Today’s News 15th April 2018

• The War Machine Springs To Life Over Syria

  Update: A few short hours after the initial writing of this report, the US, the UK and France conducted a missile air strike against Syria 

  Authored by Chris Martenson via PeakProsperity.com,

  NATO has drawn 1st blood. Will Russia respond?

  

  The events of the past few days involving Syria, the US and Russia are highly concerning.

  Currently, the US is busy readying to drop just dropped ~120 missiles on Syria to punish it for an alleged poison gas attack on its civilians. I say “alleged” because no on-the-ground investigation has been conducted.

  At this point, we don’t really know with confidence what was done by whom. But America’s war machine is straining hard against it’s chain, eager to strike. And this poison gas atrocity may just be the excuse the West needs to unleash it.

  Whodunit?

  We do know that Syria at one time indeed had stockpiles of chemical weapons. But they handed them over to international inspectors some years back.  Could they have kept some stocks hidden? Sure.

  But we also know that the rebel jihadists in Syria have been caught making and using chemical weapons many times in the recent past.  Russia has repeatedly brought forth evidence of chemical manufacturing sites (very crude basement laboratories, really), located in areas recently recaptured from Syrian jihadists and mercenaries. So it easily could have been the jihadists that conducted the gas attack.

  Are these so-called “moderate rebels” morally capable of using poison gas on civilians, children especially?  You bet they are.  These are proven head-choppers, supported by the US, who have publicly posted numerous videos of themselves beheading children.  Morals are not part of their framework or this war.

  Plus, the gas war crime certainly serves their interest more than it does Assad’s at this time.

  Between the two suspects, it’s far more likely that the increasingly desperate jihadists, who are clearly losing the fight at this point, would use any and every method at their employ to their advantage. 

  The West’s response right now feels like a bad detective movie. Imagine the lead investigator of a grisly murder choosing to focuses first on the neighbor down the hall, while ignoring the spouse with a past history of domestic abuse and who recently took out a very large life insurance policy on the victim.  The current “Blame Assad!” narrative seems a poorly written script where you have to overlook a lot of gaping plot holes to get through the movie.

  So there hasn’t been an independent investigation to clarify with confidence who is the guilty party here. But that hasn’t stopped a swift verdict from circulating throughout the western press: “Assad’s government did it, and must be punished.”

  Keep in mind that US-made cluster bombs are busy killing children in Yemen. And nearly 130 Yemen children die every day from starvation thanks to the combined actions of Saudi and US forces blockading that nation’s access to world markets. 

  Suddenly, children in Syria matter a lot to the West, while Yemen’s child victims are rarely ever mentioned. Suddenly there’s an urgent moral issue being rushed through the court of public opinion.

  This has all the hallmarks of the prior propaganda campaigns we’ve seen before.  Scant evidence, immediate assignment of blame, and a quick rush to military action before anybody can really properly question the train of events.

  The Rising Risk Of War

  Which leads us to where we are now: the US and several NATO countries may attack just attacked Syria very soon with cruise missiles launched from ships (highest likelihood) and possibly airplanes.

  Any such attack, it needs repeating, would be illegal under world laws if it happens without prior UN Security Council approval. Receiving such approval will be highly unlikely, because Russia sits on that council and has veto vote power.  So any attack will, by definition be illegal, and not a sanctioned affair.

  However, the US and its allies have been operating illegally in Syria for many years. They haven’t shown much concern to-date for securing international approval of their actions. It’s unlikely to expect that to change anytime soon.

  But the US isn’t the only one on the schoolyard who can throw a punch. Russia, which has been supporting the Bashir al-Assad regime in Syria, is now taking a much harder line.

  After years of being increasingly painted as the West’s favorite villain (the latest campaign instantly blaming Putin for the poisoning of ex-spy Skripal was particularly hamfisted), Russia has made it clear: they are done being provoked. They won’t backpedal any farther. If/when the US launches missiles at Syria, Russia has promised to shoot them down and fire a counter-strike at the launchers.

  This is serious folks:

  Russia will shoot down all US missiles and sources of fire, Russian Ambassador says

  Russian Ambassador to Lebanon Alexander Zasypkin said in an interview with the Lebanese TV channel Al-Manar that Russia would shoot down all missiles in case of US military aggression against Syria, RIA Novosti reports.

  Russian air defence systems will be used to destroy both the weapons and the sources of fire.

  Earlier, The New York Times reported that US presidential aides recommended the head of the White House to inflict a series of fierce attacks on several targets in Syria in response to the alleged chemical attack in the city of Douma, even though the fact of the chemical attack itself was never proved.

  If Russia shoots back at the “sources of fire”, that means the US ships and planes used to launch the cruise missiles

  I’d personally be worried sick if someone I loved was on the USS Donald Cook right now.  This is the “source of fire” most likely to be employed. 

  

  Oddly, it’s all alone there in the Mediterranean. Other US ships appear to be days away. Perhaps it’s “odd” in the same way as when the best ships in the seventh fleet were conveniently out of harm’s way when Pearl Harbor was attacked, leaving only older less seaworthy ships to be sunk, and giving President Roosevelt the casus belli he needed to get America into WW2.

  Will the USS Donald Cook be the neo-cons’ sacrifice as they endeavor to get their war with Russia kicked into a higher gear?

  The US, for its part, is apparently busy communicating with the Russians, communicating it will seek to avoid killing any Russians if at all possible should it strike Syria.  This will limit the range of targets, but the risks are still very, very high:

  A strike against Syria will likely come in the form of missiles, as was the case last year.

  The United States would not want to risk putting manned aircraft over Syrian air defenses — a shoot-down would send the conflict spiraling in unforeseeable new directions.

  The USS Donald Cook, an Arleigh Burke-class guided-missile destroyer, is within easy striking range of Syria, as is a French frigate with its own cruise missiles.

  These two ships, possibly aided by a US submarine, are likely to play a role in a strike.

  What are the risks?

  The reaction from Assad backer Moscow is unpredictable and Russia has threatened retaliatory action against the United States if missiles are fired at Syria.

  The Russian army on Wednesday accused the White Helmets civil defense organization of staging a chemical weapons attack in Douma, where observers say more than 40 people died in a gas attack.

  NBC News reported Tuesday that Russia has learned how to use GPS jammers to limit the capabilities of US drones operating over Syria.

  “The US has to be very careful not to accidentally strike Russian targets or kill Russian advisors,” Ben Connable, a senior political scientist at the RAND Corporation, told AFP.

  “That significantly limits the number of options available to the United States, because the Russians are embedded in many cases with the Syrians.”

  Connable warned that if the US accidentally or purposefully kills uniformed Russian soldiers, there would potentially be a dangerous escalation between the two nuclear powers.

  (Source)

  The plan here is for Trump get to appear tough, garnering the praise of the war party in the US (which is solidly bi-partisan) and the war press (the entire MSM), while not killing any Russians and, frankly, not doing too much actual damage to Syria.

  This is pretty much from the same playbook as last year’s false-flag gas attack in Syria, when we fired 59 Tomahawk missiles. 

  But this time, Russia has made it clear that any repeat of last year’s missile attack will have consequences. It has moved its key naval assets out of port and into strike positions:

  APRIL 12, 2018: RUSSIA STARTS EXERCISES OFF SYRIAN COAST, VOWS RESPONSE TO US STRIKES

  The Russian Navy has launched live-fire exercises off the Syrian coast as the US is still preparing for a possible military action against the country’s government.

  The Russian exercises will be held from April 11 to April 26, the period when, according to some experts, the US strike will be most likely if the administration of US President Donald Trump decides to attack Syria.

  On April 10, Russia’s envoy to Lebanon Alexander Zasypkin once again confirming that Russian forces are ready to shoot down missiles and target the launchers in case of an escalation in the war-torn country.

  Ali Akbar Velayati, the top adviser to Iran’s supreme leader Ali Khamenei, vowed to support the Damascus government against any attack of the US and its allies.

  So now we have Russian ships in the Mediterranean on live-fire exercises, bumping around a smallish sea with US naval assets, with everybody on pins and needles as NATO-Russia relations break down and tensions rise.

  What could possibly go wrong?

  Again, sane people ought to be asking why we are even in this position in the first place.  Exactly what US interests are at risk in Syria? Whatever they may be, is defending them worth risking a hot confrontation with a nuclear power over? So far, I’ve seen zero compelling explanations on this front.

  A Dangerous Advertising Campaign?

  Looked at from a different angle, here’s an interesting article from a Russian newspaper (translated by Google so please read past the choppy writing…) which posits that the attack will be proven a useful test of Russia’s latest anti-missile systems.

  If successful, Russia may well get to sell lots of them in the future. Great news comrades! We’re getting the chance to showcase our products!

  The S-400 and “Pantsiri” are preparing for a grandiose exam in Syria

  “Russian air defense systems in Syria have an opportunity to show everything they are capable of,” a source close to the Russian Defense Ministry noted in a comment to the newspaper VZGLYAD. Such a check is worth a lot, the interlocutor notes.

  “For the military all over the world, this will be an extremely important lesson – the analysis of this blow and its reflection will long be handled by the headquarters of all the leading military powers of the world,” the general believes. The subject of analysis will also be how the electronic warfare complexes (EW) will work when reflecting missile strikes.

  The number of downed enemy missiles is not an end in itself, Lieutenant-General Alexander Gorkov, head of the air defense missile forces in 2000-2008, remarked in conversation with the newspaper VZGLYAD. He stressed: “The air defense forces are designed to completely conserve the object. Therefore, if only one of the 100 rockets is shot down, but the one that flew exactly to the target, and because of this the object survived, this is considered a success. “

  But there are objective criteria for anti-aircraft gunners.

  This indicator means the probability of a target being hit by one missile. The number of intercepted targets is divided by the total number of missiles fired. For example, less than 0.7 means low efficiency; 0.8 and above – good, 0.9 – excellent, explained earlier to the portal ” Economy Today ” Lieutenant General Aitech Bizhev, former deputy commander-in-chief of the Russian Air Force on the CIS Joint Air Defense System.

  “If we are talking about cruise missiles going at extremely low altitudes, then the efficiency should be at least 0.85-0.90,

  As an example, Bezhev cited the result of the Syrian air defense forces, which recently repulsed the attack of  Israeli aircraft. F-15 planes fired eight missiles, the Syrians intercepted five of them. Thus, the coefficient was 0.6, that is 60% of the shot down missiles. This result is not very pleasing, Bezhev complained.

  However, the expert of the Center for Analysis of Strategies and Technologies (ACT) Vasily Kashin believes that the destruction of 50-60% of US missiles would be a huge success for Russian weapons. In fact, he added, even the destruction of 30% can be considered a great success, if we bear in mind both Russian and Syrian air defense forces.

  It should be taken into account that the Syrians used old complexes, notes Bizhev. And the newest S-400 air defense systems are located at Russian facilities – the Khmeimim base and in Tartus. According to the Lieutenant-General, the efficiency of the S-400 for unobtrusive speed targets is 0.9, that is “magnificent”, 90%.

  In turn, Kashin recalls: in addition to our ground-based air defense in Syria will be two Russian frigates with the complex “Shtil-1”, which stand off the coast of Syria. “Each of them has a vertical launch for 24 anti-aircraft missiles,” the expert reminded VZGLYAD.

  Potential buyers of weapons following the outcome of this conflict will draw conclusions about which weapon systems are more effective – American cruise missiles or Russian air defense systems. For a correct assessment, it is important to consider how many missiles are fired at the covered targets. “If the enemy will use a huge number of missiles, for example, more than 200, then you do not know exactly how many missiles will be on the target. Miracles do not happen, “Kashin said. He adds that it is impossible to completely repulse such a blow.

  “For example, there are 100 air targets, for each we spend two anti-missiles. With this amount you need to have a very high ammunition. Is there such a number of missiles in the ammunition of the grouping deployed in Syria? “Asks General Alexander Gorkov.

  “The combat component of the S-300 division is 32 missiles (if there are eight launchers) or 48 missiles, if 12 units are available,” the interlocutor points out. “If two rockets are used for each shooting, the ammunition will be enough for 16 or 24 launches, respectively.” If the coefficient of 0.9 is shown in these shootings, this will be evaluated as a success, including potential buyers of Russian weapons.

  Even if that was a little long and technical for you, just know I find it possibly comforting. If Russia is looking for a ‘grandiose exam’ of its war matériel, and the US is going to attack mainly to satisfy internal politics (and Russia knows this), then that may contain any military exchange to a relatively small skirmish (for now). 

  But if not, and Russia is truly backed into a corner, tired of the West’s vilification and NATO’s encroachment, it will show it claws. History has long shown that the Middle East is a powder keg where conflicts can easily escalate quickly. Where escalation might lead in this case is very worrisome indeed.

  Time To Prepare For War

  There remains, as yet, no evidence proving Assad’s government was behind the alleged gas attack in Douma.

  All that’s been presented to the world are video clips showing what appear to be stricken people. However, we have long learned that such videos prove to be fraudulent. The same White Helmets who released these clips have been caught many times before using crisis actors and staging events that look just like the videos released — shaking cameras that sweep and lurch in tights shots over closely spaced bodies, poor lighting, etc. 

  Moreover, the US and NATO blamed Assad and Russia within hours of these release of these videos, well before any actual evidence could have been collected and confirmed. As of course, they’ve similarly done time and again over the past years. Clearly, there’s an eagerness on the West’s side to find a reason to take harder action against Russia.

  Will this one be it?

  While the prospect of a kinetic (shooting) conflict between the West and Russia is obviously of greatest concern, the war could happen in one or several of many other forms (cyber, financial, trade, etc.) which I’ve written about extensively in the past.

  We need to prepare ourselves for the prospect of war, even if this situation merely turns out to be an S-400 marketing blitz.  Because at the current trajectory, even if this event turns out not to be the flashpoint that ignites a larger confrontation, the odds of one that does happening soon is just too damn high.

  It’s very clear that the US has embedded neocons that want a unipolar world where the US is top dog and gets to boss around China and Russia.  That makes war “highly likely” in our future. 

  China and Russia quite rightly believe that they deserve to be treated on more equal footing and have their own national pride and internal political realities with which to contend, meaning they cannot appear to be pushed around by the US.  Saving face is important.

  In Part 2: What To Prepare For we assess the most likely paths the current standoff may take, the probability of each, and what the ramifications of each would be. Knowing tomorrow’s likeliest outcomes will help you best prepare today.

  An escalating conflict between the US and Russia, even if limited to a proxy war in Syria, will result in tremendous casualites — of life, of geopolicital relations, and of markets. Protect yourself, those you love, and your wealth from becoming part of the collateral damage.

  Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

  

• 9 Things Cannabis Investors Should Know

  The swift regulatory changes taking place in the global cannabis sector are almost without modern precedent.

  While some find the situation analogous to the repeal of Prohibition in the United States,Visual Capitalist’s Jeff Desjardins notes that it’s also fair to point out that such events happened 85 years ago in the midst of the Great Depression. It was a long time ago, and in a very different economic climate.

  Today’s infographic comes to us from Evolve ETFs, and it shows what investors should know as the legal cannabis sector comes out of the dark.

  

  Courtesy of: Visual Capitalist

  WHAT CANNABIS INVESTORS SHOULD KNOW

  Since there is so much happening at once with little precedent for what such a market will look like, it’s worth summing up the sector’s potential in broad strokes:

  1. Global Size
  According to research from The Brightfield Group, the size of the legal cannabis sector is expected to surge from $7.7 billion to $31.4 billion between 2017 and 2021.

  Currently the recreational market makes up only 37% of the global total – but by 2021, that will rise to 57%.

  2. Versatile Uses
  Cannabis comes in different forms. One gram of dried cannabis is roughly equivalent to:

  • 5g of fresh cannabis

  • 15g of edible product

  • 70g of liquid product

  • 0.25g of concentrates

  • 1 cannabis plant seed

  These can be used in various medical applications, including to fight chronic pain, migraines, anxiety, multiple sclerosis, and nausea. Cannabis can also be used to treat Alzheimer’s, PTSD, and cancer.

  3. North American Growth
  By 2021, it’s estimated that North American sales will make up 86% of the global market. Specifically, the U.S. legal market is projected to hit $18.1 billion by that time, while the Canadian legal market is expected to be $8.9 billion in that same year.

  4. A Shifting Legal Landscape
  Canada will be the first G7 country to legalize cannabis at a federal level.

  In the United States, recreational cannabis is already legalized in nine states – but this could change swiftly as various states undergo referendums.

  5. European Markets
  In 2017, the legal market for cannabis is estimated to be just $0.11 billion, but by 2021 it will have expanded to $3.8 billion.

  According to The Brightfield Group, growth will be quite impressive in Western Europe: Germany’s market will grow at a 284% annual rate, the Netherlands at 364%, and Spain at 334%.

  6. Rest of the World
  Although markets outside of North America and Europe will not see the same growth in absolute dollar terms, the legal cannabis market will still expand from $80 million to $350 million, led by activity in Latin America.

  7. Pharmaceutical Research
  Israel has a special place in the cannabis world – the country is world leader in medical cannabis research, and industry expects that it will eventually translate into a $1 billion export opportunity. That said, export plans have hit a recent road bump.

  8. Investment Activity
  Compare the start of 2018 to that of 2017, and you’ll see an impressive difference in investment activity.

  For this we use Canada with its impending recreational legalization as an example: in the first six weeks of 2018, investment was up nearly 7x over the previous year. Further, the average deal size increased from $5.6 million to $18.7 million.

  Meanwhile, the Canadian Cannabis Index rose 201% between January 2017 and January 2018.

  9. How to Invest?
  There are a variety of ways to gain exposure to the sector, including:

  • Licensed producer stocks

  • Biotech stocks

  • Ancillary services stocks

  • Licensed retailer stocks

  • Cannabis ETFs

  Regardless of how you play it, the legal cannabis sector is coming out of the dark – and it will be interesting to see how the industry takes shape.

  

• WikiLeaks Secret Cable: "Overthrow The Syrian Regime, But Play Nice With Russia"

  Hours after the overnight US-led missile strikes on Syria, WikiLeaks republished a crucially important diplomatic cable through its official media accounts confirming that Saudi Arabia’s long term strategy in Syria has been to pursue regime change “by all means available.” According to the leaked internal Saudi government document, this is the kingdom’s proposed end-goal even should the United States at any point show “lack of desire” due to the threat of Russian response and possibility of a ‘great power’ confrontation. 

  With American lawmakers and media pundits already urging President Trump to escalate and sustain attacks against Syria, it must be remembered that close US allies like Israel and Saudi Arabia have long coordinated to create the conditions that might tip the US administration toward full military action resulting in regime change in Damascus. And more recently, fresh off his weeks-long tour of the US, Saudi Crown Prince Mohammed bin Salman has both slammed previous proposals of US troop withdrawal in Syria and declared eagerness “to work with allies on any military response in Syria if needed.”

  It is also essential to recall that the al-Qaeda linked group which originated the claims of a government orchestrated chemical attack on civilians in the Damascus suburb of Douma, called Jaish al Islam (JAI), is and has always been state sponsored by the Saudi regime. The Guardian, among others, reported beginning in 2013 that Saudi Arabia founded and trained the group, spending millions. 

  

  Notably, as Russia as well as some Western counter-terror experts continue to point the finger at Jaish al Islam (and the “White Helmets”) for staging the Douma “chemical attack” in order to provoke the US military response, it has emerged through past reporting that JAI itself had used chemical weapons against Kurdish militias in Aleppo’s Sheikh Maqsoud district in 2016 (and it appears that the Saudi-backed group openly admitted to carrying out prior chemical attacks according to The Daily Beast).

  Given this current context and the continued rapid unfolding of the crisis, the previously leaked ‘secret’ Saudi memo published by WikiLeaks takes on new significance and meaning: did the Saudis finally trigger their “by any means available” scenario (a ‘chemical incident’) at a moment when their proxies were collapsing in the face of overwhelming Syrian Army victory? 

  The below article and translation was originally authored by Brad Hoff in 2016 for WikiLeaks and Foreign Policy Journal, and is used here with permission.  

  * * *

  Secret Intel Memo: Overthrow the Regime “by all means available”

  A WikiLeaks cable released as part of “The Saudi Cables” in the summer of 2015, now fully translated here for the first time, reveals what the Saudis feared most in the early years of the war: Russian military intervention and Syrian retaliation. These fears were such that the kingdom directed its media “not to oppose Russian figures and to avoid insulting them” at the time.

  https://twitter.com/wikileaks/status/985171468525940737

  Saudi Arabia had further miscalculated that the “Russian position” of preserving the Assad government “will not persist in force.” In Saudi thinking, reflected in the leaked memo, Assad’s violent ouster (“by all means available”) could be pursued so long as Russia stayed on the sidelines.

  The following section of the leaked cable is categorical in its emphasis on regime change at all cost, even should the U.S. vacillate for “lack of desire”:

  “The fact must be stressed that in the case where the Syrian regime is able to pass through its current crisis in any shape or form, the primary goal that it will pursue is taking revenge on the countries that stood against it, with the Kingdom and some of the countries of the Gulf coming at the top of the list. If we take into account the extent of this regime’s brutality and viciousness and its lack of hesitancy to resort to any means to realize its aims, then the situation will reach a high degree of danger for the Kingdom, which must seek by all means available and all possible ways to overthrow the current regime in Syria. As regards the international position, it is clear that there is a lack of ‘desire’ and not a lack of ‘capability’ on the part of Western countries, chief among them the United States, to take firm steps…”

  Amman-based Albawaba News—one of the largest online news providers in the Middle East—was the first to call attention to the WikiLeaks memo, which “reveals Saudi officials saying President Bashar al-Assad must be taken down before he exacts revenge on Saudi Arabia.” Albawaba offered a brief partial translation of the cable, which though undated, was likely produced in early 2012 (based on my best speculation using event references in the text; Russia began proposing informal Syrian peace talks in January 2012).

  Russian Hardware, a Saudi Nightmare

  Over the past weeks Saudi Arabia has ratcheted up its rhetoric on Syria, threatening direct military escalation and the insertion of special forces on the ground, ostensibly for humanitarian and stabilizing purposes as a willing partner in the “war on terror.” As many pundits are now observing, in reality the kingdom’s saber rattling stems not from confidence, but utter desperation as its proxy anti-Assad fighters face defeat by overwhelming Russian air power and Syrian ground forces, and as the Saudi military itself is increasingly bogged down in Yemen.

  Even as the Saudi regime dresses its bellicose rhetoric in humanitarian terms, it ultimately desires to protect the flow of foreign fighters into Northern Syria, which is its still hoped-for “available means” of toppling the Syrian government (or at least, at this point, permanent sectarian partition of Syria).

  U.S. State Department Confirmation

  The U.S. State Department’s own 2014 Country Report on Terrorism confirms that the rate of foreign terrorist entry into Syria over the past few years is unprecedented among any conflict in history:

  “The rate of foreign terrorist fighter travel to Syria–totaling more than 16,000 foreign terrorist fighters from more than 90 countries as of late December–exceeded the rate of foreign terrorist fighters who traveled to Afghanistan and Pakistan, Iraq, Yemen, or Somalia at any point in the last 20 years.”

  According to Cinan Siddi, Director of the Institute for Turkish Studies at Georgetown’s prestigious School of Foreign Service, Russian military presence in Syria was born of genuine geopolitical interests. In a public lecture recently given at Baylor University, Siddi said that Russia is fundamentally trying to disrupt the “jihadi corridor” facilitated by Turkey and its allies in Northern Syria.

  The below leaked document gives us a glimpse into Saudi motives and fears long before Russian hardware entered the equation, and the degree to which the kingdom utterly failed in assessing Russian red lines.

  * * *

  A full translation of the text

  THE BELOW is an original and authenticated translation of the WikiLeaks file published as part of “The Saudi Cables.”  Note: the cable as published in the SaudiLeaks trove appears to be incomplete. Its accompanying pages have yet to be located within the massive trove of leaked Arabic documents. 

  […] shared interest, and believes that the current Russian position only represents a movement to put pressure on him, its goals being evident, and that this position will not persist in force, given Russia’s ties to interests with Western countries and the countries of the Gulf.

  If it pleases Your Highness, I support the idea of entering into a profound dialogue with Russia regarding its position towards Syria*, holding the Second Strategic Conference in Moscow, working to focus the discussion during it on the issue of Syria, and exerting whatever pressure is possible to dissuade it from its current position. I likewise see an opportunity to invite the head of the Committee for International Relations in the Duma to visit the Kingdom. Since it is better to remain in communication with Russia and to direct the media not to oppose Russian figures and to avoid insulting them, so that no harm may come to the interests of the Kingdom, it is possible that the new Russian president will change Russian policy toward Arab countries for the better. However, our position currently in practice, which is to criticize Russian policy toward Syria and its positions that are contrary to our declared principles, remains. It is also advantageous to increase pressure on the Russians by encouraging the Organization of Islamic States to exert some form of pressure by strongly brandishing Islamic public opinion, since Russia fears the Islamic dimension more than the Arab dimension.

  In what pertains to the Syrian crisis, the Kingdom is resolute in its position and there is no longer any room to back down. The fact must be stressed that in the case where the Syrian regime is able to pass through its current crisis in any shape or form, the primary goal that it will pursue is taking revenge on the countries that stood against it, with the Kingdom and some of the countries of the Gulf coming at the top of the list. If we take into account the extent of this regime’s brutality and viciousness and its lack of hesitancy to resort to any means to realize its aims, then the situation will reach a high degree of danger for the Kingdom, which must seek by all means available and all possible ways to overthrow the current regime in Syria.

  As regards the international position, it is clear that there is a lack of “desire” and not a lack of “capability” on the part of Western countries, chief among them the United States, to take firm steps […]

  *[in the Arabic text: Russia, but this is a typo]

  

• UK Produces "Dossier" To Prove Russian Motive In Skripal Poisoning, Russia Says UK Abducted Daughter

  The UK has proffered what they claim is evidence that Russia has had it out for former double-agent Sergei Skripal since at least 2013, and that Russia has been researching the effectiveness of spreading a nerve agent on door handles for assassination purposes, according to the BBC and the New York Times. The revelations are courtesy of Sir Mark Sedwill, Britain’s national security advisor, who detailed the declassified claims in a Friday letter to NATO. From the NYT:

  Mr. Sedwill’s letter, the most detailed account of British intelligence on the subject to be shared with the public to date, also reported that President Vladimir V. Putin of Russia was “closely involved in the chemical weapons program” beginning in the mid-2000s.

  During that period, the letter claims, Russia was secretly developing the nerve agents known as Novichok that British officials say were used in the March 4 attack on Sergei V. Skripal and his daughter, Yulia, in the quiet cathedral city of Salisbury, England.

  Mr. Sedwill’s letter also said that Britain has evidence that Russian security services have been monitoring the Skripal family. Cyberspecialists from Russia’s Foreign Intelligence Services hacked Ms. Skripal’s email in 2013, the letter said. Asked about that at his news conference, Mr. Yakovenko responded sarcastically, “Big surprise.”

  The letter added that Russian intelligence services “view at least some of its defectors as legitimate targets for assassination.” –New York Times

  The letter also claims that “during the 2000s,” a special Russian unit began to develop chemical weapons specifically for state-sponsored attacks, and to “train personnel from special units in the use of these weapons.” 

  “This program subsequently included investigation of ways of delivering nerve agents, including by application to door handles,” the letter also says.

  Meanwhile, “Russia believes Yulia Skripal has been abducted by Britain – and that the UK is faking sources in order to blame the Kremlin for her poisoning,” Sky News reported on Thursday after having spoken directly with Russia’s foreign ministry spokeswoman, Maria Zakharova.

  

  “We have zero information from officials in London about what is going on with her,” Zakharova told Sky News presenter Dermot Murnaghan in Moscow, adding “We have suspicions that she’s been abducted, held against her will.”

  “We just want to be sure that Yulia Skripal is actually better, that this is for real.”

  Yulia Skripal was found unconscious in a Salisbury park on March 4, along with her father, former Russian double-agent Sergei Skripal. The circumstances surrounding their poisoning – including the origin and delivery method of the Novichok nerve agent used on the pair has been the source of heated debate for over five weeks.

  Despite no formal investigation having been conducted (and a curious link between Sergei Skripal and former MI6 spy Christopher Steele having been revealed by The Telegraph), several nations consequently slapped Russia with sanctions under the presumption that they were responsible for the attempted assassinations. 

  Yulia cuts off her cousin

  While Yulia Skripal was in the hospital, she reportedly spoke with her Russian cousin Viktoria over the phone – a recording of which was broadcast by Russian television last Thursday in a conversation which the Rossiya 24 announcer emphasized was unverified.

  

  In the recording, Yulia can be heard telling Victoria that she and her father are healthy, and neither has suffered long-term health damage from the poisoning. British authorities maintained that only Yulia was conscious at the time and that her father was in “critical but stable” condition. 

  Viktoria Skripal, meanwhile, has repeatedly expressed doubts that Russia was behind the attack – suggesting, says the New York Times, that “bad fish” or an attack by the mother of Yulia Skripal’s boyfriend could have sickened the pair. 

  So, Yulia Skripal calls her cousin in Russia from hospital and they’re talking just fine. A few days later Yulia releases a strange statement, clearly not written by herself, asking that her cousin not contact her in the future. A bit weird, or what?

  — Danielle Ryan (@DanielleRyanJ) April 12, 2018

  Relocating to America?

  Last weekend we covered a story from The Sunday Times about a rumor that Sergei and Yulia Skripal will likely be offered “a new life in America in an attempt to protect them from further murder attempts.”

  

  Intelligence officials at MI6 have had discussions with their counterparts in the CIA about resettling the victims of the Salisbury poisoning. “They will be offered new identities,” a senior Whitehall figure said.

  …

  Security sources said Britain would want to ensure their safety by relocating them with one of the “five eyes” countries, the intelligence-sharing partnership that also includes America, Canada, Australia and New Zealand. –The Times

  “The obvious place to resettle them is in America, because they’re less likely to be killed there and it’s easier to protect them there under a new identity,” an intelligence source familiar with the negotiations added. “There’s a preference for them to be resettled in a five-eyes nation because their case would have huge security implications.”

  Many are wondering how the pair survived exposure to one of the deadliest nerve agents on the planet, as a 1mm drop is the lethal dose – about the size of a small drop of rain. So far we’ve been told the Novichok was either smeared on a doorknob, at Sergi’s wife’s graveside, the air vents on Sergei’s BMW, and a “gift from friends” opened by Yulia at Zizi’s restaurant. Whatever the case, it also sickened 38 others. 

  Skripal, a former double agent who was imprisoned in Russia in 2006 after the Kremlin discovered he had been cooperating with British secret services since 1995. He was released and pardoned by then-president Dmitry Medvedev in 2010, and relocated to the UK as part of a spy swap. According to The Telegraph, Skripal reportedly has ties to former MI6 agent Christopher Steele. 

  The Telegraph understands that Col Skripal moved to Salisbury in 2010 in a spy swap and became close to a security consultant employed by Christopher Steele, who compiled the Trump dossier. 

  The British security consultant, according to a LinkedIn social network account that was removed from the internet in the past few days, is also based in Salisbury.

  On the same LinkedIn account, the man listed consultancy work with Orbis Business Intelligence, according to reports. –The Telegraph

  The Telegraph‘s report implies that Skripal – still tied to Russian intelligence, could have been a source for some of the claims in the “Steele Dossier,” a 35-page document full of salacious and unverified claims about Donald Trump, which was paid for by Hillary Clinton and the DNC and arranged for by opposition research firm Fusion GPS.

  If Skripal was involved in the Steele dossier – it would greatly expand the list of who might want him to wake up dead. 

  

• "Elon Knew": New Lawsuit Alleges Musk Knowingly Lied About Model 3 Production

  A new securities class action lawsuit filed in late March 2018, which names Elon Musk as a defendant, alleges that the Tesla CEO knew that the Model 3 was not going to be able to be produced as the rates he claimed – and that the company was not going to be able to meet production goals due to – get this – the production lines not even being assembled. The lawsuit alleges that this didn’t prevent Elon Musk from going out and telling the investing public otherwise, hence the allegation of securities fraud.

  First, the allegation that Musk was told by his own employees that the Model 3 couldn’t be mass produced by the end of 2017, which was the company’s stated goal:

  

  Then, after claiming in May 2017 that the company was “on track” to meet its mass production goal, it’s alleged the company hadn’t even finished building its production lines, clearly meaning it wasn’t “on track”. The lawsuit alleges that Musk knew the line was “way behind”:

  

  The suit alleges that the company was building Model 3’s by hand at a “pilot shop” at the same time Tesla claimed to be on track for “mass production”; it also claims that it was “evident to anyone who visited the facility” – including Elon Musk – that the line wasn’t built and that “construction workers were spending most of their shifts sitting around with nothing to do”:

  

  We also read in the lawsuit that Tesla’s Gigafactory, at the time in question, was allegedly capable of producing only one battery pack per day – and that the production of one battery pack took “two shifts” to complete.

  

  The suit alleges that the company’s former CFO, Jason Wheeler – who is one of more than 50 key executives and VPs to have left the company over the last half decade or so – told Elon Musk personally that they wouldn’t be able to mass produce by the end of 2017. The entire lawsuit is available at this link and some of the most interesting content was first shared by critics of the company on Twitter.

  The drumbeat of accountability for Elon Musk continues to pound louder and louder as each day progresses, with some analysts calling for the SEC to investigate him if the company doesn’t meet its stated cash flow positive and “no capital raise” guidance for the back end of 2018.

  

  Yesterday we detailed how the company is cutting corners with production and suppliers, as well as with its certified preowned vehicle program. Commentators continue to suggest that Elon musk should be held accountable by regulators if the company again raises capital this year or is not free cash flow positive by the second half of this year, two claims that Musk made this week in an angry outburst where he attacked the messenger (The Economist) for pointing out a Jefferies analysis.

  The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.

  — Elon Musk (@elonmusk) April 13, 2018

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  Then, on Friday afternoon, CNBC released an scathing report detailing that a large portion of parts supplied to Tesla to manufacture vehicles with has been substandard or defective. The article alleged that:

  Tesla is struggling to manage and fix a significant volume of flawed or damaged parts from its suppliers, sending some to local machine shops for rework, according to several current and former Tesla engineers. The company said it also makes adjustments to the design of some parts after receiving them from suppliers.

  It continues: 

  All automakers have to deal with some amount of defective or damaged parts, both from their own factories and from suppliers. But, as previously reported, current and former employees say that Tesla experiences a higher rate of defects than industry norms. A significant number of flawed parts, and parts in need of design changes, also come from Tesla’s suppliers, they said.

  The reason for the large number of defective parts? Spending less time to vet suppliers, according to company employees. 

  Current and former employees from the company’s Fremont, Calif. and Sparks, Nevada factories blame Tesla for spending less time to vet suppliers than is typical in auto manufacturing. These people said the company failed to comprehensively test “variance specs” with some vendors before embarking on Model 3 production.

  Ultimately, it’s Tesla lack of experience and scramble to get a car to market that was leading to the pile up in defects, which will end up crushing the company’s “quality control” reputation, as the following episode suggests:

  Auto manufacturing expert Steve Finch, a former GM plant manager with about 40 years of industry experience, said automakers typically deal with some flawed parts from suppliers. Finch said that mass-market car companies normally will take a year or more to vet a prospective supplier. This is to ensure the supplier’s factory follows ISO quality management standards and other processes that are on par with the automaker’s own.

  Former and current employees said Tesla took less time before signing on new suppliers. Tesla employees tasked with vetting suppliers were also not always experienced with ISO quality management standards, said these people.

  We also pointed out yesterday that Tesla is starting to give other indications that it is stretched very thin – and that this leads to cutting certified pre-owned vehicle corners. Yesterday, Electrek wrote an article detailing ugly new changes to the company’s certified preowned checklist procedures, including the company no longer taking care of cosmetic details, which the article refers to as “refurbishing”:

  Now the company has updated its policy and some new cars coming on Tesla’s list of used vehicles have this ‘Not Refurbished’ warning that reads:

  “This car has passed a 70-point mechanical inspection and will be cleaned before delivery. If you would like any additional work that is not covered under your warranty, we can help arrange service after delivery for an added cost.”

  Tesla salespeople have been telling buyers that the automaker is still making sure that the vehicles are up to their standards for the warranty, but they are not fixing cosmetic issues anymore.

  Worst of all, these changes come a time where the company is about to receive a massive inflow of vehicle inventory from three-year leases that started in 2015:

  Tesla has changed its ‘certified pre-owned’ (used) vehicle policy this week to stop “refurbishing” its used cars just ahead of them receiving a big influx of vehicles as more 3-year leases are ending. The automaker had launched the program 3 years ago and it has been tuning it over the last two years.

  Previously, certified preowned Tesla vehicles not only underwent a inspection to check the mechanics and operation of the vehicle, but they also underwent a cosmetic clean up. The cosmetic cleanup always seemed like an absolute necessity, especially given the fact that Tesla buyers are actually unable to view pictures of the certified preowned vehicles that they’re purchasing:

  The cars with this new warning still don’t have real pictures of the actual vehicle, but instead only renderings of the vehicle’s configuration.

  Tesla told Electrek that they are soon going to make it easier to request real pictures of listed vehicles.

  The change comes as Tesla is getting more and more used vehicles, especially after 3-year leases from 2015 when Tesla started ramping up production significantly and also making strides with its leasing program.

  On top of that, the company is still selling these vehicles at premium prices, which the Elektrek article hilariously calls “value retention”:

  With the increased inventory and the lack of “refurbishing”, a decrease in price would be expected, but Tesla used vehicles have historically been very good at value retention.

  Regardless, the air – and questions – of accountability continues to get thicker around Elon Musk and his band of merry brothers.

  If the stock takes another dive next week, what is Mr. Musk going to come up with in order to keep a sense of being such trivial concerns as cash flow and profitability – and more importantly, how long will his lawyers let him keep talking?

  Elon was found passed out against a Tesla Model 3, surrounded by “Teslaquilla” bottles, the tracks of dried tears still visible on his cheeks.

  This is not a forward-looking statement, because, obviously, what’s the point?

  Happy New Month! pic.twitter.com/YcouvFz6Y1

  — Elon Musk (@elonmusk) April 1, 2018

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• Why Trade Wars Will Unleash Central Banks

  Authored by Nomi Prins via The Daily Reckoning,

  There’s been an abundance of coverage surrounding the recent steel and aluminum tariffs. Those measures could hurt more sectors than they help within the U.S. In particular, it could damage businesses that require metals because they’ll have to pay more for raw materials.

  

  Trade wars also escalate geopolitical tensions and economic hardships the world over. They have in the past. When the U.S. imposed tariffs in the 1930’s to try to relieve the Great Depression at home, they achieved the opposite effect.

  A global trade war flared, governments became isolated and initiated defensive build-ups. The move ultimately resulted in lower production, reduced global trade and a prolonged international depression that gave rise to WWII.

  While the early Great Depression period in which President Hoover invoked harsh trade wars might be different than today, the threat of instability remains. What we saw then was a slowdown in the world economy that lead to regional aggressions and ultimately a world war.

  The major differences now are that we have central banks financing markets — and by extension a military buildup.

  Countries are better insulated today than they were in those days. By insulating themselves, they now have more choices about who their trading partners are, and what regional or multilateral agreements they enter.

  That’s one reason China is championing regional trade agreements throughout Asia and the Pacific Rim, and inked bi-lateral deals with Japan and the EU last year.  Those nations are growing less reliant on U.S. trade and, like good portfolio managers, are diversifying their trade partners.

  The U.S. tariffs will likely accelerate this trend.

  The tariffs, and super-regional build-ups, will also do something else. Trade wars will morph into an acceleration in global military spending. That’s because the tensions from trade wars have military ramifications.

  When government allies are less connected by interdependent economies, they are more likely to act on their own domestic needs.

  These divisions are potentially dangerous for the world. As major allies become untethered by mutual economic benefits, the world, from issues ranging from North Korea to Syria, continues to destabilize.

  Before President Trump announced his latest tariffs, Mario Draghi, president of the European Central Bank (ECB), was asked about their impact on the global economy.

  He noted while the “immediate impact wouldn’t be large” referring to the economic impact, he warned also, “there is a certain worry, or concern, about the state of international relations… because if you put tariffs against what are your allies, one wonders who the enemies are.”

  It is true that Trump was targeting tariffs on places like China and South Korea, countries he believes are flooding the U.S. market with low-priced metals backed by government subsidies. Yet the fact remains that China accounts for less than 10% of all U.S. steel imports. That’s well behind U.S. import-heavy countries that are also allies, ranging from Canada and Mexico to NATO allies in the European Union.

  Peter Navarro, maybe the White House’s top trade adviser, told CNBC “we come in peace here.” But embedded in the very basic trade principal is a military provocation that cannot be ignored.

  The tariffs were characterized as necessary for national security reasons. As President Trump told a White House gathering of metals industry executives before he signed the tariff orders, “You’re going to have protection for the first time in a long time.”

  He meant two things by that, the more logical of which was really economic protection, colored in military terms.

  That’s why Mario Draghi’s position matters. By examining the real trade numbers among military allies in Europe and even Japan, the tariffs were clearly seen as economic protectionism, not as a security-related action.

  The tariffs will also harm U.S. exporters. Besides agricultural products like soybeans, China has announced tariffs against, the U.S. exports a massive amount of products that use steel including aircraft autos, appliances, and industrial machinery. By increasing the cost of metals used, these business will all face the issue of raising prices that hit the consumer.

  On the other side of the tariffs argument is the issue of what hitting imports would do domestically. What you would find is that even import taxes aimed at hitting other countries would cause a chain reaction where American metal producers could charge more to U.S. companies like Boeing Co., General Motors Co. and Whirlpool Corp.

  That behavior is even worse for smaller firms that could get hit by higher steel prices from both domestic producers and foreign producers.

  As trade issues push economies to the brink, central bankers are actively taking notice. While they may not be commenting on specific policy, they are offering a measured response. Trump’s protectionist policy has already caught the eye of his new chairman at the Federal Reserve, Jerome Powell.

  In response to the tariffs, Powell said that “a system where goods and services flow freely is a net positive for many countries, though the benefits aren’t spread equally.”

  While Powell dodged commenting directly on trade wars, he did say that the “best approach is to deal directly with the people who are directly affected, rather than falling back on tariffs.”

  Perhaps that’s because he knows tariffs can have unintended consequences.

  If Powell really believed trade wars weren’t a source of concern, he wouldn’t have mentioned them at all. With markets move upwards of 700 points in any given direction on any given day when tariffs are headline news, the Fed can’t just watch as a sideline observer.

  You can bet that deep within the halls of the Fed they are developing a game plan to keep the markets from crashing if trade wars escalate.

  This is another reason to believe that trade wars will be met with cheap money policy. You can look at this as a financial see-saw of sorts. Trade wars, or even media soundbites about them, will spark negative markets reactions.

  That is why the Fed and other central banks will combat this with cheap words and even cheaper money policies.

  If the U.S. does jump into a hot trade war it could find itself needing to make up for the costs. The logical place to turn is to the beacon of more money creation from the Fed or to issue more debt.

  The Fed would be directly involved in order to keep the cost of debt from rising, again — which is why my analysis forecasts a return to Fed policies that keep rates low. Similarly, other major economies would also unleash their central bank money when needed.

  This type of tit-for-tat response is already playing out.

  Beijing has used its new wealth to attract friends, deter enemies, modernize its military, and aggressively assert its central bank into nearly any sector it believes requires assistance.

  This type of brinksmanship shows that it is only a matter of time before a trade war with China morphs into massive military build-up and competition.

  

• Here's How The US Government Influences What Food You Eat

  Few Americans are aware of the extent to which the US government influences not just the price of their food – thanks to the massive subsidies the US Department of Agriculture disburses to America’s farmers – but also the contents of menus at restaurants and fast food chains.

  In a report published this week, Bloomberg explains how the USDA’s marketing arm helps farmer trade groups pressure fast food chains to add certain items to their menus. From mushrooms to blueberries, mandatory fees levied by the USDA help finance a cohort of industry lobbying groups that work closely with restaurants to push certain ingredients. These campaigns often have a powerful impact on farmers’ bottom lines: In March, Sonic – a fast casual burger chain – introduced two new burgers to its menu that both featured white button mushrooms: Instead of being 100% ground beef, these two burgers feature a blend of beef an processed mushrooms. The mixture dramatically lowers the calorie count of the burgers, satisfying customers’ demands for healthier alternatives, per Bloomberg.

  

  What many don’t know, however, is that the introduction of these items was the result of a monthslong lobbying effort by the USDA funded Mushroom Council, a trade group that represents mushroom growers.

  The committee’s various lobbying efforts are already bearing fruit (pardon the pun): In the year ended Jan. 28, US sales of mushrooms grew by 4.9% to $1.24 billion compared with a years earlier. And much of this growth occurred before the 3,500 Sonic locations added the new menu items.

  But despite the fact that farmers get back $9 in sales for every dollar spent on marketing, according to a research study conducted by professors of agricultural economics at Texas A&M, some farmers have decided to sue the USDA to try and scrap these mandatory payments to the USDA.

  

  Their argument? The marketing efforts benefit foreign and domestic farmers equally, and the marketing often doesn’t do enough to make clear that foods produced in the US are typically of a superior quality – at least, that’s what the farmers are arguing.

  In 2016, the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, a nonprofit that advocates for independent U.S. ranchers, filed a complaint arguing the required fees violate the First Amendment by forcing them to subsidize speech they don’t agree with. The group supports Utah Republican Senator Mike Lee’s legislation prohibiting mandatory checkoff fees.

  “We’re forced to pay and advertise foreign beef in the U.S.,” said Bill Bullard, chief executive officer of the Montana-based legal fund. “We have a superior product, and it’s coveted the world over.”

  Others are happy to pay the fees. Why? Because who could forget marketing campaigns like “Got Milk?” and the “Incredible Edible Egg”. These campaigns had a powerful act on the American consciousness, and also helped spur tremendous boosts in sales.

  In other words, farmers will readily pay the fee – if it can be demonstrated that they benefit from the campaigns, which often take years to successfully execute.

  A victory by a trade group representing blueberry farmers is another example of how the push to partner with US restaurant chains is proving to be a successful strategy.

  Recently, blueberries landed on the menu at steakhouse chain Sizzler USA Inc. in the form of a blueberry lemonade — considered a big win for the U.S. Highbush Blueberry Council, which worked on bringing the refreshment to the chain’s menu. Sizzler had 123 outlets as of last year, according to Technomic.

  Because the fruit isn’t in season during the winter, Mission Viejo, California-based Sizzler is getting them from Peru. In May, the company will add more blueberries, as part of a spinach salad with almonds and feta cheese.

  “Because the growers all pay into this fund, they want to know what the council is doing for them,” said Andrew Hunter, a chef who works with the mushroom, egg and blueberry marketing programs. “This is a tangible way for boards to say, ‘This is what we’re doing for you.’ Sizzler’s blueberry lemonade. That’s tangible.”

  In 2015, more than 8,000 chain restaurant locations added blueberries to their menus – including Dairy Queen, Wendy’s and Red Lobster. Another group funded by the USDA via these mandatory marketing fees claimed responsibility for this, citing a multiyear effort to court fast-food companies.

  And other campaigns are underway.

  The American Egg Board, working with ad agency BBDO Worldwide Inc., is relaunching its “Incredible Edible Egg” ad campaign from decades ago with a slightly modified tagline: “How do you like your eggs?” But the name has been shortened. It’s now “The Incredible Egg.”

  So next time you see a new food trending – think how millennials love avocado toast – don’t assume it happened organically. Somewhere along the line, a carefully crafted marketing campaign devised by one of these government-backed groups forced its messaging into your subconscious – often without you even knowing it.

  

• The Deflation/Inflation Debate

  Authored by Alasdair Macleod via GoldMoney.com,

  “Naïve inflationism demands an increase in the quantity of money without suspecting that this will diminish the purchasing power of the money.” ― Ludwig von mises,  The Theory of Money and Credit

  

  It is hardly surprising that with equity indices stalling, the financial community is increasingly worried that the long, steady bull market is coming to an end. Naturally, this makes investors look for reasons to worry, and it turns out that there are indeed many things to worry about.

  In fact, there are always things to worry about. Ever since the Lehman crisis, the Four Horsemen of the Apocalypse have been casting long shadows across the financial stage. But as financial assets have continued to rise in value over the last nine years, bearish fund managers, spooked by systemic risks of one sort or another and the perennial threat of a renewed slump, have been forced to discard their ursine views.

  As often as not, it is not much more than a question of emphasis. There is always good news and bad news. As an investor, you semi-consciously choose what to believe.

  There are causes for concern, of that there is no doubt. Mostly, they arise from the consequences of earlier state interventions on the money side. Governments are slowly strangling private sector production with increasingly rapacious demands on taxpayers and have been resorting to the printing press to finance the shortfalls. In reality, there is a finite limit to government spending, because it impoverishes the tax base. Yet governments, with very few exceptions, seek to conceal this truism by increasing spending and budget deficits even more. In this, President Trump is not alone.

  Bankruptcy is the end result. And don’t believe the old saw about how governments can’t go bust. They can, and they do by destroying their currencies, as von Mises implied in the quote above. The naïve inflationists referred to by von Mises justify their stance by believing that inflation is invigorating, and deflation is devastating. Any and all statistics pointing to a slowdown in the growth of money supply or in the economy is therefore taken to be a forewarning of deflation.

  Inflationists are simply recycling Irving Fisher’s debt-deflation theory, which is no longer relevant. Fisher held that in an economic crisis, bad debts forced banks to liquidate collateral, pushing down collateral values. And as previously sound loans lose their collateral cover, banks are forced to liquidate those as well.

  But it is no longer the case. Central banks have removed the discipline of gold, so they can intervene to prevent financial and economic crises, rather than let them run their destructive courses. They have fully embraced inflationism, giving them the excuse for monetary and credit expansion as a cure-all.

  Therefore, when the next crisis occurs, central banks will take steps to ensure that in aggregate the quantity of money does not contract. It is the one forecast we can make with absolute certainty. And every time a crisis happens it takes more monetary heft to get out of it. But that’s not an issue for a central bank with two overriding objectives, not the targeting of inflation and unemployment as such, but to ensure a recession never happens, and to finance, through money-printing if necessary, escalating government spending.

  Minor wobbles are not the credit crisis

  We must discriminate between the momentary problems faced by central banks and the inevitable crisis at the end of the credit cycle. Dealing with problems as they arise has become routine, the justification for continual inflationism. The credit crisis is a different matter. Central bankers do not seem to realise it, but the credit crisis is their own creation, the way markets eventually unwind the distortions created by earlier monetary policy. So long as central banks suppress interest rates and expand money and credit, there will be periodic credit crises to follow.

  The trigger for the credit crisis is always the same. The general price level threatens to rise uncontrollably, reflecting the loss of the currency’s purchasing power. This forces the central bank to reluctantly raise interest rates to the point where business assumptions about the returns on capital, based on borrowing costs, turn from profit-making to loss-making. At that point, if not before, the accumulated mountain of debt becomes fatally undermined.

  The timing of the rise and level of interest rates that triggers the crisis is set by the speed with which monetary inflation feeds into prices. And the severity of the crisis depends upon the size of the debt mountain being liquidated.

  This has nothing to do with the minor wobbles along the way. Ahead of a cyclical credit crisis, central banks routinely deal with the fires breaking out in an increasingly desolate economic landscape. They are very good at it. The share prices of European banks, such as Deutsche Bank and Credit Suisse raise concerns over systemic risk, but the ECB and SNB will always ensure credit is available to them. And if we are worried about systemic risk in key European financial behemoths, why is it that stock prices for major US banks such as JPMorgan, Goldman Sachs and Bank of America are so strong?

  There is also a narrative being promoted which posits that a slowdown in broad money supply is giving an advance warning of recession. The chart below, of US M2 plotted weekly, puts it into context.

  

  Yes, there has been a recent slowdown in the rate at which M2 is growing. But it has hardly diverged much from the average rate of increase, shown by the black line, for the last five years. And it’s not worth repeating the chart for M1 Money Stock, which is remarkably similar, despite the Fed reducing the size of its balance sheet.

  How bank credit is used is rarely questioned

  What charts of money supply do not tell us is where money is deployed between two groups of borrowers. Newly created money, mainly bank credit, is allocated either into the financial sector, which is not included in GDP excepting fees and commissions, or into non-financial activities, where goods and services are included. Furthermore, missing from GDP is all the intermediate business-to-business activity that goes towards manufacturing and delivering the goods and services included in GDP. And it is B2B which borrows to invest.

  It is only when extra money is allocated through the markets to the production of items in the consumer price index that price inflation is recorded. However, we cannot know how new money is allocated and reallocated between the arbitrary divisions set by statisticians. Attempts to marry up changes in broad money with demand for it are never convincing.

  But as proxy for non-financial business activity away from the world of big corporates, the following chart appears to confirm that ordinary businesses are just getting on with commercial life and have been for the last six years, though you wouldn’t know it from the financial headlines.

  

  Again, we see that following the great financial crisis, ordinary businesses making and doing things for ordinary people, just get on with investing in production. But there is an interesting observation here, highlighted on the chart: in the first few months of every year, almost no extra loans and leases are taken out, so the sideways trend in M2 from early-January may be nothing to worry about. Furthermore, taking this seasonality into account, it appears that demand for loans and leases so far this year is stronger than in any of the previous five years.

  Investment strategists examine statistical trends to discern turning points in stocks and bonds, when the wealth creation and destruction from bull and bear markets could be the driving force for these statistical trends, having little to do with the economy itself. In this context, our next chart shows the build-up of margin debt in the financial sector, and how it has become sufficiently large to be potentially destabilising.

  

  The point at which a fall in outstanding margin debt flashes warning signals for the equity market is one thing, but it is unlikely to destabilise the non-financial economy on its own. It is worth noting that it fell $21bn in February, and presumably more in March, yet to be reported. While some of this finance is by brokers acting as shadow banks, reductions in loans on securities are bound to be reflected in a slowdown in the rate of growth of bank lending. But no such distinction is made by financial scribblers, attributing all changes in money supply to demand in the non-financial economy.

  Another statistic worrying the scribblers is the LIBOR-OIS spread, which has suddenly increased. This is the difference between the unsecured wholesale money market lending rate in London and the overnight index swap rate, which is a derivative that is effectively tied to the risk-free interest rate. The spread is therefore normally taken as an indication of bank lending risks.

  The explanation for this spread increasing is unknown, with few signs of lending stress apparent. One could point to the share price performance of systemically important European banks, such as Deutsche Bank and Credit Suisse, which suggests there is greater counterparty risk in London’s money markets than in New York. But if that’s the case, central banks will be monitoring the position closely and ready to intervene if required.

  It is perhaps more likely that tax changes in the US are encouraging US corporations to transfer dollar funds from banks in London to New York, which is bound to increase dollar rates in London, where LIBOR is set, compared with New York.

  How the credit cycle progresses

  Investors trying to understand the financial markets’ major trends should keep an eye on the credit cycle. The first point to note is that it is now nine years since the last credit crisis ended, and there are, as yet, no signs economic growth is over. However, as the cycle progresses, history and monetary theory tell us that interest rates begin to rise from the artificially suppressed levels set by central banks. That is now happening, leading us into the final phase of the credit cycle before the credit crisis finally ends it.

  Bond markets have all peaked, and their yields are rising, and not only at the short end where prices are corelated with interest rates. The 10-year US Treasury yield bottomed at 1.46% in June 2016, since when it has increased to 2.79% currently. The 30-year UST yield bottomed at the same time at 2.182%, and now yields 3.02%. The bond bear market is firmly established.

  Generally, the rise in medium and long-term bond yields anticipates increasing prices for commodities, goods and services, the consequence of earlier monetary expansion. Business conditions then appear to be improving, and equity markets have reflected this benign environment.

  It is becoming clear that a further jump in bond yields will confirm the end of an equity bull market, and the beginning of a bear market. But that will not mark the end of the current phase of the credit cycle and the onset of the crisis. Even if equities have a 1987-type crash, the credit cycle will continue, rather than enter the crisis phase.

  The concluding phase of credit expansion before the credit crisis is now about to begin. Demand will appear to be picking up while prices are rising and interest rates still low. It will be characterised by a growing belief among businessmen that they must borrow to invest. We can already anticipate the factors leading up to this happy but brief state.

  President Trump has cut taxes and increased spending. The result is there will be a substantial injection into the US economy late in the business cycle, mostly financed by monetary inflation. It is bound to create short-term optimism but being based on money created out of thin air it will be an illusion. The consequence will be an acceleration of price inflation, as the extra money is absorbed into the non-financial economy. Bond markets will anticipate higher interest rates, so banks, losing money on their bond investments, will then compete for loan business in the non-financial economy. For a brief period, buoyed up by a business-friendly fiscal policy, the economy will appear to grow more rapidly.

  The rise in prices, initially seen by business as a stimulant to production while borrowing costs remain suppressed by the Fed, will accelerate fuelled by too much money chasing too few goods. However, the business environment will only appear to be improved during the time period taken for the economy to absorb monetary inflation and reflect it in higher prices. When it dawns on markets that next year’s prices will be significantly higher than today’s the time-preference value on loans will be increasing, irrespective of the Fed’s monetary policy.

  The crisis will then be upon us. The switch from stimulative fiscal policies to sharply escalating interest rates and bond yields could be sudden. At the worst possible time, the Fed will be forced to raise the Fed Funds Rate to protect a declining dollar. If they haven’t begun to do so already, financial assets will be crashing, along with physical assets whose values are set by interest rates, such as residential property.

  America is not alone in its stimulation of markets. Interest rates are also suppressed in the Eurozone, Japan, Britain and Switzerland, all of which stand to benefit from China’s economic evolution. Those economists who in recent weeks have proclaimed that at last synchronised growth is here do not realise that the inflationary consequences for prices brings the global credit crisis forward in time.

  So, that’s the sequence. Bonds top out, followed by equities, followed by a credit crisis. We have had the first, perhaps entered the second, and have the third event still ahead of us. And if the evidence before our eyes is not enough, we have proof of central bankers’ ignorance in these matters from Janet Yellen, who in her swansong said, “Would I say there will never, ever be another financial crisis? You know, probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”

  Hubris indeed, reminding us of Greenspan’s “Irrational exuberance” in December 1996, before the Dow nearly doubled, and his conversion to the New Paradigm of Larry Summers et al in 2000, just before the dot-com bubble burst. It is proof that those who have taken it upon themselves to protect us from our own financial indiscretions are clueless about the credit cycle, and their role in its creation. But will it result in a massive deflation?

  If by deflation is meant an increase in the dollar’s purchasing power, the answer must be an emphatic No. As well as the views of central bankers, that deflation must be avoided at all costs, even a mild recession plays havoc with government finances. This is why the Fed and other central banks will do everything in their power to stop it. But their power is confined to the cure-alls of reducing interest rates and throwing yet more money at the economy.

  Far from deflation, the Fed’s only response to the next credit crisis will be to take measures that will lead to the final destruction of the dollar. Other central banks are set to follow. Deflationists don’t have a leg to stand on, and unknowingly conform with von Mises’s description of naïve inflationists.

  

• Trump's Next-Generation Presidential Limousine Unveiled

  The next generation of Presidential limousines called ‘the Beast,’ built for President Trump, is set to be unveiled in the second half of 2018. When Trump was sworn in as the 45th U.S. President, the United States Secret Service wheeled him throughout Washington in a presidential limousine fleet from the Barack Obama era.

  A Fox News source close to the matter indicates Trump would be getting all-new Cadillac-branded models by the summer months.

  

  The new presidential limousine was photographed on public roads near GM’s proving grounds in Michigan last fall. (KGP Photography/FoxNews)

  

  The prototype is covered in a black and white camouflage wrap to hide its styling details until its official unveiling. (KGP Photography/FoxNews)

  The prototypes of the Cadillac-branded presidential limousine are part of a Department of Homeland Security (DHS) agreement with General Motors Llc. to build “the next generation parade limousine program phase 2 and 3,” which began in September of 2014. Three years later and some $15,800,765 later, it seems like Trump’s new limousines are ready for use.

  

  The heavily armored $1.5 million Cadillac-branded state car, which comes complete with five-inch thick military grade armor, a bomb-proof exterior, kevlar-reinforced wheels, and a vast array of embedded weapons — has been turned over to the United States Secret Service for the final examination.

  

  “We’ve completed our task and we’ve handed over the vehicle to the customer,” Cadillac President Johann de Nysschen told Fox News. A spokeswoman for the U.S. Secret Service added that “the program to build and deploy the next generation of Presidential limousines is on track and on schedule — both in terms of vendor production and internal Secret Service post production requirements. The public can expect to see the new vehicles put into operational use late summer of this year.”

  

  Although its designed to look like a sedan, it’s understood to be built on a sturdy truck frame that can support its armored bodywork. (KGP Photography/FoxNews)

  

  The sedan is longer than two large SUVs and, for the moment, remains in white and black camouflage designed to make it more difficult to identify new features aboard the vehicle. It is pictured here, middle, in March 2018. (Chris Doane/Daily Mail)

  Fox News believes Trump’s next generation limousine will resemble a stretched 2018 Cadillac CT6.

  “One feature it almost certainly won’t share with the CT6 is Cadillac’s semi-autonomous Super Cruise system, which allows for hands-free driving on highways. Instead, it will always be driven by a highly trained agent skilled in defensive and evasive driving techniques.

   

  Cadillac has built every presidential limousine since 1993 and didn’t face any known competition for this contract. Its American luxury counterparts, Lincoln and Chrysler, each told Fox News that they declined to submit bids this time around, but de Nysschen considers his company’s role helping to chauffer the world’s most powerful man around the world an important association for the brand.”

  

  “The public can expect to see the new vehicles put into operational use late summer of this year,” said the United States Secret Service.

  How has Twitter responded to Trump’s tricked out Cadillac?

  “I think Trump should keep the camo on his new limo,” said one Twitter user.

  I think Trump should keep the camo on his new limo. pic.twitter.com/K5frDO1cl9

  — Heather Champion (@winningatmylife) April 12, 2018

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  “Lots of talk today about Trumps new limo. Supposedly comes with vanity plates too,” someone else said.

  Lots of talk today about Trumps new limo. Supposedly comes with vanity plates too. pic.twitter.com/hQHtMrqrdF

  — CC (@dafreaks) April 12, 2018

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  “Trumps new limo looks absolutely fucking ridiculous. And by ridiculous, fucking badass!!!! Greatest president ever!!!,” exclaimed one Twitter user.

  Trumps new limo looks absolutely fucking ridiculous. And by ridiculous, fucking badass!!!! Greatest president ever!!!

  — Cfondo #MAGA🇺🇸 #THESTORM (@Cfondo3) April 12, 2018

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  Great question…

  I wonder how much horsepower Trump’s new limo boasts.

  — Mark (@SconniBadger1) April 12, 2018

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  “Trump revamped the presidential limo into a Caddy built like a tank. Fricken boss,” another Twitter said.

  Trump revamped the presidential limo into a Caddy built like a tank. Fricken boss

  — molly (@xxcudagirlllxx) April 12, 2018

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  Trump’s long-awaited heavily armored limo is set to roll out on the streets of Washington in a matter of months. The one question we ask: Will it be featured in his military parade set for Veterans Day?

  

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