- Army Major (Ret.): Why America's No-Fault Generals Won't Save Us From The Next War
Authored by Danny Sjrusen via The American Conservative,
The brass are careerists, never punished for their mistakes, quietly assenting to the latest doomed interventions.
Poll after poll indicates that the only public institution Americans still trust is the military. Not Congress, not the presidency, not the Supreme Court, the church, or the media. Just the American war machine.
But perhaps that faith in the U.S. Armed Forces is misplaced. I got to thinking about this recently after I wrote articles calling for dissent among military leaders in order to stop what seems to be a likely forthcoming war with Iran. While I still believe that dissent in the ranks stands the best chance of galvanizing an apathetic public against an ill-advised, immoral conflict in the Persian Gulf, I also know its a pipe dream.
These are company men, after all, obedient servants dedicated—no matter how much they protest otherwise—to career and promotion, as much or more than they are to the national interest. The American military, especially at the senior ranks, is apt to let you down whenever courage or moral fortitude is needed most. In nearly 18 years of post-9/11 forever war, not a single general has resigned in specific opposition to what many of them knew to be unwinnable, unethical conflicts. Writing about the not-so-long-ago Vietnam War, former national security advisor H.R. McMaster, himself a problematic war on terror general, labeled in his book title such military acquiescence Dereliction of Duty. That it was, but so is the lack of moral courage and logical reasoning among McMaster and his peers who have submissively waged these endless wars in Americans’ name.
Think on it: of the some 18 general officers who have commanded the ill-fated, ongoing war in Afghanistan, each has optimistically promised not only that victory was possible, but that it was “around the corner” or a “light at the end of the tunnel.” All these generals needed, naturally, was more time and, of course, more resources. For the most part they’ve gotten it, billions in cash to throw away and thousands of American soldiers’ lives to waste.
Why should any sentient citizen believe that these commanders’ former subordinates—a new crop of ambitious generals—will step forward now and oppose a disastrous future war with the Islamic Republic? Don’t believe it! Senior military leaders will salute, about-face, and execute unethical and unnecessary combat with Iran or whomever else (think Venezuela) Trump’s war hawks, such as John Bolton, decide needs a little regime changing.
Need proof that even the most highly lauded generals will sheepishly obey the next absurd march to war? Join me in a brief trip down an ever so depressing memory lane.
Let us begin with my distinguished West Point graduation speaker, Air Force General and Chairman of the Joint Chiefs Richard Myers. He goes down in history as as a Donald Rumsfeld lackey because it turns out he knew full well that there were “holes” in the Bush team’s inaccurate intelligence used to justify the disastrous Iraq war. Yet we heard not a peep from Myers, who kept his mouth shut and retired with full four-star honors.
Then, when Army Chief of Staff General Eric Shinseki accurately (and somewhat courageously) predicted in 2003 that an occupation of Iraq would require up to half a million U.S. troops, he was quietly retired.
Rummy passed over a whole generation of active officers to pull a known sycophant, General Peter Schoomaker, out of retirement to do Bush the Younger’s bidding. It worked too. Schoomaker, despite his highly touted special forces experience, never threw his stars on the table and called BS on a losing strategy even as it killed his soldiers by the hundreds and then the thousands. Having heard him (unimpressively) speak at West Point in 2005, I still can’t decide whether he lacked the intellect to do so or the conscience. Maybe both.
After Bush landed a fighter plane on a carrier and triumphantly announced “mission accomplished” in Iraq, poor Lieutenant General Ricardo Sanchez, the newest three-star in the Army, took over the hard part of conquest: bringing the “natives” to heel. He utterly failed, being too reliant on what he knew—Cold War armored combat—and too ambitious to yell “stop!” Soon after, it came to light that Sanchez had bungled the investigation—or coverup (take your pick)—of the massive abuse scandal at Abu Ghraib prison.
General John Abizaid was one of the most disappointing in a long line of subservient generals. It seems Abizaid knew better: he knew the Iraq war couldn’t be won, that it was best to hand over control to the Iraqis posthaste, that General David Petraeus’s magical “surge” snake oil wouldn’t work. Still, Abizaid didn’t quit and retired quietly. He’s now Trump’s ambassador to Saudi Arabia, which is far from comforting.
Lieutenant General H.R. McMaster was heralded as an outside-the-box thinker. And indeed, he was a Gulf War I hero, earned a Ph.D., taught history at West Point, and wrote a (mostly) well-received book on Vietnam. Yet when Trump appointed him national security advisor, he brought only in-the-box military beliefs with him into the White House. He then helped author a fanciful National Defense Strategy that argued the U.S. military must be ready at a moment’s notice to fight Russia, China, Iran, North Korea, and “terror.” Perhaps at the same time! No nuance, no diplomatic alternatives, no cost-benefit analysis, just standard militarism. These days, McMaster is running around decrying what he calls a “defeatist narrative” and arguing for indefinite war in the Middle East.
Then there was the other Washington insider and “liberal” favorite, one of a trio of “adults in the room,” General Jim Mattis. Though sold to the public as a “warrior monk,” Mattis offered no alternative to America’s failing forever wars. In fact, when he decided his conscience no longer allowed him to stay in the Trump administration, his reason for leaving was that the president had called for a reduction of troops in Afghanistan after 18 senseless years. U.S.-supported Saudi terror bombings that killed tens of thousands of Yemeni civilians? A U.S.-backed Saudi blockade that starved at least 85,000 Yemeni children to death? Yeah, he was fine with that. But a modest troop withdrawal from a losing 18-year-old war in landlocked Central Asia, that he couldn’t countenance.
Then there’s the propensity for politics and pageantry among senior military officers. This was embarrassingly and unconscionably on display in the tragic cases of Private First Class Jessica Lynch and Corporal Pat Tillman. When, during the initial invasion of Iraq, the young Lynch’s maintenance convoy got lost, she was captured and briefly detained by Saddam’s army. Knowing a good public relations opportunity when they saw it, Bush’s staff and the generals concocted a slew of comforting lies: Lynch was a hero who had fought to her last bullet (she’d never fired her rifle), she’d been tortured (she hadn’t), her combat-camera equipped commando rescue had come just in the nick of time (she was hardly guarded and in a hospital). Who cares if it was all lies, if this young woman’s terrifying experience was co-opted and embellished? The Lynch story was media fodder.
More tragic was the Pat Tillman escapade. Tillman was an admirable outlier, the only professional athlete to give up a million dollar contract to enlist in the military soon after 9/11. Tillman and his brother went all in, too, choosing the elite Army Rangers. It was quite the story. Rumsfeld even wrote the new private a congratulatory letter. Then reality got in the way. Tillman was killed in Afghanistan during a friendly fire incident that can only be described as gross incompetence. Almost immediately, President Bush’s staff and much of the Army’s top brass went to work crafting the big lie: a heroic narrative of Tillman’s demise, replete with dozens of marauding Taliban fighters and a one-man charge befitting the hard-hitting former NFL defensive back. Promoted to corporal posthumously, he was awarded the Silver Star. Some of his fellow Rangers were instructed to lie to the Tillman family at the memorial service regarding the manner of Pat’s death.
Only Bush’s neophytes and the Army’s complicit generals didn’t count on the tenacity of Tillman’s parents. They waged something nearing war with the U.S. military for several years until they found out the truth, unearthing a coverup that implicated Bush’s civilians and many of the military’s four-star generals (including Stanley McChrystal, John Abizaid, and Richard Myers). The Tillman family got their congressional hearing, but the sycophantic representatives on the Hill refused to seriously criticize the top brass and no one was seriously punished.
It turns out, by the way, that Tillman was much more intriguing in real life than the generals’ concocted tale. Far from some ubiquitous jock, he was a genuine thinker with immense intellectual curiosity. And he was antiwar, at least when it came to Iraq. He told a close buddy in his squad that “this war is just so fucking illegal” and even maintained a correspondence with Noam Chomsky. That the military would use and abuse this gifted, principled man as a tool to sell an illegal war ought to have at last dispelled any delusions of general officer duty or ethics.
Then there’s what I’ve seen at (admittedly) the most micro level. I’ve generally worked for majors and colonels more interested in pleasing their “bosses” and earning promotions than fighting off ill-advised missions and protecting their precious troops. I’ve buried more brave young men than I wish to count. Some of my commanders were driven by ambition; some could barely spell Afghanistan. Most were promoted anyway.
It is they who will be obediently leading the next war when it comes…in Iran.
* * *
Danny Sjursen is a retired U.S. Army Major and regular contributor to The American Conservative. His work has also appeared in Harper’s, the LA Times, The Nation, Tom Dispatch, The Huffington Post, Truthdig, and The Hill. He served combat tours with reconnaissance units in Iraq and Afghanistan and later taught history at his alma mater, West Point. He is the author of a memoir and critical analysis of the Iraq War, Ghostriders of Baghdad: Soldiers, Civilians, and the Myth of the Surge.
- US First Responders Fly Chinese Drones To Save American Lives
Acting division chief of operations with the Fremont (California) Fire Department, Jeff Kleven, told VOA News that every firetruck would carry a drone. The department already operates 14 drones, uses the aerial vehicles to conduct reconnaissance and surveillance of an incident scene.
The fire department is supplied with drones from Shenzhen-based SZ DJI Technology Co.
Several years ago, the US Army halted the use of all DJI products from the modern battlefield.
The DHS’ Cybersecurity and Infrastructure Security Agency (CISA) recently urged US firms to “be cautious” of Chinese-built drones “as they may contain components that can compromise your data and share your information on a server accessed beyond the company itself.”
Kleven told VOA that his department wouldn’t be transferring sensitive material over the internet through DJI products, which means they’re on a localized system where it’s impossible to hack.
“We are well aware of the accusations that are being made. It’s not something new. There are ways we localize our data so it doesn’t go out,” Kleven said. “There are ways we don’t have to be connected to the internet. We don’t have to transfer things over the internet. We can isolate our data within our system. We are confident with that.”
Romeo Durscher, head of public safety integration at DJI, dismissed the cyber theft allegations and said more than1,000 US fire, police, and other first responders have put their trust into DJI drones.
As DJI becomes one of the most popular drone brands for first responders, it has been caught in the middle of the trade war between Beijing and Washington.
“We certainly live in a very different and challenging time right now with what is happening politically worldwide,” Durscher said. “We’re putting mitigative solutions in place so the data security risk is managed and manageable.”
Despite DHS’ warning about Chinese drones and the risk the Trump administration could target DJI with sanctions, it seems that America’s first responders are very confident that Chinese drones save American lives.
- McGovern: DoJ Bloodhounds On the Scent Of John Brennan
Authored by Ray McGovern via ConsortiumNews.com,
With Justice Department investigators’ noses to the ground, it should be just a matter of time before they identify Brennan as fabricator-in-chief of the Russiagate story…
The New York Times Thursday morning has bad news for one of its favorite anonymous sources, former CIA Director John Brennan.
The Times reports that the Justice Department plans to interview senior CIA officers to focus on the allegation that Russian President Vladimir Putin ordered Russian intelligence to intervene in the 2016 election to help Donald J. Trump. DOJ investigators will be looking for evidence to support that remarkable claim that Special Counsel Robert Mueller’s final report failed to establish.
Despite the collusion conspiracy theory having been put to rest, many Americans, including members of Congress, right and left, continue to accept the evidence-impoverished, media-cum-“former-intelligence-officer” meme that the Kremlin interfered massively in the 2016 presidential election.
One cannot escape the analogy with the fraudulent evidence of weapons of mass destruction in Iraq. As in 2002 and 2003, when the mania for the invasion of Iraq mounted, Establishment media have simply regurgitated what intelligence sources like Brennan told them about Russia-gate.
No one batted an eye when Brennan told a House committee in May 2017, “I don’t do evidence.”
The lead story in Thursday’s New York Times.
Leak Not Hack
As we Veteran Intelligence Professionals for Sanity have warned numerous times over the past two plus years, there is no reliable forensic evidence to support the story that Russia hacked into the DNC. Moreover, in a piece I wrote in May, “Orwellian Cloud Hovers Over Russia-gate,” I again noted that accumulating forensic evidence from metadata clearly points to an inside DNC job — a leak, not a hack, by Russia or anyone else.
So Brennan and his partners, FBI Director James Comey and National Intelligence Director James Clapper were making stuff up and feeding thin but explosive gruel to the hungry stenographers that pass today for Russiagate obsessed journalists.
Is the Jig Up?
With Justice Department investigators’ noses to the ground, it should be just a matter of time before they identify Brennan conclusively as fabricator-in-chief of the Russiagate story. Evidence, real evidence in this case, abounds, since the Brennan-Comey-Clapper gang of three were sure Hillary Clinton would become president. Consequently, they did not perform due diligence to hide their tracks.
Worse still, intelligence analysts tend to hang onto instructions and terms of reference handed down to them by people like Brennan and his top lieutenants. It will not be difficult for CIA analysts to come up with documents to support the excuse: “Brennan made me do it.”
Brennan: Is the jig up? ( LBJ Library photo/ Jay Godwin)
The Times article today betrays some sympathy and worry over what may be in store for Brennan, one of its favorite sons and (anonymous) sources, as well as for those he suborned into making up stuff about the Russians.
The DOJ inquiry, says the Times, “has provoked anxiety in the ranks of the C.I.A., according to former officials. Senior agency officials have questioned why the C.I.A.’s analytical work should be subjected to a federal prosecutor’s scrutiny.” Attorney General William Barr is overseeing the review but has assigned the U.S. attorney in Connecticut, John Durham, to conduct it.
No Holds Barred
Barr is approaching this challenge with a resoluteness and a calm candor rarely seen in Washington — particularly when it comes to challenging those who run the intelligence agencies.
The big question, once again, is whether President Donald Trump will follow his customary practice of reining in subordinates at the last minute, lest they cross the vindictive and still powerful members of the Deep State.
Happily, at least for those interested in the truth, some of the authors of the rump, misnomered “Intelligence Community Assessment” commissioned by Obama, orchestrated by Brennan-Clapper-Comey, and published on January 6, 2017 will now be interviewed. The ICA is the document still widely cited as showing that the “entire intelligence community agreed” on the Russia-gate story, but this is far from the case. As Clapper has admitted, that “assessment” was drafted by “handpicked analysts” from just three of the 17 intelligence agencies — CIA, FBI, and NSA.
U.S. Attorney Durham would do well to also check with analysts in agencies — like the Defense Intelligence Agency and State Department Intelligence, as to why they believe they were excluded. The ICA on Russian interference is as inferior an example of intelligence analysis as I have ever seen. Since virtually all of the hoi aristoi and the media swear by it, I did an assessment of the Assessment on its second anniversary. I wrote:
“Under a media drumbeat of anti-Russian hysteria, credulous Americans were led to believe that Donald Trump owed his election victory to the president of Russia, whose “influence campaign” according to theTimesquoting the intelligence report,helped “President-elect Trump’s election chances when possible by discrediting Secretary Clinton.”
Hard evidence supporting the media and political rhetoric has been as elusive as proof of weapons of mass destruction in Iraq in 2002-2003. This time, though, an alarming increase in the possibility of war with nuclear-armed Russia has ensued — whether by design, hubris, or rank stupidity. The possible consequences for the world are even more dire than 16 years of war and destruction in the Middle East. …
The Defense Intelligence Agency should have been included, particularly since it has considerable expertise on the G.R.U., the Russian military intelligence agency, which has been blamed for Russian hacking of the DNC emails. But DIA, too, has an independent streak and, in fact, is capable of reaching judgments Clapper would reject as anathema. Just one year before Clapper decided to do the rump “Intelligence Community Assessment,” DIA had formally blessed the following heterodox idea in its “December 2015 National Security Strategy”:
“The Kremlin is convinced the United States is laying the groundwork for regime change in Russia, a conviction further reinforced by the events in Ukraine. Moscow views the United States as the critical driver behind the crisis in Ukraine and believes that the overthrow of former Ukrainian President Yanukovych is the latest move in a long-established pattern of U.S.-orchestrated regime change efforts.”
Any further questions as to why the Defense Intelligence Agency was kept away from the ICA drafting table?
- Retail Investors Bet, And Lost, Billions On Ghost Suburbs That Were Never Built
Calgary-based Walton Group had delivered 12% annual returns in the past, so when the company made its pitch to retail investors, planning to build suburbs on speculative land in the U.S., it likely looked like a good bet. The group was selling the idea of investing $10,000 or more in rural properties outside of fast growing cities like Toronto and Atlanta, according to Bloomberg.
But years later, investors are claiming that their shares are worth only about 20% of what they put in, based on 2017 appraisals. And after $20 billion in land assets, 92,000 investors, and 106,000 acres, about 90 Canadian investors have hired a private investigations firm to track the proceeds of Walton’s land syndication.
Meanwhile, the company says it has a new strategy for selling its investors’ land and has found potential buyers for almost half of its buildings. An attorney for the company said that a recent project brought in almost double what investors originally paid for it and the company has “a number of important initiatives and opportunities on the horizon and we are excited about what the coming years have in store for Walton and our investors.”
Ryan Kretschmer, general counsel for a Walton affiliate called Walton Global Holdings Ltd. also said that the “severity of the real estate recession was unforeseen, and the recovery in the U.S. has been much slower than expected.”
The investors’ experience provides a cautionary tale for land speculation years in advance and the perils of being a smaller retail investor. A majority of more than 300 Walton land projects stretching from Alberta to Washington, are delayed, Bloomberg said.
Rob Ivanhoe, a real estate attorney with Greenberg Traurig said:
“Syndication of raw land to retail investors is, in my 35+ years of experience, a very rare approach to investment in real estate both before and after the Great Recession. It does not seem to be the kind of high-risk investment that an unsophisticated individual retail investor can properly evaluate.”
Retiree Bruce Coristine invested in Walton’s Arcade, Georgia project 11 years ago. Today, the area remains “mostly pastureland for grazing cattle” and Coristine’s original $41,000 investment is now worth just $9,300.
Coristine said:
“It seemed to be a very good investment and they were a well respected company, until a point when they weren’t. It was not the worst investment ever, but pretty close.”
Walton’s original investors profited back in the 1980’s after buying land during a deep Alberta recession. Investors netted a 12% IRR in Calgary and Edmonton based projects from 1987 to 2007. Walton was paying sales commissions as high as 13.25% in some cases, despite 6% being more typical for speculative investments.
In the mid 2000’s the company moved “heavily” into the U.S., using the same model to buy land outside of Phoenix, Dallas, Atlanta and Washington, D.C. It sold its securities through an “exempt” market intended for savvier investors, but investors were willing to take the risk based on the company’s track record.
A markup of five times Walton’s own price wasn’t unusual across hundreds of properties. In one 2008 investment vehicle, Walton bought 304 acres northeast of Atlanta at a price of $13,600 an acre in U.S. dollars, and syndicated it to investors at about $68,000 an acre. Investors didn’t seem to mind as long as Walton sold it to home builders for some multiple of $68,000, and Walton had successfully sold land in Alberta in such fashion a few years earlier. Also, Walton’s efforts to obtain zoning changes and to get rights to develop the land would boost its value.
Steven Kelman, a Canadian investment consultant said: “Still, a reasonably intelligent investor who had seen the markup would have some questions.”
Investors began worrying in 2017 when some Walton entities filed for creditor protection in Canada and when some Walton owned land was revalued. Walton then rolled up 133 separate projects across North America into a single vehicle (anyone having housing crisis flashbacks yet?) called Roll Up Corp. After being revalued, on average, “investors got 57 cents of equity in Roll-Up Corp. for each dollar they had originally invested. Some people got as little as 17 cents per dollar, while others got as much as $1.75.”
Harlow Russell, an American expat who sold Walton securities from a glassy waterfront office in Singapore said: “We pioneered the ability to say to investors, ‘You can make money anywhere in the planet. Why don’t you do it in a safe environment like Canada?”
Walton touted the stability of the U.S. and Canada, holding sales presentations inside Singapore’s luxurious colonnaded Fullerton Hotel, and salespeople even won lavish trips to places like New Zealand and Prague.
But after the initial Canadian boom, the joy for Walton was short lived.
Russell recalled that, at one point, the company had 92,000 investors worldwide and he was so confident in the project, he invested personally. Now, he just hopes to get his principle back:
Walton said it expected most projects to sell three to seven years after it had syndicated them, while others were “fast-tracked” and given two-to-four-year timelines, Russell said. He was so much a believer he invested personally in an Edmonton project in 2004 that paid him a return two years later. A more recent investment in Texas, which he put about $10,000 into, was targeted for sale by 2014 but is still vacant. Walton recently said it has a buyer for part of that land. A second Canadian project Russell invested about $7,500 into also hasn’t sold, he said.
At this point, “If I just got my principal back, I’d be thrilled,” said Russell, who lives in Austin, Texas.
- Flores: The Democrats' Sinister Strategy To Win In 2020
Authored by Joaquin Flores via The Strategic Culture Foundation,
The wildest single phenomenon as we come close to a clearer picture of the Democratic Party’s election strategy for 2020, is that there really isn’t a single candidate that the party has been able to coalesce around. And without this, it would appear difficult to see whether the Democrats intend to focus their strategy on flipping the Rust Belt or the Sun Belt states blue. The truth is that this really isn’t their strategy at all. It’s their strategy to talk about these strategies. But what they will rely on instead is something far more dark and sinister – something we’ve already seen and felt the ramifications of, and something every vigilant citizen needs to focus their primary concerns on.
What strategy won’t work for Democrats? The one they’ve been trying since Trump won.
Most of the chatter we’ve seen so far tends to focus on that question, Rust Belt or Sun Belt (or both), and then which set of policies should the party focus on, and then naturally who will be the candidate to deliver the victory on that platform.
It’s well understood how misleading it is to look at the wide margin at the level of the Electoral College that saw Trump’s sweep. In the real battle-ground states, his victory was in some cases incredibly slim. If three or four of those states had gone for Clinton, then we’d be in a very different electoral reality today. So it goes without saying that Democrats think that they only need to keep all the states they won in 2016, and ‘simply’ (oh, it will not be simple!) flip three or four swing states.
This is very ‘by the books’ and old-model thinking however, and it’s precisely this lack of imagination that saw Democrats lose in 2016. They ran a top-down campaign, not realizing that we live in a post-modern electoral paradigm, where voters are less motivated in ways that can even be broken down by states, state politics, or state interests in the old sense. Yes, mid-term elections tell us something, but this translates less and less so to national politics. We are moving away from the swing-state, and towards the swing-individual.
The internet, at the risk of being extraordinarily cliché, keeps changing the rules. But it’s true. While state secession sentiments actually grow, politics itself has become increasingly national-oriented and also broader in scope – that is to say, paradigmatic.
Trump’s people brilliantly understood that something more was needed in addition to the standard stitching together the standard Republican big tent coalition of anti-Coastal fly-over country America, Christian Zionists and evangelicals, with small-government, low tax business conservatives.
They understood that there had to be a bigger story, a grand narrative, an entire paradigm. Something that would penetrate Reddit and 4Chan, and go full-on memetic. Tropes like the ‘Rising Chinese Menace’, ‘Pizza Gate’, the unappreciated and ‘politically incorrect White Man’, and even some Ron Paul related tropes related to currency ‘metal heads’ and the Fed – these came together to give his campaign some meaning, and meaning is what motivates the grass roots in the digital era.
Not ‘policies’ in the mundane think-tank, policy wonk sense of the term. No, not at all. If Occupy Wall Street taught us anything, is that what has radicalized people is not this or that policy – even though polling people by policy will naturally (obviously) produce policy-edible results – but instead people are radicalized by the much larger questions of our time.
And Democrats keep referring to these, because as an institutional machine, this is what it’s built on, this is the essence of its bureaucratic inertia, and where the relationships exist.
Democrats will have to use the institutions and machines they have built, not the ones they should have been building and haven’t.
What strategy will Democrats try?
In contrast to this paradigmatic approach which is required to win, Democrats seem to be stuck in trying to simulate grass roots, through the older model of ‘grass roots organizations’, a series of endorsements by way of Astro-turfing, and relying on the mobilization of students at the orders of professors and teachers, and of organized labor by order of the shop steward and internal organizer, following the SEIU model that saw Obama elected in swing-states states like Colorado.
But as Democrats have switched posture to being a pro-war party, they are seriously going to be lacking in the activism of the anti-war constituency, a constituency which may indeed view Trump at least neutrally. And trying to switch the anti-war elements of the most progressive, leftist wing of the party and the ‘left of the party adjacent’, into a pro-war party of xenophobic pogromist, neo-McCarthyite Russophobic minions, would seem to be a Herculean task. That is, of course, if those elements still have internet access. And herein lies the rub.
Democrats are going to have to rely on the most sinister and anti-democratic strategy, one that threatens democracy itself
The very sick and sad reality is that Democrats are working directly with the internet tech and platform giants, Google-Adsense, YouTube, Twitter, Facebook, and Amazon, to broaden the scope of censorship, to shut down websites, to deplatform, demonetize, and derank thousands of YouTube vloggers, even big ones, and shadow-ban countless tens, even hundreds of thousands more.
They are creating an ever-more walled garden, a fake internet, the very thing American Sinophones have been accusing the Chinese of doing. And strangely, the average Chinese appears to be more plugged into the inner-workings of American life and politics than the other way around – so much for censorship.
This is the single-most winning component of their strategy. Democrats have an institutional machine that cannot win using the internet as it had evolved until around 2016 – the war now has been a war against the internet and its denizens themselves, against online activism which challenges the status quo – even if its anti-Trump on issues of war and imperialism, since the Democrats themselves promise at least as much if not more.
If the Democrats cannot beat the internet, they will destroy it. And destroying it they have been doing.
While censorship strategy this is the main idea for their campaign – to silence the genuine progressives and socialists in their own party, and to double-down on censoring the broadly paradigmatic elements of Trump’s organic and grass-roots base – they will need to plaster on some kind of plausible pseudo-strategy to get them from here to there. And as we have seen, there isn’t really a candidate. Democrats are lacking in anyone that has anything to say, because the Democrats aren’t looking forward, they are trying to turn the clock backwards to reproduce a political geography that existed twelve years ago as Obama-esque tropes gained ascendency. To do this means to erase the real-existing internet, under the rubric of a war against ‘fake news’, and ‘alternate facts’. Only here can they win, using a victory by the numbers, not winning the battle of ideas.
This time around, their push-polling and fake-polling might work. This is the plan that aims to get their candidate to win by claiming that their candidate is winning, in all the news online or TV that you’d ever have a chance to see. They thereby win low-cognitive undecideds who want to vote for the projected winner, for low-cognitive and base-emotional reasons at the level of the amygdala, as was their plan in 2016. This plan would have worked except for the digital democracy of paradigmatic proportions, the one that Trump so masterfully mobilized, and so it is clear and obvious that Democrats aim to win by erasing digital freedoms, since the 1st amendment questions haven’t been properly sorted in the digital era. The big tech and platform firms are private agencies, have their own bizarre and discriminatory TOS’s, and have been censoring and deplatforming anyone who sniffs of paradigm.
Who are Democrats pushing on the public as the potentials?
Biden, Harris, Sanders Booker, O’Rourke, Warren, even Yang to some extent. Surely, but they don’t give us a whole lot. Besides Yang, what do any of these candidates really stand for? Like Yang, all of these candidates appear to tend to focus on single-issue policy questions; Warren with student loan debt; Harris isn’t so much an issue candidate as she is a symbolic one; and with the exception of Yang, no-one is broadly paradigmatic.
O’Rourke has charisma, and has some of the appeal of a Kennedy meets Jimmy Stewart. This Jimmy Stewart vibe carries with it both pop-psychologist and YouTube celebrity Jordan Peterson, along with elements of Ron Paul vibes. On the subconscious level, telegraphing and channeling this tremendously powerful essence has carried O’Rourke this far. Added is O’Rourke’s relative youth, indie rock scene credentials, and some resonance with the Latino community – that’s all he really has to stand on. Like the forgettable Tim what’s-his-name-? Kaine, these are white men who nominally stand for the Latino community. O’Rourke goes by Beto, like Kaine speaks Spanish.
Besides the actual strategy of relying on internet censorship, the nominal, plastered, plausible strategy is to run everyone at once, until the very end. There isn’t a single candidate because democrats in fact do not have a candidate to run. They have a censorship plan, and then simply run half a dozen people simultaneously and work their virtual supporters up into some ‘anyone but Trump’ frenzy, with each candidate taking the historic vow to officially throw their support and their supporters behind the candidate that wins the DNC primaries.
This is a very interesting approach strategically, because historically we’d find coalescence around a sense of the general electoral paradigm we are in first – the real set of issues at play – and then narrow down the candidates based on who best serves, or reflects, that paradigm in terms of electability, charisma, and ability to deploy a field campaign, especially in the swing states. That was the case for Obama in 2008.
No more Obama
For Obama, coming off of eight years of Bush and the destruction of the neoconservative brand, it was a simple strategy that worked in the targeted states. The anti-war demographic while not huge in their own, are among the most active campaigners who are absolutely fine with adjusting their talking points to reach voters on the ideas and policies that matter to them most, anything to unseat the ‘war monger in chief, Bush’. The rise of the national security state, Homeland Security, the wars in the middle-east, Guantanamo Bay and torture, extraordinary rendition, warrantless tapping and spying on Americans at home – these all had the civil libertarians against Bush as well.
Necessary for Obama’s victory also was a very strong appeal to the progressive left, still based in the last generation’s relationship to symbolic politics.
To be clear, symbolic politics of this type no longer motivates new voters, who are economically and culturally at odds with the present system, and aren’t looking for a symbolic politics based in abstract progressivism, if it doesn’t reflect in their own pocket-books and employment opportunities. That is, after all, one of the biggest reasons that Trump took the swing states in 2016. The symbolic politics that elected Obama won’t work for Democrats again, even if they tap the double-minority vein of Harris. The reality is that even Democrat voters are no longer interested in a candidate to best represent or serve the underserved or underrepresented if those are conceived of as some ‘urban other’. The reality is that the middle-class progressive base of Democrat activism really no long exists. It began to evaporate under Obama’s policies themselves, in 2008 with quantitative easing, when the too big to fail banks were bailed out, instead of Americans themselves.
Democrat strategy unlocked – Silence the Public, pretend Clinton isn’t in charge, and run half a dozen candidates representing some puerile pastiche of demography, until the very end.
While at first glance this may seem to be reflective of an incoherent strategy, we need to step back and see how there is indeed a certain logic at play here. Censorship will have a huge impact on this election, and all politics moving forward.
Not having a single candidate to focus on, that is, to draw fire on, isn’t the same thing as not having a single strategy. Single candidates and single strategies are not the same thing, not in the DNC, which is still clearly under a unified command structure under H.R Clinton. Yes indeed.
It’s clear to insiders and anyone nominally looking at the facts on paper that the DNC is still a Clinton monopoly, there was at least some thinking, at least for some time, that the technocratic and professional elements of the party who actually want to win the race, were having some significant pull. We saw signs of this in early 2017 when Tom Perez came into to chair the DNC, a former Obama Secretary of Labor in the second term, signaling at least symbolically that team blue was breaking out of the Clinton club – at least that which was dedicated to the cult of Clinton.
But to believe this, one would have to believe the old insider story going back to 2007 that Clinton and Obama represent different power factions within the party. But given that, besides the necessary myths and promises required to get elected, the real point of Democratic Party governance relates to the international questions. And H.R Clinton’s role as Secretary of State saw the significant transatlantic networking and alliances necessary to pull off the Arab Spring and the Ukrainian Maidan. And so even here it’s wildly questionable that Obama was much more than a Clinton faction ally, at best.
The Democrats’ real problem here and now is that Clinton is widely despised by real voters, especially the kinds of voters that the party needs to win in the old and emergent swing states alike. That means that the party has to give off some essence, some inkling, some notion that the DNC and the party itself isn’t still run by Clinton.
And this will be very hard to do, given that it is. The way that Sanders entirely buckled under the weight of the DNC’s corruption and gaming the delegate process during the nomination process, only served to induct a new generation of progressive voters – the real activists of the party generally tied to organized labor and astro-turf community organizations on the NGO model – into the ‘anyone but Hillary’ camp.
That’s to say that the party strategy to win the White House in 2020 can’t be based around some focus on Hillary Clinton in any way. This is the real kicker. What we’ve seen until recently to be frank is, rather than a positive program moving forward, is instead a never ending series of accusations and apologia – in the non-remorseful, Greek sense of the word – on how and why Clinton was robbed of the election. This in turn, however, has had profound effects on censorship and the erosion of digital democracy.
More recently we’ve seen some major concessions from Democratic Party leaders in their talking points around some of the culture-war issues, and related to that, immigration policy. Democrats, in tandem with their transatlantic neoliberal partners in the EU, especially in the case of France with Macron, have begun to push in a populist direction on immigration. In plain terms, Democrats hope to win over the ‘moderate’ cross section of the ‘build the wall’ crowd, at least in swing states where that subject ranks in the top five but under the top three main concerns.
But such concessions may act, in reality, not as game-changers but instead as plausible-deniability insurance, that they won voters this way, and not through a possibly illegal collaboration and collusion with the Silicon Valley tech and platform giants.
The initial ‘excitement’, scare quotes intentional, around Joe Biden’s announcement in April that he would be in the race, has steadily deflated ever since, by and by a startling rate.
When we look at the overall picture, it is difficult to see Biden being the candidate. But given that Biden has his own ‘grab em by the p%$$#’ reputation, is both white and a male, and has a masculine-aggressive personality component – important demographic cross-sections for Trump – these may all indeed, in the end, serve successfully as cover for the Democrats plan to steal this election through censorship.
- Uber Will Use Drones To Deliver Piping-Hot Food
Uber on Wednesday announced that it will begin using drones for its Uber Eats service, and had gained regulatory approval to begin testing the service in San Diego, California.
Uber announced it will begin testing drones for food delivery for its Uber Eats service, and over time will land the aircraft on its cars for final delivery (AFP Photo/EVA HAMBACH) “Our goal is to expand Uber Eats drone delivery so we can provide more options to more people at the tap of a button,” said Luke Fischer, head of flight operations at Uber Elevate during a company ‘summit.’
“We believe that Uber is uniquely positioned to take on this challenge as we’re able to leverage the Uber Eats network of restaurant partners and delivery partners as well as the aviation experience and technology of Uber Elevate.”
Not quite to your driveway…
According to AFP, the drones won’t deliver directly to customers. Instead, food will be flown from the restaurant to a safe drop-off location where Uber Eats drivers will be waiting to complete orders. The company eventually plans to land the drones on parked vehicles located near key delivery hotspots in order to allow for final delivery by hand.
Uber said it had developed a proprietary airspace management system called Elevate Cloud Systems that will guide the drones to their location.
While not the first food drone delivery service, Uber is aiming for a potentially large-scale service through its food service partners across the United States.
Initial testing in San Diego was done with McDonald’s, and will be expanded to include additional Uber Eats restaurants later this year. –AFP via Yahoo!
New autonomous car
Uber also announced its newest self-driving venture with Volvo, which will produce an XC90 prototype “capable of fully driving itself,” according to a statement by Uber. The vehicle will house sensors galore which should allow it to operate in an urban environment.
“Working in close partnership with companies like Volvo is a key ingredient to effectively building a safe, scalable, self-driving fleet,” said Uber Advanced Technologies Group CEO Eric Meyhofer. That said, fully autonomous are at least 15 years away according to Uber CEO Dara Khosrowshahi.
Uber signed a deal in 2017 with Volvo, which is owned by China’s Geely, to produce “tens of thousands” of self-driving cars for a fleet of autonomous taxis.
Volvo said it will use a similar autonomous base for the introduction of its first commercially available autonomous drive technology in the early 2020s.
This week, Uber CEO Dara Khosrowshahi said he does not expect fully self-driving vehicles to be deployed for at least 15 years, but that autonomous features will be gradually introduced and that some “easy” trips may be made autonomously. -AFP
Uber also announced the latest versions of its electric bicycles and scooters as part of the summit.
- Stockman Slams The "Deficits Don't Matter" Folly
Authored by David Stockman via Contra Corner blog,
Well, that was timely. The US Treasury just posted a record $207 billion deficit for May and record monthly spending of $440 billion. That brought the rolling 12 month deficit to just shy of the trillion dollar mark at $986 billion.
The timely part is two-fold.
First, it just so happens that May marked month #119 of the current expansion, making it tied for the duration record with the 1990s cycle. But even JM Keynes himself would be rolling in his grave in light of the chart below.
To wit, even by the lights of hardcore Keynesians of yore, fiscal deficits were supposed to be falling sharply at the end of a business cycle or even moving into surplus as they did in 1999-2000, not erupting toward 5% of GDP as has now happened.
The second timely note, of sorts, is that the Wall Street Journal was Johnny on the Spot this AM with a front page story entitled, “How Washington Learned to Love Debt and Deficits”.
The story’s quote from the current Dem Chairman of the House Budget Committee, John Yarmouth, says it all. There simply has never been such bipartisan complacency about the nation’s public finances in all of modern history—-including during the biggest borrow and spend days of FDR, LBJ and every president since Gerald Ford:
Rep. John Yarmuth (D., Ky.), House Budget Committee chairman, says he rarely hears from constituents concerned about rising deficits and debt. Many voters’ attitudes, he says: “There haven’t been any cataclysmic consequences, so why worry about it?”
The WSJ story is a dog’s breakfast of rationalizations, non sequitirs, political double-talk and Keynesian tommyrot. What is the most telling, however, is that it was co-authored by Jon Hilsenrath, who was the paper’s long-time Fed reporter. Yet it contains not a single word about the role of central banks in fostering the utter collapse of fiscal responsibility described by his lengthy report.
So for want of doubt, here is the culprit. The central banks of the world have expanded their balance sheets by upwards of $22 trillion since the turn of the century, thereby massively monetizing the erupting public debt of the US and most of the world via fiat credit snatched from thin air.
So did that massive $22 trillion “buy” order from the central banks weigh heavily on the supply of funds side of the scales in the fixed income market, thereby driving bond prices skyward and yields ever lower?
Why, goodness gracious, yes it did!
The chart below drops the dime on the $22 trillion elephant in the room. Yet the current worldwide regime of Keynesian central banking has so corrupted both financial discourse and pricing in the bond pits that this central bank balance sheet explosion is treated as inert financial wallpaper—-utterly irrelevant to the whys and wherefores of daily action on both ends of the Acela Corridor.
Combined Global Central Bank Balance Sheets
Moreover, the entire system is so mired in the fantasy called “debt doesn’t matter” (both public and private) that we get the chart below. Apparently, not a single one of the hundreds of high paid Wall Street analysts who cover or strategize on the fixed income markets came within a country mile of guessing where the 10-year UST yield would be today in their start of the year projections.
That is, as of January they were essentially blind, deaf and dumb as to what would materialize in a mere 180 days. And the utterly hideous level of forecast error shown below is not due to the fact that the Trade War and global growth outlook have deteriorated since the beginning of the year.
Here’s why Wall Street jabber about emerging macroeconomic weakness does not explain the above chart.
All things being equal in an honest financial system, of course, the bond market might well price-in modestly lower bond yields in the face of an expected or actual recession. The reason would be reduced demand—especially from business and consumers—for credit.
But that shouldn’t happen in today’s world because government borrowing explodes during a recession by a far larger magnitude than any off-setting reduction in demand for business working capital credit or long-term debt. And households are so extended that use of credit barely declines at all.
For instance, during the financial crisis and Great Recession, the rate of Federal borrowing soared from $161 billion in FY 2007 to $1.4 trillion in FY 2009. In cumulative terms, Federal debt outstanding on the eve of the crisis in September 2007 was $5.994 trillion and by the time the worst of the recession had passed in September 2009 the figure was $8.616 trillion.
So on the basis of honest finance, Uncle Sam alone absorbed $2.622 trillion of private savings during that two year period. But unlike the theory, household and business borrowings did not go down.
In fact, the debts of non-financial businesses (corporate and noncorporate) actually rose from $9.845 trillion in September 2007 to $10.387 trillion two years later, representing a gain of $542 billion.
Likewise, total household debt barely budged, notwithstanding the massive mortgage foreclosures which occurred during this period. To wit, household debt of $14.03 trillion in September 2007 had dipped to $13.96 trillion by September 2009, representing a tiny $65 billion decline (0.5%) decline.
In sum, US Treasury demand for funds rose by $2.62 trillion during the 2007-2009 recessionary decline, but private household and business demand also rose—by a net of $474 billion.
There was no weakening of demand for borrowings at all, meaning the theory that private demand for borrowings falls during a recessionary downturn is belied by the relevant facts from the last go-round.
Whatever may have been the case back in the Keynesian heydays of the 1960s and 1970s is no longer relevant. That’s because the American economy is now entombed in $72 trillion of public and private debt—upon which the daily turning of the economic wheels vitally depend.
Accordingly, households have not de-levered since the 2008-2009 crisis, with total outstanding debt now posting at a record $15.7 trillion and business debt has veritably soared by 58% to $15.6 trillion.
So the questions recurs: Why were analysts so far off the mark on bond yields just six months ago, and why has the 10-year yield collapsed from 3.24% on November 8 last fall to just 2.096% at today’s close?
That’s a whopping 35% decline in the yield in the face of only a mild mark-down of the economic outlook. And it is occurring under financial conditions which have not improved at all from the last recession, when there was no decline in private sector debt at all.
Stated differently, if the bond market was actually discounting an impending recession under current financial conditions, yields would be going up because Federal borrowing is certain to soar and private demand is virtually guaranteed to remain constant or probably rise as per 2007-2009.
Needless to say, all things are not equal and the bond market does not trade any of the facts cited above.
What it trades is the Fed and the other central banks, and it is now pricing-in a biblical flood of new liquidity that is expected to monetize the $1.5 to $2.0 trillion Federal deficits that are sure to emerge during the upcoming recession; and to do so without any “crowding out” of the now massive $31.2 trillion mountain of household and nonfinancial business debt.
But here’s the thing. The implicit assumption that indefinite and virtually infinite levels of public debt can be monetized can’t be true. Nor can the implicit assumption that the real yield on the 10-year bond can remain at virtually zero (it was 0.09% today) for the indefinite future with no harm, no foul consequences.
After all, that amounts to one epic free lunch proposition: Namely, that no one needs to save or defer gratification in the private sector because the central banks can always print enough new credit to monetize the public debt and keep interest rates aberrantly and irrationally low.
The truth is, massive central bank monetization of the debt has essentially pulled the plug on fiscal management, as underscored by today’s Wall Street Journal story, but in so doing it is also setting up the system for a thundering day of reckoning.
A hint of that can be seen in the chart below, which tracks net national savings. The latter is the real McCoy among savings measures because it subtracts today’s massive and chronic public sector dis-savings (i.e. deficits) from the meager level of positive savings generated by households and undistributed corporate profits.
It therefore shows what’s left for net investment in the private sector, and the current answer is “not much”. In fact, net national savings in Q1 2019 was just $506 billion at an annual rate.
Incredibly, that figure is 26% below the $681 billion rate recorded in Q1 of 1999. And it’s also stated in nominal dollars!
Adjusted for the 46% rise in the GDP deflator since 1999, today’s net national savings level stands at $340 billion (1999 $) or 50% below where it was exactly 20 years ago.
In a word, the radically artificial bond rates that have been generated by massive central bank debt monetization have fostered the foolish belief in the Imperial City that the public debt is benign and that borrowing a trillion dollars at the tippy-top of the business cycle is no sweat at all.
In truth, it has led to a financial metastasis down below the surface. To wit, America has been eating its seed corn (private savings) to fund the most irresponsible spree of fiscal excess in recorded history. The public debt has gone from $5.5 trillion to $22 trillion during that 20-year period, and after 30-years based on current built-in policy, the public debt will be $42 trillion or nearly 8X higher.
Stated differently, today as the economy struggles to grow after the longest, weakest business expansion ever, the private economy has 50% less in real terms to invest in future productivity and growth than it had two decades ago—-and this is occurring at the worst possible moment in history.
That is, on the eve of the tsunami of Baby Boom retirements which will hit 11,600 per day by 2022 and 80 million Social Security/Medicare beneficiaries by the end of the 2020s.
What is worse, the central bankers and their Keynesian apologists who are responsible for this impending catastrophe have become actual Debt Deniers, claiming there is plenty of savings elsewhere in the world to cover America’s fiscal profligacy. Thus, the long-time head of the New York Fed and Goldman Sach’s plenipotentiary at the central bank is quoted by the WSJ as saying—nothing to sweat here:
“There are plenty of savings around the world to be invested,” says former Federal Reserve Bank of New York President William Dudley.
What he is suggesting is that apparently the prudent folks in the rest of the world have not followed the US pattern and have increased their savings rates to compensate; and, once more, are happy to send their hard-earned savings stateside to earn hardly a pittance after inflation and currency risk.
In fact, it is even more ludicrous at the moment. After adjusting for the cost of currency hedges, Mrs. Watanabe in Japan would be earning a negative return on today’s 2.096% Treasury rate.
Perhaps, the people of Japan are secretly paying America reparations for World War II. That would be as good an explanation as any—were not the entire global fixed income market in complete breakdown owing to the depredations of central banks.
In fact, we are now apparently at near an all-time high of negative yielding debt at $11 trillion on a worldwide basis. So, indeed, somewhere on the planet there must be some kind of massive pool of stranded excess savings lapping this stuff up in order help the governments of the world make ends meet.
Except there isn’t. The alleged savings glut was invented by Bernanke and B-Dud (Bill Dudley) and it is one of the proverbial Big Lies. Most of the developed world economies, in fact, have experienced a net national savings rate decline which looks exactly like that of the US.
Relative to GDP it has been heading south for decades, and now stands at barely one-fourth of the level that prevailed during the growth heydays of the 1960s.
In the case of Japan, for instance, its net household savings rate has plummeted from 12-14% of disposable income as recently as the mid-1980s to barely 2.0% today. The image below hardly suggests that the world largest retirement colony has got a surfeit of savings to spare.
Or take the case of Australia. Just since 2008, the household savings rate has fallen more than 50%.
With respect to the major European economies, the story is the same. Since the mid1980s, the savings rate in the UK (red line) and Italy (dark green line) has virtually disappeared. Likewise, in the case of France (light green line) and Germany (yellow line), savings rates have drifted steadily lower, albeit not so precipitately as the first two.
So where does all the purported excess savings come from?
Why, the Red Ponzi, of course!
But even that is a statistical trick owing to the Keynesian assumptions built into the national income and product accounts (NIPA). To wit, since the late 1990s, China’s total debt outstanding has exploded from $2 trillion to $40 trillion, and that massive gain has been cycled back into the economy to fund its runaway investment in public infrastructure and private industry.
In the first round of accounting, all of that new debt fuels wage and salary income and business profits. But, alas, there is no off-set in the NIPA accounts for the permanent liability which funded these GDP account entries.
So, presto!
A savings glut, if you believe it.
Unfortunately, the politicians of Washington and the punters of Wall Street apparently do.
- 1000s Of Illegals Quarantined After Exposure To Chicken Pox, Mumps
Approximately 5,200 adult migrants in US custody for illegally entering the country have been quarantined by US Immigration and Customs Enforcement (ICE) after being exposed to mumps or chicken pox, according to the agency.
An ICE official told CNN on Friday that of the quarantined individuals, approximately 80% (4,200) were exposed to mumps, 800 were exposed to chicken pox, and around 100 migrants were exposed to both. They will be quarantined for 25 days.
Just because individuals are quarantined doesn’t mean they have the mumps, but they’ve at least been exposed to it. From September 2018 to June 13, 297 people in ICE custody had confirmed cases of mumps, proven by blood test. –CNN
The agency began recording cases of mumps last September, with 297 cases for the period of time ending June 13.
“I think there is heightened interest in this situation because it’s the mumps, which is a new occurrence in custody, but preventing the spread of communicable disease in ICE custody is something we have demonstrated success doing,” said ICE executive associate director for enforcement and removal operations, Nathalie Asher.
“From an operational perspective, the impact is significant in the short and long term and will result in an increase in cohorted detainees’ length of stay in detention, an inability to effect removal of eligible cohorted detainees, and postponing scheduled consular interviews for quarantined detainees,” Ascher added.
According to the report, ICE staff has been put on alert.
“This week, the ICE Health Service Corps issued a reminder to senior field leadership reminding their staff to review vaccination records and take appropriate actions,” said CNN‘s source.
In May, almost 133,000 illegals were apprehended by Customs and Border Protection, the vast majority of whom were families and unaccompanied minors.
CBP employees are overwhelmed
This week, Acting DHS Secretary Kevin McAleenan said that employee morale among border officials is low.
“Their morale is impacted. They’re tired. A lot of them have gotten sick. They’ve been exposed to flu, chicken pox, measles, mumps — all kinds of challenges in terms of the medical care,” he said. “They’re spending time overnight in hospitals instead of patrolling the border.”
Late last month, the Department of Homeland Security inspector general released a report detailing some of the issues facing border patrol facilities amid the swell of migrant arrivals.
In particular, the IG found “dangerous overcrowding” and unsanitary conditions at an El Paso, Texas, Border Patrol processing facility following an unannounced inspection, according to a new report.
The IG found “standing room only conditions” at the El Paso Del Norte Processing Center, which has a maximum capacity of 125 migrants. On May 7 and 8, logs indicated that there were “approximately 750 and 900 detainees, respectively.” –CNN
“We also observed detainees standing on toilets in the cells to make room and gain breathing space, thus limiting access to the toilets,” according to the report.
We wonder how far along Trump’s wall would be by now if Congress had played ball on day one.
- Top US Regulator Warns Financial System Is At Risk Due To… Climate Change
Submitted by Nick Cunningham of OilPrice.com
A top U.S. financial regulator is worried that climate change could threaten global financial markets.
Rostin Behnam, a commissioner at the Commodity Futures Trading Commission (CFTC), said that the financial system was at risk from the growing frequency and severity of storms.
“The impacts of climate change affect every aspect of the American economy – from production agriculture to commercial manufacturing and the financing of every step in each process,” Behnam said at the meeting of the CFTC’s market risk advisory committee on Wednesday. “As most of the world’s markets and market regulators are taking steps towards assessing and mitigating the current and potential threats of climate change, we in the U.S. must also demand action from all segments of the public and private sectors, including this agency.”
He added: “Our commodity markets and the financial markets that support them will suffer if we do not take action to mitigate the risk of contagion.”
The message is not necessarily a new one, but it is significant since it comes from the CFTC, which is not exactly a hippy enclave. Also of significance is the fact that Behnam was appointed to the CFTC by President Trump, although by law the vacancy that he filled had to be a Democrat.
Behnam will help set up a panel of experts to study the risks to the financial system from climate change.
“If climate change causes more volatile frequent and extreme weather events, you’re going to have a scenario where these large providers of financial products — mortgages, home insurance, pensions — cannot shift risk away from their portfolios,” Benham said in an NYT interview. “It’s abundantly clear that climate change poses financial risk to the stability of the financial system.”
Benham said that the world saw $160 billion in economic costs last year from natural disasters. More recently, the U.S. Midwest is facing a crisis with biblical levels of flooding that have decimated American farms – the type of disaster that is expected to become more frequent.
Financial regulators have begun to pay greater attention to the risk of climate change. A global network of roughly 40 central banks have formed the Network for Greening the Financial System (NGFS), an initiative intended to “manage risks and to mobilize capital for green and low-carbon investments.” If climate change presents threats to the global financial system, then it is imperative that central banks prepare for such dangers. “The NGFS recognises that there is a strong risk that climate-related financial risks are not fully reflected in asset valuations,” the NGFS said in an April 2019 report.
“A transition to a green and low-carbon economy is not a niche nor is it a ‘nice to have’ for the happy few. It is crucial for our own survival,” Frank Elderson, Chair of the NGFS, said in the report. “There is no alternative.”
In March, the San Francisco Fed also raised the alarm, noting the widespread risks across various industries. “These risks include potential loan losses at banks resulting from the business interruptions and bankruptcies caused by storms, droughts, wildfires, and other extreme events,” the San Francisco Fed said. “There are also transition risks associated with the adjustment to a low-carbon economy, such as the unexpected losses in the value of assets or companies that depend on fossil fuels.”
That last point is an argument that has been gaining credence in the energy industry. The idea is that the oil and gas industry may have inflated valuations given that a large portion of the reserves on their books may never be extracted and burned. They will be stuck with “stranded assets.” These oil and gas companies may be worth only a fraction of what they are currently trading at if this turns out to be the case.
David Fickling of Bloomberg Opinion recently observed that Royal Dutch Shell seems to be bucking the trend of oil companies aggressively trying to replace every last barrel of oil extracted. Shell, instead, appears content to let its reserves run down, an apparent strategy to begin to prepare for a low-carbon future. Shell is scaling up investment in power generation.
But the risk is not limited to oil and gas companies. “[F]inancial firms with limited carbon emissions may still face substantial climate-based credit risk exposure, for example, through loans to affected businesses or mortgages on coastal real estate,” the San Francisco Fed warned. “If such exposures were broadly correlated across regions or industries, the resulting climate-based risk could threaten the stability of the financial system as a whole and be of macroprudential concern.” Ultimately, climate risks threaten the economy “through elevated credit spreads, greater precautionary saving, and, in the extreme, a financial crisis.”
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