative more in the league of mall cop Paul Blart than agent extraordinaire Jason Bourne.
Whelan’s social media profile, especially on the popular Russian social media platform VKontakte, is also quite odd. Quite frankly, I believe it’s simply far too amateurish to be the profile of a professional intelligence officer seeking to use social media to recruit sources, especially because he was using his true identity rather than a covert one.
I shared some of these observations with friends who are former CIA clandestine service officers, and we all agree that Whelan is simply too much of an odd duck to be a NOC. Nevertheless, the more I look at the case, I can certainly see why Whelan’s profile and odd activities might have raised the suspicions of the FSB, which might have interpreted them as signs that he was an intelligence officer, particularly in the current environment.
The Importance Of Context
I have long advised people about the need to develop a good understanding of their destination’s environment when planning a trip abroad. This pertains not only to criminal and terrorist trends but also to the intelligence environment, as well as how growing tensions between nation-states can increase scrutiny on travelers who come from ostensibly hostile countries.
Last March, I discussed how the Sergei Skripal assassination attempt and the U.S. operations against Wagner mercenaries in Syria were increasing tensions between the West and Russia. I specifically noted:
But these incidents and their fallout will no doubt make Russia’s Federal Security Service (FSB) and Foreign Intelligence Service even more aggressive toward Westerners living or traveling in Russia.
Then, following the expulsion of Russian intelligence officers from the West and vice versa, I noted how the expulsions of intelligence officers operating under official cover would increase the West’s use of NOCs and Russian intelligence’s use of “illegals” as both sides sought to pick up the operational slack left by the expelled officers and recruit new agents. I noted that:
Civilians caught in the middle of this growing intelligence war can expect to be increasingly scrutinized, especially business travelers, tourists, nongovernmental organization workers and journalists. Security services in the West will place further emphasis on travelers from Russia, and those in Russia will do the same for Western travelers.
I also stated the following:
Individuals suspected of being intelligence officers will be heavily surveilled and their electronic communications will be monitored. The local counterintelligence agency may also interview suspects directly, in an overt attempt to either rattle them or place them on notice that they are under the microscope. Suspected intelligence officers or anyone else of interest to Russian intelligence can expect to be approached by people attempting to honey-trap them, no matter their gender and orientation. And Western visitors to Russia will likely have their hotel rooms wired for video and audio.
This was the kind of morass that Whelan waded into. With his periodic journeys to Russia, strange affect, long-standing contact with Russian guys on social media and apparent uninterest in FSB honey traps — the security service told Rosblat that it was suspicious of him because he was more interested in drinking with Russian friends (male acquaintances he had met online) rather than in “pretty Russian girls” — it is no wonder why Whelan would have elicited the FSB’s suspicions.
Throughout my travels, I have frequently encountered intelligence-officer wannabes: people who have watched too many Hollywood movies and believe that they can become self-styled “spies.” I don’t know enough about Whelan to say whether this could apply to him, although his passport collection could be an indicator of this type of profile. If he did style himself as an intelligence officer, it could explain the flash drive with classified information — another example of sloppy tradecraft for a real intelligence officer. (although it must also be noted that the FSB could have easily planted such evidence to entrap or frame Whelan.) Nevertheless, it is not difficult to see how the FSB would take a dim view of a corporate security director who is a former cop and Marine, who travels to Russia for personal rather than company business, and who likes to hang out with Russian soldiers.
Trade Bait?
Many in the media have speculated that the FSB might have nabbed Whelan as trade bait for Butina. That was also my initial thought, but on further reflection, she is unlikely to be sentenced to much more than the time she has already served, meaning she could soon be on a plane home to Russia. Thus it makes little sense to frame and arrest an innocent man to exchange for her. Besides, Butina’s guilty plea and decision to cooperate with prosecutors stands in stark contrast to past Russian intelligence officers, such as Rudolf Abel (true name Willie Fisher), who was extremely stoic — admitting nothing and denying everything — even when caught red-handed.
But while Whelan might emerge to be a hobbyist who styled himself as an intelligence officer, I can state with a fair degree of certainty that he is no NOC and that the FSB did not detain him as trade bait for Butina. That is not to say, however, that Whelan might not yet prove useful in a swap. With the Russians increasing their use of “illegals” in the wake of the West’s expulsion of intelligence officers using diplomatic cover, Whelan — and perhaps other Americans caught in the wrong place at the wrong time — might come in handy if and when the United States gets its hands on a Russian illegal.
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- Sinaloa Drug Cartel Uses Chinese Chemicals To Fuel America's Opioid Crisis
The Sinaloa Cartel, also known as the Guzmán-Loera Organization, or the Pacific Cartel, is an international drug trafficking and organized crime syndicate. The cartel is located in the city of Culiacán, Sinaloa, with operations in the Mexican states of Baja California, Durango, Sonora, and Chihuahua. In some of these regions, opium producers sell their harvest to the cartel to be transformed into heroin and the shipped to the US. But, according to Vice News, the once-lucrative crop has collapsed in price.
The Sinaloa Cartel is associated with the “Golden Triangle,” which refers to the states of Sinaloa, Durango, and Chihuahua; this region is where top producers of Mexican opium reside.
Golden Triangle producers tell Vice News that the Sinaloa cartel has stopped offering premium prices for opium gum, the brown goo that is extracted from poppy plants and processed into heroin.
Addiction rates continue to soar in the US. For cartels to meet American demand, they have discovered a new ingredient that does not involve fields of poppies.
A 49-year-old man from the small village of Tameapa, who asked not to be identified by Vice News because he owns a poppy farm, has finally figured out why poppy prices have collapsed: “It’s because of the synthetic drugs.”
More than 700,000 Americans died from drug overdoses from 1999 to 2017, about 10% of them in 2017 alone, according to our most recent report on the opioid crisis. In total, there were a staggering 70,237 drug overdose deaths last year, which is more deaths than all US military fatal casualties of the Vietnam War. Opioids were involved in 67.8%, or 47,600 of those deaths. Of those opioid-related overdose deaths, 59.8% of them, or 28,466, were due to synthetic opioids.
There is growing evidence that fentanyl is being produced primarily in Mexico in secret cartel labs, with chemicals sourced from China.
The farmer in Tameapa recalled the days, when a kilo of goma would fetch 35,000 pesos, or around $1,800. Now cartels only pay him a third of that.
“It’s like if a company would’ve died,” he said. “There’s no money, no economy, nothing. It was our only source of income. And now it’s over. All that people want here is to work.”
Since 2006, there have been three documented fentanyl lab seizures in Mexico. The two most recent cases were in Sinaloa in 2017 and in the border city of Mexicali in September, when authorities found 20,000 fentanyl pills and chemists.
DEA spokeswoman Katherine Pfaff told VICE News the agency is “extremely concerned about fentanyl entering, transiting, or originating from Mexico.”
“Numerous criminal investigations led by domestic DEA offices have developed information regarding the production of fentanyl in Mexico,” Pfaff said, noting that “ongoing bilateral investigations” with other agencies have also produced evidence that fentanyl is being manufactured in Mexico.
At the G20 summit in December, President Trump commended Chinese President Xi Jinping after the Chinese government announced that all “fentanyl-like substances” would be controlled. The effort, pressured by the Americans, is intended to counter rogue chemists that make new varieties of fentanyl.
However, the move by China is unlikely to have much impact on the US opioid crisis.
“Fentanyl, along with its primary variants and main precursors, has been a controlled substance in China for years, and it’s unclear exactly how or when the new regulations will be implemented or enforced,” said Vice News.
A former DEA agent said China is “merely seeking to create the appearance of cooperating with U.S. officials,” while not enacting any reforms that damage economic growth, said a recent report to Congress from the US-China Economic and Security Review Commission.
For decades, heroin markets in the US were divided by the Mississippi River. The Sinaloa cartel was known to supply the West with “black tar” heroin, while Colombians supplied the East with more refined “China white” powder. But with the Colombian underworld disrupted and surging demand for opioids among Americans addicted to prescription painkillers, market dynamics have shifted. Now Mexican cooks are producing synthetic opioids using Chinese chemicals to fuel America’s opioid crisis.
- Beware The Emergency State: Imperial, Unaccountable, And Unconstitutional
Authored by John Whitehead via The Rutherford Institute,
“For seven decades we have been yielding our most basic liberties to a secretive, unaccountable emergency state – a vast but increasingly misdirected complex of national security institutions, reflexes, and beliefs that so define our present world that we forget that there was ever a different America. … Life, liberty, and the pursuit of happiness have given way to permanent crisis management: to policing the planet and fighting preventative wars of ideological containment, usually on terrain chosen by, and favorable to, our enemies. Limited government and constitutional accountability have been shouldered aside by the kind of imperial presidency our constitutional system was explicitly designed to prevent.”
– David C. Unger, The Emergency State: America’s Pursuit of Absolute Security at All Costs
It’s all happening according to schedule.
The civil unrest, the national emergencies, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters,” the government’s reliance on the armed forces to solve domestic political and social problems, the implicit declaration of martial law packaged as a well-meaning and overriding concern for the nation’s security…
The government has been planning and preparing for such a crisis for years now.
No matter that this crisis is of the government’s own making.
To those for whom power and profit are everything, the end always justifies the means.
This latest brouhaha over President Trump’s threat to declare a national emergency in order to build a border wall is more manufactured political theater, a Trojan Horse intended to camouflage the real threat to our freedoms: yet another expansion of presidential power exposing us to constitutional peril.
This is not about illegal immigration or porous borders or who will pay to build that wall.
This is about unadulterated power and the rise of an “emergency state” that justifies all manner of government tyranny in the so-called name of national security.
The seeds of this present madness were sown more than a decade ago when George W. Bush stealthily issued two presidential directives that granted the president the power to unilaterally declare a national emergency, which is loosely defined as “any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions.“
Comprising the country’s Continuity of Government (COG) plan, these directives (National Security Presidential Directive 51 and Homeland Security Presidential Directive 20), which do not need congressional approval, provide a skeletal outline of the actions the president will take in the event of a “national emergency.”
Mind you, that national emergency can take any form, can be manipulated for any purpose and can be used to justify any end goal—all on the say so of the president.
This is exactly the kind of mischief that Thomas Jefferson warned against when he cautioned, “In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.”
Power corrupts.
Absolute power corrupts absolutely.
Thus far, we have at least pretended that the government abides by the Constitution.
Despite the many attempts by government leaders to claim broader powers for themselves during wartime, the Constitution allows for only one emergency power: “The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it” (Article 1, Section 9, Clause 2).
Those who wrote our Constitution sought to ensure our freedoms by creating a document that protects our God-given rights at all times, even when we are engaged in war, whether that is a so-called war on terrorism, a so-called war on drugs, or a so-called war on illegal immigration.
This threat by Trump to rule by fiat merely plays into the hands of those who would distort the government’s system of checks and balances and its constitutional separation of powers beyond all recognition.
Apart from the fact that this highly politicized, shamelessly contrived border crisis does not in any way constitute a national emergency, to allow such a manufactured emergency to override constitutional constraints and the rule of law will push the nation that much closer to outright totalitarianism.
To be clear, this is not a criticism of Trump or a disavowal of the need for better vigilance at the nation’s border.
Rather this is a word of warning.
Remember, these powers do not expire at the end of a president’s term. They remain on the books, just waiting to be used or abused by the next political demagogue.
So, too, every action taken by the Trump administration to weaken the system of checks and balances, sidestep the rule of law, and expand the power of the president makes us that much more vulnerable to those who would abuse those powers in the future.
No matter whether you consider Trump to be a demagogue or a die-hard patriot, there will come a day when Trump no longer occupies the White House, and then what?
We’ve been down this road before.
Although the Constitution invests the President with very specific, limited powers, in recent years, American presidents (Trump, Obama, Bush, Clinton, etc.) have claimed the power to completely and almost unilaterally alter the landscape of this country for good or for ill.
Should the Trump Administration act on its threat to build a border wall using the president’s emergency powers, it would constitute yet another gross perversion of what limited power the Constitution affords the executive branch.
The powers amassed by each successive president through the negligence of Congress and the courts—powers which add up to a toolbox of terror for an imperial ruler—empower whomever occupies the Oval Office to act as a dictator, above the law and beyond any real accountability.
As law professor William P. Marshall explains, “every extraordinary use of power by one President expands the availability of executive branch power for use by future Presidents.” Moreover, it doesn’t even matter whether other presidents have chosen not to take advantage of any particular power, because “it is a President’s action in using power, rather than forsaking its use, that has the precedential significance.”
In other words, each successive president continues to add to his office’s list of extraordinary orders and directives, expanding the reach and power of the presidency and granting him- or herself near dictatorial powers.
This abuse of presidential powers has been going on for so long that it has become the norm, the Constitution be damned.
We no longer have a system of checks and balances.
“The system of checks and balances that the Framers envisioned now lacks effective checks and is no longer in balance,” concludes Marshall. “The implications of this are serious. The Framers designed a system of separation of powers to combat government excess and abuse and to curb incompetence. They also believed that, in the absence of an effective separation-of-powers structure, such ills would inevitably follow. Unfortunately, however, power once taken is not easily surrendered.”
All of the imperial powers amassed by Barack Obama and George W. Bush—to kill American citizens without due process, to detain suspects indefinitely, to strip Americans of their citizenship rights, to carry out mass surveillance on Americans without probable cause, to suspend laws during wartime, to disregard laws with which he might disagree, to conduct secret wars and convene secret courts, to sanction torture, to sidestep the legislatures and courts with executive orders and signing statements, to direct the military to operate beyond the reach of the law, to operate a shadow government, and to act as a dictator and a tyrant, above the law and beyond any real accountability—have become a permanent part of the president’s toolbox of terror.
These presidential powers—acquired through the use of executive orders, decrees, memorandums, proclamations, national security directives and legislative signing statements and which can be activated by any sitting president—enable past, president and future presidents to operate above the law and beyond the reach of the Constitution.
America, meet your new dictator-in-chief: imperial, unaccountable and unconstitutional.
If we continue down this road, there can be no surprise about what awaits us at the end.
After all, it is a tale that has been told time and again throughout history.
For example, over 80 years ago, the citizens of another democratic world power elected a leader who promised to protect them from all dangers. In return for this protection, and under the auspice of fighting terrorism, he was given absolute power.
This leader went to great lengths to make his rise to power appear both legal and necessary, masterfully manipulating much of the citizenry and their government leaders.
Unnerved by threats of domestic terrorism and foreign invaders, the people had little idea that the domestic turmoil of the times—such as street rioting and the fear of Communism taking over the country—was staged by the leader in an effort to create fear and later capitalize on it. In the ensuing months, this charismatic leader ushered in a series of legislative measures that suspended civil liberties and habeas corpus rights and empowered him as a dictator.
On March 23, 1933, the nation’s legislative body passed the Enabling Act, formally referred to as the “Law to Remedy the Distress of the People and the Nation,” which appeared benign and allowed the leader to pass laws by decree in times of emergency.
What it succeeded in doing, however, was ensuring that the leader became a law unto himself.
The leader’s name was Adolf Hitler.
The rest, as they say, is history. Yet history has a way of repeating itself.
Hitler’s rise to power should serve as a stark lesson to always be leery of granting any government leader sweeping powers.
Clearly, we are not heeding that lesson.
Indeed, all of those dastardly seeds we have allowed the government to sow under the guise of national security are bearing demon fruit.
Brace yourself.
There is something being concocted in the dens of power, far beyond the public eye, and it doesn’t bode well for the future of this country.
Anytime you have an entire nation so mesmerized by the antics of the political ruling class that they are oblivious to all else, you’d better beware.
Anytime you have a government that operates in the shadows, speaks in a language of force, and rules by fiat, you’d better beware.
And anytime you have a government so far removed from its people as to ensure that they are never seen, heard or heeded by those elected to represent them, you’d better beware.
As I make clear in my book Battlefield America: The War on the American People, we are at our most vulnerable right now.
The gravest threat facing us as a nation is not extremism but despotism, exercised by a ruling class whose only allegiance is to power and money.
- Bankrupt, Eh? Insolvency Filings Soar In Almost All Canadian Provinces
The pronounced aftershock from what would historically be considered as very mild interest rate hikes in Canada is continuing.
Bloomberg reported that the number of consumers seeking debt relief was up 5.1% to 11,320 in November, according to the Ottawa-based Office of the Superintendent of Bankruptcy. Combining October and November’s numbers, there were 22,961 consumer insolvency filings, the most since 2011.
These new numbers come on the heels of the bank of Canada raising its key lending rate five times since the middle of 2017. Like in the US, the impact of rising rates on the economy is being “monitored closely”, which is a nice way to say “obsessed over by central banks in order to continue to force all asset classes to rise in price”.
David Lewis, a board member at the Canadian Association of Insolvency and Restructuring Professionals, told Bloomberg: “We’re seeing a bump, and in some provinces that bump is significant.”
Insolvency filings were up in every province except PEI, which was unchanged. Alberta saw insolvencies rise 16%. Filings in Ontario were estimated to have risen 1% in 2018 after declining for eight straight years. Insolvency firm Hoyes, Michalos & Associates Inc. estimates that Ontario will see a minimum of a 2% to 5% jump in insolvency filings in 2019. If rates continue to rise, they predict as much as an 8% jump.
66% of Ontario’s insolvency filings were consumer proposals, which is reportedly the highest year on record. You can view the country’s total insolvencies for November 2018 in the chart below.
We had previously offered a preview of this inevitable increase after October’s insolvency numbers also grew.
Chantal Gingras, chair of the Canadian Association of Insolvency and Restructuring Professionals stated in early December:
“High consumer debt levels and rising interest rates have been a growing concern over the last few years and we are now starting to see this reflected in the number of insolvent Canadians filing bankruptcies or proposals.”
“Canada is in serious trouble”, we wrote back in April 2018, when we pointed out that the country’s over-reliance on its frothy, bubbly housing sector and the fact that the average Canadian household had failed to reduce its debt load would eventually come back to bite.
We look forward to the country continuing to prove us right.
- PG&E Gets AIG-ed: Moody's Downgrade Triggers $800MM Collateral Call, Liquidity Crisis
For PG&E, just like for AIG ten years ago, this is the beginning of the end.
As we discussed on Tuesday, one of the biggest surprises involving the ongoing collapse of troubled California utility PG&E is how it was possible, that with the company reportedly contemplating a DIP loan ahead of a possible bankruptcy filing which sent PCG stock plunging and its bonds cratering to all time lows, that rating agencies still had the company rated as investment grade.
Late on Monday, this question got some closure after S&P became the first rating agency to take a machete to its rating for PG&E, when it downgraded the company by five notches, from BBB- to B, the fifth-highest junk rating while warning that more cuts are imminent. But while S&P slashed PG&E’s IG ratings, Fitch and Moody bizarrely had yet to do so, well over a month into the company’s death spiral. And when they do, both management, shareholders and bondholders would have nightmare on their hands because a similar “junking” by Moody’s to high-yield would result in a rerun of the AIG death sprial, as at least once cash collateral call for PG&E of at least $800 million – to guarantee power contracts – would be triggered according to a regulatory filing.
Well, PG&E’s AIG moment hit late on Thursday, when Moody’s did precisely what S&P did two days earlier, and cut the utility’s credit rating to junk citing the electric company’s potential wildfire liabilities. The credit grader lowered PG&E’s rating by five notches, to B2 from Baa3, and the utility Pacific Gas & Electric rating four levels to Ba3. Like S&P, the bond grader said it may (read: will) cut the company further, sending PG&E shares and bonds sliding after hours.
But it wasn’t the prospect of more downgrades that spooked the market: it was the fact that with two junk ratings, PG&E will now be required to use cash as collateral to guarantee power contracts, according to the company’s latest quarterly filing, which estimates the utility will have to fully collateralize as much as $800 million of positions.
That… is a problem because PG&E had only $430 million of cash on its books in September, precipitating what now appears to be an imminent liquidity crisis, one which as a result of some $30 billion in wildfire legal liabilities will quickly escalate into a solvency inferno, to use a term closely associated with California utility companies.
Meanwhile, assuming that PG&E somehow survives the upcoming insolvency, its junk credit ratings will assure that the company will have to pay more to borrow for years to come. In fact, the company’s 3.5% bonds due next year are currently yielding more than 9.9%, far above where most high-yield securities are paying and a level reserved for deeply distressed credits. As shown in the chart below, B-rated debt, the mid-tier of junk bonds, yields on average 7.5% as of Monday’s close, according to Bloomberg index data.
Of course, the above take assumes PG&E will survive a few quarters, which thanks to nearly $1 billion in cash collateral the company must somehow find and post immediately, it won’t.
Not even Moody’s could find a silver lining in this liquidity bonfire: “We see a much more challenging environment for PG&E,” said Moody’s analyst Jeff Cassella in the statement. “The company is increasingly reliant on extraordinary intervention by legislators and regulators, which may not occur soon enough or be of sufficient magnitude to address these adverse developments.”
Meanwhile, even as shareholders – among which bizarrely is value investing “god” Seth Klarman – hold on to hope, bondholders appear to have given up: with $18.4 billion of long-term debt, PG&E most actively-traded bonds plunged sharply after the downgrade: Pacific Gas & Electric bonds with coupons of 6.05 percent due in 2034 fell as much as 4.5 cents on the dollar to 85 cents, the lowest level since the financial crisis.
And speaking of the financial crisis, while Lehman was the spark, its was the bailout of AIG that really precipitated the most violent part of the 2008 crisis. While most analysts see PG&E as an isolated case, now that the biggest California utility is on the verge of insolvency and bankruptcy, and is about to have its own AIG moment, one wonders just how “contained” this particular shock to the system will be.
One thing is clear, however: the shock to California residents, or rather their wallets, will be most unpleasant, as their rates are about to surge one way or another.
- Starbucks Installing Needle Disposal Boxes In Store Bathrooms To "Protect Employees"
Starbucks locations in the Seattle-Tacoma-Bellevue metropolitan region will be shortly introducing needle deposit boxes in store bathrooms after thousands of employees signed a petition demanding the coffee company do more to “protect employees.”
“Exposure to HIV/AIDS, Hep C, Hep B, etc. is a risk in Seattle where there is a heroin/hep c crisis. There is no vaccine for Hep C, and Starbucks refuses to comment when employees mention this risk,” the petition — posted by “Citizen Z” states. “Employees risk getting poked, and DO get poked, even when following ‘protocol’ of using gloves and tongs to dispose of used needles left in bathrooms, tampon disposal boxes, and diaper changing stations.”
The petition provides a brief understanding of the hazardous conditions at work. First, there is a fear among employees that they will come in contact with hypodermic needles that are regularly disposed of in trash cans in bathrooms by opioid addicts and the homeless. The petition provides an example of some employees having to receive medical care and paying “almost two thousand dollars” for hospital bills after-exposure. It goes on to say that employees must “pay out-of-pocket for this before being reimbursed until Starbucks’s company insurance kicks in,” adding that, “many baristas cannot afford the medical bills and have to resort to “loans and credit cards.”
It goes on to say that there is a significant risk for pregnant employees, or those with immune disorders, find themselves afraid to go to work because of needles that are generally found in Starbucks bathrooms throughout the Seattle region. “Making coffee should not come with this kind of easily detoured risk,” the petition ends.
As of Thursday afternoon, the petition has more than 3,700 signatures out of the 4,000 needed.
Business Insider spoke with Starbucks representative Reggie Borges, who said employees are given a protocol for removing needles, but new disposal boxes will offer more safety.
“These societal issues affect us all and can sometimes place our [employees] in scary situations,” said Borges. “I can’t emphasize enough that if our partners are ever in a position where they don’t feel comfortable completing a task, they are empowered to remove themselves from the situation… As we always do, we are constantly evaluating our processes and listening to partner feedback of ways we can be better.”
Starbucks will be installing FDA-cleared sharps disposal containers in bathrooms around the city. Sharps containers are made from rigid plastic, and allow people to safely dispose of needles, syringes and other sharp medical instruments that might otherwise pierce a trash bag.
In May 2018, Starbucks announced a new “all-inclusive” public restroom policy, which opened the company’s bathrooms to opioid addicts and the homeless, as employees contended with blood spattered walls, used drug needles, and face-melting waftings from deuce-dropping vagrants filling the store.
Starbucks said: “We want our stores to be the third place, a warm and welcoming environment where customers can gather and connect. Any customer is welcome to use Starbucks spaces, including our restrooms, cafes and patios, regardless of whether they make a purchase.”
The company has since walked back its bathroom policy to just anyone, perhaps after realizing that their employees and patrons alike were not responding well to the prospects of vagrants using stores as a homeless shelter.
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