Jun 14

Today’s News 14th June 2017

  • Multipolar World Order: The Big Picture In The Qatar-Saudi Fracture

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    In a climate of outright confrontation, even the Gulf monarchies have been overtaken by a series of unprecedented events. The differences between Qatar on one side, and Saudi Arabia, the United Arab Emirates and Bahrain on the other, have escalated into a full-blown diplomatic crisis with outcomes difficult to foresee.

    Officially, everything started with statements made by Qatari emir Tamim bin Hamad Al Thani that appeared on the Qatar News Agency (QNA) on May 23, 2017. A few hours before the conference between the 50 Arab countries and the US President, Al Thani was reported to have said the same words that appeared on QNA. The speech was very indulgent towards Iran and described the idea of an «Arab NATO» as unnecessary. The exact words are not known because the event in which Al Thani had made such incendiary remarks concerned military matters and was thus not accessible to the general public. Especially to be noted is that QNA denies having published words in question and attributed them to a cyber-attack.

    The public dissemination of the Emir's words on QNA promptly provoked an unprecedented diplomatic crisis in the Gulf. Immediately, Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Egypt and the Maldives took advantage of the confusion created by Al Thani’s alleged words by enacting a series of extreme measures while accusing Doha of supporting international terrorism (through Hamas, al Qaeda, Iran and Daesh). Qatar’s ambassadors in the countries mentioned were requested to return home within 48 hours, and Qatari citizens were given 14 days to leave Bahrain, Saudi Arabia and the UAE. At the same time, Riyadh proceeded to close its airspace as well as land and sea borders to Qatar, effectively isolating the peninsula from the rest of the world.

    Realistically, what interest would Qatar have had in promulgating the words of Al Thani in order to antagonize Riyadh and Abu Dhabi? Even if the Emir had made such remarks, Doha would certainly not have given them to QNA to publish on its website. If it was not a cyber-attack, it was certainly a miscalculation on Doha's part or, worse, possibly internal sabotage to damage the Al Thani family.

    To explain the dynamics that have officially created this unprecedented situation, it is necessary to sift through the facts in order to discern reality from fiction.

    There is no difference between Saudi Arabia and Qatar

    The Saudi charge that Qatar supports terrorism is well supported by the facts, Doha having long supported terrorist groups in North Africa and the Middle East, from Libya to Syria through to Egypt and Iraq. The problem is that the one throwing the charge, Saudi Arabia, is as guilty of it as is the accused. Both countries have provided the financial backing for much of the extremism that has been infesting the globe for decades. The Saudi royal family is the ultimate expression of the Wahhabi heresy that historically corresponds to the ideology of al Qaeda. Riyadh's support for terrorist organizations was complemented by the US neoconservative strategy designed to destabilize Afghanistan in the context of anti-USSR geopolitics, as admitted by the recently deceased Zbigniew Brzezinski.

    The rivalry between Saudi Arabia and Qatar has deep roots and affects not only the ideological difference between Wahhabis and the Muslim Brotherhood, but also the increased religious tolerance of Doha as opposed to the ideological intransigence of Riyadh.

    Qatar, through the Muslim Brotherhood, has supported the Arab Spring that deposed Mubarak and placed Morsi in charge of Egypt, creating in the process strong tensions with the Saudis. Riyadh supported al Sisi to remedy the situation in Egypt, financing the coup that sent Morsi to jail. In 2014 this prompted a crisis between Gulf Cooperation Council (GCC) countries, with Qatar’s ambassadors being expelled from the UAE and Saudi Arabia. Differences were soon patched up by the convergence of interests in destabilizing Syria and Iraq with extremist terrorism funded by both nations together with Turkey's important contribution.

    The Neocon Zionist and Wahhabi plans

    What is interesting to note in connection with the Gulf crisis is the change in strategy in recent months by the US, Israel and Saudi Arabia. Washington's plan, shared by Tel Aviv and supported by Riyadh, is to pin the blame for sponsoring international terrorism on Tehran and Doha, fingering Qatar as the key financer of Hamas, al Qaeda and Daesh. The reason and purpose behind this are manifold.

    The problem of Islamic terrorism has become a subject of focussed attention for European and American citizens because of frequent attacks. Security agencies are incapable of preventing terrorist attacks from the same elements they have for years funded and supported as part of their anti-Iranian and anti-Syrian strategy. The difficulties faced by secret services in halting such attacks (as opposed to rogue secret services who aid terrorist networks a la Operation Gladio) have made people question.

    Citizens, increasingly frightened and angry with their governments for the lack of security, are beginning to realize that the extremists receive their financial support from the Gulf countries, who are known to be in business with many European capitals. The last thing that the governments of France, Italy, Germany, the UK and the US want is the revelation that they are in league with Islamic terrorism for geopolitical purposes. The consequences would be disastrous for the already fragile credibility of the West.

    Further confirmation of this strategy to gang up on Qatar can be seen in the economic field. S&P downgraded the credit rating of Qatar a short time ago to AA-, setting the stage for a further downgrade that could have important implications for the future economic stability of the emirate.

    Trump and other leaders of the G7 seem to have made up their minds, agreeing with Saudi wishes, heaping on Qatar all the blame for Islamic terrorism. The US administration, more eagerly than its European vassals, also insists on including Tehran in the charge of state sponsors of terrorism. For Washington, the aim is to curtail covert Western support for terrorism, all the more urgent given the worsening state of affairs in Europe. Politicians from the Old Continent understand that it is fundamental for a culprit to be found before being accused of being unable to stop Islamist terrorism. It is a desperate exit strategy that aims to attribute primary blame to Qatar and secondary blame to Iran.

    Europeans are more reluctant to endorse this vision, given the possible trade opportunities for the European private sector in Iran following the removal of sanctions. It is even possible that some European leaders are opposed to Trump's idea, probably discussed during the G7 in Italy, given Qatar's billions of investment poured into the dying European economy.

    Israel has officially maintained a neutral position concerning the Arab Spring, benefiting from the chaos in the region and the weakening of geopolitical opponents like Syria and Egypt. Qatar's support for Hamas, Israel's historic enemy, is a factor that has contributed to Tel Aviv's support for Riyadh's manoeuvres against Doha.

    The Saudis, on the other hand, have multiple reasons for attacking Qatar. Firstly, it brings Doha's foreign policy back into line after showing leanings towards Tehran. Secondly, it aims to incorporate Qatar in order to absorb its enormous financial resources, as an extreme measure to help solve Saudi Arabia’s disastrous economic situation.

    Chaos as a means of preserving global hegemony

    Behind a convergence of convenience involving the triumvirate of Israel, Saudi Arabia and Qatar lies a well-outlined project of preventing Tehran from becoming a regional hegemon. The Saudis regard Iran as a heretical nation with regard to Islam and have always promoted policies against Tehran. Israel considers Iran the only real danger in the region as it is also a military powerhouse like Israel. As for the United States, the main objective is to mediate a diplomatic rapprochement between Israel and Saudi Arabia, which is needed for the two nations to officially develop a military alliance against Tehran. The final goal is the creation of an Arab NATO to contain Iran, mirroring NATO's stance towards the Russian Federation.

    The fault lies in Qatar.

    Washington sees only one possible way to at once allay the concerns of her European allies suffering an onslaught of Islamist attacks while simultaneously giving the impression to a domestic audience of fighting extremists. It plans to do this by entering into a major agreement with the two nations closest to Islamist terrorism – Israel and Saudi Arabia – while blaming a third terrorist-supporting nation for all the terrorism -Qatar. Of course the weakest and strategically least relevant of these three countries is Qatar.

    The real challenge: Unipolarity vs. Multipolarity.

    The most salient point in this story is the contrast between the new multipolar order and the American unipolar world order. Qatar, thanks to its enormous financial resources, has maintained high-level contacts with a wide variety of countries that are not necessarily allied to Riyadh.

    From the point of view of energy, Qatar is the region's second power after Riyadh, getting 90% of its revenue from exports of liquefied natural gas from the world's largest deposit that is shared with Iran. In the case of relations with Moscow, the problem is not significant given the relations between Saudi Arabia and the Russian Federation. For example, Qatar has recently injected capital into Rosneft by acquiring a large share of stocks. Qatar foreign minister meet with Lavrov in Moscow a couple of days ago discussing how to deescalate tensions but also reaffirming the importance of relations between Doha and Moscow. Qatar, on the back of its economic wealth, has expanded its political horizons by moving away from Riyadh, infuriating Washington and Tel Aviv.

    The strengthening of the Iranian position in the region was achieved thanks to two main factors, namely the victories in the Syrian war and the agreement with the Obama administration over Iranian nuclear power. This rehabilitation of Iran on the international scene following the signing of the agreement slowly led Doha to advance back-channel dialogue with Tehran to reach a compromise, especially in relation to the exploitation of the South Pars / North Dome gas field. About three months ago, Qatar removed the moratorium on exploiting the field and carried out dialogue with Iran over its development. It seems that an agreement has been reached between Qatar and Iran for the future construction of a gas pipeline from Iran to the Mediterranean or Turkey that will also carry Qatari gas to Europe. In exchange, Doha’s ending of support for terrorism has been demanded, openly contravening Saudi and American directives to destroy Syria.

    The Saudis have bet all their chips on the continuation of American hegemony. They prefer to please the United States by avoiding the sale of oil to China in yuan, and are consequently paying the price, with China buying more and more oil from Angola and Russia instead. Moscow Central Bank has even opened a bank branch in Shanghai to convert yuan into gold, creating something that resembles the US dollar gold standard of yesteryear.

    In Yemen, Riyadh has compromised its future by squandering huge amounts of wealth, with the only thing to show for it being a pending military defeat at the hands of the poorest Arab country on the planet. The collapse of the price of oil has only exacerbated these difficulties. Qatar has avoided these problems by virtue of having huge gas reserves as well as a somewhat more diversified foreign policy than Riyadh. For the Saudis, placing under their control the world's largest gas reserve, as well as an obscene amount of cash, would offer the opportunity of at least recovering in part the huge losses experienced recently.

    In this bloody game, Qatar is in the wrong place at the wrong time, and the mainstream media's coverage of the events leaves us with little doubts as to what the future for Doha will be. CNN's interview with the Qatari ambassador to the United States represented a rare example of journalistic integrity when the ambassador was embarrassed by the CNN host’s airing accusations of Qatar’s support for terrorists.

    Neocon Deep State Vs Neoliberal Deep State

    The fratricidal war within the US deep state also affects the Middle East, especially in the clash between Qatar and Saudi Arabia. It has long been known that Huma Abedin has deep ties to the Muslim Brotherhood, as did the previous American administration as well as Hillary Clinton. This proximity has had repercussions on the relationship between Obama and the Sunni countries, especially Saudi Arabia.

    Until a few months ago, Washington was full of rumours about alleged lobbying efforts by former Trump adviser Michael Flynn on behalf of Erdogan. Considering that the former general was fired, this could be an important indicator of Trump’s position on Qatar, as the Turkish President is very close to the Muslim Brotherhood, a Doha-backed ideological movement. Flynn could have been fired by Trump for his close indirect relationship with the Muslim Brotherhood.

    The mainstream media close to the Clinton/Obama clan may have used the alleged links between Flynn and Russia to obscure the hidden links between Washington and the Muslim Brotherhood. On the other hand, the evidence of collusion between the Muslim Brotherhood and Washington dates even before 2010, with Obama's speech in Cairo in 2009 and the resulting Arab springs, all funded by Qatar via the Muslim Brotherhood, with Washington’s blessing. The consequences of those actions are well known, having increased the chaos in the region, forced a greater US presence in the Middle East, and contributed to increasing synergies between the Shiite axis in response to terrorist aggression.

    In this context, Turkey backed the same terrorist groups as Qatar and Saudi Arabia, and the abortive July 2016 coup only served to strengthen the takeover of power by Erdogan and the Muslim Brotherhood faction supporting him. Even today the consequences of the coup reverberate in the region, with the alliance between Ankara and Doha recently strengthened with the presence of Turkish troops in Qatar. Another element not to underestimate was Iran's attitude towards Ankara following the failed coup d'état, with Tehran declaring its solidarity with Ankara.

    The strategic choices of previous administrations in the Middle East were disastrous in every respect. They strengthened enemies and weakened historic allies. No wonder Trump has decided to hit the rewind button, placing strong confidence in the two main allies in the Middle East, Israel and Saudi Arabia.

    Trump and the deep-state faction loyal to him aims to create an Arab NATO able to confront Iran in its own right, freeing Washington from a constant presence in the Middle East. The United States is focussed on two key factors in this strategy, namely the sale of Saudi oil in US dollars, and the sale of weapons to US allies to keep its military-industrial complex happy. These goals coincide with what happened recently in the emirates with Trump's visit. The United States and Saudi Arabia have signed agreements worth over 350 billion dollars. Saudi Arabia strongly supports the creation of an Arab NATO. The organization would make official Tehran's role as the greatest danger for the entire region. Moreover, the project of an Arab NATO would suit Israel fine, as it hates Tehran.

    For the US deep state, or at least part of it, the most urgent strategy concerns the transfer of American forces in terms of presence and focus, from the Middle East and Europe to Asia in order to face the main challenge of the future, namely China’s intention to dominate the Asian region. What is happening in the Philippines with Daesh, which the author wrote about last week, is simply the continuation of a wider strategy that also affects the Saudi-Qatar conflict.

    With Obama and the ruling Democrats, much attention had been paid to the issue of human rights. In particular, the component of the deep state close to the Clinton/Obama clan embraced the Muslim Brotherhood's attempt to subvert power in the Middle Eastern region through the Arab Spring. The approach of neoconservatives and neoliberals towards hegemony is very different and shows conflicting strategies, highlighting the diversity between the two souls of the US deep state that has long been battling each other.

    On one hand, the neoliberal/human-rights clan is very close to Obama and Clinton as well as supportive of the Muslim Brotherhood and Qatar indirectly. Neoconservatives, however, are historically more aligned with Saudi Arabia and Israel, both of whom seem to support Trump in order to make the US role in the Middle East less central, thanks to an Arabian NATO that would free the US up to shift its attention to Asia by delegating regional control to Riyadh and Tel Aviv.

    In this regard, the nuclear agreement between the Obama administration and Tehran is explained. The neoliberals hoped to see Iranian revolts in the wake of the Arab Spring, leading to the overthrowing of the regime and the ushering in of democracy. Neoliberal human-rights interventionists abuse the word democracy, wielding it as a baton. The results of these efforts can be seen in the disasters in Libya and Syria. Paradoxically, Obama and Clinton's strategy has backfired on Washington, since Iran, thanks to the nuclear agreement, has increased its weight in the region, forcing the Neocon-Saudi-Zionist faction to try to sabotage it in any way.

    Conclusion

    Qatar is at a crossroads. Acquiescing to Saudi pressure means falling into line and abandoning its dalliance with the multipolar world order. The fate of Doha is probably already determined, with Iran and Russia hardly desirous of becoming too much involved in the sanguinary game. A likely outcome is that the Al Thani family will in the end acquiesce to Saudi demands after resisting thanks to foreign partners help. What is interesting to note is that the situation in Washington has deteriorated to such an extent that even Washington's historic allies are fighting each other.

    Iran, Russia and China, assisting Iraq, Syria, Yemen and Libya, have created the necessary conditions to end Middle-Eastern destabilization, even prompting an internal crisis in the Gulf Cooperation Council. The bet that Riyadh, Tel Aviv and Washington embarked on with the aggression against Doha could prove to be an unforgivable strategic error, even leading to the end of the Gulf Cooperation Council and the weakening of the anti-Iran coalition in the region.

    If Qatar should decide to resist Saudi pressure, which is only possible with the covert support of Russia, China and Iran, it is likely that the Syrian war has its days numbered. This is not to mention the fact that such an outcome would provide Turkey with an even easier path to transition into the Eurasian alliance.

    Should Doha decide to oppose the demands of Riyadh (their economic capacity is certainly not lacking), it will be up to Russia, Iran and China to decide whether to risk supporting Qatar against Saudi Arabia in order to stabilize the region. The hostility of the United States, Saudi Arabia and Israel hold towards Qatar are warning signs for the Eurasian bloc, already facing many obstacles in the world as it is.

    Despite this, Tehran and Moscow are providing and offering Qatar's first needed goods in terms of food and medicine. Iran is also opening its own airspace to Doha-based companies. Iran, in addition to being a nation usually ready to help when demanded, sees the opportunity to continue the destruction of the axis opposed to it. An overall assessment (In Astana at the SCO meeting?) will be needed to determine which strategy is best to follow. Above all it will be necessary to understand how Qatar will want to proceed in this unprecedented crisis in the Gulf region.

    Even in Syria, the terrorist groups funded by the monarchies and Turkey are fighting each other, reflecting the divisions and tensions within the Gulf. It is only a matter of time before the conflicts between various organizations extends to other places in Syria, leading to the collapse of the opposition groups. In light of these developments, it appears that Iran and Syria have proposed to Qatar that they switch from supporting terrorism and instead cooperate in the reconstruction of Syria with Chinese and Iranian partners. Receiving credible responses to such a proposition is impossible, but following dialogue between Doha and Tehran on the development of the North Pars Gas Field, one cannot rule out that an agreement could be reached in Syria in the medium term, which would also bring enormous benefits to Doha as well as to Damascus and Tehran.

    The American century is rapidly coming to an end. Terrorists are biting their masters’ hands and the vassals are rebelling. The unipolar world order that defers to the United States is rapidly disappearing, and the consequences are being felt in many areas of the world.

  • Gundlach: "You Should Be Raising Cash Literally Today"

    While there was nothing markedly new from Jeff Gundlach in his latest monthly webcast, it appeared that the DoubleLine CEO either had just read or otherwise agreed completely with JPM’s Marko Kolanovic, who as we noted earlier, warned that even a modest spike in vol coupled with a plunge in liquidity, could lead to “catastrophic losses” for the year’s best performing strategy: short convexity, or otherwise selling volatility. Recall what JPM said.

    May 17th and similar events bring substantial risk for short volatility strategies. Given the low starting point of the VIX, these strategies are at risk of catastrophic losses. For some strategies, this would happen if the VIX increases from ~10 to only ~20 (not far from the historical average level for VIX). While historically such an increase never happened, we think that this time may be different and sudden increases of that magnitude are possible. One scenario would be of e.g. VIX increasing from ~10 to ~15, followed by a collapse in liquidity given the market’s knowledge that certain structures need to cover short positions.

    A few hours later, in not so many words, Gundlach made the same warning during the webcast, in which he – like Gandalf – warned that “we’re on increasing watch for volatility,” Gundlach said, pointing out that “there is a massive amount of money that is being short VIX.”

    “It’s a trade that’s made a lot of money and its very very crowded, which suggests to me the days of low volatility are numbered,” he said. We “probably won’t see it continue through year end.”

    What does the above mean in trading terms? “If you’re a trader or a speculator I think you should be raising cash today literally today. If you’re an investor you can easily sit through a seasonally weak period,” Gundlach repeated that while he does not expect a recession any time soon, he does anticipate a summer correction in S&P.

    Aside from an imminent vol spike, Gundlach also went off on a political tangent and summarized his views on the ongoing drama in DC, saying “the establishment: in Washington is trying to undermine Trump by running out the clock on his administration. “They’re really just trying to wait Trump out, trying to obstruct his agenda as much as possible,” Gundlach said quoted by Bloomberg. “Small change is what they’re looking for.”

    Speaking during the Sessions testimony, he called the political charade taking place in DC “a sideshow or entertainment” and said the US political conflict is “rope-a-dope,” after the strategy used by Muhammad Ali to wear out opponents. It remains to be seen if the Democrats, or Trump, win this particular boxing match.

    * * *

    Finally for those who missed it, here is Gundlach’s full slideshow

  • Paul Craig Roberts Warns "Without Glass-Steagall, America Will Fail"

    Authored by Paul Craig Roberts,

    For 66 years the Glass-Steagall act reduced the risks in the banking system. Eight years after the act was repealed, the banking system blew up threatening the international economy. US taxpayers were forced to come up with $750 billion dollars, a sum much larger than the Pentagon’s budget, in order to bail out the banks. This huge sum was insufficient to do the job. The Federal Reserve had to step in and expand its balance sheet by $4 trillion in order to protect the solvency of banks declared “too big to fail.”

    The enormous increase in the supply of dollars known as Quantitative Easing inflated financial asset prices instead of the consumer price index. This rise in bond and stock prices is a major cause of the worsening income and wealth distribution in the United States. The economic polarization has undercut the image and reality of the US as a land of opportunity and has introduced political and economic instability into the life of the country.

    These are huge costs and for the benefit only of the rich who were already rich.

    So, what we can say about the repeal of Glass-Steagall is that it turned a somewhat egalitarian democracy with a large middle class into the One Percent vs. the 99 percent. The repeal resulted in the destruction of the image of the United States as an open prosperous society. The electorate is very much aware of the decline in their economic situation, and this awareness expressed itself in the last presidential election.

    Americans know that the nonsense from the US Bureau of Labor Statistics about a 4.3% unemploment rate and an abundance of new jobs is fake news. The BLS gets the low rate of unemployment by not counting the millions of discouraged workers who cannot find employment. If you haven’t looked for a job in the last 4 weeks, you are not considered unemployed. The birth/death model, a purely theoretical construct, accounts for a large percentage of the non-existent new jobs. The jobs are there by assumption. The jobs are not really there. Moreover, the replacement of full time jobs with part time jobs proceeds. Pension and health care benefits that once were a substantial part of the pay package are being terminated.

    It makes perfect sense to separate commercial from investment banking. The taxpayer insured deposits of commercial banking should not serve as backing for investment banking’s creation of risky financial instruments, such as subprime and other derivatives. The US government understood that in 1933, but no longer did in 1999. This deterioration in government competence has cost America dearly.

    By merging commercial banking with investment banking, the repeal of Glass-Steagall greatly increased the capability of the banking system to create risky financial instruments for which taxpayer backing was available. So, we have the extraordinary situation that the repeal of Glass-Steagall forced the 99 percent to bail out the One Percent.

    The repeal of Glass-Steagall has turned the United States into an unstable economic, political, and social system. We have a situation in which millions of Americans who have lost full time employment with benefits to jobs offshoring, whose lower income employment in part time and contract employment leaves them no discretionary income after payment of interest and fees to the financial system (insurance on home and car, health insurance, credit card interest, car payment interest, student loan interest, home mortgage interest, bank charges for insufficient minimum balance, etc.), are on the hook for bailing out financial institutions that make foolish and risky investments.

    This is not politically viable unless Congress and the President are going to resign and turn over the governance of America to Wall Street and the Big Banks. A growing cresendo of voices are saying that this has already happened.

    So, where is there any democracy when the One Percent can cover their losses at the expense of the 99 Percent, which is what the repeal of Glass-Steagall guarantees?

    Not only must Glass-Steagall be restored, but also the large banks must be reduced in size. That any corporation is too big to fail is a contradiction of the justification of capitalism. Capitalism’s justification is that those corporations that misuse resources and make losses go out of business, thus releasing the misused resources to those who can use them profitably. Capitalism is supposed to benefit society, not be dependent on society to bail it out.

    I was present when George Champion, former CEO and Chairman of Chase Manhattan Bank testified before the Senate Banking Committee against national branch banking. Champion said that it would result in the banks becoming too large and that the branches would suck savings out of local communities for investment in traded financial assets. Consequently, local communities would be faced with a dearth of loanable funds, and local businesses would die or not be born from lack of loanable funds.

    I covered the story for Business Week. But despite the facts as laid out by the pre-eminent banker of our time, the palms had been greased, and the folly proceeded.

    As Assistant Secretary of the US Treasury in the Reagan Administration, I opposed all financial deregulation. Financial deregulation does nothing but open the gates to fraud and sharp dealing. It allows one institution, even one individual, to make a fortune by wrecking the lives of millions.

    The American public is not sufficiently sophisticated to understand these matters, but they know when they are hurting. Few in the House and Senate are sufficiently sophisticated to understand these matters, but they do know that to understand them is not conducive to having their palms greased. So how do the elected representatives manage to represent those who vote them into office?

    The answer is that they seldom do.

    The question before Congress today is whether they will take the country down for the sake of campaign contributions and cushy jobs if they lose their seat, or will they take personal risks in order to save the country.

    America cannot survive if excessive risks and financial fraud can be bailed out by taxpayers.

    US Representatives Walter Jones and Marcy Kaptur and members of the House and staff on both sides of the aisle, along with former Goldman Sachs executive Nomi Prins and leaders of citizens’ groups,  have arranged a briefing in the House of Representatives on June 14 about the importance of Glass-Steagall to the economic, political, and social stability of the United States.  Let your representative know that you do not want the financial responsibility for the reckless financial practices of the big banks.  Let your representative know also that you do not want big banks that dominate the financial arena. Let them know that you want the return of Glass-Steagall.

    The effort to reduce the financial risks arising from the commingling of commercial and investment banking by requiring stronger capital positions of financial corporations is futile. The 2007-08 financial crisis required the taxpayers and the printing press and an amount of money that exceeded any realistic capital and liquidity requirements for financial institutions.

    If we don’t re-enact Glass-Steagall, the risks taken by financial greed will complete the economic destruction of America.

    Congress must serve the people, not Mammon.

  • White House: "Trump Has No Intention" To Fire Mueller

    Hopefully putting to rest another narrative in which the press went off on a wild goose chase, after the CEO of Newsmax Chris Ruddy first said in an interview on Monday that he thought Trump was considering firing the special prosecutor on the Russia investigation, Robert Mueller, and then the NYT boldly followed, the White House said late on Tuesday that President Trump has “no intention” to fire Mueller.

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    “While the president has the right to, he has no intention to do so,” White House spokeswoman Sarah Huckabee Sanders (who earlier today was rumored would soon be replacing Sean Spicer) told reporters flying with Trump back to Washington from a day trip to Wisconsin.

    Despite Trump’s lack of commentary on the matter – and Trump would have quickly made it very clear if he indeed wanted Mueller out in one of his morning tweetstorms – some rank-and-file Republicans on Tuesday, gripped by the media frenzy, voiced concerns that ousting Mueller a month after Trump fired FBI Director James Comey would appear as obstruction of justice. Somehow the fact that Trump originally conceded to the appointment of a special prosecutor was lost on most.

    Mueller was appointed by the Justice Department to helm the investigation after Trump abruptly fired Comey – who was the one previously leading the Russia probe – in early May. Mueller’s hiring was meant to ensure the probe would be conducted without interference.

    Meanwhile, not helping was Newt Gingrich, who said he spoke with Trump on Monday night and raised questions about the fairness of the Mueller-led probe. Gingrich noted that at least four members of Mueller’s team had donated to Democratic presidential campaigns and groups, saying it’s “time to rethink” Mueller’s role.

    Earlier on Tuesday, Rod Rosenstein, the deputy attorney general who appointed Mueller and continues to oversee the investigation, promised lawmakers he would not permit Mueller to be dismissed without legitimate reason. “As long as I’m in this position, he’s not going to be fired without good cause,” Rosenstein said. “I’m not going to follow any orders unless I believe those are lawful and appropriate orders,” he said, emphasizing that the attorney general “actually does not know what we’re investigating.” He added, “Director Mueller is going to have the full independence he needs to conduct that investigation appropriately.”

    And still the vortex of speculation grew.

    Finally, also on Tuesday, the NYT elbowed its way into the NewsMax inspired media frenzy, and reported that “behind the scenes, the president began entertaining the idea of firing Mr. Mueller even as his staff tried to discourage him from something they believed would turn a bad situation into a catastrophe.”

    Who were the NYT’s sources? The usual suspects: “several people with direct knowledge of Mr. Trump’s interactions” and “one longtime Trump associate who remains close to the White House.”

  • Houston Resorts To Selling Off City Streets To Try And Close $100 Million Budget Shortfall

    With the US shale industry producing at near-record levels as oil prices languish around $50 a barrel, cities in oil-dependent states like Texas are resorting to increasingly creative means to compensate for the shortfall left by falling energy revenues, including selling off public assets, like Houston just did.

    The city held what the Houston Chronicle described as “a yard sale of sorts” last week when the city council approved selling or swapping almost $2 million worth of city streets and utilities easements in a deal that will help close what’s expected to be a $100 million budget shortfall over the next five years.

    Specifically, the council abandoned or sold several streets and easements on the east side of the city. The land is adjacent to an oil refinery owned by Valero Energy. The oil giant already owns the blocks immediately surrounding its facility, and the move will let the company assume the intersecting streets onto its land as part of a plan to build an office building, warehouse, security building and to add parking farther away from the central plant, the Chronicle reported.

    The second example also comes from the east side, around Houston’s public Milby High School. The city agreed to abandon and sell parts of five streets and a sewer easement in and around the school campus for $431,000. But rather than pony up that cash, the school district is instead giving the city a 7.5-acre tract valued at $443,000 that used to be home to the now-defunct Clinton Park Elementary.

    City officials have ramped up efforts to jettison useless easements and strips of city land in recent years amid repeated budget crunches. However, it’s somewhat less common for the dollar amounts to rise into the millions on the same meeting agenda. Councilman Robert Gallegos, whose district includes both sites, said he hopes the land swap can be beneficial for the neighborhood.

    "Now that the city is taking over these 7.5 acres I hope this is a partnership that maybe the city and County Commissioner [Rodney] Ellis, we could work on hopefully making a community center," Gallegos said. "There's a desperate need for a community center in that community."

    In another development that is draining the city’s tax base, Houston, one of the hardest hit markets from the collapse of oil prices, saw commercial vacancies rise to a 22-year high during the first quarter, according to a report by NAI Partners.

    Unfortunately for Houston officials, there's little the city can do about the price of oil aside from praying that OPEC will come through with yet another production cut.

  • "Fire" in the Bond Market – Fed Raising Rates and US Issuing Ultra Long Bonds – by Michael Carino

     

    The bond market is on fire and you are about to get
    burned!!!  Bond yields are lower and interest
    spreads as tight or tighter than that of the bond market crisis of 2008.  This will lead to a catastrophic financial
    train wreck that can happen at any moment. 
    Why do I feel like I’m the only one sounding the alarms?  Where is the media to help warn and prepare
    the marketplace?  Why are investors going
    along and playing in what seems to be a rigged and tragically destructive game?
     It reminds me of the story of a frog
    jumping into a boiling pot of water. Once the frog hits the hot water, it jumps
    right out.  But the frogs that is in the
    pot when the water starts out cold slowly gets cooked.  The Fed has excessively accommodated financial
    markets for almost a decade. This has been such a long, accommodative cycle,
    investors can’t tell how close they are to getting cooked.

     

    Some of the world’s largest and most sophisticated investors
    who pride themselves on being some of the smartest individuals are taking some
    of the most expensive risks with the worst payoff profiles of all time.  Obviously, most investors have short term
    memories.  Longer-term government bonds
    typically trade above the level of inflation by 2-3%. That should put the long
    bond around 5-6%. However, when there is an asymmetric skew in the economic
    data, like there is today, where growth and inflation has a higher probability
    to surprise to the upside, the premium should be even higher.  Longer-term US Treasuries now yield 2-2.8%.  If the longest US Treasuries normalize, the market
    losses could be as high as 50%!

     

    Over the last couple of weeks, long dated US Treasuries
    rallied 40 basis points. That may not seem like much, but this is days before
    the Fed is going to raise rates another 25 bps.  What makes this move absurd is that the rally
    happened not when rates are normal, but still priced for a recession or a
    depression.  When factoring this 25 bp
    hike in short term rates, that is a 65 bp compression in spreads – a huge move!
    Why?  Was there a natural disaster?  Was there a financial catastrophe?  Both of these might be justification for a 25
    or 30 bp spread tightening. But 65 bps? 65 bps is over 20% of the US Treasury long
    bond yield!

     

    What has come out over the last couple of weeks is that GDP
    is running around 3%, CPI and PPI – core and headline inflation are running 2%,
    the unemployment is at a cycle low of 4.3% and the Fed is hiking rates and going
    to reduce their balance sheet.  This is
    an environment where overpriced bonds should be getting decimated because current
    yield levels are so low.  It is clear
    that fundamentals have nothing to do with setting yields in the bond
    market.  What has been setting yields is a
    consortium of Treasury market investors that have been high volume trading
    Treasuries aggressively during typically low volume periods and making the
    market believe – through price action – that there is great demand for bonds.
    This is nothing more than squeezing the bond market and giving it misinformation
    in hopes of bluffing bond investors to not pull the ripcord and cash out of the
    bond market. 

     

    This is not a unique strategy.  This is the same strategy employed during 2006
    and 2007 to coax longer term bonds into a low volatility state.  This flattened the yield curve with declining
    long term yields as the Fed raised Fed Funds from the historically low 1% last
    cycle.  And what did that lead to?  This high volume, volatility diminishing
    trading of long term rates led to mispricing of all risks embedded in the bond
    markets.  And when those risks eventually
    were realized (when Fed Funds raised high enough to be a substitute for
    overvalued bonds), the normalization process was rapid.  This market move confused investors that were
    clueless as to what was setting yield levels before, during and after the
    crisis.  The financial crisis of 2008 was
    only a crisis because yields were mispriced too low due to the manipulation in
    the Treasury market.  If rates were
    normalized in 2008, there would have never been a crisis.  Yields and spreads would have only moved a
    little bit higher instead of having to adjust so drastically that anyone with
    leverage or a low risk tolerance was forced to sell.  This led to a lack of liquidity in the bond
    market and the Fed having to step in to provide liquidity.  The Feds mistake is they provided the
    liquidity then and still are today.  This
    encourages reckless risk taking in the bond market and the insanity continues
    today. 

     

    To make this last paragraph a little clearer, monetary
    policy in the last cycle was over accommodative. These conditions led to the
    2008 financial crisis.  The Fed’s
    response was to be even more accommodative for an even longer period of time.
    They expect different results this time? (Definition of insanity!)  I fear with this next crisis congress will
    place the blame squarely on the Fed.  The
    result, most likely, will be a different mandate for the Fed – if the Fed
    continues to exist at all.  But I
    digress.

     

    The Fed will raise interest rates in two days.  The US Treasury Secretary Mnuchin just repeated
    he is looking into issuing ultra-long bonds (great timing).  The job market is tight and global economy
    roaring.  In the US, you can’t find a
    parking spot and homes are selling over asking price again.  This is not the recessionary or depressionary
    conditions reflected in the bond market.

     

    Congratulations to the Fed.  They saved us from the last financial crisis
    by sowing the seeds of the next, never to be out done, even more spectacular
    financial crisis.  The Fed has
    manipulated the markets by buying 5 Trillion of bonds and a consortium of bond
    investors are manipulating the markets, trading 1 trillion of government bonds in
    the cash and futures markets daily.  If
    you think fundamentals are setting prices in the bond market, your wrong.  Let’s be clear: when fundamentals matter in
    the market place, yields and yield spreads will be double to triple of what
    they are today.  So get ready to hop out
    of the financial pot before the water gets too hot.  With the Fed hiking rates and reducing their
    balance sheet and the bond market grossly overvalued, the pot may start to boil
    faster than most expect.

     

     

     

    by Michael Carino, 6/13/17

     

    Michael Carino is the CEO of Greenwich Endeavors, a
    financial service firm, and has been a fund manager and owner for more than 20
    years.  He has positions that benefit
    from a normalized bond market and higher yields.  Do you?

        

  • "Any Crisis Can Bring About Immediate Shortages" – Food Is A Weapon In The Hands Of The Powerful

    Authored by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces) via SHTFplan.com,

    The U.S. has experienced some record droughts for the past several years, and now that the summer has begun, everyone is speculating on this year’s crop forecasts.  The Midwest has been struck by severe flooding and rainfall levels that are far above average, complicating startups of this year’s crops.  Another dry summer could push the prices up even higher, with an ever-growing demand that always exceeds the available supplies.

    One of the problems in the overall food industry in the U.S. is not brought on by weather patterns and rainfall shortages.  The problem is inflation, the rise in the prices due to higher demand, lower supply, and less purchasing power with the fiat dollar; that problem is coupled with (and followed by) deflation, where the grocery industry is forced to lower prices to capture a declining consumer base, but to its own cost.

    Wal-Mart’s sales of groceries and food supplies now account for more than 50% of its overall revenues.  That is a staggering fact, and it also outlines the way a large retailer not originally intending to enter the arena of food sales has staked out a claim for itself.  This claim has not been without its effects, however, as what Wal-Mart earns detracts from supermarkets and other concerns whose main bread-and-butter (no pun intended) is income from food sales.

    The largest supermarket chain in the U.S. is the Kroger Company, and along with Wal-Mart taking a bite out of its business comes an increase in retail stores such as the Dollar Trees, Dollar General Stores, and others that are rapidly expanding their food sales and cutting a big slice out of that market where traditional grocery concerns have dominated in the past.  Foreign competitors, such as the German firms Aldi’s and Lidl are also posing a challenge to domestic supermarket concerns.

    Eight years of Obamanomics has severely crippled the U.S. manufacturing base, and the food industry has not been immune to that destruction by a longshot.  The dramatic rise in entitlements expanded by Obama has also caused the prices of consumer goods to shoot up drastically: more handouts by the government places more money in the hands of the entitlement-society…at taxpayer expense.  This devalues the fiat currency even further and pushes up the prices of food.

    The EBT is now looked upon by the sheeple as some sort of “necessity,” or a “status symbol” of some kind…a plethora laughing at the expense of the government, vis-à-vis the productive members of society who are forced to “contribute” to this fiasco in the form of taxes.  What is next?  The Platinum EBT card?  Producers are bearing the burdens of and paying for consumers, and worse: the consumers are parasitic, and their consumption only increases the prices of all goods consumed while decreasing the supply.

    Food is also a weapon (as poignantly illustrated by that evil icon of globalism, Henry Kissinger) that can bring other countries or populations of a given country under control.  The prices rise, the supplies dip, and the populace suffers.  The government, remember, always has its warehouses stuffed to the gills with freeze-dried foods and shelf-stable supplies for when the seams on the U.S. come apart.  The politicians in power always have a place to run to in the event of a war or a crisis…on our dime…and you can bet that none of them will miss a meal when it all comes apart.

    Raising the prices of food benefits the government, because the grocery stores, retail stores, and businesses then have extra income with the rising prices, providing extra tax income to the politicians.  The people suffer; nevertheless, they’ll pay: they must have the food, and will bear the extra cost or enter the ranks of those nonproductive eaters on the public dole.  The government and the politicians are the only ones who win in the end: endless “authority” and firearms with a smile, to tax and line their own pockets while their serfs labor endlessly to feed their elected feudal overlords.

    It is all interrelated, and any crisis can bring about immediate food shortages.  Such a crisis not gone to waste (Rahm Emmanuel) or a crisis contrived?  No matter.  The end state plays into the dynamics of what those in power wish to achieve.  Please refer to an excellent article from a few years back “When the Trucks Stop, America Will Stop” to see one segment that can trigger the burst dam that overflows into a full-blown economic collapse and a dearth (and eventual complete cessation) in the food supply.  Food is a necessity, and is a weapon in the hands of the powerful…against us.

  • Watch an Unhinged Kamala Harris Instructed to Simmer Down Again

     

    Content originally published at iBankCoin.com

    Senator Kamala Harris will most likely be the DNC’s next Presidential candidate, since they’re all about identity politics. She’s a pitbull and very effective at rattling cages. A week ago, she was scolded by Senator Burr for attempting to steamroll Rod Rosenstein.

    Today, she, indecorously, did the same thing to our acting AG, which drew the ire of Sessions. She asked ridiculous questions, like ‘did you meet with any Russian nationals?” Since when is it a crime to meet with people of Russian origin? I thought the left was obsessed with XENOPHOBIA? Or, does XENOPHOBIA only apply to people of color? Just asking.
     
    Sen. Harris asked, “Did you have any communication with Russian businessmen or any Russian nationals?”
     
    Sessions replied, “I don’t believe I had any conversations with Russian businessmen or Russian nationals.”
     
    Harris filibustered, saying, “Are you aware of any communications…”
     
    Sessions interrupted, “A lot of people were at the convention, it’s conceivable that somebody came…”
     
    Harris filibustered again, “Sir, I have just a few minutes…”
     
    Sessions, raising his voice said, “Will you let me qualify? If I don’t qualify, you’ll accuse me of lying, so I need to be correct as best I can. I am not able to be rushed this fast. It makes me nervous.”
     
    Later on, she was scolded for interrupting Sessions — and cordially asked to simmer down.
     

    //platform.twitter.com/widgets.js

    Here was the full exchange.

    On the issue of executive privilege, former Deputy AG under George H.W. Bush, George Terwilliger, said Sessions was correct.

  • RBC: Tomorrow's CPI Print Is More Important To The Market Than The Fed

    With a 95% implied probability of a rate hike tomorrow, there is little doubt that Janet Yellen will raise rates, although as Goldman previewed two days, there are at least two open issues should make tomorrow’s meeting somewhat interesting: First, will Fed officials alter their policy views in response to the increasingly different signals that both sides of the mandate are sending about the urgency of further tightening… and… Second, will the press conference provide some clarity on what the next tightening step following the June hike will be?

    But by and far, tomorrow’s FOMC announcement will be a non-event, unless – as some have suggested – Yellen tries to collapse the extra easy monetary conditions which as DB and GS calculated recently, are the loosest they have been since 2014, courtesy of the ongoing QE at the ECB and BOJ.

    So instead of the much anticipated FOMC, keep a closer eye on tomorrow’s inflation report. According to RBC’s Charlie McElliggott, the Wednesday CPI print will have a more meaningful impact on the near term direction of the market than Yellen’s priced in decision. Charlie explains:

    • A splash of “FOMC Drift / FOMC Alpha” into tomorrow’s Fed meeting, your standard ‘Spooz bid / USD offered’ pre-Fed behavior
      • Further contributing to today’s S&P melt-up was the $57B of calls btwn 2425 and 2475 levels, $20B of which sits at the 2450 ‘gravitational pull’ level into Friday’s expiration (H/T A. Ramsey)
      • Nominal rates a touch lower / curves flattening into the Fed as well -> UST’s VERY firm despite another day of meaningful Treasury issuance ($12B 30Y traded through WI) and ‘pretty-good’ PPI #’s
      • Solid—not spectacular—bounce-back day for equities ‘Momentum’ / ‘Growth’ -> Tech and Consumer Discretionary mega-longs thus two of the S&P’s top sectors on the day 
    • That said, ‘Value’ acted well too, with all four key cyclical sectors– Materials, Energy, Financials and Industrials—in the top half of S&P sector performance tables on the session
    • Tomorrow’s event risk is actually the CPI print and its impact on forward-looking Fed path
    • Macro backdrop remains entirely focused on the ‘disinflation’ versus ‘reflation’ debate ->’Macro Range Trade’ still exists
    • Fixed-income’s ‘latent-bid’ speaks to expectations for another disappointing CPI print tomorrow and growing-‘consensuality’ of the “slow-flation” narrative
    • CPI likely to dictate the near-term direction of the equities ‘Value / Growth’ factor-rotation in ‘binary’ fashion
    • Better CPI would re-rack ‘reflation’ hopes, drive nominal rates higher and reverse recently-collapsed breakevens
    • Better CPI too would further perpetuate the recent equities ‘Momentum’ unwind: into ‘Value’ (cyclicals) / ‘Size’ (small cap) / ‘High Beta,’ out of ‘Growth’ (secular growers) / ‘Anti-Beta’ (defensives / yield plays) / ‘Quality’
    • Conversely, if CPI comes in ‘soft,’ will crystalize “slow-flation” and may see consensus begin shifting to a Fed ‘one and done over balance of 2017’ view
    • Said inflation disappointment would see rates again grind lower, while equities trade will revert- back to the prior YTD status quo ‘risk barbell’ trade: long ‘Secular Growth’ and ‘Defensives,’ short ‘Cyclicals’—as if Thursday, Friday and Monday didn’t happen

    Then again maybe not even the CPI will be a surprise: going into tomorrow’s print, virtually all inflation proxies have already thrown in the towel.

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